OFG Bancorp(US:OFG)2021-04-21 20:03Financial Data and Key Metrics Changes - The company reported earnings per share of $0.56, an increase from $0.42 in the fourth quarter and breakeven in the same quarter last year [13] - Total core revenues were $128 million, with net interest income of $98 million benefiting from PPP loan fees and lower cost of deposits [13][21] - The net interest margin increased to 4.26% from the fourth quarter [15] - The effective tax rate was 32%, compared to 22% in the fourth quarter [15] - Return on average assets rose to 1.21% from 0.94% in the fourth quarter [25] - Return on average tangible common equity increased to 13.11% from 9.9% in the fourth quarter [25] Business Line Data and Key Metrics Changes - Banking and Wealth Management revenues totaled $29 million, roughly equal to the fourth quarter when seasonal items are excluded [15] - First quarter fee revenue reflected strong mortgage banking activities, benefiting from the Scotiabank acquisition [15] - Average loan balances were $6.6 billion, a decline of 1% from the fourth quarter, primarily in the mortgage portfolio [26] - Average core deposits increased to $8.5 billion, up 1% from the fourth quarter [27] Market Data and Key Metrics Changes - Loan generation totaled $528 million, with strong year-over-year increases in mortgage, auto, and commercial lending [28] - The loan yield was 6.61%, an increase of six basis points from the fourth quarter [29] - The charge-off rate fell to 0.85% in the first quarter from 1.56% in the fourth quarter [32] Company Strategy and Development Direction - The company aims to invest in transforming its business model, focusing on simplifying operations and improving efficiency [37] - The strategy includes utilizing excess liquidity, increasing loan generation, and growing fee income [37] - The company is optimistic about the economic recovery in Puerto Rico, with expectations of benefiting from federal stimulus and reconstruction funds [38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about Puerto Rico's economic recovery, citing improvements in federal stimulus flow and vaccination rates [6][38] - The company anticipates challenges from COVID-19 and high unemployment but sees early signs of recovery [38] - Management noted that the economy is expected to grow, with signs of potential in-migration as opportunities arise [46][49] Other Important Information - The company increased its common cash dividend by 14% in January and announced the redemption of all outstanding preferred stock [17] - The tangible book value per common share increased by 11.5% year-over-year [26] Q&A Session Summary Question: Can you provide more details on job creation or real estate valuations in Puerto Rico? - Management noted that Puerto Rico experienced net zero migration in 2020, which is a positive sign compared to previous years, and expects a need for workers in various industries as the economy recovers [44][46] Question: What is the outlook for loan growth and reserve levels? - Management indicated that while loan growth may not be expected by the end of the year, they anticipate growth in 2022 as liquidity levels stabilize [53] Question: What are the priorities for capital management? - Management aims for a common equity tier one capital ratio closer to 11% to 12% while focusing on returning capital to shareholders and managing excess liquidity [61] Question: How is the hospitality industry recovering in Puerto Rico? - Management reported that hotel bookings are increasing, with some high-end hotels fully booked, but overall occupancy remains below pre-pandemic levels [92] Question: What is the potential impact of Biden's infrastructure plan on Puerto Rico? - Management expects Puerto Rico to benefit from the infrastructure plan, although specific details are still fluid [95] Question: What is the company's strategy regarding digital banking and branch footprint? - Management emphasized the importance of digital adoption and indicated that the future of banking will focus more on digital solutions rather than traditional branch transactions [78][80]