OFG Bancorp(OFG) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record assets exceeding $12 billion and record loans over $8 billion, with diluted earnings per share of $1.15, reflecting a 6.5% year-over-year increase [4][5] - Core revenues totaled $182 million, with total interest income rising to $194 million, an increase of $5 million, primarily due to higher average loan and cash balances [8][9] - The efficiency ratio was 52%, return on average assets was 1.73%, and return on average tangible common equity was 17% [11] Business Line Data and Key Metrics Changes - New loan origination reached $784 million, up 38% from the first quarter and 33% year-over-year, with growth across all lending channels [13] - Average core deposits were $9.7 billion, up nearly 1%, with end-of-period balances increasing by $139 million quarter-over-quarter [14] - Non-interest expenses totaled $94.8 million, up $1.4 million, aligning with the expected range for the year [9][19] Market Data and Key Metrics Changes - The Puerto Rico economy showed stable growth, with high levels of liquidity among individuals and businesses, contributing to the positive credit environment [5][22] - The company noted a strong commercial pipeline and increased loan growth expectations for 2025, now projected at 5% to 6% [38] Company Strategy and Development Direction - The company is focusing on a digital-first strategy, enhancing customer relationships through technology and innovation [5][24] - A new $100 million stock buyback authorization was announced to return capital to shareholders, supported by strong capital generation [5][20] - The company aims to grow market share by creating value and helping customers achieve progress, backed by a strong capital position [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the Puerto Rican economy, highlighting stable wages and employment levels, and a positive business environment [22][24] - The company is committed to maintaining a strong risk management culture while pursuing growth opportunities [40] Other Important Information - Credit quality remains stable, with net charge-offs totaling $13 million, down from the previous quarter [17] - The company introduced new products, including an online marketplace and a U.S. Government money market fund, to enhance customer offerings [6] Q&A Session Summary Question: Margin dynamics and deposit competition - Management explained that deposit costs increased due to variable rate government deposits and emphasized ongoing retail customer growth [28][30] Question: Loan growth consistency - Management confirmed strong loan growth throughout the quarter, driven by a solid pipeline and increased commercial line utilization [36][38] Question: Energy situation in Puerto Rico - Management discussed ongoing efforts to improve the energy grid and its impact on the economy, noting that current issues are not significantly hindering economic performance [60][63] Question: Credit quality and charge-off levels - Management indicated that recent charge-off levels are expected to stabilize due to improved credit performance from new vintages [68][71] Question: Government deposits outlook - Management expects government deposits to continue rolling over in the coming quarters, maintaining a similar outlook as previous quarters [75][76] Question: Expense management and technology investments - Management highlighted ongoing efforts to improve efficiencies through technology while balancing investments and capital returns to shareholders [78][80]