OFG Bancorp Q4 FY2024 earnings call

• Digital First strategy continues to expand with high digital adoption in transactions. - Earnings per share up 11.2% year-over-year in Q4 on 3.6% core revenue growth. - Balance sheet: total assets up 1.4% y-o-y, customer deposits $9.4B, loans held for investment $7.8B, new loan production $609M. - Credit quality stable with net charge-offs down, provision for credit losses $30.2M in Q4. - Non-interest expenses up due to early retirement, business rightsizing, and performance incentives. - Share buybacks of $46M in Q4, with $29.7M remaining on authorization.

For the fourth quarter, total core revenues were $182 million, with earnings per share diluted of $1.09. Net interest margin was 5.4%. Total assets were $11.5 billion, customer deposits $9.4 billion, loans held for investment $7.8 billion, investments $2.7 billion. For the full year, earnings per share were $4.23 on total core revenues of $710 million, net interest margin 5.43%, provision $82 million, non-interest expense $376 million. Digital First strategy saw 96% of routine retail customer transactions, 97% of retail deposit transactions, and 68% of retail loan payments through digital/self-service channels. Revenue components: total interest income $190 million, net interest expense $41 million, banking and financial service revenues $33 million.

• NIM guidance ranges 5.30% to 5.40% for 2025, mitigated by investment portfolio extension. - 2025 non-interest expense expected to average $95-96 million per quarter. - Full-year tax rate forecasted at about 26%. - Anticipates steady loan and deposit growth, continuing Digital First strategy investments.

• Macro uncertainties affecting the business. - Credit risks related to auto delinquency trends and specific U.S. commercial loans. - Volatility in public funds due to variable rates. - Competitive pressures from credit unions in Puerto Rico impacting deposit pricing.

Q: Regarding margin, how does the deposit side and competitive environment impact NIM outlook?

A: Jose and Maritza discussed competitive intensity, deposit growth from new products, and funding mix mitigating impact of rate cuts. NIM range kept at 5.30%-5.40% due to investment portfolio extension.

Q: On expenses, how is expense growth managed?

A: Jose mentioned Digital First strategy driving transaction growth and branch efficiency, with expenses ranging $95-96M per quarter, balancing investment in technology and people with growth.

Q: Talk about tax rate guidance for 2025?

A: Maritza stated full-year tax rate expected at about 26% for 2025, down from prior years due to preferential tax treatment.

Q: On credit reserves, what's the outlook for auto book reserves?

A: Cesar noted seasonal auto delinquency trends, but auto portfolio is 87% prime, with reserves managed considering cyclical economy shifts. Provision around $18-20M per quarter expected.