OFG Bancorp Q2 FY2025 earnings call

• Financial Results: Ended with record assets over $12 billion and record loans over $8 billion. Earnings per share diluted $1.15, up 6.5% year-over-year. Total core revenue up 1.5% with high return on average assets and equity.
• Digital Platform: Strong momentum with omnichannel digital platform. Nearly all routine teller retail customer transactions and deposits, and 70% of retail loan payments through digital and self-service channels. 4% new net customer growth.
• New Products/Services: Launched Oriental Marketplace and a U.S. government money market fund.
• Loan and Deposit Growth: Strong loan origination and core deposit flows. Commercial lending growth strategy with deposit growth driven by commercial and government balances.

Loan Growth: Average loan balances were $8 billion, up close to 2% from the first quarter. End-of-period loans held for investment totaled $8.2 billion, up 7% from a year ago. New loan origination of $784 million was up 38% from the first quarter. Core Deposits: Average core deposits were $9.7 billion, up close to 1%. End-of-period balances of $9.9 billion increased 1.4% quarter-over-quarter and 3% year-over-year. Net Interest Margin: 5.31% compared to 5.42% previously. Excluding the new Federal Home Loan Bank, NIM would have been around the higher end of the 5.30% to 5.40% range. Credit Quality: Net charge-offs totaled $13 million, down $7.6 million from the first quarter. Net charge-off rate was 0.64%, down 41 basis points sequentially.

• Loan Growth: Expect loan balances to grow for full year 2025 closer to 5%-6% versus previous 3%-4%.
• Share Buyback: New $100 million stock buyback authorization and continued share repurchases.
• NIM Outlook: As loan growth continues, net interest margin should expand from second quarter levels.

• Global Macroeconomic and Geopolitical Events: Impact on Puerto Rico economy and business environment.
• Deposit Competition: Competition from small commercial banks in Florida and U.S. credit unions offering higher yielding CDs.
• Pricing Pressure: Competitive pricing on lending side, especially commercial loans.

Q: On margin and deposit costs A: José mentioned deposit costs had a tick higher due to government deposits tied to variable rates, but retail deposits growing with new products and commercial relationships. Maritza added NIM range 5.30%-5.40% with volume driving net interest income.

Q: On loan growth cadence A: Strong pipeline in Puerto Rico and U.S. early in quarter, with commercial utilization up. Expect loan balances to grow with resilient Puerto Rico economy.

Q: On margin and liquidity A: Liquidity elevated with Federal Home Loan Bank and wholesale funding, but volume and loan growth expected to drive net interest margin expansion.

Q: On credit quality and charge-offs A: Cesar explained seasonality in delinquencies, with better vintages leading to improved charge-off rates.

Q: On government deposits A: Expect government deposits to roll over in several more quarters.

Q: On expenses A: Focus on controlling expenses with tech investments and efficiencies, balancing investment and capital return.