OFG Bancorp (NYSE:OFG) Q3 2022 Earnings Conference Call October 20, 2022 10:00 AM ET

Company Participants

Jose Fernandez - Chief Executive Officer & Vice Chairman

Maritza Arizmendi - Chief Financial Officer

Conference Call Participants

Alex Twerdahl - Piper Sandler

Kelly Motta - KBW

Brett Rabatin - Hovde Group

Timur Braziler - Wells Fargo Securities

Operator

[Call starts abruplty]

Higher yield. This accounted for 43% of the increase in net interest income. Two, the increase in higher-yielding investment securities. This accounted for another 43%. And three, higher yield on lower volume of cash. This accounted for 23%. In turn, all this was slightly offset by the small increase in the cost of interest-bearing liabilities.

Please turn to Page 6 to review our credit quality and capital strength. Looking at net charge-off, they totaled $11.3 million in the third quarter. About half of that came from 2 commercial loans we provisioned from in the second quarter. The remaining balance came from auto and consumer loans. In part, that was due to higher loan volumes. Also, late payments as a result of Fiona were a factor.

Looking at provision for credit losses. Total provision was $7.1 million. Two main factors affected the non-PCD portfolio. One was higher auto and consumer loan balances. This added $8 million. The other was an increase in the qualitative component of the allowance to account for potential Fiona-related losses. This added $1.3 million. The PCD portfolio benefited from reduced balances and an improved performance of residential mortgage loans. This led to a recapture of $2.8 million. Third quarter allowance coverage ex PPP was 2.33%. That's down 5 basis points from the second quarter.

Looking at nonperforming loans. The total NPL rate was 1.55%. That's down 6 basis points from the second quarter and 53 basis points from a year ago. Overall, credit was stable with a little glitch at the end of the quarter due to the effects of Fiona.

Capital remained strong. The CET1 ratio was 13.34%. That's up 12.8% in the second quarter. Total stockholders' equity dipped a little below $1 billion. This reflects reduced other comprehensive income, partially offset by the increase in retained earnings. The TCE ratio held fairly steady at 8.83% compared to the second quarter.

Now, here’s José.

Jose Fernandez

Thank you, Maritza. Let's turn to Page 7 for our outlook. We're finishing the year with good momentum. We plan to continue to expand our digital-first solutions to provide customers with an easy-to-use 24/7 self-service capabilities. We also plan to continue our focus on growing retail and commercial loans and customer relationships as well as our investments in people, technology and network infrastructure. Ultimately, we're focused on exceeding our performance metrics, specifically efficiency ratio, return on average assets and return on average tangible common equity.