OFG Bancorp (NYSE:OFG.PRD) Q3 2016 Earnings Conference Call - Preliminary Transcript

Oct 21, 2016 • 10:00 am ET


OFG Bancorp (NYSE:OFG.PRD) Q3 2016 Earnings Conference Call - Preliminary Transcript


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Good morning. My name is Paula, and I will be your conference operator today. Thank you for joining us for this conference call for OFG Bancorp. Our speakers are Jose Rafael Fernandez, President, Chief Executive Officer and Vice Chairman, and Ganesh Kumar, Executive Vice President and Chief Financial Officer. There is a presentation that accompanies today's remarks. It can be found in the Investor Relations Web site on the homepage in the What's New Box or on the webcast, presentations, and other files page. Please note this call may feature forward-looking statements about management's goals, plans and expectations, which are subject to various risks and uncertainties outlined in the risks factor section of OFG's Securities and Exchange Commission filings.

Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call, as a result of developments, which occur afterwards. (Operator Instructions) I would now like to turn the conference call over to Mr. Fernandez.

Jose Rafael Fernandez

Thank you for joining us this morning, and please turn to Slide 3. We had another quarter of strong steady performance, earnings per share of $0.26 was slightly better than the prior two quarters. Our Oriental franchise continue to do well. New loan origination totaled $227 million in the third quarter, in line with our target of about a billion dollars a year. We saw a nice expansion of net interest margin, excluding recovery, and retail and commercial deposits grew more than 2% due in part to continued growth of net new customer accounts at an annualized rate of 4%. Most credit quality metrics remained stable, but there was a major decline in net charges, excluding PREPA. There was also a substantial drop in OREO and REPO balances.

This reflects our effective servicing and workout efforts. As a result, return on average assets and return on average tangible common equity hit the highest levels they have been in the last five quarters. As a further consequence, capital continue to build with tangible book value per share now at $15.18 and TCE ratio at 10.25%. Please turn to Slide 4. Oriental is now a proven innovator and challenger brand in Puerto Rico. Our goal is to be consistently the best performing bank on the island. To-date, we have been very successful differentiating our brand in a commoditized market, focusing on customer service, targeted marketing, and innovative retail and commercial mobile banking technology. This has been the real force behind our ability to grow our customer base, expand deposits, and generate steady loan volume as always with prudent credit underwriting and pricing discipline. At the same time, we have proactively managed credit quality and balance sheet risks.

As you'll see later in the presentation, we now have less than one-fourth of the Puerto Rico government-related exposure we had three years ago when we acquired the operations of BBVA in Puerto Rico. We have also been optimizing operating efficiencies, while continuing to invest in the retail channel and customer facing technology. As