OFG Bancorp (NYSE:OFG) Q3 2019 Earnings Conference Call - Final Transcript

Oct 21, 2019 • 10:00 am ET

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OFG Bancorp (NYSE:OFG) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning. Thank you for joining OFG Bancorp's Conference Call. My name is. Maria, and I'll be your conference operator today. Our speakers are Jose Rafael Fernandez, President, Chief Executive Officer and Vice Chairman and Maritza Arizmendi, Executive Vice President and Chief Financial Officer.

A presentation accompanies today's remarks. It can be found on the Investor Relations website on the homepage in the What's New Box or on the Webcast, Presentations & Other Files page. This call may feature certain forward-looking statements about management's goals, plans and expectations. These statements are subject to risks and uncertainties outlined in the Risk Factors section of OFG's SEC 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 that occur afterwards.

We also direct you to the explanation of non-GAAP measurements that are included in our presentation and news release. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question-and-answer session.

I would now like to turn the call over to Mr. Fernandez.

Executive
Jose Rafael Fernandez

Good morning. Thank you for joining us. Please turn to Slide 3.

Before the market opened today, we reported third quarter results, which reflected the impact of several non-core strategic transactions. We generated a 14% increase in adjusted earnings per share. Adjusted return on average assets and return on average tangible common equity also improved. And reported net interest margin continued at a level similar to top-performing peer banks in the mainland. We are extremely pleased with our core performance. Our levels of small business, auto, and consumer loan production, core deposit growth, credit quality and capital and the number of net new customers all confirmed the effectiveness of our differentiation strategies. Since we made our Scotiabank announcement, we have been engaged in extensive integration planning. We're extremely excited about how the acquisition will significantly enhance our position as a premier retail bank on the island and establish a strong foothold in another Caribbean market. As always, thanks to our OFG team and the new members who will be joining us from Scotiabank for their commitment and dedication and to all our retail and commercial customers for their loyalty and support.

Please turn to Slide 4. During the third quarter, we took advantage of positive market conditions both in the US fixed income markets and here in Puerto Rico and decided to sell a good portion of our remaining NPLs to sell some fully charge-off loans at a profit and to sell almost 40% of our investment securities. Here's how these and other items affected our results.

First, provision was increased by a net $32 million. This reflected a $39 million increase primarily from deciding to sell $95 million of unpaid principal balance NPLs. This was partially offset by $2.4 million in proceeds from the sale of $26 million of fully charge-off auto and consumer loans. It was also partially offset by a $4.5 million