OFG Bancorp (NYSE:OFG) Q2 2020 Earnings Conference Call - Final Transcript

Jul 24, 2020 • 10:00 am ET

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OFG Bancorp (NYSE:OFG) Q2 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Your first question comes from the line of Alex Twerdahl of Piper Sandler.

Analyst
Alex Twerdahl

Hey, good morning.

Executive
Jose Rafael Fernandez

Good morning, Alex. How are you?

Analyst
Alex Twerdahl

I'm well. Thanks. Just to start off on the reserve and the provision, maybe you can help us kind of just break down the provision for this quarter. And the $5 million that you put aside for COVID, was that related mostly to a change in the Moody's S3 scenario? Or was it related to internal downgrades of credits related to COVID? Or how should we be thinking about that?

Executive
Jose Rafael Fernandez

Yeah. I'll give you a high level and let Maritza answer you in more detail. But we actually have the S3 Moody's scenario. We have kept that S3 Moody's scenario. And we feel that it's -- the COVID-19 has proven to be extremely uncertain across the globe, and we feel that here in Puerto Rico, it's no exception. So, we decided to keep the S3 Moody's as the scenario where we drive our provisioning. So, that's the big side of it, the big picture of it. I'll let Maritza give you the details on the rest.

Executive
Maritza Arizmendi Diaz

Hi, Alex. Regarding the additional $5 million, as Jose mentioned, we keep the Moody's S3 scenario, and we also evaluate the qualitative adjustment that we did in the last quarter. We update them. And as a result of that, we added $5 million in the retail portfolio mostly, based on the most recent information. And that's the $5 million adjustment for the COVID-related provision.

Analyst
Alex Twerdahl

Okay. So, it's retail oriented mostly. But I'm just kind of curious if there was a specific factor in retail that you're looking at? Just kind of thinking about the amount of stimulus money that's flowing down to the island and seeing deposits really balloon at you and some of your peers, it seems like the retail might be in better shape today than they normally would without the stimulus. So, kind of how should we think about how you're expecting the retail portfolios to perform?

Executive
Jose Rafael Fernandez

Yeah. I think the assumptions that you pose are correct. There's certainly stimulus flowing down from COVID and still from Hurricane Maria and the earthquakes, and that's going to play out. I think there is a portion of it that will play out in the short term. And we would like to see the deferral program end as it ended in June 30 and see how the retail portfolios behave forward to feel more comfortable on the scenarios. But I agree with you. Longer term, we just think that the economy -- it's hard for us to pinpoint how the economy is going to be doing in the next six months. But we do agree that the economy, with the stimulus and all the items that you mentioned, should have good momentum on a more longer-term scenario. So, we will update as we see and feel more comfortable with the data on the credit side.

Analyst
Alex Twerdahl

All right. And you guys have