• Earnings Per Share (EPS): $1.09 for Q4, up 11.2% year over year; $4.23 for full year, up 10.4% year over year.
• Total Core Revenues: $182 million for Q4; $710 million for full year, up 3.9% year over year.
• Net Interest Margin: 5.4% for Q4; 5.43% for full year.
• Provision for Credit Losses: $30.2 million for Q4; $82 million for full year.
• Non-Interest Expenses: $99.7 million for Q4; $376 million for full year.
• Pre-Provision Net Revenues: $83 million for Q4; $336 million for full year.
• Total Assets: $11.5 billion, up 1.4% from a year ago.
• Customer Deposits: $9.4 billion.
• Loans Held for Investment: $7.8 billion.
• New Loan Production: $609 million for Q4.
• Investments: $2.7 billion, up 1% from a year ago and 4% from the last quarter.
• Cash: $591.1 million, down 13% from last quarter.
• CET1 Ratio: 14.26%.
• Share Buyback: $46 million in Q4; $29.7 million remaining on authorization.
• Efficiency Ratio: 54.82% for Q4.
• Return on Average Assets: 1.75%.
• Return on Tangible Common Equity: 16.71%.
• Tangible Book Value Per Share: $25.43, down 3% from the third quarter.
• Net Charge-Offs: $16 million for Q4.
• Income Tax Expense: $2.4 million for Q4.

• Warning! GuruFocus has detected 3 Warning Sign with SMBK.

Release Date: January 22, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• OFG Bancorp (NYSE:OFG) reported a strong year-over-year increase in earnings per share by 11.2% for the fourth quarter.
• The company successfully executed its Digital First strategy, with significant growth in digital transactions and customer adoption.
• OFG Bancorp (NYSE:OFG) increased its quarterly dividend by 14% to $0.25 per quarter, reflecting strong capital management.
• The company achieved a 14% growth in loans to local businesses, supported by the relaunch of the My Biz small business account.
• OFG Bancorp (NYSE:OFG) maintained a high net interest margin of 5.4%, indicating effective interest income management.

Negative Points

• Non-interest expenses increased to $99.7 million, driven by early retirement costs and business rightsizing.
• The provision for credit losses rose by $8.8 million from the previous quarter, reflecting increased loan volume and specific reserves for US commercial loans.
• Cash reserves decreased by 13% from the last quarter, indicating a potential liquidity concern.
• The tangible book value per share decreased by 3% from the third quarter, primarily due to share buybacks and lower other comprehensive income.
• The efficiency ratio increased to 54.82% from 52.60% in the previous quarter, indicating higher operational costs.

Q & A Highlights

Q: Can you discuss the outlook for net interest margin (NIM) given the competitive deposit environment and potential rate cuts in 2025? A: Jose Rafael Fernandez, CEO, explained that the competitive environment in Puerto Rico remains intense but rational. OFG Bancorp has seen good customer growth, particularly with new products like the Libre and Elite Accounts. Maritza Arizmendi, CFO, added that they expect NIM to remain between 5.3% and 5.40%, with the investment portfolio helping to mitigate rate impacts.

Q: How are you managing expense growth, especially with early retirements and increased general and administrative expenses? A: Jose Rafael Fernandez, CEO, highlighted the success of their Digital First strategy, which has doubled transaction levels since 2021 while reducing branch transactions. This has allowed for workforce reductions and increased efficiencies. They expect quarterly expenses to average $95 million to $96 million, balancing business growth and investments in technology and people.

Q: Can you provide more details on the reserve build related to US commercial loans and auto delinquencies? A: Jose Rafael Fernandez, CEO, noted that the Puerto Rican economy remains solid, with stable consumer credit trends. Cesar Ortiz, Chief Risk Officer, added that the increase in delinquencies is seasonal, and non-performing levels are better than last year. The specific reserves for US commercial loans are due to unique operational challenges.

Q: What is the outlook for the effective tax rate (ETR) in 2025? A: Maritza Arizmendi, CFO, stated that the 2024 ETR was 24% due to higher business activities with preferential tax rates. For 2025, they anticipate an ETR of about 26%, continuing to benefit from similar activities.

Q: How is OFG Bancorp approaching capital allocation, particularly regarding buybacks and dividends? A: Jose Rafael Fernandez, CEO, emphasized the importance of maintaining a strong capital position. They plan to deploy excess capital in loans, dividends, and buybacks, aiming for a methodical approach to buybacks in 2025, similar to their strategy in 2024.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.