Good morning. Thank you for joining OFG Bancorp's Conference Call. My name is Margo, and I'll be your operator today. Our speakers are Jose Rafael Fernandez, Chief Executive Officer and Chairman of the Board of Directors; Maritza Arizmendi, Chief Financial Officer; and Cesar Ortiz, Chief Risk Officer. A presentation accompanies today's remarks. It can be found on the homepage of the OFG website under the Second Quarter 2025 section. 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. [Operator Instructions] I would now like to turn the call over to Mr. Fernández. Please go ahead. José Rafael Fernández: Good morning, and thank you for joining us. We are pleased to report our second quarter results. To start, let's go to Page 3 of the presentation. It was another strong quarter, ending with record assets of more than $12 billion and record loans of more than $8 billion. We had excellent financial results, generating earnings per share diluted of $1.15 for a 6.5% increase year-over-year on a 1.5% increase in total core revenue with a high return on average assets and equity. Operating execution was highlighted by strong loan origination and core deposit flows. Credit reflected stable economy in Puerto Rico and high levels of liquidity held by individuals and businesses. We announced a new $100 million buyback -- stock buyback authorization and bought back more shares supported by our strong capital generation and balance sheet. Please turn to Page 4. We continue to see strong momentum with our omnichannel digital platform, our strategic investments in technology and innovation through our digital first strategy is paying off. We're growing accounts and building deeper customer relationships during the second quarter. Nearly all of our routine teller retail customer transactions and deposits as well as 70% of retail loan payments were made through our digital and self-service channels. This was being driven by continued year-over-year growth in digital enrollment, digital loan payments, virtual teller utilization and 4% new net customer growth. In the second quarter, we introduced 2 new products and services. We launched Oriental Marketplace, an online feature that gives our customers exclusive discounts on travel, restaurants and retail products. And we also introduced a U.S. government money market fund, a new addition to our DGI family of funds, to provide customers with another convenient investment option. Now here is Maritza to go over the financials in more detail.

Thank you, José. Please turn to Page 5 to review our financial highlights. All comparisons are to the first quarter unless otherwise noted. Core revenues totaled $182 million. Looking at the key components. Total interest income was $194 million, an increase of $5 million. This mainly reflects higher average balances of loans and cash and $1.5 million from 1 additional business day. Total interest expense was $42 million, an increase of $2 million. This mainly reflects higher average balances of core deposits and higher average balances of borrowings and broker deposits and $0.4 million from 1 additional business day. Total banking and financial service revenues were $30 million, an increase of $1 million. This mainly reflects increases in mortgage banking activities and wealth management. Looking at noninterest expenses. They totaled $94.8 million, up $1.4 million. This is in line with our continued outlook of $95 million to $96 million in quarterly noninterest expenses in 2025. Compared to the first quarter, the second quarter reflected $1.4 million less in seasonal payroll taxes and foreclosed real estate costs. Keep in mind, in the first quarter included a $3.1 million incentive payment from a business partner. Income tax expense was $14.1 million with a tax rate of 21.37%. That reflects an anticipated rate of 24.90% for the year and the benefit in the second quarter of $1.7 million in discrete items. Looking at some other metrics. Tangible book value was $27.67 per share. During the quarter, we bought back 186,000 shares. Efficiency ratio was 52%. Return on average asset was 1.73% and return on average tangible common equity was 17%. Now please turn to Page 6 to review our operational highlights. Total assets were $12.2 billion, up 9% from a year ago and 4% from the first quarter. Average loan balances were $8…

[Operator Instructions] We'll take our first question from Timur Braziler.

Maybe starting off on the margin. That's good commentary that you think margin starts to expand off of these levels. I'm just wondering, maybe from a deposit standpoint, those costs seem to tick higher a little bit in the second quarter. I guess as you look out into the back end of the year, is it just the better loan growth trajectory that drives margin higher? I guess, can you just talk to the interplay between those expected loan growth and maybe what the deposit competition is doing on the island? José Rafael Fernández: Yes. So thank you for your question, Timur. I'll take a stab at it first, and then I'll let Maritza give you additional color. So when you -- on the point on deposit costs ticking higher, remember that the government deposits are tied to variable rate treasury bill kind of formula and during the quarter, you have that -- those fluctuations kind of trend up and down. So this quarter, we have a little bit of that noise there. That's why you're seeing a little bit of that uptick on the cost of deposits. But let me just also step back also and give you a little bit of our thoughts on deposits and how we see customer deposits moving forward. Because what you have seen throughout the last 1.5 years is that our net new account growth in retail customers has continued to grow, particularly in checking during, as I said, the past 1.5 years. So that's one of the key drivers for us. Also, you have to look at the changes that we have implemented within our value proposition and our differentiation for retail customers. We have added a couple of new targeted products -- deposit products and services. We have expanded, as you…

I'm not sure if -- Timur, did that clear up your question or you need more color on other aspects of the NIM?

No, I think that's helpful. Maybe switching to loan growth, pretty impressive here. It seems like both in Puerto Rico and on the Mainland. I'm just wondering the cadence there. Did you see a real pickup early in the quarter? And then maybe that tapered off towards the back end of the quarter? Was that growth consistent throughout the quarter? And just maybe give us a lay of the land for borrower appetite both in Puerto Rico and then maybe on your Mainland operations as well. José Rafael Fernández: For sure. Yes. So yes, we had a really strong quarter on loan growth this second quarter. So what drove -- what drove it, it was primarily a very strong pipeline coming into the second quarter in both Puerto Rico and the U.S. And we mentioned in our last earnings call, that we felt that we had a very strong pipeline and some credits were kind of pushing to the second quarter. So that's number one. In addition to that, this quarter, we also saw an increase in commercial line utilization from some larger commercial clients. Third, Puerto Rico's economy continues to be doing well and it's in solid shape. Clearly, the Puerto Rico paradigm shift -- Puerto Rico economy paradigm shift continues to play out and businesses are building up their capabilities and infrastructure. Some industries are consolidating. Puerto Rico is investing in its infrastructure, et cetera, et cetera. You've heard me talk about it in the last 1.5 years or so or 2 years. So we continue to see solid pipeline for commercial loans. Consumers are in good shape. So we expect loan balances to grow for the full year 2025, now closer to the 5%, 6% versus the 3%, 4% that we previously guided. So things continue to be moving in the right direction. And in spite of all the global geopolitical and all the uncertainty created by all the things that you guys know better than I do, I think Puerto Rico remains resilient. And building a big, big hole in the economy that was created after 10 years of kind of a 20% economic contraction. So sometimes the economic numbers, which are correct, show a very slow moving economy, but if you put it in the context of building up a hole -- or filling up a hole that was created after 10 years of aggregate 20% contraction. Really, the economy is doing pretty strong from the consumer and the commercial side. So being a bank and having a strong capital base with a very prudent and risk culture, it's -- this is what we got. And we're really excited to be able to continue to grow and deploy our capital for our customers.

We'll next go to Kelly Motta with KBW.

I would love to circle back to this concept of margin. Looking at your balance sheet, it looks like -- and you called out the FHLB and wholesale funding you put on, it looks like liquidity was somewhat elevated during the quarter. Just thinking through the expectations of margin, how you're thinking about funding and moving the balance sheet ahead from here. Can you just help us with some of the dynamics of the moving parts of maybe the timing of the wholesale funding and how to think about treading that with liquidity and loan growth ahead given your expectations?

So as you saw during the quarter, Kelly, the driver was a volume factor for the NII to continue expanding. That's something that we have consistently sharing with the market that NIM probably will range between 5.30% to 5.4% and compared to prior year's NIM, there is a contraction, but volume will be the driver on the NII, and that's what happened this quarter. And as we continue to see loan growth as a good dynamic here that José was mentioning, we decided to accelerate and put funding to the books with a good rate because at the end, it's 4.13%. We have margin if we put it in cash, but we wanted to anticipate that liquidity at that moment. We were opportunistic and now we have flexibility to continue investing going forward with the opportunities. As I mentioned before, we have a great pipeline, good potential. We wanted to have that flexibility, and that's why we decided to put that into work, okay?

Got it. José Rafael Fernández: And specifically to your very specific question about the timing of those, it was halfway through the quarter that we made that call. We saw the pipeline. We're seeing the loan originations. We see the line utilization levels inching up, and that's when we decided because we also saw the good rate, like Maritza mentioned, from our perspective.

Got it. That's helpful. And then I mean, the story of the quarter, you guys just had such strong loan growth. I'm just wondering how are spreads holding up? Any kind of like competitive dynamics there because José Rafael, you said you now are expecting a bit higher loan growth for the year. Just wondering, I mean, I understand some of the dynamics and the push into 2Q, but it really was remarkable. So I'm hoping you can discuss some of the pricing dynamics there and kind of how -- where that business is coming from? José Rafael Fernández: Yes. So pricing dynamics, different than deposits. The market is much more competitive on the lending side. And we're seeing, particularly on the commercial side, we're seeing a little bit more pricing pressure. And that's part of also what we're seeing. That's mostly on the pricing side. In terms of loan growth, well, auto had a little bit of a benefit this quarter because of the announcement of the tariffs and like it happened in the States, too, there was a little bit of a, let me go out and buy the car before tariffs come in, type of things. But we're still seeing a pretty steady loan origination pipeline there from the car dealers in spite of some stabilization in the auto sales in Puerto Rico. On the -- as I mentioned, on the Puerto Rico commercial, we see still a good pipeline, and it's very well diversified from industries as well as from the type of kind of loans that they're seeking. Some of them are part of a consolidation strategy in the industry. Some of it is building infrastructure, as I mentioned in my prepared remarks, et cetera. On the mortgage, we really have inched up in the…

[Operator Instructions] We'll take our next question from Brett Rabatin with Hovde Group.

I wanted to start with just talking about what's going on with the power grid here recently and the new Fortress contracts. Can you give us any color on your vantage point, what's going on with energy in Puerto Rico and just -- I know we've talked about this before, but just any update would be helpful. José Rafael Fernández: Sure, sure. So what's going on right now is they're trying to bring in natural gas to fill in some generators that would potentially cover the grid in case of higher demands during the summer, which will happen, and that way minimize or mitigate some of the potential shutdowns that the system is having or the kind of turndowns that the system is having. So that's the objective of the well-documented contract that the fiscal board has canceled. But Brett, I look at this, as I've said in the past, this is a long journey for energy in Puerto Rico. This is year 5 or so. They're still in bankruptcy. They're too private to source. The government is in the middle. They're in the ring and they're throwing punches at each other, and sometimes they pat themselves in the back, depends on the perspective. So it's going to be noisy. But at the end, it's not making any impact on the economy. It's having an effect on the economy, but it's not -- if we wouldn't have this issue, the economy will be doing a lot better because it will reduce a lot of uncertainty from the business side and the consumer side. But it's -- the economy is in such strong base right now that even all this noise is precluding businesses and consumers from holding back. It's becoming a little bit of a kind of part of doing business until things just get resolved, and it's going to take a while.

Okay. That's helpful. And then from a credit -- I'm sorry? José Rafael Fernández: I hope that helps.

Yes, that's helpful. And then from a credit quality perspective, the delinquencies in the early-stage auto ticked back up from being really low last quarter. But charge-offs were really low this quarter. And I know the U.S.A. portfolio didn't have any charge-offs. But just wanted to get your thoughts on the charge-off levels and 2Q and if that was an anomaly or if this is kind of a new level of benchmark to think about for credit for you guys? José Rafael Fernández: Yes. I'll let Cesar give you the specifics on that.

To clarify, the first quarter always benefits in delinquencies and nonperforming loan statistics because it a seasonal positive quarter because of tax refunds, end of holiday season, et cetera. So we always expect a pick up in the second quarter and third quarter from the first quarter because of that seasonality, but when we compare it to last year's same quarter, it's much better. So it's a new vintage coming in, better vintages coming in that we adjusted back in 2022. So those new vintages with better credit performance are going to continue coming into the statistics. So that's going to continue stabilizing and we're getting hopefully better charge-off rate than nonperforming loan and delinquency rates than previous vintages. So that's basically the outcome.

Okay. So if I heard that correctly, it sounds like the outlook from here is net debt improved just kind of given the vintages in the recent performance? José Rafael Fernández: Correct. Correct. Correct.

And we'll go next again to Kelly Motta with KBW.

I apologize if you answered this more directly, if so, I may have missed it. But on the government deposits, I think last quarter, you talked about $1 billion left that had signed on a couple of months to stay, and that was kind of the determinant -- the determining factor for kind of where you would end up in the margin range. Just wondering if you have an update as to your expectations for the potential of those deposits to remain with OFG at least for here now? José Rafael Fernández: Yes. So the expectation is relatively the same as in past quarters. It's an ongoing kind of every 3, 4 months, and we feel that we are -- we're going to see this deposit kind of roll over in several more quarters.

Okay. That's helpful. And then maybe if we could touch on expenses. I don't think we addressed that yet. You guys did an excellent job controlling expenses, and you mentioned you've been investing a lot in the tech and certain efficiencies to just drive customer experience. Just wondering if you could provide a high-level update as to what other sort of investments are in the works? And how you think about balancing your investment in the business and your ability to serve the customers ahead with capital return to investors given your strong capital position? José Rafael Fernández: Yes. Well, that's a great question, Kelly. We -- how do we do it? Every day, we push for efficiencies. And certainly, technology is helping out. And I think we look at efficiencies from the back office, and we see processes that can be simplified and we see areas where technology after the process has been simplified can come in and be a lot more efficient for us. We have not yet seen some of those efficiencies, but we are expecting to see them in the years to come in the next year or so. And that's part of the push that we're constantly addressing internally. So because we have to continue to invest in technology, we need to continue to invest for the improvement of the customer experience, we need to continue to create value for our customers, not only on the retail side, but also on the commercial side. Look, we have formidable competitors that are really, really aggressive in their investments. They have deeper pockets. So we need to play it both ways. We need to invest but we need to be very much intentional in eking out efficiencies constantly on all our processes. And that's why what we're asking internally is also to continue to transform our culture to one where we have to be a lot more focused on change management and challenging each other to do better. And that's the best I can share with you, Kelly, because otherwise, I would have said it's just an art, and it's sometimes a beautiful picture, and sometimes it's an awful picture, but it's an art. It takes a team to work and a team to be buying in into what we need to achieve and we are very happy to have that team in Oriental right now and excited to continue to grow and to show value to our customers and shareholders as well.

Got it. Last very little ticky tacky question from me for Maritza is the tax rate guidance that you provided in the earnings release, you did have the tax benefit in 1Q. I was wondering if that was including or excluding that? I just wanted to get clarification, so I can model the second half of the year ahead.

The expectation that we shared with you is 24.9% for the year and it doesn't have any discrete items included within that. I'm not sure if that's your question, but it's a flat rate for the year without any benefits.

So excluding that $1.7 million benefit you had in...

Yes.

Perfect. I will step back. Great quarter.

At this time, there are no further questions. I will now turn the call back over to José Rafael Fernández for closing remarks. José Rafael Fernández: Thank you, operator. Thanks again for -- to all our team members and thank to all our stakeholders who have listened in. Looking forward to see you next quarter. Have a great day.

Thank you. And ladies and gentlemen, that does conclude today's conference. We appreciate your participation. You may now disconnect.