OFG - NYSE

Let's turn to Page five to review our financial highlights. All comparisons are to the second quarter unless otherwise noted. Core revenues totaled $184 million driven by solid performance across key areas. Total interest income was $200 million, an increase of $6 million. This mainly reflects higher balances of loans and investments and $1 million from one additional business day. Total interest expense was $45 million, an increase of $3 million. This mainly reflects higher average balances of core deposits, higher average balances of wholesale funding, and a $500,000 impact from the extra business day. Total banking and financial services revenues were $29 million, a decrease of $1 million. This mainly reflects a decline in mortgage banking revenues due to a change in MSR valuation. Compared to a year ago, when we were first subject to reviews interchange fees under Derby, total banking and financial services revenues were up $3 million or 11%. Other income category was $2.2 million. This included gains from OFG Ventures investment in FinTech-focused funds. Looking at non-interest expenses, they totaled $96.5 million, up $1.7 million. This reflected a strategic investment of $1.1 million in technology, people, and process improvement. Dollars 1,100,000.0 tied to increased business activity and marketing and an $800,000 reduction in foreclosed real estate costs. Income tax expenses were $9.5 million with a tax rate of 15.53%. This reflects a benefit of $2.3 million in this great items during the quarter and an anticipated rate of 23.06% for the year. Looking at some other metrics, tangible book value was $28.92 per share. Efficiency ratio was 52%. Return on average asset was 1.69%. Return on Tangible Common Equity was 16.39%. Now let's turn to Page six to review our operational highlights. Total assets were $12.2 billion, up 7% from a year ago and steady compared to the second quarter. Average loan balances were $8 billion, up close to 2% from the second quarter. End of period loans held for investment totaled $8.1 billion. Sequentially, loans declined $63 million or 0.8%, mainly due to repayment of commercial lines of credit funded in the second quarter. Year over year, loans increased 5% reflecting our strategy to grow commercial lending in Puerto Rico and the U.S. Loan yield was 7.9%, down one basis point. New loan origination was $624 million. As José mentioned, this reflected in part moderation in auto loans that we have been anticipating and an expected easing of our auto sales after a surge of pre-tariffs purchasing in the second quarter. Year over year originations were up 9% and the commercial pipeline continues to look good. Average core deposits were $9.9 billion, up close to 1%. End of period balance $800 million decreased $76 million or 0.8%. This reflected increased retail and government balances and reduced commercial deposits. By account type, it reflected increased savings deposit and reduced demand and time deposits. Compared to the year-ago quarter, core deposits were up $287 million or 3%. Core deposit cost was 1.47%, up five basis points. Excluding public funds, the cost of deposit was 103 basis points compared to 99 basis points in the second quarter. The increase in costs mainly reflects higher average balances in savings accounts within the upper pricing tiers. Investments totaled $2.9 billion, up $151 million. This reflected purchases of $200 million of mortgage-backed securities yielding 5.32% partially offset by repayments. Cash at $740 million declined 13% reflecting the new securities purchases. Average borrowings and broker deposits totaled $769 million compared to $672 million. The aggregate rate paid was 4.11%, level with the second quarter. End of period balances were $746 million compared to $732 million. The third quarter reflected increased variable rate borrowings and decreased brokered deposits. Net interest margin was 5.24% compared to 5.31%. This quarter NIM reflected increased interest income from the securities portfolio and slightly higher cost of deposits and increased variable rate borrowings. Please turn to Page seven to review our credit quality and capital strengths. Credit quality continues to be stable. Provision for credit losses was $28.3 million, up seven reflected $13.5 million for increased loan volume.

Certainly. Star two. We will take our first question from Erin Cyganovich with Truist. Your line is open.

Appreciate it.

We'll take our next question from Timur Braziler with Wells Fargo. Your line is open.

Yes. On the charge-offs, what we're seeing is seasonal dynamics of the retail portfolios. Usually at the lowest levels of the first quarter and then gradually those statistics come up and they peak towards the fourth quarter. So what we saw quarter over quarter is a modest increase on charge-off and all the statistics. But when we compare it to last same period last year, we see a better trend. So we're optimistic, based on those comparisons.

We will take our next question from Kelly Motta with KBW. Your line is open.

Maybe circling back to the Q4 margin guidance, 5.10 to 5.20. Wondering, Maritza, what that what that what the Fed funds assumption is in that given that you guys are asset sensitive? One. And then two, maybe you could talk a little bit about I think we on on the last quarter call, you were calling for some margin expansion provided we got some loan growth all else equal. Just with the margin being down kind of if there was anything in that that you know, differed from your expectations maybe three months ago that that drove that? Thank you.

Does that just to clarify, does that $5.10 to $5.20 contemplate any additional cuts here in fourth quarter?

We'll move next to Anya Pellshaw with Hubd. Your line is open.

My apologies. We do have a follow-up from Timur.