Oriental CEO José Rafael Fernández believes Puerto Rico has an economy that is “transitioning, from not only the aftermath of [Hurricane] María reconstruction, but also for the last 12, 13 years of economic contraction.”
During a call with analysts to discuss its third quarter results, Fernández said while federal funds are trickling in, “there is still a little bit of uncertainty regarding the magnitude of how many funds are going to come and settle down to the island.”
He said while roads and bridges are being rebuilt, there is still expectation swirling around the timing of housing funds.
“But we are seeing some of our larger construction services clients being awarded projects to build and rebuild homes. And those funds have already been allocated, they’ve been awarded. And they have yet to be disbursed, because there’s still some hoops to go through,” he said.
Oriental reported net income available to shareholders of $5.8 million, or $0.11 per share fully diluted, during the third quarter, reflecting the impact of several strategic transactions, compared to $19.6 million, or $0.42 per share fully diluted, in the third quarter of 2018.
The third quarter included $40.5 million pre-tax from items that negatively affected results, primarily due to the decision to sell mostly non-performing loans, partially offset by $13 million pre-tax from items that benefited results, such as the sale of available-for-sale mortgage-backed securities and of fully charged-off loans, and the adjustment to the qualitative factors of the allowance for loan and lease losses.
Excluding the above items, adjusted net income available to shareholders during the third quarter was $24.9 million, or $0.48 per share fully diluted.
Oriental’s CEO also said the company is moving forward on its proposed $560 million, all-cash acquisition of Scotiabank’s assets in Puerto Rico and the U.S. Virgin Islands, announced in the summer.
“Since we made our Scotiabank announcement, we have been engaged in extensive integration planning,” Fernández said. “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.”
“We’re building excellent momentum as we prepare to close on our acquisition of Scotiabank’s Puerto Rico and USVI operations. We expect to receive regulatory approval by the end of the year,” Fernández said during the call.
Loans at Sept. 30, 2019 increased 1.2% to $4.41 billion. Average core deposits rose 3.4% to $4.56 billion, while non-core funding was reduced 41.7% by quarter end. New loan origination of $291.4 million reflected Oriental Bank’s success in targeting small business customers and our growing consumer banking business.
“We’re 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 confirm the effectiveness of our differentiation strategies,” Fernández said.
Net Interest Margin remained at 5.35%, total delinquency rate improved, and capital metrics continued to climb to new multi-year highs, according to the financial institution’s results.
During the call, Fernández predicted that recovery funds will start flowing in more consistently next year.
“So far, I’m encouraged. I’m encouraged with what we’re seeing and our customers, commercial and consumer, are certainly in a much better financial position that they were a couple of years ago, and their balance sheets show it,” he said.