OFG Bancorp Q1 2023 Earnings Call
<unk> Chief Financial Officer.
Speaker 1: directors, and Maritza Arzmendi, chief financial officer. A presentation accompanies today's remarks. It can be found on our investor relations website, on the home page in the what's new box, or on the quarterly results page.
Speaker 1: This call may feature certain forward-looking statements about management's goals, plans, and expectations. This call may feature certain forward-looking statements about management's goals, plans,
Speaker 1: These statements are subject to risks and uncertainties outlined in the Risk Factors section of OFG's SEC filings.
Speaker 1: 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. All lines have been placed on mute to prevent background noise. After the speaker's remarks, there will be a question and answer session.
Speaker 2: All our businesses performed well and contributed to another strong quarterly performance by OFG.
Speaker 2: The quarter's results also reflect the strength of our franchise, supported by high levels of liquidity and capital.
Speaker 2: This places OFG in a strong position in today's banking environment.
Speaker 2: Now, let's turn to page 3 of our conference call presentation.
Speaker 2: Core revenues, net interest margin, credit quality, operating leverage, and customer acquisition trends all remain at high levels or improved compared to the fourth quarter.
Speaker 2: Deposit balances were stable with only a 10% cumulative beta.
Speaker 2: We continue to execute our digital first strategy, placing more banking kiosks and interactive teller machines in the field.
Speaker 2: Client digital adoption increased 10% year over year.
Speaker 2: Our key performance metrics also continue at strong levels.
Speaker 2: Businesses and consumers are in good financial shape in Puerto Rico and the economy continues to do well.
Speaker 2: We look forward to ongoing progress in 2023. Thanks to our teams for their excellent execution, commitment and drive helping customers and the communities we serve achieve their financial goals.
Speaker 2: Looking at the income statement,
Speaker 2: Earnings per share diluted was 96 cents, up 26% year over year.
Speaker 2: Core revenues total 164 million dollars, up 21%.
Speaker 2: Net interest margin was 5.89% of 142 basis points.
Speaker 2: Provision was $9.4 million, non-interest expenses were $90.2 million, and pre-provision net revenues totaled $74.6 million, up 34 percent.
Speaker 2: When we look at our balance sheet, customer deposits were $8.6 billion up slightly compared to the fourth quarter.
Speaker 3: fourth quarter.
Speaker 2: New loan production remains strong at $561 million.
Speaker 2: Investments total $1.9 billion, down slightly from the fourth quarter due to the maturities of treasuries.
Speaker 2: and the normal pay down of mortgage backed securities.
Speaker 2: Cash was $847 million, almost $300 million higher than the fourth quarter.
Speaker 2: We continue to build capital.
Speaker 2: The CET1 ratio was 14.07% compared to 13.64% in the fourth quarter.
Speaker 2: All in all, excellent quarter.
Speaker 2: Very strong performance.
Speaker 2: Now, here is Maritza to go over the financials in more detail.
Speaker 4: Thank you Jose. Please turn to page 4 to review our financial highlights.
Speaker 4: Let me start with total co-revenance. Met interest income of $136 million held steady compared to the fourth quarter. This primarily reflected the full effect of Fed's fourth quarter 2022 rate increase of 50 basis points. Now let's take that bonus amount our of our at mo 19. Plus total income of $ 1897.
Speaker 4: but only a partial effect of the 50 races point increase in the first quarter of 2023.
Speaker 4: Also, higher deals and higher average balances of loans, in particular, auto, commercial, and consumer. We did have two fewer days during the quarter compared to the fourth quarter, which reduced net interest income by $2.2 million.
Speaker 4: Banking and wealth management revenues were $29 million compared to $33 million in the fourth quarter. This primarily reflects the reduction of $2 million in mortgage savings by valuation, $1 million in wealth management revenues.
Speaker 4: from the annual recognition of insurance fees in the December quarter, and a half million dollars from the sale of the retirement plan administration business that we announced at the end of last year.
Speaker 4: Looking at the efficiency ratio, it was 54.87% in the first quarter. That's a minor change from the first quarter and significantly better compared to a year ago.
Speaker 4: This reflected our increased positive over-existing leverage in line with trends we have seen over the last few years.
Speaker 4: Non-interest expenses total $90 million compared to $92 million in the fourth quarter. That primarily reflected lower general and administrative costs.
Speaker 4: In part, that was due to a half million dollars of lower costs as a result of the sale of our pension and mid-station business.
Speaker 4: Non-interest expenses should continue to average about $90 to $92 million per quarter in 2023. Our efficiency ratio targets will also continue in the mid 50% range.
Speaker 4: Looking at our performance metrics, return on average asset was 1.87% and return on average tangible common equity was 19.13%.
Speaker 4: Looking at tangible book value per share, that was $20.57. That's an increase of about $1 compared to the fourth quarter of the fourth quarter.
Speaker 4: This reflected increased retained earnings and lower other comprehensive loss. Please stand to page 5 to review our operational highlights. Looking at average loan balances, they increased $96 million from the fourth quarter. End-of-speed loans increased $2.5 million.
Speaker 4: $6.85 billion.
Speaker 4: That is a 1.1% annualized increase from the previous quarter and a 4.7% increase year over year.
Speaker 4: Sequential growth reflected increased balances of auto and consumer loans.
Speaker 4: This was partially upset by paydowns of residential mortgages and commercial lines of credit.
Speaker 4: Look at long yield. It was 7.58%. That's 26 basis point increase from the fourth quarter.
Speaker 4: That's due to the FED rate increases combined with a higher proportion of auto, consumer, and commercial loans versus residential mortgages.
Speaker 4: Looking at New York loan origination, this reflects the continued high levels of auto lending and increased commercial lending in the U.S.
Speaker 4: Puerto Rico commercial lending was lower compared to the fourth quarter. However, our commercial pipeline remains strong.
Speaker 4: Looking at core deposits, compared to the fourth quarter, average balance decreased, but end of period deposit increased. Over the course of the quarter, we saw a shift from demand deposit to savings account time deposit and to a lesser degree to our wealth management business.
Speaker 4: During the quarter, government deposits went down from $295.4 million to $231.4 million. We also saw a marginal decline in retail deposits of 0.3% and a noticeable increase in commercial deposits of 2.3%.
Speaker 4: data of about 25%, well below expected main land levels through this cycle.
Speaker 4: Butter ensuring
Speaker 4: That reflected a $200 million, two-year advance from the Federal Home Loan Bank.
Speaker 4: Looking at net interest margins, that was 5.89%, an increase of 20 basis points from last quarter and 142 basis points year over year. Our net outlook generally remains the same.
Speaker 4: Our tax rate for the first quarter was 29%. For the year we are anticipating an effective tax rate of 32%. Please stand to page 5 to review our credit quality and capital strength.
Speaker 4: Looking at net charge-off, they total $10 million compared to $11 million in the fourth quarter. That reflected a significant reduction in auto loan net charge-off.
Speaker 4: In addition, delinquency and non-performing laundry fell across the board.
Speaker 4: Looking at provision for credit losses, that total $9.4 million, reflecting $6.2 million due to increased loan volume, $2.1 million from a commercial loan held for sale, and a $1.1 million increase adjustment due to increase in recessionary risk in the United States. For more information, visit www.fema.gov
Speaker 4: Lookit and non-performing norms.
Speaker 4: The total NCO rate was 1.32%.
Speaker 4: That's what down 29 basis points from the fourth quarter and 34 basis points from a year ago.
Speaker 4: Overall, paid improves in noticable from the fourth quarter.
Speaker 4: Looking at some of our other capital metrics, so that stockholders' equity was $1.1 billion, that's $47 million from the fourth quarter, and DCE ratio increased to 9.85%.
Speaker 4: Now here is Hosen.
Speaker 2: Thank you Maritza.
Speaker 2: Please turn to page 8 for the outlook. The Puerto Rico economy continues to show strength on the part of both businesses and consumers. Business activity is robust and building momentum as reconstruction projects continue to roll out. This is helping to create a more resilient infrastructure.
Speaker 2: But we must continue to keep a watchful eye on interest rate changes, inflation, and a probable mainland recession.
Speaker 2: Within this environment, our deposits overall have remained stable with retail customer flows moving to higher yielding products like CDs and to our wealth management business.
Speaker 2: High levels of liquidity put us in a strong position in the current banking environment, and this enables us to continue to focus on our plans by adding value to our customers and building stronger relationships, investing in people, technology and infrastructure to provide easy, fast, around the clock, self-service digital solutions for clients.
Speaker 2: on growing market share, you know, main businesses.
Speaker 2: I want to thank again all our dedicated team members for their commitment to the customers and the communities we serve.
Speaker 2: With this, we end our formal presentation. Operator, please open the call for questions.
Speaker 1: Thank you. If you have a question at this time, please press star 1 on your telephone keypad. If you wish to remove yourself from the question queue, please press star 2.
Speaker 1: And we'll pause just briefly to assemble our queue.
Speaker 1: Can we go to our first question from Timmer Brasilier with Wells Fargo? Please go ahead.
Speaker 1: Can we go to our first question from Timur Brasiljier with Wells Fargo. Please go ahead. Hi, good morning.
Speaker 5: Good morning. Maybe starting, I just saw the bigger picture question. So can you take us back to the week of March 13th when things were kind of falling apart on the mainland?
Speaker 5: What was the feeling on the island? What was the level of conversations you were having with your own deposit base? And ultimately what was the dynamic that was taking place in Puerto Rico?
Speaker 2: Sure, thank you for your question Timur. I'd like to take the opportunity receiving your question to kind of...
Speaker 2: share my thoughts on the overall banking environment.
Speaker 2: right now in the United States and how does that...
Speaker 2: translates, if at all, to Puerto Rico. And I think that the current banking environment in the United States.
Speaker 2: Brings to light.
Speaker 2: brings to light in a very positive way.
Speaker 2: the differences that exist between Puerto Rico banking market as well as the difference with the peers in the states. I think when you look at the Puerto Rico banking market, what you're seeing and you will see in this quarter.
Speaker 2: You're going to see an economy that continues to build momentum and a banking industry that is strong.
Speaker 2: and it's supportive of the island's economic development with higher capital levels.
Speaker 2: higher liquidity levels, much more stable deposit trends with lower betas, and really no credit deterioration and or concentration. All of these compare very favorably to our peers in the States.
Speaker 2: So to your question, I think whenever it was in the middle of March,
Speaker 2: that the events that transpired in California and New York regarding the two financial institutions that were closed. Here in Puerto Rico, the news come and everybody is aware of it, but there is...
Speaker 2: inspired in California and New York regarding the two financial institutions that were closed. Here in Puerto Rico, the news come and everybody is aware of it, but there is strong...
Speaker 2: understanding that the banking sector in Puerto Rico is solid. And it's rational and efficient. And I think all you guys have been talking about this for a while. And I think this moment in terms of the banking environment in the States. Banking rough angles to have Lincoln Al Mexicans
Speaker 2: puts a spotlight in a positive way to the Puerto Rico banking market. So that's kind of how I view what's going on and what has happened. Certainly we have a very competitive market here in the island. But it's a market very different from what the last 25, 30 years investors are accustomed to seeing Puerto Rico.
Speaker 2: as the money is coming to rebuild and reconstruct. So as I said a couple of years ago, in my 20 years almost as CEO of OFG, these last couple of years have been building the momentum. And today I'm sitting here and I see the island.
Speaker 2: being rebuilt and that is extremely positive and for us is a way to get closer to our customers and support them to help the economic development of the island also.
Speaker 5: That's kind of how I view this. Great, thank you. That's great color. And then maybe just taking that and expanding on that just a little bit. So as you're looking at the deposit base for the remainder of the year, have the activities on the mainland kind of stem the outflows that we've...
Speaker 5: still an element of deposits that are at risk for either going to a larger institution heading into treasuries or otherwise leaving the banking system.
Speaker 2: So the trends are the trends, right? And remember that in the fourth quarter of 2022, as well as in the fourth quarter of 2021, we were managing below the $10 billion mark. So that is really what kind of drove, particularly in 2021, but also in 2022 to some degree.
Speaker 2: So what has happened in the first quarter is that you're seeing that kind of stabilizing and to some degree we have higher deposit balances. Certainly the remix is taking place and that is the normal thing to happen and we're seeing some...
Speaker 2: savings deposits moving towards a one, two year CD. We're also seeing, as I said on my remarks, and I think Manica mentioned it too, we're also seeing wealth management benefiting from also some of the flows going to our business in wealth management.
Speaker 2: But our expectation throughout the year is as Marisa pointed out, 25% beta accumulative. That's how we're modeling the year. And the reason for that is we're seeing the remix playing out. And again, based on what I just said earlier,
Speaker 2: Our expectation is to deposits to remain stable and it just gonna depend on how we do business development. But I really don't see the same dynamics that are occurring in the US banking market.
Speaker 5: Okay, great. And then just last for me, looking within your commercial buckets.
Speaker 5: Can you fill us in on kind of broader commercial real estate exposure, what you have in terms of if any commercial real estate office exposure on the mainland and then more broadly kind of how you're thinking about commercial real estate in Puerto Rico versus commercial real estate on the mainland?
Speaker 2: Yeah, yeah. So we don't have anything on commercial real estate in the mainland, really. What we have here in Puerto Rico, we do have in Puerto Rico an office building is around 3% of the commercial portfolio, office building CRE.
Speaker 2: So overall, I'm sorry, 8%. I made a mistake. So 8% of the commercial portfolio is office building.
Speaker 2: So, yeah. So, that's kind of how the exposure that we have.
Speaker 5: Okay, and as you know clearly the risk around the office space is being widely publicized on the mainland. Can you just maybe talk about the dynamics in office more broadly in Puerto Rico and what the risk or perceived risk is to those loans?
Speaker 2: So Timur, let me correct myself on the numbers. Maritza just pointed them out to me. So our office building is 8% of our CRE portfolio.
Speaker 2: myself on the numbers, so our office building is 8% of our CRE portfolio.
Speaker 2: And we have a CRE portfolio around 36%. And again, the CRE portfolio has...
Speaker 2: So, Puerto Rico is an island, so there are concentrations of office buildings, particularly or primarily in the metropolitan area. So that's where you see it. And we're seeing the same global trends of hybrid office and work and all that stuff. But my take from this is that we are not seeing the same acute issues and challenges that the office building market is having in the large cities in the United States. We really don't have those type of issues right now.
Speaker 2: So from our perspective, even in spite of the trends towards hybrid work and the post pandemic kind of dynamics, we're seeing quite a bit of office occupancy, high levels of office occupancy and we're not seeing any positive change here in thedown Oxygen.
Speaker 1: significant deterioration there. Got it. Thank you for the caller, much appreciated. Yep, you're welcome. Next we go to the line of Brett Rabatten with Hovde Group. Please go ahead.
Speaker 5: Good morning, everyone. I appreciate the questions. I wanted to first start, Jose, with auto. On the mainland, you've seen things like Capital One pull back from their floor plan lending platform.
Speaker 5: But in Puerto Rico, it's obviously a different environment. You know, there's not a great public transportation system and so people need their cars. But I was a little bit surprised to see the improvement link quarter in credit across the board. I'll talk about that.
Speaker 5: And I get, you know, you talked earlier about the economy, I get that the EAI index is up a little bit in March to 1.26. And I think March sales of auto were 10.7 thousand for the island. But I was just hoping to maybe get some color around credit improvement and auto specifically, if you would describe that to anything in particular. But I found what was being talked about today was really important in marketing. I know that some of you who are bloggers or some of you who have vertigo or some of you others as you would abroad, hate to call it that, but I think buying was tip of the 23rd. Again, it's kind of the best- list of different wide Chrait Chant comparable to saying 17ams coming this one, you know, weoloing shooting and…
Speaker 2: Yep, I think you pointed out the differences and what we're seeing in the way we manage our auto business is high FICO scores. We are making the adjustments to interest rates also. We are originating on a
Speaker 2: loans right now around 9% handle with FICO score average of around 720. So we are, you know, what we're seeing in terms of the credit and the the delinquency rates on auto is a it's another confirmation of the liquidity of our consumers and how the exit
Speaker 2: have always been very conservative on the writing side of the auto business. But we also recognize that the economy is also very supportive today.
Speaker 5: Okay. And wanted to ask, you know, in my mind, PREPA is the remaining big piece to kind of getting things continued headed in the right direction. And I've seen the wrangling around that that any, as you see it from your vantage point, any update on PREPA and just.
Speaker 2: You know the the cost of electricity, you know, if you think that could be resolved, you know Here in the near term or you think that might be a longer term situation That prep is a long long-term situation the the things that are being executed on it now like privatization of the distribution and transmission and now recently the generational
Speaker 2: also supporting that and I think let's not lose sight of Puerto Rico being a beneficiary of the focus that Washington is putting on us from an economic perspective and I think that is another reason why we are sitting where we are today. So PREPA is going to take longer but it's I think they're going to be private forces.
Speaker 2: There's going to be public forces. I mean, the Secretary of Energy from the US has visited three or four times already. So PREPA and electricity for Puerto Rico is a high focus for the executive branch in Washington. And I think together with the local government in the private sector, we as banks supporting also.
Speaker 2: electricity production in Puerto Rico. So I think that's as much as I can share in terms of electricity and PREPA in itself. So don't get discouraged by hearing too much noise on PREPA. The rails are in place to...
Speaker 5: to kind of bring it down in terms of cost and improving its quality and the resiliency. Okay, appreciate that. And then maybe just lastly, I wanted to make sure I understood you're still talking about guidance of mid-50s efficiency ratio.
Speaker 5: And so if I'm just thinking about the implications of that, it would seem like your margin maybe is, has peaked out here, you know, but.
Speaker 5: In terms of the net operating income, it would seem like your your expense expenses would maybe climb You know half a million to million quarterly from here You know and fee income doesn't change too much. Is that a fair way to think about the implicit guidance from the
Speaker 5: mid-50s efficiency ratio. I think you're looking at the right way.
Speaker 2: Remember, we have some variability throughout quarter over quarter in terms of interest expenses just simply because we are deploying technology and as the deployment comes out, we need to capitalize those investments. But you are looking at it the right way Brett.
Speaker 4: I don't know if Maritza wants to add anything. That's correct. That's why we're providing a guidance of 90 to 92 million dollars in quarterly expense range.
Speaker 4: And Maritza, do you want to add anything on the margin? Well, yeah, in the ending, probably, as I mentioned in my prepared remarks, we continue to have the same expectation for the full year that we will be in the same level as the last quarter.
Speaker 4: That was around 5.69. So we will be between that range for the full year. And that's our expectation.
Speaker 2: Part of it has to do with our, I think you guys are pointing it out in your write-offs, our higher yielding assets. And that's kind of what's driving it and helps us mitigate some of the shifting on the deposit type that I mentioned earlier.
Speaker 5: Okay, great. Thanks for the call.
Speaker 2: Yep, thank you for your questions. Have a good day.
Speaker 1: Next we go to the line of Alex Twerdal with Piper Sandler. Please go ahead, your line is open.
Speaker 1: with Piper Sandler. Please go ahead, your line is open. Hey, good morning.
Speaker 6: Good morning, Alex. I first wanted to go back to the commentary on the 25% through the cycle deposit data. And I was just curious if you can just really break that down for us in terms of is that total deposits, interest bearing deposits only.
Speaker 6: And when you think about the beta, you know, how does potential rate cuts later this year play into that? Because it just seems to me that the, we actually called around this morning and tried to get the highest rate we could get at any of the Puerto Rican banks. And I'm having a hard time getting to that 25% beta based on what we're hearing in the market today. Yeah, so Alex.
Speaker 4: You know when I think we have explained You know how how we're seeing things this quarter how we have been shifting through From DDA and saving into high yielding a time deposit So we're expecting to continue to see that type of migration through the through the rest of the year
Speaker 4: that we're in our base case scenario, we are targeting or estimating a 25% beta for the end of the year.
Speaker 2: I think Alex also, when we look at the beta and you break it into retail versus commercial, the beta on the commercial is higher. So we're also going to see some commercial clients asking for higher.
Speaker 2: higher rates and that's also part of what our base case scenario of 25% beta means. So if you kind of think about it, our beta for retail is going to be, our expectation is to be significantly lower.
Speaker 2: then that's 25%. But we're going to see the commercial data trending higher the rest of the year, just simply as Maritza mentioned, the clients being more efficient in their cash management. OK.
Speaker 6: And then, you know, as we think about that playing out over the rest of the year, is it, I mean, do you think the increases will be roughly straight lined? Or are we sort of in the, have you seen more increase?
Speaker 6: or more pressure to increase deposit rates in the first quarter and you think that'll slow or you know how you kind of thinking about it playing out over the next couple quarters in terms of deposit cost pressures.
Speaker 2: So I really don't feel that we are operating in a kind of pressured environment.
Speaker 2: I think you need to think about this, and I don't have an answer for you in terms of when, because who knows, right? But I think we need to think about this on also how do we continue to build and retain good profitable customer relations too on the commercial side.
Speaker 2: asking us for higher rates or not. But in general what we're doing here, it looks to us that throughout the year there's going to be that continuing shift. But I wouldn't call it pressure. I would call it more of a normal trending of rational.
Speaker 2: clients doing the right thing in terms of their cash management.
Speaker 4: Mostly in this type of cycle, no? Correct. And we still have maturities on time deposits that had lower rates, so that will happen through the year, the maturity of time deposits and replacing with higher rates.
Speaker 2: You also mentioned lower interest rates. If the Fed turns around and starts lowering interest rates, well, that's not the base case scenario that we are modeling ourselves on. We are modeling ourselves on that the lower interest, you know, the Fed moves rates lower next year, not this year. So what we're seeing is...
Speaker 2: moving up rates a bit more from these levels and then holding on until later in the first part of 2024. But again, I don't have a crystal ball and we're just modeling. One large-scale
Speaker 4: And just to add there, so far the beta on the asset side has been much higher than the deposit side and we still have room to continue having that type of dynamic through the beta in the asset side versus the beta.
Speaker 6: sort of how much more lift there could be, assuming rates basically stay here, maybe we get one more hike in the next couple months. And then, you know, yeah, I want you to start with that.
Speaker 4: Yeah so if you think about the expansion of this quarter the 19 basis point name extension
Speaker 4: About seven basis points came from cash and investment and the other 24 came from loans. And there is nothing extraordinary there. So we still have that benefit in the next quarter that we will have the full effect of the 50 basis points.
Speaker 4: that we that the Fed increases during this first quarter, so we will have that full effect. So just wanted to mention that we still have some maturities coming from the Treasury Group. We have 40 million dollars maturities in May then in August at 200 million dollars in dollars.
Speaker 4: And we will replenish that with a high yielding asset in the base. You know, we can invest in what we want, but I think if we assume cash, cash will be yielding more than the current carry and yield of that asset.
Speaker 6: So there is room for us to continue having a very good positive beta on the asset side. Great. And then, so I guess as you boil that down, I mean, is the NIM, you know, I think one of the earlier questions alluded to the NIM potentially peaking in the first quarter. I'm just curious how you're seeing the trajectory of the NIM over the next couple of quarters.
Speaker 2: As Maritza mentioned, we're seeing it equal to what we saw in the fourth quarter. The NIM should end for the year around the 565, 567, 568 percent. So that's kind of how we're modeling the NIM for the full year. So definitely there is a little bit of a trending down throughout the year as we have...
Speaker 6: very well to have excess liquidity, excess capital levels, or at least what I would consider excess capital levels. I'm just curious, you know, with the share price pulling back, you know, with every other bank out there, you know, how you guys are thinking about, you know, buyback activity or possible for buyback activity over the next couple quarters.
Speaker 2: Thank you for your question, Alex. You know we've been patient on the investment portfolio. We've also been patient on the capital management. We've always felt in the last couple of years that there was no rush for us to go into the investment investing securities and lower rates. The same thing we felt about.
Speaker 2: And now there is an opportunity for us to a.
Speaker 2: investment opportunity, investment portfolio and now it's yielding five handle with tax benefits. So that's another kind of a another point that we put in the bag of alternatives. So that's another point that we put in the bag of alternatives. So that's another kind of a another point that we put in the bag of alternatives.
Speaker 2: The same thing with capital. When we look at capital, we've looked at the dividend. We can increase the dividend very consistently throughout the last several years. We've also been opportunistic on the buyback, and we will continue to be opportunistic on the buyback too. So we still have around $60 million in change in the authorization.
Speaker 6: Thanks for taking my questions.
Speaker 1: You're welcome, have a great day. Next we go to the line of Kelly Motta with KBW. Please go ahead.
Speaker 1: Hi, good morning. Thanks for the question. Great quarter. I think maybe I will circle back to the funding just from a high-level perspective. You with unique to Puerto Rico, you guys have a lot of relief money still flowing in and that's accelerated.
Speaker 1: in consumer accounts or business accounts and wondering if that can help stem the outflows that we're seeing on the main mainland.
Speaker 2: Yeah, so Kelly, it's a good question, hard to answer, because money is fundable. And there's some US businesses here, retail businesses that really have operations in the island, but their banking is outside of Puerto Rico. Those are kind of the nationwide kind of franchises.
Speaker 2: and I have.
Speaker 2: It hasn't stayed at the same level as it was a year ago, but certainly it has stayed at a higher level than before all the stimulus and all the reconstruction activity starts flowing in, started to flow in. So I wish I could give you a specific answer to that question, but I really don't have one.
Speaker 1: offensive measure in the midst of mid-March, and any kind of color too around what the rate is on that would be helpful for our modeling purposes. Yeah, yeah, yeah. So, I think Timur asked the question at the beginning of the call regarding mid-March.
Speaker 2: How did you guys look at deposits and all that stuff? So now, how do we look at the world? We read the news, we see what's going on. So we were just being prudent and saying, let's just, we have ample liquidity here. We have availability at the Fairhulme Bank, all kinds of liquidity.
Speaker 2: just be defensive in case that anything trickles into Puerto Rico. The good news is that it didn't and it hasn't. So I think we're in a good position overall.
Speaker 1: in terms of our balance sheet, and that's how we're seeing it. Got it. Maybe last question for me is on credit. Your early stages total linkancies are down, MPAs down as well. As you look ahead, you know, charge operates are running a lot lower than they were pre-COVID.
Speaker 1: Do you have a sense of a cadence of normalization from here on out? Do you think where you've been the past couple quarters is a good estimation near term on a go-forward basis, or is there anything you're seeing that may indicate there could be a kick-up in credit losses?
Speaker 2: We are not seeing any reversal. We are not necessarily seeing a continuation of the trend downwards in terms of the delinquency rates and all accelerating because it's hard for us to envision that.
Speaker 2: But certainly what we're seeing from the consumer side on the credit is very encouraging. And we've been kind of waiting for the last year or so when is it going to kind of revert closer to the levels before the pandemic. And it hasn't. So I think it's time for us to say.
Speaker 2: will continue to trend positive in the foreseeable future.
Speaker 1: Alright, I'll step back. Thank you so much for the questions. You're welcome. Thank you for your questions too.
Speaker 7: And once again, if you'd like to ask a question, please press star and 1 on your telephone keypad. We'll pause again briefly. At this time, there are no further questions. I'll now turn the call back over to management for any closing remarks.
Speaker 2: Thank you, operator. Thanks again to all our team members and to all our stakeholders who are listening today. Have a wonderful day and enjoy the upcoming weekend. Thank you. This does conclude today's teleconference. We thank you for your participation.
Speaker 7: you may disconnect your lines at any time.