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New words:
advertising, AFICA, breadth, broken, carbon, charitable, consulting, cybersecurity, Delaware, energy, entirety, fading, FASB, FICA, foreign, fronting, GHG, greenhouse, grown, jurisdiction, lender, licensed, located, lowest, multiple, navigate, November, objective, OBPEF, ownership, paycheck, PPP, preferential, promotion, reconciling, recover, redeployed, registrant, registration, rightsizing, seasonal, settled, stimulate, tabular, theft, threshold, Topic, treatment, unaffiliated, vested, workforce
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accruing, acting, administrator, aftermath, agreed, amend, behalf, benchmark, beta, BTFP, budgetary, buyback, ceased, ceiling, challenging, commonly, Comparative, compelling, Conduct, connectivity, continuation, convertible, daily, decreasing, delivered, depreciation, determine, direction, dollar, duration, enhanced, fallback, FCA, Florida, forward, hedged, impacting, improved, involuntary, june, largely, leasing, leveled, LIBOR, linked, managing, master, matured, modifying, month, National, netting, nonaccrual, occupancy, OCFI, omitted, OPC, open, overnight, pension, persuading, pledging, posed, President, prudent, publication, publishing, reach, recordkeeping, redundant, reference, registered, repaid, restructuring, resulted, safekeeping, segmented, sensitive, settlement, SOFR, stop, submit, target, territory, today, transformation, troubled, typically, uncertain, undue, unplanned, vintage, voluntary, weighting
Financial report summary
?Risks
- Most of our business is conducted in Puerto Rico, where economic and government fiscal and liquidity challenges, as well as the impact of natural disasters and pandemics have adversely impacted and may continue to adversely impact us.
- Puerto Rico and the USVI are susceptible to earthquakes, hurricanes and major storms, the severity of which could be heightened by the effect of climate change, which could further deteriorate their economy and infrastructure.
- Terrorist attacks and armed conflicts may impact all aspects of our operations, revenues, costs and stock price.
- Changes in interest rates could adversely affect OFG’s results of operations and financial condition.
- Any downgrade in the credit rating of the U.S. government or default by the U.S. government as a result of political conflicts over legislation to raise the U.S. government’s debt limit may have a material adverse effect on OFG.
- Heightened credit risk could require us to increase our provision for credit losses, which could have a material adverse effect on our results of operations and financial condition.
- We are subject to default and other risks in connection with mortgage loan originations.
- A decline in the real estate market would likely result in an increase in delinquencies, defaults and foreclosures and in a reduction in loan origination activity, which would adversely affect our financial results.
- We may experience losses related to fraud and theft.
- We are subject to security and operational risks related to our use of technology, including the risk of cyber-attack or cyber theft.
- We rely on third parties to provide services and systems essential to the operation of our business, and any failure, interruption or termination of such services or systems could have a material adverse effect on our financial condition and results of operations.
- Non-Compliance with the USA Patriot Act, Bank Secrecy Act, or other laws and regulations could result in fines and other sanctions.
- If we are unable to maintain or grow our core deposits, we may be subject to paying higher funding costs and our net interest income may decrease.
- Consumer protection laws and the Durbin Amendment may reduce our noninterest income.
- Our risk management policies, procedures and systems may be inadequate to mitigate all risks inherent in our various businesses.
- Adverse developments in the financial services industry could adversely affect our financial condition and results of operations.
- Our business could be adversely affected if we cannot maintain access to stable funding sources.
- Our ability to receive dividends from our subsidiaries could affect our liquidity and ability to pay dividends to our shareholders.
- Failure to keep pace with technological change could adversely affect OFG’s results of operations and financial condition.
- Competition with other financial institutions could adversely affect our profitability.
- We operate in a highly regulated industry and may be adversely affected by changes in federal and local laws and regulations.
- Reputational risk and social factors may impact our results.
- Changes in accounting standards issued by the Financial Accounting Standards Board (“FASB”) or other standard-setting bodies may adversely affect our financial statements.
- Our goodwill and other intangible assets could be determined to be impaired in the future and could decrease OFG’s earnings.
- Legislative and other measures that may be taken by Puerto Rico governmental authorities could materially increase our tax burden or otherwise adversely affect our financial condition, results of operations or cash flows.
Management Discussion
- Net interest income is a function of the difference between rates earned on OFG’s interest-earning assets and rates paid on its interest-bearing liabilities (interest rate spread) and the relative amounts of its interest earning assets and interest-bearing liabilities (interest rate margin). OFG constantly monitors the composition and re-pricing of its assets and liabilities to maintain its net interest income at adequate levels.
- Net interest income of $560.9 million increased by $78.8 million from $482.1 million. Tax equivalent basis net interest income of $576.9 million increased $80.2 million, or 16.1%, from $496.8 million.
- Interest rate spread increased by 69 basis points to 5.71% from 5.02% and net interest margin increased 74 basis points to 5.79% from 5.05%. This increase reflects an increase of 130 and 61 basis points, respectively, in the total average yield of interest-earning assets and the average cost of interest-bearing liabilities.