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Section 1: 8-K (FORM 8-K)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________________________

 

FORM 8-K

_________________________

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): July 20, 2018

 

OFG Bancorp

 

(Exact Name of Registrant as Specified in its Charter)

 

 

 

 

 

 

Commonwealth of Puerto Rico

 

001-12647

 

66-0538893

 

 

 

 

 

(State or other Jurisdiction of Incorporation)  

 

(Commission File No.)  

 

(I.R.S. Employer
Identification No.)

 

 

 

Oriental Center, 15th Floor

 

 

254 Muñoz Rivera Avenue

 

 

San Juan, Puerto Rico

 

00918

 

 

 

(Address of Principal Executive Offices)  

 

(Zip Code)

             

 

 

Registrant’s telephone number, including area code: (787) 771-6800

 

 

(Former Name or Former Address, if Changed Since Last Report)

 

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

 

     ☐   

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

 

     ☐   

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

 

 

     ☐   

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

 

     ☐   

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


 

Item 2.02. Results of Operations and Financial Condition.

  

     On July 20, 2018, OFG Bancorp (the “Company”) announced the results for the quarter ended June 30, 2018. A copy of the Company’s press release is attached as an exhibit to this report.

 

Item 9.01. Financial Statements and Exhibits.  

 

     (d) Exhibits   

 

 

 

 

 

 

 

 

 

Exhibit No.

 

Description of Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

99

 

 

Press release by the Company dated July 20, 2018.

 

 

 

 

  

 


 

SIGNATURES  

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

OFG BANCORP

 

Date: July 20, 2018

By:  

/s/ Maritza Arizmendi

 

 

Maritza Arizmendi

 

 

Executive Vice President and Chief Financial Officer 

         

 

 


(Back To Top)

Section 2: EX-99 (EXHIBIT 99)

 

 

 

Exhibit 99

 

OFG Bancorp Reports 2Q18 Results

SAN JUAN, Puerto Rico, July 20, 2018 – OFG Bancorp (NYSE: OFG) reported results for the second quarter ended June 30, 2018, reflecting the third straight quarter of continued strong recovery following hurricanes that struck the island in September 2017.

2Q18 Summary

·        Net income available to shareholders was $16.2 million, or $0.35 per fully diluted share, compared to 1Q18’s $13.5 million and 2Q17’s $13.6 million, equal to $0.30 per share, respectively.

·        Average loan balances of $4.3 billion increased 3.0% from the preceding quarter as growth of originated loans is consistently outpacing the anticipated runoff of acquired loans.

·        New loan production of $432.1 million grew 39.7% from 1Q18 with sequential increases across the board in all categories.

·        Average core deposit balances of $4.4 billion rose 1.6% from 1Q18 with a 6.2% increase in non-interest bearing accounts to a record high $1.1 billion.

·        Customer count grew 1% from 1Q18 and 3% year over year as our strategy of differentiation, delivering superior customer convenience with innovative technology solutions, continues to be successful.

·        Total provision for loan and lease losses of $14.7 million dropped 4.6% from the preceding quarter as credit quality remains stable.

·        All key performance metrics improved from 1Q18 with net interest margin at 5.24%, return on average assets at 1.23%, return on average tangible common stockholders’ equity at 9.20%, and the efficiency ratio at 54.49%.

·        Tangible book value per common share of $15.96 at June 30, 2018 increased 6.4% annualized from March 31, 2018.

CEO Comments

José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board, commented: “On behalf of OFG’s entire team, we are extremely proud to announce

 


 

yet another quarter of superior results across all facets of our business. 2Q18 EPS is up more than 17% sequentially and more than 16% year over year. Virtually every one of our metrics confirms the success of our strategies, people and technology.

“For the third quarter in a row, loan growth, new loan production, and return on average tangible common stockholders' equity are up, while credit quality remained stable. For two quarters in a row, customer count, banking and financial service revenues, core retail deposits and NIM increased, and delinquency rates fell below pre-hurricane levels.

“Our effort to differentiate Oriental through superior service and technology is working. During 2Q18, we launched Oriental SmallBiz, another banking first for Puerto Rico, where new and existing customers can apply online for commercial credit. Services like these enable us to step up our ability to reach out to customers and clients fácil, rápido, hecho (easy, fast, done).

“We are also encouraged as OFG continues to build solid capital, with tangible book value per common share at $15.96, up sequentially more than 6% on an annualized basis. All indicators are positive, positioning us well to continue this trend for the rest of 2018.

“While Puerto Rico faces similar challenges as before, now that insurance and federal funds are flowing, economic activity and optimism are gaining momentum. Based on what we have seen to date, we are confident about OFG and Oriental’s ability to continue to grow, deliver great customer experience and performance, and help Puerto Rico recover.”

Income Statement Highlights

Unless otherwise noted, the following compares data for the second quarter 2018 to the first quarter 2018.

      Interest Income: Increased 5.8% or $4.8 million, reflecting the following:

      Originated Loans: Increased $4.4 million to $61.2 million, primarily due to higher balances.

      Acquired Loans: Declined $0.6 million to $17.2 million, reflecting continued pay downs.

      Investment Securities: Increased $1.0 million to $9.6 million, the result of higher balances and higher yield.

      Interest Expense: Increased 13.5% or $1.2 million to $10.4 million, due to higher borrowings and interest-bearing deposit balances.

      Total Provision for Loan and Lease Losses: Declined 4.6% or $0.7 million to $14.7 million. Provision for originated loans declined $2.1 million as most of the incremental commercial, consumer and auto charge-offs were previously reserved. This decrease more than offset the increase of $1.4 million for acquired loans.

 


 

      Net Interest Margin: Increased 2 basis points to 5.24% mainly due to higher yield on originated commercial loans, cash balances and investment securities, partially offset by higher rate on borrowings.

      Total Banking and Wealth Management Revenues: Increased $0.2 million to $18.4 million from 1Q18’s high level. Banking Services rose $0.7 million, primarily due to increased electronic banking activity, and Wealth Management increased $0.2 million, offsetting a decline in Mortgage Banking.

      Total Non-Interest Expenses: Declined $0.2 million to $52.3 million. General and administrative increased due to higher electronic banking activity. Occupancy increased due to lease cancellations to bring more of our offices into the Oriental Center building and reduce occupancy costs next year. Compensation declined due to seasonal factors during the first quarter, and credit related expenses fell.

      Effective Tax Rate: 32.8% continued to be in line with the approximately 32% rate the Company estimates for the full year.

Balance Sheet Highlights

Unless otherwise noted, the following compares data at June 30, 2018 to March 31, 2018.

      Total Loans Net: Increased 4.4% or $182.4 million to $4.32 billion. Production highlights include:

      Auto lending at a record $131.1 million was up 2.3% from 1Q18 and 66.8% year over year, reflecting replacement of damaged vehicles, pent up demand, and the market’s effort to adjust to one less auto lender.

      Consumer lending increased 12.8% to $42.3 million as customers moved to replace needed items, repair homes and prepare for the 2018 hurricane season.

      Mortgage lending continued to come back with production up 19.4% to $31.8 million, but down 30.7% from the year ago quarter.

      Commercial lending rebound with production increasing 197.3% to $127.2 million and up 70.0% year over year, as the Company’s bankers continue to build relationships with businesses participating in Puerto Rico’s recovery.

      The recently established OFG USA program continued to grow, adding $99.7 million, up 34.0% from 1Q18, in commercial and industrial related loan participations across an array of industries and geographies in the continental U.S.

 


 

      Cash and cash equivalents: Increased 3.6% or $13.0 million to $378.4 million.

      Total Investments: Increased 4.2% or $54.5 million to $1.35 billion with the purchase of new mortgage backed securities to take advantage of favorable market opportunities.

      Customer Deposits (excluding brokered): Increased $59.9 million to $4.42 billion, up 1.4% and 10.1% from March 31, 2018 and June 30, 2017, respectively. Growth in demand and time deposits more than offset a decline in savings.

      Total Borrowings: Increased $197.9 million to $552.3 million as OFG used repurchase agreement funding and FHLB advances to acquire investment securities.

      Total Stockholders’ Equity: Increased $11.0 million to $957.8 million, with increases in retained earnings and legal surplus more than offsetting the increase of accumulated other comprehensive loss due to the effect of higher prevailing market interest rates.

Credit Quality Highlights

Unless otherwise noted, the following compares data on the originated loan portfolio at June 30, 2018 to March 31, 2018.

Following hurricanes Irma and Maria, Oriental offered automatic payment deferrals and 90-day extensions for most loans. Virtually all of these moratoriums ended early 2Q18 with most credit metrics better than, or returned to, pre-hurricanes levels.

      Delinquency Rates: The early delinquency rate declined 13 basis points to 3.07% and the total delinquency rate declined 30 basis points to 5.95% as both metrics fell below pre-hurricanes levels.

      Non-Performing Loan Rate: Declined 19 basis points to 3.63%, with the mortgage and consumer rates up and commercial and auto rates down.

      Allowance for Loan and Lease Losses: Decreased 2.7% or $2.6 million to $94.2 million, primarily reflecting the charge-off a commercial loan placed in non-accrual and provisioned for in 1Q18.

      Net Charge-Off Rate: Increased 47 basis points to 1.81%, with a 116 bps increase in auto and smaller increases in consumer, commercial and mortgage lending, as hurricane related charge-offs were taken.

Capital Position

Capital for the quarter ended June 30, 2018 was significantly above regulatory requirements for a well-capitalized institution, with Tangible Common Equity Ratio at

 


 

10.95%, Tangible Book Value per common share at $15.96, Common Equity Tier 1 Capital Ratio at 14.14%, and Total Risk-Based Capital Ratio at 19.67%.

Conference Call

A conference call to discuss OFG’s results for 2Q18, outlook and related matters will be held today, Friday, July 20, 2018, at 10:00 AM Eastern Time. The call will be accessible live via a webcast on OFG’s Investor Relations website at www.ofgbancorp.com A webcast replay will be available shortly thereafter. Access the webcast link in advance to download any necessary software.

Financial Supplement

OFG’s Financial Supplement, with full financial tables for the quarter ended June 30, 2018, can be found on the Webcasts, Presentations & Other Files page, on OFG’s Investor Relations website at www.ofgbancorp.com

Non-GAAP Financial Measures

In addition to our financial information presented in accordance with GAAP, management uses certain “non-GAAP financial measures” within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. See Tables 9-1 and 9-2 in OFG’s above-mentioned Financial Supplement for reconciliation of GAAP to non-GAAP Measures and Calculations.

Forward Looking Statements

The information included in this document contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and involve certain risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements.

Factors that might cause such a difference include, but are not limited to (i) the rate of growth in the economy and employment levels, as well as general business and economic conditions; (ii) changes in interest rates, as well as the magnitude of such changes; (iii) the credit default by the government of Puerto Rico; (iv) amendments to the fiscal plan approved by the Financial Oversight and Management Board of Puerto Rico; (v) determinations in the court-supervised debt-restructuring process under Title III of PROMESA for the Puerto Rico government and all of its agencies, including some of its public corporations; (vi) the impact of property, credit and other losses in Puerto Rico as a result of hurricanes Irma and Maria; (vii) the amount of government, private and philanthropic financial assistance for the reconstruction of Puerto Rico’s critical infrastructure, which suffered catastrophic damages caused by hurricane Maria; (viii) the pace and magnitude of Puerto Rico’s economic recovery; (ix) the potential impact of damages from future hurricanes and natural disasters in Puerto Rico; (x) the fiscal and monetary policies of the federal government and its agencies; (xi) changes in federal bank regulatory and supervisory policies, including required levels of capital; (xii) the relative

 


 

strength or weakness of the commercial and consumer credit sectors and the real estate market in Puerto Rico; (xiii) the performance of the stock and bond markets; (xiv) competition in the financial services industry; and (xv) possible legislative, tax or regulatory changes.

For a discussion of such factors and certain risks and uncertainties to which OFG is subject, see OFG’s annual report on Form 10-K for the year ended December 31, 2017, as well as its other filings with the U.S. Securities and Exchange Commission. Other than to the extent required by applicable law, including the requirements of applicable securities laws, OFG assumes no obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

 

 

 


 

About OFG Bancorp

Now in its 54th year in business, OFG Bancorp is a diversified financial holding company that operates under U.S. and Puerto Rico banking laws and regulations. Its three principal subsidiaries, Oriental Bank, Oriental Financial Services and Oriental Insurance, provide a wide range of retail and commercial banking, lending and wealth management products, services and technology, primarily in Puerto Rico. Investor information can be found at Error! Hyperlink reference not valid.www.ofgbancorp.com.

# # #

Contacts

Puerto Rico: Idalis Montalvo (idalis.montalvo@orientalbank.com) at (787) 777-2847

US: Steven Anreder (sanreder@ofgbancorp.com) and Gary Fishman (gfishman@ofgbancorp.com) at (212) 532-3232

  

 


 

 

 

 

 

 

 

 

OFG Bancorp

 

Financial Supplement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The information contained in this Financial Supplement is preliminary and based on data available at the time of the earnings presentation, and investors should refer to our June 30, 2018 Quarterly Report on Form 10-Q once it is filed with the Securities and Exchange Commission.

 
 

 

 

 

 

 

 

 

Table of Contents

 

 

 

 

 

Pages

 

 

 

 

 

 

 

 

 

OFG Bancorp (Consolidated Financial Information)

 

 

 

 

Table  1:

 

Financial and Statistical Summary - Consolidated

 

2

 

 

Table  2:

 

Consolidated Statements of Operations

 

3

 

 

Table  3:

 

Consolidated Statements of Financial Condition

 

4

 

 

Table  4:

 

Information on Loan Portfolio and Production

 

5

 

 

Table  5:

 

Average Balances, Net Interest Income and Net Interest Margin

 

6-7

 

 

Table  6:

 

Loan Information and Performance Statistics (Excluding Acquired Loans)

 

8-9

 

 

Table  7:

 

Allowance for Loan and Lease Losses

 

10

 

 

Table  8:

 

Accretable Yield on Loans Accounted for Under ASC 310-30 (Loans Acquired

 

 

 

 

 

 

   with Deteriorated Credit Quality, Including those by Analogy)

 

11

 

 

Table  9:

 

Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory

 

 

 

 

 

 

   Capital

 

12-13

 

 

Table  10:

 

Notes to Financial Summary, Selected Metrics, Loans, and Consolidated

 

 

 

 

 

 

  Financial Statements (Tables 1-9)

 

14

 

 


 

OFG Bancorp (NYSE: OFG)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 1: Financial and Statistical Summary - Consolidated

 

 

 

 

2018

 

2018

 

2017

 

2017

 

2017

 

2018

 

2017

 

(Dollars in thousands, except per share data) (unaudited)

 

 

Q2

 

Q1

 

Q4

 

Q3

 

Q2

 

YTD

 

YTD

 

Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

$

77,588

 

$

73,994

 

$

73,513

 

$

80,478

 

$

75,563

 

$

151,582

 

$

150,181

 

Non-interest income, net (core)

(2)

 

 

18,394

 

 

18,239

 

 

16,734

 

 

17,213

 

 

17,933

 

 

36,633

 

 

35,361

 

Non-interest expense

 

 

 

52,300

 

 

52,121

 

 

46,662

 

 

50,469

 

 

52,816

 

 

104,421

 

 

104,500

 

Pre-provision net revenues

(21)

 

 

43,991

 

 

40,387

 

 

43,666

 

 

47,921

 

 

47,633

 

 

84,378

 

 

89,641

 

Provision for loan and lease losses

 

 

 

14,747

 

 

15,460

 

 

24,907

(a)

 

44,042

(a)

 

26,536

(b)

 

30,207

 

 

44,190

(a)(b)

Net income before income taxes

 

 

 

29,244

 

 

24,927

 

 

18,759

 

 

3,879

 

 

21,097

 

 

54,171

 

 

45,451

 

Income tax expense

 

 

 

9,595

 

 

8,010

 

 

1,686

 

 

560

 

 

3,993

 

 

17,605

 

 

13,197

 

Net income

 

 

$

19,649

 

$

16,917

 

$

17,073

 (a)  

$

3,319

 (a)  

$

17,104

 

$

36,566

 

$

32,254

 

Common Share Statistics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - basic

(3)

 

$

0.36

 

$

0.31

 

$

0.31

 (a)  

$

-

 (a)  

$

0.30

 

$

0.67

 

$

0.58

 

Earnings per common share - diluted

(4)

 

$

0.35

 

$

0.30

 

$

0.30

(a)

$

-

(a)

$

0.30

 

$

0.65

 

$

0.57

 

Average common shares outstanding

 

 

 

43,975

 

 

43,955

 

 

43,947

 

 

43,947

 

 

43,947

 

 

43,965

 

 

43,931

 

Average common shares outstanding and equivalents

 

 

 

51,226

 

 

51,121

 

 

51,104

 

 

51,102

 

 

51,100

 

 

51,157

 

 

51,093

 

Cash dividends per common share

 

 

$

0.06

 

$

0.06

 

$

0.06

 

$

0.06

 

$

0.06

 

$

0.12

 

$

0.12

 

Book value per common share (period end)

 

 

$

18.01

 

$

17.76

 

$

17.73

 

$

17.56

 

$

17.59

 

$

18.01

 

$

17.59

 

Tangible book value per common share (period end)

(5)

 

$

15.96

 

$

15.71

 

$

15.67

 

$

15.49

 

$

15.51

 

$

15.96

 

$

15.51

 

Balance Sheet (Average Balances)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

(6)

 

$

4,310,206

 

$

4,183,775

 

$

4,081,427

 

$

4,062,042

 

$

4,129,550

 

$

4,246,991

 

$

4,132,494

 

Interest-earning assets

 

 

 

5,933,775

 

 

5,751,783

 

 

5,735,593

 

 

5,658,953

 

 

5,848,525

 

 

5,842,932

 

 

5,887,428

 

Total assets

 

 

 

6,374,240

 

 

6,189,752

 

 

6,191,737

 

 

6,046,139

 

 

6,278,464

 

 

6,282,505

 

 

6,326,056

 

Interest-bearing deposits

 

 

 

3,766,311

 

 

3,756,607

 

 

3,835,357

 

 

3,774,378

 

 

3,844,490

 

 

3,761,486

 

 

3,847,481

 

Borrowings

 

 

 

462,614

 

 

351,793

 

 

374,059

 

 

462,035

 

 

614,332

 

 

407,509

 

 

664,861

 

Stockholders' equity

 

 

 

959,777

 

 

952,151

 

 

943,823

 

 

947,404

 

 

938,707

 

 

956,264

 

 

932,388

 

Common stockholders' equity

 

 

 

793,907

 

 

786,281

 

 

777,953

 

 

781,534

 

 

772,837

 

 

790,394

 

 

766,518

 

Performance Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin

(7)

 

 

5.24%

 

 

5.22%

 

 

5.08%

 

 

5.64%

 

 

5.18%

 

 

5.23%

 

 

5.14%

 

Return on average assets

(8)

 

 

1.23%

 

 

1.09%

 

 

1.10%

 

 

0.22%

(a)

 

1.09%

 

 

1.16%

 

 

1.02%

 

Return on average tangible common stockholders' equity

(9)

 

 

9.20%

 

 

7.73%

 

 

7.92%

 

 

-0.08%

 

 

8.01%

 

 

8.47%

 

 

7.51%

 

Efficiency ratio

(10)

 

 

54.49%

 

 

56.51%

 

 

51.70%

 

 

51.66%

 

 

56.49%

 

 

55.48%

 

 

56.32%

 

Full-time equivalent employees, period end

 

 

 

1,354

 

 

1,367

 

 

1,421

 

 

1,464

 

 

1,472

 

 

1,354

 

 

1,472

 

Credit Quality Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excluding acquired loans:

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Allowance for loan and lease losses

 

 

$

94,218

 

$

96,832

 

$

92,718

(a)

$

87,541

(a)

$

69,666

(b)

$

94,218

 

$

69,666

(a)(b)

    Allowance as a % of loans held for investment

 

 

 

2.66%

 

 

2.92%

 

 

2.89%

 (a)  

 

2.83%

 (a)  

 

2.25%

 

 

2.66%

 

 

2.25%

 

    Net charge-offs

 

 

$

15,449

 

$

10,844

 

$

10,466

 

$

11,815

 

$

13,635

(b)(c)

$

26,293

 

$

24,185

(b)

    Net charge-off rate

(11)

 

 

1.81%

 

 

1.34%

 

 

1.35%

 

 

1.54%

 

 

1.79%

 (b)(c)  

 

1.58%

 

 

1.59%

 (b)  

    Early delinquency rate (30 - 89 days past due)

 

 

 

3.07%

 

 

3.20%

 

 

1.82%

(d)

 

3.79%

 

 

3.52%

 

 

3.07%

 

 

3.52%

 

    Total delinquency rate (30 days and over)

 

 

 

5.95%

 

 

6.25%

 

 

4.61%

 (d)  

 

6.84%

 

 

6.31%

 

 

5.95%

 

 

6.31%

 

Capital Ratios (Non-GAAP)

(12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leverage ratio

 

 

 

13.92%

 

 

14.07%

 

 

13.92%

 

 

14.07%

 

 

13.69%

 

 

13.92%

 

 

13.69%

 

Common equity Tier 1 capital ratio

 

 

 

14.14%

 

 

14.52%

 

 

14.59%

 

 

14.89%

 

 

14.66%

 

 

14.14%

 

 

14.66%

 

Tier 1 risk-based capital ratio

 

 

 

18.38%

 

 

19.00%

 

 

19.05%

 

 

19.53%

 

 

19.14%

 

 

18.38%

 

 

19.14%

 

Total risk-based capital ratio

 

 

 

19.66%

 

 

20.29%

 

 

20.34%

 

 

20.82%

 

 

20.42%

 

 

19.66%

 

 

20.42%

 

Tangible common equity ("TCE") ratio

 

 

 

10.95%

 

 

11.22%

 

 

11.29%

 

 

10.98%

 

 

11.09%

 

 

10.95%

 

 

11.09%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) During the Q3 and Q4 2017, earnings were impacted by Hurricanes Irma and Maria, which struck the island on September 7, 2017 and September 20, 2017, respectively. Based on our assessment of the facts we have increased our provision for the allowance of loan losses in the 3Q 2017 and 4Q 2017 by $27 million and $5.4 million, respectively, related to these hurricanes.

(b) On June 30, 2017, the Company entered into an agreement for the sale of a municipality loan for $28.8 million. At June 30, 2017, this loan, which included a principal payment of $4.8 million received in July 1, 2017, was reported as other loans held for sale, at fair value.  As a result of this transaction, the Company recognized a $4.3 million charge-off during the second quarter. Proceeds were received on July 5, 2017. An allowance of $5.9 million was created during the second quarter for the remaining portfolio of municipal loans.

(c) During Q2 2017 , the Company had additional recoveries in auto and consumer loans of $1.1 million and $612 thousand, respectively.

 

(d) After Hurricane Irma and Maria on September 7, 2017 and September 20, 2017, respectively, the Company offered an automatic three-month moratorium for the payment of principal and interest for certain loans. During Q4 2017, the Company received payments on loans in moratorium, causing a decrease in delinquency.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 


 

 


 

OFG Bancorp (NYSE: OFG)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 2: Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Six-Months Ended

 

 

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

June 30,

 

June 30,

 

(Dollars in thousands, except per share data) (unaudited)

 

 

2018

 

2018

 

2017

 

2017

 

2017

 

2018

 

2017

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Non-acquired loans

 

 

$

61,183

 

 $  

56,781

 

$

56,183

 

$

58,939

(f)

 $  

53,449

 

$

117,964

 

 $  

105,404

 

    Acquired BBVAPR loans

 

 

 

13,880

 

 

14,490

 

 

15,310

 

 

19,189

(e)

 

17,752

 

 

28,370

 

 

36,837

 

    Acquired Eurobank loans

 

 

 

3,366

 

 

3,341

 

 

3,573

 

 

4,339

 

 

6,037

 

 

6,707

 

 

12,647

 

          Total interest income from loans

 

 

 

78,429

 

 

74,612

 

 

75,066

 

 

82,467

 

 

77,238

 

 

153,041

 

 

154,888

 

Investment securities

 

 

 

9,577

 

 

8,558

 

 

8,108

 

 

7,888

 

 

8,702

 

 

18,135

 

 

17,230

 

          Total interest income

 

 

 

88,006

 

 

83,170

 

 

83,174

 

 

90,355

 

 

85,940

 

 

171,176

 

 

172,118

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Core deposits

 

 

 

5,517

 

 

5,412

 

 

5,613

 

 

5,438

 

 

5,568

 

 

10,929

 

 

11,036

 

    Brokered deposits

 

 

 

2,134

 

 

1,886

 

 

2,079

 

 

2,163

 

 

2,084

 

 

4,020

 

 

3,969

 

           Total deposits

 

 

 

7,651

 

 

7,298

 

 

7,692

 

 

7,601

 

 

7,652

 

 

14,949

 

 

15,005

 

Borrowings

 

 

 

2,767

 

 

1,878

 

 

1,969

 

 

2,276

 

 

2,725

(h)

 

4,645

 

 

6,932

 

           Total interest expense

 

 

 

10,418

 

 

9,176

 

 

9,661

 

 

9,877

 

 

10,377

 

 

19,594

 

 

21,937

 

Net interest income

 

 

 

77,588

 

 

73,994

 

 

73,513

 

 

80,478

 

 

75,563

 

 

151,582

 

 

150,181

 

    Provision for loan and lease losses, excluding acquired loans

 (1)  

 

 

12,835

 

 

14,958

 

 

15,643

 (d)  

 

29,690

 (d)  

 

22,818

 (g)  

 

27,793

 

 

34,553

 

    Provision for acquired BBVAPR loan and lease losses

(1)

 

 

1,247

 

 

363

 

 

7,112

(d)

 

11,811

(d)

 

3,306

 

 

1,610

 

 

7,605

 

    Provision (recapture) for acquired Eurobank loan and lease losses

 (1)  

 

 

665

 

 

139

 

 

2,152

 (d)  

 

2,541

 (d)  

 

412

 

 

804

 

 

2,032

 

          Total provision for loan and lease losses, net

 

 

 

14,747

 

 

15,460

 

 

24,907

(d)

 

44,042

(d)

 

26,536

 

 

30,207

 

 

44,190

 

           Net interest income after provision for loan and lease losses

 

 

 

62,841

 

 

58,534

 

 

48,606

 

 

36,436

 

 

49,027

 

 

121,375

 

 

105,991

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking service revenues

 

 

 

11,144

 

 

10,463

 

 

8,461

(a)

 

9,923

(f)

 

10,458

 

 

21,607

 

 

21,084

 

Wealth management revenues

 

 

 

6,262

 

 

6,019

 

 

7,043

 

 

6,016

 

 

6,516

 

 

12,281

 

 

12,731

 

Mortgage banking activities

 

 

 

988

 

 

1,757

 

 

1,230

 

 

1,274

 

 

959

 

 

2,745

 

 

1,546

 

          Total banking and financial service revenues

 

 

 

18,394

 

 

18,239

 

 

16,734

 

 

17,213

 

 

17,933

 

 

36,633

 

 

35,361

 

FDIC shared-loss benefit (expense), net

 

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

1,403

 (j)  

Other gains, net

 

 

 

309

 

 

275

 

 

81

 

 

699

(j)

 

6,953

(h)

 

584

 

 

7,196

 

           Total non-interest income, net

 

 

 

18,703

 

 

18,514

 

 

16,815

 

 

17,912

 

 

24,886

 

 

37,217

 

 

43,960

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

 

 

18,099

 

 

20,608

 

 

20,205

 

 

19,882

 

 

19,317

 

 

38,707

 

 

39,664

 

Rent and occupancy costs

 

 

 

9,166

 

 

7,768

 

 

8,546

 

 

8,276

 

 

8,537

 

 

16,934

 

 

15,736

 

Net loss on sale of foreclosed real estate and other repossessed assets

 

 

 

392

 

 

1,226

 

 

126

 (b)  

 

1,395

 

 

1,787

 

 

1,618

 

 

3,113

 

General and administrative expenses

 

 

 

22,746

 

 

20,100

 

 

16,350

(a)(c)

 

19,202

 

 

20,958

 

 

42,846

 

 

41,144

 

           Total operating expenses

 

 

 

50,403

 

 

49,702

 

 

45,227

 

 

48,755

 

 

50,599

 

 

100,105

 

 

99,657

 

Credit related expenses

 

 

 

1,897

 

 

2,419

 

 

1,435

 

 

1,714

 

 

2,217

 

 

4,316

 

 

4,843

 

           Total non-interest expense

 

 

 

52,300

 

 

52,121

 

 

46,662

 

 

50,469

 

 

52,816

 

 

104,421

 

 

104,500

 

Income before income taxes

 

 

 

29,244

 

 

24,927

 

 

18,759

 

 

3,879

 

 

21,097

 

 

54,171

 

 

45,451

 

Income tax expense

 

 

 

9,595

 

 

8,010

 

 

1,686

 

 

560

 

 

3,993

 (i)  

 

17,605

 

 

13,197

 

Net income

 

 

 

19,649

 

 

16,917

 

 

17,073

 

 

3,319

(d)

 

17,104

 

 

36,566

 

 

32,254

 

Less:  dividends on preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Convertible preferred stock

 

 

 

(1,837)

 

 

(1,838)

 

 

(1,838)

 

 

(1,838)

 

 

(1,837)

 

 

(3,675)

 

 

(3,675)

 

    Other preferred stock

 

 

 

(1,628)

 

 

(1,627)

 

 

(1,627)

 

 

(1,627)

 

 

(1,629)

 

 

(3,255)

 

 

(3,256)

 

Net income (loss) available to common shareholders

 

 

$

16,184

 

$

13,452

 

$

13,608

 

$

(146)

 

$

13,638

 

$

29,636

 

$

25,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) During the 4Q 2017, electronic banking fee income and  electronic banking expenses decreased $0.9 million and $1.0 million, respectively, from the prior quarter as a result of lower point of sale (POS) activity from our customers. The decrease is directly related to business interruption in several of our commercial clients from the lack of electricity.

 

(b) During the 4Q 2017, the Company generated higher gains in sale of foreclosed real estate by approximately $0.7 million and had lower write downs by approximately $0.6 million.

 

(c) During the 4Q 2017, the Company reversed $1.4 million expenses as a result of the settlement of regulatory and legal contingencies at a lower amount than estimated.

 

(d) During the Q3 and Q4 2017, earnings were impacted by Hurricanes Irma and Maria, which struck the island on September 7, 2017 and September 20, 2017, respectively. Based on our assessment of the facts we have increased our provision for the allowance of loan losses in the 3Q 2017 and 4Q 2017 by $27 million and $5.4 million, respectively, related to these hurricanes.

+

(e) During Q3 2017, the Company recognized $3.1 million in cost recoveries from the Puerto Rico Housing Finance Authority ("PRHFA") loan with an outstanding principal balance of $10.9 million.

 

(f) During Q3 2017, the Company received $22.4 million from the pay-off before maturity of a loan previously classified as non-accrual. As a result, the Company recorded $4.1 million in interest income and $439 thousand in prepayment penalty income, included in banking service revenues.

 

(g) On June 30, 2017, the Company entered into an agreement for the sale of a municipality loan for $28.8 million. At June 30, 2017, this loan, which included a principal payment of $4.8 million received in July 1, 2017, was reported as other loans held for sale, at fair value.  As a result of this transaction, the Company recognized a $4.3 million charge-off during the second quarter. Proceeds were received on July 5, 2017. An allowance of $5.9 million was created during the second quarter for the remaining portfolio of municipal loans.

 

(h) During Q2 2017, the Company sold $166.0 million of mortgage-backed securities and recorded a net gain on sale of securities of $6.8 million. Also, it sold $39.2 million Treasury Notes and recorded a net gain of $112 thousand. In addition, the Company unwound repurchase agreements in the amount of $100 million at a cost of $80 thousand.

 

(i) During Q2 2017, the effective income tax rate decreased as a result of higher proportion of exempt income and income subject to preferential rates mainly due to the gain in sale of investment portfolio.

 

(j) During Q3 2017, the Company received $571 thousand, as final settlement from a 2009 claim of loss related to a private label collateralized obligation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 


 

 


 

OFG Bancorp (NYSE: OFG)

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 3: Consolidated Statements of Financial Condition

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

(Dollars in thousands) (unaudited)

 

 

2018

 

2018

 

2017

 

2017

 

2017

 

Cash and cash equivalents

 

 

$

378,365

 

$

365,388

 

$

488,233

 

$

723,756

(e)

$

480,338

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading securities

 

 

 

418

 

 

293

 

 

191

 

 

284

 

 

294

 

Investment securities available-for-sale, at fair value, with amortized cost of $890,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    (March 31, 2018 - $815,970; December 31, 2017 - $648,799; September 30, 2017 - $611,936;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    June 30, 2017 - $649,280)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Mortgage-backed securities

 

 

 

855,686

 

 

784,972

 

 

629,124

 

 

596,222

 

 

584,930

(h)

    Other investment securities

 

 

 

16,655

 

 

16,669

 

 

16,673

 

 

17,201

 (f)  

 

64,397

 

          Total investment securities available-for-sale

 

 

 

872,341

 

 

801,641

 

 

645,797

 

 

613,423

 

 

649,327

 

Mortgage-backed securities held-to-maturity, at amortized cost, with fair value of $447,947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    (March 31, 2018 - $467,980; December 31, 2017 - $497,681; September 30, 2017 - $525,830;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     June 30, 2017 - $549,595)

 

 

 

465,427

 

 

485,143

 

 

506,064

 

 

530,178

 

 

555,407

 

Federal Home Loan Bank (FHLB) stock, at cost

 

 

 

14,919

 

 

11,499

 

 

13,995

 

 

14,016

 

 

16,616

 

Other investments

 

 

 

3

 

 

3

 

 

3

 

 

3

 

 

3

 

          Total investments

 

 

 

1,353,108

 

 

1,298,579

 

 

1,166,050

 

 

1,157,904

 

 

1,221,647

 

Loans, net

 

 

 

4,315,866

 

 

4,133,429

 

 

4,056,329

 

 

3,964,572

 

 

4,091,866

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

 

 

1,100

 

 

898

 

 

771

 

 

809

 

 

957

 

Prepaid expenses

 

 

 

11,127

 

 

7,625

 

 

9,734

 

 

13,070

 

 

17,117

 

Deferred tax asset, net

 

 

 

125,141

 

 

128,270

 

 

127,421

 

 

126,041

 

 

116,199

 

Foreclosed real estate and repossessed properties

 

 

 

46,035

 

 

45,396

 

 

47,721

 

 

51,104

 

 

53,448

 

Premises and equipment, net

 

 

 

66,174

 

 

67,163

 

 

67,860

 

 

67,994

 

 

69,836

 

Goodwill

 

 

 

86,069

 

 

86,069

 

 

86,069

 

 

86,069

 

 

86,069

 

Accounts receivable and other assets

 

 

 

118,577

 

 

114,304

 

 

138,865

(d)

 

96,898

 

 

98,349

 

Total assets

 

 

 $  

6,501,562

 

 $  

6,247,121

 

 $  

6,189,053

 

 $  

6,288,217

 

 $  

6,235,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

 

$

2,176,935

 

$

2,117,857

 

$

2,039,126

 

$

1,925,721

 

$

1,844,996

 

Savings accounts

 

 

 

1,219,159

 

 

1,228,646

 

 

1,204,514

 

 

1,311,515

 

 

1,115,669

 

Time deposits

 

 

 

1,022,682

 

 

1,012,329

 

 

1,037,310

 

 

1,053,568

 

 

1,053,110

 

Brokered deposits

 

 

 

461,425

 

 

474,596

 

 

518,532

 

 

535,600

 

 

568,911

 

          Total deposits

 

 

 

4,880,201

 

 

4,833,428

 

 

4,799,482

 

 

4,826,404

 

 

4,582,686

 

Borrowings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities sold under agreements to repurchase

 

 

 

387,770

(b)

 

273,926

(b)

 

192,869

(c)

 

283,080

(g)

 

453,492

 

Advances from FHLB and other borrowings

 

 

 

128,413

 (a)  

 

44,328

 

 

99,796

 

 

100,091

 

 

137,717

 

Subordinated capital notes

 

 

 

36,083

 

 

36,083

 

 

36,083

 

 

36,083

 

 

36,083

 

          Total borrowings

 

 

 

552,266

 

 

354,337

 

 

328,748

 

 

419,254

 

 

627,292

 

Other liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

 

679

 

 

752

 

 

1,281

 

 

1,677

 

 

1,881

 

Acceptances outstanding

 

 

 

30,578

 

 

25,869

 

 

27,644

 

 

16,486

 

 

22,739

 

Accrued expenses and other liabilities

 

 

 

80,019

 

 

85,886

 

 

86,791

 

 

86,766

 

 

62,259

 

          Total liabilities

 

 

 

5,543,743

 

 

5,300,272

 

 

5,243,946

 

 

5,350,587

 

 

5,296,857

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

176,000

 

 

176,000

 

 

176,000

 

 

176,000

 

 

176,000

 

Common stock

 

 

 

52,626

 

 

52,626

 

 

52,626

 

 

52,626

 

 

52,626

 

Additional paid-in capital

 

 

 

541,734

 

 

541,404

 

 

541,600

 

 

541,302

 

 

541,005

 

Legal surplus

 

 

 

85,249

 

 

83,138

 

 

81,454

 

 

79,795

 

 

79,460

 

Retained earnings 

 

 

 

221,441

 

 

210,008

 

 

200,878

 

 

191,567

 

 

194,687

 

Treasury stock, at cost

 

 

 

(103,969)

 

 

(104,142)

 

 

(104,502)

 

 

(104,502)

 

 

(104,502)

 

Accumulated other comprehensive (loss) income, net

 

 

 

(15,262)

 

 

(12,185)

 

 

(2,949)

 

 

842

 

 

(307)

 

          Total stockholders' equity

 

 

 

957,819

 

 

946,849

 

 

945,107

 

 

937,630

 

 

938,969

 

          Total liabilities and stockholders' equity

 

 

$

6,501,562

 

$

6,247,121

 

$

6,189,053

 

$

6,288,217

 

$

6,235,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) During Q2 2018, the Company received from the Federal Home Loan Bank of New York $70 million of advances to attend liquidity.

 

(b) During Q2 2018 and Q1 2018, the Company bought $197 million and $91 million, respectively,  of repurchase agreements to finance the investment securities purchases.

 

(c) During Q4 2017, the Company made an unwinding of $80 million repurchase agreements at no cost.

 

(d) At December 31, 2017, the Company had higher balances in accounts receivable and other assets mainly from accrued interest receivable of loans included in hurricane Maria moratorium program.

 

(e) At September 30, 2017, the Company had higher balances in cash and cash equivalents due to increased deposits and lower transaction outflows toward the end of the quarter from commercial customers.

 

(f) During Q3 2017, the Company sold $45.0 million US Treasury securities available for sale and recorded a gain of $4 thousand.

 

(g) During Q3 2017, $160.4 million in short-term repurchase agreements matured and were not renewed.

 

(h) During Q2 2017, the Company sold $166.0 million of mortgage-backed securities and recorded a net gain on sale of securities of $6.8 million. Also, it sold $39.2 million Treasury Notes and recorded a net gain of $112 thousand. In addition, the Company unwound repurchase agreements in the amount of $100 million at a cost of $80 thousand.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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