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

Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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): June 27, 2019 (June 26, 2019)

 

 

OFG BANCORP

(Exact Name of Registrant as Specified in Charter)

 

 

 

Commonwealth of Puerto Rico   001-12647   66-0538893

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(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:

 

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))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common shares, par value $1.00 per share   OFG   New York Stock Exchange
7.125% Noncumulative Monthly Income Preferred Stock, Series A ($25.00 liquidation preference per share)   OFG.PRA   New York Stock Exchange
7.0% Noncumulative Monthly Income Preferred Stock, Series B ($25.00 liquidation preference per share)   OFG.PRB   New York Stock Exchange
7.125% Noncumulative Perpetual Preferred Stock, Series D ($25.00 liquidation preference per share)   OFG.PRD   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 7.01

Regulation FD Disclosure.

On June 26, 2019, OFG Bancorp (the “Company”) issued a press release announcing that the Company and Oriental Bank, a wholly-owned subsidiary of the Company (“Oriental”) entered into (i) a definitive Stock Purchase Agreement with Bank of Nova Scotia (“Seller”), (ii) a definitive Sale and Purchase Agreement (PR) with Seller and (iii) a definitive Sale and Purchase Agreement (USVI) with Seller (collectively, the “Transaction Agreements”). Under the Transaction Agreements, Oriental Bank has agreed to acquire, on the terms and subject to the conditions set forth in the Transaction Agreements, Seller’s Puerto Rico operation for $550 million in cash and Seller’s U.S. Virgin Island branch operation for a $10 million deposit premium (the “Transactions”). The press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

On June 27, 2019, the Company released a presentation to investors about the Transactions. The presentation is attached to this Current Report on Form 8-K as Exhibit 99.2 and is incorporated herein by reference.

The preceding information, as well as Exhibit 99.1 and Exhibit 99.2 referenced therein, shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits. The following exhibits are filed with this report:

 

Exhibit
No.
  

Description

99.1    Press Release, issued by the Company on June 26, 2019.
99.2    Investor Presentation, dated June 27, 2019.


SIGNATURES

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

 

Date: June 27, 2019     OFG BANCORP
                 By:  

/s/ Carlos O. Souffront

    Name:   Carlos O. Souffront
    Title:   General Counsel and Secretary of the Board of Directors
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Section 2: EX-99.1 (EX-99.1)

EX-99.1

Exhibit 99.1

 

LOGO

OFG Bancorp to Acquire Scotiabank Operations in Puerto Rico and US Virgin Islands

Conference Call Thursday at 10:00 AM ET

SAN JUAN, Puerto Rico, June 26, 2019 – OFG Bancorp (NYSE: OFG) and Scotiabank (NYSE: BNS) today announced the signing of a definitive agreement for OFG’s subsidiary, Oriental Bank, to acquire Scotiabank’s Puerto Rico operation for $550 million in cash and Scotiabank’s US Virgin Island (USVI) branch operation for a $10 million deposit premium.

Scotiabank’s Puerto Rico and USVI operations will be merged into Oriental Bank and its related businesses. The acquisition is subject to customary regulatory approvals.

Acquisition Highlights

 

   

Strengthens OFG businesses with enhanced scale, the addition of Scotiabank’s talented team, and improves Oriental’s competitive position as Puerto Rico’s premier retail bank

 

   

Oriental becomes the second largest in Puerto Rico in core deposits, branches, automated and interactive teller machines, and mortgage servicing

 

   

Expected to be approximately 40% accretive to OFG’s EPS in 2020 with robust capital generation and significantly expanded return on average tangible common equity

 

   

Upon closing, OFG will have a well-diversified loan portfolio totaling $7.2 billion, low cost deposits of $7.9 billion, and approximately 500,000 customers

 

   

Expected to expand Oriental’s mortgage servicing book five-fold to approximately $5 billion, giving it critical mass to create a new and meaningful non-interest income profit center

 

   

Scotiabank has substantially reduced its balance sheet credit risk and streamlined branch operations over the last five years in Puerto Rico and USVI

 

   

The transaction, which will be funded by OFG’s excess capital, is conservatively priced at 1.15x adjusted tangible book value for the Puerto Rico operation and 2% deposit premium for the USVI branch operation

 

   

OFG has a highly successful track record acquiring and integrating banks, including local and multi-nationally owned operations (Eurobank in 2010 and BBVA’s Puerto Rico operations in 2012)

 

 

 

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Conference Call

OFG will hold a conference call to discuss this announcement and related matters Thursday, June 27, 2019, at 10:00 AM Eastern and Puerto Rico Time. Phone (888) 562-3356 or (973) 582-2700. Use conference ID 557-9677. The call also can be accessed live on OFG’s website at www.ofgbancorp.com. A webcast replay will be available later. Access the webcast link in advance to download any necessary software.

CEO Comment

The acquisition provides the combined companies with greater prospects for growth, profitability and employee engagement, said José Rafael Fernández, President, CEO and Vice Chairman of the Board of OFG and Oriental Bank.

“It is also an excellent opportunity to deploy OFG’s excess capital to accelerate the implementation of our differentiation strategy, enhance financial performance, and increase shareholder value.

“We are combining two excellent banks to create a strongly capitalized, market leading institution focused on the needs of consumers and businesses in Puerto Rico and the US Virgin Islands.

“We’re excited about welcoming Scotia’s valued customers and talented team into the Oriental family. We share a similar culture, approach and outlook for our businesses and how we regard and service our customers.

“Scotiabank in Puerto Rico and the US Virgin Islands is known for its strong retail banking franchise in core deposits and loans, principally residential mortgages; its well-developed mortgage servicing and insurance agency operations; and provides Oriental with a presence as the third largest bank in the US Virgin Islands.

“The acquisition is also well timed. Rebuilding activities have given a much needed impetus, turning the Puerto Rico economy positive. Ultimately, the transaction reaffirms our faith in Puerto Rico’s future, and our commitment to play an instrumental role in it.

“Ganesh Kumar, our Senior Executive Vice President and Chief Operating Officer, will lead the integration team. Following its 2012 acquisition, Dr. Kumar supervised the very successful incorporation of BBVA PR’s $3.7 billion in loans and $3.3 billion in deposits.”

The OFG-Scotiabank Puerto Rico-USVI Combination

Upon consummation of the acquisition, Oriental Bank will significantly increase the number of clients served as well as its core deposit funding. The resulting loan portfolio will be approximately a third each in commercial loans, residential mortgages, and consumer loans and leases.

In recent years, Scotiabank has improved the credit quality of its portfolios in Puerto Rico and USVI. Total non-performing assets declined by 62% from 2016 to first quarter 2019, and total direct PR government exposure is no longer significant.

 

 

 

2


As of March 31, 2019, Scotiabank’s Puerto Rico and USVI operations had $2.5 billion in net loans, $3.2 billion in deposits, 21 branches, 225 ATMs, and approximately 1,000 employees. This adds to OFG’s $4.4 billion in net loans, $4.9 billion in deposits, 37 branches, 206 ATMs and Interactive Teller Machines, and 1,394 employees.

Financial Impact

The transaction is expected to be highly positive for OFG:

 

   

Based on current estimates, the acquisition is expected to be approximately 40% accretive to earnings per share in 2020 on a pro forma basis.

 

   

Projected annual cost savings are anticipated at about 25% of Scotiabank PR’s non-interest expenses. Approximately 75% of the savings are expected to be realized in 2020. Savings are expected to result from more efficient back office operations and vendor consolidation and efficiencies.

 

   

OFG expects to incur certain one-time restructuring charges of approximately $45 million in connection with the transaction.

 

   

Tangible book value per share is expected to be diluted by approximately 15% at close of the transaction, with an expected earnback in less than three years based on the crossover method.

Additional Information

 

   

The acquisition price of $550 million takes into account Scotiabank Puerto Rico’s plan to upstream a $500 million dividend to its parent. Prior to closing, Scotiabank Puerto Rico may elect to pay additional dividends to its parent of up to $125 million. If that happens, the purchase price will be adjusted downward by the amount of the additional dividends.

 

   

The acquisition has been unanimously approved by OFG’s and Oriental Bank’s Boards of Directors.

 

   

The transaction is subject to approval by the Board of Governors of the Federal Reserve System, the FDIC, the Commissioner of Financial Institutions of Puerto Rico, and USVI banking authorities, as well as other customary closing conditions.

 

   

Keefe, Bruyette & Woods, Inc. served as financial advisor for OFG, and Skadden, Arps, Slate, Meagher & Flom LLP served as its legal advisor.

 

   

For more information regarding Scotiabank Puerto Rico and USVI, impact of the transaction on a pro forma basis, and key assumptions underlying the pro forma analysis, see the investor presentation expected to be filed tomorrow as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission and posted on our website.

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.

 

 

 

3


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) changes to the financial condition of 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 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; (vii) the pace and magnitude of Puerto Rico’s economic recovery; (viii) the potential impact of damages from future hurricanes and natural disasters in Puerto Rico; (ix) the fiscal and monetary policies of the federal government and its agencies; (x) changes in federal bank regulatory and supervisory policies, including required levels of capital; (xi) the relative strength or weakness of the commercial and consumer credit sectors and the real estate market in Puerto Rico; (xii) the performance of the stock and bond markets; (xiii) competition in the financial services industry; and (xiv) 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, 2018, 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.

This press release shall not constitute, or form a part of, an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities.

About OFG Bancorp

Now in its 55th 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. Visit us at www.ofgbancorp.com.

# # #

Contacts

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

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

 

 

 

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Section 3: EX-99.2 (EX-99.2)

EX-99.2

Slide 1

Acquisition of Bank of Nova Scotia’s Puerto Rico & USVI Operations June 27, 2019 Exhibit 99.2


Slide 2

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) changes to the financial condition of 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 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; (vii) the pace and magnitude of Puerto Rico’s economic recovery; (viii) the potential impact of damages from future hurricanes and natural disasters in Puerto Rico; (ix) the fiscal and monetary policies of the federal government and its agencies; (x) changes in federal bank regulatory and supervisory policies, including required levels of capital; (xi) the relative strength or weakness of the commercial and consumer credit sectors and the real estate market in Puerto Rico; (xii) the performance of the stock and bond markets; (xiii) competition in the financial services industry; and (xiv) 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, 2018, 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. The acquisition discussed in this presentation is subject to customary regulatory approvals and other factors that could affect the timing of the closing of the transaction. This presentation does not constitute, or form a part of, an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities. 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 OFG’s financial supplements for a reconciliation of certain GAAP to non-GAAP measures, available at www.ofgbancorp.com. Forward Looking Statements


Slide 3

Acquisition Overview Description Acquired BNS PR & USVI Operations Acquisition of BNS’s Puerto Rico operations(1) for $550mm and USVI branch operation for $10mm deposit premium BNS to dividend $500mm of excess capital, out of its PR operations, prior to close(2) 100% cash transaction using available liquidity Expected closing before year end 2019 (as of 3/31/2019) BNS PR (1) BNS USVI Assets ($mm) $3,498mm(3) Net Loans ($mm) $2,241mm $255mm Deposits ($mm) $2,788mm $456mm(4) Cost of Deposits 0.62% 0.30% Yield on Loans 5.35% 5.55% Acquisition BNS PR Operation(1) BNS USVI Operation Scotiabank de Puerto Rico Scotiabank Puerto Rico Branch Two Scotiabank Branches BNS PR consists of Scotiabank de Puerto Rico (“SBPR”), an FDIC-insured bank, with $3.4bn in assets (pro forma for the $500mm dividend) and BNS’s Puerto Rico branch (as of 4/30/2019) with ~$80mm in assets BNS may dividend up to an additional $125mm out of its PR operations. In the event additional dividends are paid, the purchase price will be reduced dollar for dollar by the amount of that additional pre-closing dividend Adjusted for anticipated $500mm pre-close dividend Excludes $2.3mm of officer checks that are also in scope


Slide 4

Transaction Rationale Franchise Enhancing Strongly Accretive and Financially Attractive Mitigated Execution Risk Enhances our scale in the market and improves our competitive positioning Pro forma company will have the #2 deposit market share on the Island Adds a strong core deposit franchise with excellent funding cost (57bps cost of deposits) Provides an expanded customer base and complementary products and services Creates a new fee revenue source in the form of scalable mortgage servicing business We will be the 2nd largest mortgage servicer on the island with a ~$5bn servicing portfolio Effective use of excess capital expected to enhance financial performance, franchise and shareholder value Expected to generate significant earnings per share accretion (~40% in 2020) Opportunity to leverage the core deposit base as funding for loan growth Conservatively priced with modeled returns that exceed internal hurdles Extremely strong expected pro forma capital generation Comprehensive due diligence over three months Conservative purchase accounting mark of the loan portfolio BNS has improved the credit quality of its portfolios in Puerto Rico and USVI Successful track record in integrating acquisitions and managing classified assets in the Puerto Rico economic environment


Slide 5

Conservative Pricing and Attractive Returns Acquisition Multiple Analysis Attractive Financial Return EPS Accretion ~40% Accretive to EPS in 2020(3) Tangible Book Value per Share Tangible book value per share dilution of ~15% at close Earnback period less than 3 years using the crossover method Cost Savings 25% of BNS PR’s non-interest expense base IRR ~20% IRR Pro Forma Capital Tier 1 Leverage Ratio: ~9.5%(6) Common Equity Tier 1 Ratio: ~11.5%(6) Total Risk Based Ratio: ~14.5%(6) P/TBV 1.15x(1) 1.24x 2.09x P/2020E EPS 16.3x 11.3x(3) 19.1x P/2020E EPS + Cost Savings 9.8x 12.2x(5) Acquisition of BNS PR OFG Standalone(2) Comparable U.S. Transactions (4) TBV adjusted for $500 million anticipated dividend Based on OFG stock price as of 6/25/2019 Based on estimated 2020 EPS of $1.83 for OFG per FactSet consensus estimate Per S&P Global Market Intelligence: Comparable transactions include nationwide transactions since 1/1/2017 with announced deal values between $300mm and $700mm Per S&P Global Market Intelligence: Calculated based on forward year’s FactSet Consensus net income estimate and after-tax cost savings Estimated as of 12/31/19


Slide 6

Founded in 1910 and headquartered in San Juan Leading deposit franchise with 980 full-time employees, 19 branches, and 200k+ retail customers Provides personal and commercial banking, corporate financing and insurance services to local clients Scotiabank Puerto Rico 1975: Scotiabank acquired Banco Mercantil 2001: Established Scotiabank Insurance de Puerto Rico to offer complementary financial solutions 2010: Acquired operations of R-G Premier Bank under a FDIC LSA 1910: Established Scotiabank in Puerto Rico 1984: Opened the Scotiabank Plaza headquarters 2005: Established Scotia Mortgage of Puerto Rico 2014-2019: Significant branch consolidation and cost reductions De-risked the balance sheet from 2016 to 2019, reduced NPAs from $353mm to $134mm and direct PR government exposure from $157mm to $27mm 2018: Scotiabank received bank of the year award for the Caribbean & Latin America Company Overview Key Financials and Ratios Historical Milestones Source: S&P Global Market Intelligence; Company documents Excludes LSAs, non-recurring items and goodwill impairment Adjusted for the portion of loans and leases guaranteed by the U.S. government Personal banking: Checking and savings accounts, personal credit cards, mortgage loans and lines of credit. Insurance services include life, home and personal property, auto and credit insurance Commercial banking: Commercial savings and checking accounts, trade financing & business banking, cash management solutions and merchant acquiring


Slide 7

Pro Forma Puerto Rico Market Position Assets ($bn) Deposit Market Share(1) Branches Source: S&P Global Market Intelligence, Financial, public SEC and regulatory filings Per “Puerto Rico Financial Activity Report December 2018” published by Office of the Commissioner of Financial Institutions (“OCFI”); excludes brokered deposits Mortgage Servicing Assets ($bn) Branch Map OFG (37) Scotiabank de PR (19)


Slide 8

Two well established branches Saint Thomas Saint Croix 57% loan to deposit ratio Mortgage focused loan book 60 dedicated employees 15 ATMs 0.30% cost of deposits BNS USVI Operation Overview Loan Composition 3/31/19 Deposit Composition 3/31/19 Source: Company documents Per USVI Bankers Association market share report as of 12/31/2018 USVI Deposit Market Share(1) USVI Loan Market Share(1) $261mm $456mm Total Retail: 97.1% Total Retail: 69.7%


Slide 9

Loan & Deposit Mix $4.9bn Source: S&P Global Market Intelligence Note: OFG data per holding company regulatory filings as of 3/31/2019; BNS PR data per bank level regulatory filings as of 3/31/2019, plus loans and deposits from BNS PR branch as of 4/30/2019 and USVI branches as of 3/31/2019 MRQ Cost of Deposits: 0.72% MRQ Cost of Deposits: 0.57% MRQ Yield on Loans: 5.37% MRQ Yield on Loans: 7.36% Deposit Mix Gross Loan Mix $3.2bn $8.1bn $7.2bn $2.6bn $4.6bn OFG Stand Alone BNS PR & USVI Pro Forma


Slide 10

Transaction Assumptions Transaction Assumptions Consideration $550 million for BNS’s Puerto Rico operations(1) and $10 million deposit premium for BNS’s USVI branch operation 100% cash consideration Financing Consideration to be paid from cash on OFG’s balance sheet Loan Credit Mark 5.1% credit mark Core Deposit Intangibles 2.50% of core deposits(2), amortized sum of the years digits over 10 years Balance Sheet Restructuring BNS PR to payout a $500 million dividend before transaction closing BNS PR could elect to pay up to additional $125 million in pre-closing dividend, upon which purchase price will be adjusted downward by the amount of additional pre-closing dividend OFG to sell ~$1 billion in securities post transaction closing with proceeds used to prepay higher cost funding OFG to run-off certain BNS PR FDIC acquired mortgages and redeploy into commercial loans BNS PR consists of Scotiabank de Puerto Rico, an FDIC-insured bank, with $3.4bn in assets (pro forma for the $500mm dividend) and BNS’s Puerto Rico branch (IBE) with ~$80mm in assets Core deposits defined as total deposits less time deposits Assumptions on Acquired Operations Net Interest Income $150 million - $160 million Fee Income $50 million - $55 million Expenses $150 million - $160 million Cost Savings ~$35 million or 25% of BNS PR’s non-interest expense 75% realized in 2020, 100% thereafter Restructuring Expenses ~$45 million (pre-tax) Taxes 37.5% marginal tax rate Closing Expected closing before year end 2019


Slide 11

Result: Well-Capitalized Balance Sheet Capital Ratios Reported OFG (3/31/19A) Pro Forma (12/31/19E)(2) TCE / TA 13.1% ~8.5% Tier 1 Leverage 14.6 ~9.5 Common Equity Tier 1 Ratio 17.1 ~11.5 Total Risk Based Capital 20.8 ~14.5 Summary Key Balance Sheet Items Assets: 3/31/19A 3/31/19A 12/31/19E ($ in billions) OFG BNS PR & USVI(1) Pro Forma(2) Gross Loans $4.6 $2.6 $7.2 Cash & Securities 1.8 1.7 1.5 Total Assets 6.6 4.5 9.4 Liabilities and Equity: Deposits $4.9 $3.2 $7.9 Borrowings 0.5 0.1 0.2 Equity 1.0 1.0 1.0 Before payout of anticipated $500mm dividend Pro forma figures include purchase accounting adjustments and impact of balance sheet deleveraging


Slide 12

Conclusion Combining two excellent banks to create a strongly capitalized, market leading institution focused on the needs of consumers and businesses Improving the balance in the Puerto Rico market and creating the 2nd largest institution by core deposits Opportunity to leverage a strong core deposit base as funding for our loan growth Efficient way to use excess capital while increasing franchise value Expected to be highly accretive to EPS with robust capital generation and significantly expanded expected return on equity Conservatively priced with modeled returns that exceed internal hurdles Highly successful track record acquiring and integrating banks, including local and multi-nationally owned operations


Slide 13

Contacts IR Coordinator: Gary Fishman (gfishman@ofgbancorp.com) at 212-532-3232 IR Coordinator: Steven Anreder (sanreder@ofgbancorp.com) at 212-532-3232

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