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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): October 21, 2019

 

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 October 21, 2019, OFG Bancorp (the “Company”) announced the results for the quarter ended September 30, 2019. 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 October  21, 2019.

 

 

 

 

  

 


 

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: October 21, 2019

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 3Q19 Results

SAN JUAN, Puerto Rico, October 21, 2019 – OFG Bancorp (NYSE: OFG) today reported results for the third quarter ended September 30, 2019.

Highlights 3Q19 vs. 3Q18

    Net income available to shareholders of $5.8 million, or $0.11 per share fully diluted, reflects the impact of several strategic transactions, compared to $19.6 million, or $0.42 per share fully diluted, in 3Q18. Book value per common share grew 3.1% to $18.84. Tangible Book Value per common share expanded 5.4% to $17.11.

    3Q19 included $40.5 million pre-tax from items that negatively affected results, primarily due to the decision to sell mostly non-performing loans, partially offset by $13.0 million pre-tax from items that benefited results, such as the sale of available-for-sale mortgage-backed securities (MBS) and of fully charged-off loans, and the adjustment to the qualitative factors of the allowance for loan and lease losses.

    Excluding the above items, 3Q19 adjusted net income available to shareholders was $24.9 million, or $0.48 per share fully diluted.*

    Loans at September 30, 2019 increased 1.2% to $4.41 billion. Average core deposits rose 3.4% to $4.56 billion, while non-core funding was reduced 41.7% by quarter end. New loan origination of $291.4 million reflected Oriental Bank’s success in targeting small business customers and our growing consumer banking business. Net Interest Margin remained strong at 5.35%, total delinquency rate improved, and capital metrics continued to climb to new multi-year highs.

Conference Call

A conference call to discuss 3Q19 results, outlook and related matters will be held today at 10:00 AM Eastern Time. Phone (888) 562-3356 or (973) 582-2700. Use conference ID 619-9357. The call can also be accessed live on www.ofgbancorp.com Webcast replay will be available shortly thereafter.

CEO Comment

“Our core operations continue to deliver excellent results,” said José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board.

“During the quarter, we took advantage of market conditions and sold MBS and fully charged off loans at a profit, and we also decided to sell a good portion of our remaining non-performing loans.

 


 

This further strengthens our liquidity and balance sheet to continue our growth strategy and prefunds our $560 million acquisition of Scotiabank’s operations in PR and USVI.

 


 

“Our strategies are proving highly effective in capturing the positive economic shift taking place in Puerto Rico. Small business, auto and consumer loan production; core deposit growth, credit quality, and capital; and number of net new clients confirm the success of our customer focused approach to banking – Fácil, Rápido, Hecho. As a result, we generated a 14% year over year increase in adjusted earnings per share.

“With our NPL sales, we reduced 3Q19 non-performing loans 40% year over year, to 2% of originated loans, which will enable us to free up resources, reduce NPL related expenses, and increase operating flexibility. Combined with the sale of MBS, we have close to $1 billion in cash to fund our growth plans, including our acquisition of Scotiabank’s PR and USVI operations. The MBS sales also enabled us to reduce high cost brokered CDs and borrowings.

“Looking ahead, Oriental will further consolidate its position as the premier retail bank on the island. Upon closing the Scotiabank acquisition, we become the second largest bank in Puerto Rico in core deposits, branches, automated and interactive teller machines, mortgage servicing, and insurance brokerage, and the third largest bank in US Virgin Islands.

“As always, thanks to our team for their commitment and dedication, and to all our retail and commercial customers for their support and loyalty.”

3Q19 Items

    The following resulted in a net $32.0 million increase in the provision for loan losses:

   Increase of $39.0 million primarily from deciding to sell $95.0 million unpaid principal balance in non-performing commercial and mortgage loans, both acquired and originated. These are expected to be sold in 4Q19.

   Decrease of $2.4 million from the proceeds of the sale of $26.0 million of previously charged off auto and consumer loans.

   Decrease of $4.5 million from the adjustment to qualitative factors of the allowance for loan and lease losses, reflecting sustained favorable macroeconomic conditions in Puerto Rico.

    The sale of $322.0 million of low-yielding MBS resulted in a $3.5 million pre-tax gain in other income, and the continued reduction of higher cost brokered CDs and repurchase agreement funding.

    Non-interest expenses were reduced $1.0 million as a result of three items discussed in the “Income Statement” section below.

Current Expected Credit Losses (CECL)

We have substantially completed the model development process for CECL implementation.

 

 


 

    For the originated book, which accounts for 84% of total gross loans, we are estimating an increase in the current allowance of around 16% to 23%. This will be phased-in through regulatory capital in 2020 through 2022.

    For the acquired book, which represents 16% of total gross loans, we expect its allowance will be enough to cover CECL implementation. Any adjustment will be made through the allowance and loan balances with no impact in capital.

The final impact of CECL will depend on the circumstances at the date of adoption such as asset quality, macro-economic conditions and economic perspective, and continued refinement in 4Q19.

Income Statement

Unless otherwise noted, the following compares data for the third quarter 2019 to the third quarter 2018.

    Interest Income fell $0.5 million, to $93.7 million. Continued originated loan growth (+7.2%) and higher yield (+11 basis points) was mostly offset by continued pay downs of acquired loans and 2Q19 and 3Q19 MBS sales. Interest income increased $5.9 million from originated loans and $2.4 million from cash equivalents, and declined $4.2 million from acquired loans and $4.6 million from investment securities.

    Interest expense increased 9.1% or $1.1 million to $12.9 million. Core deposit costs increased $2.4 million due to higher average balances excluding non-interest bearing deposits (+4.0%) and rate (+25 basis points). Brokered deposit costs fell $0.4 million due to lower average balances (-31.1%) and higher rate (+47 basis points). Borrowing costs fell $0.9 million due to lower average balances (-32.4%) and higher rate (+22 basis points).

    Net Interest Margin, excluding cost recoveries, increased 7 basis points to 5.33% from 5.26%. The increase reflected higher yield on originated loans (+11 basis points) and cash balances (+18 basis points); a higher proportion of originated loans and cash in interest-earning assets (76.8% compared to 64.9%); and the reduction in higher cost brokered CDs and borrowings, partially offset by the higher cost of core deposits.

    Total provision for Loan and Lease Losses increased $29.2 million, to $43.8 million, which includes the previously mentioned net $32.0 million increase in provision, and a decline of $2.8 million, reflecting improved asset quality.

    Total Banking and Wealth Management Revenues increased $0.1 million to $18.5 million due to higher wealth management and banking service revenues, partly offset by lower mortgage banking revenues.

    Total Non-Interest Expenses declined $0.2 million to $50.7 million, primarily reflecting three items: $1.5 million credit for FDIC insurance assessment, $1.0 million credit from Puerto Rico Treasury for employee retention after hurricane Maria, and $1.6 million in Scotiabank acquisition related expenses.

    Due to a higher proportion of exempt income, the Effective Tax Rate for the quarter was 12.0% compared to 34.7%. Estimated Effective Tax Rate for the year is 30.15%.

    Dividends on Preferred Stock declined 53.0% to $1.6 million from $3.5 million due to the 4Q18 conversion of Series C Preferred to common.

 

 


 

Balance Sheet

Unless otherwise noted, the following compares data at September 30, 2019 to September 30, 2018.

    Total Loans increased 1.2% or $54.2 million to $4.41 billion as originated loans increased 4.8%, or $172.1 million, and acquired loans declined 18.2%, or $144.4 million. Compared to June 30, 2019, total loans declined 1.5% or $67.3 million with originated loans down 0.6%, or $24.1 million, and acquired loans down 9.0%, or $64.1 million, both reflecting 2Q19 and 3Q19 loan sales.

  Loan Production totaled $291.4 million compared to $347.0 million in the year-ago quarter. Auto and consumer lending remained strong at $141.5 million and $48.3 million, respectively, while residential mortgage lending totaled $23.8 million. Commercial lending at $65.6 million reflected continued growth of small business customers, while OFG USA added $12.2 million in commercial lending.

  Cash and Cash Equivalents increased 76.1%, or $416.1 million, to $962.9 million. Compared to June 30, 2019, cash increased 42.1%, or $285.5 million. The increases reflect the sale of MBS, NPLs and fully charged off loans.

  Total Investments declined 59.4%, or $776.4 million, to $529.7 million. Compared to June 30, 2019, investments declined 39.2%, or $341.0 million. The decreases reflect sales of MBS in 2Q19 and 3Q19.

  Customer Deposits (excluding brokered) increased 0.7% or $31.6 million to $4.59 million. Compared to June 30, 2019, deposits increased 0.7% or $33.0 million. The increases reflect Oriental’s larger retail customer and funding base.

  Borrowings declined 37.3%, or $182.1 million, to $305.9 million. Compared to June 30, 2019, borrowings declined 14.3%, or $50.9 million. Brokered deposits declined 45.7%, or $242.5 million, to $288.4 million. Compared to June 30, 2019, brokered deposits declined 25.8%, or $100.0 million. The declines reflect the maturity of brokered CDs and repayment of repurchase agreement funding.

  Total stockholders’ equity increased 8.2% or $79.2 million to $1.05 billion. Compared to June 30, 2019, stockholders’ equity increased $4.2 million. The increases reflect growth of retained earnings and legal surplus and reduced other comprehensive loss.

Credit Quality

Unless otherwise noted, the following compares data on the originated loan portfolio at September 30, 2019 to September 30, 2018.

  Most credit quality metrics improved. Non-performing loan rate at 2.00% fell 145 basis points. Allowance for loan and lease losses declined 17.00%, to $79.1 million. As a percentage of loans, ALLL at 2.09% fell 53 basis points. The decrease in the NPL rate and ALLL reflects the previously mentioned sale and transfer to held-for-sale of NPLs.

  Early and total delinquency rates, at 3.64% and 5.39% were up 32 and down 80 basis points, respectively.

  Net Charge-Offs increased $22.0 million to $34.4 million. As a percentage of loans, the NCO rate increased to 3.57% from 1.38%. NCOs were affected by $15.9 million from the previously

 


 

mentioned increase in provision attributable the decision to sell certain non-performing loans. As a result, NCOs are expected to decline in 4Q19.

Capital Position

Capital continued to be significantly above regulatory requirements for a well-capitalized institution, with September 30, 2019 ratios improving across the board.

Financial Supplement & Conference Call Presentation

OFG’s Financial Supplement, with full financial tables for the quarter ended September 30, 2019, and 3Q19 Conference Call Presentation, 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, 9-2 and 10 in OFG’s above-mentioned Financial Supplement for reconciliation of GAAP to non-GAAP Measures and Calculations. OFG has attached to this news release Table 10: “Reconciliation of GAAP to Non-GAAP with adjustments to exclude the impact of significant events” for the quarters ended September 30, 2019 and June 30, 2019.

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) 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.

 

 


 

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 Error! Hyperlink reference not valid.www.ofgbancorp.com.

# # #

Contacts

Puerto Rico: Idalis Montalvo ([email protected]) at (787) 777-2847

US: Steven Anreder ([email protected]) and Gary Fishman ([email protected]) at (212) 532-3232

 


 

 


 

a)    During 2Q 2019 and 3Q 2019, the Company sold $350 million and $322 million available-for-sale mortgage-backed securities, respectively, and recognized a gain in the sale of $4.8 million and $3.5 million, respectively.

b)    During 3Q 2019, the Company decided to sell mostly non-performing loans, which are expected to be sold during 4Q 2019, increasing the provision by $37.4 million. Originated loans that were transferred to held-for-sale amounted to $25.3 million at September 30, 2019, the remaining were purchased credit impaired loans.

c)     During 2Q 2019, the Company decided to sell mostly non-performing mortgage loans increasing the provision by $8.8 million. Most of these loans were sold in 3Q 2019, increasing the provision by an additional $2.3 million.

d)    During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.

e)     During 2Q 2019, the Company entered into an agreement with Scotiabank to acquire its Puerto Rico and US Virgin Islands operations, subject to customary closing conditions. During 2Q2019 and 3Q2019, $1.0 million and $1.6 million, respectively, were incurred in related expenses.

f)     During 3Q 2019, the Company recognized an FDIC insurance assessment credit received amounting to $1.5 million.

g)    During 3Q 2019, the Company received an additional $1 million credit from Puerto Rico Treasury for employee retention after hurricane Maria.

h)    During 3Q 2019, the Company had a reduction in provision for loan losses of $4.5 million as a result of the adjustment to the qualitative factors, related to sustained favorable macroeconomic conditions in Puerto Rico.

i)     Income tax effect reflects estimated income tax annual rate at September 30, 2019 and June 30, 2019 of 30.51% and 32.12%, respectively.

  

 


 

 

 

 

 

 

 

 

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 September 30, 2019 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:

 

Reconciliation of GAAP to Non-GAAP with adjustments to exclude the impact

 

 

 

 

 

 

  of quarter-specific items

 

14

 

 

Table  11:

 

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

 

 

 

 

 

 

  Financial Statements (Tables 1-10)

 

15

 

 


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OFG Bancorp (NYSE: OFG)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 1: Financial and Statistical Summary - Consolidated

 

 

 

 

2019

 

2019

 

2019

 

2018

 

2018

 

2019

 

2018

 

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

 

 

Q3

 

Q2

 

Q1

 

Q4

 

Q3

 

YTD

 

YTD

 

Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

$

80,710

 

$

81,085

 

$

81,789

 

$

82,035

 

$

82,277

 

$

243,584

 

$

233,859

 

Non-interest income, net (core)

(2)

 

 

18,542

 

 

18,074

 

 

17,553

 

 

19,260

 

 

18,446

 

 

54,169

 

 

55,079

 

Non-interest expense

 

 

 

50,727

 

 

51,452

 

 

52,152

 

 

51,719

 

 

50,941

 

 

154,331

 

 

155,362

 

Pre-provision net revenues

(21)

 

 

52,161

 

 

52,581

 

 

47,293

 

 

54,574

 

 

49,956

 

 

152,035

 

 

134,334

 

Provision for loan and lease losses

 

 

 

43,770

(a)(b)(c)

 

17,705

(c)

 

12,249

 

 

11,300

(f)

 

14,601

 

 

73,724

(a)(b)(c)

 

44,808

 

Net income before income taxes

 

 

 

8,391

 

 

34,876

 

 

35,044

 

 

43,274

 

 

35,355

 

 

78,311

 

 

89,526

 

Income tax expense

 

 

 

1,008

 

 

10,897

 

 

11,574

 

 

18,530

 

 

12,255

 

 

23,479

 

 

29,860

 

Net income

 

 

$

7,383

 

$

23,979

 

$

23,470

 

$

24,744

 

$

23,100

 

$

54,832

 

$

59,666

 

Common Share Statistics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - basic

(3)

 

$

0.11

 

$

0.44

 

$

0.43

 

$

0.47

 

$

0.45

 

$

0.97

 

$

1.12

 

Earnings per common share - diluted

(4)

 

$

0.11

 

$

0.43

 

$

0.42

 

$

0.45

 

$

0.42

 

$

0.97

 

$

1.07

 

Average common shares outstanding

 

 

 

51,345

 

 

51,330

 

 

51,305

 

 

49,628

 (d)  

 

43,996

 

 

51,327

 

 

43,975

 

Average common shares outstanding and equivalents

 

 

 

51,772

 

 

51,680

 

 

51,626

 

 

51,602

 

 

51,464

 

 

51,695

 

 

51,344

 

Cash dividends per common share

 

 

$

0.07

 

$

0.07

 

$

0.07

 

$

0.07

 (e)  

$

0.06

 

$

0.21

 

$

0.18

 

Book value per common share (period end)

 

 

$

18.84

 

$

18.76

 

$

18.30

 

$

17.90

(d)

$

18.27

 

$

18.84

 

$

18.27

 

Tangible book value per common share (period end)

(5)

 

$

17.11

 

$

17.03

 

$

16.56

 

$

16.15

 (d)  

$

16.23

 

$

17.11

 

$

16.23

 

Balance Sheet (Average Balances)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

(6)

 

$

4,539,046

 

$

4,514,030

 

$

4,504,725

 

$

4,460,002

 

$

4,400,637

 

$

4,519,393

 

$

4,294,178

 

Interest-earning assets

 

 

 

5,981,757

 

 

6,034,338

 

 

6,152,202

 

 

6,170,455

 

 

6,055,085

 

 

6,055,475

 

 

5,906,945

 

Total assets

 

 

 

6,433,658

 

 

6,496,423

 

 

6,605,328

 

 

6,619,026

 

 

6,514,532

 

 

6,511,171

 

 

6,360,715

 

Total deposits

 

 

 

4,921,259

 

 

4,880,114

 

 

4,890,630

 

 

4,987,446

 

 

4,934,468

 

 

4,897,447

 

 

4,853,613

 

Interest-bearing deposits

 

 

 

3,827,212

 

 

3,782,211

 

 

3,791,083

 

 

3,866,842

 

 

3,854,642

 

 

3,800,302

 

 

3,793,078

 

Borrowings

 

 

 

340,194

 

 

459,802

 

 

562,152

 

 

543,920

 

 

503,268

 

 

453,236

 

 

439,810

 

Stockholders' equity

 

 

 

1,061,541

 

 

1,037,057

 

 

1,017,546

 

 

983,015

 

 

973,838

 

 

1,038,869

 

 

962,187

 

Common stockholders' equity

 

 

 

979,671

 

 

955,187

 

 

935,676

 

 

881,971

 

 

807,968

 

 

956,999

 

 

796,317

 

Performance Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin

(7)

 

 

5.35%

 

 

5.39%

 

 

5.39%

 

 

5.27%

 

 

5.39%

 

 

5.38%

 

 

5.29%

 

Return on average assets

(8)

 

 

0.46%

 

 

1.48%

 

 

1.42%

 

 

1.50%

 

 

1.42%

 

 

1.12%

 

 

1.25%

 

Return on average tangible common stockholders' equity

(9)

 

 

2.58%

 

 

10.32%

 

 

10.32%

 

 

11.67%

(d)

 

10.94%

 

 

7.67%

 

 

9.30%

 

Efficiency ratio

(10)

 

 

51.11%

 

 

51.89%

 

 

52.50%

 

 

51.06%

 

 

50.58%

 

 

51.83%

 

 

53.77%

 

Full-time equivalent employees, period end

 

 

 

1,436

 

 

1,417

 

 

1,394

 

 

1,392

 

 

1,365

 

 

1,436

 

 

1,365

 

Credit Quality Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excluding acquired loans:

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Allowance for loan and lease losses

 

 

$

79,089

 

$

89,952

 

$

94,035

 

$

95,188

 

 $  

95,236

 

$

79,089

 

$

95,236

 

    Allowance as a % of loans held for investment

 

 

 

2.09%

 

 

2.35%

 

 

2.51%

 

 

2.54%

 

 

2.62%

 

 

2.09%

 

 

2.62%

 

    Net charge-offs

 

 

$

34,427

 (a)(b)(c)  

$

12,564

 

$

12,486

 

$

10,885

 (f)  

$

12,402

 

$

59,477

 (a)(b)(c)  

$

38,695

 

    Net charge-off rate

(11)

 

 

3.57%

(a)(b)(c)

 

1.32%

 

 

1.33%

 

 

1.18%

 

 

1.38%

 

 

1.75%

(a)(b)(c)

 

1.20%

 

    Early delinquency rate (30 - 89 days past due)

 

 

 

3.64%

 

 

3.51%

 

 

3.61%

 

 

3.34%

 

 

3.32%

 

 

3.64%

 

 

3.32%

 

    Total delinquency rate (30 days and over)

 

 

 

5.39%

 

 

6.07%

 

 

6.33%

 

 

6.36%

 

 

6.19%

 

 

5.39%

 

 

6.19%

 

Capital Ratios (Non-GAAP)

(12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leverage ratio

 

 

 

15.41%

 

 

15.20%

 

 

14.64%

 

 

14.22%

(d)

 

13.93%

 

 

15.41%

 

 

13.93%

 

Common equity Tier 1 capital ratio

 

 

 

17.98%

 

 

17.48%

 

 

17.09%

 

 

16.78%

 (d)  

 

14.38%

 

 

17.98%

 

 

14.38%

 

Tier 1 risk-based capital ratio

 

 

 

20.43%

 

 

19.87%

 

 

19.49%

 

 

19.20%

(d)

 

18.55%

 

 

20.43%

 

 

18.55%

 

Total risk-based capital ratio

 

 

 

21.71%

 

 

21.14%

 

 

20.77%

 

 

20.48%

 (d)  

 

19.84%

 

 

21.71%

 

 

19.84%

 

Tangible common equity ("TCE") ratio

 

 

 

14.07%

 

 

13.71%

 

 

13.05%

 

 

12.76%

(d)

 

10.88%

 

 

14.07%

 

 

10.88%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.

 

(b) During 3Q 2019, the Company decided to sell mostly non-performing loans, which are expected to be sold during 4Q 2019, increasing the provision by $37.4 million. Originated loans that were transferred to held-for-sale amounted to $25.3 million at September 30, 2019, the remaining were purchased credit impaired loans.

 

(c) During 2Q 2019, the Company decided to sell mostly non-performing mortgage loans increasing the provision by $8.8 million. Most of these loans were sold in 3Q 2019, increasing the provision by an additional $2.3 million.

 

(d) During the 4Q 2018, the Company converted all of its outstanding 8.750% non-cumulative convertible perpetual preferred stock, series C into OFG Bancorp common stock. Each share of the 84,000 series C preferred stock was converted into 86.4225 shares of common stock.

 

(e) During the 4Q 2018, the Company increased the regular cash dividend per common share to $0.07 from $0.06.

 

(f) During the 4Q 2018, the Company received $1.8 million proceeds from the sale of fully charged-off originated auto and consumer loans.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 


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OFG Bancorp (NYSE: OFG)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 2: Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Nine-Months Ended

 

 

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

September 30,

 

September 30,

 

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

 

 

2019

 

2019

 

2019

 

2018

 

2018

 

2019

 

2018

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Non-acquired loans

 

 

$

74,303

 

 $  

72,978

 

$

71,298

 

$

70,747

 

 $  

68,387

 

$

218,580

 

 $  

189,557

 

    Acquired BBVAPR loans

 

 

 

9,090

 

 

9,603

 

 

10,247

 

 

10,935

 

 

12,144

 

 

28,939

 

 

37,308

 

    Acquired Eurobank loans

 

 

 

2,379

 

 

2,499

 

 

2,574

 

 

2,642

 

 

3,485

 

 

7,452

 

 

10,192

 

          Total interest income from loans

 

 

 

85,772

 

 

85,080

 

 

84,119

 

 

84,324

 

 

84,016

 

 

254,971

 

 

237,057

 

Investment securities

 

 

 

7,883

 

 

9,175

 

 

10,591

 

 

10,782

 

 

10,121

 

 

27,649

 

 

28,256

 

          Total interest income

 

 

 

93,655

 

 

94,255

 

 

94,710

 

 

95,106

 

 

94,137

 

 

282,620

 

 

265,313

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Core deposits

 

 

 

8,256

 

 

7,465

 

 

6,214

 

 

6,396

 

 

5,877

 

 

21,935

 

 

16,806

 

    Brokered deposits

 

 

 

2,298

 

 

2,526

 

 

2,835

 

 

3,003

 

 

2,728

 

 

7,659

 

 

6,748

 

           Total deposits

 

 

 

10,554

 

 

9,991

 

 

9,049

 

 

9,399

 

 

8,605

 

 

29,594

 

 

23,554

 

Borrowings

 

 

 

2,391

 

 

3,179

 

 

3,872

 

 

3,672

 

 

3,255

 

 

9,442

 

 

7,900

 

           Total interest expense

 

 

 

12,945

 

 

13,170

 

 

12,921

 

 

13,071

 

 

11,860

 

 

39,036

 

 

31,454

 

Net interest income

 

 

 

80,710

 

 

81,085

 

 

81,789

 

 

82,035

 

 

82,277

 

 

243,584

 

 

233,859

 

    Provision for loan and lease losses, excluding acquired loans

 (1)  

 

 

23,564

 (b)(c)(d)  

 

8,481

 

 

11,333

 

 

10,842

 

 

13,420

 

 

43,378

 (b)(c)(d)  

 

41,213

 

    Provision (recapture) for acquired BBVAPR loan and lease losses

(1)

 

 

19,135

(b)(c)(d)

 

7,446

(d)

 

1,567

 

 

(998)

(f)

 

875

 

 

28,148

(b)(c)(d)

 

2,485

 

    Provision for acquired Eurobank loan and lease losses

 (1)  

 

 

1,071

 (c)(d)

 

1,778

 (d)  

 

(651)

 (e)  

 

1,456

 

 

306

 

 

2,198

 (c)(d)  

 

1,110

 

          Total provision for loan and lease losses, net

 

 

 

43,770

 

 

17,705

 

 

12,249

 

 

11,300

 

 

14,601

 

 

73,724

 

 

44,808

 

           Net interest income after provision for loan and lease losses

 

 

 

36,940

 

 

63,380

 

 

69,540

 

 

70,735

 

 

67,676

 

 

169,860

 

 

189,051

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking service revenues

 

 

 

10,813

 

 

10,776

 

 

10,465

 

 

11,234

 

 

10,797

 

 

32,054

 

 

32,404

 

Wealth management revenues

 

 

 

6,611

 

 

6,669

 

 

5,882

 

 

7,246

 

 

6,407

 

 

19,162

 

 

18,688

 

Mortgage banking activities

 

 

 

1,118

 

 

629

 

 

1,206

 

 

780

 

 

1,242

 

 

2,953

 

 

3,987

 

          Total banking and financial service revenues

 

 

 

18,542

 

 

18,074

 

 

17,553

 

 

19,260

 

 

18,446

 

 

54,169

 

 

55,079

 

Other income, net

 

 

 

3,636

(a)

 

4,874

(a)

 

103

 

 

4,998

(g)

 

174

 

 

8,613

(a)

 

758

 

           Total non-interest income, net

 

 

 

22,178

 

 

22,948

 

 

17,656

 

 

24,258

 

 

18,620

 

 

62,782

 

 

55,837

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

 

 

20,500

 

 

19,875

 

 

20,341

 

 

19,322

 

 

18,495

 

 

60,716

 

 

57,202

 

Occupancy, equipment and infrastructure costs

 

 

 

7,307

 

 

7,511

 

 

7,746

 

 

7,762

 

 

8,388

 

 

22,564

 

 

25,322

 

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

 

 

 

794

 

 

21

 

 

1,070

 

 

1,834

 

 

1,210

 

 

1,885

 

 

2,828

 

General and administrative expenses

 

 

 

20,031

 

 

21,482

 

 

20,699

 

 

20,963

 

 

20,112

 

 

62,212

 

 

62,958

 

           Total operating expenses

 

 

 

48,632

 

 

48,889

 

 

49,856

 

 

49,881

 

 

48,205

 

 

147,377

 

 

148,310

 

Credit related expenses

 

 

 

2,095

 

 

2,563

 

 

2,296

 

 

1,838

 

 

2,736

 

 

6,954

 

 

7,052

 

           Total non-interest expense

 

 

 

50,727

 

 

51,452

 

 

52,152

 

 

51,719

 

 

50,941

 

 

154,331

 

 

155,362

 

Income before income taxes

 

 

 

8,391

 

 

34,876

 

 

35,044

 

 

43,274

 

 

35,355

 

 

78,311

 

 

89,526

 

Income tax expense

 

 

 

1,008

 

 

10,897

 

 

11,574

 

 

18,530

 (h)  

 

12,255

 

 

23,479

 

 

29,860

 

Net income

 

 

 

7,383

 

 

23,979

 

 

23,470

 

 

24,744

 

 

23,100

 

 

54,832

 

 

59,666

 

Less:  dividends on preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Convertible preferred stock

 

 

 

-

 

 

-

 

 

-

 

 

-

(i)

 

(1,838)

 

 

-

(i)

 

(5,513)

 

    Other preferred stock

 

 

 

(1,628)

 

 

(1,628)

 

 

(1,628)

 

 

(1,628)

 

 

(1,628)

 

 

(4,884)

 

 

(4,883)

 

Net income available to common shareholders

 

 

$

5,755

 

$

22,351

 

$

21,842

 

$

23,116

 

$

19,634

 

$

49,948

 

$

49,270

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) During 2Q 2019 and 3Q 2019, the Company sold $350 million and $322 million available-for-sale mortgage-backed securities, respectively, and recognized a gain in the sale of $4.8 million and $3.5 million.

 

(b) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.

 

(c) During 3Q 2019, the Company decided to sell mostly non-performing loans, which are expected to be sold during 4Q 2019, increasing the provision by $37.4 million. Originated loans that were transferred to held-for-sale amounted to $25.3 million at September 30, 2019, the remaining were purchased credit impaired loans.

 

(d) During 2Q 2019, the Company decided to sell mostly non-performing mortgage loans increasing the provision by $8.8 million. Most of these loans were sold in 3Q 2019, increasing the provision by an additional $2.3 million.

 

(e) During the 1Q 2019, the provision for acquired Eurobank loans and leases reflected better cashflows than expected.

 

(f) During the 4Q 2018, the provision for acquired BBVAPR loans reflected better cashflows than expected.

 

(g) During the 4Q 2018, the Company received a $5.0 million payment from the insurance company for Hurricane María impact on the Bank's operations.

 

(h) During the 4Q 2018, the Company recognized an aggregate amount of $4.1 million income tax expense as a result of the changes in Puerto Rico Tax Legislation, mainly driven by a reduction of the DTA since Regular Corporate Tax Rate changes from 39% to 37.5%.

 

(i) During the 4Q 2018, the Company converted of all of its outstanding 8.750% non-cumulative convertible perpetual preferred stock, series C into OFG Bancorp common stock. Each share of the 84,000 series C preferred stock was converted into 86.4225 shares of common stock.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 


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OFG Bancorp (NYSE: OFG)

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 3: Consolidated Statements of Financial Condition

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

(Dollars in thousands) (unaudited)

 

 

2019

 

2019

 

2019

 

2018

 

2018

 

Cash and cash equivalents

 

 

$

962,887

(a)

$

677,430

(a)

$

509,023

 

$

450,063

 

$

546,780

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading securities

 

 

 

41

 

 

412

 

 

381

 

 

360

 

 

405

 

Investment securities available-for-sale, at fair value, with amortized cost of $520,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    (June 30, 2019 - $860,911; March 31, 2019 - $1,248,750; December 31, 2018 - $854,511;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     September 30, 2018 - $872,895)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Mortgage-backed securities

 

 

 

505,102

(a)

 

843,333

(a)

 

1,225,225

(d)

 

827,564

 

 

834,538

 

    Other investment securities

 

 

 

13,993

 

 

14,100

 

 

14,244

 

 

14,293

 

 

14,014

 

          Total investment securities available-for-sale

 

 

 

519,095

 

 

857,433

 

 

1,239,469

 

 

841,857

 

 

848,552

 

Mortgage-backed securities held-to-maturity, at amortized cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    (fair value at December 31, 2018 - $410,353;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      September 30, 2018 - $425,066)

 

 

 

-

 

 

-

 

 

-

 (d)  

 

424,740

 

 

444,679

 

Federal Home Loan Bank (FHLB) stock, at cost

 

 

 

10,525

 

 

12,821

 

 

12,800

 

 

12,644

 

 

12,461

 

Other investments

 

 

 

57

 

 

3

 

 

3

 

 

3

 

 

3

 

          Total investments

 

 

 

529,718

 

 

870,669

 

 

1,252,653

 

 

1,279,604

 

 

1,306,100

 

Loans, net

 

 

 

4,407,190

 (b)(c)  

 

4,474,497

 

 

4,401,401

 

 

4,431,594

 

 

4,352,980

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

 

 

13

 

 

26

 

 

110

 

 

347

 

 

1,265

 

Prepaid expenses

 

 

 

14,244

 

 

11,903

 

 

7,830

 

 

10,283

 

 

13,461

 

Deferred tax asset, net

 

 

 

112,602

 

 

111,147

 

 

112,744

 

 

113,763

 

 

122,934

 

Foreclosed real estate and repossessed properties

 

 

 

30,488

 

 

32,016

 

 

34,439

 

 

36,754

 

 

42,014

 

Premises and equipment, net

 

 

 

69,754

 

 

71,001

 

 

69,017

 

 

68,892

 

 

67,762

 

Goodwill

 

 

 

86,069

 

 

86,069

 

 

86,069

 

 

86,069

 

 

86,069

 

Right of use assets

 

 

 

19,318

 

 

20,419

 

 

20,860

(e)

 

-

 

 

-

 

Accounts receivable and other assets

 

 

 

101,222

 

 

108,950

 

 

109,045

 

 

105,983

 

 

117,309

 

Total assets

 

 

$

6,333,505

 

$

6,464,127

 

$

6,603,191

 

$

6,583,352

 

$

6,656,674