OFG Bancorp Reports 1Q18 Results

SAN JUAN, Puerto Rico--()--OFG Bancorp (NYSE:OFG) today reported results for the first quarter ended March 31, 2018, reflecting continued strong recovery following hurricanes Irma and Maria, which struck the island in September 2017.

1Q18 Summary

  • Net income available to shareholders was $13.5 million, or $0.29 per fully diluted share. This was in line with 4Q17’s $13.6 million, or $0.30 per share, and exceeded the year ago quarter’s $11.7 million, or $0.26 per share.
  • Return on average assets and average tangible common equity was 1.09% and 7.73%, respectively.
  • Tangible book value per common share was $15.71, and tangible common equity ratio was 11.22%.
  • Loan production of $309.4 million increased 22.0% from 4Q17 and 41.4% from the year ago quarter.
  • Total provision for loan and lease losses, net, declined 37.9% from 4Q17, which included $5.4 million in additional hurricanes-related provision.
  • Core non-interest income of $18.2 million increased 9.0% from 4Q17 and 4.7% from the year ago quarter as banking service fees and mortgage banking revenues rebounded.

CEO Comment

José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board, commented:

“Our first quarter results reflect the success of our strategies and Puerto Rico’s emerging recovery. We earned $0.29 per share fully diluted, 12% higher than a year ago. Our strong capital position continued to build.

“The island benefited from loan payment moratoriums by Oriental and other banks, an increased availability of electric power, improvement in communications, and the return of day to day stability, as well as rebuild spending by FEMA, the start of payments of insurance claims, and the prospect of growing assignments of federal funds.

“Nearly every metric in 1Q18 confirmed this progress. For the second quarter in a row, our originated loan growth outpaced the pay down of acquired loans, resulting in a net increase of $77.1 million from December 31, 2017—close to 8% on an annualized basis.

“Auto, consumer and mortgage lending at $192.3 million increased 52% from 4Q17 and more than 11% from 1Q17. In particular, auto lending was at a record level, up more than 46% from the preceding and year ago quarters.

“Commercial loan production in Puerto Rico, while lower than 4Q17, rose more than 13% year over year. Meanwhile, our U.S. commercial and industrial loan program added $74 million in participations.

“With nearly all of our loan moratoriums expiring, 1Q18 credit quality remained stable. Most metrics were better than, or returned to, pre-hurricanes levels.

“Fee revenues rebounded with a 24% sequential increase in Banking Services and a 43% increase in Mortgage Banking. Core Wealth Management held steady at pre-hurricanes levels.

“Customer deposits (excluding brokered) increased 2% from the end of 2017 and 5% from a year ago. Our Net Interest Margin expanded to 5.22%, and net new customer accounts grew at an annualized rate of 8%, significantly exceeding 2017’s hurricanes affected 2% rise.

“Our effort to differentiate Oriental through superior service and digital banking technology is proving effective. Our team of dedicated bankers continually reaching out to our customers and clients is clearly working. And during 1Q18, we introduced another new technology-based service—My Payments (Mis Pagos), which enables loan-only customers to pay online instead of standing in line.

“While we remain cautious due to the uncertain economic environment on the island, we are confident positive momentum will prevail for both OFG and Puerto Rico. We will continue to sharpen our focus on our retail and commercial clients, improve our service levels, and provide faster and more agile ways to do banking.”

Income Statement Highlights

Unless otherwise noted, the following compares data for the first quarter 2018 to the fourth quarter 2017.

  • Interest Income
    • Originated Loans: Increased $0.6 million to $56.8 million, primarily due to higher balances.
    • Acquired Loans: Declined $1.1 million to $17.8 million, reflecting continued pay downs.
    • Investment Securities: Increased $0.5 million to $8.6 million, the result of higher balances and higher yield.
  • Interest Expense: Declined $0.5 million to $9.2 million, primarily due to reduced cost of deposits.
  • Total Provision for Loan and Lease Losses: Declined $9.4 million to $15.5 million. 1Q18 provision included $8.6 million to replenish the allowance for retail loan charge-offs of $8.2 million related to the hurricanes. 1Q18 provision also included an increase in the allowance related to auto loan portfolio growth and one commercial loan placed in non-accrual.
  • Net Interest Margin: Increased 14 basis points to 5.22% mainly due to higher yield in the investment portfolio and cash balances.
  • Total Banking and Wealth Management Revenues: Increased $1.5 million to $18.2 million.
    • Banking Service Revenues rose $2.0 million, largely the result of increased electronic banking activity with more power coming back on the island.
    • Mortgage Banking Activities were up $0.5 million, primarily due to increased business.
    • Wealth Management Revenues fell $1.0 million, reflecting the absence of annual insurance fees recognized in 4Q17.
  • Total Non-Interest Expenses: Increased $5.5 million to $52.1 million. 4Q17 included $3.8 million in items that temporarily lowered costs, including reduced expenses related to electronic banking activity. 1Q18 reflected higher seasonal compensation expenses and expenses related to the sale of foreclosed assets returning to pre-hurricanes levels.
  • Effective Tax Rate (ETR): Approximately 32%, the rate the Company is currently estimating for the full year.

Balance Sheet Highlights

Unless otherwise noted, the following compares data at March 31, 2018 to December 31, 2017.

  • Total Loans Net: Increased $77.1 million to $4.13 billion with originated loan growth more than offsetting normal pay downs of acquired loans. Production highlights include:
    • Auto lending at a record $128.1 million was up 46.3% from 4Q17 and 47.6% year over year, reflecting replacement of damaged vehicles, pent up demand, and the market’s effort to adjust to one less auto lending competitor.
    • Consumer lending increased 62.6% to $37.5 million, exceeding pre-hurricanes levels, as retail customers moved to replace needed items and repair homes.
    • Mortgage lending rebounded 67.7% to $26.6 million from 4Q17’s low, post-hurricanes level, but was down 38.7% from the year ago quarter.
    • Commercial lending at $42.8 million declined from 4Q17’s robust levels, but was up 13.5% from 1Q17. The Company’s bankers continue building relationships with businesses participating in Puerto Rico’s recovery.
    • The recently established OFG USA program added $74.4 million in commercial and industrial related loan participations across an array of industries and geographies in the continental U.S.
  • Cash and cash equivalents: Declined $122.8 million to $365.4 million as cash was used to fund new loan growth and reduce higher cost borrowings.
  • Total Investments: Increased $132.5 million to $1.30 billion with the purchase of new mortgage backed securities to take advantage of favorable market opportunities.
  • Customer Deposits (excluding brokered deposits): Increased $77.9 million to $4.36 billion, up 1.8% and 5.2% from December 31, 2017 and March 31, 2017, respectively. Growth in demand and savings accounts more than offset a decline in time deposits.
  • Total Borrowings: Increased $25.6 million to $354.3 million as OFG used repurchase agreement funding to acquire investment securities. The Company also paid down higher cost FHLB advances.
  • Total Stockholders’ Equity: Increased $1.7 million to $946.8 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 March 31, 2018 to December 31, 2017.

Following hurricanes Irma and Maria, Oriental offered automatic payment deferrals and 90-day extensions for most loan categories. Most of these payment moratoriums ended in 1Q18 with most credit metrics better than, or returned to, pre-hurricanes levels.

  • Net Charge-Off Rate: Remained virtually level at 1.34%. Consumer loan charge-offs returned to pre-hurricanes levels, while other loan categories remained flat or declined.
  • Early Delinquency Rate: Increased 138 basis points to 3.20% and Total Delinquency Rate rose 164 basis points to 6.25% as both metrics returned to pre-hurricanes levels.
  • Non-Performing Loan Rate: Increased 51 basis points to 3.82%. The commercial loan rate increased 79 bps due to a $10.5 million loan that is current in its monthly payments, but was placed in non-accrual due to credit deterioration. The auto loan rate increased 94 bps due to 1Q18 moratorium expirations.
  • Allowance for Loan and Lease Losses: Increased $4.1 million to $96.8 million, due to higher loan balances, particularly in auto lending, and the above mentioned commercial loan placed in non-accrual status.

Capital Position

Unless otherwise noted, the following compares data at March 31, 2018 to December 31, 2017.

Capital continued to grow and remains significantly above regulatory requirements for a well-capitalized institution.






QoQ Change


YoY Change

Tangible Common Equity Ratio

  11.22%   -7 bps   +56 bps

Tangible Book Value per Common Share

  $15.71   +0.3%   +2.5%

Common Equity Tier 1 Capital Ratio (using Basel III methodology)

  14.62%   +3 bps   +32 bps

Total Risk-Based Capital Ratio

  20.31%   -3 bps   +26 bps

Conference Call

A conference call to discuss OFG’s results for 1Q18, outlook and related matters will be held today, Friday, April 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 March 31, 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 www.ofgbancorp.com.


OFG Bancorp
Puerto Rico:
Idalis Montalvo, 787-777-2847
Steven Anreder, 212-532-3232
Gary Fishman, 212-532-3232


OFG Bancorp
Puerto Rico:
Idalis Montalvo, 787-777-2847
Steven Anreder, 212-532-3232
Gary Fishman, 212-532-3232