Oriental Bank to acquire Scotiabank operations in Puerto Rico, USVI

(File photo)

For some $550 million in cash, to become 2nd largest

SAN JUAN – Puerto Rico-based OFG Bancorp and Canadian financial institution Scotiabank announced Wednesday 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 U.S. Virgin Island (USVI) branch operation for a $10 million deposit premium.

Scotiabank’s Puerto Rico and USVI operations would be merged into Oriental Bank and its related businesses, which would make Oriental the second largest bank in Puerto Rico in terms of “core deposits, branches, automated and interactive teller machines, and mortgage servicing,” according to OFG, which said it would result in a loan portfolio totaling $7.2 billion, “low cost deposits of $7.9 billion” and about half a million customers.

Oriental would also become the third largest bank in the USVI.

The acquisition, which has been approved by OFG’s and Oriental Bank’s boards, 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 of March 31, 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,” the institution said.

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,” according to the announcing release.

The acquisition “is an excellent opportunity to deploy OFG’s excess capital to accelerate the implementation of our differentiation strategy, enhance financial performance, and increase shareholder value,” said José Rafael Fernández, president, CEO and vice chairman of OFG and Oriental Bank. “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.”

OFG expects the acquisition “to be approximately 40% accretive to OFG’s EPS [earnings per share] in 2020 with robust capital generation and significantly expanded return on average tangible common equity.”

Oriental also expects its mortgage servicing book will expand “five-fold,” to about $5 billion, giving it “critical mass to create a new and meaningful non-interest income profit center.”

OFG said Scotiabank “improved the credit quality of its portfolios in Puerto Rico and USVI,” and streamlined branch operations over the last five years. “Total non-performing assets declined by 62% from 2016 to first quarter 2019, and total direct PR government exposure is no longer significant,” according to OFG’s release, which adds that 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 absorbed Puerto Rico’s Eurobank in 2010 and BBVA’s Puerto Rico operations in 2012.

“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,” Fernández said.

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

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

OFG will hold a conference call to discuss this announcement Thursday at 10 a.m. Eastern. Phone (888) 562-3356 or (973) 582-2700 and 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 afterward. Access the webcast link in advance to download any necessary software.




Short-Term or Long-Term Investment

To maximize returns on your investment, you will need to choose diversified instruments at terms of five years or more. One of the instruments most commonly used by local investors is Oriental’s Diversified Growth IRA (DGI)1, which also offers the tax relief everyone is looking for when the time comes to file taxes, as every contribution can be deducted from your tax return.

This collective investment fund of IRA accounts is invested in bonds, stocks, and general assets. The investment portfolio is managed by a group of money managers who are experts in the portfolio management of investment funds. It is also accessible―allowing you to make monthly contributions of a minimum amount of $25 to a maximum of $416.66 through automatic transfers from any account.

The DGI and other types of IRA accounts have become one of the most popular ways of saving for retirement because deductible IRA’s offer immediate tax relief. Additionally, the funds may be withdrawn―without penalties imposed by the Puerto Rico Treasury Department―for certain uses, such as the purchase of your first home or your children’s college education, among others.

On the other hand, if you are looking for a short-term investment and low risk is most important for you, a product such as the Oriental CD IRA2 may be the right choice. This certificate of deposit offers fixed returns according on the term you select, from 1 to up to 5 years. It is recommended for people who seek principal security and guaranteed fixed returns. Remember, it is important to determine your profile in order to choose the IRA that best fits your needs.

To learn more about IRA accounts, please call 787-777-7777, visit any of our branches across the island, or access our web page: www.orientalbank.com.

Legal disclosures:

(1) DGI Only for individuals who are residents of Puerto Rico. The Diversified Growth IRA or DGI is not insured by the FDIC, is not an Oriental Bank deposit or obligation, is not guaranteed by the Bank, and is subject to investment risk, including the possible loss of the principal invested. It also carries greater risk because it uses borrowed money to leverage the asset base of the Diversified Growth IRA trust. Please ask for the DGI Prospectus at any of our branches or at the offices of Oriental Financial Services Corp.  (authorized dealer), Member FINRA/SIPC, and read it carefully before investing. Minimum opening balance: $250. The fees for investment withdrawals (for reasons other than participant attaining age 60 , death, disability, or unemployment) are 5% of the investment balance if withdrawn during the first year; 4% of the investment balance if withdrawn during the second year; 3% of the investment balance if withdrawn during the third year; 2% of the investment balance if withdrawn during the fourth year; and 1% of the investment balance if withdrawn during the fifth year. A $54.99 rollover fee will be assessed for each rollover to an IRA at another institution.  Subject to 10% (15% in certain cases) early withdrawal tax penalty of if the withdrawal does not comply with any of the conditions permitted by the Puerto Rico Treasury Department. The annual fee for administrative and other services is 1.80% . This annual fee is calculated based on the DGI trust’s average total assets. (2) CD IRA Only for individuals. Minimum opening balance of $250.  Penalties for early withdrawal will consist of 365 days of interests on the amount of the early withdrawal.  There is an early withdrawal tax penalty of 10% (15% in certain cases) if the early withdrawal does not comply with any of the conditions permitted by the Puerto Rico Department of the Treasury. Other fees: Distribution by check, $14.99; rollover to an IRA account at another institution, $54.99. We also offer other types of IRAs. Ask for detailed information about each IRA to decide which is the best for you. For more information visit any of our branches or go to www.orientalbank.com. You should consult with your tax advisor. Products offered by Oriental Bank. Oriental Bank is a subsidiary of OFG Bancorp. ©2019 All rights reserved.

 




Oriental’s 3Q results reflect ‘consistent core growth’

SAN JUAN – Puerto Rico-based financial holding company OFG Bancorp, whose three principal subsidiaries are Oriental Bank, Oriental Financial Services and Oriental Insurance reported results for the third quarter ended Sept. 30.

“Net income available to shareholders was $19.6 million or $0.42 per fully diluted share, compared to 2Q18’s $16.2 million or $0.35 per fully diluted share and breakeven results in the year ago third quarter due to a special hurricanes related loan loss provision,” the company said.

“EPS growth reflects another quarter of strong, consistent core growth based on the success of our strategy of differentiation – providing superior customer service, convenience and technology – coupled with Puerto Rico’s continued rebound following hurricanes that struck in September 2017,” said José Rafael Fernández, OFG Bancorp and Oriental Bank president, CEO and vice chairman.

“3Q18 EPS is up more than 20% sequentially and significantly better year over year. All financial metrics continued to build strong momentum going forward,” Fernández said. “With customer count up 4% year over year in the third quarter, we are achieving growth in part through increased customer adoption of automated and interactive teller machines, and online and mobile channels.”

He added that “economic activity has been driven primarily by businesses and consumers rebuilding. We believe businesses are starting to gain new confidence to invest and expand going forward.”

The institution listed the following highlights:

  • All key performance metrics improved, including net interest margin at 5.38%, return on average assets at 1.42%, return on average tangible common stockholders’ equity at 10.94%, and efficiency ratio at 50.58%.
  • Increased profitability was driven by new loan production of $354 million, higher average loan yields of 7.55%, annualized increase in average loan balances of 9.7%; and lower non-interest expenses.
  • Core deposit balances of $4.56 billion rose 3.2% from 2Q18 as customer count grew 1.2% sequentially and 4.0% year over year.
  • Tangible book value per common share of $16.23 at September 30, 2018 increased 6.8% annualized from June 30, 2018.
  • Regulatory capital is expected to benefit by $84.0 million as a result of the announcement in 3Q18 of the mandatory conversion effective Monday, October 22nd, of the Series C 8.750% Non-Cumulative Convertible Perpetual Preferred Stock.

A replay of the conference call webcast discussing the results, outlook and related matters Friday can be accessed at OFG’s website, www.ofgbancorp.com.

The following was extracted from OFG’s release:

Income Statement

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

  • Interest Income: Increased 7.0% to $94.1 million, reflecting the following:
    • From Originated Loans: Increased $5.7 million to $66.8 million, primarily due to higher average balances and higher yields.
    • From Acquired Loans: Declined $0.1 million to $17.2 million, resulting from continued pay downs, mostly offset by cost recoveries.
    • From Investment Securities: Increased $0.5 million to $10.1 million, primarily due to higher average cash balances and higher yields.
  • Interest Expense: Increased 13.8% or $1.4 million to $11.9 million, due to higher average balances of deposits and borrowings, and higher rates.
  • Total Provision for Loan and Lease Losses: Decreased 1.0% or $0.1 million to $14.6 million. Provision for originated loans increased $0.6 million due to growth of the portfolio while provision for acquired loans declined.
  • Net Interest Margin: Increased 14 basis points to 5.38%. Excluding cost recoveries, NIM increased 6 basis points mainly due to higher yield on originated commercial loans, cash balances and investment securities, reflecting the general effect of Federal Reserve Board rate hikes and higher proportion of high yield commercial and auto portfolios.
  • Total Banking and Wealth Management Revenues: Remained at a high level of $18.4 million as increases in Mortgage Banking and Wealth Management more than offset a slight decline in Banking Services.
  • Total Non-Interest Expenses: Declined $1.4 million to $50.9 million primarily reflecting the absence of lease cancellation expenses in 2Q18 as part of an effort to bring more of our offices into Oriental Center and reduce occupancy costs next year.
  • Effective Tax Rate: With its 3Q18 results, OFG now expects its estimated annual effective tax rate to be about 33.7% due to the higher proportion of profit generated by taxable loans.

Balance Sheet

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

  • Total Loans Net: Increased 0.9% or $37.1 million to $4.35 billion as originated loans increased $97.4 million and acquired loans declined $59.1 million.
  • New Loan Production: While lower than the recent high of $432.1 million in 2Q18, production remained strong at $354.0 million due to:
    • Record auto lending of $140.4 million, up 7.1% from 2Q18, reflecting continued pent up demand and the market’s adjustment to one less competitor in auto lending.
    • High levels of commercial lending at $105.3 million, consumer lending at $43.0 million, and residential mortgage lending at $27.9 million as businesses and retail customers began to embrace market opportunities in the aftermath of the reconstruction and recovery from last year’s hurricane.
    • The recently established OFG USA program added $37.4 million, reflecting seasonally lower deal flow compared to 2Q18.
  • Cash and Cash Equivalents: Increased 44.5% or $168.4 million to $546.8 million, reflecting the increase in deposits.
  • Total Investments: Declined 3.5% or $47.0 million to $1.31 billion. OFG retained a lower amount of originated mortgages as Mortgage Backed Securities.
  • Customer Deposits (excluding brokered): Increased $139.3 million to $4.56 billion, up 3.2% and 6.2% from June 30, 2018 and September 30, 2017, respectively. Average non-interest bearing accounts remained approximately level at $1.08 billion compared to June 30, 2018.
  • Total Borrowings: Declined $64.2 million to $488.0 million as OFG paid down FHLB advances.
  • Total Stockholders’ Equity: Increased $12.1 million to a recent high of $969.9 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

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

  • Delinquency Rates: The early delinquency rate increased 25 basis points to 3.32% and the total delinquency rate increased 24 basis points to 6.19% in line with pre-hurricanes levels.
  • Non-Performing Loan Rate: Declined 18 basis points to 3.45%, primarily reflecting a decline in the commercial rate.
  • Allowance for Loan and Lease Losses: Increased 1.1% or $1.0 million to $95.2 million, primarily reflecting the growth of originated loans.
  • Net Charge-Off Rate: Decreased 42 basis points to 1.39% primarily due to a 199 basis points decline in auto lending compared to 2Q18 when most of the remaining hurricane related charge-offs were taken.

Capital Position

Capital for the quarter ended September 30, 2018 continued to be significantly above regulatory requirements for a well-capitalized institution, with Tangible Common Equity Ratio at 10.88%, Tangible Book Value per common share at $16.23, Common Equity Tier 1 Capital Ratio at 14.38%, and Total Risk-Based Capital Ratio at 19.84%.

Financial Supplement

OFG’s Financial Supplement, with full financial tables for the quarter ended September 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.

 




Puerto Rico banks’ Labor Day schedule

SAN JUAN – On Monday, Sept. 4, Labor Day, Puerto Rico’s main banks will be operating the following limited hours.

Scotiabank

Will have its branches in Plaza Las Américas, Plaza del Sol, Plaza Carolina, Plaza Fajardo, Mayagüez Mall, Ponce Plaza del Caribe, Caguas Villa Blanca, Trujillo Alto, Los Colobos and San Patricio open to the public from 9 a.m. to 1 p.m. Its Arecibo branch will be open from 8:30 a.m. to 1 p.m.

The rest of its branches, units and central offices will be closed. Its call center, which can be contacted at (787) 766-4999, will continue operating 24 hours a day.

Banco Popular

Among the various branches located in shopping centers around the island, only the following services will be offered:

The branches in Plaza Carolina, Plaza del Sol, Plaza Las Américas and San Patricio Mall will provide service until 3 p.m.

The branches at Barceloneta Outlets, Humacao Palma Real, Plaza del Caribe and Mayagüez Mall Centro will be open until 1 p.m.

The branch in the Las Catalinas shopping center, will be open until 2 p.m.

Its Vega Alta branch will be providing services from 8 a.m. to 12 p.m.

For car and truck rentals, Popular Auto’s offices will open until 12 p.m., with the exception of the Carolina office, which will continue open until 5 p.m.

For more information or additional services, contact TeleBanco Popular, available 24 hours a day, at (787) 724-3650, or visit Mi Banco Online at www.popular.com.

Santander

The bank’s Plaza Las Américas, Plaza Carolina, Mayagüez Mall, Plaza del Caribe in Ponce and Plaza del Sol branches will be open from 9 a.m. to 1 p.m..

Santander’s headquarters, subsidiaries and affiliates will remain closed.

FirstBank

The branches in the following shopping centers: Plaza Las Américas, Plaza Carolina, Las Catalinas Mall, Ponce Centro del Sur, Mayagüez Mall, Fajardo and Plaza Río Hondo will be open from 9 a.m. to 1 p.m. Its other branches will be closed Monday.

FirstMortgage and FirstBank Insurance Agency offices will be closed.

Oriental

Its 48 branches, service centers and central offices will be closed.

However, its online banking services, at www.orientalbank.com and Banca Móvil will continue operating 24/7, as will the automatic voice system at 787-622-6800.




P.R. Bank Business Hours for Memorial Day

To commemorate Memorial Day, Monday, May 29, Puerto Rico’s leading banks will operate during the following adjusted business hours.

Banco Popular

Among its various branches at various shopping centers across the island, only the following will offer services:

Vega Alta will operate 8 a.m. to Noon.

Aguadilla Mall, Barceloneta Outlets, Humacao Palma Real, Plaza del Caribe and Mayagüez Mall Centro will be open until 1 p.m., while at Las Catalinas Mall services will be provided until 2 p.m.

Plaza Carolina, Plaza del Sol, Plaza Las Américas and San Patricio Mall will offer services until 3 p.m.

For car and truck rentals, Popular Auto’s Renta Diaria offices will be open until Noon, except its Carolina office, which will stay open until 5 p.m.

Scotiabank

All branches and units will be closed to the public.

FirstBank

Branches will operate 9 a.m. to 1 p.m. at the following shopping centers: Plaza Las Américas, Plaza Carolina, Las Catalinas Mall, Mayagüez Mall, Fajardo, Plaza Río Hondo and Ponce Centro del Sur.

Santander

The bank will operate on a special schedule, 9 a.m. to 1 p.m., at its offices in Arecibo, Mayagüez Mall, The Outlets at Montehiedra, Palma Real, Parque Escorial, Plaza del Caribe, Plaza del Sol and Plaza Las Américas.

All central offices will remain closed. All operations resume their regular schedules Tuesday, May 30.

Oriental

Only branches in shopping centers will be open until 1 p.m., except at Plaza Las Américas, which will provide services until 3 p.m.




OFG Bancorp Posts Net Income of $11.7M in 3Q

SAN JUAN – OFG Bancorp, the bank holding company of Oriental Bank, on Friday reported positive results for the third quarter (3Q) ended Sept. 30.

Net income available to shareholders totaled $11.7 million, or $0.26 per share fully diluted, compared with $10.9 million, or $0.25 per share fully diluted, in the second quarter (2Q) of 2016. In the year ago quarter, OFG reported $1.1 million, or $0.03 per share fully diluted.

Oriental Bank’s overall business performance continued strong. New loan generation totaled $226.8 million. Banking and wealth management fee revenues remained level versus 2Q16. Retail and commercial deposits grew 2.2%. Net new customer accounts continued to increase at a 4% annualized rate.

As previously announced, Oriental Bank sold its participation in a Puerto Rico Electric Power Authority (Prepa) fuel line of credit. The sale eliminated $183 million of non-performing assets

José Rafael Fernández, president, CEO and vice chairman, commented that OFG delivered another strong quarter. Diluted EPS of $0.26 was slightly better than the two prior quarters, and the bank’s return on average assets at 0.91% and return on average tangible common stockholders’ equity at 7.06% were the highest they’ve been in the last five quarters, he said.

Oriental Branch at Las Catalinas Mall

Oriental Branch at Las Catalinas Mall

“We continue to deliver consistent earnings while being proactive in our business development strategies and prudently managing balance sheet risk. We are particularly pleased to have found an optimal exit point for the PREPA credit facility. This eliminated our single largest credit exposure and significantly reduced our Puerto Rico government related exposures. It also meaningfully increased our capital ratios and contributed to improved credit quality through a major reduction in non-performing loans,” Fernández said. “Oriental Bank’s franchise growth confirms the successful customer differentiation achieved in our business delivery model, emphasizing higher levels of advisory relationships and superior levels of service.”

Fernández added that new loan generation was “good,” with “solid” yield expansion. Retail and commercial deposits rose across all categories, due in part to continued growth in net new customers.

“We have been able to reduce borrowings, with an important reduction in interest expense and positive contribution to NIM [net interest margin]. Non-interest revenues and expenses continue to be well managed, while Oriental seamlessly assumed the servicing of its originated residential mortgage loans portfolio,” Fernández added.

Income Statement Highlights

Interest income from loans rose $2.9 million to $82.6 million. A large portion of the increase came from a $2.2 million recovery from former Eurobank loans. While the non-acquired portfolio grew, acquired loan portfolios continued to run off.

Interest Income from securities declined $0.3 million to $8 million, mainly due to lower balances in the mortgage-backed securities portfolio.

Interest Expense declined $0.9 million to $13.7 million due to lower borrowings.

Total Provision for loan and lease losses increased $9 million to $23.5 million. Provision for non-acquired loans included $2.9 million toward the sale of the Prepa credit and another $2.9 million for a single commercial loan. Provision for BBVA PR acquired loans included $4.4 million for a Puerto Rico Housing Finance Authority (PRHFA) loan, which now has a carrying amount of $3.5 million or 31% of the unpaid principal balance.

Total banking and wealth management revenues remained level at $18.3 million. Banking service fees increased due to a higher transaction volume. Mortgage banking revenue grew, reflecting better mark to market on sales. Wealth management remained level, excluding certain annual broker dealer and insurance fees received in 2Q16.

Other gains reflected a $5 million recovery from a Bear Stearns claim of loss in 2009 from the BALTA private label collateralized mortgage obligation.

Total non-interest expenses increased $1.1 million to $54.9 million. Total operating expenses were $0.4 million lower despite higher compensation expenses due to the number of business days in the quarter as well as general and administrative expenses for the servicing conversion initiative. Other real estate owned (OREO) related expenses increased $1.2 million as part of normal activities.

Income tax expense benefited from a $0.3 million resolution of a contingent tax position as well as from a reduction of the effective income tax rate, now estimated at 26%.

Balance Sheet Highlights

Total loans net held for investment at $4.3 billion remained level versus 2Q ended June 30.

Total investments declined $22.2 million to $1.3 billion, mainly due to prepayments in the mortgage-backed securities (MBS) portfolio.

Total Puerto Rico government related exposure fell 50% to $202.4 million, when taking the sale of Prepa’s line of credit portion into account. Balances now primarily consist of loans to the five largest municipalities.

Total deposits increased $110.7 million to $4.75 billion across all categories, reflecting deposits from new and existing clients. Excluding brokered deposits, deposits increased $91.2 million.

Total borrowings declined $237 million to $800.3 million primarily due to net pay down of $200.5 million in Federal Home Loan Bank (FHLB) advances and the maturity of a subordinated capital note of $67 million.

Total stockholders’ equity was up $9 million to $924.9 million due to the increase in retained earnings.

Credit Quality Highlights

The following compares data as of Sept. 30, 2016, to June 30, 2016, unless otherwise noted.

Net charge-off rate (ex-Prepa) at 1.15% fell 6 basis points due to declines in the auto and commercial lending categories.

Early delinquency rate was 3.7% and total delinquency 6.92%, down 7 and 14 basis points, respectively, from year-ago levels due to “proactive” measures implemented to deal with the economic environment.

Non-performing loan rate at 3.68% declined 541 basis points reflecting the sale of Prepa, but was up only 12 basis points from the prior quarter ex-PREPA.

Allowance for loan and lease losses fell $50.6 million to $62.2 million, also reflecting the sale of Prepa. As a result, the loan loss reserve ratio to total loans (excluding acquired loans) decreased to 2.06% from 3.53%.

Capital Position

Regulatory capital ratios continued to be significantly above requirements for a well-capitalized institution.

Tangible common equity to total tangible assets at 10.25% increased 33 basis points to the highest level in five quarters.

Common Equity Tier 1 Capital Ratio (using Basel III methodology) increased to 13.34% from 12.64%.

Total Risk-Based Capital Ratio increased to 18.73% from 18%.

 




OFG Bancorp Posts $10.9M Net Income in Second Quarter

oriental

SAN JUAN – OFG Bancorp, the bank holding company of Oriental Bank, reported Friday that net income available to shareholders for the second quarter of 2016 (2Q16) was in line with the preceding quarter and surpassed the year-ago quarter. 

OFG generated $10.9 million, or $0.25 per share fully diluted, in 2Q16 compared with $10.7 million, or $0.24 per share, in 1Q16. In the year-ago quarter, OFG reported a net loss of $6.6 million, or ($0.15) per share, primarily due to non-recurring charges.

Oriental Bank’s overall performance continued strong during the quarter, at $237.8 million, up 5.1% from the preceding quarter, with increased activity in auto, mortgage, and consumer loans.

Banking and wealth management fee revenue increased 6.8% from 1Q16.

Credit quality continued its positive trajectory. Net charge-offs (excluding acquired loans) declined to 1.21% from 1.30% in 1Q16. Early and total delinquency rates dropped from the previous and year-ago quarters. Non-performing loan rates fell to the lowest level in the last five quarters.

“OFG delivered another good quarter, demonstrating strong consistency in our financial results. Diluted EPS of $0.25 was slightly better than 1Q16 as we continued to focus on building our franchise while continuously adapting to our environment,” José Rafael Fernández, president, CEO and vice chairman, commented.




Oriental’s Holding Company Reports 1Q Profit

SAN JUAN – OFG Bancorp (OFG) on Friday reported a profit available to common shareholders of $10.7 million in its first quarter.

Among the company report highlights are that net income available to shareholders amounted to $10.7 million, or $0.24 per share fully diluted. This compares to a loss of $4.4 million, or ($0.10) per share, in the preceding quarter, and a loss of $6.5 million, or ($0.14) per share, in the same quarter a year ago.

orientalOriental Bank’s retail franchise continued to grow. New loan generation at $226 million, with commercial lending leading the way, remained at high levels. Total customers increased in excess of a 4% annualized rate from December 31, 2015.

Its credit quality continued to improve. Net charge-offs of loans (excluding acquired loans) declined to 1.30% from 1.67% in 4Q15. The provision for loan losses fell 18.6% from 4Q15’s adjusted amount (see Table 1). Early and total delinquency rates declined below both the previous and year-ago quarters.

Puerto Rico investment securities balance fell 62.2% to $6.7 million, reflecting the sale of $12.8 million (average yield of 6.60%) in securities of the Puerto Rico Industrial Development Co. (PRIDCO) and the Puerto Rico Public Buildings Authority (PBA).

Its net interest margin (NIM) expanded to 4.67%, reflecting better yields on interest earning assets.

And finally, its tangible book value per common share increased to $14.68 from $14.53, and tangible common equity (TCE) ratio increased to 9.50% from 9.10%.

OFG shares have increased 7 percent since the beginning of the year. The stock has declined 50 percent in the last 12 months.

In a statement, José Rafael Fernández, president, CEO and vice chairman of the board, said, “We are pleased with our first quarter results. This is particularly so after a tough 2015 in which we had to deal with the termination of our commercial share loss agreement with the FDIC and other de-risking actions.

“During the quarter, Oriental Bank originated $226 million in new loans, while maintaining our traditional discipline in credit and pricing standards. In addition, we continued to introduce innovative features for our retail clients, such as Cardless Cash mobile phone ATM access—another first for Oriental Bank in Puerto Rico.

“The bank capitalized on market conditions to partially unwind a high-rate repurchase agreement, and to sell our PRIDCO and PBA securities and certain of our mortgage-backed securities (MBS). The aggregate gains and losses had no impact on the 1Q16 income statement, but will help to improve NIM going forward.

“Of note was our reduced credit costs and operating expenses. The active management of retail credit has improved results with lower charge-off levels and provisions, and steady enhancement in our credit metrics. We continue to closely monitor these trends given the uncertainty regarding Puerto Rico’s fiscal situation.

“Last year’s rightsizing efforts are evident in our reported non-interest expenses. The efficiency ratio improved from the previous quarter to 59.56%, the lowest since 1Q15, and is approaching our high 50s% target.”

A conference call to discuss OFG’s results for the first quarter 2016, outlook and related matters will be held at 10 a.m. Eastern Time Friday. 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.

OFG’s financial supplement, with financial tables for the first quarter ended March 31, 2016, can be found on the Webcasts, Presentations & Other Files page, on OFG’s Investor Relations website at www.ofgbancorp.com.




Oriental Included in FDIC’s 2nd Quarter CRA Examination Schedule

SAN JUAN – Puerto Rico-based Oriental Bank is among the list of institutions the Federal Deposit Insurance Corp. (FDIC) has scheduled for a Community Reinvestment Act (CRA) examination during the second quarter of 2016.

orientalThe CRA is a 1977 law intended to encourage insured banks and thrifts to help meet the credit needs of the communities in which they are chartered to do business, including low- and moderate-income neighborhoods.

The list is published pursuant to regulations that require each federal bank and thrift regulator to publish a quarterly examination schedule at least 30 days before the beginning of each quarter.

The examination schedule reflects the effects of an institution’s size and CRA rating on examination frequency. Absent reasonable cause, an institution with $250 million or less in assets and a CRA rating of “satisfactory” can be subject to a CRA examination no more frequently than once every 48 months. Absent reasonable cause, an institution with $250 million or less in assets and a CRA rating of “outstanding” can be subject to a CRA examination no more frequently than once every 60 months.

The institutions will be examined April 1, 2016 through June 30, 2016

The regulators encourage public comment on the institutions to be examined. Comments should be directed to Oriental itself or FDIC Deputy Regional Director Scott D. Strockoz of the New York Regional Office, at 350 Fifth Avenue, New York, NY 10118-0110 or via telephone, at (800) 334-9593 or (917) 320-2500.

All public comments received prior to completion of a CRA examination will be considered.




OFG Bancorp Posts 4Q Loss of $977,000

SAN JUAN –  Oriental Bank’s holding company, OFG Bancorp, reported Monday a fourth-quarter loss of $977,000, after reporting a profit in the same period a year earlier.

The bank, based in San Juan, said it had a loss of 10 cents per share.

The financial holding company posted revenue of $89.9 million in the period.

OFG shares have dropped 23 percent since the beginning of the year. The stock has dropped 65 percent in the last 12 months.