OFG Bancorp (NYSE:OFG) today reported results for the first
quarter ended March 31, 2017.
1Q17 Highlights
- Net income available to shareholders
held steady. OFG reported $11.7 million, or $0.26 per share
fully diluted, compared to $12.1 million, or $0.27 per share, in
4Q16 and $10.7 million, or $0.24 per share, in the year ago
1Q16.
- Oriental Bank’s retail franchise
continues to grow. Auto and consumer loan generation was
strong, customer deposits increased 1.3% from the previous quarter,
and retail accounts grew 5% year over year.
- Innovation streak continues.
Oriental Bank introduced the first fully integrated online and
mobile personal loan application in Puerto Rico.
- Net interest margin expanded.
NIM increased 16 basis points from 4Q16 to 5.10% due to a
significant reduction in the cost of borrowings and as the
proportion of higher yielding auto and consumer loans
increased.
- The remaining FDIC loss share
agreement was terminated. This is in line with OFG’s ongoing
efforts to optimize its operations.
- Credit quality strong. The net
charge off, non-performing loan and total delinquency rates
declined from 4Q16.
- Major performance ratios solid.
Return on average assets was 0.95%, return on average tangible
common stockholders' equity 7.00%, and efficiency ratio
56.15%.
- Capital buildup continues. All
major capital metrics advanced compared to the previous and year
ago quarters. Tangible book value per common share at $15.33 was up
1.7% and 4.4%, respectively, and the tangible common equity ratio
at 10.66% was up 33 and 116 basis points, respectively.
CEO Comment
José Rafael Fernández, President, Chief Executive Officer, and
Vice Chairman of the Board, commented:
“OFG Bancorp once again delivered consistent quarterly earnings,
generating $0.26 per share for the first quarter of 2017, with
consistent quality in our performance, especially in light of our
operating environment.
“Our overall results reflect the strength of our retail
franchise, where we saw quarter over quarter and year over year
increases in loan production and balances, deposits and
customers.
“We continued to lead the way in deploying customer-facing
banking technology in Puerto Rico, launching the first fully
integrated online personal loans application. This is part of our
highly successful strategy of differentiating ourselves in
delivering unparalleled customer experience.
“As planned during the quarter, we significantly reduced our
borrowing costs and balances and ended our remaining loss share
agreement with the FDIC, as part of our ongoing efforts to optimize
operating results.
“We continued to control credit quality in our challenging
environment. This enabled us to dramatically lower credit risk
levels, while enhancing our financial strength, as evidenced by our
credit trends and capital ratios, which are significantly stronger
today than they were five years ago.
“In mid-March, the Financial Oversight and Management Board and
the Puerto Rico Government reached an agreement on a 10-year fiscal
plan. Steps in the right direction such as this will help increase
confidence among people and businesses in Puerto Rico. However,
there is much more to be done to restore Puerto Rico’s fiscal
stability, competitiveness and economic growth.
“To sum up, we are pleased with our performance and how we have
proactively managed our business. While optimistic, we will
continue to closely monitor local economic conditions.”
1Q17 Income Statement Highlights
The following compares data for the first quarter 2017 to the
fourth quarter 2016, unless otherwise noted.
- Interest Income:
- Originated Loans: Increased $0.4
million to $52.0 million, due to higher yields from a larger
proportion of retail loans.
- Acquired Loans: Declined $1.2 million
to $25.7 million, reflecting continued pay downs.
- Securities: Increased $0.2 million to
$8.5 million, a result of higher interest rates on our cash
balances.
- Interest Expense declined $1.0
million to $11.6 million. In March 2017, a $232.0 million
repurchase agreement at 4.78% was repaid.
- Total Provision for Loan and Lease
Losses increased $4.3 million to $17.6 million. Provision for
originated loans increased $1.1 million due to continued growth of
the portfolio. Provision for acquired loans increased $3.2 million
due to periodic assessment of loans remaining in these
portfolios.
- Core Net Interest Margin
(excluding cost recoveries) expanded to 5.00% from 4.89% primarily
due to lower borrowing balances.
- Total Banking and Wealth Management
Revenues declined $3.0 million to $17.4 million. In 4Q16,
wealth management and banking services benefitted from $1.9 million
in seasonal year end income. In 1Q17, mortgage banking declined
$1.1 million due to lower secondary market activity and servicing
asset valuation.
- FDIC Shared-Loss Expense saw a
one-time net gain of $1.4 million, reflecting the outcome of the
previously announced February 2017 termination of the FDIC shared
loss agreement covering the former Eurobank loan portfolio.
- Total Non-Interest Expenses
declined $0.7 million to $51.7 million due to lower costs partially
offset by higher seasonal compensation and the semi-annual payment
of property taxes in credit related expenses.
- Effective Tax Rate was 38.3%
compared to 41.1% in 4Q16.
March 31, 2017 Balance Sheet Highlights
The following compares data at March 31, 2017 to December 31,
2016, unless otherwise noted.
- Total Loans Net declined $58.0
million to $4.09 billion. 1Q17 new retail loan production increased
0.8% to $172.4 million. Auto increased 11.8% due to the success of
marketing efforts with our floor plan auto dealers. Consumer was
level, but 23.0% higher than 1Q16, while mortgage declined 15.1%
due to market contraction. Commercial loan production declined to
$37.7 million, reflecting the seasonality of this business.
- Total Investments increased
$33.0 million to $1.40 billion. This reflected new purchases of
agency mortgage backed securities, partially offset by
prepayments.
- Customer Deposits increased
$53.9 million to $4.14 billion from both existing and new
customers.
- Total Borrowings declined $123.0
million to $672.4 million due to a reduction in repurchase
agreement balances. On a year over year basis, borrowings declined
$400.3 million with large reductions in all categories.
- Total Stockholders’ Equity
increased $11.0 million to $931.4 million primarily due to
increases in retained earnings.
Credit Quality Highlights
The following compares data at March 31, 2017 to December 31,
2016, unless otherwise noted.
- Net Charge-Off Rate fell 40
basis points to 1.40% due to declines in the commercial, auto and
consumer loan categories, partially offset by an increase in
mortgage loans.
- Early Delinquency Rate increased
11 basis points to 3.42% due to increases in commercial and
consumer loans, partially offset by improvements in auto and
mortgage loans.
- Non-Performing Loan Rate fell 29
basis points to 3.17% due to declines in mortgage, auto and
consumer loans.
- Total Delinquency Rate was down
15 basis points to 6.34% due to declines in auto and mortgage
loans, partially offset by commercial and consumer loans.
- Allowance for Loan and Lease
Losses increased $1.2 million to $60.5 million. The loan loss
reserve ratio to total loans (excluding acquired loans) rose 3
basis points to 1.98%.
Capital Position
The following compares data at March 31, 2017 to December 31,
2016, unless otherwise noted.
Capital continued to build and remains significantly above
regulatory requirements for a well-capitalized institution.
- Tangible Common Equity to Total
Tangible Assets at 10.66% increased 33 basis points from 4Q16
and 116 basis points year over year to the highest level in five
quarters.
- Tangible Book Value per Common
Share at $15.33 increased 1.7% from 4Q16 and 4.4% year over
year to the highest level in five quarters.
- Common Equity Tier 1 Capital
Ratio (using Basel III methodology) at 14.30% increased 25
basis points from 4Q16 and 197 basis points year over year to the
highest level in five quarters.
- Total Risk-Based Capital Ratio
at 20.05% increased 43 basis points from 4Q16 and 238 basis points
year over year to the highest level in five quarters.
Conference Call
A conference call to discuss OFG’s results for the first quarter
2017, outlook and related matters will be held today, Friday, April
21, 2017 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
first quarter ended March 31, 2017, 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) a credit default by the government of Puerto Rico;
(iv) the fiscal and monetary policies of the federal government and
its agencies; (v) changes in federal bank regulatory and
supervisory policies, including required levels of capital; (vi)
the relative strength or weakness of the consumer and commercial
credit sectors and of the real estate market in Puerto Rico; (vii)
the performance of the stock and bond markets; (viii) competition
in the financial services industry; and (ix) 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, 2016, 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 53rd 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, through 48 financial centers. Investor information can
be found at www.ofgbancorp.com.
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version on businesswire.com: http://www.businesswire.com/news/home/20170421005273/en/
OFG BancorpPuerto Rico:Idalis Montalvo,
787-777-2847idalis.montalvo@orientalbank.comorUS:Steven
Anreder, 212-532-3232sanreder@ofgbancorp.comorGary Fishman,
212-532-3232gfishman@ofgbancorp.com
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