OFG Bancorp (NYSE: OFG) today reported results for the second
quarter ended June 30, 2019.
Highlights 2Q19 vs. 2Q18
- Net revenues increased 3.3% to $99.2 million from $96.0
million. Increased interest income from Originated Loans and Cash
more than offset pay downs of Acquired Loans and lower Investment
Securities balances.
- Earnings per diluted share of $0.43 compared to $0.35, a 22.9%
increase. Book value per common share grew 4.2% to $18.76. Tangible
Book Value per common share expanded 6.7% to $17.03.
- Loans increased 3.7% to $4.47 billion, while core deposits rose
3.1% to $4.56 billion. New loan origination of $326.6 million
included the continued success of our Oriental Bank’s strategic
targeting of small business customers.
- Net Interest Margin increased 14 basis points to 5.37%. Credit
quality and the efficiency ratio improved. Return on Average Assets
increased 25 basis points to 1.48%. Return on Average Tangible
Common Equity expanded 112 basis points to 10.32%. Capital metrics
continued at new multi-year highs.
Other 2Q19 Items
- OFG sold $350 million in low-yielding mortgage backed
securities (MBS) in May and reduced related high cost non-core
funding. The sale resulted in a $4.8 million gain and the reduction
of $191 million of repurchase agreements and $63 million of
brokered CDs.
- OFG decided to sell $54 million unpaid principal balance of
mostly distressed acquired residential mortgages. The sale is
expected to close in 3Q19 as we take advantage of improving market
conditions in Puerto Rico. This decision resulted in an $8.8
million net increase in provision.
- Oriental Bank entered into an agreement with Scotiabank to
acquire its Puerto Rico and US Virgin Islands operations, subject
to usual closing conditions. During the quarter, $1.0 million in
related expenses were incurred.
Conference Call
A conference call to discuss OFG’s 2Q19 results, outlook and
related matters will be held today at 11:00 AM Eastern Time. Phone
(888) 562-3356 or (973) 582-2700. Use conference ID 409-9685. The
call can also be accessed live on OFG’s website at
www.ofgbancorp.com. A webcast replay will be available shortly
thereafter.
CEO Comment
“We are extremely pleased with our second quarter results as OFG
continues to deliver on all fronts,” said José Rafael Fernández,
President, Chief Executive Officer, and Vice Chairman of the
Board.
“Our strategies are proving highly effective in capturing the
positive economic shift taking place in Puerto Rico as OFG builds
excellent momentum for growth now and into the future.
“Our levels of small business, auto and consumer loan
production; core deposit growth, credit quality, and capital; and
number of customers confirm the success of our Vive la Diferencia
(Live the Difference) strategy.
“As a result, we generated a 23% increase in earnings per share
on a more than 3% increase in net revenue, with return on assets,
net interest margin, and efficiency ratios all at levels similar to
top performing peer mainland banks.
“Looking ahead, Oriental will further consolidate its position
as the premier retail bank on the island when the recently
announced Scotiabank Puerto Rico and US Virgin Island acquisition
is closed as we become the second largest in core deposits,
branches, automated and interactive teller machines, and mortgage
servicing in Puerto Rico, and the third largest bank in US Virgin
Islands.
“Thanks to our entire team for their commitment and dedication,
and to all our retail and commercial customers for their support
and loyalty.”
Income Statement
Unless otherwise noted, the following compares data for the
second quarter 2019 to the second quarter 2018.
- Interest Income increased 7.1% or $6.2 million to $94.3 million
as continued originated loan growth (+10.2%) and higher yield (+41
basis points) more than offset continued pay downs of acquired
loans and the MBS sale. Interest income from originated loans
increased $10.3 million, more than offsetting declines of $3.6
million from acquired loans and $0.4 million from investment
securities.
- Interest expense increased 26.4% or $2.8 million to $13.2
million. Core deposit costs increased $2.0 million due to higher
average balances excluding non-interest bearing deposits (+2.2%)
and rate (21 basis points). Brokered deposit costs increased $0.4
million due to lower average balances (-12.4%) and higher rate (+64
basis points). Borrowing costs increased $0.4 million due to higher
rate (+37 basis points) on slightly lower average balances.
- Net Interest Margin, excluding cost recoveries, increased 17
basis points to 5.34% from 5.17%. The increase reflected higher
yield on originated loans (+41 basis points) and cash balances (+70
basis points), plus a higher proportion of originated loans and
cash in interest-earning assets (70.6% compared to 62.8%),
partially offset by higher cost brokered CDs and borrowings.
- Total provision for Loan and Lease Losses increased 20.1% or
$3.0 million to $17.7 million. Excluding the previously mentioned
$8.8 million provision primarily related to the transfer to held
for sale of distressed acquired mortgages, 2Q19 provision declined
$5.8 million reflecting improved asset quality.
- Total Banking and Wealth Management Revenues declined 1.7% or
$0.3 million to $18.1 million due to slightly lower banking service
and mortgage banking revenues, partly offset by higher wealth
management revenues.
- Total Non-Interest Expenses declined 1.6% or $0.9 million to
$51.5 million, resulting in a 260 basis point improvement in the
Efficiency Ratio to 51.89%. In addition to $1.0 million in expenses
related to the Scotiabank PR and USVI acquisition, 2Q19 included
$0.4 million in lower losses on sale of foreclosed real estate as
general real estate market conditions in Puerto Rico continue to
improve.
- Due to higher proportion of exempt income, the Effective Tax
Rate was 32.1% compared to 32.4%.
- 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 June 30,
2019 to June 30, 2018.
- Total Loans increased 3.7% or $158.6 million to $4.47 billion
as originated loans increased 8.5% or $293.6 million and acquired
loans declined 16.3% or $139.5 million. Compared to March 31, 2019,
total loans increased 1.7% or $73.1 million with originated loans
up 2.5% or $92.9 million and acquired loans down 3.6% or $26.7
million.
- 2Q19 Loan Production totaled $326.6 million compared to $432.1
million in the year-ago quarter and $276.4 million in the previous
quarter. Auto and consumer lending remained high at $136.3 million
and $47.7 million, respectively, while residential mortgage lending
totaled $22.2 million. Commercial lending at $64.1 million
reflected continued growth of small business customers, while OFG
USA added another $56.4 million in commercial lending.
- Cash and Cash Equivalents increased 79.0% or $299.1 million to
$677.4 million. Compared to March 31, 2019, cash increased 33.1% or
$168.4 million. Total Investments declined 35.7% or $482.4 million
to $870.7 million. Compared to March 31, 2019, investments declined
30.5% or $382.0 million. The increase in cash and decrease in
investments reflect the MBS sale.
- Customer Deposits (excluding brokered) increased 3.1% or $138.0
million to $4.56 million. Compared to March 31, 2019, deposits
increased 2.5% or $110.9 million. The increases reflect stepped up
efforts to build a larger retail funding base.
- Borrowings declined 35.4% or $195.4 million to $356.8 million.
Compared to March 31, 2019, borrowings declined 35.0% or $192.2
million. Brokered deposits declined 15.8% or $73.0 million to
$388.4 million. Compared to March 31, 2019, brokered deposits
declined 13.9% or $62.8 million. The declines reflect the
cancellation of brokered CDs and repayment of repurchase
agreements.
- Total stockholders’ equity increased 9.1% or $87.1 million to
$1.04 billion. Compared to March 31, 2019, equity increased 2.3% or
$23.7 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 June 30, 2019 to June 30, 2018.
Credit quality improved. Non-performing loan rate at 2.94% fell
69 basis points. Allowance for loan losses declined 4.5% to $89.9
million. As a percentage of loans, the allowance at 2.35% fell 31
basis points. Early and total delinquency rates, at 3.51% and 6.07%
were up 44 and 12 basis points, respectively. Net Charge-Offs
declined 18.7% to $12.6 million. As a percentage of loans, the net
charge off rate at 1.32% fell 47 basis points.
Capital Position
Capital continued to be significantly above regulatory
requirements for a well-capitalized institution. June 30, 2019
ratios improved across the board. Leverage at 15.20% increased 128
basis points year over year and 56 basis points from March 31,
2019, Common Equity Tier 1 at 17.48% increased 334 and 39 bps, Tier
1 Risk-based at 19.87% increased 149 and 38 bps, Total Risk-based
Capital at 21.14% increased 147 and 37 bps, and Tangible Common
Equity at 13.71% increased 276 and 66 bps.
Financial Supplement & Conference Call
Presentation
OFG’s Financial Supplement, with full financial tables for the
quarter ended June 30, 2019, and its 2Q19 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 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) 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 www.ofgbancorp.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190722005305/en/
Puerto Rico: Idalis Montalvo
(idalis.montalvo@orientalbank.com) at (787) 777-2847 US:
Steven Anreder (sanreder@ofgbancorp.com) and Gary Fishman
(gfishman@ofgbancorp.com) at (212) 532-3232
OFG Bancorp (NYSE:OFG)
Historical Stock Chart
From Aug 2024 to Sep 2024
OFG Bancorp (NYSE:OFG)
Historical Stock Chart
From Sep 2023 to Sep 2024