SAN JUAN, Puerto Rico--(BUSINESS WIRE)--
OFG Bancorp (NYSE:OFG) today reported results for the second quarter
ended June 30, 2014.
Income available to common shareholders totaled $17.8 million, or
$0.38 per share diluted. In the preceding quarter, OFG earned $20.3
million, or $0.42 per share diluted, which included a pre-tax gain on
the sale of securities of $4.4 million. In the year ago quarter, OFG
earned $34.1 million, or $0.68 per share diluted, which included a net
positive impact of $16.3 million from non-recurring items.
Net interest margin continued strong at 6.10% compared to 5.90% in the
first quarter of 2014.
Puerto Rico government related loan and investment security balances
(excluding obligations of municipalities) declined 15.7%, to $454.9
million at June 30, 2014, from $539.5 million at March 31, 2014.
Cost of deposits continued to fall, to 76 bps from 80 bps in the first
quarter of 2014, as demand and savings account balances continued to
increase as a proportion of deposits.
Tangible book value per common share of $14.71 at June 30, 2014 rose
4.6%, from $14.07 at March 31, 2014, and book value per common share
of $16.87 grew 3.9%, from $16.23 at March 31, 2014.
Performance metrics were in line with OFG’s targets, with return on
average assets of 1.10%, return on average tangible common
stockholders' equity of 10.96%, and efficiency ratio of 47.89%.
Average common shares outstanding declined 0.7%, to 45.0 million at
June 30, 2014, from the end of the previous quarter, reflecting share
repurchases late in the first quarter of 2014.
JosÉ Rafael Fernandez, President, Chief Executive Officer, and Vice
“OFG’s strong results for the sixth consecutive quarter since the close
of the BBVA PR acquisition demonstrate the success of our growth
strategies, timely capital management actions, and overall execution
discipline. Post-acquisition, we have achieved notable growth in book
value and capital.”
“Our operational outlook remains intact. We are focused on managing our
businesses in a prudent manner, while carefully controlling costs, in
order to grow our core profits. This has been our approach to navigate
the challenging economic environment that has prevailed in Puerto Rico
for a while now. At the same time, we are continuing our focus on
building our franchise and brand value to differentiate Oriental in the
“We expect to see a notable upside to reported earnings in the second
half of 2015, as the amortization of the FDIC indemnification asset will
be significantly lower.”
2Q14 Income Statement Highlights
The following compares data for the second quarter 2014 to the first
quarter of 2014 unless otherwise noted.
Non-covered loan income increased 3.3%, to $88.1 million from
$85.2 million. Growth reflects certain acquired loans rolled over to
the originated loans category, and higher cost recoveries from
Covered loan income rose 6.4%, to $24.9 million from $23.4
million. The increase reflects continued, higher cost recoveries due
to successful workout efforts.
Investment securities interest income declined $1.5 million, to
$13.0 million from $14.4 million, due to lower balances of securities
as a result of prepayments, and the previously reported first quarter
2014 sale of mortgage-backed securities and repayment of a PR
government related security.
Total provision for loan and lease losses increased $3.1
million, to $14.8 million from $11.7 million, mostly reflecting higher
originated loan balances and an increase in charge off levels.
Banking service revenues continued steady, with revenues of
$10.0 million compared to $10.6 million, which included approximately
$0.5 million in certain annual and cyclical client payments.
Wealth management revenues increased to $7.3 million, compared
to $6.9 million, largely reflecting higher sales of variable annuities.
Mortgage banking activities remained level,with
revenues of $1.6 million compared to $1.7 million. Second quarter 2014
results reflected increased production offset by smaller gains from
secondary market sales. OFG sells most of its residential mortgage
production into the secondary market.
FDIC indemnification asset amortization continued as expected,
at $18.4 million compared to $18.5 million. The indemnification asset
was $143.7 million at June 30, 2014 compared to $166.2 million at
March 31, 2014.
Non-interest expenses declined 2.5%, to $59.8 million from
$61.4 million. This primarily reflects reaching deduction limits for
payroll benefits, and reduced costs associated with foreclosed real
June 30, 2014 Balance Sheet Highlights
The following compares data as of June 30, 2014 to March 31, 2014 or
for the second quarter of 2014 to the first quarter of 2014 unless
Production of new loans (excluding renewals) increased 4.4%, to
$221.6 million, due to increases in consumer, commercial and mortgage
volumes. Areas where OFG is focused on building loans – commercial,
consumer and auto – increased 4%, to a balance of $2.6 billion.
Puerto Rico government related debt declined primarily due to
$100.0 million in principal amount of Tax Revenue Anticipation Notes
(TRANs) repaid upon maturity by the Central Government, and $20
million in principal amount of privately-placed securities repaid by
the issuer at par.
Average interest earning assets declined to $7.0 billion from
$7.1 billion. This was primarily due to (i) second quarter 2014
maturities of PR government related loans mentioned above; and (ii)
the previously reported first quarter 2014 sale of mortgage-backed
securities and repayment of a PR government related security.
Demand deposit and savings account balances increased to 64% of
total deposits compared to 63% at the end of last quarter, and 57% at
the end of the year ago quarter. This reflects OFG’s effort to enhance
its funding profile and reduce cost of deposits, which fell to an
average 76 bps in the second quarter of 2014, compared to 80 bps in
the preceding quarter, and 96 bps in the year ago quarter.
Total stockholders’ equity increased 3.2% to $925.2 million
from $896.5 million, reflecting increases in retained earnings and
other comprehensive income.
Credit Quality Highlights
The following compares data excluding acquired loans for the second
quarter 2014 to the first quarter 2014 unless otherwise noted.
Credit metrics remained in line with general ranges reported over the
last 12 months. Increases from the preceding quarter reflect higher
volumes in certain businesses.
Net charge off rate increased to 0.96% from 0.86%, primarily
due to increasing volume in the consumer business.
Nonperforming loan rate increased to 3.39% from 3.25%, mainly
due to residential mortgages.
Total delinquency rate increased to 8.61% from 8.10%, mainly
due to mortgages.
Allowance for loan and lease losses as a percentage of loans
held for investment (including acquired loans) declined to 1.92% from
The following compares data for the second quarter 2014 to the first
quarter of 2014.
Regulatory capital ratios continued to be significantly above
requirements for a well-capitalized institution.
Tangible common equity to total tangible assets increased to
8.70% from 8.16%, based on a 4.6% increase in tangible common equity,
to $662.4 million, and a 1.9% decline in tangible assets, to $7.6
Tier 1 risk-based capital ratio increased to 15.49% from
14.76%, based on a 3.8% increase in Tier 1 capital, to $773.8 million,
and a 1.1% decline in total risk weighted assets, to $5.0 billion.
Total risk-based capital ratio increased to 17.30% from 16.56%,
based on a 3.3% increase in total risk-based capital, to $863.8
million, and total risk weighted assets of $5.0 billion.
A conference call to discuss OFG’s results for the second quarter of
2014, outlook and related matters will be held Thursday, July 24, 2014
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.
OFG’s Financial Supplement, with full financial tables for the quarter
ended June 30, 2014, can be found on the Webcasts, Presentations & Other
Files page, on OFG’s Investor Relations website at www.ofgbancorp.com.
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, 2013, 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 50th 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 full range
of commercial, consumer and mortgage banking services, as well as
financial planning, trust, insurance, investment brokerage and
investment banking services, primarily in Puerto Rico, through 55
financial centers. Investor information can be found at www.ofgbancorp.com.
Alexandra LÓpez, 787-522-6970
Steven Anreder, 212-532-3232
Source: OFG Bancorp