EX-99 2 8kexhibit992q2019.htm EXHIBIT 99  

Exhibit 99

 

OFG Bancorp Reports 2Q19 Results

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 55^th 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 Error! Hyperlink reference not valid.www.ofgbancorp.com.

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Contacts

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

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OFG Bancorp

Financial Supplement

The information contained in this Financial Supplement is preliminary and based on data available at the time of the earnings presentation, and investors should refer to our June 30, 2019 Quarterly Report on Form 10-Q once it is filed with the Securities and Exchange Commission.

Table of Contents

Pages

OFG Bancorp (Consolidated Financial Information)

Table  1:

Financial and Statistical Summary - Consolidated

2

Table  2:

Consolidated Statements of Operations

3

Table  3:

Consolidated Statements of Financial Condition

4

Table  4:

Information on Loan Portfolio and Production

5

Table  5:

Average Balances, Net Interest Income and Net Interest Margin

6-7

Table  6:

Loan Information and Performance Statistics (Excluding Acquired Loans)

8-9

Table  7:

Allowance for Loan and Lease Losses

10

Table  8:

Accretable Yield on Loans Accounted for Under ASC 310-30 (Loans Acquired

with Deteriorated Credit Quality, Including those by Analogy)

11

Table  9:

Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory

Capital

12-13

Table  10:

Notes to Financial Summary, Selected Metrics, Loans, and Consolidated

Financial Statements (Tables 1-9)

14

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OFG Bancorp (NYSE: OFG)
Table 1: Financial and Statistical Summary - Consolidated
			2019			2019			2018			2018			2018			2019			2018
(Dollars in thousands, except per share data) (unaudited)			Q2			Q1			Q4			Q3			Q2			YTD			YTD
Earnings
Net interest income			$	81,085		$	81,789		$	82,035		$	82,277		$	77,588		$	162,874		$	151,582
Non-interest income, net (core)	(2)			18,074			17,553			19,260			18,446			18,394			35,627			36,633
Non-interest expense				51,452			52,152			51,719			50,941			52,300			103,604			104,421
Pre-provision net revenues	(21)			52,581			47,293			54,574			49,956			43,991			99,874			84,378
Provision for loan and lease losses				17,705			12,249			11,300	(c)		14,601			14,747			29,954			30,207
Net income before income taxes				34,876			35,044			43,274			35,355			29,244			69,920			54,171
Income tax expense				10,897			11,574			18,530			12,255			9,595			22,471			17,605
Net income			$	23,979		$	23,470		$	24,744		$	23,100		$	19,649		$	47,449		$	36,566
Common Share Statistics
Earnings per common share - basic	(3)		$	0.44		$	0.43		$	0.47		$	0.45		$	0.36		$	0.86		$	0.67
Earnings per common share - diluted	(4)		$	0.43		$	0.42		$	0.45		$	0.42		$	0.35		$	0.86		$	0.65
Average common shares outstanding				51,330			51,305			49,628	(a)		43,996			43,975			51,317			43,965
Average common shares outstanding and equivalents				51,680			51,626			51,602			51,464			51,226			51,652			51,157
Cash dividends per common share			$	0.07		$	0.07		$	0.07	(b)	$	0.06		$	0.06		$	0.14		$	0.12
Book value per common share (period end)			$	18.76		$	18.30		$	17.90	(a)	$	18.27		$	18.01		$	18.76		$	18.01
Tangible book value per common share (period end)	(5)		$	17.03		$	16.56		$	16.15	(a)	$	16.23		$	15.96		$	17.03		$	15.96
Balance Sheet (Average Balances)
Loans	(6)		$	4,528,965		$	4,504,725		$	4,491,224		$	4,432,703		$	4,317,762		$	4,516,947		$	4,248,534
Interest-earning assets				6,060,819			6,152,202			6,230,027			6,116,644			5,951,906			6,106,868			5,847,255
Total assets				6,496,423			6,605,328			6,619,026			6,514,532			6,374,240			6,550,575			6,282,505
Total deposits				4,880,114			4,890,630			4,987,446			4,934,468			4,848,901			4,885,344			4,812,516
Interest-bearing deposits				3,782,211			3,791,083			3,866,842			3,854,642			3,766,611			3,786,624			3,761,786
Borrowings				459,802			562,152			543,920			503,268			462,646			510,694			407,554
Stockholders' equity				1,037,057			1,017,546			983,015			973,838			959,777			1,027,356			956,264
Common stockholders' equity				955,187			935,676			881,971			807,968			793,907			945,486			790,394
Performance Metrics
Net interest margin	(7)			5.37%			5.39%			5.22%			5.34%			5.23%			5.38%			5.23%
Return on average assets	(8)			1.48%			1.42%			1.50%			1.42%			1.23%			1.45%			1.16%
Return on average tangible common stockholders' equity	(9)			10.32%			10.32%			11.67%	(a)		10.94%			9.20%			10.32%			8.47%
Efficiency ratio	(10)			51.89%			52.50%			51.06%			50.58%			54.49%			52.19%			55.48%
Full-time equivalent employees, period end				1,417			1,394			1,392			1,365			1,354			1,417			1,354
Credit Quality Metrics
Excluding acquired loans:	(1)
Allowance for loan and lease losses			$	89,952		$	94,035		$	95,188		$	95,236		$	94,218		$	89,952		$	94,218
Allowance as a % of loans held for investment				2.35%			2.51%			2.54%			2.62%			2.66%			2.35%			2.66%
Net charge-offs			$	12,564		$	12,486		$	10,885	(c)	$	12,402		$	15,449		$	25,050		$	26,293
Net charge-off rate	(11)			1.32%			1.33%			1.17%			1.37%			1.79%			1.11%			1.24%
Early delinquency rate (30 - 89 days past due)				3.51%			3.61%			3.34%			3.32%			3.07%			3.51%			3.07%
Total delinquency rate (30 days and over)				6.07%			6.33%			6.36%			6.19%			5.95%			6.07%			5.95%
Capital Ratios (Non-GAAP)	(12)
Leverage ratio				15.20%			14.64%			14.22%	(a)		13.93%			13.92%			15.20%			13.92%
Common equity Tier 1 capital ratio				17.48%			17.09%			16.78%	(a)		14.38%			14.14%			17.48%			14.14%
Tier 1 risk-based capital ratio				19.87%			19.49%			19.20%	(a)		18.55%			18.38%			19.87%			18.38%
Total risk-based capital ratio				21.14%			20.77%			20.48%	(a)		19.84%			19.67%			21.14%			19.67%
Tangible common equity ("TCE") ratio				13.71%			13.05%			12.76%	(a)		10.88%			10.95%			13.71%			10.95%
(a) During the Q4 2018, the Company converted all of its outstanding 8.750% non-cumulative convertible perpetual preferred stock, series C into OFG Bancorp common stock. Each share of the 84,000 series C preferred stock was converted into 86.4225 shares of common stock.
(b) During the Q4 2018, the Company increased the regular cash dividend per common share to $0.07 from $0.06.
(c) During the Q4 2018, the Company received $1.8 million proceeds from the sale of fully charged-off originated auto and consumer loans.
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OFG Bancorp (NYSE: OFG)
Table 2: Consolidated Statements of Operations
			Quarter Ended															Six-Months Ended
			June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
(Dollars in thousands, except per share data) (unaudited)			2019			2019			2018			2018			2018			2019			2018
Interest income:
Loans	(1)
Non-acquired loans			$	72,978		$	71,298		$	70,747		$	68,387		$	62,710		$	144,276		$	121,014
Acquired BBVAPR loans				9,603			10,247			10,935			12,144			12,353			19,850			25,320
Acquired Eurobank loans				2,499			2,574			2,642			3,485			3,366			5,073			6,707
Total interest income from loans				85,080			84,119			84,324			84,016			78,429			169,199			153,041
Investment securities				9,175			10,591			10,782			10,121			9,577			19,766			18,135
Total interest income				94,255			94,710			95,106			94,137			88,006			188,965			171,176
Interest expense:
Deposits
Core deposits				7,465			6,214			6,396			5,877			5,517			13,679			10,929
Brokered deposits				2,526			2,835			3,003			2,728			2,134			5,361			4,020
Total deposits				9,991			9,049			9,399			8,605			7,651			19,040			14,949
Borrowings				3,179			3,872			3,672			3,255			2,767			7,051			4,645
Total interest expense				13,170			12,921			13,071			11,860			10,418			26,091			19,594
Net interest income				81,085			81,789			82,035			82,277			77,588			162,874			151,582
Provision for loan and lease losses, excluding acquired loans	(1)			8,481			11,333			10,842			13,420			12,835			19,814			27,793
Provision (recapture) for acquired BBVAPR loan and lease losses	(1)			7,446	(g)		1,567			(998)	(b)		875			1,247			9,013			1,610
Provision for acquired Eurobank loan and lease losses	(1)			1,778	(g)		(651)	(a)		1,456			306			665			1,127			804
Total provision for loan and lease losses, net				17,705			12,249			11,300			14,601			14,747			29,954			30,207
Net interest income after provision for loan and lease losses				63,380			69,540			70,735			67,676			62,841			132,920			121,375
Non-interest income:
Banking service revenues				10,776			10,465			11,234			10,797			11,144			21,241			21,607
Wealth management revenues				6,669			5,882			7,246			6,407			6,262			12,551			12,281
Mortgage banking activities				629			1,206			780			1,242			988			1,835			2,745
Total banking and financial service revenues				18,074			17,553			19,260			18,446			18,394			35,627			36,633
Other income, net				4,874	(f)		103			4,998	(c)		174			309			4,977			584
Total non-interest income, net				22,948			17,656			24,258			18,620			18,703			40,604			37,217
Non-interest expense:
Compensation and employee benefits				19,875			20,341			19,322			18,495			18,099			40,216			38,707
Occupancy, equipment and infrastructure costs				7,511			7,746			7,762			8,388			9,166			15,257			16,934
Net loss on sale of foreclosed real estate and other repossessed assets				21			1,070			1,834			1,210			392			1,091			1,618
General and administrative expenses				21,482			20,699			20,963			20,112			22,746			42,181			42,846
Total operating expenses				48,889			49,856			49,881			48,205			50,403			98,745			100,105
Credit related expenses				2,563			2,296			1,838			2,736			1,897			4,859			4,316
Total non-interest expense				51,452			52,152			51,719			50,941			52,300			103,604			104,421
Income before income taxes				34,876			35,044			43,274			35,355			29,244			69,920			54,171
Income tax expense				10,897			11,574			18,530	(d)		12,255			9,595			22,471			17,605
Net income				23,979			23,470			24,744			23,100			19,649			47,449			36,566
Less:  dividends on preferred stock
Convertible preferred stock				-			-			-	(e)		(1,838)			(1,837)			-			(3,675)
Other preferred stock				(1,628)			(1,628)			(1,628)			(1,628)			(1,628)			(3,256)			(3,255)
Net income available to common shareholders			$	22,351		$	21,842		$	23,116		$	19,634		$	16,184		$	44,193		$	29,636
(a) During the 1Q 2019, the provision for acquired Eurobank loans and leases reflected better cashflows than expected.
(b) During the 4Q 2018, the provision for acquired BBVAPR loans reflected better cashflows than expected.
(c) During the 4Q 2018, the Company received a $5.0 million payment from the insurance company for Hurricane María impact on the Bank's operations.
(d) During the 4Q 2018, the Company recognized an aggregate amount of $4.1 million income tax expense as a result of the Changes in Puerto Rico Tax Legislation, mainly driven by a reduction of the DTA since Regular Corporate Tax Rate changes from 39% to 37.5%.
(e) During the Q4 2018, the Company converted of all of its outstanding 8.750% non-cumulative convertible perpetual preferred stock, series C into OFG Bancorp common stock. Each share of the 84,000 series C preferred stock was converted into 86.4225 shares of common stock.
(f) During Q2 2019, the Company sold $350 million available-for-sale mortgage-backed securities and recognized a gain in the sale of $4.8 million.
(g) During Q2 2019, the Company adjusted to fair value several mortgage loans accounted under ASC 310-30, which are expected to be sold during 2019, increasing the provision by $8.8 million.
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OFG Bancorp (NYSE: OFG)
Table 3: Consolidated Statements of Financial Condition
			June 30,			March 31,			December 31,			September 30,			June 30,
(Dollars in thousands) (unaudited)			2019			2019			2018			2018			2018
Cash and cash equivalents			$	677,430		$	509,023		$	450,063		$	546,780		$	378,365
Investments:
Trading securities				412			381			360			405			418
Investment securities available-for-sale, at fair value, with amortized cost of $860,911
(March 31, 2019 - $1,248,750; December 31, 2018 - $854,511; September 30, 2018 - $872,895;
June 30, 2018 - $890,308)
Mortgage-backed securities				843,333	(d)		1,225,225	(a)		827,564			834,538			855,686
Other investment securities				14,100			14,244			14,293			14,014			16,655
Total investment securities available-for-sale				857,433			1,239,469			841,857			848,552			872,341
Mortgage-backed securities held-to-maturity, at amortized cost
(fair value at December 31, 2018 - $410,353; September 30, 2018 - $425,066; June 30, 2018 - $447,947;
March 31, 2018 - $467,980)				-			-	(a)		424,740			444,679			465,427
Federal Home Loan Bank (FHLB) stock, at cost				12,821			12,800			12,644			12,461			14,919
Other investments				3			3			3			3			3
Total investments				870,669			1,252,653			1,279,604			1,306,100			1,353,108
Loans, net				4,474,497			4,401,401			4,431,594			4,352,980			4,315,866
Other assets:
Derivative assets				26			110			347			1,265			1,100
Prepaid expenses				11,903			7,830			10,283			13,461			11,127
Deferred tax asset, net				111,147			112,744			113,763			122,934			125,141
Foreclosed real estate and repossessed properties				32,016			34,439			36,754			42,014			46,035
Premises and equipment, net				71,001			69,017			68,892			67,762			66,174
Goodwill				86,069			86,069			86,069			86,069			86,069
Right of use assets				20,419			20,860	(b)		-			-			-
Accounts receivable and other assets				108,950			109,045			105,983			117,309			118,577
Total assets			$	6,464,127		$	6,603,191		$	6,583,352		$	6,656,674		$	6,501,562
Deposits:
Demand deposits			$	2,219,911		$	2,218,186		$	2,191,802		$	2,304,067		$	2,176,935
Savings accounts				1,200,408			1,231,170			1,187,945			1,216,190			1,219,159
Time deposits				1,136,411			996,519			1,003,271			1,037,858			1,022,682
Brokered deposits				388,407	(d)		451,226			525,097			530,878			461,425
Total deposits				4,945,137			4,897,101			4,908,115			5,088,993			4,880,201
Borrowings:
Securities sold under agreements to repurchase				240,324	(d)		431,566			455,508			378,237			387,770
Advances from FHLB and other borrowings				80,423			81,397			78,834			73,723			128,413
Subordinated capital notes				36,083			36,083			36,083			36,083			36,083
Total borrowings				356,830			549,046			570,425			488,043			552,266
Other liabilities:
Derivative liabilities				985			439			333			622			679
Acceptances outstanding				23,610			25,791			16,937			28,682			30,578
Lease liability				22,179			22,618	(b)		-			-			-
Accrued expenses and other liabilities				70,512			87,004			87,665			80,448			80,019
Total liabilities				5,419,253			5,581,999			5,583,475			5,686,788			5,543,743
Stockholders' equity:
Preferred stock				92,000			92,000			92,000	(c)		176,000			176,000
Common stock				59,885			59,885			59,885	(c)		52,626			52,626
Additional paid-in capital				620,368			619,828			619,381	(c)		542,078			541,734
Legal surplus				95,020			92,621			90,167			87,563			85,249
Retained earnings				284,458			268,101	(b)		253,040			236,120			221,441
Treasury stock, at cost				(103,171)			(103,196)			(103,633)			(103,706)			(103,969)
Accumulated other comprehensive (loss) income, net				(3,686)			(8,047)			(10,963)			(20,795)			(15,262)
Total stockholders' equity				1,044,874			1,021,192			999,877			969,886			957,819
Total liabilities and stockholders' equity			$	6,464,127		$	6,603,191		$	6,583,352		$	6,656,674		$	6,501,562
(a) On January 1, 2019, the Company adopted the Accounting Standard Update ("ASU") No. 2017-12 and reclassified all of its mortgage backed securities from the held-to-maturity portfolio into the available-for-sale portfolio.
(b) On January 1, 2019, the Company adopted the ASU No. 2016-02, under the effective date method, which requires lessees to recognize a right-of-use asset and related lease liability for lease classified as operating leases, prospectively.
(c) During Q4 2018, the Company converted of all of its outstanding 8.750% non-cumulative convertible perpetual preferred stock, series C into OFG Bancorp common stock. Each share of the 84,000 series C preferred stock was converted into 86.4225 shares of common stock.
(d) During  Q2 2019, the Company sold $350 million available-for-sale mortgage-backed securities and recognized a gain in the sale of $4.8 million, resulting  in the termination before maturity of $191.2 million  of securities sold under agreements to repurchase and in a reduction of $62.8 million of brokered CDs.
4

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OFG Bancorp (NYSE: OFG)
Table 4: Information on Loan Portfolio and Production
			June 30,			March 31,			December 31,			September 30,			June 30,
(Dollars in thousands) (unaudited)			2019			2019			2018			2018			2018
Non-acquired loans held for investment:
Mortgage			$	635,616		$	651,423		$	668,809		$	667,224		$	678,259
Commercial				1,616,973			1,569,551			1,597,588			1,540,027			1,507,368
Consumer				356,110			350,543			348,980			345,399			339,341
Auto				1,218,070			1,167,482			1,129,695			1,084,912			1,014,664
				3,826,769			3,738,999			3,745,072			3,637,562			3,539,632
Less:  Allowance for loan and lease losses				(89,952)			(94,035)			(95,188)			(95,236)			(94,218)
				3,736,817			3,644,964			3,649,884			3,542,326			3,445,414
Deferred loan costs, net				9,251			8,254			7,740			7,556			7,028
Total non-acquired loans held for investment, net				3,746,068			3,653,218			3,657,624			3,549,882			3,452,442
Acquired loans:	(1)
BBVAPR
Accounted for under ASC 310-20
Commercial				2,249			2,405			2,546			2,778			2,909
Consumer				21,966			22,768			23,988			24,914			25,736
Auto				996			2,336			4,435			7,494			11,283
				25,211			27,509			30,969			35,186			39,928
Less:  Allowance for loan and lease losses				(1,685)			(1,968)			(2,062)			(2,350)			(2,726)
				23,526			25,541			28,907			32,836			37,202
Accounted for under ASC 310-30
Mortgage				476,081			484,578			492,890			503,861			516,934
Commercial				169,481			176,908			182,319			190,178			223,853
Consumer				-			-			-			95			495
Auto				6,462			9,866			14,403			20,363			26,937
				652,024			671,352			689,612			714,497			768,219
Less:  Allowance for loan and lease losses				(45,427)			(42,133)			(42,010)			(43,875)			(44,176)
				606,597			629,219			647,602			670,622			724,043
Total Acquired BBVAPR loans, net				630,123			654,760			676,509			703,458			761,245
Eurobank
Accounted for under ASC 310-30
Mortgage				61,920			62,649			63,392			64,785			65,637
Commercial				46,421			46,588			47,826			49,262			49,706
Consumer				867			856			846			895			935
				109,208			110,093			112,064			114,942			116,278
Less:  Allowance for loan and lease losses				(25,578)			(24,352)			(24,971)			(24,281)			(24,314)
Total Acquired Eurobank loans, net				83,630			85,741			87,093			90,661			91,964
Total acquired loans, net				713,753			740,501			763,602			794,119			853,209
Total loans held for investment				4,459,821			4,393,719			4,421,226			4,344,001			4,305,651
Mortgage loans held for sale				14,676			7,682			10,368			8,979			10,215
Total loans, net			$	4,474,497		$	4,401,401		$	4,431,594		$	4,352,980		$	4,315,866
Loan Portfolio Summary:
Loans held for investment:
Mortgage			$	1,173,617		$	1,198,650		$	1,225,091		$	1,235,870		$	1,260,830
Commercial				1,835,124			1,795,452			1,830,279			1,782,245			1,783,836
Consumer				378,943			374,167			373,814			371,303			366,507
Auto				1,225,528			1,179,684			1,148,533			1,112,769			1,052,884
				4,613,212			4,547,953			4,577,717			4,502,187			4,464,057
Less:  Allowance for loan and lease losses				(162,642)			(162,488)			(164,231)			(165,742)			(165,434)
				4,450,570			4,385,465			4,413,486			4,336,445			4,298,623
Deferred loan costs, net				9,251			8,254			7,740			7,556			7,028
Total loans held for investment, net				4,459,821			4,393,719			4,421,226			4,344,001			4,305,651
Mortgage loans held for sale				14,676			7,682			10,368			8,979			10,215
Total loans, net			$	4,474,497		$	4,401,401		$	4,431,594		$	4,352,980		$	4,315,866
			2019			2018			2018			2018			2018
(Dollars in thousands) (unaudited)			Q2			Q1			Q4			Q3			Q2
Quarterly loan production	(13)
Mortgage			$	22,196		$	23,097		$	33,373		$	27,869		$	31,808
Commercial				64,079			60,485			92,088			105,346			127,200
US Loan Program				56,372			31,706			31,667			30,357			99,666
Consumer				47,662			40,877			42,055			42,995			42,317
Auto				136,263			120,199			123,770			140,390			131,103
Total			$	326,572		$	276,364		$	322,953		$	346,957		$	432,094
5

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OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin
			2019 Q2									2019 Q1									2018 Q4									2018 Q3									2018 Q2
						Interest									Interest									Interest									Interest									Interest
			Average			Income/			Yield/			Average			Income/			Yield/			Average			Income/			Yield/			Average			Income/			Yield/			Average			Income/			Yield/
(Dollars in thousands) (unaudited)			Balance			Expense			Rate			Balance			Expense			Rate			Balance			Expense			Rate			Balance			Expense			Rate			Balance			Expense			Rate
Interest earning assets:
Cash equivalents			$	481,115		$	2,904		2.42	%		$	388,578		$	2,368		2.47	%		$	434,701		$	2,572		2.35	%		$	327,268		$	1,676		2.03	%		$	289,227		$	1,242		1.72	%
Investment securities				1,050,739			6,271		2.39	%			1,258,899			8,223		2.61	%			1,304,102			8,210		2.52	%			1,356,673			8,445		2.49	%			1,344,917			8,335		2.48	%
Loans
Non-acquired loans				3,800,037			72,979		7.70	%			3,763,069			71,298		7.68	%			3,706,560			70,747		7.57	%			3,614,453			68,387		7.51	%			3,449,631			62,710		7.29	%
Acquired BBVAPR loans				642,813			9,603		5.98	%			655,497			10,247		6.25	%			694,118			10,935		6.30	%			725,041			12,144		6.70	%			773,193			12,353		6.39	%
Acquired Eurobank loans				86,115			2,499		11.61	%			86,159			2,574		11.95	%			90,546			2,642		11.67	%			93,209			3,485		14.96	%			94,938			3,366		14.18	%
Total loans				4,528,965			85,081		7.54	%			4,504,725			84,119		7.57	%			4,491,224			84,324		7.45	%			4,432,703			84,016		7.52	%			4,317,762			78,429		7.29	%
Total interest-earning assets			$	6,060,819		$	94,256		6.24	%		$	6,152,202		$	94,710		6.24	%		$	6,230,027		$	95,106		6.06	%		$	6,116,644		$	94,137		6.11	%		$	5,951,906		$	88,006		5.93	%
Interest bearing liabilities:
Deposits
NOW accounts			$	1,124,670		$	1,730		0.62	%		$	1,119,612		$	1,454		0.53	%		$	1,109,795		$	1,432		0.51	%		$	1,096,023		$	1,196		0.43	%		$	1,052,465		$	968		0.37	%
Savings accounts				1,180,153			1,882		0.64	%			1,181,024			1,615		0.55	%			1,217,931			1,741		0.57	%			1,211,693			1,571		0.51	%			1,230,741			1,555		0.51	%
Time deposits				1,065,005			3,652		1.38	%			992,331			2,944		1.20	%			1,012,267			3,008		1.18	%			1,027,424			2,896		1.12	%			1,012,630			2,779		1.10	%
Brokered deposits				412,383			2,526		2.46	%			498,116			2,835		2.31	%			526,849			3,003		2.26	%			519,502			2,727		2.08	%			470,775			2,134		1.82	%
				3,782,211			9,790		1.04	%			3,791,083			8,848		0.95	%			3,866,842			9,184		0.94	%			3,854,642			8,390		0.86	%			3,766,611			7,436		0.79	%
Non-interest bearing deposit accounts				1,097,903			-		-				1,099,547			-		-				1,120,604			-		-				1,079,826			-		-				1,082,290			-		-	%
Fair value premium amortization and core deposit intangible amortization				-			201		-				-			201		-				-			215		-				-			215		-				-			215		-
Total deposits				4,880,114			9,991		0.82	%			4,890,630			9,049		0.75	%			4,987,446			9,399		0.75	%			4,934,468			8,605		0.69	%			4,848,901			7,651		0.63	%
Borrowings
Securities sold under agreements to repurchase				343,370			2,107		2.46	%			444,843			2,785		2.54	%			430,889			2,633		2.42	%			390,225			2,242		2.28	%			353,313			1,840		2.09	%
Advances from FHLB and other borrowings				80,349			559		2.79	%			81,226			563		2.81	%			76,948			536		2.76	%			76,960			517		2.67	2			73,250			448		2.45	%
Subordinated capital notes				36,083			514		5.71	%			36,083			524		5.89	%			36,083			503		5.53	%			36,083			496		5.45	%			36,083			479		5.32	%
Total borrowings				459,802			3,180		2.77	%			562,152			3,872		2.79	%			543,920			3,672		2.68	%			503,268			3,255		2.57	%			462,646			2,767		2.40	%
Total interest-bearing liabilities			$	5,339,916		$	13,171		0.99	%		$	5,452,782		$	12,921		0.96	%		$	5,531,366		$	13,071		0.94	%		$	5,437,736		$	11,860		0.87	%		$	5,311,547		$	10,418		0.79	%
Interest rate spread						$	81,085		5.25	%					$	81,789		5.28	%					$	82,035		5.12	%					$	82,277		5.24	%					$	77,588		5.14	%
Net interest margin									5.37	%								5.39	%								5.22	%								5.34	%								5.23	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans						$	241								$	427								$	653								$	1,143								$	291
Acquired Eurobank loans							189									110									123									829									533
						$	430								$	537								$	776								$	1,973								$	824
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets			$	6,060,819		$	93,826		6.21	%		$	6,152,202		$	94,173		6.21	%		$	6,230,027		$	94,330		6.01	%		$	6,116,644		$	92,165		5.98	%		$	5,951,906		$	87,182		5.88	%
Interest rate spread						$	80,655		5.22	%					$	81,252		5.25	%					$	81,259		5.07	%					$	80,305		5.11	%					$	76,764		5.09	%
Net interest margin									5.34	%								5.36	%								5.17	%								5.21	%								5.17	%
6

OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin (Continued)
			2019 YTD									2018 YTD
						Interest									Interest
			Average			Income/			Yield/			Average			Income/			Yield/
(Dollars in thousands) (unaudited)			Balance			Expense			Rate			Balance			Expense			Rate
Interest earning assets:
Cash equivalents			$	435,102		$	5,271		2.44	%		$	306,366		$	2,449		1.61	%
Investment securities				1,154,819			14,494		2.51	%			1,292,355			15,686		2.43	%
Loans
Non-acquired loans				3,781,661			144,277		7.69	%			3,366,035			121,014		7.25	%
Acquired BBVAPR loans				649,149			19,850		6.12	%			786,196			25,320		6.44	%
Acquired Eurobank loans				86,137			5,073		11.78	%			96,303			6,707		13.93	%
Total loans				4,516,947			169,200		7.55	%			4,248,534			153,041		7.26	%
Total interest-earning assets			$	6,106,868		$	188,965		6.24	%		$	5,847,255		$	171,176		5.90	%
Interest bearing liabilities:
Deposits
NOW accounts			$	1,122,155		$	3,183		0.57	%		$	1,055,779		$	1,867		0.36	%
Savings accounts				1,180,586			3,496		0.60	%			1,218,488			3,052		0.51	%
Time deposits				1,028,870			6,598		1.29	%			1,018,801			5,580		1.10	%
Brokered deposits				455,013			5,362		2.38	%			468,718			4,020		1.73	%
				3,786,624			18,639		0.99	%			3,761,786			14,519		0.78	%
Non-interest bearing deposit accounts				1,098,720			-		-				1,050,730			-		-	%
Fair value premium amortization and core deposit intangible amortization				-			401		-				-			429		-
Total deposits				4,885,344			19,040		0.79	%			4,812,516			14,948		0.63	%
Borrowings
Securities sold under agreements to repurchase				393,826			4,892		2.50	%			302,728			2,919		1.94	%
Advances from FHLB and other borrowings				80,785			1,121		2.80	%			68,743			822		2.41	%
Subordinated capital notes				36,083			1,038		5.80	%			36,083			905		5.06	%
Total borrowings				510,694			7,051		2.78	%			407,554			4,646		2.30	%
Total interest-bearing liabilities			$	5,396,038		$	26,091		0.98	%		$	5,220,070		$	19,594		0.76	%
Interest rate spread						$	162,874		5.26	%					$	151,582		5.14	%
Net interest margin									5.38	%								5.23	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans						$	668									409
Acquired Eurobank loans							299									922
						$	967								$	1,332
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets			$	6,106,868		$	187,998		6.21	%		$	5,847,255		$	169,844		5.86	%
Interest rate spread						$	161,907		5.23	%					$	150,250		5.10	%
Net interest margin									5.35	%								5.18	%
7

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (1)
			2019			2019			2018			2018			2018
(Dollars in thousands) (unaudited)			Q2			Q1			Q4			Q3			Q2
Net Charge-offs
Mortgage:
Charge-offs			$	604		$	587		$	1,570		$	1,429		$	1,328
Recoveries				(316)			(287)			(128)			(139)			(466)
Total mortgage				288			300			1,442			1,290			862
Commercial:
Charge-offs				2,146			1,086			386			3,249			1,998
Recoveries				(177)			(147)			(126)			(119)			(227)
Total commercial				1,969			939			260			3,130			1,771
Consumer:
Charge-offs				4,839			4,121			4,191			4,591			4,588
Recoveries				(327)			(263)			(1,000)			(278)			(240)
Total consumer				4,512			3,858			3,191			4,313			4,348
Auto:
Charge-offs				10,672			11,371			10,843			9,111			13,748
Recoveries				(4,877)			(3,982)			(4,851)			(5,442)			(5,280)
Total auto				5,795			7,389			5,992			3,669			8,468
Total			$	12,564		$	12,486		$	10,885		$	12,402		$	15,449
Net Charge-off Rates
Mortgage				0.18%			0.18%			0.86%			0.76%			0.50%
Commercial				0.50%			0.24%			0.07%			0.83%			0.50%
Consumer				4.87%			4.20%			3.49%			4.77%			4.88%
Auto				1.93%			2.54%			2.14%			1.39%			3.39%
Total				1.32%			1.33%			1.17%			1.37%			1.79%
Average Loans Held For Investment
Mortgage			$	647,254		$	649,408		$	673,476		$	682,202		$	682,890
Commercial				1,584,363			1,584,246			1,546,166			1,512,661			1,410,300
Consumer				370,461			367,262			365,795			361,456			356,413
Auto				1,197,959			1,162,153			1,121,123			1,058,134			1,000,028
Total			$	3,800,037		$	3,763,069		$	3,706,560		$	3,614,453		$	3,449,631
8

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (Continued) (1)
			2019			2019			2018			2018			2018
(Dollars in thousands) (unaudited)			Q2			Q1			Q4			Q3			Q2
Early Delinquency (30 - 89 days past due)
Mortgage			$	24,303		$	26,775		$	26,150		$	25,285		$	26,132
Commercial				2,738	(a)		12,825			5,568			6,871			9,699
Consumer				8,617			7,795			7,285			6,661			7,063
Auto				98,625			87,500			86,039			81,828			65,823
Total			$	134,283		$	134,895		$	125,042		$	120,645		$	108,717
Early Delinquency Rates (30 - 89 days past due)
Mortgage				3.82%			4.11%			3.91%			3.79%			3.85%
Commercial				0.17%			0.82%			0.35%			0.45%			0.64%
Consumer				2.42%			2.22%			2.09%			1.93%			2.08%
Auto				8.10%			7.49%			7.62%			7.54%			6.49%
Total				3.51%			3.61%			3.34%			3.32%			3.07%
Total Delinquency (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation			$	70,364		$	78,560		$	82,404		$	83,966		$	83,707
GNMA's buy-back option program				11,675			12,942			19,721			13,325			14,521
Total mortgage				82,039			91,502			102,125			97,291			98,228
Commercial				28,762	(a)		35,737			27,423			25,191			26,269
Consumer				10,817			9,873			8,983			8,530			9,095
Auto				110,646			99,663			99,533			93,976			76,924
Total			$	232,264		$	236,775		$	238,064		$	224,988		$	210,516
Total Delinquency Rates (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation				11.07%			12.06%			12.32%			12.58%			12.34%
GNMA's buy-back option program				1.84%			1.99%			2.95%			2.00%			2.14%
Total mortgage				12.91%			14.05%			15.27%			14.58%			14.48%
Commercial				1.78%			2.28%			1.72%			1.64%			1.74%
Consumer				3.04%			2.82%			2.57%			2.47%			2.68%
Auto				9.08%			8.54%			8.81%			8.66%			7.58%
Total				6.07%			6.33%			6.36%			6.19%			5.95%
Nonperforming Assets	(14)
Mortgage			$	53,534		$	59,665		$	63,717		$	67,236		$	67,002
Commercial				44,617	(a)		50,376			42,456			42,807			47,451
Consumer				2,208			3,971			3,354			3,116			2,826
Auto				12,024			12,163			13,494			12,185			11,141
Total nonperforming loans				112,383			126,175			123,021			125,344			128,420
Foreclosed real estate				10,954			10,011			9,571			10,295			12,186
Other repossessed assets				2,507			3,574			2,986			4,146			5,483
Total nonperforming assets			$	125,844		$	139,760		$	135,578		$	139,785		$	146,089
Nonperforming Loan Rates
Mortgage				8.42%			9.16%			9.53%			10.08%			9.88%
Commercial				2.76%			3.21%			2.66%			2.78%			3.15%
Consumer				0.62%			1.13%			0.96%			0.90%			0.83%
Auto				0.99%			1.04%			1.19%			1.12%			1.10%
Total loans				2.94%			3.37%			3.28%			3.45%			3.63%
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OFG Bancorp (NYSE: OFG)
Table 7: Allowance for Loan and Lease Losses
			Quarter Ended June 30, 2019
(Dollars in thousands) (unaudited)			Mortgage			Commercial			Consumer			Auto			Total
Non-acquired loans
Balance at beginning of period			$	16,689		$	32,154		$	16,085		$	29,107		$	94,035
(Recapture) provision for loan and lease losses, net				(1,040)			(951)			4,258			6,214			8,481
Charge-offs				(604)			(2,146)			(4,839)			(10,672)			(18,261)
Recoveries				316			177			327			4,877			5,697
Balance at end of period			$	15,361		$	29,234		$	15,831		$	29,526		$	89,952
Allowance coverage ratio				2.42%			1.81%			4.45%			2.42%			2.35%
Acquired loans
Acquired BBVAPR loans:
Acquired loans accounted for under ASC 310-20
Balance at beginning of period						$	32		$	1,869		$	67		$	1,968
(Recapture) provision for loan and lease losses, net							77			103			(45)			135
Charge-offs							(80)			(433)			(56)			(569)
Recoveries							2			78			71			151
Balance at end of period						$	31		$	1,617		$	37		$	1,685
Acquired loans accounted for under ASC 310-30
Balance at beginning of period			$	17,901		$	20,733		$	-		$	3,499		$	42,133
Provision (recapture) for loan and lease losses, net				7,390			(79)			-			-			7,311
Allowance de-recognition				(83)			(3,571)			-			(363)			(4,017)
Balance at end of period			$	25,208		$	17,083		$	-		$	3,136		$	45,427
Acquired Eurobank loans:
Balance at beginning of period			$	15,110		$	9,242		$	-		$	-		$	24,352
Provision (recapture) for loan and lease losses, net				2,502			(724)			-						1,778
Allowance de-recognition				(399)			(153)			-			-			(552)
Balance at end of period			$	17,213		$	8,365		$	-		$	-		$	25,578
Total acquired loans
Balance at beginning of period			$	33,011		$	30,007		$	1,869		$	3,566		$	68,453
Provision (recapture) for loan and lease losses, net				9,892			(726)			103			(45)			9,224
Charge-offs				-			(80)			(433)			(56)			(569)
Recoveries				-			2			78			71			151
Allowance de-recognition				(482)			(3,724)			-			(363)			(4,569)
Balance at end of period			$	42,421		$	25,479		$	1,617		$	3,173		$	72,690
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OFG Bancorp (NYSE: OFG)
Table 8: Accretable Yield on Loans Accounted for Under ASC 310-30 (Loans Acquired with Deteriorated Credit Quality, including those by Analogy)
			Quarter Ended June 30, 2019
(Dollars in thousands) (unaudited)			Mortgage			Commercial			Construction			Auto			Consumer			Total
Accretable Yield and Non-Accretable Discount
Acquired BBVAPR loans:
Accretable Yield
Balance at beginning of period			$	226,908		$	34,737		$	2,642		$	180		$	427		$	264,894
Accretion				(6,115)			(1,718)			(770)			(139)			(190)			(8,932)
Change in expected cash flows				-			1,368			7			8			190			1,573
Transfers (to) from non-accretable discount				(3,243)			(1,795)			167			(6)			(139)			(5,016)
Balance at end of period			$	217,550		$	32,592		$	2,046		$	43		$	288		$	252,519
Non-Accretable Discount
Balance at beginning of period			$	290,100		$	2,088		$	7,823		$	24,056		$	18,835		$	342,902
Change in actual and expected cash flows				(1,085)			(692)			57			21			(164)			(1,863)
Transfers from (to) accretable yield				3,243			1,795			(167)			6			139			5,016
Balance at end of period			$	292,258		$	3,191		$	7,713		$	24,083		$	18,810		$	346,055
									Construction &
									Development
			Loans Secured						Secured by
			by 1-4 Family			Commercial			1-4 Family
			Residential			and Other			Residential
			Properties			Construction			Properties			Leasing			Consumer			Total
Acquired Eurobank loans:
Accretable Yield
Balance at beginning of period			$	36,368		$	2,260		$	654		$	-		$	-		$	39,282
Accretion				(1,280)			(1,199)			-			(3)			(17)			(2,499)
Change in expected cash flows				30			910			-			(10)			31			961
Transfers (to) from non-accretable discount				817			(115)			(51)			13			(14)			650
Balance at end of period			$	35,935		$	1,856		$	603		$	-		$	-		$	38,394
Non-Accretable Discount
Balance at beginning of period			$	875		$	-		$	1,551		$	-		$	116		$	2,542
Change in actual and expected cash flows				21			(115)			-			13			(12)			(93)
Transfers from (to) accretable yield				(817)			115			51			(13)			14			(650)
Balance at end of period			$	79		$	-		$	1,602		$	-		$	118		$	1,799
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OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital
In addition to disclosing required regulatory capital measures, we also report certain non-GAAP capital measures that management uses in assessing its capital adequacy. These non-GAAP measures include tangible common equity ("TCE") and TCE ratio. The table below provides the details of the calculation of our regulatory capital and non-GAAP capital measures. While our non-GAAP capital measures are widely used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies, they may not be comparable to similarly titled measures reported by other companies.
			2019			2019			2018			2018			2018
(Dollars in thousands) (unaudited)			Q2			Q1			Q4			Q3			Q2
Stockholders' Equity to Non-GAAP Tangible Common Equity
Total stockholders' equity			$	1,044,874		$	1,021,192		$	999,877		$	969,886		$	957,819
Less:  Intangible assets				(88,852)			(89,145)			(89,437)			(89,767)			(90,097)
Noncumulative perpetual preferred stock				(92,000)			(92,000)			(92,000)			(176,000)			(176,000)
Noncumulative perpetual preferred stock issuance costs				10,130			10,130			10,130			10,130			10,130
Tangible common equity			$	874,152		$	850,177		$	828,570		$	714,249		$	701,852
Common stock outstanding at end of period				51,330			51,328			51,294			44,006			43,983
Tangible book value (Non-GAAP)			$	17.03		$	16.56		$	16.15		$	16.23		$	15.96
Total Assets to Tangible Assets
Total assets			$	6,464,127		$	6,603,191		$	6,583,352		$	6,656,674		$	6,501,562
Less:  Intangible assets				(88,852)			(89,145)			(89,437)			(89,767)			(90,097)
Tangible assets (Non-GAAP)			$	6,375,275		$	6,514,046		$	6,493,915		$	6,566,907		$	6,411,465
Non-GAAP TCE Ratio
Tangible common equity			$	874,152		$	850,177		$	828,570		$	714,249		$	701,852
Tangible assets				6,375,275			6,514,046			6,493,915			6,566,907			6,411,465
TCE ratio				13.71%			13.05%			12.76%			10.88%			10.95%
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders' equity			$	1,037,057		$	1,017,546		$	983,015		$	973,838		$	959,777
Less:  Average noncumulative perpetual preferred stock				(92,000)			(92,000)			(111,174)			(176,000)			(176,000)
Average noncumulative perpetual preferred stock issuance costs				10,130			10,130			10,130			10,130			10,130
Average total common stockholders' equity			$	955,187		$	935,676		$	881,971		$	807,968		$	793,907
Less:  Average intangible assets				(88,995)			(89,291)			(89,580)			(89,933)			(90,272)
Average tangible common equity			$	866,192		$	846,385		$	792,391		$	718,035		$	703,635
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OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures (Continued)
			BASEL III
			Standardized
			2019			2019			2018			2018			2018
(Dollars in thousands) (unaudited)			Q2			Q1			Q4			Q3			Q2
Regulatory Capital Metrics
Common equity Tier 1 capital			$	855,667		$	832,923		$	811,708		$	690,937		$	669,922
Tier 1 capital				972,537			949,793			928,578			891,807			870,792
Total risk-based capital	(15)			1,035,109			1,012,112			990,500			953,543			931,606
Risk-weighted assets				4,895,441			4,872,807			4,837,214			4,806,348			4,737,529
Regulatory Capital Ratios
Common equity Tier 1 capital ratio	(16)			17.48%			17.09%			16.78%			14.38%			14.14%
Tier 1 risk-based capital ratio	(17)			19.87%			19.49%			19.20%			18.55%			18.38%
Total risk-based capital ratio	(18)			21.14%			20.77%			20.48%			19.84%			19.67%
Leverage ratio	(19)			15.20%			14.64%			14.22%			13.93%			13.92%
Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach
Total stockholders' equity			$	1,044,874		$	1,021,192		$	999,877		$	969,886		$	957,819
Less:  Noncumulative perpetual preferred stock				(92,000)			(92,000)			(92,000)			(176,000)			(176,000)
Noncumulative perpetual preferred stock issuance costs				10,130			10,130			10,130			10,130			10,130
Unrealized gains on available-for-sale securities, net of income tax				3,087			7,841			10,972			21,187			15,518
Unrealized losses on cash flow hedges, net of income tax				599			206			(9)			(392)			(256)
				966,690			947,369			928,970			824,811			807,211
Less:    Disallowed goodwill				(86,069)			(86,069)			(86,069)			(86,069)			(86,069)
Disallowed other intangible assets, net	(20)			(1,739)			(1,922)			(2,105)			(2,256)			(2,457)
Disallowed deferred tax assets, net	(20)			(23,215)			(26,455)			(29,088)			(45,549)			(48,763)
Common equity Tier 1 capital				855,667			832,923			811,708			690,937			669,922
Plus:  Qualifying noncumulative perpetual preferred stock				92,000			92,000			92,000			176,000			176,000
Qualifying noncumulative perpetual preferred stock issuance costs				(10,130)			(10,130)			(10,130)			(10,130)			(10,130)
Subordinated capital notes				35,000			35,000			35,000			35,000			35,000
Tier 1 capital				972,537			949,793			928,578			891,807			870,792
Plus tier 2 capital:  Qualifying allowance for loan and lease losses				62,572			62,319			61,922			61,736			60,814
Total risk-based capital			$	1,035,109		$	1,012,112		$	990,500		$	953,543		$	931,606
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OFG Bancorp (NYSE: OFG)
Table 10: Notes to Financial Summary, Selected Metrics, Loans, and Consolidated Financial Statements (Tables 1 - 9)
(1)	We use the term "acquired loans" to refer to loans acquired from the BBVAPR acquisition (December 18, 2012) and loans acquired in the Eurobank FDIC-Assisted acquisition (April 30, 2010), recorded at fair value at acquisition. The majority of these loans acquired are subsequently accounted for based on estimated cash flows expected to be collected over the life of the loans (under the accounting standard known as ASC 310-30). Because the guidance takes into consideration future credit losses expected to be incurred over the life of the loans, there are no charge-offs or an allowance associated with this loans unless the estimated cash flows expected to be collected decrease subsequent to acquisition. In addition, these loans are not classified as delinquent or nonperforming even though the customer may be contractually past due because we expect that we will fully collect the carrying value of these loans. Acquired loans also include loans acquired in the BBVAPR acquisition that were accounted for under the provisions of ASC 310-20, which at the end of the reporting period still have unamortized premium or discount. The fair value of these loans already include a credit mark for losses estimated on these loans.  The allowance for loan and lease losses for these loans considers such marks applied. The accounting and classification of these loans may significantly alter some of our reported credit quality metrics. We therefore supplement certain reported credit quality metrics with metrics adjusted to exclude the impact of these acquired loans.
(2)	Total banking and financial service revenues.
(3)	Calculated based on net income available to common shareholders divided by average common shares outstanding for the period.
(4)	Calculated based on net income available to common shareholders plus the preferred dividends on the convertible preferred stock, divided by total average common shares outstanding and equivalents for the period as if converted.
(5)	Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See "Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.
(6)	Information includes all loans held for investment, including all acquired loans. Acquired loans, including those accounted for under ASC 310-30, are disclosed at carrying amount.
(7)	Calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.
(8)	Calculated based on annualized income, net of tax, for the period divided by average total assets for the period.
(9)	Calculated based on annualized income available to common shareholders for the period divided by average tangible common equity for the period.
(10)	Calculated based on non-interest expense for the period divided by total net interest income and total banking and financial services revenues for the period.
(11)	Calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period.
(12)	Non-GAAP ratios. See "Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures" for information on the calculation of each of these ratios.
(13)	Production of new loans (excluding renewals).
(14)	Loans accounted for under ASC 310-30 (loans acquired with deteriorated credit quality, including those by analogy), including Eurobank acquired loans, are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analyses. Therefore, they are not included as non-performing loans.
(15)	Total risk-based capital equals the sum of Tier 1 capital and Tier 2 capital.
(16)	Common equity Tier 1 capital ratio is a regulatory capital measure calculated based on Common equity Tier 1 capital divided by risk-weighted assets.
(17)	Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.
(18)	Total risk-based capital ratio is a regulatory capital measure calculated based on Total risk-based capital divided by risk-weighted assets.
(19)	Leverage capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by average assets, after certain adjustments.
(20)	Amounts based on transition provisions for regulatory capital deductions and adjustments of 80% for 2019 and 2018.
(21)	Pre-provision net revenues is a non-GAAP measure calculated based on net interest income plus total non-interest income, net, less total non-interest expenses for the period.
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