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OFG Bancorp Reports 4Q19 & 2019 Results; Updates on Scotia PR & USVI Acquisition

January 29, 2020 GMT

SAN JUAN, Puerto Rico--(BUSINESS WIRE)--Jan 29, 2020--

OFG Bancorp (NYSE: OFG) today reported results for 4Q19 and 2019, reflecting the previously announced acquisition of the Puerto Rico and U.S. Virgin Islands operations of The Bank of Nova Scotia (Scotiabank).

Due to the acquisition closing occurring at year-end, OFG’s 4Q19 and 2019 income statements and credit quality metrics reflect pre-acquisition operations as well as acquisition related expenses, while the December 31, 2019 balance sheet and capital metrics reflect the newly acquired assets and liabilities.



Conference Call

A conference call to discuss 4Q19 results, outlook and related matters will be held today at 10:00 AM Eastern Time. Phone (888) 562-3356 or (973) 582-2700. Use conference ID 827-3089. The call can also be accessed live on www.ofgbancorp.com. Webcast replay will be available shortly thereafter.

CEO Comment

José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board, said: “We ended 2019 on a high note, closing the Scotiabank acquisition at year-end as originally anticipated. We welcome our new team members and clients in Puerto Rico and U.S. Virgin Islands. We are committed to providing excellent career opportunities to our new employees and excellent service, products, and technology to our new clients. We’re excited about the prospects for future growth.

“I also want to thank all our staff for their exceptional work, some despite their own difficult personal circumstances, in assisting earthquake evacuees. As early responders on the ground in affected areas, Oriental teams helped organized shelters and relief centers. In coordination and collaboration with several of our clients, we provided more than 4,000 meals, bottled water, batteries, electric fans and other essentials. We also arranged access to teams of doctors and structural engineers. The quick response would not have been possible without our compassionate staff and clients. We are extremely proud of our commitment to the communities we serve.

“Turning back to business, 4Q19 was a very busy quarter, closing on the acquisition while continuing to build our existing business. Operationally, we had a strong quarter. We effectively managed the transition to slightly lower yields in the commercial loan portfolio, reflecting FRB rate cuts, with our pro-active effort to reduce high cost wholesale funding. Going forward, our funding mix will improve even further with our larger core deposit base.

“We are well positioned for 2020. The acquisition enabled us to more effectively use our excess capital and end 2019 with a record $6.6 billion in loans and a record $7.7 billion in deposits, which increases our ability to generate future growth. We are moving fast, starting the year focused on integration and loan production, and look forward to reporting our progress in the quarters ahead.”

Current Expected Credit Losses (CECL)

The following updates the model development process for CECL Day 1 implementation.

The final impact of CECL will depend on the circumstances at the date of adoption such as asset quality, macro-economic conditions and economic perspective, and continued refinement in 1Q20.

Income Statement

Unless otherwise noted, the following compares data for the fourth quarter 2019 to the fourth quarter 2018.

Balance Sheet

Unless otherwise noted, the following compares data at December 31, 2019 to December 31, 2018.

Credit Quality

Unless otherwise noted, the following compares data on the originated loan portfolio at December 31, 2019 to December 31, 2018.

Capital Position

Financial Supplement & Conference Call Presentation

OFG’s Financial Supplement, with full financial tables for the quarter ended December 31, 2019, and 4Q19 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, 9-2 and 10 in OFG’s above-mentioned Financial Supplement for reconciliation of GAAP to non-GAAP Measures and Calculations. OFG has attached to this news release Table 10: “Reconciliation of GAAP to Non-GAAP with adjustments to exclude the impact of significant events” for the year ended December 31, 2019.

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 56 th year in business, OFG Bancorp is a diversified financial holding company that operates under U.S., Puerto Rico and U.S. Virgin Islands 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 and U.S. Virgin Islands. Visit us at www.ofgbancorp.com.

OFG Bancorp (NYSE: OFG)
Table 10: Reconciliation of GAAP to Non-GAAP with adjustments to exclude the impact of significant events.
The Company prepared its Consolidated Financial Statement using accounting principles generally accepted in the U.S. (“U.S. GAAP” or the “reported basis”). In addition to analyzing the Company’s results on the reported basis, management monitors the “Adjusted net income” of the Company and excludes the impact of certain transactions on the results of its operations. Management believes that “Adjusted net income” provides meaningful information to investors about the underlying performance of the Company’s ongoing operations. “Adjusted net income” is a non-GAAP financial measure.

The table below describes adjustments to net income for the year ended December 31, 2019.
Year ended December 31, 2019
Income TaxImpact on
(Dollars in thousands) (unaudited)Pre-taxEffectNet Income
 U.S. GAAP net income 



    Non-GAAP adjustments:            
     Sale of mortgage-backed securities available-for-sale 






      Non-performing loans transferred to held-for-sale or sold    






     Sale of fully charged-off loans 




      Merger and restructuring expenses    






     FDIC insurance assessment credit 




      Hacienda credit for hurricane Maria    






     Environmental factors adjustment 




      Bargain purchase from Scotiabank PR & USVI    






Adjusted net income (Non-GAAP)   



  Less:  dividends on preferred stock          


Adjusted net income available to common shareholders (Non-GAAP)



Adjusted earnings per common share - diluted (Non-GAAP)



Adjusted Performance Metrics - Reconciliation to GAAP Financial Measures:Year ended December 31, 2019
Net income       



  Non-GAAP adjustments 


Adjusted net income (Non-GAAP)        


Average assets        


Return on average assets        


Adjusted return on average assets (Non-GAAP) 


Net income available to common shareholders



  Non-GAAP adjustments        


Adjusted net income available to common shareholders (Non-GAAP) 


Average tangible common equity


Return on average tangible common stockholders' equity 


Adjusted return on average tangible common stockholders' equity (Non-GAAP)        


Total non-interest expense        



  Non-GAAP adjustments, pre-tax 


Adjusted total non-interest expense (Non-GAAP)        


Net interest income        


Total banking and financial service revenues 




Efficiency ratio        


Adjusted efficiency ratio (Non-GAAP) 




View source version on businesswire.com:https://www.businesswire.com/news/home/20200129005402/en/

CONTACT: Puerto Rico & USVI:Idalis Montalvo (idalis.montalvo@orientalbank.com) at (787) 777-2847

US:Gary Fishman (gfishman@ofgbancorp.com) and Steven Anreder (sanreder@ofgbancorp.com) at (212) 532-3232




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PUB: 01/29/2020 07:30 AM/DISC: 01/29/2020 07:30 AM