UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 22, 2015

 

 

OFG Bancorp

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Commonwealth of Puerto Rico   001-12647   66-0538893

(State or other Jurisdiction

of Incorporation)

  

(Commission

File No.)

  

(I.R.S. Employer

Identification No.)

 

Oriental Center, 15th Floor

254 Muñoz Rivera Avenue

San Juan, Puerto Rico

   00918
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (787) 771-6800

 

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

  ¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

  ¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

  ¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

  ¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 7.01. Regulation FD Disclosure.

José Rafael Fernández, President, Chief Executive Officer and Vice Chairman of the Board of Directors of Oriental Financial Group Inc. (the “Company”), will make a presentation at the Company’s annual meeting of shareholders on the date hereof, which will be held at 10:00 a.m. (EST). The slides that will accompany the presentation are furnished in this report as Exhibit 99.1 and are incorporated herein by reference, including the text of the slide entitled “Forward-Looking Statements.” The slides will also be available in the “Investor Relations” section of the Company’s web site at www.ofgbancorp.com.

The information in this report furnished pursuant to Item 7.01 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It may only be incorporated by reference in another filing under the Exchange Act or the Securities Act of 1933, as amended, if such subsequent filing specifically references the information furnished pursuant to Item 7.01 of this report.

 

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits 

 

Exhibit
No.

   

Description of Document

99.1    Slide presentation for the Company’s annual meeting of shareholders on April 22, 2015 (furnished pursuant to Item 7.01 hereof).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

OFG BANCORP
Date: April 22, 2015 By:

/s/ Carlos O. Souffront

Carlos O. Souffront
General Counsel and Secretary of the Board of Directors


Exhibit 99.1

Forward Looking Statements
2
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, 2014, 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.

Well Diversified Business Focused on Puerto Rico
3
Highlights
Financials (12/31/14)
53 Branches, 332 ATMs in All Major Markets (4/1/15)
Loans
Deposits
* 4Q14 excludes $3.8 million accrual for cost savings in 2015
•
94% TBV growth 2008-2014
•
No. 2 bank in auto loans, No. 3 overall
•
Consumer / commercial banking
•
Well developed wealth management fee businesses
•
Efficiency ratio 49.19%* in 4Q14, down from 57.46% in
1Q13
•
Assets: $7.5 billion
•
Loans: $4.8 billion (42% under purchase accounting)
•
Deposits: $4.9 billion
•
AUM: $2.6 billion in BD, $2.8 billion in Trust
•
Market Cap: ~$744 million
Mortgage
30%
Commercial
25%
Auto
21%
Gov't
13%
Covered
6%
Consumer
5%
Demand
41%
Savings
26%
Time
21%
Brokered
13%

What Makes OFG Distinctive
4
Overview
•
Strongest bank locally and among best performing compared to mainland banks
•
Disciplined management with prudent decision-making track record
•
Proven capabilities in bank acquisitions and integrations
•
Despite prolonged recession in Puerto Rico, bank has been successful by adapting to evolving market conditions
Focus on Markets Where We Can Make a Difference
•
Loan products that target market characteristics (auto and consumer loans)
•
Avoiding residential real estate risk by focusing on originate-to-sell conforming mortgages
•
Differentiating ourselves through service delivery and customer-facing technology
•
Diversified revenue sources include focus on SMEs, wealth management and trust services
Tight Controls
•
Ability to optimize investments and overall expenditure to keep efficiency ratio down
•
Franchise strength evident from low elasticity in deposits despite consistent reductions in pricing
•
Managing collections to control net charge offs
Generating Steady Profits, Growing Capital
•
Increasing dividends—$0.10 4Q14 dividend up 150% from 4Q09
•
Share buybacks—Bought back 2.3% of shares in 2014 spending $16.9 million
•
Able to consider in/out market acquisitions

2014: Another Year of Accomplishment
5
Overview
•
First full year of combined operations after integration of BBVA
PR businesses
•
Improved consistency in quarterly operating results
•
NII close to 2013 despite lower average interest earning assets
Balance Sheet
•
Acquired loan balances lower as a portion of total portfolio
•
Improved funding profile by maintaining transactional and savings deposit balances, while reducing time deposits,
brokered CDs and borrowings
•
Reduced exposure to Puerto Rico government sector
Income Statement
•
Provisions higher than 2013, excluding the effect of NPL sales last year, reflecting increasing balances in originated
loans versus acquired
•
Fee income pressure in mortgage and banking segments, while wealth management continues to be strong
•
Lower non-interest expenses, even adjusting for non-recurring items

Performance Metrics: Compare Well to Other Publicly Traded Banks
6
1)
Efficiency ratio excludes $3.8 million accrual for cost savings in 2015
2)
KBW Industry Update, February 4, 2015
3)
Includes $16.3 million positive impact from 2Q13 non-recurring items
4Q14
OFG
OFG
1
SMID Cap
Banks
2
3 Year
Target
2014
2013
3
2012
Return on Average Assets
1.09%
1.25%
1.10%
1.15%
0.37%
Return on Average Tangible        
Common Equity
10.16%
10.77%
12.00%
10.91%
14.01%
2.32%
Efficiency
Ratio
49.19%
64.29%
Low 50%
range
49.90%
53.27%
64.05%
Net Interest Margin
5.65%
3.61%
~5%
5.84%
5.46%
2.67%
0.94%

Capital Ratios: Exceed Requirements for Well-Capitalized Institution
7
1)
Includes $3.8 million accrual for cost savings in 2015
2)
Includes $16.3 million positive impact from 2Q13 non-recurring items
2014 with Basel III
Calculation
2014                       
As Reported
1
2013
2
2012
Leverage Ratio
11.28%
10.61%
9.06%
6.55%
Tier 1 Common Ratio
13.29%
11.88%
10.46%
9.36%
Tier 1 Risk-based Capital Ratio
16.71%
16.02%
14.38%
13.18%
Total Risk-based Capital Ratio
18.24%
17.57%
16.16%
15.40%
Tangible Common Equity (TCE) Ratio
9.25%
7.71%
6.45%

TBV
¹
:
Out
Performed
vs.
PR
Peers,
Fast
Growing
Regionals
8
OFG +94%
KBW Highly
Profitable
SMID Caps
+75%
²
PR
Peers
-53%
³
12/31/08-12/31/14
1)
Per basic share
2)
KBW’s List of Highly Profitable SMID-Cap Banks, November 2014:
BKU, BOFI, CBU, FFIN, FLIC, HAFC, HOMB, HTH, NYCB, OFG,
OZRK, PACW, PB, RNST, SCBT, TCBI, UMPQ, WABC
3)
BPOP and FBP
Source: SNL
OFG 2012 decline reflects
dilution related to BBVA PR
acquisition capital plan
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
12/31/13
12/31/14

+20 Years of Progress Listed on NYSE
9
Highlights
Source: SNL
Source: SNL
Source: Yahoo Finance
OFG (+754%)
S&P (+351%)       
•
Stock has performed 2x better than S&P 500
(12/29/94 to 4/7/15)
•
Uninterrupted payment of quarterly
dividends
•
Tangible book value per share (basic) on
long-term upward trend
TBVPS (Basic)
Quarterly Dividend Per Common Share
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
12/31/97
12/31/99
12/31/01
12/31/03
12/31/05
12/31/07
12/31/09
12/31/11
12/31/13
$0.00
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
$0.14
$0.16
1/1/1995
1/1/1997
1/1/1999
1/1/2001
1/1/2003
1/1/2005
1/1/2007
1/1/2009
1/1/2011
1/1/2013
1/1/2015
0%
200%
400%
600%
800%
1000%
12/31/94
12/31/96
12/31/98
12/31/00
12/31/02
12/31/04
12/31/06
12/31/08
12/31/10
12/31/12

Strategy
10
Oriental Bank
•
Only bank to have avoided legacy credit problems–opportunity to gain market share
•
Rational market pricing on big commercial loans in Puerto Rico
•
Focus on generating interest income from
•
Consumer and retail businesses (auto, consumer)
•
Small/mid-sized commercial loans from companies ignored by the competition
•
Focus on generating fee income from banking, wealth management and residential mortgage
•
Leverage mobile banking to attract deposits and enhance customer
service
OFG Bancorp
•
Increased capital allows for expanded dividends, stock buybacks,
and ability to make acquisitions
•
If there is an opportunity for an in-market acquisition, we are the only buyer, but the price has to be reasonable
•
Would consider out-of-market acquisitions if they meet the right financial parameters
•
Strong track record for making accretive acquisitions (Eurobank in 2010, BBVA PR in 2012)

Building Our Brand
11
Focus on Service Leadership
•
Research indicates that consumers look for excellence in
service when choosing a bank
•
Oriental is the most well thought of brand for quality of
service in banking  in Puerto Rico
•
We are the “Can Do”
bank
•
Five major brand attributes:
o
Easy to access
o
Simple to use
o
Pro-active problem solvers
o
Fast execution
o
Enjoyable experience
Brand Attributes & Value Proposition
•
Make Oriental Puerto Rico’s “most convenient bank”
offering clients banking on their terms
•
Redefine customer convenience and accessibility in the local
market through service leadership and innovation
The Opportunity

Retail Optimization & Innovation to Grow Revenues, Reduce Costs
12
Banking
Banking
Has
Has
Changed
Changed
The Old Way
You go to the bank
New Customer-Centric Way
The bank goes to you
Strategy #1
Introduce Market Leading Innovations in PR
Strategy #2
Retail Optimization
•
Redefine the customer engagement model
•
Enable processes and people to revolve around the
customer
•
Focus on continuous improvement
•
Transaction migration to alternate channels
•
Optimize distribution network footprint
•
First in Puerto Rico to implement model
•
FOTOdepósito
•
Cuenta Libre
•
Mobile People Pay
•
Online Account Opening
•
Enhanced ATM Kiosks for Self-Service
•
Mobile Business Banking

Non-Interest Expenses: Enhanced Operating Efficiencies ($ in millions)
13
Efficiency Ratio
1, 2
1)
4Q14 excludes $3.8 million accrual for cost savings in 2015
2)
Operating expenses and efficiency ratio exclude FDIC indemnification asset amortization
Highlights
•
Expect modest improvement 2015
•
Consolidating two branches in 1Q15
•
Need to continue to invest in branding, customer
facing capabilities, service innovation
$63.2
$65.6
$61.4
$59.8
$59.6
$58.1
$35
$45
$55
$65
$75
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
52.27%
51.27%
50.12%
47.89%
49.30%
49.19%
47.0%
48.5%
50.0%
51.5%
53.0%
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
Operating
Expenses
1, 2

Earnings: Expanding Performance
14
EPS Diluted
Return on Average Assets
Highlights
•
Have been able to maintain EPS in mid-$0.30 range
•
As IEA declines, have been able to increase ROAA
•
Enables capital build
$0.34
$0.35
$0.42
$0.38
$0.34
$0.36
$0.05
$0.15
$0.25
$0.35
$0.45
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
0.93%
0.97%
1.18%
1.10%
1.02%
1.09%
0.8%
0.9%
1.1%
1.2%
1.3%
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14

Tangible Common Equity: Continuing to Build
15
TBV Per Common Share
ROATCE
Highlights
•
Gives us the flexibility to increase dividends, buy
back shares, or make acquisitions
•
Need to keep some cushion due to PR market
TCE Ratio
$13.47
$13.60
$14.07
$14.71
$14.82
$15.25
$12.50
$13.25
$14.00
$14.75
$15.50
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
10.71%
10.78%
12.86%
10.96%
9.78%
10.16%
6.0%
8.0%
10.0%
12.0%
14.0%
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
7.41%
7.71%
8.16%
8.70%
8.81%
9.25%
6.0%
7.0%
8.0%
9.0%
10.0%
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14

Return on Capital: Growing ($ in millions)
16
Total Payout Ratio
Annual Dividends Per Common Share
Highlights
•
General strategy is to buy back shares when the price
approaches TBV
•
Approximately $16.7 million of BOD authorization
remains
•
BOD decides dividend increases in December
•
Only PR bank paying common dividend
Cumulative Stock Buyback
$0.16
$0.17
$0.21
$0.24
$0.26
$0.34
$0.00
$0.10
$0.20
$0.30
$0.40
2009
2010
2011
2012
2013
2014
$59.4
$66.4
$66.4
$83.3
$0
$25
$50
$75
$100
2009
2010
2011
2012
2013
2014
21.33%
16.02%
231.22%
116.77%
14.04%
42.30%
0%
75%
150%
225%
300%
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14

Outlook
17
Puerto Rico
GDB Economic activity index has seen consistent declines in
the last few months
Treasury inflows for Jul-Dec lag last fiscal year as well as current year estimates
GDB is planning to raise debt again, facing challenging liquidity conditions
Sustained drop in oil prices provides an additional lever in managing current conditions
Local Banking Industry
Balance sheets are shrinking
FDIC acquirers face expiry of commercial loss share agreements in 2Q15
Credit quality continues to be a concern
Consolidation opportunities are still the key for boosting bank performances
OFG
Continue managing the situation prudently and building capital
Be flexible in our capital management approach
Opportunistic share buybacks
Review quarterly dividend on an annual basis
Explore strategic growth opportunities
OFG Bancorp (NYSE:OFG)
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