OFG Bancorp (NYSE:OFG) today reported results for the fourth
quarter and year ended December 31, 2016.
4Q16 Highlights
- Net income available to shareholders
increased to $12.1 million, or $0.27 per share fully diluted,
from $11.7 million, or $0.26 per share fully diluted, in 3Q16 and a
loss of $4.4 million, or ($0.10) per share, in the year ago
4Q15.
- Compared to 3Q16, results included
increases of 13.8% in net interest income after provision and
11.7% in banking and wealth management revenues, while non-interest
expenses fell 4.6%.
- The Oriental Bank franchise
continued to deliver strong performance with loan production of
$258.0 million, the highest quarterly level during 2016; a 3.9%
year over year increase in customer deposits; and a 5% annual
account growth.
- Credit quality remained strong
as the non-performing loan rate at 3.46% fell to its lowest level
in five quarters, and early and total delinquency rates declined
from 3Q16 and 4Q15 to 3.31% and 6.49%, respectively.
- Major performance ratios
improved from both 3Q16 and 4Q15, including return on average
assets of 0.96%, return on average tangible common equity of 7.31%,
efficiency ratio of 55.36%, and tangible common equity ratio of
10.33%.
2016 Highlights
- Net income available to shareholders
was $45.3 million, or $1.03 per share fully diluted, compared
to a loss of $16.4 million, or ($0.37) per share, in 2015.
- 2016 results reflected:
- 8.4% increase in interest income from
originated loans to $199.2 million as average balances expanded to
$3.1 billion or a 5.4% increase, due to growth in higher yielding
retail loans.
- 17.4% decrease in total interest
expense to $57.2 million on a 32.0% decline in average
borrowings.
- Sale of Oriental Bank’s last major
Puerto Rico government related loan, a participation in a Puerto
Rico Electric Power Authority (PREPA) line of credit, eliminating
$183.0 million of non-performing assets and requiring an additional
provision of only $2.9 million.
- A $5.0 million recovery in a Bear
Stearns claim from losses suffered from an investment in a private
label collateralized mortgage obligation.
- Capital continued to grow as
tangible book value per common share expanded 3.8% to $15.08 and
book value per common share grew 3.1% to $17.18.
CEO Comment
José Rafael Fernández, President, Chief Executive Officer, and
Vice Chairman of the Board, commented:
“OFG Bancorp generated another quarter of consistent, stellar
performance in the fourth quarter and throughout 2016 despite the
challenging operating environment.
“Fully diluted EPS grew to $0.27 in 4Q16 and to $1.03 for the
year, a notable turnaround from prior periods. We accomplished this
by growing interest income from originated loans and non-interest
income, while reducing both interest and non-interest expenses.
“Thanks to our management team and associates, our
uncompromising customer focus, excellence in service, and our broad
and growing utilization of customer facing technology, we are
clearly differentiating Oriental in the Puerto Rico
marketplace.
“We have attracted a steady influx of new business, enabling us
to expand or maintain our market share in key areas.
“In 2016, we introduced the Oriental Biz mobile app, adding
mobile check capture for small business customers, and cardless
cash, for making retail ATM withdrawals even faster.
“Our proactive credit monitoring systems have significantly
improved asset quality, reducing the early and total delinquency
rates, allowance for loan and lease losses, and the non-performing
loan rate.
“We ended the year growing our tangible book value per common
share to $15.08, underscoring our determination to enhance our
already solid capital position.
“We have established Oriental as a uniquely service oriented
banking institution. We are committed to continuing to consolidate
our strategic position in Puerto Rico and further grow our customer
base in a consistent and profitable way.”
4Q16 Income Statement Highlights
The following compares data for the fourth quarter 2016 to the
third quarter 2016, unless otherwise noted.
- Interest Income:
- Originated Loans: Increased $1.0
million to $51.6 million, primarily due to higher yields from a
larger proportion of retail loans.
- Acquired Loans: Declined $5.1 million
to $26.9 million due to continued pay downs and lower cost
recoveries. 3Q16 included $2.2 million in former Eurobank loan
recoveries.
- Securities: Increased $0.3 million to
$8.3 million due to lower premium amortization and higher
investment portfolio balances.
- Interest Expense declined $1.1
million to $12.6 million due to lower borrowings. In 3Q16, $200.5
million in FHLB advances and $67.0 million in subordinated capital
notes were paid down.
- Total Provision for Loan and Lease
Losses declined $10.1 million to $13.4 million. In 3Q16, there
was an additional $10.2 million provision for two Puerto Rico
government related loans and one commercial loan.
- Net Interest Margin (NIM)
remained essentially level at 4.94%. NIM, excluding recoveries,
expanded to 4.89% compared to 4.70%.
- Total Banking and Wealth Management
Revenues increased $2.1 million to $20.4 million. Wealth
management rose $1.2 million, reflecting recognition of annual
insurance revenues. Banking services grew $0.7 million due to
holiday shopping related electronic transaction volume. Mortgage
banking gained $0.3 million as a result of higher mortgage
servicing rights (MSR) valuation.
- FDIC Shared-Loss Expense,
Net decreased $0.5 million to $2.8 million, reflecting
levels from prior quarters in 2016.
- Total Non-Interest Expenses
declined $2.5 million to $52.4 million as most major cost areas
were reduced. Credit expenses fell $1.6 million as 4Q16 is an
off-quarter for property tax payments.
- Effective Tax Rate (ETR)
increased to 41.1% due to final year-end tax accounting. For the
year, the ETR was 30.5%.
December 31, 2016 Balance Sheet Highlights
The following compares data at December 31, 2016 to September
30, 2016, unless otherwise noted.
- Total Loans Net declined $151.3
million to $4.15 billion. This primarily reflected the exclusion of
the PREPA loan, the sale of which settled in October 2016.
- Total Investments increased
$64.8 million to $1.36 billion. This reflected new purchases of
treasury securities and the retention of a portion of residential
mortgage production as securities, partially offset by prepayments
in the Mortgage Backed Securities portfolio.
- Customer Deposits declined $85.5
million to $4.09 billion due to cyclic fluctuations in our large
commercial account balances. On a year over year basis, customer
deposits increased $153.3 million primarily reflecting growth of
our client base.
- Total Borrowings declined $4.9
million to $795.4 million due to slightly lower balances in
repurchase agreement funding. On a year over year basis, borrowings
declined $576.2 million with large reductions in all
categories.
- Total Stockholders’
Equity declined $4.5 million to $920.4 million. On a year over
year basis, stockholders’ equity increased $23.3 million. Retained
earnings grew $28.9 million, or 19.4%, to $177.8 million, which was
partially offset by a 4Q16 decline in the market value of
investment securities.
Credit Quality Highlights
The following compares data at December 31, 2016 to September
30, 2016, unless otherwise noted.
- Net Charge-Off Rate was 1.80%
compared to 1.15% (ex-PREPA) due to increases in the mortgage and
commercial lending categories. Total charge offs for 4Q16 included
a $3.0 million loan that was provisioned for in 3Q16.
- Early and Total Delinquency
rates improved to 3.31% and 6.49%, compared to 3.70% and 6.92%,
respectively.
- Non-Performing Loan Rate was
lower at 3.46% compared to 3.68%. It was 9.74% a year ago, which
included the PREPA loan.
- Allowance for Loan and Lease
Losses fell to $59.3 million from $62.2 million, and the loan
loss reserve ratio to total loans (excluding acquired loans)
decreased to 1.95% from 2.06%.
Capital Position
The following compares data at December 31, 2016 to September
30, 2016, unless otherwise noted.
Regulatory capital ratios continued to be significantly above
requirements for a well-capitalized institution.
- Tangible Common Equity to Total
Tangible Assets at 10.33% increased 8 basis points to the
highest level in five quarters.
- Tangible Book Value per Common
Share at $15.08 increased 3.8% year over year.
- Common Equity Tier 1 Capital
Ratio (using Basel III methodology) at 14.05% increased 71
basis points to the highest level in five quarters.
- Total Risk-Based Capital Ratio
at 19.62% increased 89 basis points to the highest level in five
quarters.
Conference Call
A conference call to discuss OFG’s results for the fourth
quarter 2016, outlook and related matters will be held today,
Tuesday, January 31, 2017 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.
Financial Supplement
OFG’s Financial Supplement, with full financial tables for the
fourth quarter and year ended December 31, 2016, 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) 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, 2015, 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 53rd 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 48 financial centers. Investor information can
be found at www.ofgbancorp.com.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170131005657/en/
OFG BancorpPuerto Rico:Idalis Montalvo,
787-777-2847idalis.montalvo@orientalbank.comorUS:Steven
Anredersanreder@ofgbancorp.comorGary Fishman,
212-532-3232gfishman@ofgbancorp.com
OFG Bancorp (NYSE:OFG)
Historical Stock Chart
From Mar 2024 to Apr 2024
OFG Bancorp (NYSE:OFG)
Historical Stock Chart
From Apr 2023 to Apr 2024