8-K

 

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): July 23, 2014

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 2.02. Results of Operations and Financial Condition.

     On July 23, 2014, OFG Bancorp (the “Company”) announced the results for the quarter ended June 30, 2014. A copy of the Company’s press release is attached as an exhibit to this report.

Item 9.01. Financial Statements and Exhibits.

     (d) Exhibits 

Exhibit No.		Description of Document
	99	Press release by the Company dated July 23, 2014.

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: July 23, 2014	By:	/s/ Ganesh Kumar
		Ganesh Kumar
		Executive Vice President and Chief Financial Officer

EX-99

 

Exhibit 99

 

OFG Bancorp Reports 2Q14 Results

SAN JUAN, Puerto Rico, July 23, 2014 – OFG Bancorp (NYSE: OFG) today reported results for the second quarter ended June 30, 2014.

2Q14 Highlights

·Income available to common shareholders totaled $17.8 million, or $0.38 per share diluted. In the preceding quarter, OFG earned $20.3 million, or $0.42 per share diluted, which included a pre-tax gain on the sale of securities of $4.4 million. In the year ago quarter, OFG earned $34.1 million, or $0.68 per share diluted, which included a net positive impact of $16.3 million from non-recurring items.

·Net interest margin continued strong at 6.10% compared to 5.90% in the first quarter of 2014.

·Puerto Rico government related loan and investment security balances (excluding obligations of municipalities) declined 15.7%, to $454.9 million at June 30, 2014, from $539.5 million at March 31, 2014.

·Cost of deposits continued to fall, to 76 bps from 80 bps in the first quarter of 2014, as demand and savings account balances continued to increase as a proportion of deposits.

·Tangible book value per common share of $14.71 at June 30, 2014 rose 4.6%, from $14.07 at March 31, 2014, and book value per common share of $16.87 grew 3.9%, from $16.23 at March 31, 2014.

·Performance metrics were in line with OFG’s targets, with return on average assets of 1.10%, return on average tangible common stockholders' equity of 10.96%, and efficiency ratio of 47.89%.

·Average common shares outstanding declined 0.7%, to 45.0 million at June 30, 2014, from the end of the previous quarter, reflecting share repurchases late in the first quarter of 2014.

CEO Comment

José Rafael Fernandez, President, Chief Executive Officer, and Vice Chairman, commented:

“OFG’s strong results for the sixth consecutive quarter since the close of the BBVA PR acquisition demonstrate the success of our growth strategies, timely capital management actions, and overall execution discipline. Post-acquisition, we have achieved notable growth in book value and capital.”

“Our operational outlook remains intact. We are focused on managing our businesses in a prudent manner, while carefully controlling costs, in order to grow our core profits. This has been our approach to navigate the challenging economic environment that has prevailed in Puerto Rico for a while now. At the same time, we are continuing our focus on building our franchise and brand value to differentiate Oriental in the local market.”

“We expect to see a notable upside to reported earnings in the second half of 2015, as the amortization of the FDIC indemnification asset will be significantly lower.”

2Q14 Income Statement Highlights

The following compares data for the second quarter 2014 to the first quarter of 2014 unless otherwise noted.

·Non-covered loan income increased 3.3%, to $88.1 million from $85.2 million. Growth reflects certain acquired loans rolled over to the originated loans category, and higher cost recoveries from acquired loans.

·Covered loan income rose 6.4%, to $24.9 million from $23.4 million. The increase reflects continued, higher cost recoveries due to successful workout efforts.

·Investment securities interest income declined $1.5 million, to $13.0 million from $14.4 million, due to lower balances of securities as a result of prepayments, and the previously reported first quarter 2014 sale of mortgage-backed securities and repayment of a PR government related security.

·Total provision for loan and lease losses increased $3.1 million, to $14.8 million from $11.7 million, mostly reflecting higher originated loan balances and an increase in charge off levels.

·Banking service revenues continued steady, with revenues of $10.0 million compared to $10.6 million, which included approximately $0.5 million in certain annual and cyclical client payments.

·Wealth management revenues increased to $7.3 million, compared to $6.9 million, largely reflecting higher sales of variable annuities.

·Mortgage banking activities remained level,with revenues of $1.6 million compared to $1.7 million. Second quarter 2014 results reflected increased production offset by smaller gains from secondary market sales. OFG sells most of its residential mortgage production into the secondary market.

·FDIC indemnification asset amortization continued as expected, at $18.4 million compared to $18.5 million. The indemnification asset was $143.7 million at June 30, 2014 compared to $166.2 million at March 31, 2014.

·Non-interest expenses declined 2.5%, to $59.8 million from $61.4 million. This primarily reflects reaching deduction limits for payroll benefits, and reduced costs associated with foreclosed real estate.

June 30, 2014 Balance Sheet Highlights

The following compares data as of June 30, 2014 to March 31, 2014 or for the second quarter of 2014 to the first quarter of 2014 unless otherwise noted.

·Production of new loans (excluding renewals) increased 4.4%, to $221.6 million, due to increases in consumer, commercial and mortgage volumes. Areas where OFG is focused on building loans – commercial, consumer and auto – increased 4%, to a balance of $2.6 billion.

·Puerto Rico government related debt declined primarily due to $100.0 million in principal amount of Tax Revenue Anticipation Notes (TRANs) repaid upon maturity by the Central Government, and $20 million in principal amount of privately-placed securities repaid by the issuer at par.

·Average interest earning assets declined to $7.0 billion from $7.1 billion. This was primarily due to (i) second quarter 2014 maturities of PR government related loans mentioned above; and (ii) the previously reported first quarter 2014 sale of mortgage-backed securities and repayment of a PR government related security.

·Demand deposit and savings account balances increased to 64% of total deposits compared to 63% at the end of last quarter, and 57% at the end of the year ago quarter. This reflects OFG’s effort to enhance its funding profile and reduce cost of deposits, which fell to an average 76 bps in the second quarter of 2014, compared to 80 bps in the preceding quarter, and 96 bps in the year ago quarter.

·Total stockholders’ equity increased 3.2% to $925.2 million from $896.5 million, reflecting increases in retained earnings and other comprehensive income.

Credit Quality Highlights

The following compares data excluding acquired loans for the second quarter 2014 to the first quarter 2014 unless otherwise noted.

Credit metrics remained in line with general ranges reported over the last 12 months. Increases from the preceding quarter reflect higher volumes in certain businesses.

·Net charge off rate increased to 0.96% from 0.86%, primarily due to increasing volume in the consumer business.

·Nonperforming loan rate increased to 3.39% from 3.25%, mainly due to residential mortgages.

·Total delinquency rate increased to 8.61% from 8.10%, mainly due to mortgages.

·Allowance for loan and lease losses as a percentage of loans held for investment (including acquired loans) declined to 1.92% from 1.95%.

Capital Position

The following compares data for the second quarter 2014 to the first quarter of 2014.

Regulatory capital ratios continued to be significantly above requirements for a well-capitalized institution.

·Tangible common equity to total tangible assets increased to 8.70% from 8.16%, based on a 4.6% increase in tangible common equity, to $662.4 million, and a 1.9% decline in tangible assets, to $7.6 billion.

·Tier 1 risk-based capital ratio increased to 15.49% from 14.76%, based on a 3.8% increase in Tier 1 capital, to $773.8 million, and a 1.1% decline in total risk weighted assets, to $5.0 billion.

·Total risk-based capital ratio increased to 17.30% from 16.56%, based on a 3.3% increase in total risk-based capital, to $863.8 million, and total risk weighted assets of $5.0 billion.

Conference Call

A conference call to discuss OFG’s results for the second quarter of 2014, outlook and related matters will be held Thursday, July 24, 2014 at 10:00 AM Eastern Time. The call will be accessible live via a webcast on OFG’s Investor Relations website at www.ofgbancorp.com. A webcast replay will be available shortly thereafter. Access the webcast link in advance to download any necessary software.

Financial Supplement

OFG’s Financial Supplement, with full financial tables for the quarter ended June 30, 2014, can be found on the Webcasts, Presentations & Other Files page, on OFG’s Investor Relations website at www.ofgbancorp.com.

Forward Looking Statements

The information included in this document contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and involve certain risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements.

Factors that might cause such a difference include, but are not limited to (i) the rate of growth in the economy and employment levels, as well as general business and economic conditions; (ii) changes in interest rates, as well as the magnitude of such changes; (iii) a credit default by the government of Puerto Rico; (iv) the fiscal and monetary policies of the federal government and its agencies; (v) changes in federal bank regulatory and supervisory policies, including required levels of capital; (vi) the relative strength or weakness of the consumer and commercial credit sectors and of the real estate market in Puerto Rico; (vii) the performance of the stock and bond markets; (viii) competition in the financial services industry; and (ix) possible legislative, tax or regulatory changes.

For a discussion of such factors and certain risks and uncertainties to which OFG is subject, see OFG’s annual report on Form 10-K for the year ended December 31, 2013, as well as its other filings with the U.S. Securities and Exchange Commission. Other than to the extent required by applicable law, including the requirements of applicable securities laws, OFG assumes no obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

About OFG Bancorp

Now in its 50th year in business, OFG Bancorp is a diversified financial holding company that operates under U.S. and Puerto Rico banking laws and regulations. Its three principal subsidiaries, Oriental Bank, Oriental Financial Services and Oriental Insurance, provide a full range of commercial, consumer and mortgage banking services, as well as financial planning, trust, insurance, investment brokerage and investment banking services, primarily in Puerto Rico, through 55 financial centers. Investor information can be found at www.ofgbancorp.com.

# # #

Contacts

Puerto Rico: Alexandra López (allopez@orientalbank.com), OFG Bancorp, (787) 522-6970

US: Steven Anreder (steven.anreder@anreder.com) and Gary Fishman (gary.fishman@anreder.com), Anreder & Company, (212) 532-3232

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, 2014 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		1
	Table  2:	Consolidated Statements of Operations		2
	Table  3:	Consolidated Statements of Financial Condition		3-4
	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 Non-GAAP Measures and Calculation of Regulatory
		Capital Measures		12-13
	Table  10:	Notes to Financial Summary, Selected Metrics, Loans, and Consolidated
		Financial Statements		14

OFG Bancorp (NYSE: OFG)
Table 1: Financial and Statistical Summary - Consolidated (2)
		2014		2014		2013		2013		2013		2014		2013
(Dollars in thousands, except per share data) (unaudited)		Q2		Q1		Q4		Q3		Q2		YTD		YTD
Earnings
Net interest income		$	106,078	$	103,398	$	110,671	$	99,091	$	106,295	$	209,476	$	199,909
Non-interest income, net (core)	(3)		18,885		19,119		17,284		21,874		24,561		38,004		46,999
Operating expenses			59,848		61,404		65,603		63,236		68,687		121,252		135,298
Provision for loan and lease losses			14,815		11,691		12,593		12,974		38,738		26,506		47,326
FDIC shared-loss expense, net			18,355		18,487		20,466		15,965		19,965		36,842		32,836
Net income before income taxes			31,922		35,532		29,608		26,204		5,605		67,454		33,923
Effective income tax rate			33.25%		33.17%		32.13%		25.13%		-569.74%		33.20%		-73.13%
Net income			21,309		23,747		20,094		19,619		37,539		45,056		58,731
Net income available to common stockholders		$	17,843	$	20,282	$	16,628	$	16,154	$	34,073	$	38,125	$	51,800
Common Share Statistics
Earnings per common share - basic	(6)	$	0.40	$	0.45	$	0.36	$	0.35	$	0.75	$	0.84	$	1.14
Earnings per common share - diluted	(7)	$	0.38	$	0.42	$	0.35	$	0.34	$	0.68	$	0.80	$	1.05
Average common shares outstanding			45,014		45,329		45,674		45,927		45,630		45,170		45,613
Average common shares outstanding and equivalents			52,352		52,598		52,987		53,322		52,968		52,476		52,929
Cash dividends per common share	(22)	$	0.08	$	0.08	$	0.08	$	0.06	$	0.06	$	0.16	$	0.12
Book value per common share (period end)		$	16.87	$	16.23	$	15.74	$	15.63	$	15.45	$	16.87	$	15.45
Tangible book value per common share (period end)	(8)	$	14.71	$	14.07	$	13.60	$	13.47	$	13.27	$	14.71	$	13.27
Balance Sheet (Quarterly Average Balances)
Loans held for investment	(9)	$	5,019,381	$	5,007,347	$	5,117,939	$	5,136,745	$	5,057,269	$	5,013,403	$	5,083,403
Interest-earning assets			6,972,134		7,108,864		7,302,708		7,438,957		7,536,360		7,093,562		7,662,089
Total assets			7,736,715		8,041,159		8,326,879		8,424,466		8,525,996		7,888,096		8,681,197
Total deposits			5,218,663		5,334,564		5,537,142		5,654,274		5,612,811		5,276,293		5,611,185
Borrowings			1,470,669		1,632,782		1,742,115		1,734,769		1,863,383		1,551,278		2,030,065
Stockholders' equity			914,395		894,636		884,913		879,726		870,924		925,202		870,924
Common stockholders' equity			748,525		728,766		715,261		702,444		698,784		738,686		697,000
Performance Metrics
Net interest margin	(10)		6.10%		5.90%		6.01%		5.28%		5.66%		5.96%		5.26%
Return on average assets	(11)		1.10%		1.18%		0.97%		0.93%		1.76%		1.14%		1.35%
Return on average tangible common stockholders' equity	(12)		10.96%		12.86%		10.78%		10.71%		22.75%		11.89%		17.35%
Efficiency ratio	(13)		47.89%		50.12%		51.18%		52.39%		52.49%		48.99%		54.80%
Full-time equivalent employees, period end			1,575		1,546		1,534		1,558		1,573		1,575		1,573
Credit Quality Metrics
Excluding acquired loans:	(1)
Allowance for loan and lease losses		$	50,638	$	49,507	$	49,081	$	47,573	$	45,701	$	50,638	$	45,701
Allowance as a % of loans held for investment			1.92%		1.95%		2.04%		2.03%		2.55%		1.92%		2.55%
Net charge-offs	(20)	$	6,300	$	5,199	$	5,427	$	5,058	$	32,552	$	21,984	$	35,935
Net charge-off rate	(15)		0.96%		0.86%		0.91%		1.02%		8.89%		0.87%		2.61%
Early delinquency rate (30 - 89 days past due)	(16) (17)		4.85%		4.51%		4.97%		4.16%		5.72%		4.85%		5.72%
Total delinquency rate (30 days and over)	(16) (17)		8.61%		8.10%		8.92%		8.04%		10.42%		8.61%		10.42%
Capital Ratios	(18)
Leverage ratio			10.26%		9.51%		9.11%		8.74%		8.54%		10.26%		8.54%
Tier 1 common ratio			11.47%		10.79%		10.44%		10.24%		10.09%		11.47%		10.09%
Tier 1 risk-based capital ratio			15.49%		14.76%		14.35%		14.24%		14.12%		15.49%		14.12%
Total risk-based capital ratio			17.30%		16.56%		16.14%		16.03%		16.19%		17.30%		16.19%
Tangible common equity ("TCE") ratio			8.70%		8.16%		7.71%		7.41%		7.25%		8.70%		7.25%

OFG Bancorp (NYSE: OFG)
Table 2: Consolidated Statements of Operations (2)
		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)		2014		2014		2013		2013		2013		2014		2013
Interest income:
Loans
Loans not covered under shared-loss agreements with the FDIC		$	88,064	$	85,243	$	92,565	$	87,655	$	91,105	$	173,307	$	171,912
Loans covered under shared-loss agreements with the FDIC			24,879		23,388		25,885		21,657		23,999		48,267		44,228
Total interest income from loans			112,943		108,631		118,450		109,312		115,104		221,574		216,140
Investment securities			12,957		14,443		13,607		11,789		11,198		27,400		24,334
Total interest income			125,900		123,074		132,057		121,101		126,302		248,974		240,474
Interest expense:
Deposits
Core deposits			7,875		7,662		8,834		9,947		8,885		15,537		17,171
Brokered deposits			1,290		1,316		1,387		1,387		602		2,606		2,252
Total deposits			9,165		8,978		10,221		11,334		9,487		18,143		19,423
Borrowings			10,657		10,698		11,165		10,676		10,520		21,355		21,142
Total interest expense			19,822		19,676		21,386		22,010		20,007		39,498		40,565
Net interest income			106,078		103,398		110,671		99,091		106,295		209,476		199,909
Provision for loan and lease losses, excluding acquired loans			7,431		5,625		6,934		6,930		35,919		13,056		41,714
Provision for acquired loan and lease losses	(1)		7,384		6,066		5,659		6,044		2,819		13,450		5,612
Total provision for loan and lease losses, net			14,815		11,691		12,593		12,974		38,738		26,506		47,326
Net interest income after provision for loan and lease losses			91,263		91,707		98,078		86,117		67,557		182,970		152,583
Non-interest income:
Banking service revenues			9,995		10,557		7,748		12,146		12,705		20,552		24,345
Wealth management revenues			7,336		6,867		7,839		7,394		8,030		14,203		15,690
Mortgage banking activities			1,554		1,695		1,697		2,334		3,826		3,249		6,964
Total banking and financial services revenues			18,885		19,119		17,284		21,874		24,561		38,004		46,999
FDIC shared-loss expense, net			(18,355)		(18,487)		(20,466)		(15,965)		(19,965)		(36,842)		(32,836)
Net gain (loss) on:
Sales of securities and derivative activities			(511)		4,179		57		(1,152)		(193)		3,668		(1,002)
Early extinguishment of borrowings			-		-		-		-		-		-		1,061
Other	(19)		488		418		258		(1,434)		2,332		906		2,416
Total non-interest income (loss), net			507		5,229		(2,867)		3,323		6,735		5,736		16,638
Non-interest expense:
Compensation and employee benefits			20,707		21,787		22,030		22,590		24,089		42,494		47,338
Rent and occupancy costs			8,605		8,309		8,856		8,270		8,066		16,914		17,282
Merger and restructuring charges	(4)		-		-		4,600		2,252		5,273		-		10,808
General and administrative expenses			30,536		31,308		30,117		30,124		31,259		61,844		59,870
Total non-interest expense			59,848		61,404		65,603		63,236		68,687		121,252		135,298
Income before income taxes			31,922		35,532		29,608		26,204		5,605		67,454		33,923
Income tax expense (benefit)	(5)		10,613		11,785		9,514		6,585		(31,934)		22,398		(24,808)
Net income			21,309		23,747		20,094		19,619		37,539		45,056		58,731
Less:  dividends on preferred stock
Convertible preferred stock			(1,838)		(1,838)		(1,838)		(1,838)		(1,838)		(3,676)		(3,676)
Other preferred stock			(1,628)		(1,627)		(1,628)		(1,627)		(1,628)		(3,255)		(3,255)
Net income available to common shareholders		$	17,843	$	20,282	$	16,628	$	16,154	$	34,073	$	38,125	$	51,800

OFG Bancorp (NYSE: OFG)
Table 3: Consolidated Statements of Financial Condition (2)
		June 30,		March 31,		December 31,		September 30,		June 30,
(Dollars in thousands) (unaudited)		2014		2014		2013		2013		2013
Cash and cash equivalents		$	611,655	$	639,806	$	703,468	$	657,520	$	748,313
Securities purchased under agreements to resell			-		-		60,000		85,000		-
Investments:
Trading securities			1,613		1,910		1,869		2,124		2,209
Investment securities available-for-sale, at fair value, with amortized cost of $1,385,438
(March 31, 2014 - $1,437,106; December 31, 2013 - $1,575,043; September 30, 2013 - $1,654,133;
June 30, 2013 - $1,807,335)
Mortgage-backed securities			1,314,677		1,334,865		1,439,539		1,526,485		1,650,165
Other investment securities			104,281		120,820		148,886		150,763		186,064
Total investment securities available-for-sale			1,418,958		1,455,685		1,588,425		1,677,248		1,836,229
Mortgage-backed securities held-to-maturity, at amortized cost, with fair value of
$26,844 at June 30, 2014			26,706		-		-		-		-
Federal Home Loan Bank (FHLB) stock, at cost			24,381		24,430		24,450		24,470		22,156
Other investments			65		65		65		65		66
Total investments			1,471,723		1,482,090		1,614,809		1,703,907		1,860,660
Securities sold but not yet delivered			-		-		-		-		16,732
Loans:
Loans not covered under shared-loss agreements with the FDIC:
Commercial
Puerto Rico Government and its dependencies			655,429		718,823		695,996		810,391		531,543
Other Commercial Loans			1,198,618		1,178,287		1,180,886		1,166,950		1,205,179
			1,854,047		1,897,110		1,876,882		1,977,341		1,736,722
Mortgage			1,480,070		1,485,604		1,484,168		1,472,824		1,527,852
Consumer			254,966		247,851		247,539		253,754		246,387
Auto and Leasing			1,054,945		1,058,694		1,060,603		1,065,749		1,067,071
Total loans receivable not covered under shared-loss agreements with the FDIC, gross			4,644,028		4,689,259		4,669,192		4,769,668		4,578,032
Less: Deferred loan costs (fees), net			3,236		2,318		1,035		120		(831)
Total loans receivable not covered under shared-loss agreements with the FDIC			4,647,264		4,691,577		4,670,227		4,769,788		4,577,201
Allowance for loan and lease losses on non-covered loans			(60,360)		(56,183)		(54,298)		(49,614)		(46,625)
Loans receivable held for investment, net			4,586,904		4,635,394		4,615,929		4,720,174		4,530,576
Mortgage loans held for sale	(14)		14,792		19,355		46,529		47,085		78,350
Total loans not covered under shared-loss agreements with the FDIC, net			4,601,696		4,654,749		4,662,458		4,767,259		4,608,926
Loans covered under shared-loss agreements with the FDIC			393,859		402,263		409,690		418,119		423,372
Allowance for loan and lease losses on covered loans			(59,515)		(54,398)		(52,729)		(56,555)		(53,992)
Loans covered under shared-loss agreements with the FDIC, net			334,344		347,865		356,961		361,564		369,380
Total loans, net			4,936,040		5,002,614		5,019,419		5,128,823		4,978,306
Other assets:
FDIC shared-loss indemnification asset			143,660		166,194		189,240		225,581		253,378
Derivative assets			9,558		15,861		20,502		21,345		19,655
Prepaid expenses			19,632		15,531		15,439		16,967		23,568
Deferred tax asset, net			115,003		127,657		137,564		147,968		159,316
Foreclosed real estate and repossessed properties			119,110		110,849		102,607		94,086		91,267
Premises and equipment, net			82,167		83,029		82,903		83,145		84,300
Goodwill			86,069		86,069		86,069		86,069		86,069
Accounts receivable and other assets			115,528		125,938		125,995		147,487		131,276
Total assets		$	7,710,145	$	7,855,638	$	8,158,015	$	8,397,898	$	8,452,840

OFG Bancorp (NYSE: OFG)
Table 3: Consolidated Statement of Financial Condition (Continued) (2)
		June 30,		March 31,		December 31,		September 30,		June 30,
(Dollars in thousands) (unaudited)		2014		2014		2013		2013		2013
Deposits:
Demand deposits		$	2,135,369	$	2,188,458	$	2,138,005	$	2,177,120	$	2,294,674
Savings accounts			1,136,155		1,172,117		1,096,271		987,371		909,755
Time deposits			1,151,234		1,227,504		1,320,875		1,651,303		1,687,115
Brokered deposits			718,475		712,913		828,114		794,672		774,092
Total deposits			5,141,233		5,300,992		5,383,265		5,610,466		5,665,636
Borrowings:
Securities sold under agreements to repurchase			1,012,233		1,012,240		1,267,618		1,267,423		1,313,870
Advances from FHLB and other borrowings			364,077		339,397		339,806		340,010		292,306
Federal funds purchased			-		23,712		-		13,202		29,431
Subordinated capital notes			100,797		100,404		100,010		99,486		98,961
Total borrowings			1,477,107		1,475,753		1,707,434		1,720,121		1,734,568
Other liabilities:
Derivative liabilities			13,617		13,830		14,937		16,741		16,701
Acceptances outstanding			17,581		28,152		23,042		31,881		30,571
Accrued expenses and other liabilities			135,405		140,420		144,424		138,963		134,440
Total liabilities			6,784,943		6,959,147		7,273,102		7,518,172		7,581,916
Stockholders' equity:
Preferred stock			176,000		176,000		176,000		176,000		176,000
Common stock			52,730		52,714		52,707		52,691		52,689
Additional paid-in capital			538,936		538,287		538,071		538,231		538,105
Legal surplus			66,438		64,292		61,957		59,867		57,906
Retained earnings			160,055		147,919		133,629		122,747		111,292
Treasury stock, at cost	(23)		(90,712)		(90,743)		(80,642)		(80,642)		(80,834)
Accumulated other comprehensive income, net			21,755		8,022		3,191		10,832		15,766
Total stockholders' equity			925,202		896,491		884,913		879,726		870,924
Total liabilities and stockholders' equity		$	7,710,145	$	7,855,638	$	8,158,015	$	8,397,898	$	8,452,840

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)		2014		2014		2013		2013		2013
Acquired loans:	(1)
Non-covered loans
Accounted for under ASC 310-30
Period-end unpaid principal balance		$	1,804,645	$	1,900,112	$	1,998,913	$	2,091,796	$	2,445,112
Period-end carrying amount			1,676,677		1,754,041		1,832,213		1,904,324		2,203,272
Average carrying amount			1,720,553		1,805,535		1,881,377		2,155,889		2,368,459
Accounted for under ASC 310-20
Period-end unpaid principal balance			318,970		381,405		420,646		494,286		566,642
Period-end carrying amount			326,602		392,491		435,439		517,842		585,700
Average carrying amount			340,940		424,766		482,396		628,363		849,281
Covered loans
Accounted for under ASC 310-30
Period-end unpaid principal balance			707,120		750,781		812,672		861,900		897,184
Period-end carrying amount			334,344		347,865		356,961		361,564		369,380
Average carrying amount			343,351		355,531		358,158		366,703		374,611
Total acquired loans
Period-end unpaid principal balance			2,830,735		3,032,298		3,232,231		3,447,982		3,908,938
Period-end  carrying amount			2,337,623		2,494,397		2,624,613		2,783,730		3,158,352
Average carrying amount			2,404,844		2,585,832		2,721,931		3,150,955		3,592,351
Non-acquired loans held for investment:
Period-end unpaid principal balance			2,659,198		2,558,795		2,496,751		2,438,310		1,792,786
Period-end  carrying amount			2,640,749		2,542,727		2,401,540		2,347,502		1,789,060
Average carrying amount			2,614,537		2,421,514		2,396,008		1,985,790		1,464,918
Total loans
Period-end unpaid principal balance		$	5,489,933	$	5,591,093	$	5,728,982	$	5,886,292	$	5,701,724
Period-end carrying amount			4,978,372		5,037,124		5,026,153		5,131,232		4,947,412
Average carrying amount			5,019,381		5,007,347		5,117,939		5,136,745		5,057,269
		2014		2014		2013		2013		2013
(Dollars in thousands) (unaudited)		Q2		Q1		Q4		Q3		Q2
Quarterly loan production
Mortgage		$	51,999	$	50,843	$	67,535	$	60,676	$	101,279
Commercial			45,432		39,769		156,898		365,300		104,538
Consumer			34,530		27,796		23,604		28,586		26,634
Auto and Leasing			89,630		93,750		84,639		94,967		94,737
Total		$	221,591	$	212,158	$	332,676	$	549,529	$	327,188

OFG Bancorp (NYSE: OFG)

Table 5: Average Balances, Net Interest Income and Net Interest Margin

2014 Q2

2014 Q1

2013 Q4

2013 Q3

2013 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 and securities purchased under agreements to resell	$	559,230	$	351	0.25	%	$	482,497	$	283	0.24	%	$	532,753	$	366	0.27	%	$	538,094	$	241	0.18	%	$	541,038	$	242	0.18	%
Investment securities		1,393,523		12,606	3.63	%		1,619,020		14,160	3.55	%		1,652,016		13,241	3.18	%		1,764,118		11,548	2.60	%		1,938,053		10,956	2.27	%
Loans
Non-acquired loans		2,614,537		43,083	6.61	%		2,421,514		39,003	6.53	%		2,396,008		37,543	6.22	%		1,985,790		30,678	6.13	%		1,464,918		23,362	6.40	%
Acquired loans accounted for under ASC 310-30		1,720,553		39,714	9.26	%		1,805,535		40,269	9.05	%		1,881,377		48,731	10.28	%		2,155,889		48,351	8.90	%		2,368,459		54,427	9.22	%
Acquired loans accounted for under ASC 310-20		340,940		5,267	6.20	%		424,766		5,971	5.70	%		482,396		6,291	5.17	%		628,363		8,624	5.45	%		849,281		13,316	6.29	%
Loans not covered under shared-loss agreements with the FDIC		4,676,030		88,064	7.55	%		4,651,816		85,243	7.43	%		4,759,781		92,565	7.72	%		4,770,042		87,653	7.29	%		4,682,658		91,105	7.80	%
Loans covered under shared-loss agreements with the FDIC		343,351		24,879	29.06	%		355,531		23,388	26.68	%		358,158		25,885	28.67	%		366,703		21,657	23.43	%		374,611		23,999	25.70	%
Total loans		5,019,381		112,943	9.03	%		5,007,347		108,631	8.80	%		5,117,939		118,450	9.18	%		5,136,745		109,310	8.44	%		5,057,269		115,104	9.13	%
Total interest-earning assets	$	6,972,134	$	125,900	7.24	%	$	7,108,864	$	123,074	7.02	%	$	7,302,708	$	132,057	7.17	%	$	7,438,957	$	121,099	6.46	%	$	7,536,360	$	126,302	6.72	%
Interest bearing liabilities:
Deposits
Demand deposits	$	2,147,931	$	2,208	0.41	%	$	2,160,959	$	2,324	0.44	%	$	2,194,780	$	2,665	0.48	%	$	2,238,164	$	2,778	0.49	%	$	2,159,859	$	1,966	0.37	%
Savings accounts		1,168,911		2,192	0.75	%		1,128,703		2,296	0.82	%		1,058,152		2,347	0.88	%		941,892		2,313	0.97	%		893,804		3,015	1.35	%
Time deposits		1,192,447		3,972	1.34	%		1,293,344		4,405	1.38	%		1,512,962		5,553	1.46	%		1,674,495		6,530	1.55	%		1,700,949		6,683	1.58	%
Brokered deposits		709,374		1,468	0.83	%		751,558		1,516	0.82	%		771,248		1,610	0.83	%		799,723		1,679	0.83	%		858,199		1,790	0.84	%
		5,218,663		9,840	0.76	%		5,334,564		10,541	0.80	%		5,537,142		12,175	0.87	%		5,654,274		13,300	0.93	%		5,612,811		13,454	0.96	%
Purchase accounting and other adjustments		-		(675)	-			-		(1,563)	-			-		(1,954)	-			-		(1,968)	-			-		(3,967)	-
Total deposits		5,218,663		9,165	0.70	%		5,334,564		8,978	0.68	%		5,537,142		10,221	0.73	%		5,654,274		11,332	0.80	%		5,612,811		9,487	0.68	%
Borrowings
Securities sold under agreements to repurchase		1,010,000		7,372	2.93	%		1,156,747		7,411	2.60	%		1,265,000		7,680	2.41	%		1,268,544		7,211	2.26	%		1,356,716		7,109	2.10	%
Advances from FHLB and other borrowings		360,130		2,289	2.55	%		375,862		2,295	2.48	%		377,422		2,344	2.46	%		366,964		2,321	2.51	%		408,019		2,241	2.20	%
Subordinated capital notes		100,539		996	3.97	%		100,173		992	4.02	%		99,693		1,141	4.54	%		99,261		1,144	4.57	%		98,648		1,170	4.76	%
Total borrowings		1,470,669		10,657	2.91	%		1,632,782		10,698	2.66	%		1,742,115		11,165	2.54	%		1,734,769		10,676	2.44	%		1,863,383		10,520	2.26	%
Total interest-bearing liabilities	$	6,689,332	$	19,822	1.19	%	$	6,967,346	$	19,676	1.15	%	$	7,279,257	$	21,386	1.17	%	$	7,389,043	$	22,008	1.18	%	$	7,476,194	$	20,007	1.07	%
Interest rate spread			$	106,078	6.05	%			$	103,398	5.87	%			$	110,671	6.00	%			$	99,091	5.28	%			$	106,295	5.65	%
Net interest margin					6.10	%					5.90	%					6.01	%					5.28	%					5.66	%

OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin (Continued)
	2014 YTD						2013 YTD
			Interest						Interest
	Average		Income/		Yield/		Average		Income/		Yield/
(Dollars in thousands) (unaudited)	Balance		Expense		Rate		Balance		Expense		Rate
Interest earning assets:
Cash equivalents and securities purchased under agreements to resell	$	574,509	$	634	0.22	%	$	556,054	$	550	0.20	%
Investment securities		1,505,650		26,766	3.58	%		2,022,632		23,784	2.37	%
Loans
Non-acquired loans		2,518,566		82,015	6.57	%		1,379,302		43,738	6.39	%
Acquired loans accounted for under ASC 310-30		1,762,810		79,983	9.15	%		2,461,322		102,096	8.36	%
Acquired loans accounted for under ASC 310-20		382,621		11,309	5.96	%		860,016		26,078	6.11	%
Loans not covered under shared-loss agreements with the FDIC		4,663,997		173,307	7.49	%		4,700,641		171,912	7.38	%
Loans covered under shared-loss agreements with the FDIC		349,406		48,267	27.86	%		382,762		44,228	23.30	%
Total loans		5,013,403		221,574	8.91	%		5,083,403		216,140	8.57	%
Total interest-earning assets	$	7,093,562	$	248,974	7.08	%	$	7,662,089	$	240,474	6.33	%
Interest bearing liabilities:
Deposits
Demand deposits	$	2,154,409	$	4,531	0.42	%	$	2,189,327	$	5,707	0.53	%
Savings accounts		1,148,918		4,488	0.79	%		877,442		4,822	1.11	%
Time deposits		1,242,617		8,378	1.36	%		1,687,086		13,936	1.67	%
Brokered deposits		730,349		2,984	0.82	%		857,330		3,779	0.89	%
		5,276,293		20,381	0.78	%		5,611,185		28,244	1.02	%
Purchase accounting and other adjustments		-		(2,238)	-			-		(8,820)	-
Total deposits		5,276,293		18,143	0.69	%		5,611,185		19,424	0.70	%
Borrowings
Securities sold under agreements to repurchase		1,082,968		14,784	2.75	%		1,440,679		14,357	2.01	%
Advances from FHLB and other borrowings		367,953		4,583	2.51	%		468,357		3,954	1.70	%
Subordinated capital notes		100,357		1,988	3.99	%		121,029		2,830	4.72	%
Total borrowings		1,551,278		21,355	2.78	%		2,030,065		21,141	2.10	%
Total interest-bearing liabilities	$	6,827,571	$	39,498	1.17	%	$	7,641,250	$	40,565	1.07	%
Interest rate spread			$	209,476	5.91	%			$	199,909	5.26	%
Net interest margin					5.96	%					5.26	%

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (1)
		2014		2014		2013		2013		2013
(Dollars in thousands) (unaudited)		Q2		Q1		Q4		Q3		Q2
Net Charge-offs
Mortgage:
Charge-offs	(20)	$	987	$	1,214	$	3,102	$	1,758	$	29,119
Recoveries			(88)		(148)		(6)		-		-
Total mortgage			899		1,066		3,096		1,758		29,119
Commercial:
Charge-offs			543		419		211		2,234		2,887
Recoveries			(115)		(98)		(91)		(28)		(234)
Total commercial			428		321		120		2,206		2,653
Consumer:
Charge-offs			1,397		838		451		465		323
Recoveries			(244)		(147)		(23)		(37)		(43)
Total consumer			1,153		691		428		428		280
Auto and Leasing:
Charge-offs			5,956		4,645		2,496		1,305		709
Recoveries			(2,136)		(1,524)		(713)		(639)		(209)
Total auto and leasing			3,820		3,121		1,783		666		500
Total		$	6,300	$	5,199	$	5,427	$	5,058	$	32,552
Net Charge-off Rates
Mortgage			0.46%		0.57%		1.66%		0.92%		14.50%
Commercial			0.14%		0.11%		0.04%		1.04%		2.71%
Consumer			3.13%		2.16%		1.46%		1.75%		1.44%
Auto and Leasing			3.15%		2.99%		2.02%		0.98%		1.04%
Total			0.96%		0.86%		0.91%		1.02%		8.89%
Period-end Loans Held For Investment
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation		$	749,676	$	746,868	$	731,345	$	714,568	$	726,666
GNMA's buy-back option program			38,329		35,282		34,920		32,511		32,513
Total mortgage			788,005		782,150		766,265		747,079		759,179
Commercial			1,183,172		1,170,145		1,127,657		1,173,212		702,270
Consumer			161,538		142,492		127,744		113,509		94,519
Auto and Leasing			508,034		447,940		379,874		313,702		233,092
Total		$	2,640,749	$	2,542,727	$	2,401,540	$	2,347,502	$	1,789,060
Average Loans Held For Investment
Mortgage		$	773,425	$	753,248	$	744,989	$	763,929	$	803,272
Commercial			1,209,346		1,121,953		1,180,142		852,395		392,261
Consumer			147,230		128,239		117,391		97,738		77,948
Auto and Leasing			484,536		418,074		353,486		271,727		191,438
Total		$	2,614,537	$	2,421,514	$	2,396,008	$	1,985,790	$	1,464,918

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (Continued) (1)
		2014		2014		2013		2013		2013
(Dollars in thousands) (unaudited)		Q2		Q1		Q4		Q3		Q2
Early Delinquency (30 - 89 days past due)
Mortgage	(16) (17)	$	70,453	$	67,016	$	72,028	$	69,919	$	77,728
Commercial			4,258		2,419		9,581		4,560		12,804
Consumer			2,797		2,995		2,665		1,983		835
Auto and Leasing			50,667		42,347		34,968		21,186		10,901
Total		$	128,175	$	114,777	$	119,242	$	97,648	$	102,268
Early Delinquency Rates (30 - 89 days past due)
Mortgage	(16) (17)		8.94%		8.57%		9.40%		9.36%		10.24%
Commercial			0.36%		0.21%		0.85%		0.39%		1.82%
Consumer			1.73%		2.10%		2.09%		1.75%		0.88%
Auto and Leasing			9.97%		9.45%		9.21%		6.75%		4.68%
Total			4.85%		4.51%		4.97%		4.16%		5.72%
Total Delinquency (30 days and over past due)
Mortgage:	(16) (17)
Traditional, Non traditional, and Loans under Loss Mitigation		$	115,180	$	107,908	$	111,263	$	102,672	$	114,452
GNMA's buy-back option program			38,329		35,282		34,920		32,511		32,513
Total mortgage			153,509		143,190		146,183		135,183		146,965
Commercial			12,437		10,865		24,738		27,249		26,251
Consumer			3,923		3,674		3,315		2,408		1,205
Auto and Leasing			57,620		48,219		40,057		23,822		11,997
Total		$	227,489	$	205,948	$	214,293	$	188,662	$	186,418
Total Delinquency Rates (30 days and over past due)
Mortgage:	(16) (17)
Traditional, Non traditional, and Loans under Loss Mitigation			14.62%		13.80%		14.52%		13.74%		15.08%
GNMA's buy-back option program			4.86%		4.51%		4.56%		4.35%		4.28%
Total mortgage			19.48%		18.31%		19.08%		18.09%		19.36%
Commercial			1.05%		0.93%		2.19%		2.32%		3.74%
Consumer			2.43%		2.58%		2.60%		2.12%		1.27%
Auto and Leasing			11.34%		10.76%		10.54%		7.59%		5.15%
Total			8.61%		8.10%		8.92%		8.04%		10.42%
Nonperforming Assets	(21)
Mortgage	(16) (17)	$	57,314	$	51,728	$	51,058	$	45,596	$	55,667
Commercial			23,506		23,792		22,830		30,838		32,430
Consumer			1,454		1,084		805		490		324
Auto and Leasing			7,300		6,047		5,089		2,661		35
Total nonperforming loans			89,574		82,651		79,782		79,585		88,456
Foreclosed real estate			13,920		14,592		16,009		19,164		18,995
Other repossessed assets			7,317		5,542		3,266		605		144
Mortgage loans held for sale			-		1,554		-		654		26,586
Total nonperforming assets		$	110,811	$	104,339	$	99,057	$	100,008	$	134,181
Nonperforming Loan Rates
Mortgage	(16) (17)		7.27%		6.61%		6.66%		6.10%		7.33%
Commercial			1.99%		2.03%		2.02%		2.63%		4.62%
Consumer			0.90%		0.76%		0.63%		0.43%		0.34%
Auto and Leasing			1.44%		1.35%		1.34%		0.85%		0.02%
Total loans			3.39%		3.25%		3.32%		3.39%		4.94%

OFG Bancorp (NYSE: OFG)
Table 7: Allowance for Loan and Lease Losses
		Quarter Ended June 30, 2014
								Auto and
(Dollars in thousands) (unaudited)		Mortgage		Commercial		Consumer		Leasing		Unallocated		Total
Non-covered loans
Non-acquired loans
Balance at beginning of period		$	19,511	$	13,994	$	7,135	$	8,731	$	136	$	49,507
Provision for loan and lease losses			450		(1,143)		1,905		6,216		3		7,431
Charge-offs			(987)		(543)		(1,397)		(5,956)		-		(8,883)
Recoveries			88		115		244		2,136		-		2,583
Balance at end of period		$	19,062	$	12,423	$	7,887	$	11,127	$	139	$	50,638
Allowance coverage ratio			2.42%	$	1.05%	$	4.88%	$	2.19%	$	0.01%	$	1.92%
Acquired
Acquired loans accounted for under ASC 310-30
Balance at beginning of period			-	$	2,653	$	405	$	-	$	-	$	3,058
Provision for loan and lease losses, net		$	-	$	3,563	$	(343)	$	-	$	-	$	3,220
Balance at end of period			-	$	6,216	$	62	$	-	$	-	$	6,278
Acquired loans accounted for under ASC 310-20
Balance at beginning of period				$	867	$	504	$	2,247	$	-	$	3,618
Provision for loan and lease losses					(323)		1,662		1,230		-		2,569
Charge-offs					(110)		(1,952)		(1,370)		-		(3,432)
Recoveries					30		124		535		-		689
Balance at end of period				$	464	$	338	$	2,642	$	-	$	3,444
Total non-covered loans
Balance at beginning of period		$	19,511	$	17,514	$	8,044	$	10,978	$	136	$	56,183
Provision for loan and lease losses			450		2,097		3,224		7,446		3		13,220
Charge-offs	(20)		(987)		(653)		(3,349)		(7,326)		-		(12,315)
Recoveries			88		145		368		2,671		-		3,272
Balance at end of period		$	19,062	$	19,103	$	8,287	$	13,769	$	139	$	60,360
Covered loans
Balance at beginning of period		$	14,221	$	39,562	$	615	$	-	$	-	$	54,398
Provision for loan and lease losses, net			411		1,184		-		-		-		1,595
FDIC shared-loss portion of provision for covered loan and lease losses, net			292		3,230		-		-		-		3,522
Balance at end of period		$	14,924	$	43,976	$	615	$	-	$	-	$	59,515

OFG Bancorp (NYSE: OFG)
Table 8: Accretable Yield on Loans Accounted for Under ASC 310-30
	Quarter Ended June 30, 2014
(Dollars in thousands) (unaudited)	Mortgage		Commercial		Construction		Auto		Consumer		Total
Accretable Yield and Non-Accretable Discount
Non-Covered Loans:
Accretable Yield
Balance at beginning of period	$	278,468	$	82,637	$	35,005	$	74,635	$	11,256	$	482,001
Accretion		(9,363)		(12,217)		(5,973)		(10,593)		(1,568)		(39,714)
Transfers (to) from non-accretable discount		-		71		1,640		578		30		2,319
Balance at end of period	$	269,105	$	70,491	$	30,672	$	64,620	$	9,718	$	444,606
Non-Accretable Discount
Balance at beginning of period	$	458,648	$	41,551	$	7,248	$	29,328	$	26,519	$	563,294
Principal losses		(2,859)		(430)		(220)		(1,471)		(1,271)		(6,251)
Transfers from (to) accretable yield		-		(71)		(1,640)		(578)		(30)		(2,319)
Balance at end of period	$	455,789	$	41,050	$	5,388	$	27,279	$	25,218	$	554,724
					Construction &
					Development
	Loans Secured				Secured by
	by 1-4 Family		Commercial		1-4 Family
	Residential		and Other		Residential
	Properties		Construction		Properties		Leasing		Consumer		Total
Covered Loans:
Accretable Yield
Balance at beginning of period	$	54,619	$	83,200	$	209	$	7,332	$	2,407	$	147,767
Accretion		(4,033)		(17,141)		(1,070)		(2,377)		(259)		(24,880)
Transfers from (to) non-accretable discount		-		4,168		861		145		-		5,174
Balance at end of period	$	50,586	$	70,227	$	-	$	5,100	$	2,148	$	128,061
Non-Accretable Discount
Balance at beginning of period	$	31,340	$	67,136	$	-	$	-	$	8,847	$	107,323
Principal losses		(1,481)		(16,372)		861		145		(78)		(16,925)
Transfers (to) from accretable yield		-		(4,168)		(861)		(145)		-		(5,174)
Balance at end of period	$	29,859	$	46,596	$	-	$	-	$	8,769	$	85,224

OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures
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 average tangible common equity, 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.
	2014		2014		2013		2013		2013
(Dollars in thousands) (unaudited)	Q2		Q1		Q4		Q3		Q2
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders' equity	$	914,395	$	894,636	$	881,131	$	868,314	$	864,654
Less:  Average noncumulative perpetual preferred stock		(176,000)		(176,000)		(176,000)		(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	$	748,525	$	728,766	$	715,261	$	702,444	$	698,784
Less:  Average intangible assets		(97,252)		(97,792)		(98,367)		(99,048)		(99,660)
Average tangible common equity	$	651,273	$	630,974	$	616,894	$	603,396	$	599,124
Stockholders' Equity to Non-GAAP Tangible Common Equity
Total stockholders' equity	$	925,202	$	896,491	$	884,913	$	879,726	$	870,924
Less:  Intangible assets		(96,896)		(97,439)		(97,981)		(98,625)		(99,270)
Noncumulative perpetual preferred stock		(176,000)		(176,000)		(176,000)		(176,000)		(176,000)
Noncumulative perpetual preferred stock issuance costs		10,130		10,130		10,130		10,130		10,130
Tangible common equity	$	662,436	$	633,182	$	621,062	$	615,231	$	605,784
Common stock outstanding at end of period		45,023		45,004		45,677		45,661		45,640
Tangible book value	$	14.71	$	14.07	$	13.60	$	13.47	$	13.27
Total Assets to Tangible Assets
Total assets	$	7,710,145	$	7,855,638	$	8,158,015	$	8,397,898	$	8,452,840
Less:  Intangible assets		(96,896)		(97,439)		(97,981)		(98,625)		(99,270)
Tangible assets	$	7,613,249	$	7,758,199	$	8,060,034	$	8,299,273	$	8,353,570
Non-GAAP TCE Ratio
Tangible common equity	$	662,436	$	633,182	$	621,062	$	615,231	$	605,784
Tangible assets		7,613,249		7,758,199		8,060,034		8,299,273		8,353,570
TCE ratio		8.70%		8.16%		7.71%		7.41%		7.25%

OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures (Continued)
	2014		2014		2013		2013		2013
(Dollars in thousands) (unaudited)	Q2		Q1		Q4		Q3		Q2
Regulatory Capital Ratios
Total stockholders' equity	$	925,202	$	896,491	$	884,913	$	879,726	$	870,924
Less:  Unrealized gains on available-for-sale securities, net of income tax		(29,759)		(16,034)		(11,434)		(20,324)		(25,400)
Unrealized losses on cash flow hedges, net of income tax		8,004		8,013		8,243		9,492		9,634
Disallowed goodwill and other intangible assets		(96,896)		(97,439)		(97,981)		(98,625)		(89,584)
Disallowed deferred tax assets		(66,362)		(79,016)		(80,430)		(89,275)		(96,473)
Disallowed servicing assets		(1,365)		(1,397)		(1,380)		(1,365)		(1,299)
Noncumulative perpetual preferred stock		(176,000)		(176,000)		(176,000)		(176,000)		(176,000)
Noncumulative perpetual preferred stock issuance costs		10,130		10,130		10,130		10,130		10,130
Tier 1 common equity capital		572,954		544,749		536,062		513,759		501,932
Plus:  Qualifying noncumulative perpetual preferred stock		176,000		176,000		176,000		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		773,824		745,618		736,931		714,629		702,802
Plus:  Long-term debt qualifying as Tier 2 capital		26,800		26,800		26,800		26,800		40,200
Qualifying allowance for loan and lease losses		63,166		63,749		64,746		63,292		62,683
Tier 2 capital		89,966		90,549		91,546		90,092		102,883
Total risk-based capital	$	863,790	$	836,168	$	828,477	$	804,721	$	805,685
Risk-weighted assets	$	4,994,378	$	5,050,672	$	5,134,538	$	5,019,563	$	4,975,818
Leverage ratio		10.26%		9.51%		9.11%		8.74%		8.54%
Tier 1 common ratio		11.47%		10.79%		10.44%		10.24%		10.09%
Tier 1 risk-based capital ratio		15.49%		14.76%		14.35%		14.24%		14.12%
Total risk-based capital ratio		17.30%		16.56%		16.14%		16.03%		16.19%

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 covered 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 consider 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. Loans acquired in the BBVAPR acquisition that were accounted for under the provisions of ASC 310-20, which had fully amortized their premium or discount recorded at the date of acquisition at the end of the reporting period, are removed from the acquired loans category.
(2)	Certain prior period amounts have been reclassified to conform to the current period presentation.
(3)	Total bankinig and financial services revenues
(4)	Results include merger and restructuring expenses, which include (1) planned integration and other activities related to the BBVAPR acquisition, and (2) organizational restructuring initiatives. The total acquisition related expense for 2013 was $17.5 million.
(5)	Tax benefit for Q2 2013 includes three items:  (i) $35.7 million gain from an increase in OFG's Deferred Tax Asset as a result of the Tax Amendments, which raised corporate income taxes to 39% from 30%; (ii) Q2 2013 income taxes at OFG's effective tax rate of 35.5%; and (iii) an amount to bring the Q1 2013 effective rate up to 35.5%, from the previously recorded 25.2%.
(6)	Calculated based on net income available to common shareholders divided by average common shares outstanding for the period.
(7)	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.
(8)	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 Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.
(9)	Information includes all loans, including all acquired loans. Acquired loans, including those accounted for under ASC 310-30, are disclosed at carrying amount.
(10)	Calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.
(11)	Calculated based on annualized income, net of tax, for the period divided by average total assets for the period.
(12)	Calculated based on annualized income available to common shareholders for the period divided by average tangible common equity for the period.  See "Table 9: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.
(13)	Calculated based on non-interest expense, excluding merger and restructuring charges, for the period divided by total net interest income and total banking and financial services revenues for the period.
(14)	The Company sells most of its conforming mortgages in the secondary market and retains servicing rights.
(15)	Calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period.
(16)	Ratios for Q2 2013 do not include $59.0 million of non-performing residential mortgage loans reclassified to held-for-sale during the quarter. These loans were sold during Q3 2013.
(17)	During Q1 2014, the Company changed its methodology for determining mortgage delinquency from calendar days to installments.
(18)	Non-GAAP ratios. See "Table 9: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for information on the calculation of each of these ratios.
(19)	Results for Q3 2013 includes $1.4 million loss from the sale of Oriental non-acquired non-performing residential mortgage loans held-for-sale.
(20)	Results for Q2 2013 includes $27.0 million charge-offs due to the reclassification to held-for-sale of non-performing residential mortgage loans with unpaid principal balance of $59.0 million.
(21)	Loans accounted for under ASC 310-30 (Loans acquired with deteriorated credit quality, including those by analogy), including covered 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.
(22)	The Board of directors increased OFG's regular quarterly dividend per common share to $0.08 per share during Q4 2013.
(23)	During Q1 2014, the Company purchased 707,400 shares under the current stock repurchase program for a total of $10.4 million, at an average price of $14.66 per share.