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 21, 2017

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 21, 2017, OFG Bancorp (the “Company”) announced the results for the quarter ended June 30, 2017. 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  21, 2017.

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 21, 2017	By:	/s/ Maritza Arizmendi
		Maritza Arizmendi
		Executive Vice President and Chief Financial Officer

EX-99

 

Exhibit 99

 

OFG Bancorp Reports 2Q17 Results

SAN JUAN, Puerto Rico, July 21, 2017 – OFG Bancorp (NYSE: OFG) today reported results for the second quarter ended June 30, 2017.

2Q17 Highlights

•Net income available to shareholders increased. OFG reported $13.6 million, or $0.30 per share fully diluted, compared to $11.7 million, or $0.26 per share fully diluted, in 1Q17 and $10.9 million, or $0.25 per share fully diluted, in the year ago 2Q16.

•Puerto Rico municipality exposure reduced. OFG opportunistically sold a $38.0 million performing term loan with a municipality, resulting in a $4.3 million pre-tax loss. The sale reduced OFG’s exposure to this sector by approximately 27% from March 31, 2017, to $140.8 million after July payments.

•Balance sheet de-levered further. OFG unwound a 1.48% $100.0 million repurchase agreement, in line with its strategy to reduce borrowings. Related to this, OFG sold $166.0 million of mortgage backed securities (MBS). These transactions resulted in a tax-advantaged gain of $6.9 million.

•Effective tax rate optimized. OFG now forecasts its 2017 effective tax rate (ETR) to be 29.15% as compared to its previously stated 38% estimate. The new rate is similar to its 2016 rate and resulted in a $2.1 million beneficial adjustment to estimated income tax in 2Q17.

•Net interest margin (NIM) improved. Due to a significant reduction in the cost of borrowings and higher yields on variable rate commercial loans and on cash, NIM increased 8 basis points from 1Q17 to 5.18%.

•Credit quality and major performance ratios remained solid. The non-performing loan and total delinquency rates fell to the lowest levels in the last five quarters. Return on average assets was 1.09%, return on average tangible common stockholders’ equity was 8.01%, and the efficiency ratio was 56.49%.

•Capital buildup continued. All major capital metrics advanced compared to the preceding and year ago quarters. Tangible book value per common share at

$15.51 was up 1.2% and 3.7%, respectively, while tangible common equity ratio at 11.09% was up 43 and 117 basis points, respectively.

CEO Comment

José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board, commented:

“OFG’s 2Q17 results of $0.30 per share underscored the stability in our business. We have pro-actively managed the environment, exploiting available financial and operating levers, as evident from the resiliency in our results.

“More importantly, our retail franchise continued to grow, with increases in loan generation and customer base. We were the first in the market to emphasize superior customer experience through innovation, which seems to be in everyone else’s vocabulary now.

“As part of our continuing leadership in bringing innovative customer facing solutions to Puerto Rico, Oriental released a new and re-designed version of our mobile banking app. We also finished deploying deposit taking capabilities in all 47 on premise ATMs. We are highly encouraged with customer adoption levels and feedback.

“We continue to be committed to delivering stable financial results in line with the range discussed at the beginning of the year.”

2Q17 Income Statement Highlights

The following compares data for the second quarter 2017 to the first quarter 2017, unless otherwise noted.

•Interest Income

☐ from Originated Loans, increased $1.5 million to $53.5 million due to higher yields from variable rate commercial loans.

☐ from Acquired Loans, declined $1.9 million to $23.8 million reflecting continued pay downs and lower cost recoveries.

☐ from Securities, increased $0.2 million to $8.7 million from higher yields on cash balances.

•Interest Expense declined $1.2 million to $10.4 million, primarily due to a full quarter impact of the March 2017 repayment of a 4.78% $232.0 million repurchase agreement.

•Total Provision for Loan and Lease Losses increased $8.9 million to $26.5 million. This included the previously mentioned loss of $4.3 million on the sale of a municipality loan, an additional provision of $5.9 million for remaining loans

to four other municipalities, and $2.3 million in recoveries on auto and consumer loans.

•Core Net Interest Margin (excluding cost recoveries) expanded to 5.12% from 5.01% primarily due to lower borrowing balances and costs.

•Total Banking and Wealth Management Revenues increased $0.5 million to $17.9 million, with increases in wealth management fees and in mortgage banking from servicing asset valuation and higher loan production.

•Other Non-Interest Income reflected the previously mentioned $6.9 million gain on the sale of securities. In 1Q17, there was a $1.4 million gain related to the final outcome of terminating the FDIC shared-loss agreement.

•Total Non-Interest Expenses increased $1.1 million to $52.8 million. This was primarily due to costs associated with consolidating office space, partially offset by lower credit expenses.

•Income Tax declined $5.2 million to $4.0 million. The reduction reflects the new 2017 estimated tax rate as a result of a higher proportion of exempt income, including the gain on sale of MBS.

June 30, 2017 Balance Sheet Highlights

The following compares data at June 30, 2017 to March 31, 2017, unless otherwise noted.

•Total Loans Net increased $2.2 million to $4.09 billion. New retail generation rose to $174.1 million, with growth in consumer and mortgage loans, partially offset by a decline in auto. Commercial loan generation expanded to $80.4 million with the closing of new small business and middle market loans.

•Total Investments declined $173.9 million to $1.22 billion due to the previously mentioned MBS sale as well as prepayments.

•Customer Deposits declined $128.1 million to $4.01 billion, largely the result of a decision not to retain a high cost corporate and a government client.

•Total Borrowings declined $45.1 million to $627.3 million due to the previously mentioned unwinding of a repurchase agreement in 2Q17.

•Total Stockholders’ Equity increased $7.5 million to $939.0 million primarily due to increases in retained earnings.

Credit Quality Highlights

The following compares data at June 30, 2017 to March 31, 2017, unless otherwise noted.

•Net Charge-Off Rate increased 39 basis points to 1.79%. This reflected an increase for commercial loans with the sale of the municipality loan, partially offset by reductions in all retail loan categories. The auto and consumer loan net charge-off rate benefited from previously mentioned recoveries.

•Early Delinquency Rate increased 10 basis points to 3.52% due to increases in auto and mortgage lending, partially offset by improvements in consumer and commercial lending. Total Delinquency Rate declined 3 basis points to 6.31%, reflecting improvements in mortgage and consumer lending, partially offset by increases in auto and commercial lending.

•Non-Performing Loans remained relatively stable at 3.16% with declines in the mortgage and auto lending non-performing loan rates offset by increases in the commercial and consumer lending non-performing loan rates.

•Allowance for Loan and Lease Losses increased $9.2 million to $69.7 million due to originated loan growth and the previously mentioned allowance for loans to municipalities.

Capital Position

The following compares data at June 30, 2017 to March 31, 2017, unless otherwise noted.

Capital continued to build and remains significantly above regulatory requirements for a well-capitalized institution.

•Tangible Common Equity to Total Tangible Assets at 11.09% increased 43 basis points from 1Q17 and 117 basis points year over year, to the highest level in five quarters.

•Tangible Book Value per Common Share at $15.51 increased 1.2% from 1Q17 and 3.7% year over year to the highest level in five quarters.

•Common Equity Tier 1 Capital Ratio (using Basel III methodology) at 14.66% increased 36 basis points from 1Q17 and 202 basis points year over year to the highest level in five quarters.

•Total Risk-Based Capital Ratio at 20.42% increased 37 basis points from 1Q17 and 242 basis points year over year to the highest level in five quarters.

Conference Call

A conference call to discuss OFG’s results for the second quarter 2017, outlook and related matters will be held today, Friday, July 21, 2017 at 10:00 AM Eastern Time. The call will be accessible live via a webcast on OFG’s Investor Relations website atwww.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, 2017, 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, 2016, 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 53^rd year in business, OFG Bancorp is a diversified financial holding company that operates under U.S. and Puerto Rico banking laws and regulations. Its three principal subsidiaries, Oriental Bank, Oriental Financial Services and Oriental Insurance, provide a wide range of retail and commercial banking, lending and wealth management products, services and technology, primarily in Puerto Rico, through 48 financial centers. Investor information can be found at Error! Hyperlink reference not valid.www.ofgbancorp.com.

# # #

Contacts

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

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

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, 2017 Quarterly Report on Form 10-Q once it is filed with the Securities and Exchange Commission.
Table of Contents
			Pages
	OFG Bancorp (Consolidated Financial Information)
	Table  1:	Financial and Statistical Summary - Consolidated		2
	Table  2:	Consolidated Statements of Operations		3
	Table  3:	Consolidated Statements of Financial Condition		4
	Table  4:	Information on Loan Portfolio and Production		5
	Table  5:	Average Balances, Net Interest Income and Net Interest Margin		6-7
	Table  6:	Loan Information and Performance Statistics (Excluding Acquired Loans)		8-9
	Table  7:	Allowance for Loan and Lease Losses		10
	Table  8:	Accretable Yield on Loans Accounted for Under ASC 310-30 (Loans Acquired
		with Deteriorated Credit Quality, Including those by Analogy)		11
	Table  9:	Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory
		Capital		12-13
	Table  10:	Notes to Financial Summary, Selected Metrics, Loans, and Consolidated
		Financial Statements (Tables 1-9)		14

OFG Bancorp (NYSE: OFG)
Table 1: Financial and Statistical Summary - Consolidated
		2017			2017		2016		2016			2016		2017		2016
(Dollars in thousands, except per share data) (unaudited)		Q2			Q1		Q4		Q3			Q2		YTD		YTD
Earnings
Net interest income		$	75,563		$	74,618	$	74,213	$	76,927		$	73,312	$	150,181	$	148,287
Non-interest income, net (core)	(2)		17,933			17,428		20,415		18,277			18,284		35,361		35,409
Non-interest expense			52,816			51,684		52,382		54,927			53,825		104,500		108,682
Pre-provision net revenues			47,633			42,008		39,777		42,215			34,642		89,641		68,263
Provision for loan and lease losses			26,536	(a)		17,654		13,373		23,469	(c)		14,445		44,190		28,234
Net income before income taxes			21,097			24,354		26,404		18,746			20,197		45,451		40,029
Income tax expense			3,993			9,204		10,848		3,627			5,858		13,197		11,519
Net income		$	17,104		$	15,150	$	15,556	$	15,119		$	14,339	$	32,254	$	28,510
Common Share Statistics
Earnings per common share - basic	(3)	$	0.30		$	0.27	$	0.28	$	0.27		$	0.25	$	0.58	$	0.49
Earnings per common share - diluted	(4)	$	0.30		$	0.26	$	0.27	$	0.26		$	0.25	$	0.57	$	0.49
Average common shares outstanding			43,947			43,915		43,914		43,926			43,914		43,931		43,906
Average common shares outstanding and equivalents			51,100			51,131		51,098		51,111			51,095		51,093		51,081
Cash dividends per common share		$	0.06		$	0.06	$	0.06	$	0.06		$	0.06	$	0.12	$	0.12
Book value per common share (period end)		$	17.59		$	17.42	$	17.18	$	17.29		$	17.08	$	17.59	$	17.08
Tangible book value per common share (period end)	(5)	$	15.51		$	15.33	$	15.08	$	15.18		$	14.96	$	15.51	$	14.96
Balance Sheet (Average Balances)
Loans	(6)	$	4,129,550		$	4,141,628	$	4,195,966	$	4,398,032		$	4,445,658	$	4,135,591	$	4,459,982
Interest-earning assets			5,848,525			5,932,924		5,972,163		6,169,251			6,270,042		5,890,526		6,348,597
Total assets			6,278,464			6,374,177		6,455,023		6,653,446			6,778,190		6,326,056		6,884,158
Interest-bearing deposits			3,844,490			3,850,506		3,875,536		3,920,565			3,929,280		3,847,481		3,925,194
Borrowings			614,332			715,951		750,446		917,212			1,047,753		664,861		1,143,713
Stockholders' equity			938,707			926,011		919,697		919,171			908,394		932,388		904,764
Common stockholders' equity			772,837			760,141		753,827		753,301			742,524		766,518		738,894
Performance Metrics
Net interest margin	(7)		5.18%			5.10%		4.94%		4.95%			4.69%		5.14%		4.68%
Return on average assets	(8)		1.09%			0.95%		0.96%		0.91%			0.85%		1.02%		0.83%
Return on average tangible common stockholders' equity	(9)		8.01%			7.00%		7.31%		7.06%			6.70%		7.51%		6.69%
Efficiency ratio	(10)		56.49%			56.15%		55.36%		57.69%			58.76%		56.32%		59.16%
Full-time equivalent employees, period end			1,472			1,446		1,437		1,439			1,451		1,472		1,451
Credit Quality Metrics
Excluding acquired loans:	(1)
Allowance for loan and lease losses		$	69,666	(a)	$	60,483	$	59,300	$	62,168	(c)	$	112,812	$	69,666	$	112,812
Allowance as a % of loans held for investment			2.25%			1.98%		1.95%		2.06%			3.53%		2.25%		3.53%
Net charge-offs		$	13,635	(a)(b)	$	10,552	$	13,506	$	65,352	(c)	$	9,478	$	24,187	$	19,526
Net charge-off rate	(11)		1.79%	(a)(b)		1.40%		1.80%		8.27%	(c)		1.21%		1.59%		1.25%
Early delinquency rate (30 - 89 days past due)			3.52%			3.42%		3.31%		3.70%			3.31%		3.52%		3.31%
Total delinquency rate (30 days and over)			6.31%			6.34%		6.49%		6.92%			6.28%		6.31%		6.28%
Capital Ratios (Non-GAAP)	(12)
Leverage ratio			13.69%			13.20%		12.99%		12.35%			11.92%		13.69%		11.92%
Common equity Tier 1 capital ratio			14.66%			14.30%		14.05%		13.34%			12.64%		14.66%		12.64%
Tier 1 risk-based capital ratio			19.14%			18.77%		18.35%		17.46%			16.71%		19.14%		16.71%
Total risk-based capital ratio			20.42%			20.05%		19.62%		18.73%			18.00%		20.42%		18.00%
Tangible common equity ("TCE") ratio			11.09%			10.66%		10.33%		10.25%			9.92%		11.09%		9.92%
(a) On June 30, 2017, the Company entered into an agreement for the sale of a municipality loan for $28.8 million. At June 30, 2017, this loan, which included a principal payment of $4.8 million received in July 1, 2017, was reported as other loans held for sale, at fair value.  As a result of this transaction, the Company recognized a $4.3 million charge-off during the quarter. Proceeds were received on July 5, 2017. A general allowance $5.9 million was created during the quarter for the remaining portfolio of municipal loans.
(b) During Q2 2017 , the Company had additional recoveries in auto and consumer loans of $1.1 million and $612 thousand, respectively.
(c) During Q3 2016, the Company entered into an agreement to sell its outstanding participation in the PREPA line of credit for $124 million, slightly lower than the adjusted book balance, net of reserves. At September 30, 2016, this line of credit was reported as other loans held for sale, at fair value. Proceeds were received on October 7, 2016. As a result of this transaction, the Company recognized a $56.2 million charge-off and a $2.9 million provision for loan and lease losses during the quarter ended September 30, 2016.
2

OFG Bancorp (NYSE: OFG)
Table 2: Consolidated Statements of Operations
		Quarter Ended													Six-Months Ended
		June 30,			March 31,			December 31,		September 30,			June 30,		June 30,			June 30,
(Dollars in thousands, except per share data) (unaudited)		2017			2017			2016		2016			2016		2017			2016
Interest income:
Loans	(1)
Non-acquired loans		$	53,449		$	51,955		$	51,581	$	50,568		$	49,108	$	105,404		$	97,008
Acquired BBVAPR loans			17,752			19,085			20,232		22,723			23,670		36,837			49,346
Acquired Eurobank loans			6,037			6,610			6,701		9,313			6,897		12,647			14,473
Total interest income from loans			77,238			77,650			78,514		82,604			79,675		154,888			160,827
Investment securities			8,702			8,528			8,280		7,980			8,233		17,230			18,387
Total interest income			85,940			86,178			86,794		90,584			87,908		172,118			179,214
Interest expense:
Deposits
Core deposits			5,568			5,468			5,536		5,580			5,551		11,036			10,687
Brokered deposits			2,084			1,885			1,895		1,751			1,816		3,969			3,804
Total deposits			7,652			7,353			7,431		7,331			7,367		15,005			14,491
Borrowings			2,725			4,207	(d)		5,150		6,326			7,229		6,932			16,436
Total interest expense			10,377			11,560			12,581		13,657			14,596		21,937			30,927
Net interest income			75,563			74,618			74,213		76,927			73,312		150,181			148,287
Provision for loan and lease losses, excluding acquired loans	(1)		22,818	(a)		11,735			10,638		14,708	(f)		9,052		34,553	(a)		19,710
Provision for acquired BBVAPR loan and lease losses	(1)		3,306			4,299			3,135		7,942			4,362		7,605			6,688
Provision (recapture) for acquired Eurobank loan and lease losses	(1)		412			1,620			(400)		819			1,031		2,032			1,836
Total provision for loan and lease losses, net			26,536			17,654			13,373		23,469			14,445		44,190			28,234
Net interest income after provision for loan and lease losses			49,027			56,964			60,840		53,458			58,867		105,991			120,053
Non-interest income:
Banking service revenues			10,458			10,626			10,980		10,330			10,219		21,084			20,337
Wealth management revenues			6,516			6,215			7,714		6,526			7,041		12,731			13,193
Mortgage banking activities			959			587			1,721		1,421			1,024		1,546			1,879
Total banking and wealth management revenues			17,933			17,428			20,415		18,277			18,284		35,361			35,409
FDIC shared-loss benefit (expense), net			-			1,403	(e)		(2,836)		(3,296)			(3,420)		1,403			(7,449)
Other gains, net			6,953	(b)		243			367		5,234	(g)		291		7,196	(b)		698
Total non-interest income, net			24,886			19,074			17,946		20,215			15,155		43,960			28,658
Non-interest expense:
Compensation and employee benefits			19,317			20,347			18,898		19,168			18,441		39,664			38,696
Rent and occupancy costs			8,690			7,367			7,553		7,484			8,107		16,057			15,928
Net loss on sale of foreclosed real estate and other repossessed assets			1,787			1,326			1,219		2,970			4,163		3,113			6,094
General and administrative expenses			20,805			20,018			22,622		21,586			20,911		40,823			43,506
Total operating expenses			50,599			49,058			50,292		51,208			51,622		99,657			104,224
Credit related expenses			2,217			2,626			2,090		3,719			2,203		4,843			4,458
Total non-interest expense			52,816			51,684			52,382		54,927			53,825		104,500			108,682
Income before income taxes			21,097			24,354			26,404		18,746			20,197		45,451			40,029
Income tax expense			3,993	(c)		9,204			10,848		3,627			5,858		13,197			11,519
Net income			17,104			15,150			15,556		15,119			14,339		32,254			28,510
Less:  dividends on preferred stock
Convertible preferred stock			(1,837)			(1,838)			(1,837)		(1,838)			(1,837)		(3,675)			(3,675)
Other preferred stock			(1,629)			(1,627)			(1,629)		(1,627)			(1,629)		(3,256)			(3,256)
Net income available to common shareholders		$	13,638		$	11,685		$	12,090	$	11,654		$	10,874	$	25,323		$	21,579
(a) On June 30, 2017, the Company entered into an agreement for the sale of a municipality loan for $28.8 million. At June 30, 2017, this loan, which included a principal payment of $4.8 million received in July 1, 2017, was reported as other loans held for sale, at fair value.  As a result of this transaction, the Company recognized a $4.3 million charge-off during the quarter. Proceeds were received on July 5, 2017. A general allowance $5.9 million was created during the quarter for the remaining portfolio of municipal loans.
(b) During Q2 2017, the Company sold $166.0 million of mortgage-backed securities and recorded a net gain on sale of securities of $6.8 million. Also, it sold $39.2 million Treasury Notes and recorded a net gain of $112 thousand. In addition, the Company unwound repurchase agreements in the amount of $100 million at a cost of $80 thousand.
(c) During Q2 2017, the effective income tax rate decreased as a result of higher proportion of exempt income and income subject to preferential rates mainly due to the gain in sale of investment portfolio.
(d) During Q1 2017, a $232.0 million repurchase agreement at 4.78% was repaid at maturity.
(e) During Q1 2017, the Bank and the FDIC agreed to terminate the single family and commercial shared-loss agreements related to the FDIC assisted acquisition of Eurobank on April 30, 2010, resulting in a benefit of $1.4 million.
(f) During Q3 2016, the Company entered into an agreement to sell its outstanding participation in the PREPA line of credit for $124 million, slightly lower than the adjusted book balance, net of reserves. At September 30, 2016, this line of credit was reported as other loans held for sale, at fair value. Proceeds were received on October 7, 2016. As a result of this transaction, the Company recognized a $56.2 million charge-off and a $2.9 provision for loan and lease losses during the quarter ended September 30, 2016.
(g) During Q3 2016, the Company received $5 million from a 2009 claim of loss related to a private label collateralized obligation.
3

OFG Bancorp (NYSE: OFG)
Table 3: Consolidated Statements of Financial Condition
	June 30,			March 31,			December 31,		September 30,			June 30,
(Dollars in thousands) (unaudited)	2017			2017			2016		2016			2016
Cash and cash equivalents	$	480,338		$	483,301		$	513,469	$	512,295		$	520,078
Investments:
Trading securities		294			314			347		380			348
Investment securities available-for-sale, at fair value, with amortized cost of $649,280
(March 31, 2017 - $796,558; December 31, 2016 - $749,867; September 30, 2016 - $623,994;
June 30, 2016 - $645,298)
Mortgage-backed securities		584,930	(a)		741,405			692,552		632,429			651,724
Other investment securities		64,397			58,637			58,932		10,254			12,578
Total investment securities available-for-sale		649,327			800,042			751,484		642,683			664,302
Mortgage-backed securities held-to-maturity, at amortized cost, with fair value of $549,595
(March 31, 2017 - $570,963; December 31, 2016 - $592,763; September 30, 2016 - $650,023;
June 30, 2016 - $643,530)		555,407			577,997			599,884		641,890			635,399
Federal Home Loan Bank (FHLB) stock, at cost		16,616			17,161			10,793		12,712			19,838
Other investments		3			3			3		3			3
Total investments		1,221,647			1,395,517			1,362,511		1,297,668			1,319,890
Loans, net		4,091,866			4,089,708			4,147,692		4,298,965	(d)		4,373,617
Other assets:
FDIC shared-loss indemnification asset		-			-	(b)		14,411		16,670			18,426
Derivative assets		957			1,123			1,330		1,503			1,926
Prepaid expenses		17,117			15,496			17,096		19,514			16,332
Deferred tax asset, net		116,199			121,442			124,200		131,061			143,048
Foreclosed real estate and repossessed properties		53,448			50,820			50,743		49,188			55,086
Premises and equipment, net		69,836			69,786			70,407		71,105			72,585
Goodwill		86,069			86,069			86,069		86,069			86,069
Accounts receivable and other assets		98,349			101,345			113,896		108,075			105,539
Total assets	$	6,235,826		$	6,414,607		$	6,501,824	$	6,592,113		$	6,712,596
Deposits:
Demand deposits	$	1,844,996		$	1,944,921		$	1,939,764	$	2,012,255		$	1,972,743
Savings accounts		1,115,669			1,174,581			1,128,190		1,118,783			1,110,423
Time deposits		1,053,110			1,022,447			1,020,138		1,042,572			999,243
Brokered deposits		568,911			575,879			576,395		581,161			561,645
Total deposits		4,582,686			4,717,828			4,664,487		4,754,771			4,644,054
Borrowings:
Securities sold under agreements to repurchase		453,492			531,179	(c)		653,756		658,232			626,109
Advances from FHLB and other borrowings		137,717			105,133			105,515		105,984	(e)		308,233
Subordinated capital notes		36,083			36,083			36,083		36,083	(e)		102,983
Total borrowings		627,292			672,395			795,354		800,299			1,037,325
Other liabilities:
Derivative liabilities		1,881			1,967			2,437		4,306			5,413
Acceptances outstanding		22,739			24,288			23,765		18,043			20,984
Accrued expenses and other liabilities		62,259			66,700			95,370		89,760			88,930
Total liabilities		5,296,857			5,483,178			5,581,413		5,667,179			5,796,706
Stockholders' equity:
Preferred stock		176,000			176,000			176,000		176,000			176,000
Common stock		52,626			52,626			52,626		52,626			52,626
Additional paid-in capital		541,005			540,808			540,948		540,692			540,705
Legal surplus		79,460			77,772			76,293		74,788			73,265
Retained earnings		194,687			185,377			177,808		169,858			162,363
Treasury stock, at cost		(104,502)			(104,502)			(104,860)		(104,874)			(104,874)
Accumulated other comprehensive income, net		(307)			3,348			1,596		15,844			15,805
Total stockholders' equity		938,969			931,429			920,411		924,934			915,890
Total liabilities and stockholders' equity	$	6,235,826		$	6,414,607		$	6,501,824	$	6,592,113		$	6,712,596
(a) During Q2 2017, the Company sold $166.0 million of mortgage-backed securities and recorded a net gain on sale of securities of $6.8 million. Also, it sold $39.2 million Treasury Notes and recorded a net gain of $112 thousand. In addition, the Company unwound repurchase agreements in the amount of $100 million at a cost of $80 thousand.
(b) During Q1 2017, the Bank and the FDIC agreed to terminate the single family and commercial shared-loss agreements related to the FDIC assisted acquisition of Eurobank on April 30, 2010, resulting in a benefit of $1.4 million.
(c) During Q1 2017, a $232.0 million repurchase agreement at 4.78% was repaid at maturity.
(d) During Q3 2016, the Company entered into an agreement to sell its outstanding participation in the PREPA line of credit for $124 million, slightly lower than the adjusted book balance, net of reserves. At September 30, 2016, this line of credit was reported as other loans held for sale, at fair value. Proceeds were received on October 7, 2016. As a result of this transaction, the Company recognized a $56.2 million charge-off and a $2.9 provision for loan and lease losses during the quarter ended September 30, 2016.
(e) During Q3 2016, the Company paid-off, at maturity, $205.0 million in FHLB advances and a former BBVA subordinated capital note of $67.0 million, assumed as part of the 2012 acquisition of its PR operations.
4

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)		2017			2017		2016		2016			2016
Non-acquired loans held for investment:
Mortgage		$	699,290		$	709,863	$	721,494	$	735,367		$	741,917
Commercial			1,270,844	(a)		1,253,712		1,277,866		1,267,177	(b)		1,476,613
Consumer			314,267			300,412		290,515		278,666			265,269
Auto			807,204			786,606		756,395		730,589			712,268
			3,091,605			3,050,593		3,046,270		3,011,799			3,196,067
Less:  Allowance for loan and lease losses			(69,666)	(a)		(60,483)		(59,301)		(62,168)	(b)		(112,812)
			3,021,939			2,990,110		2,986,969		2,949,631			3,083,255
Deferred loan costs, net			6,574			6,464		5,766		5,421			4,619
Total non-acquired loans held for investment, net			3,028,513			2,996,574		2,992,735		2,955,052			3,087,874
Acquired loans:	(1)
BBVAPR
Accounted for under ASC 310-20
Commercial			5,350			5,436		5,562		5,755			4,559
Consumer			30,233			31,001		32,862		34,215			35,194
Auto			33,661			42,523		53,026		64,393			77,118
			69,244			78,960		91,450		104,363			116,871
Less:  Allowance for loan and lease losses			(3,348)			(3,615)		(4,299)		(4,213)			(4,487)
			65,896			75,345		87,151		100,150			112,384
Accounted for under ASC 310-30
Mortgage			544,325			558,112		569,253		579,769			591,029
Commercial			266,002			278,665		292,564		301,599			323,105
Consumer			2,163			3,201		4,301		5,768			7,331
Auto			58,078			71,495		85,676		100,475			117,038
			870,568			911,473		951,794		987,611			1,038,503
Less:  Allowance for loan and lease losses			(37,494)			(34,930)		(31,056)		(29,819)			(22,801)
			833,074			876,543		920,738		957,792			1,015,702
Total Acquired BBVAPR loans, net			898,970			951,888		1,007,889		1,057,942			1,128,086
Eurobank
Accounted for under ASC 310-30
Mortgage			70,329			72,966		73,018		75,043			76,777
Commercial			66,894			73,181		81,460		82,753			83,377
Consumer			1,256			1,268		1,372		1,488			1,410
			138,479			147,415		155,850		159,284			161,564
Less:  Allowance for loan and lease losses			(21,787)			(22,006)		(21,281)		(22,812)			(22,116)
Total Acquired Eurobank loans, net			116,692			125,409		134,569		136,472			139,448
Total acquired loans, net			1,015,662			1,077,297		1,142,458		1,194,414			1,267,534
Total loans held for investment			4,044,175			4,073,871		4,135,193		4,149,466			4,355,408
Mortgage loans held for sale			14,044			15,837		12,499		26,362			18,209
Other loans held for sale			33,647	(a)		-		-		123,137	(b)		-
Total loans, net		$	4,091,866		$	4,089,708	$	4,147,692	$	4,298,965		$	4,373,617
Loan Portfolio Summary:
Loans held for investment:
Mortgage		$	1,313,944		$	1,340,941	$	1,363,765	$	1,390,179		$	1,409,723
Commercial			1,609,090	(a)		1,610,994		1,657,452		1,657,284	(b)		1,887,654
Consumer			347,919			335,882		329,050		320,137			309,204
Auto and leasing			898,943			900,624		895,097		895,457			906,424
			4,169,896			4,188,441		4,245,364		4,263,057			4,513,005
Less:  Allowance for loan and lease losses			(132,295)	(a)		(121,034)		(115,937)		(119,012)	(b)		(162,216)
			4,037,601			4,067,407		4,129,427		4,144,045			4,350,789
Deferred loan costs, net			6,574			6,464		5,766		5,421			4,619
Total loans held for investment, net			4,044,175			4,073,871		4,135,193		4,149,466			4,355,408
Mortgage loans held for sale			14,044			15,837		12,499		26,362			18,209
Other loans held for sale			33,647	(a)		-		-		123,137	(b)		-
Total loans, net		$	4,091,866		$	4,089,708	$	4,147,692	$	4,298,965		$	4,373,617
		2017			2017		2016		2016			2016
(Dollars in thousands) (unaudited)		Q2			Q1		Q4		Q3			Q2
Quarterly loan production	(13)
Mortgage		$	45,877		$	43,474	$	51,208	$	51,022		$	57,636
Commercial			80,367			46,451		86,832		62,628			66,316
Consumer			49,652			42,149		42,295		43,636			39,550
Auto and Leasing			78,584			86,784		77,602		69,523			74,383
Total		$	254,480		$	218,858	$	257,937	$	226,809		$	237,885
(a) On June 30, 2017, the Company entered into an agreement for the sale of a municipality loan for $28.8 million. At June 30, 2017, this loan, which included a principal payment of $4.8 million received in July 1, 2017, was reported as other loans held for sale, at fair value.  As a result of this transaction, the Company recognized a $4.3 million charge-off during the quarter. Proceeds were received on July 5, 2017. A general allowance $5.9 million was created during the quarter for the remaining portfolio of municipal loans.
(b) During Q3 2016, the Company entered into an agreement to sell its outstanding participation in the PREPA line of credit for $124 million, slightly lower than the adjusted book balance, net of reserves. At September 30, 2016, this line of credit was reported as other loans held for sale, at fair value. Proceeds were received on October 7, 2016. As a result of this transaction, the Company recognized a $56.2 million charge-off and a $2.9 provision for loan and lease losses during the quarter ended September 30, 2016.
5

OFG Bancorp (NYSE: OFG)

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

2017 Q2

2017 Q1

2016 Q4

2016 Q3

2016 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	$	384,037	$	956	1.00	%	$	431,110	$	845	0.79	%	$	445,246	$	581	0.52	%	$	477,968	$	661	0.55	%	$	512,916	$	612	0.48	%
Investment securities		1,334,938		7,747	2.33	%		1,360,186		7,683	2.29	%		1,330,951		7,699	2.30	%		1,293,251		7,319	2.25	%		1,311,468		7,621	2.33	%
Loans
Non-acquired loans		3,051,549		53,448	7.03	%		3,015,456		51,955	6.99	%		3,009,579		51,581	6.82	%		3,160,091		50,569	6.35	%		3,129,570		49,108	6.29	%
Acquired BBVAPR loans		949,479		17,752	7.50	%		997,649		19,085	7.76	%		1,050,468		20,232	7.66	%		1,100,336		22,723	8.19	%		1,172,087		23,670	8.10	%
Acquired Eurobank loans		128,522		6,037	18.84	%		128,522		6,610	20.86	%		135,919		6,701	19.61	%		137,605		9,313	26.85	%		144,001		6,897	19.21	%
Total loans		4,129,550		77,237	7.50	%		4,141,627		77,650	7.60	%		4,195,966		78,514	7.44	%		4,398,032		82,605	7.45	%		4,445,658		79,675	7.19	%
Total interest-earning assets	$	5,848,525	$	85,940	5.89	%	$	5,932,923	$	86,178	5.89	%	$	5,972,163	$	86,794	5.78	%	$	6,169,251	$	90,585	5.83	%	$	6,270,042	$	87,908	5.62	%
Interest bearing liabilities:
Deposits
NOW accounts	$	1,080,135	$	1,051	0.39	%	$	1,092,389	$	1,041	0.39	%	$	1,119,597	$	1,172	0.42	%	$	1,243,640	$	1,314	0.42	%	$	1,231,576	$	1,518	0.49	%
Savings accounts		1,151,650		1,485	0.52	%		1,164,040		1,481	0.52	%		1,126,600		1,384	0.49	%		1,113,649		1,351	0.48	%		1,103,808		1,308	0.48	%
Time deposits		1,037,063		2,802	1.08	%		1,019,528		2,715	1.08	%		1,045,732		2,794	1.06	%		1,013,905		2,735	1.07	%		981,759		2,558	1.05	%
Brokered deposits		575,642		2,084	1.45	%		574,549		1,885	1.33	%		583,607		1,895	1.29	%		549,371		1,751	1.26	%		612,137		1,816	1.19	%
		3,844,490		7,422	0.77	%		3,850,506		7,122	0.75	%		3,875,536		7,245	0.74	%		3,920,565		7,151	0.72	%		3,929,280		7,200	0.73	%
Non-interest bearing deposit accounts		835,026		-	-			832,665		-	-			832,332		-	-			801,833		-	-			774,496		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		231	-			-		231	-			-		186	-			-		180	-			-		167	-
Total deposits		4,679,516		7,653	0.66	%		4,683,171		7,353	0.64	%		4,707,868		7,431	0.63	%		4,722,398		7,331	0.62	%		4,703,776		7,367	0.63	%
Borrowings
Securities sold under agreements to repurchase		472,338		1,733	1.47	%		574,771		3,244	2.29	%		608,802		4,177	2.73	%		620,353		4,272	2.73	%		627,693		4,258	2.72	%
Advances from FHLB and other borrowings		105,911		607	2.30	%		105,097		596	2.30	%		105,561		611	2.30	%		195,278		1,237	2.51	2		317,191		2,098	2.65	%
Subordinated capital notes		36,083		384	4.27	%		36,083		367	4.12	%		36,083		362	3.99	%		101,581		818	3.19	%		102,869		873	3.40	%
Total borrowings		614,332		2,724	1.78	%		715,951		4,207	2.38	%		750,446		5,150	2.73	%		917,212		6,327	2.74	%		1,047,753		7,229	2.77	%
Total interest-bearing liabilities	$	5,293,848	$	10,377	0.79	%	$	5,399,122	$	11,560	0.87	%	$	5,458,314	$	12,581	0.92	%	$	5,639,610	$	13,658	0.96	%	$	5,751,529	$	14,596	1.02	%
Interest rate spread			$	75,563	5.10	%			$	74,618	5.02	%			$	74,213	4.86	%			$	76,927	4.87	%			$	73,312	4.60	%
Net interest margin					5.18	%					5.10	%					4.94	%					4.95	%					4.69	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	300					$	245					$	130					$	809					$	293
Acquired Eurobank loans				615						1,055						729						3,012						539
			$	915					$	1,300					$	859					$	3,821					$	832
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	5,848,525	$	85,025	5.83	%	$	5,932,923	$	84,878	5.80	%	$	5,972,163	$	85,935	5.72	%	$	6,169,251	$	86,764	5.58	%	$	6,270,042	$	87,076	5.57	%
Interest rate spread			$	74,648	5.04	%			$	73,318	4.93	%			$	73,354	4.80	%			$	73,106	4.62	%			$	72,480	4.55	%
Net interest margin					5.12	%					5.01	%					4.89	%					4.70	%					4.64	%
6

OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin (Continued)
	2017 YTD						2016 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	$	407,443	$	1,801	0.89	%	$	507,817	$	1,258	0.50	%
Investment securities		1,347,492		15,429	2.31	%		1,380,798		17,129	2.49	%
Loans
Non-acquired loans		3,033,503		105,404	7.01	%		3,114,864		97,023	6.25	%
Acquired BBVAPR loans		973,566		36,837	7.63	%		1,206,172		49,320	8.20	%
Acquired Eurobank loans		128,522		12,647	19.84	%		138,947		14,484	20.91	%
Total loans		4,135,591		154,888	7.55	%		4,459,982		160,827	7.23	%
Total interest-earning assets	$	5,890,526	$	172,118	5.89	%	$	6,348,597	$	179,214	5.66	%
Interest bearing liabilities:
Deposits
NOW accounts	$	1,086,228	$	2,092	0.39	%	$	1,173,975	$	2,600	0.44	%
Savings accounts		1,157,811		2,966	0.52	%		1,109,680		2,706	0.49	%
Time deposits		1,028,344		5,517	1.08	%		968,308		5,053	1.05	%
Brokered deposits		575,098		3,970	1.39	%		673,231		3,804	1.13	%
		3,847,481		14,545	0.76	%		3,925,194		14,163	0.72	%
Non-interest bearing deposit accounts		833,852		-	-			792,564		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		460	-			-		328	-
Total deposits		4,681,333		15,005	0.65	%		4,717,758		14,491	0.62	%
Borrowings
Securities sold under agreements to repurchase		523,272		4,979	1.92	%		713,653		10,358	2.91	%
Advances from FHLB and other borrowings		105,506		1,202	2.30	%		327,278		4,337	2.66	%
Subordinated capital notes		36,083		751	4.20	%		102,782		1,741	3.40	%
Total borrowings		664,861		6,932	2.10	%		1,143,713		16,436	2.88	%
Total interest-bearing liabilities	$	5,346,194	$	21,937	0.83	%	$	5,861,471	$	30,927	1.06	%
Interest rate spread			$	150,181	5.06	%			$	148,287	4.60	%
Net interest margin					5.14	%					4.68	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	545						976
Acquired Eurobank loans				1,670						1,865
			$	2,215					$	2,841
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	5,890,526	$	169,903	5.82	%	$	6,348,597	$	176,373	5.57	%
Interest rate spread			$	147,966	4.99	%			$	145,446	4.51	%
Net interest margin					5.07	%					4.59	%
7

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (1)
	2017			2017		2016		2016			2016
(Dollars in thousands) (unaudited)	Q2			Q1		Q4		Q3			Q2
Net Charge-offs
Mortgage:
Charge-offs	$	2,162		$	2,379	$	2,075	$	1,656		$	1,374
Recoveries		(63)			(56)		(125)		(21)			(36)
Total mortgage		2,099			2,323		1,950		1,635			1,338
Commercial:
Charge-offs		4,841	(a)		856		3,901		56,700	(c)		833
Recoveries		(136)			(89)		(53)		(93)			(228)
Total commercial		4,705			767		3,848		56,607	(c)		605
Consumer:
Charge-offs		4,012			3,358		3,243		3,173			2,811
Recoveries		(780)	(b)		(165)		(97)		(120)			(133)
Total consumer		3,232			3,193		3,146		3,053			2,678
Auto and Leasing:
Charge-offs		7,775			7,563		7,464		7,804			8,100
Recoveries		(4,176)	(b)		(3,294)		(2,902)		(3,747)			(3,243)
Total auto and leasing		3,599			4,269		4,562		4,057			4,857
Total	$	13,635		$	10,552	$	13,506	$	65,352	(c)	$	9,478
Net Charge-off Rates
Mortgage		1.20%			1.31%		1.07%		0.88%			0.72%
Commercial		1.50%	(a)		0.25%		1.22%		15.88%	(c)		0.17%
Consumer		4.42%	(b)		4.57%		4.62%		4.71%			4.35%
Auto and Leasing		1.79%	(b)		2.19%		2.44%		2.23%			2.75%
Total		1.79%			1.40%		1.80%		8.27%	(c)		1.21%
Average Loans Held For Investment
Mortgage	$	698,782		$	711,553	$	730,707	$	746,613		$	743,516
Commercial		1,256,827			1,245,530		1,258,896		1,426,216			1,433,944
Consumer		292,739			279,558		272,353		259,535			246,003
Auto and Leasing		803,201			778,815		747,623		727,727			706,107
Total	$	3,051,549		$	3,015,456	$	3,009,579	$	3,160,091		$	3,129,570
(a) On June 30, 2017, the Company entered into an agreement for the sale of a municipality loan for $28.8 million. At June 30, 2017, this loan, which included a principal payment of $4.8 million received in July 1, 2017, was reported as other loans held for sale, at fair value.  As a result of this transaction, the Company recognized a $4.3 million charge-off during the quarter. Proceeds were received on July 5, 2017. A general allowance $5.9 million was created during the quarter for the remaining portfolio of municipal loans.
(b) During Q2 2017 , the Company had additional recoveries in auto and consumer loans of $1.1 million and $612 thousand, respectively.
(c) During Q3 2016, the Company entered into an agreement to sell its outstanding participation in the PREPA line of credit for $124 million, slightly lower than the adjusted book balance, net of reserves. At September 30, 2016, this line of credit was reported as other loans held for sale, at fair value. Proceeds were received on October 7, 2016. As a result of this transaction, the Company recognized a $56.2 million charge-off and a $2.9 provision for loan and lease losses during the quarter ended September 30, 2016.
8

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (Continued) (1)
		2017		2017		2016		2016			2016
(Dollars in thousands) (unaudited)		Q2		Q1		Q4		Q3			Q2
Early Delinquency (30 - 89 days past due)
Mortgage		$	32,292	$	30,827	$	32,516	$	37,015		$	33,099
Commercial			4,648		5,708		1,602		4,177			4,923
Consumer			5,495		6,024		5,106		4,796			3,765
Auto and Leasing			66,372		61,912		61,728		65,302			63,871
Total		$	108,807	$	104,471	$	100,952	$	111,290		$	105,658
Early Delinquency Rates (30 - 89 days past due)
Mortgage			4.62%		4.34%		4.51%		5.03%			4.46%
Commercial			0.37%		0.46%		0.13%		0.33%			0.33%
Consumer			1.75%		2.01%		1.76%		1.72%			1.42%
Auto and Leasing			8.22%		7.87%		8.16%		8.94%			8.97%
Total			3.52%		3.42%		3.31%		3.70%			3.31%
Total Delinquency (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation		$	85,908	$	90,849	$	98,506	$	103,770		$	95,909
GNMA's buy-back option program			9,229		9,973		9,681		9,598			8,369
Total mortgage			95,137		100,822		108,187		113,368			104,278
Commercial			18,154		15,711		12,798		14,947			20,005
Consumer			7,275		7,383		6,752		6,302			5,190
Auto and Leasing			74,577		69,622		69,901		73,708			71,193
Total		$	195,143	$	193,538	$	197,638	$	208,325		$	200,666
Total Delinquency Rates (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation			12.29%		12.80%		13.65%		14.11%			12.93%
GNMA's buy-back option program			1.32%		1.40%		1.34%		1.31%			1.13%
Total mortgage			13.60%		14.20%		14.99%		15.42%			14.06%
Commercial			1.43%		1.25%		1.00%		1.18%			1.35%
Consumer			2.31%		2.46%		2.32%		2.26%			1.96%
Auto and Leasing			9.24%		8.85%		9.24%		10.09%			10.00%
Total			6.31%		6.34%		6.49%		6.92%			6.28%
Nonperforming Assets	(14)
Mortgage		$	63,071	$	66,781	$	74,503	$	75,592		$	72,947
Commercial			23,519		19,387		19,786		23,347	(a)		207,768
Consumer			2,687		1,948		1,986		2,470			2,339
Auto and Leasing			8,295		8,709		9,052		9,477			7,337
Total nonperforming loans			97,572		96,825		105,327		110,886			290,391
Foreclosed real estate			15,320		12,946		11,867		9,819			10,463
Other repossessed assets			2,921		2,600		2,408		2,462			2,979
Total nonperforming assets		$	115,813	$	112,371	$	119,602	$	123,167		$	303,833
Nonperforming Loan Rates
Mortgage			9.02%		9.41%		10.33%		10.28%			9.83%
Commercial			1.85%		1.55%		1.55%		1.84%	(a)		14.07%
Consumer			0.86%		0.65%		0.68%		0.89%			0.88%
Auto and Leasing			1.03%		1.11%		1.20%		1.30%			1.03%
Total loans			3.16%		3.17%		3.46%		3.68%			9.09%
(a) During Q3 2016, the Company entered into an agreement to sell its outstanding participation in the PREPA line of credit for $124 million, slightly lower than the adjusted book balance, net of reserves. At September 30, 2016, this line of credit was reported as other loans held for sale, at fair value. Proceeds were received on October 7, 2016. As a result of this transaction, the Company recognized a $56.2 million charge-off and a $2.9 provision for loan and lease losses during the quarter ended September 30, 2016.
9

OFG Bancorp (NYSE: OFG)
Table 7: Allowance for Loan and Lease Losses
	Quarter Ended June 30, 2017
							Auto and
(Dollars in thousands) (unaudited)	Mortgage		Commercial		Consumer		Leasing		Unallocated		Total
Non-acquired loans
Balance at beginning of period	$	18,578	$	9,888	$	13,394	$	18,621	$	2	$	60,483
Provision (recapture) for loan and lease losses, net		2,185		12,096		4,819		3,720		(2)		22,818
Charge-offs		(2,162)		(4,841)		(4,012)		(7,775)		-		(18,790)
Recoveries		63		136		780		4,176		-		5,155
Balance at end of period	$	18,664	$	17,279	$	14,981	$	18,742	$	-	$	69,666
Allowance coverage ratio		2.67%		1.36%		4.77%		2.32%		0.00%		2.25%
Acquired loans
Acquired BBVAPR loans:
Acquired loans accounted for under ASC 310-20
Balance at beginning of period			$	183	$	2,591	$	841	$	-	$	3,615
Provision (recapture) for loan and lease losses, net				(18)		508		(549)		-		(59)
Charge-offs				(126)		(771)		(205)		-		(1,102)
Recoveries				2		295		597		-		894
Balance at end of period			$	41	$	2,623	$	684	$	-	$	3,348
Acquired loans accounted for under ASC 310-30
Balance at beginning of period	$	3,573	$	23,528	$	-	$	7,829	$	-	$	34,930
Provision for loan and lease losses, net		630		2,735		-		-		-		3,365
Allowance de-recognition		(62)		(649)		-		(90)		-		(801)
Balance at end of period	$	4,141	$	25,614	$	-	$	7,739	$	-	$	37,494
Acquired Eurobank loans:
Balance at beginning of period	$	14,168		7,833		5		-		-	$	22,006
Provision (recapture) for loan and lease losses, net		474		(62)		-		-		-		412
Allowance de-recognition		(991)		360		-		-		-		(631)
Balance at end of period	$	13,651	$	8,131	$	5	$	-	$	-	$	21,787
Total acquired loans
Balance at beginning of period	$	17,741		31,544		2,596		8,670		-		60,551
Provision (recapture) for loan and lease losses, net		1,104		2,655		508		(549)		-		3,718
Charge-offs		-		(126)		(771)		(205)		-		(1,102)
Recoveries		-		2		295		597		-		894
Allowance de-recognition		(1,053)		(289)		-		(90)		-		(1,432)
Balance at end of period	$	17,792	$	33,786	$	2,628	$	8,423	$	-	$	62,629
10

OFG Bancorp (NYSE: OFG)
Table 8: Accretable Yield on Loans Accounted for Under ASC 310-30 (Loans Acquired with Deteriorated Credit Quality, including those by Analogy)
	Quarter Ended June 30, 2017
(Dollars in thousands) (unaudited)	Mortgage		Commercial		Construction		Auto		Consumer		Total
Accretable Yield and Non-Accretable Discount
Acquired BBVAPR loans:
Accretable Yield
Balance at beginning of period	$	276,817	$	34,848	$	12,054	$	6,583	$	3,058	$	333,360
Accretion		(7,694)	$	(3,204)	$	(1,309)	$	(1,776)	$	(556)	$	(14,539)
Change in expected cash flows		1		15,313		680		98		50		16,142
Transfers (to) from non-accretable discount		1,024		(2,237)		(107)		(52)		(1,066)		(2,438)
Balance at end of period	$	270,148	$	44,720	$	11,318	$	4,853	$	1,486	$	332,525
Non-Accretable Discount
Balance at beginning of period	$	309,993	$	7,544	$	7,259	$	22,564	$	18,159	$	365,519
Change in actual and expected cash flows		(2,465)		(161)		(119)		1,344		206		(1,195)
Transfers from (to) accretable yield		(1,024)		2,237		107		52		1,066		2,438
Balance at end of period	$	306,504	$	9,620	$	7,247	$	23,960	$	19,431	$	366,762
					Construction &
					Development
	Loans Secured				Secured by
	by 1-4 Family		Commercial		1-4 Family
	Residential		and Other		Residential
	Properties		Construction		Properties		Leasing		Consumer		Total
Acquired Eurobank loans:
Accretable Yield
Balance at beginning of period	$	44,697	$	12,743	$	1,871	$	-	$	-	$	59,311
Accretion		(1,923)		(4,061)		(5)		(11)		(37)		(6,037)
Change in expected cash flows		19		543		6		(22)		74		620
Transfers from (to) non-accretable discount		219		(68)		34		33		(37)		181
Balance at end of period	$	43,012	$	9,157	$	1,906	$	-	$	-	$	54,075
Non-Accretable Discount
Balance at beginning of period	$	7,426	$	2,471	$	333	$	-	$	6	$	10,236
Change in actual and expected cash flows		(520)		(529)		-		33		(29)		(1,045)
Transfers (to) from accretable yield		(219)		68		(34)		(33)		37		(181)
Balance at end of period	$	6,687	$	2,010	$	299	$	-	$	14	$	9,010
11

OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital
In addition to disclosing required regulatory capital measures, we also report certain non-GAAP capital measures that management uses in assessing its capital adequacy. These non-GAAP measures include tangible common equity ("TCE") and TCE ratio. The table below provides the details of the calculation of our regulatory capital and non-GAAP capital measures. While our non-GAAP capital measures are widely used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies, they may not be comparable to similarly titled measures reported by other companies.
	2017		2017		2016		2016		2016
(Dollars in thousands) (unaudited)	Q2		Q1		Q4		Q3		Q2
Stockholders' Equity to Non-GAAP Tangible Common Equity
Total stockholders' equity	$	938,969	$	931,429	$	920,411	$	924,934	$	915,890
Less:  Intangible assets		(91,493)		(91,861)		(92,229)		(92,648)		(93,068)
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	$	681,606	$	673,698	$	662,312	$	666,416	$	656,952
Common stock outstanding at end of period		43,947		43,947		43,915		43,914		43,914
Tangible book value (Non-GAAP)	$	15.51	$	15.33	$	15.08	$	15.18	$	14.96
Total Assets to Tangible Assets
Total assets	$	6,235,826	$	6,414,607	$	6,501,824	$	6,592,113	$	6,712,596
Less:  Intangible assets		(91,493)		(91,861)		(92,229)		(92,648)		(93,068)
Tangible assets (Non-GAAP)	$	6,144,333	$	6,322,746	$	6,409,595	$	6,499,465	$	6,619,528
Non-GAAP TCE Ratio
Tangible common equity	$	681,606	$	673,698	$	662,312	$	666,416	$	656,952
Tangible assets		6,144,333		6,322,746		6,409,595		6,499,465		6,619,528
TCE ratio		11.09%		10.66%		10.33%		10.25%		9.92%
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders' equity	$	938,707	$	926,011	$	919,697	$	919,171	$	908,394
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	$	772,837	$	760,141	$	753,827	$	753,301	$	742,524
Less:  Average intangible assets		(91,731)		(92,102)		(92,502)		(92,922)		(93,341)
Average tangible common equity	$	681,106	$	668,039	$	661,325	$	660,379	$	649,183
12

OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures (Continued)
		BASEL III
		Standardized
		2017		2017		2016		2016		2016
(Dollars in thousands) (unaudited)		Q2		Q1		Q4		Q3		Q2
Regulatory Capital Metrics
Common equity Tier 1 capital		$	643,606	$	626,707	$	627,732	$	612,792	$	596,080
Tier 1 capital			840,703		822,847		819,661		801,882		788,349
Total risk-based capital	(15)		896,926		878,867		876,656		860,513		849,147
Risk-weighted assets			4,391,321		4,383,517		4,467,556		4,593,340		4,716,534
Regulatory Capital Ratios
Common equity Tier 1 capital ratio	(16)		14.66%		14.30%		14.05%		13.34%		12.64%
Tier 1 risk-based capital ratio	(17)		19.14%		18.77%		18.35%		17.46%		16.71%
Total risk-based capital ratio	(18)		20.42%		20.05%		19.62%		18.73%		18.00%
Leverage ratio	(19)		13.69%		13.20%		12.99%		12.35%		11.92%
Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach
Total stockholders' equity		$	938,969	$	931,429	$	920,411	$	924,934	$	915,890
Less:  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
Unrealized gains on available-for-sale securities, net of income tax			(256)		(3,849)		(2,209)		(17,554)		(18,085)
Unrealized losses on cash flow hedges, net of income tax			563		501		612		1,710		2,281
			773,406		762,211		752,944		743,220		734,216
Less:    Disallowed goodwill			(86,069)		(86,069)		(86,069)		(86,069)		(86,069)
Disallowed other intangible assets, net	(20)		(2,646)		(2,826)		(2,255)		(2,408)		(2,561)
Disallowed deferred tax assets, net	(20)		(41,085)		(46,609)		(36,888)		(41,951)		(49,506)
Common equity Tier 1 capital			643,606		626,707		627,732		612,792		596,080
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
Less:  Disallowed deferred tax assets, net			(3,773)		(4,730)		(8,941)		(11,780)		(8,601)
Tier 1 capital			840,703		822,847		819,661		801,882		788,349
Plus tier 2 capital:  Qualifying allowance for loan and lease losses			56,223		56,020		56,995		58,631		60,798
Total risk-based capital		$	896,926	$	878,867	$	876,656	$	860,513	$	849,147
13

OFG Bancorp (NYSE: OFG)
Table 10: Notes to Financial Summary, Selected Metrics, Loans, and Consolidated Financial Statements (Tables 1 - 9)
(1)	We use the term "acquired loans" to refer to loans acquired from the BBVAPR acquisition (December 18, 2012) and loans acquired in the Eurobank FDIC-Assisted acquisition (April 30, 2010), recorded at fair value at acquisition. The majority of these loans acquired are subsequently accounted for based on estimated cash flows expected to be collected over the life of the loans (under the accounting standard known as ASC 310-30). Because the guidance takes into consideration future credit losses expected to be incurred over the life of the loans, there are no charge-offs or an allowance associated with this loans unless the estimated cash flows expected to be collected decrease subsequent to acquisition. In addition, these loans are not classified as delinquent or nonperforming even though the customer may be contractually past due because we expect that we will fully collect the carrying value of these loans. Acquired loans also include loans acquired in the BBVAPR acquisition that were accounted for under the provisions of ASC 310-20, which at the end of the reporting period still have unamortized premium or discount. The fair value of these loans already include a credit mark for losses estimated on these loans.  The allowance for loan and lease losses for these loans considers such marks applied. The accounting and classification of these loans may significantly alter some of our reported credit quality metrics. We therefore supplement certain reported credit quality metrics with metrics adjusted to exclude the impact of these acquired loans.
(2)	Total banking and wealth management revenues.
(3)	Calculated based on net income available to common shareholders divided by average common shares outstanding for the period.
(4)	Calculated based on net income available to common shareholders plus the preferred dividends on the convertible preferred stock, divided by total average common shares outstanding and equivalents for the period as if converted.
(5)	Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See "Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.
(6)	Information includes all loans held for investment, including all acquired loans. Acquired loans, including those accounted for under ASC 310-30, are disclosed at carrying amount.
(7)	Calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.
(8)	Calculated based on annualized income, net of tax, for the period divided by average total assets for the period.
(9)	Calculated based on annualized income available to common shareholders for the period divided by average tangible common equity for the period.
(10)	Calculated based on non-interest expense for the period divided by total net interest income and total banking and financial services revenues for the period.
(11)	Calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period.
(12)	Non-GAAP ratios. See "Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures" for information on the calculation of each of these ratios.
(13)	Production of new loans (excluding renewals).
(14)	Loans accounted for under ASC 310-30 (loans acquired with deteriorated credit quality, including those by analogy), including Eurobank acquired loans, are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analyses. Therefore, they are not included as non-performing loans.
(15)	Total risk-based capital equals the sum of Tier 1 capital and Tier 2 capital.
(16)	Common equity Tier 1 capital ratio is a regulatory capital measure calculated based on Common equity Tier 1 capital divided by risk-weighted assets.
(17)	Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.
(18)	Total risk-based capital ratio is a regulatory capital measure calculated based on Total risk-based capital divided by risk-weighted assets.
(19)	Leverage capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by average assets, after certain adjustments.
(20)	Amounts based on transition provisions for regulatory capital deductions and adjustments of 80% for 2017 and 60% for 2016.
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