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 20, 2018

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 20, 2018, OFG Bancorp (the “Company”) announced the results for the quarter ended June 30, 2018. 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 20, 2018.

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 20, 2018	By:	/s/ Maritza Arizmendi
		Maritza Arizmendi
		Executive Vice President and Chief Financial Officer

EX-99

 

Exhibit 99

 

OFG Bancorp Reports 2Q18 Results

SAN JUAN, Puerto Rico, July 20, 2018 – OFG Bancorp (NYSE: OFG) reported results for the second quarter ended June 30, 2018, reflecting the third straight quarter of continued strong recovery following hurricanes that struck the island in September 2017.

2Q18 Summary

·Net income available to shareholders was $16.2 million, or $0.35 per fully diluted share, compared to 1Q18’s $13.5 million and 2Q17’s $13.6 million, equal to $0.30 per share, respectively.

·Average loan balances of $4.3 billion increased 3.0% from the preceding quarter as growth of originated loans is consistently outpacing the anticipated runoff of acquired loans.

·New loan production of $432.1 million grew 39.7% from 1Q18 with sequential increases across the board in all categories.

·Average core deposit balances of $4.4 billion rose 1.6% from 1Q18 with a 6.2% increase in non-interest bearing accounts to a record high $1.1 billion.

·Customer count grew 1% from 1Q18 and 3% year over year as our strategy of differentiation, delivering superior customer convenience with innovative technology solutions, continues to be successful.

·Total provision for loan and lease losses of $14.7 million dropped 4.6% from the preceding quarter as credit quality remains stable.

·All key performance metrics improved from 1Q18 with net interest margin at 5.24%, return on average assets at 1.23%, return on average tangible common stockholders’ equity at 9.20%, and the efficiency ratio at 54.49%.

·Tangible book value per common share of $15.96 at June 30, 2018 increased 6.4% annualized from March 31, 2018.

CEO Comments

José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board, commented: “On behalf of OFG’s entire team, we are extremely proud to announce

yet another quarter of superior results across all facets of our business. 2Q18 EPS is up more than 17% sequentially and more than 16% year over year. Virtually every one of our metrics confirms the success of our strategies, people and technology.

“For the third quarter in a row, loan growth, new loan production, and return on average tangible common stockholders' equity are up, while credit quality remained stable. For two quarters in a row, customer count, banking and financial service revenues, core retail deposits and NIM increased, and delinquency rates fell below pre-hurricane levels.

“Our effort to differentiate Oriental through superior service and technology is working. During 2Q18, we launched Oriental SmallBiz, another banking first for Puerto Rico, where new and existing customers can apply online for commercial credit. Services like these enable us to step up our ability to reach out to customers and clients fácil, rápido, hecho (easy, fast, done).

“We are also encouraged as OFG continues to build solid capital, with tangible book value per common share at $15.96, up sequentially more than 6% on an annualized basis. All indicators are positive, positioning us well to continue this trend for the rest of 2018.

“While Puerto Rico faces similar challenges as before, now that insurance and federal funds are flowing, economic activity and optimism are gaining momentum. Based on what we have seen to date, we are confident about OFG and Oriental’s ability to continue to grow, deliver great customer experience and performance, and help Puerto Rico recover.”

Income Statement Highlights

Unless otherwise noted, the following compares data for the second quarter 2018 to the first quarter 2018.

•Interest Income: Increased 5.8% or $4.8 million, reflecting the following:

•Originated Loans: Increased $4.4 million to $61.2 million, primarily due to higher balances.

•Acquired Loans: Declined $0.6 million to $17.2 million, reflecting continued pay downs.

•Investment Securities: Increased $1.0 million to $9.6 million, the result of higher balances and higher yield.

•Interest Expense: Increased 13.5% or $1.2 million to $10.4 million, due to higher borrowings and interest-bearing deposit balances.

•Total Provision for Loan and Lease Losses: Declined 4.6% or $0.7 million to $14.7 million. Provision for originated loans declined $2.1 million as most of the incremental commercial, consumer and auto charge-offs were previously reserved. This decrease more than offset the increase of $1.4 million for acquired loans.

•Net Interest Margin: Increased 2 basis points to 5.24% mainly due to higher yield on originated commercial loans, cash balances and investment securities, partially offset by higher rate on borrowings.

•Total Banking and Wealth Management Revenues: Increased $0.2 million to $18.4 million from 1Q18’s high level. Banking Services rose $0.7 million, primarily due to increased electronic banking activity, and Wealth Management increased $0.2 million, offsetting a decline in Mortgage Banking.

•Total Non-Interest Expenses: Declined $0.2 million to $52.3 million. General and administrative increased due to higher electronic banking activity. Occupancy increased due to lease cancellations to bring more of our offices into the Oriental Center building and reduce occupancy costs next year. Compensation declined due to seasonal factors during the first quarter, and credit related expenses fell.

•Effective Tax Rate: 32.8% continued to be in line with the approximately 32% rate the Company estimates for the full year.

Balance Sheet Highlights

Unless otherwise noted, the following compares data at June 30, 2018 to March 31, 2018.

•Total Loans Net: Increased 4.4% or $182.4 million to $4.32 billion. Production highlights include:

•Auto lending at a record $131.1 million was up 2.3% from 1Q18 and 66.8% year over year, reflecting replacement of damaged vehicles, pent up demand, and the market’s effort to adjust to one less auto lender.

•Consumer lending increased 12.8% to $42.3 million as customers moved to replace needed items, repair homes and prepare for the 2018 hurricane season.

•Mortgage lending continued to come back with production up 19.4% to $31.8 million, but down 30.7% from the year ago quarter.

•Commercial lending rebound with production increasing 197.3% to $127.2 million and up 70.0% year over year, as the Company’s bankers continue to build relationships with businesses participating in Puerto Rico’s recovery.

•The recently established OFG USA program continued to grow, adding $99.7 million, up 34.0% from 1Q18, in commercial and industrial related loan participations across an array of industries and geographies in the continental U.S.

•Cash and cash equivalents: Increased 3.6% or $13.0 million to $378.4 million.

•Total Investments: Increased 4.2% or $54.5 million to $1.35 billion with the purchase of new mortgage backed securities to take advantage of favorable market opportunities.

•Customer Deposits (excluding brokered): Increased $59.9 million to $4.42 billion, up 1.4% and 10.1% from March 31, 2018 and June 30, 2017, respectively. Growth in demand and time deposits more than offset a decline in savings.

•Total Borrowings: Increased $197.9 million to $552.3 million as OFG used repurchase agreement funding and FHLB advances to acquire investment securities.

•Total Stockholders’ Equity: Increased $11.0 million to $957.8 million, with increases in retained earnings and legal surplus more than offsetting the increase of accumulated other comprehensive loss due to the effect of higher prevailing market interest rates.

Credit Quality Highlights

Unless otherwise noted, the following compares data on the originated loan portfolio at June 30, 2018 to March 31, 2018.

Following hurricanes Irma and Maria, Oriental offered automatic payment deferrals and 90-day extensions for most loans. Virtually all of these moratoriums ended early 2Q18 with most credit metrics better than, or returned to, pre-hurricanes levels.

•Delinquency Rates: The early delinquency rate declined 13 basis points to 3.07% and the total delinquency rate declined 30 basis points to 5.95% as both metrics fell below pre-hurricanes levels.

•Non-Performing Loan Rate: Declined 19 basis points to 3.63%, with the mortgage and consumer rates up and commercial and auto rates down.

•Allowance for Loan and Lease Losses: Decreased 2.7% or $2.6 million to $94.2 million, primarily reflecting the charge-off a commercial loan placed in non-accrual and provisioned for in 1Q18.

•Net Charge-Off Rate: Increased 47 basis points to 1.81%, with a 116 bps increase in auto and smaller increases in consumer, commercial and mortgage lending, as hurricane related charge-offs were taken.

Capital Position

Capital for the quarter ended June 30, 2018 was significantly above regulatory requirements for a well-capitalized institution, with Tangible Common Equity Ratio at

10.95%, Tangible Book Value per common share at $15.96, Common Equity Tier 1 Capital Ratio at 14.14%, and Total Risk-Based Capital Ratio at 19.67%.

Conference Call

A conference call to discuss OFG’s results for 2Q18, outlook and related matters will be held today, Friday, July 20, 2018, 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, 2018, 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) the credit default by the government of Puerto Rico; (iv) amendments to the fiscal plan approved by the Financial Oversight and Management Board of Puerto Rico; (v) determinations in the court-supervised debt-restructuring process under Title III of PROMESA for the Puerto Rico government and all of its agencies, including some of its public corporations; (vi) the impact of property, credit and other losses in Puerto Rico as a result of hurricanes Irma and Maria; (vii) the amount of government, private and philanthropic financial assistance for the reconstruction of Puerto Rico’s critical infrastructure, which suffered catastrophic damages caused by hurricane Maria; (viii) the pace and magnitude of Puerto Rico’s economic recovery; (ix) the potential impact of damages from future hurricanes and natural disasters in Puerto Rico; (x) the fiscal and monetary policies of the federal government and its agencies; (xi) changes in federal bank regulatory and supervisory policies, including required levels of capital; (xii) the relative

strength or weakness of the commercial and consumer credit sectors and the real estate market in Puerto Rico; (xiii) the performance of the stock and bond markets; (xiv) competition in the financial services industry; and (xv) 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, 2017, 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 54^th 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. 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, 2018 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
		2018		2018		2017			2017			2017			2018		2017
(Dollars in thousands, except per share data) (unaudited)		Q2		Q1		Q4			Q3			Q2			YTD		YTD
Earnings
Net interest income		$	77,588	$	73,994	$	73,513		$	80,478		$	75,563		$	151,582	$	150,181
Non-interest income, net (core)	(2)		18,394		18,239		16,734			17,213			17,933			36,633		35,361
Non-interest expense			52,300		52,121		46,662			50,469			52,816			104,421		104,500
Pre-provision net revenues	(21)		43,991		40,387		43,666			47,921			47,633			84,378		89,641
Provision for loan and lease losses			14,747		15,460		24,907	(a)		44,042	(a)		26,536	(b)		30,207		44,190	(a)(b)
Net income before income taxes			29,244		24,927		18,759			3,879			21,097			54,171		45,451
Income tax expense			9,595		8,010		1,686			560			3,993			17,605		13,197
Net income		$	19,649	$	16,917	$	17,073	(a)	$	3,319	(a)	$	17,104		$	36,566	$	32,254
Common Share Statistics
Earnings per common share - basic	(3)	$	0.36	$	0.31	$	0.31	(a)	$	-	(a)	$	0.30		$	0.67	$	0.58
Earnings per common share - diluted	(4)	$	0.35	$	0.30	$	0.30	(a)	$	-	(a)	$	0.30		$	0.65	$	0.57
Average common shares outstanding			43,975		43,955		43,947			43,947			43,947			43,965		43,931
Average common shares outstanding and equivalents			51,226		51,121		51,104			51,102			51,100			51,157		51,093
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)		$	18.01	$	17.76	$	17.73		$	17.56		$	17.59		$	18.01	$	17.59
Tangible book value per common share (period end)	(5)	$	15.96	$	15.71	$	15.67		$	15.49		$	15.51		$	15.96	$	15.51
Balance Sheet (Average Balances)
Loans	(6)	$	4,310,206	$	4,183,775	$	4,081,427		$	4,062,042		$	4,129,550		$	4,246,991	$	4,132,494
Interest-earning assets			5,933,775		5,751,783		5,735,593			5,658,953			5,848,525			5,842,932		5,887,428
Total assets			6,374,240		6,189,752		6,191,737			6,046,139			6,278,464			6,282,505		6,326,056
Interest-bearing deposits			3,766,311		3,756,607		3,835,357			3,774,378			3,844,490			3,761,486		3,847,481
Borrowings			462,614		351,793		374,059			462,035			614,332			407,509		664,861
Stockholders' equity			959,777		952,151		943,823			947,404			938,707			956,264		932,388
Common stockholders' equity			793,907		786,281		777,953			781,534			772,837			790,394		766,518
Performance Metrics
Net interest margin	(7)		5.24%		5.22%		5.08%			5.64%			5.18%			5.23%		5.14%
Return on average assets	(8)		1.23%		1.09%		1.10%			0.22%	(a)		1.09%			1.16%		1.02%
Return on average tangible common stockholders' equity	(9)		9.20%		7.73%		7.92%			-0.08%			8.01%			8.47%		7.51%
Efficiency ratio	(10)		54.49%		56.51%		51.70%			51.66%			56.49%			55.48%		56.32%
Full-time equivalent employees, period end			1,354		1,367		1,421			1,464			1,472			1,354		1,472
Credit Quality Metrics
Excluding acquired loans:	(1)
Allowance for loan and lease losses		$	94,218	$	96,832	$	92,718	(a)	$	87,541	(a)	$	69,666	(b)	$	94,218	$	69,666	(a)(b)
Allowance as a % of loans held for investment			2.66%		2.92%		2.89%	(a)		2.83%	(a)		2.25%			2.66%		2.25%
Net charge-offs		$	15,449	$	10,844	$	10,466		$	11,815		$	13,635	(b)(c)	$	26,293	$	24,185	(b)
Net charge-off rate	(11)		1.81%		1.34%		1.35%			1.54%			1.79%	(b)(c)		1.58%		1.59%	(b)
Early delinquency rate (30 - 89 days past due)			3.07%		3.20%		1.82%	(d)		3.79%			3.52%			3.07%		3.52%
Total delinquency rate (30 days and over)			5.95%		6.25%		4.61%	(d)		6.84%			6.31%			5.95%		6.31%
Capital Ratios (Non-GAAP)	(12)
Leverage ratio			13.92%		14.07%		13.92%			14.07%			13.69%			13.92%		13.69%
Common equity Tier 1 capital ratio			14.14%		14.52%		14.59%			14.89%			14.66%			14.14%		14.66%
Tier 1 risk-based capital ratio			18.38%		19.00%		19.05%			19.53%			19.14%			18.38%		19.14%
Total risk-based capital ratio			19.66%		20.29%		20.34%			20.82%			20.42%			19.66%		20.42%
Tangible common equity ("TCE") ratio			10.95%		11.22%		11.29%			10.98%			11.09%			10.95%		11.09%
(a) During the Q3 and Q4 2017, earnings were impacted by Hurricanes Irma and Maria, which struck the island on September 7, 2017 and September 20, 2017, respectively. Based on our assessment of the facts we have increased our provision for the allowance of loan losses in the 3Q 2017 and 4Q 2017 by $27 million and $5.4 million, respectively, related to these hurricanes.
(b) 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 second quarter. Proceeds were received on July 5, 2017. An allowance of $5.9 million was created during the second quarter for the remaining portfolio of municipal loans.
(c) During Q2 2017 , the Company had additional recoveries in auto and consumer loans of $1.1 million and $612 thousand, respectively.
(d) After Hurricane Irma and Maria on September 7, 2017 and September 20, 2017, respectively, the Company offered an automatic three-month moratorium for the payment of principal and interest for certain loans. During Q4 2017, the Company received payments on loans in moratorium, causing a decrease in delinquency.
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)		2018		2018		2017			2017			2017			2018		2017
Interest income:
Loans	(1)
Non-acquired loans		$	61,183	$	56,781	$	56,183		$	58,939	(f)	$	53,449		$	117,964	$	105,404
Acquired BBVAPR loans			13,880		14,490		15,310			19,189	(e)		17,752			28,370		36,837
Acquired Eurobank loans			3,366		3,341		3,573			4,339			6,037			6,707		12,647
Total interest income from loans			78,429		74,612		75,066			82,467			77,238			153,041		154,888
Investment securities			9,577		8,558		8,108			7,888			8,702			18,135		17,230
Total interest income			88,006		83,170		83,174			90,355			85,940			171,176		172,118
Interest expense:
Deposits
Core deposits			5,517		5,412		5,613			5,438			5,568			10,929		11,036
Brokered deposits			2,134		1,886		2,079			2,163			2,084			4,020		3,969
Total deposits			7,651		7,298		7,692			7,601			7,652			14,949		15,005
Borrowings			2,767		1,878		1,969			2,276			2,725	(h)		4,645		6,932
Total interest expense			10,418		9,176		9,661			9,877			10,377			19,594		21,937
Net interest income			77,588		73,994		73,513			80,478			75,563			151,582		150,181
Provision for loan and lease losses, excluding acquired loans	(1)		12,835		14,958		15,643	(d)		29,690	(d)		22,818	(g)		27,793		34,553
Provision for acquired BBVAPR loan and lease losses	(1)		1,247		363		7,112	(d)		11,811	(d)		3,306			1,610		7,605
Provision (recapture) for acquired Eurobank loan and lease losses	(1)		665		139		2,152	(d)		2,541	(d)		412			804		2,032
Total provision for loan and lease losses, net			14,747		15,460		24,907	(d)		44,042	(d)		26,536			30,207		44,190
Net interest income after provision for loan and lease losses			62,841		58,534		48,606			36,436			49,027			121,375		105,991
Non-interest income:
Banking service revenues			11,144		10,463		8,461	(a)		9,923	(f)		10,458			21,607		21,084
Wealth management revenues			6,262		6,019		7,043			6,016			6,516			12,281		12,731
Mortgage banking activities			988		1,757		1,230			1,274			959			2,745		1,546
Total banking and financial service revenues			18,394		18,239		16,734			17,213			17,933			36,633		35,361
FDIC shared-loss benefit (expense), net			-		-		-			-			-			-		1,403	(j)
Other gains, net			309		275		81			699	(j)		6,953	(h)		584		7,196
Total non-interest income, net			18,703		18,514		16,815			17,912			24,886			37,217		43,960
Non-interest expense:
Compensation and employee benefits			18,099		20,608		20,205			19,882			19,317			38,707		39,664
Rent and occupancy costs			9,166		7,768		8,546			8,276			8,537			16,934		15,736
Net loss on sale of foreclosed real estate and other repossessed assets			392		1,226		126	(b)		1,395			1,787			1,618		3,113
General and administrative expenses			22,746		20,100		16,350	(a)(c)		19,202			20,958			42,846		41,144
Total operating expenses			50,403		49,702		45,227			48,755			50,599			100,105		99,657
Credit related expenses			1,897		2,419		1,435			1,714			2,217			4,316		4,843
Total non-interest expense			52,300		52,121		46,662			50,469			52,816			104,421		104,500
Income before income taxes			29,244		24,927		18,759			3,879			21,097			54,171		45,451
Income tax expense			9,595		8,010		1,686			560			3,993	(i)		17,605		13,197
Net income			19,649		16,917		17,073			3,319	(d)		17,104			36,566		32,254
Less:  dividends on preferred stock
Convertible preferred stock			(1,837)		(1,838)		(1,838)			(1,838)			(1,837)			(3,675)		(3,675)
Other preferred stock			(1,628)		(1,627)		(1,627)			(1,627)			(1,629)			(3,255)		(3,256)
Net income (loss) available to common shareholders		$	16,184	$	13,452	$	13,608		$	(146)		$	13,638		$	29,636	$	25,323
(a) During the 4Q 2017, electronic banking fee income and  electronic banking expenses decreased $0.9 million and $1.0 million, respectively, from the prior quarter as a result of lower point of sale (POS) activity from our customers. The decrease is directly related to business interruption in several of our commercial clients from the lack of electricity.
(b) During the 4Q 2017, the Company generated higher gains in sale of foreclosed real estate by approximately $0.7 million and had lower write downs by approximately $0.6 million.
(c) During the 4Q 2017, the Company reversed $1.4 million expenses as a result of the settlement of regulatory and legal contingencies at a lower amount than estimated.
(d) During the Q3 and Q4 2017, earnings were impacted by Hurricanes Irma and Maria, which struck the island on September 7, 2017 and September 20, 2017, respectively. Based on our assessment of the facts we have increased our provision for the allowance of loan losses in the 3Q 2017 and 4Q 2017 by $27 million and $5.4 million, respectively, related to these hurricanes.																			+
(e) During Q3 2017, the Company recognized $3.1 million in cost recoveries from the Puerto Rico Housing Finance Authority ("PRHFA") loan with an outstanding principal balance of $10.9 million.
(f) During Q3 2017, the Company received $22.4 million from the pay-off before maturity of a loan previously classified as non-accrual. As a result, the Company recorded $4.1 million in interest income and $439 thousand in prepayment penalty income, included in banking service revenues.
(g) 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 second quarter. Proceeds were received on July 5, 2017. An allowance of $5.9 million was created during the second quarter for the remaining portfolio of municipal loans.
(h) 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.
(i) 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.
(j) During Q3 2017, the Company received $571 thousand, as final settlement 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)	2018			2018			2017			2017			2017
Cash and cash equivalents	$	378,365		$	365,388		$	488,233		$	723,756	(e)	$	480,338
Investments:
Trading securities		418			293			191			284			294
Investment securities available-for-sale, at fair value, with amortized cost of $890,308
(March 31, 2018 - $815,970; December 31, 2017 - $648,799; September 30, 2017 - $611,936;
June 30, 2017 - $649,280)
Mortgage-backed securities		855,686			784,972			629,124			596,222			584,930	(h)
Other investment securities		16,655			16,669			16,673			17,201	(f)		64,397
Total investment securities available-for-sale		872,341			801,641			645,797			613,423			649,327
Mortgage-backed securities held-to-maturity, at amortized cost, with fair value of $447,947
(March 31, 2018 - $467,980; December 31, 2017 - $497,681; September 30, 2017 - $525,830;
June 30, 2017 - $549,595)		465,427			485,143			506,064			530,178			555,407
Federal Home Loan Bank (FHLB) stock, at cost		14,919			11,499			13,995			14,016			16,616
Other investments		3			3			3			3			3
Total investments		1,353,108			1,298,579			1,166,050			1,157,904			1,221,647
Loans, net		4,315,866			4,133,429			4,056,329			3,964,572			4,091,866
Other assets:
Derivative assets		1,100			898			771			809			957
Prepaid expenses		11,127			7,625			9,734			13,070			17,117
Deferred tax asset, net		125,141			128,270			127,421			126,041			116,199
Foreclosed real estate and repossessed properties		46,035			45,396			47,721			51,104			53,448
Premises and equipment, net		66,174			67,163			67,860			67,994			69,836
Goodwill		86,069			86,069			86,069			86,069			86,069
Accounts receivable and other assets		118,577			114,304			138,865	(d)		96,898			98,349
Total assets	$	6,501,562		$	6,247,121		$	6,189,053		$	6,288,217		$	6,235,826
Deposits:
Demand deposits	$	2,176,935		$	2,117,857		$	2,039,126		$	1,925,721		$	1,844,996
Savings accounts		1,219,159			1,228,646			1,204,514			1,311,515			1,115,669
Time deposits		1,022,682			1,012,329			1,037,310			1,053,568			1,053,110
Brokered deposits		461,425			474,596			518,532			535,600			568,911
Total deposits		4,880,201			4,833,428			4,799,482			4,826,404			4,582,686
Borrowings:
Securities sold under agreements to repurchase		387,770	(b)		273,926	(b)		192,869	(c)		283,080	(g)		453,492
Advances from FHLB and other borrowings		128,413	(a)		44,328			99,796			100,091			137,717
Subordinated capital notes		36,083			36,083			36,083			36,083			36,083
Total borrowings		552,266			354,337			328,748			419,254			627,292
Other liabilities:
Derivative liabilities		679			752			1,281			1,677			1,881
Acceptances outstanding		30,578			25,869			27,644			16,486			22,739
Accrued expenses and other liabilities		80,019			85,886			86,791			86,766			62,259
Total liabilities		5,543,743			5,300,272			5,243,946			5,350,587			5,296,857
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		541,734			541,404			541,600			541,302			541,005
Legal surplus		85,249			83,138			81,454			79,795			79,460
Retained earnings		221,441			210,008			200,878			191,567			194,687
Treasury stock, at cost		(103,969)			(104,142)			(104,502)			(104,502)			(104,502)
Accumulated other comprehensive (loss) income, net		(15,262)			(12,185)			(2,949)			842			(307)
Total stockholders' equity		957,819			946,849			945,107			937,630			938,969
Total liabilities and stockholders' equity	$	6,501,562		$	6,247,121		$	6,189,053		$	6,288,217		$	6,235,826
(a) During Q2 2018, the Company received from the Federal Home Loan Bank of New York $70 million of advances to attend liquidity.
(b) During Q2 2018 and Q1 2018, the Company bought $197 million and $91 million, respectively,  of repurchase agreements to finance the investment securities purchases.
(c) During Q4 2017, the Company made an unwinding of $80 million repurchase agreements at no cost.
(d) At December 31, 2017, the Company had higher balances in accounts receivable and other assets mainly from accrued interest receivable of loans included in hurricane Maria moratorium program.
(e) At September 30, 2017, the Company had higher balances in cash and cash equivalents due to increased deposits and lower transaction outflows toward the end of the quarter from commercial customers.
(f) During Q3 2017, the Company sold $45.0 million US Treasury securities available for sale and recorded a gain of $4 thousand.
(g) During Q3 2017, $160.4 million in short-term repurchase agreements matured and were not renewed.
(h) 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.
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)		2018		2018		2017			2017			2017
Non-acquired loans held for investment:
Mortgage		$	678,259	$	682,564	$	683,607		$	694,476		$	699,290
Commercial			1,507,368		1,346,404		1,307,261			1,245,711			1,270,844	(b)
Consumer			339,341		334,865		330,039			316,357			314,267
Auto			1,014,664		957,197		883,985			831,437			807,204
			3,539,632		3,321,030		3,204,892			3,087,981			3,091,605
Less:  Allowance for loan and lease losses			(94,218)		(96,832)		(92,718)	(a)		(87,541)	(a)		(69,666)	(b)
			3,445,414		3,224,198		3,112,174			3,000,440			3,021,939
Deferred loan costs, net			7,028		7,125		6,695			6,592			6,574
Total non-acquired loans held for investment, net			3,452,442		3,231,323		3,118,869			3,007,032			3,028,513
Acquired loans:	(1)
BBVAPR
Accounted for under ASC 310-20
Commercial			2,909		4,222		4,380			4,612			5,350
Consumer			25,736		27,235		28,915			29,464			30,233
Auto			11,283		16,171		21,969			26,562			33,661
			39,928		47,628		55,264			60,638			69,244
Less:  Allowance for loan and lease losses			(2,726)		(3,184)		(3,862)	(a)		(3,363)	(a)		(3,348)
			37,202		44,444		51,402			57,275			65,896
Accounted for under ASC 310-30
Mortgage			516,934		526,089		532,053			532,948			544,325
Commercial			223,853		230,988		243,092			244,359			266,002
Consumer			495		932		1,431			1,598			2,163
Auto			26,937		35,006		43,696			49,258			58,078
			768,219		793,015		820,272			828,163			870,568
Less:  Allowance for loan and lease losses			(44,176)		(43,166)		(45,755)	(a)		(40,110)	(a)		(37,494)
			724,043		749,849		774,517			788,053			833,074
Total Acquired BBVAPR loans, net			761,245		794,293		825,919			845,328			898,970
Eurobank
Accounted for under ASC 310-30
Mortgage			65,637		69,328		69,538			68,996			70,329
Commercial			49,706		52,418		53,793			53,028			66,894
Consumer			935		972		1,112			1,220			1,256
			116,278		122,718		124,443			123,244			138,479
Less:  Allowance for loan and lease losses			(24,314)		(25,410)		(25,174)	(a)		(23,146)	(a)		(21,787)
Total Acquired Eurobank loans, net			91,964		97,308		99,269			100,098			116,692
Total acquired loans, net			853,209		891,601		925,188			945,426			1,015,662
Total loans held for investment			4,305,651		4,122,924		4,044,057			3,952,458			4,044,175
Mortgage loans held for sale			10,215		10,505		12,272			12,114			14,044
Other loans held for sale			-		-		-			-			33,647	(b)
Total loans, net		$	4,315,866	$	4,133,429	$	4,056,329		$	3,964,572		$	4,091,866
Loan Portfolio Summary:
Loans held for investment:
Mortgage		$	1,260,830	$	1,277,981	$	1,285,198		$	1,296,420		$	1,313,944
Commercial			1,783,836		1,634,032		1,608,526			1,547,710			1,609,090	(b)
Consumer			366,507		364,004		361,497			348,639			347,919
Auto			1,052,884		1,008,374		949,650			907,257			898,943
			4,464,057		4,284,391		4,204,871			4,100,026			4,169,896
Less:  Allowance for loan and lease losses			(165,434)		(168,592)		(167,509)	(a)		(154,160)	(a)		(132,295)	(b)
			4,298,623		4,115,799		4,037,362			3,945,866			4,037,601
Deferred loan costs, net			7,028		7,125		6,695			6,592			6,574
Total loans held for investment, net			4,305,651		4,122,924		4,044,057			3,952,458			4,044,175
Mortgage loans held for sale			10,215		10,505		12,272			12,114			14,044
Other loans held for sale			-		-		-			-			33,647	(b)
Total loans, net		$	4,315,866	$	4,133,429	$	4,056,329		$	3,964,572		$	4,091,866
		2018		2018		2017			2017			2017
(Dollars in thousands) (unaudited)		Q2		Q1		Q4			Q3			Q2
Quarterly loan production	(13)
Mortgage		$	31,808	$	26,645	$	15,892		$	32,559		$	45,877
Commercial			127,200		42,783		102,083			46,180			74,807
Commercial US Loan Programs			99,666		74,361		25,070			-			5,560
Consumer			42,317		37,502		23,059			33,741			49,652
Auto			131,103		128,130		87,551			78,313			78,584
Total		$	432,094	$	309,421	$	253,655		$	190,793		$	254,480
(a) During the Q3 and Q4 2017, earnings were impacted by Hurricanes Irma and Maria, which struck the island on September 7, 2017 and September 20, 2017, respectively. Based on our assessment of the facts we have increased our provision for the allowance of loan losses in the 3Q 2017 and 4Q 2017 by $27 million and $5.4 million, respectively, related to these hurricanes.
(b) 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 second quarter. Proceeds were received on July 5, 2017. An allowance of $5.9 million was created during the second quarter for the remaining portfolio of municipal loans.
5

OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin
	2018 Q2						2018 Q1						2017 Q4						2017 Q3						2017 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	$	293,431	$	1,242	1.70	%	$	328,214	$	1,207	1.49	%	$	493,354	$	1,516	1.22	%	$	426,197	$	1,304	1.21	%	$	384,037	$	956	1.00	%
Investment securities		1,330,138		8,335	2.51	%		1,239,794		7,350	2.40	%		1,160,812		6,593	2.25	%		1,170,714		6,584	2.23	%		1,334,938		7,746	2.33	%
Loans
Non-acquired loans		3,410,044		61,183	7.20	%		3,244,593		56,782	7.10	%		3,111,849		56,183	7.16	%		3,062,739		58,939	7.63	%		3,051,549		53,449	7.03	%
Acquired BBVAPR loans		806,830		13,880	6.90	%		841,638		14,490	6.98	%		869,269		15,310	6.99	%		893,596		19,189	8.52	%		949,479		17,752	7.50	%
Acquired Eurobank loans		93,332		3,366	14.47	%		97,544		3,341	13.89	%		100,310		3,573	14.13	%		105,707		4,339	16.29	%		128,522		6,037	18.84	%
Total loans		4,310,206		78,429	7.30	%		4,183,775		74,613	7.23	%		4,081,427		75,066	7.30	%		4,062,042		82,467	8.05	%		4,129,550		77,238	7.50	%
Total interest-earning assets	$	5,933,775	$	88,006	5.95	%	$	5,751,783	$	83,170	5.86	%	$	5,735,593	$	83,175	5.75	%	$	5,658,953	$	90,355	6.33	%	$	5,848,525	$	85,940	5.89	%
Interest bearing liabilities:
Deposits
NOW accounts	$	1,052,465	$	966	0.37	%	$	1,059,129	$	898	0.34	%	$	1,040,153	$	922	0.35	%	$	1,024,480	$	880	0.34	%	$	1,080,135	$	1,051	0.39	%
Savings accounts		1,230,741		1,555	0.51	%		1,206,100		1,497	0.50	%		1,224,815		1,530	0.50	%		1,142,338		1,426	0.50	%		1,151,650		1,485	0.52	%
Time deposits		1,012,330		2,781	1.10	%		1,024,740		2,802	1.11	%		1,046,191		2,932	1.11	%		1,052,910		2,902	1.09	%		1,037,063		2,802	1.08	%
Brokered deposits		470,775		2,134	1.82	%		466,638		1,886	1.64	%		524,198		2,079	1.57	%		554,650		2,163	1.55	%		575,642		2,084	1.45	%
		3,766,311		7,436	0.79	%		3,756,607		7,083	0.76	%		3,835,357		7,463	0.77	%		3,774,378		7,371	0.77	%		3,844,490		7,422	0.77	%
Non-interest bearing deposit accounts		1,082,145		-	-			1,018,789		-	-			937,328		-	-			835,255		-	-			835,026		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		215	-			-		215	-			-		230	-			-		231	-			-		230	-
Total deposits		4,848,456		7,651	0.63	%		4,775,396		7,298	0.62	%		4,772,685		7,693	0.64	%		4,609,633		7,602	0.65	%		4,679,516		7,652	0.66	%
Borrowings
Securities sold under agreements to repurchase		353,313		1,843	2.09	%		251,582		1,076	1.73	%		236,522		963	1.62	%		325,201		1,281	1.56	%		472,338		1,734	1.47	%
Advances from FHLB and other borrowings		73,218		448	2.45	%		64,128		374	2.37	%		101,454		600	2.35	%		100,751		596	2.35	2		105,911		607	2.30	%
Subordinated capital notes		36,083		476	5.29	%		36,083		428	4.81	%		36,083		406	4.46	%		36,083		398	4.38	%		36,083		384	4.27	%
Total borrowings		462,614		2,767	2.40	%		351,793		1,878	2.17	%		374,059		1,969	2.09	%		462,035		2,275	1.95	%		614,332		2,725	1.78	%
Total interest-bearing liabilities	$	5,311,070	$	10,418	0.79	%	$	5,127,189	$	9,176	0.73	%	$	5,146,744	$	9,662	0.74	%	$	5,071,668	$	9,877	0.77	%	$	5,293,848	$	10,377	0.79	%
Interest rate spread			$	77,588	5.16	%			$	73,994	5.13	%			$	73,513	5.01	%			$	80,478	5.56	%			$	75,563	5.10	%
Net interest margin					5.24	%					5.22	%					5.08	%					5.64	%					5.18	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	291					$	119					$	199					$	3,220					$	300
Acquired Eurobank loans				533						389						526						523						615
			$	824					$	508					$	725					$	3,743					$	915
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	5,933,775	$	87,182	5.89	%	$	5,751,783	$	82,662	5.83	%	$	5,735,593	$	82,450	5.70	%	$	5,658,953	$	86,612	6.07	%	$	5,848,525	$	85,025	5.83	%
Interest rate spread			$	76,764	5.10	%			$	73,486	5.10	%			$	72,788	4.96	%			$	76,735	5.30	%			$	74,648	5.04	%
Net interest margin					5.19	%					5.18	%					5.03	%					5.38	%					5.12	%
6

OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin (Continued)
	2018 YTD						2017 YTD
			Interest						Interest
	Average		Income/		Yield/		Average		Income/		Yield/
(Dollars in thousands) (unaudited)	Balance		Expense		Rate		Balance		Expense		Rate
Interest earning assets:
Cash equivalents	$	310,726	$	2,449	1.59	%	$	407,442	$	1,801	0.89	%
Investment securities		1,285,215		15,686	2.46	%		1,347,492		15,429	2.31	%
Loans
Non-acquired loans		3,327,318		117,964	7.15	%		3,033,503		105,404	7.01	%
Acquired BBVAPR loans		824,235		28,369	6.94	%		973,566		36,837	7.63	%
Acquired Eurobank loans		95,438		6,708	14.17	%		125,425		12,647	20.33	%
Total loans		4,246,991		153,041	7.27	%		4,132,494		154,888	7.56	%
Total interest-earning assets	$	5,842,932	$	171,176	5.91	%	$	5,887,428	$	172,118	5.90	%
Interest bearing liabilities:
Deposits
NOW accounts	$	1,055,779	$	1,864	0.36	%	$	1,086,228	$	2,092	0.39	%
Savings accounts		1,218,488		3,052	0.51	%		1,157,811		2,966	0.52	%
Time deposits		1,018,501		5,583	1.11	%		1,028,344		5,518	1.08	%
Brokered deposits		468,718		4,020	1.73	%		575,098		3,969	1.39	%
		3,761,486		14,519	0.78	%		3,847,481		14,545	0.76	%
Non-interest bearing deposit accounts		1,050,642		-	-			833,852		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		430	-			-		460	-
Total deposits		4,812,128		14,949	0.63	%		4,681,333		15,005	0.65	%
Borrowings
Securities sold under agreements to repurchase		302,728		2,919	1.94	%		523,272		4,979	1.92	%
Advances from FHLB and other borrowings		68,698		822	2.41	%		105,506		1,202	2.30	%
Subordinated capital notes		36,083		904	5.05	%		36,083		751	4.20	%
Total borrowings		407,509		4,645	2.30	%		664,861		6,932	2.10	%
Total interest-bearing liabilities	$	5,219,637	$	19,594	0.76	%	$	5,346,194	$	21,937	0.83	%
Interest rate spread			$	151,582	5.15	%			$	150,181	5.07	%
Net interest margin					5.23	%					5.14	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	410						545
Acquired Eurobank loans				922						1,670
			$	1,332					$	2,215
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	5,842,932	$	169,844	5.86	%	$	5,887,428	$	169,903	5.82	%
Interest rate spread			$	150,250	5.10	%			$	147,966	4.99	%
Net interest margin					5.19	%					5.07	%
7

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (1)
	2018		2018		2017		2017		2017
(Dollars in thousands) (unaudited)	Q2		Q1		Q4		Q3		Q2
Net Charge-offs
Mortgage:
Charge-offs	$	1,328	$	968	$	1,248	$	834	$	2,162
Recoveries		(466)		(314)		(126)		(341)		(63)
Total mortgage		862		654		1,122		493		2,099
Commercial:
Charge-offs		1,998		1,149		1,260		727		4,841	(a)
Recoveries		(227)		(182)		(401)		(654)		(136)
Total commercial		1,771		967		859		73		4,705
Consumer:
Charge-offs		4,588		4,258		1,849		4,424		4,012
Recoveries		(240)		(240)		(96)		(168)		(780)	(b)
Total consumer		4,348		4,018		1,753		4,256		3,232
Auto and Leasing:
Charge-offs		13,748		8,982		9,182		9,387		7,775
Recoveries		(5,280)		(3,777)		(2,450)		(2,394)		(4,176)	(b)
Total auto and leasing		8,468		5,205		6,732		6,993		3,599
Total	$	15,449	$	10,844	$	10,466	$	11,815	$	13,635
Net Charge-off Rates
Mortgage		0.51%		0.38%		0.65%		0.28%		1.20%
Commercial		0.50%		0.30%		0.27%		0.02%		1.50%	(a)
Consumer		5.42%		5.07%		2.30%		5.65%		4.42%	(b)
Auto and Leasing		3.39%		2.23%		3.13%		3.37%		1.79%	(b)
Total		1.81%		1.34%		1.35%		1.54%		1.79%
Average Loans Held For Investment
Mortgage	$	679,133	$	683,398	$	688,312	$	692,782	$	698,782
Commercial		1,411,177		1,310,444		1,257,619		1,239,390		1,256,827
Consumer		320,687		317,295		304,760		301,121		292,739
Auto and Leasing		999,047		933,456		861,158		829,446		803,201
Total	$	3,410,044	$	3,244,593	$	3,111,849	$	3,062,739	$	3,051,549
(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 second quarter. Proceeds were received on July 5, 2017. An allowance of $5.9 million was created during the second 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.
8

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (Continued) (1)
		2018			2018			2017			2017			2017
(Dollars in thousands) (unaudited)		Q2			Q1			Q4			Q3			Q2
Early Delinquency (30 - 89 days past due)
Mortgage		$	26,132		$	29,190		$	17,315		$	35,273		$	32,292
Commercial			9,699			8,126			2,620			2,727			4,648
Consumer			7,063			7,478			6,149			7,504			5,495
Auto and Leasing			65,823			61,558			32,159			71,606			66,372
Total		$	108,717	(a)	$	106,352	(a)	$	58,243	(a)	$	117,110	(a)	$	108,807
Early Delinquency Rates (30 - 89 days past due)
Mortgage			3.85%			4.28%			2.53%			5.08%			4.62%
Commercial			0.64%			0.60%			0.20%			0.22%			0.37%
Consumer			2.08%			2.23%			1.86%			2.37%			1.75%
Auto and Leasing			6.49%			6.43%			3.64%			8.61%			8.22%
Total			3.07%			3.20%			1.82%	(a)		3.79%	(a)		3.52%
Total Delinquency (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation		$	83,707		$	89,252		$	76,542		$	88,936		$	85,908
GNMA's buy-back option program			14,521			12,515			8,268			12,999			9,229
Total mortgage			98,228			101,767			84,810			101,935			95,137
Commercial			26,269			21,544			18,509			18,149			18,154
Consumer			9,095			9,129			8,028			8,847			7,275
Auto and Leasing			76,924			75,152			36,391			82,437			74,577
Total		$	210,516		$	207,592		$	147,738	(a)	$	211,368	(a)	$	195,143
Total Delinquency Rates (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation			12.34%			13.08%			11.20%			12.81%			12.29%
GNMA's buy-back option program			2.14%			1.83%			1.21%			1.87%			1.32%
Total mortgage			14.48%			14.91%			12.41%			14.68%			13.60%
Commercial			1.74%			1.60%			1.42%			1.46%			1.43%
Consumer			2.68%			2.73%			2.43%			2.80%			2.31%
Auto and Leasing			7.58%			7.85%			4.12%			9.92%			9.24%
Total			5.95%			6.25%			4.61%	(a)		6.84%	(a)		6.31%
Nonperforming Assets	(14)
Mortgage		$	67,002		$	63,866		$	64,085		$	59,667		$	63,071
Commercial			47,451			47,044			35,253			21,701			23,519
Consumer			2,826			2,263			2,572			2,445			2,687
Auto and Leasing			11,141			13,594			4,232			11,811			8,295
Total nonperforming loans			128,420			126,767			106,142			95,624	(a)		97,572
Foreclosed real estate			12,186			13,365			14,282			14,677			15,320
Other repossessed assets			5,483			5,082			3,172			3,635			2,921
Total nonperforming assets		$	146,089		$	145,214		$	123,596		$	113,936		$	115,813
Nonperforming Loan Rates
Mortgage			9.88%			9.36%			9.37%			8.59%			9.02%
Commercial			3.15%			3.49%			2.70%			1.74%			1.85%
Consumer			0.83%			0.68%			0.78%			0.77%			0.86%
Auto and Leasing			1.10%			1.42%			0.48%			1.42%			1.03%
Total loans			3.63%			3.82%			3.31%			3.10%	(a)		3.16%
(a) After Hurricane Irma and Maria on September 7, 2017 and September 20, 2017, respectively, the Company offered an automatic three-month moratorium for the payment of principal and interest for certain loans. During Q4 2017, the Company received payments on loans in moratorium, causing a decrease in delinquency.
9

OFG Bancorp (NYSE: OFG)
Table 7: Allowance for Loan and Lease Losses
	Quarter Ended June 30, 2018
(Dollars in thousands) (unaudited)	Mortgage		Commercial		Consumer		Auto		Total
Non-acquired loans
Balance at beginning of period	$	18,983	$	33,174	$	18,023	$	26,652	$	96,832
(Recapture) provision for loan and lease losses, net		1,202		77		2,517		9,039		12,835
Charge-offs		(1,328)		(1,998)		(4,588)		(13,748)		(21,662)
Recoveries		466		227		240		5,280		6,213
Balance at end of period	$	19,323	$	31,480	$	16,192	$	27,223	$	94,218
Allowance coverage ratio		2.85%		2.09%		4.77%		2.68%		2.66%
Acquired loans
Acquired BBVAPR loans:
Acquired loans accounted for under ASC 310-20
Balance at beginning of period			$	37	$	2,659	$	488	$	3,184
(Recapture) provision for loan and lease losses, net				42		24		(361)		(295)
Charge-offs				(5)		(420)		(88)		(513)
Recoveries				12		94		244		350
Balance at end of period			$	86	$	2,357	$	283	$	2,726
Acquired loans accounted for under ASC 310-30
Balance at beginning of period	$	14,331	$	22,047	$	18	$	6,770	$	43,166
Provision (recapture) for loan and lease losses, net		236		1,306		-		-		1,542
Allowance de-recognition		-		(334)		-		(198)		(532)
Balance at end of period	$	14,567	$	23,019	$	18	$	6,572	$	44,176
Acquired Eurobank loans:
Balance at beginning of period	$	15,414	$	9,991	$	5	$	-	$	25,410
Provision (recapture) for loan and lease losses, net		605		60		-		-		665
Allowance de-recognition		(849)		(912)		-		-		(1,761)
Balance at end of period	$	15,170	$	9,139	$	5	$	-	$	24,314
Total acquired loans
Balance at beginning of period	$	29,745	$	32,075	$	2,682	$	7,258	$	71,760
Provision (recapture) for loan and lease losses, net		841		1,408		24		(361)		1,912
Charge-offs		-		(5)		(420)		(88)		(513)
Recoveries		-		12		94		244		350
Allowance de-recognition		(849)		(1,246)		-		(198)		(2,293)
Balance at end of period	$	29,737	$	32,244	$	2,380	$	6,855	$	71,216
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, 2018
(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	$	248,378	$	38,256	$	7,455	$	1,726	$	649	$	296,464
Accretion		(6,916)		(2,387)		(1,210)		(656)		(194)		(11,363)
Change in expected cash flows		-		2,755		20		400		73		3,248
Transfers (to) from non-accretable discount		2,439		(1,877)		(491)		(399)		(31)		(359)
Balance at end of period	$	243,901	$	36,747	$	5,774	$	1,071	$	497	$	287,990
Non-Accretable Discount
Balance at beginning of period	$	301,107	$	3,277	$	7,454	$	23,443	$	19,309	$	354,590
Change in actual and expected cash flows		(2,531)		(1,936)		(20)		(197)		(8)		(4,692)
Transfers from (to) accretable yield		(2,439)		1,877		491		399		31		359
Balance at end of period	$	296,137	$	3,218	$	7,925	$	23,645	$	19,332	$	350,257
					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	$	39,622	$	5,616	$	1,356	$	-	$	-	$	46,594
Accretion		(1,538)		(1,706)		-		(4)		(118)		(3,366)
Change in expected cash flows		(836)		1,832		-		(111)		236		1,121
Transfers (to) from non-accretable discount		2,021		(1,157)		(132)		115		(118)		729
Balance at end of period	$	39,269	$	4,585	$	1,224	$	-	$	-	$	45,078
Non-Accretable Discount
Balance at beginning of period	$	4,479	$	-	$	849	$	-	$	219	$	5,547
Change in actual and expected cash flows		180		(1,157)		-		115		(137)		(999)
Transfers from (to) accretable yield		(2,021)		1,157		132		(115)		118		(729)
Balance at end of period	$	2,638	$	-	$	981	$	-	$	200	$	3,819
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.
	2018		2018		2017		2017		2017
(Dollars in thousands) (unaudited)	Q2		Q1		Q4		Q3		Q2
Stockholders' Equity to Non-GAAP Tangible Common Equity
Total stockholders' equity	$	957,819	$	946,849	$	945,107	$	937,630	$	938,969
Less:  Intangible assets		(90,097)		(90,426)		(90,756)		(91,124)		(91,493)
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	$	701,852	$	690,553	$	688,481	$	680,636	$	681,606
Common stock outstanding at end of period		43,983		43,968		43,947		43,947		43,947
Tangible book value (Non-GAAP)	$	15.96	$	15.71	$	15.67	$	15.49	$	15.51
Total Assets to Tangible Assets
Total assets	$	6,501,562	$	6,247,121	$	6,189,053	$	6,288,217	$	6,235,826
Less:  Intangible assets		(90,097)		(90,426)		(90,756)		(91,124)		(91,493)
Tangible assets (Non-GAAP)	$	6,411,465	$	6,156,695	$	6,098,297	$	6,197,093	$	6,144,333
Non-GAAP TCE Ratio
Tangible common equity	$	701,852	$	690,553	$	688,481	$	680,636	$	681,606
Tangible assets		6,411,465		6,156,695		6,098,297		6,197,093		6,144,333
TCE ratio		10.95%		11.22%		11.29%		10.98%		11.09%
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders' equity	$	959,777	$	952,151	$	943,823	$	947,404	$	938,707
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	$	793,907	$	786,281	$	777,953	$	781,534	$	772,837
Less:  Average intangible assets		(90,272)		(90,624)		(90,951)		(91,331)		(91,731)
Average tangible common equity	$	703,635	$	695,657	$	687,002	$	690,203	$	681,106
Adjusted Metrics for Hurricanes Irma and Maria - Reconciliation to GAAP Financial Measures
Net income					$	-	$	17,073
Plus:  Additional loan loss provision from Hurricanes Irma and Maria						-		5,406
Less:  Income tax effect						-		(2,108)
Adjusted net income					$	-	$	20,371
Less:  dividends on preferred stock						-		(3,465)
Adjusted net income available to common shareholders					$	-	$	16,906
Plus:  Effect of assumed conversion of the convertible preferred stock						-		1,838
					$	-	$	18,744
Average common shares outstanding and equivalents						-		51,104
Adjusted earnings per common share - diluted					$	0.37	$	0.40
Adjusted net income					$	-	$	20,371
Adjusted average assets					$	6,191,737	$	6,048,021
Adjusted return on average assets						1.32%		1.47%
Adjusted net income available to common shareholders					$	-	$	16,906
Adjusted average tangible common stockholders' equity					$	687,002	$	690,422
Adjusted return on average tangible common stockholders' equity						9.84%		10.90%
12

OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures (Continued)
		BASEL III
		Standardized
		2018		2018		2017		2017		2017
(Dollars in thousands) (unaudited)		Q2		Q1		Q4		Q3		Q2
Regulatory Capital Metrics
Common equity Tier 1 capital		$	669,922	$	652,013	$	644,804	$	633,401	$	643,607
Tier 1 capital			870,792		852,883		842,133		830,640		840,704
Total risk-based capital	(15)		931,606		910,828		899,258		885,523		896,927
Risk-weighted assets			4,737,529		4,489,130		4,420,667		4,252,605		4,391,321
Regulatory Capital Ratios
Common equity Tier 1 capital ratio	(16)		14.14%		14.52%		14.59%		14.89%		14.66%
Tier 1 risk-based capital ratio	(17)		18.38%		19.00%		19.05%		19.53%		19.14%
Total risk-based capital ratio	(18)		19.66%		20.29%		20.34%		20.82%		20.42%
Leverage ratio	(19)		13.92%		14.07%		13.92%		14.07%		13.69%
Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach
Total stockholders' equity		$	957,819	$	946,849	$	945,107	$	937,630	$	938,969
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			15,518		12,274		2,638		(1,371)		(256)
Unrealized losses on cash flow hedges, net of income tax			(256)		(89)		311		529		563
			807,211		793,164		782,186		770,918		773,406
Less:    Disallowed goodwill			(86,069)		(86,069)		(86,069)		(86,069)		(86,069)
Disallowed other intangible assets, net	(20)		(2,457)		(2,657)		(2,287)		(2,466)		(2,646)
Disallowed deferred tax assets, net	(20)		(48,763)		(52,425)		(49,026)		(48,982)		(41,084)
Common equity Tier 1 capital			669,922		652,013		644,804		633,401		643,607
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			-		-		(3,541)		(3,631)		(3,773)
Tier 1 capital			870,792		852,883		842,133		830,640		840,704
Plus tier 2 capital:  Qualifying allowance for loan and lease losses			60,814		57,945		57,125		54,883		56,223
Total risk-based capital		$	931,606	$	910,828	$	899,258	$	885,523	$	896,927
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 financial service 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 2018 and 2017.
(21)	Pre-provision net revenues is a non-GAAP measure calculated based on net interest income plus total non-interest income, net, less total non-interest expenses for the period.
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