8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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): June 28, 2012

ORIENTAL FINANCIAL GROUP INC.

(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 Number)	(I.R.S. Employer Identification No.)

Oriental Center

Professional Offices Park

997 San Roberto Street, 10th Floor

San Juan, Puerto Rico 00926

(Address of principal executive offices) (Zip Code)

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

Not Applicable

(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:

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

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

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

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

Item 7.01 Regulation FD Disclosure.

Acquisition

On June 28, 2012, Oriental Financial Group Inc. (“Company”) issued a press release announcing that on June 28, 2012 the Company and Banco Bilbao Vizcaya Argentaria, S.A. (“BBVA”) entered into a definitive acquisition agreement, pursuant to which BBVA agreed to sell to the Company, and the Company agreed to purchase from BBVA, all of the outstanding common stock of each of BBVA PR Holding Corporation (the sole shareholder of Banco Bilbao Vizcaya Argentaria Puerto Rico, a Puerto Rico chartered commercial bank, and BBVA Seguros, Inc., a subsidiary offering insurance services) and BBVA Securities of Puerto Rico, Inc., a registered broker-dealer (the “Acquisition”).

In addition, the Company announced that it had entered into definitive subscription agreements with various institutional purchasers to raise $84 million of new equity capital for the Company through a private placement (the “Placement”) of the Company’s 8.750% Non-Cumulative Convertible Perpetual Preferred Stock, Series C, $1.00 par value and $1,000 liquidation preference per share (the “Series C Preferred Stock”).

The Company also announced a conference call for investors at 9:00 a.m. Eastern Time on June 28, 2012 regarding the Acquisition.

Included as exhibits hereto are presentation slides to be used in the conference call for investors and certain supplemental information relating to the Company.

Copies of the press release, investor presentation and the supplement information document are included in this report as Exhibits 99.1, 99.2 and 99.3, respectively, and are incorporated by reference herein.

Information provided herein regarding the post-Acquisition combined company is based in part on certain assumptions regarding the Acquisition and the value of the acquired assets and liabilities that the Company believes are reasonable. Actual results will vary from the projections, and the variations may be material. The Company undertakes no obligation to publicly update or revise any of these projections, whether as a result of new information, future events or otherwise, except as required by law.

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

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description of Exhibit
*99.1	Press Release, dated June 28, 2012.
*99.2	Investor Presentation, dated June 28, 2012.
*99.3	Supplemental Regulation FD Disclosure.

* Filed herewith.

2

Cautionary Note Regarding Forward-Looking Statements

The information included in this report 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 forward-looking statements. Factors that might cause such a difference include, but are not limited to (i) the ability to receive and timing of necessary regulatory approvals to consummate the Acquisition, (ii) difficulties in combining the operations of Banco Bilbao Vizcaya Argentaria Puerto Rico; (iii) the amounts by which our assumptions related to the Acquisition, including future financing, fail to approximate actual results; (iv) the rate of declining growth in the economy and employment levels, as well as general business and economic conditions; (v) changes in interest rates, as well as the magnitude of such changes; (vi) the fiscal and monetary policies of the federal government and its agencies; (vii) changes in federal bank regulatory and supervisory policies, including required levels of capital; (viii) the relative strength or weakness of the consumer and commercial credit sectors and of the real estate market in Puerto Rico; (ix) the performance of the stock and bond markets; (x) competition in the financial services industry; and (xi) possible legislative, tax or regulatory changes. For a discussion of such factors and certain risks and uncertainties to which the Company is subject, see the Company’s annual report on Form 10-K for the year ended December 31, 2011, as well as its other filings with the U.S. Securities and Exchange Commission. Other than to the extent required by applicable law, the Company assumes no obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

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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.

	ORIENTAL FINANCIAL GROUP INC.
Date: June 28, 2012	By:	/s/ Carlos O. Souffront
	Name:	Carlos O. Souffront
	Title:	Secretary of the Board of Directors

Exhibit Index

Exhibit No.	Description of Exhibit
*99.1	Press Release, dated June 28, 2012.
*99.2	Investor Presentation, dated June 28, 2012.
*99.3	Supplemental Regulation FD Disclosure.

* Filed herewith.

EX-99.1

Exhibit 99.1

Oriental Financial Group to Acquire BBVA’s Puerto Rico Operations

• Creates Market Leading Bank that is Strongly Capitalized, Locally Controlled and Totally Focused on Puerto Rico

• Transforms Oriental with Bigger Branch Network, Larger and More Diversified Loan Portfolio, Greater Core Deposit Funding, Expanded Customer Base

• Projected to be Highly Accretive to Earnings Per Share

• Initial Tranche of $84 Million in Capital Raised to Support the Transaction

• Conference Call Today at 9:00 AM ET

SAN JUAN, Puerto Rico, June 28, 2012 – Oriental Financial Group Inc. (NYSE: OFG) and Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) today announced the signing of a definitive agreement for Oriental to acquire BBVA’s Puerto Rico operations for $500 million in cash, approximately a 3% premium to tangible book value. Closing of the transaction, which is subject to customary regulatory approvals, is targeted for before year end 2012.

In connection with the acquisition, Oriental announced that it has raised, in a private placement with institutional investors, $84 million of 8.75% non-cumulative convertible perpetual preferred stock, with a conversion price of $11.77, as a first step in raising an estimated $150 million in Tier 1 capital. Oriental intends to use its own excess capital to fund the balance of the purchase price.

CEO’s Comment

“We are very pleased to announce this transaction, which combines two of the healthiest banks on the Island to create a market leading bank that is strongly capitalized, locally controlled and totally focused on serving the needs of Puerto Rico businesses and consumers,” said José Rafael Fernández, President, Chief Executive Officer and Vice Chairman of the Board of Oriental.

“At the same time, by acquiring BBVA Puerto Rico, we will achieve our long time goal of transforming Oriental into a bank with a bigger branch network, a larger and more diversified loan portfolio, greater core deposit funding, expanded customer base, and a smaller investment securities portfolio.”

“BBVA PR has a strong franchise that is highly complementary to Oriental’s. It also has an experienced, highly capable management team and staff that will fit perfectly with Oriental’s service and advisory oriented culture.”

“For Puerto Rico, we believe this transaction further increases the strength of the local banking industry. It is well timed, as the Puerto Rico economy has stabilized and the fiscal situation has continued to improve.”

“For Oriental, we believe this transaction offers the best way to efficiently use our excess capital to enhance our financial performance, franchise and shareholder value. By replacing securities and borrowings with loans and deposits, it creates a unique opportunity to transform our balance sheet and significantly improve earnings predictability.”

“Ultimately, combining two healthy institutions will enable Oriental to continue to gain strength and leadership in the Puerto Rico market. The acquisition reaffirms our strong faith in Puerto Rico’s future and Oriental’s commitment to play an instrumental role in it,” Mr. Fernández concluded.

Oriental’s most recent acquisition was in 2010 when it successfully purchased and integrated Eurobank’s assets and liabilities in Puerto Rico from the Federal Deposit Insurance Corporation.

The Oriental-BBVA PR Combination

Upon consummation of the acquisition, Oriental will be the second largest bank in Puerto Rico in terms of branches and core deposit funding, and the third largest in terms of assets. The resulting loan portfolio will be approximately a third each in commercial loans, residential mortgages, and consumer loans and leases, while the resulting securities portfolio will represent less than 40% of total earning assets.

As of March 31, 2012, BBVA PR had approximately $5.2 billion in assets, $3.7 billion in loans, $3.3 billion in deposits, 36 branches, and approximately 950 employees, which would add to Oriental’s $6.5 billion in assets, $1.7 billion in loans, $2.3 billion in deposits, 28 branches and approximately 720 employees, also as of March 31, 2012. BBVA PR has strong franchises in commercial and corporate banking, auto lending, retail banking, residential mortgage lending, insurance and wealth management.

The loan portfolio being acquired positively reflects BBVA PR having aggressively addressed problem assets. Non-performing loans have significantly declined and stabilized, non-performing asset formation also has declined significantly, and BBVA PR exhibits higher loan yields versus peers. As a result of additional credit marks that will be taken as part of the closing, Oriental anticipates having the highest levels of asset quality in the Puerto Rico market.

Financial Highlights

The financial impact of the transaction is expected to be decidedly positive for Oriental. Based on current estimates, the acquisition (including the related capital raise described below) would be approximately 35% accretive to earnings per share in 2013 on a pro forma basis and approximately 52% in 2014. The projected annual cost savings are expected to be about 20% of BBVA PR’s non-interest expenses, approximately half of which are expected to be realized in 2013. Oriental expects to incur certain one-time restructuring charges of approximately $40 million in 2013 in connection with the transaction. While tangible book value per share is expected to be diluted approximately 23% at the close, it is anticipated to be earned back in less than two years, based on the combined company’s earnings.

Oriental has developed a financing plan designed to minimize shareholder dilution and maximize EPS accretion. The Company plans to finance the transaction through (i) $350 million of cash on the balance sheet, (ii) the previously mentioned private placement of $84 million in non-cumulative convertible perpetual preferred stock that is expected to close on July 3, 2012, subject only to customary closing conditions, and (iii) approximately $65-$70 million currently expected to be raised in approximately equal amounts of non-convertible perpetual preferred and common equity.

In addition, to reduce capital requirements and further strategic goals, Oriental plans to delever, at or prior to closing, approximately $1.3 billion of its investment securities portfolio and approximately $450 million of the BBVA PR investment securities portfolio, including the settlement of the related repurchase agreement funding at both Oriental and BBVA PR.

Additional Information

The acquisition has been approved by Oriental’s Board of Directors.

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Oriental has been providing updates on the acquisition, including details on capital raise, pro forma financials, risk management and its plans for integration, throughout the process to the Federal Reserve Bank of New York and the Federal Deposit Insurance Corporation. Oriental also has advised the Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico about the proposed acquisition. The acquisition is subject to approval by the Board of Governors of the Federal Reserve System, the FDIC and the Commissioner of Financial Institutions, as well as other customary conditions.

Jefferies & Company, Inc. acted as financial advisor for Oriental, delivered a fairness opinion to the Oriental Board, and acted as sole placement agent on the convertible preferred offering. Cleary Gottlieb Steen & Hamilton LLP and McConnell Valdés LLC acted as legal advisors for Oriental.

For more information regarding BBVA PR, the impact of the transaction on a pro forma basis and the key assumptions underlying the pro forma analysis, please see the investor presentation being furnished as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission today.

Conference Call

A conference call to discuss this announcement and related matters will be held today, Thursday, June 28, 2012, at 9:00 AM Eastern and Puerto Rico Time. The call will be accessible live via a webcast on Oriental’s Investor Relations website at www.orientalfg.com or at http://services.choruscall.com/links/ofg120628.html. A webcast replay will be available shortly thereafter. Access the webcast link in advance to download any necessary software.

Legal Notes

The 8.75% non-cumulative convertible perpetual preferred stock was offered and sold in private transactions and has not been and will not be registered under the Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

This press release does not constitute an offer to sell or solicitation of an offer to purchase any security, nor shall there be any sale of securities in any state or jurisdiction in which such offer, solicitation or purchase would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.

About Oriental Financial Group

Oriental Financial Group Inc. is a diversified financial holding company that operates under U.S. and Puerto Rico banking laws and regulations, principally through its two subsidiaries, Oriental Bank and Trust and Oriental Financial Services. Now in its 48^th year in business, Oriental provides a full range of commercial, consumer and mortgage banking services, as well as financial planning, trust, insurance, investment brokerage and investment banking services, primarily in Puerto Rico, through 28 financial centers. Investor information about Oriental can be found at www.orientalfg.com.

Forward-Looking Statements

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

3

Factors that might cause such a difference include, but are not limited to (i) the ability to receive and timing of necessary regulatory approvals to consummate the acquisition, (ii) difficulties in combining the operations of BBVA PR; (iii) the amounts by which our assumptions related to the acquisition, including future financing, fail to approximate actual results; (iv) the rate of declining growth in the economy and employment levels, as well as general business and economic conditions; (v) changes in interest rates, as well as the magnitude of such changes; (vi) the fiscal and monetary policies of the federal government and its agencies; (vii) changes in federal bank regulatory and supervisory policies, including required levels of capital; (viii) the relative strength or weakness of the consumer and commercial credit sectors and of the real estate market in Puerto Rico; (ix) the performance of the stock and bond markets; (x) competition in the financial services industry; (xi) possible legislative, tax or regulatory changes; and (xii) difficulties in combining the operations of any other acquired entity.

For a discussion of such factors and certain risks and uncertainties to which Oriental is subject, see Oriental’s annual report on Form 10-K for the year ended December 31, 2011, 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, Oriental assumes no obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

# # #

Contacts:

Puerto Rico: Alexandra Lopez (allopez@orientalfg.com), Oriental Financial Group Inc., (787) 522-6970

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

4

EX-99.2

Acquisition of BBVA’s Puerto Rico Operations

Investor Conference Call

June 28, 2012

1

Exhibit 99.2

2

Disclaimer

The information contained in this presentation (the “Presentation”) is preliminary, may not be complete and may be changed. Unless otherwise indicated or unless 

the context requires otherwise, all references to “Oriental,” “we,” “us,” “our” or similar references means Oriental Financial Group Inc.

The Presentation includes forward-looking statements about Oriental. These forward-looking statements may relate to Oriental’s financial condition, results of

operations, plans, objectives, future performance and business, including, but not limited to, statements with respect to the proposed acquisition described herein,

the pro forma effect of such acquisition and related transactions, and our ability to finance such acquisition. All statements contained herein that are not clearly

historical in nature are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and

future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may,” or similar expressions are generally intended to identify forward-looking

statements.

Forward-looking statements provide our expectations or predictions of future conditions, events or results. They are not guarantees of future performance, and actual

results may differ materially. By their nature, these forward-looking statements involve numerous assumptions and uncertainties, both general and specific, including

those discussed in Oriental’s Annual Report on Form 10-K for the year ended December 31, 2011 (the “2011 10-K”), Oriental’s Quarterly Report on Form 10-Q for the

three-month period ended March 31, 2012 (the “1Q 10-Q”), and other filings we make with the Securities and Exchange Commission. These statements speak only

as of the date they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date

the forward looking statements were made.

These statements are not guarantees of future performance and involve certain risks, uncertainties, estimates and assumptions by management that are difficult to

predict. Various factors, some of which, by their nature are beyond Oriental’s control, could cause actual results to differ materially from those expressed in, or

implied by, such forward-looking statements, including with respect to market conditions. Factors that might cause such a difference include, but are not limited to

those included under the “Risk Factors” section of the 2011 10-K and the 1Q 10-Q or the risk factors included in the materials provided to you in connection with this

transaction. You are urged to read the “Risk Factors” section of the 2011 10-K and the 1Q 10-Q as well as the risk factors included in the materials provided to you in

connection with this transaction.

Market data used in the Presentation has been obtained from industry sources and publications as well as from research reports prepared for other purposes.

Furthermore, certain information has been obtained from Banco Bilbao Vizcaya Argentaria, S.A. (“BBVA”) and BBVA does not assume any responsibility therefore.

We have not independently verified any the data obtained from these sources, and we cannot assure you of the accuracy or completeness of the data. In addition,

information regarding the combined company included in this presentation is based in part on certain assumptions regarding the transaction and the value of the

acquired assets and liabilities that we believe are reasonable. We cannot assure you that our assumptions will prove to be accurate over time. 

This Presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any securities by any person in any jurisdiction in which it is unlawful for such

person to make an offer or solicitation. 

The Presentation contains unaudited non-GAAP financial and other performance measures. Oriental presents non-GAAP and other performance measures when its

management believes that the additional information is useful and meaningful to investors. Non-GAAP and other performance measures do not have any standardized

meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP and other performance

measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. See Appendix

for definitions and reconciliations of certain non-GAAP measures to the comparable GAAP measures and for definitions of certain other performance measures used in

this presentation.

3

I.  Transaction Overview and Rationale

4

Acquisition Overview and Rationale

Signed

definitive

agreement

to

purchase

BBVA’s

Puerto

Rico

operations

(1)

for

$500 million in cash

–

Closing (subject to customary regulatory approvals) targeted before December 31, 2012

Effective use of excess capital which enhances financial performance, franchise

and shareholder value

–

Generates significant earnings per share accretion (over 50% in 2014)

–

Combines two of the healthiest lenders in Puerto Rico to create a market leading bank

–

Provides an expanded customer base and complementary products and services

–

Enhances Oriental’s competitive position on the Island with #2 core deposit share

Accelerates the transformation of Oriental’s balance sheet

–

Larger and more diversified loan portfolio

–

Far less reliance on investment securities and wholesale funding

–

Improves earnings stability

Well timed:  Puerto Rico’s economy has stabilized and fiscal situation has improved

(1)

Acquisition targets include BBVA PR’s commercial bank and insurance brokerage which are subsidiaries

of BBVA PR Holding Corporation, a bank holding  company, and BBVA Securities of Puerto Rico, Inc. which is a

separate subsidiary.

Description

Rationale

5

Pricing and Financing

Oriental /

BBVA PR

Comparable

Transactions

(2)

Price / Tangible Book Value Per Share

1.03x

1.65x

Price / Marked Tangible Book Value Per Share

1.37x

2.01x

Price / Earnings

(1)

14.0x

27.5x

Attractive

Purchase

Valuation for

Healthy

Commercial

Bank Target

Financing

Designed to

Minimize

Shareholder

Dilution and

Maximize EPS

Accretion

$350 million of balance sheet cash

Signing

of

purchase

agreements

for

$84

million

private

placement

of

noncumulative

convertible perpetual preferred stock occurred in connection with the signing of the

acquisition agreement

–

Conversion price of $11.77 and dividend of 8.75%

Incremental

$65-$70

million

of

Tier

1

capital

to

be

raised

before

closing

of

the

acquisition

–

Approximately equal amounts of non-convertible perpetual preferred equity and

common equity

$1.8

billion

deleveraging

of

the

investment

securities

portfolio

and

wholesale

funding

emphasizes shift towards core commercial banking platform

Source: SNL Financial, regulatory filings.

(1)

Annualized earnings for BBVA PR in 1Q 2012 and the most recent quarter prior to announcement of comparable transactions.

(2)

Includes U.S. nationwide transactions announced since June 30, 2010 with deal value between $200 million and $6 billion. Median metrics.

6

Acquisition Benefits

Financial

Metrics Are

Very Favorable

EPS Accretion

~35% accretive to 2013 EPS (Assumes 12/31/12 close)

(1)

~52% accretive to 2014 EPS

Tangible Book

Value per Share

and Earn Back

Period

Tangible book value per share dilution of ~23% at close

Less

than

2

years

earn-back

period

(2)

based

on

combined

company’s

earnings

Less

than

5

years

earn-back

period

(3)

based

on

earnings

contributed

by

acquisition

IRR

~20%

Pro Forma

Accretion and

Profitability

Provide

Attractive

Relative

Valuation

Oriental

Median of

Current

Pro Forma

U.S. Bank Peers

(5)

Price to:

2014E EPS

7.3x

4.8x

11.1x

Tangible Book Value

0.66

0.86

1.41

2014E Profitability Metrics

ROAA

0.90%

1.07%

1.13%

ROATCE

8.2

16.8

10.7

Note: Financial metrics and pro forma capital ratios assume December 31, 2012 transaction close. Combined metrics include acquisition adjustments and are pro forma for $150 million capital raise and $1.8

billion in deleverage transactions to be conducted at time of acquisition close.  Assumes constant OFG stock price of $10.46 as of June 27, 2012.

(1)     Excludes impact of one-time restructuring costs.

(2)     Tangible book value per share earn-back period defined as tangible book value per share dilution at acquisition close divided by 2014 EPS.

(3)     Tangible book value per share earn-back period defined as tangible book value per share dilution at acquisition close divided by dollars of 2014 EPS accretion.

(4)     Oriental current EPS assumes First Call 2013 median estimated diluted EPS of $1.32 grown at the First Call median long-term EPS growth rate of 8%.

(5)     Includes publicly-traded U.S. banks between $5 billion and $15 billion in assets. 2014E profitability metrics reflect First Call median estimates.

(4)

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II.  Overview of BBVA’s Puerto Rico Operations

8

BBVA PR Presents a Complementary Franchise with an Established History of Over 45

Years Serving Puerto Rico

BBVA PR

Operations

Highly

Complementary

to Oriental

Acquisition includes commercial bank, insurance agency business and securities brokerage

(1)

$5.2 billion in assets, $3.7 billion in loans, $3.3 billion in deposits and 36 branches

Specialist in commercial banking and auto lending with excellent

corporate banking services

Also strong in residential mortgages and consumer loans

Management team of local executives with significant retail and commercial banking experience

Foundation of

Banco de

Mayagüez

Acquisition of 98.8% of Banco de

Mayagüez by Banco Occidental

(Banco Occidental was acquired

by Banco Vizcaya in 1982)

Renamed as BBV PR

Headquarters moved

to San Juan

Acquisition of 20% of

General Electric Capital

Acquisition of

Royal Bank of PR

Acquisition of Las

Americas Trust & Co

Acquisition of Ponce

Bank and acquisition of

assets and liabilities of

Chase Manhattan Bank

Merger between BBV

and Argentaria

Renamed as BBVA PR

Acquisition of part of

Citibank’s auto

financing business

(1)

Acquisition targets include BBVA PR’s commercial bank and insurance brokerage which are subsidiaries

of BBVA PR Holding Corporation, a bank holding  company, and BBVA Securities of Puerto Rico, Inc. which is a

separate subsidiary.

1967

1979

1992

1993

1994

1998

1999

2000

2001

2011

BBVA PR Historical Timeline

9

BBVA PR’s Credit Quality Has Stabilized

BBVA PR

Peer

Median

(1)

Source: SNL Financial and BBVA PR regulatory filings as of March

31, 2012.

(1)

Nonperforming asset formation has declined to

normalized levels

BBVA PR’s loan portfolio has consistently earned a

considerably higher yield than U.S. national peers

BBVA

PR’s

nonperforming

loan

balance

has

declined

27% since peaking in 3Q 2010

BBVA PR has been aggressive in addressing problem

assets

with

a

reserve

to

nonperforming

loans

ratio of

52%

Key Points

BBVA PR Exhibits Higher Loan Yields Versus Peers

(1)

Nonperforming Loans Have Declined and Stabilized

NPA Formation Has Declined Significantly from Peak Levels

Peers

defined

as

U.S.

banks

with

assets

between

$3

and

$10

billion.

6

7

8

9

10%

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

0.0

6.0

12.0

18.0%

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

5.0

5.5

6.0

6.5

7.0%

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

2011

Q4

2012

Q1

10

Oriental performed extensive credit review

Process utilized Oriental’s extensive knowledge

of Puerto Rico market to generate conservative

loss estimates

Commercial loan file review covered

–

79% of construction portfolio

–

74% of nonperforming commercial real estate

–

52% of auto dealer

–

47% of corporate loans

Total nonperforming loans marked by nearly

50%

Aggregate loan mark of 7.5%

Implied cumulative losses of 16.5%

Extensive Credit Due Diligence and Conservative Loan Marks

($ in millions)

1/1/08 - 3/31/12 Average Loans, HFI Balance

$3,852

NCOs taken 1/1/08 - 3/31/12

($357)

(9.3%)

Cumulative Losses

($635)

(16.5%)

Gross Loan

Performing

Balance

Mark $

Mark %

Mortgage

$852

($37)

(4.4%)

Autos

963

0

0.0

CRE

186

(24)

(12.7)

Construction

29

(8)

(26.2)

Commercial

1,228

(69)

(5.6)

Consumer

198

(18)

(9.1)

Total Performing

$3,456

($155)

(4.5%)

Gross Loan

Non Performing

Balance

Mark $

Mark %

Mortgage

$84

($50)

(59.9%)

Autos

8

(3)

(41.4)

CRE

17

(5)

(30.1)

Construction

59

(26)

(43.2)

Commercial

79

(36)

(45.8)

Consumer

3

(2)

(73.7)

Total Nonperforming

$250

($123)

(49.0%)

Total

$3,706

($278)

(7.5%)

11

III.  Pro Forma Impact of Acquisition

12

Transaction Significantly Enhances the Competitive Position of the Oriental Franchise

Core Deposit Funded

Enhanced Scale

Island-wide Retail Branch Network

12

(1)

Puerto Rico core deposits are estimated on a pro-rata basis based on proportion of Puerto Rico deposits to total deposits disclosed in 2012 Q1 10-Q and 2011 10-K for Popular and First BanCorp.,

respectively. Actual Puerto Rico core deposits may differ.

Source: SNL Financial, public SEC and regulatory filings.

Note: Companies shown include Puerto Rico-based banks. Data as of March 31, 2012. Pro forma data represented as if financing and acquisition transactions occurred March 31, 2012, included for illustrative purposes. 

Combined metrics include acquisition adjustments and are pro forma for $150 million capital raise and $1.8 billion in deleverage transactions to be conducted at time of acquisition close. See page 20 and 21 for key 

pro forma and deleverage assumptions, respectively.

47%

14%

14%

11%

9%

7%

6%

6%

0%

10%

20%

30%

40%

50%

Popular

PF Oriental / BBVA PR

Banco Santander

First BanCorp

Scotia

BBVA PR

Doral

Oriental

Market Share of Core Deposits

$28

$13

$9

$8

$7

$7

$6

$5

$0

$5

$10

$15

$20

$25

$30

Popular

First BanCorp.

PF Oriental / BBVA PR

Doral

Banco Santander

Scotia

Oriental

BBVA PR

Total Assets ($B)

182

64

56

48

47

36

33

28

0

50

100

150

200

Popular

PF Oriental / BBVA PR

Banco Santander

First BanCorp.

Scotia

BBVA PR

Doral

Oriental

Branches

($ mm)

OFG

BBVA PR

Pro Forma

Deposits

$2,275

$3,269

$5,544

Branches

28

36

64

Dep. / Branch

$81

$91

$87

(1)

(1)

OFG

BBVA PR

13

60%

34%

36%

57%

4%

9%

1Q 2012

Standalone

Pro Forma

Brokered Deposits

Core Deposits

Borrowings

Acquisition of BBVA PR Accelerates Ongoing Transformation of Oriental

Source: SNL Financial, public SEC and regulatory filings.

Note: Combined metrics include acquisition adjustments and are pro forma for $150 million capital raise and $1.8 billion in deleverage transactions to be conducted at time of acquisition close. See page 20 and 21 for

key pro forma and deleverage assumptions, respectively.

(1)Pro forma data as if financing and acquisition transactions occurred March 31, 2012 included for illustrative purposes.

(2)Covered loans benefit from FDIC loss share agreements.

Earning Asset Composition

Funding Composition

(1)

The transaction creates a more attractive earning asset and funding composition, with an increased

proportion of loans and core deposits

–

Includes $1.8 billion deleveraging of investment securities portfolio and wholesale funding

14%

22%

57%

15%

21%

15%

9%

6%

41%

1Q 2012

Standalone

Pro Forma

Marked Loans

Covered Loans

Non-Covered Loans

Government Sponsored RMBS

Other Securities and Cash Equivalents

14

Source: SNL Financial, Oriental and BBVA PR SEC and regulatory filings.

Note: Financial data as of March 31, 2012.

(1)

Pro forma data as if financing and acquisition transactions occurred March 31, 2012 included for illustrative purposes. Combined

metrics include acquisition adjustments and are pro forma for $150 million capital raise

and $1.8 billion in deleverage transactions to be conducted at time of acquisition close. See page 20 and 21 for key pro forma and deleverage assumptions, respectively.

(2)

Other loans and leases include home equity, agricultural production, institutional / government, and floor plan loans.

BBVA PR Diversifies Oriental’s Loan Portfolio and Enhances its Funding Base

14

Pro Forma

Total: $5.2 BN

Autos

19%

Commercial

Banking

30%

Residential

Mortgages

35%

Consumer

and

Other

(2)

Loans &

Leases

17%

Oriental

Total: $1.8 BN

Commercial

Banking

37%

Residential

Mortgages

55%

Consumer

and Other

Loans &

Leases

(2)

8%

Diversifies Loan Composition Across Commercial and Retail Credits

(1)

Oriental

Total: $2.3 BN

Jumbo

Time

16%

Retail Time

29%

Non-

Interest

Bearing

8%

Other

Interest

Bearing

47%

Pro Forma

Total: $5.5 BN

Jumbo

Time

23%

Retail Time

23%

Non-

Interest

Bearing

17%

Other

Interest

Bearing

37%

(1)

Deposit Composition is Improved with Additional Core Deposits

15

Source: SNL Financial, public SEC and regulatory filings.

Note: Financial data as of March 31, 2012. Pro forma data as if financing and acquisition transactions occurred March 31, 2012, included for illustrative purposes. Combined metrics include acquisition adjustments and are

pro forma for $150 million capital raise and $1.8 billion in deleverage transactions to be conducted at time of acquisition close.  See page 20 and  21 for key pro forma and deleverage assumptions, respectively.

NPAs / Total Assets

Marked Loans / Total Loans

Loans / Deposits

Pro Forma Company Has a Low-Risk Balance Sheet

2.4%

2.6%

3.7%

5.3%

6.2%

6.3%

9.5%

11.7%

0%

2%

4%

6%

8%

10%

12%

14%

Oriental

Scotia

PF Oriental /

BBVA PR

Santander

BBVA PR

Popular

First BanCorp.

Doral

76%

56%

30%

22%

0%

0%

0%

0%

0%

20%

40%

60%

80%

100%

PF Oriental / BBVA PR

Scotiabank

Oriental

Popular

Doral

First BanCorp.

BBVA PR

Santander

77%

92%

93%

104%

104%

113%

139%

139%

0%

50%

100%

150%

Oriental

Popular

PF Oriental /

BBVA PR

First BanCorp.

Santander

BBVA PR

Scotiabank

Doral

16

Transaction Results in a Well-Capitalized Balance Sheet

Capital Ratios

Reported

Oriental (3/31/12A)

Pro Forma with

BBVA PR (12/31/12E)

TCE / TA

9.6%

5.6% -

5.8%

Tier 1 Common Capital

27.3%

7.9% -

8.2%

Tier 1 Risk Based Capital

32.3%

12.2% -

12.5%

Tier 1 Leverage

10.3%

6.8% -

7.0%

Summary Key Balance Sheet Items

($ in billions)

3/31/12A

12/31/12E

Oriental

BBVA PR

Pro Forma

Assets

Gross Loans

$1.8

$3.7

$5.2

Securities

3.6

0.7

2.2

Intangible Assets

0.0

0.1

0.1

Liabilities and Equity

Deposits

$2.3

$3.3

$5.5

Borrowings

3.4

1.2

2.9

Equity

0.7

0.6

0.8

17

IV.  Conclusions

18

Acquisition Highlights and Strategic Rationale

Repositions

balance

sheet

composition

away

from

wholesale

assets

and

liabilities

to

predominately loans and deposits

Well capitalized and over 75% of loans will have been marked by purchase accounting

Strong

credit

quality

and

asset

and

liability

composition

create

a

more

stable,

higher

quality

earnings stream

Creates a More

Stable Balance

Sheet and

Consistent

Earnings

Accelerates

Strategic

Transformation

Oriental avoided significant asset quality problems through the financial crisis and has been

generating organic growth in commercial banking

The acquisition of BBVA PR accelerates strategy with the addition of a large, profitable and

diversified institution

Purchase price of 1.03x tangible book value

(1)

and 14x MRQ net income is well below

comparable transactions

BBVA PR has produced six straight quarters of profitability

Estimated post acquisition EPS increases over 50% in 2014

Improves all key profitability ratios

Attractive

Valuation for a

Healthy Bank

Target Generates

Positive Financial

Impact

Establishes Oriental as a winner in the Puerto Rico bank recovery and consolidation cycle

19

V.  Appendix

20

Key Assumptions Underlying Pro Forma Analysis

Transaction Assumptions

Consideration

100% cash consideration to BBVA of $500 million

Financing

$150 million Tier 1 Capital issuance by Oriental

Remaining funds to be paid from cash on Oriental Bank & Trust’s balance sheet at consummation

of the transaction

Assumes 2.8% pre-tax cost of cash

Loan Credit Mark

7.5% of loans outstanding on March 31, 2012 ($278 million)

Core Deposit Intangibles

1.25% of core deposits, amortized on a straight line basis over 10 years

Balance Sheet Restructuring

$454

million

and

$1.3

billion

deleverage

from

BBVA

PR

and

OFG’s

respective

balance

sheets

(1)

Assumptions on Acquired BBVA PR Operations

Net Interest Margin

4.3% -

4.8%

Non-Interest Income

~$35 million per annum

Cost Savings

20% of BBVA PR’s non-interest expense

50% realized in 2013, 100% thereafter

Restructuring Expenses

~$40 million (pre-tax)

Deposit Run-off

$250 million; 8% of BBVA PR’s total deposits

Taxes

30% tax rate

Closing

December 31, 2012 closing date

(1)

See page 21 for transaction deleverage details.

21

Anticipated Deleverage Allocates Capital for Building Oriental’s Core Banking Business

$1.3 billion in securities sold to delever liabilities

consisting of hedged repurchase agreements and FHLB

advances

One time after-tax loss on settlement of repurchase

agreements estimated at $9 million

Estimated net income impact of:

($12) million in 2013

($8) million in 2014

Oriental’s Balance Sheet

$454 million in securities sold to delever liabilities

consisting of repurchase agreements

Mark to market loss on early settlement of repurchase

agreements estimated at $23 million (purchase

accounting mark)

Estimated net income impact of:

$7 million in 2013

Acquired BBVA PR Balance Sheet

$1.8 billion in combined deleverage from both

companies’

balance sheets

Deleverage expected to occur at acquisition close

Assets and liabilities sold are selected based upon

expected cost to unwind

Leverages core funding base to support higher yielding

assets

Optimizes Oriental’s utilization of capital

Reduces interest rate sensitivity

Deleverage

Strategic Rationale

22

Conservative Loan Mark

Source: SNL Financial, SEC and regulatory filings.

(1)

Cumulative mark based on gross loan mark and total NCOs since January 1, 2008 through announcement of acquisition.

(2)

Includes nationwide transactions since June 30, 2010 with deal value between $200 million and $6 billion. Data at announcement of acquisition.

(3)

Includes “Recent Transactions”

referenced in footnote 2 above with seller over 5% NPLs / Loans. Data at announcement of acquisition.

BBVA PR’s loan portfolio exhibits a higher loan yield and lower loss severity than precedent targets

Precedent Transaction Credit Mark Analysis

BBVA PR

Recent Transaction

Median

(2)

Comparable

Transaction Median

(3)

Gross Loan Mark / Loans

7.5 %

4.4 %

12.2 %

Cumulative Mark / Average Loans

(1)

16.5

8.1

14.7

NPLs / Loans

6.9

1.9

6.8

LTM NCOs / Average Loans

1.7

0.8

2.7

LTM NCOs / Average NPLs

22.9

31.3

42.5

Loan Yield

6.4

5.3

4.6

23

Tier 1 Common Equity:

Common Stockholders' Equity

$621

Unrealized Gains on Available-for-Sale Securties

(74)

Unrealized Losses on Cash Flow Hedges

44

Disallowed Deferred Tax Assets

(25)

Disallowed Servicing Assets

(1)

Intangible Assets

(4)

Total Tier 1 common equity

$561

Risk-weighted assets:

Balance sheet items

$2,000

Off-balance sheet items

53

Total Risk-Weighted Assets

$2,053

Tier 1 Common Equity to Risk-Weighted Assets

27.3%

Definitions/Reconciliation of Non-GAAP and Other Performance Measures

TCE / TA

Tier 1 Common Capital

($ in millions)

Tangible Common Equity:

Total Stockholders' Equity

$689

Preferred Stock

(68)

Intangible Assets

(4)

Total Tangible Common Equity

$617

Tangible Assets:

Total Assets

$6,461

Intangible Assets

(4)

Total Tangible Assets

$6,458

Tangible Common Equity to Tangible Assets

9.6%

Source: SNL Financial, Oriental public SEC filings, regulatory filings.

Other Non-GAAP and Performance Measures

•

Tangible book value and tangible common equity are defined as total common equity less total intangible assets. 

•

Marked tangible book value defined as total common equity less total intangible assets and mark-to-market adjustments. 

•

Internal Rate of Return (“IRR”) represents the annualized effective rate of return on investment. 

•

Return on average assets (“ROAA”) is calculated as projected 2014 net income available to common shareholders divided by projected 2014

average assets. Assets are assumed to grow consistently over the course of 2014.

•

Return on average tangible common equity (“ROATCE”) calculated as projected 2014 net income available to common shareholders divided by

average projected 2014 tangible common equity. Tangible common equity is assumed to grow consistently over the course of 2014.

•

Nonperforming loans defined as nonaccrual loans and loans over 90 days past due.

•

NPA formation defined as the gross amount of loans placed on nonaccrual status since prior period end annualized, expressed as a percentage of

average total assets.

•

Core deposits defined as total deposits less brokered deposits.

•

Nonperforming assets are defined as nonaccrual loans and other real estate owned. 

EX-99.3

Exhibit 99.3

SUPPLEMENTAL REGULATION FD INFORMATION

Dated June 28, 2012

SUMMARY OF TERMS OF THE PREFERRED STOCK

Issuer	Oriental Financial Group Inc., incorporated in the Commonwealth of Puerto Rico.
Securities	84,000 shares of 8.750% Non-Cumulative Convertible Perpetual Preferred Stock, Series C. The Preferred Stock was offered pursuant to Section 4(2) of the Securities Act only to investors that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act.
Price	$1,000 per share of Preferred Stock.
Ranking	The Preferred Stock will rank, with respect to the payment of dividends and distributions upon liquidation, dissolution or winding-up, senior to our Common Stock and each other class or series of capital stock we may issue in the future the terms of which do not expressly provide that it ranks on a parity with or senior to the Preferred Stock as to dividend rights and rights on liquidation, dissolution or winding-up of Oriental Financial Group Inc. The Preferred Stock will rank, with respect to the payment of dividends and distributions upon liquidation, dissolution or winding-up, on a parity with our existing preferred stock (Series A 7.125% Non-Cumulative Monthly Income Preferred Stock and Series B 7.0% Non-Cumulative Monthly Income Preferred Stock), and each class or series of capital stock we may issue in the future the terms of which expressly provide that such class or series will rank on a parity with the Preferred Stock, as to dividend rights and rights on liquidation, dissolution or winding-up of Oriental Financial Group Inc. For additional information on our Common Stock, potential investors should refer to “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in our Annual Report on Form 10-K filed with the SEC on March 9, 2012, as well as the information in our other public filings.
Liquidation Preference	Upon our voluntary or involuntary liquidation, dissolution or winding-up, holders of the Preferred Stock will be entitled to receive, out of our assets that are legally available for distribution to shareholders, before any distribution is made to holders of our Common Stock or other junior securities, a liquidating distribution in the amount of $1,000 per share of the Preferred Stock plus any accrued and unpaid dividends, whether or not declared, for the dividend period during which the liquidation, dissolution or winding up occurs. Distributions will be made pro rata as to the Preferred Stock and any other parity securities and only to the extent of our assets, if any, that are available after satisfaction of all liabilities to creditors.
Dividends	Dividends on the Preferred Stock will be payable quarterly in arrears, when, as and if authorized and declared by our board of directors out of legally available funds at an annual rate of 8.750% on the liquidation preference of $1,000 per share. Dividends on the Preferred Stock will be non-cumulative. If for any reason our board of directors does not authorize and declare full cash dividends on the Preferred Stock for a quarterly dividend period, we will have no obligation to pay any dividends for that period, whether or not our board of directors authorizes and declares dividends on the Preferred Stock for any subsequent dividend period.
Dividend Payment Dates	January 15, April 15, July 15 and October 15 of each year, commencing on October 15, 2012.
Dividend Stopper	So long as any share of Preferred Stock remains outstanding,

1

•      no dividend will be declared and paid or set aside for payment and no distribution will be declared and made or set aside for payment on any junior securities, including our Common Stock (other than a dividend payable solely in shares of junior securities), unless the full dividends for the most recent dividend payment date on all outstanding shares of the Preferred Stock have been paid or declared and a sum sufficient for the payment of those dividends has been set aside; and •      no shares of junior securities will be repurchased, redeemed, or otherwise acquired for consideration by us, directly or indirectly (other than (a) as a result of a reclassification of junior securities for or into other junior securities, (b) repurchases, redemptions or acquisitions in connection with any employment contract, benefit plan or similar arrangements with or for the benefit of any one or more employees, officers, directors or consultants or in connection with a dividend reinvestment or shareholder stock purchase plan providing for the purchase of junior securities by shareholders from us, (c) through the use of the proceeds of a substantially contemporaneous sale of other shares of junior securities and (d) conversions into or exchanges for other junior securities and cash solely in lieu of fractional shares of the junior securities), unless the full dividends for the most recent dividend payment date on all outstanding shares of the Preferred Stock have been paid or declared and a sum sufficient for the payment of those dividends has been set aside. For so long as any share of Preferred Stock remains outstanding, we will not declare, pay, or set aside for payment, dividends on any parity securities for any period unless we have paid in full, or declared and set aside payment in full, in respect of all dividends for all outstanding shares of Preferred Stock. To the extent that we declare dividends for the then-current dividend period on the Preferred Stock and on any parity securities but do not make full payment of such declared dividends, we will allocate the dividend payments on a pro rata basis among the holders of the shares of Preferred Stock and the holders of any parity securities. For purposes of calculating the pro rata allocation of partial dividend payments, we will allocate those payments so that the respective amounts of payments for the then-current dividend period bear the same ratio to each other as all accrued and unpaid dividends per share on the Preferred Stock and all parity securities bear to each other. Notwithstanding the foregoing, if there is a change in the regulatory capital guidelines applicable to us enacted in connection with or otherwise resulting from the adoption of the Federal Reserve’s notice of proposed rulemaking, approved for publication on June 7, 2012, that would implement new international capital guidelines (“Basel III”) established by the Basel Committee on Banking Supervision (as such proposed rule may be amended or revised, the “Basel III NPR”), or otherwise in connection with the implementation by applicable U.S. bank regulatory authorities of the Basel III capital accord, that would cause the Preferred Stock to fail to qualify as Tier 1 capital due to the provisions described in this “Dividend Stopper” section, then such provisions shall not be applicable if as a result thereof the Preferred Stock would then qualify as Tier 1 capital upon the closing of the acquisition of BBVA PR (as defined below) and thereafter. For the avoidance of doubt, the provisions in this “Dividend Stopper” section shall be retained and reinstated (if applicable) to the maximum extent allowable under applicable regulatory guidelines that permit the Preferred Stock to qualify as Tier 1 capital. We have agreed that for so long as the Preferred Stock is outstanding, we will not issue any shares of cumulative preferred stock.

Dividend Policy on Common Stock

Holders of our Common Stock are only entitled to receive dividends as our Board of Directors may declare out of funds legally available for such payments. Although we have historically declared cash dividends on our Common Stock, we are not required to do so. We expect to continue to pay dividends, but our ability to pay future dividends at current levels will necessarily depend upon our earnings and financial condition, and general market conditions. We paid a cash dividend of $0.06 per share on April 15, 2012, to the holders of record of our Common Stock as of March 31, 2012.

2

Optional Redemption by Us if the Acquisition is not Consummated	The Preferred Stock is not redeemable by us at any time except as follows: If the acquisition agreement relating to our pending acquisition of BBVA PR terminates without the acquisition closing, we may, subject to regulatory approval if required under 12 CFR 225.4, at our option, redeem all (but not less than all) the shares of Preferred Stock pursuant to a notice of redemption given (i) on or prior to July 28, 2013 if the acquisition agreement terminates without the acquisition closing occurring on or prior to June 28, 2013 or (ii) on or prior to the third business day after September 30, 2013, if the last day for consummation of the acquisition has been extended in accordance with the acquisition agreement, in cash, at a redemption price equal to 101% of the liquidation preference of the shares to be redeemed and accrued and unpaid dividends for such dividend period (whether or not declared), plus a “redemption premium”. We will provide not less than 45 nor more than 60 scheduled trading days’ notice before the redemption date by mail or electronic delivery to each holder of the Preferred Stock. “Redemption premium” means an amount in cash per $1,000 liquidation preference of the shares equal to 85% of the excess, if any, of (i) the applicable conversion rate multiplied by the volume weighted average price of our Common Stock during the 40 trading day period beginning on, and including, the 42nd scheduled trading day immediately preceding the redemption date over (ii) the initial conversion value (as defined below) per $1,000 liquidation preference of the shares. “Initial conversion value” per $1,000 liquidation preference of the shares means $888.8889, which is equal to the product of the initial conversion rate and the closing sale price per share of our Common Stock on The New York Stock Exchange on June 27, 2012 (the “Initial Price”).
Maturity	Perpetual, unless converted or redeemed by us as described above.
Conversion Right	Each share of the Preferred Stock may be converted at any time, at the option of the holder, into 84.9798 shares of our Common Stock (which reflects an initial conversion price of approximately $11.77 per share of our Common Stock) plus cash in lieu of fractional shares, subject to the anti-dilution adjustments described below and subject to the limitations set forth below under “Limitation on Beneficial Ownership.” Notwithstanding the foregoing, upon conversion, we may choose to pay or deliver, as the case may be, cash, shares of our Common Stock, or a combination thereof at our election, subject to any applicable regulatory approval. If we satisfy our conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of our Common Stock, the amount of cash and shares of Common Stock, if any, due upon conversion will be based on a daily conversion value (as described below) calculated on a proportionate basis for each trading day in a 40 consecutive trading-day period (the “observation period”) beginning on (i) subject to clauses (ii) and (iii) of this sentence, the second trading day immediately succeeding the related conversion date, (ii) if the relevant conversion date occurs on or after the date we issue a redemption notice with respect to the Preferred Stock (as described under “Optional Redemption by Us if the Acquisition is not Consummated,” below) and prior to the relevant redemption date, the 42nd scheduled trading day immediately preceding such redemption date and (iii) if the shares are being converted pursuant to our mandatory conversion right (as described under “Mandatory Conversion at Our Option,” below), the 42nd Scheduled Trading Day immediately preceding the Mandatory Conversion Date. “Daily conversion value” means, for each of the 40 consecutive trading days during the observation period, one-40th (1/40th) of the product of (i) the then applicable conversion rate and (ii) the per share volume-weighted average price of our Common Stock on The New York Stock Exchange on such trading day.

3

	If the conversion date is on or prior to the record date for any declared cash dividend on the Preferred Stock for the dividend period in which holder elects to convert, holder will not receive any declared cash dividends for that dividend period. If the conversion date is after the record date for any declared cash dividend on the Preferred Stock and prior to the corresponding dividend payment date, holder will receive that cash dividend on the relevant dividend payment date if holder was the holder of record on the record date for that dividend; however, whether or not holder was the holder of record on the record date, if holder converts after a record date and prior to the related dividend payment date, holder must pay to the conversion agent when holder converts shares of the Preferred Stock an amount in cash equal to the full dividend actually paid on such dividend payment date on the shares being converted, unless holder’s shares are being converted as a consequence of a mandatory conversion at our option or following a Specified Corporate Event or a Fundamental Change as described below, or following us providing notice of redemption as described above under “Optional Redemption by us if the Acquisition is not Consummated.”
Mandatory Conversion at Our Option	On or after July 15, 2017, we may, at our option, at any time or from time to time, cause some or all of the Preferred Stock to be converted into shares of our Common Stock (or, with any applicable regulatory approval, cash or a combination of shares of our Common Stock and cash) at the then-applicable conversion rate. We may exercise our conversion right if, for 20 trading days within any period of 30 consecutive trading days ending on the trading day preceding the date we give notice of mandatory conversion, the closing price of our Common Stock exceeds 130% of the then applicable conversion price of the Preferred Stock.
Adjustments to Conversion Price upon a Fundamental Change when the Reference Price is below the Conversion Price	If the reference price in connection with a Fundamental Change is less than the applicable conversion price (after giving effect to any adjustment described below under “Adjustment to Conversion Rate Upon a Fundamental Change”), each share of the Preferred Stock may be converted during the period beginning on the effective date of the Fundamental Change and ending on the date that is 30 days after the effective date of such Fundamental Change at an adjusted conversion price equal to the greater of (1) the reference price and (2) $5.23, which we refer to as the base price, which is 50% of the Initial Price, subject to adjustment. If the reference price is less than the base price, holders will receive on conversion of our Preferred Stock shares of our Common Stock with value that may be less than the liquidation preference of the Preferred Stock. In lieu of issuing shares of Common Stock upon conversion in such event, we may at our option, provided that we obtain any necessary regulatory approval, make a cash payment equal to the reference price for each share of Common Stock otherwise issuable upon conversion. If the holders of our shares of Common Stock receive only cash in connection with the Fundamental Change, the reference price shall be the cash amount paid per share. Otherwise the reference price shall be the average of the closing price per share of our Common Stock on the ten trading days up to but not including the effective date of the Fundamental Change.
Fundamental Change	A “Fundamental Change” will be deemed to have occurred if we consolidate with or merge with or into any person or convey, transfer, sell or otherwise dispose of or lease all or substantially all of our assets to any person, or any person consolidates with or merges into or with us, in any such event pursuant to a transaction in which our outstanding voting shares are changed into or exchanged for cash, securities or other property, other than any such transaction where our outstanding voting shares are not changed or exchanged at all (except to the extent necessary to reflect a change in our jurisdiction of formation); provided, however, that a Fundamental Change with respect to any such transaction will not be deemed to have occurred if at least 90% of the consideration received by holders of our Common Stock in the transaction or transactions, excluding cash payments for fractional shares and cash payments made in respect of dissenters’ appraisal rights, consists of shares of common stock or American Depositary Receipts in respect of common stock listed on any of the New York Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Global Market (or any of their respective successors) or will be so listed when issued or exchanged in connection with such transaction or transactions.

4

Additionally, if the Issuer elects to and does obtain shareholder approval to allow us to issue shares of our Common Stock in excess of 20% or more of our Common Stock outstanding at the time the Preferred Stock is issued (the “share cap”), on and after the date the Issuer obtains shareholder approval, the occurrence of either of the events described in clauses 1 and 2 of “Specified Corporate Events” below shall no longer constitute a Specified Corporate Event and shall instead constitute a Fundamental Change.

Adjustment to Conversion Rate Upon a Fundamental Change

If and only to the extent a holder elects to convert its Preferred Stock in connection with a Fundamental Change, unless the conversion rate has already been adjusted as a result of the occurrence of a Specified Corporate Event, as described below under “Adjustment to Conversion Rate Upon Specified Corporate Events”, we will in certain circumstances increase the conversion rate for any conversion of the Preferred Stock that occurs during the period (the “Fundamental Change conversion period”) beginning on the effective date of the Fundamental Change (the “effective date”) and ending on the date that is 30 days after the effective date, by a number of additional shares of Common Stock (the “make-whole shares”). The number of make whole shares will be determined by reference to the table below, based on the date on which such Fundamental Change transaction becomes effective (the “effective date”) and the price (the “share price”) paid per share for our shares of Common Stock in such Fundamental Change transaction.

Share price
Effective date	$10.46		$11.00		$11.77		$13.25		$15.30		$17.50		$22.50		$27.50		$32.50		$37.50
7/3/2012		10.6225		10.6225		10.6225		10.6164		7.4543		5.1495		2.1276		0.6840		0.0534		0.0019
7/15/2013		10.6225		10.6225		10.6225		9.8135		6.8030		4.6634		1.9116		0.6014		0.0382		0.0013
7/15/2014		10.6225		10.6225		10.6225		8.7811		5.9300		3.9983		1.6162		0.4910		0.0201		0.0006
7/15/2015		10.6225		10.6225		10.6225		7.4634		4.7481		3.0776		1.2156		0.3489		0.0002		0.0000
7/15/2016		10.6225		10.6225		9.2752		5.7676		3.0871		1.7777		0.6919		0.1931		0.0000		0.0000
7/15/2017, and after		10.6225		10.6225		8.4476		3.9448		0.0000		0.0000		0.0000		0.0000		0.0000		0.0000

The exact share prices and effective dates may not be set forth in the table above, in which case: •      If the share price is between two stock price amounts in the table or the date is between two dates in the table, the number of additional shares will be determined by a straight-line interpolation between the number of additional shares set forth for the higher and lower share price amounts and the two dates, as applicable, based on a 365-day year. •      If the share price is greater than $37.50 per share, subject to adjustment, no additional shares will be added to the conversion rate. If the share price is less than $10.46 per share, subject to adjustment, no additional shares will be added to the conversion rate.

Adjustment Upon Specified Corporate Events if Shareholder Approval is not Obtained

In connection with a Specified Corporate Event as described in “Specified Corporate Events”: •      we will permanently increase the conversion rate for the Preferred Stock by a number of additional shares (the “additional shares”) as described below, regardless of whether any holder converts its Preferred Shares in connection therewith; and •      the dividend rate per annum will increase by 3.0% during each quarter in which the closing price of our Common Stock is below the Initial Price, subject to adjustment, for 20 trading days within the period of 30 consecutive trading days ending 15 trading days prior to the quarterly record date for the quarter. The number of additional shares will be determined by reference to the table provided above under “Adjustment to Conversion Rate Upon a Fundamental Change”, based on the date on which the corporate event becomes effective (the “effective date”) and the average of the closing sale prices of our Common Stock over the ten trading day period ending on the trading day immediately preceding the effective date (the “share price”). If the share price is less than the Initial Price, subject to adjustment, however, it will be deemed to be such amount, and upon conversion a holder shall be entitled to receive additional shares as if the share price were this amount. This adjustment to the conversion rate as a result of the occurrence of a Specified Corporate Event will be made only once, regardless of the occurrence of any subsequent Specified Corporate Events, if any.

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Specified Corporate Events	A “Specified Corporate Event” will be deemed to occur if any of the following occurs: 1.      The acquisition, directly or indirectly, by any person or group (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the aggregate voting power of our voting stock; or 2.      Our Common Stock ceases to be listed on any of the New York Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Global Market (or any of their respective successors). Notwithstanding the foregoing, on and after the date on which we receive shareholder approval to allow us to issue shares of our Common Stock in excess of the share cap (as defined under “Fundamental Change,” above), the occurrence of either of the events described in clauses 1 and 2 above shall no longer constitute a Specified Corporate Event and shall instead constitute a Fundamental Change, as described under “Fundamental Changes,” above.
Anti-Dilution Adjustments	The conversion rate may be adjusted in the event of, among other things: •    increases in cash dividends on our Common Stock; •    dividends or distributions in Common Stock or other property; •    certain issuances of stock purchase rights; •    certain self tender offers; or •    subdivisions, splits and combinations of the Common Stock.
Voting Rights	The holders of the Preferred Stock do not have voting rights, except with respect to certain matters that would significantly and adversely affect the legal rights or preference of the Preferred Stock. A holder of Preferred Stock will not vote with the holders of our Common Stock until conversion of the Preferred Stock by such holder.
Preemptive Rights	None.
Use of Proceeds	We estimate that our net proceeds from the offering will be approximately $79.5 million after deducting estimated offering expenses, including fees payable to the Placement Agent. We will use the net proceeds of the offering to fund a portion of the acquisition price for BBVA PR.
Shares of Common Stock Outstanding	40,725,363 shares of our Common Stock outstanding as of June 15, 2012. After giving effect to the offering (and assuming the conversion of all the Preferred Stock into shares of Common Stock at the initial conversion price), there would have been 47,863,666 shares of our Common Stock outstanding as of June 15, 2012.

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No Registration Rights; Additional Dividends

If, at any time during the six-month period beginning on, and including, the date which is six months after the issuance of the Preferred Stock, we fail to timely file any document or report that we are required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, as applicable (after giving effect to all applicable grace periods thereunder and other than reports on Form 8-K), or the Preferred Stock is not otherwise freely tradable by holders other than our affiliates (as a result of restrictions pursuant to U.S. securities law or the terms of the Preferred Stock), the dividend rate per annum on the Preferred Stock will increase by a rate of 0.25% per annum for each day during such period for which our failure to file has occurred and is continuing or the Preferred Stock is not so freely tradable. If a failure to file has occurred and is continuing or the Preferred Stock remains not freely tradable by holders other than our affiliates for a period of 90 calendar days, the dividend rate per annum on the Preferred Stock will increase by an additional 0.25% per annum for each day during such six-month period from such 90th day for which our failure to file has occurred and is continuing or the Preferred Stock is not so freely tradable. Further, if, and for so long as, the restrictive legend on the Preferred Stock has not been removed or the Preferred Stock is not otherwise freely tradable by holders other than our affiliates (without restrictions pursuant to U.S. securities law or the terms of the Preferred Stock) as of the 365th day after the date of original issuance of the Preferred Stock , the dividend rate per annum on the Preferred Stock will increase by a rate of 0.50% per annum for each day during such period until such restrictive legend is removed and the Preferred Stock is freely tradable as described above. Subject to the increase in the dividend rate described in “Adjustment Upon Specified Corporate Events,” above, in no event will the dividend rate per annum on the Preferred Stock increase by more than 0.50% per annum as compared to the initial dividend rate as described in “Dividends”. There can be no assurances that we will be able to remove the restrictive legend from the Preferred Stock or from any shares of Common Stock issued upon conversion of the Preferred Stock.

No Listing

The Preferred Stock will not be listed on any securities exchange or included in any automated quotation system. Our Common Stock is listed on the New York Stock Exchange under the symbol “OFG.”

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RISK FACTORS

Risks Related to the Proposed Acquisition

We are subject to extensive regulation and we may not receive the necessary regulatory approvals to consummate the acquisition.

As a bank holding company, we are subject to extensive regulation, examination and potential enforcement actions by the Federal Reserve and other federal, state and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. Our depository institution subsidiary is also subject to extensive regulation, examination and potential enforcement actions by the FDIC and the Office of the Commissioner of Financial Institutions of Puerto Rico.

The consummation of our proposed acquisition of BBVA’s Puerto Rico operations (“BBVA PR”) is subject to the receipt of all necessary regulatory approvals, including those of federal and Puerto Rico bank regulators. In determining whether to approve a proposed acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on our competitors, our financial condition and our future prospects. The regulators also review current and projected capital ratios and levels, the competence, experience, and integrity of management and its record of compliance with laws and regulations, the convenience and needs of the communities to be served (including the acquiring institution’s record of compliance under the Community Reinvestment Act) and the effectiveness of the acquiring institution in combating money laundering activities. Such regulatory approvals may not be granted on terms that are acceptable to us, or at all. We may also be required to sell branches as a condition to receiving regulatory approval, which condition may not be acceptable to us or, if acceptable to us, may reduce the benefit of the acquisition. There can be no assurance as to when or whether these regulatory approvals will be received or the conditions associated with any approval.

We may not be able to integrate the target assets into our operations and realize the anticipated benefits of the acquisition.

The success of our proposed acquisition of BBVA PR will depend on, among other things, our ability to realize anticipated cost savings and to integrate the acquired assets and operations in a manner that permits growth opportunities and does not materially disrupt our or BBVA PR’s existing customer relationships or result in decreased revenues resulting from any loss of customers. If we are not able to successfully achieve these objectives, the anticipated benefits of the acquisition may not be realized fully, or at all, or may take longer to realize than expected. Additionally, we will make fair value estimates of certain assets and liabilities in recording the acquisition. Actual values of these assets and liabilities could differ from our estimates, which could result in our not achieving the anticipated benefits of the acquisition.

There is no assurance that our proposed acquisition of BBVA PR will have positive results, including results relating to: correctly assessing the asset quality of the assets acquired; the total cost of integration, including management attention and resources; the time required to complete the integration successfully; the amount of longer-term cost savings; being able to profitably deploy funds acquired in the transaction; or the overall performance of the combined business. The successful integration of BBVA PR’s banking operations, and our future growth and profitability, depend, in part, on our ability to successfully manage the combined operations. Integration of an acquired business can be complex and costly, sometimes including combining relevant accounting and data processing systems and management controls, as well as managing relevant relationships with employees, clients, suppliers and other business partners. Integration efforts could divert management attention and resources, which could adversely affect our operations or results. The loss of key employees in connection with this acquisition could adversely affect our ability to successfully conduct the combined operations.

Given the economic conditions in Puerto Rico, we may experience increased credit costs or need to take additional markdowns and make additional provisions to the allowances for loan losses on the assets and loans acquired that could adversely affect our financial condition and results of operations in the future. There is no assurance that our integration efforts will not result in other unanticipated costs, including the diversion of personnel, or losses.

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Our acquisition of BBVA PR may also result in business disruptions that cause us to lose customers or cause customers to move their accounts or business to competing financial institutions. It is possible that the integration process related to the proposed acquisition could disrupt our ongoing business or result in inconsistencies in customer service that could adversely affect our ability to maintain relationships with clients, customers, depositors and employees. Our inability to overcome these risks could have a material adverse effect on our business, financial condition, results of operations and future prospects.

Actual values could differ from the assumptions we have made regarding certain financial metrics after the acquisition.

Information regarding the combined company included in this supplement and in other documents we provide is based in part on certain assumptions regarding the transaction and the value of the acquired assets and liabilities that we believe are reasonable. There is no assurance that our assumptions will prove to be accurate over time, and it is possible that the final terms of the acquisition may be on terms materially different from the terms on which our assumptions are based. Accordingly, the historical, pro forma and other financial information included in this supplement and in other documents we provide may not reflect what our results of operations and financial condition would have been had the acquisition actually occurred during the periods presented, or what our results of operations and financial condition will be in the future.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents, capitalization and certain bank regulatory capital ratios at March 31, 2012, on an actual basis and on an as adjusted basis to give effect to the offering of Preferred Stock. The following table should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012. The following table does not give effect to our proposed acquisition of BBVA PR.

	March 31, 2012
	Actual			As adjusted
	(dollars in thousands)
Cash and Cash Equivalents	$	453,997		$	533,497
Liabilities:
Deposits	$	2,274,567		$	2,274,567
Borrowings:
Short-term borrowings	$	43,564		$	43,564
Securities sold under agreements to repurchase		3,056,165			3,056,165
Advances from FHLB		281,713			281,713
Subordinated capital notes		36,083			36,083
Total borrowings		3,417,525			3,417,525
Derivative liabilities		49,426			49,426
Accrued expenses and other liabilities		30,547			30,547
Total liabilities	$	5,772,065		$	5,772,065
Stockholders’ equity:
Preferred stock, $1 par value; 10,000,000 shares authorized, $25 liquidation value:
1,405,000 shares of Series A authorized; 1,340,000 shares of Series A issued and outstanding.		33,500			33,500
1,380,000 shares of Series B authorized, issued and outstanding		34,500			34,500
Preferred stock offered hereby, $1 par value, $1,000 liquidation value		—			84,000
Common stock, $1 par value; 100,000,000 shares authorized; 47,841,251 shares issued; 40,689,650 shares outstanding		47,841			47,841
Additional paid-in capital		499,786			495,286
Legal surplus		51,246			51,246
Retained earnings		74,091			74,091
Treasury stock, at cost, 7,151,601 shares		(81,772	)		(81,772	)
Accumulated other comprehensive income, net of tax of $1,464		30,098			30,098
Total stockholders’ equity	$	689,290		$	768,790
Total liabilities and stockholders’ equity	$	6,461,355		$	6,540,855
Regulatory capital ratios of the Bank:*
Total Capital to Risk-Weighted Assets		32.09	%		32.09	%
Tier 1 Capital to Risk-Weighted Assets		30.80	%		30.80	%
Tier 1 Capital to Total Assets		9.77	%		9.77	%

* Preferred Stock offered hereby will not qualify as Tier 1 capital until the closing of the Acquisition.

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The Preferred Stock was offered and sold in private transactions and has not been and will not be registered under the Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

This supplemental information does not constitute an offer to sell or solicitation of an offer to purchase any security.

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