OFG Bancorp (NYSE: OFG), the financial holding company for
Oriental Bank, reported results for the second quarter ended June
30, 2021.
CEO Comment
José Rafael Fernández, Chief Executive Officer, said: “We
generated outstanding second quarter results. This reflects our
larger scale and our focus on digital utilization and
differentiation, combined with Puerto Rico’s early economic and
post-pandemic recovery.
“The economy is clearly benefitting from a massive amount of
federal reconstruction and COVID stimulus, which are more
meaningful here compared to mainland states given the size of our
economy as it relates to reconstruction funds and the size of
stimulus payments compared to average income levels.
“We saw the effects of all this across all our businesses. New
loan origination increased 27.7% from 1Q21 with gains in all major
categories, led by commercial and auto lending. Interest income
grew 2.2% from 1Q21 as average loan balances expanded 1.3%,
excluding residential mortgage. Banking and financial services
revenues rose 5.4%.
“Asset quality trends continued to improve as reconstruction and
stimulus funds provided significant liquidity to businesses and
individuals. As result of this, provision for credit losses was a
net benefit of $8.3 million.
“Results were enhanced by a 12.3% reduction in cost of funds
compared to 1Q21 and the previously announced deployment of excess
capital to redeem all three of our outstanding series of preferred
stock, eliminating $1.6 million in quarterly dividends.
“Return on average assets and on average tangible equity
expanded to 1.58% and 17.78%, respectively, compared to the
previous and year ago quarters.
“As Puerto Rico continues experiencing stronger signs of
economic revival, OFG is strategically well-positioned to continue
to benefit from and play a major role in this long-awaited
development. Thanks to all our team members who have been more than
ready to help our customers achieve their goals.”
2Q21 Highlights
Summary: Earnings per share diluted was $0.78 compared to
$0.56 in 1Q21 and $0.39 in 2Q20. Total core revenues were $133.3
million compared to $127.7 million in 1Q21 and $128.2 million in
2Q20. Net interest margin was 4.22% compared to 4.26% in 1Q21 and
4.78% in 2Q20.
Total interest income of $113.5 million increased 2.2%
from 1Q21 primarily due to higher income from increased average
balances of commercial and auto loans and investment securities.
Average loan balances were $6.60 billion compared to $6.64 billion
in 1Q21 and $6.84 billion in 2Q20.
New Loan Origination totaled $673.6 million compared to
$527.6 million in 1Q21 and $506.0 million in 2Q20. 2Q21 increased
27.7% from 1Q21 due to gains in all major categories, led by
commercial and auto lending.
Total Interest Expense was $11.2 million compared to
$12.8 million in 1Q21 and $16.6 million in 2Q20. 2Q21 declined
12.3% from 1Q21 primarily due to lower cost of core deposits, which
was 38 bps compared to 47 bps in 1Q21 and 61 bps in 2Q20. Average
customer deposit balances were $8.96 billion compared to $8.54
billion in 1Q21 and $7.85 billion in 2Q20.
Asset Quality and Provision for Credit Losses: 2Q21
reflected continued improvement in asset quality trends with the
rates for net charge offs (0.13%) and early (1.86%) and total
(3.90%) delinquency at their lowest levels in five quarters.
Provision for credit losses was a net benefit of $8.3 million,
resulting from $2.1 million net charge-offs and $10.4 million net
reserve releases, compared to a provision expense of $6.3 million
in 1Q21 and $17.7 million in 2Q20.
Banking and Financial Services Revenues were $31.0
million compared to $29.5 million in 1Q21 and $23.1 million in
2Q20. 2Q21 increased 5.4% from 1Q21 and 34.4% from 2Q20 primarily
due to increased activity as pandemic related economic restrictions
have subsided.
Non-Interest Expenses were $82.7 million compared to
$77.7 million in 1Q21 and $85.5 million in 2Q20. 2Q21 reflected
previously announced cost savings, a $2.2 million technology
project write down, and higher variable expenses related to higher
revenues.
Pre-Provision Net Revenues were $51.8 million, which
includes the above non-cash write down, compared to $50.9 million
in 1Q21 and $46.7 million in 2Q20.
Capital: Tangible book value per share was $18.13
compared to $17.39 in 1Q21 and $16.01 in 2Q20. CET1 ratio was
13.95% compared to 13.56% in 1Q21 and 12.03% in 2Q21.
Conference Call, Financial Supplement &
Presentation
A conference call to discuss 2Q21 results, outlook and related
matters will be held today at 10:00 AM ET. Phone (888) 562-3356 or
(973) 582-2700. Conference ID: 573-9736. The call can also be
accessed live on www.ofgbancorp.com. Webcast replay will be
available shortly thereafter.
OFG’s Financial Supplement, with full financial tables for the
quarter ended June 30, 2021, and the 2Q21 Conference Call
Presentation, can be found on the Quarterly Results 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 SEC Regulation G, to clarify and enhance
understanding of past performance and prospects for the future.
Please refer to Tables 8-1 and 8-2 in OFG’s above-mentioned
Financial Supplement for a 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) general business and economic conditions, including
changes in interest rates; (ii) cybersecurity breaches; (iii)
hurricanes, earthquakes and other natural disasters in Puerto Rico;
(iv) competition in the financial services industry; and (v) the
severity, magnitude and duration of the COVID-19 pandemic, and its
impact on our operations, personnel, and customers.
For a discussion of such factors and certain risks and
uncertainties to which OFG is subject, please refer to OFG’s annual
report on Form 10-K for the year ended December 31, 2020, 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 57th year in business, OFG Bancorp is a diversified
financial holding company that operates under U.S., Puerto Rico and
U.S. Virgin Islands 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 and U.S. Virgin
Islands. Visit us at www.ofgbancorp.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20210721005495/en/
Puerto Rico & USVI: Idalis Montalvo
(idalis.montalvo@orientalbank.com) at (787) 777-2847 US:
Gary Fishman (gfishman@ofgbancorp.com) and Steven Anreder
(sanreder@ofgbancorp.com) at (212) 532-3232
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