OFG Bancorp (NYSE: OFG), the financial holding company for
Oriental Bank, reported results for the second quarter ended June
30, 2023. EPS diluted of $0.93 compared to $0.96 in 1Q23 and $0.84
in 2Q22. Total core revenues of $170.5 million compared to $164.4
million in 1Q23 and $146.3 million in 2Q22.
CEO Comment
José Rafael Fernández, Chief Executive Officer, said: “The
second quarter generated year-over-year increases of 16.5% in total
core revenues and 10.7% in earnings per share. The period was
highlighted by strong loan production, stable core deposits along
with low cumulative deposit beta of 16% and increased operating
leverage. Customer liquidity and the Puerto Rico economy continued
at high levels. We also repurchased 565,299 shares of OFG stock as
part of our buyback program.”
“Our ‘Digital First’ strategy continues to show excellent
progress. We launched a first to market, self-service portal that
enables customers to manage quickly and easily all their loan and
deposit accounts in one place. Customers are increasingly adopting
this and other self-service tools. Use of brick and mortar channels
is down and digital is up, leading to an overall 5% increase in
customer transaction activity in June year-over-year. This is
freeing more Oriental team members to provide value-added service
and develop new business. As always, thanks to our team for helping
our customers and the communities we serve.”
2Q23 Highlights
Performance Metrics: Net interest margin of 5.90%, return
on average assets of 1.76%, return on average tangible common
stockholders’ equity of 17.67%, and efficiency ratio of 52.13%.
Net Interest Income of $139.6 million compared to $135.9
million in 1Q23 and $115.1 million in 2Q22. 2Q23 reflected the full
effect of 1Q23’s 50 basis point increase in the Federal Reserve
Board’s funds rate and a partial effect of 2Q23’s 25 bps
increase.
Total Interest Income of $158.0 million compared to
$149.0 million in 1Q23 and $122.2 million in 2Q22. Compared to
1Q23, 2Q23 primarily reflected higher yields on increased average
balances of loans and cash.
Total Interest Expense of $18.3 million compared to $13.1
million in 1Q23 and $7.1 million in 2Q22. Compared to 1Q23, 2Q23
reflected higher cost of funds on increased average balances of
interest bearing liabilities, including the full quarter effect of
a $200 million mid-March Federal Home Loan Bank advance.
Total Banking & Financial Service Revenues of $30.9
million compared to $28.5 million in 1Q23 and $31.2 million in
2Q22. Compared to 1Q23, 2Q23 primarily reflected increased wealth
management and mortgage servicing revenues. Non-interest income
also included a loss of $0.8 million due primarily to the sale of a
short-term Treasury note.
Pre-Provision Net Revenues of $80.8 million compared to
$74.6 million in 1Q23 and $66.0 million in 2Q22.
Total Provision for Credit Losses of $15.0 million
compared to $9.4 million in 1Q23 and $6.7 million in 2Q22. 2Q23
included $9.1 million for a specific reserve for three US
commercial loans and $6.3 million due to increased loan volume.
Credit Quality: Net charge-offs of $6.6 million compared
to $10.1 million in 1Q23 and $4.5 million in 2Q22. 2Q23 included a
recovery of $3.7 million from the sale of older, fully charged off
auto and consumer loans. 2Q23 delinquency and non-performing loan
rates rose slightly from reduced levels in 1Q23.
Total Non-Interest Expense of $88.9 million compared to
$90.2 million in 1Q23 and $85.3 million in 2Q22. Compared to 1Q23,
2Q23 operating expenses increased $1.8 million, which was more than
offset by $3.1 million from (i) a higher gain on foreclosed real
estate and (ii) lower credit expenses.
Loans Held for Investment (EOP) of $7.12 billion compared
to $6.85 billion in 1Q23 and $6.70 billion in 2Q22. Loans increased
15.4% annualized from the previous quarter and 6.2% year-over-year.
Compared to 1Q23, 2Q23 reflected increases in commercial, auto, and
consumer loans. This was partially offset by regular paydowns of
residential mortgages.
New Loan Production of $691.8 million compared to $561.3
million in 1Q23 and $587.2 million in 2Q22. 2Q23 reflected strong
levels of commercial lending in Puerto Rico and the US as well as
auto, consumer, and residential mortgage lending.
Total Investments (EOP) of $1.70 billion compared to
$1.92 billion in 1Q23 and $1.73 billion in 2Q22. 2Q23 investments
declined $214.0 million from 1Q23 primarily due to the previously
mentioned sale of a Treasury note.
Customer Deposits (EOP) of $8.54 billion compared to
$8.57 billion in 1Q23 and $9.02 billion in 2Q22.
Total Borrowings (EOP) of $226.5 million compared to
$226.8 million in 1Q23 and $27.6 million in 2Q22.
Cash & Cash Equivalents (EOP) of $799.0 million
compared to $847.5 million in 1Q23 and $1.31 billion in 2Q22.
Total Assets (EOP) of $10.03 billion compared to $10.06
billion in 1Q23 and $10.25 billion in 2Q22.
Capital: CET1 ratio of 14.01% compared to 14.07% in 1Q23
and 12.80% in 2Q22. The Tangible Common Equity ratio was 9.99%
compared to 9.85% in 1Q23 and 8.85% in 2Q22. Tangible Book Value
per share of $21.06 compared to $20.57 in 1Q23 and $18.86 in
2Q22.
Conference Call, Financial Supplement &
Presentation
A conference call to discuss 2Q23 results, outlook and related
matters will be held today at 10:00 AM ET. Phone (800) 579-2543 or
(785) 424-1789. Conference ID: OFGQ223. The call can also be
accessed live on www.ofgbancorp.com with webcast replay shortly
thereafter.
OFG’s Financial Supplement, with full financial tables for the
quarter ended June 30, 2023, and the 2Q23 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, pandemics and other natural disasters; and
(iv) competition in the financial services industry.
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, 2022, 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 59th 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/20230719968432/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
OFG Bancorp (NYSE:OFG)
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