OFG Bancorp (NYSE: OFG), the financial holding company for Oriental Bank, reported results for the first quarter ended March 31, 2022. EPS diluted was $0.76 compared to $0.66 in 4Q21 and $0.56 in 1Q21. Total core revenues were $136.4 million compared to $141.0 million in 4Q21 and $127.7 million in 1Q21.

CEO Comment

José Rafael Fernández, Chief Executive Officer, said: “We had a great start to 2022. During the first quarter, our core business demonstrated strong momentum. We experienced solid loan and deposit growth, NIM expansion, and lower provision. Total assets reached $10.2 billion, expenses remained in line, and we repurchased $33.5 millions of shares as part of our $100 million buyback program. The Puerto Rico economic environment continues to trend positively, while we continue to focus on improving the customer experience and growing together with our clients and the communities we serve. During 1Q22, for example, we introduced fully proprietary digital processes to apply for consumer loans and to open and contribute into our IRA fund.”

1Q22 Highlights

Net Interest Income was $105.2 million compared to $104.2 million in 4Q21 and $98.2 million in 1Q21. NIM expanded to 4.47% from 4.18% in 4Q21 primarily due to increased volume of loans and investments.

Interest Income totaled $112.9 million compared to $112.6 million in 4Q21 and $111.0 million in 1Q21. Compared to 4Q21, 1Q22 interest income benefited from higher yields on higher average balances of loans and investment securities, and higher average yields on cash, which was offset by two fewer days that reduced Interest Income by $1.7 million.

Total Interest Expense of $7.8 million compared to $8.4 million in 4Q21 and $12.8 million in 1Q21. Compared to 4Q21, 1Q22 interest expense reflected lower average balances and costs of deposits and borrowings, partially offset by $0.4 million to expense unamortized issuance costs as a result of the early termination of $36.1 million in 3.23% variable rate subordinated notes.

Banking and Financial Service Revenues of $31.2 million compared to $29.5 million in 1Q21 and $36.8 million in 4Q21, which included $4.3 million in annual insurance commissions. 1Q22 reflected higher levels of banking service, mortgage banking, and wealth management revenues compared to 1Q21.

Pre-Provision Net Revenues totaled $55.6 million compared to $55.8 million in 4Q21 and $50.9 million in 1Q21.

Provision for Credit Losses of $1.6 million compared to $7.2 million in 4Q21 and $6.3 million in 1Q21. 1Q22 included a provision of $3.7 million related to growth of loan balances and an increase of $4.2 million for a commercial loan previously placed in non-accrual, partially offset by a $5.7 million reduction in qualitative adjustment due to improved economic conditions. 4Q21 included a provision of $9.7 million related to transferring past due loans to held for sale.

Credit Quality: Net charge off rate and early and total delinquency rates fell to 0.04%, 1.97% and 3.17%, respectively, compared to the previous and year ago quarters. 1Q22 NCOs included a $2.8 million recovery from an acquired PCD loan and a $1.1 million recovery as part of the final settlement of the non-performing mortgage loans sale contracted for in 4Q21.

Non-Interest Expenses totaled $81.2 million compared to $86.5 million in 4Q21 and $77.7 million in 1Q21. The $5.3 million reduction from 4Q21 primarily reflected lower legal reserve provisions ($2.4 million) and lower combination of other items (totaling $2.1 million), including operational losses, technology related expenses, and training costs.

Loans Held for Investment (EOP) were $6.55 billion compared to $6.40 billion in 4Q21 and $6.59 billion in 1Q21. Loans grew $145.4 million from 4Q21, reflecting increases in commercial loans (net of PPP forgiveness) as well as increases in consumer and auto loans.

New Loan Origination of $623.2 million compared to $632.7 million in 4Q21 and $527.6 million in 1Q21, which included $126.3 million of PPP loans. 1Q22 reflected continued, high levels of auto lending, commercial lending in Puerto Rico and US, and increased demand for consumer lending.

Customer Deposits (EOP) totaled $8.97 billion compared to $8.59 billion in 4Q21 and $8.72 billion in 1Q21. Core deposits grew $375.1 million from 4Q21, reflecting increases in commercial and retail accounts.

Capital: CET1 ratio was 13.24% compared to 13.77% in 4Q21 and 13.56% in 1Q21. Tangible book value per share was $18.90 compared to $19.08 in 4Q21 and $17.39 in 1Q21. The decline in CET1 and TBVPS from 4Q21 reflected the repurchase of 1.2 million shares of common stock and reduction in other comprehensive income, partially offset by an increase in retained earnings.

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; (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, 2021, 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 58th 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.