OFG Bancorp (NYSE: OFG), the financial holding company for Oriental Bank, reported results for the fourth quarter and year ended Dec. 31, 2021.

CEO Comment

José Rafael Fernández, Chief Executive Officer, said: “Our core business demonstrated strong momentum as we ended 2021 and enter 2022. Results for the fourth quarter and year underscore our opportunities for the future. We are extremely proud of our accomplishments in 2021 and look forward to continuing to invest in improving the customer experience and growing together with our clients and the communities we serve.”

Summary

4Q21: EPS diluted was $0.66 compared to $0.81 in 3Q21 and $0.42 in 4Q20. 4Q21 results were impacted by the strategic decision to sell $65.5 million of past due loans, which had been partially reserved, but required $9.7 million in additional provision. Total core revenues were $141.0 million compared to $134.7 million in 3Q21 and $132.8 million in 4Q20.

2021: EPS diluted was $2.81 compared to $1.32 in 2020. Total core revenues were $536.6 million compared to $519.3 million. OFG completed the $92.0 million redemption of its outstanding preferred stock and its $50.0 million common stock repurchase plan. Tangible Book Value per share of $19.08 grew 12.4% year over year.

4Q21 Highlights

Net Interest Income of $104.2 million compared to $102.7 million in 3Q21 and $98.7 million in 4Q20. Compared to 3Q21, 4Q21 NII reflected level interest income from loans and cash, increased income from investment securities, and lower cost of deposits and borrowings.

Loans Held for Investment totaled $6.40 billion at 12/31/21 compared to $6.41 billion at 9/30/21 and $6.66 billion at 12/31/20. The 4Q21 net decrease of $8.3 million included a reduction of $65.5 million from the previously mentioned decision to sell past due loans.

New Loan Origination totaled $632.7 million compared to $556.2 million in 3Q21 and $485.3 million in 4Q20. 4Q21 reflected continued high levels of auto, commercial, and mortgage lending, and increased demand for consumer loans.

Total Interest Expense was $8.4 million compared to $9.4 million in 3Q21 and $14.3 million in 4Q20. 4Q21 reflected lower cost of core deposits (26 bps vs. 30 bps in 3Q21 and 53 bps in 4Q20) due to generally lower rates and CD maturities. 4Q21 also reflected lower borrowings with the early termination of $33.3 million in 2.98% FHLB advances.

Customer Deposits totaled $8.59 billion at 12/31/21 compared to $9.23 billion at 9/30/21 and $8.37 billion at 12/31/20. The $641.3 million sequential decline from 3Q21 reflected withdrawals at year-end by government-related and institutional commercial clients, partially offset by increased retail deposits.

Provision for Credit Losses of $7.2 million included $9.7 million for the previously mentioned decision to sell past due loans and $2.7 million in net reserve releases. This compares to a net benefit of $5.0 million in 3Q21 and a net expense of $14.2 million in 4Q20. 4Q21’s net charge-offs of $32.5 million primarily related to the decision to sell past due loans. Total non-performing loan rate fell to 1.75% from 2.08% in 3Q21 and 2.28% in 4Q20.

Banking and Financial Service Revenues were $36.7 million compared to $32.0 million in 3Q21 and $34.0 million in 4Q20. 4Q21 reflected higher levels of banking service, mortgage banking activity, and wealth management, which included $4.3 million in annual insurance commissions.

Non-Interest Expenses were $86.5 million compared to $78.9 million in 3Q21 and $89.0 million in 4Q20. 4Q21 included increased compensation related investment in people, $2.4 million for a legal reserve and to cover operational losses, $2.0 million in technology enhancements, $1.0 million lower gains on sales of real estate owned compared to 3Q21, and costs related to higher levels of business activity.

Pre-Provision Net Revenues were $55.8 million compared to $56.3 million in 3Q21 and $44.1 million in 4Q20.

Capital: CET1 ratio was 13.77% compared to 13.52% in 3Q21 and 13.08% in 4Q20.

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.