OFG Bancorp (OFG) 8-K Oriental Financial Group Net Income Increases 28.4% In First Quarter of Fiscal 2005

EXHIBIT 99

Puerto Rico Contact:
Michelle Balaguer,
Oriental Financial Group
(787) 771-6898
 
U.S. Contact:
Steven Anreder and Gary Fishman, Anreder & Company
(212) 532-3232

ORIENTAL FINANCIAL GROUP NET INCOME
INCREASES 28.4% IN FIRST QUARTER OF FISCAL 2005

San Juan, Puerto Rico, Thursday, October 21, 2004— Oriental Financial Group Inc. (NYSE: OFG) announced record net income for the first fiscal quarter ended September 30, 2004. Net income increased 28.4%, to $17.4 million, compared to $13.6 million in the year-ago quarter, and diluted earnings per share increased 12.7%, to $0.71, compared to last year’s $0.63.

Earnings per share reflected 10.9% more average shares outstanding in the first quarter, the result of the Group’s March 2004 secondary offering of 1,995,000 common shares, which raised $51.5 million, and dividends paid on a preferred stock offering sold September 2003, which raised $33.1 million. Excluding the effect of the new equity and preferred dividend, earnings per share, compared to the year-ago period, would have been $0.18 higher, or 28.6% greater.

Return on assets increased to 1.84%, compared to 1.74% last year, on 24.8% greater bank assets, primarily due to a 34.3% year over year increase in investments to $3.0 billion and a 20.8% increase in loans to $826.3 million. Return on equity was 27.60%, compared to 30.34% in the year ago quarter, reflecting a 53.6% increase in stockholders’ equity to $314.8 million, or $11.09 per share. The efficiency ratio improved to 48.42%, compared to 55.12% last year.

“We are off to a good start this year,” said José E. Fernández, Chairman, President and CEO. “Our first quarter results benefited from a strong gain in interest income, double-digit revenue growth in banking service revenues and effective cost controls. At the same time, the Group continued to reposition the investment portfolio for a rising rate environment, and to strengthen our banking and financial service franchise.”

“Oriental increased purchases of short- and medium-term securities for the investment portfolio, and initiated a new strategy of purchasing high-quality, variable rate mortgages for the loan portfolio. There was a significant increase in commercial and consumer loan production. We began taking aggressive steps to increase mortgage originations this year, including installing a new mortgage management team by the end of the second quarter. And we furthered plans to open new financial centers and remodel others, in line with our strategy to provide full banking and financial services to our target market. We continue to be on track to achieve earnings per share growth this year in line with our average annual target of 10 to 15%.”

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EXHIBIT 99

First Quarter Fiscal 2005 Analysis

Net interest income after provision of loan losses increased 30.7%, to $23.0 million, compared to $17.6 million in the year ago quarter. Results benefited from a 20.3% increase in interest income, to $44.9 million, compared to $37.4 million in the year ago quarter, while interest expense increased 15.3%, to $21.3 million, compared to $18.5 million. Interest income reflected a 31.1% increase in the volume of investments and loans, to $3.8 billion, with an average yield of 5.01% during the quarter, compared to $2.9 billion, with an average yield of 5.16%, a year ago. Interest expense reflected cost of funds of 2.55%, compared to 2.60% last year, on a 35.5% increase in wholesale sources and a 2.6% increase in retail sources. Interest rate margin increased to 2.64%, compared to 2.61% in the year ago quarter and 2.63% in the sequential quarter ended June 30, 2004.

Banking service revenues continued their strong growth, rising 15.0%, to $2.0 million compared to $1.7 million last year, reflecting increased fees on deposit accounts, bank service charges and commissions, and the success of the Group’s product and service marketing programs. Financial service revenues declined $0.9 million, to $3.7 million, compared to the year-ago quarter, which benefited from investment banking and related brokerage fees associated with a bond offering. Mortgage banking revenues declined approximately $0.7 million, to $2.1 million. The net gain on the sale of securities and net loss on derivatives and other activities totaled $2.7 million compared to $3.9 million last year, reflecting the Group’s strategy, in a rising rate environment, of increasing interest income from investment securities and loans, as compared to gains on the sale of securities.

Non-interest expenses declined 1.3%, to $15.2 million, compared to $15.4 million last year, in line with the Group’s plan to keep these costs at an annual level comparable to last year, including expenses related to opening and remodeling financial centers and one-time expenses associated with Sarbanes-Oxley Act compliance.

Total financial assets managed and owned at September 30, 2004 increased 13.6%, to $6.6 billion, compared to $5.8 billion last year, reflecting the 24.8% increase in bank assets to $3.9 billion. Total assets managed remained approximately level at $2.7 billion compared to the year-ago quarter, reflecting investment market conditions over the last 12 months.

Investment securities increased 5.5% on a sequential quarterly basis, to $3.0 billion, compared to $2.9 billion in the quarter ended June 30, 2004. During the first quarter, the Group bought shorter-term triple-A government agency paper and general obligation bonds, as opposed to mortgage-backed securities, for both available-for-sale and held-to-maturity accounts. As of September 30, 2004, available-for-sale and held-to-maturity represented 53% and 44% of the portfolio, respectively, similar to percentages at June 30, 2004.

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EXHIBIT 99

Total loans receivable, net, increased 20.8%, to $826.3 million, compared to $684.2 million last year, with increases of 14.0% in mortgage loans, to $718.7 million; 124.7% in commercial loans, to $98.8 million; and 12.1% in consumer loans, to $21.5 million. Loan production and purchases increased 32.9%, to $152.3 million, compared to $114.6 million last year, reflecting increases of 280.1% in commercial loans, to $23.7 million, and 259.2% in consumer loans, to $5.1 million; the purchase of $69.1 million in variable rate mortgages; and mortgage production of $54.4 million.

Increases in commercial and consumer lending are the result of the Group’s expanded loan production effort, launched in Fiscal 2004. Because most of the increases came toward the end of the quarter, interest income from loans is anticipated to increase on a year over year basis, starting in the second quarter.

Deposits increased 2.6% on a year over year basis, to $1.032 billion, reflecting the success of the Group’s Oriental Preferred program, which is benefiting deposits in addition to lending. Funds from wholesale sources increased 35.5% on a year over year basis, to $2.5 billion. The Group’s strategy in Fiscal 2004 and into Fiscal 2005 has been directed at using low cost repurchase agreements, coupled with interest rate swaps, to fix these costs over multi-year periods.

Credit quality continues strong. The provision for loan losses declined to $0.7 million, compared to $1.3 million last year. Based on an analysis of the credit quality and composition of its loan portfolio, the Company determined that a smaller provision for the first quarter of 2005 was required to maintain loan loss reserves at an appropriate level. The allowance for loan losses to total loans increased to 0.94%, compared to 0.85% last year, reflecting the Group’s increased commercial and consumer lending activity, but net charge-offs to average loans outstanding declined to 0.20%, compared to 0.26% in the year-ago quarter. While non-performing loans of $29.0 million for the September 2004 quarter were 1.3% higher than the year-ago quarter, they were 6.2% lower than the June 2004 quarter and 14.5% lower than the March 2004 quarter.

About Oriental Financial Group

Oriental Financial Group Inc. (www.OrientalOnline.com) is a diversified financial holding company operating under U.S. and Puerto Rico banking laws and regulations. Now in its 40th year in business, Oriental provides comprehensive financial services to its clients throughout Puerto Rico and offers third party pension plan administration in the continental U.S. and Puerto Rico through a wholly owned subsidiary, Caribbean Pension Consultants, Inc., based in Boca Raton, Florida. The Group’s core businesses include a full range of mortgage, commercial and consumer banking services offered through 23 financial centers in Puerto Rico, as well as financial planning, trust, insurance, investment brokerage and investment banking services.

Forward-Looking Statements

This release may contain forward-looking statements that reflect management’s beliefs and expectations and are subject to risks and uncertainties inherent to the Group’s business, including, without limitation, the effect of economic and market conditions, the level and volatility of interest rates, and other considerations.

Page 3

ORIENTAL FINANCIAL GROUP
Financial Summary
(NYSE:OFG)
	Quarter period ended									Quarter period ended
Summary of Operations (In thousands, except per share data):	30-Sep-04			30-Sep-03			%			30-Jun-04
Interest Income:
Loans	$	13,289		$	13,630			-2.5	%	$	12,558
Investment securities		31,658			23,735			33.4	%		29,930
Total interest income		44,947			37,365			20.3	%		42,488
Interest Expense:
Deposits		6,518			7,540			-13.6	%		6,954
Securities sold under agreements to repurchase		11,808			8,496			39.0	%		9,995
Other borrowed funds		2,968			2,432			22.0	%		2,927
Total interest expense		21,294			18,468			15.3	%		19,876
Net interest income		23,653			18,897			25.2	%		22,612
Provision for loan losses		(700	)		(1,340	)		-47.8	%		(1,183	)
Net interest income after provision for loan losses		22,953			17,557			30.7	%		21,429
Non-Interest Income:
Commissions and fees from broker, insurance and fiduciary activities		3,697			4,564			-19.0	%		4,402
Banking service revenues		1,951			1,697			15.0	%		1,940
Mortgage banking activities		2,057			2,746			-25.1	%		1,319
Total banking and financial services revenues		7,705			9,007			-14.5	%		7,661
Net gain on sale of securities		3,243			3,972			-18.4	%		3,905
Net gain (loss) on derivatives and other activities		(544	)		(36	)		1411.1	%		970
Total non-interest income		10,404			12,943			-19.6	%		12,536
Non-Interest Expenses:
Compensation and employees’ benefits		6,768			6,055			11.8	%		6,424
Occupancy and equipment		2,501			2,294			9.0	%		2,556
Advertising and business promotion		1,341			2,070			-35.2	%		1,380
Professional and service fees		1,674			1,640			2.1	%		1,174
Communication		451			453			-0.4	%		463
Loan servicing expenses		449			463			-3.0	%		466
Taxes, other than payroll and income taxes		450			432			4.2	%		435
Electronic banking charges		490			385			27.3	%		480
Printing, postage, stationery and supplies		248			294			-15.6	%		262
Insurance, including deposit insurance		198			195			1.5	%		200
Other		613			1,100			-44.3	%		613
Total non-interest expenses		15,183			15,381			-1.3	%		14,453
Income before income taxes		18,174			15,119			20.2	%		19,512
Income tax expense		(768	)		(1,560	)		-50.8	%		(1,434	)
Net income		17,406			13,559			28.4	%		18,078
Less: Dividends on preferred stock		(1,200	)		(597	)		101.0	%		(1,200	)
Net income available to common shareholders	$	16,206		$	12,962			25.0	%	$	16,878

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ORIENTAL FINANCIAL GROUP
Financial Summary
(NYSE:OFG)
	Quarter period ended									Quarter period ended
Summary of Operations (In thousands, except per share data):	30-Sep-04			30-Sep-03			%			30-Jun-04
EARNINGS PER SHARE(1)
Earning per common share (basic)	$	0.73		$	0.67			9.0	%	$	0.77
Earning per common share (diluted)	$	0.71		$	0.63			12.7	%	$	0.74
Dividends declared per common share	$	0.14		$	0.13			7.7	%	$	0.14
Average Shares Outstanding (1)		22,056			19,449			13.4	%		21,983
Average potential common share-options (1)		756			1,115			-32.2	%		861
Total average shares outstanding and equivalents (1)		22,812			20,565			10.9	%		22,844
Common shares outstanding at end of period (1)		22,260			19,627			13.4	%		22,007
Book value per common share (1)	$	11.09		$	6.98			58.9	%	$	10.30
PERFORMANCE RATIOS:
Return on assets		1.84	%		1.74	%		5.9	%		1.99	%
Return on common equity		27.60	%		30.34	%		-9.0	%		32.33	%
Efficiency Ratio		48.42	%		55.12	%		-12.2	%		47.70	%
Leverage capital ratio		11.18	%		10.08	%		10.9	%		11.24	%
Tier 1 risk-based capital		37.87	%		33.55	%		12.9	%		37.91	%
Total risk-based capital		38.58	%		34.18	%		12.9	%		38.61	%
SELECTED FINANCIAL DATA AT PERIOD-END
Trust Assets Managed	$	1,625,275		$	1,633,922			-0.5	%	$	1,670,651
Broker-Dealer Assets Gathered		1,051,557			1,035,666			1.5	%		1,051,812
Total Assets Managed		2,676,832			2,669,588			0.3	%		2,722,463
Bank assets owned		3,938,391			3,155,090			24.8	%		3,725,695
Total financial assets managed and owned		$6,615,223		$	5,824,678			13.6	%	$	6,448,158
(1) Data adjusted to give retroactive effect to the 10% stock dividend declared on the Group’s common stock on November 20, 2003.
SELECTED FINANCIAL DATA AT PERIOD-END
Cash and due from banks	$	11,321		$	9,155			23.7	%	$	9,284
Interest-earning assets:
Investments:
Short term investments		74,602			31,350			138.0	%		7,747
Trading securities		54			2,154			-97.5	%		574
Investment securities available-for-sale, at fair value		1,580,021			1,280,533			23.4	%		1,527,407
Investment securities held-to-maturity, at amortized cost		1,319,176			899,139			46.7	%		1,282,862
Federal Home Loan Bank (FHLB) stock, at cost		28,160			22,537			25.0	%		28,160
Total investments	$	3,002,013		$	2,235,713			34.3	%	$	2,846,750

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ORIENTAL FINANCIAL GROUP
Financial Summary
(NYSE:OFG)
	Quarter period ended									Quarter period ended
Summary of Operations (In thousands, except per share data):	30-Sep-04			30-Sep-03			%			30-Jun-04
Loans:
Mortgage loans		718,657			630,577			14.0	%		656,681
Commercial loans, mainly secured by real estate		98,813			43,984			124.7	%		81,846
Consumer loans		21,532			19,204			12.1	%		18,510
Loans receivable, gross		839,002			693,765			20.9	%		757,037
Less: deferred loan fees, net		(10,845	)		(12,332	)		-12.1	%		(11,842	)
Loans receivable		828,157			681,433			21.5	%		745,195
Allowance for loan losses		(7,860	)		(5,889	)		33.5	%		(7,553	)
Loans receivable, net		820,297			675,544			21.4	%		737,642
Mortgage loans held for sale		5,968			8,697			-31.4	%		5,814
Total loans receivable, net		826,265			684,241			20.8	%		743,456
Total interest-earning assets		3,828,278			2,919,954			31.1	%		3,590,206
Securities sold but not yet delivered		23,369			156,487			-85.1	%		47,312
Accrued interest receivable		19,071			17,628			8.2	%		19,127
Premises and equipment, net		17,874			17,615			1.5	%		18,552
Deferred tax asset, net		6,649			5,823			14.2	%		7,337
Foreclosed real estate, net		978			383			155.4	%		888
Other assets		30,851			28,045			10.0	%		32,989
Total assets	$	3,938,391		$	3,155,090			24.8	%	$	3,725,695
Interest-bearing liabilities:
Deposits:
Demand deposits	$	126,233		$	128,139			-1.5	%	$	126,296
Savings accounts		91,718			85,623			7.1	%		88,463
Certificates of deposit		814,480			792,946			2.7	%		809,590
Total deposits		1,032,431			1,006,708			2.6	%		1,024,349
Borrowings:
Securities sold under agreements to repurchase		2,101,340			1,443,081			45.6	%		1,895,865
Advances from FHLB		300,000			306,000			-2.0	%		300,000
Subordinated capital notes		72,166			72,166			0.0	%		72,166
Term notes		15,000			15,000			0.0	%		15,000
Total borrowings		2,488,506			1,836,247			35.5	%		2,283,031
Total interest-bearing liabilities		3,520,937			2,842,955			23.8	%		3,307,380
Securities purchased but not yet received		53,300			50,520			5.5	%		89,068
Accrued expenses and other liabilities		49,290			56,592			-12.9	%		34,580
Total liabilities		3,623,527			2,950,067			22.8	%		3,431,028
Preferred Equity		68,000			68,000			0.0	%		68,000
Common Equity		246,864			137,023			80.2	%		226,667
Stockholders’ equity		314,864			205,023			53.6	%		294,667
Total liabilities and stockholders’ equity	$	3,938,391		$	3,155,090			24.8	%	$	3,725,695
Number of financial centers		23			23						23

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ORIENTAL FINANCIAL GROUP
Financial Summary
(NYSE:OFG)
	Quarter period ended									Quarter period ended
Summary of Operations (In thousands, except per share data):	30-Sep-04			30-Sep-03			%			30-Jun-04
CREDIT DATA
Net loans charged-off	$	393		$	482			-18.5	%	$	262
Net charge-offs to average loans outstanding		0.20	%		0.26	%		-23.1	%		0.14	%
Allowance for loan losses	$	7,860		$	5,889			33.5	%	$	7,553
Allowance coverage ratios:
Allowance for loan losses to total loans		0.94	%		0.85	%		10.4	%		1.01	%
Allowance for loan losses to non-performing loans		27.08	%		20.56	%		31.7	%		24.53	%
Allowance for loan losses to non-real estate non-performing loans		243.87	%		193.65	%		25.9	%		230.34	%
Non-performing assets summary:
Residential real estate	$	25,801		$	25,605			0.8	%	$	27,651
Commercial, mainly real estate		2,898			2,554			13.5	%		2,954
Consumer		325			487			-33.3	%		333
Non-performing loans		29,024			28,646			1.3	%	$	30,938
Foreclosed properties		978			383			155.4	%		888
Non-performing assets	$	30,002		$	29,029			3.4	%	$	31,826
Non-performing loans to total loans		3.48	%		4.15	%		-16.1	%		4.12	%
Non-performing assets to total assets		0.74	%		0.91	%		-18.8	%		0.83	%
Loan Production and Purchases Summary:
Mortgage loans production	$	54,412		$	106,979			-49.1	%	$	68,029
Mortgage loans purchased		69,140			—			100.0	%		—
Total mortgage		123,552			106,979			15.5	%		68,029
Commercial		23,663			6,226			280.1	%		23,606
Consumer		5,075			1,413			259.2	%		2,570
Total loan production and purchases	$	152,290		$	114,618			32.9	%	$	94,205

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ORIENTAL FINANCIAL GROUP
Financial Summary
(NYSE:OFG)
	Quarter period ended									Quarter period ended
Summary of Operations (In thousands, except per share data):	30-Sep-04			30-Sep-03			%			30-Jun-04
TAX EQUIVALENT SPREAD Interest-earning assets		5.01	%		5.16	%		-2.9	%		4.94	%
Tax equivalent adjustment		1.12	%		1.76	%		-36.4	%		1.12	%
Interest-earning assets — tax equivalent		6.13	%		6.92	%		-11.4	%		6.06	%
Interest-bearing liabilities		2.55	%		2.60	%		-1.9	%		2.46	%
Tax equivalent interest rate spread		3.58	%		4.32	%		-17.1	%		3.60	%
Tax equivalent interest rate margin		3.76	%		4.37	%		-14.0	%		3.75	%
NORMAL SPREAD
Investments		4.52	%		4.39	%		3.0	%		4.45	%
Loans		6.74	%		7.42	%		-9.2	%		6.65	%
Interest-earning assets		5.01	%		5.16	%		-2.9	%		4.94	%
Deposits		2.58	%		2.99	%		-13.7	%		2.62	%
Borrowings		2.53	%		2.39	%		5.9	%		2.38	%
Interest-bearing liabilities		2.55	%		2.60	%		-1.9	%		2.46	%
Interest rate spread		2.46	%		2.56	%		-3.9	%		2.48	%
Interest rate margin		2.64	%		2.61	%		1.1	%		2.63	%

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