OFG Bancorp (OFG) 8-K OFG Bancorp Reports 3Q15 Results

Exhibit 99

 

OFG Bancorp Reports 3Q15 Results

SAN JUAN, Puerto Rico, October 23, 2015 – OFG Bancorp (NYSE: OFG) today reported results for the third quarter ended September 30, 2015.

3Q15 Results

•Income available to common shareholders was $1.1 million or $0.03 per share fully diluted. This compares to a loss of $6.6 million or ($0.15) per share in the preceding quarter and a profit of $16.1 million, or $0.34 per share diluted, in the year ago quarter.

•Results included:

oThe previously announced ($20.2) million pre-tax net impact of the bulk sale of commercial non-performing assets (NPAs) from the 2010 FDIC-assisted Eurobank and the 2012 BBVA PR acquisitions.

oOther items, the largest of which was a combined $3.2 million pre-tax benefit from a cost recovery and prepayment penalty from full repayment of a 3.75%, tax free $77.6 million loan to Puerto Rico State Insurance Fund (CFSE).

•Adjusted for these factors, OFG earned $12.2 million, or $0.28 per share fully diluted, assuming an effective tax rate of 30%.

3Q15 Business Highlights

•Tangible book value and book value per common share increased to $14.76 and $16.91 at September 30, 2015, from $14.67 and $16.81 at June 30, 2015, respectively, while Tangible Common Equity ratio expanded to 9.11% from 8.91%.

•Puerto Rico (PR) central government and public corporation loan balances declined 28.4% to $215.6 million at September 30, 2015, from $301.3 million at June 30, 2015. Loans to PR municipalities fell 5.2% to $202.9 million from $214.0 million.

•The Oriental Bank franchise continued to grow in part through:

oStrong loan production at $251.0 million in line with previous quarters. OFG retained securitized GNMA pools totaling $27.8 million at a yield of 3.06% from its own originations.

oIntroduction of the new My Status mobile app for tracking the progress of residential mortgage loan applications. This feature, combined with shorter closing cycles, is part of Oriental’s strategy to differentiate itself through customer service.

•Credit metrics for loans were stable on a linked quarter basis, with no apparent deterioration from Puerto Rico’s economic challenges.

CEO Comment

José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman, commented: “The third quarter demonstrates the resiliency of our core business and unwavering customer focus, and our proactive approach to risk management.

“Regarding the core business, new loan production continued strong. Whereas 2Q15 saw higher levels of commercial loan closings, in 3Q15 we continued to build positive momentum in retail lending, picking up market share in conforming mortgage originations as well as growing consumer and auto volumes.

“While total deposits declined largely due to lower balances in government accounts and fluctuations in commercial accounts, we had another quarter of growth in net new customers. We are encouraged that our efforts to distinguish Oriental through superior customer experience, rather than competing solely based on pricing, is starting to realize its potential.

“To that end, we raised the bar again in technology innovation with the launch of our industry first My Status residential mortgage app. To bring this to market, we undertook a major effort to streamline our underlying mortgage operations, which will result in other benefits.

“Fee income levels performed well, adjusting for our decision to hold some of our mortgage production. Lower non-interest expenses reflect the control we maintain over core operations, as we have always done.

“On the credit side, the sale of NPAs showed how we can move expeditiously to further limit our exposure to deteriorating collateral values and significantly reduce adversely classified assets.

“Regarding Puerto Rico Electric Power Authority (PREPA), agreements have been reached with the Ad Hoc Group of bondholders and fuel line banks, which includes Oriental. Based on what we have seen in the media, there appears to be increased confidence on the part of the public utility to come to an agreement soon with the monolines.

“With respect to our loans to certain PR municipalities, we are comfortable with their debt service capabilities and confident that the legal dispute between the Municipal Revenue Collections Center (CRIM), various municipalities, and the Government Development

Bank, regarding the deposit of tax revenues used to service municipal debt will be satisfactorily settled, retaining our security interest on deposits serving as collateral to our loans.

“Looking forward to 4Q15 and beyond, we expect our core business to continue to perform well, although somewhat affected by lower interest income from the Eurobank loan portfolio and the reduction in PR government loans. Ultimately, we look forward to putting our PR government exposure behind us to better highlight our core business successes.

“As for Puerto Rico itself, we believe a comprehensive solution is needed to overcome the fiscal challenges and to improve its competitiveness. We are encouraged by the attention it has received from the federal government in recent weeks.”

3Q15 Income Statement Highlights

As mentioned above, results included the following quarter specific items:

•The bulk sale of acquired NPAs, resulting in: (i) $7.0 million cost recoveries from acquired loans, (ii) $38.0 million impairment provisions, (iii) $20.0 million FDIC receivable for its share of the loss, and (iv) $9.3 million loss on other real estate owned (OREO).

•Other non-recurring items, consisting of: (i) $3.2 million cost recovery in interest income due to a prepayment, (ii) $778,000 fee revenue from an associated prepayment penalty, (iii) $246,000 in an Other Than Temporary Impairment (OTTI) charge, based on a quarterly assessment, related to a $1.5 million PR security that is part of our U.S. Community Reinvestment Act obligation, (iv) $917,000 additional severance accrual, and (v) $180,000 benefit from a onetime credit from a vendor.

2Q15 results included the following quarter specific items: (i) $21.0 million charge associated with expiry of the FDIC Commercial Loss Share Agreement, and (ii) $2.5 million in a FINRA restitution settlement and legal expenses associated with concluding the FDIC agreement.

	Quarter ended June 30, 2015							Quarter ended September 30, 2015
											Loss on Bulk Sale
		Actual Results		Non-Recurrent		Adjusted Results			Actual Results		of Non-Performing		Adjusted Results		Adjusted Results
(Dollars in thousands) (unaudited)		(US GAAP)		Items		(Non-GAAP)			(US GAAP)		Loans and OREOs		Items		(Non-GAAP)
Interest income		$	99,413	$	-	$	99,413		$	107,247	$	7,058	$	3,180	$	97,009
Interest expense			(17,122)		-		(17,122)			(17,423)		-		-		(17,423)
Net interest income			82,291		-		82,291			89,824		7,058		3,180		79,586
Provision for loan and lease losses, excluding acquired Eurobank			(15,643)		-		(15,643)			(18,090)		(5,175)		-		(12,915)
Provision for acquired Eurobank loan and lease losses			105		-		105			(33,490)		(32,855)		-		(635)
Total provision for loan and lease losses, net			(15,538)		-		(15,538)			(51,580)		(38,030)		-		(13,550)
Net interest income after provision for loan and leases losess			66,753		-		66,753			38,244		(30,972)		3,180		66,036
Banking and wealth management revenues			19,358		-		19,358			18,703		-		778		17,925
Other-than-temporary impairment losses on investment securities			-		-		-			(246)		-		(246)		-
FDIC shared-loss expense, net			(23,245)		(21,000)		(2,245)			(2,079)		-		-		(2,079)
Gain on FDIC shared-loss coverage in sale of loans			-		-		-			20,000		20,000		-		-
Other (losses) gains, net			(770)		-		(770)			(401)		-		-		(401)
Total non-interest income			(4,657)		(21,000)		16,343			35,977		20,000		532		15,445
Compensation and employee benefits			(19,260)		-		(19,260)			(21,015)		-		(917)		(20,098)
Rent and occupancy costs			(8,882)		-		(8,882)			(8,556)		-		-		(8,556)
General and administrative expenses			(36,294)		(2,500)		(33,794)			(39,519)		(9,260)		180		(30,439)
Total non-interest expense			(64,436)		(2,500)		(61,936)			(69,090)		(9,260)		(737)		(59,093)
Income before taxes			(2,340)		(23,500)		21,160			5,131		(20,232)		2,975		22,388
Income tax expense (benefit)			769		-		6,198			562		-		-		6,716
Net income			(3,109)		-		14,962			4,569		-		-		15,672
Preferred stock dividends			(3,466)		-		(3,466)			(3,465)		-		-		(3,465)
Net income (loss) available to common shareholders		$	(6,575)	$	-	$	11,496		$	1,104	$	-	$	-	$	12,207
Earnings (loss) per common share - basic		$	(0.15)	$		$	0.26		$	0.03	$		$		$	0.28
Earnings (loss) per common share - diluted		$	(0.15)	$		$	0.26		$	0.03	$		$		$	0.28
Performance Metrics
Net interest margin			4.92%				4.92%			5.29%						4.68%
Return on average assets			-0.17%				0.82%			0.25%						0.86%
Return on average tangible common stockholders' equity			-3.93%				6.88%			0.68%						7.49%
Efficiency ratio			63.39%				60.93%			63.66%						60.60%

The following compares Adjusted Results (non-GAAP) for the third quarter 2015 to the second quarter 2015 based on the table above unless otherwise noted.

•Total Interest Income declined to $97.0 million from $99.4 million due to lower balances in acquired portfolios, reflecting repayments and sales. Interest income from originated loans continued to increase, compensating to a large extent for the reduction in income from the acquired BBVA PR portfolio.

•Total Interest Expense increased slightly to $17.4 million compared to $17.1 million. This was primarily due to an increase in borrowing expense as OFG used a higher average balance of short-term repurchase agreements for temporary funding purposes.

•Provision for loan and lease losses declined to $13.6 million from $15.5 million due to significantly lower impairments on acquired BBVA PR loans.

•Net Interest Margin was 4.68%, reflecting reduced cost recoveries as seen in the prior quarters, partially offset by expanded volumes of originated loans at average yields of 6.17% coupled with deposit costs staying level at 0.65%.

•Total banking and wealth management revenues were $17.9 million compared to $19.4 million. This reflected a decrease in mortgage banking activity due to foregone gains on sales as a result of retaining securitized GNMA pools, as previously mentioned.

•FDIC shared loss indemnification asset amortization was $2.1 million compared to $2.3 million. The loss share agreement now covers remaining Eurobank residential mortgages.

•Total Non-Interest Expenses declined to $59.1 million compared to $61.9 million, primarily reflecting lower losses and markdowns in OREO and repossessed autos, respectively.

September 30, 2015 Balance Sheet Highlights

The following compares data as of September 30, 2015 to June 30, 2015 unless otherwise noted.

•Total loans declined to $4.47 billion from $4.64 billion primarily due to the bulk sale and repayment of the CFSE loan.

•Total investments were almost flat with prepayments of mortgage backed securities (MBS) compensated by new purchases and retention of our GNMA securitized pools.

•Total deposits declined $32.6 million to $4.72 billion due to previously mentioned factors.

•Total borrowings reduced sharply to $1.44 billion from $1.60 billion.

•Total stockholders’ equity declined $3.7 million to $907.9 million, largely reflecting the decline in retained earnings.

Credit Quality Highlights

The following compares data for the third quarter 2015 to the second quarter 2015 unless otherwise noted.

•Net charge-off rate at 1.23% increased 17 basis points from 2Q15, but declined 11 bps from the year ago quarter, and was generally in line with its quarterly level. Auto NCOs were higher due to stepped up efforts to reduce repo lot inventory.

•Non-performing loan rate at 10.32% declined 12 basis points from 2Q15, but was up 667 bps from the year ago quarter due to the PREPA loan going on non-accrual status in 1Q15.

•Allowance for loan and lease losses increased $1.4 million to $80.4 million. Coverage of loans held for investment remained steady at 2.65% compared to 2.67%.

Capital Position

Regulatory capital ratios continued to be significantly above requirements for a well-capitalized institution.

The following compares data for the third quarter 2015 to the second quarter 2015.

•Tangible common equity to total tangible assets at 9.11% increased 20 basis points from 2Q15 and 29 basis points from the year ago quarter.

•Common Equity Tier 1 Capital Ratio (using Basel III methodology) was 12.03% compared to 12.26%.

•Total risk-based capital ratio was 16.93% compared to 17.41%.

Other Matters

During 3Q15, Oriental Bank entered into a Consent Order with the FDIC to address certain matters related to its Bank Secrecy Act / anti-money laundering (BSA/AML) compliance program. The Consent Order requires, among other things, that Oriental implement improved internal controls reasonably designed to ensure full compliance with the BSA. The Consent Order does not include civil money penalties.

Conference Call

A conference call to discuss OFG’s results for the third quarter 2015, outlook and related matters will be held today, Friday, October 23, 2015 at 11:15 AM Eastern Time. The call will be accessible live via a webcast on OFG’s Investor Relations website atwww.ofgbancorp.com. A webcast replay will be available shortly thereafter. Access the webcast link in advance to download any necessary software.

Financial Supplement

OFG’s Financial Supplement, with full financial tables for the third quarter ended September 30, 2015, can be found on the Webcasts, Presentations & Other Files page, on OFG’s Investor Relations website at www.ofgbancorp.com. 

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) the rate of growth in the economy and employment levels, as well as general business and economic conditions; (ii) changes in interest rates, as well as the magnitude of such changes; (iii) a credit default by the government of Puerto Rico; (iv) the fiscal and monetary policies of the federal government and its agencies; (v) changes in federal bank regulatory and supervisory policies, including required levels of capital; (vi) the relative strength or weakness of the consumer and commercial credit sectors and of the real estate market in Puerto Rico; (vii) the performance of the stock and bond markets; (viii) competition in the financial services industry; and (ix) possible legislative, tax or regulatory changes.

For a discussion of such factors and certain risks and uncertainties to which OFG is subject, see OFG’s annual report on Form 10-K for the year ended December 31, 2014, 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 51st year in business, OFG Bancorp is a diversified financial holding company that operates under U.S. and Puerto Rico banking laws and regulations. Its three principal subsidiaries, Oriental Bank, Oriental Financial Services and Oriental Insurance, provide a full range of commercial, consumer and mortgage banking services, as well as financial planning, trust, insurance, investment brokerage and investment banking services, primarily in Puerto Rico, through 51 financial centers and 332 ATMs. Investor information can be found atwww.ofgbancorp.com. 

# # #

Contacts

Puerto Rico: Alexandra López (allopez@orientalbank.com), OFG Bancorp, (787) 522-6970

US: Steven Anreder (sanreder@ofgbancorp.com) and Gary Fishman (gfishman@ofgbancorp.com) at (212) 532-3232

OFG Bancorp
Financial Supplement
The information contained in this Financial Supplement is preliminary and based on data available at the time of the earnings presentation, and investors should refer to our September 30, 2015 Quarterly Report on Form 10-Q once it is filed with the Securities and Exchange Commission.
Table of Contents
			Pages
	OFG Bancorp (Consolidated Financial Information)
	Table  1:	Financial and Statistical Summary - Consolidated		2
	Table  2:	Consolidated Statements of Operations		3
	Table  3:	Consolidated Statements of Financial Condition		4
	Table  4:	Information on Loan Portfolio and Production		5
	Table  5:	Average Balances, Net Interest Income and Net Interest Margin		6-7
	Table  6:	Loan Information and Performance Statistics (Excluding Acquired Loans)		8-9
	Table  7:	Allowance for Loan and Lease Losses		10
	Table  8:	Accretable Yield on Loans Accounted for Under ASC 310-30 (Loans Acquired
		with Deteriorated Credit Quality, Including those by Analogy)		11
	Table  9:	Reconciliation of Non-GAAP Measures and Calculation of Regulatory
		Capital Measures		12-13
	Table  10:	Notes to Financial Summary, Selected Metrics, Loans, and Consolidated
		Financial Statements		14

OFG Bancorp (NYSE: OFG)
Table 1: Financial and Statistical Summary - Consolidated
		2015		2015		2015		2014		2014		2015		2014
(Dollars in thousands, except per share data) (unaudited)		Q3		Q2		Q1		Q4		Q3		YTD		YTD
Earnings
Net interest income		$	89,823	$	82,292	$	89,635	$	97,128	$	101,871	$	261,750	$	311,347
Non-interest income, net (core)	(2)		18,703		19,359		19,223		20,981		18,963		57,285		56,967
Non-interest expense			69,090		64,437		56,332		61,898		59,575		189,859		180,827
Pre-provision net revenues			39,436		37,214		52,526		56,211		61,259		129,176		187,487
Provision for loan and lease losses	(3)(34)		51,579		15,539		42,193		16,877		17,257		109,311		43,763
FDIC shared-loss expense, net	(33)		2,079		23,245		13,084		11,980		16,934		38,408		53,776
Net income (loss) before income taxes			5,131		(2,340)		(2,009)		27,449		27,530		782		94,984
Net income (loss)			4,569		(3,109)		(2,988)		20,593		19,532		(1,528)		64,588
Net income (loss) available to common stockholders		$	1,104	$	(6,575)	$	(6,453)	$	17,127	$	16,067	$	(11,924)	$	54,192
Common Share Statistics
Earnings (loss) per common share - basic	(4)	$	0.03	$	(0.15)	$	(0.14)	$	0.38	$	0.36	$	(0.27)	$	1.20
Earnings (loss) per common share - diluted	(5)	$	0.03	$	(0.15)	$	(0.14)	$	0.36	$	0.34	$	(0.27)	$	1.14
Average common shares outstanding			43,929		44,505		44,634		44,705		45,054		44,353		45,131
Average common shares outstanding and equivalents			51,146		51,774		51,977		52,000		52,362		51,609		52,440
Cash dividends per common share	(6)	$	0.10	$	0.10	$	0.10	$	0.10	$	0.08	$	0.30	$	0.24
Book value per common share (period end)		$	16.91	$	16.81	$	17.25	$	17.40	$	16.96	$	16.91	$	16.96
Tangible book value per common share (period end)	(7)	$	14.76	$	14.67	$	15.12	$	15.25	$	14.82	$	14.76	$	14.82
Balance Sheet (Average Balances)
Loans	(8)	$	4,654,135	$	4,748,145	$	4,794,432	$	4,856,143	$	4,939,895	$	4,755,861	$	5,003,971
Interest-earning assets			6,740,932		6,708,519		6,703,286		6,817,770		6,923,410		6,740,516		7,051,560
Total assets			7,326,901		7,329,877		7,376,738		7,529,779		7,647,138		7,344,323		7,807,205
Interest-bearing deposits			3,932,735		3,986,700		4,167,592		4,261,729		4,397,077		4,793,732		5,221,519
Borrowings			1,572,400		1,466,103		1,378,344		1,431,076		1,457,908		1,472,993		1,519,813
Stockholders' equity			912,598		929,867		948,302		936,218		919,804		930,146		909,704
Common stockholders' equity			746,728		763,997		782,432		770,348		753,934		764,276		743,834
Performance Metrics
Net interest margin	(9)		5.29%		4.92%		5.42%		5.65%		5.84%		5.19%		5.90%
Return on average assets	(10)		0.25%		-0.17%		-0.16%		1.09%		1.02%		-0.03%		1.10%
Return on average tangible common stockholders' equity	(11)		0.68%		-3.93%		-3.76%		10.16%		9.78%		-2.38%		11.17%
Efficiency ratio	(12)		63.66%		63.39%		51.75%		52.41%		49.30%		59.51%		49.10%
Full-time equivalent employees, period end			1,491		1,507		1,510		1,567		1,570		1,491		1,570
Credit Quality Metrics
Excluding acquired loans:	(1)
Allowance for loan and lease losses	(3)	$	80,351	$	78,989	$	76,759	$	51,441	$	50,279	$	80,351	$	50,279
Allowance as a % of loans held for investment			2.65%		2.67%		2.64%		1.81%		1.84%		2.65%		1.84%
Net charge-offs		$	9,097	$	7,723	$	8,592	$	8,640	$	8,928	$	25,412	$	20,427
Net charge-off rate	(13)		1.23%		1.06%		1.21%		1.25%		1.34%		1.17%		1.05%
Early delinquency rate (30 - 89 days past due)			3.77%		4.84%		4.67%		4.91%		5.20%		3.77%		5.20%
Total delinquency rate (30 days and over)			7.06%		7.72%		8.60%		8.99%		9.27%		7.06%		9.27%
Capital Ratios	(14)(24)
Leverage ratio			10.93%		11.05%		11.23%		10.61%		10.51%		10.93%		10.51%
Common equity Tier 1 capital ratio			12.03%		12.26%		12.63%		N/A		N/A		12.03%		N/A
Tier 1 common equity ratio			N/A		N/A		N/A		11.88%		11.86%		N/A		11.86%
Tier 1 risk-based capital ratio			15.64%		15.85%		16.14%		16.02%		15.96%		15.64%		15.96%
Total risk-based capital ratio			16.93%		17.41%		17.69%		17.57%		17.50%		16.93%		17.50%
Tangible common equity ("TCE") ratio			9.11%		8.91%		9.29%		9.25%		8.81%		9.11%		8.81%
2

OFG Bancorp (NYSE: OFG)
Table 2: Consolidated Statements of Operations
		Quarter Ended										Nine-Months Ended
		September 30,		June 30,		March 31,		December 31,		September 30,		September 30,		September 30,
(Dollars in thousands, except per share data) (unaudited)		2015		2015		2015		2014		2014		2015		2014
Interest income:
Loans	(19)
Non-acquired loans		$	46,008	$	44,238	$	46,285	$	45,592	$	44,469	$	136,532	$	126,070
Acquired BBVAPR loans			35,242		33,508		35,694		40,023		43,193		104,444		134,899
Acquired Eurobank loans			16,014		12,758		15,504		19,816		20,886		44,275		69,153
Total interest income from loans			97,264		90,504		97,483		105,431		108,548		285,251		330,122
Investment securities			9,983		8,909		9,518		10,551		11,753		28,410		39,153
Total interest income			107,247		99,413		107,001		115,982		120,301		313,661		369,275
Interest expense:
Deposits
Core deposits			5,440		5,519		5,938		6,887		6,410		16,897		21,947
Brokered deposits			1,211		1,085		1,166		1,263		1,251		3,462		3,857
Total deposits			6,651		6,604		7,104		8,150		7,661		20,359		25,804
Borrowings			10,773		10,517		10,262		10,704		10,769		31,552		32,124
Total interest expense			17,424		17,121		17,366		18,854		18,430		51,911		57,928
Net interest income			89,823		82,292		89,635		97,128		101,871		261,750		311,347
Provision for loan and lease losses, excluding acquired loans	(3)		10,459		9,952		33,913		9,802		8,569		54,324		21,625
Provision for acquired BBVAPR loan and lease losses			7,630		5,692		3,471		5,734		7,573		16,793		17,799
Provision for acquired Eurobank loan and lease losses	(1)(34)		33,490		(105)		4,809		1,341		1,115		38,194		4,339
Total provision for loan and lease losses, net			51,579		15,539		42,193		16,877		17,257		109,311		43,763
Net interest income after provision for loan and lease losses			38,244		66,753		47,442		80,251		84,614		152,439		267,584
Non-interest income:
Banking service revenues			10,826		10,212		10,205		10,407		9,753		31,243		30,305
Wealth management revenues			6,885		7,285		7,155		8,539		7,113		21,325		21,316
Mortgage banking activities			992		1,862		1,863		2,035		2,097		4,717		5,346
Total banking and wealth management revenues			18,703		19,359		19,223		20,981		18,963		57,285		56,967
FDIC shared-loss expense, net	(15)(33)		(2,079)		(23,245)		(13,084)		(11,980)		(16,934)		(38,408)		(53,776)
Other-than-temporary impairment losses on investment securities			(246)		-		-		-		-		(246)		-
Reimbursement from FDIC shared-loss coverage in sale of loans	(34)		20,000		-		-		-		-		20,000		-
Other (losses) gains, net			(401)		(770)		742		95		462		(429)		5,036
Total non-interest income (loss), net			35,977		(4,656)		6,881		9,096		2,491		38,202		8,227
Non-interest expense:
Compensation and employee benefits			20,098		19,260		20,180		20,396		18,592		59,538		61,086
Rent and occupancy costs			8,556		8,883		8,636		9,026		8,770		26,075		25,684
Other non-recurring expenses	(16)(17)		917		-		-		3,800		-		917		-
General and administrative expenses			39,519		36,294		27,516		28,676		32,213		103,329		94,057
Total non-interest expense			69,090		64,437		56,332		61,898		59,575		189,859		180,827
Income (loss) before income taxes			5,131		(2,340)		(2,009)		27,449		27,530		782		94,984
Income tax expense			562		769		979		6,856		7,998		2,310		30,396
Net income (loss)			4,569		(3,109)		(2,988)		20,593		19,532		(1,528)		64,588
Less:  dividends on preferred stock
Convertible preferred stock			(1,838)		(1,837)		(1,838)		(1,838)		(1,837)		(5,513)		(5,513)
Other preferred stock			(1,627)		(1,629)		(1,627)		(1,628)		(1,628)		(4,883)		(4,883)
Net income (loss) available to common shareholders		$	1,104	$	(6,575)	$	(6,453)	$	17,127	$	16,067	$	(11,924)	$	54,192
3

OFG Bancorp (NYSE: OFG)
Table 3: Consolidated Statements of Financial Condition
		September 30,		June 30,		March 31,		December 31,		September 30,
(Dollars in thousands) (unaudited)		2015		2015		2015		2014		2014
Cash and cash equivalents		$	530,545	$	559,621	$	694,308	$	581,834	$	704,146
Investments:
Trading securities			583		786		964		1,594		1,687
Investment securities available-for-sale, at fair value, with amortized cost of $982,754
(June 30, 2015 - $1,023,573; March 31, 2015 - $1,092,040; December 31, 2014 - $1,187,679;
September 30, 2014 - $1,249,769)
Mortgage-backed securities			985,554		1,020,493		1,099,814		1,190,391		1,247,161
Other investment securities			22,151		23,826		25,888		26,147		26,718
Total investment securities available-for-sale			1,007,705		1,044,319		1,125,702		1,216,538		1,273,879
Mortgage-backed securities held-to-maturity, at amortized cost, with fair value of $595,148
(June 30, 2015 - $547,776; March 31, 1015 - $175,856; December 31, 2014 - $164,154;
September 30, 2014 - $144,217)			594,639		550,553		172,847		162,752		144,305
Federal Home Loan Bank (FHLB) stock, at cost			20,804		20,826		21,148		21,169		21,189
Other investments			3		3		3		3		65
Total investments			1,623,734		1,616,487		1,320,664		1,402,056		1,441,125
Loans, net	(19)(34)		4,468,676		4,639,467		4,724,579		4,826,646		4,856,902
Other assets:
FDIC shared-loss indemnification asset	(33)		22,895		22,704		75,221		97,378		120,619
Derivative assets			3,290		4,376		6,211		8,107		8,445
Prepaid expenses			14,151		16,492		11,264		16,018		18,375
Deferred tax asset, net			143,935		138,406		121,930		108,708		121,217
Foreclosed real estate and repossessed properties	(34)		73,063		95,994		113,863		117,461		122,297
Premises and equipment, net			75,346		76,486		78,745		80,599		82,099
Goodwill			86,069		86,069		86,069		86,069		86,069
Accounts receivable and other assets	(18)(34)		162,118		142,223		131,302		124,233		112,045
Total assets		$	7,203,822	$	7,398,325	$	7,364,156	$	7,449,109	$	7,673,339
Deposits:
Demand deposits	(20)	$	1,905,029		1,937,034		2,025,706		1,997,535		2,132,524
Savings accounts	(20)		1,217,098		1,250,460		1,336,209		1,292,698		1,169,330
Time deposits			941,821		956,829		965,196		1,014,863		1,097,677
Brokered deposits			653,126		605,361		567,122		619,310		669,644
Total deposits			4,717,074		4,749,684		4,894,233		4,924,406		5,069,175
Borrowings:
Securities sold under agreements to repurchase			1,000,664		1,161,136		927,168		980,087		1,012,228
Advances from FHLB and other borrowings			334,670		335,481		335,597		338,334		338,659
Subordinated capital notes			102,371		102,109		101,846		101,584		101,190
Total borrowings			1,437,705		1,598,726		1,364,611		1,420,005		1,452,077
Other liabilities:
Securities purchased but not yet received			-		-		-		-		30,057
Derivative liabilities			8,622		8,739		11,113		11,221		11,414
Acceptances outstanding			19,083		16,040		21,848		17,989		21,077
Accrued expenses and other liabilities			113,450		113,537		135,972		133,291		159,541
Total liabilities			6,295,934		6,486,726		6,427,777		6,506,912		6,743,341
Stockholders' equity:
Preferred stock			176,000		176,000		176,000		176,000		176,000
Common stock			52,626		52,626		52,626		52,626		52,761
Additional paid-in capital			540,088		539,669		539,222		539,311		539,522
Legal surplus			70,423		69,934		70,097		70,467		68,437
Retained earnings			155,974		159,737		170,605		181,152		170,519
Treasury stock, at cost	(21)		(105,379)		(100,668)		(96,495)		(97,070)		(90,652)
Accumulated other comprehensive income, net			18,156		14,301		24,324		19,711		13,411
Total stockholders' equity			907,888		911,599		936,379		942,197		929,998
Total liabilities and stockholders' equity		$	7,203,822	$	7,398,325	$	7,364,156	$	7,449,109	$	7,673,339
4

OFG Bancorp (NYSE: OFG)
Table 4: Information on Loan Portfolio and Production	(19)
		September 30,		June 30,		March 31,		December 31,		September 30,
(Dollars in thousands) (unaudited)		2015		2015		2015		2014		2014
Non-acquired loans held for investment:
Mortgage		$	762,636	$	757,187	$	789,545	$	791,751	$	791,106
Commercial			1,389,353		1,363,851		1,324,904		1,289,732		1,217,235
Consumer			227,756		212,629		193,658		186,760		175,882
Auto			647,544		623,198		601,963		575,582		542,892
			3,027,289		2,956,865		2,910,070		2,843,825		2,727,115
Less:  Allowance for loan and lease losses			(80,351)		(78,989)		(76,759)		(51,439)		(50,279)
			2,946,938		2,877,876		2,833,311		2,792,386		2,676,836
Deferred loan costs, net			4,571		3,877		4,433		4,282		3,575
Total non-acquired loans held for investment, net			2,951,509		2,881,753		2,837,744		2,796,668		2,680,411
Acquired loans:	(1)
BBVAPR
Accounted for under ASC 310-20
Commercial			7,736		8,448		9,506		12,675		26,984
Consumer			39,774		41,505		42,922		45,344		47,284
Auto			124,120		142,570		162,194		184,782		210,808
			171,630		192,523		214,622		242,801		285,076
Less:  Allowance for loan and lease losses			(5,473)		(5,529)		(5,450)		(4,597)		(4,460)
			166,157		186,994		209,172		238,204		280,616
Accounted for under ASC 310-30
Mortgage			617,268		631,807		645,918		656,122		670,188
Commercial			395,637		499,710		519,809		558,562		594,138
Consumer			15,072		18,869		23,841		29,888		36,470
Auto			173,979		195,891		220,990		247,233		276,749
			1,201,956		1,346,277		1,410,558		1,491,805		1,577,545
Less:  Allowance for loan and lease losses			(19,986)		(18,359)		(14,166)		(13,481)		(10,120)
			1,181,970		1,327,918		1,396,392		1,478,324		1,567,425
Total Acquired BBVAPR loans, net			1,348,127		1,514,912		1,605,564		1,716,528		1,848,041
Eurobank
Accounted for under ASC 310-30
Mortgage			92,757		102,499		100,677		102,162		106,731
Commercial			144,704		187,692		223,734		256,488		262,284
Consumer			2,708		3,295		4,047		4,506		4,905
			240,169		293,486		328,458		363,156		373,920
Less:  Allowance for loan and lease losses			(90,332)		(71,452)		(70,651)		(64,245)		(62,227)
Total Acquired Eurobank loans, net			149,837		222,034		257,807		298,911		311,693
Total acquired loans, net	(34)		1,497,964		1,736,946		1,863,371		2,015,439		2,159,734
Total loans held for investment			4,449,473		4,618,699		4,701,115		4,812,107		4,840,145
Mortgage loans held for sale			19,203		20,768		23,464		14,539		16,757
Total loans, net		$	4,468,676	$	4,639,467	$	4,724,579	$	4,826,646	$	4,856,902
		2015		2015		2015		2014		2014
(Dollars in thousands) (unaudited)		Q3		Q2		Q1		Q4		Q3
Quarterly loan production	(22)
Mortgage		$	65,248	$	64,826	$	61,717	$	57,226	$	55,299
Commercial			83,243		120,500		85,664		83,430		90,067
Consumer			36,756		39,837		26,161		28,902		28,689
Auto and Leasing			65,743		61,545		65,907		69,335		68,519
Total		$	250,990	$	286,708	$	239,449	$	238,893	$	242,574
5

OFG Bancorp (NYSE: OFG)

Table 5: Average Balances, Net Interest Income and Net Interest Margin

2015 Q3

2015 Q2

2015 Q1

2014 Q4

2014 Q3

Interest

Interest

Interest

Interest

Interest

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

Average

Income/

Yield/

(Dollars in thousands) (unaudited)

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Interest earning assets:
Cash equivalents and securities purchased under agreements to resell	$	482,959	$	308	0.25	%	$	483,507	$	322	0.27	%	$	564,237	$	323	0.23	%	$	551,238	$	360	0.26	%	$	593,391	$	316	0.21	%
Investment securities		1,603,838		9,674	2.39	%		1,476,867		8,587	2.33	%		1,344,617		9,195	2.77	%		1,410,389		10,191	2.87	%		1,390,124		11,437	3.26	%
Loans
Non-acquired loans		2,959,961		46,036	6.17	%		2,927,347		44,239	6.06	%		2,832,658		46,284	6.63	%		2,765,531		45,925	6.59	%		2,672,872		44,706	6.64	%
Acquired BBVAPR loans		1,499,399		35,215	9.32	%		1,585,422		33,507	8.48	%		1,687,044		35,695	8.58	%		1,787,600		39,690	8.81	%		1,935,245		42,956	8.81	%
Acquired Eurobank loans		194,775		16,014	32.62	%		235,376		12,758	21.74	%		274,731		15,504	22.89	%		303,012		19,816	25.95	%		331,778		20,886	24.98	%
Total loans		4,654,135		97,265	8.29	%		4,748,145		90,504	7.65	%		4,794,432		97,483	8.25	%		4,856,143		105,431	8.61	%		4,939,895		108,548	8.72	%
Total interest-earning assets	$	6,740,932	$	107,247	6.31	%	$	6,708,519	$	99,413	5.94	%	$	6,703,286	$	107,001	6.47	%	$	6,817,770	$	115,982	6.75	%	$	6,923,410	$	120,301	6.89	%
Interest bearing liabilities:
Deposits
NOW accounts	$	1,110,804	$	1,034	0.37	%	$	1,144,931	$	1,073	0.38	%	$	1,260,952	$	1,281	0.41	%	$	1,353,334	$	1,652	0.48	%	$	1,413,776	$	1,817	0.51	%
Savings accounts		1,234,772		1,592	0.51	%		1,300,001		1,662	0.51	%		1,314,360		1,734	0.54	%		1,224,708		1,829	0.59	%		1,154,712		1,780	0.61	%
Time deposits		939,076		2,613	1.10	%		969,818		2,624	1.09	%		990,091		2,976	1.22	%		1,052,552		3,426	1.29	%		1,128,333		3,769	1.33	%
Brokered deposits		648,083		1,211	0.74	%		571,950		1,085	0.76	%		602,189		1,166	0.79	%		631,135		1,331	0.84	%		700,256		1,400	0.79	%
		3,932,735		6,450	0.65	%		3,986,700		6,444	0.65	%		4,167,592		7,157	0.70	%		4,261,729		8,238	0.77	%		4,397,077		8,766	0.79	%
Non-interest bearing deposit accounts		772,545		-	-			773,910		-	-			750,897		-	-			740,527		-	-			716,681		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		201	-			-		160	-			-		(53)	-			-		(88)	-			-		(1,105)	-
Total deposits		4,705,280		6,651	0.56	%		4,760,610		6,604	0.56	%		4,918,489		7,104	0.59	%		5,002,256		8,150	0.65	%		5,113,758		7,661	0.59	%
Borrowings
Securities sold under agreements to repurchase		1,132,373		7,605	2.66	%		1,020,077		7,394	2.91	%		939,377		7,164	3.09	%		990,932		7,415	2.97	%		1,010,000		7,453	2.93	%
Advances from FHLB and other borrowings		337,829		2,283	2.68	%		344,088		2,248	2.62	%		337,292		2,235	2.69	%		338,815		2,287	2.68	%		346,977		2,314	2.65	%
Subordinated capital notes		102,198		885	3.44	%		101,938		875	3.44	%		101,675		863	3.44	%		101,329		1,002	3.92	%		100,931		1,002	3.94	%
Total borrowings		1,572,400		10,773	2.72	%		1,466,103		10,517	2.88	%		1,378,344		10,262	3.02	%		1,431,076		10,704	2.97	%		1,457,908		10,769	2.93	%
Total interest-bearing liabilities	$	6,277,680	$	17,424	1.10	%	$	6,226,713	$	17,121	1.10	%	$	6,296,833	$	17,366	1.12	%	$	6,433,332	$	18,854	1.16	%	$	6,571,666	$	18,430	1.11	%
Interest rate spread			$	89,823	5.21	%			$	82,292	4.84	%			$	89,635	5.35	%			$	97,128	5.59	%			$	101,871	5.78	%
Net interest margin					5.29	%					4.92	%					5.42	%					5.65	%					5.84	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	6,106					$	941					$	1,364					$	1,851					$	2,680
Acquired Eurobank loans				6,991						2,635						2,042						2,426						3,098
			$	13,097					$	3,576					$	3,406					$	4,277					$	5,778
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	6,740,932	$	94,150	5.54	%	$	6,708,519	$	95,837	5.73	%	$	6,703,286	$	103,595	6.27	%	$	6,817,770	$	111,705	6.50	%	$	6,923,410	$	114,523	6.56	%
Interest rate spread			$	76,726	4.44	%			$	78,716	4.63	%			$	86,229	5.15	%			$	92,851	5.34	%			$	96,093	5.45	%
Net interest margin					4.52	%					4.71	%					5.22	%					5.40	%					5.51	%
6

OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin (Continued)
	2015 YTD						2014 YTD
			Interest						Interest
	Average		Income/		Yield/		Average		Income/		Yield/
(Dollars in thousands) (unaudited)	Balance		Expense		Rate		Balance		Expense		Rate
Interest earning assets:
Cash equivalents and securities purchased under agreements to resell	$	508,598	$	953	0.25	%	$	580,872	$	951	0.22	%
Investment securities		1,476,057		27,457	2.49	%		1,466,717		38,203	3.48	%
Loans
Non-acquired loans		2,907,121		136,559	6.28	%		2,584,905		126,721	6.55	%
Acquired BBVAPR loans		1,613,780		104,417	8.65	%		2,075,599		134,248	8.65	%
Acquired Eurobank loans		234,960		44,275	25.19	%		343,467		69,153	26.92	%
Total loans		4,755,861		285,251	8.02	%		5,003,971		330,122	8.82	%
Total interest-earning assets	$	6,740,516	$	313,661	6.22	%	$	7,051,560	$	369,276	7.00	%
Interest bearing liabilities:
Deposits
NOW accounts	$	1,171,679	$	3,388	0.39	%	$	1,438,818	$	6,349	0.59	%
Savings accounts		1,282,753		4,988	0.52	%		1,150,871		6,268	0.73	%
Time deposits		965,862		8,213	1.14	%		1,203,647		12,147	1.35	%
Brokered deposits		607,575		3,462	0.76	%		720,208		4,384	0.81	%
		4,027,869		20,051	0.67	%		4,513,544		29,148	0.86	%
Non-interest bearing deposit accounts		765,863		-	-			707,975		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		308	-			-		(3,344)	-
Total deposits		4,793,732		20,359	0.57	%		5,221,519		25,804	0.66	%
Borrowings
Securities sold under agreements to repurchase		1,031,316		22,163	2.87	%		1,058,378		22,238	2.81	%
Advances from FHLB and other borrowings		339,738		6,766	2.66	%		360,884		6,897	2.56	%
Subordinated capital notes		101,939		2,623	3.44	%		100,551		2,990	3.98	%
Total borrowings		1,472,993		31,552	2.86	%		1,519,813		32,125	2.83	%
Total interest-bearing liabilities	$	6,266,725	$	51,911	1.11	%	$	6,741,332	$	57,929	1.15	%
Interest rate spread			$	261,750	5.11	%			$	311,347	5.85	%
Net interest margin					5.19	%					5.90	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	8,411						4,156
Acquired Eurobank loans				11,668						7,103
			$	20,079					$	11,259
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	6,740,516	$	293,582	5.82	%	$	7,051,560	$	358,017	6.79	%
Interest rate spread			$	241,671	4.71	%			$	300,088	5.64	%
Net interest margin					4.79	%					5.69	%
7

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (1)
	2015		2015		2015		2014		2014
(Dollars in thousands) (unaudited)	Q3		Q2		Q1		Q4		Q3
Net Charge-offs
Mortgage:
Charge-offs	$	1,058	$	1,356	$	1,414	$	1,245	$	1,563
Recoveries		(270)		(67)		-		(54)		(138)
Total mortgage		788		1,289		1,414		1,191		1,425
Commercial:
Charge-offs		828		497		992		381		1,081
Recoveries		(63)		(219)		(89)		(64)		(56)
Total commercial		765		278		903		317		1,025
Consumer:
Charge-offs		2,471		2,309		1,676		1,962		1,585
Recoveries		(186)		(390)		(153)		(113)		(66)
Total consumer		2,285		1,919		1,523		1,849		1,519
Auto and Leasing:
Charge-offs		8,510		7,662		8,136		8,047		7,393
Recoveries		(3,251)		(3,425)		(3,384)		(2,764)		(2,434)
Total auto and leasing		5,259		4,237		4,752		5,283		4,959
Total	$	9,097	$	7,723	$	8,592	$	8,640	$	8,928
Net Charge-off Rates
Mortgage		0.42%		0.66%		0.72%		0.61%		0.72%
Commercial		0.23%		0.08%		0.28%		0.10%		0.34%
Consumer		4.33%		3.99%		3.36%		4.23%		3.77%
Auto and Leasing		3.28%		2.74%		3.20%		3.73%		3.73%
Total		1.23%		1.06%		1.21%		1.25%		1.34%
Average Loans Held For Investment
Mortgage	$	758,689	$	782,753	$	787,330	$	787,121	$	789,204
Commercial		1,349,511		1,333,276		1,269,104		1,236,976		1,190,607
Consumer		210,933		192,572		181,464		175,049		161,147
Auto and Leasing		640,828		618,746		594,760		566,385		531,914
Total	$	2,959,961	$	2,927,347	$	2,832,658	$	2,765,531	$	2,672,872
8

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (Continued) (1)
		2015			2015		2015		2014		2014
(Dollars in thousands) (unaudited)		Q3			Q2		Q1		Q4		Q3
Early Delinquency (30 - 89 days past due)
Mortgage		$	37,377	*	$	68,515	$	63,060	$	68,671	$	76,236
Commercial			1,678			5,532		4,453		2,814		2,776
Consumer			3,585			3,089		3,957		3,525		3,287
Auto and Leasing			71,627			66,044		64,287		64,574		59,493
Total		$	114,267		$	143,180	$	135,757	$	139,584	$	141,792
Early Delinquency Rates (30 - 89 days past due)
Mortgage			4.90%			9.05%		7.99%		8.67%		9.64%
Commercial			0.12%			0.41%		0.34%		0.22%		0.23%
Consumer			1.57%			1.45%		2.04%		1.89%		1.87%
Auto and Leasing			11.06%			10.60%		10.68%		11.22%		10.96%
Total			3.77%			4.84%		4.67%		4.91%		5.20%
Total Delinquency (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation		$	104,355		$	127,609	$	122,597	$	124,559	$	128,556
GNMA's buy-back option program	(32)		6,993			6,961		37,458		42,243		40,066
Total mortgage			111,348			134,570		160,055		166,802		168,622
Commercial			17,014			16,062		13,518		12,164		12,109
Consumer			4,832			4,244		5,207		4,689		4,365
Auto and Leasing			80,613			73,464		71,482		71,994		67,772
Total		$	213,807		$	228,340	$	250,262	$	255,649	$	252,868
Total Delinquency Rates (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation			13.68%			16.85%		15.53%		15.73%		16.25%
GNMA's buy-back option program	(32)		0.92%			0.92%		4.74%		5.34%		5.06%
Total mortgage			14.60%			17.77%		20.27%		21.07%		21.31%
Commercial			1.22%			1.18%		1.02%		0.94%		0.99%
Consumer			2.12%			2.00%		2.69%		2.51%		2.48%
Auto and Leasing			12.45%			11.79%		11.87%		12.51%		12.48%
Total			7.06%			7.72%		8.60%		8.99%		9.27%
Nonperforming Assets	(23)
Mortgage		$	78,148		$	74,528	$	76,662	$	72,815	$	67,028
Commercial			222,072			224,014		222,820		21,679		22,290
Consumer			2,004			1,512		1,605		1,590		1,241
Auto and Leasing			10,076			8,587		8,482		8,668		9,008
Total nonperforming loans			312,300			308,641		309,569		104,752		99,567
Foreclosed real estate			10,517			9,956		10,697		12,343		13,608
Other repossessed assets			5,134			8,624		10,332		11,107		9,914
Total nonperforming assets		$	327,951		$	327,221	$	330,598	$	128,202	$	123,089
Nonperforming Loan Rates
Mortgage			10.25%			9.84%		9.71%		9.20%		8.47%
Commercial			15.98%			16.43%		16.82%		1.68%		1.83%
Consumer			0.88%			0.71%		0.83%		0.85%		0.71%
Auto and Leasing			1.56%			1.38%		1.41%		1.51%		1.66%
Total loans			10.32%			10.44%		10.64%		3.68%		3.65%
* During Q3 2015, the Company changed its early delinquency reporting on mortgage loans from one scheduled payment due to two scheduled payments due in order to comply with regulatory reporting instructions and be comparable with local peers, except for troubled debt restructured loans which remain using one scheduled payment due.
9

OFG Bancorp (NYSE: OFG)
Table 7: Allowance for Loan and Lease Losses
	Quarter Ended September 30, 2015
							Auto and
(Dollars in thousands) (unaudited)	Mortgage		Commercial		Consumer		Leasing		Unallocated		Total
Non-acquired loans
Balance at beginning of period	$	18,076	$	34,779	$	10,464	$	15,064	$	606	$	78,989
(Recapture) provision for loan and lease losses		4		1,510		2,637		6,869		(561)		10,459
Charge-offs		(1,058)		(828)		(2,471)		(8,510)		-		(12,867)
Recoveries		270		63		186		3,251		-		3,770
Balance at end of period	$	17,292	$	35,524	$	10,816	$	16,674	$	45	$	80,351
Allowance coverage ratio		2.27%	$	2.56%	$	4.75%	$	2.57%	$	0.00%	$	2.65%
Acquired loans
Acquired BBVAPR loans:
Acquired loans accounted for under ASC 310-20
Balance at beginning of period			$	54	$	2,616	$	2,859	$	-	$	5,529
(Recapture) provision for loan and lease losses				(17)		1,485		183		-		1,651
Charge-offs				(22)		(1,103)		(1,150)		-		(2,275)
Recoveries				7		59		502		-		568
Balance at end of period			$	22	$	3,057	$	2,394	$	-	$	5,473
Acquired loans accounted for under ASC 310-30
Balance at beginning of period	$	473	$	14,940	$	84	$	2,862	$	-	$	18,359
Provision for loan and lease losses, net		-		5,979		-		-		-		5,979
Loan pools fully charged-off		-		(4,352)		-		-		-		(4,352)
Balance at end of period		473	$	16,567	$	84	$	2,862	$	-	$	19,986
Acquired Eurobank loans:
Balance at beginning of period	$	17,593	$	53,470	$	389	$	-	$	-	$	71,452
Provision for loan and lease losses, net		15,813		17,398		279		-		-		33,490
Loan pools fully charged-off		(721)		(13,588)		(301)		-		-		(14,610)
Balance at end of period	$	32,685	$	57,280	$	367	$	-	$	-	$	90,332
Total acquired loans
Balance at beginning of period	$	18,066	$	68,464	$	3,089	$	5,721	$	-	$	95,340
(Recapture) provision for loan and lease losses		15,813		23,360		1,764		183		-		41,120
Charge-offs		-		(22)		(1,103)		(1,150)		-		(2,275)
Recoveries		-		7		59		502		-		568
Loan pools fully charged-off		(721)		(17,940)		(301)		-		-		(18,962)
Balance at end of period	$	33,158	$	73,869	$	3,508	$	5,256	$	-	$	115,791
10

OFG Bancorp (NYSE: OFG)
Table 8: Accretable Yield on Loans Accounted for Under ASC 310-30
	Quarter Ended September 30, 2015
(Dollars in thousands) (unaudited)	Mortgage		Commercial		Construction		Auto		Consumer		Total
Accretable Yield and Non-Accretable Discount
Acquired BBVAPR loans:
Accretable Yield
Balance at beginning of period	$	275,880	$	71,563	$	24,613	$	31,531	$	8,461	$	412,048
Change in expected cash flows		-	$	6,134	$	1,396	$	(1)	$	(1)	$	7,528
Accretion		(8,614)		(12,693)		(2,719)		(5,463)		(1,207)		(30,696)
Transfers from (to) non-accretable discount		75		(6,450)		(4,075)		148		35		(10,267)
Balance at end of period	$	267,341	$	58,554	$	19,215	$	26,215	$	7,288	$	378,613
Non-Accretable Discount
Balance at beginning of period	$	389,107	$	10,770	$	6,994	$	23,690	$	19,356	$	449,917
Change in actual and expected losses		(2,184)		(12,090)		(2,937)		(555)		(315)		(18,081)
Transfers (to) from accretable yield		(75)		6,450		4,075		(148)		(35)		10,267
Balance at end of period	$	386,848	$	5,130	$	8,132	$	22,987	$	19,006	$	442,103
					Construction &
					Development
	Loans Secured				Secured by
	by 1-4 Family		Commercial		1-4 Family
	Residential		and Other		Residential
	Properties		Construction		Properties		Leasing		Consumer		Total
Acquired Eurobank loans:
Accretable Yield
Balance at beginning of period	$	55,806	$	27,473	$	18,349	$	1,103	$	1,910	$	104,641
Change in expected cash flows		(9,262)		43,775		(10,749)		270		118		24,152
Accretion		(3,543)		(10,100)		(1,446)		(711)		(214)		(16,014)
Transfers from (to) non-accretable discount		2,068		(30,400)		175		307		1,603		(26,247)
Balance at end of period	$	45,069	$	30,748	$	6,329	$	969	$	3,417	$	86,532
Non-Accretable Discount
Balance at beginning of period	$	11,402	$	-	$	-	$	-	$	9,730	$	21,132
Change in actual and expected losses		(8)		(30,400)		175		307		(34)		(29,960)
Transfers (to) from accretable yield		(2,068)		30,400		(175)		(307)		(1,603)		26,247
Balance at end of period	$	9,326	$	-	$	-	$	-	$	8,093	$	17,419
11

OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures
In addition to disclosing required regulatory capital measures, we also report certain non-GAAP capital measures that management uses in assessing its capital adequacy. These non-GAAP measures include average tangible common equity, tangible common equity ("TCE") and TCE ratio. The table below provides the details of the calculation of our regulatory capital and non-GAAP capital measures. While our non-GAAP capital measures are widely used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies, they may not be comparable to similarly titled measures reported by other companies.
	2015		2015		2015		2014		2014
(Dollars in thousands) (unaudited)	Q3		Q2		Q1		Q4		Q3
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders' equity	$	912,598	$	929,867	$	948,302	$	936,218	$	919,804
Less:  Average noncumulative perpetual preferred stock		(176,000)		(176,000)		(176,000)		(176,000)		(176,000)
Average noncumulative perpetual preferred stock issuance costs		10,130		10,130		10,130		10,130		10,130
Average total common stockholders' equity	$	746,728	$	763,997	$	782,432	$	770,348	$	753,934
Less:  Average intangible assets		(94,697)		(95,168)		(95,616)		(96,164)		(96,712)
Average tangible common equity	$	652,031	$	668,829	$	686,816	$	674,184	$	657,222
Stockholders' Equity to Non-GAAP Tangible Common Equity
Total stockholders' equity	$	907,888	$	911,599	$	936,379	$	942,197	$	929,998
Less:  Intangible assets		(94,383)		(94,859)		(95,336)		(95,812)		(96,354)
Noncumulative perpetual preferred stock		(176,000)		(176,000)		(176,000)		(176,000)		(176,000)
Noncumulative perpetual preferred stock issuance costs		10,130		10,130		10,130		10,130		10,130
Tangible common equity	$	647,635	$	650,870	$	675,173	$	680,515	$	667,774
Common stock outstanding at end of period		43,868		44,368		44,665		44,614		45,060
Tangible book value	$	14.76	$	14.67	$	15.12	$	15.25	$	14.82
Total Assets to Tangible Assets
Total assets	$	7,203,822	$	7,398,325	$	7,364,156	$	7,449,109	$	7,673,339
Less:  Intangible assets		(94,383)		(94,859)		(95,336)		(95,812)		(96,354)
Tangible assets	$	7,109,439	$	7,303,466	$	7,268,820	$	7,353,297	$	7,576,985
Non-GAAP TCE Ratio
Tangible common equity	$	647,635	$	650,870	$	675,173	$	680,515	$	667,774
Tangible assets		7,109,439		7,303,466		7,268,820		7,353,297		7,576,985
TCE ratio		9.11%		8.91%		9.29%		9.25%		8.81%
12

OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures (Continued)
		BASEL III
		Standardized						BASEL I
		2015		2015		2015		2014		2014
(Dollars in thousands) (unaudited)		Q3		Q2		Q1		Q4		Q3
Regulatory Capital Metrics	(24)
Common equity Tier 1 capital		$	601,789		611,542		633,297		N/A		N/A
Tier 1 common equity capital			N/A	$	N/A	$	N/A	$	575,655	$	581,927
Tier 1 capital			782,561		790,936		809,652		776,525		782,797
Total risk-based capital	(25)		847,267		868,568		887,042		851,410		858,356
Risk-weighted assets			5,003,285		4,988,754		5,015,090		4,847,150		4,905,814
Regulatory Capital Ratios	(24)
Common equity Tier 1 capital ratio	(26)		12.03%		12.26%		12.63%		N/A		N/A
Tier 1 common equity ratio			N/A		N/A		N/A		11.88%		11.86%
Tier 1 risk-based capital ratio	(27)		15.64%		15.85%		16.14%		16.02%		15.96%
Total risk-based capital ratio	(28)		16.93%		17.41%		17.69%		17.57%		17.50%
Leverage ratio	(29)		10.93%		11.05%		11.23%		10.61%		10.51%
Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach	(24)
Total stockholders' equity		$	907,888	$	911,599		936,379
Less:  Noncumulative perpetual preferred stock			(176,000)		(176,000)		(176,000)
Noncumulative perpetual preferred stock issuance costs			10,130		10,130		10,130
Unrealized gains on available-for-sale securities, net of income tax	(30)		(22,486)		(18,833)		(30,215)
Unrealized losses on cash flow hedges, net of income tax	(30)		4,330		4,532		5,891
			723,862		731,428		746,185
Less:    Disallowed goodwill			(86,069)		(86,069)		(86,069)
Disallowed other intangible assets, net	(31)		(2,028)		(2,145)		(2,261)
Disallowed deferred tax assets, net	(31)		(33,976)		(31,672)		(24,558)
Common equity Tier 1 capital			601,789		611,542		633,297
Plus:  Qualifying noncumulative perpetual preferred stock			176,000		176,000		176,000
Qualifying noncumulative perpetual preferred stock issuance costs			(10,130)		(10,130)		(10,130)
Subordinated capital notes			35,000		35,000		35,000
Less:  Disallowed deferred tax assets, net			(20,098)		(21,475)		(24,515)
Tier 1 capital			782,561		790,937		809,652
Plus:  Long-term debt qualifying as Tier 2 capital			-		13,400		13,400
Qualifying allowance for loan and lease losses			64,706		64,232		63,990
Tier 2 capital			64,706		77,632		77,390
Total risk-based capital		$	847,267	$	868,569		887,042
13

OFG Bancorp (NYSE: OFG)
Table 10: Notes to Financial Summary, Selected Metrics, Loans, and Consolidated Financial Statements (Tables 1 - 9)
(1)	We use the term "acquired loans" to refer to loans acquired from the BBVAPR acquisition (December 18, 2012) and loans acquired in the Eurobank FDIC-Assisted acquisition (April 30, 2010), recorded at fair value at acquisition. The majority of these loans acquired are subsequently accounted for based on estimated cash flows expected to be collected over the life of the loans (under the accounting standard known as ASC 310-30). Because the guidance takes into consideration future credit losses expected to be incurred over the life of the loans, there are no charge-offs or an allowance associated with this loans unless the estimated cash flows expected to be collected decrease subsequent to acquisition. In addition, these loans are not classified as delinquent or nonperforming even though the customer may be contractually past due because we expect that we will fully collect the carrying value of these loans. Acquired loans also include loans acquired in the BBVAPR acquisition that were accounted for under the provisions of ASC 310-20, which at the end of the reporting period still have unamortized premium or discount. The fair value of these loans already include a credit mark for losses estimated on these loans.  The allowance for loan and lease losses for these loans consider such marks applied. The accounting and classification of these loans may significantly alter some of our reported credit quality metrics. We therefore supplement certain reported credit quality metrics with metrics adjusted to exclude the impact of these acquired loans. Loans acquired in the BBVAPR acquisition that were accounted for under the provisions of ASC 310-20, which had fully amortized their premium or discount recorded at the date of acquisition at the end of the reporting period, are removed from the acquired loans category.
(2)	Total banking and wealth management revenues.
(3)	During Q1 2015, the Company placed its $200 million participation in a fuel purchase line of credit with the Puerto Rico Electric Power Authority (PREPA) on non-accrual status and recorded a $24.0 million provision for loan and lease losses, which is part of the overall quarterly provision for loan and lease losses.
(4)	Calculated based on net (loss) income available to common shareholders divided by average common shares outstanding for the period.
(5)	Calculated based on net (loss) income available to common shareholders plus the preferred dividends on the convertible preferred stock, divided by total average common shares outstanding and equivalents for the period as if converted.
(6)	The Board of directors increased OFG's regular quarterly dividend per common share to $0.10 per share during Q4 2014.
(7)	Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See "Table 9: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.
(8)	Information includes all loans held for investment, including all acquired loans. Acquired loans, including those accounted for under ASC 310-30, are disclosed at carrying amount.
(9)	Calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.
(10)	Calculated based on annualized income, net of tax, for the period divided by average total assets for the period.
(11)	Calculated based on annualized income available to common shareholders for the period divided by average tangible common equity for the period.  See "Table 9: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.
(12)	Calculated based on non-interest expense for the period divided by total net interest income and total banking and financial services revenues for the period.
(13)	Calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period.
(14)	Non-GAAP ratios. See "Table 9: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures" for information on the calculation of each of these ratios.
(15)	During Q4 2014, the FDIC and the Company agreed to a change in the methodology for the determination of the fair value of covered assets.  The change resulted in higher claims to the FDIC and a lower amortization of the indemnification asset was required during the quarter.
(16)	During Q4 2014, the Company offered a voluntary early retirement program for qualified employees and accumulated additional compensation expenses of $3.8 million related to this program.
(17)	During Q3 2015, the Company offered a voluntary early retirement program for qualified employees and accumulated additional compensation expenses of $917 thousand related to this program.
(18)	At June 30, 2015, amount includes a $40 million receivable from the FDIC corresponding to the Q1 2015 loss-share certification amounting to $13 million that was received during July 2015 and a $27 million receivable from Q2 2015 loss-share certifications for non-single family residential mortgage loans. In August 2015, the Company received $2 million from the Q2 2015 loss-share certification receivable.
(19)	Covered loans are no longer a material amount. Therefore, during Q3 2015, the Company is changing its presentation of loans to include the following loan segments:  "Non-acquired" loans, "Acquired BBVAPR" loans and "Acquired Eurobank" loans.
(20)	During Q4 2014, the Company transferred 3,731 accounts with balances of approximately $100 million from demand deposit accounts to savings accounts.
(21)	During Q4 2014, the Company purchased 446,498 shares under the current stock repurchase program for a total of $6.5 million, at an average price of $14.65 per share. During Q2 2015, the Company purchased 303,985 shares under the current stock repurchase program for a total of $4.2 million, at an average price of $13.91 per share.In addition, during Q3 2015, the Company purchased 500,000 shares under the current stock repurchase program for a total of $4.7 million, at an average price of $9.39 per share.
(22)	Production of new loans (excluding renewals).
(23)	Loans accounted for under ASC 310-30 (Loans acquired with deteriorated credit quality, including those by analogy), including Eurobank acquired loans, are considered to be performing due to the application of the accretion method, in which these loans will accrete interest income over the remaining life of the loans using estimated cash flow analyses. Therefore, they are not included as non-performing loans.
(24)	During Q1 2015, the Company implemented the New Capital Rules, which incorporates Basel III Capital Requirements. The New Capital Rules revise the definitions and the components of regulatory capital, as well as address other issues affecting the numerator in banking institutions’ regulatory capital ratios. The New Capital Rules also address asset risk weights and other matters affecting the denominator in banking institutions’ regulatory capital ratios and replace the existing general risk-weighting approach with a more risk-sensitive approach. The New Capital Rules are effective for OFG Bancorp and Oriental Bank on January 1, 2015, subject to phase-in periods for certain of their components and other provisions. Among other matters, the New Capital Rules: (i) introduce a new capital measure called “Common Equity Tier 1” (“CET1”) and related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements; (iii) mandate that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) expand the scope of the deductions from and adjustments to capital as compared to existing regulations.
(25)	Total risk-based capital equals the sum of Tier 1 capital and Tier 2 capital.
(26)	Common equity Tier 1 capital ratio is a regulatory capital measure calculated based on Common equity Tier 1 capital divided by risk-weighted assets.
(27)	Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.
(28)	Total risk-based capital ratio is a regulatory capital measure calculated based on Total risk-based capital divided by risk-weighted assets.
(29)	Leverage capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by average assets, after certain adjustments.
(30)	During Q1 2015, the Company decided to elect the opt-out option to continue to exclude AOCI items from regulatory capital calculation.
(31)	Amounts based on transition provisions for regulatory capital deductions and adjustments of 40% for 2015.
(32)	During Q2 2015, the Company sold mortgage servicing rights on $653.5 million mortgage loans to Scotiabank PR. As a result, the delinquent GNMA's buy-back option program loans and corresponding liability decreased $30.5 million from Q1 2015.
(33)	The FDIC loss share coverage for the commercial loans and other non-single family loans was in effect until June 30, 2015. The FDIC granted an extension of 120 days for the sale of part of this portfolio and agreed to cover up to $20 million with respect to the aggregate loss resulting from this sale. Therefore, the FDIC Indemnification Asset for projected claimable losses on non-single family residential loans loss-share period expired at June 30, 2015.
(34)	On September 28, 2015, the Company sold a portion of covered non-performing commercial loans amounting to $197.1 million unpaid principal balance ($100.0 million carrying amount). The sales price was 18.44% of UPB, or $36.3 million. The FDIC agreed to cover $20.0 million of losses as part of its loss-share agreement with the Company. As a result, a $20.0 million reimbursement was recorded in the statement of operations. The Company also recorded a $32.9 million provision for loan and lease losses for acquired Eurobank loans, which was partially offset by $4.6 million in cost recoveries. Also, as part of this transaction, the Company sold certain non-performing commercial loans and real estate owned from the BBVAPR acquisition amounting to $38.1 million unpaid principal balance ($9.9 million carrying amount). The sales price was $5.2 million. As a result, a $5.2 million provision for loan and lease losses was recorded for BBVAPR acquired loans, which was partially offset by $2.4 million in cost recoveries. In addition, certain real estate owned with a carrying amount of $11.0 million was sold for $1.7 million. At September 30 , 2015, the Company had a $13.0 million receivable related to this sale and a $20.0 million receivable from the FDIC for the shared-loss portion.
14