OFG Bancorp (OFG) 8-K OFG Bancorp Reports 4Q15 and 2015 Results

Exhibit 99

 

OFG Bancorp Reports 4Q15 and 2015 Results

SAN JUAN, Puerto Rico, February 1, 2016 – OFG Bancorp (NYSE: OFG) today reported results for the fourth quarter and the year ended December 31, 2015.

4Q15 Results

•A loss of ($4.4) million, or ($0.10) per share fully diluted. This compares to net income of $1.1 million, or $0.03 per share diluted, in the preceding quarter, and $17.1 million, or $0.36 per share diluted, in the same quarter a year ago.

•Results included:

oAn additional $30.4 million provision on the $200 million participation in a syndicated fuel line of credit to the Puerto Rico Electric Power Authority (PREPA), reflecting continued hurdles in restructuring the credit. Currently in non-accrual status, interest payments are being credited to the payment of principal. The unpaid principal balance, net of allowances, was $135.9 million, or 68.5% of the total outstanding credit, at December 31, 2015.

o$9.2 million in other quarter-specific charges or expenses, consisting of $4.9 million impairment during the annual recasting of a BBVA PR loan pool, $1.5 million in additional legal fees related to PREPA negotiations, $1.6 million in final adjustments to the 2Q15 settlement of the Eurobank commercial shared loss agreement with the FDIC, and $1.2 million in an Other Than Temporary Impairment (OTTI) related to a $11.0 million Puerto Rico Industrial Development Company (PRIDCO) bond.

o$19.9 million in tax benefits primarily resulting from the 4Q15 loss.

•Adjusted for the above listed factors, OFG earned $9.1 million, or $0.21 per share fully diluted, assuming an effective tax rate of 33%.*

4Q15 Highlights

•All components of our business continued strong as in previous quarters:

oPre-Provision Net Revenues of $36.4 million compared to an average of $38.3 million the last two quarters.

oNew loan production at $236.8 million compared to an average of $254.0 million the last four quarters.

oBanking and wealth management fee revenues at $19.3 million compared to an average of $19.6 million the last four quarters.

oTangible book value per common share of $14.53 and tangible common equity (TCE) ratio of 9.10% at December 31, 2015.

•OFG’s focus on cost control brought non-interest expenses down 5.4% from 4Q14, largely due to proactive rightsizing.

•Asset quality trends were encouraging. Early and total delinquency rates fell to 3.70% and 6.94% of loans, respectively, from 4.91% and 8.99% in 4Q14. The non-performing loan rate (excluding PREPA) at 3.63% was the lowest it has been in five quarters.

2015 Summary

•A loss of ($16.4) million, or ($0.37) per share, compared to net income of $71.3 million, or $1.50 per share diluted, for 2014.

•Results reflected significant de-risking steps, including the following:

oPuerto Rico central government and public corporation loan balances fell 47.8% to $211.9 million at December 31, 2015, from $406.1 million a year ago. Loans to Puerto Rico municipalities declined 4.4% to $203.5 million, and Puerto Rico securities balance came down 15.0% to $17.8 million.

oSuccessful negotiation and termination of the FDIC commercial shared loss agreement. This resulted in a $10.2 million increase in share loss amortization in 2Q15, but a reduction of approximately $10 million a quarter going forward.

oSuccessful bulk sale of $235.2 million in unpaid principal balances of acquired NPAs. This resulted in a charge of $20.2 million pre-tax in 3Q15.

oIn all, the de-risking resulted in normalization of net interest margin to 5.03% from 5.84%, primarily reflecting contraction from the steep reduction in tax exempt, high yield, government related loans.

•Growth of the Oriental retail franchise through new customers, products and services.

oOriental Bank furthered its innovative edge in 3Q15 with the launch of MyStatus. The industry-first mobile app updates home buyers on every step of their mortgage application from origination through closing.

oMyStatus followed the introduction of FOTOdepósito, People Pay, and Cuenta Libre (Freedom Account). With Cuenta Libre, customers who access their accounts via mobile phone, tablet, web, debit / credit card, or ATMs, do not have to pay ATM fees.

oNew products and services like these helped Oriental Bank add 15,400 net new retail customers, increasing its total customer base by 4.40%. New customers added approximately $67 million in deposits, $115 million in loans, and $15 million in wealth management assets.

oIn total, new loan production of $1.0 billion increased 10.3% year over year, with commercial up 38.9%, residential mortgage up 14.8%, and consumer up 17.3%, more than offsetting a decline in auto.

CEO Comment

José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board, commented:

“Our core business performed well this past quarter and year, given the challenging economy and Puerto Rico’s fiscal situation. We maintained good levels of interest and non-interest revenues and loan production, while retaining a solid capital position. This enabled us to take decisive de-risking actions to further strengthen our balance sheet. Non-interest expenses declined, most credit metrics improved, and we continued to expand the Oriental franchise.

“Clearly, market valuations and sentiment regarding OFG outside of Puerto Rico appear to be incongruent to our core performance and asset quality trends and positions.

“We are cognizant of the high level of uncertainty regarding Puerto Rico’s future. While lower fuel prices have significantly enhanced personal disposable income and reduced operating costs for businesses, the Government lost an opportunity to take a major step in solving the fiscal situation when the Legislature, for a second time, delayed voting on the PREPA Revitalization Act.

“Despite the difficult environment in which we operate, we remain steadfast in our long standing management strategies: maintaining discipline in underwriting, pricing, operations and expenses. Furthermore, we have shifted our capital management strategy toward preserving and continuing to build excess capital. We believe this is the prudent thing to do until we can get a better read on the future.

“Looking forward to 2016 and beyond, we expect to continue to perform well, although somewhat affected by lower interest income from a smaller balance of acquired loans. Ultimately, we look forward to putting our PREPA exposure behind us, to better highlight our solid core business performance.

“As for Puerto Rico itself, a comprehensive solution is needed to overcome the fiscal challenges and to improve the island’s competitiveness. We are encouraged by the attention Puerto Rico has received in Washington, but the time for talk is over. Leadership needs to take tangible actions.”

4Q15 Income Statement Highlights

The following compares GAAP and Non-GAAP Adjusted Results for the fourth quarter 2015 to the third quarter 2015.

	Quarter ended September 30, 2015									Quarter ended December 31, 2015
				Loss on Bulk Sale
		Actual Results		of Non-Performing		Quarter Specific		Non-Recurrent	Adjusted Results		Actual Results		Quarter Specific		Non-Recurrent
(Dollars in thousands) (unaudited)		(US GAAP)		Loans and OREOs		Items		(Non-GAAP)	(Non-GAAP)		(US GAAP)		Items		(Non-GAAP)
Interest income		$	107,247	$	7,058	$	3,180	$	97,009		$	92,907	$	-	$	92,907
Interest expense			(17,423)		-		-		(17,423)			(17,285)		-		(17,285)
Net interest income			89,824		7,058		3,180		79,586			75,622		-		75,622
Provision for loan and lease losses, excluding acquired loans			(10,459)		-		-		(10,459)			(45,012)		(30,345)		(14,667)
Provision for acquired BBVAPR loan and lease losses			(7,630)		(5,175)		-		(2,455)			(7,332)		(4,900)		(2,432)
(Recapture) provision for acquired Eurobank loan and lease losses			(33,490)		(32,855)		-		(635)			154		-		154
Total provision for loan and lease losses, net			(51,579)		(38,030)		-		(13,549)			(52,190)		(35,245)		(16,945)
Net interest income after provision for loan and leases losess			38,245		(30,972)		3,180		66,037			23,432		(35,245)		58,677
Banking and wealth management revenues			18,703		-		778		17,925			19,349		-		19,349
Other-than-temporary impairment losses on investment securities			(246)		-		(246)		-			(1,244)		(1,244)		-
FDIC shared-loss expense, net			(2,079)		-		-		(2,079)			(4,400)		(1,589)		(2,811)
Gain on FDIC shared-loss coverage in sale of loans			20,000		20,000		-		-			-		-		-
Other (losses) gains, net			(401)		-		-		(401)			565		-		565
Total non-interest income			35,977		20,000		532		15,445			14,270		(2,833)		17,103
Compensation and employee benefits			(21,015)		-		(917)		(20,098)			(18,717)		-		(18,717)
Rent and occupancy costs			(8,556)		-		-		(8,556)			(8,111)		-		(8,111)
General and administrative expenses			(39,519)		(9,260)		180		(30,439)			(31,714)		(1,462)		(30,252)
Total non-interest expense			(69,090)		(9,260)		(737)		(59,093)			(58,542)		(1,462)		(57,080)
Income before taxes			5,132		(20,232)		2,975		22,389			(20,840)		(39,540)		18,700
Income tax expense (benefit)			562						7,388			(19,863)				6,171
Net income			4,570						15,001			(977)				12,529
Preferred stock dividends			(3,465)						(3,465)			(3,466)				(3,466)
Net income (loss) available to common shareholders		$	1,105					$	11,535			(4,443)			$	9,063
Earnings (loss) per common share - basic		$	0.03					$	0.26		$	(0.10)			$	0.21
Earnings (loss) per common share - diluted		$	0.03					$	0.26		$	(0.10)			$	0.21
Performance Metrics
Net interest margin			5.29%						4.68%			4.55%				4.55%
Return on average assets			0.25%						0.82%			-0.05%				0.70%
Return on average tangible common stockholders' equity			0.68%						7.08%			-2.75%				5.62%
Efficiency ratio			63.66%						60.60%			61.64%				60.10%

(1)3Q15 results included ($20.2) million pre-tax impact from the bulk sale of acquired NPAs, reflecting: (i) $7.0 million cost recoveries, (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.

(2)3Q15 results also included other quarter specific items, consisting of: (i) $3.2 million cost recovery in interest income due to a prepayment, (ii) $778,000 fee revenue from a prepayment penalty, (iii) ($246,000) in an OTTI charge, (iv) ($917,000) additional severance accrual, and (v) $180,000 from a onetime vendor credit.

(3)4Q15 results included the following quarter specific items, as previously mentioned: ($30.4) million provision related to the PREPA line, ($4.9) million impairment during the annual recasting of a BBVA PR loan pool, ($1.5) million in legal fees related to PREPA’s restructuring, ($1.6) million in a final settlement with the FDIC related to the expiration of the commercial loss sharing agreement, ($1.2) million in OTTI, and a $19.9 million tax benefit.

Adjusted for the above listed factors:

•Interest Income declined $4.1 million to $92.9 million due to lower balances and yields in the BBVA PR acquired portfolio, partially offset by higher interest income from a greater volume of originated loans.

•Interest Expense declined slightly to $17.3 million with the repayment of repurchase agreements used for temporary funding in 3Q15.

•Total Provision for Loan and Lease Losses increased $3.4 million to $16.9 million. This included $2.5 million for originated loans due to increased net charge offs and $1.0 million in re-yielding from the annual evaluation of certain acquired loan pools.

•Net Interest Margin was 4.55% compared to 4.68%, primarily due to lower yields on acquired loans.

•Total banking and wealth management revenues increased $1.4 million to $19.3 million, primarily due to certain annual fees in wealth management and an increase in fees arising from mortgage banking activities.

•Total Non-Interest Expenses declined $2.0 million to $57.1 million, primarily due to reduced compensation and employee benefits.

December 31, 2015 Balance Sheet Highlights

The following compares data as of December 31, 2015 to September 30, 2015 unless otherwise noted.

•Total loans declined to $4.43 billion from $4.47 billion, as originated loans partially offset outflows in acquired loans.

•Total investments were approximately level at$1.62 billion as mark to market and prepayments of mortgage backed securities were mostly offset by purchases.

•Total deposits remained approximately level at $4.72 billion with slightly lower savings and slightly higher short-term brokered balances.

•Total borrowings declined to $1.37 billion from $1.44 billion due to the previously mentioned repayment of short-term repurchase agreements.

•Total stockholders’ equity declined to $897.1 million from $907.9 million, reflecting a reduction in retained earnings and in accumulated other comprehensive income, net.

Credit Quality Highlights

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

•Net charge-off (NCO) rate at 1.67% increased 44 basis points. The increase in commercial NCOs was primarily due to one loan, while the increase in auto NCOs was from a year end push to reduce repo inventory.

•Early delinquency rate continued to fallto 3.70%, its lowest level in the last five quarters, due to measures taken to proactively manage the environment in Puerto Rico.

•Non-performing loan rate at 9.74% declined 58 basis points most notably due to commercial, auto and consumer, while holding nearly flat in mortgage.

•Allowance for loan and lease losses increased $32.3 million to $112.6 million primarily due to the increased PREPA provision. Coverage of loans held for investment increased to 3.62% from 2.65%.

Capital Position

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

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

•Tangible common equity to total tangible assets at 9.10% declined one basis point.

•Common Equity Tier 1 Capital Ratio (using Basel III methodology) increased to 12.15% from 12.03%.

•Total risk-based capital ratio increased to 17.30% from 16.93%.

Conference Call

A conference call to discuss OFG’s results for the fourth quarter 2015, outlook and related matters will be held today, Monday, February 1, 2016 at 10:00 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 fourth quarter ended December 31, 2015, can be found on the Webcasts, Presentations & Other Files page, on OFG’s Investor Relations website at www.ofgbancorp.com. 

*Non-GAAP Financial Measures

In addition to our financial information presented in accordance with GAAP, management uses certain “non-GAAP financial measures” within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future.

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 52^nd 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 48 financial centers. Investor information can be found at www.ofgbancorp.com.

# # #

Contacts

Puerto Rico: Alexandra López (allopez@orientalbank.com) at (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 December 31, 2015 Annual Report on Form 10-K 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		2015		2014		2015		2014
(Dollars in thousands, except per share data) (unaudited)		Q4		Q3		Q2		Q1		Q4		YTD		YTD
Earnings
Net interest income		$	75,622	$	89,823	$	82,292	$	89,635	$	97,128	$	337,372	$	408,475
Non-interest income, net (core)	(2)		19,349		18,703		19,359		19,223		20,981		76,634		77,948
Non-interest expense			58,542		69,090		64,437		56,332		61,898		248,401		242,725
Pre-provision net revenues			36,429		39,436		37,214		52,526		56,211		165,605		243,698
Provision for loan and lease losses	(3)(34)		52,190		51,579		15,539		42,193		16,877		161,501		60,640
FDIC shared-loss expense, net	(33)		4,400		2,079		23,245		13,084		11,980		42,808		65,756
Net (loss) income before income taxes			(20,840)		5,131		(2,340)		(2,009)		27,449		(20,058)		122,433
Net (loss) income			(976)		4,569		(3,109)		(2,988)		20,593		(2,504)		85,181
Net (loss) income available to common stockholders		$	(4,442)	$	1,104	$	(6,575)	$	(6,453)	$	17,127	$	(16,366)	$	71,319
Common Share Statistics
(Loss) earnings per common share - basic	(4)	$	(0.10)	$	0.03	$	(0.15)	$	(0.14)	$	0.38	$	(0.37)	$	1.58
(Loss) earnings per common share - diluted	(5)	$	(0.10)	$	0.03	$	(0.15)	$	(0.14)	$	0.36	$	(0.37)	$	1.50
Average common shares outstanding			43,868		43,929		44,505		44,634		44,705		44,231		45,024
Average common shares outstanding and equivalents			51,069		51,146		51,774		51,977		52,000		51,455		52,326
Cash dividends per common share	(6)	$	0.06	$	0.10	$	0.10	$	0.10	$	0.10	$	0.36	$	0.34
Book value per common share (period end)		$	16.67	$	16.91	$	16.81	$	17.25	$	17.40	$	16.67	$	17.40
Tangible book value per common share (period end)	(7)	$	14.53	$	14.76	$	14.67	$	15.12	$	15.25	$	14.53	$	15.25
Balance Sheet (Average Balances)
Loans	(8)	$	4,552,234	$	4,654,135	$	4,748,145	$	4,794,433	$	4,856,143	$	4,704,277	$	4,966,708
Interest-earning assets			6,600,614		6,740,932		6,708,519		6,703,287		6,817,770		6,704,995		6,992,631
Total assets			7,158,275		7,326,901		7,329,899		7,376,738		7,529,779		7,297,434		7,737,279
Interest-bearing deposits			3,931,009		3,932,735		3,986,700		4,167,592		4,261,729		4,773,245		5,166,143
Borrowings			1,394,171		1,572,400		1,466,103		1,378,344		1,431,076		1,453,126		1,497,447
Stockholders' equity			905,646		912,598		929,867		948,302		936,218		923,980		916,376
Common stockholders' equity			739,776		746,728		763,997		782,432		770,348		758,110		750,506
Performance Metrics
Net interest margin	(9)		4.55%		5.29%		4.92%		5.42%		5.65%		5.03%		5.84%
Return on average assets	(10)		-0.05%		0.25%		-0.17%		-0.16%		1.09%		-0.03%		1.10%
Return on average tangible common stockholders' equity	(11)		-2.75%		0.68%		-3.93%		-3.76%		10.16%		-2.47%		10.91%
Efficiency ratio	(12)		61.64%		63.66%		63.39%		51.75%		52.41%		60.00%		49.90%
Full-time equivalent employees, period end			1,466		1,491		1,507		1,510		1,567		1,466		1,567
Credit Quality Metrics
Excluding acquired loans:	(1)
Allowance for loan and lease losses	(3)	$	112,626	$	80,351	$	78,989	$	76,759	$	51,441	$	112,626	$	51,441
Allowance as a % of loans held for investment			3.62%		2.65%		2.67%		2.64%		1.81%		3.62%		1.81%
Net charge-offs		$	12,737	$	9,097	$	7,723	$	8,592	$	8,640	$	38,149	$	29,069
Net charge-off rate	(13)		1.67%		1.23%		1.06%		1.21%		1.25%		1.30%		1.11%
Early delinquency rate (30 - 89 days past due)			3.70%		3.77%		4.84%		4.67%		4.91%		3.70%		4.91%
Total delinquency rate (30 days and over)			6.94%		7.06%		7.72%		8.60%		8.99%		6.94%		8.99%
Capital Ratios	(14)(24)
Leverage ratio			11.18%		10.93%		11.05%		11.23%		10.61%		11.18%		10.61%
Common equity Tier 1 capital ratio			12.15%		12.03%		12.26%		12.63%		N/A		12.15%		N/A
Tier 1 common equity ratio			N/A		N/A		N/A		N/A		11.88%		N/A		11.88%
Tier 1 risk-based capital ratio			15.99%		15.64%		15.85%		16.14%		16.02%		15.99%		16.02%
Total risk-based capital ratio			17.30%		16.93%		17.41%		17.69%		17.57%		17.30%		17.57%
Tangible common equity ("TCE") ratio			9.10%		9.11%		8.91%		9.29%		9.25%		9.10%		9.25%
2

OFG Bancorp (NYSE: OFG)
Table 2: Consolidated Statements of Operations
		Quarter Ended										Year Ended
		December 31,		September 30,		June 30,		March 31,		December 31,		December 31,		December 31,
(Dollars in thousands, except per share data) (unaudited)		2015		2015		2015		2015		2014		2015		2014
Interest income:
Loans	(19)
Non-acquired loans		$	47,261	$	46,036	$	44,238	$	46,285	$	45,592	$	183,820	$	171,661
Acquired BBVAPR loans			26,976		35,214		33,508		35,694		40,023		131,392		174,923
Acquired Eurobank loans			8,134		16,014		12,758		15,504		19,816		52,410		88,969
Total interest income from loans			82,371		97,264		90,504		97,483		105,431		367,622		435,553
Investment securities			10,536		9,983		8,909		9,518		10,551		38,946		49,704
Total interest income			92,907		107,247		99,413		107,001		115,982		406,568		485,257
Interest expense:
Deposits
Core deposits			5,237		5,440		5,519		5,938		6,887		22,134		28,834
Brokered deposits			1,438		1,211		1,085		1,166		1,263		4,900		5,120
Total deposits			6,675		6,651		6,604		7,104		8,150		27,034		33,954
Borrowings			10,610		10,773		10,517		10,262		10,704		42,162		42,828
Total interest expense			17,285		17,424		17,121		17,366		18,854		69,196		76,782
Net interest income			75,622		89,823		82,292		89,635		97,128		337,372		408,475
Provision for loan and lease losses, excluding acquired loans	(3)		45,012		10,459		9,952		33,913		9,802		99,336		31,427
Provision for acquired BBVAPR loan and lease losses			7,332		7,630		5,692		3,471		5,734		24,125		23,533
(Recapture) provision for acquired Eurobank loan and lease losses	(1)(34)		(154)		33,490		(105)		4,809		1,341		38,040		5,680
Total provision for loan and lease losses, net			52,190		51,579		15,539		42,193		16,877		161,501		60,640
Net interest income after provision for loan and lease losses			23,432		38,244		66,753		47,442		80,251		175,871		347,835
Non-interest income:
Banking service revenues			10,223		10,826		10,212		10,205		10,407		41,466		40,712
Wealth management revenues			7,715		6,885		7,285		7,155		8,539		29,040		29,855
Mortgage banking activities			1,411		992		1,862		1,863		2,035		6,128		7,381
Total banking and wealth management revenues			19,349		18,703		19,359		19,223		20,981		76,634		77,948
FDIC shared-loss expense, net	(15)(20)(33)		(4,400)		(2,079)		(23,245)		(13,084)		(11,980)		(42,808)		(65,756)
Other-than-temporary impairment losses on investment securities			(1,244)		(246)		-		-		-		(1,490)		-
Reimbursement from FDIC shared-loss coverage in sale of loans	(34)		-		20,000		-		-		-		20,000		-
Other (losses) gains, net			565		(401)		(770)		742		95		136		5,131
Total non-interest income (loss), net			14,270		35,977		(4,656)		6,881		9,096		52,472		17,323
Non-interest expense:
Compensation and employee benefits			18,717		20,098		19,260		20,180		20,396		78,255		81,483
Rent and occupancy costs			8,111		8,556		8,883		8,636		9,026		34,186		34,710
Net loss on sale of foreclosed real estate and other repossessed assets	(34)		4,096		14,172		8,339		3,838		2,619		30,445		16,435
General and administrative expenses			25,612		21,537		24,904		21,454		23,210		93,507		93,277
Total operating expenses			56,536		64,363		61,386		54,108		55,251		236,393		225,905
Credit related expenses			2,006		3,810		3,051		2,224		2,847		11,091		13,020
Other non-recurring expenses	(16)(17)		-		917		-		-		3,800		917		3,800
Total non-interest expense			58,542		69,090		64,437		56,332		61,898		248,401		242,725
(Loss) income before income taxes			(20,840)		5,131		(2,340)		(2,009)		27,449		(20,058)		122,433
Income tax (benefit) expense	(35)		(19,864)		562		769		979		6,856		(17,554)		37,252
Net (loss) income			(976)		4,569		(3,109)		(2,988)		20,593		(2,504)		85,181
Less:  dividends on preferred stock
Convertible preferred stock			(1,837)		(1,838)		(1,837)		(1,838)		(1,838)		(7,350)		(7,350)
Other preferred stock			(1,629)		(1,627)		(1,629)		(1,627)		(1,628)		(6,512)		(6,512)
Net (loss) income available to common shareholders		$	(4,442)	$	1,104	$	(6,575)	$	(6,453)	$	17,128	$	(16,366)	$	71,319
3

OFG Bancorp (NYSE: OFG)
Table 3: Consolidated Statements of Financial Condition
		December 31,		September 30,		June 30,		March 31,		December 31,
(Dollars in thousands) (unaudited)		2015		2015		2015		2015		2014
Cash and cash equivalents		$	540,058	$	530,545	$	559,621	$	694,308	$	581,834
Investments:
Trading securities			288		583		786		964		1,594
Investment securities available-for-sale, at fair value, with amortized cost of $955,646
(September 30, 2015 - $982,754; June 30, 2015 - $1,023,573; March 31, 2015 - $1,092,040;
December 31, 2014 - $1,187,679)
Mortgage-backed securities			953,213		985,554		1,020,493		1,099,814		1,190,391
Other investment securities			21,396		22,151		23,826		25,888		26,147
Total investment securities available-for-sale			974,609		1,007,705		1,044,319		1,125,702		1,216,538
Mortgage-backed securities held-to-maturity, at amortized cost, with fair value of $614,679
(September 30, 2015 - $595,148; June 30, 2015 - $547,776; March 31, 1015 - $175,856;
December 31, 2014 - $164,154)			620,189		594,639		550,553		172,847		162,752
Federal Home Loan Bank (FHLB) stock, at cost			20,783		20,804		20,826		21,148		21,169
Other investments			3		3		3		3		3
Total investments			1,615,872		1,623,734		1,616,487		1,320,664		1,402,056
Loans, net	(19)(34)		4,434,213		4,468,676		4,639,467		4,724,579		4,826,646
Other assets:
FDIC shared-loss indemnification asset	(33)		22,599		22,895		22,704		75,221		97,378
Derivative assets			3,025		3,290		4,376		6,211		8,107
Prepaid expenses			11,762		14,151		16,492		11,264		16,018
Deferred tax asset, net			145,901		143,935		138,406		121,930		108,708
Foreclosed real estate and repossessed properties	(34)		64,088		73,063		95,994		113,863		117,461
Premises and equipment, net			74,590		75,346		76,486		78,745		80,599
Goodwill			86,069		86,069		86,069		86,069		86,069
Accounts receivable and other assets	(18)(34)		100,972		162,118		142,223		131,302		124,233
Total assets		$	7,099,149	$	7,203,822	$	7,398,325	$	7,364,156	$	7,449,109
Deposits:
Demand deposits		$	1,861,680		1,905,029		1,937,034		2,025,706		1,997,535
Savings accounts			1,107,618		1,217,098		1,250,460		1,336,209		1,292,698
Time deposits			964,588		941,821		956,829		965,196		1,014,863
Brokered deposits			782,973		653,126		605,361		567,122		619,310
Total deposits			4,716,859		4,717,074		4,749,684		4,894,233		4,924,406
Borrowings:
Securities sold under agreements to repurchase			934,691		1,000,664		1,161,136		927,168		980,087
Advances from FHLB and other borrowings			334,210		334,670		335,481		335,597		338,334
Subordinated capital notes			102,633		102,371		102,109		101,846		101,584
Total borrowings			1,371,534		1,437,705		1,598,726		1,364,611		1,420,005
Other liabilities:
Derivative liabilities			6,162		8,622		8,739		11,113		11,221
Acceptances outstanding			14,582		19,083		16,040		21,848		17,989
Accrued expenses and other liabilities			92,935		113,450		113,537		135,972		133,291
Total liabilities			6,202,072		6,295,934		6,486,726		6,427,777		6,506,912
Stockholders' equity:
Preferred stock			176,000		176,000		176,000		176,000		176,000
Common stock			52,626		52,626		52,626		52,626		52,626
Additional paid-in capital			540,512		540,088		539,669		539,222		539,311
Legal surplus			70,055		70,423		69,934		70,097		70,467
Retained earnings			149,266		155,974		159,737		170,605		181,152
Treasury stock, at cost	(21)		(105,379)		(105,379)		(100,668)		(96,495)		(97,070)
Accumulated other comprehensive income, net			13,997		18,156		14,301		24,324		19,711
Total stockholders' equity			897,077		907,888		911,599		936,379		942,197
Total liabilities and stockholders' equity		$	7,099,149	$	7,203,822	$	7,398,325	$	7,364,156	$	7,449,109
4

OFG Bancorp (NYSE: OFG)
Table 4: Information on Loan Portfolio and Production	(19)
		December 31,			September 30,		June 30,		March 31,		December 31,
(Dollars in thousands) (unaudited)		2015			2015		2015		2015		2014
Non-acquired loans held for investment:
Mortgage		$	757,828		$	762,636	$	757,187	$	789,545	$	791,751
Commercial			1,441,649			1,389,353		1,363,851		1,324,904		1,289,732
Consumer			242,950			227,756		212,629		193,658		186,760
Auto			669,163	��		647,544		623,198		601,963		575,582
			3,111,590			3,027,289		2,956,865		2,910,070		2,843,825
Less:  Allowance for loan and lease losses			(112,626)			(80,351)		(78,989)		(76,759)		(51,439)
			2,998,964			2,946,938		2,877,876		2,833,311		2,792,386
Deferred loan costs, net			4,203			4,571		3,877		4,433		4,282
Total non-acquired loans held for investment, net			3,003,167			2,951,509		2,881,753		2,837,744		2,796,668
Acquired loans:	(1)
BBVAPR
Accounted for under ASC 310-20
Commercial			7,457			7,736		8,448		9,506		12,675
Consumer			38,385			39,774		41,505		42,922		45,344
Auto			106,911			124,120		142,570		162,194		184,782
			152,753			171,630		192,523		214,622		242,801
Less:  Allowance for loan and lease losses			(5,542)			(5,473)		(5,529)		(5,450)		(4,597)
			147,211			166,157		186,994		209,172		238,204
Accounted for under ASC 310-30
Mortgage			608,294			617,268		631,807		645,918		656,122
Commercial			375,491			395,637		499,710		519,809		558,562
Consumer			11,843			15,072		18,869		23,841		29,888
Auto			153,592			173,979		195,891		220,990		247,233
			1,149,220			1,201,956		1,346,277		1,410,558		1,491,805
Less:  Allowance for loan and lease losses			(25,785)			(19,986)		(18,359)		(14,166)		(13,481)
			1,123,435			1,181,970		1,327,918		1,396,392		1,478,324
Total Acquired BBVAPR loans, net			1,270,646			1,348,127		1,514,912		1,605,564		1,716,528
Eurobank
Accounted for under ASC 310-30
Mortgage			92,273			92,757		102,499		100,677		102,162
Commercial			142,377			144,704		187,692		223,734		256,488
Consumer			2,314			2,708		3,295		4,047		4,506
			236,964			240,169		293,486		328,458		363,156
Less:  Allowance for loan and lease losses			(90,178)			(90,332)		(71,452)		(70,651)		(64,245)
Total Acquired Eurobank loans, net			146,786			149,837		222,034		257,807		298,911
Total acquired loans, net	(34)		1,417,432			1,497,964		1,736,946		1,863,371		2,015,439
Total loans held for investment			4,420,599			4,449,473		4,618,699		4,701,115		4,812,107
Mortgage loans held for sale			13,614			19,203		20,768		23,464		14,539
Total loans, net		$	4,434,213		$	4,468,676	$	4,639,467	$	4,724,579	$	4,826,646
		2015			2015		2015		2015		2014
(Dollars in thousands) (unaudited)		Q4			Q3		Q2		Q1		Q4
Quarterly loan production	(22)
Mortgage		$	55,450		$	65,248	$	64,826	$	61,717	$	57,226
Commercial			75,775			83,243		120,500		85,664		83,430
Consumer			37,919			36,756		39,837		26,161		28,902
Auto and Leasing			67,633			65,743		61,545		65,907		69,335
Total		$	236,777		$	250,990	$	286,708	$	239,449	$	238,893
5

OFG Bancorp (NYSE: OFG)

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

2015 Q4

2015 Q3

2015 Q2

2015 Q1

2014 Q4

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	$	438,981	$	327	0.30	%	$	482,959	$	308	0.25	%	$	483,507	$	322	0.27	%	$	564,237	$	323	0.23	%	$	551,238	$	360	0.26	%
Investment securities		1,609,399		10,209	2.52	%		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	%
Loans
Non-acquired loans		3,043,109		47,261	6.16	%		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	%
Acquired BBVAPR loans		1,361,173		26,976	7.86	%		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	%
Acquired Eurobank loans		147,952		8,134	21.81	%		194,775		16,014	32.62	%		235,376		12,758	21.74	%		274,731		15,504	22.89	%		303,012		19,816	25.95	%
Total loans		4,552,234		82,371	7.18	%		4,654,135		97,265	8.29	%		4,748,145		90,504	7.65	%		4,794,433		97,483	8.25	%		4,856,143		105,431	8.61	%
Total interest-earning assets	$	6,600,614	$	92,907	5.58	%	$	6,740,932	$	107,247	6.31	%	$	6,708,519	$	99,413	5.94	%	$	6,703,287	$	107,001	6.47	%	$	6,817,770	$	115,982	6.75	%
Interest bearing liabilities:
Deposits
NOW accounts	$	1,138,928	$	1,063	0.37	%	$	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	%
Savings accounts		1,180,220		1,516	0.51	%		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	%
Time deposits		938,291		2,456	1.04	%		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	%
Brokered deposits		673,570		1,438	0.85	%		648,083		1,211	0.74	%		571,950		1,085	0.76	%		602,189		1,166	0.79	%		631,135		1,331	0.84	%
		3,931,009		6,473	0.65	%		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	%
Non-interest bearing deposit accounts		781,440		-	-			772,545		-	-			773,910		-	-			750,897		-	-			740,527		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		202	-			-		201	-			-		160	-			-		(53)	-			-		(88)	-
Total deposits		4,712,449		6,675	0.56	%		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	%
Borrowings
Securities sold under agreements to repurchase		957,680		7,404	3.07	%		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	%
Advances from FHLB and other borrowings		334,029		2,306	2.74	%		337,829		2,283	2.68	%		344,088		2,248	2.62	%		337,292		2,235	2.69	%		338,815		2,287	2.68	%
Subordinated capital notes		102,462		900	3.48	%		102,198		885	3.44	%		101,938		875	3.44	%		101,675		863	3.44	%		101,329		1,002	3.92	%
Total borrowings		1,394,171		10,610	3.02	%		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	%
Total interest-bearing liabilities	$	6,106,620	$	17,285	1.12	%	$	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	%
Interest rate spread			$	75,622	4.46	%			$	89,823	5.21	%			$	82,292	4.84	%			$	89,635	5.35	%			$	97,128	5.59	%
Net interest margin					4.55	%					5.29	%					4.92	%					5.42	%					5.65	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	354					$	6,106					$	941					$	1,364					$	1,851
Acquired Eurobank loans				2,397						6,991						2,635						2,042						2,426
			$	2,751					$	13,097					$	3,576					$	3,406					$	4,277
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	6,600,614	$	90,156	5.42	%	$	6,740,932	$	94,150	5.54	%	$	6,708,519	$	95,837	5.73	%	$	6,703,287	$	103,595	6.27	%	$	6,817,770	$	111,705	6.50	%
Interest rate spread			$	72,871	4.30	%			$	76,726	4.44	%			$	78,716	4.63	%			$	86,229	5.15	%			$	92,851	5.34	%
Net interest margin					4.38	%					4.52	%					4.71	%					5.22	%					5.40	%
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	$	491,051	$	1,280	0.26	%	$	573,403	$	1,311	0.23	%
Investment securities		1,509,667		37,666	2.49	%		1,452,520		48,393	3.33	%
Loans
Non-acquired loans		2,940,713		183,820	6.25	%		2,630,432		172,645	6.56	%
Acquired BBVAPR loans		1,550,356		131,392	8.47	%		2,003,007		173,939	8.68	%
Acquired Eurobank loans		213,208		52,410	24.58	%		333,269		88,969	26.70	%
Total loans		4,704,277		367,622	7.81	%		4,966,708		435,553	8.77	%
Total interest-earning assets	$	6,704,995	$	406,568	6.06	%	$	6,992,631	$	485,257	6.94	%
Interest bearing liabilities:
Deposits
NOW accounts	$	1,163,424	$	4,451	0.38	%	$	1,417,272	$	8,001	0.56	%
Savings accounts		1,256,909		6,504	0.52	%		1,169,482		8,097	0.69	%
Time deposits		958,912		10,669	1.11	%		1,165,904		15,573	1.34	%
Brokered deposits		624,210		4,900	0.78	%		697,756		5,715	0.82	%
		4,003,455		26,524	0.66	%		4,450,414		37,386	0.84	%
Non-interest bearing deposit accounts		769,790		-	-			715,729		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		510	-			-		(3,432)	-
Total deposits		4,773,245		27,034	0.57	%		5,166,143		33,954	0.66	%
Borrowings
Securities sold under agreements to repurchase		1,012,756		29,567	2.92	%		1,041,378		29,652	2.85	%
Advances from FHLB and other borrowings		338,299		9,072	2.68	%		355,322		9,184	2.58	%
Subordinated capital notes		102,071		3,523	3.45	%		100,747		3,992	3.96	%
Total borrowings		1,453,126		42,162	2.90	%		1,497,447		42,828	2.86	%
Total interest-bearing liabilities	$	6,226,371	$	69,196	1.11	%	$	6,663,590	$	76,782	1.15	%
Interest rate spread			$	337,372	4.95	%			$	408,475	5.79	%
Net interest margin					5.03	%					5.84	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	8,765						6,644
Acquired Eurobank loans				14,065						16,362
			$	22,830					$	23,006
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	6,704,995	$	383,738	5.72	%	$	6,992,631	$	462,251	6.61	%
Interest rate spread			$	314,542	4.61	%			$	385,469	5.46	%
Net interest margin					4.69	%					5.51	%
7

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (1)
	2015		2015		2015		2015		2014
(Dollars in thousands) (unaudited)	Q4		Q3		Q2		Q1		Q4
Net Charge-offs
Mortgage:
Charge-offs	$	1,568	$	1,058	$	1,356	$	1,414	$	1,245
Recoveries		(53)		(270)		(67)		-		(54)
Total mortgage		1,515		788		1,289		1,414		1,191
Commercial:
Charge-offs		3,229		828		497		992		381
Recoveries		(60)		(63)		(219)		(89)		(64)
Total commercial		3,169		765		278		903		317
Consumer:
Charge-offs		2,227		2,471		2,309		1,676		1,962
Recoveries		(142)		(186)		(390)		(153)		(113)
Total consumer		2,085		2,285		1,919		1,523		1,849
Auto and Leasing:
Charge-offs		9,068		8,510		7,662		8,136		8,047
Recoveries		(3,100)		(3,251)		(3,425)		(3,384)		(2,764)
Total auto and leasing		5,968		5,259		4,237		4,752		5,283
Total	$	12,737	$	9,097	$	7,723	$	8,592	$	8,640
Net Charge-off Rates
Mortgage		0.80%		0.42%		0.66%		0.72%		0.61%
Commercial		0.91%		0.23%		0.08%		0.28%		0.10%
Consumer		3.68%		4.33%		3.99%		3.36%		4.23%
Auto and Leasing		3.59%		3.28%		2.74%		3.20%		3.73%
Total		1.67%		1.23%		1.06%		1.21%		1.25%
Average Loans Held For Investment
Mortgage	$	756,530	$	758,689	$	782,753	$	787,330	$	787,121
Commercial		1,394,597		1,349,511		1,333,276		1,269,104		1,236,976
Consumer		226,783		210,933		192,572		181,464		175,049
Auto and Leasing		665,199		640,828		618,746		594,760		566,385
Total	$	3,043,109	$	2,959,961	$	2,927,347	$	2,832,658	$	2,765,531
8

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (Continued) (1)
		2015		2015			2015		2015		2014
(Dollars in thousands) (unaudited)		Q4		Q3			Q2		Q1		Q4
Early Delinquency (30 - 89 days past due)
Mortgage		$	36,092	$	37,377	*	$	68,515	$	63,060	$	68,671
Commercial			4,461		1,678			5,532		4,453		2,814
Consumer			4,128		3,585			3,089		3,957		3,525
Auto and Leasing			70,464		71,627			66,044		64,287		64,574
Total		$	115,145	$	114,267		$	143,180	$	135,757	$	139,584
Early Delinquency Rates (30 - 89 days past due)
Mortgage			4.76%		4.90%			9.05%		7.99%		8.67%
Commercial			0.31%		0.12%			0.41%		0.34%		0.22%
Consumer			1.70%		1.57%			1.45%		2.04%		1.89%
Auto and Leasing			10.53%		11.06%			10.60%		10.68%		11.22%
Total			3.70%		3.77%			4.84%		4.67%		4.91%
Total Delinquency (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation		$	102,988	$	104,355		$	127,609	$	122,597	$	124,559
GNMA's buy-back option program	(32)		7,945		6,993			6,961		37,458		42,243
Total mortgage			110,933		111,348			134,570		160,055		166,802
Commercial			21,138		17,014			16,062		13,518		12,164
Consumer			5,171		4,832			4,244		5,207		4,689
Auto and Leasing			78,757		80,613			73,464		71,482		71,994
Total		$	215,999	$	213,807		$	228,340	$	250,262	$	255,649
Total Delinquency Rates (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation			13.59%		13.68%			16.85%		15.53%		15.73%
GNMA's buy-back option program	(32)		1.05%		0.92%			0.92%		4.74%		5.34%
Total mortgage			14.64%		14.60%			17.77%		20.27%		21.07%
Commercial			1.47%		1.22%			1.18%		1.02%		0.94%
Consumer			2.13%		2.12%			2.00%		2.69%		2.51%
Auto and Leasing			11.77%		12.45%			11.79%		11.87%		12.51%
Total			6.94%		7.06%			7.72%		8.60%		8.99%
Nonperforming Assets	(23)
Mortgage		$	77,875	$	78,148		$	74,528	$	76,662	$	72,815
Commercial			215,281		222,072			224,014		222,820		21,679
Consumer			1,631		2,004			1,512		1,605		1,590
Auto and Leasing			8,418		10,076			8,587		8,482		8,668
Total nonperforming loans			303,205		312,300			308,641		309,569		104,752
Foreclosed real estate			9,772		10,517			9,956		10,697		12,343
Other repossessed assets			3,845		5,134			8,624		10,332		11,107
Total nonperforming assets		$	316,822	$	327,951		$	327,221	$	330,598	$	128,202
Nonperforming Loan Rates
Mortgage			10.28%		10.25%			9.84%		9.71%		9.20%
Commercial			14.93%		15.98%			16.43%		16.82%		1.68%
Consumer			0.67%		0.88%			0.71%		0.83%		0.85%
Auto and Leasing			1.26%		1.56%			1.38%		1.41%		1.51%
Total loans			9.74%		10.32%			10.44%		10.64%		3.68%
* 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 remain using one scheduled payment due.
9

OFG Bancorp (NYSE: OFG)
Table 7: Allowance for Loan and Lease Losses
	Quarter Ended December 31, 2015
							Auto and
(Dollars in thousands) (unaudited)	Mortgage		Commercial		Consumer		Leasing		Unallocated		Total
Non-acquired loans
Balance at beginning of period	$	17,292	$	35,524	$	10,816	$	16,674	$	45	$	80,351
(Recapture) provision for loan and lease losses		2,575		32,436		2,466		7,555		(20)		45,012
Charge-offs		(1,568)		(3,229)		(2,227)		(9,068)		-		(16,092)
Recoveries		53		60		142		3,100		-		3,355
Balance at end of period	$	18,352	$	64,791	$	11,197	$	18,261	$	25	$	112,626
Allowance coverage ratio		2.42%	$	4.49%	$	4.61%	$	2.73%	$	0.00%	$	3.62%
Acquired loans
Acquired BBVAPR loans:
Acquired loans accounted for under ASC 310-20
Balance at beginning of period			$	22	$	3,057	$	2,394	$	-	$	5,473
(Recapture) provision for loan and lease losses				1		1,280		252		-		1,533
Charge-offs				(4)		(966)		(1,094)		-		(2,064)
Recoveries				7		58		535		-		600
Balance at end of period			$	26	$	3,429	$	2,087	$	-	$	5,542
Acquired loans accounted for under ASC 310-30
Balance at beginning of period	$	473	$	16,567	$	84	$	2,862	$	-	$	19,986
Provision for loan and lease losses, net		1,205		4,594		-		-		-		5,799
Balance at end of period		1,678	$	21,161	$	84	$	2,862	$	-	$	25,785
Acquired Eurobank loans:
Balance at beginning of period	$	32,685	$	57,280	$	367	$	-	$	-	$	90,332
Provision for loan and lease losses, net		(61)		(93)		-		-		-		(154)
Balance at end of period	$	32,624	$	57,187	$	367	$	-	$	-	$	90,178
Total acquired loans
Balance at beginning of period	$	33,158	$	73,869	$	3,508	$	5,256	$	-	$	115,791
(Recapture) provision for loan and lease losses		1,144		4,502		1,280		252		-		7,178
Charge-offs		-		(4)		(966)		(1,094)		-		(2,064)
Recoveries		-		7		58		535		-		600
Balance at end of period	$	34,302	$	78,374	$	3,880	$	4,949	$	-	$	121,505
10

OFG Bancorp (NYSE: OFG)
Table 8: Accretable Yield on Loans Accounted for Under ASC 310-30
	Quarter Ended December 31, 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	$	267,341	$	58,554	$	19,215	$	26,215	$	7,288	$	378,613
Change in expected cash flows		-	$	(4)	$	1,006	$	1	$	-	$	1,003
Accretion		(8,428)		(6,219)		(1,489)		(4,849)		(959)		(21,944)
Transfers from (to) non-accretable discount		9,881		(6,920)		883		211		(39)		4,016
Balance at end of period	$	268,794	$	45,411	$	19,615	$	21,578	$	6,290	$	361,688
Non-Accretable Discount
Balance at beginning of period	$	386,848	$	5,130	$	8,132	$	22,987	$	19,006	$	442,103
Change in actual and expected losses		(2,184)		(269)		(485)		(737)		(211)		(3,886)
Transfers (to) from accretable yield		(9,881)		6,920		(883)		(211)		39		(4,016)
Balance at end of period	$	374,783	$	11,781	$	6,764	$	22,039	$	18,834	$	434,201
					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	$	54,395	$	30,748	$	6,329	$	969	$	3,417	$	95,858
Change in expected cash flows		310		885		(4,299)		(321)		187		(3,238)
Accretion		(3,347)		(4,122)		(43)		(418)		(204)		(8,134)
Transfers from (to) non-accretable discount		596		(542)		268		(230)		(187)		(95)
Balance at end of period	$	51,954	$	26,969	$	2,255	$	-	$	3,213	$	84,391
Non-Accretable Discount
Balance at beginning of period	$	13,582	$	-	$	-	$	-	$	8,093	$	21,675
Change in actual and expected losses		(117)		(542)		268		(230)		7		(614)
Transfers (to) from accretable yield		(596)		542		(268)		230		187		95
Balance at end of period	$	12,869	$	-	$	-	$	-	$	8,287	$	21,156
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		2015		2014
(Dollars in thousands) (unaudited)	Q4		Q3		Q2		Q1		Q4
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders' equity	$	905,646	$	912,598	$	929,867	$	948,302	$	936,218
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	$	739,776	$	746,728	$	763,997	$	782,432	$	770,348
Less:  Average intangible assets		(94,217)		(94,697)		(95,168)		(95,616)		(96,164)
Average tangible common equity	$	645,559	$	652,031	$	668,829	$	686,816	$	674,184
Stockholders' Equity to Non-GAAP Tangible Common Equity
Total stockholders' equity	$	897,077	$	907,888	$	911,599	$	936,379	$	942,197
Less:  Intangible assets		(93,907)		(94,383)		(94,859)		(95,336)		(95,812)
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	$	637,300	$	647,635	$	650,870	$	675,173	$	680,515
Common stock outstanding at end of period		43,868		43,868		44,368		44,665		44,614
Tangible book value	$	14.53	$	14.76	$	14.67	$	15.12	$	15.25
Total Assets to Tangible Assets
Total assets	$	7,099,149	$	7,203,822	$	7,398,325	$	7,364,156	$	7,449,109
Less:  Intangible assets		(93,907)		(94,383)		(94,859)		(95,336)		(95,812)
Tangible assets	$	7,005,242	$	7,109,439	$	7,303,466	$	7,268,820	$	7,353,297
Non-GAAP TCE Ratio
Tangible common equity	$	637,300	$	647,635	$	650,870	$	675,173	$	680,515
Tangible assets		7,005,242		7,109,439		7,303,466		7,268,820		7,353,297
TCE ratio		9.10%		9.11%		8.91%		9.29%		9.25%
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		2015		2014
(Dollars in thousands) (unaudited)		Q4		Q3		Q2		Q1		Q4
Regulatory Capital Metrics	(24)
Common equity Tier 1 capital		$	594,482		601,789		611,542		633,297		N/A
Tier 1 common equity capital			N/A	$	N/A	$	N/A	$	N/A	$	575,655
Tier 1 capital			782,912		782,561		790,936		809,652		776,525
Total risk-based capital	(25)		846,727		847,267		868,568		887,042		851,410
Risk-weighted assets			4,894,851		5,003,285		4,988,754		5,015,090		4,847,150
Regulatory Capital Ratios	(24)
Common equity Tier 1 capital ratio	(26)		12.15%		12.03%		12.26%		12.63%		N/A
Tier 1 common equity ratio			N/A		N/A		N/A		N/A		11.88%
Tier 1 risk-based capital ratio	(27)		15.99%		15.64%		15.85%		16.14%		16.02%
Total risk-based capital ratio	(28)		17.30%		16.93%		17.41%		17.69%		17.57%
Leverage ratio	(29)		11.18%		10.93%		11.05%		11.23%		10.61%
Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach	(24)
Total stockholders' equity		$	897,077	$	907,888		911,599		936,379
Less:  Noncumulative perpetual preferred stock			(176,000)		(176,000)		(176,000)		(176,000)
Noncumulative perpetual preferred stock issuance costs			10,130		10,130		10,130		10,130
Unrealized gains on available-for-sale securities, net of income tax	(30)		(16,925)		(22,486)		(18,833)		(30,215)
Unrealized losses on cash flow hedges, net of income tax	(30)		2,927		4,330		4,532		5,891
			717,209		723,862		731,428		746,185
Less:    Disallowed goodwill			(86,069)		(86,069)		(86,069)		(86,069)
Disallowed other intangible assets, net	(31)		(1,912)		(2,028)		(2,145)		(2,261)
Disallowed deferred tax assets, net	(31)		(34,746)		(33,976)		(31,672)		(24,558)
Common equity Tier 1 capital			594,482		601,789		611,542		633,297
Plus:  Qualifying noncumulative perpetual preferred stock			176,000		176,000		176,000		176,000
Qualifying noncumulative perpetual preferred stock issuance costs			(10,130)		(10,130)		(10,130)		(10,130)
Subordinated capital notes			35,000		35,000		35,000		35,000
Less:  Disallowed deferred tax assets, net			(12,440)		(20,098)		(21,475)		(24,515)
Tier 1 capital			782,912		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			63,815		64,706		64,232		63,990
Tier 2 capital			63,815		64,706		77,632		77,390
Total risk-based capital		$	846,727	$	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. During Q4 2015, the Company recorded an additional $30.4 million provision for loan and lease losses related to PREPA. Both were 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 decreased OFG's regular quarterly dividend per common share to $0.06 per share during Q4 2015.The Board of directors had previously 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 September 30, 2015, amount includes a $25 million receivable from Q2 2015 loss-share certifications for non-single family residential mortgage loans and a $20 million receivable from the sale of non-performing covered loans during Q3 2015, which were paid by the FDIC in December 2015.
(19)	Covered loans are no longer a material amount. Therefore, during Q3 2015, the Company changed its presentation of loans to include the following loan segments:  "Non-acquired" loans, "Acquired BBVAPR" loans and "Acquired Eurobank" loans.
(20)	During Q4 2015, the FDIC expense includes a charge of $2.2 million for the recovery period.
(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 of 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, which were paid by the FDIC in December 2015.
(35)	During Q4 2015, the Company released $3.1 million of the company's valuation allowance, increasing the deferred tax benefit for the period. This was the result of a change in entity type of its insurance subsidiary, Oriental Insurance Inc. to a limited liability corporation, now Oriental Insurance LLC. In addition, the deferred tax tax benefit increased $9.0 million as a result of an increase in the allowance for loan and lease losses.
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