OFG Bancorp (OFG) 8-K OFG Bancorp Reports 4Q17 & 2017 Results

Exhibit 99.1

 

OFG Bancorp Reports 4Q17 & 2017 Results

SAN JUAN, Puerto Rico, January 30, 2018 – OFG Bancorp (NYSE: OFG) today reported results for the fourth quarter and year ended December 31, 2017. 4Q17 results reflected a strong recovery following hurricanes Irma and Maria, which struck the island in September 2017.

4Q17 Summary

·Net income available to shareholders increased to $13.6 million, or $0.30 per share fully diluted, from a net loss of $146 thousand, or $0.00 per share, in 3Q17. OFG reported net income of $12.1 million, or $0.27 per share fully diluted, in 4Q16.

·Return on average assets and average tangible common equity was 1.10% and 7.92%, respectively. Tangible book value per common share was $15.67, and the tangible common equity ratio was 11.29%.

·4Q17 results included $5.4 million in loan loss provision, pre-tax, based on new data available on the potential impact of the hurricanes. Excluding that additional provision, 4Q17 adjusted net income available to shareholders totaled $16.9 million, or $0.37 per share fully diluted.

2017 Summary

•Net income available to shareholders was $38.8 million, or $0.86 per share fully diluted, compared to $45.3 million, or $1.03 per share, in 2016.

•2017 results included a $32.4 million loan loss provision, pre-tax, related to the hurricanes. Excluding that special provision, full year adjusted net income available to shareholders totaled $61.0 million, or $1.34 per share fully diluted.

CEO Comment

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

“OFG’s fourth quarter results were strong considering the impact of the hurricanes, the slow restoration of electricity, and the resultant uncertainties. EPS before an additional $5.4 million provision for potential hurricane losses was $0.37.

“We are encouraged with how our commercial clients and retail customers have responded. Total net loans increased more than $90 million from 3Q17. December-ended loan payment moratoriums are showing encouraging trends in all portfolios.

“New loan generation increased more than 32% from 3Q17, rivaling our best quarter of the year. All our one-on-one outreach with commercial clients following the hurricanes is building a strong pipeline for new loan business.

“Auto loan production had one of its best quarters.  During December, consumer lending returned to approximately 70% of pre-hurricanes production. Mortgage loans demand, however, was understandably down as residential sales slowed.

“At December 31, customer deposits were up $267 million from June 30. Non-interest bearing deposits reached close to $1 billion. During December, average monthly net new customer acquisition returned to pre-hurricanes levels, and bank service revenues began to recover with more retail point of sale terminals back on line. Thus far, we haven’t seen any signs that outmigration is affecting our customer base.

“4Q17 results are a testament to our successful effort in restoring operations quickly after the hurricanes. Our clientele and the communities we serve clearly appreciated our efforts as we are starting to see momentum build despite a very challenging environment.

“Puerto Rico is not out of the woods yet, and the island has a long reconstruction road ahead. However, with the expected benefit from an influx of substantial funds from the federal government as well as from insurance recoveries over the next two years, the short-term outlook is hopeful.”

Income Statement Highlights

Unless otherwise noted, the following compares data for the fourth quarter 2017 to the third quarter 2017.

•Interest Income

☐ Originated Loans: $56.2 million compared to $58.9 million. 3Q17 included $4.1 million from the pay-off before maturity of a commercial loan previously classified as non-accrual. Excluding that item, 4Q17 interest income from Originated Loans increased $1.3 million due to higher balances.

☐ Acquired Loans: $18.9 million compared to $23.5 million. 3Q17 included $3.1 million in cost recoveries from the Puerto Rico Housing Finance Authority (PRHFA) canceling a loan. Excluding that item, 4Q17 interest income from Acquired Loans declined $1.5 million, reflecting continued pay downs.

•Interest Expense declined $0.2 million to $9.7 million due to reduced borrowings.

•Total Provision for Loan and Lease Losses declined $19.1 million to $24.9 million. Provision, excluding additional hurricanes related provisions of $5.4

million and $27.0 million in 4Q17 and 3Q17, respectively, was $19.5 million compared to $17.0 million due to the increase in the Originated Loans portfolio.

•Net Interest Margin was 5.08% compared to 5.64%. 3Q17 benefitted from the previously mentioned pay-off of an originated commercial loan as well as cost recoveries. Compared to the year ago quarter, 4Q17 NIM increased 14 basis points.

•Total Banking and Wealth Management Revenues declined $0.5 million to $16.7 million.

☐ Banking service revenues declined $1.5 million. This reflected lower banking fee income from reduced activity related to business interruptions due to lack of electricity. 3Q17 benefitted from $0.4 million in prepayment penalties from the previously mentioned loan pay-off before maturity.

☐ Wealth Management revenues increased $1.0 million, primarily due to recognition of annual insurance fees.

☐ Mortgage banking revenues remained approximately level at $1.2 million.

•Total Non-Interest Expenses declined $3.8 million to $46.7 million, reflecting: (1) settlement of outstanding claims at amounts below those previously reserved ($1.4 million); (2) lower expenses on foreclosed real estate ($1.3 million); and (3) lower electronic banking expenses due to reduced activity ($1.0 million).

•Effective Tax Rate (ETR) was 8.99% due to final year-end tax accounting. For the year, the ETR was 23.73% due to (1) higher proportion than anticipated of exempt income and income subject to preferential rates; and (2) expiration of a $0.7 million tax contingency.

Balance Sheet Highlights

Unless otherwise noted, the following compares data at December 31, 2017 to September 30, 2017.

•Total Loans Net increased $91.8 million to $4.06 billion with the rebound in production, partially offset by normal pay downs of Acquired Loans. New loan generation increased 32.9% to $253.7 million:

☐ Commercial lending increased 121.1% to $102.1 million as our bankers developed relationships with businesses participating in Puerto Rico’s recovery. The quarter also benefited from finalizing loans unable to close in 3Q17 due to the hurricanes.

☐ The new OFG USA program added $25.1 million in commercial and industrial related loan participations. The entity began operations in October 2017 with a capital contribution of $50.0 million.

☐ Auto lending increased 11.8% to $87.6 million, its best quarter in 2017, reflecting demand to replace damaged vehicles, pent up demand, and attractive retail pricing on new and used cars.

☐ While consumer lending declined 31.7% to $23.1 million, there was an increasing trend in the monthly production. Mortgage lending declined 51.2% to $15.9 million as housing sales had yet to recover.

•Total Investments increased $8.1 million to $1.17 billion, reflecting purchases of new mortgage backed securities to replace pay downs of existing ones.

•Cash and cash equivalents declined $235.5 million to $488.2 million, mainly due to the unwinding of an $80.0 million repurchase agreement and the increase in interest earning assets.

•Customer Deposits (excluding brokered deposits) were approximately level at $4.28 billion as deposit growth offset almost all of the temporary influx of insurance company deposits at the end of 3Q17. Average non-interest bearing deposits increased $102.1 million, to $937.3 million.

•Total Borrowings declined $90.5 million to $328.7 million, primarily due to the unwinding of an $80.0 million repurchase agreement. Due to deposit growth, higher cost borrowings have been reduced by 58.7% or $466.6 million year over year.

•Total Stockholders’ Equity increased $7.5 million to $945.1 million, reflecting the increase in retained earnings.

Credit Quality Highlights

Unless otherwise noted, the following compares data on the originated loan portfolio at December 31, 2017 to September 30, 2017.

After Irma, Oriental was the only bank to offer fee waivers for late payments, recognizing the difficulties people faced in Puerto Rico. Following Maria, the bank continued to offer automatic payment deferrals and 90-day extensions for most loan categories.

•Net Charge-Off Rate declined 19 basis points to 1.35% due to lower charge-offs in the consumer loan portfolio as a result of the loan payment moratorium.

•Early Delinquency Rate declined 197 basis points to 1.82% and Total Delinquency Rate declined 223 basis points to 4.61% due to the automatic moratorium on most retail loans and some commercial loans.

•Non-Performing Loan Rate increased 21 basis points to 3.31%. This primarily reflected commercial loans current in their monthly payments being placed in non-accrual due to deterioration of their financial statements.

•Allowance for Loan and Lease Losses for the originated portfolio increased $5.2 million to $92.7 million, primarily due to higher loan balances.

Capital Position

Unless otherwise noted, the following compares data at December 31, 2017 to September 30, 2017.

Capital continued to grow and remains significantly above regulatory requirements for a well-capitalized institution.

Metric	4Q17	QoQ Change	YoY Change
Tangible Common Equity Ratio	11.29%	+31 bps	+96 bps
Tangible Book Value per Common Share	$15.67	+1.2%	+3.9%
Common Equity Tier 1 Capital Ratio (using Basel III methodology)	14.59%	-30 bps	+54 bps
Total Risk-Based Capital Ratio	20.34%	-48 bps	+72 bps

Conference Call

A conference call to discuss OFG’s results for 4Q17, outlook and related matters will be held today, Tuesday, January 30, 2018, 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 quarter and year ended December 31, 2017, 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. See Tables 9-1 and 9-2 in OFG’s above-mentioned Financial Supplement for reconciliation of GAAP to non-GAAP Measures and Calculations.

Forward Looking Statements

The information included in this document contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and involve certain risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements.

Factors that might cause such a difference include, but are not limited to (i) 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) the credit default by the government of Puerto Rico; (iv) amendments to the fiscal plan approved by the Financial Oversight and Management Board of Puerto Rico; (v) determinations in the court-supervised debt-restructuring process under Title III of PROMESA for the Puerto Rico government and all of its agencies, including some of its public corporations; (vi) the impact of property, credit and other losses in Puerto Rico as a result of hurricanes Irma and Maria; (vii) the amount of government, private and philanthropic financial assistance for the reconstruction of Puerto Rico’s critical infrastructure, which suffered catastrophic damages caused by hurricane Maria; (viii) the pace and magnitude of Puerto Rico’s economic recovery; (ix) the potential impact of damages from future hurricanes and natural disasters in Puerto Rico; (x) the fiscal and monetary policies of the federal government and its agencies; (xi) changes in federal bank regulatory and supervisory policies, including required levels of capital; (xii) the relative strength or weakness of the commercial and consumer credit sectors and the real estate market in Puerto Rico; (xiii) the performance of the stock and bond markets; (xiv) competition in the financial services industry; and (xv) 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, 2016, 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 54^th 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 wide range of retail and commercial banking, lending and wealth management products, services and technology, primarily in Puerto Rico, through 48 financial centers. Investor information can be found at Error! Hyperlink reference not valid.www.ofgbancorp.com.

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Contacts

Puerto Rico: Idalis Montalvo (idalis.montalvo@orientalbank.com) at (787) 777-2847

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, 2017 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 GAAP to Non-GAAP Measures and Calculation of Regulatory
		Capital		12-13
	Table  10:	Notes to Financial Summary, Selected Metrics, Loans, and Consolidated
		Financial Statements (Tables 1-9)		14

OFG Bancorp (NYSE: OFG)
Table 1: Financial and Statistical Summary - Consolidated
		2017			2017			2017			2017		2016		2017			2016
(Dollars in thousands, except per share data) (unaudited)		Q4			Q3			Q2			Q1		Q4		YTD			YTD
Earnings
Net interest income		$	73,513		$	80,478		$	75,563		$	74,618	$	74,213	$	304,172		$	299,427
Non-interest income, net (core)	(2)		16,734			17,213			17,933			17,428		20,415		69,308			74,101
Non-interest expense			46,662			50,469			52,816			51,684		52,382		201,631			215,990
Pre-provision net revenues			43,666			47,921			47,633			42,008		39,777		181,228			150,256
Provision for loan and lease losses			24,907	(a)		44,042	(a)		26,536	(b)		17,654		13,373		113,139	(a)(b)		65,076
Net income before income taxes			18,759			3,879			21,097			24,354		26,404		68,089			85,180
Income tax expense			1,686			560			3,993			9,204		10,848		15,443			25,994
Net income		$	17,073	(a)	$	3,319	(a)	$	17,104		$	15,150	$	15,556	$	52,646		$	59,186
Common Share Statistics
Earnings per common share - basic	(3)	$	0.31	(a)	$	-	(a)	$	0.30		$	0.27	$	0.28	$	0.88		$	1.03
Earnings per common share - diluted	(4)	$	0.30	(a)	$	-	(a)	$	0.30		$	0.26	$	0.27	$	0.86		$	1.03
Average common shares outstanding			43,947			43,947			43,947			43,915		43,914		43,939			43,913
Average common shares outstanding and equivalents			51,104			51,102			51,100			51,131		51,098		51,096			51,088
Cash dividends per common share		$	0.06		$	0.06		$	0.06		$	0.06	$	0.06	$	0.24		$	0.24
Book value per common share (period end)		$	17.73		$	17.56		$	17.59		$	17.42	$	17.18	$	17.73		$	17.18
Tangible book value per common share (period end)	(5)	$	15.67		$	15.49		$	15.51		$	15.33	$	15.08	$	15.67		$	15.08
Balance Sheet (Average Balances)
Loans	(6)	$	4,081,427		$	4,062,042		$	4,129,550		$	4,141,628	$	4,195,966	$	4,125,804		$	4,379,156
Interest-earning assets			5,735,593			5,658,953			5,848,525			5,932,924		5,972,163		5,818,598			6,210,003
Total assets			6,191,737			6,046,139			6,278,464			6,374,177		6,455,023		6,256,827			6,718,292
Interest-bearing deposits			3,835,357			3,774,378			3,844,490			3,850,506		3,875,536		3,826,000			3,934,125
Borrowings			374,059			462,035			614,332			715,951		750,446		540,367			987,925
Stockholders' equity			943,823			947,404			938,707			926,011		919,697		944,492			911,832
Common stockholders' equity			777,953			781,534			772,837			760,141		753,827		778,622			745,962
Performance Metrics
Net interest margin	(7)		5.08%			5.64%			5.18%			5.10%		4.94%		5.23%			4.82%
Return on average assets	(8)		1.10%			0.22%	(a)		1.09%			0.95%		0.96%		0.84%			0.88%
Return on average tangible common stockholders' equity	(9)		7.92%			-0.08%			8.01%			7.00%		7.31%		5.64%			6.94%
Efficiency ratio	(10)		51.70%			51.66%			56.49%			56.15%		55.36%		53.99%			57.82%
Full-time equivalent employees, period end			1,421			1,464			1,472			1,446		1,437		1,421			1,437
Credit Quality Metrics
Excluding acquired loans:	(1)
Allowance for loan and lease losses		$	92,718	(a)	$	87,541	(a)	$	69,666	(b)	$	60,483	$	59,301	$	92,718	(a)(b)	$	59,301
Allowance as a % of loans held for investment			2.89%	(a)		2.83%	(a)		2.25%			1.98%		1.95%		2.89%			1.95%
Net charge-offs		$	10,466		$	11,815		$	13,635	(b)(c)	$	10,552	$	13,506	$	46,468	(b)	$	88,336	(d)
Net charge-off rate	(11)		1.35%			1.54%			1.79%	(b)(c)		1.40%		1.80%		1.52%	(b)		2.85%	(d)
Early delinquency rate (30 - 89 days past due)			1.82%			3.79%			3.52%			3.42%		3.31%		1.82%			3.31%
Total delinquency rate (30 days and over)			4.61%			6.84%			6.31%			6.34%		6.49%		4.61%			6.49%
Capital Ratios (Non-GAAP)	(12)
Leverage ratio			13.92%			14.07%			13.69%			13.20%		12.99%		13.92%			12.99%
Common equity Tier 1 capital ratio			14.59%			14.89%			14.66%			14.30%		14.05%		14.59%			14.05%
Tier 1 risk-based capital ratio			19.05%			19.53%			19.14%			18.77%		18.35%		19.05%			18.35%
Total risk-based capital ratio			20.34%			20.82%			20.42%			20.05%		19.62%		20.34%			19.62%
Tangible common equity ("TCE") ratio			11.29%			10.98%			11.09%			10.66%		10.33%		11.29%			10.33%
(a) During the Q3 and Q4 2017, earnings were impacted by Hurricanes Irma and Maria, which struck the island on September 7, 2017 and September 20, 2017, respectively. Based on our assessment of the facts we have increased our provision for the allowance of loan losses in the 3Q 2017 and 4Q 2017 by $27 million and $5.4 million, respectively, related to these hurricanes.
(b) On June 30, 2017, the Company entered into an agreement for the sale of a municipality loan for $28.8 million. At June 30, 2017, this loan, which included a principal payment of $4.8 million received in July 1, 2017, was reported as other loans held for sale, at fair value.  As a result of this transaction, the Company recognized a $4.3 million charge-off during the second quarter. Proceeds were received on July 5, 2017. An allowance of $5.9 million was created during the second quarter for the remaining portfolio of municipal loans.
(c) During Q2 2017 , the Company had additional recoveries in auto and consumer loans of $1.1 million and $612 thousand, respectively.
(d) During Q3 2016, the Company entered into an agreement to sell its outstanding participation in the PREPA line of credit for $124 million. As a result of this transaction, the Company recognized a $56.2 million charge-off and a $2.9 million provision for loan and lease losses during the quarter ended September 30, 2016.
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)		2017			2017			2017			2017			2016		2017			2016
Interest income:
Loans	(1)
Non-acquired loans		$	56,183		$	58,939	(f)	$	53,449		$	51,955		$	51,581	$	220,526		$	199,172
Acquired BBVAPR loans			15,310			19,189	(e)		17,752			19,085			20,232		71,336			92,301
Acquired Eurobank loans			3,573			4,339			6,037			6,610			6,701		20,559			30,472
Total interest income from loans			75,066			82,467			77,238			77,650			78,514		312,421			321,945
Investment securities			8,108			7,888			8,702			8,528			8,280		33,226			34,647
Total interest income			83,174			90,355			85,940			86,178			86,794		345,647			356,592
Interest expense:
Deposits
Core deposits			5,613			5,438			5,568			5,468			5,536		22,087			21,803
Brokered deposits			2,079			2,163			2,084			1,885			1,895		8,211			7,450
Total deposits			7,692			7,601			7,652			7,353			7,431		30,298			29,253
Borrowings			1,969			2,276			2,725	(h)		4,207	(j)		5,150		11,177			27,912
Total interest expense			9,661			9,877			10,377			11,560			12,581		41,475			57,165
Net interest income			73,513			80,478			75,563			74,618			74,213		304,172			299,427
Provision for loan and lease losses, excluding acquired loans	(1)		15,643	(d)		29,690	(d)		22,818	(g)		11,735			10,638		79,886	(d)(g)		45,058
Provision for acquired BBVAPR loan and lease losses	(1)		7,112	(d)		11,811	(d)		3,306			4,299			3,135		26,528	(d)		17,763
Provision (recapture) for acquired Eurobank loan and lease losses	(1)		2,152	(d)		2,541	(d)		412			1,620			(400)		6,725	(d)		2,255
Total provision for loan and lease losses, net			24,907			44,042	(d)		26,536			17,654			13,373		113,139			65,076
Net interest income after provision for loan and lease losses			48,606			36,436			49,027			56,964			60,840		191,033			234,351
Non-interest income:
Banking service revenues			8,461	(a)		9,923	(f)		10,458			10,626			10,980		39,468			41,647
Wealth management revenues			7,043			6,016			6,516			6,215			7,714		25,790			27,433
Mortgage banking activities			1,230			1,274			959			587			1,721		4,050			5,021
Total banking and wealth management revenues			16,734			17,213			17,933			17,428			20,415		69,308			74,101
FDIC shared-loss benefit (expense), net			-			-			-			1,403	(k)		(2,836)		1,403			(13,581)
Other gains, net			81			699	(l)		6,953	(h)		243			367		7,976	(h)		6,299	(l)
Total non-interest income, net			16,815			17,912			24,886			19,074			17,946		78,687			66,819
Non-interest expense:
Compensation and employee benefits			20,205			19,882			19,317			20,347			18,898		79,751			76,761
Rent and occupancy costs			8,546			8,276			8,537			7,198			7,305		32,557			30,300
Net loss on sale of foreclosed real estate and other repossessed assets			126	(b)		1,395			1,787			1,326			1,219		4,634			10,282
General and administrative expenses			16,350	(a)(c)		19,202			20,958			20,187			22,870		76,697			88,380
Total operating expenses			45,227			48,755			50,599			49,058			50,292		193,639			205,723
Credit related expenses			1,435			1,714			2,217			2,626			2,090		7,992			10,267
Total non-interest expense			46,662			50,469			52,816			51,684			52,382		201,631			215,990
Income before income taxes			18,759			3,879			21,097			24,354			26,404		68,089			85,180
Income tax expense			1,686			560			3,993	(i)		9,204			10,848		15,443			25,994
Net income			17,073			3,319	(d)		17,104			15,150			15,556		52,646			59,186
Less:  dividends on preferred stock
Convertible preferred stock			(1,838)			(1,838)			(1,837)			(1,838)			(1,837)		(7,352)			(7,350)
Other preferred stock			(1,627)			(1,627)			(1,629)			(1,627)			(1,629)		(6,510)			(6,512)
Net income (loss) available to common shareholders		$	13,608		$	(146)		$	13,638		$	11,685		$	12,090	$	38,784		$	45,324
(a) During the 4Q 2017, electronic banking fee income and  electronic banking expenses decreased $0.9 million and $1.0 million, respectively, from the prior quarter as a result of lower point of sale (POS) activity from our customers. The decrease is directly related to business interruption in several of our commercial clients from the lack of electricity.
(b) During the 4Q 2017, the Company generated higher gains in sale of foreclosed real estate by approximately $0.7 million and had lower write downs by approximately $0.6 million.
(c) During the 4Q 2017, the Company reversed $1.4 million expenses as a result of the settlement of regulatory and legal contingencies at a lower amount than estimated.
(d) During the Q3 and Q4 2017, earnings were impacted by Hurricanes Irma and Maria, which struck the island on September 7, 2017 and September 20, 2017, respectively. Based on our assessment of the facts we have increased our provision for the allowance of loan losses in the 3Q 2017 and 4Q 2017 by $27 million and $5.4 million, respectively, related to these hurricanes.
(e) During Q3 2017, the Company recognized $3.1 million in cost recoveries from the Puerto Rico Housing Finance Authority ("PRHFA") loan with an outstanding principal balance of $10.9 million.
(f) During Q3 2017, the Company received $22.4 million from the pay-off before maturity of a loan previously classified as non-accrual. As a result, the Company recorded $4.1 million in interest income and $439 thousand in prepayment penalty income, included in banking service revenues.
(g) On June 30, 2017, the Company entered into an agreement for the sale of a municipality loan for $28.8 million. At June 30, 2017, this loan, which included a principal payment of $4.8 million received in July 1, 2017, was reported as other loans held for sale, at fair value.  As a result of this transaction, the Company recognized a $4.3 million charge-off during the second quarter. Proceeds were received on July 5, 2017. An allowance of $5.9 million was created during the second quarter for the remaining portfolio of municipal loans.
(h) During Q2 2017, the Company sold $166.0 million of mortgage-backed securities and recorded a net gain on sale of securities of $6.8 million. Also, it sold $39.2 million Treasury Notes and recorded a net gain of $112 thousand. In addition, the Company unwound repurchase agreements in the amount of $100 million at a cost of $80 thousand.
(i) During Q2 2017, the effective income tax rate decreased as a result of higher proportion of exempt income and income subject to preferential rates mainly due to the gain in sale of investment portfolio.
(j) During Q1 2017, a $232.0 million repurchase agreement at 4.78% was repaid at maturity.
(k) During Q1 2017, the Bank and the FDIC agreed to terminate the single family and commercial shared-loss agreements related to the FDIC assisted acquisition of Eurobank on April 30, 2010, resulting in a benefit of $1.4 million.
(l) During Q3 2016, the Company received $5 million from a 2009 claim of loss related to a private label collateralized obligation. During Q3 2017, the Company received $571 thousand, as final settlement.
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)	2017			2017			2017			2017			2016
Cash and cash equivalents	$	488,233		$	723,756	(c)	$	480,338		$	483,301		$	513,469
Investments:
Trading securities		191			284			294			314			347
Investment securities available-for-sale, at fair value, with amortized cost of $648,799
(September 30, 2017 - $611,936; June 30, 2017 - $649,280; March 31, 2017 - $796,558;
December 31, 2016 - $749,867)
Mortgage-backed securities		629,124			596,222			584,930	(f)		741,405			692,552
Other investment securities		16,673			17,201	(d)		64,397			58,637			58,932
Total investment securities available-for-sale		645,797			613,423			649,327			800,042			751,484
Mortgage-backed securities held-to-maturity, at amortized cost, with fair value of $497,681
(September 30, 2017 - $525,830; June 30, 2017 - $549,595; March 31, 2017 - $570,963;
December 31, 2016 - $592,763)		506,064			530,178			555,407			577,997			599,884
Federal Home Loan Bank (FHLB) stock, at cost		13,995			14,016			16,616			17,161			10,793
Other investments		3			3			3			3			3
Total investments		1,166,050			1,157,904			1,221,647			1,395,517			1,362,511
Loans, net		4,056,329			3,964,572			4,091,866			4,089,708			4,147,692
Other assets:
FDIC shared-loss indemnification asset		-			-			-			-	(g)		14,411
Derivative assets		771			809			957			1,123			1,330
Prepaid expenses		9,734			13,070			17,117			15,496			17,096
Deferred tax asset, net		127,421			126,041			116,199			121,442			124,200
Foreclosed real estate and repossessed properties		47,721			51,104			53,448			50,820			50,743
Premises and equipment, net		67,860			67,994			69,836			69,786			70,407
Goodwill		86,069			86,069			86,069			86,069			86,069
Accounts receivable and other assets		138,865	(b)		96,898			98,349			101,345			113,896
Total assets	$	6,189,053		$	6,288,217		$	6,235,826		$	6,414,607		$	6,501,824
Deposits:
Demand deposits	$	2,039,126		$	1,925,721		$	1,844,996		$	1,944,921		$	1,939,764
Savings accounts		1,204,514			1,311,515			1,115,669			1,174,581			1,128,190
Time deposits		1,037,310			1,053,568			1,053,110			1,022,447			1,020,138
Brokered deposits		518,532			535,600			568,911			575,879			576,395
Total deposits		4,799,482			4,826,404			4,582,686			4,717,828			4,664,487
Borrowings:
Securities sold under agreements to repurchase		192,869	(a)		283,080	(e)		453,492			531,179	(h)		653,756
Advances from FHLB and other borrowings		99,796			100,091			137,717			105,133			105,515
Subordinated capital notes		36,083			36,083			36,083			36,083			36,083
Total borrowings		328,748			419,254			627,292			672,395			795,354
Other liabilities:
Derivative liabilities		1,281			1,677			1,881			1,967			2,437
Acceptances outstanding		27,644			16,486			22,739			24,288			23,765
Accrued expenses and other liabilities		86,791			86,766			62,259			66,700			95,370
Total liabilities		5,243,946			5,350,587			5,296,857			5,483,178			5,581,413
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		541,600			541,302			541,005			540,808			540,948
Legal surplus		81,454			79,795			79,460			77,772			76,293
Retained earnings		200,878			191,567			194,687			185,377			177,808
Treasury stock, at cost		(104,502)			(104,502)			(104,502)			(104,502)			(104,860)
Accumulated other comprehensive income (loss), net		(2,949)			842			(307)			3,348			1,596
Total stockholders' equity		945,107			937,630			938,969			931,429			920,411
Total liabilities and stockholders' equity	$	6,189,053		$	6,288,217		$	6,235,826		$	6,414,607		$	6,501,824
(a) During the Q4 2017, the Company made an unwinding of $80 million repurchase agreements at no cost.
(b) At December 31, 2017, the Company had higher balances in accounts receivable and other assets mainly from accrued interest receivable of loans included in hurricane Maria moratorium program.
(c) At September 30, 2017, the Company had higher balances in cash and cash equivalents due to increased deposits and lower transaction outflows toward the end of the quarter from commercial customers.
(d) During Q3 2017, the Company sold $45.0 million US Treasury securities available for sale and recorded a gain of $4 thousand.
(e) During Q3 2017, $160.4 million in short-term repurchase agreements matured and were not renewed.
(f) During Q2 2017, the Company sold $166.0 million of mortgage-backed securities and recorded a net gain on sale of securities of $6.8 million. Also, it sold $39.2 million Treasury Notes and recorded a net gain of $112 thousand. In addition, the Company unwound repurchase agreements in the amount of $100 million at a cost of $80 thousand.
(g) During Q1 2017, the Bank and the FDIC agreed to terminate the single family and commercial shared-loss agreements related to the FDIC assisted acquisition of Eurobank on April 30, 2010, resulting in a benefit of $1.4 million.
(h) During Q1 2017, a $232.0 million repurchase agreement at 4.78% was repaid at maturity.
4

OFG Bancorp (NYSE: OFG)
Table 4: Information on Loan Portfolio and Production
		December 31,			September 30,			June 30,			March 31,		December 31,
(Dollars in thousands) (unaudited)		2017			2017			2017			2017		2016
Non-acquired loans held for investment:
Mortgage		$	683,607		$	694,476		$	699,290		$	709,863	$	721,494
Commercial			1,307,261			1,245,711			1,270,844	(b)		1,253,712		1,277,866
Consumer			330,039			316,357			314,267			300,412		290,515
Auto			883,985			831,437			807,204			786,606		756,395
			3,204,892			3,087,981			3,091,605			3,050,593		3,046,270
Less:  Allowance for loan and lease losses			(92,718)	(a)		(87,541)	(a)		(69,666)	(b)		(60,483)		(59,301)
			3,112,174			3,000,440			3,021,939			2,990,110		2,986,969
Deferred loan costs, net			6,695			6,592			6,574			6,464		5,766
Total non-acquired loans held for investment, net			3,118,869			3,007,032			3,028,513			2,996,574		2,992,735
Acquired loans:	(1)
BBVAPR
Accounted for under ASC 310-20
Commercial			4,380			4,612			5,350			5,436		5,562
Consumer			28,915			29,464			30,233			31,001		32,862
Auto			21,969			26,562			33,661			42,523		53,026
			55,264			60,638			69,244			78,960		91,450
Less:  Allowance for loan and lease losses			(3,862)	(a)		(3,363)	(a)		(3,348)			(3,615)		(4,299)
			51,402			57,275			65,896			75,345		87,151
Accounted for under ASC 310-30
Mortgage			532,053			532,948			544,325			558,112		569,253
Commercial			243,092			244,359			266,002			278,665		292,564
Consumer			1,431			1,598			2,163			3,201		4,301
Auto			43,696			49,258			58,078			71,495		85,676
			820,272			828,163			870,568			911,473		951,794
Less:  Allowance for loan and lease losses			(45,755)	(a)		(40,110)	(a)		(37,494)			(34,930)		(31,056)
			774,517			788,053			833,074			876,543		920,738
Total Acquired BBVAPR loans, net			825,919			845,328			898,970			951,888		1,007,889
Eurobank
Accounted for under ASC 310-30
Mortgage			69,538			68,996			70,329			72,966		73,018
Commercial			53,793			53,028			66,894			73,181		81,460
Consumer			1,112			1,220			1,256			1,268		1,372
			124,443			123,244			138,479			147,415		155,850
Less:  Allowance for loan and lease losses			(25,174)	(a)		(23,146)	(a)		(21,787)			(22,006)		(21,281)
Total Acquired Eurobank loans, net			99,269			100,098			116,692			125,409		134,569
Total acquired loans, net			925,188			945,426			1,015,662			1,077,297		1,142,458
Total loans held for investment			4,044,057			3,952,458			4,044,175			4,073,871		4,135,193
Mortgage loans held for sale			12,272			12,114			14,044			15,837		12,499
Other loans held for sale			-			-			33,647	(b)		-		-
Total loans, net		$	4,056,329		$	3,964,572		$	4,091,866		$	4,089,708	$	4,147,692
Loan Portfolio Summary:
Loans held for investment:
Mortgage		$	1,285,198		$	1,296,420		$	1,313,944		$	1,340,941	$	1,363,765
Commercial			1,608,526			1,547,710			1,609,090	(b)		1,610,994		1,657,452
Consumer			361,497			348,639			347,919			335,882		329,050
Auto and leasing			949,650			907,257			898,943			900,624		895,097
			4,204,871			4,100,026			4,169,896			4,188,441		4,245,364
Less:  Allowance for loan and lease losses			(167,509)	(a)		(154,160)	(a)		(132,295)	(b)		(121,034)		(115,937)
			4,037,362			3,945,866			4,037,601			4,067,407		4,129,427
Deferred loan costs, net			6,695			6,592			6,574			6,464		5,766
Total loans held for investment, net			4,044,057			3,952,458			4,044,175			4,073,871		4,135,193
Mortgage loans held for sale			12,272			12,114			14,044			15,837		12,499
Other loans held for sale			-			-			33,647	(b)		-		-
Total loans, net		$	4,056,329		$	3,964,572		$	4,091,866		$	4,089,708	$	4,147,692
		2017			2017			2017			2017		2016
(Dollars in thousands) (unaudited)		Q4			Q3			Q2			Q1		Q4
Quarterly loan production	(13)
Mortgage		$	15,892		$	32,559		$	45,877		$	43,474	$	51,208
Commercial			102,083			46,180			74,807			37,691		86,832
Commercial US Loan Programs			25,070			-			5,560			8,760		-
Consumer			23,059			33,741			49,652			42,149		42,295
Auto and Leasing			87,551			78,313			78,584			86,784		77,602
Total		$	253,655		$	190,793		$	254,480		$	218,858	$	257,937
(a) During the Q3 and Q4 2017, earnings were impacted by Hurricanes Irma and Maria, which struck the island on September 7, 2017 and September 20, 2017, respectively. Based on our assessment of the facts we have increased our provision for the allowance of loan losses in the 3Q 2017 and 4Q 2017 by $27 million and $5.4 million, respectively, related to these hurricanes.
(b) On June 30, 2017, the Company entered into an agreement for the sale of a municipality loan for $28.8 million. At June 30, 2017, this loan, which included a principal payment of $4.8 million received in July 1, 2017, was reported as other loans held for sale, at fair value.  As a result of this transaction, the Company recognized a $4.3 million charge-off during the second quarter. Proceeds were received on July 5, 2017. An allowance of $5.9 million was created during the second quarter for the remaining portfolio of municipal loans.
5

OFG Bancorp (NYSE: OFG)

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

2017 Q4

2017 Q3

2017 Q2

2017 Q1

2016 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	$	493,354	$	1,516	1.22	%	$	426,197	$	1,304	1.21	%	$	384,037	$	956	1.00	%	$	431,110	$	845	0.79	%	$	445,246	$	581	0.52	%
Investment securities		1,160,812		6,593	2.25	%		1,170,714		6,584	2.23	%		1,334,938		7,747	2.33	%		1,360,186		7,683	2.29	%		1,330,951		7,699	2.30	%
Loans
Non-acquired loans		3,111,849		56,183	7.16	%		3,062,739		58,939	7.63	%		3,051,549		53,448	7.03	%		3,015,456		51,955	6.99	%		3,009,579		51,581	6.82	%
Acquired BBVAPR loans		869,269		15,310	6.99	%		893,596		19,189	8.52	%		949,479		17,752	7.50	%		997,649		19,085	7.76	%		1,050,468		20,232	7.66	%
Acquired Eurobank loans		100,309		3,573	14.13	%		105,707		4,339	16.29	%		128,522		6,037	18.84	%		128,522		6,610	20.86	%		135,919		6,701	19.61	%
Total loans		4,081,427		75,066	7.30	%		4,062,042		82,467	8.05	%		4,129,550		77,237	7.50	%		4,141,627		77,650	7.60	%		4,195,966		78,514	7.44	%
Total interest-earning assets	$	5,735,593	$	83,175	5.75	%	$	5,658,953	$	90,355	6.33	%	$	5,848,525	$	85,940	5.89	%	$	5,932,923	$	86,178	5.89	%	$	5,972,163	$	86,794	5.78	%
Interest bearing liabilities:
Deposits
NOW accounts	$	1,040,153	$	922	0.35	%	$	1,024,480	$	880	0.34	%	$	1,080,135	$	1,051	0.39	%	$	1,092,389	$	1,041	0.39	%	$	1,119,597	$	1,172	0.42	%
Savings accounts		1,224,815		1,530	0.50	%		1,142,338		1,426	0.50	%		1,151,650		1,485	0.52	%		1,164,040		1,481	0.52	%		1,126,600		1,384	0.49	%
Time deposits		1,046,191		2,932	1.11	%		1,052,910		2,902	1.09	%		1,037,063		2,802	1.08	%		1,019,528		2,715	1.08	%		1,045,732		2,794	1.06	%
Brokered deposits		524,198		2,079	1.57	%		554,650		2,163	1.55	%		575,642		2,084	1.45	%		574,549		1,885	1.33	%		583,607		1,895	1.29	%
		3,835,357		7,463	0.77	%		3,774,378		7,371	0.77	%		3,844,490		7,422	0.77	%		3,850,506		7,122	0.75	%		3,875,536		7,245	0.74	%
Non-interest bearing deposit accounts		937,328		-	-			835,255		-	-			835,026		-	-			832,659		-	-			832,332		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		230	-			-		231	-			-		231	-			-		231	-			-		186	-
Total deposits		4,772,685		7,693	0.64	%		4,609,633		7,602	0.65	%		4,679,516		7,653	0.66	%		4,683,165		7,353	0.64	%		4,707,868		7,431	0.63	%
Borrowings
Securities sold under agreements to repurchase		236,522		963	1.62	%		325,201		1,281	1.56	%		472,338		1,733	1.47	%		574,771		3,244	2.29	%		608,802		4,177	2.73	%
Advances from FHLB and other borrowings		101,454		600	2.35	%		100,751		596	2.35	%		105,911		607	2.30	%		105,097		596	2.30	2		105,561		611	2.30	%
Subordinated capital notes		36,083		406	4.46	%		36,083		398	4.38	%		36,083		384	4.27	%		36,083		367	4.12	%		36,083		362	3.99	%
Total borrowings		374,059		1,969	2.09	%		462,035		2,275	1.95	%		614,332		2,724	1.78	%		715,951		4,207	2.38	%		750,446		5,150	2.73	%
Total interest-bearing liabilities	$	5,146,744	$	9,662	0.74	%	$	5,071,668	$	9,877	0.77	%	$	5,293,848	$	10,377	0.79	%	$	5,399,116	$	11,560	0.87	%	$	5,458,314	$	12,581	0.92	%
Interest rate spread			$	73,513	5.01	%			$	80,478	5.56	%			$	75,563	5.10	%			$	74,618	5.02	%			$	74,213	4.86	%
Net interest margin					5.08	%					5.64	%					5.18	%					5.10	%					4.94	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	199					$	3,220					$	300					$	245					$	130
Acquired Eurobank loans				526						523						615						1,055						729
			$	725					$	3,743					$	915					$	1,300					$	859
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	5,735,593	$	82,450	5.70	%	$	5,658,953	$	86,612	6.07	%	$	5,848,525	$	85,025	5.83	%	$	5,932,923	$	84,878	5.80	%	$	5,972,163	$	85,935	5.72	%
Interest rate spread			$	72,788	4.96	%			$	76,735	5.30	%			$	74,648	5.04	%			$	73,318	4.93	%			$	73,354	4.80	%
Net interest margin					5.03	%					5.38	%					5.12	%					5.01	%					4.89	%
6

OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin (Continued)
	2017 YTD						2016 YTD
			Interest						Interest
	Average		Income/		Yield/		Average		Income/		Yield/
(Dollars in thousands) (unaudited)	Balance		Expense		Rate		Balance		Expense		Rate
Interest earning assets:
Cash equivalents	$	436,913	$	4,620	1.06	%	$	484,586	$	2,501	0.52	%
Investment securities		1,255,881		28,607	2.28	%		1,346,261		32,146	2.39	%
Loans
Non-acquired loans		3,061,651		220,590	7.20	%		3,098,701		199,173	6.43	%
Acquired BBVAPR loans		927,498		71,271	7.68	%		1,140,785		92,273	8.09	%
Acquired Eurobank loans		136,655		20,559	15.04	%		139,670		30,499	21.84	%
Total loans		4,125,804		312,420	7.57	%		4,379,156		321,945	7.35	%
Total interest-earning assets	$	5,818,598	$	345,647	5.94	%	$	6,210,003	$	356,592	5.74	%
Interest bearing liabilities:
Deposits
NOW accounts	$	1,059,051	$	3,893	0.37	%	$	1,200,394	$	5,086	0.42	%
Savings accounts		1,170,800		5,922	0.51	%		1,114,931		5,441	0.49	%
Time deposits		1,039,034		11,352	1.09	%		999,231		10,582	1.06	%
Brokered deposits		557,115		8,211	1.47	%		619,569		7,450	1.20	%
		3,826,000		29,378	0.77	%		3,934,125		28,559	0.73	%
Non-interest bearing deposit accounts		860,287		-	-			781,877		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		920	-			-		694	-
Total deposits		4,686,287		30,298	0.65	%		4,716,002		29,253	0.62	%
Borrowings
Securities sold under agreements to repurchase		401,070		7,223	1.80	%		663,845		18,805	2.83	%
Advances from FHLB and other borrowings		103,214		2,398	2.32	%		238,366		6,186	2.60	%
Subordinated capital notes		36,083		1,556	4.31	%		85,714		2,921	3.41	%
Total borrowings		540,367		11,177	2.07	%		987,925		27,912	2.83	%
Total interest-bearing liabilities	$	5,226,654	$	41,475	0.79	%	$	5,703,927	$	57,165	1.00	%
Interest rate spread			$	304,172	5.15	%			$	299,427	4.74	%
Net interest margin					5.23	%					4.82	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	3,964						1,915
Acquired Eurobank loans				2,719						5,606
			$	6,683					$	7,521
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	5,818,598	$	338,964	5.83	%	$	6,210,003	$	349,071	5.62	%
Interest rate spread			$	297,489	5.04	%			$	291,906	4.62	%
Net interest margin					5.11	%					4.70	%
7

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (1)
	2017		2017		2017			2017		2016
(Dollars in thousands) (unaudited)	Q4		Q3		Q2			Q1		Q4
Net Charge-offs
Mortgage:
Charge-offs	$	1,248	$	834	$	2,162		$	2,379	$	2,075
Recoveries		(126)		(341)		(63)			(56)		(125)
Total mortgage		1,122		493		2,099			2,323		1,950
Commercial:
Charge-offs		1,260		727		4,841	(a)		856		3,901
Recoveries		(401)		(654)		(136)			(89)		(53)
Total commercial		859		73		4,705			767		3,848
Consumer:
Charge-offs		1,849		4,424		4,012			3,358		3,243
Recoveries		(96)		(168)		(780)	(b)		(165)		(97)
Total consumer		1,753		4,256		3,232			3,193		3,146
Auto and Leasing:
Charge-offs		9,182		9,387		7,775			7,563		7,464
Recoveries		(2,450)		(2,394)		(4,176)	(b)		(3,294)		(2,902)
Total auto and leasing		6,732		6,993		3,599			4,269		4,562
Total	$	10,466	$	11,815	$	13,635		$	10,552	$	13,506
Net Charge-off Rates
Mortgage		0.65%		0.28%		1.20%			1.31%		1.07%
Commercial		0.27%		0.02%		1.50%	(a)		0.25%		1.22%
Consumer		2.30%		5.65%		4.42%	(b)		4.57%		4.62%
Auto and Leasing		3.13%		3.37%		1.79%	(b)		2.19%		2.44%
Total		1.35%		1.54%		1.79%			1.40%		1.80%
Average Loans Held For Investment
Mortgage	$	688,312	$	692,782	$	698,782		$	711,553	$	730,707
Commercial		1,257,619		1,239,390		1,256,827			1,245,530		1,258,896
Consumer		304,760		301,121		292,739			279,558		272,353
Auto and Leasing		861,158		829,446		803,201			778,815		747,623
Total	$	3,111,849	$	3,062,739	$	3,051,549		$	3,015,456	$	3,009,579
(a) On June 30, 2017, the Company entered into an agreement for the sale of a municipality loan for $28.8 million. At June 30, 2017, this loan, which included a principal payment of $4.8 million received in July 1, 2017, was reported as other loans held for sale, at fair value.  As a result of this transaction, the Company recognized a $4.3 million charge-off during the second quarter. Proceeds were received on July 5, 2017. An allowance of $5.9 million was created during the second quarter for the remaining portfolio of municipal loans.
(b) During Q2 2017 , the Company had additional recoveries in auto and consumer loans of $1.1 million and $612 thousand, respectively.
8

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (Continued) (1)
		2017			2017			2017		2017		2016
(Dollars in thousands) (unaudited)		Q4			Q3			Q2		Q1		Q4
Early Delinquency (30 - 89 days past due)
Mortgage		$	17,315		$	35,273		$	32,292	$	30,827	$	32,516
Commercial			2,620			2,727			4,648		5,708		1,602
Consumer			6,149			7,504			5,495		6,024		5,106
Auto and Leasing			32,159			71,606			66,372		61,912		61,728
Total		$	58,243	(b)	$	117,110	(a)	$	108,807	$	104,471	$	100,952
Early Delinquency Rates (30 - 89 days past due)
Mortgage			2.53%			5.08%			4.62%		4.34%		4.51%
Commercial			0.20%			0.22%			0.37%		0.46%		0.13%
Consumer			1.86%			2.37%			1.75%		2.01%		1.76%
Auto and Leasing			3.64%			8.61%			8.22%		7.87%		8.16%
Total			1.82%	(b)		3.79%	(a)		3.52%		3.42%		3.31%
Total Delinquency (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation		$	76,542		$	88,936		$	85,908	$	90,849	$	98,506
GNMA's buy-back option program			8,268			12,999			9,229		9,973		9,681
Total mortgage			84,810			101,935			95,137		100,822		108,187
Commercial			18,509			18,149			18,154		15,711		12,798
Consumer			8,028			8,847			7,275		7,383		6,752
Auto and Leasing			36,391			82,437			74,577		69,622		69,901
Total		$	147,738	(b)	$	211,368	(a)	$	195,143	$	193,538	$	197,638
Total Delinquency Rates (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation			11.20%			12.81%			12.29%		12.80%		13.65%
GNMA's buy-back option program			1.21%			1.87%			1.32%		1.40%		1.34%
Total mortgage			12.41%			14.68%			13.60%		14.20%		14.99%
Commercial			1.42%			1.46%			1.43%		1.25%		1.00%
Consumer			2.43%			2.80%			2.31%		2.46%		2.32%
Auto and Leasing			4.12%			9.92%			9.24%		8.85%		9.24%
Total			4.61%	(b)		6.84%	(a)		6.31%		6.34%		6.49%
Nonperforming Assets	(14)
Mortgage		$	64,085		$	59,667		$	63,071	$	66,781	$	74,503
Commercial			35,253			21,701			23,519		19,387		19,786
Consumer			2,572			2,445			2,687		1,948		1,986
Auto and Leasing			4,232			11,811			8,295		8,709		9,052
Total nonperforming loans			106,142			95,624	(a)		97,572		96,825		105,327
Foreclosed real estate			14,282			14,677			15,320		12,946		11,867
Other repossessed assets			3,172			3,635			2,921		2,600		2,408
Total nonperforming assets		$	123,596		$	113,936		$	115,813	$	112,371	$	119,602
Nonperforming Loan Rates
Mortgage			9.37%			8.59%			9.02%		9.41%		10.33%
Commercial			2.70%			1.74%			1.85%		1.55%		1.55%
Consumer			0.78%			0.77%			0.86%		0.65%		0.68%
Auto and Leasing			0.48%			1.42%			1.03%		1.11%		1.20%
Total loans			3.31%			3.10%	(a)		3.16%		3.17%		3.46%
(a) After Hurricane Irma and Maria on September 7, 2017 and September 20, 2017, respectively, the Company offered an automatic three-month moratorium for the payment of principal and interest for auto, personal, credit cards and non-conforming mortgage loans, for customers whose payments were not over 89 days past due at August 31, 2017. Both, interest and principal will be payable at the maturity of the loan. For conforming mortgage loans the same moratorium applies, but the interest and principal will be payable in aggregate with the next payment due after the moratorium period. The Company also offered an automatic one-month moratorium for the payment of principal and interest for commercial loans, for customers whose payments were not over 30 days past due at August 31, 2017 and the flexibility of extending it up to two additional months, if the customer needs it.
(b) During Q4 2017, the Company received payments on loans in moratorium, causing a decrease in delinquency.
9

OFG Bancorp (NYSE: OFG)
Table 7: Allowance for Loan and Lease Losses
	Quarter Ended December 31, 2017
								Auto and
(Dollars in thousands) (unaudited)	Mortgage		Commercial			Consumer		Leasing		Total
Non-acquired loans
Balance at beginning of period	$	22,308	$	24,278		$	15,793	$	25,162	$	87,541
Provision (recapture) for loan and lease losses, net		(747)		6,839			2,414		7,137		15,643
Charge-offs		(1,248)		(1,260)			(1,849)		(9,182)		(13,539)
Recoveries		126		401			96		2,450		3,073
Balance at end of period	$	20,439	$	30,258		$	16,454	$	25,567	$	92,718
Allowance coverage ratio		2.99%		2.31%			4.99%		2.89%		2.89%
Acquired loans
Acquired BBVAPR loans:
Acquired loans accounted for under ASC 310-20
Balance at beginning of period			$	41		$	2,591	$	731	$	3,363
Provision (recapture) for loan and lease losses, net				-			1,261		(34)		1,227
Charge-offs				-			(681)		(271)		(952)
Recoveries				1			54		169		224
Balance at end of period			$	42		$	3,225	$	595	$	3,862
Acquired loans accounted for under ASC 310-30
Balance at beginning of period	$	8,931	$	23,941		$	-	$	7,238	$	40,110
Provision for loan and lease losses, net		5,154		(10)			18		723		5,885
Allowance de-recognition		-		(240)	(a)		-		-		(240)
Balance at end of period	$	14,085	$	23,691		$	18	$	7,961	$	45,755
Acquired Eurobank loans:
Balance at beginning of period	$	14,219	$	8,922		$	5	$	-	$	23,146
Provision (recapture) for loan and lease losses, net		1,034		1,118			-		-		2,152
Allowance de-recognition		(66)		(58)			-		-		(124)
Balance at end of period	$	15,187	$	9,982		$	5	$	-	$	25,174
Total acquired loans
Balance at beginning of period	$	23,150	$	32,904		$	2,596	$	7,969	$	66,619
Provision (recapture) for loan and lease losses, net		6,188		1,108			1,279		689		9,264
Charge-offs		-		-			(681)		(271)		(952)
Recoveries		-		1			54		169		224
Allowance de-recognition		(66)		(298)			-		-		(364)
Balance at end of period	$	29,272	$	33,715		$	3,248	$	8,556	$	74,791
10

OFG Bancorp (NYSE: OFG)
Table 8: Accretable Yield on Loans Accounted for Under ASC 310-30 (Loans Acquired with Deteriorated Credit Quality, including those by Analogy)
	Quarter Ended December 31, 2017
(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	$	256,556	$	39,621	$	10,069	$	3,508	$	1,165	$	310,919
Accretion		(7,187)	$	(2,743)	$	(1,221)	$	(1,066)	$	(299)	$	(12,516)
Change in expected cash flows		-		2,324		17		7		20		2,368
Transfers (to) from non-accretable discount		9,129		(1,145)		(158)		317		(1)		8,142
Balance at end of period	$	258,498	$	38,057	$	8,707	$	2,766	$	885	$	308,913
Non-Accretable Discount
Balance at beginning of period	$	310,352	$	3,850	$	7,288	$	23,777	$	19,281	$	364,548
Change in actual and expected cash flows		(1,722)		(1,833)		(12)		(410)		2		(3,975)
Transfers from (to) accretable yield		(9,129)		1,145		158		(317)		1		(8,142)
Balance at end of period	$	299,501	$	3,162	$	7,434	$	23,050	$	19,284	$	352,431
					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	$	42,388	$	8,231	$	1,764	$	-	$	-	$	52,383
Accretion		(1,616)		(1,934)		-		(8)		(15)		(3,573)
Change in expected cash flows		2		454		39		(3)		29		521
Transfers from (to) non-accretable discount		700		-		(356)		11		(14)		341
Balance at end of period	$	41,474	$	6,751	$	1,447	$	-	$	-	$	49,672
Non-Accretable Discount
Balance at beginning of period	$	5,613	$	688	$	402	$	-	$	232	$	6,935
Change in actual and expected cash flows		(337)		(412)		-		11		(11)		(749)
Transfers (to) from accretable yield		(700)		-		356		(11)		14		(341)
Balance at end of period	$	4,576	$	276	$	758	$	-	$	235	$	5,845
11

OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital
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 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.
	2017		2017		2017		2017		2016
(Dollars in thousands) (unaudited)	Q4		Q3		Q2		Q1		Q4
Stockholders' Equity to Non-GAAP Tangible Common Equity
Total stockholders' equity	$	945,107	$	937,630	$	938,969	$	931,429	$	920,411
Less:  Intangible assets		(90,756)		(91,124)		(91,493)		(91,861)		(92,229)
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	$	688,481	$	680,636	$	681,606	$	673,698	$	662,312
Common stock outstanding at end of period		43,947		43,947		43,947		43,947		43,915
Tangible book value (Non-GAAP)	$	15.67	$	15.49	$	15.51	$	15.33	$	15.08
Total Assets to Tangible Assets
Total assets	$	6,189,053	$	6,288,217	$	6,235,826	$	6,414,607	$	6,501,824
Less:  Intangible assets		(90,756)		(91,124)		(91,493)		(91,861)		(92,229)
Tangible assets (Non-GAAP)	$	6,098,297	$	6,197,093	$	6,144,333	$	6,322,746	$	6,409,595
Non-GAAP TCE Ratio
Tangible common equity	$	688,481	$	680,636	$	681,606	$	673,698	$	662,312
Tangible assets		6,098,297		6,197,093		6,144,333		6,322,746		6,409,595
TCE ratio		11.29%		10.98%		11.09%		10.66%		10.33%
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders' equity	$	943,823	$	947,404	$	938,707	$	926,011	$	919,697
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	$	777,953	$	781,534	$	772,837	$	760,141	$	753,827
Less:  Average intangible assets		(90,951)		(91,331)		(91,731)		(92,102)		(92,502)
Average tangible common equity	$	687,002	$	690,203	$	681,106	$	668,039	$	661,325
Adjusted Metrics for Hurricanes Irma and Maria - Reconciliation to GAAP Financial Measures
Net income	$	17,073	$	3,319	$	17,104	$	15,150	$	15,556
Plus:  Additional loan loss provision from Hurricanes Irma and Maria		5,406		27,000		-		-		-
Less:  Income tax effect		(2,108)		(8,038)		-		-		-
Adjusted net income	$	20,371	$	22,281	$	17,104	$	15,150	$	15,556
Less:  dividends on preferred stock		(3,465)		(3,465)		(3,466)		(3,465)		(3,465)
Adjusted net income available to common shareholders	$	16,906	$	18,816	$	13,638	$	11,685	$	12,091
Plus:  Effect of assumed conversion of the convertible preferred stock		1,838		1,838		1,837		1,838		1,838
	$	18,744	$	20,654	$	15,475	$	13,523	$	13,929
Average common shares outstanding and equivalents		51,104		51,102		51,100		51,131		51,098
Adjusted earnings per common share - diluted	$	0.37	$	0.40	$	0.30	$	0.26	$	0.27
Adjusted net income	$	20,371	$	22,281	$	17,104	$	15,150	$	15,556
Adjusted average assets	$	6,191,737	$	6,048,021	$	6,278,464	$	6,374,177	$	6,455,023
Adjusted return on average assets		1.32%		1.47%		1.09%		0.95%		0.96%
Adjusted net income available to common shareholders	$	16,906	$	18,816	$	13,638	$	11,685	$	12,091
Adjusted average tangible common stockholders' equity	$	687,002	$	690,422	$	681,106	$	668,039	$	661,325
Adjusted return on average tangible common stockholders' equity		9.84%		10.90%		8.01%		7.00%		7.31%
12

OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures (Continued)
		BASEL III
		Standardized
		2017		2017		2017		2017		2016
(Dollars in thousands) (unaudited)		Q4		Q3		Q2		Q1		Q4
Regulatory Capital Metrics
Common equity Tier 1 capital		$	644,804	$	633,401	$	643,606	$	626,707	$	627,732
Tier 1 capital			842,133		830,640		840,703		822,847		819,661
Total risk-based capital	(15)		899,258		885,523		896,926		878,867		876,656
Risk-weighted assets			4,420,667		4,252,605		4,391,321		4,383,517		4,467,556
Regulatory Capital Ratios
Common equity Tier 1 capital ratio	(16)		14.59%		14.89%		14.66%		14.30%		14.05%
Tier 1 risk-based capital ratio	(17)		19.05%		19.53%		19.14%		18.77%		18.35%
Total risk-based capital ratio	(18)		20.34%		20.82%		20.42%		20.05%		19.62%
Leverage ratio	(19)		13.92%		14.07%		13.69%		13.20%		12.99%
Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach
Total stockholders' equity		$	945,107	$	937,630	$	938,969	$	931,429	$	920,411
Less:  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
Unrealized gains on available-for-sale securities, net of income tax			2,638		(1,371)		(256)		(3,849)		(2,209)
Unrealized losses on cash flow hedges, net of income tax			311		529		563		501		612
			782,186		770,918		773,406		762,211		752,944
Less:    Disallowed goodwill			(86,069)		(86,069)		(86,069)		(86,069)		(86,069)
Disallowed other intangible assets, net	(20)		(2,287)		(2,466)		(2,646)		(2,826)		(2,255)
Disallowed deferred tax assets, net	(20)		(49,026)		(48,982)		(41,085)		(46,609)		(36,888)
Common equity Tier 1 capital			644,804		633,401		643,606		626,707		627,732
Plus:  Qualifying noncumulative perpetual preferred stock			176,000		176,000		176,000		176,000		176,000
Qualifying noncumulative perpetual preferred stock issuance costs			(10,130)		(10,130)		(10,130)		(10,130)		(10,130)
Subordinated capital notes			35,000		35,000		35,000		35,000		35,000
Less:  Disallowed deferred tax assets, net			(3,541)		(3,631)		(3,773)		(4,730)		(8,941)
Tier 1 capital			842,133		830,640		840,703		822,847		819,661
Plus tier 2 capital:  Qualifying allowance for loan and lease losses			57,125		54,883		56,223		56,020		56,995
Total risk-based capital		$	899,258	$	885,523	$	896,926	$	878,867	$	876,656
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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 considers 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.
(2)	Total banking and wealth management revenues.
(3)	Calculated based on net income available to common shareholders divided by average common shares outstanding for the period.
(4)	Calculated based on net 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.
(5)	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 GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.
(6)	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.
(7)	Calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.
(8)	Calculated based on annualized income, net of tax, for the period divided by average total assets for the period.
(9)	Calculated based on annualized income available to common shareholders for the period divided by average tangible common equity for the period.
(10)	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.
(11)	Calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period.
(12)	Non-GAAP ratios. See "Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures" for information on the calculation of each of these ratios.
(13)	Production of new loans (excluding renewals).
(14)	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.
(15)	Total risk-based capital equals the sum of Tier 1 capital and Tier 2 capital.
(16)	Common equity Tier 1 capital ratio is a regulatory capital measure calculated based on Common equity Tier 1 capital divided by risk-weighted assets.
(17)	Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.
(18)	Total risk-based capital ratio is a regulatory capital measure calculated based on Total risk-based capital divided by risk-weighted assets.
(19)	Leverage capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by average assets, after certain adjustments.
(20)	Amounts based on transition provisions for regulatory capital deductions and adjustments of 80% for 2017 and 60% for 2016.
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