OFG Bancorp (OFG) 8-K OFG Bancorp Reports 3Q18 Results

Exhibit 99

 

OFG Bancorp Reports 3Q18 Results

SAN JUAN, Puerto Rico, October 19, 2018 – OFG Bancorp (NYSE: OFG) reported results for the third quarter ended September 30, 2018.

Net income available to shareholders was $19.6 million or $0.42 per fully diluted share, compared to 2Q18’s $16.2 million or $0.35 per fully diluted share and breakeven results in the year ago third quarter due to a special hurricanes related loan loss provision.

“EPS growth reflects another quarter of strong, consistent core growth based on the success of our strategy of differentiation – providing superior customer service, convenience and technology – coupled with Puerto Rico’s continued rebound following hurricanes that struck in September 2017,” said José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board.

Highlights

·All key performance metrics improved, including net interest margin at 5.38%, return on average assets at 1.42%, return on average tangible common stockholders’ equity at 10.94%, and efficiency ratio at 50.58%.

·Increased profitability was driven by new loan production of $354 million, higher average loan yields of 7.55%, annualized increase in average loan balances of 9.7%; and lower non-interest expenses.

·Core deposit balances of $4.56 billion rose 3.2% from 2Q18 as customer count grew 1.2% sequentially and 4.0% year over year.

·Tangible book value per common share of $16.23 at September 30, 2018 increased 6.8% annualized from June 30, 2018.

·Regulatory capital is expected to benefit by $84.0 million as a result of the announcement in 3Q18 of the mandatory conversion effective Monday, October 22^nd, of the Series C 8.750% Non-Cumulative Convertible Perpetual Preferred Stock.

Conference Call

A conference call to discuss OFG’s 3Q18 results, outlook and related matters will be held today at 10:00 AM Eastern Time. The call can be accessed live by dialing (888) 459-5609 or (973) 321-1024. Use conference ID 758-9354. The call can also be accessed live on OFG’s

website at www.ofgbancorp.com. Access the webcast link in advance to download any necessary software. A replay of the webcast will be available shortly thereafter.

CEO Comments

Mr. Fernández stated: “On behalf of OFG’s entire team, we are extremely proud to report another quarter of superior core growth across all facets of our business.

“3Q18 EPS is up more than 20% sequentially and significantly better year over year. All financial metrics continued to build strong momentum going forward.

“Key to our success has been the effectiveness of strategies we have been working on for years. This has enabled us to get closer to our commercial and retail customers through value-added service, increased convenience and highly efficient technology.

“With customer count up 4% year over year in the third quarter, we are achieving growth in part through increased customer adoption of automated and interactive teller machines, and online and mobile channels.

“Until now, economic activity has been driven primarily by businesses and consumers rebuilding. We believe businesses are starting to gain new confidence to invest and expand going forward. We are excited about our prospects for continued growth.”

Income Statement

Unless otherwise noted, the following compares data for the third quarter 2018 to the second quarter 2018.

•Interest Income: Increased 7.0% to $94.1 million, reflecting the following:

•From Originated Loans: Increased $5.7 million to $66.8 million, primarily due to higher average balances and higher yields.

•From Acquired Loans: Declined $0.1 million to $17.2 million, resulting from continued pay downs, mostly offset by cost recoveries.

•From Investment Securities: Increased $0.5 million to $10.1 million, primarily due to higher average cash balances and higher yields.

•Interest Expense: Increased 13.8% or $1.4 million to $11.9 million, due to higher average balances of deposits and borrowings, and higher rates.

•Total Provision for Loan and Lease Losses: Decreased 1.0% or $0.1 million to $14.6 million. Provision for originated loans increased $0.6 million due to growth of the portfolio while provision for acquired loans declined.

•Net Interest Margin: Increased 14 basis points to 5.38%. Excluding cost recoveries, NIM increased 6 basis points mainly due to higher yield on originated commercial loans, cash balances and investment securities, reflecting the general effect of Federal Reserve Board rate hikes and higher proportion of high yield commercial and auto portfolios.

•Total Banking and Wealth Management Revenues: Remained at a high level of $18.4 million as increases in Mortgage Banking and Wealth Management more than offset a slight decline in Banking Services.

•Total Non-Interest Expenses: Declined $1.4 million to $50.9 million primarily reflecting the absence of lease cancellation expenses in 2Q18 as part of an effort to bring more of our offices into Oriental Center and reduce occupancy costs next year.

•Effective Tax Rate: With its 3Q18 results, OFG now expects its estimated annual effective tax rate to be about 33.7% due to the higher proportion of profit generated by taxable loans.

Balance Sheet

Unless otherwise noted, the following compares data at September 30, 2018 to June 30, 2018.

•Total Loans Net: Increased 0.9% or $37.1 million to $4.35 billion as originated loans increased $97.4 million and acquired loans declined $59.1 million.

•New Loan Production: While lower than the recent high of $432.1 million in 2Q18, production remained strong at $354.0 million due to:

•Record auto lending of $140.4 million, up 7.1% from 2Q18, reflecting continued pent up demand and the market’s adjustment to one less competitor in auto lending.

•High levels of commercial lending at $105.3 million, consumer lending at $43.0 million, and residential mortgage lending at $27.9 million as businesses and retail customers began to embrace market opportunities in the aftermath of the reconstruction and recovery from last year’s hurricane.

•The recently established OFG USA program added $37.4 million, reflecting seasonally lower deal flow compared to 2Q18.

•Cash and Cash Equivalents: Increased 44.5% or $168.4 million to $546.8 million, reflecting the increase in deposits.

•Total Investments: Declined 3.5% or $47.0 million to $1.31 billion. OFG retained a lower amount of originated mortgages as Mortgage Backed Securities.

•Customer Deposits (excluding brokered): Increased $139.3 million to $4.56 billion, up 3.2% and 6.2% from June 30, 2018 and September 30, 2017, respectively. Average non-interest bearing accounts remained approximately level at $1.08 billion compared to June 30, 2018.

•Total Borrowings: Declined $64.2 million to $488.0 million as OFG paid down FHLB advances.

•Total Stockholders’ Equity: Increased $12.1 million to a recent high of $969.9 million, with increases in retained earnings and legal surplus more than offsetting the increase of accumulated other comprehensive loss due to the effect of higher prevailing market interest rates.

Credit Quality

Unless otherwise noted, the following compares data on the originated loan portfolio at September 30, 2018 to June 30, 2018.

•Delinquency Rates: The early delinquency rate increased 25 basis points to 3.32% and the total delinquency rate increased 24 basis points to 6.19% in line with pre-hurricanes levels.

•Non-Performing Loan Rate: Declined 18 basis points to 3.45%, primarily reflecting a decline in the commercial rate.

•Allowance for Loan and Lease Losses: Increased 1.1% or $1.0 million to $95.2 million, primarily reflecting the growth of originated loans.

•Net Charge-Off Rate: Decreased 42 basis points to 1.39% primarily due to a 199 basis points decline in auto lending compared to 2Q18 when most of the remaining hurricane related charge-offs were taken.

Capital Position

Capital for the quarter ended September 30, 2018 continued to be significantly above regulatory requirements for a well-capitalized institution, with Tangible Common Equity Ratio at 10.88%, Tangible Book Value per common share at $16.23, Common Equity Tier 1 Capital Ratio at 14.38%, and Total Risk-Based Capital Ratio at 19.84%.

Financial Supplement

OFG’s Financial Supplement, with full financial tables for the quarter ended September 30, 2018, 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, 2017, 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. 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 September 30, 2018 Quarterly Report on Form 10-Q once it is filed with the Securities and Exchange Commission.
Table of Contents
			Pages
	OFG Bancorp (Consolidated Financial Information)
	Table  1:	Financial and Statistical Summary - Consolidated		2
	Table  2:	Consolidated Statements of Operations		3
	Table  3:	Consolidated Statements of Financial Condition		4
	Table  4:	Information on Loan Portfolio and Production		5
	Table  5:	Average Balances, Net Interest Income and Net Interest Margin		6-7
	Table  6:	Loan Information and Performance Statistics (Excluding Acquired Loans)		8-9
	Table  7:	Allowance for Loan and Lease Losses		10
	Table  8:	Accretable Yield on Loans Accounted for Under ASC 310-30 (Loans Acquired
		with Deteriorated Credit Quality, Including those by Analogy)		11
	Table  9:	Reconciliation of 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
		2018		2018		2018		2017			2017			2018			2017
(Dollars in thousands, except per share data) (unaudited)		Q3		Q2		Q1		Q4			Q3			YTD			YTD
Earnings
Net interest income		$	82,277	$	77,588	$	73,994	$	73,513		$	80,478		$	233,859		$	230,659
Non-interest income, net (core)	(2)		18,446		18,394		18,239		16,734			17,213			55,079			52,574
Non-interest expense			50,941		52,300		52,121		46,662			50,469			155,362			154,969
Pre-provision net revenues	(21)		49,956		43,991		40,387		43,666			47,921			134,334			137,562
Provision for loan and lease losses			14,601		14,747		15,460		24,907	(a)		44,042	(a)		44,808	(b)		88,232	(a)(b)
Net income before income taxes			35,355		29,244		24,927		18,759			3,879			89,526			49,330
Income tax expense			12,255		9,595		8,010		1,686			560			29,860			13,757
Net income		$	23,100	$	19,649	$	16,917	$	17,073	(a)	$	3,319	(a)	$	59,666		$	35,573
Common Share Statistics
Earnings per common share - basic	(3)	$	0.45	$	0.36	$	0.31	$	0.31	(a)	$	-	(a)	$	1.12		$	0.57
Earnings per common share - diluted	(4)	$	0.42	$	0.35	$	0.30	$	0.30	(a)	$	-	(a)	$	1.07		$	0.56
Average common shares outstanding			43,996		43,975		43,955		43,947			43,947			43,975			43,937
Average common shares outstanding and equivalents			51,464		51,226		51,121		51,104			51,102			51,344			51,095
Cash dividends per common share		$	0.06	$	0.06	$	0.06	$	0.06		$	0.06		$	0.18		$	0.18
Book value per common share (period end)		$	18.27	$	18.01	$	17.76	$	17.73		$	17.56		$	18.27		$	17.56
Tangible book value per common share (period end)	(5)	$	16.23	$	15.96	$	15.71	$	15.67		$	15.49		$	16.23		$	15.49
Balance Sheet (Average Balances)
Loans	(6)	$	4,414,583	$	4,310,206	$	4,183,775	$	4,081,427		$	4,062,042		$	4,306,019		$	4,170,048
Interest-earning assets			6,066,821		5,933,775		5,751,783		5,735,593			5,658,953			5,918,041			5,875,859
Total assets			6,514,532		6,374,240		6,189,752		6,191,737			6,046,139			6,360,715			6,231,725
Total deposits			4,934,175		4,848,456		4,775,396		4,772,685			4,609,633			4,855,360			4,657,171
Interest-bearing deposits			3,854,342		3,766,311		3,756,607		3,835,357			3,774,378			3,792,778			3,822,846
Borrowings			503,268		462,614		351,793		374,059			462,035			439,810			596,413
Stockholders' equity			973,838		959,777		952,151		943,823			947,404			962,187			937,456
Common stockholders' equity			807,968		793,907		786,281		777,953			781,534			796,317			771,586
Performance Metrics
Net interest margin	(7)		5.38%		5.24%		5.22%		5.08%			5.64%			5.28%			5.25%
Return on average assets	(8)		1.42%		1.23%		1.09%		1.10%	(a)		0.22%	(a)		1.25%			0.76%
Return on average tangible common stockholders' equity	(9)		10.94%		9.20%		7.73%		7.92%			-0.08%			9.30%			4.94%
Efficiency ratio	(10)		50.58%		54.49%		56.51%		51.70%			51.66%			53.77%			54.71%
Full-time equivalent employees, period end			1,365		1,354		1,367		1,421			1,464			1,365			1,464
Credit Quality Metrics
Excluding acquired loans:	(1)
Allowance for loan and lease losses		$	95,236	$	94,218	$	96,832	$	92,718	(a)	$	87,541	(a)	$	95,236		$	87,541	(a)(b)
Allowance as a % of loans held for investment			2.62%		2.66%		2.92%		2.89%	(a)		2.83%	(a)		2.62%			2.83%
Net charge-offs		$	12,402	$	15,449	$	10,844	$	10,466		$	11,815		$	38,695		$	36,002	(b)
Net charge-off rate	(11)		1.39%		1.81%		1.34%		1.35%			1.54%			1.20%			1.15%	(b)
Early delinquency rate (30 - 89 days past due)			3.32%		3.07%		3.20%		1.82%	(c)		3.79%			3.32%			3.79%
Total delinquency rate (30 days and over)			6.19%		5.95%		6.25%		4.61%	(c)		6.84%			6.19%			6.84%
Capital Ratios (Non-GAAP)	(12)
Leverage ratio			13.93%		13.92%		14.07%		13.92%			14.07%			13.93%			14.07%
Common equity Tier 1 capital ratio			14.38%		14.14%		14.52%		14.59%			14.89%			14.38%			14.89%
Tier 1 risk-based capital ratio			18.55%		18.38%		19.00%		19.05%			19.53%			18.55%			19.53%
Total risk-based capital ratio			19.84%		19.67%		20.29%		20.34%			20.82%			19.84%			20.82%
Tangible common equity ("TCE") ratio			10.88%		10.95%		11.22%		11.29%			10.98%			10.88%			10.98%
(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 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) 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 certain loans. During Q4 2017, the Company received payments on loans in moratorium, causing a decrease in delinquency.
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OFG Bancorp (NYSE: OFG)
Table 2: Consolidated Statements of Operations
		Quarter Ended												Nine-Months Ended
		September 30,		June 30,		March 31,		December 31,			September 30,			September 30,		September 30,
(Dollars in thousands, except per share data) (unaudited)		2018		2018		2018		2017			2017			2018		2017
Interest income:
Loans	(1)
Non-acquired loans		$	66,843	$	61,183	$	56,781	$	56,183		$	58,939	(e)	$	184,807	$	164,343
Acquired BBVAPR loans			13,688		13,880		14,490		15,310			19,189	(d)		42,058		56,026
Acquired Eurobank loans			3,485		3,366		3,341		3,573			4,339			10,192		16,986
Total interest income from loans			84,016		78,429		74,612		75,066			82,467			237,057		237,355
Investment securities			10,121		9,577		8,558		8,108			7,888			28,256		25,118
Total interest income			94,137		88,006		83,170		83,174			90,355			265,313		262,473
Interest expense:
Deposits
Core deposits			5,877		5,517		5,412		5,613			5,438			16,806		16,474
Brokered deposits			2,728		2,134		1,886		2,079			2,163			6,748		6,132
Total deposits			8,605		7,651		7,298		7,692			7,601			23,554		22,606
Borrowings			3,255		2,767		1,878		1,969			2,276			7,900		9,208
Total interest expense			11,860		10,418		9,176		9,661			9,877			31,454		31,814
Net interest income			82,277		77,588		73,994		73,513			80,478			233,859		230,659
Provision for loan and lease losses, excluding acquired loans	(1)		13,420		12,835		14,958		15,643	(c)		29,690	(c)		41,213		64,926	(c)
Provision for acquired BBVAPR loan and lease losses	(1)		875		1,247		363		7,112	(c)		11,811	(c)		2,485		18,772	(c)
Provision (recapture) for acquired Eurobank loan and lease losses	(1)		306		665		139		2,152	(c)		2,541	(c)		1,110		4,534	(c)
Total provision for loan and lease losses, net			14,601		14,747		15,460		24,907	(c)		44,042	(c)		44,808		88,232	(c)
Net interest income after provision for loan and lease losses			67,676		62,841		58,534		48,606			36,436			189,051		142,427
Non-interest income:
Banking service revenues			10,797		11,144		10,463		8,461	(a)		9,923	(e)		32,404		31,007
Wealth management revenues			6,407		6,262		6,019		7,043			6,016			18,688		18,747
Mortgage banking activities			1,242		988		1,757		1,230			1,274			3,987		2,820
Total banking and financial service revenues			18,446		18,394		18,239		16,734			17,213			55,079		52,574
FDIC shared-loss benefit (expense), net			-		-		-		-			-			-		1,403	(g)
Other gains, net			174		309		275		81			699	(j)		758		7,895	(f)
Total non-interest income, net			18,620		18,703		18,514		16,815			17,912			55,837		61,872
Non-interest expense:
Compensation and employee benefits			18,495		18,099		20,608		20,205			19,882			57,202		59,546
Rent and occupancy costs			8,388		9,166		7,768		8,546			8,276			25,322		24,011
Net loss on sale of foreclosed real estate and other repossessed assets			1,210		392		1,226		126			1,395			2,828		4,508
General and administrative expenses			20,112		22,746		20,100		16,350	(a)(b)		19,202			62,958		60,347
Total operating expenses			48,205		50,403		49,702		45,227			48,755			148,310		148,412
Credit related expenses			2,736		1,897		2,419		1,435			1,714			7,052		6,557
Total non-interest expense			50,941		52,300		52,121		46,662			50,469			155,362		154,969
Income before income taxes			35,355		29,244		24,927		18,759			3,879			89,526		49,330
Income tax expense			12,255		9,595		8,010		1,686			560			29,860		13,757
Net income			23,100		19,649		16,917		17,073			3,319	(c)		59,666		35,573	(c)
Less:  dividends on preferred stock
Convertible preferred stock			(1,838)		(1,837)		(1,838)		(1,838)			(1,838)			(5,513)		(5,513)
Other preferred stock			(1,628)		(1,628)		(1,627)		(1,627)			(1,627)			(4,883)		(4,883)
Net income (loss) available to common shareholders		$	19,634	$	16,184	$	13,452	$	13,608		$	(146)	(c)	$	49,270	$	25,177	(c)
(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 reversed $1.4 million expenses as a result of the settlement of regulatory and legal contingencies at a lower amount estimated.
(c) 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 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.																		+
(d) 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.
(e) 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.
(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.
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OFG Bancorp (NYSE: OFG)
Table 3: Consolidated Statements of Financial Condition
	September 30,		June 30,			March 31,			December 31,			September 30,
(Dollars in thousands) (unaudited)	2018		2018			2018			2017			2017
Cash and cash equivalents	$	546,780	$	378,365		$	365,388		$	488,233		$	723,756
Investments:
Trading securities		405		418			293			191			284
Investment securities available-for-sale, at fair value, with amortized cost of $872,895
(June 30, 2018 - $890,308; March 31, 2018 - $815,970; December 31, 2017 - $648,799;
September 30, 2017 - $611,936)
Mortgage-backed securities		834,538		855,686			784,972			629,124			596,222
Other investment securities		14,014		16,655			16,669			16,673			17,201
Total investment securities available-for-sale		848,552		872,341			801,641			645,797			613,423
Mortgage-backed securities held-to-maturity, at amortized cost, with fair value of $425,066
(June 30, 2018 - $447,947; March 31, 2018 - $467,980; December 31, 2017 - $497,681
September 30, 2017 - $525,830)		444,679		465,427			485,143			506,064			530,178
Federal Home Loan Bank (FHLB) stock, at cost		12,461		14,919			11,499			13,995			14,016
Other investments		3		3			3			3			3
Total investments		1,306,100		1,353,108			1,298,579			1,166,050			1,157,904
Loans, net		4,352,980		4,315,866			4,133,429			4,056,329			3,964,572
Other assets:
Derivative assets		1,265		1,100			898			771			809
Prepaid expenses		13,461		11,127			7,625			9,734			13,070
Deferred tax asset, net		122,934		125,141			128,270			127,421			126,041
Foreclosed real estate and repossessed properties		42,014		46,035			45,396			47,721			51,104
Premises and equipment, net		67,762		66,174			67,163			67,860			67,994
Goodwill		86,069		86,069			86,069			86,069			86,069
Accounts receivable and other assets		117,309		118,577			114,304			138,865	(d)		96,898
Total assets	$	6,656,674	$	6,501,562		$	6,247,121		$	6,189,053		$	6,288,217
Deposits:
Demand deposits	$	2,304,067	$	2,176,935		$	2,117,857		$	2,039,126		$	1,925,721
Savings accounts		1,216,190		1,219,159			1,228,646			1,204,514			1,311,515
Time deposits		1,037,858		1,022,682			1,012,329			1,037,310			1,053,568
Brokered deposits		530,878		461,425			474,596			518,532			535,600
Total deposits		5,088,993		4,880,201			4,833,428			4,799,482			4,826,404
Borrowings:
Securities sold under agreements to repurchase		378,237		387,770	(b)		273,926	(b)		192,869	(c)		283,080
Advances from FHLB and other borrowings		73,723		128,413	(a)		44,328			99,796			100,091
Subordinated capital notes		36,083		36,083			36,083			36,083			36,083
Total borrowings		488,043		552,266			354,337			328,748			419,254
Other liabilities:
Derivative liabilities		622		679			752			1,281			1,677
Acceptances outstanding		28,682		30,578			25,869			27,644			16,486
Accrued expenses and other liabilities		80,448		80,019			85,886			86,791			86,766
Total liabilities		5,686,788		5,543,743			5,300,272			5,243,946			5,350,587
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		542,078		541,734			541,404			541,600			541,302
Legal surplus		87,563		85,249			83,138			81,454			79,795
Retained earnings		236,120		221,441			210,008			200,878			191,567
Treasury stock, at cost		(103,706)		(103,969)			(104,142)			(104,502)			(104,502)
Accumulated other comprehensive (loss) income, net		(20,795)		(15,262)			(12,185)			(2,949)			842
Total stockholders' equity		969,886		957,819			946,849			945,107			937,630
Total liabilities and stockholders' equity	$	6,656,674	$	6,501,562		$	6,247,121		$	6,189,053		$	6,288,217
(a) During Q2 2018, the Company received from the Federal Home Loan Bank of New York $70 million of advances.
(b) During Q2 2018 and Q1 2018, the Company bought $197 million and $91 million, respectively,  of repurchase agreements to finance the investment securities purchases.
(c) During Q4 2017, the Company made an unwinding of $80 million repurchase agreements at no cost.
(d) 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.
4

OFG Bancorp (NYSE: OFG)
Table 4: Information on Loan Portfolio and Production
		September 30,		June 30,		March 31,		December 31,			September 30,
(Dollars in thousands) (unaudited)		2018		2018		2018		2017			2017
Non-acquired loans held for investment:
Mortgage		$	667,224	$	678,259	$	682,564	$	683,607		$	694,476
Commercial			1,540,027		1,507,368		1,346,404		1,307,261			1,245,711
Consumer			345,399		339,341		334,865		330,039			316,357
Auto			1,084,912		1,014,664		957,197		883,985			831,437
			3,637,562		3,539,632		3,321,030		3,204,892			3,087,981
Less:  Allowance for loan and lease losses			(95,236)		(94,218)		(96,832)		(92,718)	(a)		(87,541)	(a)
			3,542,326		3,445,414		3,224,198		3,112,174			3,000,440
Deferred loan costs, net			7,556		7,028		7,125		6,695			6,592
Total non-acquired loans held for investment, net			3,549,882		3,452,442		3,231,323		3,118,869			3,007,032
Acquired loans:	(1)
BBVAPR
Accounted for under ASC 310-20
Commercial			2,778		2,909		4,222		4,380			4,612
Consumer			24,914		25,736		27,235		28,915			29,464
Auto			7,494		11,283		16,171		21,969			26,562
			35,186		39,928		47,628		55,264			60,638
Less:  Allowance for loan and lease losses			(2,350)		(2,726)		(3,184)		(3,862)	(a)		(3,363)	(a)
			32,836		37,202		44,444		51,402			57,275
Accounted for under ASC 310-30
Mortgage			503,861		516,934		526,089		532,053			532,948
Commercial			190,178		223,853		230,988		243,092			244,359
Consumer			95		495		932		1,431			1,598
Auto			20,363		26,937		35,006		43,696			49,258
			714,497		768,219		793,015		820,272			828,163
Less:  Allowance for loan and lease losses			(43,875)		(44,176)		(43,166)		(45,755)	(a)		(40,110)	(a)
			670,622		724,043		749,849		774,517			788,053
Total Acquired BBVAPR loans, net			703,458		761,245		794,293		825,919			845,328
Eurobank
Accounted for under ASC 310-30
Mortgage			64,785		65,637		69,328		69,538			68,996
Commercial			49,262		49,706		52,418		53,793			53,028
Consumer			895		935		972		1,112			1,220
			114,942		116,278		122,718		124,443			123,244
Less:  Allowance for loan and lease losses			(24,281)		(24,314)		(25,410)		(25,174)	(a)		(23,146)	(a)
Total Acquired Eurobank loans, net			90,661		91,964		97,308		99,269			100,098
Total acquired loans, net			794,119		853,209		891,601		925,188			945,426
Total loans held for investment			4,344,001		4,305,651		4,122,924		4,044,057			3,952,458
Mortgage loans held for sale			8,979		10,215		10,505		12,272			12,114
Total loans, net		$	4,352,980	$	4,315,866	$	4,133,429	$	4,056,329		$	3,964,572
Loan Portfolio Summary:
Loans held for investment:
Mortgage		$	1,235,870	$	1,260,830	$	1,277,981	$	1,285,198		$	1,296,420
Commercial			1,782,245		1,783,836		1,634,032		1,608,526			1,547,710
Consumer			371,303		366,507		364,004		361,497			348,639
Auto			1,112,769		1,052,884		1,008,374		949,650			907,257
			4,502,187		4,464,057		4,284,391		4,204,871			4,100,026
Less:  Allowance for loan and lease losses			(165,742)		(165,434)		(168,592)		(167,509)	(a)		(154,160)	(a)
			4,336,445		4,298,623		4,115,799		4,037,362			3,945,866
Deferred loan costs, net			7,556		7,028		7,125		6,695			6,592
Total loans held for investment, net			4,344,001		4,305,651		4,122,924		4,044,057			3,952,458
Mortgage loans held for sale			8,979		10,215		10,505		12,272			12,114
Total loans, net		$	4,352,980	$	4,315,866	$	4,133,429	$	4,056,329		$	3,964,572
		2018		2018		2018		2017			2017
(Dollars in thousands) (unaudited)		Q3		Q2		Q1		Q4			Q3
Quarterly loan production	(13)
Mortgage		$	27,869	$	31,808	$	26,645	$	15,892		$	32,559
Commercial			105,346		127,200		42,783		102,083			46,180
OFG USA			37,356		99,666		74,361		25,070			-
Consumer			42,995		42,317		37,502		23,059			33,741
Auto and Leasing			140,390		131,103		128,130		87,551			78,313
Total		$	353,956	$	432,094	$	309,421	$	253,655		$	190,793
(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.
5

OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin
	2018 Q3						2018 Q2						2018 Q1						2017 Q4						2017 Q3
			Interest						Interest						Interest						Interest						Interest
	Average		Income/		Yield/		Average		Income/		Yield/		Average		Income/		Yield/		Average		Income/		Yield/		Average		Income/		Yield/
(Dollars in thousands) (unaudited)	Balance		Expense		Rate		Balance		Expense		Rate		Balance		Expense		Rate		Balance		Expense		Rate		Balance		Expense		Rate
Interest earning assets:
Cash equivalents	$	325,058	$	1,676	2.05	%	$	293,431	$	1,242	1.70	%	$	328,214	$	1,207	1.49	%	$	493,354	$	1,516	1.22	%	$	426,197	$	1,304	1.21	%
Investment securities		1,327,180		8,445	2.52	%		1,330,138		8,335	2.51	%		1,239,794		7,350	2.40	%		1,160,812		6,593	2.25	%		1,170,714		6,584	2.23	%
Loans
Non-acquired loans		3,557,252		66,843	7.45	%		3,410,044		61,183	7.20	%		3,244,593		56,782	7.10	%		3,111,849		56,183	7.16	%		3,062,739		58,939	7.63	%
Acquired BBVAPR loans		765,705		13,688	7.09	%		806,830		13,880	6.90	%		841,638		14,490	6.98	%		869,269		15,310	6.99	%		893,596		19,189	8.52	%
Acquired Eurobank loans		91,626		3,485	15.09	%		93,332		3,366	14.47	%		97,544		3,341	13.89	%		100,310		3,573	14.13	%		105,707		4,339	16.29	%
Total loans		4,414,583		84,016	7.55	%		4,310,206		78,429	7.30	%		4,183,775		74,613	7.23	%		4,081,427		75,066	7.30	%		4,062,042		82,467	8.05	%
Total interest-earning assets	$	6,066,821	$	94,137	6.16	%	$	5,933,775	$	88,006	5.95	%	$	5,751,783	$	83,170	5.86	%	$	5,735,593	$	83,175	5.75	%	$	5,658,953	$	90,355	6.33	%
Interest bearing liabilities:
Deposits
NOW accounts	$	1,096,023	$	1,196	0.43	%	$	1,052,465	$	966	0.37	%	$	1,059,129	$	898	0.34	%	$	1,040,153	$	922	0.35	%	$	1,024,480	$	880	0.34	%
Savings accounts		1,211,693		1,571	0.51	%		1,230,741		1,555	0.51	%		1,206,100		1,497	0.50	%		1,224,815		1,530	0.50	%		1,142,338		1,426	0.50	%
Time deposits		1,027,124		2,896	1.12	%		1,012,330		2,781	1.10	%		1,024,740		2,802	1.11	%		1,046,191		2,932	1.11	%		1,052,910		2,902	1.09	%
Brokered deposits		519,502		2,727	2.08	%		470,775		2,134	1.82	%		466,638		1,886	1.64	%		524,198		2,079	1.57	%		554,650		2,163	1.55	%
		3,854,342		8,390	0.86	%		3,766,311		7,436	0.79	%		3,756,607		7,083	0.76	%		3,835,357		7,463	0.77	%		3,774,378		7,371	0.77	%
Non-interest bearing deposit accounts		1,079,833		-	-			1,082,145		-	-			1,018,789		-	-			937,328		-	-			835,255		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		215	-			-		215	-			-		215	-			-		230	-			-		231	-
Total deposits		4,934,175		8,605	0.69	%		4,848,456		7,651	0.63	%		4,775,396		7,298	0.62	%		4,772,685		7,693	0.64	%		4,609,633		7,602	0.65	%
Borrowings
Securities sold under agreements to repurchase		390,225		2,242	2.28	%		353,313		1,843	2.09	%		251,582		1,076	1.73	%		236,522		963	1.62	%		325,201		1,281	1.56	%
Advances from FHLB and other borrowings		76,960		517	2.67	%		73,218		448	2.45	%		64,128		374	2.37	%		101,454		600	2.35	2		100,751		596	2.35	%
Subordinated capital notes		36,083		496	5.45	%		36,083		476	5.29	%		36,083		428	4.81	%		36,083		406	4.46	%		36,083		398	4.38	%
��     Total borrowings		503,268		3,255	2.57	%		462,614		2,767	2.40	%		351,793		1,878	2.17	%		374,059		1,969	2.09	%		462,035		2,275	1.95	%
Total interest-bearing liabilities	$	5,437,443	$	11,860	0.87	%	$	5,311,070	$	10,418	0.79	%	$	5,127,189	$	9,176	0.73	%	$	5,146,744	$	9,662	0.74	%	$	5,071,668	$	9,877	0.77	%
Interest rate spread			$	82,277	5.29	%			$	77,588	5.16	%			$	73,994	5.13	%			$	73,513	5.01	%			$	80,478	5.56	%
Net interest margin					5.38	%					5.24	%					5.22	%					5.08	%					5.64	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	1,143					$	291					$	119					$	199					$	3,220
Acquired Eurobank loans				829						533						389						526						523
			$	1,972					$	824					$	508					$	725					$	3,743
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	6,066,821	$	92,165	6.03	%	$	5,933,775	$	87,182	5.89	%	$	5,751,783	$	82,662	5.83	%	$	5,735,593	$	82,450	5.70	%	$	5,658,953	$	86,612	6.07	%
Interest rate spread			$	80,305	5.16	%			$	76,764	5.10	%			$	73,486	5.10	%			$	72,788	4.96	%			$	76,735	5.30	%
Net interest margin					5.25	%					5.19	%					5.18	%					5.03	%					5.38	%
6

OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin (Continued)
	2018 YTD						2017 YTD
			Interest						Interest
	Average		Income/		Yield/		Average		Income/		Yield/
(Dollars in thousands) (unaudited)	Balance		Expense		Rate		Balance		Expense		Rate
Interest earning assets:
Cash equivalents	$	312,665	$	4,126	1.76	%	$	417,892	$	3,105	0.99	%
Investment securities		1,299,357		24,131	2.48	%		1,287,919		22,014	2.29	%
Loans
Non-acquired loans		3,396,945		184,811	7.27	%		3,043,249		164,407	7.22	%
Acquired BBVAPR loans		814,141		42,054	6.91	%		1,007,942		55,961	7.42	%
Acquired Eurobank loans		94,933		10,192	14.35	%		118,857		16,986	19.11	%
Total loans		4,306,019		237,057	7.36	%		4,170,048		237,354	7.61	%
Total interest-earning assets	$	5,918,041	$	265,314	5.99	%	$	5,875,859	$	262,473	5.97	%
Interest bearing liabilities:
Deposits
NOW accounts	$	1,069,341	$	3,064	0.38	%	$	1,065,419	$	2,972	0.37	%
Savings accounts		1,216,198		4,623	0.51	%		1,152,597		4,392	0.51	%
Time deposits		1,021,407		8,475	1.11	%		1,036,623		8,420	1.09	%
Brokered deposits		485,832		6,748	1.86	%		568,207		6,132	1.44	%
		3,792,778		22,910	0.81	%		3,822,846		21,916	0.77	%
Non-interest bearing deposit accounts		1,062,582		-	-			834,325		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		644	-			-		690	-
Total deposits		4,855,360		23,554	0.65	%		4,657,171		22,606	0.65	%
Borrowings
Securities sold under agreements to repurchase		332,215		5,160	2.08	%		456,523		6,260	1.83	%
Advances from FHLB and other borrowings		71,512		1,339	2.50	%		103,807		1,799	2.32	%
Subordinated capital notes		36,083		1,402	5.19	%		36,083		1,149	4.26	%
Total borrowings		439,810		7,901	2.40	%		596,413		9,208	2.06	%
Total interest-bearing liabilities	$	5,295,170	$	31,455	0.79	%	$	5,253,584	$	31,814	0.81	%
Interest rate spread			$	233,859	5.20	%			$	230,659	5.16	%
Net interest margin					5.28	%					5.25	%
ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	1,553						3,765
Acquired Eurobank loans				1,752						2,193
			$	3,305					$	5,958
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	5,918,041	$	262,009	5.92	%	$	5,875,859	$	256,515	5.84	%
Interest rate spread			$	230,554	5.13	%			$	224,701	5.03	%
Net interest margin					5.21	%					5.11	%
7

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (1)
	2018		2018		2018		2017		2017
(Dollars in thousands) (unaudited)	Q3		Q2		Q1		Q4		Q3
Net Charge-offs
Mortgage:
Charge-offs	$	1,429	$	1,328	$	968	$	1,248	$	834
Recoveries		(139)		(466)		(314)		(126)		(341)
Total mortgage		1,290		862		654		1,122		493
Commercial:
Charge-offs		3,249		1,998		1,149		1,260		727
Recoveries		(119)		(227)		(182)		(401)		(654)
Total commercial		3,130		1,771		967		859		73
Consumer:
Charge-offs		4,591		4,588		4,258		1,849		4,424
Recoveries		(278)		(240)		(240)		(96)		(168)
Total consumer		4,313		4,348		4,018		1,753		4,256
Auto and Leasing:
Charge-offs		9,111		13,748		8,982		9,182		9,387
Recoveries		(5,442)		(5,280)		(3,777)		(2,450)		(2,394)
Total auto and leasing		3,669		8,468		5,205		6,732		6,993
Total	$	12,402	$	15,449	$	10,844	$	10,466	$	11,815
Net Charge-off Rates
Mortgage		0.77%		0.51%		0.38%		0.65%		0.28%
Commercial		0.83%		0.50%		0.30%		0.27%		0.02%
Consumer		5.35%		5.42%		5.07%		2.30%		5.65%
Auto and Leasing		1.40%		3.39%		2.23%		3.13%		3.37%
Total		1.39%		1.81%		1.34%		1.35%		1.54%
Average Loans Held For Investment
Mortgage	$	672,526	$	679,133	$	683,398	$	688,312	$	692,782
Commercial		1,513,556		1,411,177		1,310,444		1,257,619		1,239,390
Consumer		322,553		320,687		317,295		304,760		301,121
Auto and Leasing		1,048,617		999,047		933,456		861,158		829,446
Total	$	3,557,252	$	3,410,044	$	3,244,593	$	3,111,849	$	3,062,739
8

OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (Continued) (1)
		2018		2018		2018		2017			2017
(Dollars in thousands) (unaudited)		Q3		Q2		Q1		Q4			Q3
Early Delinquency (30 - 89 days past due)
Mortgage		$	25,285	$	26,132	$	29,190	$	17,315		$	35,273
Commercial			6,871		9,699		8,126		2,620			2,727
Consumer			6,661		7,063		7,478		6,149			7,504
Auto and Leasing			81,828		65,823		61,558		32,159			71,606
Total		$	120,645	$	108,717	$	106,352	$	58,243	(a)	$	117,110
Early Delinquency Rates (30 - 89 days past due)
Mortgage			3.79%		3.85%		4.28%		2.53%			5.08%
Commercial			0.45%		0.64%		0.60%		0.20%			0.22%
Consumer			1.93%		2.08%		2.23%		1.86%			2.37%
Auto and Leasing			7.54%		6.49%		6.43%		3.64%			8.61%
Total			3.32%		3.07%		3.20%		1.82%	(a)		3.79%
Total Delinquency (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation		$	83,966	$	83,707	$	89,252	$	76,542		$	88,936
GNMA's buy-back option program			13,325		14,521		12,515		8,268			12,999
Total mortgage			97,291		98,228		101,767		84,810			101,935
Commercial			25,191		26,269		21,544		18,509			18,149
Consumer			8,530		9,095		9,129		8,028			8,847
Auto and Leasing			93,976		76,924		75,152		36,391			82,437
Total		$	224,988	$	210,516	$	207,592	$	147,738	(a)	$	211,368
Total Delinquency Rates (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation			12.58%		12.34%		13.08%		11.20%			12.81%
GNMA's buy-back option program			2.00%		2.14%		1.83%		1.21%			1.87%
Total mortgage			14.58%		14.48%		14.91%		12.41%			14.68%
Commercial			1.64%		1.74%		1.60%		1.42%			1.46%
Consumer			2.47%		2.68%		2.73%		2.43%			2.80%
Auto and Leasing			8.66%		7.58%		7.85%		4.12%			9.92%
Total			6.19%		5.95%		6.25%		4.61%	(a)		6.84%
Nonperforming Assets	(14)
Mortgage		$	67,236	$	67,002	$	63,866	$	64,085		$	59,667
Commercial			42,807		47,451		47,044		35,253			21,701
Consumer			3,116		2,826		2,263		2,572			2,445
Auto and Leasing			12,185		11,141		13,594		4,232			11,811
Total nonperforming loans			125,344		128,420		126,767		106,142			95,624
Foreclosed real estate			10,295		12,186		13,365		14,282			14,677
Other repossessed assets			4,146		5,483		5,082		3,172			3,635
Total nonperforming assets		$	139,785	$	146,089	$	145,214	$	123,596		$	113,936
Nonperforming Loan Rates
Mortgage			10.08%		9.88%		9.36%		9.37%			8.59%
Commercial			2.78%		3.15%		3.49%		2.70%			1.74%
Consumer			0.90%		0.83%		0.68%		0.78%			0.77%
Auto and Leasing			1.12%		1.10%		1.42%		0.48%			1.42%
Total loans			3.45%		3.63%		3.82%		3.31%			3.10%
(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 certain loans. 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 September 30, 2018
(Dollars in thousands) (unaudited)	Mortgage		Commercial		Consumer		Auto		Total
Non-acquired loans
Balance at beginning of period	$	19,323	$	31,480	$	16,192	$	27,223	$	94,218
(Recapture) provision for loan and lease losses, net		1,512		4,141		3,836		3,931		13,420
Charge-offs		(1,429)		(3,249)		(4,591)		(9,111)		(18,380)
Recoveries		139		119		278		5,442		5,978
Balance at end of period	$	19,545	$	32,491	$	15,715	$	27,485	$	95,236
Allowance coverage ratio		2.93%		2.11%		4.55%		2.53%		2.62%
Acquired loans
Acquired BBVAPR loans:
Acquired loans accounted for under ASC 310-20
Balance at beginning of period			$	86	$	2,357	$	283	$	2,726
(Recapture) provision for loan and lease losses, net				(71)		326		(187)		68
Charge-offs				(1)		(638)		(72)		(711)
Recoveries				3		95		169		267
Balance at end of period			$	17	$	2,140	$	193	$	2,350
Acquired loans accounted for under ASC 310-30
Balance at beginning of period	$	14,567	$	23,019	$	18	$	6,572	$	44,176
Provision (recapture) for loan and lease losses, net		746		61		-		-		807
Allowance de-recognition		(55)		(824)		-		(229)		(1,108)
Balance at end of period	$	15,258	$	22,256	$	18	$	6,343	$	43,875
Acquired Eurobank loans:
Balance at beginning of period	$	15,170	$	9,140	$	5	$	-	$	24,315
Provision (recapture) for loan and lease losses, net		231		75		-		-		306
Allowance de-recognition		(246)		(94)		-		-		(340)
Balance at end of period	$	15,155	$	9,121	$	5	$	-	$	24,281
Total acquired loans
Balance at beginning of period	$	29,737	$	32,245	$	2,380	$	6,855	$	71,217
Provision (recapture) for loan and lease losses, net		977		65		326		(187)		1,181
Charge-offs		-		(1)		(638)		(72)		(711)
Recoveries		-		3		95		169		267
Allowance de-recognition		(301)		(918)		-		(229)		(1,448)
Balance at end of period	$	30,413	$	31,394	$	2,163	$	6,536	$	70,506
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 September 30, 2018
(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	$	243,903	$	36,747	$	5,774	$	1,071	$	497	$	287,992
Accretion		(6,722)		(2,276)		(1,701)		(466)		(88)		(11,253)
Change in expected cash flows		-		500		834		3		25		1,362
Transfers (to) from non-accretable discount		1,456		304		(1,444)		3		(26)		293
Balance at end of period	$	238,637	$	35,275	$	3,463	$	611	$	408	$	278,394
Non-Accretable Discount
Balance at beginning of period	$	296,137	$	3,218	$	7,925	$	23,645	$	19,332	$	350,257
Change in actual and expected cash flows		(1,860)		(291)		(834)		181		13		(2,791)
Transfers from (to) accretable yield		(1,456)		(304)		1,444		(3)		26		(293)
Balance at end of period	$	292,821	$	2,623	$	8,535	$	23,823	$	19,371	$	347,173
					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	$	39,269	$	4,585	$	1,224	$	-	$	-	$	45,078
Accretion		(1,440)		(1,883)		-		(7)		(155)		(3,485)
Change in expected cash flows		6		2,063		-		(143)		283		2,209
Transfers (to) from non-accretable discount		188		(412)		(525)		150		(128)		(727)
Balance at end of period	$	38,023	$	4,353	$	699	$	-	$	-	$	43,075
Non-Accretable Discount
Balance at beginning of period	$	2,638	$	-	$	981	$	-	$	200	$	3,819
Change in actual and expected cash flows		63		(412)		-		150		(160)		(359)
Transfers from (to) accretable yield		(188)		412		525		(150)		128		727
Balance at end of period	$	2,513	$	-	$	1,506	$	-	$	168	$	4,187
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.
	2018		2018		2018		2017		2017
(Dollars in thousands) (unaudited)	Q3		Q2		Q1		Q4		Q3
Stockholders' Equity to Non-GAAP Tangible Common Equity
Total stockholders' equity	$	969,886	$	957,819	$	946,849	$	945,107	$	937,630
Less:  Intangible assets		(89,767)		(90,097)		(90,426)		(90,756)		(91,124)
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	$	714,249	$	701,852	$	690,553	$	688,481	$	680,636
Common stock outstanding at end of period		44,006		43,983		43,968		43,947		43,947
Tangible book value (Non-GAAP)	$	16.23	$	15.96	$	15.71	$	15.67	$	15.49
Total Assets to Tangible Assets
Total assets	$	6,656,674	$	6,501,562	$	6,247,121	$	6,189,053	$	6,288,217
Less:  Intangible assets		(89,767)		(90,097)		(90,426)		(90,756)		(91,124)
Tangible assets (Non-GAAP)	$	6,566,907	$	6,411,465	$	6,156,695	$	6,098,297	$	6,197,093
Non-GAAP TCE Ratio
Tangible common equity	$	714,249	$	701,852	$	690,553	$	688,481	$	680,636
Tangible assets		6,566,907		6,411,465		6,156,695		6,098,297		6,197,093
TCE ratio		10.88%		10.95%		11.22%		11.29%		10.98%
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders' equity	$	973,838	$	959,777	$	952,151	$	943,823	$	947,404
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	$	807,968	$	793,907	$	786,281	$	777,953	$	781,534
Less:  Average intangible assets		(89,933)		(90,272)		(90,624)		(90,951)		(91,331)
Average tangible common equity	$	718,035	$	703,635	$	695,657	$	687,002	$	690,203
Adjusted Metrics for Hurricanes Irma and Maria - Reconciliation to GAAP Financial Measures
Net income							$	17,073		3,319
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
Less:  dividends on preferred stock								(3,465)		(3,465)
Adjusted net income available to common shareholders							$	16,906		18,816
Plus:  Effect of assumed conversion of the convertible preferred stock								1,838		1,838
							$	18,744		20,654
Average common shares outstanding and equivalents								51,104		51,102
Adjusted earnings per common share - diluted							$	0.37		0.40
Adjusted net income							$	20,371		22,281
Adjusted average assets							$	6,193,619		6,048,021
Adjusted return on average assets								1.32%		1.47%
Adjusted net income available to common shareholders							$	16,906		18,816
Adjusted average tangible common stockholders' equity							$	687,221		690,422
Adjusted return on average tangible common stockholders' equity								9.84%		10.90%
12

OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures (Continued)
		BASEL III
		Standardized
		2018		2018		2018		2017		2017
(Dollars in thousands) (unaudited)		Q3		Q2		Q1		Q4		Q3
Regulatory Capital Metrics
Common equity Tier 1 capital		$	690,937	$	669,922	$	652,013	$	644,804	$	633,401
Tier 1 capital			891,807		870,792		852,883		842,133		830,640
Total risk-based capital	(15)		953,543		931,606		910,828		899,258		885,523
Risk-weighted assets			4,806,348		4,737,529		4,489,130		4,420,667		4,252,605
Regulatory Capital Ratios
Common equity Tier 1 capital ratio	(16)		14.38%		14.14%		14.52%		14.59%		14.89%
Tier 1 risk-based capital ratio	(17)		18.55%		18.38%		19.00%		19.05%		19.53%
Total risk-based capital ratio	(18)		19.84%		19.67%		20.29%		20.34%		20.82%
Leverage ratio	(19)		13.93%		13.92%		14.07%		13.92%		14.07%
Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach
Total stockholders' equity		$	969,886	$	957,819	$	946,849	$	945,107	$	937,630
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			21,187		15,518		12,274		2,638		(1,371)
Unrealized losses on cash flow hedges, net of income tax			(392)		(256)		(89)		311		529
			824,811		807,211		793,164		782,186		770,918
Less:    Disallowed goodwill			(86,069)		(86,069)		(86,069)		(86,069)		(86,069)
Disallowed other intangible assets, net	(20)		(2,256)		(2,457)		(2,657)		(2,287)		(2,466)
Disallowed deferred tax assets, net	(20)		(45,549)		(48,763)		(52,425)		(49,026)		(48,982)
Common equity Tier 1 capital			690,937		669,922		652,013		644,804		633,401
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)
Tier 1 capital			891,807		870,792		852,883		842,133		830,640
Plus tier 2 capital:  Qualifying allowance for loan and lease losses			61,736		60,814		57,945		57,125		54,883
Total risk-based capital		$	953,543	$	931,606	$	910,828	$	899,258	$	885,523
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 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 financial service 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 2018 and 2017.
(21)	Pre-provision net revenues is a non-GAAP measure calculated based on net interest income plus total non-interest income, net, less total non-interest expenses for the period.
14