OFG Bancorp 8K Reports 3Q19 Results | OFG 21 Oct 19

Exhibit 99

OFG Bancorp Reports 3Q19 Results

SAN JUAN, Puerto Rico, October 21, 2019 – OFG Bancorp (NYSE: OFG) today reported results for the third quarter ended September 30, 2019.

Highlights 3Q19 vs. 3Q18

• Net income available to shareholders of $5.8 million, or $0.11 per share fully diluted, reflects the impact of several strategic transactions, compared to $19.6 million, or $0.42 per share fully diluted, in 3Q18. Book value per common share grew 3.1% to $18.84. Tangible Book Value per common share expanded 5.4% to $17.11.

• 3Q19 included $40.5 million pre-tax from items that negatively affected results, primarily due to the decision to sell mostly non-performing loans, partially offset by $13.0 million pre-tax from items that benefited results, such as the sale of available-for-sale mortgage-backed securities (MBS) and of fully charged-off loans, and the adjustment to the qualitative factors of the allowance for loan and lease losses.

• Excluding the above items, 3Q19 adjusted net income available to shareholders was $24.9 million, or $0.48 per share fully diluted.*

• Loans at September 30, 2019 increased 1.2% to $4.41 billion. Average core deposits rose 3.4% to $4.56 billion, while non-core funding was reduced 41.7% by quarter end. New loan origination of $291.4 million reflected Oriental Bank’s success in targeting small business customers and our growing consumer banking business. Net Interest Margin remained strong at 5.35%, total delinquency rate improved, and capital metrics continued to climb to new multi-year highs.

Conference Call

A conference call to discuss 3Q19 results, outlook and related matters will be held today at 10:00 AM Eastern Time. Phone (888) 562-3356 or (973) 582-2700. Use conference ID 619-9357. The call can also be accessed live on www.ofgbancorp.com. Webcast replay will be available shortly thereafter.

CEO Comment

“Our core operations continue to deliver excellent results,” said José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board.

“During the quarter, we took advantage of market conditions and sold MBS and fully charged off loans at a profit, and we also decided to sell a good portion of our remaining non-performing loans.

This further strengthens our liquidity and balance sheet to continue our growth strategy and prefunds our $560 million acquisition of Scotiabank’s operations in PR and USVI.

“Our strategies are proving highly effective in capturing the positive economic shift taking place in Puerto Rico. Small business, auto and consumer loan production; core deposit growth, credit quality, and capital; and number of net new clients confirm the success of our customer focused approach to banking – Fácil, Rápido, Hecho. As a result, we generated a 14% year over year increase in adjusted earnings per share.

“With our NPL sales, we reduced 3Q19 non-performing loans 40% year over year, to 2% of originated loans, which will enable us to free up resources, reduce NPL related expenses, and increase operating flexibility. Combined with the sale of MBS, we have close to $1 billion in cash to fund our growth plans, including our acquisition of Scotiabank’s PR and USVI operations. The MBS sales also enabled us to reduce high cost brokered CDs and borrowings.

“Looking ahead, Oriental will further consolidate its position as the premier retail bank on the island. Upon closing the Scotiabank acquisition, we become the second largest bank in Puerto Rico in core deposits, branches, automated and interactive teller machines, mortgage servicing, and insurance brokerage, and the third largest bank in US Virgin Islands.

“As always, thanks to our team for their commitment and dedication, and to all our retail and commercial customers for their support and loyalty.”

3Q19 Items

• The following resulted in a net $32.0 million increase in the provision for loan losses:

• Increase of $39.0 million primarily from deciding to sell $95.0 million unpaid principal balance in non-performing commercial and mortgage loans, both acquired and originated. These are expected to be sold in 4Q19.

• Decrease of $2.4 million from the proceeds of the sale of $26.0 million of previously charged off auto and consumer loans.

• Decrease of $4.5 million from the adjustment to qualitative factors of the allowance for loan and lease losses, reflecting sustained favorable macroeconomic conditions in Puerto Rico.

• The sale of $322.0 million of low-yielding MBS resulted in a $3.5 million pre-tax gain in other income, and the continued reduction of higher cost brokered CDs and repurchase agreement funding.

• Non-interest expenses were reduced $1.0 million as a result of three items discussed in the “Income Statement” section below.

Current Expected Credit Losses (CECL)

We have substantially completed the model development process for CECL implementation.

• For the originated book, which accounts for 84% of total gross loans, we are estimating an increase in the current allowance of around 16% to 23%. This will be phased-in through regulatory capital in 2020 through 2022.

• For the acquired book, which represents 16% of total gross loans, we expect its allowance will be enough to cover CECL implementation. Any adjustment will be made through the allowance and loan balances with no impact in capital.

The final impact of CECL will depend on the circumstances at the date of adoption such as asset quality, macro-economic conditions and economic perspective, and continued refinement in 4Q19.

Income Statement

Unless otherwise noted, the following compares data for the third quarter 2019 to the third quarter 2018.

• Interest Income fell $0.5 million, to $93.7 million. Continued originated loan growth (+7.2%) and higher yield (+11 basis points) was mostly offset by continued pay downs of acquired loans and 2Q19 and 3Q19 MBS sales. Interest income increased $5.9 million from originated loans and $2.4 million from cash equivalents, and declined $4.2 million from acquired loans and $4.6 million from investment securities.

• Interest expense increased 9.1% or $1.1 million to $12.9 million. Core deposit costs increased $2.4 million due to higher average balances excluding non-interest bearing deposits (+4.0%) and rate (+25 basis points). Brokered deposit costs fell $0.4 million due to lower average balances (-31.1%) and higher rate (+47 basis points). Borrowing costs fell $0.9 million due to lower average balances (-32.4%) and higher rate (+22 basis points).

• Net Interest Margin, excluding cost recoveries, increased 7 basis points to 5.33% from 5.26%. The increase reflected higher yield on originated loans (+11 basis points) and cash balances (+18 basis points); a higher proportion of originated loans and cash in interest-earning assets (76.8% compared to 64.9%); and the reduction in higher cost brokered CDs and borrowings, partially offset by the higher cost of core deposits.

• Total provision for Loan and Lease Losses increased $29.2 million, to $43.8 million, which includes the previously mentioned net $32.0 million increase in provision, and a decline of $2.8 million, reflecting improved asset quality.

• Total Banking and Wealth Management Revenues increased $0.1 million to $18.5 million due to higher wealth management and banking service revenues, partly offset by lower mortgage banking revenues.

• Total Non-Interest Expenses declined $0.2 million to $50.7 million, primarily reflecting three items: $1.5 million credit for FDIC insurance assessment, $1.0 million credit from Puerto Rico Treasury for employee retention after hurricane Maria, and $1.6 million in Scotiabank acquisition related expenses.

• Due to a higher proportion of exempt income, the Effective Tax Rate for the quarter was 12.0% compared to 34.7%. Estimated Effective Tax Rate for the year is 30.15%.

• Dividends on Preferred Stock declined 53.0% to $1.6 million from $3.5 million due to the 4Q18 conversion of Series C Preferred to common.

Balance Sheet

Unless otherwise noted, the following compares data at September 30, 2019 to September 30, 2018.

• Total Loans increased 1.2% or $54.2 million to $4.41 billion as originated loans increased 4.8%, or $172.1 million, and acquired loans declined 18.2%, or $144.4 million. Compared to June 30, 2019, total loans declined 1.5% or $67.3 million with originated loans down 0.6%, or $24.1 million, and acquired loans down 9.0%, or $64.1 million, both reflecting 2Q19 and 3Q19 loan sales.

• Loan Production totaled $291.4 million compared to $347.0 million in the year-ago quarter. Auto and consumer lending remained strong at $141.5 million and $48.3 million, respectively, while residential mortgage lending totaled $23.8 million. Commercial lending at $65.6 million reflected continued growth of small business customers, while OFG USA added $12.2 million in commercial lending.

• Cash and Cash Equivalents increased 76.1%, or $416.1 million, to $962.9 million. Compared to June 30, 2019, cash increased 42.1%, or $285.5 million. The increases reflect the sale of MBS, NPLs and fully charged off loans.

• Total Investments declined 59.4%, or $776.4 million, to $529.7 million. Compared to June 30, 2019, investments declined 39.2%, or $341.0 million. The decreases reflect sales of MBS in 2Q19 and 3Q19.

• Customer Deposits (excluding brokered) increased 0.7% or $31.6 million to $4.59 million. Compared to June 30, 2019, deposits increased 0.7% or $33.0 million. The increases reflect Oriental’s larger retail customer and funding base.

• Borrowings declined 37.3%, or $182.1 million, to $305.9 million. Compared to June 30, 2019, borrowings declined 14.3%, or $50.9 million. Brokered deposits declined 45.7%, or $242.5 million, to $288.4 million. Compared to June 30, 2019, brokered deposits declined 25.8%, or $100.0 million. The declines reflect the maturity of brokered CDs and repayment of repurchase agreement funding.

• Total stockholders’ equity increased 8.2% or $79.2 million to $1.05 billion. Compared to June 30, 2019, stockholders’ equity increased $4.2 million. The increases reflect growth of retained earnings and legal surplus and reduced other comprehensive loss.

Credit Quality

Unless otherwise noted, the following compares data on the originated loan portfolio at September 30, 2019 to September 30, 2018.

• Most credit quality metrics improved. Non-performing loan rate at 2.00% fell 145 basis points. Allowance for loan and lease losses declined 17.00%, to $79.1 million. As a percentage of loans, ALLL at 2.09% fell 53 basis points. The decrease in the NPL rate and ALLL reflects the previously mentioned sale and transfer to held-for-sale of NPLs.

• Early and total delinquency rates, at 3.64% and 5.39% were up 32 and down 80 basis points, respectively.

• Net Charge-Offs increased $22.0 million to $34.4 million. As a percentage of loans, the NCO rate increased to 3.57% from 1.38%. NCOs were affected by $15.9 million from the previously

mentioned increase in provision attributable the decision to sell certain non-performing loans. As a result, NCOs are expected to decline in 4Q19.

Capital Position

Capital continued to be significantly above regulatory requirements for a well-capitalized institution, with September 30, 2019 ratios improving across the board.

Financial Supplement & Conference Call Presentation

OFG’s Financial Supplement, with full financial tables for the quarter ended September 30, 2019, and 3Q19 Conference Call Presentation, 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, 9-2 and 10 in OFG’s above-mentioned Financial Supplement for reconciliation of GAAP to non-GAAP Measures and Calculations. OFG has attached to this news release Table 10: “Reconciliation of GAAP to Non-GAAP with adjustments to exclude the impact of significant events” for the quarters ended September 30, 2019 and June 30, 2019.

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) changes to the financial condition of 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 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; (vii) the pace and magnitude of Puerto Rico’s economic recovery; (viii) the potential impact of damages from future hurricanes and natural disasters in Puerto Rico; (ix) the fiscal and monetary policies of the federal government and its agencies; (x) changes in federal bank regulatory and supervisory policies, including required levels of capital; (xi) the relative strength or weakness of the commercial and consumer credit sectors and the real estate market in Puerto Rico; (xii) the performance of the stock and bond markets; (xiii) competition in the financial services industry; and (xiv) 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, 2018, 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 55^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. Visit us 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

a) During 2Q 2019 and 3Q 2019, the Company sold $350 million and $322 million available-for-sale mortgage-backed securities, respectively, and recognized a gain in the sale of $4.8 million and $3.5 million, respectively.

b) During 3Q 2019, the Company decided to sell mostly non-performing loans, which are expected to be sold during 4Q 2019, increasing the provision by $37.4 million. Originated loans that were transferred to held-for-sale amounted to $25.3 million at September 30, 2019, the remaining were purchased credit impaired loans.

c) During 2Q 2019, the Company decided to sell mostly non-performing mortgage loans increasing the provision by $8.8 million. Most of these loans were sold in 3Q 2019, increasing the provision by an additional $2.3 million.

d) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.

e) During 2Q 2019, the Company entered into an agreement with Scotiabank to acquire its Puerto Rico and US Virgin Islands operations, subject to customary closing conditions. During 2Q2019 and 3Q2019, $1.0 million and $1.6 million, respectively, were incurred in related expenses.

f) During 3Q 2019, the Company recognized an FDIC insurance assessment credit received amounting to $1.5 million.

g) During 3Q 2019, the Company received an additional $1 million credit from Puerto Rico Treasury for employee retention after hurricane Maria.

h) During 3Q 2019, the Company had a reduction in provision for loan losses of $4.5 million as a result of the adjustment to the qualitative factors, related to sustained favorable macroeconomic conditions in Puerto Rico.

i) Income tax effect reflects estimated income tax annual rate at September 30, 2019 and June 30, 2019 of 30.51% and 32.12%, respectively.


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, 2019 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:	Reconciliation of GAAP to Non-GAAP with adjustments to exclude the impact
		of quarter-specific items		14
	Table 11:	Notes to Financial Summary, Selected Metrics, Loans, and Consolidated
		Financial Statements (Tables 1-10)		15

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OFG Bancorp (NYSE: OFG)
Table 1: Financial and Statistical Summary - Consolidated
		2019			2019			2019		2018			2018		2019			2018
(Dollars in thousands, except per share data) (unaudited)		Q3			Q2			Q1		Q4			Q3		YTD			YTD
Earnings
Net interest income		$	80,710		$	81,085		$	81,789	$	82,035		$	82,277	$	243,584		$	233,859
Non-interest income, net (core)	(2)		18,542			18,074			17,553		19,260			18,446		54,169			55,079
Non-interest expense			50,727			51,452			52,152		51,719			50,941		154,331			155,362
Pre-provision net revenues	(21)		52,161			52,581			47,293		54,574			49,956		152,035			134,334
Provision for loan and lease losses			43,770	(a)(b)(c)		17,705	(c)		12,249		11,300	(f)		14,601		73,724	(a)(b)(c)		44,808
Net income before income taxes			8,391			34,876			35,044		43,274			35,355		78,311			89,526
Income tax expense			1,008			10,897			11,574		18,530			12,255		23,479			29,860
Net income		$	7,383		$	23,979		$	23,470	$	24,744		$	23,100	$	54,832		$	59,666
Common Share Statistics
Earnings per common share - basic	(3)	$	0.11		$	0.44		$	0.43	$	0.47		$	0.45	$	0.97		$	1.12
Earnings per common share - diluted	(4)	$	0.11		$	0.43		$	0.42	$	0.45		$	0.42	$	0.97		$	1.07
Average common shares outstanding			51,345			51,330			51,305		49,628	(d)		43,996		51,327			43,975
Average common shares outstanding and equivalents			51,772			51,680			51,626		51,602			51,464		51,695			51,344
Cash dividends per common share		$	0.07		$	0.07		$	0.07	$	0.07	(e)	$	0.06	$	0.21		$	0.18
Book value per common share (period end)		$	18.84		$	18.76		$	18.30	$	17.90	(d)	$	18.27	$	18.84		$	18.27
Tangible book value per common share (period end)	(5)	$	17.11		$	17.03		$	16.56	$	16.15	(d)	$	16.23	$	17.11		$	16.23
Balance Sheet (Average Balances)
Loans	(6)	$	4,539,046		$	4,514,030		$	4,504,725	$	4,460,002		$	4,400,637	$	4,519,393		$	4,294,178
Interest-earning assets			5,981,757			6,034,338			6,152,202		6,170,455			6,055,085		6,055,475			5,906,945
Total assets			6,433,658			6,496,423			6,605,328		6,619,026			6,514,532		6,511,171			6,360,715
Total deposits			4,921,259			4,880,114			4,890,630		4,987,446			4,934,468		4,897,447			4,853,613
Interest-bearing deposits			3,827,212			3,782,211			3,791,083		3,866,842			3,854,642		3,800,302			3,793,078
Borrowings			340,194			459,802			562,152		543,920			503,268		453,236			439,810
Stockholders' equity			1,061,541			1,037,057			1,017,546		983,015			973,838		1,038,869			962,187
Common stockholders' equity			979,671			955,187			935,676		881,971			807,968		956,999			796,317
Performance Metrics
Net interest margin	(7)		5.35%			5.39%			5.39%		5.27%			5.39%		5.38%			5.29%
Return on average assets	(8)		0.46%			1.48%			1.42%		1.50%			1.42%		1.12%			1.25%
Return on average tangible common stockholders' equity	(9)		2.58%			10.32%			10.32%		11.67%	(d)		10.94%		7.67%			9.30%
Efficiency ratio	(10)		51.11%			51.89%			52.50%		51.06%			50.58%		51.83%			53.77%
Full-time equivalent employees, period end			1,436			1,417			1,394		1,392			1,365		1,436			1,365
Credit Quality Metrics
Excluding acquired loans:	(1)
Allowance for loan and lease losses		$	79,089		$	89,952		$	94,035	$	95,188		$	95,236	$	79,089		$	95,236
Allowance as a % of loans held for investment			2.09%			2.35%			2.51%		2.54%			2.62%		2.09%			2.62%
Net charge-offs		$	34,427	(a)(b)(c)	$	12,564		$	12,486	$	10,885	(f)	$	12,402	$	59,477	(a)(b)(c)	$	38,695
Net charge-off rate	(11)		3.57%	(a)(b)(c)		1.32%			1.33%		1.18%			1.38%		1.75%	(a)(b)(c)		1.20%
Early delinquency rate (30 - 89 days past due)			3.64%			3.51%			3.61%		3.34%			3.32%		3.64%			3.32%
Total delinquency rate (30 days and over)			5.39%			6.07%			6.33%		6.36%			6.19%		5.39%			6.19%
Capital Ratios (Non-GAAP)	(12)
Leverage ratio			15.41%			15.20%			14.64%		14.22%	(d)		13.93%		15.41%			13.93%
Common equity Tier 1 capital ratio			17.98%			17.48%			17.09%		16.78%	(d)		14.38%		17.98%			14.38%
Tier 1 risk-based capital ratio			20.43%			19.87%			19.49%		19.20%	(d)		18.55%		20.43%			18.55%
Total risk-based capital ratio			21.71%			21.14%			20.77%		20.48%	(d)		19.84%		21.71%			19.84%
Tangible common equity ("TCE") ratio			14.07%			13.71%			13.05%		12.76%	(d)		10.88%		14.07%			10.88%

(a) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.
(b) During 3Q 2019, the Company decided to sell mostly non-performing loans, which are expected to be sold during 4Q 2019, increasing the provision by $37.4 million. Originated loans that were transferred to held-for-sale amounted to $25.3 million at September 30, 2019, the remaining were purchased credit impaired loans.
(c) During 2Q 2019, the Company decided to sell mostly non-performing mortgage loans increasing the provision by $8.8 million. Most of these loans were sold in 3Q 2019, increasing the provision by an additional $2.3 million.
(d) During the 4Q 2018, the Company converted all of its outstanding 8.750% non-cumulative convertible perpetual preferred stock, series C into OFG Bancorp common stock. Each share of the 84,000 series C preferred stock was converted into 86.4225 shares of common stock.
(e) During the 4Q 2018, the Company increased the regular cash dividend per common share to $0.07 from $0.06.
(f) During the 4Q 2018, the Company received $1.8 million proceeds from the sale of fully charged-off originated auto and consumer loans.

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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)		2019			2019			2019			2018			2018		2019			2018
Interest income:
Loans	(1)
Non-acquired loans		$	74,303		$	72,978		$	71,298		$	70,747		$	68,387	$	218,580		$	189,557
Acquired BBVAPR loans			9,090			9,603			10,247			10,935			12,144		28,939			37,308
Acquired Eurobank loans			2,379			2,499			2,574			2,642			3,485		7,452			10,192
Total interest income from loans			85,772			85,080			84,119			84,324			84,016		254,971			237,057
Investment securities			7,883			9,175			10,591			10,782			10,121		27,649			28,256
Total interest income			93,655			94,255			94,710			95,106			94,137		282,620			265,313
Interest expense:
Deposits
Core deposits			8,256			7,465			6,214			6,396			5,877		21,935			16,806
Brokered deposits			2,298			2,526			2,835			3,003			2,728		7,659			6,748
Total deposits			10,554			9,991			9,049			9,399			8,605		29,594			23,554
Borrowings			2,391			3,179			3,872			3,672			3,255		9,442			7,900
Total interest expense			12,945			13,170			12,921			13,071			11,860		39,036			31,454
Net interest income			80,710			81,085			81,789			82,035			82,277		243,584			233,859
Provision for loan and lease losses, excluding acquired loans	(1)		23,564	(b)(c)(d)		8,481			11,333			10,842			13,420		43,378	(b)(c)(d)		41,213
Provision (recapture) for acquired BBVAPR loan and lease losses	(1)		19,135	(b)(c)(d)		7,446	(d)		1,567			(998)	(f)		875		28,148	(b)(c)(d)		2,485
Provision for acquired Eurobank loan and lease losses	(1)		1,071	(c)(d)		1,778	(d)		(651)	(e)		1,456			306		2,198	(c)(d)		1,110
Total provision for loan and lease losses, net			43,770			17,705			12,249			11,300			14,601		73,724			44,808
Net interest income after provision for loan and lease losses			36,940			63,380			69,540			70,735			67,676		169,860			189,051
Non-interest income:
Banking service revenues			10,813			10,776			10,465			11,234			10,797		32,054			32,404
Wealth management revenues			6,611			6,669			5,882			7,246			6,407		19,162			18,688
Mortgage banking activities			1,118			629			1,206			780			1,242		2,953			3,987
Total banking and financial service revenues			18,542			18,074			17,553			19,260			18,446		54,169			55,079
Other income, net			3,636	(a)		4,874	(a)		103			4,998	(g)		174		8,613	(a)		758
Total non-interest income, net			22,178			22,948			17,656			24,258			18,620		62,782			55,837
Non-interest expense:
Compensation and employee benefits			20,500			19,875			20,341			19,322			18,495		60,716			57,202
Occupancy, equipment and infrastructure costs			7,307			7,511			7,746			7,762			8,388		22,564			25,322
Net loss on sale of foreclosed real estate and other repossessed assets			794			21			1,070			1,834			1,210		1,885			2,828
General and administrative expenses			20,031			21,482			20,699			20,963			20,112		62,212			62,958
Total operating expenses			48,632			48,889			49,856			49,881			48,205		147,377			148,310
Credit related expenses			2,095			2,563			2,296			1,838			2,736		6,954			7,052
Total non-interest expense			50,727			51,452			52,152			51,719			50,941		154,331			155,362
Income before income taxes			8,391			34,876			35,044			43,274			35,355		78,311			89,526
Income tax expense			1,008			10,897			11,574			18,530	(h)		12,255		23,479			29,860
Net income			7,383			23,979			23,470			24,744			23,100		54,832			59,666
Less: dividends on preferred stock
Convertible preferred stock			-			-			-			-	(i)		(1,838)		-	(i)		(5,513)
Other preferred stock			(1,628)			(1,628)			(1,628)			(1,628)			(1,628)		(4,884)			(4,883)
Net income available to common shareholders		$	5,755		$	22,351		$	21,842		$	23,116		$	19,634	$	49,948		$	49,270

(a) During 2Q 2019 and 3Q 2019, the Company sold $350 million and $322 million available-for-sale mortgage-backed securities, respectively, and recognized a gain in the sale of $4.8 million and $3.5 million.
(b) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.
(c) During 3Q 2019, the Company decided to sell mostly non-performing loans, which are expected to be sold during 4Q 2019, increasing the provision by $37.4 million. Originated loans that were transferred to held-for-sale amounted to $25.3 million at September 30, 2019, the remaining were purchased credit impaired loans.
(d) During 2Q 2019, the Company decided to sell mostly non-performing mortgage loans increasing the provision by $8.8 million. Most of these loans were sold in 3Q 2019, increasing the provision by an additional $2.3 million.
(e) During the 1Q 2019, the provision for acquired Eurobank loans and leases reflected better cashflows than expected.
(f) During the 4Q 2018, the provision for acquired BBVAPR loans reflected better cashflows than expected.
(g) During the 4Q 2018, the Company received a $5.0 million payment from the insurance company for Hurricane María impact on the Bank's operations.
(h) During the 4Q 2018, the Company recognized an aggregate amount of $4.1 million income tax expense as a result of the changes in Puerto Rico Tax Legislation, mainly driven by a reduction of the DTA since Regular Corporate Tax Rate changes from 39% to 37.5%.
(i) During the 4Q 2018, the Company converted of all of its outstanding 8.750% non-cumulative convertible perpetual preferred stock, series C into OFG Bancorp common stock. Each share of the 84,000 series C preferred stock was converted into 86.4225 shares of common stock.

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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)	2019			2019			2019			2018			2018
Cash and cash equivalents	$	962,887	(a)	$	677,430	(a)	$	509,023		$	450,063		$	546,780
Investments:
Trading securities		41			412			381			360			405
Investment securities available-for-sale, at fair value, with amortized cost of $520,960
(June 30, 2019 - $860,911; March 31, 2019 - $1,248,750; December 31, 2018 - $854,511;
September 30, 2018 - $872,895)
Mortgage-backed securities		505,102	(a)		843,333	(a)		1,225,225	(d)		827,564			834,538
Other investment securities		13,993			14,100			14,244			14,293			14,014
Total investment securities available-for-sale		519,095			857,433			1,239,469			841,857			848,552
Mortgage-backed securities held-to-maturity, at amortized cost
(fair value at December 31, 2018 - $410,353;
September 30, 2018 - $425,066)		-			-			-	(d)		424,740			444,679
Federal Home Loan Bank (FHLB) stock, at cost		10,525			12,821			12,800			12,644			12,461
Other investments		57			3			3			3			3
Total investments		529,718			870,669			1,252,653			1,279,604			1,306,100
Loans, net		4,407,190	(b)(c)		4,474,497			4,401,401			4,431,594			4,352,980
Other assets:
Derivative assets		13			26			110			347			1,265
Prepaid expenses		14,244			11,903			7,830			10,283			13,461
Deferred tax asset, net		112,602			111,147			112,744			113,763			122,934
Foreclosed real estate and repossessed properties		30,488			32,016			34,439			36,754			42,014
Premises and equipment, net		69,754			71,001			69,017			68,892			67,762
Goodwill		86,069			86,069			86,069			86,069			86,069
Right of use assets		19,318			20,419			20,860	(e)		-			-
Accounts receivable and other assets		101,222			108,950			109,045			105,983			117,309
Total assets	$	6,333,505		$	6,464,127		$	6,603,191		$	6,583,352		$	6,656,674

Deposits:
Demand deposits	$	2,228,256		$	2,219,911		$	2,218,186		$	2,191,802		$	2,304,067
Savings accounts		1,206,569			1,200,408			1,231,170			1,187,945			1,216,190
Time deposits		1,154,871			1,136,411			996,519			1,003,271			1,037,858
Brokered deposits		288,362			388,407	(a)		451,226			525,097			530,878
Total deposits		4,878,058			4,945,137			4,897,101			4,908,115			5,088,993
Borrowings:
Securities sold under agreements to repurchase		190,261			240,324	(a)		431,566			455,508			378,237
Advances from FHLB and other borrowings		79,603			80,423			81,397			78,834			73,723
Subordinated capital notes		36,083			36,083			36,083			36,083			36,083
Total borrowings		305,947			356,830			549,046			570,425			488,043
Other liabilities:
Derivative liabilities		1,159			985			439			333			622
Acceptances outstanding		21,796			23,610			25,791			16,937			28,682
Lease liability		21,081			22,179			22,618	(e)		-			-
Accrued expenses and other liabilities		56,388			70,512			87,004			87,665			80,448
Total liabilities		5,284,429			5,419,253			5,581,999			5,583,475			5,686,788
Stockholders' equity:
Preferred stock		92,000			92,000			92,000			92,000	(f)		176,000
Common stock		59,885			59,885			59,885			59,885	(f)		52,626
Additional paid-in capital		620,948			620,368			619,828			619,381	(f)		542,078
Legal surplus		95,783			95,020			92,621			90,167			87,563
Retained earnings		285,854			284,458			268,101	(e)		253,040			236,120
Treasury stock, at cost		(102,936)			(103,171)			(103,196)			(103,633)			(103,706)
Accumulated other comprehensive (loss) income, net		(2,458)			(3,686)			(8,047)			(10,963)			(20,795)
Total stockholders' equity		1,049,076			1,044,874			1,021,192			999,877			969,886
Total liabilities and stockholders' equity	$	6,333,505		$	6,464,127		$	6,603,191		$	6,583,352		$	6,656,674

(a) During 3Q 2019, the Company sold $322 million available-for-sale mortgage-backed securities and recognized a gain in the sale of $3.4 million. During 2Q 2019, the Company sold $350 million available-for-sale mortgage-backed securities and recognized a gain in the sale of $4.8 million, resulting in the termination before maturity of $191.2 million of securities sold under agreements to repurchase and in a reduction of $62.8 million of brokered CDs.
(b) During 3Q 2019, the Company decided to sell mostly non-performing loans, which are expected to be sold during 4Q 2019, increasing the provision by $37.4 million. Originated loans that were transferred to held-for-sale amounted to $25.3 million at September 30, 2019, the remaining were purchased credit impaired loans.
(c) During 2Q 2019, the Company decided to sell mostly non-performing mortgage loans increasing the provision by $8.8 million. Most of these loans were sold in 3Q 2019, increasing the provision by an additional $2.3 million.
(d) On January 1, 2019, the Company adopted the Accounting Standard Update ("ASU") No. 2017-12 and reclassified all of its mortgage backed securities from the held-to-maturity portfolio into the available-for-sale portfolio.
(e) On January 1, 2019, the Company adopted the ASU No. 2016-02, under the effective date method, which requires lessees to recognize a right-of-use asset and related lease liability for lease classified as operating leases, prospectively.
(f) During 4Q 2018, the Company converted of all of its outstanding 8.750% non-cumulative convertible perpetual preferred stock, series C into OFG Bancorp common stock. Each share of the 84,000 series C preferred stock was converted into 86.4225 shares of common stock.

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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)		2019		2019		2019		2018		2018
Non-acquired loans held for investment:
Mortgage		$	589,383	$	635,616	$	651,423	$	668,809	$	667,224
Commercial			1,573,629		1,616,973		1,569,551		1,597,588		1,540,027
Consumer			362,358		356,110		350,543		348,980		345,399
Auto			1,266,066		1,218,070		1,167,482		1,129,695		1,084,912
			3,791,436		3,826,769		3,738,999		3,745,072		3,637,562
Less: Allowance for loan and lease losses			(79,089)		(89,952)		(94,035)		(95,188)		(95,236)
			3,712,347		3,736,817		3,644,964		3,649,884		3,542,326
Deferred loan costs, net			9,608		9,251		8,254		7,740		7,556
Total non-acquired loans held for investment, net			3,721,955		3,746,068		3,653,218		3,657,624		3,549,882

Acquired loans:	(1)
BBVAPR
Accounted for under ASC 310-20
Commercial			2,217		2,249		2,405		2,546		2,778
Consumer			21,461		21,966		22,768		23,988		24,914
Auto			237		996		2,336		4,435		7,494
			23,915		25,211		27,509		30,969		35,186
Less: Allowance for loan and lease losses			(1,490)		(1,685)		(1,968)		(2,062)		(2,350)
			22,425		23,526		25,541		28,907		32,836

Accounted for under ASC 310-30
Mortgage			439,675		476,081		484,578		492,890		503,861
Commercial			155,653		169,481		176,908		182,319		190,178
Consumer			-		-		-		-		95
Auto			3,883		6,462		9,866		14,403		20,363
			599,211		652,024		671,352		689,612		714,497
Less: Allowance for loan and lease losses			(51,394)		(45,427)		(42,133)		(42,010)		(43,875)
			547,817		606,597		629,219		647,602		670,622
Total Acquired BBVAPR loans, net			570,242		630,123		654,760		676,509		703,458

Eurobank
Accounted for under ASC 310-30
Mortgage			54,603		61,920		62,649		63,392		64,785
Commercial			46,412		46,421		46,588		47,826		49,262
Consumer			802		867		856		846		895
			101,817		109,208		110,093		112,064		114,942
Less: Allowance for loan and lease losses			(22,370)		(25,578)		(24,352)		(24,971)		(24,281)
Total Acquired Eurobank loans, net			79,447		83,630		85,741		87,093		90,661
Total acquired loans, net			649,689		713,753		740,501		763,602		794,119
Total loans held for investment			4,371,644		4,459,821		4,393,719		4,421,226		4,344,001
Mortgage loans held for sale			23,504		13,293		7,682		10,368		8,979
Other loans held for sale			12,042		1,383		-		-		-
Total loans, net		$	4,407,190	$	4,474,497	$	4,401,401	$	4,431,594	$	4,352,980

Loan Portfolio Summary:
Loans held for investment:
Mortgage		$	1,083,661	$	1,173,617	$	1,198,650	$	1,225,091	$	1,235,870
Commercial			1,777,911		1,835,124		1,795,452		1,830,279		1,782,245
Consumer			384,621		378,943		374,167		373,814		371,303
Auto			1,270,186		1,225,528		1,179,684		1,148,533		1,112,769
			4,516,379		4,613,212		4,547,953		4,577,717		4,502,187
Less: Allowance for loan and lease losses			(154,343)		(162,642)		(162,488)		(164,231)		(165,742)
			4,362,036		4,450,570		4,385,465		4,413,486		4,336,445
Deferred loan costs, net			9,608		9,251		8,254		7,740		7,556
Total loans held for investment, net			4,371,644		4,459,821		4,393,719		4,421,226		4,344,001
Mortgage loans held for sale			23,504		13,293		7,682		10,368		8,979
Other loans held for sale			12,042		1,383		-		-		-
Total loans, net		$	4,407,190	$	4,474,497	$	4,401,401	$	4,431,594	$	4,352,980

		2019		2019		2019		2018		2018
(Dollars in thousands) (unaudited)		Q3		Q2		Q1		Q4		Q3
Quarterly loan production	(13)
Mortgage		$	23,805	$	22,196	$	23,097	$	33,373	$	27,869
Commercial			65,635		64,079		60,485		92,088		105,346
US Loan Program			12,224		56,372		31,706		31,667		30,357
Consumer			48,257		47,662		40,877		42,055		42,995
Auto			141,507		136,263		120,199		123,770		140,390
Total		$	291,428	$	326,572	$	276,364	$	322,953	$	346,957


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OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin
	2019 Q3						2019 Q2						2019 Q1						2018 Q4						2018 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	$	734,105	$	4,086	2.21	%	$	481,115	$	2,904	2.42	%	$	388,578	$	2,368	2.47	%	$	434,701	$	2,572	2.35	%	$	327,268	$	1,676	2.03	%
Investment securities		708,606		3,797	2.14	%		1,039,193		6,271	2.41	%		1,258,899		8,223	2.61	%		1,275,752		8,210	2.57	%		1,327,180		8,445	2.55	%
Loans
Non-acquired loans		3,859,035		74,303	7.64	%		3,794,263		72,979	7.71	%		3,764,457		71,298	7.68	%		3,693,398		70,747	7.60	%		3,601,149		68,387	7.53	%
Acquired BBVAPR loans		597,777		9,090	6.08	%		634,598		9,603	6.05	%		654,109		10,247	6.27	%		678,026		10,935	6.45	%		708,306		12,144	6.86	%
Acquired Eurobank loans		82,234		2,379	11.57	%		85,169		2,499	11.74	%		86,159		2,574	11.95	%		88,578		2,642	11.93	%		91,182		3,485	15.29	%
Total loans		4,539,046		85,772	7.50	%		4,514,030		85,081	7.56	%		4,504,725		84,119	7.57	%		4,460,002		84,324	7.50	%		4,400,637		84,016	7.57	%
Total interest-earning assets	$	5,981,757	$	93,655	6.21	%	$	6,034,338	$	94,256	6.27	%	$	6,152,202	$	94,710	6.24	%	$	6,170,455	$	95,106	6.11	%	$	6,055,085	$	94,137	6.17	%

Interest bearing liabilities:
Deposits
NOW accounts	$	1,118,156	$	1,616	0.57	%	$	1,124,670	$	1,730	0.62	%	$	1,119,612	$	1,454	0.53	%	$	1,109,795	$	1,432	0.51	%	$	1,096,023	$	1,196	0.43	%
Savings accounts		1,199,678		2,012	0.67	%		1,180,153		1,882	0.64	%		1,181,024		1,615	0.55	%		1,217,931		1,741	0.57	%		1,211,693		1,571	0.51	%
Time deposits		1,151,248		4,427	1.53	%		1,065,005		3,652	1.38	%		992,331		2,944	1.20	%		1,012,267		3,008	1.18	%		1,027,424		2,896	1.12	%
Brokered deposits		358,130		2,298	2.55	%		412,383		2,526	2.46	%		498,116		2,835	2.31	%		526,849		3,003	2.26	%		519,502		2,727	2.08	%
		3,827,212		10,353	1.07	%		3,782,211		9,790	1.04	%		3,791,083		8,848	0.95	%		3,866,842		9,184	0.94	%		3,854,642		8,390	0.86	%
Non-interest bearing deposit accounts		1,094,047		-	-			1,097,903		-	-			1,099,547		-	-			1,120,604		-	-			1,079,826		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		201	-			-		201	-			-		201	-			-		215	-			-		215	-
Total deposits		4,921,259		10,554	0.85	%		4,880,114		9,991	0.82	%		4,890,630		9,049	0.75	%		4,987,446		9,399	0.75	%		4,934,468		8,605	0.69	%
Borrowings
Securities sold under agreements to repurchase		224,783		1,342	2.37	%		343,370		2,107	2.46	%		444,843		2,785	2.54	%		430,889		2,633	2.42	%		390,225		2,242	2.28	%
Advances from FHLB and other borrowings		79,328		550	2.75	%		80,349		559	2.79	%		81,226		563	2.81	%		76,948		536	2.76	%		76,960		517	2.67	%
Subordinated capital notes		36,083		499	5.49	%		36,083		514	5.71	%		36,083		524	5.89	%		36,083		503	5.53	%		36,083		496	5.45	%
Total borrowings		340,194		2,391	2.79	%		459,802		3,180	2.77	%		562,152		3,872	2.79	%		543,920		3,672	2.68	%		503,268		3,255	2.57	%
Total interest-bearing liabilities	$	5,261,453	$	12,945	0.98	%	$	5,339,916	$	13,171	0.99	%	$	5,452,782	$	12,921	0.96	%	$	5,531,366	$	13,071	0.94	%	$	5,437,736	$	11,860	0.87	%
Interest rate spread			$	80,710	5.23	%			$	81,085	5.28	%			$	81,789	5.28	%			$	82,035	5.17	%			$	82,277	5.30	%
Net interest margin					5.35	%					5.39	%					5.39	%					5.27	%					5.39	%

ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	217					$	241					$	427					$	653					$	1,143
Acquired Eurobank loans				154						189						110						123						829
			$	371					$	430					$	537					$	776					$	1,972
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	5,981,757	$	93,284	6.19	%	$	6,034,338	$	93,826	6.24	%	$	6,152,202	$	94,173	6.21	%	$	6,170,455	$	94,330	6.07	%	$	6,055,085	$	92,165	6.04	%
Interest rate spread			$	80,339	5.21	%			$	80,655	5.25	%			$	81,252	5.25	%			$	81,259	5.13	%			$	80,305	5.17	%
Net interest margin					5.33	%					5.36	%					5.36	%					5.22	%					5.26	%

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OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin (Continued)
	2019 YTD						2018 YTD
			Interest						Interest
	Average		Income/		Yield/		Average		Income/		Yield/
(Dollars in thousands) (unaudited)	Balance		Expense		Rate		Balance		Expense		Rate

Interest earning assets:
Cash equivalents	$	535,865	$	9,357	2.33	%	$	313,410	$	4,126	1.76	%
Investment securities		1,000,217		18,292	2.44	%		1,299,357		24,131	2.48	%
Loans
Non-acquired loans		3,806,265		218,580	7.68	%		3,443,834		189,557	7.36	%
Acquired BBVAPR loans		628,622		28,939	6.14	%		756,120		37,308	6.58	%
Acquired Eurobank loans		84,506		7,452	11.76	%		94,224		10,192	14.42	%
Total loans		4,519,393		254,971	7.54	%		4,294,178		237,057	7.38	%
Total interest-earning assets	$	6,055,475	$	282,620	6.24	%	$	5,906,945	$	265,314	6.01	%

Interest bearing liabilities:
Deposits
NOW accounts	$	1,120,807	$	4,800	0.57	%	$	1,069,341	$	3,064	0.38	%
Savings accounts		1,187,020		5,508	0.62	%		1,216,198		4,623	0.51	%
Time deposits		1,070,111		11,024	1.38	%		1,021,707		8,475	1.11	%
Brokered deposits		422,364		7,660	2.42	%		485,832		6,748	1.86	%
		3,800,302		28,992	1.02	%		3,793,078		22,910	0.81	%
Non-interest bearing deposit accounts		1,097,145		-	-			1,060,535		-	-	%
Fair value premium amortization and core deposit intangible amortization		-		602	-			-		644	-
Total deposits		4,897,447		29,594	0.81	%		4,853,613		23,554	0.65	%
Borrowings
Securities sold under agreements to repurchase		336,859		6,234	2.47	%		332,215		5,160	2.08	%
Advances from FHLB and other borrowings		80,294		1,671	2.78	%		71,512		1,339	2.50	%
Subordinated capital notes		36,083		1,537	5.70	%		36,083		1,402	5.19	%
Total borrowings		453,236		9,442	2.79	%		439,810		7,901	2.40	%
Total interest-bearing liabilities	$	5,350,683	$	39,036	0.98	%	$	5,293,423	$	31,455	0.79	%
Interest rate spread			$	243,584	5.26	%			$	233,859	5.22	%
Net interest margin					5.38	%					5.29	%

ASC 310-30 loan cost recoveries:
Acquired BBVAPR loans			$	885						1,553
Acquired Eurobank loans				453						1,752
			$	1,338					$	3,305
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets	$	6,055,475	$	281,282	6.21	%	$	5,906,945	$	262,009	5.93	%
Interest rate spread			$	242,246	5.23	%			$	230,554	5.14	%
Net interest margin					5.35	%					5.22	%


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OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (1)
	2019			2019		2019		2018		2018
(Dollars in thousands) (unaudited)	Q3			Q2		Q1		Q4		Q3
Net Charge-offs
Mortgage:
Charge-offs	$	16,299	(b)	$	604	$	587	$	1,570	$	1,429
Recoveries		(493)			(316)		(287)		(128)		(139)
Total mortgage		15,806			288		300		1,442		1,290
Commercial:
Charge-offs		8,402	(b)		2,146		1,086		386		3,249
Recoveries		(174)			(177)		(147)		(126)		(119)
Total commercial		8,228			1,969		939		260		3,130
Consumer:
Charge-offs		5,046			4,839		4,121		4,191		4,591
Recoveries		(1,260)	(a)		(327)		(263)		(1,000)		(278)
Total consumer		3,786			4,512		3,858		3,191		4,313
Auto:
Charge-offs		12,331			10,672		11,371		10,843		9,111
Recoveries		(5,724)	(a)		(4,877)		(3,982)		(4,851)		(5,442)
Total auto		6,607			5,795		7,389		5,992		3,669
Total	$	34,427		$	12,564	$	12,486	$	10,885	$	12,402
Net Charge-off Rates
Mortgage		10.14%			0.18%		0.18%		0.88%		0.77%
Commercial		2.06%			0.50%		0.24%		0.07%		0.83%
Consumer		4.00%			4.85%		4.18%		3.47%		4.74%
Auto		2.10%			1.94%		2.54%		2.14%		1.39%
Total		3.57%	(b)		1.32%		1.33%		1.18%		1.38%
Average Loans Held For Investment
Mortgage	$	623,772		$	640,141	$	649,408	$	658,835	$	667,372
Commercial		1,597,902			1,584,362		1,584,246		1,546,166		1,512,661
Consumer		378,967			372,477		369,382		368,083		363,884
Auto		1,258,394			1,197,283		1,161,421		1,120,314		1,057,232
Total	$	3,859,035		$	3,794,263	$	3,764,457	$	3,693,398	$	3,601,149

(a) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.
(b) During 3Q 2019, the Company decided to sell several non-performing originated loans, which are expected to be sold during 4Q 2019, increasing charge-offs by $15.9 million, $4.4 million in commercial loans and $11.5 million in residential mortgages.

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OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excluding Acquired Loans) (Continued) (1)
		2019			2019		2019		2018		2018
(Dollars in thousands) (unaudited)		Q3			Q2		Q1		Q4		Q3
Early Delinquency (30 - 89 days past due)
Mortgage		$	21,631		$	24,303	$	26,775	$	26,150	$	25,285
Commercial			4,403			2,738		12,825		5,568		6,871
Consumer			8,550			8,617		7,795		7,285		6,661
Auto			103,346			98,625		87,500		86,039		81,828
Total		$	137,930		$	134,283	$	134,895	$	125,042	$	120,645
Early Delinquency Rates (30 - 89 days past due)
Mortgage			3.67%			3.82%		4.11%		3.91%		3.79%
Commercial			0.28%			0.17%		0.82%		0.35%		0.45%
Consumer			2.36%			2.42%		2.22%		2.09%		1.93%
Auto			8.16%			8.10%		7.49%		7.62%		7.54%
Total			3.64%			3.51%		3.61%		3.34%		3.32%
Total Delinquency (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation		$	40,194	(a)	$	70,364	$	78,560	$	82,404	$	83,966
GNMA's buy-back option program			11,403			11,675		12,942		19,721		13,325
Total mortgage			51,597			82,039		91,502		102,125		97,291
Commercial			24,399	(a)		28,762		35,737		27,423		25,191
Consumer			10,912			10,817		9,873		8,983		8,530
Auto			117,566			110,646		99,663		99,533		93,976
Total		$	204,474		$	232,264	$	236,775	$	238,064	$	224,988
Total Delinquency Rates (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation			6.82%			11.07%		12.06%		12.32%		12.58%
GNMA's buy-back option program			1.93%			1.84%		1.99%		2.95%		2.00%
Total mortgage			8.75%			12.91%		14.05%		15.27%		14.58%
Commercial			1.55%			1.78%		2.28%		1.72%		1.64%
Consumer			3.01%			3.04%		2.82%		2.57%		2.47%
Auto			9.29%			9.08%		8.54%		8.81%		8.66%
Total			5.39%			6.07%		6.33%		6.36%		6.19%
Nonperforming Assets	(14)
Mortgage		$	21,138	(a)	$	53,534	$	59,665	$	63,717	$	67,236
Commercial			35,601	(a)		44,617		50,376		42,456		42,807
Consumer			4,008			2,208		3,971		3,354		3,116
Auto			15,019			12,024		12,163		13,494		12,185
Total nonperforming loans			75,766			112,383		126,175		123,021		125,344
Foreclosed real estate			11,210			10,954		10,011		9,571		10,295
Other repossessed assets			3,537			2,507		3,574		2,986		4,146
Total nonperforming assets		$	90,513		$	125,844	$	139,760	$	135,578	$	139,785
Nonperforming Loan Rates
Mortgage			3.59%			8.42%		9.16%		9.53%		10.08%
Commercial			2.26%			2.76%		3.21%		2.66%		2.78%
Consumer			1.11%			0.62%		1.13%		0.96%		0.90%
Auto			1.19%			0.99%		1.04%		1.19%		1.12%
Total loans			2.00%			2.94%		3.37%		3.28%		3.45%

(a) During 3Q 2019, the Company identified non-performing originated loans expected to be sold during 4Q 2019, $29 million in mortgage loans and $9 million in commercial loans. These loans were reclassified as held-for-sale at their fair value.

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OFG Bancorp (NYSE: OFG)

Table 7: Allowance for Loan and Lease Losses

Quarter Ended September 30, 2019

(Dollars in thousands) (unaudited)

Mortgage

Commercial

Consumer

Auto

Total

Non-acquired loans

Balance at beginning of period

15,361

29,234

15,831

29,526

89,952

(Recapture) provision for loan and lease losses, net

8,836

1,317

3,283

10,128

23,564

Charge-offs

(16,299)

(8,402)

(5,046)

(12,331)

(42,078)

Recoveries

493

174

1,260

5,724

7,651

Balance at end of period

8,391

22,323

15,328

33,047

79,089

Allowance coverage ratio

1.42%

4.23%

2.61%

2.09%

Acquired loans

Acquired BBVAPR loans:

Acquired loans accounted for under ASC 310-20

Balance at beginning of period

1,617

1,685

(Recapture) provision for loan and lease losses, net

(102)

(41)

(136)

Charge-offs

(19)

(270)

(52)

(341)

Recoveries

203

282

Balance at end of period

1,448

1,490

Acquired loans accounted for under ASC 310-30

Balance at beginning of period

25,208

17,083

3,136

45,427

Provision (recapture) for loan and lease losses, net

7,954

11,714

(396)

19,272

Allowance de-recognition

(12,704)

(150)

(451)

(13,305)

Balance at end of period

20,458

28,647

2,289

51,394

Acquired Eurobank loans:

Balance at beginning of period

17,213

8,365

25,578

Provision (recapture) for loan and lease losses, net

953

118

1,071

Allowance de-recognition

(4,357)

(4,279)

Balance at end of period

13,809

8,561

22,370

Total acquired loans

Balance at beginning of period

42,421

25,479

1,617

3,173

72,690

Provision (recapture) for loan and lease losses, net

8,907

11,839

(102)

(437)

20,207

Charge-offs

(19)

(270)

(52)

(341)

Recoveries

203

282

Allowance de-recognition

(17,061)

(72)

(451)

(17,584)

Balance at end of period

34,267

37,228

1,448

2,311

75,254

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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, 2019

(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

217,549

32,592

2,046

288

252,518

Accretion

(5,876)

(1,606)

(773)

(77)

(151)

(8,483)

Change in expected cash flows

13,503

1,403

151

15,062

Transfers (to) from non-accretable discount

(9,849)

(26,688)

(1,351)

(94)

(37,925)

Balance at end of period

201,824

17,801

1,325

194

221,172

Non-Accretable Discount

Balance at beginning of period

292,258

3,191

7,713

24,083

18,810

346,055

Change in actual and expected cash flows

(21,356)

(13,089)

(1,735)

(118)

(36,254)

Transfers from (to) accretable yield

9,849

26,688

1,351

(57)

37,925

Balance at end of period

280,751

16,790

7,329

24,070

18,786

347,726

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

35,935

1,856

603

38,394

Accretion

(1,218)

(1,075)

(89)

(2,379)

Change in expected cash flows

1,917

550

(93)

132

2,506

Transfers (to) from non-accretable discount

(2,518)

(438)

(24)

(43)

(2,933)

Balance at end of period

34,116

893

579

35,588

Non-Accretable Discount

Balance at beginning of period

1,602

118

1,799

Change in actual and expected cash flows

(2,597)

(438)

(73)

(3,018)

Transfers from (to) accretable yield

2,518

438

(90)

2,933

Balance at end of period

1,626

1,714

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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.

	2019		2019		2019		2018		2018
(Dollars in thousands) (unaudited)	Q3		Q2		Q1		Q4		Q3
Stockholders' Equity to Non-GAAP Tangible Common Equity
Total stockholders' equity	$	1,049,076	$	1,044,874	$	1,021,192	$	999,877	$	969,886
Less: Intangible assets		(88,560)		(88,852)		(89,145)		(89,437)		(89,767)
Noncumulative perpetual preferred stock		(92,000)		(92,000)		(92,000)		(92,000)		(176,000)
Noncumulative perpetual preferred stock issuance costs		10,130		10,130		10,130		10,130		10,130
Tangible common equity	$	878,646	$	874,152	$	850,177	$	828,570	$	714,249

Common stock outstanding at end of period		51,347		51,330		51,328		51,294		44,006
Tangible book value (Non-GAAP)	$	17.11	$	17.03	$	16.56	$	16.15	$	16.23
Total Assets to Tangible Assets
Total assets	$	6,333,505	$	6,464,127	$	6,603,191	$	6,583,352	$	6,656,674
Less: Intangible assets		(88,560)		(88,852)		(89,145)		(89,437)		(89,767)
Tangible assets (Non-GAAP)	$	6,244,945	$	6,375,275	$	6,514,046	$	6,493,915	$	6,566,907
Non-GAAP TCE Ratio
Tangible common equity	$	878,646	$	874,152	$	850,177	$	828,570	$	714,249
Tangible assets		6,244,945		6,375,275		6,514,046		6,493,915		6,566,907
TCE ratio		14.07%		13.71%		13.05%		12.76%		10.88%
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders' equity	$	1,061,541	$	1,037,057	$	1,017,546	$	983,015	$	973,838
Less: Average noncumulative perpetual preferred stock		(92,000)		(92,000)		(92,000)		(111,174)		(176,000)
Average noncumulative perpetual preferred stock issuance costs		10,130		10,130		10,130		10,130		10,130
Average total common stockholders' equity	$	979,671	$	955,187	$	935,676	$	881,971	$	807,968
Less: Average intangible assets		(88,701)		(88,995)		(89,291)		(89,580)		(89,933)
Average tangible common equity	$	890,970	$	866,192	$	846,385	$	792,391	$	718,035
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OFG Bancorp (NYSE: OFG)
Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures (Continued)

		BASEL III
		Standardized
		2019		2019		2019		2018		2018
(Dollars in thousands) (unaudited)		Q3		Q2		Q1		Q4		Q3
Regulatory Capital Metrics
Common equity Tier 1 capital		$	858,092	$	855,667	$	832,923	$	811,708	$	690,937
Tier 1 capital			974,962		972,537		949,793		928,578		891,807
Total risk-based capital	(15)		1,035,910		1,035,109		1,012,112		990,500		953,543
Risk-weighted assets			4,771,165		4,895,441		4,872,807		4,837,214		4,806,348
Regulatory Capital Ratios
Common equity Tier 1 capital ratio	(16)		17.98%		17.48%		17.09%		16.78%		14.38%
Tier 1 risk-based capital ratio	(17)		20.43%		19.87%		19.49%		19.20%		18.55%
Total risk-based capital ratio	(18)		21.71%		21.14%		20.77%		20.48%		19.84%
Leverage ratio	(19)		15.41%		15.20%		14.64%		14.22%		13.93%

Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach
Total stockholders' equity		$	1,049,076	$	1,044,874	$	1,021,192	$	999,877	$	969,886
Less: Noncumulative perpetual preferred stock			(92,000)		(92,000)		(92,000)		(92,000)		(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			1,742		3,087		7,841		10,972		21,187
Unrealized losses on cash flow hedges, net of income tax			716		599		206		(9)		(392)
			969,664		966,690		947,369		928,970		824,811
Less: Disallowed goodwill			(86,069)		(86,069)		(86,069)		(86,069)		(86,069)
Disallowed other intangible assets, net	(20)		(1,557)		(1,739)		(1,922)		(2,105)		(2,256)
Disallowed deferred tax assets, net	(20)		(23,946)		(23,215)		(26,455)		(29,088)		(45,549)
Common equity Tier 1 capital			858,092		855,667		832,923		811,708		690,937
Plus: Qualifying noncumulative perpetual preferred stock			92,000		92,000		92,000		92,000		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
Tier 1 capital			974,962		972,537		949,793		928,578		891,807
Plus tier 2 capital: Qualifying allowance for loan and lease losses			60,948		62,572		62,319		61,922		61,736
Total risk-based capital		$	1,035,910	$	1,035,109	$	1,012,112	$	990,500	$	953,543

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OFG Bancorp (NYSE: OFG)
Table 10: Reconciliation of GAAP to Non-GAAP with adjustments to exclude the impact of significant events.
The Company prepared its Consolidated Financial Statement using accounting principles generally accepted in the U.S. (“U.S. GAAP” or the “reported basis”). In addition to analyzing the Company’s results on the reported basis, management monitors the “Adjusted net income” of the Company and excludes the impact of certain transactions on the results of its operations. Management believes that “Adjusted net income” provides meaningful information to investors about the underlying performance of the Company’s ongoing operations. “Adjusted net income” is a non-GAAP financial measure. The table below describes adjustments to net income for the quarter ended September 31, 2019 and June 30, 2019.
		Quarter ended September 30, 2019						Quarter ended June 30, 2019

				Income Tax		Impact on				Income Tax		Impact on
(Dollars in thousands) (unaudited)		Pre-tax		Effect (i)		Net Income		Pre-tax		Effect (i)		Net Income

U.S. GAAP net income						$	7,383					$	23,979
Non-GAAP adjustments:
Sale of mortgage-backed securities available-for-sale	(a)	$	(3,498)	$	1,067		(2,431)	$	(4,769)	$	1,532		(3,237)
Non-performing loans transferred to held-for-sale or sold	(b)(c)		38,958		(11,886)		27,072		8,803		(2,828)		5,975
Sale of fully charged-off loans	(d)		(2,382)		727		(1,655)		-		-		-
Merger expenses	(e)		1,556		(475)		1,081		1,000		(321)		679
FDIC insurance assessment credit	(f)		(1,534)		468		(1,066)		-		-		-
Hacienda credit for hurricane Maria	(g)		(1,010)		308		(702)		-		-		-
Environmental factors adjustment	(h)		(4,541)		1,385		(3,156)		-		-		-
Adjusted net income (Non-GAAP)						$	26,527					$	27,396
Less: dividends on preferred stock							(1,628)						(1,628)
Adjusted net income available to common shareholders (Non-GAAP)						$	24,899					$	25,768

U.S. GAAP earnings per common share - diluted						$	0.11					$	0.43
Non-GAAP adjustments:
Sale of mortgage-backed securities available-for-sale	(a)	$	(0.07)	$	0.02		(0.05)	$	(0.09)	$	0.03		(0.06)
Non-performing loans transferred to held-for-sale or sold	(b)(c)		0.75		(0.23)		0.52		0.17		(0.05)		0.12
Sale of fully charged-off loans	(d)		(0.04)		0.01		(0.03)		-		-		-
Merger expenses	(e)		0.03		(0.01)		0.02		0.02		(0.01)		0.01
FDIC insurance assessment credit	(f)		(0.03)		0.01		(0.02)		-		-		-
Hacienda credit for hurricane Maria	(g)		(0.02)		0.01		(0.01)		-		-		-
Environmental factors adjustment	(h)		(0.09)		0.03		(0.06)		-		-		-
Adjusted earnings per common share - diluted (Non-GAAP)						$	0.48					$	0.50

Adjusted Performance Metrics - Reconciliation to GAAP Financial Measures:						Quarter ended September 30, 2019						Quarter ended June 30, 2019
Net income						$	7,383					$	23,979
Non-GAAP adjustments	(a)(b)(c)(d)(e)(f)(g)(h)						19,144						3,417
Adjusted net income (Non-GAAP)							26,527						27,396

Average assets							6,433,658						6,496,423

Return on average assets							0.46%						1.48%
Adjusted return on average assets (Non-GAAP)							1.65%						1.69%

Net income available to common shareholders						$	5,755					$	22,351
Non-GAAP adjustments	(a)(b)(c)(d)(e)(f)(g)(h)						19,144						3,417
Adjusted net income available to common shareholders (Non-GAAP)							24,899						25,768

Average tangible common equity							890,970						866,192

Return on average tangible common stockholders' equity							2.58%						10.32%
Adjusted return on average tangible common stockholders' equity (Non-GAAP)							11.18%						11.90%

Total non-interest expense						$	50,727					$	51,452
Non-GAAP adjustments, pre-tax	(e)(f)(g)						988						(1,000)
Adjusted total non-interest expense (Non-GAAP)							51,715						50,452

Net interest income							80,710						81,085
Total banking and financial service revenues							18,542						18,074
							99,252						99,159

Efficiency ratio							51.11%						51.89%
Adjusted efficiency ratio (Non-GAAP)							52.10%						50.88%

(a) During 2Q 2019 and 3Q 2019, the Company sold $350 million and $322 million available-for-sale mortgage-backed securities, respectively, and recognized a gain in the sale of $4.8 million and $3.5 million, respectively.
(b) During 3Q 2019, the Company decided to sell mostly non-performing loans, which are expected to be sold during 4Q 2019, increasing the provision by $37.4 million. Originated loans that were transferred to held-for-sale amounted to $25.3 million at September 30, 2019, the remaining were purchased credit impaired loans.
(c) During 2Q 2019, the Company decided to sell mostly non-performing mortgage loans increasing the provision by $8.8 million. Most of these loans were sold in 3Q 2019, increasing the provision by an additional $2.3 million.
(d) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.
(e) During 2Q 2019, the Company entered into an agreement with Scotiabank to acquire its Puerto Rico and US Virgin Islands operations, subject to customary closing conditions. During 2Q2019 and 3Q2019, $1.0 million and $1.6 million, respectively, were incurred in related expenses.
(f) During 3Q 2019, the Company recognized an FDIC insurance assessment credit received amounting to $1.5 million.
(g) During 3Q 2019, the Company received an additional $1 million credit from Puerto Rico Treasury on employee retention during hurricane Maria.
(h) During 3Q 2019, the Company had a reduction in provision for loan losses of $4.5 million as a result of the adjustment to the qualitative factor related to sustained favorable macroeconomic conditions in Puerto Rico.
(i) Income tax effect reflects estimated income tax annual rate at September 30, 2019 and June 30, 2019 of 30.51% and 32.12%, respectively.

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OFG Bancorp (NYSE: OFG)
Table 11: Notes to Financial Summary, Selected Metrics, Loans, and Consolidated Financial Statements (Tables 1 - 10)

(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 2019 and 2018.
(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.
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OFG Bancorp (OFG) 8-KOFG Bancorp Reports 3Q19 Results

Highlights 3Q19 vs. 3Q18

Conference Call

CEO Comment

3Q19 Items

Current Expected Credit Losses (CECL)

Income Statement

Balance Sheet

Credit Quality

Capital Position

Financial Supplement & Conference Call Presentation

*Non-GAAP Financial Measures

Forward Looking Statements

About OFG Bancorp

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