[ORIENTAL FINANCIAL GROUP LOGO]
QUARTERLY EARNINGS NEWS RELEASE
FOR RELEASE: CONTACT:
Monday, February 9, 2004 In Puerto Rico:
Robert P. Schoene
Phone: (787) 720-2638
In New York City:
Steven Anreder and Gary Fishman
Phone: (800) 421-1003
ORIENTAL REPORTS A 25.4% INCREASE IN NET
INCOME FOR THE SECOND QUARTER OF FISCAL 2004
San Juan, Puerto Rico, February 9, 2004 - Oriental Financial Group Inc. (NYSE:
OFG), a financial holding company specializing in banking and financial
services, today reported a 25.4 percent increase in net income for the second
fiscal quarter ended on December 31, 2003. Net income for the quarter rose to
$15.7 million, compared with $12.5 million for the corresponding three-month
period in fiscal 2003. Earnings per diluted share increased to $0.70 for the
quarter, up 18.6 percent from $0.59 for the corresponding period in the previous
fiscal year.
Net interest income after provision for loan losses increased by 26.5 percent
for the second fiscal quarter, reaching $21.9 million, compared with $17.3
million for the same period in the previous fiscal year. This reflected an
increase of 20.0 percent in interest earning assets, as well as lower interest
expenses, offset somewhat by a 12 basis point decline in the interest rate
spread to 2.85 percent.
"Our ability to continue to manage assets and liabilities in a profitable
manner, while building our core profit centers for current and future growth,
was the primary factor in achieving the results for the second quarter and the
first six months of fiscal 2004," said Jose E. Fernandez, President, Chairman
and Chief Executive Officer of Oriental.
ORIENTAL FINANCIAL GROUP
EARNINGS NEWS RELEASE
MONDAY, FEBRUARY 9, 2004
PAGE 2
Moreover, return on equity (ROE) rose sharply in the second quarter to 41.28
percent from 31.25 percent in the same quarter a year earlier, a 32.1 percent
gain. "These outstanding results outperform our peers in Puerto Rico and place
Oriental among the top performing U.S. banks with assets in the $1 billion to $5
billion range, as well," Mr. Fernandez noted.
"The steady gain in interest income, growth in fee income and the ability to
continue to attract trust and broker-dealer assets strengthen our belief that
Oriental will meet or exceed expectations for profitability in the second half
of fiscal 2004," Mr. Fernandez said.
On a sequential quarter basis, second quarter net interest income after
provision for loan losses increased 24.8 percent from $17.6 million in the first
quarter. The increase primarily reflected an 11.0 percent gain in the interest
rate spread from 2.56 percent to 2.85 percent, higher volume of interest earning
assets and lower provision for loan losses.
SIX-MONTH RESULTS
Results for the first six months of the current fiscal year represent a net
income increase to $29.2 million, up 21.4 percent from the $24.1 million earned
in the same six-month period in fiscal 2003. Earnings per share (fully diluted)
rose to $1.33 for the first half of the current fiscal year, a 17.7 percent
increase from the $1.13 earned per fully diluted share in the first half of
fiscal 2003.
For the six-month period ended December 31, 2003 net interest income after
provision for loan losses reached $39.5 million, against $34.7 million for the
same six-month period a year earlier, an increase of 13.9 percent.
At the end of the second quarter, investment securities totaled $2,539.6
million, 23.9 percent greater than $2,049.2 million at the end of the year ago
quarter and 13.6 percent more than $2,235.7 million at the end of the first
quarter of fiscal 2004.
During the second quarter of fiscal 2004 gross loans increased 8.0 percent to
$717.4 million, compared with $664.4 million at the end of the same quarter a
year earlier. This reflects a 7.5 percent increase in mortgages to $645.5
million from $600.4 million and a 22.4 percent increase in commercial loans to
$54.0 million, compared to $44.1 million in the year ago quarter.
ORIENTAL FINANCIAL GROUP
EARNINGS NEWS RELEASE
MONDAY, FEBRUARY 9, 2004
PAGE 3
NON-INTEREST INCOME
The gain from other income sources, such as service fees and the sale of
securities, continued to be an important factor in the second quarter and the
first six months of fiscal 2004. Total non-interest income reached $9.4 million
in the second quarter of fiscal 2004, compared with $8.6 million in the same
fiscal 2003 quarter, an increase of 8.9 percent. For the six-month period, total
non-interest income was $22.3 million in fiscal 2004, against $16.2 million in
fiscal 2003, up 38.0 percent.
Oriental's strategy aimed at improving the mix of higher revenue and lower cost
deposits and increasing the number of customers caused banking service revenues
to increase by 17.2 percent to $1.7 million, compared to $1.5 million in the
year ago quarter.
"We are encouraged by the new commercial business that is currently in the
pipeline," Mr. Fernandez said, "as well as the spin-offs that are being
developed from the emphasis on building relationships with other products, such
as financial planning, investments, mortgages, insurance, credit cards and
deposit accounts."
Financial service revenues (trust, mortgage banking activities, brokerage and
insurance fees) increased 5.6 percent to $6.0 million as compared to $5.7
million, primarily due to the January 2003 acquisition of Caribbean Pension
Consultants, Inc., (CPC). As a result, total non-interest income related to
banking and financial services revenue amounted to $7.7 million in the second
quarter compared with $7.1 million in the year-ago quarter, an increase of 8.0
percent. The net gain on sale of securities totaled $2.2 million, a 2.5 percent
increase as compared with the year ago quarter.
NON-INTEREST EXPENSES
Second quarter non-interest expenses increased 17.1 percent to $14.6 million as
compared to $12.5 million in the year-ago quarter. The increase was the result
of investments in human resources, new technology, marketing, improvements to
the current network of 23 branches and the acquisition of CPC. On a sequential
quarter basis, however, non-interest expenses declined 5.1 percent from $15.4
million, reflecting tighter expense controls. The efficiency ratio improved to
47.60 percent, compared to 55.09 percent in the first quarter and 48.76 percent
in the year-ago second quarter.
ORIENTAL FINANCIAL GROUP
EARNINGS NEWS RELEASE
MONDAY, FEBRUARY 9, 2004
PAGE 4
TOTAL FINANCIAL ASSETS MANAGED AND OWNED SURPASS $6 BILLION
Total financial assets managed and owned increased 22.7 percent to $6.1 billion
from $5.0 billion at the end of the year-ago quarter and grew by 4.9 percent
from $5.8 billion at the end of the first quarter.
Trust assets managed totaled $1,661.6 million, up 29.4 percent from $1,284.3
million at the end of the year-ago quarter and up slightly from $1,633.9 million
at the end of the first quarter of fiscal 2004. Broker-dealer assets gathered
increased 23.2 percent to $1,101.5 million from $894.3 million at the end of the
year-ago quarter and increased 6.4 percent from $1,035.7 million at the end of
the first quarter of fiscal 2004. Bank assets owned increased 19.4 percent to
$3,344.2 million from $2,800.7 million at the end of the year-ago quarter and
6.1 percent from $3,152.9 million at the end of the first quarter of fiscal
2004.
Return on Assets (ROA) grew in the second quarter to 1.95 percent, compared to
1.87 percent in the year-ago quarter, up 4.3 percent. In the first quarter ROA
was 1.74 percent. ROA for the six-month period was down slightly to 1.84 percent
from 1.86 percent, a decline of 1.1 percent.
The allowance for loan losses was increased to $6.0 million as of December 31,
2003, 54.3 percent over the $3.9 million as of December 31, 2002. Non-performing
assets grew to $32.9 million, up 19.1 percent from $27.6 million for the same
periods. However, the ratio of non-performing assets to total assets went down
somewhat from 0.99 percent to 0.98 percent, a drop of 1.0 percent year to year.
Deposits increased 13.3 percent to $1,077.8 million as of December 31, 2003,
compared to $951.3 million as of December 31, 2002, and rose 7.1 percent from
$1,006.7 million as of September 30, 2003. Deposits benefited from the success
of Oriental's program to attract accounts and larger deposits from professional
customers.
Borrowings as of December 31, 2003 increased 32.1 percent to $1,993.8 million as
compared with $1,509.4 million as of December 31, 2002, and 8.7 percent from
$1,834.1 million as of September 30, 2003.
Stockholders' equity, meanwhile, rose to $223.5 million as of December 31, 2003,
up 15.5 percent from $193.6 million as of December 31, 2002 and 9.0 percent
greater than the $205.0 million as of September 30, 2003. The increase reflects
the impact of $34.5 million of preferred stock issued in September 2003 and
earnings retention.
ORIENTAL FINANCIAL GROUP
EARNINGS NEWS RELEASE
MONDAY, FEBRUARY 9, 2004
PAGE 5
In November 2003, Oriental increased its quarterly cash dividend by 10 percent
and also declared a 10 percent stock dividend on its common shares.
ABOUT ORIENTAL FINANCIAL GROUP
Oriental Financial Group Inc. is a financial holding company operating under
U.S. and Puerto Rico banking laws and regulations. It provides comprehensive
financial services to its clients throughout Puerto Rico and offers third party
pension plan administration in the continental U.S. and Puerto Rico through a
wholly owned subsidiary, Caribbean Pension Consultants, Inc., which is
headquartered in Boca Raton, Florida. The Group's core businesses include a full
range of mortgage, commercial and consumer banking services offered through 23
financial centers in Puerto Rico, as well as financial planning, trust,
insurance, investment brokerage and investment banking services. More
information about the Group may be obtained at www.OrientalOnline.com.
FORWARD-LOOKING STATEMENTS
This release may contain forward-looking statements that reflect management's
beliefs and expectations and are subject to risks and uncertainties inherent to
the Group's business, including, without limitation, the effect of economic and
market conditions, the level and volatility of interest rates, and other
considerations.
# # #
[ORIENTAL FINANCIAL GROUP LOGO]
ORIENTAL FINANCIAL GROUP QUARTER PERIOD SIX-MONTH PERIOD
FINANCIAL SUMMARY --------------------------------- ----------------------------------------------
(NYSE:OFG) 31-DEC-03 31-DEC-02 % 30-SEP-03 31-DEC-03 31-DEC-02 %
--------- --------- ------ --------- --------- --------- ------
SUMMARY OF OPERATIONS (IN THOUSANDS,
EXCEPT PER SHARE DATA):
Interest income $ 42,085 $ 37,851 11.2% $ 37,365 $ 79,451 $ 75,566 5.1%
Interest expense (19,139) (19,414) -1.4% (18,466) (37,606) (38,962) -3.5%
-------- -------- ------ -------- -------- -------- ------
NET INTEREST INCOME 22,946 18,437 24.5% 18,899 41,845 36,604 14.3%
Provision for loan losses (1,014) (1,100) -7.8% (1,340) (2,354) (1,940) 21.3%
-------- -------- ------ -------- -------- -------- ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 21,932 17,337 26.5% 17,559 39,491 34,664 13.9%
-------- -------- ------ -------- -------- -------- ------
NON-INTEREST INCOME:
- -------------------
Banking service revenues 1,709 1,458 17.2% 1,697 3,405 2,978 14.3%
Trust, mortgage banking activities,
brokerage and insurance fees 6,002 5,683 5.6% 7,309 13,311 10,464 27.2%
-------- -------- ------ -------- -------- -------- ------
Total banking and financial
services revenues 7,711 7,141 8.0% 9,006 16,716 13,442 24.4%
Net gain on sale of securities 2,230 2,176 2.5% 3,972 6,202 6,928 -10.5%
Net loss on derivatives and other
activities (584) (725) -19.4% (37) (621) (4,210) -85.2%
-------- -------- ------ -------- -------- -------- ------
TOTAL NON-INTEREST INCOME 9,357 8,592 8.9% 12,941 22,297 16,160 38.0%
-------- -------- ------ -------- -------- -------- ------
NON-INTEREST EXPENSES:
- ---------------------
Salaries and benefits 5,719 4,526 26.4% 6,055 11,774 9,168 28.4%
Occupancy and Equipment 2,324 2,193 6.0% 2,294 4,618 4,353 6.1%
Advertising and business promotion 2,097 1,763 18.9% 2,070 4,167 3,557 17.1%
Professional and service fees 1,435 1,517 -5.4% 1,640 3,075 3,344 -8.0%
Other 3,028 2,472 22.5% 3,322 6,349 4,887 29.9%
-------- -------- ------ -------- -------- -------- ------
TOTAL NON-INTEREST EXPENSES 14,603 12,471 17.1% 15,381 29,983 25,309 18.5%
-------- -------- ------ -------- -------- -------- ------
INCOME BEFORE INCOME TAXES 16,686 13,458 24.0% 15,119 31,805 25,515 24.7%
Income tax expense (998) (943) 5.8% (1,560) (2,558) (1,426) 79.4%
-------- -------- ------ -------- -------- -------- ------
NET INCOME 15,688 12,515 25.4% 13,559 29,247 24,089 21.4%
Less: Dividends on preferred stock (1,200) (597) 101.0% (597) (1,797) (1,193) 50.6%
-------- -------- ------ -------- -------- -------- ------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $ 14,488 $ 11,918 21.6% $ 12,962 $ 27,450 $ 22,896 19.9%
======== ======== ====== ======== ======== ======== ======
EARNINGS PER SHARE (1)
- ----------------------
Earning per common share (basic) $ 0.73 $ 0.62 17.7% $ 0.67 $ 1.40 $ 1.21 15.7%
-------- -------- ------ -------- -------- -------- ------
Earning per common share (diluted) $ 0.70 $ 0.59 18.6% $ 0.63 $ 1.33 $ 1.13 17.7%
-------- -------- ------ -------- -------- -------- ------
Dividends declared per common share $ 0.14 $ 0.13 7.7% $ 0.13 $ 0.27 $ 0.24 12.5%
-------- -------- ------ -------- -------- -------- ------
Average Shares Outstanding (1) 19,714 19,095 3.2% 19,449 19,582 18,984 3.2%
Average potential common
share-options (1) 973 1,178 -17.4% 1,116 1,044 1,212 -13.9%
-------- -------- ------ -------- -------- -------- ------
TOTAL AVERAGE SHARES OUTSTANDING
AND EQUIVALENTS (1) 20,687 20,273 2.0% 20,565 20,626 20,196 2.1%
-------- -------- ------ -------- -------- -------- ------
Common shares outstanding at end of
period (1) 19,627 19,786 19,087 3.7%
-------- -------- -------- ------
Book value per common share (1) $ 6.98 $ 7.86 $ 8.39 -6.3%
-------- -------- -------- ------
PERFORMANCE RATIOS:
- ------------------
Interest rate spread 2.85% 2.97% -4.0% 2.56% 2.71% 3.02% -10.3%
-------- -------- ------ -------- -------- -------- ------
Interest rate margin 2.96% 3.06% -3.3% 2.61% 2.79% 3.11% -10.3%
-------- -------- ------ -------- -------- -------- ------
Return on assets 1.95% 1.87% 4.3% 1.74% 1.84% 1.86% -1.1%
-------- -------- ------ -------- -------- -------- ------
Return on common equity 41.28% 31.25% 32.1% 30.34% 35.27% 31.19% 13.1%
-------- -------- ------ -------- -------- -------- ------
Efficiency Ratio 47.60% 48.76% -2.4% 55.09% 51.17% 50.57% 1.2%
-------- -------- ------ -------- -------- -------- ------
Leverage capital ratio 10.08% 10.50% 7.96% 31.9%
-------- -------- -------- ------
Tier 1 risk-based capital 33.55% 32.66% 23.32% 40.1%
-------- -------- -------- ------
Total risk-based capital 34.18% 33.26% 23.74% 40.1%
-------- -------- -------- ------
[ORIENTAL FINANCIAL GROUP LOGO]
ORIENTAL FINANCIAL GROUP QUARTER PERIOD SIX-MONTH PERIOD
FINANCIAL SUMMARY --------------------------------- ----------------------------------------------
(NYSE:OFG) 31-DEC-03 31-DEC-02 % 30-SEP-03 31-DEC-03 31-DEC-02 %
--------- --------- ------ --------- --------- --------- ------
SELECTED FINANCIAL DATA AT PERIOD-END
Trust Assets Managed $1,633,922 $1,661,598 $1,284,254 29.4%
Broker-Dealer Assets Gathered 1,035,666 1,101,455 894,270 23.2%
---------- ---------- ---------- -----
TOTAL ASSETS MANAGED 2,669,588 2,763,053 2,178,524 26.8%
Bank assets owned 3,152,920 3,344,243 2,800,697 19.4%
---------- ---------- ---------- -----
TOTAL FINANCIAL ASSETS MANAGED
AND OWNED $5,822,508 $6,107,296 $4,979,221 22.7%
========== ========== ========== =====
Investments $2,235,713 $2,539,633 $2,049,220 23.9%
Loans (including loans
held-for-sale), net 684,241 711,427 660,501 7.7%
---------- ---------- ---------- -----
INTEREST-EARNING ASSETS $2,919,954 $3,251,060 $2,709,721 20.0%
---------- ---------- ---------- -----
Deposits $1,006,708 $1,077,751 $ 951,331 13.3%
Borrowings 1,834,081 1,993,813 1,509,371 32.1%
---------- ---------- ---------- -----
INTEREST-BEARING LIABILITIES $2,840,789 $3,071,564 $2,460,702 24.8%
---------- ---------- ---------- -----
Preferred Equity 68,000 68,000 33,500 103.0%
Common Equity 137,023 155,517 160,076 -2.8%
---------- ---------- ---------- -----
STOCKHOLDERS' EQUITY $ 205,023 $ 223,517 $ 193,576 15.5%
---------- ---------- ---------- -----
NUMBER OF FINANCIAL CENTERS 23 23 23
---------- ---------- ----------
CREDIT QUALITY DATA
Net loans charged-off $ 883 $ 499 77.0% $ 482 $ 1,365 $ 1,078 26.6%
-------- -------- ----- ---------- ---------- ---------- -----
Net charge-offs to average
loans outstanding 0.49% 0.30% 63.3% 0.26% 0.37% 0.34% 8.8%
-------- -------- ----- ---------- ---------- ---------- -----
Allowance for loan losses $ 5,889 $ 6,020 $ 3,901 54.3%
---------- ---------- ---------- -----
Allowance coverage ratios:
Allowance for loan losses to
total loans 0.85% 0.84% 0.59% 42.4%
---------- ---------- ---------- -----
Allowance for loan losses to
non-performing loans 20.6% 18.64% 14.35% 29.9%
---------- ---------- ---------- -----
Allowance for loan losses to
non-real estate non-performing
loans 193.65% 162.05% 233.73% -30.7%
---------- ---------- ---------- -----
Non-performing loans $ 28,646 $ 32,290 $ 27,188 18.8%
Foreclosed properties 383 601 422 42.3%
---------- ---------- ---------- -----
Non-performing assets $ 29,029 $ 32,891 $ 27,610 19.1%
---------- ---------- ---------- -----
Non-performing loans to total loans 4.15% 4.50% 4.09% 10.00%
---------- ---------- ---------- -----
Non-performing assets to total assets 0.92% 0.98% 0.99% -1.01%
---------- ---------- ---------- -----
TAX EQUIVALENT SPREAD
Interest-earning assets 5.43% 6.27% -13.4% 5.16% 5.30% 6.41% -17.3%
Tax equivalent adjustment 1.16% 2.22% -47.7% 1.76% 1.06% 2.27% -53.3%
-------- -------- ----- ---------- ---------- ---------- -----
INTEREST-EARNING ASSETS -- TAX
EQUIVALENT 6.59% 8.49% -22.4% 6.92% 6.36% 8.68% -26.7%
Interest-bearing liabilities 2.58% 3.30% -21.8% 2.60% 2.59% 3.39% -23.6%
-------- -------- ----- ---------- ---------- ---------- -----
Tax equivalent interest rate spread 4.01% 5.19% -22.7% 4.32% 3.77% 5.29% -28.7%
-------- -------- ----- ---------- ---------- ---------- -----
Tax equivalent interest rate margin 4.12% 5.28% -22.0% 4.37% 3.85% 5.38% -28.4%
-------- -------- ----- ---------- ---------- ---------- -----
(1) DATA ADJUSTED TO GIVE RETROACTIVE EFFECT TO THE 10% STOCK DIVIDEND DECLARED
ON THE GROUP'S COMMON STOCK ON NOVEMBER 20, 2003.