OFG BANCORP [OFG] Filings

10-Q 1 ofg-20240630.htm 10-Q ofg-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-12647

OFG Bancorp

(Exact name of registrant as specified in its charter)


Commonwealth of Puerto Rico						66-0538893
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


254 Muñoz Rivera Avenue						00918
San Juan, Puerto Rico						(Zip code)
(Address of principal executive offices)


			(787) 771-6800
			(Registrant’s telephone number, including area code)
			N/A
			(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares, par value $1.00 per share	OFG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þNo ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þNo ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☑

Large Accelerated Filer

☐

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

46,561,532 common shares ($1.00 par value per share) outstanding as of July 31, 2024

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION		Page
Item 1.	Financial Statements
	Unaudited Consolidated Statements of Financial Condition	3
	Unaudited Consolidated Statements of Operations	5
	Unaudited Consolidated Statements of Comprehensive Income	7
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity	8
	Unaudited Consolidated Statements of Cash Flows	9
	Notes to Unaudited Consolidated Financial Statements

	Note 1 – Summary of Significant Accounting Policies	12
	Note 2 – Restricted Cash	13
	Note 3 – Investment Securities	13

	Note 4 – Loans	18
	Note 5 – Allowance for Credit Losses	35
	Note 6 – Foreclosed Real Estate	38

	Note 7 – Servicing Assets	38

	Note 8 – Goodwill and Other Intangible Assets	39
	Note 9 – Accrued Interest Receivable and Other Assets	40
	Note 10 – Deposits and Related Interest	41
	Note 11 – Borrowings and Related Interest	42


	Note 12 – Income Taxes	43
	Note 13 – Regulatory Capital Requirements	44

	Note 14 – Stockholders’ Equity	45
	Note 15 – Accumulated Other Comprehensive Loss	46
	Note 16 – Earnings per Common Share	48
	Note 17 – Guarantees	48
	Note 18 – Commitments and Contingencies	50
	Note 19 – Operating Leases	52
	Note 20 – Fair Value of Financial Instruments	53
	Note 21 – Banking and Financial Service Revenues	60
	Note 22 – Business Segments	61


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	64
	Critical Accounting Policies and Estimates	65
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	99
Item 4.	Controls and Procedures	105

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	105
Item 1A.	Risk Factors	105
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	105
Item 3.	Defaults upon Senior Securities	106
Item 4.	Mines Safety Disclosures	106
Item 5.	Other Information	106
Item 6.	Exhibits	107
Signatures		108

FORWARD-LOOKING STATEMENTS

The information included in this quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to the financial condition, results of operations, plans, objectives, future performance and business of OFG Bancorp (“we,” “our,” “us” or “OFG”), including, but not limited to, statements with respect to the adequacy of the allowance for credit losses (“ACL”), delinquency trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect of legal proceedings and new accounting standards on OFG’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may,” or similar expressions are generally intended to identify forward-looking statements.

These statements are not guarantees of future performance and involve certain risks, uncertainties, estimates and assumptions by management that are difficult to predict. Various factors, some of which by their nature are beyond OFG’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Factors that might cause such a difference include, but are not limited to:

•the rate of growth in the economy and employment levels, inflationary pressures or recessionary conditions, as well as general business and economic conditions;

•changes in interest rates, as well as the magnitude of such changes;

•a credit default by municipalities of the government of Puerto Rico;

•a credit default by the U.S. government or a downgrade in the credit ratings of the U.S. government;

•the impacts related to or resulting from bank failures and other volatility, including potential increased regulatory and compliance requirements and costs and potential impacts to macroeconomic conditions, which could affect the ability of depository institutions, including the Bank, to attract and retain depositors and to borrow or raise capital;

•the actual or perceived soundness of other financial institutions, including as a result of the financial or operational failure of a major financial institution, or concerns about the creditworthiness of such a financial institution or its ability to fulfill its obligations, which can cause substantial and cascading disruption within the financial markets;

•amendments to the fiscal plans approved by the Financial Oversight and Management Board for Puerto Rico;

•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, as well as the ability to successfully implement any court-approved plan of adjustment;

•unforeseen or catastrophic events, including extreme weather events, other natural disasters, man-made disasters, pandemics, war or other international conflicts and acts of terrorism (including cyber-attacks), or utility disruptions, which could cause a disruption in our operations or other adverse consequences for our business;

•the impact of property, credit and other losses in Puerto Rico as a result of hurricanes, earthquakes and other natural disasters;

•the amount of government financial assistance for the reconstruction of Puerto Rico’s infrastructure, which was impacted by the effects of Hurricane Maria in 2017, earthquakes in 2020, and Hurricane Fiona in 2022;

•the pace and magnitude of Puerto Rico’s economic recovery;

•the fiscal and monetary policies of the federal government and its agencies;

•changes in federal bank regulatory and supervisory policies, including with respect to required levels of capital;

•the relative strength or weakness of the commercial and consumer credit sectors and the real estate market in Puerto Rico;

•the performance of the stock and bond markets;

•competition in the financial services industry;

•possible legislative, tax or regulatory changes; and

•factors beyond our control such as severe weather conditions, natural disasters, pandemics, power loss, disruptions in telecommunications, terrorism and other catastrophic events, any of which could significantly affect delinquency rates, loan and accounts receivable balances and other aspects of our business and results of operations.

Other possible events or factors that could cause results or performance to differ materially from those expressed in these forward-looking statements include the following: negative economic conditions that adversely affect the general economy, housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of non-performing assets, charge-offs and provision for credit losses expense; changes in interest rates and market liquidity which may reduce interest margins, impact funding sources and affect the ability to originate and distribute financial products in the primary and secondary markets; adverse movements and volatility in debt and equity capital markets; changes in market rates and prices which may adversely impact the value of financial assets and liabilities; risk of impairment of investment securities, goodwill, other intangible assets or deferred tax assets; liabilities resulting from litigation and regulatory investigations; changes in accounting standards, rules and interpretations; increased competition; OFG’s ability to grow its core businesses; decisions to downsize, sell or close units or otherwise change OFG’s business mix; and management’s ability to identify and manage these and other risks.

All forward-looking statements included in this quarterly report on Form 10-Q are based upon information available to OFG as of the date of this quarterly report on Form 10-Q, and other than as required by law, including the requirements of applicable securities laws, OFG assumes no obligation to update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

Table of Contents

OFG BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

AS OF JUNE 30, 2024 AND DECEMBER 31, 2023


	June 30,		December 31,
	2024		2023
	(In thousands)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	735,346	$	743,550
Money market investments	5,083		4,623
Total cash and cash equivalents	740,429		748,173

Investments:
Trading securities, at fair value, with amortized cost of $163 (December 31, 2023 - $163)	16		13
Investment securities available-for-sale, at fair value, with amortized cost of $2,198,116 (December 31, 2023 - $2,177,761); no allowance for credit losses	2,096,306		2,099,264
Investment securities held-to-maturity, at amortized cost, with fair value of $279,437 (December 31, 2023 - $490,764); no allowance for credit losses	338,621		549,024
Equity securities	41,074		38,469
Total investments	2,476,017		2,686,770
Loans:
Loans held-for-sale, at lower of cost or fair value	20,736		28,345
Loans held-for-investment, net of allowance for credit losses of $157,301 (December 31, 2023 - $161,106)	7,482,406		7,373,273
Total loans	7,503,142		7,401,618
Other assets:
Foreclosed real estate	6,526		10,780
Accrued interest receivable	72,969		71,400
Deferred tax assets, net	4,094		4,923
Premises and equipment, net	104,384		104,102
Customers' liability on acceptances	28,504		25,576
Servicing assets	49,789		49,520
Goodwill	84,241		84,241
Other intangible assets	17,738		20,694
Operating lease right-of-use assets	20,298		21,725
Other assets	150,954		114,931
Total assets	$	11,259,085	$	11,344,453

See notes to unaudited consolidated financial statements.

Table of Contents

OFG BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

AS OF JUNE 30, 2024 AND DECEMBER 31, 2023 (CONTINUED)


	June 30,		December 31,
	2024		2023
	(In thousands)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand deposits	$	6,017,364	$	6,050,428
Savings accounts	2,002,342		2,088,102
Time deposits	1,585,544		1,623,639
Total deposits	9,605,250		9,762,169
Borrowings:

Advances from the Federal Home Loan Bank of New York (the “FHLB”)	200,741		200,768

Other borrowings	—		2
Total borrowings	200,741		200,770
Other liabilities:


Acceptances executed and outstanding	28,504		25,576
Operating lease liabilities	22,605		24,029
Deferred tax liabilities, net	33,873		22,444
Accrued expenses and other liabilities	140,410		115,985
Total liabilities	10,031,383		10,150,973
Commitments and contingencies (See Note 18)
Stockholders’ equity:

Common stock, $1 par value; 100,000,000 shares authorized; 59,885,234 shares issued: 46,561,532 shares outstanding (December 31, 2023 - 59,885,234 shares issued; 47,065,156 shares outstanding)	59,885		59,885
Additional paid-in capital	637,895		638,667
Legal surplus	160,560		150,967
Retained earnings	706,807		639,324
Treasury stock, at cost, 13,323,702 shares (December 31, 2023 - 12,820,078 shares)	(250,951)		(228,350)
Accumulated other comprehensive loss, net of tax of $15,316 (December 31, 2023 - $11,484)	(86,494)		(67,013)
Total stockholders’ equity	1,227,702		1,193,480
Total liabilities and stockholders’ equity	$	11,259,085	$	11,344,453

See notes to unaudited consolidated financial statements.

Table of Contents

OFG BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE QUARTERS AND SIX-MONTH PERIODS ENDED JUNE 30, 2024 AND 2023


	Quarter Ended June 30,				Six-Month Period Ended June 30,
	2024		2023		2024		2023
	(In thousands, except per share data)
Interest income:
Loans	$	154,257	$	135,518	$	303,851	$	263,829
Mortgage-backed securities	20,893		10,593		40,687		20,667
Investment securities and other	12,508		11,877		26,546		22,477
Total interest income	187,658		157,988		371,084		306,973
Interest expense:
Deposits	37,812		15,916		74,604		28,413

Advances from FHLB and other borrowings	2,521		2,428		5,053		3,019

Total interest expense	40,333		18,344		79,657		31,432
Net interest income	147,325		139,644		291,427		275,541
Provision for credit losses	15,581		15,044		30,702		24,489
Net interest income after provision for credit losses	131,744		124,600		260,725		251,052
Non-interest income:
Banking service revenue	18,781		17,440		36,040		34,953
Wealth management revenue	8,440		8,194		16,547		15,314
Mortgage banking activities	4,864		5,225		9,557		9,123
Total banking and financial service revenues	32,085		30,859		62,144		59,390


Net loss on sale of securities	—		(1,149)		(7)		(1,149)


Other non-interest income	391		363		687		733
Total non-interest income	32,476		30,073		62,824		58,974

See notes to unaudited consolidated financial statements.

Table of Contents

OFG BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE QUARTERS AND SIX-MONTH PERIODS ENDED JUNE 30, 2024 AND 2023 (CONTINUED)



	Quarter Ended June 30,				Six-Month Period Ended June 30,
	2024		2023		2024		2023
	(In thousands, except per share data)
Non-interest expense:
Compensation and employee benefits	38,467		37,841		78,283		76,314
Occupancy, equipment and infrastructure costs	14,393		14,362		28,715		28,619
Electronic banking charges	11,687		10,262		22,053		20,598
Information technology expenses	6,565		7,188		13,168		13,606
Professional and service fees	5,117		5,319		9,121		10,383
Taxes, other than payroll and income taxes	3,224		3,265		6,467		6,538
Insurance	3,117		2,689		5,793		5,606
Loan servicing and clearing expenses	1,890		1,866		4,000		4,133
Advertising, business promotion, and strategic initiatives	2,445		2,063		4,824		4,098
Communication	1,219		1,160		2,300		2,189
Printing, postage, stationery and supplies	939		866		1,898		1,596


Foreclosed real estate and other repossessed assets income, net of expenses	(731)		(2,320)		(63)		(1,527)
Other	4,628		4,327		7,813		6,955
Total non-interest expense	92,960		88,888		184,372		179,108
Income before income taxes	71,260		65,785		139,177		130,918
Income tax expense	20,129		21,612		38,354		40,516


Net income available to common shareholders	$	51,131	$	44,173	$	100,823	$	90,402
Earnings per common share:
Basic	$	1.09	$	0.93	$	2.14	$	1.91
Diluted	$	1.08	$	0.93	$	2.13	$	1.89
Average common shares outstanding and equivalents	47,131		47,490		47,244		47,716
Cash dividends per share of common stock	$	0.25	$	0.22	$	0.50	$	0.44

See notes to unaudited consolidated financial statements.

Table of Contents

OFG BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE QUARTERS AND SIX-MONTH PERIODS ENDED JUNE 30, 2024 AND 2023


	Quarter Ended June 30,				Six-Month Period Ended June 30,
	2024		2023		2024		2023
	(In thousands)
Net income	$	51,131	$	44,173	$	100,823	$	90,402
Other comprehensive (loss) income before tax:
Unrealized (loss) gain on securities available-for-sale	(5,763)		(14,342)		(23,320)		3,583
Realized loss on sale of securities available-for-sale	—		1,149		7		1,149
Unrealized loss on cash flow hedges	—		(155)		—		(286)
Other comprehensive (loss) income before taxes	(5,763)		(13,348)		(23,313)		4,446
Income tax effect	1,000		2,124		3,832		(601)
Other comprehensive (loss) income after taxes	(4,763)		(11,224)		(19,481)		3,845
Comprehensive income	$	46,368	$	32,949	$	81,342	$	94,247

See notes to unaudited consolidated financial statements.

Table of Contents

OFG BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

FOR THE QUARTERS AND SIX-MONTH PERIODS ENDED JUNE 30, 2024 AND 2023


	Quarter Ended June 30,				Six-Month Period Ended June 30,
	2024		2023		2024		2023
	(In thousands)




Common stock:
Balance at the beginning and end of period	59,885		59,885		59,885		59,885
Additional paid-in capital:
Balance at beginning of period	636,208		634,785		638,667		636,793
Stock-based compensation expense	1,966		1,403		3,130		2,368
Lapsed restricted stock units	(279)		(137)		(3,902)		(3,110)

Balance at end of period	637,895		636,051		637,895		636,051
Legal surplus:
Balance at beginning of period	155,732		138,333		150,967		133,901
Transfer from retained earnings	4,828		4,234		9,593		8,666
Balance at end of period	160,560		142,567		160,560		142,567
Retained earnings:
Balance at beginning of period	672,455		547,641		639,324		516,371



Net income	51,131		44,173		100,823		90,402
Cash dividends declared on common stock[1]	(11,951)		(10,538)		(23,747)		(21,065)

Transfer to legal surplus	(4,828)		(4,234)		(9,593)		(8,666)

Balance at end of period	706,807		577,042		706,807		577,042
Treasury stock:
Balance at beginning of period	(226,896)		(212,794)		(228,350)		(211,135)
Stocks repurchased	(24,282)		(13,573)		(24,282)		(16,467)
Lapsed restricted stock units and options	227		137		1,681		1,372
Balance at end of period	(250,951)		(226,230)		(250,951)		(226,230)
Accumulated other comprehensive loss, net of tax:
Balance at beginning of period	(81,731)		(78,340)		(67,013)		(93,409)
Other comprehensive (loss) gain, net of tax	(4,763)		(11,224)		(19,481)		3,845
Balance at end of period	(86,494)		(89,564)		(86,494)		(89,564)
Total stockholders’ equity	$	1,227,702	$	1,099,751	$	1,227,702	$	1,099,751

[1] Dividends declared per common share during the quarter ended June 30, 2024 - $0.25 (June 30, 2023 - $0.22). Dividends declared per common share during the six-month period ended June 30, 2024 - $0.50 (June 30, 2023 - $0.44).

See notes to unaudited consolidated financial statements.

Table of Contents

OFG BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2024 AND 2023


	Six-Month Period Ended June 30,
	2024			2023
	(In thousands)
Cash flows from operating activities:
Net income	$	100,823		$	90,402
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred loan origination fees, net of costs, and fair value premiums on loans	855			323

Amortization of investment securities discounts, net of accretion of premiums	(5,359)			(3,191)
Amortization of other intangible assets	2,956		<

OFG BANCORP [OFG] Filings
10-Q	[2024-08-07]
10-Q	[2024-05-08]
10-K	[2024-02-26]
10-Q	[2023-11-06]
10-Q	[2023-08-04]
10-Q	[2023-05-05]
10-K	[2023-02-24]
10-Q	[2022-11-04]
10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-02-25]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-02-26]
10-Q	[2020-11-06]
10-Q	[2020-08-07]
10-Q	[2020-05-11]
10-K	[2020-03-03]
10-Q	[2019-11-08]
10-Q	[2019-08-02]
10-Q	[2019-05-06]
10-K	[2019-03-08]
10-Q	[2018-11-02]
10-Q	[2018-08-03]
10-Q	[2018-05-04]
10-K	[2018-03-13]
10-Q	[2017-11-08]
10-Q	[2017-08-04]
10-Q	[2017-05-05]
10-K	[2017-03-10]
10-Q	[2016-11-04]
10-Q	[2016-08-05]
10-Q	[2016-05-06]
10-K	[2016-03-15]
10-Q	[2015-11-06]
10-Q	[2015-08-10]
10-Q	[2015-05-08]
10-K	[2015-02-26]
10-Q	[2014-11-07]
10-Q	[2014-08-08]
10-Q	[2014-05-09]
10-K	[2014-03-03]
10-Q	[2013-11-12]
10-Q	[2013-08-09]
10-Q	[2013-05-10]
10-K	[2013-03-15]
10-Q	[2012-11-09]
S-1	[2012-10-19]
S-1	[2012-09-13]
10-Q	[2012-08-03]
10-Q	[2012-05-04]
10-K	[2012-03-09]