OFG Bancorp (NYSE:OFG), the financial holding company for Oriental Bank, reported results for the third quarter ended September 30, 2022. EPS diluted was $0.87 compared to $0.84 in 2Q22 and $0.81 in 3Q21. Total core revenues were $156.8 million compared to $146.3 million in 2Q22 and $134.7 million in 3Q21. The regular quarterly cash dividend was increased to $0.20 per common share in 3Q22 from $0.15 in 2Q22 and $0.12 in 3Q21.

CEO Comment

José Rafael Fernández, Chief Executive Officer, said: "This was OFG's strongest quarter year to date, driven by total core revenue growth of 7.2% quarter-over-quarter. All our key performance metrics improved compared to 2Q22 and 3Q21, with return on average assets of 1.65%, return on average tangible common stockholders' equity of 18.05%, and an efficiency ratio of 55.80%.

"Thanks to the resilience of our dedicated staff and our digital first banking model, OFG performed well, and we were able to fully support the needs of our customers under a very challenging environment following Hurricane Fiona. Our hearts go out to all those affected. Thankfully, business activity has begun to return to pre-hurricane levels. We look forward to seeing Puerto Rico's economy continue its economic growth path."

3Q22 Highlights

Net Interest Income of $126.5 million compared to $115.1 million in 2Q22 and $102.7 million in 3Q21. Net interest margin expanded to 5.23% from 4.80% in 2Q22 due to increased volume of loans and investments and FRB rate hikes.

Interest Income of $134.7 million compared to $122.2 million in 2Q22 and $112.1 million in 3Q21. Compared to 2Q22, 3Q22 interest income benefited from higher yields on higher average balances of loans and of investment securities, and higher average yields on lower cash balances.

Total Interest Expense of $8.2 million compared to $7.1 million in 2Q22 and $9.4 million in 3Q21. Compared to 2Q22, 3Q22 interest expense reflected a 4 basis point cost increase.

Non-Interest Income of $30.6 million compared to $36.2 million in 2Q22 and $32.5 million in 3Q21. Compared to 2Q22, 3Q22 banking service revenues declined $0.9 million due to Fiona's effect on economic activity and fee waivers. 2Q22 included a $4.7 million gain on sale of a legacy branch building.

Pre-Provision Net Revenues of $69.6 million compared to $66.0 million in 2Q22 and $56.3 million in 3Q21.

Provision for Credit Losses of $7.1 million compared to $6.7 million in 2Q22 and a net benefit of $5.0 million in 3Q21. 3Q22 non-PCD provision included $8.0 million for higher auto and consumer loan balances and a $1.3 million increase in qualitative adjustment for anticipated Fiona-related losses. 3Q22 PCD recapture of $2.8 million was due to reduced balances and improved performance of residential mortgage loans.

Credit Quality: Net charge offs were $11.3 million compared to $4.5 million in 2Q22 and $6.1 million in 3Q21. 3Q22 charge-offs included $6.6 million, of which $5.5 million was previously reserved for two commercial loans, and $5.5 million related to auto and consumer loans.

Non-Interest Expense of $87.5 million compared to $85.3 million in 2Q22 and $78.9 million in 3Q21. 3Q22 included $1.4 million Fiona related expenses and $0.6 million of expenses for real estate owned versus $1.4 million in income in 2Q22.

Loans Held for Investment (EOP) of $6.68 billion compared to $6.70 billion in 2Q22 and $6.41 billion in 3Q21. Loans declined 0.3% or $17.7 million from 2Q22, reflecting paydowns of residential mortgages and seasonal commercial lines of credit as well as PPP loan forgiveness, mostly offset by increases in auto and consumer loans. Year over year, loans increased 4.3% or $274.1 million.

New Loan Origination of $511.3 million compared to $587.2 million in 2Q22 and $556.2 million in 3Q21. 3Q22 included a record level of auto originations at $219.9 million.

Total Investments (EOP) of $2.04 billion compared to $1.73 billion in 2Q22 and $902.3 million in 3Q21. Investments grew $315.3 million from 2Q22 as OFG purchased $410.0 million in short-term US Treasury Notes, taking advantage of the higher yield environment.

Customer Deposits (EOP) of $8.84 billion compared to $9.02 billion in 2Q22 and $9.23 billion in 3Q21. 3Q22 core deposits declined $174.4 million from 2Q22.

Total Assets (EOP) of $10.06 billion compared to $10.25 billion in 2Q22 and $10.61 billion in 3Q21.

Capital: CET1 ratio of 13.34% compared to 12.80% in 2Q22 and 13.52% in 3Q21. Tangible book value per share of $18.46 compared to $18.86 in 2Q22 and $18.59 in 3Q21. The decline from 2Q22 reflected reduced other comprehensive income, partially offset by increased retained earnings.

Conference Call, Financial Supplement & Presentation

A conference call to discuss 3Q22 results, outlook and related matters will be held today at 10:00 AM ET. Phone (800) 225-9448 or (203) 518-9708. Conference ID: OFGQ322. The call can also be accessed live on www.ofgbancorp.com with webcast replay shortly thereafter.

OFG's Financial Supplement, with full financial tables for the quarter ended September 30, 2022, and the 3Q22 Conference Call Presentation, can be found on the Quarterly Results 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 SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Please refer to Tables 8-1 and 8-2 in OFG's above-mentioned Financial Supplement for a reconciliation of GAAP to non-GAAP measures and calculations.

Forward Looking Statements

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

Factors that might cause such a difference include but are not limited to (i) general business and economic conditions, including changes in interest rates; (ii) cybersecurity breaches; (iii) hurricanes, earthquakes, and other natural disasters; (iv) competition in the financial services industry; and (v) the severity, magnitude and duration of the COVID-19 pandemic, and its impact on our operations, personnel, and customers.

For a discussion of such factors and certain risks and uncertainties to which OFG is subject, please refer to OFG's annual report on Form 10-K for the year ended December 31, 2021, 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 58^th year in business, OFG Bancorp is a diversified financial holding company that operates under U.S., Puerto Rico and U.S. Virgin Islands 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 and U.S. Virgin Islands. Visit us at www.ofgbancorp.com.

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