OFG Bancorp reports 2Q22 results
San Juan, Puerto Rico–(BUSINESS WIRE)–OFG Bancorp (NYSE: OFG), the financial holding company of Oriental Bank, reported results for the second quarter ended June 30, 2022. Diluted EPS was $0.84, compared to $0.76 at 1Q22 and $0.78 in 2Q21. Total base revenue was $146.3 million, compared to $136.4 million in 1Q22 and $133.3 million in 2Q21.
José Rafael Fernández, Chief Executive Officer, said: “We recorded another strong quarterly performance across all of our core businesses. Loans and deposits increased, net interest margin increased, and banking and wealth management revenues rebounded. All this confirms an overall increase in activity, driven by our solid strategic position and the continuous improvement of the customer experience. This quarter, we increased our number of self-service banking kiosks and introduced digital business account opening. We also repurchased $30.6 million in shares, completing $64.1 million of our current $100 million buyback program. Capital metrics remain elevated. At the macro level, despite global headwinds, Puerto Rico’s economic environment continues to evolve positively.
Net interest income $115.1 million versus $105.2 million in 1Q22 and $102.3 million in 2Q21. Net interest margin increased to 4.80% from 4.47% in 1Q22 due to higher lending and investment volume and FRB rate hikes.
interest income $122.2 million versus $112.9 million in 1Q22 and $113.5 million in 2Q21. Compared to 1Q22, 2Q22 interest income benefited from higher yields on higher average balances of loans and investment securities, and higher average yields on cash.
Total interest expense $7.1 million versus $7.8 million in 1Q22 and $11.2 million in 2Q21. Compared to 1Q22, 2Q22 interest expense primarily reflects lower average balances and lower borrowing costs.
Non-interest income $36.2 million versus $31.6 million in 1Q22 and $32.2 million in 2Q21. Compared to 1Q22, 2Q22 non-interest revenue primarily reflects higher Banking and Wealth Management revenue, lower Mortgage Banking revenue and a $4.7 million gain on sale of a former branch.
Net income before provision $66.0 million versus $55.6 million in 1Q22 and $51.8 million in 2Q21.
Provision for credit losses of $6.7 million versus $1.6 million in 1Q22 and net income of $8.3 million in 2Q21. 2Q22 reflected increases of $5.1 million due to loan growth and $4.8 million in trade specific reserves due to two loans placed on non-recognition, partially offset by a reduction of 4 $.9 million of loss and qualitative adjustment factors due to improved loan portfolio performance and economic conditions in Puerto Rico.
Credit quality: Net write-off and NPL rates increased to 0.27% and 1.61%, respectively, from 0.04% and 1.49% in 1Q22. 2Q22 NCOs of $4.5 million included $2.5 million from a previously reserved commercial loan sold during the quarter. 1Q22 NCOs of $0.6m benefited from $3.9m recovery of an acquired PCD loan and final settlement of the sale of non-performing mortgages in 4Q21.
Non-interest expenses $85.3 million versus $81.2 million in 1Q22 and $82.7 million in 2Q21. The $4.1 million increase from 1Q22 primarily reflects an increase in compliance-related professional expenses due to higher activity levels as well as higher technology expenses related to digital transformation.
Loans held for investment purposes (EOP) $6.70 billion versus $6.55 billion in 1Q22 and $6.50 billion in 2Q21. Loans increased $154.7 million from 1Q22, primarily reflecting increases in commercial loans as well as increases in consumer and automotive loans.
Creation of a new loan of $587.2 million compared to $623.2 million in 1Q22 and $673.6 million in 2Q21, including $32.7 million in PPP loans. 2Q22 reflected continued high levels of auto and consumer loans as well as commercial loans in Puerto Rico and the United States.
Total investments (EOP) $1.73 billion versus $1.26 billion in 1Q22 and $643.5 million in 2Q21. Capital expenditures increased by $468.5 million compared to 1Q22, benefiting from the higher yield environment.
Customer deposits (EOP) $9.02 billion versus $8.97 billion in 1Q22 and $9.08 billion in 2Q21. Core deposits increased by $51.3 million from 1Q22, reflecting the increase in commercial and retail accounts.
Total assets (EOP) $10.25 billion versus $10.19 billion in 1Q22 and $10.46 billion in 2Q21.
Capital: The CET1 ratio was 12.80% compared to 13.24% in 1Q22 and 13.95% in 2Q21. The decline from 1Q22 reflects the repurchase of common shares during the quarter and an increase in risk-weighted assets, partially offset by an increase in retained earnings. Tangible book value per share was $18.86, compared to $18.90 in 1Q22 and $18.13 in 2Q21. The slight decrease from 1Q22 reflects the repurchase of common shares and a reduction in other comprehensive income, partially offset by the increase in retained earnings.
Conference call, financial supplement and presentation
A conference call to discuss 2Q22 results, outlook and related matters will take place today at 10:00 a.m. ET. Phone (800) 459-5346 or (203) 518-9544. Conference ID: OFGQ222. The call can also be viewed live at www.ofgbancorp.com with a webcast shortly thereafter.
OFG’s financial supplement, with full financial tables for the quarter ended June 30, 2022, and 2Q22 conference call presentation, can be viewed on the quarterly results page on the Investor Relations website. OFG 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” as defined in SEC Regulation G, to clarify and enhance understanding of past performance and future prospects. Please refer to Tables 8-1 and 8-2 of OFG’s financial supplement referenced above for a reconciliation of GAAP and non-GAAP measures and calculations.
The information contained herein 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. significantly from those expressed. in forward-looking statements.
Factors that could 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 sector; and (v) the severity, scale and duration of the COVID-19 pandemic, and its impact on our operations, staff and customers.
For a discussion of these factors and certain risks and uncertainties to which OFG is subject, please see OFG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and its other filings with of the United States Securities and Exchange Commission. . Except to the extent required by applicable law, including the requirements of applicable securities laws, OFG undertakes no obligation to update any forward-looking statements to reflect events or unanticipated events or circumstances after the date of such statements.
About OFG Bancorp
Now in his 58’se year of operation, OFG Bancorp is a diversified financial holding company that operates in accordance with the banking laws and regulations of the United States, Puerto Rico and the US Virgin Islands. Its three main subsidiaries, Oriental Bank, Oriental Financial Services and Oriental Insurance, offer a wide range of retail and commercial banking, lending and wealth management products, services and technologies, primarily in Puerto Rico and the islands. American virgins. Visit us at www.ofgbancorp.com.