OFG Bancorp (NYSE: OFG) reported Q4 EPS of $0.42, $0.03 worse than the analyst estimate of $0.45. Revenue for the quarter came in at $132.8 million versus the consensus estimate of $99.8 million.

4Q20 Highlights

• Increased Earnings & Revenues: EPS diluted of $0.42 compared to a loss of $0.05 in 4Q19. Results reflected pre-tax merger and restructuring charges of $10.1 million compared to $21.5 million in 4Q19. Total core revenues were $132.8 million versus $98.4 million in 4Q19. Net interest income of $98.7 million increased 24.7%. Non-interest income of $34.0 million increased 77.4%. Net interest margin was 4.24% compared to 5.34% in 4Q19.
• Solid Production: New loan originations totaled $485.4 million compared to $404.9 million in 4Q19. Compared to 3Q20, production (excluding Paycheck Protection Program loans) increased $38.0 million, driven by commercial and mortgage with continued strong levels of auto and consumer lending. Net loans declined $77.9 million from 9/30/20 to $6.5 billion at 12/31/20.
• Lower Provision: Provision for credit losses was $14.2 million compared to $23.1 million in 4Q19. 4Q20 net charge-offs of $44.8 million included $31.2 million for two acquired commercial loans that were substantially reserved. 4Q20 loan deferrals fell to 1.4% of total loans from 2.0% in 3Q20.
• Core Expenses: Non-interest expenses were $89.0 million compared to $78.9 million in 4Q19. Excluding merger and COVID-19 related costs, 4Q20 non-interest expenses of $77.4 million fell $9.4 million from 1Q20, amounting to approximately $38.0 million in annualized reductions from the Scotiabank acquisition, exceeding original expectations by about 9%.
• Lower Cost of Funds: Cost of funds was 66 bps compared to 92 bps in 4Q19. Compared to 3Q20, cost of funds fell 5 bps. Customer deposits declined $169.8 million from 9/30/20 to $8.4 billion at 12/31/20.
• Capital Building: Tangible book value per share increased $1.01 to $16.97 compared to 4Q19 and CET1 capital increased $158.6 million to $894.1 million. The CET1 ratio was 13.08% versus 12.55% on 9/30/20 and 10.91% on 12/31/19, when the Scotiabank acquisition closed.

CEO Comment

José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board, said: “We had another quarter of strong performance in our core businesses, reflecting our larger scale, solid levels of new loan production, lower cost of funds, higher non-interest income, and reduced expenses.

“On a macro-basis, we are benefitting from the improved economic environment in Puerto Rico and the U.S. Virgin Islands due to the continuing nascent rebound from the easing of COVID-19 restrictions and from pandemic-related stimulus.

“Within this environment, Oriental’s success continues to be driven by resiliency, agility, and being more than ready to help customers and communities with their changing product and service needs. During the fourth quarter, we also completed the integration of the Scotiabank acquisition and related cost-savings.

“We look forward to realizing the full benefits of our larger scale over the course of 2021. The vaccine inoculations should reduce the threat of COVID-19, and the economies of Puerto Rico and USVI should expand from all the pending federal reconstruction and stimulus.

“2020 was another challenging year for Puerto Rico, USVI and Oriental. As in years past, we successfully worked our way through it. Our heartfelt thanks go to our team members who helped customers by swiftly processing loan deferrals; implementing an easy-to-use, fully online Paycheck Protection Program; managing the rapid influx of deposits; and providing contactless and in-person services in a COVID-safe manner. Thanks also to the many team members who had to successfully adapt to working from home and implement the Scotiabank integration in the middle of a pandemic.”

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