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Oriental Financial Group Fourth Quarter & 2011 Results

Oriental Financial Group Inc. (NYSE: OFG) today announced results for the fourth quarter and year ended December 31, 2011.

“We achieved major progress in 2011 executing on our strategies, growing our franchise value and returning capital to investors,” said José Rafael Fernández, President, Chief Executive Officer and Vice- Chairman of the Board. “We are entering 2012 with increasing momentum in our ability to expand quality credit and deposit relationships, as well as continuing to build our reputation as a solid commercial lender.

“We are also selectively reducing our wholesale funding and generating more interest income from loans. The 2010 Eurobank acquisition is becoming more accretive than originally expected. This should continue to benefit Oriental in upcoming quarters as well.

”During the fourth quarter, we reduced and renewed certain repos in a manner that should positively impact results in 2012 and beyond. We also recorded a charge on a CDO sold in January. On a pre-tax operating income basis, we had a solidly profitable fourth quarter and an excellent year.

“The steps we have taken are expected to enhance Oriental’s plans to grow our banking capabilities, fortify our already strong capital position, and further improve performance.”

2011 Financial Summary

  • Income available to common shareholders of $29.6 million, or $ 0.67 per diluted share, compared to loss of $18.2 million, or ($0.50) per share, in 2010.
  • Pre-tax operating income of $48.6 million increased 22.5% from $39.7 million in 2010.
  • Strong growth in core lending, banking and wealth management operations, including a more than 38% increase in commercial loan production.
  • Book value per share at December 31, 2011 of $15.22, up 6.2% from a year ago and 1.5% from September 30, 2011.
  • Due to the Company’s stock repurchase program, common shares outstanding at December 31, 2011 of 41.2 million were reduced 11.0% from a year ago and 6.3% from September 30, 2011.
  • Cash dividends per common share of $0.21 for the year, up 23.5% from 2010.
  • Net credit losses of only 0.81% of average loans outstanding, while the allowance for loan losses increased 17.8%.

4Q11 Financial Summary

  • Loss to common shareholders of $13.1 million, or ($0.31) per share, which includes an income tax benefit of $4.8 million. This compares to income of $3.9 million, or $0.08 per share, in the year ago quarter, and income of $15.6 million, or $0.35 per share, in the quarter ended September 30, 2011.
  • Results reflected the following charges that are not considered part of Oriental’s pre-tax operating income: (i) a $15.0 million other than temporary impairment (OTTI) charge on the aforementioned collateralized debt obligation (CDO); (ii) a $2.4 million write-down of interest receivable on delinquent residential mortgage loans; and (iii) a $2.4 million write-down on foreclosed properties and other non-performing real estate-related assets, most of which were acquired as part of the FDIC assisted Eurobank acquisition.
  • Oriental sold the aforementioned CDO in January 2012 for $10.5 million. The security, which was no longer consistent with the Company’s investment strategy, had experienced market deterioration in recent months. At September 30, 2011, it had an unrealized loss of approximately $10.0 million.
  • Pre-tax operating income of $6.1 million. This compares to a loss of $0.6 million in the year ago quarter and income of $11.5 million in the third quarter of 2011. Compared to the preceding quarter, the fourth quarter of 2011 included $6.2 million in additional premium amortization on mortgage backed securities (MBS), partially offset by continued growth in core lending, banking and wealth management activities.

4Q11 Income Statement Analysis

  • Interest income from loans of $39.4 million increased 11.3% from the third quarter. Growth was due to continued improved performance of covered loans (the former Eurobank loans) and growth of Oriental’s non-covered commercial, auto leasing and consumer loan portfolio.
  • Interest income from investment securities of $25.9 million declined 28.5% from the third quarter. This primarily reflected increased premium amortization, based on an increase in repayments as a result of the current interest rate environment. Other factors were lower balances and yields.
  • Total interest expense of $37.4 million declined 4.3% from the third quarter. This was due to reduced cost of deposits (both retail and wholesale) and lower cost and lower balances of wholesale funding.
  • Total banking and wealth management revenues of $12.4 million increased 9.8% from the third quarter. Wealth management revenues grew 10.0% due to increased brokerage and trust business. Assets under management of $4.1 billion at December 31, 2011 were up 4.0% from September 30, 2011, including a 7.5% increase in brokerage account assets. Banking service revenues increased 14.6% due to the use of more commercial products and services.
  • Non-interest expenses of $30.4 million were flat with the third quarter due to effective cost controls.

Partial Pay Down of Repurchase Agreements

  • In December 2011, $600 million in repurchase agreement (repo) funding with an average cost of 4.23% matured. Utilizing cash on hand and proceeds from the sale of approximately $77 million of mortgage backed securities, half of the repos were paid off. The remaining balance was renewed for an average period of approximately three and a half years at an effective fixed rate of 2.36%.
  • These transactions enabled Oriental to eliminate $300 million in wholesale funding, reduce cost of funds on an additional $300 million of borrowings, and deploy cash at a significantly higher return – all of which is expected to generate approximately $13 million more in net interest income on an annualized basis. Oriental reduced repo funding by a total of $400 million in 2011, including the early extinguishment of a $100 million repo in the third quarter.

December 31, 2011 Balance Sheet Analysis

  • Cash and cash equivalents (including securities purchased under agreements to resell) of $605.5 million declined $76.9 million from September 30, 2011, reflecting the aforementioned repo pay down, partially offset by repayments on MBS.
  • Total investments of $3.9 billion declined 5.4% from September 30, 2011, primarily reflecting the aforementioned pre-payments on MBS and sale of securities.
  • Total non-covered loans of approximately $1.2 billion increased 1.2% from September 30, 2011. Growth of commercial, leasing and consumer loans more than offset the reduction of residential mortgage loans. Covered loans of $533.5 million declined 5.0% from September 30, 2011 as they continue to pay down.
  • Loan production in the strategically significant commercial category totaled $47.5 million, up 58.0% from the third quarter. For the year, commercial loan production increased 38.3%, to $139.8 million.
  • Retail deposits of $2.0 billion remained approximately level compared to September 30, 2011 as cost of those deposits dropped to 1.66% from 1.79%. For the year, interest-bearing savings and demand deposits increased 2.2%, while cost of retail deposits dropped to 1.81% in 2011 from 2.23% in 2010.
  • Stockholders’ equity of $695.6 million declined 4.4% from September 30, 2011, primarily due to stock repurchases. Book value per share, however, increased to $15.22 as of December 31, 2011 from $14.99 as of September 30, 2011.

Other 4Q11 Highlights

  • Credit Quality: The allowance of $37.0 million increased 3.2%, equal to 3.06% of total non-covered loans and leases versus 3.00% at September 30, 2011. Net credit losses of $2.7 million resulted in a total of $9.6 million for the year. Non-performing assets increased less than 1.0% from September 30, 2011.
  • Stock Repurchases: As part of its authorization to repurchase $70 million in shares of its common stock in the open market, Oriental bought approximately 2.8 million shares, at an average price of $10.57 per share, during the quarter ended December 31, 2011. Under the current authorization, Oriental can buy back approximately $40 million more in shares. For all of 2011, Oriental bought approximately 5.2 million shares at an average price of $11.28 per share.
  • Capital: Oriental maintains regulatory capital ratios well above the requirements for a well-capitalized institution. At December 31, 2011, the Leverage Capital Ratio was 9.65%, Tier-1 Risk-Based Capital Ratio was 31.56%, and Total Risk-Based Capital Ratio was 32.84%.

Conference Call

A conference call to discuss Oriental’s results, outlook and related matters will be held Tuesday, January 31, 2012, at 8:30 AM Eastern Time / 9:30 AM Puerto Rico Time. The call will be accessible live via a webcast on Oriental’s Investor Relations website at www.orientalfg.com. A webcast replay will be available shortly thereafter. Access the webcast link in advance to download any necessary software.

About Oriental Financial Group

Oriental Financial Group Inc. is a diversified financial holding company that operates under U.S. and Puerto Rico banking laws and regulations, principally through its two subsidiaries, Oriental Bank and Trust and Oriental Financial Services. Now in its 48th year in business, Oriental provides a full range of commercial, consumer and mortgage banking services, as well as financial planning, trust, insurance, investment brokerage and investment banking services, primarily in Puerto Rico, through 30 financial centers. Investor information about Oriental can be found at www.orientalfg.com.

Non-GAAP Financial Measures

From time to time, Oriental uses certain non-GAAP measures of financial performance to supplement the financial statements presented in accordance with GAAP. Oriental presents non-GAAP measures when its management believes that the additional information is useful and meaningful to investors. Non-GAAP measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP.

Oriental’s management has reported and discussed the results of operations herein both on a GAAP basis and on a pre-tax operating income basis (defined as net interest income, less provision for loan and lease losses, plus banking and wealth management revenues, less non-interest expenses, and calculated on the accompanying table). Oriental’s management believes that, given the nature of the items excluded from the definition of pre-tax operating income, it is useful to state what the results of operations would have been without them so that investors can see the financial trends from Oriental’s continuing business.

Tangible common equity consists of common equity less goodwill. Management believes that the ratios of tangible common equity to total assets and to risk-weighted assets assist investors in analyzing Oriental’s capital position.

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 forward-looking statements. Factors that might cause such a difference include, but are not limited to (i) the rate of declining growth in the economy and employment levels, as well as general business and economic conditions; (ii) changes in interest rates, as well as the magnitude of such changes; (iii) the fiscal and monetary policies of the federal government and its agencies; (iv) changes in federal bank regulatory and supervisory policies, including required levels of capital; (v) the relative strength or weakness of the consumer and commercial credit sectors and of the real estate market in Puerto Rico; (vi) the performance of the stock and bond markets; (vii) competition in the financial services industry; (viii) possible legislative, tax or regulatory changes; and (ix) difficulties in combining the operations of any acquired entity. For a discussion of such factors and certain risks and uncertainties to which Oriental is subject, see Oriental’s annual report on Form 10-K for the year ended December 31, 2010, 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, Oriental assumes no obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

 
ORIENTAL FINANCIAL GROUP                                  
Financial Summary                                  
(NYSE: OFG)

QUARTER ENDED

YEAR TO DATE

31-Dec-11 31-Dec-10 % 30-Sep-11 31-Dec-11 31-Dec-10 %

SUMMARY OF OPERATIONS (Dollars in thousands):

Interest Income:

Loans
Loans not covered under shared-loss agreements with the FDIC $ 17,239 $ 18,160 -5.1 % $ 17,161 $ 68,333 $ 71,310 -4.2 %
Loans covered under shared-loss agreements with the FDIC   22,158     15,926   39.1 %   18,222     67,665     44,158   53.2 %
Total interest income from loans 39,397 34,086 15.6 % 35,383 135,998 115,468 17.8 %
Mortgage-backed securities 23,649 35,977 -34.3 % 33,515 151,924 161,518 -5.9 %
Investment securities 1,897 2,205 -14.0 % 2,366 8,000 26,418 -69.7 %
Short term investments   314     134   134.3 %   272     1,106     397   178.6 %
Total interest income   65,257     72,402   -9.9 %   71,536     297,028     303,801   -2.2 %
 

Interest Expense:

Deposits 10,519 12,673 -17.0 % 11,413 45,645 48,603 -6.1 %
Securities sold under agreements to repurchase 22,402 24,709 -9.3 % 23,206 93,279 100,609 -7.3 %
Advances from FHLB and other borrowings 3,116 3,101 0.5 % 3,121 12,347 12,248 0.8 %
FDIC-guaranteed term notes 1,021 1,021 0.0 % 1,021 4,084 4,084 0.0 %
Note payable to the FDIC - - 0.0 % - - 1,887 -100.0 %
Subordinated capital notes   316     308   2.6 %   305     1,231     1,238   -0.6 %
Total interest expense   37,374     41,812   -10.6 %   39,066     156,586     168,669   -7.2 %
 
Net interest income 27,883 30,590 -8.8 % 32,470 140,442 135,132 3.9 %
Provision for non-covered loan and lease losses 3,800 3,700 2.7 % 3,800 15,200 15,914 -4.5 %
Provision for (recapture of) covered loan and lease losses, net   -     6,282   -100.0 %   (1,936 )   (1,387 )   6,282   -122.1 %
Total provision for loan and lease losses, net   3,800     9,982   -61.9 %   1,864     13,813     22,196   -37.8 %
Net interest income after provision for loan and lease losses   24,083     20,608   16.9 %   30,606     126,629     112,936   12.1 %
 

Non-Interest Income (Loss):

Wealth management revenues 5,927 4,717 25.7 % 5,387 20,571 17,967 14.5 %
Banking service revenues 3,648 3,756 -2.9 % 3,182 13,788 11,797 16.9 %
Mortgage banking activities   2,859     1,999   43.0 %   2,758     9,876     9,554   3.4 %
Total banking and wealth management revenues 12,434 10,472 18.7 % 11,327 44,235 39,318 12.5 %
Total loss on other-than-temporarily impaired securities (15,018 ) - -100.0 % - (15,018 ) (39,674 ) 62.1 %
Portion of loss on securities recognized in other comprehensive income   -     -   0.0 %   -     -     22,508   -100.0 %
Other-than-temporary impairments on securities (15,018 ) - -100.0 % - (15,018 ) (17,166 ) 12.5 %
 
Net accretion (amortization) of FDIC loss-share indemnification asset (3,189 ) 1,416 -325.2 % (2,422 ) (3,379 ) 4,330 -178.0 %
Fair value adjustment on FDIC equity appreciation instrument - - 0.0 % - - 909 -100.0 %
Net gain (loss) on:
Sales of securities 4,895 (22,775 ) 121.5 % 13,971 27,996 15,032 86.2 %
Derivatives (4,851 ) 22,953 -121.1 % (709 ) (13,220 ) (36,824 ) 64.1 %
Trading securities 8 21 -61.9 % 14 (15 ) 23 -165.2 %
Foreclosed real estate (1,383 ) (241 ) -473.9 % (199 ) (1,717 ) (524 ) -227.7 %
Early extinguishment of repurchase agreement - - 0.0 % (4,790 ) (4,790 ) - -100.0 %
Other   (3,251 )   53   -6234.0 %   (14 )   (3,103 )   99   -3234.3 %
Total non-interest income (loss), net   (10,355 )   11,899   -187.0 %   17,178     30,989     5,197   496.3 %
 

Non-Interest Expenses:

Compensation and employee benefits 11,041 11,354 -2.8 % 11,593 45,552 41,723 9.2 %
Professional and service fees 5,236 4,939 6.0 % 5,309 21,742 16,491 31.8 %
Occupancy and equipment 4,419 5,073 -12.9 % 4,369 17,407 18,556 -6.2 %
Insurance 1,709 1,788 -4.4 % 1,302 6,642 7,006 -5.2 %
Electronic banking charges 1,724 1,392 23.9 % 1,375 5,709 4,504 26.8 %
Taxes, other than payroll and income taxes 1,299 1,348 -3.6 % 1,184 4,721 5,106 -7.5 %
Advertising, business promotion, and strategic initiatives 1,589 1,639 -3.1 % 1,686 5,975 4,978 20.0 %
Loan servicing and clearing expenses 907 512 77.1 % 975 3,979 3,051 30.4 %
Foreclosure and repossession expenses 633 1,311 -51.7 % 819 2,936 2,830 3.7 %
Communication 411 656 -37.3 % 391 1,623 2,561 -36.6 %
Director and investor relations 328 365 -10.1 % 352 1,305 1,463 -10.8 %
Printing, postage, stationery and supplies 327 393 -16.8 % 292 1,264 1,188 6.4 %
Other   785     879   -10.7 %   769     3,447     3,141   9.7 %
Total non-interest expenses   30,408     31,649   -3.9 %   30,416     122,302     112,598   8.6 %
 
Income (loss) before income taxes (16,680 ) 858 -2044.1 % 17,368 35,316 5,535 538.0 %
Income tax expense (benefit)   (4,794 )   (4,216 ) -13.7 %   580     866     (4,298 ) 120.1 %
Net income (loss) (11,886 ) 5,074 -334.3 % 16,788 34,450 9,833 250.4 %
Less: Dividends on preferred stock (1,200 ) (1,200 ) 0.0 % (1,201 ) (4,802 ) (5,334 ) 10.0 %
Less: Deemed dividend on preferred stock beneficial conversion feature   -     -   0.0 %   -     -     (22,711 ) 100.0 %
Income available (loss) to common shareholders $ (13,086 ) $ 3,874   -437.8 % $ 15,587   $ 29,648   $ (18,212 ) 262.8 %
 
 
ORIENTAL FINANCIAL GROUP                              
Financial Summary                                  
(NYSE: OFG)

QUARTER ENDED

YEAR TO DATE

  31-Dec-11 31-Dec-10 % 30-Sep-11 31-Dec-11 31-Dec-10 %

(Dollars in thousands, except per share data)

 

PRE-TAX OPERATING INCOME

Net interest income $ 27,883 $ 30,590 -8.8 % $ 32,470 $ 140,442 $ 135,132 3.9 %
Provision for non-covered loan and lease losses (3,800 ) (3,700 ) -2.7 % (3,800 ) (15,200 ) (15,914 ) 4.5 %
Recapture of (provision for) covered loan and lease losses, net - (6,282 ) 100.0 % 1,936 1,387 (6,282 ) 122.1 %
Core non-interest income:
Wealth management revenues 5,927 4,717 25.7 % 5,387 20,571 17,967 14.5 %
Banking service revenues 3,648 3,756 -2.9 % 3,182 13,788 11,797 16.9 %
Mortgage banking activities   2,859     1,999   43.0 %   2,758     9,876     9,554   3.4 %
Total core non-interest income 12,434 10,472 18.7 % 11,327 44,235 39,318 12.5 %
Non-interest expenses   (30,408 )   (31,649 ) 3.9 %   (30,416 )   (122,302 )   (112,598 ) -8.6 %
Total Pre-tax operating income $ 6,109   $ (569 ) 1173.6 % $ 11,517   $ 48,562   $ 39,656   22.5 %
 

INCOME (LOSS) PER COMMON SHARE

Basic $ (0.31 ) $ 0.08   -467.7 % $ 0.35   $ 0.67   $ (0.50 ) 234.6 %
Diluted $ (0.31 ) $ 0.08   -467.7 % $ 0.35   $ 0.67   $ (0.50 ) 232.0 %
 

COMMON STOCK DATA

Average common shares outstanding and equivalents   42,668     46,433   -8.1 %   44,105     44,524     36,810   21.0 %
 
Cash dividends per share of common stock $ 0.06   $ 0.05   19.9 % $ 0.05   $ 0.21   $ 0.17   23.5 %
Cash dividends declared on common shares $ 2,476   $ 2,320   6.7 % $ 2,202   $ 9,153   $ 6,820   34.2 %
Pay-out ratio   -19.58 %   60.02 % -132.6 %   14.16 %   31.54 %   -33.71 % 193.6 %
 

SELECTED FINANCIAL DATA

 

PERFORMANCE RATIOS:

Return on average assets   -0.68 %   0.28 % -343.8 %   0.95 %   0.48 %   0.14 % 244.9 %
Return on average common equity   -7.98 %   2.35 % -439.9 %   9.41 %   4.50 %   -3.63 % 224.0 %
Equity-to-assets ratio   10.39 %   10.02 % 3.7 %   10.36 %   10.39 %   10.02 % 3.7 %
Efficiency ratio   75.42 %   77.08 % -2.1 %   69.45 %   66.22 %   64.54 % 2.6 %
Expense ratio   1.13 %   1.32 % -13.9 %   1.19 %   1.21 %   1.14 % 5.7 %
 

TAX EQUIVALENT SPREAD

Interest-earning assets 4.11 % 4.50 % -8.6 % 4.46 % 4.60 % 4.74 % -3.0 %
Tax equivalent adjustment   0.81 %   1.46 % -44.5 %   0.54 %   0.82 %   1.54 % -46.8 %
Interest-earning assets - tax equivalent 4.92 % 5.96 % -17.4 % 5.00 % 5.42 % 6.28 % -13.7 %
Interest-bearing liabilities   2.43 %   2.55 % -4.8 %   2.49 %   2.48 %   2.57 % -3.5 %
Tax equivalent interest rate spread   2.50 %   3.41 % -26.8 %   2.51 %   2.94 %   3.71 % -20.8 %
Tax equivalent interest rate margin   2.56 %   3.36 % -23.8 %   2.57 %   2.99 %   3.65 % -18.1 %
 

NORMAL SPREAD

Investments 2.23 % 3.35 % -33.3 % 3.08 % 3.41 % 3.96 % -13.9 %
Loans
Loans not covered under shared-loss agreements with the FDIC 5.75 % 6.27 % -8.3 % 5.80 % 5.77 % 6.14 % -6.0 %
Loans covered under shared-loss agreements with the FDIC   17.12 %   9.07 % 88.7 %   13.73 %   12.12 %   8.93 % 35.7 %
  9.18 %   7.32 % 25.4 %   8.25 %   7.81 %   6.97 % 12.1 %
Interest-earning assets   4.11 %   4.50 % -8.6 %   4.46 %   4.60 %   4.74 % -3.0 %
 
Deposits
Retail deposits   1.66 %   2.11 % -21.56 %   1.79 %   1.81 %   2.23 % -18.83 %
Wholesale deposits   2.45 %   1.42 % 72.82 %   2.49 %   2.14 %   1.76 % 21.59 %
  1.79 %   1.95 % -8.36 %   1.92 %   1.87 %   2.12 % -11.79 %
 
Borrowings
Securities sold under agreements to repurchase 2.69 % 2.84 % -5.4 % 2.72 % 2.73 % 2.84 % -3.9 %
Advances from FHLB and other borrowings 3.83 % 3.78 % 1.3 % 3.80 % 3.83 % 3.77 % 1.6 %
FDIC-guaranteed term notes 3.88 % 3.88 % -0.1 % 3.85 % 3.87 % 3.87 % 0.0 %
Purchase money note issued to the FDIC - - - - - 0.73 % -100.0 %
Subordinated capital notes   3.50 %   3.41 % 2.7 %   3.38 %   3.41 %   3.43 % -0.6 %
  2.82 %   2.95 % -4.2 %   2.85 %   2.86 %   2.81 % 1.8 %
Interest-bearing liabilities   2.43 %   2.55 % -4.8 %   2.49 %   2.48 %   2.57 % -3.5 %
 
Interest rate spread   1.69 %   1.95 % -13.6 %   1.97 %   2.12 %   2.17 % -2.3 %
Interest rate margin   1.76 %   1.90 % -7.5 %   2.03 %   2.17 %   2.11 % 2.8 %
 

AVERAGE BALANCES

Investments $ 4,628,789 $ 4,574,376 1.2 % $ 4,698,429 $ 4,721,157 $ 4,755,710 -0.7 %
Loans   1,717,081     1,861,734   -7.8 %   1,715,035     1,742,137     1,656,758   5.2 %
Interest-earning assets $ 6,345,870   $ 6,436,110   -1.4 % $ 6,413,464   $ 6,463,294   $ 6,412,468   0.8 %
 
Deposits $ 2,354,569 $ 2,603,713 -9.6 % $ 2,382,490 $ 2,435,868 $ 2,289,167 6.4 %
Borrowings   3,802,972     3,954,446   -3.8 %   3,881,440     3,882,101     4,272,056   -9.1 %
Interest-bearing liabilities $ 6,157,541   $ 6,558,159   -6.1 % $ 6,263,930   $ 6,317,969   $ 6,561,223   -3.7 %
 
                 
ORIENTAL FINANCIAL GROUP
Financial Summary                                
(NYSE: OFG)

AS OF

  31-Dec-11   31-Dec-10   % 30-Sep-11

(Dollars in thousands)

 

BALANCE SHEET

 
Cash and cash equivalents $ 605,477   $ 448,936   34.9 % $ 517,336  
 
Securities purchased under agreements to resell   -     -   0.0 %   165,000  
 
Investments:
Trading securities 180 1,330 -86.5 % 346
Investment securities available-for-sale, at fair value, with amortized cost of $2,873,682
(December 31, 2010 - $3,661,146, September 30, 2011 - $3,154,057)
FNMA and FHLMC certificates 2,676,781 3,282,189 -18.4 % 2,834,979
Obligations of US Government sponsored agencies - 3,000 -100.0 % -
CMO's issued by US Government sponsored agencies 130,045 177,805 -26.9 % 232,130
GNMA certificates 28,336 127,714 -77.8 % 31,367
Structured credit investments 37,288 41,693 -10.6 % 40,976
Obligations of Puerto Rico Government and political subdivisions 81,482 67,663 20.4 % 81,354
Other debt securities   5,980     -   100.0 %   6,166  
Total investment securities available-for-sale   2,959,912     3,700,064   -20.0 %   3,226,972  
FNMA and FHLMC certificates held-to-maturity, at amortized cost, with fair value
of $904,556 (December 31, 2010 - $675,721, September 30, 2011 - $854,633) 884,026 689,917 28.1 % 837,920
Federal Home Loan Bank (FHLB) stock, at cost 23,779 22,496 5.7 % 23,779
Other investments   73     150   -51.3 %   75  
Total investments   3,867,970     4,413,957   -12.4 %   4,089,092  
 
Loans:
Loans not covered under shared-loss agreements with the FDIC:
Mortgage 819,651 872,482 -6.1 % 837,164
Commercial 301,573 234,992 28.3 % 270,633
Leasing 25,768 10,257 151.2 % 21,283
Consumer   41,301     35,942   14.9 %   37,241  
Total loans receivable not covered under shared-loss agreements with the FDIC, gross 1,188,293 1,153,673 3.0 % 1,166,321
Less: Deferred loan fees, net   (4,545 )   (4,354 ) -4.4 %   (4,683 )
Total loans receivable not covered under shared-loss agreements with the FDIC 1,183,748 1,149,319 3.0 % 1,161,638
Allowance for loan and lease losses on non-covered loans   (37,010 )   (31,430 ) -17.8 %   (35,869 )
Loans receivable, net 1,146,738 1,117,889 2.6 % 1,125,769
Mortgage loans held for sale   26,939     33,979   -20.7 %   33,619  
Total loans not covered under shared-loss agreements with the FDIC, net 1,173,677 1,151,868 1.9 % 1,159,388
 
Loans covered under shared-loss agreements with the FDIC:
Loans secured by 1-4 family residential properties 140,824 166,865 -15.6 % 143,861
Construction and development secured by 1-4 family residential properties 16,976 17,253 -1.6 % 16,044
Commercial and other construction 325,832 388,240 -16.1 % 341,388
Leasing 36,122 79,093 -54.3 % 45,598
Consumer   13,778     18,546   -25.7 %   14,839  
Loans covered under shared-loss agreements with the FDIC 533,532 669,997 -20.4 % 561,730
Allowance for loan and lease losses on covered loans   (37,256 )   (49,286 ) 24.4 %   (37,240 )
Loans covered under shared-loss agreements with the FDIC, net   496,276     620,711   -20.0 %   524,490  
Total loans, net 1,669,953 1,772,579 -5.8 % 1,683,878
 
FDIC shared-loss indemnification asset 392,367 473,629 -17.2 % 392,096
Foreclosed real estate covered under shared-loss agreements with the FDIC 13,867 14,871 -6.8 % 16,319
Foreclosed real estate not covered under shared-loss agreements with the FDIC 13,812 11,969 15.4 % 14,675
Other repossessed assets covered under shared-loss agreements with the FDIC 708 2,350 -69.9 % 1,824
Core deposit intangible 1,185 1,328 -10.8 % 1,221
Accrued interest receivable 20,182 28,716 -29.7 % 24,246
Deferred tax asset, net 32,023 30,732 4.2 % 33,102
Prepaid FDIC Insurance 11,599 16,796 -30.9 % 12,882
Premises and equipment, net 21,520 23,941 -10.1 % 22,498
Other prepaid expenses 6,498 7,858 -17.3 % 10,477
Servicing asset 10,454 9,695 7.8 % 10,014
Tax credits 1,303 3,432 -62.0 % 2,605
Debt issuance costs 1,067 2,299 -53.6 % 1,375
Goodwill 2,701 2,701 0.0 % 2,701
Investment in statutory trust 1,086 1,086 0.0 % 1,086
Derivative assets 9,317 28,315 -67.1 % 6,707
Accounts receivable and other assets   10,577     15,816   -33.1 %   14,154  
Total assets $ 6,693,666   $ 7,311,006   -8.4 % $ 7,023,288  
 
                   
ORIENTAL FINANCIAL GROUP
Financial Summary                    
(NYSE: OFG)

AS OF

  31-Dec-11 31-Dec-10 % 30-Sep-11

(Dollars in thousands)

 
Deposits:
Non-interest bearing demand deposits $ 190,001 $ 170,705 11.3 % $ 181,711
Interest-bearing savings and demand deposits 1,041,529 1,019,539 2.2 % 1,054,226
Individual retirement accounts 361,411 361,972 -0.2 % 356,952
Retail certificates of deposit   378,146     477,180   -20.8 %   395,902  
Total Retail Deposits 1,971,087 2,029,396 -2.9 % 1,988,791
Institutional deposits 168,301 280,617 -40.0 % 184,022
Brokered Deposits   255,879     278,875   -8.2 %   205,552  
Total deposits   2,395,267     2,588,888   -7.5 %   2,378,365  
 
Borrowings:
Short-term borrowings 39,920 42,460 -6.0 % 46,619
Securities sold under agreements to repurchase 3,056,238 3,456,781 -11.6 % 3,356,322
Advances from FHLB 281,753 281,753 0.0 % 281,753
FDIC-guaranteed term notes 105,834 105,834 0.0 % 105,112
Subordinated capital notes   36,083     36,083   0.0 %   36,083  
Total borrowings   3,519,828     3,922,911   -10.3 %   3,825,889  
Total interest-bearing liabilities   5,915,095     6,511,799   -9.2 %   6,204,254  
 
FDIC net settlement payable 115 22,954 -99.5 % 41
Derivative liabilities 47,425 64 74001.6 % 48,146
Accrued expenses and other liabilities   35,476     43,858   -19.1 %   42,931  
Total liabilities   5,998,111     6,578,675   -8.8 %   6,295,372  
 
Preferred stock 68,000 68,000 0.0 % 68,000
Common stock 47,809 47,808 0.0 % 47,808
Additional paid-in capital 499,096 498,435 0.1 % 498,875
Legal surplus 50,178 46,331 8.3 % 51,274
Retained earnings 68,149 51,502 32.3 % 82,616
Treasury stock, at cost (74,808 ) (16,732 ) -347.1 % (45,376 )
Accumulated other comprehensive income, net   37,131     36,987   0.4 %   24,719  
Total stockholders' equity   695,555     732,331   -5.0 %   727,916  
Total liabilities and stockholders' equity $ 6,693,666   $ 7,311,006   -8.4 % $ 7,023,288  
 

SELECTED FINANCIAL DATA AT YEAR-END

Common shares outstanding at end of period   41,245     46,349   -11.0 %   44,015  
Book value per common share $ 15.22   $ 14.33   6.2 % $ 14.99  
Tangible book value per common share $ 15.12   $ 14.25   6.1 % $ 14.90  
 
Trust assets managed $ 2,216,088 $ 2,175,270 1.9 % $ 2,193,425
Broker-dealer assets gathered   1,926,148     1,695,635   13.6 %   1,791,408  
Total assets managed $ 4,142,236   $ 3,870,905   7.0 % $ 3,984,833  
 
                   
ORIENTAL FINANCIAL GROUP
Financial Summary                    
(NYSE: OFG)

AS OF

  31-Dec-11 31-Dec-10 % 30-Sep-11

CAPITAL DATA

Leverage capital ratio 9.65 % 9.50 % 1.6 % 10.12 %
Leverage capital ratio required 4.00 % 4.00 % 4.00 %
Actual tier 1 capital $ 661,614 $ 699,415 -5.4 % $ 705,939
Tier 1 capital required $ 274,231 $ 294,472 -6.9 % $ 279,070
Excess over regulatory requirement $ 387,383 $ 404,943 -4.3 % $ 426,869
 
Tier 1 risk-based capital ratio 31.56 % 31.04 % 1.7 % 31.47 %
Tier 1 risk-based capital ratio required 4.00 % 4.00 % 4.00 %
Actual tier 1 risk-based capital $ 661,614 $ 699,415 -5.4 % $ 705,939
Tier 1 risk-based capital required $ 83,845 $ 90,139 -7.0 % $ 89,742
Excess over regulatory requirement $ 577,769 $ 609,276 -5.2 % $ 616,197
Risk-weighted assets $ 2,096,125 $ 2,253,487 -7.0 % $ 2,243,558
 
Total risk-based capital ratio 32.84 % 32.32 % 1.6 % 32.74 %
Total risk-based capital ratio required 8.00 % 8.00 % 8.00 %
Actual total risk-based capital $ 688,415 $ 728,241 -5.5 % $ 734,547
Total risk-based capital required $ 167,690 $ 180,279 -7.0 % $ 179,485
Excess over regulatory requirement $ 520,725 $ 547,962 -5.0 % $ 555,062
Risk-weighted assets $ 2,096,125 $ 2,253,487 -7.0 % $ 2,243,558
 
Tangible common equity to total assets 9.32 % 9.03 % 3.2 % 9.34 %
Tangible common equity to total risk-weighted assets 29.75 % 29.30 % 1.5 % 29.24 %
Total equity to total assets 10.39 % 10.02 % 3.7 % 10.36 %
Total equity to risk-weighted assets 33.18 % 32.50 % 2.1 % 32.44 %
 
Tier 1 common equity to risk-weighted assets 28.32 % 28.02 % 1.1 % 28.43 %
Tier 1 common equity $ 593,614 $ 631,415 -6.0 % $ 637,939
 
                               
ORIENTAL FINANCIAL GROUP
Financial Summary                                      
(NYSE: OFG)

QUARTER ENDED

YEAR TO DATE

31-Dec-11 31-Dec-10 % 30-Sep-11 31-Dec-11 31-Dec-10 %

(Dollars in thousands)

 

Loan Production and Purchases Summary:

Mortgage loans production $ 47,584 $ 50,726 -6.2 % $ 52,699 $ 205,389 $ 220,253 -6.7 %
Mortgage loans purchased   -     6,626   -100.0 %   -     7,395     24,925   -70.3 %
Total mortgage   47,584     57,352   -17.0 %   52,699     212,784     245,178   -13.2 %
Commercial 47,466 34,381 38.1 % 30,037 139,785 101,042 38.3 %
Leasing 5,522 5,242 5.3 % 5,582 21,646 11,633 86.1 %
Consumer   6,698     4,503   48.7 %   5,734     21,738     13,758   58.0 %
Total loan production and purchases $ 107,270   $ 101,478   5.7 % $ 94,052   $ 395,953   $ 371,611   6.6 %
 

CREDIT DATA

Net credit losses, excluding loans covered under shared-loss agreements

with the FDIC:

Mortgage $ 1,300 $ 978 32.9 % $ 1,391 $ 5,735 $ 3,773 52.0 %
Commercial 976 488 100.0 % 385 2,345 2,753 -14.8 %
Consumer 367 445 -17.5 % 305 1,353 1,230 10.0 %
Leasing   16     -   100.0 %   80     186     -   100.0 %
Total net credit losses $ 2,659   $ 1,911   39.1 % $ 2,161   $ 9,619   $ 7,756   24.0 %
Net credit losses to average loans outstanding   0.89 %   0.66 % 34.6 %   0.73 %   0.81 %   0.67 % 21.8 %
 
                   

AS OF

31-Dec-11 31-Dec-10 % 30-Sep-11
 
Allowance for loan and lease losses on non-covered loans $ 37,010   $ 31,430   17.8 % $ 35,869  

Allowance coverage ratios:

Allowance for loan and lease losses to total loans (excluding loans covered under
shared-loss agreements with the FDIC)   3.06 %   2.66 % 15.1 %   3.00 %
Allowance for loan and lease losses to non-performing loans   27.46 %   25.59 % 7.3 %   27.08 %
 

Non-performing assets summary (excluding assets covered under shared-loss

agreements with the FDIC):

Mortgage $ 97,340 $ 98,729 -1.4 % $ 94,520
Commercial 36,988 23,619 56.6 % 37,471
Consumer 334 421 -20.7 % 334
Leasing   102     35   191.4 %   119  
Non-performing loans 134,764 122,804 9.7 % 132,444
Foreclosed properties   13,812     11,969   15.4 %   14,675  
Non-performing assets $ 148,576   $ 134,773   10.2 % $ 147,119  
 
Non-performing loans to:
Total loans, excluding covered loans   11.38 %   10.68 % 6.6 %   11.40 %
Total assets, excluding covered assets   2.19 %   1.85 % 18.4 %   2.06 %
Total capital   19.38 %   16.77 % 15.6 %   18.19 %
Non-performing assets to total assets, excluding covered assets   2.42 %   2.03 % 19.2 %   2.28 %
Non-performing assets to total capital   21.36 %   18.40 % 16.1 %   20.21 %
 

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