Oriental reports $34.1M in 2Q ’13 income
OFG Bancorp, parent company of Oriental Bank, reported second quarter results Monday that reflected $34.1 million in income available to common shareholders, or $0.68 per share diluted, compared to $13.8 million, or $0.34 per share, in the second quarter of 2012, and $17.7 million, or $0.37 per share, in the first quarter of 2013.
Net interest margin was 5.56 percent compared to 4.71 percent in the preceding quarter, the report showed.
Company executives said that second quarter results reflect the positive impact of a $37 million reduction in tax provisions stemming from the increase in deferred tax assets as a result of enactment during the quarter of amendments to the Puerto Rico Income Tax Code, and a $2.1 million recovery from the sale of a claim in the Lehman Brothers bankruptcy.
“The second quarter was an excellent one for OFG Bancorp,” said OFG President José Rafael Fernández. “Our results, both organic and with the quarter specific items, were strong.”
“Strategically, Oriental is growing in Puerto Rico as a major player with a solid track record for consistent, quality service in retail and commercial banking and financial services. Operationally, we are demonstrating our ability to smoothly integrate OFG and the former BBVA-PR businesses into a larger, more effective platform,” he said.
Meanwhile, the quarter’s results also reflect the negative impact of $21 million in additional provision for loan and lease losses due to reclassification to held-for-sale of $59 million of non-performing residential mortgage loans, $7.1 million in additional amortization of the FDIC Indemnification Asset from stepped up cost recoveries on certain loan pools, and $5.3 million in planned integration expenses.
“During the quarter, we saw record levels of loan income and production, wealth management and banking fee income, and retail and commercial deposits,” said Fernández, who is also the institution’s CEO and board chairman.
“Reclassifying substantially all non-performing residential loans that Oriental originated prior to 2009 as held-for-sale has increased our ability to further enhance our already strong credit quality,” he said.
Interest income from loans increased 14 percent from the preceding quarter, to a record $114.6 million, while interest income from investments of $11.2 million declined 14.8 percent.
“The foregoing results reflect OFG’s strategic decision last year to focus its growth on higher yielding loans and sharply reduce the size of its investment portfolio when interest rates were at record low levels,” the report noted.
For the six months ended June 30, 2013, income available to common shareholders increased to $51.8 million, or $1.05 per share diluted, compared to $23.2 million, or $0.57 per share, in the year ago period.
The bank’s total bank and wealth management revenues increased 3 percent from the preceding quarter, to a record $24 million, reflecting the expansion of services to OFG’s larger client base.
Meanwhile, operating expenses of $63.5 million increased from $61.3 million from the preceding quarter. The increase primarily reflects the $2 million impact for the first and second quarters’ application of the new 1 percent tax on gross revenues which was part of the government’s tax code amendments, the bank said.