About OFG Bancorp

OFG Bancorp (OFG), through its subsidiaries, provides a range of banking and financial services. OFG provides comprehensive banking and financial services and solutions to its clients through Oriental and various other subsidiaries, including commercial, consumer, auto, and mortgage lending, financial planning, insurance sales, investment advisory and security brokerage services, as well as corporate and individual trust services. OFG provides most of its products and services to clients in Puerto Rico and U.S. Virgin Islands (the USVI) and certain loan products in the continental United States. OFG operates through various subsidiaries, including a commercial bank, Oriental Bank (the bank), a securities broker-dealer and investment adviser, Oriental Financial Services LLC (Oriental Financial Services), an insurance agency, Oriental Insurance, LLC (Oriental Insurance), a captive reinsurance company, OFG Reinsurance Ltd (OFG Reinsurance), OFG Ventures LLC (OFG Ventures), which holds investments, and a commercial lender, OFG USA LLC (OFG USA), which is a subsidiary of the bank. Most of the company's subsidiaries are based in San Juan, Puerto Rico and the USVI, except for OFG USA which is organized in Delaware, but operates out of Cornelius, North Carolina, OFG Reinsurance, which is based in the Cayman Islands, and OFG Ventures, which is based on Delaware. As part of the company's ongoing strategic reviews, OFG sold its retirement plan administration business in its subsidiary Oriental Pension Consultants, Inc. (OPC) effective as of December 30, 2022, and thereafter ceased its operations. Strategy The company's strategy highly differentiates OFG through a sales and service business model and culture that emphasizes convenience and accessibility through digital channels while creating a simple, self-service and enjoyable customer experience. The company's strategy to become a digital first bank will continue to be carried by investing in its technology to make systems and processes oriented to provide digital customer service interactions above all else aiming for self-service to become the norm; analytics to enhance its vision, empower business and drive profitability by anticipating its customers' needs and proactively offer them solutions through the most appropriate channel; and business Development to build an engine of growth with intelligence of customer behavior and experience across the whole sales process from awareness to the final purchase and amplify digital sales models. Segments The company operates through three segments: Banking, Wealth Management, and Treasury. Banking Activities The bank, OFG's main subsidiary, is a full-service Puerto Rico commercial bank with its main office located in San Juan, Puerto Rico. The bank has branches throughout Puerto Rico and branches in the USVI. As an FDIC-insured Puerto Rico-chartered commercial bank, it is subject to examination by the FDIC and the Office of the Commissioner of Financial Institutions of Puerto Rico (the OCFI). The bank offers banking services, such as commercial, consumer, auto, and mortgage lending, savings and time deposit products, wealth management services, and corporate and individual trust services, and capitalizes on its retail banking network to provide commercial and mortgage lending products to its clients. The bank has a wholly-owned operating subsidiary, OFG USA, which is organized in Delaware but operates out of Cornelius, North Carolina. It also has two international banking entities (each an IBE) organized in Puerto Rico pursuant to the International Banking Center Regulatory Act of Puerto Rico, as amended (the IBE Act), a unit operating within the bank, named Oriental Overseas (the IBE Unit), and the other is a wholly-owned subsidiary of the bank, named Oriental International Bank, Inc. (the IBE Subsidiary). The IBE Unit and the IBE Subsidiary offer the bank certain Puerto Rico tax advantages, and their services are limited under Puerto Rico law to persons and assets/liabilities located outside of Puerto Rico. Banking activities include the bank's branches and mortgage banking activities with traditional retail banking products such as deposits, commercial loans, consumer loans, auto loans, and mortgage loans. The Bank's lending activities are primarily with consumers located in Puerto Rico and the USVI. The Bank's lending transactions include a diversified number of industries and activities, all of which are encompassed within four main categories: commercial, consumer, mortgage and auto loans. OFG's mortgage banking activities are conducted through a division of the bank. The mortgage banking activities include the origination of mortgage loans for the bank's own portfolio, the sale of loans directly into the secondary market or the securitization of conforming loans into mortgage-backed securities, and the purchase or assumption of the right to service loans originated by others. The bank originates Federal Housing Administration (FHA) insured mortgages, Veterans Administration (VA) guaranteed mortgages, and Rural Housing Service (RHS) guaranteed loans that are primarily securitized for issuance of Government National Mortgage Association (GNMA) mortgage-backed securities which can be resold to individual or institutional investors in the secondary market. Conventional loans that meet the underwriting requirements for sale or exchange under standard Federal National Mortgage Association (the FNMA) or the Federal Home Loan Mortgage Corporation (the FHLMC) programs are referred to as conforming mortgage loans and are also securitized for issuance of FNMA or FHLMC mortgage-backed securities. The bank is an approved seller of FNMA mortgage loans for issuance of FNMA mortgage-backed securities. The bank is also an approved issuer of GNMA mortgage-backed securities. The bank is the master servicer of its mortgage loan portfolio and the GNMA, FNMA and FHLMC pools that it issues. The bank had a subservicing arrangement with a third party for a portion of its acquired loan portfolio that was terminated on May 1, 2023. After such termination, OFG services all of its mortgage loan portfolio. Wealth Management Activities Wealth management activities at OFG are generated by three wholly-owned subsidiaries and a division of the bank. These activities include such businesses as securities brokerage, insurance agency, captive reinsurance, pension plan administration and servicing, trust services, and other financial services. Oriental Financial Services LLC, a Puerto Rico limited liability company, is OFG's subsidiary engaged in securities brokerage and investment advisory activities. Its operations are part of OFG's strategy of providing retail and institutional clients fully integrated financial solutions. These can include a variety of investment alternatives, such as tax-advantaged fixed income securities, mutual funds, stocks, and bonds. It also offers separately managed accounts and mutual fund asset allocation programs sponsored by unaffiliated professional asset managers. These services are designed to meet each client's individual needs and preferences, including transaction-based pricing and asset-based fee pricing. Oriental Financial Services is a registered securities broker-dealer pursuant to the Securities Exchange Act of 1934, as amended (the Exchange Act) and a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation. Oriental Financial Services does not carry customer accounts and is, accordingly, exempt from the Customer Protection Rule (SEC Rule 15c3-3). It clears securities transactions through Pershing LLC, a clearing agent that carries the accounts of its customers on a fully disclosed basis. Oriental Insurance LLC, a Puerto Rico limited liability company, is OFG's subsidiary engaged in insurance agency services in Puerto Rico. Oriental Insurance currently earns commissions by acting as a licensed insurance agent in connection with the issuance of insurance policies by unaffiliated insurance companies and continues to cross market its services to OFG's existing customer base. OFG Reinsurance Ltd., a Cayman Islands company, is OFG's subsidiary engaged in the reinsurance business. It reinsures credit insurance policies on consumer loans originated by the bank, as well as personal accident and health policies underwritten by unaffiliated insurers. Oriental Pension Consultants Inc., a Florida corporation, is an OFG subsidiary that was engaged in the administration and servicing of retirement plans in the U.S., Puerto Rico, and the Caribbean. In 2022, the bank sold the rights to administer and service the retirement plans of its customers, and Oriental Pension Consultants ceased operations. Corporate and individual trust services are provided by Oriental Trust, the bank's trust division. Treasury Activities Treasury activities encompass all of the company's treasury-related functions. OFG's investment portfolio consists of mortgage-backed securities, obligations of U.S. government-sponsored agencies, US Treasury securities and money market instruments. U.S. agency mortgage-backed securities, the largest component, consist principally of pools of residential mortgage loans that are made to consumers and could be either retained as available for sale (AFS) or held to maturity (HTM) securities or resold in the form of pass-through certificates in the secondary market, the payment of interest and principal of those pools is guaranteed by GNMA, FNMA or FHLMC. Market Area OFG continues to develop commercial relationships in the United States with its U.S. commercial loan program. This program, through its internally developed and managed relationship with commercial and investment banks across the United States, engages primarily in the activities of purchasing participations in credit facilities through underwriting and portfolio management of commercial and industrial loans to middle-market and lower middle-market commercial borrowers in the mainland United States. Regulation and Supervision As a publicly-traded financial services firm, the company is subject to extensive regulation under the U.S. federal, Puerto Rico and other laws and are also subject to supervision by regulators in the markets where it conducts its business. OFG is a financial holding company subject to supervision and regulation by the Board of Governors of the Federal Reserve System (Federal Reserve Board) under the BHC Act, as amended by the Gramm-Leach-Bliley Financial Services Modernization Act of 1999, as amended (the Gramm-Leach-Bliley Act) and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended (the Dodd-Frank Act). OFG elected to be treated as a financial holding company as permitted by the Gramm-Leach-Bliley Act. OFG is required to file with the Federal Reserve Board and the U.S. Securities and Exchange Commission (the SEC) periodic reports and other information concerning its own business operations and those of its subsidiaries. The bank is regulated by various agencies in the United States and the Commonwealth of Puerto Rico. Its main regulators are the OCFI and the FDIC. The bank is subject to extensive regulation and examination by the OCFI and the FDIC and is subject to the Federal Reserve Board's regulation of transactions between the bank and its affiliates. The bank's activities in the USVI are also subject to regulation and examination by the USVI Banking Board. The federal and Puerto Rico laws and regulations which are applicable to the bank regulate, among other things, the scope of its business, its investments, its reserves against deposits, the timing of the availability of deposited funds, and the nature and amount of and collateral for certain loans. OFG's mortgage banking business is subject to the rules and regulations of FHA, VA, RHS, FNMA, FHLMC, HUD and GNMA with respect to the origination, processing, servicing and selling of mortgage loans and the sale of mortgage-backed securities. Mortgage origination activities are subject to, among others, the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Real Estate Settlement Procedures Act and the regulations promulgated thereunder which, among other things, prohibit discrimination and require the disclosure of certain basic information to mortgagors concerning credit terms and settlement costs. OFG is also subject to regulation by the OCFI with respect to, among other things, licensing requirements and maximum origination fees on certain types of mortgage loan products. OFG and its subsidiaries are subject to the rules and regulations of certain other regulatory agencies. Oriental Financial Services, as a registered broker-dealer, is subject to the supervision, examination and regulation of FINRA, the SEC, and the OCFI in matters relating to the conduct of its securities business, including record keeping and reporting requirements, supervision and licensing of employees, and obligations to customers. As a registered investment adviser, it is subject to the supervision, examination and regulation of the SEC in connection with its advisory activities and is subject to custody, disclosure, books and records, contractual and other requirements. Oriental Insurance is subject to the supervision, examination and regulation of the Office of the Commissioner of Insurance of Puerto Rico in matters relating to insurance sales, including but not limited to, licensing of employees, sales practices, charging of commissions and reporting requirements. OFG Reinsurance is subject to regulation by the Cayman Islands Monetary Authority (CIMA). The laws and regulations of the Cayman Islands require that, among other things, OFG Reinsurance maintain minimum levels of statutory capital, surplus and liquidity, meet solvency standards, submit to periodic examinations of its financial condition and restrict payments of dividends and reductions of capital. Statutes, regulations and policies that OFG Reinsurance is subject to may also restrict the ability of OFG Reinsurance to write insurance and reinsurance policies, make certain investments and distribute funds. The bank is the only depository institution subsidiary of OFG. For example, the ability of the bank to pay dividends on its common stock is restricted by the Puerto Rico Banking Act of 1933, as amended (the Banking Act), the Federal Deposit Insurance Act, as amended (the FDIA), and the FDIC regulations. The FHLB system, of which the Bank is a member, consists of 11 regional FHLBs supervised and regulated by the Federal Housing Finance Agency. The FHLB serves as a credit facility for member institutions within their assigned regions. The FHLB system, of which the bank is a member, consists of 11 regional FHLBs supervised and regulated by the Federal Housing Finance Agency. The bank is subject to FDIC deposit insurance assessments. Transactions between the bank and any of its affiliates are governed by sections 23A and 23B of the Federal Reserve Act. As a Puerto Rico-chartered commercial bank, the bank is subject to regulation and supervision by the OCFI under the Banking Act, which contains provisions governing the organization of the bank, rights and responsibilities of directors, officers and stockholders, as well as the corporate powers, savings, lending, capital and investment requirements and other aspects of the bank and its affairs. The business and operations of the bank's IBE Unit and IBE Subsidiary are subject to supervision and regulation by the OCFI. Pursuant to the IBE Act and the IBE Regulations, the bank's IBE Unit and IBE Subsidiary have to maintain in Puerto Rico the books and records of all their transactions in the ordinary course of business. OFG is subject to the provisions of the U.S. Bank Holding Company Act of 1956, as amended, (the BHC Act) and accordingly, subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the Federal Reserve Board). OFG's principal subsidiary is Oriental Bank (Oriental or the bank), an FDIC insured Puerto Rico commercial bank founded as a federal savings and loan. History The company was founded in 1964. The company was incorporated in 1996 under the laws of the Commonwealth of Puerto Rico. It was formerly known as Oriental Financial Group Inc. and changed its name to OFG Bancorp in 2013.