OFG: Noisy Quarter Hides Favorable Trends; Raising EPS Estimates and Target Price; Reiterating Outperform Rating.

OFG reported 3Q19 net income to common shareholders of $7.4 million, down 69.2% compared to the $22.4 million posted in 2Q19. On a per share basis, 3Q19 results were $0.11 compared to $0.43 in the prior quarter. There were some substantial one time or nonrecurring items that affected 3Q19 results, including the sale of $121 million of NPLs, the sale of $322 million of MBS, merger expenses, and several one-time credits. Collectively, the nonrecurring items reduced earnings by $19.1 million or $0.37 per share (after-tax). Adjusted 3Q19 EPS was $0.48 excluding the impact of these items. Adjusted 3Q19 results exceeded our $0.38 estimate and the $0.45 median Street estimate. Driving the better-than-expected results versus our estimate were a lower than-expected loan loss provision (roughly $2.0 million lower excluding the impact of the adjustments) and a lower effective tax rate than we anticipated.

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