8-K
OFG BANCORP (OFG)
UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________________
FORM 8-K
_________________________
CURRENT REPORTPursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 29, 2020
OFGBancorp
(Exact Name of Registrant as Specified inits Charter)
| Commonwealth of Puerto Rico | 001-12647 | 66-0538893 | |
|---|---|---|---|
| (State or other Jurisdiction of Incorporation) | (Commission File No.) | (I.R.S. Employer Identification No.) | |
| Oriental Center, 15^th^ Floor | |||
| 254 Muñoz Rivera Avenue | |||
| San Juan, Puerto Rico | 00918 | ||
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (787) 771-6800
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the<br> Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the<br> Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b)<br> under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c)<br> under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operationsand Financial Condition.
On April 29, 2020, OFG Bancorp (the “Company”) announced the results for the quarter ended March 31, 2020. A copy of the Company’s press release is attached as an exhibit to this report.
Item 9.01.Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description<br> of Document | |
|---|---|---|
| 99 | Press release by the Company dated<br> April 29, 2020. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| OFG BANCORP | ||
|---|---|---|
| Date:<br> April 29, 2020 | By: | /s/<br> Maritza Arizmendi |
| Maritza<br> Arizmendi | ||
| Executive<br> Vice President and Chief Financial Officer |
Exhibit99
OFG Bancorp Reports 1Q20 Results
SAN JUAN, Puerto Rico, April 29, 2020 – OFG Bancorp (NYSE: OFG) today reported results for the first quarter ended March 31, 2020.
1Q20
Highlights
· Strong increase in core net revenues due to the December 31, 2019 acquisition of the Puerto Rico and U.S. Virgin Islands operations of The Bank of Nova Scotia (Scotiabank), and a major reserve build reflecting CECL as well as anticipated changes in Puerto Rico and USVI macroeconomic scenarios due to the effect of the coronavirus pandemic.
· Core net revenues of $131.3 million, CECL “Day 1” allowance of $89.9 million, provision for credit losses of $48.5 million, $4.7 million gain on sale of investment securities, and $0.00 earnings per share. This compares in the year-ago quarter to net core revenues of $99.3 million, provision of $12.2 million, no gain, and $0.42 earnings per share fully diluted.
· All March 31, 2020 regulatory capital ratios increased from December 31, 2019 and continue to be significantly above requirements for a well-capitalized institution. CET1 capital ratio of 11.67%. More than $1.6 billion available liquidity from cash and unencumbered securities.
· Our core operations performed well in what became a challenging and unique operating environment. Net interest margin was 4.94%, loan production totaled $280 million, and there was a large reduction in wholesale funding due to the significant increase in client deposits from the acquisition.
· Following the implementation of local stay-at-home restrictions mid-March, Oriental has achieved uninterrupted and excellent levels of service through all channels while maintaining employee and customer safety and social distancing.
· Years of investments in first to market customer-facing technology, some with unique features, is resulting in noticeable increases by retail and business customers who want to get things done fácil, rápido, hecho.
Conference
Call
A conference call to discuss 1Q20 results, outlook and related matters will be held today at 10:00 AM Eastern Time. Phone (888) 562-3356 or (973) 582-2700. Conference ID: 555-0929. The call can also be accessed live on www.ofgbancorp.com. Webcast replay will be available shortly thereafter.
CEO Comment
José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board, said: “The rapid spread around the world of Covid-19 is affecting everybody, personally and financially. Our heart goes out to those who have lost loved ones, are ill, or are suffering monetarily.
“Our priority going into the pandemic was to keep our employees safe while maintaining our nimble and proactive approach to business. OFG entered this crisis in a position of strength, and we remain well capitalized and highly liquid with a CET1 ratio of 11.67% and $1.6 billion in liquidity. Coming out of it, our goal is to maintain our strong capital and liquidity positions so we can continue to help customers now and throughout the inevitable recovery.
“Our first quarter performance confirms the strength of our business, balance sheet and franchise during this critical time. This is the direct result of the proactive and customer focused culture we have developed through the years, our ongoing technology investments, and the effective strategies we have put to work.
“We believe we are in a strong position going forward. In addition to closing the Scotiabank acquisition last year, we significantly reduced higher-cost non-core funding and sold a large portion of non-performing loans. During the first quarter, we increased our allowance for loan losses by $114 million, to a total of $231 million, equal to 3.41% of loans.
“In March, for our employees, we implemented a comprehensive program combining workplace safety, technology and special benefits. More than 90% are working on site or remote. For our retail and business customers, we launched payment relief programs, waived late charges and ATM and overdraft fees, and increased amounts that can be withdrawn or transferred electronically. As a result, we have achieved uninterrupted and superior levels of service through all channels while maintaining employee and customer safety and social distancing.
“The investments we made early on in our digital capabilities are helping customers continue to do banking. Our teams worked quickly to design and deploy a new digital forbearance tool as well as one for the SBA’s Payroll Protection Program. More than 43% of retail customers who requested forbearance have done so digitally, and 100% of small businesses applied for PPP loans digitally. Technology is a core part of our strategy, and we will continue to look for new and innovative ways to help our customers.
“All of this has facilitated close communication with our customers, enabling us to provide the financial advice and resources they need to navigate this challenging time. For example, in the first round of PPP, we helped 900 small businesses with more than 25,000 employees access more than $140 million in loans.
“Our deepest appreciation goes to the front line first responders and healthcare professionals dealing with the coronavirus. We also want to thank our teams at OFG and Oriental on the other front line for doing an outstanding job helping consumers and businesses manage the financial challenges during this crisis.
“For more than half a century, we have been there to help customers manage their finances, own homes, buy cars, build businesses, protect themselves with insurance, and save for retirement. We’re ready to help them now and will be for the decades ahead.”
Current Expected Credit Losses (CECL)
On January 1, 2020, the Company implemented the new accounting rules for the measurement of Credit Losses on Financial Instruments (CECL). OFG believes CECL makes the allowance for credit losses more comparable between originated and acquired financial assets. The January 1, 2020 or “Day 1” impact was as follows:
· For non-purchased credit deteriorated (non-PCD) loans, which represents 70% of the total loan portfolio, a $39.4 million allowance was recorded. This resulted in a charge against retained earnings of $25.5 million net of tax.
· For purchased credit deteriorated (PCD) loans, which includes Eurobank, BBVA and Scotiabank acquired loans and represents 30% of the total loan portfolio, a $50.5 million adjustment was made through the allowance and loan balances with no impact in capital.
Income
Statement
Unlessotherwise noted, the following compares data for the first quarter 2020 to thefirst quarter 2019. Balances are quarterly averages.
· Net interest income was $105.2 million, up 29%. This reflected increased earning assets as a result of the Scotiabank acquisition, partially offset by Net Interest Margin of 4.94%. NIM declined 45 basis points mainly due to a higher proportion of 30-year, fixed rate residential mortgages from the Scotiabank acquisition. The NIM decline also reflected the full effect of FRB’s second half 2019 rate cuts (75 basis points) and the partial effect of the March 2020 rate cuts (150 basis points) on cash and variable rate commercial loans.
· Total interest income was $123.8 million, up 31%, due to increased interest earning assets partially offset by lower yield. Interest earning assets totaled $8.6 billion, up 39%. Yield was 5.82%, down 43 basis points.
· Total interest expense was $18.6 million, up 44%, due to increased balances of lower-cost deposits partially offset by decreased balances of higher-cost borrowings. Cost of deposits was $16.6 million, up 84%, primarily reflecting a 59% increase in balances from the Scotiabank acquisition and a 2 basis point increase in cost, before the deposit intangible amortization from the acquisition. Cost of borrowings was $2.0 million, down 49%, due to a 52% decrease in balances and a 13 basis point increase in cost.
· Provision for credit losses was $48.5 million, up $36.3 million. This included a $34.1 million provision to incorporate changes in the macro-economic scenario and qualitative adjustments as a result of the Covid-19 pandemic.
· Total banking and financial service revenues were $26.2 million, up 49%, primarily due to the Scotiabank acquisition. Banking service revenues were higher due to the Company’s larger customer base. Mortgage banking revenues reflected increased servicing fees. Wealth management grew with the addition of Scotiabank’s insurance business.
· Other income, net was $4.8 million, most of which was due to the previously mentioned gain on sale of $316.0 million in mortgage backed securities.
· Total non-interest expense was $85.9 million, an increase of $33.8 million, primarily due to the Scotiabank acquisition.
· The effective tax rate was 14.2% compared to 33.0%. 1Q20 reflected a 26% 2020 estimated tax rate partially reduced by quarter specific items. The 26% rate is based on a higher proportion of exempt income and income taxed at preferential rates.
Balance
Sheet
Unless otherwise noted, the followingcompares data at March 31, 2020 to March 31, 2019. Balances are end-of-period.Because the purchase of Scotiabank closed on December 31, 2019, balances as ofand subsequent to that date included those from the acquisition.
· Loans held for investment were $6.8 billion, up $2.2 billion, primarily due to the Scotiabank acquisition. Compared to December 31, 2019, loans increased $27.3 million.
· Loan production was $280.1 million, up $3.7 million. Mortgage generation increased while consumer, auto and commercial declined. Production was strong in January and February, benefitting from the increased customer base and added capabilities from the Scotiabank acquisition, but was significantly lower in March. The US Loan Program added $47.1 million, an increase of $15.4 million.
· Cash and cash equivalents were $1.3 billion, up $816.9 million. Compared to December 31, 2019, they increased $473.2 million from the MBS sale, regular MBS payments, and the maturity of Treasuries.
· Total investments were $668.8 million, down $583.9 million. Compared to December 31, 2019, they declined $419.1 million.
· Customer deposits, excluding brokered, were $7.6 billion, up $3.1 billion, primarily reflecting the Scotiabank acquisition. Compared to December 31, 2019, customer deposits increased $108.6 million as both retail and commercial clients retained higher balances.
· Brokered deposits were $255.5 million, down $195.7 million. Compared to December 31, 2019, they increased $12.0 million. Borrowings were $163.8 million, down $385.3 million. Compared to December 31, 2019, they were down $141.8 million. The overall declines in brokered deposits and borrowings are part of the strategy to replace higher cost funding with lower cost core deposits.
· Total stockholder’s equity was $1.02 billion, up $1.4 million. Compared to December 31, 2019, it was $22.8 million lower due to the decline in retained earnings mainly as a result of the CECL “Day 1” impact partially offset by an increase in accumulated other comprehensive income from improved mark to market on securities.
· Book value per common share was $18.33, up $0.03 from a year-ago and down $0.42 from December 31, 2019. Tangible book value per share was $15.60, down $0.97 year-over year primarily due to the Scotiabank acquisition, and down $0.37 from December 31, 2019.
Credit
Quality
Unless otherwise noted, the followingcompares data at March 31, 2020 to March 31, 2019.
· The allowance for loan and lease losses totaled $230.8 million and 3.41% of loans held for investment, for increases of $136.7 million and 90 basis points, respectively. Compared to December 31, 2019, the allowance increased $147.3 million and as a percentage of loans 126 basis points. The increases primarily reflected the impact of CECL “Day 1” and changes to macroeconomic scenarios due to the Covid-19 pandemic.
· Net charge offs were $24.0 million, an 87% increase. The NCO rate was 1.44%, up 8 basis points. NCOs reflected a 77% increase in average loans held for investment as a result of the Scotiabank acquisition.
· The early delinquency loan rate was 3.16%, down 44 basis points, and the total delinquency rate was 6.38%, up 4 basis points.
· Total non-performing loans excluding PCD loans were $98.6 million, down $29.1 million, primarily due to NPLs sold in 2019. The corresponding non-performing loan rate was 2.07%, down 131 basis points.
Capital
Position
· March 31, 2020 regulatory capital ratios increased from December 31, 2019 and continue to be significantly above requirements for a well-capitalized institution.
· Leverage ratio was 10.14%, up 90 bps; common equity Tier 1 capital ratio was 11.67%, up 76 bps; Tier 1 risk-based capital ratio was 13.34%, up 70 bps; and total risk-based capital ratio was 14.60%, up 69 bps.
Financial
Supplement & Conference Call Presentation
OFG’s Financial Supplement, with full financial tables for the quarter ended March 31, 2020, and the 1Q20 Conference Call Presentation, can be found on the Webcasts, Presentations & Other Files page, on OFG’s Investor Relations website at www.ofgbancorp.com.
Non-GAAP
Financial Measures
In addition to our financial information presented in accordance with GAAP, management uses certain “non-GAAP financial measures” within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. See Tables 8-1 and 8-2 in OFG’s above-mentioned Financial Supplement for reconciliation of GAAP to non-GAAP Measures and Calculations.
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 the forward-looking statements.
Factors that might cause such a difference include, but are not limited to (i) the rate of 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) changes to the financial condition of the government of Puerto Rico; (iv) amendments to the fiscal plan approved by the Financial Oversight and Management Board of Puerto Rico; (v) determinations in the court-supervised debt-restructuring process under Title III of PROMESA for the Puerto Rico government and all of its agencies, including some of its public corporations; (vi) the amount of government, private and philanthropic financial assistance for the reconstruction of Puerto Rico’s critical infrastructure, which suffered catastrophic damages caused by hurricane Maria; (vii) the pace and magnitude of Puerto Rico’s economic recovery; (viii) the potential impact of damages from future hurricanes and natural disasters in Puerto Rico; (ix) the fiscal and monetary policies of the federal government and its agencies; (x) changes in federal bank regulatory and supervisory policies, including required levels of capital; (xi) the relative strength or weakness of the commercial and consumer credit sectors and the real estate market in Puerto Rico; (xii) the performance of the stock and bond markets; (xiii) competition in the financial services industry; (xiv) possible legislative, tax or regulatory changes; and (xv) the impact of the coronavirus pandemic.
For a discussion of such factors and certain risks and uncertainties to which OFG is subject, see OFG’s annual report on Form 10-K for the year ended December 31, 2019, 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, OFG assumes no obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.
About OFG
Bancorp
Now in its 56^th^ year in business, OFG Bancorp is a diversified financial holding company that operates under U.S., Puerto Rico and U.S. Virgin Islands banking laws and regulations. Its three principal subsidiaries, Oriental Bank, Oriental Financial Services and Oriental Insurance, provide a wide range of retail and commercial banking, lending and wealth management products, services, and technology, primarily in Puerto Rico and U.S. Virgin Islands. Visit us at **Error! Hyperlink reference not valid.**www.ofgbancorp.com.
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Contacts
Puerto Rico& USVI: Idalis Montalvo (idalis.montalvo@orientalbank.com) at (787) 777-2847
US: Gary Fishman (gfishman@ofgbancorp.com) and Steven Anreder (sanreder@ofgbancorp.com) at (212) 532-3232
| OFG Bancorp | ||||
|---|---|---|---|---|
| Financial Supplement | ||||
| The information contained in this Financial Supplement is<br> preliminary and based on data available at the time of the earnings<br> presentation, and investors should refer to our March 31, 2020 Quarterly<br> Report on Form 10-Q once it is filed with the Securities and Exchange<br> Commission. | ||||
| Table of Contents | ||||
| Pages | ||||
| OFG Bancorp (Consolidated Financial Information) | ||||
| Table 1: | Financial and Statistical Summary - Consolidated | 2 | ||
| Table 2: | Consolidated Statements of Operations | 3 | ||
| Table 3: | Consolidated Statements of Financial Condition | 4 | ||
| Table 4: | Information on Loan Portfolio and Production | 5 | ||
| Table 5: | Average Balances, Net Interest Income and Net Interest Margin | 6 | ||
| Table 6: | Loan Information and Performance Statistics | 7-9 | ||
| Table 7: | Allowance for Credit Losses | 10 | ||
| Table 8: | Reconciliation of GAAP to Non-GAAP Measures and Calculation of<br> Regulatory | |||
| Capital | 11-12 | |||
| Table 9: | Notes to Financial Summary, Selected Metrics, Loans, and<br> Consolidated | |||
| Financial Statements (Tables 1-8) | 13 |
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| OFG<br> Bancorp (NYSE: OFG) | **** | **** | **** | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Table 1: Financial and Statistical Summary -<br> Consolidated | ||||||||||||||
| 2020 | **** | 2019 | 2019 | 2019 | 2019 | |||||||||
| (Dollars in thousands, except per share data)<br> (unaudited) | Q1 | **** | Q4 | Q3 | Q2 | Q1 | ||||||||
| Earnings | **** | **** | **** | |||||||||||
| Net interest income | $ | 105,168 | (c) | $ | 79,209 | $ | 80,711 | $ | 81,085 | $ | 81,789 | |||
| Non-interest income, net (core) | **** | 26,166 | (c) | 19,196 | 18,542 | 18,074 | 17,553 | |||||||
| Non-interest expense | **** | 85,923 | (c) | 78,913 | 50,728 | 51,452 | 52,152 | |||||||
| Pre-provision net revenues | **** | 50,628 | **** | 20,007 | 52,161 | 52,581 | 47,293 | |||||||
| Provision for credit losses, excluding<br> PCD/PCI loans | **** | 42,350 | (a)(b) | 18,859 | (e) | 23,427 | (d)(e)(f) | 8,616 | (f) | 11,631 | ||||
| Provision for credit losses on PCD/PCI loans | **** | 6,180 | (a)(b) | 4,209 | (e) | 20,343 | (d)(e)(f) | 9,089 | (f) | 618 | ||||
| Net income (loss) before income taxes | **** | 2,098 | **** | (3,061) | 8,391 | 34,876 | 35,044 | |||||||
| Income tax expense (benefit) | **** | 297 | **** | (2,070) | 1,008 | 10,897 | 11,574 | |||||||
| Net income (loss) | $ | 1,801 | **** | $ | (991) | (c) | $ | 7,383 | $ | 23,979 | $ | 23,470 | ||
| Common Share Statistics | **** | **** | **** | |||||||||||
| Earnings (loss) per common share - basic | $ | - | **** | $ | (0.05) | (c) | $ | 0.11 | $ | 0.44 | $ | 0.43 | ||
| Earnings<br> (loss) per common share - diluted | $ | - | **** | $ | (0.05) | (c) | $ | 0.11 | $ | 0.43 | $ | 0.42 | ||
| Average common shares outstanding | **** | 51,404 | **** | 51,360 | 51,345 | 51,330 | 51,305 | |||||||
| Average common shares outstanding and<br> equivalents | **** | 51,713 | **** | 51,791 | 51,772 | 51,680 | 51,626 | |||||||
| Cash dividends per common share | $ | 0.07 | **** | $ | 0.07 | $ | 0.07 | $ | 0.07 | $ | 0.07 | |||
| Book value per common share (period end) | $ | 18.33 | (a) | $ | 18.75 | $ | 18.84 | $ | 18.76 | $ | 18.30 | |||
| Tangible book value per common share (period<br> end) | $ | 15.60 | (a) | $ | 15.96 | $ | 17.11 | $ | 17.03 | $ | 16.56 | |||
| Balance Sheet (Average Balances) | **** | **** | **** | |||||||||||
| Loans | $ | 6,687,987 | **** | $ | 4,500,075 | $ | 4,539,045 | $ | 4,514,030 | $ | 4,504,725 | |||
| Interest-earning assets | **** | 8,556,533 | **** | 5,886,383 | 5,981,756 | 6,034,338 | 6,152,202 | |||||||
| Total assets | **** | 9,326,602 | **** | 6,325,334 | 6,433,658 | 6,496,423 | 6,605,328 | |||||||
| Total deposits | **** | 7,752,446 | **** | 4,850,979 | 4,921,317 | 4,880,112 | 4,890,628 | |||||||
| Interest-bearing deposits | **** | 6,053,482 | **** | 3,740,133 | 3,827,270 | 3,782,209 | 3,791,081 | |||||||
| Borrowings | **** | 271,800 | **** | 304,365 | 340,194 | 459,802 | 562,152 | |||||||
| Stockholders' equity | **** | 1,043,481 | (a) | 1,062,720 | 1,061,541 | 1,037,057 | 1,017,546 | |||||||
| Common stockholders' equity | **** | 961,611 | (a) | 980,850 | 979,671 | 955,187 | 935,676 | |||||||
| Performance Metrics | **** | **** | **** | |||||||||||
| Net interest margin | **** | 4.94% | **** | 5.34% | 5.35% | 5.39% | 5.39% | |||||||
| Return on average assets | **** | 0.08% | **** | -0.06% | 0.46% | 1.48% | 1.42% | |||||||
| Return on average tangible common<br> stockholders' equity | **** | 0.08% | **** | -1.17% | 2.58% | 10.32% | 10.32% | |||||||
| Efficiency ratio | **** | 65.42% | **** | 80.19% | 51.11% | 51.89% | 52.50% | |||||||
| Full-time<br> equivalent employees, period end | **** | 2,460 | **** | 2,455 | 1,436 | 1,417 | 1,394 | |||||||
| Credit Quality Metrics | **** | **** | **** | |||||||||||
| Allowance for loan and lease losses | $ | 230,755 | (a)(b) | $ | 116,539 | $ | 154,343 | $ | 162,642 | $ | 162,488 | |||
| Allowance as a % of loans held for<br> investment | **** | 3.41% | **** | 1.73% | 3.41% | 3.52% | 3.57% | |||||||
| Net charge-offs | $ | 24,034 | **** | $ | 14,395 | $ | 34,486 | (d)(e)(f) | $ | 12,982 | $ | 12,878 | ||
| Net charge-off rate | **** | 1.44% | **** | 1.48% | 3.56% | (d)(e)(f) | 1.36% | 1.36% | ||||||
| Early delinquency rate (30 - 89 days past<br> due) | **** | 3.16% | **** | 3.07% | 3.63% | 3.50% | 3.60% | |||||||
| Total delinquency rate (30 days and over) | **** | 6.38% | **** | 5.85% | 5.40% | 6.07% | 6.34% | |||||||
| Capital Ratios (Non-GAAP) | **** | **** | **** | |||||||||||
| Leverage ratio | **** | 10.14% | (g) | 9.24% | 15.41% | 15.20% | 14.64% | |||||||
| Common<br> equity Tier 1 capital ratio | **** | 11.67% | (g) | 10.91% | 17.98% | 17.48% | 17.09% | |||||||
| Tier 1 risk-based capital ratio | **** | 13.34% | (g) | 12.64% | 20.43% | 19.87% | 19.49% | |||||||
| Total risk-based capital ratio | **** | 14.60% | (g) | 13.91% | 21.71% | 21.14% | 20.77% | |||||||
| Tangible common equity ("TCE")<br> ratio | **** | 8.80% | (g) | 8.96% | 14.07% | 13.71% | 13.05% | |||||||
| (a) On January 1, 2020, the Company<br> implemented ASU No. 2016-13: Measurement of Credit Losses on Financial<br> Instruments "(CECL)" using the modified retrospective approach. As<br> a result, a 39.2 million allowance for credit losses was recorded for<br> Non-PCD loans and 0.2 million for unused commitments with the corresponding<br> adjustment reducing retained earnings, net of a 13.9 million deferred tax<br> effect. For PCD loans, including BBVA and Eurobank acquired book plus the<br> recently acquired Scotiabank, the adjustment amounting to 50.5 million was<br> made through the allowance and loan balances with no impact in capital. As<br> disclosed in the Company’s 2019 Form 10-K, the Company had initially elected<br> to phase-in the January 1, 2020 (“day 1”) impact to retained earnings to<br> regulatory capital, over a three-year transition period beginning in 2020. As<br> part of its response to the impact of COVID-19, in March 2020, the Federal<br> Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller<br> of the Currency issued an interim final rule that provided the option to<br> temporarily delay the effects of CECL on regulatory capital for two years,<br> followed by a three-year transition period. In addition, for the first two<br> years, a uniform 25% “scaling factor” is introduced to approximate the<br> portion of the post day-one allowance attributable to CECL relative to the<br> incurred loss methodology. The 25% scaling factor is calibrated to<br> approximate an overall after-tax impact of differences in allowances under<br> CECL vs the incurred loss methodology. | ||||||||||||||
| (b) During March 2020, a global pandemic was<br> declared by the World Health Organization related to the rapidly growing<br> outbreak of a novel strain of coronavirus (COVID-19). The pandemic has<br> significantly impacted the economic conditions in P.R. and the U.S., creating<br> significant uncertainties. As a result of these developments, we have<br> increased our provision for credit losses in the 1Q 2020 by 34.1 million. | ||||||||||||||
| (c) On December 31, 2019, the Company<br> acquired Scotiabank's Puerto Rico and USVI operations, incurring in merger<br> and restructuring charges of 21.5 million during 4Q 2019. At December 31,<br> 2019, the consolidated statement of financial condition contemplated the<br> effects of the Scotiabank PR & USVI acquisition. Nevertheless, the<br> consolidated statement of operations did not contemplated the effects of the<br> Scotiabank PR & USVI acquisition until January 1, 2020. | ||||||||||||||
| (d) During 3Q 2019, the Company received 2.4<br> million proceeds from the sale of fully charged-off originated auto and<br> consumer loans. | ||||||||||||||
| (e) During 3Q 2019, the Company decided to<br> sell mostly non-performing loans, increasing the provision by 37.2 million.<br> Originated loans that were transferred to held-for-sale amounted to 25.3<br> million at September 30, 2019, the remaining were purchased credit impaired<br> loans. Loans were sold during 4Q 2019, with an additional increase in the<br> provision of 6.6 million. | ||||||||||||||
| (f) During 2Q 2019, the Company decided to<br> sell mostly non-performing mortgage loans increasing the provision by 8.8<br> million. Most of these loans were sold in 3Q 2019, increasing the provision<br> by an additional 1.8 million. | ||||||||||||||
| (g)<br> During 1Q 2020, the Company decided to early implement Simplifications to the<br> Capital Rule, which simplified the regulatory capital treatment for mortgage<br> servicing assets (MSA) and certain deferred tax assets arising from temporary<br> differences (temporary difference DTAs). It Increased common equity tier 1<br> (CET1) capital threshold deductions from 10 percent to 25 percent and removes<br> the aggregate 15 percent CET1 threshold deduction. However, it retains the<br> 250 percent risk weight applicable to non-deducted amounts of MSAs and<br> temporary difference DTAs. | ||||||||||||||
| 2 |
All values are in US Dollars.
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| OFG Bancorp (NYSE: OFG) | **** | |||||||||||||
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| Table 2: Consolidated Statements of Operations | ||||||||||||||
| Quarter Ended | ||||||||||||||
| March 31, | **** | December 31, | September 30, | June 30, | March 31, | |||||||||
| (Dollars in thousands, except per share data) (unaudited) | 2020 | **** | 2019 | 2019 | 2019 | 2019 | ||||||||
| Interest income: | **** | |||||||||||||
| Loans | **** | |||||||||||||
| Non-PCD/Non-PCI loans | $ | 87,204 | **** | $ | 74,142 | $ | 74,910 | $ | 73,649 | $ | 72,025 | |||
| PCD/PCI loans | **** | 29,298 | **** | **** | 10,762 | 10,863 | 11,432 | 12,094 | ||||||
| Total interest income from loans | **** | 116,502 | **** | 84,904 | 85,773 | 85,081 | 84,119 | |||||||
| Investment securities | 7,262 | **** | 6,271 | 7,883 | 9,175 | 10,591 | ||||||||
| Total interest income | 123,764 | (b) | 91,175 | 93,656 | 94,256 | 94,710 | ||||||||
| Interest expense: | **** | **** | ||||||||||||
| Deposits | **** | **** | ||||||||||||
| Core deposits | 15,034 | **** | 7,957 | 8,256 | 7,466 | 6,214 | ||||||||
| Brokered deposits | 1,586 | **** | 1,804 | 2,298 | 2,526 | 2,835 | ||||||||
| Total deposits | 16,620 | (b) | 9,761 | 10,554 | 9,992 | 9,049 | ||||||||
| Borrowings | 1,976 | **** | 2,205 | 2,391 | 3,179 | 3,872 | ||||||||
| Total interest expense | 18,596 | **** | 11,966 | 12,945 | 13,171 | 12,921 | ||||||||
| Net interest income | **** | 105,168 | **** | 79,209 | 80,711 | 81,085 | 81,789 | |||||||
| Provision for credit losses, excluding PCD/PCI loans | 42,350 | **** | 18,859 | 23,427 | (d)(e)(f) | 8,616 | 11,631 | |||||||
| Provision for credit losses on PCD/PCI loans | 6,180 | **** | 4,209 | 20,343 | (d)(e)(f) | 9,089 | 618 | |||||||
| Total provision for credit losses | **** | 48,530 | (a)(b) | 23,068 | 43,770 | 17,705 | 12,249 | |||||||
| Net interest income after<br> provision for loan and lease losses | 56,638 | **** | 56,141 | 36,941 | 63,380 | 69,540 | ||||||||
| Non-interest income: | **** | **** | ||||||||||||
| Banking service revenues | 15,646 | **** | 10,812 | 10,813 | 10,776 | 10,465 | ||||||||
| Wealth management revenues | 7,286 | **** | 7,062 | 6,611 | 6,669 | 5,882 | ||||||||
| Mortgage banking activities | 3,234 | **** | 1,322 | 1,118 | 629 | 1,206 | ||||||||
| Total banking and financial service revenues | **** | 26,166 | (b) | 19,196 | 18,542 | 18,074 | 17,553 | |||||||
| Bargain purchase from Scotiabank PR & USVI acquisition | 409 | **** | 315 | - | - | - | ||||||||
| Other income, net | 4,808 | (c) | 200 | 3,636 | (c) | 4,874 | (c) | 103 | ||||||
| Total non-interest income, net | 31,383 | **** | 19,711 | 22,178 | 22,948 | 17,656 | ||||||||
| Non-interest expense: | **** | **** | ||||||||||||
| Compensation and employee benefits | 35,544 | **** | 21,817 | 20,500 | 19,875 | 20,341 | ||||||||
| Occupancy, equipment and infrastructure costs | 11,439 | **** | 7,488 | 7,307 | 7,511 | 7,746 | ||||||||
| Merger and restructuring charges | 304 | **** | 21,499 | (b) | 1,556 | 1,000 | - | |||||||
| Net (gain) loss on sale of foreclosed real estate and other<br> repossessed assets | (193) | **** | 541 | 794 | 21 | 1,070 | ||||||||
| General and administrative expenses | 36,114 | **** | 25,450 | 18,476 | 20,482 | 20,699 | ||||||||
| Total operating expenses | 83,208 | **** | 76,795 | 48,633 | 48,889 | 49,856 | ||||||||
| Credit related expenses | 2,715 | **** | 2,118 | 2,095 | 2,563 | 2,296 | ||||||||
| Total non-interest expense | **** | 85,923 | (b) | 78,913 | 50,728 | 51,452 | 52,152 | |||||||
| Income (loss) before income taxes | **** | 2,098 | **** | (3,061) | 8,391 | 34,876 | 35,044 | |||||||
| Income tax expense (benefit) | 297 | **** | (2,070) | 1,008 | 10,897 | 11,574 | ||||||||
| Net income (loss) | **** | 1,801 | (a) | (991) | (b) | 7,383 | 23,979 | 23,470 | ||||||
| Less: dividends on preferred stock | **** | **** | **** | |||||||||||
| Other preferred stock | **** | (1,628) | **** | (1,628) | (1,628) | (1,628) | (1,628) | |||||||
| Net income (loss) available to common shareholders | $ | 173 | **** | $ | (2,619) | $ | 5,755 | $ | 22,351 | $ | 21,842 | |||
| (a) During March 2020, a global pandemic was declared by the<br> World Health Organization related to the rapidly growing outbreak of a novel<br> strain of coronavirus (COVID-19). The pandemic has significantly impacted the<br> economic conditions in P.R. and the U.S., creating significant<br> uncertainties. As a result of these developments, we have increased our<br> provision for credit losses in the 1Q 2020 by 34.1 million. | ||||||||||||||
| (b) On December 31, 2019, the Company acquired Scotiabank's<br> Puerto Rico and USVI operations, incurring in merger and restructuring<br> charges of 21.5 million during 4Q 2019. At December 31, 2019, the<br> consolidated statement of financial condition contemplated the effects of the<br> Scotiabank PR & USVI acquisition. Nevertheless, the consolidated<br> statement of operations did not contemplated the<br> effects of the Scotiabank PR & USVI acquisition until January 1, 2020. | ||||||||||||||
| (c) During 1Q 2020, 2Q 2019 and 3Q 2019, the Company sold 316<br> million, 350 million and 322 million available-for-sale mortgage-backed<br> securities, respectively, and recognized a gain in the sale of 4.7 million,<br> 4.8 million and 3.5 million. | ||||||||||||||
| (d) During 3Q 2019, the Company received 2.4 million proceeds<br> from the sale of fully charged-off originated auto and consumer loans. | ||||||||||||||
| (e) During 3Q 2019, the Company decided to sell mostly<br> non-performing loans, increasing the provision by 37.2 million. Originated<br> loans that were transferred to held-for-sale amounted to 25.3 million at<br> September 30, 2019, the remaining were purchased credit impaired loans. Loans<br> were sold during 4Q 2019, with an additional increase in the provision of<br> 6.6 million. | ||||||||||||||
| (f) During 2Q 2019, the Company decided to sell mostly<br> non-performing mortgage loans increasing the provision by 8.8 million. Most<br> of these loans were sold in 3Q 2019, increasing the provision by an<br> additional 1.8 million. | ||||||||||||||
| 3 |
All values are in US Dollars.
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| OFG Bancorp (NYSE: OFG) | **** | **** | **** | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Table 3: Consolidated Statements of Financial Condition | **** | **** | **** | ||||||||||
| **** | December 31, | September 30, | June 30, | March 31, | |||||||||
| (Dollars in thousands) (unaudited) | **** | 2019 | 2019 | 2019 | 2019 | ||||||||
| Cash and cash equivalents | 1,325,941 | **** | $ | 852,757 | $ | 962,887 | $ | 677,430 | $ | 509,023 | |||
| Investments: | **** | **** | |||||||||||
| Trading securities | 29 | **** | 37 | 41 | 412 | 381 | |||||||
| Investment securities available-for-sale, at fair value, with<br> amortized cost of 648,565 and allowance for credit losses of 0 | **** | **** | |||||||||||
| (December 31, 2019 - 1,074,474; September 30, 2019 -<br> 520,960; June 30, 2019 - 860,911; | **** | **** | |||||||||||
| March 31, 2019 - 1,248,750) | **** | **** | |||||||||||
| Mortgage-backed securities | 355,637 | **** | 673,886 | 505,102 | 843,333 | 1,225,225 | |||||||
| US treasury notes | 298,986 | **** | 397,183 | 10,938 | 10,907 | 10,859 | |||||||
| Other investment securities | 2,837 | **** | 3,100 | 3,055 | 3,193 | 3,385 | |||||||
| Total investment securities available-for-sale | 657,460 | (c) | 1,074,169 | (b) | 519,095 | (c) | 857,433 | (c) | 1,239,469 | ||||
| Federal Home Loan Bank (FHLB) stock, at cost | 10,301 | **** | 13,048 | 10,525 | 12,821 | 12,800 | |||||||
| Other investments | 973 | **** | 560 | 57 | 3 | 3 | |||||||
| Total investments | 668,763 | **** | 1,087,814 | 529,718 | 870,669 | 1,252,653 | |||||||
| Loans, net | 6,541,174 | (a) | 6,641,847 | (b) | 4,407,190 | (d) | 4,474,497 | 4,401,401 | |||||
| Other assets: | **** | **** | |||||||||||
| Prepaid expenses | 44,633 | **** | 52,648 | 14,244 | 11,903 | 7,830 | |||||||
| Deferred tax asset, net | 196,129 | (a) | 176,740 | 112,602 | 111,147 | 112,744 | |||||||
| Foreclosed real estate and repossessed properties | 30,388 | **** | 33,236 | 30,488 | 32,016 | 34,439 | |||||||
| Premises and equipment, net | 81,834 | **** | 81,105 | 69,754 | 71,001 | 69,017 | |||||||
| Goodwill | 86,069 | **** | 86,069 | 86,069 | 86,069 | 86,069 | |||||||
| Right of use assets | 36,844 | **** | 39,112 | 19,318 | 20,419 | 20,860 | |||||||
| Core deposit, customer relationship intangible and other<br> intangibles | 54,174 | **** | 56,965 | 2,491 | 2,783 | 3,076 | |||||||
| Servicing asset | 49,287 | **** | 50,779 | 10,125 | 10,134 | 10,623 | |||||||
| Accounts receivable and other assets | 120,997 | **** | 138,589 | 88,619 | 96,059 | 95,456 | |||||||
| Total assets | 9,236,233 | **** | $ | 9,297,661 | (b) | $ | 6,333,505 | $ | 6,464,127 | $ | 6,603,191 | ||
| Deposits: | **** | **** | |||||||||||
| Demand deposits | 3,711,492 | **** | $ | 3,579,115 | $ | 2,228,256 | $ | 2,219,911 | $ | 2,218,186 | |||
| Savings accounts | 1,829,054 | **** | 1,815,044 | 1,206,569 | 1,200,408 | 1,231,170 | |||||||
| Time deposits | 2,023,211 | **** | 2,060,953 | 1,154,871 | 1,136,411 | 996,519 | |||||||
| Brokered deposits | 255,514 | **** | 243,498 | 288,362 | 388,407 | (c) | 451,226 | ||||||
| Total deposits | 7,819,271 | **** | 7,698,610 | (b) | 4,878,058 | 4,945,137 | 4,897,101 | ||||||
| Borrowings: | **** | **** | |||||||||||
| Securities sold under agreements to repurchase | 50,103 | **** | 190,274 | 190,261 | 240,324 | (c) | 431,566 | ||||||
| Advances from FHLB and other borrowings | 77,601 | **** | 79,204 | 79,603 | 80,423 | 81,397 | |||||||
| Subordinated capital notes | 36,083 | **** | 36,083 | 36,083 | 36,083 | 36,083 | |||||||
| Total borrowings | 163,787 | **** | 305,561 | 305,947 | 356,830 | 549,046 | |||||||
| Other liabilities: | **** | **** | |||||||||||
| Derivative liabilities | 2,059 | **** | 913 | 1,159 | 985 | 439 | |||||||
| Acceptances outstanding | 11,763 | **** | 21,599 | 21,796 | 23,610 | 25,791 | |||||||
| Lease liability | 37,702 | **** | 39,840 | 21,081 | 22,179 | 22,618 | |||||||
| Accrued expenses and other liabilities | 179,057 | **** | 185,660 | 56,388 | 70,512 | 87,004 | |||||||
| Total liabilities | 8,213,639 | **** | 8,252,183 | 5,284,429 | 5,419,253 | 5,581,999 | |||||||
| Stockholders' equity: | **** | **** | |||||||||||
| Preferred stock | 92,000 | **** | 92,000 | 92,000 | 92,000 | 92,000 | |||||||
| Common stock | 59,885 | **** | 59,885 | 59,885 | 59,885 | 59,885 | |||||||
| Additional paid-in capital | 621,206 | **** | 621,515 | 620,948 | 620,368 | 619,828 | |||||||
| Legal surplus | 95,945 | **** | 95,779 | 95,783 | 95,020 | 92,621 | |||||||
| Retained earnings | 250,557 | (a) | 279,646 | 285,854 | 284,458 | 268,101 | |||||||
| Treasury stock, at cost | (103,289) | **** | (102,339) | (102,936) | (103,171) | (103,196) | |||||||
| Accumulated other comprehensive (loss) income, net | 6,290 | **** | (1,008) | (2,458) | (3,686) | (8,047) | |||||||
| Total stockholders' equity | 1,022,594 | (a) | 1,045,478 | 1,049,076 | 1,044,874 | 1,021,192 | |||||||
| Total liabilities and stockholders' equity | 9,236,233 | **** | $ | 9,297,661 | $ | 6,333,505 | $ | 6,464,127 | $ | 6,603,191 | |||
| (a) On January 1, 2020, the Company implemented ASU No. 2016-13:<br> Measurement of Credit Losses on Financial Instruments "(CECL)"<br> using the modified retrospective approach. As a result, a 39.2 million<br> allowance for credit losses was recorded for Non-PCD loans and 0.2 million<br> for unused commitments with the corresponding adjustment reducing retained<br> earnings, net of a 13.9 million deferred tax effect. For PCD loans,<br> including BBVA and Eurobank acquired book plus the recently acquired<br> Scotiabank, the adjustment amounting to 50.5 million was made through the<br> allowance and loan balances with no impact in capital. | |||||||||||||
| (b) On December 31, 2019, the Company acquired Scotiabank's<br> Puerto Rico and USVI operations, increasing investments by 576.2 million,<br> loans by 2.2 billion and deposits by 3.0 billion. | |||||||||||||
| (c) During 1Q 2020, the Company sold 316 million<br> available-for-sale mortgage-backed securities and recognized a gain in the<br> sale of 4.7 million. During 3Q 2019, the Company sold 322 million<br> available-for-sale mortgage-backed securities and recognized a gain in the sale<br> of 3.4 million. During 2Q 2019, the Company sold 350 million<br> available-for-sale mortgage-backed securities and recognized a gain in the<br> sale of 4.8 million, resulting in the termination before maturity of 191.2<br> million of securities sold under agreements to repurchase and in a reduction<br> of 62.8 million of brokered CDs. | |||||||||||||
| (d) During 3Q 2019, the Company decided to sell mostly<br> non-performing loans. Originated loans that were transferred to held-for-sale<br> amounted to 25.3 million at September 30, 2019 and were sold in 4Q 2019. | |||||||||||||
| 4 |
All values are in US Dollars.
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| OFG Bancorp (NYSE: OFG) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Table 4: Information on Loan Portfolio and Production | |||||||||||
| **** | **** | 2020 | 2019 | 2019 | 2019 | 2019 | |||||
| (Dollars in thousands) (unaudited) | **** | March 31, | December 31, | September 30, | June 30, | March 31, | |||||
| Non-PCD/Non-PCI: | (1) | **** | **** | ||||||||
| Mortgage | $ | 887,950 | $ | 898,118 | $ | 588,535 | $ | 634,774 | $ | 649,972 | |
| Commercial | 1,910,192 | 1,862,484 | 1,575,491 | 1,618,809 | 1,571,480 | ||||||
| Consumer | 481,710 | 495,244 | 383,819 | 388,582 | 373,311 | ||||||
| Auto | 1,487,701 | 1,479,612 | 1,277,114 | 1,219,066 | 1,179,999 | ||||||
| 4,767,553 | 4,735,458 | 3,824,959 | 3,861,231 | 3,774,762 | |||||||
| Less: Allowance for credit losses | (149,961) | (85,044) | (80,579) | (91,637) | (96,003) | ||||||
| Total non- PCD/non-PCI loans held for investment, net | 4,617,592 | 4,650,414 | 3,744,380 | 3,769,594 | 3,678,759 | ||||||
| PCD/PCI: | (1) | **** | **** | ||||||||
| Mortgage | 1,561,557 | 1,591,112 | 494,278 | 538,001 | 547,227 | ||||||
| Commercial | 391,158 | 359,601 | 202,065 | 215,902 | 223,496 | ||||||
| Consumer | 3,350 | 9,263 | 802 | 867 | 856 | ||||||
| Auto | 42,466 | 43,361 | 3,883 | 6,462 | 9,866 | ||||||
| 1,998,531 | 2,003,337 | 701,028 | 761,232 | 781,445 | |||||||
| Less: Allowance for credit losses | (1) | (80,794) | (31,495) | (73,764) | (71,005) | (66,485) | |||||
| Total PCD/PCI loans held for investment, net | **** | 1,917,737 | **** | 1,971,842 | 627,264 | 690,227 | 714,960 | ||||
| Total loans held for investment | **** | 6,535,329 | **** | 6,622,256 | 4,371,644 | 4,459,821 | 4,393,719 | ||||
| Mortgage loans held for sale | **** | 5,845 | 19,591 | 23,504 | 13,293 | 7,682 | |||||
| Other loans held for sale | - | - | 12,042 | 1,383 | - | ||||||
| Total loans, net | **** | $ | 6,541,174 | $ | 6,641,847 | $ | 4,407,190 | $ | 4,474,497 | $ | 4,401,401 |
| Loan Portfolio Summary: | **** | **** | **** | ||||||||
| Loans held for investment: | **** | **** | **** | ||||||||
| Mortgage | **** | $ | 2,449,507 | $ | 2,489,230 | $ | 1,082,813 | $ | 1,172,775 | $ | 1,197,199 |
| Commercial | **** | **** | 2,301,350 | 2,222,085 | 1,777,556 | 1,834,711 | 1,794,976 | ||||
| Consumer | **** | **** | 485,060 | 504,507 | 384,621 | 389,449 | 374,167 | ||||
| Auto | **** | **** | 1,530,167 | 1,522,973 | 1,280,997 | 1,225,528 | 1,189,865 | ||||
| **** | **** | 6,766,084 | 6,738,795 | 4,525,987 | 4,622,463 | 4,556,207 | |||||
| Less: Allowance for credit losses | **** | **** | (230,755) | (116,539) | (154,343) | (162,642) | (162,488) | ||||
| Total loans held for investment, net | **** | **** | 6,535,329 | 6,622,256 | 4,371,644 | 4,459,821 | 4,393,719 | ||||
| Mortgage loans held for sale | **** | **** | 5,845 | 19,591 | 23,504 | 13,293 | 7,682 | ||||
| Other loans held for sale | **** | - | - | 12,042 | 1,383 | - | |||||
| Total loans, net | **** | $ | 6,541,174 | $ | 6,641,847 | $ | 4,407,190 | $ | 4,474,497 | $ | 4,401,401 |
| **** | **** | 2020 | 2019 | 2019 | 2019 | 2019 | |||||
| (Dollars in thousands) (unaudited) | **** | March 31, | December 31, | September 30, | June 30, | March 31, | |||||
| Quarterly loan production | (13) | **** | |||||||||
| Mortgage | **** | $ | 30,776 | $ | 23,680 | $ | 23,805 | $ | 22,196 | $ | 23,097 |
| Commercial | **** | 54,113 | 216,610 | 65,635 | 64,079 | 60,485 | |||||
| US Loan Program | **** | 47,125 | 12,482 | 12,225 | 56,372 | 31,706 | |||||
| Consumer | **** | 39,199 | 41,947 | 48,257 | 47,662 | 40,877 | |||||
| Auto | **** | 108,878 | 110,184 | 141,507 | 136,263 | 120,199 | |||||
| Total | **** | $ | 280,091 | $ | 404,903 | $ | 291,429 | $ | 326,572 | $ | 276,364 |
| 5 |
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| OFG Bancorp (NYSE: OFG) | |||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Table 5: Average Balances, Net Interest Income and Net Interest Margin | |||||||||||||||||||||||||||||||
| 2020 Q1 | 2019 Q4 | 2019 Q3 | 2019 Q2 | 2019 Q1 | |||||||||||||||||||||||||||
| Interest | Interest | Interest | Interest | Interest | |||||||||||||||||||||||||||
| Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | |||||||||||||||||
| (Dollars in thousands) (unaudited) | **** | Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | |||||||||||||||
| Interest earning assets: | |||||||||||||||||||||||||||||||
| Cash equivalents | $ | 943,581 | $ | 2,788 | 1.19 | % | $ | 863,497 | $ | 3,684 | 1.69 | % | $ | 734,105 | $ | 4,086 | 2.21 | % | $ | 481,115 | $ | 2,904 | 2.42 | % | $ | 388,578 | $ | 2,368 | 2.47 | % | |
| Investment securities | 924,965 | 4,474 | 1.91 | % | 522,811 | 2,587 | 1.98 | % | 708,606 | 3,797 | 2.14 | % | 1,039,193 | 6,271 | 2.41 | % | 1,258,899 | 8,223 | 2.61 | % | |||||||||||
| Loans | (1) | **** | **** | **** | |||||||||||||||||||||||||||
| Non-PCD/Non-PCI loans | 4,654,313 | 87,204 | 7.54 | % | 3,884,143 | 74,142 | 7.57 | % | 3,873,743 | 74,910 | 7.67 | % | 3,810,005 | 73,649 | 7.75 | % | 3,782,180 | 72,025 | 7.72 | % | |||||||||||
| PCD/PCI loans | 2,033,674 | 29,298 | 5.79 | % | 615,932 | 10,762 | 6.99 | % | 665,302 | 10,863 | 6.53 | % | 704,025 | 11,432 | 6.50 | % | 722,545 | 12,094 | 6.70 | % | |||||||||||
| Total loans | 6,687,987 | 116,502 | 7.01 | % | 4,500,075 | 84,904 | 7.49 | % | 4,539,045 | 85,773 | 7.50 | % | 4,514,030 | 85,081 | 7.56 | % | 4,504,725 | 84,119 | 7.57 | % | |||||||||||
| Total interest-earning assets | $ | 8,556,533 | $ | 123,764 | 5.82 | % | $ | 5,886,383 | $ | 91,175 | 6.15 | % | $ | 5,981,756 | $ | 93,656 | 6.21 | % | $ | 6,034,338 | $ | 94,256 | 6.27 | % | $ | 6,152,202 | $ | 94,710 | 6.24 | % | |
| Interest bearing liabilities: | **** | **** | **** | ||||||||||||||||||||||||||||
| Deposits | **** | **** | **** | ||||||||||||||||||||||||||||
| NOW accounts | $ | 1,980,505 | $ | 2,389 | 0.49 | % | $ | 1,119,371 | $ | 1,471 | 0.52 | % | $ | 1,118,214 | $ | 1,616 | 0.57 | % | $ | 1,124,668 | $ | 1,730 | 0.62 | % | $ | 1,119,610 | $ | 1,454 | 0.53 | % | |
| Savings accounts | **** | 1,797,658 | 2,440 | 0.55 | % | 1,195,689 | 1,843 | 0.61 | % | 1,199,678 | 2,012 | 0.67 | % | 1,180,153 | 1,882 | 0.64 | % | 1,181,024 | 1,615 | 0.55 | % | ||||||||||
| Time deposits | **** | 2,039,311 | 8,131 | 1.60 | % | 1,156,965 | 4,442 | 1.52 | % | 1,151,248 | 4,427 | 1.53 | % | 1,065,005 | 3,652 | 1.38 | % | 992,331 | 2,944 | 1.20 | % | ||||||||||
| Brokered deposits | 236,008 | 1,586 | 2.70 | % | 268,108 | 1,804 | 2.67 | % | 358,130 | 2,298 | 2.55 | % | 412,383 | 2,526 | 2.46 | % | 498,116 | 2,835 | 2.31 | % | |||||||||||
| 6,053,482 | 14,546 | 0.97 | % | 3,740,133 | 9,560 | 1.01 | % | 3,827,270 | 10,353 | 1.07 | % | 3,782,209 | 9,790 | 1.04 | % | 3,791,081 | 8,848 | 0.95 | % | ||||||||||||
| Non-interest bearing deposit accounts | 1,698,964 | - | - | **** | 1,110,847 | - | - | 1,094,047 | - | - | 1,097,903 | - | - | 1,099,547 | - | - | % | ||||||||||||||
| Fair value premium amortization and core deposit<br> intangible amortization | - | 2,074 | - | **** | - | 201 | - | - | 201 | - | - | 201 | - | - | 201 | - | |||||||||||||||
| Total deposits | 7,752,446 | 16,620 | 0.86 | % | 4,850,980 | 9,761 | 0.80 | % | 4,921,317 | 10,554 | 0.85 | % | 4,880,112 | 9,991 | 0.82 | % | 4,890,628 | 9,049 | 0.75 | % | |||||||||||
| Borrowings | **** | **** | **** | ||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 158,462 | 1,002 | 2.54 | % | 190,000 | 1,189 | 2.48 | % | 224,783 | 1,342 | 2.37 | % | 343,370 | 2,107 | 2.46 | % | 444,843 | 2,785 | 2.54 | % | |||||||||||
| Advances from FHLB and other borrowings | 77,255 | 539 | 2.81 | % | 78,282 | 541 | 2.74 | % | 79,328 | 550 | 2.75 | % | 80,349 | 559 | 2.79 | % | 81,226 | 563 | 2.81 | % | |||||||||||
| Subordinated capital notes | 36,083 | 435 | 4.85 | % | 36,083 | 475 | 5.22 | % | 36,083 | 499 | 5.49 | % | 36,083 | 514 | 5.71 | % | 36,083 | 524 | 5.89 | % | |||||||||||
| Total borrowings | 271,800 | 1,976 | 2.92 | % | 304,365 | 2,205 | 2.87 | % | 340,194 | 2,391 | 2.79 | % | 459,802 | 3,180 | 2.77 | % | 562,152 | 3,872 | 2.79 | % | |||||||||||
| Total interest-bearing liabilities | $ | 8,024,246 | $ | 18,596 | 0.93 | % | $ | 5,155,345 | $ | 11,966 | 0.92 | % | $ | 5,261,511 | $ | 12,945 | 0.98 | % | $ | 5,339,914 | $ | 13,171 | 0.99 | % | $ | 5,452,780 | $ | 12,921 | 0.96 | % | |
| Interest rate spread | **** | $ | 105,168 | 4.89 | % | $ | 79,209 | 5.23 | % | $ | 80,711 | 5.23 | % | $ | 81,085 | 5.28 | % | $ | 81,789 | 5.28 | % | ||||||||||
| Net interest margin | 4.94 | % | 5.34 | % | 5.35 | % | 5.39 | % | 5.39 | % | |||||||||||||||||||||
| PCI loan cost recoveries | **** | **** | **** | **** | **** | $ | 1,033 | $ | 371 | $ | 430 | $ | 537 | ||||||||||||||||||
| Adjusted excluding cost recoveries (Non-GAAP): | **** | **** | **** | **** | |||||||||||||||||||||||||||
| Total interest-earning assets | $ | 8,556,533 | $ | 123,764 | 5.82 | % | $ | 5,886,383 | $ | 90,142 | 6.08 | % | $ | 5,981,756 | $ | 93,285 | 6.19 | % | $ | 6,034,338 | $ | 93,826 | 6.24 | % | $ | 6,152,202 | $ | 94,173 | 6.21 | % | |
| Interest rate spread | **** | $ | 105,168 | 4.89 | % | $ | 78,176 | 5.16 | % | $ | 80,340 | 5.21 | % | $ | 80,655 | 5.25 | % | $ | 81,252 | 5.25 | % | ||||||||||
| Net interest margin | 4.94 | % | 5.27 | % | 5.33 | % | 5.36 | % | 5.36 | % | |||||||||||||||||||||
| 6 |
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| OFG Bancorp (NYSE: OFG) | **** | **** | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Table 6: Loan Information and Performance Statistics (1) | |||||||||||
| 2020 | 2019 | 2019 | 2019 | 2019 | |||||||
| (Dollars in thousands) (unaudited) | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||
| Net Charge-offs | **** | **** | |||||||||
| Non-PCD/Non-PCI | **** | **** | |||||||||
| Mortgage: | **** | **** | |||||||||
| Charge-offs | $ | 418 | $ | 1,075 | (b) | $ | 16,299 | $ | 604 | $ | 587 |
| Recoveries | **** | (249) | (437) | (493) | (316) | (287) | |||||
| Total mortgage | **** | 169 | 638 | 15,806 | 288 | 300 | |||||
| Commercial: | **** | **** | |||||||||
| Charge-offs | **** | 3,771 | 463 | (b) | 8,421 | 2,226 | 1,086 | ||||
| Recoveries | **** | (1,522) | (606) | (176) | (179) | (150) | |||||
| Total commercial | **** | 2,249 | (143) | 8,245 | 2,047 | 936 | |||||
| Consumer: | **** | **** | |||||||||
| Charge-offs | **** | 6,015 | 5,289 | 5,317 | 5,272 | 4,561 | |||||
| Recoveries | **** | (644) | (196) | (a) | (1,463) | (405) | (303) | ||||
| Total consumer | **** | 5,371 | 5,093 | 3,854 | 4,867 | 4,258 | |||||
| Auto: | **** | **** | |||||||||
| Charge-offs | **** | 13,053 | 12,930 | 12,383 | 10,728 | 11,456 | |||||
| Recoveries | **** | (4,211) | (4,123) | (a) | (5,802) | (4,948) | (4,072) | ||||
| Total auto | **** | 8,842 | 8,807 | 6,581 | 5,780 | 7,384 | |||||
| Total | $ | 16,631 | $ | 14,395 | $ | 34,486 | $ | 12,982 | $ | 12,878 | |
| PCD | **** | **** | |||||||||
| Mortgage: | **** | **** | |||||||||
| Charge-offs | $ | 5,143 | $ | - | $ | - | $ | - | $ | - | |
| Recoveries | **** | (122) | - | - | - | - | |||||
| Total mortgage | **** | 5,021 | - | - | - | - | |||||
| Commercial: | **** | **** | |||||||||
| Charge-offs | **** | 2,357 | - | - | - | - | |||||
| Recoveries | **** | (375) | - | - | - | - | |||||
| Total commercial | **** | 1,982 | - | - | - | - | |||||
| Consumer: | **** | **** | |||||||||
| Charge-offs | **** | 431 | - | - | - | - | |||||
| Recoveries | **** | (63) | - | - | - | - | |||||
| Total consumer | **** | 368 | - | - | - | - | |||||
| Auto: | **** | **** | |||||||||
| Charge-offs | **** | 375 | - | - | - | - | |||||
| Recoveries | **** | (343) | - | - | - | - | |||||
| Total auto | **** | 32 | - | - | - | - | |||||
| Total | $ | 7,403 | $ | - | $ | - | $ | - | $ | - | |
| Total Net Charge-offs | $ | 24,034 | $ | 14,395 | $ | 34,486 | $ | 12,982 | $ | 12,878 | |
| Net Charge-off Rates | **** | **** | |||||||||
| Mortgage | **** | 0.84% | 0.43% | 10.14% | 0.18% | 0.18% | |||||
| Commercial | **** | 0.77% | -0.04% | 2.06% | 0.52% | 0.24% | |||||
| Consumer | **** | 4.60% | 5.16% | 3.93% | 5.05% | 4.45% | |||||
| Auto | **** | 2.31% | 2.74% | 2.09% | 1.93% | 2.54% | |||||
| Total | **** | 1.44% | 1.48% | (b) | 3.56% | 1.36% | 1.36% | ||||
| Average Loans Held For Investment | **** | **** | |||||||||
| Mortgage | $ | 2,459,920 | $ | 593,480 | $ | 623,772 | $ | 640,141 | $ | 649,408 | |
| Commercial | **** | 2,192,683 | 1,609,338 | 1,598,860 | 1,585,404 | 1,585,352 | |||||
| Consumer | **** | 498,827 | 394,499 | 391,898 | 385,356 | 382,397 | |||||
| Auto | **** | 1,536,557 | 1,287,465 | 1,259,214 | 1,199,105 | 1,165,023 | |||||
| Total | $ | 6,687,987 | $ | 3,884,782 | $ | 3,873,744 | $ | 3,810,006 | $ | 3,782,180 | |
| (a) During 3Q 2019, the Company received 2.4 million proceeds<br> from the sale of fully charged-off originated auto and consumer loans. | |||||||||||
| (b) During 3Q 2019, the Company decided to sell several<br> non-performing originated loans, which were sold during 4Q 2019, increasing<br> charge-offs by 15.9 million, 4.4 million in commercial loans and 11.5<br> million in residential mortgages. | |||||||||||
| 7 |
All values are in US Dollars.
| OFG Bancorp (NYSE: OFG) | **** | **** | **** | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Table 6: Loan Information and Performance Statistics (Excludes<br> PCD/PCI Loans) (1) | ||||||||||||
| 2020 | **** | 2019 | 2019 | 2019 | 2019 | |||||||
| (Dollars in thousands) (unaudited) | Q1 | **** | Q4 | Q3 | Q2 | Q1 | ||||||
| Early Delinquency (30 - 89 days past due) | **** | **** | **** | |||||||||
| Mortgage | $ | 20,518 | **** | $ | 22,389 | $ | 21,631 | **** | $ | 24,303 | $ | 26,775 |
| Commercial | **** | 6,074 | **** | 9,895 | 4,467 | **** | 2,823 | 12,892 | ||||
| Consumer | **** | 13,127 | **** | 9,560 | 9,360 | **** | 9,223 | 8,494 | ||||
| Auto | **** | 110,959 | **** | 103,749 | 103,452 | **** | 98,847 | 87,860 | ||||
| Total | $ | 150,678 | **** | $ | 145,593 | $ | 138,910 | **** | $ | 135,196 | $ | 136,021 |
| Early Delinquency Rates (30 - 89 days past due) | **** | **** | **** | **** | ||||||||
| Mortgage | **** | 2.31% | **** | 2.49% | 3.68% | **** | 3.83% | 4.12% | ||||
| Commercial | **** | 0.32% | **** | 0.53% | 0.28% | **** | 0.17% | 0.82% | ||||
| Consumer | **** | 2.73% | **** | 1.93% | 2.44% | **** | 2.37% | 2.28% | ||||
| Auto | **** | 7.46% | **** | 7.01% | 8.10% | **** | 8.11% | 7.45% | ||||
| Total | **** | 3.16% | **** | 3.07% | 3.63% | **** | 3.50% | 3.60% | ||||
| Total Delinquency (30 days and over past due) | **** | **** | **** | **** | ||||||||
| Mortgage: | **** | **** | **** | |||||||||
| Traditional, Non traditional, and Loans under Loss<br> Mitigation | $ | 46,768 | **** | $ | 41,314 | $ | 40,194 | (b) | $ | 70,364 | $ | 78,560 |
| GNMA's buy-back option program | **** | 75,314 | **** | 75,181 | 11,403 | (b) | 11,675 | 12,942 | ||||
| Total mortgage | **** | 122,082 | **** | 116,495 | 51,597 | 82,039 | 91,502 | |||||
| Commercial | **** | 33,746 | **** | 30,111 | 25,271 | (b) | 29,673 | 36,736 | ||||
| Consumer | **** | 16,808 | **** | 12,258 | 11,927 | (b) | 11,710 | 10,998 | ||||
| Auto | **** | 131,715 | **** | 118,020 | 117,716 | (b) | 110,926 | 100,123 | ||||
| Total | $ | 304,351 | **** | $ | 276,884 | $ | 206,511 | **** | $ | 234,348 | $ | 239,359 |
| Total Delinquency Rates (30 days and over past due) | **** | **** | **** | **** | ||||||||
| Mortgage: | **** | **** | **** | **** | ||||||||
| Traditional, Non traditional, and Loans under Loss<br> Mitigation | **** | 5.27% | **** | 4.60% | 6.83% | **** | 11.08% | 12.09% | ||||
| GNMA's buy-back option program | **** | 8.48% | **** | 8.37% | 1.94% | **** | 1.84% | 1.99% | ||||
| Total mortgage | **** | 13.75% | **** | 12.97% | 8.77% | **** | 12.92% | 14.08% | ||||
| Commercial | **** | 1.77% | **** | 1.62% | 1.60% | **** | 1.83% | 2.34% | ||||
| Consumer | **** | 3.49% | **** | 2.48% | 3.11% | **** | 3.01% | 2.95% | ||||
| Auto | **** | 8.85% | **** | 7.98% | 9.22% | **** | 9.10% | 8.49% | ||||
| Total | **** | 6.38% | **** | 5.85% | 5.40% | **** | 6.07% | 6.34% | ||||
| Nonperforming Assets | **** | **** | **** | **** | ||||||||
| Mortgage | $ | 31,073 | **** | $ | 22,552 | $ | 21,138 | **** | $ | 53,534 | $ | 59,665 |
| Commercial | **** | 42,668 | **** | 42,606 | 36,409 | (b) | 45,443 | 51,308 | ||||
| Consumer | **** | 3,690 | **** | 5,287 | 4,213 | **** | 2,495 | 4,397 | ||||
| Auto | **** | 21,147 | **** | 14,295 | 15,063 | **** | 12,082 | 12,263 | ||||
| Total nonperforming loans | **** | 98,578 | (a) | 84,740 | 76,823 | **** | 113,554 | 127,633 | ||||
| Foreclosed real estate | **** | 27,292 | **** | 29,909 | 26,952 | **** | 29,509 | 30,865 | ||||
| Other repossessed assets | **** | 3,096 | **** | 3,327 | 3,537 | **** | 2,507 | 3,574 | ||||
| Total nonperforming assets | $ | 128,966 | **** | $ | 117,976 | $ | 107,312 | **** | $ | 145,570 | $ | 162,072 |
| Nonperforming Loan Rates | **** | **** | **** | **** | ||||||||
| Mortgage | **** | 3.50% | **** | 2.51% | 3.59% | **** | 8.43% | 9.18% | ||||
| Commercial | **** | 2.23% | **** | 2.29% | 2.31% | **** | 2.81% | 3.26% | ||||
| Consumer | **** | 0.77% | **** | 1.07% | 1.10% | **** | 0.64% | 1.18% | ||||
| Auto | **** | 1.42% | **** | 0.97% | 1.18% | **** | 0.99% | 1.04% | ||||
| Total loans | **** | 2.07% | **** | 1.79% | 2.01% | **** | 2.94% | 3.38% | ||||
| (a) During March 2020, a global pandemic was declared by the<br> World Health Organization related to the rapidly growing outbreak of a novel<br> strain of coronavirus (COVID-19). The pandemic has significantly impacted the<br> economic conditions in P.R. and the U.S., creating significant uncertainties.<br> After recent disruptions in economic conditions caused by COVID-19, the<br> Company has offered several deferral programs for the payment of principal<br> and interest for auto, personal, credit cards and mortgage, and commercial<br> loans, for customers whose payments were not over 29 days past due at March<br> 12, 2020 and requested to be included in these programs. | ||||||||||||
| (b) During 3Q 2019, the Company identified non-performing<br> originated loans sold during 4Q 2019, 29 million in mortgage loans and 9<br> million in commercial loans. These loans were reclassified as held-for-sale<br> at their fair value. | ||||||||||||
| 8 |
All values are in US Dollars.
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| OFG Bancorp (NYSE: OFG) | **** | **** | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Table 6: Loan Information and Performance Statistics (1) | |||||||||||||
| **** | **** | 2020 | 2019 | 2019 | 2019 | 2019 | |||||||
| (Dollars in thousands) (unaudited) | **** | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||
| Nonperforming PCD/PCI Loans | (14) | **** | **** | ||||||||||
| Mortgage | $ | 1,341 | $ | - | $ | - | $ | - | $ | - | |||
| Commercial | **** | 82,411 | 225 | 242 | 239 | 264 | |||||||
| Consumer | **** | 10 | 499 | 560 | 628 | 592 | |||||||
| Total nonperforming loans | $ | 83,762 | $ | 724 | $ | 802 | $ | 867 | $ | 856 | |||
| Nonperforming PCD/PCI Loan Rates | **** | **** | |||||||||||
| Mortgage | **** | 0.09% | 0.00% | 0.00% | 0.00% | 0.00% | |||||||
| Commercial | **** | 21.07% | 0.06% | 0.12% | 0.11% | 0.12% | |||||||
| Consumer | **** | 0.30% | 5.39% | 69.83% | 72.43% | 69.16% | |||||||
| Total loans | **** | 4.19% | 0.04% | 0.11% | 0.11% | 0.11% | |||||||
| Total PCD/PCI Loans Held for Investment | (21) | **** | **** | ||||||||||
| Mortgage | $ | 1,561,557 | $ | 1,591,112 | (a) | $ | 494,278 | $ | 538,001 | $ | 547,227 | ||
| Commercial | **** | 391,158 | 359,601 | 202,065 | (b) | 215,902 | 223,496 | ||||||
| Consumer | **** | 3,350 | 9,263 | 802 | 867 | 856 | |||||||
| Total nonperforming loans | $ | 1,956,065 | $ | 1,959,976 | $ | 697,145 | $ | 754,770 | $ | 771,579 | |||
| 9 |
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| OFG Bancorp (NYSE: OFG) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Table 7: Allowance for Credit Losses (1) | **** | **** | ||||||||
| **** | Quarter Ended March 31, 2020 | |||||||||
| (Dollars in thousands) (unaudited) | Mortgage | Commercial | Consumer | Auto | Total | |||||
| Allowance for credit losses Non-PCD: | **** | **** | ||||||||
| Balance at beginning of period | $ | 8,727 | $ | 25,993 | $ | 18,446 | $ | 31,878 | $ | 85,044 |
| Impact of ASC 326 adoption | **** | 10,980 | **** | 3,562 | **** | 8,418 | **** | 16,238 | **** | 39,198 |
| Provision for credit losses | **** | 156 | **** | 21,890 | **** | 6,270 | **** | 14,034 | **** | 42,350 |
| Charge-offs | **** | (418) | **** | (3,771) | **** | (6,015) | **** | (13,053) | **** | (23,257) |
| Recoveries | **** | 249 | **** | 1,522 | **** | 644 | **** | 4,211 | **** | 6,626 |
| Balance at end of period | $ | 19,694 | $ | 49,196 | $ | 27,763 | $ | 53,308 | $ | 149,961 |
| Allowance for credit losses PCD: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Balance at beginning of period | $ | 21,655 | $ | 8,893 | $ | - | $ | 947 | $ | 31,495 |
| Impact of ASC 326 adoption | **** | 7,830 | **** | 42,143 | **** | 181 | **** | 368 | **** | 50,522 |
| Provision for credit losses | **** | 6,139 | **** | (218) | **** | 364 | **** | (105) | **** | 6,180 |
| Charge-offs | **** | (5,143) | **** | (2,357) | **** | (431) | **** | (375) | **** | (8,306) |
| Recoveries | **** | 122 | **** | 375 | **** | 63 | **** | 343 | **** | 903 |
| Balance at end of period | $ | 30,603 | $ | 48,836 | $ | 177 | $ | 1,178 | $ | 80,794 |
| Allowance for credit losses summary: | **** | **** | **** | **** | **** | **** | **** | **** | **** | **** |
| Balance at beginning of period | $ | 30,382 | $ | 34,886 | $ | 18,446 | $ | 32,825 | $ | 116,539 |
| Impact of ASC 326 adoption | **** | 18,810 | **** | 45,705 | **** | 8,599 | **** | 16,606 | **** | 89,720 |
| Provision for credit losses | **** | 6,295 | **** | 21,672 | **** | 6,634 | **** | 13,929 | **** | 48,530 |
| Charge-offs | **** | (5,561) | **** | (6,128) | **** | (6,446) | **** | (13,428) | **** | (31,563) |
| Recoveries | **** | 371 | **** | 1,897 | **** | 707 | **** | 4,554 | **** | 7,529 |
| Balance at end of period | $ | 50,297 | $ | 98,032 | $ | 27,940 | $ | 54,486 | $ | 230,755 |
| Allowance coverage ratio | **** | 2.05% | **** | 4.26% | **** | 5.76% | **** | 3.56% | **** | 3.41% |
| 10 |
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| OFG Bancorp (NYSE: OFG) | **** | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Table 8: Reconciliation of GAAP to Non-GAAP Measures and<br> Calculation of Regulatory Capital | ||||||||||
| In addition to disclosing required regulatory capital measures,<br> we also report certain non-GAAP capital measures that management uses in<br> assessing its capital adequacy. These non-GAAP measures include tangible<br> common equity ("TCE") and TCE ratio. The table below provides the<br> details of the calculation of our regulatory capital and non-GAAP capital<br> measures. While our non-GAAP capital measures are widely used by investors,<br> analysts and bank regulatory agencies to assess the capital position of<br> financial services companies, they may not be comparable to similarly titled<br> measures reported by other companies. | ||||||||||
| 2019 | 2019 | 2019 | 2019 | |||||||
| (Dollars in thousands) (unaudited) | Q4 | Q3 | Q2 | Q1 | ||||||
| Stockholders' Equity to Non-GAAP Tangible Common Equity | **** | |||||||||
| Total stockholders' equity | 1,022,594 | (a) | $ | 1,045,478 | $ | 1,049,076 | $ | 1,044,874 | $ | 1,021,192 |
| Less: Intangible assets | (140,243) | (143,034) | (88,560) | (88,852) | (89,145) | |||||
| Noncumulative perpetual preferred stock | (92,000) | (92,000) | (92,000) | (92,000) | (92,000) | |||||
| Noncumulative perpetual preferred stock issuance<br> costs | 10,130 | 10,130 | 10,130 | 10,130 | 10,130 | |||||
| Tangible common equity | 800,481 | $ | 820,574 | $ | 878,646 | $ | 874,152 | $ | 850,177 | |
| Common stock outstanding at end of period | 51,327 | 51,399 | 51,347 | 51,330 | 51,328 | |||||
| Tangible book value (Non-GAAP) | 15.60 | $ | 15.96 | $ | 17.11 | $ | 17.03 | $ | 16.56 | |
| Total Assets to Tangible Assets | **** | |||||||||
| Total assets | 9,236,233 | $ | 9,297,661 | $ | 6,333,505 | $ | 6,464,127 | $ | 6,603,191 | |
| Less: Intangible assets | (140,243) | (143,034) | (88,560) | (88,852) | (89,145) | |||||
| Tangible assets (Non-GAAP) | 9,095,990 | $ | 9,154,627 | $ | 6,244,945 | $ | 6,375,275 | $ | 6,514,046 | |
| Non-GAAP TCE Ratio | **** | |||||||||
| Tangible common equity | 800,481 | $ | 820,574 | $ | 878,646 | $ | 874,152 | $ | 850,177 | |
| Tangible assets | 9,095,990 | 9,154,627 | 6,244,945 | 6,375,275 | 6,514,046 | |||||
| TCE ratio | 8.80% | 8.96% | 14.07% | 13.71% | 13.05% | |||||
| Average Equity to Non-GAAP Average Tangible Common Equity | **** | |||||||||
| Average total stockholders' equity | 1,043,481 | (a) | $ | 1,062,720 | $ | 1,061,541 | $ | 1,037,057 | $ | 1,017,546 |
| Less: Average noncumulative perpetual preferred stock | (92,000) | (92,000) | (92,000) | (92,000) | (92,000) | |||||
| Average noncumulative perpetual preferred stock<br> issuance costs | 10,130 | 10,130 | 10,130 | 10,130 | 10,130 | |||||
| Average total common stockholders' equity | 961,611 | $ | 980,850 | $ | 979,671 | $ | 955,187 | $ | 935,676 | |
| Less: Average intangible assets | (141,875) | (89,005) | (88,701) | (88,995) | (89,291) | |||||
| Average tangible common equity | 819,736 | $ | 891,845 | $ | 890,970 | $ | 866,192 | $ | 846,385 | |
| (a) On January 1, 2020, the Company implemented ASU No. 2016-13:<br> Measurement of Credit Losses on Financial Instruments "(CECL)"<br> using the modified retrospective approach. As a result, a 39.2 million<br> allowance for credit losses was recorded for Non-PCD loans and 0.2 million<br> for unused commitments with the corresponding adjustment reducing retained<br> earnings, net of a 13.9 million deferred tax effect. For PCD loans,<br> including BBVA and Eurobank acquired book plus the recently acquired<br> Scotiabank, the adjustment amounting to 50.5 million was made through the<br> allowance and loan balances with no impact in capital. | ||||||||||
| 11 |
All values are in US Dollars.
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| OFG Bancorp (NYSE: OFG) | **** | **** | **** | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Table 8: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures (Continued) | ||||||||||||
| **** | **** | BASEL III | ||||||||||
| Standardized | ||||||||||||
| **** | **** | 2020 | **** | 2019 | 2019 | 2019 | 2019 | |||||
| (Dollars in thousands) (unaudited) | **** | Q1 | **** | Q4 | Q3 | Q2 | Q1 | |||||
| Regulatory Capital Metrics | **** | **** | **** | |||||||||
| Common equity Tier 1 capital | $ | 816,356 | **** | $ | 735,442 | $ | 858,092 | $ | 855,667 | $ | 832,923 | |
| Tier 1 capital | **** | 933,226 | **** | 852,312 | 974,962 | 972,537 | 949,793 | |||||
| Total risk-based capital | (15) | **** | 1,020,871 | **** | 937,963 | 1,035,910 | 1,035,109 | 1,012,112 | ||||
| Risk-weighted assets | **** | 6,993,806 | (a) | 6,740,846 | 4,771,165 | 4,895,441 | 4,872,807 | |||||
| Regulatory Capital Ratios | **** | **** | **** | |||||||||
| Common equity Tier 1 capital ratio | (16) | **** | 11.67% | **** | 10.91% | 17.98% | 17.48% | 17.09% | ||||
| Tier 1 risk-based capital ratio | (17) | **** | 13.34% | **** | 12.64% | 20.43% | 19.87% | 19.49% | ||||
| Total risk-based capital ratio | (18) | **** | 14.60% | **** | 13.91% | 21.71% | 21.14% | 20.77% | ||||
| Leverage ratio | (19) | **** | 10.14% | **** | 9.24% | 15.41% | 15.20% | 14.64% | ||||
| Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach | **** | **** | **** | |||||||||
| Total stockholders' equity | (1) | $ | 1,022,594 | **** | $ | 1,045,478 | $ | 1,049,076 | $ | 1,044,874 | $ | 1,021,192 |
| CECL transition adjustment | (20) | **** | 31,882 | **** | - | - | - | - | ||||
| Less: Noncumulative perpetual preferred stock | **** | (92,000) | **** | (92,000) | (92,000) | (92,000) | (92,000) | |||||
| Noncumulative perpetual preferred stock issuance costs | **** | 10,130 | **** | 10,130 | 10,130 | 10,130 | 10,130 | |||||
| Unrealized gains on available-for-sale securities, net<br> of income tax | **** | (7,576) | **** | 441 | 1,742 | 3,087 | 7,841 | |||||
| Unrealized losses on cash flow<br> hedges, net of income tax | **** | 1,286 | **** | 567 | 716 | 599 | 206 | |||||
| **** | 966,316 | **** | 964,616 | 969,664 | 966,690 | 947,369 | ||||||
| Less: Disallowed goodwill | **** | (86,069) | **** | (86,069) | (86,069) | (86,069) | (86,069) | |||||
| Disallowed other intangible assets, net | **** | (37,241) | **** | (39,127) | (1,557) | (1,739) | (1,922) | |||||
| Disallowed deferred tax assets, net | **** | (26,650) | (a) | (95,879) | (23,946) | (23,215) | (26,455) | |||||
| Threshold 15% | **** | - | (a) | (8,099) | - | - | - | |||||
| Common equity Tier 1 capital | **** | 816,356 | **** | 735,442 | 858,092 | 855,667 | 832,923 | |||||
| Plus: Qualifying noncumulative perpetual preferred stock | **** | 92,000 | **** | 92,000 | 92,000 | 92,000 | 92,000 | |||||
| Qualifying noncumulative perpetual preferred stock<br> issuance costs | **** | (10,130) | **** | (10,130) | (10,130) | (10,130) | (10,130) | |||||
| Subordinated capital notes | **** | 35,000 | **** | 35,000 | 35,000 | 35,000 | 35,000 | |||||
| Tier 1 capital | **** | 933,226 | **** | 852,312 | 974,962 | 972,537 | 949,793 | |||||
| Plus tier 2 capital: Qualifying allowance for loan and lease<br> losses | **** | 87,645 | **** | 85,651 | 60,948 | 62,572 | 62,319 | |||||
| Total risk-based capital | $ | 1,020,871 | **** | $ | 937,963 | $ | 1,035,910 | $ | 1,035,109 | $ | 1,012,112 | |
| (a) During 1Q 2020, the Company decided to early implement<br> Simplifications to the Capital Rule, which simplified the regulatory capital<br> treatment for mortgage servicing assets (MSA) and certain deferred tax assets<br> arising from temporary differences (temporary difference DTAs). It Increased<br> common equity tier 1 (CET1) capital threshold deductions from 10 percent to<br> 25 percent and removes the aggregate 15 percent CET1 threshold deduction.<br> However, it retains the 250 percent risk weight applicable to non-deducted amounts<br> of MSAs and temporary difference DTAs. | ||||||||||||
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| OFG Bancorp (NYSE: OFG) | |
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| Table 9: Notes to Financial Summary, Selected Metrics, Loans, and Consolidated Financial Statements (Tables 1 - 8) | |
| (1) | We used the term "PCI" to refer to loans acquired with<br> credit deterioration from the Scotiabank acquisition (December 31, 2019), the<br> BBVAPR acquisition (December 18, 2012) and the Eurobank FDIC-Assisted<br> acquisition (April 30, 2010), recorded at fair value at acquisition. On<br> January 1, 2020, the Company implemented ASU No. 2016-13: Measurement of<br> Credit Losses on Financial Instruments "(CECL)" using the modified<br> retrospective approach. CECL replaces the concept of purchased credit<br> impaired loans (PCI) with the concept of purchased financial assets with credit<br> deterioration (PCD). PCD accounting is called ‘gross-up accounting’ because,<br> at acquisition, an entity grosses up the amortized cost basis of the PCD<br> asset for the initial estimate of credit losses. This Day 1 allowance for<br> credit losses is established without an income statement effect. The Company<br> elected to maintain previously existing pools on adoption, therefore the pool<br> continues to be the unit of account, and the allowance and non-credit<br> discount or premium is not allocated to the individual assets. These loans<br> are not classified as delinquent or nonperforming even though the customer<br> may be contractually past due because we expect that we will fully collect<br> the carrying value of these loans. |
| (2) | Total banking and financial service revenues. |
| (3) | Calculated based on net income available to common shareholders<br> divided by average common shares outstanding for the period. |
| (4) | Calculated based on net income available to common shareholders<br> plus the preferred dividends on the convertible preferred stock, divided by<br> total average common shares outstanding and equivalents for the period as if<br> converted. |
| (5) | Tangible book value per common share is a non-GAAP measure<br> calculated based on tangible common equity divided by common shares outstanding.<br> See "Table 9: Reconciliation of GAAP to Non-GAAP Measures and<br> Calculation of Regulatory Capital Measures" for additional information. |
| (6) | Information includes all loans held for investment, including<br> PCD/PCI loans. |
| (7) | Calculated based on annualized net interest income for the<br> period divided by average interest-earning assets for the period. |
| (8) | Calculated based on annualized income, net of tax, for the<br> period divided by average total assets for the period. |
| (9) | Calculated based on annualized income available to common<br> shareholders for the period divided by average tangible common equity for the<br> period. |
| (10) | Calculated based on non-interest expense for the period divided<br> by total net interest income and total banking and financial services<br> revenues for the period. |
| (11) | Calculated based on annualized net charge-offs for the period<br> divided by average loans held for investment for the period. |
| (12) | Non-GAAP ratios. See "Table 9: Reconciliation of GAAP to<br> Non-GAAP Measures and Calculation of Regulatory Capital Measures" for<br> information on the calculation of each of these ratios. |
| (13) | Production of new loans (excluding renewals). |
| (14) | Most PCD loans are considered to be performing due to the<br> application of the accretion method, in which these loans will accrete<br> interest income over the remaining life of the loans using estimated cash<br> flow analyses. Therefore, they are not included as non-performing loans. PCD<br> loan pools that are not accreting interest income are deemed to be<br> non-performing loans and presented separately. For periods before CECL<br> implementation, only PCI loan pools that were not accreting interest income<br> were deemed to be non-performing loans. |
| (15) | Total risk-based capital equals the sum of Tier 1 capital and<br> Tier 2 capital. |
| (16) | Common equity Tier 1 capital ratio is a regulatory capital<br> measure calculated based on Common equity Tier 1 capital divided by risk-weighted<br> assets. |
| (17) | Tier 1 risk-based capital ratio is a regulatory capital measure<br> calculated based on Tier 1 capital divided by risk-weighted assets. |
| (18) | Total risk-based capital ratio is a regulatory capital measure<br> calculated based on Total risk-based capital divided by risk-weighted assets. |
| (19) | Leverage capital ratio is a regulatory capital measure<br> calculated based on Tier 1 capital divided by average<br> assets, after certain adjustments. |
| (20) | In March 2020, in light of recent strains on the U.S. economy as<br> a result of the coronavirus disease 2019 (COVID-19), the Board of Governors<br> of the Federal Reserve System, the Federal Deposit Insurance Corporation, and<br> the Office of the Comptroller of the Currency issued an interim final rule<br> that provided the option to temporarily delay the effects of CECL on<br> regulatory capital for two years, followed by a three-year transition period.<br> In addition, for the first two years, a uniform 25% “scaling factor” is<br> introduced to approximate the portion of the post day-one allowance<br> attributable to CECL relative to the incurred loss methodology. The 25%<br> scaling factor is calibrated to approximate an overall after-tax impact of<br> differences in allowances under CECL vs the incurred loss methodology. |
| (21) | CECL replaces the concept of purchased credit impaired loans<br> (PCI assets) with the concept of purchased financial assets with credit<br> deterioration (PCD assets). An entity records a PCD asset at the purchase<br> price plus the allowance for credit losses expected at the time of<br> acquisition. Under this method, there is no credit loss expense affecting net<br> income on acquisition. Changes in estimates of expected credit losses after<br> acquisition are recognized as credit loss expense (or reversal of credit loss<br> expense) in subsequent periods as they arise. |
| (22) | Pre-provision net revenues is a non-GAAP measure calculated<br> based on net interest income plus total non-interest income, net, less total<br> non-interest expenses for the period. |
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