Equibles

8-K

OFG BANCORP (OFG)

8-K 2020-07-24 For: 2020-07-24
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Added on April 04, 2026

UNITED STATESSECURITIES 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): July 24, 2020

OFG Bancorp

(Exact Name of Registrant as Specified in its Charter)

Commonwealth of Puerto Rico 001-12647 66-0538893
(State or other Jurisdiction of Incorporation) (Commission File No.) (I.R.S. Employer<br>Identification No.)
Oriental Center, 15th 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 Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
--- ---
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On July 24, 2020, OFG Bancorp (the “Company”) announced the results for the quarter ended June 30, 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 of Document
99 Press release by the Company dated July 24, 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: July 24, 2020 By: /s/ Maritza Arizmendi
Maritza Arizmendi
Executive Vice President and Chief Financial Officer

Exhibit 99

OFG Bancorp Reports 2Q20 Results

SAN JUAN, Puerto Rico, July 24, 2020 – OFG Bancorp (NYSE: OFG) today reported results for the second quarter ended June 30, 2020.

2Q20 Financial Highlights

·      Net income available to common shareholders totaled $20.2 million or $0.39 per share fully diluted. This compares to 1Q20 net income available to common shareholders of $173 thousand or break-even per share and 2Q19 net income available to shareholders of $22.4 million or $0.43 per share fully diluted.

·      Total core revenues were $128.2 million compared to $131.3 million in 1Q20 and $99.2 million in 2Q19. 2Q20 revenues included $6.0 million in one-time interest recoveries from acquired SOP Scotiabank loans.

·      Provision of $17.7 million included a $5.0 million increase to 1Q20’s $34.1 million provision based on additional data available to forecast the effects of the Covid-19 pandemic.

·      Net interest margin was 4.78%. Loan production totaled $503.4 million, including $286.4 million in Paycheck Protection Plan (PPP) commercial loans.

·      Total assets of $9.93 billion increased 7.5% from 1Q20 primarily due to a $574.1 million increase in cash and a $198.1 million increase in loans. Customer deposits of $8.32 billion increased $760.0 million or 10.0% from 1Q20.

·      All regulatory capital ratios increased and continue to be significantly above requirements for a well-capitalized institution with the CET1 ratio at 12.03% on June 30, 2020.

Conference Call

A conference call to discuss 2Q20 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: 807-1129. 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:

“As other banks did, we faced a number of Covid-19 pandemic related challenges during the second quarter, but acting promptly and with foresight, we generated excellent results. We are extremely proud and thankful of our team’s accomplishments.

“Governments in Puerto Rico and U.S. Virgin Islands shut down their respective economies in mid-March. Restrictions eased in late May, but recent spikes in contagiousness have forced Puerto Rico to scale down the flexibility. Results were also impacted by the Federal Reserve Bank 150 bps rate cut in March. All of this followed the Puerto Rico earthquakes in January and occurred while we are in the process of integrating the Scotiabank acquisition.

“Our commitment and preparation enabled us to successfully manage these challenges fácil, rápido, hecho. During the quarter, our team worked mostly remotely. Branches operated safely assisted by our enhanced technology platform. Full-service ATMs and ITMs, mobile app, and online bill paying tools facilitated routine transactions in a contactless manner. Online/mobile appointment scheduling helped make possible Covid-19 safe meetings with customers at branches.

“The results speak for themselves. Loan production totaled more than $500 million, including $286 million in PPP loans, exceeding our Puerto Rico market share. We deployed a 100% digital, client-friendly application and funds disbursement process for PPP loans. Our PPP results enabled us to help more than 4,000 small businesses save more than 50,000 jobs. It also enabled us to attract new accounts in this strategically important customer base. Our online loan deferral tool and call centers processed relief for more than 44,000 retail customers. During the quarter, we also maintained a strong level of net interest margin, added to our Covid-19 related provisioning, reduced higher-cost wholesale funding, and increased liquidity and capital.

“Looking ahead, we expect to complete the integration of Scotiabank operations as planned by the end of the year, improve efficiencies, and continue to invest for the future to further simplify our operations and enhance our ability to serve customers. While we still face much uncertainty regarding Covid-19 and its impact on the economy, we are in a strong financial position, ready to assist our customers during these trying times.”

Income Statement

Unless otherwise noted, the following compares data for the secondquarter 2020 to the second quarter 2019. Balances are quarterly averages. TheScotiabank acquisition closed on December 31, 2019.

·      Total interest income of $121.7 million increased $27.4 million. This was primarily due to a 46.6% increase in interest earning assets partially offset by a 73 bps decline in yield. The increase in interest income from loans more than offset declines from increased cash due to significantly lower rates and lower investment securities balances. 2Q20 also included the previously-mentioned $6.0 million in interest recoveries.

·      Total interest expense of $16.6 million increased $3.5 million. This was primarily due to a 54.4% increase in interest bearing liabilities and an 18 bps decline in rate. Rate declined due to the increase in lower-cost core deposits and the reduction in higher-cost balances of brokered CDs and borrowings.

·      Provision for credit losses of $17.7 million was level with last year. 2Q20 included $5.0 million to incorporate the expected economic effects of the Covid-19 pandemic, while 2Q19 included $8.8 million for loans transferred to held for sale.

·      Total banking and financial service revenues of $23.1 million increased $5.0 million. This was primarily due to our increased customer base and our larger mortgage servicing portfolio.

·      All other non-interest income of $4.0 million declined $0.8 million. 2Q20 included a $3.5 million bargain purchase gain from the Scotiabank acquisition, while 2Q19 included a $4.8 million gain on sales of mortgage backed securities (MBS).

·      Total non-interest expense of $85.5 million increased $34.0 million primarily due to the Scotiabank acquisition. 2Q20 also included $3.0 million in merger and restructuring charges, $2.4 million in legal claims, and $2.0 million in expenses necessary to deal with Covid-19’s impact on operations.

·      The effective tax rate (ETR) was 25.0% compared to 31.2%. 2Q20 reflected a 24.2% full year ETR based on the mix of exempt income and income taxed at preferential rates.

Balance Sheet

Unless otherwisenoted, the following compares data at June 30, 2020 to June 30, 2019. Balancesare end-of-period. The purchase of Scotiabank closed on December 31, 2019.

·      Net loans of $6.7 billion increased $2.3 billion primarily due to the Scotiabank acquisition. Compared to March 31, 2020, loans increased $198.1 million. This reflected increases from PPP and other commercial loans partially offset by paydown of retail loans.

·      Loan production of $503.4 million increased $176.9 million. This reflected increases from PPP and other commercial loans and declines in the mortgage, auto and consumer categories due to the Covid-19 pandemic. Compared to 1Q20, production increased $222.9 million.

·      Cash and cash equivalents of $1.9 billion increased $1.2 billion. Compared to March 31, 2020, they increased $574.1 million primarily because of the influx of both commercial and retail deposits.

·      Total investments of $549.7 million declined $321.0 million. Compared to March 31, 2020, they declined $119.1 million, reflecting Treasury maturities and MBS repayments.

·      Customer deposits, excluding brokered, of $8.3 billion increased $3.8 billion. Compared to March 31, 2020, customer deposits increased $760.0 million, reflecting commercial deposits from existing and new clients, and in retail accounts from increased liquidity in the economy.

·      Brokered deposits of $218.2 million declined $170.2 million year-over-year and $37.3 million quarter-over-quarter. Borrowings of $104.4 million declined $252.4 million year-over-year and $59.4 million quarter-over-quarter.

·      Total stockholder’s equity of $1.04 billion declined $3.6 million. Compared to March 31, 2020, it was $18.7 million higher due to the increase in retained earnings.

·      Book value per common share of $18.69 declined $0.07 from a year-ago and increased $0.36 from March 31, 2020. Tangible book value per share of $16.01 declined $1.02 year-over-year and increased $0.41 from March 31, 2020.

Credit

Quality

Unless otherwisenoted, the following compares data at June 30, 2020 to June 30, 2019.

·      Loans under 1-4 month deferral programs totaled $2.1 billion or 30% of total loans. Retail loans under deferral totaled $1.4 billion or 32% of such loans. Commercial loans under deferral totaled $685 million or 27% of such loans.

·      The allowance for loan and lease losses of $232.7 million increased $70.1 million and as a percentage of loans held for investment was 3.35%, a decline of 17 bps. Compared to March 31, 2020, the allowance increased $1.9 million and as a percentage of loans declined 6 bps.

·      Net charge offs of $15.8 million increased $2.8 million due to higher loan balances. The NCO rate of 0.92% declined 23 bps. Compared to March 31, 2020, NCOs declined $8.3 million and the NCO rate declined 52 bps.

·      The early delinquency loan rate of 2.64% was down 86 bps year-over-year and 52 bps quarter-over-quarter. The total delinquency rate of 5.56% was down 51 bps year-over-year and 82 bps quarter-over-quarter. The declines reflect increased payments from customers and deferral programs.

·      Total non-performing loans of $90.2 million declined $23.4 million year-over-year and $8.4 million quarter-over-quarter. The NPL rate of 1.81% declined 113 bps year-over-year and 26 bps quarter-over-quarter. The sequential decline in NPLs and rate reflects loan paydowns and deferrals.

Capital Position

June 30, 2020 regulatory capital ratios increased from March 31, 2020 and continue to be significantly above requirements for a well-capitalized institution: Leverage ratio was 10.16%, up 2 bps; common equity Tier 1 capital ratio (CET1) was 12.03%, up 34 bps; Tier 1 risk-based capital ratio was 13.71%, up 35 bps; and total risk-based capital ratio was 14.96%, up 34 bps.

Financial Supplement &

Conference Call Presentation

OFG’s Financial Supplement, with full financial tables for the quarter ended June 30, 2020, and the 2Q20 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. Please refer to Tables 8-1, 8-2 and 8-3 in OFG’s above-mentioned Financial Supplement for a 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, earthquakes and other 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 severity, magnitude and duration of the Covid-19 pandemic, including impacts of the pandemic and of responses of federal, state and local governments on our branches, operations and personnel, and on our customers and their businesses.

For a discussion of such factors and certain risks and uncertainties to which OFG is subject, please refer to 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

PuertoRico & 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<br> Supplement is preliminary and based on data available at the time of the<br> earnings presentation, and investors should refer to our June 30, 2020<br> Quarterly Report on Form 10-Q once it is filed with the Securities and<br> Exchange Commission.
Table of Contents
Pages
OFG Bancorp (Consolidated Financial Information)
Table  1: Financial and Statistical Summary -<br> Consolidated 2
Table  2: Consolidated Statements of Operations 3
Table  3: Consolidated Statements of Financial<br> Condition 4
Table  4: Information on Loan Portfolio and Production 5-6
Table  5: Average Balances, Net Interest Income and<br> Net Interest Margin 7-8
Table  6: Loan Information and Performance Statistics 9-11
Table  7: Allowance for Credit Losses 12
Table  8: Reconciliation of GAAP to Non-GAAP Measures<br> and Calculation of Regulatory
Capital 13-15
Table  9: Notes to Financial Summary, Selected<br> Metrics, Loans, and Consolidated
Financial Statements (Tables 1-8) 16
OFG Bancorp<br> (NYSE: OFG) **** **** **** **** **** ****
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Table 1: Financial and Statistical<br> Summary - Consolidated
2020 **** 2020 2019 2019 2019 2020 **** 2019
(Dollars in thousands,<br> except per share data) (unaudited) Q2 **** Q1 Q4 Q3 Q2 YTD **** YTD
Statement of Operations **** **** **** **** **** ****
Net interest income $ 105,060 **** $ 105,101 (e) $ 79,209 $ 80,710 $ 81,085 $ 210,161 **** $ 162,874
Non-interest income, net<br> (core) **** 23,106 **** 26,233 (e) 19,196 18,542 18,074 **** 49,339 **** 35,627
Total core revenues **** 128,166 **** 131,334 (e) 98,405 99,252 99,159 **** 259,500 **** 198,501
Non-interest expense **** 85,481 **** 87,322 (e) 78,913 (e) 50,727 51,452 **** 172,803 **** 103,604
Pre-provision net revenues **** 46,731 **** 49,229 20,007 52,161 52,581 **** 95,960 **** 99,874
Total provision for credit<br> losses **** 17,696 **** 47,131 (c)(d) 23,068 (g) 43,770 (g)(h) 17,705 (h) **** 64,827 **** 29,954
Net income (loss) before<br> income taxes **** 29,035 **** 2,098 (3,061) 8,391 34,876 **** 31,133 **** 69,920
Income tax expense (benefit) **** 7,248 **** 297 (2,070) 1,008 10,897 **** 7,545 **** 22,471
Net income (loss) available<br> to common stockholders $ 20,159 **** 173 (2,619) 5,755 22,351 **** 20,332 **** 44,193
Common Share Statistics **** **** **** **** **** ****
Earnings (loss) per common<br> share - basic $ 0.39 **** - (0.05) 0.11 0.44 **** 0.40 **** 0.86
Earnings (loss) per common<br> share - diluted $ 0.39 **** - (0.05) 0.11 0.43 **** 0.39 **** 0.86
Average common shares<br> outstanding **** 51,336 **** 51,404 51,360 51,345 51,330 **** 51,370 **** 51,317
Average common shares<br> outstanding and equivalents **** 51,470 **** 51,713 51,791 51,772 51,680 **** 51,584 **** 51,652
Cash dividends per common<br> share $ 0.07 **** $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.14 **** $ 0.14
Book value per common share<br> (period end) $ 18.69 **** $ 18.33 (c) $ 18.75 $ 18.84 $ 18.76 $ 18.69 **** $ 18.76
Tangible book value per<br> common share (period end) $ 16.01 **** $ 15.60 (c) $ 15.96 $ 17.11 $ 17.03 $ 16.01 **** $ 17.03
Balance Sheet (Average<br> Balances) **** **** **** **** **** ****
Loans $ 6,840,650 (a) $ 6,687,875 $ 4,500,071 $ 4,539,045 $ 4,514,030 $ 6,764,263 **** $ 4,509,403
Interest-earning assets **** 8,845,744 (a) 8,556,421 5,886,379 5,981,756 6,034,338 **** 8,701,083 **** 6,092,944
Total assets **** 9,512,129 (a) 9,326,627 6,325,334 6,433,658 6,496,423 **** 9,419,378 **** 6,550,575
Core deposits **** 7,852,495 **** 7,516,438 4,582,872 4,563,187 4,467,729 **** 7,684,466 **** 4,430,331
Total deposits **** 8,088,106 **** 7,752,446 4,850,979 4,921,317 4,880,112 **** 7,920,275 **** 4,885,344
Borrowings **** 157,669 **** 271,800 304,365 340,194 459,802 **** 214,735 **** 510,694
Stockholders' equity **** 1,037,195 **** 1,043,481 (c) 1,062,720 1,061,541 1,037,057 **** 1,040,338 **** 1,027,356
Common stockholders' equity **** 955,325 **** 961,611 (c) 980,850 979,671 955,187 **** 958,468 **** 945,486
Performance Metrics **** **** **** **** **** ****
Net interest margin **** 4.78% **** 4.94% 5.34% 5.35% 5.39% **** 4.84% **** 5.39%
Return on average assets **** 0.92% **** 0.08% -0.06% 0.46% 1.48% **** 0.50% **** 1.45%
Return on average tangible<br> common stockholders' equity **** 9.88% **** 0.08% -1.17% 2.58% 10.32% **** 4.97% **** 10.32%
Efficiency ratio **** 66.70% **** 66.49% 80.19% 51.11% 51.89% **** 66.59% **** 52.19%
Full-time equivalent<br> employees, period end **** 2,373 **** 2,449 2,455 1,436 1,417 **** 2,373 **** 1,417
Credit Quality Metrics **** **** **** **** **** ****
Allowance for loan and lease<br> losses $ 232,701 **** $ 230,755 (c)(d) $ 116,539 $ 154,343 $ 162,642 $ 232,701 **** $ 162,642
Allowance as a % of loans<br> held for investment **** 3.35% (a) 3.41% 1.73% 3.41% 3.52% **** 3.35% (a) 3.52%
Net<br> charge-offs $ 15,750 **** $ 24,034 $ 14,395 $ 34,486 (f)(g) $ 12,982 $ 39,784 **** $ 25,050
Net charge-off rate **** 0.92% **** 1.44% 1.28% 3.04% (f)(g) 1.15% **** 1.18% **** 1.11%
Early delinquency rate (30 -<br> 89 days past due) **** 2.64% **** 3.16% 3.07% 3.63% 3.50% **** 2.64% **** 3.50%
Total delinquency rate (30<br> days and over) **** 5.56% **** 6.38% 5.85% 5.40% 6.07% **** 5.56% **** 6.07%
Capital Ratios (Non-GAAP) **** **** **** **** **** ****
Leverage ratio **** 10.16% **** 10.14% (b)(c) 9.24% 15.41% 15.20% **** 10.16% **** 15.20%
Common equity Tier 1 capital<br> ratio **** 12.03% (a) 11.69% (b)(c) 10.91% 17.98% 17.48% **** 12.03% **** 17.48%
Tier 1 risk-based capital<br> ratio **** 13.71% (a) 13.36% (b)(c) 12.64% 20.43% 19.87% **** 13.71% **** 19.87%
Total risk-based capital<br> ratio **** 14.96% (a) 14.62% (b)(c) 13.91% 21.71% 21.14% **** 14.96% **** 21.14%
Tangible common equity<br> ("TCE") ratio **** 8.39% **** 8.80% 8.96% 14.07% 13.71% **** 8.39% **** 13.71%
(a) In response to the<br> Coronavirus (COVID-19) pandemic, CARES Act created funding for the Small<br> Business Administration (SBA) Paycheck Protection Program (PPP), which<br> provides loans to small businesses to keep their employees on payroll and<br> make other eligible payments. The original funding for the PPP was fully<br> allocated by mid-April 2020, with additional funding made available on April<br> 24, 2020 under the Paycheck Protection Program and Health Care Enhancement Act.<br> During 2Q 2020, the Company participated in this program originating 4,342<br> PPP loans. At June 30, 2020, Oriental had PPP loans amounting to 278.1<br> million. These loans are fully guaranteed by the SBA and risk-weighted at 0%.
(b) During 1Q 2020, the Company<br> decided to early implement Simplifications to the Capital Rule, which<br> simplified the regulatory capital treatment for mortgage servicing assets<br> (MSA) and certain deferred tax assets arising from temporary differences<br> (temporary difference DTAs). It Increased common equity tier 1 (CET1) capital<br> threshold deductions from 10 percent to 25 percent and removes the aggregate<br> 15 percent CET1 threshold deduction. However, it retains the 250 percent risk<br> weight applicable to non-deducted amounts of MSAs and temporary difference<br> DTAs.
(c) On January 1, 2020, the<br> Company implemented ASU No. 2016-13: Measurement of Credit Losses on<br> Financial Instruments "(CECL)" using the modified retrospective<br> approach. As a result, a 39.2 million allowance for credit losses was<br> recorded for Non-PCD loans and 0.2 million for unused commitments with the<br> corresponding adjustment reducing retained earnings, net of a 13.9 million<br> deferred tax effect. For PCD loans, including BBVA and Eurobank acquired book<br> plus the recently acquired Scotiabank, the adjustment amounting to 50.5<br> million was made through the allowance and loan balances with no impact in<br> capital. As disclosed in the Company’s 2019 Form 10-K, the Company had<br> initially elected to phase-in the January 1, 2020 (“day 1”) impact to<br> retained earnings to regulatory capital, over a three-year transition period<br> beginning in 2020. As part of its response to the impact of COVID-19, in<br> March 2020, the Federal Reserve, Federal Deposit Insurance Corporation and<br> Office of the Comptroller of the Currency issued an interim final rule that<br> provided the option to temporarily delay the effects of CECL on regulatory<br> capital for two years, followed by a three-year transition period. In<br> 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.
(d) During March 2020, a<br> global pandemic was declared by the World Health Organization related to the<br> rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The<br> pandemic has significantly impacted the economic conditions in P.R. and the<br> U.S., creating significant uncertainties. As a result of these developments,<br> we increased our provision for credit losses in 1Q 2020 and 2Q 2020 by 34.1<br> million and 5.0 million, respectively.
(e) On December 31, 2019,<br> the Company acquired Scotiabank's Puerto Rico and USVI operations, incurring<br> in merger and restructuring charges of 21.5 million during 4Q 2019. At<br> December 31, 2019, the consolidated statement of financial condition<br> contemplated the effects of the Scotiabank PR & USVI acquisition.<br> Nevertheless, the consolidated statement of operations did not contemplated<br> the effects of the Scotiabank PR & USVI acquisition until January 1,<br> 2020.
(f) During 3Q 2019, the<br> Company received 2.4 million proceeds from the sale of fully charged-off<br> originated auto and consumer loans.
(g) During 3Q 2019, the<br> Company decided to sell mostly non-performing loans, increasing the provision<br> by 37.2 million. Originated loans that were transferred to held-for-sale<br> amounted to 25.3 million at September 30, 2019, the remaining were purchased<br> credit impaired loans. Loans were sold during 4Q 2019, with an additional<br> increase in the provision of 6.6 million.
(h) During 2Q 2019, the<br> Company decided to sell mostly non-performing mortgage loans increasing the<br> provision by 8.8 million. Most of these loans were sold in 3Q 2019,<br> increasing the provision by an additional 1.8 million.
2

All values are in US Dollars.

OFG Bancorp<br> (NYSE: OFG) **** ****
Table 2: Consolidated Statements of<br> Operations ****
Quarter Ended Six-Months Ended
June 30, **** March 31, December 31, September 30, June 30, June 30, **** June 30,
(Dollars in thousands,<br> except per share data) (unaudited) 2020 **** 2020 2019 2019 2019 2020 **** 2019
Interest income: **** ****
Loans **** ****
Non-PCD loans $ 83,832 **** $ 87,482 $ 74,142 $ 74,910 $ 73,648 $ 171,314 **** $ 145,673
PCD loans **** 34,700 (a) **** 28,953 10,762 10,862 11,432 **** 63,653 (a) 23,526
Total interest<br> income from loans **** 118,532 **** 116,435 84,904 85,772 85,080 **** 234,967 **** **** 169,199
Investment securities 3,160 **** 7,262 6,271 7,883 9,175 10,422 **** 19,766
Total interest<br> income 121,692 **** 123,697 (d) 91,175 93,655 94,255 245,389 **** **** 188,965
Interest expense: **** **** **** ****
Deposits **** **** **** ****
Core deposits 13,999 **** 15,034 7,957 8,256 7,465 29,033 **** 13,679
Brokered deposits 1,446 **** 1,586 1,804 2,298 2,526 3,032 **** 5,362
Total deposits 15,445 **** 16,620 (d) 9,761 10,554 9,991 32,065 (d) 19,041
Borrowings 1,187 **** 1,976 2,205 2,391 3,179 3,163 **** 7,050
Total interest<br> expense 16,632 **** 18,596 11,966 12,945 13,170 35,228 **** **** 26,091
Net interest income **** 105,060 **** 105,101 79,209 80,710 81,085 **** 210,161 **** **** 162,874
Provision for credit losses,<br> excluding PCD loans 15,227 **** 40,951 18,859 23,427 8,616 56,178 **** 20,248
Provision for credit losses<br> on PCD loans 2,469 **** 6,180 4,209 20,343 9,089 8,649 **** 9,706
Total provision<br> for credit losses **** 17,696 **** 47,131 (c)(d) 23,068 43,770 (f)(g)(h) 17,705 (h) **** 64,827 (c)(d) **** 29,954
Net interest<br> income after provision for loan and lease losses 87,364 **** 57,970 56,141 36,940 63,380 145,334 **** **** 132,920
Non-interest income: **** **** **** **** ****
Banking service revenues 13,668 **** 15,713 10,812 10,813 10,776 29,381 **** 21,241
Wealth management revenues 6,366 **** 7,286 7,062 6,611 6,669 13,652 **** **** 12,551
Mortgage banking activities 3,072 **** 3,234 1,322 1,118 629 6,306 **** **** 1,835
Total banking and<br> financial service revenues **** 23,106 (c) 26,233 (d) 19,196 18,542 18,074 **** 49,339 (d) **** 35,627
Bargain purchase from<br> Scotiabank PR & USVI acquisition 3,462 (b) 409 315 - - 3,871 (b) **** -
Other income, net 584 **** 4,808 (e) 200 3,636 (e) 4,874 (e) 5,392 (e) **** 4,977 (e)
Total non-interest<br> income, net 27,152 **** 31,450 19,711 22,178 22,948 58,602 **** **** 40,604
Non-interest expense: **** **** **** ****
Compensation and employee<br> benefits 34,506 **** 35,544 21,817 20,500 19,875 70,050 **** **** 40,216
Occupancy, equipment and<br> infrastructure costs 11,837 **** 11,439 7,488 7,307 7,511 23,276 **** **** 15,257
Merger and restructuring<br> charges 3,006 (d) 304 21,499 (d) 1,556 1,000 3,310 **** **** -
Net (gain) loss on sale of<br> foreclosed real estate and other repossessed assets 316 **** (193) 541 794 21 123 **** **** 1,091
General and administrative<br> expenses 33,214 **** 37,513 25,450 18,475 20,482 70,727 **** **** 42,181
Credit related expenses 2,602 **** 2,715 2,118 2,095 2,563 5,317 **** **** 4,859
Total non-interest<br> expense **** 85,481 **** 87,322 (d) 78,913 50,727 51,452 172,803 (d) **** 103,604
Income (loss) before income<br> taxes **** 29,035 **** 2,098 (3,061) 8,391 34,876 31,133 **** **** 69,920
Income tax expense (benefit) 7,248 **** 297 (2,070) 1,008 10,897 7,545 **** **** 22,471
Net income (loss) **** 21,787 **** 1,801 (c) (991) (d) 7,383 23,979 23,588 (c) **** 47,449
Less:  dividends on preferred<br> stock **** (1,628) **** (1,628) (1,628) (1,628) (1,628) (3,256) **** **** (3,256)
Net income (loss) available<br> to common shareholders $ 20,159 **** $ 173 $ (2,619) $ 5,755 $ 22,351 $ 20,332 **** $ 44,193
(a) During 2Q 2020, the<br> Company recognized interest recoveries on SOP loans acquired in the Scotiabank<br> PR & USVI acquisition collected subsequently to the acquisition date<br> amounting to 6.0 million.
(b) During 2Q 2020, the<br> Company increased the Bargain purchase from Scotiabank PR & USVI<br> acquisition by 3.5 million to adjust the fair value of accrued interest<br> receivable in Day 1, net of taxes.
(c) During March 2020, a<br> global pandemic was declared by the World Health Organization related to the<br> rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The<br> pandemic has significantly impacted the economic conditions in P.R. and the<br> U.S., creating significant uncertainties. As a result of these developments,<br> we increased our provision for credit losses in the 1Q 2020 and 2Q 2020 by<br> 34.1 million and 5.0 million, respectively.
(d) On December 31, 2019,<br> the Company acquired Scotiabank's Puerto Rico and USVI operations, incurring<br> in merger and restructuring charges of 21.5 million during 4Q 2019 and 3.0<br> million during 2Q 2020. At December 31, 2019, the consolidated statement of<br> financial condition contemplated the effects of the Scotiabank PR & USVI<br> acquisition. Nevertheless, the consolidated statement of operations did not<br> contemplated the effects of the Scotiabank PR & USVI acquisition until<br> January 1, 2020.
(e) During 1Q 2020, 2Q 2019<br> and 3Q 2019, the Company sold 316 million, 350 million and 322 million<br> available-for-sale mortgage-backed securities, respectively, and recognized a<br> gain in the sale of 4.7 million, 4.8 million and 3.5 million.
(f) During 3Q 2019, the<br> Company received 2.4 million proceeds from the sale of fully charged-off<br> originated auto and consumer loans.
(g) During 3Q 2019, the<br> Company decided to sell mostly non-performing loans, increasing the provision<br> by 37.2 million. Originated loans that were transferred to held-for-sale<br> amounted to 25.3 million at September 30, 2019, the remaining were purchased<br> credit impaired loans. Loans were sold during 4Q 2019, with an additional<br> increase in the provision of 6.6 million.
(h) During 2Q 2019, the<br> Company decided to sell mostly non-performing mortgage loans increasing the<br> provision by 8.8 million. Most of these loans were sold in 3Q 2019,<br> increasing the provision by an additional 1.8 million.
3

All values are in US Dollars.

OFG Bancorp<br> (NYSE: OFG) **** **** ****
Table 3: Consolidated Statements of<br> Financial Condition **** **** ****
**** March 31, December 31, September 30, June 30,
(Dollars in thousands)<br> (unaudited) **** 2020 2019 2019 2019
Cash and cash equivalents 1,900,037 (b) $ 1,325,941 $ 852,757 $ 962,887 $ 677,430
Investments: **** ****
Trading securities 22 **** 29 37 41 412
Investment securities<br> available-for-sale, at fair value, with amortized cost of 529,985 and<br> allowance for credit losses of 0 **** ****
(March 31, 2020 -<br> 648,565 and an allowance for credit losses of 0; December 31, 2019 -<br> 1,074,474; **** ****
September 30, 2019 -<br> 520,960; June 30, 2019 - 860,911) **** ****
Mortgage-backed<br> securities 340,192 **** 355,637 673,886 505,102 843,333
US treasury notes 197,340 **** 298,986 397,183 10,938 10,907
Other investment<br> securities 2,707 **** 2,837 3,100 3,055 3,193
Total investment<br> securities available-for-sale 540,239 **** 657,460 (e) 1,074,169 (d) 519,095 (e) 857,433
Federal Home Loan Bank<br> (FHLB) stock, at cost 8,366 **** 10,301 13,048 10,525 12,821
Other investments 1,076 **** 973 560 57 3
Total investments 549,703 **** 668,763 1,087,814 529,718 870,669
Loans, net 6,739,243 (b) 6,541,174 (c) 6,641,847 (d) 4,407,190 (f) 4,474,497
Other assets: **** ****
Prepaid expenses 40,119 **** 44,633 52,648 14,244 11,903
Deferred tax asset, net 186,730 **** 196,129 (c) 176,740 112,602 111,147
Foreclosed real estate and<br> repossessed properties 26,152 **** 30,388 33,236 30,488 32,016
Premises and equipment, net 82,234 **** 81,834 81,105 69,754 71,001
Goodwill 86,069 **** 86,069 86,069 86,069 86,069
Right of use assets 34,692 **** 36,844 39,112 19,318 20,419
Core deposit, customer<br> relationship intangible and other intangibles 51,406 **** 54,174 56,965 2,491 2,783
Servicing asset 47,926 **** 49,287 50,779 10,125 10,134
Accounts receivable and<br> other assets 188,408 (a) 123,335 138,589 88,619 96,059
Total assets 9,932,719 **** $ 9,238,571 $ 9,297,661 (b) $ 6,333,505 $ 6,464,127
Deposits: **** ****
Demand deposits 4,370,419 (b) $ 3,711,492 $ 3,579,115 $ 2,228,256 $ 2,219,911
Savings accounts 1,978,118 **** 1,829,054 1,815,044 1,206,569 1,200,408
Time deposits 1,975,223 **** 2,023,211 2,060,953 1,154,871 1,136,411
Brokered deposits 218,166 **** 255,514 243,498 288,362 388,407
Total deposits 8,541,926 **** 7,819,271 7,698,610 (d) 4,878,058 4,945,137
Borrowings: **** ****
Securities sold under<br> agreements to repurchase - **** 50,103 190,274 190,261 240,324
Advances from FHLB and other<br> borrowings 68,340 **** 77,601 79,204 79,603 80,423
Subordinated capital notes 36,083 **** 36,083 36,083 36,083 36,083
Total borrowings 104,423 **** 163,787 305,561 305,947 356,830
Other liabilities: **** ****
Derivative liabilities 2,078 **** 2,059 913 1,159 985
Acceptances outstanding 20,034 **** 11,763 21,599 21,796 23,610
Lease liability 35,694 **** 37,702 39,840 21,081 22,179
Accrued expenses and other<br> liabilities 187,280 **** 181,395 185,660 56,388 70,512
Total<br> liabilities 8,891,435 **** 8,215,977 8,252,183 5,284,429 5,419,253
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 621,860 **** 621,206 621,515 620,948 620,368
Legal surplus 98,347 **** 95,945 95,779 95,783 95,019
Retained earnings 264,725 **** 250,557 (c) 279,646 285,854 284,459
Treasury stock, at cost (103,121) **** (103,289) (102,339) (102,936) (103,171)
Accumulated other<br> comprehensive (loss) income, net 7,588 **** 6,290 (1,008) (2,458) (3,686)
Total<br> stockholders' equity 1,041,284 **** 1,022,594 1,045,478 1,049,076 1,044,874
Total liabilities<br> and stockholders' equity 9,932,719 **** $ 9,238,571 $ 9,297,661 $ 6,333,505 $ 6,464,127
(a) During March 2020, a<br> global pandemic was declared by the World Health Organization related to the<br> rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The<br> pandemic has significantly impacted the economic conditions in P.R. and the<br> U.S., creating significant uncertainties. After recent disruptions in<br> economic conditions caused by COVID-19, the Company has offered several<br> deferral programs for the payment of principal and interest for auto,<br> personal, credit cards and mortgage, and commercial loans, for customers<br> whose payments were not over 89 days past due at March 12, 2020 and requested<br> to be included in these programs, which has caused accrued interest<br> receivable to increase by approximately 40 million from 1Q 2020 to 2Q 2020.
(b)<br> In response to the Coronavirus (COVID-19) pandemic, CARES Act created funding<br> for the Small Business Administration (SBA) Paycheck Protection Program<br> (PPP), which provides loans to small businesses to keep their employees on<br> payroll and make other eligible payments. The original funding for the PPP<br> was fully allocated by mid-April 2020, with additional funding made available<br> on April 24, 2020 under the Paycheck Protection Program and Health Care<br> Enhancement Act. During 2Q 2020, the Company participated in this program<br> originating 4,342 PPP loans. At June 30, 2020, Oriental had PPP loans<br> amounting to 278.1 million. These loans are fully guaranteed by the SBA and<br> risk-weighted at 0%. These funds has been disbursed into the customers'<br> deposit accounts which have increased the Company's cash and core deposits.
(c) On January 1, 2020, the<br> Company implemented ASU No. 2016-13: Measurement of Credit Losses on<br> Financial Instruments "(CECL)" using the modified retrospective<br> approach. As a result, a 39.2 million allowance for credit losses was<br> recorded for Non-PCD loans and 0.2 million for unused commitments with the<br> corresponding adjustment reducing retained earnings, net of a 13.9 million<br> deferred tax effect. For PCD loans, including BBVA and Eurobank acquired book<br> plus the recently acquired Scotiabank, the adjustment amounting to 50.5<br> million was made through the allowance and loan balances with no impact in<br> capital.
(d) On December 31, 2019, <br> the Company acquired Scotiabank's Puerto Rico and USVI operations, increasing<br> investments by 576.2 million, loans by 2.2 billion and deposits by 3.0<br> billion.
(e) During 1Q 2020, the<br> Company sold 316 million available-for-sale mortgage-backed securities and<br> recognized a gain in the sale of 4.7 million. During 3Q 2019, the Company<br> sold 322 million available-for-sale mortgage-backed securities and<br> recognized a gain in the sale of 3.4 million. During 2Q 2019, the Company<br> sold 350 million available-for-sale mortgage-backed securities and<br> recognized a gain in the sale of 4.8 million, resulting  in the termination<br> before maturity of 191.2 million of securities sold under agreements to<br> repurchase and in a reduction of 62.8 million of brokered CDs.
(f) During 3Q 2019, the<br> Company decided to sell mostly non-performing loans. Originated loans that<br> were transferred to held-for-sale amounted to 25.3 million at September 30,<br> 2019 and were sold in 4Q 2019.
4

All values are in US Dollars.

OFG Bancorp<br> (NYSE: OFG) ****
Table 4-1: Information on Loan Portfolio<br> and Production ****
June 30, **** March 31, December 31, September 30, June 30,
(Dollars in thousands)<br> (unaudited) 2020 **** 2020 2019 2019 2019
Non-PCD: **** **** ****
Mortgage $ 874,286 **** $ 887,950 $ 898,118 $ 588,535 $ 634,774
Commercial 1,918,424 **** 1,910,192 1,862,484 1,575,491 1,618,809
Commercial Paycheck<br> Protection Program (PPP Loans) 278,059 (a) - - - -
Consumer 458,714 **** 481,710 495,244 383,819 388,582
Auto 1,454,987 **** 1,487,701 1,479,612 1,277,114 1,219,066
4,984,470 **** 4,767,553 4,735,458 3,824,959 3,861,231
Less:  Allowance for<br> credit losses (151,507) **** (149,961) (85,044) (80,579) (91,637)
Total non- PCD<br> loans held for investment, net 4,832,963 **** 4,617,592 4,650,414 3,744,380 3,769,594
PCD: **** **** ****
Mortgage 1,541,637 **** 1,561,557 1,591,112 494,278 538,001
Commercial 386,046 **** 391,158 359,601 202,065 215,902
Consumer 2,950 **** 3,350 9,263 802 867
Auto 37,409 **** 42,466 43,361 3,883 6,462
1,968,042 **** 1,998,531 2,003,337 701,028 761,232
Less:  Allowance for<br> credit losses (81,194) **** (80,794) (31,495) (73,764) (71,005)
Total PCD loans<br> held for investment, net **** 1,886,848 **** **** 1,917,737 1,971,842 627,264 690,227
Total loans held for<br> investment **** 6,719,811 **** **** 6,535,329 6,622,256 4,371,644 4,459,821
Mortgage loans held for<br> sale 19,432 **** 5,845 19,591 23,504 13,293
Other loans held for sale - **** - - 12,042 1,383
Total loans, net $ 6,739,243 **** $ 6,541,174 $ 6,641,847 $ 4,407,190 $ 4,474,497
Loan Portfolio Summary: **** **** ****
Loans held for investment: **** **** ****
Mortgage $ 2,415,923 **** $ 2,449,507 $ 2,489,230 $ 1,082,813 $ 1,172,775
Commercial **** 2,582,529 **** 2,301,350 2,222,085 1,777,556 1,834,711
Consumer **** 461,664 **** 485,060 504,507 384,621 389,449
Auto **** 1,492,396 **** 1,530,167 1,522,973 1,280,997 1,225,528
**** 6,952,512 **** 6,766,084 6,738,795 4,525,987 4,622,463
Less:  Allowance for<br> credit losses **** (232,701) **** (230,755) (116,539) (154,343) (162,642)
Total loans held<br> for investment, net **** 6,719,811 **** 6,535,329 6,622,256 4,371,644 4,459,821
Mortgage loans held for<br> sale **** 19,432 **** 5,845 19,591 23,504 13,293
Other loans held for sale **** - **** - - 12,042 1,383
Total loans, net $ 6,739,243 **** $ 6,541,174 $ 6,641,847 $ 4,407,190 $ 4,474,497
(a) In response to the<br> Coronavirus (COVID-19) pandemic, CARES Act created funding for the Small<br> Business Administration (SBA) Paycheck Protection Program (PPP), which<br> provides loans to small businesses to keep their employees on payroll and<br> make other eligible payments. The original funding for the PPP was fully<br> allocated by mid-April 2020, with additional funding made available on April<br> 24, 2020 under the Paycheck Protection Program and Health Care Enhancement<br> Act. During 2Q 2020, the Company participated in this program originating<br> 4,342 PPP loans. At June 30, 2020, Oriental had PPP loans amounting to 278.1<br> million. These loans are fully guaranteed by the SBA and risk-weighted at 0%.
5

All values are in US Dollars.

OFG Bancorp (NYSE: OFG)
Table 4-2: Information on Loan Portfolio and Production
Quarter Ended Six-Months Ended
**** **** June 30, March 31, December 31, September 30, June 30, June 30, June 30,
(Dollars in thousands) (unaudited) **** 2020 2020 2019 2019 2019 **** 2020 2019
Loan production (13) ****
Mortgage **** $ 21,138 $ 30,776 $ 23,680 $ 23,805 $ 22,196 $ 51,914 $ 45,293
Commercial **** 98,558 54,113 216,610 65,635 64,079 152,671 124,564
Commercial PPP Loans **** 286,420 - - - - 286,420 -
US Loan Programs **** 35,711 47,125 12,482 12,225 56,372 82,836 88,078
Consumer **** 14,231 39,199 41,947 48,257 47,662 53,430 88,539
Auto **** 47,374 109,344 110,184 141,507 136,263 156,718 256,462
Total **** $ 503,432 $ 280,557 $ 404,903 $ 291,429 $ 326,572 $ 783,989 $ 602,936
6
OFG Bancorp (NYSE: OFG)
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Table 5-1: Average Balances, Net Interest Income and Net Interest Margin
2020 Q2 2020 Q1 2019 Q4 2019 Q3 2019 Q2
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 $ 1,393,187 $ 359 0.10 % $ 943,581 $ 2,788 1.19 % $ 863,497 $ 3,684 1.69 % $ 734,105 $ 4,086 2.21 % $ 481,115 $ 2,904 2.42 %
Investment securities 611,907 2,801 1.83 % 924,965 4,474 1.93 % 522,811 2,587 1.98 % 708,606 3,797 2.14 % 1,039,193 6,271 2.41 %
Loans held for<br> investment (1) **** **** ****
Non-PCD loans 4,857,281 83,832 6.94 % 4,613,878 87,482 7.63 % 3,888,442 74,142 7.56 % 3,873,743 74,910 7.67 % 3,810,005 73,648 7.75 %
PCD loans 1,983,369 34,700 7.00 % 2,073,997 28,953 5.58 % 611,629 10,762 7.04 % 665,302 10,862 6.53 % 704,025 11,432 6.50 %
Total loans 6,840,650 118,532 6.97 % 6,687,875 116,435 7.00 % 4,500,071 84,904 7.49 % 4,539,045 85,772 7.50 % 4,514,030 85,080 7.56 %
Total interest-earning<br> assets $ 8,845,744 $ 121,692 5.53 % $ 8,556,421 $ 123,697 5.81 % $ 5,886,379 $ 91,175 6.15 % $ 5,981,756 $ 93,655 6.21 % $ 6,034,338 $ 94,255 6.27 %
Interest bearing liabilities: **** **** ****
Deposits **** **** ****
NOW accounts $ 2,069,247 $ 2,138 0.42 % $ 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 %
Savings accounts **** 1,809,517 1,976 0.44 % 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 %
Time deposits **** 1,990,639 7,835 1.58 % 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 %
Brokered deposits 235,611 1,446 2.47 % 236,008 1,586 2.70 % 268,108 1,804 2.67 % 358,130 2,298 2.55 % 412,383 2,526 2.46 %
6,105,014 13,394 0.88 % 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 %
Non-interest bearing<br> deposit accounts 1,983,092 - - **** 1,698,964 - - 1,110,847 - - 1,094,047 - - 1,097,903 - - %
Fair value premium<br> amortization and core deposit intangible amortization - 2,051 - **** - 2,074 - - 201 - - 201 - - 201 -
Total deposits 8,088,106 15,445 0.77 % 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 %
Borrowings **** **** ****
Securities sold<br> under agreements to repurchase 46,154 334 2.91 % 158,462 1,002 2.54 % 190,000 1,189 2.48 % 224,783 1,342 2.37 % 343,370 2,107 2.46 %
Advances from FHLB<br> and other borrowings 75,432 505 2.69 % 77,255 539 2.81 % 78,282 541 2.74 % 79,328 550 2.75 % 80,349 559 2.79 %
Subordinated capital<br> notes 36,083 348 3.88 % 36,083 435 4.85 % 36,083 475 5.22 % 36,083 499 5.49 % 36,083 514 5.71 %
Total borrowings 157,669 1,187 3.03 % 271,800 1,976 2.92 % 304,365 2,205 2.87 % 340,194 2,391 2.79 % 459,802 3,180 2.77 %
Total interest-bearing<br> liabilities $ 8,245,775 $ 16,632 0.81 % $ 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 %
Interest rate spread **** $ 105,060 4.72 % $ 105,101 4.88 % $ 79,209 5.23 % $ 80,710 5.23 % $ 81,084 5.28 %
Net interest margin 4.78 % 4.94 % 5.34 % 5.35 % 5.39 %
**** $ - **** **** $ - $ 701 $ 217 $ 241
**** - **** **** - 332 154 189
SOP loan cost recoveries (interest recoveries in 2Q 2020) **** $ 5,982 **** **** $ - $ 1,033 $ 371 $ 430
Adjusted excluding cost/interests recoveries (Non-GAAP): **** **** **** ****
Total interest-earning<br> assets $ 8,845,744 $ 115,710 5.26 % $ 8,556,421 $ 123,697 5.81 % $ 5,886,379 $ 90,142 6.08 % $ 5,981,756 $ 93,284 6.19 % $ 6,034,338 $ 93,825 6.24 %
Interest rate spread **** $ 99,078 4.45 % $ 105,101 4.88 % $ 78,176 5.16 % $ 80,339 5.21 % $ 80,654 5.25 %
Net interest margin 4.50 % 4.94 % 5.27 % 5.33 % 5.36 %
Core deposits: (Non-GAAP) **** ****
Deposits **** ****
NOW accounts $ 2,069,247 $ 2,138 0.42 % $ 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 %
Savings accounts 1,809,517 **** 1,976 0.44 % 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 %
Time deposits 1,990,639 **** 7,835 1.58 % 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 %
5,869,403 **** 11,949 0.82 % 5,817,474 12,960 0.90 % 3,472,025 7,756 0.89 % 3,469,140 8,055 0.92 % 3,369,826 7,264 0.86 %
Non-interest bearing<br> deposit accounts 1,983,092 **** - - % 1,698,964 - - % 1,110,847 - - % 1,094,047 - - % 1,097,903 - - %
Total core<br> deposits $ 7,852,495 $ 11,949 0.61 % $ 7,516,438 $ 12,960 0.69 % $ 4,582,872 $ 7,756 0.67 % $ 4,563,187 $ 8,055 0.70 % $ 4,467,729 $ 7,264 0.65 %
7
OFG Bancorp (NYSE: OFG)
--- --- --- --- --- --- --- --- --- --- --- --- ---
Table 5-2: Average Balances, Net Interest Income and Net Interest Margin (Continued)
2020 YTD 2019 YTD
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
(Dollars in thousands) (unaudited) Balance Expense Rate Balance Expense Rate
Interest earning assets:
Cash equivalents $ 1,168,384 $ 3,147 0.54 % $ 435,102 $ 5,271 2.44 %
Investment securities 768,436 7,275 1.89 % 1,148,439 14,495 2.52 %
Loans held for<br> investment **** **** ****
Non-PCD loans 4,735,580 171,315 7.26 % 3,796,169 145,673 7.74 %
PCD loans 2,028,683 63,653 6.28 % 713,234 23,526 6.60 %
Total loans 6,764,263 234,968 6.97 % 4,509,403 169,199 7.57 %
Total interest-earning<br> assets $ 8,701,083 $ 245,390 5.66 % $ 6,092,944 $ 188,965 6.25 %
Interest bearing liabilities: **** **** ****
Deposits **** **** ****
NOW accounts $ 2,024,876 $ 4,525 0.45 % $ 1,122,155 $ 3,183 0.57 %
Savings accounts **** 1,803,587 4,416 0.49 % 1,180,586 3,496 0.60 %
Time deposits **** 2,014,975 15,967 1.59 % 1,028,870 6,598 1.29 %
Brokered deposits 235,809 3,032 2.58 % 455,013 5,362 2.38 %
6,079,247 27,940 0.92 % 3,786,624 18,639 0.99 %
Non-interest bearing<br> deposit accounts 1,841,028 - - **** 1,098,720 - - %
Fair value premium<br> amortization and core deposit intangible amortization - 4,125 - **** - 401 -
Total deposits 7,920,275 32,065 0.81 % 4,885,344 19,040 0.79 %
Borrowings **** **** ****
Securities sold<br> under agreements to repurchase 102,308 1,334 2.62 % 393,826 4,892 2.50 %
Advances from FHLB<br> and other borrowings 76,344 1,045 2.74 % 80,785 1,121 2.80 %
Subordinated capital<br> notes 36,083 785 4.35 % 36,083 1,038 5.80 %
Total borrowings 214,735 3,164 2.95 % 510,694 7,051 2.78 %
Total interest-bearing<br> liabilities $ 8,135,010 $ 35,229 0.87 % $ 5,396,038 $ 26,091 0.98 %
Interest rate spread **** $ 210,161 4.79 % $ 162,874 5.27 %
Net interest margin 4.84 % 5.39 %
SOP loan cost recoveries (interest recoveries in 2Q 2020) $ 5,982 **** **** $ 967
Acquired BBVAPR<br> loans $ - **** **** 668
Acquired Eurobank<br> loans - **** **** 299
Adjusted excluding cost/interests recoveries (Non-GAAP): **** ****
Total interest-earning<br> assets $ 8,701,083 $ 239,408 5.52 % $ 6,092,944 $ 187,998 6.22 %
Interest rate spread $ 204,179 4.65 % $ 161,907 5.24 %
Net interest margin 4.71 % 5.36 %
Core deposits: (Non-GAAP) **** ****
Deposits **** ****
NOW accounts $ 2,024,876 $ 4,525 0.45 % $ 1,122,155 $ 3,183 0.57 %
Savings accounts 1,803,587 **** 4,416 0.49 % 1,180,586 3,496 0.60 %
Time deposits 2,014,975 **** 15,967 1.59 % 1,028,870 6,598 1.29 %
5,843,438 **** 24,908 0.85 % 3,331,611 13,277 0.80 %
Non-interest bearing<br> deposit accounts 1,841,028 **** - - % 1,098,720 - - %
Total core<br> deposits $ 7,684,466 $ 24,908 0.65 % $ 4,430,331 $ 13,277 0.60 %
8
OFG Bancorp<br> (NYSE: OFG) **** ****
--- --- --- --- --- --- --- --- --- --- --- ---
Table 6-1: Loan Information and<br> Performance Statistics (1)
2020 2020 2019 2019 2019
(Dollars in thousands)<br> (unaudited) Q2 Q1 Q4 Q3 Q2
Net Charge-offs **** ****
Non-PCD **** ****
Mortgage: **** ****
Charge-offs $ 185 $ 418 $ 1,075 $ 16,299 (b) $ 604
Recoveries **** (9) (249) (437) (493) (316)
Total mortgage **** 176 169 638 15,806 288
Commercial: **** ****
Charge-offs **** 497 3,771 463 8,421 (b) 2,226
Recoveries **** (631) (1,522) (606) (176) (179)
Total commercial **** (134) 2,249 (143) 8,245 2,047
Consumer: **** ****
Charge-offs **** 4,187 6,015 5,289 5,317 5,272
Recoveries **** (443) (644) (196) (1,463) (a) (405)
Total consumer **** 3,744 5,371 5,093 3,854 4,867
Auto: **** ****
Charge-offs **** 13,300 13,053 12,930 12,383 10,728
Recoveries **** (3,405) (4,211) (4,123) (5,802) (a) (4,948)
Total auto **** 9,895 8,842 8,807 6,581 5,780
Total $ 13,681 $ 16,631 $ 14,395 $ 34,486 $ 12,982
PCD **** ****
Mortgage: **** ****
Charge-offs $ 2,178 $ 5,143 $ - $ - $ -
Recoveries **** (580) (122) - - -
Total mortgage **** 1,598 5,021 - - -
Commercial: **** ****
Charge-offs **** 386 2,357 - - -
Recoveries **** (286) (375) - - -
Total commercial **** 100 1,982 - - -
Consumer: **** ****
Charge-offs **** 30 431 - - -
Recoveries **** (30) (63) - - -
Total consumer **** - 368 - - -
Auto: **** ****
Charge-offs **** 600 375 - - -
Recoveries **** (229) (343) - - -
Total auto **** 371 32 - - -
Total $ 2,069 $ 7,403 $ - $ - $ -
Total Net Charge-offs $ 15,750 $ 24,034 $ 14,395 $ 34,486 $ 12,982
Net Charge-off Rates **** ****
Mortgage **** 0.30% 0.86% 0.24% 5.68% 0.10%
Commercial **** -0.01% 0.76% -0.03% 1.86% 0.46%
Consumer **** 3.12% 4.63% 5.15% 3.93% 5.04%
Auto **** 2.72% 2.31% 2.73% 2.09% 1.92%
Total **** 0.92% 1.44% 1.28% 3.04% (b) 1.15%
Average Loans Held For<br> Investment **** ****
Mortgage $ 2,366,598 $ 2,414,686 $ 1,062,845 $ 1,112,487 $ 1,153,357
Commercial **** 2,484,533 2,239,659 1,753,070 1,772,333 1,770,601
Consumer **** 479,996 496,336 395,612 392,724 386,177
Auto **** 1,509,523 1,537,194 1,288,544 1,261,501 1,203,895
Total $ 6,840,650 $ 6,687,875 $ 4,500,071 $ 4,539,045 $ 4,514,030
(a) During 3Q 2019, the<br> Company received 2.4 million proceeds from the sale of fully charged-off<br> originated auto and consumer loans.
(b) During 3Q 2019, the<br> Company decided to sell several non-performing originated loans, which were<br> sold during 4Q 2019, increasing charge-offs by 15.9 million, 4.4 million in<br> commercial loans and 11.5 million in residential mortgages.
9

All values are in US Dollars.

OFG Bancorp<br> (NYSE: OFG) **** **** ****
Table 6-2: Loan Information and<br> Performance Statistics (Excludes PCD/PCI Loans) (1)
2020 **** 2020 2019 2019 2019
(Dollars in thousands)<br> (unaudited) Q2 **** Q1 Q4 Q3 Q2
Early Delinquency (30 -<br> 89 days past due) **** **** ****
Mortgage $ 15,665 **** $ 20,518 $ 22,389 **** $ 21,631 $ 24,303
Commercial **** 7,704 **** 6,074 9,895 **** 4,467 2,823
Consumer **** 18,254 **** 13,127 9,560 **** 9,360 9,223
Auto **** 89,825 **** 110,959 103,749 **** 103,452 98,847
Total $ 131,448 (a) $ 150,678 $ 145,593 **** $ 138,910 $ 135,196
Early Delinquency Rates<br> (30 - 89 days past due) **** **** **** ****
Mortgage **** 1.79% **** 2.31% 2.49% **** 3.68% 3.83%
Commercial **** 0.40% **** 0.32% 0.53% **** 0.28% 0.17%
Consumer **** 3.98% **** 2.73% 1.93% **** 2.44% 2.37%
Auto **** 6.17% **** 7.46% 7.01% **** 8.10% 8.11%
Total **** 2.64% **** 3.16% 3.07% **** 3.63% 3.50%
Total Delinquency (30<br> days and over past due) **** **** **** ****
Mortgage: **** **** ****
Traditional, Non<br> traditional, and Loans under Loss Mitigation $ 40,719 **** $ 46,768 $ 41,314 (b) $ 40,194 $ 70,364
GNMA's buy-back option<br> program **** 75,091 **** 75,314 75,181 (b) 11,403 11,675
Total mortgage **** 115,810 **** 122,082 116,495 51,597 82,039
Commercial **** 38,258 **** 33,746 30,111 (b) 25,271 29,673
Consumer **** 22,796 **** 16,808 12,258 (b) 11,927 11,710
Auto **** 100,027 **** 131,715 118,020 (b) 117,716 110,926
Total $ 276,891 (a) $ 304,351 $ 276,884 **** $ 206,511 $ 234,348
Total Delinquency Rates<br> (30 days and over past due) **** **** **** ****
Mortgage: **** **** **** ****
Traditional, Non<br> traditional, and Loans under Loss Mitigation **** 4.66% **** 5.27% 4.60% **** 6.83% 11.08%
GNMA's buy-back option<br> program **** 8.59% **** 8.48% 8.37% **** 1.94% 1.84%
Total mortgage **** 13.25% **** 13.75% 12.97% **** 8.77% 12.92%
Commercial **** 1.99% **** 1.77% 1.62% **** 1.60% 1.83%
Consumer **** 4.97% **** 3.49% 2.48% **** 3.11% 3.01%
Auto **** 6.87% **** 8.85% 7.98% **** 9.22% 9.10%
Total **** 5.56% **** 6.38% 5.85% **** 5.40% 6.07%
Nonperforming Assets **** **** **** ****
Mortgage $ 30,491 **** $ 31,073 $ 22,552 **** $ 21,138 $ 53,534
Commercial **** 44,187 **** 42,668 42,606 (b) 36,409 45,443
Consumer **** 4,933 **** 3,690 5,287 **** 4,213 2,495
Auto **** 10,539 **** 21,147 14,295 **** 15,063 12,082
Total nonperforming<br> loans **** 90,150 (a) 98,578 84,740 **** 76,823 113,554
Foreclosed real estate **** 24,792 **** 27,292 29,909 **** 26,952 29,509
Other repossessed assets **** 1,360 **** 3,096 3,327 **** 3,537 2,507
Total nonperforming<br> assets $ 116,302 **** $ 128,966 $ 117,976 **** $ 107,312 $ 145,570
Nonperforming Loan Rates **** **** **** ****
Mortgage **** 3.49% **** 3.50% 2.51% **** 3.59% 8.43%
Commercial **** 2.30% **** 2.23% 2.29% **** 2.31% 2.81%
Consumer **** 1.08% **** 0.77% 1.07% **** 1.10% 0.64%
Auto **** 0.72% **** 1.42% 0.97% **** 1.18% 0.99%
Total loans **** 1.81% **** 2.07% 1.79% **** 2.01% 2.94%
(a) During March 2020, a<br> global pandemic was declared by the World Health Organization related to the<br> rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The<br> pandemic has significantly impacted the economic conditions in P.R. and the<br> U.S., creating significant uncertainties. After recent disruptions in<br> economic conditions caused by COVID-19, the Company has offered several<br> deferral programs for the payment of principal and interest for auto,<br> personal, credit cards and mortgage, and commercial loans, for customers<br> whose payments were not over 89 days past due at March 12, 2020 and requested<br> to be included in these programs.
(b) During 3Q 2019, the<br> Company identified non-performing originated loans sold during 4Q 2019, 29<br> million in mortgage loans and 9 million in commercial loans. These loans<br> were reclassified as held-for-sale at their fair value.
10

All values are in US Dollars.

OFG Bancorp (NYSE: OFG) **** ****
Table 6-3: Loan Information and Performance Statistics (1)
**** **** 2020 2020 2019 2019 2019
(Dollars in thousands) (unaudited) **** Q2 Q1 Q4 Q3 Q2
Nonperforming PCD Loans (14) **** ****
Mortgage $ 1,373 $ 1,341 $ - $ - $ -
Commercial **** 81,064 82,411 225 242 239
Consumer **** 12 10 499 560 628
Total nonperforming<br> loans $ 82,449 $ 83,762 $ 724 $ 802 $ 867
Nonperforming PCD Loan Rates **** ****
Mortgage **** 0.09% 0.09% 0.00% 0.00% 0.00%
Commercial **** 21.00% 21.07% 0.06% 0.12% 0.11%
Consumer **** 0.41% 0.30% 5.39% 69.83% 72.43%
Total loans **** 4.19% 4.19% 0.04% 0.11% 0.11%
Total PCD Loans Held for Investment (21) **** ****
Mortgage $ 1,541,637 $ 1,561,557 $ 1,591,112 $ 494,278 $ 538,001
Commercial **** 386,046 391,158 359,601 (b) 202,065 215,902
Consumer **** 2,950 3,350 9,263 802 867
Total loans $ 1,930,633 $ 1,956,065 $ 1,959,976 $ 697,145 $ 754,770
11
OFG Bancorp (NYSE: OFG)
--- --- --- --- --- --- --- --- --- --- ---
Table 7: Allowance for Credit Losses (1) **** ****
**** Quarter Ended June 30, 2020
(Dollars in thousands) (unaudited) Mortgage Commercial Consumer Auto Total
Allowance for credit losses Non-PCD: **** ****
Balance at beginning of<br> period $ 19,694 $ 49,196 $ 27,763 $ 53,308 $ 149,961
Provision for credit<br> losses **** 455 **** (6,319) **** 7,935 **** 13,156 **** 15,227
Charge-offs **** (185) **** (497) **** (4,187) **** (13,300) **** (18,169)
Recoveries **** 9 **** 631 **** 443 **** 3,405 **** 4,488
Balance at end of<br> period $ 19,973 $ 43,011 $ 31,954 $ 56,569 $ 151,507
Allowance for credit losses PCD: **** **** **** **** **** **** **** **** **** ****
Balance at beginning of<br> period $ 30,603 $ 48,836 $ 177 $ 1,178 $ 80,794
Provision for credit<br> losses **** 1,915 **** 177 **** (8) **** 385 **** 2,469
Charge-offs **** (2,178) **** (386) **** (30) **** (600) **** (3,194)
Recoveries **** 580 **** 286 **** 30 **** 229 **** 1,125
Balance at end of period $ 30,920 $ 48,913 $ 169 $ 1,192 $ 81,194
Allowance for credit losses summary: **** **** **** **** **** **** **** **** **** ****
Balance at beginning of<br> period $ 50,297 $ 98,032 $ 27,940 $ 54,486 $ 230,755
Provision for credit<br> losses **** 2,370 **** (6,142) **** 7,927 **** 13,541 **** 17,696
Charge-offs **** (2,363) **** (883) **** (4,217) **** (13,900) **** (21,363)
Recoveries **** 589 **** 917 **** 473 **** 3,634 **** 5,613
Balance at end of period $ 50,893 $ 91,924 $ 32,123 $ 57,761 $ 232,701
Allowance coverage ratio **** 2.11% **** 3.56% **** 6.96% **** 3.87% **** 3.35%
Allowance coverage ratio<br> excluding PPP loans (Non-GAAP) **** 2.11% **** 3.99% **** 6.96% **** 3.87% **** 3.49%
12
OFG Bancorp<br> (NYSE: OFG) ****
--- --- --- --- --- --- --- --- --- --- ---
Table 8-1: Reconciliation of GAAP to<br> Non-GAAP Measures and Calculation of Regulatory Capital
In addition to disclosing required<br> regulatory capital measures, we also report certain non-GAAP capital measures<br> that management uses in assessing its capital adequacy. These non-GAAP<br> measures include tangible common equity ("TCE") and TCE ratio. The<br> table below provides the details of the calculation of our regulatory capital<br> and non-GAAP capital measures. While our non-GAAP capital measures are widely<br> used by investors, analysts and bank regulatory agencies to assess the<br> capital position of financial services companies, they may not be comparable<br> to similarly titled measures reported by other companies.
2020 2019 2019 2019
(Dollars in thousands)<br> (unaudited) Q1 Q4 Q3 Q2
Stockholders' Equity to<br> Non-GAAP Tangible Common Equity ****
Total stockholders' equity 1,041,284 $ 1,022,594 (a) $ 1,045,478 $ 1,049,076 $ 1,044,874
Less:  Intangible assets (137,475) (140,243) (143,034) (88,560) (88,852)
Noncumulative<br> perpetual preferred stock (92,000) (92,000) (92,000) (92,000) (92,000)
Noncumulative<br> perpetual preferred stock issuance costs 10,130 10,130 10,130 10,130 10,130
Tangible common equity 821,939 $ 800,481 $ 820,574 $ 878,646 $ 874,152
Common stock outstanding at<br> end of period 51,342 51,327 51,399 51,347 51,330
Tangible book value<br> (Non-GAAP) 16.01 $ 15.60 $ 15.96 $ 17.11 $ 17.03
Total Assets to Tangible<br> Assets ****
Total assets 9,932,719 $ 9,238,571 $ 9,297,661 $ 6,333,505 $ 6,464,127
Less:  Intangible assets (137,475) (140,243) (143,034) (88,560) (88,852)
Tangible assets (Non-GAAP) 9,795,244 $ 9,098,328 $ 9,154,627 $ 6,244,945 $ 6,375,275
Non-GAAP TCE Ratio ****
Tangible common equity 821,939 $ 800,481 $ 820,574 $ 878,646 $ 874,152
Tangible assets 9,795,244 9,098,328 9,154,627 6,244,945 6,375,275
TCE ratio 8.39% 8.80% 8.96% 14.07% 13.71%
Average Equity to<br> Non-GAAP Average Tangible Common Equity ****
Average total stockholders'<br> equity 1,037,195 $ 1,043,481 (a) $ 1,062,720 $ 1,061,541 $ 1,037,057
Less:  Average noncumulative<br> perpetual preferred stock (92,000) (92,000) (92,000) (92,000) (92,000)
Average<br> noncumulative perpetual preferred stock issuance costs 10,130 10,130 10,130 10,130 10,130
Average total common<br> stockholders' equity 955,325 $ 961,611 $ 980,850 $ 979,671 $ 955,187
Less:  Average intangible<br> assets (139,094) (141,875) (89,005) (88,701) (88,995)
Average tangible common<br> equity 816,231 $ 819,736 $ 891,845 $ 890,970 $ 866,192
(a) On January 1, 2020, the<br> Company implemented ASU No. 2016-13: Measurement of Credit Losses on<br> Financial Instruments "(CECL)" using the modified retrospective<br> approach. As a result, a 39.2 million allowance for credit losses was<br> recorded for Non-PCD loans and 0.2 million for unused commitments with the<br> corresponding adjustment reducing retained earnings, net of a 13.9 million<br> deferred tax effect. For PCD loans, including BBVA and Eurobank acquired book<br> plus the recently acquired Scotiabank, the adjustment amounting to 50.5<br> million was made through the allowance and loan balances with no impact in<br> capital.
13

All values are in US Dollars.

OFG Bancorp (NYSE: OFG) **** ****
Table 8-2: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures (Continued)
**** **** BASEL III
Standardized
**** **** 2020 2020 2019 2019 2019
(Dollars in thousands) (unaudited) **** Q2 Q1 Q4 Q3 Q2
Regulatory Capital Metrics **** ****
Common equity Tier 1 capital $ 836,899 $ 816,356 $ 735,442 $ 858,092 $ 855,667
Tier 1 capital **** 953,769 933,226 852,312 974,962 972,537
Total risk-based capital (15) **** 1,040,984 1,020,748 937,963 1,035,910 1,035,109
Risk-weighted assets **** 6,957,647 6,983,626 (a) 6,740,846 4,771,165 4,895,441
Regulatory Capital Ratios **** ****
Common equity Tier 1 capital<br> ratio (16) **** 12.03% 11.69% 10.91% 17.98% 17.48%
Tier 1 risk-based capital<br> ratio (17) **** 13.71% 13.36% 12.64% 20.43% 19.87%
Total risk-based capital<br> ratio (18) **** 14.96% 14.62% 13.91% 21.71% 21.14%
Leverage ratio (19) **** 10.16% 10.14% 9.24% 15.41% 15.20%
Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach **** ****
Total stockholders' equity (1) $ 1,041,284 $ 1,022,594 $ 1,045,478 $ 1,049,076 $ 1,044,874
CECL transition adjustment (20) **** 32,269 31,882 - - -
Less:  Noncumulative<br> perpetual preferred stock **** (92,000) (92,000) (92,000) (92,000) (92,000)
Noncumulative<br> perpetual preferred stock issuance costs **** 10,130 10,130 10,130 10,130 10,130
Unrealized gains<br> on available-for-sale securities, net of income tax **** (8,885) (7,576) 441 1,742 3,087
Unrealized losses<br> on cash flow hedges, net of income tax **** 1,297 1,286 567 716 599
**** 984,095 966,316 964,616 969,664 966,690
Less:    Disallowed goodwill **** (86,069) (86,069) (86,069) (86,069) (86,069)
Disallowed other<br> intangible assets, net **** (35,563) (37,241) (39,127) (1,557) (1,739)
Disallowed<br> deferred tax assets, net **** (25,564) (26,650) (a) (95,879) (23,946) (23,215)
Threshold 15% **** - - (a) (8,099) - -
Common equity Tier 1 capital **** 836,899 816,356 735,442 858,092 855,667
Plus:  Qualifying<br> noncumulative perpetual preferred stock **** 92,000 92,000 92,000 92,000 92,000
Qualifying<br> noncumulative perpetual preferred stock issuance costs **** (10,130) (10,130) (10,130) (10,130) (10,130)
Subordinated<br> capital notes **** 35,000 35,000 35,000 35,000 35,000
Tier 1 capital **** 953,769 933,226 852,312 974,962 972,537
Plus tier 2 capital: <br> Qualifying allowance for loan and lease losses **** 87,215 87,522 85,651 60,948 62,572
Total risk-based capital $ 1,040,984 $ 1,020,748 $ 937,963 $ 1,035,910 $ 1,035,109
(a) During 1Q 2020, the<br> Company decided to early implement Simplifications to the Capital Rule, which<br> simplified the regulatory capital treatment for mortgage servicing assets<br> (MSA) and certain deferred tax assets arising from temporary differences<br> (temporary difference DTAs). It Increased common equity tier 1 (CET1) capital<br> threshold deductions from 10 percent to 25 percent and removes the aggregate<br> 15 percent CET1 threshold deduction. However, it retains the 250 percent risk<br> weight applicable to non-deducted amounts of MSAs and temporary difference<br> DTAs.
14
OFG<br> Bancorp (NYSE: OFG)
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Table 8-3: Reconciliation<br> of GAAP to Non-GAAP with adjustments to exclude the impact of significant<br> events.
The Company prepared its<br> Consolidated Financial Statement using accounting principles generally<br> accepted in the U.S. (“U.S. GAAP” or the “reported basis”). In addition to<br> analyzing the Company’s results on the reported basis, management monitors<br> the “Adjusted net income” of the Company and excludes the impact of certain<br> transactions on the results of its operations. Management believes that<br> “Adjusted net income” provides meaningful information to investors about the<br> underlying performance of the Company’s ongoing operations. “Adjusted net<br> income” is a non-GAAP financial measure. <br>  <br> The table below describes<br> adjustments to net income for the quarters ended June 30, 2020 and March 31,<br> 2020.
Quarter ended June 30, 2020 **** Quarter ended March 31, 2020
**** Income Tax Impact on **** **** Income Tax Impact on ****
(Dollars in thousands) (unaudited) Pre-tax Effect Net Income **** Pre-tax Effect Net Income ****
U.S. GAAP net income $ 21,787 **** $ 1,801
Non-GAAP adjustments: ****
Sale of mortgage-backed<br> securities available-for-sale $ - $ - - **** $ (4,728) $ 1,324 (3,404) (a)
Merger expenses 3,006 (1,127) 1,879 (b) 304 (114) 190 (b)
Bargain purchase from<br> Scotiabank PR & USVI (3,462) - (3,462) (c) (409) - (409) (c)
Interest recoveries on<br> PCI loans acquired in the Scotiabank PR & USVI acquisition (5,982) 2,243 (3,739) (d) - - -
COVID 19 additional<br> provision for credit losses 5,000 (1,875) 3,125 (e) 34,083 (12,781) 21,302 (e)
COVID 19 expenses 2,008 (753) 1,255 (f) 168 (63) 105 (f)
Adjusted net income<br> (Non-GAAP) $ 20,845 **** $ 19,585
Less:  dividends on<br> preferred stock (1,628) **** (1,628)
Adjusted net income<br> available to common shareholders (Non-GAAP) $ 19,217 **** $ 17,957
Adjusted earnings per<br> common share - diluted (Non-GAAP) $ 0.37 **** $ 0.35
Adjusted Performance<br> Metrics - Reconciliation to GAAP Financial Measures: **** **** ****
Net income $ 21,787 **** $ 1,801
Non-GAAP adjustments (942) **** 17,784
Adjusted net income<br> (Non-GAAP) 20,845 **** 19,585
Average assets 9,512,129 **** 9,326,627
Return on average assets 0.92% **** 0.08%
Adjusted return on<br> average assets (Non-GAAP) 0.88% **** 0.84%
Net income available to<br> common shareholders $ 20,159 **** $ 173
Non-GAAP adjustments (942) **** 17,784
Adjusted net income<br> available to common shareholders (Non-GAAP) 19,217 **** 17,957
Average tangible common<br> equity 816,231 **** 819,736
Return on average<br> tangible common stockholders' equity 9.88% **** 0.08%
Adjusted return on<br> average tangible common stockholders' equity (Non-GAAP) 9.42% **** 8.76%
Total non-interest expense $ 85,481 **** $ 87,322
Non-GAAP adjustments,<br> pre-tax (5,014) **** (472)
Adjusted total non-interest<br> expense (Non-GAAP) 80,467 **** 86,850
Net interest income 105,060 **** 105,101
Total banking and financial<br> service revenues 23,106 **** 26,233
Non-GAAP adjustments (5,982) **** -
122,184 **** 131,334
Efficiency ratio 66.70% **** 66.49%
Adjusted efficiency ratio<br> (Non-GAAP) 65.86% **** 66.13%
(a) During 1Q 2020, 2Q 2019<br> and 3Q 2019, the Company sold 316 million, 350 million and 322 million available-for-sale<br> mortgage-backed securities, respectively, and recognized a gain in the sale<br> of 4.7 million, 4.8 million and 3.5 million.
(b) During 2Q 2019, the<br> Company entered into an agreement with Scotiabank to acquire its Puerto Rico<br> and US Virgin Islands operations. On December 31, 2019, the Company completed<br> the acquisition. During 1Q 2020 and 2Q 2020, 0.3 million, and 3.0 million,<br> respectively, were incurred in related expenses.
(c)  On December 31, 2019,<br> the Company acquired Scotiabank de Puerto Rico and USVI resulting in bargain<br> purchase income of 5.7 million during 4Q 2019. During 2Q 2020, the Company<br> increased the bargain purchase income by 3.5 million to adjust the fair<br> value of accrued interest receivable in Day 1, net of taxes. 2.3 million.
(d) During 2Q 2020, the<br> Company recognized interest recoveries on SOP loans acquired in the<br> Scotiabank PR & USVI acquisition collected subsequently to the<br> acquisition date amounting to 6.0 million.
(e) During 1Q 2020 and 2Q<br> 2020, the Company recorded a 34.1 million and 5.0 million provision for<br> credit losses, respectively, in relation to the global pandemic from the<br> coronavirus COVID-19.
(f) During 1Q 2020 and 2Q<br> 2020, the Company recorded 0.2 million and 2.0 million expenses, respectively,<br> in relation to the global pandemic from the coronavirus COVID-19.
15

All values are in US Dollars.

OFG Bancorp (NYSE: OFG)
Table 9: Notes to Financial Summary, Selected Metrics, Loans, and Consolidated Financial Statements (Tables 1 - 8)
(1) We used the terms<br> "PCI" and "SOP" to refer to loans acquired with credit<br> deterioration from the Scotiabank acquisition (December 31, 2019), the BBVAPR<br> acquisition (December 18, 2012) and the Eurobank FDIC-Assisted acquisition<br> (April 30, 2010), recorded at fair value at acquisition. On January 1, 2020,<br> the Company implemented ASU No. 2016-13: Measurement of Credit Losses on<br> Financial Instruments "(CECL)" using the modified retrospective<br> approach. CECL replaces the concept of purchased credit impaired loans (PCI)<br> with the concept of purchased financial assets with credit deterioration<br> (PCD). PCD accounting is called ‘gross-up accounting’ because, at<br> acquisition, an entity grosses up the amortized cost basis of the PCD asset<br> for the initial estimate of credit losses. This Day 1 allowance for credit<br> losses is established without an income statement effect. The Company elected<br> 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<br> service revenues.
(3) Calculated based on net<br> income available to common shareholders divided by average common shares<br> outstanding for the period.
(4) Calculated based on net<br> income available to common shareholders plus the preferred dividends on the<br> convertible preferred stock, divided by total average common shares<br> outstanding and equivalents for the period as if converted.
(5) Tangible book value per<br> common share is a non-GAAP measure calculated based on tangible common equity<br> divided by common shares outstanding. See "Table 9: Reconciliation of<br> GAAP to Non-GAAP Measures and Calculation of Regulatory Capital<br> Measures" for additional information.
(6) Information includes all<br> loans held for investment, including PCD/PCI loans.
(7) Calculated based on<br> annualized net interest income for the period divided by average<br> interest-earning assets for the period.
(8) Calculated based on<br> annualized income, net of tax, for the period divided by average total assets<br> for the period.
(9) Calculated based on<br> annualized income available to common shareholders for the period divided by<br> average tangible common equity for the period.
(10) Calculated based on<br> non-interest expense for the period divided by total net interest income and total<br> banking and financial services revenues for the period.
(11) Calculated based on<br> annualized net charge-offs for the period divided by average loans held for<br> investment for the period.
(12) Non-GAAP ratios. See<br> "Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of<br> Regulatory Capital Measures" for information on the calculation of each<br> of these ratios.
(13) Production of new loans<br> (excluding renewals).
(14) Most PCD loans are<br> considered to be performing due to the application of the accretion method,<br> in which these loans will accrete interest income over the remaining life of<br> the loans using estimated cash flow analyses. Therefore, they are not<br> included as non-performing loans. PCD loan pools that are not accreting interest<br> income are deemed to be non-performing loans and presented separately.
(15) Total risk-based capital<br> equals the sum of Tier 1 capital and Tier 2 capital.
(16) Common equity Tier 1 capital<br> ratio is a regulatory capital measure calculated based on Common equity Tier<br> 1 capital divided by risk-weighted assets.
(17) Tier 1 risk-based capital<br> ratio is a regulatory capital measure calculated based on Tier 1 capital<br> divided by risk-weighted assets.
(18) Total risk-based capital<br> ratio is a regulatory capital measure calculated based on Total risk-based<br> capital divided by risk-weighted assets.
(19) Leverage capital ratio is a<br> regulatory capital measure calculated based on Tier 1 capital divided by<br> average assets, after certain adjustments.
(20) In March 2020, in light of<br> recent strains on the U.S. economy as a result of the coronavirus disease<br> 2019 (COVID-19), the Board of Governors of the Federal Reserve System, the<br> Federal Deposit Insurance Corporation, and the Office of the Comptroller of<br> 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.
(21) CECL replaces the concept of<br> purchased credit impaired loans (PCI assets) with the concept of purchased<br> financial assets with credit deterioration (PCD assets). An entity records a PCD<br> asset at the purchase price plus the allowance for credit losses expected at<br> the time of acquisition. Under this method, there is no credit loss expense<br> affecting net income on acquisition. Changes in estimates of expected credit<br> losses after acquisition are recognized as credit loss expense (or reversal<br> of credit loss expense) in subsequent periods as they arise.
(22) Pre-provision net revenues<br> is a non-GAAP measure calculated based on net interest income plus total<br> non-interest income, net, less total non-interest expenses for the period.
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