Exhibit 99
OFG Bancorp Reports 3Q20 Results
SAN JUAN, Puerto Rico, October 23, 2020 – OFG Bancorp (NYSE: OFG), the financial holding company for
Oriental Bank, reported results for the third quarter ended September 30, 2020.
CEO Comment
José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board, stated:
“We had a strong third quarter performance in our core business. This was due to an improved macro -economic environment
in Puerto Rico and the U.S. Virgin Islands coupled with our being resilient, agile, and more than ready to service the changing
needs of our customers and communities.
“The macro- economic environment benefited from reduced Covid -19 related government restrictions on economic activity,
combined with growing liquidity from the federal stimulus programs Puerto Rico is receiving following 2017’s Hurricane Maria,
the early 2020 earthquakes, and now the Covid-19 pandemic.
“Our success was driven by staying close to our customers and the communities we serve, providing the financial solutions
they need as we enter what appears to be a nascent and potentially expanding recovery.
“Customer accounts grew, and digital migration expanded. Deposit gathering and loan production were robust. Credit quality
continued to be under control. Operating efficiency improved, and the Scotiabank integration is proceeding on schedule.
“Return on average assets increased to 1.11%, return on average tangible common stockholders' equity expanded to 12.23%,
and tangible book value, at $16.51 per share, continued to grow.
“Tremendous thanks go to our hardworking team who continues to put Oriental and its customers first throughout these
challenging times.”
3Q20 Highlights
1
●
Increased Earnings:
EPS diluted of $0.50 increased 28% compared to $0.39 in 2Q20 and 355% compared to
$0.11 in 3Q19. Total core revenues were $127.0 million versus $128.2 million in 2Q20 and $99.3 million in
3Q19. Net interest margin was 4.30% compared to 4.78% in 2Q20. The effective tax rate was 18.7% based on a
higher than originally anticipated proportion of exempt income.
1
balances shown are end of period.
●
Lower Provision:
$43.8 million in 3Q19. Credit quality also reflected reduced deferrals (2.0% of total loans compared to 30.0%),
$5.2 million in lower net charge offs, and increases in the total delinquency and non-performing loan rates of 11
bps and 52 bps, respectively, for non -PCD loans, from 2Q20.
●
Expense Reduction:
$85.5 million in 2Q20, with the efficiency ratio improving 101 bps to 65.7%. Excluding merger and Covid-19
related costs, the adjusted efficiency ratio improved 369 bps to 62.2% from 2Q20, as increased operating
leverage from the Scotiabank acquisition began to kick in.
●
Deposit and Cash Growth:
Customer deposits grew $212.6 million to $8.5 billion on September 30, 2020 from
June 30, 2020. Due to the increased deposits as well as repayments of loans and securities, cash increased
$383.0 million, to $2.3 billion. As a result, total assets grew $83.6 million to $10.0 billion, which OFG does not
anticipate exceeding on December 31, 2020.
●
Strong Production:
Paycheck Protection Program loans, production increased $227.8 million, driven by commercial, auto, mortgage
and consumer lending. Net loans were $6.6 billion on September 30, 2020 compared to $6.7 billion on June 30,
2020.
●
Capital Building:
Tangible book value per share expanded 3% or $0.50 to $16.51 compared to 2Q20. All
regulatory capital ratios continued to be significantly above requirements for a well-capitalized institution. The
CET1 ratio was 12.55% on September 30, 2020 compared to 12.03% on June 30, 2020 and 17.98% on
September 30, 2019, the quarter before the Scotiabank acquisition.
Conference Call
A conference call to discuss 3Q20 results, outlook and related matters will be held today at 1 0:00 AM ET. Phone (888) 562-
3356 or (973) 582 -2700. Conference ID: 899-3880. The call can also be accessed live on
www.ofgbancorp.com.
replay will be available shortly thereafter.
Financial Supplement & Conference Call Presentation
OFG’s Financial Supplement, with full financial tables for the quarter ended September 30, 2020, and the 3Q20
Conference Call Presentation, can be found on the Quarterly Results 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 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) the
potential impact of damages from future hurricanes, earthquakes and other natural disasters in Puerto Rico; (v) the
fiscal and monetary policies of the federal government and its agencies; (vi) the performance of the stock and bond
markets; (vii) competition in the financial services industry; (viii) possible legislative, tax or regulatory changes; and
(ix) 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
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
.
# # #
Contacts
Puerto Rico & USVI:
idalis.montalvo@orientalbank.com
) at (787) 777-2847
US:
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 preliminary and based on data available at the time of the earnings
presentation, and investors should refer to our September 30, 2020 Quarterly Report on Form 10-Q once it is filed with the
Securities and Exchange 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
5-6
Table 5:
Average Balances, Net Interest Income and 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 and Calculation of Regulatory Capital
13-15
Table 9:
Notes to Financial Summary, Selected Metrics, Loans, and Consolidated
16
OFG Bancorp (NYSE: OFG)
Table 1: Financial and Statistical Summary - Consolidated
2020
2020
2020
2019
2019
2020
2019
(Dollars in thousands, except per
share data) (unaudited)
Q3
Q2
Q1
Q4
Q3
YTD
YTD
Statement of Operations
Net interest income
$
99,533
$
105,060
$
105,101
$
79,209
$
80,710
$
309,694
$
243,584
Non-interest income, net (core)
(2)
27,486
23,106
26,233
(e)
19,196
18,542
76,825
(e)
54,169
Total core revenues
127,019
128,166
131,334
98,405
99,252
386,519
297,753
Non-interest expense
83,444
85,481
87,322
(e)
78,913
(e)
50,727
256,247
(e)
154,331
(e)
Pre-provision net revenues
(22)
47,415
46,731
49,229
20,007
52,161
143,375
152,035
Total provision for credit losses
13,669
(d)
17,696
(d)
47,131
(c)(d)
23,068
(g)
43,770
(g)
78,496
(c)(d)
73,724
(g)
Net income (loss) before income taxes
33,746
29,035
2,098
(3,061)
8,391
64,879
78,311
Income tax expense (benefit)
6,308
7,248
297
(2,070)
1,008
13,853
23,479
Net income (loss) available to common
stockholders
$
25,810
20,159
173
(2,619)
5,755
46,142
49,948
Common Share Statistics
Earnings (loss) per common share -
basic
(3)
$
0.50
0.39
-
(0.05)
0.11
0.90
0.97
Earnings (loss) per common share -
diluted
(4)
$
0.50
0.39
-
(0.05)
0.11
0.89
0.97
Average common shares outstanding
51,342
51,336
51,404
51,360
51,345
51,361
51,327
Average common shares outstanding
and equivalents
51,527
51,470
51,713
51,791
51,772
51,563
51,695
Cash dividends per common share
$
0.07
$
0.07
$
0.07
$
0.07
$
0.07
$
0.21
$
0.21
Book value per common share (period
end)
$
19.13
$
18.69
$
18.33
(c)
$
18.75
$
18.84
$
19.13
(c)
$
18.84
Tangible book value per common share
(period end)
(5)
$
16.51
$
16.01
$
15.60
$
15.96
$
17.11
$
16.51
$
17.11
Balance Sheet (Average Balances)
Loans
(6)
$
6,787,022
$
6,840,650
(a)
$
6,687,875
$
4,500,071
$
4,539,045
$
6,771,904
$
4,519,393
Interest-earning assets
9,218,717
(a)
8,845,744
(a)
8,556,421
5,886,379
5,981,756
8,874,886
(a)
6,055,475
Total assets
9,918,381
9,512,129
(a)
9,326,627
6,325,334
6,433,658
9,586,921
6,511,171
Core deposits
8,376,623
7,852,495
7,516,438
4,582,872
4,563,187
7,916,869
4,475,101
Total deposits
8,517,039
8,088,106
7,752,446
4,850,979
4,921,317
8,120,648
4,897,465
Borrowings
102,916
157,669
271,800
304,365
340,194
177,189
453,236
Stockholders' equity
1,062,460
1,037,195
1,043,481
1,062,720
1,061,541
1,047,766
1,038,869
Common stockholders' equity
980,590
955,325
961,611
(c)
980,850
979,671
965,896
(c)
956,999
Performance Metrics
Net interest margin
(7)
4.30%
4.78%
4.94%
5.34%
5.35%
4.65%
5.38%
Return on average assets
(8)
1.11%
0.92%
0.08%
-0.06%
0.46%
0.71%
1.12%
Return on average tangible common
stockholders' equity
(9)
12.23%
9.88%
0.08%
-1.17%
2.58%
7.44%
7.67%
Efficiency ratio
(10)
65.69%
66.70%
66.49%
80.19%
51.11%
66.30%
51.83%
Full-time equivalent employees, period
end
2,334
2,373
2,449
2,455
1,436
2,334
1,436
Credit Quality Metrics
(1)(21)
Allowance for loan and lease losses
$
235,313
$
232,701
$
230,755
(c)(d)
$
116,539
$
154,343
$
235,313
(c)(d)
$
154,343
Allowance as a % of loans held for
investment
3.48%
3.35%
(a)
3.41%
1.73%
3.41%
3.48%
3.41%
Net charge-offs
$
10,570
$
15,750
$
24,034
$
14,395
$
34,486
(f)(g)
$
50,354
$
59,477
Net charge-off rate
(11)
0.62%
0.92%
1.44%
1.28%
3.04%
0.99%
1.75%
Early delinquency rate (30 - 89 days
past due)
2.50%
2.64%
3.16%
3.07%
3.63%
2.50%
3.63%
Total delinquency rate (30 days and
over)
5.67%
5.56%
6.38%
5.85%
5.40%
5.67%
5.40%
Capital Ratios (Non-GAAP)
(12)(20)
Leverage ratio
10.00%
10.16%
10.14%
(b)(c)
9.24%
15.41%
10.00%
15.41%
Common equity Tier 1 capital ratio
12.55%
12.03%
(a)
11.69%
(b)(c)
10.91%
17.98%
12.55%
(a)(b)(c)
17.98%
Tier 1 risk-based capital ratio
14.25%
13.71%
(a)
13.36%
(b)(c)
12.64%
20.43%
14.25%
20.43%
Total risk-based capital ratio
15.50%
14.96%
(a)
14.62%
(b)(c)
13.91%
21.71%
15.50%
(a)(b)(c)
21.71%
Tangible common equity ("TCE") ratio
8.58%
8.39%
8.80%
8.96%
14.07%
8.58%
14.07%
(a) In response to the Coronavirus (COVID-19) pandemic, CARES Act created funding for the Small Business Administration (SBA) Paycheck Protection Program (PPP), which provides
loans to small businesses to keep their employees on payroll and make other eligible payments. The original funding for the PPP was fully allocated by mid-April 2020, with additional
funding made available on April 24, 2020 under the Paycheck Protection Program and Health Care Enhancement Act. During 2Q 2020 and 3Q 2020, the Company participated in this
program originating 4,342 and 732 PPP loans, respectively. Òn June 30, 2020 and September 30, 2020, Oriental had PPP loans amounting to $278.1 million and $289.2 million,
respectively. These loans are fully guaranteed by the SBA and risk-weighted at 0%.
(b) During 1Q 2020, the Company decided to early implement Simplifications to the Capital Rule, which simplified the regulatory capital treatment for mortgage servicing assets (MSA)
and certain deferred tax assets arising from temporary differences (temporary difference DTAs). It Increased common equity tier 1 (CET1) capital threshold deductions from 10 percent to
25 percent and removes the aggregate 15 percent CET1 threshold deduction. However, it retains the 250 percent risk weight applicable to non-deducted amounts of MSAs and
temporary difference DTAs.
(c) On January 1, 2020, the Company implemented ASU No. 2016-13: Measurement of Credit Losses on Financial Instruments "(CECL)" using the modified retrospective approach. As a
result, a $39.2 million allowance for credit losses was recorded for Non-PCD loans and $0.2 million for unused commitments with the corresponding adjustment reducing retained
earnings, net of a $13.9 million deferred tax effect. For PCD loans, including BBVA and Eurobank acquired book plus the recently acquired Scotiabank, the adjustment amounting to
$50.5 million was made through the allowance and loan balances with no impact in capital. As disclosed in the Company’s 2019 Form 10-K, the Company had initially elected to phase-in
the January 1, 2020 (“day 1”) impact to retained earnings to regulatory capital, over a three-year transition period beginning in 2020. As part of its response to the impact of COVID-19, in
March 2020, the Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency issued an interim final rule that provided the option to temporarily
delay the effects of CECL on regulatory capital for two years, followed by a three-year transition period. In addition, for the first two years, a uniform 25% “scaling factor” is introduced to
approximate the portion of the post day-one allowance attributable to CECL relative to the incurred loss methodology. The 25% scaling factor is calibrated to approximate an overall after-
tax impact of differences in allowances under CECL vs the incurred loss methodology.
(d) In March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The pandemic
significantly impacted the economic conditions in P.R. and the U.S., creating significant uncertainties. In response, we increased our provision for credit losses on loans in 1Q 2020 and
2Q 2020 by $34.1 million and $5.0 million, respectively, and established a provision for credit losses on accrued interest receivables under deferral plans in 3Q 2020 of $826 thousand.
(e) On December 31, 2019, the Company acquired Scotiabank's Puerto Rico and USVI operations, incurring in merger and restructuring charges of $21.5 million during 4Q 2019, $3.0
million during 2Q 2020, and $2.7 million during 3Q 2020. At December 31, 2019, the consolidated statement of financial condition contemplated the effects of the Scotiabank PR & USVI
acquisition. Nevertheless, the consolidated statement of operations did not contemplate the effects of the Scotiabank PR & USVI acquisition until January 1, 2020.
(f) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.
(g) During 3Q 2019, the Company decided to sell mostly non-performing loans, increasing the provision by $37.2 million. Originated loans that were transferred to held-for-sale amounted
to $25.3 million at September 30, 2019, the remaining were purchased credit impaired loans. Loans were sold during 4Q 2019, with an additional increase in the provision of $6.6 million.
2
OFG Bancorp (NYSE: OFG)
Table 2: Consolidated Statements of Operations
Quarter Ended
Nine-Months Ended
September
30,
June 30,
March 31,
December
31,
September
30,
September
30,
September
30,
(Dollars in thousands, except per
share data) (unaudited)
2020
2020
2020
2019
2019
2020
2019
Interest income:
Loans
(1)
$
83,029
$
83,832
$
87,482
$
74,142
$
74,910
$
254,343
$
220,583
29,018
(a)
34,700
(a)
28,953
10,762
10,862
92,671
(a)
34,388
112,047
118,532
116,435
84,904
85,772
347,014
254,971
Investment securities
2,890
3,160
7,262
6,271
7,883
13,312
27,649
114,937
121,692
123,697
(d)
91,175
93,655
360,326
(d)
282,620
Interest expense:
Deposits
13,808
13,999
15,034
7,957
8,256
42,841
21,934
812
1,446
1,586
1,804
2,298
3,844
7,660
14,620
15,445
16,620
(d)
9,761
10,554
46,685
(d)
29,594
Borrowings
784
1,187
1,976
2,205
2,391
3,947
9,442
15,404
16,632
18,596
11,966
12,945
50,632
39,036
Net interest income
99,533
105,060
105,101
79,209
80,710
309,694
243,584
Provision for credit losses, excluding
PCD loans
(1)
13,845
15,227
40,951
18,859
23,427
70,023
43,675
(Recapture) provision for credit losses
on PCD loans
(1)
(176)
2,469
6,180
4,209
20,343
8,473
30,049
13,669
(c)
17,696
(c)
47,131
(c)(d)
23,068
43,770
(f)(g)(h)
78,496
(c)(d)
73,724
(f)(g)(h)
provision for loan and lease losses
85,864
87,364
57,970
56,141
36,940
231,198
169,860
Non-interest income:
Banking service revenues
16,297
13,668
15,713
10,812
10,813
45,678
32,054
Wealth management revenues
7,272
6,366
7,286
7,062
6,611
20,924
19,162
Mortgage banking activities
3,917
3,072
3,234
1,322
1,118
10,223
2,953
service revenues
27,486
23,106
26,233
(d)
19,196
18,542
76,825
(d)
54,169
Bargain purchase from Scotiabank PR &
USVI acquisition
3,465
(b)
3,462
409
315
-
7,336
-
Other income, net
375
584
4,808
(e)
200
3,636
(e)
5,767
(e)
8,613
(e)
31,326
27,152
31,450
19,711
22,178
89,928
62,782
Non-interest expense:
Compensation and employee benefits
31,955
34,506
35,544
21,817
20,500
102,005
60,716
Occupancy, equipment and
infrastructure costs
11,943
11,837
11,439
7,488
7,307
35,219
22,564
General and administrative expenses
33,452
31,206
37,345
25,451
18,475
102,003
59,656
Net (gain) loss on sale of foreclosed real
estate and other repossessed assets
(866)
316
(193)
541
794
(743)
1,885
Credit related expenses
2,189
2,602
2,715
2,118
2,095
7,506
6,954
Merger and restructuring charges
2,681
(d)
3,006
(d)
304
21,498
(d)
1,556
5,991
(d)
2,556
COVID 19 expenses
2,090
2,008
168
-
-
4,266
-
83,444
85,481
87,322
(d)
78,913
50,727
256,247
(d)
154,331
Income (loss) before income taxes
33,746
29,035
2,098
(3,061)
8,391
64,879
78,311
Income tax expense (benefit)
6,308
7,248
297
(2,070)
1,008
13,853
23,479
Net income (loss)
27,438
21,787
1,801
(991)
7,383
51,026
54,832
Less: dividends on preferred stock
(1,628)
(1,628)
(1,628)
(1,628)
(1,628)
(4,884)
(4,884)
Net income (loss) available to
common shareholders
$
25,810
$
20,159
$
173
$
(2,619)
$
5,755
$
46,142
$
49,948
(a) During 2Q 2020 and 3Q 2020, the Company recognized interest recoveries on SOP loans acquired in the Scotiabank PR & USVI acquisition collected subsequently to the
acquisition date amounting to $6.0 million and $469 thousand, respectively.
(b) During 2Q 2020, the Company increased the Bargain purchase from Scotiabank PR & USVI acquisition by $3.5 million to adjust the fair value of accrued interest receivable in Day
1, net of taxes. During 3Q 2020, the Company increased the Bargain purchase from Scotiabank PR & USVI acquisition by $3.5 million to adjust the deferred tax asset in Day 1.
(c) In March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The pandemic
significantly impacted the economic conditions in P.R. and the U.S., creating significant uncertainties. In response, we increased our provision for credit losses on loans in 1Q 2020 and
2Q 2020 by $34.1 million and $5.0 million, respectively, and established a provision for credit losses on accrued interest receivables under deferral plans in 3Q 2020 of $826 thousand.
(d) On December 31, 2019, the Company acquired Scotiabank's Puerto Rico and USVI operations, incurring in merger and restructuring charges of $21.5 million during 4Q 2019, $3.0
million during 2Q 2020, and $2.7 million during 3Q 2020. On December 31, 2019, the consolidated statement of financial condition contemplated the effects of the Scotiabank PR &
USVI acquisition. Nevertheless, the consolidated statement of operations did not contemplate the effects of the Scotiabank PR & USVI acquisition until January 1, 2020.
(e) During 1Q 2020, 2Q 2019 and 3Q 2019, the Company sold $316 million, $350 million and $322 million available-for-sale mortgage-backed securities, respectively, and recognized a
gain in the sale of $4.7 million, $4.8 million and $3.5 million.
(f) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.
(g) During 3Q 2019, the Company decided to sell mostly non-performing loans, increasing the provision by $37.2 million. Originated loans that were transferred to held-for-sale
amounted to $25.3 million at September 30, 2019, the remaining were purchased credit impaired loans. Loans were sold during 4Q 2019, with an additional increase in the provision of
$6.6 million.
(h) During 2Q 2019, the Company decided to sell mostly non-performing mortgage loans increasing the provision by $8.8 million. Most of these loans were sold in 3Q 2019, increasing
the provision by an additional $1.8 million.
3
OFG Bancorp (NYSE: OFG)
Table 3: Consolidated Statements of Financial Condition
September 30,
June 30,
March 31,
December 31,
September 30,
(Dollars in thousands) (unaudited)
2020
2020
2020
2019
2019
Cash and cash equivalents
$
2,283,050
(b)
$
1,900,037
(b)
$
1,325,941
$
852,757
$
962,887
Investments:
Trading securities
22
22
29
37
41
Investment securities available-for-sale, at fair value,
329,719
340,192
355,637
673,886
505,102
91,531
197,340
298,986
397,183
10,938
2,565
2,707
2,837
3,100
3,055
423,815
540,239
657,460
(e)
1,074,169
(d)
519,095
Federal Home Loan Bank (FHLB) stock, at cost
8,322
8,366
10,301
13,048
10,525
Other investments
2,205
1,076
973
560
57
434,364
549,703
668,763
1,087,814
529,718
Loans, net
6,579,140
(b)
6,739,243
(b)
6,541,174
(c)
6,641,847
(d)
4,407,190
Other assets:
Prepaid expenses
51,915
40,119
44,633
52,648
14,244
Deferred tax asset, net
178,957
186,730
196,129
(c)
176,740
112,602
Foreclosed real estate and repossessed properties
21,374
26,152
30,388
33,236
30,488
Premises and equipment, net
83,270
82,234
81,834
81,105
69,754
Goodwill
86,069
86,069
86,069
86,069
86,069
Right of use assets
35,900
34,692
36,844
39,112
19,318
Core deposit, customer relationship intangible and other intangibles
48,650
51,406
54,174
56,965
2,491
Servicing asset
47,242
47,926
49,287
50,779
10,125
Accounts receivable and other assets
166,392
188,408
(a)
123,335
138,589
88,619
Total assets
$
10,016,323
$
9,932,719
$
9,238,571
$
9,297,661
$
6,333,505
Deposits:
Demand deposits
$
4,682,991
(b)
$
4,370,419
(b)
$
3,711,492
$
3,579,115
$
2,228,256
Savings accounts
1,919,859
1,978,118
1,829,054
1,815,044
1,206,569
Time deposits
1,933,517
1,975,223
2,023,211
2,060,953
1,154,871
Brokered deposits
96,090
218,166
255,514
243,498
288,362
8,632,457
8,541,926
7,819,271
7,698,610
(d)
4,878,058
Borrowings:
Securities sold under agreements to repurchase
-
-
50,103
190,274
190,261
Advances from FHLB and other borrowings
66,781
68,340
77,601
79,204
79,603
Subordinated capital notes
36,083
36,083
36,083
36,083
36,083
102,864
104,423
163,787
305,561
305,947
Other liabilities:
Derivative liabilities
1,895
2,078
2,059
913
1,159
Acceptances outstanding
18,291
20,034
11,763
21,599
21,796
Lease liability
37,029
35,694
37,702
39,840
21,081
Accrued expenses and other liabilities
159,465
187,280
181,395
185,660
56,388
8,952,001
8,891,435
8,215,977
8,252,183
5,284,429
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
621,978
621,860
621,206
621,515
620,948
Legal surplus
101,233
98,347
95,945
95,779
95,783
Retained earnings
284,053
264,725
250,557
(c)
279,646
285,854
Treasury stock, at cost
(103,095)
(103,121)
(103,289)
(102,339)
(102,936)
Accumulated other comprehensive (loss) income, net
8,268
7,588
6,290
(1,008)
(2,458)
1,064,322
1,041,284
1,022,594
1,045,478
1,049,076
$
10,016,323
$
9,932,719
$
9,238,571
$
9,297,661
$
6,333,505
(a) In March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The pandemic
significantly impacted the economic conditions in P.R. and the U.S., creating significant uncertainties. After recent disruptions in economic conditions caused by COVID-19, the Company
has offered several deferral programs for the payment of principal and interest for auto, personal, credit cards and mortgage, and commercial loans, for customers whose payments were
not over 89 days past due at March 12, 2020 and requested to be included in these programs, which contributed to the increase of accrued interest receivable from 1Q 2020 to 2Q 2020 of
approximately $40 million.
(b) In response to the Coronavirus (COVID-19) pandemic, CARES Act created funding for the Small Business Administration (SBA) Paycheck Protection Program (PPP), which provides
loans to small businesses to keep their employees on payroll and make other eligible payments. The original funding for the PPP was fully allocated by mid-April 2020, with additional
funding made available on April 24, 2020 under the Paycheck Protection Program and Health Care Enhancement Act. During 2Q 2020 and 3Q 2020, the Company participated in this
program originating 4,342 and 732 PPP loans, respectively. On June 30, 2020 and September 30, 2020, Oriental had PPP loans amounting to $278.1 million and $289.2 million,
respectively. These loans are fully guaranteed by the SBA and risk-weighted at 0%. These funds have been disbursed into the customers' deposit accounts and, along with other
government stimulus and relief during the pandemic, they have increased the Company's cash and core deposits.
(c) On January 1, 2020, the Company implemented ASU No. 2016-13: Measurement of Credit Losses on Financial Instruments "(CECL)" using the modified retrospective approach. As a
result, a $39.2 million allowance for credit losses was recorded for Non-PCD loans and $0.2 million for unused commitments with the corresponding adjustment reducing retained earnings,
net of a $13.9 million deferred tax effect. For PCD loans, including BBVA and Eurobank acquired book plus the recently acquired Scotiabank, the adjustment amounting to $50.5 million was
made through the allowance and loan balances with no impact in capital.
(d) On December 31, 2019, the Company acquired Scotiabank's Puerto Rico and USVI operations, increasing investments by $576.2 million, loans by $2.2 billion and deposits by $3.0
billion.
(e) During 1Q 2020, the Company sold $316 million available-for-sale mortgage-backed securities and recognized a gain in the sale of $4.7 million.
4
OFG Bancorp (NYSE: OFG)
Table 4-1: Information on Loan Portfolio and
Production
September 30,
June 30,
March 31,
December 31,
September 30,
(Dollars in thousands) (unaudited)
2020
2020
2020
2019
2019
Non-PCD:
(1)
$
847,588
$
874,286
$
887,950
$
898,118
$
588,535
1,785,022
1,918,424
1,910,192
1,862,484
1,575,491
289,218
(a)
278,059
(a)
-
-
-
434,546
458,714
481,710
495,244
383,819
1,511,829
1,454,987
1,487,701
1,479,612
1,277,114
4,868,203
4,984,470
4,767,553
4,735,458
(c)
3,824,959
(156,409)
(151,507)
(149,961)
(b)
(85,044)
(80,579)
4,711,794
4,832,963
4,617,592
4,650,414
3,744,380
PCD:
(1)
1,504,914
1,541,637
1,561,557
1,591,112
494,278
352,555
386,046
391,158
359,601
202,065
2,336
2,950
3,350
9,263
802
31,836
37,409
42,466
43,361
3,883
1,891,641
1,968,042
1,998,531
2,003,337
(c)
701,028
(1)
(78,904)
(81,194)
(80,794)
(b)
(31,495)
(73,764)
1,812,737
1,886,848
1,917,737
1,971,842
627,264
Total loans held for investment
6,524,531
6,719,811
6,535,329
6,622,256
4,371,644
Mortgage loans held for sale
54,609
19,432
5,845
19,591
23,504
Other loans held for sale
-
-
-
-
12,042
Total loans, net
$
6,579,140
$
6,739,243
$
6,541,174
$
6,641,847
$
4,407,190
Loan Portfolio Summary:
$
2,352,502
$
2,415,923
$
2,449,507
$
2,489,230
$
1,082,813
2,426,795
2,582,529
2,301,350
2,222,085
1,777,556
436,882
461,664
485,060
504,507
384,621
1,543,665
1,492,396
1,530,167
1,522,973
1,280,997
6,759,844
6,952,512
6,766,084
6,738,795
(c)
4,525,987
(235,313)
(232,701)
(230,755)
(b)
(116,539)
(154,343)
6,524,531
6,719,811
6,535,329
6,622,256
4,371,644
54,609
19,432
5,845
19,591
23,504
-
-
-
-
12,042
Total loans, net
$
6,579,140
$
6,739,243
$
6,541,174
$
6,641,847
$
4,407,190
(a) In response to the Coronavirus (COVID-19) pandemic, CARES Act created funding for the Small Business Administration (SBA) Paycheck Protection Program (PPP), which provides
loans to small businesses to keep their employees on payroll and make other eligible payments. The original funding for the PPP was fully allocated by mid-April 2020, with additional
funding made available on April 24, 2020 under the Paycheck Protection Program and Health Care Enhancement Act. During 2Q 2020 and 3Q 2020, the Company participated in this
program originating 4,342 and 732 PPP loans, respectively. On June 30, 2020 and September 30, 2020, Oriental had PPP loans amounting to $278.1 million and $289.2 million,
respectively. These loans are fully guaranteed by the SBA and risk-weighted at 0%.
(b) On January 1, 2020, the Company implemented ASU No. 2016-13: Measurement of Credit Losses on Financial Instruments "(CECL)" using the modified retrospective approach. As a
result, a $39.2 million allowance for credit losses was recorded for Non-PCD loans and $0.2 million for unused commitments with the corresponding adjustment reducing retained earnings,
net of a $13.9 million deferred tax effect. For PCD loans, including BBVA and Eurobank acquired book plus the recently acquired Scotiabank, the adjustment amounting to $50.5 million
was made through the allowance and loan balances with no impact in capital.
(c) On December 31, 2019, the Company acquired Scotiabank's Puerto Rico and USVI operations, increasing investments by $576.2 million, loans by $2.2 billion and deposits by $3.0
billion.
5
OFG Bancorp (NYSE: OFG)
Table 4-2: Information on Loan
Portfolio and Production
Quarter Ended
Nine-Months Ended
September 30,
June 30,
March 31,
December 31,
September 30,
September 30,
September 30,
(Dollars in thousands) (unaudited)
2020
2020
2020
2019
2019
2020
2019
Loan production
(13)
$
93,650
$
23,744
$
30,988
$
23,680
$
23,805
$
148,382
$
69,098
83,488
98,558
54,113
216,610
65,635
236,159
190,199
10,318
286,420
-
-
-
296,738
-
90,878
35,711
47,125
12,482
12,225
173,714
100,304
23,540
14,231
39,199
41,947
48,257
76,970
136,776
155,880
47,374
109,344
110,184
141,506
312,598
397,968
$
457,754
$
506,038
$
280,769
$
404,903
$
291,428
$
1,244,561
$
894,346
6
OFG Bancorp (NYSE: OFG)
Table 5-1: Average Balances, Net Interest Income and Net Interest Margin
2020 Q3
2020 Q2
2020 Q1
2019 Q4
2019 Q3
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:
$
1,929,024
$
613
0.13
%
$
1,393,187
$
359
0.10
%
$
943,581
$
2,788
1.19
%
$
863,497
$
3,684
1.69
%
$
734,105
$
4,086
2.21
%
502,671
2,278
1.81
%
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)
4,870,753
83,028
6.78
%
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
%
1,916,269
29,018
6.06
%
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
%
6,787,022
112,046
6.57
%
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
%
Total interest-earning assets
$
9,218,717
$
114,937
4.96
%
$
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
%
Interest bearing liabilities:
$
2,227,687
$
2,247
0.40
%
$
2,069,247
$
2,138
0.42
%
$
1,980,505
$
2,389
0.48
%
$
1,119,371
$
1,471
0.52
%
$
1,118,214
$
1,616
0.57
%
1,927,680
2,010
0.41
%
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
%
1,944,856
7,512
1.54
%
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
%
140,416
812
2.30
%
235,611
1,446
2.47
%
236,008
1,586
2.70
%
268,108
1,804
2.67
%
358,130
2,298
2.55
%
6,240,639
12,581
0.80
%
6,105,014
13,395
0.88
%
6,053,482
14,546
0.97
%
3,740,133
9,560
1.01
%
3,827,270
10,353
1.07
%
accounts
2,276,400
-
-
1,983,092
-
-
1,698,964
-
-
1,110,847
-
-
1,094,047
-
-
and core deposit intangible
amortization
-
2,039
-
-
2,051
-
-
2,074
-
-
201
-
-
201
-
8,517,039
14,620
0.68
%
8,088,106
15,446
0.77
%
7,752,446
16,620
0.86
%
4,850,980
9,761
0.80
%
4,921,317
10,554
0.85
%
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
%
borrowings
66,833
476
2.83
%
75,432
505
2.69
%
77,255
539
2.81
%
78,282
541
2.74
%
79,328
550
2.75
%
36,083
308
3.39
%
36,083
347
3.87
%
36,083
435
4.85
%
36,083
475
5.22
%
36,083
499
5.49
%
102,916
784
3.03
%
157,669
1,186
3.03
%
271,800
1,976
2.92
%
304,365
2,205
2.87
%
340,194
2,391
2.79
%
Total interest-bearing liabilities
$
8,619,955
$
15,404
0.71
%
$
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
%
Interest rate spread
$
99,533
4.25
%
$
105,060
4.72
%
$
105,101
4.88
%
$
79,209
5.23
%
$
80,710
5.23
%
Net interest margin
4.30
%
4.78
%
4.94
%
5.34
%
5.35
%
SOP loan cost recoveries (interest
recoveries in 2Q and 3Q 2020)
$
469
$
5,982
$
-
$
1,033
$
371
Adjusted excluding cost/interests
recoveries (Non-GAAP):
Total interest-earning assets
$
9,218,717
$
114,468
4.94
%
$
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
%
Interest rate spread
$
99,064
4.23
%
$
99,078
4.45
%
$
105,101
4.88
%
$
78,176
5.16
%
$
80,339
5.21
%
Net interest margin
4.28
%
4.50
%
4.94
%
5.27
%
5.33
%
Core deposits: (Non-GAAP)
$
2,227,687
$
2,247
0.40
%
$
2,069,247
$
2,138
0.42
%
$
1,980,505
$
2,389
0.48
%
$
1,119,371
$
1,471
0.52
%
$
1,118,214
$
1,616
0.57
%
1,927,680
2,010
0.41
%
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
%
1,944,856
7,512
1.54
%
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
%
6,100,223
11,769
0.77
%
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
%
accounts
2,276,400
-
-
1,983,092
-
-
1,698,964
-
-
1,110,847
-
-
1,094,047
-
-
$
8,376,623
$
11,769
0.56
%
$
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
%
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:
$
1,423,781
$
3,760
0.35
%
$
535,865
$
9,357
2.33
%
679,201
9,552
1.88
%
1,000,217
18,292
2.44
%
4,780,966
254,343
7.09
%
3,822,312
220,583
7.72
%
1,990,938
92,671
6.21
%
697,081
34,388
6.58
%
6,771,904
347,014
6.83
%
4,519,393
254,971
7.54
%
Total interest-earning assets
$
8,874,886
$
360,326
5.41
%
$
6,055,475
$
282,620
6.24
%
Interest bearing liabilities:
$
2,092,973
$
6,772
0.43
%
$
1,120,825
$
4,800
0.57
%
1,845,253
6,426
0.46
%
1,187,020
5,508
0.62
%
1,991,432
23,480
1.57
%
1,070,111
11,024
1.38
%
203,779
3,844
2.51
%
422,364
7,660
2.42
%
6,133,437
40,522
0.88
%
3,800,320
28,992
1.02
%
1,987,211
-
-
1,097,145
-
-
%
-
6,163
-
-
602
-
8,120,648
46,685
0.77
%
4,897,465
29,594
0.81
%
Borrowings
67,956
1,335
2.62
%
336,859
6,235
2.47
%
73,150
1,521
2.77
%
80,294
1,671
2.78
%
36,083
1,091
4.02
%
36,083
1,536
5.69
%
177,189
3,947
2.97
%
453,236
9,442
2.79
%
Total interest-bearing liabilities
$
8,297,837
$
50,632
0.81
%
$
5,350,701
$
39,036
0.98
%
Interest rate spread
$
309,694
4.60
%
$
243,584
5.26
%
Net interest margin
4.65
%
5.38
%
SOP loan cost recoveries (interest recoveries in 2020)
$
6,451
$
1,338
Adjusted excluding cost/interests recoveries (Non-GAAP):
Total interest-earning assets
$
8,874,886
$
353,875
5.31
%
$
6,055,475
$
281,282
6.21
%
Interest rate spread
$
303,243
4.50
%
$
242,246
5.23
%
Net interest margin
4.55
%
5.35
%
Core deposits: (Non-GAAP)
$
2,092,973
$
6,772
0.43
%
$
1,120,825
$
4,800
0.57
%
1,845,253
6,426
0.46
%
1,187,020
5,508
0.62
%
1,991,432
23,480
1.57
%
1,070,111
11,024
1.38
%
5,929,658
36,678
0.83
%
3,377,956
21,332
0.84
%
1,987,211
-
-
%
1,097,145
-
-
%
$
7,916,869
$
36,678
0.62
%
$
4,475,101
$
21,332
0.64
%
8
OFG Bancorp (NYSE: OFG)
Table 6-1: Loan Information and Performance Statistics (1)
2020
2020
2020
2019
2019
(Dollars in thousands) (unaudited)
Q3
Q2
Q1
Q4
Q3
Net Charge-offs
(21)
Non-PCD
Mortgage:
$
56
$
185
$
418
$
1,075
$
16,299
(b)
(269)
(9)
(249)
(437)
(493)
(213)
176
169
638
15,806
Commercial:
298
497
3,771
463
8,421
(b)
(253)
(631)
(1,522)
(606)
(176)
45
(134)
2,249
(143)
8,245
Consumer:
5,114
4,187
6,015
5,289
5,317
(663)
(443)
(644)
(196)
(1,463)
(a)
4,451
3,744
5,371
5,093
3,854
Auto:
10,123
13,300
13,053
12,930
12,383
(5,950)
(3,405)
(4,211)
(4,123)
(5,802)
(a)
4,173
9,895
8,842
8,807
6,581
$
8,456
$
13,681
$
16,631
$
14,395
$
34,486
PCD
Mortgage:
$
1,677
$
2,178
$
5,143
$
-
$
-
(89)
(580)
(122)
-
-
1,588
1,598
5,021
-
-
Commercial:
293
386
2,357
-
-
(91)
(286)
(375)
-
-
202
100
1,982
-
-
Consumer:
60
30
431
-
-
1
(30)
(63)
-
-
61
-
368
-
-
Auto:
474
600
375
-
-
(211)
(229)
(343)
-
-
263
371
32
-
-
$
2,114
$
2,069
7,403
-
-
Total Net Charge-offs
$
10,570
$
15,750
$
24,034
$
14,395
$
34,486
Net Charge-off Rates
(21)
Mortgage
0.24%
0.30%
0.86%
0.24%
5.68%
Commercial
0.04%
-0.01%
0.76%
-0.03%
1.86%
Consumer
3.94%
3.12%
4.63%
5.15%
3.93%
Auto
1.17%
2.72%
2.31%
2.73%
2.09%
0.62%
0.92%
1.44%
1.28%
3.04%
(b)
Average Loans Held For Investment
(21)
Mortgage
$
2,325,756
$
2,366,600
$
2,414,685
$
1,062,845
$
1,112,488
Commercial
2,484,977
2,484,573
2,239,684
1,753,069
1,772,332
Consumer
457,620
479,957
496,313
395,611
392,725
Auto
1,518,669
1,509,521
1,537,194
1,288,546
1,261,501
$
6,787,022
$
6,840,650
$
6,687,875
$
4,500,071
$
4,539,045
(a) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.
(b) During 3Q 2019, the Company decided to sell several non-performing originated loans, which were sold during 4Q 2019, increasing charge-offs by $15.9 million, $4.4 million in
commercial loans and $11.5 million in residential mortgages.
9
Table 6-2: Loan Information and Performance Statistics (Excludes PCD Loans) (1)
OFG Bancorp (NYSE: OFG)
2020
2020
2020
2019
2019
(Dollars in thousands) (unaudited)
Q3
Q2
Q1
Q4
Q3
Early Delinquency (30 - 89 days past due)
Mortgage
$
16,783
$
15,665
$
20,518
$
22,389
$
21,631
Commercial
5,151
7,704
6,074
9,895
4,467
Consumer
12,032
18,254
13,127
9,560
9,360
Auto
87,912
89,825
110,959
103,749
103,452
$
121,878
$
131,448
$
150,678
(a)
$
145,593
$
138,910
Early Delinquency Rates (30 - 89 days past due)
Mortgage
1.98%
1.79%
2.31%
2.49%
3.68%
Commercial
0.29%
0.40%
0.32%
0.53%
0.28%
Consumer
2.77%
3.98%
2.73%
1.93%
2.44%
Auto
5.81%
6.17%
7.46%
7.01%
8.10%
2.50%
2.64%
3.16%
3.07%
3.63%
Total Delinquency (30 days and over past due)
Mortgage:
$
51,123
$
40,719
$
46,768
$
41,314
$
40,194
62,651
75,091
75,314
75,181
11,403
113,774
115,810
122,082
116,495
51,597
Commercial
35,596
38,258
33,746
30,111
25,271
Consumer
17,080
22,796
16,808
12,258
11,927
Auto
109,735
100,027
131,715
118,020
117,716
$
276,185
$
276,891
$
304,351
(a)
$
276,884
$
206,511
Total Delinquency Rates (30 days and over past due)
Mortgage:
6.03%
4.66%
5.27%
4.60%
6.83%
7.39%
8.59%
8.48%
8.37%
1.94%
13.42%
13.25%
13.75%
12.97%
8.77%
Commercial
1.99%
1.99%
1.77%
1.62%
1.60%
Consumer
3.93%
4.97%
3.49%
2.48%
3.11%
Auto
7.26%
6.87%
8.85%
7.98%
9.22%
5.67%
5.56%
6.38%
5.85%
5.40%
Nonperforming Assets
(14)
Mortgage
$
40,477
$
30,491
$
31,073
$
22,552
$
21,138
Commercial
44,941
44,187
42,668
42,606
36,409
Consumer
5,206
4,933
3,690
5,287
4,213
Auto
22,583
10,539
21,147
14,295
15,063
113,207
90,150
98,578
(a)
84,740
76,823
Foreclosed real estate
21,374
24,792
27,292
29,909
26,952
Other repossessed assets
1,918
1,360
3,096
3,327
3,537
$
136,499
$
116,302
$
128,966
$
117,976
$
107,312
Nonperforming Loan Rates
Mortgage
4.78%
3.49%
3.50%
2.51%
3.59%
Commercial
2.52%
2.30%
2.23%
2.29%
2.31%
Consumer
1.20%
1.08%
0.77%
1.07%
1.10%
Auto
1.49%
0.72%
1.42%
0.97%
1.18%
2.33%
1.81%
2.07%
1.79%
2.01%
(a) During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The
pandemic has significantly impacted the economic conditions in P.R. and the U.S., creating significant uncertainties. After recent disruptions in economic conditions caused by COVID-19,
the Company has offered several deferral programs for the payment of principal and interest for auto, personal, credit cards and mortgage, and commercial loans, for customers whose
payments were not over 89 days past due at March 12, 2020 and requested to be included in these programs. These loans may have been classified as delinquent loans in 1Q 2020, due
to the short proximity to quarter end, and subsequently adjusted when the deferral program was granted. Deferrals dropped to 2% of loans in 3Q 2020 from 30% in 2Q 2020. Most of that
relates to about $112 million commercial loans, and most of that represents well-capitalized customers in the hospitality industry.
10
OFG Bancorp (NYSE: OFG)
Table 6-3: Loan Information and Performance Statistics (1)
2020
2020
2020
2019
2019
(Dollars in thousands) (unaudited)
Q3
Q2
Q1
Q4
Q3
Nonperforming PCD Loans
(14)
Mortgage
$
1,003
$
1,373
$
1,341
$
-
$
-
Commercial
79,631
81,064
82,411
225
242
Consumer
4
12
10
499
560
$
80,638
$
82,449
$
83,762
$
724
$
802
Nonperforming PCD Loan Rates
Mortgage
0.07%
0.09%
0.09%
0.00%
0.00%
Commercial
22.59%
21.00%
21.07%
0.06%
0.12%
Consumer
0.17%
0.41%
0.30%
5.39%
69.83%
4.26%
4.19%
4.19%
0.04%
0.11%
Total PCD Loans Held for Investment
(21)
Mortgage
$
1,504,914
$
1,541,637
$
1,561,557
$
1,591,112
$
494,278
Commercial
352,555
386,046
391,158
359,601
202,065
Consumer
2,336
2,950
3,350
9,263
802
$
1,859,805
$
1,930,633
$
1,956,065
$
1,959,976
$
697,145
11
OFG Bancorp (NYSE: OFG)
Table 7: Allowance for Credit Losses (1)
Quarter Ended September 30, 2020
(Dollars in thousands) (unaudited)
Mortgage
Commercial
Consumer
Auto
Total
Allowance for credit losses Non-PCD:
$
19,973
$
43,011
$
31,954
$
56,569
$
151,507
(564)
(1,771)
(378)
16,071
13,358
(56)
(298)
(5,114)
(10,123)
(15,591)
269
253
663
5,950
7,135
$
19,622
$
41,195
$
27,125
$
68,467
$
156,409
Allowance for credit losses PCD:
$
30,919
$
48,914
$
169
$
1,192
$
81,194
1,077
(1,262)
-
9
(176)
(1,677)
(293)
(60)
(474)
(2,504)
89
91
(1)
211
390
$
30,408
$
47,450
$
108
$
938
$
78,904
Allowance for credit losses summary:
$
50,892
$
91,925
$
32,123
$
57,761
$
232,701
513
(3,033)
(378)
16,080
13,182
(1,733)
(591)
(5,174)
(10,597)
(18,095)
358
344
662
6,161
7,525
$
50,030
$
88,645
$
27,233
$
69,405
$
235,313
Allowance coverage ratio
2.13%
3.65%
6.23%
4.50%
3.48%
Allowance coverage ratio excluding PPP loans (Non-GAAP)
2.13%
4.15%
6.23%
4.50%
3.64%
12
OFG Bancorp (NYSE: OFG)
Table 8-1: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital
In addition to disclosing required regulatory capital measures, we also report certain non-GAAP capital measures that management uses in assessing its capital
adequacy. These non-GAAP measures include tangible common equity ("TCE") and TCE ratio. The table below provides the details of the calculation of our
regulatory capital and non-GAAP capital measures. While our non-GAAP capital measures are widely used by investors, analysts and bank regulatory agencies to
assess the capital position of financial services companies, they may not be comparable to similarly titled measures reported by other companies.
2020
2020
2020
2019
2019
(Dollars in thousands) (unaudited)
Q3
Q2
Q1
Q4
Q3
Stockholders' Equity to Non-GAAP Tangible Common Equity
Total stockholders' equity
$
1,064,322
$
1,041,284
$
1,022,594
(a)
$
1,045,478
$
1,049,076
Less: Intangible assets
(134,719)
(137,475)
(140,243)
(143,034)
(88,560)
(92,000)
(92,000)
(92,000)
(92,000)
(92,000)
10,130
10,130
10,130
10,130
10,130
Tangible common equity
$
847,733
$
821,939
$
800,481
$
820,574
$
878,646
Common stock outstanding at end of period
51,345
51,342
51,327
51,399
51,347
Tangible book value (Non-GAAP)
$
16.51
$
16.01
$
15.60
$
15.96
$
17.11
Total Assets to Tangible Assets
Total assets
$
10,016,323
$
9,932,719
$
9,238,571
$
9,297,661
$
6,333,505
Less: Intangible assets
(134,719)
(137,475)
(140,243)
(143,034)
(88,560)
Tangible assets (Non-GAAP)
$
9,881,604
$
9,795,244
$
9,098,328
$
9,154,627
$
6,244,945
Non-GAAP TCE Ratio
Tangible common equity
$
847,733
$
821,939
$
800,481
$
820,574
$
878,646
Tangible assets
9,881,604
9,795,244
9,098,328
9,154,627
6,244,945
TCE ratio
8.58%
8.39%
8.80%
8.96%
14.07%
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders' equity
$
1,062,460
$
1,037,195
$
1,043,481
$
1,062,720
$
1,061,541
Less: Average noncumulative perpetual preferred stock
(92,000)
(92,000)
(92,000)
(92,000)
(92,000)
10,130
10,130
10,130
10,130
10,130
Average total common stockholders' equity
$
980,590
$
955,325
$
961,611
$
980,850
$
979,671
Less: Average intangible assets
(136,138)
(139,094)
(141,875)
(89,005)
(88,701)
Average tangible common equity
$
844,452
$
816,231
$
819,736
$
891,845
$
890,970
(a) On January 1, 2020, the Company implemented ASU No. 2016-13: Measurement of Credit Losses on Financial Instruments "(CECL)" using the modified retrospective approach. As a
result, a $39.2 million allowance for credit losses was recorded for Non-PCD loans and $0.2 million for unused commitments with the corresponding adjustment reducing retained earnings,
net of a $13.9 million deferred tax effect. For PCD loans, including BBVA and Eurobank acquired book plus the recently acquired Scotiabank, the adjustment amounting to $50.5 million was
made through the allowance and loan balances with no impact in capital.
13
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
2020
2019
2019
(Dollars in thousands) (unaudited)
Q3
Q2
Q1
Q4
Q3
Regulatory Capital Metrics
Common equity Tier 1 capital
$
862,636
$
836,899
$
816,356
$
735,442
$
858,092
Tier 1 capital
979,506
953,769
933,226
852,312
974,962
Total risk-based capital
(15)
1,065,711
1,040,987
1,020,748
937,963
1,035,910
Risk-weighted assets
6,873,472
6,957,906
6,983,626
(a)
6,740,846
4,771,165
Regulatory Capital Ratios
Common equity Tier 1 capital ratio
(16)
12.55%
12.03%
11.69%
10.91%
17.98%
Tier 1 risk-based capital ratio
(17)
14.25%
13.71%
13.36%
12.64%
20.43%
Total risk-based capital ratio
(18)
15.50%
14.96%
14.62%
13.91%
21.71%
Leverage ratio
(19)
10.00%
10.16%
10.14%
9.24%
15.41%
Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach
Total stockholders' equity
(1)
$
1,064,322
$
1,041,284
$
1,022,594
$
1,045,478
$
1,049,076
CECL transition adjustment
(20)
33,494
32,269
31,882
-
-
Less: Noncumulative perpetual preferred stock
(92,000)
(92,000)
(92,000)
(92,000)
(92,000)
10,130
10,130
10,130
10,130
10,130
(9,453)
(8,885)
(7,576)
441
1,742
1,185
1,297
1,286
567
716
1,007,678
984,095
966,316
964,616
969,664
Less: Disallowed goodwill
(86,069)
(86,069)
(86,069)
(86,069)
(86,069)
(33,810)
(35,563)
(37,241)
(39,127)
(1,557)
(25,163)
(25,564)
(26,650)
(a)
(95,879)
(23,946)
-
-
-
(a)
(8,099)
-
Common equity Tier 1 capital
862,636
836,899
816,356
735,442
858,092
Plus: Qualifying noncumulative perpetual preferred stock
92,000
92,000
92,000
92,000
92,000
(10,130)
(10,130)
(10,130)
(10,130)
(10,130)
35,000
35,000
35,000
35,000
35,000
Tier 1 capital
979,506
953,769
933,226
852,312
974,962
Plus tier 2 capital: Qualifying allowance for loan and lease losses
86,205
87,218
87,522
85,651
60,948
Total risk-based capital
$
1,065,711
$
1,040,987
$
1,020,748
$
937,963
$
1,035,910
(a) During 1Q 2020, the Company decided to early implement Simplifications to the Capital Rule, which simplified the regulatory capital treatment for mortgage servicing assets (MSA) and
certain deferred tax assets arising from temporary differences (temporary difference DTAs). It Increased common equity tier 1 (CET1) capital threshold deductions from 10 percent to 25
percent and removes the aggregate 15 percent CET1 threshold deduction. However, it retains the 250 percent risk weight applicable to non-deducted amounts of MSAs and temporary
difference DTAs.
14
OFG Bancorp (NYSE: OFG)
Table 8-3: Reconciliation of GAAP to Non-GAAP with adjustments to exclude the impact of significant events.
The Company prepared its Consolidated Financial Statement using accounting principles generally accepted in the U.S. (“U.S. GAAP” or the “reported basis”). In addition to analyzing the
Company’s results on the reported basis, management monitors the “Adjusted net income” of the Company and excludes the impact of certain transactions on the results of its operations.
Management believes that “Adjusted net income” provides meaningful information to investors about the underlying performance of the Company’s ongoing operations. “Adjusted net income”
is a non-GAAP financial measure.
The table below describes adjustments to net income for the quarters ended September 30, 2020, June 30, 2020 and March 31, 2020.
Quarter ended September 30, 2020
Quarter ended June 30, 2020
Quarter ended March 31, 2020
Income Tax
Impact on
Income Tax
Impact on
Income Tax
Impact on
(Dollars in thousands) (unaudited)
Pre-tax
Effect
Net Income
Pre-tax
Effect
Net Income
Pre-tax
Effect
Net Income
$
27,438
$
21,787
$
1,801
available-for-sale
$
-
$
-
-
$
-
$
-
-
$
(4,728)
$
1,324
(3,404)
2,681
(1,005)
1,676
(b)
3,006
(1,127)
1,879
(b)
304
(114)
190
(b)
USVI
(3,465)
-
(3,465)
(3,462)
-
(3,462)
(409)
-
(409)
in the Scotiabank PR & USVI acquisition
(469)
176
(293)
(d)
(5,982)
2,243
(3,739)
(d)
-
-
-
losses
826
(310)
516
5,000
(1,875)
3,125
34,083
(12,781)
21,302
2,090
(784)
1,306
(f)
2,008
(753)
1,255
(f)
168
(63)
105
(f)
Adjusted net income (Non-GAAP)
$
27,178
$
20,845
$
19,585
Less: dividends on preferred stock
(1,628)
(1,628)
(1,628)
Adjusted net income available to
common shareholders (Non-GAAP)
$
25,550
$
19,217
$
17,957
Adjusted earnings per common share -
diluted (Non-GAAP)
$
0.50
$
0.37
$
0.35
Adjusted Performance Metrics -
Reconciliation to GAAP Financial
Measures:
Net income
$
27,438
$
21,787
$
1,801
(260)
(942)
17,784
Adjusted net income (Non-GAAP)
27,178
20,845
19,585
Average assets
9,918,381
9,512,129
9,326,627
Return on average assets
1.11%
0.92%
0.08%
Adjusted return on average assets (Non-
GAAP)
1.10%
0.88%
0.84%
Net income available to common
shareholders
$
25,810
$
20,159
$
173
(260)
(942)
17,784
Adjusted net income available to common
shareholders (Non-GAAP)
25,550
19,217
17,957
Average tangible common equity
844,452
816,231
819,736
Return on average tangible common
stockholders' equity
12.23%
9.88%
0.08%
Adjusted return on average tangible
common stockholders' equity (Non-
GAAP)
12.10%
9.42%
8.76%
Total non-interest expense
$
83,444
$
85,481
$
87,322
(4,771)
(5,014)
(472)
Adjusted total non-interest expense (Non-
GAAP)
78,673
80,467
86,850
Net interest income
99,533
105,060
105,101
Total banking and financial service
revenues
27,486
23,106
26,233
(469)
(5,982)
-
126,550
122,184
131,334
Efficiency ratio
65.69%
66.70%
66.49%
Adjusted efficiency ratio (Non-GAAP)
62.17%
65.86%
66.13%
(a) During 1Q 2020, the Company sold $316 million available-for-sale mortgage-backed securities and recognized a gain in the sale of $4.7 million.
(b) On December 31, 2019, the Company acquired Scotiabank's Puerto Rico and USVI operations ("the SBPR & USVI Acquisition"). During 1Q 2020, 2Q 2020 and 3Q 2020, $0.3 million, $3.0
million, and $2.7 million, respectively, were incurred in related expenses.
(c) In 2019, the Company recognized a bargain purchase gain of $5.7 million from the SBPR & USVI Acquisition. During 1Q 2020, 2Q 2020 and 3Q 2020, the Company increased the bargain
purchase gain from Scotiabank PR & USVI acquisition by $0.4 million, $3.5 million and $3.5 million, respectively, as remeasurement period adjustments.
(d) During 2Q 2020 and 3Q 2020, the Company recognized interest recoveries on SOP loans acquired in the Scotiabank PR & USVI acquisition collected subsequently to the acquisition date
amounting to $6.0 million and $0.5 million, respectively.
(e) In March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The pandemic
significantly impacted the economic conditions in P.R. and the U.S., creating significant uncertainties. In response, we increased our provision for credit losses on loans in 1Q 2020 and 2Q
2020 by $34.1 million and $5.0 million, respectively, and established a provision for credit losses on accrued interest receivables under deferral plans in 3Q 2020 of $826 thousand.
(f) During 1Q 2020, 2Q 2020 and 3Q 2020, the Company recorded $0.2 million, $2.0 million and $2.1 million expenses, respectively, in relation to the global pandemic from the coronavirus
COVID-19.
15
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 "PCI" and "SOP" to refer to loans acquired with credit deterioration from the Scotiabank acquisition (December 31, 2019), the
BBVAPR acquisition (December 18, 2012) and the Eurobank FDIC-Assisted acquisition (April 30, 2010), recorded at fair value at acquisition. On January
1, 2020, the Company implemented ASU No. 2016-13: Measurement of Credit Losses on Financial Instruments "(CECL)" using the modified retrospective
approach. CECL replaces the concept of purchased credit impaired loans (PCI) with the concept of purchased financial assets with credit deterioration
(PCD). PCD accounting is called ‘gross-up accounting’ because, at acquisition, an entity grosses up the amortized cost basis of the PCD asset for the
initial estimate of credit losses. This Day 1 allowance for credit losses is established without an income statement effect. The Company elected to
maintain previously existing pools on adoption, therefore the pool continues to be the unit of account, and the allowance and non-credit discount or
premium is not allocated to the individual assets. These loans are not classified as delinquent or nonperforming even though the customer may be
contractually past due because we expect that we will fully collect the carrying value of these loans.
(2)
Total banking and financial service revenues.
(3)
Calculated based on net income available to common shareholders divided by average common shares outstanding for the period.
(4)
Calculated based on net income available to common shareholders plus the preferred dividends on the convertible preferred stock, divided by total
average common shares outstanding and equivalents for the period as if converted.
(5)
Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding.
See "Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures" for additional information.
(6)
Information includes all loans held for investment, including PCD loans.
(7)
Calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.
(8)
Calculated based on annualized income, net of tax, for the period divided by average total assets for the period.
(9)
Calculated based on annualized income available to common shareholders for the period divided by average tangible common equity for the period.
(10)
Calculated based on non-interest expense for the period divided by total net interest income and total banking and financial services revenues for the
period.
(11)
Calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period.
(12)
Non-GAAP ratios. See "Table 9: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures" for 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 application of the accretion method, in which these loans will accrete interest income over the
remaining life of the loans using estimated cash flow analyses. Therefore, they are not included as non-performing loans. PCD loan pools that are not
accreting interest income are deemed to be non-performing loans and presented separately.
(15)
Total risk-based capital equals the sum of Tier 1 capital and Tier 2 capital.
(16)
Common equity Tier 1 capital ratio is a regulatory capital measure calculated based on Common equity Tier 1 capital divided by risk-weighted assets.
(17)
Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.
(18)
Total risk-based capital ratio is a regulatory capital measure calculated based on Total risk-based capital divided by risk-weighted assets.
(19)
Leverage capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by average assets, after certain adjustments.
(20)
In March 2020, in light of recent strains on the U.S. economy as a result of the coronavirus disease 2019 (COVID-19), the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued an interim final rule that
provided the option to temporarily delay the effects of CECL on regulatory capital for two years, followed by a three-year transition period. In addition, for
the first two years, a uniform 25% “scaling factor” is introduced to approximate the portion of the post day-one allowance attributable to CECL relative to
the incurred loss methodology. The 25% scaling factor is calibrated to approximate an overall after-tax impact of differences in allowances under CECL vs
the incurred loss methodology.
(21)
CECL replaces the concept of purchased credit impaired loans (PCI assets) with the concept of purchased financial assets with credit deterioration (PCD
assets). An entity records a PCD asset at the purchase price plus the allowance for credit losses expected at the time of acquisition. Under this method,
there is no credit loss expense affecting net income on acquisition. Changes in estimates of expected credit losses after acquisition are recognized as
credit loss expense (or reversal of credit loss expense) in subsequent periods as they arise.
(22)
Pre-provision net revenues is a non-GAAP measure calculated based on net interest income plus total non-interest income, net, less total non-interest
expenses for the period.
16