Exhibit 99
OFG Bancorp Reports 4Q20 & 2020 Results
SAN JUAN, Puerto Rico, January 25, 2021 – OFG Bancorp (NYSE: OFG), the financial holding company for Oriental Bank,
reported results for the fourth quarter and year ended December 31, 2020.
CEO Comment
José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board, said: “We had another quarter of strong
performance in our core businesses, reflecting our larger scale, solid levels of new loan production, lower cost of funds, higher non-
interest income, and reduced expenses.
“On a macro-basis, we are benefitting from the improved economic environment in Puerto Rico and the U.S. Virgin Islands due to the
continuing nascent rebound from the easing of COVID-19 restrictions and from pandemic-related stimulus.
“Within this environment, Oriental’s success continues to be driven by resiliency, agility, and being more than ready to help customers
and communities with their changing product and service needs. During the fourth quarter, we also completed the integration of the
Scotiabank acquisition and related cost-savings.
“We look forward to realizing the full benefits of our larger scale over the course of 2021. The vaccine inoculations should reduce the
threat of COVID-19, and the economies of Puerto Rico and USVI should expand from all the pending federal reconstruction and stimulus.
“2020 was another challenging year for Puerto Rico, USVI and Oriental. As in years past, we successfully worked our way through it. Our
heartfelt thanks go to our team members who helped customers by swiftly processing loan deferrals; implementing an easy-to-use, fully
online Paycheck Protection Program; managing the rapid influx of deposits; and providing contactless and in-person services in a COVID-
safe manner. Thanks also to the many team members who had to successfully adapt to working from home and implement the
Scotiabank integration in the middle of a pandemic.”
4Q20 Highlights
Increased Earnings & Revenues:
EPS diluted of $0.42 compared to a loss of $0.05 in 4Q19. Results reflected pre-tax merger and
restructuring charges of $10.1 million compared to $21.5 million in 4Q19. Total core revenues were $132.8 million versus $98.4 million in
4Q19. Net interest income of $98.7 million increased 24.7%. Non-interest income of $34.0 million increased 77.4%. Net interest margin
was 4.24% compared to 5.34% in 4Q19.
Solid Production:
(excluding Paycheck Protection Program loans) increased $38.0 million, driven by commercial and mortgage with continued strong levels
of auto and consumer lending. Net loans declined $77.9 million from 9/30/20 to $6.5 billion at 12/31/20.
Lower Provision:
included $31.2 million for two acquired commercial loans that were substantially reserved. 4Q20 loan deferrals fell to 1.4% of total loans
from 2.0% in 3Q20.
Core Expenses:
costs, 4Q20 non-interest expenses of $77.4 million fell $9.4 million from 1Q20, amounting to approximately $38.0 million in annualized
reductions from the Scotiabank acquisition, exceeding original expectations by about 9%.
Lower Cost of Funds:
deposits declined $169.8 million from 9/30/20 to $8.4 billion at 12/31/20.
Capital Building:
$894.1 million. The CET1 ratio was 13.08% versus 12.55% on 9/30/20 and 10.91% on 12/31/19, when the Scotiabank acquisition closed.
2020 Highlights
Increased Earnings & Revenues:
EPS diluted of $1.32 compared to $0.92 in 2019. Total core revenues were $519.3 million versus $396.2
million in 2019, with increases of 26.5% and 51.1% in net interest and non-interest income, respectively. New loan production was $1.7
billion compared to $1.3 billion. Net interest margin was 4.55% compared to 5.37%. The effective tax rate was 21.6% compared to 28.5%.
Results Included (all amounts pre -tax):
compared to $24.1 million in 2019, and bargain purchase gain from the acquisition of $7.3 million compared to $0.3 million in 2019. 2020
also included $39.9 million in COVID-19 related provision for credit losses and $5.8 million in COVID-19 related expenses.
Conference Call
A conference call to discuss 4Q20 results, outlook and related matters will be held today at 10:00 AM ET. Phone (888) 562-3356 or (973)
582-2700. Conference ID: 864-1568. The call can also be accessed live on
www.ofgbancorp.com.
thereafter.
Financial Supplement & Conference Call Presentation
OFG’s Financial Supplement, with full financial tables for the quarter and year ended December 31, 2020, and the 4Q20
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 and 8-2 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 57
th
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 December 31, 2020 Annual Report on Form 10-K 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
2-3
Table 2:
Consolidated Statements of Operations
4-5
Table 3:
Consolidated Statements of Financial Condition
6
Table 4:
Information on Loan Portfolio and Production
7-8
Table 5:
Average Balances, Net Interest Income and Net Interest Margin
9-10
Table 6:
Loan Information and Performance Statistics
11-13
Table 7:
Allowance for Credit Losses
14
Table 8:
Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital
15-16
Table 9:
Notes to Financial Summary, Selected Metrics, Loans, and Consolidated
17
OFG Bancorp (NYSE: OFG)
Table 1-2: Financial and Statistical Summary - Consolidated
2020
2020
2020
2020
2019
(Dollars in thousands, except per share data) (unaudited)
Q4
Q3
Q2
Q1
Q4
Statement of Operations
Net interest income
$
98,738
99,533
105,060
$
105,101
$
79,209
Non-interest income, net (core)
(2)
34,047
(a)
27,486
23,106
26,233
(g)
19,196
Total core revenues
132,785
127,019
128,166
131,334
98,405
Non-interest expense
89,039
(g)
83,444
85,481
87,322
(g)
78,913
(g)
Pre-provision net revenues
(22)
44,123
47,415
46,731
49,229
20,007
Total provision for credit losses
14,176
13,669
(f)
17,696
(f)
47,131
(e)(f)
23,068
Net income (loss) before income taxes
29,947
33,746
29,035
2,098
(3,061)
Income tax expense (benefit)
6,646
6,308
7,248
297
(2,070)
Net income (loss) available to common stockholders
$
21,673
25,810
20,159
173
(2,619)
Common Share Statistics
Earnings (loss) per common share - basic
(3)
$
0.42
0.50
0.39
-
(0.05)
Earnings (loss) per common share - diluted
(4)
$
0.42
(a)(g)
0.50
0.39
-
(0.05)
Average common shares outstanding
51,350
51,342
51,336
51,404
51,360
Average common shares outstanding and equivalents
51,618
51,527
51,470
51,713
51,791
Cash dividends per common share
$
0.07
$
0.07
$
0.07
$
0.07
$
0.07
Book value per common share (period end)
$
19.54
$
19.13
$
18.69
$
18.33
(e)
$
18.75
Tangible book value per common share (period end)
(5)
$
16.97
$
16.51
$
16.01
$
15.60
$
15.96
Balance Sheet (Average Balances)
Loans
(6)
$
6,708,284
$
6,787,022
$
6,840,650
$
6,687,875
$
4,500,071
Interest-earning assets
9,270,739
(c)
9,218,717
(c)
8,845,744
(c)
8,556,421
5,886,379
Total assets
9,921,254
9,918,381
9,512,129
9,326,627
6,325,334
Core deposits
8,451,308
8,376,623
7,852,495
7,516,438
4,582,872
Total deposits
8,515,646
8,517,039
8,088,106
7,752,446
4,850,980
Interest-bearing deposits
6,199,929
6,240,639
6,105,014
6,053,482
3,740,133
Borrowings
101,930
102,916
157,669
271,800
304,365
Stockholders' equity
1,083,423
1,062,460
1,037,195
1,043,481
(e)
1,062,720
Common stockholders' equity
1,001,553
980,590
955,325
961,611
980,850
Performance Metrics
Net interest margin
(7)
4.24%
4.30%
4.78%
4.94%
5.34%
Return on average assets
(8)
0.94%
1.11%
0.92%
0.08%
-0.06%
Return on average tangible common stockholders' equity
(9)
9.99%
12.23%
9.88%
0.08%
-1.17%
Efficiency ratio
(10)
67.06%
(g)
65.69%
66.70%
66.49%
80.19%
Full-time equivalent employees, period end
2,275
2,332
2,373
2,449
2,455
Credit Quality Metrics
(1)(21)
Allowance for loan and lease losses
$
204,809
$
235,313
$
232,701
$
230,755
$
116,539
Allowance as a % of loans held for investment
3.07%
(b)
3.48%
(c)
3.35%
(c)
3.41%
1.73%
Net charge-offs
$
44,814
$
10,570
$
15,750
$
24,034
$
14,395
Net charge-off rate
(11)
2.67%
(b)
0.62%
0.92%
1.44%
1.28%
Early delinquency rate (30 - 89 days past due)
2.68%
2.50%
2.64%
3.16%
3.07%
Total delinquency rate (30 days and over)
5.74%
5.67%
5.56%
6.38%
5.85%
Capital Ratios (Non-GAAP)
(12)(20)
Leverage ratio
10.30%
10.00%
10.16%
10.14%
(d)(e)
9.24%
Common equity Tier 1 capital ratio
13.08%
12.55%
12.03%
11.69%
10.91%
Tier 1 risk-based capital ratio
14.78%
14.25%
13.71%
(c)
13.36%
(d)(e)
12.64%
Total risk-based capital ratio
16.04%
15.50%
14.96%
14.62%
13.91%
Tangible common equity ("TCE") ratio
9.00%
8.58%
8.39%
8.80%
8.96%
(a) During 4Q 2020, the Company recognized annual insurance contingent commissions amounting to $4.0 million. In addition, mortgage banking activities reflected higher gains on
sale of loans and securitizations, and higher servicing fees compared to 3Q 2020.
(b) During 4Q 2020, commercial charge-offs reflected $31.2 million from two commercial non-performing PCD loans from the government and hospital sectors, reducing loan
balance and their corresponding allowance for credit losses by that amount.
(c) 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, September 30, 2020 and December 31, 2020, Oriental had PPP loans amounting to $278.1 million,
$289.2 million and $282.7 million, respectively. These loans are fully guaranteed by the SBA and risk-weighted at 0%.
(d) 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.
(e) 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 year s, 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.
(f) 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.
(g) 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, $2.7 million during 3Q 2020, and $10.1 million during 4Q 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.
2
OFG Bancorp (NYSE: OFG)
Table 1-2: Financial and Statistical Summary - Consolidated (Continued)
2020
2019
(Dollars in thousands, except per share data) (unaudited)
YTD
YTD
Statement of Operations
Net interest income
408,432
322,793
Non-interest income, net (core)
(2)
110,872
(e)
73,365
Total core revenues
519,304
396,158
Non-interest expense
345,286
(e)
233,244
(e)
Pre-provision net revenues
(22)
187,498
172,042
Total provision for credit losses
92,672
(c)(d)
96,792
(g)
Net income before income taxes
94,826
75,250
Income tax expense
20,499
21,409
Net income available to common stockholders
67,815
47,329
Common Share Statistics
Earnings per common share - basic
(3)
1.32
0.92
Earnings per common share - diluted
(4)
1.32
0.92
Average common shares outstanding
51,358
51,335
Average common shares outstanding and equivalents
51,555
51,719
Cash dividends per common share
$
0.28
$
0.28
Book value per common share (period end)
$
19.54
(c)
$
18.75
Tangible book value per common share (period end)
(5)
$
16.97
$
15.96
Balance Sheet (Average Balances)
Loans
(6)
$
6,748,510
$
4,514,522
Interest-earning assets
8,966,989
(a)
6,012,853
Total assets
9,670,969
6,464,330
Core deposits
8,051,208
4,502,265
Total deposits
8,219,936
4,885,748
Interest-bearing deposits
6,150,150
3,785,149
Borrowings
158,271
415,712
Stockholders' equity
1,056,729
(c)
1,044,881
Common stockholders' equity
974,859
963,011
Performance Metrics
Net interest margin
(7)
4.55%
5.37%
Return on average assets
(8)
0.77%
0.83%
Return on average tangible common stockholders' equity
(9)
8.10%
5.42%
Efficiency ratio
(10)
66.49%
58.88%
Full-time equivalent employees, period end
2,275
2,455
Credit Quality Metrics
(1)(21)
Allowance for loan and lease losses
$
204,809
$
116,539
Allowance as a % of loans held for investment
3.07%
(a)
1.73%
Net charge-offs
$
95,168
$
74,741
Net charge-off rate
(11)
1.41%
1.66%
(f)(g)
Early delinquency rate (30 - 89 days past due)
2.68%
3.07%
Total delinquency rate (30 days and over)
5.74%
5.85%
Capital Ratios (Non-GAAP)
(12)(20)
Leverage ratio
10.30%
(b)(c)
9.24%
Common equity Tier 1 capital ratio
13.08%
10.91%
Tier 1 risk-based capital ratio
14.78%
(a)(b)(c)
12.64%
Total risk-based capital ratio
16.04%
13.91%
Tangible common equity ("TCE") ratio
9.00%
8.96%
(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, September 30, 2020 and December 31, 2020,
Oriental had PPP loans amounting to $278.1 million, $289.2 million and $282.7 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, $2.7 million during 3Q 2020, and $10.1 million during 4Q 2020. At December 31, 2019, the consolidated statement of financial
condition contemplated the effects of the Scotiabank PR & USVI acquisition. Nevertheless, the consolidate statement of operations did not contemplated 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.
3
OFG Bancorp (NYSE: OFG)
Table 2-1: Consolidated Statements of Operations
Quarter Ended
December 31,
September 30,
June 30,
March 31,
December 31,
(Dollars in thousands, except per share data) (unaudited)
2020
2020
2020
2020
2019
Interest income:
Loans
(1)
$
81,171
$
83,029
$
83,832
$
87,482
$
74,142
29,250
29,018
(c)
34,700
(c)
28,953
10,762
110,421
112,047
118,532
116,435
84,904
Investment securities
2,600
2,890
3,160
7,262
6,271
113,021
114,937
121,692
123,697
(g)
91,175
Interest expense:
Deposits
13,225
13,808
13,999
15,034
7,957
288
812
1,446
1,586
1,804
13,513
14,620
15,445
16,620
(g)
9,761
Borrowings
770
784
1,187
1,976
2,205
14,283
15,404
16,632
18,596
11,966
Net interest income
98,738
99,533
105,060
105,101
79,209
Provision for credit losses, excluding PCD loans
(1)
15,464
13,845
15,227
40,951
18,859
(Recapture) provision for credit losses on PCD loans
(1,288)
(176)
2,469
6,180
4,209
14,176
13,669
(e)
17,696
(e)
47,131
(e)(g)
23,068
84,562
85,864
87,364
57,970
56,141
Non-interest income:
Banking service revenues
16,901
16,297
13,668
15,713
10,812
Wealth management revenues
10,865
(a)
7,272
6,366
7,286
7,062
Mortgage banking activities
6,281
(b)
3,917
3,072
3,234
1,322
34,047
27,486
23,106
26,233
(g)
19,196
Bargain purchase from Scotiabank PR & USVI acquisition
-
3,465
3,462
409
315
Other income, net
377
375
584
4,808
(h)
200
34,424
31,326
27,152
31,450
19,711
Non-interest expense:
Compensation and employee benefits
30,921
31,955
34,506
35,544
21,817
Occupancy, equipment and infrastructure costs
12,064
11,943
11,837
11,439
7,488
General and administrative expenses
33,454
33,452
31,181
37,345
25,451
Net (gain) loss on sale of foreclosed real estate and other repossessed assets
(300)
(866)
316
(193)
541
Credit related expenses
1,304
2,189
2,602
2,715
2,118
Merger and restructuring charges
10,092
(g)
2,681
(g)
3,006
(g)
304
21,498
(g)
COVID 19 expenses
1,504
(f)
2,090
(f)
2,033
(f)
168
-
89,039
83,444
85,481
87,322
(g)
78,913
Income (loss) before income taxes
29,947
33,746
29,035
2,098
(3,061)
Income tax expense (benefit)
6,646
6,308
7,248
297
(2,070)
Net income (loss)
23,301
27,438
21,787
1,801
(991)
Less: dividends on preferred stock
(1,628)
(1,628)
(1,628)
(1,628)
(1,628)
Net income (loss) available to common shareholders
$
21,673
$
25,810
$
20,159
$
173
$
(2,619)
(a) During 4Q 2020, the Company recognized annual insurance contingent commissions amounting to $4.0 million.
(b) During 4Q 2020, mortgage banking activities reflected higher gains on sale of loans and securitizations, and higher servicing fees compared to 3Q 2020.
(c) 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.
(d) 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.
(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 2Q 2020, 3Q 2020 and 4Q 2020, the Company recorded $2.0 million, $2.1 million and $1.5 million expenses, respectively, in relation to the global pandemic from the
coronavirus COVID-19. Covid-19 expenses represented expenses incurred within our premises, as acrylic shields, face shields and masks, and cleaning and disinfecting costs, in order
to control pandemic spread and keep customers and employees safe. It also includes employees COVID testing.
(g) 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, $2.7 million during 3Q 2020, and $10.1 million during 4Q 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.
(h) 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.
4
OFG Bancorp (NYSE: OFG)
Table 2-2: Consolidated Statements of Operations (Continued)
Year Ended
December 31,
December 31,
(Dollars in thousands, except per share data) (unaudited)
2020
2019
Interest income:
Loans
(1)
$
335,514
$
294,726
121,921
(a)
45,149
457,435
339,875
Investment securities
15,912
33,920
473,347
(e)
373,795
Interest expense:
Deposits
56,066
29,892
4,132
9,463
60,198
(e)
39,355
Borrowings
4,717
11,647
64,915
51,002
Net interest income
408,432
322,793
Provision for credit losses, excluding PCD loans
(1)
85,487
62,533
(Recapture) provision for credit losses on PCD loans
7,185
34,259
92,672
(c)(e)
96,792
(g)(h)(i)
315,760
226,001
Non-interest income:
Banking service revenues
62,579
42,866
Wealth management revenues
31,789
26,224
Mortgage banking activities
16,504
4,275
110,872
(e)
73,365
Bargain purchase from Scotiabank PR & USVI acquisition
7,336
315
Other income, net
6,144
(f)
8,813
(f)
124,352
82,493
Non-interest expense:
Compensation and employee benefits
132,926
82,533
Occupancy, equipment and infrastructure costs
47,283
30,052
General and administrative expenses
135,432
85,107
Net (gain) loss on sale of foreclosed real estate and other repossessed assets
(1,043)
2,426
Credit related expenses
8,810
9,072
Merger and restructuring charges
16,083
(e)
24,054
COVID 19 expenses
5,795
(d)
-
345,286
(e)
233,244
Income before income taxes
94,826
75,250
Income tax expense
20,499
21,409
Net income
74,327
53,841
Less: dividends on preferred stock
(6,512)
(6,512)
Net income available to common shareholders
$
67,815
$
47,329
(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) During 2Q 2020, 3Q 2020 and 4Q 2020, the Company recorded $2.0 million, $2.1 million and $1.5 million expenses, respectively, in relation to the global pandemic from the
coronavirus COVID-19. Covid-19 expenses represented expenses incurred within our premises, as acrylic shields, face shields and masks, and cleaning and disinfecting costs, in order
to control pandemic spread and keep customers and employees safe. It also includes employees COVID testing.
(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, $2.7 million during 3Q 2020, and $10.1 million during 4Q 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 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.
(g) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.
(h) 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.
(i) 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.
5
OFG Bancorp (NYSE: OFG)
Table 3: Consolidated Statements of Financial Condition
December 31,
September 30,
June 30,
March 31,
December 31,
(Dollars in thousands) (unaudited)
2020
2020
2020
2020
2019
Cash and cash equivalents
$
2,155,577
$
2,283,050
(b)
$
1,900,037
(b)
$
1,325,941
$
852,757
Investments:
Trading securities
22
22
22
29
37
Investment securities available-for -sale, at fair value,
432,935
329,719
340,192
355,637
673,886
10,983
91,531
197,340
298,986
397,183
2,520
2,565
2,707
2,837
3,100
446,438
423,815
540,239
657,460
(d)
1,074,169
Federal Home Loan Bank (FHLB) stock, at cost
8,278
8,322
8,366
10,301
13,048
Other investments
3,962
2,205
1,076
973
560
458,700
434,364
549,703
668,763
1,087,814
Loans, net
6,501,259
(b)
6,579,140
(b)
6,739,243
(b)
6,541,174
6,641,847
Other assets:
Prepaid expenses
61,416
54,583
40,119
44,633
52,648
Deferred tax asset, net
162,478
178,957
186,730
196,129
(c)
176,740
Foreclosed real estate and repossessed properties
13,412
21,374
26,152
30,388
33,236
Premises and equipment, net
83,786
83,270
82,234
81,834
81,105
Goodwill
86,069
86,069
86,069
86,069
86,069
Right of use assets
31,383
35,900
34,692
36,844
39,112
Core deposit, customer relationship intangible and other intangibles
45,896
48,650
51,406
54,174
56,965
Servicing asset
47,295
47,242
47,926
49,287
50,779
Accounts receivable and other assets
178,740
166,392
188,408
123,335
138,589
Total assets
$
9,826,011
$
10,018,991
$
9,932,719
$
9,238,571
$
9,297,661
Deposits:
Demand deposits
$
4,613,309
$
4,682,991
(b)
$
4,370,419
(b)
$
3,711,492
$
3,579,115
Savings accounts
1,920,325
1,919,859
1,978,118
1,829,054
1,815,044
Time deposits
1,832,891
1,933,517
1,975,223
2,023,211
2,060,953
Brokered deposits
49,115
96,090
218,166
255,514
243,498
8,415,640
8,632,457
8,541,926
7,819,271
7,698,610
Borrowings:
Securities sold under agreements to repurchase
-
-
-
50,103
190,274
Advances from FHLB and other borrowings
66,268
66,781
68,340
77,601
79,204
Subordinated capital notes
36,083
36,083
36,083
36,083
36,083
102,351
102,864
104,423
163,787
305,561
Other liabilities:
Derivative liabilities
1,712
1,895
2,078
2,059
913
Acceptances outstanding
33,349
18,291
20,034
11,763
21,599
Lease liability
32,566
37,029
35,694
37,702
39,840
Accrued expenses and other liabilities
154,418
162,133
187,280
181,395
185,660
8,740,036
8,954,669
8,891,435
8,215,977
8,252,183
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
622,652
621,978
621,860
621,206
621,515
Legal surplus
103,269
101,233
98,347
95,945
95,779
Retained earnings
300,096
284,053
264,725
250,557
(c)
279,646
Treasury stock, at cost
(102,949)
(103,095)
(103,121)
(103,289)
(102,339)
Accumulated other comprehensive (loss) income, net
11,022
8,268
7,588
6,290
(1,008)
1,085,975
1,064,322
1,041,284
1,022,594
1,045,478
$
9,826,011
$
10,018,991
$
9,932,719
$
9,238,571
$
9,297,661
(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, September 30, 2020 and December 31, 2020, Oriental had PPP loans amounting
to $278.1 million, $289.2 million and $282.7 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) 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.
6
OFG Bancorp (NYSE: OFG)
Table 4-1: Information on Loan Portfolio and
Production
December 31,
September 30,
June 30,
March 31,
December 31,
(Dollars in thousands) (unaudited)
2020
2020
2020
2020
2019
Non-PCD:
(1)
$
823,443
$
847,671
$
874,286
$
887,950
$
898,118
1,836,137
1,785,022
1,918,424
1,910,192
1,862,484
282,713
(b)
289,218
(b)
278,059
(b)
-
-
413,552
434,546
458,714
481,710
495,244
1,534,269
1,511,829
1,454,987
1,487,701
1,479,612
4,890,114
4,868,286
4,984,470
4,767,553
4,735,458
(161,015)
(156,409)
(151,507)
(149,961)
(c)
(85,044)
4,729,099
4,711,877
4,832,963
4,617,592
4,650,414
PCD:
(1)
1,459,932
1,504,914
1,541,637
1,561,557
1,591,112
283,160
(a)
352,555
386,046
391,158
359,601
1,394
2,336
2,950
3,350
9,263
27,533
31,836
37,409
42,466
43,361
1,772,019
1,891,641
1,968,042
1,998,531
2,003,337
(1)
(43,794)
(a)
(78,904)
(81,194)
(80,794)
(c)
(31,495)
1,728,225
1,812,737
1,886,848
1,917,737
1,971,842
Total loans held for investment
6,457,324
6,524,614
6,719,811
6,535,329
6,622,256
Mortgage loans held for sale
41,654
54,526
19,432
5,845
19,591
Other loans held for sale
2,281
-
-
-
-
Total loans, net
$
6,501,259
$
6,579,140
$
6,739,243
$
6,541,174
$
6,641,847
Loan Portfolio Summary:
$
2,283,375
$
2,352,585
$
2,415,923
$
2,449,507
$
2,489,230
2,402,010
2,426,795
2,582,529
2,301,350
2,222,085
414,946
436,882
461,664
485,060
504,507
1,561,802
1,543,665
1,492,396
1,530,167
1,522,973
6,662,133
6,759,927
6,952,512
6,766,084
6,738,795
(204,809)
(235,313)
(232,701)
(230,755)
(c)
(116,539)
6,457,324
6,524,614
6,719,811
6,535,329
6,622,256
41,654
54,526
19,432
5,845
19,591
2,281
-
-
-
-
Total loans, net
$
6,501,259
$
6,579,140
$
6,739,243
$
6,541,174
$
6,641,847
(a) During 4Q 2020, commercial charge-offs reflected $31.2 million from two commercial non-performing PCD loans from the government and hospital sectors, reducing loan balance
and their corresponding allowance for credit losses by that amount.
(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, September 30, 2020 and December 31, 2020, Oriental had PPP loans amounting to $278.1 million,
$289.2 million and $282.7 million, respectively. These loans are fully guaranteed by the SBA and risk-wei ghted at 0%.
(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.
7
OFG Bancorp (NYSE: OFG)
Table 4-2: Information on Loan
Portfolio and Production
Quarter Ended
Year Ended
December 31,
September 30,
June 30,
March 31,
December 31,
December 31,
December 31,
(Dollars in thousands) (unaudited)
2020
2020
2020
2020
2019
2020
2019
Loan production
(13)
$
97,656
$
93,650
$
23,744
$
30,988
$
23,680
$
246,038
$
92,779
174,994
83,488
98,558
54,113
216,610
411,153
406,809
-
10,318
286,420
-
-
296,738
-
49,221
90,878
35,711
47,125
12,482
222,935
112,786
25,984
23,540
14,231
39,199
41,947
102,954
178,723
137,545
155,880
47,374
109,344
110,184
450,143
508,152
$
485,400
$
457,754
$
506,038
$
280,769
$
404,903
$
1,729,961
$
1,299,248
8
OFG Bancorp (NYSE: OFG)
Table 5-1: Average Balances, Net Interest Income and Net Interest Margin
2020 Q4
2020 Q3
2020 Q2
2020 Q1
2019 Q4
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:
$
2,091,458
$
613
0.12
%
$
1,929,024
$
613
0.13
%
$
1,393,187
$
359
0.10
%
$
943,581
$
2,788
1.19
%
$
863,497
$
3,684
1.69
%
470,997
1,986
1.69
%
502,671
2,278
1.81
%
611,907
2,801
1.83
%
924,965
4,474
1.93
%
522,811
2,587
1.98
%
(1)
4,863,902
81,171
6.64
%
4,870,753
83,029
6.78
%
4,857,281
83,832
6.94
%
4,613,878
87,482
7.63
%
3,888,442
74,142
7.56
%
1,844,382
29,250
6.34
%
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
%
6,708,284
110,421
6.55
%
6,787,022
112,047
6.57
%
6,840,650
118,532
6.97
%
6,687,875
116,435
7.00
%
4,500,071
84,904
7.49
%
Total interest -earning assets
$
9,270,739
$
113,020
4.85
%
$
9,218,717
$
114,938
4.96
%
$
8,845,744
$
121,692
5.53
%
$
8,556,421
$
123,697
5.81
%
$
5,886,379
$
91,175
6.15
%
Interest bearing liabilities:
$
2,344,903
$
2,258
0.38
%
$
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
%
1,897,618
1,954
0.41
%
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
%
1,893,070
6,975
1.47
%
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
%
64,338
289
1.78
%
140,416
812
2.30
%
235,611
1,446
2.47
%
236,008
1,586
2.70
%
268,108
1,804
2.67
%
6,199,929
11,476
0.74
%
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
%
2,315,717
-
-
2,276,400
-
-
1,983,092
-
-
1,698,964
-
-
1,110,847
-
-
core deposit intangible amortization
-
2,037
-
-
2,039
-
-
2,051
-
-
2,074
-
-
201
-
8,515,646
13,513
0.63
%
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
%
repurchase
-
-
-
%
-
-
-
%
46,154
334
2.91
%
158,462
1,002
2.54
%
190,000
1,189
2.48
%
borrowings
65,847
468
2.83
%
66,833
476
2.83
%
75,432
505
2.69
%
77,255
539
2.81
%
78,282
541
2.74
%
36,083
301
3.34
%
36,083
308
3.39
%
36,083
347
3.87
%
36,083
435
4.85
%
36,083
475
5.22
%
101,930
769
3.01
%
102,916
784
3.03
%
157,669
1,186
3.03
%
271,800
1,976
2.92
%
304,365
2,205
2.87
%
Total interest -bearing liabilities
$
8,617,576
$
14,282
0.66
%
$
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
%
Interest rate spread
$
98,738
4.19
%
$
99,534
4.25
%
$
105,060
4.72
%
$
105,101
4.88
%
$
79,209
5.23
%
Net interest margin
4.24
%
4.30
%
4.78
%
4.94
%
5.34
%
SOP loan cost recoveries (interest recoveries
in 2Q, 3Q and 4Q 2020)
$
17
$
469
$
5,982
$
-
$
1,033
Adjusted excluding cost/interests recoveries
(Non-GAAP):
Total interest -earning assets
$
9,270,739
$
113,003
4.85
%
$
9,218,717
$
114,469
4.94
%
$
8,845,744
$
115,710
5.26
%
$
8,556,421
$
123,697
5.81
%
$
5,886,379
$
90,142
6.08
%
Interest rate spread
$
98,721
4.19
%
$
99,065
4.23
%
$
99,078
4.45
%
$
105,101
4.88
%
$
78,176
5.16
%
Net interest margin
4.24
%
4.28
%
4.50
%
4.94
%
5.27
%
Core deposits: (Non-GAAP)
$
2,344,903
$
2,258
0.38
%
$
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
%
1,897,618
1,954
0.41
%
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
%
1,893,070
6,975
1.47
%
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
%
6,135,591
11,187
0.73
%
6,100,223
11,769
0.77
%
5,869,403
11,949
0.82
%
5,817,474
12,960
0.91
%
3,472,025
7,756
0.89
%
2,315,717
-
-
2,276,400
-
-
1,983,092
-
-
1,698,964
-
-
1,110,847
-
-
$
8,451,308
$
11,187
0.53
%
$
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
%
9
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:
$
1,591,613
$
4,373
0.27
%
$
618,446
$
13,041
2.11
%
626,866
11,539
1.84
%
879,885
20,879
2.37
%
4,801,813
335,514
6.99
%
3,838,980
294,726
7.68
%
1,946,697
121,921
6.26
%
675,542
45,149
6.68
%
6,748,510
457,435
6.78
%
4,514,522
339,875
7.53
%
Total interest -earning assets
$
8,966,989
$
473,347
5.28
%
$
6,012,853
$
373,795
6.22
%
Interest bearing liabilities:
$
2,156,300
$
9,029
0.42
%
$
1,120,459
$
6,271
0.56
%
1,858,416
8,380
0.45
%
1,189,205
7,351
0.62
%
1,966,706
30,455
1.55
%
1,092,002
15,468
1.42
%
168,728
4,132
2.45
%
383,483
9,463
2.47
%
6,150,150
51,996
0.85
%
3,785,149
38,553
1.02
%
2,069,786
-
-
1,100,599
-
-
%
-
8,202
-
-
802
-
8,219,936
60,198
0.73
%
4,885,748
39,355
0.81
%
Borrowings
50,874
1,335
2.63
%
299,842
7,423
2.48
%
71,314
1,988
2.79
%
79,787
2,212
2.77
%
36,083
1,394
3.86
%
36,083
2,012
5.58
%
158,271
4,717
2.98
%
415,712
11,647
2.80
%
Total interest -bearing liabilities
$
8,378,207
$
64,915
0.77
%
$
5,301,460
$
51,002
0.96
%
Interest rate spread
$
408,432
4.51
%
$
322,793
5.26
%
Net interest margin
4.55
%
5.37
%
SOP loan cost recoveries (interest recoveries in 2020)
$
6,468
$
2,372
Adjusted excluding cost/interests recoveries (Non-GAAP):
Total interest -earning assets
$
8,966,989
$
466,879
5.21
%
$
6,012,853
$
371,423
6.18
%
Interest rate spread
$
401,964
4.44
%
$
320,421
5.22
%
Net interest margin
4.48
%
5.33
%
Core deposits: (Non-GAAP)
$
2,156,300
$
9,029
0.42
%
$
1,120,459
$
6,271
0.56
%
1,858,416
8,380
0.45
%
1,189,205
7,351
0.62
%
1,966,706
30,455
1.55
%
1,092,002
15,468
1.42
%
5,981,422
47,864
0.80
%
3,401,666
29,090
0.86
%
2,069,786
-
-
%
1,100,599
-
-
%
$
8,051,208
$
47,864
0.59
%
$
4,502,265
$
29,090
0.65
%
10
OFG Bancorp (NYSE: OFG)
Table 6-1: Loan Information and Performance Statistics (1)
2020
2020
2020
2020
2019
(Dollars in thousands) (unaudited)
Q4
Q3
Q2
Q1
Q4
Net Charge-offs
(21)
Non-PCD
Mortgage:
$
225
$
56
$
185
$
418
$
1,075
(79)
(269)
(9)
(249)
(437)
146
(213)
176
169
638
Commercial:
413
298
497
3,771
463
(334)
(253)
(631)
(1,522)
(606)
79
45
(134)
2,249
(143)
Consumer:
6,456
5,114
4,187
6,015
5,289
(1,832)
(663)
(443)
(644)
(196)
4,624
4,451
3,744
5,371
5,093
Auto:
12,071
10,123
13,300
13,053
12,930
(5,928)
(5,950)
(3,405)
(4,211)
(4,123)
6,143
4,173
9,895
8,842
8,807
$
10,992
$
8,456
$
13,681
$
16,631
$
14,395
PCD
Mortgage:
$
1,344
$
1,677
$
2,178
$
5,143
$
-
(63)
(89)
(580)
(122)
-
1,281
1,588
1,598
5,021
-
Commercial:
33,061
(a)
293
386
2,357
-
(234)
(91)
(286)
(375)
-
32,827
202
100
1,982
-
Consumer:
21
60
30
431
-
(200)
1
(30)
(63)
-
(179)
61
-
368
-
Auto:
574
474
600
375
-
(681)
(211)
(229)
(343)
-
(107)
263
371
32
-
$
33,822
(a)
$
2,114
2,069
7,403
-
Total Net Charge -offs
$
44,814
$
10,570
$
15,750
$
24,034
$
14,395
Net Charge-off Rates
(21)
Mortgage
0.25%
0.24%
0.30%
0.86%
0.24%
Commercial
5.45%
(a)
0.04%
-0.01%
0.76%
-0.03%
Consumer
4.09%
3.94%
3.12%
4.63%
5.15%
Auto
1.56%
1.17%
2.72%
2.31%
2.73%
2.67%
(a)
0.62%
0.92%
1.44%
1.28%
Average Loans Held For Investment
(21)
Mortgage
$
2,305,495
$
2,325,756
$
2,366,600
$
2,414,685
$
1,062,845
Commercial
2,416,703
2,484,977
2,484,573
2,239,684
1,753,069
Consumer
434,565
457,620
479,957
496,313
395,611
Auto
1,551,521
1,518,669
1,509,521
1,537,194
1,288,546
$
6,708,284
$
6,787,022
$
6,840,650
$
6,687,875
$
4,500,071
(a) During 4Q 2020, commercial charge-offs reflected $31.2 million from two commercial non-performing PCD loans from the government and hospital sectors, reducing loan balance
and their corresponding allowance for credit losses by that amount.
11
Table 6-2: Loan Information and Performance Statistics (Excludes PCD Loans) (1)
OFG Bancorp (NYSE: OFG)
2020
2020
2020
2020
2019
(Dollars in thousands) (unaudited)
Q4
Q3
Q2
Q1
Q4
Early Delinquency (30 - 89 days past due)
Mortgage
$
22,339
$
16,783
$
15,665
$
20,518
$
22,389
Commercial
8,043
5,151
7,704
6,074
9,895
Consumer
12,230
12,032
18,254
13,127
9,560
Auto
88,357
87,912
89,825
110,959
103,749
$
130,969
$
121,878
$
131,448
$
150,678
(a)
$
145,593
Early Delinquency Rates (30 - 89 days past due)
Mortgage
2.71%
1.98%
1.79%
2.31%
2.49%
Commercial
0.44%
0.29%
0.40%
0.32%
0.53%
Consumer
2.96%
2.77%
3.98%
2.73%
1.93%
Auto
5.76%
5.81%
6.17%
7.46%
7.01%
2.68%
2.50%
2.64%
3.16%
3.07%
Total Delinquency (30 days and over past due)
Mortgage:
$
67,671
$
51,123
$
40,719
$
46,768
$
41,314
56,193
62,651
75,091
75,314
75,181
123,864
113,774
115,810
122,082
116,495
Commercial
30,604
35,596
38,258
33,746
30,111
Consumer
17,147
17,080
22,796
16,808
12,258
Auto
108,842
109,735
100,027
131,715
118,020
$
280,457
$
276,185
$
276,891
$
304,351
(a)
$
276,884
Total Delinquency Rates (30 days and over past due)
Mortgage:
8.22%
6.03%
4.66%
5.27%
4.60%
6.82%
7.39%
8.59%
8.48%
8.37%
15.04%
13.42%
13.25%
13.75%
12.97%
Commercial
1.67%
1.99%
1.99%
1.77%
1.62%
Consumer
4.15%
3.93%
4.97%
3.49%
2.48%
Auto
7.09%
7.26%
6.87%
8.85%
7.98%
5.74%
5.67%
5.56%
6.38%
5.85%
Nonperforming Assets
(14)
Mortgage
$
46,967
$
40,477
$
30,491
$
31,073
$
22,552
Commercial
41,999
44,941
44,187
42,668
42,606
Consumer
4,987
5,206
4,933
3,690
5,287
Auto
20,766
22,583
10,539
21,147
14,295
114,719
113,207
90,150
98,578
(a)
84,740
Foreclosed real estate
11,596
19,456
24,792
27,292
29,909
Other repossessed assets
1,816
1,918
1,360
3,096
3,327
$
128,131
$
134,581
$
116,302
$
128,966
$
117,976
Nonperforming Loan Rates
Mortgage
5.70%
4.78%
3.49%
3.50%
2.51%
Commercial
2.29%
2.52%
2.30%
2.23%
2.29%
Consumer
1.21%
1.20%
1.08%
0.77%
1.07%
Auto
1.35%
1.49%
0.72%
1.42%
0.97%
2.35%
2.33%
1.81%
2.07%
1.79%
(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 and further to 1.4% in 4Q 2020. Most of that relates to about $76 million commercial loans, and most of that represents well-capitalized customers
in the hospitality industry.
12
OFG Bancorp (NYSE: OFG)
Table 6-3: Loan Information and Performance Statistics (1)
2020
2020
2020
2020
2019
(Dollars in thousands) (unaudited)
Q4
Q3
Q2
Q1
Q4
Nonperforming PCD Loans
(14)
Mortgage
$
1,003
$
1,003
$
1,373
$
1,341
$
-
Commercial
36,470
(a)
79,631
81,064
82,411
225
Consumer
1
4
12
10
499
$
37,474
(a)
$
80,638
$
82,449
$
83,762
$
724
Nonperforming PCD Loan Rates
Mortgage
0.07%
0.07%
0.09%
0.09%
0.00%
Commercial
12.88%
(a)
22.59%
21.00%
21.07%
0.06%
Consumer
0.07%
0.17%
0.41%
0.30%
5.39%
2.11%
(a)
4.26%
4.19%
4.19%
0.04%
Total PCD Loans Held for Investment
(21)
Mortgage
$
1,459,932
$
1,504,914
$
1,541,637
$
1,561,557
$
1,591,112
Commercial
283,160
352,555
386,046
391,158
359,601
Consumer
1,394
2,336
2,950
3,350
9,263
$
1,744,486
$
1,859,805
$
1,930,633
$
1,956,065
$
1,959,976
2020
2020
2020
2020
2019
(Dollars in thousands) (unaudited)
Q4
Q3
Q2
Q1
Q4
Total Nonperforming Loans
(14)
Mortgage
$
47,970
$
41,480
$
31,864
$
32,414
$
22,552
Commercial
78,469
(a)
124,572
125,251
125,079
42,831
Consumer
4,988
5,210
4,945
3,700
5,786
Auto
20,766
22,583
10,539
21,147
14,295
$
152,193
(a)
$
193,845
$
172,599
$
182,340
$
85,464
Total Nonperforming Loan Rates
Mortgage
2.10%
1.76%
1.32%
1.32%
0.91%
Commercial
3.27%
(a)
5.13%
4.85%
5.44%
1.93%
Consumer
1.20%
1.19%
1.07%
0.76%
1.15%
Auto
1.33%
1.46%
0.71%
1.38%
0.94%
2.28%
(a)
2.87%
2.48%
2.69%
1.27%
Total Loans Held for Investment
(21)
Mortgage
$
2,283,375
$
2,352,585
$
2,415,923
$
2,449,507
$
2,489,230
Commercial
2,402,010
2,426,795
2,582,529
2,301,350
2,222,085
Consumer
414,946
436,882
461,664
485,060
504,507
Auto
1,561,802
1,543,665
1,492,396
1,530,167
1,522,973
$
6,662,133
$
6,759,927
$
6,952,512
$
6,766,084
$
6,738,795
(a) During 4Q 2020, commercial charge-offs reflected $31.2 million from two commercial non-performing PCD loans from the government and hospital sectors, reducing loan
balance and their corresponding allowance for credit losses by that amount.
13
OFG Bancorp (NYSE: OFG)
Table 7: Allowance for Credit Losses (1)
Quarter Ended December 31, 2020
(Dollars in thousands) (unaudited)
Mortgage
Commercial
Consumer
Auto
Total
Allowance for credit losses Non-PCD:
$
19,622
$
41,195
$
27,125
$
68,467
$
156,409
211
4,663
2,752
7,972
15,598
(225)
(413)
(6,456)
(12,071)
(19,165)
79
334
1,832
5,928
8,173
$
19,687
$
45,779
$
25,253
$
70,296
$
161,015
Allowance for credit losses PCD:
$
30,408
$
47,450
$
108
$
938
$
78,904
(2,739)
1,783
(230)
(102)
(1,288)
(1,344)
(33,061)
(21)
(574)
(35,000)
63
234
200
681
1,178
$
26,388
$
16,406
$
57
$
943
$
43,794
Allowance for credit losses summary:
$
50,030
$
88,645
$
27,233
$
69,405
$
235,313
(2,528)
6,446
2,522
7,870
14,310
(1,569)
(33,474)
(6,477)
(12,645)
(54,165)
142
568
2,032
6,609
9,351
$
46,075
$
62,185
$
25,310
$
71,239
$
204,809
Allowance coverage ratio
2.02%
2.59%
6.10%
4.56%
3.07%
Allowance coverage ratio excluding PPP loans (Non-GAAP)
2.02%
2.93%
6.10%
4.56%
3.21%
14
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
2020
2019
(Dollars in thousands) (unaudited)
Q4
Q3
Q2
Q1
Q4
Stockholders' Equity to Non-GAAP Tangible Common Equity
Total stockholders' equity
$
1,085,975
$
1,064,322
$
1,041,284
$
1,022,594
(a)
$
1,045,478
Less: Intangible assets
(131,965)
(134,719)
(137,475)
(140,243)
(143,034)
(92,000)
(92,000)
(92,000)
(92,000)
(92,000)
10,130
10,130
10,130
10,130
10,130
Tangible common equity
$
872,140
$
847,733
$
821,939
$
800,481
$
820,574
Common shares outstanding at end of period
51,387
51,345
51,342
51,327
51,399
Tangible book value per common share (Non-GAAP)
$
16.97
$
16.51
$
16.01
$
15.60
$
15.96
Total Assets to Tangible Assets
Total assets
$
9,826,011
$
10,018,991
$
9,932,719
$
9,238,571
$
9,297,661
Less: Intangible assets
(131,965)
(134,719)
(137,475)
(140,243)
(143,034)
Tangible assets (Non-GAAP)
$
9,694,046
$
9,884,272
$
9,795,244
$
9,098,328
$
9,154,627
Non-GAAP TCE Ratio
Tangible common equity
$
872,140
$
847,733
$
821,939
$
800,481
$
820,574
Tangible assets
9,694,046
9,884,272
9,795,244
9,098,328
9,154,627
TCE ratio
9.00%
8.58%
8.39%
8.80%
8.96%
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders' equity
$
1,083,423
$
1,062,460
$
1,037,195
$
1,043,481
$
1,062,720
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
$
1,001,553
$
980,590
$
955,325
$
961,611
$
980,850
Less: Average intangible assets
(133,542)
(136,138)
(139,094)
(141,875)
(89,005)
Average tangible common equity
$
868,011
$
844,452
$
816,231
$
819,736
$
891,845
(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.
15
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
2020
2019
(Dollars in thousands) (unaudited)
Q4
Q3
Q2
Q1
Q4
Regulatory Capital Metrics
Common equity Tier 1 capital
$
894,074
$
862,636
$
836,899
$
816,356
$
735,442
Tier 1 capital
1,010,944
979,506
953,769
933,226
852,312
Total risk-based capital
(15)
1,096,764
1,065,744
1,040,987
1,020,748
937,963
Risk-weighted assets
6,837,846
6,875,108
6,957,906
6,983,626
(a)
6,740,846
Regulatory Capital Ratios
Common equity Tier 1 capital ratio
(16)
13.08%
12.55%
12.03%
11.69%
10.91%
Tier 1 risk-based capital ratio
(17)
14.78%
14.25%
13.71%
13.36%
12.64%
Total risk-based capital ratio
(18)
16.04%
15.50%
14.96%
14.62%
13.91%
Leverage ratio
(19)
10.30%
10.00%
10.16%
10.14%
9.24%
Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach
Total stockholders' equity
(1)
$
1,085,975
$
1,064,322
$
1,041,284
$
1,022,594
$
1,045,478
Plus: CECL transition adjustment
(20)
34,646
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
(12,091)
(9,453)
(8,885)
(7,576)
441
1,069
1,185
1,297
1,286
567
1,027,729
1,007,678
984,095
966,316
964,616
Less: Disallowed goodwill
(86,069)
(86,069)
(86,069)
(86,069)
(86,069)
(32,073)
(33,810)
(35,563)
(37,241)
(39,127)
(15,513)
(25,163)
(25,564)
(26,650)
(a)
(95,879)
-
-
-
-
(a)
(8,099)
Common equity Tier 1 capital
894,074
862,636
836,899
816,356
735,442
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
1,010,944
979,506
953,769
933,226
852,312
Plus tier 2 capital: Qualifying allowance for loan and lease losses
85,820
86,238
87,218
87,522
85,651
Total risk-based capital
$
1,096,764
$
1,065,744
$
1,040,987
$
1,020,748
$
937,963
(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.
16
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.
17