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Section 1: 8-K (FORM 8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________________________

 

FORM 8-K

_________________________

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): July 24, 2020

 

OFG Bancorp

 

(Exact Name of Registrant as Specified in its Charter)

 

 

 

 

 

 

Commonwealth of Puerto Rico

 

001-12647

 

66-0538893

 

 

 

 

 

(State or other Jurisdiction of Incorporation)

 

(Commission File No.)

 

(I.R.S. Employer
Identification No.)

 

 

 

Oriental Center, 15th Floor

 

 

254 Muñoz Rivera Avenue

 

 

San Juan, Puerto Rico

 

00918

 

 

 

(Address of Principal Executive Offices)

 

(Zip Code)

 

 

Registrant’s telephone number, including area code: (787) 771-6800

 

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

 

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

 

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

 

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

 

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


 

Item 2.02. Results of Operations and Financial Condition.

 

On July 24, 2020, OFG Bancorp (the “Company”) announced the results for the quarter ended June 30, 2020. A copy of the Company’s press release is attached as an exhibit to this report.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

 

 

 

 

 

 

 

 

 

Exhibit No.

 

Description of Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

99

 

 

Press release by the Company dated July 24, 2020.

 

 

 

 

 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

OFG BANCORP

Date: July 24, 2020

By:

/s/ Maritza Arizmendi

 

 

Maritza Arizmendi

 

 

Executive Vice President and Chief Financial Officer

 

(Back To Top)

Section 2: EX-99 (EXHIBIT 99)

 

 

Exhibit 99

 

OFG Bancorp Reports 2Q20 Results

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

2Q20 Financial Highlights

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

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

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

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

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

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

Conference Call

A conference call to discuss 2Q20 results, outlook and related matters will be held today at 10:00 AM Eastern Time. Phone (888) 562-3356 or (973) 582-2700. Conference ID: 807-1129. The call can also be accessed live on www.ofgbancorp.com Webcast replay will be available shortly thereafter.

CEO Comment

José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board, said:

 


 

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

 


 

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

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

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

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

Income Statement

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

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

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

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

 


 

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

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

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

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

Balance Sheet

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

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

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

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

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

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

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

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

 


 

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

 

 


 

Credit Quality

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

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

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

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

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

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

Capital Position

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

Financial Supplement & Conference Call Presentation

OFG’s Financial Supplement, with full financial tables for the quarter ended June 30, 2020, and the 2Q20 Conference Call Presentation, can be found on the Webcasts, Presentations & Other Files page, on OFG’s Investor Relations website at www.ofgbancorp.com

Non-GAAP Financial Measures

In addition to our financial information presented in accordance with GAAP, management uses certain “non-GAAP financial measures” within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Please refer to Tables 8-1, 8-2 and 8-3 in OFG’s above-mentioned Financial Supplement for a reconciliation of GAAP to non-GAAP measures and calculations.

 


 

 

 

 


 

Forward Looking Statements

The information included in this document contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and involve certain risks and uncertainties that may cause actual results to differ materially from those expressed in the forward-looking statements.

Factors that might cause such a difference include, but are not limited to (i) the rate of growth in the economy and employment levels, as well as general business and economic conditions; (ii) changes in interest rates, as well as the magnitude of such changes; (iii) changes to the financial condition of the government of Puerto Rico; (iv) amendments to the fiscal plan approved by the Financial Oversight and Management Board of Puerto Rico; (v) determinations in the court-supervised debt-restructuring process under Title III of PROMESA for the Puerto Rico government and all of its agencies, including some of its public corporations; (vi) the amount of government, private and philanthropic financial assistance for the reconstruction of Puerto Rico’s critical infrastructure, which suffered catastrophic damages caused by hurricane Maria; (vii) the pace and magnitude of Puerto Rico’s economic recovery; (viii) the potential impact of damages from future hurricanes, earthquakes and other natural disasters in Puerto Rico; (ix) the fiscal and monetary policies of the federal government and its agencies; (x) changes in federal bank regulatory and supervisory policies, including required levels of capital; (xi) the relative strength or weakness of the commercial and consumer credit sectors and the real estate market in Puerto Rico; (xii) the performance of the stock and bond markets; (xiii) competition in the financial services industry; (xiv) possible legislative, tax or regulatory changes; and (xv) the severity, magnitude and duration of the Covid-19 pandemic, including impacts of the pandemic and of responses of federal, state and local governments on our branches, operations and personnel, and on our customers and their businesses.

For a discussion of such factors and certain risks and uncertainties to which OFG is subject, please refer to OFG’s annual report on Form 10-K for the year ended December 31, 2019, as well as its other filings with the U.S. Securities and Exchange Commission. Other than to the extent required by applicable law, including the requirements of applicable securities laws, OFG assumes no obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

About OFG Bancorp

Now in its 56th year in business, OFG Bancorp is a diversified financial holding company that operates under U.S., Puerto Rico and U.S. Virgin Islands banking laws and regulations. Its three principal subsidiaries, Oriental Bank, Oriental Financial Services and Oriental Insurance, provide a wide range of retail and commercial banking, lending and wealth management products, services, and technology, primarily in Puerto Rico and U.S. Virgin Islands. Visit us at Error! Hyperlink reference not valid.www.ofgbancorp.com.

# # #

Contacts

Puerto Rico & USVI: Idalis Montalvo ([email protected]) at (787) 777-2847

US: Gary Fishman ([email protected]) and Steven Anreder ([email protected]) 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 June 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

 

 

 

 

 

 

  Financial Statements (Tables 1-8)

 

16

 

  


  

OFG Bancorp (NYSE: OFG)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 1: Financial and Statistical Summary - Consolidated

 

 

 

2020

 

2020

 

2019

 

2019

 

2019

 

2020

 

2019

(Dollars in thousands, except per share data) (unaudited)

 

 

Q2

 

Q1

 

Q4

 

Q3

 

Q2

 

YTD

 

YTD

Statement of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

$

105,060

 

 $  

105,101

 (e)  

 $  

79,209

 

 $  

80,710

 

 $  

81,085

 

 $  

210,161

 

 $  

162,874

Non-interest income, net (core)

(2)

 

 

23,106

 

 

26,233

(e)

 

19,196

 

 

18,542

 

 

18,074

 

 

49,339

 

 

35,627

Total core revenues

(2)

 

 

128,166

 

 

131,334

 (e)  

 

98,405

 

 

99,252

 

 

99,159

 

 

259,500

 

 

198,501

Non-interest expense

 

 

 

85,481

 

 

87,322

(e)

 

78,913

(e)

 

50,727

 

 

51,452

 

 

172,803

 

 

103,604

Pre-provision net revenues

(22)

 

 

46,731

 

 

49,229

 

 

20,007

 

 

52,161

 

 

52,581

 

 

95,960

 

 

99,874

Total provision for credit losses

(22)

 

 

17,696

 

 

47,131

(c)(d)

 

23,068

(g)

 

43,770

(g)(h)

 

17,705

(h)

 

64,827

 

 

29,954

Net income (loss) before income taxes

 

 

 

29,035

 

 

2,098

 

 

(3,061)

 

 

8,391

 

 

34,876

 

 

31,133

 

 

69,920

Income tax expense (benefit)

 

 

 

7,248

 

 

297

 

 

(2,070)

 

 

1,008

 

 

10,897

 

 

7,545

 

 

22,471

Net income (loss) available to common stockholders

 

 

$

20,159

 

 

173

 

 

(2,619)

 

 

5,755

 

 

22,351

 

 

20,332

 

 

44,193

Common Share Statistics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share - basic

(3)

 

$

0.39

 

 

-

 

 

(0.05)

 

 

0.11

 

 

0.44

 

 

0.40

 

 

0.86

Earnings (loss) per common share - diluted

(4)

 

$

0.39

 

 

-

 

 

(0.05)

 

 

0.11

 

 

0.43

 

 

0.39

 

 

0.86

Average common shares outstanding

 

 

 

51,336

 

 

51,404

 

 

51,360

 

 

51,345

 

 

51,330

 

 

51,370

 

 

51,317

Average common shares outstanding and equivalents

 

 

 

51,470

 

 

51,713

 

 

51,791

 

 

51,772

 

 

51,680

 

 

51,584

 

 

51,652

Cash dividends per common share

 

 

$

0.07

 

$

0.07

 

$

0.07

 

$

0.07

 

$

0.07

 

$

0.14

 

$

0.14

Book value per common share (period end)

 

 

$

18.69

 

$

18.33

(c)

$

18.75

 

$

18.84

 

$

18.76

 

$

18.69

 

$

18.76

Tangible book value per common share (period end)

(5)

 

$

16.01

 

$

15.60

 (c)  

$

15.96

 

$

17.11

 

$

17.03

 

$

16.01

 

$

17.03

Balance Sheet (Average Balances)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

(6)

 

$

6,840,650

 (a)  

$

6,687,875

 

$

4,500,071

 

$

4,539,045

 

$

4,514,030

 

$

6,764,263

 

$

4,509,403

Interest-earning assets

 

 

 

8,845,744

(a)

 

8,556,421

 

 

5,886,379

 

 

5,981,756

 

 

6,034,338

 

 

8,701,083

 

 

6,092,944

Total assets

 

 

 

9,512,129

 (a)  

 

9,326,627

 

 

6,325,334

 

 

6,433,658

 

 

6,496,423

 

 

9,419,378

 

 

6,550,575

Core deposits

 

 

 

7,852,495

 

 

7,516,438

 

 

4,582,872

 

 

4,563,187

 

 

4,467,729

 

 

7,684,466

 

 

4,430,331

Total deposits

 

 

 

8,088,106

 

 

7,752,446

 

 

4,850,979

 

 

4,921,317

 

 

4,880,112

 

 

7,920,275

 

 

4,885,344

Borrowings

 

 

 

157,669

 

 

271,800

 

 

304,365

 

 

340,194

 

 

459,802

 

 

214,735

 

 

510,694

Stockholders' equity

 

 

 

1,037,195

 

 

1,043,481

 (c)  

 

1,062,720

 

 

1,061,541

 

 

1,037,057

 

 

1,040,338

 

 

1,027,356

Common stockholders' equity

 

 

 

955,325

 

 

961,611

(c)

 

980,850

 

 

979,671

 

 

955,187

 

 

958,468

 

 

945,486

Performance Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin

(7)

 

 

4.78%

 

 

4.94%

 

 

5.34%

 

 

5.35%

 

 

5.39%

 

 

4.84%

 

 

5.39%

Return on average assets

(8)

 

 

0.92%

 

 

0.08%

 

 

-0.06%

 

 

0.46%

 

 

1.48%

 

 

0.50%

 

 

1.45%

Return on average tangible common stockholders' equity

(9)

 

 

9.88%

 

 

0.08%

 

 

-1.17%

 

 

2.58%

 

 

10.32%

 

 

4.97%

 

 

10.32%

Efficiency ratio

(10)

 

 

66.70%

 

 

66.49%

 

 

80.19%

 

 

51.11%

 

 

51.89%

 

 

66.59%

 

 

52.19%

Full-time equivalent employees, period end

 

 

 

2,373

 

 

2,449

 

 

2,455

 

 

1,436

 

 

1,417

 

 

2,373

 

 

1,417

Credit Quality Metrics

(1)(21)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan and lease losses

 

 

$

232,701

 

$

230,755

(c)(d)

$

116,539

 

$

154,343

 

$

162,642

 

$

232,701

 

$

162,642

Allowance as a % of loans held for investment

 

 

 

3.35%

 (a)  

 

3.41%

 

 

1.73%

 

 

3.41%

 

 

3.52%

 

 

3.35%

 (a)  

 

3.52%

Net charge-offs

 

 

$

15,750

 

$

24,034

 

$

14,395

 

$

34,486

(f)(g)

$

12,982

 

$

39,784

 

$

25,050

Net charge-off rate

(11)

 

 

0.92%

 

 

1.44%

 

 

1.28%

 

 

3.04%

 (f)(g)  

 

1.15%

 

 

1.18%

 

 

1.11%

Early delinquency rate (30 - 89 days past due)

 

 

 

2.64%

 

 

3.16%

 

 

3.07%

 

 

3.63%

 

 

3.50%

 

 

2.64%

 

 

3.50%

Total delinquency rate (30 days and over)

 

 

 

5.56%

 

 

6.38%

 

 

5.85%

 

 

5.40%

 

 

6.07%

 

 

5.56%

 

 

6.07%

Capital Ratios (Non-GAAP)

(12)(20)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leverage ratio

 

 

 

10.16%

 

 

10.14%

 (b)(c)  

 

9.24%

 

 

15.41%

 

 

15.20%

 

 

10.16%

 

 

15.20%

Common equity Tier 1 capital ratio

 

 

 

12.03%

(a)

 

11.69%

(b)(c)

 

10.91%

 

 

17.98%

 

 

17.48%

 

 

12.03%

 

 

17.48%

Tier 1 risk-based capital ratio

 

 

 

13.71%

 (a)  

 

13.36%

 (b)(c)  

 

12.64%

 

 

20.43%

 

 

19.87%

 

 

13.71%

 

 

19.87%

Total risk-based capital ratio

 

 

 

14.96%

(a)

 

14.62%

(b)(c)

 

13.91%

 

 

21.71%

 

 

21.14%

 

 

14.96%

 

 

21.14%

Tangible common equity ("TCE") ratio

 

 

 

8.39%

 

 

8.80%

 

 

8.96%

 

 

14.07%

 

 

13.71%

 

 

8.39%

 

 

13.71%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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, the Company participated in this program originating 4,342 PPP loans. At June 30, 2020, Oriental had PPP loans amounting to $278.1 million. 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) 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. As a result of these developments, we increased our provision for credit losses in 1Q 2020 and 2Q 2020 by $34.1 million and $5.0 million, respectively.

(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. 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 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.

(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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

  


  

  


  

OFG Bancorp (NYSE: OFG)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 2: Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Six-Months Ended

 

 

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

June 30,

 

June 30,

 

(Dollars in thousands, except per share data) (unaudited)

 

 

2020

 

2020

 

2019

 

2019

 

2019

 

2020

 

2019

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Non-PCD loans

 

 

$

83,832

 

 $  

87,482

 

$

74,142

 

$

74,910

 

 $  

73,648

 

$

171,314

 

 $  

145,673

 

    PCD loans

 

 

 

34,700

(a)

 

28,953

 

 

10,762

 

 

10,862

 

 

11,432

 

 

63,653

(a)

 

23,526

 

           Total interest income from loans

 

 

 

118,532

 

 

116,435

 

 

84,904

 

 

85,772

 

 

85,080

 

 

234,967

 

 

169,199

 

Investment securities

 

 

 

3,160

 

 

7,262

 

 

6,271

 

 

7,883

 

 

9,175

 

 

10,422

 

 

19,766

 

           Total interest income

 

 

 

121,692

 

 

123,697

(d)

 

91,175

 

 

93,655

 

 

94,255

 

 

245,389

 

 

188,965

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Core deposits

 

 

 

13,999

 

 

15,034

 

 

7,957

 

 

8,256

 

 

7,465

 

 

29,033

 

 

13,679

 

    Brokered deposits

 

 

 

1,446

 

 

1,586

 

 

1,804

 

 

2,298

 

 

2,526

 

 

3,032

 

 

5,362

 

          Total deposits

 

 

 

15,445

 

 

16,620

(d)

 

9,761

 

 

10,554

 

 

9,991

 

 

32,065

(d)

 

19,041

 

Borrowings

 

 

 

1,187

 

 

1,976

 

 

2,205

 

 

2,391

 

 

3,179

 

 

3,163

 

 

7,050

 

          Total interest expense

 

 

 

16,632

 

 

18,596

 

 

11,966

 

 

12,945

 

 

13,170

 

 

35,228

 

 

26,091

 

Net interest income

 

 

 

105,060

 

 

105,101

 

 

79,209

 

 

80,710

 

 

81,085

 

 

210,161

 

 

162,874

 

Provision for credit losses, excluding PCD loans

(1)

 

 

15,227

 

 

40,951

 

 

18,859

 

 

23,427

 

 

8,616

 

 

56,178

 

 

20,248

 

Provision for credit losses on PCD loans

 (1)  

 

 

2,469

 

 

6,180

 

 

4,209

 

 

20,343

 

 

9,089

 

 

8,649

 

 

9,706

 

          Total provision for credit losses

 

 

 

17,696

 

 

47,131

(c)(d)

 

23,068

 

 

43,770

(f)(g)(h)

 

17,705

(h)

 

64,827

(c)(d)

 

29,954

 

           Net interest income after provision for loan and lease losses

 

 

 

87,364

 

 

57,970

 

 

56,141

 

 

36,940

 

 

63,380

 

 

145,334

 

 

132,920

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking service revenues

 

 

 

13,668

 

 

15,713

 

 

10,812

 

 

10,813

 

 

10,776

 

 

29,381

 

 

21,241

 

Wealth management revenues

 

 

 

6,366

 

 

7,286

 

 

7,062

 

 

6,611

 

 

6,669

 

 

13,652

 

 

12,551

 

Mortgage banking activities

 

 

 

3,072

 

 

3,234

 

 

1,322

 

 

1,118

 

 

629

 

 

6,306

 

 

1,835

 

          Total banking and financial service revenues

 

 

 

23,106

(c)

 

26,233

(d)

 

19,196

 

 

18,542

 

 

18,074

 

 

49,339

(d)

 

35,627

 

Bargain purchase from Scotiabank PR & USVI acquisition

 

 

 

3,462

 (b)  

 

409

 

 

315

 

 

-

 

 

-

 

 

3,871

 (b)  

 

-

 

Other income, net

 

 

 

584

 

 

4,808

 (e)  

 

200

 

 

3,636

 (e)  

 

4,874

(e)

 

5,392

 (e)  

 

4,977

 (e)  

          Total non-interest income, net

 

 

 

27,152

 

 

31,450

 

 

19,711

 

 

22,178

 

 

22,948

 

 

58,602

 

 

40,604

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

 

 

34,506

 

 

35,544

 

 

21,817

 

 

20,500

 

 

19,875

 

 

70,050

 

 

40,216

 

Occupancy, equipment and infrastructure costs

 

 

 

11,837

 

 

11,439

 

 

7,488

 

 

7,307

 

 

7,511

 

 

23,276

 

 

15,257

 

Merger and restructuring charges

 

 

 

3,006

(d)

 

304

 

 

21,499

(d)

 

1,556

 

 

1,000

 

 

3,310

 

 

-

 

Net (gain) loss on sale of foreclosed real estate and other repossessed assets

 

 

 

316

 

 

(193)

 

 

541

 

 

794

 

 

21

 

 

123

 

 

1,091

 

General and administrative expenses

 

 

 

33,214

 

 

37,513

 

 

25,450

 

 

18,475

 

 

20,482

 

 

70,727

 

 

42,181

 

Credit related expenses

 

 

 

2,602

 

 

2,715

 

 

2,118

 

 

2,095

 

 

2,563

 

 

5,317

 

 

4,859

 

          Total non-interest expense

 

 

 

85,481

 

 

87,322

(d)

 

78,913

 

 

50,727

 

 

51,452

 

 

172,803

(d)

 

103,604

 

Income (loss) before income taxes

 

 

 

29,035

 

 

2,098

 

 

(3,061)

 

 

8,391

 

 

34,876

 

 

31,133

 

 

69,920

 

Income tax expense (benefit)

 

 

 

7,248

 

 

297

 

 

(2,070)

 

 

1,008

 

 

10,897

 

 

7,545

 

 

22,471

 

Net income (loss)

 

 

 

21,787

 

 

1,801

 (c)  

 

(991)

 (d)  

 

7,383

 

 

23,979

 

 

23,588

 (c)  

 

47,449

 

Less:  dividends on preferred stock

 

 

 

(1,628)

 

 

(1,628)

 

 

(1,628)

 

 

(1,628)

 

 

(1,628)

 

 

(3,256)

 

 

(3,256)

 

Net income (loss) available to common shareholders

 

 

$

20,159

 

$

173

 

$

(2,619)

 

$

5,755

 

$

22,351

 

$

20,332

 

$

44,193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) During 2Q 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.

 

(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.

 

(c) 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. As a result of these developments, we increased our provision for credit losses in the 1Q 2020 and 2Q 2020 by $34.1 million and $5.0 million, respectively.

 

(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 and $3.0 million during 2Q 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 contemplated 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

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

June 30,

(Dollars in thousands) (unaudited)

 

 

2020

 

2020

 

2019

 

2019

 

2019

Cash and cash equivalents

 

 

$

1,900,037

(b)

$

1,325,941

 

$

852,757

 

$

962,887

 

$

677,430

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading securities

 

 

 

22

 

 

29

 

 

37

 

 

41

 

 

412

Investment securities available-for-sale, at fair value, with amortized cost of $529,985 and allowance for credit losses of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     (March 31, 2020 - $648,565 and an allowance for credit losses of $0; December 31, 2019 - $1,074,474;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      September 30, 2019 - $520,960; June 30, 2019 - $860,911)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Mortgage-backed securities

 

 

 

340,192

 

 

355,637

 

 

673,886

 

 

505,102

 

 

843,333

    US treasury notes

 

 

 

197,340

 

 

298,986

 

 

397,183

 

 

10,938

 

 

10,907

    Other investment securities

 

 

 

2,707

 

 

2,837

 

 

3,100

 

 

3,055

 

 

3,193

          Total investment securities available-for-sale

 

 

 

540,239

 

 

657,460

 (e)  

 

1,074,169

 (d)  

 

519,095

 (e)  

 

857,433

Federal Home Loan Bank (FHLB) stock, at cost

 

 

 

8,366

 

 

10,301

 

 

13,048

 

 

10,525

 

 

12,821

Other investments

 

 

 

1,076

 

 

973

 

 

560

 

 

57

 

 

3

          Total investments

 

 

 

549,703

 

 

668,763

 

 

1,087,814

 

 

529,718

 

 

870,669

Loans, net

 

 

 

6,739,243

(b)

 

6,541,174

(c)

 

6,641,847

(d)

 

4,407,190

(f)

 

4,474,497

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

 

40,119

 

 

44,633

 

 

52,648

 

 

14,244

 

 

11,903

Deferred tax asset, net

 

 

 

186,730

 

 

196,129

 (c)  

 

176,740

 

 

112,602

 

 

111,147

Foreclosed real estate and repossessed properties

 

 

 

26,152

 

 

30,388

 

 

33,236

 

 

30,488

 

 

32,016

Premises and equipment, net

 

 

 

82,234

 

 

81,834

 

 

81,105

 

 

69,754

 

 

71,001

Goodwill

 

 

 

86,069

 

 

86,069

 

 

86,069

 

 

86,069

 

 

86,069

Right of use assets

 

 

 

34,692

 

 

36,844

 

 

39,112

 

 

19,318

 

 

20,419

Core deposit, customer relationship intangible and other intangibles

 

 

 

51,406

 

 

54,174

 

 

56,965

 

 

2,491

 

 

2,783

Servicing asset

 

 

 

47,926

 

 

49,287

 

 

50,779

 

 

10,125

 

 

10,134

Accounts receivable and other assets

 

 

 

188,408

(a)

 

123,335

 

 

138,589

 

 

88,619

 

 

96,059

Total assets

 

 

 $  

9,932,719

 

 $  

9,238,571

 

 $  

9,297,661

 (b)  

 $  

6,333,505

 

 $  

6,464,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

 

$

4,370,419

(b)

$

3,711,492

 

$

3,579,115

 

$

2,228,256

 

$

2,219,911

Savings accounts

 

 

 

1,978,118

 

 

1,829,054

 

 

1,815,044

 

 

1,206,569

 

 

1,200,408

Time deposits

 

 

 

1,975,223

 

 

2,023,211

 

 

2,060,953

 

 

1,154,871

 

 

1,136,411

Brokered deposits

 

 

 

218,166

 

 

255,514

 

 

243,498

 

 

288,362

 

 

388,407

          Total deposits

 

 

 

8,541,926

 

 

7,819,271

 

 

7,698,610

(d)

 

4,878,058

 

 

4,945,137

Borrowings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities sold under agreements to repurchase

 

 

 

-

 

 

50,103

 

 

190,274

 

 

190,261

 

 

240,324

Advances from FHLB and other borrowings

 

 

 

68,340

 

 

77,601

 

 

79,204

 

 

79,603

 

 

80,423

Subordinated capital notes

 

 

 

36,083

 

 

36,083

 

 

36,083

 

 

36,083

 

 

36,083

          Total borrowings

 

 

 

104,423

 

 

163,787

 

 

305,561

 

 

305,947

 

 

356,830

Other liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

 

2,078

 

 

2,059

 

 

913

 

 

1,159