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

 

 

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): April 29, 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 April 29, 2020, OFG Bancorp (the “Company”) announced the results for the quarter ended March 31, 2020. A copy of the Company’s press release is attached as an exhibit to this report.

 

Item 9.01. Financial Statements and Exhibits.  

 

     (d) Exhibits   

 

 

 

 

 

 

 

 

 

Exhibit No.

 

Description of Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

99

 

 

Press release by the Company dated April 29, 2020.

 

 

 

 

  

 


 

SIGNATURES  

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

 

 

 

 

 

 

OFG BANCORP

 

Date: April 29, 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 1Q20 Results

SAN JUAN, Puerto Rico, April 29, 2020 – OFG Bancorp (NYSE: OFG) today reported results for the first quarter ended March 31, 2020.

1Q20 Highlights

·      Strong increase in core net revenues due to the December 31, 2019 acquisition of the Puerto Rico and U.S. Virgin Islands operations of The Bank of Nova Scotia (Scotiabank), and a major reserve build reflecting CECL as well as anticipated changes in Puerto Rico and USVI macroeconomic scenarios due to the effect of the coronavirus pandemic.

·      Core net revenues of $131.3 million, CECL “Day 1” allowance of $89.9 million, provision for credit losses of $48.5 million, $4.7 million gain on sale of investment securities, and $0.00 earnings per share. This compares in the year-ago quarter to net core revenues of $99.3 million, provision of $12.2 million, no gain, and $0.42 earnings per share fully diluted.

·      All March 31, 2020 regulatory capital ratios increased from December 31, 2019 and continue to be significantly above requirements for a well-capitalized institution. CET1 capital ratio of 11.67%. More than $1.6 billion available liquidity from cash and unencumbered securities.

·      Our core operations performed well in what became a challenging and unique operating environment. Net interest margin was 4.94%, loan production totaled $280 million, and there was a large reduction in wholesale funding due to the significant increase in client deposits from the acquisition.

·      Following the implementation of local stay-at-home restrictions mid-March, Oriental has achieved uninterrupted and excellent levels of service through all channels while maintaining employee and customer safety and social distancing.

·      Years of investments in first to market customer-facing technology, some with unique features, is resulting in noticeable increases by retail and business customers who want to get things done fácil, rápido, hecho.

Conference Call

A conference call to discuss 1Q20 results, outlook and related matters will be held today at 10:00 AM Eastern Time. Phone (888) 562-3356 or (973) 582-2700. Conference ID: 555-0929. The call can also be accessed live on www.ofgbancorp.com Webcast replay will be available shortly thereafter.

 

 


 

CEO Comment

José Rafael Fernández, President, Chief Executive Officer, and Vice Chairman of the Board, said: “The rapid spread around the world of Covid-19 is affecting everybody, personally and financially. Our heart goes out to those who have lost loved ones, are ill, or are suffering monetarily.

“Our priority going into the pandemic was to keep our employees safe while maintaining our nimble and proactive approach to business. OFG entered this crisis in a position of strength, and we remain well capitalized and highly liquid with a CET1 ratio of 11.67% and $1.6 billion in liquidity. Coming out of it, our goal is to maintain our strong capital and liquidity positions so we can continue to help customers now and throughout the inevitable recovery.

“Our first quarter performance confirms the strength of our business, balance sheet and franchise during this critical time. This is the direct result of the proactive and customer focused culture we have developed through the years, our ongoing technology investments, and the effective strategies we have put to work.

“We believe we are in a strong position going forward. In addition to closing the Scotiabank acquisition last year, we significantly reduced higher-cost non-core funding and sold a large portion of non-performing loans. During the first quarter, we increased our allowance for loan losses by $114 million, to a total of $231 million, equal to 3.41% of loans.

“In March, for our employees, we implemented a comprehensive program combining workplace safety, technology and special benefits. More than 90% are working on site or remote. For our retail and business customers, we launched payment relief programs, waived late charges and ATM and overdraft fees, and increased amounts that can be withdrawn or transferred electronically. As a result, we have achieved uninterrupted and superior levels of service through all channels while maintaining employee and customer safety and social distancing.

“The investments we made early on in our digital capabilities are helping customers continue to do banking. Our teams worked quickly to design and deploy a new digital forbearance tool as well as one for the SBA’s Payroll Protection Program. More than 43% of retail customers who requested forbearance have done so digitally, and 100% of small businesses applied for PPP loans digitally. Technology is a core part of our strategy, and we will continue to look for new and innovative ways to help our customers.

“All of this has facilitated close communication with our customers, enabling us to provide the financial advice and resources they need to navigate this challenging time. For example, in the first round of PPP, we helped 900 small businesses with more than 25,000 employees access more than $140 million in loans.

“Our deepest appreciation goes to the front line first responders and healthcare professionals dealing with the coronavirus. We also want to thank our teams at OFG and Oriental on the other front line for doing an outstanding job helping consumers and businesses manage the financial challenges during this crisis.

“For more than half a century, we have been there to help customers manage their finances, own homes, buy cars, build businesses, protect themselves with insurance, and save for retirement. We’re ready to help them now and will be for the decades ahead.”

 

 


 

Current Expected Credit Losses (CECL)

On January 1, 2020, the Company implemented the new accounting rules for the measurement of Credit Losses on Financial Instruments (CECL). OFG believes CECL makes the allowance for credit losses more comparable between originated and acquired financial assets. The January 1, 2020 or “Day 1” impact was as follows:

·         For non-purchased credit deteriorated (non-PCD) loans, which represents 70% of the total loan portfolio, a $39.4 million allowance was recorded. This resulted in a charge against retained earnings of $25.5 million net of tax.

·         For purchased credit deteriorated (PCD) loans, which includes Eurobank, BBVA and Scotiabank acquired loans and represents 30% of the total loan portfolio, a $50.5 million adjustment was made through the allowance and loan balances with no impact in capital.

Income Statement

Unless otherwise noted, the following compares data for the first quarter 2020 to the first quarter 2019. Balances are quarterly averages.

·      Net interest income was $105.2 million, up 29%. This reflected increased earning assets as a result of the Scotiabank acquisition, partially offset by Net Interest Margin of 4.94%. NIM declined 45 basis points mainly due to a higher proportion of 30-year, fixed rate residential mortgages from the Scotiabank acquisition. The NIM decline also reflected the full effect of FRB’s second half 2019 rate cuts (75 basis points) and the partial effect of the March 2020 rate cuts (150 basis points) on cash and variable rate commercial loans.

·      Total interest income was $123.8 million, up 31%, due to increased interest earning assets partially offset by lower yield. Interest earning assets totaled $8.6 billion, up 39%. Yield was 5.82%, down 43 basis points.

·      Total interest expense was $18.6 million, up 44%, due to increased balances of lower-cost deposits partially offset by decreased balances of higher-cost borrowings. Cost of deposits was $16.6 million, up 84%, primarily reflecting a 59% increase in balances from the Scotiabank acquisition and a 2 basis point increase in cost, before the deposit intangible amortization from the acquisition. Cost of borrowings was $2.0 million, down 49%, due to a 52% decrease in balances and a 13 basis point increase in cost.

·      Provision for credit losses was $48.5 million, up $36.3 million. This included a $34.1 million provision to incorporate changes in the macro-economic scenario and qualitative adjustments as a result of the Covid-19 pandemic.

·      Total banking and financial service revenues were $26.2 million, up 49%, primarily due to the Scotiabank acquisition. Banking service revenues were higher due to the Company’s larger customer base. Mortgage banking revenues reflected increased servicing fees. Wealth management grew with the addition of Scotiabank’s insurance business.

·      Other income, net was $4.8 million, most of which was due to the previously mentioned gain on sale of $316.0 million in mortgage backed securities.

·      Total non-interest expense was $85.9 million, an increase of $33.8 million, primarily due to the Scotiabank acquisition.

 


 

·      The effective tax rate was 14.2% compared to 33.0%. 1Q20 reflected a 26% 2020 estimated tax rate partially reduced by quarter specific items. The 26% rate is based on a higher proportion of exempt income and income taxed at preferential rates.

Balance Sheet

Unless otherwise noted, the following compares data at March 31, 2020 to March 31, 2019. Balances are end-of-period. Because the purchase of Scotiabank closed on December 31, 2019, balances as of and subsequent to that date included those from the acquisition.

·      Loans held for investment were $6.8 billion, up $2.2 billion, primarily due to the Scotiabank acquisition. Compared to December 31, 2019, loans increased $27.3 million.

·      Loan production was $280.1 million, up $3.7 million. Mortgage generation increased while consumer, auto and commercial declined. Production was strong in January and February, benefitting from the increased customer base and added capabilities from the Scotiabank acquisition, but was significantly lower in March. The US Loan Program added $47.1 million, an increase of $15.4 million.

·      Cash and cash equivalents were $1.3 billion, up $816.9 million. Compared to December 31, 2019, they increased $473.2 million from the MBS sale, regular MBS payments, and the maturity of Treasuries.

·      Total investments were $668.8 million, down $583.9 million. Compared to December 31, 2019, they declined $419.1 million.

·      Customer deposits, excluding brokered, were $7.6 billion, up $3.1 billion, primarily reflecting the Scotiabank acquisition. Compared to December 31, 2019, customer deposits increased $108.6 million as both retail and commercial clients retained higher balances.

·      Brokered deposits were $255.5 million, down $195.7 million. Compared to December 31, 2019, they increased $12.0 million. Borrowings were $163.8 million, down $385.3 million. Compared to December 31, 2019, they were down $141.8 million. The overall declines in brokered deposits and borrowings are part of the strategy to replace higher cost funding with lower cost core deposits.

·      Total stockholder’s equity was $1.02 billion, up $1.4 million. Compared to December 31, 2019, it was $22.8 million lower due to the decline in retained earnings mainly as a result of the CECL “Day 1” impact partially offset by an increase in accumulated other comprehensive income from improved mark to market on securities.

·      Book value per common share was $18.33, up $0.03 from a year-ago and down $0.42 from December 31, 2019. Tangible book value per share was $15.60, down $0.97 year-over year primarily due to the Scotiabank acquisition, and down $0.37 from December 31, 2019.

Credit Quality

Unless otherwise noted, the following compares data at March 31, 2020 to March 31, 2019.

·      The allowance for loan and lease losses totaled $230.8 million and 3.41% of loans held for investment, for increases of $136.7 million and 90 basis points, respectively. Compared to December 31, 2019, the allowance increased $147.3 million and as a percentage of loans 126 basis points. The increases primarily reflected the impact of CECL “Day 1” and changes to macroeconomic scenarios due to the Covid-19 pandemic.

 


 

·      Net charge offs were $24.0 million, an 87% increase. The NCO rate was 1.44%, up 8 basis points. NCOs reflected a 77% increase in average loans held for investment as a result of the Scotiabank acquisition.

·      The early delinquency loan rate was 3.16%, down 44 basis points, and the total delinquency rate was 6.38%, up 4 basis points.

·      Total non-performing loans excluding PCD loans were $98.6 million, down $29.1 million, primarily due to NPLs sold in 2019. The corresponding non-performing loan rate was 2.07%, down 131 basis points.

Capital Position

·      March 31, 2020 regulatory capital ratios increased from December 31, 2019 and continue to be significantly above requirements for a well-capitalized institution.

·      Leverage ratio was 10.14%, up 90 bps; common equity Tier 1 capital ratio was 11.67%, up 76 bps; Tier 1 risk-based capital ratio was 13.34%, up 70 bps; and total risk-based capital ratio was 14.60%, up 69 bps.

Financial Supplement & Conference Call Presentation

OFG’s Financial Supplement, with full financial tables for the quarter ended March 31, 2020, and the 1Q20 Conference Call Presentation, can be found on the Webcasts, Presentations & Other Files page, on OFG’s Investor Relations website at www.ofgbancorp.com

Non-GAAP Financial Measures

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

Forward Looking Statements

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

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

 


 

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

About OFG Bancorp

Now in its 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 March 31, 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

 

 

Table  5:

 

Average Balances, Net Interest Income and Net Interest Margin

 

6

 

 

Table  6:

 

Loan Information and Performance Statistics

 

7-9

 

 

Table  7:

 

Allowance for Credit Losses

 

10

 

 

Table  8:

 

Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory

 

 

 

 

 

 

   Capital

 

11-12

 

 

Table  9:

 

Notes to Financial Summary, Selected Metrics, Loans, and Consolidated

 

 

 

 

 

 

  Financial Statements (Tables 1-8)

 

13

 

 


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OFG Bancorp (NYSE: OFG)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 1: Financial and Statistical Summary - Consolidated

 

 

 

2020

 

2019

 

2019

 

2019

 

2019

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

 

 

Q1

 

Q4

 

Q3

 

Q2

 

Q1

Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

$

105,168

(c)

$

79,209

 

$

80,711

 

$

81,085

 

$

81,789

Non-interest income, net (core)

(2)

 

 

26,166

 (c)  

 

19,196

 

 

18,542

 

 

18,074

 

 

17,553

Non-interest expense

 

 

 

85,923

(c)

 

78,913

 

 

50,728

 

 

51,452

 

 

52,152

Pre-provision net revenues

(22)

 

 

50,628

 

 

20,007

 

 

52,161

 

 

52,581

 

 

47,293

Provision for credit losses, excluding PCD/PCI loans

 

 

 

42,350

(a)(b)

 

18,859

(e)

 

23,427

(d)(e)(f)

 

8,616

(f)

 

11,631

Provision for credit losses on PCD/PCI loans

 

 

 

6,180

 (a)(b)  

 

4,209

 (e)  

 

20,343

 (d)(e)(f)  

 

9,089

 (f)  

 

618

Net income (loss) before income taxes

 

 

 

2,098

 

 

(3,061)

 

 

8,391

 

 

34,876

 

 

35,044

Income tax expense (benefit)

 

 

 

297

 

 

(2,070)

 

 

1,008

 

 

10,897

 

 

11,574

Net income (loss)

 

 

$

1,801

 

$

(991)

(c)

$

7,383

 

$

23,979

 

$

23,470

Common Share Statistics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share - basic

(3)

 

$

-

 

$

(0.05)

(c)

$

0.11

 

$

0.44

 

$

0.43

Earnings (loss) per common share - diluted

(4)

 

$

-

 

$

(0.05)

 (c)  

$

0.11

 

$

0.43

 

$

0.42

Average common shares outstanding

 

 

 

51,404

 

 

51,360

 

 

51,345

 

 

51,330

 

 

51,305

Average common shares outstanding and equivalents

 

 

 

51,713

 

 

51,791

 

 

51,772

 

 

51,680

 

 

51,626

Cash dividends per common share

 

 

$

0.07

 

$

0.07

 

$

0.07

 

$

0.07

 

$

0.07

Book value per common share (period end)

 

 

$

18.33

 (a)  

$

18.75

 

$

18.84

 

$

18.76

 

$

18.30

Tangible book value per common share (period end)

(5)

 

$

15.60

(a)

$

15.96

 

$

17.11

 

$

17.03

 

$

16.56

Balance Sheet (Average Balances)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

(6)

 

$

6,687,987

 

$

4,500,075

 

$

4,539,045

 

$

4,514,030

 

$

4,504,725

Interest-earning assets

 

 

 

8,556,533

 

 

5,886,383

 

 

5,981,756

 

 

6,034,338

 

 

6,152,202

Total assets

 

 

 

9,326,602

 

 

6,325,334

 

 

6,433,658

 

 

6,496,423

 

 

6,605,328

Total deposits

 

 

 

7,752,446

 

 

4,850,979

 

 

4,921,317

 

 

4,880,112

 

 

4,890,628

Interest-bearing deposits

 

 

 

6,053,482

 

 

3,740,133

 

 

3,827,270

 

 

3,782,209

 

 

3,791,081

Borrowings

 

 

 

271,800

 

 

304,365

 

 

340,194

 

 

459,802

 

 

562,152

Stockholders' equity

 

 

 

1,043,481

(a)

 

1,062,720

 

 

1,061,541

 

 

1,037,057

 

 

1,017,546

Common stockholders' equity

 

 

 

961,611

 (a)  

 

980,850

 

 

979,671

 

 

955,187

 

 

935,676

Performance Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin

(7)

 

 

4.94%

 

 

5.34%

 

 

5.35%

 

 

5.39%

 

 

5.39%

Return on average assets

(8)

 

 

0.08%

 

 

-0.06%

 

 

0.46%

 

 

1.48%

 

 

1.42%

Return on average tangible common stockholders' equity

(9)

 

 

0.08%

 

 

-1.17%

 

 

2.58%

 

 

10.32%

 

 

10.32%

Efficiency ratio

(10)

 

 

65.42%

 

 

80.19%

 

 

51.11%

 

 

51.89%

 

 

52.50%

Full-time equivalent employees, period end

 

 

 

2,460

 

 

2,455

 

 

1,436

 

 

1,417

 

 

1,394

Credit Quality Metrics

(1)(21)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Allowance for loan and lease losses

 

 

$

230,755

 (a)(b)  

$

116,539

 

$

154,343

 

$

162,642

 

 $  

162,488

    Allowance as a % of loans held for investment

 

 

 

3.41%

 

 

1.73%

 

 

3.41%

 

 

3.52%

 

 

3.57%

    Net charge-offs

 

 

$

24,034

 

$

14,395

 

$

34,486

 (d)(e)(f)  

$

12,982

 

$

12,878

    Net charge-off rate

(11)

 

 

1.44%

 

 

1.48%

 

 

3.56%

(d)(e)(f)

 

1.36%

 

 

1.36%

    Early delinquency rate (30 - 89 days past due)

 

 

 

3.16%

 

 

3.07%

 

 

3.63%

 

 

3.50%

 

 

3.60%

    Total delinquency rate (30 days and over)

 

 

 

6.38%

 

 

5.85%

 

 

5.40%

 

 

6.07%

 

 

6.34%

Capital Ratios (Non-GAAP)

(12)(20)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leverage ratio

 

 

 

10.14%

(g)

 

9.24%

 

 

15.41%

 

 

15.20%

 

 

14.64%

Common equity Tier 1 capital ratio

 

 

 

11.67%

 (g)  

 

10.91%

 

 

17.98%

 

 

17.48%

 

 

17.09%

Tier 1 risk-based capital ratio

 

 

 

13.34%

(g)

 

12.64%

 

 

20.43%

 

 

19.87%

 

 

19.49%

Total risk-based capital ratio

 

 

 

14.60%

 (g)  

 

13.91%

 

 

21.71%

 

 

21.14%

 

 

20.77%

Tangible common equity ("TCE") ratio

 

 

 

8.80%

(g)

 

8.96%

 

 

14.07%

 

 

13.71%

 

 

13.05%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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. 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.

(b) 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 have increased our provision for credit losses in the 1Q 2020 by $34.1 million.

(c) 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.

(d) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.

(e) 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.

(f) 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.

(g) 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 


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OFG Bancorp (NYSE: OFG)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 2: Consolidated Statements of Operations

 

 

 

Quarter Ended

 

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

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

 

 

2020

 

2019

 

2019

 

2019

 

2019

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Non-PCD/Non-PCI loans

 

 

$

87,204

 

 $  

74,142

 

$

74,910

 

$

73,649

 

 $  

72,025

    PCD/PCI loans

 

 

 

29,298

 

 

10,762

 

 

10,863

 

 

11,432

 

 

12,094

           Total interest income from loans

 

 

 

116,502

 

 

84,904

 

 

85,773

 

 

85,081

 

 

84,119

Investment securities

 

 

 

7,262

 

 

6,271

 

 

7,883

 

 

9,175

 

 

10,591

           Total interest income

 

 

 

123,764

(b)

 

91,175

 

 

93,656

 

 

94,256

 

 

94,710

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Core deposits

 

 

 

15,034

 

 

7,957

 

 

8,256

 

 

7,466

 

 

6,214

    Brokered deposits

 

 

 

1,586

 

 

1,804

 

 

2,298

 

 

2,526

 

 

2,835

          Total deposits

 

 

 

16,620

(b)

 

9,761

 

 

10,554

 

 

9,992

 

 

9,049

Borrowings

 

 

 

1,976

 

 

2,205

 

 

2,391

 

 

3,179

 

 

3,872

          Total interest expense

 

 

 

18,596

 

 

11,966

 

 

12,945

 

 

13,171

 

 

12,921

Net interest income

 

 

 

105,168

 

 

79,209

 

 

80,711

 

 

81,085

 

 

81,789

Provision for credit losses, excluding PCD/PCI loans

(1)

 

 

42,350

 

 

18,859

 

 

23,427

(d)(e)(f)

 

8,616

 

 

11,631

Provision for credit losses on PCD/PCI loans

 (1)  

 

 

6,180

 

 

4,209

 

 

20,343

 (d)(e)(f)  

 

9,089

 

 

618

          Total provision for credit losses

 

 

 

48,530

(a)(b)

 

23,068

 

 

43,770

 

 

17,705

 

 

12,249

           Net interest income after provision for loan and lease losses

 

 

 

56,638

 

 

56,141

 

 

36,941

 

 

63,380

 

 

69,540

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking service revenues

 

 

 

15,646

 

 

10,812

 

 

10,813

 

 

10,776

 

 

10,465

Wealth management revenues

 

 

 

7,286

 

 

7,062

 

 

6,611

 

 

6,669

 

 

5,882

Mortgage banking activities

 

 

 

3,234

 

 

1,322

 

 

1,118

 

 

629

 

 

1,206

          Total banking and financial service revenues

 

 

 

26,166

(b)

 

19,196

 

 

18,542

 

 

18,074

 

 

17,553

Bargain purchase from Scotiabank PR & USVI acquisition

 

 

 

409

 

 

315

 

 

-

 

 

-

 

 

-

Other income, net

 

 

 

4,808

 (c)  

 

200

 

 

3,636

 (c)  

 

4,874

(c)

 

103

          Total non-interest income, net

 

 

 

31,383

 

 

19,711

 

 

22,178

 

 

22,948

 

 

17,656

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

 

 

35,544

 

 

21,817

 

 

20,500

 

 

19,875

 

 

20,341

Occupancy, equipment and infrastructure costs

 

 

 

11,439

 

 

7,488

 

 

7,307

 

 

7,511

 

 

7,746

Merger and restructuring charges

 

 

 

304

 

 

21,499

(b)

 

1,556

 

 

1,000

 

 

-

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

 

 

 

(193)

 

 

541

 

 

794

 

 

21

 

 

1,070

General and administrative expenses

 

 

 

36,114

 

 

25,450

 

 

18,476

 

 

20,482

 

 

20,699

           Total operating expenses

 

 

 

83,208

 

 

76,795

 

 

48,633

 

 

48,889

 

 

49,856

Credit related expenses

 

 

 

2,715

 

 

2,118

 

 

2,095

 

 

2,563

 

 

2,296

           Total non-interest expense

 

 

 

85,923

 (b)  

 

78,913

 

 

50,728

 

 

51,452

 

 

52,152

Income (loss) before income taxes

 

 

 

2,098

 

 

(3,061)

 

 

8,391

 

 

34,876

 

 

35,044

Income tax expense (benefit)

 

 

 

297

 

 

(2,070)

 

 

1,008

 

 

10,897

 

 

11,574

Net income (loss)

 

 

 

1,801

(a)

 

(991)

(b)

 

7,383

 

 

23,979

 

 

23,470

Less:  dividends on preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Other preferred stock

 

 

 

(1,628)

 

 

(1,628)

 

 

(1,628)

 

 

(1,628)

 

 

(1,628)

Net income (loss) available to common shareholders

 

 

$

173

 

$

(2,619)

 

$

5,755

 

$

22,351

 

$

21,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) During March 2020, a global pandemic was declared by the 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 have increased our provision for credit losses in the 1Q 2020 by $34.1 million.

(b) 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.

(c) 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.

(d) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.

(e) 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.

(f) 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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OFG Bancorp (NYSE: OFG)

 

 

 

 

 

 

 

 

 

 

 

 

Table 3: Consolidated Statements of Financial Condition

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

(Dollars in thousands) (unaudited)

 

 

2020

 

2019

 

2019

 

2019

 

2019

Cash and cash equivalents

 

 

$

1,325,941

 

$

852,757

 

$

962,887

 

$

677,430

 

$

509,023

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trading securities

 

 

 

29

 

 

37

 

 

41

 

 

412

 

 

381

Investment securities available-for-sale, at fair value, with amortized cost of $648,565 and allowance for credit losses of $0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     (December 31, 2019 - $1,074,474; September 30, 2019 - $520,960; June 30, 2019 - $860,911;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     March 31, 2019 - $1,248,750)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Mortgage-backed securities

 

 

 

355,637

 

 

673,886

 

 

505,102

 

 

843,333

 

 

1,225,225

    US treasury notes

 

 

 

298,986

 

 

397,183

 

 

10,938

 

 

10,907

 

 

10,859

    Other investment securities

 

 

 

2,837

 

 

3,100

 

 

3,055

 

 

3,193

 

 

3,385

          Total investment securities available-for-sale

 

 

 

657,460

 (c)  

 

1,074,169

 (b)  

 

519,095

 (c)  

 

857,433

 (c)  

 

1,239,469

Federal Home Loan Bank (FHLB) stock, at cost

 

 

 

10,301

 

 

13,048

 

 

10,525

 

 

12,821

 

 

12,800

Other investments

 

 

 

973

 

 

560

 

 

57

 

 

3

 

 

3

          Total investments

 

 

 

668,763

 

 

1,087,814

 

 

529,718

 

 

870,669

 

 

1,252,653

Loans, net

 

 

 

6,541,174

(a)

 

6,641,847

(b)

 

4,407,190

(d)

 

4,474,497

 

 

4,401,401

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

 

44,633

 

 

52,648

 

 

14,244

 

 

11,903

 

 

7,830

Deferred tax asset, net

 

 

 

196,129

 (a)  

 

176,740

 

 

112,602

 

 

111,147

 

 

112,744

Foreclosed real estate and repossessed properties

 

 

 

30,388

 

 

33,236

 

 

30,488

 

 

32,016

 

 

34,439

Premises and equipment, net

 

 

 

81,834

 

 

81,105

 

 

69,754

 

 

71,001

 

 

69,017

Goodwill

 

 

 

86,069

 

 

86,069

 

 

86,069

 

 

86,069

 

 

86,069

Right of use assets

 

 

 

36,844

 

 

39,112

 

 

19,318

 

 

20,419

 

 

20,860

Core deposit, customer relationship intangible and other intangibles

 

 

 

54,174

 

 

56,965

 

 

2,491

 

 

2,783

 

 

3,076

Servicing asset

 

 

 

49,287

 

 

50,779

 

 

10,125

 

 

10,134

 

 

10,623

Accounts receivable and other assets

 

 

 

120,997

 

 

138,589

 

 

88,619

 

 

96,059

 

 

95,456

Total assets

 

 

 $  

9,236,233

 

 $  

9,297,661

 (b)

 $  

6,333,505

 

 $  

6,464,127

 

 $  

6,603,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

 

$

3,711,492

 

$

3,579,115

 

$

2,228,256

 

$

2,219,911

 

$

2,218,186

Savings accounts

 

 

 

1,829,054

 

 

1,815,044

 

 

1,206,569

 

 

1,200,408

 

 

1,231,170

Time deposits

 

 

 

2,023,211

 

 

2,060,953

 

 

1,154,871

 

 

1,136,411

 

 

996,519

Brokered deposits

 

 

 

255,514

 

 

243,498

 

 

288,362

 

 

388,407

 (c)  

 

451,226

          Total deposits

 

 

 

7,819,271

 

 

7,698,610

(b)

 

4,878,058

 

 

4,945,137

 

 

4,897,101

Borrowings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities sold under agreements to repurchase

 

 

 

50,103

 

 

190,274

 

 

190,261

 

 

240,324

(c)

 

431,566

Advances from FHLB and other borrowings

 

 

 

77,601

 

 

79,204

 

 

79,603

 

 

80,423

 

 

81,397

Subordinated capital notes

 

 

 

36,083

 

 

36,083

 

 

36,083

 

 

36,083

 

 

36,083

          Total borrowings

 

 

 

163,787

 

 

305,561

 

 

305,947

 

 

356,830

 

 

549,046

Other liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

 

 

2,059

 

 

913

 

 

1,159

 

 

985

 

 

439

Acceptances outstanding

 

 

 

11,763

 

 

21,599

 

 

21,796

 

 

23,610

 

 

25,791

Lease liability

 

 

 

37,702

 

 

39,840

 

 

21,081

 

 

22,179

 

 

22,618

Accrued expenses and other liabilities

 

 

 

179,057

 

 

185,660

 

 

56,388

 

 

70,512

 

 

87,004

          Total liabilities

 

 

 

8,213,639

 

 

8,252,183

 

 

5,284,429

 

 

5,419,253

 

 

5,581,999

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

92,000

 

 

92,000

 

 

92,000

 

 

92,000

 

 

92,000

Common stock

 

 

 

59,885

 

 

59,885

 

 

59,885

 

 

59,885

 

 

59,885

Additional paid-in capital

 

 

 

621,206

 

 

621,515

 

 

620,948

 

 

620,368

 

 

619,828

Legal surplus

 

 

 

95,945

 

 

95,779

 

 

95,783

 

 

95,020

 

 

92,621

Retained earnings 

 

 

 

250,557

 (a)  

 

279,646

 

 

285,854

 

 

284,458

 

 

268,101

Treasury stock, at cost

 

 

 

(103,289)

 

 

(102,339)

 

 

(102,936)

 

 

(103,171)

 

 

(103,196)

Accumulated other comprehensive (loss) income, net

 

 

 

6,290

 

 

(1,008)

 

 

(2,458)

 

 

(3,686)

 

 

(8,047)

          Total stockholders' equity

 

 

 

1,022,594

(a)

 

1,045,478

 

 

1,049,076

 

 

1,044,874

 

 

1,021,192

          Total liabilities and stockholders' equity

 

 

 $

9,236,233

 

 $  

9,297,661

 

 $  

6,333,505

 

 $  

6,464,127

 

 $  

6,603,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) On January 1, 2020, the Company implemented ASU No. 2016-13: 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.

(b) On December 31, 2019,  the Company acquired Scotiabank's Puerto Rico and USVI operations, increasing investments by $576.2 million, loans by $2.2 billion and deposits by $3.0 billion.

(c) 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. During 3Q 2019, the Company sold $322 million available-for-sale mortgage-backed securities and recognized a gain in the sale of $3.4 million. During 2Q 2019, the Company sold $350 million available-for-sale mortgage-backed securities and recognized a gain in the sale of $4.8 million, resulting  in the termination before maturity of $191.2 million of securities sold under agreements to repurchase and in a reduction of $62.8 million of brokered CDs.

(d) During 3Q 2019, the Company decided to sell mostly non-performing loans. Originated loans that were transferred to held-for-sale amounted to $25.3 million at September 30, 2019 and were sold in 4Q 2019.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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OFG Bancorp (NYSE: OFG)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 4: Information on Loan Portfolio and Production

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

2019

 

2019

 

2019

 

2019

(Dollars in thousands) (unaudited)

 

 

March 31,

 

December 31,

 

September 30,

 

June 30,

 

March 31,

Non-PCD/Non-PCI:

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Mortgage

 

 

$

887,950

 

$

898,118

 

$

588,535

 

$

634,774

 

$

649,972

      Commercial

 

 

 

1,910,192

 

 

1,862,484

 

 

1,575,491

 

 

1,618,809

 

 

1,571,480

      Consumer

 

 

 

481,710

 

 

495,244

 

 

383,819

 

 

388,582

 

 

373,311

      Auto

 

 

 

1,487,701

 

 

1,479,612

 

 

1,277,114

 

 

1,219,066

 

 

1,179,999

 

 

 

 

4,767,553

 

 

4,735,458

 

 

3,824,959

 

 

3,861,231

 

 

3,774,762

      Less:  Allowance for credit losses

 

 

 

(149,961)

 

 

(85,044)

 

 

(80,579)

 

 

(91,637)

 

 

(96,003)

          Total non- PCD/non-PCI loans held for investment, net

 

 

 

4,617,592

 

 

4,650,414

 

 

3,744,380

 

 

3,769,594

 

 

3,678,759

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PCD/PCI:

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Mortgage

 

 

 

1,561,557

 

 

1,591,112

 

 

494,278

 

 

538,001

 

 

547,227

      Commercial

 

 

 

391,158

 

 

359,601

 

 

202,065

 

 

215,902

 

 

223,496

      Consumer

 

 

 

3,350

 

 

9,263

 

 

802

 

 

867

 

 

856

      Auto

 

 

 

42,466

 

 

43,361

 

 

3,883