EX-99 2 ofg8kexhibit991q2020.htm 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 56^th year in business, OFG Bancorp is a diversified financial holding company that operates under U.S., Puerto Rico and U.S. Virgin Islands banking laws and regulations. Its three principal subsidiaries, Oriental Bank, Oriental Financial Services and Oriental Insurance, provide a wide range of retail and commercial banking, lending and wealth management products, services, and technology, primarily in Puerto Rico and U.S. Virgin Islands. Visit us at Error! Hyperlink reference not valid.www.ofgbancorp.com.

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Contacts

Puerto Rico & USVI: Idalis Montalvo (idalis.montalvo@orientalbank.com) at (787) 777-2847

US: Gary Fishman (gfishman@ofgbancorp.com) and Steven Anreder (sanreder@ofgbancorp.com) at (212) 532-3232

OFG Bancorp

Financial Supplement

The information contained in this Financial 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.
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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.
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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			6,462			9,866
				1,998,531			2,003,337			701,028			761,232			781,445
Less:  Allowance for credit losses	(1)			(80,794)			(31,495)			(73,764)			(71,005)			(66,485)
Total PCD/PCI loans held for investment, net				1,917,737			1,971,842			627,264			690,227			714,960
Total loans held for investment				6,535,329			6,622,256			4,371,644			4,459,821			4,393,719
Mortgage loans held for sale				5,845			19,591			23,504			13,293			7,682
Other loans held for sale				-			-			12,042			1,383			-
Total loans, net			$	6,541,174		$	6,641,847		$	4,407,190		$	4,474,497		$	4,401,401
Loan Portfolio Summary:
Loans held for investment:
Mortgage			$	2,449,507		$	2,489,230		$	1,082,813		$	1,172,775		$	1,197,199
Commercial				2,301,350			2,222,085			1,777,556			1,834,711			1,794,976
Consumer				485,060			504,507			384,621			389,449			374,167
Auto				1,530,167			1,522,973			1,280,997			1,225,528			1,189,865
				6,766,084			6,738,795			4,525,987			4,622,463			4,556,207
Less:  Allowance for credit losses				(230,755)			(116,539)			(154,343)			(162,642)			(162,488)
Total loans held for investment, net				6,535,329			6,622,256			4,371,644			4,459,821			4,393,719
Mortgage loans held for sale				5,845			19,591			23,504			13,293			7,682
Other loans held for sale				-			-			12,042			1,383			-
Total loans, net			$	6,541,174		$	6,641,847		$	4,407,190		$	4,474,497		$	4,401,401
			2020			2019			2019			2019			2019
(Dollars in thousands) (unaudited)			March 31,			December 31,			September 30,			June 30,			March 31,
Quarterly loan production	(13)
Mortgage			$	30,776		$	23,680		$	23,805		$	22,196		$	23,097
Commercial				54,113			216,610			65,635			64,079			60,485
US Loan Program				47,125			12,482			12,225			56,372			31,706
Consumer				39,199			41,947			48,257			47,662			40,877
Auto				108,878			110,184			141,507			136,263			120,199
Total			$	280,091		$	404,903		$	291,429		$	326,572		$	276,364
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OFG Bancorp (NYSE: OFG)
Table 5: Average Balances, Net Interest Income and Net Interest Margin
			2020 Q1									2019 Q4									2019 Q3									2019 Q2									2019 Q1
						Interest									Interest									Interest									Interest									Interest
			Average			Income/			Yield/			Average			Income/			Yield/			Average			Income/			Yield/			Average			Income/			Yield/			Average			Income/			Yield/
(Dollars in thousands) (unaudited)			Balance			Expense			Rate			Balance			Expense			Rate			Balance			Expense			Rate			Balance			Expense			Rate			Balance			Expense			Rate
Interest earning assets:
Cash equivalents			$	943,581		$	2,788		1.19	%		$	863,497		$	3,684		1.69	%		$	734,105		$	4,086		2.21	%		$	481,115		$	2,904		2.42	%		$	388,578		$	2,368		2.47	%
Investment securities				924,965			4,474		1.91	%			522,811			2,587		1.98	%			708,606			3,797		2.14	%			1,039,193			6,271		2.41	%			1,258,899			8,223		2.61	%
Loans	(1)
Non-PCD/Non-PCI loans				4,654,313			87,204		7.54	%			3,884,143			74,142		7.57	%			3,873,743			74,910		7.67	%			3,810,005			73,649		7.75	%			3,782,180			72,025		7.72	%
PCD/PCI loans				2,033,674			29,298		5.79	%			615,932			10,762		6.99	%			665,302			10,863		6.53	%			704,025			11,432		6.50	%			722,545			12,094		6.70	%
Total loans				6,687,987			116,502		7.01	%			4,500,075			84,904		7.49	%			4,539,045			85,773		7.50	%			4,514,030			85,081		7.56	%			4,504,725			84,119		7.57	%
Total interest-earning assets			$	8,556,533		$	123,764		5.82	%		$	5,886,383		$	91,175		6.15	%		$	5,981,756		$	93,656		6.21	%		$	6,034,338		$	94,256		6.27	%		$	6,152,202		$	94,710		6.24	%
Interest bearing liabilities:
Deposits
NOW accounts			$	1,980,505		$	2,389		0.49	%		$	1,119,371		$	1,471		0.52	%		$	1,118,214		$	1,616		0.57	%		$	1,124,668		$	1,730		0.62	%		$	1,119,610		$	1,454		0.53	%
Savings accounts				1,797,658			2,440		0.55	%			1,195,689			1,843		0.61	%			1,199,678			2,012		0.67	%			1,180,153			1,882		0.64	%			1,181,024			1,615		0.55	%
Time deposits				2,039,311			8,131		1.60	%			1,156,965			4,442		1.52	%			1,151,248			4,427		1.53	%			1,065,005			3,652		1.38	%			992,331			2,944		1.20	%
Brokered deposits				236,008			1,586		2.70	%			268,108			1,804		2.67	%			358,130			2,298		2.55	%			412,383			2,526		2.46	%			498,116			2,835		2.31	%
				6,053,482			14,546		0.97	%			3,740,133			9,560		1.01	%			3,827,270			10,353		1.07	%			3,782,209			9,790		1.04	%			3,791,081			8,848		0.95	%
Non-interest bearing deposit accounts				1,698,964			-		-				1,110,847			-		-				1,094,047			-		-				1,097,903			-		-				1,099,547			-		-	%
Fair value premium amortization and core deposit intangible amortization				-			2,074		-				-			201		-				-			201		-				-			201		-				-			201		-
Total deposits				7,752,446			16,620		0.86	%			4,850,980			9,761		0.80	%			4,921,317			10,554		0.85	%			4,880,112			9,991		0.82	%			4,890,628			9,049		0.75	%
Borrowings
Securities sold under agreements to repurchase				158,462			1,002		2.54	%			190,000			1,189		2.48	%			224,783			1,342		2.37	%			343,370			2,107		2.46	%			444,843			2,785		2.54	%
Advances from FHLB and other borrowings				77,255			539		2.81	%			78,282			541		2.74	%			79,328			550		2.75	%			80,349			559		2.79	%			81,226			563		2.81	%
Subordinated capital notes				36,083			435		4.85	%			36,083			475		5.22	%			36,083			499		5.49	%			36,083			514		5.71	%			36,083			524		5.89	%
Total borrowings				271,800			1,976		2.92	%			304,365			2,205		2.87	%			340,194			2,391		2.79	%			459,802			3,180		2.77	%			562,152			3,872		2.79	%
Total interest-bearing liabilities			$	8,024,246		$	18,596		0.93	%		$	5,155,345		$	11,966		0.92	%		$	5,261,511		$	12,945		0.98	%		$	5,339,914		$	13,171		0.99	%		$	5,452,780		$	12,921		0.96	%
Interest rate spread						$	105,168		4.89	%					$	79,209		5.23	%					$	80,711		5.23	%					$	81,085		5.28	%					$	81,789		5.28	%
Net interest margin									4.94	%								5.34	%								5.35	%								5.39	%								5.39	%
PCI loan cost recoveries															$	1,033								$	371								$	430								$	537
Adjusted excluding cost recoveries (Non-GAAP):
Total interest-earning assets			$	8,556,533		$	123,764		5.82	%		$	5,886,383		$	90,142		6.08	%		$	5,981,756		$	93,285		6.19	%		$	6,034,338		$	93,826		6.24	%		$	6,152,202		$	94,173		6.21	%
Interest rate spread						$	105,168		4.89	%					$	78,176		5.16	%					$	80,340		5.21	%					$	80,655		5.25	%					$	81,252		5.25	%
Net interest margin									4.94	%								5.27	%								5.33	%								5.36	%								5.36	%
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OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (1)
			2020			2019			2019			2019			2019
(Dollars in thousands) (unaudited)			Q1			Q4			Q3			Q2			Q1
Net Charge-offs	(21)
Non-PCD/Non-PCI
Mortgage:
Charge-offs			$	418		$	1,075	(b)	$	16,299		$	604		$	587
Recoveries				(249)			(437)			(493)			(316)			(287)
Total mortgage				169			638			15,806			288			300
Commercial:
Charge-offs				3,771			463	(b)		8,421			2,226			1,086
Recoveries				(1,522)			(606)			(176)			(179)			(150)
Total commercial				2,249			(143)			8,245			2,047			936
Consumer:
Charge-offs				6,015			5,289			5,317			5,272			4,561
Recoveries				(644)			(196)	(a)		(1,463)			(405)			(303)
Total consumer				5,371			5,093			3,854			4,867			4,258
Auto:
Charge-offs				13,053			12,930			12,383			10,728			11,456
Recoveries				(4,211)			(4,123)	(a)		(5,802)			(4,948)			(4,072)
Total auto				8,842			8,807			6,581			5,780			7,384
Total			$	16,631		$	14,395		$	34,486		$	12,982		$	12,878
PCD
Mortgage:
Charge-offs			$	5,143		$	-		$	-		$	-		$	-
Recoveries				(122)			-			-			-			-
Total mortgage				5,021			-			-			-			-
Commercial:
Charge-offs				2,357			-			-			-			-
Recoveries				(375)			-			-			-			-
Total commercial				1,982			-			-			-			-
Consumer:
Charge-offs				431			-			-			-			-
Recoveries				(63)			-			-			-			-
Total consumer				368			-			-			-			-
Auto:
Charge-offs				375			-			-			-			-
Recoveries				(343)			-			-			-			-
Total auto				32			-			-			-			-
Total			$	7,403		$	-		$	-		$	-		$	-
Total Net Charge-offs			$	24,034		$	14,395		$	34,486		$	12,982		$	12,878
Net Charge-off Rates	(21)
Mortgage				0.84%			0.43%			10.14%			0.18%			0.18%
Commercial				0.77%			-0.04%			2.06%			0.52%			0.24%
Consumer				4.60%			5.16%			3.93%			5.05%			4.45%
Auto				2.31%			2.74%			2.09%			1.93%			2.54%
Total				1.44%			1.48%	(b)		3.56%			1.36%			1.36%
Average Loans Held For Investment	(21)
Mortgage			$	2,459,920		$	593,480		$	623,772		$	640,141		$	649,408
Commercial				2,192,683			1,609,338			1,598,860			1,585,404			1,585,352
Consumer				498,827			394,499			391,898			385,356			382,397
Auto				1,536,557			1,287,465			1,259,214			1,199,105			1,165,023
Total			$	6,687,987		$	3,884,782		$	3,873,744		$	3,810,006		$	3,782,180
(a) During 3Q 2019, the Company received $2.4 million proceeds from the sale of fully charged-off originated auto and consumer loans.
(b) During 3Q 2019, the Company decided to sell several non-performing originated loans, which were sold during 4Q 2019, increasing charge-offs by $15.9 million, $4.4 million in commercial loans and $11.5 million in residential mortgages.
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OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (Excludes PCD/PCI Loans) (1)
			2020			2019			2019			2019			2019
(Dollars in thousands) (unaudited)			Q1			Q4			Q3			Q2			Q1
Early Delinquency (30 - 89 days past due)
Mortgage			$	20,518		$	22,389		$	21,631		$	24,303		$	26,775
Commercial				6,074			9,895			4,467			2,823			12,892
Consumer				13,127			9,560			9,360			9,223			8,494
Auto				110,959			103,749			103,452			98,847			87,860
Total			$	150,678		$	145,593		$	138,910		$	135,196		$	136,021
Early Delinquency Rates (30 - 89 days past due)
Mortgage				2.31%			2.49%			3.68%			3.83%			4.12%
Commercial				0.32%			0.53%			0.28%			0.17%			0.82%
Consumer				2.73%			1.93%			2.44%			2.37%			2.28%
Auto				7.46%			7.01%			8.10%			8.11%			7.45%
Total				3.16%			3.07%			3.63%			3.50%			3.60%
Total Delinquency (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation			$	46,768		$	41,314		$	40,194	(b)	$	70,364		$	78,560
GNMA's buy-back option program				75,314			75,181			11,403	(b)		11,675			12,942
Total mortgage				122,082			116,495			51,597			82,039			91,502
Commercial				33,746			30,111			25,271	(b)		29,673			36,736
Consumer				16,808			12,258			11,927	(b)		11,710			10,998
Auto				131,715			118,020			117,716	(b)		110,926			100,123
Total			$	304,351		$	276,884		$	206,511		$	234,348		$	239,359
Total Delinquency Rates (30 days and over past due)
Mortgage:
Traditional, Non traditional, and Loans under Loss Mitigation				5.27%			4.60%			6.83%			11.08%			12.09%
GNMA's buy-back option program				8.48%			8.37%			1.94%			1.84%			1.99%
Total mortgage				13.75%			12.97%			8.77%			12.92%			14.08%
Commercial				1.77%			1.62%			1.60%			1.83%			2.34%
Consumer				3.49%			2.48%			3.11%			3.01%			2.95%
Auto				8.85%			7.98%			9.22%			9.10%			8.49%
Total				6.38%			5.85%			5.40%			6.07%			6.34%
Nonperforming Assets	(14)
Mortgage			$	31,073		$	22,552		$	21,138		$	53,534		$	59,665
Commercial				42,668			42,606			36,409	(b)		45,443			51,308
Consumer				3,690			5,287			4,213			2,495			4,397
Auto				21,147			14,295			15,063			12,082			12,263
Total nonperforming loans				98,578	(a)		84,740			76,823			113,554			127,633
Foreclosed real estate				27,292			29,909			26,952			29,509			30,865
Other repossessed assets				3,096			3,327			3,537			2,507			3,574
Total nonperforming assets			$	128,966		$	117,976		$	107,312		$	145,570		$	162,072
Nonperforming Loan Rates
Mortgage				3.50%			2.51%			3.59%			8.43%			9.18%
Commercial				2.23%			2.29%			2.31%			2.81%			3.26%
Consumer				0.77%			1.07%			1.10%			0.64%			1.18%
Auto				1.42%			0.97%			1.18%			0.99%			1.04%
Total loans				2.07%			1.79%			2.01%			2.94%			3.38%
(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 29 days past due at March 12, 2020 and requested to be included in these programs.
(b) During 3Q 2019, the Company identified non-performing originated loans sold during 4Q 2019, $29 million in mortgage loans and $9 million in commercial loans. These loans were reclassified as held-for-sale at their fair value.
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OFG Bancorp (NYSE: OFG)
Table 6: Loan Information and Performance Statistics (1)
			2020			2019			2019			2019			2019
(Dollars in thousands) (unaudited)			Q1			Q4			Q3			Q2			Q1
Nonperforming PCD/PCI Loans	(14)
Mortgage			$	1,341		$	-		$	-		$	-		$	-
Commercial				82,411			225			242			239			264
Consumer				10			499			560			628			592
Total nonperforming loans			$	83,762		$	724		$	802		$	867		$	856
Nonperforming PCD/PCI Loan Rates
Mortgage				0.09%			0.00%			0.00%			0.00%			0.00%
Commercial				21.07%			0.06%			0.12%			0.11%			0.12%
Consumer				0.30%			5.39%			69.83%			72.43%			69.16%
Total loans				4.19%			0.04%			0.11%			0.11%			0.11%
Total PCD/PCI Loans Held for Investment	(21)
Mortgage			$	1,561,557		$	1,591,112	(a)	$	494,278		$	538,001		$	547,227
Commercial				391,158			359,601			202,065	(b)		215,902			223,496
Consumer				3,350			9,263			802			867			856
Total nonperforming loans			$	1,956,065		$	1,959,976		$	697,145		$	754,770		$	771,579
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OFG Bancorp (NYSE: OFG)
Table 7: Allowance for Credit Losses (1)
			Quarter Ended March 31, 2020
(Dollars in thousands) (unaudited)			Mortgage			Commercial			Consumer			Auto			Total
Allowance for credit losses Non-PCD:
Balance at beginning of period			$	8,727		$	25,993		$	18,446		$	31,878		$	85,044
Impact of ASC 326 adoption				10,980			3,562			8,418			16,238			39,198
Provision for credit losses				156			21,890			6,270			14,034			42,350
Charge-offs				(418)			(3,771)			(6,015)			(13,053)			(23,257)
Recoveries				249			1,522			644			4,211			6,626
Balance at end of period			$	19,694		$	49,196		$	27,763		$	53,308		$	149,961
Allowance for credit losses PCD:
Balance at beginning of period			$	21,655		$	8,893		$	-		$	947		$	31,495
Impact of ASC 326 adoption				7,830			42,143			181			368			50,522
Provision for credit losses				6,139			(218)			364			(105)			6,180
Charge-offs				(5,143)			(2,357)			(431)			(375)			(8,306)
Recoveries				122			375			63			343			903
Balance at end of period			$	30,603		$	48,836		$	177		$	1,178		$	80,794
Allowance for credit losses summary:
Balance at beginning of period			$	30,382		$	34,886		$	18,446		$	32,825		$	116,539
Impact of ASC 326 adoption				18,810			45,705			8,599			16,606			89,720
Provision for credit losses				6,295			21,672			6,634			13,929			48,530
Charge-offs				(5,561)			(6,128)			(6,446)			(13,428)			(31,563)
Recoveries				371			1,897			707			4,554			7,529
Balance at end of period			$	50,297		$	98,032		$	27,940		$	54,486		$	230,755
Allowance coverage ratio				2.05%			4.26%			5.76%			3.56%			3.41%
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OFG Bancorp (NYSE: OFG)
Table 8: 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			2019			2019			2019			2019
(Dollars in thousands) (unaudited)			Q1			Q4			Q3			Q2			Q1
Stockholders' Equity to Non-GAAP Tangible Common Equity
Total stockholders' equity			$	1,022,594	(a)	$	1,045,478		$	1,049,076		$	1,044,874		$	1,021,192
Less:  Intangible assets				(140,243)			(143,034)			(88,560)			(88,852)			(89,145)
Noncumulative perpetual preferred stock				(92,000)			(92,000)			(92,000)			(92,000)			(92,000)
Noncumulative perpetual preferred stock issuance costs				10,130			10,130			10,130			10,130			10,130
Tangible common equity			$	800,481		$	820,574		$	878,646		$	874,152		$	850,177
Common stock outstanding at end of period				51,327			51,399			51,347			51,330			51,328
Tangible book value (Non-GAAP)			$	15.60		$	15.96		$	17.11		$	17.03		$	16.56
Total Assets to Tangible Assets
Total assets			$	9,236,233		$	9,297,661		$	6,333,505		$	6,464,127		$	6,603,191
Less:  Intangible assets				(140,243)			(143,034)			(88,560)			(88,852)			(89,145)
Tangible assets (Non-GAAP)			$	9,095,990		$	9,154,627		$	6,244,945		$	6,375,275		$	6,514,046
Non-GAAP TCE Ratio
Tangible common equity			$	800,481		$	820,574		$	878,646		$	874,152		$	850,177
Tangible assets				9,095,990			9,154,627			6,244,945			6,375,275			6,514,046
TCE ratio				8.80%			8.96%			14.07%			13.71%			13.05%
Average Equity to Non-GAAP Average Tangible Common Equity
Average total stockholders' equity			$	1,043,481	(a)	$	1,062,720		$	1,061,541		$	1,037,057		$	1,017,546
Less:  Average noncumulative perpetual preferred stock				(92,000)			(92,000)			(92,000)			(92,000)			(92,000)
Average noncumulative perpetual preferred stock issuance costs				10,130			10,130			10,130			10,130			10,130
Average total common stockholders' equity			$	961,611		$	980,850		$	979,671		$	955,187		$	935,676
Less:  Average intangible assets				(141,875)			(89,005)			(88,701)			(88,995)			(89,291)
Average tangible common equity			$	819,736		$	891,845		$	890,970		$	866,192		$	846,385
(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.
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OFG Bancorp (NYSE: OFG)
Table 8: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital Measures (Continued)
			BASEL III
			Standardized
			2020			2019			2019			2019			2019
(Dollars in thousands) (unaudited)			Q1			Q4			Q3			Q2			Q1
Regulatory Capital Metrics
Common equity Tier 1 capital			$	816,356		$	735,442		$	858,092		$	855,667		$	832,923
Tier 1 capital				933,226			852,312			974,962			972,537			949,793
Total risk-based capital	(15)			1,020,871			937,963			1,035,910			1,035,109			1,012,112
Risk-weighted assets				6,993,806	(a)		6,740,846			4,771,165			4,895,441			4,872,807
Regulatory Capital Ratios
Common equity Tier 1 capital ratio	(16)			11.67%			10.91%			17.98%			17.48%			17.09%
Tier 1 risk-based capital ratio	(17)			13.34%			12.64%			20.43%			19.87%			19.49%
Total risk-based capital ratio	(18)			14.60%			13.91%			21.71%			21.14%			20.77%
Leverage ratio	(19)			10.14%			9.24%			15.41%			15.20%			14.64%
Common Equity Tier 1 Capital Ratio Under Basel III Standardized Approach
Total stockholders' equity	(1)		$	1,022,594		$	1,045,478		$	1,049,076		$	1,044,874		$	1,021,192
CECL transition adjustment	(20)			31,882			-			-			-			-
Less:  Noncumulative perpetual preferred stock				(92,000)			(92,000)			(92,000)			(92,000)			(92,000)
Noncumulative perpetual preferred stock issuance costs				10,130			10,130			10,130			10,130			10,130
Unrealized gains on available-for-sale securities, net of income tax				(7,576)			441			1,742			3,087			7,841
Unrealized losses on cash flow hedges, net of income tax				1,286			567			716			599			206
				966,316			964,616			969,664			966,690			947,369
Less:    Disallowed goodwill				(86,069)			(86,069)			(86,069)			(86,069)			(86,069)
Disallowed other intangible assets, net				(37,241)			(39,127)			(1,557)			(1,739)			(1,922)
Disallowed deferred tax assets, net				(26,650)	(a)		(95,879)			(23,946)			(23,215)			(26,455)
Threshold 15%				-	(a)		(8,099)			-			-			-
Common equity Tier 1 capital				816,356			735,442			858,092			855,667			832,923
Plus:  Qualifying noncumulative perpetual preferred stock				92,000			92,000			92,000			92,000			92,000
Qualifying noncumulative perpetual preferred stock issuance costs				(10,130)			(10,130)			(10,130)			(10,130)			(10,130)
Subordinated capital notes				35,000			35,000			35,000			35,000			35,000
Tier 1 capital				933,226			852,312			974,962			972,537			949,793
Plus tier 2 capital:  Qualifying allowance for loan and lease losses				87,645			85,651			60,948			62,572			62,319
Total risk-based capital			$	1,020,871		$	937,963		$	1,035,910		$	1,035,109		$	1,012,112
(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.
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OFG Bancorp (NYSE: OFG)
Table 9: Notes to Financial Summary, Selected Metrics, Loans, and Consolidated Financial Statements (Tables 1 - 8)
(1)	We used the term "PCI" 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/PCI 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. For periods before CECL implementation, only PCI loan pools that were not accreting interest income were deemed to be non-performing loans.
(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.
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