OFG Bancorp (NYSE: OFG)
Table 9: Notes to Financial Summary,
Selected Metrics, Loans, and Consolidated Financial Statements (Tables
1 - 8)
(1)
We used the terms "PCI" and "SOP" to refer
to loans acquired with credit deterioration
from the Scotiabank acquisition (December 31, 2019), the BBVAPR
acquisition
(December 18, 2012) and the Eurobank FDIC-Assisted acquisition (April 30, 2010), recorded
at fair value at acquisition. On January 1, 2020, the Company implemented
ASU No. 2016-13: Measurement of Credit Losses on Financial Instruments
"(CECL)" using the modified retrospective approach. CECL
replaces the concept of purchased
credit impaired loans (PCI) with the concept of purchased financial assets
with credit deterioration (PCD). PCD accounting is
called ‘gross-up accounting’ because, at
acquisition, an entity grosses up the amortized cost basis
of the PCD asset for the initial estimate of credit losses.
This Day 1 allowance for credit losses is established
without an income statement effect.
The Company elected to maintain previously existing
pools on adoption, therefore the pool continues to
be the unit of account,
and the allowance and non-credit discount or premium is not allocated
to the individual assets. These loans are not classified as delinquent or nonperforming
even
though the customer may be contractually
past due because we expect that we will fully collect the carrying
value of these loans.
(2)
Total banking and financial
service revenues.
(3)
Calculated based on net income available to common
shareholders divided by average
common shares outstanding for the period.
(4)
Calculated based on net income available to common
shareholders plus the preferred dividends
on the convertible preferred stock,
divided by total average common
shares outstanding and equivalents for the period
as if converted.
(5)
Tangible book value per common
share is a non-GAAP measure calculated based on tangible
common equity divided by common shares outstanding.
See "Table 9:
Reconciliation of GAAP to Non-GAAP Measures and Calculation
of Regulatory Capital Measures" for additional information.
(6)
Information includes all loans held for investment,
including PCD loans.
(7)
Calculated based on annualized net interest
income for the period divided by average
interest-earning assets for the period.
(8)
Calculated based on annualized income, net of tax,
for the period divided by average total
assets for the period.
(9)
Calculated based on annualized income available
to common shareholders for the period divided by average
tangible common equity for the period.
(10)
Calculated based on non-interest expense for
the period divided by total net interest income
and total banking and financial services revenues for the
period.
(11)
Calculated based on annualized net charge-offs
for the period divided by average loans held
for investment for the period.
(12)
Non-GAAP ratios. See "Table
9: Reconciliation of GAAP to Non-GAAP Measures and Calculation
of Regulatory Capital Measures" for information
on the calculation of
each of these ratios.
(13)
Production of new loans (excluding renewals).
(14)
Most PCD loans are considered to be performing due to
the application of the accretion method, in which these loans will accrete
interest income over the remaining
life of the loans using estimated cash flow analyses.
Therefore, they are not included as non-performing
loans. PCD loan pools that are not accreting interest
income
are deemed to be non-performing loans and presented
separately.
(15)
Total risk-based
capital equals the sum of Tier 1 capital and Tier 2 capital.
(16)
Common equity Tier 1 capital ratio is a regulatory capital
measure calculated based on Common equity Tier 1 capital divided
by risk-weighted assets.
(17)
Tier 1 risk-based capital ratio is a regulatory
capital measure calculated based on Tier 1 capital
divided by risk-weighted assets.
(18)
Total risk-based
capital ratio is a regulatory capital
measure calculated based on Total
risk-based capital divided by risk-weighted
assets.
(19)
Leverage capital ratio is a regulatory
capital measure calculated based on Tier 1 capital
divided by average assets, after certain
adjustments.
(20)
In March 2020, in light of recent strains on the U.S.
economy as a result of the coronavirus disease 2019 (COVID
-19), the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance
Corporation, and the Office of the Comptroller of the Currency
issued an interim final rule that provided the option to
temporarily delay the effects of CECL
on regulatory capital for two years,
followed by a three-year transition
period. In addition, for the first two years,
a uniform 25%
“scaling factor” is introduced to approximate
the portion of the post day-one allowance attributable
to CECL relative to the incurred loss methodology.
The 25% scaling
factor is calibrated to approximate
an overall after-tax impact of differences
in allowances under CECL vs the incurred loss methodology.
(21)
CECL replaces the concept of purchased credit impaired
loans (PCI assets) with the concept of purchased financial assets with credit
deterioration (PCD assets). An
entity records a PCD asset at the purchase price plus the
allowance for credit losses expected at the time
of acquisition. Under this method, there is no credit loss
expense affecting net income on acquisition. Changes
in estimates of expected credit losses after acquisition
are recognized as credit loss expense (or reversal
of credit
loss expense) in subsequent periods as they arise.
(22)
Pre-provision net revenues is a non-GAAP measure calculated
based on net interest income plus total non-interest
income, net, less total non-interest expenses
for the
period.
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