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.
14
