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 lo
ans.
(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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