OFG BANCORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)
Written by Luck Wilson on November 6, 2021
INTRODUCTION
The next dialogue of OFG's monetary situation and outcomes of operations must be learn along with the "Chosen Monetary Information" and OFG's consolidated monetary statements and associated notes. This dialogue and evaluation comprises forward-looking statements. Please see "Ahead-Wanting Statements," "Danger Components," and "Quantitative and Qualitative Disclosures about Market Danger" on this Quarterly Report on Type 10-Q for the quarter endedSeptember 30, 2021 and set forth in our Type 10-Okay for the 12 months endedDecember 31, 2020 (the "2020 Type 10-Okay"), for dialogue of the uncertainties, dangers and assumptions related to these statements. Different components not recognized above, together with these described below the headings in our Annual Report on Type 10-Okay for the 12 months endedDecember 31 might also trigger precise outcomes to vary materially from these described in our forward-looking statements. OFG is a publicly-owned monetary holding firm that gives a full vary of banking and monetary providers by its subsidiaries, together with business, client, auto and mortgage lending; checking and financial savings accounts; monetary planning, insurance coverage and securities brokerage providers; and company and particular person belief and retirement providers. OFG operates by three main enterprise segments: Banking, Wealth Administration, andTreasury , and distinguishes itself primarily based on high quality service. OFG has 50 branches inPuerto Rico , 2 branches within the USVI, a subsidiary inBoca Raton, Florida , and a non-bank working subsidiary inCornelius, North Carolina . OFG's long-term purpose is to strengthen its banking and monetary providers franchise by increasing its lending companies, rising the extent of integration within the advertising and supply of banking and monetary providers, sustaining efficient asset-liability administration, rising non-interest income from banking and monetary providers, and bettering working efficiencies. OFG's diversified combine of companies and merchandise generates each the curiosity earnings historically related to a banking establishment and non-interest earnings historically related to a monetary providers establishment (generated by such companies as securities brokerage, fiduciary providers, funding banking, insurance coverage company, and retirement plan administration). Though all of these companies, to various levels, are affected by rate of interest and monetary market fluctuations and different exterior components, OFG's dedication is to proceed producing a balanced and rising income stream. RECENT DEVELOPMENTS Capital Actions InJuly 2021 , OFG introduced the approval by the Board of Administrators of a brand new inventory repurchase program to buy$50 million of its widespread inventory within the open market. AtSeptember 30, 2021 , OFG has repurchased roughly 1.7 million shares of its widespread inventory for a complete buy value of$40.2 million at an common of$23.83 per share.
Additionally, on
enhance in its widespread inventory dividend payable to shareholders of report on
In the course of the nine-months interval ended
redemption of
represented all of OFG’s excellent most popular inventory.
Covid-19 Pandemic Within the first quarter of 2020, theWorld Well being Group declared the outbreak of Covid-19 a pandemic. OFG has been and should proceed to be impacted by the Covid-19 pandemic.Puerto Rico's economic system is bettering as extra folks get vaccinated and restrictive measures have eased. Nonetheless, uncertainty stays concerning the length of the pandemic and the timing and power ofPuerto Rico's financial restoration. In response to the pandemic, the federal authorities enacted a number of financial aid packages offering trillions of {dollars} in aid to companies and people and have additionally decreased rates of interest to additional stimulate the economic system. Along with these authorities aid initiatives, OFG and different banks inPuerto Rico granted numerous types of help to clients and purchasers impacted by the Covid-19 pandemic, together with fee deferrals and extending forgivable loans to companies for payroll and sure different bills below the Paycheck Safety Program of theSmall Enterprise Administration . These aid measures have led to a surge in liquidity inPuerto Rico which have considerably elevated OFG's deposits ($9.2 billion as ofSeptember 30, 2021 ) and money balances ($2.Eight billion as ofSeptember 30, 2021 ). This enhance in deposits induced OFG to exceed$10 billion in belongings for the primary 72 --------------------------------------------------------------------------------
time throughout the first quarter of 2021, and OFG has commenced making ready for the
elevated regulatory oversight and different necessities that can apply as a
results of crossing such measurement threshold.
With respect to our mortgage portfolios, the elevated liquidity has considerably decreased delinquent and non-performing loans by$94.Zero million and$20.Four million , respectively, in comparison withDecember 31, 2020 . Furthermore, such liquidity coupled with the lower in rates of interest has led to will increase in new house purchases, actual property values, and refinancing of owned residential mortgage loans with lower-rate residential mortgage loans offered to company traders. These refinancing along with the lower in PPP loans as they're forgiven have been partially offset by will increase within the manufacturing of business and auto loans because the economic system reopened and began to indicate indicators of development. The macroeconomic outlook forPuerto Rico has improved from decreased Covid-19 associated restrictions on financial exercise, mixed with the extra federal stimulus fundsPuerto Rico is predicted to obtain associated to the restoration from hurricane Maria in 2017, the early 2020 earthquakes, and now the Covid-19 pandemic. For our folks, we've selected a compulsory Covid vaccination coverage to maintain our clients and other people protected. We have now additionally applied a hybrid work mannequin to enhance flexibility for our folks and have elevated the hourly base pay fee for non-salaried workers. Given OFG's money place and capital ranges, OFG will search alternatives to proceed rising our mortgage portfolios organically and can proceed to judge returning capital to shareholders by is inventory repurchase program and quarterly widespread inventory dividend.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of monetary statements in accordance with GAAP requires administration to make numerous judgments, estimates and assumptions that have an effect on the reported quantity of belongings, liabilities, earnings and bills within the consolidated monetary statements. Understanding our accounting insurance policies and the extent to which we use administration judgment and estimates in making use of these insurance policies is integral to understanding our monetary statements. We offer a abstract of our important accounting insurance policies in "Observe 1-Abstract of Important Accounting Insurance policies" of our 2020 Type 10-Okay. Within the "Administration's Dialogue and Evaluation of Monetary Situation and Outcomes of Operations-Vital Accounting Insurance policies and Estimates" part of our 2020 Type 10-Okay, we recognized a number of accounting insurance policies as crucial, together with the following, as a result of they require important judgments and assumptions about extremely complicated and inherently unsure issues and the usage of fairly totally different estimates and assumptions may have a cloth influence on our reported outcomes of operations or monetary situation:
?Allowance for Mortgage and Lease Losses
We consider our crucial accounting estimates and judgments on an ongoing foundation
and replace them as vital primarily based on altering circumstances. There have been no
materials modifications within the strategies used to formulate these crucial accounting
estimates from these mentioned in our 2020 Type 10-Okay.
73
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FINANCIAL HIGHLIGHTS OFG generated excellent outcomes throughout the quarter endedSeptember 30, 2021 . This displays the constant rising recurring internet earnings, our bigger scale, our concentrate on rising digital utilization and customer support differentiation, andPuerto Rico's nascent financial and post-pandemic restoration. OFG noticed the consequences of all this throughout all our companies. New mortgage origination remained robust at$556.Zero million . Asset high quality traits continued to enhance as reconstruction and stimulus funds offered important liquidity to companies and people. On account of this, the supply for credit score losses was a internet advantage of$5.Zero million .
Outcomes had been enhanced by a 17.0% discount in value of funds in comparison with the
quarter ended
capital to redeem all three of our excellent sequence of most popular inventory,
eliminating
Return on common belongings and on common tangible fairness expanded to 1.59% and
17.72%, respectively, in comparison with the earlier and 12 months in the past quarters.
In the course of the quarter endedSeptember 30, 2021 , OFG efficiently executed on the buyback program, buying$40.2 million of shares as a part of our beforehand introduced$50.Zero million authorization.
OFG is strategically well-positioned to proceed to learn from and play a
main function supporting the financial improvement of the communities we serve.
Third quarter of 2021: Earnings: Earnings per share diluted was$0.81 in comparison with$0.78 within the second quarter of 2021 and$0.50 within the third quarter of 2020. Whole core revenues had been$134.7 million in comparison with$133.Three million within the second quarter of 2021 and$127.Zero million within the third quarter of 2020. Internet curiosity margin was 4.12% in comparison with 4.22% within the second quarter of 2021 and 4.30% within the third quarter of 2020. Curiosity Revenue: Whole curiosity earnings of$112.1 million in comparison with$113.5 million in second quarter and$114.9 million within the third quarter of 2020. Third quarter mirrored mortgage paydowns and PPP mortgage forgiveness principally offset by elevated earnings from auto and business loans, and funding securities. Common mortgage balances had been$6.47 billion in comparison with$6.60 billion in second quarter and$6.79 billion in third quarter of 2020. Mortgage Origination: Mortgage origination totaled$556.2 million in comparison with$673.6 million in second quarter and$457.Eight million in third quarter of 2020. Third quarter mirrored continued excessive ranges of auto, business, client, and mortgage lending. Deposit Balances and Price of Funds: Curiosity Expense was$9.Four million in contrast to$11.2 million in second quarter and$15.Four million in third quarter of 2020. This quarter mirrored decrease value of core deposits (30 bps in comparison with 38 bps in second quarter and 56 bps in third quarter of 2020) primarily on account of usually decrease charges and CD maturities. Common buyer deposit balances had been$9.10 billion in comparison with$8.96 billion in second quarter and$8.38 billion in third quarter of 2020. Asset High quality and Provision for Credit score Losses: The third quarter of 2021 mirrored a internet advantage of$5.Zero million , reflecting$4.Three million in internet reserve releases. This compares to a internet advantage of$8.Three million within the second quarter and a internet expense of$13.7 million in prior 12 months quarter. This quarter mirrored continued enchancment in asset high quality traits. Third quarters internet charge-offs of$6 million included$6.5 million for a beforehand reserved quantity on a business mortgage. Banking and Monetary Service Revenues: Whole banking and monetary service income totaled$32.Zero million in comparison with$31.Zero million within the second quarter and$27.5 million in prior 12 months quarter. This quarter mirrored continued larger ranges of banking service, wealth administration, and mortgage banking exercise as pandemic-related restrictions have subsided. Bills: Non-interest bills had been$78.9 million in comparison with$82.7 million in the second quarter and$83.Four million in prior 12 months quarter. This quarter displays a$2.2 million profit in credit score associated bills from positive aspects on gross sales of actual property owned, beforehand introduced value financial savings, and elevated compensation. The second quarter included a$2.2 million know-how venture write down. 74
-------------------------------------------------------------------------------- Pre-Provision Internet Revenues: PPNR was$56.Three million , which incorporates the above non-cash write down, in comparison with$51.Eight million within the second quarter of 2021 and$47.Four million within the third quarter of 2020. Loans held for funding: Loans totaled$6.41 billion at third quarter in contrast to$6.50 billion at second quarter and$6.76 billion at prior 12 months quarter. Excluding PPP loans, loans held for funding of$6.27 billion elevated$5.0 million in comparison with second quarter.
Capital: Tangible e-book worth per share was
second quarter and
to 13.95% within the second quarter and 12.55% in prior 12 months quarter.
Quarter Ended September 30 ,
9-Month Interval Ended
Variance Variance
2021 2020 % 2021 2020 %
EARNINGS DATA: (In hundreds, besides per share knowledge) (In hundreds, besides per share knowledge)
Curiosity earnings $ 112,139 $ 114,937 -2.4% $ 336,584 $ 360,326 -6.6%
Curiosity expense 9,434 15,404 -38.8% 33,418 50,632 -34.0%
Internet curiosity earnings 102,705 99,533 3.2% 303,166 309,694 -2.1%
(Recapture)
provision for
credit score losses, internet (4,997) 13,669 -136.6% (6,978) 78,496 -108.9%
Internet curiosity earnings
after (recapture)
provision for
credit score losses 107,702 85,864 25.4% 310,144 231,198 34.1%
Non-interest earnings 32,517 31,326 3.8% 95,115 89,928 5.8%
Non-interest
bills 78,924 83,444 -5.4% 239,266 256,247 -6.6%
Revenue earlier than taxes 61,295 33,746 81.6% 165,993 64,879 155.9%
Revenue tax expense 19,624 6,308 211.1% 53,122 13,853 283.5%
Internet earnings 41,671 27,438 51.9% 112,871 51,026 121.2%
Much less: dividends on
most popular inventory - (1,628) 100.0% (1,255) (4,884) 74.3%
Revenue accessible to
widespread shareholders $ 41,671 $ 25,810 61.5% $ 111,616 $ 46,142 141.9%
PER SHARE DATA:
Primary $ 0.82 $ 0.50 64.0% $ 2.18 $ 0.90 142.2%
Diluted $ 0.81 $ 0.50 62.0% $ 2.15 $ 0.89 141.6%
Common widespread
shares excellent 51,063 51,342 -0.5% 51,364 51,361 0.0%
Common widespread
shares excellent
and equivalents 51,516 51,527 0.0% 51,748 51,563 0.4%
Money dividends
declared per widespread
share $ 0.12 $ 0.07 75.2% $ 0.28 $ 0.21 33.0%
Money dividends
declared on widespread
shares $ 6,240 $ 3,595 73.6% $ 14,637 $ 10,787 35.7%
PERFORMANCE RATIOS:
Return on common
belongings (ROA) 1.59% 1.11% 43.2% 1.46% 0.71% 105.6%
Return on common
tangible widespread
fairness 17.72% 12.23% 44.9% 16.25% 7.44% 118.4%
Return on common
widespread fairness (ROE) 15.63% 10.53% 48.4% 14.25% 6.37% 123.7%
Effectivity ratio 58.59% 65.69% -10.8% 60.47% 66.30% -8.8%
Rate of interest
unfold 4.09% 4.25% -3.8% 4.16% 4.60% -9.6%
Rate of interest
margin 4.12% 4.30% -4.0% 4.20% 4.65% -9.7%
75
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September 30, December 31, Variance
2021 2020 %
PERIOD END BALANCES AND CAPITAL RATIOS: (In hundreds, besides per share knowledge)
Money, money equivalents and restricted money
27.8% Investments and loans Funding securities$ 902,273 $ 458,700 96.7% Loans and leases, internet 6,282,485 6,501,259 -3.4% Whole investments and loans$ 7,184,758 $ 6,959,959 3.2% Deposits and borrowings Deposits$ 9,244,389 $ 8,415,640 9.8% Different borrowings 99,017 102,351 -3.3% Whole deposits and borrowings$ 9,343,406 $ 8,517,991 9.7% Stockholders' fairness Most well-liked inventory $ -$ 92,000 -100.0% Frequent inventory 59,885 59,885 0.0% Extra paid-in capital 635,808 622,652 2.1% Authorized surplus 114,485 103,269 10.9% Retained earnings 375,729 300,096 25.2% Treasury inventory, at value (140,862) (102,949) -36.8% Collected different complete (loss) 8,620 11,022 -21.8% Whole stockholders' fairness$ 1,053,665 $ 1,085,975 -3.0% Per share knowledge E book worth per widespread share $ 21.08$ 19.54 7.9%
Tangible e-book worth per widespread share $ 18.59
9.5%
Market value at finish of interval $ 25.22$ 18.54
36.0%
Capital ratios Leverage capital 9.33% 10.30%
-9.4%
Frequent fairness Tier 1 capital ratio 13.52% 13.08% 3.4% Tier 1 risk-based capital 14.03% 14.78% -5.1% Whole risk-based capital 15.28% 16.04% -4.7% Fairness-to-assets ratio 9.93% 11.05% -10.1% Monetary belongings managed Belief belongings managed$ 3,685,968 $ 3,476,491 6.0% Dealer-dealer belongings$ 2,362,317 $ 2,474,234 -4.5% 76
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ANALYSIS OF RESULTS OF OPERATIONS
The next tables present main classes of interest-earning belongings and interest-bearing liabilities, their respective curiosity earnings, bills, yields and prices, and their influence on internet curiosity earnings on account of modifications in quantity and charges for the quarters and nine-month intervals endedSeptember 30, 2021 and 2020. ComparativeSeptember 30, 2020 toSeptember 30, 2019 data has been omitted pursuant to Merchandise 303(b) of Regulation S-Okay. For such comparative data, please see Administration's Dialogue and Evaluation of Monetary Situation and Outcomes of Operations in Oriental'sSeptember 30, 2020 quarterly report on Type 10-Q.
TABLE 1 – ANALYSIS OF NET INTEREST INCOME AND CHANGES DUE TO VOLUME/RATE
FOR THE QUARTERS ENDED
Curiosity Common fee
Common steadiness
September September September September September September
2021 2020 2021 2020 2021 2020
({Dollars} in hundreds)
A - TAX EQUIVALENT
SPREAD
Curiosity-earning
belongings $ 112,139 $ 114,938 4.50% 4.96% $ 9,879,687 $ 9,218,717
Tax equal
adjustment 2,438 2,427 0.10% 0.10% - -
Curiosity-earning
belongings - tax
equal 114,577 117,365 4.60% 5.06%
9,879,687 9,218,717 Curiosity-bearing liabilities 9,434 15,404 0.41% 0.71% 9,213,530 8,619,955 Tax equal internet curiosity earnings / unfold 105,143 101,961 4.19% 4.35% 666,157 598,762 Tax equal rate of interest margin 4.30% 4.45% B - NORMAL SPREAD Curiosity-earning belongings: Investments: Funding securities 3,216 2,278 1.80% 1.81%
714,669 502,671
Curiosity bearing money
and cash market
investments 986 613 0.14% 0.13% 2,699,144 1,929,024
Whole investments 4,202 2,891 0.49% 0.47% 3,413,813 2,431,695
Non-PCD:
Mortgage 9,759 11,208 5.22% 5.51% 747,942 814,189
Business 29,558 27,667 5.55% 5.20% 2,111,935 2,117,502
Shopper 11,180 12,931 11.12% 11.31% 399,002 454,780
Auto 34,535 31,223 8.35% 8.37% 1,640,433 1,484,282
Whole Non-PCD loans 85,032 83,029 6.89% 6.78% 4,899,312 4,870,753
PCD loans:
Mortgage 18,785 21,843 5.66% 5.75% 1,299,330 1,511,567
Business 3,609 6,390 5.76% 6.92% 248,708 367,475
Shopper 64 35 16.16% 4.87% 1,580 2,839
Auto 447 750 10.47% 8.68% 16,944 34,388
Whole PCD loans 22,905 29,018 5.85% 6.06% 1,566,562 1,916,269
Whole loans 107,937 112,047 6.62% 6.57% 6,465,874 6,787,022
Whole interest-earning
belongings 112,139 114,938 4.50% 4.96% 9,879,687 9,218,717
77
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Curiosity Common fee
Common steadiness
September September September September September September
2021 2020 2021 2020 2021 2020
({Dollars} in hundreds)
Curiosity-bearing
liabilities:
Deposits:
NOW Accounts 2,288 2,247 0.33% 0.40% 2,754,985 2,227,687
Financial savings and cash
market 1,639 2,010 0.28% 0.41% 2,330,121 1,927,680
Time deposits 2,916 7,512 0.84% 1.55% 1,378,505 1,944,856
Whole core deposits 6,843 11,769 0.42% 0.78% 6,463,611 6,100,223
Brokered deposits 10 812 0.34% 2.30% 11,366 140,416
6,853 12,581 0.42% 0.81% 6,474,977 6,240,639
Non-interest bearing
deposits - - 0.00% 0.00% 2,639,610 2,276,400
Truthful worth premium and
core deposit
intangible
amortizations 1,838 2,039 - - - -
Whole deposits 8,691 14,620 0.38% 0.68% 9,114,587 8,517,039
Borrowings:
Advances from FHLB and
different borrowings 450 476 2.84% 2.83% 62,860 66,833
Subordinated capital
notes 293 308 3.21% 3.39% 36,083 36,083
Whole borrowings 743 784 2.98% 3.03% 98,943 102,916
Whole curiosity bearing
liabilities 9,434 15,404 0.41% 0.71% 9,213,530 8,619,955
Internet curiosity earnings /
unfold $ 102,705 $ 99,534 4.09% 4.25%
Rate of interest margin 4.12% 4.30%
Extra of common
interest-earning
belongings over common
interest-bearing
liabilities $ 666,157 $ 598,762
Common
interest-earning
belongings to common
interest-bearing
liabilities ratio 107.23% 106.95%
C – CHANGES IN NET INTEREST INCOME DUE TO:
Quantity Fee Whole
(In hundreds)
Curiosity Revenue:
Investments $ 1,168 $ 143 $ 1,311
Loans (4,809) 699 (4,110)
Whole curiosity earnings (3,641) 842 (2,799)
Curiosity Expense:
Deposits 1,026 (6,955) (5,929)
Different borrowings (30) (11) (41)
Whole curiosity expense 996 (6,966) (5,970)
Internet Curiosity Revenue $ (4,637) $ 7,808 $ 3,171
78
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TABLE 1A – ANALYSIS OF NET INTEREST INCOME AND CHANGES DUE TO VOLUME/RATE
FOR THE NINE-MONTH PERIODS ENDED
Curiosity Common fee
Common steadiness
September September September September September September
2021 2020 2021 2020 2021 2020
({Dollars} in hundreds)
A - TAX EQUIVALENT
SPREAD
Curiosity-earning
belongings $ 336,584 $ 360,326 4.66% 5.41% $ 9,656,838 $ 8,874,886
Tax equal
adjustment 6,803 7,869 0.09% 0.12% - -
Curiosity-earning
belongings - tax
equal 343,387 368,195 4.75% 5.53% 9,656,838 8,874,886
Curiosity-bearing
liabilities 33,418 50,632 0.50% 0.81% 8,999,822 8,297,837
Tax equal internet
curiosity earnings /
unfold 309,969 317,563 4.25% 4.72% 657,016 577,049
Tax equal
rate of interest margin 4.34% 4.84%
B - NORMAL SPREAD
Curiosity-earning
belongings:
Investments:
Funding securities 8,088 9,552 1.75% 1.88% 614,599 679,201
Curiosity bearing money
and cash market
investments 2,287 3,760 0.12% 0.35% 2,476,139 1,423,781
Whole investments 10,375 13,312 0.45% 0.85% 3,090,738 2,102,982
Non-PCD
Mortgage 30,557 33,196 5.25% 5.50% 776,225 804,702
Business 86,934 85,528 5.44% 5.64% 2,138,474 2,019,853
Shopper 34,006 42,064 11.28% 11.81% 403,037 474,455
Auto and leasing 101,652 93,555 8.53% 8.43% 1,592,482 1,481,956
Whole Non-PCD loans 253,149 254,343 6.89% 7.09% 4,910,218 4,780,966
PCD
Mortgage 59,548 72,570 5.80% 6.19% 1,369,410 1,564,153
Business 11,716 17,172 5.93% 5.98% 264,238 383,525
Shopper 176 323 14.39% 12.54% 1,635 3,434
Auto 1,620 2,606 10.51% 8.74% 20,599 39,826
Whole PCD loans 73,060 92,671 5.88% 6.21% 1,655,882 1,990,938
Whole loans 326,209 347,014 6.64% 6.83% 6,566,100 6,771,904
Whole interest-earning
belongings 336,584 360,326 4.66% 5.41% 9,656,838 8,874,886
79
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Curiosity Common fee
Common steadiness
September September September September September September
2021 2020 2021 2020 2021 2020
({Dollars} in hundreds)
Curiosity-bearing
liabilities:
Deposits:
NOW Accounts 6,940 6,772 0.36% 0.43% 2,566,201 2,092,973
Financial savings and cash
market 5,859 6,426 0.36% 0.46% 2,191,316 1,845,253
Time deposits 12,664 23,480 1.07% 2.37% 1,576,460 1,991,432
Whole core deposits 25,463 36,678 0.54% 0.85% 6,333,977 5,929,658
Brokered deposits 197 3,844 0.86% 2.51%
30,482 203,779
25,660 40,522 0.54% 0.88% 6,364,459 6,133,437 Non-interest bearing deposits - - 0.00% 0.00% 2,535,422 1,987,211 Truthful worth premium and core deposit intangible amortizations 5,515 6,163 - - - - Whole deposits 31,175 46,685 0.47% 0.77%
8,899,881 8,120,648 Borrowings: Securities offered below agreements to repurchase - 1,335 0.00% 2.62% - 67,956 Advances from FHLB and different borrowings 1,361 1,521 2.85% 2.77% 63,858 73,150 Subordinated capital notes 882 1,091 3.26% 4.02% 36,083 36,083 Whole borrowings 2,243 3,947 3.00% 2.97% 99,941 177,189 Whole interest-bearing liabilities 33,418 50,632 0.50% 0.81% 8,999,822 8,297,837 Internet curiosity earnings / unfold$ 303,166 $ 309,694 4.16% 4.60% Rate of interest margin 4.20% 4.65% Extra of common interest-earning belongings over common interest-bearing liabilities$ 657,016 $ 577,049 Common interest-earning belongings to common interest-bearing liabilities ratio 107.30%$ 106 .95%
C – CHANGES IN NET INTEREST INCOME DUE TO:
Quantity Fee Whole
(In hundreds)
Curiosity Revenue:
Investments $ 6,253 $ (9,190) $ (2,937)
Loans (8,720) (12,085) (20,805)
Whole curiosity earnings (2,467) (21,275) (23,742)
Curiosity Expense:
Deposits 4,480 (19,990) (15,510)
Repurchase agreements (1,335) - (1,335)
Different borrowings (222) (147) (369)
Whole curiosity expense 2,923 (20,137) (17,214)
Internet Curiosity Revenue $ (5,390) $ (1,138) $ (6,528)
Internet Curiosity Revenue
Internet curiosity earnings is a operate of the distinction between charges earned on
OFG's interest-earning belongings and charges paid on its interest-bearing liabilities
(rate of interest unfold) and the relative quantities of its curiosity incomes belongings
and interest-bearing liabilities (rate of interest margin). OFG continually screens
the composition and re-pricing of its belongings and liabilities to take care of its internet
curiosity earnings at ample ranges.
80
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Comparability of the quarters ended
Internet curiosity earnings of
Tax equal foundation internet curiosity earnings of
million
Rate of interest unfold decreased 16 foundation factors to 4.09% from 4.25% and internet curiosity margin decreased 18 foundation factors to 4.12% from 4.30%. These decreases are primarily as a result of internet impact of a lower of 46 foundation factors within the common yield of whole interest-earning belongings, pushed by the rise in money and funding securities, and a lower of 30 foundation factors within the whole common value of interest-bearing liabilities. Internet curiosity margin, on a taxable equal foundation, is 4.30%, a lower of 15 foundation factors in comparison with 4.45% for the identical quarter of 2020.
Internet curiosity earnings was adversely impacted by:
?Decrease curiosity earnings from loans by$4.1 million , reflecting decrease common balances within the mortgage and business PCD portfolios and the impact ofFederal Reserve Board's fee cuts on variable fee business loans offset by curiosity earnings of$3.Four million from unamortized yield for$95.6 million of forgiven PPP loans.
Internet curiosity earnings was positively impacted by:
?Decrease curiosity expense from deposits by$5.9 million , primarily associated to pricing modifications applied throughout fourth quarter of 2020 and to the maturity and cancelation of upper value time and brokered deposits and migration of those time deposits to checking and financial savings accounts at decrease prices.
Comparability of the nine-month intervals ended
Internet curiosity earnings of
million
million
Rate of interest unfold decreased 44 foundation factors to 4.16% from 4.60% and internet curiosity margin decreased 45 foundation factors to 4.20% from 4.65%. These decreases are primarily as a result of internet impact of a lower of 75 foundation factors within the common yield of whole interest-earning belongings, pushed by the rise in money and funding securities, and a lower of 31 foundation factors within the whole common value of interest-bearing liabilities.
Internet curiosity earnings was adversely impacted by:
?Decrease curiosity earnings from loans by$20.Eight million , reflecting decrease common balances within the mortgage and business PCD portfolios, and the impact ofFederal Reserve Board's fee cuts on variable fee business loans, partially offset by curiosity earnings of$7.Zero million from unamortized yield for$310.7 million of forgiven PPP loans;
?
throughout prior 12 months; and
?Decrease curiosity earnings from curiosity bearing money and funding securities by
Internet curiosity earnings was positively impacted by:
?Decrease curiosity expense from deposits by$15.5 million , primarily associated to pricing modifications applied throughout fourth quarter of 2020 and to the maturity and cancelation of upper value time and brokered deposits and migration of those time deposits to checking and financial savings accounts at decrease prices; and ?Decrease curiosity expense in borrowings by$1.7 million , primarily because of a lower in curiosity expense from securities offered below agreements to repurchase from$1.Three million within the prior 12 months interval to none within the present interval. Throughout the nine-month interval endedSeptember 30, 2020 , all repurchase agreements matured or had been early extinguished. 81 --------------------------------------------------------------------------------
TABLE 2 - NON-INTEREST
INCOME SUMMARY
Quarter Ended September 30 ,
9-Month Interval Ended
2021 2020 Variance 2021 2020 Variance
(In
hundreds)
Banking service income
15.9%
Wealth administration income 7,619 7,272 4.8% 23,270
20,924 11.2%
Mortgage banking actions 6,195 3,917 58.2% 16,303
10,223 59.5% Whole banking and monetary service income 32,012 27,486 16.5% 92,512 76,825 20.4% Internet achieve on: Sale of securities accessible on the market - - 0.0% - 4,728 -100.0% Discount buy from Scotiabank acquisition - 3,465 -100.0% - 7,336 -100.0% Different non-interest earnings 505 375 34.7% 2,603 1,039 150.5% Whole non-interest earnings, internet$ 32,517 $ 31,326 3.8%$ 95,115 $ 89,928 5.8% Non-Curiosity Revenue Non-interest earnings is affected by the quantity of the Financial institution's belief division belongings below administration, transactions generated by purchasers' monetary belongings serviced by OFG's securities broker-dealer and insurance coverage company subsidiaries, the extent of mortgage banking actions, charges generated from loans and deposit accounts, and positive aspects on gross sales of belongings.
Comparability of quarters ended
OFG recorded non-interest earnings, internet, within the quantity of
to
non-interest earnings was primarily on account of:
?A rise of$1.9 million in banking service revenues, primarily from larger charges on deposit accounts, credit score and debit playing cards interchange charges and better quantity of transactions as a result of influence of the COVID-19 on financial exercise final 12 months; and
?A rise of
mortgage-servicing rights valuation and positive aspects on loans offered elevated by
The rise in non-interest earnings was offset by:
?A$3.5 million discount buy achieve from the Scotiabank Acquisition to regulate the truthful worth of accrued curiosity receivable at closing, internet of taxes, recorded throughout prior 12 months quarter.
Comparability of nine-month intervals ended
OFG recorded non-interest earnings, internet, within the quantity of
to
non-interest earnings was primarily on account of:
?A rise of$7.Three million in banking service revenues, primarily from larger charges on deposit accounts, credit score and debit playing cards interchange charges and better quantity of transactions reflecting the influence of the COVID-19 on financial exercise final 12 months;
?A rise of
broker-dealer gross sales, insurance coverage earnings and belief charges of
thousand
82 --------------------------------------------------------------------------------
?A rise of
charges and positive aspects on loans offered elevated by
respectively. This enhance was offset by larger losses of
repurchased loans as common quantity elevated throughout the interval.
The rise in non-interest earnings was offset by:
?A
mortgage-backed securities; and
?A$7.Three million discount buy achieve from the Scotiabank Acquisition to regulate the truthful worth of accrued curiosity receivable at closing, internet of taxes, recorded throughout 2020. TABLE 3 - NON-INTEREST EXPENSES SUMMARY Quarter Ended September 30, 9-Month Interval Ended September 30, 2021 2020 Variance % 2021 2020 Variance % (In hundreds) Compensation and worker advantages$ 33,745 $ 31,955 5.6%$ 99,282 $ 102,005 -2.7% Occupancy, gear and infrastructure prices 12,078 11,943 1.1% 37,734 35,220 7.1% Digital banking costs 9,615 8,734 10.1% 27,163 26,284 3.3% Info know-how bills 3,621 5,381 -32.7% 13,407 16,259 -17.5% Skilled and service charges 5,003 3,331 50.2% 14,938 12,596 18.6% Taxes, aside from payroll and earnings taxes 3,257 3,774 -13.7% 10,535 10,123 4.1% Insurance coverage 2,530 2,428 4.2% 7,659 8,667 -11.6% Foreclosed actual property and different repossessed belongings (earnings) bills (2,163) 1,323 -263.5% (1,885) 6,763 -127.9% Mortgage servicing and clearing bills 1,908 2,345 -18.6% 5,690 4,836 17.7% Promoting, enterprise promotion, and strategic initiatives 1,646 1,481 11.1% 4,783 4,643 3.0% Communication 1,327 1,117 18.8% 3,332 2,993 11.3% Printing, postage, stationery and provides 878 1,094 -19.7% 3,037 2,767 9.8% Director and investor relations 243 302 -19.5% 867 928 -6.6% Merger and restructuring costs - 2,681 -100.0% - 5,991 -100.0% Pandemic bills 1,223 2,090 -41.5% 4,523 4,291 5.4% Different 4,013 3,465 15.8% 8,201 11,881 -31.0% Whole non-interest bills$ 78,924 $ 83,444 -5.4%$ 239,266 $ 256,247 -6.6% Related ratios and knowledge: Effectivity ratio 58.59% 65.69% 60.47% 66.30% Compensation and advantages to non-interest expense 42.76% 38.30% 41.49% 39.81% Compensation to common whole belongings owned (annualized) 1.29% 1.29% 1.29% 1.42% Common variety of staff 2,251 2,343 2,241 2,405 Common compensation per worker (annualized, in hundreds)$ 60.0 $ 54.6 $ 59.1 $ 56.6 Common loans per common worker$ 2,872 $ 2,897 $ 2,931 $ 2,816 Non-Curiosity Bills
Comparability of quarters ended
Non-interest expense was
million
83 --------------------------------------------------------------------------------
Non-interest bills had been positively impacted by:
?Lower in foreclosed actual property and different repossessed belongings bills by$3.5 million reflecting larger positive aspects on gross sales and favorable valuation of$2.2 million and$800 thousand , respectively; ?Lower in data know-how bills by$1.Eight million reflecting programs integrations bills associated to Scotiabank Acquisition recorded within the prior 12 months quarter; and
?Merger and restructuring costs amounting
Scotiabank Acquisition.
Non-interest bills had been adversely impacted by:
?Improve in compensation and worker advantages by$1.Eight million reflecting$1.2 million of upper stock-based compensation expense and elevated compensation for hourly staff; and ?Improve in skilled and repair charges bills by$1.7 million primarily due to larger consulting and advisory bills and authorized bills by$832 thousand and$512 thousand , respectively. The effectivity ratio improved to 58.59% from 65.69%. The effectivity ratio measures how a lot of OFG's revenues is used to pay working bills. OFG computes its effectivity ratio by dividing non-interest bills by the sum of its internet curiosity earnings and non-interest earnings, however excluding positive aspects on the sale of funding securities, derivatives positive aspects or losses, different positive aspects and losses, and different earnings which may be thought-about risky in nature. Administration believes that the exclusion of these gadgets permits constant comparability. Quantities introduced as a part of non-interest earnings which can be excluded from the effectivity ratio computation for the quarters endedSeptember 30, 2021 and 2020 amounted to$505 thousand and$3.Eight million , respectively.
Comparability of nine-month intervals ended
Non-interest expense was
Non-interest bills had been positively impacted by:
?Decrease compensation and worker advantages by
worker depend and a
?Lower in data know-how bills by$2.9 million reflecting programs integrations bills associated to Scotiabank Acquisition recorded throughout prior 12 months interval; ?Enhancements in foreclosed actual property and different repossessed belongings (earnings) bills by$8.6 million reflecting larger valuations and positive aspects on gross sales on different actual property owned of$1.9 million and$2.9 million , respectively. Additionally, larger positive aspects on repossessed auto of$1.6 million on account of larger demand and quantity in comparison with prior 12 months interval;
?Merger and restructuring costs amounting
Scotiabank Acquisition within the prior 12 months interval; and
?Lower in claims and settlements accruals by
Non-interest bills had been adversely impacted by:
?Improve in skilled and repair charges bills by
to larger authorized bills by
?Improve in occupancy, gear, and infrastructure prices by
reflecting larger data know-how infrastructure bills by
million
84
--------------------------------------------------------------------------------
The effectivity ratio improved to 60.47% from 66.30%. Quantities introduced as half
of non-interest earnings which can be excluded from the effectivity ratio computation
for the nine-months ended September 30, 2021 and 2020 amounted to $2.6 million
and $13.1 million , respectively.
Provision for Credit score Losses
Comparability of quarters ended
Primarily based on an evaluation of the credit score high quality and the composition of OFG's mortgage portfolio, administration decided that the supply for the quarter endedSeptember 30, 2021 was ample to take care of the allowance for credit score losses at an acceptable stage to supply for anticipated credit score losses. Provision for credit score losses decreased$18.7 million from$13.7 million to a recapture of$5.Zero million ensuing from$4.Three million internet reserve releases. Internet charge-offs for the quarter amounting to$6.Zero million included$6.5 million for a beforehand reserved quantity on a business mortgage.
Comparability of nine-month intervals ended
Primarily based on an evaluation of the credit score high quality and the composition of OFG's mortgage portfolio, administration decided that the supply for the nine-month interval endedSeptember 30, 2021 was ample to take care of the allowance for credit score losses at an acceptable stage to supply for anticipated credit score losses primarily based upon an analysis of identified and inherent dangers. Provision for credit score losses decreased$85.5 million from$78.5 million to a recapture of$7.Zero million reflecting continued enchancment in asset high quality traits. Prior 12 months provision included a$39.9 million provision to include modifications within the macro-economic state of affairs and qualitative changes in consequence of the Covid-19 pandemic. Revenue Taxes
Comparability of quarters ended
OFG’s efficient tax fee (ETR) was 32.0% in 2021 in comparison with 18.7% in 2020. The
enhance in ETR is related to a better proportion of exempt earnings and
earnings taxed at preferential charges within the earlier 12 months quarter.
Comparability of nine-month intervals ended
OFG’s efficient tax fee (ETR) was 32.0% in 2021 in comparison with 21.4% in 2020. The
enhance in ETR is related to a better proportion of exempt earnings and
earnings taxed at preferential charges within the earlier 12 months.
85 --------------------------------------------------------------------------------
Enterprise Segments OFG segregates its companies into the next main reportable segments: Banking, Wealth Administration, andTreasury . Administration established the reportable segments primarily based on the inner reporting used to judge efficiency and to assess the place to allocate assets. Different components resembling OFG's group, nature of its merchandise, distribution channels and financial traits of its providers had been additionally thought-about within the dedication of the reportable segments. OFG measures the efficiency of those reportable segments primarily based on pre-established targets of various monetary parameters resembling internet earnings, internet curiosity earnings, mortgage manufacturing, and costs generated. OFG's methodology for allocating non-interest bills amongst segments is predicated on a number of components such as income, worker headcount, occupied house, devoted providers or time, amongst others. Following are the outcomes of operations and the chosen monetary data by working phase for the quarters and nine-month intervals endedSeptember 30, 2021 and 2020. Quarter Ended September 30, 2021 Wealth Whole Main Consolidated Banking Administration Treasury Segments
Eliminations Whole
(In hundreds)
Curiosity earnings
-$ 112,139 Curiosity expense (8,946) - (488) (9,434) - (9,434) Internet curiosity earnings 99,533 7 3,165 102,705 - 102,705 Recapture of credit score losses 4,815 - 182 4,997 - 4,997 Non-interest earnings 24,348 8,079 90 32,517 - 32,517 Non-interest bills (72,463) (5,245) (1,216) (78,924) - (78,924) Intersegment income 616 - - 616 (616) - Intersegment bills - (318) (298) (616) 616 - Revenue earlier than earnings taxes$ 56,849 $ 2,523 1,923$ 61,295 $ -$ 61,295 Revenue tax expense 19,614 - 10 19,624 - 19,624 Internet earnings$ 37,235 $ 2,523 $ 1,913 $ 41,671 $ -$ 41,671 Whole belongings$ 8,116,648 $ 24,581 $ 3,558,568 $ 11,699,797 $ (1,092,932) $ 10,606,865 9-Month Interval Ended September 30, 2021 Wealth Whole Main Consolidated Banking Administration Treasury Segments Eliminations Whole (In hundreds)
Curiosity earnings
-$ 336,584 Curiosity expense (31,794) - (1,624) (33,418) - (33,418) Internet curiosity earnings 295,373 25 7,768 303,166 - 303,166 Recapture of credit score losses 5,964 - 1,014 6,978 - 6,978 Non-interest earnings 71,424 23,584 107 95,115 - 95,115 Non-interest bills (222,960) (13,089) (3,217) (239,266) - (239,266) Intersegment income 1,714 - - 1,714 (1,714) - Intersegment bills - (911) (803) (1,714) 1,714 - Revenue earlier than earnings taxes$ 151,515 $ 9,609 4,869$ 165,993 $ -$ 165,993 Revenue tax expense 53,089 - 33 53,122 - 53,122 Internet earnings$ 98,426 $ 9,609 $ 4,836 $ 112,871 $ -$ 112,871 Whole belongings$ 8,116,648 $ 24,581 $ 3,558,568 $ 11,699,797 $ (1,092,932) $ 10,606,865 86
--------------------------------------------------------------------------------
Quarter Ended September 30, 2020
Wealth Whole Main Consolidated
Banking Administration Treasury Segments Eliminations Whole
(In hundreds)
Curiosity earnings $ 112,832 $ 14 $ 2,091 $ 114,937 $ - $ 114,937
Curiosity expense (14,092) - (1,312) (15,404) - (15,404)
Internet curiosity
earnings 98,740 14 779 99,533 - 99,533
Provision for
mortgage and lease
losses (14,461) - 792 (13,669) - (13,669)
Non-interest
earnings 23,994 7,323 9 31,326 - 31,326
Non-interest
bills (76,988) (5,138) (1,318) (83,444) - (83,444)
Intersegment
income 769 - - 769 (769) -
Intersegment
bills - (225) (544) (769) 769 -
Revenue earlier than
earnings taxes $ 32,054 $ 1,974 $ (282) $ 33,746 $ - $ 33,746
Revenue tax
expense 6,308 (13) 13 6,308 - 6,308
Internet earnings $ 25,746 $ 1,987 $ (295) $ 27,438 $ - $ 27,438
Whole belongings $ 9,367,141 $ 33,006 $ 1,725,221 $ 11,125,368 $ (1,106,377) $ 10,018,991
9-Month Interval Ended September 30, 2020
Wealth Whole Main Consolidated
Banking Administration Treasury Segments Eliminations Whole
(In hundreds)
Curiosity earnings $ 351,933 $ 46 $ 8,347 $ 360,326 $ - $ 360,326
Curiosity expense (44,307) - (6,325) (50,632) - (50,632)
Internet curiosity
earnings 307,626 46 2,022 309,694 - 309,694
Provision for
mortgage and lease
losses (77,795) - (701) (78,496) - (78,496)
Non-interest
earnings 64,349 21,089 4,490 89,928 - 89,928
Non-interest
bills (237,943) (14,819) (3,485) (256,247) - (256,247)
Intersegment
income 1,920 - - 1,920 (1,920) -
Intersegment
bills - (580) (1,340) (1,920) 1,920 -
Revenue earlier than
earnings taxes $ 58,157 $ 5,736 $ 986 $ 64,879 $ - $ 64,879
Revenue tax
expense 9,305 4,506 42 13,853 - 13,853
Internet earnings $ 48,852 $ 1,230 $ 944 $ 51,026 $ - $ 51,026
Whole belongings $ 9,367,141 $ 33,006 $ 1,725,221 $ 11,125,368 $ (1,106,377) $ 10,018,991
Comparability of quarters ended
Banking
OFG’s banking phase internet earnings earlier than taxes elevated
million
?Lower in provision for credit score losses by
quarter
enchancment in asset high quality;
87 -------------------------------------------------------------------------------- ?Decrease curiosity expense from deposits by$5.1 million , primarily associated to pricing modifications applied throughout fourth quarter of 2020 and to the maturity and cancelation of upper value time and brokered deposits and migration of those time deposits to checking and financial savings accounts at decrease prices; ?A rise of$1.9 million in banking service revenues, primarily from larger charges on deposit accounts, credit score and debit playing cards interchange charges and better quantity of transactions reflecting the influence of the COVID-19 on financial exercise final 12 months; and
?A rise of
mortgage-servicing rights valuation and positive aspects on loans offered elevated by
million
The will increase within the banking phase's internet earnings was partially offset by, decrease curiosity earnings from loans by$4.Four million , reflecting decrease common balances in the mortgage and business PCD portfolios and the impact ofFederal Reserve Board's fee cuts on variable fee business loans offset by curiosity earnings of$3.Four million from unamortized yield for$95.6 million of forgiven PPP loans. Wealth Administration Wealth administration phase income consists of commissions and costs from fiduciary actions, and securities brokerage and insurance coverage actions. Internet earnings earlier than taxes from this phase elevated$549 thousand , primarily from larger broker-dealer gross sales and belief charges of$265 thousand and$99 thousand , respectively.Treasury
reflecting:
?Improve in curiosity earnings by
maturity securities throughout present quarter; and
?Lower in provision for credit score losses in US business loans by
thousand
Comparability of nine-month intervals ended
Banking
OFG’s banking phase internet earnings earlier than taxes elevated
million
?Lower in provision for credit score losses by$83.Eight million , primarily on account of updates in macro-economic outlook and continued asset high quality enchancment, as mirrored in charge-off, non-performing, and delinquency charges. Prior 12 months interval included a$39.9 million provision to include modifications within the macro-economic state of affairs and qualitative changes because of the Covid-19 pandemic; ?Decrease curiosity expense from deposits by$12.5 million , primarily associated to pricing modifications applied throughout fourth quarter of 2020 and to the maturity and cancelation of upper value time and brokered deposits and migration of those time deposits to checking and financial savings accounts at decrease prices; ?A rise of$7.Three million in banking service revenues, primarily from larger charges on deposit accounts, credit score and debit playing cards interchange charges and better quantity of transactions reflecting the influence of the COVID-19 on financial exercise final 12 months;
?A rise of
charges and positive aspects on loans offered elevated by
respectively. This enhance was offset by larger losses of
repurchased loans as common quantity elevated throughout the interval; and
?Lower in non-interest bills by$15.Zero million , primarily in compensation and worker advantages, data know-how bills, foreclosed actual property and different repossessed belongings bills, merger and restructuring, and insurance coverage bills. 88 --------------------------------------------------------------------------------
The will increase within the banking phase’s internet earnings had been partially offset by:
?Decrease curiosity earnings from loans by$25.Zero million , reflecting decrease balances in the mortgage and business PCD portfolios and the impact ofFederal Reserve Board's fee cuts on variable fee business loans offset by curiosity earnings of$7.Zero million from unamortized yield for$310.7 million of forgiven PPP loans.
?A
in prior 12 months.
Wealth Administration Wealth administration phase income consists of commissions and costs from fiduciary actions, and securities brokerage and insurance coverage actions. Internet earnings earlier than taxes from this phase elevated$3.9 million , primarily from larger broker-dealer gross sales, insurance coverage earnings and belief charges of$1.Three million ,$460 thousand , and$568 thousand , respectively.Treasury
reflecting:
?Decrease curiosity bills in borrowings by
early extinguishment of repurchase agreements throughout 2020; and
?Lower in provision for credit score losses in US business loans by
primarily due asset high quality enhancements throughout the present interval.
Such will increase had been partially offset by a achieve of
securities recorded in prior interval.
ANALYSIS OF FINANCIAL CONDITION
Belongings Owned AtSeptember 30, 2021 , OFG's whole belongings amounted to$10.607 billion representing a rise of seven.9%, when in comparison with$9.826 billion atDecember 31, 2020 . Money and due from banks and investments portfolios elevated by$602.2 million and$443.6 million , respectively, whereas loans decreased by$218.8 million .
Money and money equivalents of
primarily due to the inflow of each business and retail deposits from
elevated liquidity within the economic system due to authorities stimulus packages.
OFG's mortgage portfolio is comprised of residential mortgage loans, business loans collateralized by mortgages on actual property, different business and industrial loans, client loans, and auto loans. AtSeptember 30, 2021 , OFG's mortgage portfolio decreased by 3.4% primarily on account of mortgage portfolios run-off. PCD mortgage portfolio, excluding allowance for credit losses, decreased$244.Eight million to$1.527 billion atSeptember 30, 2021 . This lower was offset by mortgage manufacturing within the nine-month interval of 2021 of$1.758 billion , in comparison with$1.245 billion within the 12 months in the past interval, pushed by auto and business lending, together with$159.Zero million PPP mortgage originations. Monetary Belongings Managed OFG's monetary belongings embrace these managed by OFG's belief division, retirement plan administration subsidiary, and belongings gathered by its broker-dealer and insurance coverage subsidiaries. OFG's belief division affords numerous varieties of particular person retirement accounts ("IRAs") and manages 401(okay) and Keogh retirement plans and custodian and company belief accounts, whereas the retirement plan administration subsidiary manages non-public retirement plans. AtSeptember 30, 2021 , the entire belongings managed by OFG's belief division and retirement plan administration subsidiary amounted to$3.667 billion , in comparison with$3.476 billion atDecember 31, 2020 . OFG's broker-dealer subsidiary affords a big selection of funding options to its shopper base, resembling tax-advantaged mounted earnings securities, mutual funds, shares, bonds and cash administration wrap-fee packages. AtSeptember 30, 2021 , whole belongings gathered by the broker-dealer and insurance coverage company subsidiaries from their clients' funding accounts amounted to$2.362 billion , in comparison with$2.474 billion atDecember 31, 2020 . 89 --------------------------------------------------------------------------------
Goodwill OFG's goodwill will not be amortized to expense however is examined a minimum of yearly for impairment. A quantitative annual impairment check will not be required if, primarily based on a qualitative evaluation, OFG determines that the existence of occasions and circumstances point out that it's extra probably than not that goodwill will not be impaired. OFG completes its annual goodwill impairment check as ofOctober 31 of annually. OFG checks for impairment by first allocating its goodwill and different belongings and liabilities, as vital, to outlined reporting items. A good worth is then decided for every reporting unit. If the truthful values of the reporting items exceed their e-book values, no write-down of the recorded goodwill is vital. As ofSeptember 30, 2021 , OFG had$86.1 million of goodwill allotted as follows:$84.1 million to the banking phase and$2.Zero million to the wealth administration phase. Please confer with Observe 9Goodwill and Different Intangible Belongings for extra data on the annual goodwill impairment check. 90 --------------------------------------------------------------------------------
TABLE 4 – ASSETS SUMMARY AND COMPOSITION
September 30 December 31, Variance
2021 2020 %
(In hundreds)
Investments:
FNMA and FHLMC certificates $ 570,489 $ 210,949 170.4%
Obligations of US government-sponsored businesses 1,280 1,606 -20.3%
US Treasury securities 10,875 10,983 -1.0%
CMOs issued by US government-sponsored businesses 27,625 39,214 -29.6%
GNMA certificates 271,828 182,772 48.7%
FHLB inventory 7,496 8,278 -9.4%
Different debt securities 2,224 914 143.3%
Different investments 10,456 3,984 162.4%
Whole investments 902,273 458,700 96.7%
Loans 6,282,485 6,501,259 -3.4%
Whole investments and loans 7,184,758 6,959,959 3.2%
Different belongings:
Money and due from banks (together with restricted money) 2,745,854 2,143,669 28.1%
Cash market investments 9,837 11,908 -17.4%
Foreclosed actual property 13,904 11,596 19.9%
Accrued curiosity receivable 56,815 65,547 -13.3%
Deferred tax asset, internet 128,663 162,478 -20.8%
Premises and gear, internet 86,981 83,786 3.8%
Servicing belongings 48,227 47,295 2.0%
Goodwill 86,069 86,069 0.0%
Working lease right-of-use belongings 30,625 31,383 -2.4%
Different intangible belongings 38,545 45,896 -16.0%
Different belongings and clients' legal responsibility on acceptances 176,587 176,425 0.1%
Whole different belongings 3,422,107 2,866,052 19.4%
Whole belongings $ 10,606,865 $ 9,826,011 7.9%
Funding portfolio composition:
FNMA and FHLMC certificates 63.2%
46.0%
Obligations of US government-sponsored businesses 0.1%
0.4%
US Treasury securities 1.2%
2.4%
CMOs issued by US government-sponsored businesses 3.1% 8.5%
GNMA certificates 30.1% 39.8%
FHLB inventory 0.8% 1.8%
Different debt securities and different investments 1.5% 1.1%
100.0% 100.0%
91
--------------------------------------------------------------------------------
TABLE 5 – LOAN PORTFOLIO COMPOSITON
September 30, December 31,
2021 2020
(In hundreds)
Loans held for funding:
Business $ 2,331,056 $ 2,402,010
Mortgage 2,022,243 2,307,034
Shopper 374,631 391,287
Auto 1,682,933 1,561,802
6,410,863 6,662,133
Allowance for credit score losses (180,872) (204,809)
Whole loans held for funding 6,229,991 6,457,324
Mortgage loans held on the market 35,031 41,654
Different loans held on the market 17,463 2,281
Whole loans, internet $ 6,282,485 $ 6,501,259
OFG's mortgage portfolio consists of mortgage, business, client, and auto
loans enterprise merchandise. As proven in Desk 5 above, whole loans, internet, amounted
to $6.282 billion at September 30, 2021 and $6.501 billion at December 31, 2020 .
OFG's loans held-for-investment portfolio composition and traits had been as
follows:
?Business mortgage portfolio amounted to $2.331 billion (36.4% of the gross mortgage
portfolio) in comparison with $2.402 billion (36.1% of the gross mortgage portfolio) at
December 31, 2020 . Business manufacturing, excluding PPP mortgage manufacturing,
elevated 45.8%, or $79.Eight million , and 73.4% or $300.9 million to $254.2 million
and $710.Eight million within the quarter and nine-month interval ended September 30,
2021 , respectively, from $174.4 and $409.9 million for a similar intervals in 2020.
PPP mortgage manufacturing decreased $10.Three million and $137.7 million in quarter and
nine-months interval ended September 30, 2021 , respectively, from $10.Three million
and $296.7 million for a similar intervals in 2020, as PPP program was initially
launched within the second quarter of 2020 and concluded in 2021.
?Mortgage mortgage portfolio amounted to $2.022 billion (31.5% of the gross mortgage
portfolio) in comparison with $2.307 billion (34.6% of the gross originated mortgage
portfolio) at December 31, 2020 . Mortgage mortgage manufacturing totaled $85.5 million
and $285.2 million for the quarter and nine-month interval ended September 30,
2021 , respectively, which represents a lower of 8.7% and a rise of 92.2%
from $93.7 million and $148.Four million for a similar intervals in 2020. Mortgage
loans included delinquent loans within the GNMA buy-back choice program amounting to
$19.9 million and $56.2 million at September 30, 2021 and December 31, 2020 ,
respectively. Servicers of loans underlying GNMA mortgage-backed securities should
report as their very own belongings the defaulted loans that they've the choice (however
not the duty) to repurchase, even once they elect to not train that
choice.
?Shopper mortgage portfolio amounted to $374.6 million (5.8% of the gross mortgage
portfolio) in comparison with $391.Three million (5.9% of the gross mortgage portfolio) at
December 31, 2020 . Shopper mortgage manufacturing elevated 115.0% to $50.6 million
and 50.9% to $116.2 million for the quarter and nine-month interval ended
September 30, 2021 , respectively, from $23.5 million and $77.Zero million for the
identical intervals in 2020.
?Auto and leasing portfolio amounted to $1.683 billion (26.3% of the gross mortgage
portfolio) in comparison with $1.562 billion (23.4% of the gross mortgage portfolio) at
December 31, 2020 . Auto manufacturing elevated 6.4% to $165.9 million and 55.6% to
$486.Three million within the quarter and nine-month interval ended September 30, 2021 ,
respectively, in comparison with $155.9 million and $312.6 million for a similar intervals
in 2020.
92
-------------------------------------------------------------------------------- The next desk consists of the maturities of OFG's lending publicity to thePuerto Rico authorities, which is proscribed solely to loans to municipalities secured by advert valorem taxation, with out limitation as to fee or quantity, on all taxable property throughout the issuing municipalities and a mortgage to a public company acquired within the Scotiabank Acquisition. The great religion, credit score and limitless taxing energy of every issuing municipality are pledged for the fee of its basic obligations. Deposits from thePuerto Rico authorities totaled$281.7 million atSeptember 30, 2021 .
TABLE 6 –
September 30, 2021
Maturity
Much less Extra
Carrying than 1 1 to three than 3
Worth 12 months Years Years
Loans: (In hundreds)
Public firms $ 1,102 $ 1,102 $ - $ -
Municipalities 86,010 - 34,818 51,192
Whole $ 87,112 $ 1,102 $ 34,818 $ 51,192
At
Credit score Danger Administration Allowance for Credit score Losses
OFG maintains an allowance for credit score losses at a stage that administration
considers ample to supply for lifetime anticipated losses primarily based upon an
analysis of identified and inherent dangers and cheap and supportable forecasts.
OFG’s allowance for credit score losses (“ACL”) coverage offers for an in depth
quarterly evaluation of anticipated credit score losses.
OnJanuary 1, 2020 , OFG adopted the brand new CECL accounting customary that requires the measurement of the allowance for credit score losses to be primarily based on administration's finest estimate of future anticipated credit score losses over the lifetime of the Firm's related monetary belongings. Tables 7 by 9 set forth an evaluation of exercise within the allowance for credit score losses for the quarters and nine-month intervals endedSeptember 30, 2021 and 2020 and current chosen credit score loss statistics forSeptember 30, 2021 andDecember 31, 2020 . As well as, Desk 5 units forth the composition of the mortgage portfolio.
Please confer with the “Provision for Credit score Losses” part within the MD&A for a extra
detailed evaluation of provisions for credit score losses.
Non-performing Belongings OFG's non-performing belongings embrace non-performing loans and foreclosed actual property (see Tables 10 and 12). AtSeptember 30, 2021 , OFG had$123.9 million of non-accrual loans, together with$38.Eight million PCD loans accounted for below ASU 2016-13, in comparison with$147.9 million atDecember 31, 2020 . AtSeptember 30, 2021 andDecember 31, 2020 , loans whose phrases have been prolonged and that are categorised as troubled-debt restructurings that aren't included in non-performing belongings amounted to$122.5 million and$113.9 million , respectively. Delinquent residential mortgage loans insured or assured below relevant FHA andVA packages are categorised as non-performing loans once they develop into 90 days or extra overdue, however should not positioned in non-accrual standing till they develop into 12 months or extra overdue, since they're insured loans. Subsequently, these loans are included as non-performing loans however excluded from non-accrual loans. AtSeptember 30, 2021 , OFG's non-performing belongings decreased by 10.3% to$148.6 million (1.40% of whole belongings) from$165.6 million (1.69% of whole belongings) atDecember 31, 2020 . Foreclosed actual property amounting to$13.9 million atSeptember 30, 2021 , elevated from$11.6 million atDecember 31, 2020 . Different repossessed belongings amounting to$1.5 million atSeptember 30, 2021 , 93 -------------------------------------------------------------------------------- decreased from$1.Eight million atDecember 31, 2020 . OFG doesn't count on non-performing loans to end in considerably larger losses. AtSeptember 30, 2021 , the allowance protection ratio to non-performing loans was 135.8% (134.6% atDecember 31, 2020 ). Upon adoption of CECL, OFG elected to take care of swimming pools of loans that had been beforehand accounted for below ASC 310-30 and can proceed to account for these swimming pools as a unit of account. As such, for PCD loans the dedication of nonaccrual or accrual standing is made on the pool stage, not the person mortgage stage. Upon adoption of CECL, the allowance for credit score losses was decided for every pool and added to the pool's carrying quantity to ascertain a brand new amortized value foundation. The distinction between the unpaid principal steadiness of the pool and the brand new amortized value foundation is the non-credit premium or low cost which might be amortized curiosity earnings over the remaining lifetime of the pool. On a quarterly foundation, administration will monitor the composition and habits of the swimming pools to assess the flexibility for money circulate estimation and timing. If primarily based on the evaluation carried out, the pool is assessed as non-accrual the accretion/amortization of the non-credit (low cost) premium will stop. OFG follows a conservative residential mortgage lending coverage, with greater than 90% of its residential mortgage portfolio consisting of fixed-rate, absolutely amortizing, absolutely documented loans that should not have the extent of threat related with subprime loans supplied by sure mainU.S. mortgage mortgage originators. Moreover, OFG has by no means been lively in unfavourable amortization loans or adjustable fee mortgage loans, together with these with teaser charges.
The next gadgets comprise non-performing loans held for funding, Non-PCD
and PCDs:
Business loans -AtSeptember 30, 2021 , OFG's non-performing business loans amounted to$65.Three million (49.0 % of OFG's non-performing loans), a 16.8% lower from$78.5 million atDecember 31, 2020 (51.6% of OFG's non-performing loans). Non-PCD business loans are positioned on non-accrual standing once they develop into 90 days or extra overdue and are written-down, if vital, primarily based on the particular analysis of the underlying collateral, if any. Residential mortgage loans -AtSeptember 30, 2021 , OFG's non-performing mortgage loans totaled$53.6 million (40.3% of OFG's non-performing loans), a 10.1% enhance from$48.7 million (32.0% of OFG's non-performing loans) atDecember 31, 2020 . Non-PCD residential mortgage loans are positioned on non-accrual standing once they develop into 90 days or extra overdue and are written-down, if vital, primarily based on the precise analysis of the collateral underlying the mortgage, besides for FHA andVA insured mortgage loans that are positioned in non-accrual once they develop into 12 months or extra overdue. Shopper loans -AtSeptember 30, 2021 , OFG's non-performing client loans amounted to$2.2 million (1.7% of OFG's non-performing loans), a 47.9% lower from$4.2 million atDecember 31, 2020 (2.8% of OFG's non-performing loans). Non-PCD client loans are positioned on non-accrual standing once they develop into 90 days overdue and written-off when funds are delinquent 120 days in private loans and 180 days in bank cards and private strains of credit score. Auto loans and leases -AtSeptember 30, 2021 , OFG's non-performing auto loans and leases amounted to$12.1 million (9.1% of OFG's whole non-performing loans), a lower of 41.9% from$20.Eight million atDecember 31, 2020 (13.6% of OFG's whole non-performing loans). Non-PCD auto loans and leases are positioned on non-accrual standing once they develop into 90 days overdue, partially written-off to collateral worth when funds are delinquent 120 days, and absolutely written-off when funds are delinquent 180 days. OFG has two mortgage mortgage modification packages. These are the Loss Mitigation Program and the Non-Conforming Mortgage Mortgage Program. Each packages are supposed to assist accountable householders to stay of their houses and keep away from foreclosures, whereas additionally lowering OFG's losses on non-performing mortgage loans. The Loss Mitigation Program helps mortgage debtorswho are or will develop into financially unable to satisfy the present or scheduled mortgage funds. Loans that qualify below this program are these assured by FHA,VA , RURAL, PRHFA, standard loans assured byMortgage Warranty Insurance coverage Company (MGIC), standard loans offered toFNMA and FHLMC, and traditional loans retained by OFG. This system affords diversified options resembling common or decreased fee plans, fee moratorium, mortgage mortgage modification, partial claims (solely FHA), quick sale, and deed in lieu of foreclosures. The Non-Conforming Mortgage Mortgage Program is for non-conforming mortgages, together with balloon fee, curiosity solely/curiosity first, variable rate of interest, adjustable rate of interest and different certified loans. Non-conforming mortgage mortgage portfolios are segregated into the next classes: performing loans that meet secondary market requirement and are refinanced below the credit score underwriting tips of FHA/VA /FNMA / FHLMC, and performing loans not assembly secondary market tips processed pursuant OFG's present credit score and underwriting tips. OFG achieved an reasonably priced and sustainable month-to-month fee by taking 94 --------------------------------------------------------------------------------
particular, sequential, and vital steps resembling lowering the rate of interest,
extending the mortgage time period, capitalizing arrearages, deferring the fee of
principal or, if the borrower qualifies, refinancing the mortgage.
With the intention to apply for any of our mortgage modification packages, if the borrower is
lively in Chapter 13 chapter, it should request an authorization from the
chapter trustee to permit for the mortgage modification. Debtors with discharged
Chapter 7 bankruptcies might also apply. Loans in these packages are evaluated by
designated underwriters for troubled-debt restructuring classification if OFG
grants a concession for authorized or financial causes as a result of debtor's monetary
difficulties.
95
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TABLE 7 – ALLOWANCE FOR CREDIT LOSSES BREAKDOWN
September 30, December 31, Variance
2021 2020 %
(In hundreds)
Allowance for credit score losses:
Non-PCD:
Business $ 33,240 $ 45,779 -27.4%
Mortgage 16,867 19,687 -14.3%
Shopper 17,848 25,253 -29.3%
Auto and leases 70,919 70,296 0.9%
Whole allowance for credit score losses $ 138,874 $ 161,015 $ -13 .8%
PCD:
Business $ 11,166 16,405 -31.9%
Mortgage 30,390 26,389 15.2%
Shopper 37 57 -35.1%
Auto and leases 405 943 -57.1%
Whole allowance for credit score losses $ 41,998
43,794 -4.1%
Allowance for credit score losses abstract Business$ 44,406 $ 62,184 -28.6% Mortgage 47,257 46,076 2.6% Shopper 17,885 25,310 -29.3% Auto and leases 71,324 71,239 0.1% Whole allowance for credit score losses$ 180,872 $ 204,809 $ -11 .7% Allowance composition: Business 24.6% 30.4% Mortgage 26.1% 22.5% Shopper 9.9% 12.4% Auto and leases 39.4% 34.8% 100.0% 100.0% Allowance protection ratio at finish of interval: Business 1.9% 2.6% -26.6% Mortgage 2.3% 2.0% 17.0% Shopper 4.8% 6.5% -26.3% Auto and leases 4.2% 4.6% -7.0% 2.82% 3.1% -8.1% Allowance protection ratio to non-performing loans: Business 68.0% 79.3% -14.2% Mortgage 88.1% 94.6% -6.8% Shopper 811.9% 599.1% 35.5% Auto and leases 591.7% 343.1% 72.5% 135.8% 134.6% 0.9% 96
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TABLE 8 – ALLOWANCE FOR CREDIT LOSSES SUMMARY
Quarter Ended September 30, Variance 9-Month Interval Ended Variance
September 30,
2021 2020 % 2021 2020 %
(In hundreds)
Allowance for credit score
losses:
Steadiness at starting of
interval $ 191,717 $ 232,701 -17.6% $ 204,809 $ 116,539 75.7%
Influence of ASC 326
adoption - - 0.0% - 89,720 -100.0%
Provision for credit score
losses (4,794) 13,182 -136.4% (6,664) 79,407 -108.4%
Cost-offs (16,237) (18,095) -10.3% (44,718) (71,021) -37.0%
Recoveries 10,186 7,525 35.4% 27,445 20,668 32.8%
Steadiness at finish of interval $ 180,872 $ 235,313 -23.1% $ 180,872 $ 235,313 $ -23 .1%
97
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TABLE 9 -NET CREDIT LOSSES STATISTICS ON LOAN AND LEASES 9-Month Interval Ended Quarter Ended September 30, Variance September 30, Variance 2021 2020 % 2021 2020 % ({Dollars} in hundreds) Non-PCD: Mortgage Cost-offs $ (160) $ (56) 185.7%$ (1,216) $ (659) 84.5% Recoveries 419 269 55.8% 1,227 527 132.8% Whole 259 213 21.6% 11 (132) -108.3% Business Cost-offs (7,518) (298) 2422.8% (8,238) (4,566) 80.4% Recoveries 558 253 120.6% 1,983 2,407 -17.6% Whole (6,960) (45) 15366.7% (6,255) (2,159) 189.7% Shopper Cost-offs (2,370) (5,114) -53.7% (9,736) (15,316) -36.4% Recoveries 894 663 34.8% 2,157 1,750 23.3% Whole (1,476) (4,451) -66.8% (7,579) (13,566) -44.1% Auto and leases Cost-offs (4,989) (10,123) -50.7% (19,242) (36,476) -47.2% Recoveries 5,874 5,950 -1.3% 17,688 13,566 30.4% Whole 885 (4,173) -121.2% (1,554) (22,910) -93.2% PCD: Mortgage Cost-offs$ (1,008) $ (1,677) -39.9%$ (5,340) $ (8,998) -40.7% Recoveries 641 89 620.2% 971 791 22.8% Whole (367) (1,588) -76.9% (4,369) (8,207) -46.8% Business Cost-offs (68) (293) -76.8% (118) (3,036) -96.1% Recoveries 1,316 91 1346.2% 2,183 752 190.3% Whole 1,248 (202) -717.8% 2,065 (2,284) -190.4% Shopper Cost-offs - (61) -100.0% (22) (521) -95.8% Recoveries 219 - 100.0% 274 92 197.8% Whole 219 (61) 100.0% 252 (429) -158.7% Auto and leases Cost-offs (124) (474) -73.8% (806) (1,449) -44.4% Recoveries 265 211 25.6% 962 783 22.9% Whole 141 (263) -153.6% 156 (666) -123.4% Whole charge-offs (16,237) (18,096) -10.3% (44,718) (71,021) -37.0% Whole recoveries 10,186 7,526 35.3% 27,445 20,668 32.8% Internet charge-offs$ (6,051) $ (10,570) -42.8%$ (17,273) $ (50,353) -65.7% Internet credit score losses to common loans excellent: 98
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Mortgage 0.02% 0.24% -91.08% 0.27% 0.47% -42.30% Business 0.97% 0.04% 2334.35% 0.23% 0.25% -5.68% Shopper 1.26% 3.94% -68.17% 2.41% 3.90% -38.17% Auto and leases -0.25% 1.17% -121.19% 0.12% 2.07% -94.41% Whole 0.37% 0.62% -39.91% 0.35% 0.99% -64.62% Recoveries to charge-offs 62.73% 41.59% 50.84% 61.37% 29.10% 110.90% Common Loans Held for Funding Mortgage$ 2,047,272 $ 2,325,756 -12.0%$ 2,145,635 $ 2,368,855 -9.4% Business 2,360,642 2,484,977 -5.0% 2,402,904 2,403,377 0.0% Shopper 400,582 457,620 -12.5% 404,672 477,889 -15.3% Auto and leases 1,657,378 1,518,669 9.1% 1,612,889 1,521,783 6.0% Whole$ 6,465,874 $ 6,787,022 -4.7%$ 6,566,100 $ 6,771,904 -3.0%
TABLE 10 – NON-PERFORMING ASSETS
September 30, December 31, Variance
2021 2020 (%)
({Dollars} in hundreds)
Non-performing belongings:
Non-PCD
Non-accruing loans
Troubled-Debt Restructuring loans $ 26,586 $ 28,297
-6.0%
Different loans 58,537 82,122
-28.7%
Accruing loans Troubled-Debt Restructuring loans 8,239 3,411 141.5% Different loans 980 889 10.2% Whole$ 94,342 $ 114,719 -17.8% PCD[1] 38,828 37,475 3.6% Whole non-performing loans$ 133,170 $ 152,194 -12.5% Foreclosed actual property 13,904 11,596 19.9% Different repossessed belongings 1,528 1,816 -15.9%$ 148,602 $ 165,606 -10.3% Non-performing belongings to whole belongings 1.40% 1.69%
-17.2%
Non-performing belongings to whole capital 14.10% 15.25%
-7.5%
[1] PCD loans on nonaccrual standing
99
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9-Month Interval Ended
Quarter Ended September 30, September 30,
2021 2020 2021 2020
(In hundreds) (In hundreds)
Curiosity that might have been
recorded within the interval if the
loans had not been categorised as
non-accruing loans $ 634 $ 855 $ 1,558 $ 1,879
TABLE 11 – NON-ACCRUAL LOANS
September 30, December 31 Variance
2021 2020 %
({Dollars} in hundreds)
Non-accrual loans:
Non-PCD loans
Business $ 28,473 $ 41,999 -32.2%
Mortgage 42,392 43,430 -2.4%
Shopper 2,200 4,224 -47.9%
Auto and leasing 12,055 20,766 -41.9%
85,120 110,419 -22.9%
PCD loans
Business 36,798 36,471 0.9%
Mortgage 2,030 1,003 102.4%
Shopper - 1 -100.0%
38,828 37,475 3.6%
Whole $ 123,948 $ 147,894 -16.2%
Non-performing loans composition percentages:
Business 52.7% 53.1%
Mortgage 35.8% 30.0%
Shopper 1.8% 2.9%
Auto and leasing 9.7% 14.0%
Whole 100.0% 100.0%
Non-accrual loans ratios:
Non-accrual loans to whole loans 1.93%
2.22% -13.1%
Allowance for credit score losses to non-accrual loans 145.93% 138.48% 5.4%
100
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TABLE 12 – NON-PERFORMING LOANS
September 30, December 31, Variance
2021 2020 %
({Dollars} in hundreds)
Non-performing loans
Non-PCD
Business $ 28,472 $ 41,999 -32.2%
Mortgage 51,612 47,730 8.1%
Shopper 2,203 4,224 -47.8%
Auto and leases 12,055 20,766 -41.9%
Whole $ 94,342 $ 114,719 -17.8%
PCD
Business $ 36,798 $ 36,471 0.9%
Mortgage 2,030 1,003 100.0%
Shopper - 1 -100.0%
Whole $ 38,828 $ 37,475 3.6%
Whole non-performing loans $ 133,170 $ 152,194 -12.5%
Non-performing loans composition percentages:
Business 49.0% 51.6%
Mortgage 40.3% 32.0%
Shopper 1.7% 2.8%
Auto and leases 9.1% 13.6%
100.0% 100.0%
Non-performing loans to:
Whole loans 2.1% 2.3% -8.8%
Whole belongings 1.3% 1.6% -18.7%
Whole capital 12.6% 14.0% -9.8%
Non-performing loans with partial charge-offs
to:
Whole loans 0.5% 0.6% -8.8%
Non-performing loans 25.1% 24.8% 1.2%
Different non-performing loans ratios:
Cost-off fee on non-performing loans to
non-performing loans on which charge-offs have 181.2% 151.3% 19.7%
been taken
Allowance for credit score losses to non-performing 181.4% 179.0% 1.3%
loans on which no charge-offs have been taken
101
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TABLE 13 – LIABILITIES SUMMARY AND COMPOSITION
September 30, December 31, Variance
2021 2020 %
({Dollars} in hundreds)
Deposits:
Non-interest bearing deposits $ 2,695,993 $ 2,259,048 19.3%
NOW accounts 2,835,075 2,354,194 20.4%
Financial savings and cash market accounts 2,378,205 1,944,426 22.3%
Certificates of deposit 1,334,324 1,856,400 -28.1%
Whole deposits 9,243,597 8,414,068 9.9%
Accrued curiosity payable 792 1,572 -49.6%
Whole deposits and accrued curiosity payable 9,244,389 8,415,640 9.8%
Borrowings:
Advances from FHLB 62,559 65,561 -4.6%
Subordinated capital notes 36,083 36,083 0.0%
Different time period notes 375 707 -47.0%
Whole borrowings 99,017 102,351 -3.3%
Whole deposits and borrowings 9,343,406 8,517,991 9.7%
Different Liabilities:
Securities bought however not but obtained 31,565 - 100.0%
By-product liabilities 1,136 1,712 -33.6%
Acceptances excellent 24,371 33,349 -26.9%
Lease legal responsibility 32,167 32,566 -1.2%
Different liabilities 120,555 154,418 -21.9%
Whole liabilities $ 9,553,200 $ 8,740,036 9.3%
Deposits portfolio composition percentages:
Non-interest bearing deposits 29.2%
26.8%
NOW accounts 30.7%
28.0%
Financial savings and cash market accounts 25.7% 23.1%
Certificates of deposit 14.4% 22.1%
100.0% 100.0%
Borrowings portfolio composition percentages:
Advances from FHLB 63.2% 64.1%
Different time period notes 0.4% 0.7%
Subordinated capital notes 36.4% 35.2%
100.0% 100.0%
Securities offered below agreements to repurchase
(excluding accrued curiosity)
Quantity excellent at period-end $ - $
–
Every day common excellent steadiness $ - $
50,492
Most excellent steadiness at any month-end $ -$ 190,000
Liabilities and Funding Sources
As proven in Desk 13 above, atSeptember 30, 2021 , OFG's whole liabilities had been$9.553 billion , 9.3% greater than the$8.740 billion reported atDecember 31, 2020 . Deposits and borrowings, OFG's funding sources, amounted to$9.343 billion atSeptember 30, 2021 versus$8.518 billion atDecember 31, 2020 , a 9.7% enhance, primarily from larger core deposits by$1.352 billion , whereas time deposits, brokered deposits and borrowings decreased by$509.2 million ,$13.6 million and$3.Three million , respectively. AtSeptember 30, 2021 , deposits represented 99% and borrowings represented 1% of interest-bearing liabilities. AtSeptember 30, 2021 , deposits, the most important class of OFG's interest-bearing liabilities, had been$9.244 billion , a rise of 9.8% from$8.416 billion 102
-------------------------------------------------------------------------------- atDecember 31, 2020 , reflecting larger business deposits from current and new purchasers and better retail deposits because of elevated liquidity within the economic system from authorities stimulus. Borrowings consist primarily of FHLB-NY advances and subordinated capital notes. The general declines in time deposits, brokered deposits and borrowings are half of the technique to switch larger value funding with decrease value core deposits. Stockholders' Fairness AtSeptember 30, 2021 , OFG's whole stockholders' fairness was$1.054 billion , a 3.0% lower when in comparison with$1.086 billion atDecember 31, 2020 . This discount in stockholders' fairness displays lower in most popular inventory of$92.0 million as a result of Collection A, Collection B and Collection D most popular inventory redemptions, in collected different complete earnings, internet of tax, of$2.Four million , and in treasury inventory of$37.9 million on account of repurchases of$41.2 million , as a part of purchase again program of$50 million applied throughout the quarter endedSeptember 30, 2021 . Lower was offset by, enhance in authorized surplus of$11.2 million , in retained earnings of$75.6 million , and extra paid-in capital of$13.2 million . E book worth per share was$21.08 atSeptember 30, 2021 in comparison with$19.54 atDecember 31, 2020 . FromDecember 31, 2020 toSeptember 30, 2021 , tangible widespread fairness to tangible whole belongings decreased from 9.00% to eight.86%, leverage capital ratio decreased from 10.30% to 9.33%, tier 1 risk-based capital ratio decreased from 14.78% to 14.03%, and whole risk-based capital ratio decreased from 16.04% to 15.28%, as a results of the popular inventory redemptions and inventory repurchase program. Frequent fairness tier 1 capital ratio elevated from 13.08% to 13.52% from internet earnings throughout the nine-month interval endedSeptember 30, 2021 , partially offset by the inventory repurchase program.Regulatory Capital OFG and the Financial institution are topic to regulatory capital necessities established by theFederal Reserve Board and theFDIC . The present risk-based capital requirements relevant to OFG and the Financial institution ("Basel III capital guidelines"), which have been efficient sinceJanuary 1, 2015 , are primarily based on the ultimate capital framework for strengthening worldwide capital requirements, often known as Basel III, of theBasel Committee on Banking Supervision . As ofSeptember 30, 2021 , the capital ratios of OFG and the Financial institution proceed to exceed the minimal necessities for being "well-capitalized" below the Basel III capital guidelines. OnJanuary 1, 2020 , the Firm applied CECL utilizing the modified retrospective method. Consequently, a$39.2 million allowance for credit score losses was recorded for Non-PCD loans and$0.2 million for unused commitments with the corresponding adjustment lowering retained earnings, internet of a$13.9 million deferred tax impact. For extra data, see Observe 1 - Abstract of Important Accounting Insurance policies to the Consolidated Monetary Statements. OnMarch 27, 2020 , in response to the Covid-19 pandemic,U.S. banking regulators issued an interim ultimate rule that the Firm adopted to delay for 2 years the preliminary adoption influence of CECL on regulatory capital, adopted by a three-year transition interval to section out the combination quantity of the capital profit offered throughout 2020 and 2021 (i.e., a five-year transition interval). In the course of the two-year delay, OFG will add again to widespread fairness tier 1 ("CET1") capital 100% of the preliminary adoption influence of CECL plus 25% of the cumulative quarterly modifications within the allowance for credit score losses (i.e., quarterly transitional quantities). After two years, beginning onJanuary 1, 2022 , the quarterly transitional quantities alongside with the preliminary adoption influence of CECL might be phased out of CET1 capital over a three-year interval. InJuly 2019 , the federal banking regulatory businesses adopted a ultimate rule, pursuant to the Financial Development and Regulatory Paperwork Discount Act of 1996, that simplifies for non-advanced approaches banking organizations the regulatory capital therapy for mortgage servicing belongings ("MSAs") and sure deferred tax belongings arising from non permanent variations (non permanent distinction DTAs). It will increase CET1 capital threshold deductions from 10% to 25% and removes the combination 15% CET1 threshold deduction. Nonetheless, it retains the 250% threat weight relevant to non-deducted quantities of MSAs and non permanent distinction DTAs. OnJanuary 1, 2020 , the Firm elected to early implement the simplifications to the capital rule. The chance-based capital ratios introduced in Desk 14, which embrace widespread fairness tier 1, tier 1 capital, whole capital and leverage capital as ofSeptember 30, 2021 andDecember 31, 2020 , are calculated primarily based on the Basel III capital guidelines associated to the measurement of capital, risk-weighted belongings and common belongings. 103
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The next are OFG’s consolidated capital ratios below the Basel III capital
guidelines at
TABLE 14 – CAPITAL, DIVIDENDS AND STOCK DATA
September 30, December 31, Variance
2021 2020 %
({Dollars} in hundreds, besides per
share knowledge)
Capital knowledge:
Stockholders' fairness $ 1,053,665 $ 1,085,975 -3.0%
Regulatory Capital Ratios knowledge:
Frequent fairness tier 1 capital ratio 13.52% 13.08% 3.4%
Minimal widespread fairness tier 1 capital ratio required 4.50% 4.50% 0.0%
Precise widespread fairness tier 1 capital $ 931,885 894,075 4.2%
Minimal widespread fairness tier 1 capital required $ 310,196 307,703 0.8%
Minimal capital conservation buffer required (2.5%) $ 172,331 170,946 0.8%
Extra over regulatory requirement $ 449,357 415,426 8.2%
Danger-weighted belongings $ 6,893,254 6,837,846 0.8%
Tier 1 risk-based capital ratio 14.03% 14.78% -5.1%
Minimal tier 1 risk-based capital ratio required 6.00% 6.00% 0.0%
Precise tier 1 risk-based capital $ 966,885 $ 1,010,945 -4.4%
Minimal tier 1 risk-based capital required $ 413,595 $ 410,271 0.8%
Minimal capital conservation buffer required (2.5%) $ 172,331 170,946 0.8%
Extra over regulatory requirement $ 380,959 $ 429,728 -11.3%
Danger-weighted belongings $ 6,893,254 $ 6,837,846 0.8%
Whole risk-based capital ratio 15.28% 16.04% -4.7%
Minimal whole risk-based capital ratio required 8.00% 8.00% 0.0%
Precise whole risk-based capital $ 1,053,185 $ 1,096,766 -4.0%
Minimal whole risk-based capital required $ 551,460 $ 547,028 0.8%
Minimal capital conservation buffer required (2.5%) $ 172,331 170,946 0.8%
Extra over regulatory requirement $ 329,394 $ 378,972 -13.1%
Danger-weighted belongings $ 6,893,254 $ 6,837,846 0.8%
Leverage capital ratio 9.33% 10.30% -9.5%
Minimal leverage capital ratio required 4.00% 4.00% 0.0%
Precise tier 1 capital $ 966,885 $ 1,010,945 -4.4%
Minimal tier 1 capital required $ 414,708 $ 392,424 5.7%
Extra over regulatory requirement $ 552,177 $ 618,521 -10.7%
Tangible widespread fairness to whole belongings 8.76% 8.88% -1.4%
Tangible widespread fairness to risk-weighted belongings 13.48% 12.75% 5.7%
Whole fairness to whole belongings 9.93% 11.05% -10.1%
Whole fairness to risk-weighted belongings 15.29% 15.88% -3.8%
Inventory knowledge:
Excellent widespread shares 49,977,236 51,387,071 -2.7%
E book worth per widespread share $ 21.08 $ 19.54 7.9%
Tangible e-book worth per widespread share $ 18.59 $ 16.97 9.5%
Market value at finish of interval $ 25.22 $ 18.54 36.0%
Market capitalization at finish of interval $ 1,260,426 $ 952,716 32.3%
104
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The next desk presents a reconciliation of OFG’s whole stockholders’
fairness to tangible widespread fairness and whole belongings to tangible belongings at
September 30, December 31,
2021 2020
(In hundreds, besides share or per
share data)
Whole stockholders' fairness $ 1,053,665 $ 1,085,975
Most well-liked inventory - (92,000)
Most well-liked inventory issuance prices - 10,130
Goodwill (86,069) (86,069)
Core deposit intangible (29,468) (34,983)
Buyer relationship intangible (8,934)
(10,629)
Different intangibles (143) (284) Whole tangible widespread fairness (non-GAAP)$ 929,051 $ 872,140 Whole belongings 10,606,865 9,826,011 Goodwill (86,069) (86,069) Core deposit intangible (29,468) (34,983) Buyer relationship intangible (8,934) (10,629) Different intangibles (143) (284) Whole tangible belongings$ 10,482,251 $ 9,694,046 Tangible widespread fairness to tangible belongings 8.86% 9.00% Frequent shares excellent at finish of interval 49,977,236
51,387,071
Tangible e-book worth per widespread share $ 18.59 $ 16.97
The tangible widespread fairness ratio and tangible e-book worth per widespread share are
non-GAAP measures and, in contrast to tier 1 capital and customary fairness tier 1 capital,
should not codified within the federal banking rules. Administration and lots of inventory
analysts use the tangible widespread fairness ratio and tangible e-book worth per widespread
share along with extra conventional financial institution capital ratios to match the
capital adequacy of banking organizations. Neither tangible widespread fairness nor
tangible belongings or associated measures must be thought-about in isolation or as a
substitute for stockholders' fairness, whole belongings or another measure
calculated in accordance with GAAP. Furthermore, the style during which OFG calculates
its tangible widespread fairness, tangible belongings and another associated measures could
differ from that of different firms reporting measures with comparable names.
Non-GAAP monetary measures have inherent limitations, should not required to be
uniformly utilized, and should not audited. To mitigate these limitations, OFG has
procedures in place to calculate these measures utilizing the suitable GAAP or
regulatory parts. Though these non-GAAP monetary measures are steadily
utilized by stakeholders within the analysis of an organization, they've limitations as
analytical instruments and shouldn't be thought-about in isolation or instead
for analyses of outcomes as reported below GAAP.
105
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The next desk presents OFG's capital adequacy data below the Basel
III capital guidelines:
September 30, December 31, Variance
2021 2020 %
({Dollars} in hundreds)
Danger-based capital:
Frequent fairness tier 1 capital $ 931,885 $ 894,075 4.2%
Extra tier 1 capital 35,000 116,870 -70.1%
Tier 1 capital 966,885 1,010,945 -4.4%
Extra Tier 2 capital 86,300 85,820 0.6%
Whole risk-based capital $ 1,053,185 $ 1,096,765 -4.0%
Danger-weighted belongings:
Steadiness sheet gadgets $ 6,312,427 $ 6,338,524 -0.4%
Off-balance sheet gadgets 580,827 499,322 16.3%
Whole risk-weighted belongings $ 6,893,254 $ 6,837,846 0.8%
Ratios:
Frequent fairness tier 1 capital (minimal required,
together with capital conservation buffer - 7%) 13.52% 13.08% 3.4%
Tier 1 capital (minimal required, together with
capital conservation buffer - 8.5%) 14.03% 14.78% -5.1%
Whole capital (minimal required, together with
capital conservation buffer - 10.5%) 15.28% 16.04% -4.7%
Leverage ratio (minimal required - 4%) 9.33% 10.30% -9.4%
Fairness to belongings 9.93% 11.05% -10.1%
Tangible widespread fairness to belongings 8.76% 8.88% -1.4%
106
-------------------------------------------------------------------------------- The Financial institution is taken into account "nicely capitalized" below the regulatory framework for immediate corrective motion. The desk beneath reveals the Financial institution's regulatory capital ratios atSeptember 30, 2021 andDecember 31, 2020 : September 30, December 31, Variance 2021 2020 % ({Dollars} in hundreds) Oriental Financial institution Regulatory Capital Ratios: Frequent Fairness Tier 1 Capital to Danger-Weighted Belongings 13.45% 14.06% -4.3% Precise widespread fairness tier 1 capital$ 921,975 $ 956,845 -3.6% Minimal capital requirement (4.5%)$ 308,528 $ 306,206 0.8% Minimal capital conservation buffer requirement (2.5%)$ 171,404 $ 170,114 0.8% Minimal to be nicely capitalized (6.5%)$ 445,651 $ 442,297 0.8% Tier 1 Capital to Danger-Weighted Belongings 13.45% 14.06% -4.3% Precise tier 1 risk-based capital$ 921,975 $ 956,845 -3.6% Minimal capital requirement (6%)$ 411,370 $ 408,274 0.8% Minimal capital conservation buffer requirement (2.5%)$ 171,404 $ 170,114 0.8% Minimal to be nicely capitalized (8%)$ 548,493 $ 544,366 0.8% Whole Capital to Danger-Weighted Belongings 14.70% 15.32% -4.0% Precise whole risk-based capital$ 1,007,817 $ 1,042,255 -3.3% Minimal capital requirement (8%)$ 548,493 $ 544,366 0.8% Minimal capital conservation buffer requirement (2.5%)$ 171,404 $ 170,114 0.8% Minimal to be nicely capitalized (10%)$ 685,617 $ 680,457 0.8% Whole Tier 1 Capital to Common Whole Belongings 8.96% 9.81% -8.7% Precise tier 1 capital$ 921,975 $ 956,845 -3.6% Minimal capital requirement (4%)$ 411,478 $ 390,304 5.4% Minimal to be nicely capitalized (5%)$ 514,348 $ 487,879 5.4% OFG's widespread inventory is traded on theNew York Inventory Alternate ("NYSE") below the image "OFG." AtSeptember 30, 2021 andDecember 31, 2020 , OFG's market capitalization for its excellent widespread inventory was$1.260 billion ($25.22 per share) and$952.7 million ($18.54 per share), respectively. 107 --------------------------------------------------------------------------------
The next desk offers the excessive and low costs and dividends per share of
OFG’s widespread inventory for every quarter of the final three calendar years:
Money
Worth Dividend
Excessive Low Per share
2021
September 30, 2021 $ 25.66 $ 20.04 $ 0.12
June 30, 2021 $ 25.14 $ 21.61 $ 0.08
March 31, 2021 $ 22.93 $ 16.48 $ 0.08
2020
December 31, 2020 $ 18.54 $ 12.59 $ 0.07
September 30, 2020 $ 14.35 $ 12.12 $ 0.07
June 30, 2020 $ 15.10 $ 9.38 $ 0.07
March 31, 2020 $ 23.50 $ 9.32 $ 0.07
2019
December 31, 2019 $ 23.61 $ 20.00 $ 0.07
September 30, 2019 $ 24.20 $ 19.84 $ 0.07
June 30, 2019 $ 23.77 $ 18.78 $ 0.07
March 31, 2019 $ 21.24 $ 16.37 $ 0.07
In July 2021 , the Firm introduced the approval by the Board of Administrators of a
inventory repurchase program to buy an extra $50 million of the Firm's
widespread inventory within the open market.
Underneath OFG's inventory repurchase program in impact at September 30, 2021 , it was
approved to buy within the open market as much as $50.Zero million of its excellent
shares of widespread inventory. The shares of widespread inventory repurchased are to be held by
OFG as treasury shares. In the course of the nine-month interval ended September 30, 2021 ,
OFG repurchased 1,684,921 shares below this program for a complete of $40.2
million , at a mean value of $23.83 per share. In the course of the nine-month interval
ended September 30, 2020 , OFG repurchased 175,000 shares below this program for
a complete of $2.2 million , at a mean value of $12.69 per share. OFG didn't
repurchase any shares of its widespread inventory within the quarters and nine-month intervals
ended on September 30, 2021 and 2020, aside from by its publicly introduced
inventory repurchase program.
At September 30, 2021 , the variety of shares which will but be bought below such
program is estimated at 390,652 and was calculated by dividing the remaining
steadiness of $9.Eight million by $25.22 (closing value of OFG's widespread inventory at
September 30, 2021 ).
Influence of Inflation and Altering Costs
The monetary statements and associated knowledge introduced herein (apart from sure
non-GAAP measures as beforehand indicated) have been ready in accordance with
GAAP which require the measurement of monetary place and working outcomes
by way of historic {dollars} with out contemplating modifications within the relative
buying energy of cash over time on account of inflation.
Not like most industrial firms, nearly the entire belongings and liabilities of
a monetary establishment are financial in nature. Consequently, rates of interest have
a extra important influence on a monetary establishment's efficiency than the
results of basic ranges of inflation. Rates of interest don't essentially transfer
in the identical course or with the identical magnitude as the costs of products and
providers since such costs are affected by inflation.
108
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