OFG Bancorp(OFG) - 2020 Q2 - Quarterly Report

Financial Performance - Net income for the quarter ended June 30, 2020, was $21,787,000, a decrease of 9.1% compared to $23,979,000 in the same quarter of 2019[26]. - Earnings per common share for the quarter was $0.39, down from $0.44 in the same quarter of 2019, representing a decrease of 11.4%[24]. - Comprehensive income for the quarter ended June 30, 2020, was $23,085,000, a decrease of 18.5% from $28,340,000 in the prior year[26]. - The company reported a net gain of $3,462 thousand from the bargain purchase related to the Scotiabank PR & USVI acquisition[22]. - The company reported a total of $1,393.9 million in carrying amount for acquired loans with deteriorated credit quality as of December 31, 2019[107]. Assets and Liabilities - Total assets increased to $9,932,719 thousand as of June 30, 2020, up from $9,297,661 thousand at December 31, 2019, representing a growth of 6.8%[17]. - Total liabilities increased to $8,891,435 thousand, up from $8,252,183 thousand at the end of 2019, representing a rise of 7.8%[20]. - Stockholders' equity slightly decreased to $1,041,284 thousand from $1,045,478 thousand at December 31, 2019[20]. - Cash and cash equivalents totaled $1,898,987 thousand as of June 30, 2020, significantly up from $851,307 thousand at December 31, 2019, indicating a growth of 123.5%[17]. - The total cash, cash equivalents, and restricted cash at the end of the period reached $1,900,037 thousand, up from $677,430 thousand at the end of the same period in 2019, representing a growth of 180.5%[33]. Deposits and Interest Income - Total deposits rose to $8,541,926 thousand, an increase of 11% from $7,698,610 thousand at the end of 2019[20]. - Net interest income for the quarter ended June 30, 2020, was $105,060 thousand, a 29.5% increase compared to $81,085 thousand for the same period in 2019[22]. - The weighted average interest rate of deposits was 0.82% as of June 30, 2020, slightly down from 0.86% as of December 31, 2019[163]. - Interest expense for the six-month period ended June 30, 2020, was $32.1 million, compared to $19.0 million for the same period in 2019, indicating a significant increase[163]. Credit Losses and Provisions - Provision for credit losses was $17,696 thousand for the quarter, slightly down from $17,705 thousand in the same quarter of the previous year[22]. - Provision for credit losses rose significantly to $64,827,000 for the six-month period ended June 30, 2020, compared to $29,954,000 in the same period of 2019, reflecting a 116.5% increase[31]. - The allowance for credit losses was $232.7 million, reflecting an increase of $81.2 million compared to the previous period[102]. - The provision for credit losses for the quarter ended June 30, 2020, was $15.2 million, which included a charge-off of $18.2 million and recoveries of $4.5 million[142]. Loan Portfolio - Loans held for investment increased to $6,719,811 thousand, up from $6,622,256 thousand at December 31, 2019, reflecting a growth of 1.5%[17]. - The total loans, net, stood at $6,739.2 million, with a significant portion attributed to the auto loan segment, which accounted for $1,454.9 million[102]. - The total loans past due represented approximately 4.1% of the total loans held for investment as of June 30, 2020[105]. - The aging of loans held for investment showed a total of $276.9 million in loans past due as of June 30, 2020, with $145.4 million in loans 30-59 days past due and $72.1 million in loans 60-89 days past due[105]. Acquisitions and Mergers - Oriental acquired Scotiabank de Puerto Rico for an aggregate purchase price of $550 million, merging it with Oriental Bank immediately after the acquisition[81]. - As of June 30, 2020, Oriental's total identifiable assets acquired from the Scotiabank acquisition were valued at $3.56 billion, with total identifiable net assets of $434.6 million[83]. - The merger and restructuring charges related to the Scotiabank acquisition amounted to $3.006 million for the quarter ended June 30, 2020, and $3.310 million for the six-month period[85]. Tax and Regulatory Compliance - The effective tax rate for the six-month period ended June 30, 2020, was 24.2%, down from 32.1% for the same period in 2019[184]. - Oriental's total unrecognized tax benefits decreased from $2.7 million as of December 31, 2019, to $1.2 million as of June 30, 2020[185]. - As of June 30, 2020, OFG Bancorp and the Bank met all capital adequacy requirements and were categorized as "well capitalized" under regulatory standards[193]. - The minimum capital ratios required under Basel III include 4.5% CET1 to risk-weighted assets and 6.0% Tier 1 capital to risk-weighted assets[189]. Strategic Initiatives - The company plans to continue focusing on strategic initiatives to enhance operational efficiency and market expansion[25]. - The company has implemented various loan modification programs in response to the economic impacts of Covid-19, with most modifications not classified as troubled debt restructurings (TDRs)[77].