UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________________________

 

FORM 11-K

_________________________

 

FOR ANNUAL REPORTS OF EMPLOYEE
STOCK REPURCHASE SAVINGS AND
SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

(Mark One):

 

x   ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the fiscal year ended December 31, 2012

 

OR

 

¨   TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE    ACT OF 1934.

 

For the transition period from __________ to __________

 

Commission file number 001-12647 

 

 

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

 

The Oriental Bank and Trust CODA Profit Sharing Plan

c/o Oriental Bank
254 Muñoz Rivera Avenue,

Oriental Center 15th Floor

San Juan, Puerto Rico 00918

 

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

 

OFG BANCORP

FORMERLY KNOWN AS

ORIENTAL FINANCIAL GROUP INC.

254 Muñoz Rivera Avenue,

Oriental Center 15th Floor

San Juan, Puerto Rico 00918

 

 


 

 

 

The Oriental Bank and Trust CODA Profit Sharing Plan

 

 

TABLE OF CONTENTS

 

 

 

Page

 

 

Report of Independent Registered Public Accounting Firm

1

 

 

Financial Statements:

 

 

 

Statements of Net Assets Available for Benefits as of December 31, 2012 and 2011

2

 

 

Statement of Changes in Net Assets Available for Benefits for the Year Ended

December 31, 2012

3

 

 

Notes to Financial Statements

4 – 12

 

 

Supplemental Schedules:

 

Schedule I – Schedule H, Line 4a - Schedule of Delinquent Participant Contributions as of

December 31, 2012

13

Schedule II – Schedule H, Line 4i - Schedule of Assets (Held at Year End) as of

December 31, 2012

14

 

 

Signatures

15

 

 

EX-23.1 CONSENT OF KPMG LLP

17

 

 

 

 

 


 

 

 

Report of Independent Registered Public Accounting Firm

 

The 1165(e) Retirement Plan Committee

The Oriental Bank and Trust CODA Profit Sharing Plan:

 

We have audited the accompanying statements of net assets available for benefits of The Oriental Bank and Trust CODA Profit Sharing Plan (the “Plan”) as of December 31, 2012 and 2011, and the related statement of changes in net assets available for benefits for the year ended December 31, 2012. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2012 and 2011, and the changes in net assets available for benefits for the year ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.

 

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of  Schedule H, Line 4a – Schedule of Delinquent Participant Contributions for the year ended December 31, 2012 and Schedule H, Line 4i – Schedule of Assets (Held at End of Year) as of December 31, 2012 are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.

 

The supplemental schedule H, Line 4i – Schedule of Assets (Held at End of Year) as of December 31, 2012 that accompanies the Plan’s financial statements does not disclose the historical cost of nonparticipant directed plan assets held by the Plan trustee. Disclosure of this information is required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.

 

 

/s/ KPMG LLP

 

June 28, 2013

San Juan, Puerto Rico

Certified Public Accountants

1 

 


 

 

 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

Statements of Net Assets Available for Benefits

December 31, 2012 and 2011

 

 

 

 

 

 

 

2012 

 

2011 

Assets:

 

 

 

 

 

    Cash and investments:

 

 

 

 

 

        Cash

$

 4,844 

 

$

 560 

        Investments at fair value:

 

 

 

 

 

            Money market instruments

 

 336,678 

 

 

 5,802 

            Common stock

 

 3,663,800 

 

 

 3,601,633 

            Insurance company investment contracts:

 

 

 

 

 

                Pooled separate accounts

 

 4,471,311 

 

 

 3,318,082 

                Stable value fund

 

 1,852,502 

 

 

 1,868,195 

                    Total cash and investments

 

 10,329,135 

 

 

 8,794,272 

    Receivables:

 

 

 

 

 

        Participants' contributions

 

 39,069 

 

 

 31,774 

        Employer's contributions

 

 16 

 

 

 4,715 

        Dividends

 

 14,898 

 

 

 17,845 

                    Total receivables

 

 53,983 

 

 

 54,334 

                    Total assets

$

 10,383,118 

 

$

 8,848,606 

Liabilities:

 

 

 

 

 

    Other liabilities

$

 37,960 

 

$

 22,446 

                    Total liabilities

 

 37,960 

 

 

 22,446 

                    Net assets available for benefits

$

 10,345,158 

 

$

 8,826,160 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

 

 

 

 

2 

 


 

 

 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

Statement of Changes in Net Assets Available for Benefits

Year ended December 31, 2012

 

 

 

Additions to net assets attributed to:

 

 

    Investment income:

 

 

        Net appreciation in fair value of investments

$

 834,317 

        Dividends

 

 65,378 

        Interest and other

 

 30,056 

           Total investment income

 

 929,751 

    Contributions:

 

 

        Participants

 

 1,044,754 

        Employer 

 

 329,938 

           Total contributions

 

 1,374,692 

                Total additions

 

 2,304,443 

Deductions from net assets attributed to:

 

 

    Benefits paid to participants

 

 (753,928) 

    Administrative fees

 

 (31,517) 

                Total deductions

 

 (785,445) 

                Net increase

 

 1,518,998 

Net assets available for benefits:

 

 

       Beginning of year

 

 8,826,160 

       End of year

$

 10,345,158 

 

 

 

See accompanying notes to financial statements.

 

 

3 

 


 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

NOTES TO FINANCIAL STATEMENTS 

YEARS ENDED DECEMBER 31, 2012 AND 2011

  

(1)           Description of the Plan

The following description of The Oriental Bank and Trust CODA Profit Sharing Plan (the “Plan”) provides only general information. Participants should refer to the plan agreement for a more complete description of the Plan’s provisions.

(a)           General 

The Plan was organized on January 1, 1992 as a defined contribution plan originally maintained by Oriental Bank, formerly known as Oriental Bank and Trust, (the “Bank”) for the benefit of its employees and those of its affiliated companies, who are residents of Puerto Rico and are age 21 or older. The Plan is intended to be a qualified plan pursuant to Section 1165(a) of the Puerto Rico Internal Revenue Code of 1994, as amended (the “1994 Code”). It contains a cash or deferred arrangement qualifying under Section 1165(e) of the 1994 Code and is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Effective January 1, 2011, the Plan is intended to be a qualified plan pursuant to Sections 1081.01(a) and (d) of the Puerto Rico Internal Revenue Code of 2011, as amended (the “2011 Code”). The Employer amended the Plan effective as of January 1, 2011 and as of January 1, 2012, as statutorily required, in compliance with the provisions of Sections 1081.01 (a) and (d) of the 2011 Code, and submitted the Plan to the Puerto Rico Treasury Department (the “PR Treasury”) to obtain an updated favorable determination letter as to the Plan’s Puerto Rico tax qualified status under the 2011 Code.  The Employer further intends to amend the Plan to incorporate statutory requirements introduced by Act No. 232-201, a technical amendments bill to the 2011 Code, and to submit such amendment for qualification with the PR Treasury.

Effective November 30, 2011, the Plan changed its legal name to “The Oriental Bank and Trust CODA Profit Sharing Plan” from the “Oriental Financial Group, Inc. CODA Profit Sharing Plan”.

 

(b)           Contributions 

Effective as of January 1, 2011, total deferrals cannot exceed the maximum deferral amount under the provisions of U.S. Code Section 402(g) as annually indexed by the U.S. Internal Revenue Service (for 2012 the limit is $17,000).  If in addition to a deferral election under the Plan, participants contribute to an individual retirement account in Puerto Rico (“PR-IRA”), pre-tax contributions cannot exceed the sum of the annual deferral limit under the 2011 Code ($13,000 for tax year ended December 31, 2012) and the 2011 Code limit on contributions to a PR-IRA ($5,000).

Participants may also contribute amounts representing distributions from other Puerto Rico and U.S. qualified defined benefit or contribution plans.  Participants direct the investment of their contributions into various investment options offered by the Plan.  The Plan currently offers pooled separate accounts, a stable value fund, and shares of common stock of the Employer as investment options for participants.  For the years 2012 and 2011, the employer matched 80% of the participants’ contributions, up to a maximum of $832 per year as discretionary matching contributions. As part of the Plan Amendments, effective on April 1, 2013, the Employer will match 50% of each participant’s contributions up to a maximum of 4% of the participant’s compensation per year as discretionary matching contributions.  Contributions are subject to certain limitations.

(c)           Participant Accounts

Each participant’s account is credited with the participant’s contribution and allocations of (a) the Employer’s contribution and (b) Plan earnings, and charged with an allocation of administrative fees. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

(d)           Vesting 

Participants are immediately vested in their contributions plus actual earnings thereon. The Employer’s contribution portion of their accounts plus actual earnings thereon vest upon the occurrence of any of the

4 

 


 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2012 AND 2011

  

following events: completion of three years of credited service; attaining age 65; total disability while employed by the Employer; or death while employed by the Employer.

(e)           Payment of Benefits

On termination of service due to death, disability, or retirement, a participant may elect to receive the value of the vested interest in his or her account in either a lump‑sum amount, a fixed period that may not exceed the participant’s life expectancy or through a fixed annuity contract. For termination of service for other reasons, a participant may receive the value of the vested interest in his or her account as a lump‑sum distribution.

(f)            Loans to Participants

The Plan does not allow for loans to participants.

(g)           Forfeited Accounts

Employer contributions that are not vested upon termination of employment are forfeited and may be used to reduce future contributions to the Plan by the Employer. For the years ended December 31, 2012 and 2011, forfeitures totaling approximately $12,000 and $300, respectively, were used to offset Employer contributions.

(h)           Plan Termination

Although it has not expressed any intent to do so, the Employer has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of plan termination, participants will become 100% vested in their Employer’s contributions.

5 

 


 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2012 AND 2011

  

 

(2)           Summary of Significant Accounting Policies

Following are the significant accounting policies followed by the Plan:

(a)           Basis of Presentation

The accompanying financial statements have been prepared under the accrual method of accounting.

Investment contracts held by a defined contribution plan are required to be reported at fair value. However, for a defined contribution plan attributable to fully benefit‑responsive investment contracts, such as the stable value fund, the contract value is the relevant measurement attribute for that portion of the net assets available for plan benefits since it is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The statement of net assets available for benefits presents the fair value of the investment contracts. For the stable value fund, the contract value of each participant account approximates its fair value.

(b)           Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the plan administrator to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

(c)           Risks and Uncertainties

The Plan invests in various investment instruments. Investment securities are exposed to various risks, such as interest rate, credit, and market risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.

(d)           Investments Valuation and Income Recognition

The pooled separate accounts with Transamerica Life Insurance Company (“Transamerica”) are stated at fair value as reported to the Plan by Transamerica, based on the quoted market prices of the underlying mutual funds. The unit value of the pooled separate account is calculated by dividing the total value of the assets of the separate account by the number of units in the separate account. For separate accounts that invest exclusively in mutual funds, the total value of the assets of the separate account is based on the net asset value (NAV), or price per share, of the underlying mutual fund. The mutual fund calculates its NAV by dividing the mutual fund’s net assets by the mutual fund’s outstanding number of shares. Those separate accounts investing in mutual funds or equity securities are measured using quoted prices in active markets for identical assets. Those separate accounts directly investing in fixed maturity securities are measured based on the pricing data provided by outside valuation service providers who in turn generally use the mean of bid and ask prices but may also use alternative observable pricing inputs for certain securities. The stable value fund is valued at contract value, and is based on its beginning balance plus any deposit and credited interest, less any withdrawals, charges, or expenses, a measurement which approximates fair value. Shares of common stock are valued at quoted closing market prices. Money market instruments are stated at fair value, which approximates cost plus accumulated interest earnings less distributions to date.

Purchases and sales of securities are recorded on a trade‑date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex‑dividend date. Net appreciation includes the Plan’s gains and losses on investments bought and sold as well as held during the year.

(e)           Payments of Benefits

Benefits are recorded when paid.

6 

 


 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2012 AND 2011

  

(f)            Plan Expenses

Under the group annuity contract entered into with Transamerica, contract asset charges are assessed each month based on the actual combined balance of all separate accounts and the stable value fund. These charges are presented as administrative fees in the statement of changes in net assets available for benefits.

Administrative expenses, including trustee, legal, auditing, and other fees, may be paid out of the invested assets unless paid by the Employer. Expenses paid and absorbed by the Employer during the year ended December 31, 2012 amounted to $38,629.

(g)           Subsequent Events

Effective January 1, 2013, the Plan changed its legal name to “The Oriental Bank CODA Profit Sharing Plan” from the “The Oriental Bank and Trust CODA Profit Sharing Plan.”

Effective April 1, 2013, the Plan was amended to include a new subsection which states that all Employees who were employed by Banco Bilbao Vizcaya Argentaria Puerto Rico (“BBVA Bank”) on December 17, 2012 and who became employees of the Employer on December 18, 2012 as a result of the BBVAPR Acquisition by OFG Bancorp that was completed on the same date, shall be credited with all periods of service with BBVA Bank for all appropriate purposes under the Plan and can participate in the Plan.

The Plan has evaluated subsequent events from the statement of net assets available for benefits date through the filing of this Annual Report on Form 11-K for the year ended December 31, 2012.

(h)           Recent Accounting Developments:

Fair Value Measurements Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2011‑04, “Fair Value Measurement (FASB ASC Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, issued in May 2011, changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, FASB does not intend for the amendments in such update to result in a change in the application of the requirements in Topic 820. Some of the amendments clarify FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. Such update was effective for interim and annual reporting periods beginning after December 15, 2011. The Plan’s adoption of this guidance did not have a material impact on the Plan’s Financial Statements.

Other accounting standards that have been issued by FASB or other standards‑setting bodies are not expected to have a material impact on the Plan’s statements of net assets available for benefits, and the related statement of changes in net assets available for benefits.

7 

 


 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2012 AND 2011

  

 

(3)           Investments 

 

The following presents investments as of December 31, 2012 and 2011 that represent 5% or more of the Plan’s net assets.

 

 

2012 

 

2011 

Nonparticipant-directed investments:

 

 

 

 

 

    OFG Bancorp - common stock; 275,888 and

 

 

 

 

 

        297,410 shares, respectively

$

 3,663,800 

 

$

 3,601,633 

Participant-directed investments:

 

 

 

 

 

    Pooled separate accounts:

 

 

 

 

 

        Columbia Marsico 21st Century; 45,617 and 49,754 units, respectively

 

 641,536 

 

 

 625,971 

    Stable value fund:

 

 

 

 

 

        Transamerica Stable Value; 99,991 and 102,602 units, respectively

 

 1,852,502 

 

 

 1,868,195 

 

During 2012, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $834,317 as follows:

 

 

2012 

OFG Bancorp - common stock

$

 361,934 

Pooled separate accounts

 

 472,383 

Total

$

 834,317 

 

Transamerica offers a stable value fund that the participant may elect to transfer all or part of its funds into. The stable value fund is considered to be a fully benefit‑responsive investment contract. Contract value is the relevant measurement attribute for that portion of the net assets available for benefits. Contract value, as reported by Transamerica, is the beginning balance plus any deposit and credited interest, less any withdrawals, charges, or expenses, a measurement that approximates fair value. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.

There are no reserves against contract value for credit risk of Transamerica or otherwise. The contract value of the investment contract at December 31, 2012 and 2011 was $1,852,502 and $1,868,195, respectively. This investment seeks to protect against any loss of principal while providing returns in excess of money market funds and one‑year U.S. Treasury bills. The investment has a portfolio investment rate design in which all deposits are credited with the same interest rate, credited on a daily basis, and with no set maturity. The effective credited interest rate is set monthly and effective on the first day of the month. Contract charges may reduce this return. The Transamerica stable value fund is not a separate account investment choice – it is an investment in Transamerica’s general account. The average yield of the stable value fund based on actual earnings and interest credited to participants was 1.75% and 2.45% for the years ended December 31, 2012 and 2011, respectively.

Certain events limit the ability of the Plan to transact at contract value with Transamerica. Such events include the following: (1) the Plan is changed so as to significantly affect Transamerica’s obligations to the contract, (2) the contract can no longer be treated as a pension plan contract, (3) the Plan is terminated, (4) failure to comply with the contract’s requirements, (5) failure to provide information, (6) the sum of the contract account values at any time equals $20,000 or less, or (7) the failure of the trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under ERISA. The plan administrator is not aware of any events, which would limit the Plan’s ability to transact at contract value with participants, that are probable of occurring.

 

(4)           Nonparticipant Directed Investments

 

Information about the net assets and the significant components of the changes in net assets relating to the nonparticipant directed investments is as follows:

 

8 

 


 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2012 AND 2011

  

OFG Bancorp common stock, 297,410 shares at December 31, 2011

$

 3,601,633 

Changes in net assets during the year:

 

 

    Contributions

 

 404,244 

    Transfers in

 

 559,986 

    Dividends

 

 65,378 

    Net increase in fair value

 

 361,934 

    Benefits paid to participants

 

 (432,636) 

    Transfers out

 

 (896,739) 

Net increase in OFG Bancorp common stock

 

 62,167 

OFG Bancorp common stock, 275,888 shares at December 31, 2012

$

 3,663,800 

 

(5)           Related‑Party Transactions

 

Certain plan investments are shares of the Employer’s common stock. The Employer is the plan sponsor and, therefore, qualifies as a party‑in‑interest. At December 31, 2012 and 2011, the Plan held an investment of 275,888 and 297,410 shares of the Employer’s common stock, respectively. The fair value of the common stock at December 31, 2012 and 2011 was $3,663,800 and $3,601,633, respectively.

The Plan has a money market account with the Bank amounting to $22,123 at December 31, 2012 ($552 at December 31, 2011), earning interest at 0.02% at December 31, 2012 (0.01% at December 31, 2011). The Bank, who is also the Trustee, is a subsidiary of the plan sponsor and, therefore, qualifies as a party‑in‑interest.

The recordkeeper of the Plan is CPC, a subsidiary of the Employer. Fees charged by CPC for services provided were absorbed by the Employer.

 

(6)           Income Taxes

 

The trust established to fund the Plan is intended to be exempt from Puerto Rico and U.S. income taxes formerly under the 1994 Code and the U.S. Code, and currently under the 2011 Code and the U.S. Code. As applicable, the Plan is required to operate in conformity with the 1994 Code, the 2011 Code and the U.S. Code to maintain its qualification.

 

On June 18, 2010, the PR Treasury issued a favorable determination letter confirming the qualified status of the Plan under Sections 1165(a) and (e) of the 1994 Code effective January 1, 2009.  On March 11, 2011, the IRS issued a favorable determination letter as to the qualified status of the Plan under Sections 401(a) and (k) of the U.S. Code.  The Employer amended the Plan in compliance with the provisions of Sections 1081.01(a) and (d) of the 2011 Code, and submitted the Plan to the PR Treasury to obtain an updated favorable determination letter as to the Plan’s Puerto Rico tax qualified status under the 2011 Code.  The Employer further intends to amend the Plan to incorporate statutory requirements introduced by Act No. 232-2011, a technical amendments bill to the 2011 Code, and to submit such amendment for qualification with the PR Treasury. However, the Plan administrator believes that the Plan is designed and operating in compliance with the applicable requirements of the PR Treasury and U.S. Code and remains qualified.

 

U.S. generally accepted accounting principles require plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS and the PR Treasury. As of December 31, 2012, there are no uncertain tax positions taken or expected to be taken that would require recognition or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions.  However, there are currently no audits in progress for any tax periods. The Plan is no longer subject to income tax examinations for the years prior to 2009.

 

(7)           Fair Value

 

9 

 


 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2012 AND 2011

  

As discussed in Note 2, the Plan uses the fair value measurement framework under U.S. generally accepted accounting principles.

Fair Value Measurement

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value:

Level 1 – assets include equity securities that are traded in an active exchange market, as well as certain money market instruments. Valuations are obtained from readily available pricing sources for market transactions involving identical assets.

Level 2 – observable inputs other than Level 1 prices such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets. Level 2 assets include (i) pooled separate accounts, and (ii) the stable value fund.

Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets include financial instruments whose value is determined using pricing models, for which the determination of fair value requires significant management judgment or estimation. As of December 31, 2012 and 2011, the Plan did not have such assets.

The following is a description of the valuation methodologies used for instruments measured at fair value:

Pooled Separate Accounts: the fair value of the investment in this category has been estimated using the NAV per share, as a practical expedient. The NAV of these accounts is based on the market value of its underlying investments. The NAV of these accounts is not a public‑quoted price in an active market (“Level 2). There are currently no redemption restrictions on these investments, except in the “Janus Overseas Ret Opt” mutual fund which assesses a 2.00% fee for selling shares that have not been held for a period longer than 90 days.

Stable Value Fund: valued at contract value, and is based on its beginning balance plus any deposit and credited interest, less any withdrawals, charges, or expenses, a measurement which approximates fair value (“Level 2”).

Shares of the Employer’s common stock: valued at quoted closing market prices (“Level 1”).

Money Market Instruments: stated at fair value, which approximates cost plus accumulated interest earnings less distributions to date (“Level 1”).

The estimated fair value is subjective in nature and involves uncertainties and matters of significant judgment and, therefore, cannot be determined with precision.  Changes in assumptions could affect these fair value estimates.  The fair value estimates do not take into consideration the value of future business and the value of assets and liabilities that are not financial instruments.

10 

 


 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2012 AND 2011

  

 

The following tables set forth by level, within the fair value hierarchy, the Plan’s fair value measurements at December 31, 2012 and 2011:

 

 

December 31, 2012

 

Fair Value Measurements

 

Level 1

 

Level 2

 

Level 3

 

Total

Money market instruments

$

 336,678 

 

$

 - 

 

$

 - 

 

$

 336,678 

Common stock

 

 3,663,800 

 

 

 - 

 

 

 - 

 

 

 3,663,800 

Pooled separate accounts

 

 

 

 

 

 

 

 

 

 

 

    Hybrid (a)

 

 - 

 

 

 1,431,835 

 

 

 - 

 

 

 1,431,835 

    Bond (b)

 

 - 

 

 

 906,755 

 

 

 - 

 

 

 906,755 

    International Equity (c)

 

 - 

 

 

 515,903 

 

 

 - 

 

 

 515,903 

    Equity - Large Cap (d)

 

 - 

 

 

 1,105,846 

 

 

 - 

 

 

 1,105,846 

    Equity - Mid Cap (e)

 

 - 

 

 

 292,477 

 

 

 - 

 

 

 292,477 

    Equity - Small Cap (f)

 

 - 

 

 

 218,495 

 

 

 - 

 

 

 218,495 

Stable value fund

 

 - 

 

 

 1,852,502 

 

 

 - 

 

 

 1,852,502 

 

$

 4,000,478 

 

$

 6,323,813 

 

$

 - 

 

$

 10,324,291 

 

 

December 31, 2011

 

Fair Value Measurements

 

Level 1

 

Level 2

 

Level 3

 

Total

Money market instruments

$

 5,802 

 

$

 - 

 

$

 - 

 

$

 5,802 

Common stock

 

 3,601,633 

 

 

 - 

 

 

 - 

 

 

 3,601,633 

Pooled separate accounts

 

 

 

 

 

 

 

 

 

 

 

    Hybrid (a)

 

 - 

 

 

 866,687 

 

 

 - 

 

 

 866,687 

    Bond (b)

 

 - 

 

 

 684,110 

 

 

 - 

 

 

 684,110 

    International Equity (c)

 

 - 

 

 

 398,322 

 

 

 - 

 

 

 398,322 

    Equity - Large Cap (d)

 

 - 

 

 

 1,007,183 

 

 

 - 

 

 

 1,007,183 

    Equity - Mid Cap (e)

 

 - 

 

 

 190,700 

 

 

 - 

 

 

 190,700 

    Equity - Small Cap (f)

 

 - 

 

 

 171,080 

 

 

 - 

 

 

 171,080 

Stable value fund

 

 - 

 

 

 1,868,195 

 

 

 - 

 

 

 1,868,195 

 

$

 3,607,435 

 

$

 5,186,277 

 

$

 - 

 

$

 8,793,712 

 

(a)   The pooled separate accounts in this category primarily invest in U.S. and non-U.S. stocks, and fixed-income securities which may include bonds, mutual funds, cash equivalents or other money market instruments.

(b)   The pooled separate accounts in this category primarily invest in bonds (at least 80% of total assets), preferred stocks, cash equivalents or other money market instruments.

(c)   The pooled separate accounts in this category primarily invest at least 80% of assets in equity and debt securities of issuers from countries outside of the United States.

(d)   The pooled separate accounts in this category primarily invest in equity securities of medium and large capitalization companies, and may invest in securities of non-U.S. issuers.

(e)   The pooled separate accounts in this category primarily invest in domestic equity securities with growth potential, including foreign equity securities and debt securities.

(f)    The pooled separate accounts in this category primarily invest in common stocks contained in both the Small Cap 1750 Index and the Russell 2000 Value Index.

 

Investments can be redeemed with no advance notice on any day on which the New York Stock Exchange is open for trading.

 

There were no transfers into and out of Level 1 and Level 2 fair value measurements during the years ended December 31, 2012 and 2011.

11 

 


 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

NOTES TO FINANCIAL STATEMENTS – (Continued)

YEARS ENDED DECEMBER 31, 2012 AND 2011

  

 

(8)           Prohibited Transaction – Participants’ Contributions Remittances

 

In accordance with the U.S. Department of Labor’s Regulation 2510.3102, an employer is required to segregate participants’ contributions from its general assets as soon as practical when amounts are contributed by participants or withheld from their wages for a pension benefit plan such as the Plan. There were unintentional delays in the remittance of participants’ contributions withheld in one occasion during the year ended December 31, 2011. The Employer agreed to absorb any costs incurred by the Plan as a result of the untimely remittances of the participants’ contributions. No prohibited transactions occurred during the year ended December 31, 2012.

12 

 


 

   

SCHEDULE I

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

 

Schedule H, Line 4a - Schedule of Delinquent Participant Contributions

 

Year ended December 31, 2012

 

Total that Constitute Nonexempt Prohibited Transactions

 

Year Ended

 

Participant

Contributions

Transferred

Late to Plan *

 

Contributions

Not

Corrected

 

Contributions

Corrected

Outside

VFCP

 

Contributions

Pending

Correction

in VFCP

 

Total Fully

Corrected

Under

VFCP and PTE

2002-51

 

December 31, 2010

 

$

 8,397 

 

 - 

 

 8,397 

 

 - 

 

 - 

 

December 31, 2011

 

$

 5,954 

 

 - 

 

 5,954 

 

 - 

 

 - 

 

____________

 

 

 

 

 

 

 

 

 

 

 

 

*   It was noted that there were unintentional delays by the employer in submitting 2011 and 2010 employee's

 

     contributions in the amount of $5,954 and $8,397, respectively, to the trustee. The employer reimbursed the Plan

 

      for the lost interest on July 17, 2012.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the accompanying report of the independent registered public accounting firm.

 

13 

 


 

A                      

SCHEDULE II

 

 

 

 

 

 

 

 

 

 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

Schedule H, Line 4i - Schedule of Assets (Held at End of Year)

December 31, 2012

 

 

 

 

 

 

 

 

 

 

(a)

 

(b)

Identity of issue, borrower,

lessor, or similar party

 

(c)

Description of Investment, including maturity

date, rate of interest, collateral, par,

or maturity value

 

(d)

Cost

 

(e)

Current Value

 

 

Money markets/cash equivalents

 

 

 

 

 

 

 

 

 

    Cash

 

 

 

**

 

$

 4,844 

 

 

Nonparticipant directed:

 

 

 

 

 

 

 

*

 

    OFG Bancorp

 

OFG Bancorp:

 

 

 

 

 

 

 

 

 

    Common Stock; 275,888 shares

 

NA

 

$

 3,663,800 

 

 

Participant directed:

 

 

 

 

 

 

 

 

 

    Transamerica

 

Pooled Separate Accounts:

 

 

 

 

 

 

 

 

 

    Columbia Marsico 21st Century; 45,617 units

 

**

 

 

 641,536 

 

 

 

 

    Janus Overseas Ret Opt; 9,960 units

 

**

 

 

 515,903 

 

 

 

 

    Loomis Sayles Inv Grade Bond; 14,060 units

 

**

 

 

 496,017 

 

 

 

 

    Transamerica AA - Moderate; 27,605 units

 

**

 

 

 460,105 

 

 

 

 

    Transamerica AA - Growth; 30,632 units

 

**

 

 

 451,911 

 

 

 

 

    Thornburg Core Growth; 17,937 units

 

**

 

 

 292,477 

 

 

 

 

    Transamerica AA - Mod Growth; 18,346 units

 

**

 

 

 289,550 

 

 

 

 

    Pioneer Cullen Value; 11,835 units

 

**

 

 

 254,912 

 

 

 

 

    Transamerica Partners Hg Yd Bd; 6,888 units

 

**

 

 

 230,779 

 

 

 

 

    WMC Core Equity; 10,737 units

 

**

 

 

 209,398 

 

 

 

 

    Loomis Sayles Bond; 2,916 units

 

**

 

 

 179,959 

 

 

 

 

    SSgA Russell SC Value Index; 3,070 units

 

**

 

 

 169,801 

 

 

 

 

    Transamerica AA - Conservative; 9,057 units

 

**

 

 

 154,934 

 

 

 

 

    Janus Balanced Ret Opt; 2,200 units

 

**

 

 

 75,335 

 

 

 

 

    Vanguard Small-Cap Index, 383 units

 

**

 

 

 48,694 

 

 

 

 

 

 

 

 

 

 4,471,311 

 

 

Money Market Instruments:

 

 

 

 

 

 

 

 

 

    Money Market

 

    Invesco Short Term Liquid Asset

 

**

 

 

 314,555 

*

 

    Oriental Bank and Trust

 

    Money Market (0.02% yield)

 

**

 

 

 22,123 

 

 

 

 

 

 

 

 

 

 336,678 

 

 

Stable Value Fund:

 

 

 

 

 

 

 

*

 

    Transamerica

 

    Transamerica Stable Value; 99,991 units

 

**

 

 

 1,852,502 

 

 

 

 

 

 

 

 

$

 10,329,135 

_______________

 

 

 

 

 

 

 

*    Party in interest as defined by ERISA.

**   Not applicable as these are participant directed.

NA  Not available

 

 

 

 

 

 

 

 

 

 

See accompanying report of independent registered public accounting firm.

14 

 


 

A                      

SIGNATURES

 

The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

THE ORIENTAL BANK AND TRUST CODA PROFIT SHARING PLAN

 (Name of Plan)

 

 

 

 

 

Date:

 June 28, 2013

 

/s/ Ganesh Kumar

 

Ganesh Kumar

 

 

Executive Vice President and

 

 

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

/s/ René Colón

 

 

René Colón

Vice President and

 

 

Trust Officer

 

         

15 

 


 

A                      

INDEX OF EXHIBITS

 

 

 

 

Exhibit No.

 

Description of Document

 

23.1

 

Consent of KPMG LLP

 

 

 

 

 

 

16