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Allowance for Credit Losses | 3 Months Ended
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Mar. 31, 2021
Allowance for Credit Losses [Abstract] |
Allowance for Credit Losses | NOTE 5 – ALLOWANCE FOR CREDIT LOSSES On January 1, 2020, OFG adopted the new accounting standard that requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in OFG’s relevant financial assets. Upon adoption of the new accounting standard, OFG recorded a $89.7 million increase in the allowance for credit losses on January 1, 2020. For Non-PCD loans, which represents 70% of the total loan portfolio, a $39.2 million allowance was recorded. For PCD loans, which represents 30% of the total loan portfolio, a $50.5 million adjustment was made through the allowance and loan balances with no impact in capital. The allowance for credit losses is estimated using quantitative methods that consider a variety of factors such as historical loss experience, the current credit quality of the portfolio as well as an economic outlook over the life of the loan. Also included in the ACL are qualitative reserves to cover losses that are expected but, in OFG's assessment, may not be adequately represented in the quantitative methods or the economic assumptions. In its loss forecasting framework, OFG incorporates forward-looking information through the use of macroeconomic scenarios applied over the forecasted life of the assets. The scenarios that are chosen each quarter and the amount of weighting given to each scenario depend on a variety of factors including recent economic events, leading economic indicators, views of internal as well as third-party economists and industry trends. At March 31, 2021, OFG used a probability weighted scenario approach using Moody’s Economic Forecast Scenarios as it is expected that Puerto Rico’s economic performance should be close to the baseline scenario, and to a lesser extent to the S3 (pessimistic) scenario. In addition, the allowance for credit losses at March 31, 2021 continues to include qualitative reserves for certain segments that OFG views as higher risk that may not be fully recognized through its quantitative models such as commercial loans concentrated in certain industries. There are still many unknowns including the duration of the impact of Covid-19 on the economy and the results of the government fiscal and monetary actions. The following tables present the activity in OFG’s allowance for credit losses by segment for the quarters ended March 31, 2021 and 2020:
| Quarter Ended March 31, 2021
| Commercial |  | Mortgage |  | Consumer |  | Auto |  | Total
| (In thousands)
Non-PCD: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 45,779 |  | $ | 19,687 |  | $ | 25,253 |  | $ | 70,296 |  | $ | 161,015
Provision (recapture) for credit losses |  | 1,542 |  |  | (2,480) |  |  | (158) |  |  | 4,039 |  |  | 2,943
Charge-offs |  | (68) |  |  | (787) |  |  | (4,469) |  |  | (9,083) |  |  | (14,407)
Recoveries |  | 430 |  |  | 615 |  |  | 565 |  |  | 5,817 |  |  | 7,427
Balance at end of period | $ | 47,683 |  | $ | 17,035 |  | $ | 21,191 |  | $ | 71,069 |  | $ | 156,978
PCD: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 16,405 |  | $ | 26,389 |  | $ | 57 |  | $ | 943 |  | $ | 43,794
Provision (recapture) for credit losses |  | (2,492) |  |  | 5,994 |  |  | (4) |  |  | (172) |  |  | 3,326
Charge-offs |  | (43) |  |  | (2,590) |  |  | (22) |  |  | (456) |  |  | (3,111)
Recoveries |  | 436 |  |  | 146 |  |  | 21 |  |  | 383 |  |  | 986
Balance at end of period | $ | 14,306 |  | $ | 29,939 |  | $ | 52 |  | $ | 698 |  | $ | 44,995
Total allowance for credit losses at end of period | $ | 61,989 |  | $ | 46,974 |  | $ | 21,243 |  | $ | 71,767 |  | $ | 201,973
| Quarter ended March 31, 2020
| Commercial |  | Mortgage |  | Consumer |  | Auto and Leasing |  | Total
| (In thousands)
Non-PCD: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 25,993 |  | $ | 8,727 |  | $ | 18,446 |  | $ | 31,878 |  | $ | 85,044
Impact of ASC 326 adoption |  | 3,562 |  |  | 10,980 |  |  | 8,418 |  |  | 16,238 |  |  | 39,198
Provision for credit losses |  | 21,890 |  |  | 156 |  |  | 6,270 |  |  | 14,034 |  |  | 42,350
Charge-offs |  | (3,771) |  |  | (418) |  |  | (6,015) |  |  | (13,053) |  |  | (23,257)
Recoveries |  | 1,522 |  |  | 249 |  |  | 644 |  |  | 4,211 |  |  | 6,626
Balance at end of period | $ | 49,196 |  | $ | 19,694 |  | $ | 27,763 |  | $ | 53,308 |  | $ | 149,961
PCD: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 8,893 |  | $ | 21,655 |  | $ | - |  | $ | 947 |  | $ | 31,495
Impact of ASC 326 adoption |  | 42,143 |  |  | 7,830 |  |  | 181 |  |  | 368 |  |  | 50,522
Provision (recapture) for credit losses |  | (218) |  |  | 6,139 |  |  | 364 |  |  | (105) |  |  | 6,180
Charge-offs |  | (2,357) |  |  | (5,143) |  |  | (431) |  |  | (375) |  |  | (8,306)
Recoveries |  | 375 |  |  | 122 |  |  | 63 |  |  | 343 |  |  | 903
Balance at end of period | $ | 48,836 |  | $ | 30,603 |  | $ | 177 |  | $ | 1,178 |  | $ | 80,794
Total allowance for loan and lease losses at end of period | $ | 98,032 |  | $ | 50,297 |  | $ | 27,940 |  | $ | 54,486 |  | $ | 230,755

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- Definition The entire disclosure for allowance for credit losses. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -URI http://asc.fasb.org/topic&trid=2196771 + Details
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