Income Taxes	9 Months Ended
Sep. 30, 2021
Income Taxes [Abstract]
Income Taxes	NOTE 14 — INCOME TAXES OFG is subject to the provisions of the Puerto Rico Internal Revenue Code of 2011, as amended (the “Code”), which imposes a maximum statutory corporate tax rate of 37.5% on a corporation’s net taxable income. Under the Code, all corporations are treated as separate taxable entities and are not entitled to file consolidated tax returns. Such entities are subject to Puerto Rico regular income tax or the alternative minimum tax (“AMT”) on income earned from all sources pursuant to the Code. The AMT is payable if it exceeds regular income tax. The excess of AMT over regular income tax paid in any one year may be used to offset regular income tax in future years, subject to certain limitations. OFG also has operations in the United States mainland through its wholly owned subsidiary, OPC, a retirement plan administrator based in Florida. In October 2017, OFG expanded its operations in the United States through the Bank’s wholly owned subsidiary, OFG USA. In addition, in March 2019, OFG incorporated in Delaware OFG Ventures, a limited liability company, which will hold new investments; and, on December 31, 2019, OFG established a new branch in USVI acquired as a result of the Scotiabank Acquisition. The United States subsidiaries are subject to federal income taxes at the corporate level, while the USVI branch is subject to the federal income taxes under a mirror system and a 10% surtax included in the maximum tax rate. OPC is subject to Florida state taxes, OFG USA is subject to North Carolina state taxes, and current investments in OFG Ventures are subject to state taxes in Missouri. At September 30, 2021 and December 31, 2020, OFG’s net deferred tax asset amounted to $128.7 million and $162.5 million, respectively. In assessing the realizability of the deferred tax asset, management considers whether it is more likely than not that some portion or the entire deferred tax asset will not be realized. The ultimate realization of the deferred tax asset is mainly dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax asset is deductible, management believes it is more likely than not that OFG will realize the deferred tax asset, net of the existing valuation allowances recorded at September 30, 2021 and December 31, 2020. The amount of the deferred tax asset that is considered realizable could be reduced in the near term if there are changes in estimates of future taxable income. OFG maintained an effective tax rate lower than the statutory rate for the nine-month periods ended September 30, 2021 and 2020 of 32.0% and 21.4%, respectively; the increase is associated with a higher proportion of exempt income and income taxed at preferential rates in the previous year. The estimated annual effective tax rate was 32.8%, however, the current effective tax rate was 32.0% due to a discrete tax windfall on stock awards and other true up adjustments. The current effective tax rate was lower than statutory tax rates mainly due to the exempt income. OFG classifies unrecognized tax benefits in other liabilities. These gross unrecognized tax benefits would affect the effective tax rate if realized. At September 30, 2021 and December 31, 2020, unrecognized tax benefits amounted to $780 thousand and $728 thousand, respectively. Income tax expense for the quarters ended September 30, 2021 and 2020, was $19.6 million and $6.3 million, respectively. Income tax expense for the nine-month periods ended September 30, 2021 and 2020, was $53.1 million and $13.9 million, respectively.

Income Taxes

9 Months Ended

Sep. 30, 2021

NOTE 14 — INCOME TAXES

OFG is subject to the provisions of the Puerto Rico Internal Revenue Code of 2011, as amended (the “Code”), which imposes a maximum statutory corporate tax rate of 37.5% on a corporation’s net taxable income. Under the Code, all corporations are treated as separate taxable entities and are not entitled to file consolidated tax returns. Such entities are subject to Puerto Rico regular income tax or the alternative minimum tax (“AMT”) on income earned from all sources pursuant to the Code. The AMT is payable if it exceeds regular income tax. The excess of AMT over regular income tax paid in any one year may be used to offset regular income tax in future years, subject to certain limitations.

OFG also has operations in the United States mainland through its wholly owned subsidiary, OPC, a retirement plan administrator based in Florida. In October 2017, OFG expanded its operations in the United States through the Bank’s wholly owned subsidiary, OFG USA. In addition, in March 2019, OFG incorporated in Delaware OFG Ventures, a limited liability company, which will hold new investments; and, on December 31, 2019, OFG established a new branch in USVI acquired as a result of the Scotiabank Acquisition. The United States subsidiaries are subject to federal income taxes at the corporate level, while the USVI branch is subject to the federal income taxes under a mirror system and a 10% surtax included in the maximum tax rate. OPC is subject to Florida state taxes, OFG USA is subject to North Carolina state taxes, and current investments in OFG Ventures are subject to state taxes in Missouri.

At September 30, 2021 and December 31, 2020, OFG’s net deferred tax asset amounted to $128.7 million and $162.5 million, respectively. In assessing the realizability of the deferred tax asset, management considers whether it is more likely than not that some portion or the entire deferred tax asset will not be realized. The ultimate realization of the deferred tax asset is mainly dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax asset is deductible, management believes it is more likely than not that OFG will realize the deferred tax asset, net of the existing valuation allowances recorded at September 30, 2021 and December 31, 2020. The amount of the deferred tax asset that is considered realizable could be reduced in the near term if there are changes in estimates of future taxable income.

OFG maintained an effective tax rate lower than the statutory rate for the nine-month periods ended September 30, 2021 and 2020 of 32.0% and 21.4%, respectively; the increase is associated with a higher proportion of exempt income and income taxed at preferential rates in the previous year. The estimated annual effective tax rate was 32.8%, however, the current effective tax rate was 32.0% due to a discrete tax windfall on stock awards and other true up adjustments. The current effective tax rate was lower than statutory tax rates mainly due to the exempt income.

OFG classifies unrecognized tax benefits in other liabilities. These gross unrecognized tax benefits would affect the effective tax rate if realized. At September 30, 2021 and December 31, 2020, unrecognized tax benefits amounted to $780 thousand and $728 thousand, respectively.

Income tax expense for the quarters ended September 30, 2021 and 2020, was $19.6 million and $6.3 million, respectively. Income tax expense for the nine-month periods ended September 30, 2021 and 2020, was $53.1 million and $13.9 million, respectively.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details