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Allowance for Credit Losses
 12 Months Ended
Dec. 31, 2021
Credit Loss [Abstract]  
Allowance for Credit Losses 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 (“ACL”) 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. For more information on OFG’s credit loss accounting policies, including the allowance for credit losses, see Note 1 – Summary of Significant Accounting Policies.
At December 31, 2021, OFG used an economic probability weighted scenario approach which consist of the baseline and moderate recession scenarios, giving more weight to the baseline scenario. In addition, the ACL at December 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 and consumer retail portfolios. 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 resulting from inflation effect.

The allowance for credit losses decreased during the year ended December 31, 2021, mainly due to updates in macro-economic forecasts and continued asset quality improvement, as reflected in net credit losses, non-performing, and delinquency rates. The provision for credit losses for the year ended December 31, 2021 includes an additional expense of $9.7 million related to the decision to sell $65.5 million of past due loans. The allowance for credit losses for the year ended December 31, 2020 included a $39.9 million provision to incorporate changes in the macro-economic scenario and qualitative adjustments as a result of the Covid-19 pandemic.
The following tables present the activity in OFG’s allowance for credit losses by segment for the years ended December 31, 2021, 2020 and 2019:
Year Ended December 31, 2021
CommercialMortgageConsumerAuto and LeasingTotal
(In thousands)
Non-PCD:
Balance at beginning of year$45,779 $19,687 $25,253 $70,296 $161,015 
(Recapture) provision for credit losses(7,130)(242)2,868 (2,373)(6,877)
Charge-offs(8,788)(5,789)(11,880)(26,530)(52,987)
Recoveries2,401 1,643 2,900 23,970 30,914 
Balance at end of year$32,262 $15,299 $19,141 $65,363 $132,065 
PCD:
Balance at beginning of year$16,405 $26,389 $57 $943 $43,794 
(Recapture) provision for credit losses(2,585)11,556 (317)(894)7,760 
Charge-offs(12,241)(20,350)(22)(946)(33,559)
Recoveries2,929 1,423 316 1,209 5,877 
Balance at end of year$4,508 $19,018 $34 $312 $23,872 
Total allowance for credit losses at end of year$36,770 $34,317 $19,175 $65,675 $155,937 
As a result of the decision to sell loans during 2021, OFG recognized $30.1 million in net charge-offs and an additional provision of $9.7 million, decreasing the allowance for credit losses by $20.4 million.
Year ended December 31, 2020
CommercialMortgageConsumerAuto and LeasingTotal
(In thousands)
Non-PCD:
Balance at beginning of year$25,993 $8,727 $18,446 $31,878 $85,044 
Impact of ASC 326 adoption3,562 10,980 8,418 16,238 39,198 
Provision for credit losses18,462 258 16,579 51,233 86,532 
Charge-offs(4,979)(884)(21,772)(48,547)(76,182)
Recoveries2,741 606 3,582 19,494 26,423 
Balance at end of year$45,779 $19,687 $25,253 $70,296 $161,015 
PCD:
Balance at beginning of year$8,893 $21,655 $— $947 $31,495 
Impact of ASC 326 adoption42,143 7,830 181 368 50,522 
Provision for credit losses480 6,392 126 187 7,185 
Charge-offs(36,097)(10,342)(542)(2,023)(49,004)
Recoveries986 854 292 1,464 3,596 
Balance at end of year$16,405 $26,389 $57 $943 $43,794 
Total allowance for credit losses at end of year$62,184 $46,076 $25,310 $71,239 $204,809 
Year Ended December 31, 2019
CommercialMortgageConsumerAuto and LeasingTotal
(In thousands)
Allowance for loan and lease losses, excluding loans accounted for under ASC 310-30:
Balance at beginning of year$30,348 $19,783 $17,476 $29,643 $97,250 
Provision for credit losses6,731 5,975 19,038 30,789 62,533 
Charge-offs(12,196)(18,564)(20,435)(47,498)(98,693)
Recoveries1,110 1,533 2,367 18,944 23,954 
Balance at end of year$25,993 $8,727 $18,446 $31,878 $85,044 
Allowance for loan and lease losses for acquired loans accounted for under ASC 310-30:
Balance at beginning of year$30,226 $30,607 $4 $6,144 $66,981 
Provision (recapture) for credit losses13,484 23,703 — (2,928)34,259 
Allowance derecognition(34,817)(32,655)(4)(2,269)(69,745)
Balance at end of year$8,893 $21,655 $— $947 $31,495 
Total allowance for loan and lease losses at end of year$34,886 $30,382 $18,446 $32,825 $116,539