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ALLOWANCE FOR CREDIT LOSSES | 6 Months Ended
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Jun. 30, 2024
Credit Loss [Abstract] |
ALLOWANCE FOR CREDIT LOSSES | ALLOWANCE FOR CREDIT LOSSES OFG measures its ACL based on management’s best estimate of lifetime expected credit losses inherent in OFG’s relevant financial assets. The ACL is estimated using quantitative methods that consider a variety of factors such as historical loss experience, the current credit quality of the portfolio, and 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 weight 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” included in OFG’s 2023 Form 10-K. At June 30, 2024, OFG used an economic probability-weighted scenario approach consisting of the baseline and moderate recession scenarios, giving more weight to the baseline scenario, except for the US loan segment that uses a higher probability level in the moderate recessionary scenario. In addition, the ACL at June 30, 2024 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 auto loan portfolio credit trends and the evolution of risk ratings applied to the commercial loans and collateral changes in real estate portfolios. There are still many unknown variables, including the results of the government’s fiscal and monetary actions resulting from the effect of inflation and geopolitical tension. As of June 30, 2024, the ACL decreased by $3.8 million compared to December 31, 2023. The provision for credit losses for the six-month period ended June 30, 2024, reflected adjustments of $26.4 million related to loan volume, $4.5 million from loss rate model and $2.9 million in specific reserves, offset by a $4.9 million release from economic model. The net charge-offs for the six-month period ended June 30, 2024, amounted to $34.8 million, an increase of $18.1 million when compared to the same period of 2023. The increase is mainly due to $11.5 million from auto loans, $6.2 million from consumer loans and $1.2 million from commercial loans, mainly from higher loan volume. Net charge-offs for the six-month period ended June 30, 2024 include $3.5 million from retail commercial loans, mainly from previously and fully-reserved nonperforming paycheck protection program (“PPP”) loans. The following tables present the activity in OFG’s allowance for credit losses by segment for the quarters and six-month periods ended June 30, 2024 and 2023:
| Quarter Ended June 30, 2024
| Commercial |  | Mortgage |  | Consumer |  | Auto |  | Total
| (In thousands)
Non-PCD: |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 37,371 |  |  | $ | 7,627 |  |  | $ | 27,453 |  |  | $ | 76,316 |  |  | $ | 148,767 |
(Recapture of) provision for credit losses | (1,984) |  |  | (1,280) |  |  | 9,308 |  |  | 11,039 |  |  | 17,083 |
Charge-offs | (1,734) |  |  | (1) |  |  | (8,180) |  |  | (12,559) |  |  | (22,474) |
Recoveries | 156 |  |  | 540 |  |  | 851 |  |  | 5,926 |  |  | 7,473 |
Balance at end of period | $ | 33,809 |  |  | $ | 6,886 |  |  | $ | 29,432 |  |  | $ | 80,722 |  |  | $ | 150,849 |
PCD: |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 1,133 |  |  | $ | 6,638 |  |  | $ | 7 |  |  | $ | 18 |  |  | $ | 7,796 |
Recapture of credit losses | (237) |  |  | (1,060) |  |  | (6) |  |  | (29) |  |  | (1,332) |
Charge-offs | (265) |  |  | (29) |  |  | — |  |  | (6) |  |  | (300) |
Recoveries | 158 |  |  | 93 |  |  | 7 |  |  | 30 |  |  | 288 |
Balance at end of period | $ | 789 |  |  | $ | 5,642 |  |  | $ | 8 |  |  | $ | 13 |  |  | $ | 6,452 |
Total allowance for credit losses at end of period | $ | 34,598 |  |  | $ | 12,528 |  |  | $ | 29,440 |  |  | $ | 80,735 |  |  | $ | 157,301 |
| Six-Month Period Ended June 30, 2024
| Commercial |  | Mortgage |  | Consumer |  | Auto |  | Total
| (In thousands)
Non-PCD: |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 44,041 |  |  | $ | 7,998 |  |  | $ | 27,086 |  |  | $ | 73,485 |  |  | $ | 152,610 |
(Recapture of) provision for credit losses | (3,390) |  |  | (1,854) |  |  | 16,963 |  |  | 22,117 |  |  | 33,836 |
Charge-offs | (7,050) |  |  | (65) |  |  | (16,161) |  |  | (26,777) |  |  | (50,053) |
Recoveries | 208 |  |  | 807 |  |  | 1,544 |  |  | 11,897 |  |  | 14,456 |
Balance at end of period | $ | 33,809 |  |  | $ | 6,886 |  |  | $ | 29,432 |  |  | $ | 80,722 |  |  | $ | 150,849 |
PCD: |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 1,113 |  |  | $ | 7,351 |  |  | $ | 7 |  |  | $ | 25 |  |  | $ | 8,496 |
Recapture of credit losses | (374) |  |  | (2,328) |  |  | (29) |  |  | (85) |  |  | (2,816) |
Charge-offs | (265) |  |  | (112) |  |  | — |  |  | (15) |  |  | (392) |
Recoveries | 315 |  |  | 731 |  |  | 30 |  |  | 88 |  |  | 1,164 |
Balance at end of period | $ | 789 |  |  | $ | 5,642 |  |  | $ | 8 |  |  | $ | 13 |  |  | $ | 6,452 |
Total allowance for credit losses at end of period | $ | 34,598 |  |  | $ | 12,528 |  |  | $ | 29,440 |  |  | $ | 80,735 |  |  | $ | 157,301 |
| Quarter Ended June 30, 2023
| Commercial |  | Mortgage |  | Consumer |  | Auto |  | Total
| (In thousands)
Non-PCD: |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 37,774 |  |  | $ | 9,083 |  |  | $ | 24,664 |  |  | $ | 69,864 |  |  | $ | 141,385 |
Provision for (recapture of) credit losses | 14,089 |  |  | (556) |  |  | 4,517 |  |  | (1,800) |  |  | 16,250 |
Charge-offs | (3,496) |  |  | (191) |  |  | (5,518) |  |  | (9,169) |  |  | (18,374) |
Recoveries | 237 |  |  | 334 |  |  | 2,003 |  |  | 8,332 |  |  | 10,906 |
Balance at end of period | $ | 48,604 |  |  | $ | 8,670 |  |  | $ | 25,666 |  |  | $ | 67,227 |  |  | $ | 150,167 |
PCD: |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 1,693 |  |  | $ | 8,717 |  |  | $ | 12 |  |  | $ | 77 |  |  | $ | 10,499 |
(Recapture of) provision for credit losses | (604) |  |  | (679) |  |  | 78 |  |  | (401) |  |  | (1,606) |
Charge-offs | — |  |  | (1) |  |  | (124) |  |  | (34) |  |  | (159) |
Recoveries | 319 |  |  | 260 |  |  | 42 |  |  | 401 |  |  | 1,022 |
Balance at end of period | $ | 1,408 |  |  | $ | 8,297 |  |  | $ | 8 |  |  | $ | 43 |  |  | $ | 9,756 |
Total allowance for credit losses at end of period | $ | 50,012 |  |  | $ | 16,967 |  |  | $ | 25,674 |  |  | $ | 67,270 |  |  | $ | 159,923 |
| Six-Month Period Ended June 30, 2023
| Commercial |  | Mortgage |  | Consumer |  | Auto |  | Total
| (In thousands)
Non-PCD: |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 39,158 |  |  | $ | 9,571 |  |  | $ | 23,264 |  |  | $ | 69,848 |  |  | $ | 141,841 |
Provision for (recapture of) credit losses | 13,754 |  |  | (1,059) |  |  | 10,491 |  |  | 1,096 |  |  | 24,282 |
Charge-offs | (4,871) |  |  | (392) |  |  | (10,958) |  |  | (18,648) |  |  | (34,869) |
Recoveries | 563 |  |  | 550 |  |  | 2,869 |  |  | 14,931 |  |  | 18,913 |
Balance at end of period | $ | 48,604 |  |  | $ | 8,670 |  |  | $ | 25,666 |  |  | $ | 67,227 |  |  | $ | 150,167 |
PCD: |  |  |  |  |  |  |  |  |
Balance at beginning of period | $ | 1,388 |  |  | $ | 9,359 |  |  | $ | 14 |  |  | $ | 71 |  |  | $ | 10,832 |
Provision for (recapture of) credit losses | 1,316 |  |  | (1,493) |  |  | 278 |  |  | (408) |  |  | (307) |
Charge-offs | (2,104) |  |  | (76) |  |  | (337) |  |  | (121) |  |  | (2,638) |
Recoveries | 808 |  |  | 507 |  |  | 53 |  |  | 501 |  |  | 1,869 |
Balance at end of period | $ | 1,408 |  |  | $ | 8,297 |  |  | $ | 8 |  |  | $ | 43 |  |  | $ | 9,756 |
Total allowance for credit losses at end of period | $ | 50,012 |  |  | $ | 16,967 |  |  | $ | 25,674 |  |  | $ | 67,270 |  |  | $ | 159,923 |

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