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ALLOWANCE FOR CREDIT LOSSES
 6 Months Ended
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
CommercialMortgageConsumer
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)
Recoveries156 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)
Recoveries158 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
CommercialMortgageConsumer
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)
Recoveries208 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)
Recoveries315 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
CommercialMortgageConsumer
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 losses14,089 (556)4,517 (1,800)16,250 
Charge-offs(3,496)(191)(5,518)(9,169)(18,374)
Recoveries237 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)
Recoveries319 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
CommercialMortgageConsumer
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 losses13,754 (1,059)10,491 1,096 24,282 
Charge-offs(4,871)(392)(10,958)(18,648)(34,869)
Recoveries563 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 losses1,316 (1,493)278 (408)(307)
Charge-offs(2,104)(76)(337)(121)(2,638)
Recoveries808 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