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FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 Months Ended
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Sep. 30, 2024
Fair Value Disclosures [Abstract] |
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS OFG follows the fair value measurement framework under GAAP. Fair Value Measurement The fair value measurement framework defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This framework also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Money market investments The fair value of money market investments is based on the carrying amounts reflected in the consolidated statements of financial condition as these are reasonable estimates of fair value given the short-term nature of the instruments. Investment securities The fair value of investment securities is based on valuations obtained from an independent pricing provider, ICE Data Pricing (formerly known as IDC) (“ICE”). ICE is a well-recognized pricing company and an established leader in financial information. Such securities are classified as Level 1 or Level 2, depending on the basis for determining fair value. At September 30, 2024, there was one security held-to-maturity, carried at amortized cost with no ACL established, classified as Level 3. Servicing assets Servicing assets do not trade in an active market with readily observable prices. Servicing assets are priced using a discounted cash flow model. The valuation model considers servicing fees, portfolio characteristics, prepayment assumptions, delinquency rates, late charges, other ancillary revenues, cost to service, and other economic factors. Due to the unobservable nature of certain valuation inputs, the servicing rights are classified as Level 3. Foreclosed real estate Foreclosed real estate includes real estate properties securing residential mortgage and commercial loans. The fair value of foreclosed real estate may be determined using an external appraisal, broker price opinion or an internal valuation. These foreclosed assets are classified as Level 3 given certain internal adjustments that may be made to external appraisals. Other repossessed assets Other repossessed assets are mainly composed of repossessed automobiles. The fair value of the repossessed automobiles may be determined using internal valuation and an external appraisal. These repossessed assets are classified as Level 3 given certain internal adjustments that may be made to external appraisals. Assets and liabilities measured at fair value on a recurring and non-recurring basis are summarized below:
| September 30, 2024 |
| Fair Value Measurements |
| Level 1 |  | Level 2 |  | Level 3 |  | Total |
| (In thousands) |
Recurring fair value measurements: |  |  |  |  |  |  |  |
Investment securities available-for-sale | $ | 1,136 |  |  | $ | 2,228,966 |  |  | $ | — |  |  | $ | 2,230,102 |  |
Trading securities | — |  |  | 18 |  |  | — |  |  | 18 |  |
Money market investments | 5,885 |  |  | — |  |  | — |  |  | 5,885 |  |
Servicing assets | — |  |  | — |  |  | 68,512 |  |  | 68,512 |  |
| $ | 7,021 |  |  | $ | 2,228,984 |  |  | $ | 68,512 |  |  | $ | 2,304,517 |  |
Non-recurring fair value measurements: |  |  |  |  |  |  |  |
Collateral dependent loans | $ | — |  |  | $ | — |  |  | $ | 8,583 |  |  | $ | 8,583 |  |
Foreclosed real estate | — |  |  | — |  |  | 4,419 |  |  | 4,419 |  |
Other repossessed assets | — |  |  | — |  |  | 6,969 |  |  | 6,969 |  |
Mortgage loans held for sale | — |  |  | — |  |  | 10,908 |  |  | 10,908 |  |
Other loans held for sale | — |  |  | — |  |  | 4,716 |  |  | 4,716 |  |
| $ | — |  |  | $ | — |  |  | $ | 35,595 |  |  | $ | 35,595 |  |
| December 31, 2023
| Fair Value Measurements
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (In thousands)
Recurring fair value measurements: |  |  |  |  |  |  |
Investment securities available-for-sale | $ | 296,799 |  |  | $ | 1,802,465 |  |  | $ | — |  |  | $ | 2,099,264 |
Trading securities | — |  |  | 13 |  |  | — |  |  | 13 |
Money market investments | 4,623 |  |  | — |  |  | — |  |  | 4,623 |
Servicing assets | — |  |  | — |  |  | 49,520 |  |  | 49,520 |
| $ | 301,422 |  |  | $ | 1,802,478 |  |  | $ | 49,520 |  |  | $ | 2,153,420 |
Non-recurring fair value measurements: |  |  |  |  |  |  |
Collateral dependent loans | $ | — |  |  | $ | — |  |  | $ | 8,027 |  |  | $ | 8,027 |
Foreclosed real estate | — |  |  | — |  |  | 10,780 |  |  | 10,780 |
Other repossessed assets | — |  |  | — |  |  | 4,032 |  |  | 4,032 |
Other loans held for sale | $ | — |  |  | $ | — |  |  | $ | 28,345 |  |  | 28,345 |
| $ | — |  |  | $ | — |  |  | $ | 51,184 |  |  | $ | 51,184 |
The fair value information included in the tables above for non-recurring fair value measurements is not as of period-end. Instead, it is as of the date that the fair value measurement was recorded closest to September 30, 2024 and December 31, 2023 and excludes nonrecurring fair value measurements of assets no longer outstanding as of the reporting date. The tables below present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarters and nine-month periods ended September 30, 2024 and 2023: Level 3 Instruments Only
|  | Quarter Ended September 30, |  |  |  |  |  |
|  | 2024 |  | 2023 |  |  |  |  |  |
|  | Servicing Assets |  |  | Other debt securities available for sale | Servicing Assets | Total |  |  |  |  |  |
|  | (In thousands) |  |  |  |  |  |
Balance at beginning period |  | $ | 49,789 |  |  |  | $ | 413 |  | $ | 49,966 |  | $ | 50,379 |  |  |  |  |  |  |
New instruments acquired |  | 21,923 |  |  |  | — |  | 453 |  | 453 |  |  |  |  |  |  |
Principal repayments and amortization |  | (1,108) |  |  |  | — |  | (1,060) |  | (1,060) |  |  |  |  |  |  |
Instrument converted to equity security |  | — |  |  |  | (413) |  | — |  | (413) |  |  |  |  |  |  |
Gains (losses) included in earnings |  | (2,092) |  |  |  | — |  | 1,242 |  | 1,242 |  |  |  |  |  |  |
Balance at end of period |  | $ | 68,512 |  |  |  | $ | — |  | $ | 50,601 |  | $ | 50,601 |  |  |  |  |  |  |
|  | Nine-Month Period Ended September 30, |  |  |  |  |  |
|  | 2024 |  | 2023 |  |  |  |
|  | Servicing Assets |  |  | Other debt securities available for sale | Servicing Assets | Total |  |  |  |  |  |
|  | (In thousands) |  |  |
Balance at beginning of period |  | $ | 49,520 |  |  |  | $ | 406 |  | $ | 50,921 |  | $ | 51,327 |  |  |  |  |  |  |
New instruments acquired |  | 22,753 |  |  |  | — |  | 1,818 |  | 1,818 |  |  |  |  |  |  |
Principal repayments and amortization |  | (2,759) |  |  |  | — |  | (3,210) |  | (3,210) |  |  |  |  |  |  |
Instrument converted to equity security |  | — |  |  |  | (406) |  | — |  | (406) |  |  |  |  |  |  |
Gains (losses) included in earnings |  | (1,002) |  |  |  | — |  | 1,072 |  | 1,072 |  |  |  |  |  |  |
Balance at end of period |  | $ | 68,512 |  |  |  | $ | — |  | $ | 50,601 |  | $ | 50,601 |  |  |  |  |  |  |
Servicing assets gains (losses) included in earnings during the quarters and nine-month periods ended September 30, 2024 and 2023 were included as mortgage servicing activities in the consolidated statements of operations. For more information on the qualitative information about Level 3 fair value measurements, see Note 7 – Servicing Assets. There were no liabilities measured at fair value on a recurring basis and non-recurring basis at September 30, 2024 and December 31, 2023. The table below presents quantitative information for all assets measured at fair value on a recurring and non-recurring basis using significant unobservable inputs (Level 3) at September 30, 2024 and December 31, 2023:
| September 30, 2024
| Fair Value |  | Valuation Technique |  | Unobservable Input |  | Range |  | Weighted Average
| (In thousands) |  |  |  |  |  |  |  |
Servicing assets | $ | 68,512 |  |  | Cash flow valuation |  | Constant prepayment rate |  | 0.85% - 13.30% |  | 6.25 | %
|  |  |  |  | Discount rate |  | 10.00% - 15.50% |  | 11.61 | %
Collateral dependent loans | $ | 8,583 |  |  | Fair value of property or collateral |  | Appraised value less disposition costs |  | 10.20% - 33.20% |  | 17.04 | %
Foreclosed real estate | $ | 4,419 |  |  | Fair value of property or collateral |  | Appraised value less disposition costs |  | 10.00% - 33.00% |  | 11.10 | %
Other repossessed assets | $ | 6,969 |  |  | Fair value of property or collateral |  | Estimated net realizable value less disposition costs |  | 37.00% - 71.00% |  | 56.32 | %
Mortgage loans held for sale | $ | 10,908 |  |  | Market prices |  | Pricing and execution whole loan |  | 94.06% - 102.10% |  | 98.56 | %
Other loans held for sale | $ | 4,716 |  |  | Bids or sales contract prices |  | Estimated market value |  | 99.75% - 101.21% |  | 101.12 | %
| December 31, 2023
| Fair Value |  | Valuation Technique |  | Unobservable Input |  | Range |  | Weighted Average
| (In thousands) |  |  |  |  |  |  |  |
Servicing assets | $ | 49,520 |  |  | Cash flow valuation |  | Constant prepayment rate |  | 1.35% - 17.34% |  | 6.12 | %
|  |  |  |  | Discount rate |  | 10.00% - 15.50% |  | 11.45 | %
Collateral dependent loans | $ | 8,027 |  |  | Fair value of property or collateral |  | Appraised value less disposition costs |  | 10.20% - 33.20% |  | 17.00 | %
Foreclosed real estate | $ | 10,780 |  |  | Fair value of property or collateral |  | Appraised value less disposition costs |  | 10.20% - 33.20% |  | 12.67 | %
Other repossessed assets | $ | 4,032 |  |  | Fair value of property or collateral |  | Estimated net realizable value less disposition costs |  | 31.00% - 77.00% |  | 57.72 | %
Other loans held for sale | $ | 28,345 |  |  | Bids or sales contract prices |  | Estimated market value |  | 52.00% - 103.20% |  | 84.80%
Information about Sensitivity to Changes in Significant Unobservable Inputs Servicing assets – The significant unobservable inputs used in the fair value measurement of OFG’s servicing assets are constant prepayment rates and discount rates. Changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or offset the sensitivities. Mortgage banking activities, a component of total banking and financial service revenue in the consolidated statements of operations, include the changes from period to period in the fair value of the mortgage loan servicing rights, which may result from changes in the valuation model inputs or assumptions (principally reflecting changes in discount rates and prepayment speed assumptions) and other changes, including changes due to collection/realization of expected cash flows. Fair Value of Financial Instruments The information about the estimated fair value of financial instruments required by GAAP is presented hereunder. The aggregate fair value amounts presented do not necessarily represent management’s estimate of the underlying value of OFG. The estimated fair value is subjective in nature, involves uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could affect these fair value estimates. The fair value estimates do not take into consideration the value of future business and the value of assets and liabilities that are not financial instruments. Other significant tangible and intangible assets that are not considered financial instruments include the value of long-term customer relationships of retail deposits, and premises and equipment. The estimated fair value and carrying value of OFG’s financial instruments at September 30, 2024 and December 31, 2023 was as follows:
| September 30, 2024 |  | December 31, 2023
| Fair Value |  | Carrying Value |  | Fair Value |  | Carrying Value |  |  |  |  |  |
| (In thousands) |  |  |  |  |  |
Financial Assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Level 1 |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 680,587 |  |  | $ | 680,587 |  |  | $ | 748,173 |  |  | $ | 748,173 |  |  |  |  |  |  |
Investment securities available-for-sale | $ | 1,136 |  |  | $ | 1,136 |  |  | $ | 296,799 |  |  | $ | 296,799 |  |  |  |  |  |  |
Level 2 |  |  |  |  |  |  |  |  |  |  |  |  |
Financial Assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Trading securities | $ | 18 |  |  | $ | 18 |  |  | $ | 13 |  |  | $ | 13 |  |  |  |  |  |  |
Investment securities available-for-sale | $ | 2,228,966 |  |  | $ | 2,228,966 |  |  | $ | 1,802,465 |  |  | $ | 1,802,465 |  |  |  |  |  |  |
Investment securities held-to-maturity | $ | 249,198 |  |  | $ | 297,713 |  |  | $ | 455,709 |  |  | $ | 514,024 |  |  |  |  |  |  |
Federal Home Loan Bank (FHLB) stock | $ | 18,430 |  |  | $ | 18,430 |  |  | $ | 14,488 |  |  | $ | 14,488 |  |  |  |  |  |  |
Equity securities | $ | 27,262 |  |  | $ | 27,262 |  |  | $ | 23,981 |  |  | $ | 23,981 |  |  |  |  |  |  |
Level 3 |  |  |  |  |  |  |  |  |  |  |  |  |
Financial Assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Investment securities held-to-maturity | $ | 35,051 |  |  | $ | 35,000 |  |  | $ | 35,055 |  |  | $ | 35,000 |  |  |  |  |  |  |
Total loans (including loans held-for-sale) | $ | 7,516,112 |  |  | $ | 7,604,700 |  |  | $ | 7,282,214 |  |  | $ | 7,401,618 |  |  |  |  |  |  |
Accrued interest receivable | $ | 70,367 |  |  | $ | 70,367 |  |  | $ | 71,400 |  |  | $ | 71,400 |  |  |  |  |  |  |
Servicing assets | $ | 68,512 |  |  | $ | 68,512 |  |  | $ | 49,520 |  |  | $ | 49,520 |  |  |  |  |  |  |
Accounts receivable and other assets | $ | 62,052 |  |  | $ | 62,052 |  |  | $ | 47,859 |  |  | $ | 47,589 |  |  |  |  |  |  |
Financial Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits | $ | 9,651,703 |  |  | $ | 9,608,652 |  |  | $ | 9,767,068 |  |  | $ | 9,762,169 |  |  |  |  |  |  |
Advances from FHLB | $ | 270,045 |  |  | $ | 270,827 |  |  | $ | 199,184 |  |  | $ | 200,768 |  |  |  |  |  |  |
Other borrowings | $ | — |  |  | $ | — |  |  | $ | 2 |  |  | $ | 2 |  |  |  |  |  |  |
Accrued expenses and other liabilities | $ | 157,609 |  |  | $ | 157,609 |  |  | $ | 115,985 |  |  | $ | 115,985 |  |  |  |  |  |  |
The following methods and assumptions were used to estimate the fair values of significant financial instruments at September 30, 2024 and December 31, 2023: •Cash and cash equivalents (including money market investments and time deposits with other banks), accrued interest receivable, accounts receivable and other assets, accrued expenses and other liabilities, and other borrowings have been valued at the carrying amounts reflected in the consolidated statements of financial condition as these are reasonable estimates of fair value given the short-term nature of the instruments. •Investments in FHLB stock are valued at their redemption value. •The fair value of investment securities, including trading securities, is based on quoted market prices, when available, or prices provided by contracted pricing providers or by recognized broker-dealers. If listed prices or quotes are not available, fair value is based upon externally developed models that use both observable and unobservable inputs depending on the market activity of the instrument. The estimated fair value of the AFICA bond in other debt securities held-to-maturity is determined by using a detailed discounted cash flow valuation model to calculate the present value of projected future cash flows. The credit losses are recorded using the ACL methodology. This involves comparing the amortized cost of the securities with the fair value of the expected future cash flows. Several assumptions requiring a high degree of judgment include the selection of market discount rates, the determination of current credit spread, and the estimation of both the probability of default and loss given default rates. Equity securities do not have readily available fair values and are measured at cost, less any impairment. •The fair value of servicing asset is estimated by using a cash flow valuation model, which calculates the present value of estimated future net servicing cash flows, taking into consideration actual and expected loan prepayment rates, discount rates, servicing costs, and other economic factors, which are determined based on current market conditions. •The fair value of the loan portfolio (including loans held-for-sale and non-performing loans) is based on the exit market price, which is estimated by segregating by loan type, such as mortgage, commercial, consumer and auto. The fair value is calculated by discounting contractual cash flows. The discount rate used in such calculation considers a capital adjustment as well as other premiums for systemic risk, servicing costs, modeling and uncertainty risk, and impairment uncertainty. •The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is based on the discounted value of the contractual cash flows, using estimated current market discount rates for deposits of similar remaining maturities. •The fair value of advances from FHLB is based on the discounted value of the contractual cash flows using current estimated market discount rates for borrowings with similar terms, remaining maturities and put dates.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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