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INCOME TAXES | 9 Months Ended
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Sep. 30, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES OFG is subject to the provisions of the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Code”). The PR Code imposes a maximum statutory corporate tax rate of 37.5%. OFG has operations in the U.S. through its wholly owned subsidiaries OFG Ventures and OFG USA, which is a direct subsidiary of the Bank, and has two branches in the USVI. The United States subsidiaries are subject to federal income taxes at the corporate level, while the USVI branches are subject to federal income taxes under a mirror system and a 10% surtax included in the maximum tax rate. OFG USA is subject to North Carolina state taxes, and current investments in OFG Ventures are subject to state taxes in Missouri. In addition, OFG’s wholly owned subsidiary, OFG Reinsurance Ltd., is tax exempt in Grand Cayman. As of September 30, 2024, OFG’s net deferred tax assets, net of a valuation allowance of $6.0 million, amounted to $4.1 million; and the net deferred tax liability, net of valuation allowance of $726 thousand, amounted to $57.5 million, reflecting the aggregate deferred tax assets or liabilities of individual tax-paying subsidiaries of OFG. As of December 31, 2023, OFG’s deferred tax asset, net of a valuation allowance of $7.0 million, amounted to $4.9 million; and net deferred tax liability, net of a valuation allowance of $569 thousand, amounted to $22.4 million, reflecting aggregate deferred tax assets or liabilities of individual tax-paying subsidiaries of OFG. The decrease in valuation allowance of $850 thousand was mainly related to OFG’s operations at the holding company level. 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 dependent upon the generation of future income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future income, and tax planning strategies in making this assessment. Based upon the assessment of positive and negative evidence, the level of historical taxable income, projections for future taxable income over the periods in which the deferred tax asset are deductible, and provisions of certain closing agreements, management believes it is more likely than not that OFG will realize the benefits of these deductible differences, net of the existing valuation allowances, at September 30, 2024. 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 (“ETR”) lower than the statutory rate for the nine-month periods ended September 30, 2024 and 2023 of 26.4% and 31.3%, respectively, the decrease is mainly related to exempt income subject to preferential tax treatment under the PR Code, a discrete tax windfall on stock options and a discrete benefit from the purchase of tax credits during the period. The expected ETR for 2024 is 26.81%. OFG classifies unrecognized tax benefits in other liabilities. These gross unrecognized tax benefits would affect the ETR if realized. At September 30, 2024, the amount of unrecognized tax benefits was $987 thousand (December 31, 2023 - $936 thousand). Income tax expense for the quarters ended September 30, 2024 and 2023 was $14.8 million and $21.0 million, respectively. Income tax expense for the nine-month periods ended September 30, 2024 and 2023 was $53.1 million and $61.5 million, respectively.

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