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INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2024

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

INVESTMENT SECURITIES

Money Market Investments

OFG considers as cash equivalents all money market instruments that are not pledged and that have maturities of three months or less at the date of acquisition. At September 30, 2024 and December 31, 2023, money market instruments included as part of cash and cash equivalents amounted to $5.9 million and $4.6 million, respectively.

Investment Securities

The amortized cost, gross unrealized gains and losses, fair value, weighted average yield and contractual maturities of the securities owned by OFG at September 30, 2024 and December 31, 2023 were as follows:

			September 30, 2024
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value						Weighted Average Yield
			(In thousands)
Available-for-sale
Mortgage-backed securities
FNMA and FHLMC certificates
Due from 1 to 5 years			$	13,748					$	—					$	427					$	13,321					2.08		%
Due from 5 to 10 years			28,114						—						1,321						26,793						1.91		%
Due after 10 years			1,774,062						23,652						38,846						1,758,868						4.42		%
Total FNMA and FHLMC certificates			1,815,924						23,652						40,594						1,798,982						4.36		%
GNMA certificates
Due from 1 to 5 years			7,131						—						195						6,936						1.73		%
Due from 5 to 10 years			12,344						14						515						11,843						2.25		%
Due after 10 years			423,810						9,220						28,906						404,124						3.61		%
Total GNMA certificates			443,285						9,234						29,616						422,903						3.54		%
CMOs issued by US government-sponsored agencies
Due from 1 to 5 years			5,901						—						151						5,750						1.78		%
Due after 10 years			769						—						5						764						5.06		%
Total CMOs issued by US government-sponsored agencies			6,670						—						156						6,514						2.16		%
Total mortgage-backed securities			2,265,879						32,886						70,366						2,228,399						4.19		%
Investment securities
US Treasury securities
Due less than 1 year			1,135						1						—						1,136						4.88		%
Other debt securities
Due less than 1 year			500						—						—						500						3.25		%
Due from 1 to 5 years			68						—						1						67						2.97		%
Total other debt securities			568						—						1						567						3.22		%
Total investment securities			1,703						1						1						1,703						4.32		%
Total securities available for sale			$	2,267,582					$	32,887					$	70,367					$	2,230,102					4.19		%
			September 30, 2024
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value						Weighted Average Yield
			(In thousands)
Held-to-maturity
Mortgage-backed securities
FNMA and FHLMC certificates
Due after 10 years			$	297,713					$	—					$	48,515					$	249,198					1.73		%
Investment securities
Other debt securities
Due from 1 to 5 years			35,000						51						—						35,051						6.20		%
Total securities held to maturity			$	332,713					$	51					$	48,515					$	284,249					2.20		%

			December 31, 2023
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value						Weighted Average Yield
			(In thousands)
Available-for-sale
Mortgage-backed securities
FNMA and FHLMC certificates
Due from 1 to 5 years			$	6,972					—						$	311					$	6,661					1.76		%
Due from 5 to 10 years			45,835						—						2,767						43,068						2.00		%
Due after 10 years			1,411,327						8,989						54,100						1,366,216						4.11		%
Total FNMA and FHLMC certificates			1,464,134						8,989						57,178						1,415,945						4.03		%
GNMA certificates
Due less than 1 year			5						—						—						5						1.31		%
Due from 1 to 5 years			8,851						—						351						8,500						1.71		%
Due from 5 to 10 years			17,113						16						955						16,174						2.19		%
Due after 10 years			380,306						4,419						33,110						351,615						3.38		%
Total GNMA certificates			406,275						4,435						34,416						376,294						3.30		%
CMOs issued by US government-sponsored agencies
Due from 1 to 5 years			9,071						—						364						8,707						1.78		%
Due from 5 to 10 years			54						—						—						54						2.14		%
Due after 10 years			861						—						12						849						5.07		%
Total CMOs issued by US government-sponsored agencies			9,986						—						376						9,610						2.06		%
Total mortgage-backed securities			1,880,395						13,424						91,970						1,801,849						3.86		%
Investment securities
US Treasury securities due less than 1 year			296,747						52						—						296,799						5.40		%
Other debt securities
Due less than 1 year			500						—						—						500						3.25		%
Due from 1 to 5 years			119						—						3						116						2.97		%
Total other debt securities			619						—						3						616						3.20		%
Total investment securities			297,366						52						3						297,415						5.39		%
Total securities available for sale			$	2,177,761					$	13,476					$	91,973					$	2,099,264					4.07		%
			December 31, 2023
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value						Weighted Average Yield
			(In thousands)
Held-to-maturity
Mortgage-backed securities
FNMA and FHLMC certificates
Due after 10 years			$	314,710					$	—					$	56,767					$	257,943					1.72		%
Investment securities
US Treasury securities
Due less than 1 year			199,314						—						1,548						197,766						3.33		%
Other debt securities
Due from 1 to 5 years			35,000						55						—						35,055						6.36		%
Total securities held to maturity			$	549,024					$	55					$	58,315					$	490,764					2.60		%

Securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period of final contractual maturity. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

The weighted average yield on debt securities available-for-sale is based on amortized cost and does not give effect to changes in fair value. Weighted average yields on tax-exempt obligations have been computed on a fully taxable equivalent basis.

At September 30, 2024 and December 31, 2023, most securities held by OFG are issued by U.S. government entities and government-sponsored agencies that have a zero-credit loss assumption and, therefore, have no allowance for credit losses.

Investment securities at September 30, 2024 include $1.641 billion pledged to secure government deposits and regulatory collateral, of which $1.595 billion serve as collateral for public funds. For regulatory collateral, the secured parties are not permitted to sell or repledge them. Investment securities as of December 31, 2023 include $1.624 billion pledged to secure government deposits, derivatives, and regulatory collateral that the secured parties are not permitted to sell or repledge, of which $1.575 billion serve as collateral for public funds.

At September 30, 2024 and December 31, 2023, the Bank’s international banking entities held short-term US Treasury securities in the amount of $525 thousand and $325 thousand, respectively, as the legal reserve required for international banking entities under Puerto Rico law. These instruments cannot be withdrawn or transferred without the prior written approval of the Office of the Commissioner of Financial Institutions.

During the nine-month periods ended September 30, 2024 and 2023, OFG retained securitized GNMA pools totaling $55.7 million and $52.8 million, respectively, at a yield of 5.08% and 5.20%, respectively, from its own originations.

During the nine-month periods ended September 30, 2023, OFG retained FNMA pools totaling $17.2 million at a yield of 5.37%, from its own originations. OFG did not retain FNMA pools during the nine-month period ended September 30, 2024

During the nine-month periods ended September 30, 2024 and 2023, OFG sold $149.4 million and $203.3 million, respectively, of available for sale US Treasury securities and recognized a $7 thousand and $1.1 million, respectively, in losses on the sale. These losses are included in the consolidated statements of operations.

						Nine-Month Period Ended September 30, 2024
Description						Sale Price						Book Value at Sale						Gross Gains						Gross Losses
						(In thousands)
Sale of investment securities available-for-sale
Investment securities
US Treasury securities						$	149,406					$	149,413					$	—					$	7

						Nine-Month Period Ended September 30, 2023
Description						Sale Price						Book Value at Sale						Gross Gains						Gross Losses
						(In thousands)
Sale of investment securities available-for-sale
Investment securities
US Treasury securities						$	202,133					$	203,282					$	—					$	1,149

The following table shows OFG’s gross unrealized losses and fair value of investment securities available-for-sale at September 30, 2024 and December 31, 2023, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

			September 30, 2024
			12 months or more
			Amortized Cost						Unrealized Loss						Fair Value
			(In thousands)
Securities available-for-sale
FNMA and FHLMC certificates			$	663,730					$	40,594					$	623,136
GNMA certificates			245,156						29,616						215,540
CMOs issued by US Government-sponsored agencies			6,670						156						6,514
Other debt securities			68						1						67
			$	915,624					$	70,367					$	845,257

There were no investment securities available-for-sale at September 30, 2024 with unrealized losses under 12 months.

			December 31, 2023
			12 months or more
			Amortized Cost						Unrealized Loss						Fair Value
			(In thousands)
Securities available-for-sale
FNMA and FHLMC certificates			$	731,334					$	56,847					$	674,487
GNMA certificates			275,669						34,364						241,305
CMOs issued by US Government-sponsored agencies			9,986						376						9,610
Other debt securities			119						3						116
			$	1,017,108					$	91,590					$	925,518

			December 31, 2023
			Less than 12 months
			Amortized Cost						Unrealized Loss						Fair Value
			(In thousands)
Securities available-for-sale
FNMA and FHLMC certificates			$	106,235					$	331					$	105,904
GNMA certificates			7,864						52						7,812
			$	114,099					$	383					$	113,716

			December 31, 2023
			Total
			Amortized Cost						Unrealized Loss						Fair Value
			(In thousands)
Securities available-for-sale
FNMA and FHLMC certificates			$	837,569					$	57,178					$	780,391
GNMA certificates			283,533						34,416						249,117
CMOs issued by US Government-sponsored agencies			9,986						376						9,610
Other debt securities			119						3						116
			$	1,131,207					$	91,973					$	1,039,234

The unrealized losses on OFG’s investment in federal agency mortgage-backed securities were caused by market volatility related to the sharp interest rate increases in 2022 and 2023. During 2024, interest rates have decreased and are expected to continue to decrease through the end of the year. These decreases have reduced the unrealized losses of investments. OFG purchased those investments at a discount relative to their face amount, and the contractual cash flows of those investments are guaranteed by an agency of the U.S. government or by a government-sponsored enterprise. Accordingly, it is expected that the securities would not be settled at a price that is less than the amortized cost basis of OFG’s investments. OFG does not intend to sell the investments, and it is not more likely than not that OFG will be required to sell the investments before recovery of their amortized cost basis.

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- Definition

The entire disclosure for investments in certain debt and equity securities.

+ References

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