ALLOWANCE FOR CREDIT LOSSES

3 Months Ended

Mar. 31, 2025

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 ACL, see Note 1 – Summary of Significant Accounting Policies included in OFG’s 2024 Form 10-K.

At March 31, 2025, 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 March 31, 2025 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 local and U.S. mainland governments’ fiscal and monetary actions resulting from the effect of inflation, geopolitical tension, and new trade policies.

As of March 31, 2025, the ACL increased by $5.3 million compared to December 31, 2024. The provision for credit losses for the quarter ended March 31, 2025, reflected adjustments of $17.4 million related to loan volume, $4.8 million in specific reserves and $3.5 million to reflect auto current loss given default trends post pandemic.

The net charge-offs for the quarter ended March 31, 2025, amounted to $20.4 million, an increase of $0.6 million when compared to the same period of 2024. The increase is due to $2.3 million from auto loans and $0.3 million from consumer loans mainly as a result of higher loan volume, partially offset by a decrease of $2.3 million from commercial loans. Net charge-offs for the quarter ended March 31, 2025 include a $2.9 million dollar partial charge-off of a previously reserved commercial US loan. Net charge-offs for the quarter ended March 31, 2024 include $3.5 million from previously and fully-reserved nonperforming paycheck protection program (“PPP”) loans.

The following tables present the activity in OFG’s ACL by segment for the quarters ended March 31, 2025 and 2024:


	Quarter Ended March 31, 2025
	Commercial		Mortgage		Consumer		Auto		Total
	(In thousands)
Non-PCD:
Balance at beginning of period	$	44,814	$	6,395	$	31,818	$	87,682	$	170,709
Provision for (recapture of) credit losses	3,516		(636)		7,945		13,978		24,803
Charge-offs	(3,030)		(23)		(8,252)		(18,192)		(29,497)
Recoveries	152		186		725		7,674		8,737
Balance at end of period	$	45,452	$	5,922	$	32,236	$	91,142	$	174,752
PCD:
Balance at beginning of period	$	622	$	4,514	$	11	$	7	$	5,154
Provision for (recapture of) credit losses	1,691		(787)		(6)		(20)		878
Charge-offs	—		—		—		(1)		(1)
Recoveries	25		341		6		19		391
Balance at end of period	$	2,338	$	4,068	$	11	$	5	$	6,422
Total allowance for credit losses at end of period	$	47,790	$	9,990	$	32,247	$	91,147	$	181,174


	Quarter Ended March 31, 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
Provision for (recapture of) credit losses	(1,406)		(574)		7,655		11,078		16,753
Charge-offs	(5,316)		(64)		(7,981)		(14,218)		(27,579)
Recoveries	52		267		693		5,971		6,983
Balance at end of period	$	37,371	$	7,627	$	27,453	$	76,316	$	148,767
PCD:
Balance at beginning of period	$	1,113	$	7,351	$	7	$	25	$	8,496
Recapture of credit losses	(137)		(1,268)		(23)		(56)		(1,484)
Charge-offs	—		(83)		—		(9)		(92)
Recoveries	157		638		23		58		876
Balance at end of period	$	1,133	$	6,638	$	7	$	18	$	7,796
Total allowance for credit losses at end of period	$	38,504	$	14,265	$	27,460	$	76,334	$	156,563