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What changed in OFG BANCORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of OFG BANCORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+384 added−387 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-26)

Top changes in OFG BANCORP's 2024 10-K

384 paragraphs added · 387 removed · 294 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

86 edited+11 added−12 removed164 unchanged
Biggest changeUnder that law, if OFG fails to meet the requirements for being a financial holding company and is unable to correct such deficiencies within certain prescribed time periods, the Federal Reserve Board could require OFG to divest control of its depository institution subsidiary or alternatively cease conducting activities impermissible for bank holding companies that are not financial holding companies.
Biggest changeUnder that law, if OFG fails to meet the requirements for being a financial holding company and is unable to correct such deficiencies within certain prescribed time periods, the Federal Reserve Board could require OFG to divest control of its depository institution subsidiary or alternatively cease conducting activities impermissible for bank holding companies that are not financial holding companies. 9 Financial holding companies may engage, directly or indirectly, in any activity that is determined to be (i) financial in nature or incidental to such financial activity, or (ii) complementary to a financial activity provided it does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.
Under such rules, an insured depository institution is: (i) “well capitalized,” if it has a total risk-based capital ratio of 10% or more, a tier 1 risk-based capital ratio of 8% or more, a common equity tier 1 capital ratio of 6.5% or more, and a tier 1 leverage capital ratio of 5% or more, and is not subject to any written capital order or directive; (ii) “adequately capitalized,” if it has a total risk-based capital ratio of 8% or more, a tier 1 risk-based capital ratio of 6% or more, a common equity tier 1 capital ratio of 4.5% or more, and a tier 1 leverage capital ratio of 4% or more; (iii) “undercapitalized,” if it has a total risk-based capital ratio that is less than 8%, a tier 1 risk-based ratio that is less than 6%, a common equity tier 1 capital ratio that is less than 4.5%, or a tier 1 leverage capital ratio that is less than 4%; 13 (iv) “significantly undercapitalized,” if it has a total risk-based capital ratio that is less than 6%, a tier 1 risk-based capital ratio that is less than 4%, a common equity tier 1 capital ratio that is less than 3%, or a tier 1 leverage capital ratio that is less than 3%; and (v) “critically undercapitalized,” if it has a ratio of tangible equity (defined as tier 1 capital plus non-tier 1 perpetual preferred stock) to total assets that is equal to or less than 2%.
Under such rules, an insured depository institution is: 13 (i) “well capitalized,” if it has a total risk-based capital ratio of 10% or more, a tier 1 risk-based capital ratio of 8% or more, a common equity tier 1 capital ratio of 6.5% or more, and a tier 1 leverage capital ratio of 5% or more, and is not subject to any written capital order or directive; (ii) “adequately capitalized,” if it has a total risk-based capital ratio of 8% or more, a tier 1 risk-based capital ratio of 6% or more, a common equity tier 1 capital ratio of 4.5% or more, and a tier 1 leverage capital ratio of 4% or more; (iii) “undercapitalized,” if it has a total risk-based capital ratio that is less than 8%, a tier 1 risk-based ratio that is less than 6%, a common equity tier 1 capital ratio that is less than 4.5%, or a tier 1 leverage capital ratio that is less than 4%; (iv) “significantly undercapitalized,” if it has a total risk-based capital ratio that is less than 6%, a tier 1 risk-based capital ratio that is less than 4%, a common equity tier 1 capital ratio that is less than 3%, or a tier 1 leverage capital ratio that is less than 3%; and (v) “critically undercapitalized,” if it has a ratio of tangible equity (defined as tier 1 capital plus non-tier 1 perpetual preferred stock) to total assets that is equal to or less than 2%.
The interchange fee restrictions contained in the Durbin Amendment, and the rules promulgated thereunder, apply to debit card issuers with $10 billion or more in total consolidated assets as of the end of previous calendar year and imposes limits on what banks may charge for debit card interchange fees.
The interchange fee restrictions contained in the Durbin Amendment, and the rules promulgated thereunder, apply to debit card issuers with $10 billion or more in total consolidated assets as of the end of the previous calendar year and imposes limits on what banks may charge for debit card interchange fees.
An insured state bank, such as the Bank, is not prohibited from, among other things, (i) acquiring or retaining a majority interest in a subsidiary engaged in permissible activities, (ii) investing as a limited partner in a partnership, or as a non-controlling interest holder of a limited liability company, the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation or new construction of a qualified housing project, provided that such investments may not exceed 2% of the bank’s total assets, (iii) acquiring up to 10% of the voting stock of a company that solely provides or reinsures directors’, trustees’ and officers’ liability insurance coverage or bankers’ blanket bond group insurance coverage for insured depository institutions, and (iv) acquiring or retaining the voting stock of an insured depository institution if certain requirements are met, including that it is owned exclusively by other banks.
An insured state bank, such as the Bank, is not prohibited from, among other things, (i) acquiring or retaining a majority interest in a subsidiary engaged in permissible activities, (ii) investing as a limited partner in a partnership, or as a non-controlling interest holder of a limited liability company, the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation or new construction of a qualified housing project, provided that such investments may not exceed 2% of the bank’s total assets, (iii) acquiring up to 10% of the voting stock of a company that solely provides or reinsures directors’, trustees’ and officers’ liability insurance coverage or bankers’ blanket bond group insurance coverage for insured depository institutions, and (iv) acquiring or retaining the voting stock of an insured depository institution if certain 15 requirements are met, including that it is owned exclusively by other banks.
Furthermore, such loans and extensions of credit are required to be secured in specified amounts, carried out on an arm’s length basis, and consistent with safe and sound banking practices. Under the Dodd-Frank Act, a bank holding company, such as OFG, must serve as a source of financial strength for any subsidiary depository institution.
Furthermore, such loans and extensions of credit are required to be secured in specified amounts, carried out on an arm’s length basis, and consistent with safe and sound banking practices. 11 Under the Dodd-Frank Act, a bank holding company, such as OFG, must serve as a source of financial strength for any subsidiary depository institution.
OFG operates through various subsidiaries, including a commercial bank, Oriental Bank (the “Bank”), a securities broker-dealer and investment adviser, Oriental Financial Services LLC (“Oriental Financial Services”), an insurance agency, Oriental Insurance, LLC (“Oriental Insurance”), a captive reinsurance company, OFG Reinsurance Ltd (“OFG Reinsurance”), OFG Ventures LLC (“OFG Ventures”), which holds investments, and a commercial lender, OFG USA LLC (“OFG USA”), which is a subsidiary of the Bank.
OFG operates through various subsidiaries, including a commercial bank, the Bank, a securities broker-dealer and investment adviser, Oriental Financial Services LLC (“Oriental Financial Services”), an insurance agency, Oriental Insurance, LLC (“Oriental Insurance”), a captive reinsurance company, OFG Reinsurance Ltd (“OFG Reinsurance”), OFG Ventures LLC (“OFG Ventures”), which holds investments, and a commercial lender, OFG USA LLC (“OFG USA”), which is a subsidiary of the Bank.
As part of the Company’s ongoing strategic reviews, OFG sold its retirement plan administration business in its subsidiary Oriental Pension Consultants, Inc. (“OPC”) effective as of December 30, 2022, and thereafter ceased its operations. OFG’s mission is to make possible the progress of our customers, employees, shareholders, and communities we serve.
As part of the Company’s ongoing strategic reviews, OFG sold the retirement plan administration business of its subsidiary Oriental Pension Consultants, Inc. (“OPC”) effective as of December 30, 2022, and thereafter ceased its operations. OFG’s mission is to make possible the progress of our customers, employees, shareholders, and communities we serve.
It also has two international banking entities (each an “IBE”) organized in Puerto Rico pursuant to the International Banking Center Regulatory Act of Puerto Rico, as amended (the “IBE Act”), a unit operating within the Bank, named Oriental Overseas (the “IBE Unit”), and the other is a wholly-owned subsidiary of the Bank, named Oriental International Bank, Inc. (the “IBE Subsidiary”).
It also has two international banking entities (each an “IBE”) organized in Puerto Rico pursuant to the International Banking Center Regulatory Act of Puerto Rico, as amended (the “IBE Act”), a unit operating within the Bank, named Oriental Overseas (the “IBE Unit”), and the other is a wholly owned subsidiary of the Bank, named Oriental International Bank, Inc.
The new assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceeds 2% in order to support growth in the DIF in progressing toward the FDIC’s long-term goal of a 2% DRR. Progressively lower assessment rate schedules will take effect when the reserve ratio reaches 2%, and again when it reaches 2.5%.
The new assessment rate schedules will remain in effect unless and until the reserve ratio meets or 14 exceeds 2% in order to support growth in the DIF in progressing toward the FDIC’s long-term goal of a 2% DRR. Progressively lower assessment rate schedules will take effect when the reserve ratio reaches 2%, and again when it reaches 2.5%.
Transactions with Affiliates and Related Parties Transactions between the Bank and any of its affiliates are governed by sections 23A and 23B of the Federal Reserve Act. These sections are important statutory provisions designed to protect a depository institution from transferring to its 15 affiliates the subsidy arising from the institution’s access to the Federal safety net.
Transactions with Affiliates and Related Parties Transactions between the Bank and any of its affiliates are governed by sections 23A and 23B of the Federal Reserve Act. These sections are important statutory provisions designed to protect a depository institution from transferring to its affiliates the subsidy arising from the institution’s access to the Federal safety net.
Oriental Insurance is subject to the supervision, examination and regulation of the Office of the Commissioner of Insurance of Puerto Rico in matters relating to insurance sales, including but not limited to, licensing of employees, sales practices, charging of commissions and reporting requirements. OFG Reinsurance is subject to regulation by the Cayman Islands Monetary Authority (“CIMA”).
Oriental Insurance is subject to the supervision, examination and regulation of the Office of the Commissioner of Insurance of Puerto Rico in matters relating to insurance sales, including but not limited to, licensing of employees, sales practices, charging of commissions and reporting requirements. 10 OFG Reinsurance is subject to regulation by the Cayman Islands Monetary Authority (“CIMA”).
The Banking Act further requires every bank to maintain a legal reserve which cannot be less than 20% of its demand liabilities, except government deposits (federal, commonwealth and municipal), which are secured by actual collateral. 17 The Banking Act also requires change of control filings.
The Banking Act further requires every bank to maintain a legal reserve which cannot be less than 20% of its demand liabilities, except government deposits (federal, commonwealth and municipal), which are secured by actual collateral. The Banking Act also requires change of control filings.
OFG’s ability to 6 originate loans depends primarily on the services that it provides to its borrowers, in making prompt credit decisions, and on the rates and fees that it charges. OFG continues to develop commercial relationships in the United States with its U.S. commercial loan program.
OFG’s ability to originate loans depends primarily on the services that it provides to its borrowers, in making prompt credit decisions, and on the rates and fees that it charges. OFG continues to develop commercial relationships in the United States with its U.S. commercial loan program.
Such lines of credit bear an interest rate that floats with a base rate, the prime rate, SOFR or another established index. 5 Sale of Loans and Securitization Activities OFG may engage in the sale or securitization of the residential mortgage loans that it originates.
Such lines of credit bear an interest rate that floats with a base rate, the prime rate, SOFR or another established index. Sale of Loans and Securitization Activities OFG may engage in the sale or securitization of the residential mortgage loans that it originates.
Besides providing business continuity, the process serves as tool to drive our diversity and inclusion practices. The process is also carried out for other managerial levels periodically allowing time to act on the development plans.
Besides providing business continuity, the process serves as a tool to drive our diversity and inclusion practices. The process is also carried out for other managerial levels periodically, allowing time to act on the development plans.
Failure to meet the capital rules could subject an institution to a variety of enforcement actions including the termination of deposit insurance by the FDIC and the imposition of certain restrictions on its business. As of December 31, 2023, OFG was in compliance with all applicable capital requirements. For more information, please refer to the accompanying consolidated financial statements.
Failure to meet the capital rules could subject an institution to a variety of enforcement actions including the termination of deposit insurance by the FDIC and the imposition of certain restrictions on its business. As of December 31, 2024, OFG was in compliance with all applicable capital requirements. For more information, please refer to the accompanying consolidated financial statements.
ITEM 1. BUSINESS General OFG Bancorp (“OFG”) is a financial holding company headquartered in San Juan, Puerto Rico. OFG is subject to the provisions of the U.S. Bank Holding Company Act of 1956, as amended, (the “BHC Act”) and accordingly, subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”).
ITEM 1. BUSINESS General OFG is a financial holding company headquartered in San Juan, Puerto Rico. OFG is subject to the provisions of the U.S. Bank Holding Company Act of 1956, as amended, (the “BHC Act”) and accordingly, subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”).
Wellbeing and Safety The success of our business is fundamentally connected to the wellbeing of our people. We have a holistic approach to wellbeing that considers five dimensions: physical, emotional, professional, community and financial. Our wellness program offers a comprehensive series of onsite and virtual activities throughout the year focused on these dimensions.
Wellbeing and Safety The success of our business is fundamentally connected to the wellbeing of our people. We have a holistic approach to wellbeing that considers five dimensions: physical, social, professional, community, and financial. Our wellness program offers a comprehensive series of onsite and virtual activities throughout the year focused on these dimensions.
OFG’s principal funding source is branch deposits. Through its branch network, Oriental offers personal non-interest and interest-bearing checking accounts, savings accounts, certificates of deposit, individual retirement accounts (“IRAs”) and commercial non-interest and interest-bearing checking accounts. The FDIC insures the Bank’s deposit accounts up to applicable limits.
OFG’s principal funding source is branch deposits. Through its branch network, the Bank offers personal non-interest and interest-bearing checking accounts, savings accounts, certificates of deposit, individual retirement accounts (“IRAs”) and commercial non-interest and interest-bearing checking accounts. The FDIC insures the Bank’s deposit accounts up to applicable limits.
Most of our subsidiaries are based in San Juan, Puerto Rico and the USVI, except for OFG USA which is organized in Delaware, but operates out of Cornelius, North Carolina, OFG Reinsurance which is based in the Cayman Islands, and OFG Ventures which is based on Delaware.
Most of our subsidiaries are based in San Juan, Puerto Rico and the USVI, except for OFG USA which is organized in Delaware, but operates out of Charlotte, North Carolina, OFG Reinsurance which is based in the Cayman Islands, and OFG Ventures which is based on Delaware.
Undercapitalized institutions are not permitted to accept brokered deposits. As of December 31, 2023, the Bank meets the requirements to be considered a well-capitalized institution and is therefore not subject to these limitations on brokered deposits.
Undercapitalized institutions are not permitted to accept brokered deposits. As of December 31, 2024, the Bank meets the requirements to be considered a well-capitalized institution and is therefore not subject to these limitations on brokered deposits.
Moreover, higher performance ratings compared to the previous year, and aligned with our business results are proof OFG’s talent is doing their very best to contribute and intentionally live our purpose to make progress possible. Once a year, a talent review and succession planning process is conducted for senior leaders and presented to our Board of Directors.
Moreover, higher performance ratings compared to previous years and aligned with our business results are proof that OFG’s talent is doing their very best to contribute and intentionally live our purpose to make progress possible. Once a year, a talent review and succession planning process is conducted for senior leaders and presented to our Board of Directors.
Banking activities include the Bank’s branches and mortgage banking activities with traditional retail banking products such as deposits, commercial loans, consumer loans, auto loans, and mortgage loans. The Bank’s lending activities are primarily with consumers located in Puerto Rico and the USVI.
Banking activities include the Bank’s branches and mortgage banking activities with traditional retail banking products such as deposits, commercial loans, consumer loans, auto loans, and mortgage loans. The Bank’s lending activities are primarily with customers located in Puerto Rico and the USVI.
The IBE Act provides further that every IBE must have not less than $300 thousand of unencumbered assets or acceptable financial guarantees in Puerto Rico.
The IBE Act provides further that every IBE must have not less than $525 thousand of unencumbered assets or acceptable financial guarantees in Puerto Rico.
The Bank has a wholly-owned operating subsidiary, OFG USA, which is organized in Delaware but operates out of Cornelius, North Carolina.
The Bank has a wholly owned operating subsidiary, OFG USA, which is organized in Delaware but operates out of Charlotte, North Carolina.
OFG provides comprehensive banking and financial services and solutions to its clients through Oriental and various other subsidiaries, including commercial, consumer, auto, and mortgage lending, financial planning, insurance sales, investment advisory and security brokerage services, as well as corporate and individual trust services. OFG operates through three major business segments: Banking, Wealth Management, and Treasury.
OFG provides comprehensive banking and financial services and solutions to its clients through the Bank and various other subsidiaries, including commercial, consumer, auto, and mortgage lending, financial planning, insurance sales, investment advisory and security brokerage services, as well as corporate trust services. OFG operates through three major business segments: Banking, Wealth Management, and Treasury.
The Bank is an approved seller of FNMA mortgage loans for issuance of FNMA mortgage-backed securities. The Bank is also an approved issuer of GNMA mortgage-backed securities. The Bank is the master servicer of its mortgage loan portfolio and the GNMA, FNMA and FHLMC pools that it issues.
The Bank is an approved seller of FNMA conforming mortgage loans for issuance of FNMA mortgage-backed securities. The Bank is also an approved issuer of GNMA mortgage-backed securities. The Bank is the master servicer of its mortgage loan portfolio and the GNMA, FNMA and FHLMC pools that it issues or services.
The Bank offers banking services such as commercial, consumer, auto, and mortgage lending, savings and time deposit products, wealth management services, and corporate and individual trust services, and capitalizes on its retail banking network to provide commercial and mortgage lending products to its clients.
The Bank offers banking services such as commercial, consumer, auto, and mortgage lending, savings and time deposit products, and corporate trust services, and capitalizes on its retail banking network to provide commercial and mortgage lending products to its clients.
Given that OFG has uninsured deposits under $5 billion, this special assessment does not apply to us. However, in 14 the future, there may be additional special assessments imposed on insured depository institutions that may apply to us. It is not yet possible to quantify the scope of any of these actions or the potential impact on our operations.
Given that OFG had uninsured deposits under $5 billion, this special assessment did not apply to us. However, in the future, there may be additional special assessments imposed on insured depository institutions that may apply to us. It is not yet possible to quantify the scope of any of these actions or the potential impact on our operations.
The Dodd-Frank Act also created a new consumer financial services regulator, the Consumer Financial Protection Bureau (the “CFPB”), empowered to exercise broad rulemaking, supervision, and enforcement authority for a wide range of consumer financial laws previously exercised by federal banking regulators and other agencies.
The Dodd-Frank Act also created a new consumer financial services regulator, the CFPB, empowered to exercise broad rulemaking, supervision, and enforcement authority for a wide range of consumer financial laws previously exercised by federal banking regulators and other agencies.
Commercial term loans generally have terms from one to five years, may be collateralized by the asset being acquired, real estate, or other available assets, and bear interest rates that float with the prime rate, SOFR or another established index, or are fixed for the term of the loan.
Commercial term loans generally have terms from one to five years, may be collateralized by the asset being acquired, real estate, or other available assets, and bear interest rates that float with the prime rate, Secured Overnight Financing Rate (“SOFR”) or another established index, or are fixed for the term of the loan.
Our strategy to become a digital first bank will continue to be carried by investing in our: • People to attract, retain, and develop people with necessary capabilities and skills for digital transformation with a strong customer service orientation, flexibility, and good collaboration skills, in addition to technical capabilities needed for specific jobs. 3 • Technology to make systems and processes oriented to provide digital customer service interactions above all else aiming for self-service to become the norm. • Analytics to enhance our vision, empower business and drive profitability by anticipating our customers’ needs and proactively offer them solutions through the most appropriate channel. • Business Development to build an engine of growth with intelligence of customer behavior and experience across the whole sales process from awareness to the final purchase and amplify digital sales models.
Our banking experts are equipped with the knowledge to proactively help customers achieve their financial aspirations. 3 Our strategy to become a digital first bank will continue to be carried by investing in our: • People to attract, retain, and develop people with necessary capabilities and skills for digital transformation with a strong customer service orientation, flexibility, and good collaboration skills, in addition to technical capabilities needed for specific jobs. • Technology to make systems and processes oriented to provide digital customer service interactions above all else aiming for self-service to become the norm. • Analytics to enhance our vision, empower business and drive profitability by anticipating our customers’ needs and proactively offer them solutions through the most appropriate channel. • Business Development to build an engine of growth with intelligence of customer behavior and experience across the whole sales process from awareness to the final purchase and amplify digital sales models.
The Bank is currently the only depository institution subsidiary of OFG. 11 Since OFG is a financial holding company, its right to participate in the assets of any subsidiary upon the latter’s liquidation or reorganization will be subject to the prior claims of the subsidiary’s creditors (including depositors in the case of the Bank) except to the extent that OFG is a creditor with recognized claims against the subsidiary.
Since OFG is a financial holding company, its right to participate in the assets of any subsidiary upon the latter’s liquidation or reorganization will be subject to the prior claims of the subsidiary’s creditors (including depositors in the case of the Bank) except to the extent that OFG is a creditor with recognized claims against the subsidiary.
As of December 31, 2023, OFG’s management concluded that its internal control over financial reporting was effective.
As of December 31, 2024, OFG’s management concluded that its internal control over financial reporting was effective.
Diversity, Equity, and Inclusion OFG’s hiring and talent management practices are committed to ensuring a diverse workforce that reflects the makeup of the communities in which it operates. Oriental prepares an annual diversity plan, whereby it identifies members of the community that are underrepresented in our workforce.
Diversity, Equity, and Inclusion OFG’s hiring and talent management practices are committed to ensuring a diverse workforce that reflects the makeup of the communities in which it operates. We prepare an annual plan, whereby we identify members of the community that are underrepresented in our workforce.
The IBE Unit and the IBE Subsidiary offer the Bank certain Puerto Rico 4 tax advantages, and their services are limited under Puerto Rico law to persons and assets/liabilities located outside of Puerto Rico.
(“OIB” or the “IBE Subsidiary”). The IBE Unit and the IBE Subsidiary offer the Bank certain Puerto Rico tax advantages, and their services are limited under Puerto Rico law to persons and assets/liabilities located outside of Puerto Rico.
USA Patriot Act Under Title III of the USA Patriot Act, also known as the “International Money Laundering Abatement and Anti-Terrorism Financing Act of 2001,” as amended, which is part of the legislative framework known as the “Bank Secrecy Act”, all financial institutions, including OFG, Oriental Financial Services, and the Bank, are generally required to identify and verify the identity of their customers (including the beneficial owners of a legal entity customer and an individual with significant responsibility for managing such legal entity customer), adopt formal and comprehensive anti-money laundering programs, scrutinize or prohibit altogether certain transactions of special concern, and be prepared to respond to inquiries from U.S. law enforcement agencies concerning their customers and their transactions. 16 The US Treasury has issued a number of regulations implementing the USA Patriot Act that apply certain of its requirements to financial institutions.
The Bank received a “satisfactory” rating in its most recent CRA examination. 16 USA Patriot Act Under Title III of the USA Patriot Act, also known as the “International Money Laundering Abatement and Anti-Terrorism Financing Act of 2001,” as amended, which is part of the legislative framework known as the “Bank Secrecy Act”, all financial institutions, including OFG, Oriental Financial Services, and the Bank, are generally required to identify and verify the identity of their customers (including the beneficial owners of a legal entity customer and an individual with significant responsibility for managing such legal entity customer), adopt formal and comprehensive anti-money laundering programs, scrutinize or prohibit altogether certain transactions of special concern, and be prepared to respond to inquiries from U.S. law enforcement agencies concerning their customers and their transactions.
Residential mortgage loans: All loan originations, regardless of whether originated through OFG’s retail banking network or purchased from third parties, must be underwritten in accordance with OFG’s underwriting criteria, including loan-to-value ratios, borrower income qualifications, debt ratios and credit history, FICO score, investor requirements, and title insurance and property appraisal requirements.
The proprietary credit scoring system is a fundamental part of the decision process. 5 Residential mortgage loans: All loan originations, regardless of whether originated through OFG’s retail banking network or purchased from third parties, must be underwritten in accordance with OFG’s underwriting criteria, including loan-to-value ratios, borrower income qualifications, debt ratios and credit history, FICO score, investor requirements, and title insurance and property appraisal requirements.
In addition, any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank.
In addition, any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. The Bank is currently the only depository institution subsidiary of OFG.
As an FDIC-insured Puerto Rico-chartered commercial bank, it is subject to examination by the FDIC and the Office of the Commissioner of Financial Institutions of Puerto Rico (the “OCFI”).
The Bank has 42 branches throughout Puerto Rico and 2 branches in the USVI. As an FDIC-insured Puerto Rico-chartered commercial bank, it is subject to examination by the FDIC and the Office of the Commissioner of Financial Institutions of Puerto Rico (the “OCFI”).
Our technology, systems and processes are trouble free, secure, automated, efficient and low latency. We relentlessly pursue the improvement of our processes. • Customer Insights: Readily available, timely insights that empower customers to monitor and manage their finances. Our banking experts are equipped with the knowledge to proactively help customers achieve their financial aspirations.
Our technology, systems and processes are trouble free, secure, automated, efficient and low latency. We relentlessly pursue the improvement of our processes. • Customer Insights: Readily available, timely insights that empower customers to monitor and manage their finances.
Oriental Insurance currently earns commissions by acting as a licensed insurance agent in connection with the issuance of insurance policies by unaffiliated insurance companies and continues to cross market its services to OFG’s existing customer base. OFG Reinsurance Ltd., a Cayman Islands company, is OFG’s subsidiary engaged in the reinsurance business.
Oriental Insurance, a Puerto Rico limited liability company, is OFG’s subsidiary engaged in insurance agency services in Puerto Rico. Oriental Insurance currently earns commissions by acting as a licensed insurance agent in connection with the issuance of insurance policies by unaffiliated insurance companies and continues to cross market its services to OFG’s existing customer base.
OFG’s principal subsidiary is Oriental Bank (“Oriental” or the “Bank”), an FDIC insured Puerto Rico commercial bank founded as a federal savings and loan in 1964.
OFG’s principal subsidiary is Oriental Bank (the “Bank”), an Federal Deposit Insurance Corporation (“FDIC”) insured Puerto Rico commercial bank founded as a federal savings and loan in 1964.
Under the rule, the FDIC will collect a special assessment based on a calculation using an insured depository institution’s estimated amount of uninsured deposits. In particular, the special assessment will be imposed on insured depository institutions based on their estimated uninsured deposits in excess of $5 billion.
Under the rule, the FDIC collected a special assessment based on a calculation using an insured depository institution’s estimated amount of uninsured deposits. In particular, the special assessment was imposed on insured depository institutions based on their estimated uninsured deposits in excess of $5 billion at December 31, 2022.
As of December 31, 2023, OFG had 2,248 employees, none of which are represented by a collective bargaining group. Employee Experience and Culture Maintaining an emotional connection with our employees is key to achieving our vision. In our latest annual engagement survey in collaboration with Gallup, we received feedback from 91% of our workforce.
As of December 31, 2024, OFG had 2,246 employees, none of which are represented by a collective bargaining group. Employee Experience and Culture We believe that maintaining an emotional connection with our employees is key to achieving our vision and results. In our latest annual engagement survey in collaboration with Gallup, Inc.
OFG’s investment portfolio consists of mortgage-backed securities, obligations of U.S. government-sponsored agencies, US Treasury securities and money market instruments.
Treasury Activities Treasury activities encompass all of the Company’s treasury-related functions. OFG’s investment portfolio consists of mortgage-backed securities, obligations of U.S. government-sponsored agencies, US Treasury securities and money market instruments.
We believe that our philosophy of providing highly competitive performance driven compensation, an employee centered culture, along with significant opportunities for career growth and development opportunities, encourages a high level of employee retention. At December 31, 2023, OFG’s talent had an average of 10 years of service.
More than 73% of exits are for non-exempt roles. We believe that our philosophy of providing highly competitive performance-driven compensation, an employee-centered culture, along with significant opportunities for career growth and development, encourages a high level of employee retention. As of December 31, 2024, OFG’s talent had an average of 11 years of service.
OFG’s corporate governance principles and guidelines, code of business conduct and ethics, and the charters of its audit committee, compensation committee, risk and compliance committee, and corporate governance and nominating committee are available free of charge on OFG’s website at www.ofgbancorp.com under the corporate governance link. 19 OFG’s Code of Business Conduct and Ethics applies to its directors, officers, employees and agents, including its principal executive, financial and accounting officers.
OFG’s corporate governance principles and guidelines, code of business conduct and ethics, and the charters of its audit committee, compensation committee, risk and compliance committee, and corporate governance and nominating committee are available free of charge on OFG’s website at www.ofgbancorp.com under the corporate governance link.
They are also required to submit quarterly and annual reports of their financial condition and results of operations to the OCFI, including annual audited financial statements. 18 The IBE Act empowers the OCFI to revoke or suspend, after notice and hearing, a license issued thereunder if, among other things, the IBE fails to comply with the IBE Act, the IBE Regulations or the terms of its license, or if the OCFI finds that the business or affairs of the IBE are conducted in a manner that is not consistent with the public interest.
The IBE Act empowers the OCFI to revoke or suspend, after notice and hearing, a license issued thereunder if, among other things, the IBE fails to comply with the IBE Act, the IBE Regulations or the terms of its license, or if the OCFI finds that the business or affairs of the IBE are conducted in a manner that is not consistent with the public interest.
Since December 31, 2019, OFG operates in the USVI and expects to grow the business that it acquired in such jurisdiction. Our Human Capital At OFG, our unwavering commitment to propelling the progress of our customers, employees, shareholders, and the communities we serve is the driving force behind everything we do.
OFG also operates in the USVI through two branches and expects to continue to grow its business in such jurisdiction. Our Human Capital At OFG, our unwavering commitment to propelling the progress of our customers, employees, shareholders, and the communities we serve is the driving force behind everything we do.
In addition, as a highly regulated entity, OFG makes sure that its employees are properly trained on company policies and compliance matters, including regulatory compliance and anti-money laundering programs, among others.
In addition, as a highly regulated entity, OFG ensures that its employees are properly trained on company policies and compliance matters, including regulatory compliance and anti-money laundering programs, among others. All employees are required to complete annual online training courses covering all required topics.
Treasury Department (the “US Treasury”) and gives the Federal Reserve Board authority to allow a financial holding company to engage in any activity that is complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system.
In addition, the Gramm-Leach-Bliley Act specifically gives the Federal Reserve Board the authority, by regulation or order, to expand the list of financial or incidental activities, but requires consultation with the US Treasury Department (the “US Treasury”) and gives the Federal Reserve Board authority to allow a financial holding company to engage in any activity that is complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system.
Regulatory Capital Requirements Under the Dodd-Frank Act, federal banking regulators are required to establish minimum leverage and risk-based capital requirements, on a consolidated basis, for insured institutions, depository institution holding companies, and non-bank financial companies supervised by the Federal Reserve Board.
All loans, advances and other extensions of credit made by the FHLB to the Bank are secured by a portion of the Bank’s mortgage and commercial loan portfolios and certain other investments. 12 Regulatory Capital Requirements Under the Dodd-Frank Act, federal banking regulators are required to establish minimum leverage and risk-based capital requirements, on a consolidated basis, for insured institutions, depository institution holding companies, and non-bank financial companies supervised by the Federal Reserve Board.
Wealth Management Activities Wealth management activities at OFG are generated by three wholly-owned subsidiaries and a division of the Bank. These activities include such businesses as securities brokerage, insurance agency, captive reinsurance, pension plan administration and servicing, trust services, and other financial services.
Wealth Management Activities Wealth management activities at OFG are generated by three wholly owned subsidiaries and a division of the Bank. These activities include such businesses as securities brokerage, insurance agency, captive reinsurance, trust services, and other financial services. Oriental Financial Services, a Puerto Rico limited liability company, is OFG’s subsidiary engaged in securities brokerage and investment advisory activities.
In addition, the OCFI is given extensive rulemaking power and administrative discretion under the Banking Act. The OCFI generally examines the Bank at least once every year.
In addition, the OCFI is given extensive rulemaking power and administrative discretion under the Banking Act.
The Board oversees these activities through regular reports by senior management regarding new or altered programs and as part of the Compensation Committee and Enterprise Risk Management process.
Management and Board Oversight Management is engaged in OFG’s efforts regarding the administration of human capital through regular informational meetings, OFG’s Enterprise Risk Management program, and organized succession planning. The Board oversees these activities through regular reports by senior management regarding new or altered programs and as part of the Compensation Committee and Enterprise Risk Management process.
The Banking Act requires that a minimum of 10% of the Bank’s net income for the year be transferred to a reserve fund until such fund (legal surplus) equals the total paid-in capital on common and preferred stock. At December 31, 2023 and 2022, legal surplus amounted to $151.0 million and $133.9 million, respectively.
The OCFI generally examines the Bank at least once every two years. 17 The Banking Act requires that a minimum of 10% of the Bank’s net income for the year be transferred to a reserve fund until such fund (legal surplus) equals the total paid-in capital on common and preferred stock.
Leadership development programs, Gallup-based initiatives, and emerging talent programs, including trainee and alumni mentorship programs, further contribute to our talent pool. OFG also has customer service and sales-service academies provided to client-facing sales and service employees. During the year ended December 31, 2023, and as part of our career growth and development programs, 20% of open positions were filled internally.
Leadership development programs, Gallup-based initiatives, and emerging talent programs, including trainee and alumni mentorship programs, further contribute to our talent pool. OFG also has customer service and sales-service academies provided to client-facing sales and service employees.
As provided by the Dodd-Frank Act, however, a financial holding company may not acquire, without prior Federal Reserve Board approval, a company in a transaction in which the total consolidated assets to be acquired by the financial holding company exceed $10 billion. 9 In addition, the Gramm-Leach-Bliley Act specifically gives the Federal Reserve Board the authority, by regulation or order, to expand the list of financial or incidental activities, but requires consultation with the U.S.
As provided by the Dodd-Frank Act, however, a financial holding company may not acquire, without prior Federal Reserve Board approval, a company in a transaction in which the total consolidated assets to be acquired by the financial holding company exceed $10 billion.
Any failure to meet the applicable requirements or minimum statutory capital requirements could subject it to further examination or corrective action by CIMA, including restrictions on dividend payments, limitations on our writing of additional business or engaging in finance activities, supervision or liquidation. 10 Dodd-Frank Wall Street Reform and Consumer Protection Act The Dodd-Frank Act implemented a variety of far-reaching changes and has been described as the most sweeping reform of the financial services industry since the 1930’s.
Any failure to meet the applicable requirements or minimum statutory capital requirements could subject it to further examination or corrective action by CIMA, including restrictions on dividend payments, limitations on our writing of additional business or engaging in finance activities, supervision or liquidation.
The amount transferred to the legal surplus account is not available for the payment of dividends to shareholders.
At 2024 and 2023, legal surplus amounted to $169.5 million and $151.0 million, respectively. The amount transferred to the legal surplus account is not available for the payment of dividends to shareholders.
On December 30, 2022, the Bank sold the rights to administer and service the retirement plans of its customers, and Oriental Pension Consultants ceased operations. Corporate and individual trust services are provided by Oriental Trust, the Bank’s trust division. Treasury Activities Treasury activities encompass all of the Company’s treasury-related functions.
On December 30, 2022, the Bank sold the rights to administer and service the retirement plans of its customers, and Oriental Pension Consultants ceased operations. 6 Oriental Trust, the Bank’s trust division, provides trustee and paying agent services to retirement plans in Puerto Rico, and provides other corporate trust services.
Because the capital requirements must be the same for insured depository institutions and their holding companies, the Collins Amendment generally excludes certain debt or equity instruments, such as cumulative perpetual preferred stock and trust preferred securities, from Tier 1 Capital. 12 The capital rules adopted by the federal banking agencies in 2013 under Basel III framework include a minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5% and a common equity tier 1 capital conservation buffer of 2.5% of risk-weighted assets that apply to all banking organizations.
The capital rules adopted by the federal banking agencies in 2013 under Basel III framework include a minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5% and a common equity tier 1 capital conservation buffer of 2.5% of risk-weighted assets that apply to all banking organizations.
The regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing. Failure of a financial institution to comply with the USA Patriot Act’s requirements could have serious legal consequences for the institution.
The US Treasury has issued a number of regulations implementing the USA Patriot Act that apply certain of its requirements to financial institutions. The regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing.
The anti-discrimination policy also includes procedures for protecting employees from domestic abuse. Compensation Integral to our strategy is our compensation program, designed by our Human Resources team and overseen by the Board’s Compensation Committee. The program aligns individual and business performance objectives, ensuring competitiveness with market practices.
Compensation Central to our strategy is our compensation program, designed by our Human Resources team and overseen by the Board’s Compensation Committee. The program aligns individual and business performance objectives, ensuring competitiveness with market practices. It aims to attract and retain employees; link pay with performance and align with corporate governance principles.
Talent Development As a continuous learning advocate, our culture encourages growth through various programs—training, feedback, coaching, mentoring, and stretch assignments. In the year ended December 31, 2023, we offered over 300 learning sessions totaling more than 20,000 training hours. Partnering with LinkedIn Learning expanded our offerings to over 22,000 courses.
Talent Development As an advocate of continuous learning, we believe OFG's culture encourages growth through various programs—training, feedback, coaching, mentoring, and stretch assignments. In 2024, we offered over 350 learning sessions totaling more than 28,000 training hours. We partnered with a global content provider to offer access to over 22,000 online courses for skills development.
It aims to attract and retain employees, link pay with performance, and align with corporate governance principles. The Board’s Compensation Committee approves compensation of OFG’s senior executive management team, taking into account input of the Compensation Committee’s independent compensation consultant. The application of our compensation philosophy is supported through program design and communication.
The Board’s Compensation Committee approves compensation of our senior executive management team, taking into account input received from the Compensation Committee’s independent compensation consultant. 8 The application of our compensation philosophy is supported through program design and communication. It is also presented to the Compensation Committee annually. We also offer a comprehensive benefits package to all eligible employees.
Moreover, the amount to be carried over to a particular year is limited to the excess of the NOL over 90% of the net income for the year for regular tax and is limited to the excess of the NOL over 70% of the net income for alternative minimum tax (“AMT”) purposes.
Moreover, the amount to be carried over to a particular year is limited to 90% of the net income for the year for regular tax purposes and 70% of the net income for the year for alternative minimum tax (“AMT”) purposes. 18 International Banking Center Regulatory Act of Puerto Rico The business and operations of the Bank’s IBE Unit and IBE Subsidiary are subject to supervision and regulation by the OCFI.
Oriental Financial Services LLC, a Puerto Rico limited liability company, is OFG’s subsidiary engaged in securities brokerage and investment advisory activities. Its operations are part of OFG’s strategy of providing retail and institutional clients fully integrated financial solutions. These can include a variety of investment alternatives such as tax-advantaged fixed income securities, mutual funds, stocks, and bonds.
Its operations are part of OFG’s strategy of providing retail and institutional clients fully integrated financial solutions. These can include a variety of investment alternatives such as tax-advantaged fixed income securities, mutual funds, stocks, and bonds. It also offers separately managed accounts and mutual fund asset allocation programs sponsored by unaffiliated professional asset managers.
It reinsures credit insurance policies on consumer loans originated by the Bank, as well as personal accident and health policies underwritten by unaffiliated insurers. Oriental Pension Consultants Inc., a Florida corporation, is an OFG subsidiary that was engaged in the administration and servicing of retirement plans in the U.S., Puerto Rico, and the Caribbean.
OFG Reinsurance, a Cayman Islands company, is OFG’s subsidiary engaged in the reinsurance business. It reinsures credit insurance policies on consumer loans originated by the Bank, as well as personal accident and health policies underwritten by unaffiliated insurers.
Oriental Financial Services is a registered securities broker-dealer pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation. Oriental Financial Services does not carry customer accounts and is, accordingly, exempt from the Customer Protection Rule (SEC Rule 15c3-3).
These services are designed to meet each client’s individual needs and preferences, including transaction-based pricing and asset-based fee pricing. Oriental Financial Services is a registered securities broker-dealer pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation.
OFG’s investment in human capital extends to our workforce’s dependents and during the last nine years $533 thousand has been awarded to 109 students as part of our university scholarship program for our employee’s dependents. 8 We also provide targeted benefits aimed at promoting work-life balance, such as paid time-off for vacation, illness, maternity and paternity leave, community service leave, personal days, and flexible work arrangements, among others.
We also provide targeted benefits aimed at promoting work-life balance, such as paid time-off for vacation, illness, maternity and paternity leave, community service leave, personal days, and flexible work arrangements, among others.
All employees are required to complete annual online training courses covering all required topics. 7 Talent Acquisition and Retention To enhance OFG’s talent ecosystem, the talent acquisition process incorporates a skills-based approach to drive hiring decisions. OFG has leveraged internships and partnerships with universities to enrich recruiting efforts.
Talent Acquisition and Retention To enhance OFG’s talent ecosystem, the talent acquisition process incorporates a skills-based approach to drive hiring decisions. OFG has leveraged internships and partnerships with universities to enrich recruiting efforts. During 2024, OFG was present at 16 job fairs held in Puerto Rico, USVI, and the US mainland.
During 2023, OFG was present in 18 job fairs held in Puerto Rico, US Virgin Islands and the US mainland. OFG has also utilized outreach and partnerships with local community resources at different locations such as workforce development agencies, industry groups and other entities to strengthen OFG’s hiring process and expand the future workforce candidate pool.
OFG has also utilized outreach and partnerships with local community resources at different locations such as workforce development agencies, industry groups, and other entities to strengthen OFG’s hiring process and expand the future workforce candidate pool. OFG monitors employee turnover rates and trends, as we believe that our success depends upon retaining our highly skilled and dedicated talent.
The Bank’s activities in the USVI are also subject to regulation and examination by the USVI Banking Board.
During 2024, the Bank became subject to the Consumer Financial Protection Bureau (the “CFPB”) supervisory and enforcement authority with respect to consumer financial laws. The Bank’s activities in the USVI are also subject to regulation and examination by the USVI Banking Board.
It clears securities transactions through Pershing LLC, a clearing agent that carries the accounts of its customers on a “fully disclosed” basis. Oriental Insurance LLC, a Puerto Rico limited liability company, is OFG’s subsidiary engaged in insurance agency services in Puerto Rico.
Oriental Financial Services does not carry customer accounts and is, accordingly, exempt from the Customer Protection Rule (SEC Rule 15c3-3). It clears securities transactions through Pershing LLC, a clearing agent that carries the accounts of its customers on a “fully disclosed” basis.
OFG monitors employee turnover rates and trends, as we believe that our success depends upon retaining our highly skilled and dedicated talent. OFG’s proactive approach to talent retention includes conducting stay interviews on a need basis. On the other hand, exit interviews and termination reasons are analyzed to act on trends and plan future strategies.
OFG’s proactive approach to talent retention includes conducting stay interviews on need basis. On the other hand, exit interviews and termination reasons are analyzed to act on trends and plan future strategies. OFG’s voluntary turnover rate was 10% by the 2024 year-end and continues to show a downward trend when compared to prior years.
OFG measures the performance of these reportable segments based on pre-established annual goals involving different financial parameters such as net income, interest rate spread, loan production, and fees generated. For detailed information regarding the performance of OFG’s operating segments, please refer to “Note 27 – Business Segments” in OFG’s accompanying consolidated financial statements.
OFG measures the performance of these reportable segments based on pre-established annual goals involving different financial parameters such as net income.
We also aim to continuously understand how employees live our values, how they connect their purpose to our mission and the impact of leadership styles in enabling our business strategy and empowering employees to thrive.
We continuously seek to understand how our employees embody our values, connect their purpose to our mission, and how leadership styles impact our business strategy and empower employees to thrive. To achieve this, we conduct culture assessments to understand our current state and its implications on business outcomes.
OFG’s assets exceeded $10 billion as of December 31, 2023; therefore, we estimate that, beginning on July 1, 2024, the Durbin Amendment will reduce OFG’s income from debit card interchange fees by approximately $10 to $11 million, on an annual basis, based on current volume.
OFG’s assets exceeded $10 billion as of December 31, 2023; therefore, beginning on July 1, 2024, the Durbin Amendment reduced OFG’s income from debit card interchange fees. OFG had implemented 19 measures to anticipate the increased regulatory oversight and other requirements that applied as a result of crossing such $10 billion threshold.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese losses may be material and negatively affect OFG’s results of operations, financial condition or prospects. These losses could also lead to significant reputational risks and other effects. The sophistication of external fraud actors continues to increase, and in some cases includes large criminal rings, which increases the resources and infrastructure needed to thwart these attacks.
Biggest changeOPERATIONS AND BUSINESS RISK We may experience losses related to fraud and theft. OFG has experienced, and may experience in the future, losses incurred due to customer or employee fraud and theft. These losses may be material and negatively affect OFG’s results of operations, financial condition or prospects. These losses could also lead to significant reputational risks and other effects.
In the event that such sources of funds are reduced or eliminated, and we are not able to replace them on a cost-effective basis, we may be forced to curtail or cease our loan origination business and treasury activities, which would have a material adverse effect on our operations and financial condition.
In 26 the event that such sources of funds are reduced or eliminated, and we are not able to replace them on a cost-effective basis, we may be forced to curtail or cease our loan origination business and treasury activities, which would have a material adverse effect on our operations and financial condition.
The adequacy of the reserve and the ultimate amount of losses incurred will depend on, among other things, the actual future mortgage loan performance, the actual level of future repurchase and indemnification requests, the actual success rate of claimants, developments in litigation 22 related to us and the industry, actual recoveries on the collateral, and macroeconomic conditions (including unemployment levels and housing prices).
The adequacy of the reserve and the ultimate amount of losses incurred will depend on, among other things, the actual future mortgage loan performance, the actual level of future repurchase and indemnification requests, the actual success rate of claimants, developments in litigation related to us and the industry, actual recoveries on the collateral, and macroeconomic conditions (including unemployment levels and housing prices).
In such circumstances, it may be difficult for us to reduce our risk positions due to the activity of such other market participants. Adverse developments in the financial services industry could adversely affect our financial condition and results of operations. 25 In 2023, several depository institutions failed or required outside liquidity support.
In such circumstances, it may be difficult for us to reduce our risk positions due to the activity of such other market participants. Adverse developments in the financial services industry could adversely affect our financial condition and results of operations. In 2023, several depository institutions failed or required outside liquidity support.
In determining the amount of the ACL, we rely on loan quality reviews, past and expected loss experience, and an evaluation of economic conditions, among other factors. If our assumptions prove to be incorrect, our ACL may not be enough to cover losses inherent in our loan portfolio, resulting in additions to the ACL.
In determining the amount of the ACL, we rely on loan quality reviews, past loss experience, expected losses modeling, and an evaluation of economic conditions, among other factors. If our assumptions prove to be incorrect, our ACL may not be enough to cover losses inherent in our loan portfolio, resulting in additions to the ACL.
In addition, we may be required to indemnify certain purchasers and others against losses they incur in the event of breaches of our representations and warranties and in various other circumstances, including securities fraud claims, and the amount of such losses could exceed the purchase amount of the related loans.
In addition, we 22 may be required to indemnify certain purchasers and others against losses they incur in the event of breaches of our representations and warranties and in various other circumstances, including securities fraud claims, and the amount of such losses could exceed the purchase amount of the related loans.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services, such as artificial intelligence technologies. The effective use of technology 26 increases efficiency and enables financial institutions to better serve clients and to reduce costs.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services, such as artificial intelligence technologies. The effective use of technology increases efficiency and enables financial institutions to better serve clients and to reduce costs.
This default risk is affected by a number of factors, including: • the duration of the loan; 21 • credit risks of a particular borrower; • changes in economic or industry conditions; and • in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral.
This default risk is affected by a number of factors, including: • the duration of the loan; • credit risks of a particular borrower; • changes in economic or industry conditions; and • in the case of a collateralized loan, risks resulting from uncertainties about the future value of the collateral.
It is possible that future accounting standards that we are required to adopt could change the 27 current accounting treatment that applies to the consolidated financial statements and that such changes could have a material effect on our financial condition and results of operations.
It is possible that future accounting standards that we are required to adopt could change the current accounting treatment that applies to the consolidated financial statements and that such changes could have a material effect on our financial condition and results of operations.
These risks are heightened further by the advent of new artificial intelligence technologies that may be adapted to increase the 23 effectiveness of cyberattacks and their proper use may be necessary to aid in the defense of such attacks.
These risks are heightened further by the advent of new artificial intelligence technologies that may be adapted to increase the effectiveness of cyberattacks and their proper use may be necessary to aid in the defense of such attacks.
Based on our annual goodwill impairment test and our impairment evaluation of intangibles, we determined that no impairment charges were necessary as of December 31, 2023. However, there can be no assurance that future evaluations of such goodwill or intangibles will not result in any impairment charges.
Based on our annual goodwill impairment test and our impairment evaluation of intangibles, we determined that no impairment charges were necessary as of December 31, 2024. However, there can be no assurance that future evaluations of such goodwill or intangibles will not result in any impairment charges.
Our business relies on the secure, successful and uninterrupted functioning of our core banking platform, information technology, telecommunications, and loan servicing. We outsource some of our major systems, such as customer data and deposit processing, internet and mobile banking, and electronic fund transfer systems.
Our business relies on the secure, successful and uninterrupted functioning of our core banking platforms, information technology, telecommunications, and loan servicing. We outsource some of our major systems, such as customer data and deposit processing, internet and mobile banking, and electronic fund transfer systems.
Thus, our profitability and financial condition may be adversely affected by an extended economic recession, adverse political, fiscal or economic developments in Puerto Rico, or the effects of natural disasters, all of which could result in a reduction in loan originations, an increase in credit losses and a reduction in the value of our loans and loan servicing portfolio.
Thus, our profitability and financial condition may be adversely affected by an extended economic recession, adverse political, fiscal or economic developments in Puerto Rico, all of which could result in a reduction in loan originations, an increase in credit losses and a reduction in the value of our loans and loan servicing portfolio.
During 2023, we repurchased $9.6 million of loans from GNMA and FNMA. We have established reserves in our consolidated financial statements for potential losses that are considered to be both probable and reasonably estimable related to the mortgage loans sold by us.
During 2024, we repurchased $6.1 million of loans from GNMA and FNMA. We have established reserves in our consolidated financial statements for potential losses that are considered to be both probable and reasonably estimable related to the mortgage loans sold by us.
If market interest rates increase or remain higher for longer, OFG will have competitive pressure to increase the rates on its deposits, which could result in a decrease of its net interest income and borrowers of variable rate commercial loans may experience difficulties paying their heightened debt service.
Furthermore, if market interest rates increase, OFG could have competitive pressure to increase the rates on its deposits, which could result in a decrease of its net interest income and borrowers of variable rate commercial loans may experience difficulties paying their heightened debt service.
Our ability to originate loans and to attract deposits and assets is highly dependent upon the perceptions of consumer, commercial and funding markets of our business practices and our financial health.
Reputational risk and social factors may impact our results. Our ability to originate loans and to attract deposits and assets is highly dependent upon the perceptions of consumer, commercial and funding markets of our business practices and our financial health.
The Puerto Rico government has enacted tax reforms in the past providing, among other things, for changes in income tax rates and the expansion of certain taxes, such as the sales and use tax, and may do so again in the future.
Legislative changes, particularly changes in local tax laws, could adversely impact our results of operations. The Puerto Rico government has enacted tax reforms in the past providing, among other things, for changes in income tax rates and the expansion of certain taxes, such as the sales and use tax, and may do so again in the future.
For example, Puerto Rico enacted legislation in 2012 under which no new IBEs may be organized and newly organized “international financial entities” are generally subject to a 4% Puerto Rico income tax rate.
In the past, the Legislature of Puerto Rico has considered proposals to curb the tax benefits afforded to IBEs. For example, Puerto Rico enacted legislation in 2012 under which no new IBEs may be organized and newly organized “international financial entities” are generally subject to a 4% Puerto Rico income tax rate.
Among other factors, any declines in our common stock as a result of macroeconomic conditions and any weakness in the Puerto Rico economy could lead to an impairment of such assets. If such assets become impaired, it could have a negative impact on our results of operations.
Among other factors, any declines in our common stock as a result of macroeconomic conditions and any weakness in the Puerto Rico economy could lead to an impairment of such assets.
A significant portion of our noninterest income is derived from service charge income, including NSF fees. Violations of applicable consumer protection laws could result in enforcement actions and significant potential liability from litigation brought by customers, including actual damages, restitution and attorneys’ fees.
A significant portion of our noninterest income is derived from service charge income, including NSF fees. Our failure or the inability to comply with these laws could result in enforcement actions, and significant potential liability from litigation brought by customers, including actual damages, restitution and attorneys’ fees.
Furthermore, we have a significant amount of collateralized deposits from the Puerto Rico government, its instrumentalities and municipalities ($1.618 billion, or approximately 17% of our total deposits, as of December 31, 2023), and the amount of these deposits may fluctuate depending on the financial condition and liquidity of these entities, as well as on our ability to maintain these customer relationships.
Furthermore, we have a significant amount of collateralized deposits from the Puerto Rico government, its instrumentalities and municipalities ($1.445 billion, or approximately 15.0% of our total deposits, as of December 31, 2024), of which a $1.2 billion consist of a deposit that will reprice in May 15, 2025, and the amount of these deposits may fluctuate depending on the financial condition and liquidity of these entities, as well as on our ability to maintain these customer relationships.
Changes in interest rates could adversely affect OFG’s results of operations and financial condition. OFG’s earnings depend substantially on OFG’s interest rate spread, which is the difference between (i) the rates earned on loans, securities, and other earning-assets and (ii) the interest rates paid on deposits and other borrowings.
OFG’s earnings depend substantially on OFG’s interest rate spread, which is the difference between (i) the rates earned on loans, securities, and other earning-assets and (ii) the interest rates paid on deposits and other borrowings.
If we are unable to maintain or grow our deposits for any reason, we may be subject to paying higher funding costs and our net interest income may decrease. Consumer protection laws and the Durbin Amendment may reduce our noninterest income.
No assurance can be given that any such deposit will be available in the future. If we are unable to maintain or grow our deposits for any reason, we may be subject to paying higher funding costs and our net interest income may decrease. 25 Consumer protection laws may reduce our noninterest income.
For example, the Dodd-Frank Act has a broad impact on the financial services industry, including significant regulatory and compliance changes, as discussed under the subheading “Dodd-Frank Wall Street Reform and Consumer Protection Act” in Item 1 of this annual report on Form 10-K.
For example, the Dodd-Frank Act has a broad impact on the financial services industry, including significant regulatory and compliance changes, as discussed under the subheading “Dodd-Frank Wall Street Reform and Consumer Protection Act” in Item 1 of this annual report on Form 10-K. 27 We may be required to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements.
ECONOMIC AND MARKET CONDITIONS RISK Most of our business is conducted in Puerto Rico, where economic and government fiscal and liquidity challenges, as well as the impact of natural disasters and pandemics have adversely impacted and may continue to adversely impact us. Our business is directly affected by economic conditions within Puerto Rico.
ECONOMIC AND MARKET CONDITIONS RISK Most of our business is conducted in Puerto Rico, where economic and government fiscal and liquidity challenges have adversely impacted and may continue to adversely impact us. Our business is directly affected by economic conditions within Puerto Rico. A significant portion of our credit risk exposure on our loan portfolio is concentrated in Puerto Rico.
Legislative and other measures that may be taken by Puerto Rico governmental authorities could materially increase our tax burden or otherwise adversely affect our financial condition, results of operations or cash flows. Legislative changes, particularly changes in local tax laws, could adversely impact our results of operations.
If such assets become impaired, it could have a negative impact on our results of operations. 28 Legislative and other measures that may be taken by Puerto Rico governmental authorities could materially increase our tax burden or otherwise adversely affect our financial condition, results of operations or cash flows.
This uncertainty has resulted in considerable volatility in the financial and commodity markets, including through significant increases in the price of oil, natural gas and food and continue putting additional inflationary pressures on central banks, including the Federal Open Market Committee of the Board of Governors of the Federal Reserve System (“FRB”).
The uncertainty caused by such events has resulted in considerable volatility in the financial and commodity markets, including through significant increases in the price of oil, natural gas and food and continue putting additional inflationary pressures on central banks, including the FRB.
We rely on third parties to provide services and systems essential to the operation of our business, and any failure, interruption or termination of such services or systems could have a material adverse effect on our financial condition and results of operations.
Though we have insurance against some cyber-risks and attacks, it may not be sufficient to offset the impact of a material loss event. 24 We rely on third parties to provide services and systems essential to the operation of our business, and any failure, interruption or termination of such services or systems could have a material adverse effect on our financial condition and results of operations.
Puerto Rico and the USVI are susceptible to earthquakes, hurricanes and major storms, the severity of which could be heightened by the effect of climate change, which could further deteriorate their economy and infrastructure.
In addition, there is no assurance that the Puerto Rico government will be able to satisfy its obligations as restructured. Puerto Rico and the USVI are susceptible to earthquakes, hurricanes and major storms, the severity of which could be heightened by the effect of climate change, which could further deteriorate their economy and infrastructure.
While we cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on us, these changes could be materially adverse to our investors. Reputational risk and social factors may impact our results.
Failure to comply with the new requirements may negatively impact our results of operations and financial condition and may limit our ability to implement our strategic initiatives. While we cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on us, these changes could be materially adverse to our investors.
If market interest rates decline, OFG could experience lower interest income from its variable rate commercial loans and prepayments or refinancing of higher fixed-rate loans. OFG’s earnings can also be impacted by the spread between short-term and long-term market interest rates.
If market interest rates decline, OFG could experience lower interest income from its variable rate commercial loans and prepayments or refinancing of higher fixed-rate loans.
We operate an IBE unit and an IBE subsidiary pursuant to the IBE Act which provides significant tax advantages. The IBEs have an exemption from Puerto Rico income taxes on interest earned on, or gain realized from the sale of, non-Puerto Rico assets, including U.S. government obligations and certain mortgage-backed securities.
The IBEs have an exemption from Puerto Rico income taxes on interest earned on, or gain realized from the sale of, non-Puerto Rico assets, including U.S. government obligations and certain mortgage-backed securities. These qualified activities have allowed us to have an effective tax rate below the maximum statutory tax rate.
The market for residential mortgage loan originations in Puerto Rico is currently in decline, and this trend could also reduce the level of mortgage loans that we may originate in the future and may adversely impact our business.
The market for residential mortgage loan originations in Puerto Rico has remained constant throughout the year. However, a decline in the level of mortgage loans that we may originate in the future could adversely impact our business. In addition, the residential mortgage loan origination business is impacted by home values.
The full impact of the actions by the Russian Federation regarding Ukraine and from the conflict in Israel are not known at this time, but they could continue to bring economic disruption, supply-chain interruptions, heightened volatility in financial and commodity markets, and diminished consumer, business and investor confidence, among others, adversely impacting the financial services industry generally and our business, financial condition, results of operation, and stock price.
In addition, changes in foreign policy, economic sanctions, and regulatory frameworks can alter trade dynamics and investment flows, which could adversely impact the markets in which we operate. 23 The full impact of ongoing and any future global military actions are not known at this time, but they could result in economic disruption, supply-chain interruptions, heightened volatility in financial and commodity markets, and diminished consumer, business and investor confidence, among others, adversely impacting the financial services industry generally and our business, financial condition, results of operation, and stock price.
Therefore, our funding costs are largely dependent on our ability to maintain and grow our core deposits. As we face substantial competition in attracting and retaining deposits caused by rising interest rates, we have increased our cost of funds by increasing the rates we pay to our depositors to avoid losing deposits.
As we face substantial competition in attracting and retaining deposits, we have increased our cost of funds by increasing the rates we pay to our depositors to avoid losing deposits. We may also need to rely on more expensive sources of funding if deposits decrease.
We are subject to security and operational risks related to our use of technology, including the risk of cyber-attack or cyber theft.
OFG continues to invest in fraud prevention in the forms of people and systems designed to prevent, detect and mitigate the customer and financial impacts. We are subject to security and operational risks related to our use of technology, including the risk of cyber-attack or cyber theft.
This makes us vulnerable to downturns in Puerto Rico’s and the USVI’s economy as a result of natural disasters, such as earthquakes in 2020, and hurricanes Irma and Maria in 2017, and Hurricane Fiona in 2022, the severity of which could increase as a result of the effects of climate change.
Any such natural disasters may further adversely affect Puerto Rico’s and the USVI’s critical infrastructure, which are generally weak and necessitating capital investment. This makes us vulnerable to downturns in Puerto Rico’s and the USVI’s economy as a result of natural disasters, the severity of which could increase as a result of the effects of climate change.
Our failure or the inability to comply with these regulations could result in enforcement actions, fines or penalties, curtailment of expansion opportunities, intervention or sanctions by regulators, costly litigation, or expensive additional internal controls and systems. 24 If we are unable to maintain or grow our core deposits, we may be subject to paying higher funding costs and our net interest income may decrease.
We have developed a compliance program reasonably designed to ensure compliance with such laws and regulations. Our failure or the inability to comply with these regulations could result in enforcement actions, fines or penalties, curtailment of expansion opportunities, intervention or sanctions by regulators, costly litigation, or expensive additional internal controls and systems.
In addition, any material decline in real estate values would weaken our collateral loan-to-value ratios and increase the possibility of loss if a borrower default. OPERATIONS AND BUSINESS RISK We may experience losses related to fraud and theft. OFG has experienced, and may experience in the future, losses incurred due to customer or employee fraud and theft.
In addition, any material decline in real estate values would weaken our collateral loan-to-value ratios and increase the possibility of loss if a borrower default. GEOPOLITICAL RISK Global armed conflicts may impact all aspects of our operations, revenues, costs and stock price.
CREDIT RISK Heightened credit risk could require us to increase our provision for credit losses, which could have a material adverse effect on our results of operations and financial condition. Originating loans is an essential element of our business, and there is a risk that the loans will not be repaid.
OFG’s earnings can also be impacted by the spread between short-term and long-term market interest rates. 21 CREDIT RISK Heightened credit risk could require us to increase our provision for credit losses, which could have a material adverse effect on our results of operations and financial condition.
We must maintain adequate liquidity and funding sources to support our operations, comply with our financial obligations, finance our digitalization initiatives, fund planned capital distributions and meet regulatory requirements. We rely primarily on core deposits as a low cost and stable source of funding for our lending activities and the operation of our business.
If we are unable to maintain or grow our core deposits, we may be subject to paying higher funding costs and our net interest income may decrease. We must maintain adequate liquidity and funding sources to support our operations, comply with our financial obligations, finance our digitalization initiatives, fund planned capital distributions and meet regulatory requirements.
Climate change presents both immediate and long-term risks to OFG and its clients, and these risks are expected to increase over time.
Any subsequent earthquakes, hurricanes, major storms or other natural disasters could negatively affect or disrupt our operations and customer base and materially impact our business. 20 Climate change presents both immediate and long-term risks to OFG and its clients, and these risks are expected to increase over time.
The industry fraud threat continues to evolve, including but not limited to card fraud, check fraud, social engineering and phishing attacks for identity theft and account takeover. OFG continues to invest in fraud prevention in the forms of people and systems designed to prevent, detect and mitigate the customer and financial impacts.
The sophistication of external fraud actors continues to increase, and in some cases includes large criminal rings, which increases the resources and infrastructure needed to thwart these attacks. The industry fraud threat continues to evolve, including but not limited to card fraud, check fraud, social engineering and phishing attacks for identity theft and account takeover.
Terrorist attacks and armed conflicts may impact all aspects of our operations, revenues, costs and stock price. 20 Geopolitical and macroeconomic uncertainty, including the military actions taken by the Russian Federation against Ukraine that began in early 2022 and the armed conflict in Israel as a result of a terrorist attack by Hamas in late 2023, have negatively impacted and will continue to have a significant negative impact on the global and United States economies.
Geopolitical and macroeconomic uncertainty, including military actions and terrorist attacks, have negatively impacted and will continue to have a significant negative impact on the global and United States economies.
Removed
A significant portion of our credit risk exposure on our loan portfolio is concentrated in Puerto Rico.
Added
Puerto Rico depends on federal disaster relief funds and any prolonged delay in disbursements of such funds could adversely affect the local economy. The economy of Puerto Rico heavily depends on federal disaster relief funds allocated for recovery from natural disasters. Although significant funding has been approved by the federal government, delays in disbursement and utilization remain a persistent issue.
Removed
In addition, there is no assurance that the Puerto Rico government will be able to satisfy its obligations as restructured. Various significant natural disasters, including hurricanes and earthquakes, as well as the Covid-19 pandemic have also impacted Puerto Rico’s economy.
Added
Prolonged delays could hinder economic recovery, reduce infrastructure development, and create uncertainty in the local economy. This dependence on undisbursed funds, coupled with the potential for changes in federal disaster relief policies, poses a risk to economic stability.
Removed
Although federal disaster reconstruction assistance is expected to continue to drive economic growth in the short term, there is no guarantee that funds set aside for these purposes will not be repurposed by the federal government or that their disbursement will not be unreasonably conditioned or delayed.
Added
Any resulting economic downturn could adversely affect our borrowers and depositors, potentially leading to increased credit risk, reduced loan demand, and an overall weakening of the financial environment in which we operate. These factors could have a material adverse effect on our financial condition and results of operations.
Removed
Puerto Rico also continues to be vulnerable to hurricanes and earthquakes and may continue to be impacted by natural disasters in the future, including those as a result of climate change.
Added
Potential adverse effects of political changes may disrupt the economic recovery process in Puerto Rico. Changes in political administrations in Puerto Rico and the United States introduce uncertainty regarding economic policies and priorities that directly impact Puerto Rico’s recovery efforts.
Removed
Any such natural disasters may further adversely affect Puerto Rico’s and the USVI’s critical infrastructure, which are generally weak and necessitating capital investment.
Added
Shifts in leadership at the federal or local level may result in changes to disaster relief funding, infrastructure development initiatives, and economic support programs that are critical to the island’s ongoing recovery and long-term stability. Policy changes, delays, or reduced federal support could disrupt the economic recovery process and negatively affect local businesses, consumer confidence, and public infrastructure.
Removed
Any subsequent earthquakes, hurricanes, major storms or other natural disasters could further deteriorate the economy and infrastructure of Puerto Rico and USVI, as well as negatively affect or disrupt our operations and customer base and materially impact our business.
Added
These uncertainties may also heighten credit risks, reduce economic activity, and limit growth opportunities, potentially impacting our financial performance and ability to operate effectively in Puerto Rico. Changes in interest rates could adversely affect OFG’s results of operations and financial condition.
Removed
Also, it has increased cybersecurity risks and may continue to have a negative impact on the stock market generally and, in turn, on our stock price.
Added
In an effort to address inflation, the Federal Open Market Committee of the Board of Governors of the Federal Reserve System (“FRB”) tightened monetary policy back in 2022 and 2023. During 2024, monetary policy changed, and interest rate cuts were implemented. However, these interest rate cuts were not as frequent as expected, causing market volatility.
Removed
In an effort to address inflation, the FRB tightened monetary policy and increased the federal funds rate considerably since March 2022 through July 2023. In December 2023, the FRB held interest rates steady at a target rate range between 5.25% to 5.50% and suggested the possibility of rate cuts during 2024.
Added
Actions taken by the Federal Reserve and other central banks are beyond our control and difficult to predict and can affect the value of financial instruments and other assets, such as debt securities and mortgage servicing rights (MSRs), and impact our borrowers, potentially increasing delinquency rates.
Removed
Notwithstanding FRB’s announcements, the amount, timing, and frequency of any decrease in the federal funds rate are not fully known at this time.
Added
Originating loans is an essential element of our business, and there is a risk that the loans will not be repaid.
Removed
Any downgrade in the credit rating of the U.S. government or default by the U.S. government as a result of political conflicts over legislation to raise the U.S. government’s debt limit may have a material adverse effect on OFG.
Added
In addition, shifts in political priorities and public policy in key global markets can influence economic conditions in the U.S. and Puerto Rico.
Removed
Recent federal budget deficit concerns and political conflict over legislation to raise the U.S. government’s debt limit have increased the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession in the United States.
Added
We rely primarily on core deposits as a low cost and stable source of funding for our lending activities and the operation of our business. Therefore, our funding costs are largely dependent on our ability to maintain and grow our core deposits.
Removed
Many of our investment securities are issued by the U.S. government, including certain government agencies and sponsored entities.
Added
We operate an IBE unit and an IBE subsidiary pursuant to the IBE Act which provides significant tax advantages, and a wholly owned subsidiary that engages in certain Puerto Rico qualified investing activities that have certain tax advantages under the Incentives Code.
Removed
As a result of uncertain domestic political conditions, including the possibility of the federal government defaulting on its obligations for a period of time due to debt-ceiling limitations or other unresolved political issues, investments in financial instruments issued or guaranteed by the federal government may pose liquidity risks.
Removed
In connection with prior political disputes over U.S. fiscal and budgetary issues leading to the U.S. government shutdown in 2011, Standard & Poor’s lowered its long-term sovereign credit rating on the U.S. from AAA to AA+.
Removed
A downgrade, or a similar action by other rating agencies, in response to current political dynamics, as well as sovereign debt issues facing the governments of other countries, could generally have a material adverse impact on financial markets and economic conditions in the U.S. and worldwide and, therefore, materially adversely affect OFG’s business, financial condition and results of operations.
Removed
During periods of rising interest rates, refinancing originations for many mortgage products tend to decrease as the economic incentives for borrowers to refinance their existing mortgage loans are reduced. In addition, the residential mortgage loan origination business is impacted by home values.
Removed
Though we have insurance against some cyber-risks and attacks, it may not be sufficient to offset the impact of a material loss event.
Removed
We have developed a compliance program reasonably designed to ensure compliance with such laws and regulations.
Removed
We may also need to rely on more expensive sources of funding if deposits decrease. Rising interest rates have also led customers to move their funds to alternative investments that pay higher interest rates.
Removed
In addition, the Durbin Amendment is a provision in the Dodd-Frank Act that gave the Federal Reserve the authority to establish rates on debit card transactions. The Durbin Amendment aims to control debit card interchange fees and restrict anti-competitive practices.
Removed
This law applies to banks with over $10 billion in consolidated assets and limits these banks on what they charge for debit card interchange fees.
Removed
OFG’s assets exceeded $10 billion as of December 31, 2023, and therefore, we estimate that beginning in July 1, 2024, the Durbin Amendment will reduce OFG’s income from debit card interchange fees by approximately $10 to $11 million on an annual basis based on current volume.
Removed
We may be required to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements. Failure to comply with the new requirements may negatively impact our results of operations and financial condition and may limit our ability to implement our strategic initiatives.
Removed
This exemption has allowed us to have an effective tax rate below the maximum statutory tax rate. In the past, the Legislature of Puerto Rico has considered proposals to curb the tax benefits afforded to IBEs.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+0 added−1 removed8 unchanged
Biggest changePursuant to our cybersecurity risk management framework, our Information Security team develops an annual information security awareness plan to educate employees as to the Company’s standards, processes and practices with respect to information security, potential cybersecurity threats and proper use of information security resources entrusted to them, with the goal of minimizing possible employee security risks.
Biggest changeOFG also conducts due diligence of third-party software and related services and reviews cybersecurity reports from technology services providers to ensure that our cybersecurity infrastructure can respond to evolving cybersecurity risks relevant to our business. 29 Pursuant to our cybersecurity risk management framework, our Information Security team develops an annual information security awareness plan to educate employees as to OFG’s standards, processes and practices with respect to information security, potential cybersecurity threats and proper use of information security resources entrusted to them, with the goal of minimizing possible employee security risks.
Our ISO, under the supervision of the Chief Risk Officer, leads the development and implementation of the Information Security Program. In addition, our Information Technology Department (“IT”) also has a dedicated cybersecurity team under the supervision of our Chief Information Officer.
Our ISO, under the supervision of our Chief Risk Officer, leads the development and implementation of the Information Security Program. In addition, our Information Technology Department (“IT”) also has a dedicated cybersecurity team under the supervision of our Chief Information Officer.
ITEM 1C. CYBERSECURITY Cybersecurity Risk Management Strategy OFG has a comprehensive framework in place to assess, identify and manage material risks from cybersecurity threats. Our Information Security Officer (“ISO”) is responsible for overseeing and implementing the Company’s cybersecurity risk management framework as part of our broader Information Security Program approved by the Board.
ITEM 1C. CYBERSECURITY Cybersecurity Risk Management Strategy OFG has a comprehensive framework in place to assess, identify and manage material risks from cybersecurity threats. Our Information Security Officer (“ISO”) is responsible for overseeing and implementing OFG’s cybersecurity risk management framework as part of our broader Information Security Program approved by our Board.
Our cybersecurity risk management framework is integrated into the Company’s broader risk management system with a focus on monitoring key risk indicators within a defined risk tolerance set by our Board.
Our cybersecurity risk management framework is integrated into OFG’s broader risk management system with a focus on monitoring key risk indicators within a defined risk tolerance set by our Board.
Our cybersecurity risk management framework is focused on the following key areas: • Regular cybersecurity risk assessments; • Design and implementation of controls to mitigate any identified cybersecurity risks; • Continuous evaluation of the effectiveness of such controls; and • Implementation of an incident response plan that includes procedures for responding to cybersecurity incidents. 28 In addition, our cybersecurity risk management framework incorporates three lines of defense, each with defined roles and responsibilities.
Our cybersecurity risk management framework is focused on the following key areas: • Regular cybersecurity risk assessments; • Design and implementation of controls to mitigate any identified cybersecurity risks; • Continuous evaluation of the effectiveness of such controls; and • Implementation of an incident response plan that includes procedures for responding to cybersecurity incidents.
OFG conducts an annual cybersecurity maturity assessment to (a) evaluate its cybersecurity risk management practices and (b) develop action plans for improving its cybersecurity risk management program.
In addition, our cybersecurity risk management framework incorporates three lines of defense, each with defined roles and responsibilities. OFG conducts an annual cybersecurity maturity assessment to (a) evaluate its cybersecurity risk management practices and (b) develop action plans for improving its cybersecurity risk management program.
Removed
OFG also conducts due diligence of third-party software and related services and reviews cybersecurity reports from technology services providers to ensure that our cybersecurity infrastructure can respond to evolving cybersecurity risks relevant to our business.

Item 2. Properties

Properties — owned and leased real estate

5 edited+1 added−0 removed0 unchanged
Biggest changeThe Bank’s management believes that each of its facilities is well maintained and suitable for its purpose and can readily obtain appropriate additional space as may be required at competitive rates by extending expiring leases or finding alternative space. 29 At December 31, 2023, the aggregate future rental commitments under the terms of its leases, exclusive of taxes, insurance and maintenance expenses payable by OFG, was approximately $24.0 million.
Biggest changeThe Bank’s management believes that each of its facilities is well maintained and suitable for its purpose and can readily obtain appropriate additional space as may be required at competitive rates by extending expiring leases or finding alternative space.
Based upon a review by legal counsel and the development of these matters to date, management is of the opinion that the ultimate aggregate liability, if any, resulting from these claims will not have a material adverse effect on OFG’s financial condition or results of operations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Based upon a review by legal counsel and the development of these matters to date, management is of the opinion that the ultimate aggregate liability, if any, resulting from these claims will not have a material adverse effect on OFG’s financial condition or results of operations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 30 PART II
ITEM 2. PROPERTIES At December 31, 2023, OFG owns a fifteen-story office building located at 254 Muñoz Rivera Avenue, San Juan, Puerto Rico, known as “Oriental Center”, where its executive offices are located. OFG operates a full-service branch at the plaza level and its centralized units and subsidiaries occupy approximately 99% of the office floor space.
ITEM 2. PROPERTIES At December 31, 2024, OFG owns a fifteen-story office building located at 254 Muñoz Rivera Avenue, San Juan, Puerto Rico, known as “Oriental Center”, where its executive offices are located. OFG operates a full-service branch at the plaza level and its centralized units and subsidiaries occupy approximately 99% of the office floor space.
Approximately 1% of the office space is leased to outside tenants. In addition, at December 31, 2023, the Bank owns three branch premises and leases thirty-nine branch locations throughout Puerto Rico and owns two branch premises in the USVI.
Approximately 1% of the office space is leased to outside tenants. In addition, at December 31, 2024, the Bank owns three branch premises and leases thirty-nine branch locations throughout Puerto Rico and owns two branch premises in the USVI.
OFG’s investment in premises and equipment, exclusive of leasehold improvements at December 31, 2023, was $160.8 million, gross of accumulated depreciation. 30 ITEM 3 . LEGAL PROCEEDINGS OFG and its subsidiaries are defendants in a number of legal proceedings incidental to their business. OFG is vigorously contesting such claims.
LEGAL PROCEEDINGS OFG and its subsidiaries are defendants in a number of legal proceedings incidental to their business. OFG is vigorously contesting such claims.
Added
At 2024, the aggregate future rental commitments under the terms of its leases, exclusive of taxes, insurance and maintenance expenses payable by OFG, was approximately $21.4 million. OFG’s investment in premises and equipment, exclusive of leasehold improvements at 2024, was $174.7 million, gross of accumulated depreciation. ITEM 3 .

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+3 added−1 removed4 unchanged
Biggest changeThe cumulative total stockholder return was obtained by dividing (a) the sum of (i) the cumulative amount of dividends per share, assuming dividend reinvestment, for the measurement period beginning December 31, 2018, and (ii) the difference between the share price at the beginning and the end of the measurement period, by (b) the share price at the beginning of the measurement period. 31 Comparison of 5 Year Cumulative Total Return Assumes Initial Investment of $100 Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 OFG Bancorp 100.00 145.34 116.58 169.77 180.87 253.63 Russell 2000 100.00 125.53 150.58 172.90 137.56 160.85 S&P US BMI Banks Index 100.00 137.36 119.83 162.92 135.13 147.41 Dividends You can find dividend information concerning our common stock in Table 16 of Item 7 in this annual report on Form 10-K and our Consolidated Statements of Shareholders’ Equity in our consolidated financial statements accompanying this annual report on Form 10-K.
Biggest changeComparison of 5 Year Cumulative Total Return Assumes Initial Investment of $100 31 Index 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 OFG Bancorp 100.00 80.21 116.81 124.45 174.51 202.10 Russell 2000 100.00 119.96 137.74 109.59 128.14 142.93 S&P US BMI Banks Index 100.00 87.24 118.61 98.38 107.32 143.68 Dividends You can find dividend information concerning our common stock in Table 17 of Item 7 in this annual report on Form 10-K and our Consolidated Statements of Shareholders’ Equity in our consolidated financial statements accompanying this annual report on Form 10-K.
As of December 31, 2023, OFG had approximately 14,694 holders of record of its common stock, including all directors and officers of OFG, and beneficial owners whose shares are held in “street” name by securities broker-dealers or other nominees.
As of December 31, 2024, OFG had approximately 19,470 holders of record of its common stock, including all directors and officers of OFG, and beneficial owners whose shares are held in “street” name by securities broker-dealers or other nominees.
Equity Based Compensation For information about the securities remaining available for issuance under our equity-based plans, refer to Part III, Item 12 of this annual report on Form 10-K. Repurchase of Common Stock OFG did not repurchase any shares of its common stock during the quarter ended December 31, 2023.
Equity Based Compensation For information about the securities remaining available for issuance under our equity-based plans, refer to Part III, Item 12 of this annual report on Form 10-K. Repurchase of Common Stock Refer to “Recent Developments-Capital Actions” in Part II, Item 7 of this annual report on Form 10-K for information regarding OFG's common stock repurchase programs.
Removed
Refer to "Recent Developments-Capital Actions" in Part II, Item 7 of this annual report on Form 10-K for information regarding OFG's common stock repurchase programs. ITEM 6. RESERVED 32
Added
The cumulative total stockholder return was obtained by dividing (a) the sum of (i) the cumulative amount of dividends per share, assuming dividend reinvestment, for the measurement period beginning December 31, 2019, and (ii) the difference between the share price at the beginning and the end of the measurement period, by (b) the share price at the beginning of the measurement period.
Added
The table below sets forth the information with respect to purchases of our common stock made by or on behalf of OFG during the quarter ended December 31, 2024: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced programs Maximum approximate dollar value of shares that may yet be purchased under the programs (In thousands, except per share data) 10/1/2024 - 10/31/2024 660,969 $ 40.41 660,969 $ 48,907 11/1/2024 - 11/30/2024 151,110 40.88 151,110 42,730 12/1/2024 - 12/31/2024 307,535 42.45 307,535 29,676 Total 1,119,614 $ 41.03 1,119,614 $ 29,676 The estimated remaining number of shares that may be purchased under the current $50.0 million stock buyback programs is estimated at 701,236 and was calculated by dividing the remaining balance of $29.7 million by $42.32 (closing price of OFG common stock at December 31, 2024).
Added
OFG did not repurchase any shares of its common stock during the quarter ended December 31, 2024 other than through its publicly announced stock repurchase program. ITEM 6. RESERVED

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

103 edited+50 added−32 removed33 unchanged
Biggest changeThe fourth quarter of 2023 Tangible Book Value reflected increased retained earnings and accumulated other comprehensive income. 36 Selected income statement and balance sheet data and key performance indicators are presented in the tables below: Year Ended December 31, 2023 2022 2021 EARNINGS DATA: (In thousands, except per share data) Interest income $ 648,880 $ 515,573 $ 449,199 Interest expense 88,010 33,493 41,829 Net interest income 560,870 482,080 407,370 Provision for credit losses 60,638 24,119 221 Net interest income after provision for credit losses 500,232 457,961 407,149 Non-interest income 128,381 131,690 133,210 Non-interest expenses 363,365 345,546 325,756 Income before taxes 265,248 244,105 214,603 Income tax expense 83,376 77,866 68,452 Net income 181,872 166,239 146,151 Less: dividends on preferred stock — — (1,255) Income available to common shareholders $ 181,872 $ 166,239 $ 144,896 PER SHARE DATA: Basic $ 3.85 $ 3.46 $ 2.85 Diluted $ 3.83 $ 3.44 $ 2.81 Average common shares outstanding 47,258 48,033 50,956 Average common shares outstanding and equivalents 47,552 48,436 51,370 Cash dividends declared per common share $ 0.88 0.70 0.40 Cash dividends declared on common shares $ 41,853 33,593 20,505 PERFORMANCE RATIOS: Return on average assets (ROA) 1.79 % 1.64 % 1.42 % Return on average tangible common stockholders’ equity 18.14 % 17.98 % 15.70 % Return on average common equity (ROE) 16.37 % 15.95 % 13.80 % Efficiency ratio 53.22 % 56.85 % 60.70 % Interest rate spread 5.71 % 5.02 % 4.18 % Interest rate margin 5.79 % 5.05 % 4.20 % 37 December 31, 2023 2022 2021 PERIOD END BALANCES AND CAPITAL RATIOS: (In thousands, except per share data) Investments and loans Investment securities $ 2,686,770 $ 1,971,522 $ 895,818 Loans, net 7,401,618 6,723,236 6,329,311 Total investments and loans $ 10,088,388 $ 8,694,758 $ 7,225,129 Deposits and borrowings Deposits $ 9,762,169 $ 8,568,364 $ 8,603,118 Borrowings 200,770 27,034 64,571 Total deposits and borrowings $ 9,962,939 $ 8,595,398 $ 8,667,689 Stockholders’ equity Common stock 59,885 59,885 59,885 Additional paid-in capital 638,667 636,793 637,061 Legal surplus 150,967 133,901 117,677 Retained earnings 639,324 516,371 399,949 Treasury stock, at cost (228,350) (211,135) (150,572) Accumulated other comprehensive loss (67,013) (93,409) 5,160 Total stockholders’ equity $ 1,193,480 $ 1,042,406 $ 1,069,160 Per share data Book value per common share $ 25.36 $ 21.91 $ 21.54 Tangible book value per common share $ 23.13 $ 19.56 $ 19.08 Market price $ 37.48 $ 27.56 $ 26.56 Capital ratios Leverage capital 11.03 % 10.36 % 9.69 % Common equity Tier 1 capital 14.12 % 13.64 % 13.77 % Tier 1 risk-based capital 14.12 % 13.64 % 14.27 % Total risk-based capital 15.37 % 14.89 % 15.52 % Financial assets managed Trust assets managed $ 2,511,880 $ 2,334,672 $ 3,758,895 Broker-dealer assets managed 2,446,281 2,172,116 2,466,004 Total assets managed $ 4,958,161 $ 4,506,788 $ 6,224,899 ANALYSIS OF RESULTS OF OPERATIONS The following tables show major categories of interest-earning assets and interest-bearing liabilities, their respective interest income, expenses, yields and costs, and their impact on net interest income due to changes in volume and rates for 2023 and 2022. 38 TABLE 1 - ANALYSIS OF NET INTEREST INCOME AND CHANGES DUE TO VOLUME/RATE FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 Interest Average rate Average balance December 2023 December 2022 December 2023 December 2022 December 2023 December 2022 (Dollars in thousands) A - TAX EQUIVALENT SPREAD Interest-earning assets $ 648,880 515,573 6.70 % 5.40 % $ 9,688,019 $ 9,544,055 Tax equivalent adjustment 16,061 14,679 0.17 % 0.15 % — — Interest-earning assets - tax equivalent 664,941 530,252 6.87 % 5.55 % 9,688,019 9,544,055 Interest-bearing liabilities 88,010 33,493 0.99 % 0.38 % 8,903,725 8,902,427 Tax equivalent net interest income / spread 576,931 496,759 5.88 % 5.17 % 784,294 641,628 Tax equivalent interest rate margin 6.05 % 5.32 % B - NORMAL SPREAD Interest-earning assets: Investments: Investment securities 62,730 40,722 3.23 % 2.55 % 1,940,776 1,594,662 Interest bearing cash and money market investments 31,406 14,689 5.02 % 1.14 % 626,067 1,291,633 Total investments 94,136 55,411 3.67 % 1.92 % 2,566,843 2,886,295 Non-PCD loans Mortgage loans 34,442 36,881 5.54 % 5.42 % 621,382 680,768 Commercial loans 201,260 138,715 7.69 % 5.90 % 2,617,240 2,349,114 Consumer loans 70,197 58,181 11.42 % 11.28 % 614,902 515,781 Auto loans 176,144 147,557 8.30 % 8.17 % 2,122,997 1,805,976 Total Non-PCD loans 482,043 381,334 8.07 % 7.13 % 5,976,521 5,351,639 PCD loans Mortgage loans 60,434 66,610 6.16 % 6.02 % 980,564 1,106,708 Commercial loans 11,764 11,112 7.35 % 5.86 % 160,001 189,606 Consumer loans 109 155 14.99 % 14.03 % 727 1,102 Auto loans 394 951 11.72 % 10.94 % 3,363 8,705 Total PCD loans 72,701 78,828 6.35 % 6.04 % 1,144,655 1,306,121 Total loans (1) 554,744 460,162 7.79 % 6.91 % 7,121,176 6,657,760 Total interest-earning assets $ 648,880 515,573 6.70 % 5.40 % $ 9,688,019 $ 9,544,055 39 Interest Average rate Average balance December 2023 December 2022 December 2023 December 2022 December 2023 December 2022 (Dollars in thousands) Interest-bearing liabilities: Deposits: NOW Accounts 25,710 11,291 1.03 % 0.41 % 2,489,560 2,761,653 Savings accounts 17,727 6,470 0.80 % 0.28 % 2,214,256 2,306,607 Time deposits 25,225 7,943 1.92 % 0.69 % 1,315,745 1,143,469 Non-interest bearing deposits — — — % — % 2,590,523 2,647,871 Total core deposits 68,662 25,704 0.80 % 0.29 % 8,610,084 8,859,600 Fair value premium and core deposit intangible amortizations 5,283 6,500 — % — % — — Brokered deposits 2,020 35 5.16 % 0.30 % 39,100 11,366 Total deposits 75,965 32,239 0.88 % 0.36 % 8,649,184 8,870,966 Borrowings: Securities sold under agreements to repurchase 3,306 — 5.55 % — % 59,541 — Advances from FHLB and other borrowings 8,739 733 4.48 % 2.67 % 195,000 27,497 Subordinated capital notes — 521 — % 13.15 % — 3,964 Total borrowings 12,045 1,254 4.73 % 3.99 % 254,541 31,461 Total interest-bearing liabilities 88,010 33,493 0.99 % 0.38 % 8,903,725 8,902,427 Net interest income / spread $ 560,870 $ 482,080 5.71 % 5.02 % Interest rate margin 5.79 % 5.05 % Excess of average interest-earning assets over average interest-bearing liabilities $ 784,294 $ 641,628 Average interest-earning assets to average interest-bearing liabilities ratio 108.81 % 107.21 % (1) Includes loans held for sale and excludes allowance for credit losses.
Biggest changeTangible Book Value per share reflected the above-mentioned share buybacks and lower other comprehensive income. 36 Selected income statement and balance sheet data and key performance indicators are presented in the tables below: Year Ended December 31, 2024 2023 2022 EARNINGS DATA: (In thousands, except per share data) Interest income $ 750,277 $ 648,880 $ 515,573 Interest expense 161,837 88,010 33,493 Net interest income 588,440 560,870 482,080 Provision for credit losses 82,251 60,638 24,119 Net interest income after provision for credit losses 506,189 500,232 457,961 Non-interest income 123,249 128,381 131,690 Non-interest expenses 375,690 363,365 345,546 Income before taxes 253,748 265,248 244,105 Income tax expense 55,578 83,376 77,866 Net income available to common shareholders $ 198,170 $ 181,872 $ 166,239 PER SHARE DATA: EPS Basic $ 4.25 $ 3.85 $ 3.46 EPS Diluted $ 4.23 $ 3.83 $ 3.44 Average common shares outstanding 46,637 47,258 48,033 Average common shares outstanding and equivalents 46,902 47,552 48,436 Cash dividends declared per common share $ 1.00 0.88 0.70 Cash dividends declared on common shares $ 46,931 41,853 33,593 PERFORMANCE RATIOS: Return on average assets (ROA) 1.75 % 1.79 % 1.64 % Return on average equity (ROE) 15.78 % 16.37 % 15.95 % Return on average tangible common stockholders’ equity (non-GAAP, see Table 18) 17.17 % 18.14 % 17.98 % Efficiency ratio 52.94 % 53.22 % 56.85 % Interest rate spread 5.29 % 5.71 % 5.02 % Interest rate margin 5.43 % 5.79 % 5.05 % 37 December 31, 2024 2023 2022 PERIOD END BALANCES AND CAPITAL RATIOS: (In thousands, except per share data) Investments and loans Investment securities $ 2,720,277 $ 2,686,770 $ 1,971,522 Loans, net 7,633,831 7,401,618 6,723,236 Total investments and loans $ 10,354,108 $ 10,088,388 $ 8,694,758 Deposits and borrowings Deposits $ 9,604,786 $ 9,762,169 $ 8,568,364 Securities sold under agreements to repurchase 75,222 — — Advances from FHLB and other borrowings 325,952 200,770 27,034 Total deposits and borrowings $ 10,005,960 $ 9,962,939 $ 8,595,398 Stockholders’ equity Common stock 59,885 59,885 59,885 Additional paid-in capital 639,786 638,667 636,793 Legal surplus 169,537 150,967 133,901 Retained earnings 771,993 639,324 516,371 Treasury stock, at cost (296,991) (228,350) (211,135) Accumulated other comprehensive loss (89,839) (67,013) (93,409) Total stockholders’ equity $ 1,254,371 $ 1,193,480 $ 1,042,406 Per share data Book value per common share $ 27.60 $ 25.36 $ 21.91 Tangible book value per common share (non-GAAP, see Table 18) $ 25.43 $ 23.13 $ 19.56 Market price $ 42.32 $ 37.48 $ 27.56 Capital ratios Leverage capital 10.93 % 11.03 % 10.36 % Common equity Tier 1 capital 14.26 % 14.12 % 13.64 % Tier 1 risk-based capital 14.26 % 14.12 % 13.64 % Total risk-based capital 15.52 % 15.37 % 14.89 % Financial assets managed Trust assets managed $ 2,262,446 $ 2,511,880 $ 2,334,672 Broker-dealer assets managed 2,246,884 2,446,281 2,172,116 Total assets managed $ 4,509,330 $ 4,958,161 $ 4,506,788 38 ANALYSIS OF RESULTS OF OPERATIONS The following tables show major categories of interest-earning assets and interest-bearing liabilities, their respective interest income, expenses, yields and costs, and their impact on net interest income due to changes in volume and rates for 2024 and 2023.
Significant changes in the financial condition of individual borrowers, in economic conditions, in historical loss experience, and in the condition of the various markets in which collateral may be sold may all affect the required level of the ACL. Consequently, the business, financial condition, liquidity, capital and results of operations could also be affected.
Significant changes in the financial condition of individual borrowers, in economic conditions, in historical loss 33 experience, and in the condition of the various markets in which collateral may be sold may all affect the required level of the ACL. Consequently, the business, financial condition, liquidity, capital and results of operations could also be affected.
As of December 31, 2023, the capital ratios of OFG and the Bank continue to exceed the minimum requirements for being “well-capitalized” under the Basel III capital rules. On January 1, 2020, OFG implemented CECL using the modified retrospective approach, with an impact to capital of $25.5 million, net of its corresponding deferred tax effect.
As of December 31, 2024, the capital ratios of OFG and the Bank continue to exceed the minimum requirements for being “well-capitalized” under the Basel III capital rules. On January 1, 2020, OFG implemented CECL using the modified retrospective approach, with an impact to capital of $25.5 million, net of its corresponding deferred tax effect.
As such, for PCD loans the determination of nonaccrual or accrual status is made at the pool level, not the individual loan level. The ACL was determined for each pool and added to the pool’s carrying amount to establish a new amortized cost basis.
As such, for PCD loans the determination of non-accrual or accrual status is made at the pool level, not the individual loan level. The ACL was determined for each pool and added to the pool’s carrying amount to establish a new amortized cost basis.
We have omitted discussion of 2021 results where it would be redundant to the discussion previously included in Item 7 of our 2022 annual report on Form 10-K.
We have omitted discussion of 2022 results where it would be redundant to the discussion previously included in Item 7 of our 2023 annual report on Form 10-K.
As of both December 31, 2023 and 2022, OFG had $84.2 million of goodwill allocated as follows: $84.1 million to the banking segment and $100 thousand to the wealth management segment.
As of both December 31, 2024 and 2023, OFG had $84.2 million of goodwill allocated as follows: $84.1 million to the banking segment and $100 thousand to the wealth management segment.
At December 31, 2023, the allowance coverage ratio to non-performing loans was 189.1% (152.9% at December 31, 2022). Upon adoption of the current expected credit losses (“CECL”) methodology, OFG elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account.
At December 31, 2024, the allowance coverage ratio to non-performing loans was 211.9% (189.1% at December 31, 2023). Upon adoption of the current expected credit losses (“CECL”) methodology, OFG elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account.
OFG applied a discounted cash flow (“DCF”) method for non-purchased credit deteriorated loans (non-PCD) and an undiscounted cash flow (“UDCF”) method for purchased credit deteriorated (PCD) loans to determine the ACL for loans collectively measured for impairment, except for credit cards and overdrafts which utilize a remaining life methodology.
OFG applied a discounted cash flow (“DCF”) method for non-purchased credit deteriorated loans (“non-PCD”) and an undiscounted cash flow (“UDCF”) method for purchased credit deteriorated (“PCD”) loans to determine the ACL for loans collectively measured for impairment, except for credit cards and overdrafts which utilize a remaining life methodology.
OFG’s methodology for allocating non-interest expenses among segments is based on several factors such as revenue, employee headcount, occupied space, dedicated services or time, among others.
OFG’s methodology for allocating expenses for corporate services among segments is based on several factors such as revenue, employee headcount, occupied space, dedicated services or time, among others.
The difference between the unpaid principal balance of the pool and the new amortized cost basis is the non-credit premium or discount which will be amortized interest income over the remaining life of the pool. On a quarterly basis, management will monitor the composition and behavior of the pools to assess the ability for cash flow estimation and timing.
The difference between the unpaid principal balance of the pool and the new amortized cost basis is the non-credit premium or discount which is amortized as interest income over the remaining life of the pool. On a quarterly basis, management monitors the composition and behavior of the pools to assess the ability for cash flow estimation and timing.
Foreclosed real estate decreased from $11.2 million at December 31, 2022 to $10.8 million at December 31, 2023 and other repossessed assets decreased from $4.6 million at December 31, 2022 to $4.0 million at December 31, 2023, both recorded at fair value. OFG does not expect non-performing loans to result in significantly higher losses.
Foreclosed real estate decreased from $10.8 million at December 31, 2023 to $4.0 million at December 31, 2024 and other repossessed assets increased from $4.0 million at December 31, 2023 to $6.6 million at December 31, 2024, both recorded at fair value. OFG does not expect non-performing loans to result in significantly higher losses.
OFG’s trust division offers various types of individual retirement accounts (“IRAs”) and manages Keogh retirement plans and custodian and corporate trust accounts. At December 31, 2023 and 2022, the total assets managed by OFG’s trust division amounted to $2.512 billion and $2.335 billion, respectively.
OFG’s trust division offers various types of individual retirement accounts (“IRAs”) and manages retirement plans and custodian and corporate trust accounts. At December 31, 2024 and 2023, the total assets managed by OFG’s trust division amounted to $2.262 billion and $2.512 billion, respectively.
Therefore, those loans are included as non-performing loans but excluded from non-accrual loans. As of December 31, 2023 and 2022, the outstanding balance of these residential mortgage loans was $5.8 million and $10.3 million, respectively.
Therefore, those loans are included as non-performing loans but excluded from non-accrual loans. As of December 31, 2024 and 2023, the outstanding balance of these residential mortgage loans was $5.0 million and $5.8 million, respectively.
This increase reflects an increase of 130 and 61 basis points, respectively, in the total average yield of interest-earning assets and the average cost of interest-bearing liabilities.
This reflects an increase of 23 and 65 basis points, respectively, in the total average yield of interest-earning assets and the average cost of interest-bearing liabilities.
The time deposit with a balance of $300.3 million and $470.2 million at December 31, 2023 and 2022, respectively, is included in the Treasury Segment with its corresponding interest expense, to fund Oriental Overseas operations, which is included in the Banking Segment with its corresponding interest income, and are eliminated in the consolidation.
The time deposit with a balance of $278.4 million and $300.3 million at December 31, 2024 and 2023, respectively, to fund Oriental Overseas operations is included in the Treasury Segment with its corresponding interest expense, and the related interest income is included in the Banking Segment, and are eliminated in the consolidation.
The good faith, credit and unlimited taxing power of each issuing municipality are pledged for the payment of its general obligations. Deposits from the Puerto Rico government totaled $1,616.3 million at December 31, 2023.
The good faith, credit and unlimited taxing power of each issuing municipality are pledged for the payment of its general obligations. Deposits from the Puerto Rico government totaled $1.445 billion at December 31, 2024.
The current risk-based capital standards applicable to OFG and the Bank (“Basel III capital rules”) are based on the final capital framework for strengthening international capital standards, known as Basel III, of the Basel Committee on Banking Supervision.
Regulatory Capital OFG and the Bank are subject to regulatory capital requirements established by the FRB and the FDIC. The current risk-based capital standards applicable to OFG and the Bank (“Basel III capital rules”) are based on the final capital framework for strengthening international capital standards, known as Basel III, of the Basel Committee on Banking Supervision.
Furthermore, OFG has never been active in negative amortization loans or offered adjustable-rate mortgage loans with teaser rates. • Consumer loan portfolio amounted to $620.4 million (8.2% of the gross loan portfolio) compared to $537.3 million (7.9% of the gross loan portfolio) at December 31, 2022.
Furthermore, OFG has never been active in negative amortization loans or offered adjustable-rate mortgage loans with teaser rates. 50 • Consumer loan portfolio amounted to $668.6 million (8.6% of the gross loan portfolio) compared to $620.4 million (8.2% of the gross loan portfolio) at December 31, 2023.
As shown in Table 6 above, total loans, net, amounted to $7.402 billion at December 31, 2023, a 10.1% increase when compared to $6.723 billion at December 31, 2022.
As shown in Table 6 above, total loans, net, amounted to $7.634 billion at December 31, 2024, a 3.1% increase when compared to $7.402 billion at December 31, 2023.
On January 1, 2023, OFG adopted ASU 2022-02 related to the elimination of the recognition and measurement of TDRs and the enhancement of disclosures for loan restructurings for borrowers experiencing financial difficulty using the prospective transition method.
On January 1, 2023, OFG adopted ASU 2022-02 related to the elimination of the recognition and measurement of Troubled Debt Restructurings (“TDRs”) and the enhancement of disclosures for loan restructurings for borrowers experiencing financial difficulty, or financial difficulties modifications (“FDMs”), using the prospective transition method.
Net charge-offs variances were as follows: Residential mortgage loans net recoveries amounted to $839 thousand in 2023, decreasing by $3.2 million when compared to net recoveries of $4.0 million in 2022. Commercial loans net charge-offs for 2023 amounted to $14.5 million, increasing by $6.0 million, when compared to net charge-offs of $8.4 million in 2022.
Net charge-offs variances were as follows: • Residential mortgage loans net recoveries in 2024 amounted to $2.1 million, increasing by $1.3 million when compared to net recoveries of $839 thousand in 2023. • Commercial loans net charge-offs in 2024 amounted $5.7 million, decreasing by $8.8 million, when compared to $14.5 million in 2023.
For a detailed description of the principal factors used to determine the ACL related to loans collectively evaluated for impairment and for the principal enhancement’s management made to its methodology, please refer to “Note 1– Summary of Significant Accounting Policies” and “Note 5 – Loans” to the consolidated financial statements. 34 FINANCIAL HIGHLIGHTS The year ended December 31, 2023 was an outstanding year.
For a detailed description of the principal factors used to determine the ACL related to loans collectively evaluated for impairment and for the principal enhancement’s management made to its methodology, please refer to “Note 1– Summary of Significant Accounting Policies” and “Note 5 – Loans” to the consolidated financial statements.
Commercial loans secured by non-owner occupied commercial real estate amounted to $744.6 million and $605.5 million at December 31, 2023 and December 31, 2022, respectively, which represented 9.9% and 8.9% of our total loan portfolio held for investment.
Commercial loans secured by non-owner occupied commercial real estate amounted to $796.9 million and $744.6 million at December 31, 2024 and 2023, respectively, which represented 10.2% and 9.9% of our total gross loan portfolio held for investment.
These estimates are based on management's historical industry experience and on various other judgments and assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these judgments, assumptions and estimates.
We evaluate these judgments, assumptions and estimates for changes that would affect the reported amounts. These estimates are based on management's historical industry experience and on various other judgments and assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these judgments, assumptions and estimates.
OFG constantly monitors the composition and re-pricing of its assets and liabilities to maintain its net interest income at adequate levels. Comparison of the years ended December 31, 2023 and 2022 Net interest income of $560.9 million increased by $78.8 million from $482.1 million.
OFG constantly monitors the composition and re-pricing of its assets and liabilities to maintain its net interest income at adequate levels. Comparison of the years ended December 31, 2024 and 2023 Net interest income of $588.4 million increased by $27.5 million from $560.9 million.
For accounting purposes, these loans subject to the repurchase option are required to be reflected (rebooked) on our financial statements with an offsetting liability. Mortgage loan production totaled $133.0 million in 2023 which represents a decrease of 34% from $200.9 million in 2022.
For accounting purposes, these loans subject to the repurchase option are required to be reflected (rebooked) on our financial statements with an offsetting liability. Mortgage loan production totaled $150.3 million in 2024, which represents an increase of 13.1% from $133.0 million in 2023.
Other factors such as OFG’s organization, nature of its products, distribution channels and economic characteristics of its services were also considered in the determination of the reportable segments. OFG measures the performance of these reportable segments based on pre-established goals of different financial parameters such as net income, net interest income, loan production, and fees generated.
Other factors such as OFG’s organization, nature of its products, distribution channels and economic characteristics of its services were also considered in the determination of the reportable segments. OFG measures the performance of these reportable segments based on net income.
Announcement of Forthcoming 2024 Capital Actions In January 2024, OFG announced that its Board of Directors approved the increase of its regular quarterly cash dividend to $0.25 per common share from $0.22 per share, beginning in the quarter ending March 31, 2024. The Board of Directors also approved a new $50.0 million stock repurchase program.
Announcement of Forthcoming 2025 Capital Actions In January 2025, OFG announced that its Board of Directors approved the increase of its regular quarterly cash dividend to $0.30 per common share from $0.25 per share, beginning in the quarter ending March 31, 2025.
Deposits and borrowings, OFG’s funding sources, amounted to $9.963 billion at December 31, 2023 compared to $8.595 billion at December 31, 2022.
Deposits and borrowings, OFG’s funding sources, amounted to $10.006 billion at December 31, 2024 compared to $9.963 billion at December 31, 2023.
Please refer to the “Provision for Credit Losses” and “Critical Accounting Policies and Estimates” sections in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this annual report on Form 10-K and “Note 6 – Allowance for Credit Losses” of the accompanying consolidated financial statements for a more detailed analysis of provisions and ACL. 50 Non-performing Assets OFG’s non-performing assets include non-performing loans, foreclosed real estate, and other repossessed assets (see Tables 13 and 15).
Please refer to the “Provision for Credit Losses” and “Critical Accounting Policies and Estimates” sections in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this annual report on Form 10-K and “Note 6 – Allowance for Credit Losses” of the accompanying consolidated financial statements for a more detailed analysis of provisions and ACL.
Delinquent residential mortgage loans insured or guaranteed under applicable Federal Housing Administration (“FHA”) and United States Department of Veterans Affairs (“VA”) programs are classified as non-performing loans when they become 90 days or more past due but are not placed in non-accrual status until they become 12 months or more past due, since they are insured loans.
Delinquent residential mortgage loans insured or guaranteed under applicable FHA and VA programs are classified as non-performing loans when they become 90 days or more past due but are not placed in non-accrual status until they become 12 months or more past due, since they are insured loans.
At December 31, 2023, OFG’s net loan portfolio increased by $678.4 million or 10.1% reflecting increases in commercial, auto and consumer loans, partially offset by a decrease in residential mortgage loans. Financial Assets Managed At December 31, 2023, OFG’s financial assets include those managed by OFG’s trust division and its securities broker-dealer and insurance agency subsidiaries.
At December 31, 2024, OFG’s net loan portfolio increased by $232.2 million or 3.1% reflecting increases in commercial, retail auto and consumer loans, partially offset by regular paydowns and securitization of residential mortgage loans. Financial Assets Managed At December 31, 2024, OFG’s financial assets include those managed by OFG’s trust division and its securities broker-dealer and insurance agency subsidiaries.
Consumer loan production decreased 6% to $313.6 million in 2023 from $334.2 million in 2022. • Auto loans portfolio amounted to $2.274 billion (30.3% of the gross loan portfolio) compared to $1.964 billion (28.7% of the gross originated loan portfolio) at December 31, 2022.
Consumer loan production decreased by 3% or $9.1 million to $304.5 million in 2024 from $313.6 million in 2023. • Auto loans portfolio amounted to $2.549 billion (32.7% of the gross loan portfolio) compared to $2.274 billion (30.3% of the gross originated loan portfolio) at December 31, 2023.
Consumer loans - At December 31, 2023, OFG’s non-performing consumer loans amounted to $3.4 million (4.0% of OFG’s non-performing loans), a 7.9% increase from $3.1 million at December 31, 2022 (3.1% of OFG’s non-performing loans).
Consumer loans - At December 31, 2024, OFG’s non-performing consumer loans amounted to $4.2 million (5.1% of OFG’s non-performing loans), a 24.6% increase from $3.4 million at December 31, 2023 (4.0% of OFG’s non-performing loans).
The increases in capital ratios reflected an increase in retained earnings from net income, net of dividends and stock repurchases, partially offset by an increase in risk-weighted assets of $712.3 million. Risk-weighted assets increased mainly from an increase in loans.
The increases in regulatory capital ratios reflected an increase in retained earnings from net income, net of dividends, CECL transition and stock repurchases, partially offset by an increase in risk-weighted assets of $494.6 million.
At December 31, 2023, OFG had $79.4 million of non-accrual loans held for investment, including $6.7 million PCD loans, compared to $89.6 million at December 31, 2022, reflecting decreases of $0.6 million and $9.1 million in auto and mortgage loan portfolios, respectively.
At December 31, 2024, OFG had $78.0 million of non-accrual loans held for investment, including $2.9 million PCD loans, compared to $79.4 million at December 31, 2023, reflecting decreases of $2.3 million and $1.0 million in mortgage and commercial loan portfolios, respectively (see Table 14).
The following table provides the high and low prices and dividends per share of OFG’s common stock for each quarter of the last three calendar years: Cash Price Dividend High Low Per share 2023 December 31, 2023 $ 38.29 $ 28.67 $ 0.22 September 30, 2023 $ 33.82 $ 26.14 $ 0.22 June 30, 2023 $ 27.80 $ 22.80 $ 0.22 March 31, 2023 $ 30.42 $ 24.37 $ 0.22 2022 December 31, 2022 $ 28.90 $ 25.50 $ 0.20 September 30, 2022 $ 29.45 $ 24.66 $ 0.20 June 30, 2022 $ 29.22 $ 25.40 $ 0.15 March 31, 2022 $ 30.54 $ 26.21 $ 0.15 2021 December 31, 2021 $ 27.33 $ 23.84 $ 0.12 September 30, 2021 $ 25.66 $ 20.04 $ 0.12 June 30, 2021 $ 25.14 $ 21.61 $ 0.08 March 31, 2021 $ 22.93 $ 16.48 $ 0.08 In January 2022, OFG announced the approval by the Board of Directors of a stock repurchase program for the purchase of up to $100 million of its outstanding shares of common stock.
The following table provides the high and low prices and dividends per share of OFG’s common stock for each quarter of the last three calendar years: Cash Price Dividend High Low Per share 2024 December 31, 2024 $ 46.72 $ 38.97 $ 0.25 September 30, 2024 $ 46.84 $ 36.77 $ 0.25 June 30, 2024 $ 38.16 $ 33.37 $ 0.25 March 31, 2024 $ 38.51 $ 34.78 $ 0.25 2023 December 31, 2023 $ 38.29 $ 28.67 $ 0.22 September 30, 2023 $ 33.82 $ 26.14 $ 0.22 June 30, 2023 $ 27.80 $ 22.80 $ 0.22 March 31, 2023 $ 30.42 $ 24.37 $ 0.22 2022 December 31, 2022 $ 28.90 $ 25.50 $ 0.20 September 30, 2022 $ 29.45 $ 24.66 $ 0.20 June 30, 2022 $ 29.22 $ 25.40 $ 0.15 March 31, 2022 $ 30.54 $ 26.21 $ 0.15 In January 2024, the Board of Directors approved a $50.0 million stock repurchase program.
Capital: CET1 ratio of 14.12% compared to 14.06% in the third quarter of 2023 and 13.64% in the fourth quarter of 2022. The Tangible Common Equity ratio was 9.68% compared to 9.74% in the third quarter of 2023 and 9.59% in the fourth quarter of 2022.
Capital: CET1 ratio was 14.26% compared to 14.37% in the third quarter of 2024 and 14.12% in the fourth quarter of 2023. The Tangible Common Equity ratio was 10.13% compared to 10.72% in the third quarter of 2024 and 9.68% in the fourth quarter of 2023.
For PCD loans, the expected cash flows are calculated for each loan pool, pool reserve is calculated by aggregating total loss from the UDCF. Expected cash flows are resulted from applying the contractual payment term, probability of defaults, loss given defaults, and prepayment assumptions.
For PCD loans, the expected cash flows are calculated for each loan pool, pool reserve is calculated by aggregating total loss from the UDCF. Expected cash flows are resulted from applying the probability of default (“PD”), loss given default (“LGD”), and exposure at default (“EAD”).
Mortgage loans - At December 31, 2023, OFG’s non-performing mortgage loans totaled $20.3 million (23.8% of OFG’s non-performing loans), a 40.0% decrease from $33.8 million (33.8% of OFG’s non-performing loans) at December 31, 2022.
Mortgage loans - At December 31, 2024, OFG’s non-performing mortgage loans totaled $17.2 million (20.7% of OFG’s non-performing loans), a 15.3% decrease from $20.3 million (23.8% of OFG’s non-performing loans) at December 31, 2023.
Loans in these programs are evaluated by designated credit underwriters for financial difficulty modification if OFG grants a concession for legal or economic reasons due to the debtor’s financial difficulties. 52 TABLE 9 - ALLOWANCE FOR CREDIT LOSSES BREAKDOWN December 31, Variance % 2023 2022 (In thousands) ACL: Non-PCD Commercial loans $ 44,041 $ 39,158 12.5 % Mortgage loans 7,998 9,571 -16.4 % Consumer loans 27,086 23,264 16.4 % Auto loans 73,485 69,848 5.2 % Total ACL $ 152,610 $ 141,841 7.6 % PCD Commercial loans $ 1,113 $ 1,388 -19.8 % Mortgage loans 7,351 9,359 -21.5 % Consumer loans 7 14 -50.0 % Auto loans 25 71 -64.8 % Total ACL $ 8,496 $ 10,832 -21.6 % ACL summary Commercial loans $ 45,154 $ 40,546 11.4 % Mortgage loans 15,349 18,930 -18.9 % Consumer loans 27,093 23,278 16.4 % Auto loans 73,510 69,919 5.1 % Total ACL $ 161,106 $ 152,673 5.5 % ACL composition: Commercial loans 28.0 % 26.6 % Mortgage loans 9.5 % 12.4 % Consumer loans 16.8 % 15.2 % Auto loans 45.7 % 45.8 % 100.0 % 100.0 % ACL coverage ratio at end of year: Commercial loans 1.5 % 1.5 % (4.5) % Mortgage loans 1.0 % 1.1 % (11.7) % Consumer loans 4.4 % 4.3 % 0.9 % Auto loans 3.2 % 3.6 % (9.3) % 2.1 % 2.2 % (4.0) % ACL coverage ratio to non-performing loans: Commercial loans 106.2 % 93.5 % 13.6 % Mortgage loans 75.8 % 56.1 % 35.2 % Consumer loans 802.5 % 744.2 % 7.8 % Auto loans 385.8 % 356.5 % 8.2 % 189.1 % 152.9 % 23.7 % 53 TABLE 10 - ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES December 31, 2023 2022 Amount of ACL Percent of loans in each category of total loans [1] Amount of ACL Percent of loans in each category of total loans [1] Commercial loans $ 45,154 40.8% $ 40,546 38.5% Mortgage loans 15,349 20.7% 18,930 24.9% Consumer loans 27,093 8.2% 23,278 7.9% Auto loans 73,510 30.3% 69,919 28.7% Total $ 161,106 100.0 % $ 152,673 100.0 % [1] Total loans in this table refers to total loans held for investment.
Loans in these programs are evaluated by designated credit underwriters for financial difficulty modification if OFG grants a concession for legal or economic reasons due to the debtor’s financial difficulties. 53 TABLE 9 - ALLOWANCE FOR CREDIT LOSSES BREAKDOWN December 31, Variance % 2024 2023 (In thousands) ACL: Non-PCD Commercial loans $ 44,814 $ 44,041 1.8 % Mortgage loans 6,395 7,998 (20.0) % Consumer loans 31,818 27,086 17.5 % Auto loans 87,682 73,485 19.3 % Total ACL $ 170,709 $ 152,610 11.9 % PCD Commercial loans $ 622 $ 1,113 (44.1) % Mortgage loans 4,514 7,351 (38.6) % Consumer loans 11 7 57.1 % Auto loans 7 25 (72.0) % Total ACL $ 5,154 $ 8,496 (39.3) % ACL summary Commercial loans $ 45,436 $ 45,154 0.6 % Mortgage loans 10,909 15,349 (28.9) % Consumer loans 31,829 27,093 17.5 % Auto loans 87,689 73,510 19.3 % Total ACL $ 175,863 $ 161,106 9.2 % ACL composition: Commercial loans 25.8 % 28.0 % Mortgage loans 6.2 % 9.5 % Consumer loans 18.1 % 16.8 % Auto loans 49.9 % 45.7 % 100.0 % 100.0 % ACL coverage ratio at end of year: Commercial loans 1.46 % 1.47 % (0.7) % Mortgage loans 0.74 % 0.98 % (24.5) % Consumer loans 4.76 % 4.37 % 8.9 % Auto loans 3.44 % 3.23 % 6.5 % 2.26 % 2.14 % 5.6 % ACL coverage ratio to non-performing loans: Commercial loans 109.3 % 106.2 % 2.9 % Mortgage loans 63.5 % 75.8 % (16.2) % Consumer loans 756.6 % 802.5 % (5.7) % Auto loans 437.2 % 385.8 % 13.3 % 211.9 % 189.1 % 12.1 % 54 TABLE 10 - ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES December 31, 2024 2023 Amount of ACL Percent of loans in each category of total loans [1] Amount of ACL Percent of loans in each category of total loans [1] (In thousands) (In thousands) Commercial loans $ 45,436 39.8% $ 45,154 40.8% Mortgage loans 10,909 18.9% 15,349 20.7% Consumer loans 31,829 8.6% 27,093 8.2% Auto loans 87,689 32.7% 73,510 30.3% Total $ 175,863 100.0 % $ 161,106 100.0 % [1] Total loans in this table refers to total loans held for investment.
OFG evaluated sensitivities by applying 100% weight to baseline and moderate recession scenarios. The impact of assigning a 100% weight to the baseline scenario was a hypothetical decrease of 4% to the collective ACL, and the impact of assigning a 100% weight to the moderate recession scenario was a hypothetical increase of 6% to the collective ACL.
The impact of assigning a 100% weight to the baseline scenario was a hypothetical decrease of 2% to the collective ACL, and the impact of assigning a 100% weight to the moderate recession scenario was a hypothetical increase of 3% to the collective ACL.
Provision for Credit Losses Comparison of the years ended December 31, 2023 and 2022 Provision for credit losses increased $36.5 million to $60.6 million from $24.1 million.
Provision for Credit Losses Comparison of the years ended December 31, 2024 and 2023 Provision for credit losses increased $21.7 million to $82.3 million from $60.6 million.
A discussion of OFG’s significant accounting policies, including further discussion of the accounting estimate described below, can be found in “Note 1– Summary of Significant Accounting Policies” to the consolidated financial statements and should be read in conjunction with this section. 33 Allowance for Credit Losses related to loans collectively evaluated for impairment The most critical and complex accounting estimate is associated with the determination of the ACL.
A discussion of OFG’s significant accounting policies, including further discussion of the accounting estimate described below, can be found in “Note 1– Summary of Significant Accounting Policies” to the consolidated financial statements and should be read in conjunction with this section.
The charge-offs for the 2023 included $11.5 million charge-offs recognized on three US commercial loan relationships, a $2.1 million charge-off recognized on a PCD commercial loan, and $906 thousand charge-offs for a small portfolio of non-performing small business commercial loans that were sold during the period.
The charge-offs in 2023 included $10.5 million charge-offs recognized on three US commercial loan relationships and $906 thousand charge-offs for a small portfolio of non-performing small business commercial loans that were sold during the period. • Consumer loans net charge-offs in 2024 amounted $29.0 million increasing by $9.0 million when compared to $20.0 million in 2023.
Tangible Book Value per share of $23.13 compared to $21.01 in the third quarter of 2023 and $19.56 in the fourth quarter of 2022.
Tangible Book Value per share was $25.43 compared to $26.15 in the third quarter of 2024 and $23.13 in the fourth quarter of 2023.
OFG’s management evaluates the adequacy of the ACL on a quarterly basis following a systematic methodology in order to provide for inherent risks in the loan portfolio.
The ACL represents management’s best estimate deemed appropriate to provide current expected future credit losses in the portfolio as of the date of the reporting period. OFG’s management evaluates the adequacy of the ACL on a quarterly basis following a systematic methodology in order to provide for inherent risks in the loan portfolio.
Please refer to “Note 11 – Goodwill and Other Intangible Assets” to our consolidated financial statements for more information on the annual goodwill impairment test. 47 TABLE 5 - ASSETS SUMMARY AND COMPOSITION December 31, Variance % 2023 2022 (In thousands) Investments: FNMA and FHLMC certificates $ 1,730,655 $ 1,105,551 56.5 % US Treasury securities 496,113 506,768 -2.1 % GNMA certificates 376,294 319,534 17.8 % Equity securities 38,469 23,667 62.5 % CMOs issued by US government-sponsored agencies 9,610 14,851 -35.3 % Other debt securities 35,616 1,142 3,018.7 % Trading securities 13 9 44.4 % Total investments 2,686,770 1,971,522 36.3 % Loans, net 7,401,618 6,723,236 10.1 % Total investments and loans 10,088,388 8,694,758 16.0 % Other assets: Cash and due from banks (including restricted cash) 743,550 546,303 36.1 % Money market investments 4,623 4,161 11.1 % Foreclosed real estate 10,780 11,214 -3.9 % Accrued interest receivable 71,400 62,402 14.4 % Deferred tax asset, net 4,923 55,485 -91.1 % Premises and equipment, net 104,102 106,820 -2.5 % Servicing assets 49,520 50,921 -2.8 % Goodwill 84,241 84,241 0.0 % Other intangible assets 20,694 27,593 -25.0 % Operating lease right-of-use assets 21,725 25,363 -14.3 % Other assets and customers' liability on acceptances 140,507 149,519 -6.0 % Total other assets 1,256,065 1,124,022 11.7 % Total assets $ 11,344,453 $ 9,818,780 15.5 % Investment portfolio composition: FNMA and FHLMC certificates 64.4 % 56.0 % US Treasury securities 18.5 % 25.7 % GNMA certificates 14.0 % 16.2 % Equity securities 1.4 % 1.2 % CMOs issued by US government-sponsored agencies 0.4 % 0.8 % Other debt securities and trading securities 1.3 % 0.1 % 100.0 % 100.0 % 48 TABLE 6 - LOAN PORTFOLIO COMPOSITION December 31, Variance % 2023 2022 (In thousands) Loans held for investment: Commercial loans $ 3,076,903 $ 2,629,929 17.0 % Mortgage loans 1,562,609 1,704,221 (8.3) % Consumer loans 620,446 537,257 15.5 % Auto loans 2,274,421 1,963,915 15.8 % 7,534,379 6,835,322 10.2 % Allowance for credit losses (161,106) (152,673) 5.5 % Total loans held for investment 7,373,273 6,682,649 10.3 % Mortgage loans held for sale — 19,499 (100.0) % Other loans held for sale 28,345 21,088 34.4 % Total loans, net $ 7,401,618 $ 6,723,236 10.1 % OFG’s loan portfolio is composed of commercial, mortgage, consumer, and auto loans.
Please refer to “Note 10 – Goodwill and Other Intangible Assets” to our consolidated financial statements for more information on the annual goodwill impairment test. 48 TABLE 5 - ASSETS SUMMARY AND COMPOSITION December 31, Variance % 2024 2023 (In thousands) Investments: FNMA and FHLMC certificates $ 2,205,039 $ 1,730,655 27.4 % US Treasury securities 1,150 496,113 (99.8) % GNMA certificates 417,985 376,294 11.1 % Equity securities 54,896 38,469 42.7 % CMOs issued by US government-sponsored agencies 5,639 9,610 (41.3) % Other debt securities 35,550 35,616 (0.2) % Trading securities 18 13 38.5 % Total investments 2,720,277 2,686,770 1.2 % Loans, net 7,633,831 7,401,618 3.1 % Total investments and loans 10,354,108 10,088,388 2.6 % Other assets: Cash and due from banks 584,467 743,550 (21.4) % Money market investments 6,670 4,623 44.3 % Foreclosed real estate 4,002 10,780 (62.9) % Accrued interest receivable 71,667 71,400 0.4 % Deferred tax asset, net 6,248 4,923 26.9 % Premises and equipment, net 104,512 104,102 0.4 % Servicing assets 70,435 49,520 42.2 % Goodwill 84,241 84,241 0.0 % Other intangible assets 14,782 20,694 (28.6) % Operating lease right-of-use assets 19,197 21,725 (11.6) % Customers' liability on acceptances 31,526 25,576 23.3 % Other assets 148,879 114,931 29.5 % Total other assets 1,146,626 1,256,065 (8.7) % Total assets $ 11,500,734 $ 11,344,453 1.4 % Investment portfolio composition: FNMA and FHLMC certificates 81.1 % 64.4 % US Treasury securities 0.0 % 18.5 % GNMA certificates 15.4 % 14.0 % Equity securities 2.0 % 1.4 % CMOs issued by US government-sponsored agencies 0.2 % 0.4 % Other debt securities and trading securities 1.3 % 1.3 % 100.0 % 100.0 % 49 TABLE 6 - LOAN PORTFOLIO COMPOSITION December 31, Variance % 2024 2023 (In thousands) Loans held for investment: Commercial loans $ 3,103,091 $ 3,076,903 0.9 % Mortgage loans 1,470,817 1,562,609 (5.9) % Consumer loans 668,561 620,446 7.8 % Auto loans 2,549,493 2,274,421 12.1 % 7,791,962 7,534,379 3.4 % Allowance for credit losses (175,863) (161,106) 9.2 % Total loans held for investment, net 7,616,099 7,373,273 3.3 % Mortgage loans held for sale 13,286 — 100.0 % Other loans held for sale 4,446 28,345 (84.3) % Total loans held for sale 17,732 28,345 (37.4) % Total loans, net $ 7,633,831 $ 7,401,618 3.1 % OFG’s loan portfolio is composed of commercial, mortgage, consumer, and auto loans.
In December 2023, OFG received a $1.2 billion deposit in an interest-bearing checking account from an existing long-standing Puerto Rico government client who had an inflow of liquidity. At December 31, 2023 and 2022, total public fund deposits from various Puerto Rico government municipalities, agencies and corporations amounted to $1.616 billion and $284.2 million, respectively.
Excluding public fund deposits, commercial deposits increased by $75.2 million and retail deposits decreased by $55.5 million. In December 2023, OFG received a $1.2 billion deposit in an interest-bearing checking account from an existing long-standing Puerto Rico government client who had an inflow of liquidity.
The composition and trends of OFG’s loans held-for-investment portfolio were as follows: • Commercial loan portfolio amounted to $3.077 billion (40.8% of the gross loan portfolio) compared to $2.630 billion (38.5% of the gross loan portfolio) at December 31, 2022.
The composition and trends of OFG’s loans held-for-investment portfolio were as follows: • Commercial loan portfolio amounted to $3.103 billion (39.8% of the gross loan portfolio) compared to $3.077 billion (40.8% of the gross loan portfolio) at December 31, 2023, a 0.9% increase as a result of originations and credit lines usage during 2024.
US commercial loans amounted to $755.2 million and $642.1 million at December 31, 2023 and 2022, respectively, which represented 10.0% and 9.4% of our total loan portfolio held for investment.
Commercial US loans amounted to $704.1 million and $755.2 million at December 31, 2024 and 2023, respectively, which represented 9.0% and 10.0% of our total gross loan portfolio held for investment. Commercial loan production decreased 19% or $213.0 million to $895.3 million in 2024 from $1.108 billion in 2023, mainly in the commercial US loan portfolio.
The efficiency ratio was 53.22%, an improvement from 56.85%. Amounts presented as part of non-interest income that were excluded from the efficiency ratio computation for years ended December 31, 2023 and 2022 amounted to $6.5 million and $6.0 million, respectively.
Management believes that the exclusion of those items permits consistent comparability. Amounts presented as part of non-interest income that were excluded from the efficiency ratio computation for years ended December 31, 2024 and 2023 amounted to $2.1 million and $6.5 million, respectively.
Deposits, excluding accrued interest payable, increased by $1.191 billion reflecting an increase in demand deposits of $733.7 million, brokered deposits of $150.8 million and time deposits of $309.2 million, offset by a decrease in savings and money market accounts of $139.9 million.
Deposits, excluding accrued interest payable, decreased by $157.5 million or 1.6% reflecting a decrease in demand deposits of $423.0 million, brokered deposits of $6.1 million and savings and money market accounts of $23.2 million, offset by an increase in time deposits of $294.9 million.
December 31, Variance 2023 2022 % (Dollars in thousands) Common dividend data: Cash dividends declared $ 41,853 $ 33,593 24.6 % Cash dividends declared per share $ 0.88 $ 0.70 25.7 % Payout ratio 22.98 % 20.35 % 12.9 % Dividend yield 2.35 % 2.54 % (7.5) % The following table presents a reconciliation of OFG’s total stockholders’ equity to tangible common equity and total assets to tangible assets at December 31, 2023 and 2022: December 31, 2023 2022 (In thousands, except share or per share information) Total stockholders’ equity $ 1,193,480 $ 1,042,406 Goodwill (84,241) (84,241) Other intangible assets (20,694) (27,593) Total tangible common equity (non-GAAP) $ 1,088,545 $ 930,572 Total assets $ 11,344,453 9,818,780 Goodwill (84,241) (84,241) Core deposit intangible (15,848) (21,131) Customer relationship intangible (4,846) (6,462) Total tangible assets $ 11,239,518 $ 9,706,946 Tangible common equity to tangible assets 9.68 % 9.59 % Common shares outstanding at end of period 47,065,156 47,581,375 Tangible book value per common share $ 23.13 $ 19.56 The tangible common equity to tangible assets ratio and tangible book value per common share are non-GAAP measures and, unlike tier 1 capital and common equity tier 1 capital, are not codified in the federal banking regulations.
December 31, Variance 2024 2023 % (Dollars in thousands) Common dividend data: Cash dividends declared $ 46,931 $ 41,853 12.1 % Cash dividends declared per share $ 1.00 $ 0.88 13.6 % Payout ratio 23.64 % 22.98 % 2.9 % Dividend yield 2.36 % 2.35 % 0.4 % 65 Non-GAAP financial measures The following table presents a reconciliation of OFG’s total stockholders’ equity to tangible common equity and total assets to tangible assets at December 31, 2024 and 2023: TABLE 18 — RECONCILIATION OF TANGIBLE COMMON EQUITY AND TANGIBLE ASSETS December 31, 2024 2023 (In thousands, except share or per share information) Total stockholders’ equity $ 1,254,371 $ 1,193,480 Goodwill (84,241) (84,241) Other intangible assets (14,782) (20,694) Total tangible common equity (non-GAAP) $ 1,155,348 $ 1,088,545 Total assets $ 11,500,734 11,344,453 Goodwill (84,241) (84,241) Core deposit intangible (11,320) (15,848) Customer relationship intangible (3,462) (4,846) Total tangible assets (non-GAAP) $ 11,401,711 $ 11,239,518 Tangible common equity to tangible assets (non-GAAP) 10.13 % 9.68 % Common shares outstanding at end of year 45,440,269 47,065,156 Tangible book value per common share (non-GAAP) $ 25.43 $ 23.13 Year-to-date average 2024 2023 (In thousands) Total stockholders’ equity $ 1,255,872 $ 1,110,919 Average intangible assets (101,764) (108,200) Average tangible common equity (non-GAAP) $ 1,154,108 $ 1,002,719 Average return on tangible common equity (Non-GAAP) 17.17% 18.14% The tangible common equity to tangible assets ratio and tangible book value per common share are non-GAAP measures and, unlike tier 1 capital and common equity tier 1 capital, are not codified in the federal banking regulations.
Performance metrics: Net interest margin of 5.62%, return on average assets of 1.76%, return on average tangible common stockholders’ equity of 18.22%, and efficiency ratio of 53.59%. Total interest income of $176.2 million compared to $165.7 million in the third quarter of 2023 and $145.7 million in the fourth quarter of 2022.
Performance metrics: Net interest margin of 5.40%, return on average assets of 1.75%, return on average stockholders’ equity of 15.43%, and efficiency ratio of 54.82%. Total Interest Income of $190.2 million compared to $189.0 million in the third quarter of 2024 and $176.2 million in the fourth quarter of 2023.
Tax equivalent basis net interest income of $576.9 million increased $80.2 million, or 16.1%, from $496.8 million. Interest rate spread increased by 69 basis points to 5.71% from 5.02% and net interest margin increased 74 basis points to 5.79% from 5.05%.
Tax equivalent basis net interest income of $605.2 million increased $28.3 million, or 4.9%, from $576.9 million. Interest rate spread decreased by 42 basis points to 5.29% from 5.71% and net interest margin decreased 36 basis points to 5.43% from 5.79%.
The preparation of these financial statements requires our management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We evaluate these judgments, assumptions and estimates for changes that would affect the reported amounts.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES The accounting and reporting policies followed by OFG conform with GAAP and general practices within the financial services industry. The preparation of these financial statements requires our management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.
The risk-based capital ratios presented in Table 16 include common equity tier 1, tier 1 capital, total capital and leverage capital as of December 31, 2023 and 2022 and are calculated based on the Basel III capital rules related to the measurement of capital, risk-weighted assets and average assets. 61 The following are OFG’s consolidated capital ratios under the Basel III capital rules at December 31, 2023 and 2022: TABLE 16 — CAPITAL, DIVIDENDS AND STOCK DATA December 31, Variance 2023 2022 % (Dollars in thousands, except per share data) Capital data: Stockholders’ equity $ 1,193,480 $ 1,042,406 14.5 % Regulatory Capital Ratios data: Common equity tier 1 capital ratio 14.12 % 13.64 % 3.5 % Minimum common equity tier 1 capital ratio required 4.50 % 4.50 % 0.0 % Actual common equity tier 1 capital $ 1,174,205 1,037,385 13.2 % Minimum common equity tier 1 capital required $ 374,301 342,246 9.4 % Minimum capital conservation buffer required (2.5%) $ 207,945 190,137 9.4 % Excess over regulatory requirement $ 591,959 505,002 17.2 % Risk-weighted assets $ 8,317,802 7,605,466 9.4 % Tier 1 risk-based capital ratio 14.12 % 13.64 % 3.5 % Minimum tier 1 risk-based capital ratio required 6.00 % 6.00 % 0.0 % Actual tier 1 risk-based capital $ 1,174,205 $ 1,037,385 13.2 % Minimum tier 1 risk-based capital required $ 499,068 $ 456,328 9.4 % Minimum capital conservation buffer required (2.5%) $ 207,945 190,137 9.4 % Excess over regulatory requirement $ 467,192 $ 390,920 19.5 % Risk-weighted assets $ 8,317,802 $ 7,605,466 9.4 % Total risk-based capital ratio 15.37 % 14.89 % 3.2 % Minimum total risk-based capital ratio required 8.00 % 8.00 % 0.0 % Actual total risk-based capital $ 1,278,537 $ 1,132,658 12.9 % Minimum total risk-based capital required $ 665,424 $ 608,437 9.4 % Minimum capital conservation buffer required (2.5%) $ 207,945 190,137 9.4 % Excess over regulatory requirement $ 405,168 $ 334,084 21.3 % Risk-weighted assets $ 8,317,802 $ 7,605,466 9.4 % Leverage capital ratio 11.03 % 10.36 % 6.5 % Minimum leverage capital ratio required 4.00 % 4.00 % 0.0 % Actual tier 1 capital $ 1,174,205 $ 1,037,385 13.2 % Minimum tier 1 capital required $ 425,911 $ 400,445 6.4 % Excess over regulatory requirement $ 748,294 $ 636,940 17.5 % Tangible common equity to total assets 9.60 % 9.48 % 1.3 % Tangible common equity to risk-weighted assets 13.09 % 12.24 % 6.9 % Total equity to total assets 10.52 % 10.62 % -0.9 % Total equity to risk-weighted assets 14.35 % 13.71 % 4.7 % Stock data: Outstanding common shares 47,065,156 47,581,375 (1.1) % Book value per common share $ 25.36 $ 21.91 15.7 % Tangible book value per common share $ 23.13 $ 19.56 18.3 % Market price at end of period $ 37.48 $ 27.56 36.0 % Market capitalization at end of period $ 1,764,002 $ 1,311,343 34.5 % 62 From December 31, 2022 to December 31, 2023, leverage capital ratio increased from 10.36% to 11.03%, tier 1 risk-based capital ratio and common equity tier 1 capital ratio increased from 13.64% to 14.12%, total risk-based capital ratio increased from 14.89% to 15.37%, and tangible common equity to tangible total assets increased from 9.59% to 9.68%.
The risk-based capital ratios presented in Table 17 include CET1, tier 1 capital, total capital and leverage capital as of December 31, 2024 and 2023 and are calculated based on the Basel III capital rules related to the measurement of capital, risk-weighted assets and average assets. 61 The following are OFG’s consolidated capital, dividends, and stock data, including capital ratios under the Basel III capital rules at December 31, 2024 and 2023: TABLE 17 — CAPITAL, DIVIDENDS AND STOCK DATA December 31, Variance 2024 2023 % (Dollars in thousands, except per share data) Capital data: Stockholders’ equity $ 1,254,371 $ 1,193,480 5.1% Regulatory Capital Ratios data: Common equity tier 1 capital ratio 14.26 % 14.12 % 1.0 % Minimum common equity tier 1 capital ratio required 4.50 % 4.50 % — % Actual common equity tier 1 capital $ 1,256,906 1,174,205 7.0% Minimum common equity tier 1 capital required $ 396,559 374,301 5.9% Minimum capital conservation buffer required (2.5%) $ 220,311 207,945 5.9% Excess over regulatory requirement $ 640,036 591,959 8.1% Risk-weighted assets $ 8,812,422 8,317,802 5.9% Tier 1 risk-based capital ratio 14.26 % 14.12 % 1.0 % Minimum tier 1 risk-based capital ratio required 6.00 % 6.00 % — % Actual tier 1 risk-based capital $ 1,256,906 $ 1,174,205 7.0% Minimum tier 1 risk-based capital required $ 528,745 $ 499,068 5.9% Minimum capital conservation buffer required (2.5%) $ 220,311 207,945 5.9% Excess over regulatory requirement $ 507,850 $ 467,192 8.7% Risk-weighted assets $ 8,812,422 $ 8,317,802 5.9% Total risk-based capital ratio 15.52 % 15.37 % 1.0 % Minimum total risk-based capital ratio required 8.00 % 8.00 % — % Actual total risk-based capital $ 1,367,692 $ 1,278,537 7.0% Minimum total risk-based capital required $ 704,994 $ 665,424 5.9% Minimum capital conservation buffer required (2.5%) $ 220,311 207,945 5.9% Excess over regulatory requirement $ 442,387 $ 405,168 9.2% Risk-weighted assets $ 8,812,422 $ 8,317,802 5.9% Leverage capital ratio 10.93 % 11.03 % (0.9) % Minimum leverage capital ratio required 4.00 % 4.00 % — % Actual tier 1 capital $ 1,256,906 $ 1,174,205 7.0% Minimum tier 1 capital required $ 460,138 $ 425,911 8.0% Excess over regulatory requirement $ 796,768 $ 748,294 6.5% Total equity to total assets 10.91 % 10.52 % 3.7 % Total equity to risk-weighted assets 14.23 % 14.35 % (0.8) % Stock data: Outstanding common shares 45,440,269 47,065,156 (3.5)% Book value per common share $ 27.60 $ 25.36 8.8% Tangible book value per common share $ 25.43 $ 23.13 9.9% Market price at end of year $ 42.32 $ 37.48 12.9% Market capitalization at end of year $ 1,923,032 $ 1,764,002 9.0% 62 The following table presents OFG’s capital adequacy information under the Basel III capital rules: December 31, Variance 2024 2023 % (Dollars in thousands) Risk-based capital: Common equity tier 1 capital $ 1,256,906 $ 1,174,205 7.0% Tier 1 capital 1,256,906 1,174,205 7.0% Additional Tier 2 capital 110,786 104,332 6.2% Total risk-based capital $ 1,367,692 $ 1,278,537 7.0% Risk-weighted assets: Balance sheet items $ 8,215,743 $ 7,768,828 5.8% Off-balance sheet items 596,679 548,974 8.7% Total risk-weighted assets $ 8,812,422 $ 8,317,802 5.9% Ratios: Common equity tier 1 capital (minimum required, including capital conservation buffer - 7%) 14.26 % 14.12 % 1.0% Tier 1 capital (minimum required, including capital conservation buffer - 8.5%) 14.26 % 14.12 % 1.0% Total capital (minimum required, including capital conservation buffer - 10.5%) 15.52 % 15.37 % 1.0% Leverage ratio (minimum required - 4%) 10.93 % 11.03 % (0.9)% From December 31, 2023 to December 31, 2024, leverage capital ratio decreased from 11.03% to 10.93%, tier 1 risk-based capital ratio and common equity tier 1 capital ratio increased from 14.12% to 14.26%, and total risk-based capital ratio increased from 15.37% to 15.52%.
The new stock repurchase program, which is open-ended, replaces the prior stock repurchase program, which had had been approved by the Board of Directors in January 2022 and had $17.2 million remaining of its $100 million repurchase parameters. Local Economic Conditions We believe that Puerto Rico’s economy continues to demonstrate resiliency and growth and its private sector is expanding.
The new open-ended stock repurchase program replaced the prior stock repurchase program, which had been approved by the Board of Directors in January 2022 and had $17.2 million remaining of its $100.0 million repurchase parameters.
Management’s judgment is required in selecting the macroeconomic scenarios and the weighting of the economic scenarios, which consist of baseline and moderate recession scenarios. As of December 31, 2023, management gave more weight to the baseline scenario, except for the US loan segment where the moderate recession scenario was given a greater weight.
As of December 31, 2024, management gave more weight to the baseline scenario, except for the US loan segment where the moderate recession scenario was given a greater weight. Management selects the macroeconomic forecast that is most reflective of expectations at that point in time.
TABLE 2 - NON-INTEREST INCOME SUMMARY Year Ended December 31, 2023 2022 Variance % (In thousands) Banking service revenue $ 70,078 $ 71,161 (1.5) % Wealth management revenue 32,990 32,635 1.1 % Mortgage banking activities 18,787 21,929 (14.3) % Total banking and financial service revenue 121,855 125,725 (3.1) % Net (loss) gain on: Sale of securities (1,149) (247) 365.2 % Early extinguishment of debt — 42 (100.0) % Other non-interest income 7,675 6,170 24.4 % Total non-interest income $ 128,381 $ 131,690 (2.5) % Non-Interest Income Non-interest income is affected by fees generated from loans and deposit accounts, the amount of assets under management of the Bank’s trust department, transactions generated by clients’ financial assets serviced by OFG’s securities broker-dealer, insurance agency and reinsurance subsidiaries, the level of mortgage banking activities, and gains or losses on sales of assets.
These increases were partially offset by higher interest expense of $73.8 million from interest paid on: (i) deposits of $74.3 million due to higher average cost of total deposits of 68 basis point and (ii) borrowings of $0.5 million reflecting FHLB advances taken in late 2023 and during 2024 and new securities under agreements to repurchase in late 2024. 41 TABLE 2 - NON-INTEREST INCOME SUMMARY Year Ended December 31, 2024 2023 Variance % (In thousands) Banking service revenue $ 66,923 $ 70,078 (4.5) % Wealth management revenue 35,622 32,990 8.0 % Mortgage banking activities 18,636 18,787 (0.8) % Total banking and financial service revenue 121,181 121,855 (0.6) % Net loss on sale of securities (7) (1,149) (99.4) % Other non-interest income 2,075 7,675 (73.0) % Total non-interest income $ 123,249 $ 128,381 (4.0) % Non-Interest Income Non-interest income is affected by fees generated from loans and deposit accounts, the amount of assets under management of the Bank’s trust department, transactions generated by clients’ financial assets serviced by OFG’s securities broker-dealer, insurance agency and reinsurance subsidiaries, the level of mortgage banking activities, and gains or losses on sales of assets.
The following items comprise non-performing loans held for investment, including Non-PCD and PCDs: Commercial loans - At December 31, 2023, OFG’s non-performing commercial loans amounted to $42.5 million (49.9% of OFG’s non-performing loans), a 1.9% decrease from $43.4 million at December 31, 2022 (43.4% of OFG’s non-performing loans).
If based on the analysis performed the pool is classified as non-accrual, the accretion/amortization of the non-credit (discount) premium ceases. 52 The following items comprise non-performing loans held for investment, including non-PCD and PCDs: Commercial loans - At December 31, 2024, OFG’s non-performing commercial loans amounted to $41.6 million (50.1% of OFG’s non-performing loans), a 2.3% decrease from $42.5 million at December 31, 2023 (49.9% of OFG’s non-performing loans).
At December 31, 2023 the number of shares that may yet be purchased under the $100 million stock buyback program is estimated at 459,898 and was calculated by dividing the remaining balance of $17.2 million by $37.48 (closing price of OFG’s common stock at December 31, 2023). 65
At December 31, 2024, the estimated remaining number of shares that may be purchased under the $50.0 million programs is 701,236 and was calculated by dividing the remaining balance of $29.7 million by $42.32 (closing price of OFG’s common stock at December 31, 2024).
TABLE 8 - PUERTO RICO GOVERNMENT RELATED LOANS December 31, 2023 Maturity Carrying Value Less than 1 Year 1 to 3 Years More than 3 Years Loans: (In thousands) Municipalities $ 68,557 $ — $ 2,030 $ 66,527 At December 31, 2023, OFG has $68.6 million of direct credit exposure to the Puerto Rico government, a $5.1 million decrease from $73.7 million in December 31, 2022.
TABLE 8 - PUERTO RICO GOVERNMENT RELATED LOANS December 31, 2024 Maturity Carrying Value Less than 1 Year 1 to 3 Years More than 3 Years Loans: (In thousands) Municipalities $ 66,439 $ 950 $ 11,246 $ 54,243 At December 31, 2024, OFG has $66.4 million of direct credit exposure to the Puerto Rico government, a $2.1 million decrease from $68.6 million at December 31, 2023. 51 Allowance for Credit Losses OFG measures its ACL based on management’s best estimate of expected credit losses inherent in OFG’s relevant financial assets.
Non-PCD consumer loans are placed on non-accrual status when they become 90 days past due and written-off when payments are delinquent 120 days in personal loans and 180 days in credit cards and personal lines of credit. 51 Auto loans - At December 31, 2023, OFG’s non-performing auto loans amounted to $19.1 million (22.3% of OFG’s total non-performing loans), a decrease of 2.8% from $19.6 million at December 31, 2022 (19.7% of OFG’s total non-performing loans).
Non-PCD consumer loans are placed on non-accrual status when they become 90 days past due and written-off when payments are delinquent 120 days in personal loans and 180 days in credit cards and personal lines of credit.
At December 31, 2023, OFG’s non-performing assets decreased by 13.6% to $100.0 million (0.88% total assets) from $115.7 million (1.18% of total assets) at December 31, 2022.
At December 31, 2024, OFG’s non-performing assets decreased by 6.4% to $93.6 million (0.81% total assets) from $100.0 million (0.88% of total assets) at December 31, 2023, mainly from non-performing loans and foreclosed real estate.
The table below shows the Bank’s regulatory capital ratios at December 31, 2023 and 2022: December 31, Variance 2023 2022 % (Dollars in thousands) Oriental Bank Regulatory Capital Ratios: Common Equity Tier 1 Capital to Risk-Weighted Assets 13.01% 12.36% 5.26 % Actual common equity tier 1 capital $ 1,075,487 $ 933,494 15.2 % Minimum capital requirement (4.5%) $ 371,913 $ 339,910 9.4 % Minimum capital conservation buffer requirement (2.5%) $ 206,618 $ 188,839 9.4 % Minimum to be well capitalized (6.5%) $ 537,208 $ 490,981 9.4 % Tier 1 Capital to Risk-Weighted Assets 13.01% 12.36% 5.3 % Actual tier 1 risk-based capital $ 1,075,487 $ 933,494 15.2 % Minimum capital requirement (6%) $ 495,884 $ 453,214 9.4 % Minimum capital conservation buffer requirement (2.5%) $ 206,618 $ 188,839 9.4 % Minimum to be well capitalized (8%) $ 661,179 $ 604,285 9.4 % Total Capital to Risk-Weighted Assets 14.27% 13.61% 4.8 % Actual total risk-based capital $ 1,179,164 $ 1,028,126 14.7 % Minimum capital requirement (8%) $ 661,179 $ 604,285 9.4 % Minimum capital conservation buffer requirement (2.5%) $ 206,618 $ 188,839 9.4 % Minimum to be well capitalized (10%) $ 826,474 $ 755,356 9.4 % Total Tier 1 Capital to Average Total Assets 10.20% 9.42% 8.3 % Actual tier 1 capital $ 1,075,487 $ 933,494 15.2 % Minimum capital requirement (4%) $ 421,660 $ 396,525 6.3 % Minimum to be well capitalized (5%) $ 527,075 $ 495,656 6.3 % 64 OFG’s common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “OFG.” At December 31, 2023 and 2022, OFG’s market capitalization for its outstanding common stock was $1.764 billion ($37.48 per share) and $1.311 billion ($27.56 per share), respectively.
The table below shows the Bank’s regulatory capital ratios at December 31, 2024 and 2023: December 31, Variance 2024 2023 % (Dollars in thousands) Oriental Bank Regulatory Capital Ratios: Common Equity Tier 1 Capital to Risk-Weighted Assets 13.60% 13.01% 4.5% Actual common equity tier 1 capital $ 1,191,547 $ 1,075,487 10.8% Minimum capital requirement (4.5%) $ 394,192 $ 371,913 6.0% Minimum capital conservation buffer requirement (2.5%) $ 218,995 $ 206,618 6.0% Minimum to be well capitalized (6.5%) $ 569,388 $ 537,208 6.0% Tier 1 Capital to Risk-Weighted Assets 13.60% 13.01% 4.5% Actual tier 1 risk-based capital $ 1,191,547 $ 1,075,487 10.8% Minimum capital requirement (6%) $ 525,589 $ 495,884 6.0% Minimum capital conservation buffer requirement (2.5%) $ 218,995 $ 206,618 6.0% Minimum to be well capitalized (8%) $ 700,786 $ 661,179 6.0% Total Capital to Risk-Weighted Assets 14.86% 14.27% 4.1% Actual total risk-based capital $ 1,301,684 $ 1,179,164 10.4% Minimum capital requirement (8%) $ 700,786 $ 661,179 6.0% Minimum capital conservation buffer requirement (2.5%) $ 218,995 $ 206,618 6.0% Minimum to be well capitalized (10%) $ 875,982 $ 826,474 6.0% Total Tier 1 Capital to Average Total Assets 10.45% 10.20% 2.5% Actual tier 1 capital $ 1,191,547 $ 1,075,487 10.8% Minimum capital requirement (4%) $ 456,144 $ 421,660 8.2% Minimum to be well capitalized (5%) $ 570,179 $ 527,075 8.2% 64 OFG’s common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “OFG”.
At December 31, 2023, total assets managed by the securities broker-dealer and insurance agency subsidiaries from their customers’ investment accounts amounted to $2.446 billion, compared to $2.172 billion at December 31, 2022. Changes in trust and broker-dealer related assets also reflect changes in portfolio balances and differences in market value resulting from the increase in interest rates.
At December 31, 2024, total assets managed by the securities broker-dealer and insurance agency subsidiaries from their customers’ investment accounts amounted to $2.247 billion, compared to $2.446 billion at December 31, 2023. The decrease in trust and broker-dealer related assets reflects the termination of services by a retirement plan customer during 2024.
Income Tax Expense Comparison of the years ended December 31, 2023 and 2022 Income tax expense increased by $5.5 million to $83.4 million from $77.9 million. OFG’s Effective Tax Rate was 31.4% in 2023 compared to 31.9% in 2022. The increase in the income tax expense was related to greater income before tax by $13.0 million.
Income Tax Expense Comparison of the years ended December 31, 2024 and 2023 Income tax expense decreased by $27.8 million to $55.6 million from $83.4 million. OFG’s ETR was 21.9% in 2024 compared to 31.4% in 2023.
TABLE 11 - ALLOWANCE FOR CREDIT LOSSES SUMMARY Year Ended December 31, 2023 2022 Variance % (Dollars in thousands) Balance at beginning of year $ 152,673 $ 155,937 -2.1 % Provision for credit losses 60,277 24,408 147.0 % Charge-offs (86,271) (63,774) 35.3 % Recoveries 34,427 36,102 -4.6 % Balance at end of year $ 161,106 $ 152,673 5.5 % 54 TABLE 12 — NET CREDIT LOSSES STATISTICS ON LOANS Year Ended December 31, 2023 2022 Variance % (Dollars in thousands) Non-PCD: Mortgage loans Charge-offs $ (759) $ (284) 167.3 % Recoveries 1,217 3,314 -63.3 % Total 458 3,030 -84.9 % Commercial loans Charge-offs (14,191) (13,380) 6.1 % Recoveries 874 1,200 -27.2 % Total (13,317) (12,180) 9.3 % Consumer loans Charge-offs (23,655) (15,198) 55.6 % Recoveries 4,175 3,237 29.0 % Total (19,480) (11,961) 62.9 % Auto loans Charge-offs (43,764) (32,662) 34.0 % Recoveries 25,107 21,131 18.8 % Total (18,657) (11,531) 61.8 % PCD: Mortgage loans Charge-offs $ (317) $ (1,695) (81.3) % Recoveries 698 2,665 (73.8) % Total 381 970 (60.7) % Commercial loans Charge-offs (2,794) (69) 3,949.3 % Recoveries 1,618 3,804 (57.5) % Total (1,176) 3,735 (131.5) % Consumer loans Charge-offs (621) (176) 252.8 % Recoveries 96 94 2.1 % Total (525) (82) 540.2 % Auto loans Charge-offs (170) (310) (45.2) % Recoveries 642 657 (2.3) % Total 472 347 36.0 % Total charge-offs (86,271) (63,774) 35.3 % Total recoveries 34,427 36,102 (4.6) % Net credit losses $ (51,844) $ (27,672) 87.4 % 55 TABLE 12 — NET CREDIT LOSSES STATISTICS ON LOANS (CONTINUED) Year Ended December 31, 2023 2022 Variance % (Dollars in thousands) Net credit losses (recoveries) to average loans outstanding: Mortgage loans (0.05) % (0.22) % 76.60 % Commercial loans 0.52 % 0.33 % 56.9 % Consumer 3.25 % 2.33 % 39.5 % Auto loans 0.86 % 0.62 % 38.8 % Total 0.73 % 0.42 % 75.2 % Recoveries to charge-offs 39.91 % 56.61 % -29.5 % Average Loans Held for Investment Mortgage loans $ 1,601,946 $ 1,787,476 -10.4 % Commercial loans 2,777,241 2,538,720 9.4 % Consumer loans 615,629 516,883 19.1 % Auto loans 2,126,360 1,814,681 17.2 % Total $ 7,121,176 $ 6,657,760 7.0 % Net charge-offs for 2023 amounted to $51.8 million, increasing by $24.2 million, when compared to $27.7 million in 2022.
TABLE 11 - ALLOWANCE FOR CREDIT LOSSES SUMMARY Year Ended December 31, 2024 2023 Variance % (In thousands) Balance at beginning of year $ 161,106 $ 152,673 5.5 % Provision for credit losses 82,547 60,277 36.9 % Charge-offs (104,430) (86,271) 21.0 % Recoveries 36,640 34,427 6.4 % Balance at end of year $ 175,863 $ 161,106 9.2 % 55 TABLE 12 — NET CREDIT LOSSES STATISTICS ON LOANS Year Ended December 31, 2024 2023 Variance % (Dollars in thousands) Non-PCD: Mortgage loans Charge-offs $ (126) $ (759) (83.4) % Recoveries 1,069 1,217 (12.2) % Total 943 458 105.9 % Commercial PR Charge-offs (4,579) (3,678) 24.5 % Recoveries 1,999 833 140.0 % Total (2,580) (2,845) (9.3) % Commercial US Charge-offs (3,638) (10,513) (65.4) % Recoveries 69 41 68.3 % Total (3,569) (10,472) (65.9) % Consumer loans Charge-offs (33,266) (23,655) 40.6 % Recoveries 4,166 4,175 (0.2) % Total (29,100) (19,480) 49.4 % Auto loans Charge-offs (61,651) (43,764) 40.9 % Recoveries 26,334 25,107 4.9 % Total (35,317) (18,657) 89.3 % PCD: Mortgage loans Charge-offs $ (178) $ (317) (43.8) % Recoveries 1,326 698 90.0 % Total 1,148 381 201.3 % Commercial PR Charge-offs (967) (2,794) (65.4) % Recoveries 1,411 1,618 (12.8) % Total 444 (1,176) (137.8) % Consumer loans Charge-offs — (621) (100.0) % Recoveries 62 96 (35.4) % Total 62 (525) (111.8) % Auto loans Charge-offs (25) (170) (85.3) % Recoveries 204 642 (68.2) % Total 179 472 (62.1) % Total charge-offs (104,430) (86,271) 21.0 % Total recoveries 36,640 34,427 6.4 % Net credit losses $ (67,790) $ (51,844) 30.8 % 56 TABLE 12 — NET CREDIT LOSSES STATISTICS ON LOANS (CONTINUED) Year Ended December 31, 2024 2023 Variance % (Dollars in thousands) Net credit losses (recoveries) to average loans outstanding: Mortgage loans (0.14) % (0.05) % 180.0 % Commercial PR 0.09 % 0.19 % (52.6) % Commercial US 0.51 % 1.54 % (66.9) % Consumer loans 4.32 % 3.25 % 32.9 % Auto loans 1.45 % 0.86 % 68.6 % Total 0.89 % 0.73 % 21.9 % Recoveries to charge-offs 35.09 % 39.91 % (12.1) % Average Loans Held for Investment Mortgage loans $ 1,466,528 $ 1,601,946 (8.5) % Commercial PR 2,364,263 2,095,262 12.8 % Commercial US 705,009 681,979 3.4 % Consumer loans 672,496 615,629 9.2 % Auto loans 2,418,534 2,126,360 13.7 % Total $ 7,626,830 $ 7,121,176 7.1 % Net charge-offs in 2024 amounted to $67.8 million (0.89% of average loans), increasing by $15.9 million, when compared to $51.8 million (0.73% of average loans) in 2023.
Results for 2022 also included a $4.7 million gain recognized on the sale of a branch building. 42 TABLE 3 - NON-INTEREST EXPENSES SUMMARY Year Ended December 31, 2023 2022 Variance % (In thousands) Compensation and employee benefits $ 155,827 $ 142,930 9.0 % Occupancy, equipment and infrastructure costs 59,235 51,308 15.4 % Electronic banking charges 41,336 39,554 4.5 % Information technology expenses 27,162 21,891 24.1 % Professional and service fees 18,764 24,842 -24.5 % Taxes, other than payroll and income taxes 12,968 12,999 -0.2 % Insurance 10,494 9,898 6.0 % Loan servicing and clearing expenses 7,774 9,161 -15.1 % Advertising, business promotion, and strategic initiatives 8,743 8,240 6.1 % Communication 4,678 4,296 8.9 % Printing, postage, stationery and supplies 3,338 3,563 -6.3 % Director and investor relations 1,351 1,125 20.1 % Foreclosed real estate and other repossessed assets income, net of expenses (405) (2,074) 80.5 % Other 12,100 17,813 -32.1 % Total non-interest expenses $ 363,365 $ 345,546 5.2 % Relevant ratios and data: Efficiency ratio 53.22 % 56.85 % Compensation and benefits to non-interest expense 42.88 % 41.36 % Compensation to average total assets owned 1.53 % 1.41 % Number of employees end of year 2,248 2,253 Average number of employees 2,258 2,249 Average compensation per employee (in thousands) $ 69.01 $ 63.55 Average loans per average employee $ 3,154 $ 2,960 Non-Interest Expenses Comparison of the years ended December 31, 2023 and 2022 Non-interest expense was $363.4 million, representing an increase of 5.2%, or $17.8 million, compared to $345.5 million.
These decreases were offset by: • A $2.6 million increase in wealth management revenue primarily reflecting: (i) $1.4 million in broker-dealer fees related to higher investment advisory service fees and mutual funds retailer fees, (ii) $813 thousand in insurance income related to higher income from annuities and (iii) an increase in trust fees of $449 thousand due to higher trustee-only fees; and • A $1.1 million loss associated with the sale of a $149.4 million short-term US treasury note AFS in 2023. 42 TABLE 3 - NON-INTEREST EXPENSES SUMMARY Year Ended December 31, 2024 2023 Variance % (In thousands) Compensation and employee benefits $ 159,710 $ 155,827 2.5 % Occupancy, equipment and infrastructure costs 59,123 59,235 (0.2) % Electronic banking charges 42,816 41,336 3.6 % Information technology expenses 27,582 27,162 1.5 % Professional and service fees 18,876 18,764 0.6 % Taxes, other than payroll and income taxes 13,949 12,968 7.6 % Insurance 11,252 10,494 7.2 % Loan servicing and clearing expenses 7,935 7,774 2.1 % Advertising, business promotion, and strategic initiatives 9,714 8,743 11.1 % Communication 4,551 4,678 (2.7) % Printing, postage, stationery and supplies 3,816 3,338 14.3 % Foreclosed real estate and other repossessed assets expenses, net of (income) 3,012 (405) 843.7 % Other 13,354 13,451 (0.7) % Total non-interest expenses $ 375,690 $ 363,365 3.4 % Relevant ratios and data: Efficiency ratio 52.94 % 53.22 % Compensation and benefits to non-interest expense 42.51 % 42.88 % Compensation to average total assets owned 1.41 % 1.53 % Number of employees end of year 2,246 2,248 Average number of employees 2,235 2,258 Average compensation per employee (in thousands) $ 71.45 $ 69.01 Average loans per average employee $ 3,412 $ 3,154 Non-Interest Expense Comparison of the years ended December 31, 2024 and 2023 Non-interest expense was $375.7 million, representing an increase of 3.4%, or $12.3 million, compared to $363.4 million.
The Puerto Rico Economic Activity Index, as published by the Economic Development Bank for Puerto Rico, in November 2023 increased 5.9% year-over-year and retail sales in November increased 7.4% year-over-year and, according to the data published by Economic Development Bank for Puerto Rico, wages are also rising and labor participation is increasing.
The Puerto Rico Economic Activity Index, as published by the Economic Development Bank for Puerto Rico, registered 126.4 points in November 2024, which represents a decrease of 1.1% when compared to the same period of the previous year. However, according to the data published by the Economic Development Bank for Puerto Rico, wages are rising, and labor participation is increasing.
Mortgage loans included delinquent loans in the GNMA buy-back option program amounting to $19.4 million and $32.6 million at December 31, 2023 and 2022, respectively. Under the GNMA program, issuers such as OFG have the option but not the obligation to repurchase loans that are 90 days or more past due.
At the time of acquisition, defaulted loans under the GNMA buy-back option program corresponding to this servicing portfolio amounted to $24.2 million. Under the GNMA program, issuers such as OFG have the option but not the obligation to repurchase loans that are 90 days or more past due.
As mentioned previously, on January 1, 2023, OFG adopted ASU 2022-02 related to the elimination of the recognition and measurement of TDRs and the enhancement of disclosures for loan restructurings for borrowers experiencing financial difficulty using the prospective transition method. 57 TABLE 14 — NON-ACCRUAL LOANS December 31, Variance % 2023 2022 (Dollars in thousands) Non-accrual loans Non-PCD Commercial loans $ 36,096 $ 34,432 4.8 % Mortgage loans 14,197 23,241 -38.9 % Consumer loans 3,376 3,128 7.9 % Auto loans 19,056 19,613 -2.8 % Total $ 72,725 $ 80,414 -9.6 % PCD Commercial loans $ 6,424 $ 8,927 -28.0 % Mortgage loans 250 259 -3.5 % Total $ 6,674 $ 9,186 -27.3 % Total non-accrual loans $ 79,399 $ 89,600 -11.4 % Non-accruals loans composition percentages: Commercial loans 53.6 % 48.4 % Mortgage loans 18.2 % 26.2 % Consumer loans 4.3 % 3.5 % Auto loans 23.9 % 21.9 % 100.0 % 100.0 % Non-accrual loans ratios: Non-accrual loans to total loans 1.05 % 1.31 % -19.85 % Allowance for credit losses to non-accrual loans 202.91 % 170.39 % 19.09 % Year Ended December 31, 2023 2022 (In thousands) Interest that would have been recorded in the period if the loans had not been classified as non-accruing loans $ 941 $ 1,190 58 TABLE 15 - NON-PERFORMING LOANS December 31, Variance % 2023 2022 (Dollars in thousands) Non-performing loans Non-PCD Commercial loans $ 36,096 $ 34,432 4.8 % Mortgage loans 20,007 33,512 -40.3 % Consumer loans 3,376 3,128 7.9 % Auto loans 19,056 19,613 -2.8 % Total $ 78,535 $ 90,685 -13.4 % PCD Commercial loans $ 6,424 $ 8,927 -28.0 % Mortgage loans 250 259 -3.5 % Total $ 6,674 $ 9,186 -27.3 % Total non-performing loans $ 85,209 $ 99,871 -14.7 % Non-performing loans composition percentages: Commercial loans 49.90 % 43.40 % Mortgage loans 23.80 % 33.80 % Consumer loans 4.00 % 3.10 % Auto loans 22.30 % 19.70 % 100.00 % 100.00 % Non-performing loans to: Total loans held for investment gross 1.13 % 1.46 % -22.6 % Total assets 0.75 % 1.02 % -26.5 % Total capital 7.14 % 9.58 % -25.5 % Non-performing loans with partial charge-offs to: Total loans held for investment gross 0.29 % 0.40 % -27.5 % Non-performing loans 25.63 % 27.27 % -6.0 % Other non-performing loans ratios: Charge-off rate on non-performing loans to non-performing loans on which charge-offs have been taken 75.14 % 99.57 % -24.5 % Allowance for credit losses to non-performing loans on which no charge-offs have been taken 254.24 % 210.18 % 21.0 % 59 TABLE 16 - LIABILITIES SUMMARY AND COMPOSITION December 31, Variance % 2023 2022 (Dollars in thousands) Deposits: Non-interest-bearing deposits $ 2,537,431 $ 2,630,458 -3.5 % NOW accounts 3,512,887 2,546,245 38.0 % Savings accounts 2,088,091 2,227,963 -6.3 % Time deposits 1,620,688 1,162,959 39.4 % Total deposits 9,759,097 8,567,625 13.91 % Accrued interest payable 3,072 739 315.7 % Total deposits and accrued interest payable 9,762,169 8,568,364 13.93 % Borrowings: Advances from FHLB 200,768 26,716 651.5 % Other borrowings 2 318 -99.4 % Total borrowings 200,770 27,034 642.7 % Total deposits and borrowings 9,962,939 8,595,398 15.9 % Other Liabilities: Acceptances outstanding 25,576 28,607 -10.6 % Lease liability 24,029 27,370 -12.2 % Deferred tax liability, net 22,444 — 100.0 % Other liabilities 115,985 124,999 -7.2 % Total liabilities $ 10,150,973 $ 8,776,374 15.7 % Deposits portfolio composition percentages: Non-interest-bearing deposits 26.0% 30.7% NOW accounts 36.0% 29.7% Savings accounts 21.4% 26.0% Time deposits 16.6% 13.6% 100.0 % 100.0 % Borrowings portfolio composition percentages: Advances from FHLB 100.0 % 98.8 % Other borrowings — % 1.2 % 100.0 % 100.0 % Liabilities and Funding Sources As shown in Table 15 above, at December 31, 2023, OFG’s total liabilities were $10.151 billion, 15.7% higher than the $8.776 billion reported at December 31, 2022.
The increase in net charge-offs in 2024 was also impacted by an increase in business volume, partially offset by a recovery of $800 thousand from the sale of older, previously fully charged-off auto loans. 57 TABLE 13 — NON-PERFORMING ASSETS December 31, Variance % 2024 2023 (Dollars in thousands) Non-performing assets: Non-PCD Non-accruing loans $ 75,098 $ 72,725 3.3% Accruing loans 5,005 5,810 (13.9)% Total $ 80,103 $ 78,535 2.0% PCD 2,880 6,674 (56.8)% Total non-performing loans $ 82,983 $ 85,209 (2.6)% Foreclosed real estate 4,002 10,780 (62.9)% Other repossessed assets 6,595 4,032 63.6% $ 93,580 $ 100,021 (6.4)% Non-performing assets to total assets 0.81 % 0.88 % (7.7) % Non-performing assets to total capital 7.46 % 8.38 % (11.0) % TABLE 14 — NON-ACCRUAL LOANS December 31, Variance % 2024 2023 (Dollars in thousands) Non-accrual loans Non-PCD Commercial loans $ 38,913 $ 36,096 7.8% Mortgage loans 11,923 14,197 (16.0)% Consumer loans 4,207 3,376 24.6% Auto loans 20,055 19,056 5.2% Total $ 75,098 $ 72,725 3.3% PCD Commercial loans $ 2,641 $ 6,424 (58.9)% Mortgage loans 239 250 (4.4)% Total $ 2,880 $ 6,674 (56.8)% Total non-accrual loans $ 77,978 $ 79,399 (1.8)% Non-accruals loans composition percentages: Commercial loans 53.3 % 53.6 % Mortgage loans 15.6 % 18.2 % Consumer loans 5.4 % 4.3 % Auto loans 25.7 % 23.9 % 100.0 % 100.0 % Non-accrual loans ratios: Non-accrual loans to total loans 1.00 % 1.05 % (4.8)% Allowance for credit losses to non-accrual loans 225.53 % 202.91 % 11.1% Year Ended December 31, 2024 2023 (In thousands) Interest that would have been recorded in the year if the loans had not been classified as non-accruing loans $ 1,220 $ 941 58 TABLE 15 - NON-PERFORMING LOANS December 31, Variance % 2024 2023 (Dollars in thousands) Non-performing loans Non-PCD Commercial loans $ 38,913 $ 36,096 7.8% Mortgage loans 16,928 20,007 (15.4)% Consumer loans 4,207 3,376 24.6% Auto loans 20,055 19,056 5.2% Total $ 80,103 $ 78,535 2.0% PCD Commercial loans $ 2,641 $ 6,424 (58.9)% Mortgage loans 239 250 (4.4)% Total $ 2,880 $ 6,674 (56.8)% Total non-performing loans $ 82,983 $ 85,209 (2.6)% Non-performing loans composition percentages: Commercial loans 50.1 % 49.9 % Mortgage loans 20.7 % 23.8 % Consumer loans 5.1 % 4.0 % Auto loans 24.1 % 22.3 % 100.0 % 100.0 % Non-performing loans to: Total loans held for investment gross 1.06 % 1.13 % (6.2)% Total assets 0.72 % 0.75 % (4.0)% Total capital 6.62 % 7.14 % (7.3)% Non-performing loans with partial charge-offs to: Total loans held for investment gross 0.20 % 0.29 % (31.0)% Non-performing loans 18.41 % 25.63 % (28.2)% Other non-performing loans ratios: Charge-off rate on non-performing loans to non-performing loans on which charge-offs have been taken 109.79 % 75.14 % 46.1% Allowance for credit losses to non-performing loans on which no charge-offs have been taken 259.75 % 254.24 % 2.2% 59 TABLE 16 - LIABILITIES SUMMARY AND COMPOSITION December 31, Variance % 2024 2023 (Dollars in thousands) Deposits: Non-interest-bearing deposits $ 2,493,859 $ 2,537,431 (1.7) % NOW accounts 3,133,467 3,512,887 (10.8) % Savings accounts 2,064,909 2,088,091 (1.1) % Time deposits 1,909,324 1,620,688 17.8 % Total deposits 9,601,559 9,759,097 (1.6) % Accrued interest payable 3,227 3,072 5.0 % Total deposits and accrued interest payable 9,604,786 9,762,169 (1.6) % Borrowings: Securities sold under agreements to repurchase 75,222 — 100.0 % Advances from FHLB 325,952 200,768 62.4 % Other borrowings — 2 (100.0) % Total borrowings 401,174 200,770 99.80 % Total deposits and borrowings 10,005,960 9,962,939 0.4 % Other Liabilities: Acceptances executed and outstanding 31,526 25,576 23.3 % Lease liability 21,388 24,029 (11.0) % Deferred tax liability, net 40,718 22,444 81.4 % Accrued expenses and other liabilities 146,771 115,985 26.5 % Total liabilities $ 10,246,363 $ 10,150,973 0.9 % Deposits portfolio composition percentages: Non-interest-bearing deposits 26.0% 26.0% NOW accounts 32.6% 36.0% Savings accounts 21.5% 21.4% Time deposits 19.9% 16.6% 100.0 % 100.0 % Borrowings portfolio composition percentages: Securities sold under agreements to repurchase 18.8 % 0.0 % Advances from FHLB 81.2 % 100.0 % 100.0 % 100.0 % Securities sold under agreements to repurchase (excluding accrued interest) Amount outstanding at year-end $ 75,000 $ — Daily average outstanding balance $ 75,000 $ — Maximum outstanding balance at any month-end $ 75,000 $ — 60 Liabilities and Funding Sources As shown in Table 16 above, at December 31, 2024, OFG’s total liabilities were $10.246 billion, 0.9% higher than the $10.151 billion reported at December 31, 2023.
RECENT DEVELOPMENTS Capital Actions 2023 Capital Actions In January 2023, OFG announced that its Board of Directors approved the increase of its regular quarterly cash dividend to $0.22 per common share from $0.20 per share, beginning in the quarter ended March 31, 2023.
For our discussion and analysis of our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, see Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our 2023 annual report on Form 10-K. 32 RECENT DEVELOPMENTS Capital Actions 2024 Capital Actions In January 2024, OFG announced that its Board of Directors approved the increase of its regular quarterly cash dividend to $0.25 per common share from $0.22 per share, beginning in the quarter ending March 31, 2024.
Pre-provision net revenues of $88.2 million compared to $82.3 million in the third quarter of 2023 and $76.9 million in the fourth quarter of 2022. Total provision for credit losses of $19.7 million compared to $16.4 million in the third quarter of 2023 and $8.8 million in the fourth quarter of 2022.
Total Provision for Cr e dit Losses of $30.2 million compared to $21.4 million in the third quarter of 2024 and $19.7 million in the fourth quarter of 2023.
The increase in borrowings reflects a new two-year FHLB advance amounting to $200.0 million during the period as part of OFG’s asset liability management strategies. Stockholders’ Equity At December 31, 2023, OFG’s total stockholders’ equity was $1.193 billion, a 14.5% increase when compared to $1.042 billion at December 31, 2022.
Borrowings increased by $200.4 million or 99.8% from December 31, 2023, reflecting new FHLB advances taken and new securities sold under agreements to repurchase in 2024 as part of OFG’s asset liability management strategies. Stockholders’ Equity At December 31, 2024, OFG’s total stockholders’ equity was $1.254 billion, a 5.1% increase when compared to $1.193 billion at December 31, 2023.
Management selects the macroeconomic forecast that is most reflective of expectations at that point in time. The applicability of qualitative adjustments includes adjustments of inherent risk not captured by the quantitative model. OFG’s sensitivity analysis does not represent management’s view of expected credit losses at December 31, 2023.
The applicability of qualitative adjustments includes adjustments of inherent risk not captured by the quantitative model. OFG’s sensitivity analysis does not represent management’s view of expected credit losses at December 31, 2024. OFG evaluated sensitivities by applying 100% weight to baseline and moderate recession scenarios.
Highlights: Earnings per share diluted was $0.98 compared to $0.95 in the third quarter of 2023 and $0.97 in the fourth quarter of 2022. Total core revenues of $175.6 million compared to $172.2 million in the third quarter of 2023 and $168.3 million in the fourth quarter of 2022.
Fourth Quarter of 2024: Earnings per share diluted was $1.09 compared to $1.00 in the third quarter of 2024 and $0.98 in the fourth quarter of 2023. Net income of $50.3 million compared to $47.0 million in the third quarter of 2024 and $46.6 million in the fourth quarter of 2023.
At December 31, 2023 and 2022, total commercial non-accrual loans excluded $6.4 million and $16.4 million, respectively, of non-accrual commercial loans held for sale.
As of December 31, 2023, total non-accrual loans excluded $6.4 million of past due commercial loans held - for - sale, these loans were sold in 2024. There were no past due or non-accrual commercial loans held-for-sale as of December 31, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn the event that such sources of 69 funds are reduced or eliminated and OFG is not able to replace these on a cost-effective basis, OFG may be forced to curtail or cease its loan origination business and treasury activities, which would have a material adverse effect on its operations and financial condition.
Biggest changeIn the event that such sources of funds are reduced or eliminated and OFG is not able to replace these on a cost-effective basis, OFG may be forced to curtail or cease its loan origination business and treasury activities, which would have a material adverse effect on its operations and financial condition. 71 As of December 31, 2024, OFG had approximately $591.1 million in unrestricted cash and cash equivalents, $1.102 billion in investment securities that are not pledged as collateral, $383.1 million in borrowing capacity at the FHLB and a secured line of credit through the FRB discount window with $2.701 billion in loans pledged (borrowing capacity $2.017 billion).
These assumptions are subjective and, as a result, net interest income simulation results will differ from actual results due to the timing, magnitude 66 and frequency of interest rate changes, changes in market conditions, customer behavior and management strategies, among other factors. OFG uses a software application to project future movements in OFG’s balance sheet and income statement.
These assumptions are subjective and, as a result, net interest income simulation results will differ from actual results due to the timing, magnitude and frequency of interest rate changes, changes in market conditions, customer behavior and management strategies, among other factors. OFG uses a software application to project future movements in OFG’s balance sheet and income statement.
In March 2023, the market reacted with volatility as a result of the collapse of three large US regional banks, which became the biggest bank failures since 2008, after they experienced a run on deposits mainly driven by a significant decrease in the value of their investments.
In 2023, the market reacted with volatility as a result of the collapse of three large US regional banks, which became the biggest bank failures since 2008, after they experienced a run on deposits mainly driven by a significant decrease in the value of their investments.
OFG has a corporate compliance function headed by the General Counsel who reports to the Chief Executive Officer and supervises the BSA Officer and Regulatory Compliance Officer. The General Counsel is responsible for the oversight of regulatory compliance and implementation of a company-wide compliance program, including the Bank Secrecy Act/Anti-Money Laundering compliance program.
OFG has a corporate compliance function headed by the General Counsel who reports to the Chief Executive Officer and supervises the BSA Officer and Corporate Compliance Director. The General Counsel is responsible for the oversight of regulatory compliance and implementation of a company-wide compliance program, including the Bank Secrecy Act/Anti-Money Laundering compliance program.
OFG also maintains a cybersecurity risk management framework in place to assess, identify and manage risks from cybersecurity threats. Refer to “Item 1C. Cybersecurity” in this annual report on Form 10-K for furthers discussion on OFG’s cybersecurity risk management framework. OFG classifies operational risk into two major categories: business specific and corporate-wide affecting all business lines.
OFG also maintains a cybersecurity risk management framework in place to assess, identify and manage risks from cybersecurity threats. Refer to “Item 1C. Cybersecurity” in this annual report on Form 10-K for further discussion on OFG’s cybersecurity risk management framework. OFG classifies operational risk into two major categories: business specific and corporate-wide affecting all business lines.
As a consequence, OFG’s profitability and financial condition may be adversely affected by an extended economic slowdown, 70 adverse political, fiscal or economic developments in Puerto Rico, or the effects of a natural disaster, all of which could result in a reduction in loan originations, an increase in non-performing assets, an increase in foreclosure losses on mortgage loans, and a reduction in the value of its loans and loan servicing portfolio. 71
As a consequence, OFG’s profitability and financial condition may be adversely affected by an extended economic slowdown, adverse political, fiscal or economic developments in Puerto Rico, or the effects of a natural disaster, all of which could result in a reduction in loan originations, an increase in non-performing assets, an increase in foreclosure losses on mortgage loans, and a reduction in the value of its loans and loan servicing portfolio. 72
Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities will perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly different changes to net interest income than indicated above.
Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities will perform as anticipated. Additionally, a change in the US Treasury rates in the designated amounts accompanied by a change in the shape of the US Treasury yield curve would cause significantly different changes to net interest income than indicated above.
The starting point of the projections generally corresponds to the actual values of the balance sheet on the date of the simulations. The following table presents the results of the simulations for the most likely scenarios at December 31, 2023.
The starting point of the projections generally corresponds to the actual values of the balance sheet on the date of the simulations. The following table presents the results of the simulations for the most likely scenarios at December 31, 2024.
In December 2023, OFG received a $1.2 billion deposit in an interest-bearing checking account from an existing long-standing Puerto Rico government client who had an isolated inflow of liquidity resulting in a total of $1.618 billion deposits from the Puerto Rico government and its instrumentalities as of December 31, 2023.
In December 2023, OFG received a $1.2 billion deposit in an interest-bearing checking account from an existing long-standing Puerto Rico government client who had an isolated inflow of liquidity resulting in a total of $1.445 billion and $1.618 billion deposits from the Puerto Rico government and its instrumentalities as of December 31, 2024 and 2023, respectively.
Others require us to focus our technology on investments that drive our strategy, namely digital, data analytics, cloud migration, cyber security, and our sales and service capabilities. At December 31, 2023 and 2022, OFG had commitments for capital expenditures in technology amounting to $7.8 million and $8.6 million, respectively, which are expected to be satisfied with OFG’s unrestricted cash.
Others require us to focus our technology on investments that drive our strategy, namely digital, data analytics, cloud migration, cyber security, and our sales and service capabilities. At December 31, 2024 and 2023, OFG had commitments for capital expenditures in technology amounting to $1.0 million and $7.8 million, respectively, which are expected to be satisfied with OFG’s unrestricted cash.
These public funds are collateralized with securities and commercial loans amounting to $1.645 billion and $367.3 million at December 31, 2023 and 2022, respectively. The amount of these deposits may fluctuate depending on the financial condition and liquidity of these entities, as well as on our ability to maintain these customer relationships.
These public funds are collateralized with securities and commercial loans amounting to $1.507 billion and $1.645 billion at December 31, 2024 and 2023, respectively. The amount of these deposits may fluctuate depending on the financial condition and liquidity of these entities, as well as on our ability to maintain these customer relationships.
This coverage extends to both principal and accrued interest while the account balance remains within the limits. At December 31, 2023 and 2022, the aggregate amount of our uninsured deposits was $4.885 billion and $3.498 billion, respectively.
This coverage extends to both principal and accrued interest while the account balance remains within the limits. At December 31, 2024 and 2023, the aggregate amount of our uninsured deposits was $4.915 billion and $4.885 billion, respectively.
OFG is not relying on this deposit as part its long-term funding management strategies, even though these funds could remain in the Bank for a longer period. Deposit volumes as well as the customer deposit base, excluding the Puerto Rico government deposit mentioned above, have remained stable.
OFG is not relying on this deposit as part its long-term funding management strategies, even though these funds could remain in the Bank for a longer period. Deposit volumes as well as the customer deposit base, excluding the Puerto Rico government deposits, have increased.
We have $1.618 billion of deposits from the Puerto Rico government, its instrumentalities and municipalities, which represents 17% of our total deposits as of December 31, 2023, mainly from a $1.2 billion deposit received in mid-December, as we continue to build and strengthen our customer relationships.
We have $1.445 billion of deposits from the Puerto Rico government, its instrumentalities and municipalities, which represents 15% of our total deposits as of December 31, 2024, mainly from a $1.2 billion deposit received in December 2023, as we continue to build and strengthen our customer relationships.
During 2023, OFG redeployed its high cash levels and maturing treasury positions into longer-term mortgage-backed securities.
Since 2023, OFG has redeployed its high cash levels and maturing US Treasury positions into longer-term mortgage-backed securities.
However, as demonstrated by Hurricane Fiona in September 2022, the January 2020 earthquakes and Hurricanes Irma and Maria in 2017, Puerto Rico is susceptible to natural disasters, which can have a disproportionate impact because of the logistical difficulties of bringing relief to an island far from the United States mainland.
However, as demonstrated by hurricanes and earthquakes in the past, Puerto Rico is susceptible to natural disasters, which can have a disproportionate impact because of the logistical difficulties of bringing relief to an island far from the United States mainland.
Liquidity Risk Liquidity risk is the risk of OFG not being able to generate sufficient cash from either assets or liabilities to meet obligations as they become due without incurring substantial losses. The Board has established a policy to manage this risk.
Liquidity Risk Liquidity risk is the risk of OFG not being able to generate sufficient cash from either assets or liabilities to meet obligations as they become due without incurring substantial losses and the potential inability to operate our businesses because adequate contingent liquidity is not available. The Board has established a policy to manage this risk.
Future net interest income could be affected by OFG’s investments in callable securities, prepayment risk related to mortgage loans and mortgage-backed securities, and any structured repurchase agreements and advances from the FHLB in which it may enter into from time to time.
ALT strategies consider all these factors as part of the monitoring of the exposure to interest rate risk. Future net interest income could be affected by OFG’s investments in callable securities, prepayment risk related to mortgage loans and mortgage-backed securities, and any structured repurchase agreements and advances from the FHLB in which it may enter into from time to time.
OFG evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by OFG upon extension of credit, is based on management’s credit evaluation of the customer.
The amount of collateral obtained, if deemed necessary by OFG upon extension of credit, is based on management’s credit evaluation of the customer.
After the events triggered by such bank failures, our customer deposits base has increased. Total core deposits at December 31, 2023 amounted to $9.600 billion compared to $8.557 billion at December 31, 2022. The FDIC covers up to $250,000 per account owner by ownership category for retail and commercial deposit accounts.
After the events triggered by aforementioned bank failures above, our customer deposits base has increased, even though total core deposits at December 31, 2024 were $9.449 billion, down slightly from $9.600 billion at December 31, 2023. The FDIC covers up to $250,000 per account owner by ownership category for retail and commercial deposit accounts.
For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag changes in market rates.
For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates.
While OFG is able to fund its operations through deposits as well as through advances from the FHLB and other alternative sources, OFG’s business may at times need to rely upon other external wholesale funding sources.
While OFG is able to fund its operations through deposits as well as through advances from the FHLB and other alternative sources, OFG’s business may at times need to rely upon other external wholesale funding sources, such as repurchase agreements and brokered deposits. At December 31, 2024, OFG had $156.1 million brokered deposits and $75.2 million in repurchase agreements.
Management believes that these limitations will not impact OFG’s ability to meet its ongoing short-term cash obligations. Although OFG expects to have continued access to credit from the foregoing sources of funds, there can be no assurance that such financing sources will continue to be available or will be available on favorable terms.
Although OFG expects to have continued access to credit from the foregoing sources of funds, there can be no assurance that such financing sources will continue to be available or will be available on favorable terms.
In executing its responsibilities, ALT considers different methods to enhance profitability while maintaining acceptable levels of interest rate risks by implementing investment, pricing and financial strategies that help manage OFG’s vulnerability to changes in interest rates.
In executing its responsibilities, ALT considers different methods to enhance profitability while maintaining acceptable levels of interest rate risks by implementing investment, pricing and financial strategies that help manage OFG’s vulnerability to changes in interest rates. 68 On a quarterly basis, OFG performs net interest income simulation analysis on a consolidated basis to estimate the potential change in future earnings from projected changes in interest rates.
The Board has delegated the management of this risk to ALT which is composed of certain executive officers from the risk management, treasury and finance areas. One of ALT’s primary goals is to ensure that the market risk assumed by OFG is within the parameters established in such policies.
The Board and management are primarily responsible for ensuring that the market risk assumed by OFG complies with the guidelines established by policies approved by the Board. The Board has delegated the management of this risk to ALT which is composed of certain executive officers from the risk management, treasury and finance areas.
OFG faces ongoing and emerging risk and regulatory pressure related to the activities that surround the delivery of banking and financial products and services. Coupled with external influences such as the risk of natural disasters, market conditions, security risks, and legal risks, the potential for operational and reputational loss has increased.
Coupled with external influences such as the risk of natural disasters, market conditions, security risks, and legal risks, the potential for operational and reputational loss has increased.
For business specific risks, a risk assessment group works with the various business units to ensure consistency in policies, processes and assessments. With respect to corporate-wide risks, such as information security, business recovery, legal and compliance, OFG has specialized groups, such as Information Security, Enterprise Risk Management, Legal and Corporate Compliance, Information Technology, and Operations.
With respect to corporate-wide risks, such as information security, business recovery, legal and compliance, OFG has specialized groups, such as Information Security, Enterprise Risk Management, Legal and Corporate Compliance, Information Technology, and Operations. These groups assist our lines of business in the development and implementation of risk management practices specific to the needs of our business groups.
OFG’s executive Credit Risk Team, composed of its Chief Risk Officer, Chief Credit Officer and other senior executives, has primary responsibility for setting strategies to achieve OFG’s credit risk goals and objectives. Those goals and objectives are set forth in OFG’s Credit Policy as approved by the Board.
Thus, these instruments are guaranteed by mortgages, a U.S. government-sponsored entity, or the full faith and credit of the U.S. government. OFG’s executive Credit Risk Team, composed of its Chief Risk Officer, Chief Credit Officer and other senior executives, has primary responsibility for setting strategies to achieve OFG’s credit risk goals and objectives.
Our liquidity risk management practices have allowed us to effectively manage the market volatility in the past, as with the Covid-19 pandemic, and in the present, with the recent disruption in the banking industry with the high-profile bank failures during the first half of 2023.
OFG expects to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. Our liquidity risk management practices have allowed us to effectively manage the market volatility in the past, as with the Covid-19 pandemic and the disruption in the banking industry caused by certain high-profile bank failures in 2023.
Commitments to extend credit are agreements to lend to customers as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates, bear variable interest rate and may require payment of a fee. Since the commitments may expire unexercised, the total commitment amounts do not necessarily represent future cash requirements.
Commitments generally have fixed expiration dates, bear variable interest rate and may require payment of a fee. Since the commitments may expire unexercised, the total commitment amounts do not necessarily represent future cash requirements. OFG evaluates each customer’s creditworthiness on a case-by-case basis.
Loan commitments, which represent unused lines of credit, decreased to $1.256 billion at December 31, 2023 ($111.4 million with maturity of one year or less and $1.144 billion with maturity over one year) compared to $1.403 billion at December 31, 2022 ($214.7 million with maturity of one year or less and $1.188 billion with maturity over one year), and standby letters of credit provided to customers amounted to $24.0 million and $24.7 million at December 31, 2023 and 2022, respectively.
Loan commitments, which represent unused lines of credit, increased to $1.360 billion at December 31, 2024 ($157.3 million with maturity of one year or less and $1.203 billion with maturity over one year) compared to $1.256 billion at December 31, 2023 ($111.4 million with maturity of one year or less and $1.144 billion with maturity over one year) as a result of seasonal paydowns of commercial lines of credit.
As discussed in greater detail below, OFG’s primary risk exposures include market, interest rate, credit, liquidity, operational and concentration risks. Market Risk Market risk is the risk to earnings or capital arising from adverse movements of interest rate or prices. OFG evaluates market risk together with interest rate risk.
As discussed in greater detail below, OFG’s primary risk exposures include market, interest rate, credit, liquidity, operational and concentration risks. 67 Market Risk Market risk is the risk that changes in market conditions may adversely impact the value of assets or liabilities, or otherwise negatively impact earnings.
It is not yet possible to quantify the scope of any of these actions or the potential impact on our operations. Concentration Risk Most of OFG’s business activities and a significant portion of its credit exposure are concentrated in Puerto Rico.
Concentration Risk Most of OFG’s business activities and a significant portion of its credit exposure are concentrated in Puerto Rico.
Such amounts advanced are recorded as a receivable by OFG and are expected to be collected from the borrower and/or government agency (FNMA). At December 31, 2023 and 2022, OFG maintained other non-credit commitments amounting to $18.9 million and $21.5 million, respectively, primarily for the acquisition of other investments.
Such amounts advanced are recorded as a receivable by OFG and are expected to be collected from the borrower and/or government agency (FNMA). At December 31, 2024, the outstanding balance of funds advanced by OFG under such mortgage loan servicing agreements was approximately $5.0 million (December 31, 2023 - $4.2 million).
With the current economic uncertainty resulting from inflation, recent geopolitical events, and increasing recessionary risk in the US, we continue monitoring our liquidity position, specifically cash on hand to meet customer demands.
With the current economic uncertainty resulting from inflation, geopolitical events, and new mainland economic policies, we continue monitoring our liquidity position, specifically cash on hand to meet customer demands. In addition, as OFG is a holding company, separate from the Bank, OFG’s primary sources of liquidity are dividends received from the Bank and borrowings from outside sources.
At December 31, 2023, the Bank had $419 million in securities not pledged that qualified for the BTFP. Operational Risk Operational risk is the risk of loss from inadequate or failed internal processes, personnel and systems or from external events. All functions, products and services of OFG are susceptible to operational risk.
Operational Risk Operational risk is the risk of loss from inadequate or failed internal processes, personnel and systems or from external events. All functions, products and services of OFG are susceptible to operational risk. OFG faces ongoing and emerging risk and regulatory pressure related to the activities that surround the delivery of banking and financial products and services.
Loans sold with recourse at December 31, 2023 and 2022 amounted to $98.7 million and $110.9 million, respectively.
Standby letters of credit provided to customers amounted to $25.3 million and $24.0 million at December 31, 2024 and 2023, respectively. Loans sold with recourse at December 31, 2024 and 2023 amounted to $90.5 million and $98.7 million, respectively.
We believe that our clients are confident in the resiliency and strong position of the Bank. Interest Rate Risk Interest rate risk is the exposure to decline in earnings or capital due to changes in interest rates.
Interest Rate Risk Interest rate risk is the exposure to decline in earnings or capital due to changes in interest rates. Interest rate risk results primarily from our traditional banking activities of gathering deposits and extending loans.
Nevertheless, we believe that OFG has strong capital and liquidity levels that facilitate holding securities until the recovery of their amortized cost basis. We also believe that our market risk management practices have allowed us to effectively manage the market volatility over time and remained strong under these conditions.
We believe that our clients are confident in the resiliency and strong position of the Bank. We also believe that OFG has strong capital and liquidity levels that facilitate holding investment securities until the recovery of their amortized cost basis.
These events increase credit risk as debtors may no longer be capable of operating their businesses and the collateral securing OFG’s loans may suffer significant damages. OFG manages its credit risk through a comprehensive credit policy which we believe establishes sound underwriting standards by monitoring and evaluating loan portfolio quality, and by the constant assessment of reserves and loan concentrations.
These events increase credit risk as debtors may no longer be capable of operating their businesses and the collateral securing OFG’s loans may suffer significant damages. Credit risk is one of our most significant risks.
Net Interest Income Risk (one-year projection) Instantaneous Changes in Interest Rates Gradual Changes in Interest Rates Amount Change Percent Change Amount Change Percent Change Change in interest rate (Dollars in thousands) + 50 Basis points $ 7,401 1.25 % $ 3,789 0.64 % + 100 Basis points $ 14,825 2.50 % $ 7,699 1.30 % + 200 Basis points $ 29,695 5.01 % $ 15,466 2.61 % - 50 Basis points $ (8,357) -1.41 % $ (4,213) -0.71 % ' -100 Basis points $ (16,665) -2.81 % $ (8,204) -1.38 % ' -200 Basis points $ (32,089) -5.41 % $ (17,044) -2.87 % The scenarios above are both instantaneous shocks and gradual interest rate ramps that assume balance sheet management will mirror the base case.
Net Interest Income Risk (one-year projection) Instantaneous Changes in Interest Rates Gradual Changes in Interest Rates Amount Change Percent Change Amount Change Percent Change Change in interest rate (Dollars in thousands) + 50 Basis points $ 5,155 0.85 % $ 2,740 0.45 % + 100 Basis points $ 10,347 1.71 % $ 5,490 0.91 % + 200 Basis points $ 20,771 3.44 % $ 11,004 1.82 % - 50 Basis points $ (5,627) (0.93) % $ (2,411) (0.40) % ' -100 Basis points $ (10,456) (1.73) % $ (4,733) (0.78) % ' -200 Basis points $ (22,653) (3.75) % $ (11,348) (1.88) % The scenarios above are both instantaneous shocks and gradual interest rate ramps that assume balance sheet management will mirror the base case.
Market scenarios that include instantaneous and parallel interest rate movements as well as other scenarios with gradual interest rate ramps, speed of interest rate changes, and changes in the slope of the yield curve are also modeled. In addition to the change in interest rates, the results of the analysis could be affected by prepayments, caps, and floors.
These simulations are carried out over a five-year time horizon, assuming certain upward and downward interest rate movements, achieved during a twelve-month period. Market scenarios that include instantaneous and parallel interest rate movements as well as other scenarios with gradual interest rate ramps, speed of interest rate changes, and changes in the slope of the yield curve are also modeled.
In the ordinary course of OFG’s operations, it has entered into certain contractual obligations and has made other commitments to make future payments. OFG believes that it will be able to meet its contractual obligations as they come due through the maintenance of adequate cash levels.
OFG believes that it will be able to meet its contractual obligations as they come due through the maintenance of adequate cash levels. 70 Commitments to extend credit are agreements to lend to customers as long as there is no violation of any condition established in the contract.
These groups assist the lines of business in the development and implementation of risk management practices specific to the needs of the business groups. All these matters are reviewed and discussed by the executive Risk and Compliance Team and the executive Consumer Compliance Team.
They review and challenge line of business adherence to the framework to help ensure proper controls are in place and appropriate risk mitigation plans are established as necessary. All these matters are reviewed and discussed by the executive Risk and Compliance Team and the executive Consumer Compliance Team.
OFG also employs proactive collection and loss mitigation practices. OFG may also encounter risk of default in relation to its securities portfolio. The securities held by OFG are mostly agency mortgage-backed securities and US Treasury securities. Thus, these instruments are guaranteed by mortgages, a U.S. government-sponsored entity, or the full faith and credit of the U.S. government.
We believe that our comprehensive credit policy establishes sound underwriting standards by monitoring and evaluating loan portfolio quality, and by the constant assessment of reserves and loan concentrations. OFG may also encounter risk of default in relation to its securities portfolio. The securities held by OFG are mostly agency mortgage-backed securities and US Treasury securities.
Also, the ability of many borrowers to service their debts may decrease in the event of an interest rate increase. ALT strategies consider all these factors as part of the monitoring of the exposure to interest rate risk.
The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag changes in market rates and therefore the ability of many borrowers to service their debts may decrease in the event of an interest rate increase.
As of December 31, 2023, OFG has transitioned all of its financial instruments to an alternative benchmark rate by adopting the SOFR alternatives and other credit sensitive alternative reference rates. Credit Risk Credit risk is the possibility of loss arising from a borrower or counterparty in a credit-related contract failing to perform in accordance with its terms.
These moves are intended to position OFG’s balance sheet better for the expected lower interest rate environment in the last quarter of 2024 and throughout 2025. 69 Credit Risk Credit risk is the possibility of loss arising from a borrower or counterparty in a credit-related contract failing to perform in accordance with its terms.
Removed
OFG’s financial results and capital levels are constantly exposed to market risk. The Board and management are primarily responsible for ensuring that the market risk assumed by OFG complies with the guidelines established by policies approved by the Board.
Added
Our traditional banking loan and deposit products are generally reported at amortized cost for assets or the amount owed for liabilities (historical cost). However, they are still subject to changes in economic value based on varying market conditions, with one of the primary risks being changes in the levels of interest rates.
Removed
On a quarterly basis, OFG performs net interest income simulation analysis on a consolidated basis to estimate the potential change in future earnings from projected changes in interest rates. These simulations are carried out over a five-year time horizon, assuming certain upward and downward interest rate movements, achieved during a twelve-month period.
Added
Our investment portfolio, including equity securities, are also directly impacted by market factors. OFG’s financial results and capital levels are constantly exposed to market risk. OFG evaluates market risk together with interest rate risk.
Removed
As part of the strategy to limit the interest rate risk and reduce the re-pricing gaps of OFG’s assets and liabilities, OFG has executed, in the past, certain transactions which included extending the maturity and the re-pricing frequency of the liabilities to longer terms and using hedge-designated swaps to hedge the variability of future interest cash flows of forecasted wholesale borrowings.
Added
One of ALT’s primary goals is to ensure that the market risk assumed by OFG is within the parameters established in such policies.
Removed
In the past, OFG has also incorporated the use of derivative instruments to minimize significant unplanned fluctuations in earnings that were caused by interest rate volatility.
Added
Factors, as the potential impact of prolonged high market interest rates, inflation trends, new mainland and local economic policies, other economic factors, and global conflicts, all could impact market conditions. We believe that our market risk management practices have allowed us to effectively manage the market volatility over time and remained strong under these conditions.
Removed
OFG’s goal was to manage interest rate sensitivity by modifying the repricing or maturity characteristics of certain balance sheet assets and liabilities so that the net interest margin was not, on a material basis, adversely affected by movements in interest rates. As a result of interest rate fluctuations, hedged fixed-rate assets and liabilities appreciated or depreciated in market value.
Added
Many factors, including economic and financial conditions, movements in interest rates and consumer preferences, affect the difference between the interest that we earn on assets and the interest that we pay on liabilities and the level of our noninterest-bearing funding sources.
Removed
Also, for some fixed-rate assets or liabilities, the effect of this variability in earnings was expected to be substantially offset by OFG’s gains and losses on the derivative instruments that were linked to the forecasted cash flows of these hedged assets and liabilities.
Added
Due to the repricing term mismatches and embedded options inherent in certain of these products, changes in market interest rates not only affect expected near-term earnings, but also the economic values of these assets and liabilities.
Removed
OFG considered the strategic use of derivatives to be a prudent method of managing interest-rate sensitivity as it reduced the exposure of earnings and the market value of its equity to undue risk posed by changes in interest rates. At December 31, 2023, OFG did not have derivative instruments.
Added
In addition to the change in interest rates, the results of the analysis could be affected by prepayments, caps, and floors.
Removed
These moves position OFG’s balance sheet better for the expected lower interest rate environment in the second half of 2024. 67 In July 2017, the Chief Executive of the Financial Conduct Authority (“FCA”) of the United Kingdom announced that the FCA intended to stop persuading or compelling banks to submit rates for the calculation of LIBOR after 2021.
Added
Our processes for managing credit risk are designed to be embedded in our risk culture and in our decision-making processes using a systematic approach whereby credit risks and related exposures are identified and assessed, managed through specific policies and processes, measured and evaluated against our risk appetite and credit concentration limits, and reported, along with proactive collection and specific mitigation practices, to management and the Board of Directors through our governance structure.
Removed
However, the administrator of LIBOR extended the publication of the most commonly used U.S. Dollar LIBOR settings until June 30, 2023 and ceased publishing other LIBOR settings since December 31, 2021. The U.S. federal banking agencies issued guidance strongly encouraging banking organizations to cease using U.S.
Added
Those goals and objectives are set forth in OFG’s Credit Policy as approved by the Board.
Removed
Dollar LIBOR as a reference rate in new contracts as soon as practicable and in any event by December 31, 2021.
Added
At December 31, 2023, OFG had $162.2 million brokered deposits and no repurchase agreements. In the ordinary course of OFG’s operations, it has entered into certain contractual obligations and has made other commitments to make future payments.
Removed
On March 15, 2022, President Biden signed into law the “Adjustable Interest Rate (LIBOR) Act,” as part of the Consolidated Appropriations Act of 2022, which provides for a statutory transition to a replacement rate selected by the FRB based on the Secured Overnight Financing Rate (“SOFR”) for contracts referencing LIBOR that contain no fallback provisions or ineffective fallback provisions, unless a replacement rate is selected by a determining person as outlined in the statute.
Added
To the extent the mortgage loans underlying OFG’s servicing portfolio experience increased delinquencies, OFG would be required to dedicate additional cash resources to comply with its obligation to advance funds. At December 31, 2024 and 2023, OFG maintained other non-credit commitments amounting to $14.6 million and $18.9 million, primarily for the acquisition of other investments.
Removed
On December 16, 2022, the FRB adopted a final rule implementing the Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on SOFR that replaced LIBOR in certain financial contracts after June 30, 2023.
Added
Banking regulations may limit the amount of dividends that may be paid by the Bank. Management believes that these limitations will not impact OFG’s ability to meet its ongoing short-term cash obligations.
Removed
OFG has selectively reduced its use of certain wholesale funding sources, such as repurchase agreements and subordinated notes, but depending on its assets and 68 liabilities management strategies, it could use them in the future.
Added
For business specific risks, a risk assessment group works with the various business units to ensure consistency in policies, processes and assessments. The lines of business are responsible for identifying, owning, managing and monitoring the operational risks and controls associated with their business activities and product or service offerings to within acceptable levels.
Removed
In 2023, OFG received a $200.0 million 2-year FHLB advance with a weighted average interest rate of 4.52%, and as of December 31, 2023, had $162.2 million in brokered deposits. Most of the brokered deposits at December 31, 2023 will mature early in the first quarter of 2024.
Removed
The interim increase in wholesale funding during 2023 reflected asset and liability management strategies that involved a short-term need of increased liquidity. OFG expects to continue using excess deposits to reduce wholesale funding. In addition, approximately $500 million US Treasury securities will mature during the first semester of 2024, which will provide additional funds.
Removed
OFG expects to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities.
Removed
In addition, as OFG is a holding company and is a separate operating entity from the Bank, OFG’s primary sources of liquidity are dividends received from the Bank and borrowings from outside sources. Banking regulations may limit the amount of dividends that may be paid by the Bank.
Removed
As of December 31, 2023, OFG had approximately $748.2 million in unrestricted cash and cash equivalents, $1.024 billion in investment securities that are not pledged as collateral, $446.0 million in borrowing capacity at the FHLB and a secured line of credit through the FRB discount window with $1.240 billion in loans pledged (borrowing capacity $770.0 million).
Removed
Also starting with the first quarter 2023, the Bank is eligible to borrow from the FRB's Bank Term Funding Program (“BTFP”), which provides additional contingent liquidity through the pledge of certain qualifying securities and other assets.
Removed
The BTFP is a one-year program ending on March 11, 2024 and OFG can borrow any time during the term and can repay the obligation at any time without penalty. The Bank pledged $48.1 million of investment securities under the program even though it does not expect to use it.

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