OFG BANCORPOFG
OFG BANCORP Fair Value Disclosure
FAIR VALUE OF FINANCIAL INSTRUMENTS
OFG follows the fair value measurement framework under GAAP.
Fair Value Measurement
The fair value measurement framework defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This framework also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Money market investments
The fair value of money market investments is based on the carrying amounts reflected in the consolidated statements of financial condition as these are reasonable estimates of fair value given the short-term nature of the instruments.
Investment securities
The fair value of investment securities is based on valuations obtained from an independent pricing provider, ICE Data Pricing (“ICE”). ICE is a well-recognized pricing company and an established leader in financial information. Such securities are classified as Level 1 or Level 2, depending on the basis for determining fair value. At December 31, 2024, there was one security held-to-maturity, carried at amortized cost with no ACL established, classified as Level 3. Such security is no longer outstanding at December 31, 2025.
Servicing assets
Servicing assets do not trade in an active market with readily observable prices. Servicing assets are priced using a DCF model. The valuation model considers servicing fees, portfolio characteristics, prepayment assumptions, delinquency rates, late charges, other ancillary revenues, cost to service, and other economic factors. Due to the unobservable nature of certain valuation inputs, the servicing rights are classified as Level 3.
Collateral-dependent loans
OFG records nonrecurring fair value adjustments to collateral-dependent loans to reflect partial write-downs that are based on the fair value of the collateral in accordance with GAAP or the full charge-off of the loan carrying value. The impairment is measured based on the fair value of the collateral less estimated costs to sell. The fair value of the collateral is derived from appraisals, market quotes, and customized discounting. Currently, the loans are classified as Level 3.
Foreclosed real estate
Foreclosed real estate includes real estate properties securing residential mortgage and commercial loans. The fair value of foreclosed real estate may be determined using an external appraisal, broker price opinion or an internal valuation. These foreclosed assets are classified as Level 3 given certain internal adjustments that may be made to external appraisals.
Other repossessed assets
Other repossessed assets are mainly composed of repossessed automobiles. The fair value of the repossessed automobiles may be determined using internal valuation and an external appraisal. These repossessed assets are classified as Level 3 given certain internal adjustments that may be made to external appraisals.
Assets and liabilities measured at fair value on a recurring and non-recurring basis are summarized below:
| December 31, 2025 | |||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Recurring fair value measurements: | |||||||||||||||||||||||
| Investment securities available-for-sale | $ | 1,651 | $ | 2,509,231 | $ | — | $ | 2,510,882 | |||||||||||||||
| Trading securities | — | 23 | — | 23 | |||||||||||||||||||
| Money market investments | 4,261 | — | — | 4,261 | |||||||||||||||||||
| Servicing assets | — | — | 66,333 | 66,333 | |||||||||||||||||||
| $ | 5,912 | $ | 2,509,254 | $ | 66,333 | $ | 2,581,499 | ||||||||||||||||
| Non-recurring fair value measurements: | |||||||||||||||||||||||
Collateral-dependent loans | $ | — | $ | — | $ | 3,065 | $ | 3,065 | |||||||||||||||
| Foreclosed real estate | — | — | 2,490 | 2,490 | |||||||||||||||||||
| Other repossessed assets | — | — | 3,457 | 3,457 | |||||||||||||||||||
| Mortgage loans held for sale | — | — | 12,483 | 12,483 | |||||||||||||||||||
| Other loans held for sale | — | — | 3,062 | 3,062 | |||||||||||||||||||
| $ | — | $ | — | $ | 24,557 | $ | 24,557 | ||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Recurring fair value measurements: | |||||||||||||||||||||||
| Investment securities available-for-sale | $ | 1,150 | $ | 2,337,055 | $ | — | $ | 2,338,205 | |||||||||||||||
| Trading securities | — | 18 | — | 18 | |||||||||||||||||||
| Money market investments | 6,670 | — | — | 6,670 | |||||||||||||||||||
| Servicing assets | — | — | 70,435 | 70,435 | |||||||||||||||||||
| $ | 7,820 | $ | 2,337,073 | $ | 70,435 | $ | 2,415,328 | ||||||||||||||||
| Non-recurring fair value measurements: | |||||||||||||||||||||||
Collateral-dependent loans | $ | — | $ | — | $ | 6,877 | $ | 6,877 | |||||||||||||||
| Foreclosed real estate | — | — | 4,002 | 4,002 | |||||||||||||||||||
| Other repossessed assets | — | — | 6,595 | 6,595 | |||||||||||||||||||
| Mortgage loans held for sale | — | — | 13,286 | 13,286 | |||||||||||||||||||
| Other loans held for sale | $ | — | $ | — | $ | 4,446 | 4,446 | ||||||||||||||||
| $ | — | $ | — | $ | 35,206 | $ | 35,206 | ||||||||||||||||
The fair value information included in the tables above for non-recurring fair value measurements is not as of year-end. Instead, it is as of the date that the fair value measurement was recorded closest to December 31, 2025 and 2024, and excludes nonrecurring fair value measurements of assets no longer outstanding as of the reporting date.
At December 31, 2025, collateral-dependent loans valued using Level 3 inputs comprised loans with principal balances amounting to $3.1 million and an allowance of $387 thousand reflecting a fair value of $2.7 million. At December 31, 2024, collateral-dependent loans valued using Level 3 inputs comprised loans with principal balances amounting to $6.9 million and an allowance of $115 thousand reflecting a fair value of $6.8 million.
The tables below present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for 2025, 2024 and 2023:
Level 3 Instruments Only
| Year Ended December 31, | |||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||
| Servicing Assets | Servicing Assets | Other debt securities available for sale | Servicing Assets | Total | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Balance at beginning year | $ | 70,435 | $ | 49,520 | 406 | $ | 50,921 | $ | 51,327 | ||||||||||||||||||||
| New instruments acquired | 2,699 | 23,164 | — | 2,560 | 2,560 | ||||||||||||||||||||||||
| Principal repayments and amortization | (5,391) | (3,979) | — | (4,163) | (4,163) | ||||||||||||||||||||||||
| Instrument converted to equity security | — | — | (406) | — | (406) | ||||||||||||||||||||||||
| (1,410) | 1,730 | — | 202 | 202 | |||||||||||||||||||||||||
| Balance at end of year | $ | 66,333 | $ | 70,435 | $ | — | $ | 49,520 | $ | 49,520 | |||||||||||||||||||
Servicing assets losses included in earnings during 2025, 2024 and 2023 were included as mortgage servicing activities in the consolidated statements of operations. For more information on the qualitative information about Level 3 fair value measurements, see Note 9– Servicing Assets.
There were no liabilities measured at fair value on a recurring basis and non-recurring basis at December 31, 2025 and 2024. The table below presents quantitative information for all assets measured at fair value on a recurring and non-recurring basis using significant unobservable inputs (Level 3) at December 31, 2025 and 2024:
| December 31, 2025 | |||||||||||||||||||||||||||||
| Fair Value | Valuation Technique | Unobservable Input | Range | Weighted Average | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Servicing assets | $ | 66,333 | Cash flow valuation | Constant prepayment rate | 2.38% - 22.45% | 5.61 | % | ||||||||||||||||||||||
| Discount rate | 10.00% - 15.50% | 11.62 | % | ||||||||||||||||||||||||||
Collateral-dependent loans | $ | 3,065 | Fair value of property or collateral | Appraised value less disposition costs | 8.20% - 33.20% | 24.67 | % | ||||||||||||||||||||||
| Foreclosed real estate | $ | 2,490 | Fair value of property or collateral | Appraised value less disposition costs | 8.20% - 33.20% | 13.29 | % | ||||||||||||||||||||||
| Other repossessed assets | $ | 3,457 | Fair value of property or collateral | Estimated net realizable value less disposition costs | 39.00% - 70.00% | 49.94 | % | ||||||||||||||||||||||
| Mortgage loans held for sale | $ | 12,483 | Market prices | Pricing and execution whole loan | 94.54% - 101.73% | 97.09 | % | ||||||||||||||||||||||
| Other loans held for sale | $ | 3,062 | Bids or sales contract prices | Estimated market value | 34.00% - 95.24% | 54.89 | % | ||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||
| Fair Value | Valuation Technique | Unobservable Input | Range | Weighted Average | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Servicing assets | $ | 70,435 | Cash flow valuation | Constant prepayment rate | 1.09% - 15.28% | 5.83 | % | ||||||||||||||||||||||
| Discount rate | 10.00% - 15.50% | 11.61 | % | ||||||||||||||||||||||||||
Collateral-dependent loans | $ | 6,877 | Fair value of property or collateral | Appraised value less disposition costs | 10.20% - 33.20% | 18.14 | % | ||||||||||||||||||||||
| Foreclosed real estate | $ | 4,002 | Fair value of property or collateral | Appraised value less disposition costs | 10.20% - 33.20% | 13.16 | % | ||||||||||||||||||||||
| Other repossessed assets | $ | 6,595 | Fair value of property or collateral | Estimated net realizable value less disposition costs | 37.00% - 69.00% | 54.73 | % | ||||||||||||||||||||||
| Mortgage loans held for sale | $ | 13,286 | Fair value of property | Estimated net realizable value | 89.38% - 101.38% | 95.01% | |||||||||||||||||||||||
| Other loans held for sale | $ | 4,446 | Bids or sales contract prices | Estimated market value | 101.21% - 101.21% | 101.21% | |||||||||||||||||||||||
Information about Sensitivity to Changes in Significant Unobservable Inputs
Servicing assets – The significant unobservable inputs used in the fair value measurement of OFG’s servicing assets are constant prepayment rates and discount rates. Changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or offset the sensitivities. Mortgage banking activities, a component of total banking and financial service revenue in the consolidated statements of operations, include the changes from period to period in the fair value of the mortgage loan servicing rights, which may result from changes in the valuation model inputs or assumptions (principally reflecting changes in discount rates and prepayment speed assumptions) and other changes, including changes due to collection/realization of expected cash flows.
Fair Value of Financial Instruments
The information about the estimated fair value of financial instruments required by GAAP is presented hereunder. The aggregate fair value amounts presented do not necessarily represent management’s estimate of the underlying value of OFG.
The estimated fair value is subjective in nature, involves uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could affect these fair value estimates. The fair value estimates do not take into consideration the value of future business and the value of assets and liabilities that are not financial instruments. Other significant tangible and intangible assets that are not considered financial instruments include the value of long-term retail deposits customer relationships and premises and equipment.
The estimated fair value and carrying value of OFG’s financial instruments at December 31, 2025 and 2024 was as follows:
| December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Fair Value | Carrying Value | Fair Value | Carrying Value | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||
| Level 1 | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 1,040,335 | $ | 1,040,335 | $ | 591,137 | $ | 591,137 | |||||||||||||||
| Investment securities available-for-sale | $ | 1,651 | $ | 1,651 | $ | 1,150 | $ | 1,150 | |||||||||||||||
| Level 2 | |||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||
| Trading securities | $ | 23 | $ | 23 | $ | 18 | $ | 18 | |||||||||||||||
| Investment securities available-for-sale | $ | 2,509,231 | $ | 2,509,231 | $ | 2,337,055 | $ | 2,337,055 | |||||||||||||||
| Investment securities held-to-maturity | $ | 225,065 | $ | 269,498 | $ | 232,152 | $ | 292,158 | |||||||||||||||
| Federal Home Loan Bank (FHLB) stock | $ | 27,421 | $ | 27,421 | $ | 24,280 | $ | 24,280 | |||||||||||||||
| Equity securities | $ | 35,317 | $ | 35,317 | $ | 30,616 | $ | 30,616 | |||||||||||||||
| Level 3 | |||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||
| Investment securities held-to-maturity | $ | — | $ | — | $ | 35,022 | $ | 35,000 | |||||||||||||||
Total loans, net (including loans held-for-sale) | $ | 8,002,176 | $ | 8,014,246 | $ | 7,567,075 | $ | 7,633,831 | |||||||||||||||
| Accrued interest receivable | $ | 71,110 | $ | 71,110 | $ | 71,667 | $ | 71,667 | |||||||||||||||
| Servicing assets | $ | 66,333 | $ | 66,333 | $ | 70,435 | $ | 70,435 | |||||||||||||||
| Accounts receivable and other assets | $ | 68,371 | $ | 68,371 | $ | 70,191 | $ | 70,191 | |||||||||||||||
| Financial Liabilities: | |||||||||||||||||||||||
| Deposits | $ | 10,281,789 | $ | 10,262,752 | $ | 9,625,803 | $ | 9,604,786 | |||||||||||||||
| Securities sold under agreements to repurchase | $ | 100,037 | $ | 100,714 | $ | 75,226 | $ | 75,222 | |||||||||||||||
| Advances from FHLB | $ | 457,679 | $ | 456,581 | $ | 324,510 | $ | 325,952 | |||||||||||||||
| Other borrowings | $ | 9 | $ | 9 | $ | — | $ | — | |||||||||||||||
| Accrued expenses and other liabilities | $ | 209,997 | $ | 209,997 | $ | 146,771 | $ | 146,771 | |||||||||||||||
The following methods and assumptions were used to estimate the fair values of significant financial instruments at December 31, 2025 and 2024:
•Cash and cash equivalents (including money market investments), accrued interest receivable, accounts receivable and other assets, and accrued expenses and other liabilities have been valued at the carrying amounts reflected in the consolidated statements of financial condition as these are reasonable estimates of fair value given the short-term nature of the instruments.
•Investments in FHLB stock are valued at their redemption value.
•The fair value of investment securities, including trading securities, is based on quoted market prices, when available, or prices provided by contracted pricing providers or by recognized broker-dealers. If listed prices or quotes are not available, fair value is based upon externally developed models that use both observable and unobservable inputs depending on the market activity of the instrument. Equity securities do not have readily available fair values and are measured at cost, less any impairment. At December 31, 2024, the estimated fair value of the AFICA bond in other debt securities held-to-maturity was determined by using a detailed DCF valuation model to calculate the present value of projected future cash flows. The credit losses were recorded using the ACL methodology. This involved comparing the amortized cost of the securities with the fair value of the expected future cash flows. Several assumptions requiring a high degree of judgment included the selection of market discount rates, the determination of current credit spread, and the estimation of both the PD and LGD rates.
•The fair value of servicing assets is estimated by using a cash flow valuation model, which calculates the present value of estimated future net servicing cash flows, taking into consideration actual and expected loan prepayment rates, discount rates, servicing costs, and other economic factors, which are determined based on current market conditions.
•The fair value of the loan portfolio (including loans held-for-sale and non-performing loans) is based on the exit market price, which is estimated by segregating the portfolio by loan type, such as mortgage, commercial, consumer and auto. The fair value is calculated by discounting contractual cash flows. The discount rate used in such calculation considers a capital adjustment as well as other premiums for systemic risk, servicing costs, modeling and uncertainty risk, and impairment uncertainty.
•The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is based on the discounted value of the contractual cash flows, using estimated current market discount rates for deposits of similar remaining maturities.
•The fair value of borrowings, which include securities sold under agreements to repurchase and advances from FHLB are based on the discounted value of the contractual cash flows using current estimated market discount rates for borrowings with similar terms, remaining maturities and put dates.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.