INCOME TAXES |
6 Months Ended |
|---|---|
Jun. 30, 2025 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | INCOME TAXES OFG is subject to the provisions of the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Code”). The PR Code imposes a maximum statutory corporate tax rate of 37.5%. OFG has operations in the mainland U.S. through its wholly owned subsidiaries OFG Ventures and OFG USA, which is a direct subsidiary of the Bank, and has two branches in the USVI. The United States subsidiaries are subject to federal income taxes at the corporate level, while the USVI branches are subject to federal income taxes under a mirror system and a 10% surtax included in the maximum tax rate. OFG USA is subject to North Carolina state taxes, and current investments in OFG Ventures are subject to state taxes in Missouri. In addition, OFG’s wholly owned subsidiary, OFG Reinsurance Ltd., is tax exempt in Grand Cayman. As of June 30, 2025, OFG’s net deferred tax assets, net of a valuation allowance of $4.1 million, amounted to $7.0 million, and the net deferred tax liability, net of valuation allowance of $561 thousand, amounted to $48.4 million, reflecting the aggregate deferred tax assets or liabilities of individual tax-paying subsidiaries of OFG. As of December 31, 2024, OFG’s deferred tax asset, net of a valuation allowance of $4.7 million, amounted to $6.2 million, and net deferred tax liability, net of a valuation allowance of $694 thousand, amounted to $40.7 million, reflecting aggregate deferred tax assets or liabilities of individual tax-paying subsidiaries of OFG. The decrease in valuation allowance of $789 thousand was related to OFG’s operations at the holding company level and USVI operations. In assessing the realizability of the deferred tax asset, management considers whether it is more likely than not that some portion or the entire deferred tax asset will not be realized. The ultimate realization of the deferred tax asset is dependent upon the generation of future income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future income, and tax planning strategies in making this assessment. Based upon the assessment of positive and negative evidence, the level of historical taxable income, projections for future taxable income over the periods in which the deferred tax asset are deductible, and provisions of certain closing agreements, management believes it is more likely than not that OFG will realize the benefits of these deductible differences, net of the existing valuation allowances, at June 30, 2025. The amount of the deferred tax asset that is considered realizable could be reduced in the near term if there are changes in estimates of future taxable income. OFG maintained an effective tax rate lower than the statutory rate for the six-month periods ended June 30, 2025 and 2024 of 22.3% and 27.6%, respectively, the decrease is mainly related to investment subject to preferential tax treatment under the PR Code, a discrete tax windfall on stock options, the release of unrecognized tax benefits recognized during the first quarter of 2025 and a discrete benefit related to the purchase of tax credits at discount. The expected effective tax rate (“ETR”) for 2025, excluding discrete items, is 24.9%. OFG classifies unrecognized tax benefits in other liabilities. These gross unrecognized tax benefits would affect the effective tax rate if realized. At June 30, 2025, the amount of unrecognized tax benefits was zero (December 31, 2024 - $1.0 million). The amount of unrecognized tax benefits was reversed as a result of the expiration of the statue of limitations during the first quarter of 2025. Income tax expense for the quarters ended June 30, 2025 and 2024 was $14.1 million and $20.1 million, respectively. Income tax expense for the six-month periods ended June 30, 2025 and 2024 was $28.0 million and $38.4 million, respectively.
|