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GUARANTEES
 3 Months Ended
Mar. 31, 2026
Guarantees [Abstract]  
GUARANTEES GUARANTEES
At March 31, 2026 and December 31, 2025, the notional amount of the obligations undertaken in issuing the guarantees under standby letters of credit represented a liability of $25.9 million and $26.1 million, respectively.
OFG has a liability for residential mortgage loans sold subject to credit recourse, principally loans associated with FHLMC residential mortgage loan sales and securitization programs. At March 31, 2026 and December 31, 2025, the unpaid principal balance of residential mortgage loans sold subject to credit recourse under the residential mortgage loan sale programs was $81.3 million and $83.0 million, respectively. The estimated losses to be absorbed under the credit recourse arrangements were recorded as a liability when the credit recourse was assumed and are updated on a quarterly basis. At March 31, 2026, OFG’s liability for estimated credit losses related to loans sold with credit recourse amounted to $80 thousand (December 31, 2025 - $111 thousand).
The following table shows the changes in OFG’s liability for estimated losses from credit recourse agreements included in the consolidated statements of financial condition during the quarters ended March 31, 2026 and 2025:
Quarter Ended March 31,
20262025
(In thousands)
Balance at beginning of period
$111 $155 
Net (charge-offs/amortization) recoveries
(31)65 
Balance at end of period
$80 $220 
The expected loss, which represents the amount expected to be lost on a given loan, considers the PD and loss severity. The PD represents the probability that a loan in good standing would become 120 days delinquent; however, for loans subject to credit recourse, OFG is not required to repurchase the loan.
If a borrower defaults, pursuant to the credit recourse provided, OFG is required to repurchase the loan or reimburse the third-party investor for the incurred loss. The maximum potential amount of future payments that OFG would be required to make under the recourse arrangements is equivalent to the total outstanding balance of the residential mortgage loans serviced with recourse and interest, if applicable. There were no repurchases of unpaid principal balance in such mortgage loans during the quarters ended March 31, 2026 and 2025. If a borrower defaults, OFG has rights to the underlying collateral securing the mortgage loan. OFG suffers losses on these mortgage loans when the proceeds from a foreclosure sale of the collateral property are less than the outstanding principal balance of the loan, any uncollected interest advanced, and the costs of holding and disposing of the related property.
When OFG sells or securitizes mortgage loans, it generally makes customary representations and warranties regarding the characteristics of the loans sold. OFG groups mortgage loans into pools that are exchanged for FNMA and GNMA mortgage-backed securities, which are generally sold to private investors, or are sold directly to FNMA, FHLMC or other private investors for cash. As required under such mortgage-backed securities programs, OFG performs quality review procedures to ensure compliance with applicable underwriting and eligibility guidelines. To the extent the loans do not meet specified characteristics, OFG may be required to repurchase such loans or indemnify for losses and bear any subsequent loss related to the loans. During the quarters ended March 31, 2026 and 2025, OFG did not repurchase any mortgage loans related to representations and warranties, excluding mortgage loans sold subject to separate credit recourse provisions. In addition to obligations arising from contractual credit recourse provisions and customary representations and warranties, OFG may, from time to time, repurchase or buy back mortgage loans for other reasons, including, but not limited to, loan delinquency and modification, portfolio realignments, or other business purposes. During the quarters ended March 31, 2026 and 2025, OFG repurchased $1.1 million and $1.0 million, respectively, of unpaid principal balance in mortgage loans, excluding mortgage loans sold subject to such credit recourse provisions and related representations and warranties. At March 31, 2026 and December 31, 2025, OFG had a $222 thousand and $249 thousand liability, respectively, for the estimated credit losses related to these loans.
During the quarters ended March 31, 2026 and 2025, OFG recognized $57 thousand and $66 thousand losses, respectively, from the repurchase of residential mortgage loans sold subject to credit recourse, including provisions for possible losses. During the quarters ended March 31, 2026 and 2025, OFG recognized $80 thousand and $15 thousand in gains, respectively, from the repurchase of residential mortgage loans without recourse, net of provisions for possible losses, including repurchases related to breaches of customary representations and warranties and other activities.
At March 31, 2026, OFG serviced $5.7 billion (December 31, 2025 - $5.7 billion) in mortgage loans for third parties, including subserviced mortgage loans. Servicing agreements relating to the mortgage-backed securities programs of FNMA and GNMA, and to mortgage loans sold and serviced to certain other investors, including FHLMC, require OFG to advance funds to make scheduled payments of principal, interest, taxes and insurance, if such payments have not been received from the borrowers. OFG generally recovers funds advanced pursuant to these arrangements from liquidation proceeds when the mortgage loan is foreclosed or, in the case of FHA or VA loans, under the applicable FHA and VA insurance and guarantee programs. However, in the meantime, OFG must absorb the cost of the funds it advances during the time the advance is outstanding. OFG must also bear the costs of attempting to collect on delinquent and defaulted mortgage loans. In addition, if a defaulted loan is not cured, the mortgage loan would be canceled as part of the foreclosure proceedings and OFG would not receive any future servicing income with respect to that loan. At March 31, 2026, the outstanding balance of funds advanced by OFG under such mortgage loan servicing agreements was approximately $4.6 million (December 31, 2025 - $5.0 million). 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 as well as incur additional administrative costs related to increases in collection efforts.