OFG measures its ACL based on management’s best estimate of lifetime expected credit losses inherent in OFG’s relevant financial assets. The ACL is estimated using quantitative methods that consider a variety of factors such as historical loss experience, the current credit quality of the portfolio, and an economic outlook over the life of the loan. Also included in the ACL are qualitative reserves to cover losses that are expected but, in OFG’s assessment, may not be adequately represented in the quantitative methods or the economic assumptions. In its loss forecasting framework, OFG incorporates forward-looking information by using macroeconomic scenarios applied over the forecasted life of the assets. The scenarios that are chosen each quarter and the amount of weight given to each scenario depend on a variety of factors, including recent economic events, leading economic indicators, views of internal as well as third-party economists and industry trends. For more information on OFG’s credit loss accounting policies, including the ACL, see Note 1 – Summary of Significant Accounting Policies included in OFG’s 2025 Form 10-K.

At June 30, 2026, OFG used an economic probability-weighted scenario approach consisting of the baseline and moderate recession scenarios, giving more weight to the baseline scenario, except for the commercial US loan segment that uses a higher probability level in the moderate recessionary scenario. In addition, the ACL at June 30, 2026, continues to include qualitative reserves for certain segments that OFG views as higher risk that may not be fully recognized through its quantitative models, such as credit trends in the auto loan portfolio. There are still many unknown variables, including the results of the local and U.S. mainland governments’ fiscal and monetary actions resulting from the effect of inflation, geopolitical tension, and new trade and tax policies.

As of June 30, 2026, the ACL decreased by $14.1 million compared to December 31, 2025. The provision for credit losses for the six-month period ended June 30, 2026, reflected $32.2 million related to loan volume and $4.3 million related to specific commercial loan reserves. Net charge-offs for the six-month period ended June 30, 2026, amounted to $50.2 million, an increase of $17.0 million when compared to the same period of 2025. The increase corresponds to $16.2 million from commercial loans, mainly due to $15.6 million charge-offs recognized from the sale of two previously reserved non-performing commercial loans during the period. The provision for credit losses for the six-month period ended June 30, 2025, reflected $34.6 million related to loan volume, $8.5 million in commercial loans specific reserves and $6.0 million due to alignment of model assumptions and risk weighting factors mainly in Puerto Rico. Net charge-offs for the six-month period ended June 30, 2025, amounted to $33.2 million and included a $2.9 million partial charge-off related to a previously reserved U.S. commercial loan.


	Quarter Ended June 30, 2026
	Commercial		Mortgage		Consumer		Auto		Total
	(In thousands)
Non-PCD:
Balance at beginning of period	$	68,408	$	6,243	$	32,998	$	92,462	$	200,111
Provision for (recapture of) credit losses	904		(194)		7,413		6,786		14,909
Charge-offs	(16,833)		—		(7,766)		(14,420)		(39,019)
Recoveries	228		265		1,112		7,141		8,746
Balance at end of period	$	52,707	$	6,314	$	33,757	$	91,969	$	184,747
PCD:
Balance at beginning of period	$	495	$	3,338	$	10	$	2	$	3,845
Recapture of credit losses	(1,521)		(273)		(13)		(12)		(1,819)
Charge-offs	—		—		—		—		—
Recoveries	1,380		78		13		11		1,482
Balance at end of period	$	354	$	3,143	$	10	$	1	$	3,508
Total allowance for credit losses at end of period	$	53,061	$	9,457	$	33,767	$	91,970	$	188,255


	Six-Month Period Ended June 30, 2026
	Commercial		Mortgage		Consumer		Auto		Total
	(In thousands)
Non-PCD:
Balance at beginning of period	$	65,943	$	6,358	$	33,466	$	92,472	$	198,239
Provision for (recapture of) credit losses	7,326		(436)		14,696		16,776		38,362
Charge-offs	(20,843)		(66)		(16,585)		(32,579)		(70,073)
Recoveries	281		458		2,180		15,300		18,219
Balance at end of period	$	52,707	$	6,314	$	33,757	$	91,969	$	184,747
PCD:
Balance at beginning of period	$	493	$	3,599	$	9	$	1	$	4,102
Recapture of credit losses	(1,540)		(696)		(17)		(25)		(2,278)
Charge-offs	—		(6)		—		—		(6)
Recoveries	1,401		246		18		25		1,690
Balance at end of period	$	354	$	3,143	$	10	$	1	$	3,508
Total allowance for credit losses at end of period	$	53,061	$	9,457	$	33,767	$	91,970	$	188,255