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    OFG
    Earnings call· Jun 2026(Q2 FY26)

    OFG BANCORP OFG

    Jul 21, 2026 Source

    Executive summary

    OFG Bancorp Q2 FY26 — Strong Performance Driven by Digital Strategy and Resilient Economy

    OFG Bancorp delivered an outstanding second quarter, marked by robust financial performance, consistent loan growth, and strong core deposits. The company's digital-at-the-core strategy continues to drive customer engagement and operational efficiencies, positioning it well within Puerto Rico's resilient economy. Management remains confident in its revised NIM outlook and disciplined capital allocation, while actively managing credit quality.

    Highlights

    5

    • Earnings per share increased 21% year-over-year.

    • Total core revenues grew 4% year-over-year.

    • Net interest margin increased 9 basis points quarter-over-quarter to 5.45%.

    • New loan production was $750 million, an increase of almost 24% quarter-over-quarter.

    • CET1 ratio increased to 14.07%.

    Concerns

    3

    • Noninterest expense increased $8.1 million to $103 million, including $5.8 million in non-recurring business operational charges.

    • Net charge-offs increased $7.4 million to 1.0% of average loans, primarily due to the sale of nonperforming commercial relationships.

    • Early and total delinquency rates were 2.5% and 3.7% respectively, reflecting typical seasonality and normalization across consumer portfolios.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year loan growth
    low single-digit
    high materiality
    High
    Full-year Net Interest Margin (NIM)
    5.25%-5.35%
    high materiality
    High
    Fed rate cuts
    once next year
    medium materiality
    Medium
    Full-year expenses
    $380M-$385M
    high materiality
    High
    Full-year estimated tax rate (ETR)
    22.6%
    medium materiality
    High
    Share buyback strategy
    selective and opportunistic
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Puerto Rico Commercial
    Contributed to end-of-period loan balance growth. Strong pipeline expected to support overall loan growth.
    		——increased—
    Puerto Rico Consumer
    Contributed to end-of-period loan balance growth. Retail net charge-off rates improved.
    		——increased—

    Operational metrics

    36
    Adjusted EPS
    $1.39climbed
    Q2 FY26

    Reported as EPS, implied adjusted by context of other adjusted metrics.

    Loans to deposit ratio
    85%
    Q2 FY26

    Reflects balance sheet management.

    Payout ratio
    25%
    Q2 FY26

    Reflects higher income in the quarter versus Q1.

    Total core revenues
    $190M+$4.5M QoQ
    Q2 FY26

    Increased from Q1.

    Total interest income
    $197M+$3M QoQ
    Q2 FY26

    Reflected higher average balances of loans at higher average rates, offsetting lower income from cash and securities. Included $4.1M from three paid-in-full commercial loans.

    Total interest expense
    $40M-$0.5M QoQ
    Q2 FY26

    Reflected lower average balances of broker CDs and borrowings, offsetting cost of higher average balances of core deposits.

    Income tax
    $15.7M
    Q2 FY26

    Reflecting an anticipated ETR of 22.64% for the year and benefit of discrete items.

    Average loan balances
    $8.2B+$78M QoQ
    Q2 FY26

    Grew due to increases in Puerto Rico commercial and consumer loans.

    End-of-period loan balances
    $62M+0.8% QoQ
    Q2 FY26

    Grew due to increases in Puerto Rico commercial and consumer loans. (Transcription note: 'billion' in transcript was an ASR error, corrected to 'million' based on percentage growth and context.)

    New loan production
    $750M+$146M or almost 24% QoQ
    Q2 FY26

    Reflecting increases in Puerto Rico commercial, residential mortgage and consumer lending.

    Average core deposit balances
    $9.7B+$145M QoQ
    Q2 FY26

    Reflecting commercial and retail deposit growth.

    End-of-period core deposit balances
    $85M+0.9% QoQ
    Q2 FY26

    Reflecting commercial and retail deposit growth. (Transcription note: 'billion' in transcript was an ASR error, corrected to 'million' based on percentage growth and context.)

    Noninterest-bearing deposits
    $2.7B+$92M QoQ
    Q2 FY26

    Contributed to stable core deposit costs.

    Cost of deposits (excluding public funds)
    98 bpsvs 1% QoQ
    Q2 FY26

    Improved from prior quarter.

    Average cash balances
    -$45MQoQ change
    Q2 FY26

    Change in average cash balances.

    End-of-period cash balances
    +$109MQoQ change
    Q2 FY26

    Increased as a result of deposit growth and repayments from the investment portfolio.

    Average investment balances
    -$84MQoQ change
    Q2 FY26

    Fell due to principal pay downs in mortgage-backed securities.

    End-of-period investment balances
    -$92MQoQ change
    Q2 FY26

    Fell due to principal pay downs in mortgage-backed securities.

    Average borrowings and broker deposits
    -$133MQoQ change
    Q2 FY26

    Fell, reflecting liquidity management.

    End-of-period borrowings and broker deposits
    +$49MQoQ change
    Q2 FY26

    Increased, reflecting liquidity management.

    Total stockholders' equity
    $1.4Brose
    Q2 FY26

    Continued to build capital.

    Tangible book value per share
    $31.12expanded
    Q2 FY26

    Continued to expand.

    Net new retail and commercial customers
    4%YoY growth
    Q2 FY26

    Driving deposit growth on the retail side.

    Active digital users
    11%YoY growth
    Q2 FY26

    Reflects success of digital strategy.

    Digital loan payments
    6%YoY growth
    Q2 FY26

    Reflects increased digital adoption.

    Virtual teller use
    3%YoY growth
    Q2 FY26

    Reflects increased digital adoption.

    Lever accounts opened digitally
    28%
    YTD as of June

    OFG is the only bank in Puerto Rico with full digital capabilities for account opening.

    Personalized smart banking insights delivered
    >1.1M
    monthly

    Leveraging data to provide real-time personalized insights.

    Customers accessing live remote tellers
    >68,000
    Q2 FY26

    Customers accessing services during times when other banks are closed.

    Loan yields (excluding repayments)
    7.7%vs 7.71% QoQ
    Q2 FY26

    Relatively stable quarter-over-quarter.

    New commercial loan entry price
    ~7.25%
    Q2 FY26

    Including small business loans.

    Auto loan yield
    ~8.5%
    Q2 FY26

    Fixed rate portfolio.

    Commercial loan variable vs fixed mix
    60% variable / 40% fixed
    Q2 FY26

    Approximate mix for commercial loans.

    Consolidated net charge-off rate (excl. telecom sale)
    0.72%
    Q2 FY26

    Net charge-off rate if the large telecom loan sale was excluded.

    Core deposits cost
    1.29%level QoQ
    Q2 FY26

    Remained stable.

    June NIM
    5.26%
    June 2026

    Reflects the impact of the government deposit relocation by month-end.

    Industry KPIs

    12
    MetricValueDetails
    Loans$8.2B average, $62M end-of-periodUSD
    Deposits$9.7B average core, $85M end-of-periodUSD
    Rotce ROEalmost 18% ROTCE, 1.93% ROAA%
    Cet1 ratio14.07%%
    Capital returns$194MUSD
    Fee income lines$33MUSD
    Net interest income$157MUSD
    Net interest margin5.45%%
    Net charge offs npls1.0% NCO rate, 0.81% NPLs%
    Total operating expenses$103MUSD
    Provision for credit losses$13MUSD
    Efficiency ratio operating leverage54%%

    Product announcements

    4
    ProductTypeDetails
    New Branding Campaignlaunch
    Lever Accountupdate
    Elite Accountupdate
    MyBase Accountupdate

    Risks & headwinds

    3
    Evolving macroeconomic conditionsongoing

    unquantified

    Mitigation: Remaining attentive to interest rate outlook and geopolitical developments; agile and disciplined execution.

    Seasonality in consumer portfoliossecond half of the year

    Early delinquency rates 2.5%, total delinquency rates 3.7%

    Mitigation: Strong recent vintages and quality of new originations; proactive risk management and disciplined execution.

    Non-recurring operational chargesQ2 FY26 (one-time)

    $5.8M

    Mitigation: Problem has been corrected; charge is non-recurring.

    What to watch in Q3 FY26

    5

    Net Interest Margin (NIM) trajectory

    H2 FY26
    Current5.45% (Q2 FY26)
    Target5.25%-5.35% (H2 2025)

    Why it matters

    NIM is a key driver of profitability for banks, and management has revised its outlook upwards, making its realization critical for earnings.

    Now we expect NIM to range from 5.25% to 5.35% in the second half of 2025.

    Q&A highlights

    6

    What are the assumptions behind the raised NIM outlook, particularly regarding the longevity of government deposits and the underlying dynamics of loan originations and core funding costs?

    Management confirmed the relocation of $400 million in government deposits to time deposits by end of June, which provides additional spread and reduces the need for market funding. They expect a more stable NIM resembling Q1 and Q2 (excluding special recoveries), with higher loan balances, especially from the commercial side, also contributing positively.

    “The reality is that we completed that relocation end of June. So we were able to assess what -- for the next half of the year. And now we will not need to go to the market to replace that funding and provide us with additional spread. So that's why we are increasing the guidance.”

    asked by Kelly Motta · answered by Maritza Arizmendi

    2 min read5 chapters

    Detailed Narrative

    01

    Digital Strategy & Customer Engagement

    OFG's core digital strategy focuses on innovative account products like Lever for the mass market, Elite for the mass affluent, and MyBase for small businesses. The omnichannel platform drives digital adoption, generating efficiencies and savings, allowing reinvestment into customer service and transforming branches into relationship-building centers. Leveraging data for personalized insights, the bank delivers over 1.1 million smart banking insights monthly with 90%+ positive feedback, and 68,000+ customers access live remote tellers during extended hours.

    02

    Puerto Rico Economic Resilience

    Puerto Rico's economy continues to be resilient, supported by healthy consumer and business liquidity, wage growth, and historically low unemployment. Favorable reconstruction funding, infrastructure projects, and private investment reinforce economic activity, manufacturing expansion, and new onshoring initiatives. Management notes a pipeline of $3 billion in projects over the next several years, contributing to a stable and consistent economic environment.

    03

    Balance Sheet Management and NIM Outlook

    The company successfully relocated $400 million of large government deposits into 3 and 6-month time deposits by the end of June, with approximately $175 million remaining in demand deposits. This strategic move, combined with higher loan balances and a strong commercial pipeline, has led to an increased NIM outlook for the second half of 2025, now expected to range from 5.25% to 5.35%.

    04

    Credit Quality and Portfolio Management

    Credit quality reflected disciplined execution and proactive risk management. Net charge-offs increased due to the successful sale of a stand-alone telecom exposure and another nonperforming commercial relationship, which reduced concentration and improved the commercial portfolio's risk profile. Retail net charge-off rates improved in auto (down 41 bps to 1.11%) and consumer (down 62 bps to 3.78%), with nonperforming loans falling $53.6 million to 0.81% of average loans.

    05

    Brand Evolution and Operational Charges

    OFG launched a new branding campaign in early June, highlighting its strategic and financial evolution into a digital bank with a human touch. This initiative aims to communicate the bank's unique capabilities and align its brand with its technology investments. The quarter also included $5.8 million in non-recurring📎 business operational charges, which management stated have been corrected.

    AI-generated summary of the company’s earnings call. Not investment advice.