OFG Bancorp

05/08/2026 | Press release | Distributed by Public on 05/08/2026 12:10

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Item I, "Financial Statements" of this quarterly report on Form 10-Q. This discussion and analysis section contains forward-looking statements. Please see "Forward-Looking Statements," "Risk Factors," and "Quantitative and Qualitative Disclosures about Market Risk" in this quarterly report on Form 10-Q for the quarter ended March 31, 2026, and set forth in OFG's annual report on our 2025 Form 10-K, as supplemented and amended by any subsequent quarterly reports on Form 10-Q, for a discussion of the uncertainties, risks and assumptions associated with these statements.
Other factors not identified above, including those described under the headings in our 2025 Form 10-K and any subsequent quarterly reports on Form 10-Q may also cause actual results to differ materially from those described in our forward-looking statements.
INTRODUCTION
OFG is a publicly-owned financial holding company that provides a wide range of banking and financial services such as commercial, consumer, auto, and mortgage lending, financial planning, insurance sales, investment advisory and securities brokerage services, as well as corporate trust services. It operates through three business segments: Banking, Wealth Management, and Treasury, and distinguishes itself based on quality service. OFG conducts its business through its main office in San Juan, Puerto Rico, forty-two branches in Puerto Rico and two branches in the USVI. It has five subsidiaries with operations in Puerto Rico: the Bank, Oriental Financial Services, Oriental Insurance, OIB and OBPEF; two subsidiaries in the United States, OFG USA and OFG Ventures; and one subsidiary in the Cayman Islands, OFG Reinsurance. OFG's long-term goal is to strengthen its banking and financial services franchise by expanding its lending businesses, increasing the level of integration in the marketing and delivery of banking and financial services, continuously improving our already effective asset-liability management, growing non-interest revenue from banking and financial services, as well as achieving greater operating efficiencies.
OFG's diversified mix of businesses and products generates both the interest income traditionally associated with a banking institution and non-interest income traditionally associated with a financial services institution (generated by such businesses as securities brokerage, fiduciary services, investment advisory, insurance agency and reinsurance). Although all of these businesses, to varying degrees, are affected by interest rate and financial market fluctuations and other external factors, OFG's commitment is to continue producing a balanced and growing revenue stream.
OFG's mission is to make possible the progress of our customers, employees, shareholders, and communities we serve. As the world evolves rapidly, we seek to amplify our ambition, with the goal of advancing from steady progress to bold transformation. We believe that our strategy is designed to accelerate our transformation into a fully digital, data-driven, customer-centric financial institution, while maintaining the strong human relationships that define our brand. OFG aims to deliver intelligent growth, operational excellence, and deeper financial empowerment to make progress possible for our communities. OFG aims to position itself as a trusted digital financial coach, by understanding the customers' objectives and needs by offering value-added services that help them achieve financial progress and well-being. OFG is transitioning from a digital-first model to a truly digital bank, one where customers should be able to perform every financial activity seamlessly, securely, and intuitively, anytime, anywhere. Our goal is to provide a one-stop digital experience that is enriched by human connection and powered by intelligence.
RECENT DEVELOPMENTS
Capital Actions
In January 2026, OFG announced that its Board approved the increase of its regular quarterly cash dividend to $0.35 per common share from $0.30 per share, beginning in the quarter ending March 31, 2026. The Board also approved a new $200 million stock repurchase program. This new, open-ended program is in addition to the stock repurchase program approved in April 2025.
Economic Conditions
Puerto Rico's economy has continued to show stable performance, supported by favorable labor market conditions and adequate system liquidity. According to the Puerto Rico Department of Economic Development and Commerce, the Puerto Rico Economic Activity Index stood at 127.2 points in January 2026, representing a 0.3% increase compared to January 2025 and a consistent upward month-to-month trend in recent periods. Employment data published by such government agency indicates continued gains across multiple industries. As of January 2026, total non-farm payroll employment averaged approximately 951,600 jobs, reflecting a 1.7% increase from the previous month and a slight decrease of 0.1% year over year. Economic activity has benefited from public sector reconstruction funding, private investment, and onshoring initiatives. However, OFG continues to monitor global economic and geopolitical conditions, related uncertainties, and their possible impact on Puerto Rico's economy, which could influence OFG's business and operational results.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with GAAP requires management to make judgments, assumptions and estimates that affect the reported amount of assets, liabilities, income and expenses in the consolidated financial statements. Understanding our accounting policies and the extent to which we use judgment and estimates in applying these policies is integral to understanding our financial statements. We provide a summary of our significant accounting policies in "Note 1-Summary of Significant Accounting Policies" of our 2025 Form 10-K.
In the "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates" section of our 2025 Form 10-K, we identified the Allowance for Credit Losses related to loans collectively evaluated for impairment as a critical accounting policy and estimate because it involves significant estimation uncertainty that has or is reasonably likely to have a material impact on our financial condition or results of operations.
We evaluate our critical accounting estimates and judgments on an ongoing basis and update them as necessary based on changing conditions. There have been no material changes in the methods that we used to formulate these critical accounting estimates from those discussed in our 2025 Form 10-K.
FINANCIAL HIGHLIGHTS
Business momentum and disciplined execution drove strong first quarter of 2026 results, supported by proactive balance sheet management and core deposit strength. Our operating model continued to deliver, with ongoing loan growth, high quality credit performance, and consistent execution across the Company. During the quarter ended March 31, 2026, we repurchased $44.5 million of common stock and increased our dividend by 17%, reinforcing our commitment to capital management and shareholder returns.
Our positioning as a digital bank that values personal connections continues to deliver tangible results. Increased use of Libre and Elite retail products, as well as My Biz commercial accounts, contributed to deposit expansion and greater customer engagement and growth. This progress has enabled us to further optimize our funding mix and reduce reliance on wholesale funding, even amid the normalization of government deposits.
Puerto Rico's economy is stable, with federal reconstruction funds and private investment supporting continued activity, particularly in manufacturing and onshoring. This environment, combined with our focus on operational excellence, positions OFG to continue to deliver solid financial performance and to take advantage of long-term growth prospects.
First Quarter of 2026:
Earnings per share diluted was $1.26 compared to $1.27 in the fourth quarter of 2025 and $1.00 in the first quarter of 2025. Total core revenues of $185.8 million compared to $185.4 million in the fourth quarter of 2025 and $178.3 million in the first quarter of 2025.
Performance metrics: Net interest margin of 5.36%, return on average assets of 1.78%, return on average tangible common stockholders' equity of 16.43%, and efficiency ratio of 50.97%.
Total Interest Income of $194.1 million compared to $197.2 million in the fourth quarter of 2025 and $189.2 million in the first quarter of 2025. Compared to the fourth quarter of 2025, total interest income in the first quarter of 2026 decreased $3.1 million, reflecting lower average balances of cash and investment securities at lower average rates, partially offset by higher average balances of loans at higher average rates. The first quarter of 2026 included $3.3 million from a paid in full PCD loan. Compared to the fourth quarter of 2025, the first quarter of 2026 also reflected two fewer business days, which negatively affected interest income by approximately $3.1 million.
Total Interest Expense of $40.3 million compared to $44.5 million in the fourth quarter of 2025 and $40.2 million in the first quarter of 2025. Compared to the fourth quarter of 2025, total interest expense in the first quarter of 2026 decreased by $4.2 million, reflecting lower average balances of deposits at lower average rates, partially offset by higher average balances of borrowings at lower average rates. Compared to the fourth quarter of 2025, the first quarter of 2026 also reflected two fewer business days, which reduced interest expense by approximately $1.0 million.
Total Banking and Financial Service Revenues of $32.0 million compared to $32.6 million in the fourth quarter of 2025 and $29.2 million in the first quarter of 2025. Compared to the fourth quarter of 2025, total banking and financial service revenue in the first quarter of 2026 included favorable MSR valuation of approximately $1.3 million, while the fourth quarter of 2025 included $2.3 million in annual insurance commission recognition.
Pre-Provision Net Revenues of $91.3 million compared to $79.3 million in the fourth quarter of 2025 and $85.1 million in the first quarter of 2025.
Other Income reflected income of $0.2 million compared to a loss of $1.1 million in the fourth quarter of 2025 and income of $0.3 million in the first quarter of 2025. The first quarter of 2026 increased $1.3 million, reflecting the absence of $6.1 million accelerated amortization of technology related assets and gains of $3.9 million on the sale of non-performing loans and $1.1 million on the sale of a building in the fourth quarter of 2025.
Total Provision for Credit Losses of $22.5 million compared to $31.9 million in the fourth quarter of 2025 and $25.7 million in the first quarter of 2025. Total provision for credit losses in the first quarter of 2026 primarily reflected $17.5 million for increased loan volume and increased allowance of $3.7 million for a previously reserved commercial loan and $1.0 million mainly related to newly classified small commercial loans.
Credit Quality: Net charge-offs ("NCOs") of $21.4 million (1.05% of average loans) compared to $26.9 million (1.32% of average loans) in the fourth quarter of 2025 and $20.4 million (1.05% of average loans) in the first quarter of 2025. NCOs decreased $5.5 million from the fourth quarter of 2025. The first quarter of 2026 reflected $3.9 million for a previously reserved commercial US loan and improved auto and commercial NCOs, while the fourth quarter of 2025 included $4.8 million from a sale of non-performing loans. The first quarter of 2026 early and total delinquency rates at 2.21% and 3.40%, respectively, declined from the fourth quarter of 2025, as well as the nonperforming loan rate at 1.47%.
Total Non-Interest Expense of $94.7 million compared to $105.0 million in the fourth quarter of 2025 and $93.5 million in the first quarter of 2025. Total non-interest expense in the first quarter of 2026 included $1.0 million in merit raises, $0.7 million in seasonal FICA costs, $1.0 million costs related to a capital markets readiness and registration process, $3.6 million in business related volume incentive payment (compared to $3.1 million in the first quarter of 2025), and $2.5 million in planned cost-savings. The fourth quarter of 2025 included $3.3 million in professional service fees related to performance-based advisory costs as part of the renegotiation of a cost-saving technology services contract, $2.5 million for business rightsizing, and $1.0 million related to the accelerated amortization of technology related assets.
Income Tax Expense was $14.9 million compared to a benefit of $8.5 million in the fourth quarter of 2025 and $13.9 million in the first quarter of 2025. The first quarter of 2026 ETR was 21.60%, reflecting an anticipated rate of 22.34% for the year, the benefit of some discrete items, and the absence of $16.8 million in previously reported tax benefits in the fourth quarter of 2025.
Loans Held-for-Investment of $8.24 billion compared to $8.20 billion in the fourth quarter of 2025 and $7.85 billion in the first quarter of 2025. Loans held-for-investment in the first quarter of 2026 increased $34.0 million or 0.4% sequentially, reflecting increases in U.S. and Puerto Rico commercial loans, partially offset by lower balances in residential mortgage, auto and consumer loans.
New Loan Production of $608.9 million compared to $605.6 million in the fourth quarter of 2025 and $558.9 million in the first quarter of 2025. Compared to the fourth quarter of 2025, new loan production in the first quarter of 2026 increased marginally, mainly due to auto loans. Year-over-year new loan production increased 8.9%, primarily reflecting increases in commercial loans while auto loans moderated as anticipated.
Total Investments of $2.79 billion compared to $2.84 billion in the fourth quarter of 2025 and $2.79 billion in the first quarter of 2025. Compared to the fourth quarter of 2025, total investments in the first quarter of 2026 reflected principal paydowns and maturities, partially offset by purchases of $49.2 million of mortgage-backed securities and residential mortgage securitizations of $23.5 million.
Customer Deposits of $9.66 billion compared to $9.92 billion in the fourth quarter of 2025 and $9.76 billion in the first quarter of 2025. Deposits decreased $263.4 million sequentially, reflecting the previously announced $500 million transfer of a government demand deposit into a wealth management account during the quarter, which was partially offset by retail and commercial deposit growth.
Total Borrowings and Brokered Deposits of $746.6 million compared to $897.3 million in the fourth quarter of 2025 and $421.5 million in the first quarter of 2025. Compared to the fourth quarter of 2025, the first quarter of 2026 total borrowings and brokered deposits declined $150.7 million, reflecting maturities.
Cash and Cash Equivalents of $636.5 million compared to $1.04 billion in the fourth quarter of 2025 and $710.6 million in the first quarter of 2025. Compared to the fourth quarter of 2025, the first quarter of 2026 declined $403.8 million primarily due to the previously mentioned government deposit transfer to wealth management.
Capital: CET1 ratio was 13.75% compared to 13.97% in the fourth quarter of 2025 and 14.27% in the first quarter of 2025. Tangible Common Equity ratio was 10.66% compared to 10.47% in the fourth quarter of 2025 and 10.30% in the first quarter of 2025. Tangible Book Value per share was $30.14 compared to $29.96 in the fourth quarter of 2025 and $26.66 in the first quarter of 2025.
Selected income statement and balance sheet data and key performance indicators are presented in the tables below:
Quarter Ended March 31,
2026 2025 Variance %
EARNINGS DATA: (In thousands, except per share data)
Interest income $ 194,126 $ 189,222 2.6%
Interest expense 40,313 40,151 0.4%
Net interest income 153,813 149,071 3.2%
Provision for credit losses 22,483 25,688 (12.5)%
Net interest income after provision for credit losses 131,330 123,383 6.4%
Non-interest income 32,167 29,517 9.0%
Non-interest expenses 94,703 93,452 1.3%
Income before taxes 68,794 59,448 15.7%
Income tax expense 14,857 13,876 7.1%
Net income available to common shareholders
$ 53,937 $ 45,572 18.4%
PER SHARE DATA:
EPS Basic $ 1.26 $ 1.01 24.8%
EPS Diluted $ 1.26 $ 1.00 26.0%
Average common shares outstanding 42,786 45,295 (5.5)%
Average common shares outstanding and equivalents 42,956 45,509 (5.6)%
Cash dividends declared per common share $ 0.35 0.30 16.7%
Cash dividends declared on common shares $ 14,921 11,173 33.5%
PERFORMANCE RATIOS:
Return on average assets (ROA) 1.78 % 1.56 % 14.1%
Return on average tangible common stockholders' equity (non-GAAP, see Table 17) 16.43 % 15.28 % 7.5%
Return on average common equity (ROE) 15.33 % 14.12 % 8.6%
Efficiency ratio 50.97 % 52.42 % (2.8)%
Interest rate spread 5.21 % 5.27 % (1.1)%
Interest rate margin 5.36 % 5.42 % (1.1)%
March 31, December 31,
2026 2025
PERIOD END BALANCES AND CAPITAL RATIOS: (In thousands, except per share data)
Investments and loans
Investment securities $ 2,788,458 $ 2,843,141
Loans, net 8,040,074 8,014,246
Total investments and loans $ 10,828,532 $ 10,857,387
Deposits and borrowings
Deposits $ 9,849,272 $ 10,262,752
Securities sold under agreements to repurchase 100,086 100,714
Advances from FHLB and other borrowings
456,581 456,590
Total deposits and borrowings $ 10,405,939 $ 10,820,056
Stockholders' equity
Common stock 59,885 59,885
Additional paid-in capital 640,656 642,973
Legal surplus 193,787 188,490
Retained earnings 938,349 904,630
Treasury stock, at cost (432,209) (389,067)
Accumulated other comprehensive loss (33,573) (16,906)
Total stockholders' equity $ 1,366,895 $ 1,390,005
Per share data
Book value per common share $ 32.35 $ 32.13
Tangible book value per common share (non-GAAP, see Table 17) $ 30.14 $ 29.96
Market price $ 40.46 $ 40.98
Capital ratios
Leverage capital 10.88 % 10.71 %
Common equity Tier 1 capital 13.75 % 13.97 %
Tier 1 risk-based capital 13.75 % 13.97 %
Total risk-based capital 15.01 % 15.24 %
Financial assets managed
Trust assets managed $ 2,282,622 $ 2,490,272
Broker-dealer assets managed 3,073,340 2,612,508
Total assets managed $ 5,355,962 $ 5,102,780
ANALYSIS OF RESULTS OF OPERATIONS
The following tables show major categories of interest-earning assets and interest-bearing liabilities, their respective interest income, expenses, yields and costs, and their impact on net interest income due to changes in volume and rates for the quarters ended March 31, 2026 and 2025.
TABLE 1 - ANALYSIS OF NET INTEREST INCOME AND CHANGES DUE TO VOLUME/RATE FOR THE QUARTERS ENDED MARCH 31, 2026 AND 2025
Interest Average rate Average balance
March 31, March 31, March 31,
2026 2025 2026 2025 2026 2025
(Dollars in thousands)
A - TAX-EQUIVALENT SPREAD (Non-GAAP)
Interest-earning assets $ 194,126 $ 189,222 6.77 % 6.88 % $ 11,633,354 $ 11,152,184
Tax-equivalent adjustment 3,884 3,587 0.14 % 0.13 % - -
Interest-earning assets - tax- equivalent (1)
198,010 192,809 6.91 % 7.01 % 11,633,354 11,152,184
Interest-bearing liabilities 40,313 40,151 1.56 % 1.61 % 10,489,319 10,140,667
Tax-equivalent net interest income / spread 157,697 152,658 5.35 % 5.40 % 1,144,035 1,011,517
Tax-equivalent interest rate margin 5.49 % 5.53 %
B - NORMAL SPREAD
Interest-earning assets:
Investments:
Investment securities 29,717 29,498 4.24 % 4.25 % 2,805,387 2,774,102
Interest bearing cash and money market investments 5,855 6,316 3.59 % 4.32 % 660,529 593,325
Total investments 35,572 35,814 4.16 % 4.31 % 3,465,916 3,367,427
Non-PCD loans
Mortgage 8,321 8,123 5.71 % 5.65 % 582,836 575,556
Commercial 58,586 55,227 6.92 % 7.43 % 3,433,445 3,021,629
Consumer 20,091 19,787 11.57 % 11.58 % 704,512 692,890
Auto
55,213 54,553 8.49 % 8.60 % 2,636,107 2,574,105
Total Non-PCD loans 142,211 137,690 7.84 % 8.14 % 7,356,900 6,864,180
PCD loans
Mortgage 11,479 12,939 6.21 % 6.24 % 739,413 829,405
Commercial 4,848 2,745 27.41 % 12.17 % 70,750 90,215
Consumer 13 23 14.27 % 13.37 % 360 673
Auto
3 11 74.49 % 15.13 % 15 284
Total PCD loans 16,343 15,718 8.07 % 6.83 % 810,538 920,577
Total loans (2)
158,554 153,408 7.87 % 7.99 % 8,167,438 7,784,757
Total interest-earning assets 194,126 189,222 6.77 % 6.88 % 11,633,354 11,152,184
Interest Average rate Average balance
March 31, March 31, March 31,
2026 2025 2026 2025 2026 2025
(Dollars in thousands)
Interest-bearing liabilities:
Deposits:
NOW Accounts 10,093 14,897 1.51 % 1.89 % 2,711,262 3,193,088
Savings and money market 6,391 5,028 1.12 % 0.97 % 2,319,764 2,093,431
Time deposits 13,957 13,777 3.02 % 3.11 % 1,872,184 1,795,517
30,441 33,702 1.79 % 1.93 % 6,903,210 7,082,036
Brokered deposits 2,672 1,647 4.04 % 4.22 % 268,379 158,222
33,113 35,349 1.87 % 1.99 % 7,171,589 7,240,258
Non-interest bearing deposits - - - - 2,657,430 2,541,743
Fair value premium and core deposit intangible amortizations 755 943 - % - % - -
Total deposits 33,868 36,292 1.40 % 1.50 % 9,829,019 9,782,001
Borrowings:
Securities sold under agreements to repurchase 1,855 710 3.68 % 4.53 % 204,480 63,531
Advances from FHLB and other borrowings 4,590 3,149 4.08 % 4.33 % 455,820 295,135
Total borrowings 6,445 3,859 3.96 % 4.36 % 660,300 358,666
Total interest-bearing liabilities 40,313 40,151 1.56 % 1.61 % 10,489,319 10,140,667
Net interest income / spread $ 153,813 $ 149,071 5.21 % 5.27 %
Interest rate margin 5.36 % 5.42 %
Excess of average interest-earning assets over average interest-bearing liabilities $ 1,144,035 $ 1,011,517
Average interest-earning assets to average interest-bearing liabilities ratio 110.91 % 109.97 %
(1) To provide meaningful comparisons of interest income, yields, and net interest margins, we calculate interest income on a taxable-equivalent basis. This involves adjusting the interest income from tax-exempt assets to be equivalent to taxable investments. Note that this adjustment is not permitted under GAAP in the unaudited consolidated statements of operations.
(2) Includes loans held for sale and excludes allowance for credit losses. Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis.
C - CHANGES IN NET INTEREST INCOME DUE TO:
Volume Rate Total
(In thousands)
Interest Income:
Investment securities $ 571 $ (352) $ 219
Interest bearing cash and money market investments 667 (1,128) (461)
Loans 7,456 (2,310) 5,146
Total interest income 8,694 (3,790) 4,904
Interest Expense:
NOW Accounts (2,792) (2,012) (4,804)
Savings and money market 960 403 1,363
Time deposits 695 (515) 180
Brokered deposits 1,100 (75) 1,025
Fair value premium and core deposit intangible amortizations - (188) (188)
Securities sold under agreements to repurchase 1,302 (157) 1,145
Advances from FHLB and other borrowings 1,627 (186) 1,441
Total interest expense 2,892 (2,730) 162
Net Interest Income $ 5,802 $ (1,060) $ 4,742
Net Interest Income
Net interest income is a function of the difference between rates earned on OFG's interest-earning assets and rates paid on its interest-bearing liabilities (interest rate spread) and the relative amounts of its interest earning assets and interest-bearing liabilities (interest rate margin). OFG constantly monitors the composition and re-pricing of its assets and liabilities to maintain its net interest income at adequate levels.
Comparison of quarters ended March 31, 2026 and 2025
Net interest income of $153.8 million increased $4.7 million from $149.1 million, reflecting higher loan interest income and lower deposit interest expense, partially offset by higher borrowing cost. On a tax equivalent basis net interest income increased $5.0 million or 3.3% to $157.7 million from $152.7 million.
The interest rate spread decreased six basis points to 5.21% from 5.27% and the net interest margin declined six basis points to 5.36% from 5.42%, primarily reflecting an eleven basis point decrease in the yield of interest-earning assets.
Net interest income was positively impacted by:
•A $5.1 million increase in loan interest income, driven by growth in average balances across multiple portfolios, including: (i) $5.5 million from commercial loans, mainly due to an increase of $392.4 million in average balances reflecting OFG's strategy to grow commercial lending in Puerto Rico and the U.S. mainland, (ii) $0.7 million from auto loans, mainly due to a $61.7 million increase in the average balance and (iii) $0.3 million from consumer loans, mainly due to $11.3 million increase in the average balance. These increases were partially offset by $1.3 million lower interest income from residential mortgage loans, reflecting an $82.7 million decrease in average balances primarily due to the securitization and sale of conforming loans, normal paydowns, and the extinguishment of the PCD portfolio; and
•A $2.4 million decrease in deposit interest expense, reflecting lower average rates, reflecting the previously announced $500 million transfer of a government demand deposit into a wealth management account during the quarter, which was partially offset by retail and commercial deposit growth.
These increases were offset by higher interest paid on borrowings of $2.6 million from FHLB advances and securities under agreements to repurchase taken during the year 2025.
TABLE 2 - NON-INTEREST INCOME SUMMARY
Quarter Ended March 31,
2026 2025 Variance %
(Dollars in thousands)
Banking service revenue $ 16,944 $ 15,981 6.0 %
Wealth management revenue 8,913 8,455 5.4 %
Mortgage banking activities 6,131 4,776 28.4 %
Total banking and financial service revenue 31,988 29,212 9.5 %
Other non-interest income 179 305 (41.3) %
Total non-interest income $ 32,167 $ 29,517 9.0 %
Non-Interest Income
Non-interest income is affected by fees generated from loans and deposit accounts, the amount of assets under management of the Bank's trust department, transactions generated by clients' financial assets serviced by OFG's securities broker-dealer, insurance agency and reinsurance subsidiaries, the level of mortgage banking activities, and gains or losses on sales of assets.
Comparison of quarters ended March 31, 2026 and 2025
OFG reported non-interest income in the amount of $32.2 million, an increase of $2.7 million or 9.0%, compared to $29.5 million in the prior period. The increase in non-interest income was due to:
•An increase of $1.4 million in mortgage banking activities, mainly due to favorable variance in the valuation of the MSR of $2.0 million, partially offset by an unfavorable $429 thousand impact from lower-of-cost-or-market adjustments on mortgage loans held-for-sale;
•A $963 thousand increase in banking service revenue, driven by higher customer activity and transaction volumes. Electronic banking increased $1.4 million, mainly from higher: (i) interchange fees and increased merchant business activity of $1.1 million and (ii) cash management fees in commercial accounts of $249 thousand. These increases were partially offset by (i) lower deposit service fees of $214 thousand, reflecting reduced checking and savings accounts service charges, and (ii) a $159 thousand decline in servicing and other loan fees, mainly from auto care commissions and administration fees; and
•An increase of $458 thousand in wealth management revenues, mainly due to: (i) a $547 thousand increase in broker-dealer fees from investment advisory and mutual fund retailer fees, partially offset by (ii) a $179 thousand decrease in insurance income reflecting lower annuity sales.
TABLE 3 - NON-INTEREST EXPENSES SUMMARY
Quarter Ended March 31,
2026 2025 Variance %
(Dollars in thousands)
Compensation and employee benefits $ 41,347 39,932 3.5 %
Occupancy, equipment and infrastructure costs 13,418 14,820 (9.5) %
Electronic banking charges 8,604 9,670 (11.0) %
Information technology expenses 6,597 6,287 4.9 %
Professional and service fees 6,214 5,118 21.4 %
Taxes, other than payroll and income taxes 4,133 3,726 10.9 %
Insurance 2,873 2,766 3.9 %
Advertising, business promotion, and strategic initiatives 3,016 2,617 15.2 %
Loan servicing and clearing expenses 2,564 2,234 14.8 %
Communication 1,099 1,120 (1.9) %
Printing, postage, stationery and supplies 1,487 1,147 29.6 %
Director and investor relations 313 333 (6.0) %
Foreclosed real estate and other repossessed assets (income) expenses, net (114) 1,028 111.1 %
Other 3,152 2,654 18.8 %
Total non-interest expenses $ 94,703 $ 93,452 1.3 %
Relevant ratios and data:
Efficiency ratio 50.97 % 52.42 %
Compensation and benefits to non-interest expense 43.66 % 42.73 %
Compensation to average total assets owned 1.36 % 1.37 %
Number of employees end of period 2,181 2,223
Average number of employees 2,189 2,232
Average compensation per employee (in thousands) $ 75.55 $ 71.56
Average loans per average employee $ 3,731 $ 3,488
Non-Interest Expense
Comparison of quarters ended March 31, 2026 and 2025
Non-interest expense was $94.7 million, representing an increase of 1.3% or $1.3 million, compared to $93.5 million. The increase in non-interest expense was mainly due to:
•Increase of $1.4 million in compensation and employee benefits, as a result of higher salaries and benefits, including payroll taxes; and
•Increase of $1.1 million in professional and service fees mainly due to $1.0 million of costs associated to a capital markets readiness and registration process.
These increases in non-interest expense were partially offset by:
•A $1.4 million decrease in occupancy, equipment and infrastructure costs, driven by lower internet services expenses of $657 thousand, $445 thousand of insurance reimbursement related to equipment, and $99 thousand in reduced software maintenance expenses.
The efficiency ratio was 50.97% compared to 52.42%. The efficiency ratio measures how much of OFG's revenues is used to pay operating expenses. OFG computes its efficiency ratio by dividing non-interest expenses by the sum of its net interest income and non-interest income, but excluding gains on the sale of investment securities, other gains and losses, and other income that may be considered volatile in nature. Management believes that the exclusion of those items permits consistent
comparability. Amounts presented as part of non-interest income that were excluded from the adjusted efficiency ratio computation for the quarters ended March 31, 2026 and 2025, amounted to $179 thousand and $305 thousand, respectively.
Provision for Credit Losses
Comparison of quarters ended March 31, 2026 and 2025
Provision for credit losses decreased by $3.2 million to $22.5 million from $25.7 million. The provision for credit losses for the quarter ended March 31, 2026, reflected $17.5 million for increased loan volume and increased allowance of $3.7 million for a previously reserved commercial US loan and $1.0 million related mainly to newly classified commercial loans. These downgrades are borrower specific and event driven and do not indicate a broad base deterioration in portfolio credit quality.
The provision for credit losses for the quarter ended March 31, 2025, reflected adjustments of $17.4 million related to loan volume, $4.8 million in specific reserves and $3.5 million to reflect auto current loss given default trends post pandemic.
Income Tax Expense
Comparison of quarters ended March 31, 2026 and 2025
Income tax expense for the quarter ended March 31, 2026 increased by $1.0 million to $14.9 million from $13.9 million. OFG maintained an effective tax rate ("ETR") lower than the statutory rate for the quarters ended March 31, 2026 and 2025 of 21.6% and 23.3%, respectively. The lower ETR is mainly related to exempt income and investments subject to preferential tax treatment under the PR Code. The expected ETR for 2026 is 22.3%.
Business Segments
OFG segregates its businesses into the following segments: Banking, Wealth Management, and Treasury. Management established the reportable segments based on the internal reporting used to evaluate performance and assess where to allocate resources. Other factors such as OFG's organization, nature of its products, distribution channels and economic characteristics of its services were also considered in the determination of the reportable segments. OFG measures the performance of these reportable segments based on net income. OFG's methodology for allocating expenses for corporate services among segments is based on several factors such as revenue, employee headcount, occupied space, and dedicated services or time, among others. Following are the results of operations and the selected financial information by operating segment for the quarters ended March 31, 2026 and 2025.
TABLE 4 - BUSINESS SEGMENTS
Quarter Ended March 31, 2026
Banking Wealth
Management 		Treasury Total Eliminations Consolidated
Total
(In thousands)
Interest income $ 159,778 $ 5 $ 35,669 $ 195,452 $ (1,326) $ 194,126
Interest expense (31,048) - (10,591) (41,639) 1,326 (40,313)
Net interest income 128,730 5 25,078 153,813 - 153,813
Provision for credit losses (22,479) - (4) (22,483) - (22,483)
Non-interest income, net 23,023 9,144 - 32,167 - 32,167
Non-interest expense:
Compensation and employee benefits (38,460) (2,565) (322) (41,347) - (41,347)
Occupancy, equipment and infrastructure costs (8,460) (124) (14) (8,598) - (8,598)
Depreciation and amortization of premises and equipment (4,799) (10) (11) (4,820) - (4,820)
Electronic banking charges (8,604) - - (8,604) - (8,604)
Information technology expenses (6,560) (37) - (6,597) - (6,597)
Professional and service fees (4,332) (719) (1,163) (6,214) - (6,214)
Loan servicing and clearing expenses (1,856) (573) (135) (2,564) - (2,564)
Amortization of other intangible assets (231) - - (231) - (231)
Intersegment expenses 1,034 (585) (449) - - -
Other (15,088) (478) (162) (15,728) - (15,728)
Total non-interest expense (87,356) (5,091) (2,256) (94,703) - (94,703)
Income before income taxes $ 41,918 $ 4,058 $ 22,818 $ 68,794 $ - $ 68,794
Income tax expense (14,804) - (53) (14,857) - (14,857)
Net income $ 27,114 $ 4,058 $ 22,765 $ 53,937 $ - $ 53,937
Total assets $ 10,045,598 $ 33,939 $ 3,328,963 $ 13,408,500 $ (1,360,597) $ 12,047,903
Eliminations include interest income and expense for a time deposit opened by the Bank in Oriental Overseas, the IBE unit, which operates within the Bank. The time deposit with a balance of $285.2 million and $279.6 million at March 31, 2026 and 2025, respectively, which is used to fund Oriental Overseas operations, is included in the Treasury Segment with its corresponding interest expense, the related interest income is included in the Banking Segment, all are eliminated in the consolidation. Interest income is accrued on the unpaid principal balance. The increase in interest income and interest expense from the prior year quarter was mainly as a result of higher average balance.
Quarter Ended March 31, 2025
Banking Wealth
Management 		Treasury Total Eliminations Consolidated
Total
(In thousands)
Interest income $ 155,027 $ 5 $ 35,433 $ 190,465 $ (1,243) $ 189,222
Interest expense (34,530) - (6,864) (41,394) 1,243 (40,151)
Net interest income 120,497 5 28,569 149,071 - 149,071
(Provision for) recapture of credit losses
(25,690) - 2 (25,688) - (25,688)
Non-interest income, net 20,700 8,817 - 29,517 - 29,517
Non-interest expenses
Compensation and employee benefits (36,786) (2,871) (275) (39,932) - (39,932)
Occupancy, equipment and infrastructure costs (9,540) (178) (16) (9,734) - (9,734)
Depreciation and amortization of premises and equipment (5,068) (13) (5) (5,086) - (5,086)
Electronic banking charges (9,670) - - (9,670) - (9,670)
Information technology expenses (6,238) (55) 6 (6,287) - (6,287)
Professional and service fees (4,423) (642) (53) (5,118) - (5,118)
Loan servicing and clearing expenses (1,576) (590) (68) (2,234) - (2,234)
Amortization of other intangible assets (288) - - (288) - (288)
Intersegment expenses 830 (520) (310) - - -
Other
(14,600) (373) (130) (15,103) - (15,103)
Total non-interest expense (87,359) (5,242) (851) (93,452) - (93,452)
Income before income taxes $ 28,148 $ 3,580 $ 27,720 $ 59,448 $ - $ 59,448
Income tax expense (13,808) (17) (51) (13,876) - (13,876)
Net income $ 14,340 $ 3,563 $ 27,669 $ 45,572 $ - $ 45,572
Total assets $ 9,567,669 $ 37,647 $ 3,350,980 $ 12,956,296 $ (1,227,039) $ 11,729,257
Comparison of quarters ended March 31, 2026 and 2025
Banking
OFG's banking segment net income before taxes increased by $13.8 million from $28.1 million to $41.9 million, mainly due to:
•Increase of $4.8 million in loan interest income, driven by higher average loan balances;
•Decrease of $3.5 million in interest expense, reflecting the $500 million government demand deposit transfer into a wealth management account during the quarter, partially offset by higher retail and commercial deposits.
•Decrease of $3.2 million in provision for credit losses, primarily driven by lower loss rate model and qualitative provisions. In addition, the economic model resulted in a net release in the current quarter, compared to the prior year, consistent with more favorable macroeconomic assumptions. These improvements were partially offset by relatively stable volume-driven provisions and individual loan activity.
•Increase of $2.3 million in non-interest income primarily related to $1.4 million increase in mortgage banking activities, mainly from favorable variance in the valuation of the MSR, and $963 thousand increase in banking service revenue due to higher customer activity and transaction volumes.
Wealth Management
Wealth management segment revenue consists of commissions and fees from fiduciary activities, securities brokerage and investment advisory services, and insurance and reinsurance activities. Net income before taxes from this segment increased to $4.1 million from $3.6 million, mainly from higher non-interest income of $327 thousand related to higher broker-dealer fees from investment advisory service fees and mutual funds retailer fees, partially offset by lower insurance income.
Treasury
Treasury segment net income before taxes decreased by $4.9 million from $27.7 million to $22.8 million. The decrease was mainly due to higher: (i) interest expense of $3.7 million, including $2.6 million from higher borrowings and $1.0 million from brokered deposits, which were utilized to enhance liquidity and support strategic growth in the commercial loan portfolio, and (ii) non-interest expense of $1.4 million, mainly related to costs incurred in capital markets readiness and registration process amounting to $1.1 million.
ANALYSIS OF FINANCIAL CONDITION
Assets Owned
At March 31, 2026, OFG's total assets amounted to $12.048 billion, a decrease of $417.8 million, when compared to $12.466 billion at December 31, 2025.
Cash and due from banks decreased by $404.4 million to $631.7 million, reflecting the $500 million transfer of a government demand deposit into a wealth management account during the quarter.
The investment portfolio decreased $54.7 million or 1.9% primarily reflecting principal paydowns and maturities, as well as $20.1 million in unfavorable market value adjustments, partially offset by $51.3 million of new available-for-sale mortgage-backed securities and US Treasury securities, and $23.5 million related to mortgage loan securitizations. OFG's investment strategy focuses on liquidity and highly liquid securities, considering their investment and the current market environment.
OFG's loan portfolio is comprised of Puerto Rico residential mortgage loans, consumer loans, auto loans, commercial loans secured by real estate, other commercial and industrial loans, and commercial US loans. At March 31, 2026, OFG's net loan portfolio increased by $25.8 million or 0.3% reflecting increases in US and Puerto Rico commercial loans, partially offset by auto and consumer loans, mortgage securitizations, and portfolio run-off.
Financial Assets Managed
At March 31, 2026, OFG's financial assets include assets managed by its trust division and by its securities broker-dealer and insurance agency subsidiaries. OFG's trust division offers various types of IRAs and manages retirement plans and custodian and corporate trust accounts. At March 31, 2026 and December 31, 2025, total assets managed by OFG's trust division amounted to $2.283 billion and $2.490 billion, respectively. The $207.6 million decrease reflects changes in market conditions, as well as the discontinuance of Keogh plan services during the quarter. OFG's broker-dealer subsidiary offers a wide array of investment alternatives to its client base, such as tax-advantaged fixed income securities, mutual funds, stocks, bonds and money management wrap-fee programs. At March 31, 2026, total assets managed by the securities broker-dealer and insurance agency subsidiaries from their customers' investment accounts amounted to $3.073 billion, compared to $2.613 billion at December 31, 2025. The $460.8 million increase in broker-dealer related assets is mainly due to the transfer of $500 million government demand deposit from the Bank into a wealth management account during the quarter, as well as changes in market conditions.
Goodwill
OFG's goodwill is not amortized to expense but is tested at least annually for impairment. A quantitative annual impairment test is not required if, based on a qualitative analysis, OFG determines that the existence of events and circumstances indicate that it is more likely than not that goodwill is not impaired. OFG completes its annual goodwill impairment test as of October 31 of each year. OFG tests for impairment by first allocating its goodwill and other assets and liabilities, as necessary, to defined reporting units. A fair value is then determined for each reporting unit. If the fair values of the reporting units exceed their book values, no write-down of the recorded goodwill is necessary. If the fair values are less than the book values, an additional valuation procedure is necessary to assess the proper carrying value of the goodwill. During the quarter ended March 31, 2026, OFG performed an assessment of events or circumstances that could trigger reductions in the book value of the goodwill. Based on this assessment, no impairments were identified at March 31, 2026.
As of both March 31, 2026 and December 31, 2025, OFG had $84.2 million of goodwill allocated as follows: $84.1 million to the banking segment and $178 thousand to the wealth management segment. Please refer to "Note 8 - Goodwill and Other Intangible Assets" to our consolidated financial statements for more information on the annual goodwill impairment test.
TABLE 5 - ASSETS SUMMARY AND COMPOSITION
March 31, December 31, Variance
%
2026 2025
(In thousands)
Investments:
FNMA and FHLMC certificates $ 2,216,931 $ 2,285,078 (3.0) %
GNMA certificates 503,159 490,571 2.6 %
US Treasury securities 2,131 1,651 29.1 %
Equity securities 63,682 62,738 1.5 %
CMOs issued by US government-sponsored agencies 2,031 2,579 (21.2) %
Other debt securities 500 501 (0.2) %
Trading securities 24 23 4.3 %
Total investments 2,788,458 2,843,141 (1.9) %
Loans, net 8,040,074 8,014,246 0.3 %
Total investments and loans 10,828,532 10,857,387 (0.3) %
Other assets:
Cash and due from banks
631,672 1,036,074 (39.0) %
Money market investments 4,827 4,261 13.3 %
Foreclosed real estate 2,037 2,490 (18.2) %
Accrued interest receivable 69,685 71,110 (2.0) %
Deferred tax asset, net 120,431 104,359 15.4 %
Premises and equipment, net 92,731 93,554 (0.9) %
Customers' liability on acceptances 22,665 22,442 1.0 %
Servicing assets 67,228 66,333 1.3 %
Goodwill 84,241 84,241 - %
Other intangible assets 8,869 9,854 (10.0) %
Operating lease right-of-use assets 20,275 21,261 (4.6) %
Other assets 94,710 92,291 2.6 %
Total other assets 1,219,371 1,608,270 (24.2) %
Total assets $ 12,047,903 $ 12,465,657 (3.4) %
Investment portfolio composition:
FNMA and FHLMC certificates 79.5 % 80.3 %
GNMA certificates 18.0 % 17.3 %
US Treasury securities 0.1 % 0.1 %
Equity securities 2.3 % 2.2 %
CMOs issued by US government-sponsored agencies 0.1 % 0.1 %
Other debt securities and trading securities 0.0 % 0.0 %
100.0 % 100.0 %
TABLE 6 - LOAN PORTFOLIO COMPOSITION
March 31, December 31, Variance
%
2026 2025
(In thousands)
Loans held-for-investment:
Commercial loans
$ 3,553,096 $ 3,490,169 1.8 %
Mortgage loans
1,373,629 1,390,346 (1.2) %
Consumer loans
677,841 683,548 (0.8) %
Auto loans 2,630,497 2,636,979 (0.2) %
8,235,063 8,201,042 0.4 %
Allowance for credit losses (203,956) (202,341) 0.8 %
Total loans held-for-investment, net 8,031,107 7,998,701 0.4 %
Mortgage loans held-for-sale 8,967 12,483 (28.2) %
Other loans held-for-sale - 3,062 (100.0) %
Total loans held-for-sale 8,967 15,545 (42.3) %
Total loans, net $ 8,040,074 $ 8,014,246 0.3 %
OFG's loan portfolio is composed of commercial, mortgage, consumer, and auto loans. As shown in Table 6 above, total loans, net, amounted to $8.040 billion at March 31, 2026, a 0.3% increase when compared to $8.014 billion at December 31, 2025. The composition and trends of OFG's loans held-for-investment portfolio were as follows:
•Commercial loan portfolio amounted to $3.553 billion (43.1% of the gross loan portfolio) compared to $3.490 billion (42.6% of the gross loan portfolio) at December 31, 2025, a 1.8% increase as a result of originations and credit lines usage during the first quarter of 2026. Commercial loans secured by non-owner occupied commercial real estate amounted to $766.6 million and $774.1 million at March 31, 2026 and December 31, 2025, respectively, which represented 9.3% of our total gross loan portfolio held-for-investment. Commercial US loans amounted to $871.6 million and $830.0 million at March 31, 2026 and December 31, 2025, respectively, which represented 10.6% and 10.1% of our total gross loan portfolio held-for-investment.
During the quarter ended March 31, 2026, OFG sold commercial loans held-for-sale with a reporting balance of $3.1 million and recognized a $28 thousand loss, included in other non-interest income in the consolidated statements of operations.
Commercial loan production increased 37.1% or $82.0 million to $303.2 million in the quarter ended March 31, 2026 from $221.2 million in the prior year quarter, mainly in the commercial US loan portfolio. Commercial US loans activities include the purchase of middle market senior secured cash flow loan participations and the purchase of participations of loans to small and medium sized businesses. Excluding commercial US loans activities, commercial PR loan production increased by 22.8% to $200.4 million in the quarter ended March 31, 2026 from $163.2 million in the prior year quarter.
•Mortgage loan portfolio amounted to $1.374 billion (16.7% of the gross loan portfolio) compared to $1.390 billion (17.0% of the gross originated loan portfolio) at December 31, 2025, a 1.2% decrease resulting from securitization of conforming loans into mortgage-backed securities and regular paydowns. Mortgage loans included delinquent loans in the GNMA buy-back option program amounting to $54.4 million and $56.5 million at March 31, 2026 and December 31, 2025, respectively. Under the GNMA program, issuers such as OFG have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected (rebooked) on our financial statements with an offsetting liability.
Mortgage loan production totaled $41.9 million in the quarter ended March 31, 2026, which represents an increase of 13.3% from $37.0 million in the prior year quarter.
OFG follows a conservative residential mortgage lending policy with more than 90% of its residential mortgage portfolio consisting of fixed-rate, fully amortizing, fully documented loans that do not have the level of risk associated with subprime loans offered by certain major U.S. mortgage loan originators. Furthermore, OFG has never been active in negative amortization loans or offered adjustable-rate mortgage loans with teaser rates.
•Consumer loan portfolio amounted to $677.8 million (8.2% of the gross loan portfolio) compared to $683.5 million (8.3% of the gross loan portfolio) at December 31, 2025. Consumer loan production increased by 0.9% or $622 thousand to $68.5 million in the quarter ended March 31, 2026 from $67.9 million in the prior year quarter.
•Auto loans portfolio amounted to $2.630 billion (32.0% of the gross loan portfolio) compared to $2.637 billion (32.1% of the gross originated loan portfolio) at December 31, 2025. Auto loans production decreased by 16.2% or $37.6 million to $195.3 million in the quarter ended March 31, 2026 from $232.9 million in the prior year quarter, as expected.
The following table includes the maturities of OFG's lending exposure to the Puerto Rico government.
TABLE 7 - PUERTO RICO GOVERNMENT RELATED LOANS
March 31, 2026
Maturity
Carrying Value Less than 1 Year 1 to 3 Years More than 3 Years
Loans: (In thousands)
Municipalities $ 77,135 $ - $ 12,302 $ 64,833
At March 31, 2026, OFG has $77.1 million of direct credit exposure to the Puerto Rico government, a $161 thousand decrease from $77.3 million at December 31, 2025. The Bank's loans to the Puerto Rico government are general obligations of municipalities secured by ad valorem taxation, without limitation as to rate or amount, on all taxable property within the issuing municipalities in current status. The good faith, credit and unlimited taxing power of each issuing municipality are pledged for the payment of its general obligations. Deposits from the Puerto Rico government totaled $1.261 billion at March 31, 2026.
Allowance for Credit Losses
OFG measures its ACL based on management's best estimate of expected credit losses inherent in OFG's relevant financial assets. Tables 8 through 11 set forth an analysis of activity in the ACL and present selected credit loss statistics for the quarters ended March 31, 2026 and 2025 and as of March 31, 2026 and December 31, 2025. In addition, Table 6 sets forth the composition of the loan portfolio.
Please refer to the "Provision for Credit Losses" and "Critical Accounting Policies and Estimates" sections in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of this quarterly report on Form 10-Q and "Note 5 - Allowance for Credit Losses" of the accompanying consolidated financial statements for a more detailed analysis of provisions and ACL.
Non-performing Assets
OFG's non-performing assets include non-performing loans, foreclosed real estate, and other repossessed assets (see Tables 12 and 14). At March 31, 2026, OFG had $115.4 million of non-accrual loans held-for-investment, including $248 thousand PCD loans, compared to $124.6 million at December 31, 2025. The decrease is mainly related to a decrease of $3.3 million in commercial loan portfolio from $87.3 million at December 31, 2025 and a decrease of $5.8 million in auto loan portfolio from $20.8 million at December 31, 2025.
As of December 31, 2025, OFG had $3.1 million in non-accrual commercial US loans held-for-sale. There were no past due or non-accrual commercial loans held-for-sale as of March 31, 2026.
Delinquent residential mortgage loans insured or guaranteed under applicable FHA and VA programs are classified as non-performing loans when they become 90 days or more past due but are not placed in non-accrual status until they become 12 months or more past due, since they are insured loans. Therefore, those loans are included as non-performing loans but
excluded from non-accrual loans. As of March 31, 2026 and December 31, 2025, the outstanding balance of these residential mortgage loans was $5.6 million and $5.5 million, respectively.
At March 31, 2026, OFG's non-performing assets decreased by 6.4% to $127.3 million (1.06% of total assets) from $136.0 million (1.09% of total assets) at December 31, 2025.
Foreclosed real estate decreased from $2.5 million at December 31, 2025 to $2.0 million at March 31, 2026 and other repossessed assets increased from $3.5 million at December 31, 2025 to $4.3 million at March 31, 2026, both recorded at fair value. OFG does not expect non-performing loans to result in significantly higher losses. At March 31, 2026, the allowance coverage ratio to non-performing loans was 168.6% (155.6% at December 31, 2025).
Upon adoption of CECL, OFG elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. As such, the determination of non-accrual or accrual status for PCD loans is made at the pool level, not the individual loan level. The ACL was determined for each pool and added to the pool's carrying amount to establish a new amortized cost basis. The difference between the unpaid principal balance of the pool and the new amortized cost basis is the non-credit premium or discount which is amortized as interest income over the remaining life of the pool. On a quarterly basis, management monitors the composition and behavior of the pools to assess the ability for cash flow estimation and timing. If based on the analysis performed the pool is classified as non-accrual, the accretion/amortization of the non-credit (discount) premium ceases.
The following items comprise non-performing loans held-for-investment, including non-PCD and PCDs:
Commercial loans - At March 31, 2026, OFG's non-performing commercial loans amounted to $84.0 million (69.5% of OFG's non-performing loans), a 3.8% decrease from $87.3 million at December 31, 2025 (67.1% of OFG's non-performing loans). This balance includes a Puerto Rico telecommunications commercial loan moved to non-accrual classification during 2025 amounting to $44.1 million and $45.0 million at March 31, 2026 and December 31, 2025, respectively. Non-PCD commercial loans are placed on non-accrual status when they become 90 days or more past due and are written down, if necessary, based on the specific evaluation of the underlying collateral, if any.
Mortgage loans - At March 31, 2026, OFG's non-performing mortgage loans totaled $18.1 million (15.0% of OFG's non-performing loans), a 2.9% increase from $17.6 million (13.6% of OFG's non-performing loans) at December 31, 2025. Non-PCD mortgage loans are placed on non-accrual status when they become 90 days or more past due and are written-down, if necessary, based on the specific evaluation of the collateral underlying the loan, except for FHA and VA insured mortgage loans which are placed in non-accrual when they become 12 months or more past due.
Consumer loans - At March 31, 2026, OFG's non-performing consumer loans amounted to $3.8 million (3.2% of OFG's non-performing loans), a 12.4% decrease from $4.4 million at December 31, 2025 (3.4% of OFG's non-performing loans). Non-PCD consumer loans are placed on non-accrual status when they become 90 days past due and written-off when payments are delinquent 120 days in personal loans and 180 days in credit cards and personal lines of credit.
Auto loans - At March 31, 2026, OFG's non-performing auto loans amounted to $14.9 million (12.3% of OFG's total non-performing loans), a 28.0% decrease from $20.8 million at December 31, 2025 (15.9% of OFG's total non-performing loans). Non-PCD auto loans are placed on non-accrual status when they become 90 days past due, partially written-off to collateral value when payments are delinquent 120 days and fully written-off when payments are delinquent 180 days.
OFG has two mortgage loan modification programs. These are the Loss Mitigation Program and the Non-Conforming Mortgage Loan Program. Both programs are intended to help responsible homeowners to remain in their homes and avoid foreclosure, while also reducing OFG's losses on non-performing mortgage loans. The Loss Mitigation Program helps mortgage borrowers who are or will become financially unable to meet the current or scheduled mortgage payments. Loans that qualify under this program are those guaranteed by FHA, VA, Rural Housing Service (RHS), Puerto Rico Housing Finance Authority (PRHFA), conventional loans guaranteed by Mortgage Guaranty Insurance Corporation (MGIC), conventional loans sold to FNMA and FHLMC, and conventional loans retained by OFG. The program offers diversified alternatives such as regular or reduced payment plans, payment moratorium, mortgage loan modification, partial claims (only FHA), short sale, and deed in lieu of foreclosure. The Non-Conforming Mortgage Loan Program is for non-conforming mortgages, including balloon payment, interest-only/interest first, variable interest rate, adjustable interest rate and other qualified loans. Non-conforming mortgage loan portfolios are segregated into the following categories: performing loans that meet secondary market requirement and are refinanced under the credit underwriting guidelines of FHA, VA, FNMA, or FHLMC, as applicable, and performing loans not meeting secondary market guidelines processed pursuant OFG's current credit and underwriting
guidelines. OFG achieved an affordable and sustainable monthly payment by taking specific, sequential, and necessary steps such as reducing the interest rate, extending the loan term, capitalizing arrearages, deferring the payment of principal or, if the borrower qualifies, refinancing the loan. In order to apply for any of our loan modification programs, if the borrower is active in Chapter 13 bankruptcy, it must request an authorization from the bankruptcy trustee to allow the loan modification. Borrowers with discharged Chapter 7 bankruptcies may also apply. Loans in these programs are evaluated by designated credit underwriters for financial difficulty modification if OFG grants a concession for legal or economic reasons due to the debtor's financial difficulties.
TABLE 8 - ALLOWANCE FOR CREDIT LOSSES BREAKDOWN
March 31, December 31, Variance
2026 2025
%
(In thousands)
ACL:
Non-PCD
Commercial loans
$ 68,408 $ 65,943 3.7 %
Mortgage loans
6,243 6,358 (1.8) %
Consumer loans
32,998 33,466 (1.4) %
Auto loans 92,462 92,472 - %
Total ACL
$ 200,111 $ 198,239 0.9 %
PCD
Commercial loans
$ 495 $ 493 0.4 %
Mortgage loans
3,338 3,599 (7.3) %
Consumer loans
10 9 11.1 %
Auto loans 2 1 100.0 %
Total ACL
$ 3,845 $ 4,102 (6.3) %
ACL summary
Commercial loans
$ 68,903 $ 66,436 3.7 %
Mortgage loans
9,581 $ 9,957 (3.8) %
Consumer loans
33,008 $ 33,475 (1.4) %
Auto loans 92,464 $ 92,473 - %
Total ACL
$ 203,956 $ 202,341 0.8 %
ACL composition:
Commercial loans
33.8 % 32.8 %
Mortgage loans
4.7 % 4.9 %
Consumer loans
16.2 % 16.5 %
Auto loans 45.3 % 45.8 %
100.0 % 100.0 %
ACL coverage ratio at end of period:
Commercial loans
1.94 % 1.90 % 2.1 %
Mortgage loans
0.70 % 0.72 % (2.8) %
Consumer loans
4.87 % 4.90 % (0.6) %
Auto loans 3.52 % 3.51 % 0.3 %
2.48 % 2.47 % 0.4 %
ACL coverage ratio to non-performing loans:
Commercial loans
82.0 % 76.1 % 7.8 %
Mortgage loans
52.8 % 56.5 % (6.5) %
Consumer loans
860.3 % 764.6 % 12.5 %
Auto loans 619.2 % 445.7 % 38.9 %
168.6 % 155.6 % 8.4 %
TABLE 9 - ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES
March 31, December 31,
2026 2025
Amount of ACL
Percent of loans in each category of total loans [1]
Amount of ACL
Percent of loans in each category of total loans [1]
(In thousands) (In thousands)
Commercial loans
$ 68,903 43.1% $ 66,436 42.6%
Mortgage loans
9,581 16.7% 9,957 17.0%
Consumer loans
33,008 8.2% 33,475 8.3%
Auto loans
92,464 32.0% 92,473 32.1%
Total $ 203,956 100.0 % $ 202,341 100.0 %
[1] Total loans in this table refers to total loans held-for-investment.
TABLE 10 - ALLOWANCE FOR CREDIT LOSSES SUMMARY
Quarter Ended March 31,
2026 2025 Variance %
(In thousands)
Balance at beginning of period
$ 202,341 $ 175,863 15.1 %
Provision for credit losses 22,994 25,681 (10.5) %
Charge-offs (31,059) (29,498) 5.3 %
Recoveries 9,680 9,128 6.0 %
Balance at end of period
$ 203,956 $ 181,174 12.6 %
TABLE 11 - NET CREDIT LOSSES STATISTICS ON LOANS
Quarter Ended March 31,
2026 2025 Variance %
(In thousands)
Non-PCD:
Mortgage loans
Charge-offs $ (66) $ (23) 187.0 %
Recoveries 193 186 3.8 %
Total 127 163 (22.1) %
Commercial PR
Charge-offs (75) (112) (33.0) %
Recoveries 52 152 (65.8) %
Total (23) 40 (157.5) %
Commercial US
Charge-offs (3,934) (2,918) 34.8 %
Recoveries - - - %
Total (3,934) (2,918) 34.8 %
Consumer loans
Charge-offs (8,819) (8,252) 6.9 %
Recoveries 1,068 725 47.3 %
Total (7,751) (7,527) 3.0 %
Auto loans
Charge-offs (18,159) (18,192) (0.2) %
Recoveries 8,159 7,674 6.3 %
Total $ (10,000) $ (10,518) (4.9) %
PCD:
Mortgage loans
Charge-offs $ (6) $ - 100.0 %
Recoveries 167 341 (51.0) %
Total 161 341 (52.8) %
Commercial PR
Charge-offs - - - %
Recoveries 21 25 (16.0) %
Total 21 25 (16.0) %
Consumer loans
Charge-offs - - - %
Recoveries 6 6 - %
Total 6 6 - %
Auto loans
Charge-offs - (1) (100.0) %
Recoveries 14 19 (26.3) %
Total $ 14 $ 18 (22.2) %
Total charge-offs $ (31,059) $ (29,498) 5.3 %
Total recoveries 9,680 9,128 6.0 %
Net credit losses $ (21,379) $ (20,370) 5.0 %
TABLE 11 - NET CREDIT LOSSES STATISTICS ON LOANS (CONTINUED)
Quarter Ended March 31,
2026 2025 Variance %
(Dollars in thousands)
Net credit losses (recoveries) to average loans outstanding:
Mortgage loans (0.09) % (0.14) % (35.7) %
Commercial PR - % (0.01) % (100.0) %
Commercial US 1.85 % 1.62 % 14.2 %
Consumer loans 4.40 % 4.34 % 1.4 %
Auto loans 1.52 % 1.63 % (6.7) %
Total 1.05 % 1.05 % - %
Recoveries to charge-offs 31.17 % 30.94 % 0.7 %
Average Loans Held-for-Investment
Mortgage loans $ 1,322,249 $ 1,404,961 (5.9) %
Commercial PR 2,654,345 2,392,006 11.0 %
Commercial US 849,850 719,838 18.1 %
Consumer loans 704,872 693,563 1.6 %
Auto loans 2,636,122 2,574,389 2.4 %
Total $ 8,167,438 $ 7,784,757 4.9 %
Net charge-offs for the quarter ended March 31, 2026 amounted to $21.4 million (1.05% of average loans), increasing by $1.0 million when compared to $20.4 million (1.05% of average loans) in the prior year quarter.
Net charge-offs variances were as follows:
•Residential mortgage loans net recoveries for the quarter ended March 31, 2026 amounted to $288 thousand, decreasing by $216 thousand when compared to prior year quarter.
•Commercial loans net charge-offs for the quarter ended March 31, 2026 amounted to $3.9 million, increasing by $1.1 million when compared to $2.9 million in the first quarter of 2025. The quarters ended March 31, 2026 and 2025 included partial charge-offs of previously reserved commercial US loans for $3.9 million and $2.9 million, respectively.
•Consumer loans net charge-offs in the quarter ended March 31, 2026 amounted to $7.7 million, increasing by $224 thousand when compared to net charge-offs of $7.5 million in the prior year quarter.
•Auto loans net charge-offs for the quarter ended March 31, 2026 amounted to $10.0 million, decreasing by $514 thousand when compared to net charge-offs of $10.5 million in the prior year quarter.
TABLE 12 - NON-PERFORMING ASSETS
March 31, December 31, Variance
%
2026 2025
(Dollars in thousands)
Non-performing assets:
Non-PCD
Non-accruing loans $ 115,144 $ 124,300 (7.4)%
Accruing loans 5,552 5,481 1.3%
Total $ 120,696 $ 129,781 (7.0)%
PCD 248 282 (12.1)%
Total non-performing loans $ 120,944 $ 130,063 (7.0)%
Foreclosed real estate 2,037 2,490 (18.2)%
Other repossessed assets 4,310 3,457 24.7%
$ 127,291 $ 136,010 (6.4)%
Non-performing assets to total assets 1.06 % 1.09 % (2.8) %
Non-performing assets to total capital 9.31 % 9.78 % (4.8) %
TABLE 13 - NON-ACCRUAL LOANS
March 31, December 31, Variance
%
2026 2025
(Dollars in thousands)
Non-accrual loans
Non-PCD
Commercial loans $ 84,004 $ 87,253 (3.7)%
Mortgage loans 12,369 11,919 3.8%
Consumer loans 3,836 4,378 (12.4)%
Auto loans 14,934 20,750 (28.0)%
Total $ 115,143 $ 124,300 (7.4)%
PCD
Commercial loans $ 24 $ 55 (56.4)%
Mortgage loans 224 227 (1.3)%
Total $ 248 $ 282 (12.1)%
Total non-accrual loans $ 115,391 $ 124,582 (7.4)%
Non-accruals loans composition percentages:
Commercial loans 72.8 % 70.1 %
Mortgage loans 10.9 % 9.7 %
Consumer loans 3.3 % 3.5 %
Auto loans 13.0 % 16.7 %
100.0 % 100.0 %
Non-accrual loans ratios:
Non-accrual loans to total loans 1.40 % 1.52 % (7.9)%
Allowance for credit losses to non-accrual loans 176.75 % 162.42 % 8.8%
Quarter Ended March 31,
2026 2025
(In thousands)
Interest that would have been recorded in the period if the loans had not been classified as non-accruing loans
$ 331 $ 596
TABLE 14 - NON-PERFORMING LOANS
March 31, December 31, Variance
%
2026 2025
(Dollars in thousands)
Non-performing loans
Non-PCD
Commercial loans
$ 84,004 $ 87,253 (3.7)%
Mortgage loans
17,921 17,400 3.0%
Consumer loans
3,837 4,378 (12.4)%
Auto loans
14,934 20,750 (28.0)%
Total $ 120,696 $ 129,781 (7.0)%
PCD
Commercial loans
$ 24 $ 55 (56.4)%
Mortgage loans
224 227 (1.3)%
Total $ 248 $ 282 (12.1)%
Total non-performing loans $ 120,944 $ 130,063 (7.0)%
Non-performing loans composition percentages:
Commercial loans
69.5 % 67.1 %
Mortgage loans
15.0 % 13.6 %
Consumer loans
3.2 % 3.4 %
Auto loans
12.3 % 15.9 %
100.0 % 100.0 %
Non-performing loans to:
Total loans held-for-investment gross 1.47 % 1.59 % (7.5)%
Total assets 1.00 % 1.04 % (3.8)%
Total capital 8.85 % 9.36 % (5.4)%
Non-performing loans with partial charge-offs to:
Total loans held-for-investment gross 0.18 % 0.19 % (5.3)%
Non-performing loans 12.19 % 11.95 % 2.0%
Other non-performing loans ratios:
Charge-off rate on non-performing loans to non-performing loans on which charge-offs have been taken 110.55 % 109.85 % 0.6%
Allowance for credit losses to non-performing loans on which no charge-offs have been taken 193.21 % 176.69 % 9.3%
TABLE 15 - LIABILITIES SUMMARY AND COMPOSITION
March 31, December 31, Variance
%
2026 2025
(Dollars in thousands)
Deposits:
Non-interest-bearing deposits $ 2,719,175 $ 2,626,768 3.5 %
NOW accounts 2,628,727 3,173,142 (17.2) %
Savings accounts
2,367,522 2,259,973 4.8 %
Time deposits 2,128,353 2,197,358 (3.1) %
Total deposits 9,843,777 10,257,241 (4.0) %
Accrued interest payable 5,495 5,511 (0.3) %
Total deposits and accrued interest payable 9,849,272 10,262,752 (4.0) %
Borrowings:
Securities sold under agreements to repurchase 100,086 100,714 (0.6) %
Advances from FHLB 456,581 456,581 - %
Other borrowings - 9 (100.0) %
Total borrowings 556,667 557,304 (0.1) %
Total deposits and borrowings 10,405,939 10,820,056 (3.8) %
Other liabilities:
Acceptances executed and outstanding 22,665 22,442 1.0 %
Operating lease liabilities 22,088 23,157 (4.6) %
Deferred tax liabilities, net 337 - 100.0 %
Accrued expenses and other liabilities 229,979 209,997 9.5 %
Total liabilities $ 10,681,008 $ 11,075,652 (3.6) %
Deposits portfolio composition percentages:
Non-interest-bearing deposits 27.6% 25.6%
NOW accounts 26.7% 31.0%
Savings accounts
24.1% 22.0%
Time deposits 21.6% 21.4%
100.0 % 100.0 %
Borrowings portfolio composition percentages:
Securities sold under agreements to repurchase 18.0 % 18.1 %
Advances from FHLB 82.0 % 81.9 %
100.0 % 100.0 %
Securities sold under agreements to repurchase (excluding accrued interest)
Amount outstanding at period-end $ 100,000 $ 100,000
Daily average outstanding balance $ 204,480 $ 66,941
Maximum outstanding balance at any month-end $ 300,000 $ 127,344
Liabilities and Funding Sources
As shown in Table 15 above, at March 31, 2026, OFG's total liabilities were $10.681 billion, representing a 3.6% decrease from $11.076 billion at December 31, 2025. Deposits and borrowings, OFG's primary funding sources, amounted to $10.406 billion at March 31, 2026 compared to $10.820 billion at December 31, 2025. Deposits, excluding accrued interest payable, decreased by $413.5 million or 4.0%, driven primarily by declines in demand deposits of $452.0 million and time deposits of $69.0 million. These decreases were partially offset by growth of $107.5 million in savings and money market accounts.
At March 31, 2026 and December 31, 2025, total public fund deposits from various Puerto Rico government municipalities, agencies and corporations amounted to $1.261 billion and $1.676 billion, respectively, of which $500 million moved to our wealth management business as an advisory account in January 2026. Public funds were collateralized with securities and commercial loans amounting to $1.277 billion and $1.691 billion at March 31, 2026 and December 31, 2025, respectively.
As of March 31, 2026, borrowings amounted to $556.7 million, consisting of short and long-term FHLB advances and short-term repurchase agreements. This balance decreased by $0.6 million or 0.1% compared to December 31, 2025.
Stockholders' Equity
At March 31, 2026, OFG's total stockholders' equity was $1.367 billion, representing a 1.7% decrease from $1.390 billion at December 31, 2025. The decrease primarily reflected a $43.1 million increase in treasury stock resulting from repurchases of common stock under the approved stock repurchase programs totaling $44.5 million during the quarter ended March 31, 2026 as well as a $16.7 million increase in accumulated other comprehensive loss, net of tax, from unfavorable market value adjustments in available-for-sale investment securities. These variances were partially offset by a $33.7 million increase in retained earnings, mainly due to net income of $53.9 million, partially offset by dividends declared on common stock of $14.9 million and transfers to legal surplus of $5.3 million.
Regulatory Capital
OFG and the Bank are subject to regulatory capital requirements established by the Federal Reserve Board and the FDIC. The current risk-based capital standards applicable to OFG and the Bank are based on the final capital framework for strengthening international capital standards, known as Basel III, of the Basel Committee on Banking Supervision. As of March 31, 2026, the capital ratios of OFG and the Bank continue to exceed the minimum requirements for being "well-capitalized" under the Basel III capital rules.
The risk-based capital ratios presented in Table 16 include CET1, tier 1 capital, total capital and leverage capital as of March 31, 2026 and December 31, 2025, and are calculated based on the Basel III capital rules related to the measurement of capital, risk-weighted assets and average assets. The following are OFG's consolidated capital, dividends, and stock data, including capital ratios under the Basel III capital rules at March 31, 2026 and December 31, 2025:
TABLE 16 - CAPITAL, DIVIDENDS AND STOCK DATA
March 31, December 31, Variance
2026 2025 %
(Dollars in thousands, except per share data)
Capital data:
Stockholders' equity $ 1,366,895 $ 1,390,005 (1.7)%
Regulatory Capital Ratios data:
Common equity tier 1 capital ratio 13.75 % 13.97 % (1.6) %
Minimum common equity tier 1 capital ratio required 4.50 % 4.50 % - %
Actual common equity tier 1 capital $ 1,312,874 1,318,633 (0.4)%
Minimum common equity tier 1 capital required $ 429,789 424,620 1.2%
Minimum capital conservation buffer required (2.5%) $ 238,772 235,900 1.2%
Excess over regulatory requirement $ 644,313 658,113 (2.1)%
Risk-weighted assets $ 9,550,860 9,436,010 1.2%
Tier 1 risk-based capital ratio 13.75 % 13.97 % (1.6) %
Minimum tier 1 risk-based capital ratio required 6.00 % 6.00 % - %
Actual tier 1 risk-based capital $ 1,312,874 $ 1,318,633 (0.4)%
Minimum tier 1 risk-based capital required $ 573,052 $ 566,161 1.2%
Minimum capital conservation buffer required (2.5%) $ 238,772 235,900 1.2%
Excess over regulatory requirement $ 501,050 $ 516,572 (3.0)%
Risk-weighted assets $ 9,550,860 $ 9,436,010 1.2%
Total risk-based capital ratio 15.01 % 15.24 % (1.5) %
Minimum total risk-based capital ratio required 8.00 % 8.00 % - %
Actual total risk-based capital $ 1,433,271 $ 1,437,596 (0.3)%
Minimum total risk-based capital required $ 764,069 $ 754,881 1.2%
Minimum capital conservation buffer required (2.5%) $ 238,772 235,900 1.2%
Excess over regulatory requirement $ 430,430 $ 446,815 (3.7)%
Risk-weighted assets $ 9,550,860 $ 9,436,010 1.2%
Leverage capital ratio 10.88 % 10.71 % 1.6 %
Minimum leverage capital ratio required 4.00 % 4.00 % - %
Actual tier 1 capital $ 1,312,874 $ 1,318,633 (0.4)%
Minimum tier 1 capital required $ 482,528 $ 492,568 (2.0)%
Excess over regulatory requirement $ 830,346 $ 826,065 0.5%
Tangible common equity to total assets 10.57 % 10.40 % 1.6 %
Tangible common equity to risk-weighted assets 13.34 % 13.73 % (2.8) %
Total equity to total assets 11.35 % 11.15 % 1.8 %
Total equity to risk-weighted assets 14.31 % 14.73 % (2.9) %
Stock data:
Outstanding common shares 42,257,281 43,257,167 (2.3)%
Book value per common share $ 32.35 $ 32.13 0.7%
Tangible book value per common share $ 30.14 $ 29.96 0.6%
Market price at end of period $ 40.46 $ 40.98 (1.3)%
Market capitalization at end of period $ 1,709,730 $ 1,772,679 (3.6)%
The following table presents OFG's capital adequacy information under the Basel III capital rules:
March 31, December 31, Variance
2026 2025 %
(Dollars in thousands)
Risk-based capital:
Common equity tier 1 capital $ 1,312,874 $ 1,318,633 (0.4)%
Tier 1 capital 1,312,874 1,318,633 (0.4)%
Additional Tier 2 capital 120,397 118,963 1.2%
Total risk-based capital $ 1,433,271 $ 1,437,596 (0.3)%
Risk-weighted assets:
Balance sheet items $ 8,864,274 $ 8,798,325 0.7%
Off-balance sheet items 686,586 637,685 7.7%
Total risk-weighted assets $ 9,550,860 $ 9,436,010 1.2%
Ratios:
Common equity tier 1 capital (minimum required, including capital conservation buffer - 7%) 13.75 % 13.97 % (1.6)%
Tier 1 capital (minimum required, including capital conservation buffer - 8.5%) 13.75 % 13.97 % (1.6)%
Total capital (minimum required, including capital conservation buffer - 10.5%) 15.01 % 15.24 % (1.5)%
Leverage ratio (minimum required - 4%) 10.88 % 10.71 % 1.6%
From December 31, 2025 to March 31, 2026, the leverage capital ratio increased from 10.71% to 10.88%, the tier 1 risk-based and common equity tier 1 capital ratios decreased from 13.97% to 13.75%, and the total risk-based capital ratio decreased from 15.24% to 15.01%. The decreases in regulatory capital ratios reflected an increase in risk-weighted assets of $114.9 million, and a decrease in regulatory capital of $4.3 million. Risk-weighted assets increased mainly from higher loan balances, as a result of originations, and an increase in deferred tax assets, primarily related to an investment in OBPEF, our private equity fund, during the quarter. Regulatory capital decreased mainly due to dividends and treasury stock repurchases, partially offset by net income.
The Bank is considered "well capitalized" under the regulatory framework for prompt corrective action. The table below shows the Bank's regulatory capital ratios at March 31, 2026 and December 31, 2025:
March 31, December 31, Variance
2026 2025 %
(Dollars in thousands)
Oriental Bank Regulatory Capital Ratios:
Common Equity Tier 1 Capital to Risk-Weighted Assets 13.17% 13.44% (2.0)%
Actual common equity tier 1 capital $ 1,251,163 $ 1,260,530 (0.7)%
Minimum capital requirement (4.5%) $ 427,416 $ 422,175 1.2%
Minimum capital conservation buffer requirement (2.5%) $ 237,453 $ 234,542 1.2%
Minimum to be well capitalized (6.5%) $ 617,378 $ 609,808 1.2%
Tier 1 Capital to Risk-Weighted Assets 13.17% 13.44% (2.0)%
Actual tier 1 risk-based capital $ 1,251,163 $ 1,260,530 (0.7)%
Minimum capital requirement (6%) $ 569,888 $ 562,900 1.2%
Minimum capital conservation buffer requirement (2.5%) $ 237,453 $ 234,542 1.2%
Minimum to be well capitalized (8%) $ 759,850 $ 750,533 1.2%
Total Capital to Risk-Weighted Assets 14.43% 14.70% (1.8)%
Actual total risk-based capital $ 1,370,909 $ 1,378,822 (0.6)%
Minimum capital requirement (8%) $ 759,850 $ 750,533 1.2%
Minimum capital conservation buffer requirement (2.5%) $ 237,453 $ 234,542 1.2%
Minimum to be well capitalized (10%) $ 949,813 $ 938,167 1.2%
Total Tier 1 Capital to Average Total Assets 10.45% 10.31% 1.4%
Actual tier 1 capital $ 1,251,163 $ 1,260,530 (0.7)%
Minimum capital requirement (4%) $ 478,865 $ 489,159 (2.1)%
Minimum to be well capitalized (5%) $ 598,581 $ 611,449 (2.1)%
Non-GAAP financial measures
OFG reports certain financial measures that are not in accordance with GAAP. These non-GAAP financial measures are provided as supplemental information to the financial measures in this report that are calculated and presented in accordance with GAAP.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. To mitigate these limitations, OFG has procedures in place to calculate these measures using the appropriate GAAP or regulatory components. Although these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP.
TABLE 17 - RECONCILIATION OF TANGIBLE COMMON EQUITY AND TANGIBLE ASSETS
The following table presents a reconciliation of OFG's total stockholders' equity to tangible common equity and total assets to tangible assets at March 31, 2026 and December 31, 2025:
March 31, December 31,
2026 2025
(In thousands, except share or per share information)
Total stockholders' equity $ 1,366,895 $ 1,390,005
Goodwill (84,241) (84,241)
Other intangible assets (8,869) (9,855)
Total tangible common equity (non-GAAP) $ 1,273,785 $ 1,295,909
Total assets $ 12,047,903 12,465,657
Goodwill (84,241) (84,241)
Core deposit intangible (6,792) (7,547)
Customer relationship intangible (2,077) (2,308)
Total tangible assets (non-GAAP)
$ 11,954,793 $ 12,371,561
Tangible common equity to tangible assets (non-GAAP)
10.66 % 10.47 %
Common shares outstanding at end of period
42,257,281 43,257,167
Tangible book value per common share (non-GAAP)
$ 30.14 $ 29.96
Average stockholders' equity
$ 1,406,938 $ 1,341,568
Average intangible assets
(93,460) (96,362)
Average tangible common equity (non-GAAP)
$ 1,313,478 $ 1,245,206
Average return on tangible common equity (Non-GAAP)
16.43% 16.47%
* Averages are calculated on a year-to-date basis.
The tangible common equity to tangible assets ratio and tangible book value per common share are non-GAAP measures and, unlike tier 1 capital and common equity tier 1 capital, are not codified in the federal banking regulations. Management and many stock analysts use the tangible common equity to tangible assets ratio and tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations. Neither tangible common equity nor tangible assets or related measures should be considered in isolation or as a substitute for stockholders' equity, total assets or any other measure calculated in accordance with GAAP. Moreover, the manner in which OFG calculates its tangible common equity, tangible assets and any other related measures may differ from that of other companies reporting measures with similar names.
Tangible common equity to tangible total assets increased from 10.47% to 10.66%, reflecting a decrease in total assets, mainly related to the decrease in cash from the $500 million Puerto Rico government deposit moved to our wealth management business as an advisory account.
OFG's common stock is traded on the NYSE under the symbol "OFG". At March 31, 2026 and December 31, 2025, OFG's market capitalization for its outstanding common stock was $1.710 billion ($40.46 per share) and $1.773 billion ($40.98 per share), respectively. The following table provides the high and low prices and dividends per share of OFG's common stock for each quarter of the last three calendar years:
Cash
Price Dividend
High Low Per share
2026
March 31, 2026 $ 42.66 $ 37.15 $ 0.35
2025
December 31, 2025 $ 43.38 $ 38.21 $ 0.30
September 30, 2025 $ 45.47 $ 41.72 $ 0.30
June 30, 2025 $ 43.28 $ 34.78 $ 0.30
March 31, 2025 $ 44.74 $ 38.85 $ 0.30
2024
December 31, 2024 $ 46.72 $ 38.97 $ 0.25
September 30, 2024 $ 46.84 $ 36.77 $ 0.25
June 30, 2024 $ 38.16 $ 33.37 $ 0.25
March 31, 2024 $ 38.51 $ 34.78 $ 0.25
In January 2026, the Board approved a new $200.0 million stock repurchase program in addition to the $100.0 million stock repurchase program approved in April 2025. The shares of common stock repurchased are held by OFG as treasury shares. OFG records treasury stock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.
OFG did not repurchase any shares of its common stock during the quarters ended March 31, 2026 and 2025, other than through its publicly announced stock repurchase programs.
At March 31, 2026, the estimated remaining number of shares that may be purchased under the Existing Repurchase Programs is 4,785,159 and was calculated by dividing the remaining balance of $193.6 million by $40.46 (closing price of OFG's common stock at March 31, 2026).
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Background
OFG's risk management policies are established by its Board and implemented by management through the adoption of a risk management program, which is overseen and monitored by the Chief Risk Officer, the Board's Risk and Compliance Committee, the executive Risk and Compliance Team, the executive Credit Risk Team, and the executive Asset/Liability Team ("ALT"). OFG has continued to refine and enhance its risk management program by strengthening policies, processes and procedures necessary to maintain effective risk management.
All aspects of OFG's business activities are susceptible to risk. Consequently, risk identification and monitoring are essential to risk management. As discussed in greater detail below, OFG's primary risk exposures include market, interest rate, credit, liquidity, operational and concentration risks.
Market Risk
Market risk is the risk that changes in market conditions may adversely impact the value of assets or liabilities, or otherwise
negatively impact earnings. Our traditional banking loan and deposit products are generally reported at amortized cost
for assets or the amount owed for liabilities (historical cost). However, they are still subject to changes in
economic value based on varying market conditions, with one of the primary risks being changes in the levels of interest rates. Our investment portfolio, including equity securities, are also directly impacted by market factors. OFG's financial results and capital levels are constantly exposed to market risk. OFG evaluates market risk together with interest rate risk. The Board and management are primarily responsible for ensuring that the market risk assumed by OFG complies with the guidelines established by policies approved by the Board. The Board has delegated the management of this risk to ALT which is composed of certain executive officers from the risk management, treasury and finance areas. One of ALT's primary goals is to ensure that the market risk assumed by OFG is within the parameters established in such policies.
Certain factors, such as the potential impact of changes in market interest rates, inflation trends, trade and supply chain disruptions, a possible recession, global economic policies and conflicts, and other economic factors, including periods of increased global economic and geopolitical uncertainties, could impact market conditions.
We believe that our market risk management practices have allowed us to effectively manage the market volatility over time and that our clients are confident in the resiliency and strong position of the Bank. We also believe that OFG has strong capital and liquidity levels that facilitate holding investment securities until the recovery of their amortized cost basis.
Interest Rate Risk
Interest rate risk is the exposure to decline in earnings or capital due to changes in interest rates. Interest rate risk results primarily from our traditional banking activities of gathering deposits and extending loans. Many factors, including economic and financial conditions, movements in interest rates and consumer preferences, affect the difference between the interest that we earn on assets and the interest that we pay on liabilities and the level of our noninterest-bearing funding sources. Due
to the repricing term mismatches and embedded options inherent in certain of these products, changes in market interest rates not only affect expected near-term earnings, but also the economic values of these assets and liabilities. To actively monitor the interest rate risk, the Board created ALT whose principal responsibilities consist of overseeing the management of the Bank's assets and liabilities to balance its risk exposures. In executing its responsibilities, ALT considers different methods to enhance profitability while maintaining acceptable levels of interest rate risks by implementing investment, pricing and financial strategies that help manage OFG's vulnerability to changes in interest rates.
On a quarterly basis, OFG performs net interest income simulation analysis on a consolidated basis to estimate the potential change in future earnings from projected changes in interest rates. These simulations are carried out over a five-year time horizon, assuming certain upward and downward interest rate movements, achieved during a twelve-month period. Market scenarios that include instantaneous and parallel interest rate movements as well as other scenarios with gradual interest rate ramps, speed of interest rate changes, and changes in the slope of the yield curve are also modeled. In addition to the change in interest rates, the results of the analysis could be affected by prepayments, caps, and floors. Management exercises its best judgment in formulating assumptions regarding events that management can influence such as non-maturity deposits repricing, as well as events outside management's control such as customer behavior on loans and deposits activity and the effects that competition has on both lending and deposits pricing. These assumptions are subjective and, as a result, net interest income simulation results will differ from actual results due to the timing, magnitude and frequency of interest rate changes, changes in market conditions, customer behavior and management strategies, among other factors.
OFG uses a software application to project future movements in OFG's balance sheet and income statement. The starting point of the projections generally corresponds to the actual values of the balance sheet on the date of the simulations. The following table presents the results of the simulations for the most likely scenarios at March 31, 2026. The left of the table presents an analysis of our interest rate risk as measured by the estimated changes in net interest income resulting from an instantaneous and parallel shift in the yield curve over a 12-month horizon. The base case scenario assumes that the current interest rate environment is held constant throughout the forecast period for a static balance sheet and the instantaneous shocks are performed against that yield curve. The right side of the table presents an analysis of our interest rate risk as measured by the estimated changes in net interest income resulting from parallel gradual interest rates ramps over a 12-month horizon.
Net Interest Income Risk (one-year projection)
Instantaneous Changes in Interest Rates Gradual Changes in Interest Rates
Amount
Change 		Percent
Change 		Amount
Change 		Percent
Change
Change in interest rate (Dollars in thousands)
+ 50 Basis points $ 7,950 1.30 % $ 3,254 0.53 %
+ 100 Basis points $ 16,186 2.65 % $ 6,791 1.11 %
+ 200 Basis points $ 32,553 5.32 % $ 13,944 2.28 %
- 50 Basis points $ (7,121) (1.16) % $ (2,802) (0.46) %
'- 100 Basis points
$ (14,414) (2.36) % $ (5,362) (0.88) %
'- 200 Basis points
$ (31,150) (5.10) % $ (12,080) (1.98) %
The scenarios above are both instantaneous shocks and gradual interest rate ramps that assume balance sheet management will mirror the base case. Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities will perform as anticipated. Additionally, a change in the US Treasury rates in the designated amounts accompanied by a change in the shape of the US Treasury yield curve would cause significantly different changes to net interest income than indicated above. OFG's strategic management of the balance sheet would be adjusted to accommodate these movements. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag changes in market rates and therefore the ability of many borrowers to service their debts may decrease in the event of an interest rate increase. ALT strategies consider all these factors as part of the monitoring of the exposure to interest rate risk.
Future net interest income could be affected by OFG's investments in callable securities, prepayment risk related to mortgage loans and mortgage-backed securities, and any structured repurchase agreements and advances from the FHLB in which it may enter into from time to time.
Credit Risk
Credit risk is the possibility of loss arising from a borrower or counterparty in a credit-related contract failing to perform in accordance with its terms. The principal source of credit risk for OFG is its lending activities. In Puerto Rico, OFG's principal market, we believe that recent macroeconomic conditions continue to be generally positive. However, as demonstrated by hurricanes and earthquakes in the past, Puerto Rico is susceptible to natural disasters, which can have a disproportionate impact because of the logistical difficulties of bringing relief to an island far from the United States mainland. The effects of climate change may further increase the risk of natural disasters in the future and the correlative risk that the physical impact of such events could adversely affect our customers, operations, and business. Moreover, the Puerto Rico government's fiscal challenges and Puerto Rico's unique relationship with the United States, coupled with recent changes in the U.S. trade policy and proposed significant reduction in federal spending, also affect the local economy and complicate any relief efforts after a natural disaster. These events increase credit risk as debtors may no longer be capable of operating their businesses and the collateral securing OFG's loans may suffer significant damages.
Credit risk is one of our most significant risks. Our processes for managing credit risk are designed to be embedded in our risk culture and in our decision-making processes using a systematic approach whereby credit risks and related exposures are identified and assessed, managed through specific policies and processes, measured and evaluated against our risk appetite and credit concentration limits, and reported, along with proactive collection and specific mitigation practices, to management and the Board through our governance structure. We believe that our comprehensive credit policy establishes sound underwriting standards by monitoring and evaluating loan portfolio quality, and by the constant assessment of reserves and loan concentrations.
OFG may also encounter risk of default in relation to its securities portfolio. The securities held by OFG are mostly agency mortgage-backed securities. Thus, these instruments are guaranteed by mortgages, a U.S. government-sponsored entity, or the full faith and credit of the U.S. government.
OFG's executive Credit Risk Team, composed of its Chief Risk Officer, Chief Credit Officer and other senior executives, has primary responsibility for setting strategies to achieve OFG's credit risk goals and objectives. Those goals and objectives are set forth in OFG's Credit Policy as approved by the Board.
Liquidity Risk
Liquidity risk is the risk of OFG not being able to generate sufficient cash from either assets or liabilities to meet obligations as they become due without incurring substantial losses and the potential inability to operate our businesses because adequate contingent liquidity is not available. The Board has established a policy to manage this risk. OFG's cash requirements principally consist of deposit withdrawals, contractual loan funding, repayment of borrowings as these mature, and funding of new and existing investments as required.
OFG's business requires continuous access to various funding sources. Liquidity to support growth in loans held-for-investment has been fulfilled primarily through growth in customer deposits. OFG's goal is to obtain as much of its funding for loans held-for-investment and other earning assets as possible from customer deposits, which are generated principally through development of long-term customer relationships. In December 2023, OFG received a $1.2 billion deposit in an interest-bearing checking account from an existing long-standing Puerto Rico government client who had an isolated inflow of
liquidity. Subsequently, in January 2026, $500 million was moved to our wealth management business as an advisory account, resulting in a total of $1.261 billion and $1.676 billion deposits from the Puerto Rico government and its instrumentalities as of March 31, 2026 and December 31, 2025, respectively. OFG's customer deposit base, excluding public funds, has consistently increased. While OFG is able to fund its operations through deposits as well as through advances from the FHLB and other alternative sources, OFG's business may at times need to rely upon other external wholesale funding sources, such as repurchase agreements and brokered deposits. At March 31, 2026, OFG had $189.9 million brokered deposits and $100.0 million repurchase agreements. At December 31, 2025, OFG had $340.0 million brokered deposits and $100.0 million repurchase agreements.
In the ordinary course of OFG's operations, it has entered into certain contractual obligations and has made other commitments to make future payments. OFG believes that it will be able to meet its contractual obligations as they come due through the maintenance of adequate cash levels.
Commitments to extend credit are agreements to lend to customers as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates, bear variable interest rate and may require payment of a fee. Since the commitments may expire unexercised, the total commitment amounts do not necessarily represent future cash requirements. OFG evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by OFG upon extension of credit, is based on management's credit evaluation of the customer. Loan commitments, which represent unused lines of credit, increased to $1.493 billion at March 31, 2026 ($208.7 million with maturity of one year or less and $1.284 billion with maturity over one year) compared to $1.377 billion at December 31, 2025 ($183.0 million with maturity of one year or less and $1.194 billion with maturity over one year) as a result of commercial lines of credit originations and repayments. Standby letters of credit provided to customers amounted to $25.9 million and $26.1 million, respectively, at March 31, 2026 and December 31, 2025. Loans sold with recourse at March 31, 2026 and December 31, 2025 amounted to $81.3 million and $83.0 million, respectively.
In the case of loans serviced by OFG for FNMA, OFG is required to advance to the owners the payment of principal and interest on a scheduled basis for six months even when such payment was not collected from the borrower due to payment forbearance granted or payment delinquency. Such amounts advanced are recorded as a receivable by OFG and are expected to be collected from the borrower and/or government-sponsored entity (FNMA). 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.
At March 31, 2026 and December 31, 2025, OFG maintained other non-credit commitments amounting to $16.8 million and $17.8 million, primarily for the acquisition of other investments. These cash requirements are expected to be satisfied with OFG's unrestricted cash. In addition, as we continue to transform OFG with a focus on simplification and building a culture of excellence and customer service, we continue to invest in technology. Some of our technology investments are integrated at our long-term financial plan and required to continuously upgrade our systems. Others require us to focus our technology on investments that drive our strategy, namely digital, data analytics, cloud migration, cyber security, and our sales and service capabilities. At March 31, 2026 and December 31, 2025, OFG had commitments for capital expenditures in technology amounting to $2.0 million and $1.6 million, respectively, which are expected to be satisfied with OFG's unrestricted cash.
OFG expects to maintain adequate cash levels through continued deposit gathering activities, profitability, and loan and securities repayment and maturity activity. Our liquidity risk management practices have allowed us to effectively manage the market volatility in the past, as with the Covid-19 pandemic and the disruption in the banking industry caused by certain high-profile bank failures in 2023. Liquidity has grown from the federal stimulus programs Puerto Rico has received following Hurricane Maria in 2017, the January 2020 earthquakes, the Covid-19 pandemic, and Hurricane Fiona in 2022. However, liquidity can be further affected by a number of factors such as counterparty willingness or ability to extend credit, regulatory actions and customer preferences, some of which are beyond our control. Given the current climate of economic uncertainty resulting from inflation, geopolitical events, and new U.S. mainland economic and trading policies, we continuously monitor our liquidity position, specifically cash on hand, with the goal to ensure that we meet customer demands.
In addition, as OFG is a holding company, separate from the Bank, OFG's primary sources of liquidity are dividends received from the Bank and borrowings from outside sources. Banking regulations may limit the amount of dividends that may be paid by the Bank. Management believes that these limitations will not impact OFG's ability to meet its ongoing short-term cash obligations.
Although OFG expects to have continued access to credit from the foregoing sources of funds, there can be no assurance that such financing sources will continue to be available or will be available on favorable terms. In a period of financial disruption
or if negative developments occur with respect to OFG, the availability and cost of OFG's funding sources could be adversely affected. In that event, OFG's cost of funds may increase, thereby reducing its net interest income, or OFG may need to dispose of a portion of its investment portfolio, which depending upon market conditions, could result in realizing a loss or experiencing other adverse accounting consequences upon any such dispositions. OFG's efforts to monitor and manage liquidity risk may not be successful to deal with dramatic or unanticipated changes in the global or US securities markets or other reductions in liquidity driven by OFG or market-related events. In the event that such sources of funds are reduced or eliminated and OFG is not able to replace these on a cost-effective basis, OFG may be forced to curtail or cease its loan origination business and treasury activities, which would have a material adverse effect on its operations and financial condition.
As of March 31, 2026, OFG had approximately $636.5 million in unrestricted cash and cash equivalents, $1.415 billion in investment securities that are not pledged as collateral, $375.0 million in borrowing capacity at the FHLB and a secured line of credit through the FRB discount window with $3.024 billion in loans pledged (borrowing capacity $2.256 billion).
Operational Risk
Operational risk is the risk of loss from inadequate or failed internal processes, personnel and systems or from external events. All functions, products and services of OFG are susceptible to operational risk.
OFG faces ongoing and emerging risk and regulatory pressure related to the activities that surround the delivery of banking and financial products and services. Coupled with external influences such as the risk of natural disasters, market conditions, security risks, and legal risks, the potential for operational and reputational loss has increased. In order to mitigate and control operational risk, OFG has developed, and continues to enhance, specific internal controls, policies and procedures that are designed to identify and manage operational risk at appropriate levels throughout the organization. The purpose of these policies and procedures is to provide reasonable assurance that OFG's business operations are functioning within established limits. OFG also maintains a cybersecurity risk management framework in place to assess, identify and manage risks from cybersecurity threats. Please refer to "Item 1C. Cybersecurity" in our 2025 Form 10-K for further discussion on OFG's cybersecurity risk management framework.
OFG classifies operational risk into two major categories: business specific and corporate-wide affecting all business lines. For business specific risks, a risk assessment group works with the various business units to ensure consistency in policies, processes and assessments. The lines of business are responsible for identifying, owning, managing and monitoring the operational risks and controls associated with their business activities and product or service offerings to within acceptable levels. With respect to corporate-wide risks, such as information security, business recovery, legal and compliance, OFG has specialized groups, such as Information Security, Enterprise Risk Management, Legal and Corporate Compliance, Information Technology, and Operations. These groups assist our lines of business in the development and implementation of risk management practices specific to the needs of our business groups. They review and challenge line of business adherence to the framework to help ensure proper controls are in place and appropriate risk mitigation plans are established as necessary. All these matters are reviewed and discussed by the executive Risk and Compliance Team and the executive Consumer Compliance Team. OFG also has a Business Continuity Plan to address situations where its capacity to perform critical functions is affected. Under such circumstances, a Crisis Management Team is activated to restore such critical functions within established timeframes.
OFG is subject to extensive United States federal and Puerto Rico regulations, and OFG has established and continues to enhance procedures based on legal and regulatory requirements that are reasonably designed to ensure compliance with all applicable statutory and regulatory requirements. OFG has a corporate compliance function headed by the General Counsel who reports to the Chief Executive Officer and supervises the BSA Officer and Corporate Compliance Director. The General Counsel is responsible for the oversight of regulatory compliance and implementation of a company-wide compliance program, including the Bank Secrecy Act/Anti-Money Laundering compliance program.
Concentration Risk
Most of OFG's business activities and a significant portion of its credit exposure are concentrated in Puerto Rico. As a consequence, OFG's profitability and financial condition may be adversely affected by an extended economic slowdown, adverse political, fiscal or economic developments in Puerto Rico, or the effects of a natural disaster, all of which could result in a reduction in loan originations, an increase in non-performing assets, an increase in foreclosure losses on mortgage loans, and a reduction in the value of its loans and loan servicing portfolio.
OFG Bancorp published this content on May 08, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 08, 2026 at 18:10 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]