OFG Bancorp (NYSE:OFG) executives highlighted year-over-year earnings growth, continued balance sheet expansion, and progress on the company’s digital-first strategy during the bank’s fourth-quarter earnings call. Management also discussed credit actions tied to a non-performing loan sale and a newly classified non-accrual commercial exposure, while outlining expectations for net interest margin, expenses, and loan growth in 2026.
Fourth-quarter performance and capital return
Chief Executive Officer and Chairman José Rafael Fernández said diluted earnings per share rose 17% year-over-year in the fourth quarter, supported by 2% growth in total core revenues, “disciplined core operations,” and a favorable tax benefit. Fernández added that asset quality and credit metrics were “sound and well-controlled” during the quarter.
Full-year 2025 results and strategic progress
Fernández said the company met “many” strategic and financial goals in 2025. He reported:
- Earnings per share increased 8.3% on a 2.8% increase in total core revenues.
- Total assets grew 8.4% to a record $12.5 billion.
- Core deposits grew 5% to $9.9 billion.
- Loans rose 5.3% to $8.2 billion, with commercial loans reaching $3.5 billion, or 43% of the loan book.
- New loan production increased 11.5% to $2.6 billion.
- The company repurchased close to $92 million of shares and increased the dividend 20%.
Fernández described business activity in Puerto Rico as “robust,” with a positive outlook for economic growth and resilience from both businesses and consumers.
A major theme of the call was digital execution. Fernández said OFG has “clearly emerged as a leader in banking innovation in Puerto Rico” over the past two years. He pointed to the Libre account for mass-market customers and the Elite account for mass-affluent customers, which he said have attracted deposits from new and existing customers. The company also enhanced its Oriental Biz account suite for small businesses, which management said helped drive a 5% increase in commercial customers during 2025.
In 2025, OFG launched an omnichannel platform intended to provide a “seamless banking experience” and reposition branches toward relationship-building. Fernández said the company’s “intelligent banking model” delivers tailored insights based on customer cash flows and payment habits. Management said these initiatives contributed to increased market share in retail deposits and 4% growth in retail customers.
Revenue, expenses, tax items, and margin dynamics
Chief Financial Officer Maritza Arizmendi said fourth-quarter core revenues totaled $185 million, up $1.4 million from the third quarter. Total interest income was $197 million, down $3 million, which she attributed to higher average balances of loans and cash at lower average yields, partially offset by higher average balances of investment securities at slightly higher yields.
Total interest expense was $44 million, down $1 million, reflecting higher average balances of deposits and borrowings at lower average rates. Banking and financial service revenues were $33 million, up $3.4 million, primarily due to increased wealth management revenue tied to $2.3 million in annual insurance commission recognition.
Arizmendi said “other income” was a loss of $1.1 million versus a profit of $2.2 million in the third quarter, reflecting $6.1 million in accelerated amortization of technology-related assets, gains of $3.9 million on the sale of non-performing loans, and $1.1 million on sales of real estate. She noted the third quarter benefited from gains from OFG Ventures’ investment in fintech funds.
Noninterest expenses were $105 million, up $8.5 million from the third quarter. Arizmendi cited professional services fees related to performance-based advisory costs tied to renegotiation of a technology services contract, business “sizing” costs, accelerated amortization, and increased bonus accruals, marketing activity, and costs tied to sales of foreclosed assets. For 2026, she said the company expects total noninterest expense of $380 million to $385 million.
Income tax was a benefit of $8.5 million, driven by two discrete items: $12.9 million from the expiration of a tax agreement tied to the 2019 acquisition of Scotiabank Puerto Rico and USVI operations, and $3.9 million from a released valuation allowance of deferred tax assets at the holding company. Excluding discrete benefits, Arizmendi said the estimated tax rate for 2025 was 21.8% and the expected 2026 effective tax rate is around 23%, excluding discrete items.
Arizmendi reported tangible book value of $29.96 per share, an efficiency ratio of 56.7%, return on average assets of 1.81%, and return on average tangible common equity of 17.2%.
Net interest margin (NIM) was 5.12% in the fourth quarter, which management said was within expectations. Arizmendi said full-year 2025 NIM was 5.27%, and the company expects 2026 NIM to range from 4.95% to 5.05%, factoring in expected rate cuts, the partial exit of certain government deposits, and replacement funding costs. Executives reiterated the bank’s asset-sensitive positioning and pointed to the impact of Federal Reserve rate cuts on variable-rate commercial loan yields.
Loan, deposit, and credit updates; 2026 priorities
Operationally, the company reported average loan balances of $8.0 billion in the fourth quarter, up slightly from the third quarter, driven by Puerto Rico commercial loan growth and partially offset by lower auto and residential mortgage balances. Loan yield was 7.73%, down 70 basis points, which Arizmendi said was mainly due to the effect of a 50-basis-point Fed rate cut during the quarter on variable-rate commercial loans.
Average core deposits were $9.9 billion, up nearly 1% from the third quarter, reflecting increases across retail, commercial, and government balances. Core deposit cost was 1.42%, down 5 basis points, mainly due to lower cost of government deposits. Excluding public funds, cost of deposits was 102 basis points versus 103 basis points in the third quarter.
On credit, provision for credit losses was $31.9 million, up $4 million from the third quarter. Arizmendi attributed the change to increased loan volume, a specific reserve on a Puerto Rico telecommunications commercial loan, U.S. macroeconomic factors, and charge-offs tied to the sale of non-performing loans. Net charge-offs totaled $27 million, including $4.8 million related to the non-performing loan sale, with $3.1 million of that previously reserved.
Management described delinquency trends as consistent with typical year-end seasonality. Early delinquency was 2.8%, down from the third quarter and down year-over-year, while total delinquency was 4.18%, up from the third quarter but down year-over-year. The non-performing loan rate was 1.59%, which executives tied to the move of a single Puerto Rico telecommunications loan to non-accrual status.
During Q&A, executives said the non-performing loan sale removed about $17 million of non-performing loans, which triggered related charge-offs but resulted in a reported gain of $3.9 million. They characterized the telecom exposure as an “idiosyncratic” single-loan issue and said the borrower continued to pay, but recent financial information warranted a prudent move to non-accrual.
Looking ahead, management reiterated an expectation for low single-digit loan growth in 2026. Executives said they expect auto balances to decline 2% to 3% in 2026, while commercial loans are expected to grow 5% to 6% across Puerto Rico and the U.S. operations. They also said the company expects retail and commercial deposits to increase as Libre Plus, Elite, Oriental Biz, and digital offerings drive customer growth.
On funding, Arizmendi said $500 million of Puerto Rico government deposits moved to the wealth management business as an advisory account, while the remaining $600 million is sustained as a variable-rate core deposit. She said replacement funding for the moved balances is expected to be wholesale funding at a higher cost, contributing to NIM expectations.
Fernández said OFG will continue investing in customer experience and omnichannel capabilities in 2026, but that the company’s strategic focus will shift “much more on commercial,” with an emphasis on translating digital and technology strategies to commercial banking over a multi-year effort. He also said the company intends to remain “very intentional” about buybacks, calling repurchases a preferred use of capital given the stock’s valuation relative to peers, while also continuing to evaluate dividends.
Management closed by reiterating confidence in Puerto Rico’s economic stability, citing low unemployment and tailwinds from public reconstruction funds and private investment, while noting the need to monitor global macroeconomic and political uncertainties that could affect the island.
About OFG Bancorp (NYSE:OFG)
OFG Bancorp, through its principal subsidiary Oriental Bank, is a financial holding company headquartered in San Juan, Puerto Rico. The company provides a wide range of banking services, including commercial and consumer deposit accounts, small business loans, corporate lending, treasury management, and cash management solutions. Its consumer offerings encompass personal checking and savings accounts, credit cards, and electronic banking platforms designed to serve retail customers across its markets.
In addition to traditional banking products, OFG Bancorp offers mortgage origination and servicing, as well as wealth management and trust services for high‐net‐worth individuals and institutional clients.
