OFG Bancorp Q1 2026 Earnings Call Summary

1Key Financial Results and Metrics

Earnings Per Share (EPS): Increased by 26% year-over-year.

Core Revenues: $186 million, approximately flat compared to the previous quarter.

Total Interest Income: $194 million, a decrease of $3 million due to lower cash and investment securities balances, partially offset by higher loan balances.

Loan Growth: 5% year-over-year, with new loan production up 9%.

Core Deposits: Reported a decline of 1%, but grew over 4% year-over-year when excluding a $500 million government deposit transfer.

Net Interest Margin (NIM): 5.36%, with guidance for the full year set between 5.1% and 5.2%.

Noninterest Expense: Decreased to $95 million, down $10.3 million from the previous quarter.

Credit Quality: Net charge-offs totaled $21 million, down $5.5 million, with a net charge-off rate of 1.05%.

2Strategic Updates and Business Highlights

Digital Strategy: Focused on three pillars: targeted service offerings (Libre, Elite, MyBiz), technology enhancements, and intelligent banking through data insights.

Customer Engagement: Retail digital enrollments up 10%, digital loan payments up 5%, and virtual teller usage up 7%.

Capital Management: $44.5 million in common share repurchases and a 17% increase in dividends.

Economic Context: Positive economic indicators in Puerto Rico, including strong liquidity and low unemployment.

3Forward Guidance and Outlook

Loan Growth: Anticipated low single-digit growth for the year, driven by commercial loans while auto loans may decline.

NIM Guidance: Expected to remain stable at 5.1% to 5.2%, reflecting conservative estimates due to uncertainty around government deposit exits.

Noninterest Expenses: Expected to remain within a range of $380 million to $385 million for the year.

Tax Rate: Estimated at 22.3% for 2026, excluding discrete items.

4Bad News, Challenges, or Points of Concern

Core Deposits: The decline in reported core deposits due to the government deposit transfer raises concerns about future liquidity.

Economic Headwinds: Potential risks from geopolitical uncertainties, inflationary pressures, and the impact of energy prices on the Puerto Rican economy.

Credit Quality Risks: While current metrics are strong, ongoing monitoring is necessary due to potential economic fluctuations.

5Notable Q&A Insights

Margin Discussion: Analysts highlighted better-than-expected NIM performance, with management cautious about future guidance due to uncertain timing of government deposit exits.

Credit Quality Improvements: Management noted improvements in credit metrics due to enhanced underwriting standards implemented in late 2022.

Economic Outlook: Management remains optimistic about the Puerto Rican economy, citing strong liquidity and ongoing reconstruction efforts, despite acknowledging potential macroeconomic challenges.

Product Growth: The success of targeted deposit products (Libre, Elite, MyBiz) was emphasized, with management noting strong adoption and customer engagement. Overall, OFG Bancorp reported a solid financial performance in Q1 2026, driven by strategic initiatives and a favorable economic backdrop, while remaining cautious about potential risks and uncertainties ahead.