OFG - NYSE
OFG Bancorp
OFG·NYSE
$44.73
-1.8%Financial ServicesBanks - Regional
OFG Bancorp, a financial holding company, provides a range of banking and financial services. It operates through three segments: Banking, Wealth Management, and Treasury. The company offers checking and savings accounts, as well as time deposit products; commercial, consumer, auto, and mortgage lending services; financial planning and insurance services; and corporate and individual trust, and retirement services. It also provides securities brokerage and investment advisory services, including various investment alternatives, such as tax-advantaged fixed income securities, mutual funds, stocks, and bonds to retail and institutional clients; and separately-managed accounts and mutual fund asset allocation programs. In addition, the company engages in the insurance agency and reinsurance businesses; administration and servicing of retirement plans; various treasury-related functions with an investment portfolio consisting of mortgage-backed securities, obligations of U.S. government sponsored agencies, and U.S. Treasury securities and money market instruments; and management and participation in public offerings and private placements of debt and equity securities. Further, it offers money management and investment banking services; and engages in the asset/liability management activities, such as purchases and sales of investment securities, interest rate risk management, derivatives, and borrowings. The company operates through a network of 50 branches in Puerto Rico and 2 branches in USVI. OFG Bancorp was founded in 1964 and is headquartered in San Juan, Puerto Rico.
At a Glance
Live SnapshotMarket Cap$1.89B
EPS4.5300
P/E Ratio9.87
Earnings Date07/16/2026
Earnings Call Transcript
OFG • 2026 • Q1
Operator
Good morning. Thank you for joining OFG Bancorp's Conference Call. My name is Nikki. I will be your operator today. Our speakers are José Rafael Fernández, Chief Executive Officer and Chairman of the Board of Directors, Maritza Arizmendi, Chief Financial Officer, and César Ortiz, Chief Risk Officer. A presentation accompanies today's remarks. It can be found on the homepage of the OFG website under the first quarter 2026 section. This call may feature certain forward-looking statements about management's goals, plans, and expectations. These statements are subject to risks and uncertainties outlined in the Risk Factors section of OFG's SEC filings. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards. All lines have been placed on mute to prevent any background noise.
Maritza Arizmendi
Thank you, José. Let's turn to page 6 to review our financial highlights. All comparisons are to the fourth quarter unless otherwise noted. Core revenues at $186 million were approximately level. Total interest income was $194 million, a decrease of $3 million. This reflected lower average balances of cash and investment securities at lower average yields. This was partially offset by higher average balances of loans at higher average yields. First quarter interest income included $3.3 million from a PCD loan paid in full. There were two fewer days in the first quarter. This negatively affected interest income by about $3.1 million. Total interest expense was $40 million, a decrease of $4 million.
Maritza Arizmendi
This reflected lower average balances of core deposits at lower average yields. This was partially offset by higher average balances of brokered CDs and borrowings at lower average yields. The two fewer days reduced interest expense by approximately $1 million. Total banking and financial service revenues were $32 million, a decrease of $0.6 million. This reflected favorable MSR valuation of about $1.3 million, while the fourth quarter included $2.3 million in annual insurance commissions recognition. The other income category was $0.2 million compared to a loss of $1.1 million. The change reflected the absence of several previously reported items from the fourth quarter. Non-interest expense totaled $95 million, down $10.3 million from the fourth quarter.
Maritza Arizmendi
The first quarter included $1 million in merit raises, $0.7 million in payroll tax costs, $1 million in costs related to a capital market readiness and registration process, $3.6 million in business-related volume incentives compared to $3.1 million a year ago, and $2.5 million in cost savings. The fourth quarter included net $6.8 million in previously reported expense items. Income tax was $14.9 million compared to a benefit of $8.5 million in the fourth quarter. The first quarter ETR was 21.60%. Looking at some other metrics, tangible book value was $30.14 per share. Efficiency ratio was 51%, return on average assets was 1.78%, and return on average common equity was 16.4%. Now let's turn to page seven to review our operational highlights. Average loan balances were $8.2 billion, up $50 million from the fourth quarter.
Maritza Arizmendi
This reflected increases in Puerto Rico and U.S. commercial loans, partially offset by lower balances in residential mortgage, auto, and consumer. Loan yield was 7.87%, up 14 basis points. Excluding the first quarter loan recovery, loan yield was 7.71%, down two basis points from the fourth quarter. New loan production was $609 million. This mainly reflected an increase in auto loan production. Year-over-year, new loan production increased 9%, primarily reflecting increases in new commercial loans with auto moderating as anticipated. Average core deposit balances were $9.6 billion, down 4% from the fourth quarter. This reflected the $500 government deposit transfer to wealth management early in the first quarter. By the end of the quarter, this was partially offset by increases in retail and commercial deposits totaling more than $150 million across all categories, demand, savings, and to a lower extent, time deposits.
Maritza Arizmendi
Core deposit cost was 1.29%, down 13 basis points. This was mainly due to the previously mentioned government deposit withdrawal combined with lower average rates. Excluded public funds cost of deposit was 1% compared to 1.02%. Also, reported average non-interest-bearing deposits totaled $7 billion in the first quarter, an increase of 1.41% sequentially and 4.55% year-over-year. Investment totaled $2.8 billion, down $55 million. This reflected principal pay downs and maturities. This was partially offset by purchases of $49.2 million of mortgage-backed securities and residential mortgage securitization of $23.5 million. Average borrowings and brokered deposits total $929 million compared to $787 million in the fourth quarter. The aggregate rate paid was 3.98%, down five basis points. By the end of the first quarter, balances were down to $747 million due to intentional runoff, compared to $897 million quarter.
Maritza Arizmendi
End of period cash at $636 million was 39% lower due to the government deposit transfer. Net interest margin was 5.36%, reflecting the previously mentioned $3.3 million interest recovery and lower cost of deposits and borrowings. César will provide more detail about credit quality in a moment, but first let me summarize the quarter. We demonstrated year over year loan growth and production in line with expectations, continue to expect low single digit growth with our expanding presence in commercial, more than offsetting a declining auto. Our digital-first strategy is continuing to lead to more customer, digital, and debit card transactions. Digital-first also helped grow deposits in line with our strategies. We continue to anticipate growth this year with our Libre, Elite, and MyBiz accounts. We now expect net interest margin to range from 5.10%-5.20%.
Operator
Thank you. If you have a question at this time, please press star one on your telephone keypad. If you wish to remove yourself from the queue, press star two. We'll take our first question from Brett Rabatin with StoneX. Please go ahead. Your line is open.
Maritza Arizmendi
Yeah. Thanks, José, for that color. As I mentioned that for the first quarter, definitely the fact that deposits increased at a higher rate than expected, it was a very good momentum for us. The reality is that going forward, we don't see, thinking about the rate scenario that we're managing with no cuts. We don't see much of a flexibility to push down more the cost of deposits. So we will continue to see deposits at the same level as we saw during the first quarter. The other element that is embedded within the range that I provide is the asset composition, because we will continue to see gradually commercial book having a higher proportion as auto continues to go down, as I shared with you in the prepared remarks.
Operator
Thank you. We will move next with Arren Cyganovich with Truist Securities. Please go ahead. Your line is open.
Arren Cyganovich
Thank you.
Operator
Thank you. We will move next with Kelly Motta with KBW. Please go ahead. Your line is open.
Kelly Motta
Hi. Good morning. Thanks for the question. Just a real quick one. Just a point of guidance clarification from Maritza. That 5%-10% to 5.20% margin, just wanted to clarify, is that for the full year or the balance of 2026 quarters, say?
Maritza Arizmendi
Yeah. It's for the full year. I already shared a little bit on how we're seeing and why we're seeing that range. José also provided how tricky it is to forecast the timing of the big government deposits transfers. That considered that and the fact that we are not seeing cuts during the year.
Kelly Motta
Okay, great. That's helpful. Maybe last ticky-tacky question for me, just modeling based. I appreciate the color on margin. You had the interest recovery. Just looking at your average balance sheet, it looks like there was a jump up in PCD interest income. Just to confirm, was that where that interest recovery came in?
Maritza Arizmendi
Yes.
Kelly Motta
Okay. Great.
Maritza Arizmendi
Yes. It was a payoff of a loan that was within that group. Yes.
Operator
Thank you. We will move next with Manuel Navas with Piper Sandler. Please go ahead. Your line is open.
Manuel Navas
Hi. How much do the taking out of Fed rate cuts help that NIM guide? If we did get one rate cut, what would you expect the impact to be?
Maritza Arizmendi
Well, thank you, Manuel. We continue to be asset sensitive, but the reality is that a 50 basis point cut will have a very low impact, less than 1%. The reality is that we are taking that into consideration in this new guidance because we were expecting two cuts mid-year and then at the end of the year, and that's no longer impacting the commercial book. That's why it is impacting positively the guidance that we provide, and we move it like 10 basis points, not necessarily fully related to the change in the expectation on rate cuts. Also it's a combination with the fact that the funding mix is better than expected because of the inflow that we received during the first quarter. It's encouraging us with the perspective that we had for the rest of the year.
Maritza Arizmendi
We are expecting core deposit to continue growing, so that will help funding mix in front of the potential exit of the government deposits. That's what is embedded with that guidance.
Transcript from April 21, 2026
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