OFG Bancorp (NYSE:OFG) reported what management described as a strong start to 2026, highlighted by year-over-year earnings growth, continued loan expansion, and improving credit performance across its retail portfolios. On the company’s first-quarter earnings call, CEO and Chairman José Rafael Fernández pointed to “strong financial performance,” with diluted earnings per share up 26% from the prior year on 4% growth in total core revenues.
Quarter performance: loan growth, deposits, and capital returns
Fernández said results reflected “ongoing loan growth, high-quality credit performance, core deposit strength, expense, and proactive balance sheet management.” Loans grew 5% year-over-year and new loan production increased 9% from the prior year. Reported core deposits declined 1% year-over-year, but Fernández said that excluding a previously announced $500 million government deposit transfer, core deposits grew more than 4% year-over-year.
Net interest margin and guidance influenced by government deposit uncertainty
Chief Financial Officer Maritza Arizmendi said core revenues were $186 million, approximately flat versus the fourth quarter. Total interest income was $194 million, down $3 million, reflecting lower average balances of cash and investment securities at lower yields, partially offset by higher average loan balances at higher yields. Arizmendi noted that first-quarter interest income included $3.3 million from a purchased credit deteriorated (PCD) loan paid in full. She also said the first quarter had two fewer days, reducing interest income by about $3.1 million.
Total interest expense was $40 million, down $4 million, which Arizmendi attributed to lower average balances of core deposits at lower average yields, partly offset by higher average balances of brokered CDs and borrowings. Net interest margin was 5.36%, which Arizmendi said reflected the interest recovery and lower funding costs.
OFG updated its full-year net interest margin outlook to a range of 5.10% to 5.20%. Arizmendi said the updated range assumes no additional rate cuts in 2026 (versus two cuts previously expected) and incorporates the expected exit of a large remaining government deposit later in the year. During Q&A, Fernández emphasized uncertainty around the timing of the remaining government deposit outflow, calling NIM guidance “a little tricky” and saying the bank aims to be conservative. He told analysts about “around $600 million” remains in one government deposit, after the earlier $500 million transfer to the broker-dealer business.
Arizmendi added that while deposit inflows were stronger than expected in the first quarter, the company does not anticipate “much of a flexibility to push down more the cost of deposits” from here under the no-cuts scenario. She also said changes in asset mix—more commercial lending as auto loans decline—could influence loan yields, with “asset sensitivity and the liability sensitivity somehow compensating” to keep NIM relatively stable within the guidance range.
Expense trends, profitability metrics, and 2026 outlook
Non-interest expense totaled $95 million, down $10.3 million from the fourth quarter. Arizmendi said the quarter included $1 million in merit raises, $0.7 million in payroll tax costs, and $1 million tied to a capital markets readiness and registration process, alongside $3.6 million in business-related volume incentives and $2.5 million in cost savings. She noted the fourth quarter included $6.8 million in previously reported expense items.
OFG’s first-quarter income tax expense was $14.9 million compared to a benefit of $8.5 million in the prior quarter, with an effective tax rate of 21.60%. Tangible book value was $30.14 per share. Arizmendi reported an efficiency ratio of 51%, return on average assets of 1.78%, and return on average common equity of 16.4%.
For 2026, Arizmendi said the company remains on track to keep expenses within a range of $380 million to $385 million and expects an estimated tax rate of 22.3%, excluding discrete items. She said OFG continues to expect low single-digit loan growth, with an expanding commercial presence more than offsetting a declining auto portfolio.
Digital strategy and deposit momentum: Libre, Elite, and MyBiz
Fernández reiterated OFG’s “digital strategy” is centered on targeted offerings, an omni-channel technology platform, and “intelligent banking” using data and real-time insights. He said retail digital enrollments rose 10% year-over-year, digital loan payments increased 5%, and virtual teller usage climbed 7%. Net new retail and commercial customer counts each grew by close to 3%, according to Fernández.
On deposit growth during the quarter, Fernández told analysts the company’s simplified product lineup is helping drive adoption: Libre (mass market), Elite (mass affluent), and MyBiz (small business). He said Libre is “non-interest bearing” and “mostly a digital account,” while Elite is seeing both deposit growth and deeper relationships, including more lending penetration. For MyBiz, Fernández called it a “flagship” offering supported by a cash management platform he said compares favorably with U.S. banks, adding that customers are increasingly recognizing the benefits.
Arizmendi said average core deposit balances were $9.6 billion, down 4% sequentially due to the $500 million government deposit transfer early in the quarter, but by quarter-end increases in retail and commercial deposits totaled more than $150 million. Core deposit cost was 1.29%, down 13 basis points, and reported average non-interest-bearing deposits totaled $7 billion, up 1.41% sequentially and 4.55% year-over-year.
Credit quality: seasonal improvements and underwriting benefits
Chief Risk Officer César Ortiz said the quarter reinforced management’s view that higher customer liquidity in the first quarter supports improved credit metrics. He reported net charge-offs of $21 million, down $5.5 million sequentially, and a net charge-off rate of 1.05%, improving 27 basis points from the fourth quarter. Ortiz said net charge-offs included $3.9 million from a final settlement of a previously reserved U.S. loan, while the prior quarter included $4.8 million tied to a non-performing loan sale.
Ortiz highlighted improvements in retail portfolios:
- Auto net charge-off rate declined to 1.52%, improving 29 basis points sequentially.
- Consumer net charge-off rate improved to 4.40%, 15 basis points better than the fourth quarter.
- Early-stage delinquency declined to 2.2% and total delinquency to 3.4%.
- Non-performing loan rate fell to 1.47%, down 12 basis points.
Provision for credit losses was $22.5 million, down $9 million from the fourth quarter. Ortiz said the provision included $17.5 million tied to increased loan volume, $3.7 million of added reserves for a previously reserved commercial loan, and $1 million for newly classified small commercial loans. Allowance coverage was 2.48% of loans.
On the commercial side, Ortiz said the non-performing loan rate declined to 2.36% from 2.50% in the fourth quarter. He noted the portfolio still includes a “single-name telecommunication exposure” that moved to non-accrual late last year, calling it “well understood and idiosyncratic” and not indicative of broader commercial credit deterioration.
During Q&A, Ortiz also pointed to underwriting changes made in late 2022 as a contributor to better credit performance, saying the auto portfolio is now “91% prime.” Fernández added that the vintages seasoning in 2026 have “80+% in prime,” which management expects will lower future loss content. On full-year charge-offs, Fernández said he would “stick” with a 1% expectation, while acknowledging the improved FICO quality could lead to better outcomes.
Fernández also discussed Puerto Rico’s economic backdrop, citing historically low unemployment, strong liquidity, and continued inflows of reconstruction funds and private investment, while noting risks from geopolitics, energy prices, and inflation. He said OFG remains focused on growing customers, loans, and deposits, and noted the company received a 2026 Gallup Exceptional Workplace Award during the quarter.
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.
