OFG Bancorp (OFG) Earnings

Management highlights

### General Performance & Economic Environment - OFG management reported an outstanding quarter with broad-based momentum driven by disciplined execution, strong customer engagement, and a differentiated operating model - Puerto Rico's economy remains resilient, supported by healthy consumer and business liquidity, strong wage growth, historically low unemployment, federal reconstruction funding, ongoing infrastructure projects, private investment, manufacturing expansion, and new onshoring initiatives ### Digital Strategy Execution - OFG's core digital strategy focuses on three key pillars: targeted innovative account products (Libre for the mass market, Elite for mass affluent, My Biz for small businesses), omnichannel digital technology, and data-driven intelligent banking - Digital adoption continues to grow: 11% year-over-year increase in active digital users, 6% growth in digital loan payments, and 3% growth in virtual teller use; 28% of YTD Libre accounts are opened fully digitally, making OFG the only bank in Puerto Rico with this full digital capability - Over 1.1 million personalized smart banking insights are delivered monthly, with over 90% positive customer feedback; more than 68,000 customers use live remote tellers during hours when other Puerto Rican banks are closed - Digital transformation has allowed OFG to refactor traditional branches into relationship-building centers rather than transaction processing locations, driving operating efficiencies and cost savings ### Credit Quality - Disciplined risk management has driven continued improvement in overall portfolio quality; nonperforming loans fell $53.6 million after the successful sale of a large nonperforming telecom exposure and another nonperforming commercial relationship, reducing portfolio concentration and tail risk - Retail net charge-off rates improved across auto (down 41 basis points to 1.11%) and consumer (down 62 basis points to 3.78%), with stable mortgage charge-off rates - Provision for credit losses fell $9.5 million to $13 million in Q2, driven by commercial loan recoveries and lower incremental allowance building relative to Q1

Guidance

- Full-year 2026 loan growth is expected to remain low-single-digit, with commercial growth more than offsetting an unanticipated auto lending decline (auto performance has been slightly stronger than management expected) - Core deposit growth (excluding large government deposits) is expected to continue through the end of 2026 - NIM is projected to range from 5.25% to 5.35% for H2 2026, an upward revision to prior guidance that incorporates the repositioning of large government deposits into term CDs; this range aligns with core NIM performance from the first half of 2026 after excluding non-recurring loan paydown impacts - Management maintains expectations that the Federal Reserve will hold rates steady through 2026, with only one rate cut projected for 2027 - Full-year 2026 noninterest expenses are projected to remain in the range of $380 million to $385 million, unchanged from prior guidance - Full-year 2026 estimated effective tax rate remains 22.6%, excluding discrete items - OFG has $194 million in remaining share repurchase authorization; management will remain selective and opportunistic with buybacks, maintaining its prior strategy of repurchasing when shares are viewed as undervalued relative to peers

Segment performance

OFG Bancorp does not break out product-specific separate segments in this call. Overall firm financial performance for Q2 2026: EPS reached $1.39, a 21% year-over-year increase, with 4% year-over-year growth in total core revenues to $190 million (a $4.5 million increase from Q1 2026). Total interest income was $197 million, a $3 million increase from Q1, driven by higher average loan balances at higher average rates. Net interest margin (NIM) increased 9 basis points to 5.45%. Average loan balances grew $78 million to $8.2 billion, with end-of-period loan balances up $62 million (0.8%) on growth in Puerto Rican commercial and consumer lending. Q2 2026 new loan production was $750 million, a $146 million (24%) increase from Q1. Average core deposit balances grew $145 million to $9.7 billion, with end-of-period deposits up $85 million (0.9%) across government, commercial, and retail categories. CET1 ratio increased to 14.07%, total stockholders' equity rose to $1.4 billion, and return on average tangible common equity reached almost 18%. Net charge-offs came in at 1.0% of average loans, while nonperforming loans fell to 0.81% of average loans after the sale of two large nonperforming commercial exposures.

Risks & headwinds

- Early-stage consumer delinquencies saw a modest seasonal uptick in Q2, consistent with historical seasonal patterns that typically see higher delinquencies in the second half of the year, followed by declines in the first half of the subsequent year - Persistently elevated fuel prices (above $4 per gallon U.S. equivalent) may put moderate pressure on consumer loan repayment in the second half of 2026 - Large government deposits represent an uncontrollable variable for net interest margin planning, though management has now term most of these balances into 3- and 6-month CDs to reduce future margin volatility - OFG remains attentive to evolving macroeconomic risks, including changes to the interest rate outlook and global geopolitical developments - Auto lending has seen an unanticipated year-over-year decline, though performance has been slightly stronger than management projected earlier in the year

Analyst Q&A

• Q: The NIM guidance was raised again; what assumptions about the longevity of the repositioned large government deposits drive this updated outlook, and what are the core dynamics for new originations and funding costs? /

  A: The government deposit repositioning was completed at the end of June, removing the need for OFG to seek more expensive replacement market funding. This created additional spread stability justifying the upward guidance revision. OFG is slightly asset sensitive, and with no expected rate changes in 2026, NIM will remain stable around the core levels seen in the first half of 2026. Management also noted solid growing commercial loan balances with a strong pipeline that supports projected low-single-digit full-year growth.

• Q: Early delinquency numbers picked up in Q2; can you provide additional color on underlying credit trends? /

  A: The main large change in Q2 credit metrics came from the successful sale of a large nonperforming telecom loan, which reduced portfolio risk. Consumer delinquency levels are still similar or better than year-ago levels, and post-2022 underwriting vintages have stronger credit quality that is now driving improved portfolio performance. Management expects seasonal increases in delinquency and charge-offs in H2 2026, in line with historical patterns, even though elevated fuel prices continue to put mild pressure on consumer budgets.

• Q: What is the outlook for share buybacks after the large first quarter repurchase activity and no buybacks in Q2? /

  A: OFG's buyback strategy has not changed. The pause in Q2 reflected higher-than-expected loan origination activity that required retaining capital in the quarter. There is $194 million in remaining approved buyback authorization, and management will continue to methodically repurchase shares when they view OFG stock as undervalued relative to peer institutions.

• Q: What was the source of the $5.8 million in operational charges in Q2, and how does it impact future results? /

  A: The $5.8 million charge was not related to the new Q2 branding campaign. It stemmed from corrected operational errors, is fully nonrecurring, and the issues that caused the charge have already been remediated, so no further impact is expected going forward.

• Q: What deposit trends are you seeing across your three targeted retail and small business product lines? /

  A: Retail deposit growth is driven by 4% annual net new customer growth and deepening relationships with existing customers, with growing CD demand from mass market Libre account users. Elite (mass affluent) accounts see steady consistent deposit inflows, even with slower customer growth. Small business My Bix deposit growth is driven by new account openings, with relationship building leading to future lending and cash management opportunities. Core deposit costs are expected to remain stable in H2 2026.