OFG Bancorp Q4 FY2025 earnings call

Financial Results

• Earnings per share diluted up 17% YOY on 2% growth in total core revenues. Asset quality and credit metrics were sound. Repurchased $40 million of common shares in Q4.

Strategic Accomplishments

• 2025 saw 8.3% increase in earnings per share, 2.8% growth in total core revenues, total assets at $12.5 billion, core deposits at $9.9 billion, loans at $8.2 billion. Digital-first strategy progress with Libre and Elite accounts, enhanced Oriental Biz account suite, and omnichannel platform launch.

Economic Outlook

• Puerto Rico economy steady with sustainable outlook, businesses and consumers resilient. Public reconstruction and private investments providing tailwinds.

Core revenues totaled $185 million, an increase of $1.4 million. Total interest income was $197 million, down $3 million due to lower yields on loans and cash, partially offset by higher yields on investment securities. Total interest expense was $44 million, down $1 million due to lower rates on deposits and borrowings. Banking and financial service revenues were $33 million, up $3.4 million, mainly from wealth management. Other income was a loss of $1.11 million vs. profit of $2.2 million in Q3, due to accelerated amortization of technology assets and gains from loan sales. Average loan balances were $8 billion, up slightly. Loan yield was 7.73%, down 70 basis points. New loan production was $606 million, down from $624 million. Commercial loans grew to $3.5 billion, representing 43% of the loan book. Average core deposit balances were $9.9 billion, up almost 1%. Core deposit cost was 1.42%, down 5 basis points. Provision for credit losses was $31.9 million, up $4 million. Net charge-offs were $27 million, up $6.7 million. Credit metrics showed seasonal patterns but remained within expected ranges. CET1 ratio was 13.97%, stockholders' equity totaled $1.4 billion, up $15 million.

Loans

• Expect loans to continue low single-digit growth.

Deposits

• Expect retail and commercial deposits to increase with Libre plus Elite and digital offerings.

Expenses

• Non-interest expense expected to be between $380 million to $385 million in 2026.

Capital Return

• Intend to continue share buybacks as a best use of capital given valuation, with dividends also considered.

• Macroeconomic Uncertainties: Global macroeconomic and political uncertainties could impact Puerto Rico.
• Competitive Landscape: Intensifying competition in deposit rates, particularly from credit unions.

Q: Color on Puerto Rico charge-offs and NPLs A: Charge-offs were from a loan sale, offset by a telecommunications loan recorded as nonaccrual.

Q: Loan growth outlook A: Auto balances expected down 2-3%, commercial loans up 5-6%, low single-digit overall loan growth.

Q: Expense confidence and drivers A: Expense range reflects investment in technology and people, with efficiencies from technology and process improvements expected in 2027-2028.

Q: Margin guidance for 2026 A: Margin guidance reflects asset-sensitive positioning, impact of rate cuts, and expected funding mix changes.

Q: Credit outlook and allowance A: Net charge-off rate expected around 1%, allowance built considering specific cases, with stabilization expected.

Q: Competitive response to Libre and Elite products A: No significant rate response, success from product functionality and accessibility, attracting new and younger customers.