[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) [Registrant Details](index=1&type=section&id=Registrant%20Details) OFG Bancorp, a large accelerated filer, reported 44.5 million common shares outstanding as of July 31, 2025 - OFG Bancorp is a **Large Accelerated Filer**[4](index=4&type=chunk) | Metric | Value | | :--- | :--- | | Quarterly Period Ended | June 30, 2025 | | Commission File Number | 001-12647 | | Common Shares Outstanding (as of July 31, 2025) | 44,519,175 | | Par Value per Share | $1.00 | [Forward-Looking Statements](index=5&type=section&id=FORWARD-LOOKING%20STATEMENTS) [Nature and Risks of Forward-Looking Statements](index=5&type=section&id=Nature%20and%20Risks%20of%20Forward-Looking%20Statements) Forward-looking statements in this report are not guarantees of future performance and involve inherent risks, uncertainties, and assumptions - Forward-looking statements are not guarantees of future performance and are subject to various unpredictable risks and uncertainties[11](index=11&type=chunk) - Key risk factors include: - Rate of growth in the economy and employment levels, inflationary pressures or recessionary conditions - Changes in interest rates and their magnitude - Credit defaults by municipalities of Puerto Rico or the U.S. government - Impacts related to bank failures and market volatility - Unforeseen or catastrophic events (e.g., natural disasters, pandemics, cyber-attacks)[11](index=11&type=chunk)[12](index=12&type=chunk)[14](index=14&type=chunk) - The company assumes no obligation to update or revise any forward-looking statements unless required by law[13](index=13&type=chunk) [PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents OFG Bancorp's unaudited consolidated financial statements and notes for Q2 2025 and FY2024 [Unaudited Consolidated Statements of Financial Condition](index=7&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Financial%20Condition) Total assets and liabilities increased from December 2024 to June 2025, driven by growth in cash, investments, and loans | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Assets | $12,231,510 | $11,500,734 | $730,776 | 6.35% | | Total Liabilities | $10,897,057 | $10,246,363 | $650,694 | 6.35% | | Total Stockholders' Equity | $1,334,453 | $1,254,371 | $80,082 | 6.38% | | Cash and cash equivalents | $851,798 | $591,137 | $260,661 | 44.09% | | Total investments | $2,784,634 | $2,720,277 | $64,357 | 2.37% | | Total loans | $8,009,599 | $7,633,831 | $375,768 | 4.92% | | Total deposits | $10,144,165 | $9,604,786 | $539,379 | 5.61% | | Total borrowings | $483,993 | $401,174 | $82,819 | 20.64% | [Unaudited Consolidated Statements of Operations](index=9&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) Net income slightly decreased in H1 2025 due to higher credit loss provisions and lower non-interest income, despite increased net interest income | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Total interest income | $194,347 | $187,658 | $6,689 | 3.57% | | Total interest expense | $42,419 | $40,333 | $2,086 | 5.17% | | Net interest income | $151,928 | $147,325 | $4,603 | 3.12% | | Provision for credit losses | $21,678 | $15,581 | $6,097 | 39.13% | | Total non-interest income | $30,431 | $32,476 | $(2,045) | -6.29% | | Total non-interest expense | $94,802 | $92,960 | $1,842 | 1.98% | | Net income available to common shareholders | $51,801 | $51,131 | $670 | 1.31% | | Basic EPS | $1.15 | $1.09 | $0.06 | 5.50% | | Diluted EPS | $1.15 | $1.08 | $0.07 | 6.48% | | Cash dividends per share | $0.30 | $0.25 | $0.05 | 20.00% | | Metric | H1 2025 ($ thousands) | H1 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Total interest income | $383,569 | $371,084 | $12,485 | 3.36% | | Total interest expense | $82,570 | $79,657 | $2,913 | 3.66% | | Net interest income | $300,999 | $291,427 | $9,572 | 3.28% | | Provision for credit losses | $47,366 | $30,702 | $16,664 | 54.27% | | Total non-interest income | $59,948 | $62,824 | $(2,876) | -4.58% | | Total non-interest expense | $188,254 | $184,372 | $3,882 | 2.11% | | Net income available to common shareholders | $97,373 | $100,823 | $(3,450) | -3.42% | | Basic EPS | $2.16 | $2.14 | $0.02 | 0.93% | | Diluted EPS | $2.15 | $2.13 | $0.02 | 0.94% | | Cash dividends per share | $0.60 | $0.50 | $0.10 | 20.00% | [Unaudited Consolidated Statements of Comprehensive Income](index=11&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income significantly increased in Q2 and H1 2025, driven by unrealized gains on available-for-sale securities | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Net income | $51,801 | $51,131 | $670 | 1.31% | | Other comprehensive income (loss) before tax | $11,018 | $(5,763) | $16,781 | -291.19% | | Income tax effect | $(1,799) | $1,000 | $(2,799) | -279.90% | | Other comprehensive income (loss) after taxes | $9,219 | $(4,763) | $13,982 | -293.55% | | Comprehensive income | $61,020 | $46,368 | $14,652 | 31.60% | | Metric | H1 2025 ($ thousands) | H1 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Net income | $97,373 | $100,823 | $(3,450) | -3.42% | | Other comprehensive income (loss) before tax | $49,131 | $(23,313) | $72,444 | -310.74% | | Income tax effect | $(8,074) | $3,832 | $(11,906) | -310.71% | | Other comprehensive income (loss) after taxes | $41,057 | $(19,481) | $60,538 | -310.75% | | Comprehensive income | $138,430 | $81,342 | $57,088 | 70.18% | [Unaudited Consolidated Statements of Changes in Stockholders' Equity](index=12&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity increased in H1 2025 due to net income and comprehensive income, partially offset by dividends and repurchases | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | | :--- | :--- | :--- | :--- | | Total stockholders' equity | $1,334,453 | $1,254,371 | $80,082 | | Retained earnings | $833,187 | $771,993 | $61,194 | | Treasury stock | $(328,572) | $(296,991) | $(31,581) | | Accumulated other comprehensive loss | $(48,782) | $(89,839) | $41,057 | - Cash dividends declared per common share: - Q2 2025: **$0.30** (up from $0.25 in Q2 2024) - H1 2025: **$0.60** (up from $0.50 in H1 2024)[20](index=20&type=chunk)[22](index=22&type=chunk) - The company repurchased **768,423 shares** for **$31.1 million** during the six-month period ended June 30, 2025[144](index=144&type=chunk)[146](index=146&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=13&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 saw decreased operating cash, increased investing cash usage, and substantially increased financing cash from deposits and FHLB advances | Cash Flow Activity | H1 2025 ($ thousands) | H1 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $119,003 | $156,077 | $(37,074) | -23.75% | | Net cash (used in) provided by investing activities | $(406,175) | $57,533 | $(463,708) | -806.07% | | Net cash provided by (used in) financing activities | $547,833 | $(221,354) | $769,187 | -347.49% | | Net change in cash and cash equivalents | $260,661 | $(7,744) | $268,405 | -3466.00% | | Cash and cash equivalents at end of period | $851,798 | $740,429 | $111,369 | 15.04% | - Key drivers for cash flow changes (H1 2025 vs. H1 2024): - **Operating Activities:** Decrease mainly due to changes in other assets and accrued expenses - **Investing Activities:** Shift from net cash provided to net cash used, primarily due to increased originations and purchases of loans, and lower maturities/redemptions of investment securities - **Financing Activities:** Significant increase in cash provided, driven by a net increase in deposits and FHLB advances, partially offset by treasury stock purchases and dividends paid[25](index=25&type=chunk)[26](index=26&type=chunk) [Note 1 – Summary of Significant Accounting Policies](index=16&type=section&id=Note%201%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) OFG Bancorp, a Puerto Rico financial holding company, prepares interim financials under U.S. GAAP, adopting minor Q1 2025 updates and planning for future adoptions - OFG operates through subsidiaries including Oriental Bank, Oriental Financial Services LLC, Oriental Insurance, OFG Reinsurance Ltd, and OFG Ventures LLC, offering commercial, consumer, auto, and mortgage lending, financial planning, insurance, investment advisory, and securities brokerage services[31](index=31&type=chunk) - Unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC guidance, relying on management estimates and assumptions[33](index=33&type=chunk) - New Accounting Updates Not Yet Adopted: - **ASU 2024-03 (Disaggregation of Income Statement Expenses):** Effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Impact is currently being estimated - **ASU 2023-09 (Improvements to Income Tax Disclosures):** Effective for annual periods beginning after December 15, 2024. Impact is not expected to be material[35](index=35&type=chunk)[36](index=36&type=chunk) - New Accounting Updates Adopted in H1 2025: - **ASU 2024-02 (Codification Improvements—Amendments to Remove References to the Concepts Statements):** Adopted in Q1 2025, no material impact - **ASU 2024-01 (Compensation—Stock Compensation):** Adopted in Q1 2025, no material impact[37](index=37&type=chunk)[38](index=38&type=chunk) [Note 2 – Cash Restrictions](index=17&type=section&id=Note%202%20%E2%80%93%20Cash%20Restrictions) Oriental Bank complied with Puerto Rico's average weekly reserve balance requirement for demand deposits as of June 30, 2025 | Metric | June 30, 2025 ($ millions) | December 31, 2024 ($ millions) | | :--- | :--- | :--- | | Minimum average reserve balances | $467.4 | $472.0 | - The Bank uses cash and due from banks, as well as other short-term highly liquid securities, to cover the required average reserve balances[39](index=39&type=chunk) [Note 3 – Investment Securities](index=17&type=section&id=Note%203%20%E2%80%93%20Investment%20Securities) OFG's investment securities, mainly mortgage-backed, saw increased fair value for AFS and decreased HTM, with unrealized losses from interest rate volatility | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total investments | $2,784,634 | $2,720,277 | $64,357 | 2.37% | | Investment securities available-for-sale (Fair Value) | $2,408,874 | $2,338,205 | $70,669 | 3.02% | | Investment securities held-to-maturity (Amortized Cost) | $316,186 | $327,158 | $(10,972) | -3.35% | | Equity securities | $59,556 | $54,896 | $4,660 | 8.49% | | Total securities available for sale (Amortized Cost) | $2,465,673 | $2,444,135 | $21,538 | 0.88% | | Total securities held to maturity (Amortized Cost) | $316,186 | $327,158 | $(10,972) | -3.35% | - As of June 30, 2025, **$1.680 billion** of investment securities were pledged to secure government deposits, regulatory collateral, and borrowings, with **$1.609 billion** specifically for public funds[47](index=47&type=chunk) - Most securities are issued by U.S. government entities and government-sponsored agencies, carrying a zero-credit loss assumption[46](index=46&type=chunk) - Unrealized losses on available-for-sale securities are primarily due to market volatility from interest rate fluctuations. OFG does not intend to sell these investments before recovery of their amortized cost basis[52](index=52&type=chunk) [Note 4 – Loans](index=22&type=section&id=Note%204%20%E2%80%93%20Loans) OFG's loan portfolio increased in H1 2025, with detailed analysis of aging, non-accrual status, modifications, collateral-dependent loans, and credit quality [Loan Portfolio Composition](index=22&type=section&id=Loan%20Portfolio%20Composition) OFG's loan portfolio amortized cost increased by **4.9%** in H1 2025, driven by commercial and auto loans, offset by mortgage loan decreases | Loan Segment | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total loans held for investment | $8,180,591 | $7,791,962 | $388,629 | 4.99% | | Commercial loans | $3,423,434 | $3,103,091 | $320,343 | 10.32% | | Mortgage loans | $1,414,567 | $1,470,817 | $(56,250) | -3.82% | | Consumer loans | $680,635 | $668,561 | $12,074 | 1.81% | | Auto loans | $2,661,955 | $2,549,493 | $112,462 | 4.41% | | Allowance for credit losses | $(189,944) | $(175,863) | $(14,081) | 8.01% | | Total loans held for investment, net | $7,990,647 | $7,616,099 | $374,548 | 4.92% | - Loans held for investment granted to the Puerto Rico government or its instrumentalities increased to **$87.4 million** at June 30, 2025, from **$66.4 million** at December 31, 2024, as part of the commercial loan segment[56](index=56&type=chunk) [Aging of Loans Held for Investment](index=22&type=section&id=Aging%20of%20Loans%20Held%20for%20Investment) Total past due loans (30+ days) decreased to **$262.0 million** by June 2025, primarily due to a reduction in past due auto loans | Loan Class | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Past Due (30+ Days) | $262,001 | $300,158 | $(38,157) | -12.71% | | Commercial PR | $14,282 | $15,688 | $(1,406) | -8.96% | | Commercial US | $0 | $4,505 | $(4,505) | -100.00% | | Mortgage loans | $63,227 | $71,426 | $(8,199) | -11.48% | | Consumer loans | $16,839 | $18,471 | $(1,632) | -8.84% | | Auto loans | $167,653 | $190,068 | $(22,415) | -11.79% | - Mortgage loans past due include **$43.3 million** of delinquent loans in the GNMA buy-back option program at June 30, 2025, down from **$48.6 million** at December 31, 2024[57](index=57&type=chunk) [Non-accrual Loans](index=25&type=section&id=Non-accrual%20Loans) Total non-accrual loans increased by **19.1%** in H1 2025, primarily due to a significant rise in non-accrual commercial loans | Loan Class | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total non-accrual loans | $92,897 | $77,978 | $14,919 | 19.13% | | Non-PCD Commercial loans | $54,003 | $38,913 | $15,090 | 38.78% | | Non-PCD Mortgage loans | $11,300 | $11,923 | $(623) | -5.23% | | Non-PCD Consumer loans | $3,790 | $4,207 | $(417) | -9.91% | | Non-PCD Auto loans | $14,968 | $20,055 | $(5,087) | -25.36% | | PCD Commercial loans | $8,603 | $2,641 | $5,962 | 225.75% | | PCD Mortgage loans | $233 | $239 | $(6) | -2.51% | - Delinquent residential mortgage loans insured or guaranteed by FHA/VA are classified as non-performing when 90+ days past due but not non-accrual until 12+ months past due[63](index=63&type=chunk) [Modifications to Debtors Experiencing Financial Difficulty](index=26&type=section&id=Modifications%20to%20Debtors%20Experiencing%20Financial%20Difficulty) OFG provides loan modifications for distressed debtors; H1 2025 saw significant principal forbearance for Commercial US and term extensions for mortgage/auto loans - Loss mitigation programs offer alternatives like interest rate reduction, payment delay, term extension, and principal forbearance/forgiveness to avoid foreclosure[64](index=64&type=chunk)[65](index=65&type=chunk) | Loan Class (H1 2025) | Interest Rate Reduction (Avg %) | Term Extension (Avg months) | Principal Forgiveness/Forbearance ($ thousands) | | :--- | :--- | :--- | :--- | | Commercial PR - Secured by real estate | 2.99% | 24 | $0 | | Commercial PR - Other commercial and industrial | 5.00% | 36 | $0 | | Commercial US | 2.15% | 16 | $5,309 | | Mortgage loans | 0.35% | 123 | $35 | | Auto loans | 3.00% | 34 | $0 | - As of June 30, 2025, no loans modified within the preceding twelve months had entered payment default, indicating the effectiveness of modification efforts[74](index=74&type=chunk) | Payment Status (Modified Loans, June 30, 2025) | Total Past Due ($ thousands) | Current ($ thousands) | Total ($ thousands) | | :--- | :--- | :--- | :--- | | Commercial PR | $0 | $1,472 | $1,472 | | Commercial US | $0 | $35,326 | $35,326 | | Mortgage loans | $222 | $1,986 | $2,208 | | Auto loans | $0 | $296 | $296 | | Total | $222 | $39,080 | $39,302 | [Collateral-dependent Loans](index=31&type=section&id=Collateral-dependent%20Loans) The amortized cost of commercial collateral-dependent real estate loans decreased in H1 2025 | Loan Class | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Commercial PR: Commercial loans secured by real estate | $6,435 | $6,877 | $(442) | -6.43% | [Credit Quality Indicators (Loan Grades)](index=31&type=section&id=Credit%20Quality%20Indicators%20(Loan%20Grades)) OFG categorizes loans by credit quality; most commercial loans are 'Pass,' with an increase in 'Substandard' US commercial loans in Q2 2025 - Loan grades definitions: - **Pass:** Well-defined primary repayment source, strong financial position, minimal risk - **Special Mention:** Potential weakness requiring close management attention - **Substandard:** Inadequately protected, jeopardizes debt liquidation, distinct possibility of loss - **Doubtful:** Weaknesses make full collection questionable and improbable - **Loss:** Considered uncollectible, not practical to defer write-off[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) | Commercial Loan Grade (June 30, 2025) | Amortized Cost Basis ($ thousands) | | :--- | :--- | | Commercial PR - Secured by real estate: Pass | $1,196,330 | | Commercial PR - Secured by real estate: Special Mention | $54,947 | | Commercial PR - Secured by real estate: Substandard | $11,343 | | Other commercial and industrial: Pass | $1,175,370 | | Other commercial and industrial: Special Mention | $21,169 | | Other commercial and industrial: Substandard | $52,336 | | Commercial US: Pass | $693,774 | | Commercial US: Special Mention | $61,720 | | Commercial US: Substandard | $68,195 | | Commercial US: Doubtful | $1,565 | | Total Commercial Loans | $3,336,749 | | Mortgage & Consumer Loan Performance (June 30, 2025) | Performing ($ thousands) | Nonperforming ($ thousands) | | :--- | :--- | :--- | | Mortgage loans | $602,900 | $15,804 | | Personal loans | $631,905 | $3,179 | | Credit lines | $9,451 | $89 | | Credit cards | $34,406 | $522 | | Overdrafts | $508 | $0 | | Auto Loan FICO Score (June 30, 2025) | Amortized Cost Basis ($ thousands) | | :--- | :--- | | 1-660 | $716,203 | | 661-699 | $421,555 | | 700+ | $1,499,108 | | No FICO | $24,929 | | Total Auto Loans | $2,661,795 | [Note 5 – Allowance for Credit Losses](index=38&type=section&id=Note%205%20%E2%80%93%20Allowance%20for%20Credit%20Losses) ACL increased to **$189.9 million** by June 2025 due to loan volume and model adjustments; net charge-offs decreased by **$1.7 million** in H1 2025 - ACL is based on management's best estimate of lifetime expected credit losses, incorporating historical loss experience, current credit quality, and macroeconomic scenarios. Qualitative reserves are also included for higher-risk segments[94](index=94&type=chunk)[95](index=95&type=chunk) | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total ACL | $189,944 | $175,863 | $14,081 | 8.01% | | Non-PCD ACL | $182,765 | $170,709 | $12,056 | 7.06% | | PCD ACL | $7,179 | $5,154 | $2,025 | 39.29% | - Key drivers for ACL increase (H1 2025): - **$34.6 million** for loan volume - **$8.5 million** in specific reserves - **$6.0 million** due to alignment of model assumptions and risk weighting factors, mainly in Puerto Rico[96](index=96&type=chunk) | Net Charge-offs (H1) | 2025 ($ thousands) | 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Net Charge-offs | $33,200 | $34,900 | $(1,700) | -4.87% | | Commercial loans | $(3,800) | $(6,800) | $3,000 | -44.12% | | Consumer loans | $(1,000) | $(14,600) | $13,600 | -93.15% | | Auto loans | $3,000 | $(14,800) | $17,800 | -120.27% | [Note 6 – Foreclosed Real Estate](index=41&type=section&id=Note%206%20%E2%80%93%20Foreclosed%20Real%20Estate) Foreclosed real estate balances significantly decreased in H1 2025 due to sales, exceeding additions and value declines | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Balance at end of period | $2,603 | $4,002 | $(1,399) | -34.96% | | Activity (H1) | 2025 ($ thousands) | 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Additions | $557 | $2,051 | $(1,494) | -72.84% | | Sales | $(2,425) | $(6,930) | $4,505 | -65.01% | | Decline in value | $(223) | $(301) | $78 | -25.91% | [Note 7 – Servicing Assets](index=41&type=section&id=Note%207%20%E2%80%93%20Servicing%20Assets) Mortgage servicing rights fair value slightly decreased in H1 2025, influenced by loan payments and valuation assumptions, while fees increased | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Fair value of mortgage servicing rights | $68,588 | $70,435 | $(1,847) | -2.62% | | Activity (H1) | 2025 ($ thousands) | 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Servicing from mortgage securitization or asset transfers | $1,410 | $830 | $580 | 69.88% | | Changes due to payments on loans | $(2,608) | $(1,652) | $(956) | 57.87% | | Changes in fair value due to valuation model inputs or assumptions | $(649) | $1,091 | $(1,740) | -159.49% | | Servicing Fees | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | H1 2025 ($ thousands) | H1 2024 ($ thousands) | | :--- | :--- | :--- | :--- | | Servicing and ancillary fees on mortgage loans | $5,600 | $4,500 | $11,100 | $8,900 | - Key economic assumptions for fair value measurement: - Constant prepayment rate: **1.00% - 18.42%** (2025) vs. 1.49% - 11.45% (2024) - Discount rate: **10.00% - 15.50%** (both years)[104](index=104&type=chunk) [Note 8 – Goodwill and Other Intangible Assets](index=42&type=section&id=Note%208%20%E2%80%93%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill remained stable at **$84.2 million** with no impairment; other intangible assets decreased due to amortization in H1 2025 | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Goodwill | $84,241 | $84,241 | $0 | 0.00% | | Other intangible assets (Net Carrying Value) | $12,318 | $14,782 | $(2,464) | -16.67% | | Core deposit intangibles (Net Carrying Value) | $9,434 | $11,320 | $(1,886) | -16.66% | | Customer relationship intangibles (Net Carrying Value) | $2,884 | $3,462 | $(578) | -16.69% | - No impairment losses were identified for goodwill or other intangible assets as of June 30, 2025[109](index=109&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk) | Amortization of Other Intangible Assets | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | H1 2025 ($ thousands) | H1 2024 ($ thousands) | | :--- | :--- | :--- | :--- | | Amortization expense | $1,200 | $1,500 | $2,500 | $3,000 | [Note 9 – Accrued Interest Receivable and Other Assets](index=43&type=section&id=Note%209%20%E2%80%93%20Accrued%20Interest%20Receivable%20and%20Other%20Assets) Accrued interest receivable slightly increased, with other assets rising substantially due to prepaid expenses, including taxes | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Accrued interest receivable | $73,782 | $71,667 | $2,115 | 2.95% | | Loans (Accrued Interest Receivable) | $62,623 | $60,864 | $1,759 | 2.89% | | Investments (Accrued Interest Receivable) | $11,159 | $10,803 | $356 | 3.29% | | Other assets | $189,948 | $148,879 | $41,069 | 27.59% | | Prepaid expenses | $119,772 | $72,093 | $47,679 | 66.14% | | Other repossessed assets | $4,760 | $6,595 | $(1,835) | -27.82% | - Accrued interest receivable on loans in Hurricane Fiona and Covid-19 deferral programs amounted to **$17.4 million** at June 30, 2025, with an ACL of **$59 thousand**[115](index=115&type=chunk) - Prepaid expenses include **$107.3 million** in prepaid municipal, property, and income taxes at June 30, 2025[116](index=116&type=chunk) [Note 10 – Deposits and Related Interest](index=44&type=section&id=Note%2010%20%E2%80%93%20Deposits%20and%20Related%20Interest) Total deposits increased by **5.6%** in H1 2025, driven by time and brokered deposits, while the weighted average interest rate slightly decreased | Deposit Type | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total deposits | $10,144,165 | $9,604,786 | $539,379 | 5.61% | | Non-interest-bearing demand deposits | $2,586,734 | $2,493,860 | $92,874 | 3.72% | | Interest-bearing savings and demand deposits | $5,345,742 | $5,198,462 | $147,280 | 2.83% | | Retail certificates of deposit | $1,182,213 | $1,170,560 | $11,653 | 0.99% | | Institutional certificates of deposit | $781,123 | $585,829 | $195,294 | 33.34% | | Brokered deposits | $248,353 | $156,075 | $92,278 | 59.12% | - Weighted average interest rate of deposits: - June 30, 2025: **1.51%** - December 31, 2024: **1.56%**[119](index=119&type=chunk) - Total public fund deposits from Puerto Rico government entities increased to **$1.622 billion** at June 30, 2025, from **$1.445 billion** at December 31, 2024, collateralized by **$1.697 billion** in securities and commercial loans[120](index=120&type=chunk) | Interest Expense on Deposits (H1) | 2025 ($ thousands) | 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | Demand and savings deposits | $42,434 | $52,748 | $(10,314) | -19.55% | | Certificates of deposit | $31,737 | $21,856 | $9,881 | 45.21% | | Total | $74,171 | $74,604 | $(433) | -0.58% | [Note 11 – Borrowings and Related Interest](index=46&type=section&id=Note%2011%20%E2%80%93%20Borrowings%20and%20Related%20Interest) Total borrowings increased by **20.6%** in H1 2025, driven by new FHLB advances for liquidity and growth, while repurchase agreements decreased | Borrowing Type | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total borrowings | $483,993 | $401,174 | $82,819 | 20.64% | | Advances from FHLB | $456,530 | $325,952 | $130,578 | 40.06% | | Securities sold under agreements to repurchase | $27,463 | $75,222 | $(47,759) | -63.49% | - FHLB advances: - Weighted average remaining maturity: **1.7 years** (June 30, 2025) vs. 4 months (December 31, 2024) - Additional borrowing capacity: **$257.1 million** (June 30, 2025) vs. $383.1 million (December 31, 2024)[123](index=123&type=chunk) - A new two-year **$200.0 million** FHLB advance at **4.13%** was taken in H1 2025 to increase liquidity and fund strategic growth in commercial loans[342](index=342&type=chunk) | Interest Expense on Borrowings (H1) | 2025 ($ thousands) | 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | Securities sold under agreements to repurchase | $830 | $0 | $830 | 100.00% | | Advances from FHLB and other borrowings | $7,569 | $5,053 | $2,516 | 49.79% | | Total | $8,399 | $5,053 | $3,346 | 66.22% | [Note 12 – Offsetting of Financial Assets and Liabilities](index=48&type=section&id=Note%2012%20%E2%80%93%20Offsetting%20of%20Financial%20Assets%20and%20Liabilities) OFG's securities sold under repurchase agreements have a right of set-off with counterparties, impacting recognized financial assets and liabilities - Securities sold under agreements to repurchase have a right of set-off with the respective counterparty under supplemental terms of master repurchase agreements[128](index=128&type=chunk) | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | | Gross Amount of Recognized Liabilities (Securities sold under agreements to repurchase) | $27,344 | $75,000 | | Fair Value of Underlying Securities | $28,946 | $80,968 | | Net Amount | $(1,602) | $(5,968) | [Note 13 – Income Taxes](index=49&type=section&id=Note%2013%20%E2%80%93%20Income%20Taxes) OFG's effective tax rate decreased in H1 2025 due to preferential tax treatment and discrete benefits, despite increases in deferred tax assets and liabilities - OFG is subject to the Puerto Rico Internal Revenue Code (maximum **37.5%** corporate tax rate) and U.S. federal and state income taxes for its mainland operations and USVI branches[131](index=131&type=chunk) | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Net deferred tax assets | $7,048 | $6,248 | $800 | 12.80% | | Net deferred tax liability | $48,374 | $40,718 | $7,656 | 18.79% | | Valuation allowance (decrease) | $(789) | N/A | N/A | N/A | - Effective Tax Rate (ETR): - H1 2025: **22.3%** (down from 27.6% in H1 2024) - Expected ETR for 2025 (excluding discrete items): **24.9%**[133](index=133&type=chunk) - The decrease in ETR is mainly related to investments subject to preferential tax treatment under the PR Code, a discrete tax windfall on stock options, the release of unrecognized tax benefits, and a discrete benefit from purchasing tax credits at a discount[133](index=133&type=chunk) | Income Tax Expense | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | H1 2025 ($ thousands) | H1 2024 ($ thousands) | | :--- | :--- | :--- | :--- | | Income tax expense | $14,078 | $20,129 | $27,954 | $38,354 | [Note 14 – Regulatory Capital Requirements](index=50&type=section&id=Note%2014%20%E2%80%93%20Regulatory%20Capital%20Requirements) OFG and Oriental Bank remain 'well capitalized' under Basel III, though capital ratios slightly decreased due to increased risk-weighted assets - OFG and the Bank are subject to Basel III capital rules and are categorized as 'well capitalized' as of June 30, 2025[136](index=136&type=chunk)[137](index=137&type=chunk) | OFG Bancorp Ratios | June 30, 2025 | December 31, 2024 | Change (bps) | | :--- | :--- | :--- | :--- | | Total capital to risk-weighted assets | 15.25% | 15.52% | -27 | | Tier 1 capital to risk-weighted assets | 13.99% | 14.26% | -27 | | Common equity tier 1 capital to risk-weighted assets | 13.99% | 14.26% | -27 | | Tier 1 capital to average total assets | 10.83% | 10.93% | -10 | | Oriental Bank Ratios | June 30, 2025 | December 31, 2024 | Change (bps) | | :--- | :--- | :--- | :--- | | Total capital to risk-weighted assets | 14.21% | 14.86% | -65 | | Tier 1 capital to risk-weighted assets | 12.95% | 13.60% | -65 | | Common equity tier 1 capital to risk-weighted assets | 12.95% | 13.60% | -65 | | Tier 1 capital to average total assets | 10.07% | 10.45% | -38 | - The decrease in regulatory capital ratios from December 31, 2024, to June 30, 2025, reflected an increase in risk-weighted assets of **$432.7 million**, partially offset by an increase in regulatory capital of **$41.8 million**[348](index=348&type=chunk) [Note 15 – Stockholders' Equity](index=51&type=section&id=Note%2015%20%E2%80%93%20Stockholders'%20Equity) Total stockholders' equity increased by **6.4%** in H1 2025, driven by net income, legal surplus, and reduced AOCI, offset by repurchases | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total stockholders' equity | $1,334,453 | $1,254,371 | $80,082 | 6.38% | | Legal surplus | $178,834 | $169,537 | $9,297 | 5.48% | | Retained earnings | $833,187 | $771,993 | $61,194 | 7.93% | | Treasury stock, at cost | $(328,572) | $(296,991) | $(31,581) | 10.63% | | Accumulated other comprehensive loss | $(48,782) | $(89,839) | $41,057 | -45.70% | - Legal surplus increased due to transfers from retained earnings: - Q2 2025: **$4.9 million** - H1 2025: **$9.3 million**[142](index=142&type=chunk) - In April 2025, the Board approved a new **$100 million** stock repurchase program, in addition to the **$50 million** program from October 2024. During H1 2025, OFG repurchased **768,423 shares** for **$31.1 million**[143](index=143&type=chunk)[144](index=144&type=chunk) [Note 16 – Accumulated Other Comprehensive Loss](index=52&type=section&id=Note%2016%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss significantly decreased in H1 2025, primarily due to unrealized gains on available-for-sale securities, net of tax | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Accumulated other comprehensive loss, net of income taxes | $(48,782) | $(89,839) | $41,057 | -45.70% | | Unrealized loss on securities available-for-sale | $(56,799) | $(105,930) | $49,131 | -46.38% | | Income tax effect of unrealized loss | $8,017 | $16,091 | $(8,074) | -50.18% | | Changes in AOCI (Net unrealized loss on securities available-for-sale) | Q2 2025 ($ thousands) | H1 2025 ($ thousands) | | :--- | :--- | :--- | | Beginning balance | $(58,001) | $(89,839) | | Other comprehensive income (loss), net of tax | $9,219 | $41,057 | | Ending balance | $(48,782) | $(48,782) | [Note 17 – Earnings per Common Share](index=54&type=section&id=Note%2017%20%E2%80%93%20Earnings%20per%20Common%20Share) Basic and diluted EPS increased in Q2 and H1 2025 despite fewer average common shares outstanding | Metric | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $1.15 | $1.09 | $0.06 | 5.50% | | Diluted EPS | $1.15 | $1.08 | $0.07 | 6.48% | | Average common shares outstanding (thousands) | 44,854 | 46,952 | (2,098) | -4.47% | | Average common shares outstanding and equivalents (thousands) | 45,033 | 47,131 | (2,098) | -4.45% | | Metric | H1 2025 | H1 2024 | YoY Change | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $2.16 | $2.14 | $0.02 | 0.93% | | Diluted EPS | $2.15 | $2.13 | $0.02 | 0.94% | | Average common shares outstanding (thousands) | 45,074 | 47,024 | (1,950) | -4.15% | | Average common shares outstanding and equivalents (thousands) | 45,265 | 47,244 | (1,979) | -4.19% | - The quarterly common stock cash dividend increased to **$0.30 per share** in Q1 2025 from $0.25 per share in Q1 2024[152](index=152&type=chunk) [Note 18 – Guarantees](index=54&type=section&id=Note%2018%20%E2%80%93%20Guarantees) OFG's standby letters of credit increased, while residential mortgage loans subject to credit recourse and related loss liabilities decreased | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Notional amount of standby letters of credit | $26,300 | $25,300 | $1,000 | 3.95% | | Unpaid principal balance of residential mortgage loans sold subject to credit recourse | $86,700 | $90,500 | $(3,800) | -4.20% | | Estimated losses to be absorbed under credit recourse arrangements | $91 | $155 | $(64) | -41.29% | | Changes in Liability for Estimated Losses (H1) | 2025 ($ thousands) | 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | Balance at beginning of period | $155 | $102 | $53 | 51.96% | | Net recoveries (charge-offs/terminations) | $(64) | $(43) | $(21) | 48.84% | | Balance at end of period | $91 | $59 | $32 | 54.24% | - OFG serviced **$5.6 billion** in mortgage loans for third parties at June 30, 2025, and is required to advance funds for scheduled payments on serviced loans, with **$4.9 million** outstanding in such advances[159](index=159&type=chunk) [Note 19 – Commitments and Contingencies](index=56&type=section&id=Note%2019%20%E2%80%93%20Commitments%20and%20Contingencies) OFG manages off-balance-sheet credit risks, including commitments to extend credit and standby letters of credit, and maintains liabilities for legal and operational contingencies | Commitment Type | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Commitments to extend credit | $1,318,822 | $1,360,351 | $(41,529) | -3.05% | | Commercial letters of credit | $230 | $1,096 | $(866) | -79.01% | | Standby letters of credit and financial guarantees | $26,321 | $25,321 | $1,000 | 3.95% | | Loans sold with recourse | $86,747 | $90,464 | $(3,717) | -4.11% | - The ACL for off-balance sheet credit exposures (commitments to extend credit and standby letters of credit) increased to **$1.0 million** at June 30, 2025, from $878 thousand at December 31, 2024[167](index=167&type=chunk) - Other non-credit commitments: - Acquisition of equity securities: **$13.2 million** (June 30, 2025) vs. $14.6 million (December 31, 2024) - Capital expenditures in technology: **$2.9 million** (June 30, 2025) vs. $953 thousand (December 31, 2024)[168](index=168&type=chunk) - Accrued liability for legal contingencies increased to **$600 thousand** at June 30, 2025, from $407 thousand at December 31, 2024. Management believes the ultimate outcome of legal matters will not have a material adverse effect[171](index=171&type=chunk)[172](index=172&type=chunk) [Note 20 – Operating Leases](index=57&type=section&id=Note%2020%20%E2%80%93%20Operating%20Leases) OFG's operating lease costs slightly decreased in H1 2025, with both right-of-use assets and lease liabilities declining due to amortization and payments | Lease Cost Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | H1 2025 ($ thousands) | H1 2024 ($ thousands) | | :--- | :--- | :--- | :--- | | Total lease costs | $2,745 | $2,693 | $5,454 | $5,785 | | Lease Balance Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Right-of-use assets | $17,284 | $19,197 | $(1,913) | -9.96% | | Lease Liabilities | $19,354 | $21,388 | $(2,034) | -9.51% | - Weighted-average remaining lease term: **4.6 years** (June 30, 2025) vs. 4.8 years (December 31, 2024) Weighted-average discount rate: **7.6%** (both periods)[175](index=175&type=chunk) | Future Minimum Lease Payments (as of June 30, 2025) | Amount ($ thousands) | | :--- | :--- | | 2025 | $3,505 | | 2026 | $5,872 | | 2027 | $4,807 | | 2028 | $3,457 | | 2029 | $1,872 | | Thereafter | $3,534 | | Total lease payments | $23,047 | | Less imputed interest | $3,693 | | Present value of lease liabilities | $19,354 | [Note 21 – Fair Value of Financial Instruments](index=59&type=section&id=Note%2021%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) OFG measures financial instrument fair value using a hierarchy, with most assets and liabilities increasing in fair value from December 2024 to June 2025 - Fair value measurement framework: - Defines fair value as the exchange price in an orderly transaction between market participants - Establishes a fair value hierarchy (Level 1, 2, 3) to maximize observable inputs[177](index=177&type=chunk) - Valuation methodologies for Level 3 assets: - **Servicing assets:** Discounted cash flow (DCF) model, considering servicing fees, prepayment assumptions, delinquency rates, etc - **Collateral-dependent loans:** Fair value of collateral less estimated selling costs, derived from appraisals, market quotes, and customized discounting - **Foreclosed real estate:** External appraisal, broker price opinion, or internal valuation, with internal adjustments - **Other repossessed assets:** Internal valuation and external appraisal, with internal adjustments[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) | Financial Instrument | June 30, 2025 (Fair Value, $ thousands) | December 31, 2024 (Fair Value, $ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents (Level 1) | $851,798 | $591,137 | $260,661 | 44.09% | | Investment securities available-for-sale (Level 2) | $2,407,475 | $2,337,055 | $70,420 | 3.01% | | Investment securities held-to-maturity (Level 2) | $229,716 | $232,152 | $(2,436) | -1.05% | | Servicing assets (Level 3) | $68,588 | $70,435 | $(1,847) | -2.62% | | Total loans, net (Level 3) | $7,946,890 | $7,567,075 | $379,815 | 5.02% | | Deposits | $10,172,396 | $9,625,803 | $546,593 | 5.68% | | Advances from FHLB | $456,276 | $324,510 | $131,766 | 40.61% | | Level 3 Assets (June 30, 2025) | Fair Value ($ thousands) | Unobservable Input | Range | Weighted Average | | :--- | :--- | :--- | :--- | :--- | | Servicing assets | $68,588 | Constant prepayment rate | 1.00% - 18.42% | 5.65% | | | | Discount rate | 10.00% - 15.50% | 11.61% | | Collateral dependent loans | $6,435 | Appraised value less disposition costs | 9.20% - 33.20% | 20.33% | | Foreclosed real estate | $2,603 | Appraised value less disposition costs | 9.20% - 33.20% | 13.21% | | Other repossessed assets | $4,760 | Estimated net realizable value less disposition costs | 33.00% - 63.00% | 51.02% | | Mortgage loans held for sale | $14,590 | Pricing and execution whole loan | 92.70% - 100.62% | 97.66% | | Other loans held for sale | $4,362 | Estimated market value | 103.16% - 103.16% | 103.16% | [Note 22 – Banking and Financial Service Revenues](index=66&type=section&id=Note%2022%20%E2%80%93%20Banking%20and%20Financial%20Service%20Revenues) Total banking and financial service revenues decreased in Q2 and H1 2025 due to Durbin Amendment impact, partially offset by wealth management and mortgage banking growth | Revenue Category | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Total banking and financial service revenues | $30,247 | $32,085 | $(1,838) | -5.73% | | Banking service revenues | $15,982 | $18,781 | $(2,799) | -14.90% | | Wealth management revenue | $8,918 | $8,440 | $478 | 5.66% | | Mortgage banking activities | $5,347 | $4,864 | $483 | 9.93% | | Revenue Category | H1 2025 ($ thousands) | H1 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Total banking and financial service revenues | $59,459 | $62,144 | $(2,685) | -4.32% | | Banking service revenues | $31,963 | $36,040 | $(4,077) | -11.31% | | Wealth management revenue | $17,373 | $16,547 | $826 | 4.99% | | Mortgage banking activities | $10,123 | $9,557 | $566 | 5.92% | - The decrease in banking service revenues is mainly due to reduced interchange fees from the implementation of the Durbin Amendment, which became applicable to the Bank on July 1, 2024[197](index=197&type=chunk)[271](index=271&type=chunk) - Wealth management revenue increases were driven by higher insurance income and broker-dealer fees from investment advisory services and mutual funds[273](index=273&type=chunk)[274](index=274&type=chunk) [Note 23 – Business Segments](index=67&type=section&id=Note%2023%20%E2%80%93%20Business%20Segments) OFG's Banking segment net income decreased in H1 2025, while Wealth Management increased, and Treasury decreased due to higher interest expense - OFG's reportable segments are Banking, Wealth Management, and Treasury, with performance evaluated by the CEO (CODM) primarily based on net income[203](index=203&type=chunk)[208](index=208&type=chunk) | Segment Net Income (H1) | 2025 ($ thousands) | 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Banking | $34,180 | $39,223 | $(5,043) | -12.86% | | Wealth Management | $8,011 | $5,384 | $2,627 | 48.79% | | Treasury | $55,182 | $56,216 | $(1,034) | -1.84% | | Consolidated Total | $97,373 | $100,823 | $(3,450) | -3.42% | - Key drivers for segment performance (H1 2025 vs. H1 2024): - **Banking:** Decrease in net income before taxes due to **$16.6 million** higher provision for credit losses and **$5.8 million** lower non-interest income (Durbin Amendment impact), partially offset by **$6.5 million** higher interest income from loans and **$3.5 million** lower interest expense from core deposits - **Wealth Management:** Increase in net income before taxes from **$2.9 million** higher non-interest income (broker-dealer fees, insurance income, trustee fees), partially offset by **$0.6 million** higher salaries and employee benefits - **Treasury:** Decrease in net income before taxes due to **$7.1 million** higher interest expense (FHLB advances, brokered deposits), partially offset by **$6.0 million** higher interest income from investment securities[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=72&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews OFG Bancorp's Q2 and H1 2025 financial performance, condition, and strategic initiatives, including asset growth and key financial metrics - OFG's long-term goal is to strengthen its banking and financial services franchise by expanding lending, increasing integration of services, improving asset-liability management, growing non-interest revenue, and achieving greater operating efficiencies[224](index=224&type=chunk) - The company is deploying a 'Digital First' strategy to enhance customer experience through digital channels, emphasizing convenience, self-service, and value-added services[226](index=226&type=chunk) - Recent Capital Actions: - Increased regular quarterly cash dividend to **$0.30 per common share** (from $0.25) starting Q1 2025 - Approved a new **$100 million** stock repurchase program in April 2025, in addition to the October 2024 program[227](index=227&type=chunk) - Puerto Rico's economy shows a positive outlook with consistent upward trends in economic activity, wages, and labor participation rates, despite global economic volatility[229](index=229&type=chunk) - Financial Highlights for Q2 2025: - Diluted EPS: **$1.15** (up 6.5% YoY) - Net income: **$51.8 million** (up 1.3% YoY) - Net interest margin: **5.31%** - Return on average assets: **1.73%** - Return on average tangible common stockholders' equity: **16.96%** - Efficiency ratio: **52.04%** - Record assets: **$12.2 billion** - Core deposits: **$9.9 billion** - Loans held for investment: **$8.2 billion**[233](index=233&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total assets | $12,231,510 | $11,500,734 | $730,776 | 6.35% | | Cash and due from banks | $844,492 | $584,467 | $260,025 | 44.49% | | Total investments | $2,784,634 | $2,720,277 | $64,357 | 2.37% | | Total loans, net | $8,009,599 | $7,633,831 | $375,768 | 4.92% | [Introduction](index=72&type=section&id=Introduction) OFG Bancorp, a financial holding company, offers diverse banking and financial services, balancing interest and non-interest income through its 'Digital First' strategy - OFG operates through three business segments: Banking, Wealth Management, and Treasury, with a diversified mix of businesses and products generating both interest and non-interest income[224](index=224&type=chunk)[225](index=225&type=chunk) - The company's 'Digital First' strategy focuses on convenience and accessibility through digital channels, aiming for a simple, self-service, and enjoyable customer experience to drive financial progress[226](index=226&type=chunk) [Recent Developments](index=72&type=section&id=Recent%20Developments) OFG Bancorp increased its quarterly dividend to **$0.30** and approved a new **$100 million** stock repurchase program in April 2025 - Capital Actions: - Quarterly cash dividend increased to **$0.30 per common share**, effective Q1 2025 - New **$100 million** stock repurchase program approved in April 2025, supplementing an existing program[227](index=227&type=chunk) | Metric | H1 2025 | | :--- | :--- | | Shares repurchased | 768,423 | | Total value of repurchases ($ million) | $31.1 | | Average price per share | $40.46 | | Estimated remaining shares under new program (as of June 30, 2025) | 2,303,476 | | Remaining balance under new program (as of June 30, 2025) ($ million) | $98.6 | [Economic Conditions](index=73&type=section&id=Economic%20Conditions) Puerto Rico's economy shows a positive outlook with rising indicators and investments, though OFG remains cautious about global volatility - Puerto Rico's Economic Activity Index stood at **127.6 points** in March 2025, showing a **0.2%** month-over-month increase but a **1.0%** year-over-year decrease[229](index=229&type=chunk) - Total non-farm payroll employment averaged **963,200 jobs** in February 2025, reflecting a **0.2%** month-over-month increase and **1.2%** annual growth[229](index=229&type=chunk) - OFG remains vigilant to increased global economic and geopolitical volatility and its potential effects on Puerto Rico's economy[229](index=229&type=chunk) [Critical Accounting Policies and Estimates](index=73&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) ACL for loans is a critical accounting estimate; OFG updated its ACL methodology for Puerto Rico loans in H1 2025, using a higher recessionary probability - The Allowance for Credit Losses (ACL) is identified as a critical accounting policy and estimate due to significant estimation uncertainty[231](index=231&type=chunk) - During H1 2025, OFG updated its ACL methodology for the Puerto Rico loan segment to use a higher probability level in the moderate recessionary scenario, which is considered a change in accounting estimate[232](index=232&type=chunk) [Financial Highlights](index=73&type=section&id=Financial%20Highlights) OFG Bancorp reported strong Q2 2025 operating performance with increased EPS, record assets, core deposits, and significant loan production growth - Q2 2025 Performance Highlights: - Diluted EPS: **$1.15** (up from $1.08 in Q2 2024) - Net income: **$51.8 million** (up from $51.1 million in Q2 2024) - Net interest margin: **5.31%** - Return on average assets: **1.73%** - Return on average tangible common stockholders' equity: **16.96%** - Efficiency ratio: **52.04%**[236](index=236&type=chunk) - Key Financial Metrics (Q2 2025 vs. Q2 2024): - Total Interest Income: **$194.3 million** (up 3.6%) - Total Interest Expense: **$42.4 million** (up 5.2%) - Net Interest Income: **$151.9 million** (up 3.1%) - Provision for Credit Losses: **$21.7 million** (up 39.1%) - Total Non-Interest Income: **$30.4 million** (down 6.3%) - Total Non-Interest Expense: **$94.8 million** (up 2.0%) - Net Income Available to Common Shareholders: **$51.8 million** (up 1.3%)[251](index=251&type=chunk) - Balance Sheet Highlights (June 30, 2025): - Record assets: **$12.2 billion** - Core deposits: **$9.9 billion** - Loans held for investment: **$8.18 billion** - New loan production: **$783.7 million** (up from $589.0 million in Q2 2024)[235](index=235&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) | Capital Ratios | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | CET1 ratio | 13.99% | 14.26% | | Tangible Common Equity ratio | 10.20% | 10.13% | | Tangible Book Value per share | $27.67 | $25.43 | [Analysis of Results of Operations](index=77&type=section&id=Analysis%20of%20Results%20of%20Operations) This section analyzes OFG Bancorp's Q2 and H1 2025 operational results, including net interest income, non-interest income/expenses, credit losses, and segment performance [Net Interest Income](index=81&type=section&id=Net%20Interest%20Income) Net interest income increased in Q2 and H1 2025, driven by higher interest income from investments and loans, partially offset by increased borrowing costs | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $151,928 | $147,325 | $4,603 | 3.12% | | Interest rate spread | 5.17% | 5.36% | -0.19% | -3.54% | | Interest rate margin | 5.31% | 5.51% | -0.20% | -3.63% | | Metric | H1 2025 ($ thousands) | H1 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $300,999 | $291,427 | $9,572 | 3.28% | | Interest rate spread | 5.22% | 5.31% | -0.09% | -1.69% | | Interest rate margin | 5.37% | 5.45% | -0.08% | -1.47% | - Positive impacts on net interest income (Q2 2025 vs. Q2 2024): - **$4.6 million** increase from investment securities (higher yield and volume) - **$2.7 million** increase from loans (driven by auto and consumer loans, partially offset by commercial and mortgage loans)[264](index=264&type=chunk)[265](index=265&type=chunk) - Offsetting factors: - Higher interest expense of **$2.1 million** from borrowings - Lower interest income of **$0.7 million** from interest-bearing cash and money market investments[264](index=264&type=chunk) [Non-Interest Income](index=83&type=section&id=Non-Interest%20Income) Total non-interest income decreased in Q2 and H1 2025 due to Durbin Amendment impact, partially offset by growth in wealth management and mortgage banking | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Total non-interest income | $30,431 | $32,476 | $(2,045) | -6.29% | | Banking service revenue | $15,982 | $18,781 | $(2,799) | -14.90% | | Wealth management revenue | $8,918 | $8,440 | $478 | 5.66% | | Mortgage banking activities | $5,347 | $4,864 | $483 | 9.93% | | Metric | H1 2025 ($ thousands) | H1 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Total non-interest income | $59,948 | $62,824 | $(2,876) | -4.58% | | Banking service revenue | $31,963 | $36,040 | $(4,077) | -11.31% | | Wealth management revenue | $17,373 | $16,547 | $826 | 4.99% | | Mortgage banking activities | $10,123 | $9,557 | $566 | 5.92% | - The decrease in banking service revenues was mainly due to reduced interchange fees following the implementation of the Durbin Amendment on July 1, 2024[271](index=271&type=chunk) - Offsetting increases: - Wealth management revenues: Higher insurance income and broker-dealer fees - Mortgage banking activities: Higher servicing fees (due to portfolio purchase in late 2024) and gains on sale of loans/securitizations, partially offset by unfavorable valuation of mortgage servicing rights[273](index=273&type=chunk)[274](index=274&type=chunk) [Non-Interest Expense](index=84&type=section&id=Non-Interest%20Expense) Total non-interest expense increased in Q2 and H1 2025 due to higher compensation, foreclosed real estate expenses, and taxes, partially offset by other reductions | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Total non-interest expenses | $94,802 | $92,960 | $1,842 | 1.98% | | Compensation and employee benefits | $39,565 | $38,467 | $1,098 | 2.86% | | Foreclosed real estate and other repossessed assets expenses (income), net | $310 | $(731) | $1,041 | -142.41% | | Electronic banking charges | $12,276 | $11,687 | $589 | 5.04% | | Taxes, other than payroll and income taxes | $3,743 | $3,224 | $519 | 16.10% | | Other non-interest expenses | $2,843 | $4,628 | $(1,785) | -38.57% | | Metric | H1 2025 ($ thousands) | H1 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Total non-interest expenses | $188,254 | $184,372 | $3,882 | 2.11% | | Foreclosed real estate and other repossessed assets expenses (income), net | $1,338 | $(63) | $1,401 | -2223.81% | | Compensation and employee benefits | $79,497 | $78,283 | $1,214 | 1.55% | | Taxes, other than payroll and income taxes | $7,469 | $6,467 | $1,002 | 15.50% | | Professional and service fees | $9,931 | $9,121 | $810 | 8.88% | | Other non-interest expenses | $5,831 | $7,813 | $(1,982) | -25.37% | - Efficiency ratio: - Q2 2025: **52.04%** (up from 51.81% in Q2 2024) - H1 2025: **52.23%** (up from 52.15% in H1 2024)[278](index=278&type=chunk)[280](index=280&type=chunk) [Provision for Credit Losses](index=85&type=section&id=Provision%20for%20Credit%20Losses) Provision for credit losses significantly increased in Q2 and H1 2025 due to higher loan volume, specific commercial loan reserves, and model adjustments | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Provision for credit losses | $21,678 | $15,581 | $6,097 | 39.13% | - Q2 2025 provision drivers: - **$17.2 million** for increased loan volume - **$3.7 million** in specific reserves on four commercial loans - **$0.7 million** due to alignment of model assumptions and risk weighting factors, mainly in Puerto Rico[241](index=241&type=chunk)[281](index=281&type=chunk) | Metric | H1 2025 ($ thousands) | H1 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Provision for credit losses | $47,366 | $30,702 | $16,664 | 54.27% | - H1 2025 provision drivers: - **$34.6 million** related to loan volume - **$8.5 million** in specific reserves - **$6.0 million** due to alignment of model assumptions and risk weighting factors, mainly in Puerto Rico[283](index=283&type=chunk) [Income Tax Expense](index=87&type=section&id=Income%20Tax%20Expense) Income tax expense decreased in Q2 and H1 2025 due to a lower effective tax rate, driven by preferential tax treatment and discrete benefits | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Income tax expense | $14,078 | $20,129 | $(6,051) | -30.06% | | Effective tax rate | 21.37% | 28.2% | -6.83% | -24.22% | | Metric | H1 2025 ($ thousands) | H1 2024 ($ thousands) | YoY Change ($ thousands) | YoY % Change | | :--- | :--- | :--- | :--- | :--- | | Income tax expense | $27,954 | $38,354 | $(10,400) | -27.12% | | Effective tax rate | 22.3% | 27.6% | -5.3% | -19.20% | - The decrease in income tax expense was mainly related to investment subject to preferential tax treatment under the PR Code, a discrete tax windfall on stock options, the release of unrecognized tax benefits, and a discrete benefit related to the purchase of tax credits at a discount[286](index=286&type=chunk)[287](index=287&type=chunk) [Business Segments](index=88&type=section&id=Business%20Segments) In H1 2025, Banking segment net income decreased, Wealth Management increased, and Treasury decreased due to higher interest expense | Segment Net Income Before Taxes (Q2) | 2025 ($ thousands) | 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Banking | $33,877 | $40,065 | $(6,188) | -15.45% | | Wealth Management | $4,448 | $2,797 | $1,651 | 59.03% | | Treasury | $27,554 | $28,398 | $(844) | -2.97% | | Consolidated Total | $65,879 | $71,260 | $(5,381) | -7.55% | | Segment Net Income Before Taxes (H1) | 2025 ($ thousands) | 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Banking | $62,025 | $77,485 | $(15,460) | -19.95% | | Wealth Management | $8,028 | $5,392 | $2,636 | 48.89% | | Treasury | $55,274 | $56,300 | $(1,026) | -1.82% | | Consolidated Total | $125,327 | $139,177 | $(13,850) | -9.95% | - Banking segment (H1 2025 vs. H1 2024): - Decrease in net income before taxes mainly due to **$16.6 million** higher provision for credit losses and **$5.8 million** lower non-interest income (Durbin Amendment impact), partially offset by **$6.5 million** higher interest income from loans and **$3.5 million** lower interest expense from core deposits[299](index=299&type=chunk)[301](index=301&type=chunk) - Wealth Management segment (H1 2025 vs. H1 2024): - Increase in net income before taxes mainly from **$2.9 million** higher non-interest income (broker-dealer fees, insurance income, trustee fees), partially offset by **$0.6 million** higher salaries and employee benefits[299](index=299&type=chunk) - Treasury segment (H1 2025 vs. H1 2024): - Decrease in net income before taxes mainly due to **$7.1 million** higher interest expense (FHLB advances, brokered deposits), partially offset by **$6.0 million** higher interest income from investment securities[300](index=300&type=chunk) [Analysis of Financial Condition](index=94&type=section&id=Analysis%20of%20Financial%20Condition) OFG Bancorp's total assets increased by **$730.8 million** to **$12.232 billion** by June 2025, driven by growth in cash, investments, and loans, with detailed analysis of financial condition [Assets Owned](index=94&type=section&id=Assets%20Owned) Total assets increased by **$730.8 million**, driven by higher cash, investment portfolio growth, and an increase in the net loan portfolio - Cash and due from banks increased by **$260.0 million** to **$844.5 million**, reflecting new wholesale borrowings[302](index=302&type=chunk) - Investment portfolio increased by **$64.4 million (2.4%)**, driven by new available-for-sale mortgage-backed securities, mortgage loan securitization, and favorable market value adjustments, offset by principal paydowns[303](index=303&type=chunk) - Net loan portfolio increased by **$375.8 million (4.9%)**, reflecting growth in US and Puerto Rico commercial, auto, and consumer loans, partially offset by portfolio run-off[304](index=304&type=chunk) [Financial Assets Managed](index=94&type=section&id=Financial%20Assets%20Managed) Total financial assets managed by OFG's trust and broker-dealer subsidiaries increased to **$4.826 billion** due to market conditions and new accounts | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total assets managed | $4,825,531 | $4,509,330 | $316,201 | 7.01% | | Trust assets managed | $2,371,430 | $2,262,446 | $108,984 | 4.82% | | Broker-dealer assets managed | $2,454,101 | $2,246,884 | $207,217 | 9.22% | - The increase in trust assets reflects changes in current market conditions, while the increase in broker-dealer related assets is mainly due to new customer accounts[305](index=305&type=chunk) [Goodwill](index=94&type=section&id=Goodwill) Goodwill remained stable at **$84.2 million** with no impairment identified as of June 30, 2025 | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | | Goodwill | $84,241 | $84,241 | - No impairments were identified at June 30, 2025, based on the assessment of events or circumstances that could trigger reductions in goodwill's book value[306](index=306&type=chunk) - Goodwill is allocated **$84.1 million** to the banking segment and **$100 thousand** to the wealth management segment[307](index=307&type=chunk) [Loan Portfolio Composition](index=96&type=section&id=Loan%20Portfolio%20Composition) OFG's net loan portfolio increased by **4.9%** to **$8.010 billion**, driven by commercial and auto loan growth, partially offset by mortgage loan decreases | Loan Type | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Chang

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Financial Data and Key Metrics Changes - The company reported record assets exceeding $12 billion and record loans over $8 billion, with diluted earnings per share of $1.15, reflecting a 6.5% year-over-year increase [4][20] - Core revenues totaled $182 million, with total interest income rising to $194 million, an increase of $5 million, primarily due to higher average loan and cash balances [8][12] - The efficiency ratio was 52%, return on average assets was 1.73%, and return on average tangible common equity was 17% [11][20] Business Line Data and Key Metrics Changes - New loan origination reached $784 million, up 38% from the first quarter and 33% year-over-year, with strong performance across all lending channels [13][19] - Average loan balances increased to $8 billion, up nearly 2% from the first quarter, while end-of-period loans held for investment totaled $8.2 billion, up 7% year-over-year [12][19] - Total banking and financial service revenues were $30 million, reflecting increases in mortgage banking activities and wealth management [10] Market Data and Key Metrics Changes - Average core deposits were $9.7 billion, up close to 1%, with end-of-period balances increasing by $139 million or 1.4% quarter-over-quarter [14] - The commercial pipeline remains strong, with a focus on growing commercial lending in both Puerto Rico and the U.S. [12][19] - Cash increased by 20% to $852 million, reflecting new wholesale funding to support continued loan growth [16] Company Strategy and Development Direction - The company is focused on a digital-first strategy, enhancing customer relationships through technology and innovation [5][22] - A new $100 million stock buyback authorization was announced, supported by strong capital generation [5][20] - The company aims to grow market share by creating value and helping customers achieve progress, backed by a strong capital position [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the Puerto Rico economy, noting stable growth and high levels of employment [21][22] - The company anticipates loan growth for the full year 2025 to be closer to 5%-6%, up from previous guidance of 3%-4% [38] - Credit quality remains stable, with net charge-offs decreasing and a strong capital base to support growth [17][19] Other Important Information - The company introduced new products, including an online marketplace and a U.S. Government money market fund, to enhance customer offerings [6] - The net interest margin was reported at 5.31%, with expectations for expansion as loan growth continues [16][19] Q&A Session Summary Question: Margin dynamics and deposit competition - Management noted that deposit costs increased slightly due to fluctuations in government deposits tied to variable rates, but retail customer deposits are expected to continue growing [27][30][32] Question: Loan growth consistency - Loan growth was strong throughout the quarter, driven by a solid pipeline and increased commercial line utilization, with expectations for continued growth in Puerto Rico and the U.S. [35][36][38] Question: Energy situation in Puerto Rico - Management discussed ongoing efforts to improve the energy grid in Puerto Rico, noting that while challenges exist, the economy remains resilient [57][60] Question: Credit quality and charge-offs - Management clarified that seasonal factors typically lead to a rise in delinquencies in the second quarter, but overall credit quality is improving with better vintages coming in [65][66][68] Question: Government deposits outlook - The expectation for government deposits remains stable, with rollovers anticipated over the coming quarters [72][73] Question: Expense management and technology investments - Management emphasized the importance of balancing investments in technology and efficiency improvements while maintaining strong capital returns to investors [74][78]

Financial Data and Key Metrics Changes - The company reported record assets exceeding $12 billion and record loans over $8 billion, with diluted earnings per share of $1.15, reflecting a 6.5% year-over-year increase [4][5] - Core revenues totaled $182 million, with total interest income rising to $194 million, an increase of $5 million, primarily due to higher average loan and cash balances [8][9] - The efficiency ratio was 52%, return on average assets was 1.73%, and return on average tangible common equity was 17% [11] Business Line Data and Key Metrics Changes - New loan origination reached $784 million, up 38% from the first quarter and 33% year-over-year, with growth across all lending channels [13] - Average core deposits were $9.7 billion, up nearly 1%, with end-of-period balances increasing by $139 million quarter-over-quarter [14] - Non-interest expenses totaled $94.8 million, up $1.4 million, aligning with the expected range for the year [9][19] Market Data and Key Metrics Changes - The Puerto Rico economy showed stable growth, with high levels of liquidity among individuals and businesses, contributing to the positive credit environment [5][22] - The company noted a strong commercial pipeline and increased loan growth expectations for 2025, now projected at 5% to 6% [38] Company Strategy and Development Direction - The company is focusing on a digital-first strategy, enhancing customer relationships through technology and innovation [5][24] - A new $100 million stock buyback authorization was announced to return capital to shareholders, supported by strong capital generation [5][20] - The company aims to grow market share by creating value and helping customers achieve progress, backed by a strong capital position [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the Puerto Rican economy, highlighting stable wages and employment levels, and a positive business environment [22][24] - The company is committed to maintaining a strong risk management culture while pursuing growth opportunities [40] Other Important Information - Credit quality remains stable, with net charge-offs totaling $13 million, down from the previous quarter [17] - The company introduced new products, including an online marketplace and a U.S. Government money market fund, to enhance customer offerings [6] Q&A Session Summary Question: Margin dynamics and deposit competition - Management explained that deposit costs increased due to variable rate government deposits and emphasized ongoing retail customer growth [28][30] Question: Loan growth consistency - Management confirmed strong loan growth throughout the quarter, driven by a solid pipeline and increased commercial line utilization [36][38] Question: Energy situation in Puerto Rico - Management discussed ongoing efforts to improve the energy grid and its impact on the economy, noting that current issues are not significantly hindering economic performance [60][63] Question: Credit quality and charge-off levels - Management indicated that recent charge-off levels are expected to stabilize due to improved credit performance from new vintages [68][71] Question: Government deposits outlook - Management expects government deposits to continue rolling over in the coming quarters, maintaining a similar outlook as previous quarters [75][76] Question: Expense management and technology investments - Management highlighted ongoing efforts to improve efficiencies through technology while balancing investments and capital returns to shareholders [78][80]

Financial Performance - Earnings per share (EPS) reached $1.15[7] - Total core revenues amounted to $182.2 million[7] - Net Interest Margin (NIM) stood at 5.31%[7] - Provision for credit losses was $21.7 million[7] - Non-interest expense totaled $94.8 million[7] - Pre-Provision Net Revenue (PPNR) reached $87.6 million[7] Balance Sheet & Capital Strength - Total assets reached $12.2 billion[7] - Customer deposits totaled $9.9 billion[7] - Loans held for investment amounted to $8.2 billion[7] - Investments totaled $2.8 billion[7] - Cash reserves were $851.8 million[7] - Common Equity Tier 1 (CET1) ratio was 13.99%[7] - Total Risk-Based Capital Ratio was 15.25%[7] - Leverage ratio was 10.83%[7] - New loan production reached $783.7 million[7] Digital Transformation - 96% of all routine transactions are now conducted through digital channels[12] - 97% of all deposit transactions are now conducted through digital channels[12] - 70% of all loan payments are now conducted through digital channels[12] - Digital enrollment grew by 8%[12] - Digital loan payments increased by 11%[12] - Virtual teller use grew by 37%[12]

OFG Bancorp 2Q25 Earnings Release [CEO Commentary and 2Q25 Highlights](index=1&type=section&id=CEO%20Commentary%20and%202Q25%20Highlights) The CEO highlighted strong Q2 performance with record assets, deposits, and loans, driven by digital strategy and robust loan origination Q2 2025 Key Results vs. Prior Periods | Metric | 2Q25 | 1Q25 | 2Q24 | | :--- | :--- | :--- | :--- | | EPS Diluted | $1.15 | $1.00 | $1.08 | | Total Core Revenues | $182.2M | $178.3M | $179.4M | - Strategic initiatives in Q2 included the launch of the Oriental Marketplace and a DGI Money Market fund to enhance customer experience and drive efficiencies[2](index=2&type=chunk) - The company executed a share buyback, repurchasing **186,024 shares** during the second quarter[2](index=2&type=chunk) - Achieved record end-of-quarter balances for total assets (**$12.2 billion**), core deposits (**$9.9 billion**), and loans held for investment (**$8.2 billion**)[2](index=2&type=chunk) [Key Financial and Operational Metrics](index=1&type=section&id=Key%20Financial%20and%20Operational%20Metrics) The company reported solid performance with a 5.31% net interest margin, higher interest income, and a lower provision for credit losses Q2 2025 Performance Metrics | Metric | Value | | :--- | :--- | | Net Interest Margin | 5.31% | | Return on Average Assets | 1.73% | | Return on Average Tangible Common Equity | 16.96% | | Efficiency Ratio | 52.04% | Income and Provision Analysis (vs. 1Q25) | Item | 2Q25 | 1Q25 | Change | | :--- | :--- | :--- | :--- | | Total Interest Income | $194.3M | $189.2M | +$5.1M | | Total Interest Expense | $42.4M | $40.2M | +$2.3M | | Pre-Provision Net Revenues | $87.6M | $85.1M | +$2.5M | | Provision for Credit Losses | $21.7M | $25.7M | -$4.0M | - Credit quality remained stable, with net charge-offs decreasing to **$12.8 million (0.64% of average loans)** from $20.4 million (1.05%) in 1Q25, and the nonperforming loan rate was **1.19%**[6](index=6&type=chunk) [Balance Sheet and Capital Highlights](index=2&type=section&id=Balance%20Sheet%20and%20Capital%20Highlights) The balance sheet expanded with loan and deposit growth, while capital ratios remained strong with a 13.99% CET1 ratio End of Period Balance Sheet Highlights (vs. 1Q25) | Balance Sheet Item | 2Q25 | 1Q25 | | :--- | :--- | :--- | | Loans Held for Investment | $8.18B | $7.85B | | Customer Deposits | $9.90B | $9.76B | | Total Borrowings & Brokered Deposits | $732.3M | $421.5M | | Cash & Cash Equivalents | $851.8M | $710.6M | - New loan production significantly increased to **$783.7 million**, compared to $558.9 million in 1Q25, with growth across all lending channels[9](index=9&type=chunk) Capital Position (vs. 1Q25) | Capital Metric | 2Q25 | 1Q25 | | :--- | :--- | :--- | | CET1 Ratio | 13.99% | 14.27% | | Tangible Common Equity Ratio | 10.20% | 10.30% | | Tangible Book Value per Share | $27.67 | $26.66 | [Corporate Information](index=2&type=section&id=Corporate%20Information) This section provides conference call details, non-GAAP disclosures, and an overview of the company's operations - A conference call to discuss Q2 2025 results was scheduled for July 17, 2025, at 10:00 AM ET[14](index=14&type=chunk) - The company uses non-GAAP financial measures to enhance understanding of performance, with reconciliations available in the Financial Supplement[16](index=16&type=chunk) - OFG Bancorp is a diversified financial holding company operating for 61 years, primarily providing banking, lending, and wealth management services in Puerto Rico and the U.S. Virgin Islands through its subsidiaries Oriental Bank, Oriental Financial Services, and Oriental Insurance[18](index=18&type=chunk) Consolidated Financial Information [Table 1: Financial and Statistical Summary - Consolidated](index=5&type=section&id=Table%201%3A%20Financial%20and%20Statistical%20Summary%20-%20Consolidated) This table presents a consolidated financial summary, with Q2 2025 net income of $51.8 million and an ROA of 1.73% Quarterly Performance Summary | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income (Common) | $51,801K | $45,572K | $51,131K | | EPS - Diluted | $1.15 | $1.00 | $1.08 | | Return on Average Assets | 1.73% | 1.56% | 1.82% | | Efficiency Ratio | 52.04% | 52.42% | 51.81% | Year-to-Date Performance Summary | Metric | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Net Income (Common) | $97,373K | $100,823K | | EPS - Diluted | $2.15 | $2.13 | [Table 2: Consolidated Statements of Operations](index=7&type=section&id=Table%202%3A%20Consolidated%20Statements%20of%20Operations) The consolidated income statement shows Q2 2025 net interest income of $151.9 million and net income of $51.8 million Q2 2025 Statement of Operations Highlights (in thousands) | Line Item | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $151,928 | $149,071 | $147,325 | | Total Provision for Credit Losses | $21,678 | $25,688 | $15,581 | | Total Non-Interest Expense | $94,802 | $93,452 | $92,960 | | Net Income (Common) | $51,801 | $45,572 | $51,131 | [Table 3: Consolidated Statements of Financial Condition](index=9&type=section&id=Table%203%3A%20Consolidated%20Statements%20of%20Financial%20Condition) The consolidated balance sheet shows total assets grew to $12.23 billion, with net loans at $8.01 billion Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Assets | $12,231,510 | $11,729,257 | $11,259,085 | | Loans, net | $8,009,599 | $7,688,271 | $7,503,142 | | Total Deposits | $10,144,165 | $9,922,969 | $9,605,250 | | Total Stockholders' Equity | $1,334,453 | $1,295,361 | $1,227,702 | [Table 4: Information on Loan Portfolio and Production](index=10&type=section&id=Table%204%3A%20Information%20on%20Loan%20Portfolio%20and%20Production) The loan portfolio reached $8.18 billion, with quarterly loan production surging to $783.7 million Loan Portfolio Composition (in thousands) | Loan Category | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Commercial PR | $2,598,180 | $2,425,651 | | Commercial US | $825,254 | $727,409 | | Auto | $2,661,955 | $2,593,203 | | **Total Loans Held for Investment** | **$8,180,591** | **$7,852,644** | Quarterly Loan Production (in thousands) | Loan Category | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Commercial PR | $253,874 | $163,232 | $192,122 | | Commercial US | $147,193 | $57,939 | $27,402 | | Auto | $250,269 | $232,897 | $250,638 | | **Total Production** | **$783,668** | **$558,941** | **$589,011** | [Table 5: Average Balances, Net Interest Income and Net Interest Margin](index=12&type=section&id=Table%205%3A%20Average%20Balances%2C%20Net%20Interest%20Income%20and%20Net%20Interest%20Margin) This table details the net interest margin, which was 5.31% for Q2 2025, based on average asset and liability balances Net Interest Margin Analysis | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Interest Rate Spread | 5.17% | 5.27% | 5.36% | | Net Interest Margin | 5.31% | 5.42% | 5.51% | - Average interest-earning assets increased to **$11.47 billion** in Q2 2025 from $11.15 billion in Q1 2025, while average interest-bearing liabilities grew to **$10.41 billion** from $10.14 billion[33](index=33&type=chunk) [Table 6: Loan Information and Performance Statistics](index=14&type=section&id=Table%206%3A%20Loan%20Information%20and%20Performance%20Statistics) Credit quality metrics show an improved net charge-off rate of 0.64% and a nonperforming loan rate of 1.19% Key Credit Quality Rates | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Charge-off Rate | 0.64% | 1.05% | 0.79% | | Early Delinquency Rate (30-89 days) | 2.46% | 2.19% | 2.81% | | Total Delinquency Rate (30+ days) | 3.59% | 3.49% | 3.71% | | Total Nonperforming Loan Rate | 1.19% | 1.11% | 1.01% | - Total nonperforming loans increased to **$97.4 million** at the end of Q2 2025 from $87.5 million at the end of Q1 2025, primarily driven by an increase in nonperforming commercial loans[39](index=39&type=chunk) [Table 7: Allowance for Credit Losses](index=17&type=section&id=Table%207%3A%20Allowance%20for%20Credit%20Losses) The allowance for credit losses increased to $189.9 million, representing a coverage ratio of 2.32% of total loans Q2 2025 Allowance for Credit Losses Roll-Forward (in thousands) | Description | Amount | | :--- | :--- | | Balance at beginning of period | $181,174 | | Provision for credit losses | $21,554 | | Charge-offs | ($22,228) | | Recoveries | $9,444 | | **Balance at end of period** | **$189,944** | - The allowance for credit losses as a percentage of total loans held for investment was **2.32%** at the end of Q2 2025[41](index=41&type=chunk) [Table 8: Reconciliation of GAAP to Non-GAAP Measures and Calculation of Regulatory Capital](index=18&type=section&id=Table%208%3A%20Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures%20and%20Calculation%20of%20Regulatory%20Capital) This section reconciles capital measures, showing a CET1 ratio of 13.99% and tangible book value per share of $27.67 Key Capital Ratios | Ratio | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Tangible Book Value per Share (Non-GAAP) | $27.67 | $26.66 | $24.18 | | TCE Ratio (Non-GAAP) | 10.20% | 10.30% | 10.09% | | Common Equity Tier 1 (CET1) Ratio | 13.99% | 14.27% | 14.29% | | Total Risk-Based Capital Ratio | 15.25% | 15.53% | 15.54% | [Table 9: Notes to Financial Statements](index=20&type=section&id=Table%209%3A%20Notes%20to%20Financial%20Summary%2C%20Selected%20Metrics%2C%20Loans%2C%20and%20Consolidated%20Financial%20Statements%20%28Tables%201%20-%208%29) This section provides definitions for financial terms, non-GAAP measures, and specific accounting treatments - Defines Pre-provision net revenues (PPNR) as a non-GAAP measure calculated as net interest income plus core non-interest income, less non-interest expenses[48](index=48&type=chunk) - Explains that under the GNMA program, the company has the option, but not the obligation, to repurchase loans 90+ days delinquent, which are then rebooked on the balance sheet[48](index=48&type=chunk) - Clarifies that most Purchased Credit Deteriorated (PCD) loans are considered performing and not included in non-performing loan statistics due to the application of the accretion method[47](index=47&type=chunk)

[FORM 10-Q (Cover Page)](index=1&type=section&id=FORM%2010-Q) [Cover Page Information](index=1&type=section&id=Cover%20Page%20Information) This section presents the cover page for OFG Bancorp's 10-Q quarterly report as of March 31, 2025, identifying the company as a large accelerated filer and detailing its registered securities and outstanding shares - Filing Type: **10-Q quarterly report** as of March 31, 2025[2](index=2&type=chunk) - Registrant: **OFG Bancorp**, Commission File Number: **001-12647**[2](index=2&type=chunk) - Filing Status: **Large accelerated filer**[4](index=4&type=chunk) Securities Registered Pursuant to Section 12(b) of the Exchange Act | Class Title | Trading Symbol | Name of Each Exchange on Which Registered | | :--- | :--- | :--- | | Common Stock, $1.00 par value per share | OFG | New York Stock Exchange | - Outstanding Common Stock as of April 30, 2025: **44,913,111 shares** ($1.00 par value per share)[5](index=5&type=chunk) [TABLE OF CONTENTS](index=3&type=section&id=TABLE%20OF%20CONTENTS) [Report Structure](index=3&type=section&id=Report%20Structure) This section provides the detailed table of contents for the 10-Q report, clearly dividing financial information (Part I) and other information (Part II), listing all financial statements, notes, management's discussion and analysis, market risk disclosures, controls and procedures, legal proceedings, risk factors, and exhibits - The report is divided into Part I (Financial Information) and Part II (Other Information), covering financial statements, notes, management's discussion and analysis, market risk, controls and procedures, legal proceedings, risk factors, and exhibits[8](index=8&type=chunk) [FORWARD-LOOKING STATEMENTS](index=5&type=section&id=FORWARD-LOOKING%20STATEMENTS) [Nature and Risks of Forward-Looking Statements](index=5&type=section&id=Nature%20and%20Risks%20of%20Forward-Looking%20Statements) This section cautions that forward-looking statements in the report are not guarantees of future performance and involve unpredictable risks, uncertainties, estimates, and assumptions, including economic conditions, interest rate changes, government credit defaults, bank failures, natural disasters, and regulatory policy shifts - The report contains forward-looking statements related to OFG Bancorp's financial condition, operating results, plans, objectives, future performance, and business[10](index=10&type=chunk) - These statements are not guarantees of future performance and involve unpredictable risks, uncertainties, estimates, and management assumptions[11](index=11&type=chunk) - Key risk factors include economic growth rates, employment levels, inflationary pressures, interest rate changes, credit defaults by the Government of Puerto Rico or the U.S. Government, impacts of bank failures, changes in regulatory policies, unforeseen catastrophic events (such as natural disasters, cyberattacks), and the pace and magnitude of Puerto Rico's economic recovery[11](index=11&type=chunk)[12](index=12&type=chunk)[14](index=14&type=chunk) [PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part includes OFG Bancorp's unaudited consolidated financial statements as of March 31, 2025, comprising statements of financial condition, operations, comprehensive income, changes in stockholders' equity, and cash flows, along with detailed notes, management's discussion and analysis of financial condition and results of operations, quantitative and qualitative disclosures about market risk, and controls and procedures [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents OFG Bancorp's unaudited consolidated financial statements as of March 31, 2025, and December 31, 2024, including statements of financial condition, operations, comprehensive income, changes in stockholders' equity, and cash flows, accompanied by detailed notes explaining significant accounting policies and specific financial accounts [Unaudited Consolidated Statements of Financial Condition](index=7&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Financial%20Condition) The consolidated statements of financial condition show that as of March 31, 2025, OFG Bancorp's total assets and total stockholders' equity both increased compared to December 31, 2024, with increases in cash and cash equivalents, total investments, and total loans, while total borrowings decreased Consolidated Statements of Financial Condition (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | Quarter-over-Quarter Change | | :--- | :--- | :--- | :--- | | Total Assets | $11,729,257 | $11,500,734 | +$228,523 | | Total Liabilities | $10,433,896 | $10,246,363 | +$187,533 | | Total Stockholders' Equity | $1,295,361 | $1,254,371 | +$40,990 | | Cash and Cash Equivalents | $710,600 | $591,137 | +$119,463 | | Total Investments | $2,785,965 | $2,720,277 | +$65,688 | | Total Loans | $7,688,271 | $7,633,831 | +$54,440 | | Total Deposits | $9,922,969 | $9,604,786 | +$318,183 | | Total Borrowings | $255,642 | $401,174 | -$145,532 | [Unaudited Consolidated Statements of Operations](index=9&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) The consolidated statements of operations indicate that for the quarter ended March 31, 2025, OFG Bancorp's net interest income increased year-over-year, but a significant rise in the provision for credit losses led to a decrease in net income and diluted earnings per share Consolidated Statements of Operations (in thousands of dollars, except per share data) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Total Interest Income | $189,222 | $183,426 | +$5,796 | | Total Interest Expense | $40,151 | $39,324 | +$827 | | Net Interest Income | $149,071 | $144,102 | +$4,969 | | Provision for Credit Losses | $25,688 | $15,121 | +$10,567 | | Total Non-Interest Income | $29,517 | $30,348 | -$831 | | Total Non-Interest Expense | $93,452 | $91,412 | +$2,040 | | Income Before Income Taxes | $59,448 | $67,917 | -$8,469 | | Income Tax Expense | $13,876 | $18,225 | -$4,349 | | Net Income Attributable to Common Stockholders | $45,572 | $49,692 | -$4,120 | | Basic Earnings Per Share | $1.01 | $1.06 | -$0.05 | | Diluted Earnings Per Share | $1.00 | $1.05 | -$0.05 | | Cash Dividends Per Common Share | $0.30 | $0.25 | +$0.05 | [Unaudited Consolidated Statements of Comprehensive Income](index=11&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Income) The consolidated statements of comprehensive income show that OFG Bancorp's comprehensive income significantly increased for the quarter ended March 31, 2025, primarily driven by unrealized gains on available-for-sale securities, despite a year-over-year decrease in net income Consolidated Statements of Comprehensive Income (in thousands of dollars) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Net Income | $45,572 | $49,692 | -$4,120 | | Unrealized Gain (Loss) on Available-for-Sale Securities (Pre-Tax) | $38,113 | $(17,557) | +$55,670 | | Other Comprehensive Income (Loss) (Net of Tax) | $31,838 | $(14,718) | +$46,556 | | Comprehensive Income | $77,410 | $34,974 | +$42,436 | [Unaudited Consolidated Statements of Changes in Stockholders' Equity](index=12&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement outlines the changes in OFG Bancorp's stockholders' equity for the quarters ended March 31, 2025, and March 31, 2024, reflecting increases in retained earnings and statutory surplus, partially offset by treasury stock repurchases Consolidated Statements of Changes in Stockholders' Equity (in thousands of dollars) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | Common Stock | $59,885 | $59,885 | | Additional Paid-in Capital | $638,475 | $636,208 | | Statutory Surplus | $173,905 | $155,732 | | Retained Earnings | $802,024 | $672,455 | | Treasury Stock (at cost) | $(320,927) | $(226,896) | | Accumulated Other Comprehensive Loss (Net of Tax) | $(58,001) | $(81,731) | | Total Stockholders' Equity | $1,295,361 | $1,215,653 | - In Q1 2025, OFG repurchased **$23.392 million** of treasury stock, compared to no repurchases in Q1 2024[25](index=25&type=chunk) - Cash dividends per common share increased to **$0.30** in Q1 2025 from **$0.25** in Q1 2024[25](index=25&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=13&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows show that for the quarter ended March 31, 2025, OFG Bancorp experienced a significant increase in net cash from operating activities, a shift from net cash outflow to inflow in financing activities, and a change from net cash inflow to outflow in investing activities Consolidated Statements of Cash Flows (in thousands of dollars) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $83,071 | $60,991 | | Net Cash Provided by (Used in) Investing Activities | $(97,319) | $163,518 | | Net Cash Provided by (Used in) Financing Activities | $133,711 | $(218,290) | | Net Change in Cash and Cash Equivalents | $119,463 | $6,219 | | Cash and Cash Equivalents at End of Period | $710,600 | $754,392 | - Net cash provided by operating activities increased by **$22.08 million** year-over-year, driven by higher net income and adjustments for non-cash items[28](index=28&type=chunk) - Cash flow from investing activities shifted from a net inflow of **$163.5 million** in Q1 2024 to a net outflow of **$97.3 million** in Q1 2025, primarily due to increased loan originations and investment security purchases[30](index=30&type=chunk) - Cash flow from financing activities shifted from a net outflow of **$218.29 million** in Q1 2024 to a net inflow of **$133.71 million** in Q1 2025, mainly due to increased deposits and reduced FHLB advances, partially offset by treasury stock purchases[30](index=30&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=16&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the unaudited consolidated financial statements, covering significant accounting policies, specific asset and liability categories, capital requirements, and fair value measurements of financial instruments [Note 1 – Summary of Significant Accounting Policies](index=16&type=section&id=Note%201%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note describes OFG Bancorp's nature of operations, basis of financial statement presentation, and recent accounting standard updates, highlighting its role as a financial holding company primarily offering diversified banking and financial services in Puerto Rico - OFG is a financial holding company providing commercial, consumer, auto, and mortgage loans, financial planning, insurance, investment advisory, and securities brokerage services through subsidiaries like Oriental Bank[35](index=35&type=chunk) - Financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) for interim financial information and SEC guidance, requiring management estimates and assumptions[37](index=37&type=chunk) - New accounting standard updates include ASU 2024-03 (income statement expense disaggregation, effective 2027) and ASU 2023-09 (income tax disclosures, effective 2025), while ASU 2024-02 and 2024-01 were adopted in Q1 2025 with no material impact[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) [Note 2 – Cash Restrictions](index=17&type=section&id=Note%202%20%E2%80%93%20Cash%20Restrictions) This note details Oriental Bank's requirement under Puerto Rico law to maintain average weekly reserve balances to cover demand deposits (excluding government deposits) and confirms the bank's compliance with this requirement - Oriental Bank is required by Puerto Rico law to maintain average weekly reserve balances to cover demand deposits (excluding government deposits)[43](index=43&type=chunk) Minimum Average Reserve Balances (in millions of dollars) | Date | Amount | | :--- | :--- | | March 31, 2025 | $475.6 | | December 31, 2024 | $472.0 | - As of March 31, 2025, the bank complied with this requirement, using cash and due from banks and other short-term highly liquid securities to cover the required average reserve balances[43](index=43&type=chunk) [Note 3 – Investment Securities](index=17&type=section&id=Note%203%20%E2%80%93%20Investment%20Securities) This note details OFG Bancorp's investment securities, including available-for-sale and held-to-maturity categories, their fair values, unrealized gains/losses, and yields, noting that most securities are issued by U.S. government entities with a zero credit loss assumption Total Investments (in thousands of dollars) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Available-for-Sale Securities (Fair Value) | $2,415,337 | $2,338,205 | | Held-to-Maturity Securities (Amortized Cost) | $321,824 | $327,158 | | Equity Securities | $48,785 | $54,896 | | Trading Securities | $19 | $18 | | **Total Investments** | **$2,785,965** | **$2,720,277** | Unrealized Losses on Available-for-Sale Securities (in thousands of dollars) | Date | Fair Value | Total Unrealized Losses | | :--- | :--- | :--- | | March 31, 2025 | $1,248,567 | $88,392 | | December 31, 2024 | $1,662,446 | $115,544 | - Unrealized losses on federal agency mortgage-backed securities are due to market fluctuations from interest rate volatility, but OFG does not intend to sell these investments before the recovery of amortized cost[55](index=55&type=chunk) - Most securities are issued by U.S. government entities and government-sponsored agencies, carrying a zero credit loss assumption[49](index=49&type=chunk) - As of March 31, 2025, **$1.567 billion** of investment securities were pledged to secure government deposits, FHLB advances, and regulatory collateral[50](index=50&type=chunk) [Note 4 – Loans](index=22&type=section&id=Note%204%20%E2%80%93%20Loans) This note details OFG Bancorp's loan portfolio, segmented by commercial, mortgage, consumer, and auto loans, providing amortized cost, aging, non-accrual status, and credit quality indicators, showing an increase in total loans held for investment and a rise in non-accrual loans Loan Portfolio Composition (Amortized Cost Basis, in thousands of dollars) | Loan Type | March 31, 2025 | December 31, 2024 | Quarter-over-Quarter Change | | :--- | :--- | :--- | :--- | | Commercial Loans | $3,153,060 | $3,103,091 | +$49,969 | | Mortgage Loans | $1,435,573 | $1,470,817 | -$35,244 | | Consumer Loans | $670,808 | $668,561 | +$2,247 | | Auto Loans | $2,593,203 | $2,549,493 | +$43,710 | | **Total Loans Held for Investment (Gross)** | **$7,852,644** | **$7,791,962** | **+$60,682** | Non-Accrual Loans (Amortized Cost Basis, in thousands of dollars) | Loan Type | March 31, 2025 | December 31, 2024 | Quarter-over-Quarter Change | | :--- | :--- | :--- | :--- | | Commercial Loans | $44,150 | $38,913 | +$5,237 | | Mortgage Loans | $11,581 | $11,923 | -$342 | | Consumer Loans | $3,482 | $4,207 | -$725 | | Auto Loans | $14,043 | $20,055 | -$6,012 | | **Total Non-PCD Non-Accrual Loans** | **$73,256** | **$75,098** | **-$1,842** | | PCD Non-Accrual Loans | $8,900 | $2,880 | +$6,020 | | **Total Non-Accrual Loans** | **$82,156** | **$77,978** | **+$4,178** | - As of March 31, 2025, past due mortgage loans included **$44.7 million** in delinquent loans under the GNMA repurchase option program, compared to **$48.6 million** as of December 31, 2024[60](index=60&type=chunk) - OFG offers various loan modification programs (interest rate reductions, term extensions, principal forbearance) to borrowers facing financial difficulties, detailing the financial impact of these modifications[67](index=67&type=chunk)[70](index=70&type=chunk)[73](index=73&type=chunk) - Credit quality indicators categorize loans into pass, special mention, substandard, doubtful, and loss grades, based on borrower repayment capacity and collateral protection[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) [Note 5 – Allowance for Credit Losses](index=36&type=section&id=Note%205%20%E2%80%93%20Allowance%20for%20Credit%20Losses) This note explains OFG Bancorp's methodology for measuring the Allowance for Credit Losses (ACL), which uses a lifetime expected credit loss approach adjusted for current conditions and forward-looking macroeconomic scenarios, with Q1 2025 ACL increasing by **$5.3 million** due to loan volume, specific reserves, and auto loan loss trends - ACL is estimated using quantitative methods considering historical loss experience, current portfolio credit quality, and economic outlook over the loan's life, supplemented by qualitative reserves for high-risk segments[94](index=94&type=chunk)[95](index=95&type=chunk) Allowance for Credit Losses (ACL) Summary (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | Quarter-over-Quarter Change | | :--- | :--- | :--- | :--- | | Total ACL | $181,174 | $175,863 | +$5,311 | | Non-PCD ACL | $174,752 | $170,709 | +$4,043 | | PCD ACL | $6,422 | $5,154 | +$1,268 | - The Q1 2025 provision for credit losses was **$25.688 million**, including **$17.4 million** for increased loan volume, **$4.8 million** for specific reserves on three commercial loans, and **$3.5 million** reflecting post-pandemic auto loan loss trends[96](index=96&type=chunk) - Net charge-offs for Q1 2025 were **$20.4 million**, an increase of **$0.6 million** year-over-year, primarily driven by auto and consumer loans, partially offset by a decrease in commercial loans[97](index=97&type=chunk) [Note 6 – Foreclosed Real Estate](index=37&type=section&id=Note%206%20%E2%80%93%20Foreclosed%20Real%20Estate) This note presents OFG Bancorp's foreclosed real estate activity for the quarters ended March 31, 2025, and March 31, 2024, showing a slight increase in the ending balance for Q1 2025 compared to the beginning of the period Foreclosed Real Estate Activity (in thousands of dollars) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | Beginning Balance | $4,002 | $10,780 | | Additions | $557 | $1,345 | | Sales | $(695) | $(1,826) | | Valuation Decreases | $(122) | $(170) | | Other Adjustments | $529 | $721 | | Ending Balance | $4,271 | $10,850 | [Note 7 – Servicing Assets](index=37&type=section&id=Note%207%20%E2%80%93%20Servicing%20Assets) This note details OFG Bancorp's servicing assets, primarily mortgage servicing rights, which are measured using the fair value method, with a slight decrease in fair value in Q1 2025 due to loan payments and changes in valuation model inputs - OFG recognizes servicing assets when the compensation for servicing loans is expected to adequately compensate for servicing costs[101](index=101&type=chunk) Fair Value of Mortgage Servicing Rights (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Ending Fair Value | $69,238 | $70,435 | Changes in Servicing Rights (Fair Value Method, in thousands of dollars) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | Beginning Fair Value | $70,435 | $49,520 | | Servicing Rights from Mortgage Loan Securitization or Asset Transfers | $659 | $527 | | Changes Due to Loan Payments | $(1,262) | $(920) | | Changes in Fair Value Due to Changes in Valuation Model Inputs or Assumptions | $(594) | $426 | | Ending Fair Value | $69,238 | $49,553 | - Key economic assumptions for fair value measurement include fixed prepayment rates (1.30%-18.14% in Q1 2025) and discount rates (10.00%-15.50% in Q1 2025)[104](index=104&type=chunk) - Mortgage servicing and ancillary fees totaled **$5.5 million** in Q1 2025, up from **$4.4 million** in Q1 2024[107](index=107&type=chunk) [Note 8 – Goodwill and Other Intangible Assets](index=40&type=section&id=Note%208%20%E2%80%93%20Goodwill%20and%20Other%20Intangible%20Assets) This note provides information on OFG Bancorp's goodwill and other intangible assets, confirming no impairment was identified in Q1 2025, with other intangible assets, primarily core deposit and customer relationship intangibles, amortized over their determined useful lives Goodwill by Reportable Business Segment (in thousands of dollars) | Segment | December 31, 2024 | March 31, 2025 | | :--- | :--- | :--- | | Banking | $84,063 | $84,063 | | Wealth Management | $178 | $178 | | Financial | $0 | $0 | | **Total Goodwill** | **$84,241** | **$84,241** | - Based on an assessment of events and circumstances, no goodwill impairment was identified as of March 31, 2025[111](index=111&type=chunk) Other Intangible Assets (Net Book Value, in thousands of dollars) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Core Deposit Intangible Assets | $10,377 | $11,320 | | Customer Relationship Intangible Assets | $3,173 | $3,462 | | **Total Other Intangible Assets** | **$13,550** | **$14,782** | - Amortization expense for other intangible assets was **$1.2 million** in Q1 2025, compared to **$1.5 million** in Q1 2024[113](index=113&type=chunk) [Note 9 – Accrued Interest Receivable and Other Assets](index=41&type=section&id=Note%209%20%E2%80%93%20Accrued%20Interest%20Receivable%20and%20Other%20Assets) This note details the composition of accrued interest receivable and other assets, including prepaid expenses and repossessed automobiles, also highlighting the allowance for credit losses on accrued interest receivable for loans in deferral programs Accrued Interest Receivable (in thousands of dollars) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Loans | $58,953 | $60,864 | | Investments | $11,076 | $10,803 | | **Total** | **$70,029** | **$71,667** | Other Assets (in thousands of dollars) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Prepaid Expenses | $68,332 | $72,093 | | Other Repossessed Assets | $6,656 | $6,595 | | Accounts Receivable and Other Assets | $64,296 | $70,191 | | **Total** | **$139,284** | **$148,879** | - As of March 31, 2025, prepaid expenses included **$60.6 million** in prepaid municipal, property, and income taxes[115](index=115&type=chunk) - As of March 31, 2025, the allowance for credit losses on accrued interest receivable for loans in deferral programs was **$0.028 million**[114](index=114&type=chunk) [Note 10 – Deposits and Related Interest](index=42&type=section&id=Note%2010%20%E2%80%93%20Deposits%20and%20Related%20Interest) This note provides a breakdown of OFG Bancorp's deposits by type, weighted average interest rates, and maturity schedule for time deposits, also detailing public fund deposits and their collateralization Total Deposits (in thousands of dollars) | Deposit Type | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Non-Interest Bearing Demand Deposits | $2,600,555 | $2,493,860 | | Interest Bearing Savings and Demand Deposits | $5,348,484 | $5,198,462 | | Retail Time Deposits | $1,184,359 | $1,170,560 | | Institutional Time Deposits | $623,759 | $585,829 | | **Total Deposits** | **$9,922,969** | **$9,604,786** | - The weighted average interest rate on deposits decreased from **1.56%** as of December 31, 2024, to **1.50%** as of March 31, 2025[118](index=118&type=chunk) - Total uninsured deposits as of March 31, 2025, were **$5.176 billion** (**52.16%** of total deposits)[117](index=117&type=chunk) - Public fund deposits from Puerto Rico government entities and instrumentalities totaled **$1.537 billion** as of March 31, 2025, collateralized by **$1.591 billion** in securities and commercial loans[119](index=119&type=chunk) [Note 11 – Borrowings and Related Interest](index=44&type=section&id=Note%2011%20%E2%80%93%20Borrowings%20and%20Related%20Interest) This note details OFG Bancorp's borrowings, primarily Federal Home Loan Bank (FHLB) advances and securities sold under repurchase agreements, showing a significant decrease in total borrowings due to maturities and strategic asset/liability management FHLB Advances (in thousands of dollars) | Type | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Short-Term Fixed Rate Advances | $0 | $270,000 | | Long-Term Fixed Rate Advances | $255,000 | $55,000 | | **Total FHLB Advances** | **$255,000** | **$325,000** | - Total borrowings decreased by **$145.5 million** (**36.3%**) as of March 31, 2025, compared to December 31, 2024, reflecting maturities of FHLB advances and repurchase agreements[16](index=16&type=chunk)[124](index=124&type=chunk)[126](index=126&type=chunk) - As of March 31, 2025, OFG had an additional borrowing capacity of **$435.9 million** at the FHLB[123](index=123&type=chunk) - As of March 31, 2025, there were no securities sold under repurchase agreements, compared to **$75.222 million** as of December 31, 2024[16](index=16&type=chunk)[127](index=127&type=chunk) [Note 12 – Offsetting of Financial Assets and Liabilities](index=46&type=section&id=Note%2012%20%E2%80%93%20Offsetting%20of%20Financial%20Assets%20and%20Liabilities) This note explains OFG Bancorp's right of offset for securities sold under repurchase agreements, which allows for offsetting amounts owed in case of default, noting no outstanding repurchase agreements as of March 31, 2025 - OFG has a right of offset with counterparties for securities sold under repurchase agreements, pursuant to supplemental terms of the master repurchase agreement[128](index=128&type=chunk) - In the event of default, each party has the right to offset any other amounts or obligations due under the relevant agreement and any other agreements or transactions between the parties[128](index=128&type=chunk) - As of March 31, 2025, there were no repurchase agreements, thus no offsetting financial assets and liabilities to report[129](index=129&type=chunk) [Note 13 – Income Taxes](index=46&type=section&id=Note%2013%20%E2%80%93%20Income%20Taxes) This note outlines OFG Bancorp's income tax situation, including its subjection to Puerto Rico and U.S. federal/state tax laws, detailing deferred tax assets and liabilities, effective tax rates, and a reduction in unrecognized tax benefits - OFG is subject to the Puerto Rico Internal Revenue Code of 2011, as amended (maximum statutory corporate tax rate of **37.5%**), with its U.S. mainland subsidiaries and U.S. Virgin Islands branch subject to federal and state income taxes[130](index=130&type=chunk) Deferred Tax Assets and Liabilities (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Net Deferred Tax Assets | $6,300 | $6,200 | | Net Deferred Tax Liabilities | $44,200 | $40,700 | - The effective tax rate for Q1 2025 was **23.3%**, down from **26.8%** in Q1 2024, primarily due to preferential tax treatment under the Puerto Rico Code, discrete tax windfalls from stock options, and the release of unrecognized tax benefits in the current period[132](index=132&type=chunk) - Unrecognized tax benefits were zero as of March 31, 2025, compared to **$1 million** as of December 31, 2024, due to the expiration of the statute of limitations in Q1 2025[133](index=133&type=chunk) [Note 14 – Regulatory Capital Requirements](index=47&type=section&id=Note%2014%20%E2%80%93%20Regulatory%20Capital%20Requirements) This note confirms that OFG Bancorp and Oriental Bank met all Basel III capital adequacy requirements as of March 31, 2025, and December 31, 2024, and are categorized as "well capitalized" institutions under the regulatory framework - OFG and its subsidiary, Oriental Bank, are subject to risk-based capital standards (Basel III Capital Rules) by federal and Puerto Rico banking agencies and elected to exclude accumulated other comprehensive income (loss) related to available-for-sale securities and derivative valuations from common equity tier 1 capital[135](index=135&type=chunk) - As of March 31, 2025, and December 31, 2024, both OFG and Oriental Bank met all capital adequacy requirements and were rated "well capitalized" under the prompt corrective action regulatory framework[136](index=136&type=chunk) OFG Bancorp Regulatory Capital Ratios (March 31, 2025, and December 31, 2024) | Ratio | March 31, 2025 | December 31, 2024 | Minimum Requirement to be Well Capitalized | | :--- | :--- | :--- | :--- | | Total Capital to Risk-Weighted Assets | 15.53% | 15.52% | 10.00% | | Tier 1 Capital to Risk-Weighted Assets | 14.27% | 14.26% | 8.00% | | Common Equity Tier 1 Capital to Risk-Weighted Assets | 14.27% | 14.26% | 6.50% | | Tier 1 Capital to Average Total Assets (Leverage Ratio) | 10.83% | 10.93% | 5.00% | [Note 15 – Stockholders' Equity](index=49&type=section&id=Note%2015%20%E2%80%93%20Stockholders'%20Equity) This note details the composition of OFG Bancorp's stockholders' equity, including common stock, additional paid-in capital, statutory surplus, retained earnings, and treasury stock, highlighting the increase in statutory surplus and significant stock repurchases in Q1 2025 - Statutory surplus increased from **$169.5 million** as of December 31, 2024, to **$173.9 million** as of March 31, 2025, with **$4.4 million** transferred from retained earnings in Q1 2025[141](index=141&type=chunk) - In Q1 2025, OFG repurchased **582,399 shares** for **$23.4 million** at an average price of **$40.17 per share** under its **$50 million** stock repurchase program[143](index=143&type=chunk)[144](index=144&type=chunk) - As of March 31, 2025, the estimated number of shares remaining to be purchased under the **$50 million** repurchase program was **157,017 shares**, with a remaining amount of **$6.3 million**[143](index=143&type=chunk) [Note 16 – Accumulated Other Comprehensive Loss](index=50&type=section&id=Note%2016%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20Loss) This note presents the changes in OFG Bancorp's Accumulated Other Comprehensive Loss (AOCL) (net of tax), which significantly decreased in Q1 2025 due to unrealized gains on available-for-sale securities Accumulated Other Comprehensive Loss (AOCL) (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Unrealized Losses on Available-for-Sale Securities | $(67,817) | $(105,930) | | Income Tax Impact | $9,816 | $16,091 | | **Net Unrealized Losses on Available-for-Sale Securities (AOCL)** | **$(58,001)** | **$(89,839)** | - AOCL decreased by **$31.838 million** in Q1 2025, primarily due to other comprehensive income (gain) of **$31.838 million**, reflecting unrealized gains on available-for-sale securities[145](index=145&type=chunk) [Note 17 – Earnings per Common Share](index=51&type=section&id=Note%2017%20%E2%80%93%20Earnings%20per%20Common%20Share) This note provides the calculation of OFG Bancorp's basic and diluted earnings per common share for the quarters ended March 31, 2025, and March 31, 2024, showing a slight year-over-year decrease in EPS Earnings per Common Share (in thousands of dollars, except per share data) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | Income Attributable to Common Stockholders | $45,572 | $49,692 | | Average Common Shares Outstanding | 45,295 | 47,096 | | Basic Earnings Per Share | $1.01 | $1.06 | | Diluted Earnings Per Share | $1.00 | $1.05 | - In Q1 2025, OFG increased its quarterly cash dividend per common share to **$0.30** from **$0.25** as of December 31, 2024[150](index=150&type=chunk) [Note 18 – Guarantees](index=51&type=section&id=Note%2018%20%E2%80%93%20Guarantees) This note details OFG Bancorp's guarantees, including standby letters of credit and liabilities for residential mortgage loans sold with credit recourse, outlining estimated losses and repurchase obligations associated with these guarantees - The nominal amount of obligations under standby letters of credit was **$25.3 million** as of both March 31, 2025, and December 31, 2024[151](index=151&type=chunk) - The outstanding principal balance of residential mortgage loans sold with credit recourse was **$88.8 million** as of March 31, 2025, and **$90.5 million** as of December 31, 2024[152](index=152&type=chunk) Estimated Credit Loss Liabilities (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Loans Sold with Credit Recourse | $220 | $155 | | Loans in Breach of Representations and Warranties | $388 | $562 | - As of March 31, 2025, OFG serviced **$5.6 billion** in mortgage loans for third parties and had advanced approximately **$4.8 million** under such mortgage servicing agreements[159](index=159&type=chunk) [Note 19 – Commitments and Contingencies](index=52&type=section&id=Note%2019%20%E2%80%93%20Commitments%20and%20Contingencies) This note outlines OFG Bancorp's credit-related financial instruments with off-balance sheet risk, including commitments to extend credit and financial guarantees, also addressing legal proceedings and other contingencies, stating no material adverse impact is expected Credit-Related Financial Instruments (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Commitments to Extend Credit | $1,338,010 | $1,360,351 | | Commercial Letters of Credit | $2,308 | $1,096 | | Standby Letters of Credit and Financial Guarantees | $25,321 | $25,321 | | Loans Sold with Recourse | $88,764 | $90,464 | - The allowance for credit losses for off-balance sheet credit exposures was **$0.925 million** as of March 31, 2025[166](index=166&type=chunk) - As of March 31, 2025, OFG had **$14.2 million** in other non-credit commitments and **$3.8 million** in technology capital expenditure commitments[167](index=167&type=chunk) - The accrued liability for legal contingencies was **$0.62 million** as of March 31, 2025, and management believes the ultimate outcome of all matters will not have a material adverse effect on OFG's financial condition or results of operations[170](index=170&type=chunk)[171](index=171&type=chunk) [Note 20 – Operating Leases](index=54&type=section&id=Note%2020%20%E2%80%93%20Operating%20Leases) This note details OFG Bancorp's real estate operating leases, presenting lease costs, assets, liabilities, and future minimum payments, also including information on OFG as a lessor Operating Lease Costs (in thousands of dollars) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | Lease Cost | $2,240 | $2,653 | | Variable Lease Cost | $382 | $411 | | Short-Term Lease Cost | $100 | $50 | | Lease Income | $(13) | $(22) | | **Total Lease Cost** | **$2,709** | **$3,092** | Operating Lease Assets and Liabilities (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Right-of-Use Assets | $18,663 | $19,197 | | Lease Liabilities | $20,795 | $21,388 | - As of March 31, 2025, the weighted average remaining lease term was **4.7 years**, and the weighted average discount rate was **7.6%**[174](index=174&type=chunk) [Note 21 – Fair Value of Financial Instruments](index=56&type=section&id=Note%2021%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) This note explains OFG Bancorp's fair value measurement framework, classifying assets and liabilities into Level 1, 2, or 3 based on input observability, and provides detailed tables for recurring and non-recurring fair value measurements, along with sensitivity analysis for unobservable input changes - Fair value is defined as the price to exchange an asset or transfer a liability in an orderly transaction between market participants in the principal or most advantageous market, maximizing observable inputs and minimizing unobservable inputs[176](index=176&type=chunk) - Investment securities are classified as Level 1 or 2, with one held-to-maturity security classified as Level 3; servicing assets, foreclosed real estate, and other repossessed assets are classified as Level 3 due to unobservable inputs[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) Recurring Fair Value Measurements (March 31, 2025, in thousands of dollars) | Category | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Available-for-Sale Investment Securities | $1,384 | $2,413,953 | $0 | $2,415,337 | | Trading Securities | $0 | $19 | $0 | $19 | | Money Market Investments | $7,107 | $0 | $0 | $7,107 | | Servicing Assets | $0 | $0 | $69,238 | $69,238 | | **Total** | **$8,491** | **$2,413,972** | **$69,238** | **$2,491,701** | - Sensitivity analysis for servicing assets shows that an adverse **10%** change in fixed prepayment rates would decrease fair value by **$1.309 million**, and an adverse **10%** change in discount rates would decrease fair value by **$3.035 million**[184](index=184&type=chunk) [Note 22 – Banking and Financial Service Revenues](index=62&type=section&id=Note%2022%20%E2%80%93%20Banking%20and%20Financial%20Service%20Revenues) This note presents the main categories of banking and financial service revenues, including banking service income, wealth management income, and mortgage banking activities, explaining the recognition policies for each revenue stream Banking and Financial Service Revenues (in thousands of dollars) | Category | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | Banking Service Income | $15,981 | $17,259 | | Wealth Management Income | $8,455 | $8,107 | | Mortgage Banking Activities | $4,776 | $4,693 | | **Total Banking and Financial Service Revenues** | **$29,212** | **$30,059** | - Banking service income decreased primarily due to reduced interchange fees following the implementation of the Durbin Amendment on July 1, 2024[193](index=193&type=chunk) - Wealth management income includes insurance income, brokerage fees (securities sales commissions, managed account fees, mutual fund distribution fees), and trust fees[195](index=195&type=chunk)[196](index=196&type=chunk)[198](index=198&type=chunk) [Note 23 – Business Segments](index=64&type=section&id=Note%2023%20%E2%80%93%20Business%20Segments) This note describes OFG Bancorp's three reportable business segments: Banking, Wealth Management, and Financial, providing operating results and selected financial information for each segment, emphasizing performance assessment based on net income - OFG operates through three segments: Banking (traditional banking products, mortgages), Wealth Management (financial planning, brokerage, insurance, trust services), and Financial (asset/liability management, investment securities, borrowings)[200](index=200&type=chunk)[201](index=201&type=chunk) - The Chief Operating Decision Maker (CEO) primarily assesses segment performance and allocates resources based on net income[203](index=203&type=chunk) Net Income by Business Segment (Quarter Ended March 31, 2025, in thousands of dollars) | Segment | Net Income | | :--- | :--- | | Banking | $14,340 | | Wealth Management | $3,563 | | Financial | $27,669 | | **Consolidated Total** | **$45,572** | Net Income by Business Segment (Quarter Ended March 31, 2024, in thousands of dollars) | Segment | Net Income | | :--- | :--- | | Banking | $19,254 | | Wealth Management | $2,582 | | Financial | $27,856 | | **Consolidated Total** | **$49,692** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=59&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on OFG Bancorp's financial performance and condition, offering a detailed analysis of operating results, financial position, and key performance indicators for the quarter ended March 31, 2025, compared to prior periods [Introduction](index=67&type=section&id=Introduction) This introduction outlines OFG Bancorp's business model as a financial holding company, providing diversified banking and financial services primarily in Puerto Rico and the U.S. Virgin Islands through its Banking, Wealth Management, and Financial segments, emphasizing its "digital-first" strategy to enhance client convenience and financial progress - OFG is a financial holding company operating through Banking, Wealth Management, and Financial segments, offering a broad range of services in Puerto Rico and the U.S. Virgin Islands[213](index=213&type=chunk) - OFG's long-term goals include strengthening its financial franchise by expanding lending, enhancing integration of banking and financial service marketing and delivery, continuously improving asset/liability management, increasing non-interest income from banking and financial services, and improving operational efficiency[213](index=213&type=chunk) - The company is implementing a "digital-first" strategy to enhance client experience through digital channels, self-service, and value-added services, aiming for clients' financial progress and well-being[215](index=215&type=chunk) [Recent Developments](index=67&type=section&id=Recent%20Developments) This section highlights recent capital actions, including increased quarterly cash dividends and significant stock repurchases, and discusses Puerto Rico's economic conditions, noting its resilience but also potential impacts from federal spending cuts and global uncertainties - In January 2025, OFG announced an increase in its regular quarterly cash dividend on common stock from **$0.25** to **$0.30** per share[216](index=216&type=chunk) - In Q1 2025, OFG repurchased **582,399 shares** for **$23.4 million** at an average price of **$40.17 per share**[216](index=216&type=chunk) - On April 30, 2025, the Board of Directors approved a new **$100 million** stock repurchase program[217](index=217&type=chunk) - Puerto Rico's economy continues to show resilience with positive wage, employment, and business conditions, benefiting from federal stimulus and infrastructure reconstruction funds, but OFG is closely monitoring potential impacts of federal funding reductions and global uncertainties on the local economy and business operating results[218](index=218&type=chunk) [Critical Accounting Policies and Estimates](index=68&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section reiterates that the Allowance for Credit Losses (ACL) related to collectively assessed impairment remains a critical accounting policy and estimate due to significant estimation uncertainty, but its methodology has not materially changed since the previous annual report - The Allowance for Credit Losses (ACL) related to collectively assessed impairment is identified as a critical accounting policy and estimate due to significant estimation uncertainty[220](index=220&type=chunk) - Management continuously evaluates and updates critical accounting estimates, with no material changes in methodology since the 2024 Form 10-K[221](index=221&type=chunk) [Financial Highlights](index=68&type=section&id=Financial%20Highlights) OFG Bancorp demonstrated strong performance in Q1 2025 with solid overall results, customer and deposit growth, improved consumer credit, and strategic technology investments; despite a slight year-over-year decrease in net income and diluted EPS, capital levels remained strong, and dividends increased - Q1 2025 results were strong, with customer and deposit growth, improved consumer credit, and excellent operational execution, supported by strategic investments in technology (digital-first strategy, omnichannel applications, intelligent banking insights, Apple Pay)[222](index=222&type=chunk) Key Financial Highlights (Q1 2025 vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Diluted EPS | $1.00 | $1.05 | -4.8% | | Net Income | $45.6M | $49.7M | -8.3% | | Net Interest Margin | 5.42% | 5.40% | +0.02% | | Return on Average Assets (ROA) | 1.56% | 1.77% | -11.9% | | Return on Average Tangible Common Equity | 15.28% | 17.92% | -14.7% | | Efficiency Ratio | 52.42% | 52.49% | -0.07% | | Total Interest Income | $189.2M | $183.4M | +3.2% | | Total Interest Expense | $40.2M | $39.3M | +2.1% | | Total Banking and Financial Service Revenues | $29.2M | $30.1M | -2.8% | | Pre-Provision Net Revenue | $85.1M | $83.0M | +2.5% | | Total Provision for Credit Losses | $25.7M | $15.1M | +69.9% | | Net Charge-Offs (NCOs) | $20.4M | $19.8M | +2.8% | | Non-Performing Loan Ratio | 1.11% | N/A | N/A | | Total Non-Interest Expense | $93.5M | $91.4M | +2.2% | | Income Tax Expense | $13.9M | $18.2M | -23.9% | | Loans Held for Investment | $7.85B | $7.54B | +4.15% | | New Loan Originations | $558.9M | $536.6M | +4.16% | | Total Investments | $2.79B | $2.48B | +12.5% | | Customer Deposits | $9.76B | $9.55B | +2.2% | | Total Borrowings and Brokered Deposits | $421.5M | $203.3M | +107.3% | | Cash and Cash Equivalents | $710.6M | $754.4M | -5.8% | | CET1 Ratio | 14.27% | 14.45% | -0.18% | | Tangible Common Equity Ratio | 10.30% | 10.06% | +0.24% | | Tangible Book Value Per Share | $26.66 | $23.55 | +13.2% | [Analysis of Results of Operations](index=73&type=section&id=Analysis%20of%20Results%20of%20Operations) This section provides a detailed comparison of OFG Bancorp's financial results for the quarters ended March 31, 2025, and March 31, 2024, focusing on net interest income, non-interest income, non-interest expenses, provision for credit losses, income tax expense, and performance across business segments [Net Interest Income](index=73&type=section&id=Net%20Interest%20Income) Net interest income increased by **$5 million** (**3.4%**) year-over-year, driven by higher interest income from loans and investment securities, partially offset by decreased interest income from cash and money market investments and increased interest expense on borrowings Net Interest Income (in thousands of dollars) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $149,071 | $144,102 | +$4,969 | | Interest Spread | 5.27% | 5.26% | +0.01% | | Net Interest Margin | 5.42% | 5.40% | +0.02% | - Loan interest income increased by **$3.8 million**, primarily from auto loans (up **$5.6 million** due to higher average balances) and consumer loans (up **$1.2 million**), partially offset by commercial loans (down **$1.4 million**) and mortgage loans (down **$1.6 million**)[253](index=253&type=chunk) - Investment securities interest income increased by **$3.7 million**, driven by acquisitions of higher-yielding investment securities and increased average volumes[253](index=253&type=chunk) - These increases were partially offset by a **$1.7 million** decrease in interest income from interest-bearing cash and money market investments and a **$0.9 million** increase in interest expense on borrowings[252](index=252&type=chunk) [Non-Interest Income](index=76&type=section&id=Non-Interest%20Income) Total non-interest income decreased by **$0.831 million** (**2.7%**) year-over-year, primarily due to lower banking service income from reduced interchange fees, partially offset by increased wealth management income and mortgage banking activities Non-Interest Income Summary (in thousands of dollars) | Category | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Banking Service Income | $15,981 | $17,259 | (7.4)% | | Wealth Management Income | $8,455 | $8,107 | 4.3% | | Mortgage Banking Activities | $4,776 | $4,693 | 1.8% | | **Total Non-Interest Income** | **$29,517** | **$30,348** | **(2.7)%** | - Banking service income decreased by **$1.3 million**, mainly due to reduced interchange fees after the Durbin Amendment implementation, partially offset by increased merchant income and sponsorship commissions[256](index=256&type=chunk) - Wealth management income increased by **$0.348 million**, driven by higher investment advisory services and insurance income[256](index=256&type=chunk) - Mortgage banking activities increased by **$0.083 million**, primarily from higher servicing fees and favorable valuations of the mortgage loans held for sale portfolio, partially offset by lower MSR valuations and increased repurchase loan losses[256](index=256&type=chunk) [Non-Interest Expenses](index=77&type=section&id=Non-Interest%20Expenses) Total non-interest expenses increased by **$2 million** (**2.2%**) year-over-year, primarily driven by higher professional services fees, occupancy, equipment and infrastructure costs, taxes and fees, and foreclosed real estate expenses, partially offset by lower electronic banking fees Non-Interest Expenses Summary (in thousands of dollars) | Category | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Salaries and Employee Benefits | $39,932 | $39,816 | 0.3% | | Occupancy, Equipment, and Infrastructure Costs | $14,820 | $14,322 | 3.5% | | Electronic Banking Fees | $9,670 | $10,366 | -6.7% | | Information Technology Expenses | $6,287 | $6,603 | -4.8% | | Professional and Service Fees | $5,118 | $4,004 | 27.8% | | Taxes and Fees (Excluding Payroll and Income Taxes) | $3,726 | $3,243 | 14.9% | | Insurance | $2,766 | $2,676 | 3.4% | | Loan Servicing and Clearing Fees | $2,234 | $2,110 | 5.9% | | Advertising, Business Development, and Strategic Initiatives | $2,617 | $2,379 | 10.0% | | Communications | $1,120 | $1,081 | 3.6% | | Printing, Postage, Stationery, and Supplies | $1,147 | $959 | 19.6% | | Foreclosed Real Estate and Other Repossessed Assets Expense (Net) | $1,028 | $668 | 53.9% | | Other | $2,987 | $3,185 | -6.2% | | **Total Non-Interest Expenses** | **$93,452** | **$91,412** | **2.2%** | - The increase primarily stemmed from professional and service fees (up **$1.1 million**), occupancy, equipment, and infrastructure costs (up **$0.498 million**), taxes and fees (up **$0.483 million**), and foreclosed real estate expenses (up **$0.36 million**)[260](index=260&type=chunk) - This was partially offset by a **$0.696 million** decrease in electronic banking fees, reflecting a **$3.1 million** quantitative incentive payment from a business partner, partially offset by increased electronic banking fee volume and other related costs[258](index=258&type=chunk) - The efficiency ratio remained stable at **52.42%** in Q1 2025, compared to **52.49%** in Q1 2024[259](index=259&type=chunk) [Provision for Credit Losses](index=78&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses significantly increased by **$10.6 million** (**69.9%**) year-over-year to **$25.7 million**, primarily due to increased loan volume, specific reserves for commercial loans, and auto loan loss trends Provision for Credit Losses (in thousands of dollars) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Provision for Credit Losses | $25,688 | $15,121 | 69.9% | - The increase in the Q1 2025 provision reflects **$17.4 million** for increased loan volume, **$4.8 million** for specific reserves on three commercial loans, and **$3.5 million** to reflect post-pandemic auto loan default loss trends[261](index=261&type=chunk) [Income Tax Expense](index=78&type=section&id=Income%20Tax%20Expense) Income tax expense decreased by **$4.3 million** (**23.9%**) year-over-year to **$13.9 million**, resulting in a lower effective tax rate of **23.3%** due to preferential tax treatment, stock option windfalls, and the release of unrecognized tax benefits Income Tax Expense (in thousands of dollars) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Income Tax Expense | $13,876 | $18,225 | (23.9)% | - The effective tax rate decreased from **26.8%** in Q1 2024 to **23.3%** in Q1 2025[262](index=262&type=chunk) - The decrease is primarily associated with preferential tax treatment under the Puerto Rico Code, discrete tax windfalls from stock options, and the release of unrecognized tax benefits in the current period[262](index=262&type=chunk) [Business Segments](index=78&type=section&id=Business%20Segments) This section analyzes the performance of OFG Bancorp's three business segments: Banking, Wealth Management, and Financial, noting that the Banking segment's pre-tax net income decreased due to higher credit loss provisions and lower non-interest income, while Wealth Management grew, and the Financial segment's pre-tax net income slightly declined due to increased interest expense Pre-Tax Net Income by Segment (in thousands of dollars) | Segment | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | | :--- | :--- | :--- | | Banking | $28,148 | $37,420 | | Wealth Management | $3,580 | $2,595 | | Financial | $27,720 | $27,902 | | **Consolidated Total** | **$59,448** | **$67,917** | - The Banking segment's pre-tax net income decreased by **$9.3 million**, primarily due to a **$10.5 million** increase in the provision for credit losses and a **$2.4 million** decrease in non-interest income (reduced interchange fees)[267](index=267&type=chunk)[269](index=269&type=chunk) - The Wealth Management segment's pre-tax net income increased by **$1 million**, driven by higher non-interest income from investment advisory service fees, mutual fund retailer fees, and insurance income[267](index=267&type=chunk) - The Financial segment's pre-tax net income decreased by **$0.182 million**, mainly due to a **$2.3 million** increase in interest expense on borrowings and brokered deposits, partially offset by a **$1.9 million** increase in interest income from higher-yielding investment securities[268](index=268&type=chunk) [Analysis of Financial Condition](index=82&type=section&id=Analysis%20of%20Financial%20Condition) This section provides an in-depth analysis of OFG Bancorp's financial condition, covering changes in assets, liabilities, and stockholders' equity, with detailed discussions on the loan portfolio, allowance for credit losses, non-performing assets, funding sources, and regulatory capital [Assets Owned](index=82&type=section&id=Assets%20Owned) As of March 31, 2025, OFG Bancorp's total assets increased by **$228.6 million** (**2.0%**) to **$11.729 billion**, primarily driven by higher cash and due from banks, growth in the investment portfolio, and increased net loans Total Assets (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Total Assets | $11,729,257 | $11,500,734 | 2.0% | | Cash and Due from Banks | $703,493 | $584,467 | 20.4% | | Total Investments | $2,785,965 | $2,720,277 | 2.4% | | Net Loans | $7,688,271 | $7,633,831 | 0.7% | - The investment portfolio increased by **$65.7 million** (**2.4%**), primarily from **$100 million** in new available-for-sale mortgage-backed securities and **$19.2 million** in mortgage loan securitizations[271](index=271&type=chunk) - Net loans increased by **$54.4 million** (**0.7%**), reflecting growth in U.S. and Puerto Rico commercial, auto, and consumer loan portfolios, partially offset by natural reductions in residential mortgages[272](index=272&type=chunk) [Financial Assets Managed](index=82&type=section&id=Financial%20Assets%20Managed) As of March 31, 2025, OFG Bancorp's total financial assets under management increased to **$4.581 billion**, with a slight decrease in trust assets under management due to market conditions, but a significant increase in assets managed by brokerage-dealer and insurance agency subsidiaries due to new client accounts Total Assets Under Management (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Trust Assets Under Management | $2,246,182 | $2,262,446 | | Broker-Dealer Assets Under Management | $2,335,238 | $2,246,884 | | **Total Assets Under Management** | **$4,581,420** | **$4,509,330** | - Trust assets under management decreased by **$16.3 million**, reflecting changes in current market conditions[273](index=273&type=chunk) - Broker-dealer and insurance agency subsidiaries' assets under management increased by **$88.4 million**, primarily due to new client accounts opened during the quarter[273](index=273&type=chunk) [Goodwill](index=82&type=section&id=Goodwill) As of March 31, 2025, OFG Bancorp's goodwill remained unchanged at **$84.2 million**, with no impairment identified during the quarter, as goodwill is tested annually for impairment and qualitatively analyzed quarterly - Goodwill is not amortized but is tested for impairment annually (as of October 31) and assessed quarterly for triggering events[274](index=274&type=chunk) Goodwill Allocation (in thousands of dollars) | Segment | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Banking | $84,100 | $84,100 | | Wealth Management | $100 | $100 | | **Total Goodwill** | **$84,241** | **$84,241** | - No impairment was identified as of March 31, 2025[274](index=274&type=chunk) [Loan Portfolio Composition](index=84&type=section&id=Loan%20Portfolio%20Composition) As of March 31, 2025, OFG Bancorp's net loans increased by **0.7%** to **$7.688 billion**, with increases in commercial and auto loan portfolios, while mortgage loans decreased due to repayments and securitizations Loan Portfolio Composition (Gross, in thousands of dollars) | Loan Type | March 31, 2025 | December 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Commercial Loans | $3,153,060 | $3,103,091 | 1.6% | | Mortgage Loans | $1,435,573 | $1,470,817 | (2.4)% | | Consumer Loans | $670,808 | $668,561 | 0.3% | | Auto Loans | $2,593,203 | $2,549,493 | 1.7% | | **Total Loans Held for Investment (Gross)** | **$7,852,644** | **$7,791,962** | **0.8%** | - Commercial loan originations increased by **8.7%** to **$221.2 million** in Q1 2025, primarily concentrated in the U.S. commercial loan portfolio[277](index=277&type=chunk) - The mortgage loan portfolio decreased by **2.4%** due to scheduled repayments of residential mortgages and securitization of eligible loans; mortgage loan originations increased by **15.0%** to **$37 million**[277](index=277&type=chunk) - As of March 31, 2025, OFG's direct credit exposure to the Government of Puerto Rico was **$87.3 million**, an increase of **$20.8 million** from December 31, 2024[279](index=279&type=chunk) [Allowance for Credit Losses](index=85&type=section&id=Allowance%20for%20Credit%20Losses) The Allowance for Credit Losses (ACL) increased by **3.0%** to **$181.174 million** as of March 31, 2025, with a significant rise in the provision for credit losses and increased net charge-offs, primarily driven by auto and consumer loans, reflecting post-pandemic credit normalization and higher business volumes Allowance for Credit Losses (ACL) Summary (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Total ACL | $181,174 | $175,863 | 3.0% | | Commercial Loans ACL | $47,790 | $45,436 | 5.2% | | Mortgage Loans ACL | $9,990 | $10,909 | (8.4)% | | Consumer Loans ACL | $32,247 | $31,829 | 1.3% | | Auto Loans ACL | $91,147 | $87,689 | 3.9% | Provision for Credit Losses (in thousands of dollars) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Provision for Credit Losses | $25,681 | $15,269 | 68.2% | Net Credit Losses (in thousands of dollars) | Item | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Net Credit Losses | $(20,370) | $(19,812) | 2.8% | | Net Credit Losses as a Percentage of Average Loans | 1.05% | 1.05% | 0.0% | - Net charge-offs for auto loans increased by **$2.3 million**, reflecting post-pandemic credit normalization and increased business volumes[300](index=300&type=chunk) [Non-performing Assets](index=90&type=section&id=Non-performing%20Assets) As of March 31, 2025, OFG Bancorp's non-performing assets increased by **5.2%** to **$98.4 million**, primarily due to a significant increase in non-accrual commercial loans, partially offset by decreases in non-accrual auto, consumer, and mortgage loans Non-Performing Assets (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Total Non-Performing Loans | $87,484 | $82,983 | 5.4% | | Foreclosed Real Estate | $4,271 | $4,002 | 6.7% | | Other Repossessed Assets | $6,656 | $6,595 | 0.9% | | **Total Non-Performing Assets** | **$98,411** | **$93,580** | **5.2%** | Non-Accrual Loans (in thousands of dollars) | Loan Type | March 31, 2025 | December 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Commercial Loans | $52,816 | $41,554 | 27.1% | | Mortgage Loans | $11,815 | $12,162 | (2.9)% | | Consumer Loans | $3,482 | $4,207 | (17.2)% | | Auto Loans | $14,043 | $20,055 | (30.0)% | | **Total Non-Accrual Loans** | **$82,156** | **$77,978** | **5.4%** | - The increase in non-accrual commercial loans is primarily related to a **$6.8 million** PCD commercial loan and a **$6.1 million** non-PCD U.S. commercial loan[288](index=288&type=chunk) - As of March 31, 2025, the allowance for credit losses coverage of non-performing loans was **207.1%** (compared to **211.9%** as of December 31, 2024)[285](index=285&type=chunk) [Liabilities and Funding Sources](index=93&type=section&id=Liabilities%20and%20Funding%20Sources) As of March 31, 2025, OFG Bancorp's total liabilities increased by **1.8%** to **$10.434 billion**, with deposits as the primary funding source increasing by **3.3%**, while borrowings significantly decreased by **36.3%** due to maturities and strategic asset/liability management Total Liabilities (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Total Liabilities | $10,433,896 | $10,246,363 | 1.8% | | Total Deposits | $9,922,969 | $9,604,786 | 3.3% | | Total Borrowings | $255,642 | $401,174 | (36.3)% | - Deposits increased by **$318.4 million**, reflecting growth in demand deposits (up **$214 million**), time deposits (up **$61.7 million**), and savings and money market accounts (up **$42.7 million**)[305](index=305&type=chunk) - Borrowings decreased by **$145.5 million**, reflecting maturities of FHLB advances and securities sold under repurchase agreements[307](index=307&type=chunk) - As of March 31, 2025, public fund deposits from Puerto Rico government entities and instrumentalities totaled **$1.537 billion**, collateralized by **$1.591 billion** in securities and commercial loans[306](index=306&type=chunk) [Stockholders' Equity](index=94&type=section&id=Stockholders'%20Equity) As of March 31, 2025, OFG Bancorp's total stockholders' equity increased by **3.3%** to **$1.295 billion**, primarily driven by net income, increased statutory surplus, and reduced accumulated other comprehensive loss due to favorable market value adjustments on available-for-sale securities, partially offset by treasury stock repurchases Total Stockholders' Equity (in thousands of dollars) | Item | March 31, 2025 | December 31, 2024 | Percentage Change | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $1,295,361 | $1,254,371 | 3.3% | - The increase reflects **$45.6 million** in net income, a **$4.4 million** increase in statutory surplus, and a **$31.8 million** decrease in accumulated other comprehensive loss (favorable market value adjustments on available-for-sale securities)[308](index=308&type=chunk) - These positive impacts were partially offset by **$11.2 million** in common stock dividends and **$23.9 million** in treasury stock repurchases[308](index=308&type=chunk) [Regulatory Capital](index=94&type=section&id=Regulatory%20Capital) OFG Bancorp and Oriental Bank continue to exceed all Basel III regulatory capital requirements and are rated "well capitalized"; while the leverage capital ratio slightly decreased, risk-weighted cap

Core Viewpoint - The Annual Report for Octopus Future Generations VCT plc for the period ended 31 December 2024 has been made available to shareholders, along with the Notice of Meeting for the upcoming Annual General Meeting scheduled for 4 June 2025 [1][2]. Group 1 - The Annual Report has been posted or made available to shareholders [1]. - A copy of the Annual Report can be viewed on the Company's website [1]. - The Form of Proxy has been submitted to the Financial Conduct Authority's Electronic Submission System [2]. Group 2 - The Annual General Meeting is set to take place on 4 June 2025 [1]. - Further information can be obtained by contacting Rachel Peat at Octopus Company Secretarial Services Limited [2]. - The Annual Report is also available for inspection at the Financial Conduct Authority's website [2].

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Core Viewpoint - Octopus Future Generations VCT plc focuses on investing in early-stage companies that address significant societal and environmental challenges, aiming to provide investors with growth opportunities in purpose-driven businesses [1][4]. Financial Performance - The NAV per share as of 31 December 2024 was 88.8p, reflecting a decrease of 5.5p from 30 June 2023 [5][23]. - The company utilized £10.1 million of cash resources during the reporting period, with £8.2 million invested in 16 new and follow-on opportunities [5][29]. - The loss for the period was £2.9 million, attributed to specific performance challenges and difficult funding conditions in the early-stage investment space [5][18]. Investment Strategy - The company aims to maintain a portfolio comprising 80% to 90% in VCT qualifying investments and 10% to 20% in permitted non-VCT qualifying investments or cash [6]. - The investment focus is on three key themes: revitalising healthcare (53% of portfolio), empowering people (28%), and building a sustainable planet (19%) [24]. Fundraising Activities - A fundraise of £3.6 million was completed on 31 October 2024, amidst a competitive VCT fundraising market that raised £882 million in total [7]. - An initial offer to raise up to £5 million was launched on 3 February 2025, successfully closing on 1 April 2025 [8]. Portfolio Management - The company completed 16 investments totaling £8.2 million during the 18-month period, with an additional £2.4 million invested after the reporting date [29]. - Significant valuation declines were noted in 11 companies, with a collective decrease of £7.9 million, primarily affecting Tympa Health, Pear Bio, and Elo Health [24][25]. Exits and Returns - The company achieved its first full and partial exits during the reporting period, with returns of 1.5x from the sales of shares in Neat and Cobee [28][19]. - The long-term target is to pay an annual dividend of 5% of the NAV, although significant dividends are unlikely before 2026 [20]. Governance and Management Changes - Emma Davies announced her retirement from the Board effective 31 March 2024, with Ajay Chowdhury appointed as her successor [10]. - Erin Platts was appointed as the new CEO of Octopus Ventures in January 2025, bringing extensive experience from the UK and European tech ecosystem [15]. Market Outlook - The M&A environment is showing signs of recovery, with startups experiencing the highest annual transaction levels since 2019 [19]. - The company is optimistic about stabilizing NAV and potential growth as the portfolio matures, despite the challenges faced during the reporting period [18][72].