KBRA Assigns Ratings to OFG Bancorp, Inc. and Affirms Ratings for Oriental Bank

(Neutral)

Key Terms

senior unsecured debt financial

A senior unsecured debt is a loan or bond that a company must repay before other unsecured obligations but is not backed by specific assets as collateral. Think of it as being earlier in line for repayment, like a preferred ticket in a queue, but without a guarantee you’ll get property if the company fails; that priority reduces risk compared with junior debt and affects expected interest rates and recovery prospects for investors.

subordinated debt financial

Subordinated debt is a type of loan that is paid back after other debts have been settled if a company encounters financial trouble. It is considered riskier for lenders because they have lower priority in getting repaid, similar to being last in line during a payout. For investors, this means higher potential returns in exchange for taking on more risk.

short-term debt financial

Short-term debt is money a company must pay back within one year, including loans, notes, and commercial paper. It matters to investors because it shows near-term cash demands and how well a company can cover those payments with available cash or regular income; like a household managing a credit card bill, heavy short-term debt can raise the risk of running short of cash or needing costly refinancing, while manageable levels suggest stronger short-term financial health.

structural subordination financial

Structural subordination occurs when creditors of a parent company stand behind creditors of its subsidiaries for payment because the subsidiaries’ assets and cash are legally reserved for their own creditors first. For investors this matters because debt or claims at the parent level can be harder to get paid if a subsidiary faces trouble—think of money locked in separate piggy banks that first must cover each piggy bank’s bills before the top-level holder can access any leftovers—so it raises recovery risk and often affects yield and perceived credit strength.

double leverage ratio financial

A double leverage ratio measures how much a parent company has used borrowed money to finance its ownership stakes in its subsidiaries, typically expressed as the parent's investment in subsidiaries divided by the parent's own equity. It matters to investors because it reveals hidden or layered borrowing: a group can look moderately leveraged overall while the parent has taken on extra debt to fund subsidiary investments, increasing risk if cash flows weaken—like using one loan to buy another asset you already control.

fixed charge coverage ratio financial

A fixed charge coverage ratio measures how well a company's operating income can cover its fixed, recurring obligations like interest payments and lease costs. Think of it as a safety margin — the higher the number, the more comfortably a business can pay steady bills from its normal earnings, which matters to investors because it signals financial stability, lower default risk, and greater ability to withstand revenue dips.

See more from StockTitan in Google Search and AI answers. Adds StockTitan as a preferred source · opens Google

Add on Google

03/02/2026 - 04:53 PM

NEW YORK--(BUSINESS WIRE)-- KBRA assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 to San Juan, Puerto Rico-based OFG Bancorp, Inc. (NYSE: OFG) ("the company"). In addition, KBRA affirms the deposit and senior unsecured debt ratings of BBB+ and the short-term deposit and debt ratings of K2 for its bank subsidiary, Oriental Bank ("the bank"). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

Oriental Bank’s ratings continue to be anchored by the ongoing economic recovery in PR, as well as management’s stewardship during periods of unforeseen and severe natural disasters, the COVID era disruptions, and economic dislocation caused by the Commonwealth’s debt default in 2016. The positive economic performance in PR has been driven by the inflow of federal funds and private capital, the bulk of which has been invested in and remains targeted toward growth and infrastructure projects, which has helped to stabilize the unemployment rate at low levels. The Child Tax Credit expansion in 2021 has strengthened household finances and introduced more citizenry into the banking system.

Profitability, including risk-adjusted measures, remains robust, driven by the bank’s relatively low cost deposit base (including throughout changed Fed monetary regimes), solid loan yields, notably within the auto book, and sturdy (and diversified) sources of noninterest income. Capital at the bank has been managed consistently in recent years, and prudently in KBRA’s view, given the still weakened fiscal, albeit steadily improving, position of PR and the propensity for unpredictable natural disasters.

Loan quality reflects the somewhat riskier customer base in PR but also the higher mix of consumer loans, which generally results in higher loan charge-off rates. Risk-adjusted margins on consumer-oriented loans remain favorable. KBRA notes the emergence of mild credit weakness within the U.S. commercial loan book, which has been managed proactively in terms of resolution.

OFG Bancorp, Inc. is a relatively diversified holding company. Its key assets consist of the equity investment in Oriental Bank and several nonbank subsidiaries, including three operating units that have demonstrated profitability, enabling them to distribute dividends to OFG, in addition to the dividends the Oriental Bank regularly pays to OFG. The three operating nonbank subsidiaries, Oriental Financial Services (SEC regulated dealer), Oriental Insurance, and OFG Reinsurance, offer products and services connected to investment advisory and wealth management, homeowners’ property, life, and annuity insurance products (on an agency basis), among other products. OFG also maintains venture capital investments through OFG Ventures LLC.

As of 4Q25, parent company total assets amounted to approximately $1.4 billion, encapsulating the equity investment in Oriental Bank of $1.3 billion, equity investment in nonbank subsidiaries of $39 million, and cash of $33 million. Liabilities were minimal. OFG, standalone, has not operated with any fixed charge obligations, debt or preferred stock, in several years. In terms of revenue performance, dividends received from Oriental Bank have averaged about 70% of total OFG revenues in recent years, with another 5%-10% of total revenues coming from management fees paid by the bank to OFG. Dividends paid by nonbank subsidiaries, plus management fees, have constituted roughly 15% of total revenues in recent periods. Parent company operating expenses were relatively low at $6.6 million in 2025.

The ratings for OFG are linked to the ratings of Oriental Bank, due primarily to the reliance on bank dividends to fund the BHC’s cash needs, although as noted above, OFG has additional sources of revenue beyond dividends received from the Oriental Bank that add an element of strength to its financial profile. As a separate legal entity, the ratings for OFG are reduced by one level, relative to the ratings of Oriental Bank, because of structural subordination, which typically exists between holding company and bank level creditors.

Rating Sensitivities

The ratings for Oriental Bank continue to be well anchored, reflective of solid multi-year operating performance and the sustained economic recovery in PR. Rating momentum remains tied to the continued maintenance of solid regulatory capital ratios and earnings performance, as well as the prospect for long-term stability in the Commonwealth’s fiscal position. Conversely, although unlikely, the ratings would most likely come under pressure if loan quality were to deteriorate beyond expectations such that KBRA needed to reevaluate the efficacy of management’s loan underwriting and administration standards (within PR and the U.S. loan books), or periodic loan losses (or provision expense) were to move structurally higher such that the bank’s historically robust bottom line earnings profile were to compress to below peer-like levels. OFG’s ratings could be widened from the current level relative to the bank’s ratings if the double leverage ratio were to be consistently maintained more than 120% or the fixed charge coverage ratio were to consistently perform below 5x.

To access ratings and relevant documents, click here.

Methodologies

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1013731