OFG Bancorp (NYSE: OFG) lifts Q2 profit on loan growth and credit actions
OFG Bancorp reported higher profitability for the quarter ended June 30, 2026. Net interest income was $157,299 thousand versus $151,928 thousand a year earlier, with provision for credit losses of $13,006 thousand versus $21,678 thousand. Non-interest income rose to $33,023 thousand, while non-interest expense increased to $102,832 thousand. Net income available to common shareholders was $58,777 thousand versus $51,801 thousand, and diluted EPS was $1.39 versus $1.15. Quarterly cash dividends were $0.35 per share, up from $0.30.
At June 30, 2026, total assets were $12,154,572 thousand, with loans held-for-investment, net, of $8,109,199 thousand and deposits of $9,983,128 thousand. Cash and cash equivalents declined, and investment securities also decreased, while total stockholders’ equity increased to $1,407,272 thousand, reflecting retained earnings, dividends and share repurchases of $44,473 thousand in the first half.
Credit quality metrics were reshaped by active portfolio management. The allowance for credit losses stood at $188,255 thousand, down from $202,341 thousand, as OFG applied a probability‑weighted economic scenario framework with additional qualitative reserves for higher‑risk segments such as auto loans. Net charge‑offs for the first six months were $50.2 million, up from $33.2 million, including $15.6 million of charge‑offs tied to the sale of two previously reserved non‑performing commercial loans. Non‑accrual loans decreased to $62,171 thousand from $124,582 thousand, and only a modest volume of loans was modified for borrowers experiencing financial difficulty.
Positive
- None.
Negative
- None.
Filing Explained
As of June 30, cash and deposits were lower, while $1.337 billion of securities was pledged as collateral.
The Form 10-Q is an unaudited quarterly report; this filing reports OFG Bancorp’s position at
At
The filing states that
For the six months ended
Key Figures
Total Assets: $12,154,572 thousand
Loans Held-for-Investment, Net: $8,109,199 thousand
Total Deposits: $9,983,128 thousand
+5 more
8 metrics
Total Assets
$12,154,572 thousand
As of June 30, 2026
Loans Held-for-Investment, Net
$8,109,199 thousand
As of June 30, 2026
Total Deposits
$9,983,128 thousand
As of June 30, 2026
Q2 2026 Net Income
$58,777 thousand
Quarter ended June 30, 2026
Six-Month 2026 Net Income
$112,714 thousand
Six months ended June 30, 2026
Diluted EPS
$1.39
Quarter ended June 30, 2026
Allowance for Credit Losses
$188,255 thousand
Loans held-for-investment as of June 30, 2026
Net Cash from Operating Activities
$126,316 thousand
Six months ended June 30, 2026
Key Terms
allowance for credit losses, purchased credit deteriorated, non-accrual, GNMA buy-back option, +2 more
6 terms
allowance for credit losses financial
"OFG measures its ACL based on management’s best estimate of lifetime expected credit losses"
Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.
purchased credit deteriorated financial
"segregated between non-purchased credit deteriorated (“non-PCD”) loans and purchased credit deteriorated"
Purchased credit deteriorated (PCD) describes a debt asset bought when its borrower’s ability to repay has already worsened since the loan was first issued. Under accounting rules, buyers must immediately account for the full expected loss rather than spreading it out, so PCD holdings lower reported earnings and capital right away and signal higher credit risk—similar to buying a used car with known damage that you must account for in your budget.
non-accrual financial
"The following table presents the amortized cost basis of loans held-for-investment on non-accrual status"
A non-accrual loan or asset is one for which a lender has stopped counting expected interest as income because the borrower is very late on payments or in serious financial trouble. For investors, non-accruals signal that future cash from interest is uncertain and that the lender may need to write down the loan’s value or set aside extra reserves, similar to a landlord who stops recording rent when a tenant stops paying.
GNMA buy-back option financial
"delinquent loans in the GNMA buy-back option program at June 30, 2026"
collateral-dependent loans financial
"The table below presents the amortized cost of commercial collateral-dependent loans"
probability-weighted scenario financial
"OFG used an economic probability-weighted scenario approach consisting of the baseline"
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FAQ
How did OFG (OFG) perform financially in Q2 2026?
OFG Bancorp generated $58,777 thousand in net income for Q2 2026, up from $51,801 thousand a year earlier. Net interest income reached $157,299 thousand, and non‑interest income was $33,023 thousand, supporting diluted EPS of $1.39.
What were OFG (OFG) year-to-date 2026 earnings and dividends?
For the six months ended June 30, 2026, OFG earned $112,714 thousand, compared with $97,373 thousand in 2025. Common shareholders received cash dividends totaling $0.70 per share year‑to‑date, versus $0.60 in the prior‑year period.
What does OFG (OFG) show on its balance sheet as of June 30, 2026?
Total assets were $12,154,572 thousand, with loans held‑for‑investment, net, of $8,109,199 thousand and deposits of $9,983,128 thousand. Total stockholders’ equity was $1,407,272 thousand, reflecting retained earnings, dividends, and share repurchases.
How are credit quality and reserves trending at OFG (OFG)?
The allowance for credit losses was $188,255 thousand, down from $202,341 thousand at year‑end 2025. Net charge‑offs rose to $50.2 million year‑to‑date, while non‑accrual loans fell to $62,171 thousand, aided by sales of non‑performing commercial loans.
What loan portfolio changes did OFG (OFG) report in Q2 2026?
Loans held‑for‑investment, net, increased to $8,109,199 thousand from $7,998,701 thousand at December 31, 2025. Auto loans totaled $2,623,762 thousand, and commercial loans reached $3,550,734 thousand, with active management of non‑performing exposures.
How much stock did OFG (OFG) repurchase in the first half of 2026?
Treasury stock increased as OFG repurchased common shares costing $44,473 thousand during the six‑month period ended June 30, 2026. This buyback activity reduced outstanding shares and contributed to total stockholders’ equity of $1,407,272 thousand.
What is OFG (OFG) doing to help borrowers in financial difficulty?
OFG operates a loss mitigation program offering interest rate reductions, term extensions, and principal forbearance or forgiveness. In the first half of 2026, only a relatively small volume of loans across commercial, mortgage, consumer, and auto segments was modified under these programs.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended June 30, 2026
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ______________ to ______________
Commission File Number: 001-12647
(Exact name of registrant as specified in its charter)
Commonwealth of | ||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Zip code) | ||||||||
| (Address of principal executive offices) | ||||||||
( | ||||||||
| (Registrant’s telephone number, including area code) | ||||||||
| N/A | ||||||||
| (Former name, former address and former fiscal year, if changed since last report) | ||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☑ | ☐ | Accelerated Filer | ☐ | Non-Accelerated Filer | Smaller Reporting Company | ||||||||||||||||||
| Emerging Growth Company | |||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | Page | |||||||||||||
| Item 1. | Financial Statements | |||||||||||||
Unaudited Consolidated Statements of Financial Condition | 3 | |||||||||||||
Unaudited Consolidated Statements of Operations | 5 | |||||||||||||
Unaudited Consolidated Statements of Comprehensive Income | 7 | |||||||||||||
Unaudited Consolidated Statements of Changes in Stockholders’ Equity | 8 | |||||||||||||
Unaudited Consolidated Statements of Cash Flows | 9 | |||||||||||||
| Notes to Unaudited Consolidated Financial Statements | ||||||||||||||
Note 1 – Summary of Significant Accounting Policies | 12 | |||||||||||||
Note 2 – Cash Restrictions | 13 | |||||||||||||
Note 3 – Investment Securities | 13 | |||||||||||||
Note 4 – Loans | 17 | |||||||||||||
Note 5 – Allowance for Credit Losses | 33 | |||||||||||||
Note 6 – Foreclosed Real Estate | 36 | |||||||||||||
Note 7 – Servicing Assets | 36 | |||||||||||||
Note 8 – Goodwill and Other Intangible Assets | 37 | |||||||||||||
Note 9 – Accrued Interest Receivable and Other Assets | 38 | |||||||||||||
Note 10 – Deposits and Related Interest | 39 | |||||||||||||
Note 11 – Borrowings and Related Interest | 40 | |||||||||||||
Note 12 – Offsetting of Financial Assets and Liabilities | 42 | |||||||||||||
Note 13 – Income Taxes | 42 | |||||||||||||
Note 14 – Regulatory Capital Requirements | 43 | |||||||||||||
Note 15 – Stockholders’ Equity | 44 | |||||||||||||
Note 16 – Accumulated Other Comprehensive Loss | 45 | |||||||||||||
Note 17 – Earnings per Common Share | 46 | |||||||||||||
Note 18 – Guarantees | 47 | |||||||||||||
Note 19 – Commitments and Contingencies | 48 | |||||||||||||
Note 20 – Operating Leases | 50 | |||||||||||||
Note 21 – Fair Value of Financial Instruments | 51 | |||||||||||||
Note 22 – Banking and Financial Service Revenues | 57 | |||||||||||||
Note 23 – Business Segments | 58 | |||||||||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 62 | ||||||||||||
Critical Accounting Policies and Estimates | ||||||||||||||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 102 | ||||||||||||
Item 4. | Controls and Procedures | 107 | ||||||||||||
PART II – OTHER INFORMATION | ||||||||||||||
Item 1. | Legal Proceedings | 107 | ||||||||||||
Item 1A. | Risk Factors | 107 | ||||||||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 108 | ||||||||||||
| Item 3. | Defaults upon Senior Securities | 108 | ||||||||||||
| Item 4. | Mine Safety Disclosures | 108 | ||||||||||||
| Item 5. | Other Information | 108 | ||||||||||||
| Item 6. | Exhibits | 108 | ||||||||||||
Signatures | 109 | |||||||||||||
FORWARD-LOOKING STATEMENTS
The information included in this quarterly report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to the financial condition, results of operations, plans, objectives, future performance and business of OFG Bancorp (“we,” “our,” “us,” the “Company,” or “OFG”), including, but not limited to, statements with respect to the adequacy of the allowance for credit losses (“ACL”), delinquency trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect of legal proceedings and new accounting standards on OFG’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions are generally intended to identify forward-looking statements.
These statements are not guarantees of future performance and involve certain risks, uncertainties, estimates, and assumptions by management that are difficult to predict. Various factors, some of which by their nature are beyond OFG’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Factors that might cause such a difference include, but are not limited to:
•the rate of growth in the economy and employment levels, inflationary pressures or recessionary conditions, as well as general business and economic conditions;
•changes in interest rates, as well as the magnitude of such changes;
•a credit default by municipalities of the government of Puerto Rico;
•a credit default by the United States (“U.S.”) government or a downgrade in the credit ratings of the U.S. government;
•the impacts related to, or resulting from, bank failures and other volatility, including potential increased regulatory and compliance requirements and costs and potential impacts to macroeconomic conditions, which could affect the ability of depository institutions, including the Bank, to attract and retain depositors and to borrow or raise capital;
•the actual or perceived soundness of other financial institutions, including as a result of the financial or operational failure of a major financial institution, or concerns about the creditworthiness of such a financial institution or its ability to fulfill its obligations, which can cause substantial and cascading disruption within the financial markets;
•amendments to the fiscal plans approved by the Financial Oversight and Management Board for Puerto Rico;
•determinations in the court-supervised debt-restructuring process for the Puerto Rico Electric Power Authority (“PREPA”) under Title III of PROMESA, as well as the ability to successfully implement any court-approved plan of adjustment for PREPA or any other Puerto Rico government instrumentality or public corporation;
•unforeseen or catastrophic events, including extreme weather events, other natural disasters, man-made disasters, pandemics, war or other international conflicts and acts of terrorism (including cyber-attacks), or utility disruptions, any of which could significantly affect delinquency rates, loan and accounts receivable balances and other aspects of our business and results of operations;
•the impact of property, credit and other losses in Puerto Rico as a result of hurricanes, earthquakes and other natural disasters;
•the amount of government financial assistance for the reconstruction of Puerto Rico’s infrastructure, which was impacted by the effects of Hurricane Maria in 2017, earthquakes in 2020, and Hurricane Fiona in 2022;
•the pace and magnitude of Puerto Rico’s economic recovery;
•the fiscal and monetary policies of the federal government and its agencies;
•the potential impact of a federal government shutdown, including delays in federal spending, disruptions to economic activity, and uncertainty in financial markets;
1
•the impact of changes in trade policies of the federal government, including the changes in imported goods tariffs, as well as the impact of federal spending cuts on federal emergency and stimulus funds, and their effect on the economy;
•the impact of changes in federal economic policies, including the spending and tax cuts arising under the One Big Beautiful Bill Act, as well as their effect on the U.S. and Puerto Rico economies;
•changes in federal bank regulatory and supervisory policies, including with respect to required levels of capital;
•the relative strength or weakness of the commercial and consumer credit sectors and the real estate market in Puerto Rico;
•the performance of the stock and bond markets;
•our ability to successfully invest in, deploy, and maintain advanced technologies, including artificial intelligence and digital banking platforms;
•competition in the financial services industry; and
•possible additional legislative, tax or regulatory changes.
Other possible events or factors that could cause results or performance to differ materially from those expressed in these forward-looking statements include the following: negative economic conditions that adversely affect the general economy, housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of non-performing assets, charge-offs and provision for credit losses expense; changes in interest rates and market liquidity which may reduce interest margins, impact funding sources and affect the ability to originate and distribute financial products or services in the primary and secondary markets; adverse movements and volatility in debt and equity capital markets; changes in market rates and prices which may adversely impact the value of financial assets and liabilities; risk of impairment of investment securities, goodwill, other intangible assets or deferred tax assets; liabilities resulting from litigation and regulatory investigations; changes in accounting standards, rules and interpretations; increased competition; OFG’s ability to grow its core businesses; decisions to downsize, sell or close units or otherwise change OFG’s business mix; and management’s ability to identify and manage these and other risks.
All forward-looking statements included in this quarterly report on Form 10-Q are based upon information available to OFG as of the date of this report, and other than as required by law, including the requirements of applicable securities laws, OFG assumes no obligation to update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.
2
Table of Contents
OFG BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF JUNE 30, 2026 AND DECEMBER 31, 2025
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents: | |||||||||||
| Cash and due from banks | $ | $ | |||||||||
| Money market investments | |||||||||||
| Total cash and cash equivalents | |||||||||||
| Investments: | |||||||||||
Trading securities, at fair value, with amortized cost of $ | |||||||||||
Investment securities available-for-sale, at fair value, with amortized cost of $ | |||||||||||
Investment securities held-to-maturity, at amortized cost, with fair value of $ | |||||||||||
| Equity securities | |||||||||||
| Total investments | |||||||||||
| Loans: | |||||||||||
| Loans held-for-sale, at lower of cost or fair value | |||||||||||
Loans held-for-investment, net of allowance for credit losses of $ | |||||||||||
| Total loans | |||||||||||
| Other assets: | |||||||||||
| Foreclosed real estate | |||||||||||
| Accrued interest receivable | |||||||||||
| Deferred tax assets, net | |||||||||||
| Premises and equipment, net | |||||||||||
| Customers’ liability on acceptances | |||||||||||
| Servicing assets | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
See notes to unaudited consolidated financial statements.
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OFG BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF JUNE 30, 2026 AND DECEMBER 31, 2025 (CONTINUED)
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Deposits: | |||||||||||
| Demand deposits | $ | $ | |||||||||
| Savings accounts | |||||||||||
| Time deposits | |||||||||||
| Total deposits | |||||||||||
| Borrowings: | |||||||||||
| Securities sold under agreements to repurchase | |||||||||||
| Advances from the FHLB | |||||||||||
| Other borrowings | |||||||||||
| Total borrowings | |||||||||||
| Other liabilities: | |||||||||||
| Acceptances executed and outstanding | |||||||||||
| Operating lease liabilities | |||||||||||
| Deferred tax liabilities, net | |||||||||||
| Accrued expenses and other liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (See Note 19) | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Legal surplus | |||||||||||
| Retained earnings | |||||||||||
Treasury stock, at cost, | ( | ( | |||||||||
Accumulated other comprehensive loss, net of tax of $ | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See notes to unaudited consolidated financial statements.
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OFG BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS AND SIX-MONTH PERIODS ENDED JUNE 30, 2026 AND 2025
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||||||||
| Interest income: | |||||||||||||||||||||||||||||
| Loans | $ | $ | $ | $ | |||||||||||||||||||||||||
| Mortgage-backed securities | |||||||||||||||||||||||||||||
| Investment securities and other | |||||||||||||||||||||||||||||
| Total interest income | |||||||||||||||||||||||||||||
| Interest expense: | |||||||||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | |||||||||||||||||||||||||||||
| Advances from FHLB and other borrowings | |||||||||||||||||||||||||||||
| Total interest expense | |||||||||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||||||||
| Net interest income after provision for credit losses | |||||||||||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||||||||
| Banking service revenue | |||||||||||||||||||||||||||||
| Wealth management revenue | |||||||||||||||||||||||||||||
| Mortgage banking activities | |||||||||||||||||||||||||||||
| Total banking and financial service revenues | |||||||||||||||||||||||||||||
| Other non-interest income | |||||||||||||||||||||||||||||
| Total non-interest income | |||||||||||||||||||||||||||||
See notes to unaudited consolidated financial statements.
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OFG BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS AND SIX-MONTH PERIODS ENDED JUNE 30, 2026 AND 2025 (CONTINUED)
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||||||||
| Compensation and employee benefits | |||||||||||||||||||||||||||||
| Occupancy, equipment and infrastructure costs | |||||||||||||||||||||||||||||
| Electronic banking charges | |||||||||||||||||||||||||||||
| Information technology expenses | |||||||||||||||||||||||||||||
| Professional and service fees | |||||||||||||||||||||||||||||
| Taxes, other than payroll and income taxes | |||||||||||||||||||||||||||||
| Insurance | |||||||||||||||||||||||||||||
| Advertising, business promotion, and strategic initiatives | |||||||||||||||||||||||||||||
| Loan servicing and clearing expenses | |||||||||||||||||||||||||||||
| Communication | |||||||||||||||||||||||||||||
| Printing, postage, stationery and supplies | |||||||||||||||||||||||||||||
| Director and investor relations | |||||||||||||||||||||||||||||
| Foreclosed real estate and other repossessed assets (income) expenses, net | ( | ( | |||||||||||||||||||||||||||
Operational losses and related loss provisions | |||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||
| Total non-interest expense | |||||||||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||||||||
| Net income available to common shareholders | $ | $ | $ | $ | |||||||||||||||||||||||||
| Earnings per common share: | |||||||||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||||||||
| Average common shares outstanding and equivalents | |||||||||||||||||||||||||||||
| Cash dividends per share of common stock | $ | $ | $ | $ | |||||||||||||||||||||||||
See notes to unaudited consolidated financial statements.
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OFG BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE QUARTERS AND SIX-MONTH PERIODS ENDED JUNE 30, 2026 AND 2025
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||||||||
| Other comprehensive (loss) income before tax: | |||||||||||||||||||||||||||||
| Unrealized (loss) gain on securities available-for-sale | ( | ( | |||||||||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||||||||
| Income tax effect | ( | ( | |||||||||||||||||||||||||||
| Other comprehensive (loss) income after taxes | ( | ( | |||||||||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||||||||
See notes to unaudited consolidated financial statements.
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OFG BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY
FOR THE QUARTERS AND SIX-MONTH PERIODS ENDED JUNE 30, 2026 AND 2025
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Common stock: | |||||||||||||||||||||||||||||
| Balance at the beginning and end of period | |||||||||||||||||||||||||||||
| Additional paid-in capital: | |||||||||||||||||||||||||||||
Balance at beginning of period | |||||||||||||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||||||||||||
| Lapsed restricted stock units | ( | ( | ( | ( | |||||||||||||||||||||||||
Balance at end of period | |||||||||||||||||||||||||||||
| Legal surplus: | |||||||||||||||||||||||||||||
Balance at beginning of period | |||||||||||||||||||||||||||||
| Transfer from retained earnings | |||||||||||||||||||||||||||||
Balance at end of period | |||||||||||||||||||||||||||||
| Retained earnings: | |||||||||||||||||||||||||||||
Balance at beginning of period | |||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||
Cash dividends declared on common stock[1] | ( | ( | ( | ( | |||||||||||||||||||||||||
| Transfer to legal surplus | ( | ( | ( | ( | |||||||||||||||||||||||||
Balance at end of period | |||||||||||||||||||||||||||||
| Treasury stock: | |||||||||||||||||||||||||||||
Balance at beginning of period | ( | ( | ( | ( | |||||||||||||||||||||||||
| Stocks repurchased | ( | ( | ( | ||||||||||||||||||||||||||
| Lapsed restricted stock units and options, net of employee awards repurchased | ( | ||||||||||||||||||||||||||||
Balance at end of period | ( | ( | ( | ( | |||||||||||||||||||||||||
| Accumulated other comprehensive loss, net of tax: | |||||||||||||||||||||||||||||
Balance at beginning of period | ( | ( | ( | ( | |||||||||||||||||||||||||
Other comprehensive (loss) gain, net of tax | ( | ( | |||||||||||||||||||||||||||
Balance at end of period | ( | ( | ( | ( | |||||||||||||||||||||||||
| Total stockholders’ equity | $ | $ | $ | $ | |||||||||||||||||||||||||
[1] Dividends declared per common share during the quarter ended June 30, 2026 - $0.35 (June 30, 2025 - $0.30 ). Dividends declared per common share during the six-month period ended June 30, 2026 - $0.70 (June 30, 2025 - $0.60 ).
See notes to unaudited consolidated financial statements.
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OFG BANCORP
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2026 AND 2025
| Six-Month Period Ended June 30, | |||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| (In thousands) | |||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net income | $ | $ | |||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
| Amortization of deferred loan origination (fees), net of costs, and accretion of fair value discounts on loans | ( | ||||||||||||||||
Accretion of investment securities discounts, net of amortization of premiums | ( | ( | |||||||||||||||
| Amortization of other intangible assets | |||||||||||||||||
| Net change in operating leases | ( | ( | |||||||||||||||
| Depreciation and amortization of premises and equipment | |||||||||||||||||
| Deferred income tax benefit, net | ( | ( | |||||||||||||||
| Provision for credit losses | |||||||||||||||||
| Stock-based compensation | |||||||||||||||||
| (Gain) loss on: | |||||||||||||||||
| Sale of loans | ( | ||||||||||||||||
| Foreclosed real estate and other repossessed assets | ( | ( | |||||||||||||||
| Sale of other assets | |||||||||||||||||
| Originations and purchases of loans held-for-sale | ( | ( | |||||||||||||||
| Proceeds from sale of loans held-for-sale | |||||||||||||||||
| Net decrease (increase) in: | |||||||||||||||||
| Accrued interest receivable | ( | ||||||||||||||||
| Servicing assets | ( | ||||||||||||||||
| Other assets | ( | ( | |||||||||||||||
| Net (decrease) increase in: | |||||||||||||||||
| Accrued interest on deposits and borrowings | ( | ||||||||||||||||
| Accrued expenses and other liabilities | ( | ||||||||||||||||
| Net cash provided by operating activities | |||||||||||||||||
See notes to unaudited consolidated financial statements. | |||||||||||||||||
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OFG BANCORP UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2026 AND 2025 (CONTINUED) | |||||||||||||||||
| Six-Month Period Ended June 30, | |||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| (In thousands) | |||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Purchases of: | |||||||||||||||||
| Investment securities available-for-sale | ( | ( | |||||||||||||||
| FHLB stock | ( | ( | |||||||||||||||
| Equity securities | ( | ( | |||||||||||||||
| Maturities and redemptions of: | |||||||||||||||||
| Investment securities available-for-sale | |||||||||||||||||
| Investment securities held-to-maturity | |||||||||||||||||
| FHLB stock | |||||||||||||||||
| Proceeds from sales of: | |||||||||||||||||
| Foreclosed real estate and other repossessed assets, including write-offs | |||||||||||||||||
| Premises and equipment | |||||||||||||||||
| Origination and purchase of loans, excluding loans held-for-sale | ( | ( | |||||||||||||||
| Principal repayment of loans | |||||||||||||||||
| Additions to premises and equipment | ( | ( | |||||||||||||||
Net cash used in investing activities | $ | ( | $ | ( | |||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Net (decrease) increase in: | |||||||||||||||||
| Deposits | ( | ||||||||||||||||
| Securities sold under agreements to repurchase | ( | ||||||||||||||||
| FHLB advances and other borrowings | ( | ||||||||||||||||
| Exercise of stock options and restricted units lapsed, net of employee awards repurchased | ( | ( | |||||||||||||||
| Purchase of treasury stock | ( | ( | |||||||||||||||
| Dividends paid on common stock | ( | ( | |||||||||||||||
| Net cash (used in) provided by financing activities | $ | ( | $ | ||||||||||||||
| Net change in cash and cash equivalents | ( | ||||||||||||||||
Cash and cash equivalents at beginning of period | |||||||||||||||||
Cash and cash equivalents at end of period | $ | $ | |||||||||||||||
See notes to unaudited consolidated financial statements.
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OFG BANCORP UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2026 AND 2025 (CONTINUED) | |||||||||||||||||
| Six-Month Period Ended June 30, | |||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| (In thousands) | |||||||||||||||||
| Reconciliation of the Consolidated Statements of Cash Flows to the Consolidated Statements of Financial Condition: | |||||||||||||||||
| Cash and due from banks | $ | $ | |||||||||||||||
| Money market investments | |||||||||||||||||
Total cash and cash equivalents at end of period | $ | $ | |||||||||||||||
| Supplemental Cash Flow Disclosure and Schedule of Non-cash Activities: | |||||||||||||||||
| Interest paid | $ | $ | |||||||||||||||
| Income taxes paid | $ | $ | |||||||||||||||
| Operating lease liabilities paid | $ | $ | |||||||||||||||
| Mortgage loans held-for-sale securitized into mortgage-backed securities | $ | $ | |||||||||||||||
| Transfer from loans to foreclosed real estate and other repossessed assets | $ | $ | |||||||||||||||
| Reclassification of commercial loans held-for-investment to held-for-sale portfolio | $ | $ | |||||||||||||||
| Reclassification of mortgage loans held-for-sale portfolio to held-for-investment portfolio | $ | $ | |||||||||||||||
| Financed sales of foreclosed real estate | $ | $ | |||||||||||||||
| Delinquent loans booked under the GNMA buy-back option | $ | $ | |||||||||||||||
See notes to unaudited consolidated financial statements.
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OFG BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
OFG is a publicly owned financial holding company incorporated under the laws of the Commonwealth of Puerto Rico. OFG operates through various subsidiaries, including a commercial bank, Oriental Bank (the “Bank”), a securities broker-dealer and investment adviser, Oriental Financial Services LLC (“Oriental Financial Services”), an insurance agency, Oriental Insurance, LLC (“Oriental Insurance”), a captive reinsurance company, OFG Reinsurance Ltd (“OFG Reinsurance”), and OFG Ventures LLC (“OFG Ventures”), which holds equity investments. Through these subsidiaries and their respective divisions, OFG provides a wide range of banking and financial services such as commercial, consumer, auto, and mortgage lending, financial planning, insurance sales, investment advisory, and securities brokerage services, as well as corporate trust services. The Bank has a wholly owned operating subsidiary, OFG USA LLC (“OFG USA”), which is a commercial lender organized in Delaware. In addition, Oriental International Bank Inc. (“OIB”), a wholly owned subsidiary of the Bank, and Oriental Overseas, a division of the Bank, are international banking entities (each an “IBE”) licensed pursuant to the International Banking Center Regulatory Act of Puerto Rico, as amended. OIB and Oriental Overseas offer the Bank certain Puerto Rico tax advantages. Their activities are limited under Puerto Rico law to assets/liabilities located outside of Puerto Rico. The Bank also has a wholly owned subsidiary, OBPEF LLC (“OBPEF”), which is a private equity fund under the Puerto Rico Incentives Code, as amended, whose objective is to provide financing to eligible borrowers, whether in the form of senior or subordinated debt, to support the economic development of Puerto Rico.
Basis of Presentation
The accompanying unaudited consolidated financial statements of OFG have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with guidance provided by the Securities and Exchange Commission (“SEC”). Accordingly, these consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows of OFG on a consolidated basis, and all such adjustments are of a normal recurring nature. The consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in OFG’s annual report on Form 10-K for the fiscal year ended December 31, 2025 (the “2025 Form 10-K”). Operating results for the six-month period ended June 30, 2026, are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. OFG evaluated subsequent events through the filing date of this report with the SEC and has recorded or disclosed those material events or transactions as described within the accompanying consolidated financial statements and notes. Material estimates that are particularly susceptible to significant change in the near term relate mainly to the determination of the allowance for credit losses.
New Accounting Updates Not Yet Adopted
Codification Improvements. In December 2025, the Financial Accounting Standards Board (the “FASB”) issued ASU 2025-12, which is intended to facilitate codification updates for a broad range of topics arising from technical corrections, unintended application of the codification, clarifications, and other minor improvements. The amendments in ASU 2025-12 are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted on an issue-by-issue basis, and an entity may apply certain amendments prospectively while applying others retrospectively. We will adopt this guidance when it becomes effective in 2027. We are currently evaluating the impact on our financial statements and disclosures.
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Interim Reporting (Topic 270): Narrow-Scope Improvements. In December 2025, the FASB issued ASU 2025-11, which is intended to improve the navigability of the guidance in ASC 270 and clarify when it applies. Under these amendments, an entity is subject to ASC 270 if it provides “interim financial statements and notes in accordance with GAAP,” with the aim of improving clarity and consistency without significantly changing existing practices. The amendments in ASU 2025-11 are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and entities may apply the amendments either prospectively or retrospectively to any or all prior periods presented in the financial statements. We will adopt this guidance when it becomes effective in 2028. We are currently evaluating the impact on our financial statements and disclosures.
Financial Instruments—Credit Losses (Topic 326): Purchased Loans. In November 2025, the FASB issued ASU 2025-08, which amends the guidance in ASC 326 on the accounting for certain purchased loans. Under these amendments, entities must account for acquired loans (excluding credit cards) that meet certain criteria at acquisition (“purchased seasoned loans”) by recognizing them at their purchase price plus an allowance for expected credit losses under the gross-up approach, aligning the accounting for purchased seasoned loans with the treatment of financial assets purchased with more-than-insignificant credit deterioration since origination (“PCD assets”). The amendments are effective for annual reporting periods beginning after December 15, 2026, including interim reporting periods within those annual reporting periods. Early adoption is permitted, and entities must apply the amendments prospectively. We will adopt this guidance when it becomes effective in 2027. We are currently evaluating the impact on our financial statements and disclosures.
Disaggregation of Income Statement Expenses. In November 2024, the FASB issued ASU 2024-03, which requires disaggregated disclosure of income statement expenses for public business entities. This ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. These amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and entities may apply the amendments on a prospective basis. We will adopt this guidance when it becomes effective in 2027. We are currently evaluating the impact on our financial statements and disclosures.
NOTE 2 – CASH RESTRICTIONS
OFG had no 509.1 million (December 31, 2025 - $481.5 million). At June 30, 2026, and December 31, 2025, the Bank complied with this requirement. Cash and due from banks, as well as other short-term highly liquid securities, are used to cover the required average reserve balances.
NOTE 3 – INVESTMENT SECURITIES
Money Market Investments
At June 30, 2026, and December 31, 2025, money market instruments included as part of cash and cash equivalents amounted to $5.3 million and $4.3 million, respectively.
Investment Securities
The amortized cost, gross unrealized gains and losses, fair value, weighted average yield and contractual maturities of the securities owned by OFG at June 30, 2026, and December 31, 2025, were as follows:
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Weighted Average Yield | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Available-for-sale | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FNMA and FHLMC certificates | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due after 10 years | $ | $ | $ | $ | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| GNMA certificates | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due from 5 to 10 years | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due after 10 years | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total GNMA certificates | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CMOs issued by US government-sponsored enterprises | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due after 10 years | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mortgage-backed securities | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| US Treasury securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due less than 1 year | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other debt securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due from 1 to 5 years | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total investment securities | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total securities available-for-sale | $ | $ | $ | $ | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Weighted Average Yield | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Held-to-maturity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FNMA and FHLMC certificates | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due after 10 years | $ | $ | $ | $ | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Weighted Average Yield | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Available-for-sale | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FNMA and FHLMC certificates | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due after 10 years | $ | $ | $ | $ | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
GNMA certificates | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due from 5 to 10 years | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due after 10 years | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total GNMA certificates | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CMOs issued by US government-sponsored enterprises | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due after 10 years | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mortgage-backed securities | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| US Treasury securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due less than 1 year | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other debt securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due from 1 to 5 years | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due after 10 years | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total other debt securities | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total investment securities | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total securities available-for-sale | $ | $ | $ | $ | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Weighted Average Yield | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Held-to-maturity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FNMA and FHLMC certificates | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due after 10 years | $ | $ | $ | $ | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
As of June 30, 2026, and December 31, 2025, the amortized cost of investment securities excludes accrued interest receivable, included in the accrued interest receivable line in OFG’s consolidated statements of financial condition. Refer to Note 9 – Accrued Interest Receivable and Other Assets for more information.
Securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
The weighted average yield on debt securities available-for-sale is based on amortized cost and does not give effect to any changes in fair value. Weighted average yields on tax-exempt obligations have been computed on a fully taxable equivalent basis.
At June 30, 2026, and December 31, 2025, most securities held by OFG are issued by U.S. government entities and government-sponsored enterprises that have a zero-credit loss assumption and, therefore, have no ACL.
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Investment securities as of June 30, 2026, include $1.337 billion pledged to secure government deposits, regulatory collateral, and borrowings, of which $1.226 billion serve as collateral for public funds. Investment securities as of December 31, 2025, include $1.724 billion pledged to secure government deposits, regulatory collateral, and borrowings, of which $1.614 billion serve as collateral for public funds. For regulatory collateral, the secured parties are not permitted to sell or repledge the collateral.
The Bank’s IBEs, OIB and Oriental Overseas, each held short-term US Treasury securities in the amount of $1.0 775
During the six-month periods ended June 30, 2026 and 2025, OFG retained securitized GNMA pools totaling $44.9 million and $42.0 million, respectively, at a yield of 4.58 % and 4.74 %, respectively, from its own originations.
There were no
The following table shows OFG’s gross unrealized losses and fair value of investment securities available-for-sale at June 30, 2026, and December 31, 2025, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:
| June 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||||||||||||||||||||||||||
| Securities available-for-sale | |||||||||||||||||||||||||||||||||||||||||||||||
| FNMA and FHLMC certificates | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| GNMA certificates | |||||||||||||||||||||||||||||||||||||||||||||||
| CMOs issued by US government-sponsored enterprises | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||
| Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||||||||||||||
| Securities available-for-sale | |||||||||||||||||||||||||||||||||||
| FNMA and FHLMC certificates | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| GNMA certificates | |||||||||||||||||||||||||||||||||||
| CMOs issued by US government-sponsored enterprises | |||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
The unrealized losses on OFG’s investment in federal agency mortgage-backed securities were caused by market volatility related to market uncertainty tied to interest rate fluctuations. OFG purchased those investments at a discount relative to their face amount, and the contractual cash flows of those investments are guaranteed by an agency of the U.S. government or by a government-sponsored enterprise. Accordingly, it is expected that the securities would not be settled at a price that is less than the amortized cost basis of OFG’s investments. OFG does not intend to sell the investments, and it is not more likely than not that OFG will be required to sell the investments before recovery of their amortized cost basis.
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NOTE 4 - LOANS
OFG’s loan portfolio is composed of four segments: commercial, mortgage, consumer, and auto loans. Loans are further segregated into classes which OFG uses when assessing and monitoring the risk and performance of the portfolio.
The composition of the amortized cost basis of OFG’s loan portfolio at June 30, 2026, and December 31, 2025, segregated between non-purchased credit deteriorated (“non-PCD”) loans and purchased credit deteriorated (“PCD”) loans, was as follows:
| June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||
| Non-PCD | PCD | Total | Non-PCD | PCD | Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Commercial PR: | |||||||||||||||||||||||||||||||||||
| Commercial secured by real estate | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Other commercial and industrial | |||||||||||||||||||||||||||||||||||
| Commercial US | |||||||||||||||||||||||||||||||||||
| Total commercial loans | |||||||||||||||||||||||||||||||||||
| Mortgage loans | |||||||||||||||||||||||||||||||||||
| Consumer loans: | |||||||||||||||||||||||||||||||||||
| Personal loans | |||||||||||||||||||||||||||||||||||
| Credit lines | |||||||||||||||||||||||||||||||||||
| Credit cards | |||||||||||||||||||||||||||||||||||
| Overdraft | |||||||||||||||||||||||||||||||||||
| Auto loans | |||||||||||||||||||||||||||||||||||
| Allowance for credit losses | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Total loans held-for-investment, net | |||||||||||||||||||||||||||||||||||
| Mortgage loans held-for-sale | |||||||||||||||||||||||||||||||||||
| Other loans held-for-sale | |||||||||||||||||||||||||||||||||||
| Total loans held-for-sale | |||||||||||||||||||||||||||||||||||
| Total loans, net | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
At December 31, 2025, OFG had $3.1 million in commercial loans held-for-sale. During the six-month period ended June 30, 2026, OFG sold commercial loans held-for-sale with a reporting balance of $3.1 million and recognized a $28 thousand loss, included in other non-interest income in the consolidated statements of operations. At June 30, 2026, OFG had no commercial loans held-for-sale. There were no sales of commercial loans held-for-sale during the six-month period ended June 30, 2025.
Additionally, during the quarter ended June 30, 2026, OFG sold two previously reserved non-performing commercial loans held-for-investment with an aggregate reporting balance of $49.6 million and recognized $15.6 million in related charge-offs.
At June 30, 2026, and December 31, 2025, OFG had carrying balances of $94.0 million and $77.3 million, respectively, in loans held-for-investment granted to the Puerto Rico government or its instrumentalities as part of the commercial loan segment. The Bank’s loans to the Puerto Rico government are general obligations of municipalities secured by ad valorem taxation, without limitation as to rate or amount, on all taxable property within the issuing municipalities and are in current status. The good faith, credit and unlimited taxing power of each issuing municipality are pledged for the payment of its general obligations.
17
Table of Contents
OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The tables below present the aging of the amortized cost of loans held-for-investment at June 30, 2026, and December 31, 2025, by class of loans. Mortgage loans past due include $52.9 million and $56.5 million of delinquent loans in the GNMA buy-back option program at June 30, 2026, and December 31, 2025, respectively. Servicers of loans underlying GNMA mortgage-backed securities must report as their own assets the defaulted loans that they have the option (but not the obligation) to repurchase, even when they elect not to exercise that option.
| June 30, 2026 | |||||||||||||||||||||||||||||||||||||||||
| 30-59 Days Past Due | 60-89 Days Past Due | 90+ Days Past Due | Total Past Due | Current | Total Loans | Loans 90+ Days Past Due and Still Accruing | |||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||
| Commercial PR: | |||||||||||||||||||||||||||||||||||||||||
| Commercial secured by real estate | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Other commercial and industrial | |||||||||||||||||||||||||||||||||||||||||
| Commercial US | |||||||||||||||||||||||||||||||||||||||||
| Total commercial loans | |||||||||||||||||||||||||||||||||||||||||
| Mortgage loans | |||||||||||||||||||||||||||||||||||||||||
| Consumer loans: | |||||||||||||||||||||||||||||||||||||||||
| Personal loans | |||||||||||||||||||||||||||||||||||||||||
| Credit lines | |||||||||||||||||||||||||||||||||||||||||
| Credit cards | |||||||||||||||||||||||||||||||||||||||||
| Overdraft | |||||||||||||||||||||||||||||||||||||||||
| Auto loans | |||||||||||||||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
18
Table of Contents
OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||
| 30-59 Days Past Due | 60-89 Days Past Due | 90+ Days Past Due | Total Past Due | Current | Total Loans | Loans 90+ Days Past Due and Still Accruing | |||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||
| Commercial PR: | |||||||||||||||||||||||||||||||||||||||||
| Commercial secured by real estate | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Other commercial and industrial | |||||||||||||||||||||||||||||||||||||||||
| Commercial US | |||||||||||||||||||||||||||||||||||||||||
| Total commercial loans | |||||||||||||||||||||||||||||||||||||||||
Mortgage loans | |||||||||||||||||||||||||||||||||||||||||
Consumer loans: | |||||||||||||||||||||||||||||||||||||||||
| Personal loans | |||||||||||||||||||||||||||||||||||||||||
| Credit lines | |||||||||||||||||||||||||||||||||||||||||
| Credit cards | |||||||||||||||||||||||||||||||||||||||||
| Overdraft | |||||||||||||||||||||||||||||||||||||||||
| Auto loans | |||||||||||||||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
As of December 31, 2025, total past due loans exclude $563 thousand of past due commercial loans held-for-sale. There were no past due commercial loans held-for-sale as of June 30, 2026.
Upon adoption of the current expected credit losses (“CECL”) methodology, OFG elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. As such, PCD loans are not included in the preceding two tables.
19
Table of Contents
OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Non-accrual Loans
The following table presents the amortized cost basis of loans held-for-investment on non-accrual status as of June 30, 2026, and December 31, 2025:
| June 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||
| Non-accrual with Allowance for Credit Loss | Non-accrual with no Allowance for Credit Loss | Total | Non-accrual with Allowance for Credit Loss | Non-accrual with no Allowance for Credit Loss | Total | ||||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||
| Non-PCD: | |||||||||||||||||||||||||||||||||||||||||
| Commercial PR: | |||||||||||||||||||||||||||||||||||||||||
| Commercial secured by real estate | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Other commercial and industrial | |||||||||||||||||||||||||||||||||||||||||
| Commercial US | |||||||||||||||||||||||||||||||||||||||||
Total commercial loans | |||||||||||||||||||||||||||||||||||||||||
Mortgage loans | |||||||||||||||||||||||||||||||||||||||||
Consumer loans: | |||||||||||||||||||||||||||||||||||||||||
| Personal loans | |||||||||||||||||||||||||||||||||||||||||
| Credit lines | |||||||||||||||||||||||||||||||||||||||||
| Credit cards | |||||||||||||||||||||||||||||||||||||||||
| Auto loans | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| PCD: | |||||||||||||||||||||||||||||||||||||||||
| Commercial PR: | |||||||||||||||||||||||||||||||||||||||||
| Commercial secured by real estate | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
Mortgage loans | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Total non-accrual loans | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
The determination of non-accrual or accrual status of PCD loans is made at the pool level, not the individual loan level.
As of December 31, 2025, total commercial non-accrual loans exclude $3.1 million of non-accrual commercial loans held-for-sale. There were no commercial non-accrual loans held-for-sale at June 30, 2026.
Delinquent residential mortgage loans insured or guaranteed under applicable FHA and VA programs are classified as non-performing loans when they become 90 days or more past due but are not placed in non-accrual status until they become 12 months or more past due, since they are insured loans. Therefore, those loans are included as non-performing loans but excluded from non-accrual loans.
20
Table of Contents
OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Modifications to Debtors Experiencing Financial Difficulty
OFG’s loss mitigation program was designed to ensure that borrowers experiencing financial difficulties have an opportunity to continue paying their obligations. The loss mitigation alternatives are divided depending on the borrower’s hardship and its ability to continue with regular payment or with a new modified payment plan. The loss mitigation program provides alternatives for home retention or disposition options avoiding foreclosure proceedings and collateral retention.
OFG offers various types of loan modifications to borrowers experiencing financial difficulty in the form of an interest rate reduction, an other-than-insignificant payment delay, a term extension, interest or principal forbearance or forgiveness, or any combination of these types of concessions.
As of June 30, 2026, and December 31, 2025, the amortized cost of modified loans excludes $52 thousand and $37 thousand, respectively, of accrued interest receivable. Accrued interest receivable on loans is included in the accrued interest receivable line in OFG’s consolidated statements of financial condition. Modified loans during the six-month periods ended June 30, 2026 and 2025, include $767 thousand and $1.5 million, respectively, of government-guaranteed loans (e.g., FHA/VA).
The following tables present the amortized cost basis as of June 30, 2026 and 2025, of loans held-for-investment that were modified during the quarters and six-month periods ended June 30, 2026 and 2025, disaggregated by class of financing receivable and type of concession granted.
| Interest Rate Reduction | ||||||||||||||||||||||||||||||||||||||||||||
| Quarters Ended June 30, | Six-Month Period Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||
$1 | %2 | $1 | %2 | $1 | %2 | $1 | %2 | |||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||
| Commercial PR: | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial secured by real estate | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||
| Other commercial and industrial | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
1 -Amortized cost basis. | ||||||||||||||||||||||||||||||||||||||||||||
2 - Percentage of total class of financing receivable. | ||||||||||||||||||||||||||||||||||||||||||||
| Term Extension | ||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended June 30, | Six-Month Period Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||
$1 | %2 | $1 | %2 | $1 | %2 | $1 | %2 | |||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||
| Commercial PR: | ||||||||||||||||||||||||||||||||||||||||||||
| Other commercial and industrial | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||
| Mortgage loans | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||
| Auto loans | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
1 -Amortized cost basis. | ||||||||||||||||||||||||||||||||||||||||||||
2 - Percentage of total class of financing receivable. | ||||||||||||||||||||||||||||||||||||||||||||
21
Table of Contents
OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| Principal Forbearance/Forgiveness | ||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended June 30, | Six-Month Period Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||
$1 | %2 | $1 | %2 | $1 | %2 | $1 | %2 | |||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||
| Commercial US | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||
1 -Amortized cost basis. | ||||||||||||||||||||||||||||||||||||||||||||
2 - Percentage of total class of financing receivable. | ||||||||||||||||||||||||||||||||||||||||||||
| Combination of Term Extension and Interest Rate Reduction | ||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended June 30, | Six-Month Period Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||
$1 | %2 | $1 | %2 | $1 | %2 | $1 | %2 | |||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||
| Commercial PR: | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial secured by real estate | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||
| Other commercial and industrial | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||
| Mortgage loans | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||||||||||||||||||||
| Personal loans | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||
| Auto loans | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
1 -Amortized cost basis. | ||||||||||||||||||||||||||||||||||||||||||||
2 - Percentage of total class of financing receivable. | ||||||||||||||||||||||||||||||||||||||||||||
| Combination of Term Extension and Principal or Interest Forgiveness/Forbearance | ||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended June 30, | Six-Month Period Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||
$1 | %2 | $1 | %2 | $1 | %2 | $1 | %2 | |||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||
| Commercial US | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||
| Mortgage loans | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
1 -Amortized cost basis. | ||||||||||||||||||||||||||||||||||||||||||||
2 - Percentage of total class of financing receivable. | ||||||||||||||||||||||||||||||||||||||||||||
22
Table of Contents
OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| Combination of Interest Rate Reduction, Term Extension and Principal Forgiveness/Forbearance | ||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended June 30, | Six-Month Period Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||||
$1 | %2 | $1 | %2 | $1 | %2 | $1 | %2 | |||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial US | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||
| Mortgage loans | % | % | % | % | ||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
1 -Amortized cost basis. | ||||||||||||||||||||||||||||||||||||||||||||
2 - Percentage of total class of financing receivable. | ||||||||||||||||||||||||||||||||||||||||||||
Our credit loss estimation methodology incorporates a lifetime approach, utilizing modeled loan performance based on the historical experience of loans with similar risk characteristics, adjusted for current conditions, and reasonable and supportable forecasts. The model considers extensive historical loss experience, including the impact of loss mitigation programs offered to borrowers facing financial difficulty and projected loss severity from loan defaults, and is applied consistently across all portfolio segments. Additionally, our ACL is recorded on each asset upon origination or acquisition and is based on historical loss information, including modifications made to borrowers facing financial difficulty, and expected behavior. Changes to the ACL are generally not recorded upon modification, as the effects of most modifications are already considered in the estimation methodology. Refer to Note 5 – Allowance for Credit Losses for additional information.
The following tables present the financial effect of the modifications granted to borrowers experiencing financial difficulty during the quarters and six-month periods ended June 30, 2026 and 2025. The financial effect of the combined modifications is presented separately by type of modification.
| Quarter Ended June 30, 2026 | |||||||||||||||||
| Weighted-Average Interest Rate Reduction | Weighted-Average Term Extension (In months) | Weighted-Average Forgiveness/Forbearance of Principal or Interest Amount (In thousands) | |||||||||||||||
| Commercial PR: | |||||||||||||||||
| Commercial loans secured by real estate | % | $ | |||||||||||||||
| Commercial US | % | $ | |||||||||||||||
| Mortgage loans | % | $ | |||||||||||||||
| Consumer loans: | |||||||||||||||||
| Personal loans | % | $ | |||||||||||||||
| Auto loans | % | $ | |||||||||||||||
23
Table of Contents
OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| Six-Month Period Ended June 30, 2026 | |||||||||||||||||
| Weighted-Average Interest Rate Reduction | Weighted-Average Term Extension (In months) | Weighted-Average Forgiveness/Forbearance of Principal Amount (In thousands) | |||||||||||||||
| Commercial PR: | |||||||||||||||||
| Commercial loans secured by real estate | % | $ | |||||||||||||||
| Other commercial and industrial | % | $ | |||||||||||||||
| Commercial US | % | $ | |||||||||||||||
| Mortgage loans | % | $ | |||||||||||||||
| Consumer loans: | |||||||||||||||||
| Personal loans | % | $ | |||||||||||||||
| Auto loans | % | $ | |||||||||||||||
| Quarter Ended June 30, 2025 | |||||||||||||||||
| Weighted-Average Interest Rate Reduction | Weighted-Average Term Extension (In months) | Weighted-Average Forgiveness/Forbearance of Principal Amount (In thousands) | |||||||||||||||
| Commercial PR: | |||||||||||||||||
| Commercial loans secured by real estate | % | $ | |||||||||||||||
| Other commercial and industrial | % | ||||||||||||||||
| Commercial US | % | ||||||||||||||||
| Mortgage loans | % | ||||||||||||||||
| Auto loans | % | ||||||||||||||||
| Six-Month Period Ended June 30, 2025 | |||||||||||||||||
| Weighted-Average Interest Rate Reduction | Weighted-Average Term Extension (In months) | Weighted-Average Forgiveness/Forbearance of Principal Amount (In thousands) | |||||||||||||||
| Commercial PR: | |||||||||||||||||
| Commercial loans secured by real estate | % | $ | |||||||||||||||
| Other commercial and industrial | % | $ | |||||||||||||||
| Commercial US | % | $ | |||||||||||||||
| Mortgage loans | % | $ | |||||||||||||||
| Auto loans | % | ||||||||||||||||
24
Table of Contents
OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following tables present the amortized cost basis as of June 30, 2026, of loans held for investment that had a payment default subsequently to being granted a modification to borrowers experiencing financial difficulty in the prior twelve months.
| Twelve-Month Period Ended | ||||||||||||||||||||||||||||||||||||||
| Amortized Cost Basis of Modified Financing Receivables that Subsequently Defaulted | ||||||||||||||||||||||||||||||||||||||
| Interest Rate Reduction | Term Extension | Principal Forgiveness/Forbearance | Combination of Term Extension and Interest Rate Reduction | Combination of Term Extension and Principal or Interest Forgiveness/Forbearance | Combination of Interest Rate Reduction, Term Extension and Principal Forgiveness/Forbearance | Total | ||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||||||||||||||||
| Mortgage loans | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
As of June 30, 2025, no loans held for investment had entered payment default following a modification granted to borrowers experiencing financial difficulty within the preceding twelve months.
A payment default for a financial difficulty modification loan is defined as reaching 90 days past due with respect to principal and/or interest payments or when the borrower misses three consecutive monthly payments since modification. Payment defaults are among the factors considered when projecting future cash flows in the calculation of the ACL of loans.
OFG closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the payment status of loans that have been modified in the twelve-month periods ended June 30, 2026 and 2025 that were granted to borrowers experiencing financial difficulty.
| June 30, 2026 | |||||||||||||||||||||||||||||||||||
| 30-59 Days Past Due | 60-89 Days Past Due | 90+ Days Past Due | Total Past Due | Current | Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Commercial PR: | |||||||||||||||||||||||||||||||||||
| Commercial loans secured by real estate | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Other commercial and industrial | |||||||||||||||||||||||||||||||||||
| Commercial US | |||||||||||||||||||||||||||||||||||
| Total commercial loans | |||||||||||||||||||||||||||||||||||
| Mortgage loans | |||||||||||||||||||||||||||||||||||
| Consumer loans: | |||||||||||||||||||||||||||||||||||
| Personal loans | |||||||||||||||||||||||||||||||||||
| Auto loans | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
25
Table of Contents
OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| June 30, 2025 | |||||||||||||||||||||||||||||||||||
| 30-59 Days Past Due | 60-89 Days Past Due | 90+ Days Past Due | Total Past Due | Current | Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Commercial PR: | |||||||||||||||||||||||||||||||||||
| Commercial loans secured by real estate | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Other commercial and industrial | |||||||||||||||||||||||||||||||||||
| Commercial US | |||||||||||||||||||||||||||||||||||
Mortgage loans | |||||||||||||||||||||||||||||||||||
| Auto loans | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
There were no
As of June 30, 2026, and December 31, 2025, the recorded investment on residential mortgage loans collateralized by residential real estate property that were in the process of foreclosure amounted to $32.8 million and $33.6 million, respectively. OFG commences the foreclosure process on residential real estate loans when a borrower becomes 120 days delinquent. Puerto Rico and the U.S. Virgin Islands (the “USVI”) require the foreclosure to be processed through their respective courts. Foreclosure timelines vary according to local law and investor guidelines. Occasionally, foreclosures may be delayed due to, among other reasons, mandatory mediation, bankruptcy, court delays and property title issues.
Collateral-dependent Loans
The table below presents the amortized cost of commercial collateral-dependent loans held-for-investment at June 30, 2026, and December 31, 2025, by class of loans.
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Commercial PR: | |||||||||||
| Commercial loans secured by real estate | $ | $ | |||||||||
| Other commercial and industrial | |||||||||||
| Total | $ | $ | |||||||||
PCD loans, except for single-pooled loans, are not included in the table above as their unit of account is the loan pool.
26
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Credit Quality Indicators
OFG categorizes its commercial loans into loan grades based on relevant information about the ability of borrowers to service their debts, such as economic conditions, portfolio risk characteristics, prior loss experience, and the results of periodic credit reviews of individual loans.
OFG uses the following definitions for loan grades:
Pass: Loans classified as “pass” have a well-defined primary source of repayment very likely to be sufficient, with no apparent risk, strong financial position, minimal operating risk, profitability, liquidity and capitalization better than industry standards.
Special Mention: Loans classified as “special mention” have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard: Loans classified as “substandard” are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful: Loans classified as “doubtful” have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values, questionable and improbable.
Loss: Loans classified as “loss” are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be effected in the future.
Loans not meeting the criteria above that are analyzed individually as part of such process are considered to be pass loans.
27
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As of June 30, 2026, and based on the most recent analysis performed, the risk category of loans held-for-investment subject to risk rating by class of loans, and current year-to-date period gross charge-offs by year of origination are as follows:
| Term Loans Amortized Cost Basis by Origination Year | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | |||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial PR: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial secured by real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial secured by real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial secured by real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other commercial and industrial: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total other commercial and industrial: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other commercial and industrial: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial US: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Commercial US: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial US: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Total YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
28
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As of December 31, 2025, and based on the most recent analysis performed, the risk category of loans held-for-investment subject to risk rating by class of loans, and current year-to-date period gross charge-offs by year of origination are as follows:
| Term Loans Amortized Cost Basis by Origination Year | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | |||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial PR: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial secured by real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial secured by real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial secured by real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other commercial and industrial: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total other commercial and industrial: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other commercial and industrial: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial US: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Commercial US: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial US: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Total YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
At June 30, 2026, and December 31, 2025, the balance of revolving commercial loans converted to term loans was $168.5 million and $169.5 million, respectively.
29
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
OFG considers the performance of the loan portfolio and its impact on the ACL. For mortgage and consumer loan classes, OFG also evaluates credit quality based on the aging status of the loan and payment activity. The following table presents the amortized cost in mortgage and consumer loans held-for-investment based on payment performance as of June 30, 2026, and current year-to-date period gross charge-offs by year of origination:
| Term Loans Amortized Cost Basis by Origination Year | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | |||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mortgage loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Personal loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total personal loans | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Personal loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit lines: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total credit lines | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit lines: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit cards: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total credit cards | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit cards: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Overdrafts: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total overdrafts | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Overdrafts: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer loans | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mortgage and consumer loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Total mortgage and consumer loans YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
30
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table presents the amortized cost in mortgage and consumer loans held-for-investment based on payment performance as of December 31, 2025, and the current year-to-date period gross charge-offs by year of origination:
| Term Loans Amortized Cost Basis by Origination Year | Revolving Loans Amortized Cost Basis | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | |||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mortgage loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Personal loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total personal loans | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Personal loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit lines: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total credit lines | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit lines: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit cards: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total credit cards | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit cards: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Overdrafts: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total overdrafts | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Overdrafts: | ||||||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer loans | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans YTD gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mortgage and consumer loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Total mortgage and consumer loans YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
At June 30, 2026, and December 31, 2025, the balance of mortgage and consumer revolving loans that were converted to term loans was $2.5 million and $2.6 million, respectively.
31
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
OFG evaluates credit quality for auto loans based on FICO score. The following table presents the amortized cost in auto loans held-for-investment based on their most recent FICO score as of June 30, 2026, and the current year-to-date period gross charge-offs by year of origination:
| Term Loans Amortized Cost Basis by Origination Year | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2024 | 2023 | 2022 | Prior | ||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
Auto loans: | |||||||||||||||||||||||||||||||||||||||||||||||
| FICO score: | |||||||||||||||||||||||||||||||||||||||||||||||
| 1-660 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| 661-699 | |||||||||||||||||||||||||||||||||||||||||||||||
| 700+ | |||||||||||||||||||||||||||||||||||||||||||||||
| No FICO | |||||||||||||||||||||||||||||||||||||||||||||||
Total auto loans | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
Auto loans: | |||||||||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
The following table presents the amortized cost in auto loans held-for-investment based on their most recent FICO score as of December 31, 2025, and the current year-to-date period gross charge-offs by year of origination:
| Term Loans Amortized Cost Basis by Origination Year | Total | ||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | ||||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||
Auto loans: | |||||||||||||||||||||||||||||||||||||||||
| FICO score: | |||||||||||||||||||||||||||||||||||||||||
| 1-660 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| 661-699 | |||||||||||||||||||||||||||||||||||||||||
| 700+ | |||||||||||||||||||||||||||||||||||||||||
| No FICO | |||||||||||||||||||||||||||||||||||||||||
Total auto loans | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Auto loans: | |||||||||||||||||||||||||||||||||||||||||
YTD gross charge-offs | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Upon adoption of CECL, OFG elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. As such, PCD loans are not included in the preceding tables.
As of June 30, 2026, and December 31, 2025, accrued interest receivable on loans totaled $59.4 million and $59.8 million, respectively, and is included in the accrued interest receivable line in OFG’s consolidated statements of financial condition. Refer to Note 9 – Accrued Interest Receivable and Other Assets for more information on accrued interest receivable on loans.
32
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NOTE 5 – ALLOWANCE FOR CREDIT LOSSES
OFG measures its ACL based on management’s best estimate of lifetime expected credit losses inherent in OFG’s relevant financial assets. The ACL is estimated using quantitative methods that consider a variety of factors such as historical loss experience, the current credit quality of the portfolio, and an economic outlook over the life of the loan. Also included in the ACL are qualitative reserves to cover losses that are expected but, in OFG’s assessment, may not be adequately represented in the quantitative methods or the economic assumptions. In its loss forecasting framework, OFG incorporates forward-looking information by using macroeconomic scenarios applied over the forecasted life of the assets. The scenarios that are chosen each quarter and the amount of weight given to each scenario depend on a variety of factors, including recent economic events, leading economic indicators, views of internal as well as third-party economists and industry trends. For more information on OFG’s credit loss accounting policies, including the ACL, see Note 1 – Summary of Significant Accounting Policies included in OFG’s 2025 Form 10-K.
At June 30, 2026, OFG used an economic probability-weighted scenario approach consisting of the baseline and moderate recession scenarios, giving more weight to the baseline scenario, except for the commercial US loan segment that uses a higher probability level in the moderate recessionary scenario. In addition, the ACL at June 30, 2026, continues to include qualitative reserves for certain segments that OFG views as higher risk that may not be fully recognized through its quantitative models, such as credit trends in the auto loan portfolio. There are still many unknown variables, including the results of the local and U.S. mainland governments’ fiscal and monetary actions resulting from the effect of inflation, geopolitical tension, and new trade and tax policies.
As of June 30, 2026, the ACL decreased by $14.1 million compared to December 31, 2025. The provision for credit losses for the six-month period ended June 30, 2026, reflected $32.2 million related to loan volume and $4.3 million related to specific commercial loan reserves. Net charge-offs for the six-month period ended June 30, 2026, amounted to $50.2 million, an increase of $17.0 million when compared to the same period of 2025. The increase corresponds to $16.2 million from commercial loans, mainly due to $15.6 million charge-offs recognized from the sale of two previously reserved non-performing commercial loans during the period. The provision for credit losses for the six-month period ended June 30, 2025, reflected $34.6 million related to loan volume, $8.5 million in commercial loans specific reserves and $6.0 million due to alignment of model assumptions and risk weighting factors mainly in Puerto Rico. Net charge-offs for the six-month period ended June 30, 2025, amounted to $33.2 million and included a $2.9 million partial charge-off related to a previously reserved U.S. commercial loan.
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following tables present the activity in OFG’s ACL by segment for the quarters and six-month periods ended June 30, 2026 and 2025:
| Quarter Ended June 30, 2026 | |||||||||||||||||||||||||||||
| Commercial | Mortgage | Consumer | Auto | Total | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Non-PCD: | |||||||||||||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Provision for (recapture of) credit losses | ( | ||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | |||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| PCD: | |||||||||||||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Recapture of credit losses | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Charge-offs | |||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Total allowance for credit losses at end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Six-Month Period Ended June 30, 2026 | |||||||||||||||||||||||||||||
| Commercial | Mortgage | Consumer | Auto | Total | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Non-PCD: | |||||||||||||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Provision for (recapture of) credit losses | ( | ||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| PCD: | |||||||||||||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Recapture of credit losses | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Charge-offs | ( | ( | |||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Total allowance for credit losses at end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| Quarter Ended June 30, 2025 | |||||||||||||||||||||||||||||
| Commercial | Mortgage | Consumer | Auto | Total | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Non-PCD: | |||||||||||||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Provision for (recapture of) credit losses | ( | ||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| PCD: | |||||||||||||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Provision for (recapture of) credit losses | ( | ( | ( | ||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Total allowance for credit losses at end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Six-Month Period Ended June 30, 2025 | |||||||||||||||||||||||||||||
| Commercial | Mortgage | Consumer | Auto | Total | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Non-PCD: | |||||||||||||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Provision for (recapture of) credit losses | ( | ||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| PCD: | |||||||||||||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Provision for (recapture of) credit losses | ( | ( | ( | ||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Total allowance for credit losses at end of period | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NOTE 6 — FORECLOSED REAL ESTATE
The following table presents the activity related to foreclosed real estate for the quarters and six-month periods ended June 30, 2026 and 2025:
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||||||||
| Additions | |||||||||||||||||||||||||||||
| Sales | ( | ( | ( | ( | |||||||||||||||||||||||||
| Decline in value | ( | ( | ( | ( | |||||||||||||||||||||||||
| Other adjustments | |||||||||||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | |||||||||||||||||||||||||
NOTE 7 - SERVICING ASSETS
OFG periodically sells or securitizes mortgage loans while retaining the obligation to perform the servicing of such loans. In addition, OFG may purchase or assume the right to service mortgage loans originated by others. Whenever OFG undertakes an obligation to service a loan, management assesses whether a servicing asset and/or liability should be recognized. A servicing asset is recognized whenever the compensation for servicing is expected to more than adequately compensate OFG for servicing the loans. Likewise, a servicing liability would be recognized whenever the servicing fees to be received are not expected to adequately compensate OFG for its expected cost.
At June 30, 2026, the fair value of mortgage servicing rights (“MSR”) was $67.9 million ($66.3 million — December 31, 2025).
The following table presents the changes in servicing rights measured using the fair value method for the quarters and six-month periods ended June 30, 2026 and 2025:
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||||||||
| Servicing from mortgage securitization or asset transfers | |||||||||||||||||||||||||||||
| Changes due to payments on loans | ( | ( | ( | ( | |||||||||||||||||||||||||
| Changes in fair value due to changes in valuation model inputs or assumptions | ( | ( | |||||||||||||||||||||||||||
Fair value at end of period | $ | $ | $ | $ | |||||||||||||||||||||||||
The following table presents key economic assumption ranges used in measuring the mortgage-related servicing asset fair value as of June 30, 2026, and December 31, 2025:
| June 30, | December 31, | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Constant prepayment rate | |||||||||||||||||
| Discount rate | |||||||||||||||||
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The sensitivity of the current fair value of servicing assets to immediate 10 percent and 20 percent adverse changes in the above key assumptions were as follows:
| June 30, | December 31, | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| (In thousands) | |||||||||||||||||
| Mortgage-related servicing asset | |||||||||||||||||
| Carrying value of mortgage servicing asset | $ | $ | |||||||||||||||
| Weighted average life (in years) | |||||||||||||||||
| Constant prepayment rate | |||||||||||||||||
| Decrease in fair value due to 10% adverse change | $ | ( | $ | ( | |||||||||||||
| Decrease in fair value due to 20% adverse change | $ | ( | $ | ( | |||||||||||||
| Discount rate | |||||||||||||||||
| Decrease in fair value due to 10% adverse change | $ | ( | $ | ( | |||||||||||||
| Decrease in fair value due to 20% adverse change | $ | ( | $ | ( | |||||||||||||
These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. In addition, in this table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. Changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or offset the sensitivities. Mortgage banking activities, a component of total banking and financial service revenue in the consolidated statements of operations, include the changes from period to period in the fair value of the MSR, which may result from changes in the valuation model inputs or assumptions (principally reflecting changes in discount rates and prepayment speed assumptions) and other changes, including changes due to collection/realization of expected cash flows.
Servicing fee income is based on a contractual percentage of the outstanding principal balance. Ancillary fees include various service charges such as late payment fees and fees for additional services. These fees are recorded as income when earned and included in the mortgage banking activities section in the consolidated statement of operations. Servicing and ancillary fees on mortgage loans for the quarters ended June 30, 2026 and 2025 totaled $6.0 million and $5.6 million, respectively. Servicing and ancillary fees on mortgage loans for the six-month periods ended June 30, 2026 and 2025 totaled $11.3 million and $11.1 million, respectively.
NOTE 8 — GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill by reportable business segment is included in the table below. Refer to Note 23 – Business Segments for additional information on OFG’s reportable business segments.
| Banking | Wealth Management | Treasury | Total | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| June 30, 2026 | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 2025 | $ | $ | $ | $ | |||||||||||||||||||
There were no no
Relevant events and circumstances for evaluating whether it is more likely than not that the fair value of a reporting segment is less than its carrying amount may include macroeconomic conditions (such as deterioration of the Puerto Rico economy or the liquidity for Puerto Rico securities or loans secured by assets in Puerto Rico), adverse changes in legal factors or in the business climate, adverse actions by a regulator, unanticipated competition, the loss of key employees, natural disasters, or similar events.
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
OFG performed its annual impairment review of goodwill during the fourth quarter of 2025 using October 31, 2025, as the annual evaluation date and concluded that there was no impairment on December 31, 2025. During the six-month period ended June 30, 2026, OFG performed an assessment of events or circumstances that could trigger reductions in the book value of goodwill. Based on this assessment, no
The following table reflects the components of other intangible assets subject to amortization at June 30, 2026, and December 31, 2025:
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||
| Core deposit intangibles | $ | $ | $ | |||||||||||||||||
| Customer relationship intangibles | ||||||||||||||||||||
| Total other intangible assets | $ | $ | $ | |||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
| Core deposit intangibles | $ | $ | $ | |||||||||||||||||
| Customer relationship intangibles | ||||||||||||||||||||
| Total other intangible assets | $ | $ | $ | |||||||||||||||||
In connection with previous acquisitions, OFG recorded core deposit intangibles representing the value of checking and savings deposits acquired. In addition, OFG recorded customer relationship intangibles representing the value of customer relationships acquired with its acquisitions of insurance agencies. During the six-month period ended June 30, 2026, OFG performed an assessment of events or circumstances that could trigger reductions in the book value of other intangible assets. Based on this assessment, no
Other intangible assets have a definite useful life. Amortization of other intangible assets for the quarters ended June 30, 2026 and 2025, was $985 thousand and $1.2 million, respectively. Amortization of other intangibles assets for the six-month periods ended June 30, 2026 and 2025, was $2.0 million and $2.5 million, respectively.
The following table presents the estimated remaining amortization of other intangible assets as of June 30, 2026:
| As of June 30, 2026 | (In thousands) | ||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
NOTE 9 — ACCRUED INTEREST RECEIVABLE AND OTHER ASSETS
Accrued interest receivable at June 30, 2026, and December 31, 2025, consists of the following:
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Loans | $ | $ | |||||||||
| Investment securities and other | |||||||||||
| $ | $ | ||||||||||
Accrued interest receivable on loans that participated in the Hurricane Fiona and Covid-19 deferral programs amounted to $15.8 million at June 30, 2026, of which $15.5 million corresponded to loans in current status, and $16.4 million at December 31, 2025, of which $14.9 million corresponded to loans in current status. OFG estimates expected credit losses on
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OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
accrued interest receivable for loans that participated in these moratorium programs. An allowance has been established for loans with delinquency status in 30 to 89 days past due and is calculated by applying the corresponding loan projected loss factors to the accrued interest receivable balance. At June 30, 2026, and December 31, 2025, the ACL for accrued interest receivable for loans that participated in moratorium programs amounted to $31 thousand and $13 thousand, respectively, and is included in accrued interest receivable in the statement of financial condition.
Other assets at June 30, 2026, and December 31, 2025, consist of the following:
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Prepaid expenses | $ | $ | |||||||||
| Other repossessed assets | |||||||||||
| Accounts receivable and other assets | |||||||||||
| $ | $ | ||||||||||
Prepaid expenses amounting to $26.0 million at June 30, 2026, include prepaid municipal, property and income taxes aggregating to $18.2 million. At December 31, 2025, prepaid expenses amounted to $20.5 million, including prepaid municipal, property and income taxes aggregating to $11.9 million.
Other repossessed assets totaled $4.2 million and $3.5 million at June 30, 2026, and December 31, 2025, respectively, and mainly consist of repossessed automobiles, which are recorded at their net realizable value.
NOTE 10 — DEPOSITS AND RELATED INTEREST
Total deposits, including related accrued interest payable, as of June 30, 2026, and December 31, 2025, consist of the following:
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Non-interest-bearing demand deposits | $ | $ | |||||||||
| Interest-bearing savings and demand deposits | |||||||||||
| Retail certificates of deposit | |||||||||||
| Institutional certificates of deposit | |||||||||||
| Total core deposits | |||||||||||
| Brokered deposits | |||||||||||
| Total deposits | $ | $ | |||||||||
At June 30, 2026, and December 31, 2025, the aggregate amount of uninsured deposits was $5.198 billion (52.07 % of total deposits) and $5.386 billion (52.48 % of total deposits), respectively.
The weighted average interest rate of OFG’s deposits was 1.39 % and 1.53 %, respectively, at June 30, 2026, and December 31, 2025.
Interest expense for the quarters and six-month periods ended June 30, 2026 and 2025 was as follows:
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Demand and savings deposits | $ | $ | $ | $ | |||||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||||||||
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
At June 30, 2026, and December 31, 2025, time deposits in denominations of $250 thousand or higher, excluding accrued interest and unamortized discounts, amounted to $1.792 billion and $1.177 billion, respectively.
At June 30, 2026, and December 31, 2025, total public fund deposits from various Puerto Rico government municipalities, agencies and corporations amounted to $1.301 billion and $1.676 billion, respectively. As of June 30, 2026, and December 31, 2025, these public funds were collateralized by investment securities totaling $1.226 billion and $1.614 billion, respectively, and by commercial loans totaling $76.6
Excluding accrued interest of approximately $4.8 million and $5.4 million as of June 30, 2026, and December 31, 2025, the scheduled maturities of certificates of deposit are as follows:
| June 30, | December 31, | ||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Period-end amount | Uninsured amount | Period-end amount | Uninsured amount | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Within one year: | |||||||||||||||||||||||
| Three months or less | $ | $ | $ | $ | |||||||||||||||||||
| Over 3 months through 6 months | |||||||||||||||||||||||
| Over 6 months through 1 year | |||||||||||||||||||||||
| Over 1 through 2 years | |||||||||||||||||||||||
| Over 2 through 3 years | |||||||||||||||||||||||
| Over 3 through 4 years | |||||||||||||||||||||||
| Over 4 through 5 years | |||||||||||||||||||||||
| Over 5 years | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
The table of scheduled maturities of certificates of deposit above includes brokered-deposits and IRAs.
NOTE 11— BORROWINGS AND RELATED INTEREST
Securities Sold under Agreements to Repurchase
At June 30, 2026, and December 31, 2025, securities underlying agreements to repurchase were delivered to, and held by, the counterparties with whom the repurchase agreements were transacted. The counterparties agreed to resell to OFG the same or similar securities at the maturity of these agreements. The purpose of these transactions is to provide financing for OFG’s securities portfolio.
The following table shows OFG’s repurchase agreements, excluding accrued interest in the amount of $85 thousand and $714 thousand at June 30, 2026, and December 31, 2025:
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
Short-term fixed-rate repurchase agreements, with a weighted average interest rate of | $ | $ | |||||||||
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Repurchase agreement maturities at June 30, 2026, and December 31, 2025 were as follows:
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Over 90 days to one year | $ | $ | |||||||||
The following securities were sold under agreements to repurchase at June 30, 2026, and December 31, 2025:
| Underlying Securities | Amortized Cost of Underlying Securities | Balance of Borrowing | Approximate Fair Value of Underlying Securities | Weighted Average Interest Rate of Security | ||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| June 30, 2026 | ||||||||||||||||||||||||||
| FNMA and FHLMC Certificates | $ | $ | $ | % | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| FNMA and FHLMC Certificates | $ | $ | $ | % | ||||||||||||||||||||||
Advances from the Federal Home Loan Bank of New York
Advances are received from the FHLB-NY under an agreement whereby OFG is required to maintain as collateral an amount of qualifying collateral which has a fair market value that is at least equal to the FHLB-NY collateral maintenance level. At June 30, 2026, and December 31, 2025, these advances were secured by mortgage and commercial loans amounting to $1.346 billion and $1.255 billion, respectively. Further, at June 30, 2026, and December 31, 2025, OFG had an additional borrowing capacity with the FHLB of $409.4 million and $351.1 million, respectively. At June 30, 2026, and December 31, 2025, the weighted average remaining maturity of FHLB advances was 7 months and 1.10 years, respectively.
The following table shows a summary of the advances and their terms, excluding accrued interest in the amount of $1.5 million and $1.6 million at June 30, 2026 and December 31, 2025, respectively:
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
Short-term fixed-rate advances from FHLB, with a weighted average interest rate of | $ | $ | |||||||||
Long-term fixed-rate advance from FHLB, with a weighted average interest rate of | |||||||||||
| $ | $ | ||||||||||
Advances from FHLB mature as follows:
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Under 90 days | $ | ||||||||||
| Over 90 days to one year | |||||||||||
| Over one to three years | |||||||||||
| $ | $ | ||||||||||
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NOTE 12 – OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES
OFG’s securities sold under agreements to repurchase have a right of set-off with the respective counterparty under the supplemental terms of the master repurchase agreements. In an event of default, each party has a right of set-off against the other party for amounts owed in the related agreements and any other amount or obligation owed in respect of any other agreement or transaction between them. Security collateral posted to open and maintain a master netting agreement with a counterparty, in the form of cash and securities, may from time to time be segregated in an account at a third-party custodian pursuant to an account control agreement.
The following table presents the potential effect of rights of set-off associated with OFG’s recognized financial assets and liabilities at June 30, 2026, and December 31, 2025:
| Gross Amounts Not Offset in the Statement of Financial Condition | |||||||||||||||||||||||||||||||||||
| Gross Amount of Recognized Liabilities | Gross Amounts Offset in the Statement of Financial Condition | Net Amount of Liabilities Presented in Statement of Financial Condition | Financial Instruments | Cash Collateral Provided | Net Amount | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| June 30, 2026 | |||||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | $ | $ | $ | $ | $ | $ | ( | ||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | $ | $ | $ | $ | $ | $ | ( | ||||||||||||||||||||||||||||
NOTE 13 — INCOME TAXES
OFG is subject to the provisions of the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Code”). The PR Code imposes a maximum statutory corporate tax rate of 37.5 %. OFG has operations in the mainland U.S. through its wholly owned subsidiaries OFG Ventures and OFG USA, the latter of which is a direct subsidiary of the Bank, and has two branches in the USVI. The U.S. subsidiaries are subject to federal income taxes at the corporate level, while the USVI branches are subject to federal income taxes under a mirror system and a 10% surtax included in the maximum tax rate. OFG USA is subject to North Carolina state taxes, and investments held by OFG Ventures are subject to state taxes in Missouri. In addition, OFG’s wholly owned subsidiary, OFG Reinsurance Ltd., is tax exempt in Grand Cayman.
As of June 30, 2026, OFG’s net deferred tax assets, net of a valuation allowance of $720 thousand, amounted to $113.3 million, and the net deferred tax liability, net of valuation allowance of $18 thousand, amounted to $615 thousand, reflecting the aggregate deferred tax assets or liabilities of individual tax-paying subsidiaries of OFG. As of December 31, 2025, OFG’s deferred tax asset, net of a valuation allowance of $568 thousand, amounted to $104.4 million. The increase in valuation allowance of $170 thousand was related to USVI operations. In assessing the realizability of the deferred tax asset, management considers whether it is more likely than not that some portion or the entire deferred tax asset will not be realized. The ultimate realization of the deferred tax asset is dependent upon the generation of future income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future income, and tax planning strategies in making this assessment. Based upon the assessment of positive and negative evidence, the level of historical taxable income, projections for future taxable income over the periods in which the deferred tax asset are deductible, and provisions of certain closing agreements, management believes it is more likely than not that OFG will realize the benefits of these deductible differences, net of the existing valuation allowances, at June 30, 2026. The amount of the deferred tax asset that is considered realizable could be reduced in the near term if there are changes in estimates of future taxable income.
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OFG maintained an effective tax rate (“ETR”) lower than the statutory rate for the six-month periods ended June 30, 2026 and 2025 of 21.3 % and 22.3 %, respectively. The lower ETR is mainly related to exempt income and investments subject to preferential tax treatment under the PR Code.
OFG classifies unrecognized tax benefits in other liabilities. These gross unrecognized tax benefits would affect the ETR if realized. At June 30, 2026, there were no unrecognized tax benefits.
NOTE 14 — REGULATORY CAPITAL REQUIREMENTS
Regulatory Capital Requirements
OFG (on a consolidated basis) and the Bank are subject to various risk-based capital standards (“Basel III capital rules”) administered by federal and Puerto Rico banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on OFG’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, OFG and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. OFG and the Bank have elected to exclude accumulated comprehensive loss related to available for sale securities valuation from Common Equity Tier 1 Capital.
As of June 30, 2026, and December 31, 2025, OFG and the Bank met all capital adequacy requirements to which they are subject. As of June 30, 2026, and December 31, 2025, OFG and the Bank are “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” an institution must maintain minimum CET1 risk-based, Tier 1 risk-based, total risk-based, and Tier 1 leverage ratios as set forth in the tables presented below.
OFG’s and the Bank’s actual capital amounts and ratios as of June 30, 2026, and December 31, 2025, were as follows:
| Actual | Minimum Capital Requirement (including capital conservation buffer) | Minimum to be Well Capitalized | |||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| OFG Bancorp Ratios | |||||||||||||||||||||||||||||||||||
| As of June 30, 2026 | |||||||||||||||||||||||||||||||||||
| Total capital to risk-weighted assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| Tier 1 capital to risk-weighted assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| Common equity tier 1 capital to risk-weighted assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| Tier 1 capital to average total assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| As of December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Total capital to risk-weighted assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| Tier 1 capital to risk-weighted assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| Common equity tier 1 capital to risk-weighted assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| Tier 1 capital to average total assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
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| Actual | Minimum Capital Requirement (including capital conservation buffer) | Minimum to be Well Capitalized | |||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Bank Ratios | |||||||||||||||||||||||||||||||||||
| As of June 30, 2026 | |||||||||||||||||||||||||||||||||||
| Total capital to risk-weighted assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| Tier 1 capital to risk-weighted assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| Common equity tier 1 capital to risk-weighted assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| Tier 1 capital to average total assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| As of December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Total capital to risk-weighted assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| Tier 1 capital to risk-weighted assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| Common equity tier 1 capital to risk-weighted assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
| Tier 1 capital to average total assets | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||
NOTE 15 – STOCKHOLDERS’ EQUITY
Common Stock
At June 30, 2026, and December 31, 2025, common stock paid-in capital amounted to $59.9
Additional Paid-in Capital
Additional paid-in capital represents contributed capital in excess of par value of common stock, net of the costs of issuance. At June 30, 2026, and December 31, 2025, accumulated common stock issuance costs charged against additional paid-in capital amounted to $13.6
Legal Surplus
The Banking Act requires that a minimum of 10% of the Bank’s net income for the year be transferred to a reserve fund until such fund (legal surplus) equals the total paid-in capital on common and preferred stock. At June 30, 2026, and December 31, 2025, the Bank’s legal surplus amounted to $199.4 million and $188.5 million, respectively. During the quarter and six-month period ended June 30, 2026, OFG transferred $5.6 million and $10.9 million, respectively, to the legal surplus account. For the same periods in 2025, OFG transferred $4.9 million and $9.3 million, respectively, to the legal surplus account. The amount transferred to the legal surplus account is not available for the payment of dividends to shareholders.
Treasury Stock
In January 2026, OFG’s Board of Directors (the “Board”) approved a $200.0 million stock repurchase program in addition to the $100.0 million stock repurchase program approved in April 2025. The shares of common stock repurchased are held by
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OFG as treasury shares. OFG records common stock repurchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.
During the six-month period ended June 30, 2026, and 2025, OFG repurchased 1,097,953 and 768,423 shares, respectively, for a total of $44.5 million and $31.1 million, at an average price of $40.51 and $40.46 per share, under the approved stock repurchase programs for such periods.
At June 30, 2026, the estimated remaining number of shares that may be purchased under the repurchase programs is 3,945,538 and was calculated by dividing the remaining balance of $193.6 million by $49.07 (closing price of OFG’s common stock on June 30, 2026).
OFG did not
The activity in connection with common shares held in treasury by OFG for the quarters and six-month periods ended June 30, 2026 and 2025, is set forth below:
| Quarter Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Dollar Amount | Shares | Dollar Amount | ||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except shares data) | |||||||||||||||||||||||||||||||||||||||||||||||
| Beginning of period | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Common shares used upon lapse of restricted stock units and options | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Common shares repurchased as part of the stock repurchase programs | |||||||||||||||||||||||||||||||||||||||||||||||
| End of period | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Six-Month Period Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Dollar Amount | Shares | Dollar Amount | ||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except shares data) | |||||||||||||||||||||||||||||||||||||||||||||||
| Beginning of period | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Common shares used upon lapse of restricted stock units and options | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Common shares repurchased from employee awards | |||||||||||||||||||||||||||||||||||||||||||||||
| Common shares repurchased as part of the stock repurchase programs | |||||||||||||||||||||||||||||||||||||||||||||||
| End of period | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss, net of income taxes, as of June 30, 2026, and December 31, 2025, consisted of:
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Unrealized loss on securities available-for-sale | $ | ( | $ | ( | |||||||
| Income tax effect of unrealized loss on securities available-for-sale | |||||||||||
| Net unrealized loss on securities available-for-sale | ( | ( | |||||||||
| Accumulated other comprehensive loss, net of income taxes | $ | ( | $ | ( | |||||||
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table presents changes in accumulated other comprehensive loss by component, net of taxes, for the quarters and six-month periods ended June 30, 2026 and 2025:
| Net unrealized loss on securities available-for-sale | |||||||||||||||||||||||
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Beginning balance | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive (loss) income before reclassifications | ( | ( | |||||||||||||||||||||
| Amounts reclassified out of accumulated other comprehensive loss | |||||||||||||||||||||||
| Other comprehensive (loss) income | ( | ( | |||||||||||||||||||||
| Ending balance | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The following table presents reclassifications out of accumulated other comprehensive loss for the quarters and six-month periods ended June 30, 2026 and 2025:
| Amount reclassified out of accumulated other comprehensive loss | ||||||||||||||||||||||||||||||||
| Quarter Ended June 30, | Six-Month Period Ended June 30, | Affected Line Item in Consolidated Statement of Operations | ||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||
| Tax effect from changes in tax rates | $ | $ | Income tax expense | |||||||||||||||||||||||||||||
NOTE 17 – EARNINGS PER COMMON SHARE
The calculation of earnings per common share for the quarters and six-month periods ended June 30, 2026 and 2025 is as follows:
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||||||||
| Income available to common shareholders | $ | $ | $ | $ | |||||||||||||||||||||||||
| Average common shares outstanding | |||||||||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||||||||
| Average potential common shares-options | |||||||||||||||||||||||||||||
| Total weighted average common shares outstanding and equivalents | |||||||||||||||||||||||||||||
| Earnings per common share - basic | $ | $ | $ | $ | |||||||||||||||||||||||||
| Earnings per common share - diluted | $ | $ | $ | $ | |||||||||||||||||||||||||
For the quarters ended June 30, 2026 and 2025, weighted-average restricted stock units with an anti-dilutive effect on earnings per common share (“EPS”) not included in the calculation amounted to 238 and zero , respectively. For the six-month periods ended June 30, 2026 and 2025, weighted-average restricted stock units with an anti-dilutive effect on EPS not included in the calculation amounted to zero and 99 , respectively.
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NOTE 18 – GUARANTEES
At June 30, 2026, and December 31, 2025, the notional amount of the obligations undertaken in issuing the guarantees under standby letters of credit represented a liability of $25.9 million and $26.1 million, respectively.
OFG has a liability for residential mortgage loans sold subject to credit recourse, principally loans associated with FHLMC residential mortgage loan sales and securitization programs. At June 30, 2026, and December 31, 2025, the unpaid principal balance of residential mortgage loans sold subject to credit recourse under the residential mortgage loan sale programs was $79.4 million and $83.0 million, respectively. The estimated losses to be absorbed under the credit recourse arrangements were recorded as a liability when the credit recourse was assumed and are updated on a quarterly basis. At June 30, 2026, OFG’s liability for estimated credit losses related to loans sold with credit recourse amounted to $75 thousand (December 31, 2025 - $111 thousand).
The following table shows the changes in OFG’s liability for estimated losses from credit recourse agreements included in the consolidated statements of financial condition during the quarters and six-month periods ended June 30, 2026 and 2025:
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||||||||
| Net (charge-offs/amortization) recoveries | ( | ( | ( | ( | |||||||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | |||||||||||||||||||||||||
The expected loss, which represents the amount expected to be lost on a given loan, considers the probability of default (“PD”) and the loss severity. The PD represents the probability that a loan in good standing would become 120 days delinquent; however, for loans subject to credit recourse, OFG is not required to repurchase the loan.
If a borrower defaults, pursuant to the credit recourse provided, OFG is required to repurchase the loan or reimburse the third-party investor for the loss incurred. The maximum potential amount of future payments that OFG would be required to make under the recourse arrangements is equivalent to the total outstanding balance of the residential mortgage loans serviced with recourse and interest, if applicable. During the quarters and six-month periods ended June 30, 2026 and 2025, OFG repurchased mortgage loans with unpaid principal balances of $74 69
When OFG sells or securitizes mortgage loans, it generally makes customary representations and warranties regarding the characteristics of the loans sold. OFG groups mortgage loans into pools that are exchanged for FNMA and GNMA mortgage-backed securities, which are generally sold to private investors, or are sold directly to FNMA, FHLMC or other private investors for cash. As required under such mortgage-backed securities programs, OFG performs quality review procedures to ensure compliance with applicable underwriting and eligibility guidelines. To the extent the loans do not meet specified characteristics, OFG may be required to repurchase such loans or indemnify for losses and bear any subsequent loss related to the loans. During the quarters and six-month periods ended June 30, 2026 and 2025, OFG did not 1.2 million and $1.3 million, respectively, of unpaid principal balance in mortgage loans, excluding mortgage loans sold subject to such credit recourse provisions and related representations and warranties. During the six-month periods ended June 30, 2026, and 2025, OFG repurchased $2.2 million and $2.3 million, respectively, of such unpaid principal balance. At June 30, 2026 and December 31, 2025, OFG had a $380 thousand and $249 thousand liability, respectively, for the estimated credit losses related to these loans.
During the quarters ended June 30, 2026 and 2025, OFG recognized $4 thousand and $130 thousand in gains, respectively, from the repurchase of residential mortgage loans sold subject to credit recourse, including provisions for possible losses. During the six-month periods ended June 30, 2026 and 2025, OFG recognized $52 thousand in losses and $64 thousand in gains, respectively, from the repurchase of residential mortgage loans sold to credit recourse, including provisions for possible losses. During the quarters ended June 30, 2026 and 2025, OFG recognized $180 thousand in losses and $75 thousand in gains,
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respectively, from the repurchase of residential mortgage loans as a result of breaches of customary representations and warranties. During the six-month periods ended June 30, 2026 and 2025, OFG recognized $100 thousand in losses and $90 thousand in gains, respectively, from the repurchase of residential mortgage loans without recourse, net of provisions for possible losses, including repurchases related to breaches of customary representations and warranties and other activities.
NOTE 19— COMMITMENTS AND CONTINGENCIES
Commitments
In the normal course of business, OFG becomes a party to credit-related financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby and commercial letters of credit, and financial guarantees. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated statements of financial condition. The contract or notional amount of those instruments reflects the extent of OFG’s involvement in particular types of financial instruments.
OFG’s exposure to credit losses in the event of nonperformance by the counterparty to the financial instrument for commitments to extend credit, including commitments under credit card arrangements and commercial letters of credit, is represented by the contractual notional amounts of those instruments, which do not necessarily represent the amounts potentially subject to risk. In addition, the measurement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are identified. OFG uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
Credit-related financial instruments at June 30, 2026, and December 31, 2025, were as follows:
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Commitments to extend credit | $ | $ | |||||||||
| Commercial letters of credit | |||||||||||
Commitments to extend credit represent agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. OFG evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by OFG upon the extension of credit, is based on management’s credit evaluation of the counterparty.
At June 30, 2026, and December 31, 2025, commitments to extend credit consisted mainly of undisbursed available amounts on commercial lines of credit, construction loans, and revolving credit card arrangements. Since many of the unused commitments are expected to expire unused or be only partially used, the total amount of these unused commitments does not necessarily represent future cash requirements.
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Commercial letters of credit are issued or confirmed to guarantee payment of customers’ payables or receivables in short-term international trade transactions. Generally, drafts will be drawn when the underlying transaction is consummated as intended. However, the short-term nature of this instrument serves to mitigate the risk associated with these contracts.
The summary of instruments that are considered financial guarantees in accordance with the authoritative guidance related to guarantor’s accounting and disclosure requirements for guarantees, including indirect guarantees of indebtedness of others, at June 30, 2026, and December 31, 2025, is as follows:
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Standby letters of credit and financial guarantees | $ | $ | |||||||||
| Loans sold with recourse | |||||||||||
Standby letters of credit and financial guarantees are written conditional commitments issued by OFG to guarantee the payment and/or performance of a customer to a third party (“beneficiary”). If the customer fails to comply with the agreement, the beneficiary may draw on the standby letter of credit or financial guarantee as a remedy. The amount of credit risk involved in issuing letters of credit in the event of non-performance is the face amount of the letter of credit or financial guarantee. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financings, and similar credit transactions. The amount of collateral obtained, if it is deemed necessary by OFG upon extension of credit, is based on management’s credit evaluation of the customer.
At June 30, 2026, and December 31, 2025, the ACL for off-balance-sheet credit exposures corresponding to commitments to extend credit and standby letters of credit amounted to $1.1 million and $1.7 million, respectively, and is included in other liabilities in the statements of financial condition.
At June 30, 2026, and December 31, 2025, OFG maintained other non-credit commitments amounting to $19.2 million and $17.8 million, respectively, primarily for the acquisition of equity securities. In addition, as OFG continues to transform with a focus on simplification and building a culture of excellence and customer service, OFG continues to invest in technology that drives its strategy, namely digital, data analytics, cloud migration, cyber security, and sales and service capabilities. At June 30, 2026, and December 31, 2025, OFG had commitments for capital expenditures in technology amounting to $1.9 million and $1.6 million, respectively.
Contingencies
OFG and its subsidiaries are defendants in a number of legal proceedings incidental to their business. In the ordinary course of business, OFG and its subsidiaries are also subject to governmental and regulatory examinations. Certain subsidiaries of OFG, including the Bank (and its subsidiary, OIB), Oriental Financial Services and Oriental Insurance, are subject to regulation by various U.S., Puerto Rico and other regulators.
OFG seeks to resolve all arbitration, litigation and regulatory matters in the manner management believes is in the best interests of OFG and its shareholders, and contests allegations of liability or wrongdoing and, where applicable, the amount of damages or scope of any penalties or other relief sought as appropriate in each pending matter.
In accordance with applicable accounting guidance, OFG establishes an accrued liability when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. As a matter develops, OFG, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. Once the loss contingency is deemed to be both probable and estimable, OFG will establish an accrued liability and record a corresponding amount of expense. At June 30, 2026, and December 31, 2025, accrued liability for legal contingencies amounted to $908 thousand and $605 thousand, respectively. OFG continues to monitor the matters for further developments that could affect the amount of the accrued liability that has been previously established. OFG also has an accrued liability for potential losses, operational errors, loss on theft not covered by insurance premiums, and uncollectible receivables, among other transactions, amounting to $5.9 million and $182 thousand at June 30, 2026, and December 31, 2025, respectively.
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Subject to the accounting and disclosure framework under the provisions of ASC 450, it is the opinion of OFG’s management, based on its current knowledge and after taking into account its current legal accruals, that the eventual outcome of all matters would not be likely to have a material adverse effect on OFG’s consolidated statements of financial condition. Nonetheless, given the substantial or indeterminate amounts sought in certain of these matters, and the inherent unpredictability of such matters, an adverse outcome in certain of these matters could, from time to time, have a material adverse effect on OFG’s consolidated results of operations or cash flows in particular quarterly or annual periods. OFG has evaluated all arbitration, litigation and regulatory matters where the likelihood of a potential loss is deemed reasonably possible. OFG has determined that the estimate of the reasonably possible loss is not significant.
NOTE 20— OPERATING LEASES
Substantially all leases in which OFG is the lessee are comprised of real estate property for branches, ATM locations, and office space with terms extending through 2038. OFG’s leases do not contain residual value guarantees or material variable lease payments. All leases are classified as operating leases and are included on the consolidated statements of financial condition as a right-of-use asset and a corresponding lease liability. OFG leases to others certain space in its principal offices for terms extending through 2028 with one additional extension through 2030; all are operating leases.
Operating Lease Cost
| Quarter Ended June 30, | Six-Month Period Ended June 30, | Statement of Operations | |||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | Classification | |||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Lease costs | $ | $ | $ | $ | Occupancy and equipment | ||||||||||||||||||||||||||||||
| Variable lease costs | $ | $ | Occupancy and equipment | ||||||||||||||||||||||||||||||||
| Short-term lease costs | $ | $ | Occupancy and equipment | ||||||||||||||||||||||||||||||||
| Lease income | $ | ( | ( | $ | ( | ( | Occupancy and equipment | ||||||||||||||||||||||||||||
| Total lease costs | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
Operating Lease Assets and Liabilities
| June 30, | December 31, | Statement of Financial Condition | |||||||||||||||
| 2026 | 2025 | Classification | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Right-of-use assets | $ | $ | Operating lease right-of-use assets | ||||||||||||||
| Lease Liabilities | $ | $ | Operating leases liabilities | ||||||||||||||
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Weighted-average remaining lease term | |||||||||||
| Weighted-average discount rate | % | % | |||||||||
Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2026, were as follows:
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| Minimum Rent | |||||
| As of June 30, 2026 | (In thousands) | ||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
| Total lease payments | $ | ||||
| Less imputed interest | |||||
| Present value of lease liabilities | $ | ||||
OFG, as lessor, leases or subleases real property to tenants under operating leases. As of June 30, 2026, no material lease concessions have been granted to tenants. As of June 30, 2026, OFG, as lessee, has not requested any lease concessions.
NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS
OFG follows the fair value measurement framework under GAAP.
Fair Value Measurement
The fair value measurement framework defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This framework also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Money market investments
The fair value of money market investments is based on the carrying amounts reflected in the consolidated statements of financial condition as these are reasonable estimates of fair value given the short-term nature of the instruments.
Investment securities
The fair value of investment securities is based on valuations obtained from an independent pricing provider, ICE Data Pricing (“ICE”). ICE is a well-recognized pricing company and an established leader in financial information. Such securities are classified as Level 1 or Level 2, depending on the basis for determining fair value.
Servicing assets
Servicing assets do not trade in an active market with readily observable prices. Servicing assets are priced using a discounted cash flow model. The valuation model considers servicing fees, portfolio characteristics, prepayment assumptions, delinquency rates, late charges, other ancillary revenues, cost to service, and other economic factors. Due to the unobservable nature of certain valuation inputs, the servicing rights are classified as Level 3.
Collateral-dependent loans
OFG records nonrecurring fair value adjustments to collateral-dependent loans to reflect partial write-downs that are based on the fair value of the collateral in accordance with GAAP or the full charge-off of the loan carrying value. The impairment is measured based on the fair value of the collateral less estimated costs to sell. The fair value of the collateral is derived from appraisals, market quotes, and customized discounting. Currently, the loans are classified as Level 3.
Foreclosed real estate
Foreclosed real estate includes real estate properties securing residential mortgage and commercial loans. The fair value of foreclosed real estate may be determined using an external appraisal, broker price opinion or an internal valuation. These foreclosed assets are classified as Level 3 given certain internal adjustments that may be made to external appraisals.
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Other repossessed assets
Other repossessed assets are mainly composed of repossessed automobiles. The fair value of the repossessed automobiles may be determined using internal valuation and an external appraisal. These repossessed assets are classified as Level 3 given certain internal adjustments that may be made to external appraisals.
Mortgage loans held for sale
Residential mortgage loans reported as held for sale are stated at lower of amortized cost or fair value. The fair value of these loans is based on published secondary market prices of mortgage-backed securities with similar characteristics. These loans are classified as Level 3 given certain internal adjustments that may be made when amortized costs are lower.
Assets and liabilities measured at fair value on a recurring and non-recurring basis are summarized below:
| June 30, 2026 | ||||||||||||||||||||||||||
| Fair Value Measurements | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Recurring fair value measurements: | ||||||||||||||||||||||||||
| Investment securities available-for-sale | $ | $ | $ | $ | ||||||||||||||||||||||
| Trading securities | ||||||||||||||||||||||||||
| Money market investments | ||||||||||||||||||||||||||
| Servicing assets | ||||||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| Non-recurring fair value measurements: | ||||||||||||||||||||||||||
| Collateral-dependent loans | $ | $ | $ | $ | ||||||||||||||||||||||
| Foreclosed real estate | ||||||||||||||||||||||||||
| Other repossessed assets | ||||||||||||||||||||||||||
| Mortgage loans held for sale | ||||||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| Fair Value Measurements | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Recurring fair value measurements: | ||||||||||||||||||||||||||
| Investment securities available-for-sale | $ | $ | $ | $ | ||||||||||||||||||||||
| Trading securities | ||||||||||||||||||||||||||
| Money market investments | ||||||||||||||||||||||||||
| Servicing assets | ||||||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
| Non-recurring fair value measurements: | ||||||||||||||||||||||||||
| Collateral-dependent loans | $ | $ | $ | $ | ||||||||||||||||||||||
| Foreclosed real estate | ||||||||||||||||||||||||||
| Other repossessed assets | ||||||||||||||||||||||||||
| Mortgage loans held for sale | ||||||||||||||||||||||||||
| Other loans held for sale | ||||||||||||||||||||||||||
| $ | $ | $ | $ | |||||||||||||||||||||||
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The fair value information included in the tables above for non-recurring fair value measurements is not as of period-end. Instead, it is as of the date that the fair value measurement was recorded closest to June 30, 2026, and December 31, 2025, and excludes nonrecurring fair value measurements of assets no longer outstanding as of the reporting date.
At June 30, 2026, collateral-dependent loans valued using Level 3 inputs comprised loans with principal balances amounting to $4.2 million and an allowance of $1.0 million reflecting a net fair value of $3.2 million. At December 31, 2025, collateral-dependent loans valued using Level 3 inputs comprised loans with principal balances amounting to $3.1 million and an allowance of $387 thousand reflecting a net fair value of $2.7 million.
The tables below present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the quarters and six-month periods ended June 30, 2026 and 2025:
Level 3 Instruments Only
| Servicing Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| New instruments acquired | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principal repayments and amortization | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gains (losses) included in earnings | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Servicing assets gains (losses) included in earnings during the quarters and six-month periods ended June 30, 2026, and 2025 were included as mortgage servicing activities in the consolidated statements of operations. For more information on the qualitative information about Level 3 fair value measurements, see Note 7 – Servicing Assets.
There were no The table below presents quantitative information for all assets measured at fair value on a recurring and non-recurring basis using significant unobservable inputs (Level 3) at June 30, 2026, and December 31, 2025:
| June 30, 2026 | |||||||||||||||||||||||||||||
| Fair Value | Valuation Technique | Unobservable Input | Range | Weighted Average | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Servicing assets | $ | Cash flow valuation | Constant prepayment rate | % | |||||||||||||||||||||||||
| Discount rate | % | ||||||||||||||||||||||||||||
| Collateral-dependent loans | $ | Fair value of property or collateral | Appraised value less disposition costs | % | |||||||||||||||||||||||||
| Foreclosed real estate | $ | Fair value of property or collateral | Appraised value less disposition costs | % | |||||||||||||||||||||||||
| Other repossessed assets | $ | Fair value of property or collateral | Estimated net realizable value less disposition costs | % | |||||||||||||||||||||||||
| Mortgage loans held for sale | $ | Market prices | Pricing and execution wholesale loans | % | |||||||||||||||||||||||||
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| December 31, 2025 | |||||||||||||||||||||||||||||
| Fair Value | Valuation Technique | Unobservable Input | Range | Weighted Average | |||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Servicing assets | $ | Cash flow valuation | Constant prepayment rate | % | |||||||||||||||||||||||||
| Discount rate | % | ||||||||||||||||||||||||||||
| Collateral-dependent loans | $ | Fair value of property or collateral | Appraised value less disposition costs | % | |||||||||||||||||||||||||
| Foreclosed real estate | $ | Fair value of property or collateral | Appraised value less disposition costs | % | |||||||||||||||||||||||||
| Other repossessed assets | $ | Fair value of property or collateral | Estimated net realizable value less disposition costs | % | |||||||||||||||||||||||||
| Mortgage loans held for sale | $ | Market prices | Pricing and execution wholesale loans | ||||||||||||||||||||||||||
| Other loans held for sale | $ | Bids or sales contract prices | Estimated market value | ||||||||||||||||||||||||||
Information about Sensitivity to Changes in Significant Unobservable Inputs
Servicing assets – The significant unobservable inputs used in the fair value measurement of OFG’s servicing assets are constant prepayment rates and discount rates. Changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments), which may magnify or offset the sensitivities. Mortgage banking activities, a component of total banking and financial service revenue in the consolidated statements of operations, include the changes from period to period in the fair value of the MSR, which may result from changes in the valuation model inputs or assumptions (principally reflecting changes in discount rates and prepayment speed assumptions) and other changes, including changes due to collection/realization of expected cash flows.
Fair Value of Financial Instruments
The information about the estimated fair value of financial instruments required by GAAP is presented hereunder. The aggregate fair value amounts presented do not necessarily represent management’s estimate of the underlying value of OFG.
The estimated fair value is subjective in nature, involves uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could affect these fair value estimates. The fair value estimates do not take into consideration the value of future business and the value of assets and liabilities that are not financial instruments. Other significant tangible and intangible assets that are not considered financial instruments include the value of long-term retail deposits, customer relationships, and premises and equipment.
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The estimated fair value and carrying value of OFG’s financial instruments at June 30, 2026, and December 31, 2025, was as follows:
| June 30, | December 31, | ||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||
| Fair Value | Carrying Value | Fair Value | Carrying Value | ||||||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||||||||||||||||||||
| Level 1 | |||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Investment securities available-for-sale | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Level 2 | |||||||||||||||||||||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||||||||||||||||||||
| Trading securities | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Investment securities available-for-sale | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Investment securities held-to-maturity | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Federal Home Loan Bank (FHLB) stock | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Equity securities | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Level 3 | |||||||||||||||||||||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||||||||||||||||||||
| Total loans, net (including loans held-for-sale) | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Accrued interest receivable | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Servicing assets | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Accounts receivable and other assets | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Financial Liabilities: | |||||||||||||||||||||||||||||||||||||||||
| Deposits | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Advances from FHLB | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Other borrowings | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Accrued expenses and other liabilities | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
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The following methods and assumptions were used to estimate the fair values of significant financial instruments at June 30, 2026, and December 31, 2025:
•Cash and cash equivalents (including money market investments), accrued interest receivable, accounts receivable and other assets, and accrued expenses and other liabilities have been valued at the carrying amounts reflected in the consolidated statements of financial condition as these are reasonable estimates of fair value given the short-term nature of the instruments.
•Investments in FHLB stock are valued at their redemption value.
•The fair value of investment securities, including trading securities, is based on quoted market prices, when available, or prices provided by contracted pricing providers or by recognized broker-dealers. If listed prices or quotes are not available, fair value is based upon externally developed models that use both observable and unobservable inputs depending on the market activity of the instrument. Equity securities do not have readily available fair values and are measured at cost, less any impairment.
•The fair value of servicing assets is estimated by using a cash flow valuation model, which calculates the present value of estimated future net servicing cash flows, taking into consideration actual and expected loan prepayment rates, discount rates, servicing costs, and other economic factors, which are determined based on current market conditions.
•The fair value of the loan portfolio (including non-performing loans) is based on the exit market price, which is estimated by segregating the portfolio by loan type, such as mortgage, commercial, consumer and auto. The fair value is calculated by discounting contractual cash flows. The discount rate used in such calculation considers a capital adjustment as well as other premiums for systemic risk, servicing costs, modeling and uncertainty risk, and impairment uncertainty.
•The fair value of demand deposits and savings accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is based on the discounted value of the contractual cash flows, using estimated current market discount rates for deposits of similar remaining maturities.
•The fair value of borrowings, which include securities sold under agreements to repurchase and advances from FHLB are based on the discounted value of the contractual cash flows using current estimated market discount rates for borrowings with similar terms, remaining maturities and put dates.
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NOTE 22 – BANKING AND FINANCIAL SERVICE REVENUES
The following table presents the major categories of banking and financial service revenues for the quarters and six-month periods ended June 30, 2026 and 2025:
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||
| Banking service revenues: | |||||||||||||||||||||||||||||
| Electronic banking fees | $ | $ | $ | $ | |||||||||||||||||||||||||
| Checking accounts fees | |||||||||||||||||||||||||||||
| Savings accounts fees | |||||||||||||||||||||||||||||
| Branch service and credit life commissions | |||||||||||||||||||||||||||||
| Servicing and other loan fees | |||||||||||||||||||||||||||||
| International fees | |||||||||||||||||||||||||||||
| Miscellaneous income | |||||||||||||||||||||||||||||
| Total banking service revenues | $ | $ | $ | $ | |||||||||||||||||||||||||
| Wealth management revenue: | |||||||||||||||||||||||||||||
| Insurance income | $ | $ | $ | $ | |||||||||||||||||||||||||
| Broker fees | |||||||||||||||||||||||||||||
| Trust fees | |||||||||||||||||||||||||||||
| Total wealth management revenue | $ | $ | $ | $ | |||||||||||||||||||||||||
| Mortgage banking activities: | |||||||||||||||||||||||||||||
| Net servicing fees | $ | $ | $ | $ | |||||||||||||||||||||||||
| Net gains on sale of mortgage loans and valuation | |||||||||||||||||||||||||||||
| Net (loss) gain on repurchased loans and other | ( | ( | |||||||||||||||||||||||||||
| Total mortgage banking activities | $ | $ | $ | $ | |||||||||||||||||||||||||
| Total banking and financial service revenues | $ | $ | $ | $ | |||||||||||||||||||||||||
OFG recognizes the revenue from banking services, wealth management and mortgage banking based on the nature and timing of revenue streams from contracts with customers:
Banking Service Revenues
Electronic banking fees include credit and debit card processing services, fees for using the Bank’s ATMs by non-customers, debit card interchange income, and service charges on deposit accounts. Revenue is recorded once the contracted service has been provided. Debit card interchange fees earned by the Bank are subject to pricing limits imposed by the Durbin Amendment.
Service charges on checking and saving accounts are recognized as consumer periodic maintenance revenue once the service is rendered, while overdraft and late charges revenues are recorded after the contracted service has been provided.
Other income such as branch service commissions, servicing and other loan fees, international fees, and miscellaneous income recognized as banking service revenue are out of the scope of ASC 606 – Revenue from Contracts with Customers.
Wealth Management Revenue
Insurance income from commissions generated in the sale of insurance policies issued by unaffiliated insurance companies and sale of annuities are recorded once the sale has been completed. Reinsurance revenue is recorded based on earned premium
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confirmed by the fronting insurance company. Contingent insurance commissions are recorded once the paying insurance companies confirm the amounts earned.
Broker fees consist of two categories:
•Sales commissions generated by advisers for their clients’ purchases and sales of securities and other investment products, which are collected once the stand-alone transactions are completed at trade date or as earned, and managed account fees, which are fees charged to advisers’ clients’ accounts on OFG’s corporate advisory platform. These revenues do not cover future services; as a result, there is no need to allocate the amount received to any other service.
•Fees for providing distribution services related to mutual funds, net of compensation paid to a provider of such services, as well as trailer fees (also known as 12b-1 fees). These fees are considered variable and are recognized over time, as the uncertainty of the fees to be received is resolved as the net asset value of the mutual fund is determined and investor activity occurs. Fees do not cover future services, as a result there is no need to allocate the amount received to any other service.
Trust fees are revenues related to fiduciary services provided to IRA trusts and other retirement plans. These generally include payment for trustee services, distribution services, custodial services of plan assets, due diligence services, and investment advisory services. Fees are billed based on services contracted. Negotiated fees are detailed in the contract. Fees collected in advance are amortized over the term of the contract. Fees are generally collected on an annual or quarterly basis once the administrative service has been completed. Fees do not include future services.
Mortgage Banking Activities
Mortgage banking activities such as servicing fees and valuation of servicing assets, gain on sale of mortgage loans, and gain on repurchased loans and others are out of the scope of ASC 606.
NOTE 23 – BUSINESS SEGMENTS
OFG segregates its businesses into the following three segments of business: Banking, Wealth Management, and Treasury. Management established the reportable segments based on the internal reporting used to evaluate performance and assess where to allocate resources. Other factors such as OFG’s organization, nature of its products, distribution channels and economic characteristics of the products were also considered in the determination of the reportable segments. OFG measures the performance of these segments based on pre-established goals across various financial parameters, such as net income. OFG’s methodology for allocating non-interest expenses among segments is based on several factors such as revenue, employee headcount, occupied space, dedicated services or time, among others. These factors are reviewed on a periodic basis and may change if the conditions so warrant.
Banking includes the Bank’s branches and traditional banking products such as deposits and commercial, consumer, auto, and mortgage loans. Mortgage banking activities are carried out by the Bank’s mortgage banking division, whose principal activity is to originate mortgage loans for OFG’s own portfolio. As part of its mortgage banking activities, OFG may sell loans directly into the secondary market or securitize conforming loans into mortgage-backed securities.
Wealth Management is comprised of the Bank’s trust division, Oriental Financial Services, Oriental Insurance, and OFG Reinsurance. The core operations of this segment are financial planning, securities brokerage services, investment advisory services, insurance, reinsurance, and corporate trust and retirement services.
The Treasury segment encompasses all of OFG’s asset/liability management activities, such as purchases and sales of investment securities, interest rate risk management, and borrowings. This segment also includes activities of the Bank’s IBEs, including purchases of US loan participations.
The accounting policies of the segments are the same as those referred to in Note 1 – “Summary of Significant Accounting Policies” of our 2025 Form 10-K. Intersegment sales and transfers, if any, are accounted for as if the sales or transfers were to third parties, that is, at current market prices. Financial results are presented, to the extent practicable, as if each business operated on a standalone basis, and includes expense allocations for corporate services used by the business segments, disclosed as intersegment expenses. Significant expense categories identified by management are disclosed for all segments, even though it may not be significant to a particular segment.
OFG’s chief operating decision maker (“CODM”) is the chief executive officer (the “CEO”). The CODM evaluates the performance of the Banking, Wealth Management and Treasury segments primarily based on net income, which guides
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resource allocation across segments. The CODM also continuously monitors performance and adjusts as necessary. Additionally, OFG employs a forecasting process to project future performance and resource needs, which are reviewed and updated regularly to ensure alignment with its strategic goals.
Following are the results of operations and the selected financial information by operating segment for the quarters and six-month periods ended June 30, 2026 and 2025:
| Quarter Ended June 30, 2026 | |||||||||||||||||||||||||||||||||||
| Banking | Wealth Management | Treasury | Total Major Segments | Eliminations | Consolidated Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Interest income | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||||||||||||||
| (Provision for) recapture of credit losses | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Non-interest income, net | |||||||||||||||||||||||||||||||||||
Non-interest expenses [1]: | |||||||||||||||||||||||||||||||||||
| Compensation and employee benefits | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Occupancy, equipment and infrastructure costs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Depreciation and amortization of premises and equipment | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Electronic banking charges | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Information technology expenses | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Professional and service fees | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Loan servicing and clearing expenses | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Amortization of other intangible assets | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Intersegment expenses | ( | ( | |||||||||||||||||||||||||||||||||
Other [2] | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Total non-interest expense | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Income before income taxes | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Income tax expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Expenditures for long-lived assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
[1] The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. | |||||||||||||||||||||||||||||||||||
| [2] Other non-interest expenses include: | |||||||||||||||||||||||||||||||||||
Banking: taxes, other than payroll and income taxes; insurance; advertising; data communication and systems; printing, postage, stationery and supplies; communication; travels, meals and training; credit related expenses; director and investor relations; loss on sale of foreclosed real estate and other repossessed properties; and losses and operational errors, among other business expenses. | |||||||||||||||||||||||||||||||||||
Wealth Management: reinsurance incurred net losses; taxes, other than payroll and income taxes; advertising; insurance; and data communication and systems, among other business expenses. | |||||||||||||||||||||||||||||||||||
| Treasury: Data communication and systems; taxes, other than payroll and income taxes; insurance, among other business expenses. | |||||||||||||||||||||||||||||||||||
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| Six-Month Period Ended June 30, 2026 | |||||||||||||||||||||||||||||||||||
| Banking | Wealth Management | Treasury | Total | Eliminations | Consolidated Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Interest income | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||||||||||||||
Provision for credit losses | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Non-interest income, net | |||||||||||||||||||||||||||||||||||
Non-interest expenses [1] | |||||||||||||||||||||||||||||||||||
| Compensation and employee benefits | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Occupancy, equipment and infrastructure costs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Depreciation and amortization of premises and equipment | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Electronic banking charges | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Information technology expenses | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Professional and service fees | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Loan servicing and clearing expenses | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Amortization of other intangible assets | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Intersegment expenses | ( | ( | |||||||||||||||||||||||||||||||||
Other [2] | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Total non-interest expense | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Income before income taxes | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Income tax expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Expenditures for long-lived assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
[1] The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. | |||||||||||||||||||||||||||||||||||
| [2] Other non-interest expenses include: | |||||||||||||||||||||||||||||||||||
Banking: taxes, other than payroll and income taxes; insurance; advertising; communication; printing, postage, stationery and supplies; travels, meals and training; credit related expenses; director and investor relations; loss on sale of foreclosed real estate and other repossessed properties; and losses and operational errors, among other business expenses. | |||||||||||||||||||||||||||||||||||
Wealth Management: reinsurance incurred net losses; taxes, other than payroll and income taxes; advertising; insurance; and data communication and systems, among other business expenses. | |||||||||||||||||||||||||||||||||||
Treasury: data communication and systems; taxes, other than payroll and income taxes; and insurance, among other business expenses. | |||||||||||||||||||||||||||||||||||
Eliminations include interest income and expense for a time deposit opened by the Bank in Oriental Overseas, the IBE unit, which operates within the Bank. The time deposit with a balance of $286.6 million and $281.0 million at June 30, 2026 and 2025, respectively, which is used to fund Oriental Overseas operations, is included in the Treasury Segment with its corresponding interest expense, the related interest income is included in the Banking Segment, all are eliminated in the consolidation. Interest income is accrued on the unpaid principal balance. The increase in interest income and interest expense from the prior year quarter was mainly the result of higher average balance.
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Table of Contents
OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| Quarter Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||
| Banking | Wealth Management | Treasury | Total Major Segments | Eliminations | Consolidated Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Interest income | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||||||||||||||
| Provision for credit losses | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Non-interest income, net | |||||||||||||||||||||||||||||||||||
Non-interest expenses [1]: | |||||||||||||||||||||||||||||||||||
| Compensation and employee benefits | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Occupancy, equipment and infrastructure costs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Depreciation and amortization of premises and equipment | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Electronic banking charges | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Information technology expenses | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Professional and service fees | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Loan servicing and clearing expenses | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Amortization of other intangibles assets | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Intersegment expenses | ( | ( | |||||||||||||||||||||||||||||||||
Other [2] | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Total non-interest expense | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Income before income taxes | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Income tax expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Expenditures for long-lived assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
[1] The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. | |||||||||||||||||||||||||||||||||||
| [2] Other non-interest expenses include: | |||||||||||||||||||||||||||||||||||
Banking: taxes, other than payroll and income taxes; insurance; advertising; data communication and systems; printing, postage, stationery and supplies; travels, meals and training; credit related expenses; director and investor relations; loss on sale of foreclosed real estate and other repossessed properties; and losses and operational errors, among other business expenses. | |||||||||||||||||||||||||||||||||||
Wealth Management: reinsurance incurred net losses; taxes, other than payroll and income taxes; advertising; insurance; and data communication and systems, among other business expenses. | |||||||||||||||||||||||||||||||||||
Treasury: data communication and systems; taxes, other than payroll and income taxes; and insurance, among other business expenses. | |||||||||||||||||||||||||||||||||||
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Table of Contents
OFG BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| Six-Month Period Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||
| Banking | Wealth Management | Treasury | Total | Eliminations | Consolidated Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Interest income | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Net interest income | |||||||||||||||||||||||||||||||||||
(Provision for) recapture of credit losses | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Non-interest income, net | |||||||||||||||||||||||||||||||||||
Non-interest expenses [1] | |||||||||||||||||||||||||||||||||||
| Compensation and employee benefits | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Occupancy, equipment and infrastructure costs | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Depreciation and amortization of premises and equipment | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Electronic banking charges | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Information technology expenses | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
| Professional and service fees | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Loan servicing and clearing expenses | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Amortization of other intangible assets | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Intersegment expenses | ( | ( | |||||||||||||||||||||||||||||||||
Other [2] | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Total non-interest expense | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Income before income taxes | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Income tax expense | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Expenditures for long-lived assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
[1] The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. | |||||||||||||||||||||||||||||||||||
| [2] Other non-interest expenses include: | |||||||||||||||||||||||||||||||||||
Banking: taxes, other than payroll and income taxes; insurance; advertising; communication; printing, postage, stationery and supplies; travels, meals and training; credit related expenses; director and investor relations; loss on sale of foreclosed real estate and other repossessed properties; and losses and operational errors, among other business expenses. | |||||||||||||||||||||||||||||||||||
Wealth Management: reinsurance incurred net losses; taxes, other than payroll and income taxes; advertising; insurance; and data communication and systems, among other business expenses. | |||||||||||||||||||||||||||||||||||
Treasury: data communication and systems; taxes, other than payroll and income taxes; and insurance, among other business expenses. | |||||||||||||||||||||||||||||||||||
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Item 1, “Financial Statements” of this quarterly report on Form 10-Q. This discussion and analysis section contains forward-looking statements. Please see “Forward-Looking Statements,” “Risk Factors,” and “Quantitative and Qualitative Disclosures about Market Risk” in this quarterly report on Form 10-Q, and set forth in OFG’s annual report on our 2025 Form 10-K, as supplemented and amended by any subsequent quarterly reports on Form 10-Q, for a discussion of the uncertainties, risks and assumptions associated with these statements.
Other factors not identified above, including those described under the headings in our 2025 Form 10-K and any subsequent quarterly reports on Form 10-Q may also cause actual results to differ materially from those described in our forward-looking statements.
INTRODUCTION
OFG is a publicly owned financial holding company that provides a wide range of banking and financial services such as commercial, consumer, auto, and mortgage lending, financial planning, insurance sales, investment advisory and securities brokerage services, as well as corporate trust services. It operates through three business segments: Banking, Wealth Management, and Treasury, and distinguishes itself based on quality service. OFG conducts its business through its main office in San Juan, Puerto Rico, forty-two branches in Puerto Rico and two branches in the USVI. It has five subsidiaries with operations in Puerto Rico: the Bank, Oriental Financial Services, Oriental Insurance, OIB and OBPEF; two subsidiaries in the United States, OFG USA and OFG Ventures; and one subsidiary in the Cayman Islands, OFG Reinsurance. OFG’s long-term goal is to strengthen its banking and financial services franchise by expanding its lending businesses, increasing the level of integration in the marketing and delivery of banking and financial services, continuously improving our already effective asset-liability management, growing non-interest revenue from banking and financial services, as well as achieving greater operating efficiencies.
OFG’s diversified mix of businesses and products generates both the interest income traditionally associated with a banking institution and non-interest income traditionally associated with a financial services institution (generated by such businesses as securities brokerage, fiduciary services, investment advisory, insurance agency and reinsurance). Although all these businesses, to varying degrees, are affected by interest rate and financial market fluctuations and other external factors, OFG’s commitment is to continue producing a balanced and growing revenue stream.
OFG’s mission is to make possible the progress of our customers, employees, shareholders, and communities we serve. As the world evolves rapidly, we seek to amplify our ambition, with the goal of advancing from steady progress to bold transformation. We believe that our strategy is designed to accelerate our transformation into a fully digital, data-driven, customer-centric financial institution, while maintaining the strong human relationships that define our brand. OFG aims to deliver intelligent growth, operational excellence, and deeper financial empowerment to make progress possible for our communities. OFG aims to position itself as a trusted digital financial coach, by understanding the customers’ objectives and needs by offering value-added services that help them achieve financial progress and well-being. OFG is transitioning from a digital-first model to a truly digital bank, one where customers should be able to perform every financial activity seamlessly, securely, and intuitively, anytime, anywhere. Our goal is to provide a one-stop digital experience that is enriched by human connection and powered by intelligence.
RECENT DEVELOPMENTS
Economic Conditions
Puerto Rico’s economy has continued to show stable performance, supported by favorable labor market conditions and adequate system liquidity. According to the Puerto Rico Department of Economic Development and Commerce, employment data indicates continued gains across multiple industries. As of May 2026, total non-farm payroll employment averaged approximately 962,600 jobs, reflecting a 0.3% increase from the previous month and a 1.0% growth year over year. Electric power generation and cement sales have also increased 2.4% and 1.2% year over year, respectively. Economic activity has benefited from public sector reconstruction funding, private investment, and infrastructure projects. Manufacturing expansion and new on-shoring initiatives reinforce long-term growth outlook. However, OFG continues to monitor global economic and
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geopolitical conditions, including interest rate outlook, related uncertainties, and their possible impact on Puerto Rico’s economy, which could influence OFG’s business and operational results.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with GAAP requires management to make judgments, assumptions and estimates that affect the reported amount of assets, liabilities, income and expenses in the consolidated financial statements. Understanding our accounting policies and the extent to which we use judgment and estimates in applying these policies is integral to understanding our financial statements. We provide a summary of our significant accounting policies in “Note 1—Summary of Significant Accounting Policies” of our 2025 Form 10-K.
In the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” section of our 2025 Form 10-K, we identified the Allowance for Credit Losses related to loans collectively evaluated for impairment as a critical accounting policy and estimate because it involves significant estimation uncertainty that has or is reasonably likely to have a material impact on our financial condition or results of operations.
We evaluate our critical accounting estimates and judgments on an ongoing basis and update them as necessary based on changing conditions. There have been no material changes in the methods that we used to formulate these critical accounting estimates from those discussed in our 2025 Form 10-K.
FINANCIAL HIGHLIGHTS
With year-over-year increases of 20.9% in EPS and 4.5% in core revenues, second quarter results reflected continued momentum across all our businesses, supported by disciplined execution, excellent customer engagement, and our differentiated operating model. OFG continues to show core deposit strength, consistent loan growth, stable credit trends, and effective balance sheet management.
During the second quarter of 2026, OFG launched a branding-marketing campaign reflecting our evolution to a digital bank with a human touch. The campaign highlights our market-leading banking and customer communication technologies in Puerto Rico combined with our people and intensely customer-focused culture. This sets us apart and reinforces our mission to help customers achieve progress. They are the point of everything we do.
On a macro level, the Puerto Rico economy remains stable, with federal reconstruction funds continuing to flow, a strong labor market, and private sector manufacturing and onshoring investment. With the economy as a tailwind, our operational strength, disciplined execution, and focus on the customer experience positions us well to capitalize on long-term growth opportunities.
Second Quarter of 2026:
Earnings per common share diluted was $1.39 compared to $1.26 in the first quarter of 2026 and $1.15 in the second quarter of 2025. Net income available to common shareholders was $58.8 million compared to $53.9 million in the first quarter of 2026 and $51.8 million in the second quarter of 2025. Total core revenues (non-GAAP) of $190.3 million compared to $185.8 million in the first quarter of 2026 and $182.2 million in the second quarter of 2025. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP financial measures” section in this quarterly report on Form 10-Q.
Performance metrics: Net interest margin of 5.45%, return on average assets of 1.93%, return on average tangible common stockholders’ equity of 17.94%, and efficiency ratio of 54.04%.
Total Interest Income of $197.2 million compared to $194.1 million in the first quarter of 2026 and $194.3 million in the second quarter of 2025. The second quarter of 2026 increased $3.0 million sequentially, primarily reflecting higher average balances of loans at higher average rate, $4.1 million from paid in full commercial loans compared to $3.3 million from another paid in full commercial loan in the first quarter of 2026, and one additional business day, which increased interest income by $1.6 million.
Total Interest Expense of $39.9 million compared to $40.3 million in the first quarter of 2026 and $42.4 million in the second quarter of 2025. The second quarter of 2026 decreased $462 thousand sequentially, primarily reflecting lower average balances of borrowings and brokered deposits, which more than offset the additional expense of higher average balances of core deposits, and one additional business day, which increased interest expense by $440 thousand.
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Total Banking and Financial Service Revenues of $33.0 million compared to $32.0 million in the first quarter of 2026 and $30.2 million in the second quarter of 2025. The second quarter of 2026 increased $1.0 million sequentially, reflecting higher banking service and wealth management revenues, which included $1.1 million in insurance and annuity fees, and lower mortgage banking revenues.
Pre-Provision Net Revenues (Non-GAAP) of $87.5 million compared to $91.3 million in the first quarter of 2026 and $87.6 million in the second quarter of 2025. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP financial measures” section in this quarterly report on Form 10-Q.
Total Provision for Credit Losses of $13.0 million compared to $22.5 million in the first quarter of 2026 and $21.7 million in the second quarter of 2025. Total provision for credit losses in the second quarter of 2026 primarily reflected $14.7 million for increased loan volume and $1.9 million in commercial loan recoveries, while the first quarter of 2026 included $17.5 million for increased loan volume and increased allowance of $3.7 million for a previously reserved telecom commercial loan and $1.0 million for newly classified small commercial loans.
Credit Quality: Net charge-offs (“NCOs”) of $28.8 million (1.40% of average loans) compared to $21.4 million (1.05% of average loans) in the first quarter of 2026 and $12.8 million (0.64% of average loans) in the second quarter of 2025, and non-performing loans (“NPLs”) of $67.3 million (0.81% of average loans) compared to $120.9 million (1.47% of average loans) in the first quarter of 2026 and $97.4 million (1.19% of average loans) in the second quarter of 2025. The changes in second quarter of 2026 NCOs and NPLs primarily reflected the sales of the above-mentioned telecom loan and a U.S. commercial loan.
Total Non-Interest Expense of $102.8 million compared to $94.7 million in the first quarter of 2026 and $94.8 million in the second quarter of 2025. The second quarter of 2026 included $5.8 million in business related operational charges, while the first quarter of 2026 included $1.0 million in capital markets readiness and registration expenses and the benefit of $3.6 million in a business related volume incentive payment.
Income Tax Expense was $15.7 million compared to $14.9 million in the first quarter of 2026 and $14.1 million in the second quarter of 2025.
Loans Held-for-Investment of $8.30 billion compared to $8.24 billion in the first quarter of 2026 and $8.18 billion in the second quarter of 2025. Loans held-for-investment in the second quarter of 2026 grew $62.4 million or 0.8% sequentially, reflecting increases in Puerto Rico commercial and consumer loans.
New loan production of $755.0 million compared to $608.9 million in the first quarter of 2026 and $783.7 million in the second quarter of 2025. The second quarter of 2026 production grew $146.2 million or 24.0% sequentially, reflecting increases in Puerto Rico commercial, residential mortgage, and consumer loans. Production in the second quarter of 2026 declined 3.7% year-over-year, reflecting unusually strong auto sales in the second quarter of 2025 due to the threat of tariffs.
Total Investments of $2.70 billion compared to $2.79 billion in the first quarter of 2026 and $2.78 billion in the second quarter of 2025 primarily reflected principal paydowns in mortgage-backed securities.
Customer Deposits of $9.74 billion compared to $9.66 billion in the first quarter of 2026 and $9.90 billion in the second quarter of 2025. The second quarter of 2026 deposits increased $84.9 million or 0.9% sequentially, reflecting government, commercial and retail deposit growth.
Total Borrowings and Brokered Deposits of $795.5 million compared to $746.6 million in the first quarter of 2026 and $732.3 million in the second quarter of 2025. The second quarter of 2026 total borrowings and brokered deposits increased $48.9 million sequentially for liquidity management purposes.
Cash and Cash Equivalents of $745.7 million compared to $636.5 million in the first quarter of 2026 and $851.8 million in the second quarter of 2025. The second quarter of 2026 cash increased $109.2 million sequentially primarily due to deposit growth and repayments from the investment portfolio.
Capital: CET1 ratio was 14.07% compared to 13.75% in the first quarter of 2026 and 13.99% in the second quarter of 2025. Tangible Common Equity ratio was 10.90% compared to 10.66% in the first quarter of 2026 and 10.20% in the second quarter
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of 2025. Tangible Book Value per share was $31.12 compared to $30.14 in the first quarter of 2026 and $27.67 in the second quarter of 2025.
Selected income statement and balance sheet data and key performance indicators are presented in the tables below:
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Variance % | 2026 | 2025 | Variance % | ||||||||||||||||||||||||||||||||||||
| EARNINGS DATA: | (In thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 197,150 | $ | 194,347 | 1.4% | $ | 391,276 | $ | 383,569 | 2.0% | |||||||||||||||||||||||||||||||
| Interest expense | 39,851 | 42,419 | (6.1)% | 80,164 | 82,570 | (2.9)% | |||||||||||||||||||||||||||||||||||
| Net interest income | 157,299 | 151,928 | 3.5% | 311,112 | 300,999 | 3.4% | |||||||||||||||||||||||||||||||||||
| Provision for credit losses | 13,006 | 21,678 | (40.0)% | 35,489 | 47,366 | (25.1)% | |||||||||||||||||||||||||||||||||||
| Net interest income after provision for credit losses | 144,293 | 130,250 | 10.8% | 275,623 | 253,633 | 8.7% | |||||||||||||||||||||||||||||||||||
| Non-interest income | 33,023 | 30,431 | 8.5% | 65,190 | 59,948 | 8.7% | |||||||||||||||||||||||||||||||||||
| Non-interest expenses | 102,832 | 94,802 | 8.5% | 197,535 | 188,254 | 4.9% | |||||||||||||||||||||||||||||||||||
| Income before taxes | 74,484 | 65,879 | 13.1% | 143,278 | 125,327 | 14.3% | |||||||||||||||||||||||||||||||||||
| Income tax expense | 15,707 | 14,078 | 11.6% | 30,564 | 27,954 | 9.3% | |||||||||||||||||||||||||||||||||||
Net income available to common shareholders | $ | 58,777 | $ | 51,801 | 13.5% | $ | 112,714 | $ | 97,373 | 15.8% | |||||||||||||||||||||||||||||||
| PER SHARE DATA: | |||||||||||||||||||||||||||||||||||||||||
| EPS Basic | $ | 1.39 | $ | 1.15 | 20.9% | $ | 2.65 | $ | 2.16 | 22.7% | |||||||||||||||||||||||||||||||
| EPS Diluted | $ | 1.39 | $ | 1.15 | 20.9% | $ | 2.64 | $ | 2.15 | 22.8% | |||||||||||||||||||||||||||||||
| Average common shares outstanding | 42,261 | 44,854 | (5.8)% | 42,522 | 45,074 | (5.7)% | |||||||||||||||||||||||||||||||||||
| Average common shares outstanding and equivalents | 42,397 | 45,033 | (5.9)% | 42,645 | 45,265 | (5.8)% | |||||||||||||||||||||||||||||||||||
| Cash dividends declared per common share | $ | 0.35 | $ | 0.30 | 16.7% | $ | 0.70 | $ | 0.60 | 16.7% | |||||||||||||||||||||||||||||||
| Cash dividends declared on common shares | $ | 14,538 | $ | 15,709 | (7.5)% | $ | 29,459 | $ | 26,882 | 9.6% | |||||||||||||||||||||||||||||||
| PERFORMANCE RATIOS: | |||||||||||||||||||||||||||||||||||||||||
| Return on average assets (ROA) | 1.93 | % | 1.73 | % | 11.6% | 1.86 | % | 1.65 | % | 12.7% | |||||||||||||||||||||||||||||||
| Return on average tangible common stockholders’ equity (non-GAAP, see Table 17) | 17.94 | % | 16.96 | % | 5.8% | 17.18 | % | 16.13 | % | 6.5% | |||||||||||||||||||||||||||||||
| Return on average common equity (ROE) | 16.76 | % | 15.71 | % | 6.7% | 16.04 | % | 14.92 | % | 7.5% | |||||||||||||||||||||||||||||||
| Efficiency ratio | 54.04 | % | 52.04 | % | 3.8% | 52.52 | % | 52.23 | % | 0.6% | |||||||||||||||||||||||||||||||
| Interest rate spread | 5.31 | % | 5.17 | % | 2.7% | 5.26 | % | 5.22 | % | 0.8% | |||||||||||||||||||||||||||||||
| Interest rate margin | 5.45 | % | 5.31 | % | 2.6% | 5.40 | % | 5.37 | % | 0.6% | |||||||||||||||||||||||||||||||
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| June 30, | December 31, | |||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||
| PERIOD END BALANCES AND CAPITAL RATIOS: | (In thousands, except per share data) | |||||||||||||||||||
| Investments and loans | ||||||||||||||||||||
| Investment securities | $ | 2,696,656 | $ | 2,843,141 | ||||||||||||||||
| Loans, net | 8,117,021 | 8,014,246 | ||||||||||||||||||
| Total investments and loans | $ | 10,813,677 | $ | 10,857,387 | ||||||||||||||||
| Deposits and borrowings | ||||||||||||||||||||
| Deposits | $ | 9,983,128 | $ | 10,262,752 | ||||||||||||||||
| Securities sold under agreements to repurchase | 100,085 | 100,714 | ||||||||||||||||||
Advances from FHLB and other borrowings | 456,530 | 456,590 | ||||||||||||||||||
| Total deposits and borrowings | $ | 10,539,743 | $ | 10,820,056 | ||||||||||||||||
| Stockholders’ equity | ||||||||||||||||||||
| Common stock | 59,885 | 59,885 | ||||||||||||||||||
| Additional paid-in capital | 642,019 | 642,973 | ||||||||||||||||||
| Legal surplus | 199,429 | 188,490 | ||||||||||||||||||
| Retained earnings | 976,946 | 904,630 | ||||||||||||||||||
| Treasury stock, at cost | (432,061) | (389,067) | ||||||||||||||||||
| Accumulated other comprehensive loss | (38,946) | (16,906) | ||||||||||||||||||
| Total stockholders’ equity | $ | 1,407,272 | $ | 1,390,005 | ||||||||||||||||
| Per share data | ||||||||||||||||||||
| Book value per common share | $ | 33.30 | $ | 32.13 | ||||||||||||||||
| Tangible book value per common share (non-GAAP, see Table 17) | $ | 31.12 | $ | 29.96 | ||||||||||||||||
| Market price | $ | 49.07 | $ | 40.98 | ||||||||||||||||
| Capital ratios | ||||||||||||||||||||
| Leverage capital | 11.23 | % | 10.71 | % | ||||||||||||||||
| Common equity Tier 1 capital | 14.07 | % | 13.97 | % | ||||||||||||||||
| Tier 1 risk-based capital | 14.07 | % | 13.97 | % | ||||||||||||||||
| Total risk-based capital | 15.33 | % | 15.24 | % | ||||||||||||||||
| Financial assets managed | ||||||||||||||||||||
| Trust assets managed | $ | 2,484,283 | $ | 2,490,272 | ||||||||||||||||
| Broker-dealer assets managed | 3,335,732 | 2,612,508 | ||||||||||||||||||
| Total assets managed | $ | 5,820,015 | $ | 5,102,780 | ||||||||||||||||
67
ANALYSIS OF RESULTS OF OPERATIONS
The following tables show major categories of interest-earning assets and interest-bearing liabilities, their respective interest income, expenses, yields and costs, and their impact on net interest income due to changes in volume and rates for the quarters and six-month periods ended June 30, 2026 and 2025.
TABLE 1 - ANALYSIS OF NET INTEREST INCOME AND CHANGES DUE TO VOLUME/RATE FOR THE QUARTERS ENDED JUNE 30, 2026 AND 2025
| Interest | Average rate | Average balance | |||||||||||||||||||||||||||||||||
| June 30, | June 30, | June 30, | |||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| A - TAX-EQUIVALENT SPREAD (Non-GAAP) | |||||||||||||||||||||||||||||||||||
| Interest-earning assets | $ | 197,150 | $ | 194,347 | 6.83 | % | 6.80 | % | $ | 11,582,521 | $ | 11,466,602 | |||||||||||||||||||||||
| Tax-equivalent adjustment | 4,070 | 3,808 | 0.14 | % | 0.13 | % | — | — | |||||||||||||||||||||||||||
Interest-earning assets tax- equivalent (1) | 201,220 | 198,155 | 6.97 | % | 6.93 | % | 11,582,521 | 11,466,602 | |||||||||||||||||||||||||||
| Interest-bearing liabilities | 39,851 | 42,419 | 1.52 | % | 1.63 | % | 10,501,531 | 10,408,780 | |||||||||||||||||||||||||||
| Tax-equivalent net interest income / spread | 161,369 | 155,736 | 5.45 | % | 5.30 | % | 1,080,990 | 1,057,822 | |||||||||||||||||||||||||||
| Tax-equivalent interest rate margin | 5.59 | % | 5.43 | % | |||||||||||||||||||||||||||||||
| B - NORMAL SPREAD | |||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||
| Investments: | |||||||||||||||||||||||||||||||||||
| Investment securities | 29,242 | 29,282 | 4.30 | % | 4.25 | % | 2,721,498 | 2,756,356 | |||||||||||||||||||||||||||
| Interest-bearing cash and money market investments | 5,493 | 8,078 | 3.58 | % | 4.34 | % | 615,369 | 746,356 | |||||||||||||||||||||||||||
| Total investments | 34,735 | 37,360 | 4.18 | % | 4.28 | % | 3,336,867 | 3,502,712 | |||||||||||||||||||||||||||
| Non-PCD loans | |||||||||||||||||||||||||||||||||||
| Mortgage | 8,625 | 8,132 | 5.79 | % | 5.67 | % | 595,708 | 573,824 | |||||||||||||||||||||||||||
| Commercial | 62,707 | 57,157 | 7.11 | % | 7.27 | % | 3,536,628 | 3,160,081 | |||||||||||||||||||||||||||
| Consumer | 20,203 | 20,158 | 11.54 | % | 11.58 | % | 702,158 | 697,938 | |||||||||||||||||||||||||||
Auto | 55,327 | 56,350 | 8.45 | % | 8.58 | % | 2,626,505 | 2,635,524 | |||||||||||||||||||||||||||
| Total Non-PCD loans | 146,862 | 141,797 | 7.90 | % | 8.05 | % | 7,460,999 | 7,067,367 | |||||||||||||||||||||||||||
| PCD loans | |||||||||||||||||||||||||||||||||||
| Mortgage | 11,252 | 12,270 | 6.27 | % | 6.09 | % | 717,357 | 806,162 | |||||||||||||||||||||||||||
| Commercial | 4,277 | 2,899 | 25.56 | % | 12.95 | % | 66,931 | 89,565 | |||||||||||||||||||||||||||
| Consumer | 18 | 14 | 20.39 | % | 8.79 | % | 361 | 643 | |||||||||||||||||||||||||||
Auto | 6 | 7 | 369.70 | % | 18.57 | % | 6 | 153 | |||||||||||||||||||||||||||
| Total PCD loans | 15,553 | 15,190 | 7.93 | % | 6.78 | % | 784,655 | 896,523 | |||||||||||||||||||||||||||
Total loans (2) | 162,415 | 156,987 | 7.90 | % | 7.91 | % | 8,245,654 | 7,963,890 | |||||||||||||||||||||||||||
| Total interest-earning assets | 197,150 | 194,347 | 6.83 | % | 6.80 | % | 11,582,521 | 11,466,602 | |||||||||||||||||||||||||||
68
| Interest | Average rate | Average balance | |||||||||||||||||||||||||||||||||
| June 30, | June 30, | June 30, | |||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||||||||||||
| NOW Accounts | 8,786 | 15,451 | 1.41 | % | 1.93 | % | 2,503,812 | 3,211,382 | |||||||||||||||||||||||||||
| Savings and money market | 6,281 | 5,175 | 1.07 | % | 0.98 | % | 2,345,584 | 2,119,036 | |||||||||||||||||||||||||||
| Time deposits | 16,138 | 13,960 | 3.07 | % | 3.07 | % | 2,107,062 | 1,824,006 | |||||||||||||||||||||||||||
| 31,205 | 34,586 | 1.80 | % | 1.94 | % | 6,956,458 | 7,154,424 | ||||||||||||||||||||||||||||
| Brokered deposits | 2,164 | 2,350 | 4.01 | % | 4.14 | % | 216,327 | 227,659 | |||||||||||||||||||||||||||
| 33,369 | 36,936 | 1.87 | % | 2.01 | % | 7,172,785 | 7,382,083 | ||||||||||||||||||||||||||||
| Non-interest-bearing deposits | — | — | — | % | — | % | 2,749,022 | 2,581,877 | |||||||||||||||||||||||||||
| Fair value premium and core deposit intangible amortizations | 755 | 943 | — | % | — | % | — | — | |||||||||||||||||||||||||||
| Total deposits | 34,124 | 37,879 | 1.38 | % | 1.52 | % | 9,921,807 | 9,963,960 | |||||||||||||||||||||||||||
| Borrowings: | |||||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 1,074 | 120 | 3.51 | % | 4.56 | % | 122,685 | 10,517 | |||||||||||||||||||||||||||
| Advances from FHLB and other borrowings | 4,653 | 4,420 | 4.08 | % | 4.08 | % | 457,039 | 434,303 | |||||||||||||||||||||||||||
| Total borrowings | 5,727 | 4,540 | 3.96 | % | 4.09 | % | 579,724 | 444,820 | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 39,851 | 42,419 | 1.52 | % | 1.63 | % | 10,501,531 | 10,408,780 | |||||||||||||||||||||||||||
| Net interest income / spread | $ | 157,299 | $ | 151,928 | 5.31 | % | 5.17 | % | |||||||||||||||||||||||||||
| Interest rate margin | 5.45 | % | 5.31 | % | |||||||||||||||||||||||||||||||
| Excess of average interest-earning assets over average interest-bearing liabilities | $ | 1,080,990 | $ | 1,057,822 | |||||||||||||||||||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities ratio | 110.29 | % | 110.16 | % | |||||||||||||||||||||||||||||||
| (1) To provide meaningful comparisons of interest income, yields, and net interest margins, we calculate interest income on a taxable-equivalent basis. This involves adjusting the interest income from tax-exempt assets to be equivalent to taxable investments. Note that this adjustment is not permitted under GAAP in the unaudited consolidated statements of operations. | |||||||||||||||||||||||||||||||||||
| (2) Includes loans held for sale and excludes allowance for credit losses. Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis. | |||||||||||||||||||||||||||||||||||
69
C - CHANGES IN NET INTEREST INCOME DUE TO:
| Volume | Rate | Total | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Interest Income: | |||||||||||||||||
| Investment securities | $ | (228) | $ | 188 | $ | (40) | |||||||||||
| Interest bearing cash and money market investments | (1,293) | (1,292) | (2,585) | ||||||||||||||
| Loans | 5,565 | (137) | 5,428 | ||||||||||||||
| Total interest income | 4,044 | (1,241) | 2,803 | ||||||||||||||
| Interest Expense: | |||||||||||||||||
| NOW Accounts | (4,449) | (2,216) | (6,665) | ||||||||||||||
| Savings and money market | 915 | 191 | 1,106 | ||||||||||||||
| Time deposits | 2,546 | (368) | 2,178 | ||||||||||||||
| Brokered deposits | (115) | (71) | (186) | ||||||||||||||
| Fair value premium and core deposit intangible amortizations | — | (188) | (188) | ||||||||||||||
| Securities sold under agreements to repurchase | 988 | (34) | 954 | ||||||||||||||
| Advances from FHLB and other borrowings | 231 | 2 | 233 | ||||||||||||||
| Total interest expense | 116 | (2,684) | (2,568) | ||||||||||||||
| Net Interest Income | $ | 3,928 | $ | 1,443 | $ | 5,371 | |||||||||||
TABLE 1A - ANALYSIS OF NET INTEREST INCOME AND CHANGES DUE TO VOLUME/RATE
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2026 AND 2025
| Interest | Average rate | Average balance | |||||||||||||||||||||||||||||||||
2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| A - TAX EQUIVALENT SPREAD (Non-GAAP) | |||||||||||||||||||||||||||||||||||
| Interest-earning assets | $ | 391,276 | 383,569 | 6.80 | % | 6.84 | % | $ | 11,607,798 | $ | 11,310,263 | ||||||||||||||||||||||||
| Tax equivalent adjustment | 7,953 | 7,395 | 0.14 | % | 0.13 | % | — | — | |||||||||||||||||||||||||||
Interest-earning assets tax- equivalent (1) | 399,229 | 390,964 | 6.94 | % | 6.97 | % | 11,607,798 | 11,310,263 | |||||||||||||||||||||||||||
| Interest-bearing liabilities | 80,164 | 82,570 | 1.54 | % | 1.62 | % | 10,495,461 | 10,275,464 | |||||||||||||||||||||||||||
| Tax equivalent net interest income / spread | 319,065 | 308,394 | 5.40 | % | 5.35 | % | 1,112,337 | 1,034,799 | |||||||||||||||||||||||||||
| Tax equivalent interest rate margin | 5.54 | % | 5.48 | % | |||||||||||||||||||||||||||||||
| B - NORMAL SPREAD | |||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||
| Investments: | |||||||||||||||||||||||||||||||||||
| Investment securities | 58,959 | 58,781 | 4.27 | % | 4.25 | % | 2,763,211 | 2,765,180 | |||||||||||||||||||||||||||
| Interest-bearing cash and money market investments | 11,348 | 14,393 | 3.59 | % | 4.33 | % | 637,824 | 670,264 | |||||||||||||||||||||||||||
| Total investments | 70,307 | 73,174 | 4.17 | % | 4.30 | % | 3,401,035 | 3,435,444 | |||||||||||||||||||||||||||
| Non-PCD loans | |||||||||||||||||||||||||||||||||||
Mortgage loans | 16,946 | 16,255 | 5.75 | % | 5.66 | % | 589,309 | 574,685 | |||||||||||||||||||||||||||
Commercial loans | 121,294 | 112,384 | 7.02 | % | 7.35 | % | 3,485,322 | 3,091,238 | |||||||||||||||||||||||||||
Consumer loans | 40,293 | 39,943 | 11.55 | % | 11.58 | % | 703,328 | 695,428 | |||||||||||||||||||||||||||
| Auto loans | 110,540 | 110,905 | 8.47 | % | 8.59 | % | 2,631,279 | 2,604,984 | |||||||||||||||||||||||||||
| Total Non-PCD loans | 289,073 | 279,487 | 7.87 | % | 8.09 | % | 7,409,238 | 6,966,335 | |||||||||||||||||||||||||||
70
| Interest | Average rate | Average balance | |||||||||||||||||||||||||||||||||
2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| PCD loans | |||||||||||||||||||||||||||||||||||
Mortgage loans | 22,747 | 25,209 | 6.25 | % | 6.17 | % | 728,324 | 817,719 | |||||||||||||||||||||||||||
Commercial loans | 9,109 | 5,644 | 26.69 | % | 12.56 | % | 68,830 | 89,889 | |||||||||||||||||||||||||||
Consumer loans | 31 | 37 | 17.34 | % | 11.13 | % | 360 | 658 | |||||||||||||||||||||||||||
Auto loans | 9 | 18 | 154.18 | % | 16.36 | % | 11 | 218 | |||||||||||||||||||||||||||
| Total PCD loans | 31,896 | 30,908 | 8.00 | % | 6.80 | % | 797,525 | 908,484 | |||||||||||||||||||||||||||
Total loans (2) | 320,969 | 310,395 | 7.89 | % | 7.95 | % | 8,206,763 | 7,874,819 | |||||||||||||||||||||||||||
| Total interest-earning assets | $ | 391,276 | $ | 383,569 | 6.80 | % | 6.84 | % | $ | 11,607,798 | $ | 11,310,263 | |||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||||||||||||
| NOW Accounts | 18,879 | 30,347 | 1.46 | % | 1.91 | % | 2,606,964 | 3,202,286 | |||||||||||||||||||||||||||
| Savings accounts | 12,672 | 10,202 | 1.10 | % | 0.98 | % | 2,332,745 | 2,106,304 | |||||||||||||||||||||||||||
| Time deposits | 30,096 | 27,738 | 3.05 | % | 3.09 | % | 1,990,272 | 1,809,840 | |||||||||||||||||||||||||||
| Total core deposits | 61,647 | 68,287 | 1.79 | % | 1.94 | % | 6,929,981 | 7,118,430 | |||||||||||||||||||||||||||
| Brokered deposits | 4,836 | 3,997 | 4.03 | % | 4.17 | % | 242,209 | 193,132 | |||||||||||||||||||||||||||
| 66,483 | 72,284 | 1.87 | % | 1.99 | % | 7,172,190 | 7,311,562 | ||||||||||||||||||||||||||||
| Non-interest-bearing deposits | — | — | — | % | — | % | 2,703,482 | 2,561,921 | |||||||||||||||||||||||||||
| Fair value premium and core deposit intangible amortizations | 1,509 | 1,887 | — | % | — | % | — | — | |||||||||||||||||||||||||||
| Total deposits | 67,992 | 74,171 | 1.39 | % | 1.51 | % | 9,875,672 | 9,873,483 | |||||||||||||||||||||||||||
| Borrowings: | |||||||||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | 2,929 | 830 | 3.62 | % | 4.54 | % | 163,356 | 36,878 | |||||||||||||||||||||||||||
| Advances from FHLB and other borrowings | 9,243 | 7,569 | 4.08 | % | 4.18 | % | 456,433 | 365,103 | |||||||||||||||||||||||||||
| Total borrowings | 12,172 | 8,399 | 3.96 | % | 4.21 | % | 619,789 | 401,981 | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 80,164 | 82,570 | 1.54 | % | 1.62 | % | 10,495,461 | 10,275,464 | |||||||||||||||||||||||||||
| Net interest income / spread | $ | 311,112 | $ | 300,999 | 5.26 | % | 5.22 | % | |||||||||||||||||||||||||||
| Interest rate margin | 5.40 | % | 5.37 | % | |||||||||||||||||||||||||||||||
| Excess of average interest-earning assets over average interest-bearing liabilities | $ | 1,112,337 | $ | 1,034,799 | |||||||||||||||||||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities ratio | 110.60 | % | 110.07 | % | |||||||||||||||||||||||||||||||
| (1) To provide meaningful comparisons of interest income, yields, and net interest margins, we calculate interest income on a taxable-equivalent basis. This involves adjusting the interest income from tax-exempt assets to be equivalent to taxable investments. Note that this adjustment is not permitted under GAAP in the unaudited consolidated statements of operations. | |||||||||||||||||||||||||||||||||||
| (2) Includes loans held for sale and excludes allowance for credit losses. Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis. | |||||||||||||||||||||||||||||||||||
71
C - CHANGES IN NET INTEREST INCOME DUE TO:
| Volume | Rate | Total | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Interest Income: | |||||||||||||||||
| Investment securities | $ | 337 | $ | (159) | $ | 178 | |||||||||||
| Interest-bearing cash and money market investments | (670) | (2,375) | (3,045) | ||||||||||||||
| Loans | 13,004 | (2,430) | 10,574 | ||||||||||||||
| Total interest income | 12,671 | (4,964) | 7,707 | ||||||||||||||
| Interest Expense: | |||||||||||||||||
NOW accounts | (7,739) | (3,729) | (11,468) | ||||||||||||||
| Savings accounts | 2,067 | 403 | 2,470 | ||||||||||||||
| Time deposits | 3,345 | (987) | 2,358 | ||||||||||||||
| Brokered deposits | 984 | (145) | 839 | ||||||||||||||
| Fair value premium and core deposit intangible amortizations | — | (378) | (378) | ||||||||||||||
| Securities sold under agreements to repurchase | 2,300 | (201) | 2,099 | ||||||||||||||
| Advances from FHLB and other borrowings | 1,853 | (179) | 1,674 | ||||||||||||||
| Total interest expense | 2,810 | (5,216) | (2,406) | ||||||||||||||
| Net Interest Income | $ | 9,861 | $ | 252 | $ | 10,113 | |||||||||||
Net Interest Income
Net interest income is a function of the difference between rates earned on OFG’s interest-earning assets and rates paid on its interest-bearing liabilities (interest rate spread) and the relative amounts of its interest-earning assets and interest-bearing liabilities (interest rate margin). OFG constantly monitors the composition and re-pricing of its assets and liabilities to maintain its net interest income at adequate levels.
Comparison of quarters ended June 30, 2026 and 2025
Net interest income of $157.3 million increased $5.4 million from $151.9 million, reflecting higher loan interest income and lower deposit interest expense, partially offset by lower cash and money market investments interest income and higher borrowing cost. On a tax equivalent basis net interest income increased $5.7 million or 3.7% to $161.4 million from $155.7 million.
The interest rate spread and net interest margin each increased 14 basis points, to 5.31% and 5.45%, respectively, from 5.17% and 5.31%.
Net interest income was positively impacted by:
•A $5.4 million increase in loan interest income, driven by growth in average balances across multiple portfolios, including: (i) $6.9 million from commercial loans, mainly due to the effect of increase of $353.9 million in average balances and repricing of variable-rate loans reflecting OFG’s strategy to grow commercial lending in Puerto Rico and the U.S. mainland; and (ii) $49 thousand from consumer loans reflecting a $3.9 million increase in the average balance. These increases were partially offset by a $1.0 million decrease from auto loans, mainly due to a $9.2 million decrease in the average balance; and $525 thousand lower interest income from residential mortgage loans, reflecting a $66.9 million decrease in average balances primarily due to the securitization and sale of conforming loans, normal paydowns, and the extinguishment of the PCD portfolio; and
•A $3.8 million decrease in deposit interest expense, reflecting lower average rates and the previously mentioned $500 million government demand deposit transfer into a wealth management account in January 2026, partially offset by growth in retail and commercial deposits.
These increases were offset by:
•A $2.6 million decrease in interest income on interest bearing cash and money market investments due to the decrease of $131.0 million in average balances and a 76 basis points decrease in interest rates, and
72
•A $1.2 million increase on interest paid of borrowings related to securities sold under agreements to repurchase and FHLB advances, mainly from higher average balances by $112.2 million and $22.7 million, respectively.
Comparison of the six-month periods ended June 30, 2026 and 2025
Net interest income of $311.1 million increased by $10.1 million from $301.0 million reflecting higher loan interest income and lower deposit interest expense, partially offset by lower cash and money market investments interest income and higher borrowing cost. Tax equivalent basis net interest income of $319.1 million increased by $10.7 million, or 3.5%, from $308.4 million.
Interest rate spread increased by 4 basis points to 5.26% from 5.22% and net interest margin increased by 3 basis points to 5.40% from 5.37%.
Net interest income was positively impacted by:
•A $10.6 million increase in interest income from loans mainly driven by growth in average balances across multiple portfolios, including: (i) $12.4 million from commercial loans, mainly due to an increase of $373.0 million in average balances and repricing of variable-rate loans reflecting OFG’s strategy to grow commercial lending in Puerto Rico and the U.S. mainland, and (ii) $344 thousand from consumer loans mainly due to an increase of $7.6 million in the average balance. These increases were partially offset by a $1.8 million decrease from mortgage loans, mainly due to a reduction of $74.8 million in average balances from the securitization and sale of conforming loans and regular paydowns, including the extinguishment of the PCD portfolio; and $374 thousand from Non‑PCD auto loans, reflecting a 12 basis point decline in yield, which reduced interest income by $1.5 million, offset by a $26.3 million increase in average balances, which contributed to $1.1 million to interest income; and
•A $6.2 million decrease in deposit interest expense, reflecting lower average rates and the previously mentioned $500 million government demand deposit transfer into a wealth management account in January 2026, partially offset by growth in retail and commercial deposits.
These increases were partially offset by a $3.0 million decrease in interest income on cash and money market investments, reflecting lower market rates, and a $3.8 million increase in interest paid on borrowings related to higher volume of securities under agreements to repurchase and FHLB advances from liquidity management strategies.
TABLE 2 - NON-INTEREST INCOME SUMMARY
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Variance % | 2026 | 2025 | Variance % | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Banking service revenue | $ | 17,397 | $ | 15,982 | 8.9 | % | $ | 34,341 | $ | 31,963 | 7.4 | % | |||||||||||||||||||||||
| Wealth management revenue | 9,727 | 8,918 | 9.1 | % | 18,640 | 17,373 | 7.3 | % | |||||||||||||||||||||||||||
| Mortgage banking activities | 5,860 | 5,347 | 9.6 | % | 11,991 | 10,123 | 18.5 | % | |||||||||||||||||||||||||||
| Total banking and financial service revenue | 32,984 | 30,247 | 9.1 | % | 64,972 | 59,459 | 9.3 | % | |||||||||||||||||||||||||||
| Other non-interest income | 39 | 184 | (78.8) | % | 218 | 489 | (55.4) | % | |||||||||||||||||||||||||||
| Total non-interest income | $ | 33,023 | $ | 30,431 | 8.5 | % | $ | 65,190 | $ | 59,948 | 8.7 | % | |||||||||||||||||||||||
Non-Interest Income
Non-interest income is affected by fees generated from loans and deposit accounts, the amount of assets under management of the Bank’s trust department, transactions generated by clients’ financial assets serviced by OFG’s securities broker-dealer, insurance agency and reinsurance subsidiaries, the level of mortgage banking activities, and gains or losses on sales of assets.
73
Comparison of quarters ended June 30, 2026 and 2025
Non-interest income increased $2.6 million or 8.5% to $33.0 million from $30.4 million. The increase in non-interest income was due to:
•A $1.4 million increase in banking service revenue, primarily reflecting a $1.8 million increase in electronic banking revenue driven by higher debit card interchange income and merchant business activity. These increases were partially offset by a $290 thousand decrease in loan prepayments and servicing fees and commissions;
•An $809 thousand increase in wealth management revenues, mainly due to a $379 thousand increase in broker fees related to investment advisory services fees and securities sales commissions, and a $394 thousand increase in insurance income due to higher annuities and contingency commissions; and
•An increase of $513 thousand in mortgage banking activities, mainly due to $1.3 million increase in servicing fees, including a $1.5 million favorable variance in the valuation of mortgage servicing rights, partially offset by a $400 thousand decrease in gains on sale of loans and securitization and $370 thousand decrease in gains on sale of repurchased loans.
Comparison of the six-month periods ended June 30, 2026 and 2025
Non-interest income increased $5.3 million to $65.2 million from $59.9 million. The increase was mainly due to:
•A $2.4 million increase in banking service revenues, reflecting a $3.1 million increase in electronic banking revenues driven by higher debit card interchange income, merchant business activity, and cash management and account analysis fees. These increases were partially offset by a $468 thousand decrease in loan prepayments and servicing fees and commissions, and a $288 thousand decrease in deposit account fees due to lower checking account service charges;
•A $1.9 million increase in mortgage banking activities, mainly due to $3.1 million in servicing fees, including a $3.4 million favorable variance in the valuation of mortgage servicing rights, partially offset by an $899 thousand decrease in gains on sale of loans and securitization and a $315 thousand decrease in gains on sale of repurchased loans.
•A $1.3 million increase in wealth management revenue primarily reflecting a $926 thousand increase in broker fees related to investment advisory service fees, securities sales commissions and mutual funds retailer fees, and a $215 thousand increase in insurance income due to higher premiums and contingency commissions.
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TABLE 3 - NON-INTEREST EXPENSES SUMMARY
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Variance % | 2026 | 2025 | Variance % | ||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Compensation and employee benefits | $ | 41,176 | $ | 39,565 | 4.1 | % | $ | 82,523 | $ | 79,497 | 3.8 | % | |||||||||||||||||||||||
| Occupancy, equipment and infrastructure costs | 14,273 | 14,629 | (2.4) | % | 27,691 | 29,449 | (6.0) | % | |||||||||||||||||||||||||||
| Electronic banking charges | 12,229 | 12,276 | (0.4) | % | 20,834 | 21,946 | (5.1) | % | |||||||||||||||||||||||||||
| Information technology expenses | 7,117 | 6,678 | 6.6 | % | 13,714 | 12,966 | 5.8 | % | |||||||||||||||||||||||||||
| Professional and service fees | 4,839 | 4,813 | 0.5 | % | 11,053 | 9,931 | 11.3 | % | |||||||||||||||||||||||||||
| Taxes, other than payroll and income taxes | 4,158 | 3,743 | 11.1 | % | 8,291 | 7,469 | 11.0 | % | |||||||||||||||||||||||||||
| Insurance | 2,802 | 3,025 | (7.4) | % | 5,675 | 5,791 | (2.0) | % | |||||||||||||||||||||||||||
| Advertising, business promotion, and strategic initiatives | 3,187 | 2,544 | 25.3 | % | 6,204 | 5,161 | 20.2 | % | |||||||||||||||||||||||||||
| Loan servicing and clearing expenses | 2,497 | 2,172 | 15.0 | % | 5,061 | 4,406 | 14.9 | % | |||||||||||||||||||||||||||
| Communication | 1,100 | 1,221 | (9.9) | % | 2,199 | 2,340 | (6.0) | % | |||||||||||||||||||||||||||
| Printing, postage, stationery and supplies | 933 | 983 | (5.1) | % | 2,420 | 2,129 | 13.7 | % | |||||||||||||||||||||||||||
| Director and investor relations | 396 | 382 | 3.7 | % | 709 | 717 | (1.1) | % | |||||||||||||||||||||||||||
| Foreclosed real estate and other repossessed assets (income) expenses, net | (476) | 310 | (253.6) | % | (590) | 1,338 | (144.1) | % | |||||||||||||||||||||||||||
| Operational losses and related loss provisions | 5,930 | 306 | 1,837.9 | % | 6,547 | 380 | 1,622.9 | % | |||||||||||||||||||||||||||
| Other | 2,671 | 2,155 | 23.9 | % | 5,204 | 4,734 | 9.9 | % | |||||||||||||||||||||||||||
| Total non-interest expenses | $ | 102,832 | $ | 94,802 | 8.5 | % | $ | 197,535 | $ | 188,254 | 4.9 | % | |||||||||||||||||||||||
| Relevant ratios and data: | |||||||||||||||||||||||||||||||||||
| Efficiency ratio | 54.04 | % | 52.04 | % | 52.52 | % | 52.23 | % | |||||||||||||||||||||||||||
| Compensation and benefits to non-interest expense | 40.04 | % | 41.73 | % | 41.78 | % | 42.23 | % | |||||||||||||||||||||||||||
| Compensation to average total assets owned | 1.36 | % | 1.32 | % | 1.36 | % | 1.35 | % | |||||||||||||||||||||||||||
| Number of employees end of period | 2,185 | 2,222 | 2,185 | 2,222 | |||||||||||||||||||||||||||||||
| Average number of employees | 2,179 | 2,213 | 2,184 | 2,222 | |||||||||||||||||||||||||||||||
| Average compensation per employee (in thousands) | $ | 75.59 | $ | 71.52 | $ | 75.57 | $ | 71.55 | |||||||||||||||||||||||||||
| Average loans per average employee | $ | 3,784 | $ | 3,599 | $ | 3,758 | $ | 3,544 | |||||||||||||||||||||||||||
Non-Interest Expense
Comparison of quarters ended June 30, 2026 and 2025
Non-interest expense was $102.8 million, representing an increase of 8.5% or $8.0 million, compared to $94.8 million. The increase in non-interest expense was mainly due to:
•A $5.6 million increase in operational losses and related loss provisions, which includes a provision of $5.8 million in the second quarter of 2026;
•A $1.6 million increase in compensation and employee benefits, as a result of higher salaries and benefits, including payroll taxes; and
•A $643 thousand increase in advertising, business promotion, and strategic initiatives driven by a new branding-marketing campaign during 2026.
75
These increases in non-interest expense were partially offset by:
•A $786 thousand decrease in foreclosed real estate and other repossessed assets expenses, net, primarily reflecting a $470 thousand decrease in credit related expenses, which includes $421 thousand in escrow recoveries related to acquired residential loans, and a $319 thousand favorable variance in gains on sales of other repossessed assets due to improved pricing.
The efficiency ratio was 54.04% compared to 52.04%. The efficiency ratio measures how much of OFG’s revenues is used to pay operating expenses. OFG computes its efficiency ratio by dividing non-interest expenses by the sum of its net interest income and non-interest income, but excluding gains on the sale of investment securities, other gains and losses, and other income that may be considered volatile in nature. Management believes that the exclusion of those items permits consistent comparability. Amounts presented as part of non-interest income that were excluded from the adjusted efficiency ratio computation for the quarters ended June 30, 2026 and 2025, amounted to $39 thousand and $184 thousand, respectively.
Comparison of the six-month periods ended June 30, 2026 and 2025
Non-interest expense was $197.5 million, representing an increase of 4.9% or $9.3 million, compared to $188.3 million. The increase in non-interest expense was mainly due to:
•A $6.2 million increase in operational losses and related loss provisions, which includes a provision of $5.8 million in the second quarter of 2026;
•A $3.0 million increase in compensation and employee benefits from higher salaries and benefits, including payroll taxes;
•A $1.1 million increase in professional and service fees mainly due to $1.0 million of costs associated with a capital markets readiness and registration process; and
•A $1.0 million increase in advertising, business promotion, and strategic initiatives driven by a new branding-marketing campaign during 2026.
These increases in non-interest expense were partially offset by:
•A $1.9 million decrease in foreclosed real estate and other repossessed assets expenses, net. This reduction primarily reflects a $1.4 million increase in gains from the sale of other repossessed assets driven by improved pricing and a $647 thousand decrease in credit related expenses, which includes $421 thousand in escrow recoveries related to acquired residential loans during 2026.
•A $1.8 million decrease in occupancy, equipment and infrastructure costs, driven by lower internet services expenses of $965 thousand, $445 thousand of insurance reimbursement related to equipment, and $112 thousand in reduced software maintenance expenses; and
•A $1.1 million decrease in electronic banking charges mainly due to the benefit recognized from a $3.6 million business-related volume incentive payment in the first quarter of 2026.
The efficiency ratio was 52.52% compared to 52.23%. Amounts presented as part of non-interest income that were excluded from the efficiency ratio computation for 2026 and 2025 amounted to $218 thousand and $489 thousand, respectively.
Provision for Credit Losses
Comparison of quarters ended June 30, 2026 and 2025
Provision for credit losses decreased by $8.7 million to $13.0 million from $21.7 million. The provision for credit losses for the second quarter of 2026, reflected $14.7 million dollars for increased loan volume and $1.9 million dollars in commercial loan recoveries. The provision for credit losses for the second quarter of 2025, reflected adjustments of $17.2 million for increased loan volume, $3.7 million in specific reserves and $677 thousand due to alignment of model assumptions and risk weighting factors mainly in Puerto Rico.
76
Comparison of the six-month periods ended June 30, 2026 and 2025
Provision for credit losses decreased by $11.9 million to $35.5 million from $47.4 million. The provision for credit losses for the six-month period ended June 30, 2026, reflected $32.2 million related to loan volume and $4.3 million related to specific commercial loan reserves. The provision for credit losses for the six-month period ended June 30, 2025, reflected $34.6 million related to loan volume, $8.5 million in commercial loans specific reserves and $6.0 million due to alignment of model assumptions and risk weighting factors mainly in Puerto Rico.
Income Tax Expense
Comparison of quarters ended June 30, 2026 and 2025
Income tax expense for the second quarter of 2026 increased by $1.6 million to $15.7 million from $14.1 million, primarily due to higher income before taxes. OFG maintained an ETR lower than the statutory rate for the second quarters of 2026 and 2025 of 21.1% and 21.4%, respectively. The lower ETR is mainly related to exempt income and investments subject to preferential tax treatment under the PR Code.
Comparison of the six-month periods ended June 30, 2026 and 2025
Income tax expense increased by $2.6 million to $30.6 million from $28.0 million, primarily due to higher income before taxes and fewer favorable discrete tax benefits. OFG maintained an ETR lower than the statutory rate for the six-month periods ended June 30, 2026 and 2025 of 21.3% and 22.3%, reflecting exempt income, investments subject to preferential tax treatment under the PR Code, a discrete tax windfall on stock options, and benefits related to the purchase of tax credits at a discount.
Business Segments
OFG segregates its businesses into the following segments: Banking, Wealth Management, and Treasury. Management established the reportable segments based on the internal reporting used to evaluate performance and assess where to allocate resources. Other factors such as OFG’s organization, nature of its products, distribution channels and economic characteristics of its services were also considered in the determination of the reportable segments. OFG measures the performance of these reportable segments based on net income. OFG’s methodology for allocating expenses for corporate services among segments is based on several factors such as revenue, employee headcount, occupied space, and dedicated services or time, among others. Following are the results of operations and the selected financial information by operating segment for the quarters and six-month periods ended June 30, 2026 and 2025.
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TABLE 4 - BUSINESS SEGMENTS | |||||||||||||||||||||||||||||||||||
| Quarter Ended June 30, 2026 | |||||||||||||||||||||||||||||||||||
| Banking | Wealth Management | Treasury | Total Major Segments | Eliminations | Consolidated Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Interest income | $ | 163,741 | $ | 7 | $ | 34,827 | $ | 198,575 | $ | (1,425) | $ | 197,150 | |||||||||||||||||||||||
| Interest expense | (31,815) | — | (9,461) | (41,276) | 1,425 | (39,851) | |||||||||||||||||||||||||||||
| Net interest income | 131,926 | 7 | 25,366 | 157,299 | — | 157,299 | |||||||||||||||||||||||||||||
| (Provision for) recapture of credit losses | (13,010) | — | 4 | (13,006) | — | (13,006) | |||||||||||||||||||||||||||||
| Non-interest income, net | 23,016 | 9,954 | 53 | 33,023 | — | 33,023 | |||||||||||||||||||||||||||||
| Non-interest expenses: | |||||||||||||||||||||||||||||||||||
| Compensation and employee benefits | (38,318) | (2,554) | (304) | (41,176) | — | (41,176) | |||||||||||||||||||||||||||||
| Occupancy, equipment and infrastructure costs | (9,261) | (135) | (20) | (9,416) | — | (9,416) | |||||||||||||||||||||||||||||
| Depreciation and amortization of premises and equipment | (4,844) | (9) | (4) | (4,857) | — | (4,857) | |||||||||||||||||||||||||||||
| Electronic banking charges | (12,229) | — | — | (12,229) | — | (12,229) | |||||||||||||||||||||||||||||
| Information technology expenses | (7,067) | (49) | (1) | (7,117) | — | (7,117) | |||||||||||||||||||||||||||||
| Professional and service fees | (3,832) | (953) | (54) | (4,839) | — | (4,839) | |||||||||||||||||||||||||||||
| Loan servicing and clearing expenses | (1,908) | (451) | (138) | (2,497) | — | (2,497) | |||||||||||||||||||||||||||||
| Amortization of other intangible assets | (231) | — | — | (231) | — | (231) | |||||||||||||||||||||||||||||
| Intersegment expenses | 1,062 | (594) | (468) | — | — | — | |||||||||||||||||||||||||||||
| Other | (19,814) | (522) | (134) | (20,470) | — | (20,470) | |||||||||||||||||||||||||||||
| Total non-interest expense | (96,442) | (5,267) | (1,123) | (102,832) | — | (102,832) | |||||||||||||||||||||||||||||
| Income before income taxes | $ | 45,490 | $ | 4,694 | $ | 24,300 | $ | 74,484 | $ | — | $ | 74,484 | |||||||||||||||||||||||
| Income tax expense | (15,651) | — | (56) | (15,707) | — | (15,707) | |||||||||||||||||||||||||||||
| Net income | $ | 29,839 | $ | 4,694 | $ | 24,244 | $ | 58,777 | $ | — | $ | 58,777 | |||||||||||||||||||||||
| Total assets | $ | 10,146,471 | $ | 40,520 | $ | 3,345,116 | $ | 13,532,107 | $ | (1,377,535) | $ | 12,154,572 | |||||||||||||||||||||||
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| Six-Month Period Ended June 30, 2026 | |||||||||||||||||||||||||||||||||||
| Banking | Wealth Management | Treasury | Total | Eliminations | Consolidated Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Interest income | $ | 323,519 | $ | 12 | $ | 70,496 | $ | 394,027 | $ | (2,751) | $ | 391,276 | |||||||||||||||||||||||
| Interest expense | (62,863) | — | (20,052) | (82,915) | 2,751 | (80,164) | |||||||||||||||||||||||||||||
| Net interest income | 260,656 | 12 | 50,444 | 311,112 | — | 311,112 | |||||||||||||||||||||||||||||
| Provision for credit losses | (35,489) | — | — | (35,489) | — | (35,489) | |||||||||||||||||||||||||||||
| Non-interest income, net | 46,039 | 19,098 | 53 | 65,190 | — | 65,190 | |||||||||||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||||||||||||||
| Compensation and employee benefits | (76,778) | (5,119) | (626) | (82,523) | — | (82,523) | |||||||||||||||||||||||||||||
| Occupancy, equipment and infrastructure costs | (17,721) | (259) | (34) | (18,014) | — | (18,014) | |||||||||||||||||||||||||||||
| Depreciation and amortization of premises and equipment | (9,643) | (19) | (15) | (9,677) | — | (9,677) | |||||||||||||||||||||||||||||
| Electronic banking charges | (20,834) | — | — | (20,834) | — | (20,834) | |||||||||||||||||||||||||||||
| Information technology expenses | (13,627) | (86) | (1) | (13,714) | — | (13,714) | |||||||||||||||||||||||||||||
| Professional and service fees | (8,164) | (1,672) | (1,217) | (11,053) | — | (11,053) | |||||||||||||||||||||||||||||
| Loan servicing and clearing expenses | (3,764) | (1,024) | (273) | (5,061) | — | (5,061) | |||||||||||||||||||||||||||||
| Amortization of other intangible assets | (462) | — | — | (462) | — | (462) | |||||||||||||||||||||||||||||
| Intersegment expenses | 2,096 | (1,179) | (917) | — | — | — | |||||||||||||||||||||||||||||
| Other | (34,901) | (1,000) | (296) | (36,197) | — | (36,197) | |||||||||||||||||||||||||||||
| Total non-interest expense | (183,798) | (10,358) | (3,379) | (197,535) | — | (197,535) | |||||||||||||||||||||||||||||
| Income before income taxes | $ | 87,408 | $ | 8,752 | $ | 47,118 | $ | 143,278 | $ | — | $ | 143,278 | |||||||||||||||||||||||
| Income tax expense | (30,455) | — | (109) | (30,564) | — | (30,564) | |||||||||||||||||||||||||||||
| Net income | $ | 56,953 | $ | 8,752 | $ | 47,009 | $ | 112,714 | $ | — | $ | 112,714 | |||||||||||||||||||||||
| Total assets | $ | 10,146,471 | $ | 40,520 | $ | 3,345,116 | $ | 13,532,107 | $ | (1,377,535) | $ | 12,154,572 | |||||||||||||||||||||||
79
| Quarter Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||
| Banking | Wealth Management | Treasury | Total Major Segments | Eliminations | Consolidated Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Interest income | $ | 158,778 | $ | 6 | $ | 36,975 | $ | 195,759 | $ | (1,412) | $ | 194,347 | |||||||||||||||||||||||
| Interest expense | (35,426) | — | (8,405) | (43,831) | 1,412 | (42,419) | |||||||||||||||||||||||||||||
| Net interest income | 123,352 | 6 | 28,570 | 151,928 | — | 151,928 | |||||||||||||||||||||||||||||
| Provision for credit losses | (21,678) | — | — | (21,678) | — | (21,678) | |||||||||||||||||||||||||||||
| Non-interest income, net | 21,300 | 9,129 | 2 | 30,431 | — | 30,431 | |||||||||||||||||||||||||||||
| Non-interest expenses: | |||||||||||||||||||||||||||||||||||
| Compensation and employee benefits | (36,962) | (2,320) | (283) | (39,565) | — | (39,565) | |||||||||||||||||||||||||||||
| Occupancy, equipment and infrastructure costs | (9,335) | (191) | (18) | (9,544) | — | (9,544) | |||||||||||||||||||||||||||||
| Depreciation and amortization of premises and equipment | (5,068) | (12) | (5) | (5,085) | — | (5,085) | |||||||||||||||||||||||||||||
| Electronic banking charges | (12,276) | — | — | (12,276) | — | (12,276) | |||||||||||||||||||||||||||||
| Information technology expenses | (6,636) | (42) | — | (6,678) | — | (6,678) | |||||||||||||||||||||||||||||
| Professional and service fees | (3,935) | (825) | (53) | (4,813) | — | (4,813) | |||||||||||||||||||||||||||||
| Loan servicing and clearing expenses | (1,705) | (337) | (130) | (2,172) | — | (2,172) | |||||||||||||||||||||||||||||
| Amortization of other intangibles assets | (289) | — | — | (289) | — | (289) | |||||||||||||||||||||||||||||
| Intersegment expenses | 975 | (570) | (405) | — | — | — | |||||||||||||||||||||||||||||
Other | (13,866) | (390) | (124) | (14,380) | — | (14,380) | |||||||||||||||||||||||||||||
| Total non-interest expense | (89,097) | (4,687) | (1,018) | (94,802) | — | (94,802) | |||||||||||||||||||||||||||||
| Income before income taxes | $ | 33,877 | $ | 4,448 | $ | 27,554 | $ | 65,879 | $ | — | $ | 65,879 | |||||||||||||||||||||||
| Income tax expense | (14,037) | — | (41) | (14,078) | — | (14,078) | |||||||||||||||||||||||||||||
| Net income | $ | 19,840 | $ | 4,448 | $ | 27,513 | $ | 51,801 | $ | — | $ | 51,801 | |||||||||||||||||||||||
| Total assets | $ | 10,007,703 | $ | 40,323 | $ | 3,469,640 | $ | 13,517,666 | $ | (1,286,156) | $ | 12,231,510 | |||||||||||||||||||||||
80
| Six-Month Period Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||
| Banking | Wealth Management | Treasury | Total | Eliminations | Consolidated Total | ||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||
| Interest income | $ | 313,805 | $ | 11 | $ | 72,408 | $ | 386,224 | $ | (2,655) | $ | 383,569 | |||||||||||||||||||||||
| Interest expense | (69,956) | — | (15,269) | (85,225) | 2,655 | (82,570) | |||||||||||||||||||||||||||||
| Net interest income | 243,849 | 11 | 57,139 | 300,999 | — | 300,999 | |||||||||||||||||||||||||||||
(Provision for) recapture of credit losses | (47,368) | — | 2 | (47,366) | — | (47,366) | |||||||||||||||||||||||||||||
| Non-interest income, net | 42,000 | 17,946 | 2 | 59,948 | — | 59,948 | |||||||||||||||||||||||||||||
| Non-interest expenses | |||||||||||||||||||||||||||||||||||
| Compensation and employee benefits | (73,748) | (5,191) | (558) | (79,497) | — | (79,497) | |||||||||||||||||||||||||||||
| Occupancy, equipment and infrastructure costs | (18,875) | (369) | (34) | (19,278) | — | (19,278) | |||||||||||||||||||||||||||||
| Depreciation and amortization of premises and equipment | (10,136) | (25) | (10) | (10,171) | — | (10,171) | |||||||||||||||||||||||||||||
| Electronic banking charges | (21,946) | — | — | (21,946) | — | (21,946) | |||||||||||||||||||||||||||||
| Information technology expenses | (12,875) | (97) | 6 | (12,966) | — | (12,966) | |||||||||||||||||||||||||||||
| Professional and service fees | (8,358) | (1,467) | (106) | (9,931) | — | (9,931) | |||||||||||||||||||||||||||||
| Loan servicing and clearing expenses | (3,281) | (927) | (198) | (4,406) | — | (4,406) | |||||||||||||||||||||||||||||
| Amortization of other intangible assets | (577) | — | — | (577) | — | (577) | |||||||||||||||||||||||||||||
| Intersegment expenses | 1,805 | (1,090) | (715) | — | — | — | |||||||||||||||||||||||||||||
Other | (28,465) | (763) | (254) | (29,482) | — | (29,482) | |||||||||||||||||||||||||||||
| Total non-interest expense | (176,456) | (9,929) | (1,869) | (188,254) | — | (188,254) | |||||||||||||||||||||||||||||
| Income before income taxes | $ | 62,025 | $ | 8,028 | $ | 55,274 | $ | 125,327 | $ | — | $ | 125,327 | |||||||||||||||||||||||
| Income tax expense | (27,845) | (17) | (92) | (27,954) | — | (27,954) | |||||||||||||||||||||||||||||
| Net income | $ | 34,180 | $ | 8,011 | $ | 55,182 | $ | 97,373 | $ | — | $ | 97,373 | |||||||||||||||||||||||
| Total assets | $ | 10,007,703 | $ | 40,323 | $ | 3,469,640 | $ | 13,517,666 | $ | (1,286,156) | $ | 12,231,510 | |||||||||||||||||||||||
Comparison of quarters ended June 30, 2026 and 2025
Banking
OFG’s banking segment income before income taxes increased $11.6 million to $45.5 million from $33.9 million, mainly due to:
•A $5.0 million increase in loan interest income, driven by higher average loan balances;
•A $3.6 million decrease in interest expense, reflecting the $500 million government demand deposit transfer into a wealth management account in January 2026 and lower interest rates, partially offset by higher retail and commercial deposit balances;
•An $8.7 million decrease in provision for credit losses, mainly due to lower specific reserves and changes in loan growth; and
•A $1.7 million increase in non-interest income primarily related to $1.4 million increase in banking service revenue due to higher customer activity and transaction volumes and a $513 thousand increase in mortgage banking activities, mainly from favorable variance in the valuation of the mortgage servicing rights.
These increases in banking segment income were partially offset by a $7.3 million increase in non-interest expenses reflecting
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$5.8 million in business-related operational charges and a $1.4 million increase in compensation and employee benefits from higher salaries and benefits.
Wealth Management
Wealth management segment revenue consists of commissions and fees earned from fiduciary activities, securities brokerage and investment advisory services, and insurance and reinsurance activities. Income before income taxes for this segment increased to $4.7 million from $4.4 million, mainly from higher non-interest income of $825 thousand reflecting higher broker-dealer fees related to investment advisory service fees, securities sales commissions, and mutual funds retailer fees.
Treasury
Treasury segment income before income taxes decreased $3.3 million to $24.3 million from $27.6 million, mainly due to a $2.1 million decrease in interest income on interest-bearing cash and money market investments reflecting lower average balances and interest rates, and a $1.1 million increase in interest expense reflecting $1.2 million from interest paid on borrowings, which were utilized to enhance liquidity and support strategic growth in the commercial loan portfolio.
Comparison of six-month periods ended June 30, 2026 and 2025
Banking
OFG’s banking segment income before income taxes increased $25.4 million to $87.4 million from $62.0 million, mainly due to:
•A $10.6 million increase in interest income from loans, driven by higher loan balances;
•A $7.1 million decrease in interest expense reflecting the $500 million government demand deposit transfer into a wealth management account in January 2026 and lower interest rates, partially offset by higher retail and commercial deposit balances;
•A $11.9 million decrease in provision for credit losses, mainly due to lower specific reserves and the alignment in prior period of economic and loss rate model assumptions; and
•A $4.0 million increase in non-interest income, related to $2.4 million increase in banking service revenue due to higher customer activity and transaction volumes and a $1.9 million increase in mortgage banking activities, mainly from favorable variance in the valuation of the mortgage servicing rights.
These increases in banking segment income were partially offset by a $7.3 million increase in non-interest expenses, reflecting $5.8 million in business-related operational charges, $3.0 million higher salaries and benefits, and $1.0 million from new branding-marketing campaign during 2026.
Wealth Management
Income before income taxes for this segment increased to $8.8 million from $8.0 million, reflecting a $1.2 million increase in non-interest income from higher broker-dealer fees related to investment advisory service fees, securities sales commissions, and mutual funds retailer fees, partially offset by a $205 thousand increase in professional and service fees related to consulting and advisory services.
Treasury
Treasury segment income before income taxes decreased $8.2 million to $47.1 million from $55.3 million. The decrease was mainly due to a $4.8 million increase in interest expense, reflecting $3.8 million from interest paid on borrowings and $839 thousand from brokered deposits, which were utilized to enhance liquidity and support strategic growth in the commercial loan portfolio, a $1.9 million decrease in interest income on interest-bearing cash and money market investments due to lower average balances and interest rates, and a $1.1 million increase in professional and service fees, related to $1.0 million of costs associated to a capital markets readiness and registration process.
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ANALYSIS OF FINANCIAL CONDITION
Assets Owned
At June 30, 2026, OFG’s total assets amounted to $12.155 billion, a decrease of $311.1 million, when compared to $12.466 billion at December 31, 2025.
Cash and due from banks decreased by $295.6 million to $740.5 million, reflecting the $500 million transfer of a government demand deposit into a wealth management account in January 2026.
The investment portfolio decreased $146.5 million or 5.15% primarily reflecting $216.1 million principal paydowns, as well as $26.5 million in unfavorable market value adjustments, partially offset by $51.3 million of new available-for-sale mortgage-backed securities and US Treasury securities, and $44.9 million related to mortgage loan securitizations. OFG’s investment strategy focuses on liquidity and highly liquid securities, considering their investment and the current market environment.
OFG’s loan portfolio is comprised of Puerto Rico residential mortgage loans, consumer loans, auto loans, commercial loans secured by real estate, other commercial and industrial loans, and commercial US loans. At June 30, 2026, OFG’s net loan portfolio increased by $102.8 million or 1.3% reflecting increases in US and Puerto Rico commercial loans and consumer loans, partially offset by a decrease in auto loans, mortgage securitizations, and portfolio run-off.
Financial Assets Managed
At June 30, 2026, OFG’s financial assets include assets managed by its trust division and its securities broker-dealer and insurance agency subsidiaries. OFG’s trust division offers various types of IRAs and manages retirement plans and custodian and corporate trust accounts. At June 30, 2026, and December 31, 2025, total assets managed by OFG’s trust division amounted to $2.484 billion and $2.490 billion, respectively. The $6.0 million decrease reflected the discontinuance of Keogh plan services during the period, partially offset by favorable market conditions. OFG’s broker-dealer subsidiary offers a wide array of investment alternatives to its client base, such as tax-advantaged fixed income securities, mutual funds, stocks, bonds and money management wrap-fee programs. At June 30, 2026, total assets managed by the securities broker-dealer and insurance agency subsidiaries from their customers’ investment accounts amounted to $3.336 billion, compared to $2.613 billion at December 31, 2025. The $723.2 million increase in broker-dealer related assets is mainly due to the transfer of a $500 million government demand deposit from the Bank into a wealth management account during the period, as well as favorable changes in market conditions.
Goodwill
OFG’s goodwill is not amortized to expense but is tested at least annually for impairment. A quantitative annual impairment test is not required if, based on a qualitative analysis, OFG determines that the existence of events and circumstances indicate that it is more likely than not that goodwill is not impaired. OFG completes its annual goodwill impairment test as of October 31 of each year. OFG tests for impairment by first allocating its goodwill and other assets and liabilities, as necessary, to defined reporting units. A fair value is then determined for each reporting unit. If the fair values of the reporting units exceed their book values, no write-down of the recorded goodwill is necessary. If the fair values are less than the book values, an additional valuation procedure is necessary to assess the proper carrying value of the goodwill. During the second quarter of 2026, OFG performed an assessment of events or circumstances that could trigger reductions in the book value of goodwill. Based on this assessment, no impairments were identified at June 30, 2026.
As of both June 30, 2026, and December 31, 2025, OFG had $84.2 million of goodwill allocated as follows: $84.1 million to the banking segment and $178 thousand to the wealth management segment. Please refer to “Note 8 – Goodwill and Other Intangible Assets” to our consolidated financial statements for more information on the annual goodwill impairment test.
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TABLE 5 - ASSETS SUMMARY AND COMPOSITION
| June 30, | December 31, | Variance % | |||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| (In thousands) | |||||||||||||||||
| Investments: | |||||||||||||||||
| FNMA and FHLMC certificates | $ | 2,112,319 | $ | 2,285,078 | (7.6) | % | |||||||||||
| GNMA certificates | 515,301 | 490,571 | 5.0 | % | |||||||||||||
| Equity securities | 64,817 | 62,738 | 3.3 | % | |||||||||||||
| US Treasury securities | 2,150 | 1,651 | 30.2 | % | |||||||||||||
| CMOs issued by US government-sponsored enterprises | 1,546 | 2,579 | (40.1) | % | |||||||||||||
| Other debt securities | 500 | 501 | (0.2) | % | |||||||||||||
| Trading securities | 23 | 23 | — | % | |||||||||||||
| Total investments | 2,696,656 | 2,843,141 | (5.2) | % | |||||||||||||
| Loans, net | 8,117,021 | 8,014,246 | 1.3 | % | |||||||||||||
| Total investments and loans | 10,813,677 | 10,857,387 | (0.4) | % | |||||||||||||
| Other assets: | |||||||||||||||||
Cash and due from banks | 740,450 | 1,036,074 | (28.5) | % | |||||||||||||
| Money market investments | 5,256 | 4,261 | 23.4 | % | |||||||||||||
| Foreclosed real estate | 1,675 | 2,490 | (32.7) | % | |||||||||||||
| Accrued interest receivable | 70,128 | 71,110 | (1.4) | % | |||||||||||||
| Deferred tax asset, net | 113,343 | 104,359 | 8.6 | % | |||||||||||||
| Premises and equipment, net | 95,601 | 93,554 | 2.2 | % | |||||||||||||
| Customers’ liability on acceptances | 19,418 | 22,442 | (13.5) | % | |||||||||||||
| Servicing assets | 67,867 | 66,333 | 2.3 | % | |||||||||||||
| Goodwill | 84,241 | 84,241 | — | % | |||||||||||||
| Other intangible assets | 7,884 | 9,854 | (20.0) | % | |||||||||||||
| Operating lease right-of-use assets | 19,640 | 21,261 | (7.6) | % | |||||||||||||
| Other assets | 115,392 | 92,291 | 25.0 | % | |||||||||||||
| Total other assets | 1,340,895 | 1,608,270 | (16.6) | % | |||||||||||||
| Total assets | $ | 12,154,572 | $ | 12,465,657 | (2.5) | % | |||||||||||
| Investment portfolio composition: | |||||||||||||||||
| FNMA and FHLMC certificates | 78.3 | % | 80.3 | % | |||||||||||||
| GNMA certificates | 19.1 | % | 17.3 | % | |||||||||||||
| Equity securities | 2.4 | % | 2.2 | % | |||||||||||||
| US Treasury securities | 0.1 | % | 0.1 | % | |||||||||||||
| CMOs issued by US government-sponsored enterprises | 0.1 | % | 0.1 | % | |||||||||||||
| 100.0 | % | 100.0 | % | ||||||||||||||
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TABLE 6 - LOAN PORTFOLIO COMPOSITION
| June 30, | December 31, | Variance % | |||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| (In thousands) | |||||||||||||||||
| Loans held-for-investment: | |||||||||||||||||
| Commercial loans | $ | 3,619,221 | $ | 3,490,169 | 3.7 | % | |||||||||||
| Mortgage loans | 1,367,206 | 1,390,346 | (1.7) | % | |||||||||||||
| Consumer loans | 687,199 | 683,548 | 0.5 | % | |||||||||||||
| Auto loans | 2,623,828 | 2,636,979 | (0.5) | % | |||||||||||||
| 8,297,454 | 8,201,042 | 1.2 | % | ||||||||||||||
| Allowance for credit losses | (188,255) | (202,341) | (7.0) | % | |||||||||||||
| Total loans held-for-investment, net | 8,109,199 | 7,998,701 | 1.4 | % | |||||||||||||
| Mortgage loans held-for-sale | 7,822 | 12,483 | (37.3) | % | |||||||||||||
| Other loans held-for-sale | — | 3,062 | (100.0) | % | |||||||||||||
| Total loans held-for-sale | 7,822 | 15,545 | (49.7) | % | |||||||||||||
| Total loans, net | $ | 8,117,021 | $ | 8,014,246 | 1.3 | % | |||||||||||
OFG’s loan portfolio is composed of commercial, mortgage, consumer, and auto loans. As shown in Table 6 above, total loans, net, amounted to $8.117 billion at June 30, 2026, a 1.3% increase when compared to $8.014 billion at December 31, 2025. The composition and trends of OFG’s loans held-for-investment portfolio were as follows:
•Commercial loan portfolio amounted to $3.619 billion (43.6% of the gross loan portfolio) compared to $3.490 billion (42.6% of the gross loan portfolio) at December 31, 2025, a 3.7% increase resulting from originations and credit lines usage in the six-month period ended June 30, 2026. Commercial loans secured by non-owner-occupied commercial real estate amounted to $761.9 million and $774.1 million at June 30, 2026, and December 31, 2025, respectively, which represented 9.2% and 9.4% of our total gross loan portfolio held-for-investment. Commercial US loans amounted to $871.5 million and $830.0 million at June 30, 2026, and December 31, 2025, respectively, which represented 10.5% and 10.1% of our total gross loan portfolio held-for-investment.
During the six-month period ended June 30, 2026, OFG sold commercial loans held-for-sale with a reporting balance of $3.1 million and recognized a $28 thousand loss, included in other non-interest income in the consolidated statements of operations. Additionally, during the second quarter of 2026, OFG sold two previously reserved non-performing commercial loans held-for-investment with an aggregate reporting balance of $49.6 million and recognized $15.6 million in related charge-offs.
Commercial loan production increased by 6.9% or $27.7 million to $428.7 million in the second quarter of 2026 from $401.1 million in the prior year quarter and increased by 18% or $109.7 million to $731.9 million in the six-month period ended June 30, 2026 from $622.2 million for the same period of 2025, resulting from the commercial PR loan portfolio, while commercial US loan production decreased slightly. Commercial US loans activities include the purchase of middle-market senior secured cash flow loan participations and the purchase of participations in loans to small and medium sized businesses.
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•Mortgage loan portfolio amounted to $1.367 billion (16.5% of the gross loan portfolio) compared to $1.390 billion (17.0% of the gross originated loan portfolio) at December 31, 2025, a 1.7% decrease resulting from securitization of conforming loans into mortgage-backed securities and regular paydowns. Mortgage loans included delinquent loans in the GNMA buy-back option program amounting to $52.9 million and $56.5 million at June 30, 2026, and December 31, 2025, respectively. Under the GNMA program, issuers such as OFG have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected (rebooked) on our financial statements with an offsetting liability.
Mortgage loan production remained stable at $55.6 million in the second quarters of 2026 and 2025 and increased by 5.3% or $4.9 million to $97.5 million in the six-month period ended June 30, 2026, from $92.6 million for the same period of 2025.
OFG follows a conservative residential mortgage lending policy with more than 90% of its residential mortgage portfolio consisting of fixed rate, fully amortizing, fully documented loans that do not have the level of risk associated with subprime loans offered by certain major U.S. mortgage loan originators. Furthermore, OFG has never been active in negative amortization loans or offered adjustable-rate mortgage loans with teaser rates.
•Consumer loan portfolio amounted to $687.2 million (8.3% of the gross loan portfolio) compared to $683.5 million (8.3% of the gross loan portfolio) at December 31, 2025, a 0.5% increase resulting from originations. Consumer loan production increased by 7.2% to $82.3 million in the second quarter of 2026 from $76.8 million in the prior year quarter, and increased by 4.3% or $6.2 million to $150.8 million in the six-month period ended June 30, 2026 from $144.6 million for the same period in 2025.
•Auto loans portfolio amounted to $2.624 billion (31.6% of the gross loan portfolio) compared to $2.637 billion (32.1% of the gross originated loan portfolio) at December 31, 2025. Auto loans production decreased by 24.7% or $61.8 million to $188.4 million in the second quarter of 2026 compared to $250.3 million in the prior year quarter, and decreased by 20.6% or $99.5 million to $383.7 million in the six-month period ended June 30, 2026, from $483.2 million for the same period of 2025. Production in the year-ago periods reflected unusually strong auto sales from the threat of tariffs in the second quarter of 2025.
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The following table includes the maturities of OFG’s lending exposure to the Puerto Rico government.
TABLE 7 - PUERTO RICO GOVERNMENT RELATED LOANS
| June 30, 2026 | |||||||||||||||||||||||
| Maturity | |||||||||||||||||||||||
| Carrying Value | Less than 1 Year | 1 to 3 Years | More than 3 Years | ||||||||||||||||||||
| Loans: | (In thousands) | ||||||||||||||||||||||
| Municipalities | $ | 94,029 | $ | — | $ | 4,667 | $ | 89,362 | |||||||||||||||
At June 30, 2026, OFG has $94.0 million of direct credit exposure to the Puerto Rico government, a $16.7 million increase from $77.3 million at December 31, 2025. The Bank’s loans to the Puerto Rico government are general obligations of municipalities secured by ad valorem taxation, without limitation as to rate or amount, on all taxable property within the issuing municipalities and are in current status. The good faith, credit and unlimited taxing power of each issuing municipality are pledged for the payment of its general obligations.
Allowance for Credit Losses
OFG measures its ACL based on management’s best estimate of expected credit losses inherent in OFG’s relevant financial assets. Tables 8 through 11 set forth an analysis of activity in the ACL and present selected credit loss statistics for the quarters and six-month period ended June 30, 2026, and 2025 and as of June 30, 2026 and December 31, 2025. In addition, Table 6 sets forth the composition of the loan portfolio.
The decline in the allowance for credit losses reflected, in part, the impact of the sale of two non-performing loans during the period, which reduced specific credit exposure and contributed to improved asset-quality metrics. However, management continued to retain qualitative reserves for areas of uncertainty not fully captured by the quantitative model, including trends in the auto portfolio. As a result, the reserve release reflected the improved risk profile following the non-performing loan sale, while the remaining qualitative reserves demonstrate continued prudence in light of portfolio-specific risk profile.
Please refer to the “Provision for Credit Losses” and “Critical Accounting Policies and Estimates” sections in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this quarterly report on Form 10-Q and “Note 5 – Allowance for Credit Losses” of the accompanying consolidated financial statements for a more detailed analysis of provisions and ACL.
Non-performing Assets
OFG’s non-performing assets include non-performing loans, foreclosed real estate, and other repossessed assets (see Tables 12 to 14). At June 30, 2026, OFG had $62.2 million of non-accrual loans held-for-investment, a $62.4 million decrease compared to $124.6 million at December 31, 2025. The decrease is mainly related to the sale of two previously reserved non-performing commercial loans during the second quarter of 2026 with an aggregate reporting balance of $49.6 million, recognizing $15.6 million in charge-offs.
As of December 31, 2025, OFG had $3.1 million in non-accrual commercial US loans held-for-sale. There were no past due or non-accrual commercial loans held-for-sale as of June 30, 2026.
Delinquent residential mortgage loans insured or guaranteed under applicable FHA and VA programs are classified as non-performing loans when they become 90 days or more past due but are not placed in non-accrual status until they become 12 months or more past due, since they are insured loans. Therefore, those loans are included as non-performing loans but excluded from non-accrual loans. As of June 30, 2026, and December 31, 2025, the outstanding balance of these residential mortgage loans was $5.1 million and $5.5 million, respectively.
At June 30, 2026, OFG’s non-performing assets decreased by 46.2% to $73.2 million (0.60% of total assets) from $136.0 million (1.09% of total assets) at December 31, 2025, mainly related to the previously mentioned sale of non-performing loans during the second quarter of 2026.
Foreclosed real estate decreased from $2.5 million at December 31, 2025, to $1.7 million at June 30, 2026, and other repossessed assets increased from $3.5 million at December 31, 2025, to $4.2 million at June 30, 2026, both recorded at fair
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value. OFG does not expect non-performing loans to result in significantly higher losses. At June 30, 2026, the allowance coverage ratio to non-performing loans was 279.7% (155.6% at December 31, 2025).
Upon adoption of CECL, OFG elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. As such, the determination of non-accrual or accrual status for PCD loans is made at the pool level, not the individual loan level. The ACL was determined for each pool and added to the pool’s carrying amount to establish a new amortized cost basis. The difference between the unpaid principal balance of the pool and the new amortized cost basis is the non-credit premium or discount which is amortized as interest income over the remaining life of the pool. On a quarterly basis, management monitors the composition and behavior of the pools to assess the ability for cash flow estimation and timing. If based on the analysis performed the pool is classified as non-accrual, the accretion/amortization of the non-credit (discount) premium ceases.
The following items comprise non-performing loans held-for-investment, including non-PCD and PCDs:
Commercial loans - At June 30, 2026, OFG’s non-performing commercial loans amounted to $32.5 million (48.2% of OFG’s non-performing loans), a $54.8 million or 62.8% decrease from $87.3 million at December 31, 2025 (67.1% of OFG’s non-performing loans). During the second quarter of 2026, OFG sold two non-performing commercial loans held-for-investment with an aggregate reporting balance of $49.6 million. Non-PCD commercial loans are placed on non-accrual status when they become 90 days or more past due and are written down, if necessary, based on the specific evaluation of the underlying collateral, if any.
Mortgage loans - At June 30, 2026, OFG’s non-performing mortgage loans totaled $16.5 million (24.5% of OFG’s non-performing loans), a 6.6% decrease from $17.6 million (13.6% of OFG’s non-performing loans) at December 31, 2025. Non-PCD mortgage loans are placed on non-accrual status when they become 90 days or more past due and are written down, if necessary, based on the specific evaluation of the collateral underlying the loan, except for FHA and VA insured mortgage loans which are placed in non-accrual when they become 12 months or more past due.
Consumer loans - At June 30, 2026, OFG’s non-performing consumer loans amounted to $3.8 million (5.6% of OFG’s non-performing loans), a 13.2% decrease from $4.4 million at December 31, 2025 (3.4% of OFG’s non-performing loans). Non-PCD consumer loans are placed on non-accrual status when they become 90 days past due and written off when payments are delinquent 120 days in personal loans and 180 days in credit cards and personal lines of credit.
Auto loans - At June 30, 2026, OFG’s non-performing auto loans amounted to $14.6 million (21.7% of OFG’s total non-performing loans), a 29.7% decrease from $20.8 million at December 31, 2025 (15.9% of OFG’s total non-performing loans). Non-PCD auto loans are placed on non-accrual status when they become 90 days past due, partially written-off to collateral value when payments are delinquent 120 days and fully written-off when payments are delinquent 180 days.
OFG has two mortgage loan modification programs. These are the Loss Mitigation Program and the Non-Conforming Mortgage Loan Program. Both programs are intended to help responsible homeowners to remain in their homes and avoid foreclosure, while also reducing OFG’s losses on non-performing mortgage loans. The Loss Mitigation Program helps mortgage borrowers who are or will become financially unable to meet the current or scheduled mortgage payments. Loans that qualify under this program are those guaranteed by FHA, VA, Rural Housing Service (RHS), Puerto Rico Housing Finance Authority (PRHFA), conventional loans guaranteed by Mortgage Guaranty Insurance Corporation (MGIC), conventional loans sold to FNMA and FHLMC, and conventional loans retained by OFG. The program offers diversified alternatives such as regular or reduced payment plans, payment moratorium, mortgage loan modification, partial claims (only FHA), short sale, and deed in lieu of foreclosure. The Non-Conforming Mortgage Loan Program is for non-conforming mortgages, including balloon payment, interest-only/interest first, variable interest rate, adjustable interest rate and other qualified loans. Non-conforming mortgage loan portfolios are segregated into the following categories: performing loans that meet secondary market requirement and are refinanced under the credit underwriting guidelines of FHA, VA, FNMA or FHLMC, as applicable, and performing loans not meeting secondary market guidelines processed pursuant OFG’s current credit and underwriting guidelines. OFG achieved an affordable and sustainable monthly payment by taking specific, sequential, and necessary steps such as reducing the interest rate, extending the loan term, capitalizing arrearages, deferring the payment of principal or, if the borrower qualifies, refinancing the loan. To apply for any of our loan modification programs, if the borrower is active in Chapter 13 bankruptcy, it must request an authorization from the bankruptcy trustee to allow the loan modification. Borrowers with discharged Chapter 7 bankruptcies may also apply. Loans in these programs are evaluated by designated credit underwriters for financial difficulty modification if OFG grants a concession for legal or economic reasons due to the debtor’s financial difficulties.
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TABLE 8 - ALLOWANCE FOR CREDIT LOSSES BREAKDOWN
| June 30, | December 31, | Variance | |||||||||||||||
| 2026 | 2025 | % | |||||||||||||||
| (In thousands) | |||||||||||||||||
ACL: | |||||||||||||||||
| Non-PCD | |||||||||||||||||
Commercial loans | $ | 52,707 | $ | 65,943 | (20.1) | % | |||||||||||
Mortgage loans | 6,314 | 6,358 | (0.7) | % | |||||||||||||
Consumer loans | 33,757 | 33,466 | 0.9 | % | |||||||||||||
| Auto loans | 91,969 | 92,472 | (1) | % | |||||||||||||
Total ACL | $ | 184,747 | $ | 198,239 | (6.8) | % | |||||||||||
| PCD | |||||||||||||||||
Commercial loans | $ | 354 | $ | 493 | (28.2) | % | |||||||||||
Mortgage loans | 3,143 | 3,599 | (12.7) | % | |||||||||||||
Consumer loans | 10 | 9 | 11.1 | % | |||||||||||||
| Auto loans | 1 | 1 | 0.0 | % | |||||||||||||
Total ACL | $ | 3,508 | $ | 4,102 | (14.5) | % | |||||||||||
ACL summary | |||||||||||||||||
Commercial loans | $ | 53,061 | $ | 66,436 | (20.1) | % | |||||||||||
Mortgage loans | 9,457 | $ | 9,957 | (5.0) | % | ||||||||||||
Consumer loans | 33,767 | $ | 33,475 | 0.9 | % | ||||||||||||
| Auto loans | 91,970 | $ | 92,473 | (1) | % | ||||||||||||
Total ACL | $ | 188,255 | $ | 202,341 | (7.0) | % | |||||||||||
ACL composition: | |||||||||||||||||
Commercial loans | 28.2 | % | 32.8 | % | |||||||||||||
Mortgage loans | 5.0 | % | 4.9 | % | |||||||||||||
Consumer loans | 17.9 | % | 16.5 | % | |||||||||||||
| Auto loans | 48.9 | % | 45.8 | % | |||||||||||||
| 100.0 | % | 100.0 | % | ||||||||||||||
| ACL coverage ratio at end of period: | |||||||||||||||||
Commercial loans | 1.47 | % | 1.90 | % | (22.6) | % | |||||||||||
Mortgage loans | 0.69 | % | 0.72 | % | (4.2) | % | |||||||||||
Consumer loans | 4.91 | % | 4.90 | % | 0.2 | % | |||||||||||
| Auto loans | 3.51 | % | 3.51 | % | — | % | |||||||||||
| 2.27 | % | 2.47 | % | (8.1) | % | ||||||||||||
ACL coverage ratio to non-performing loans: | |||||||||||||||||
Commercial loans | 163.4 | % | 76.1 | % | 114.7 | % | |||||||||||
Mortgage loans | 57.5 | % | 56.5 | % | 1.8 | % | |||||||||||
Consumer loans | 889.1 | % | 764.6 | % | 16.3 | % | |||||||||||
| Auto loans | 630.8 | % | 445.7 | % | 41.5 | % | |||||||||||
| 279.7 | % | 155.6 | % | 79.8 | % | ||||||||||||
89
TABLE 9 - ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES
| June 30, | December 31, | |||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||
| Amount of ACL | Percent of loans in each category of total loans [1] | Amount of ACL | Percent of loans in each category of total loans [1] | |||||||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||||
Commercial loans | 53,061 | 43.6% | 66,436 | 42.6% | ||||||||||||||||||||||
Mortgage loans | 9,457 | 16.5% | 9,957 | 17.0% | ||||||||||||||||||||||
Consumer loans | 33,767 | 8.3% | 33,475 | 8.3% | ||||||||||||||||||||||
Auto loans | 91,970 | 31.6% | 92,473 | 32.1% | ||||||||||||||||||||||
| Total | 188,255 | 100.0 | % | 202,341 | 100.0 | % | ||||||||||||||||||||
| [1] Total loans in this table refers to total loans held-for-investment. | ||||||||||||||||||||||||||
TABLE 10 - ALLOWANCE FOR CREDIT LOSSES SUMMARY
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Variance % | 2026 | 2025 | Variance % | ||||||||||||||||||||||||||||||
| (In thousands) | (In thousands) | ||||||||||||||||||||||||||||||||||
Balance at beginning of period | $ | 203,956 | $ | 181,174 | 12.6 | % | $ | 202,341 | $ | 175,863 | 15.1 | % | |||||||||||||||||||||||
| Provision for credit losses | 13,090 | 21,554 | (39.3) | % | 36,084 | 47,235 | (23.6) | % | |||||||||||||||||||||||||||
| Charge-offs | (39,019) | (22,228) | 75.5 | % | (70,079) | (51,726) | 35.5 | % | |||||||||||||||||||||||||||
| Recoveries | 10,228 | 9,444 | 8.3 | % | 19,909 | 18,572 | 7.2 | % | |||||||||||||||||||||||||||
Balance at end of period | $ | 188,255 | $ | 189,944 | (0.9) | % | $ | 188,255 | $ | 189,944 | (0.9) | % | |||||||||||||||||||||||
90
TABLE 11 — NET CREDIT LOSSES STATISTICS ON LOANS
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Variance % | 2026 | 2025 | Variance % | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Non-PCD: | |||||||||||||||||||||||||||||||||||
| Mortgage loans | |||||||||||||||||||||||||||||||||||
| Charge-offs | $ | — | $ | (11) | (100.0) | % | $ | (66) | $ | (34) | 94.1 | % | |||||||||||||||||||||||
| Recoveries | 265 | 745 | (64.4) | % | 458 | 931 | (50.8) | % | |||||||||||||||||||||||||||
| Total | 265 | 734 | (63.9) | % | 392 | 897 | (56.3) | % | |||||||||||||||||||||||||||
| Commercial PR | |||||||||||||||||||||||||||||||||||
| Charge-offs | (15,225) | (273) | 5476.9 | % | (15,301) | (385) | 3874.3 | % | |||||||||||||||||||||||||||
| Recoveries | 173 | 88 | 96.6 | % | 226 | 240 | (5.8) | % | |||||||||||||||||||||||||||
| Total | (15,052) | (185) | 8,036.2 | % | (15,075) | (145) | 10,296.6 | % | |||||||||||||||||||||||||||
| Commercial US | |||||||||||||||||||||||||||||||||||
| Charge-offs | (1,608) | — | 100.0 | % | (5,542) | (2,918) | 89.9 | % | |||||||||||||||||||||||||||
| Recoveries | 55 | — | 100.0 | % | 55 | — | 100.0 | % | |||||||||||||||||||||||||||
| Total | (1,553) | — | 100.0 | % | (5,487) | (2,918) | 88.0 | % | |||||||||||||||||||||||||||
| Consumer loans | |||||||||||||||||||||||||||||||||||
| Charge-offs | (7,766) | (6,970) | 11.4 | % | (16,585) | (15,222) | 9.0 | % | |||||||||||||||||||||||||||
| Recoveries | 1,112 | 848 | 31.1 | % | 2,180 | 1,573 | 38.6 | % | |||||||||||||||||||||||||||
| Total | (6,654) | (6,122) | 8.7 | % | (14,405) | (13,649) | 5.5 | % | |||||||||||||||||||||||||||
| Auto loans | |||||||||||||||||||||||||||||||||||
| Charge-offs | (14,420) | (14,870) | (3.0) | % | (32,579) | (33,062) | (1.5) | % | |||||||||||||||||||||||||||
| Recoveries | 7,141 | 7,570 | (5.7) | % | 15,300 | 15,244 | 0.4 | % | |||||||||||||||||||||||||||
| Total | $ | (7,279) | $ | (7,300) | (0.3) | % | (17,279) | (17,818) | (3.0) | % | |||||||||||||||||||||||||
| PCD: | |||||||||||||||||||||||||||||||||||
| Mortgage loans | |||||||||||||||||||||||||||||||||||
| Charge-offs | $ | — | $ | (59) | (100.0) | % | $ | (6) | $ | (59) | (89.8) | % | |||||||||||||||||||||||
| Recoveries | 78 | 91 | (14.3) | % | 246 | 432 | (43.1) | % | |||||||||||||||||||||||||||
| Total | 78 | 32 | 143.8 | % | 240 | 373 | (35.7) | % | |||||||||||||||||||||||||||
| Commercial PR | |||||||||||||||||||||||||||||||||||
| Charge-offs | — | (31) | (100) | % | — | (31) | (100.0) | % | |||||||||||||||||||||||||||
| Recoveries | 1,380 | 63 | 2090.5 | % | 1,401 | 88 | 1492.0 | % | |||||||||||||||||||||||||||
| Total | 1,380 | 32 | 4,212.5 | % | 1,401 | 57 | 2,357.9 | % | |||||||||||||||||||||||||||
| Consumer loans | |||||||||||||||||||||||||||||||||||
| Charge-offs | — | (1) | (100.0) | % | — | (1) | (100.0) | % | |||||||||||||||||||||||||||
| Recoveries | 13 | 11 | 18.2 | % | 18 | 17 | 5.9 | % | |||||||||||||||||||||||||||
| Total | 13 | 10 | 30.0 | % | 18 | 16 | 12.5 | % | |||||||||||||||||||||||||||
| Auto loans | |||||||||||||||||||||||||||||||||||
| Charge-offs | — | (13) | (100.0) | % | — | (14) | (100.0) | % | |||||||||||||||||||||||||||
| Recoveries | 11 | 28 | (60.7) | % | 25 | 47 | (46.8) | % | |||||||||||||||||||||||||||
| Total | $ | 11 | $ | 15 | (26.7) | % | 25 | 33 | (24.2) | % | |||||||||||||||||||||||||
| Total charge-offs | $ | (39,019) | $ | (22,228) | 75.5 | % | (70,079) | (51,726) | 35.5 | % | |||||||||||||||||||||||||
| Total recoveries | 10,228 | 9,444 | 8.3 | % | 19,909 | 18,572 | 7.2 | % | |||||||||||||||||||||||||||
| Net credit losses | $ | (28,791) | $ | (12,784) | 125.2 | % | $ | (50,170) | $ | (33,154) | 51.3 | % | |||||||||||||||||||||||
91
TABLE 11 — NET CREDIT LOSSES STATISTICS ON LOANS (CONTINUED)
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Variance % | 2026 | 2025 | Variance % | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Net credit losses (recoveries) to average loans outstanding: | |||||||||||||||||||||||||||||||||||
| Mortgage loans | (0.10) | % | (0.22) | % | (54.5) | % | (0.10) | % | (0.18) | % | (44.40) | % | |||||||||||||||||||||||
| Commercial PR | 2.01 | % | 0.02 | % | 9,950.0 | % | 1.02 | % | 0.01 | % | 10100.0 | % | |||||||||||||||||||||||
| Commercial US | 0.71 | % | — | % | 100.0 | % | 1.27 | % | 0.77 | % | 64.9 | % | |||||||||||||||||||||||
| Consumer loans | 3.78 | % | 3.50 | % | 8.0 | % | 4.09 | % | 3.92 | % | 4.3 | % | |||||||||||||||||||||||
| Auto loans | 1.11 | % | 1.11 | % | — | % | 1.31 | % | 1.37 | % | (4.40) | % | |||||||||||||||||||||||
| Total | 1.40 | % | 0.64 | % | 118.8 | % | 1.22 | % | 0.84 | % | 45.2 | % | |||||||||||||||||||||||
| Recoveries to charge-offs | 26.21 | % | 42.49 | % | (38.3) | % | 28.41 | % | 35.90 | % | (20.9) | % | |||||||||||||||||||||||
| Average Loans Held-for-Investment | |||||||||||||||||||||||||||||||||||
| Mortgage loans | $ | 1,313,065 | $ | 1,379,986 | (4.8) | % | $ | 1,317,633 | $ | 1,392,404 | (5.4) | % | |||||||||||||||||||||||
| Commercial PR | 2,726,998 | 2,463,009 | 10.7 | % | 2,690,737 | 2,427,705 | 10.8 | % | |||||||||||||||||||||||||||
| Commercial US | 876,561 | 786,637 | 11.4 | % | 863,415 | 753,422 | 14.6 | % | |||||||||||||||||||||||||||
| Consumer loans | 702,519 | 698,581 | 0.6 | % | 703,688 | 696,086 | 1.1 | % | |||||||||||||||||||||||||||
| Auto loans | 2,626,511 | 2,635,677 | (0.3) | % | 2,631,290 | 2,605,202 | 1.0 | % | |||||||||||||||||||||||||||
| Total | $ | 8,245,654 | $ | 7,963,890 | 3.5 | % | $ | 8,206,763 | $ | 7,874,819 | 4.2 | % | |||||||||||||||||||||||
Net charge-offs for the quarter ended June 30, 2026, amounted to $28.8 million (1.40% of average loans), increasing by $16.0 million when compared to $12.8 million (0.64% of average loans) in prior year quarter. Net charge-offs for the six-month period ended June 30, 2026, amounted to $50.2 million (1.22% of average loans), increasing by $17.0 million when compared to $33.2 million (0.84% of average loans) in prior year period.
Net charge-offs variances were as follows:
•Residential mortgage loans net recoveries in the second quarter of 2026 amounted to $343 thousand, decreasing by $423 thousand when compared to $766 thousand in prior year quarter. Residential mortgage loans net recoveries for the six-month period ended June 30, 2026, amounted to $632 thousand, decreasing by $638 thousand when compared to $1.3 million in prior year period.
•Commercial loans net charge-offs in the second quarter of 2026 amounted to $15.2 million, increasing by $15.1 million when compared to $153 thousand in prior year quarter. The charge-offs for the six-month period ended June 30, 2026, amounted to $19.2 million, increasing by $16.2 million when compared to $3.0 million in prior year period. The charge-offs for the quarter and six-month period ended June 30, 2026, included $15.6 million charge-offs recognized from the sale of two non-performing commercial loans during the period. Net charge-offs for the six-month period ended June 30, 2025, included a $2.9 million partial charge-off related to a previously reserved U.S. commercial loan.
•Consumer loans net charge-offs in the second quarter of 2026 amounted to $6.6 million, increasing by $529 thousand when compared to net charge-offs of $6.1 million in the prior year quarter. The charge-offs for the six-month period ended June 30, 2026, amounted to $14.4 million, increasing by $754 thousand when compared to net charge-offs of $13.6 million in prior year period.
•Auto loans net charge-offs for the second quarters of 2026 and 2025 remained stable at $7.3 million. The charge-offs for the six-month period ended June 30, 2026, amounted to $17.3 million, decreasing by $531 thousand when compared to net charge-offs of $17.8 million in prior year period.
92
TABLE 12 — NON-PERFORMING ASSETS
| June 30, | December 31, | Variance % | |||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Non-performing assets: | |||||||||||||||||||||||
| Non-PCD | |||||||||||||||||||||||
| Non-accruing loans | $ | 61,950 | $ | 124,300 | (50.2)% | ||||||||||||||||||
| Accruing loans | 5,140 | 5,481 | (6.2)% | ||||||||||||||||||||
| Total | $ | 67,090 | $ | 129,781 | (48.3)% | ||||||||||||||||||
| PCD | 221 | 282 | (21.6)% | ||||||||||||||||||||
| Total non-performing loans | $ | 67,311 | $ | 130,063 | (48.2)% | ||||||||||||||||||
| Foreclosed real estate | 1,675 | 2,490 | (32.7)% | ||||||||||||||||||||
| Other repossessed assets | 4,195 | 3,457 | 21.3% | ||||||||||||||||||||
| $ | 73,181 | $ | 136,010 | (46.2)% | |||||||||||||||||||
| Non-performing assets to total assets | 0.60 | % | 1.09 | % | (45.0) | % | |||||||||||||||||
| Non-performing assets to total capital | 5.20 | % | 9.78 | % | (46.8) | % | |||||||||||||||||
The decrease in non-performing assets and related percentages is mainly due to the sale of two non-performing commercial loans during the second quarter of 2026 with a reporting balance of $49.6 million.
93
TABLE 13 — NON-ACCRUAL LOANS
| June 30, | December 31, | Variance % | |||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Non-accrual loans | |||||||||||||||||
| Non-PCD | |||||||||||||||||
| Commercial loans | $ | 32,474 | $ | 87,253 | (62.8)% | ||||||||||||
| Mortgage loans | 11,098 | 11,919 | (6.9)% | ||||||||||||||
| Consumer loans | 3,798 | 4,378 | (13.2)% | ||||||||||||||
| Auto loans | 14,580 | 20,750 | (29.7)% | ||||||||||||||
| Total | $ | 61,950 | $ | 124,300 | (50.2)% | ||||||||||||
| PCD | |||||||||||||||||
| Commercial loans | $ | — | $ | 55 | (100.0)% | ||||||||||||
| Mortgage loans | 221 | 227 | (2.6)% | ||||||||||||||
| Total | $ | 221 | $ | 282 | (21.6)% | ||||||||||||
| Total non-accrual loans | $ | 62,171 | $ | 124,582 | (50.1)% | ||||||||||||
| Non-accruals loans composition percentages: | |||||||||||||||||
| Commercial loans | 52.2 | % | 70.1 | % | |||||||||||||
| Mortgage loans | 18.2 | % | 9.7 | % | |||||||||||||
| Consumer loans | 6.1 | % | 3.5 | % | |||||||||||||
| Auto loans | 23.5 | % | 16.7 | % | |||||||||||||
| 100.0 | % | 100.0 | % | ||||||||||||||
| Non-accrual loans ratios: | |||||||||||||||||
| Non-accrual loans to total loans | 0.75 | % | 1.52 | % | (50.7)% | ||||||||||||
| Allowance for credit losses to non-accrual loans | 302.80 | % | 162.42 | % | 86.4% | ||||||||||||
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
Interest that would have been recorded in the period if the loans had not been classified as non-accruing loans | $ | 313 | $ | 450 | $ | 457 | $ | 723 | |||||||||||||||
The decrease in non-accrual loans and related percentages is mainly due to the sale of two non-performing commercial loans during the second quarter of 2026 with a reporting balance of $49.6 million.
94
TABLE 14 - NON-PERFORMING LOANS
| June 30, | December 31, | Variance % | |||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Non-performing loans | |||||||||||||||||
| Non-PCD | |||||||||||||||||
Commercial loans | $ | 32,474 | $ | 87,253 | (62.8)% | ||||||||||||
Mortgage loans | 16,238 | 17,400 | (6.7)% | ||||||||||||||
Consumer loans | 3,798 | 4,378 | (13.2)% | ||||||||||||||
Auto loans | 14,580 | 20,750 | (29.7)% | ||||||||||||||
| Total | $ | 67,090 | $ | 129,781 | (48.3)% | ||||||||||||
| PCD | |||||||||||||||||
Commercial loans | $ | — | $ | 55 | (100.0)% | ||||||||||||
Mortgage loans | 221 | 227 | (2.6)% | ||||||||||||||
| Total | $ | 221 | $ | 282 | (21.6)% | ||||||||||||
| Total non-performing loans | $ | 67,311 | $ | 130,063 | (48.2)% | ||||||||||||
| Non-performing loans composition percentages: | |||||||||||||||||
Commercial loans | 48.2 | % | 67.1 | % | |||||||||||||
Mortgage loans | 24.5 | % | 13.6 | % | |||||||||||||
Consumer loans | 5.6 | % | 3.4 | % | |||||||||||||
Auto loans | 21.7 | % | 15.9 | % | |||||||||||||
| 100.0 | % | 100.0 | % | ||||||||||||||
| Non-performing loans to: | |||||||||||||||||
| Total loans held-for-investment, gross | 0.81 | % | 1.59 | % | (49.1)% | ||||||||||||
| Total assets | 0.55 | % | 1.04 | % | (47.1)% | ||||||||||||
| Total capital | 4.78 | % | 9.36 | % | (48.9)% | ||||||||||||
| Non-performing loans with partial charge-offs to: | |||||||||||||||||
| Total loans held-for-investment, gross | 0.17 | % | 0.19 | % | (10.5)% | ||||||||||||
| Non-performing loans | 20.65 | % | 11.95 | % | 72.8% | ||||||||||||
| Other non-performing loans ratios: | |||||||||||||||||
| Charge-off rate on non-performing loans to non-performing loans on which charge-offs have been taken | 118.71 | % | 109.85 | % | 8.1% | ||||||||||||
| Allowance for credit losses to non-performing loans on which no charge-offs have been taken | 352.46 | % | 176.69 | % | 99.5% | ||||||||||||
The decrease in non-performing loans and related percentages is mainly due to the sale of two non-performing commercial loans during the second quarter of 2026 with an aggregate reporting balance of $49.6 million.
95
TABLE 15 - LIABILITIES SUMMARY AND COMPOSITION
| June 30, | December 31, | Variance % | |||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Deposits: | |||||||||||||||||
| Non-interest-bearing deposits | $ | 2,767,422 | $ | 2,626,768 | 5.4 | % | |||||||||||
| NOW accounts | 2,119,913 | 3,173,142 | (33.2) | % | |||||||||||||
Savings accounts | 2,358,053 | 2,259,973 | 4.3 | % | |||||||||||||
| Time deposits | 2,732,825 | 2,197,358 | 24.4 | % | |||||||||||||
| Total deposits | 9,978,213 | 10,257,241 | (2.7) | % | |||||||||||||
| Accrued interest payable | 4,915 | 5,511 | (10.8) | % | |||||||||||||
| Total deposits and accrued interest payable | 9,983,128 | 10,262,752 | (2.7) | % | |||||||||||||
| Borrowings: | |||||||||||||||||
| Securities sold under agreements to repurchase | 100,085 | 100,714 | (0.6) | % | |||||||||||||
| Advances from FHLB | 456,530 | 456,581 | — | % | |||||||||||||
| Other borrowings | — | 9 | (100.0) | % | |||||||||||||
| Total borrowings | 556,615 | 557,304 | (0.1) | % | |||||||||||||
| Total deposits and borrowings | 10,539,743 | 10,820,056 | (2.6) | % | |||||||||||||
| Other liabilities: | |||||||||||||||||
| Acceptances executed and outstanding | 19,418 | 22,442 | (13.5) | % | |||||||||||||
| Operating lease liabilities | 21,376 | 23,157 | (7.7) | % | |||||||||||||
| Deferred tax liabilities, net | 615 | — | 100.0 | % | |||||||||||||
| Accrued expenses and other liabilities | 166,148 | 209,997 | (20.9) | % | |||||||||||||
| Total liabilities | $ | 10,747,300 | $ | 11,075,652 | (3.0) | % | |||||||||||
| Deposits portfolio composition percentages: | |||||||||||||||||
| Non-interest-bearing deposits | 27.7 | % | 25.6 | % | |||||||||||||
| NOW accounts | 21.3 | % | 31.0 | % | |||||||||||||
Savings accounts | 23.6 | % | 22.0 | % | |||||||||||||
| Time deposits | 27.4 | % | 21.4 | % | |||||||||||||
| 100.0 | % | 100.0 | % | ||||||||||||||
| Borrowings portfolio composition percentages: | |||||||||||||||||
| Securities sold under agreements to repurchase | 18.0 | % | 18.1 | % | |||||||||||||
| Advances from FHLB | 82.0 | % | 81.9 | % | |||||||||||||
| 100.0 | % | 100.0 | % | ||||||||||||||
| Securities sold under agreements to repurchase (excluding accrued interest) | |||||||||||||||||
| Amount outstanding at period-end | $ | 100,000 | $ | 100,000 | |||||||||||||
| Daily average outstanding balance | $ | 163,356 | $ | 66,941 | |||||||||||||
| Maximum outstanding balance at any month-end | $ | 300,000 | $ | 127,344 | |||||||||||||
96
Liabilities and Funding Sources
As shown in Table 15 above, at June 30, 2026, OFG’s total liabilities were $10.747 billion, representing a 3.0% decrease from $11.076 billion at December 31, 2025. Deposits and borrowings, OFG’s primary funding sources, amounted to $10.540 billion at June 30, 2026, compared to $10.820 billion at December 31, 2025. Deposits, excluding accrued interest payable, decreased by $279.0 million or 2.7%, driven primarily by a decline in demand deposits of $912.6 million, partially offset by the growth of $535.5 million in time deposits and $98.1 million in savings and money market accounts.
At June 30, 2026, and December 31, 2025, total public fund deposits from various Puerto Rico government municipalities, agencies and corporations amounted to $1.301 billion and $1.676 billion, respectively, of which $500 million moved to our wealth management business as an advisory account in January 2026. Public funds were collateralized with securities and commercial loans amounting to $1.302 billion and $1.691 billion at June 30, 2026, and December 31, 2025, respectively.
As of June 30, 2026, borrowings amounted to $556.6 million, consisting of short-term FHLB advances and repurchase agreements. This balance decreased by $689 thousand or 0.1% compared to December 31, 2025.
Stockholders’ Equity
At June 30, 2026, OFG’s total stockholders’ equity was $1.407 billion, representing a 1.2% increase from $1.390 billion at December 31, 2025. The increase primarily reflected a $72.3 million increase in retained earnings, mainly due to net income of $112.7 million, partially offset by dividends declared on common stock of $29.5 million and transfers to legal surplus of $10.9 million. These variances were partially offset by a $43.0 million increase in treasury stock resulting from repurchases of common stock under the approved stock repurchase programs totaling $44.5 million during the six-months ended June 30, 2026, as well as a $22.0 million increase in accumulated other comprehensive loss, net of tax, from unfavorable market value adjustments in available-for-sale investment securities.
Regulatory Capital
OFG and the Bank are subject to regulatory capital requirements established by the Federal Reserve Board and the FDIC. The current risk-based capital standards applicable to OFG and the Bank are based on the final capital framework for strengthening international capital standards, known as Basel III, of the Basel Committee on Banking Supervision. As of June 30, 2026, the capital ratios of OFG and the Bank continue to exceed the minimum requirements for being “well-capitalized” under the Basel III capital rules.
The risk-based capital ratios presented in Table 16 include CET1, tier 1 capital, total capital and leverage capital as of June 30, 2026, and December 31, 2025, and are calculated based on the Basel III capital rules related to the measurement of capital, risk-weighted assets and average assets. The following are OFG’s consolidated capital, dividends, and stock data, including capital ratios under the Basel III capital rules at June 30, 2026, and December 31, 2025:
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TABLE 16 — CAPITAL, DIVIDENDS AND STOCK DATA
| June 30, | December 31, | Variance | |||||||||||||||
| 2026 | 2025 | % | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||
| Capital data: | |||||||||||||||||
| Stockholders’ equity | $ | 1,407,272 | $ | 1,390,005 | 1.2% | ||||||||||||
| Regulatory Capital Ratios data: | |||||||||||||||||
| Common equity tier 1 capital ratio | 14.07 | % | 13.97 | % | 0.7 | % | |||||||||||
| Minimum common equity tier 1 capital ratio required | 4.50 | % | 4.50 | % | — | % | |||||||||||
| Actual common equity tier 1 capital | $ | 1,359,866 | 1,318,633 | 3.1% | |||||||||||||
| Minimum common equity tier 1 capital required | $ | 435,008 | 424,620 | 2.4% | |||||||||||||
| Minimum capital conservation buffer required (2.5%) | $ | 241,671 | 235,900 | 2.4% | |||||||||||||
| Excess over regulatory requirement | $ | 683,187 | 658,113 | 3.8% | |||||||||||||
| Risk-weighted assets | $ | 9,666,852 | 9,436,010 | 2.4% | |||||||||||||
| Tier 1 risk-based capital ratio | 14.07 | % | 13.97 | % | 0.7 | % | |||||||||||
| Minimum tier 1 risk-based capital ratio required | 6.00 | % | 6.00 | % | — | % | |||||||||||
| Actual tier 1 risk-based capital | $ | 1,359,866 | $ | 1,318,633 | 3.1% | ||||||||||||
| Minimum tier 1 risk-based capital required | $ | 580,011 | $ | 566,161 | 2.4% | ||||||||||||
| Minimum capital conservation buffer required (2.5%) | $ | 241,671 | 235,900 | 2.4% | |||||||||||||
| Excess over regulatory requirement | $ | 538,184 | $ | 516,572 | 4.2% | ||||||||||||
| Risk-weighted assets | $ | 9,666,852 | $ | 9,436,010 | 2.4% | ||||||||||||
| Total risk-based capital ratio | 15.33 | % | 15.24 | % | 0.6 | % | |||||||||||
| Minimum total risk-based capital ratio required | 8.00 | % | 8.00 | % | — | % | |||||||||||
| Actual total risk-based capital | $ | 1,481,504 | $ | 1,437,596 | 3.1% | ||||||||||||
| Minimum total risk-based capital required | $ | 773,348 | $ | 754,881 | 2.4% | ||||||||||||
| Minimum capital conservation buffer required (2.5%) | $ | 241,671 | 235,900 | 2.4% | |||||||||||||
| Excess over regulatory requirement | $ | 466,485 | $ | 446,815 | 4.4% | ||||||||||||
| Risk-weighted assets | $ | 9,666,852 | $ | 9,436,010 | 2.4% | ||||||||||||
| Leverage capital ratio | 11.23 | % | 10.71 | % | 4.9 | % | |||||||||||
| Minimum leverage capital ratio required | 4.00 | % | 4.00 | % | — | % | |||||||||||
| Actual tier 1 capital | $ | 1,359,866 | $ | 1,318,633 | 3.1% | ||||||||||||
| Minimum tier 1 capital required | $ | 484,365 | $ | 492,568 | (1.7)% | ||||||||||||
| Excess over regulatory requirement | $ | 875,501 | $ | 826,065 | 6.0% | ||||||||||||
| Tangible common equity to total assets | 10.82 | % | 10.40 | % | 4.0 | % | |||||||||||
| Tangible common equity to risk-weighted assets | 13.60 | % | 13.73 | % | (0.9) | % | |||||||||||
| Total equity to total assets | 11.58 | % | 11.15 | % | 3.9 | % | |||||||||||
| Total equity to risk-weighted assets | 14.56 | % | 14.73 | % | (1.2) | % | |||||||||||
| Stock data: | |||||||||||||||||
| Outstanding common shares | 42,265,184 | 43,257,167 | (2.3)% | ||||||||||||||
| Book value per common share | $ | 33.30 | $ | 32.13 | 3.6% | ||||||||||||
| Tangible book value per common share | $ | 31.12 | $ | 29.96 | 3.9% | ||||||||||||
| Market price at end of period | $ | 49.07 | $ | 40.98 | 19.7% | ||||||||||||
| Market capitalization at end of period | $ | 2,073,953 | $ | 1,772,679 | 17.0% | ||||||||||||
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The following table presents OFG’s capital adequacy information under the Basel III capital rules:
| June 30, | December 31, | Variance | |||||||||||||||
| 2026 | 2025 | % | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Risk-based capital: | |||||||||||||||||
| Common equity tier 1 capital | $ | 1,359,866 | $ | 1,318,633 | 3.1% | ||||||||||||
| Tier 1 capital | 1,359,866 | 1,318,633 | 3.1% | ||||||||||||||
| Additional Tier 2 capital | 121,638 | 118,963 | 2.2% | ||||||||||||||
| Total risk-based capital | $ | 1,481,504 | $ | 1,437,596 | 3.1% | ||||||||||||
| Risk-weighted assets: | |||||||||||||||||
| Balance sheet items | $ | 8,916,587 | $ | 8,798,325 | 1.3% | ||||||||||||
| Off-balance sheet items | 750,265 | 637,685 | 17.7% | ||||||||||||||
| Total risk-weighted assets | $ | 9,666,852 | $ | 9,436,010 | 2.4% | ||||||||||||
| Ratios: | |||||||||||||||||
| Common equity tier 1 capital (minimum required, including capital conservation buffer - 7%) | 14.07 | % | 13.97 | % | 0.7% | ||||||||||||
| Tier 1 capital (minimum required, including capital conservation buffer - 8.5%) | 14.07 | % | 13.97 | % | 0.7% | ||||||||||||
| Total capital (minimum required, including capital conservation buffer - 10.5%) | 15.33 | % | 15.24 | % | 0.6% | ||||||||||||
| Leverage ratio (minimum required - 4%) | 11.23 | % | 10.71 | % | 4.9% | ||||||||||||
From December 31, 2025 to June 30, 2026, the leverage capital ratio increased from 10.71% to 11.23%, the tier 1 risk-based and common equity tier 1 capital ratios increased from 13.97% to 14.07%, and the total risk-based capital ratio increased from 15.24% to 15.33%. The increases in regulatory capital ratios reflected a $43.9 million increase in regulatory capital, partially offset by an increase in risk-weighted assets of $230.8 million. Regulatory capital increased mainly due to net income, partially offset by dividends and treasury stock repurchases. Risk-weighted assets increased mainly from higher loan balances from originations, and an increase in deferred tax assets, primarily related to an investment in OBPEF, our private equity fund, during the period.
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The Bank is considered “well capitalized” under the regulatory framework for prompt corrective action. The table below shows the Bank’s regulatory capital ratios at June 30, 2026, and December 31, 2025:
| June 30, | December 31, | Variance | |||||||||||||||
| 2026 | 2025 | % | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Oriental Bank Regulatory Capital Ratios: | |||||||||||||||||
| Common Equity Tier 1 Capital to Risk-Weighted Assets | 13.22% | 13.44% | (1.6)% | ||||||||||||||
| Actual common equity tier 1 capital | $ | 1,269,911 | $ | 1,260,530 | 0.7% | ||||||||||||
| Minimum capital requirement (4.5%) | $ | 432,259 | $ | 422,175 | 2.4% | ||||||||||||
| Minimum capital conservation buffer requirement (2.5%) | $ | 240,144 | $ | 234,542 | 2.4% | ||||||||||||
| Minimum to be well capitalized (6.5%) | $ | 624,374 | $ | 609,808 | 2.4% | ||||||||||||
| Tier 1 Capital to Risk-Weighted Assets | 13.22% | 13.44% | (1.6)% | ||||||||||||||
| Actual tier 1 risk-based capital | $ | 1,269,911 | $ | 1,260,530 | 0.7% | ||||||||||||
| Minimum capital requirement (6%) | $ | 576,345 | $ | 562,900 | 2.4% | ||||||||||||
| Minimum capital conservation buffer requirement (2.5%) | $ | 240,144 | $ | 234,542 | 2.4% | ||||||||||||
| Minimum to be well capitalized (8%) | $ | 768,460 | $ | 750,533 | 2.4% | ||||||||||||
| Total Capital to Risk-Weighted Assets | 14.48% | 14.70% | (1.5)% | ||||||||||||||
| Actual total risk-based capital | $ | 1,390,795 | $ | 1,378,822 | 0.9% | ||||||||||||
| Minimum capital requirement (8%) | $ | 768,460 | $ | 750,533 | 2.4% | ||||||||||||
| Minimum capital conservation buffer requirement (2.5%) | $ | 240,144 | $ | 234,542 | 2.4% | ||||||||||||
| Minimum to be well capitalized (10%) | $ | 960,575 | $ | 938,167 | 2.4% | ||||||||||||
| Total Tier 1 Capital to Average Total Assets | 10.57% | 10.31% | 2.5% | ||||||||||||||
| Actual tier 1 capital | $ | 1,269,911 | $ | 1,260,530 | 0.7% | ||||||||||||
| Minimum capital requirement (4%) | $ | 480,373 | $ | 489,159 | (1.8)% | ||||||||||||
| Minimum to be well capitalized (5%) | $ | 600,466 | $ | 611,449 | (1.8)% | ||||||||||||
Non-GAAP financial measures
OFG reports certain financial measures that are not in accordance with GAAP. These non-GAAP financial measures are provided as supplemental information to the financial measures in this report that are calculated and presented in accordance with GAAP.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. To mitigate these limitations, OFG has procedures in place to calculate these measures using the appropriate GAAP or regulatory components. Although these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP. Below is a reconciliation of non-GAAP financial measures:
| Quarter Ended June 30, | Six-Month Period Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Net interest income | $ | 157,299 | $ | 151,928 | $ | 311,112 | $ | 300,999 | |||||||||||||||
| Total banking and financial service revenues | 32,984 | 30,247 | 64,972 | 59,459 | |||||||||||||||||||
| Core revenues (non-GAAP) | $ | 190,283 | $ | 182,175 | $ | 376,084 | $ | 360,458 | |||||||||||||||
| Other non-interest income | 39 | 184 | 218 | 489 | |||||||||||||||||||
| Non-interest expense | 102,832 | 94,802 | 197,535 | 188,254 | |||||||||||||||||||
| Pre-provision net revenues (non-GAAP) | $ | 87,490 | $ | 87,557 | $ | 178,767 | $ | 172,693 | |||||||||||||||
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TABLE 17 — RECONCILIATION OF TANGIBLE COMMON EQUITY AND TANGIBLE ASSETS
The following table presents a reconciliation of OFG’s total stockholders’ equity to tangible common equity and total assets to tangible assets at June 30, 2026, and December 31, 2025:
| June 30, | December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands, except share or per share information) | |||||||||||
| Total stockholders’ equity | $ | 1,407,272 | $ | 1,390,005 | |||||||
| Goodwill | (84,241) | (84,241) | |||||||||
| Other intangible assets | (7,883) | (9,855) | |||||||||
| Total tangible common equity (non-GAAP) | $ | 1,315,148 | $ | 1,295,909 | |||||||
| Total assets | $ | 12,154,572 | 12,465,657 | ||||||||
| Goodwill | (84,241) | (84,241) | |||||||||
| Core deposit intangible | (6,037) | (7,547) | |||||||||
| Customer relationship intangible | (1,846) | (2,308) | |||||||||
| Total tangible assets (non-GAAP) | $ | 12,062,448 | $ | 12,371,561 | |||||||
| Tangible common equity to tangible assets (non-GAAP) | 10.90 | % | 10.47 | % | |||||||
Common shares outstanding at end of period | 42,265,184 | 43,257,167 | |||||||||
| Tangible book value per common share (non-GAAP) | $ | 31.12 | $ | 29.96 | |||||||
Average stockholders’ equity | $ | 1,405,027 | $ | 1,341,568 | |||||||
Average intangible assets | (92,963) | (96,362) | |||||||||
| Average tangible common equity (non-GAAP) | $ | 1,312,064 | $ | 1,245,206 | |||||||
| Average return on tangible common equity (non-GAAP) | 17.18% | 16.47% | |||||||||
* Averages are calculated on a year-to-date basis. | |||||||||||
The tangible common equity to tangible assets ratio and tangible book value per common share are non-GAAP measures and, unlike tier 1 capital and common equity tier 1 capital, are not codified in the federal banking regulations. Management and many stock analysts use the tangible common equity to tangible assets ratio and tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations. Neither tangible common equity nor tangible assets or related measures should be considered in isolation or as a substitute for stockholders’ equity, total assets or any other measure calculated in accordance with GAAP. Moreover, the manner in which OFG calculates its tangible common equity, tangible assets and any other related measures may differ from that of other companies reporting measures with similar names.
Tangible common equity to tangible total assets increased from 10.47% to 10.90%, reflecting a decrease in total assets, mainly related to the decrease in cash from the $500 million Puerto Rico government deposit moved to our wealth management business as an advisory account.
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Common Stock
OFG’s common stock is traded on the NYSE under the symbol “OFG”. At June 30, 2026, and December 31, 2025, OFG’s market capitalization for its outstanding common stock was $2.074 billion ($49.07 per share) and $1.773 billion ($40.98 per share), respectively. The following table provides the high and low prices and dividends per share of OFG’s common stock for each quarter of the last three calendar years:
| Cash | |||||||||||||||||
| Price | Dividend | ||||||||||||||||
| High | Low | Per share | |||||||||||||||
| 2026 | |||||||||||||||||
| June 30, 2026 | $ | 49.31 | $ | 41.09 | $ | 0.35 | |||||||||||
| March 31, 2026 | $ | 42.66 | $ | 37.15 | $ | 0.35 | |||||||||||
| 2025 | |||||||||||||||||
| December 31, 2025 | $ | 43.38 | $ | 38.21 | $ | 0.30 | |||||||||||
| September 30, 2025 | $ | 45.47 | $ | 41.72 | $ | 0.30 | |||||||||||
| June 30, 2025 | $ | 43.28 | $ | 34.78 | $ | 0.30 | |||||||||||
| March 31, 2025 | $ | 44.74 | $ | 38.85 | $ | 0.30 | |||||||||||
| 2024 | |||||||||||||||||
| December 31, 2024 | $ | 46.72 | $ | 38.97 | $ | 0.25 | |||||||||||
| September 30, 2024 | $ | 46.84 | $ | 36.77 | $ | 0.25 | |||||||||||
| June 30, 2024 | $ | 38.16 | $ | 33.37 | $ | 0.25 | |||||||||||
| March 31, 2024 | $ | 38.51 | $ | 34.78 | $ | 0.25 | |||||||||||
In January 2026, the Board approved a $200.0 million stock repurchase program in addition to the $100.0 million stock repurchase program approved in April 2025. The shares of common stock repurchased are held by OFG as treasury shares. OFG records treasury stock purchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.
OFG did not repurchase any shares of common stock during the six-month periods ended June 30, 2026 and 2025, other than through its publicly announced stock repurchase programs.
At June 30, 2026, the estimated remaining number of shares that may be purchased under the repurchase programs is 3,945,538 and was calculated by dividing the remaining balance of $193.6 million by $49.07 (closing price of OFG’s common stock June 30, 2026).
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Background
OFG’s risk management policies are established by its Board and implemented by management through the adoption of a risk management program, which is overseen and monitored by the Chief Risk Officer, the Board’s Risk and Compliance Committee, the executive Risk and Compliance Team, the executive Credit Risk Team, and the executive Asset/Liability Team (“ALT”). OFG has continued to refine and enhance its risk management program by strengthening policies, processes and procedures necessary to maintain effective risk management.
All aspects of OFG’s business activities are susceptible to risk. Consequently, risk identification and monitoring are essential to risk management. As discussed in greater detail below, OFG’s primary risk exposures include market, interest rate, credit, liquidity, operational and concentration risks.
Market Risk
Market risk is the risk that changes in market conditions may adversely impact the value of assets or liabilities, or otherwise
negatively impact earnings. Our traditional banking loan and deposit products are generally reported at amortized cost
for assets or the amount owed for liabilities (historical cost). However, they are still subject to changes in
economic value based on varying market conditions, with one of the primary risks being changes in the levels of interest rates. Our investment portfolio, including equity securities, are also directly impacted by market factors. OFG’s financial results and capital levels are constantly exposed to market risk. OFG evaluates market risk together with interest rate risk. The Board and management are primarily responsible for ensuring that the market risk assumed by OFG complies with the guidelines established by policies approved by the Board. The Board has delegated the management of this risk to ALT which is composed of certain executive officers from the risk management, treasury and finance areas. One of ALT’s primary goals is to ensure that the market risk assumed by OFG is within the parameters established in such policies.
Certain factors, such as the potential impact of changes in market interest rates, inflation trends, trade and supply chain disruptions, a possible recession, global economic policies and conflicts, and other economic factors, including periods of increased global economic and geopolitical uncertainties, could impact market conditions.
We believe that our market risk management practices have allowed us to effectively manage the market volatility over time and that our clients are confident in the resiliency and strong position of the Bank. We also believe that OFG has strong capital and liquidity levels that facilitate holding investment securities until the recovery of their amortized cost basis.
Interest Rate Risk
Interest rate risk is the exposure to decline in earnings or capital due to changes in interest rates. Interest rate risk results primarily from our traditional banking activities of gathering deposits and extending loans. Many factors, including economic and financial conditions, movements in interest rates and consumer preferences, affect the difference between the interest that we earn on assets and the interest that we pay on liabilities and the level of our noninterest-bearing funding sources. Due
to the repricing term mismatches and embedded options inherent in certain of these products, changes in market interest rates not only affect expected near-term earnings, but also the economic values of these assets and liabilities. To actively monitor the interest rate risk, the Board created ALT whose principal responsibilities consist of overseeing the management of the Bank’s assets and liabilities to balance its risk exposures. In executing its responsibilities, ALT considers different methods to enhance profitability while maintaining acceptable levels of interest rate risks by implementing investment, pricing and financial strategies that help manage OFG’s vulnerability to changes in interest rates.
On a quarterly basis, OFG performs net interest income simulation analysis on a consolidated basis to estimate the potential change in future earnings from projected changes in interest rates. These simulations are carried out over a five-year time horizon, assuming certain upward and downward interest rate movements, achieved during a twelve-month period. Market scenarios that include instantaneous and parallel interest rate movements as well as other scenarios with gradual interest rate ramps, speed of interest rate changes, and changes in the slope of the yield curve are also modeled. In addition to the change in interest rates, the results of the analysis could be affected by prepayments, caps, and floors. Management exercises its best judgment in formulating assumptions regarding events that management can influence such as non-maturity deposits repricing, as well as events outside management’s control such as customer behavior on loans and deposits activity and the effects that competition has on both lending and deposits pricing. These assumptions are subjective and, as a result, net interest income simulation results will differ from actual results due to the timing, magnitude and frequency of interest rate changes, changes in market conditions, customer behavior and management strategies, among other factors.
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OFG uses a software application to project future movements in OFG’s balance sheet and income statement. The starting point of the projections generally corresponds to the actual values of the balance sheet on the date of the simulations. The following table presents the results of the simulations for the most likely scenarios at June 30, 2026. The left of the table presents an analysis of our interest rate risk as measured by the estimated changes in net interest income resulting from an instantaneous and parallel shift in the yield curve over a 12-month horizon. The base case scenario assumes that the current interest rate environment is held constant throughout the forecast period for a static balance sheet and the instantaneous shocks are performed against that yield curve. The right side of the table presents an analysis of our interest rate risk as measured by the estimated changes in net interest income resulting from parallel gradual interest rates ramps over a 12-month horizon.
| Net Interest Income Risk (one-year projection) | |||||||||||||||||||||||
| Instantaneous Changes in Interest Rates | Gradual Changes in Interest Rates | ||||||||||||||||||||||
| Amount Change | Percent Change | Amount Change | Percent Change | ||||||||||||||||||||
| Change in interest rate | (Dollars in thousands) | ||||||||||||||||||||||
| + 50 Basis points | $ | 9,019 | 1.47 | % | $ | 3,659 | 0.60 | % | |||||||||||||||
| + 100 Basis points | $ | 18,166 | 2.96 | % | $ | 7,373 | 1.20 | % | |||||||||||||||
| + 200 Basis points | $ | 38,303 | 6.25 | % | $ | 15,418 | 2.52 | % | |||||||||||||||
| - 50 Basis points | $ | (8,337) | (1.36) | % | $ | (3,405) | (0.56) | % | |||||||||||||||
'- 100 Basis points | $ | (16,110) | (2.63) | % | $ | (6,390) | (1.04) | % | |||||||||||||||
'- 200 Basis points | $ | (32,758) | (5.34) | % | $ | (13,479) | (2.20) | % | |||||||||||||||
The scenarios above are both instantaneous shocks and gradual interest rate ramps that assume balance sheet management will mirror the base case. Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities will perform as anticipated. Additionally, a change in the US Treasury rates in the designated amounts accompanied by a change in the shape of the US Treasury yield curve would cause significantly different changes to net interest income than indicated above. OFG’s strategic management of the balance sheet would be adjusted to accommodate these movements. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag changes in market rates and therefore the ability of many borrowers to service their debts may decrease in the event of an interest rate increase. ALT strategies consider all these factors as part of the monitoring of the exposure to interest rate risk.
Future net interest income could be affected by OFG’s investments in callable securities, prepayment risk related to mortgage loans and mortgage-backed securities, and any structured repurchase agreements and advances from the FHLB in which it may enter into from time to time.
Credit Risk
Credit risk is the possibility of loss arising from a borrower or counterparty in a credit-related contract failing to perform in accordance with its terms. The principal source of credit risk for OFG is its lending activities. In Puerto Rico, OFG’s principal market, we believe that recent macroeconomic conditions continue to be generally positive. However, as demonstrated by hurricanes and earthquakes in the past, Puerto Rico is susceptible to natural disasters, which can have a disproportionate impact because of the logistical difficulties of bringing relief to an island far from the United States mainland. The effects of climate change may further increase the risk of natural disasters in the future and the correlative risk that the physical impact of such events could adversely affect our customers, operations, and business. Moreover, the Puerto Rico government’s fiscal challenges and Puerto Rico’s unique relationship with the United States, coupled with recent changes in U.S. trade policy and any significant reduction in federal spending, also affect the local economy and complicate any relief efforts after a natural disaster. These events increase credit risk as debtors may no longer be capable of operating their businesses and the collateral securing OFG’s loans may suffer significant damages.
Credit risk is one of our most significant risks. Our processes for managing credit risk are designed to be embedded in our risk culture and in our decision-making processes using a systematic approach whereby credit risks and related exposures are
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identified and assessed, managed through specific policies and processes, measured and evaluated against our risk appetite and credit concentration limits, and reported, along with proactive collection and specific mitigation practices, to management and the Board through our governance structure. We believe that our comprehensive credit policy establishes sound underwriting standards by monitoring and evaluating loan portfolio quality, and by the constant assessment of reserves and loan concentrations.
OFG may also encounter risk of default in relation to its securities portfolio. The securities held by OFG are mostly mortgage-backed securities. Thus, these instruments are guaranteed by mortgages, a U.S. government-sponsored enterprise, or the full faith and credit of the U.S. government.
OFG’s executive Credit Risk Team, composed of its Chief Risk Officer, Chief Credit Officer and other senior executives, has primary responsibility for setting strategies to achieve OFG’s credit risk goals and objectives. Those goals and objectives are set forth in OFG’s Credit Policy as approved by the Board.
Liquidity Risk
Liquidity risk is the risk of OFG not being able to generate sufficient cash from either assets or liabilities to meet obligations as they become due without incurring substantial losses and the potential inability to operate our businesses because adequate contingent liquidity is not available. The Board has established a policy to manage this risk. OFG’s cash requirements principally consist of deposit withdrawals, contractual loan funding, repayment of borrowings as these mature, and funding of new and existing investments as required.
OFG’s business requires continuous access to various funding sources. Liquidity to support growth in loans held-for-investment has been fulfilled primarily through growth in customer deposits. OFG’s goal is to obtain as much of its funding for loans held-for-investment and other earning assets as possible from customer deposits, which are generated principally through development of long-term customer relationships. In December 2023, OFG received a $1.2 billion deposit in an interest-bearing checking account from an existing long-standing Puerto Rico government client who had an isolated inflow of liquidity. Subsequently, in January 2026, $500 million was moved to our wealth management business as an advisory account resulting in a total of $1.301 billion and $1.676 billion deposits from the Puerto Rico government and its instrumentalities as of June 30, 2026 and December 31, 2025, respectively. OFG’s customer deposit base, excluding public funds, has consistently increased. While OFG is able to fund its operations through deposits as well as through advances from the FHLB and other alternative sources, OFG’s business may at times need to rely upon other external wholesale funding sources, such as repurchase agreements and brokered deposits. At June 30, 2026, OFG had $238.9 million brokered deposits and $100.0 million repurchase agreements. At December 31, 2025, OFG had $340.0 million brokered deposits and $100.0 million repurchase agreements.
In the ordinary course of OFG’s operations, it has entered into certain contractual obligations and has made other commitments to make future payments. OFG believes that it will be able to meet its contractual obligations, as they come due, through the maintenance of adequate cash levels.
Commitments to extend credit are agreements to lend to customers provided that there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates, bear variable interest rates and may require payment of a fee. Since the commitments may expire unexercised, the total commitment amounts do not necessarily represent future cash requirements. OFG evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by OFG upon extension of credit, is based on management’s credit evaluation of the customer. Loan commitments, which represent unused lines of credit, increased to $1.619 billion at June 30, 2026 ($210.9 million with maturity of one year or less and $1.408 billion with maturity over one year) compared to $1.377 billion at December 31, 2025 ($183.0 million with maturity of one year or less and $1.194 billion with maturity over one year) as a result of commercial lines of credit originations and repayments. Standby letters of credit provided to customers amounted to $25.9 million and $26.1 million, respectively, at June 30, 2026 and December 31, 2025. Loans sold with recourse at June 30, 2026, and December 31, 2025, amounted to $79.4 million and $83.0 million, respectively.
In the case of loans serviced by OFG for FNMA, OFG is required to advance to the owners the payment of principal and interest on a scheduled basis for six months even when such payment was not collected from the borrower due to payment forbearance granted or payment delinquency. The amounts advanced are recorded as a receivable by OFG and are expected to be collected from the borrower and/or government-sponsored enterprise (FNMA). At June 30, 2026, the outstanding balance of funds advanced by OFG under such mortgage loan servicing agreements was approximately $5.0 million (December 31, 2025 - $5.0 million). To the extent the mortgage loans underlying OFG’s servicing portfolio experience increased delinquencies, OFG would be required to dedicate additional cash resources to comply with its obligation to advance funds.
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At June 30, 2026 and December 31, 2025, OFG maintained other non-credit commitments amounting to $19.2 million and $17.8 million, respectively, primarily for the acquisition of other investments. These cash requirements are expected to be satisfied with OFG’s unrestricted cash. In addition, as we continue to transform OFG with a focus on simplification and building a culture of excellence and customer service, we continue to invest in technology. Some of our technology investments are integrated as part of our long-term financial plan and we are required to continuously upgrade our systems. Others require us to focus our technology on investments that drive our strategy, namely digital, data analytics, cloud migration, cyber security, and our sales and service capabilities. At June 30, 2026 and December 31, 2025, OFG had commitments for capital expenditures in technology amounting to $1.9 million and $1.6 million, respectively, which are expected to be satisfied with OFG’s unrestricted cash.
OFG expects to maintain adequate cash levels through continued deposit gathering activities, profitability, and loan and securities repayment and maturity activity. Our liquidity risk management practices have allowed us to effectively manage the market volatility in the past, as with the Covid-19 pandemic and the disruption in the banking industry caused by certain high-profile bank failures in 2023. Liquidity has grown from the federal stimulus programs Puerto Rico has received following Hurricane Maria in 2017, the January 2020 earthquakes, the Covid-19 pandemic, and Hurricane Fiona in 2022. However, liquidity can be further affected by several factors such as counterparty willingness or ability to extend credit, regulatory actions and customer preferences, some of which are beyond our control. Given the current climate of economic uncertainty resulting from inflation, geopolitical events, and new U.S. mainland economic and trading policies, we continuously monitor our liquidity position, specifically cash on hand, with the goal to ensure that we meet customer demands.
In addition, as OFG is a holding company, separate from the Bank, OFG’s primary sources of liquidity are dividends received from the Bank and borrowings from outside sources. Banking regulations may limit the dividends that may be paid by the Bank. Management believes that these limitations will not impact OFG’s ability to meet its ongoing short-term cash obligations.
Although OFG expects to have continued access to credit from the foregoing sources of funds, there can be no assurance that such financing sources will continue to be available or will be available on favorable terms. In a period of financial disruption or if negative developments occur with respect to OFG, the availability and cost of OFG’s funding sources could be adversely affected. In that event, OFG’s cost of funds may increase, thereby reducing its net interest income, or OFG may need to dispose of a portion of its investment portfolio, which depending upon market conditions, could result in realizing a loss or experiencing other adverse accounting consequences upon any such dispositions. OFG’s efforts to monitor and manage liquidity risk may not be successful to deal with dramatic or unanticipated changes in the global or US securities markets or other reductions in liquidity driven by OFG or market-related events. In the event that such sources of funds are reduced or eliminated and OFG is unable to replace these on a cost-effective basis, OFG may be forced to curtail or cease its loan origination business and treasury activities, which would have a material adverse effect on its operations and financial condition.
As of June 30, 2026, OFG had approximately $745.7 million in unrestricted cash and cash equivalents, $1.295 billion in investment securities that are not pledged as collateral, $409.4 million in borrowing capacity at the FHLB and a secured line of credit through the FRB discount window with $2.930 billion in pledged loans (borrowing capacity of $2.140 billion).
Operational Risk
Operational risk is the risk of loss from inadequate or failed internal processes, personnel and systems or from external events. All functions, products and services of OFG are susceptible to operational risk.
OFG faces ongoing and emerging risk and regulatory pressure related to the activities that surround the delivery of banking and financial products and services. Coupled with external influences such as the risk of natural disasters, market conditions, security risks, and legal risks, the potential for operational and reputational loss has increased. In order to mitigate and control operational risk, OFG has developed, and continues to enhance, specific internal controls, policies and procedures that are designed to identify and manage operational risk at appropriate levels throughout the organization. The purpose of these policies and procedures is to provide reasonable assurance that OFG’s business operations are functioning within established limits. OFG also maintains a cybersecurity risk management framework in place to assess, identify and manage risks from cybersecurity threats. Please refer to “Item 1C. Cybersecurity” in our 2025 Form 10-K for further discussion on OFG’s cybersecurity risk management framework.
OFG classifies operational risk into two major categories: business specific and corporate-wide affecting all business lines. For business specific risks, a risk assessment group works with the various business units to ensure consistency in policies, processes and assessments. The lines of business are responsible for identifying, owning, managing and monitoring the operational risks and controls associated with their business activities and product or service offerings to within acceptable
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levels. With respect to corporate-wide risks, such as information security, business recovery, legal and compliance, OFG has specialized groups, such as Information Security, Enterprise Risk Management, Legal and Corporate Compliance, Information Technology, and Operations. These groups assist our lines of business in the development and implementation of risk management practices specific to the needs of our business groups. They review and challenge lines of business adherence to the framework to help ensure proper controls are in place and appropriate risk mitigation plans are established as necessary. All these matters are reviewed and discussed by the executive Risk and Compliance Team and the executive Consumer Compliance Team. OFG also has a Business Continuity Plan to address situations where its capacity to perform critical functions is affected. Under such circumstances, a Crisis Management Team is activated to restore such critical functions within established timeframes.
OFG is subject to extensive United States federal and Puerto Rico regulations, and OFG has established and continues to enhance procedures based on legal and regulatory requirements that are reasonably designed to ensure compliance with all applicable statutory and regulatory requirements. OFG has a corporate compliance function headed by the General Counsel who reports to the Chief Executive Officer and supervises the BSA Officer and Corporate Compliance Director. The General Counsel is responsible for the oversight of regulatory compliance and implementation of a company-wide compliance program, including the Bank Secrecy Act/Anti-Money Laundering compliance program.
Concentration Risk
Most of OFG’s business activities and a significant portion of its credit exposure are concentrated in Puerto Rico. As a consequence, OFG’s profitability and financial condition may be adversely affected by an extended economic slowdown, adverse political, fiscal or economic developments in Puerto Rico, or the effects of a natural disaster, all of which could result in a reduction in loan originations, an increase in non-performing assets, an increase in foreclosure losses on mortgage loans, and a reduction in the value of its loans and loan servicing portfolio.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
OFG’s management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of the end of the period covered by this quarterly report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of OFG’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of OFG’s disclosure controls and procedures. Based upon such evaluation, the CEO and CFO have concluded that, as of the end of the period covered by this quarterly report on Form 10-Q, OFG’s disclosure controls and procedures provided reasonable assurance of effectiveness in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by OFG in the reports that it files or submits under the Exchange Act. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within OFG to disclose material information otherwise required to be set forth in OFG’s periodic reports.
Internal Control over Financial Reporting
There have not been any changes in OFG’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2026, that have materially affected, or are reasonably likely to materially affect, OFG’s internal control over financial reporting.
PART - II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
OFG and its subsidiaries are defendants in a number of legal proceedings incidental to their business. OFG is vigorously contesting such claims. Based upon a review by legal counsel and the development of these matters to date, management is of the opinion that the ultimate aggregate liability, if any, resulting from these claims will not have a material adverse effect on OFG’s financial condition or results of operations.
ITEM 1A. RISK FACTORS
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There have been no material changes to the risk factors previously disclosed in our 2025 Form 10-K, except as set forth in our subsequent quarterly reports on Form 10-Q. In addition to other information set forth in this quarterly report, you should carefully consider the risk factors included in our 2025 Form 10-K, as updated by this report or other filings we make with the SEC under the Exchange Act. Additional risks and uncertainties not presently known to OFG at this time or OFG currently deems immaterial may also adversely affect OFG’s business, financial condition or results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
(a) None
(b) None.
ITEM 6. EXHIBITS
Exhibit No. | Description of Document: | |||||||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
| 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
| 101 | The following materials from OFG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Unaudited Consolidated Statements of Financial Condition, (ii) Unaudited Consolidated Statements of Operations, (iii) Unaudited Consolidated Statements of Comprehensive Income, (iv) Unaudited Consolidated Statements of Changes in Stockholders’ Equity, (v) Unaudited Consolidated Statements of Cash Flows, and (vi) Notes to Unaudited Consolidated Financial Statements. | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
OFG BANCORP
| By: | /s/ José Rafael Fernández | Dated: August 6, 2026 | |||||||||
| José Rafael Fernández President and Chief Executive Officer | |||||||||||
| By: | /s/ Maritza Arizmendi Díaz | Dated: August 6, 2026 | |||||||||
| Maritza Arizmendi Díaz Chief Financial Officer | |||||||||||
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