OFG Bancorp Soars on Digital Growth, Faces Rising Credit Scrutiny

SAN JUAN, Puerto Rico – January 22, 2026 – OFG Bancorp (NYSE: OFG) announced strong fourth-quarter and full-year 2025 results, capping a year marked by significant earnings growth, strategic digital advancements, and robust capital returns to shareholders. The parent company of Oriental Bank reported a diluted earnings per share (EPS) of $1.27 for the fourth quarter, a 16.4% increase year-over-year, while the full-year EPS grew 8.3% to $4.58.

While the headline numbers point to a flourishing financial performance, the quarter's results were substantially influenced by a one-time tax benefit. Simultaneously, a deeper dive into the financials reveals an increase in credit loss provisions and non-performing loans, presenting a more nuanced picture of the bank's position as it moves into the new year.

A Tax-Boosted Quarter

A key driver of the impressive fourth-quarter earnings was a significant tax event. The company recorded an income tax benefit of $8.5 million for the quarter, a stark contrast to the $9.5 million tax expense in the third quarter of 2025. This was driven by $16.8 million in discrete tax benefits, which significantly skewed the bottom line.

These benefits included a $12.9 million gain from the expiration of a tax agreement tied to the 2019 acquisition of Scotiabank’s operations in Puerto Rico and the U.S. Virgin Islands, along with a $3.9 million benefit from a released valuation allowance on deferred tax assets. Excluding these one-time items, OFG Bancorp's estimated tax rate for the full year 2025 was 21.8%, providing a clearer lens on its underlying tax obligations and core profitability.

Total core revenues for the fourth quarter reached $185.4 million, a modest increase from the prior quarter and the same period in 2024. For the full year, core revenues grew 2.8% to $729.8 million. José Rafael Fernández, Chief Executive Officer, commented on the results, stating, “Fourth quarter EPS increased 16.4% year-over-year on 1.9% growth in total core revenues, driven by disciplined core operations and a favorable tax benefit.”

Digital Strategy Fuels Growth

Beyond the favorable tax implications, OFG Bancorp’s performance was bolstered by the successful execution of its 'Digital First' strategy, which has solidified its reputation as a banking innovator in the region. This focus on technology and customer experience fueled a 4.26% expansion of its client base in 2025.

Central to this growth was the “broad acceptance” of its flagship Libre and Elite deposit accounts, tailored for the mass-market and mass-affluent segments, respectively. These products helped drive a 5% year-over-year increase in total customer deposits, which stood at $9.92 billion at the end of December. The bank's loan portfolio also expanded, with loans held for investment growing 5.25% year-over-year to $8.20 billion, led by increases in commercial and consumer lending.

Fernández highlighted the strategic success, noting, “By year end, we grew our client base 4.26% and our Digital First strategy continued to solidify our leadership in banking innovation in Puerto Rico.”

This growth is set against the backdrop of a strengthening Puerto Rican economy. Fernández expressed confidence in the island's economic trajectory, pointing to “infrastructure investments with federal and private funds and new multi-million dollar on-shoring projects” as key drivers. He added that these developments reinforce “Puerto Rico’s position as a global hub for medical devices and pharmaceutical manufacturing,” underpinning the bank's optimism for sustained growth.

Credit Quality Under the Microscope

Despite the positive growth narrative, the bank’s credit quality metrics showed signs of pressure in the fourth quarter. The non-performing loan (NPL) rate increased to 1.59%, up from 1.22% in the third quarter and 1.06% a year prior. This figure is notably higher than the non-performing asset ratios reported by some stateside regional peers, suggesting a more challenging credit environment or a different risk composition in OFG's portfolio.

The provision for credit losses also rose to $31.9 million, compared to $28.3 million in the previous quarter. The increase was attributed to several factors, including a $5.1 million specific reserve on a commercial loan to a Puerto Rico telecommunications company, provisions for increased loan volume, and reserves related to U.S. macroeconomic factors. Net charge-offs for the quarter were $26.9 million, or 1.32% of average loans, up from 1.00% in the third quarter. While the early delinquency rate improved, the total delinquency rate ticked up from the prior quarter.

Despite these figures, Fernández maintained that the bank’s credit health is being managed effectively. “Asset quality and credit metrics remained sound and well-controlled throughout the year,” he stated in the release.

Balancing Shareholder Returns and Costs

OFG Bancorp continued its commitment to shareholder returns, repurchasing $40.1 million of its common shares in the fourth quarter, bringing the full-year total to $91.6 million. This capital deployment strategy was supported by strong capital ratios, with the Common Equity Tier 1 (CET1) ratio at 13.97% at year-end.

On the expense side, however, costs increased. Total non-interest expense rose to $105.0 million in the fourth quarter, up from $96.5 million in the third quarter. The increase was driven by several specific items, including $3.3 million in advisory fees related to the renegotiation of a technology services contract, $2.5 million for business rightsizing, and costs associated with the accelerated amortization of technology assets. The bank’s efficiency ratio stood at 56.65% for the quarter. While this reflects a reasonably efficient operation, it is higher than the adjusted ratios of some regional peers, indicating potential room for further cost optimization.

The bank's profitability metrics remained a key strength, with a net interest margin (NIM) of 5.12%, a return on average assets (ROAA) of 1.81%, and a return on average tangible common stockholders’ equity (ROATCE) of 17.20%. These figures demonstrate strong earnings power and efficient use of capital, positioning OFG favorably within its sector as it navigates the opportunities and challenges of the year ahead.