Financial Data and Key Metrics Changes - The company reported diluted EPS of $1.16, a 16% increase year over year, with total core revenue rising by 5.6% [3] - Total interest income reached $200 million, up $6 million, while total interest expense increased to $45 million, up $3 million [7][8] - Net interest margin was 5.24%, down from 5.31% in the previous quarter [11] - Return on average assets was 1.69%, and return on tangible common equity was 16.39% [9] Business Line Data and Key Metrics Changes - Loans and core deposit balances increased year over year, with a particular focus on commercial loans [3] - Average loan balances were $8 billion, up nearly 2% from the second quarter, while end-of-loans held for investment totaled $8.1 billion, reflecting a 5% year-over-year increase [9][10] - Core deposits were up $287 million or 3% year over year, with average core deposits at $9.9 billion [10] Market Data and Key Metrics Changes - The Puerto Rico economy is performing well, with high levels of wages and employment, and a boost from tourism [16] - The company is seeing strong business activity in Puerto Rico, contributing to its growth outlook [3][16] Company Strategy and Development Direction - The company is pursuing a digital-first strategy, enhancing its position in banking innovation in Puerto Rico [4] - New product offerings, such as the Libre and Elite accounts, are aimed at attracting deposits from new and existing customers [5] - The company is leveraging AI to provide tailored insights to customers, enhancing customer engagement and operational efficiency [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the commercial pipeline and credit trends, anticipating annual loan growth of 5% to 6% [14][16] - The company remains watchful of global macroeconomic and geopolitical uncertainties but is optimistic about its growth prospects [17] - The anticipated effective tax rate for the year has been adjusted to 23.06% from a previous estimate of 24.9% [15] Other Important Information - The company repurchased $20.4 million of common shares during the quarter [3] - Credit quality remains stable, with a non-performing loan rate of 1.22% [14] Q&A Session Summary Question: Dynamics impacting deposit costs - Management indicated that higher deposit costs are driven by a strategic focus on attracting mass affluent clients through competitive rates on accounts [20][21] Question: Outlook for commercial loan growth - Management noted that while there were paydowns on lines of credit, the commercial pipeline remains solid, with confidence in future growth [22][23] Question: Credit quality and charge-offs - Management clarified that recent charge-offs are idiosyncratic and not indicative of broader market issues, with a focus on managing risk within the portfolio [31][32] Question: Guidance on net interest margin - Management provided guidance for the fourth quarter net interest margin at 5.10% to 5.20%, influenced by recent Fed rate cuts [42][45] Question: Investments in AI and operational efficiencies - Management discussed ongoing investments in AI to enhance customer service and operational efficiencies, with a focus on delivering unique insights to customers [46][47] Question: Capital management priorities - Management emphasized that capital priorities include funding loan growth, share buybacks, and dividends, supported by a strong economic outlook in Puerto Rico [49][50]

Financial Data and Key Metrics Changes - The company reported diluted EPS of $1.16, a 16% increase year-over-year, with total core revenue rising by 5.6% [3] - Core revenues totaled $184 million, with total interest income at $200 million, reflecting a $6 million increase [7] - Net interest expenses were $96.5 million, up $1.7 million, while the efficiency ratio was 52% [8][9] - Return on average assets was 1.69%, and return on tangible common equity was 16.39% [9][14] Business Line Data and Key Metrics Changes - Loans and core deposit balances increased year-over-year, particularly in commercial loans, while auto loans moderated [3][10] - Average loan balances were $8 billion, up nearly 2% from the second quarter, with year-over-year loans increasing by 5% [9][10] - Core deposits were up $287 million or 3% year-over-year, with average core deposits at $9.9 billion [10][11] Market Data and Key Metrics Changes - The Puerto Rico economy is performing well, with high levels of wages and employment, and a boost from tourism [16] - The company is seeing strong business activity in Puerto Rico, with a solid commercial pipeline and credit trends [16] Company Strategy and Development Direction - The company is focusing on a digital-first strategy, enhancing customer engagement through innovative product offerings and AI-driven insights [4][5] - The Libre and Elite accounts are designed to attract mass affluent clients, contributing to growth in core deposits and loans [16] - The company is actively pursuing share buybacks and anticipates continued growth in both retail and commercial accounts [15][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Puerto Rican economy and its impact on business growth, while remaining cautious about global macroeconomic uncertainties [16][17] - The company anticipates annual loan growth in the range of 5%-6% and expects to maintain a net interest margin within the target range [14][15] Other Important Information - The company repurchased $20.4 million of common shares during the quarter [3] - Credit quality remains stable, with a non-performing loan rate of 1.22% and a CET1 ratio of 14.13% [12][14] Q&A Session Summary Question: Dynamics impacting deposit costs - Management indicated that higher deposit costs are driven by a strategic focus on attracting mass affluent clients through the Libre and Elite accounts [20][21] Question: Outlook for commercial loan growth - Management noted a solid pipeline for commercial loans and confidence in business activity in Puerto Rico [22][23] Question: Competitive landscape for savings account deposits - The average cost for the Elite account is around 1%+, targeting mass affluent clients while focusing on deepening customer relationships [30] Question: Credit quality and charge-offs - Management discussed idiosyncratic issues in the commercial loan portfolio but expressed overall confidence in credit quality [31][32] Question: Guidance on net interest margin - Management provided guidance for Q4 net interest margin at 5.10%-5.20%, influenced by recent Fed rate cuts [41][44] Question: Investments in AI and operational efficiencies - Management highlighted ongoing investments in AI to enhance customer service and operational efficiencies [46][47] Question: Capital management priorities - The company prioritizes loan growth, share buybacks, and dividends, supported by a strong capital position [50]

Financial Data and Key Metrics Changes - Earnings per share diluted increased to $1.16, up 16% year over year, with total core revenue rising by 5.6% [4] - Total interest income reached $200 million, an increase of $6 million, primarily due to higher loan and investment balances [11] - Total interest expense rose to $45 million, up $3 million, reflecting higher average balances of core deposits and wholesale funding [12] - Tangible book value was reported at $28.92 per share, with an efficiency ratio of 52% [13] - Return on average assets was 1.69%, and return on tangible common equity was 16.39% [13] Business Line Data and Key Metrics Changes - Loans and core deposit balances increased year over year, with a particular focus on commercial loans [4] - Average loan balances were $8 billion, up nearly 2% from the second quarter, while end-of-period loans held for investment totaled $8.1 billion [14] - Core deposits increased by $287 million or 3% year over year, with average core deposits at $9.9 billion [16] Market Data and Key Metrics Changes - The Puerto Rico economy is performing well, with high levels of wages and employment, and solid consumer and business liquidity [25] - The company is experiencing growth in digital banking, with digital enrollment up 8% and net new customer growth at 4.6% [6] Company Strategy and Development Direction - The company is focusing on a digital-first strategy, enhancing customer engagement through innovative product offerings and AI-driven insights [6][8] - The introduction of the Liberty and Elite accounts has successfully attracted deposits from new and existing customers [7] - The company aims to continue growing its market share in retail deposits and commercial lending [9][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the commercial pipeline and credit trends, anticipating annual loan growth of 5% to 6% [22] - The company remains watchful of global macroeconomic and geopolitical uncertainties but is optimistic about the Puerto Rican economy [26] - The anticipated effective tax rate for the year has been adjusted to 23.06% from a previous estimate of 24.99% [23] Other Important Information - The company repurchased $20.4 million of common shares during the quarter [5] - Credit quality remains stable, with a provision for credit losses of $28.3 million [19] - The company is actively investing in technology and AI to improve operational efficiency [61] Q&A Session Summary Question: Dynamics impacting deposit costs - Management indicated that higher deposit costs are driven by strategic positioning to attract mass affluent clients through the Elite account, which offers higher rates [31][32] Question: Outlook for commercial loan growth - Management noted that while there were paydowns on lines of credit, the commercial pipeline remains solid, with confidence in future growth [33][34] Question: Credit quality concerns - Management reassured that the recent charge-offs are idiosyncratic and not indicative of broader market issues, with a focus on managing risk within the portfolio [45][46] Question: Auto loan trends - Management acknowledged a seasonal increase in charge-offs but expressed optimism about the overall credit quality and growth in auto lending [50][49] Question: Margin guidance and Fed funds assumptions - Management discussed expectations for margin guidance in the fourth quarter, factoring in potential Fed rate cuts [58][60] Question: Investments in AI and operational efficiencies - Management highlighted ongoing investments in AI to enhance customer service and operational efficiencies, with a focus on delivering unique insights to customers [62][63] Question: Capital management priorities - Management outlined capital priorities, emphasizing loan growth, share buybacks, and dividends as key focuses moving forward [66]

Financial Data and Key Metrics Changes - The company reported diluted EPS of $1.16, a 16% increase year over year, with total core revenue rising by 5.6% [3] - Total interest income reached $200 million, up $6 million, while total interest expense increased to $45 million, reflecting higher average balances of core deposits and wholesale funding [7][9] - Net interest margin was 5.24%, down from 5.31%, influenced by increased interest income from the securities portfolio and a slightly higher cost of deposits [12][14] Business Line Data and Key Metrics Changes - Core revenues totaled $184 million, driven by solid performance across key areas, with banking and financial services revenues at $29 million, a decrease of $1 million [7][8] - Average loan balances were $8 billion, up nearly 2% from the second quarter, while end-of-period loans held for investment totaled $8.1 billion, reflecting a year-over-year increase of 5% [10][11] - Core deposit balances were $9.9 billion, up close to 1% year over year, with a cost of deposits at 1.47%, up five basis points [11][12] Market Data and Key Metrics Changes - The Puerto Rico economy is performing well, with historically high levels of wages and employment, and a boost from increased tourism [16] - The company is experiencing strong business activity in Puerto Rico, with a solid commercial pipeline and credit trends [16] Company Strategy and Development Direction - The company is focusing on a digital-first strategy, enhancing its position as a leader in banking innovation in Puerto Rico [4][6] - The introduction of innovative product offerings, such as the Libre and Elite accounts, is aimed at attracting new deposits and deepening customer relationships [5][16] - The company is leveraging AI to provide tailored insights to customers, enhancing customer engagement and operational efficiency [5][47] Management's Comments on Operating Environment and Future Outlook - Management remains watchful of global macroeconomic and geopolitical uncertainties but is optimistic about the company's growth prospects [17] - The company anticipates annual loan growth in the range of 5% to 6%, supported by a solid commercial pipeline [14][16] - The effective tax rate for the year is now expected to be 23.06%, down from a previous estimate of 24.9% [15] Other Important Information - The company repurchased $20.4 million of common shares during the quarter, reflecting strong capital growth [3][14] - Credit quality remains stable, with a non-performing loan rate of 1.22% and a CET1 ratio of 14.13% [14] Q&A Session Summary Question: Dynamics impacting deposit costs - Management indicated that higher deposit costs are driven by a strategy to attract mass affluent clients through competitive rates on the Libre and Elite accounts [20][21] Question: Outlook for commercial loan growth - Management expressed confidence in the commercial pipeline, noting solid business activity in Puerto Rico and expectations for continued growth [22][23] Question: Competitive rates for savings account deposits - The average cost for the Elite account is around 1% to 1.5%, targeting mass affluent clients while focusing on deepening customer relationships [28] Question: Credit quality and charge-offs - Management noted that recent charge-offs in the commercial portfolio are idiosyncratic and not indicative of broader market issues, with a focus on managing risk [29][30] Question: Q4 margin guidance and Fed funds assumptions - The company expects a net interest margin of 5.10% to 5.20% for Q4, factoring in anticipated Fed rate cuts [40][41] Question: Investments in AI and operational efficiencies - Management highlighted ongoing investments in AI to enhance customer value and operational efficiencies, with a focus on delivering unique insights [46][47] Question: Capital management and buyback outlook - The company plans to be more active in share buybacks, prioritizing loan growth and capital management in a favorable economic environment [49][50]

Financial Performance - Earnings per share (EPS) reached $1.16[7] - Total core revenues amounted to $184 million[7], showing an increase from $182 million in the previous quarter (2Q25)[15] - Net Interest Margin (NIM) stood at 5.24%[7] - Return on Average Assets (ROAA) was 1.69%[20] - Return on Average Tangible Common Equity (ROATCE) was 16.39%[21] Balance Sheet & Capital Strength - Total assets reached $12.2 billion[7] - Customer deposits totaled $9.8 billion[7] - Loans held for investment were $8.1 billion[7] - New loan production reached $623.9 million[7] - The Common Equity Tier 1 (CET1) ratio was 14.13%[7] - Stock buyback involved 477,641 common shares[7]

Exhibit 99 OFG Bancorp Reports 3Q25 Results SAN JUAN, Puerto Rico, October 22, 2025 – OFG Bancorp (NYSE: OFG), the financial holding company for Oriental Bank, today reported results for the third quarter ended September 30, 2025. EPS diluted of $1.16 compared to $1.15 in 2Q25 and $1.00 in 3Q24. Total core revenues of $184.0 million compared to $182.2 million in 2Q25 and $174.1 million in 3Q24. CEO Comment José Rafael Fernández, Chief Executive Officer, said: "Third quarter EPS grew 16% year-over-year on a ...

Company Overview - OFG Bancorp (OFG) is based in San Juan and operates in the Finance sector, with a year-to-date share price change of -0.28% [3] - The company currently pays a dividend of $0.30 per share, resulting in a dividend yield of 2.84%, which is higher than the Banks - Northeast industry's yield of 2.67% and the S&P 500's yield of 1.51% [3] Dividend Performance - OFG Bancorp's annualized dividend of $1.20 has increased by 20% from the previous year [4] - Over the last five years, the company has raised its dividend five times, achieving an average annual increase of 36.70% [4] - The current payout ratio is 28%, indicating that the company pays out 28% of its trailing 12-month earnings per share as dividends [4] Earnings Growth Expectations - For the fiscal year, OFG expects solid earnings growth, with the Zacks Consensus Estimate for 2025 projected at $4.50 per share, reflecting a year-over-year growth rate of 6.38% [5] Investment Considerations - Dividends are favored by investors for various reasons, including improving stock investing profits and providing tax advantages [5] - It is noted that high-yielding stocks may face challenges during periods of rising interest rates, yet OFG is considered a compelling investment opportunity due to its strong dividend profile [6] - The stock currently holds a Zacks Rank of 3 (Hold) [6]

Core Insights - OFG Bancorp's earnings have largely met expectations for the year, indicating stable financial performance [1] - The stock price performance has not aligned with the earnings expectations, suggesting potential market challenges or investor sentiment issues [1] Financial Performance - Earnings for OFG Bancorp have been consistent with prior forecasts, reflecting a solid operational foundation [1] - The discrepancy between earnings and stock price performance may indicate underlying market dynamics that could affect future valuations [1]

Core Insights - The company, Octopus Future Generations VCT plc, focuses on investing in businesses that address significant societal challenges, providing investors with opportunities to participate in the growth of purpose-driven companies [1][2]. Financial Performance - The Net Asset Value (NAV) per share as of 30 June 2025 was 88.4p, reflecting a decrease of 0.4p per share (-0.5%) from 31 December 2024 [4][11]. - The company invested £4.5 million into five new and follow-on opportunities during the six-month period [5]. - The total net assets of the company stood at £52.6 million as of 30 June 2025 [11]. Fundraising Activities - An initial offer to raise up to £5 million was launched on 3 February 2025 and successfully closed on 1 April 2025 [6]. Dividend Declaration - A special dividend of 5.6p per share was declared on 22 August 2025, marking the company's first dividend payment [8][65]. Investment Strategy - The company aims to invest in businesses aligned with three key themes: revitalising healthcare, empowering people, and building a sustainable planet [7][16]. - As of 30 June 2025, the portfolio comprised 37 investments, with the following distribution: 19 in revitalising healthcare, 11 in empowering people, and 7 in building a sustainable planet [16]. Portfolio Performance - The NAV decline was attributed to downward valuation movements across 13 companies, which collectively decreased in value by £3.1 million [25]. - Conversely, 13 companies in the portfolio saw a collective increase in value of £3.2 million, indicating potential for growth despite economic challenges [26]. Compliance and Qualification - The company met the requirement for 80% of its funds to be invested in VCT-qualifying holdings by 30 June 2025, with 100% of the portfolio qualifying under HMRC rules [10][31]. Management and Team Changes - The company has committed to enhancing team resources to improve focus on driving returns and realisations from the existing portfolio [13].

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