OFG BANCORP

The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates and assumptions 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 management 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 2024 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 2024 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 2024 Form 10-K.

FINANCIAL HIGHLIGHTS

We believe that the quarter ended March 31, 2025, reflected a strong start to the year with solid overall performance, consistent financial results, and excellent operating execution. Highlights included customer and deposit growth, and improved consumer credit. As part of OFG's Digital First strategy, OFG is the first among Puerto Rico banks to launch an Omnichannel online and mobile app for a truly seamless experience, Smart Banking insights to help customers better manage their finances, and Apple Pay for fast and easy credit and debit transactions. While OFG's strategic investment in technology is driving innovation, its investment in people is building strong customer relationships through OFG's island-wide network.

During the quarter ended March 31, 2025, OFG also repurchased $23.4 million of common shares and increased the dividend on its common stock by 20%. The increase in capital return was supported by its earnings and elevated capital levels, with a CET1 ratio at 14.3%. We believe that at this time, Puerto Rico’s economy continues to be stable, benefiting from public and private investment, but we are closely monitoring increased global economic and geopolitical uncertainties. OFG's balance sheet provides us with a strong foundation during volatile or challenging times.

First Quarter of 2025:

Earnings per share diluted was $1.00 compared to $1.09 in the fourth quarter of 2024 and $1.05 in the first quarter of 2024. Net income of $45.6 million compared to $50.3 million in the fourth quarter of 2025 and $49.7 million in the first quarter of 2024.

Performance metrics: Net interest margin of 5.42%, return on average assets of 1.56%, return on average tangible common stockholders’ equity of 15.28%, and efficiency ratio of 52.42%.

Total Interest Income of $189.2 million compared to $190.2 million in the fourth quarter of 2024 and $183.4 million in the first quarter of 2024. Compared to the fourth quarter of 2024, the first quarter of 2025 decreased $0.9 million, reflecting two fewer business days, which negatively affected interest income by approximately $3.0 million, partially offset by higher balances and yields on investment securities and higher loan balances.

Total Interest Expense of $40.2 million compared to $41.0 million in the fourth quarter of 2024 and $39.3 million in the first quarter of 2024. Compared to the fourth quarter of 2024, the first quarter of 2025 decreased $0.9 million, primarily reflecting two fewer business days. Higher average balances of core deposits at a lower rate were partially offset by higher average balances of borrowings and brokered deposits.

Total Banking and Financial Service Revenuesof $29.2 million compared to $32.8 million in the fourth quarter of 2024 and $30.1 million in the first quarter of 2024. The fourth quarter of 2024 included $4.8 million combined in annual insurance fees and favorable MSR valuation. Excluding those items, the first quarter of 2025 total banking and financial services revenues increased.

Pre-Provision Net Revenuesof $85.1 million compared to $83.0 million in the fourth quarter of 2024 and $83.0 million in the first quarter of 2024.

Total Provision for Credit Losses of $25.7 million compared to $30.2 million in the fourth quarter of 2024 and $15.1 million in the first quarter of 2024. The first quarter of 2025 primarily reflected $17.4 million for increased loan volume, $4.8 million for a specific reserve for three commercial loans, and $3.5 million to reflect auto current loss given default trends post pandemic.

Credit Quality: Net charge-offs (“NCOs”) of $20.4 million (1.05% of average loans) compared to $15.9 million (0.82%) in the fourth quarter of 2024 and $19.8 million (1.05%) in the first quarter of 2024. The first quarter of 2025 included a $2.9 million partial charge-off of a previously reserved commercial US loan, while the fourth quarter of 2024 included $2.6 million in recoveries from the sale of previously fully charged-off auto and consumer loans. The early and total delinquency rates in the first quarter of 2025 improved to 2.19% and 3.49%, respectively, reflecting seasonal trends. The nonperforming loan rate was 1.11%.

Total Non-Interest Expense of $93.5 million compared to $99.7 million in the fourth quarter of 2024 and $91.4 million in the first quarter of 2024. Compared to the fourth quarter of 2024, the first quarter of 2025 compensation reflected $1.6 million in seasonal FICA expenses and merit raises, while general and administrative declined $2.0 million, reflecting a $3.1 million volume incentive payment from a business partner, partially offset by $1.2 million for increased electronic banking fee volume and other related costs. The fourth quarter of 2024 included $4.8 million in early retirement, rightsizing and performance incentives.

Income Tax Expense of $13.9 million compared to $2.4 million in the fourth quarter of 2024 and $18.2 million in the first quarter of 2024. The effective tax rate in the first quarter of 2025 was 23.34%, reflecting an anticipated rate of 26.14% for the year and the benefit of $1.7 million in discrete items.

Loans Held for Investmentof $7.85 billion compared to $7.79 billion in the fourth quarter of 2024 and $7.54 billion in the first quarter of 2024. Compared to the fourth quarter of 2024, the first quarter of 2025 loans increased 0.8%, reflecting growth in auto, commercial US, commercial PR, and consumer loans, partially offset by a decline in residential mortgage loans. Loans increased 4.15% year-over-year.

New Loan Productionof $558.9 million compared to $609.0 million in the fourth quarter of 2024 and $536.6 million in the first quarter of 2024. Compared to the fourth quarter of 2024, the first quarter of 2025 reflected seasonal declines in Puerto Rico lending, partially offset by increases in U.S. commercial lending.

Total Investments of $2.79 billion compared to $2.72 billion in the fourth quarter of 2024 and $2.48 billion in the first quarter of 2024. The first quarter of 2025 reflected purchases of $100 million of mortgage-backed securities yielding 5.40%, partially offset by MBS repayments.

Customer Depositsof $9.76 billion increased $308.4 million from $9.45 billion in the fourth quarter of 2024 and $211.5 million from $9.55 billion in the first quarter of 2024. Compared to the fourth quarter of 2024, the first quarter of 2025 reflected increases in demand, savings and time deposits, from commercial, government, and retail accounts.

Total Borrowings and Brokered Deposits of $421.5 million compared to $557.2 million in the fourth quarter of 2024 and $203.3 million in the first quarter of 2024. The first quarter of 2025 reflected the maturity of $145 million in repurchase agreement funding and Federal Home Loan Bank advances. Separately, a two-year $200 million FHLB advance was renewed at 4.14% compared to the previous rate of 4.52%.

Cash and Cash Equivalentsof $710.6 million compared to $591.1 million in the fourth quarter of 2024 and $754.4 million in the first quarter of 2024.

Capital: CET1 ratio was 14.27% compared to 14.26% in the fourth quarter of 2024 and 14.45% in the first quarter of 2024. Tangible Common Equity ratio was 10.30% compared to 10.13% in the fourth quarter of 2024 and 10.06% in the first quarter of 2024. Tangible Book Value per share was $26.66 compared to $25.43 in the fourth quarter of 2024 and $23.55 in the first quarter of 2024.

Selected income statement and balance sheet data and key performance indicators are presented in the tables below:

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 ended March 31, 2025 and 2024.

TABLE 1 - ANALYSIS OF NET INTEREST INCOME AND CHANGES DUE TO VOLUME/RATE FOR THE QUARTERS ENDED MARCH 31, 2025 AND 2024

C - CHANGES IN NET INTEREST INCOME DUE TO:

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.

Net interest income of $149.1 million increased $5.0 million from $144.1 million. Tax equivalent basis net interest income of $152.7 million increased $4.5 million, or 3.0%, from $148.2 million.

Interest rate spread increased 1 basis points to 5.27% from 5.26% and net interest margin increased 2 basis points to 5.42% from 5.40%. This reflects an increase of 1 basis point in the total average yield of interest-earning assets.

Net interest income was positively impacted by:

•A $3.8 million increase in interest income from loans, primarily driven by: (i) higher interest income of $5.6 million from auto loans, mainly due to an increase in the average balance of this portfolio by $265.7 million from new loans originated; and (ii) higher interest income of $1.2 million from consumer loans, mainly due to an increase in the average balance of this portfolio by $40.7 million. These increases were partially offset by lower interest income of: (i) $1.4 million from commercial loans, reflecting the repricing of variable rate loans at lower market rates; and (ii) $1.6 million from residential mortgage loans, reflecting a decrease in the average balance of this portfolio by $106.3 million, mainly from regular paydowns and the securitization and sale of conforming loans; and

•A $3.7 million increase in interest income from investments securities, primarily due to the acquisition of higher-yield investment securities. It reflects higher yield by 27 basis points, which contributed to an increase in interest income of approximately $2.0 million and higher average volume of $176.6 million, resulting in an increase in interest income of approximately $1.6 million.

These increases were offset by lower interest income on interest bearing cash and money market investments of $1.7 million, reflecting lower market rates, and higher interest expense of $900 thousand from interest paid on borrowings of $1.3 million reflecting FHLB advances and securities under agreements to repurchase taken during 2024, offset by lower interest on deposits of $0.5 million due to lower average cost of total deposits of 4 basis point.

TABLE 2 - NON-INTEREST INCOME SUMMARY

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.

OFG recorded non-interest income, net, in the amount of $29.5 million, compared to $30.3 million, a decrease of 2.7%, or $831 thousand. The decrease in non-interest income was mainly due to the net effect of:

•A $1.3 million decrease in banking service revenues mainly driven by reduced interchange fees due to the implementation of Durbin Amendment that took effect in July 1, 2024, partially offset by an increase in: (i) merchant income of $431 thousand from higher volume of transactions, and (ii) a merchant business sponsorship commissions payment of $188 thousand received during the current quarter;

•A $348 thousand increase in wealth management revenues, mainly due to: (i) higher revenues from investment advisory services of $191 thousand, and (ii) higher insurance income by $133 thousand, reflecting increases in annuities and insurance policies; and

•A $83 thousand increase in mortgage banking activities, as a result of: (i) $1.1 million higher servicing fees driven by the purchase of a servicing portfolio in late 2024, (ii) $339 thousand favorable valuation of held-for-sale mortgage portfolio, and (iii) $78 thousand higher gain on securitization and sales of mortgage loans; partially offset by (i) a $1.2 million decrease in MSR valuation, and (ii) $160 thousand higher losses in repurchased loans.

TABLE 3 - NON-INTEREST EXPENSES SUMMARY

Non-interest expense was $93.5 million, representing an increase of 2.2% or $2.0 million, compared to $91.4 million. The increase in non-interest expense was mainly due to:

•Increase of $1.1 million in professional and service fees reflecting higher compliance-related expenses;

•Increase of $498 thousand in occupancy, equipment and infrastructure costs, mainly due to higher infrastructure costs of $994 thousand, offset by lower lease expense of $413 thousand;

•Increase of $483 thousand in taxes, other than payroll and income taxes, mainly related to higher municipal taxes; and

•Increase of $360 thousand in foreclosed real estate and other repossessed assets expenses, net of income, due to lower gain on sale of foreclosed real estate from lower volume of properties sold.

These increases were partially offset by a decrease of $696 thousand in electronic banking charges, reflecting a $3.1 million volume incentive payment from a business partner, partially offset by $1.2 million for increased electronic banking fee volume and other related costs.

The efficiency ratio was 52.42% compared to 52.49%. 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 March 31, 2025 and 2024 amounted to $305 thousand and $289 thousand, respectively.

Provision for Credit Losses

Provision for credit losses increased by $10.6 million to $25.7 million from $15.1 million. The provision for credit losses for the quarter ended March 31, 2025, reflected adjustments of $17.4 million related to loan volume, $4.8 million in specific reserves and $3.5 million to reflect auto current loss given default trends post pandemic. The provision for credit losses for the quarter ended March 31, 2024, reflected adjustments of $15.1 million related to loan volume and $1.7 million as a result of the strategic sale of a performing U.S. commercial loan, partially offset by $1.7 million related to a reduction in specific reserves for payments received on substantially reserved U.S. commercial loans.

Income Tax Expense

Income tax expense for the quarter ended March 31, 2025 decreased by $4.3 million to $13.9 million from $18.2 million. OFG maintained an effective tax rate lower than the statutory rate for the quarters ended March 31, 2025 and 2024 of 23.3% and 26.8%, respectively. The decrease is mainly related to investment subject to preferential tax treatment under the PR Code, a discrete tax windfall on stock options, and release of unrecognized tax benefits during the current period.

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 to 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, dedicated services or time, among others. Following are the results of operations and the selected financial information by operating segment for the quarters ended March 31, 2025 and 2024.

Eliminations include interest income and expense for a time deposit opened by the Bank in Oriental Overseas, the IBEunit, which operates within the Bank. The time deposit with a balance of $279.6 million and $301.4 million at March 31, 2025 and 2024, respectively, to fund Oriental Overseas operations is included in the Treasury Segment with its corresponding interest expense, and the related interest income is included in the Banking Segment, and 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 period was mainly as a result of higher interest rate.

Banking

OFG’s banking segment net income before taxes decreased by $9.3 million from $37.4 million to $28.1 million, mainly due to:

•Increase of $10.5 million in provision for credit losses, mainly due to growth in loan balances; and

•Decrease of $2.4 million in non-interest income primarily related to reduced interchange fees due to the implementation of Durbin Amendment which took effect for the Bank in July 1, 2024.

The decrease in the banking segment’s net income before taxes was partially offset by:

•Increase of$4.0 million in interest income from loans, driven by increased yields on higher balances; and

•Decrease of$1.3 million in interest expense primarily related to a decrease of 4 basis points in the average cost of deposits.

Wealth Management

Wealth management segment revenue consists of commissions and fees from fiduciary activities, securities brokerage, and insurance and reinsurance activities. Net income before taxes from this segment increased from $2.6 million to $3.6 million, mainly from higher non interest income of $1.4 million, mainly related to higher broker-dealer fees from investment advisory service fees and mutual funds retailer fees, higher insurance income from annuities, partially offset by higher salaries and employee benefits of $601 thousand.

Treasury

Treasury segment net income before taxes decreased by $182 thousand. This reduction is mainly due to higher interest expense of $2.3 million, which includes $1.3 million from interest paid on borrowings and $844 thousand from brokered deposits. These expenses reflect FHLB advances, securities under agreements to repurchase and brokered deposits taken during 2024. This was partially offset by an increase in interest income of $1.9 million from the purchases of higher-yield investment securities.

ANALYSIS OF FINANCIAL CONDITION

Assets Owned

At March 31, 2025, OFG’s total assets amounted to $11.729 billion, an increase of $228.6 million, when compared to $11.501 billion at December 31, 2024.

Cash and due from banks increased by $119.0 million to $703.5 million, reflecting higher deposit balances.

The investment portfolio increased by $65.7 million or 2.4% primarily driven by $100 million new available-for-sale mortgage-backed securities yielding 5.40%, and $19.2 million in mortgage loan securitization. These increases were offset by principal paydowns. 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 March 31, 2025, OFG’s net loan portfolio increased by $54.4 million or 0.7% reflecting increases in US and Puerto Rico commercial, auto and consumer loans, partially offset by portfolio run-off.

Financial Assets Managed

At March 31, 2025, OFG’s financial assets include those managed by OFG’s trust division and its securities broker-dealer and insurance agency subsidiaries. OFG’s trust division offers various types of individual retirement accounts and manages retirement plans and custodian and corporate trust accounts. At March 31, 2025 and December 31, 2024, the total assets managed by OFG’s trust division amounted to $2.246 billion and $2.262 billion, respectively. The decrease of $16.3 million reflects changes in current 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 March 31, 2025, total assets managed by the securities broker-dealer and insurance agency subsidiaries from their customers’ investment accounts amounted to $2.335 billion, compared to $2.247 billion at December 31, 2024. The increase of $88.4 million in broker-dealer related assets is mainly due to new customers accounts opened during the current quarter.

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 quarter ended March 31, 2025, OFG performed an assessment of events or circumstances that could trigger reductions in the book value of the goodwill. Based on this assessment, no impairments were identified at March 31, 2025.

As of both March 31, 2025 and December 31, 2024, OFG had $84.2 million of goodwill allocated as follows: $84.1 million to the banking segment and $100 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.

TABLE 5 - ASSETS SUMMARY AND COMPOSITION

TABLE 6 - LOAN PORTFOLIO COMPOSITION

OFG’s loan portfolio is composed of commercial, mortgage, consumer, and auto loans. As shown in Table 6 above, total loans, net, amounted to $7.688 billion at March 31, 2025, a 0.7% increase when compared to $7.634 billion at December 31, 2024. The composition and trends of OFG’s loans held-for-investment portfolio were as follows:

•Commercial loan portfolio amounted to $3.153 billion (40.2% of the gross loan portfolio) compared to $3.103 billion (39.8% of the gross loan portfolio) at December 31, 2024, a 1.6% increase as a result of originations and credit lines usage during the first quarter of 2025. Commercial loans secured by non-owner occupied commercial real estate amounted to $807.3 million and $796.9 million at March 31, 2025 and December 31, 2024, respectively, which represented 10.3% and 10.2% of our total gross loan portfolio held for investment. Commercial US loans amounted to $727.4 million and $704.1 million at March 31, 2025 and December 31, 2024, respectively, which represented 9.3% and 9.0% of our total gross loan portfolio held for investment.

Commercial loan production increased 8.7% or $17.7 million to $221.2 million in the quarter ended March 31, 2025 from $203.5 million in the prior year quarter, mainly in the commercial US loan portfolio. Commercial US loans activities include the purchase of middle market senior secured cash flow loan participations and the purchase of participations of loans to small and medium sized businesses. Excluding commercial US loans activities, commercial PR loan production decreased 12.4% to $163.2 million in the quarter ended March 31, 2025 from $186.4 million in the prior year quarter.

•Mortgage loan portfolio amounted to $1.436 billion (18.3% of the gross loan portfolio) compared to $1.471 billion (18.9% of the gross originated loan portfolio) at December 31, 2024, a 2.4% decrease resulting from regular paydowns of residential mortgages and securitization of conforming loans into mortgage-backed securities. Mortgage loans included delinquent loans in the GNMA buy-back option program amounting to $44.7 million and $48.6 million at March 31, 2025 and December 31, 2024, 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 totaled $37.0 million in the quarter ended March 31, 2025, which represents an increase of 15.0% from $32.2 million in the prior year quarter.

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 US 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 $670.8 million (8.5% of the gross loan portfolio) compared to $668.6 million (8.6% of the gross loan portfolio) at December 31, 2024. Consumer loan production decreased by 1.1% or $732 thousand to $67.9 million in the quarter ended March 31, 2025 from $68.6 million in the prior year quarter.

•Auto loans portfolio amounted to $2.593 billion (33.0% of the gross loan portfolio) compared to $2.549 billion (32.7% of the gross originated loan portfolio) at December 31, 2024. Auto loans production increased by 0.3% or $583 thousand to $232.9 million in the quarter ended March 31, 2025 from $232.3 million in the prior year quarter.

TABLE 7 - PUERTO RICO GOVERNMENT RELATED LOANS

At March 31, 2025, OFG has $87.3 million of direct credit exposure to the Puerto Rico government, a $20.8 million increase from $66.4 million at December 31, 2024.

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 ended March 31, 2025 and 2024 and as of March 31, 2025 and December 31, 2024. In addition, Table 6 sets forth the composition of the loan portfolio.

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 and 14). At March 31, 2025, OFG had $82.2 million of non-accrual loans held for investment, including $8.9 million PCD loans, compared to $78.0 million at December 31, 2024, reflecting an increase of $11.3 million in commercial loan portfolio and a seasonal decrease of $6.0 million, $725 thousand $347 thousand in auto, consumer and mortgage loan portfolios, respectively (see Table 13). There were no past due or non-accrual commercial loans held-for-sale as of March 31, 2025 and December 31, 2024.

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 March 31, 2025 and December 31, 2024, the outstanding balance of these residential mortgage loans was $5.3 million and $5.0 million, respectively.

At March 31, 2025, OFG’s non-performing assets increased by 5.2% to $98.4 million (0.84% total assets) from $93.6 million (0.81% of total assets) at December 31, 2024, mainly from non-performing loans.

Foreclosed real estate increased from $4.0 million at December 31, 2024 to $4.3 million at March 31, 2025 and other repossessed assets increased from $6.6 million at December 31, 2024 to $6.7 million at March 31, 2025, both recorded at fair value. OFG does not expect non-performing loans to result in significantly higher losses. At March 31, 2025, the allowance coverage ratio to non-performing loans was 207.1% (211.9% at December 31, 2024).

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, for PCD loans the determination of non-accrual or accrual status 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 March 31, 2025, OFG’s non-performing commercial loans amounted to $52.8 million (60.4% of OFG’s non-performing loans), a 27.1% increase from $41.6 million at December 31, 2024 (50.1% of OFG’s non-performing loans), mostly related to a $6.8 million PCD commercial loan and a $6.1 million Non-PCD commercial US loan. 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 March 31, 2025, OFG’s non-performing mortgage loans totaled $17.1 million (19.6% of OFG’s non-performing loans), a 0.1% decrease from $17.2 million (20.7% of OFG’s non-performing loans) at December 31, 2024. 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 March 31, 2025, OFG’s non-performing consumer loans amounted to $3.5 million (4.0% of OFG’s non-performing loans), a 17.2% decrease from $4.2 million at December 31, 2024 (5.1% 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 March 31, 2025, OFG’s non-performing auto loans amounted to $14.0 million (16.0% of OFG’s total non-performing loans), a 30.0% decrease from $20.1 million at December 31, 2024 (24.1% 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, USDA Rural Development (RURAL), 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.

In order 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.

TABLE 8 - ALLOWANCE FOR CREDIT LOSSES BREAKDOWN

TABLE 9 - ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES

TABLE 10 - ALLOWANCE FOR CREDIT LOSSES SUMMARY

TABLE 11 — NET CREDIT LOSSES STATISTICS ON LOANS

TABLE 11 — NET CREDIT LOSSES STATISTICS ON LOANS (CONTINUED)

Net charge-offs for the quarter ended March 31, 2025 amounted to $20.4 million (1.05% of average loans), increasing by $558 thousand, when compared to $19.8 million (1.05% of average loans) in prior year quarter.

Net charge-offs variances were as follows:

•Residential mortgage loans net recoveries in the first quarter of 2025 amounted to $504 thousand, decreasing by $254 thousand when compared to net recoveries of $758 thousand in the first quarter of 2024.

•Commercial loans net charge-offs in the first quarter of 2025 amounted $2.9 million, decreasing by $2.3 million, when compared to $5.1 million in the first quarter of 2024. The first quarter of 2025 includes a $2.9 million partial charge-off from a previously reserved commercial US loan. The first quarter of 2024 includes $3.5 million from previously and fully-reserved nonperforming paycheck protection program (“PPP”) loans and a $1.7 million charge-off from a commercial US loan sold during the period.

•Consumer loans net charge-offs in the first quarter of 2025 amounted $7.5 million increasing by $256 thousand when compared to $7.3 million in the first quarter of 2024. The increase in net charge-offs in the first quarter of 2025 was mainly driven by an increase in business volume.

•Auto loans net charge-offs in the first quarter of 2025 amounted to $10.5 million, increasing by $2.3 million, when compared to $8.2 million in the first quarter of 2024, reflecting post-pandemic credit normalization. The increase in net charge-offs in the first quarter of 2025 was also impacted by an increase in business volume.

TABLE 12 — NON-PERFORMING ASSETS

TABLE 13 — NON-ACCRUAL LOANS

TABLE 14 - NON-PERFORMING LOANS

TABLE 15 - LIABILITIES SUMMARY AND COMPOSITION

Liabilities and Funding Sources

As shown in Table 15 above, at March 31, 2025, OFG’s total liabilities were $10.434 billion, 1.8% higher than the $10.246 billion reported at December 31, 2024. Deposits and borrowings, OFG’s funding sources, amounted to $10.179 billion at March 31, 2025 compared to $10.006 billion at December 31, 2024. Deposits, excluding accrued interest payable, increased by $318.4 million or 3.3% reflecting increases in demand deposits of $214.0 million, time deposits of $61.7 million and savings and money market accounts of $42.7 million.

At March 31, 2025 and December 31, 2024, total public fund deposits from various Puerto Rico government municipalities, agencies and corporations amounted to $1.537 billion and $1.445 billion, respectively. These public funds were collateralized with securities and commercial loans amounting to $1.591 billion and $1.507 billion at March 31, 2025 and December 31, 2024, respectively.

As of March 31, 2025, borrowings consist of long term FHLB advances amounting to $255.6 million. Borrowings decreased by $145.5 million or 36.3% from December 31, 2024, reflecting the maturity in FHLB advances and securities sold under agreements to repurchase during the quarter as part of OFG’s asset liability management strategies.

Stockholders’ Equity

At March 31, 2025, OFG’s total stockholders’ equity was $1.295 billion, a 3.3% increase when compared to $1.254 billion at December 31, 2024. This reflects an increase in retained earnings of $30.0 million and legal surplus of $4.4 million, mainly due to $45.6 million in net income, partially offset by $11.2 million in common stock dividends, and lower accumulated other comprehensive loss, net of tax, of $31.8 million from favorable market value adjustments in available-for-sale investment securities. These variances were partially offset by $23.9 million from higher treasury stock as a result of repurchases of common stock in the aggregate amount of $23.4 million during the quarter ended March 31, 2025 in connection with the $50 million stock buy back program announced in October 2024.

Regulatory Capital

OFG and the Bank are subject to regulatory capital requirements established by the Federal Reserve System (“FRB”) and the Federal Deposit Insurance Corporation (“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 March 31, 2025, the capital ratios of OFG and the Bank continue to exceed the minimum requirements for being “well-capitalized” under the Basel III capital rules.

On January 1, 2020, OFG implemented CECL using the modified retrospective approach, with an impact to capital of $25.5 million, net of its corresponding deferred tax effect. On March 27, 2020, in response to the Covid-19 pandemic, U.S. banking regulators issued an interim final rule that OFG adopted to delay for two years the initial adoption impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during 2020 and 2021 (i.e., a five-year transition period). During the two-year delay, OFG added back to common equity tier 1 (“CET1”) capital 100% of the initial adoption impact of CECL plus 25% of the cumulative quarterly changes in the ACL (i.e., quarterly transitional amounts). After two years, starting on January 1, 2022 and ending in December 31, 2024, the quarterly transitional amounts along with the initial adoption impact of CECL were phased out of CET1 capital over the three-year period.

The risk-based capital ratios presented in Table 16 include CET1, tier 1 capital, total capital and leverage capital as of March 31, 2025 and December 31, 2024 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 March 31, 2025 and December 31, 2024:

TABLE 16 — CAPITAL, DIVIDENDS AND STOCK DATA

The following table presents OFG’s capital adequacy information under the Basel III capital rules:

From December 31, 2024 to March 31, 2025, leverage capital ratio decreased from 10.93% to 10.83%, tier 1 risk-based capital ratio and common equity tier 1 capital ratio increased from 14.26% to 14.27%, and total risk-based capital ratio increased from 15.52% to 15.53%. The increases in regulatory capital ratios reflected an increase in regulatory capital of $4.8 million, partially offset by an increase in risk-weighted assets of $30.6 million. Regulatory capital increased mainly due to net income, net of dividends, offset by CECL transition deduction elimination and treasury stock repurchases. Risk-weighted assets increased mainly due to an increase in loans, investment securities, and other assets.

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 March 31, 2025 and December 31, 2024:

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.

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 March 31, 2025 and December 31, 2024:

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.

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.

Tangible common equity to tangible total assets increased from 10.13% to 10.30%, reflecting an increase in retained earnings from net income, net of dividends and stock repurchases.

OFG’s common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “OFG”. At March 31, 2025 and December 31, 2024, OFG’s market capitalization for its outstanding common stock was $1.798 billion ($40.02 per share) and $1.923 billion ($42.32 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:

In October 2024, OFG announced that its Board of Directors approved a $50.0 million stock repurchase program, in addition to the $50 million stock repurchase program approved in January 2024. 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 its common stock during the March 31, 2025 and 2024 other than through its publicly announced stock repurchase programs.

At March 31, 2025, the estimated remaining number of shares that may be purchased under the both programs is 157,017 and was calculated by dividing the remaining balance of $6.3 million by $40.02 (closing price of OFG’s common stock at March 31, 2025).