OFG Bancorp Q3 2025 Earnings Report

OFG Bancorp EPS Results

• Actual EPS: $1.16
• Consensus EPS: $1.16
• Beat/Miss: Met Expectations
• One Year Ago EPS: $1.00

OFG Bancorp Revenue Results

• Actual Revenue: $184.00 million
• Expected Revenue: $186.71 million
• Beat/Miss: Missed by -$2.71 million
• YoY Revenue Growth: +5.70%

OFG Bancorp Announcement Details

• Quarter: Q3 2025
• Date: 10/22/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, October 22, 2025
• Conference Call Time: 10:00AM ET

OFG Bancorp (NYSE:OFG), through its principal subsidiary Oriental Bank, is a financial holding company headquartered in San Juan, Puerto Rico. The company provides a wide range of banking services, including commercial and consumer deposit accounts, small business loans, corporate lending, treasury management, and cash management solutions. Its consumer offerings encompass personal checking and savings accounts, credit cards, and electronic banking platforms designed to serve retail customers across its markets.

In addition to traditional banking products, OFG Bancorp offers mortgage origination and servicing, as well as wealth management and trust services for high‐net‐worth individuals and institutional clients. The company’s mortgage operations include home purchase and refinance loans, while its wealth division focuses on investment advisory, retirement planning, and fiduciary solutions tailored to individual and corporate fiduciaries.

OFG Bancorp’s primary markets are Puerto Rico and the U.S. Virgin Islands, where it operates a network of branches and automated teller machines. The company caters to both urban and rural communities, seeking to support local economic development through small business financing and community outreach initiatives. Its regional focus allows OFG Bancorp to adapt its product offerings and service delivery to the unique needs of Caribbean markets.

Founded as Oriental Bank & Trust in 1964, the institution reorganized in 2010 under the OFG Bancorp holding structure to strengthen its capital base and governance framework. Today, the company is overseen by a board of directors and led by a seasoned executive team with deep experience in banking, risk management, and community relations. OFG Bancorp continues to emphasize financial stability and customer service as cornerstones of its strategic growth plan.

OFG Bancorp Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong quarterly results: Diluted EPS was $1.16 (up 16% YoY) on a 5.6% increase in core revenue, management repurchased $20.4M of stock, and profitability metrics remain healthy (ROA 1.69%, ROTCE 16.39%).
• Positive Sentiment: Digital‑first and AI momentum: Digital enrollment (+8%), virtual teller use (25%), and product wins (Libre new customers +17%, related deposits +14%) plus AI insights (avg. 9/month, 93% positive) are driving retail growth and deposit market share gains.
• Positive Sentiment: Commercial lending focus and loan growth target: New loan originations were $624M, loans held for investment totaled $8.1B (year‑over‑year loans +5%), and management expects annual loan growth of 5–6% with a solid commercial pipeline.
• Negative Sentiment: Credit costs increased: Q3 provision for credit losses was $28.3M (including specific reserves for two commercial loans) and net charge‑offs rose to $20M, with NPLs at 1.22%; management calls most issues idiosyncratic but they pressured results.
• Negative Sentiment: Funding and margin pressure: Core deposit cost rose to 1.47% (partly intentional to attract mass‑affluent customers), NIM fell to 5.24% Q/Q, and Q4 NIM is guided to 5.1–5.2% while modeling Fed cuts—a potential near‑term headwind to earnings.

Presentation

[Operator]

Good morning. Thank you for joining OFG Bancorp's conference call. My name is Chloe, and I will be your operator today. Our speakers are José Rafael Fernández, Chief Executive Officer and Chairman of the Board of Directors, Maritza Arizmendi, Chief Financial Officer, and César Ortiz, Chief Risk Officer. A presentation accompanies today's remarks. It can be found on the homepage of the OFG website under the Third Quarter 2025 section. This call may feature certain forward-looking statements about management's goals, plans, and expectations. These statements are subject to risks and uncertainties outlined in the Risk Factors section of OFG's SEC filings. Actual results may differ materially from those currently anticipated. We disclaim any obligation to update information disclosed in this call as a result of developments that occur afterwards. All lines have been placed on mute to prevent any background noise.

[Operator]

After the speaker's remarks, there will be a question and answer session. Instructions will be given at that time. I would now like to turn the call over to Mr. Fernández.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Good morning, and thank you for joining us. We are pleased to report our third quarter results. Let's go to page three of the presentation. We had a strong quarter with diluted EPS of $1.16, up 16% year-over-year on a 5.6% increase in total core revenue. Loans and core deposit balances increased year-over-year with particular growth in commercial loans, which has been a strategic focus as auto loans moderated, something we have been anticipating for a while. Performance metrics continue to be strong. Credit was solid. Capital continued to grow, and we repurchased $20.4 million of common shares. Business activity remains strong in Puerto Rico with a continued outlook for growth. Please turn to page four. Our digital-first strategy is making significant strides, expanding our positioning as leaders in banking innovation in Puerto Rico.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

As a result of our digital-first strategy, we're gaining strong momentum in both adoption and new accounts. During the third quarter, nearly all our routine retail customer transactions were made through our digital and self-service channels. This is driven by continued year-over-year growth in digital enrollment at 8%, digital loan payments at 5%, virtual teller utilization at 25%, and net new customer growth at 4.6%. All this is being enhanced by two related strategies. The first is our innovative product service offerings. Last year, we introduced the Libre account for the mass market and the Elite account for the mass affluent. Both offer reward programs unique to Puerto Rico and have been successful in attracting deposits from new and existing customers. The number of Libre new customers increased 17% year-over-year.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

27% of Libre accounts have been opened digitally versus 19% last year, and new Libre accounts generated a 14% increase in related deposits. The Elite account continues to lead the market as a unique alternative for clients who want to maximize their financial progress. We have also enhanced our Oriental Biz account suite, making treasury management easier and secure for small businesses, driving higher new account openings and deposits. The second strategy is leveraging AI. Customers now receive tailored insights based on cash flows and payment habits, helping them monitor their budgets and access value-added tools to improve their finances directly from their mobile phones. We are providing an average of nine insights per month per account. Customer feedback has been running 93% positive.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

This quarter, we also launched internal initiatives to apply AI to boost efficiency across all banking operations and make it faster and easier to solve our customer questions and needs. All this has directly contributed to our increased market share in retail deposits and positions OFG Bancorp for continued success in the coming years. Now, here's Maritza to go over the financials in more detail.

[Maritza Arizmendi, CFO at OFG Bancorp]

Thank you, José. Let's turn to page five to review our financial highlights. All comparisons are to the second quarter unless otherwise noted. Core revenues total $184 million, driven by solid performance across key areas. Total interest income was $200 million, an increase of $6 million. This mainly reflects higher balances of loans and investments and $1.6 million from one additional business day. Total interest expense was $45 million, an increase of $3 million. This mainly reflects higher average balances of core deposits, higher average balances of wholesale funding, and $0.5 million impact from the extra business day. Total banking and financial services revenues were $29 million, a decrease of $1 million. This mainly reflects a decline in mortgage banking revenues due to a change in MSR valuation.

[Maritza Arizmendi, CFO at OFG Bancorp]

Compared to a year ago, when we were first subject to reduced interest and fees under Durbin, total banking and financial services revenues were up $3 million or 11%. Other income category was $2.2 million. This included gains from OFG Ventures investment in fintech-focused funds. Looking at net interest expenses, they total $96.5 million, up $1.7 million. This reflected a strategic investment of $1.1 million in technology, people, and process improvement, $1.1 million tied to increased business activity and marketing, and an $800,000 reduction in foreclosed real estate costs. Income tax expenses were $9.5 million with a tax rate of 15.53%. This reflects a benefit of $2.3 million in discrete items during the quarter and an anticipated rate of 23.06% for the year. Looking at some other metrics, tangible book value was $28.92/share. Efficiency ratio was 52%.

[Maritza Arizmendi, CFO at OFG Bancorp]

Return on average assets was 1.69%, and return on tangible common equity, on average tangible common equity, was 16.39%. Now, let's turn to page six to review our operational highlights. Total assets were $12.2 billion, up 7% from a year ago and steady compared to the second quarter. Average loan balances were $8 billion, up close to 2% from the second quarter. End of loans held for investment total $8.1 billion. Sequentially, loans declined $63 million or 0.8%, mainly due to repayment of commercial lines of credit funded in the second quarter. Year-over-year, loans increased 5%, reflecting our strategy to grow commercial lending in Puerto Rico and the U.S. Loan yield was 7.90%, down one basis point. New loan origination was $624 million.

[Maritza Arizmendi, CFO at OFG Bancorp]

As José mentioned, this reflected in part moderation in auto loans that we have been anticipating and an expected easing of auto sales after a surge of repetitive purchasing in the second quarter. Year over year, originations were up 9%, and the commercial pipeline continues to look good. Average core deposits were $9.9 billion, up close to 1%. End of period balance $8.8 billion decreased $76 million or 0.8%. This reflected increased retail and government balances and reduced commercial deposits. By account type, it reflected increased savings deposit and reduced demand and time deposit. Compared to the year ago quarter, core deposits were up $287 million or 3%. Core deposit cost was 1.47%, up five basis points. Excluding public funds, cost of deposit was 103 basis points compared to 99 basis points in the second quarter.

[Maritza Arizmendi, CFO at OFG Bancorp]

The increase in cost mainly reflects higher average balances in savings accounts within the upper pricing tiers. Investment total $2.9 billion, up $154 million. This reflected purchases of $200 million of mortgage-backed securities yielding 5.32%, partially offset by repayments. Cash at $740 million declined 13%, reflecting the new securities purchases. Average borrowings and broker deposits total $769 million compared to $672 million. The aggregate rate paid was 4.11%, 11% with the second quarter. End of period balances were $746 million compared to $732 million. The third quarter reflected increased variable rate borrowings and decreased brokerage deposits. Net interest margin was 5.24% compared to 5.31%. This quarter NIM reflected increased interest income from the securities portfolio, a slightly higher cost of deposits, and increased variable rate borrowings. Please turn to page seven to review our credit quality and capital strength. Credit quality continues to be stable.

[Maritza Arizmendi, CFO at OFG Bancorp]

Provision for credit losses was $28.3 million, up $7 million. Reflected $13.5 million for increased loan volume, $5.6 million for specific reserves on two commercial loans, the impact of two items from our annual assumptions update, $4.3 million from updated repayment assumptions in commercial loan and residential mortgage portfolio, and $2.9 million for macro-economic factors. Provision also included $1.3 million due to the auto qualitative adjustment related to the seasonal increase in early delinquency not captured in the model. Net charge of total $20 million, up $7.4 million. Total net charge of rate was 1%, up 36 basis points sequentially. This includes $3.6 million from one of the two commercial loans mentioned before. Year-over-year, the net charge-off rate improved in consumer and auto portfolios, and there was a higher recovery rate in mortgage.

[Maritza Arizmendi, CFO at OFG Bancorp]

Looking at other credit metrics, the early and total delinquency rates were up from the second quarter, but in line with the range over the past year. The non-performing loan rate was 1.22%. On the capital side, our CET1 ratio was 14.13%, stockholders' equity totaled $1.4 billion, up $41 million, and the tangible common equity ratio increased 35 basis points to 10.55%. Now, to summarize the third quarter, net interest income continued to grow, reflecting our strategy of an increased volume of loans, in particular commercial, more than offsetting our lower NIM. We continue to anticipate annual loan growth in the range of 5%-6%. While deposits were down sequentially, they increased year-over-year. We continue to expect annual growth driven by both retail and commercial accounts.

[Maritza Arizmendi, CFO at OFG Bancorp]

Net interest margin was 5.32% for the nine months, in line with our target range of 5.30%-5.4% for the year. During the fourth quarter, we anticipate a range of 5.10%-5.20%. Credit quality remains stable, reflecting the strong economic environment in Puerto Rico. Third quarter non-interest expense was a little above our range, but we continue to anticipate they will be between $95 million-$96 million a quarter. As I mentioned, we now anticipate our effective tax rate for the year to be 23.06% compared to our previous expectation of 24.9%. Capital continued to build, and we anticipate continuing to buy back shares on a regular basis. Now, here's José.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Thank you, Maritza. Please turn to page eight. The Puerto Rico economy continues to perform well. Wages and employment remain at historically high levels. Consumer and business liquidity is solid. The economy also got a boost this summer from a surge in tourism. More importantly, new developments in onshoring confirm Puerto Rico's position as a world leader in medical device and pharmaceutical manufacturing. Turning to OFG, we will continue to pursue our differentiated, unique customer-centric strategies. Our Libre and Elite accounts and our Oriental Biz commercial accounts are helping to grow core deposits and loans. Our commercial pipeline and credit trends are solid, and our risk management capabilities and asset liability management discipline are strong. Combined with the level of business activity, all this continues to position OFG well for growth and expanded market share.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Having said that, we continue to be watchful regarding all the global macro-economic and geopolitical uncertainties. As always, we could not have achieved these results without the hard work of our dedicated team members. We are thankful to them and excited about the future. With this, we end our formal presentation. Operator, let's start the Q&A.

[Operator]

Certainly. If you have a question at this time, please press star one on your telephone keypad. If you wish to remove yourself from the queue, press the pound or press star two. Again, that is star one for your questions. We will take our first question from Arren Cyganovich with Truist. Your line is open.

[Arren Cyganovich, Financial Services Equity Research Analyst at Truist Securities]

Good morning. Thank you. Maybe we could talk a little bit about the deposits in the quarter. The costs of your deposits rose modestly. Is that driven by the competitive environment? Maybe you could talk a little bit about the dynamics impacting that.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

First of all, welcome to our call. It's your first call with OFG, and thank you for covering us at Truist. I appreciate that. To answer your question regarding the higher deposit cost, it's really driven by our strategy. When we talk about the Libre account, which is mass, but we talk about the Elite account, which is mass affluent, we really are strategically positioning ourselves to attract mass affluent clients through that account, paying a little higher rate, and that's kind of the short-term cost of it, but also betting on a long-term strategy of deepening that relationship with the customer. That's how that product is structured. What you're starting to see is a little bit of a higher cost on the savings side because we're being very successful with our strategy.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

We're really happy with the results, and we'll continue to leverage the added features that we're adding to our deposit customers in terms of the insights and the predictive insights that we provide through AI, which are unique to each customer. That's actually something that no other bank in Puerto Rico offers, and it's giving us great momentum for us to attract new customers and a potential for deepening. That's a little bit of what's driving some of that higher customer cost on the savings side.

[Arren Cyganovich, Financial Services Equity Research Analyst at Truist Securities]

Okay. That helps. In terms of the commercial loan originations, those were solid, but you had some paydowns on lines of credit. Maybe you'd talk about the dynamics for commercial and the outlook for commercial loan growth ahead.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Sure. As Maritzai pointed out in her remarks, part of what occurred in the third quarter was the repayment of some of the commercial lines that were drawn in the second quarter. That's a little bit of what drove the balances to go down. Going forward, we have a very solid pipeline. We continue to see great business activity in Puerto Rico and Oriental Bank going after those opportunities. We're very confident about our commercial pipeline in the fourth quarter and starting to build the 2026 pipeline also.

[Arren Cyganovich, Financial Services Equity Research Analyst at Truist Securities]

Okay. All right. Thank you.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

You're welcome. Thank you, and welcome to the team.

[Arren Cyganovich, Financial Services Equity Research Analyst at Truist Securities]

Appreciate it.

[Operator]

We'll take our next question from Timur Braziler with Wells Fargo. Your line is open.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Hi. Good morning. Thanks for the question.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Good morning. Good morning, Timur.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Just a follow-up on the paying up for some of the savings account deposits. Can you just maybe talk us through what type of rate is being required to win some of those balances? As you think about it from a competitive landscape, where are you really targeting to take some market share here?

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

As I explained earlier a little bit, we go after the mass market with a zero-cost account. It's a checking account, and we drive the growth through our uniqueness in terms of the offering. On the Elite account, our average cost is around 1%+, let's say, 1.5% on average. It's targeting the mass affluent. Again, it's us driving value add and focusing on the customer just to attract those customers to OFG and be able to deepen those relationships as we build trust with them. That is, again, playing very nicely for us in our strategy. The key here is deepening, right? How are we able to deepen that relationship through debit card utilization, auto loans, mortgage loans, wealth management, etc., which we offer throughout? That's kind of what's driving that higher cost on the savings side. There's nothing else to it.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Got it. Thanks. Maybe two questions around credit. The first, if you could just provide any kind of additional color on the two commercial loans. Looking at that commercial portfolio, on the mainland in particular, two out of the last three quarters, we saw some pretty large charge-offs out of that portfolio. Can you just maybe speak a little bit more broadly about what you're seeing within mainland CRE?

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Yeah. Let me answer your second question first. On the mainland portfolio, we do see some very good opportunities for us to continue to build the book and use it as a geographic diversification. We do small participations on the small and mid-sized commercial lending with some partners, and that strategy continues to play out. On the first part of your question where you've seen some charges in the last several quarters, it's part of our way of managing risk within that portfolio. It actually started a couple of years ago when we started to feel pressure in the U.S. economy and felt that we should reduce some of those risks, and it required some charges. We don't see that as, we see it more idiosyncratic than being more market-wide and feel comfortable with our team and the efforts that we're doing.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Now, in particular to this quarter, there are the two commercial loans. One is a U.S. loan and one is a Puerto Rico loan. The U.S. loan, it's a $5 million loan where we basically took a provision and the charge this quarter because we sold it. The second loan is a Puerto Rico commercial loan that is a company that did a large acquisition. They're having some operating and financial weaknesses, and we're proactively provisioning for that loan. These are idiosyncratic. We don't see them as being market-related.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Okay. Thanks. Lastly, on auto loans, the pickup in charge-offs there is kind of more in line where it had been three Q, four Q, one Q. Is this just getting back to that type of rate? I know you've been calling for origination sales down in auto for quite some time. We finally got that there. Maybe talk a little bit more about broader auto trends, both from a growth standpoint and then from a credit standpoint.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

I'll talk about the growth, and I'll pass it to César to talk about the credit. On the growth side, we were expecting the slowdown. I think on the auto lending side, what we're seeing is, we see the bottoming coming in right now in terms of loan originations, and we might see slightly higher in the fourth quarter. These are more normal levels in our view, and we feel comfortable with the originating levels that we're having right now, Timur. César, can you talk about the credit?

[César Ortiz, Chief Risk Officer at OFG Bancorp]

Yes. On the charge-offs, what we're seeing is seasonal dynamics of the retail portfolios. We're usually at the lowest levels in the first quarter, and then gradually, those statistics come up, and they peak towards the fourth quarter. What we saw quarter over quarter is a modest increase on charge-off and all the statistics. When we compare it to the same period last year, we see a better trend. We're optimistic, based on those comparisons.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Great. Thanks for the color.

[César Ortiz, Chief Risk Officer at OFG Bancorp]

Thank you, Timur. Thank you for the call.

[Operator]

We will take our next question from Kelly Ann Motta with Keefe, Bruyette & Woods. Your line is open.

[Kelly Motta, Managing Director and Equity Research Analyst at KBW]

Good morning. Thanks for the question.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Hi, Kelly.

[Kelly Motta, Managing Director and Equity Research Analyst at KBW]

Hi. Maybe circling back to the Q4 margin guidance, $5.10-$5.20. Wondering, Maritza, what the Fed funds assumption is in that, given that you guys are asset-sensitive, one. Two, maybe you could talk a little bit about, I think on the last quarter call, you were calling for some margin expansion provided we got some loan growth, all else equal. Just with the margin being down, if there was anything in that that differed from your expectations maybe three months ago that drove that? Thank you.

[Maritza Arizmendi, CFO at OFG Bancorp]

Thank you, Kelly, for your question. First, I think one point when we look back at the quarter and the inflows into the deposits that have been better than expected in the savings account, that is one of the deviations from our original estimate, no? That's the answer to that. The second part relates to what we are expecting in the fourth quarter. The reality is that we are asset-sensitive, and the last cut was end of September. We will have most of that impact during the fourth quarter. The repricing, the full effect will be on the cash and in the variable rate portfolio that we have in the commercial that is half of it. That's why we are reviewing our guidance towards 5.10%-5.20% and always depending on the funding mix. Right now, everything remaining equal, is mostly related to the 25 basis point cuts.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

I don't know if you realize, too, but we do have inflows and outflows throughout the quarter of large deposits, and that is also part of what creates a little bit of the quarter volatility. As Maritza said, the fourth quarter guidance, as the one that she mentioned, $510 million-$520 million.

[Kelly Motta, Managing Director and Equity Research Analyst at KBW]

Does that, just to clarify, does that $510-$520 contemplate any additional cuts here in fourth quarter?

[Maritza Arizmendi, CFO at OFG Bancorp]

We are expecting 50 basis point cuts, but since it won't be outstanding most of the quarter, most of this impact relates to the 25 basis point that was made late September.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Yes, we are modeling a 50 basis points reduction in Fed funds in the fourth quarter.

[Kelly Motta, Managing Director and Equity Research Analyst at KBW]

Great. That's really helpful. Maybe one for you, José. You've highlighted the investments you're making in AI to drive some efficiencies ahead, and that drove expenses a bit higher. I know that's over time to generate greater revenues or recognize better improvement on the expense side. If you could talk a bit more about that and kind of like the cadence because I know it takes some time to realize that. How you're strategically approaching? Thanks.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Thank you. Not only, you know, just to clarify, we are making the investments, but we're also delivering on the features and the benefits for our customers on the value proposition that we provide, and it's unique. No other bank in Puerto Rico is actually today providing any insights to their customers based on their cash flows and their payments and whatnot. That's a very big differentiation that we're going to continue to drive forward. Now, regarding the investments that we make in technology, we will continue to make those investments, but we are also starting to see opportunities for us to bring efficiencies in our banking operations. We will be guiding you guys into the expenses of 2026 in the fourth quarter, but we're starting to see opportunities for us to bring efficiencies and be able to pass those efficiencies as part of our investment in technology.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

We're very cognizant of the investments that we're making in technology, but we're equally cognizant of the importance of bringing efficiencies. We're seeing it in the operating side of the bank, particularly with people efficiencies.

[Kelly Motta, Managing Director and Equity Research Analyst at KBW]

That's really helpful. Maybe last question for me. You guys were more active on the buyback this quarter. Given you know capital is strong, you're generating a ton of earnings. What's the go-forward outlook? Can you remind us of capital priorities here, including M&A?

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Sure. I mean, capital is strong. We feel that we have a great opportunity to fund loan growth, and that's our priority. What we're seeing, we're going to be a lot more active on the buyback in the fourth quarter and into 2026 because the earnings momentum that we have and the earnings power that we're having puts us in a great spot in terms of capital management. Also backed up by a Puerto Rico economy that remains pretty good, and it's driving infrastructure investments. We mentioned the onshoring benefits that are starting to become somewhat of a reality. It will take some time, but it's moving along. We're also seeing Puerto Rico well-positioned geographically given the current geopolitical challenges in the Caribbean and Puerto Rico being the hub for that.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

All those things give us confidence on the Puerto Rico economy, and certainly, it's going to drive our business forward. From a capital management perspective, loan growth, number one, buybacks and dividends, number two and number three, because we really are in a good spot right now.

[Kelly Motta, Managing Director and Equity Research Analyst at KBW]

Great. Thank you so much for all the color. I'll step back.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Thank you, Kelly, for your question.

[Operator]

We'll move next to Anya Telshaw with Hovde Group. Your line is open.

[Anya Pelshaw, Equity Research Associate at Hovde]

Hey, guys. I'm asking questions on behalf of Brett here. I know you guys already talked about loan growth, but I was hoping you could expand on any payoff activity that might also affect commercial in the future.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

I'm sorry. I could not understand well your question. Can you repeat it?

[Anya Pelshaw, Equity Research Associate at Hovde]

Yeah. You've already talked about loan growth, but could you expand and talk about any payoff activity that might also affect commercial from here?

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Yeah. Payoffs are hard to predict, but what we are seeing is there's usually some small seasonality on the lines of credit in the third quarter given some clients that we have that receive federal funds either for construction services or education. They kind of draw on the line of credit in the second quarter, and then they get the funding in the third quarter and pay them off. That's usually in the third quarter. We are not expecting any significant variability on the draws on the lines of credit in the fourth quarter.

[Anya Pelshaw, Equity Research Associate at Hovde]

Thank you. You've talked about charge-offs a little bit, but is there anything else you guys might be seeing as far as credit quality goes?

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

As I mentioned, we're not seeing anything, apart from a couple of idiosyncratic commercial loans that I mentioned earlier. The rest on the consumer book and the auto book, we're not seeing anything that concerns us. We're seeing, again, supported by an economy that has a lot of activity and liquidity in the system. We're not seeing anything that drives us to be concerned on credit.

[Anya Pelshaw, Equity Research Associate at Hovde]

Thank you. Appreciate it.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Thank you for your questions.

[Operator]

If you would like to ask a question, please press star one. We'll pause a moment. At this time, there are no further questions. I will now turn the call back over to management for closing remarks.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Thank you, operator. Thanks again to all our team members. Thank all our stakeholders who have listened in.

[Operator]

My apologies. We do have a follow-up from Timur.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Hi.

[Operator]

Timur, you're on.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

Thank you. Got in there at the last second. José, you made a comment on new onshoring investments in Puerto Rico. Can you just maybe talk us through what those have been and maybe how that's progressed in the Trump 2.0 administration?

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

What we know is what we hear and listen and read in the papers. We are seeing around 10 or 11 multinationals that are already announcing investments in Puerto Rico. Some of them are medical devices, others are pharmaceuticals. We're seeing solar panels. We're seeing textiles. It's a little bit broader than what we have seen in the past. It points out to Puerto Rico's positioning in terms of manufacturing that we've been for many years, and it's an opportunity for these companies to expand their production lines. Some of them have already operations. There's one or two that have announced new operations in Puerto Rico, but the majority are existing companies that are announcing investments in additional production lines in the island. Overall, I think it's all driven because of the onshoring benefits that provide the tariffs, the tariff threats, and all the tariffs that have been imposed.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Puerto Rico being a U.S. jurisdiction and being a manufacturing hub for medical devices and pharmaceuticals is just the right hub for those companies to invest further in the island. It's something new for Puerto Rico because we haven't seen this in several decades. For the first time, we're starting to see those announcements. It's encouraging. That will drive indirect benefits because there's a lot of hires with well-paid employees. It also drives indirect suppliers to these companies and all that. It has a trickle-down effect to the economy that is pretty positive. We're encouraged with that. This is not flowing in now, but it's a great way of starting to see the light at the end of the tunnel when federal funds start to fade away and we have some private investments coming in. To us, it's a win-win.

[Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo]

That's great color. Thank you.

[José Rafael Fernández, CEO and Chairman at OFG Bancorp]

Thank you, Timur. Thank you, everybody, for the call. I appreciate everyone participating and looking forward to the fourth quarter results. Have a great day.

[Operator]

This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful afternoon.

Participants

Executives

• Maritza Arizmendi, CFO
• José Rafael Fernández, CEO and Chairman
• César Ortiz, Chief Risk Officer

Analysts

• Anya Pelshaw, Equity Research Associate at Hovde
• Kelly Motta, Managing Director and Equity Research Analyst at KBW
• Timur Braziler, Director of Mid-Cap Bank Equity Research at Wells Fargo
• Arren Cyganovich, Financial Services Equity Research Analyst at Truist Securities