OFG Bancorp Q1 2025 Earnings Report

OFG Bancorp EPS Results

• Actual EPS: $1.00
• Consensus EPS: $1.02
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: $1.05

OFG Bancorp Revenue Results

• Actual Revenue: $178.30 million
• Expected Revenue: $175.35 million
• Beat/Miss: Beat by +$2.95 million
• YoY Revenue Growth: N/A

OFG Bancorp Announcement Details

• Quarter: Q1 2025
• Date: 4/23/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, April 23, 2025
• Conference Call Time: 10:00AM ET

OFG Bancorp (NYSE:OFG), a financial holding company, provides a range of banking and financial services. It operates through three segments: Banking, Wealth Management, and Treasury. The company offers checking and savings accounts, and individual retirement accounts; certificate of deposits, as well as time deposit products; commercial, consumer, auto leasing, and mortgage lending services; credit cards; cash management; financial planning and insurance services; and corporate and individual trust, and retirement services. In addition, it provides securities brokerage and investment advisory services, including various investment alternatives, such as tax-advantaged fixed income securities, mutual funds, stocks, and bonds to retail and institutional clients; and separately-managed accounts and mutual fund asset allocation programs. Further, the company engages in the insurance agency and reinsurance businesses; administration and servicing of retirement plans; and various treasury-related functions with an investment portfolio consisting of mortgage-backed securities, obligations of U.S. government sponsored agencies, and U.S. Treasury securities and money market instruments. Additionally, it offers money management and investment banking services; and engages in the asset/liability management activities, such as purchases and sales of investment securities, interest rate risk management, derivatives, and borrowings. The company provides investment brokerage, transactional, international trade financing, residential mortgage, and consumer finance services. OFG Bancorp was founded in 1964 and is headquartered in San Juan, Puerto Rico.

OFG Bancorp Q1 2025 Earnings Call Transcript

Key Takeaways

• OFG reported a strong first quarter with diluted EPS of $1.00, driven by solid operating execution and growth in both loans and deposits.
• The digital-first strategy delivered 96% of routine retail transactions online, supported by 12% growth in digital enrollment and the launch of an omnichannel app, smart banking insights, and Apple Pay.
• Average loan balances rose 1% sequentially to $7.8 billion and core deposits grew 3% to $9.8 billion, while net interest margin held steady at 5.42%.
• Credit quality remained stable with net charge-offs of $20 million, improved early delinquency rates, and a provision for credit losses of $25.7 million.
• The bank’s capital and shareholder returns remain robust, featuring a CET1 ratio of 14.27%, $23.4 million in share buybacks, and a 20% dividend increase.

Presentation

[Operator]

Good morning. Thank you for joining OFG Bancorp's conference call. My name is Madison. I will be your operator today. Our speakers are Jose Rafael Fernandez, Chief Executive Officer and Chairman of the Board of Directors Maritza Erezmendi, Chief Financial Officer and Cesar Ortiz, Chief Risk Officer.

[Operator]

A presentation accompanies today's remarks. It can be found on the homepage of the OFG website under the First Quarter twenty twenty five secondtion. 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.

[Operator]

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 background noise. After the speakers' 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.

[Operator]

Fernandez.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Good morning, and thank you for joining us. We are pleased to report our first quarter results. As we look at Page three of our presentation, it was another strong start to the year with solid overall performance. We had consistent financial results generating earnings per share diluted of $1 This was driven by excellent operating execution and loan and deposit growth. Consumer credit reflected higher seasonal customer liquidity in Puerto Rico.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

And we bought back shares and raised our dividend supported by our strong capital generation and balance sheet. Please turn to Page four. Our strategic investment in technology through our digital first strategy continues to drive innovation. This is freeing up our people to build stronger customer relationships through our island wide branch network. Looking at the numbers, 96% of all routine retail customer transactions, 97% of retail deposit transactions and 68 of retail loan payments were made through our digital and self-service channels.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

This is being driven by year over year growth of 12% in digital enrollment, 21% in digital loan payments, 40% in virtual teller utilization and close to 5% customer growth. During the quarter, we launched three digital tools, all first in Puerto Rico. Our omnichannel online mobile app that provides customers with a fast, easy and seamless banking experience across all digital points. Smart banking insights that offers advice to help customers achieve greater financial progress. This reinforces our innovative position in the banking market in Puerto Rico with intelligent and personalized solutions and tools and Apple Pay for both debit and credit cards.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

This is new in the local banking industry, giving our customers another option for easy and secure in store, in app and online purchases. I'd like to add that our self-service portal, which we launched in 2023, was nominated for a Banking Tech Award for Best Use of Technology in Consumer Banking, which is another first for a Puerto Rican bank. As you can imagine, we're very proud of all these accomplishments. Now here's Maritza to go over the financials in more detail. Then I'll come back and provide our outlook for Puerto Rico and OFG.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Thank you, Jose. Please turn to Page five to review our financial highlights. All comparisons are to the fourth quarter unless otherwise noted. Core revenues totaled $178,000,000 Looking at key components, total interest income was $189,000,000 a decline of $941,941,000 dollars. This mainly reflects two fewer business days, which negatively affected interest income by $3,000,000 Partially offsetting these were higher balances and yields on investment securities and higher loan balances.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Total interest expense was $40,000,000 a decline of $874,000 This mainly reflects the two fewer business days and higher average balances of core deposits at a lower rate were partially offset by higher average balances of borrowings and brokerage deposits. Total banking and financial service revenues were $29,000,000 a decrease of $3,600,000 The fourth quarter included $4,800,000 combined in annual insurance fees and favorable MSR valuation change. Excluding that, total banking and financial service service revenues increased for the quarter. Looking at non interest expense, they totaled $93,500,000, down $6,300,000. First quarter compensation included $1,600,000 in increase in seasonal FICA expenses and merit raises.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

General and administrative expenses included a $3,100,000 volume incentive payment from business partners. It also included $1,200,000 in higher electronic banking volume and related costs as compared to the last quarter. Note that the fourth quarter included $4,800,000 in early retirement business right sizing, and annual performance incentives. Taking all these factors into consideration, we were in line with our guidance of 95,000,000 to $96,000,000 in quarterly non interest expense in 2025. Income tax expense was $13,900,000 The tax rate was 23.34%.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

That reflects an anticipated rate of 26.14% for the year and the benefit of $1,700,000 in discrete items. The annual book value was 26.66 per share 26.66¢ per share. During the quarter, we bought back $23,400,000 of shares and raised our dividend 20%. Looking at our performance metrics, efficiency ratio was 52.42%, return on average assets was 1.56% and return on tangible common equity was 15.28%. Please turn to page six to review our operational highlights.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Total assets were $11,700,000,000 up 5% from a year ago and 2% from the fourth quarter. Average loan balances were $7,800,000,000, up close to 1%. And of the loans held for investment totaled $7,900,000 billion dollars, up 44.2% from a year ago and up $60,000,000 $61,000,000 from the last quarter. The sequential increase mainly reflects growth in auto and consumer loans, US and Puerto Rico commercial loans and repayments of residential mortgages. Growth of Puerto Rico commercial loans included a higher level of line of credit utilization.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Loan yield was 7.99%, down two basis points. New loan origination of $559,000,000 were was down 9.3% from the fourth quarter, but up 4.2% from a year ago. First quarter originations reflected seasonal declines in Puerto Rico commercial lending, partially offset by by an increase in US commercial. We continue to have a strong commercial top line at this time. Average core deposits were $9,600,000,000, up close to 1%.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

End of period balances of $9,800,000,000 increased $308,000,000 or 3.3% quarter over quarter and February or 2.2% year over year. The sequential increase reflects growth in retail, commercial, and government deposit. It also reflects growth in savings, time deposits, and demand deposits. Core deposit cost was 1.42%, down four basis points from the fourth quarter. Excluding public funds, cost of deposit was 1% compared to point 96% last quarter.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Average borrowing and brokerage deposits were were $517,000,000 compared to $426,000,000. The aggregate rate paid was 4.32%, down eight basis points. End of period balances were $421,000,000 compared to $557,000,000. During the first quarter, hundred a hundred, $45,000,000 in short term repurchase agreement after a home loan bank advances mature. Separately, a two a two two year two hundred million dollar Federal Home Loan Bank advance was renewed at 4.14% compared to previous rate of 4.52%.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Cash at $710,600,000 was up 20% and investments totaled $2,800,000,000, up 2%. During the first quarter, we acquired $100,000,000 of mortgage backed securities yielding 5.40%. Net interest margin was 5.42% compared to 5.40%. First quarter NIM benefited slightly from the investment securities portfolio and lower cost of government deposits. Please turn to page seven to review our credit quality and capital strength.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Credit quality continues to be stable. Net charge offs totaled $20,000,000 up $4,500,000 The first quarter included a $2,900,000 partial charge off of a previously reserved commercial loan as compared to the fourth quarter, which included $2,600,000 in recoveries from the sale of previously charged off auto and consumer loans. First quarter auto net charge off were unchanged, 1.63%. Consumer net charge off ratio increased 62 points to 4.34%, and there were continued recoveries in mortgage and Puerto Rico commercial loans. Total net charge off rate was one point o 5%, up 23 basis points sequentially.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Year over year, it wasn't changed. Provision for credit losses was 25,700,000, down $4,500,000. The first quarter included $17,400,000 for increased volume, $4.4800000.0 dollars for specific reserve for three commercial loans, and $3,500,000 to reflect current loss given default trend post pandemic. Looking at our credit metrics, the early and total delinquency rates were 2.193.49% respectively, both down from the fourth quarter. The non performing loans loan rate was 11.11%.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Looking at other capital metrics, our CET1 ratio was 14.27%, a stockholder's equity was at $1,300,000,000 up about $41,000,000 and the tangible common equity ratio increased 11 basis points to 10.30%. To summarize the first quarter, net interest income remained stable as growth in loan balances and a declining deposit cost largely neutralized the impact of two fewer days. Loan growth continued to do well in auto and consumer and U. S. And Puerto Rico commercial.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Retail and commercial deposit balances increased as we continue to deepen customer relationship and grow our client base. Net interest margin was slightly higher than expected from higher yielding investment securities and lower cost of government deposits. Credit quality continued to be well managed. The trends are stable, reflecting the solid economic environment in Puerto Rico. Noninterest expenses were in line when you remove the the effect of the specific items in the fourth and first quarter.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Results also benefit benefited from a lower tax rate and share count. Regarding tariff allocation, in addition to buying back shares, the dividend was increased. And our CET ratio provides us with a strong foundation during volatile or challenging times. Now here's Jose.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Thank you, Maritza. Please turn to page eight. As you all know, we're navigating an uncertain environment, and this is how we see things today. On the one hand, in Puerto Rico, wages and employment are at historically high levels. The business environment is constructively positive.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Investments in public and private projects continue to flow and the economy continues to grow, albeit at a slower pace. On the other hand, higher levels of volatility due to macroeconomic and geopolitical events, if they continue, they will eventually have an impact an economic impact. Our team members are in close contact with our customers to make sure we have a good pulse on how they're adapting to the environment and how OFG can better serve them. Turning to OFG, our digital first strategy is proving to be highly effective. We will continue to invest in and deploy new customer innovations to further differentiate our business model, increase efficiencies and most important, help both our retail and commercial customers.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Consumer credit trends are good, supported by a strong balance sheet and a well tested leadership team, we continue to methodically execute our business plan and be there for our clients and the communities we serve. As always, our results could not have been achieved without the hard work and dedication of all our team members. We are extremely thankful to them and excited for what's to come. We hold our Annual Shareholders Meeting next Wednesday. With this, we conclude our remarks, and we open the call for questions.

[Operator]

And we will take our first question from Frank Schiraldi with Piper Sandler. Please go ahead.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Good morning.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Good morning, Frank.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Jose, just in terms of the digital channel, obviously, you cite some pretty impressive numbers in terms of transactional use. Are you able to see deposit account openings through the digital channels? Is that something that's ramping up? Is that something still yet to come? How is that Actually

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Actually, Frank yes. Yes. We we do have online digital account opening, and it's through the digit through the sales service channel. So, yes, we do have that capability. And and as everything that we've done from the first detail first strategy that we have deployed throughout the years, it requires us to be the kind of the educators in the market in terms of how things can move into the digital channels and all that.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

So right now, around 25% to 26% of our checking accounts and certificates of deposits are opened through the digital channel. The rest are open at the branches. So we're we have seen increasing trends there also.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Okay.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

And then just in terms of the deposit growth from here, can you detail any seasonality here in the first quarter? And could you talk about the timing of some assumed think you had assumed some public deposit outflow in February. Just trying to get thoughts around growth from here.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Yes. So first quarter is always somewhat seasonal in terms of deposits. We do have the tax refunds. The child tax credit also is part of the equation on the first quarter in terms of deposits. So we do acknowledge that the first quarter has some important seasonal components.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

But we are very encouraged with the way our online and branch network are moving along and growing our client base. So we do expect to continue to see some deposit growth from here. On in terms of your second part of your question, which I forgot, if you can recall.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Just on the government government deposits. I thought there

[José Fernández, President, CEO & Chairman at OFG Bancorp]

was some Yeah.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Yeah. Yeah. Yeah. We have we have a yes. We have a billion or so government deposit that we expect to be renewed for for another several months.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

So that is something that we will update every quarter. But it's it's it's still there, and and we're we're expecting to renew it in the next couple of weeks.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Okay. And if I could just sneak in one more just in terms of consumer charge offs. Can you speak to do expect to continue to see some normalization there? I know you had some commercial as well that I'm sure can be more volatile. But on the consumer side, just wondering your thoughts around charge off levels and if you anticipate continued normalization on that front.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Yes. I'll ask Cesar, our Chief Risk Officer, to give you some color on that one.

[César Ortiz-Marcano, Chief Risk Officer at OFG Bancorp]

So consumer, we have two main portfolios. We have the auto portfolio, which is the largest one, and then we have unsecured personal loans. On the portfolio, we and both of them actually, we expected the the trend to improve during this quarter because it's a seasonal improvement always. The first quarter is always good for all credit statistics, we experienced that. So that was realized.

[César Ortiz-Marcano, Chief Risk Officer at OFG Bancorp]

On the second, on our auto portfolio, we are seeing now a stabilization too on the recovery rates from the collaterals. I think that was a positive effect on the issues with the tires that the customers are having an increased demand for this used vehicle. So that's a positive trend. And the third part of the auto is that we're seeing vintages that have better grade on the grading. We've called three titan back in 2022, we tightened grade on the grinding standard.

[César Ortiz-Marcano, Chief Risk Officer at OFG Bancorp]

So we're starting seeing those better grade on the written vintages coming into play for the net charge offs. So so this quarter was a positive quarter because we expected it, but it was actually better than than we expected because the quarter behaved very good. So next quarter, we do expect an increase, a slight increase because of the seasonality for this first quarter. But overall, we are gonna expect a stabilization on both portfolios on all the great metrics.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Okay.

[Frank Schiraldi, Managing Director at Piper Sandler Companies]

Okay. Thank you.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Yep. Thank you. Thank you for your questions.

[Operator]

And we will take our next question from Timur Braziler with Wells Fargo. Please go ahead.

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

Hi. Good morning.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Good morning.

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

The security yields were up nicely again this quarter. I'm just wondering what's the current duration of the bond book and, just some of the the highlights on what's coming off maybe, from a cash flowing standpoint in the next couple of quarters and where those reinvestment rates are coming on right now.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Yep. Well, the the duration, we we we have monthly mortgage tax security agency paper, and it's around five to six years, the the the duration right now. And repayments are coming around this quarter was $84,000,000, and we will keep monitoring the market to see opportunities. But right now, cash issue is yielding around five 4.25. So so we will keep looking at the funding side and manage the asset liability as we deem more appropriate.

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

Okay. And then maybe more broadly around the margin, certainly held up better than I was expecting, and part of that was the security yields, loan yields also seem to hold up better. Just where we are today, forget about the impact of additional rate cuts, is there the next move likely some pressure on the margin or maybe some of the bond reinvestments and loan growth could could offset that? I guess, what's the trajectory for margin here?

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Yeah. The the we share with you the last the in the last call that we have a, you know, a range between 5.3% to 5.4% margin for the year. That that range will move. It depends a lot on on the funding side, particularly if if the if the government deposit exit at certain point because we will need it to replace with a wholesale funding, which will cut it a little bit higher funding than this government deposit. But as long as it remain in the in the bank, I I will see that range in the upper level.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Okay?

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

Okay. Great. Thanks. And then just last for me. Any additional color for the specific reserve on the commercial loans?

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

Were those Mainland or or Puerto Rico? And I guess, yeah, any, similarities across those three?

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Yes. So these are three loans. One is a Puerto Rico long standing substandard loan that we placed in non accrual. And the other two loans are U. S.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Loans. They're totaling both in the aggregate around $10,000,000 And they were placed in substandard and we took the provision for that.

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

Great. Thank you.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Yes. Thank you for your questions.

[Operator]

And we will take our next question from Brett Rabatin with Hovde Group. Please go ahead.

[Brett Rabatin, Director of Research at Hovde Group]

Hey, good morning.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Morning.

[Brett Rabatin, Director of Research at Hovde Group]

Wanted to start, Jose Rafael, could

[Brett Rabatin, Director of Research at Hovde Group]

you give us I haven't seen a lot since power outage last week. And so, you know, I haven't seen a lot in the press about what's happened with the the Luma contract and anything else going on related to the power grid. And seems like it continues to be an area of opportunity for more sustainable and cheaper power. Just want to see if you heard So

[José Fernández, President, CEO & Chairman at OFG Bancorp]

the only comment I can add here, Brett, is this is gonna be a long process. It's it's it's gonna take at least a decade, and we are into a two year kind of or so privatization program. It's been privatized for two years only or so. So it's going to take a long time. And we're going to have these events sporadically.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Probably in the summer, we'll have some too when the heat comes up and demand increases because it's a fragile system. That's the reality. The other reality is that we are pretty much ready to cover all these issues because most of the businesses have power generators or solar panels or they have been able to do what it requires to adapt to these unexpected events. So yes, it does have an impact on the economy. It was said that it was $100 and some million, the impact, because it was a total blackout.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

And it's unfortunate and there's no way to sugarcoat it. But the reality is that it's going to take a while to get this fixed from the generation as well as from the transmission and distribution to make it resilient, to make it low cost, to make it diversified. The electric grid in Puerto Rico was destroyed by the hurricanes. And so it's going to take a while. And requires execution by the private sector and it requires oversight by the government.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

And those are areas of opportunity, if I should say, taking a bit of your words.

[Brett Rabatin, Director of Research at Hovde Group]

Yeah. Yeah. And it also seems like some of the opportunity could still be there for onshoring pharmaceuticals and that kind of stuff, but I haven't seen anything on that really either other than just talking about potential.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Correct. I think the tariff environment though, Brett, does pose a good opportunity for the Puerto Rican government to position itself in a way that can take some share of the onshoring given the current infrastructure in terms of the pharmaceutical and medical devices, the expertise that we have, the educated workforce that we have. So all that should be good positive incentives and motivation for some of the onshoring coming back to Puerto Rico. But I agree with you, it's been talked and not necessarily evidence of it has been seen. But I'm encouraged, to tell you the truth, because the tariffs is a catalyst for that.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

So being part of The United States is and our history in the manufacturing side, remember Puerto Rico's economy is 40% manufacturing. So it plays very, very well. It will require, again, good systematic execution from the government.

[Brett Rabatin, Director of Research at Hovde Group]

Okay. That's great color. And then maybe Maritza on fee income. You know, typically, wealth management is a little soft in 1Q and then stronger stronger in 2Q. I wanna make sure I I understood the the outlook for fee income from here.

[Brett Rabatin, Director of Research at Hovde Group]

And then, you know, obviously, mortgage banking is is is tough to to forecast, but I would would assume that that that level also improves from here.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Yeah. Okay. This call was was was better than expected in the sense that the the banking fees were higher even though we do have did have two two less day in in business activity. So we are this quarter, were at $29,000,000. We share with you last quarter that we are seeing 29 to $30,000,000 at the wrong rate for us in fees for the for the year.

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

So that that's how we're seeing the fees at this moment. And and and we we we this quarter, particularly, was really active in the debit card transactionality and and the POS.

[Brett Rabatin, Director of Research at Hovde Group]

Okay.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

You know, and and And then maybe just I could add, Brad, if I could add just one thing here and that Maritza just pointed out in terms of transactionality, we do are seeing a lot more activity from our customers utilization of our debit cards our services. So that is definitely very encouraging for us because it validates not only our strategy, right, the digital first strategy, but

[José Fernández, President, CEO & Chairman at OFG Bancorp]

it also

[José Fernández, President, CEO & Chairman at OFG Bancorp]

validates that we are being recognized and our brand is gaining additional traction here in the market.

[Brett Rabatin, Director of Research at Hovde Group]

Okay. And does Apple does Apple Pay rollout, does that mean a lot to you guys transactionally from here? Or how do you think about the Apple Pay rollout?

[José Fernández, President, CEO & Chairman at OFG Bancorp]

It's good to have, to be honest. It's good to have. People in Puerto Rico was not Apple permitted. It was just more of an Apple thing than a Puerto Rico thing. Were together with another institution in Puerto Rico.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

We were there were only two institutions that that were able to get the Apple Pay available for our customers, and we were one of those. And we're proud of that. We're proud of that because we are leaders in innovation and technology, and we continue to prove it by delivering on a timely basis even to the requirements of Apple, which somewhat elusive to some others.

[Brett Rabatin, Director of Research at Hovde Group]

Okay. And then just last quick one. Tax rate from here, you know, any thoughts on full year and then maybe work trends relative to the past two quarters?

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Yeah. We we are we're seeing a 26%, APR for the year for the full year.

[Brett Rabatin, Director of Research at Hovde Group]

Okay. Great. Thanks. Appreciate all the color.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Yeah. Thank you. Have a great day.

[Operator]

And your next question comes from Kelly Motta with KBW. Please go ahead.

[Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)]

Hi, good morning. Thanks for the question. Maybe circling back to the margin, Maritza, could help us out and remind us how much of the asset base is more rate sensitive and impacted by an immediate reset on on Fed funds? How to think through that? And how how does that fit in that margin guidance?

[Maritza Arizmendi, Chief Financial Officer at OFG Bancorp]

Yes. In the asset side, the most elastic asset is the commercial book, which right now, 53% is tied to to buy our rates and the cash. So that's the two assets that are more sensitive to the to any change in in the market.

[Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)]

Okay. That's helpful. And then it was it it looks like, you know, the the deposit costs are continuing to perform well. I'm wondering if you could provide an update as to the competitive environment in Puerto Rico. What are what are you seeing in terms of, you know, your your competitors?

[Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)]

Or is it still is it still relatively high competition? Or have you have you seen pressure there back off in the the last quarter or two?

[José Fernández, President, CEO & Chairman at OFG Bancorp]

I mean, look, competitors are competitors, and they they are relentless. So I hope they stay the same of us. So it is what it is. But well, yes, the market remains the same, Kelly. We were looking out for the best for our customers.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

And on the deposit side, there were some credit unions that were laggards in terms of rates. That's certainly normalized. And we're really happy with our core performance, particularly on the deposit side. We continue to grow demand and savings and time deposits with Rome. That's driven primarily by not only existing customers bringing in deposits and us deepening the relationship, but also new customers.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

We're seeing a growth net growth of 5% year over year in net customers, and that is also driving. There's a particular aspect of the deposit growth that is also interesting for us, that is that we're growing non interest bearing deposits too in the quarter. So those are good indicators. We'll see how much of it is seasonal, how much of it is a part of structural savings and deposits from the economy that we're operating in Puerto Rico, but certainly a pretty solid quarter.

[Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)]

Thanks for that. And then I also appreciate the commentary about you know, Puerto Rico being and being having a lot of manufacturing in in in the economy. Wondering if you've seen any movement there, you know, Puerto Rico could theoretically be a beneficiary on on, a move to greater onshoring to The US. I'm wondering if you're seeing any movement there, what the discussion is on the ground, and your your thoughts around that as, you know, I know I know it's a moving target here.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Yeah. Yeah. It's it's too early to tell on on any you know, we haven't seen any any movement to speak of, but it's certainly a good opportunity. And and it's it's too early to tell as you can as you can read on the in in the papers and online, the world is trying to figure things out, and we're not we're not an exception. So we're we're also looking at what's going on around the world and seeing all the tariffs and all that.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Right now, I believe pharmaceutical products are not being tariffs additional tariffs. So it's still not yet being added to the list. So we'll see. We're seeing some good news coming out of the market yesterday and today. So we'll see.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

We have to take a hard look this quarter and see how things evolve. And we speak to our customers. As I mentioned, we were visiting customers, particularly on the commercial side, asking them how they're adapting, how are they seeing things. And again, it's too early to tell, but they are definitely managing the uncertainties by building up inventories, making a little bit of a pause in some of the projects, but not necessarily putting a full stop. And those that's the color we get

[José Fernández, President, CEO & Chairman at OFG Bancorp]

And we're trying to make sure that we're as close to them as possible because that's what banks are for.

[Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)]

Got it. I really appreciate the color. Most of my questions have been asked and answered. I'll step back. Thank you.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Thank you. Have a great day.

[Operator]

And at this time, there are no further questions. I will now turn the call back over to Mr. Fernandez for closing remarks.

[José Fernández, President, CEO & Chairman at OFG Bancorp]

Thank you all for joining us in the call today. We look forward to seeing you in the next quarter. We'll have our shareholders meeting next week. So thank you for being with us. Have a great day.

[Operator]

This does conclude today's presentation. Thank you for your participation. You may disconnect at any time.

Participants

Executives

• José Fernández, President, CEO & Chairman
• Maritza Arizmendi, Chief Financial Officer
• César Ortiz-Marcano, Chief Risk Officer

Analysts

• Frank Schiraldi, Managing Director at Piper Sandler Companies
• Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo
• Brett Rabatin, Director of Research at Hovde Group
• Kelly Motta, Managing Director at Keefe, Bruyette & Woods (KBW)