OFG Bancorp Q2 2025 slides: EPS jumps to $1.15, digital strategy accelerates growth

Introduction & Market Context

OFG Bancorp (NYSE:OFG) reported strong second-quarter 2025 results on July 17, with earnings per share rising to $1.15, marking a significant improvement from the $1.00 reported in both Q1 2025 and Q2 2024. The Puerto Rico-based financial institution saw its stock surge 5.38% in premarket trading to $46.39, reflecting positive investor sentiment toward the results.

The bank’s performance was driven by growth in core revenues, which reached $182.2 million, and robust loan production of $783.7 million. These results come amid what the company describes as a "constructively positive" business environment in Puerto Rico, though management noted they are monitoring increased global economic and geopolitical volatility.

As shown in the following summary of key financial metrics from the presentation:

Quarterly Performance Highlights

OFG Bancorp demonstrated solid financial performance across multiple metrics in Q2 2025. The bank’s pre-provision net revenue (PPNR) reached $87.6 million, while maintaining a net interest margin of 5.31%, slightly down from 5.42% in Q1 2025. Total (EPA:TTEF) assets grew to $12.2 billion, with loans held for investment increasing to $8.2 billion and customer deposits reaching $9.9 billion.

The company’s profitability metrics remained strong, with return on average assets (ROAA) at 1.73% and return on average tangible common equity (ROATCE) at 16.96% for Q2 2025. The efficiency ratio improved to 52.04%, indicating better operational efficiency.

The following chart illustrates the positive trends in core revenues, EPS, and tangible book value per share, along with key profitability metrics:

Loan growth was particularly strong in the commercial segment, which increased by $270 million during the quarter, while auto loans grew by $69 million. Mortgage loans continued their gradual decline, decreasing by $21 million, reflecting the bank’s strategic focus on higher-yielding lending categories.

The operational highlights below show the growth in loans, deposits, and new loan origination, along with trends in loan yield, deposit cost, and net interest margin:

Credit Quality & Capital Position

OFG Bancorp maintained solid credit quality metrics in Q2 2025, with the net charge-off (NCO) rate improving to 0.64% from 1.05% in Q1 2024. However, the non-performing loan (NPL) rate increased slightly to 1.19% from 1.01% in Q2 2024, suggesting some potential pressure in certain segments of the loan portfolio.

The provision for credit losses stood at $21.7 million for the quarter, reflecting the bank’s prudent approach to risk management amid economic uncertainties. The allowance for credit losses to total loans ratio was maintained at 2.32%, providing adequate coverage for potential loan losses.

The following chart details the trends in credit quality metrics and capital strength:

Capital ratios remained robust, with Common Equity Tier 1 (CET1) at 13.99%, though slightly down from 14.29% in Q2 2024. The total risk-based capital ratio stood at 15.25%, well above regulatory requirements, while the tangible common equity ratio was 10.20%.

The bank’s allowance for credit losses by loan category shows its risk management approach across different segments of its portfolio:

Digital Strategy Success

OFG Bancorp’s "Digital First" strategy continues to drive operational efficiency and customer engagement. In Q2 2025, 96% of all routine transactions, 97% of deposit transactions, and 70% of all loan payments were conducted through digital or self-service channels.

The company reported impressive year-over-year growth in digital metrics, including an 8% increase in digital enrollment, 11% growth in digital loan payments, 37% growth in virtual teller use, and 4% net customer growth compared to Q2 2024.

As illustrated in the following slide on the bank’s digital strategy:

The bank has also introduced new digital products and services, including the "Oriental Marketplace" and a "New DGI Fund," further enhancing its digital offerings to customers.

Capital Management & Outlook

OFG Bancorp’s board approved a new $100 million stock repurchase authorization, underscoring its commitment to returning capital to shareholders. During the quarter, the bank repurchased 186,024 common shares, reflecting confidence in its financial position and future prospects.

The bank’s tangible book value per common share increased to $27.67 in Q2 2025, up from $23.55 in Q1 2024, representing significant value creation for shareholders over the past year.

Management maintains a "constructively positive" outlook for Puerto Rico, noting that wages and employment are at historically high levels. However, they remain vigilant about increased global economic and geopolitical volatility that could impact the operating environment.

The company’s outlook is summarized in the following slide:

OFG Bancorp’s CEO, Jose Rafael Fernandez, emphasized that the bank’s Digital First strategy "is proving highly effective" and that ongoing investments in technology are enhancing their "differentiated business model" and improving back-office efficiencies.

With a strong balance sheet, improving operational metrics, and continued execution of its digital transformation strategy, OFG Bancorp appears well-positioned to navigate the current economic environment while delivering value to shareholders.

Full presentation:

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