OFG Bancorp(NYSE:OFG) reported its Q2 2025 results on July 17, with assets exceeding $12.2 billion and loans topping $8.2 billion, driving a 6.5% year-over-year increase in diluted EPS to $1.15. The company raised its guidance for full-year loan growth to nearly 6%, initiated a new $100 million share buyback, and maintained a CET1 ratio of 13.99%, while net interest margin settled at 5.31% due to proactive liquidity management.

Digital Adoption Drives Relationship Deepening and Account Growth

New net customer growth reached 4%, supported by increased digital engagement and the rollout of new online products like Oriental Marketplace and a U.S. government money market fund. Nearly all routine retail teller transactions and 70% of loan payments occurred through digital and self-service channels, demonstrating tangible customer migration to lower-cost, scalable delivery methods.

"During the second quarter, nearly all of our routine teller retail customer transactions and deposits, as well as 70% of retail loan payments, were made through our digital and self-service channels. This was driven by continued year-over-year growth in digital enrollment, digital loan payments, virtual teller utilization, and 4% new net customer growth."
— Jose Rafael Fernandez, Chief Executive Officer and Chairman of the Board of Directors

This accelerated digital transformation enhances efficiency and supports account growth.

Strategic Liquidity Build Positions for Above-Plan Commercial Loan Growth

End-of-period loans held for investment jumped by $328 million from the previous quarter to $8.2 billion, with new originations up 38% quarter-over-quarter and a robust U.S. and Puerto Rico commercial pipeline in place. Management proactively secured a $200 million Federal Home Loan Bank advance at 4.13% alongside $82.5 million of brokered deposits to support rising loan demand as average loan balances grew close to 2% sequentially.

"[W]e decided to accelerate and put funding to the post with a good rate because at the end, it's 4.13. We have margin if we put it in cash, but we wanted to anticipate that liquidity at that moment. We were opportunistic. And now we have flexibility to continue investing going forward with the opportunities."
— Maritza Arizmendi, Chief Financial Officer

This deliberate approach to securing low-cost, flexible funding ahead of forecast loan demand ensures OFG can support lending targets while maintaining capital discipline and credit underwriting standards.

Improved Asset Quality from Enhanced Underwriting and Favorable Economic Environment

Net charge-offs declined to $13 million, down $7.6 million sequentially and delivering a charge-off rate of 0.64%, while early and total delinquency rates remained manageable at 2.46% and 3.59%, respectively. Management attributed these metrics to improved consumer and commercial loan vintages, with risk model recalibration since 2022 resulting in persistently lower loss rates and a more resilient portfolio, despite modest quarter-to-quarter seasonal variation.

"So it's a new vintage coming in, better vintages coming in that we adjusted back in 2022. So those new vintages with better credit performance are going to continue coming into the statistics. So that's going to continue stabilizing and repairing hopefully, better charge-off rates and number loan and delinquency rates than previous vintages."
— Cesar Ortiz, Chief Risk Officer

Looking Ahead

Management expects retail deposit growth to persist throughout the second half of 2025 and into 2026, and raised loan growth expectations for 2025 to nearly 6%, up from a prior guidance range of 3% to 4%. Noninterest expenses are anticipated to remain within $95 million to $96 million per quarter, excluding discrete items, with a full-year effective tax rate forecast of 24.9% for 2025, absent unique tax benefits.

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