Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Please standby. Your meeting is about to begin. Good morning. Thank you for joining OFG Bancorp's conference call. My name is Nikki, 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 Cesar Ortiz, Chief Risk Officer. A presentation accompanies today's remarks. It can be found on the homepage of the OFG website under the fourth 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 Sectors 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 afterward. All lines have been placed on mute to prevent any 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. Fernández. José Rafael Fernández: Good morning, and thank you for joining us. We are pleased to report our fourth quarter and 2025 results. Let's go to Page three of the presentation to review the fourth quarter. Earnings per share diluted were up 17% year over year on 2% growth in total core revenues. This was driven…

Thank you, José. Let's turn to page seven to review our financial highlights. All comparisons are to the third quarter unless otherwise noted. Core revenues totaled $185 million, an increase of $1.4 million. Total interest income was $197 million, a decrease of $3 million. This reflected higher average balances of loans and cash at lower average yields. This was partially offset by higher average balances of investment securities at slightly higher yields. Total interest expense was $44 million, a decrease of $1 million. This reflected higher average balances of deposits and borrowings at lower average rates. Total banking and financial service revenues were $33 million, an increase of $3.4 million. This mainly reflected increased wealth management revenues due to $2.3 million in annual insurance commission recognition. The other income category was a loss of $1.11 million compared to a profit of $2.2 million in the third quarter. The change reflects $6.1 million for accelerated amortization of technology-related assets. Gains of $3.9 million on the sale of nonperforming loans and $1.1 million on the sale of free real estate. Please note that the third quarter benefited from gains from OFG Ventures investment in fintech hubs. Looking at non-interest expenses, they totaled $105 million, up $8.5 million from the third quarter. This reflected $3.3 million in professional services fees related to performance-based advisory costs. This was part of the cost savings renegotiation of our technology service contract. $2.5 million of business rightsizing and $1 million related to the previously mentioned acceleration of technology-related assets. Compared to the third quarter, there were $1.7 million in increased costs related to an additional accumulation of performance bonuses, expanded marketing activities, and the sales of foreclosed assets. For 2026, we currently expect that total non-interest expense to be between $380 million to $385 million. Income tax…

If you have a question at this time, please press 1 on your telephone keypad. Press 2. Again, if you would like to ask a question, press star, then the number 1 on your telephone keypad. We'll take our first question from Kelly Motta of KBW. Please go ahead. Your line is open.

Hey, good morning. Thanks for the question. Maybe to just kick it off with credit, given that provisions were a bit elevated for the second quarter now. Can you provide additional color into the larger Puerto Rico charge-offs this quarter as well as there was some movement in NPLs with some sales? Can you provide more color as to what was done there and what migrated back in? Thank you. José Rafael Fernández: Hi, Kelly. This is José. I'll let Cesar take that question.

So the charge-offs that you're looking at in the quarter are the result of a sale that we performed that released $17 million in nonperforming loans during the quarter. And that release triggered charge-offs, etcetera. But the result at the end of the day was a gain of $3.9 million. We reported. Offset, of course, by the entry of a telecommunications loan that was recorded as nonaccrual nonperforming during this quarter. So that's basically the movement in nonperforming during the quarter in commercial. So, only one loan, and it's not something that it's across the portfolio. We just see this as very idiosyncratic.

Yeah. And just to add, and I shared a little bit on prepared remarks. There was a charge-off related to the sale, of about $4.8 million, and a big portion of it was already reserved. It was about $3.1 million that was already set.

Got it. And then on loan growth, I mean, you've been talking about auto being more competitive in prior calls and such. In terms of your outlook, for low single-digit loan growth ahead, can you provide additional color in terms of what's the driver of that? Is the expectation that auto will be kind of more muted like the past two quarters? José Rafael Fernández: Yep. Yeah. Yeah. That's a great point. We see auto starting to stabilize at these levels. As again, in Puerto Rico, you also are starting to see a stabilization in the new car sales. So we look at auto balances to be down in the year between 2-3%. We also see commercial loans up 5-6% during the year. Both Puerto Rico and US. So with that kind of a setup, see consumer going up a bit. Mortgage also is trending down, but less than in years past. We see low single digits as a reasonable target for us for loan growth overall.

Got it. Last question, if I can just sneak it in, is on your expenses. $380 to $385, you know, relative to your operating is relatively flat year over year. Can you provide like your confidence in that and the drivers of those increased efficiencies?

Well, yes, thank you for your question, Kelly. The range reflects our continuous investment in technology and people capabilities talent. To continue driving the digital-first strategy that we are deploying constantly in the bank. And we have seen certain efficiencies. Like, this year, we have, like, you look at our full-time equivalent employee, there are 30 less, 30 people. 60. Sixty altogether. No? So we continue to expect that number to go down. But we need to continue reinvesting. That's why we see expenses to continue to be flat this year, but we're thinking that by the end of the year, we will start seeing some of that saving and in 2027 and 2028, we see savings to accelerate. And we will see that more in a time you will wait for 2027, 2028. Yep. José Rafael Fernández: It's something that we've always been very cognizant of. These investments in technology they certainly have enhanced the customer experience in a significant way, and it's providing us the ability to grow and differentiate ourselves. But it also has a very intentional effort to bring efficiencies to the bank. And is the first year where we are seeing in 2026, we're seeing the expense range flattening it out. And it has everything to do with a little bit of what we've done in the past, but it's being more importantly on the culture of a continuous improvement and how do we look at processes to simplify them, make them more agile, and really try to eliminate interactions and processes that are very manual and with very little value add, try to convert them into technologies and use the blockchain and all the technology, all the robotics and all. We are starting to use all those things. And we feel more confident in our expense ranges in 26 for sure. And we will continue to work hard to bring additional expense reductions in '27 and '28. Maritza mentioned.

Great. Thank you so much. I'll step back. Appreciate the color. José Rafael Fernández: Yep. Thank you, Kelly. Thank you.

Our next question comes from Arren Cyganovich of Turist. Please go ahead. Your line is open.

Thank you. Good morning, José, I was wondering if you could talk a little bit about what you're viewing as the best strategic initiatives or your focused on strategic initiatives for 2026. Maybe relative to 2025, it seems like you're making a good push on the deposit side and, of course, always investing in technology. José Rafael Fernández: Yes. Thank you, Arren. So as we will continue to enhance our retail efforts. It's not something that we're gonna decelerate. So we will continue to invest in enhancing the customer experience and adding additional functionality to our omnichannel platform and drive additional benefits for our customers on the retail side, and you'll see some of those playing out throughout 2026. In 2026, our focus is gonna be much more on commercial. And we see a good opportunity as you saw, we grew 5%. Our commercial customers last year. And I think we have an opportunity here to continue to translate the same strategies that we have done in terms of technology and digital translate it as it is appropriate on the commercial side. And it's gonna be a journey. It's gonna be three years or so for us to be able to deploy all this and all that stuff. Well, that's where we're gonna be putting more effort. We see an opportunity for us to keep growing our commercial business and we think the Puerto Rican economy is supporting that. And I also as a bank feel compelled to invest in small and mid-sized clients and help them grow because that's critical for the growth of our economy here in Puerto Rico. We're really focused on the Puerto Rico market, and we feel that we have a great opportunity there.

Thanks. And on capital return, I think we just said that she expects capital to build so to return capital to shareholders. I'm just trying to balance the two. What's the expectations for account for return for 2026? José Rafael Fernández: I think the fourth quarter capital actions that we took in terms of the buyback I think it's going to become more given our valuation. Right? Given the way the market is valuing our stock and given the multiples that they're assigning to us versus our peers, we feel the best use of our capital after loan growth and balance sheet growth is buying back shares. And so we will continue to be very intentional there. We certainly will also look at the dividend. But, again, we see some differentiation in the valuation there, and we feel that it's the best way to reward our shareholders by buying back shares.

Great. And then just lastly, some clarification on your answer about expenses. The expense reductions in '27 and '28, is that more so thinking about the efficiencies that you're going to get from actions you're making this year? It's like And Correct. And then I guess I'm just thinking, like, is it actually gonna go down, or is are you gonna Yeah. Yeah. Yeah. So going down and some erosion on top of that. José Rafael Fernández: I don't wanna put the cart in front of the horses. Right? But I tell you, you're working we're working very hard to bring additional efficiencies during 2026 that will play out in '27 and '28. We will give you more details as we execute on those initiatives. But as Maritza mentioned, we are looking at FTEs and where can we redeploy our people talent to more customer-facing and value-add building relationships type of talent versus having FTEs sitting behind a desk in operations and servicing and pushing papers and dealing with Excel spreadsheets to manage different functions. And I can give you an example. We have been able to optimize the entire fraud management processes just simply by using robotics and being able to eliminate several FTEs that were basically managing fraud on a daily basis. And those are some of the small examples that we can provide. And I'm sure, you know, many banks in the US and in Puerto Rico are also doing the same. We're trying too hard to bring down expenses. Not without investing in technology, investing in our people, and continuing to do the right thing for the long term of our franchise. Which is critical for us. It's important.

Great. Thank you. José Rafael Fernández: Yep. You're welcome.

Thank you. We will move next with Brett Rabatin of Hovde Group. Please go ahead. Your line is open.

Hey. Good morning, everyone. Wanted to start on the margin and just on the fourth quarter, wanted to get a little better color on the linked quarter change in the loan yields. Which had been fairly stable up until this quarter. So this the 17 basis point linked quarter change, was just hoping to figure out how much of that was the large nonaccrual loan and any other comments on the loan portfolio yield change linked quarter?

Yep. My name is Alex. Yeah. You. Thank you, Brett, for your question. And you know, remember that we are asset sensitive and we continue to be asset sensitive and this quarter, as I mentioned in my prepared remarks, the loan yield went down basically because of first, 50 basis point cost during the quarter, but also we have the full effect of the September 25 basis cost. So that's one of the main drivers for the reduction in the NIM, and we were able to compensate that to our government deposit variable rate because it also got a reduction there. But it reflects our asset-sensitive positioning. Yep. I think also, you're also on the loan side. You're starting to see since we have moved our auto originations to higher significantly higher quality, we have been able to we are also seeing a slight decrease in the yield coming in on the auto lending side. And that's just a testament to the credit quality that we're bringing in, better credit quality.

Okay. That's helpful. And then just thinking about the margin guidance for '26, it was nice to see that the funding cost which were up a little bit in 3Q, moved back down in the fourth quarter. Is the margin guidance for 26%, does that reflect some additional leverage to lower funding costs from here? You know, one of the key things that's always been a question is Puerto Rico has lower cost deposits. The mainland, you know, how much can those go down? As rates go down given they're already fairly competitively priced?

Yeah. The reality is when you look forward for this year, 2026, we will have a change in our funding mix because the $500 million exit, $500 million exiting the bank, you know, moving to the wealth management business. And we will replace that with wholesale funding, and that carries a higher cost of about 25 basis point to 40 basis point depends on the term of that wholesale funding, but the reality is that we will have that change. And that's part of the impact of the NIM. But when you look at 2026, 2026 will have the full effect of the 75 basis point cut that happened in the last part of 2025. Will have all that full effect, plus we are also foreseeing two additional cuts during 2025. And we are sensitive. We have more assets repricing than the deposit side. And that's why we are giving that indicative in the margin. Okay? That guidance. And when you look at 2024 basis 2025, it reflects that. You know, we had a margin in 2024 of 5.43%. This year, it was 5.27%. It was about 16 basis points reduction, and it's related to the rate cuts that 100 basis point late 2024. And this year, 75 basis point end of 2025. Brett, and could also add as you saw this quarter and you saw throughout 2025, core deposits, excluding government, went up. On the retail side as well as on the commercial side. And that is also something that we expect to help mitigate what Maritza just said. Right? Because the more core funding that we bring in, it's gonna be cheaper than wholesale funding. So you know, our margin guidance is the margin guidance, and that's how we see it. But we're gonna be working hard to beat that margin guidance as you guys can expect. So we'll update everybody on the first quarter when we talk again.

Okay. If I could ask one last one, the other thing I was hoping to figure out was if you look at slide 20, it has the auto portfolio net charge-off rate. It was a little bit higher in the fourth quarter as were NPLs. And just wanted to see if the higher level in 4Q, if that seems to be an anomaly, a year-end cleanup of the portfolio or what have you. You know, versus something maybe you're seeing with the book?

Yeah. Seth, I can take that one. This is a like Maritza mentioned before, it's typical that the seasonality of the portfolio starts very low in terms of delinquencies and nonperforming loans in the first quarter of the year, and then it tickles up until the fourth quarter. And at the fourth quarter, got the upper level of that equation. But next year jobs, if you compare this next year job, we usually compare it to last year. Same period last year. And what you saw what you see there is 1.63 last year. But that was benefited by because we sold charge-off portfolio. Without that sale, that number would have been 1.86%, and we are right now at 1.81%. This quarter. So it is a positive sign. But, you know, but again, the seasonality of the portfolio will result in an increase in delinquency in this quarter, but we expect that benefit in the next quarter. You're gonna see a positive effect on all those metrics. José Rafael Fernández: Yeah.

Okay. So it's That's helpful. Central and lower.

I'm sorry. The year is no. It's just end of the year seasonality. And we'll keep on keep you guys updated in the first part of the year and see if that turns around again. But that's what we've seen in the last three years. We'll be watching closely in the part of this year to see if that replicates again.

Okay. Okay. Great. Thanks for all the color. José Rafael Fernández: Yeah. Thank you for your questions, Brett.

Thank you. Our next question comes from Timur Braziler with Wells Fargo. Please go ahead. Your line is open.

Hi, good morning. Maybe bigger picture on the credit. Hi. Can you hear me? José Rafael Fernández: Operator, we can't hear anymore.

Here. One second. How about now? Can you hear me?

Hello.

Can you hear me now?

Timur, we are able to hear you. One moment, please. Sure.

Hey, and for the interruption speakers, are you able to hear us? Is this better? José Rafael Fernández: I can hear now I can hear Okay.

Perfect. Sorry about that. Maybe just a bigger picture on credit. You know, if we look at kind of 1% full-year charge-off rate, is that kind of a good proxy for where we are in this post-pandemic cycle? And then if you look at the allowance ratio, you know, year over year, you added a little bit over $25 million to allowance. You built that to almost, you know, 2.46% of loans. I guess, how do we think about the allowance build in 2025, what that might portend for charge-off activity in 2026, and then you know, what does a stabilized level of credit activity look like going forward here?

Well, I think that the 1% range that you mentioned is within what we can expect here in the in HR two. If you look at 2025 without any specifics of the sales or any particular case, that should be a good run rate. When we think about how we build the reserve, please be mindful that there's some specific reserve at the end of this year related to the telecommunication loan. So that's a very isolated case, very specific. So setting that aside, I think that we could continue monitoring credit and building this stuff as needed, but 1% net charge-off delinquency remaining this the level that we're managing this year. Maybe we won't be reserved at the same level because of the specific that we have this quarter, but definitely it could be about flat from what we have right now. Excluding any specific case that we have managed during the year. Okay?

Got it. And then the telecom credit this quarter, was there anything incremental that happened in 4Q that drove the activity? Or is this just really recalibration of maybe what the other banks were talking about in the third quarter and you guys kind of catching up to that same level of reserving in the fourth quarter?

No. It's basically, we receive financials every period. So last period, you know, they didn't, you know, warranted right away, you know, no closed out. But this period, it repeated the deterioration of the on the financials. So basically, we decided, yeah, this is a situation that merits the no approved status.

Yeah. And at the end, this is a loan that is continuing to pay. You know, it stays paying. So what we're doing is being prudent on giving the specific situation of the company that comes from the outcome of a merger we decided to put it in.

Got it. That's great color. Thank you. And then just last for me, you guys have had really good success rolling out some of these retail deposit products during the course of 2025 that have been, you know, differentiated from what the island typically sees. I'm just wondering from a competitive standpoint, what's been the reaction? And as you think about, you know, Puerto Rico ex public fund deposits, during 2026, during 2027. Does it feel like the competitive nature is shifting now, and do you still think you can maybe get those lower with these rate cuts, or is the competitive nature such that even with these rate cuts, the cost of the core Puerto Rican deposits are likely continuing to rise here? José Rafael Fernández: Yes. I think the competitive landscape is slowly but surely intensifying. I think each institution has its own drivers. Right? And some of the drivers that come in from the reinvestment in the investment portfolio at a higher yield gives flexibility to be more competitive and more aggressive on some of the CD offerings and stuff like that. So I'm not saying that we are going out crazy here in the market in Puerto Rico in terms of deposits, but it's slightly and slowly but surely getting more intense in terms of deposit competition. Also, be aware that we have credit unions, US credit unions that have been for the last three or four years very aggressive. They remain so. And that is also part of the equation here in Puerto Rico, these tax-exempt credit unions. They have another lever there that allows them to be more aggressive on the deposit side. So that's our strategy is to target the mass and the mass affluent. We have come up with the products. We have come up with the in terms of our platforms and technology and the way we do the business. That's the formula that we're using. And it's paying off. I'm sure, our friendly and larger competitors are also doing their thing, and I'm sure they're going to be very competitive throughout. So it's just now blocking and tackling and trying to achieve organic growth on the loan side and on the deposit side. And it's exciting for us at this juncture how we are well-positioned to achieve both.

Got it. Thanks for the color. Appreciate it. José Rafael Fernández: Yep. Thank you, Timur.

Thank you. We will move next with Manuel Navas with Piper Sandler. Please go ahead. Your line is open.

Hey, good morning. I just wanted to follow-up on that last question. Has there been any price response from other players on the island from your new, Libre and Elite products? And where are those having the most success? Yeah. Happy to hear a little bit more on those two products as well. José Rafael Fernández: So there's no need to have a price response because we're not paying high yield. So, I don't know where the idea that we're kind of bringing in higher yields or so. It's actually, the Libre account is a noninterest-bearing account. So I don't know where that comes from. But Elite does pay 1.28% average cost of funds on the balances that we have. And that is the way we approach the mass affluent, and it's paying off, and it's doing well. Because it's not about the rate only. It's about what we offer as a product and what is the value that we bring into the equation here. And it's not only a rate. It's more than a rate. It's the functionality. It's the accessibility. It's the everyday, every time, anywhere, wherever you are. And the fast, the agile way we service our customers in any that they have with us. That brings us the ability to attract, deepen, and expand relationships across markets that we operate, which is here in Puerto Rico. So reaction from the competition, zero. There's no increase in competition in terms of rates here. What we're seeing is more on a targeted basis, CD rates, and that's what I have mentioned earlier, Manuel.

Alright. I appreciate that. And it is pretty early innings, but are you seeing that deeper relationship? Are you seeing younger clientele in these accounts as well given they're a little bit more digital forward? José Rafael Fernández: Actually, that's a good point, Manuel. Given Puerto Rico's demographics, what we're seeing is that I'll share this information 75% of the accounts that we're opening on the Libre account are new customers. 40% of those are 29 years or younger. And to us, that is extremely positive. Because it allows us to build a long-term relationship and build a long-term franchise with them. So it's exciting times for us. That's kind of the crux of the matter. You actually pointed out one of the great things that is going on in the last couple of years.

I appreciate that extra color. Going back to the NIM for a moment, as you're targeting a little different auto client and commercial loans are adjusting. What are kind of some of your new yields coming on, especially in those two categories in auto and commercial? José Rafael Fernández: So commercial, remember, our commercial originations are 50% fixed, 50% variable. And the rates are depending on the type and the size of the commercial loan, but it ranges between, let's say, 275 to 350 basis points above the term that we're lending at. So that's kind of I'm giving you a range, and it can get on the lower end when it's a larger account, a larger loan, or if it's a small business or a larger commercial account or loan. So that's on the commercial side. On the auto side, I think the yields are in the eight handle, eight and change. It is coming from the higher eight levels. It's now stabilizing around eight thirty or eight forty or something like that, between eight thirty and eight fifty. And it's all about, certainly competition, but also us originating close to 90% of our loans in prime and super prime loans.

That's really helpful. And then I guess my last question is, is there a level, I appreciate the commentary around the buyback. The pace was a little accelerated in the fourth quarter. Do you think we stay at this fourth quarter pace? And is there any price sensitivity, or where is there some price sensitivity on repurchases? José Rafael Fernández: Oh, I'll repeat what I said earlier, Manuel, because we don't have a price target. We do see the market being of penalizing us a bit in terms of the multiples that they're pricing us at. So I think we kind of look at the market in general. We see where we can deploy our capital in terms of loan growth. This year, we're probably going to grow single digits, as I said earlier, low single digits. Because of what I mentioned earlier on the auto. So we might have more ability to deploy capital through buybacks throughout the year. But we don't have a set number or a set stock price to go after. It's just part of our natural ongoing capital management strategies.

I really appreciate the commentary. Thank you. José Rafael Fernández: Yep. Thank you for your questions, Manuel, and welcome to the calls.

Thank you. Yeah. Thank you.

And once again, if you would like to ask a question, please press star then the number one on your telephone keypad. And at this time, there are no further questions. I will now turn the call back over to management for closing remarks.

Thank you, operator, and thanks again to all our team members. José Rafael Fernández: Thanks. To all our shareholders who have listened in. Looking forward to our next call. Have a great day.

Thank you. This does conclude today's program. Thank you for your participation, and you may disconnect at any time.