OFG Bancorp

Good morning, thank you for joining OFG TimeCorps conference call. My name is Nikki and I will be your operator today. Our speakers are Jose Rafael Fernandez, 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 afterwards. All lines have been placed on mute to prevent any background noise. 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. Fernandez.

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 by disciplined core operations and a favorable tax benefit. Asset quality and credit metrics were sound and well controlled throughout the quarter. During the quarter and year, in line with our strategies, we saw increased commercial loans and broad acceptance of our flagship mass market Libre account and mass affluent elite deposit account. Performance and credit metrics remain strong, capital continued to grow, and we repurchased $40 million of common shares in the fourth quarter. Maritza will go into more detail on these numbers shortly. Please turn to page four. We accomplished many of our strategic and financial goals last year. Earnings per share increased 8.3 percent on a 2.8 percent increase in total core revenues. Total assets grew 8.4 percent to a record $12.5 billion. Core deposits grew 5 percent to $9.9 billion. Loans grew 5.3 percent to $8.2 billion, with commercial loans growing to $3.5 billion, now representing 43 percent of our loan books. In addition, new loan production increased 11.5% to $2.6 billion. We repurchased close to $92 million of shares and increased our dividend 20%. Business activity is robust in Puerto Rico. The outlook for economic growth is positive and businesses and the consumer are resilient. Having said all that, One of our biggest strategic and financial accomplishments of 2025 was the progress we made with our Digital First strategy. Please turn to page five. Over the last two years, we have clearly emerged as a leader in banking innovation in Puerto Rico. Our digital focus gives us a differentiated approach and provides customers with a unique, enhanced experience. In 2024, we introduced the Libre account for the mass market and the Elite account for the mass affluent market. Both Libre and Elite have been successful in attracting deposits from new and existing customers. In addition, we enhanced our OrientalBiz account suite, making treasury management easier and more secure for small businesses, driving a 5% increase in commercial customers during 2025. We have further enhanced the customer experience through technology. In 2025, we launched our Omnichannel platform. This provides customers with a seamless banking experience anywhere they choose to interact, transforming the branch into a place for building customer relationships. With our intelligent banking model, customers now receive tailored insights based on cash flows and payment habits, helping them access and monitor their finances with real-time value-added tools to improve their financial life from their mobile phones. Please turn to page six. All this has directly contributed to our increased market share in retail deposits and a 4% growth in retail customers. To put this into perspective, we have provided data showing our progress over the last two years. As you can see, OFG is well positioned for continued success in the coming years. Now here's Maritza to go over the financials in more detail.

Thank you, Jose. Let's turn to page seven to review our financial highlights. All comparisons are to the third quarter, unless otherwise noted. Core revenues total $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 $1.1 million compared to a profit of $2.2 million in the third quarter. The change reflected $6.1 million for accelerated amortization of technology-related assets. Gains of $3.9 million on the sale of non-performing loans and $1.1 million on sales of real estate. Please note that the third quarter benefited from gains from OFG Ventures' investment in FinTech funds. 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 a technology services contract. $2.5 million of business licensing and $1 million related to the previously mentioned accelerated amortization 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 sale of foreclosed assets. For 2026, we currently expect that total non-interest expense to be between $380 million to $385 million. Income tax was a benefit of $8.5 million due to two discrete items. $12.9 million from the expiration of a tax agreement from the 2019 acquisition of Scotia and Puerto Rico and USVI operations and $3.9 million from a release evaluation allowance of deferred tax assets at the holding company level. Excluding discrete benefits, the estimated tax rate for 2025 was 21.8%. Looking at some other metrics, tangible book value was $29.96 per share, efficiency ratio was 56.7%, Return on average assets was 1.81%, and return on average tangible common equity was 17.2%. Now, let's turn to page eight to review our operational highlights. Average loan balances were $8 billion, up slightly from the third quarter. This reflected increases in Puerto Rico commercial loans partially offset by lower balances in auto and residential mortgage. Loan yield was 7.73%, down 70 basis points. This was mainly due to the effect on variable rate commercial loans from the Fed's 50 basis rate cut in the fourth quarter. New loan production was $606 million compared to $624 million. This reflected decreases in Puerto Rico and U.S. commercial and consumer lending, partially offset by increases in auto and residential mortgage lending. Average core deposit balances were $9.9 billion, up almost 1% from the third quarter. This reflected increase in retail, commercial, and government balances. By account type, it reflected increase in demand, time, and saving deposits. Core deposit cost was 1.42%, down five basis points. This was mainly due to lower cost of government deposits. Excluding public funds, cost of deposit was 102 basis points compared to 103 basis points in the third quarter. Investment totaled $2.8 billion, down $96 million. This reflected principal pay downs and maturities, and it was partially offset by purchases of $25 million of mortgage-backed securities and residential mortgage securitization of $21 million. Average borrowings and brokerage deposits were $787 million, compared to $769 million in the third quarter. The aggregate rate paid was 4.03%, down eight basis points from the third quarter. End of period balances were $897 million compared to $746 million. This reflected increased broker deposits for liquidity management. End of period cash at $1 billion was 41% higher. reflecting increased core and brokerage deposits. Net interest margin was 5.12% within the range we had expected. Please turn to page nine to review our credit quality and capital strengths. Credit quality continues to be resilient. Provision for credit losses was $31.9 million, up $4 million from the third quarter. This reflected $21 million for increased loan volume, $5.1 million for a specific reserve on a Puerto Rico telecommunications commercial loan, $2.4 million related to the US macroeconomic factors, and $1.7 million in charge of from the sale of non-performing loans. Net charge of total $27 million, up $6.7 million. Net charge-offs included $4.8 million related to the sale of non-performing loans, of which $3.1 million had been previously reserved. Looking at other credit metrics, we observed the typical seasonal pattern of higher delinquency and non-performing levels during the EJR end period. Despite this, overall credit quality remains within expected ranges. Early delinquency rate was 2.8%, down from the third quarter and down year-over-year. Total delinquency rate was 4.18%, up from the third quarter but down year-over-year. The non-performing loan rate was 1.59% due to the move to non-accrual classification of the Puerto Rico telecommunication loan that I mentioned. On the capital side, our CDT1 ratio was 13.97%. Stockholders' equity totaled $1.4 billion, up $15 million, and the annual common equity ratio decreased eight basis points to 10.47%. To summarize the year, loans and core deposits both grew about 5% in 2025. This year, we expect loans to continue to grow in low single digits. We also expect retail and commercial deposits to increase with Libre Plus, Elite, Oriental Biz, and our digital offerings driving customer growth. As for the Puerto Rico, as for the large Puerto Rico government deposit, $500 million moved this month to our wealth management business as an advisory account. The remaining $600 million is sustained as a variable rate core deposit. Net interest margin was 5.27% for 2025. Looking ahead, net interest margin should range between 4.95% to 5.05% in 2026. That takes into account two more 25 basis point costs, the effect of the partial exit of the government deposit and the incremental cost of funding to replace it. Non-interest expense total $89 million in 2025. We currently expect them to be between $380 million to $385 million a year. Credit should remain steady, reflecting the strong economic environment in Puerto Rico. Our effective tax rate for 2026 should be around 23%, excluding any possible discrete items. Capital should continue to build, enabling us to continue to return capital to shareholders through dividends and buyback shares on a regular basis. Now, here's Jose.