OFG Bancorp

Good morning. Thank you for joining OFG Bank Group's conference call. My name is Nikki. 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. The presentation accompanies today's remarks. It can be found on the homepage of the OFG website under the first quarter 2026 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 factors section of OFG's SEC filings. Azure results may differ materially from those currently anticipated. We disclaim any application to update information disclosed in this call as a result of developments that occur afterwards. Call 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 first quarter results. Let's go to page three of our presentation. We started the year with a strong financial performance. Earnings per share diluted were up 26% year over year on 4% growth in total core revenues. This was driven by ongoing loan growth, high quality credit performance, core deposit strength, expense and proactive balance sheet management. Loans grew 5% year over year, and new loan production grew 9%. Reported core deposits declined 1%. Excluding the previously announced $500 million government deposit transfer, core deposits grew more than 4% year over year. This demonstrates how our strategies and operating model continue to deliver, supported by momentum in our businesses and disciplined execution across the franchise. We further our commitment to capital management, repurchasing $44.5 million of common shares and increasing the dividend 17%. Despite growing geopolitical uncertainties and their effect on energy prices, Puerto Rico economy continues to grow and businesses and consumers' balance sheets are solid with high liquidity levels. Please turn to page four. Our core digital strategy consists of three main pillars. The first is our service offerings. We are targeting specific customer segments with accounts that meet their needs. Libre for the mass market, Elite for the mass affluent, and MyBiz for small businesses. This targeted approach is driving strong market adoption and deeper customer relationships. The second pillar is technology. Our omnichannel platform allows customers to interact with us seamlessly across all touchpoints. This is driving continued digital adoption, resulting in efficiency and savings that we reinvest in new ways to serve our customers. The third pillar is intelligent banking. We're leveraging data and real-time insights to help customers better manage their finances. while increasingly seeing real customer connections being built through our digital channels. Please turn to page four. As proof of our success, we're driving innovation year over year. Retail digital enrollments are up by 10%. Digital loan payments, 5%. and virtual teller usage up by 7%. Net new retail and commercial customers each grew by close to 3%. The added benefit is that this enables us to free up more of our teams to provide personal value-added services, focus on sales to expand our market share, and develop new digital products and services. Now, here's Maritza to go over the financials in more detail.

Thank you, José. Let's turn to page six to review our financial highlights. All comparisons are to the fourth quarter, unless otherwise noted. Core revenues at $186 million were approximately level. Total interest income was $194 million, a decrease of $3 million. This reflected lower average balances of cash and investment securities at lower average yields. This was partially offset by higher average balances of loans at higher average yields. First quarter interest income included $3.3 million from a PCV loan paid in full. There were two fewer days in the first quarter. This negatively affected interest income by about $3.1 million. Total interest expense was $40 million. a decrease of $4 million. This reflected lower average balances of core deposits at lower average yields. This was partially offset by higher average balances of brokerage CDs and borrowings at lower average yields. The two fewer days reduced interest expense by approximately $1 million. Total banking and financial service revenues were $32 million, a decrease of $0.6 million. This reflected favorable MSR valuation of about $1.3 million, while the fourth quarter included $2.3 million in annual insurance commission recognition. The other income category was $0.2 million, compared to a loss of $1.1 million. The change reflected the absence of several previously reported items from the fourth quarter. Non-interest expense totaled $95 million, down $10.3 million from the fourth quarter. The first quarter included $1 million in merit raises, $0.7 million in payroll taxes costs, $1 million in costs related to a capital market readiness and registration process, $3.6 million in business-related volume incentives compared to $3.1 million a year ago. And $2.5 million in net cost savings. The fourth quarter included net $6.8 million in previously reported expense items. Income taxes. was $14.9 million compared to a benefit of $8.5 million in the fourth quarter. The first quarter ETR was 21.60%. Looking at some other metrics, tangible book value was $30.14 per share. Efficiency ratio was 51%. Return on average assets was 1.78% and return on average Common equity was 16.4%. Now let's turn to page 7 to review our operational highlights. Average loan balances were $8.2 billion, up $50 million from the fourth quarter. This reflected increases in Puerto Rico and U.S. commercial loans, partially offset by lower balances in residential mortgage, auto, and consumer. Loan yield was 7.87%, up 14 basis points. Excluding the first quarter loan recovery, loan yield was 7.71%, down two basis points from the fourth quarter. New loan production was $609 million. This mainly reflected an increase in auto loan production. Year over year, new loan production increased 9%. primarily reflected increases in new commercial loans with auto moderating as anticipated. Average core deposit balances were $9.6 billion, down 4% from the first quarter. This reflected the $500 government deposit transfer to wealth management early in the first quarter. By the end of the quarter, This was partially offset by increases in retail and commercial deposits totaling more than $150 million across all categories, demand, savings, and to a lower extent, time deposits. Core deposit cost was 1.29%, down 13 basis points. This was mainly due to the previously mentioned government deposit withdrawal combined with lower average rates. Excluded public funds cost of deposit was 1% compared to 1.02%. Also, reported average non-interest-bearing deposits totaled $7 billion in the first quarter, an increase of 1.41% sequentially and 4.55% year-over-year. Investment totaled $2.8 billion, down $55 million. This reflected principal paydowns and maturities. This was partially offset by purchases of $49.2 million of mortgage-backed securities and residential mortgage securitization of $23.5 million. Average borrowings and brokerage deposits totaled $929 million compared to $787 million in the fourth quarter. The aggregate rate paid was 3.98%, down five basis points. By the end of the first quarter, balances were down to $747 million due to intentional runoff, compared to $897 million quarter. End of period cash at $636 million was 39% lower due to the government deposit transfer. Net interest margin was 5.36%, deflecting the previously mentioned $3.3 million interest recovery and lower cost of deposits and borrowing. CESA will provide more detail about credit quality in a moment, but first let me summarize the quarter. We demonstrated year-over-year long growth and production in line with expectations and continue to expect low single-digit growth with our expanding presence in commercial, more than offsetting a declining auto. Our Digital First strategy is continuing to lead to more customer and digital and debit card transactions. Digital First also helps grow deposits in line with our strategies. We continue to anticipate growth this year with our Libre, Elite and MyVisa accounts. We now expect net interest margin to range from 5.10% to 5.20%. This updated range assumes no additional rate cuts in 2026 compared to two cuts previously expected and incorporates the exit of the large remaining government deposits later this year. Non-interest expense were maintained within our expected long range. We remain on track to keep expenses in a range of $380 to $385 million this year. Based on our first quarter results, the estimated tax rate for 2026 is anticipated to be 22.3%, excluding any discrete items. We were very active returning capital to shareholders. We will continue to be selective and opportunistic, balancing shareholder returns with disciplined growth. Now here, Cesar.