Better credit data, still one big loan
- Q1 2026 eased the main credit worry: non-performing assets fell 6.4% to $127.3 million.
- Net interest margin was strong at 5.36%, above the new full-year guide of 5.10% to 5.20%.
- The company bought back $44.5 million of stock in the quarter and raised the dividend to $0.35 per share.
- The biggest risk is still a $44.1 million non-performing Puerto Rico telecom loan.
- Commercial loans are now 43.1% of the loan book, so OFG is leaning harder into business credit.
Margin rebound, credit not cleared
OFG looks better after its Q1 2026 filing. The first earnings release sounded good, but the 10-Q gave the missing credit detail. Non-performing assets fell 6.4% to $127.3 million, the non-performing loan rate fell to 1.47%, and net charge-offs stayed at 1.05% of average loans.
The bull case is now clearer. Net interest margin, or NIM, which is the spread a bank earns between loan yields and funding costs, was 5.36% in Q1. Management also lifted 2026 NIM guidance to 5.10% to 5.20%, after earlier guidance had pointed to more pressure. Buybacks help too, with $44.5 million of shares repurchased in the quarter.
The bear case did not disappear. One Puerto Rico telecommunications loan is still on non-accrual, meaning it is not paying as expected. Its balance only moved from $45.0 million at year-end 2025 to $44.1 million at March 31, 2026. Until that loan is worked down more, credit risk is contained, not gone.
Finn's overall view is mixed rather than excited. OFG earns well for a small regional bank, but it is highly tied to Puerto Rico, loan growth is moderating, and the stock does not screen as a clear bargain.
A Puerto Rico bank with fee add-ons
OFG makes most of its money the way a bank does. It takes deposits, lends to people and businesses, and earns net interest income from loans and securities. Its loans include commercial, auto, mortgage, and consumer credit.
Fees add a second layer. The wealth management arm sells financial planning, insurance, investment advisory, securities brokerage, and trust services. These fees can help when lending spreads get tighter, but banking and treasury results still drive the story.
The company is also pushing a Digital First model. As of Q1 2025, 96% of retail customer transactions and 97% of retail deposit transactions were done through digital or self-service channels. That can lower branch pressure over time, but it also raises the cost of staying current in technology and security.
The model can break if credit losses rise, if deposit costs climb faster than loan yields, or if Puerto Rico has a local economic shock. OFG also had $1.261 billion of deposits from the Puerto Rico government in Q1 2026, which adds funding concentration risk.
What OFG sells
Commercial lending
Commercial loans were 43.1% of the gross loan portfolio in Q1 2026, up from 42.6% at year-end 2025. This is the main strategic shift, but it also brings larger borrower risk.
Auto lending
Auto loans were 32.0% of the loan book in Q1 2026. This remains a large lending pool, even as commercial lending takes more share.
Mortgage lending
Mortgage loans were 16.7% of the Q1 2026 loan portfolio. They give OFG a steadier retail credit base than a pure business lender would have.
Consumer lending
Consumer loans were 8.2% of the Q1 2026 loan book. This is the smallest major loan category, but it helps keep the bank tied to local household banking.
Wealth management
Wealth management provides planning, insurance, investment advisory, brokerage, and trust services. It produced $18.7 million of pre-tax income in 2025, up from $17.9 million in 2024.
Digital banking
OFG runs forty-two branches in Puerto Rico and two in the U.S. Virgin Islands, supported by a large digital platform. Digital use is high, with 96% of retail customer transactions through digital or self-service channels as of Q1 2025.
Profit mix by segment
Segment shares use 2025 pre-tax income: Banking $102.2 million, Wealth Management $18.7 million, and Treasury $113.2 million. The mix shows a caveat: Treasury was the largest profit contributor, but Banking remains the main customer business.
What could break the thesis
The telecom loan worsens
High impact · Medium oddsThe known problem loan is a Puerto Rico telecommunications commercial loan. It was $44.1 million at March 31, 2026, down only slightly from $45.0 million at year-end 2025. If the workout fails, OFG could need more reserves or charge-offs.
Puerto Rico shock
High impact · Medium oddsOFG conducts most of its business in Puerto Rico and the U.S. Virgin Islands. Local fiscal stress, storms, recession, or government liquidity issues could hurt borrowers and deposits at the same time. This is a structural risk, not a one-quarter issue.
Commercial credit mix turns risky
Medium impact · Medium oddsCommercial loans rose to 43.1% of the portfolio in Q1 2026. That can lift yields, but business loans can be lumpy because one borrower can matter a lot. The recent telecom loan shows why the mix shift needs close watching.
Margin guide misses
Medium impact · Medium oddsQ1 2026 NIM was 5.36%, and management guided 2026 NIM to 5.10% to 5.20%. If deposit costs rise or loan yields reset lower, earnings could fall even if credit stays calm. The earlier 2026 guide had been lower, so this remains a key proof point.
Government deposit concentration
Medium impact · Low oddsOFG had $1.261 billion of deposits from the Puerto Rico government in Q1 2026. Large public deposits can move for reasons outside normal customer behavior. If they leave quickly, the bank may need more expensive funding.
In one breath
What does OFG Bancorp do?
OFG Bancorp is a bank holding company focused mainly on Puerto Rico and the U.S. Virgin Islands. It offers commercial, auto, mortgage, consumer, wealth, insurance, brokerage, and trust services.
Why is OFG's telecom loan important?
The telecom loan is a single non-performing commercial loan with a $44.1 million balance at March 31, 2026. Because it is large for one borrower, investors should watch whether OFG reduces it or takes more losses.
Is OFG mainly a growth story or an income story?
It is more of an earnings and capital return story than a fast growth story. Loan growth is moderating, but margin improved in Q1 2026 and the company repurchased $44.5 million of stock during the quarter.
What is the main thing to watch next?
Watch credit and margin together. The cleanest bull path is a lower telecom loan balance, NIM staying inside the 5.10% to 5.20% 2026 guide, and steady buyback execution.