OFG BANCORP (OFG)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Item 1, “Financial Statements” of this quarterly report on Form 10-Q. This discussion and analysis section contains forward-looking statements. Please see “Forward-Looking Statements,” “Risk Factors,” and “Quantitative and Qualitative Disclosures about Market Risk” in this quarterly report on Form 10-Q, and set forth in OFG’s annual report on our 2025 Form 10-K, as supplemented and amended by any subsequent quarterly reports on Form 10-Q, for a discussion of the uncertainties, risks and assumptions associated with these statements.

Other factors not identified above, including those described under the headings in our 2025 Form 10-K and any subsequent quarterly reports on Form 10-Q may also cause actual results to differ materially from those described in our forward-looking statements.

INTRODUCTION

OFG is a publicly owned financial holding company that provides a wide range of banking and financial services such as commercial, consumer, auto, and mortgage lending, financial planning, insurance sales, investment advisory and securities brokerage services, as well as corporate trust services. It operates through three business segments: Banking, Wealth Management, and Treasury, and distinguishes itself based on quality service. OFG conducts its business through its main office in San Juan, Puerto Rico, forty-two branches in Puerto Rico and two branches in the USVI. It has five subsidiaries with operations in Puerto Rico: the Bank, Oriental Financial Services, Oriental Insurance, OIB and OBPEF; two subsidiaries in the United States, OFG USA and OFG Ventures; and one subsidiary in the Cayman Islands, OFG Reinsurance. OFG’s long-term goal is to strengthen its banking and financial services franchise by expanding its lending businesses, increasing the level of integration in the marketing and delivery of banking and financial services, continuously improving our already effective asset-liability management, growing non-interest revenue from banking and financial services, as well as achieving greater operating efficiencies.

OFG’s diversified mix of businesses and products generates both the interest income traditionally associated with a banking institution and non-interest income traditionally associated with a financial services institution (generated by such businesses as securities brokerage, fiduciary services, investment advisory, insurance agency and reinsurance). Although all these businesses, to varying degrees, are affected by interest rate and financial market fluctuations and other external factors, OFG’s commitment is to continue producing a balanced and growing revenue stream.

OFG’s mission is to make possible the progress of our customers, employees, shareholders, and communities we serve. As the world evolves rapidly, we seek to amplify our ambition, with the goal of advancing from steady progress to bold transformation. We believe that our strategy is designed to accelerate our transformation into a fully digital, data-driven, customer-centric financial institution, while maintaining the strong human relationships that define our brand. OFG aims to deliver intelligent growth, operational excellence, and deeper financial empowerment to make progress possible for our communities. OFG aims to position itself as a trusted digital financial coach, by understanding the customers’ objectives and needs by offering value-added services that help them achieve financial progress and well-being. OFG is transitioning from a digital-first model to a truly digital bank, one where customers should be able to perform every financial activity seamlessly, securely, and intuitively, anytime, anywhere. Our goal is to provide a one-stop digital experience that is enriched by human connection and powered by intelligence.

RECENT DEVELOPMENTS

Economic Conditions

Puerto Rico’s economy has continued to show stable performance, supported by favorable labor market conditions and adequate system liquidity. According to the Puerto Rico Department of Economic Development and Commerce, employment data indicates continued gains across multiple industries. As of May 2026, total non-farm payroll employment averaged approximately 962,600 jobs, reflecting a 0.3% increase from the previous month and a 1.0% growth year over year. Electric power generation and cement sales have also increased 2.4% and 1.2% year over year, respectively. Economic activity has benefited from public sector reconstruction funding, private investment, and infrastructure projects. Manufacturing expansion and new on-shoring initiatives reinforce long-term growth outlook. However, OFG continues to monitor global economic and

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geopolitical conditions, including interest rate outlook, related uncertainties, and their possible impact on Puerto Rico’s economy, which could influence OFG’s business and operational results.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with GAAP requires management to make judgments, assumptions and estimates that affect the reported amount of assets, liabilities, income and expenses in the consolidated financial statements. Understanding our accounting policies and the extent to which we use judgment and estimates in applying these policies is integral to understanding our financial statements. We provide a summary of our significant accounting policies in “Note 1—Summary of Significant Accounting Policies” of our 2025 Form 10-K.

In the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” section of our 2025 Form 10-K, we identified the Allowance for Credit Losses related to loans collectively evaluated for impairment as a critical accounting policy and estimate because it involves significant estimation uncertainty that has or is reasonably likely to have a material impact on our financial condition or results of operations.

We evaluate our critical accounting estimates and judgments on an ongoing basis and update them as necessary based on changing conditions. There have been no material changes in the methods that we used to formulate these critical accounting estimates from those discussed in our 2025 Form 10-K.

FINANCIAL HIGHLIGHTS

With year-over-year increases of 20.9% in EPS and 4.5% in core revenues, second quarter results reflected continued momentum across all our businesses, supported by disciplined execution, excellent customer engagement, and our differentiated operating model. OFG continues to show core deposit strength, consistent loan growth, stable credit trends, and effective balance sheet management.

During the second quarter of 2026, OFG launched a branding-marketing campaign reflecting our evolution to a digital bank with a human touch. The campaign highlights our market-leading banking and customer communication technologies in Puerto Rico combined with our people and intensely customer-focused culture. This sets us apart and reinforces our mission to help customers achieve progress. They are the point of everything we do.

On a macro level, the Puerto Rico economy remains stable, with federal reconstruction funds continuing to flow, a strong labor market, and private sector manufacturing and onshoring investment. With the economy as a tailwind, our operational strength, disciplined execution, and focus on the customer experience positions us well to capitalize on long-term growth opportunities.

Second Quarter of 2026:

Earnings per common share diluted was $1.39 compared to $1.26 in the first quarter of 2026 and $1.15 in the second quarter of 2025. Net income available to common shareholders was $58.8 million compared to $53.9 million in the first quarter of 2026 and $51.8 million in the second quarter of 2025. Total core revenues (non-GAAP) of $190.3 million compared to $185.8 million in the first quarter of 2026 and $182.2 million in the second quarter of 2025. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP financial measures” section in this quarterly report on Form 10-Q.

Performance metrics: Net interest margin of 5.45%, return on average assets of 1.93%, return on average tangible common stockholders’ equity of 17.94%, and efficiency ratio of 54.04%.

Total Interest Income of $197.2 million compared to $194.1 million in the first quarter of 2026 and $194.3 million in the second quarter of 2025. The second quarter of 2026 increased $3.0 million sequentially, primarily reflecting higher average balances of loans at higher average rate, $4.1 million from paid in full commercial loans compared to $3.3 million from another paid in full commercial loan in the first quarter of 2026, and one additional business day, which increased interest income by $1.6 million.

Total Interest Expense of $39.9 million compared to $40.3 million in the first quarter of 2026 and $42.4 million in the second quarter of 2025. The second quarter of 2026 decreased $462 thousand sequentially, primarily reflecting lower average balances of borrowings and brokered deposits, which more than offset the additional expense of higher average balances of core deposits, and one additional business day, which increased interest expense by $440 thousand.

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Total Banking and Financial Service Revenues of $33.0 million compared to $32.0 million in the first quarter of 2026 and $30.2 million in the second quarter of 2025. The second quarter of 2026 increased $1.0 million sequentially, reflecting higher banking service and wealth management revenues, which included $1.1 million in insurance and annuity fees, and lower mortgage banking revenues.

Pre-Provision Net Revenues (Non-GAAP) of $87.5 million compared to $91.3 million in the first quarter of 2026 and $87.6 million in the second quarter of 2025. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP financial measures” section in this quarterly report on Form 10-Q.

Total Provision for Credit Losses of $13.0 million compared to $22.5 million in the first quarter of 2026 and $21.7 million in the second quarter of 2025. Total provision for credit losses in the second quarter of 2026 primarily reflected $14.7 million for increased loan volume and $1.9 million in commercial loan recoveries, while the first quarter of 2026 included $17.5 million for increased loan volume and increased allowance of $3.7 million for a previously reserved telecom commercial loan and $1.0 million for newly classified small commercial loans.

Credit Quality: Net charge-offs (“NCOs”) of $28.8 million (1.40% of average loans) compared to $21.4 million (1.05% of average loans) in the first quarter of 2026 and $12.8 million (0.64% of average loans) in the second quarter of 2025, and non-performing loans (“NPLs”) of $67.3 million (0.81% of average loans) compared to $120.9 million (1.47% of average loans) in the first quarter of 2026 and $97.4 million (1.19% of average loans) in the second quarter of 2025. The changes in second quarter of 2026 NCOs and NPLs primarily reflected the sales of the above-mentioned telecom loan and a U.S. commercial loan.

Total Non-Interest Expense of $102.8 million compared to $94.7 million in the first quarter of 2026 and $94.8 million in the second quarter of 2025. The second quarter of 2026 included $5.8 million in business related operational charges, while the first quarter of 2026 included $1.0 million in capital markets readiness and registration expenses and the benefit of $3.6 million in a business related volume incentive payment.

Income Tax Expense was $15.7 million compared to $14.9 million in the first quarte

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Please read the following discussion and analysis of our financial condition and results of operations together with “Note about Forward-Looking Statements,” Part I, Item 1 “Business,” Part I, Item 1A “Risk Factors,” and our consolidated financial statements and related notes included under Item 8 of this annual report on Form 10-K. We have omitted discussion of 2023 results where it would be redundant to the discussion previously included in Item 7 of our 2024 annual report on Form 10-K. For our discussion and analysis of our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, see Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our 2024 annual report on Form 10-K.

RECENT DEVELOPMENTS

Capital Actions

2025 Capital Actions

In January 2025, OFG announced that its Board of Directors (the “Board”) approved the increase of its regular quarterly cash dividend to $0.30 per common share from $0.25 per share, beginning in the quarter ended March 31, 2025. In April 2025, the Board approved a new $100 million stock repurchase program. This new, open-ended program is in addition to the $50 million stock repurchase program approved by the Board in October 2024 (collectively, the “Existing Repurchase Programs”). Under the Existing Repurchase Programs, OFG repurchased 2,253,819 shares during 2025 for a total of $91.6 million at an average price of $40.64 per share. At December 31, 2025, the estimated remaining amount that may be purchased under the Existing Repurchase Programs is $38.1 million.

Announcement of Forthcoming 2026 Capital Actions

In January 2026, OFG announced that its Board approved the increase of its regular quarterly cash dividend to $0.35 per common share from $0.30 per share, beginning in the quarter ending March 31, 2026. The Board also approved a new $200 million stock repurchase program. This new, open-ended program is in addition to the Existing Repurchase Programs.

Economic Conditions

Puerto Rico’s economy has continued to show stable performance, supported by favorable labor market conditions and adequate system liquidity. According to the Puerto Rico Department of Economic Development and Commerce, the Puerto Rico Economic Activity Index stood at 128.1 points in November 2025, representing a 0.8% increase compared to November 2024 and a consistent upward month-to-month trend in recent periods. Employment data published by such government agency

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indicates continued gains across multiple industries. As of November 2025, total non-farm payroll employment averaged approximately 963,400 jobs, reflecting a 0.2% increase from the prior month and a 0.9% increase year over year. Economic activity has benefited from public sector reconstruction funding, private investment, and on-shoring initiatives. However, OFG continues to monitor global economic conditions, related uncertainties and their possible impact on Puerto Rico's economy, which could influence OFG's business and operational results.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accounting and reporting policies followed by OFG conform with GAAP and general practices within the financial services industry. The preparation of these financial statements requires our management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We evaluate these judgments, assumptions and estimates for changes that would affect the reported amounts. These estimates are based on management's historical industry experience and on various other judgments and assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these judgments, assumptions and estimates. The following critical accounting estimate involves significant estimation uncertainty that has or is reasonably likely to have a material impact on our financial condition or results of operations. A discussion of OFG’s significant accounting policies, including further discussion of the accounting estimate described below, can be found in “Note 1– Summary of Significant Accounting Policies” to the consolidated financial statements and should be read in conjunction with this section.

Allowance for Credit Losses Related to Loans Collectively Evaluated for Impairment

The most critical and complex accounting estimate is associated with the determination of the ACL. The provision for credit losses charged to current operations is based on this determination. The ACL represents management’s best estimate deemed appropriate to provide current expected future credit losses in the portfolio as of the date of the reporting period.

OFG’s management evaluates the adequacy of the ACL on a quarterly basis following a systematic methodology in order to provide for inherent risks in the loan portfolio. In developing its assessment of the adequacy of the ACL, OFG must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown, such as economic developments affecting specific customers, industries or markets. Other factors that can affect management’s estimates are the key drivers used for each macroeconomic scenario, the macroeconomic scenarios selected, and the weighting given to each scenario, among others. Significant changes in the financial condition of individual borrowers, in economic conditions, in historical loss experience, and in the condition of the various markets in which collateral may be sold may all affect the required level of the ACL. Consequently, the business, financial condition, liquidity, capital and results of operations could also be affected.

The ACL estimation requires management to use relevant forward-looking economic forecasts, by using variables such as employment and unemployment rate, gross national product (“GNP”), retail sales, and house price index, including in the application of reasonable and supportable forecasts. ACL estimations are performed by aggregating loans with similar risk characteristics.

OFG applied a discounted cash flow (“DCF”) method for non-purchased credit deteriorated loans (“non-PCD”) and an undiscounted cash flow (“UDCF”) method for purchased credit deteriorated (“PCD”) loans to determine the ACL for loans collectively measured for impairment, except for credit cards and overdrafts which utilize a remaining life methodology. For non-PCD, the expected cash flows are calculated for each loan and discounted using the effective yield. The discounted amount of expected cash flows is compared to the amortized cost, and any shortfall is recorded as a reserve. For PCD loans, the expected cash flows are calculated for each loan pool, pool reserve is calculated by aggregating total loss from the UDCF. Expected cash flows are resulted from applying the probability of default (“PD”), loss given default (“LGD”), and exposure at default (“EAD”). For the EAD, OFG uses a prepayment model that projects prepayments over the life of the loans.

Management’s judgment is required in selecting the macroeconomic scenarios and the weighting of the economic scenarios, which consist of baseline and moderate recession scenarios. As of December 31, 2025, management gave more weight to the baseline scenario, except for the US loan segment where the moderate recession scenario was given a greater weight. Management selects the macroeconomic forecast that is most reflective of expectations at that point in time. The applicability of qualitative adjustments includes adjustments of inherent risk not captured by the quantitative model.

OFG’s sensitivity analysis does not represent management’s view of expected credit losses at December 31, 2025. OFG evaluated sensitivities by applying 100% weight to baseline and moderate recession scenarios. The impact of assigning a 100%

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weight to the baseline scenario was a hypothetical decrease of 4.3% to the collective ACL, and the impact of assigning a 100% weight to the moderate recession scenario was a hypothetical increase of 3.7% to the collective ACL. These hypothetical sensitivities do not incorporate the impact of management’s judgment for qualitative factors applied in the current ACL for loans. It is possible that others performing similar sensitivity analyses could reach different conclusions or results. The sensitivity analysis excludes the ACL for off-balance sheet credit exposures.

For a detailed description of the principal factors used to determine the ACL related to loans collectively evaluated for impairment and for the principal enhancement’s management made to its methodology, please refer to “Note 1– Summary of Significant Accounting Policies” and “Note 5 – Loans” to the consolidated financial statements.

FINANCIAL HIGHLIGHTS

The quarter ended December 31, 2025 earnings per share increased 16.4% year-over-year on a 1.9% growth in total core revenues in total core revenues, driven by disciplined core operations and a favorable tax benefit. For 2025, earnings per share grew 8.3% on a 2.8% increase in total core revenues, reflecting continued operating momentum and solid underlying performance.

Asset quality and credit metrics remained sound and well-controlled throughout the year. OFG repurchased $40.1 million of common shares during the fourth quarter of 2025 and $91.6 million for the year, reinforcing our commitment to disciplined capital deployment and shareholder returns.

During the quarter and year ended December 31, 2025, in line with our strategies, we saw increased commercial loans and broad acceptance of our flagship mass-market Libre and mass affluent Elite deposit accounts. By December 31, 2025, we grew our client base 4.26% from December 31, 2024 and our Digital First strategy continued to solidify our leadership in banking innovation in Puerto Rico.

The island’s economy also continued to perform well, supported by infrastructure investments with federal and private funds and new multi-million dollar on-shoring projects, reinforcing Puerto Rico’s position as a global hub for medical devices and pharmaceutical manufacturing. These developments underpin our confidence in sustained economic activity and long-term growth across our core businesses.

Year 2025:

Earnings per share diluted of $4.58 compared to $4.23 in 2024. Total core revenues of $729.8 million compared to $709.6 million in 2024.

Fourth Quarter of 2025:

Earnings per share diluted was $1.27 compared to $1.16 in the third quarter of 2025 and $1.09 in the fourth quarter of 2024. Total core revenues of $185.4 million compared to $184.0 million in the third quarter of 2025 and $181.9 million in the fourth quarter of 2024.

Performance metrics: Net interest margin of 5.12%, return on average assets of 1.81%, return on average tangible common stockholders’ equity of 17.20%, and efficiency ratio of 56.65%.

Total Interest Income of $197.2 million compared to $200.1 million in the third quarter of 2025 and $190.2 million in the fourth quarter of 2024. Compared to the third quarter of 2025, total interest income in the fourth quarter of 2025 decreased $2.9 million, reflecting higher average balances of loans and cash at lower average yields, partially offset by higher average balances of investment securities at slightly higher yields.

Total Interest Expense of $44.5 million compared to $45.4 million in the third quarter of 2025 and $41.0 million in the fourth quarter of 2024. Compared to the third quarter of 2025, total interest expense in the fourth quarter of 2025 decreased by $0.9 million, reflecting higher average balances of deposits and borrowings at lower average rates.

Total Banking and Financial Service Revenues of $32.6 million compared to $29.3 million in th

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