OFG Bancorp (OFG)

Puerto Rican financial services company OFG Bancorp (NYSE:OFG) met Wall Streets revenue expectations in Q4 CY2025, with sales up 1.9% year on year to $185.4 million. Its GAAP profit of $1.27 per share was 10.4% above analysts’ consensus estimates.

Company Overview

Originally founded in 1964 as a federal savings and loan institution, OFG Bancorp (NYSE:OFG) provides banking and financial services including commercial and consumer lending, wealth management, insurance, and trust services primarily in Puerto Rico and the U.S. Virgin Islands.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

OFG Bancorp's main competitors in Puerto Rico include Popular, Inc. (NASDAQ:BPOP), First BanCorp (NYSE:FBP), and Citibank. In its U.S. mainland commercial lending activities, it competes with regional and national banks that serve middle-market businesses.

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Over the last five years, OFG Bancorp grew its revenue at a tepid 7% compounded annual growth rate. This was below our standard for the banking sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. OFG Bancorp’s recent performance shows its demand has slowed as its annualized revenue growth of 3.4% over the last two years was below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, OFG Bancorp grew its revenue by 1.9% year on year, and its $185.4 million of revenue was in line with Wall Street’s estimates.

Net interest income made up 80.7% of the company’s total revenue during the last five years, meaning OFG Bancorp barely relies on non-interest income to drive its overall growth.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

Topline growth alone doesn't tell the complete story - the profitability of that growth shapes actual earnings impact. Banks track this dynamic through efficiency ratios, which compare non-interest expenses such as personnel, rent, IT, and marketing costs to total revenue streams.

Investors focus on efficiency ratio changes rather than absolute levels, understanding that expense structures vary by revenue mix. Counterintuitively, lower efficiency ratios indicate better performance since they represent lower costs relative to revenue.

Over the last five years, OFG Bancorp’s efficiency ratio has swelled by 12.9 percentage points, going from 60.5% to 53.4%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

OFG Bancorp’s efficiency ratio came in at 56.7% this quarter, falling short of analysts’ expectations by 417 basis points (100 basis points = 1 percentage point).

For the next 12 months, Wall Street expects OFG Bancorp to maintain its trailing one-year ratio with a projection of 53.7%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

OFG Bancorp’s EPS grew at an astounding 28.3% compounded annual growth rate over the last five years, higher than its 7% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For OFG Bancorp, its two-year annual EPS growth of 9.5% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, OFG Bancorp reported EPS of $1.27, up from $1.09 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects OFG Bancorp’s full-year EPS of $4.58 to stay about the same.

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

When analyzing banks, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value by removing intangible assets of debatable liquidation worth. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

OFG Bancorp’s TBVPS grew at an incredible 12.3% annual clip over the last five years. TBVPS growth has also accelerated recently, growing by 13.8% annually over the last two years from $23.13 to $29.96 per share.

Over the next 12 months, Consensus estimates call for OFG Bancorp’s TBVPS to grow by 8.9% to $32.64, paltry growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, OFG Bancorp has averaged a Tier 1 capital ratio of 14.2%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, OFG Bancorp has averaged an ROE of 15.6%, impressive for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for OFG Bancorp.

It was good to see OFG Bancorp beat analysts’ EPS expectations this quarter. We were also happy its tangible book value per share narrowly outperformed Wall Street’s estimates. On the other hand, its net interest income and net interest margin slightly missed. Overall, this print still had some key positives. The stock remained flat at $42.58 immediately following the results.

Updated: January 22, 2026 at 8:04 AM EST

Before deciding whether to buy OFG Bancorp or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

There are some bright spots in OFG Bancorp’s fundamentals, but its business quality ultimately falls short. Although its revenue growth was uninspiring over the last five years and analysts expect growth to slow over the next 12 months, its admirable net interest margin a wonderful starting point for the overall profitability of the business. Be wary, however, as OFG Bancorp’s declining net interest margin shows its loan book is becoming less profitable.

OFG Bancorp’s P/B ratio based on the next 12 months is 1.2x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $47.60 on the company (compared to the current share price of $42.58).