KBRA assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 to San Juan, Puerto Rico-based OFG Bancorp, Inc. (NYSE: OFG) ("the company"). In addition, KBRA affirms the deposit and senior unsecured debt ratings of BBB+ and the short-term deposit and debt ratings of K2 for its bank subsidiary, Oriental Bank ("the bank"). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

Oriental Bank’s ratings continue to be anchored by the ongoing economic recovery in PR, as well as management’s stewardship during periods of unforeseen and severe natural disasters, the COVID era disruptions, and economic dislocation caused by the Commonwealth’s debt default in 2016. The positive economic performance in PR has been driven by the inflow of federal funds and private capital, the bulk of which has been invested in and remains targeted toward growth and infrastructure projects, which has helped to stabilize the unemployment rate at low levels. The Child Tax Credit expansion in 2021 has strengthened household finances and introduced more citizenry into the banking system.

Profitability, including risk-adjusted measures, remains robust, driven by the bank’s relatively low cost deposit base (including throughout changed Fed monetary regimes), solid loan yields, notably within the auto book, and sturdy (and diversified) sources of noninterest income. Capital at the bank has been managed consistently in recent years, and prudently in KBRA’s view, given the still weakened fiscal, albeit steadily improving, position of PR and the propensity for unpredictable natural disasters.

Loan quality reflects the somewhat riskier customer base in PR but also the higher mix of consumer loans, which generally results in higher loan charge-off rates. Risk-adjusted margins on consumer-oriented loans remain favorable. KBRA notes the emergence of mild credit weakness within the U.S. commercial loan book, which has been managed proactively in terms of resolution.

OFG Bancorp, Inc. is a relatively diversified holding company. Its key assets consist of the equity investment in Oriental Bank and several nonbank subsidiaries, including three operating units that have demonstrated profitability, enabling them to distribute dividends to OFG, in addition to the dividends the Oriental Bank regularly pays to OFG. The three operating nonbank subsidiaries, Oriental Financial Services (SEC regulated dealer), Oriental Insurance, and OFG Reinsurance, offer products and services connected to investment advisory and wealth management, homeowners’ property, life, and annuity insurance products (on an agency basis), among other products. OFG also maintains venture capital investments through OFG Ventures LLC.

As of 4Q25, parent company total assets amounted to approximately $1.4 billion, encapsulating the equity investment in Oriental Bank of $1.3 billion, equity investment in nonbank subsidiaries of $39 million, and cash of $33 million. Liabilities were minimal. OFG, standalone, has not operated with any fixed charge obligations, debt or preferred stock, in several years. In terms of revenue performance, dividends received from Oriental Bank have averaged about 70% of total OFG revenues in recent years, with another 5%-10% of total revenues coming from management fees paid by the bank to OFG. Dividends paid by nonbank subsidiaries, plus management fees, have constituted roughly 15% of total revenues in recent periods. Parent company operating expenses were relatively low at $6.6 million in 2025.

The ratings for OFG are linked to the ratings of Oriental Bank, due primarily to the reliance on bank dividends to fund the BHC’s cash needs, although as noted above, OFG has additional sources of revenue beyond dividends received from the Oriental Bank that add an element of strength to its financial profile. As a separate legal entity, the ratings for OFG are reduced by one level, relative to the ratings of Oriental Bank, because of structural subordination, which typically exists between holding company and bank level creditors.

Rating Sensitivities

The ratings for Oriental Bank continue to be well anchored, reflective of solid multi-year operating performance and the sustained economic recovery in PR. Rating momentum remains tied to the continued maintenance of solid regulatory capital ratios and earnings performance, as well as the prospect for long-term stability in the Commonwealth’s fiscal position. Conversely, although unlikely, the ratings would most likely come under pressure if loan quality were to deteriorate beyond expectations such that KBRA needed to reevaluate the efficacy of management’s loan underwriting and administration standards (within PR and the U.S. loan books), or periodic loan losses (or provision expense) were to move structurally higher such that the bank’s historically robust bottom line earnings profile were to compress to below peer-like levels. OFG’s ratings could be widened from the current level relative to the bank’s ratings if the double leverage ratio were to be consistently maintained more than 120% or the fixed charge coverage ratio were to consistently perform below 5x.

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Methodologies

• Financial Institutions: Bank & Bank Holding Company Global Rating Methodology
• ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

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