OFG Bancorp (OFG): what the price assumes

In the published model solve dated 2026-Q2, anchored at $52.43, OFG Bancorp (OFG) is priced for 12.9% return on equity. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-29.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/OFG

Headline

FieldValue
TickerOFG
CompanyOFG Bancorp
Current price$52.43/sh
CompositionBanking 79% / Wealth Management 5% / Treasury 16%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfinancials
Return on equity needed12.9%
Return on equity now14.8%
ROE gap-1.9pp
Price-to-book1.57x

Solve inputs: computed at a 9.7% cost of equity with 4% terminal growth over a 10-year stage, on common book equity (FY2026).

How unusual the bet is: within-range

ReferenceValue
vs own history+0.99σ
cohort percentile (of 122 peers)70
sustained it ~10 years at this level67%
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset0.85x3justifies
Earnings0.95x1justifies
Relative—0—
Growth1.07x1expensive

Families that justify the price: Asset, Earnings, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 5.3%); the inversion above states its own rate.

Per-Model Detail (n=5)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
Bank Fair Value (P/TBV)—$75.070.70xyesTBVPS $31.12 × 2.41x (ROE (TTM) 15.7% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption), credit 2.32% allowance/loans → ×0.96)
Relative ValuationRelative——noP/E 10x (static sector reference · 2026-04), scenarios: 8.4x / 10.0x / 11.6x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDMGrowth——no—
Two-Stage DDMGrowth$49.161.07xyesStage 1: 20% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$56.390.93xyesBV/sh $33.30, ROE (TTM) 15.7%, ke 9.3%
Two-Stage Excess ReturnAsset$72.460.72xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth——noRev $0.6B, growth 3% (input: historical growth; tapered), Terminal P/S: 3.0x / 3.6x / 4.2x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative——noEPS $5.08, growth 20% (input: historical EPS growth), PEG=0.51 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset$61.690.85xyes√(22.5 × EPS $5.08 × BVPS $33.30) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings——noEPS $5.08 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative——no—
PEG Fair ValueRelative——noEPS $5.08 × (PEG 1.5 × growth 19.6% (input: historical EPS growth)) → PE 29.4x
Earnings YieldEarnings$54.920.95xyesEPS $5.08 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Economic-Unit Decomposition (Sum Of The Parts)

The issuer is a funded financial business. Debt, interest, and cash flows are operating inputs, so industrial EV, net-debt, WACC, and free-cash-flow lenses do not apply; value the common-equity claim with book, earnings, capital, and payout economics.

UnitRoleValuation basisRevenueReported profitValue evidenceStatus
Bankingfinancialequity$575.4m—withheldunresolved standalone equity facts required
Wealth Managementfinancialequity$38.8m—withheldunresolved standalone equity facts required
Treasuryfinancialequity$117.2m—withheldunresolved standalone equity facts required

No unit-level total common-equity value is stated. Each financial unit requires supported standalone common equity, normalized earnings, capital adequacy, and payout capacity. Consolidated debt, interest, and cash are operating balances, not an enterprise-to-equity bridge; company-level book, earnings, capital, and payout lenses remain the coherent cross-checks.

Solvency

FieldValue
Share count CAGR (buyback)-3.3%

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

Bull Case

Begin with where the price lands against the methods, because OFG is the rare name in this report that trades below them. The asset-value lens, the earnings-power lens, and the peer-multiple lens all sit above the current price; only the forward-growth lens reads it as anything but cheap. For a bank, that pattern has a clean translation: the market is pricing OFG as if it earns a return on equity below what it actually earns. The stock trades around 1.4 times book value while generating a return on average tangible common equity of 16.43%, a spread over its cost of equity near 10% that would ordinarily warrant a higher multiple. When the methods say cheap and the bank is demonstrably profitable, the spread itself is the bull argument.

The profitability is not an accident of one quarter. OFG earned diluted EPS of $1.26 in Q1 2026, up 26% year over year, on a net interest margin of 5.36% and a return on average assets of 1.78%. A net interest margin above 5% is wide for a US-regulated bank, a reflection of Puerto Rico's deposit-funded, higher-yielding loan economics, and a 1.78% return on assets is well above the roughly 1% that a typical mainland bank earns. The efficiency ratio of 50.97% means OFG converts revenue to profit more cheaply than most peers. This is a structurally high-return bank trading at a value multiple, which is the combination value investors look for.

The capital-return picture closes the case. OFG repurchased $44.5 million of common stock in Q1 2026 and raised its dividend by 17%, while the share count has been shrinking around 3.5% a year. Buying back stock at only about 1.4 times book retires more earnings power per dollar than the same buyback at a higher multiple would, so the repurchase compounds the value rather than spending it. Loan growth of 5% year over year with new production up 9% shows the bank is still growing the book, not just returning capital. For a financial the right solvency frame is capital adequacy and payout capacity, and OFG is generating high returns, growing loans, and returning capital at the same time, which is what lets it shrink the share count while the dividend rises.

Bear Case

The competitive reality is the place to start, because OFG is the third bank in a market the leader dominates. Popular, through Banco Popular, holds the commanding share of Puerto Rico's deposits and loans, First BanCorp's FirstBank is the entrenched number two, and OFG's Oriental Bank sits behind both, with Scotiabank and Santander also competing for the same island customers. Being third in a concentrated market is a structurally weaker position than the headline returns suggest: the leader sets pricing, has the deepest branch and relationship network, and can absorb a downturn more comfortably. First BanCorp, the closer competitor, runs a higher return on equity and a wider net interest margin than the market leader, which is a reminder that OFG's elite-looking metrics are being earned in a field where rivals are at least as efficient. The bank's scale disadvantage is permanent unless it consolidates, and consolidation in a small market is rare and expensive.

The deeper bear concern is concentration, and it shows in the credit data. OFG's loan book, its deposits, and its fee income are overwhelmingly tied to a single economy. Puerto Rico has been in a genuine recovery, which has flattered bank earnings across the island, but the same concentration that lifts results in good years magnifies them in bad ones. Net charge-offs ran at 1.05% of average loans in Q1 2026, a level that is manageable now but that would climb quickly if the island's economy softened, and a bank earning a 1.78% return on assets has that return partly because it lends at higher yields to higher-risk borrowers. The wide net interest margin and the elevated charge-off rate are two sides of the same coin: OFG is paid more because it takes more credit risk, and that trade looks great until the cycle turns.

The valuation does not require a rescue, which changes the shape of the bear. Because the price already sits below most of the methods, the bear here is not an overvaluation argument; it is a quality-of-earnings and durability argument. The return on equity the price embeds is below what OFG currently earns, so the market is already discounting some normalization. The bear case is that the discount is warranted: a concentrated, number-three bank earning peak-of-recovery returns in a small economy deserves to trade below a mainland bank with the same metrics, because its earnings are more cyclical and its competitive position weaker. Net interest margins above 5% are not a permanent feature; as rates fall and competition for the island's deposits persists, that margin compresses, and the high return that makes the stock look cheap drifts toward the level the market is already paying for.

Valuation

OFG is read the way a bank should be read: on price-to-book against the return it earns versus its cost of equity, with the cash-flow and operating-margin lenses set aside because deposits are funding, not corporate debt. On that test the stock looks inexpensive. It earns a return on average tangible common equity of 16.43% against a cost of equity near 10%, a wide positive spread, and it trades at only about 1.4 times book value. The price embeds a return below what the bank actually earns, which is the signature of a value situation rather than a stretched one.

The methods agree it is cheap. The asset-based lenses anchored on tangible book and profitability, the earnings-power lenses, and the peer-multiple lenses all land above today's price; only the forward-growth lens, which credits future expansion, reads the stock as fully valued. In plain terms, the price sits below most of the ways a bank can be valued, and the reverse lens makes the same point from the other direction: the price assumes OFG sustains a return on equity in the low-to-mid teens, comfortably below its current mid-teens return. The question this raises is not why the stock is expensive, because it is not. It is why the market is applying a discount, and the answer is the quality and durability of the earnings rather than the level.

The peer and solvency frame explain the discount and bound it. OFG's net interest margin of 5.36% and efficiency ratio of 50.97% are strong, but they are earned as the number-three bank in a single concentrated economy, which is a more cyclical and competitively weaker position than the same metrics on a diversified mainland bank. For a bank the solvency frame is capital adequacy and payout capacity, and OFG is comfortable on both: it grows loans, returns capital through a rising dividend and steady buybacks, and shrinks its share count around 3.5% a year. The valuation leaves a value-versus-quality question rather than a too-expensive one: the price is undemanding, and what an investor underwrites is whether OFG's elevated, recovery-aided returns prove durable enough to justify even today's modest multiple.

Catalysts

The catalyst that matters most for OFG is credit quality, because the value case rests on the durability of the bank's high returns. In Q1 2026 net charge-offs ran at 1.05% of average loans even as early and total delinquency rates declined to 2.21% and 3.40%. Those two signals point in opposite directions, falling delinquencies suggest the pipeline of future losses is shrinking, while the current charge-off rate shows the cost of the higher-yield lending model, so the trajectory of both over the next several quarters is the clearest read on whether the recovery-era earnings hold.

The earnings drivers are net interest margin and loan growth. OFG posted a 5.36% net interest margin and 5% year-over-year loan growth with new production up 9% in Q1 2026, lifting diluted EPS 26% to $1.26. As central banks ease, the path of that margin is the swing factor; a wide margin is the source of the elevated returns, and its direction determines whether the next prints sustain the momentum.

The capital-return cadence is the third catalyst and the most controllable. OFG repurchased $44.5 million of stock and raised its dividend 17% in Q1 2026; with the shares trading below where the standard bank lens would value them, continued buybacks at this level are an efficient use of capital, and the pace of repurchases is a direct signal of how management reads its own valuation.

Peer Cohorts (Per Segment, With Filing Citations)

Banking (reported)

Wealth Management (reported)

Treasury (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 2026 earnings release · company financial data · Q1 2026 earnings release; company financial data · Puerto Rico banking market analysis, 2026

View the full interactive OFG report on boothcheck