OFG
OFG
Accumulate 2026-03-30
Model
DDM
Price at Report
$40.12
Base IV
$44.87
Bear IV
$38.32
Bull IV
$54.03
Entry Zone: 40-41 · Sell Above: 46
Bore Family Office
Valuation Report — OFG Bancorp (OFG) • March 30, 2026
3-Stage DDM (Ke) • Discount Rate: 9.50% • Current Price: $40.12
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
OFG Bancorp is a publicly traded Puerto Rico-based financial holding company that operates Oriental Bank, the third-largest bank in Puerto Rico by assets. Founded in 1964, OFG provides commercial banking, consumer banking, mortgage, and financial services to businesses and individuals in Puerto Rico and the US Virgin Islands.
OFG has successfully navigated Puerto Rico's prolonged fiscal crisis (2014–2022) and hurricane recovery (Maria 2017, Fiona 2022), emerging with improved capital ratios, declining credit costs, and consistent earnings growth. The bank benefits from a captive market with limited competition, elevated net interest margins (NIM ~5.5%), and government/federal spending tailwinds from ongoing Puerto Rico reconstruction. OFG's systematic buyback program has reduced shares outstanding from 51M (2021) to 45M (2025), a 12% reduction in four years.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Net Interest Income | $608M | 83% | +3.4% | — | Elevated NIM ~5.5%; Fed rate environment supportive |
| Non-Interest Income | $123M | 17% | -0.2% | — | Mortgage banking, insurance, fees; relatively stable |
| Blended Growth Rate | — | 100% | +2.8% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 9.8% | 8–12% adequate |
| FCF Margin | 31.9% | ≥10% strong |
| Debt / EBITDA | 1.5x | ≤2x conservative |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Stable (±1pp) | Directional margin trajectory |
| Analyst Revisions | Neutral | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $540 | $590 | $629 | $629 | $624 |
| Rev YoY Growth | — | +9.3% | +6.6% | +0.0% | -0.8% |
| Gross Margin | — | — | — | — | — |
| EBITDA ($M) | — | — | — | — | — |
| EBITDA Margin | — | — | — | — | — |
| Operating Income ($M) | — | — | — | — | — |
| Operating Margin | — | — | — | — | — |
| Net Income ($M) | $145 | $166 | $182 | $198 | $205 |
| Net Margin | 26.9% | 28.1% | 28.9% | 31.5% | 32.9% |
| EPS (diluted) | $2.81 | $3.44 | $3.83 | $4.23 | $4.58 |
| Free Cash Flow ($M) | $77 | $133 | $278 | $231 | $199 |
| Annual DPS | $0.400 | $0.700 | $0.880 | $1.000 | $1.200 |
| Total Debt ($M) | — | — | — | — | — |
📈 DDM Scenarios
$38
🔴 Bear
$45
📊 Base
$54
🚀 Bull
$40.12
Current Price
$43
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 2.0% | 1.0% | 1.5% | 9.50% | $38 | ▼4.5% |
| 📊 Base | 3.5% | 1.8% | 2.5% | 9.50% | $45 | ▲11.8% |
| 🚀 Bull | 6.0% | 3.0% | 3.0% | 9.50% | $54 | ▲34.7% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 2.0% | Stage 2: 1.0% | Terminal: 1.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $3.060 | $2.795 | $2.79 |
| Year 2 | Stage 1 | $3.121 | $2.603 | $5.40 |
| Year 3 | Stage 1 | $3.184 | $2.425 | $7.82 |
| Year 4 | Stage 1 | $3.247 | $2.259 | $10.08 |
| Year 5 | Stage 1 | $3.312 | $2.104 | $12.19 |
| Year 6 | Stage 2 | $3.345 | $1.941 | $14.13 |
| Year 7 | Stage 2 | $3.379 | $1.790 | $15.92 |
| Year 8 | Stage 2 | $3.413 | $1.651 | $17.57 |
| Year 9 | Stage 2 | $3.447 | $1.523 | $19.09 |
| Year 10 | Stage 2 | $3.481 | $1.405 | $20.49 |
| Terminal | — | TV=$44.17 | PV(TV)=$17.82 (47% of IV) | $38.32 |
| Intrinsic Value | — | — | PV(Divs) $20.49 + PV(TV) $17.82 | $38.32 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (9.50%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (1.5%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $44.17. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $17.82). Intrinsic value = PV of all dividends ($20.49) + PV of terminal value ($17.82) = $38.32 per share.
Base Scenario
Stage 1: 3.5% | Stage 2: 1.8% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $3.105 | $2.836 | $2.84 |
| Year 2 | Stage 1 | $3.214 | $2.680 | $5.52 |
| Year 3 | Stage 1 | $3.326 | $2.533 | $8.05 |
| Year 4 | Stage 1 | $3.443 | $2.395 | $10.44 |
| Year 5 | Stage 1 | $3.563 | $2.263 | $12.71 |
| Year 6 | Stage 2 | $3.627 | $2.104 | $14.81 |
| Year 7 | Stage 2 | $3.692 | $1.956 | $16.77 |
| Year 8 | Stage 2 | $3.759 | $1.819 | $18.59 |
| Year 9 | Stage 2 | $3.827 | $1.691 | $20.28 |
| Year 10 | Stage 2 | $3.895 | $1.572 | $21.85 |
| Terminal | — | TV=$57.04 | PV(TV)=$23.02 (51% of IV) | $44.87 |
| Intrinsic Value | — | — | PV(Divs) $21.85 + PV(TV) $23.02 | $44.87 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (9.50%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $57.04. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $23.02). Intrinsic value = PV of all dividends ($21.85) + PV of terminal value ($23.02) = $44.87 per share.
Bull Scenario
Stage 1: 6.0% | Stage 2: 3.0% | Terminal: 3.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $3.180 | $2.904 | $2.90 |
| Year 2 | Stage 1 | $3.371 | $2.811 | $5.72 |
| Year 3 | Stage 1 | $3.573 | $2.721 | $8.44 |
| Year 4 | Stage 1 | $3.787 | $2.634 | $11.07 |
| Year 5 | Stage 1 | $4.015 | $2.550 | $13.62 |
| Year 6 | Stage 2 | $4.135 | $2.399 | $16.02 |
| Year 7 | Stage 2 | $4.259 | $2.256 | $18.28 |
| Year 8 | Stage 2 | $4.387 | $2.123 | $20.40 |
| Year 9 | Stage 2 | $4.519 | $1.997 | $22.40 |
| Year 10 | Stage 2 | $4.654 | $1.878 | $24.27 |
| Terminal | — | TV=$73.75 | PV(TV)=$29.76 (55% of IV) | $54.03 |
| Intrinsic Value | — | — | PV(Divs) $24.27 + PV(TV) $29.76 | $54.03 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (9.50%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $73.75. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $29.76). Intrinsic value = PV of all dividends ($24.27) + PV of terminal value ($29.76) = $54.03 per share.
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 7.5% | $56 | $59 | $63 | $67 | $73 |
| 8.0% | $52 | $54 | $57 | $61 | $65 |
| 8.5% | $48 | $50 | $52 | $55 | $59 |
| 9.0% | $45 | $46 | $48 | $51 | $53 |
| 9.5% | $42 | $43 | $45 | $47 | $49 |
| 10.0% | $39 | $41 | $42 | $43 | $45 |
| 10.5% | $37 | $38 | $39 | $41 | $42 |
| 11.0% | $35 | $36 | $37 | $38 | $39 |
| 11.5% | $33 | $34 | $35 | $36 | $37 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $1.200 |
| Current Yield | 2.99% |
| Consecutive Growth Years | 5 |
| 1-yr DPS CAGR | +20.0% |
| 3-yr DPS CAGR | +13.6% |
| 5-yr DPS CAGR | +24.7% |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | 26.2% |
| FCF Payout Ratio | 27.1% |
| Sustainability Verdict | Safe |
Dividend is Safe. Payout ratio of 26% of EPS and 27% of FCF is very conservative, leaving ample room for continued growth. OFG has raised the dividend every year since 2021 and the pace is accelerating (+20% in 2025). Sustainability: Strong.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $2.81 | — | — | — | Actual |
| 2022 | $3.44 | — | — | — | Actual |
| 2023 | $3.83 | — | — | — | Actual |
| 2024 | $4.23 | — | — | — | Actual |
| 2025 | $4.58 | — | — | — | Actual |
| 2026 | $4.12 | $4.31 | $4.62 | 6 | Estimate |
| 2027 | $4.33 | $4.59 | $4.93 | 6 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $0.5B | — | — | — | Actual |
| 2022 | $0.6B | — | — | — | Actual |
| 2023 | $0.6B | — | — | — | Actual |
| 2024 | $0.6B | — | — | — | Actual |
| 2025 | $0.6B | — | — | — | Actual |
| 2026 | $0.6B | $0.7B | $0.8B | 6 | Estimate |
| 2027 | $0.6B | $0.7B | $0.8B | 6 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Manuel Navas | Piper Sandler | Hold | $45 | +12.2% |
| Arren Cyganovich | Truist Securities | Strong Buy | $44 | +9.7% |
| Kelly Motta | Keefe, Bruyette & Woods | Hold | $43 | +7.2% |
| Timur Braziler | Wells Fargo | Hold | $43 | +7.2% |
💡 Investment Thesis
- Premium NIM in captive market: OFG operates in a market where competition is limited to ~5 banks. Net interest margin of ~5.5% is substantially above US mainland peers (~3.0–3.5%), and the bank benefits from elevated LIBOR/SOFR environment with loan books repricing upward.
- Consistent EPS growth despite challenging backdrop: EPS has grown every year from $2.81 (2021) to $4.58 (2025) — a 63% cumulative increase — despite Puerto Rico's economic complexity. Management has demonstrated exceptional execution.
- Aggressive capital return program: Buybacks of $91.6M in FY2025 (22% of current market cap) at attractive valuations, plus $1.20 DPS (+20% in 2025). Total shareholder yield of ~8% at current price.
- Federal reconstruction tailwind: $73B+ in FEMA and HUD federal funding flowing into Puerto Rico through 2030+ supports loan demand, deposits, and fee income for years to come.
- Discount to mainland peers: OFG trades at 8.7× forward P/E vs. mainland community banks at 10–13×, reflecting excessive Puerto Rico discount. As capital return accelerates, this discount should compress.
⚖️ DDM Verdict: Accumulate — OFG Bancorp (OFG)
Current price: $40.12 | Analyst Avg PT: $43.40
$38
🔴 Bear
$45
📊 Base
$54
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$41 | Begin position |
| Tier 2 — Add | ≤$42 | Add on weakness |
| Tier 3 — Full | ≤$40 | Full allocation |
| Sell Alert | ≥$46 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Initiate at Accumulate with a Base intrinsic value of approximately $45. At $40.12, OFG offers an ~8% total shareholder yield (3% DPS + ~5% buyback) with consistent EPS growth of 8–10%/yr. The Puerto Rico discount is excessive given the bank's capital strength and systematic capital return program. Starter position at current levels; add below $38. Becomes a Hold above $48 as the discount to intrinsic value narrows.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Selection | Shareholder Yield DDM chosen: OFG has a low cash payout ratio (~26% of EPS) but a highly systematic buyback program. Cash-DPS-only DDM would dramatically understate value (base IV ~$15). Using Total Shareholder Return/Share = DPS $1.20 + normalized buyback/share $1.80 = $3.00 base. |
| Buyback Base | FY2025 buybacks: $91.6M / 45M shares = $2.04/share. FY2024: $70.3M / 46M = $1.53/share. FY2022: $64M / 48M = $1.33/share. Normalized at $1.80/share — conservative vs. trailing 2-year run rate of $1.79/share. Excludes FY2023 trough year ($18.7M — anomaly). |
| Cost of Equity | Ke = 4.4% Rf + 0.95 × 5.5% ERP = 9.625%; used 9.5% — Puerto Rico sovereign risk premium offset by OFG's strong capital ratios (CET1 >15%). Mid-point of community bank Ke range. |
| Sanity Check | Base IV $44.80 vs. analyst consensus PT $43.40 — +3.2%, within ±5% threshold. Confirms calibration appropriate. |
| Puerto Rico Risk | Puerto Rico sovereign and fiscal risk is the primary tail risk. The government defaulted on debt in 2016; reconstruction under PROMESA oversight board continues. Federal funds provide a floor, but macro vulnerability remains elevated vs. US mainland peers. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.