OFG Bancorp (NYSE:OFG) reported third-quarter 2026 earnings per share of $1.33, up 15% from a year earlier, as commercial loan growth, expense discipline and stable credit performance supported results. Chief Executive Officer and Chairman José Rafael Fernández said the company delivered “excellent performance across the board” while continuing to invest in its digital banking strategy.
Core revenue totaled $186 million, down $4.5 million from the second quarter, according to Chief Financial Officer Maritza Arizmendi. The decline primarily reflected the absence of $4.1 million associated with commercial loans prepaid in full during the prior quarter, as well as lower mortgage banking revenue and the absence of annual insurance and annuity fees. Those factors were partly offset by higher loan and cash balances, higher yields on cash and investments, and higher banking service revenue.
Non-interest expense fell $6.6 million sequentially to $96 million, mainly because the second quarter included $5.8 million in business operational charges. OFG reported a 52% efficiency ratio, return on average assets of 1.86%, and return on average tangible common equity of 17%.
Commercial lending drives balance-sheet growth
Average loan balances increased $37 million during the quarter to $8.3 billion, while period-end loan balances rose $151 million, or 1.8%. Puerto Rico commercial and consumer lending growth more than offset declines in auto, residential mortgage and U.S. commercial loans. Year over year, loans were up 4.1%.
Fernández said OFG continues to see a strong commercial lending pipeline, particularly in Puerto Rico’s middle-market and small-business segments. The company expects low-single-digit loan growth for the full year, with commercial growth more than offsetting an anticipated decline in auto loans.
Management said auto originations have been lower but have held up better than expected. Fernández said the company expects auto lending activity to remain relatively stable entering 2027, though new-car sales and auto originations could be modestly lower.
Average core deposits increased $15 million to $9.7 billion, though end-of-period deposits declined $80 million, or 0.8%, as demand and savings balances fell and time deposits increased. Excluding $500 million of government deposits transferred to wealth management in the first quarter, deposits were up 3.5% from a year earlier.
Management attributed some deposit movement to seasonality and greater rate sensitivity among higher-balance customers. Arizmendi said government deposit repricing, with balances tied to three-month Treasury bill rates, also affected funding costs and will continue to influence fourth-quarter results.
Margin outlook reflects funding mix and rate environment
Net interest margin was 5.23% in the third quarter. Loan yield declined 22 basis points to 7.68%, largely because the previous quarter had benefited from commercial loan prepayments. Core deposit costs increased 5 basis points to 1.34%, reflecting greater demand for time deposits and higher costs on certain government deposits.
Arizmendi said the Federal Reserve’s September 25-basis-point rate increase had limited impact during the quarter because only about $550 million of OFG’s $1.7 billion variable-rate commercial portfolio repriced late in the period. The company expects net interest margin to remain near 5.25% for the remainder of 2026, based on an assumption of one additional 25-basis-point rate increase in December.
Management said higher asset yields are expected to be largely offset by rising liability costs. The company also said commercial loan originations late in the quarter were priced at yields similar to the existing portfolio.
Digital banking strategy expands customer engagement
OFG said its “Digital at the Core” strategy is focused on account products, omni-channel banking technology and artificial intelligence-powered customer insights. The company’s Libre, Elite and My Biz offerings are intended to serve mass-market, mass-affluent and small-business customers, respectively.
- Net new retail and commercial customers increased 5% year over year.
- Active digital users increased 24%.
- Virtual teller use rose 11%.
- Libre accounts grew 7%, while digitally opened Libre accounts increased 18%.
- My Biz commercial accounts grew 6%, while accounts opened digitally or by phone increased 16%.
Fernández said OFG delivered more than 1.5 million customized AI-enabled Smart Banking Insights monthly to customers through September, with more than 90% positive feedback. He described alerts that project expected expenses and income based on a customer’s account activity or flag potential duplicate bill payments. Management said the tools are designed to support customer acquisition and deepen existing relationships.
Credit quality remains resilient; capital stays strong
Provision for credit losses rose $5.1 million from the second quarter to $18.1 million, reflecting increased loan volume and seasonal auto delinquency trends. Chief Risk Officer César Ortiz said the provision was slightly below the company’s prior expectation because auto and consumer credit metrics were better than anticipated.
Early and total delinquency rates increased sequentially to 2.65% and 3.91%, respectively, but declined from a year earlier. Net charge-offs of 0.70% and nonperforming loans of 0.74% both declined from the second quarter and the third quarter of 2025. Commercial nonperforming loans improved to 0.68% from 0.90% in the prior quarter.
Ortiz said auto delinquencies increased modestly on a seasonal basis, while auto charge-offs improved year over year and collateral liquidation values remained stable. He said OFG expects the typical pattern of higher retail credit risk in the second half of the year followed by improvement in the first quarter.
Capital ratios remained above management’s stated levels despite higher mark-to-market adjustments in the securities portfolio. OFG ended the quarter with a 14.10% common equity tier 1 ratio, a 10.34% tangible common equity ratio and tangible book value per share of $29.66. The company repurchased $13.5 million of common stock during the quarter and had $180 million remaining under its repurchase authorization.
Fernández said Puerto Rico’s economy remains stable, citing low unemployment, higher wages, private investment, infrastructure projects and manufacturing expansion. Management said it remains attentive to inflation, elevated energy costs, borrowing costs and broader geopolitical developments.
About OFG Bancorp (NYSE:OFG)
OFG Bancorp is a financial holding company headquartered in San Juan, Puerto Rico. Through its principal subsidiary, Oriental Bank, the company provides banking and financial services to individuals, businesses and institutions in Puerto Rico and the U.S. Virgin Islands.
Oriental Bank offers deposit accounts, consumer and commercial loans, residential mortgage lending, auto financing, credit cards and other retail banking products. The company also provides wealth management, trust, investment and insurance-related services through its affiliated businesses.
Founded in 1964, OFG Bancorp has expanded its presence in Puerto Rico through organic growth and acquisitions, including the purchase of Scotiabank’s Puerto Rico operations in 2019.
