Finance

OFG's Net Interest Margin Compresses After Loan Yields Fall

The Tip Desk · October 27, 2026 · 3 min read

Net interest income was $153.6 million as the margin fell 22 bps to 5.23% and diluted EPS was $1.33 a share.

OFG Bancorp (OFG), the financial holding company for Oriental Bank, reported net interest income of $153.6 million for the third quarter ended September 30, 2026, down $3.7 million from $157.3 million in the second quarter, as the net interest margin compressed 22 bps to 5.23% from 5.45%.

The margin move tracked a drop in asset yields and a rise in deposit costs. Loan yields fell to 7.68% from 7.90%, and interest-earning-asset yields declined to 6.67% from 6.83%. Deposit costs rose to 1.44% from 1.38%. Total interest income was $195.7 million, down $1.4 million sequentially; the company said the decline primarily reflected the absence of $4.1 million from three commercial loans paid in full in the second quarter, partially offset by higher average loan and cash balances, higher cash and investment yields, and one additional business day. Interest expense rose $2.3 million to $42.2 million on higher average deposit balances at a higher cost.

Loans held for investment grew $150.9 million, or 1.8%, sequentially to $8.45 billion at period end, up 4.1% from a year earlier. Puerto Rico commercial loans rose $179.1 million to $2.93 billion, more than offsetting declines in other categories. New loan production was $693.8 million, down $61.2 million from $755.0 million in the second quarter, with Puerto Rico commercial production down $75.4 million to $258.0 million, auto down $11.9 million, and mortgage down $5.8 million, partially offset by higher U.S. commercial and Puerto Rico consumer originations.

Customer deposits ended the quarter at $9.66 billion, down $79.9 million, or 0.8%, from the prior quarter, with demand deposits down $136.2 million and savings down $81.1 million, partially offset by a $137.4 million increase in time deposits. Average total deposits were $9.98 billion. Total borrowings and brokered deposits rose $131.1 million to $926.6 million for liquidity management, with brokered deposits up $85.7 million to $324.6 million and repo balances up $100.6 million to $200.7 million. Cash and cash equivalents fell $178.9 million to $566.8 million, which the company tied to a $216.1 million purchase of mortgage-backed securities toward quarter-end and loan growth.

The provision for credit losses was $18.1 million, up $5.1 million from $13.0 million, reflecting $17.5 million for increased loan volume and $1.3 million of seasonal auto-delinquency adjustment. Net charge-offs fell $14.3 million to $14.5 million, and the net charge-off rate halved to 0.70% from 1.40% after a $15.2 million Puerto Rico commercial charge-off in the second quarter. The nonperforming loan rate declined to 0.74% from 0.81%. Early delinquency rose to 2.65% from 2.51% and total delinquency to 3.91% from 3.68% on seasonal trends, with auto early delinquency at 6.73% and auto total delinquency at 7.38%.

Banking and financial service revenues were $32.2 million, down $0.8 million, reflecting the absence of $1.1 million of insurance and annuity fees in wealth management and lower mortgage banking revenues, partially offset by higher banking service revenues. Total non-interest expense fell $6.6 million to $96.3 million, primarily the absence of $5.8 million of business-related operational charges in the second quarter, reducing the efficiency ratio to 51.83% from 54.04%. Pre-provision net revenues were $89.9 million. Diluted earnings were $1.33 a share, compared with $1.39 in the second quarter.

The CET1 ratio ticked up to 14.10% from 14.07% after $13.5 million of common-share repurchases. The tangible common equity ratio fell to 10.34% from 10.90%, and tangible book value per share declined to $29.66 from $31.12, primarily due to a larger accumulated other comprehensive loss.

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