Earnings call transcript: Popular Inc Q3 2025 sees EPS beat, stock rises

Popular Inc., a $7.8 billion market cap financial institution, reported its third-quarter earnings for 2025, surpassing earnings per share (EPS) expectations with a reported $3.14 against a forecasted $2.95, marking a 6.44% surprise. Despite revenue slightly missing expectations at $817.7 million compared to the $821 million forecast, the company’s stock rose 4% in pre-market trading, reflecting investor optimism. According to InvestingPro data, the company maintains strong financial health with an overall score of "GOOD," supported by robust profitability metrics.

Key Takeaways

• Popular Inc. exceeded EPS forecasts, achieving $3.14 per share.
• Revenue fell short of expectations by 0.4%.
• The stock price increased by 4% in pre-market trading.
• The company reported significant loan growth and expanded its digital offerings.
• Popular Inc. exited the U.S. residential mortgage origination business.

Company Performance

Popular Inc. demonstrated a robust performance in Q3 2025, with net income rising to $211 million, a $1 million increase from the previous quarter. The company reported a net interest income of $647 million, up by $15 million, and a net interest margin expansion by 2 basis points. Loan growth was substantial, with a $502 million increase for the quarter, aligning with the company’s guidance of 4-5% consolidated loan growth for the year.

Financial Highlights

• Revenue: $817.7 million, slightly below the forecast of $821 million.
• Earnings per share: $3.14, beating the forecast of $2.95.
• Net income: $211 million, up by $1 million.
• Loan growth: $502 million for the quarter.

Earnings vs. Forecast

Popular Inc. reported an EPS of $3.14, exceeding the forecasted $2.95 by 6.44%. However, revenue fell short of expectations by 0.4%, coming in at $817.7 million against a forecast of $821 million. This marks a significant earnings beat but a minor revenue miss, which may not significantly affect investor sentiment given the strong EPS performance.

Market Reaction

Following the earnings announcement, Popular Inc.’s stock surged by 4% in pre-market trading, reaching $119.99. The stock’s movement reflects investor confidence in the company’s ability to exceed earnings expectations despite a slight revenue miss. The stock is approaching its 52-week high of $129.32, indicating strong market performance. InvestingPro analysis suggests the stock is currently trading above its Fair Value, with analyst targets ranging from $135 to $160. The stock has delivered impressive returns, up 25.67% year-to-date and 32.66% over the past year.

Outlook & Guidance

Popular Inc. aims for a sustainable 14% return on common equity and expects net interest income growth of 10-11% for 2025. The company is projecting non-interest income between $650-$655 million for the year, with an effective tax rate guidance of 16-18%. The guidance suggests a positive outlook with continued focus on digital platform modernization and service expansion. InvestingPro subscribers have access to additional insights, including 8 more ProTips and a comprehensive analysis of Popular Inc.’s financial health metrics, which could help investors make more informed decisions. Notable ProTips highlight the company’s consistent dividend increases over 6 consecutive years and its attractive P/E ratio of 11.01 relative to growth prospects.

Executive Commentary

CEO Javier Ferrer stated, "We are determined to close out 2025 on a high note," emphasizing the company’s commitment to strong year-end performance. SVP of Investor Relations, Paul Cardillo, added, "We’re not going to stop at 14%," highlighting the company’s ambitious growth targets. Chief Risk Officer Lidio Soriano noted, "We compete every day for our piece of the business," underlining the company’s competitive drive.

Risks and Challenges

• Potential economic downturns in Puerto Rico could impact consumer spending and loan growth.
• The exit from the U.S. residential mortgage origination business may affect revenue streams.
• Increasing expenses, guided to rise by 4-5% in 2025, could pressure margins.
• Competition in digital banking and payment solutions remains intense.
• Interest rate fluctuations may affect net interest income and margin.

Q&A

During the earnings call, analysts inquired about two large commercial loan non-accrual situations, with management affirming strong credit quality outside these specific loans. The company also confirmed expectations for continued margin expansion and highlighted ongoing transformation and cost discipline initiatives.

Full transcript - Popular Inc (BPOP) Q3 2025:

Elliot, Call Coordinator: Hello everybody, and welcome to Popular Incorporated’s third quarter 2025 earnings call. My name is Elliot, and I’ll be coordinating your call today. If you would like to register a question, please press star one on your telephone keypad. Now I’d like to hand over to Paul Cardillo, Senior Vice President, Investor Relations Officer. Please go ahead.

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Good morning, and thank you for joining us. With us on the call today are our President and CEO, Javier Ferrer, our CFO, Jorge García, and our CRO, Lidio Soriano. They will review our results for the third quarter and then answer your questions. Other members of our management team will also be available during the Q&A session. Before we begin, I would like to remind you that during today’s call, we may make forward-looking statements regarding Popular, such as projections of revenue, earnings, credit quality, expenses, taxes, and capital structure, as well as statements regarding Popular’s plans and objectives. These statements are based on management’s current expectations and are subject to risks and uncertainties. Factors that can cause actual results to differ materially from these forward-looking statements are set forth within today’s earnings release and our SEC filings.

You may find today’s press release and our SEC filings on our webpage at popular.com. I now turn the call over to our President and CEO, Javier Ferrer.

Javier Ferrer, President and CEO, Popular Incorporated: Thank you, Paul, and good morning, everyone. Starting on slide three, we share a few highlights that reflect our strong operating performance in the third quarter. We reported a net income of $211 million and EPS of $3.15, an increase of $1 million and $0.06 per share, respectively. Our results were driven by higher revenues, an expanding net interest margin, strong loan growth, and, importantly, stable customer deposit balances. Our credit metrics were impacted by two large commercial loans, which were related to isolated circumstances that do not reflect broader credit quality concerns. As Lidio will discuss in more detail in his remarks, I note that excluding these two relationships, credit metrics remain stable. For the second quarter in a row, we have demonstrated progress from our efforts to achieve sustainable returns above 12% this year and towards our longer-term 14% objective. Please turn to slide four.

At the end of the third quarter, business activity in Puerto Rico continued to be solid, as reflected by favorable trends in total employment, consumer spending, tourism, and other key economic data. The unemployment rate of 5.6% continues to hover around all-time lows. Consumer spending has been resilient and remains healthy. Combined credit and debit card sales for Banco Popular customers increased by approximately 5% compared to the third quarter of 2024. Home purchase activity continues to be strong, as demonstrated by the $129 million increase in mortgage balances at Banco Popular during the quarter. Momentum in the construction sector has been solid, with both public and private investment fueling higher employment levels and cement sales.

We are optimistic that these trends will persist, given the backlog of obligated federal disaster recovery funds, announced real estate and tourism development projects, as well as the renewed focus on reshoring by global manufacturing companies. One example of this is Amgen’s recently announced $650 million manufacturing network expansion, which is expected to create roughly 750 direct new jobs in Puerto Rico. Puerto Rico is also well-positioned, given its strategic geographic location, considering current geopolitical focus in the Caribbean region. The tourism and hospitality sector continues to be a source of strength for the local economy. This summer, the sector benefited from Bad Bunny’s 31-night concert residency at the Coliseum in San Juan, right next to our Popular Center complex. This was more than just a series of concerts. The event also featured Puerto Rico as a destination, highlighting our music, natural beauties, and culinary offerings.

The celebration of our culture generated significant media exposure for the island globally and led to a substantial increase in tourism activity during what is normally a seasonally slow period of the year. Please turn to slide five. I would like to comment on our new strategic framework and transformation progress. Our strategy centers on three objectives. First, be the number one bank for our customers by deepening relationships, earning trust, delivering value across all channels, and providing exceptional service. Leveraging our very strong primacy and satisfaction scores in Puerto Rico, we are focused on advancing digital and payment solutions to further grow engagement. Second, be simple and efficient by working collaboratively, streamlining operations, and reducing costs. We are committed to making our processes simpler and more effective to deliver superior solutions for our customers.

Finally, be a top-performing bank by attracting and retaining top talent and converting customer and operational success into shareholder value, with a commitment to generating a sustainable 14% ROCI over the long term. This framework, simple yet powerful, guides our transformation, which continues to show steady and notable progress. We are investing in seamless, secure banking solutions, expanding service channels, and modernizing branches and digital platforms to provide our customers with the flexibility to connect with Popular through the channel that best fits their needs. We plan to extend these digital capabilities to more products to further improve online and mobile experiences and support future growth. Recent initiatives include the launch of a fully online personal and credit card loan origination process in Puerto Rico and the Virgin Islands, and the expansion of digital deposit products in the U.S. mainland.

On the commercial side, we are improving cash management and credit delivery for small and mid-sized businesses. We are pleased with the progress we have made so far in our transformation and are convinced that these efforts will continue to unlock growth opportunities and efficiencies to drive sustained financial performance. I will now turn the call over to Jorge for more details on our financial results. Jorge?

Jorge García, CFO, Popular Incorporated: Thank you, Javier. Good morning, and thank you all for joining the call today. As Javier mentioned, our quarterly net income increased by $1 million to $211 million. Our EPS improved by $0.06 to $3.15 per share. These results were driven by better NII and non-interest income and a lower effective tax rate, offset somewhat by a higher provision for credit losses. As we have mentioned before, our objective is to deliver sustainable financial performance. While there is some noise in the current quarter’s results, we’re very pleased to have once again exceeded a 13% ROCI for the period. We continue to expect to achieve at least a 12% ROCI in Q4, as well as for the full year. Longer term, we remain focused on achieving a sustainable 14% return on tangible common equity. Please turn to slide seven.

Our net interest income of $647 million increased by $15 million and was driven by higher average deposit balances, fixed-rate asset repricing in our investment portfolio, and deposit pricing discipline in both of our banks. Our net interest margin expanded by two basis points on a gap basis and by five basis points on a tax-equivalent basis, driven by a larger balance of loans and tax-exempt investment securities. Loan growth of $502 million in the quarter was strong, with both banks contributing to the increase. At BBPR, we saw loan growth of $357 million reflected across most portfolios, but driven primarily by commercial and construction lending. At Popular Bank, we saw loan growth of $145 million, also driven by the commercial and construction lending segments.

Given that the underlying economic activity and demand for credit in both of our markets remain solid, we now expect consolidated loan growth in 2025 to be between 4% and 5%, as compared to the original 3% to 5% guidance for the year, despite the expected headwinds in our U.S. construction balances due to paydowns expected during the fourth quarter. In our investment portfolio, we continue to reinvest proceeds from bond maturities into U.S. Treasury notes and bills. During the quarter, we purchased approximately $2.5 billion of Treasury notes with a duration of 1.4 years and an average yield of around 3.65%. We funded the purchases by reinvesting roughly $1 billion of bond maturities, along with redeploying $1.5 billion of cash reserves.

We expect to continue to invest in US Treasury notes to lessen our NII sensitivity to lower rates while maintaining an overall duration of two to three years in the investment portfolio. Ending deposit balances decreased by $704 million, while average balances grew by $793 million. Puerto Rico public deposits ended the quarter at $20.1 billion, a decrease of $842 million when compared to Q2. We continue to expect public deposits to be in the range of $18 to $20 billion. At BBPR, excluding Puerto Rico public deposits, ending deposit balances decreased by $162 million and on an average deposits decreased by $44 million, demonstrating the impact of our continued focus on deposit retention strategies. At Popular Bank, ending deposit balances increased by approximately $216 million, net of intercompany deposits. Total deposit costs increased by one basis point at both banks.

At BBPR, the increase was mostly due to a higher average balance of public deposits. Given the results year to date, along with the anticipated NIM expansion in Q4 from repricing of our fixed-rate earning assets, we continue to expect to see NII growth of 10% to 11% in 2025. Please turn to slide eight. Non-interest income was $171 million, an increase of $3 million compared to Q2 and above the high end of our 2025 quarterly guidance. We continue to see solid performance across most of our fee-generating segments, including robust customer transaction activity. This quarter, we also benefited from a $5 million retroactive payment from a tenant related to an amended lease contract. Given the trends year to date and particularly the stability in customer transaction activity, we now expect Q4 non-interest income to be in a range of $160 to $165 million.

This will result in total non-interest income between $650 and $655 million for the year. Please turn to slide nine. Total operating expenses were $495 million, an increase of $3 million when compared to last quarter. The largest variance was related to a $13 million non-cash goodwill impairment in our US-based equipment leasing subsidiary due to lower projected earnings. Offsetting this was a $13.5 million quarter-over-quarter reduction in other operating expenses, driven by the effect of a reversal this quarter of a $5 million claims accrual recorded in Q2 and a similar reduction in operational reserves. We also saw a $3.6 million increase in personnel costs, mainly due to annual salary and merit increases, effective in July, along with the impact of employee termination benefits related to cost efficiency initiatives at Popular Bank. Specifically, as part of our ongoing efforts to improve profitability, we decided to exit the U.S.

residential mortgage origination business and to close four underperforming branches in the New York metro area. We will remain focused on areas where we feel we can invest to achieve improved operating leverage. We continue to expect the increase in 2025 expenses to be between 4% and 5% when compared to last year. Our effective tax rate in the third quarter was 14.5%, compared to 18.5% in Q2, driven by a higher proportion of exempt income. This higher exempt income, along with the impact of changes to Puerto Rico’s tax code, will result in an effective tax rate for Q4 in the range of 14% to 16%. For the year, we now expect the effective tax rate to be between 16% and 18%. Please turn to slide 10. Regulatory capital levels remain strong.

Our CET1 ratio of 15.8% decreased by 12 basis points, mainly due to loan growth and the effects of capital actions, net of our quarterly net income. Tangible book value per share at the end of the quarter was $79.12, an increase of $3.71 per share, driven by our net income and lower unrealized losses in our MBS portfolio, offset in part by our capital return activity in the quarter. During the third quarter, we declared a quarterly common stock dividend of $0.75 per share, an increase of $0.05 from Q2. Finally, we repurchased approximately $119 million in shares during Q3, and as of September 30, we still had $429 million remaining on our active share repurchase authorization. With that, I turn the call over to Lidio.

Lidio Soriano, CRO, Popular Incorporated: Thank you, Jorge. Good morning, and thank you for joining the call. Turning to slide number 11, the ratio of NPLs to total loans held in portfolio increased to 1.3% compared to 82 basis points in the prior quarter. Credit quality metrics were impacted by two unrelated commercial exposures in BBPR, resulting in an increase in NPLs and net charge-offs. This impact relates to borrower-specific circumstances and does not reflect broader credit quality concerns. The first loan is a commercial and industrial facility extended to a telecommunication company in Puerto Rico, experiencing reduced revenue due to operational challenges and client attrition following a business acquisition. As of September 30, we classified this loan as non-accrual, with a carrying value of approximately $158 million, and drove the increase in provisional expenses in the quarter. The second loan is a commercial real estate facility secured by a hotel property in Florida.

This loan has also been placed on non-accrual status and carries a value of $30 million as of September 30, which includes a $14 million charge-off recognized during the quarter. Excluding these two cases, credit quality metrics were stable. We continue to closely monitor the economic environment and borrower performance, as economic uncertainty remains a key consideration. We are confident that the risk profile of our loan portfolios positions Popular to operate successfully under the current environment. Turning to slide number 12, net charge-off amounted to $58 million, or annualized 60 basis points, compared to $42 million, or 45 basis points in the prior quarter. Net charge-off in BBPR increased by $16 million, mostly due to the $14 million charge-off related to the $30 million commercial NPL inflow mentioned earlier.

Consumer net charge-off increased by $4 million, mostly due to higher auto loans net charge-off by $6 million, partially offset by a $2 million reduction in credit card net charge-offs. Given our credit performance year to date and NPL inflows this quarter, we expect net charge-off to be between 50 to 65 basis points for the full year. The allowance for credit losses increased by $17 million to $786 million, while the provision for credit losses increased by $29 million to $75 million. Both increases were driven by the impact of the two commercial exposures, offset in part by improvements in the credit quality of the consumer portfolios. The corporation ratio of ACL to loans held in portfolio remains stable at 2.03%, while the ratio of ACL to NPLs was 157% compared to 247% in the previous quarter. With that, I would like to turn the call over to Mr.

Ferrer for his concluding remarks. Gracias.

Javier Ferrer, President and CEO, Popular Incorporated: Thank you, Lidio and Jorge, for your updates. We are very pleased with our financial performance in the third quarter. We increased revenues, maintained expense discipline, generated strong loan growth, and benefited from stable customer deposit trends. We are determined to close out 2025 on a high note as we continue to execute on our strategy, and I am urging our teams to remain focused on deposit retention, loan generation, and particularly on our expense discipline. We will continue to generate value for our shareholders and deliver our ROCI objectives. We will achieve this by concentrating on our strategic framework: be the number one bank for our customers, be simple and efficient, and be a top-performing bank. I want to give a shout-out to our colleagues and recognize their hard work. I see what they do every day in our branches, call centers, and centralized offices.

We are pushing ourselves to deliver more for our clients every day, and I am incredibly grateful for their commitment. We are now ready to answer your questions.

Elliot, Call Coordinator: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. First question comes from Jared Shore with Barclays. Your line is open. Please go ahead.

Hey, good morning, everybody.

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Hey, good morning, Jared.

Maybe starting just on the margin and on asset yields, with the securities yields or I’m sorry, with the securities purchases this quarter, should we assume that that trend continues? I guess where are the new purchase yields? It looks like maybe we won’t be able to see net yield expansion much more from here if we see the rate cuts.

No, I mean, let me first answer the yield expansion. We do believe that we still have strong tailwinds. You can see in our appendix, we provide to you kind of the upcoming maturities in the investment portfolio. Those are still coming off at one and change, and we expect to be able to continue to get a significant spread pickup on those maturities. While they may be priced lower as rates are coming down, remember that a large portion of our portfolio is also being financed in, let’s call it money stand in fungible, but still being financed by public deposits. We would expect those public deposits to also benefit from the lower rate environment, giving us the opportunity to create that spread. We do continue to expect our NIM to expand in the fourth quarter and beyond.

Okay. On the loan side, what about new loan yields this quarter? Oh, sorry, go ahead.

Yeah. Okay, on new loan yields during the quarter, we still saw kind of the condition that we had been seeing for the last year, where particularly in personal loans and auto lending, we’ll still see some yield pickup quarter over quarter. I would expect, Jared, that maybe that would slow down a little, particularly in the auto volumes or new car sales activity is slowing down. It’s possible that it wouldn’t be unreasonable to believe that that would result in more competitive pricing to maintain demand for auto sales. As we said in the past, there’s a lot of front and back book in that auto loan portfolio in particular. When you look back, given the average life of those loans, assuming the same type of risk profile, we still see opportunities of repricing given the current rate environment.

All right, thanks. Maybe just shifting onto the credit side, especially on the auto, there was an increase in delinquency, but it’s still lower, I guess, year over year. How are you looking at the credit trends over the next few quarters within auto and consumer, I guess, more broadly?

Lidio Soriano, CRO, Popular Incorporated: I will say that the variation that you saw this quarter is within the seasonality of the portfolio. We continue to be very optimistic about the consumer, given the trends in Puerto Rico, given the trends in employment, liquidity of our client base. We see losses are about in the auto portfolio about 45 basis points below last year. We are comfortable with our position and the outlook for the portfolio.

Great, thank you.

Elliot, Call Coordinator: We now turn to Tima Prisila with Wells Fargo. Your line is open. Please go ahead.

Hi, good morning.

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Good morning.

Sticking with the credit commentary, the large CNI loan, I guess, what are the specific reserves that you set aside for that, the timing of resolution as you see it? I’m just wondering, you know, why it moved into non-performers right away instead of kind of up the risk migration chain. Did they stop making payments, or is that still accruing at this point? Maybe start there.

Lidio Soriano, CRO, Popular Incorporated: Thank you for the question. They continue to make payments, so the loans are current from a payment standpoint. In terms of our decision, the situation has deteriorated over time. We have been downgrading the loans over time. For us, it is a business that carries a significant amount of debt, and management has indicated their intent to right-size its capital structure, including liability management of the liability structure. That drove our decision to place it in non-accrual status.

Okay. I guess in terms of specific reserve and any kind of timeline around planned resolution?

I think planned resolution most likely is next year. Most likely next year. In terms of specific reserves, we have not provided that information at this time.

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Yeah, Timur, you can assume that the driver of the variance in the quarter in provision was related to these loans.

Okay. This is a little bit of a larger credit, just maybe stack ranking the loan book. Is this one of the larger credits that you guys carry? Is this kind of typical size, just given your place in the Puerto Rico economy? Maybe just talk a little bit more broadly as to the health of the economy from a business standpoint versus a consumer standpoint, and if there are any kind of signs that might be flashing yellow or any other kind of degradation.

Lidio Soriano, CRO, Popular Incorporated: If you look at our portfolio over the years, we shifted our portfolio from being more of an SME portfolio to a corporate credit type of portfolio. We have seen strong trends over the last few years. If you look, I think the last time we had one issue with a large group was in 2019. I think we will continue to focus in that segment. We think there are significant opportunities in Puerto Rico. They have performed very well over the years. That is the nature of our portfolio. Every now and then, you might see a situation. The importance is we stick to our underwriting discipline. The performance of the portfolio has been very strong, and we feel comfortable with the proposals that we have today.

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Yeah. If I may add to that, to your question about the macro, I think in our commentary, we were clear that we are not seeing any sort of yellows or reds or any insects in Puerto Rico, referencing something that somebody said in the United States. We are seeing a strong economy. As Lidio just said, it so happens that we continue to focus on large commercial opportunities. From time to time, as happened this quarter, and it hasn’t happened in a long time, there may be an isolated credit event that occurs due to idiosyncratic borrower-specific issues that are unrelated to the underlying economic backdrop. That’s exactly how we feel. I can’t really point to anything in the Puerto Rico economy that gives us any pause or worry, au contraire, as they say across the ocean.

We feel that the economy is performing well, and our big customers are investing and continue to move on with their projects.

That’s great, Carlos. Thank you. Lastly, for me, encouraging to hear that margin expansion is going to continue here. I’m just wondering, from an NII standpoint, you guys reiterated the guidance. It is a little bit wide in terms of the range, just as it implies to 4Q. Should we assume that margin expansion portends to NII kind of flat to up here as we go through these rate cuts, or just given some of the lags, maybe NII growth stalls here over the next couple of quarters? Thank you.

Yeah. I think first, I want to reiterate that we continue to see the benefits of fixed asset repricing, loan growth. All those things should continue to contribute to improving NII and the expansion of the margin. As you mentioned, the guidance for NII, we left it where it was. Part of that has to do with our perspective on public deposit balances in the fourth quarter. We still expect to be within the range, but maybe not at the high end of the range where we are at when we close out Q3. You also mentioned the lag in pricing of these deposits. We continue to be slightly asset-sensitive, particularly in the early stages of moves of the Fed funds rate. As we stated before, the cost of public deposits is linked to short-term market rates, and in general, they reprice on a quarterly lag.

We’ve never given the index, but we’re going to do Paul a favor, and it’s tied to three-month US Treasury notes, obviously minus the spread. They are in a lag, so over time, we would expect to see the effects of changes in rates be reflected in the cost of public deposits with a beta of near one. That pricing structure will continue to support our fixed asset repricing and the investment portfolio, making sure that we generate that improving spread on that investment. Anytime there’s movement in the Fed, maybe there is a little bit of a lag. Not always, right? We talked about that in the past, that if the market and US Treasury notes get ahead in anticipation of Fed moves, we might be able to benefit a little quicker. We’ve kind of incorporated all that into our NII guidance for the fourth quarter.

We have a high level of confidence that as that stabilizes and the passage of time and into 2026 and beyond, we’ll continue our previous growth trends.

Great. Thank you.

Elliot, Call Coordinator: Our next question comes from Ben Gerlinger with Citi. Your line is open. Please go ahead.

Lidio Soriano, CRO, Popular Incorporated: Hi, good morning.

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Hi, Ben. Not to belabor the point on credit, because it’s pretty clear that you guys are doing phenomenal relative to like the last 10 years. I found it interesting that your guide, you kind of fine-tuned a lot, whereas the charge-off outlook, you just brought up the low end. When you think about the 65 bps on the high end on a full-year basis, that would imply something pretty draconian for the fourth quarter. Is that a possibility, or how should we think about that considering the other guidance portions were fine-tuned?

Lidio Soriano, CRO, Popular Incorporated: I mean, I will say that, as we mentioned in the remarks, we took a reserve and a provision for some of the exposure. We charge off one of the two related exposures. There is a possibility that we may have to take charge-offs in the exposure that we reserved this quarter, which did not charge off, and that is driving the results. Overall, if you exclude that, we continue to expect a very solid performance out of the rest of our book. That’s the only thing that we are caveat in terms of the range that we provided to you.

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Yeah. In similar words, we talked about this in the past, where when we provide that spread in the guidance of net charge-off, we are trying to put in for idiosyncratic events that could happen in our portfolio at any given time. Certainly, the activity that we have seen here today, as you say, does not reflect necessarily a lot of opportunities to get to that high end without it being a commercial loan. Got it. Okay. That’s helpful. I know you guys have gone through quite a bit of initiatives on the expense front. Is there anything? I know you’re not going to give me a 2026 guide, but is there anything in 2026 that we could potentially prepare for outside of just kind of a normal and cost inflation? Yeah. Right. We’re not going to give you anything 2026.

Good try. Good try. Good try. You know, we’re very happy with the cost discipline and a lot of initiatives that are ongoing. We talked about it in the last quarter’s call. There’s a lot of efforts around really just focusing on execution and really what Javier says, you know, focus on excellence. There’s a lot of efforts that are ongoing that are, you know, maybe a lot of singles and bunts, but they add up. They add up. This quarter, we saw some of those. We saw some of the actions. We talked about the activity in the U.S. It’s not easy impacting our colleagues, but we did make a decision to terminate our mortgage origination business in the U.S. We don’t believe, given our funding profile and deposit branches in the U.S., that that’s a business that we really want to be in at this time.

There are other things across the organization. I would say the important part is that those efforts are sustainable. They’re not one-offs. We do expect to see those benefits that would allow us to reinvest in other things. We talked to you in the past about slowing down our expense growth rate. These are all the things that allow us to do that while continuing to invest in areas that we think will add value and get us closer to that 14% ROCI.

Lidio Soriano, CRO, Popular Incorporated: Gotcha.

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Sounds good. Thank you, guys.

Thank you.

Elliot, Call Coordinator: We now turn to Kelly Motta with KBW. Your line is open. Please go ahead.

Hey, good morning. Thanks for the question. I will pick up on that 14% ROCI you mentioned. You’ve been above 13 the last two quarters. It seems like we have 14 in sight. I appreciate the guidance around at least 12% for the year, which seems very doable. Wondering if you have any update on the timing of the 14, one and then two, you know, given what you’ve laid out with your NII trajectory. Has there been any discussion in terms of whether 14% is the right place to stop as a sustainable ROCI, or could we see that potential expire?

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Yeah, Kelly, good morning. For certain, we’re not going to stop at 14. It is a guiding principle, and we want to get there, but we’re not going to stop there. Having said that, what we want to make sure is that sustainable performance. We’ve said that in the past. I agree with you. We’re a lot closer today than we were a year ago when we pulled back that guide for this year. A lot of effort from a lot of people, a lot of things going right, and we just want to make sure that we continue to execute. More to come in terms of guidance and when and how we get there. The important part is we continue to believe strongly that we get there through improving our net income performance and our operating leverage.

Whatever we do on the capital side just adds to the opportunity to get there and surpass it.

Okay. Got it. That’s really helpful. On the tax rate, the reduction in guide, you called out the higher proportion of tax-exempt income, as well as some changes in the tax rate. There is some noise, and appreciating you know you’re not giving 2026 guidance. I’m just hoping if you could, you know, kind of help us out with what is this full year 2025 a good core run rate ahead, or can you expand upon, you know, the Puerto Rico tax rate change and how that kind of impacts the go forward? Just any kind of color on that would be helpful, given that there is a lot of moving parts here.

Yeah. I would ground on two things. One, this quarter, there were not any real discrete events that impacted the effective tax rate of this quarter. It was lower, given the mix of taxable income and tax-exempt income. We did benefit, you know, the $5 million other operating income number. Those have a preferred tax treatment, so that helped. I say that so that you know it is a good basis to start off. When you look at the guidance for the fourth quarter, what we’re talking about is saying we’re reversing, you know, this change in the tax law in Puerto Rico will allow us to reverse the related tax expense during the year. I tell you this whole long story to say that the guide for 2025 of 16% to 18% really ends up being a fairly clean number for us for this year.

That guide does not really have a lot of noise of discrete events that are not part of our normal tax strategy. You can infer from that whatever you’d like. We can confirm it in January when we give you the 2026 guide.

Fair enough. Last question, if I can sneak it in. Some of your competitors have noted increased competition on the deposit side. One was on government deposits. The other was some of the initiatives they’re doing. Wondering if you could just expand upon the market competition you’re seeing in Puerto Rico, one. Two, has there been any news of any new entrants to the island, specifically on the depository side? Thank you.

Lidio Soriano, CRO, Popular Incorporated: I’ll start by saying not that we’re aware of, no new entrants in the depository side of Puerto Rico. Competition, yes. I mean, it’s a vibrant market, and there is competition every day. We compete every day for our piece of the business and for customers. We’re going to be rational while we’re doing that. Yet, we won’t lose any good clients on pricing and on terms. We’re seeing competition. It’s normal. You see how some of our esteemed bank competitors in Puerto Rico are sort of positioning themselves as challenger banks or, you know, whatever banks. Frankly, we like where we’re at, and we like the fact that the franchise has certainly been re-energized, and we’re not behaving like a 132-year bank. More to come on that, quite frankly. I don’t know what else to say other than we like where we’re at.

Right, thank you so much. I will step back.

Elliot, Call Coordinator: Our next question comes from Jared Cassidy with RBC. Your line is open. Please go ahead.

Hi, good morning. This is Thomas Leddy standing in for Gerard. Loan growth in the quarter was strong, as you mentioned. Just on the back of the increased competition on the deposit side, I’m curious, in booking new CNI and CRE loans, have you seen a similar increase in competition, maybe resulting in less rigorous underwriting standards? In other words, anything you can tell us about changes in underwriting standards on loans you’re originating now versus, say, a year ago?

Lidio Soriano, CRO, Popular Incorporated: I mean, I guess each one of us can answer that, but no, the answer is no. You know we have a very strong credit underwriting process. Lidio leads the risk side and our business side as well. We are not going to do anything that doesn’t make any sense, frankly. We tend to be a bit conservative by nature, quite frankly. I’m not seeing anything in originations that points to that concern.

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Yeah. From talking to our bankers and listening to the teams, the pushback we get in competition is more pricing. We’re seeing maybe, particularly, you know, we’re hearing some entrants in the New York metro area and maybe South Florida, where people are being a little more aggressive in pricing. Frankly, you know, if those loans are not true relationships, you know, and they’re not coming with deposits, we’re not going to pursue that, particularly in the United States. In Puerto Rico, we might have a different strategy, echoing what Javier Ferrer previously said in his comments.

Okay, no, that’s helpful. Thank you.

Elliot, Call Coordinator: We now turn to Aaron Sajanovich with Truist Securities. Your line is open. Please go ahead.

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Thanks.

Hey, Aaron. By the way, Javier, you.

Welcome to the call, Aaron.

Thank you for picking up the call.

Thank you.

For us and other Puerto Rico banks, welcome.

Good. Good to be back. Maybe we could just talk a little bit about, Javier, your commentary around investment initiatives that you have in your transformation plan or the second leg of your transformation plan. How are you thinking about all of the items that you mentioned in your prepared remarks with regard to the cost? Would that be a step up in cost, or do you see some efficiencies that you’ll be gaining that will help offset some of the further investment as you continue down that path?

Sorry, Aaron. The one thing I’ll reiterate, our goal here is to be able to continue to invest and generate opportunities and efficiencies to be able to then continue to reinvest at the level, slowing down the overall level of expense growth.

Lidio Soriano, CRO, Popular Incorporated: Yeah. There is going to be, at the beginning and in certain periods, a disconnect between initial investments and then results from those investments, which is what Jorge is referring to. We think that’s okay as long as the actual investment makes sense to us. We’re not going to do something dramatic or irrational. You know we have to invest in our technology to continue to compete, not only in Puerto Rico, but we compete with folks that come from the United States. You may imagine the big players are already here, and they have the best technology. Our program is rational in that way, and I think our expense base shows it. I don’t perceive that we’re going to go above and beyond a particular sort of threshold.

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Yeah. What happens is that right now we’ve got over 80 projects that are ongoing. Some of them have higher levels of current investment. Some are in capitalizing modes, but a lot of them are in dual expense mode. As you’re developing, particularly with SaaS licensing agreements, you’re paying for your new system and you’re paying for your old system. Over time, as you start generating the cost avoidances and turning off old systems, that allows us buffers to continue to reinvest, following a business case and value-add analysis. When we talk about being able to slow down the rate of growth, that’s the kind of thing that we’re talking about, how do we shift and reallocate expenses and savings to continue to improve the business and add value to our shareholders?

Lidio Soriano, CRO, Popular Incorporated: I say this and shut up. That’s a very important point that Jorge just made. We’re not looking at this on a siloed view, right? We’re saying, if we are going, if we are investing in the transformation, we want to make sure that if we can generate some savings in other parts of the bank, which will, of course, kind of fund that transformation, that’s the mindset. In many cases, we’ve been able to do that. That minimizes the impact of the actual investment. It’s a broad-based program. We’re very excited about it, and we’re starting to see results. We’ll continue because, as I said, we’re also creating a transformation mindset in our teams, right? We need to continue moving forward.

Thank you. I appreciate the color.

Sure. Thank you.

Elliot, Call Coordinator: This concludes our Q&A. I’ll now hand back to Javier Ferrer, CEO, for any final remarks.

Paul Cardillo, Senior Vice President, Investor Relations Officer, Popular Incorporated: Thank you. Thanks again, everybody, for joining us and for your questions. Really appreciate that. We look forward to updating you on our fourth quarter results in January. Thank you.

Elliot, Call Coordinator: Ladies and gentlemen, today’s call is now concluded. We’d like to thank you for your participation. You may now disconnect your lines.

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