Banco Popular Q4 2025 Earnings Call - Loan growth, margin expansion and capital returns lift net income 36% y/y

Paul Cardillo, Investor Relations, Banco Popular: I’d like to hand over to Paul Cardillo. Please go ahead.

Paul Cardillo, Investor Relations, Banco Popular: Good morning, and thank you for joining us. With me on the call today is our President and CEO, Javier Ferrer, our CFO, Jorge García, and our CRO, Lidio Soriano. They will review our results for the full year and fourth 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, 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 could 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 will now turn the call over to our President and CEO, Javier Ferrer.

Javier Ferrer, President and CEO, Banco Popular: Thank you, Paul, and good morning, everyone. Please turn to slide 4. In 2025, we delivered results that reflect the strength of our franchise and the continuous stability of the Puerto Rico economy. Our annual net income of $833 million increased by $219 million, or 36% compared to 2024. Our strong fourth quarter loan growth helped bring our total growth for the year to $2.2 billion, an increase of 6%. Banco Popular generated loan growth across most business segments, led by commercial loans. Popular Bank achieved growth in commercial and construction loans. Credit quality generally remained stable throughout 2025, aside from a couple of isolated commercial credit relationships in the third quarter. For the year, net charge-offs decreased by 16 basis points to 52 basis points.

Our capital levels are strong, ending the year with a Common Equity Tier 1 ratio of 15.7%. Our tangible book value per share of $82.65 increased by 21% year-over-year, primarily due to lower unrealized losses on investment securities and net income for the year, offsetting part by dividends and our share repurchase activity. We repurchased approximately $500 million in common stock during 2025. Since resuming buybacks in the third quarter of 2024, we have repurchased approximately $720 million worth of common stock. We continue to believe that our shares are attractive at current prices. Additionally, in the fourth quarter, we increased our quarterly common stock dividend by $0.05 to $0.75 per share. Please turn to slide 5, where we share highlights that reflect our strong operating performance in the fourth quarter.

We reported net income of $234 million, an EPS of $3.53, an increase of $23 million and $0.38 per share, respectively. Our results were driven by higher net interest income and expanding net interest margin, strong loan growth, and importantly, lower operating expenses. Our credit metrics were stable in the quarter, with lower NPLs and net charge-offs. We are very pleased to have exceeded a 14% ROTCE for the quarter and a 13% ROTCE for the full year. We demonstrated significant progress in our efforts to improve our sustainable returns towards our 14% objective. Please turn to slide 6. As of the end of the fourth quarter, business activity in Puerto Rico continued to be solid, as reflected by federal trends in total employment, consumer spending, construction, tourism, and other key economic data.

The unemployment rate of 5.7% remains stable, near all-time lows. Consumer spending remains healthy. Combined credit and debit card sales for Banco Popular customers increased by approximately 5% compared to the fourth quarter of 2024. We also continue to see healthy demand for homes in Puerto Rico. Mortgage balances at Banco Popular increased by $115 million during the quarter. The construction sector continues to show positive momentum, with public and private investment fueling higher employment levels and driving cement sales to the highest level since 2021. We are optimistic that these trends will persist given the backlog of obligated federal disaster recovery funds, publicly announced real estate and tourism development projects, and the renewed focus on reshoring by global manufacturing companies. The tourism and hospitality sector continues to be a source of strength for the local economy.

In 2025, airport passenger traffic reached a record of 13.6 million, increasing by 3% compared to 2024. During the fourth quarter, passenger traffic remained stable at around 3 million passengers. According to Discover Puerto Rico, in the fourth quarter, hotel demand reached nearly 250,000 room nights, marking 11% year-over-year growth and driving a 4% increase in total revenue. We are executing on our strategic framework to be the number one bank for our customers by strengthening relationships and providing exceptional service and products to our customers. We’re also focused on delivering solutions faster and improving productivity while reducing costs. Ultimately, our goal is to be a top-performing bank. In addition to the rollout of a commercial cash, cash management platform, we also deployed a new consumer credit origination platform in Puerto Rico and the Virgin Islands.

This platform provides a fully digital origination process for personal loans and credit cards. We saw an upward trend in online originations during the fourth quarter and have originated approximately 36 million since launch in the third quarter. We have continued to invest in our physical retail network to blend the speed and convenience of self-service with in-person support. Our branches continue to be an advantage in Puerto Rico and the Virgin Islands. As we continue to modernize our channels and platforms, we are creating a more seamless experience to provide our customers with the flexibility to connect with Popular through the channel that best fits their needs without compromising the quality of our service. We’re also seeing the results of our focus on being simple and efficient. We have sustained and continued to simplify our commercial credit origination and portfolio risk management.

We are seeing faster cycle times, higher banker productivity, a more seamless customer journey, and loan growth in our small and middle market segments. During the year, we also executed a series of sustainable efficiency initiatives, including exiting our mortgage business in the United States, optimizing our mortgage servicing business in Puerto Rico, and transforming our ERP solution to a modern cloud platform that significantly improves agility and performance. Currently, more than 800 of our colleagues are working on these projects, and we are very proud of the progress that we have made. I will now turn the call over to Jorge for more details on our financial results. Jorge?

Jorge García, CFO, Banco Popular: Thank you, Javier. Good morning, and thank you all for joining the call today. As Javier mentioned, our quarterly net income increased by $23 million to $234 million, and our EPS improved by $0.38 to $3.53. Excluding the partial reversal of the FDIC special assessment, adjusted net income for the quarter was $224 million, an improvement of $13 million from Q3. These results were driven by better NII and lower expenses. As we have mentioned before, our objective is to deliver sustainable financial results. While we benefited from the FDIC reversal, we are pleased to have exceeded 14% ROC for the period and 13% ROC for the full year.

In 2025, we executed targeted initiatives to improve profitability by growing the top line and capturing sustainable cost efficiencies, both of which are key drivers of the ROC numerator. Looking ahead for 2026 and beyond, we will build on this progress and continue to drive improvement in operating leverage and profitability. At the same time, we see capital levels as a meaningful driver to improve ROC. Our current objective remains a sustainable 14% ROC. We’ll continue to use all available levers to position the company as a top-performing bank when compared to mainland peers. Please turn to slide 8. Our net interest income of $658 million increased by $11 million and was driven by higher loan balances, fixed-rate asset repricing in our investment portfolio, and lower deposit costs in both of our banks.

For the year, NII increased by $259 million, or 11%. During the quarter, our net interest margin expanded by 10 basis points to 3.61% on a GAAP basis. Our fully tax-equivalent margin improved by 13 basis points to 4.03%, driven by higher loan balances and lower interest expense, primarily due to lower balances and costs of Puerto Rico public deposits. Loan growth of $641 million in the quarter was strong, with both banks contributing to that increase. At BBPR, we saw loan growth of $497 million, driven primarily by commercial and mortgage lending. At Popular Bank, we saw loan growth of $144 million, mainly driven by commercial lending. For 2026, we expect consolidated loan growth of 3%-4%.

In our investment portfolio, we continued to reinvest proceeds from bond maturities into U.S. Treasury notes and bills. During the quarter, we purchased approximately $900 million of Treasury notes with a duration of 2.1 years and an average yield of around 3.56%. We expect to maintain a 2-3-year duration in the investment portfolio. Ending deposit balances decreased by $323 million, and average deposit balances decreased by $880 million. This decline was mostly driven by anticipated outflows from Puerto Rico public deposits, which ended the quarter at $19.4 billion, a decrease of $662 million compared to Q3. We continue to expect public deposits to be in the range of $18 billion-$20 billion.

At BBPR, excluding Puerto Rico public deposits, ending balances increased by $525 million, driven by growth of $430 million in commercial demand deposits. Average deposits increased by $192 million. Total deposit costs decreased by 11 basis points at each bank. At BBPR, the decrease is mostly a result of Puerto Rico public deposits repricing lower by 22 basis points due to recent interest rate cuts by the Fed, while non-public customer deposit costs decreased by 1 basis point. At PV, the reduction was mainly related to lower online savings deposit costs and repricing of time deposits. We anticipate 2026 NII will increase 5%-7%, driven by continued reinvestment of lower-yielding securities and loan originations in the current rate environment, as well as lower costs of Puerto Rico public deposits and online deposits at Popular Bank.

Please turn to slide nine. Non-interest income was $166 million, a decrease of $5 million compared to Q3 and in line with the high end of our guidance. We continue to see solid performance across most of our fee-generating segments, including robust customer transaction activity during the holiday season. In 2026, we expect quarterly non-interest income to continue to be in a range of $160 million-$165 million. Please turn to slide 10. Total operating expenses were $473 million, a decrease of $22 million when compared to Q3. Excluding the FDIC reversal, operating expenses were $489 million. Aside from the reversal, the largest quarter-over-quarter variance was related to a $13 million non-cash goodwill impairment taken in the third quarter.

For the year, GAAP operating expenses increased by roughly 2.5%, which was below our original 4% guidance, as we executed on a series of sustainable efficiency initiatives and also benefited from the delay of some expenditures that will occur in 2026. In 2026, we expect total full-year GAAP expenses to increase by approximately 3% compared to 2025, as we continue to invest in our people and technology. Our effective tax rate in the fourth quarter was 16%, compared to approximately 15% in Q3. In 2025, our effective tax rate was 17%, compared to 23% last year, driven by a higher proportion of exempt income. In 2026, we expect the effective tax rate for the year to be in a range of 15%-17%. Please turn to slide 11.

Tangible book value per share at the end of the quarter was $83.65, an increase of $3.53 per share, driven by our net income and lower unrealized losses in our investment portfolio, offset in part by our capital return activity in the quarter. During the fourth quarter, we paid a quarterly common stock dividend of $0.75 per share, an increase of $0.05 from Q3. As Javier noted earlier, we’re pushing our teams to enhance profitability through ongoing incremental revenue initiatives and expense discipline. While we’ve made progress over the past 2 years in reducing our CET1 ratio, there’s more we can do. In Q4, we repurchased approximately $148 million in common stock. We believe this is a good run rate for the pace of buybacks going forward, subject to market conditions.

As of December 31st, we had $281 million remaining on our active share repurchase authorization. In addition to the common stock repurchases, we’ll continue to use capital for loan growth, and we also expect to pursue a dividend increase later this year. Finally, we carry less additional Tier 1 capital than peers and see that as another opportunity to optimize our capital structure in the future. We believe that these actions, which are subject to market conditions and board approval, will help us achieve our long-term stated CET1 goal of having levels consistent with mainland bank peers, plus a buffer for our geographic concentration. With that, I turn the call over to Lidio.

Lidio Soriano, CRO, Banco Popular: Thank you, Jorge, and thank you all for being with us. Turning to slide number 12. Credit quality metrics remained stable during the fourth quarter, with lower NPLs and lower net charge-off. Non-performing assets and loans decreased by $4 million this quarter, mainly due to Popular Bank. US NPLs decreased by $14 million, as a $17 million mortgage relationship returned to accrual status, offset in part by higher commercial NPLs. BPR NPLs increased $5 million, with commercial up $8 million and consumer up $3 million, offset in part by an $8 million decrease in mortgage NPLs. Inflows of NPLs declined by $194 million, primarily in BPR, as the previous quarter included inflows from two unrelated commercial relationships, totaling $188 million. The ratio of NPLs to total loans held in portfolio decreased 3 basis points to 1.27%. Turning to slide number 13.

Net charge-offs amounted to $50 million or annualized 51 basis points, compared to $58 million or 60 basis points in the prior quarter. This quarter’s results include $5 million in recoveries from the sales of previously charged-off auto loans and credit cards. Excluding this, the net charge-off ratio was 57 basis points. The net charge-off in BPR decreased by $7 million, driven by a decrease in commercial net charge-offs, as the prior quarter included a $14 million charge-off related to a single borrower.

Jorge García, CFO, Banco Popular4: In 2025, net charge-offs were 52 basis points, an improvement of 16 basis points from last year, driven by lower consumer net charge-offs. For 2026, based on current trends and macroeconomic outlook, we expect annual net charge-offs of 55-70 basis points. The allowance for credit losses increased by $22 million to $108 million, mostly in BBPR, due to higher reserves for the commercial portfolio, driven by higher balances, specific reserves, and loan modifications, coupled with higher reserves for consumer loans due to changes in FICO mix. The coverage ratio of the ACL to loans in the portfolio remains stable at 2.05%, while the ratio of the ACL to NPLs was 162%, compared to 157% in the previous quarter.

The provision for loan losses was $71 million, down $3 million from $75 million in the prior quarter. For the BBPR segment, the provision was $72 million, compared to $74 million in the previous quarter. With that, I would like to turn the call over to Mr. Ferrer for his concluding remarks. Thank you.

Javier Ferrer, President and CEO, Banco Popular: Well, thank you, Lidio and Jorge, for your updates. Our fourth quarter results closed out the year on a high note. We are very pleased with our financial performance in 2025. We increased revenues, maintained expense discipline, generated strong loan growth, and improved customer deposit trends. I’m urging our teams to remain focused on deposit growth, loan generation, and particularly on our expense discipline. Our strategy is grounded in customer primacy. We are focused on deepening relationships, delivering value across channels, and simplifying how we operate. Most importantly, it is focused on translating these efforts into tangible financial results and generating value for our shareholders. In closing, I want to recognize our colleagues and their contribution to our results. 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 deeply grateful for their commitment and dedication. We are now ready to answer your questions.

Paul Cardillo, Investor Relations, Banco Popular: 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 Brett Rabatin with Hovde Group. Your line is open. Please go ahead.

Brett Rabatin, Analyst, Hovde Group: Hey, good morning, everyone. How are you doing?

Javier Ferrer, President and CEO, Banco Popular: Good morning, Brett. Doing well.

Brett Rabatin, Analyst, Hovde Group: I wanted to start on the guidance and just thinking about the NII guide, and if I’m reading it correctly, it kind of would suggest maybe slightly slower average balance sheet growth during 2026 and 5-10 basis points of margin expansion. And I know you guys don’t like to give explicit margin guidance, but would that be within the realm of what you’re looking at? And then just wanted to ask around the ROC goal, you know, why with operating leverage, that might not increase a bit from here?

Jorge García, CFO, Banco Popular4: Okay. Thank you, Brett. Good morning. First on the NII, first, we were very pleased with the 11% growth this year. The 11% growth in NII was driven by expanding the margin, being able to reinvest fixed rate investments in our portfolio into higher yielding assets, loan growth, and lower cost of deposits. We believe all those three factors will continue into 2026, albeit at a smaller magnitude. We will see a slowdown, for example, of the yield uptake that we will get on the reinvestment of the portfolio. But we’re very comfortable with that 5%-7% guide. We are expecting margin to continue to expand throughout 2026.

I think when you look at that range, if you’re looking at, you know, what drives one for the other, really always revolves around low cost deposit levels and our ability to reduce deposits in the US market. In terms of the ROC, you know, we’ve talked in the past, you know, that we want ROC to be driven by the improvement in performance and net income, right? And again, we are very pleased with the results this year. We have a lot of momentum going into 2026. We expect that momentum to continue. We want that, you know, above 14% to be sustainable. There’s enough uncertainty in the world, and we want to make sure that we are absorbing any ups and downs through the cycle. So we’re not quite there yet.

We do feel that we have a lot of momentum and like, you know, the starting point and where we’re at, but that is something that we, we want to continue to focus on. I think this year we try to be more intent or deliberate in how we’re managing capital levels as well. And you know, as I discussed in my, in my prepared remarks.

Brett Rabatin, Analyst, Hovde Group: Okay. And then the other question I had was just around, you know, loan growth, which was better than I expected and pretty strong in commercial. You know, when I think about that guidance for the coming year, I mean, you’ve had 6%-ish growth the past two years, 4Q was 7%. You know, is the slowness or slower level anticipated in 2026, you know, is that just conservatism around consumer or any thoughts around that? And then as it relates to onshoring, you guys seen any opportunities related to that?

Jorge García, CFO, Banco Popular: Okay. So let’s start first on the loan growth. You know, as you said, we have seen loan growth around 6% for the last couple of years, led by growth in Puerto Rico. That growth in Puerto Rico was across all of our portfolio, right? You know, commercial, mortgage, and consumer. As we look into 2026, we expect to continue to see commercial to lead the way and mortgage in Puerto Rico. But we do see a softening on the consumer, particularly around auto. So that is one part of the guide. The other growth engine for us has been in the U.S. You know, we are in good markets in the U.S. We like those markets, but we want to make sure that we are pricing for relationships and for profitable loan growth.

There’s some of that embedded. As well as Brent, as you can imagine, you know, there’s always timing as loan transactions are focused on some larger clients. When those things close in terms of funding that you advance or when things slow down on expected payoffs, that has an impact on those kind of year-over-year kind of changes. But we, we’re confident on the 3%-4% guide and the momentum that we’ve had over the last couple of years in both Puerto Rico and our U.S. markets.

Brett Rabatin, Analyst, Hovde Group: Okay. That’s helpful. Congrats on a strong year, guys.

Jorge García, CFO, Banco Popular: Thank you.

Javier Ferrer, President and CEO, Banco Popular: Thank you.

Paul Cardillo, Investor Relations, Banco Popular: We now turn to Jared Shaw with Barclays. Your line is open. Please go ahead.

Jared Shaw, Analyst, Barclays: Hey, good morning.

Jorge García, CFO, Banco Popular: Good morning.

Jared Shaw, Analyst, Barclays: Maybe, I guess just sticking to the theme of growth outlook. When you look at fees, where do you see potential softness, I guess, in fees and that growth rate? You’ve had some pretty good trends during the course of the year.

Jorge García, CFO, Banco Popular: Yeah, remember, Jared, one of the things that the 25 results included, you know, roughly $10 million of kind of unusual items, you know, the recovery for prior periods of a tenant, and then we also had some refunds of federal taxes that were recognized in fee income. So that $10 million, really, if you look at the guide, you’re making up for that $10 million next year. So there’s a little bit more growth embedded in that guide than probably, you know, jumps out at you.

Jared Shaw, Analyst, Barclays: Okay. And then on capital, nice to see the buyback and the commentary around, you know, sort of the willingness to bring capital ratios down. How should we think about M&A with that backdrop? And, you know, you certainly have the capital and the growth to do something, I guess, you know, in terms of, you know, potential sizes or anything like that. Any thoughts you could share with us?

Javier Ferrer, President and CEO, Banco Popular: Sure. This is Javier. Well, our primary focus continues to be our transformation program. That said, in the U.S., we’re always open to opportunities to add on profitable niche businesses, teams, and assets. So whole bank M&A is not a priority. However, it would be responsible for us to say that we would not evaluate opportunities to enhance shareholder value over the long term. I think we said this before, there is a high threshold for any transaction that we may consider, and we’ll evaluate opportunities to grow inorganically as long as they meet the following criteria to complement our U.S. business. First, it needs to be compelling enough for us to consider reallocating resources away from our transformation initiatives.

We have a little bit over 800 employees who are currently focused on these efforts that we would need to reallocate to whatever, you know, effort related to an M&A, you know, due diligence, integration, conversion. Number 2, core deposits. Any transaction, we need to strengthen our deposit franchise and lower cost cost deposits with lower cost deposits. Number 3, it needs to be commercial-led, which is our key strategy in the United States. It needs to enhance our commercial-led and niche business strategy, and also provide some CRE diversification. 4, it needs to be geographically consistent. So create greater market penetration in our existing footprint, increasing opportunities for value creation through cost synergies, or need to extend presence to adjacent markets or geographies.

And I think, also it needs to have the scale in terms of scale, it needs to be right size for our US business. I have a preference for not for

Jorge García, CFO, Banco Popular: MOE.

Javier Ferrer, President and CEO, Banco Popular: MOE. You know, I don’t think highly of those, not that they can’t work, but that’s just my bias. And I think the last item would be cultural fit, and it’s last, but it’s really top of mind. Whatever target needs to align to our culture of performance and employee well-being. So, we are very mindful that not all customer demographics will make sense as a part of Popular. So I think, you know, very specifically, that’s how we think today about M&A.

Jared Shaw, Analyst, Barclays: Okay, thanks. That’s, that’s great, great insight. Just maybe finally for me, do you just have the, the spot,

Kelly Motta, Analyst, KBW: ... deposit costs and asset yields at the end of the year?

Jorge García, CFO, Banco Popular: We don’t usually provide, you know, the spot rates, Jared.

Kelly Motta, Analyst, KBW: Okay. All right, thanks.

Paul Cardillo, Investor Relations, Banco Popular: We now turn to Ben Gerlinger with Citi. Your line is open. Please go ahead.

Ben Gerlinger, Analyst, Citi: Hi, good morning. I was wondering-

Jorge García, CFO, Banco Popular: Good morning, Ben.

Ben Gerlinger, Analyst, Citi: Based on expenses. Good morning. So on the expense guide, I know you guys always give a GAAP basis, so that’s inclusive of investments and things like that. I know that last year you were also investing, and this year I’m assuming 27 marks will or are going to, because it’s, you know, your size investment is almost like a core. So I’m just kind of curious, is this year on an investment basis, kind of smaller or larger or anything you could frame it in terms of timing and any expectations on that relative to kind of what we’ve seen previously or potentially starting new projects that are multi-year in nature?

Jorge García, CFO, Banco Popular: Yeah, I think the run rate that we’re going is not changing much. It gets to a point then where we only have so much capacity and resources to be able to do so much at once. I think, certainly in 2025, we were running at that capacity level. As things roll off and we go live, you know, for example, Javier talked about that we went live on a new ERP in January first. That releases some resources, but then a lot of those resources get reallocated to the next big project and the next thing going on. You know, so I think we all feel fairly comfortable with the level and focus of the teams.

You know, we can always certainly do more, but there is a reality that you can only have so much, you know, resource and management focus on these implementations.

Ben Gerlinger, Analyst, Citi: Gotcha. That’s helpful. I know we’ve talked about the pace of loan growth and then also the reinvestment of the securities higher. But just kind of looking at, like, just the average earning asset mix, where it is today, and obviously if you could get securities into a loan, it’s probably the best case scenario. But I’m just kind of curious, is today’s mix within kind of the guardrails that you want? Could you potentially see more loans down the road? Just kind of curious on just how you think about average earning asset mix down 2 or 3, 4, 5 years from now, given that you also have the public deposits.

Jorge García, CFO, Banco Popular: Yeah, I mean, certainly, we would prefer to make loans, not so much necessarily on a yield perspective, but we’d rather have those relationships, right? And we feel that, you know, we can have a deeper profit base with a lending relationship than we can just buying, you know, portfolio assets. But there is a reality that we have around 30% of our deposits in Puerto Rico that require to be collateralized, and that will keep us in the portfolio business of buying investment securities. So, as we go forward, we would like to see a higher loan to deposit ratio. But it will depend on the composition of our balance sheet.

But as I said before, we do expect NIM to continue to grow and expand this year. And even as we go forward and we start combining maturities between our recent purchases and more, you know, legacy pre-2023 investments, we still have a good upside for pickup of yield in that investment portfolio. At current rates, the more recent purchases don’t reset very far to where we bought them versus the uptake that we get in the more legacy portfolio. So, we still see that as a strong tailwind going forward.

Ben Gerlinger, Analyst, Citi: Gotcha. Okay. Thank you.

Paul Cardillo, Investor Relations, Banco Popular: We now turn to Kelly Motta with KBW. Your line is open. Please go ahead.

Kelly Motta, Analyst, KBW: Hey, good morning. Thanks for the question. Maybe, maybe-

Jorge García, CFO, Banco Popular: Good morning, Kelly.

Kelly Motta, Analyst, KBW: Turning back to capital, I want to make sure. Good morning. I wanted to make sure I heard you correctly. It seems like you alluded to maybe additional Tier 1 being lower than peers. Wondering if from a high level you can discuss, you know, it seems like maybe then leverage would be your guiding ratio, how you’re thinking about that, as we move ahead, given that the importance of capital return to the profitability improvement story. Thank you.

Jorge García, CFO, Banco Popular: Sure. Thank you, Kelly. So we often talked with you all about CET1 and a lot of focus on CET1, and we talked about, you know, our goal of getting that lower plus a buffer. One of the things that we don’t very often talk about is that, you know, we have somewhat an efficient capital stack and that we really have very little additional Tier 1, right? We have, you know, around 5 basis points. And when we look at peers, they have anywhere between 50 and 100 basis points of additional Tier 1. So we look at this as another lever, that’s an opportunity that we’re evaluating and looking at.

Perhaps there’s an opportunity for, for something that’s accretive, without necessarily impacting the total Tier 1 or total regulatory capital, and being able to balance lowering CET1 with management and board’s intent to be more, you know, deliberate in, in reducing that capital over a, over, a prolonged period of time.

Kelly Motta, Analyst, KBW: Okay. All right. Fair enough. And maybe I, I think we’ve hit on, on this a bit, but turning to, loans and yields, I was surprised, you know, your loan yields have held in really nicely, even with the rate cuts. Can you remind us how much of your book floats and, and I, I don’t believe you usually provide it, but I’ll, I’ll try. Any, you know, new production rates would be really helpful here. Thank you.

Javier Ferrer, President and CEO, Banco Popular: Yeah. So a couple of things on loan yields. We’re still seeing loan growth in Puerto Rico on the consumer side to be, you know, flat or above, and with the exception of credit cards. But in the quarter, we still saw an improvement in auto yield, and flat in personnel, I’m sorry, in personal loans. And, you know, we’ve talked about in the past that, you know, we just have the low beta on the way of, you know, we didn’t pass through all the increases in the loan pricing, and we’re seeing kind of the benefits, a little bit of the opposite behavior that we see in our deposit base in Puerto Rico.

I don’t, you know, I think last quarter we talked about where I don’t know how long that’s gonna continue, where, you know, as I said in talking about loan growth, we do see a softening in consumer demand, particularly around auto. So it would seem logical to me that we start seeing some lower pricing there, as people compete for the production. In terms of variable, it’s around 25% of our total loans are variable or floating. Most of that is commercial loans. I think both portfolios, around 40% of commercial loans are floating. And then remember, we do have the credit card. We have, you know, the construction portfolio, that float. And in terms of new yields,

Kelly Motta, Analyst, KBW: Um-

Javier Ferrer, President and CEO, Banco Popular: We don’t, we don’t provide that. Yeah.

Kelly Motta, Analyst, KBW: Okay, fair enough. Last one, if I can slip it in. I apologize if this was addressed already, but with the charge-off, 55-75 basis points is certainly lower than, you know, historically what we’ve seen in Puerto Rico, but a step up from 2025. I would imagine that’s mostly on the consumer side, but can you kind of piece together the outlook here of what you’re seeing and how you came to that 55-75 basis point range? Any movement between now and, you know, what gets you to that higher range in 2026? Thank you.

Javier Ferrer, President and CEO, Banco Popular: Yeah. Small correction, Kelly. I mean, we provided for 55-70 basis points, so the high end was a little bit lower than 55-

Kelly Motta, Analyst, KBW: My bad.

Javier Ferrer, President and CEO, Banco Popular: 70 basis points. Yeah. I mean, generally, before going into the details, I mean, we see we have a very stable outlook. We think the Puerto Rico economy continue to be stable with moderate growth, and that’s the outlook that we have for next year. Under that context, we believe that generally our consumer portfolio will continue to, will continue to behave as they have in 2025. We do, we do our accounting for potentially some charge-off of some of larger commercial relationships that we have reserved for. So that is embedded in the range that we have provided to you. So that explains a little bit, our rationale.

Kelly Motta, Analyst, KBW: Thank you so much. I’ll step back.

Paul Cardillo, Investor Relations, Banco Popular: We now turn to Arren Cyganovich with Truist. Your line is open. Please go ahead.

Arren Cyganovich, Analyst, Truist: Thank you. Maybe you could talk a little bit about whether or not you’re seeing any kind of deposit competition in Puerto Rico and your expectations for deposit growth in the year.

Javier Ferrer, President and CEO, Banco Popular: Well, I think clearly there is competition in the market, no? You can see from our numbers that we’ve grown deposit balances, and we expect to do the same this year. But there’s a few banks in the market and also credit unions. So but we are not seeing any irrationality in the pricing, so on this cycle. So I would say that it’s pretty steady and we will not, however, as we said it before, we won’t lose good clients to pricing, on deposit pricing. So again, we’re gonna defend our position and particularly good relationships in all segments, but hopefully not do anything that’s crazy.

Arren Cyganovich, Analyst, Truist: Okay, that’s helpful. And then, maybe just kind of thinking broader picture, the U.S. has really stepped up military in the Caribbean, and wondering if you’re seeing any, you know, increasing presence and whether or not that’s a positive from an economic standpoint to Puerto Rico.

Javier Ferrer, President and CEO, Banco Popular: Well, I will say that it’s a net positive. We have seen some increased activity, but it’s mostly... I wouldn’t say in our branches. I’m gonna say it’s in geographies adjacent to military bases or installations. You know, we’ve seen customers that are benefiting from relationships with the military throughout Puerto Rico, and we’re seeing there are reports of the military entering into lease agreements for, you may imagine, you know, ports and airports. And again, know of customers, clients of ours that, you know, smaller or middle market clients that have entered into contracts with the military. So that’s why we believe it’s net positive. Obviously, we’re monitoring it. If military presence were to grow, that can only increase.

So that’s why I started by saying that it’s a net positive. We’ll see, ’cause it’s dependent on, as you know, you know, geopolitical and forces and decisions out of the White House.

Ben Gerlinger, Analyst, Citi: Thank you.

Javier Ferrer, President and CEO, Banco Popular: Sure.

Paul Cardillo, Investor Relations, Banco Popular: As another reminder, if you’d like to ask a question, please press star followed by one on your telephone keypad. We now turn to Gerard Cassidy with RBC. Your line is open. Please go ahead.

Jorge García, CFO, Banco Popular0: Good morning, Jorge. Good morning, Javier.

Javier Ferrer, President and CEO, Banco Popular: Good morning, Jared.

Ben Gerlinger, Analyst, Citi: Good morning.

Jorge García, CFO, Banco Popular0: At the risk of being called a curmudgeon again, as I was on a call with one of your peers, I have to ask the question. I mean, the outlook for you folks and your peers is quite good for 2026. The economy is healthy. Credit, as you guys pointed out, is resilient. We have a steeper positive slope yield curve. Maybe it gets even more positive sloped. We’ve got loan growth, as you pointed out as well. When you look around corners, aside from the geopolitical risk that we’re all aware of, when you guys have to look around corners, what are you watching out for so that we don’t get a surprise this year that nobody’s obviously expecting?

Javier Ferrer, President and CEO, Banco Popular: Well, that’s a very good question, and of course, we think about it all the time. I think that one of the themes that is in the States, as in Puerto Rico, is affordability, right? I mean, we think about that and how it may impact certain segments of our clients, right? And it’s something that obviously impacts home creation, let’s say, and it may impact our customers if inflation would escalate. So that’s something that we think about. And the other item that we can’t control, but it obviously has an impact to our economy is the PREPA situation. The fact that the electric power authority bankruptcy is still pending.

So anything having to do with generation of electricity is a concern because it’s essentially a tax on economic growth. Now, we’re also benefiting from the fact that gasoline is at very good levels, so we’re benefiting from that. But I think those will be the two items that are kind of lurking, you know, and may bite us. But you know, we’re hoping that this is a year where the PREPA bankruptcy gets dealt with. And clearly, everybody recognizes that, you know, developing the grid and fixing this is critical for Puerto Rico’s future. So we think that, you know, clear heads will prevail, and we’ll get to a resolution that’s rational for all the parties involved.

Jorge García, CFO, Banco Popular0: Very good. And then as a follow-up, stepping back for a moment, you guys touched on some of the economic statistics for Puerto Rico. Can you, remind us and give us some color, the onshoring of America and, you know, the building of manufacturing plants that’s taking place on the mainland? I believe Puerto Rico is seeing some of those benefits as well. Can you give us some color on what you’re seeing on the ground? Is there progress being made there, and what that future might look like, for the economy for Puerto Rico?

Javier Ferrer, President and CEO, Banco Popular: Yeah. Well, we can comment on what’s public and maybe provide, offer some, like, thoughts on maybe stuff that we’re listening to the grapevine. But,

Jorge García, CFO, Banco Popular0: Sure.

Javier Ferrer, President and CEO, Banco Popular: You’re absolutely right. Global manufacturers are increasingly prioritizing reshoring initiatives, and Puerto Rico is very well positioned to benefit from this trend. So, during last year, multiple companies announced new investments or expansions in Puerto Rico, of all sizes, and that representing about $2.2 billion in total capital investment and the creation of more than-

Ben Gerlinger, Analyst, Citi: Twenty-five million.

Javier Ferrer, President and CEO, Banco Popular: Yeah, yeah, 2,500... Well, actually, I thought it was 4,600 jobs. So and I think we called it the whale. I mean, there’s again, all sizes, but the whale we call the Eli Lilly’s announcement, which is a $1.2 billion commitment to modernize and expand its pharma manufacturing facilities in Carolina, and that’s close to 1,100-1,200 new jobs. And Amgen’s $650 million investment to expand its biopharm operations in Juncos, and that’s another 760. Now, that said, we expect, and this is grapevine now, that that’s what happened last year.

And it’s close to 17, you know, entities that announced new investments in Puerto Rico through the onshoring or reshoring. But grapevine tells us that, you know, we ought to expect more announcements in 2026, and a few will be large, so but that’s just grapevine. So we think that trend will continue. And of course, that will fuel our economy. It’s not only the direct jobs, but as you know, this has a multiplier effect, and any such investment will generate, you know,

Lidio Soriano, CRO, Banco Popular: ... three times what it typically generates in direct investment. So looking forward to more announcements from the government in 2026. And of course, once that happens, you’ll know right away.

Jorge García, CFO, Banco Popular1: Very good. Now, will there be any benefits from the halftime show at the Super Bowl?

Lidio Soriano, CRO, Banco Popular: We’ll see. We’ll see. We’ll see.

Jorge García, CFO, Banco Popular1: More, more record sales.

Lidio Soriano, CRO, Banco Popular: Well, next week, we’ll talk about it.

Jorge García, CFO, Banco Popular1: Thank you.

Lidio Soriano, CRO, Banco Popular: Yeah, it’s interesting. I don’t know if you’ve seen the ads. The ads are fantastic. Yeah, the ads are, are fantastic.

Jorge García, CFO, Banco Popular1: Good.

Lidio Soriano, CRO, Banco Popular: But we’ll see.

Jorge García, CFO, Banco Popular1: That’s good for Puerto Rico. Okay, thank you.

Lidio Soriano, CRO, Banco Popular: Yep, absolutely. Thank you, Jerry.

Paul Cardillo, Investor Relations, Banco Popular: We now turn to Manuel Navas with Piper Sandler. Your line is open. Please go ahead.

Jorge García, CFO, Banco Popular2: Hey, most of my questions have been asked, but I just wanted to check in on what are the market conditions that would impact your buyback? Just, is that valuation, pricing? Are you targeting some sort of total return target? Just any kind of color more on the buyback pace, please.

Jorge García, CFO, Banco Popular: First, Manuel, I just want to welcome you to the call and thank you for picking up coverage for all the banks in Puerto Rico and supporting our island. So I appreciate it. In terms of market conditions, I mean, you know, we tend to do these on 10 by 5-1 plans. So certainly changes in market prices that, you know, could impact the grids that we use. So that’s certainly something unexpected that could be an accelerator or decelerator from the target number. But also, you know, all the global political, macroeconomic environment, and these are all things that impact our perception, you know, of what’s happening and how quickly we want to execute on the repurchases.

But I will reiterate what Javier said, we believe that we find that our current share price are very attractive.

Jorge García, CFO, Banco Popular2: And the current share number in this quarter was nice. And you like that pace, correct?

Jorge García, CFO, Banco Popular: We like the total volume, the total dollar that we spent to be a good baseline.

Jorge García, CFO, Banco Popular2: Perfect. I appreciate that. Thank you, guys.

Paul Cardillo, Investor Relations, Banco Popular: We now turn to Timur Braziler with Wells Fargo. Your line is open. Please go ahead.

Jorge García, CFO, Banco Popular1: Hi, good morning.

Jorge García, CFO, Banco Popular: Hey, Timur.

Jorge García, CFO, Banco Popular1: Trying to put a finer point on auto expectations, can you just give us a little bit of color here, as to what current demand looks like? And as you start looking out throughout the course of 2026, do you see this being a tough comp year kind of throughout the year? Or do trends start getting better, maybe post-April, once you kind of lapse through some of the pull forward when tariffs first got announced last year?

Lidio Soriano, CRO, Banco Popular: I’ll give you a little bit, this is Timur. This is me. I’ll give you a little bit of perspective in terms of the auto industry and maybe a little bit of perspective in terms of the outlook for 2026. I mean, if you look historically, prior to COVID, I mean, new auto sales in Puerto Rico, when you had a year above 100,000, that was a great year for the industry. Over the recent years after COVID, numbers have been higher than that. I mean, we had years of 120,000 was the record year for the industry.

This year, we are ending up the year around 111,000, which is a 9% down from the previous year, and the expectation for the industry is to be slightly down 5% from the numbers that we have. But I will say still, I mean, a year that it is above 110,000, or close to 110,000, that is a great year for the industry in Puerto Rico.

Jorge García, CFO, Banco Popular1: Okay. Got it. Thank you. And then maybe asking the expense question a different way. I think historically, you’ve broken it down kind of into three different phases, with the first phase being to kind of change the mindset of the employee base and focusing on the customer. Phase two being simplify the franchise, improve efficiency, and then finally becoming a top-performing bank. I’m guessing between... Or I’m questioning, I guess, between phase one and phase two, the costs kind of associated with those, are they similar? And your comment that you had to delay some technology expenditures in 2025 that are running in 2026, like, are those costs similar as well, or is one of those phases implicitly more expensive maybe than some of these other?

Jorge García, CFO, Banco Popular: Look, I think the one thing that I would encourage us to think differently is, it’s not really phase driven. I mean, this is an arms race every day, you know, whether it is other banks, fintechs, other competitors that are competing. Everybody’s competing for a user experience that’s very unique and omni-channel, et cetera. We can come up with all the different buzzwords. You know, we’re happy with the level of investment that we’re at. We know that there’s more to do, and we’re going to wake up tomorrow and have another new challenge that we’ll have to evaluate and put on the queue for something else. You know, I think that what’s important is that we’re very much focused on it.

We have a strong investment discipline in terms of the projects that we’re greenlighting, with our customer in mind, but also our employees. I think it’s that combination that creates the operating leverage that we’re looking for, but I think we need to really kind of think of this as a steady state and how do we focus and shift to adding value from our decisions. But Timur, there’s a lot of things here that just become table stakes that we’ve got to do or risk falling behind.

Javier Ferrer, President and CEO, Banco Popular: Yeah, I agree with that. I don’t see it as phases. I see it as a strategic framework which would have us, to Jorge’s point, do our jobs every day better, faster, and quicker to tackle competition, which, you know, is not gonna let down. As you know, everything’s going quicker, faster. So, you know, we have a great position in Puerto Rico. We need to defend it, but also grow it. That’s exactly what we’re trying to do every day, so.

Arren Cyganovich, Analyst, Truist: Got it. Thank you.

Paul Cardillo, Investor Relations, Banco Popular: We now turn to Brandon Berman with Bank of America. Your line is open. Please go ahead.

Jorge García, CFO, Banco Popular3: Thank you. Good morning, everyone. Very nice quarter. I just wanted to build off of, the last question on expenses. If, if we pull out the profit sharing, incurred last year, it implies a little bit faster of a growth rate. I was just hoping you’d be able to dissect, the drivers of that. Is, is it the, the planned investments that were delayed that’s causing the, the 100 basis point difference in the growth rate, or is it something else? Any breakdown, would be helpful. Thank you.

Jorge García, CFO, Banco Popular: Yeah. Thanks, Brandon. Thanks for the question. You know, first, I think, if you look at where we ended up, 2025 versus our original guide and even our guidance in the third quarter call, we did, I think, outpace or overperform in 2025. The teams have done a really good job to be focused on efficiency. We’ve done and implemented a lot of opportunities that are sustainable and will continue to generate savings. But we also had some wins that resulted in maybe a benefit that we see in 25 that we didn’t. We won’t see repeat in 26, or we will see a lower level in 26 versus 25.

And then when you add that to the continued investments in technology, you know, I think we’ve talked in the past how as projects go near live, you start doubling up on expenses as you’re supporting two platforms, and kind of incurring, you know, the cost of licensing on the old platform and the cost of development in the new platform, et cetera. That tends to have some peaks and valleys, and that’s part of kind of the noise that you’re seeing in comparing the run rate. But we will continue to invest in technology and continue to invest in our people and making sure that we’re attracting talent. And those are the two biggest drivers when we look at year-over-year, and our expectation of expense growth.

Jorge García, CFO, Banco Popular3: Thank you very much. Have a great day.

Javier Ferrer, President and CEO, Banco Popular: Thank you.

Paul Cardillo, Investor Relations, Banco Popular: We have a follow-up from Kelly Motta with KBW. Your line is open. Please go ahead.

Kelly Motta, Analyst, KBW: Hey, thanks for letting me circle back. I apologize. I forgot there were so many people on this call! Just to dig down a bit into the NII guide and parsing that with your commentary for margin expansion, thinking through the funding side, mainly, mainly deposits, you know, you had some declines in brokers. You gave the range for government. Embedded in your NII guide, do you have any, you know, thoughts around or, I guess, opportunity to run off some higher cost funding given the strong cash flows you’re generating off the securities portfolio and overall outlook for, you know, core deposits in Puerto Rico here? Thank you.

Jorge García, CFO, Banco Popular: You know, of course, our objective is not only to retain, you know, client deposits, but, you know, also increase them, right? So we have been seeing good momentum in our retail network across all segments. You know, affluent, mass affluent and mass. We’ve seen strong deposit growth in commercial, really led by corporate and small business. So we expect some of those trends to continue. I think the opportunity on that NII is, you know, can we reduce the cost of the U.S. deposits? And those are driven both by the competitive nature of online, you know, direct deposit, which are an important funding source for our U.S. business. But we’re also seeing strong competition in New York and the Florida markets.

You know, the reality is that, kind of for that incremental money and clients that are more rate sensitive, it’s still very competitive out there, and it’s our team’s goal is we’re very much focused on relationship growth, and if that begins with a loan relationship in the U.S., making sure that that translate into deposit relationships, that, you know, maybe impacts our loan growth guidance as we want our teams to be more focused on those relationships and that profitability. But at the end, no secret in banking that the deposits and low-cost transactional accounts and primacy with those clients are gonna be the driver of that guide.

When we look at the outperformance this year, it was really driven by the growth in deposits in both of our markets.

Kelly Motta, Analyst, KBW: Got it. Thank you so much.

Jorge García, CFO, Banco Popular: Okay.

Paul Cardillo, Investor Relations, Banco Popular: This concludes our Q&A. I’ll now hand back to Javier Ferrer for any final remarks.

Javier Ferrer, President and CEO, Banco Popular: Well, thanks again for joining us and for your questions. We look forward to updating you on our first quarter results in April. Have a good day.

Paul Cardillo, Investor Relations, Banco Popular: Ladies and gentlemen, today’s call is now concluded. We’d like to thank you for your participation. You may now disconnect your line.