Popular NASDAQ: BPOP reported third-quarter net income of $266 million, or $4.21 per share, as higher net interest income and stable underlying credit trends were partly offset by higher operating expenses and lower non-interest income.
Earnings per share declined $0.14 from the second quarter but rose 34% from the third quarter of 2025. Return on tangible common equity was 15.8%, compared with 17% in the prior quarter and 13.1% a year earlier.
“We delivered another solid quarter,” Chief Financial Officer Lidio Soriano said during the company’s earnings call, pointing to the company’s focus on generating sustainable returns.
Loans Rise While Deposits Decline
Loans held in portfolio increased by $293 million during the quarter, driven by commercial and mortgage lending. Popular now expects full-year 2026 loan growth of about 2%, reflecting lower auto and lease activity and more moderate commercial growth.
President and CEO Jorge García said demand in Puerto Rico remains positive, though the size and supply of potential transactions have moderated after several years of growth that outpaced the island’s economy. In the U.S., the company is emphasizing deeper, multiproduct customer relationships and deposit gathering rather than pursuing single-product lending relationships, García said.
Total ending deposits were $68.7 billion, down $1.5 billion from the second quarter. Puerto Rico public deposits declined by $1.2 billion to $21.5 billion. Excluding public funds, customer balances decreased by about $289 million on an ending basis, a change management said was consistent with seasonal expectations.
Popular expects Puerto Rico public deposits to remain between $20 billion and $22 billion for the rest of the year. García said the company does not expect infrastructure spending to cause a significant decline in those balances, though it anticipates some pickup in municipal activity tied to federally funded rebuilding projects.
Net interest income increased $6 million from the prior quarter to $699 million, supported by higher income from investment securities and commercial loans. GAAP net interest margin declined 3 basis points to 3.63%, while tax-equivalent margin declined 1 basis point to 4.16%.
The company maintained its strategy of reinvesting maturing U.S. Treasury securities into two- and three-year notes. During the quarter, it invested approximately $1.4 billion at an average yield of about 4.3% and an average duration of 2.7 years. That represented a 206-basis-point pickup relative to the securities that matured during the quarter.
Popular expects full-year net interest income to increase about 8.5%. Management also said it expects net interest income to continue growing in 2027, supported by investment portfolio repricing and current loan demand, although the pace of margin expansion will depend partly on the mix of loans, investments and public deposits.
Credit Trends Remain Stable Despite Commercial Developments
Popular said overall credit quality remained stable, with consumer performance favorable and mortgage delinquencies and net recoveries remaining strong. Net charge-offs declined to $73 million, or 73 basis points annualized, from $104 million, or 1.05%, in the second quarter.
Commercial credit metrics were affected by two unrelated commercial and industrial relationships. The company placed a $74 million relationship on nonaccrual status and recorded a $34 million partial charge-off on a credit that had become non-performing in the prior quarter. Soriano said the deterioration in both cases was driven primarily by borrower-specific issues rather than a shared risk factor.
Total non-performing assets decreased by $37 million, aided by the sale of an $84 million non-performing loan held for sale. However, total non-performing loans increased by $52 million to $466 million, and the non-performing loan ratio rose to 1.16% from 1.04% in the prior quarter.
Popular raised its full-year net charge-off outlook to a range of 80 to 90 basis points. Chief Risk Officer Luis Sousa said the fourth-quarter outlook mainly incorporates potential scenarios involving the disclosed commercial and industrial credits. Looking ahead, management’s preliminary expectation is for 2027 net charge-offs of roughly 60 to 75 basis points.
Expenses, Capital Returns and Customer Initiatives
Non-interest income decreased $5 million sequentially to $176 million, though it remained above the company’s guidance range. The quarter included a $5 million benefit associated with a commercial loan refinancing. Compared with a year earlier, non-interest income rose 3%, including growth in debit and credit card fees and a 60% increase in broker and asset management fees. Popular expects fourth-quarter non-interest income of about $170 million.
Operating expenses increased $21 million to $506 million, primarily due to annual salary adjustments, higher profit sharing and performance-based compensation. The company now expects full-year operating expenses to rise about 2%, including the maximum profit-sharing contribution.
García said the company has identified and implemented about $50 million in recurring efficiencies that it expects to benefit results next year. He said Popular has not deliberately deferred projects to reduce expenses.
The company launched a simplified consumer deposit product during the quarter and reclassified more than 1 million existing accounts into the new offerings. García said the change reduced quarterly fee income by roughly $2 million and could represent an annualized impact of $8 million to $10 million, though Popular expects deeper customer relationships and deposit growth to help offset the effect over time.
Popular also completed the final wave of onboarding for its commercial cash-management platform and introduced an account for college students. Its healthcare professional program has generated more than $90 million in new loans this year, García said.
Share Repurchases and Return Targets
Popular returned $236 million to shareholders during the quarter, including $179 million in common-stock repurchases. It raised its quarterly dividend 20% to $0.90 per share, beginning with the Oct. 1 payment.
Tangible book value per share declined $1.64 to $86.30, primarily due to lower market values of available-for-sale securities. The tangible common equity ratio was 7.05%, down 13 basis points from the prior quarter.
Management expects to repurchase between $150 million and $200 million of common stock in the fourth quarter and said quarterly repurchases could remain in a similar range during 2027, subject to current conditions. The company continues to target annual return on tangible common equity of 14% to 17%.
About Popular (NASDAQ:BPOP)
Popular, Inc NASDAQ: BPOP is a financial services company headquartered in San Juan, Puerto Rico. Its principal subsidiary, Banco Popular de Puerto Rico, provides banking services to individuals, businesses and institutions, including deposit accounts, consumer and commercial loans, residential mortgages, credit cards and electronic banking services.
The company also offers investment, brokerage, insurance and wealth management services through specialized subsidiaries and affiliated businesses.
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