Popular Q4 2025 Popular Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Popular Inc Earnings Call
Speaker #1: Hello, everybody, and welcome to the POPULAR, Incorporated's fourth quarter 2025 earnings call. My name is Elliot, and I'll be coordinating your call today. If you would like to register a question, join today's event, please press star one on your telephone keypad.
Paul Cardillo: Hello, everybody, and welcome to Popular, Inc.'s Q4 2025 earnings call. My name is Elliot, and I'll be coordinating your call today. If you would like to register a question during today's event, please press star one on your telephone keypad. I'd like to hand over to Paul Cardillo. Please go ahead.
Operator: Hello, everybody, and welcome to Popular, Inc.'s Q4 2025 earnings call. My name is Elliot, and I'll be coordinating your call today. If you would like to register a question during today's event, please press star one on your telephone keypad. I'd like to hand over to Paul Cardillo. Please go ahead.
Speaker #1: And I'd like to hand over to Paul Cardillo. Please go ahead.
Speaker #2: Good morning, and thank you for joining us. With me on the call today is our President and CEO, Javier Ferrer; our CFO, Jorge Garcia; and our CRO, Lidio Soriano.
Ignacio Alvarez: 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.
Paul Cardillo: 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.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: 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.
Speaker #2: 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.
Ignacio Alvarez: 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.
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.
Speaker #3: Thank you, Paul, and good morning, everyone. Please turn to slide four. In 2025, we deliver results that reflect the strength of our franchise, and that continued stability of the Puerto Rico economy.
Javier Ferrer: Thank you, Paul, and good morning, everyone. Please turn to slide four. In 2025, we deliver results that reflect the strength of our franchise and the continued 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%.
Javier Ferrer: Thank you, Paul, and good morning, everyone. Please turn to slide four. In 2025, we deliver results that reflect the strength of our franchise and the continued 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%.
Speaker #3: 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%.
Speaker #3: 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.
Speaker #3: 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.
Speaker #3: Our capital levels are strong. Ending the year with a common equity tier-one 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.
Javier Ferrer: 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, offset in 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 five, 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 $23.38 per share, respectively.
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, offset in 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 five, 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 $23.38 per share, respectively.
Speaker #3: 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.
Speaker #3: 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.
Speaker #3: Please turn to slide five, where we share highlights that reflect our strong operating performance in the fourth quarter. We reported net income of $234 million and EPS of $3.53, an increase of $23 million and $0.38 per share, respectively.
Speaker #3: 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 MPLs and net charge-offs.
Javier Ferrer: Our results were driven by higher net interest income, an 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% remained 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.
Our results were driven by higher net interest income, an 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% remained 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.
Speaker #3: We are very pleased to have exceeded a 14% ROTC for the quarter and a 13% ROTC for the full year. We demonstrated significant progress in our efforts to improve our sustainable returns towards our 14% objective.
Speaker #3: Please turn to slide six. As of the end of the fourth quarter, this is 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.
Speaker #3: The unemployment rate of 5.7% 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.
Speaker #3: We also continue to see healthy demand for homes in Puerto Rico. Mortgage balances at Banco Popular increased by quarter. The construction sector continues to show positive momentum.
Javier Ferrer: 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 levels 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.
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 levels 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.
Speaker #3: 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 companies.
Speaker #3: 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.
Speaker #3: During the fourth quarter, passenger traffic remained stable at around 3 million passengers. And according to Discover Puerto Rico, in the fourth quarter, hotel demand reached nearly $350,000 room nights, marking 11% year over year growth and driving a 4% increase in total revenue.
Javier Ferrer: According to Discover Puerto Rico, in Q4, hotel demand reached nearly 350,000 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 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 Q4 and have originated approximately $36 million since launch in Q3.
According to Discover Puerto Rico, in Q4, hotel demand reached nearly 350,000 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 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 Q4 and have originated approximately $36 million since launch in Q3.
Speaker #3: 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.
Speaker #3: 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 management platform, we also deployed a new consumer credit origination platform in Puerto Rico and the Virgin Islands.
Speaker #3: 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.
Speaker #3: 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.
Javier Ferrer: 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.
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.
Speaker #3: 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.
Speaker #3: We're also seeing the results of our focus on being simple and efficient. We have sustained and continue to simplify our commercial credit origination and portfolio risk management.
Speaker #3: We are seeing faster cycle times and higher banker productivity, a more seamless customer journey, and long growth in our small and middle market segments.
Speaker #3: During the year, we also executed a series of sustainable efficiency initiatives, including exiting our mortgage servicing business in Puerto Rico and transforming our ERP solution to a modern cloud platform that significantly improves agility and performance.
Javier Ferrer: 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?
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?
Speaker #3: 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.
Speaker #3: Jorge.
Speaker #2: Thank you,
Jorge García: 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% ROTCE for the period and 13% ROTCE 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 ROTCE numerator.
Jorge García: 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% ROTCE for the period and 13% ROTCE 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 ROTCE numerator.
Speaker #2: 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 38 cents to $3.53.
Speaker #2: 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.
Speaker #2: 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% ROTC for the period and 13% ROTC for the full year.
Speaker #2: 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 ROTC numerator.
Speaker #2: Looking ahead to 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 ROTC.
Jorge García: 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 ROTCE. Our current objective remains a sustainable 14% ROTCE. 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 eight. 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.
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 ROTCE. Our current objective remains a sustainable 14% ROTCE. 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 eight. 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.
Speaker #2: Our current objective remains a sustainable 14% ROTC. We'll continue to use all available levers to position the company as a top-performing bank when compared to mainland peers.
Speaker #2: Please turn to slide eight. 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.
Speaker #2: 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.
Speaker #2: 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 cost of Puerto Rico public deposits.
Jorge García: 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% to 4%. 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 $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- to 3-year duration in the investment portfolio.
Jorge García: 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% to 4%. 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 $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- to 3-year duration in the investment portfolio.
Speaker #2: 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.
Speaker #2: At POPULAR Bank, we saw loan growth of $144 million, mainly driven by commercial lending. For 2026, we expect consolidated loan growth of 3 to 4%.
Speaker #2: In our investment portfolio, we continue to reinvest proceeds from bond maturities into US 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%.
Speaker #2: We expect to maintain a two- to three-year duration in the investment portfolio. Ending deposit balances decreased by $323 million, and average deposit balances decreased by $880 million.
Jorge García: 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 to $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.
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 to $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.
Speaker #2: 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.
Speaker #2: We continue to expect public deposits to be in the range of 18 to 20 billion. At BBPR, excluding Puerto Rico public deposits, ending balances increased by $525 million.
Speaker #2: 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.
Speaker #2: At BBPR, the decrease was mostly a result of Puerto Rico public deposits repricing lower by 22 basis points due to recent interest rate cuts by the Fed.
Speaker #2: While non-public customer deposit costs decreased by one basis point. At PB, the reduction was mainly related to lower online savings deposit costs and repricing of time deposits.
Jorge García: 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% to 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 9. 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 to $165 million. Please turn to slide 10. Total operating expenses were $473 million, a decrease of $22 million when compared to Q3.
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% to 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 9. 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 to $165 million. Please turn to slide 10. Total operating expenses were $473 million, a decrease of $22 million when compared to Q3.
Speaker #2: We anticipate 2026 NII will increase 5 to 7%. Driven by continued 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.
Speaker #2: 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.
Speaker #2: 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 to $165 million.
Speaker #2: 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.
Jorge García: 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.
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.
Speaker #2: 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.
Speaker #2: In 2026, we expect total full-year GAP expenses to increase by approximately 3% compared to 2025, as we continue to invest in our people and technology.
Speaker #2: 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.
Speaker #2: In 2026, we expect the effective tax rate for the year to be in a range of 15 to 17%. Please turn to slide 11.
Jorge García: In 2026, we expect the effective tax rate for the year to be in a range of 15% to 17%. Please turn to slide 11. Tangible book value per share at the end of the quarter was $82.65, an increase of $3.53 per share, driven by our net income and lower unrealized losses in our investment portfolio, often 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 two years in reducing our CET1 ratio, there's more we can do. In Q4, we repurchased approximately $148 million in common stock.
In 2026, we expect the effective tax rate for the year to be in a range of 15% to 17%. Please turn to slide 11. Tangible book value per share at the end of the quarter was $82.65, an increase of $3.53 per share, driven by our net income and lower unrealized losses in our investment portfolio, often 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 two years in reducing our CET1 ratio, there's more we can do. In Q4, we repurchased approximately $148 million in common stock.
Speaker #2: Tangible book value per share at the end of the quarter was $82.65, 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.
Speaker #2: 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.
Speaker #2: While we've made progress over the past two years in reducing our CET1 ratio, there's more we can do. In Q4, we repurchased approximately $148 million in common stock.
Speaker #2: 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.
Jorge García: We believe this is a good run rate for the pace of buybacks going forward, subject to market conditions. As of 31 December, 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-one 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.
We believe this is a good run rate for the pace of buybacks going forward, subject to market conditions. As of 31 December, 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-one 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.
Speaker #2: 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.
Speaker #2: 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 mainline bank peers, plus a buffer for our geographic concentration.
Speaker #2: With that, I turn the call over to Lidio. Thank you, Jorge, and thank you all for being with us. Turning to slide number 12.
Paul Cardillo: 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-offs. Non-performing assets and loans decreased by $4 million this quarter, mainly due to Popular Bank. U.S. NPLs decreased by $14 million, as a $17 million mortgage relationship returned to accrual status, offset in part by higher commercial NPLs. BBPR 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 BBPR, 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%.
Lidio Soriano: 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-offs. Non-performing assets and loans decreased by $4 million this quarter, mainly due to Popular Bank. U.S. NPLs decreased by $14 million, as a $17 million mortgage relationship returned to accrual status, offset in part by higher commercial NPLs. BBPR 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 BBPR, 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%.
Speaker #2: remained stable during the fourth Credit quality metrics quarter, with lower MPLs and lower net charge-off. Non-performing assets and loans decreased by $4 million this quarter, mainly due to POPULAR Bank.
Speaker #2: US MPLs decreased by $14 million, as a $17 million mortgage relationship returned to accrual status, offset in part by higher commercial MPLs. BPR MPLs increased $5 million, with commercial up $8 million and consumer up $3 million, offset in part by an $8 million decrease in mortgage MPLs.
Speaker #2: Inflows of MPLs declined by $194 million, primarily in BPR, as the previous quarter included inflows from two unrelated commercial relationships totaling $188 million. The ratio of MPLs to total loans held in portfolio decreased three basis points to 1.27%.
Speaker #2: Turning to slide number 13. Net charge-offs amounted to $50 million, or an annualized 51 basis points, compared to $58 million, or 60 basis points, in the prior quarter.
Paul Cardillo: Turning to slide number 13, net charge-off amounted to $50 million, or an annualized 51 basis points, compared to $58 million, or 60 basis points, in the prior quarter. This quarter results include $5 million in recoveries from the sales of previously charge-off auto loans and credit cards. Excluding this, the net charge-off ratio was 57 basis points. The net charge-off in BBPR decreased by $7 million, driven by a decrease in commercial net charge-off as the prior quarter included a $14 million charge-off related to a single borrower. 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-off of 55 to 70 basis points.
Turning to slide number 13, net charge-off amounted to $50 million, or an annualized 51 basis points, compared to $58 million, or 60 basis points, in the prior quarter. This quarter results include $5 million in recoveries from the sales of previously charge-off auto loans and credit cards. Excluding this, the net charge-off ratio was 57 basis points. The net charge-off in BBPR decreased by $7 million, driven by a decrease in commercial net charge-off as the prior quarter included a $14 million charge-off related to a single borrower. 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-off of 55 to 70 basis points.
Speaker #2: This quarter results includes $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.
Speaker #2: The net charge-off in BPR decreased by $7 million, driven by a decrease in commercial net charge-off as the prior quarter included a $14 million charge-off related to a single borrower.
Speaker #2: In 2025, net charge-off was 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-off of $55 to $70 basis points.
Speaker #2: The allowance for credit losses increased by $22 million, $308 million, mostly in BPR, due to higher research for the commercial portfolio driven by higher balances specific reserves and loan modifications, coupled with higher reserves for consumer loans due to changes in FICOMEX.
Paul Cardillo: The Allowance for Credit Losses increased by $22 million to $308 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 comparison ratio of the ACL to loans held in portfolio remained 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.
The Allowance for Credit Losses increased by $22 million to $308 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 comparison ratio of the ACL to loans held in portfolio remained 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.
Speaker #2: The corporation ratio of the ACL to loans held in portfolio remained stable, at 2.05%, while the ratio of the ACL to MPLs was 162%, compared to 157% in the previous quarter.
Speaker #2: The provision for loan losses was $71 million down $3 million from $75 million in the prior quarter. For the BPR segment, the provision was $72 million, compared to $74 million in the previous quarter.
Speaker #2: With that, I would like to turn the call over to Mr. Ferrer for his concluding remarks. Thank
Speaker #2: you.
Speaker #3: Well, thank you,
Javier Ferrer: Well, thank you, Lidio and Jorge, for your updates. Our Q4 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.
Javier Ferrer: Well, thank you, Lidio and Jorge, for your updates. Our Q4 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.
Speaker #3: Lidio and Jorge, thank you 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.
Speaker #3: 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.
Speaker #3: Our strategy is grounded in customer primacy, where our focus 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.
Speaker #3: 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.
Speaker #3: 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
Javier Ferrer: 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.
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.
Speaker #3: questions. Thank
Speaker #1: 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.
Jorge García: Thank you. If you would like to ask a question, please press star followed by one on the 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.
Operator: Thank you. If you would like to ask a question, please press star followed by one on the 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.
Speaker #1: When preparing to ask your question, please ensure your device is unmuted locally. First question comes from Brett Rabbiton with Hope Group. Your line is open.
Speaker #1: Please go ahead.
Speaker #4: Hey, good morning, everyone. How are you doing?
[Analyst] (Hovde Group): Hey, good morning, everyone. How are you doing?
Brett Rabatin: Hey, good morning, everyone. How are you doing?
Jorge García: Good morning, Brett. Doing well.
Jorge García: Good morning, Brett. [crosstalk] Doing well.
Speaker #4: Doing Good morning, Brett.
Speaker #4: Well, I wanted to start on the—
[Analyst] (Hovde Group): I wanted to start on the guidance and just thinking about the NII guide. If I'm reading it correctly, it kind of would suggest maybe slightly slower average balance sheet growth during 2026 and 5 to 10 basis points of margin expansion. 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? Then just wanted to ask around the ROTCE goal, why with operating leverage that might not increase a bit from here?
Brett Rabatin: I wanted to start on the guidance and just thinking about the NII guide. If I'm reading it correctly, it kind of would suggest maybe slightly slower average balance sheet growth during 2026 and 5 to 10 basis points of margin expansion. 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? Then just wanted to ask around the ROTCE goal, why with operating leverage that might not increase a bit from here?
Speaker #5: 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 '26, and 5 to 10 basis points of margin expansion.
Speaker #5: 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 ROTSI goal, why with operating leverage that might not increase a bit from here?
Speaker #4: 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.
Jorge García: 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% to 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 what drives one for the other, really always revolves around low-cost deposit levels and our ability to reduce deposits in the US market.
Jorge García: 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% to 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 what drives one for the other, really always revolves around low-cost deposit levels and our ability to reduce deposits in the US market.
Speaker #4: 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.
Speaker #4: But we're very comfortable with that 5 to 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 what drives one for the other, really always revolves around low cost deposit levels and our ability to reduce deposits in the US market.
Speaker #4: In terms of the ROTSI, we talked in the past that we want ROTSI to be driven by the improvement in performance and net income, right?
Jorge García: In terms of the ROTCE, we've talked in the past that we want ROTCE 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 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 the starting point where we're at, but that is something that we want to continue to focus on. And I think this year we try to be more intent or deliberate in how we're managing capital levels as well, and as I discussed in my prepared remarks.
In terms of the ROTCE, we've talked in the past that we want ROTCE 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 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 the starting point where we're at, but that is something that we want to continue to focus on. And I think this year we try to be more intent or deliberate in how we're managing capital levels as well, and as I discussed in my prepared remarks.
Speaker #4: 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.
Speaker #4: We want that 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.
Speaker #4: So we're not quite there yet. We do feel that we have a lot of momentum, and like the starting point where we're at, but that is something that we want to continue to focus on.
Speaker #4: And I think this year we try to be more intent or deliberate in how we're managing capital levels as well, and as I discussed in my prepared remarks.
Speaker #5: Okay. And then the other question I had was just around loan growth, which was better than I expected, and pretty strong in commercial. 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%.
[Analyst] (Hovde Group): Okay. And then the other question I had was just around loan growth, which was better than I expected and pretty strong in commercial. When I think about that guidance for the coming year, I mean, you've had 6%-ish growth the past two years. Q4 was 7%. Is this slowness or slower level anticipated in 2026? Is that just conservatism around consumer or any thoughts around that? And then as it relates to onshoring, are you guys seeing any opportunities related to that?
Brett Rabatin: Okay. And then the other question I had was just around loan growth, which was better than I expected and pretty strong in commercial. When I think about that guidance for the coming year, I mean, you've had 6%-ish growth the past two years. Q4 was 7%. Is this slowness or slower level anticipated in 2026? Is that just conservatism around consumer or any thoughts around that? And then as it relates to onshoring, are you guys seeing any opportunities related to that?
Speaker #5: Is this slowness or slower level anticipated in '26? Is that just conservatism around consumer or any thoughts around that? And then as it relates to onshoring you guys seeing any opportunities related to
Speaker #5: that? Okay.
Jorge García: Okay. So let's start first on the loan growth. 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? 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 US. We are in good markets in the US. 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.
Jorge García: Okay. So let's start first on the loan growth. 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? 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 US. We are in good markets in the US. 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.
Speaker #4: So let's start first on the loan growth. As you said, we have seen loan growth around 6% for the last couple of years, led by growth in Puerto Rico.
Speaker #4: That growth in Puerto Rico was across all of our portfolio, right? 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.
Speaker #4: So that is one part of the guide. The other growth engine for us has been in the US, we are in good markets in the US.
Speaker #4: 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.
Speaker #4: As well as, Brett, as you can imagine, there's always timing, as loan transactions are focused on larger clients. When those things close in terms of funding that you advance, or when things slow down on expected payoff, that has an impact on those kind of year-over-year changes.
Jorge García: As well as Brett, as you can imagine, there's always timing as loan transactions are focused on larger clients. When those things close in terms of funding that you advance or when things slow down on expected payout, that has an impact on those kind of year-over-year kind of changes. But we're confident on the 3% to 4% guide and the momentum that we've had over the last couple of years in both Puerto Rico and our US markets.
As well as Brett, as you can imagine, there's always timing as loan transactions are focused on larger clients. When those things close in terms of funding that you advance or when things slow down on expected payout, that has an impact on those kind of year-over-year kind of changes. But we're confident on the 3% to 4% guide and the momentum that we've had over the last couple of years in both Puerto Rico and our US markets.
Speaker #4: But we're confident on the 3% to 4% guide and the momentum that we've had over the last couple of years in both Puerto Rico and our U.S. markets.
Speaker #5: Okay. That's helpful. Congrats on a strong year, guys.
[Analyst] (Hovde Group): Okay. That's helpful. Congrats on a strong year, guys.
Brett Rabatin: Okay. That's helpful. Congrats on a strong year, guys.
Jorge García: Thank you.
Jorge García: Thank you.
Speaker #5: Thank Thank you.
Speaker #5: You. We now turn to Jared.
Paul Cardillo: Thank you.
Lidio Soriano: Thank you.
Jorge García: We now turn to Jared Shaw with Barclays. Your line is open. Please go ahead.
Operator: We now turn to Jared Shaw with Barclays. Your line is open. Please go ahead.
Speaker #1: Shaw with Barclays. Your line is open. Please go
Speaker #1: ahead. Hey, good
[Analyst] (Barclays): Hey, good morning.
Jared Shaw: Hey, good morning.
Speaker #6: morning. Good
Jorge García: Good morning.
Jorge García: Good morning.
Speaker #6: Maybe, I guess, just sticking to the morning theme of growth outlook—when you look at fees, where do you see potential softness, I guess, in fees in that growth rate?
[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.
Jared Shaw: 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.
Speaker #6: You've had some pretty good trends during the course of the year.
Speaker #5: Yeah. Remember, Jared, one of the things that the '25 results included roughly 10 million of kind of unusual items, the recovery for prior periods of about 10 and then we also had some refunds of federal taxes that were recognized in fee income.
Jorge García: Yeah. Remember, Jared, one of the things that the 2025 results included roughly $10 million of kind of unusual items, the recovery for prior periods, about $10 million. 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 jumps out at you.
Jorge García: Yeah. Remember, Jared, one of the things that the 2025 results included roughly $10 million of kind of unusual items, the recovery for prior periods, about $10 million. 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 jumps out at you.
Speaker #5: 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 jumps out at you.
Speaker #6: Okay, and then on capital, nice to see the buyback and the commentary around sort of the willingness to bring capital ratios down. How should we think about M&A with that backdrop?
[Analyst] (Barclays): Okay. And then on capital, nice to see the buyback and the commentary around sort of the willingness to bring capital ratios down. How should we think about M&A with that backdrop? And you certainly have the capital and the growth to do something, I guess, in terms of potential sizes or anything like that. Any thoughts you could share with us?
Jared Shaw: Okay. And then on capital, nice to see the buyback and the commentary around sort of the willingness to bring capital ratios down. How should we think about M&A with that backdrop? And you certainly have the capital and the growth to do something, I guess, in terms of potential sizes or anything like that. Any thoughts you could share with us?
Speaker #6: And you certainly have the capital and the growth to do something, I guess, in terms of potential sizes or anything like that. Any thoughts you could share with us?
Speaker #4: 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.
Jorge García: 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.
Javier Ferrer: 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.
Speaker #4: 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.
Speaker #4: 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 US business.
Speaker #4: 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 effort related to an M&A.
Jorge García: We have a little bit over 800 employees who are currently focused on these efforts that we would need to reallocate to whatever effort related to an M&A, due diligence, integration, conversion. Number two, core deposits. Any transaction, we need to strengthen our deposit franchise and lower-cost deposits with lower-cost deposits. Number three, 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. Four, 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 U.S. business. I have a preference not for.
We have a little bit over 800 employees who are currently focused on these efforts that we would need to reallocate to whatever effort related to an M&A, due diligence, integration, conversion. Number two, core deposits. Any transaction, we need to strengthen our deposit franchise and lower-cost deposits with lower-cost deposits. Number three, 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. Four, 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 U.S. business. I have a preference not for. MOEs.
Speaker #4: Due diligence, integration, conversion, number two, core deposits. Any transaction, we need to strengthen our deposit franchise and lower-cost deposits. With lower-cost deposits.
Speaker #4: Number three, 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.
Speaker #4: And also provide some CRE diversification. Four, 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.
Speaker #4: And I think also it needs to have the in terms of scale, it needs to be right size for our US business. I have a preference for not for MOEs.
[Analyst] (Hovde Group): MOEs.
Jorge García: M&As. 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 very specifically, that's how we think today about M&A.
M&As. 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 very specifically, that's how we think today about M&A.
Speaker #4: 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 its last, but it's really top of mind.
Speaker #4: 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.
Speaker #4: So I think very specifically that's how we think today about M&A.
Speaker #6: Okay, thanks. That's great—great insight. Just maybe, finally for me, do you have the spot deposit costs and asset yields at the end of the year?
[Analyst] (Barclays): Okay. Thanks. That's great. Great insight. Just maybe finally for me, do you just have the spot deposit costs and asset yields at the end of the year?
Jared Shaw: Okay. Thanks. That's great. Great insight. Just maybe finally for me, do you just have the spot deposit costs and asset yields at the end of the year?
Speaker #4: We don't usually provide the spot
Jorge García: We don't usually provide the spot rates, Jared.
Jorge García: We don't usually provide the spot rates, Jared.
[Analyst] (Barclays): Okay. All right. Thanks.
Jared Shaw: Okay. All right. Thanks.
Speaker #6: All right. rates
Speaker #1: We now turn to Ben Gerlinger with CITI. Your line is open. Please go ahead.
Jorge García: We now turn to Ben Gerlinger with Citi. Your line is open. Please go ahead.
Operator: We now turn to Ben Gerlinger with Citi. Your line is open. Please go ahead.
Speaker #5: Hi, good morning. I was wondering if we could spend some time on expenses. Good morning. So, on the expense guide, I know you guys always give a GAAP basis.
[Analyst] (Citi): Hi. Good morning. I was wondering if we could.
Ben Gerlinger: Hi. Good morning. I was wondering if we could.
Jorge García: Good morning, Ben.
Jorge García: Good morning, Ben.
[Analyst] (Citi): Expense versus expenses. Good morning. So on the expense guide, I know you guys obviously have a GAAP basis. So that's inclusive of investment and things like that. I know that last year you were also investing, and this year, I'm assuming 2027 you are as well or are going to because at your size, investment is almost like a core. So I was just kind of curious, is this year on an investment basis kind of smaller or larger, or anything you could frame 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?
Ben Gerlinger: Expense versus expenses. Good morning. So on the expense guide, I know you guys obviously have a GAAP basis. So that's inclusive of investment and things like that. I know that last year you were also investing, and this year, I'm assuming 2027 you are as well or are going to because at your size, investment is almost like a core. So I was just kind of curious, is this year on an investment basis kind of smaller or larger, or anything you could frame 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?
Speaker #5: So that's inclusive of investment and things like that. I know that last year you were also investing, and this year I'm assuming 27 you are as well.
Speaker #5: They're going to, because your size investment is almost like a core. So I was just kind of curious, is this year on an investment basis kind of smaller or larger?
Speaker #5: Anything you could frame 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?
Speaker #5: Is there anything you could frame 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: I think the run rate that we're going is not changing much. It gets to a point, Ben, 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, for example, Javier talked about that we went live on a new ERP on 1 January 2025. That releases some resources, but then a lot of those resources get reallocated to the next big project and the next thing going on. So I think we all feel fairly comfortable with the level and focus of the teams. We can always certainly do more, but there is a reality that you can only have so much resource and management focus on these implementations.
Jorge García: I think the run rate that we're going is not changing much. It gets to a point, Ben, 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, for example, Javier talked about that we went live on a new ERP on 1 January 2025. That releases some resources, but then a lot of those resources get reallocated to the next big project and the next thing going on. So I think we all feel fairly comfortable with the level and focus of the teams. We can always certainly do more, but there is a reality that you can only have so much resource and management focus on these implementations.
Speaker #4: I think the run rate that we're going at 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.
Speaker #4: I think it's certainly in '25 we were running at that capacity level. As things roll off and we go live—for example, have you ever talked about that we went live on a new ERP on January 1st?
Speaker #4: That releases some resources, but then a lot of those resources get reallocated to the next big project or the next thing going on. So I think we all feel fairly comfortable with the level and focus of the teams.
Speaker #4: We can always certainly do more, but there is a reality that you can only have so much resource and management focus on these.
Speaker #4: implementations. Gotcha.
[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 just the average earning asset mix, where it is today, 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, 3, 4, 5 years from now, given that you also have the public deposits.
Ben Gerlinger: 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 just the average earning asset mix, where it is today, 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, 3, 4, 5 years from now, given that you also have the public deposits.
Speaker #5: That's helpful. I know we've talked about the pace of loan growth and then also the reinvestment of the securities higher. I'm just kind of looking at the average earning asset mix.
Speaker #5: Where does 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?
Speaker #5: Could you potentially see more loans down the road or just kind of curious on just how you think about average earning asset mix down two or three, four, five years from now given that you also have the public
Speaker #5: deposits? Yeah.
Speaker #3: 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 we can have a deeper profit base with a lending relationship than we can just buying portfolio assets.
Jorge García: 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 we can have a deeper profit base with a lending relationship than we can just buying 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 lower loan to deposit or, sorry, 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.
Jorge García: 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 we can have a deeper profit base with a lending relationship than we can just buying 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 lower loan to deposit or, sorry, 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.
Speaker #3: But there is a reality that we have around 30% of our deposits in Puerto Rico that are required to be collateralized, and that will keep us in the portfolio business of buying investment securities.
Speaker #3: So if we go forward, we would like to see a lower loan-to-sorry, higher loan-to-deposit ratio but it will depend on the composition of our balance sheet.
Speaker #3: 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 legacy pre-2023 investments, we still have a good upside for pickup of yield in that investment portfolio at current rates.
Jorge García: Even as we go forward and we start combining maturities between our recent purchases and more 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.
Even as we go forward and we start combining maturities between our recent purchases and more 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.
Speaker #3: 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.
Speaker #3: forward. Gotcha.
[Analyst] (Citi): Gotcha. Okay. Thank you.
Ben Gerlinger: Gotcha. Okay. Thank you.
Speaker #5: Okay. Thank you.
Jorge García: We now turn to Kelly Motta with KBW. Your line is open. Please go ahead.
Operator: We now turn to Kelly Motta with KBW. Your line is open. Please go ahead.
Speaker #1: KBW. Your line is open. Please go We now turn to Kelly Motta with
Speaker #1: ahead. Hey, good morning.
[Analyst] (KBW): Hey, good morning. Thanks for the question. Maybe going back to capital, I want 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 it; it seems like maybe then leverage would be your guiding ratio, how you're thinking about that as we move ahead, given the importance of capital return to the profitability improvement story. Thank you.
Kelly Motta: Hey, good morning. Thanks for the question. [crosstalk] Maybe going back to capital, I want 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 it; it seems like maybe then leverage would be your guiding ratio, how you're thinking about that as we move ahead, given the importance of capital return to the profitability improvement story. Thank you.
Speaker #7: Thanks for the question. Maybe more exact 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 one being lower than peers, wondering if from a high level you can discuss 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.
Speaker #7: Thank
Speaker #7: you. Sure.
Jorge García: Sure. Thank you, Kelly. So we often talk with you all about CET1 and a lot of focus on CET1. We've talked about our goal of getting that lower plus a buffer. One of the things that we don't very often talk about is that we have somewhat an inefficient capital stack and that we really have very little additional tier one, right? We have around five basis points. When we look at peers, they have anywhere between 50 and 100 basis points of additional tier one. So we look at this as another lever that's an opportunity that we're evaluating and looking at.
Jorge García: Sure. Thank you, Kelly. So we often talk with you all about CET1 and a lot of focus on CET1. We've talked about our goal of getting that lower plus a buffer. One of the things that we don't very often talk about is that we have somewhat an inefficient capital stack and that we really have very little additional tier one, right? We have around five basis points. When we look at peers, they have anywhere between 50 and 100 basis points of additional tier one. So we look at this as another lever that's an opportunity that we're evaluating and looking at.
Speaker #4: Thank you, Kelly. So we often talk with you all about CP1 and a lot of focus. On CP1, and we've talked about our goal of getting that lower plus a buffer.
Speaker #4: One of the things that we don't very often talk about is that we have somewhat of an inefficient capital stack and that we really have very little additional tier one, right?
Speaker #4: We have around five basis points. And when we look at peers, they have anywhere between 50 and 100 basis points of additional tier one.
Speaker #4: 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 something that's accretive without necessarily impacting the total Tier 1 or total regulatory capital, and being able to balance lowering CP1 with management and the board's intent to be more deliberate in reducing that capital over a prolonged period of time.
Jorge García: Perhaps there's an opportunity 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 deliberate in reducing that capital over a prolonged period of time.
Perhaps there's an opportunity 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 deliberate in reducing that capital over a prolonged period of time.
Speaker #7: Okay. All right. Fair enough. And maybe—I think we've hit on this a bit—but turning to loans and yields, I was surprised your loan yields have held in really nicely even with the rate cuts.
[Analyst] (KBW): Okay. All right. Fair enough. And maybe I think we've hit on this a bit, but turning to loans and yields, I was surprised your loan yields have held in really nicely even with the rate cuts. Can you remind us how much of your book floats? And I don't believe you usually provide it, but I'll try. Any new production rates would be really helpful here. Thank you.
Kelly Motta: Okay. All right. Fair enough. And maybe I think we've hit on this a bit, but turning to loans and yields, I was surprised your loan yields have held in really nicely even with the rate cuts. Can you remind us how much of your book floats? And I don't believe you usually provide it, but I'll try. Any new production rates would be really helpful here. Thank you.
Speaker #7: Can you remind us how much of your book floats, and—I don't believe you usually provide it, but I'll try—any new production rates would be really helpful here.
Speaker #7: Thank you.
Speaker #4: Yeah, so a couple of things on loan yields. We're still seeing loan growth in Puerto Rico on the consumer side to be flat or above.
Jorge García: Yeah. So, a couple of things on loan yields. We're still seeing loan growth in Puerto Rico on the consumer side to be flat or above, 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 we talked about in the past that we just have the low beta on the way up. 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 think last quarter we talked about, well, I don't know how long that's going to continue. As I said in talking about loan growth, we do see a softening in consumer demand, particularly around auto.
Jorge García: Yeah. So, a couple of things on loan yields. We're still seeing loan growth in Puerto Rico on the consumer side to be flat or above, 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 we talked about in the past that we just have the low beta on the way up. 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 think last quarter we talked about, well, I don't know how long that's going to continue. As I said in talking about loan growth, we do see a softening in consumer demand, particularly around auto.
Speaker #4: 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.
Speaker #4: And we talked about in the past that we just have the low beta on the way up. We didn't pass through all the increases in the loan pricing.
Speaker #4: And we're seeing kind of the benefits, a little bit of the opposite behavior that we see in our deposit base and in Puerto Rico.
Speaker #4: I don't I think last quarter we talked about where I don't know how long that's going to continue. As I said in talking about loan growth, we do see a softening in consumer demand, particularly around auto.
Speaker #4: 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 that are variable or floating.
Jorge García: 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 are around 40% of commercial loans are floating. And then remember, we do have the credit card. We have the construction portfolio that float. And in terms of new yields, we don't provide that. Yeah.
Jorge García: 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 are around 40% of commercial loans are floating. And then remember, we do have the credit card. We have the construction portfolio that float. And in terms of new yields, we don't provide that. Yeah.
Speaker #4: 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.
Speaker #4: We have the construction portfolio. That float. And in terms of new yields, we don't provide that. Yeah.
Speaker #7: Okay. Fair enough. Last one, if I can flip it in. I apologize. This was addressed already. But with the charge-off, 55 to 75 basis points is certainly lower than historically what we've seen in Puerto Rico, but a step up from 2025.
[Analyst] (KBW): Okay. Fair enough. Last one, if I can slip it in. I apologize. This was addressed already. But with the charge-off, 55 to 75 basis points is certainly lower than 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 to 75 basis point range? Any movement between now and what gets you to that higher range in 2026? Thank you.
Kelly Motta: Okay. Fair enough. Last one, if I can slip it in. I apologize. This was addressed already. But with the charge-off, 55 to 75 basis points is certainly lower than 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 to 75 basis point range? Any movement between now and what gets you to that higher range in 2026? Thank you.
Speaker #7: 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 to 75 basis point range?
Speaker #7: Any movement between now and then that gets you to that higher range in '26? Thank you.
Speaker #7: you. Yep.
[Analyst] (Citi): Yep. Small correction, Kelly. I mean, we provided for 55 to 70 basis points. So the high end was a little bit lower than 55 to 70 basis points. Yeah. I mean, generally, before going into the details, I mean, we have a very stable outlook. We think the Puerto Rico economy continues 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 behave as they have in 2025. 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.
Ben Gerlinger: Yep. Small correction, Kelly. I mean, we provided for 55 to 70 basis points. So the high end was a little bit lower than 55 to 70 basis points. Yeah. I mean, generally, before going into the details, I mean, we have a very stable outlook. We think the Puerto Rico economy continues 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 behave as they have in 2025. 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.
Speaker #4: for 55 Small correction, Kelly. to 70 basis points, I mean, we provide it so the high end was a little bit lower than 25, 70 basis points.
Speaker #4: Yeah. I mean, generally, before going into the details, we see we have a very stable outlook. We think the Puerto Rico economy continues to be stable with moderate growth, and that's the outlook that we have for next year.
Speaker #4: Under that context, we believe that generally our consumer portfolio will continue to behave as they have in 2025. We do our accounting for potentially some charge-off of some of larger commercial relationships that we have reserved for.
Speaker #4: So that is embedded in the range that we have provided to you. So that explains a little bit our rationale.
Speaker #7: Thank you so much. I'll step
[Analyst] (KBW): Thank you so much. I'll step back.
Kelly Motta: Thank you so much. I'll step back.
Speaker #7: Back. We now turn to Aaron.
Jorge García: We now turn to Arren Cyganovich with Truist. Your line is open. Please go ahead.
Jorge García: We now turn to Arren Cyganovich with Truist. Your line is open. Please go ahead.
Speaker #1: Strykonovich with Truist, your line is open. Please go ahead.
Speaker #4: 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...
Jorge García: 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?
Jorge García: 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?
Speaker #4: year. Well, I
Speaker #5: think clearly there is competition in the market. You can see from our numbers that we've grown deposit balances. And we expect to do the same this year.
Jorge García: Well, I think clearly there is competition in the market. 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. But we are not seeing any irrationality in the pricing on this cycle. So I would say that it's pretty steady, and we will not, however, as we said before, we won't lose good clients to pricing, deposit pricing. So again, we're going to defend our position and particularly good relationships in all segments, but hopefully not do anything that's crazy.
Jorge García: Well, I think clearly there is competition in the market. 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. But we are not seeing any irrationality in the pricing on this cycle. So I would say that it's pretty steady, and we will not, however, as we said before, we won't lose good clients to pricing, deposit pricing. So again, we're going to defend our position and particularly good relationships in all segments, but hopefully not do anything that's crazy.
Speaker #5: But there are a few banks in the market and also credit unions, but we are not seeing any irrationality in the pricing. So on these cycles.
Speaker #5: So I would say that it's pretty steady and we will not, however, we said this before, we won't lose a good client to pricing on deposit pricing.
Speaker #5: So again, we're going to be we're going to defend our position and particularly good relationships in all segments. But hopefully not do anything that's
Speaker #5: crazy. Okay.
Jorge García: Okay. That's helpful. And then, maybe just kind of thinking broader picture, the US has really stepped up military in the Caribbean, and wondering if you're seeing any increasing presence and whether or not that's a positive from an economic standpoint to Puerto Rico.
Jorge García: Okay. That's helpful. And then, maybe just kind of thinking broader picture, the US has really stepped up military in the Caribbean, and wondering if you're seeing any increasing presence and whether or not that's a positive from an economic standpoint to Puerto Rico.
Speaker #4: That's helpful. And then maybe just kind of thinking broader picture, the US is really stepped up military in the Caribbean. And wondering if you're seeing any increasing presence and whether or not that's a positive from an economic standpoint to Puerto Rico.
Speaker #5: 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 going to say it's in geographies adjacent to military bases or installations.
Jorge García: 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 going to say it's in geographies adjacent to military bases or installations. We've seen customers that are benefiting from relationships with the military throughout Puerto Rico. We're seeing there are reports of the military entering into lease agreements for, you may imagine, ports and airports. Again, no customers, clients of ours, 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 because it's dependent on, as you know, geopolitical forces and decisions out of the White House.
Jorge García: 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 going to say it's in geographies adjacent to military bases or installations. We've seen customers that are benefiting from relationships with the military throughout Puerto Rico. We're seeing there are reports of the military entering into lease agreements for, you may imagine, ports and airports. Again, no customers, clients of ours, 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 because it's dependent on, as you know, geopolitical forces and decisions out of the White House.
Speaker #5: 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, ports and airports. And again, we know of customers, clients of ours—smaller or middle-market clients—that have entered into contracts with the military.
Speaker #5: So, that's why we believe it's net positive. Obviously, we're monitoring it. If its military presence were to grow, that can only increase. So that's why I started by saying that it's a net positive.
Speaker #5: We'll see, because it's dependent on, as you know, geopolitical forces and decisions out of the White House.
Speaker #5: House. Thank
Speaker #4: you.
Jorge García: Thank you.
Jorge García: Thank you.
Speaker #5: Sure.
Jorge García: Sure.
Jorge García: Sure.
Speaker #1: That's another
Jorge García: As another reminder, if you'd like to ask a question, please press star followed by one on the telephone keypad. We now turn to Gerard Cassidy with RBC. Your line is open. Please go ahead.
Jorge García: As another reminder, if you'd like to ask a question, please press star followed by one on the telephone keypad. We now turn to Gerard Cassidy with RBC. Your line is open. Please go ahead.
Speaker #1: reminder. If you'd like to ask a question, please press star, followed by one on your telephone keypad. We now turn to Jared Cassidy with RBC.
Speaker #1: Your line is open. Please go ahead.
Speaker #6: Good morning, Jorge. Good morning,
[Analyst] (Citi): Good morning, Jorge. Good morning, Javier.
Ben Gerlinger: Good morning, Jorge. Good morning, Javier.
Speaker #6: Javier.
Speaker #6: Javier.
Speaker #7: Good morning,
Jorge García: Good morning, Jorge García.
Jorge García: Good morning, Jorge García.
Speaker #7: Jorge. Good
[Analyst] (Citi): Good morning. Good morning.
Ben Gerlinger: Good morning. Good morning.
Speaker #7: At the risk of morning. being called a curmudgeon again, as I was on a call with one of your peers, I have to ask the question.
Jorge García: 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?
Jorge García: 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?
Speaker #7: 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.
Speaker #7: We have a steeper positive slope yield curve. Maybe it gets even more positively sloped. We've got loan growth, as you pointed out, as well.
Speaker #7: 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—
Speaker #7: expecting? Well,
Jorge García: 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 important as 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 on 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.
Jorge García: 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 important as 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 on 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.
Speaker #5: 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 important as Puerto Rico, is affordability, right?
Speaker #5: 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.
Speaker #5: 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 purpose situation, the fact that the electric power authority bankruptcy is still pending.
Speaker #5: 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 a very good level.
Speaker #5: So we're benefiting from that. But I think those would be the two items that are kind of lurking and make bite us. But we're hoping that this is a year where the PREPA bankruptcy gets dealt with.
Jorge García: So we're benefiting from that. But I think those would be the two items that are kind of lurking and may bite us. But we're hoping that this is a year where the PREPA bankruptcy gets dealt with. And clearly, everybody recognizes that developing the grid and fixing this is critical for Puerto Rico's future. So we think that clear heads will prevail and we'll get to a resolution that's rational for all the parties involved.
Jorge García: So we're benefiting from that. But I think those would be the two items that are kind of lurking and may bite us. But we're hoping that this is a year where the PREPA bankruptcy gets dealt with. And clearly, everybody recognizes that developing the grid and fixing this is critical for Puerto Rico's future. So we think that clear heads will prevail and we'll get to a resolution that's rational for all the parties involved.
Speaker #5: And clearly, everybody recognizes that developing the grid and fixing this is critical for Puerto Rico's future. So, we think that clear heads will prevail and we'll get to a resolution that's rational for all the parties involved.
Speaker #4: 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?
Jorge García: 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 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 of 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?
Jorge García: 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 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 of 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?
Speaker #4: The onshoring of American and the building of manufacturing plants is taking place on the mainland. I believe Puerto Rico is seeing some of those benefits as well.
Speaker #4: Can you give us some color of what you're seeing on the ground? Is there progress being made there? And what might that future look like for the economy of Puerto Rico?
Speaker #5: Yeah. Well, we can comment on what's public and maybe provide or offer some thoughts on maybe stuff that we're listening to through the grapevine.
Jorge García: Yeah. Well, we can comment on what's public and maybe offer some thoughts on maybe stuff that we're listening through the grapevine. But 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.
Jorge García: Yeah. Well, we can comment on what's public and maybe offer some thoughts on maybe stuff that we're listening through the grapevine. But 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.
Speaker #5: But we'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.
Speaker #5: Of all sizes. And that's representing about $2.2 billion in total capital investment. And the creation of more than 2,500—well, actually, I thought it was 4,600—jobs.
Jorge García: 2500?
Jorge García: 2500?
Jorge García: Yeah, yeah. 2,500. Well, actually, I thought it was 4,600 jobs. 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 to 1,200 new jobs. And Amgen's $650 million investment to expand its biopharma operations in Juncos. And that's another 750. Now, that said, we expect, and this is grapevine now, that's what happened last year. And it's close to 17 entities that announced new investments in Puerto Rico through the onshoring or reshoring. But grapevine tells us that we ought to expect more announcements in 2026, and a few will be large. But that's just grapevine. So we think that that trend will continue. And of course, that will fuel our economy.
Jorge García: Yeah, yeah. 2,500. Well, actually, I thought it was 4,600 jobs. 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 to 1,200 new jobs. And Amgen's $650 million investment to expand its biopharma operations in Juncos. And that's another 750. Now, that said, we expect, and this is grapevine now, that's what happened last year. And it's close to 17 entities that announced new investments in Puerto Rico through the onshoring or reshoring. But grapevine tells us that we ought to expect more announcements in 2026, and a few will be large. But that's just grapevine. So we think that that trend will continue. And of course, that will fuel our economy.
Speaker #5: So I think we called it the whale. I mean, there's, again, all sizes. But the whale we call the LA 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.
Speaker #5: And Amgen's $650 million investment to expand its biopharm operations in Juncos. And that's another $750 million. Now, that said, we expect—and this is a grapevine now.
Speaker #5: That's what happened last year. And it's close to 17 entities that announced new investments in Puerto Rico, through the onshoring and reshoring. But grapevine tells us that we ought to expect more announcements in 2026.
Speaker #5: And a few will be large. So but that's just grapevine. So we think that that trend will continue. And of course, that will fuel our economy.
Speaker #5: It's not only the direct jobs that—as you know—this has a multiplier effect. And any such investment will generate three times what it typically generates in direct investment.
Jorge García: It's not only the direct jobs, but as you know, this has a multiplier effect. And any such investment will generate 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: It's not only the direct jobs, but as you know, this has a multiplier effect. And any such investment will generate 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.
Speaker #5: So looking forward to more announcements from the government in 2026. And of course, once that happens, you'll know right
Speaker #5: away. Very
Speaker #4: Good. And now, will there be any benefits from the halftime show at the Super Bowl?
Jorge García: Very good. And now, will there be any benefits from the halftime show at the Super Bowl?
Jorge García: Very good. And now, will there be any benefits from the halftime show at the Super Bowl?
Speaker #4: Bowl? We'll
Speaker #5: see. We'll see. We'll see.
Jorge García: We'll see. We'll see. We'll see.
Jorge García: We'll see. We'll see. We'll see.
Speaker #4: More record
Jorge García: More record sales.
Jorge García: More record sales.
Speaker #4: sales. When we next talk about it. Thank you.
Jorge García: Well, we'll talk about that.
Jorge García: Well, we'll talk about that.
Jorge García: Thank you.
Jorge García: Thank you.
Speaker #5: It's interesting. I don't know if you've seen the ads. The ads are fantastic. Yeah, the—
Speaker #5: It's interesting. I don't know if you've seen the ads. The ads are fantastic. Yeah, the ads are fantastic. But we'll Good. see.
Jorge García: It's interesting. I don't know if you've seen the ads. The ads are fantastic. Yeah, the ads are fantastic.
Jorge García: It's interesting. I don't know if you've seen the ads. The ads are fantastic. Yeah, the ads are fantastic.
Jorge García: Good.
Jorge García: Good.
Jorge García: But we'll see.
Jorge García: But we'll see.
Speaker #4: Oh, that's good for Puerto Rico. Okay. Thank you.
Jorge García: That's good for Puerto Rico. Okay. Thank you.
Jorge García: That's good for Puerto Rico. Okay. Thank you.
Speaker #5: Yep. Absolutely. Thank you, Gerard.
Jorge García: Yep. Absolutely. Thank you, Jared.
Jorge García: Yep. Absolutely. Thank you, Jared.
Speaker #1: We now turn to Manuel Navas with Puerto Santo. Your line is open. Please go ahead.
Jorge García: We now turn to Manuel Navas with Piper Sandler. Your line is open. Please go ahead.
Jorge García: We now turn to Manuel Navas with Piper Sandler. Your line is open. Please go ahead.
Speaker #6: 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?
[Analyst] (Piper Sandler): 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.
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.
Speaker #6: 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.
Speaker #7: 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.
Jorge García: First, Manuela, 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, we tend to do these on 10b5-1 plans. So certainly, changes in market prices that could impact the grids that we use. So that's certainly something that is unexpected. It could be an accelerator or decelerator from the target number. But also, all the global political, macroeconomic environment, these are all things that impact our perception 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 is very attractive.
Jorge García: First, Manuela, 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, we tend to do these on 10b5-1 plans. So certainly, changes in market prices that could impact the grids that we use. So that's certainly something that is unexpected. It could be an accelerator or decelerator from the target number. But also, all the global political, macroeconomic environment, these are all things that impact our perception 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 is very attractive.
Speaker #7: So I appreciate it. In terms of market conditions, I mean, we tend to do these on 10B51 plans. So certainly, changes in market prices that could impact the grids that we use.
Speaker #7: So that's certainly something that is something unexpected could be an accelerator or decelerator from the target number. But also, global political, macroeconomic, environment, these are all things that impact our perception of what's happening and how quickly we want to execute on the repurchases.
Speaker #7: But I will reiterate what Javier said. We believe that our current share price is very attractive.
Speaker #8: And the current share number in this quarter was nice. And you like that pace, correct?
[Analyst] (Piper Sandler): The current share number in this quarter was nice. You like that pace, correct?
The current share number in this quarter was nice. You like that pace, correct?
Speaker #7: We like the total volume total dollar that we spent to be a good
Jorge García: We like the total volume, the total dollar that we spent to be a good baseline.
Jorge García: We like the total volume, the total dollar that we spent to be a good baseline.
Speaker #8: Perfect. I appreciate that. Thank you, guys.
[Analyst] (Piper Sandler): Perfect. I appreciate that. Thank you, guys.
Perfect. I appreciate that. Thank you, guys.
Speaker #1: We now turn to Team Brasilo with Wells Fargo. Your line is open. Please go ahead.
Jorge García: We now turn to Timur Braziler with Wells Fargo. Your line is open. Please go ahead.
Jorge García: We now turn to Timur Braziler with Wells Fargo. Your line is open. Please go ahead.
Speaker #9: Hi, good
[Analyst] (Wells Fargo): Hi, good morning.
Hi, good morning.
Speaker #9: morning.
Speaker #7: Hey,
Jorge García: Hey, Timur.
Jorge García: Hey, Timur.
Speaker #9: I'm trying to put a Team. finer point on auto expectations can you just give us a little bit of color here as to what current demand looks like?
[Analyst] (Piper Sandler): I'm 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?
I'm 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?
Speaker #9: 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?
Speaker #9: 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?
Speaker #5: I'll give you a little bit this is Timur. This is Lidio. 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 historically, prior 2026.
Lidio Soriano: I'll give you a little bit, this is Timur, this is Leo. 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, which was the record year for the industry. This year, we are ending up the year around 111,000, which is 9% down from the previous year. The expectation for the industry is to be slightly down 5% from the numbers that we have.
Lidio Soriano: I'll give you a little bit, this is Timur, this is Leo. 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, which was the record year for the industry. This year, we are ending up the year around 111,000, which is 9% down from the previous year. The expectation for the industry is to be slightly down 5% from the numbers that we have.
Speaker #5: I mean, if you look new auto sales in Puerto Rico, when you had a year above 100,000, that was a great year for the industry.
Speaker #5: Over the 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.
Speaker #5: And the expectation for the industry is 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
Speaker #5: And the expectation for the industry is 5% from the numbers that we have. But I will say still, I mean, a year that is above 110,000 or close to 110,000—that is a great year for the industry in Puerto Rico.
Lidio Soriano: 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.
Lidio Soriano: 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.
Speaker #9: 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 phases.
[Analyst] (Piper Sandler): 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, are those costs similar as well, or is one of those phases implicitly more expensive maybe than some of these other?
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, are those costs similar as well, or is one of those phases implicitly more expensive maybe than some of these other?
Speaker #9: into three different 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.
Speaker #9: I'm guessing between or I'm questioning, I guess, between phase one and phase two, the cost kind of associated with those. Are they similar? And your comment that you had to delay some technology expenditures in '25 that are running in '26, are those costs similar as well?
Speaker #9: Or is one of those phases implicitly more expensive maybe than some of these
Speaker #9: other? Look, I think
Jorge García: 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, whether it is other banks, fintechs, other competitors that are competing. Everybody's competing for a user experience that's very unique and omnichannel, etc. We can come up with all the different buzzwords. 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. 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.
Jorge García: 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, whether it is other banks, fintechs, other competitors that are competing. Everybody's competing for a user experience that's very unique and omnichannel, etc. We can come up with all the different buzzwords. 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. 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.
Speaker #7: the one thing that I would encourage us to think differently is there's no really phase-driven I mean, this is an arms race. Every day, whether it is other banks, fintechs, other competitors that are competing, everybody's competing for a user experience that's very unique and omnichannel, etc.
Speaker #7: We can come up with all the different buzzwords. We're happy with the level of investment that we're at. We know that there's more to do.
Speaker #7: And we're going to wake up tomorrow and have another new challenge that we'll have to evaluate and put in the queue for something else.
Speaker #7: 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.
Speaker #7: 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?
Jorge García: 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.
Jorge García: 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.
Speaker #7: But Timur, there's a lot of things here that just become table stakes. That we've got to do or risk
Speaker #7: falling behind. Yeah.
Jorge García: Yeah. And I include 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 is not going to let down. As you know, everything's going quicker, faster. So we have a great position in Puerto Rico. We need to defend it, but also grow it. And that's exactly what we're trying to do every day, so.
Jorge García: Yeah. And I include 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 is not going to let down. As you know, everything's going quicker, faster. So we have a great position in Puerto Rico. We need to defend it, but also grow it. And that's exactly what we're trying to do every day, so.
Speaker #9: And I include that. I don't see it as phases. I see it as a strategic framework which would have us to our point do our job, our jobs every day better, faster, and quicker.
Speaker #9: To tackle competition, which is not going to let down. As you know, everything's going quicker, faster. So we have a great position in Puerto Rico.
Speaker #9: We need to defend it. But also grow it. And that's exactly what we're trying to do every day. So got it. Thank
[Analyst] (Piper Sandler): Got it. Thank you.
Got it. Thank you.
Speaker #9: you.
Jorge García: We now turn to Brandon Berman with Bank of America. Your line is open. Please go ahead.
Jorge García: We now turn to Brandon Berman with Bank of America. Your line is open. Please go ahead.
Speaker #1: Brandon Bowman with Bank of America. Your line is open. Please go
Speaker #1: ahead. Thank
Speaker #8: you. Good morning, everyone. Very nice quarter. I just wanted to build off of the last question on expenses. If we pull out the profit-sharing incurred last year, it implies a little bit faster of a growth rate.
[Analyst] (Piper Sandler): Thank you. Good morning, everyone. Very nice quarter. I just wanted to build off of the last question on expenses. If we pull out the profit sharing incurred last year, it implies a little bit faster of a growth rate. And I was just hoping you'd be able to dissect the drivers of that. Is it the planned investments that were delayed that's causing the 100 basis point difference in the growth rate, or is it something else? Any breakdown would be helpful. Thank you.
Thank you. Good morning, everyone. Very nice quarter. I just wanted to build off of the last question on expenses. If we pull out the profit sharing incurred last year, it implies a little bit faster of a growth rate. And I was just hoping you'd be able to dissect the drivers of that. Is it the planned investments that were delayed that's causing the 100 basis point difference in the growth rate, or is it something else? Any breakdown would be helpful. Thank you.
Speaker #8: And I was just hoping you'd be able to dissect the drivers of that. Is it the planned investments that were delayed that's causing the 100 basis point difference in the growth rate?
Speaker #8: Or is it something else? Any breakdown would be helpful. Thank you.
Speaker #7: Yeah, thanks, Brandon. Thanks for the question. First, I think if you look at where we ended up in 2025 versus our original guide, and even our guidance in the third-quarter call, we did, I think, outpace or overperform in 2025.
Jorge García: Yeah. Thanks, Brandon. Thanks for the question. First, I think if you look at where we ended up 2025 versus our original guide, and even our guidance in the Q3 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 2025 that we won't see repeat in 2026, or we'll see a lower level in 2026 versus 2025.
Jorge García: Yeah. Thanks, Brandon. Thanks for the question. First, I think if you look at where we ended up 2025 versus our original guide, and even our guidance in the Q3 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 2025 that we won't see repeat in 2026, or we'll see a lower level in 2026 versus 2025.
Speaker #7: The teams have done a really good job to be focused on efficiency. We've implemented a lot of opportunities that are sustainable and will continue to generate savings.
Speaker #7: But we also had some wins that resulted in maybe a benefit that we see in '25 that we won't see repeat in '26. Or we'll see a lower level in '26 versus '25.
Jorge García: Then when you add that to the continued investments in technology, 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 the cost of licensing on the old platform and the cost of development and the new platform, etc. That tends to have some peaks and valleys, and that's part of kind of the noise that you're seeing and comparing the run rate. We will continue to invest in technology and continue to invest in our people and making sure that we're attracting talent. Those are the two biggest drivers when we look at year-over-year and our expectation of expense growth.
Jorge García: Then when you add that to the continued investments in technology, 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 the cost of licensing on the old platform and the cost of development and the new platform, etc. That tends to have some peaks and valleys, and that's part of kind of the noise that you're seeing and comparing the run rate. We will continue to invest in technology and continue to invest in our people and making sure that we're attracting talent. Those are the two biggest drivers when we look at year-over-year and our expectation of expense growth.
Speaker #7: Due to the continuous investments in technology, I think—and then, when you add that we've talked in the past about how, as projects go near live, you start doubling up on expenses as you're supporting two platforms and kind of incurring the cost of licensing on the old platform and the cost of development in the new platform, etc.
Speaker #7: That tends to have some peaks and valleys. And that's part of kind of the noise that you're seeing and comparing the run rate. But we will continue to invest in technology and continue to invest in our people and making sure that we are tracking talent and those are the two biggest drivers when we look at year over year and our expectation of expense
Speaker #7: growth. Thank you very much.
[Analyst] (Piper Sandler): Thank you very much. Have a great day.
Thank you very much. Have a great day.
Speaker #9: I've heard that.
Speaker #9: I've heard that.
Jorge García: Thanks.
Jorge García: Thanks.
Speaker #1: We have a follow-up Thanks. from Kalimoto with KBW. Your line is open. Please go ahead.
Jorge García: We have a follow-up from Kelly Motta with KBW. Your line is open. Please go ahead.
Jorge García: We have a follow-up from Kelly Motta with KBW. Your line is open. Please go ahead.
Speaker #10: Hey, thanks for letting me circle back. I apologize—I forgot there are 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 deposits—you had some declines in brokerage.
Javier Ferrer: 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 deposits, you had some declines in brokers. You gave the range for government. Embedded in your NII guide, do you have any thoughts around, 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 core deposits in Puerto Rico here? Thank you.
Kelly Motta: 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 deposits, you had some declines in brokers. You gave the range for government. Embedded in your NII guide, do you have any thoughts around, 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 core deposits in Puerto Rico here? Thank you.
Speaker #10: You gave the range for government. Embedded in your NII guide, do you have any 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 core deposits in Puerto Rico here?
Speaker #10: Thank
Speaker #10: you. Of course,
Jorge García: Of course, our objective is not only to retain client deposits, but also increase them, right? So we have been seeing good momentum in our retail network across all segments. 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 can we reduce the cost of the US deposits? And those are driven both by the competitive nature of online direct deposits, which are an important funding source for our US business. But we're also seeing strong competition in New York and the Florida markets. 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 our team's goal is we're very much focused on relationship growth.
Jorge García: Of course, our objective is not only to retain client deposits, but also increase them, right? So we have been seeing good momentum in our retail network across all segments. 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 can we reduce the cost of the US deposits? And those are driven both by the competitive nature of online direct deposits, which are an important funding source for our US business. But we're also seeing strong competition in New York and the Florida markets. 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 our team's goal is we're very much focused on relationship growth.
Speaker #7: Our objective is not only to retain client deposits, but also to increase them, right? So, we have been seeing good momentum in our retail network across all segments.
Speaker #7: Affluent and 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.
Speaker #7: I think the opportunity on that NII is can we reduce the cost of the US deposits? And those are driven both by the competitive nature of online direct deposit, which are important funding sources for our US business.
Speaker #7: But we're also seeing strong competition in New York and the Florida markets. The reality is that kind of for that incremental money and clients that are more rate-sensitive, it's still very competitive out there.
Speaker #7: And it's our team's goal—we're very much focused on relationship growth, and if that begins with the loan relationship in the U.S., making sure that that's translated into deposit relationships.
Jorge García: And if that begins with the loan relationship in the US, making sure that that translates into deposit relationships, that 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, low-cost transactional accounts, and primacy with those clients are going to be the driver of that guide. And when we look at the outperformance this year, it was really driven by the growth in deposits in both of our markets.
And if that begins with the loan relationship in the US, making sure that that translates into deposit relationships, that 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, low-cost transactional accounts, and primacy with those clients are going to be the driver of that guide. And when we look at the outperformance this year, it was really driven by the growth in deposits in both of our markets.
Speaker #7: That may impact 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, the deposits and low-cost transactional accounts and primacy with those clients are going to be the driver of that guidance.
Speaker #7: And when we look at the outperformance this year, it was really driven by the growth in deposits in both of our
Speaker #7: markets.
Speaker #10: Got it.
Javier Ferrer: Got it. Thank you so much.
Kelly Motta: Got it. Thank you so much.
Speaker #10: Thank you so much.
Speaker #7: Okay.
Jorge García: This concludes our Q&A. I'll now hand back to Javier Ferrer for any final remarks.
Operator: This concludes our Q&A. I'll now hand back to Javier Ferrer for any final remarks.
Speaker #1: This concludes our Q&A. I'll now hand back to Javier Ferrer for any final remarks.
Speaker #7: 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.
Jorge García: Well, thanks again for joining us, and for your questions. We look forward to updating you on our Q1 results in April. Have a good day.
Javier Ferrer: Well, thanks again for joining us, and for your questions. We look forward to updating you on our Q1 results in April. Have a good day.
Jorge García: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
Operator: Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.