Popular earns $266 million as it lifts 2026 charge-off guidance to 80-90 bps

Popular, Inc. earned $266 million in the third quarter, or $4.21 a diluted share, down from $278 million in the second quarter and up from $211 million a year earlier, as a $21 million rise in operating expenses and a smaller fee base offset a $6 million gain in net interest income. The San Juan-based bank also raised the net charge-off rate it expects for the full year to 80 bps-90 bps annualized from 55 bps-70 bps, citing commercial credit.

Net interest income reached $699 million, which Popular attributed to higher income from investment securities and commercial loans along with one extra day in the quarter. The net interest margin narrowed three basis points from the second quarter to 3.63% while deposit costs rose to 1.64%. The provision for credit losses declined to $59 million, which the release attributed to lower reserve requirements in the mainland U.S. segment.

Costs and fees squeeze an otherwise stable quarter

Non-interest income slipped $5 million from the second quarter to $176 million, or 3%, as service charges on deposits fell following the August launch of a deposit product that waives monthly fees for customers who meet certain criteria. Operating expenses rose $21 million from the second quarter, or 4%, to $506 million, led by a $16 million increase in personnel costs that included $5 million of profit sharing tied to the company's financial performance. Full-time equivalent employees fell to 9,112 from 9,203.

Jorge J. García, Popular's president and chief executive officer, said the quarter reflected "higher net interest income, stable underlying credit trends and continued capital return, partially offset by higher operating expenses and lower non-interest income." Return on average tangible common equity, a non-GAAP measure the bank adjusts for unrealized securities losses, was 15.80%, down from 17.02% in the second quarter but inside the 14% to 17% annual range management has set. Return on assets eased to 1.32% from 1.41%.

Charge-offs fall now while the full-year bill rises

Net charge-offs equaled 0.73% of average loans on an annualized basis, down from 1.05% in the second quarter but above the 0.60% recorded a year earlier. The linked-quarter improvement reflected lower commercial charge-offs, a comparison flattered by a $71 million commercial resolution booked in the prior period. Non-performing loans rose $52 million to $466 million, pushing the NPL ratio to 1.16% from 1.04%, as a $74 million commercial and industrial loan entered non-performing status, partly offset by a $34 million partial charge-off. The allowance for loan losses declined to $771 million and covered 165% of non-performing loans, down from 190%.

Against that backdrop, the updated outlook assumes full-year net charge-offs of 80 bps-90 bps annualized, against an original 55 bps-70 bps, a revision the release attributes to year-to-date charge-offs and non-performing loan inflows in the commercial portfolio. The new range compares with the 0.73% annualized rate reported for the third quarter.

Buybacks and a higher dividend as public deposits drain

Popular repurchased 1,060,241 shares for $179 million at an average price of $168.40 and returned $236 million to shareholders through repurchases and dividends during the quarter. Its common equity Tier 1 ratio was 16.06%, two basis points below June, while tangible book value per share fell to $86.30 from $87.94, mainly on $255 million of unrealized losses on securities available for sale. Dividends declared per common share rose to $0.90 from $0.75.

Deposits declined $1.5 billion to $68.7 billion, including a $1.2 billion drop in Puerto Rico public deposits that the bank linked to operational needs and scheduled payment commitments. Those public deposits totaled $21.5 billion, or 31% of deposits, and Popular said it expects them to run between $20-22 billion for the rest of the year. Total assets were $77.8 billion, and loans held in portfolio rose $293 million.

A call, a pending 10-Q and a lower loan-growth target

Popular holds its results call today at 11:00 a.m. Eastern Time, and its Form 10-Q for the quarter ended September 30, 2026 has not yet been filed. The revised outlook table lists net interest income growth of about 8.5% for the year, against an original 5%-7% range, and fourth-quarter non-interest income of roughly $170 million versus an earlier $160 million-$165 million quarterly range. Operating expense growth is now put at 2% instead of 3%, loan growth at 2% instead of 3%-4%, and the effective tax rate at 14%, with the lower loan forecast tied to weaker auto and lease financing activity.