Popular's NIM Compresses as Public-Deposit Costs Rise
Net interest margin fell 3 bps to 3.63% as Puerto Rico public-deposit rates lifted total deposit costs to 1.64%.
Popular, Inc. (BPOP), the Puerto Rico–focused bank, reported net interest income of $698.9 million for the quarter ended Sept. 30, 2026, up $5.5 million from the second quarter. The company said the increase reflected higher income from investment securities and commercial loans and one extra day, partly offset by higher interest expense on larger Puerto Rico public deposits.
Net interest margin compressed 3 bps to 3.63%. Total deposit costs rose 7 bps to 1.64%. Loan yields on a fully taxable-equivalent basis rose 3 bps to 7.56%, and money-market and investment-securities yields FTE rose 13 bps to 3.82%.
Average earning assets increased $677 million, which the company attributed mainly to higher U.S. Treasury balances from reinvestment of maturities and higher average commercial loans. Total average deposits increased $502 million, including a $1.1 billion rise in Puerto Rico public deposits. Excluding those public deposits, average deposits decreased $619 million.
Banco Popular de Puerto Rico, the company’s main market, posted net interest income of $592.0 million. Its net interest margin fell 4 bps to 3.81%. Deposit costs rose 9 bps to 1.41%, including Puerto Rico public-deposit rates up 11 bps to 2.72%. Popular Bank’s net interest margin expanded 3 bps to 3.20% on higher commercial-loan yields; its deposit costs rose 1 bps to 2.74%.
Loans held in the portfolio increased $293 million to $40.04 billion, mainly $268 million at BPPR across most portfolios and $25 million at Popular Bank, primarily commercial loans. Period-end deposits decreased $1.53 billion to $68.70 billion, including $1.2 billion of Puerto Rico public deposits from operational needs and scheduled payments. The company said public deposits are expected in a $20–22 billion range for the rest of the year.
Non-interest income fell $4.9 million to $175.7 million. Banking fees decreased $1.6 million after an August zero-fee deposit product. Other operating income decreased $3.3 million after a $3 million unrealized investment gain in the second quarter, a $2 million equity-investment impairment, and a $2 million lower deferred-benefit-plan valuation adjustment, partly offset by a $5 million commercial-loan refinancing benefit.
Operating expenses rose $21.5 million to $505.6 million. Personnel costs increased $16.0 million, which the company tied to annual salary and merit increases, one extra day, and $8 million higher incentives including $5 million of profit-sharing.
The provision for credit losses declined $7.3 million to $58.6 million. The loan-portfolio provision fell $6.4 million to $58.8 million, which the company attributed to lower Popular Bank reserve requirements and more favorable macro scenarios.
Net charge-offs fell $31.1 million to $72.9 million, and the annualized NCO ratio dropped 32 bps to 0.73%, reflecting lower commercial charge-offs after a $71 million commercial resolution in the prior quarter. Non-performing loans held in the portfolio rose $52.3 million to $465.8 million, and the NPL ratio increased 12 bps to 1.16%, including a $74 million C&I inflow at BPPR partly offset by a $34 million partial charge-off. Excluding consumer loans, NPL inflows decreased $56 million. The company said those commercial events were borrower-specific.
The allowance for credit losses on loans held in the portfolio decreased $14.1 million to $770.7 million, and ACL/loans fell 5 bps to 1.92%, driven by improved consumer credit partly offset by higher specific commercial reserves. ACL/NPLs declined 25 percentage points to 165%.
Net income was $266 million, or $4.21 a share, down from $278 million, or $4.35 a share, in the second quarter. ROTCE declined 122 bps to 15.80%.
The Common Equity Tier 1 ratio slipped 2 bps to 16.06% after $179 million of common-stock repurchases and $57 million of dividends, partly offset by net income. Tangible book value per share fell $1.64 to $86.30 on $255 million of AFS unrealized losses, buybacks and dividends. Capital returned to shareholders increased $62 million to $236 million, including the repurchases and a 20% quarterly dividend increase to $0.90 a share.
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