10-K: Popular, Inc. Reports Strong 2025 Growth, Exceeding Targets

Popular, Inc. announced a significant increase in net income and expanded net interest margin for 2025, driven by strategic transformation initiatives and loan growth.

Summary

• Net income for the year ended December 31, 2025, increased by $219.0 million to $833.2 million, up from $614.2 million in 2024.
• Adjusted net income for 2025 was $823.5 million, compared to $646.1 million in 2024, excluding the partial reversal of the FDIC Special Assessment reserve and prior period tax withholdings.
• Net interest income grew by $258.9 million to $2.5 billion, with net interest margin expanding by 25 basis points to 3.49%.
• Total assets increased by $2.3 billion to $75.3 billion at December 31, 2025, primarily due to growth in loans held-in-portfolio and available-for-sale securities.
• Deposits rose by $1.3 billion to $66.2 billion, driven by higher savings, NOW, money market, demand, and time deposits, mainly at Banco Popular de Puerto Rico (BPPR).
• The provision for credit losses increased slightly by $3.2 million to $260.2 million, mainly due to higher reserves for commercial real estate (CRE) and BPPR's commercial portfolio, partially offset by lower consumer portfolio provisions.
• Operating expenses increased by $44.6 million to $1.9 billion, influenced by higher personnel costs, a $13.0 million goodwill impairment charge, and increased technology expenses, partially offset by lower operational loss reserves and professional fees.
• The Corporation repurchased 4,660,124 shares of common stock for $501.5 million in 2025, with $281.2 million remaining on the authorization.
• The quarterly common stock dividend was increased from $0.70 to $0.75 per share, starting in Q3 2025.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this filing positively, reflecting strong financial performance, strategic execution in digital transformation, and robust capital positions, despite some increases in non-performing loans and ongoing operational risks.

Positives

• Net income increased significantly by $219.0 million to $833.2 million in 2025.
• Adjusted net income also saw a substantial rise to $823.5 million in 2025.
• Net interest income grew by $258.9 million to $2.5 billion, with net interest margin expanding by 25 basis points to 3.49%.
• Total assets increased by $2.3 billion to $75.3 billion, indicating balance sheet growth.
• Deposits increased by $1.3 billion to $66.2 billion, demonstrating strong funding stability.
• The Corporation achieved a 13% Return on Tangible Common Equity (ROTCE) for the full year 2025, progressing towards its long-term goal of 14%.
• BPPR's net income increased by $173.8 million to $729.5 million, driven by lower deposit expenses and loan growth.
• Popular U.S. net income increased by $10.2 million to $87.8 million, benefiting from loan growth and lower deposit costs.
• The Common Equity Tier 1 Capital ratio remained strong at 15.72% at December 31, 2025, well above regulatory minimums.
• Tangible book value per common share increased by $14.49 to $82.65.
• Successful implementation of transformation initiatives, including a commercial cash management solution and a new consumer credit origination platform in Puerto Rico and the Virgin Islands, contributing to an upward trend in online originations ($36 million since Q3 launch).
• Employee loyalty score of 81% positions the company above the 50th percentile of the Qualtrics global benchmark and above the financial services industry average.

Negatives

• The provision for credit losses increased slightly by $3.2 million to $260.2 million, driven by higher reserves for the CRE portfolio at Popular Bank and two unrelated non-performing loan (NPL) inflows in BPPR's commercial portfolio.
• Net non-interest income decreased by $0.9 million, mainly due to lower revenues from the car rental business sold in Q4 2024 and lower mortgage banking activities.
• Operating expenses increased by $44.6 million, partly due to a $13.0 million non-cash goodwill impairment charge related to the U.S. based leasing subsidiary.
• Total non-performing assets (NPAs) increased by $132.7 million to $540.8 million, and total NPLs increased by $147.6 million to $498.3 million, primarily due to two significant unrelated commercial exposures.
• The ratio of NPLs to total loans held-in-portfolio increased to 1.27% from 0.95% in 2024.
• The Corporation's liquidity may come under pressure from significant unexpected cash outflows due to deposit withdrawals, especially for uninsured deposits ($14 billion in excess of FDIC-insured limit).
• Two out of three principal credit rating agencies still rate the Corporation's debt securities below investment grade, potentially increasing borrowing costs and limiting capital market access.

Risks

• Weakness in the economy, particularly in Puerto Rico where a significant portion of the business is concentrated (77% of assets, 79% of deposits, 80% of revenues as of December 31, 2025), could adversely impact financial condition and results of operations.
• Adverse economic conditions, including high inflation, affecting housing prices, job market, consumer confidence, and spending habits, may increase non-performing assets, charge-offs, and provision expense.
• Changes in interest rates and market liquidity may reduce interest margins, impact funding sources, reduce loan originations, affect the value of the investment portfolio, and ability to return capital to shareholders.
• The impact of bank failures or adverse developments at other banks and related negative media coverage of the banking industry could affect investor and depositor sentiment.
• The current fiscal and economic challenges of Puerto Rico and measures taken by the Puerto Rico Government and the Federally-appointed oversight board could impact the economy, customers, and business.
• Uncertainty and difficulty in predicting future balances of Puerto Rico public sector deposits, which may be impacted by federal funds received and expenditure rates, and the financial condition of the Puerto Rico Government.
• Unforeseen or catastrophic events, including extreme weather events (hurricanes), natural disasters, acts of violence or war, or pandemics, could disrupt operations and cause adverse consequences.
• Failure to achieve expected benefits from transformation initiatives, including projected earnings, efficiencies, and return on tangible common equity, or accurately anticipating associated costs and expenses.
• Exposure to increased credit risks and credit losses due to client concentration by industry segment (e.g., residential and commercial real estate, hospitality, healthcare).
• Direct lending and investment exposure to Puerto Rico government entities ($391 million direct exposure, $209 million insured/issued by PR governmental entities but non-governmental repayment source), which face fiscal challenges.
• Deterioration in real property values securing commercial, mortgage, and construction portfolios could lead to increased credit losses.
• Defective and repurchased loans, particularly in mortgage sales and securitizations, could result in significant losses.
• Inability to maintain or grow deposits could lead to higher funding costs and decreased net interest income.
• Cyber-attacks on the company's or third-party providers' operational or security systems could cause substantial harm, including data breaches, service disruptions, reputational damage, and increased costs.
• Dependence on Evertec, Inc. for core financial transaction processing and IT services exposes the company to operational risks, including system breakdowns, zero-day vulnerabilities, and application obsolescence.
• The lengthy and complex transition to new financial services technology providers, replacing services currently provided by Evertec, carries business and financial risks.
• Climate change could have a material adverse impact on business operations and clients, especially given geographic concentration in hurricane-prone regions.
• Highly regulated business environment, with evolving U.S. federal, state, and Puerto Rico laws, could lead to increased compliance costs, fines, penalties, or restrictions on operations.
• Potential judgments, claims, damages, penalties, fines, enforcement actions, and reputational damage from pending or future litigation and regulatory investigations.
• Liquidity risks arising from market events, disruptions, low investor/depositor confidence, or credit rating downgrades, affecting funding access and borrowing costs.
• Dependence on dividends and distributions from subsidiaries for holding company liquidity, which are subject to regulatory limits and financial performance of subsidiaries.
• Potential acquisitions could increase risks, including exposure to unknown liabilities, asset quality issues, business disruption, and integration difficulties.
• Significant and increasing competition in the financial services industry, including from non-traditional providers and technology companies, could lead to pricing pressure and competitive disadvantage.
• Challenges in adopting new technologies like artificial intelligence at the pace of competitors due to operational and compliance issues.
• Inability to attract and retain qualified employees, especially in information technology, could hinder business strategies and service quality.
• Impairment of goodwill, deferred tax assets, or amortizable intangible assets could adversely affect financial condition and results of operations.
• Unexpected losses if estimates or assumptions used in financial statements (e.g., allowance for credit losses, fair value measurements) are incorrect or differ materially from actual results.

Future Outlook

The Corporation anticipates continued investments in technology and business transformation to deliver an improved digital experience for clients and more efficient processes for employees. These efforts are expected to drive sustainable profitable growth and value for shareholders, with a long-term goal of achieving a 14% Return on Tangible Common Equity (ROTCE). The rate at which public deposit balances may change is uncertain and difficult to predict, impacted by federal assistance levels and Puerto Rico Government's financial condition. The FDIC special assessment is projected to have its last payment in Q3 2026. The company expects to expend significant additional resources to modify or enhance cybersecurity defenses and address information security vulnerabilities.

Management Comments

• The Corporation continues its broad-based, multi-year, technological and business process transformation, launched in 2022, making significant investments in technology, talent, and new digital and data capabilities.
• The goal of the transformation is to provide customers with more personalized and accessible services, increase employee performance and satisfaction with more agile work processes, and generate sustainable profitable growth and value for shareholders.
• The Corporation is working to achieve a sustainable return on tangible common equity (ROTCE) of 14% over the long term, having achieved 13% ROTCE for the full year 2025.
• Management views the exposure to riskier borrowers as adequately managed, supported by experience in credit risk management and recent credit tightening measures.

Industry Context

StockSavvy.ai notes that Popular, Inc.'s strong financial performance in 2025, particularly its net income growth and NIM expansion, reflects effective management in a dynamic interest rate environment. The company's strategic focus on digital transformation and customer experience aligns with broader industry trends of technological innovation and enhanced service delivery. Its significant concentration in Puerto Rico, while a source of risk, also provides a unique market position. The increase in non-performing loans, though attributed to specific commercial exposures, highlights the ongoing credit quality challenges faced by regional banks, especially those with concentrated portfolios. The company's proactive approach to cybersecurity and compliance with evolving regulations, such as those from the CFPB and NYSDFS, demonstrates an awareness of increasing regulatory scrutiny across the financial services sector.

Comparison to Industry Standards

• Popular, Inc. ranks among the 50 largest U.S. bank holding companies based on total assets, indicating its significant scale within the U.S. banking sector.
• The company's 13% Return on Average Tangible Common Equity (ROTCE) for 2025 is approaching its long-term target of 14%, suggesting competitive efficiency and profitability compared to peers.
• Popular, Inc. covers up to 78% of employee health insurance premiums, a figure that surpasses regional benchmarks, indicating strong employee benefits relative to its geographic operating areas.
• The employee loyalty score of 81% positions Popular, Inc. above the 50th percentile of the Qualtrics global benchmark and above the financial services industry average benchmark, reflecting strong human capital management compared to global and industry standards.

Management Changes

Corporate Governance

Legal Proceedings

• Popular Bank consented to a $2.3 million civil money penalty from the Federal Reserve Board on January 24, 2023, to settle findings related to Payment Protection Program loan approvals.
• The FDIC imposed a special assessment to recover $16.3 billion in costs from the Silicon Valley Bank and Signature Bank receiverships, with Popular accruing $71.4 million in Q4 2023 and an additional $14.3 million in Q1 2024, partially reversed by $15.3 million in 2025 due to amended collection rates.
• Popular agreed to pay $256,000 to OFAC in Q2 2022 to settle apparent violations related to transactions processed on behalf of two employees of the Government of Venezuela, which had been self-disclosed.

Related Party Transactions

• Loan transactions with directors, executive officers, certain related individuals or organizations, and affiliates totaled $149.1 million at December 31, 2025, with new loans of $14.6 million and payments of $7.1 million during the year.
• The Corporation holds a 15.63% equity interest in Centro Financiero BHD, S.A. (BHD León) in the Dominican Republic, with a carrying amount of $249.4 million at December 31, 2025, and received $20.0 million in cash dividends from BHD during 2025.

Stakeholder Impact

• Shareholders: Benefit from increased net income, expanded net interest margin, higher tangible book value per common share, and increased quarterly common stock dividends, along with ongoing share repurchase programs.
• Employees: Benefit from comprehensive health and wellness programs (Popular covering up to 78% of health insurance premiums), a state-of-the-art fitness center, mental health support, paid time off, flexible work arrangements, a 401(k) plan with a 50% match up to 8% of salary, and a profit-sharing plan up to 8% of eligible compensation. Talent development programs and high internal mobility rates (47% in 2025) also positively impact employees.
• Customers: Benefit from modernization of customer channels, enhanced digital experience, and new platforms like the commercial cash management solution and consumer credit origination platform. However, potential disruptions from Evertec transition or cyber-attacks could negatively impact service delivery.
• Creditors: The strong capital ratios (CET1 at 15.72%) and adequate liquidity ($27.0 billion available) provide comfort, but below-investment-grade credit ratings from two major agencies could increase borrowing costs.
• Regulators: The company is subject to extensive and evolving regulations, with compliance efforts and potential penalties (e.g., Popular Bank's $2.3 million civil money penalty, FDIC special assessment) impacting financial results and operations.

Next Steps

• Continue broad-based, multi-year, technological and business process transformation.
• Make significant investments in technology, talent, and new digital and data capabilities.
• Deliver an improved digital experience for clients and enhanced technology and more efficient processes for employees.
• Work towards achieving a sustainable Return on Tangible Common Equity (ROTCE) of 14% over the long term.
• Monitor and review U.S. operations results, including earnings trends, pre-tax earnings forecasts, new tax initiatives, and performance indicators.
• Expend significant additional resources to continue to modify or enhance layers of defense against cyber threats or to investigate and remediate additional information security vulnerabilities or incidents.
• Complete the transition to the Cyber Risk Institute (CRI) Profile 2.0 assessment framework in 2026.

Key Dates

Recommendation

The filing indicates strong financial performance with a significant increase in net income and expanded net interest margin, driven by effective strategic initiatives and loan growth. The company's capital position remains robust, and management is actively returning capital to shareholders through increased dividends and share repurchases. While there are identified risks, particularly related to NPLs and reliance on third-party technology, the overall positive trends in profitability, asset growth, and strategic transformation suggest a favorable outlook for long-term investors.

Keywords

Banking, Financial Services, Puerto Rico, Commercial Banking, Mortgage Banking, Consumer Lending, SEC Filing, 10-K, Financial Performance, Net Income, Net Interest Margin, Deposits, Loans, Credit Quality, Cybersecurity, Regulatory Compliance, Capital Adequacy, Risk Management, Transformation Initiatives, Evertec, Share Repurchase, Dividends