Popular Q3 2026 Earnings: Higher Net Interest Income Lifts Profit

Popular (NASDAQ: BPOP) reported Q3 2026 net interest income of $698.9 million, up from $646.5 million a year earlier, while diluted EPS rose 34% to $4.21 from $3.14. Net income increased by $55.0 million to $266.3 million, supported by higher interest income and a lower credit-loss provision, although earnings declined sequentially as expenses rose and non-interest income fell. Credit trends remained stable overall despite a borrower-specific increase in commercial non-performing loans.

Core Earnings Data

The year-over-year earnings increase primarily reflected $52.4 million of additional net interest income and a $16.5 million reduction in the provision for credit losses. These benefits outweighed higher operating expenses, lifting pretax income by $63.1 million.

Compared with Q2 2026, however, net income decreased by $11.9 million. Higher personnel costs and lower non-interest income more than offset modest growth in net interest income and a lower provision.

Business and Segment Performance

Banco Popular de Puerto Rico generated net interest income of $592.0 million, compared with $589.9 million in Q2 and $550.7 million a year earlier. Higher income from Treasury securities and loans offset $17 million of additional deposit interest expense. Its net interest margin declined four basis points sequentially to 3.81% as the cost of Puerto Rico public deposits increased.

Popular Bank, the U.S. segment, produced $116.7 million of net interest income, up from $113.1 million in Q2 and $105.2 million in Q3 2025. Its margin expanded three basis points sequentially to 3.20%, helped by higher commercial-loan income and higher yields on new originations.

Non-interest income was $175.7 million, down $4.9 million from Q2 but up $4.5 million year over year. Banking fees declined sequentially to $115.9 million, partly because a deposit product launched in August waived service fees for qualifying customers. Asset management and insurance fees increased to $31.8 million, while other operating income fell by $3.3 million.

Higher Interest Income and Lower Provisions Outweighed Expense Growth

The quarter showed a clear difference between annual and sequential performance. Compared with Q3 2025, higher net interest income and a lower credit-loss provision more than covered the increase in expenses. Compared with Q2 2026, net interest income rose by only $5.5 million and the provision declined by $7.3 million, while expenses increased by $21.5 million and non-interest income fell by $4.9 million.

Net interest income benefited from higher securities and commercial-loan income, as well as one additional calendar day that contributed $6 million. However, total deposit costs increased seven basis points from Q2 to 1.64%, contributing to a three-basis-point sequential decline in net interest margin.

Personnel costs increased by $16.0 million from Q2 as annual salary and merit increases took effect and performance-related incentives rose. This occurred even as full-time-equivalent employment declined to 9,112 from 9,203. Non-GAAP return on tangible common equity was 15.80%, compared with 17.02% in Q2 and 13.06% a year earlier.

Credit Quality and Balance Sheet

Credit indicators were mixed but did not point to broad deterioration. Non-performing loans increased by $52 million from Q2 to $466 million, raising the NPL ratio to 1.16% from 1.04%. Both measures remained below their Q3 2025 levels of $502 million and 1.30%.

The increase was concentrated in Banco Popular de Puerto Rico and included a $74 million commercial and industrial loan entering non-performing status. Management described this and other commercial developments as borrower-specific. The net charge-off ratio declined to 0.73% from 1.05% in Q2, although it remained above 0.60% a year earlier. The allowance for loan losses decreased to $771 million, or 1.92% of portfolio loans, as improved consumer performance was partly offset by reserves for specific commercial exposures.

Total assets ended the quarter at $77.8 billion, down $1.2 billion from Q2, mainly because money-market assets and investment securities decreased by $1.5 billion. Portfolio loans increased by $293 million to $40.0 billion, with growth across both major banking segments.

Deposits declined by $1.5 billion sequentially to $68.7 billion, including a $1.2 billion reduction in Puerto Rico public deposits associated with operational needs and scheduled payments. Public deposits still represented 31% of total deposits at quarter-end.

The common equity Tier 1 ratio was 16.06%, nearly unchanged from Q2 and above 15.79% a year earlier. Popular returned $236 million to shareholders during the quarter, including $179 million of common-stock repurchases, and declared a 20% increase in its quarterly common dividend to $0.90 per share.

Management Commentary

CEO Jorge J. García described business activity in Puerto Rico as healthy and supported by a strong labor market. He said underlying credit trends remained stable but noted that the company was monitoring economic conditions, particularly the potential effects of prolonged inflation and higher fuel and energy costs.

Recent Insider Transactions

The supplied six-month summary recorded 21,591 shares under purchases across three transactions and 60,061 shares sold across seven transactions, resulting in net sales of 38,470 shares. In the detailed list, the three non-sale transactions were identified as stock award grants.

The transaction data do not state the reasons for the reported sales.

Risks Investors Should Watch

• Deposit costs and margin pressure: Total deposit costs rose seven basis points sequentially, while net interest margin declined three basis points. Further funding-cost increases could limit net interest income growth.
• Puerto Rico public-deposit volatility: Public deposits accounted for 31% of total deposits and fell by $1.2 billion during the quarter, creating potential variability in liquidity, securities balances, and funding costs.
• Commercial credit developments: The increase in non-performing loans was borrower-specific, but additional commercial inflows or charge-offs could raise provisions and reduce earnings.
• Expense growth: Personnel costs rose by $16.0 million from Q2 despite lower headcount, making salary and incentive costs important to future operating leverage.
• Inflation and energy costs: Management specifically identified prolonged inflation and higher fuel and energy costs as economic factors requiring continued attention in Puerto Rico.

Summary

Popular’s Q3 2026 earnings improved substantially from the prior-year period as higher net interest income and a lower credit-loss provision lifted net income and EPS. Sequentially, rising personnel costs and weaker non-interest income constrained the benefit from loan and securities income. Future results will depend in part on deposit pricing, public-deposit movements, expense control, and whether commercial credit issues remain limited to individual borrowers.