Popular, Inc. (BPOP) 2026 年第 3 季法說會：淨利息收入上升，信貸指引更新

Popular, Inc. (NASDAQ: BPOP) 公布 2026 年第三季獲利高於去年同期，主因淨利息收入增加，且底層消費者與房貸信用維持穩定。營業費用上升、非利息收入下降以及兩起特定借款人的商業信貸問題，減緩了本季的表現。

重點摘要

• 淨利為 2.66 億美元，稀釋後每股盈餘為 4.21 美元，季減 0.14 美元，但 年增 34%。
• 淨利息收入增加 600 萬美元至 6.99 億美元。GAAP 淨利差下滑 3 個基點至 3.63%。
• 投資組合持有的放款成長了 2.93 億美元，由商業與房貸放款領軍。管理層將 2026 全年預期的放款成長率調降至約 2%。
• 淨呆帳沖銷額下降至 7,300 萬美元（年化 73 個基點），低於第二季的 1.04 億美元（1.05%）。然而，不良貸款增加 5,200 萬美元至 4.66 億美元。
• Popular 向股東回報 2.36 億美元，其中包括 1.79 億美元的股票回購，並將季度普通股股利調升 20% 至 每股 0.90 美元。
• 管理層持續維持年度 ROTCE 目標為 14% 至 17%，並預期在投資組合重新定價的支撐下，2027 年淨利息收入將持續成長。

核心財務數據

業務與營運表現

Popular 本季投資約 14 億美元於二年期與三年期美國國債。該筆購入資產的平均存續期間為 2.7 年，平均收益率約為 4.3%，較到期國債高出 206 個基點。管理層預期投資組合持續重新定價將有助於支撐資產收益率與淨利息收入。

本季末存款總額為 687 億美元。波多黎各公共部門存款減少 12 億美元至 215 億美元，而扣除公共資金後的客戶存款餘額則減少約 2.89 億美元。管理層指出此下滑符合季節性趨勢。

總存款成本上升 7 個基點至 1.64%，主因是與市場利率掛鉤的波多黎各公共存款利率提高。若不計該等存款餘額，存款成本則增加 3 個基點至 1.13%。

非利息收入下滑至 1.76 億美元，但其中包含了來自商業貸款重新融資的 500 萬美元效益。與 2025 年第三季相比，非利息收入成長 3%，包括簽帳金融卡手續費成長 10%、信用卡手續費成長 8%，以及經紀與資產管理手續費成長 60%。

Popular 將超過 100 萬個帳戶重新分類至更簡便的消費者存款產品中，客戶可透過薪資轉帳等行為免除手續費。管理層估計此變動使單季手續費收入減少約 200 萬美元，相當於年化影響約 800 萬至 1,000 萬美元。公司預期隨著時間推移，深化存款客戶關係將能抵銷部分影響。

營業費用增加主要源於年度薪資調整、分紅費用增加以及績效獎金提高。管理層表示團隊已實施並確認約 5,000 萬美元的經常性效率改善，預計將對 2027 年的費用產生正面效益。

在波多黎各方面，管理層提及經濟活動穩定、就業市場健全、觀光業與基礎設施投資維持成長。Popular 客戶的簽帳金融卡與信用卡刷卡消費金額約 年增 7%。管理層亦補充，獲撥款的聯邦預算中仍有約 430 億美元尚未支用。

管理層財務展望

• 2026 年放款成長：約 2%，反映出車貸與租賃業務減少，以及商業放款成長較為緩和。
• 2026 年淨利息收入：預計成長約 8.5%。
• 2026 年第四季非利息收入：約 1.7 億美元。
• 2026 年營業費用：預計成長約 2%，包含提撥最高額度之員工分紅。
• 2026 年有效稅率：約 14%。
• 2026 年淨呆帳沖銷率：預計為 80 至 90 個基點。
• 2027 年初步淨呆帳沖銷率預測：約 60 至 75 個基點。
• 波多黎各公共部門存款：預計 2026 年剩餘時間將維持在 200 億至 220 億美元之間。
• 2026 年第四季股票回購：預計為 1.5 億至 2 億美元。根據當前情況，管理層預期 2027 年各季回購規模將維持在類似區間。
• 年度 ROTCE 目標：14% 至 17%，旨在於不同營運環境下保持永續可行的水準。

風險與關注焦點

商業信貸指標受到兩起互不相關的工商業（C&I）客戶個案影響。Popular 將一筆 7,400 萬美元的客戶放款轉為非計息放款，並對另一筆於第二季轉為不良貸款的信用個案進行了 3,400 萬美元的部分沖銷。管理層表示，該兩起案例涉及不同產業，主要是由借款人自身的個別問題所致，而非共同的風險因素。

不良貸款率（NPL 比率）從 1.04% 升至 1.16%。儘管如此，管理層表示消費與房貸業務表現依然強勁，其中消費貸款的淨呆帳沖銷率與房貸逾期率均處於歷史低點。

通貨膨脹與燃料及能源成本上升所帶來的負擔能力壓力，在波多黎各仍是一大疑慮。此外，放款成長亦可能受到車貸業務疲軟、美國本土採取更注重客戶關係的放款策略，以及波多黎各大型交易案源有限所限制。

公共部門存款可能會造成財報中淨利差的波動。管理層指出，較高的公共存款餘額可能會對淨利差（NIM）造成壓力，但對整體淨利息收入仍具正面貢獻。

法說會分析師問答重點

管理層表示，利率長期維持在較高水平（Higher for longer）整體而言對 Popular 有利，因為這有助於投資組合的重新定價。在目前的利率水平下，公司尚未見到借款人出現顯著壓力，不過短期利率變動確實會影響公共存款的定價。

在美國本土放款方面，Popular 正強調擴大客戶關係與吸納存款，而非為了達成業務量目標而追求單一產品客戶。這種紀律使短期放款成長放緩，但管理層形容建案貸款的案件儲備（pipeline）依然強勁。

管理層目前不打算強制發行特別股，因為當前的利率仍缺乏吸引力。管理層稱該類發行為可裁量性質，並表示公司仍有能力繼續進行普通股回購。

Popular 美國業務毛遞延所得稅資產約為 6 億美元，備抵評價約為 3.85 億美元，淨 DTA 約為 2.15 億美元。該資產大部分將於 2028 年至 2031 年間到期。管理層表示，美國業務獲利能力提升將有助於抵扣使用，但任何備抵評價的迴轉皆不會對 CET1 產生效益，因為基於虧損扣抵（NOL）的 DTA 並未計入法定監理資本。

完整法說會逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Good day, and thank you for standing by. Welcome to the Popular, Inc. Third Quarter 2026 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Investor Relations Officer of Popular, Paul Cardillo. Please go ahead.

Paul Cardillo

Good morning, and thank you for joining us. With me on the call today are our President and CEO, Jorge Garcia; and our CFO, Lidio Soriano. They will review our third quarter results and then answer your questions. Other members of our management team, including our CRO, Luis Sousa, 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 discussed in today's earnings release and our SEC filings. You may find today's earnings release and our SEC filings on our website at popular.com.

I will now turn the call over to Jorge.

Jorge Garcia

Thank you, Paul, and good morning, everyone. Please turn to Slide 4 to discuss the highlights of another solid quarter.

We reported net income of $266 million and earnings per share of $4.21, a decrease of $0.14 per share from the second quarter. Results reflected higher net interest income and stable underlying credit trends, partially offset by higher operating expenses and lower noninterest income. Compared with the third quarter of last year, earnings per share increased by 34%. Our ROTCE was 15.8%, compared with 17% in the second quarter and 13.1% in the third quarter of 2025.

Loans held in portfolio increased by $293 million, driven by growth in commercial and mortgage lending. Total deposits decreased by $1.5 billion, primarily reflecting lower Puerto Rico public sector balances. Excluding public funds, customer balances decreased by approximately $289 million. The delta was consistent with our expectations and third quarter seasonality.

Credit performance remained stable. Net charge-offs declined from the second quarter, while nonperforming loans increased, primarily reflecting a commercial relationship at BPPR that was placed on nonaccrual.

We continue to return capital to shareholders, repurchasing $179 million of common stock in the quarter. We also increased the quarterly dividend to $0.90 per share, beginning with the payment on October 1.

While some indicators have moderated from the strong levels experienced over the last several years, economic conditions and business activity in Puerto Rico remained stable. The labor market continued to be healthy. Total employment increased to approximately 1.26 million in September, its highest level of the year, as the labor force grew by roughly 24,000 people in the quarter while employment grew by 18,000 jobs. The unemployment rate increased modestly to 6.2%, largely reflecting a higher participation rate rather than job losses. Job growth was strongest in leisure and hospitality, with most other sectors showing modest growth or broadly stable conditions.

Consumer spending was solid during the quarter as evidenced by Popular's customers' debit and credit card sales volume, which increased by approximately 7% year-over-year.

Tourism was another source of meaningful support for the Puerto Rico economy. Through August, hotel occupancy improved by more than 4 percentage points to approximately 79%. Cruise passenger arrivals increased by 27% through September. Air passenger traffic has moderated from record levels but remained healthy, declining approximately 3% year-over-year.

Construction activity is supported by public and private investment, including the ongoing deployment of federal disaster recovery funds and a growing pipeline of private sector projects. We continue to see demand in the energy sector as well as in warehousing and logistics.

Overall, Puerto Rico's economic environment is stable, supported by healthy employment, tourism, infrastructure investment and private sector development. At the same time, we are monitoring affordability pressures that are being driven by inflation and the higher cost of fuel and energy.

We continue to focus on the 3 objectives we have shared previously: being the #1 bank for our customers, being simple and efficient, and being a top-performing bank. We are on the right path, and we will continue to execute with discipline.

Being the #1 bank for our customers means building stronger relationships and continuing to strengthen our deposit franchise, one of our most important competitive advantages. That starts with giving customers the flexibility to bank through the channel that best meets their needs, while continuing to enhance our products and maintain our high service standards.

On the retail side, this quarter we launched a simpler deposit product that encourages behaviors such as direct deposits to eliminate banking fees, that will help us build deeper relationships over time. We also launched an account for college students to establish relationships earlier in their financial journey. These efforts advance our segment-led strategy, which leverages specialized offerings to unlock opportunities and deepening customer relationships.

Our successful health care professional program is one example of this segment-led approach. The program supports the [ positive ] retention and has also generated more than $90 million in loans -- in new loans this year.

On the commercial side, we completed the final wave of customer onboarding to our new cash management platform, concluding a multiyear effort. The platform provides greater flexibility and mobile access and enhanced money movement capabilities for our commercial clients. This strengthens our value proposition for business clients and further differentiates our commercial banking franchise in Puerto Rico, and gives us a platform to continue to enhance functionality.

Together, these initiatives demonstrate that our strategy is translating into tangible results. I look forward to building on this momentum with our teams as we continue advancing our objectives.

I will now turn the call over to Lidio for more details on our financial and credit performance.

Lidio Soriano

Thank you, Jorge, and good morning, everyone. As Jorge said, we delivered another solid quarter. Our focus on generating sustainable returns remained evident this quarter with ROTCE of 15.8%, compared with 17% in the second quarter.

Please turn to Slide #7. Net interest income increased by $6 million to $699 million, driven by higher income from investment securities and commercial loans. On a GAAP basis, net interest margin declined by 3 basis points to 3.63%. And on a tax equivalent basis, NIM was 4.16%, 1 basis point lower than last quarter.

Ending loan balances increased by $293 million, driven by commercial and mortgage loans. We now expect full year loan growth for 2026 of approximately 2%, primarily reflecting lower auto and lease activity and more moderate commercial growth.

In our investment portfolio, we have maintained our strategy of reinvesting proceeds from U.S. Treasury note maturities into 2 and 3-year notes. During the quarter, we invested approximately $1.4 billion with an average duration of 2.7 years, an average yield of approximately 4.3%. This represented a pickup of approximately 206 basis points on the notes that matured during the quarter.

Ending deposits were $68.7 billion, down $1.5 billion from the second quarter. Puerto Rico public deposits decreased by $1.2 billion to $21.5 billion. On an average basis, total deposits increased by $502 million. Excluding Puerto Rico public deposits, average customer deposits decreased by $619 million. Customer balances were consistent with historical patterns and continue to reflect the strength of our deposit franchise. We continue to expect Puerto Rico public deposits to remain between $20 billion and $22 billion for the rest of the year.

Total deposit costs increased by 7 basis points to 1.64%, primarily reflecting higher rates on market-linked Puerto Rico public deposits that increased by 11 basis points. Excluding these balances, deposit costs increased by 3 basis points to 1.13%, including an increase of 2 basis points in private sector deposit costs at BPPR and a 1 basis point increase at Popular Bank.

For the year, we expect net interest income to increase by approximately 8.5%.

Please turn to Slide #8. Noninterest income decreased by $5 million to $176 million, but remain above our guidance range. The quarter included a $5 million benefit associated with a commercial loan refinancing. Compared with the third quarter of 2025, noninterest income increased by 3%, reflecting growth in debit and credit card fees of 10% and 8%, respectively, and a 60% increase in brokerage and asset management fees. These results demonstrate the benefit of our broad product offering.

We expect fourth quarter noninterest income of approximately $170 million.

Please turn to Slide #9. Operating expenses increased by $21 million to $506 million. The increase was primarily related to higher personnel costs, including annual salary adjustments, higher profit-sharing expenses and increased performance-based compensation linked to the corporation's financial results. Based on current trends, we now expect full year operational expenses to increase by approximately 2%, including the maximum profit-sharing contribution.

Our effective tax rate was 14% during the quarter, driven by higher taxes and income. For the full year, we expect an effective tax rate of 14%.

Turning to credit. Overall credit quality was stable during the third quarter. Consumer performance remained favorable, with net charge-offs continuing at historical low level despite a seasonal increase in auto losses. Mortgage performance also remained strong, with historically low delinquencies and recoveries.

Commercial credit metrics were influenced by developments involving 2 unrelated commercial and industrial relationships. We placed a $74 million relationship on nonaccrual status and recorded a $34 million partial charge-off on a credit that entered nonperforming status in the second quarter. The 2 credits are in different industries and do not share a common risk factor. In each case, the deterioration was driven primarily by borrower-specific issues.

Please turn to Slide #10. Total nonperforming assets decreased by $37 million, reflecting the sale of the $84 million nonperforming loan held for sale, while total NPLs increased by $52 million to $466 million. The NPL ratio increased to 1.16% from 1.04% in the prior quarter. Excluding consumer loans, NPL inflows decreased by $56 million from the second quarter.

Turning to Slide 11, net charge-offs were $73 million or annualized 73 basis points, compared with $104 million or 1.05% in the prior quarter. Given our year-to-date commercial charge-offs and NPL inflows this quarter, we now expect net charge-offs to be in the range of 80 to 90 basis points for the full year. While we will provide formal 2027 guidance when we report fourth quarter results in January, looking ahead to 2027, our initial expectation is that net charge-offs will be in the range of roughly 60 to 75 basis points.

Overall, underlying credit metrics were stable and reserve coverage remained strong. We remain vigilant and continue to take a disciplined approach to managing risk.

Turning now to capital, please turn to Slide #12. Tangible book value per share decreased by $1.64 to $86.30, primarily reflecting lower market values on available-for-sale investment securities. The tangible common equity ratio was 7.05%, down 13 basis points from the second quarter. We remain comfortable with both the absolute level of TCE and the real sensitivity of the securities portfolio to changes in interest rates.

Our capital actions will continue to balance the need to support growth, maintain capital strength and return excess capital to shareholders. During the quarter, we returned $236 million to shareholders, including $179 million through common stock repurchases. We also increased our quarterly common stock dividend by 20%. In the fourth quarter, we expect to repurchase between $150 million and $200 million of common stock. Based on current conditions, we expect quarterly repurchases to remain within a similar range during 2027. And finally, we continue to target a 14% to 17% annual ROTCE.

With that, I will turn the call back to Jorge for his concluding remarks. Thank you.

Jorge Garcia

Thank you, Lidio. During my first 2 months as CEO, I have been visiting branches, regional offices and customers across our markets. I have experienced firsthand the trust our customers place in us and their deep connection with our teams. I also continue to hear from customers that they are optimistic about Puerto Rico's long-term opportunities, of how vital it is that we play a role in that outcome.

Staying connected also extends to the communities we serve. Two weeks ago, as we celebrated our 133rd anniversary, I joined hundreds of colleagues who volunteered at food banks, youth centers and other nonprofits as part of our Embracing our Communities Day of Service.

These experiences reaffirm what I already knew. What makes Popular special is our people. Our pride and commitment are the foundation of our sustainable success. I am fortunate to step into this role with a strong capital position, a solid franchise, a talented team and real momentum. Our responsibility is to carry that forward and continue creating long-term value for our customers, shareholders, colleagues and our communities.

I am grateful to my colleagues for their commitment and the results they deliver every day. We intend to be active participants in shaping what lies ahead and not simply react to it.

With that, we're now ready to take your questions.

Operator

[Operator Instructions] And our first question comes from the line of Jared Shaw, Barclays.

分析師問答

Jared David Shaw

Maybe just starting with credit and walking through some of the items you spoke about. So the 1 new commercial nonperformer, I mean, I guess, if we -- without that, commercial nonperformers would have been lower. And then when we look at the net charge-off guidance for fourth quarter, I guess that implies about 100 basis points. So is there -- is that going to be some lost content in the -- that commercial loan? Or is that just more overall weaker expectations in the portfolio?

Luis Sousa

This is Luis. I would say that our net charge-off guidance for the fourth quarter mainly reflects our potential scenarios, including the [ C&I bills ] that we have disclosed.

Lidio Soriano

I think if I can add, I mean, what is important is, I mean, we see the core portfolios continue to behave very well. As we said in the prepared remarks, both consumer and mortgage portfolio activated a strong performance in the third quarter, and that's our expectation going to the fourth quarter. The guidance that we provided reflects some of the cases that we're working on.

Jared David Shaw

Okay. Okay. So overall though, apart from the one-offs, you still feel pretty good about credit, it sounds like. Okay. And then any update on the outlook for preferred issuance or any capital restacking beyond the buyback?

Jorge Garcia

Jared, I mean, the rates continue to not be attractive to us. I mean, as we've said, this is really a discretionary transaction. We still have plenty of room to continue our repurchase activity. This is something that makes things better for our capital stack, I mean, optimizes it. And we'll be strategic and take advantage if we see an opportunity. But right now, we're not just going to force a transaction that doesn't make sense.

Jared David Shaw

Okay. If I could just sneak a third one in. Just what's -- do you know what the update of the balance of federal spending is? You talked about continued spending from that $48 billion out there. What's remaining left of allocated but not spent?

Jorge Garcia

Yes, slightly about $43 billion. And one thing important there, we did see a pickup in spend in the third quarter from the FEMA funds that are managed through the local core 3 group. That, basically year-to-date, we're running just slightly below the entire year -- at the end of the third quarter, we're slightly below the total of last year, almost 40% higher than at the same time last year. So we're glad to see a little bit of that pickup.

Operator

Our next question comes from the line of Terry McEvoy of Wells Fargo.

Terence McEvoy

Can you hear me?

Jorge Garcia

Yes. Good morning, Terry, and thank you for picking up coverage. Welcome to the call.

Terence McEvoy

Much appreciated. First question, the new consumer deposit product, was that in response to market demand or customer demand? Are your competitors offering that? And then financially, what would -- what's the full quarter impact it was rolled out in August? And how should we think about maybe a full year impact of what that could mean to fee income?

Jorge Garcia

Yes. So a couple of things. I mean, certainly, it is something that we hear from our customers. They want simpler products, lower fees. So the idea is to launch a product that gives them the opportunity to establish relationships and deepening that relationship that go along with the primacy -- customer primacy that we're targeting.

The other thing of launching the project, it just continues to be part of our strategy to create segment-led strategies. We believe that there's still great opportunity in Puerto Rico for us to be able to deepen and provide more value and enhance functionality to certain segments, both on the retail as well as in the commercial. So that's a big driver.

In terms of the fee, what we did is we did reclassify over 1 million accounts into these new products to be able to give existing clients the benefit and not essentially put the onus on them on having to change accounts. That resulted, I think, with a reduction in the quarter of around $2 million decrease in fee income. So on an annualized basis, it's probably somewhere between $8 million and $10 million. Of course, we expect to be able to gain traction and increase our deposits to offset some of that. And it's embedded in the guide for the fourth quarter, $170 million target for fees for the fourth quarter.

Terence McEvoy

Great. And then maybe as a follow-up, how could a higher-for-longer rate environment impact loan demand? And then on that same theme, are there particular industries within your commercial portfolio that are more sensitive to higher rates that you're monitoring today?

Jorge Garcia

So in the past and when we look at our models and stress tests, we don't see a lot of stress related to 1 or 2 moves in the rate, and certainly not where the rates are at today. In terms of where we are at, higher for longer will help us continue to take benefits of our -- the tailwind of the repricing of our investment portfolio. We certainly look forward to stability. If we can -- the rhythm of change and the movement of, particularly the short-term end of the curve, creates some noise given the exposure we have and the repricing of our public funds.

But overall, higher for longer is favorable for us. We get to take a higher benefit on tax advantages of some of the investments. And we have not found particularly these levels where there's significant stress to our borrowers from those rates. Demand in Puerto Rico continues to be strong. A lot of the transactions are not going to be rate sensitive. We do see some more rate sensitivity in the U.S. at times. But frankly, right now, the pipelines around -- particularly around commercial projects -- I'm sorry, construction projects in the U.S., continues to be strong even looking through to the current rate environment.

Operator

Our next question comes from the line of Timur Braziler of UBS.

Timur Braziler

Starting on the reinvestment rate, I think it was $1.4 billion purchased at 4.3%. I guess why is 4.3% -- I mean, it's a decent amount lower than the 2 and 3-year yields were during the quarter. And I guess, as we roll forward into 4Q and beyond, should that reinvestment rate more so mirror that 2 and 3-year rate? Or are we, call it, 40, 50 basis points below it going forward?

Unknown Executive

Yes. This is [ Juan Pablo ], Treasurer. Yes. I mean part of the reflection is if you recall the quarter, it didn't start out where it ended up, right? So we're effectively purchasing bonds as they mature during the month. And any given period like this one where you start out lower and ended up higher, obviously you're going to miss out on the higher rate, right? So I think of it more as on average during the quarter and not just the endpoint as the quarter. So that's an effect of what we're doing as we got about $1.5 billion, $1.6 billion coming due every quarter, and we just kind of continue that mechanical process.

Lidio Soriano

I would just add to that. I mean, as you see, and we have some of the slides in the appendix, we have a significant amount of investments that we are repricing on a quarterly basis, around 1.5, 1.6, out of which 600, 700 relates to legacy investment that were 1.25%. And even the newer investments were 3.25%. So going forward, we will continue to see a significant pickup in the yield of that portfolio given the repricing dynamics and given the interest rate environment that we have today.

Timur Braziler

Okay. Great. And then maybe looking at the public funds, you guys have been closer in guiding those balances more recently. But I'm wondering, particularly going into the '28 election, is there any kind of empirical data that you can point to as to projects kicking off? Like is there a risk through '27 that some of the public funds that are sitting on balance sheet are actually being utilized, or maybe looking at history is different versus this time when there's a little bit more flush in liquidity? But I guess, what is the way that you guys are framing risk around public funds balances in reference to the election that's coming up 2 years from now?

Jorge Garcia

So I think a couple of things, Timur. I mean number one, yes, I think we would expect some pickup in activity related to municipal spending, particularly at the municipal level, maybe not as much at the central government level. But a couple of things there.

First, remember that there are a lot of projects that are still rebuilding with FEMA and federal funds. A lot of those projects are at the municipal level. So what -- where we think we will see some of the first impact is seen a speed-up or a pickup in the activity, maybe the mayors and the municipalities prioritizing either projects that can -- that are of big scale or that can be completed quickly since that money is going to be coming in from federal funds, that's a flow, right? So in and out, those monies are not sitting on our balance sheet right now.

Other than that, you also have the Federal Oversight Board that still manages for a balanced budget, and the government needs to be able to get those budgets approved and execute to those approved budgets by the Oversight Board. So I mean, so we give ranges, and in those ranges we tend to incorporate scheduled payments like for pensions or kind of the continued value bonds that -- and then some sense of operating accounts, but -- and certainly competition, right? I mean we actively bid on retaining certain excess funds from the government clients.

But in terms of predicting or projecting that we're going to see significant declines because of infrastructure spend out of these funds, that is not something that we think will be significant.

Operator

Our next question comes from the line of Arren Cyganovich of Truist Securities.

Arren Cyganovich

Maybe you could just talk a little bit about the loan growth expectation, a modest slowdown in loan growth into the fourth quarter. Makes sense in terms of the auto and the consumer side. But commercial has been pretty strong over the past couple of quarters. So what's driving the kind of more moderate expectation there into the quarter?

Jorge Garcia

Yes. So certainly, when you look at from the original guidance and where we're at now, the auto portfolio is one of the areas where we've been under our expectations for the year. So that certainly has an impact.

The other thing is that we are trying to be a lot more disciplined in our U.S. business as well. Historically, we drove the teams to kind of hit their budget targets, and that has resulted in a lot of single product clients that we're not deepening those relationships. And we're pushing our teams to really create deeper relationships, lead with deposits. And even in CRE and multifamily transactions, we want to make sure that we have a whole relationship. And that's certainly slowing down the production of our U.S. team.

We're also expecting some payoffs in our construction portfolio in the U.S. like we saw in this quarter. There are strong pipelines coming behind those. But as you can imagine, those construction projects do take a little bit more time to start seeing the effect.

In Puerto Rico, there is still good demand. I think the issue in Puerto Rico is more about supply. We've been benefiting from 6% to 9% growth over the last few years. Some of that growth has been driven by tax incentives, and there's only so many large transactions that can occur in Puerto Rico. So I still see a lot of positive movement in Puerto Rico, a lot of positive demand, but just the scale and supply of it is reducing.

Arren Cyganovich

Okay. I mean, I guess that doesn't -- I know you're not going to give 2027 guidance, but does that impact your view in terms of loan growth post this quarter? I mean it sounds like you have some headwinds there.

Jorge Garcia

I mean we've talked in the past that we have been growing, outpacing the Puerto Rico economy and GDP significantly. And given our size, over time, we should be growing closer or above -- slightly above the Puerto Rico economy.

I think what's important as we look forward, Arren, is that we will continue to see NII growth. When we look at our projections into '27, particularly in this environment, given the tailwinds that we have with the investment portfolio repositioning and the loan demand that we're seeing and the prices -- current prices, we do expect to continue to see creating operating leverage in 2027.

Arren Cyganovich

Okay. And can you just remind me on the ROTCE updated guidance of 14% to 17% that you put out there last quarter -- or I think it was last quarter? That's more of a kind of a longer-term expectation, right? Like just over time, not necessarily expectation for next year?

Jorge Garcia

No, we're -- I mean, I guess, we...

Arren Cyganovich

I know you're earning that now, but I just didn't know if that was like if you're always expecting to earn between that -- seems...

Jorge Garcia

Always it's a tough world, but based on the environment that we're seeing, the balance sheet structure and all our plans and the execution that we're seeing from our teams, we felt very comfortable giving the guidance of the 14% to 17% on an annual basis. And that's what we're driving our teams to.

Lidio Soriano

And I think what is important, we wanted to also be sustainable. So it takes into account potentially different operating environments. So that's why maybe a little bit of a wider range and why so wide. I mean it is, for us, the sustainable part is as important as just hitting the target.

Operator

Our next question comes from the line of Kelly Motta of KBW.

Kelly Motta

Piecing together the outlook for loan growth coming in a little bit weaker, with auto being a higher-yielding category, just wondering as we think through the outlook ahead for specifically loan yields, if there could be some pressure offsetting the rate hikes from just a change in mix, and overall, how new origination yields are coming in.

Jorge Garcia

I think with the higher rates, I mean, those -- the current higher rates impact those consumer loans a lot more, right, than the commercial. And we have been -- if you look over the last, I would say, probably since the Fed started moving rates down, we have been seeing kind of incremental yields on our loan portfolio every quarter. And this quarter, I think, was the first time that we see a decline in those yields as I think the portfolio starts stabilizing.

I mean the way I look at it, I think given the ins and outs of the portfolio, I mean, auto, for example, we -- our originations are, even this quarter where we didn't grow, I think the originations were like $450 million. So it is a significant amount of volume that is coming in. So it's going to depend on, obviously, the credit risk profile of those clients, the terms of those loans. But right now, I don't think loan yield is something that's putting pressure in terms of, as we look forward, it's not a concern for us. Again, the NII, we do see NII coming to expand in 2027. And yes.

Kelly Motta

Got it. Okay. That's helpful. And then on expenses, I appreciate you lowered to the lower end of the guide, which is nice given the incentive compensation with revenue coming in so strong. Just wondering the drivers of that is additional you were better at getting some cost savings out? Or if maybe projects have been kicked out until next year.

Jorge Garcia

We have not made any conscious decisions to move projects. I mean for us, the rhythm of the project is more about capacity, how much we can continue. We've actually thrown in some non-budgeted or unanticipated projects this year. The teams have done a great job in delivering efficiencies. Around $50 million in recurring efficiencies have been implemented and identified. We expect that amount to be a benefit next year. Obviously, it's not -- at some point, we're going to start seeing expense growth again. But the teams have done an awesome job.

The 2% includes the, as you mentioned, profit sharing. We are expecting at this rate to max out that profit sharing payment based on our formulas, and that's all embedded into that guide. But it goes to just a lot of effort from a lot of people that are just -- we call it a lot of bunts and singles, nothing huge to create those efficiencies and savings.

Operator

Our next question comes from the line of Gerard Cassidy, RBC Capital Markets.

Gerard Cassidy

Jorge, now with Terry covering you, maybe you guys can do your call from Portland in July. The weather is nice.

Jorge Garcia

I think October isn't that cold, and pretty.

Gerard Cassidy

It is gorgeous up here today, that's for sure. A question for you. Can you guys share with us how much of your U.S. deferred tax asset do you expect to utilize over the next 2 to 3 years? And what needs to change to support a release of that large valuation allowance? And then what are the implications, if you're able to do that, of course, what are the implications for cash taxes and CET1 capital should that happen or when that happens?

Lidio Soriano

Let me just give you some of the numbers, and then I'll give you what it will take in order for us to be able to utilize more of that DTA. DTA number gross is around $600 million. Net of our allowance of close to $385 million, that gives a net of about $215 million DTA. The majority of that DTA expires between the years 2028 and 2031. And the one way that we can use it is to become more profitable. I mean that's it. I mean the more money we make, the more we're going to be able to use DTA. We have done -- the teams have done a great job of improving profitability in the U.S., so this year and last year. And that's something that, obviously, we feel very proud and something that we continue to work hard in order to realize as much as we can from those NOLs.

Jorge Garcia

One thing, Gerard, the DTA in the U.S. is NOL-based, it's not part of regulatory capital. There are some limitations. So even if you were in a situation where you could reverse more of that DTA, it's not going to have a benefit on CET1.

Now the flip side of that is that the income that the U.S. business is generating, that capital is actually accruing at essentially a pretax level instead of the after-tax amount that you see on a GAAP basis.

Gerard Cassidy

Very good. correct. And then just to circle back to credit, when you think about the large credit that went into nonaccrual in the second quarter and now it's off, of course, and you took a charge as well, and then the large credit that showed up this quarter, when you guys do like a post-op analysis of what went wrong with the credit or the underwriting, what did you learn? Or can you share with us what were some of maybe the shortfalls in the underwriting possibly? Or just really, what did you learn from those 2 experiences?

Lidio Soriano

I mean those 2 experiences in particular, I would say, I mean, part of the learnings, I mean, in one of the cases, it was a client that was extending into a new venture. So I think that's always something that we look very carefully from an underwriting standpoint. So that's something that we need to keep in our teams, as you're diversifying your industry, that's something that also brings risk with it.

I think the other one is a longstanding client, which have a very profitable relationship, over time, is in the food service industry, that over time, competition and market conditions in the island. From there, I mean, I don't know -- I'm not sure, I mean, other than having a closer look add the client and being top of the client on a day-to-day basis, I don't think that from an underwriting perspective, there was anything that we needed to change.

Jorge Garcia

And I think, Gerard, I mean, given our position in Puerto Rico, we want to lend to some of these deals. The telecom transaction, that was a fairly large deal. It makes sense to us as the primary bank in Puerto Rico to lead into an acquisition of a large telecom provider in Puerto Rico. Unfortunately, these are operational issues that the integration of the acquisition didn't go well and we end up having to take the hit for it.

I think the other part that's important is that we've been able to work through a handful of these C&I loans over the last few quarters, but we still have been able to perform, absorb those losses and be able to continue to improve our profitability.

Lidio Soriano

I mean just to finalize, Gerard. I mean when you look at it, we have thousands of relationships, and we have issues with maybe 2 cases last year and 3 cases this year. So just to keep in mind that the performance of our book has been very, very strong, notwithstanding the fact that, every now on then, we may have issues one of our customers.

Operator

[Operator Instructions] Our next question comes from the line of Manuel Navas of Piper Sandler.

Manuel Navas

How should I think about the near-term NIM? I hear you on the NII guide for the year and an improvement for next year. And I just kind of want to think about the near-term NIM and how it could enter next year, especially if there's like a December rate hike as well?

Lidio Soriano

I mean I -- when you look at our NIM, I think we have, as Jorge mentioned earlier in the commentary, we have still a lot of tailwinds related to the repricing of our investment portfolio. So that's going to lead to an increase in asset yields as well as the pricing of some of our short-term assets and short-term liabilities. We have also -- we guided, we said we expect net interest income to continue to grow. It continues to be the guide for us as an organization.

So in that regard, I mean, you think -- you can think of we'll see ascending trajectory that is going to depend upon the mix between assets, our assets between treasuries and investment -- sorry, between investments and loans.

Jorge Garcia

I think the other factor is the level of public deposits, that's really a big driver, Manuel. I mean if we continue to see growth in public deposits, that does put pressure on NIM. It's not good for NIM, but it does contribute nicely to NII. And we'll take the NII growth.

Manuel Navas

Got it. And just switching over to growth for a second, what dynamics would need to come into play for loan growth to accelerate? I hear you that perhaps the tendency is more towards GDP levels of Puerto Rico, that's the longer-term trend. But what would take -- what would give you some tailwind on loan growth?

Jorge Garcia

Yes. I mean I think when -- one of the cool things about going through the accounting and finance world to the CEO role has been able to spend time with clients and spending a lot of time with our customers. And you hear a lot of people enthusiastic about the opportunities in Puerto Rico. And these are people thinking 3, 5, 10 years down the road. And you see some of their projects and more of their vision, some of those dreams. And if they start coming [ through petition ], you see acceleration, we're able to bring in and see population growth in the U.S., attract professionals and the diaspora of Puerto Rico, you see $4 billion of manufacturing jobs -- I'm sorry, $4 billion of manufacturing investment announced. I still think there's coming in, if you're seeing a shift in population and the ecosystem that goes around some of those investments, certainly, those are things that could help the entire economy of Puerto Rico, and we'll benefit from that lift.

Manuel Navas

I appreciate that. Last question here is shifting over to the ROTCE guide, what are kind of the biggest drivers of the high end of that guide or the low end of that? It's through the cycle. But as you look into next year, just kind of thoughts on what could really drive it towards the high end, but potentially what could drive it to the lower end?

Jorge Garcia

We love the ROTCE guidance because it captures everything, Manuel. So certainly, when you look at that band, credit cost provision is a factor, NII growth, continued NII growth is a positive factor. Our ability to be able to execute on our segment-led strategies in Puerto Rico and deepening deposit relationships in Puerto Rico, which we believe we can do, that will help the top end of that range. So these are all the things that drive profitability in banks, and it's no different for us.

Operator

Thank you. I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.