Popular (NasdaqGS:BPOP) Q4 2025 Earnings call January 27, 2026 10:00 AM ET Speaker3I'd like to hand over to Paul Cardillo. Please go ahead.Speaker4Good morning, and thank you for joining us. With me on the call today is our President and CEO, Javier Ferrer, our CFO, Jorge García, and our CRO, Lidio Soriano. They will review our results for the full year and fourth quarter and then answer your questions. Other members of our management team will also be available during the Q&A session. Before we begin, I wo ...

Financial Data and Key Metrics Changes - The company reported record revenue of $655 million for the full year 2025, with GAAP EPS for Q4 at $0.31 and adjusted EPS at $0.33, reflecting a quarter-over-quarter improvement from $0.29 [4][12] - Net interest income grew by $6.2 million or 4.6% quarter-over-quarter, with net interest margin improving to 3.69% [12][17] - Non-interest income increased by $5.5 million or 17% quarter-over-quarter, contributing to a total revenue increase of $11.8 million or 7% [12][18] Business Line Data and Key Metrics Changes - Average loans grew by $414 million quarter-over-quarter, with end-of-period loans increasing by $66 million, totaling $13 billion [13][14] - Commercial loans increased by $162 million or 7.1% quarter-over-quarter and $509 million or 26% year-over-year [14] - The company introduced a new franchise finance vertical and significantly grew its SBA lending activity, ranking among the top 50 originators in the U.S. [8] Market Data and Key Metrics Changes - Average total deposits grew by $475 million quarter-over-quarter, with customer non-brokered average deposits increasing by $507 million [15][16] - The company has a diversified deposit book with an average balance of $19,000 across over 723,000 accounts [16] - The cost of deposits decreased by 2 basis points to 1.53%, benefiting from proactive management and late-year rate cuts [16] Company Strategy and Development Direction - The company aims for continued growth in 2026, focusing on optimizing operations, expanding its financial center network, and enhancing consumer and commercial lines of business [9][22] - The successful integration of the Penns Woods acquisition has positioned the company among the top 100 banks in the U.S. by assets [5][9] - The company is committed to returning more than half of its profits to shareholders through dividends, maintaining a strong focus on organic growth [9][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the trajectory for 2026, providing guidance for revenues between $710 million and $730 million and net interest margin in the low 3.70s [22] - The company anticipates loan growth in the low-to-mid single digits and deposit growth in the low single digits for 2026 [22] - Management noted a focus on reducing classified assets and maintaining strong credit quality metrics [20][21] Other Important Information - The company has been recognized by Newsweek as one of America's best regional banks for three consecutive years [7] - The adjusted efficiency ratio improved to 59.5% in Q4, reflecting ongoing expense management discipline [19] Q&A Session Summary Question: Can you comment on the trend line with expenses? - Management indicated that expenses typically see increases in Q1 due to seasonal factors, but overall guidance suggests a lower level than Q4 [27][28] Question: Is there a non-recurring element in Q4 performance? - Management confirmed that there was a lift in Q4 due to year-end adjustments in incentive plans [29] Question: What is the impact of purchase accounting on NIM? - Management clarified that the guidance includes normal purchase accounting accretion and that they expect to maintain NIM even with potential rate cuts [30][31] Question: Can you provide details on the SBA business growth expectations? - Management highlighted the flexibility in balancing fee income and retaining loans on the balance sheet, with a focus on quality business and customer retention [44][46] Question: What is the appetite for future M&A? - Management stated that while they are open to conversations, the focus remains on executing the current acquisition and driving organic growth [83][84]

Core Insights - Bank of America's loan book expanded by 8% year over year to $1.17 trillion as of December 31, 2025, with commercial balances driving most of the growth at 12% [1][9] - Consumer lending growth was more modest at 4%, indicating a cautious borrowing appetite among households [5][9] Loan Composition - Commercial loans accounted for the majority of quarterly growth, with a 12% increase from the prior year, reflecting diverse demand across U.S. and non-U.S. markets [4][9] - Consumer balances increased by 4%, primarily driven by credit cards and direct/indirect consumer lending, suggesting selective borrowing behavior [5][9] Future Outlook - The sustainability of commercial momentum is contingent on business confidence and macroeconomic clarity, while faster rate cuts could compress net interest income [6][7] - The next few quarters will depend on whether commercial demand remains strong as rates decrease and if credit costs are kept in check [7] Peer Comparison - JPMorgan's total loans reached $1.49 trillion, with wholesale loans growing by 17% year over year, while consumer loans increased by 4% [10] - Citigroup reported $752 billion in loans, with corporate loans growing by 14% year over year, while consumer loans also rose by 4% [11] Valuation and Earnings Estimates - Bank of America shares have increased by 7.9% over the past six months, trading at a price-to-tangible book ratio of 1.89X, below the industry average [12] - The Zacks Consensus Estimate for Bank of America's earnings implies year-over-year growth of 13.1% for 2026 and 14.4% for 2027, although recent estimates have been revised lower [13]

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Core Viewpoint - South Plains Financial reported strong financial results for the fourth quarter and full year 2025, highlighting earnings growth, net interest margin (NIM) expansion, and strategic initiatives, while also discussing expectations for loan growth in 2026 and the pending acquisition of BOH Holdings and its banking subsidiary, Bank of Houston [4][6][16]. Financial Performance - Fourth-quarter diluted EPS was $0.90, down from $0.96 in the previous quarter, primarily due to a larger provision for credit losses and one-time interest income items [2]. - Full-year 2025 results included a 17.8% increase in diluted EPS, 33 basis points of NIM expansion, and tangible book value per share growth of over 14% to $29.05 [3][6]. - Net interest income for the fourth quarter was $43 million, essentially unchanged from the third quarter [2]. Loan Growth and Yields - Loans held for investment increased by $91 million to $3.14 billion in the fourth quarter, driven by organic growth in multifamily property loans and other commercial loans [7][9]. - Loan yields were 6.79% in the fourth quarter, down from 6.92% in the linked quarter, with expectations for moderation in yields as Federal Reserve rate cuts take effect [8][12]. Acquisition of BOH Holdings - The pending acquisition of BOH Holdings/Bank of Houston is expected to close in early Q2 2026, projected to be about 11% accretive to earnings in 2027 [5][16]. - The combined company is expected to have over $1 billion in loans in the Houston region, enhancing scale and customer relationships [15][17]. Deposit Dynamics - Deposits ended the quarter at $3.87 billion, steady from the linked quarter, with a 7% increase from year-end 2024 [13]. - The cost of deposits decreased by 9 basis points to 2.01%, attributed to deposit repricing following Federal Reserve rate reductions [14]. Credit Quality and Expenses - The allowance for credit losses was stable at 1.44% of total loans held for investment, with a provision for credit losses of $1.8 million in the fourth quarter [18]. - Non-interest income was $10.9 million in the fourth quarter, with a slight decline due to lower mortgage banking revenue [20]. - Non-interest expense remained unchanged at $33 million, with expectations for modest increases in the first quarter due to hiring and project work [21]. Capital and Returns - Tangible common equity to tangible assets increased to 10.61% at quarter-end, and the company authorized a $0.17 per share quarterly dividend, marking the 27th consecutive dividend [22].

Loan Production and Growth - The company reported robust overall loan growth, with $374 million in new loans originated for the full year, which is 79% higher than the prior year [1][6] - In the fourth quarter, total loan originations were $141 million, including $106 million funded, with over 90% of that in commercial loans [2][6] - The loan pipeline is approximately 30% larger than a year ago, with expectations for consistent mid-single-digit production in 2026 [6][7] Financial Performance - The company experienced a GAAP net loss of $39.5 million in the fourth quarter due to a $69 million loss from a securities portfolio repositioning, but non-GAAP net income was $9.4 million [3][5][15] - Core earnings and net interest margin improved, with net interest margin reaching 3.42% in December, reflecting a 30 basis point expansion [4][16][17] - Non-interest income remained consistent with the prior quarter, while non-interest expense increased slightly [18] Credit Quality and Management - Classified loans decreased by 35% to 1.5% of total loans, and non-accrual loans fell to 1.3% [4][20] - The allowance for credit losses stood at 1.42% of total loans, with a minor provision for credit losses recorded in the fourth quarter [22] Deposit Dynamics - Total deposits increased in the fourth quarter, driven by higher balances from long-term clients and new relationships, with a total deposit cost of 1.17% [8][9] - The bank opened nearly 1,000 accounts during the period, with about 45% being new to the bank, contributing to a growing deposit base [11] Capital Actions and Future Outlook - The company plans to target a mid-single-digit loan growth in 2026, with potential for better performance depending on payoffs [7] - Management expects approximately $0.40 of EPS accretion and about a 25-basis-point lift in net interest margin over the next 12 months following capital replenishment [5][13]

Core Insights - The company is enhancing its fee income through the introduction of SBA loans and first lien HELOCs, with $8 million in SBA originations in 2025 and over $100 million by First Savings [1][3] - The acquisition of First Savings Financial Group, announced on September 25, adds approximately $2.4 billion in assets and expands the company's presence in Southern Indiana [3][5] - The company reported a 9% loan growth for the quarter, with earnings per share at $0.98 and a return on assets (ROA) of 1.22% [3][4] Financial Performance - Year-to-date net income reached $167.5 million, a 23.5% increase from the previous year, with earnings per share up 25.5% to $2.90 [5] - The efficiency ratio was reported at 55%, indicating strong operational performance [3] - Total revenues in Q3 showed growth in both net interest income and noninterest income, leading to pretax pre-provision earnings of $70.5 million [15] Loan and Deposit Growth - The company achieved $268 million in commercial loan growth for the quarter, with a year-to-date total of $699 million [8] - Consumer segment deposits increased by $96 million, with non-maturity categories growing at nearly 5% annualized [10][11] - The total loan portfolio yield increased to 6.4%, driven by loan originations and refinances [17] Asset Quality - Nonperforming assets (NPA) plus loans 90 days past due totaled 0.51%, down from 0.62% a year ago [6] - The allowance for credit losses (ACL) was robust, with a coverage ratio of 1.43% [17][24] - The company reported net charge-offs of $5.1 million for the quarter, maintaining strong credit quality across its portfolios [17][24] Strategic Outlook - The company is focused on building a community bank model in Southern Indiana, leveraging past successful acquisitions [2] - There is confidence in maintaining loan growth and increasing market share, with stable pipelines for the fourth quarter [9][40] - The company plans to continue optimizing its balance sheet and exploring opportunities for higher-yielding assets [35][67]

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Financial Data and Key Metrics Changes - Webster Financial generated a 17% ROTCE and a 1.2% ROA for the full year 2025, with EPS up 10% year-over-year [6] - Loans grew by 8% and deposits by 6% over the year, while tangible book value per share increased by 13% [6] - The company repurchased 10.9 million shares, enhancing capital distributions to shareholders [6] Business Line Data and Key Metrics Changes - In the fourth quarter, loans increased by $1.5 billion or 2.8%, with a full-year increase of 7.8%, primarily driven by commercial loan categories [12] - Classified commercial loans decreased by 7% and nonperforming loans were down 8%, indicating progress in credit remediation [8][15] - HSA Bank is expected to drive $1 billion-$2.5 billion in incremental deposit growth over the next five years, with $50 million-$100 million growth anticipated in 2026 [10] Market Data and Key Metrics Changes - The overall asset quality remains strong, with a decline in problem assets expected to continue [9] - The company experienced a seasonal decline in public funds of $1.2 billion but backfilled this with corporate deposits [12] - The average cost of deposits decreased to 1.91% from 1.99% in the previous quarter, reflecting competitive pricing [43] Company Strategy and Development Direction - Webster Financial's strategy in 2025 focused on execution and enhancing operational capabilities while investing in non-traditional banking verticals [6] - The company aims to maintain growth while ensuring resiliency and adaptability in a supportive macroeconomic environment [20] - Investments are being made in technology and marketing to enhance client outreach, particularly in the HSA segment [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's ability to grow sustainably while managing risks effectively [6][20] - The outlook for 2026 anticipates loan growth of 5%-7% and deposit growth of 4%-6%, with expected revenue of $3 billion [17] - Management noted that the banking industry is experiencing positive momentum from macroeconomic and regulatory tailwinds [20] Other Important Information - The company acquired SecureSave, a provider of employer-sponsored emergency savings accounts, which is expected to enhance its offerings in the healthcare vertical [144] - The capital management strategy includes a focus on organic growth and potential share repurchases, with a CET1 target of 10.5% in the long term [96] Q&A Session Summary Question: Update on loan growth and partnership with Marathon - Management indicated that while the partnership is operational, it has not yet materially impacted loan growth, but they remain optimistic about future contributions [28] Question: Expense trends and investments in systems - Most investments are focused on marketing and client outreach to identify potential HSA account holders, with technology investments already in place [30] Question: Impact of potential changes in regulatory thresholds on expenses - Management noted that anticipated changes could provide flexibility in capital allocation, but overall strategic growth plans remain unchanged [34] Question: NIM trajectory for early 2026 - The company expects to maintain a NIM of around 335 basis points throughout 2026, with some seasonal variability [38] Question: Loan growth guidance and competition - Management explained that the 5%-7% loan growth guidance reflects a balance between growth and profitability, considering competitive pressures [61] Question: Non-interest-bearing deposits trend - There is a slowing pace in reductions of non-interest-bearing deposits, indicating a potential inflection point [113]

Financial Data and Key Metrics Changes - The company reported a net income of $90.5 million for Q4 2025, a 16.5% increase from $77.7 million in Q3 2025 [4][39] - Diluted earnings per share increased by 18.3% to $1.33 in Q4, up from $1.13 in Q3 [4][39] - For the full year 2025, net income was $315.1 million, a 10.1% increase from $286 million in 2024 [4][39] - The net interest margin increased to 3.36% in Q4 from 3.31% in Q3 [10][45] Business Line Data and Key Metrics Changes - Total gross loans grew by $42 million, driven by increases of $80 million in commercial real estate (CRE) loans and $17 million in residential loans [5][39] - Non-accrual loans were 0.6% of total loans as of December 31, 2025, down $53.3 million to $112.4 million compared to the prior quarter [7][42] - The average loan-to-value of CRE loans remained steady at 49% [5][40] Market Data and Key Metrics Changes - Total deposits increased by $373 million or 7.6% on an annualized basis during Q4, primarily driven by $366 million increases in core deposits [8][44] - As of December 31, 2025, total uninsured deposits were $9.3 billion, representing 44.6% of total deposits [8][44] Company Strategy and Development Direction - The company expects loan growth in 2026 to be between 3.5% and 4.5% [5][39] - The company plans to announce a new stock buyback program after approvals are received, with $12 million remaining under the current buyback program [4][39] Management's Comments on Operating Environment and Future Outlook - Management anticipates further benefit to the net interest margin from declining deposit costs supported by the fixed-rate proportion of the loan portfolio [10][45] - The effective tax rate for Q4 2025 was 20.23%, with expectations for 2026 to be between 20.5% and 21.5% [12][46] Other Important Information - The company recorded $17.2 million in provisions for credit losses in Q4 compared to $28.7 million in Q3 [8][43] - The Tier 1 risk-based capital ratio increased to 13.27% from 13.15% in Q3 [12][47] Q&A Session Summary Question: Can you speak more in terms of what you're assuming for deposit betas embedded in that NIM outlook? - The company is assuming deposit betas in the 60% range, with market competition remaining rational in Q4 [16][18] Question: What are you seeing in terms of credit and any migration into criticized and overall trends? - There are no particular trends observed, but some loans have been downgraded to special mention due to not meeting certain debt covenants [20][50] Question: Have you seen an elevated level of competition for incremental loan growth? - There is strong competition for the right type of assets and loans, particularly in the C&I segment, which has seen the most competition [29][52]