Popular, Inc. Announces Third Quarter 2024 Financial Results

• Net income of $155.3 million in Q3 2024, compared to net income of $177.8 million in Q2 2024.
• Net interest income of $572.5 million, an increase of $4.2 million compared to Q2 2024.
• Net interest margin of 3.24% in Q3 2024, compared to 3.22% in Q2 2024; net interest margin on a taxable equivalent basis of 3.47% in Q3 2024, compared to 3.48% in Q2 2024.
• Non-interest income of $164.1 million, compared to $166.3 million in Q2 2024.
• Operating expenses amounted to $467.3 million, down by $2.3 million when compared to Q2 2024.
• Credit quality metrics remained stable:
  • Non-performing loans held-in-portfolio ("NPLs") increased by $19.6 million from Q2 2024; NPLs to loans ratio remained flat at 1.0%;
  • Net charge-offs ("NCOs") increased by $4.9 million from Q2 2024; annualized NCOs to average loans held-in-portfolio at 0.65% vs. 0.61% in Q2 2024;
  • Allowance for credit losses ("ACL") to loans held-in-portfolio at 2.06% vs. 2.05% in Q2 2024; and
  • ACL to NPLs at 206.0% vs. 213.6% in Q2 2024.
• Money market and investment securities ending balances decreased by $1.8 billion from Q2 2024
  • Average quarterly balances decreased by $808.2 million.
• Loans ending balances, excluding loans held-for-sale, amounted to $36.2 billion, an increase of $603.3 million from Q2 2024.
  • Average quarterly loan balances increased by $384.8 million.
• Ending deposit balances amounted to $63.7 billion, a decrease of $1.9 billion from Q2 2024.
  • Average quarterly deposit balances decreased by $519.9 million.
• Completed the repurchase of 599,096 shares of common stock for $58.8 million at an average price of $98.11 per share, under the previously announced share repurchase authorization.
• Common Equity Tier 1 ratio of 16.42%, Common Equity per share of $80.35 and Tangible Book Value per share of $69.04 at September 30, 2024, an increase of $6.33 per share from Q2 2024.

Popular, Inc. (the "Corporation," "Popular," "we," "us," "our") (NASDAQ:BPOP) reported net income of $155.3 million for the quarter ended September 30, 2024, compared to net income of $177.8 million for the quarter ended June 30, 2024.

Ignacio Alvarez, Chief Executive Officer, said: "Our results for the third quarter reflected an increase in net interest income, which was offset by a higher provision for credit losses. The increase in the provision was related in part to loan growth of nearly 2% during the quarter. Credit quality trends remained stable. While consumer portfolios reflected increased delinquencies, they remain slightly below pre-pandemic levels.

Capital continues to be a source of strength, evidenced by the increase in our dividend and stock repurchases. We also experienced healthy increases in our tangible book value per share and TCE ratio.

We continued to advance our business transformation, making meaningful progress in modernizing our customer channels and improving the customer experience. We are optimistic about the future, as we continue to leverage the opportunities stemming from our robust balance sheet, our dedicated team and extensive customer base."

Non-GAAP Financial Measures

This press release contains financial information prepared under accounting principles generally accepted in the United States ("U.S. GAAP") and non-GAAP financial measures. Management uses non-GAAP financial measures when it has determined that these measures provide more meaningful information about the underlying performance of the Corporation's ongoing operations. Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies.

Net interest income on a taxable equivalent basis

Net interest income, on a taxable equivalent basis, is presented with its different components in Tables D, E and F. Net interest income on a taxable equivalent basis is a non-GAAP financial measure. Management believes that this presentation provides meaningful information since it facilitates the comparison of revenues arising from taxable and tax-exempt sources.

Tangible Common Equity

The tangible common equity, tangible common equity ratio, tangible assets and tangible book value per common share are non-GAAP financial measures. Tangible common equity ratio and tangible book value per common share in conjunction with more traditional bank capital ratios are commonly used by banks and analysts to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase accounting method for mergers and acquisitions. Neither tangible common equity nor tangible assets or related measures should be used in isolation or as a substitute for stockholders' equity, total assets or any other measure calculated in accordance with GAAP.

Refer to Table R for a reconciliation of total stockholders' equity to tangible common equity and total assets to tangible assets.

Net interest income and net interest income on a taxable equivalent basis (non-GAAP )

Net interest income for the quarter ended September 30, 2024, was $572.5 million, an increase of $4.2 million when compared to $568.3 million for the previous quarter. Net interest margin for the third quarter of 2024 was 3.24% compared to 3.22% in the prior quarter.

Net Interest Income and Net Interest Margin Taxable Equivalent

Net interest income on a taxable equivalent basis for the third quarter of 2024 was $612.9 million, compared to $614.8 million in the previous quarter, a decrease of $1.8 million. Net interest margin on a taxable equivalent basis for the third quarter of 2024 was 3.47%, compared to 3.48% in the second quarter of 2024 driven by lower exempt income from U.S. Treasury Securities.

The main variances in net interest income and net interest margin on a taxable equivalent basis were:

• lower interest income from investment securities by $14.6 million due to lower volume of U.S. Treasury Bills by $1.2 billion due to the slow down in the reinvestment activity of matured investments, in part due to a reduction in average deposit balances during the quarter of $519.9 million, mainly P.R. low cost deposits, and funding loan growth; and
• higher interest expense from deposits by $11.0 million, due to higher cost of interest-bearing deposits by eight basis points. In Puerto Rico, government interest-bearing deposits increased by two basis points, and their average balances increased by $176.1 million quarter-over-quarter. This cost of deposits during the quarter was further impacted by a 21 basis points increase in the overall cost of time deposits, including the full quarter effect of the repricing of certain P.R. government deposits managed by the Corporation's fiduciary services division, which were repriced late in the second quarter;

partially offset by:

• higher income from money market investments by $7.7 million due to higher volumes by $562.7 million compared to the previous quarter; and
• higher interest income from loans by $16.3 million due to a higher average loan balance and higher yields, mainly in the commercial, mortgage and auto loans portfolio.

Net Interest Income and Net Interest Margin (Banco Popular de Puerto Rico Segment)

Net interest income for the Banco Popular de Puerto Rico ("BPPR") segment amounted to $488.0 million for the third quarter of 2024, a decrease of $0.7 million when compared to $488.7 million in the previous quarter. Net interest margin in the BPPR segment increased from the second quarter of 2024 by one basis points to 3.41%. The most significant variances quarter-over-quarter were:

• interest income from investment securities decreased by $9.9 million, primarily due to a $1.3 billion reduction in the volume of U.S. Treasury bills. This decline was mainly caused by maturities and a slowdown in reinvestment, partly due to support loan growth and a lower deposit balance; and
• interest expense on deposits increased by $6.9 million, mainly driven by P.R. government deposits that increased two basis points or $4.7 million quarter-over-quarter. Time deposit costs went up by $2.1 million or a 24-basis point increase, driven by the full quarter effect of the repricing of certain P.R. government deposits managed by the Corporation's fiduciary services division. The total deposit cost for the quarter was 1.89%, a six-basis point increase from the prior quarter;

partially offset by:

• an increase of $12.8 million in interest income from loans, primarily driven by a higher average loan balance across all portfolios. The most significant contributions to the quarter-over-quarter variance came from commercial loans, auto loans, and mortgage loans, which increased by $4.1 million, $2.9 million, and $2.2 million, respectively; and
• higher income from money market investments by $3.6 million due to higher volumes by $239.9 million.

Net Interest Income and Net Interest Margin (Popular Bank Segment)

Net interest income and net interest margin for the Popular Bank ("PB", or "Popular U.S.") segment increased compared to the previous quarter by $7.3 million and 13 basis points and totaled $93.1 million and 2.73%, respectively. The most significant variances quarter-over-quarter contributing to net interest income and net interest margin for PB were:

• interest income from money markets and investment securities increased by $5.3 million, mainly due to higher volume of money market investments by $284.0 million resulting from higher average deposit balances; and
• interest income from loans increased by $3.2 million mainly due to a higher yield in the commercial loan portfolio by 12 basis points;

partially offset by:

• total interest expense on deposits in PB increased by $1.4 million primarily due to an increase in the average balance of time deposits of $307.0 million partially offset by a decrease in time deposit costs of 23 basis points, driven by changes in the cost of intercompany deposits. When compared to the previous period, the overall cost of deposits fell by eight basis points.

Non-interest income

Non-interest income amounted to $164.1 million for the quarter ended September 30, 2024, a decrease of $2.2 million when compared to $166.3 million for the quarter ended June 30, 2024. The variance in non-interest income was primarily due to lower income from mortgage banking activities by $3.1 million, mainly due to a decrease in the fair value of Mortgage Servicing Rights ("MSRs") driven by portfolio runoff, a slight increase in prepayment speeds and lower estimated escrow float earnings.

Refer to Table B for further details.

Operating expenses

Operating expenses for the third quarter of 2024 totaled $467.3 million, a decrease of $2.3 million when compared to the second quarter of 2024. The variance in operating expenses was driven primarily by:

• lower professional fees by $11.0 million mainly due to a decrease of $6.1 million in consulting fees related to corporate initiatives. The remaining decrease in professional fees is mainly attributed to lower legal service fees and equity compensation granted to directors during the second quarter of 2024;
• lower operational losses by $6.1 million due to a buildup of reserves for operational losses during the second quarter of 2024; and
• lower processing and transactional services expenses by $4.8 million mainly due to lower debit card issuance costs and point of service (POS) processing fees;

partially offset by:

• higher technology and software expenses by $8.7 million mainly driven by an increase of $3.0 million in IT project consulting fees, higher consulting fees for cybersecurity and fraud prevention initiatives, and higher software amortization expenses;
• higher personnel costs by $4.4 million mainly due to higher salary expense and contributions to employee savings plans resulting from annual salary revisions and merit increases effective in July 2024; partially offset by a decrease in restricted shares and incentive compensation expenses;
• higher other taxes expense by $2.4 million mainly due to an increase in municipal license tax and expenses related to regulatory examination fees in BPPR; and
• lower other real estate owned (OREO) benefit by $3.1 million mainly due to lower gains on sale of mortgage and commercial properties.

Full-time equivalent employees were 9,246 as of September 30, 2024, compared to 9,241 as of June 30, 2024.

For a breakdown of operating expenses by category refer to Table B.

Income taxes

For the quarter ended September 30, 2024, the Corporation recorded an income tax expense of $42.5 million, compared to an income tax expense of $40.5 million for the previous quarter.

The effective tax rate ("ETR") for the third quarter of 2024 was 21.5%, compared to 18.5% for the previous quarter.

The ETR of the Corporation is impacted by the composition and source of its taxable income. The Corporation expects its ETR for the year 2024 to be within a range from 21% to 23%.

Credit Quality

The Corporation continued to reflect favorable credit quality metrics in the third quarter of 2024 when compared to the previous quarter. While non-performing loans ("NPLs"), net charge offs ("NCOs") and inflows to NPLs remained below historical averages, consumer portfolios reflected increased delinquencies and NCOs for the quarter primarily driven by auto loans. The mortgage and commercial portfolios continue to operate with low level of delinquencies and NCOs. The Corporation continues to closely monitor changes in the macroeconomic environment and borrower performance given higher interest rates and inflationary pressures. Management believes that the improvements over recent years in risk management practices and the overall risk profile of the Corporation's loan portfolios position Popular to continue to operate successfully under the current environment.

The following presents credit quality results for the third quarter of 2024:

Non-Performing Loans and Net Charge Offs

Total NPLs increased by $19.6 million compared to the previous quarter. Excluding consumer loans, inflows of NPLs held-in-the-portfolio saw a decrease of $7.7 million in the third quarter of 2024. The ratio of NPLs to total loans held in the portfolio remained steady at 1.0%, consistent with the prior quarter's ratio. The drivers of these changes are mainly related to the following:

• In the BPPR segment, NPLs increased by $1.9 million, mainly driven by auto loans NPLs with a $8.5 million increase, offset in part by lower mortgage loans NPLs by $5.9 million. Excluding consumer loans, inflows to NPLs in the BPPR segment decreased by $4.5 million compared to the previous quarter.
• In the PB segment, NPLs increased by $17.6 million driven by a single $17.1 million mortgage loan. Inflows to NPLs, excluding consumer loans, decreased by $3.2 million, driven by lower inflows in the commercial portfolio by $19.6 million, offset in part by a single mortgage relationship.

Total NCOs of $58.5 million, increased by $4.9 million when compared to the second quarter of 2024. The Corporation's ratio of annualized NCOs to average loans held-in-portfolio was 0.65%, compared to 0.61% in the second quarter of 2024. The drivers of these changes are mainly related to the following:

• In the BPPR segment, NCOs increased by $5.3 million quarter-over-quarter, mainly driven by higher consumer NCOs by $8.6 million. NCOs increase in the consumer portfolio was mostly related to auto loans by $6.6 million.
• In the PB segment, NCOs remained flat quarter-over-quarter.

Refer to Table N for further information on NCOs and related ratios.

Other Real Estate Owned Properties ("OREO")

As of September 30, 2024, the Corporation's OREO portfolio amounted to $63.0 million, a decrease of $7.2 million when compared to the second quarter of 2024. The decrease in OREO assets was driven by sales of residential properties in the BPPR segment.

Refer to Table L for additional information and related ratios.

Allowance for Credit Losses ("ACL") and Provision for Credit Losses ("PCL")

The ACL as of September 30, 2024 amounted to $744.3 million, an increase of $14.2 million when compared to the second quarter of 2024.

In the BPPR segment, the ACL increased by $22.6 million driven by an increase of $13.9 million in reserves for commercial loans and an $8.4 million increase in reserves for consumer portfolios. These increases were mainly due to a combination of growth in the commercial portfolio and changes in credit quality trends for the auto and credit cards portfolio. In the PB segment, the ACL decreased by $8.3 million from the previous quarter, mainly driven by lower reserves for the commercial and construction portfolios due to improvements in credit quality and lower balances.

The Corporation's ratio of the ACL to loans held-in-portfolio was 2.06% in the third quarter of 2024, compared to 2.05% in the previous quarter. The ratio of the ACL to NPLs held-in-portfolio was 206.0%, down from 213.6% in the previous quarter.

The provision for loan losses for the loan and lease portfolios for the third quarter of 2024 was $72.8 million, compared to $44.2 million in the previous quarter. The provision loan losses for the BPPR segment amounted to $77.2 million, compared to $48.6 million in the previous quarter, an increase of $28.6 million largely driven by the commercial loan growth and changes in credit quality trends for the auto loans portfolios. The PB segment had a release of $4.4 million, consistent with the previous quarter and driven by improvements in credit quality.

The provision for loan losses for the loan and lease portfolios, along with the $0.5 million reserve release related to unfunded loan commitments and the $0.9 million reserve release in the Corporation's investment portfolio for the third quarter of 2024, are consolidated and shown together under the provision for credit losses in our Consolidated Statement of Operations. For the third quarter, the provision for credit losses amounted to $71.4 million, up from $46.8 million in the previous quarter.

Total assets amounted to $71.3 billion at September 30, 2024, a decrease of $1.5 billion from the second quarter of 2024, driven by:

• a decrease in securities available-for-sale ("AFS") of $1.4 billion, mainly due to repayments and maturities, partially offset by a decrease in the unrealized losses of AFS securities of $378.9 million;
• a decrease in other assets of $404.6 million, driven by unsettled trade receivables related to proceeds from maturities of U.S. Treasury Notes and interest payments from the second quarter of 2024 which were received in the third quarter; and
• a decrease in money market investments of $320.6 million, mainly driven by lower deposits and deployment of funds to support loan growth;

partially offset by:

• an increase in loans held-in-portfolio by $603.3 million, primarily in BPPR with an increase of $582.1 million across most portfolios, particularly commercial loans, while PB's increased by $21.2 million.

Total liabilities decreased by $1.9 billion from the second quarter of 2024, driven by:

• a decrease of $1.9 billion in deposits, mainly driven by interest bearing deposit accounts in BPPR, including the P.R. government demand accounts, offset by an increase in time deposits at PB.

Stockholders' equity increased by $417.8 million from the second quarter of 2024 mainly due to the change in the accumulated other comprehensive loss driven by the decrease in net unrealized losses in the portfolio of AFS securities of $326.1 million and the amortization of unrealized losses from securities previously reclassified to HTM of $36.3 million, net of tax effect, coupled with retained earnings resulting from the quarter's net income of $155.3 million, partially offset by common and preferred dividends declared during the quarter of $45.0 million and by an increase in Treasury Stock due to the repurchases of 599,096 shares of common stock for $58.8 million during the quarter as part of the previously announced authorization.

The Corporation is in the process of completing its annual goodwill impairment test, using July 31, 2024 as the evaluation date. The Corporation expects to finalize its evaluation prior to the filing of its Form 10-Q for the quarter ended September 30, 2024 with the Securities and Exchange Commission. Any impairment of goodwill would result in a non-cash expense, net of tax impact. A charge to earnings related to goodwill impairment would not materially impact regulatory capital and tangible capital calculations.

Common Equity Tier 1 ratio ("CET1"), common equity per share and tangible book value per share were 16.42%, $80.35 and $69.04, respectively, at September 30, 2024, compared to 16.48%, $73.94 and $62.71, respectively, at June 30, 2024. Refer to Table A for capital ratios.

Cautionary Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including without limitation those regarding Popular's business, financial condition, results of operations, plans, objectives and future performance. These statements are not guarantees of future performance, are based on management's current expectations and, by their nature, involve risks, uncertainties, estimates and assumptions. Potential factors, some of which are beyond the Corporation's control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Risks and uncertainties include, without limitation, the effect of competitive and economic factors, and our reaction to those factors, the adequacy of the allowance for loan losses, delinquency trends, market risk and the impact of interest rate changes (including on our cost of deposits), our ability to attract deposits and grow our loan portfolio, capital market conditions, capital adequacy and liquidity, the effect of legal and regulatory proceedings, new regulatory requirements or accounting standards on the Corporation's financial condition and results of operations, the occurrence of unforeseen or catastrophic events, including extreme weather events, pandemics, man-made disasters or acts of violence or war, as well as actions taken by governmental authorities in response thereto, and the direct and indirect impact of such events on Popular, our customers, service providers and third parties. Other potential factors include Popular's ability to successfully execute its transformation initiative, including, but not limited to, achieving projected earnings, efficiencies and return on tangible common equity and accurately anticipating costs and expenses associated therewith, imposition of additional or special FDIC assessments, changes to regulatory capital, liquidity and resolution-related requirements applicable to financial institutions in response to recent developments affecting the banking sector and the impact of bank failures or adverse developments at other banks and related negative media coverage of the banking industry in general on investor and depositor sentiment regarding the stability and liquidity of banks. All statements contained herein that are not clearly historical in nature, are forward-looking, and the words "anticipate," "believe," "continues," "expect," "estimate," "intend," "project" and similar expressions, and future or conditional verbs such as "will," "would," "should," "could," "might," "can," "may" or similar expressions, are generally intended to identify forward-looking statements.

More information on the risks and important factors that could affect the Corporation's future results and financial condition is included in our Form 10-K for the year ended December 31, 2023, our Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024 and the Form 10-Q for the quarter ended September 30, 2024, to be filed with the Securities and Exchange Commission. Our filings are available on the Corporation's website (www.popular.com) and on the Securities and Exchange Commission website (www.sec.gov). The Corporation assumes no obligation to update or revise any forward-looking statements or information which speak as of their respective dates.

About Popular, Inc.

Popular, Inc. (NASDAQ:BPOP) is the leading financial institution in Puerto Rico, by both assets and deposits, and ranks among the top 50 U.S. bank holding companies by assets. Founded in 1893, Banco Popular de Puerto Rico, Popular's principal subsidiary, provides retail, mortgage and commercial banking services in Puerto Rico and the U.S. Virgin Islands. Popular also offers in Puerto Rico auto and equipment leasing and financing, investment banking, broker-dealer and insurance services through specialized subsidiaries. In the mainland United States, Popular provides retail, mortgage and commercial banking services through its New York-chartered banking subsidiary, Popular Bank, which has branches located in New York, New Jersey and Florida.

Conference Call

Popular will hold a conference call to discuss its financial results today, Wednesday, October 23, 2024 at 11:00 a.m. Eastern Time. The call will be broadcast live over the Internet and can be accessed through the Investor Relations section of the Corporation's website: www.popular.com.

Listeners are recommended to go to the website at least 15 minutes prior to the call to download and install any necessary audio software. The call may also be accessed through a dial-in telephone number 1-833-470-1428 (Toll Free) or 1-404-975-4839 (Local). The dial-in access code is 177500.

A replay of the webcast will be archived in Popular's website. A telephone replay will be available one hour after the end of the conference call through Friday, November 22, 2024. The replay dial in is: 1-866-813-9403 or 1-929-458-6194. The replay passcode is 473434.

An electronic version of this press release can be found at the Corporation's website: www.popular.com.