Prepared remarks
Good day, and thank you for standing by. Welcome to the Popular Inc. First Quarter 2026 Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to the Investor Relations Officer at Popular, Inc., Paul Cardillo. Paul, please go ahead.
Good morning, and thank you for joining us. With me on the call today is our President and CEO, Javier Ferrer; our CFO, Jorge Garcia; and our CRO, Lidio Soriano. They will review our results for the first 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 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 press release and our SEC filings on our web page at popular.com. I will now turn the call over to Javier.
Thank you, Paul, and good morning, everyone. Please turn to Slide 4, where we share highlights of our strong operating performance in the first quarter. We reported net income of $246 million and earnings per share of $3.78, up $12 million and $0.25 per share from the fourth quarter. The improvement was driven by higher net interest income, margin expansion and lower operating expenses. Net income and EPS improved by 38% and 48%, respectively, compared to the first quarter of 2025. We continue to invest in our businesses and expand our capabilities in support of our strategic objectives. When we deliver for our customers, our franchise strengthens and our shareholders benefit. Overall credit trends remained favorable with lower NPLs and improved NPL ratios. Quarterly net charge-offs increased primarily due to a single previously identified commercial relationship. We also demonstrated our commitment to returning capital to our shareholders by repurchasing $155 million in common stock and paying a quarterly common stock dividend of $0.75 per share. Our ROCE was 15.5%, up from 14.4% in the fourth quarter of 2025 and 11.4% a year ago. We are very pleased with these returns and remain focused on reaching our 14% through-the-cycle objective. Before turning the call over to Jorge, I will comment on the business environment in Puerto Rico. Business activity in Puerto Rico remained positive, supported by steady trends in employment and consumer activity with manufacturing, construction and tourism leading the way. We're closely monitoring ongoing geopolitical developments as sustained higher oil and commodity prices can impact our customer base. As of the end of the first quarter, we have not seen significant signs of economic stress. The labor market remains healthy with the unemployment rate at 5.6%, stable near historic lows. Three sectors have outperformed the broader labor market: construction, transportation and warehousing, and leisure and hospitality. Consumer spending remains healthy. Combined credit and debit card purchases by Banco Popular customers increased by approximately 5% compared to the first quarter of 2025. We continue to see healthy demand for homes in Puerto Rico. Mortgage balances at Banco Popular increased modestly during the quarter. Momentum in the construction sector continues to be solid with public and private investment fueling higher employment and strong liquidity. We're optimistic that these trends will persist given the backlog of obligated federal disaster recovery funds. On the private side, real estate and tourism development projects and the renewed focus on reshoring to Puerto Rico by global manufacturing companies should continue to support economic growth on the island. The tourism and hospitality sector continues to be an important contributor to the Puerto Rico economy. Year-to-date through February, hotel occupancy increased to 83%, up from 76% in the same period last year. Over the same period, RevPAR increased 6%. Hotel demand averaged roughly 400,000 room nights, representing 10% growth versus the same period in 2025. Passenger traffic at Luis Muñoz Marín International Airport was down 2% in the first quarter after a record year in 2025. JetBlue also announced an expansion of its San Juan hub with five new nonstop domestic routes beginning in the spring of 2026. Cruise activity has also been a meaningful tailwind after record cruise arrivals in 2025; arrivals accelerated sharply in the first two months of 2026 with year-to-date arrivals through February up 40% year-over-year. In addition, the Puerto Rico Tourism Company announced a strategic partnership with Royal Caribbean, beginning in July of this year, that would establish San Juan as the cruise line's home port. Moving to our strategic framework. We continue to advance our three objectives; a growing number of initiatives are gaining traction simultaneously and the pace of execution is accelerating. One of our objectives is to be the number-one bank for our customers by delivering exceptional service and products. A key part of that is making it easier for customers to engage with Popular through our digital channels. We recently launched an integrated marketplace within our digital app Mi Banco, one of Puerto Rico's most widely used mobile apps. The platform gives our retail customers access to exclusive offers, discounts and benefits from a wide variety of merchants while enabling businesses, many of them small and medium-sized, to reach a high volume of potential customers. This allows us to create meaningful connections between our retail and commercial customers and strengthens the value of banking with Popular. We also launched two new corporate credit cards designed to facilitate payments and optimize cash flow. Both have gained traction and driven purchase volume. In addition to our core retail and commercial efforts, we are advancing targeted segment strategies to improve service, enable more personal relationship-based engagement and position Popular as the primary bank earlier in our relationship with our customers. A recent example is our newly launched program designed to meet the unique financial needs of doctors, dentists and veterinarians. The momentum behind these initiatives reflects the energy and focus of our teams. We are encouraged to see that execution translating into stronger results, and we expect the benefits to become more visible over time. And with that, I turn the call over to Jorge for more details on our financial results.
Thank you, Javier. Good morning, and thank you all for joining the call today. As Javier mentioned, our quarterly net income increased by $12 million to $246 million, and our EPS improved by $0.25 to $3.78. Compared to adjusted net income in the fourth quarter, which excluded a partial reversal of the FDIC special assessment reserve, net income increased by $22 million. These results were driven by better net interest income, higher net interest margin and lower expenses, partly offset by a slightly higher provision for credit losses. Our objective is to deliver sustainable financial results, and we are pleased to have generated a roughly 15.5% return for the period. We will continue to use all levers to position the company as a top-performing bank when compared to our mainland peers. Please turn to Slide 7. Net interest income of $670 million increased by approximately $13 million, driven by fixed-rate asset repricing and a higher balance of investments due to higher deposit balances and lower deposit costs at both banks. Net interest margin expanded five basis points to 3.66% on a GAAP basis. On a taxable-equivalent basis, the margin improved by 11 basis points to 4.14%, driven primarily by lower interest expense, including a meaningful reduction in the cost of Puerto Rico public deposits. Ending loan balances were essentially flat at $39.3 billion, down about $38 million from the fourth quarter, driven primarily by lower balances at Popular Bank due to paydowns in the construction segment and runoff from the exited residential mortgage business. At BPPR, modest growth in the mortgage and commercial segments were somewhat offset by weaker trends in auto lending. Given the slower demand in the consumer and auto segments, we expect consolidated loan growth in 2026 to be at the low end of our original 3% to 4% range. In our investment portfolio, we have maintained our strategy of reinvesting proceeds from bond maturities into U.S. Treasury notes and bills. During the quarter, we purchased approximately $1.9 billion of Treasury notes with a duration of 2.6 years at an average yield of around 3.7%, taking advantage of a modestly steeper curve. Deposit balances ended the quarter at $67.6 billion, $1.4 billion higher than the fourth quarter. Retail and commercial deposits increased by $1.2 billion, driven by tax refund activity. On an average basis, total deposits increased by $1.1 billion, or by $384 million when excluding Puerto Rico public deposits. Puerto Rico public deposits increased by $250 million to end the quarter at $19.7 billion. We continue to expect public deposits to be in the range of $18 billion to $20 billion for the year. Total deposit costs decreased by 12 basis points quarter-over-quarter to 1.56%, with improvement in both of our banks. Excluding Puerto Rico public deposits, total deposit costs decreased by five basis points to 1.09%. At BPPR, deposit cost decreased by 11 basis points mostly as a result of Puerto Rico public deposits repricing lower by 31 basis points due to lower short-term rates. At Popular Bank, the 16 basis point reduction in deposit costs was primarily related to lower online savings deposit costs and repricing of time deposits. Given positive deposit trends in Puerto Rico, we now expect 2026 net interest income growth at the upper end of our 5% to 7% guidance range. Please turn to Slide 8. Noninterest income was $166 million, in line with Q4 and at the high end of our quarterly guidance, with solid performance across most of our fee-generating segments. Compared to the first quarter of 2025, noninterest income improved by 9%, driven by growth in debit and credit card fees of 14% and 6%, respectively, as well as a 13% increase in asset management and insurance fees, demonstrating our ability to benefit from our breadth of product offerings. We continue to expect quarterly noninterest income to be in the range of $160 million to $165 million. Please turn to Slide 9. Total operating expenses were $467 million, a decrease of $6 million when compared to Q4. Excluding the FDIC reversal in Q4, operating expenses decreased by $22 million. The decrease was primarily driven by lower personnel costs, as the fourth quarter included a profit-sharing accrual of approximately $13 million, along with the impact of fewer calendar days in the first quarter. This quarter also benefited from lower employee health care-related costs. We also saw lower seasonal business promotion expenses and lower professional fees, partly offset by higher technology and software expenses, reflecting our continued investment in technology and transformation initiatives. We expect full year expenses to increase by 2% to 3% compared to our original guidance of 3%. We will continue to prioritize investments in our people and technology and continue to target expense efficiencies. Our effective tax rate in the first quarter was 16%, unchanged from the fourth quarter. We now expect the effective tax rate for the year to be at the low end of our original 15% to 17% guidance range due to higher projected excess income. Please turn to Slide 10. Tangible book value per share at the end of the quarter was $84.98, an increase of $2.33 per share driven by our net income and offset in part by our capital return activity. During the quarter, we repurchased approximately $155 million in common stock. We ended the quarter with $126 million remaining under our active repurchase authorization, which we expect to exhaust during the second quarter. As we have said in the past, we seek to maintain an active repurchase authorization in place and we are targeting an update on capital actions before the second quarter's earnings call. In addition to common stock repurchases, we also expect to continue evaluating capital optimization alternatives and pursue a dividend increase during the year. Of course, our plans are subject to market conditions, regulatory considerations and any required Board approvals. With that, I turn the call over to Lidio.
Thank you, Jorge, and good morning to all. Credit quality metrics remained stable during the first quarter with lower early delinquency, NPLs and inflows, and higher net charge-offs. Despite the uncertain economic environment, our consumer businesses remain resilient. We continuously monitor our portfolios for signs of stress where our data remain consistent with normal seasonal behavior and no deterioration. Turning to Slide 11. Nonperforming assets and loans decreased by $37 million and $40 million, respectively, mainly due to Banco Popular de Puerto Rico. NPLs in BPPR decreased by $39 million. This was driven by reductions in the commercial portfolio due to an $11 million charge-off related to a commercial real estate facility classified as NPL in the third quarter of 2025 and consumer due to lower auto NPLs driven by increased payment activity. In the U.S., NPLs decreased by $2 million. Inflows of NPLs decreased by $7 million, with an improvement of $5 million in the U.S. and $2 million in BPPR. The ratio of NPLs to total loans held in portfolio was 1.17% compared to 1.27% in the previous quarter. Turning to Slide 12. Net charge-offs amounted to $60 million or annualized 61 basis points compared to $50 million or 51 basis points in the prior quarter. Last quarter results included $5 million in recoveries from the sales of previously charged-off auto loans and credit cards. Excluding this, the net charge-off ratio for the fourth quarter was 57 basis points. Net charge-offs in BPPR increased by $10 million driven by the $11 million commercial net charge-off mentioned previously. Based on current trends and the macroeconomic outlook, we reiterate our 2026 annual net charge-off guidance of 55 to 70 basis points. The allowance for credit losses increased by $16 million to $124 million. The change was mostly in BPPR which had higher results in the commercial portfolio due to loan modifications and an additional specific reserve for a single power in the telecommunication industry. Additionally, the ACL for the mortgage portfolio increased slightly due to changes in the macroeconomic scenarios. These increases were offset in part by a reduction in the ACL for consumer loans, mainly in the auto portfolio, reflecting improvements in credit quality. In the U.S., the ACL increased by $1.4 million from the previous quarter. The coverage ratio of the ACL to loans held in portfolio was 2.10% compared to 2.05% in the previous quarter, while the ratio of the ACL to NPLs held in portfolio increased to 180% from 162%. With that, I would like to turn the call over to Javier for his concluding remarks. Thank you.
Thank you, Lidio and Jorge, for your updates. We're happy with our strong first quarter results. We grew net interest income, expanded our margin and reduced operating expenses, all while continuing to invest in the franchise and advance our strategic priorities. While we are very pleased with the quarter, we remain focused on execution, growing deposits, regaining loans and maintaining strong expense discipline. We are confident that the sustained execution of our strategy will advance our ultimate goal to be a top-performing bank with excellent talent, delivering sustainable profitable growth and long-term value to our shareholders. On a more personal note, this past February marked a milestone for Popular. We brought together our 9,200 employees for the first time in over 20 years. I have to say it was awesome. The event reminded each one of us what it means to be part of Popular and connected us with our history. The excitement was palpable, and it was simply an unforgettable day. On behalf of my colleagues, I thank our clients and shareholders for their continued trust and support. We are very proud to be the leader in the Puerto Rico market. We're ready to answer your questions.
Questions and answers
Operator: And our first question comes from Jared Shaw of Barclays.
Maybe just starting with the great growth on the deposit side, how should we think about average and end-of-period deposits over the next few quarters as some of the tax refunds maybe get spent?
Yes. So traditionally, we do see increases in ending deposits in the first quarter. This quarter, we also saw increases in average deposits compared to the fourth quarter results. Historically, in the second quarter, we would expect ending balances to trend lower, but average balances higher after tax season overlaps March and April and people tend to spend that money through the quarter. Then the third quarter is where we actually see ending balances coming down and in the fourth quarter we tend to see ending balances come back up historically. Our guidance increased toward the higher end because we are expecting more retention of those deposit balances. Our teams are very much focused not only on retention but also on deposit growth. While we would expect ending balances to perhaps come down from these levels, we do not expect to see a runoff like we saw in 2024, for example.
Okay. So overall, though, you're still feeling like average account size is stabilized at a higher level and the magnitude of what you've seen in the past may not be as severe?
Yes. I think we saw the peak in 2022 where averages were about 40% higher. Those have come down to the low 30s, roughly 30% to 32%, and have been stable for the last couple of years. We are bringing in new clients that's resulting in higher balances. We're seeing strength across retail and commercial; we see strength in our small and middle-market clients. Our corporate clients also have a lot of liquidity, but they tend to be managing their treasury excess cash a little bit better. Overall, we've been very happy with the trends.
Okay. And then in the past, you've talked about looking for potential acquisitions on the mainland that match up with your geographic focus. Any update on your thoughts there? And if you're not able to find something that fits, could we expect maybe more of an organic de novo expansion utilizing some of your capital?
Javier, I'll go for the first one. No change in our outlook on M&A. Our primary focus continues to be our transformation efforts and growing the profitability of the institution.
In terms of de novo growth strategy, it's tough to compete in the U.S. markets in retail, which is normally what you would see with de novos. We have been successful in expanding some of our national businesses through team acquisitions or team hires and that may present opportunities. It's not unusual for banks our size to look at that, leveraging those niche businesses. At this stage, we have opportunity to improve profitability in our U.S. operations organically, but not necessarily through investing in a big branch de novo expansion.
And in Puerto Rico, we are the strongest in the market given our branch footprint. It's a differentiating factor for us and it continues to be. In the United States, as Javier said, our strategy is more commercial led, so it will be difficult to expand in any major way our branch footprint.
Okay. And if I could just ask one final one. Have you been seeing any spread compression on the loan portfolio or on new loans and were you putting on new loans in the quarter?
If you look at levels and yields, we continue to be successful in expanding and are keeping our loan yields fairly flat even with rates coming down. So we have not seen broad-based compression. We talked in the last call about competition, particularly in Puerto Rico and auto, and you can see that in trends in that portfolio. We could see potentially more competition in pricing there. We've tried to get our teams to be smart and provide profitable loan growth, not just loan growth, and focus on relationship banking, ensuring those relationships come in with deposits. That gives us a fresh start to avoid chasing irrational loan pricing.
And our next question comes from Brett Rabatin of StoneX Group.
Good morning, everyone. Wanted to start on the NII guide. It was great to see the first quarter higher NII and lower expenses. Just thinking about the high end of the guide, with the slight growth in the balance sheet that would imply the margin is fairly flat, but you still have securities that are maturing. Any thoughts on the margin and opportunities for NII growth from here?
We do expect the margin to grow by the end of the year. We had a nice expansion in the first quarter, driven largely by the repricing of public deposits. We don't expect that level of repricing to occur again; that will depend on what happens to short-term rates, and pricing typically lags. I would expect margin expansion to be slower in the second quarter, but then continue to expand as we drive toward the higher NII guidance. We also have the tailwinds of the fixed-rate investment portfolio continuing to reprice, so that part of the story remains intact.
If the Fed doesn't cut interest rates, would that put you above the higher end of the range on NII?
Our current guidance assumes no further cuts in 2026. For us, we'd love to see steepening of the curve, but margin really depends on the mix of deposits; we are heavier on public deposits which will have an impact on margin. Deposit balances and deposit costs are the key drivers of spread and whether we can get above our current guidance.
That's helpful, Jorge. And then around capital and 15.9% CET1, it sounds like you'll give more color in 2Q. Any color on end-of-year capital ratios or targets as you work through this?
We want capital ratios to be lower than they are now, unless we make a lot more money. We are committed to deploying capital in a controlled manner over time. We're trying to be more intentional in our communications on this and we are committed to executing. We'll be consistent and deliberate about returning capital.
If you look purely at numerical thresholds for investment-grade, we are in the range. But rating agencies also consider other factors, including our role as Puerto Rico's largest financial institution. We have retaken outreach efforts to ensure S&P and Moody's are updated on what’s going on with Popular and Puerto Rico. If you looked only at peer banks and performance, we'd likely be investment-grade rated.
But we'll take the positive outlook. We view it as momentum and will continue our advocacy with the agencies.
And our next question comes from Timur Braziler of UBS.
Going back to the profitability comment: two straight quarters now above that 40% objective. Javier, you reiterated remaining focused on reaching that 14% through-the-cycle objective. Are you not there yet? And when you say 'through the cycle,' how far out are you looking for that sustainability?
Two quarters of strong results are encouraging, but a trend doesn't make a sustainable outcome. Through the cycle refers to performing across different economic conditions, including periods of stress. We want to demonstrate sustainable performance against that backdrop. The teams are doing great, but we need longer consistent performance before we claim sustained success. We launched our transformation a bit over three years ago and the 14% target reflects where we want to be in a sustainable way.
Got it. Maybe on Basel III proposals, any color on the type of impact that might have on your capital day?
We are not subject to Category 4 with AOCI. We've done a preliminary review and our estimates are consistent with the Fed guidance for smaller banks. The end result will depend on our balance sheet when the final rule is implemented and whatever the final rule contains, but right now it's consistent with an estimated reduction in risk-weighted assets of about the magnitude the Fed has suggested.
And on public funds, second quarter specifically, is there any reason not to pencil in a historical-type run rate for a planned increase in public funds in 2Q?
I don't want to speculate. These public deposit balances are driven by over 200 clients and thousands of accounts. We have some visibility through relationship officers, but large numbers move around. We're going to stick with the $18 billion to $20 billion range for the year.
Just to confirm the Basel III impact estimate of roughly 7% on RWA was what you were referring to?
Yes. That is correct.
And our next question comes from Arren Cyganovich of Truist.
Just want to hear your views on onshoring manufacturing in Puerto Rico. Last year there were a lot of large announced investments. I haven't seen much in the way of new wins yet this year. Anything you're hearing in terms of new potential investments? Have you seen any actual benefits yet from the ones announced last year?
You're right, there haven't been many new public announcements by the government, so we don't want to get ahead of them. They continue working through approvals and pipeline development. We've heard about two more entities in the pipeline. Looking at global trends, it's rational to believe momentum will continue, whether expansions of existing operations or new entrants from the U.S., Canada, the Far East and Europe. We expect announcements from the Puerto Rico government, but we don't want to speculate on rumors. Manufacturing represents approximately 44% of Puerto Rico's GDP, so it's an important contributor to our economy. On timing, it takes some time. We have seen some new entities open accounts with us and purchase property; they are setting up. Typically, after a government announcement and agreements, companies begin opening bank accounts, investing in real estate and hiring third-party service providers. We've seen some of that activity. It's going to take three to five years to see the full economic impact. The largest announcements are expansions of facilities which will require significant construction investment and time, so we'll first see impacts on the construction side.
Great. And then lastly, Lidio, you mentioned some loan modifications in commercial. Are these anything abnormal in magnitude — increases or decreases — and can you give a little color?
Nothing I would characterize as affecting the broader portfolio; these have been one-offs. Some clients have had financial difficulties and we executed some loan modifications, but they do not impact the whole portfolio.
And our next question comes from Kelly Motta of KBW.
Maybe to kick off on expenses. You were well controlled in the first quarter and the guidance range was brought down a bit. Can you opine on the drivers of that variance? I know there are transformation efforts in play — wondering if some investments have been pushed out a year or two.
There are always projects that shift in timing. I wouldn't say anything has been canceled. We benefited from a handful of things: better negotiations, adjustments to expected expenditures that were lower in the first quarter, and reduced excess accruals from incentive payouts for profit sharing from last year. Those benefits are present in the first quarter and will help for the year. There are also timing differences. We'll continue to invest in technology and people and pursue efficiency efforts. Our expense targets already included around $50 million of efficiency initiatives, and we continue to make progress. For example, we went live on our ERP in January, so there are shifts in how costs translate between capital and expense. Overall, we're focused on cost control and execution.
Just to clarify: this guidance range doesn't include any potential excess profit sharing, correct? If you beat NII outlook, would profit-sharing expenses kick in and change expenses?
That is the correct way to think about it. Our current guidance does not include any profit-sharing expense. We would love to pay profit-sharing because those programs align with shareholders — they reflect performance above expectations. Last year, even with a near $40 million profit-sharing expense, we delivered on our original expense guidance. We aim to be able to absorb incremental expenses if performance warrants it.
One last one on balance sheet size: cash, money market and investments have been around $4.8 to $4.9 billion the past two quarters. Is that a good level going forward or would you anticipate continued runoff into securities and loans from that level?
We've had that level for the last two to three quarters and are comfortable with where we're at on that.
And our next question comes from Gerard Cassidy of RBC.
If I recall my credit ratings correctly, your slide deck showed S&P and Moody's have you on positive watch. It looks like you're a notch below investment grade with those two agencies. Fitch I think is investment grade. Can you share when you think they'll determine whether to lift the credit rating? And remind us when Popular was last rated investment grade by Moody's or S&P?
I'd love to be able to predict timing. We are focused on discussions with the rating agencies and have an active advocacy effort to educate them about Popular and Puerto Rico. We cannot guess when they will act. We believe our ratings should be higher given our performance. As to when we were last investment grade from S&P or Moody's, my recollection is roughly before the 2008 financial crisis — around 2005 or 2006.
It's an insightful question. We've renewed efforts to ensure S&P and Moody's are current on our progress. If you looked solely at the numerical thresholds, we would be in the range for investment grade, but rating agencies consider other aspects, including our market role in Puerto Rico, which factors into their decisions. If you looked at us purely as a peer bank, given our performance, we would be investment-grade rated.
We'll take the positive outlook as momentum and continue engaging with the agencies.
As a follow-up on the price of oil: you haven't seen significant signs of economic stress at elevated oil prices. Can you remind us the impact when oil rose in early 2022 after Russia invaded Ukraine? What did that do to credit quality then? And if oil stays elevated at $125 per barrel for a long period, what could that do to credit quality here and in the U.S.? Also, can you update on Puerto Rico's energy mix — the island's dependence on oil versus movement to natural gas or LNG?
The impact depends on the duration of elevated prices. In 2022, the oil price spike was relatively short-lived and had minimal impact on delinquencies and credit quality. For Puerto Rico and our portfolio, the key is how long oil stays at elevated levels. As we noted earlier, our portfolios show no deterioration; we've seen normal seasonal patterns and our delinquencies are better than last quarter and much better than a year ago. We're pleased with our portfolio performance so far.
The premise of the question is correct: if high oil prices persist for a long time, it would negatively affect consumers and businesses since Puerto Rico still relies on oil for electricity generation. There has been growth in other energy sources, but we cannot switch quickly enough to fully offset higher oil prices in the short term. So far, we haven't seen a material impact. The second quarter will provide more information on whether sustained higher prices have a meaningful effect.
Lidio, on the delinquencies, is the health of the economy the primary reason delinquencies and credit are strong in the consumer books?
It's a combination of factors, but employment is a primary driver for consumer book performance. In addition, tax refund activity boosted consumer liquidity in the first quarter; local IRS data shows refunds to customers around $2.2 billion, about $300 million ahead of last year. That has aided consumer liquidity and their ability to pay loans.
And our next question comes from Manuel Navas at Piper Sandler.
You added reserves on a commercial NPL from the third quarter. Most other loan buckets had lower reserves, especially auto and consumer with delinquencies down. Could there be upside in provisioning from here or reserves coming down? How do you see credit costs progressing?
We had strong performance in consumer books, which led to releases of reserves, particularly in older portfolios. We've done significant work over the last few years to improve performance. The commercial book issues have been related to a couple of specific clients — one commercial real estate in the U.S. and one telecom company in Puerto Rico. We haven't seen indicators of broader portfolio deterioration. If the economy stays where it is, there may be opportunities in quarters ahead for further reserve improvement, but we will monitor and evaluate quarter-to-quarter.
Could that opportunity show up in different places? And would a change in provisioning affect your buyback plans — would the buyback accelerate?
We'll be consistent and deliberate. We'll come back to investors on levels and timing. We're looking at deploying capital over multiple quarters to reach target levels that make sense. Any single quarter's provision changes are unlikely to materially change our repurchase strategy; we remain committed to returning capital in a measured fashion.
Is the update you're expecting this quarter likely to include business line changes or anything beyond a reauthorization of shares?
We are talking about a traditional update from the Board, which could include authorization items and potentially a dividend increase. We will provide additional detail at that time.
I'm showing no further questions at this time. This concludes today's conference call. Thank you for participating, and you may now disconnect.