[Management View]
Popular reported a net income of $210 million for Q2 2025, up $32 million sequentially, driven by higher net interest income, increased noninterest income, and improved credit quality. EPS rose to $3.09, and ROCE expanded to 13.3%. Management announced a $500 million share repurchase program and a 7% increase in the quarterly dividend to $0.75 per share. Strategic priorities include loan and deposit growth, operational transformation, and efficiency measures.

[Outlook]
Management raised full-year guidance for net interest income (NII) growth to 10%-11% and expects ROCE to exceed 12% for 2025. Noninterest income is projected at the upper end of the $155 million-$160 million quarterly range. Loan growth guidance remains at 3%-5%, with construction payoffs anticipated in Q4. Expense growth guidance was revised to 4%-5%, inclusive of profit-sharing accruals.

[Financial Performance]
Popular achieved strong YoY and QoQ growth across key metrics:
- Net Interest Income: $632 million (+$26 million QoQ)
- Net Interest Margin: GAAP NIM expanded by 9 basis points; tax-equivalent NIM by 12 basis points
- Loan Growth: $931 million (+$681 million at Banco Popular; +$251 million at Popular Bank)
- Deposit Growth: $1.4 billion increase, including $1.3 billion in Puerto Rico public deposits
- Noninterest Income: $168 million (+$16 million QoQ)
- Operating Expenses: $493 million (+$22 million QoQ)
- Credit Quality: Net charge-offs reduced to $42 million (45 basis points annualized), and ACL/NPLs ratio improved to 247%.

[Q&A Highlights]
Question 1: How does Popular view stablecoins and their potential impact on the business?
Answer: CEO Javier Ferrer stated that Popular is monitoring stablecoins closely and has formed a team to explore potential use cases. While it is early stages, the company recognizes the potential industry impact and is preparing to adapt.

Question 2: What is the interplay between profit-sharing accruals and revenue guidance?
Answer: CFO Jorge Garcia explained that profit-sharing accruals are tied to exceeding net income budget by at least 2%. The current $13 million accrual is expected to increase to the $40 million cap as revenue guidance is met. This aligns employee incentives with shareholder interests.

Question 3: Can you elaborate on deposit seasonality and competition trends?
Answer: Garcia noted that deposit seasonality reflects higher inflows in H1 due to tax refunds, followed by spending in Q3. Inflows are 6% higher YoY, demonstrating consumer strength in Puerto Rico. While retail clients exhibit yield-seeking behavior, commercial deposit competition remains stable.

Question 4: What drives loan growth guidance, and what is the outlook for construction payoffs?
Answer: Garcia highlighted strong pipelines in Puerto Rico and the US, with construction payoffs expected in Q4. Multifamily construction loans often transition to term loans, but retention rates vary.

Question 5: Will deposit growth cover loan growth, or will borrowings be needed?
Answer: Garcia clarified that deposit growth, particularly nonpublic deposits, remains strong. Borrowings are used strategically for liquidity management, with over $25 billion in combined liquidity available.

Question 6: What factors are driving lower-than-expected operating expenses?
Answer: Garcia attributed expense control to efficiency measures, delayed transformation projects, and external factors like Fedwire conversion delays. Teams are incentivized to focus on expense discipline.

Question 7: Are federal stimulus funds driving larger infrastructure deals?
Answer: Ferrer confirmed deployment of federal funds in Puerto Rico and expects more projects to be announced. Popular remains the go-to bank for public-private partnership financing.

Question 8: Should fee income guidance reflect steady trends?
Answer: Garcia noted cyclical patterns, with higher transactional activity in Q2 and Q4. The IRS refund was unusual, but equity investment income aligns with historical trends.

Question 9: Is the current pace of share buybacks sustainable?
Answer: Garcia affirmed the pace as reasonable, given the attractive share price and strong capital position.

[Sentiment Analysis]
Management conveyed confidence in sustained profitability and growth, emphasizing operational discipline and strategic focus. Analysts expressed positive sentiment regarding loan growth, deposit strength, and expense control, while seeking clarity on guidance and capital actions.

[Quarterly Comparison]
| Metric | Q2 2025 | Q1 2025 | Change |
|----------------------------|-----------------|-----------------|-----------------|
| Net Income (GAAP) | $210 million | $178 million | +$32 million |
| EPS | $3.09 | $2.56 | +$0.53 |
| ROCE | 13.3% | 11.4% | +190 bps |
| Net Interest Income | $632 million | $606 million | +$26 million |
| Loan Growth | $931 million | $0 | +$931 million |
| Deposit Growth | $1.4 billion | $0 | +$1.4 billion |
| Noninterest Income | $168 million | $152 million | +$16 million |
| Operating Expenses | $493 million | $471 million | +$22 million |
| Net Charge-Offs | $42 million | $49 million | -$7 million |

[Risks and Concerns]
1. Deposit seasonality may impact Q3 balances, requiring careful liquidity management.
2. Construction loan payoffs in Q4 could reduce loan growth momentum.
3. Profit-sharing accruals may increase operating expenses, necessitating sustained efficiency efforts.
4. Stablecoin developments could disrupt traditional banking models, requiring proactive adaptation.

[Final Takeaway]
Popular delivered strong Q2 2025 results, driven by robust loan and deposit growth, improved credit quality, and disciplined expense management. Management's strategic focus on operational transformation, capital returns, and efficiency measures positions the company for sustained profitability. While risks such as deposit seasonality and construction payoffs remain, Popular's proactive approach to liquidity and credit management underscores its resilience. Investors should monitor progress on federal stimulus deployment and stablecoin initiatives as potential growth catalysts.