With our next fireside chat, Popular, Inc., a company that has about $75 billion in total assets. Market cap is around $8.5 billion, and we're very pleased and privileged to have Javier D. Ferrer, the president and CEO of Popular. He was president of Popular from, I guess, May of 2024 and chief operating officer from January 2022 to June 2025. He's been a director at Popular or Popular Puerto Rico since 2015. Javier, thank you so much for coming, and most importantly, bringing the warm weather, especially after this winter. Well, thank you for having us. It's a privilege and an honor. Great to be here, Jerry. Though it's early in the year, maybe you could share with us how the Puerto Rican economy is shaping up for you, how Popular is positioned, you know, to benefit from this economic growth. Then also tie in, if you don't mind, how important is the health of the U.S. economy to the Puerto Rican economy? Sure. Well, I think we're doing fine in Puerto Rico, quite frankly. There's momentum in the economy, which I believe has not slowed down. Of course, given what's happened in the Middle East, people are watching. The economy follows human psychology, so if there's worry and there's uncertainty, people begin to worry a little bit. But we haven't seen it in the numbers yet, frankly. It's like we're going through a good period, low unemployment, high number of people employed, even though we have less folks on island, the percentage of people working, the participation rate, is higher now. It's still in the low 40s, 44%-45%, which is still low, but you know. Yeah. Right 5% more than it was a few years back. It's a broad-based recovery, I want to say. Construction, very strong, hospitality, very strong, manufacturing, very strong. The Puerto Rico economy used to move alongside the U.S. economy, frankly, until 2006 when we lost 936, a big sort of tax benefit for U.S. companies and foreign companies, yeah, operating in Puerto Rico. We decoupled. Yep we went south. The United States continued going north, or, right now I think it's sort of like recoupled, let's say. Yeah. Whatever happens in the United States obviously impacts Puerto Rico, particularly in the East Coast, where we find a lot of folks visiting, and again, in a hospitality industry that continues to grow and contribute to our, to, you know, jobs and to our bottom line in the economy. So far, you know, there's momentum. We're happy about it. Given our size and footprint, you know, in the on market, and the fact that we've only been there for 133 years this year in October, you know, we are the main player. We're very honored to be so. We've earned that place. We work hard. We're almost everywhere. Our stores, our branches are almost everywhere in Puerto Rico, so we'll benefit from Puerto Rico's growth. We're a very active participant. We collaborate in policy decisions. We have good relationships with the government and the Financial Oversight Board who has been in Puerto Rico for 10 years now. You know, all good Yep. Maybe you could share with us, there's been a move since the pandemic for onshoring in America, and there's obviously some benefits potentially for Puerto Rico. Can you share with us just some color on what you guys might be seeing down there? Yeah. I mean, so that started with a promise of it actually happening to us seeing results. Absolutely, we have, as we like to say, we're on the right side of the fence, right? Yeah. Last year the new governor came in about a year ago. The economic development team is young, but very experienced within their years, you know, are very active. Last year we got big announcements of companies either expanding investment in Puerto Rico and operations in Puerto Rico and also their employment base and people coming in, new people coming in. Last year was over $2.6 billion in new investment announced, close to 5,000 direct jobs. In the past that has generated a multiplier effect. Yep. The early innings of the onshoring to Puerto Rico are proving also to be productive. We have a good relationship between our current, you know, governor and the White House, which is also something that we didn't have, you know, in the first Trump administration, quite frankly. That's also benefited the island so far. Yep. Maybe another interesting aspect of what's going on in Puerto Rico is that, because of the tax issues that you referenced in 2006 when advantages went away and Puerto Rico struggled with the economy, the outmigration of the population because the jobs weren't there, but that has, from the numbers we've seen, it's kind of leveling off. What do you hear from either family, friends, business? It just, it seems like could we actually maybe see immigration at some point, back? That's another good question. Absolutely. It's leveled off, to your point. Anecdotally, we don't have the best sort of data gathering for precisely what's happening today. You know, it's really. We need some time to go before we have, you know, six months or a year before we actually have good data, or a quarter. It depends on precisely the data we're seeking, but it is. It's a little of. Anecdotally, this is, you know, there's a bunch of talented young folks, and for me young is anybody from 15- 60, frankly, 50-something wanting to come back. Yep. We see it in high-paying jobs, we see it in high-tech jobs, you know, data, technology, analytics, cyber fraud, all the areas that the banks need to grow, right, to compete. We're seeing a lot of young people wanting to come back to Puerto Rico. Some have come back. We've been successful in getting good talent in, and other people also are getting good talent from the outside into Puerto Rico. What's the issue? The same as some parts in the United States, affordability. Housing is an issue in Puerto Rico, affordable housing. It's something that is gonna take a little while to sort of get sorted out, because you need to obviously couple years to build certain projects that are now either in the works, permitted and starting, you know. That's an issue. It's expensive to get new homes in Puerto Rico. It's a good trend. There's also the government is also trying to help with specific tax exemption decrease for young professionals. Mm. Substantially lowering their tax obligation, which is something that's very good. I don't qualify unfortunately, but I'm glad to see, again, young talent come back to Puerto Rico. Yep. That's very, very good. Shifting to a different area, you know, we hear a lot about, you know, the Basel III Endgame, and there's talk about we'll hopefully get a proposal coming up in the next two to three weeks, and that's obviously the very large banks are very focused on it. Share with us just the regulatory environment from your perspective when you look at your size bank, and how it's evolved over the last five to 10 years. Yeah. Well, the Basel III is still not applicable to us yet. I mean, we're very conscious of what's happening out there on the regulatory sides. Yes Of things. I think our mindset. I'm gonna try to be precise and not miss anybody here with this one. I think we take the regulatory aspects of our industry, you know, very seriously. What I mean by that is we understand the benefits of a flexi mode regulatory mindset, but that doesn't mean that that's gonna drive our strategy or how we operate, au contraire, I'd say. I mean, we have had situations where, you know, we'd have to fix certain things, you know, across our years. So we understand the weight of doing things right. It's in our DNA to try to operate correctly and within regulatory constraints. It's a pendulum of sorts. We feel that it may come back, right, if there's a change in Washington. You do have state regulation, which is relevant. Our U.S. bank is chartered by New York DFS. Oh, yeah. You know, again, it doesn't inform how we strategize, but it's, you know, the risk aspect of it is important to us. Our risk group is very strong. You know, we try to keep abreast of developments. We are gonna be intelligent in how we maximize any business decision to tailor changes that may be productive on the regulatory side, but we're gonna be cognizant of the fact that may change. We need to do the right thing by our customers, right? Right. You know, rational regulation is good for the industry. Oh, yes. It's good for us. Yep. No, you wanna keep that 132-year streak alive. Absolutely. It, um- Yes. Maybe we could talk about capital. You're one of the best capitalized banks. Yes In your class. I think the CET1 ratio is just around 15.7%. Certainly banks your size on the mainland are comfortable around 10, when their CET1 requirements are seven. We know there's a mainland equity buffer that needs to be included in there. Can you share with us what's your comfort range on the CET1 ratio and how, if it is lower than where it is today, how do you get there? Yeah. Well, that's that. Yeah. Well, you know when you're on a road trip with kids. Mm You know, the question that you hear the most, and you continue hearing it, is, "Are we there yet?" "Are we there yet?" Well, that's the kind of, like, psychology we get around this question, which is, by the way, a very rational and good question, and it's a question that our investors ask us, you know, you know, on almost every meeting. I mean. Yep We recognize that we, some people say we're, you know, 500-600 basis points above where we need to be. I think it has to do with the fact that we are a conservative bank. Yeah. This is not because, you know, we woke up one day and decided to be like this. I mean, it's a compendium of experiences. You know, it's what facing a lot of, you know, big-ticket items such as, you know, hurricanes and earthquakes and issues with the economy, a bankruptcy of the state. All those things get to a certain mindset, right? We are conservative. We think that we understand that we need to. If we can't use the capital constructively to generate more shareholder value, we need to give it back. We've put out a good repurchase program, which we've told the street and our investors is the last quarter, the fourth quarter, we said it's gonna be around $150 million a quarter. Mm. I mean, we still think that you know, that the shares are priced. You know, there's value in the stock price, so we'll continue with the program. The dividend for us is also important, that we continue to increase the dividend, as we continue to provide sustainable profitability in the business, you know, and we can demonstrate earnings growth. So I mean, I'm saying, yes, you're right. We ought to lower the amount of capital. We can also rationalize our capital stack. We're thinking about doing that. I mean, I think there's Tier 1. There's space to do, you know, some more additional Tier 1, move common to some other sorts of, you know, capital. We're thinking about that, how to optimize the capital stack. That's at top of mind as well. This is a good question, again, that we grapple with and with our board at all times, and we'll continue to handle it, as time progresses. Yep. We'll have to get a bunch of investors in a station wagon and say, "Are we there yet?" Right? Yes. Yes. Yes. Um- I mean, it's a fair point. Yeah. It's a fair point. It's top of mind for us, but we can't do it. For us it's, you know, organic growth, right, and transformation. Investing in those two. You know, other people may say, "Well, you should deploy an M&A. Yeah We can talk about that. Sure I'm sure. Yep. The stock has done very well the last 5 and 10-year time periods. Yes. Yes. Yes. Maybe you can share with us, what do you guys focus on to create, you know, shareholder value? How do you guys kinda measure it, aside from the stock price doing well? Well, the most important thing for us is making sure that we're good stewards of capital, right? Right. That we're growing. That we have positive, you know, leverage in our businesses. That we continue to grow rationally. That we are, you know, with transformation, we sort of heighten the importance of profitability in all business lines 'cause we, when you're so successful, people forget what got you there. Yeah. It's important for our teams to understand you know the meaning of profitability by product, by segment, by service. What does that mean? That all adds up. The importance of service, the importance of excellent omnichannel experience. Really mean it and really deliver that. Ultimately, ROCE is the measure that we put out there, right? Mm. There are others, as you know. You know, ROA, ROE, it's stuff we look at, but ROCE is the public measure that we're sort of putting out there. In many ways educating everybody from the person that comes in for the first day to whoever's sitting in the chair. That's what I call the CEO position, the chair. I just happen to be sitting on it now. But you know, it's what does that mean? Mm. The importance of sustainable profitability, the fact that if we do that well, it'll benefit not only our shareholders but also our employees. Mm ... the communities we serve through our foundations. You know, we provide a lot of help and assistance to that sector through our Popular, Fundación Banco Popular, and here in the United States the same thing. But we need to be profitable. Yep. It needs to be sustainable. It can't be up and down, up and down. That's a challenge that we put out to the teams. You know, last year we had a great year. Hopefully this year I mean, we feel good about this year, notwithstanding all the noise. Yep That's in the world. It's a tough world, particularly you know, in some areas more than others, obviously. That's it. I mean, it's you know, bottom line, profitability, sustainable profitability, making good decisions, defending our turf, pricing appropriately, you know, good yields, defending good customers. Mm-hmm. Yep. That's it. Circling back to, you mentioned M&A. Over the years you've done different types of acquisitions and a nice loan portfolio acquisition from Wells Fargo. Yes ... on the auto. During the financial crisis, you were able to pick up some great assets from the FDIC. What's your view as you look forward and it doesn't have to be just depositories, but what's out there or could you find, whether it's a loan portfolio or some other type of asset? Well, you just gave two examples of something that we'd be looking at. Yep in the program. In the proper context, right? Yes. An FDIC-assisted transaction that's rightly priced, clearly. I mean, we've done that before. Yeah. Oh, yeah. In Puerto Rico, you know, we do it in the States if it makes sense. Right. It's gonna be difficult in Puerto Rico. I'm not saying impossible, but it's gonna be difficult in Puerto Rico given our size. In assisted transaction you never know, right? Yeah. Right. You also mentioned the, you know, the auto business that we sort of consolidated out of Wells Fargo. Now, that took a while. That was a fantastic transaction. It took a while to sort of gel. Assets, you know, portfolio of assets. Mm outside of wholesale banks, we're always looking at niche businesses in the States. Themes, the same thing that others are looking at, I think the differentiating factor is actually delivering on that promise. Mm. We'll continue to look at that. Whole bank deal's difficult for us, frankly, right now, 'cause we're so invested in transformation, in making the bank better because we frankly compete with a bunch of people. Right you know, of all sizes coming to Puerto Rico. Right. Some people think there's not a whole lot of competition in Puerto Rico. Well, I have news for you. There is a bunch of competition. Yeah In Puerto Rico, we have to earn it every day. Right. I mean, I'd say that in the States, a whole loan bank deal would be difficult at this point. Yeah. It needs to be an incredible opportunity that we, you know. We'll have to look at it, right? I mean Right. Right Obviously, if it's accretive, if it strengthens our deposit franchise, if it's, you know, close to where we operate nowadays. The culture for us is critical. Yeah. I mean, you're the dean of this space, so you know, the culture for me is critical. Oh. I mean, you can't change people just through a merger, right? No. You need to share some values that make sense. I've been in some conferences where I look a couple of CEOs talking, you know that just announced a merger, and I go, like, you know, I mean, I wish them the best, but. Yeah It ain't looking like it's gonna work. Right. You know. Culture is important. We'll see. Yeah. I mean, never say never, but right now that's not our focus. Yep. One of the uniquenesses of your balance sheet, of course, is the deposits from the government. Maybe can you share with us just the deposit outlook and just how that. Because it's a large amount, you know, from the government and the benefits that you receive from them, but also the challenges. Yeah of that block of deposits. Well, it's a bit of one. That block of deposits, you know, obviously it's a great relationship. We look at it, more holistically, right? The deposits are but a part of it. It's an important part, right? Right. You're talking about, like, 2,000 different accounts. Right. Right. Right. I mean, so people know, when the Puerto Rico government went under and, you know, filed for, you know, I'd say bankruptcy, although that's not the way it happened, but. Yeah Effectively that's what happened. Yeah. There used to be an entity called the Government Development Bank for Puerto Rico, which was a central bank for the island, and we essentially took the risk. We could write a book about this, but I'm not gonna bore people with details. That actually is a very fascinating story, how we became essentially the bank for the government of Puerto Rico. Yeah. What I mean by that is, and this for us is an honor, and it's something that we take very seriously, it's not only the deposit side, it's also the credit side. Yeah the services side. Right. I mean, it's a relationship that we've had for a long, long time. The pricing has to do with an agreement that we signed a long time ago. You know, it comes and goes in terms of benefiting. We still make money on it. I mean, it's a great relationship. I mean, we have been very bad at projecting when it will come down in terms of the amount. I mean, it's, I think, $18 billion-$20 billion right now. They constantly bring new pieces to market, and we bid for them. We also put together a tech system to be able to service those amounts. Yep. It's a complex relationship. I mean, it's not one client. Right. Right. Right. Right. Right. It's again over 2,000 accounts. You know, we've done very well, and I think the government also is getting a fair return on their cash, frankly. Yep. Can you estimate what a normalized level would be, or is this the new normal that it's gonna be in the high teens, $20 billion? As I said, Robert, we've been terrible at projecting that, as you know. Yeah. I don't know. I think it'll depend on stuff like what happens with the PREPA bankruptcy. Yeah ... you know, with the- Yeah with the Power Authority bankruptcy. There are some who say that in the past, the central government and the Fiscal Oversight Board would've never thought of using, you know, central funds from the central government to pay, contributing to, you know, the resolution of. Sure the bankruptcy. What we hear is that view has changed. I don't think that that's gonna necessarily materially alter the amount of money- Right That's gonna be leaving the bank. It'll depend on how quickly some of the money's used for reconstruction. There's like $16 billion-$17 billion, which is not all with us, for the reconstruction of the power grid. Some of that is with us. I think it's gonna take some time, quite frankly. Yeah for the money to leave. You know, when to what level, we've been almost. You know, it's impossible to predict. Yeah Quite frankly. Yeah. You mentioned the bankruptcy of PREPA. Any updates? You know, I mean, I know that's another tough- This is the year. That's the update. This is the year. Okay. You know? I mean, every year we get out of the holidays in Puerto Rico, which as you know are fantastic, you know, with the promise that this is the year where PREPA gets resolved. Yeah. Now, this year, the drums are beating, you know, louder. Yeah on that promise. We don't know if it's gonna happen, but it. We get the sense that it may happen this year. Okay. I mean, I think the different parties are making some noises to that effect. I think it's a highly complex situation. Obviously bondholders wanna get paid. That's Yeah That's okay. Puerto Rico needs to determine what it can pay, and the board is in the middle trying to ascertain what that is. Yeah. It needs to be an amount that makes sense for Puerto Rico, the Puerto Ricans, and the economy because you don't wanna kill, you know, the economy to then, you know, be a bondholder that has whether it be whoever cuts the deal and holds the bonds on day one or buys the debt, right? Yep. They don't wanna be in the same position again. Right. Right? Right. Anytime soon. It needs to make sense. You need to have something that's sustainable. That's gonna be the big challenge. Sure that's why we haven't had a deal. Again, the noise is, you know, in the halls of the Puerto Rico government and elsewhere, that this is the year. We'll see. Oh, good. That put that last chapter behind. Absolutely. Puerto Ri- Psychologically. Yes To your point, it'd be fantastic even if it's imperfect. Yes. You know, it gets the. It attacks the problem, and you can build on it, right? Correct. Continue iterating to make it better. I think it's a, it'd be a great thing because you can then say, "We're out of bankruptcy. Yes fully. Yes. If anybody has any issues coming in, investors, whatever. It also would provide a, you know, a framework. Yeah of what it'll mean, you know, to operate in Puerto Rico, you know, going forward, and also for our businesses and our people. Yep, absolutely. You touched on, you know, 2026. Any thoughts about how the quarter's progressing for the first quarter of 2026? Any color you'd like to add to that? I mean, I'd love to answer that question, but as you know, I'm a corporate securities lawyer. You know, I wouldn't wanna be the first one to sort of issue any guidance. You'll just whisper in my ear. Indeed. That's all right. Yeah. No, I'd say that, I mean, we're happy with where Puerto Rico is at today. Yep. We can always do better. We need to do better, and in the bank the same thing. We expect a good year this year. Yep. We expect a good year, not only on loan growth, even though we've tempered, you know, the projections as you know. Yep Of a little bit less than the prior three to four years. We still think there's gonna be growth in Puerto Rico. Credit, you know, feels okay, frankly. We think credit's gonna be fine, barring again, you know. Mm ... factors such as the, you know, the ongoing conflict in the Middle East and others. Yeah. I think Venezuela has been, you know, a good thing for Puerto Rico given you know the military investment, the U.S. military investment in Puerto Rico. It may be tactical. May not be for a long time. God knows what happens to Cuba. If something happens to Cuba, we'll be in the mix. Yeah. Maybe not at the beginning, but it's more rational to have Puerto Rico partnering on a Cuba project than in Venezuela, quite frankly. Sure. Yep. That's something that we're looking at very intently, see what's gonna happen there. No, I think, I mean, again, we expect a good year. We expect to build on our recent success to continue delivering, you know, shareholder value. Yep Good profitability as you've told us and taught us. Absolutely. I mean, we're good students. We're gonna try to be good students. That's great. Coming back to credit, obviously it's benign. Yes about everywhere, yours as well. Yes. Is there any particular areas that you always keep an extra eye on just because a slip up in the economy could lead to some deterioration, whether it's construction lending or some other type of lending? Well, right now we feel very comfortable with the construction of our portfolio. Yeah. Yep Yep Frankly. Yep. Not only the commercial, but also the individual. I think that initially, you know, we're looking at this energy, the energy prices, it may impact small businesses. Yeah that may spill over onto retail. It's too early to tell, frankly. We haven't seen anything yet. You know, nothing in particular. In the past, you know, there's been a lot of banks burnt on commercial, I mean, on construction to your point. I mean, we feel there's no specific area where we feel that we're overexposed or that, you know, we have high FICO originations in our retail book. You know, you always need to be vigilant. Oh, yes. To credit and the impact to your assets. Right now we feel we're in a good place, and again, we'll remain vigilant. Got it. We're running out of time, so maybe the last question. What's the one core message you'd like about Popular's future you want investors to take away from this conversation? Well, I think that we're walking our talk. Yep. You know that we are very strong in Puerto Rico. That you know, our presence is. We've been there for a long, long time. We know Puerto Rico. We have you know a good operation in the United States, investments outside in the Virgin Islands and, you know, a passing investment in the Dominican Republic. Ultimately, you know, our fortress is Puerto Rico. Right. That's not gonna change, hopefully. You know, we have to defend it every day, as I said before. Right. Our people know that. We have great people doing it every day. That's it. I mean, you can count on us. Top of mind for us through a transformation initiative is profitability needs to be sustainable. When we get to 14%, we're not gonna stop at 14%. Everybody is looking at their jobs top to bottom in the institution. It's all about delivering value. It's all about delivering value. Yep. I would want people to take a look at us. You know, I think we're doing fine. We can do better. We have to do better. You know, competition is not gonna get any smoother. Sure. It's gonna be tougher. We have an obligation, you know, a deep obligation to the people of Puerto Rico, and we've been there through thick and thin. We believe in the future of Puerto Rico. Also servicing other communities where we have operations outside Puerto Rico. You know, we're here for the long term. We're not gonna do anything dumb, hopefully, anytime soon. You know, that's it. Again, I really appreciate the invite, being here with you. It's an honor. Yeah. So far we've had great meetings with our investors, and we have more in the afternoon. It's an interesting operation, Popular is. Sure. Absolutely. Great heart. Javier, thank you so much. Join me in a round of applause thanking him. No, thank you. Thank you. Thank you.