Operator
Good day, and thank you for standing by. Welcome to the Popular, Inc. 3rd quarter, 2026 conference call. At this time, all participants are in listen-only mode. After this brief presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message inviting your hand is raised. To withdraw your question, please press star 1-1 again. Please advise that today's conference will be recorded. I will invite the hand of the conference over to your first speaker today, Investor Relations Officer of Popular, Paul Cardillo. Please go ahead.
Good morning, and thank you for joining us. With me on the call today are our President and CEO, Jorge Garcia, and our CFO, Lidio Soriano. They will review our third quarter results and then answer your questions. Other members of our management team, including our CRO, Luis Sosa, 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 RSC filings. You may find today's earnings release and RSC filings on our website at POPULAR.com. I will now turn the call over to Jorge.
Thank you, Paul, and good morning, everyone. Please turn to slide four to discuss the highlights of another solid quarter. We reported net income of $266 million and earnings per share of $4.21, a decrease of $0.14 per share from the second quarter. Results reflected higher net interest income and stable underlying credit trends, partially offset by higher operating expenses and lower non-interest income. Compared with the third quarter of last year, earnings per share increased by 34%. Our ROTC was 15.8%, compared with 17% in the second quarter, and 13.1% in the third quarter of 2025. Loans held in portfolio increased by $293 million, driven by growth in commercial and mortgage lending. Total deposits decreased by $1.5 billion, primarily reflecting lower Puerto Rico public sector balances. Excluding public funds, customer balances decreased by approximately $289 million. The delta was consistent with our expectations and third quarter seasonality. credit performance remains stable net charge-offs declined from the second quarter while non-performing loans increase primarily reflecting a commercial relationship at BPPR that was placed on non-accrual we continued to return capital to shareholders repurchasing 179 million of common stock in the quarter we also increased the quarterly dividend to 90 cents per share beginning with the payment on October 1st while some indicators have moderated from the strong levels experienced over the last several years, economic conditions and business activity in Puerto Rico remain stable. The labor market continued to be healthy. Total employment increased to approximately 1.26 million in September, its highest level of the year, as the labor force grew by roughly 24,000 people in the quarter, while employment grew by 18,000 jobs. The unemployment rate increased modestly to 6.2%, largely reflecting a higher participation rate rather than job losses. Job growth was strongest in leisure and hospitality, with most other sectors showing modest growth or broadly stable conditions. Consumer spending was solid during the quarter, as evidenced by popularis customers' debit and credit card sales volume which increased by approximately 7% year-over-year. Tourism was another source of meaningful support for the Puerto Rico economy. Through August, hotel occupancy improved by more than four percentage points to approximately 79%. Cruise passenger arrivals increased by 27% through September. Air passenger traffic has moderated from record levels but remain healthy, declining approximately 3% year-over-year. Construction activity is supported by public and private investment, including the ongoing deployment of federal disaster recovery funds and a growing pipeline of private sector projects. We continue to see demand in the energy sector, as well as in warehousing and logistics. Overall, Puerto Rico's economic environment is stable, supported by healthy employment, tourism, infrastructure investment, and private sector development. At the same time, we are monitoring affordability pressures that are being driven by inflation and the higher costs of fuel and energy. We continue to focus on the three objectives we have shared previously, being the number one bank for our customers, being simple and efficient, and being a top-performing bank. We are on the right path and we will continue to execute with discipline. Being the number one bank for our customers means building stronger relationships and continuing to strengthen our deposit franchise, one of our most important competitive advantages. That starts with giving customers the flexibility to bank through the channel that best meets their needs, while continuing to enhance our products and maintain our high service standards. efforts. On the retail side, this quarter we launched a simpler deposit product that encourages behavior such as direct deposits to eliminate banking fees that will help us build deeper relationships over time. We also launched an account for college students to establish relationships earlier in their financial journey. These efforts advance our segment-led strategy which leverages specialized offerings to unlock opportunities and deepening customer relationships. Our successful healthcare professional program is one example of this segment-led approach. The program supports deposit retention and has also generated more than $90 million in new loans this year. On the commercial side, we completed the final wave of customer onboarding to our new cash management platform, concluding a multi-year effort the platform provides greater flexibility and mobile access and enhance money movement capabilities for our commercial clients this strengthen our value proposition for business clients and further differentiates our commercial banking franchise in Puerto Rico and gives us a platform to continue to enhance functionality together these initiatives demonstrate that our strategy is translating into tangible results I I look forward to building on this momentum with our teams as we continue advancing our objectives. I will now turn the call over to Lidia for more details on our financial and credit performance.
Thank you, Jorge, and good morning, everyone. As Jorge said, we deliver another solid quarter. Our focus on generating sustainable returns remains evident this quarter with broad sea of 15.8% compared with 17% in the second quarter. Please turn to slide number seven. Net interest income increased by $6 million to $699 million, driven by higher income from investment securities and commercial loans. On a gap basis, net interest margin declined by three basis points to 3.63%, and on a tax of equivalent basis, NIMB was 4.16%, one basis point lower than last quarter. Ending loan balances increased by $293 million driven by commercial and mortgage loans. We now expect full-year loan growth for 2026 of approximately 2%, primarily reflecting lower auto and lease activity and more moderate commercial growth. In our investment portfolio, we have maintained our strategy of reinvesting proceeds from U.S. treasury note maturities into two- and three-year notes. During the quarter, we invested approximately $1.4 billion with an average duration of 2.7 years and average yield of approximately 4.3%. This represented a pickup of approximately 206 basis points on the notes that matured during the quarter. Ending deposits were $68.7 billion, down $1.5 billion from the second quarter. Puerto Rico public deposit decreased by 1.2 billion to 21.5 billion on average basis total deposit increased by 502 million excluding Puerto Rico public deposit average customer deposits decreased by 619 million customer balances were consistent with historical patterns and continue to reflect the strength of our deposit franchise we continue to expect Puerto Rico public deposit to remain between $20 billion and $22 billion for the rest of the year. Total deposit cost increased by 7 basis points to 1.64%, formally reflecting higher rates on market-linked Puerto Rico public deposit that increased by 11 basis points. Excluding these balances, deposit costs increased by 3 basis points to 1.13%, including an increase of two basis points in private sector deposit costs at BVPR and a one basis point increase at Popular Bank. For the year, we expect net interest income to increase by approximately 8.5%. Please turn to slide number 8. Net interest income decreased by $5 million to $176 million, but remained above our guidance range. The quarter included a $5 million benefit associated with a commercial loan refinancing. Compared with the third quarter of 2025, non-interest income increased by 3 percent, reflecting growth in debit and credit card fees of 10 percent and 8 percent respectively, and a 60 percent increase in brokerage and asset management fees. These results demonstrate the benefit of a broad product offering. We expect fourth quarter non-interest income of approximately $170 million. Please turn to slide number 9. Operating expenses increased by $21 million to $506 million. The increase was primarily related to higher personal costs, including annual salary adjustments, payments, higher profit-sharing expenses, and increased performance-based compensation linked to the corporation's financial results. Based on current trends, we now expect full-year operational expenses to increase by approximately 2 percent, including the maximum profit-sharing contribution. Our effective tax rate was 14 percent during the quarter, driven by higher taxes and income. For the full year, we expect an effective tax rate of 14%. Turning to credit, overall credit quality was stable during the third quarter. Consumer performance remained favorable, with net charge-off continuing at the historical low level despite a seasonal increase in auto losses. Mortgage performance also remained strong, with historically low delinquencies and net recoveries. Commercial credit metrics were influenced by developments involving two unrelated commercial and industrial relationships. We placed a $74 million relationship on nonaccurable status and recorded a $34 million partial charge-off on a credit that entered non-performing status in the second quarter. The two credits are in different industries and do not share a common risk factor. In each case, the iteration was driven primarily by buyer-specific issues. Please turn to slide number 10. Total non-performing assets decreased by $37 million, reflecting the sale of the $84 million non-performing loans held for sale, while total NPLs increased by $52 million to $466 million. The NPL ratio increased to 1.16 percent from 1.04 percent in the prior quarter. Excluding consumer loans, NPL inflows decreased by 56 million from the second quarter. Turning to slide number 11, net charge-off was 73 million or annualized 73 basis points compared with 104 million or 1.05 percent in the prior quarter. Given our year-to-date commercial charge-off and NPL inflows this quarter, we now expect net charge-off to be in the range of 80 to 90 basis points for the full year. While we will provide formal 2027 guidance when we report fourth-quarter results in January, looking ahead to 2027, our initial expectation is that net charge-off will be in the range of roughly 60 to 75 basis points. Overall, underlying credit metrics were stable and reserve coverage remained strong. We remain vigilant and continue to take a disciplined approach to managing risk. Turning now to capital, please turn to slide number 12. Tangible book value per share decreased by $1.64 to $86.30, primarily reflecting lower market values on available-for-sale investment securities. The tangible common equity ratio was 7.05 percent, down 13 basis points from the second quarter. We remain comfortable with both the absolute level of TCE and the wealth sensitivity of the securities portfolio to changes in interest rates. Our capital actions will continue to balance the need support growth, maintain capital strength, and return excess capital to shareholders. During the quarter, we returned $236 million to shareholders, including $179 million through common stock repurchases. We also increased our quarterly common stock dividend by 20%. In the fourth quarter, we expect to repurchase between $150 and $200 million of common stock. Based on current conditions, we expect quarterly repurchases to remain within a similar range during 2027. And finally, we continue to target a 14% to 17% annual ROTC. With that, I will turn the call back to Jorge for his concluding remarks.
Thank you, Lidio. During my first two months as CEO, I have been visiting branches, regional offices, and customers across our markets. I have experienced firsthand the trust our customers place in us and their deep connections with our teams. I also continue to hear from customers that they are optimistic about Puerto Rico's long-term opportunities and how vital it is that we play a role in that outcome. Staying connected also extends to the communities we serve. Two weeks ago, as we celebrated our 133rd anniversary, I joined hundreds of colleagues who volunteered at food banks, youth centers, and other non-profits as part of our Embracing Our Community's Day of Service. These experiences reaffirmed what I already knew. What makes Popular special is our people. Our pride and commitment are the foundation of our sustainable success. I am fortunate to step into this role with a strong capital position, a solid franchise, a talented team, and real momentum. Our responsibility is to carry that forward and continue creating long-term value for our customers, shareholders, colleagues, and our communities. I am grateful to my colleagues for their commitment and the results they deliver every day. We intend to be active participants in shaping what lies ahead and not simply react to it. With that, we're now ready to take your questions.
Operator
Thank you. At this time, we'll conduct a question and answer session. As a reminder to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes from the line of Jerry Shaw Barclays. The line is now open.
Thanks. Maybe just starting with credit and walking through some of the items you spoke about. So the one new commercial non-performer, I mean, I guess if we, without that, commercial non-performers would have been lower. And then when we look at the net charge-off guidance for fourth quarter, I guess that implies about 100 basis points. So is that going to be some lost content in that commercial loan, or is that just more overall weaker expectations in the portfolio?
Good morning. This is Luis. I would say that our net charge for guidance for the fourth quarter really reflects our potential scenarios, including the CNI MPLs that we have disclosed.
I think, if I can add, I mean, what is important is, I mean, we see the core portfolios continue to behave very well. As we said in the prepared remarks, both consumer and mortgage portfolio exhibited a strong performance in the third quarter, and that's our expectation going to the fourth quarter. The guidance that we provided reflects some of the cases that we're working on.
So overall, though, apart from the one-offs, you still feel pretty good about credit, it sounds like. Okay. And then any update on the outlook for preferred issuance or any capital restacking beyond the buyback?
I was trying. I mean, the rates continue to not be attractive to us. I mean, as we've said, this is really a discretionary transaction. We still have plenty of room to continue our repurchase activity. This is something that makes things better for our capital stack, I mean, it optimizes it, and we'll be strategic and take advantage if we see an opportunity. But right now, we're not just going to force a transaction that doesn't make sense.
If I could just sink a third one in. Do you know what the update of the balance of federal spending is? You talked about continued spending from that $48 billion out there. What's remaining left of allocated but not spent?
Yeah, slightly above $43 billion. And one thing important there, we did see a pickup in spend in the third quarter from, you know, the FEMA funds that are managed through the local core three group. That, you know, basically a year today, we're running just slightly below the entire year. or at the end of the third quarter, we're slightly below the total of last year, almost 40% higher than at the same time last year. So we're glad to see a little bit of that pickup.
Operator
Thank you. One moment for our next question. Our next question comes to the line of Terry McAvoy of Wells Fargo. Your line is now open.
Good morning. Can you hear me?
Yes, we can. Good morning, Terry, and thank you for picking up coverage. Welcome to the call.
Much, much appreciated. first question the new consumer deposit product was that in response to market demand or customer demand are your competitors offering that and then financially uh what would what's the full quarter impact it was rolled out in august and and how should we think about maybe a full year impact of what that could mean to fee income yeah so a couple of things i mean certainly it is something that we hear from our customers they want simpler products lower fees so the idea is launch a product that gives them the opportunity to establish relationships and deepening that relationship that go along with the primacy customer primacy that we're targeting the other thing of launching the project it just continues to be part of our strategy to create segment-led strategies we believe that there's still great opportunity in puerto rico for us to be able to deepen and provide more value and hangs enhance functionality to certain segments both in the retail as well as in the commercial so you know that's a big driver in terms of the fee What we did is we did reclassify over a million accounts into these new products to be able to give existing clients the benefit and not essentially put the onus on them on having to change accounts. That resulted, I think, with a reduction in the quarter of a $2 million decrease in fee income. So on an analyzed basis, you know, probably somewhere between $8 and $10 million. Of course, you know, we expect to be able to gain traction and increase our deposits to offset some of that. And, you know, it's embedded in the guide for the fourth quarter, $170 million target for fees for the fourth quarter.
Great. Thank you. And then maybe as a follow-up, how could a higher-for-longer rate environment impact loan demand?
And then on that same theme, are there particular industries within your commercial portfolio that are more sensitive to higher rates that you're monitoring today? so we in the past and when we look at our models and stress tests we don't see a lot of stress related to to you know one or two you know moves in the in the rate and certainly not where the rates are today um in terms of of where we are at you know and hire for longer will help us continue to take benefits of our the tailwind of the repricing of our investment portfolio we certainly look forward to stability you know if we can you know the the the rhythm of change and the movement of particularly the short-term and of the of the curve create some noise given the exposure we have in the repricing of our public funds but overall you know hire for longer it's favorable for us we get to take a higher benefit on tax advantages of some of the investments and we have not found particularly these levels where there's significant stress to our borrowers from those rates. Demand in Puerto Rico continues to be strong. A lot of the transactions are not going to be rate sensitive. We do see some more rate sensitivity in the U.S. at times, but frankly right now the pipelines around, particularly around commercial projects, I'm sorry, construction projects in the U.S. continues to be strong, even looking through to the current rate environment.
That's great. Thanks for taking my questions.
Operator
Thank you. We'll move in for our next question. Our next question comes from the line of Timur Braziller of UBS. Your line is now open.
Hi, good morning. Starting on the reinvestment rate, I think it was $1.4 billion purchased at 4.3%. I guess why 4.3%? I mean, it's a decent amount lower than the two- and three-year yields were during the quarter. And I guess as we roll forward into 4Q and beyond, should that reinvestment rate more so mirror that two- and three-year rate? Or are we, call it, 40, 50 basis points below it going forward?
Good morning. This is Juan Pablo. Yeah, I mean, part of the quarter, it didn't start out, you know, any given period. I think of it more as on average during the quarter and not just the, about 1.5, 1.5.
I just have to add that, I mean, as you see, and we have some of the sliding appendix, we have a significant amount of investments that we are repricing on a quarterly basis around 1.5, 1.6, out of which 600, 700 relates to legacy investments that were at 1.25%, and even the newer investments were at 3.25%. So going forward, we will continue to see a significant pickup in the yield of that portfolio, given the repricing dynamics and given the interest rate environment that we have today.
Okay, great. And then maybe looking at the public funds, you guys have been closer in guiding those balances more recently, But I'm wondering, particularly going into the 28 election, is there any kind of empirical data that you can point to as to, you know, projects kicking off? Like, is there a risk through 27 that some of the public funds that are sitting on balance sheet are actually being utilized or maybe looking at history is different versus this time where there's a little bit more flush and liquidity? But I guess what is the way that you guys are framing risk around public funds balances in reference to the election that's coming up two years from now?
So I think a couple of things, Timur. I mean, number one, yes, I think we would expect some pickup in activity related to municipal spending, particularly at the municipal level, maybe not as much at the central government level. but a couple of things there. First, you know, remember that there are a lot of projects that are still rebuilding, you know, with FEMA and federal funds. A lot of those projects are at the municipal level. So, where we think we will see some of the first impact is in seeing a speed up or a pickup in the activity. Maybe, you know, the mayors and the municipalities prioritizing either projects that are a big scale or that can be completed quickly. Since that money is going to be coming in from federal funds, that's a flow, right, so in and out those monies are not sitting on our balance sheet right now. So other than that, you also have the Federal Oversight Board that still manages for a balanced budget and the government needs to be able to get those budgets approved and execute to those approved budgets by the Oversight Board. So, I mean, we give ranges, and in those ranges, we tend to incorporate scheduled payments, like for pensions or kind of the continued value bonds, and then some sense of operating accounts, and certainly competition, right? I mean, we actively bid on retaining certain, you know, excess funds from the government clients. So, but in terms of predicting or projecting that we're going to see significant declines because of infrastructure spend out of these funds, that is not something that we think will be significant.
Great. Thanks for that, caller.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Aaron Snogovic of True Securities. It lies now open.
Maybe you did talk a little bit about the loan growth expectation, the modest slowdown in loan growth into the fourth quarter.
It makes sense in terms of the auto and consumer side, but commercial has been pretty strong over the past couple of quarters. what's what's driving the kind of more moderate expectation there into the quarter so so certainly when you look at from the original guidance and where we're at now the auto portfolio is one of the areas where you know we've been under our expectations for the year so that certainly has an impact the other thing is that we are trying to be a lot more disciplined in our US business as well and historically you know we drove the teams to kind of hit their their their budget targets and you know that has resulted in a lot of you know single product clients that we're not deepening those relationships and we're pushing our teams to really create deeper relationships leave with deposits and even in CRE and multi family transactions we want to make sure that we have a whole relationship and that's certainly slowing down the production of our US team we're also expecting some payoffs in our construction portfolio in the US like we saw in this quarter and there are strong pipelines coming behind those but as you can imagine those construction projects to take a little bit more time to start seeing the effect in Puerto Rico you know there is still good demand I think the issue in Puerto Rico is more about supply we've been benefiting from six to nine percent growth over the last few years some of that growth has been driven by tax incentives and there's only so many large transactions that can occur in Puerto Rico so I still see a A lot of positive movement in Puerto Rico, a lot of positive demand, but just the scale and supply of it is, you know, reducing.
Okay. I mean, I guess that doesn't – I know you're not going to give 2027 guidance, but does that impact your, you know, view in terms of loan growth, you know, post this quarter? I mean, it sounds like you have some headwinds there.
I mean, we've talked in the past that we have been growing, outpacing the Puerto Rico economy and GDP significantly, and given our size over time, we should be growing closer or above, you know, slightly above the Puerto Rico economy. I think what's important as we look forward, Aaron, is that we will continue to see NII When we look at our projections into 27, particularly in this environment, given the tailwind that we have with the investment portfolio repositioning and the loan demand that we're seeing and the current prices, we do expect to continue to see creating operating leverage in 2027.
And can you just remind me on the ROTC updated guidance of 14% to 17% that you put out there last quarter, or I think it was last quarter. That's more of a kind of a longer-term expectation, right? Like, just over time, not necessarily, you know, expectation for next year.
I mean, I guess we're there now.
I know you're earning that now, but, you know, I just didn't know if that was, like, if you're always expecting to earn between that, it seems, you know.
I think always is a tough word. Based on the environment that we're seeing, the balance sheet structure and all our plans and the execution that we're seeing from our teams, we felt very comfortable giving the guidance of the 14% to 17% on an annual basis, and that's what we're driving our teams to.
I think what is important, we want it to also be sustainable, so it takes into account potentially different operating environments, so that's why maybe a little bit of the Why the range and why so wide? I mean, it is, for us, the sustainable part is as important as just hitting the target.
Operator
Thank you. One moment for our next question. Our next question comes from the line of Kelly Mota of KBW. Your line is not open.
Thanks for the questions here. You know, piecing together the outlook for loan growth coming in a little bit weaker with with auto being a higher yielding category just wondering um as we think through the outlook ahead for specifically loan yields if there could be some pressure offset offsetting the the um rate hikes from just a change in mix and overall how how new origination yields are coming in thanks
i think with the with the higher rates i mean the those the current higher rates impact those consumer loans a lot more, right, than the commercial.
And we have been, if you look over the last, I would say, probably since the Fed started moving rates down, we have been seeing kind of incremental yields in our loan portfolio every quarter. And this quarter was, I think, the first time we see a decline in those yields as I think the portfolio starts stabilizing. I mean, the way, you know, I look at it, I think given the ins and outs of the portfolio, I mean, auto, for example, our originations are, even this quarter where we didn't grow, I think the originations were like $450 million. So it is a significant amount of volume that is coming in. So it's going to depend on, obviously, the credit risk profile of those clients, the terms of those loans. But right now, I don't think loan yield is something, you know, that putting pressure, you know, in terms of as we look forward, it's not a concern for us. Again, the NII, we do see NII continuing to expand in 2027, and, yeah.
Got it. Okay, that's helpful. And then on expenses, I appreciate you lowered to the lower end of the guide, which is you know nice given um the incentive compensation with with revenue coming in so strong just wondering um the drivers of that it's additional you were better at getting some cost savings out or if um maybe projects have been kicked out till next year thanks
we have not made any conscious decisions to move projects i mean for us the the rhythm of the project is more about capacity how much we can continue we've actually thrown in some some non-budgeted or unanticipated projects this year the teams have done a
great job in delivering efficiencies around 50 million in recurring efficiencies have been implemented identified we expect that that amount to be a benefit next year obviously it's not at some point we're gonna start seeing expense growth again but the teams have done an awesome job the two percent includes the as you mentioned probably sharing we we are expecting at this rate to max out that profit sharing payment based on our formulas and that's all embedded in into that guide but it goes to to just a lot of effort from a lot of people that are just we call it a lot of bunts and singles nothing huge to create those efficiencies and savings right I'll step back thank you thank Thank you.
Operator
One moment for our next question.
Operator
Our next question comes from the line of Gerard Cassidy for RBC Capital Markets. Your line is now open.
Jorge, now with Terry covering you, maybe you guys can do your call from Portland in July. The weather's nice.
I figure October, it's not that cold, and the leaves are pretty, so that's it.
It is gorgeous up here today, that's for sure. Thank you. Question for you. Can you guys share with us how much of your U.S. deferred tax asset do you expect to utilize over the next two to three years? And what needs to change to support a release of that large, you know, valuation allowance? And then what are the implications, if you're able to do that, of course, what are the implications for cash taxes and CET1 capital? Should that happen or when that happens?
Let me just give you some of the numbers, and then I'll give you what it will take in order for us to be able to utilize more of that DTA. Our DTA number gross is around $600 million, net of an allowance of close to $385 million. dollars that gives a net of about 215 million DTA. The majority of that DTA expires between the years 228 and 2031, and the one way that we can use it is to become more profitable. I mean, that's it. I mean, the more money we make, the more we're going to be able to use our DTA. We have done, the team have done a great job of improving profitability in the U.S. so this year and last year, and that's something that, obviously, we feel very proud and something that we continue to work hard in order to realize as much as we can from those NOLs.
Yeah, one thing, Gerard, the DTA in the U.S. is NOL-based. It's not part of regulatory capital. There are some limitations. So even if you were in a situation where you could reverse more of that DTA, it's not going to have a benefit on CET1. Now, the flip side of that is that the income that the U.S. business is generating, you know, that capital is actually accruing at essentially a pre-tax level instead of at the after-tax amount that you see on a gap basis.
Very good. Correct. And then just to circle back to credit, you know, when you think about the large credit that went into non-accrual in the second quarter and now it's off, of course, and you took a charge as well. And then the large credit that showed up this quarter. When you guys do like a post-op analysis of what went wrong with the credit or, you know, the underwriting, what did you learn? Or can you share with us, you know, what were some of maybe the shortfalls in the underwriting possibly or just really what did you learn from those two experiences?
I mean, those two experiences in particular, I would say, I mean, part of the learnings, I mean, in one of the cases, it was a client that was extending into a new venture. So, I think that's always something that we look very carefully from the writing standpoint. So, that's something that we need to keep bringing our teams as you're diversifying your industry does something also bring risk with it I think the other one is a long-standing client we have a very profitable relationship over time is in the food service industry that over time competition and market conditions in the island I from there I mean I don't know I'm not sure I mean other than having a closer look at the client and being top of the client on a day-to-day basis I I don't think that from an underwriting perspective, there was anything that we needed to change.
And I think, Gerard, I mean, given our position in Puerto Rico, we want to lend to some of these deals. You know, the telecom transaction, that was, you know, a fairly large deal. It made sense to us as the primary bank in Puerto Rico to lead into an acquisition of a large telecom provider in Puerto Rico. So unfortunately, these are operational issues that the integration of the acquisition didn't go well, and we end up having to take the hit for it. I think the other part that's important is that we've been able to work through a handful of these C&I loans over the last few quarters, but we still have been able to perform, absorb those losses, and be able to continue to improve our profitability.
I mean, just to finalize, I mean, when you look at it, we have thousands of relationships and we have issues with maybe two cases last year and three cases this year. So just to keep in mind that the performance of our book has been very, very strong, not withstanding the fact that every now and then we may have issues with one or another customer.
Operator
Thank you for our next question. Again, every reminder to ask a question, you'll need to press star 1-1 on your telephone. Our next question comes from the line of Manuel Navas of Piper Sandler. Your line is now open.
Hey, guys. How should I think about the near-term NIM? I hear you on the NII Guide for the Year, NII Improvement for next year. And I just kind of want to think about the near-term NIM and how it could enter next year, especially if there's like a December rate hike as well.
I mean, when you look at our NIM, I think we have, as Jorge mentioned in earlier commentary, we have still a lot of tailwinds related to the repricing of our investment portfolio. so that's going to lead to an increase in asset yields as well as the repricing of some of our short-term assets and short-term liabilities. We have also, we said we expect net interest income to continue to grow, continue to be the guide for us as an organization. So in that regard, I mean, you can think of, we'll see an ascending trajectory that is going to depend upon the mix between assets, our assets between treasuries and investments, sorry, between investments and loans.
I think the other factor is the level of public deposits. You know, that's really a big driver, Manuel. I mean, if we continue to see growth in public deposits, that does put pressure on NIM. It's not good for NIMH, but it does contribute nicely to NII, and we'll take the NII growth.
Got it. And just switching over to growth for a second, what dynamics would need to come into play for loan growth to accelerate? I hear you that perhaps the tendency is more towards GDP levels of Puerto Rico, where that's the longer-term trend. But what would give you some tailwind on loan growth?
Yeah, I mean, I think when, you know, one of the cool things about going from the accounting and finance world to the CEO role is being able to spend time with clients and spending a lot of time with our customers, and you hear a lot of people enthusiastic about the opportunities in Puerto Rico, and these are people thinking, you know, three, five, ten years down the road, and you see some of their projects, some of their visions, some of those dreams, and if they start coming to fruition, you see acceleration for able to bring in and see population growth in the u.s attract the professionals and the diaspora of puerto rico you see you know four billion dollars of of manufacturing jobs i'm sorry four billion dollars of manufacturing investment announced as those things starts coming in if you're seeing a shift in in population and the ecosystem that goes around some of those investments you know certainly you know those those are things that could help the entire economy of puerto rico and will benefit it from that lift.
I appreciate that. Last question here is shifting over to the ROTC guide. What are kind of the biggest drivers of the high end of that guide or the low end of that? You know, it's through the cycle. But as you look into next year, just kind of thoughts on what could really drive it towards the high end, but potentially what could drive it to the lower end?
We love the ROTC guidance because it captures everything, Manuel. So certainly, you know, when you look at that ban, you know, credit cost, you know, provision is a factor. NII growth, continued NII growth is a positive factor. You know, our ability to be able to execute on our segment-led strategies in Puerto Rico and deepening deposit relationships in Puerto Rico, which we believe we can do, that will help the top end of that range. So these are all things that, you know, drive profitability really in banks, and it's no different for us.
I appreciate the commentary.
Operator
Thank you. I'm showing no further questions at this time. Thank you for your participation in today's conference. Does this conclude the program? You may now disconnect.
