Earnings Call Transcript - BPOP Q3 2025

Operator, Operator

Hello, everyone, and welcome to the Popular, Inc. Third Quarter 2025 Earnings Call. My name is Elliot, and I will be coordinating your call today. Now, I would like to hand it over to Paul Cardillo, Senior Vice President, Investor Relations Officer. Please proceed.

Paul Cardillo, Senior Vice President, Investor Relations Officer

Good morning, and thank you for joining us. With us on the call today is our President and CEO, Javier Ferrer; our CFO, Jorge García; and our CRO, Lidio Soriano. They will review our results for the third 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 structure 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 set forth within 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 now turn the call over to our President and CEO, Javier Ferrer.

Javier Ferrer-Fernández, President and CEO

Thank you, Paul, and good morning, everyone. Starting on Slide 3, we share a few highlights that reflect our strong operating performance in the third quarter. We reported net income of $211 million and EPS of $3.15, an increase of $1 million and $0.06 per share, respectively. Our results were driven by higher revenues and expanding net interest margin, strong loan growth and importantly, stable customer deposit balances. Our credit metrics were impacted by two large commercial loans, which were related to isolated circumstances that do not reflect broader credit quality concerns. As Lidio will discuss in more detail in his remarks, I'd note that excluding these two relationships, credit metrics remained stable. For the second quarter in a row, we have demonstrated progress from our efforts to achieve sustainable returns above 12% this year and towards our longer-term 14% objective. Please turn to Slide 4. As of the end of the third quarter, business activity in Puerto Rico continued to be solid as reflected by favorable trends in total employment, consumer spending, tourism, and other key economic data. The unemployment rate of 5.6% continues to hover around all-time lows. Consumer spending has been resilient and remains healthy. Combined credit and debit card sales for Banco Popular customers increased by approximately 5% compared to the third quarter of 2024. Home purchase activity continues to be strong as demonstrated by the $129 million increase in mortgage balances at Banco Popular during the quarter. Momentum in the construction sector has been solid with both public and private investment fueling higher employment levels and cement sales. We are optimistic that these trends will persist given the backlog of obligated federal disaster recovery funds, announced real estate and tourism development projects as well as the renewed focus on reshoring by global manufacturing companies. One example of this is Amgen's recently announced $650 million manufacturing network expansion, which is expected to create roughly 750 direct new jobs in Puerto Rico. Puerto Rico is also well positioned given its strategic geographic location considering current geopolitical focus in the Caribbean region. The tourism and hospitality sector continues to be a source of strength for the local economy. This summer, the sector benefited from Bad Bunny's 31-night concert residency at the Coliseum in San Juan, right next to our Popular center complex. This was more than just a series of concerts. The event also featured Puerto Rico as a destination, highlighting our music, natural beauties, and culinary offerings. The celebration of our culture generated significant media exposure for the island globally and led to a substantial increase in tourism activity during what is normally a seasonally slow period of the year. Please turn to Slide 5. I would like to comment on our new strategic framework and transformation progress. Our strategy centers on three objectives: First, Be The #1 Bank For Our Customers by deepening relationships, earning trust, delivering value across all channels, and providing exceptional service. Leveraging our very strong primacy and satisfaction scores in Puerto Rico, we are focused on advancing digital and payment solutions to further grow engagement. Second, Be Simple and Efficient by working collaboratively, streamlining operations, and reducing costs. We are committed to making our processes simpler and more effective to deliver superior solutions for our customers. And finally, Be a Top Performing Bank by attracting and retaining top talent and converting customer and operational success into shareholder value with a commitment to generating a sustainable 14% ROTCE over the long term. This framework, simple yet powerful, guides our transformation, which continues to show steady and notable progress. We are investing in seamless, secure banking solutions, expanding service channels, and modernizing branches and digital platforms to provide our customers with the flexibility to connect with Popular through the channel that best fits their needs. We plan to extend these digital capabilities to more products to further improve online and mobile experiences and support future growth. Recent initiatives include the launch of a fully online personal and credit card loan origination process in Puerto Rico and the Virgin Islands and the expansion of digital deposit products in the U.S. Mainland. On the commercial side, we are improving cash management and credit delivery for small and midsized businesses. We are pleased with the progress we have made so far in our transformation and are convinced that these efforts will continue to unlock growth opportunities and efficiencies to drive sustained financial performance. I will now turn the call over to Jorge for more details on our financial results. Jorge?

Jorge Garcia, CFO

Thank you, Javier. Good morning, and thank you all for joining the call today. As Javier mentioned, our quarterly net income increased by $1 million to $211 million. Our EPS improved by $0.06 to $3.15 per share. These results were driven by better net interest income and noninterest income and a lower effective tax rate, offset somewhat by a higher provision for credit losses. As we have mentioned before, our objective is to deliver sustainable financial performance. While there is some noise in the current quarter's results, we're very pleased to have once again exceeded a 13% ROTCE for the period. We continue to expect to achieve at least a 12% ROTCE in Q4 as well as for the full year. Longer term, we remain focused on achieving a sustainable 14% return on tangible common equity. Please turn to Slide 7. Our net interest income of $647 million increased by $15 million and was driven by higher average deposit balances, fixed rate asset repricing in our investment portfolio, and deposit pricing discipline in both of our banks. Our net interest margin expanded by 2 basis points on a GAAP basis and by 5 basis points on a tax-equivalent basis, driven by a larger balance of loans and tax-exempt investment securities. Loan growth of $502 million in the quarter was strong with both banks contributing to the increase. At BPPR, we saw loan growth of $357 million reflected across most portfolios, but driven primarily by commercial and construction lending. At Popular Bank, we saw loan growth of $145 million, also driven by the commercial and construction lending segments. Given that the underlying economic activity and demand for credit in both of our markets remain solid, we now expect consolidated loan growth in 2025 to be between 4% and 5% as compared to the original 3% to 5% guidance for the year despite the expected headwinds in our U.S. construction balances due to paydowns expected during the fourth quarter. In our investment portfolio, we continue to reinvest proceeds from bond maturities into U.S. treasury notes and bills. During the quarter, we purchased approximately $2.5 billion of treasury notes with a duration of 1.4 years and an average yield of around 3.65%. We funded the purchases by reinvesting roughly $1 billion of bond maturities, along with redeploying $1.5 billion of cash reserves. We expect to continue to invest in treasury notes to lessen our net interest income sensitivity to lower rates while maintaining an overall duration of 2 to 3 years in the investment portfolio. Ending deposit balances decreased by $704 million, while average balances grew by $793 million. Puerto Rico public deposits ended the quarter at $20.1 billion, a decrease of $842 million when compared to Q2. We continue to expect public deposits to be in the range of $18 billion to $20 billion. At BPPR, excluding Puerto Rico public deposits, ending deposit balances decreased by $162 million and on an average deposits decreased by $44 million, demonstrating the impact of our continued focus on deposit retention strategies. At Popular Bank, ending deposit balances increased by approximately $216 million, net of intercompany deposits. Total deposit costs increased by 1 basis point at both banks. At BPPR, the increase was mostly due to a higher average balance of public deposits. Given the results year-to-date, along with the anticipated net interest margin expansion in Q4 from the repricing of our fixed-rate earning assets, we continue to expect to see net interest income growth of 10% to 11% in 2025. Please turn to Slide 8. Noninterest income was $171 million, an increase of $3 million compared to Q2 and above the high end of our 2025 quarterly guidance. We continue to see solid performance across most of our fee-generating segments, including robust customer transaction activity. This quarter, we also benefited from a $5 million retroactive payment from a tenant related to an amended lease contract. Given the trends year-to-date and particularly the stability in customer transaction activity, we now expect Q4 noninterest income to be in the range of $160 million to $165 million. This will result in total noninterest income between $650 million and $655 million for the year. Please turn to Slide 9. Total operating expenses were $495 million, an increase of $3 million when compared to last quarter. The largest variance was related to a $13 million noncash goodwill impairment in our U.S.-based equipment leasing subsidiary due to lower projected earnings. Offsetting this was a $13.5 million quarter-over-quarter reduction in other operating expenses, driven by the effect of a reversal this quarter of a $5 million claims accrual recorded in Q2 and a similar reduction in operational reserves. We also saw a $3.6 million increase in personnel costs, mainly due to annual salary and merit increases effective in July, along with the impact of employee termination benefits related to cost efficiency initiatives at Popular Bank. Specifically, as part of our ongoing efforts to improve profitability, we decided to exit the U.S. residential mortgage origination business and to close four underperforming branches in the New York Metro area. We will remain focused on areas where we feel we can invest to achieve improved operating leverage. We continue to expect the increase in 2025 expenses to be between 4% and 5% when compared to last year. Our effective tax rate in the third quarter was 14.5% compared to 18.5% in Q2, driven by a higher proportion of exempt income. This higher exempt income along with the impact of changes to Puerto Rico's tax code will result in an effective tax rate for Q4 in the range of 14% to 16%, and for the year, we now expect the effective tax rate to be between 16% and 18%. Please turn to Slide 10. Regulatory capital levels remain strong. Our CET1 ratio of 15.8% decreased by 12 basis points, mainly due to loan growth and the effect of capital actions, net of our quarterly net income. Tangible book value per share at the end of the quarter was $79.12, an increase of $3.71 per share, driven by our net income and lower unrealized losses in our MBS portfolio, offset in part by our capital return activity in the quarter. During the third quarter, we declared a quarterly common stock dividend of $0.75 per share, an increase of $0.05 from Q2. Finally, we repurchased approximately $119 million in shares during Q3. And as of September 30, we still have $429 million remaining on our active share repurchase authorization. With that, I turn the call over to Lidio.

Lidio Soriano, CRO

Thank you, Jorge. Good morning, and thank you for joining the call. Turning to Slide #11. The ratio of non-performing loans to total loans held in portfolio increased to 1.3% compared to 82 basis points in the prior quarter. Credit quality metrics were impacted by two unrelated commercial exposures in BPPR, resulting in an increase in non-performing loans and net charge-offs. This impact relates to borrower-specific circumstances and does not reflect broader credit quality concerns. The first loan is a commercial and industrial facility extended to a telecommunications company in Puerto Rico, which is facing reduced revenue due to operational challenges and client attrition following a business acquisition. As of September 30, we classified this loan as non-accrual with a carrying value of approximately $158 million, which contributed to the increase in provision expenses in the quarter. The second loan is a commercial real estate facility secured by hotel property in Florida. This loan has also been placed on non-accrual status and carries a value of $30 million as of September 30, which includes a $14 million charge-off recognized during the quarter. Excluding these two cases, credit quality metrics were stable. We continue to closely monitor the economic environment and borrower performance as economic uncertainty remains a key consideration. We are confident that the risk profile of our loan portfolios positions Popular to operate successfully under the current environment. Turning to Slide #12. Net charge-offs amounted to $58 million or annualized 60 basis points compared to $42 million or 45 basis points in the prior quarter. Net charge-off in BPPR increased by $16 million, mostly due to the $4 million charge-off related to the $30 million commercial non-performing loan inflow mentioned earlier. Consumer net charge-offs increased by $4 million, primarily due to a $6 million increase in auto loans net charge-offs, partially offset by a $2 million reduction in credit card net charge-offs. Given our credit performance year-to-date and non-performing loan inflows this quarter, we expect net charge-offs to be between 50 to 65 basis points for the full year. The allowance for credit losses increased by $17 million to $786 million, while the provision for credit losses increased by $29 million to $75 million. Both increases were driven by the impact of the two commercial exposures, offset in part by improvements in the credit quality of the consumer portfolio. The Corporation's ratio of allowance for credit losses to loans held in portfolio remained stable at 2.03%, while the ratio of allowance for credit losses to non-performing loans was 157% compared to 247% in the previous quarter. With that, I would like to turn the call over to Mr. Ferrer for his concluding remarks.

Javier Ferrer-Fernández, President and CEO

Well, thank you, Lidio, and Jorge for your updates. We are very pleased with our financial performance in the third quarter. We increased revenues, maintained expense discipline, generated strong loan growth, and benefited from stable customer deposit trends. We are determined to close out 2025 on a high note as we continue to execute on our strategy, and I am urging our teams to remain focused on deposit retention, loan generation, and particularly on our expense discipline. We will continue to generate value for our shareholders and deliver our ROTCE objectives. We will achieve this by concentrating on our strategic framework, Be The #1 Bank For Our Customers, Be Simple and Efficient, and Be a Top Performing Bank. I want to give a shout out to our colleagues and recognize their hard work. I see what they do every day in our branches, call centers, and centralized offices. We are pushing ourselves to deliver more for our clients every day, and I am incredibly grateful for their commitment. We are now ready to answer your questions.

Operator, Operator

First question comes from Jared Shaw with Barclays.

Jared David Shaw, Analyst

Maybe starting just on the margin and on asset yields. With the securities purchases this quarter, should we assume that trend continues? And I guess, where are the new purchase yields? It looks like maybe we won't be able to see net yield expansion much more from here if we see the rate cuts?

Lidio Soriano, CRO

No. I mean let me first answer the yield expansion. We do believe that we still have strong tailwinds. You can see in our appendix we provide to you kind of the upcoming maturities in the investment portfolio, those are still coming off at a rate of 1 and change, and we expect to be able to continue to get a significant spread pickup on those maturities. So while they may be priced lower as rates are coming down, remember that a large portion of our portfolio is also being financed, let's call it, money fungible, but still being financed by public deposits. And we would expect those public deposits to also benefit from the lower rate environment, giving us the opportunity to create that spread. So we do continue to expect our net interest margin to expand in the fourth quarter and beyond.

Jared David Shaw, Analyst

Okay. And then on the loan side, what about new loan yields this quarter? Please go ahead.

Jorge Garcia, CFO

Yes. Regarding new loan yields for the quarter, we have continued to observe the same trends we've seen over the past year, particularly in personal loans and auto lending, where there has been a quarter-over-quarter increase in yield. I anticipate that this may slow down somewhat, especially as auto sales activity decelerates, which could lead to more competitive pricing to stimulate demand. However, as we've previously mentioned, there is a significant amount of both front and back book in the auto loan portfolio. Given the average duration of these loans and assuming a consistent risk profile, we still see potential for repricing in the current rate environment.

Jared David Shaw, Analyst

All right. And then maybe just shifting on the credit side, especially on the auto. There was an increase in delinquency, but it's still lower, I guess, year-over-year. How are you looking at the credit trends over the next few quarters within auto and consumer, I guess, more broadly?

Lidio Soriano, CRO

I would say the variation we observed this quarter is consistent with the seasonal patterns of the portfolio. We remain optimistic about the consumer, considering the trends in Puerto Rico, employment rates, and the liquidity of our client base. Losses in the auto portfolio are approximately 45 basis points lower than last year. Therefore, we feel confident about our position and the outlook for the portfolio.

Operator, Operator

We now turn to Timur Braziler with Wells Fargo.

Timur Braziler, Analyst

Sticking with the credit commentary, the large C&I loan, I guess, what are the specific reserves that you set aside for that, the timing of resolution as you see it? And I'm just wondering why it moved into non-performers right away instead of kind of up the risk migration chain. Did they stop making payments? Or is that still accruing at this point? Maybe start there.

Lidio Soriano, CRO

Thank you for the question. The loans are current in terms of payments. However, the situation has deteriorated over time, leading us to downgrade the loan progressively. This business carries a significant amount of debt, and management has expressed their intention to adjust its capital structure, including liability management. This is why we decided to classify it as non-accrual.

Timur Braziler, Analyst

Okay. And then I guess, in terms of specific reserve and any kind of timeline around planned resolution?

Lidio Soriano, CRO

I think planned resolution most likely is next year. In terms of specific reserves, we have not provided that information at this time. So...

Jorge Garcia, CFO

Yes, Timur, you can assume that the driver of the variance in the quarter in provision was related to these loans.

Timur Braziler, Analyst

Okay. And I mean this is a little bit of a larger credit, just maybe stack ranking the loan book. Is this one of the larger credits that you guys carry? Is this kind of typical size just given your place in the Puerto Rico economy? And maybe just talk a little bit more broadly as to the health of the economy from a business standpoint versus a consumer standpoint? And if there are any kind of signs that might be flashing yellow or any other kind of degradation?

Lidio Soriano, CRO

If you look at our portfolio over the years, we have transitioned from a focus on small and medium-sized enterprises to a corporate credit portfolio. We have seen strong trends in recent years. In fact, the last time we encountered an issue with a large group was in 2019. We plan to continue focusing on that segment, as we believe there are significant opportunities in Puerto Rico, which has performed very well over the years. That reflects the nature of our portfolio. Occasionally, you may see a situation arise. The key is that we maintain our underwriting discipline. The performance of the portfolio has been very strong, and we are comfortable with our current exposures.

Javier Ferrer-Fernández, President and CEO

Yes. And if I may add to that, I mean, to your question about the macro, I think in our commentary, we are clear that we are not seeing any sort of yellow or red indicators in Puerto Rico, referencing something that somebody said in the United States. We're seeing a strong economy. But as Lidio just said, it so happens that we continue to focus on large commercial opportunities. And from time to time, as happened this quarter and it hasn't happened in a long time, there may be an isolated credit event that occurs due to idiosyncratic specific issues that are unrelated to the underlying economic backdrop. And that's exactly how we feel. So I can't really point to anything in the Puerto Rico economy that gives us any pause or worry or contrary, as they say, across the ocean. We feel that the economy is performing well and our big customers are investing and continue to move on with their projects.

Timur Braziler, Analyst

That's great color. And then just lastly for me, encouraging to hear that margin expansion is going to continue here. I'm just wondering from an NII standpoint, you guys reiterated the guidance. It is a little bit wide in terms of the range just as it implies to 4Q. Should we assume that margin expansion portends to NII kind of flat to up here as we go through these rate cuts? Or just given some of the lags, maybe NII growth stalls here over the next couple of quarters?

Jorge Garcia, CFO

Yes. I think first, I want to reiterate that we continue to see the benefits of fixed asset repricing, loan growth, all those things should continue to contribute to improving NII and the expansion of the margin. As you mentioned, the guidance for NII, we left it where it was. Part of that has to do with our perspective on public deposit balances in the fourth quarter. We still expect to be within the range, but maybe not at the high end of the range where we are when we closed out Q3. We also mentioned the lag in pricing of these deposits. We continue to be slightly asset sensitive, particularly in the early stages of moves of the Fed funds rate. But as we stated before, the cost of public deposits are linked to short-term market rates. And in general, they reprice on a quarterly lag. Because we've never given the index, but we're going to do call a favor, and it's tied to 3-month treasuries, obviously minus a spread. And so they reprice at a lag. So over time, we would expect to see the effects of changes in rates be reflected in the cost of public deposits with a beta of near 1, and that pricing structure will continue to support our fixed asset repricing and the investment portfolio, making sure that we generate that improving spread on that investment. But any time there's movement in the Fed, maybe there is a little bit of a lag, not always, right? We talked about that in the past that if the market and treasuries get ahead in anticipation of Fed moves, we might be able to benefit a little quicker. But we've kind of incorporated all that into our NII guidance for the fourth quarter, but we have a high level of confidence that as that stabilizes and the passage of time into 2026 and beyond will continue our previous growth trends.

Operator, Operator

Our next question comes from Ben Gerlinger with Citi.

Benjamin Gerlinger, Analyst

Not to belabor the point on credit because it's pretty clear that you guys are doing phenomenal relative to like the last 10 years. But I found it interesting that your guide, you kind of fine-tuned a lot, whereas the charge-off outlook, you just brought up the low end. So when you think about the 65 bps on the high end on a full-year basis, that would imply something pretty draconian for the fourth quarter. I mean, is that a possibility? Or how should we think about that considering the other guidance portions were fine-tuned?

Lidio Soriano, CRO

I will say as we mentioned in the remarks, we took a reserve and a provision for some of the exposure. We charge off one of the two related exposures. There is a possibility that we may have to take charge-offs in the exposure that we reserve this quarter, which did not charge off, and that is driving the results. Overall, I mean, if you exclude that, we continue to expect a very solid performance out of the rest of our book. So that's the only thing that we are caveat in terms of the range that we provided to you.

Jorge Garcia, CFO

Yes. Ben, in similar words, we talked about this in the past where when we provide that spread in the guidance of net charge-off, we are trying to put in for idiosyncratic events that could happen in our portfolio at any given time. Certainly, the activity that we have seen year-to-date, as you say, don't reflect necessarily a lot of opportunities to get to the high end without it being a commercial loan. Yes, you're correct. We won’t provide any guidance for 2026. We appreciate your efforts in trying to get more information. We are pleased with our cost discipline and the various initiatives currently underway. We discussed these in our last quarterly call. There is a strong focus on executing well and achieving excellence. Many of the ongoing efforts may seem small, but they contribute significantly over time. This quarter, we recognized some of those efforts, particularly in the U.S. It was a tough decision for us to shut down our mortgage origination business in the U.S. because we don’t think it aligns with our funding profile and deposit franchise at the moment. Other areas within the organization are also being addressed. Importantly, these efforts are sustainable and not just one-time actions. We anticipate seeing their benefits, which will enable us to reinvest in other opportunities. We have previously mentioned our strategy to reduce our expense growth rate, and these measures support that objective while allowing ongoing investment in areas that we believe will create value and help us achieve a 14% return on tangible common equity.

Operator, Operator

We now turn to Kelly Motta with KBW.

Kelly Motta, Analyst

I will address the 14% ROTCE you mentioned. You have maintained over 13% in the last two quarters, and 14% seems attainable. I appreciate your guidance of at least 12% for the year, as it appears achievable. Do you have any updates on when we might reach 14%? Additionally, considering what you've shared about your NII trajectory, has there been any discussion on whether aiming for 14% is sufficient as a sustainable ROTCE, or should we consider targeting a higher figure?

Jorge Garcia, CFO

I can assure you that we are not going to settle at 14%. It's a guiding principle for us, and while we aim to reach it, we have no intention of stopping there. We want to ensure sustainable performance, as we've mentioned before. I agree we are closer to that goal now than we were a year ago when we adjusted our guidance for this year. We've had a lot of effort from many people, and things are going well. Our focus is on continuing to execute our strategy, and we will provide more guidance on how and when we achieve our goals. What's crucial is that we believe firmly in reaching this through enhancements in our net income performance and operating leverage. Any actions we take on the capital side will only enhance our chances of not only reaching but exceeding that goal.

Kelly Motta, Analyst

Okay, that's really helpful. Regarding the tax rate, you mentioned a reduction in the guidance due to a higher proportion of tax-exempt income and some tax rate changes. I understand there is some variability, and while you're not providing guidance for 2026, could you clarify if the full year 2025 represents a solid core run rate? Also, could you provide more details on the changes in the Puerto Rico tax rate and their impact moving forward? Any additional insights would be appreciated given the many factors at play.

Jorge Garcia, CFO

Yes. I want to focus on two aspects. First, in this quarter, there were no significant discrete events that affected the effective tax rate, which was lower due to the combination of taxable and tax-exempt income. We also gained from the $5 million in other operating income, which enjoys favorable tax treatment. This provides a solid foundation. Moving on to the guidance for the fourth quarter, we are indicating that the reversal of a tax law change in Puerto Rico will enable us to reverse the corresponding tax expense for the year. I share this lengthy explanation to clarify that our guidance for 2025 of 16% to 18% is quite straightforward, without many unusual elements or discrete events that deviate from our usual tax strategy. You may interpret that as you wish, and we will provide confirmation in January with our 2026 guidance.

Kelly Motta, Analyst

Fair enough. Last question if I can sneak it in. Some of your competitors have noted increased competition on the deposit side. One was on government deposits. The other was some of the initiatives they're doing. Wondering if you could just expand upon the market competition you're seeing in Puerto Rico, one? And two, like has there been any news of any new entrants to the island, specifically on the depository side?

Javier Ferrer-Fernández, President and CEO

I'll start by saying that we are not aware of any new entrants on the depository side in Puerto Rico. There is certainly competition; it's a lively market, and we compete daily for our share of the business and customers. However, we will remain rational in our approach and are determined not to lose any valuable clients due to pricing or terms. Competition is a normal part of doing business. It's evident how some of our respected bank competitors in Puerto Rico are presenting themselves as challenger banks, but we are pleased with our current position and the revitalization of our franchise. We are not acting like a 132-year-old bank, and there's more to come on that. Overall, we are satisfied with where we are.

Operator, Operator

Our next question comes from Gerard Cassidy with RBC.

Thomas Leddy, Analyst

This is Thomas Leddy standing in for Gerard. Loan growth in the quarter was strong, as you mentioned. And just on the back of the increased competition on the deposit side. I'm curious, in booking new C&I and CRE loans, have you seen a similar increase in competition, maybe resulting in less rigorous underwriting standards? In other words, anything you can tell us about changes in underwriting standards on loans you're originating now versus, say, a year ago?

Javier Ferrer-Fernández, President and CEO

I mean, I guess each one of us can answer that. But no, the answer is no. We have a very strong credit underwriting process, and Lidio leads the risk side, and then our business side as well. We are not going to do anything that doesn't make any sense, frankly. We tend to be a bit conservative by nature, quite frankly. But I'm not seeing anything in originations that points to that concern.

Jorge Garcia, CFO

Yes. From talking to our bankers and listening to the teams, the pushback we gather in competition is more pricing. And we're seeing maybe particularly you're hearing in some entrants in the New York market and maybe South Florida, where people are being a little more aggressive in pricing. And frankly, if those loans are not true relationships and they're not coming with deposits, we're not going to pursue that, particularly in the U.S. In Puerto Rico, we might have a different strategy, echoing what Javier previously said in his comments.

Operator, Operator

We now turn to Arren Cyganovich with Truist Securities.

Arren Cyganovich, Analyst

Javier, you.

Jorge Garcia, CFO

Thank you for picking up Puerto Rico Bank.

Arren Cyganovich, Analyst

Good to be back. Could you share your thoughts on the investment initiatives mentioned in your transformation plan? How do you view the items you've discussed in your remarks regarding costs? Do you anticipate an increase in costs, or do you expect to identify efficiencies that could help balance out the additional investments as you move forward?

Jorge Garcia, CFO

Great. Arren, I mean, the one thing I'll reiterate, our goal here is to be able to continue to invest and generate opportunities and efficiencies to be able to then continue to reinvest at a level slowing down the overall level of expense growth.

Javier Ferrer-Fernández, President and CEO

Yes. So there's going to be at the beginning and in certain periods, right, a disconnect between initial investments and then results from those investments, which is what Jorge is referring to. And we think that's okay as long as the actual investment makes sense to us. We're not going to do something dramatic or irrational. But we have to invest in our technology to continue to compete, not only in Puerto Rico, but we compete with folks that come from the United States, you may imagine, the big players are already here, and they have the best technology. So our program is rational in that way, and I think our expense base shows it. I don't perceive that we're going to go above and beyond a particular sort of threshold.

Jorge Garcia, CFO

Yes. And what happens is right now, we've got over 80 projects that are ongoing. Some of them have higher levels of current investments, some are in capitalizing mode, but a lot of them are in dual expense mode. As you're developing, particularly with SaaS licensing agreements, you're paying for your new system and you're paying for your old system. So over time, as you start generating the cost avoidances and turning off the old system, that allows us buffers to continue to reinvest following a business case and value-add analysis. But when we talk about being able to slow down the rate of growth, that's the kind of thing that we're talking about is how do we shift and reallocate expenses and savings to continue to improve the business and add value to our shareholders.

Javier Ferrer-Fernández, President and CEO

So, I want to highlight a very important point that Jorge just made. We're not viewing this in isolation. We are investing in the transformation and want to ensure that we can generate savings in other parts of the bank to help fund that transformation. That's our approach, and in many cases, we've successfully achieved this, which reduces the impact of the actual investment. It's a comprehensive program, and we are excited about the results we're beginning to see. We will continue this effort because we are also fostering a transformation mindset within our teams. We need to keep moving forward.

Operator, Operator

This concludes our Q&A. I'll now hand back to Javier Ferrer, CEO, for any final remarks.

Javier Ferrer-Fernández, President and CEO

Well, thank you. Thanks again, everybody, for joining us and for your questions. Really appreciate that. We look forward to updating you on our fourth quarter results in January. Thank you.

Operator, Operator

Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.