$62.18
$246.50
bear $62.18
base $171.81
bull $246.50
margin of safety $42.00
market price* $158.89
Popular, Inc. is the holding company for Banco Popular de Puerto Rico, the largest financial institution based in Puerto Rico, and for Popular Bank, a smaller New York-chartered bank with branches in New York, New Jersey and Florida. At December 31, 2025 it had $75.3 billion of assets, $66.2 billion of deposits and $6.2 billion of equity; by June 30, 2026 those were $79.0 billion, $70.2 billion and $6.4 billion. Tangible book value was $82.65 a share at year-end 2025 and is about $88 at June 30, 2026 by our calculation. Its fortunes are tied closely to the Puerto Rico economy. HOW WE MEASURE EARNINGS. Deposits are a bank's raw material rather than borrowed money, so we measure owner earnings as profit available to common shareholders per diluted share, and we do not subtract deposits or other funding as debt. Stock compensation and capital spending are not deducted separately because stock compensation is already an expense in reported profit. That series is $2.06 (2016), $1.02 (2017), $6.06 (2018), $6.88 (2019), $5.87 (2020), $11.46 (2021), $14.63 (2022), $7.52 (2023), $8.56 (2024) and $12.30 (2025). Several years are distorted. 2017 carried a one-time $168.4 million tax charge from the U.S. tax-law change, plus the 2017 hurricanes. 2020 carried loan-loss provisions of $292.5 million in the pandemic year. 2021 was lifted by releasing loan-loss reserves (the provision was a $193.5 million credit). 2022 included gains from the sale of its Evertec shares. STARTING LEVEL. We anchor on the middle of 2024 and 2025, $10.43 a share. We chose those two years because the net interest margin had recovered from 3.13% in 2023 to 3.24% in 2024 and 3.49% in 2025, so they reflect today's funding-cost structure; earlier years carried one-time items or a different rate environment. The margin gain came mainly from lower deposit costs, loan growth and Treasury purchases at higher yields. The last four quarters support the higher level: net income was $445.2 million in the second half of 2025, $245.7 million in the first quarter of 2026 and $278.2 million in the second quarter, an average of $242 million a quarter against $154 million a quarter in 2024. First-half 2026 diluted earnings were $8.13 a share against $5.64 a year earlier, and net interest income rose 10.2%. We did not set the level at those run-rates. Part of 2025's jump comes from a lower tax rate (17.3% in 2025 and 15.0% in the first half of 2026, against 22.9% in 2024, a year that included a $16.5 million impact from intercompany distributions) and from a buyback that cut the weighted diluted share count from 71.6 million to 67.6 million. Growth check: owner earnings per share grew 43.7% in 2025 ($8.56 to $12.30); the base case assumes 0% growth from the $10.43 starting level in year one, which is below that trailing rate. CREDIT. Gross loan write-offs (before recoveries) were $326.5 million in 2024 and $297.0 million in 2025. In 2025 the bank booked a specific reserve on a $158.3 million commercial and industrial facility and a charge-off on a $30.1 million commercial real estate facility. In the first half of 2026, write-offs were $215.0 million against $139.4 million a year earlier (the second quarter alone was $132.8 million against $64.3 million), while the allowance fell to $784.8 million at June 30 from $823.7 million at March 31. We could not tie the 2026 increase to a specific loan from the filings available. First-half provisions were $141.8 million against $113.0 million and earnings still rose, so we did not change the starting level, but this is the figure to watch. A second exposure is Puerto Rico public-sector deposits of $19.4 billion at year-end 2025, about 29% of all deposits; they are fully collateralized and linked to market rates, but the company states their future balances are uncertain and difficult to predict. BASE CASE: about $172 a share. Earnings of $10.43 a share held flat, with one downturn in year four patterned on 2020, when net income fell 24.5% ($671.1 million to $506.6 million) before recovering. Flat afterwards because the franchise has earned more than $500 million in every year from 2018 through 2025 (the low was $506.6 million in 2020). We credit no growth. Loans grew from $28.5 billion in 2021 to $38.5 billion in 2025, but that growth depends on rates, the island economy and retained capital, none of which is secured; the company also paid out about 85% of 2025 earnings through dividends ($2.90 a share) and roughly $511 million of repurchases, leaving little retained to fund more. BEAR CASE: about $62 a share, below tangible book value. It starts from $8.56 (the 2023-2025 median, giving no credit to the recent step-up, since the gain came largely from falling deposit costs) and then repeats Popular's own 2007-2012 credit cycle. From 2003 to 2006 net income averaged $464.8 million. Then 2007 was a $64.5 million loss, 2008 a $1,243.9 million loss, 2009 a $573.9 million loss, 2010 a $137.4 million profit, 2011 $151.3 million and 2012 $245.3 million, which is -0.14, -2.68, -1.23, +0.30, +0.33 and +0.53 times the pre-crisis level. Applied to $8.56 that gives year 1 at $8.56, then -$1.19, -$22.91, -$10.57, +$2.53, +$2.79 and +$4.52, and 80% of $8.56 ($6.85) from year 8 on, reflecting a smaller capital base after the losses. The cumulative loss of $34.67 a share is about 39% of today's tangible book. We assume the year-end 2025 common equity tier 1 capital ratio of 15.72% absorbs that without selling shares; between 2007 and 2009 book value per share fell about 68% ($121.24 to $38.91, adjusted for the 2012 reverse split), so if issuing shares at trough prices were needed, this value would be lower. Earnings continue after the cycle because the company was profitable in each year from 2010 to 2013 and from 2015 through 2025 (2014 was a loss). BULL CASE: about $246.50 a share. The last four quarters' earnings, about $14.79 a share (2025's $12.30, less first-half 2025's $5.64, plus first-half 2026's $8.13), held flat with no downturn. This level has already been earned, supported by a 3.61% fourth-quarter 2025 margin and the first-half 2026 results. We credit nothing beyond what has already been achieved. VALUE AFTER FUNDING. Because deposits and other funding are the raw material of a bank, each case is the value of shareholders' earnings with nothing deducted for borrowings: base about $172, bear about $62, bull about $246.50. Our previous estimate was built on a different basis, so its figures are not comparable. What changed in the business: second-quarter 2026 earnings were well above 2025's, the share count fell to 63.9 million from 65.7 million at year-end, and write-offs rose. WHAT COULD MAKE THIS WRONG. A Puerto Rico downturn that coincides with a credit cycle (the bear case), a margin squeeze if deposit costs rise, and a sudden loss of public-sector deposits. HOW WE ARRIVED AT THE MARGIN-OF-SAFETY PRICE. We are fairly sure of the floor: net income has exceeded $500 million every year since 2018, and the last four quarters averaged $242 million against $154 million in 2024. We are less sure of the 2025-2026 level, which rests on a margin set by deposit costs and on a single island economy. The worst plausible outcome is a repeat of 2008-2010, losses of about 39% of tangible book on our arithmetic, with 29% of deposits in public-sector accounts and little geographic diversification beyond a small mainland bank. Outcomes no case models include a rapid withdrawal of those deposits or a hurricane on the 2017 scale. The company did survive 2008-2010, but per-share book value fell about 68%, so the structure survives while shareholders are hurt. If we are wrong about the level and true normal earnings are only $8.56 a share, the base case shape is worth about $141; at $7.52 (the 2023 result) about $124; and if the cycle is as severe as 2008-2010, about $62. The price assumes a three-to-five-year holding period, over which the company pays $0.75 a quarter ($3.00 a year) plus buybacks. The margin-of-safety price is $42. From that price the base case's cash flows alone (no re-rating) imply about 24% a year; if earnings were only $8.56 a share, about 19.9% a year; the $3.00 dividend alone is 7.1%. It is about 0.48 times tangible book, and this stock has traded that low before: at year-end 2011 it was 0.37 times book ($13.90 on $37.71) and at year-end 2009 0.58 times. The bear case ($62) still exceeds that price. The price is not set higher because the 20% return must hold even if the earnings level is wrong.