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1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10-Q
[X]
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended
 
March 31, 2024
or
[ ]
 
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number:
 
001-34084
POPULAR, INC.
(Exact name of registrant as specified in its charter)
Puerto Rico
66-0667416
(State or other jurisdiction of Incorporation or
(IRS Employer Identification Number)
organization)
Popular Center Building
209 Muñoz Rivera Avenue
Hato Rey
,
Puerto Rico
00918
(Address of principal executive offices)
(Zip code)
(
787
)
765-9800
(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which
registered
Common Stock ($0.01 par value)
BPOP
The
NASDAQ Stock Market
6.125% Cumulative Monthly Income Trust
Preferred Securities
BPOPM
The
NASDAQ Stock Market
Indicate by check mark whether the registrant (1) has filed all reports
 
required to be filed by Section 13 or 15(d) of the
Securities Exchange
 
Act of
 
1934 during
 
the preceding
 
12 months
 
(or for
 
such shorter
 
period that
 
the registrant
 
was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X]
 
Yes
[
 
]
 
No
Indicate by
 
check mark
 
whether the registrant
 
has submitted electronically
 
every Interactive
 
Data File
 
required to
 
be
submitted pursuant to
 
Rule 405 of
 
Regulation S-T (§
 
232.405 of this
 
chapter) during the
 
preceding 12 months
 
(or for
such shorter period that the registrant was required to submit such files).
[X]
 
Yes
[
 
]
 
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company.
 
See definitions of “large accelerated filer”, “accelerated
filer,” “smaller reporting company,”
 
and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
 
[X]
Accelerated filer [
 
]
Non-accelerated filer [
 
]
Smaller reporting company
[ ]
Emerging growth company
[ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act.
 
[
 
]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[
 
]
 
Yes
[X]
 
No
Indicate
 
the
 
number
 
of
 
shares
 
outstanding
 
of
 
each
 
of
 
the
 
issuer’s
 
classes
 
of
 
common
 
stock,
 
as
 
of
 
the
 
latest
practicable date:
 
Common Stock, $0.01 par value,
72,271,778
 
shares outstanding as of May 8, 2024.
 
 
 
2
POPULAR, INC.
INDEX
Part I – Financial Information
Page
Item 1. Financial Statements
Unaudited Consolidated Statements of Financial Condition
 
at March 31, 2024 and
December 31, 2023
6
Unaudited Consolidated Statements of Operations for
 
the quarters
 
ended March 31, 2024 and 2023
7
Unaudited Consolidated Statements of Comprehensive (Loss)
 
Income for the
quarters
 
ended March 31, 2024 and 2023
8
Unaudited Consolidated Statements of Changes in
 
Stockholders’ Equity for the
quarters ended March 31, 2024 and 2023
9
Unaudited Consolidated Statements of Cash Flows for
 
the quarters
ended March 31, 2024 and 2023
11
Notes to Unaudited Consolidated Financial Statements
13
Item 2. Management’s Discussion and Analysis of Financial
 
Condition and
 
 
Results of Operations
114
Item 3. Quantitative and Qualitative Disclosures about
 
Market Risk
 
158
Item 4. Controls and Procedures
158
Part II – Other Information
Item 1. Legal Proceedings
159
Item 1A. Risk Factors
159
Item 2. Unregistered Sales of Equity Securities and
 
Use of Proceeds
 
159
 
Item 3. Defaults Upon Senior Securities
160
Item 4. Mine Safety Disclosures
160
Item 5. Other information
 
160
Item 6. Exhibits
161
Signatures
 
162
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
Forward-Looking Statements
This
 
Form 10-Q
 
contains “forward-looking
 
statements” within
 
the meaning
 
of the
 
U.S. Private
 
Securities Litigation
 
Reform Act
 
of
1995,
 
including,
 
without
 
limitation,
 
statements
 
about
 
Popular,
 
Inc.’s
 
(the
 
“Corporation,”
 
“Popular,”
 
“we,”
 
“us,”
 
“our”)
 
business,
financial condition, results
 
of operations, plans,
 
objectives and future
 
performance. These statements
 
are not
 
guarantees of future
performance,
 
are
 
based
 
on
 
management’s
 
current
 
expectations
 
and,
 
by
 
their
 
nature,
 
involve
 
risks,
 
uncertainties,
 
estimates
 
and
assumptions. Potential
 
factors, some
 
of which
 
are beyond
 
the Corporation’s
 
control, could
 
cause actual
 
results to
 
differ materially
from those expressed in, or implied by, such forward-looking statements. Risks and uncertainties include without limitation the effect
of competitive and
 
economic factors, and our
 
reaction to those factors,
 
the adequacy of
 
the allowance for loan
 
losses, delinquency
trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity,
 
and the effect
of legal and regulatory proceedings and new accounting
 
standards on the Corporation’s financial condition and
 
results of operations.
All statements
 
contained herein
 
that are
 
not clearly
 
historical in
 
nature are
 
forward-looking, and
 
the words
 
“anticipate,” “believe,”
“continues,” “expect,”
 
“estimate,” “intend,”
 
“project” and
 
similar expressions
 
and future
 
or conditional
 
verbs such
 
as “will,”
 
“would,”
“should,” “could,” “might,” “can,” “may” or similar
 
expressions are generally intended to identify
 
forward-looking statements.
 
Various factors, some of which
 
are beyond Popular’s control, could cause actual results to differ materially from those expressed in,
or implied by, such forward-looking statements. Factors that might cause such a
 
difference include, but are not limited to:
 
 
the
 
rate
 
of
 
growth
 
or
 
decline
 
in
 
the
 
economy
 
and
 
employment
 
levels,
 
as
 
well
 
as
 
general
 
business
 
and
 
economic
conditions
 
in
 
the
 
geographic
 
areas
 
we
 
serve
 
and,
 
in
 
particular,
 
in
 
the
 
Commonwealth
 
of
 
Puerto
 
Rico
 
(the
“Commonwealth” or “Puerto Rico”), where a significant
 
portion of our business is concentrated;
 
adverse
 
economic conditions,
 
including high
 
levels
 
of
 
inflation, that
 
adversely affect
 
housing
 
prices, the
 
job
 
market,
consumer confidence
 
and spending
 
habits which
 
may affect
 
in turn,
 
among other
 
things, our
 
level of
 
non-performing
assets, charge-offs and provision expense;
 
changes in interest rates and market liquidity,
 
which may reduce interest margins, impact funding sources, reduce loan
originations, affect
 
our ability
 
to originate
 
and distribute
 
financial products
 
in the
 
primary and
 
secondary markets
 
and
impact the value of our investment portfolio and
 
our ability to return capital to our shareholders;
 
the
 
impact
 
of
 
bank
 
failures
 
or
 
adverse
 
developments
 
at
 
other
 
banks
 
and
 
related
 
negative
 
media
 
coverage
 
of
 
the
banking industry in general on investor and depositor
 
sentiment regarding the stability and liquidity of
 
banks;
 
the impact of the current fiscal and economic challenges of Puerto Rico and
 
the measures taken and to be taken by the
Puerto
 
Rico
 
Government
 
and
 
the
 
Federally-appointed
 
oversight
 
board
 
on
 
the
 
economy,
 
our
 
customers
 
and
 
our
business;
 
the impact of the pending debt
 
restructuring proceedings under Title III of the
 
Puerto Rico Oversight, Management and
Economic
 
Stability
 
Act
 
(“PROMESA”)
 
and
 
of
 
other
 
actions
 
taken
 
or
 
to
 
be
 
taken
 
to
 
address
 
Puerto
 
Rico’s
 
fiscal
challenges on the value of our portfolio of Puerto Rico government securities and
 
loans to governmental entities and of
our
 
commercial,
 
mortgage
 
and
 
consumer
 
loan
 
portfolios
 
where
 
private
 
borrowers
 
could
 
be
 
directly
 
affected
 
by
governmental action;
 
the
 
amount of
 
Puerto Rico
 
public sector
 
deposits held
 
at
 
the Corporation,
 
whose future
 
balances are
 
uncertain and
difficult
 
to
 
predict
 
and
 
may
 
be
 
impacted
 
by
 
factors
 
such
 
as
 
the
 
amount
 
of
 
Federal
 
funds
 
received
 
by
 
the
 
P.R.
Government
 
and
 
the
 
rate
 
of
 
expenditure
 
of
 
such
 
funds,
 
as
 
well
 
as
 
the
 
financial
 
condition,
 
liquidity
 
and
 
cash
management practices of the Puerto Rico Government
 
and its instrumentalities;
 
unforeseen
 
or
 
catastrophic
 
events,
 
including
 
extreme
 
weather
 
events,
 
including
 
hurricanes,
 
other
 
natural
 
disasters,
man-made disasters, acts of violence or war or pandemics,
 
epidemics and other health-related crises,
 
or the fear of any
such event
 
occurring, any of
 
which could cause
 
adverse consequences for
 
our business, including,
 
but not
 
limited to,
disruptions in our operations;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
 
our ability to
 
achieve the expected
 
benefits from our
 
transformation initiative, including
 
our ability to
 
achieve projected
earnings, efficiencies and our targeted sustainable return on
 
tangible common equity of 14% by the end of 2025;
 
risks related to Popular’s acquisition of certain information technology and related assets formerly used by Evertec, Inc.
to
 
service certain
 
of Banco
 
Popular de
 
Puerto Rico’s
 
key channels,
 
as well
 
as the
 
entry into
 
amended and
 
restated
commercial agreements (the “Evertec Business Acquisition
 
Transaction”);
 
the fiscal and monetary policies of the federal government
 
and its agencies;
 
changes in
 
federal
 
bank regulatory
 
and supervisory
 
policies, including
 
required levels
 
of
 
capital, liquidity,
 
resolution-
related requirements and the impact of other proposed
 
capital standards on our capital ratios;
 
additional Federal Deposit Insurance Corporation (“FDIC”) assessments,
 
such as the special assessment
 
implemented
by the FDIC to recover the losses to the deposit insurance fund (“DIF”)
 
resulting from the receiverships of Silicon Valley
Bank and Signature Bank;
 
regulatory approvals
 
that may
 
be necessary
 
to undertake
 
certain actions
 
or consummate
 
strategic transactions,
 
such
as acquisitions and dispositions;
 
the
 
relative strength
 
or
 
weakness
 
of
 
the
 
consumer and
 
commercial credit
 
sectors
 
and
 
of
 
the
 
real
 
estate markets
 
in
Puerto Rico and the other markets in which
 
our borrowers are located;
 
a deterioration in the credit quality of our
 
clients, customers and counterparties;
 
the performance of the stock and bond markets;
 
competition in the financial services industry;
 
possible legislative, tax or regulatory changes;
 
a failure
 
in or
 
breach of
 
our operational
 
or security
 
systems or
 
infrastructure or
 
those of
 
Evertec, Inc.,
 
our provider
 
of
core financial
 
transaction processing and
 
information technology services,
 
or of
 
third parties
 
providing services
 
to us,
including
 
as
 
a
 
result
 
of
 
cyberattacks,
 
e-fraud,
 
denial-of-services
 
and
 
computer
 
intrusion,
 
resulting
 
in,
 
among
 
other
things, loss or breach of customer data, disruption
 
of services, reputational damage or additional
 
costs to Popular;
 
changes in market rates and prices which may
 
adversely impact the value of financial assets
 
and liabilities;
 
potential judgments,
 
claims, damages,
 
penalties, fines,
 
enforcement actions
 
and
 
reputational damage
 
resulting from
pending or future litigation and regulatory or government
 
investigations or actions;
 
changes in accounting standards, rules and interpretations;
 
our ability to grow our core businesses;
 
decisions to downsize, sell or close branches or business
 
units or otherwise change our business mix;
 
and
 
management’s ability to identify and manage these and
 
other risks.
Moreover,
 
the
 
outcome
 
of
 
legal
 
and
 
regulatory
 
proceedings,
 
as
 
discussed
 
in
 
“Part
 
II,
 
Item
 
1.
 
Legal
 
Proceedings,”
 
is
 
inherently
uncertain and depends on judicial interpretations of law and the findings of regulators, judges and/or juries. Investors should refer to
the Corporation’s Annual
 
Report on Form
 
10-K for the
 
year ended December 31,
 
2023 (the “2023
 
Form 10-K”), as
 
well as “Part
 
II,
Item 1A” of this report for a discussion of
 
such factors and certain risks and uncertainties to which
 
the Corporation is subject.
5
All forward-looking
 
statements included
 
in this
 
Form 10-Q
 
are based
 
upon information
 
available to
 
Popular as
 
of the
 
date of
 
this
Form 10-Q, and other than as
 
required by law, including the
 
requirements of applicable securities laws, we assume no
 
obligation to
update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date
of such statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF FINANCIAL CONDITION
(UNAUDITED)
[UNAUDITED]
March 31,
December 31,
(In thousands, except share information)
2024
2023
Assets:
Cash and due from banks
$
320,486
$
420,462
Money market investments:
 
Time deposits with other banks
 
5,928,578
6,998,871
Total money market investments
5,928,578
6,998,871
Trading account debt securities, at fair value:
 
Other trading account debt securities
27,308
31,568
Debt securities available-for-sale, at fair
 
value:
Pledged securities with creditors’ right to repledge
 
41,261
72,827
Other debt securities available-for-sale
17,976,663
16,656,217
Debt securities available-for-sale
18,017,924
16,729,044
Less – Allowance for credit losses
500
-
Debt securities available-for-sale, net
18,017,424
16,729,044
Debt securities held-to-maturity, at amortized cost:
Pledged securities with creditors’ right to repledge
 
27,372
27,083
Other debt securities held-to-maturity
8,055,788
8,167,252
Debt securities held-to-maturity (fair
 
value 2024 - $
7,958,326
; 2023 - $
8,159,385
)
8,083,160
8,194,335
Less – Allowance for credit losses
5,731
5,780
Debt securities held-to-maturity, net
8,077,429
8,188,555
Equity securities (realizable value 2024 -
 
$
196,324
; 2023 - $
194,641
)
195,747
193,726
Loans held-for-sale, at fair value
5,352
4,301
Loans held-in-portfolio
35,486,161
35,420,879
Less – Unearned income
367,423
355,908
 
Allowance for credit losses
739,544
729,341
Total loans held-in-portfolio, net
34,379,194
34,335,630
Premises and equipment, net
588,708
565,284
Other real estate
80,542
80,416
Accrued income receivable
266,908
263,433
Mortgage servicing rights, at fair value
114,964
118,109
Other assets
2,120,902
2,014,564
Goodwill
804,428
804,428
Other intangible assets
8,969
9,764
Total assets
$
70,936,939
$
70,758,155
Liabilities and Stockholders’ Equity
Liabilities:
 
Deposits:
Non-interest bearing
$
15,492,050
$
15,419,624
Interest bearing
48,316,734
48,198,619
Total deposits
63,808,784
63,618,243
Assets sold under agreements to repurchase
66,090
91,384
Notes payable
966,303
986,948
Other liabilities
918,448
914,627
Total liabilities
65,759,625
65,611,202
Commitments and contingencies (Refer
 
to Note 20)
 
 
Stockholders’ equity:
 
Preferred stock,
30,000,000
 
shares authorized;
885,726
 
shares issued and outstanding (2023 -
885,726
)
22,143
22,143
Common stock, $
0.01
 
par value;
170,000,000
 
shares authorized;
104,790,485
 
shares issued (2023 -
104,767,348
) and
72,284,875
 
shares outstanding (2023 -
72,153,621
)
1,048
1,048
Surplus
4,847,466
4,843,399
Retained earnings
4,253,030
4,194,851
Treasury stock - at cost,
32,505,610
 
shares (2023 -
32,613,727
)
 
(2,013,187)
(2,018,957)
Accumulated other comprehensive loss, net
 
of tax
 
(1,933,186)
(1,895,531)
Total stockholders’ equity
 
5,177,314
5,146,953
Total liabilities and stockholders’ equity
$
70,936,939
$
70,758,155
The accompanying notes are an integral part of
 
these Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF OPERATIONS
(UNAUDITED)
Quarters ended March 31,
(In thousands, except per share information)
2024
2023
Interest income:
Loans
$
638,730
$
541,210
Money market investments
88,516
65,724
Investment securities
166,895
132,088
Total interest income
894,141
739,022
Interest expense:
 
Deposits
329,496
193,215
Short-term borrowings
1,192
2,885
Long-term debt
12,709
11,266
Total interest expense
343,397
207,366
Net interest income
 
550,744
531,656
Provision for credit losses
72,598
47,637
Net interest income after provision for credit losses
478,146
484,019
Non-interest income:
 
Service charges on deposit accounts
37,442
34,678
Other service fees
94,272
90,076
Mortgage banking activities (Refer to Note 9)
4,360
7,400
Net gain, including impairment on equity securities
1,103
1,100
Net gain on trading account debt securities
361
378
Adjustments to indemnity reserves on loans sold
 
(237)
612
Other operating income
26,517
27,717
Total non-interest income
163,818
161,961
Operating expenses:
 
Personnel costs
215,377
198,760
Net occupancy expenses
28,041
26,039
Equipment expenses
9,567
8,412
Other taxes
14,375
16,291
Professional fees
28,918
33,431
Technology and software expenses
79,462
68,559
Processing and transactional services
34,194
33,909
Communications
4,557
4,088
Business promotion
20,989
18,871
Deposit insurance
23,887
8,865
Other real estate owned (OREO) income
(5,321)
(1,694)
Other operating expenses
28,272
24,361
Amortization of intangibles
795
795
Total operating expenses
483,113
440,687
Income before income tax
158,851
205,293
Income tax expense
55,568
46,314
Net Income
$
103,283
$
158,979
Net Income Applicable to Common Stock
 
$
102,930
$
158,626
Net Income per Common Share - Basic
$
1.43
$
2.22
Net Income per Common Share - Diluted
$
1.43
$
2.22
The accompanying notes are an integral part of
 
these Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
Quarters ended March 31,
(In thousands)
2024
2023
Net income
 
$
103,283
$
158,979
Other comprehensive (loss) income before tax:
Foreign currency translation adjustment
(4,020)
(5,245)
Amortization of net losses of pension and
 
postretirement benefit plans
3,618
4,813
Unrealized holding (losses) gains on debt securities arising
 
during the period
 
(73,030)
213,318
Amortization of unrealized losses of debt securities
 
transfer from available-for-sale to held-to-
maturity
44,009
42,040
Unrealized net gains (losses) on cash flow hedges
-
(30)
Reclassification adjustment for net gains included
 
in net income
-
(41)
Other comprehensive (loss) income before tax
(29,423)
254,855
Income tax expense
(8,232)
(31,752)
Total other comprehensive (loss) income, net of tax
(37,655)
223,103
Comprehensive income, net of tax
$
65,628
$
382,082
Tax effect allocated to each component of other comprehensive income
 
(loss):
Quarters ended March 31,
(In thousands)
2024
2023
Amortization of net losses of pension and
 
postretirement benefit plans
(1,356)
(1,805)
Unrealized holding (losses) gains on debt securities arising
 
during the period
 
1,926
(21,566)
Amortization of unrealized losses of debt securities
 
transfer from available-for-sale to held-to-
maturity
(8,802)
(8,407)
Unrealized net gains (losses) on cash flow hedges
-
11
Reclassification adjustment for net gains included
 
in net income
-
15
Income tax expense
$
(8,232)
$
(31,752)
The accompanying notes are an integral part of
 
these Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
 
other
Common
Preferred
 
Retained
Treasury
comprehensive
(In thousands)
stock
stock
Surplus
earnings
stock
(loss) Income
Total
Balance at December 31, 2022
$
1,047
$
22,143
$
4,790,993
$
3,834,348
$
(2,030,178)
$
(2,524,928)
$
4,093,425
Cumulative effect of accounting change
28,752
28,752
Net income
158,979
158,979
Issuance of stock
1,567
1,567
Dividends declared:
Common stock
[1]
(39,586)
(39,586)
Preferred stock
(353)
(353)
Common stock purchases
(2,970)
(2,970)
Stock based compensation
59
7,749
7,808
Other comprehensive income, net of tax
223,103
223,103
Balance at March 31, 2023
 
$
1,047
$
22,143
$
4,792,619
$
3,982,140
$
(2,025,399)
$
(2,301,825)
$
4,470,725
Balance at December 31, 2023
$
1,048
$
22,143
$
4,843,399
$
4,194,851
$
(2,018,957)
$
(1,895,531)
$
5,146,953
Net income
103,283
103,283
Issuance of stock
1,799
1,799
Dividends declared:
Common stock
[1]
(44,751)
(44,751)
Preferred stock
(353)
(353)
Common stock purchases
(3,576)
(3,576)
Stock based compensation
2,268
9,346
11,614
Other comprehensive loss, net of tax
(37,655)
(37,655)
Balance at March 31, 2024
$
1,048
$
22,143
$
4,847,466
$
4,253,030
$
(2,013,187)
$
(1,933,186)
$
5,177,314
[1]
Dividends declared per common share during the quarter
 
ended March 31, 2024 - $
0.62
 
(2023 - $
0.55
).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
For the quarter ended
March 31,
March 31,
Disclosure of changes in number of shares:
2024
2023
Preferred Stock:
Balance at beginning and end of period
885,726
885,726
Common Stock – Issued:
Balance at beginning of period
104,767,348
104,657,522
Issuance of stock
23,137
25,488
Balance at end of period
104,790,485
104,683,010
Treasury stock
(32,505,610)
(32,717,026)
Common Stock – Outstanding
72,284,875
71,965,984
The accompanying notes are an integral part of these Consolidated
 
Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF CASH FLOWS
(UNAUDITED)
Quarters ended March 31,
(In thousands)
2024
2023
Cash flows from operating activities:
Net income
$
103,283
$
158,979
Adjustments to reconcile net income to net cash provided
 
by operating activities:
Provision for credit losses
72,598
47,637
Amortization of intangibles
795
795
Depreciation and amortization of premises and equipment
15,361
13,842
Net accretion of discounts and amortization of premiums and
 
deferred fees
 
(51,360)
(2,276)
Interest capitalized on loans subject to the temporary payment
 
moratorium or loss mitigation alternatives
(1,641)
(2,876)
Share-based compensation
11,479
7,873
Fair value adjustments on mortgage servicing rights
3,439
1,376
Adjustments to indemnity reserves on loans sold
237
(612)
Earnings from investments under the equity method, net
 
of dividends or distributions
(11,792)
(8,621)
Deferred income tax expense (benefit)
 
9,513
(2,064)
Gain on:
Disposition of premises and equipment and other productive
 
assets
(3,412)
(2,423)
Sale of loans, including valuation adjustments on loans
 
held-for-sale and mortgage banking activities
(74)
(264)
Sale of foreclosed assets, including write-downs
(4,447)
(5,228)
Acquisitions of loans held-for-sale
(324)
(2,861)
Proceeds from sale of loans held-for-sale
8,283
9,148
Net originations on loans held-for-sale
(11,056)
(21,790)
Net decrease (increase) in:
Trading debt securities
6,465
(1,055)
Equity securities
(1,995)
(3,731)
Accrued income receivable
 
(22,719)
314
Other assets
38,702
25,072
Net (decrease) increase in:
Interest payable
(10,799)
(2,846)
Pension and other postretirement benefits obligation
916
4,038
Other liabilities
10,111
(59,381)
Total adjustments
58,280
(5,933)
Net cash provided by operating activities
161,563
153,046
Cash flows from investing activities:
 
Net decrease (increase) in money market investments
1,070,973
(483,178)
Purchases of investment securities:
Available-for-sale
(8,161,525)
(3,960,443)
Equity
(971)
(11,927)
Proceeds from calls, paydowns, maturities and redemptions
 
of investment securities:
Available-for-sale
6,728,665
4,909,334
Held-to-maturity
154,009
3,818
Proceeds from sale of investment securities:
 
 
Equity
945
25,595
Net repayments (disbursements) on loans
2,354
(155,538)
Proceeds from sale of loans
15,356
3,276
Acquisition of loan portfolios
(141,730)
(145,735)
Return of capital from equity method investments
-
249
Acquisition of premises and equipment and other productive
 
assets
(53,889)
(36,062)
Proceeds from sale of:
Premises and equipment and other productive assets
1,632
1,972
Foreclosed assets
26,773
21,417
Net cash (used in) provided by investing activities
(357,408)
172,778
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12
Cash flows from financing activities:
 
Net increase (decrease) in:
Deposits
190,477
(293,780)
Assets sold under agreements to repurchase
 
(25,294)
(25,110)
Other short-term borrowings
-
(365,000)
Payments of notes payable
(21,000)
(1,000)
Principal payments of finance leases
(881)
(804)
Proceeds from issuance of notes payable
-
394,178
Proceeds from issuance of common stock
1,799
1,567
Dividends paid
(44,976)
(39,878)
Net payments for repurchase of common stock
(314)
(282)
Payments related to tax withholding for share-based compensation
(3,262)
(2,688)
Net cash provided by (used in) financing activities
96,549
(332,797)
Net decrease in cash and due from banks, and restricted
 
cash
(99,296)
(6,973)
Cash and due from banks, and restricted cash at beginning
 
of period
427,575
476,159
Cash and due from banks, and restricted cash at the end of
 
the period
$
328,279
$
469,186
The accompanying notes are an integral part of these Consolidated
 
Financial Statements.
13
Notes to Consolidated Financial
 
Statements
 
(Unaudited)
Note 1 -
Nature of operations
14
Note 2 -
Basis of presentation
15
Note 3 -
New accounting pronouncements
16
Note 4 -
Restrictions on cash and due from banks and
certain securities
19
Note 5 -
Debt securities available-for-sale
20
Note 6 -
Debt securities held-to-maturity
23
Note 7 -
Loans
27
Note 8 -
Allowance for credit losses – loans held-in-
portfolio
36
Note 9 -
Mortgage banking activities
66
Note 10 -
Transfers of financial assets and mortgage
servicing assets
67
Note 11 -
Other real estate owned
70
Note 12 -
Other assets
71
Note 13 -
Goodwill and other intangible assets
 
72
Note 14 -
Deposits
74
Note 15 -
Borrowings
75
Note 16 -
Other liabilities
77
Note 17 -
Stockholders’ equity
78
Note 18 -
Other comprehensive income (loss)
 
79
Note 19 -
Guarantees
81
Note 20 -
Commitments and contingencies
83
Note 21-
Non-consolidated variable interest entities
87
Note 22 -
Related party transactions
89
Note 23 -
Fair value measurement
90
Note 24 -
Fair value of financial instruments
95
Note 25 -
Net income per common share
98
Note 26 -
Revenue from contracts with customers
99
Note 27 -
Leases
101
Note 28 -
Pension and postretirement benefits
103
Note 29 -
Stock-based compensation
104
Note 30 -
Income taxes
106
Note 31 -
Supplemental disclosure on the consolidated
statements of cash flows
110
Note 32 -
Segment reporting
111
14
Note 1 – Nature of Operations
Popular,
 
Inc. (the
 
“Corporation” or
 
“Popular”) is
 
a diversified,
 
publicly-owned financial
 
holding company
 
subject to
 
the supervision
and
 
regulation
 
of
 
the
 
Board
 
of
 
Governors
 
of
 
the
 
Federal
 
Reserve
 
System.
 
The
 
Corporation
 
has
 
operations
 
in
 
Puerto
 
Rico,
 
the
mainland United
 
States (“U.S.”)
 
and the
 
U.S. and
 
British Virgin
 
Islands. In
 
Puerto Rico,
 
the Corporation
 
provides retail,
 
mortgage,
and
 
commercial
 
banking
 
services,
 
through
 
its
 
principal
 
banking
 
subsidiary,
 
Banco
 
Popular
 
de
 
Puerto
 
Rico
 
(“BPPR”),
 
as
 
well
 
as
investment
 
banking,
 
broker-dealer,
 
auto
 
and
 
equipment
 
leasing
 
and
 
financing,
 
and
 
insurance
 
services
 
through
 
specialized
subsidiaries. In
 
the U.S.
 
mainland, the
 
Corporation provides
 
retail, mortgage,
 
commercial banking
 
services, as
 
well as
 
equipment
leasing
 
and
 
financing,
 
through
 
its
 
New
 
York-chartered
 
banking
 
subsidiary,
 
Popular
 
Bank
 
(“PB”
 
or
 
“Popular
 
U.S.”),
 
which
 
has
branches located in New York, New Jersey, and Florida.
 
15
Note 2 – Basis of Presentation
 
Basis of Presentation
The (unaudited) interim Consolidated Financial Statements are, in the opinion of management, a fair statement of the results
 
for the
periods reported
 
and include
 
all necessary
 
adjustments, all
 
of a
 
normal recurring
 
nature, for
 
a fair
 
statement of
 
such results.
 
The
consolidated statement of financial
 
condition presented as of
 
December 31, 2023 was
 
derived from audited Consolidated Financial
Statements of the Corporation for the year ended
 
December 31, 2023.
Certain
 
information
 
and
 
notes
 
to
 
the
 
financial
 
statements
 
disclosures
 
which
 
would
 
normally
 
be
 
included
 
in
 
financial
 
statements
prepared in
 
accordance
 
with Accounting
 
Principles
 
Generally Accepted
 
in
 
the
 
United
 
States
 
of
 
America
 
(US
 
GAAP), have
 
been
condensed or omitted from the unaudited financial statements pursuant
 
to the rules and regulations of the
 
Securities and Exchange
Commission.
 
Accordingly,
 
these
 
financial
 
statements
 
should
 
be
 
read
 
in
 
conjunction
 
with
 
the
 
audited
 
Consolidated
 
Financial
Statements of
 
the Corporation
 
for the
 
year ended
 
December 31,
 
2023,
 
included in
 
the 2023
 
Form 10-K.
 
Operating results
 
for the
interim periods disclosed herein are not necessarily
 
indicative of the results that may be expected
 
for a full year or any future period.
 
Tax impact on Intercompany Distributions
The net
 
income for
 
the quarter
 
ended March
 
31, 2024,
 
included $
22.9
 
million of
 
expenses, of
 
which $
16.5
 
million is
 
reflected in
income tax expense and $
6.4
 
million is reflected in other operating expenses, related to an out-of-period adjustment associated with
the Corporation’s U.S. subsidiary’s non-payment of taxes on certain intercompany distributions
 
to the Bank Holding Company (BHC)
in Puerto
 
Rico, a
 
foreign corporation
 
for U.S.
 
tax purposes.
 
The adjustment
 
corrected errors
 
for income
 
tax expense
 
that should
have been recognized of $
5.5
 
million and $
5.4
 
million in the years 2023 and 2022, respectively,
 
and an aggregate of $
5.6
 
million, in
the years prior to 2022. The $
6.4
 
million recognized as other operating expense corresponded to interest due
 
up to March 31, 2024
on the related late payment of the withholding tax, of which approximately $
3.0
 
million correspond to years prior to 2022. As a result
of
 
this
 
adjustment, the
 
deferred tax
 
asset related
 
to
 
NOL of
 
the BHC
 
and
 
its
 
related valuation
 
allowance was
 
reduced by
 
$
53.7
million. The
 
Corporation evaluated the
 
impact of
 
the out-of-period
 
adjustment and
 
concluded it
 
was not
 
material to
 
any previously
issued
 
interim or
 
annual consolidated
 
financial statements
 
and the
 
adjustment is
 
not expected
 
to
 
be material
 
to
 
the year
 
ending
December 31, 2024.
 
Use of Estimates in the Preparation of Financial Statements
The preparation of financial
 
statements in conformity with
 
accounting principles generally accepted in
 
the United States
 
of America
requires management to make
 
estimates and assumptions that
 
affect the reported
 
amounts of assets and
 
liabilities and contingent
assets
 
and
 
liabilities
 
at
 
the
 
date
 
of
 
the
 
financial
 
statements,
 
and
 
the
 
reported
 
amounts
 
of
 
revenues
 
and
 
expenses
 
during
 
the
reporting period. Actual results could differ from those estimates.
16
Note 3 - New accounting pronouncements
 
Recently Adopted Accounting Standards Updates
Standard
Description
Date of adoption
Effect on the financial statements
 
FASB ASU 2023-02,
Investments—Equity
Method and Joint
Ventures (Topic 323) -
Accounting for
Investments in Tax Credit
Structures Using the
Proportional Amortization
Method
The
 
Financial Accounting
 
Standards Board
("FASB")
 
issued
 
Accounting
 
Standard
Update ("ASU") 2023-02 in March
2023, which
 
amends Accounting Standards
Codification ("ASC") Topic 323 by
permitting the election to apply the
proportional amortization method to account
for tax equity investments that generate
income tax credits through investment in
low-income-housing tax credit (LIHTC)
structures and other tax credit programs if
certain conditions are met. The ASU also
eliminates the application of the ASC
Subtopic 323-740 to LIHTC investments not
accounted for using the proportional
amortization method and instead requires
the use of other guidance.
January 1, 2024
The
 
Corporation
 
was
 
not
 
impacted
 
by
the
 
adoption of
 
this
 
ASU
 
since
 
it does
not
 
hold
 
investments
 
in
 
tax
 
equity
investments.
FASB ASU 2023-01,
Leases (Topic 842) -
Common Control
Arrangements
The FASB issued ASU 2023-01 in March
2023, which amends ASC Topic 842 and
requires the amortization leasehold
improvements associated with common
control leases over the useful life of the
leasehold improvements to the common
control group as long as the lessee controls
the use of the underlying assets through a
lease. In addition, the ASU requires
companies to account for leasehold
improvements associated with common
control leases as a transfer between entities
under common control through an
adjustments to equity if, and when, the
lessee no longer controls the use
 
of the
underlying asset.
January 1, 2024
The
 
Corporation
 
was
 
not
 
impacted
 
by
the
 
adoption of
 
this
 
ASU
 
since
 
it does
not
 
hold
 
common
 
control
 
leasehold
improvements, however, it
 
will consider
this
 
guidance
 
to
 
determine
 
the
amortization
 
period for
 
and
 
accounting
treatment
 
of
 
leasehold
 
improvements
associated with common control
 
leases
acquired on or after the effective date.
FASB ASU 2022-03, Fair
Value Measurement
(Topic 820) - Fair Value
Measurement of Equity
Securities Subject to
Contractual Sale
Restriction
The FASB issued ASU 2022-03 in June
2022, which clarifies that a contractual
restriction that prohibits the sale of an equity
security is not considered part of the unit of
account of the equity security, therefore, is
not considered in measuring its fair value.
The ASU also provides enhanced
disclosures for equity securities subject to a
contractual sale restriction.
January 1, 2024
The
 
Corporation
 
was
 
not
 
impacted
 
by
the
 
adoption
 
of
 
this
 
accounting
pronouncement
 
since
 
it
 
does
 
not
 
hold
equity securities measured at
 
fair value
with sale restrictions.
17
 
Accounting Standards Updates Not Yet Adopted
Standard
Description
Date of adoption
Effect on the financial statements
 
FASB ASU 2024-02,
Codification
Improvements—
Amendments to Remove
References to the
Concepts Statements
 
The
 
FASB
 
issued
 
ASU
 
2024-02
 
in
 
March
2024, which
 
removes various
 
references to
concept
 
statements
 
from
 
the
 
FASB
Accounting
 
Standards
 
Codification.
 
The
ASU
 
intends
 
to
 
simplify
 
the
 
Codification
and
 
distinguish
 
between
 
nonauthoritative
and authoritative guidance.
January 1, 2025
The Corporation
 
is currently
 
evaluating
 
any
 
impact
 
that
 
the
 
adoption
 
of
 
this
guidance
 
will
 
have
 
on
 
its
 
financial
statements
 
and
 
presentation
 
and
disclosures.
FASB ASU 2024-01,
Compensation - Stock
Compensation (Topic 718)
- Scope Application of
Profits Interest and Similar
Awards
The FASB issued ASU 2024-01 in March
2024, which amends ASC Topic 718 by
including an illustrative example to
demonstrate how an entity would apply the
scope guidance in paragraph 718-10-15-3
to determine whether profits interest awards
should be accounted for in accordance with
ASC
 
Topic
 
718.
 
The
 
ASU
 
is
 
intended
 
to
reduce complexity and diversity in practice.
January 1, 2025
The Corporation
 
is currently
 
evaluating
any
 
impact
 
that
 
the
 
adoption
 
of
 
this
guidance
 
will
 
have
 
on
 
its
 
financial
statements
 
and
 
presentation
 
and
disclosures.
FASB ASU 2023-09,
Income Tax ( Topic
 
740) -
Improvements to Income
Tax Disclosures
The
 
FASB
 
issued
 
ASU
 
2023-09
 
in
December 2023,
 
which amends
 
ASC Topic
 
740
 
by
 
enhancing
 
disclosures
 
regarding
rate
 
reconciliation
 
and
 
requiring
 
the
disclosure of
 
income taxes paid, income (or
loss)
 
from
 
continuing
 
operations
 
before
income
 
tax
 
expense
 
and
 
income
 
tax
expense
 
disaggregated
 
by
 
national,
 
state
and foreign level. Disclosures that no longer
were considered
 
cost
 
beneficial or
 
relevant
were removed from ASC Topic 740.
January 1, 2025
The Corporation
 
is currently
 
evaluating
any
 
impact
 
that
 
the
 
adoption
 
of
 
this
guidance
 
will
 
have
 
on
 
its
 
financial
statements
 
and
 
presentation
 
and
disclosures.
FASB ASU 2023-08,
Intangibles - Goodwill and
Other - Crypto Assets
(Subtopic 350-60) -
Accounting for and
Disclosure of Crypto
Assets
 
The
 
FASB
 
issued
 
ASU
 
2023-08
 
in
December
 
2023,
 
which
 
amends
 
ASC
Subtopic
 
350-60
 
by
 
requiring
 
that
 
crypto
assets
 
are
 
measured
 
at
 
fair
 
value
 
in
 
the
statement
 
of
 
financial
 
position
 
each
reporting
 
period
 
with
 
changes
 
from
remeasurement
 
being
 
recognized
 
in
 
net
income.
 
The
 
ASU
 
also
 
requires
 
enhanced
disclosures
 
for
 
both
 
annual
 
and
 
interim
 
reporting
 
periods
 
to
 
provide
 
investors
 
with
relevant information
 
to
 
analyze and
 
assess
the
 
exposure
 
and
 
risk
 
of
 
significant
individual crypto asset holdings.
January 1, 2025
The Corporation does not expect to be
impacted by the adoption of this ASU
since it
 
does not
 
hold crypto-assets
 
for
its platform users.
FASB ASU 2023-07,
Segment Reporting (Topic
280) - Improvements to
Reportable Segment
Disclosures
The
 
FASB
 
issued
 
ASU
 
2023-07
 
in
November 2023,
 
which amends
 
ASC Topic
 
280
 
by
 
requiring
 
additional
 
disclosures
about significant segment expenses.
For fiscal years
beginning on
January 1, 2024
For interim periods
within fiscal years
beginning after
January 1, 2025
The Corporation
 
is currently
 
evaluating
any
 
impact
 
that
 
the
 
adoption
 
of
 
this
guidance
 
will
 
have
 
on
 
its
 
financial
statements
 
and
 
presentation
 
and
disclosures.
18
 
Accounting Standards Updates Not Yet Adopted
Standard
Description
Date of adoption
Effect on the financial statements
 
FASB ASU 2023-06,
Disclosure Improvements -
Codification Amendments
in Response to the SEC’s
 
Disclosure Update and
Simplification Initiative
The FASB
 
issued ASU
 
2023-06 in
 
October
2023
 
which
 
modifies
 
the
 
disclosure
 
or
presentation
 
requirements
 
of
 
various
subtopics
 
in
 
the
 
Codification
 
with
 
the
purpose
 
of
 
aligning
 
U.S.
 
GAAP
requirements
 
with
 
those
 
of
 
the
 
SEC
 
under
Regulation S-X and S-K.
 
The date on which
the SEC removes
related disclosure
requirements from
Regulation S-X or
Regulation S-K. If by
June 30, 2027, the
SEC has not
removed the
applicable
requirements from
Regulation S-X or
Regulation S-K, the
pending content of
the related
amendment will be
removed from the
Codification and will
not become
 
effective for any
entity.
The Corporation
 
does not
 
expect to
 
be
impacted
 
by
 
the
 
adoption
 
of
 
this
 
ASU
since
 
it
 
is
 
currently
 
subject
 
to
 
SEC's
current
 
disclosure
 
and
 
presentation
requirements under Regulation S-X and
S-K.
FASB ASU 2023-05,
Business Combinations -
Joint Venture Formations
(Subtopic 805-60) -
Recognition and initial
measurement
The
 
FASB
 
issued
 
ASU
 
2023-05
 
in
 
August
2023, which
 
amends ASC
 
Subtopic 805-60
to include specific
 
guidance about how
 
joint
ventures
 
should
 
recognize
 
and
 
initially
measure
 
assets
 
contributed
 
and
 
liabilities
assumed.
 
The
 
amendments
 
require
 
that
 
a
joint venture, upon formation, recognize and
initially
 
measure
 
its
 
assets
 
and
 
liabilities at
fair value.
January 1, 2025
Upon
 
adoption
 
of
 
this
 
ASU,
 
the
Corporation will
 
consider this
 
guidance
for
 
the
 
initial
 
measure
 
of
 
assets
 
and
liabilities
 
of
 
newly
 
created
 
joint
ventures.
19
Note 4 - Restrictions on cash and due from
 
banks and certain securities
BPPR is
 
required by
 
regulatory agencies
 
to maintain
 
average reserve
 
balances with
 
the Federal
 
Reserve Bank
 
of New
 
York
 
(the
“Fed”) or other banks.
 
Those required average reserve balances amounted
 
to $
2.8
 
billion at March 31, 2024
 
(December 31, 2023 -
$
2.7
 
billion). Cash
 
and due
 
from banks,
 
as well
 
as other
 
highly liquid
 
securities, are
 
used to
 
cover the
 
required average
 
reserve
balances.
 
At March 31,
 
2024, the Corporation
 
held $
61
 
million in restricted
 
assets in the
 
form of funds
 
deposited in money
 
market accounts,
debt
 
securities
 
available
 
for
 
sale
 
and
 
equity
 
securities
 
(December
 
31,
 
2023
 
-
 
$
78
 
million).
 
The
 
restricted
 
assets
 
held
 
in
 
debt
securities available for sale and equity securities consist primarily of assets
 
held for the Corporation’s non-qualified retirement plans
and fund deposits guaranteeing possible liens or encumbrances
 
over the title of insured properties.
20
Note 5 – Debt securities available-for-sale
The following tables present
 
the amortized cost, gross
 
unrealized gains and losses,
 
approximate fair value, weighted average
 
yield
and contractual maturities of debt securities available-for-sale
 
at March 31, 2024 and December 31, 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At March 31, 2024
Allowance
Gross
Gross
Weighted
Amortized
for credit
unrealized
unrealized
Fair
 
average
(In thousands)
cost
losses
gains
 
losses
value
yield
U.S. Treasury securities
Within 1 year
$
9,394,716
$
-
68
$
60,864
$
9,333,920
3.90
%
After 1 to 5 years
2,825,336
-
-
140,775
2,684,561
1.32
After 5 to 10 years
307,174
-
-
36,444
270,730
1.63
Total U.S. Treasury
 
securities
12,527,226
-
68
238,083
12,289,211
3.26
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
15,883
-
-
813
15,070
1.54
After 5 to 10 years
19,189
-
-
1,337
17,852
2.29
After 10 years
104,671
-
21
10,006
94,686
2.55
Total collateralized
 
mortgage obligations - federal agencies
139,743
-
21
12,156
127,608
2.40
Mortgage-backed securities - federal agencies
Within 1 year
457
-
-
5
452
2.06
After 1 to 5 years
78,628
-
6
3,683
74,951
2.36
After 5 to 10 years
817,332
-
181
56,576
760,937
2.33
After 10 years
5,897,090
-
449
1,135,279
4,762,260
1.65
Total mortgage-backed
 
securities - federal agencies
6,793,507
-
636
1,195,543
5,598,600
1.74
Other
Within 1 year
1,005
500
-
-
505
4.00
After 1 to 5 years
1,500
-
-
-
1,500
8.50
Total other
 
2,505
500
-
-
2,005
6.69
Total debt securities
 
available-for-sale
[1]
$
19,462,981
$
500
725
$
1,445,782
$
18,017,424
2.72
%
[1]
 
Includes $
11.8
 
billion pledged to secure government and trust deposits, assets
 
sold under agreements to repurchase, credit facilities
 
and loan servicing
agreements that the secured parties are not permitted
 
to sell or repledge the collateral, of which $
11
.0 billion serve as collateral for public funds.
 
The
Corporation had unpledged Available for Sale securities
 
with a fair value of
 
$
6.2
 
billion that could be used to increase its borrowing
 
facilities.
 
21
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2023
Gross
 
Gross
 
Weighted
 
Amortized
 
unrealized
unrealized
Fair
 
average
 
(In thousands)
cost
gains
 
losses
value
yield
U.S. Treasury securities
 
Within 1 year
$
7,103,518
$
526
$
59,415
$
7,044,629
3.51
%
After 1 to 5 years
3,598,209
84
170,209
3,428,084
1.35
After 5 to 10 years
307,512
-
33,164
274,348
1.63
Total U.S. Treasury
 
securities
11,009,239
610
262,788
10,747,061
2.75
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
17,899
-
838
17,061
1.55
After 5 to 10 years
20,503
2
1,321
19,184
2.28
After 10 years
108,280
29
9,868
98,441
2.54
Total collateralized
 
mortgage obligations - federal agencies
146,682
31
12,027
134,686
2.38
Mortgage-backed securities - federal agencies
Within 1 year
637
-
3
634
3.72
After 1 to 5 years
82,310
11
3,536
78,785
2.34
After 5 to 10 years
792,431
75
48,250
744,256
2.28
After 10 years
6,067,353
667
1,046,909
5,021,111
1.64
Total mortgage-backed
 
securities - federal agencies
6,942,731
753
1,098,698
5,844,786
1.72
Other
Within 1 year
1,011
-
-
1,011
4.00
After 1 to 5 years
1,500
-
-
1,500
8.50
Total other
 
2,511
-
-
2,511
6.69
Total debt securities
 
available-for-sale
[1]
$
18,101,163
$
1,394
$
1,373,513
$
16,729,044
2.35
%
[1]
Includes $
12
 
billion pledged to secure government and trust deposits,
 
assets sold under agreements to repurchase, credit facilities
 
and loan
servicing agreements that the secured parties are not permitted
 
to sell or repledge the collateral, of which $
11.1
 
billion serve as collateral for
public funds. The Corporation had unpledged Available
 
for Sale securities with a fair value of
 
$
4.6
 
billion that could be used to increase its
borrowing facilities.
The weighted
 
average yield
 
on debt
 
securities available-for-sale
 
is based
 
on amortized
 
cost; therefore,
 
it
 
does not
 
give
 
effect to
changes in fair value.
Debt
 
securities
 
not
 
due
 
on
 
a
 
single
 
contractual
 
maturity
 
date,
 
such
 
as
 
mortgage-backed
 
securities
 
and
 
collateralized
 
mortgage
obligations, are classified
 
in the period
 
of final contractual
 
maturity. The
 
expected maturities of
 
collateralized mortgage obligations,
mortgage-backed securities and certain other securities may
 
differ from their contractual maturities
 
because they may be subject to
prepayments or may be called by the issuer.
At March 31, 2024, the Corporation did not intend
 
to sell or believed it was more
 
likely than not that it would be
 
required to sell debt
securities classified as available-for-sale. There were
no
 
debt securities sold during the quarters ended March 31,
 
2024 and 2023.
 
 
 
22
The
 
following
 
tables
 
present
 
the
 
Corporation’s
 
fair
 
value
 
and
 
gross
 
unrealized
 
losses
 
of
 
debt
 
securities
 
available-for-sale,
aggregated by investment category and length of
 
time that individual securities have been in a continuous
 
unrealized loss position at
March 31, 2024 and December 31, 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At March 31, 2024
Less than 12 months
12 months or more
Total
Gross
Gross
Gross
Fair
 
 
unrealized
Fair
 
 
unrealized
Fair
 
 
unrealized
(In thousands)
value
 
losses
value
 
losses
value
 
losses
U.S. Treasury securities
$
4,845,109
$
3,713
$
5,809,606
$
234,370
$
10,654,715
$
238,083
Collateralized mortgage obligations - federal agencies
 
2,127
2
123,238
12,154
125,365
12,156
Mortgage-backed securities
45,988
428
5,523,133
1,195,115
5,569,121
1,195,543
Total debt securities
 
available-for-sale in an unrealized loss position
 
$
4,893,224
$
4,143
$
11,455,977
$
1,441,639
$
16,349,201
$
1,445,782
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2023
Less than 12 months
12 months or more
Total
Gross
Gross
Gross
Fair
 
 
unrealized
Fair
 
 
unrealized
Fair
 
 
unrealized
(In thousands)
value
 
losses
value
 
losses
value
 
losses
U.S. Treasury securities
$
244,925
$
5,126
$
6,550,941
$
257,662
$
6,795,866
$
262,788
Collateralized mortgage obligations - federal agencies
 
5,234
35
124,930
11,992
130,164
12,027
Mortgage-backed securities
37,118
405
5,779,260
1,098,293
5,816,378
1,098,698
Total debt securities
 
available-for-sale in an unrealized loss position
 
$
287,277
$
5,566
$
12,455,131
$
1,367,947
$
12,742,408
$
1,373,513
As of March 31, 2024, the
 
portfolio of available-for-sale debt securities reflects gross
 
unrealized losses of $
1.4
 
billion, driven mainly
by
 
mortgage-backed
 
securities,
 
which
 
have
 
been
 
impacted
 
by
 
a
 
decline
 
in
 
fair
 
value
 
as
 
a
 
result
 
of
 
the
 
rising
 
interest
 
rate
environment.
 
The portfolio of
 
available-for-sale debt securities is comprised
 
mainly of U.S Treasuries
 
and obligations from the
 
U.S.
Government, its
 
agencies or
 
government sponsored
 
entities, including
 
Federal National
 
Mortgage Association
 
(“FNMA”), Federal
Home Loan Mortgage Corporation (“FHLMC”) and Government National Mortgage Association (“GNMA”). As discussed in Note 2 of
the 2023
 
Form 10-K,
 
these securities
 
carry an
 
explicit or
 
implicit guarantee
 
from the
 
U.S. Government,
 
are highly
 
rated by
 
major
rating agencies, and have a long history of
 
no credit losses. Accordingly, the Corporation applies a zero-credit loss assumption.
 
 
23
Note 6 –Debt securities held-to-maturity
The following
 
tables present
 
the amortized
 
cost, allowance
 
for credit
 
losses, gross
 
unrealized gains
 
and losses,
 
approximate fair
value, weighted
 
average yield
 
and contractual
 
maturities of
 
debt securities
 
held-to-maturity at
 
March 31,
 
2024 and
 
December 31,
2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At March 31, 2024
Allowance
Carrying
Value
 
Gross
 
Gross
 
Weighted
Amortized
 
Book
[1]
for Credit
Net of
 
unrealized
unrealized
Fair
 
average
(In thousands)
cost
Value
Losses
Allowance
gains
 
losses
value
yield
U.S. Treasury securities
 
Within 1 year
$
597,620
$
597,620
$
-
$
597,620
$
-
$
7,857
$
589,763
2.61
%
After 1 to 5 years
8,030,813
7,416,332
-
7,416,332
-
111,295
7,305,037
1.37
Total U.S. Treasury
 
securities
8,628,433
8,013,952
-
8,013,952
-
119,152
7,894,800
1.46
Obligations of Puerto Rico, States and
political subdivisions
Within 1 year
3,055
3,055
11
3,044
7
6
3,045
6.23
After 1 to 5 years
18,615
18,615
135
18,480
68
130
18,418
3.60
After 5 to 10 years
845
845
28
817
28
-
845
5.80
After 10 years
39,197
39,197
5,557
33,640
2,890
2,636
33,894
1.42
Total obligations of
 
Puerto Rico, States and
political subdivisions
61,712
61,712
5,731
55,981
2,993
2,772
56,202
2.38
Collateralized mortgage obligations - federal
agencies
After 10 years
1,536
1,536
-
1,536
-
172
1,364
2.87
Total collateralized
 
mortgage obligations -
federal agencies
1,536
1,536
-
1,536
-
172
1,364
2.87
Securities in wholly owned statutory business
trusts
After 10 years
5,960
5,960
-
5,960
-
-
5,960
6.33
Total securities
 
in wholly owned statutory
business trusts
5,960
5,960
-
5,960
-
-
5,960
6.33
Total debt securities
 
held-to-maturity [2]
$
8,697,641
$
8,083,160
$
5,731
$
8,077,429
$
2,993
$
122,096
$
7,958,326
1.47
%
[1]
Book value includes $
614
 
million of net unrealized loss which remains in
 
Accumulated other comprehensive (loss) income
 
(AOCI) related to
certain securities previously transferred from available-for-sale
 
securities portfolio to the held-to-maturity securities portfolio.
[2]
Includes $
8
.0 billion pledged to secure public and trust deposits
 
that the secured parties are not permitted to sell
 
or repledge the collateral.
 
The
Corporation had unpledged held-to-maturities securities with
 
a fair value of $
69.3
 
million that could be used to increase its borrowing facilities.
 
24
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2023
Allowance
 
Carrying
Value
 
Gross
 
Gross
 
Weighted
 
Amortized
 
Book
[1]
for Credit
Net of
unrealized
unrealized
Fair
 
average
 
(In thousands)
cost
Value
Losses
Allowance
gains
 
losses
value
yield
U.S. Treasury securities
 
Within 1 year
$
597,768
$
597,768
$
-
$
597,768
$
-
$
7,526
$
590,242
2.58
%
After 1 to 5 years
7,971,072
7,335,159
-
7,335,159
637
21,996
7,313,800
1.39
After 5 to 10 years
211,061
188,484
-
188,484
-
187
188,297
1.50
Total U.S. Treasury
 
securities
8,779,901
8,121,411
-
8,121,411
637
29,709
8,092,339
1.47
Obligations of Puerto Rico, States and
political subdivisions
`
Within 1 year
4,820
4,820
9
4,811
3
-
4,814
6.17
%
After 1 to 5 years
20,171
20,171
147
20,024
96
125
19,995
3.80
After 5 to 10 years
845
845
28
817
28
-
845
5.80
After 10 years
39,572
39,572
5,596
33,976
2,814
2,766
34,024
1.41
Total obligations of
 
Puerto Rico, States and
political subdivisions
65,408
65,408
5,780
59,628
2,941
2,891
59,678
2.55
Collateralized mortgage obligations - federal
agencies
Within 1 year
13
13
-
13
-
-
13
6.44
After 10 years
1,543
1,543
-
1,543
-
148
1,395
2.87
Total collateralized
 
mortgage obligations -
federal agencies
1,556
1,556
-
1,556
-
148
1,408
2.90
Securities in wholly owned statutory business
trusts
After 10 years
5,960
5,960
-
5,960
-
-
5,960
6.33
Total securities
 
in wholly owned statutory
business trusts
5,960
5,960
-
5,960
-
-
5,960
6.33
Total debt securities
 
held-to-maturity [2]
$
8,852,825
$
8,194,335
$
5,780
$
8,188,555
$
3,578
$
32,748
$
8,159,385
1.48
%
[1]
Book value includes $
658
 
million of net unrealized loss which remains in Accumulated
 
other comprehensive (loss) income (AOCI)
 
related to certain
securities transferred from available-for-sale securities
 
portfolio to the held-to-maturity securities portfolio as discussed
 
in Note 6 of the 2023 Form
10-K.
[2]
Includes $
8.1
 
billion pledged to secure public and trust deposits that
 
the secured parties are not permitted to sell or repledge
 
the collateral. The
Corporation had unpledged held-to-maturities securities with
 
a fair value of
 
$
67.3
 
million that could be used to increase its
 
borrowing facilities.
Debt securities not due on a single contractual maturity date,
 
such as collateralized mortgage obligations, are classified in the period
of final
 
contractual maturity.
 
The expected
 
maturities of
 
collateralized mortgage
 
obligations and
 
certain other
 
securities may
 
differ
from their contractual maturities because they may be
 
subject to prepayments or may be called
 
by the issuer.
Credit Quality Indicators
The following describes the credit quality indicators by major security
 
type that the Corporation considers to develop the
 
estimate of
the allowance for credit losses for investment securities
 
held-to-maturity.
As
 
discussed in
 
Note
 
2
 
of
 
2023 Form
 
10-K,
 
U.S. Treasury
 
securities
 
carry
 
an
 
explicit
 
guarantee from
 
the
 
U.S. Government
 
are
highly rated by major rating
 
agencies and have a long
 
history of no credit losses. Accordingly,
 
the Corporation applies a zero-credit
loss assumption and no allowance for credit losses
 
(“ACL”) for these
 
securities has been established.
At March 31, 2024
 
and December 31, 2023, the
 
“Obligations of Puerto Rico, States and
 
political subdivisions” classified as held-to-
maturity,
 
includes
 
securities
 
issued by
 
municipalities
 
of
 
Puerto
 
Rico
 
that
 
are
 
generally
 
not
 
rated
 
by
 
a
 
credit
 
rating
 
agency.
 
This
includes $
16
 
million of general and special obligation bonds issued by three municipalities of Puerto Rico, that
 
are payable primarily
from
 
certain
 
property
 
taxes
 
imposed
 
by
 
the
 
issuing
 
municipality
 
(December
 
31,
 
2023
 
-
 
$
19
 
million).
 
In
 
the
 
case
 
of
 
general
obligations, they
 
also benefit
 
from a
 
pledge of
 
the full
 
faith, credit
 
and unlimited
 
taxing power
 
of the
 
issuing municipality,
 
which is
required by law to levy property taxes in an amount sufficient for the payment of
 
debt service on such general obligation bonds. The
Corporation performs periodic credit quality
 
reviews of these securities and
 
internally assigns standardized credit risk ratings based
on its evaluation. The
 
Corporation considers these ratings in
 
its estimate to develop the
 
allowance for credit losses
 
associated with
these
 
securities.
 
For
 
the
 
definitions
 
of
 
the
 
obligor
 
risk
 
ratings,
 
refer
 
to
 
the
 
Credit
 
Quality
 
section
 
of
 
Note
 
8
 
to
 
the
 
Consolidated
Financial Statements.
 
 
25
The
 
following
 
presents
 
the
 
amortized
 
cost
 
basis
 
of
 
securities
 
held
 
by
 
the
 
Corporation
 
issued
 
by
 
municipalities
 
of
 
Puerto
 
Rico
aggregated by the internally assigned standardized
 
credit risk rating:
 
 
 
 
 
 
 
 
At March 31, 2024
At December 31, 2023
(In thousands)
Securities issued by Puerto Rico municipalities
Watch
$
2,255
$
2,255
Pass
13,265
16,565
Total
$
15,520
$
18,820
At
 
March
 
31,
 
2024,
 
the
 
portfolio
 
of
 
“Obligations
 
of
 
Puerto
 
Rico,
 
States
 
and
 
political
 
subdivisions”
 
also
 
includes
 
$
39
 
million
 
in
securities
 
issued
 
by
 
the
 
Puerto
 
Rico
 
Housing
 
Finance
 
Authority
 
(“HFA”),
 
a
 
government
 
instrumentality,
 
for
 
which
 
the
 
underlying
source of payment is second mortgage loans in Puerto Rico residential
 
properties (not the government), but for which HFA, provides
a guarantee
 
in the
 
event of default
 
and upon the
 
satisfaction of certain
 
other conditions (December
 
31, 2023 -
 
$
40
 
million). These
securities are not rated by a credit rating agency.
 
The
 
Corporation
 
assesses
 
the
 
credit
 
risk
 
associated
 
with
 
these
 
securities
 
by
 
evaluating
 
the
 
refreshed
 
FICO
 
scores
 
of
 
a
representative
 
sample
 
of
 
the
 
underlying
 
borrowers.
 
As
 
of
 
March
 
31,
 
2024,
 
the
 
average
 
refreshed
 
FICO
 
score
 
for
 
the
 
sample,
comprised
 
of
68
%
 
of
 
the
 
nominal
 
value
 
of
 
the
 
securities,
 
used
 
for
 
the
 
loss
 
estimate
 
was
 
of
708
 
(compared
 
to
67
%
 
and
708
,
respectively, at
 
December 31, 2023).
 
The loss estimates
 
for this portfolio
 
was based on
 
the methodology established
 
under CECL
for
 
similar
 
loan
 
obligations.
 
The
 
Corporation
 
does
 
not
 
consider
 
the
 
government
 
guarantee
 
when
 
estimating
 
the
 
credit
 
losses
associated with this portfolio.
A
deterioration of
 
the Puerto
 
Rico economy
 
or
 
of
 
the fiscal
 
health of
 
the
 
Government of
 
Puerto
 
Rico
 
and/or
 
its
 
instrumentalities
(including if any
 
of the issuing municipalities
 
become subject to a
 
debt restructuring proceeding under
 
PROMESA) could adversely
affect the value of these securities, resulting in losses to
 
the Corporation.
 
Refer to
 
Note 20
to the
 
Consolidated Financial
 
Statements
for additional
 
information on
 
the Corporation’s
 
exposure to
 
the Puerto
Rico Government.
At
 
March
 
31,
 
2024
 
and
 
December 31,
 
2023,
 
the
 
portfolio
 
of
 
“Obligations
 
of
 
Puerto
 
Rico,
 
States
 
and
 
political
 
subdivisions”
 
also
includes
 
$
7
 
million
 
in securities
 
issued
 
by the
 
HFA
 
for
 
which the
 
underlying source
 
of
 
payment
 
is U.S.
 
Treasury
 
securities.
 
The
Corporation applies a
zero
-credit loss assumption for
 
these securities, and no
 
ACL has been
 
established for these securities
 
given
that U.S. Treasury
 
securities carry an
 
explicit guarantee from the
 
U.S. Government, are
 
highly rated by
 
major rating agencies,
 
and
have a long history of no credit losses. Refer
 
to Note 2 of 2023 Form 10-K for further details.
Delinquency status
At March 31, 2024 and December 31, 2023, there were
no
 
securities held-to-maturity in past due or non-performing
 
status.
Allowance for credit losses on debt securities held-to-maturity
The following table provides the
 
activity in the allowance for
 
credit losses related to debt securities
 
held-to-maturity by security type
at March 31, 2024 and March 31, 2023:
 
26
 
 
 
 
 
 
 
 
 
 
For the quarters ended March 31,
 
2024
2023
(In thousands)
Obligations of Puerto Rico, States and political subdivisions
Allowance for credit losses:
Beginning balance
$
5,780
$
6,911
Provision for credit losses (benefit)
(49)
(119)
Securities charged-off
-
-
Recoveries
-
-
Ending balance
$
5,731
$
6,792
The
 
allowance
 
for
 
credit
 
losses
 
for
 
the
 
Obligations
 
of
 
Puerto
 
Rico,
 
States
 
and
 
political
 
subdivisions
 
includes
 
$
0.2
 
million
 
for
securities issued by municipalities of
 
Puerto Rico, and $
5.6
 
million for bonds issued by
 
the Puerto Rico HFA,
 
which are secured by
second mortgage loans on
 
Puerto Rico residential properties (compared to
 
$
0.2
 
million and $
5.6
 
million, respectively, at
 
December
31, 2023).
27
Note 7 – Loans
For
 
a
 
summary
 
of the
 
accounting policies
 
related to
 
loans, interest
 
recognition
 
and
 
allowance for
 
credit
 
losses
 
refer to
 
Note
 
2
 
-
Summary of Significant Accounting Policies of the 2023
 
Form 10-K.
During the
 
quarter ended
 
March 31,
 
2024, the
 
Corporation recorded purchases
 
(including repurchases)
 
of mortgage
 
loans of
 
$
86
million,
 
and
 
commercial
 
loans
 
of
 
$
56
 
million;
 
compared
 
to
 
purchases
 
(including
 
repurchases)
 
of
 
mortgage
 
loans
 
of
 
$
76
 
million,
consumer loans of $
27
 
million, and commercial loans of $
45
 
million during the quarter ended March 31, 2023.
 
The Corporation
 
performed whole-loan
 
sales involving
 
approximately $
11
 
million of
 
residential mortgage loans,
 
and $
12
 
million of
commercial and construction loans
 
during the quarter ended
 
March 31, 2024 (March
 
31, 2023 -
 
$
10
 
million of residential mortgage
loans
 
and
 
$
2
 
million
 
of
 
commercial
 
and
 
construction
 
loans).
 
Also,
 
during
 
the
 
quarter
 
ended
 
March
 
31,
 
2024,
 
the
 
Corporation
securitized approximately $
1
 
million of mortgage loans into GNMA mortgage-backed
 
securities and $
1
 
million of mortgage loans into
FNMA mortgage-backed securities, compared to $
1
 
million and $
10
 
million, respectively, during the quarter ended March 31, 2023.
 
Delinquency status
The following tables present the
 
amortized cost basis of loans
 
held-in-portfolio (“HIP”), net of unearned
 
income, by past due status,
and by loan class including those that are in non-performing status or that are accruing
 
interest but are past due 90 days or more at
March 31, 2024 and December 31, 2023.
 
 
28
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
BPPR
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
 
(In thousands)
days
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
19,384
$
2,027
$
106
$
21,517
$
282,134
$
303,651
$
106
$
-
Commercial real estate:
Non-owner occupied
2,378
3,278
7,922
13,578
2,982,907
2,996,485
7,922
-
Owner occupied
6,628
432
26,124
33,184
1,392,908
1,426,092
26,124
-
Commercial and industrial
3,020
8,552
33,741
45,313
4,699,810
4,745,123
29,171
4,570
Construction
-
-
-
-
162,724
162,724
-
-
Mortgage
254,008
107,224
385,062
746,294
5,737,257
6,483,551
166,473
218,589
Leasing
19,936
4,752
7,267
31,955
1,733,458
1,765,413
7,267
-
Consumer:
Credit cards
13,034
9,528
23,858
46,420
1,095,716
1,142,136
-
23,858
Home equity lines of credit
-
226
7
233
2,336
2,569
-
7
Personal
19,822
12,169
19,092
51,083
1,695,410
1,746,493
19,092
-
Auto
82,957
18,420
41,807
143,184
3,563,670
3,706,854
41,807
-
Other
1,022
150
939
2,111
151,567
153,678
632
307
Total
$
422,189
$
166,758
$
545,925
$
1,134,872
$
23,499,897
$
24,634,769
$
298,594
$
247,331
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
Popular U.S.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
 
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
3,434
$
-
$
8,700
$
12,134
$
2,068,850
$
2,080,984
$
8,700
$
-
Commercial real estate:
Non-owner occupied
740
1,364
2,407
4,511
2,056,063
2,060,574
2,407
-
Owner occupied
6,107
19,009
3,877
28,993
1,662,759
1,691,752
3,877
-
Commercial and industrial
9,961
628
6,634
17,223
2,263,137
2,280,360
6,423
211
Construction
8,825
-
-
8,825
837,754
846,579
-
-
Mortgage
25,558
533
28,071
54,162
1,245,949
1,300,111
28,071
-
Consumer:
Credit cards
-
-
-
-
17
17
-
-
Home equity lines of
credit
846
390
3,986
5,222
58,926
64,148
3,986
-
Personal
2,142
1,695
2,068
5,905
144,612
150,517
2,068
-
Other
-
-
1
1
8,926
8,927
1
-
Total
$
57,613
$
23,619
$
55,744
$
136,976
$
10,346,993
$
10,483,969
$
55,533
$
211
 
 
29
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
Popular, Inc.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
[2] [3]
loans
loans
Commercial multi-family
$
22,818
$
2,027
$
8,806
$
33,651
$
2,350,984
$
2,384,635
$
8,806
$
-
Commercial real estate:
Non-owner occupied
3,118
4,642
10,329
18,089
5,038,970
5,057,059
10,329
-
Owner occupied
12,735
19,441
30,001
62,177
3,055,667
3,117,844
30,001
-
Commercial and industrial
12,981
9,180
40,375
62,536
6,962,947
7,025,483
35,594
4,781
Construction
8,825
-
-
8,825
1,000,478
1,009,303
-
-
Mortgage
[1]
279,566
107,757
413,133
800,456
6,983,206
7,783,662
194,544
218,589
Leasing
19,936
4,752
7,267
31,955
1,733,458
1,765,413
7,267
-
Consumer:
Credit cards
13,034
9,528
23,858
46,420
1,095,733
1,142,153
-
23,858
Home equity lines of credit
846
616
3,993
5,455
61,262
66,717
3,986
7
Personal
21,964
13,864
21,160
56,988
1,840,022
1,897,010
21,160
-
Auto
82,957
18,420
41,807
143,184
3,563,670
3,706,854
41,807
-
Other
1,022
150
940
2,112
160,493
162,605
633
307
Total
$
479,802
$
190,377
$
601,669
$
1,271,848
$
33,846,890
$
35,118,738
$
354,127
$
247,542
[1]
It is the Corporation’s policy to report delinquent residential
 
mortgage loans insured by Federal Housing Administration
 
(“FHA”) or guaranteed by
the U.S. Department of Veterans Affairs
 
(“VA”) as accruing loans past
 
due 90 days or more as opposed to non-performing
 
since the principal
repayment is insured.
 
These balances include $
93
 
million of residential mortgage loans insured by FHA
 
or guaranteed by the VA
 
that are no
longer accruing interest as of March 31, 2024. Furthermore, as
 
of March 31, 2024, the Corporation had approximately
 
$
37
 
million in reverse
mortgage loans which are guaranteed by FHA, but which
 
are currently not accruing interest. Due to the guaranteed
 
nature of the loans, it is the
Corporation’s policy to exclude these balances from
 
non-performing assets.
[2]
Loans held-in-portfolio are net of $
367
 
million in unearned income and exclude $
5
 
million in loans held-for-sale.
[3]
Includes $
14
 
billion pledged to secure credit facilities and public
 
funds that the secured parties are not permitted to sell
 
or repledge the collateral,
of which $
7.0
 
billion were pledged at the Federal Home Loan Bank
 
("FHLB") as collateral for borrowings and $
7
 
billion at the Federal Reserve
Bank ("FRB") for discount window borrowings. As of
 
March 31, 2024, the Corporation had an available borrowing
 
facility with the FHLB and the
discount window of Federal Reserve Bank of New York
 
of $
3.8
 
billion and $
4.6
 
billion, respectively.
 
 
30
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2023
BPPR
Past due
Past due 90 days or more
30-59
60-89
90 days
 
Total
Non-accrual
Accruing
(In thousands)
 
days
 
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
524
$
-
$
1,991
$
2,515
$
289,427
$
291,942
$
1,991
$
-
Commercial real estate:
Non-owner occupied
5,510
77
8,745
14,332
2,990,922
3,005,254
8,745
-
Owner occupied
2,726
249
29,430
32,405
1,365,978
1,398,383
29,430
-
Commercial and industrial
6,998
3,352
36,210
46,560
4,749,666
4,796,226
32,826
3,384
Construction
-
-
6,378
6,378
163,479
169,857
6,378
-
Mortgage
260,897
114,282
416,528
791,707
5,600,117
6,391,824
175,106
241,422
Leasing
20,140
6,719
8,632
35,491
1,696,318
1,731,809
8,632
-
Consumer:
Credit cards
13,243
9,912
23,281
46,436
1,089,292
1,135,728
-
23,281
Home equity lines of credit
230
-
26
256
2,392
2,648
-
26
Personal
19,065
14,611
19,031
52,707
1,723,603
1,776,310
19,031
-
Auto
100,061
27,443
45,615
173,119
3,487,661
3,660,780
45,615
-
Other
1,641
204
1,213
3,058
147,104
150,162
964
249
Total
$
431,035
$
176,849
$
597,080
$
1,204,964
$
23,305,959
$
24,510,923
$
328,718
$
268,362
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2023
Popular U.S.
Past due
Past due 90 days or more
30-59
60-89
90 days
 
Total
Non-accrual
Accruing
(In thousands)
 
days
 
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
9,141
$
2,001
$
-
$
11,142
$
2,112,536
$
2,123,678
$
-
$
-
Commercial real estate:
Non-owner occupied
566
1,036
1,117
2,719
2,079,448
2,082,167
1,117
-
Owner occupied
30,560
-
6,274
36,834
1,645,418
1,682,252
6,274
-
Commercial and industrial
7,815
697
3,881
12,393
2,317,502
2,329,895
3,772
109
Construction
-
-
-
-
789,423
789,423
-
-
Mortgage
48,818
7,821
11,191
67,830
1,236,263
1,304,093
11,191
-
Consumer:
Credit cards
-
-
-
-
19
19
-
-
Home equity lines of credit
1,472
4
3,733
5,209
58,096
63,305
3,733
-
Personal
 
2,222
1,948
2,805
6,975
161,962
168,937
2,805
-
Other
4
-
1
5
10,274
10,279
1
-
Total
$
100,598
$
13,507
$
29,002
$
143,107
$
10,410,941
$
10,554,048
$
28,893
$
109
 
 
31
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2023
Popular, Inc.
Past due
Past due 90 days or more
30-59
60-89
90 days
 
Total
Non-accrual
Accruing
(In thousands)
 
days
 
days
or more
past due
Current
Loans HIP
[2]
[3]
loans
loans
Commercial multi-family
$
9,665
$
2,001
$
1,991
$
13,657
$
2,401,963
$
2,415,620
$
1,991
$
-
Commercial real estate:
Non-owner occupied
6,076
1,113
9,862
17,051
5,070,370
5,087,421
9,862
-
Owner occupied
33,286
249
35,704
69,239
3,011,396
3,080,635
35,704
-
Commercial and industrial
14,813
4,049
40,091
58,953
7,067,168
7,126,121
36,598
3,493
Construction
-
-
6,378
6,378
952,902
959,280
6,378
-
Mortgage
[1]
309,715
122,103
427,719
859,537
6,836,380
7,695,917
186,297
241,422
Leasing
20,140
6,719
8,632
35,491
1,696,318
1,731,809
8,632
-
Consumer:
Credit cards
13,243
9,912
23,281
46,436
1,089,311
1,135,747
-
23,281
Home equity lines of credit
1,702
4
3,759
5,465
60,488
65,953
3,733
26
Personal
21,287
16,559
21,836
59,682
1,885,565
1,945,247
21,836
-
Auto
100,061
27,443
45,615
173,119
3,487,661
3,660,780
45,615
-
Other
1,645
204
1,214
3,063
157,378
160,441
965
249
Total
$
531,633
$
190,356
$
626,082
$
1,348,071
$
33,716,900
$
35,064,971
$
357,611
$
268,471
[1]
It is the Corporation’s policy to report delinquent residential
 
mortgage loans insured by FHA or guaranteed
 
by the VA as accruing loans
 
past due
90 days or more as opposed to non-performing since
 
the principal repayment is insured.
 
These balances include $
106
 
million of residential
mortgage loans insured by FHA or guaranteed by the VA
 
that are no longer accruing interest as of December
 
31, 2023. Furthermore, as of
December 31, 2023, the Corporation had approximately
 
$
38
 
million in reverse mortgage loans which are guaranteed
 
by FHA, but which are
currently not accruing interest. Due to the guaranteed nature
 
of the loans, it is the Corporation’s policy to exclude
 
these balances from non-
performing assets.
[2]
Loans held-in-portfolio are net of $
356
 
million in unearned income and exclude $
4
 
million in loans held-for-sale.
[3]
Includes $
14.2
 
billion pledged to secure credit facilities and public funds
 
that the secured parties are not permitted to sell or repledge
 
the collateral,
of which $
7.0
 
billion were pledged at the Federal Home Loan Bank
 
(FHLB) as collateral for borrowings and $
7.2
 
billion at the Federal Reserve
Bank (FRB) for discount window borrowings. As of December
 
31, 2023, the Corporation had an available borrowing
 
facility with the FHLB and the
discount window of Federal Reserve Bank of New York
 
of $
3.5
 
billion and $
4.4
 
billion, respectively.
Recognition of interest income on mortgage loans is generally discontinued when loans are 90 days or more in arrears on payments
of principal or interest. The Corporation discontinues the recognition of interest income on residential mortgage loans insured by the
FHA or guaranteed by the VA when 15 months
 
delinquent as to principal or interest, since the principal repayment on these loans is
insured.
At March
 
31, 2024, mortgage
 
loans held-in-portfolio include
 
$
2.3
 
billion (December 31,
 
2023 -
 
$
2.2
 
billion) of loans
 
insured by the
FHA, or
 
guaranteed by
 
the VA
 
of which
 
$
218.7
 
million (December
 
31, 2023
 
- $
241.6
 
million) are
 
90 days
 
or more
 
past due.
 
The
portfolio of guaranteed loans includes $
93
 
million of residential mortgage loans in Puerto Rico
 
that are no longer accruing interest as
of March 31, 2024 (December 31, 2023 - $
106
 
million). The Corporation has approximately $
37
 
million in reverse mortgage loans in
Puerto Rico
 
which are guaranteed
 
by FHA,
 
but which
 
are currently not
 
accruing interest at
 
March 31,
 
2024 (December 31,
 
2023 -
$
38
 
million).
Loans with a delinquency status of 90 days past due as of March 31, 2024 include $
10
 
million in loans previously pooled into GNMA
securities
 
(December
 
31,
 
2023
 
-
 
$
11
 
million).
 
Under
 
the
 
GNMA
 
program,
 
issuers
 
such
 
as
 
BPPR
 
have
 
the
 
option
 
but
 
not
 
the
obligation to repurchase loans
 
that are 90
 
days or more
 
past due. For
 
accounting purposes, these loans
 
subject to the
 
repurchase
option
 
are
 
required to
 
be
 
reflected on
 
the
 
financial statements
 
of BPPR
 
with
 
an
 
offsetting
 
liability.
 
Loans
 
in
 
our
 
serviced
 
GNMA
portfolio benefit
 
from payment
 
forbearance programs
 
but continue
 
to reflect
 
the contractual
 
delinquency until
 
the borrower
 
repays
deferred payments or completes a payment deferral
 
modification or other borrower assistance alternative.
 
The following tables present the amortized cost basis
 
of non-accrual loans as of March 31, 2024
 
and December 31, 2023 by class of
loans:
 
 
32
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Commercial multi-family
$
-
$
106
$
8,700
$
-
$
8,700
$
106
Commercial real estate non-owner occupied
3,635
4,287
1,344
1,063
4,979
5,350
Commercial real estate owner occupied
17,541
8,583
3,877
-
21,418
8,583
Commercial and industrial
18,914
10,257
-
6,423
18,914
16,680
Mortgage
82,843
83,630
190
27,881
83,033
111,511
Leasing
453
6,814
-
-
453
6,814
Consumer:
 
HELOCs
-
-
-
3,986
-
3,986
 
Personal
 
3,458
15,634
-
2,068
3,458
17,702
 
Auto
 
1,809
39,998
-
-
1,809
39,998
 
Other
263
369
-
1
263
370
Total
$
128,916
$
169,678
$
14,111
$
41,422
$
143,027
$
211,100
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2023
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Commercial multi-family
$
-
$
1,991
$
-
$
-
$
-
$
1,991
Commercial real estate non-owner occupied
3,695
5,050
-
1,117
3,695
6,167
Commercial real estate owner occupied
20,432
8,998
3,877
2,397
24,309
11,395
Commercial and industrial
6,991
25,835
-
3,772
6,991
29,607
Construction
-
6,378
-
-
-
6,378
Mortgage
84,677
90,429
120
11,071
84,797
101,500
Leasing
481
8,151
-
-
481
8,151
Consumer:
 
HELOCs
-
-
-
3,733
-
3,733
 
Personal
 
3,589
15,442
-
2,805
3,589
18,247
 
Auto
 
1,833
43,782
-
-
1,833
43,782
 
Other
263
701
-
1
263
702
Total
$
121,961
$
206,757
$
3,997
$
24,896
$
125,958
$
231,653
The Corporation has
 
designated loans classified as
 
collateral dependent for
 
which the ACL
 
is measured based
 
on the fair
 
value of
the collateral less
 
cost to sell,
 
when foreclosure is
 
probable or when
 
the repayment is
 
expected to be
 
provided substantially by the
sale or
 
operation of
 
the collateral
 
and the
 
borrower is
 
experiencing financial
 
difficulty.
 
The fair
 
value of
 
the collateral
 
is based
 
on
appraisals, which may be
 
adjusted due to their
 
age, and the
 
type, location, and condition
 
of the property
 
or area or general
 
market
conditions to reflect the expected change in value between the effective date
 
of the appraisal and the measurement date. Appraisals
are updated every one to two years depending on
 
the type of loan and the total exposure of
 
the borrower.
Loans in non-accrual status with
 
no allowance at March 31,
 
2024 include $
143
 
million in collateral dependent loans
 
(December 31,
2023 - $
126
 
million). The Corporation recognized $
3
 
million in interest income on non-accrual loans during the quarter ended March
31, 2024 (March 31, 2023 - $
4
 
million).
The following tables present the amortized cost basis
 
of collateral-dependent loans, for which the ACL was measured
 
based on the
fair value of the collateral less cost to sell, by class
 
of loans and type of collateral as of March
 
31, 2024 and December 31, 2023:
 
33
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
(In thousands)
Real Estate
Auto
Equipment
Accounts
Receivables
Other
Total
BPPR
Commercial multi-family
$
1,325
$
-
$
-
$
-
-
$
1,325
Commercial real estate:
Non-owner occupied
159,712
-
-
-
-
159,712
Owner occupied
22,840
-
-
-
-
22,840
Commercial and industrial
1,130
-
-
2,172
23,693
26,995
Mortgage
80,487
-
-
-
-
80,487
Leasing
-
1,257
-
-
-
1,257
Consumer:
Personal
3,708
-
-
-
-
3,708
Auto
-
13,910
-
-
-
13,910
Other
-
-
-
-
303
303
Total BPPR
$
269,202
$
15,167
$
-
$
2,172
23,996
$
310,537
Popular U.S.
Commercial multi-family
$
8,700
$
-
$
-
$
-
-
$
8,700
Commercial real estate:
Non-owner occupied
1,344
$
-
-
-
-
1,344
Owner occupied
3,877
$
-
-
-
-
3,877
Commercial and industrial
-
-
70
-
2,297
2,367
Mortgage
1,040
-
-
-
-
1,040
Total Popular U.S.
$
14,961
$
-
$
70
$
-
2,297
$
17,328
Popular, Inc.
Commercial multi-family
$
10,025
$
-
$
-
$
-
-
$
10,025
Commercial real estate:
Non-owner occupied
161,056
-
-
-
-
161,056
Owner occupied
26,717
-
-
-
-
26,717
Commercial and industrial
1,130
-
70
2,172
25,990
29,362
Mortgage
81,527
-
-
-
-
81,527
Leasing
-
1,257
-
-
-
1,257
Consumer:
Personal
3,708
-
-
-
-
3,708
Auto
-
13,910
-
-
-
13,910
Other
-
-
-
-
303
303
Total Popular,
 
Inc.
$
284,163
$
15,167
$
70
$
2,172
26,293
$
327,865
 
34
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2023
(In thousands)
Real Estate
Auto
Equipment
Other
Total
BPPR
Commercial multi-family
$
1,339
$
-
$
-
$
-
$
1,339
Commercial real estate:
Non-owner occupied
160,555
-
-
-
160,555
Owner occupied
25,848
-
-
-
25,848
Commercial and industrial
1,103
-
-
30,287
31,390
Construction
6,378
-
-
-
6,378
Mortgage
85,113
-
-
-
85,113
Leasing
-
1,373
-
-
1,373
Consumer:
Personal
4,338
-
-
-
4,338
Auto
-
12,965
-
-
12,965
Other
-
-
-
305
305
Total BPPR
$
284,674
$
14,338
$
-
$
30,592
$
329,604
Popular U.S.
Commercial real estate:
Owner occupied
3,877
-
-
-
3,877
Commercial and industrial
-
-
105
400
505
Construction
5,990
-
-
-
5,990
Mortgage
1,303
-
-
-
1,303
Total Popular U.S.
$
11,170
$
-
$
105
$
400
$
11,675
Popular, Inc.
Commercial multi-family
$
1,339
$
-
$
-
$
-
$
1,339
Commercial real estate:
Non-owner occupied
160,555
-
-
-
160,555
Owner occupied
29,725
-
-
-
29,725
Commercial and industrial
1,103
-
105
30,687
31,895
Construction
12,368
-
-
-
12,368
Mortgage
86,416
-
-
-
86,416
Leasing
-
1,373
-
-
1,373
Consumer:
Personal
4,338
-
-
-
4,338
Auto
-
12,965
-
-
12,965
Other
-
-
-
305
305
Total Popular,
 
Inc.
$
295,844
$
14,338
$
105
$
30,992
$
341,279
 
35
Purchased Credit Deteriorated (PCD) Loans
The Corporation has purchased loans during
 
the quarter for which there was, at acquisition, evidence
 
of more than insignificant
deterioration of credit quality since origination. The
 
carrying amount of those loans is as follows:
 
 
 
 
 
 
 
 
(In thousands)
March 31, 2024
March 31, 2023
Purchase price of loans at acquisition
$
426
$
255
Allowance for credit losses at acquisition
17
68
Non-credit discount / (premium) at acquisition
-
9
Par value of acquired loans at acquisition
$
443
$
332
36
Note 8 – Allowance for credit losses – loans
 
held-in-portfolio
The
Corporation follows
 
the current
 
expected credit
 
loss (“CECL”)
 
model, to
 
establish and
 
evaluate the
 
adequacy of
 
the ACL
 
to
provide for
 
expected losses
 
in the
 
loan portfolio.
 
This model
 
establishes a forward-looking
 
methodology that
 
reflects the
 
expected
credit losses over the lives of financial assets, starting when such
 
assets are first acquired or originated. In addition, CECL provides
that
 
the
 
initial ACL
 
on PCD
 
financial
 
assets be
 
recorded as
 
an
 
increase to
 
the
 
purchase price,
 
with subsequent
 
changes to
 
the
allowance
 
recorded
 
as
 
a
 
credit
 
loss
 
expense.
 
The
 
provision
 
for
 
credit
 
losses
 
recorded
 
in
 
current
 
operations
 
is
 
based
 
on
 
this
methodology.
 
Loan losses
 
are charged,
 
and recoveries
 
are credited
 
to the
 
ACL. The
 
Corporation’s modeling
 
framework includes
competing risk
 
models that
 
generate lifetime
 
default and
 
prepayment estimates as
 
well as
 
other loan
 
level techniques
 
to estimate
loss
 
severity.
 
These
 
models
 
combine
 
credit
 
risk
 
factors,
 
which
 
include
 
the
 
impact
 
of
 
loan
 
modifications,
 
with
 
macroeconomic
expectations to derive the lifetime expected loss.
 
At March
 
31,2024, the
 
Corporation estimated
 
the ACL
 
by weighting
 
the outputs
 
of optimistic,
 
baseline, and
 
pessimistic scenarios.
Among the
 
three scenarios used
 
to estimate
 
the ACL, the
 
baseline is
 
assigned the highest
 
probability,
 
followed by the
 
pessimistic
scenario given the
 
uncertainties in the
 
economic outlook and
 
downside risk. The
 
weightings applied are
 
subject to
 
evaluation on a
quarterly basis as
 
part of the
 
ACL’s governance
 
process. The Corporation evaluates,
 
at least on
 
an annual basis, the
 
assumptions
tied to the CECL accounting framework. These
 
include the reasonable and supportable period
 
as well as the reversion window.
The
 
2024
 
annualized GDP
 
growth in
 
the
 
baseline scenario
 
improved to
 
2.0%
 
and
 
2.3%
 
for
 
Puerto
 
Rico
 
and
 
the
 
United
 
States,
respectively, compared to 1.2% and 1.7%
 
in the previous quarter. The 2024 forecasted average unemployment rate for
 
Puerto Rico
and the United States remained stable at 6.5%
 
and 3.9%, respectively, compared to 6.8% and 4.0% in previous forecast.
The following
 
tables present
 
the changes
 
in the
 
ACL of
 
loans held-in-portfolio
 
and unfunded
 
commitments for
 
the quarters
 
ended
March 31, 2024 and 2023.
 
37
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended March 31, 2024
BPPR
Provision for
Allowance for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balances
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
3,614
$
(48)
$
-
$
-
$
1
$
3,567
Commercial real estate non-owner occupied
53,754
(413)
-
-
325
53,666
Commercial real estate owner occupied
40,637
5,147
-
(2,785)
538
43,537
Commercial and industrial
107,577
376
-
(6,669)
1,560
102,844
Total Commercial
205,582
5,062
-
(9,454)
2,424
203,614
Construction
5,294
(2,180)
-
-
-
3,114
Mortgage
72,440
(319)
17
(765)
5,191
76,564
Leasing
9,708
2,968
-
(4,850)
1,165
8,991
Consumer
 
Credit cards
80,487
21,640
-
(16,396)
2,438
88,169
 
Home equity lines of credit
103
103
-
(197)
93
102
 
Personal
101,181
20,263
-
(24,349)
2,409
99,504
 
Auto
157,931
13,371
-
(20,167)
6,321
157,456
 
Other
7,132
100
-
(664)
240
6,808
Total Consumer
346,834
55,477
-
(61,773)
11,501
352,039
Total - Loans
$
639,858
$
61,008
$
17
$
(76,842)
$
20,281
$
644,322
Allowance for credit losses - unfunded commitments:
Commercial
$
5,062
$
(120)
$
-
$
-
$
-
$
4,942
Construction
1,618
(177)
-
-
-
1,441
Ending balance - unfunded commitments [1]
$
6,680
$
(297)
$
-
$
-
$
-
$
6,383
[1] Allowance for credit losses of unfunded commitments
 
is presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
38
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended March 31, 2024
Popular U.S.
Provision for
 
Beginning
credit losses -
Ending
(In thousands)
Balance
(benefit)
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
10,126
$
(510)
$
(441)
$
1
$
9,176
Commercial real estate non-owner occupied
11,699
195
-
64
11,958
Commercial real estate owner occupied
16,227
4,019
-
24
20,270
Commercial and industrial
14,779
3,203
(564)
156
17,574
Total Commercial
52,831
6,907
(1,005)
245
58,978
Construction
7,392
633
-
-
8,025
Mortgage
10,774
(925)
-
25
9,874
Consumer
 
Home equity lines of credit
1,875
(253)
(7)
155
1,770
 
Personal
16,609
4,991
(5,712)
685
16,573
 
Other
2
25
(31)
6
2
Total Consumer
18,486
4,763
(5,750)
846
18,345
Total - Loans
$
89,483
$
11,378
$
(6,755)
$
1,116
$
95,222
Allowance for credit losses - unfunded commitments:
Commercial
$
1,851
$
691
$
-
$
-
$
2,542
Construction
8,446
(609)
-
-
7,837
Consumer
29
(24)
-
-
5
Ending balance - unfunded commitments [1]
$
10,326
$
58
$
-
$
-
$
10,384
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
39
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended March 31, 2024
Popular Inc.
Provision for
Allowance
for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
13,740
$
(558)
$
-
$
(441)
$
2
$
12,743
Commercial real estate non-owner occupied
65,453
(218)
-
-
389
65,624
Commercial real estate owner occupied
56,864
9,166
-
(2,785)
562
63,807
Commercial and industrial
122,356
3,579
-
(7,233)
1,716
120,418
Total Commercial
258,413
11,969
-
(10,459)
2,669
262,592
Construction
12,686
(1,547)
-
-
-
11,139
Mortgage
83,214
(1,244)
17
(765)
5,216
86,438
Leasing
9,708
2,968
-
(4,850)
1,165
8,991
Consumer
 
Credit cards
80,487
21,640
-
(16,396)
2,438
88,169
 
Home equity lines of credit
1,978
(150)
-
(204)
248
1,872
 
Personal
117,790
25,254
-
(30,061)
3,094
116,077
 
Auto
157,931
13,371
-
(20,167)
6,321
157,456
 
Other
7,134
125
-
(695)
246
6,810
Total Consumer
365,320
60,240
-
(67,523)
12,347
370,384
Total - Loans
$
729,341
$
72,386
$
17
$
(83,597)
$
21,397
$
739,544
Allowance for credit losses - unfunded commitments:
Commercial
$
6,913
$
571
$
-
$
-
$
-
$
7,484
Construction
10,064
(786)
-
-
-
9,278
Consumer
29
(24)
-
-
-
5
Ending balance - unfunded commitments [1]
$
17,006
$
(239)
$
-
$
-
$
-
$
16,767
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
40
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended March 31, 2023
BPPR
Impact of
Provision for
Allowance for
Beginning
Adopting
credit losses
credit losses -
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
5,210
$
-
$
(454)
$
-
$
-
$
-
$
4,756
Commercial real estate non-owner occupied
52,475
-
1,284
-
-
135
53,894
Commercial real estate owner occupied
48,393
(1,161)
(2,730)
-
(3)
1,510
46,009
Commercial and industrial
68,217
(552)
9,819
-
(1,607)
1,165
77,042
Total Commercial
174,295
(1,713)
7,919
-
(1,610)
2,810
181,701
Construction
2,978
-
94
-
-
-
3,072
Mortgage
117,344
(33,556)
1,267
68
(846)
4,800
89,077
Leasing
20,618
(35)
734
-
(1,417)
1,090
20,990
Consumer
 
Credit cards
58,670
-
15,570
-
(8,676)
2,389
67,953
 
Home equity lines of credit
103
-
(39)
-
(33)
69
100
 
Personal
96,369
(7,020)
11,104
-
(13,580)
1,535
88,408
 
Auto
129,735
(21)
8,319
-
(12,118)
4,914
130,829
 
Other
15,433
-
235
-
(11,007)
216
4,877
Total Consumer
300,310
(7,041)
35,189
-
(45,414)
9,123
292,167
Total - Loans
$
615,545
$
(42,345)
$
45,203
$
68
$
(49,287)
$
17,823
$
587,007
Allowance for credit losses - unfunded commitments:
Commercial
$
4,336
$
-
$
564
$
-
$
-
$
-
$
4,900
Construction
2,022
-
(76)
-
-
-
1,946
Ending balance - unfunded commitments [1]
$
6,358
$
-
$
488
$
-
$
-
$
-
$
6,846
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
41
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended March 31, 2023
Popular U.S.
Impact of
Provision for
Beginning
Adopting
credit losses
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
21,101
$
-
$
(493)
$
-
$
2
$
20,610
Commercial real estate non-owner occupied
19,065
-
(2,961)
-
1,852
17,956
Commercial real estate owner occupied
8,688
-
(224)
-
24
8,488
Commercial and industrial
12,227
-
2,528
(499)
968
15,224
Total Commercial
61,081
-
(1,150)
(499)
2,846
62,278
Construction
1,268
-
(10)
-
-
1,258
Mortgage
17,910
(2,098)
(426)
-
14
15,400
Consumer
 
Credit cards
-
-
1
(1)
-
-
 
Home equity lines of credit
2,439
-
(712)
(143)
269
1,853
 
Personal
22,057
(1,140)
4,191
(4,170)
383
21,321
 
Other
2
-
49
(53)
5
3
Total Consumer
24,498
(1,140)
3,529
(4,367)
657
23,177
Total - Loans
$
104,757
$
(3,238)
$
1,943
$
(4,866)
$
3,517
$
102,113
Allowance for credit losses - unfunded commitments:
Commercial
$
1,175
$
-
$
54
$
-
$
-
$
1,229
Construction
1,184
-
94
-
-
1,278
Consumer
88
-
(26)
-
-
62
Ending balance - unfunded commitments [1]
$
2,447
$
-
$
122
$
-
$
-
$
2,569
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
42
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended March 31, 2023
Popular Inc.
Impact of
Provision for
Allowance for
Beginning
Adopting
credit losses
credit losses -
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
26,311
$
-
$
(947)
$
-
$
-
$
2
$
25,366
Commercial real estate non-owner occupied
71,540
-
(1,677)
-
-
1,987
71,850
Commercial real estate owner occupied
57,081
(1,161)
(2,954)
-
(3)
1,534
54,497
Commercial and industrial
80,444
(552)
12,347
-
(2,106)
2,133
92,266
Total Commercial
235,376
(1,713)
6,769
-
(2,109)
5,656
243,979
Construction
4,246
-
84
-
-
-
4,330
Mortgage
135,254
(35,654)
841
68
(846)
4,814
104,477
Leasing
20,618
(35)
734
-
(1,417)
1,090
20,990
Consumer
 
Credit cards
58,670
-
15,571
-
(8,677)
2,389
67,953
 
Home equity lines of credit
2,542
-
(751)
-
(176)
338
1,953
 
Personal
118,426
(8,160)
15,295
-
(17,750)
1,918
109,729
 
Auto
129,735
(21)
8,319
-
(12,118)
4,914
130,829
 
Other
15,435
-
284
-
(11,060)
221
4,880
Total Consumer
324,808
(8,181)
38,718
-
(49,781)
9,780
315,344
Total - Loans
$
720,302
$
(45,583)
$
47,146
$
68
$
(54,153)
$
21,340
$
689,120
Allowance for credit losses - unfunded commitments:
Commercial
$
5,511
$
-
$
618
$
-
$
-
$
-
$
6,129
Construction
3,206
-
18
-
-
-
3,224
Consumer
88
-
(26)
-
-
-
62
Ending balance - unfunded commitments [1]
$
8,805
$
-
$
610
$
-
$
-
$
-
$
9,415
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
Modifications
A
 
modification
 
constitutes
 
a
 
change
 
in
 
loan
 
terms
 
in
 
the
 
form
 
of
 
principal
 
forgiveness,
 
an
 
interest
 
rate
 
reduction,
 
other
 
than-
insignificant payment delay, term extension or combination of the above made
 
to a borrower experiencing financial difficulty.
The amount of outstanding commitments to lend additional funds to debtors with financial difficulties owing receivables whose terms
have
 
been
 
modified
 
during the
 
quarters
 
ended March
 
31,
 
2024
 
and
 
March
 
31,
 
2023
 
amounted
 
to
 
$
4.2
 
million
 
and
 
$
7.0
 
million,
respectively, related to the commercial loan portfolios.
The following tables show the amortized cost basis of the loans modified to borrowers experiencing financial difficulties at the end of
the reporting period disaggregated by class of financing receivable
 
and type of concession granted for the quarters ended March
 
31,
2024
 
and
 
March
 
31,
 
2023.
 
Loans
 
modified
 
to
 
borrowers
 
under
 
financial
 
difficulties
 
that
 
were
 
fully
 
paid
 
down,
 
charged-off
 
or
foreclosed upon by period end are not reported.
 
 
43
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan Modifications Made to Borrowers Experiencing Financial
 
Difficulty for the quarter ended March 31,2024
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Commercial and industrial
$
387
0.01
%
$
-
-
%
$
387
0.01
%
Consumer:
 
Credit cards
129
0.01
%
-
-
%
129
0.01
%
 
Personal
243
0.01
%
-
-
%
243
0.01
%
Total
$
759
-
%
$
-
-
%
$
759
-
%
Term Extension
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
CRE non-owner occupied
$
36,718
1.23
%
$
-
-
%
$
36,718
0.73
%
CRE owner occupied
16,366
1.15
%
-
-
%
16,366
0.52
%
Commercial and industrial
2,494
0.05
%
-
-
%
2,494
0.04
%
Mortgage
12,979
0.20
%
-
-
%
12,979
0.17
%
Consumer:
 
Personal
199
0.01
%
5
-
%
204
0.01
%
Total
$
68,756
0.28
%
$
5
-
%
$
68,761
0.20
%
Other-Than-Insignificant Payment Delays
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
CRE owner occupied
$
10,312
0.72
%
$
-
-
%
$
10,312
0.33
%
Commercial and industrial
5,920
0.12
%
-
-
%
5,920
0.08
%
Total
$
16,232
0.07
%
$
-
-
%
$
16,232
0.05
%
Combination - Term extension
 
and Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
CRE non-owner occupied
$
891
0.03
%
$
-
-
%
$
891
0.02
%
Commercial and industrial
101
-
%
-
-
%
101
-
%
Mortgage
3,422
0.05
%
38
-
%
3,460
0.04
%
Consumer:
 
Personal
1,056
0.06
%
145
0.10
%
1,201
0.06
%
Total
$
5,470
0.02
%
$
183
-
%
$
5,653
0.02
%
Combination -
 
Other-Than-Insignificant Payment Delays and Interest Rate
 
Reduction
Puerto Rico
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2024
% of total class of
Financing
Receivable
Commercial and industrial
$
16
-
%
$
-
-
%
$
16
-
%
Consumer:
 
Credit cards
315
0.03
%
-
-
%
315
0.03
%
Total
$
331
-
%
$
-
-
%
$
331
-
%
 
44
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan Modifications Made to Borrowers Experiencing Financial
 
Difficulty for the quarter ended March 31,2023
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
Mortgage
$
227
-
%
$
-
-
%
$
227
-
%
Consumer:
 
Credit cards
497
0.05
%
-
-
%
497
0.05
%
 
Personal
172
0.01
%
-
-
%
172
0.01
%
 
Other
3
-
%
-
-
%
3
-
%
Total
$
899
-
%
$
-
-
%
$
899
-
%
Term Extension
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
CRE owner occupied
$
1,754
0.12
%
$
-
-
%
$
1,754
0.06
%
Commercial and industrial
3,705
0.09
%
-
-
%
3,705
0.06
%
Construction
-
-
%
3,518
0.65
%
3,518
0.50
%
Mortgage
14,521
0.24
%
1,853
0.14
%
16,374
0.22
%
Consumer:
 
Personal
26
-
%
54
0.02
%
80
-
%
Total
$
20,006
0.09
%
$
5,425
0.06
%
$
25,431
0.08
%
Other-Than-Insignificant Payment Delays
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
CRE non-owner occupied
$
1,751
0.06
%
$
-
-
%
$
1,751
0.04
%
CRE owner occupied
13,156
0.88
%
13,744
0.90
%
26,900
0.89
%
Commercial and industrial
1,411
0.04
%
864
0.04
%
2,275
0.04
%
Consumer:
 
Other
33
0.03
%
-
-
%
33
0.02
%
Total
$
16,351
0.07
%
$
14,608
0.15
%
$
30,959
0.10
%
Combination - Term extension
 
and Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at March
31,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at March
31,2023
% of total class of
Financing
Receivable
CRE owner occupied
$
101
0.01
%
$
-
-
%
$
101
-
%
Mortgage
10,473
0.17
%
328
0.03
%
10,801
0.15
%
Consumer:
 
Personal
422
0.03
%
-
-
%
422
0.02
%
 
Auto
29
-
%
-
-
%
29
-
%
Total
$
11,025
0.05
%
$
328
-
%
$
11,353
0.04
%
45
The following tables describe the financial effect of the
 
modifications made to borrowers experiencing
 
financial difficulties:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended March 31, 2024
Interest rate reduction
Loan Type
Financial Effect
CRE Non-owner occupied
Reduced weighted-average contractual interest rate from
10.13
% to
8.25
%.
Commercial and industrial
Reduced weighted-average contractual interest rate from
25.53
% to
9.83
%.
Mortgage
Reduced weighted-average contractual interest rate from
5.88
% to
4.5
0%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
21.05
% to
6.23
%.
Personal
Reduced weighted-average contractual interest rate from
18.06
% to
9.68
%.
Term extension
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
1
 
year to the life of loans.
CRE Owner occupied
Added a weighted-average of
6
 
months to the life of loans.
Commercial and industrial
Added a weighted-average of
9
 
months to the life of loans.
Mortgage
Added a weighted-average of
12
 
years to the life of loans.
Consumer:
Personal
Added a weighted-average of
11
 
years to the life of loans.
Other than insignificant payment delay
Loan Type
Financial Effect
CRE Owner occupied
Added a weighted-average of
12
 
months to the life of loans.
Commercial and industrial
Added a weighted-average of
8
 
months to the life of loans.
Consumer:
Credit cards
Added a weighted-average of
23
 
months to the life of loans.
 
46
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended March 31, 2023
Interest rate reduction
Loan Type
Financial Effect
CRE Owner occupied
Reduced weighted-average contractual interest rate from
6.00
% to
5.25
%.
Mortgage
Reduced weighted-average contractual interest rate from
5.69
% to
4.17
%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
17.76
% to
4.47
%.
Personal
Reduced weighted-average contractual interest rate from
16.97
% to
9.11
%.
Auto
Reduced weighted-average contractual interest rate from
12.64
% to
12.62
%.
Other
Reduced weighted-average contractual interest rate from
17.99
% to
0
%.
Term extension
Loan Type
Financial Effect
CRE Owner occupied
Added a weighted-average of
2
 
years to the life of loans.
Commercial and industrial
Added a weighted-average of
5
 
months to the life of loans.
Construction
Added a weighted-average of
6
 
months to the life of loans.
Mortgage
Added a weighted-average of
10
 
years to the life of loans.
Consumer:
Personal
Added a weighted-average of
6
 
years to the life of loans.
Auto
Added a weighted-average of
2
 
years to the life of loans.
Other than insignificant payment delay
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
12
 
months to the life of loans.
CRE Owner occupied
Added a weighted-average of
7
 
months to the life of loans.
Commercial and industrial
Added a weighted-average of
9
 
months to the life of loans.
Consumer:
Other
Added a weighted-average of
11
 
months to the life of loans.
47
The following tables present, by class, the performance of loans that have been modified during the twelve months preceding March
31,
 
2024.
 
The
 
past
 
due
 
90
 
days
 
or
 
more
 
categories
 
includes
 
all
 
loans
 
modified
 
classified
 
as
 
non-accruing
 
at
 
the
 
time
 
of
 
the
modification. These
 
loans will
 
continue in
 
non-accrual status,
 
and presented
 
as past
 
due 90
 
days or
 
more, until
 
the borrower
 
has
demonstrated a willingness and
 
ability to make
 
the restructured loan payments
 
(at least six
 
months of sustained
 
performance after
the modification
 
or one
 
year for
 
loans providing
 
for quarterly
 
or semi-annual
 
payments) and
 
management has
 
concluded that
 
it is
probable that the borrower would not be in payment
 
default in the foreseeable future.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BPPR
 
March 31, 2024
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
Commercial multi-family
$
-
$
-
$
65
$
65
$
-
$
65
$
-
$
65
CRE non-owner occupied
179
3,278
2,918
6,375
60,491
66,866
-
2,918
CRE owner occupied
811
-
1,969
2,780
189,327
192,107
537
1,432
Commercial and industrial
626
-
16,492
17,118
32,511
49,629
2,774
13,718
Mortgage
5,970
3,954
23,151
33,075
49,225
82,300
3,525
19,626
Consumer:
 
Credit cards
126
31
223
380
1,017
1,397
159
64
 
Personal
42
105
1,058
1,205
3,071
4,276
51
1,007
 
Auto
-
-
13
13
71
84
-
13
 
Other
-
-
-
-
3
3
-
-
Total
$
7,754
$
7,368
$
45,889
$
61,011
$
335,716
$
396,727
$
7,046
$
38,843
[1] Loans that were in non-accrual status at the time
 
of modification are presented as past due until the borrower
 
has demonstrated a willingness and ability
to make the restructured loan payments. Payment default
 
is defined as a restructured loan becoming 90 days past
 
due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment
 
as of period end is inclusive of all partial paydowns
 
and charge-offs since the modification
date. Loans modified with financial difficulty that
 
were fully paid down, charged-off or foreclosed upon
 
by period end are not reported.
Popular U.S.
 
March 31, 2024
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE owner occupied
$
-
$
-
$
-
$
-
$
57,550
$
57,550
$
-
$
-
Mortgage
-
-
324
324
3,403
3,727
-
324
Consumer:
 
Personal
-
-
160
160
124
284
-
160
Total
$
-
$
-
$
484
$
484
$
61,077
$
61,561
$
-
$
484
[1] Loans that were in non-accrual status at the time
 
of modification are presented as past due until the borrower
 
has demonstrated a willingness and ability
to make the restructured loan payments. Payment default
 
is defined as a restructured loan becoming 90 days past
 
due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment
 
as of period end is inclusive of all partial paydowns
 
and charge-offs since the modification
date. Loans modified with financial difficulty that
 
were fully paid down, charged-off or foreclosed upon
 
by period end are not reported.
48
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Popular Inc.
 
March 31, 2024
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
Commercial multi-family
$
-
$
-
$
65
$
65
$
-
$
65
$
-
$
65
CRE non-owner occupied
179
3,278
2,918
6,375
60,491
66,866
-
2,918
CRE owner occupied
811
-
1,969
2,780
246,877
249,657
537
1,432
Commercial and industrial
626
-
16,492
17,118
32,511
49,629
2,774
13,718
Mortgage
5,970
3,954
23,475
33,399
52,628
86,027
3,525
19,950
Consumer:
 
Credit cards
126
31
223
380
1,017
1,397
159
64
 
Personal
42
105
1,218
1,365
3,195
4,560
51
1,167
 
Auto
-
-
13
13
71
84
-
13
 
Other
-
-
-
-
3
3
-
-
Total
$
7,754
$
7,368
$
46,373
$
61,495
$
396,793
$
458,288
$
7,046
$
39,327
[1] Loans that were in non-accrual status at the time
 
of modification are presented as past due until the borrower
 
has demonstrated a willingness and ability
to make the restructured loan payments.
 
Payment default is defined as a restructured loan becoming
 
90 days past due after being modified, foreclosed
 
or
charged-off, whichever occurs first. The recorded inve
 
stment as of period end is inclusive of all partial
 
paydowns and charge-offs since the modification
date. Loans modified with financial difficulty that
 
were fully paid down, charged-off or foreclosed upon
 
by period end are not reported.
49
The following tables present, by class, the performance
 
of loans that have been modified during the quarter
 
ended March 31, 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BPPR
 
March 31, 2023
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE non-owner occupied
$
-
$
-
$
-
$
-
$
1,751
$
1,751
$
-
$
-
CRE owner occupied
-
-
1,803
1,803
13,208
15,011
209
1,594
Commercial and industrial
-
-
142
142
4,974
5,116
28
114
Mortgage
1,202
180
7,518
8,900
16,321
25,221
-
7,518
Consumer:
 
Credit cards
21
46
96
163
334
497
96
-
 
Personal
6
-
232
238
382
620
-
232
 
Auto
-
-
-
-
29
29
-
-
 
Other
-
-
33
33
3
36
-
33
Total
$
1,229
$
226
$
9,824
$
11,279
$
37,002
$
48,281
$
333
$
9,491
[1] Loans that were in non-accrual status at the time
 
of modification are presented as past due until the borrower
 
has demonstrated a willingness and ability
to make the restructured loan payments. Payment default
 
is defined as a restructured loan becoming 90 days past
 
due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment
 
as of period end is inclusive of all partial paydowns
 
and charge-offs since the modification
date. Loans modified with financial difficulty that
 
were fully paid down, charged-off or foreclosed upon
 
by period end are not reported.
Popular U.S.
 
March 31, 2023
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE owner occupied
$
-
$
-
$
-
$
-
$
13,744
$
13,744
$
-
$
-
Commercial and industrial
-
-
-
-
864
864
-
-
Construction
-
-
-
-
3,518
3,518
-
-
Mortgage
-
-
104
104
2,077
2,181
-
104
Consumer:
 
Personal
-
-
54
54
-
54
-
54
Total
$
-
$
-
$
158
$
158
$
20,203
$
20,361
$
-
$
158
[1] Loans that were in non-accrual status at the time
 
of modification are presented as past due until the borrower
 
has demonstrated a willingness and ability
to make the restructured loan payments. Payment default
 
is defined as a restructured loan becoming 90 days past
 
due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment
 
as of period end is inclusive of all partial paydowns
 
and charge-offs since the modification
date. Loans modified with financial difficulty that
 
were fully paid down, charged-off or foreclosed upon
 
by period end are not reported.
50
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Popular Inc.
 
March 31, 2023
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE non-owner occupied
$
-
$
-
$
-
$
-
$
1,751
$
1,751
$
-
$
-
CRE owner occupied
-
-
1,803
1,803
26,952
28,755
209
1,594
Commercial and industrial
-
-
142
142
5,838
5,980
28
114
Construction
-
-
-
-
3,518
3,518
-
-
Mortgage
1,202
180
7,622
9,004
18,398
27,402
-
7,622
Consumer:
 
Credit cards
21
46
96
163
334
497
96
-
 
Personal
6
-
286
292
382
674
-
286
 
Auto
-
-
-
-
29
29
-
-
 
Other
-
-
33
33
3
36
-
33
Total
$
1,229
$
226
$
9,982
$
11,437
$
57,205
$
68,642
$
333
$
9,649
[1] Loans that were in non-accrual status at the time
 
of modification are presented as past due until the borrower
 
has demonstrated a willingness and ability
to make the restructured loan payments.
 
Payment default is defined as a restructured loan becoming
 
90 days past due after being modified, foreclosed
 
or
charged-off, whichever occurs first. The recorded inve
 
stment as of period end is inclusive of all partial
 
paydowns and charge-offs since the modification
date. Loans modified with financial difficulty that
 
were fully paid down, charged-off or foreclosed upon
 
by period end are not reported.
Payment
 
default
 
is
 
defined
 
as
 
a
 
restructured
 
loan
 
becoming
 
90
 
days
 
past
 
due
 
after
 
being
 
modified,
 
foreclosed
 
or
 
charged-off,
whichever occurs
 
first. During
 
the quarter
 
ended March
 
31,2024, the
 
outstanding balance
 
of
 
loans modified
 
for borrowers
 
under
financial difficulties that were subject to payment default and that had been modified during the
 
twelve months preceding the default
date was $
21
 
million. The amount was not considered material
 
for the quarter ended March 31, 2023.
For the quarter ended March 31,2024, extension of maturity and the combination of interest rate reduction and extension of maturity
amounted
 
to
 
$
20
 
million
 
and
 
$
1
 
million,
 
respectively,
 
of
 
the
 
outstanding balance
 
of
 
loans modified
 
for borrowers
 
under financial
difficulties that were subject to payment default during
 
the year preceding the default date.
 
Credit Quality
The risk
 
rating system
 
provides for
 
the assignment
 
of ratings
 
at the
 
obligor level
 
based on
 
the financial
 
condition of
 
the borrower.
The
 
risk rating
 
analysis process
 
is
 
performed at
 
least
 
once a
 
year
 
or more
 
frequently if
 
events or
 
conditions change
 
which may
deteriorate the credit quality.
 
In the case of
 
consumer and mortgage loans, these
 
loans are classified considering their
 
delinquency
status at the end of the reporting period.
The following tables present the amortized cost basis, net of unearned income, of
 
loans held-in-portfolio based on the Corporation’s
assignment
 
of
 
obligor
 
risk
 
ratings
 
as
 
defined
 
at
 
March
 
31,
 
2024
 
and
 
December
 
31,
 
2023
 
and
 
the
 
gross
 
write-offs
 
recorded
 
by
vintage year. For
 
the definitions of the obligor risk ratings,
 
refer to the Credit Quality section of
 
Note 9 to the Consolidated Financial
Statements included in the 2023 Form 10-K:
 
 
 
 
51
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
 
Years
Total
BPPR
Commercial:
Commercial multi-family
Pass
$
41,585
$
37,808
$
138,013
$
21,271
$
20,401
$
28,387
$
-
$
-
$
287,465
Watch
-
-
-
-
-
6,112
-
-
6,112
Special Mention
-
-
554
-
-
4,743
-
-
5,297
Substandard
-
-
-
-
-
4,777
-
-
4,777
Total commercial
multi-family
$
41,585
$
37,808
$
138,567
$
21,271
$
20,401
$
44,019
$
-
$
-
$
303,651
Commercial real estate non-owner occupied
Pass
$
24,000
$
308,584
$
854,075
$
558,216
$
356,421
$
594,172
$
3,896
$
-
$
2,699,364
Watch
-
2,590
727
5,144
21,840
39,832
-
-
70,133
Special Mention
-
42,111
6,879
24,626
-
73,034
-
-
146,650
Substandard
-
1,011
1,260
179
2,164
71,074
4,650
-
80,338
Total commercial
real estate non-
owner occupied
$
24,000
$
354,296
$
862,941
$
588,165
$
380,425
$
778,112
$
8,546
$
-
$
2,996,485
Commercial real estate owner occupied
Pass
$
56,699
$
94,564
$
154,134
$
224,909
$
49,919
$
369,657
$
8,083
$
-
$
957,965
Watch
249
1,965
44,450
9,048
4,556
61,509
1,003
-
122,780
Special Mention
-
942
21,683
20,611
1,101
41,356
-
-
85,693
Substandard
161
1,238
15,848
4,962
142,903
80,416
14,017
-
259,545
Doubtful
-
-
-
-
-
109
-
-
109
Total commercial
real estate owner
occupied
$
57,109
$
98,709
$
236,115
$
259,530
$
198,479
$
553,047
$
23,103
$
-
$
1,426,092
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
2,785
$
-
$
-
$
2,785
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
Pass
$
142,966
$
975,917
$
627,072
$
339,891
$
236,641
$
368,158
$
1,202,822
$
-
$
3,893,467
Watch
4,012
66,951
55,844
162,005
3,730
77,782
216,159
-
586,483
Special Mention
423
5,472
36,829
260
2,867
41,837
73,721
-
161,409
Substandard
418
1,051
2,182
8,570
15,962
31,756
43,282
-
103,221
Doubtful
-
-
-
-
54
32
-
-
86
Loss
-
-
-
-
-
-
457
-
457
Total commercial
and industrial
$
147,819
$
1,049,391
$
721,927
$
510,726
$
259,254
$
519,565
$
1,536,441
$
-
$
4,745,123
Year-to-Date gross
write-offs
$
124
$
-
$
58
$
-
$
24
$
5,131
$
1,332
$
-
$
6,669
Construction
Pass
$
-
$
29,488
$
24,618
$
19,243
$
10,696
$
1,766
$
37,970
$
-
$
123,781
Watch
-
-
17,187
11,801
-
-
$
8,917
-
37,905
Special Mention
-
-
-
1,038
-
-
-
-
1,038
Total construction
$
-
$
29,488
$
41,805
$
32,082
$
10,696
$
1,766
$
46,887
$
-
$
162,724
Mortgage
Pass
$
192,679
$
759,057
$
432,327
$
415,791
$
255,350
$
4,355,912
$
-
$
-
$
6,411,116
Substandard
-
1,181
319
379
350
70,206
-
-
72,435
Total mortgage
$
192,679
$
760,238
$
432,646
$
416,170
$
255,700
$
4,426,118
$
-
$
-
$
6,483,551
Year-to-Date gross
write-offs
$
-
 
$
-
 
$
-
 
$
-
 
$
-
 
$
765
$
-
$
-
$
765
 
52
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
 
Years
Total
BPPR
Leasing
Pass
$
210,843
$
570,183
$
456,718
$
287,444
$
148,154
$
84,804
$
-
$
-
$
1,758,146
Substandard
-
902
1,980
2,580
578
1,129
-
-
7,169
Loss
-
81
-
-
-
17
-
-
98
Total leasing
$
210,843
$
571,166
$
458,698
$
290,024
$
148,732
$
85,950
$
-
$
-
$
1,765,413
Year-to-Date gross
write-offs
$
42
$
1,071
$
1,966
$
1,082
$
238
$
451
$
-
$
-
$
4,850
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
1,118,278
$
-
$
1,118,278
Substandard
-
-
-
-
-
-
23,837
-
23,837
Loss
-
-
-
-
-
-
21
-
21
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,142,136
$
-
$
1,142,136
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
16,396
$
-
$
16,396
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
2,562
$
-
$
2,562
Substandard
-
-
-
-
-
-
7
-
7
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
-
$
2,569
$
-
$
2,569
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
197
$
-
$
197
Personal
Pass
$
200,218
$
745,798
$
417,333
$
158,860
$
48,662
$
134,930
$
-
$
21,077
$
1,726,878
Substandard
-
2,864
4,243
1,551
472
9,452
-
1,033
19,615
Total Personal
$
200,218
$
748,662
$
421,576
$
160,411
$
49,134
$
144,382
$
-
$
22,110
$
1,746,493
Year-to-Date gross
write-offs
$
-
$
6,810
$
11,488
$
3,295
$
880
$
1,403
$
-
$
473
$
24,349
Auto
Pass
$
342,983
$
1,145,262
$
840,316
$
654,624
$
366,598
$
307,952
$
-
$
-
$
3,657,735
Substandard
119
9,989
12,762
10,704
7,415
8,008
-
-
48,997
Loss
-
68
27
19
-
8
-
-
122
Total Auto
$
343,102
$
1,155,319
$
853,105
$
665,347
$
374,013
$
315,968
$
-
$
-
$
3,706,854
Year-to-Date gross
write-offs
$
114
$
9,028
$
5,738
$
3,008
$
1,521
$
758
$
-
$
-
$
20,167
Other consumer
Pass
$
8,302
$
35,338
$
22,941
$
13,787
$
5,252
$
5,716
$
61,379
$
-
$
152,715
Substandard
-
244
24
-
44
81
307
-
700
Loss
-
-
-
-
-
263
-
-
263
Total Other
consumer
$
8,302
$
35,582
$
22,965
$
13,787
$
5,296
$
6,060
$
61,686
$
-
$
153,678
Year-to-Date gross
write-offs
$
-
$
34
$
50
$
29
$
93
$
458
$
-
$
-
$
664
Total BPPR
$
1,225,657
$
4,840,659
$
4,190,345
$
2,957,513
$
1,702,130
$
6,874,987
$
2,821,368
$
22,110
$
24,634,769
 
 
 
 
53
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular U.S.
Commercial:
Commercial multi-family
Pass
$
34
$
165,837
$
436,312
$
341,089
$
165,978
$
592,171
$
5,334
$
-
$
1,706,755
Watch
-
-
101,958
19,914
67,303
149,375
-
-
338,550
Special Mention
-
-
-
858
-
2,192
-
-
3,050
Substandard
-
-
-
-
-
32,629
-
-
32,629
Total commercial
multi-family
$
34
$
165,837
$
538,270
$
361,861
$
233,281
$
776,367
$
5,334
$
-
$
2,080,984
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
441
$
-
$
-
$
441
Commercial real estate non-owner occupied
Pass
$
6,741
$
396,376
$
493,557
$
168,986
$
214,339
$
503,436
$
11,254
$
-
$
1,794,689
Watch
-
-
17,023
33,260
29,093
94,339
-
-
173,715
Special Mention
-
-
-
2,406
-
64,664
-
-
67,070
Substandard
-
-
2,708
2,790
7,995
11,607
-
-
25,100
Total commercial
real estate non-
owner occupied
$
6,741
$
396,376
$
513,288
$
207,442
$
251,427
$
674,046
$
11,254
$
-
$
2,060,574
Commercial real estate owner occupied
Pass
$
36,651
$
302,989
$
245,911
$
225,998
$
57,688
$
250,846
$
4,951
$
-
$
1,125,034
Watch
-
-
38,795
27,687
51,281
102,480
3,972
-
224,215
Special Mention
-
-
34,633
131,309
4,922
11,152
-
-
182,016
Substandard
-
-
28,593
2,413
-
129,481
-
-
160,487
Total commercial
real estate owner
occupied
$
36,651
$
302,989
$
347,932
$
387,407
$
113,891
$
493,959
$
8,923
$
-
$
1,691,752
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
Pass
$
41,163
$
218,204
$
301,833
$
337,350
$
249,043
$
511,963
$
310,873
$
-
$
1,970,429
Watch
25
184
39,927
46,133
57,607
112,073
20,338
-
276,287
Special Mention
-
196
6,065
902
21
433
14,865
-
22,482
Substandard
914
1,057
427
132
2,779
2,214
3,639
-
11,162
Total commercial
and industrial
$
42,102
$
219,641
$
348,252
$
384,517
$
309,450
$
626,683
$
349,715
$
-
$
2,280,360
Year-to-Date gross
write-offs
$
-
$
-
$
190
$
272
$
5
$
44
$
53
$
-
$
564
Construction
Pass
$
17,234
$
348,577
$
230,756
$
82,615
$
-
$
38,754
$
15,733
$
-
$
733,669
Watch
-
-
31,690
14,210
-
8,118
-
-
54,018
Special Mention
-
2,168
13,466
-
-
-
-
-
15,634
Substandard
-
-
-
8,825
-
-
34,433
-
43,258
Total construction
$
17,234
$
350,745
$
275,912
$
105,650
$
-
$
46,872
$
50,166
$
-
$
846,579
Mortgage
Pass
$
23,480
$
93,943
$
225,010
$
283,981
$
230,999
$
414,626
$
-
$
-
$
1,272,039
Substandard
-
-
235
-
645
27,192
-
-
28,072
Total mortgage
$
23,480
$
93,943
$
225,245
$
283,981
$
231,644
$
441,818
$
-
$
-
$
1,300,111
 
54
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular U.S.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
17
$
-
$
17
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
17
$
-
$
17
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
6,878
$
40,955
$
12,329
$
60,162
Substandard
-
-
-
-
-
1,816
-
1,280
3,096
Loss
-
-
-
-
-
99
-
791
890
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
8,793
$
40,955
$
14,400
$
64,148
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
7
$
-
$
-
$
7
Personal
Pass
$
8,545
$
36,778
$
78,649
$
18,867
$
2,167
$
3,441
$
-
$
-
$
148,447
Substandard
-
506
956
201
40
366
-
-
2,069
Loss
-
-
-
-
-
1
-
-
1
Total Personal
$
8,545
$
37,284
$
79,605
$
19,068
$
2,207
$
3,808
$
-
$
-
$
150,517
Year-to-Date gross
write-offs
$
-
$
545
$
3,701
$
873
$
62
$
531
$
-
$
-
$
5,712
Other consumer
Pass
$
18
$
-
$
-
$
-
$
-
$
-
$
8,908
$
-
$
8,926
Loss
-
-
-
-
-
-
1
-
1
Total Other
consumer
$
18
$
-
$
-
$
-
$
-
$
-
$
8,909
$
-
$
8,927
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
31
$
-
$
31
Total Popular U.S.
$
134,805
$
1,566,815
$
2,328,504
$
1,749,926
$
1,141,900
$
3,072,346
$
475,273
$
14,400
$
10,483,969
 
55
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular, Inc.
Commercial:
Commercial multi-family
Pass
$
41,619
$
203,645
$
574,325
$
362,360
$
186,379
$
620,558
$
5,334
$
-
$
1,994,220
Watch
-
-
101,958
19,914
67,303
155,487
-
-
344,662
Special Mention
-
-
554
858
-
6,935
-
-
8,347
Substandard
-
-
-
-
-
37,406
-
-
37,406
Total commercial
multi-family
$
41,619
$
203,645
$
676,837
$
383,132
$
253,682
$
820,386
$
5,334
$
-
$
2,384,635
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
441
$
-
$
-
$
441
Commercial real estate non-owner occupied
Pass
$
30,741
$
704,960
$
1,347,632
$
727,202
$
570,760
$
1,097,608
$
15,150
$
-
$
4,494,053
Watch
-
2,590
17,750
38,404
50,933
134,171
-
-
243,848
Special Mention
-
42,111
6,879
27,032
-
137,698
-
-
213,720
Substandard
-
1,011
3,968
2,969
10,159
82,681
4,650
-
105,438
Total commercial
real estate non-
owner occupied
$
30,741
$
750,672
$
1,376,229
$
795,607
$
631,852
$
1,452,158
$
19,800
$
-
$
5,057,059
Commercial real estate owner occupied
Pass
$
93,350
$
397,553
$
400,045
$
450,907
$
107,607
$
620,503
$
13,034
$
-
$
2,082,999
Watch
249
1,965
83,245
36,735
55,837
163,989
4,975
-
346,995
Special Mention
-
942
56,316
151,920
6,023
52,508
-
-
267,709
Substandard
161
1,238
44,441
7,375
142,903
209,897
14,017
-
420,032
Doubtful
-
-
-
-
-
109
-
-
109
Total commercial
real estate owner
occupied
$
93,760
$
401,698
$
584,047
$
646,937
$
312,370
$
1,047,006
$
32,026
$
-
$
3,117,844
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
2,785
$
-
$
-
$
2,785
Commercial and industrial
Pass
$
184,129
$
1,194,121
$
928,905
$
677,241
$
485,684
$
880,121
$
1,513,695
$
-
$
5,863,896
Watch
4,037
67,135
95,771
$
208,138
$
61,337
$
189,855
$
236,497
$
-
$
862,770
Special Mention
423
5,668
42,894
1,162
2,888
42,270
88,586
-
183,891
Substandard
1,332
2,108
2,609
8,702
18,741
33,970
46,921
-
114,383
Doubtful
-
-
-
-
54
32
-
-
86
Loss
-
-
-
-
-
-
457
-
457
Total commercial
and industrial
$
189,921
$
1,269,032
$
1,070,179
$
895,243
$
568,704
$
1,146,248
$
1,886,156
$
-
$
7,025,483
Year-to-Date gross
write-offs
$
124
$
-
$
248
$
272
$
29
$
5,175
$
1,385
$
-
$
7,233
 
56
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular, Inc.
Construction
Pass
$
17,234
$
378,065
$
255,374
$
101,858
$
10,696
$
40,520
$
53,703
$
-
$
857,450
Watch
-
-
48,877
26,011
-
8,118
8,917
-
91,923
Special Mention
-
2,168
13,466
1,038
-
-
-
-
16,672
Substandard
-
-
-
8,825
-
-
34,433
-
43,258
Total construction
$
17,234
$
380,233
$
317,717
$
137,732
$
10,696
$
48,638
$
97,053
$
-
$
1,009,303
Mortgage
Pass
$
216,159
$
853,000
$
657,337
$
699,772
$
486,349
$
4,770,538
$
-
$
-
$
7,683,155
Substandard
-
1,181
554
379
995
97,398
-
-
100,507
Total mortgage
$
216,159
$
854,181
$
657,891
$
700,151
$
487,344
$
4,867,936
$
-
$
-
$
7,783,662
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
765
$
-
$
-
$
765
Leasing
Pass
$
210,843
$
570,183
$
456,718
$
287,444
$
148,154
$
84,804
$
-
$
-
$
1,758,146
Substandard
-
902
1,980
2,580
578
1,129
-
-
7,169
Loss
-
81
-
-
-
17
-
-
98
Total leasing
$
210,843
$
571,166
$
458,698
$
290,024
$
148,732
$
85,950
$
-
$
-
$
1,765,413
Year-to-Date gross
write-offs
$
42
$
1,071
$
1,966
$
1,082
$
238
$
451
$
-
$
-
$
4,850
 
57
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular, Inc.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
1,118,295
$
-
$
1,118,295
Substandard
-
-
-
-
-
-
23,837
-
23,837
Loss
-
-
-
-
-
-
21
-
21
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,142,153
$
-
$
1,142,153
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
16,396
$
-
$
16,396
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
6,878
$
43,517
$
12,329
$
62,724
Substandard
-
-
-
-
-
1,816
7
1,280
3,103
Loss
-
-
-
-
-
99
-
791
890
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
8,793
$
43,524
$
14,400
$
66,717
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
7
$
197
$
-
$
204
Personal
Pass
$
208,763
$
782,576
$
495,982
$
177,727
$
50,829
$
138,371
$
-
$
21,077
$
1,875,325
Substandard
-
3,370
5,199
1,752
512
9,818
-
1,033
21,684
Loss
-
-
-
-
-
1
-
-
1
Total Personal
$
208,763
$
785,946
$
501,181
$
179,479
$
51,341
$
148,190
$
-
$
22,110
$
1,897,010
Year-to-Date gross
write-offs
$
-
$
7,355
$
15,189
$
4,168
$
942
$
1,934
$
-
$
473
$
30,061
Auto
Pass
$
342,983
$
1,145,262
$
840,316
$
654,624
$
366,598
$
307,952
$
-
$
-
$
3,657,735
Substandard
119
9,989
12,762
10,704
7,415
8,008
-
-
48,997
Loss
-
68
27
19
-
8
-
-
122
Total Auto
$
343,102
$
1,155,319
$
853,105
$
665,347
$
374,013
$
315,968
$
-
$
-
$
3,706,854
Year-to-Date gross
write-offs
$
114
$
9,028
$
5,738
$
3,008
$
1,521
$
758
$
-
$
-
$
20,167
Other consumer
Pass
$
8,320
$
35,338
$
22,941
$
13,787
$
5,252
$
5,716
$
70,287
$
-
$
161,641
Substandard
-
244
24
-
44
81
307
-
700
Loss
-
-
-
-
-
263
1
-
264
Total Other
consumer
$
8,320
$
35,582
$
22,965
$
13,787
$
5,296
$
6,060
$
70,595
$
-
$
162,605
Year-to-Date gross
write-offs
$
-
$
34
$
50
$
29
$
93
$
458
$
31
$
-
$
695
Total Popular Inc.
$
1,360,462
$
6,407,474
$
6,518,849
$
4,707,439
$
2,844,030
$
9,947,333
$
3,296,641
$
36,510
$
35,118,738
 
 
 
 
58
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
 
Years
Total
BPPR
Commercial:
Commercial multi-family
Pass
$
37,976
$
138,619
$
21,334
$
20,487
$
32,554
$
24,248
$
306
$
-
$
275,524
Watch
-
-
-
-
1,068
5,179
-
-
6,247
Special Mention
-
559
-
-
-
4,780
-
-
5,339
Substandard
-
-
-
-
-
4,832
-
-
4,832
Total commercial
multi-family
$
37,976
$
139,178
$
21,334
$
20,487
$
33,622
$
39,039
$
306
$
-
$
291,942
Commercial real estate non-owner occupied
Pass
$
305,243
$
871,191
$
560,785
$
359,853
$
41,262
$
563,794
$
7,042
$
-
$
2,709,170
Watch
1,959
882
5,205
22,211
5,938
27,015
-
-
63,210
Special Mention
43,020
5,413
24,730
-
15,843
68,368
-
-
157,374
Substandard
1,016
1,307
180
2,231
53,729
12,968
4,069
-
75,500
Total commercial
real estate non-
owner occupied
$
351,238
$
878,793
$
590,900
$
384,295
$
116,772
$
672,145
$
11,111
$
-
$
3,005,254
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
609
$
-
$
521
$
-
$
-
$
1,130
Commercial real estate owner occupied
Pass
$
92,234
$
155,819
$
227,246
$
51,038
$
24,184
$
357,429
$
9,146
$
-
$
917,096
Watch
2,947
45,106
9,913
4,285
5,017
62,217
1,000
-
130,485
Special Mention
-
16,860
20,741
1,462
887
44,069
-
-
84,019
Substandard
1,316
15,710
5,080
143,696
845
87,383
12,617
-
266,647
Doubtful
-
-
-
-
-
136
-
-
136
Total commercial
real estate owner
occupied
$
96,497
$
233,495
$
262,980
$
200,481
$
30,933
$
551,234
$
22,763
$
-
$
1,398,383
Year-to-Date gross
write-offs
$
-
$
4
$
-
$
-
$
1
$
4,432
$
-
$
-
$
4,437
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
Pass
$
1,109,898
$
634,401
$
511,912
$
241,452
$
123,458
$
258,872
$
1,343,885
$
-
$
4,223,878
Watch
28,841
95,785
6,111
4,043
15,560
65,360
182,756
-
398,456
Special Mention
6,401
3,269
276
3,200
2,088
41,289
9,410
-
65,933
Substandard
731
1,760
8,644
22,065
1,922
32,087
40,670
-
107,879
Doubtful
-
-
-
54
-
26
-
-
80
Total commercial
and industrial
$
1,145,871
$
735,215
$
526,943
$
270,814
$
143,028
$
397,634
$
1,576,721
$
-
$
4,796,226
Year-to-Date gross
write-offs
$
896
$
184
$
215
$
335
$
555
$
1,086
$
4,468
$
-
$
7,739
Construction
Pass
$
26,662
$
24,462
$
27,364
$
10,758
$
1,944
$
1,049
$
38,720
$
-
$
130,959
Watch
-
16,546
5,458
-
-
-
9,506
-
31,510
Special Mention
-
-
1,009
-
-
-
1
-
1,010
Substandard
-
6,378
-
-
-
-
-
-
6,378
Total construction
$
26,662
$
47,386
$
33,831
$
10,758
$
1,944
$
1,049
$
48,227
$
-
$
169,857
Year-to-Date gross
write-offs
$
-
 
$
2,611
$
-
 
$
-
 
$
-
 
$
-
 
$
-
 
$
-
 
$
2,611
Mortgage
Pass
$
751,532
$
439,373
$
421,297
$
259,412
$
164,438
$
4,280,509
$
-
$
-
$
6,316,561
Substandard
$
96
$
161
$
162
$
345
$
2,606
$
71,893
$
-
$
-
$
75,263
Total mortgage
$
751,628
$
439,534
$
421,459
$
259,757
$
167,044
$
4,352,402
$
-
$
-
$
6,391,824
Year-to-Date gross
write-offs
$
-
 
$
-
 
$
-
 
$
-
 
$
-
 
$
1,638
$
-
$
-
$
1,638
 
59
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
 
Years
Total
BPPR
Leasing
Pass
$
647,659
$
488,506
$
313,133
$
163,189
$
88,983
$
21,706
$
-
$
-
$
1,723,176
Substandard
806
2,516
3,053
906
818
517
-
-
8,616
Loss
-
-
-
-
-
17
-
-
17
Total leasing
$
648,465
$
491,022
$
316,186
$
164,095
$
89,801
$
22,240
$
-
$
-
$
1,731,809
Year-to-Date gross
write-offs
$
1,065
$
4,424
$
2,878
$
849
$
976
$
687
$
-
$
-
$
10,879
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
1,112,447
$
-
$
1,112,447
Substandard
-
-
-
-
-
-
23,259
-
23,259
Loss
-
-
-
-
-
-
22
-
22
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,135,728
$
-
$
1,135,728
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
41,007
$
-
$
41,007
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
2,622
$
-
$
2,622
Substandard
-
-
-
-
-
-
26
-
26
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
-
$
2,648
$
-
$
2,648
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
213
$
-
$
213
Personal
Pass
$
859,434
$
480,771
$
181,483
$
57,227
$
58,849
$
96,956
$
-
$
22,034
$
1,756,754
Substandard
1,815
4,985
1,939
493
933
8,322
-
1,006
19,493
Loss
-
-
14
-
12
37
-
-
63
Total Personal
$
861,249
$
485,756
$
183,436
$
57,720
$
59,794
$
105,315
$
-
$
23,040
$
1,776,310
Year-to-Date gross
write-offs
$
4,458
$
35,915
$
18,076
$
4,210
$
4,891
$
2,952
$
-
$
1,475
$
71,977
Auto
Pass
$
1,210,622
$
899,797
$
711,439
$
405,768
$
260,355
$
120,318
$
-
$
-
$
3,608,299
Substandard
6,980
14,049
11,916
9,157
7,051
3,199
-
-
52,352
Loss
9
44
45
16
9
6
-
-
129
Total Auto
$
1,217,611
$
913,890
$
723,400
$
414,941
$
267,415
$
123,523
$
-
$
-
$
3,660,780
Year-to-Date gross
write-offs
$
10,170
$
23,849
$
11,820
$
5,914
$
3,553
$
-
$
-
$
-
$
55,306
Other consumer
Pass
$
36,144
$
24,238
$
14,942
$
5,618
$
3,433
$
2,753
$
61,796
$
-
$
148,924
Substandard
244
25
-
73
16
131
249
-
738
Loss
-
-
137
-
-
363
-
-
500
Total Other
consumer
$
36,388
$
24,263
$
15,079
$
5,691
$
3,449
$
3,247
$
62,045
$
-
$
150,162
Year-to-Date gross
write-offs
$
47
$
154
$
125
$
164
$
88
$
11,876
$
-
$
-
$
12,454
Total BPPR
$
5,173,585
$
4,388,532
$
3,095,548
$
1,789,039
$
913,802
$
6,267,828
$
2,859,549
$
23,040
$
24,510,923
 
60
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular U.S.
Commercial:
Commercial multi-family
Pass
$
166,410
$
417,169
$
326,047
$
164,887
$
182,528
$
410,836
$
5,112
$
-
$
1,672,989
Watch
-
116,794
39,319
71,237
93,239
98,365
-
-
418,954
Special Mention
-
-
862
1,171
-
3,377
-
-
5,410
Substandard
-
-
-
-
5,545
20,780
-
-
26,325
Total commercial
multi-family
$
166,410
$
533,963
$
366,228
$
237,295
$
281,312
$
533,358
$
5,112
$
-
$
2,123,678
Commercial real estate non-owner occupied
Pass
$
396,712
$
490,316
$
170,074
$
201,225
$
86,595
$
394,455
$
6,086
$
-
$
1,745,463
Watch
-
39,721
38,713
43,705
39,908
91,922
4,557
-
258,526
Special Mention
-
-
-
-
1,327
63,365
-
-
64,692
Substandard
-
-
-
8,054
1,702
3,730
-
-
13,486
Total commercial
real estate non-
owner occupied
$
396,712
$
530,037
$
208,787
$
252,984
$
129,532
$
553,472
$
10,643
$
-
$
2,082,167
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
193
$
-
$
-
$
193
Commercial real estate owner occupied
Pass
$
303,202
$
278,380
$
226,289
$
58,505
$
47,083
$
204,888
$
9,753
$
-
$
1,128,100
Watch
-
69,894
84,218
53,066
14,057
98,502
1,905
-
321,642
Special Mention
-
-
77,912
4,955
6,074
11,224
-
-
100,165
Substandard
-
477
2,430
-
21,763
107,675
-
-
132,345
Total commercial
real estate owner
occupied
$
303,202
$
348,751
$
390,849
$
116,526
$
88,977
$
422,289
$
11,658
$
-
$
1,682,252
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
1,395
$
-
$
-
$
1,395
 
61
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular U.S.
Commercial and industrial
Pass
$
196,959
$
278,238
$
346,428
$
268,835
$
148,502
$
379,635
$
414,883
$
-
$
2,033,480
Watch
198
37,022
47,299
44,939
23,493
93,299
32,497
-
278,747
Special Mention
208
889
1,021
30
151
39
8,674
-
11,012
Substandard
636
628
152
1,152
730
1,841
1,517
-
6,656
Total commercial
and industrial
$
198,001
$
316,777
$
394,900
$
314,956
$
172,876
$
474,814
$
457,571
$
-
$
2,329,895
Year-to-Date gross
write-offs
$
247
$
221
$
1,994
$
44
$
1,320
$
-
$
49
$
-
$
3,875
Construction
Pass
$
280,188
$
251,627
$
89,450
$
14,733
$
25,254
$
-
$
-
$
-
$
661,252
Watch
-
22,867
12,869
-
21,896
782
-
-
58,414
Special Mention
2,120
13,151
-
-
-
-
-
-
15,271
Substandard
-
1
13,997
3,895
-
36,593
-
-
54,486
Total construction
$
282,308
$
287,646
$
116,316
$
18,628
$
47,150
$
37,375
$
-
$
-
$
789,423
Mortgage
Pass
$
99,296
$
229,720
$
288,767
$
233,805
$
177,245
$
264,069
$
-
$
-
$
1,292,902
Substandard
-
235
-
646
2,102
8,208
-
-
11,191
Total mortgage
$
99,296
$
229,955
$
288,767
$
234,451
$
179,347
$
272,277
$
-
$
-
$
1,304,093
 
62
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular U.S.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
19
$
-
$
19
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
19
$
-
$
19
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
1
$
-
$
1
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
7,394
$
39,925
$
12,253
$
59,572
Substandard
-
-
-
-
-
1,849
-
966
2,815
Loss
-
-
-
-
-
99
-
819
918
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
9,342
$
39,925
$
14,038
$
63,305
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
471
$
-
$
-
$
471
Personal
Pass
$
41,016
$
93,759
$
23,325
$
2,993
$
3,597
$
1,441
$
-
$
-
$
166,131
Substandard
333
1,630
325
50
126
211
-
-
2,675
Loss
-
-
-
-
1
130
-
-
131
Total Personal
$
41,349
$
95,389
$
23,650
$
3,043
$
3,724
$
1,782
$
-
$
-
$
168,937
Year-to-Date gross
write-offs
$
735
$
13,136
$
4,450
$
618
$
872
$
160
$
-
$
-
$
19,971
Other consumer
Pass
$
19
$
-
$
-
$
-
$
-
$
-
$
10,259
$
-
$
10,278
Substandard
-
-
-
-
-
-
1
-
1
Total Other
consumer
$
19
$
-
$
-
$
-
$
-
$
-
$
10,260
$
-
$
10,279
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
171
$
-
$
171
Total Popular U.S.
$
1,487,297
$
2,342,518
$
1,789,497
$
1,177,883
$
902,918
$
2,304,709
$
535,188
$
14,038
$
10,554,048
 
63
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular, Inc.
Commercial:
Commercial multi-family
Pass
$
204,386
$
555,788
$
347,381
$
185,374
$
215,082
$
435,084
$
5,418
$
-
$
1,948,513
Watch
-
116,794
39,319
71,237
94,307
103,544
-
-
425,201
Special Mention
-
559
862
1,171
-
8,157
-
-
10,749
Substandard
-
-
-
-
5,545
25,612
-
-
31,157
Total commercial
multi-family
$
204,386
$
673,141
$
387,562
$
257,782
$
314,934
$
572,397
$
5,418
$
-
$
2,415,620
Commercial real estate non-owner occupied
Pass
$
701,955
$
1,361,507
$
730,859
$
561,078
$
127,857
$
958,249
$
13,128
$
-
$
4,454,633
Watch
1,959
40,603
43,918
65,916
45,846
118,937
4,557
-
321,736
Special Mention
43,020
5,413
24,730
-
17,170
131,733
-
-
222,066
Substandard
1,016
1,307
180
10,285
55,431
16,698
4,069
-
88,986
Total commercial
real estate non-
owner occupied
$
747,950
$
1,408,830
$
799,687
$
637,279
$
246,304
$
1,225,617
$
21,754
$
-
$
5,087,421
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
609
$
-
$
714
$
-
$
-
$
1,323
Commercial real estate owner occupied
Pass
$
395,436
$
434,199
$
453,535
$
109,543
$
71,267
$
562,317
$
18,899
$
-
$
2,045,196
Watch
2,947
115,000
94,131
57,351
19,074
160,719
2,905
-
452,127
Special Mention
-
16,860
98,653
6,417
6,961
55,293
-
-
184,184
Substandard
1,316
16,187
7,510
143,696
22,608
195,058
12,617
-
398,992
Doubtful
-
-
-
-
-
136
-
-
136
Total commercial
real estate owner
occupied
$
399,699
$
582,246
$
653,829
$
317,007
$
119,910
$
973,523
$
34,421
$
-
$
3,080,635
Year-to-Date gross
write-offs
$
-
$
4
$
-
$
-
$
1
$
5,827
$
-
$
-
$
5,832
Commercial and industrial
Pass
$
1,306,857
$
912,639
$
858,340
$
510,287
$
271,960
$
638,507
$
1,758,768
$
-
$
6,257,358
Watch
29,039
132,807
53,410
48,982
39,053
158,659
215,253
-
677,203
Special Mention
6,609
4,158
1,297
3,230
2,239
41,328
18,084
-
76,945
Substandard
1,367
2,388
8,796
23,217
2,652
33,928
42,187
-
114,535
Doubtful
-
-
-
54
-
26
-
-
80
Total commercial
and industrial
$
1,343,872
$
1,051,992
$
921,843
$
585,770
$
315,904
$
872,448
$
2,034,292
$
-
$
7,126,121
Year-to-Date gross
write-offs
$
1,143
$
405
$
2,209
$
379
$
1,875
$
1,086
$
4,517
$
-
$
11,614
 
64
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular, Inc.
Construction
Pass
$
306,850
$
276,089
$
116,814
$
25,491
$
27,198
$
1,049
$
38,720
$
-
$
792,211
Watch
-
39,413
18,327
-
21,896
782
9,506
-
89,924
Special Mention
2,120
13,151
1,009
-
-
-
1
-
16,281
Substandard
-
6,379
13,997
3,895
-
36,593
-
-
60,864
Total construction
$
308,970
$
335,032
$
150,147
$
29,386
$
49,094
$
38,424
$
48,227
$
-
$
959,280
Year-to-Date gross
write-offs
$
-
$
2,611
$
-
$
-
$
-
$
-
$
-
$
-
$
2,611
Mortgage
Pass
$
850,828
$
669,093
$
710,064
$
493,217
$
341,683
$
4,544,578
$
-
$
-
$
7,609,463
Substandard
96
396
162
991
4,708
80,101
-
-
86,454
Total mortgage
$
850,924
$
669,489
$
710,226
$
494,208
$
346,391
$
4,624,679
$
-
$
-
$
7,695,917
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
1,638
$
-
$
-
$
1,638
Leasing
Pass
$
647,659
$
488,506
$
313,133
$
163,189
$
88,983
$
21,706
$
-
$
-
$
1,723,176
Substandard
806
2,516
3,053
906
818
517
-
-
8,616
Loss
-
-
-
-
-
17
-
-
17
Total leasing
$
648,465
$
491,022
$
316,186
$
164,095
$
89,801
$
22,240
$
-
$
-
$
1,731,809
Year-to-Date gross
write-offs
$
1,065
$
4,424
$
2,878
$
849
$
976
$
687
$
-
$
-
$
10,879
 
65
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular, Inc.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
1,112,466
$
-
$
1,112,466
Substandard
-
-
-
-
-
-
23,259
-
23,259
Loss
-
-
-
-
-
-
22
-
22
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,135,747
$
-
$
1,135,747
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
41,008
$
-
$
41,008
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
7,394
$
42,547
$
12,253
$
62,194
Substandard
-
-
-
-
-
1,849
26
966
2,841
Loss
-
-
-
-
-
99
-
819
918
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
9,342
$
42,573
$
14,038
$
65,953
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
471
$
213
$
-
$
684
Personal
Pass
$
900,450
$
574,530
$
204,808
$
60,220
$
62,446
$
98,397
$
-
$
22,034
$
1,922,885
Substandard
2,148
6,615
2,264
543
1,059
8,533
-
1,006
22,168
Loss
$
-
$
-
$
14
$
-
$
13
$
167
$
-
$
-
$
194
Total Personal
$
902,598
$
581,145
$
207,086
$
60,763
$
63,518
$
107,097
$
-
$
23,040
$
1,945,247
Year-to-Date gross
write-offs
$
5,193
$
49,051
$
22,526
$
4,828
$
5,763
$
3,112
$
-
$
1,475
$
91,948
Auto
Pass
$
1,210,622
$
899,797
$
711,439
$
405,768
$
260,355
$
120,318
$
-
$
-
$
3,608,299
Substandard
6,980
14,049
11,916
9,157
7,051
3,199
-
-
52,352
Loss
9
44
45
16
9
6
-
-
129
Total Auto
$
1,217,611
$
913,890
$
723,400
$
414,941
$
267,415
$
123,523
$
-
$
-
$
3,660,780
Year-to-Date gross
write-offs
$
10,170
$
23,849
$
11,820
$
5,914
$
3,553
$
-
$
-
$
-
$
55,306
Other consumer
Pass
$
36,163
$
24,238
$
14,942
$
5,618
$
3,433
$
2,753
$
72,055
$
-
$
159,202
Substandard
244
25
-
73
16
131
250
-
739
Loss
-
-
137
-
-
363
-
-
500
Total Other
consumer
$
36,407
$
24,263
$
15,079
$
5,691
$
3,449
$
3,247
$
72,305
$
-
$
160,441
Year-to-Date gross
write-offs
$
47
$
154
$
125
$
164
$
88
$
11,876
$
171
$
-
$
12,625
Total Popular Inc.
$
6,660,882
$
6,731,050
$
4,885,045
$
2,966,922
$
1,816,720
$
8,572,537
$
3,394,737
$
37,078
$
35,064,971
 
66
Note 9 – Mortgage banking activities
Income
 
from
 
mortgage
 
banking
 
activities
 
includes
 
mortgage
 
servicing
 
fees
 
earned
 
in
 
connection
 
with
 
administering
 
residential
mortgage
 
loans
 
and
 
valuation
 
adjustments
 
on
 
mortgage
 
servicing
 
rights.
 
It
 
also
 
includes
 
gain
 
on
 
sales
 
and
 
securitizations
 
of
residential mortgage
 
loans, losses
 
on repurchased
 
loans, including
 
interest advances,
 
and trading
 
gains and
 
losses on
 
derivative
contracts
 
used
 
to
 
hedge
 
the
 
Corporation’s
 
securitization
 
activities.
 
In
 
addition,
 
fair
 
value
 
valuation
 
adjustments
 
to
 
residential
mortgage loans held for sale, if any, are recorded as part of the mortgage
 
banking activities.
The following table presents the components of mortgage
 
banking activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters ended March 31,
(In thousands)
2024
2023
Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees
$
7,751
$
8,689
Mortgage servicing rights fair value adjustments
(3,439)
(1,376)
Total mortgage
 
servicing fees, net of fair value adjustments
4,312
7,313
Net gain on sale of loans, including valuation on loans
 
held-for-sale
74
263
Trading account profit (loss):
Unrealized gains (loss) on outstanding derivative positions
101
(131)
Realized gains on closed derivative positions
3
56
Total trading account
 
profit (loss)
104
(75)
Losses on repurchased loans, including interest advances
(130)
(101)
Total mortgage
 
banking activities
$
4,360
$
7,400
 
 
67
Note 10 – Transfers of financial assets and mortgage servicing assets
The
 
Corporation
 
typically
 
transfers
 
conforming
 
residential
 
mortgage
 
loans
 
in
 
conjunction
 
with
 
GNMA,
 
FNMA
 
and
 
FHLMC
securitization transactions
 
whereby the
 
loans are
 
exchanged for
 
cash or
 
securities and
 
servicing rights.
 
As seller,
 
the Corporation
has made
 
certain representations
 
and warranties
 
with respect
 
to the
 
originally transferred
 
loans and,
 
in the
 
past,
 
has sold
 
certain
loans
 
with
 
credit
 
recourse
 
to
 
a
 
government-sponsored
 
entity,
 
namely
 
FNMA.
 
Refer
 
to
 
Note
 
19
 
to
 
the
 
Consolidated
 
Financial
Statements for a description of such arrangements.
 
No
 
liabilities were incurred as a result of these securitizations during the quarters ended March 31, 2024 and 2023 because they did
not contain
 
any credit
 
recourse arrangements. The
 
securitizations completed by
 
the Corporation
 
during the
 
quarters ended
 
March
31, 2024 and 2023 were completed without credit
 
recourse.
The
 
following tables
 
present the
 
initial fair
 
value of
 
the
 
assets obtained
 
as
 
proceeds from
 
residential mortgage
 
loans securitized
during the quarters ended March 31, 2024 and
 
2023:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds Obtained During the Quarter Ended March
 
31, 2024
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
-
$
1,100
$
-
$
1,100
Mortgage-backed securities - FNMA
-
1,105
-
1,105
Total trading account
 
debt securities
$
-
$
2,205
$
-
$
2,205
Mortgage servicing rights
$
-
$
-
$
45
$
45
Total
 
$
-
$
2,205
$
45
$
2,250
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds Obtained During the Quarter Ended March
 
31, 2023
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
-
$
1,067
$
-
$
1,067
Mortgage-backed securities - FNMA
-
9,899
-
9,899
Total trading account
 
debt securities
$
-
$
10,966
$
-
$
10,966
Mortgage servicing rights
$
-
$
-
$
278
$
278
Total
 
$
-
$
10,966
$
278
$
11,244
During the quarter ended March 31, 2024, the Corporation retained servicing rights on whole loan sales involving approximately $
11
million in principal
 
balance outstanding (March 31,
 
2023 - $
10
 
million), with net
 
realized gains of approximately
 
$
0.2
 
million (March
31, 2023 -
 
gains of $
0.2
 
million). All loan
 
sales performed during the
 
quarters ended March 31,
 
2024 and 2023
 
were without credit
recourse agreements.
 
The Corporation recognizes as assets the rights to service loans for others,
 
whether these rights are purchased or result from asset
transfers such as sales and securitizations. These mortgage
 
servicing rights (“MSRs”) are measured at fair
 
value.
The
 
Corporation
 
uses
 
a
 
discounted
 
cash
 
flow
 
model
 
to
 
estimate
 
the
 
fair
 
value
 
of
 
MSRs.
 
The
 
discounted
 
cash
 
flow
 
model
incorporates
 
assumptions
 
that
 
market
 
participants
 
would
 
use
 
in
 
estimating
 
future
 
net
 
servicing
 
income,
 
including
 
estimates
 
of
prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, prepayment and late
fees, among other considerations. Prepayment speeds are
 
adjusted for the loans’ characteristics and portfolio behavior.
 
The following
 
table presents
 
the changes
 
in MSRs
 
measured using
 
the fair
 
value method
 
for the
 
quarters ended
 
March 31,
 
2024
and 2023.
 
68
 
 
 
 
 
 
 
 
 
 
 
 
Residential MSRs
(In thousands)
March 31, 2024
March 31, 2023
Fair value at beginning of period
$
118,109
$
128,350
Additions
294
501
Changes due to payments on loans
[1]
(2,100)
(2,422)
Reduction due to loan repurchases
(137)
(240)
Changes in fair value due to changes in valuation model inputs
 
or assumptions
(1,202)
1,286
Fair value at end of period
[2]
$
114,964
$
127,475
[1] Represents changes due to collection / realization of expected cash flows over time.
[2] At March 31, 2024, PB had MSRs amounting to $
2
.0 million (March 31, 2023 - $
2.0
 
million).
Residential mortgage loans serviced for others were
 
$
9.7
 
billion at March 31, 2024 (December 31, 2023
 
- $
9.9
 
billion).
 
Net mortgage servicing fees, a component of mortgage banking activities in the Consolidated Statements of Operations, include the
changes from period to period in the fair value of the MSRs, including changes due to collection / realization of expected cash flows.
The banking
 
subsidiaries receive servicing
 
fees based
 
on a
 
percentage of the
 
outstanding loan balance.
 
These servicing fees
 
are
credited to income
 
when they are
 
collected. As of
 
March 31, 2024,
 
weighted average mortgage
 
servicing fees were
0.32
% (March
31, 2023 -
0.31
%). Under these servicing agreements, the banking
 
subsidiaries do not generally earn significant prepayment
 
penalty
fees on the underlying loans serviced.
The section
 
below includes
 
information on
 
assumptions used
 
in the
 
valuation model
 
of the
 
MSRs, originated
 
and purchased.
 
Key
economic assumptions used
 
in measuring the
 
servicing rights derived
 
from loans securitized
 
or sold by
 
the Corporation during
 
the
quarters ended March 31, 2024 and 2023 were
 
as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters ended
March 31, 2024
March 31, 2023
 
BPPR
PB
BPPR
PB
Prepayment speed
6.1
%
6.0
%
6.7
%
7.3
%
Weighted average life (in years)
9.6
8.8
8.9
8.0
Discount rate (annual rate)
9.5
%
12.5
%
9.5
%
10.5
%
Key
 
economic
 
assumptions
 
used
 
to
 
estimate
 
the
 
fair
 
value
 
of
 
MSRs
 
derived
 
from
 
sales
 
and
 
securitizations
 
of
 
mortgage
 
loans
performed
 
by
 
the
 
banking
 
subsidiaries
 
and
 
servicing
 
rights
 
purchased
 
from
 
other
 
financial
 
institutions,
 
and
 
the
 
sensitivity
 
to
immediate changes in those assumptions, were as follows
 
as of the end of the periods reported:
69
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Originated MSRs
Purchased MSRs
March 31,
December 31,
March 31,
December 31,
 
(In thousands)
2024
2023
2024
2023
Fair value of servicing rights
$
38,660
$
39,757
$
76,304
$
78,352
Weighted average life (in years)
6.5
6.6
6.7
6.8
Weighted average prepayment speed (annual
 
rate)
5.7
%
5.9
%
6.8
%
7.0
%
Impact on fair value of 10% adverse change
$
(721)
$
(696)
$
(1,410)
$
(1,440)
Impact on fair value of 20% adverse change
$
(1,416)
$
(1,365)
$
(2,767)
$
(2,827)
Weighted average discount rate (annual rate)
11.3
%
11.3
%
10.9
%
10.9
%
Impact on fair value of 10% adverse change
$
(1,438)
$
(1,387)
$
(2,783)
$
(2,871)
Impact on fair value of 20% adverse change
$
(2,782)
$
(2,686)
$
(5,391)
$
(5,562)
The sensitivity analyses presented in the table above for servicing rights are hypothetical and should be used with caution. As the
figures indicate, changes in fair value based on a 10 and 20 percent variation in assumptions generally cannot be extrapolated
because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the sensitivity tables
included herein, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without
changing any other assumption. In reality, changes in one factor may result in changes in another (for example, increases in market
interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities.
At
 
March
 
31,
 
2024,
 
the
 
Corporation
 
serviced
 
$
544
 
million
 
in
 
residential
 
mortgage
 
loans
 
with
 
credit
 
recourse
 
to
 
the
 
Corporation
(December 31, 2023
 
- $
561
 
million). Also refer
 
to Note
 
19 to
 
the Consolidated Financial
 
Statements for information
 
on changes in
the Corporation’s liability of estimated losses related to
 
loans serviced with credit recourse.
Under the GNMA
 
securitizations, the Corporation, as
 
servicer, has
 
the right to
 
repurchase (but not the
 
obligation), at its
 
option and
without
 
GNMA’s
 
prior
 
authorization,
 
any
 
loan
 
that
 
is
 
collateral
 
for
 
a
 
GNMA
 
guaranteed
 
mortgage-backed
 
security
 
when
 
certain
delinquency
 
criteria
 
are
 
met.
 
At
 
the
 
time
 
that
 
individual
 
loans
 
meet
 
GNMA’s
 
specified
 
delinquency
 
criteria
 
and
 
are
 
eligible
 
for
repurchase, the Corporation is deemed to have regained effective control over these loans if the Corporation was the pool issuer. At
March 31, 2024, the Corporation had
 
recorded $
10
 
million in mortgage loans on its
 
Consolidated Statements of Financial Condition
related
 
to
 
this
 
buy-back
 
option
 
program
 
(December
 
31,
 
2023
 
-
 
$
11
 
million).
 
Loans
 
in
 
our
 
serviced
 
GNMA
 
portfolio
 
benefit from
payment forbearance programs
 
but continue to
 
reflect the contractual
 
delinquency until the
 
borrower repays deferred
 
payments or
completes a payment deferral modification or other borrower assistance alternative. As long as the Corporation continues to service
the
 
loans
 
that
 
continue
 
to
 
be
 
collateral
 
in
 
a
 
GNMA
 
guaranteed
 
mortgage-backed
 
security,
 
the
 
MSR
 
is
 
recognized
 
by
 
the
Corporation.
 
During the quarter ended March 31,
 
2024, the Corporation repurchased approximately $
10
 
million (March 31, 2023 -
 
$
18
 
million) of
mortgage
 
loans
 
from
 
its
 
GNMA
 
servicing
 
portfolio.
 
The
 
determination
 
to
 
repurchase
 
these
 
loans
 
was
 
based
 
on
 
the
 
economic
benefits of the
 
transaction, which results in
 
a reduction of
 
the servicing costs
 
for these severely
 
delinquent loans, mainly
 
related to
principal and interest advances. The risk associated with
 
the loans is reduced due to their
 
guaranteed nature. The Corporation may
place these loans under modification programs offered by FHA, VA or United States Department of Agriculture (USDA)
 
or other loss
mitigation programs offered by the Corporation, and once brought back to current status, these may be either retained in portfolio or
re-sold in the secondary market.
 
 
 
70
Note 11 – Other real estate owned
The following tables present the
 
activity related to Other Real Estate
 
Owned (“OREO”),
 
for the quarters
 
ended March 31, 2024 and
2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended March 31, 2024
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
11,189
$
69,227
$
80,416
Write-downs in value
(25)
(284)
(309)
Additions
5,344
12,636
17,980
Sales
(546)
(16,934)
(17,480)
Other adjustments
-
(65)
(65)
Ending balance
$
15,962
$
64,580
$
80,542
 
 
 
 
 
 
 
 
 
 
 
 
 
For the quarter ended March 31, 2023
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
12,500
$
76,626
$
89,126
Write-downs in value
(194)
(751)
(945)
Additions
1,023
18,675
19,698
Sales
(941)
(15,099)
(16,040)
Other adjustments
-
(118)
(118)
Ending balance
$
12,388
$
79,333
$
91,721
 
 
71
Note 12 − Other assets
The caption of other assets in the consolidated
 
statements of financial condition consists of the following
 
major categories:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
March 31, 2024
December 31, 2023
Net deferred tax assets (net of valuation allowance)
$
1,001,093
$
1,009,068
Investments under the equity method
244,165
236,485
Prepaid taxes
32,146
39,052
Other prepaid expenses
26,332
29,338
Capitalized software costs
102,716
93,404
Derivative assets
24,040
24,419
Trades receivable from brokers and counterparties
23,477
23,102
Receivables from investments maturities
301,000
176,000
Principal, interest and escrow servicing advances
47,594
48,557
Guaranteed mortgage loan claims receivable
27,722
29,648
Operating ROU assets (Note 27)
110,712
116,106
Finance ROU assets (Note 27)
20,344
21,093
Assets for pension benefit
24,406
23,404
Others
135,155
144,888
Total other assets
$
2,120,902
$
2,014,564
The Corporation regularly incurs in
 
capitalizable costs associated with software development or
 
licensing which are recorded within
the Other Assets line item in the accompanying Consolidated Statements of Financial Condition.
 
In addition, the Corporation incurs
costs
 
associated
 
with
 
hosting
 
arrangements
 
that
 
are
 
service
 
contracts
 
that
 
are
 
also
 
recorded
 
within
 
Other
 
Assets.
 
The
 
hosting
arrangements can
 
include capitalizable
 
implementation costs
 
that are
 
amortized during
 
the term
 
of the
 
hosting arrangement.
The
following
 
table
 
summarizes
 
the
 
composition
 
of
 
acquired
 
or
 
developed
 
software
 
costs
 
as
 
well
 
as
 
costs
 
related
 
to
 
hosting
arrangements:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Carrying
Accumulated
Net
Carrying
(In thousands)
Amount
Amortization
Value
March 31, 2024
Software development costs
$
75,489
$
23,983
$
51,506
Software license costs
47,950
23,658
24,292
Cloud computing arrangements
37,240
10,322
26,918
Total Capitalized
 
software costs [1] [2]
$
160,679
$
57,963
$
102,716
December 31, 2023
Software development costs
$
76,497
$
22,086
$
54,411
Software license costs
42,868
18,048
24,820
Cloud computing arrangements
23,623
9,450
14,173
Total Capitalized
 
software costs [1] [2]
$
142,988
$
49,584
$
93,404
[1]
Software intangible assets are presented as part of Other
 
Assets in the Consolidated Statements of Financial Condition.
[2]
The tables above excludes assets that have been fully
 
amortized.
Total
 
amortization expense for
 
all capitalized software
 
and hosting arrangement
 
cost, reflected as
 
part of
 
technology and software
expenses in the consolidated statement of operations,
 
is as follows:
 
 
 
 
 
 
 
 
 
 
Quarters ended March 31,
(In thousands)
2024
2023
Software development and license costs
$
17,701
$
14,991
Cloud computing arrangements
872
984
Total amortization
 
expense
$
18,573
$
15,975
 
 
 
72
Note 13 – Goodwill and other intangible assets
 
Goodwill
There were
no
 
changes in the carrying amount of goodwill for
 
the quarters ended March 31, 2024 and 2023.
The following tables present the gross amount of
 
goodwill and accumulated impairment losses by
 
reportable segments:
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
Balance at
Balance at
March 31,
Accumulated
March 31,
2024
impairment
 
2024
(In thousands)
 
(gross amounts)
losses
 
(net amounts)
Banco Popular de Puerto Rico
$
440,184
$
3,801
$
436,383
Popular U.S.
564,456
196,411
368,045
Total Popular,
 
Inc.
 
$
1,004,640
$
200,212
$
804,428
 
 
 
 
 
 
 
 
 
 
 
December 31, 2023
 
Balance at
 
 
Balance at
 
December 31,
Accumulated
December 31,
2023
impairment
 
2023
(In thousands)
 
(gross amounts)
losses
 
(net amounts)
Banco Popular de Puerto Rico
$
440,184
$
3,801
$
436,383
Popular U.S.
564,456
196,411
368,045
Total Popular,
 
Inc.
 
$
1,004,640
$
200,212
$
804,428
 
Other Intangible Assets
The following table reflects the components of
 
other intangible assets subject to amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Carrying
Accumulated
Net
Carrying
(In thousands)
Amount
Amortization
Value
March 31, 2024
Core deposits
$
12,810
$
11,636
$
1,174
Other customer relationships
14,286
7,251
7,035
Total other intangible
 
assets
$
27,096
$
18,887
$
8,209
December 31, 2023
Core deposits
$
12,810
$
11,315
$
1,495
Other customer relationships
14,286
6,777
7,509
Total other intangible
 
assets
$
27,096
$
18,092
$
9,004
73
During the
 
quarter ended
 
March 31,
 
2024,
 
the
 
Corporation recognized
 
$
0.8
 
million
 
in
 
amortization expense
 
related to
 
intangible
assets with definite useful lives (March 31, 2023
 
- $
0.8
 
million).
 
The following
 
table presents
 
the estimated
 
amortization of
 
the intangible
 
assets with
 
definite useful
 
lives for
 
each of
 
the following
periods:
 
 
 
 
 
 
 
 
(In thousands)
Remaining 2024
$
2,143
Year 2025
1,750
Year 2026
1,440
Year 2027
959
Year 2028
959
Later years
958
 
74
Note 14 – Deposits
Total deposits as of the end of the periods presented consisted of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
March 31, 2024
December 31, 2023
Savings accounts
$
14,797,976
$
14,602,411
NOW, money market and other interest
 
bearing demand deposits
24,763,686
25,094,316
Total savings, NOW,
 
money market and other interest bearing demand
 
deposits
39,561,662
39,696,727
Certificates of deposit:
Under $250,000
5,420,905
5,443,062
$250,000 and over
3,334,167
3,058,830
 
Total certificates
 
of deposit
8,755,072
8,501,892
Total interest bearing
 
deposits
$
48,316,734
$
48,198,619
Non- interest bearing deposits
$
15,492,050
$
15,419,624
Total deposits
$
63,808,784
$
63,618,243
A summary of certificates of deposits by maturity at
 
March 31, 2024 follows:
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
2024
$
4,649,279
2025
1,915,324
2026
838,041
2027
470,438
2028
625,629
2029 and thereafter
256,361
Total certificates of
 
deposit
$
8,755,072
At March 31, 2024, the Corporation had brokered
 
deposits amounting to $
1.6
 
billion (December 31, 2023 - $
1.7
 
billion).
The aggregate amount of overdrafts in demand deposit accounts
 
that were reclassified to loans was $
12.2
 
million at March 31, 2024
(December 31, 2023 - $
9.1
 
million).
At March
 
31, 2024,
 
Puerto Rico
 
public sector
 
deposits amounted
 
to
 
$
18.0
 
billion. Puerto
 
Rico public
 
sector deposits
 
are interest
bearing accounts. These
 
public sector deposits
 
are indexed to
 
short-term market rates
 
and fluctuate in
 
cost with changes
 
in those
rates, in
 
accordance with contractual
 
terms. Public
 
deposit balances are
 
difficult to
 
predict. For example,
 
the receipt
 
by the Puerto
Rico
 
Government
 
of
 
hurricane
 
recovery
 
related
 
Federal
 
assistance
 
and
 
seasonal
 
tax
 
collections
 
could
 
increase
 
public
 
deposit
balances at BPPR.
 
On the other hand,
 
the amount and
 
timing of reductions
 
in balances are
 
likely to be
 
impacted by,
 
for example,
the speed at
 
which federal assistance
 
is distributed,
 
the financial condition,
 
liquidity and cash
 
management practices of the
 
Puerto
Rico
 
Government
 
and
 
its
 
instrumentalities
 
and
 
the
 
implementation
 
of
 
fiscal
 
and
 
debt
 
adjustment
 
plans
 
approved
 
pursuant
 
to
PROMESA or
 
other
 
actions
 
mandated by
 
the
 
Fiscal
 
Oversight and
 
Management Board
 
for Puerto
 
Rico
 
(the
 
“Oversight Board”).
Generally, these deposits require that
 
the bank pledge high credit quality securities as collateral, therefore,
 
liquidity risk arising from
public sector deposit outflows are lower.
 
75
Note 15 – Borrowings
Assets sold under agreements to repurchase
Assets sold under agreements to repurchase amounted
 
to $
66
 
million at March 31, 2024 and $
91
 
million at December 31, 2023.
The Corporation’s
 
repurchase transactions are
 
overcollateralized with the
 
securities detailed in
 
the table
 
below.
 
The Corporation’s
repurchase
 
agreements
 
have
 
a
 
right
 
of
 
set-off
 
with
 
the
 
respective
 
counterparty
 
under
 
the
 
supplemental
 
terms
 
of
 
the
 
master
repurchase agreements.
 
In an
 
event of
 
default,
 
each party
 
has a
 
right of
 
set-off
 
against the
 
other party
 
for amounts
 
owed in
 
the
related
 
agreement
 
and
 
any
 
other
 
amount
 
or
 
obligation
 
owed
 
in
 
respect
 
of
 
any
 
other
 
agreement
 
or
 
transaction
 
between
 
them.
Pursuant to the
 
Corporation’s accounting policy,
 
the repurchase agreements
 
are not offset
 
with other repurchase
 
agreements held
with the same counterparty.
The following table
 
presents information related to
 
the Corporation’s repurchase
 
transactions accounted for as
 
secured borrowings
that are collateralized with
 
debt securities available-for-sale, debt securities
 
held-to-maturity, other assets
 
held-for-trading purposes
or which have been obtained under agreements to resell.
 
It is the Corporation’s policy to maintain effective control over assets
 
sold
under agreements
 
to repurchase;
 
accordingly,
 
such securities
 
continue to
 
be carried
 
on the
 
Consolidated Statements
 
of Financial
Condition.
Repurchase agreements accounted for as secured borrowings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
December 31, 2023
Repurchase
Repurchase
(In thousands)
 
liability
 
liability
U.S. Treasury securities
Within 30 days
$
30,581
$
16,931
After 30 to 90 days
18,504
18,369
After 90 days
-
8,292
Total U.S. Treasury
 
securities
49,085
43,592
Mortgage-backed securities
 
Within 30 days
11,550
27,171
 
After 30 to 90 days
5,228
20,394
Total mortgage-backed
 
securities
16,778
47,565
Collateralized mortgage obligations
 
Within 30 days
227
227
Total collateralized
 
mortgage obligations
227
227
Total
$
66,090
$
91,384
Repurchase agreements in this portfolio
 
are generally short-term, often overnight.
 
As such our risk
 
is very limited.
 
We manage the
liquidity risks arising from secured
 
funding by sourcing funding globally from
 
a diverse group of counterparties, providing
 
a range of
securities collateral and pursuing longer durations,
 
when appropriate.
Other short-term borrowings
There were
no
 
other short-term borrowings outstanding at March 31,
 
2024 and December 31, 2023.
 
 
76
Notes Payable
The following table presents the composition of notes
 
payable at March 31, 2024 and December
 
31, 2023.
 
 
 
 
 
 
 
 
 
 
(In thousands)
March 31, 2024
December 31, 2023
Advances with the FHLB with maturities ranging from
2024
 
through
2029
 
paying interest at
monthly
fixed rates ranging from
0.44
% to
5.26
%
$
373,665
$
394,665
Unsecured senior debt securities maturing on
2028
 
paying interest
semiannually
 
at a fixed rate of
7.25
%, net of debt issuance costs of $
5,715
[1]
394,285
393,937
Junior subordinated deferrable interest debentures (related to
 
trust preferred securities) maturing on
2034
 
with fixed interest rates ranging from
6.125
% to
6.564
%, net of debt issuance costs of $
281
198,353
198,346
Total notes payable
$
966,303
$
986,948
Note: Refer to the 2023 Form 10-K for rates information
 
at December 31, 2023.
[1] On March 13, 2023, the Corporation issued $
400
 
million aggregate principal amount of
7.25
% Senior Notes due
2028
 
(the “2028 Notes”) in an
underwritten public offering. The Corporation used a
 
portion of the net proceeds of the 2028 Notes offering
 
to redeem, on August 14, 2023, the
outstanding $
300
 
million aggregate principal amount of its
6.125
% Senior Notes which were due on September
2023
. The redemption price was
equal to
100
% of the principal amount plus accrued and unpaid
 
interest through the redemption date.
A breakdown of borrowings by contractual maturities
 
at March 31, 2024 is included in the table
 
below.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets sold under
 
(In thousands)
agreements to
repurchase
Notes payable
Total
2024
$
66,090
$
70,943
$
137,033
2025
-
144,214
144,214
2026
-
74,500
74,500
2028
-
438,636
438,636
Later years
-
238,010
238,010
Total borrowings
$
66,090
$
966,303
$
1,032,393
At March
 
31, 2024
 
and December 31,
 
2023, the
 
Corporation had FHLB
 
borrowing facilities whereby
 
the Corporation could
 
borrow
up to $
4.4
 
billion and $
4.2
 
billion, respectively, of which $
0.4
 
billion were used. In addition, at each of March 31,
 
2024 and December
31, 2023,
 
the Corporation
 
had placed
 
$
0.3
 
billion of
 
the available
 
FHLB credit
 
facility as
 
collateral for
 
municipal letters
 
of credit
 
to
secure
 
deposits.
 
The
 
FHLB
 
borrowing
 
facilities
 
are
 
collateralized
 
with
 
securities
 
and
 
loans
 
held-in-portfolio,
 
and
 
do
 
not
 
have
restrictive covenants or callable features.
 
Also, at March 31,
 
2024, the Corporation had borrowing
 
facilities at the discount window
 
of the Federal Reserve Bank
 
of New York
amounting to
 
$
4.6
 
billion (December 31,
 
2023 -
 
$
4.4
 
billion), which remained
 
unused at March
 
31, 2024
 
and December
 
31, 2023.
 
The facilities are a collateralized source of credit
 
that is highly reliable even under difficult market
 
conditions.
 
77
Note 16 − Other liabilities
The caption of other liabilities in the consolidated
 
statements of financial condition consists of the following
 
major categories:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
March 31, 2024
December 31, 2023
Accrued expenses
$
361,839
$
337,695
Accrued interest payable
48,302
59,102
Accounts payable
92,715
89,339
Dividends payable
44,869
44,741
Trades payable
45
31
Liability for GNMA loans sold with an option to repurchase
9,538
10,960
Reserves for loan indemnifications
4,542
4,408
Reserve for operational losses
25,209
27,994
Operating lease liabilities (Note 27)
121,333
126,946
Finance lease liabilities (Note 27)
24,897
25,778
Pension benefit obligation
6,696
6,772
Postretirement benefit obligation
115,421
117,045
Others
63,042
63,816
Total other liabilities
$
918,448
$
914,627
78
Note 17 – Stockholders’ equity
 
As of March 31,
 
2024, stockholders’ equity totaled $
5.2
 
billion. During the quarter
 
ended March 31, 2024, the
 
Corporation declared
cash dividends of $
0.62
 
(2023 - $
0.55
) per common share amounting to
 
$
44.8
 
million (2023 - $
39.6
 
million). The quarterly dividend
declared to stockholders
 
of record as
 
of the close
 
of business on
March 14, 2024
 
was paid on
April 1, 2024
. On May
 
9, 2024, the
Corporation’s Board of
 
Directors approved a
 
quarterly cash dividend
 
of $
0.62
 
per share on
 
its outstanding common stock,
 
payable
on
July 1, 2024
 
to stockholders of record at the close of business on
May 30, 2024
.
79
Note 18 – Other comprehensive income (loss)
 
The
 
following
 
table
 
presents
 
changes
 
in
 
accumulated
 
other
 
comprehensive
 
income
 
(loss)
 
by
 
component
 
for
 
the
 
quarters
 
ended
March 31, 2024 and, 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes in Accumulated Other Comprehensive Income
 
(Loss) by Component [1]
Quarters ended March 31,
(In thousands)
2024
2023
Foreign currency translation
Beginning Balance
$
(64,528)
$
(56,735)
Other comprehensive loss
(4,020)
(5,245)
Net change
(4,020)
(5,245)
Ending balance
$
(68,548)
$
(61,980)
Adjustment of pension and
postretirement benefit plans
Beginning Balance
$
(117,894)
$
(144,335)
Other comprehensive loss before reclassifications
-
-
Amounts reclassified from accumulated other comprehensive loss
 
for
amortization of net losses
2,262
3,008
Net change
2,262
3,008
Ending balance
$
(115,632)
$
(141,327)
Unrealized net holding losses on
debt securities
Beginning Balance
$
(1,713,109)
$
(2,323,903)
Other comprehensive income (loss) before reclassifications
(71,104)
191,752
Amounts reclassified from accumulated other comprehensive loss
 
for
amortization of net unrealized losses of debt securities
 
transferred from
available-for-sale to held-to-maturity
35,207
33,633
Net change
(35,897)
225,385
Ending balance
$
(1,749,006)
$
(2,098,518)
Unrealized net gains on cash
flow hedges
Beginning Balance
$
-
$
45
Other comprehensive (loss) income before reclassifications
-
(19)
Amounts reclassified from accumulated other comprehensive
 
gains
-
(26)
Net change
-
(45)
Ending balance
$
-
$
-
Total
 
$
(1,933,186)
$
(2,301,825)
[1] All amounts presented are net of tax.
 
80
The following table
 
presents the amounts
 
reclassified out of
 
each component of
 
accumulated other comprehensive loss
 
during the
quarters ended March 31, 2024 and 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reclassifications Out of Accumulated Other Comprehensive
 
Loss
Affected Line Item in the
 
Quarters ended March 31,
(In thousands)
Consolidated Statements of Operations
2024
2023
Adjustment of pension and postretirement benefit plans
Amortization of net losses
Other operating expenses
$
(3,618)
$
(4,813)
Total before tax
(3,618)
(4,813)
Income tax benefit
1,356
1,805
Total net of tax
$
(2,262)
$
(3,008)
Unrealized holding losses on debts securities
Amortization of unrealized net losses of debt
securities transferred to held-to-maturity
Investment securities
$
(44,009)
$
(42,040)
Total before tax
(44,009)
(42,040)
Income tax benefit
8,802
8,407
Total net of tax
$
(35,207)
$
(33,633)
Unrealized net gains on cash flow hedges
Forward contracts
Mortgage banking activities
$
-
$
41
Total before tax
-
41
Income tax expense
-
(15)
Total net of tax
$
-
$
26
Total reclassification
 
adjustments, net of tax
$
(37,469)
$
(36,615)
 
81
Note 19 – Guarantees
At March 31, 2024, the
 
Corporation had a liability of $
1
 
million (December 31, 2023 -
 
$
1
 
million), which represents the unamortized
balance of the obligations undertaken in issuing the guarantees under the standby letters of credit. Management does not anticipate
any material losses related to these instruments.
From time to time, the Corporation securitized mortgage loans into guaranteed mortgage-backed securities subject to limited, and in
certain instances, lifetime credit
 
recourse on the loans
 
that serve as
 
collateral for the
 
mortgage-backed securities. The Corporation
has not
 
sold any
 
mortgage loans
 
subject to
 
credit recourse since
 
2009. At
 
March 31,
 
2024, the
 
Corporation serviced
 
$
544
 
million
(December 31, 2023 -
 
$
561
 
million) in residential mortgage
 
loans subject to credit
 
recourse provisions, principally loans associated
with FNMA
 
and FHLMC
 
residential mortgage
 
loan securitization
 
programs. In
 
the event
 
of any
 
customer default,
 
pursuant to
 
the
credit recourse
 
provided, the
 
Corporation is
 
required to
 
repurchase the
 
loan or
 
reimburse the
 
third party
 
investor for
 
the incurred
loss.
 
The
 
maximum
 
potential
 
amount
 
of
 
future
 
payments
 
that
 
the
 
Corporation
 
would
 
be
 
required
 
to
 
make
 
under
 
the
 
recourse
arrangements
 
in
 
the
 
event
 
of
 
nonperformance by
 
the
 
borrowers
 
is
 
equivalent
 
to
 
the
 
total
 
outstanding
 
balance
 
of
 
the
 
residential
mortgage
 
loans
 
serviced
 
with
 
recourse
 
and
 
interest,
 
if
 
applicable.
 
During
 
the
 
quarter
 
ended
 
March
 
31,
 
2024,
 
the
 
Corporation
repurchased
 
approximately
 
$
0.6
 
million
 
of
 
unpaid
 
principal
 
balance
 
in
 
mortgage
 
loans
 
subject
 
to
 
the
 
credit
 
recourse
 
provisions
(March 31, 2023
-
$
1
 
million). In the event of nonperformance by the borrower, the Corporation has rights
 
to the underlying collateral
securing the
 
mortgage loan. The
 
Corporation suffers
 
ultimate losses on
 
these loans when
 
the proceeds from
 
a foreclosure sale
 
of
the property underlying
 
a defaulted mortgage
 
loan are less
 
than the outstanding
 
principal balance of
 
the loan plus
 
any uncollected
interest
 
advanced
 
and
 
the
 
costs
 
of
 
holding
 
and
 
disposing
 
the
 
related
 
property.
 
At
 
March
 
31,
 
2024,
 
the
 
Corporation’s
 
liability
established to cover the estimated credit loss exposure related to loans sold
 
or serviced with credit recourse amounted to $
4
 
million
(December 31, 2023 - $
4
 
million).
The following table shows the changes in the Corporation’s liability of estimated losses related to loans serviced with credit recourse
provisions during the quarters ended March 31, 2024
 
and 2023.
 
 
 
 
 
 
 
 
Quarters ended
March 31,
(In thousands)
2024
2023
Balance as of beginning of period
$
4,211
$
6,897
Provision (benefit) for recourse liability
244
(654)
Net charge-offs
(102)
(379)
Balance as of end of period
$
4,353
$
5,864
From time
 
to
 
time, the
 
Corporation sells
 
loans and
 
agrees to
 
indemnify the
 
purchaser for
 
credit
 
losses or
 
any
 
breach of
 
certain
representations and warranties made in connection
 
with the sale.
Servicing agreements
 
relating to
 
the mortgage-backed
 
securities programs
 
of FNMA,
 
FHLMC and
 
GNMA, and
 
to mortgage
 
loans
sold or serviced to certain other investors, including FHLMC,
 
require the Corporation to advance funds to
 
make scheduled payments
of principal,
 
interest, taxes
 
and insurance,
 
if such
 
payments have
 
not been
 
received from
 
the borrowers.
 
At March
 
31, 2024,
 
the
Corporation serviced $
9.7
 
billion in mortgage loans for third-parties, including the loans serviced with credit recourse (December 31,
2023 - $
9.9
 
billion). The Corporation generally recovers funds advanced pursuant to these arrangements from
 
the mortgage owner,
from liquidation proceeds when the mortgage
 
loan is foreclosed or,
 
in the case of FHA/VA
 
loans, under the applicable FHA
 
and
VA
insurance
 
and guarantees
 
programs. However,
 
in
 
the meantime,
 
the Corporation
 
must absorb
 
the cost
 
of the
 
funds
 
it
 
advances
during the
 
time the
 
advance is
 
outstanding. The
 
Corporation must
 
also bear
 
the costs
 
of attempting
 
to collect
 
on delinquent
 
and
defaulted
 
mortgage
 
loans.
 
In
 
addition,
 
if
 
a
 
defaulted
 
loan
 
is
 
not
 
cured,
 
the
 
mortgage
 
loan
 
would
 
be
 
canceled
 
as
 
part
 
of
 
the
foreclosure proceedings and the
 
Corporation would not
 
receive any future servicing
 
income
 
with respect to
 
that loan. At
 
March 31,
2024,
 
the
 
outstanding
 
balance
 
of
 
funds
 
advanced
 
by
 
the
 
Corporation
 
under
 
such
 
mortgage
 
loan
 
servicing
 
agreements
 
was
approximately
 
$
48
 
million
 
(December
 
31,
 
2023
 
-
 
$
49
 
million).
 
To
 
the
 
extent
 
the
 
mortgage
 
loans
 
underlying
 
the
 
Corporation’s
servicing portfolio experience
 
increased delinquencies, the Corporation
 
would be required
 
to dedicate additional
 
cash resources to
comply with its obligation to advance funds as well
 
as incur additional administrative costs related
 
to increases in collection efforts.
Popular,
 
Inc. Holding
 
Company (“PIHC”) fully
 
and unconditionally guarantees
 
certain borrowing
 
obligations issued by
 
certain of
 
its
100
%
 
owned
 
consolidated
 
subsidiaries
 
amounting
 
to
 
$
94
 
million
 
at
 
March
 
31,
 
2024
 
and
 
December
 
31,
 
2023,
 
respectively.
 
In
addition, at both March 31, 2024 and
 
December 31, 2023, PIHC fully and unconditionally guaranteed on
 
a subordinated basis $
193
82
million
 
of
 
capital
 
securities
 
(trust
 
preferred
 
securities)
 
issued
 
by
 
wholly-owned issuing
 
trust
 
entities to
 
the
 
extent
 
set
 
forth
 
in
 
the
applicable
 
guarantee
 
agreement.
 
Refer
 
to
 
Note
 
18
 
to
 
the
 
Consolidated Financial
 
Statements
 
in
 
the
 
2023
 
Form
 
10-K
 
for
 
further
information on the trust preferred securities.
83
Note 20 – Commitments and contingencies
Off-balance sheet risk
The Corporation
 
is a
 
party to
 
financial instruments
 
with off-balance
 
sheet credit
 
risk in
 
the normal
 
course of
 
business to
 
meet the
financial needs of its customers. These financial instruments
 
include loan commitments, letters of credit and standby
 
letters of credit.
These instruments involve,
 
to varying
 
degrees, elements of
 
credit and
 
interest rate
 
risk in
 
excess of
 
the amount
 
recognized in
 
the
consolidated statements of financial condition.
The
 
Corporation’s
 
exposure
 
to
 
credit
 
loss
 
in
 
the
 
event
 
of
 
nonperformance
 
by
 
the
 
other
 
party
 
to
 
the
 
financial
 
instrument
 
for
commitments to extend credit, standby
 
letters of credit and financial
 
guarantees is represented by the
 
contractual notional amounts
of those instruments. The
 
Corporation uses the same
 
credit policies in
 
making these commitments and conditional
 
obligations as it
does for those reflected on the consolidated statements
 
of financial condition.
Financial instruments with
 
off-balance sheet credit
 
risk, whose contract
 
amounts represent potential credit
 
risk as of
 
the end of
 
the
periods presented were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
March 31, 2024
December 31, 2023
Commitments to extend credit:
Credit card lines
$
6,130,148
$
6,108,939
Commercial lines of credit
3,661,556
3,626,269
Construction lines of credit
1,212,596
1,287,679
Other consumer unused credit commitments
 
257,059
256,610
Commercial letters of credit
1,234
1,404
Standby letters of credit
115,808
80,889
Commitments to originate or fund mortgage loans
29,524
32,968
At March
 
31, 2024
 
and December 31,
 
2023, the
 
Corporation maintained a
 
reserve of
 
approximately $
16.8
 
million and
 
$
17
 
million,
respectively, for potential losses associated with unfunded loan commitments
 
related to commercial
 
and construction lines of credit.
Other commitments
At March 31,
 
2024 and December 31,
 
2023, the Corporation also
 
maintained other non-credit commitments for
 
approximately $
3.3
million, primarily for the acquisition of other investments.
 
Business concentration
Since the Corporation’s business activities are concentrated primarily in Puerto Rico, its results of operations and financial condition
are dependent
 
upon the
 
general trends
 
of the
 
Puerto Rico
 
economy and,
 
in particular,
 
the residential
 
and commercial
 
real estate
markets. The concentration
 
of the Corporation’s
 
operations in Puerto Rico
 
exposes it to
 
greater risk than other
 
banking companies
with a wider geographic base. Its
 
asset and revenue composition by geographical area
 
is presented in Note 32
 
to the Consolidated
Financial Statements.
 
Puerto
 
Rico
 
has
 
faced
 
significant
 
fiscal
 
and
 
economic
 
challenges
 
for
 
over
 
a
 
decade.
 
In
 
response
 
to
 
such
 
challenges,
 
the
 
U.S.
Congress enacted the
 
Puerto Rico Oversight
 
Management and Economic Stability
 
Act (“PROMESA”) in
 
2016, which, among
 
other
things,
 
established
 
the
 
Oversight
 
Board
 
and
 
a
 
framework
 
for
 
the
 
restructuring
 
of
 
the
 
debts
 
of
 
the
 
Commonwealth,
 
its
instrumentalities and
 
municipalities.
 
The
 
Commonwealth and
 
several
 
of
 
its
 
instrumentalities have
 
commenced
 
debt
 
restructuring
proceedings under
 
PROMESA. As
 
of the
 
date of
 
this report,
 
while municipalities
 
have been
 
designated as
 
covered entities
 
under
PROMESA,
 
no
 
municipality
 
has
 
commenced,
 
or
 
has
 
been
 
authorized
 
by
 
the
 
Oversight
 
Board
 
to
 
commence,
 
any
 
such
 
debt
restructuring proceeding under PROMESA.
At
 
March 31,
 
2024, the
 
Corporation’s direct
 
exposure to
 
the Puerto
 
Rico
 
government and
 
its
 
instrumentalities and
 
municipalities
totaled $
388
 
million, of which
 
$
363
 
million were outstanding
 
($
362
 
million and $
333
 
million at December
 
31, 2023). Of
 
the amount
outstanding,
 
$
348
 
million
 
consists
 
of
 
loans
 
and
 
$
16
 
million
 
are
 
securities
 
($
314
 
million
 
and
 
$
19
 
million
 
at
 
December 31,
 
2023).
Substantially all
 
of the
 
amount outstanding
 
at March
 
31, 2024
 
and December
 
31, 2023
 
were obligations from
 
various Puerto
 
Rico
municipalities. In most cases, these were “general obligations” of a municipality, to which
 
the applicable municipality has pledged its
good
 
faith,
 
credit
 
and
 
unlimited taxing
 
power,
 
or
 
“special
 
obligations”
 
of
 
a
 
municipality,
 
to
 
which
 
the
 
applicable
 
municipality
 
has
pledged other revenues. At March 31, 2024,
78
% of the Corporation’s exposure to municipal loans and securities
 
was concentrated
in the municipalities of San Juan, Guaynabo, Carolina
 
and Caguas.
 
 
84
The following table details the loans and investments representing the Corporation’s direct exposure to
 
the Puerto Rico government
according to their maturities as of March 31, 2024:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Investment
Portfolio
Loans
Total Outstanding
Total Exposure
Central Government
After 1 to 5 years
$
3
$
-
$
3
$
3
After 5 to 10 years
1
-
1
1
After 10 years
42
-
42
42
Total Central
 
Government
46
-
46
46
Municipalities
Within 1 year
3,055
13,218
16,273
41,273
After 1 to 5 years
11,620
141,519
153,139
153,139
After 5 to 10 years
845
145,965
146,810
146,810
After 10 years
-
46,823
46,823
46,823
Total Municipalities
15,520
347,525
363,045
388,045
Total Direct Government
 
Exposure
$
15,566
$
347,525
$
363,091
$
388,091
In addition, at March
 
31, 2024, the Corporation had
 
$
233
 
million in loans insured
 
or securities issued by
 
Puerto Rico governmental
entities but for
 
which the principal
 
source of
 
repayment is non-governmental
 
($
238
 
million at December
 
31, 2023). These
 
included
$
187
 
million
 
in
 
residential
 
mortgage
 
loans
 
insured
 
by
 
the
 
Puerto
 
Rico
 
Housing
 
Finance
 
Authority
 
(“HFA”),
 
a
 
governmental
instrumentality
 
that
 
has
 
been
 
designated
 
as
 
a
 
covered
 
entity
 
under
 
PROMESA
 
(December
 
31,
 
2023
 
-
 
$
191
 
million).
 
These
mortgage loans
 
are secured
 
by first
 
mortgages on
 
Puerto Rico
 
residential properties
 
and the
 
HFA
 
insurance covers
 
losses in
 
the
event of a
 
borrower default and upon the
 
satisfaction of certain other
 
conditions. The Corporation also
 
had at March
 
31, 2024, $
39
million in
 
bonds issued by
 
HFA which
 
are secured by
 
second mortgage loans
 
on Puerto Rico
 
residential properties, and
 
for which
HFA also provides
 
insurance to cover losses in the
 
event of a borrower default and
 
upon the satisfaction of certain other
 
conditions
(December 31,
 
2023 -
 
$
40
 
million). In
 
the event
 
that the
 
mortgage loans
 
insured by
 
HFA
 
and held
 
by the
 
Corporation directly
 
or
those serving
 
as collateral
 
for the
 
HFA
 
bonds default
 
and the
 
collateral is
 
insufficient to
 
satisfy the
 
outstanding balance
 
of these
loans,
 
HFA’s
 
ability
 
to
 
honor
 
its
 
insurance
 
will
 
depend, among
 
other factors,
 
on
 
the
 
financial
 
condition
 
of
 
HFA
 
at
 
the
 
time
 
such
obligations
 
become
 
due
 
and
 
payable. The
 
Corporation does
 
not consider
 
the
 
government guarantee
 
when
 
estimating the
 
credit
losses
 
associated
 
with
 
this
 
portfolio.
 
Although
 
the
 
Governor
 
is
 
currently
 
authorized
 
by
 
local
 
legislation
 
to
 
impose
 
a
 
temporary
moratorium on the financial obligations of the HFA, a moratorium on
 
such obligations has not been imposed as of
 
the date hereof.
 
BPPR’s
 
commercial loan
 
portfolio also
 
includes loans
 
to
 
private borrowers
 
who
 
are service
 
providers, lessors,
 
suppliers or
 
have
other relationships with the government. These
 
borrowers could be negatively affected by
 
the Commonwealth’s fiscal crisis and
 
the
ongoing
 
Title
 
III
 
proceedings
 
under
 
PROMESA.
 
Similarly,
 
BPPR’s
 
mortgage
 
and
 
consumer
 
loan
 
portfolios
 
include
 
loans
 
to
government
 
employees
 
and
 
retirees,
 
which
 
could
 
also
 
be
 
negatively
 
affected
 
by
 
fiscal
 
measures
 
such
 
as
 
employee
 
layoffs
 
or
furloughs or reductions in pension benefits.
 
In
 
addition,
 
$
1.9
 
billion
 
of
 
residential
 
mortgages
 
and
 
$
92.4
 
million
 
commercial
 
loans
 
were
 
insured
 
or
 
guaranteed
 
by
 
the
 
U.S.
Government or
 
its agencies
 
at March
 
31, 2024
 
(compared to
 
$
1.9
 
billion and
 
$
89.2
 
million, respectively,
 
at December
 
31, 2023).
The Corporation also had
 
U.S. Treasury and
 
obligations from the U.S.
 
Government, its agencies or
 
government sponsored entities
within the
 
portfolio of
 
available-for-sale and
 
held-to-maturity securities as
 
described in
 
Note 5
 
and 6
 
to the
 
Consolidated Financial
Statements.
At
 
March
 
31,
 
2024,
 
the
 
Corporation had
 
operations
 
in
 
the
 
United States
 
Virgin
 
Islands
 
(the
 
“USVI”) and
 
has
 
approximately $
28
million
 
in
 
direct
 
exposure
 
to
 
USVI
 
government
 
entities
 
(December
 
31,
 
2023
 
-
 
$
28
 
million).
 
The
 
USVI
 
has
 
been
 
experiencing
 
a
number of
 
fiscal and
 
economic challenges
 
that could
 
adversely affect
 
the ability
 
of its
 
public corporations
 
and instrumentalities
 
to
service their outstanding debt obligations.
 
At March 31, 2024, the Corporation had operations in the British Virgin Islands (“BVI”), which
 
islands were negatively affected by the
COVID-19 pandemic, particularly due to a reduction in
 
the tourism activity which accounts for a significant
 
portion of their economy.
Although the
 
Corporation has
 
no significant
 
exposure to
 
a single
 
borrower in
 
the BVI,
 
at
 
March 31,
 
2024,
 
it
 
had a
 
loan portfolio
85
amounting to
 
approximately $
208
 
million comprised
 
of various
 
retail and
 
commercial clients,
 
compared to
 
a loan
 
portfolio of
 
$
205
million at December 31, 2023.
FDIC Special Assessment
 
On
 
November
 
16,
 
2023,
 
the
 
Federal
 
Deposit
 
Insurance
 
Corporation
 
(“FDIC”)
 
approved
 
a
 
final
 
rule
 
that
 
imposes
 
a
 
special
assessment (the “FDIC
 
Special Assessment”) to recover
 
the losses to
 
the deposit insurance
 
fund resulting from
 
the FDIC’s use,
 
in
March 2023,
 
of the systemic
 
risk exception to
 
the least-cost resolution
 
test under the
 
Federal Deposit Insurance
 
Act in
 
connection
with the
 
receiverships of
 
several failed
 
banks. In
 
connection with
 
this assessment,
 
the Corporation
 
recorded an
 
expense of
 
$
71.4
million, $
45.3
 
million net of tax, in the fourth quarter
 
of 2023, representing the full amount of the
 
assessment.
During the quarter ended March 31, 2024, the Corporation
 
recorded an additional expense of $
14.3
 
million, $
9.1
 
million net of tax, to
reflect the
 
FDIC's higher loss
 
estimate which increased
 
from $
16.3
 
billion, when
 
approved, to
 
$
20.4
 
billion during
 
the quarter.
 
The
special assessment
 
amount and
 
collection period
 
may change
 
as the
 
estimated loss
 
is periodically
 
adjusted or
 
if the
 
total amount
collected varies.
Legal Proceedings
The
 
nature
 
of
 
Popular’s
 
business
 
ordinarily
 
generates
 
claims,
 
litigation,
 
investigations,
 
and
 
legal
 
and
 
administrative
 
cases
 
and
proceedings
 
(collectively,
 
“Legal Proceedings”).
 
When the
 
Corporation determines
 
that
 
it
 
has
 
meritorious
 
defenses to
 
the
 
claims
asserted, it vigorously defends itself. The Corporation will consider the settlement of cases (including cases where it has meritorious
defenses) when, in management’s judgment, it
 
is in the best
 
interest of the Corporation and
 
its stockholders to do so.
 
On at least a
quarterly basis, Popular assesses its liabilities and contingencies relating
 
to outstanding Legal Proceedings utilizing the most current
information
 
available.
 
For
 
matters
 
where
 
it
 
is
 
probable
 
that
 
the
 
Corporation
 
will
 
incur
 
a
 
material
 
loss
 
and
 
the
 
amount
 
can
 
be
reasonably estimated,
 
the Corporation
 
establishes an
 
accrual for
 
the loss.
 
Once established,
 
the accrual
 
is adjusted
 
on at
 
least a
quarterly
 
basis
 
to
 
reflect
 
any
 
relevant
 
developments,
 
as
 
appropriate.
 
For
 
matters
 
where
 
a
 
material
 
loss
 
is
 
not
 
probable,
 
or
 
the
amount of the loss cannot be reasonably estimated,
 
no accrual is established.
 
In certain cases,
 
exposure to loss
 
exists in
 
excess of any
 
accrual to the
 
extent such loss
 
is reasonably possible,
 
but not
 
probable.
Management believes and
 
estimates that the
 
range of reasonably
 
possible losses (with
 
respect to those
 
matters where such
 
limits
may be determined, in excess of amounts accrued)
 
for current Legal Proceedings ranged from $
0
 
to approximately $
15.8
 
million as
of March 31,
 
2024. In certain cases,
 
management cannot reasonably estimate the
 
possible loss at this
 
time. Any estimate involves
significant
 
judgment,
 
given
 
the
 
varying
 
stages
 
of
 
the
 
Legal
 
Proceedings
 
(including
 
the
 
fact
 
that
 
many
 
of
 
them
 
are
 
currently
 
in
preliminary stages), the existence of multiple defendants in several of the current Legal Proceedings whose share of liability has yet
to be
 
determined, the
 
numerous unresolved issues
 
in many
 
of the
 
Legal Proceedings,
 
and the
 
inherent uncertainty
 
of the
 
various
potential
 
outcomes
 
of
 
such
 
Legal
 
Proceedings.
 
Accordingly,
 
management’s
 
estimate
 
will
 
change
 
from
 
time-to-time,
 
and
 
actual
losses may be more or less than the current estimate.
 
While the
 
outcome of
 
Legal Proceedings
 
is inherently
 
uncertain, based
 
on information
 
currently available,
 
advice of
 
counsel, and
available
 
insurance
 
coverage,
 
management
 
believes
 
that
 
the
 
amount
 
it
 
has
 
already
 
accrued
 
is
 
adequate
 
and
 
any
 
incremental
liability arising from
 
the Legal Proceedings
 
in matters in
 
which a loss
 
amount can be
 
reasonably estimated will not
 
have a material
adverse effect
 
on the Corporation’s
 
consolidated financial position.
 
However, in
 
the event
 
of unexpected future
 
developments, it is
possible that
 
the ultimate
 
resolution of
 
these matters
 
in a
 
reporting period, if
 
unfavorable, could have
 
a material
 
adverse effect
 
on
the Corporation’s consolidated financial position for that period.
 
Set forth below is a description of the Corporation’s
 
significant Legal Proceedings.
Insufficient Funds and Overdraft Fees Class Actions
Popular, Inc. was
 
named as a defendant on a
 
putative class action complaint captioned Golden v.
 
Popular, Inc. filed
 
in March 2020
before
 
the
 
U.S.
 
District
 
Court
 
for
 
the
 
Southern
 
District
 
of
 
New
 
York,
 
seeking
 
damages,
 
restitution
 
and
 
injunctive
 
relief.
 
Plaintiff
alleged breach
 
of contract,
 
violation
 
of
 
the covenant
 
of
 
good faith
 
and
 
fair
 
dealing, unjust
 
enrichment and
 
violation
 
of
 
New York
consumer
 
protection law
 
due
 
to
 
Popular’s purported
 
practice of
 
charging
 
overdraft fees
 
(“OD
 
Fees”) on
 
transactions that,
 
under
86
plaintiffs’ theory,
 
do not
 
overdraw the
 
account. Plaintiff
 
described Popular’s purported
 
practice of
 
charging OD
 
Fees as
 
“Authorize
Positive,
 
Purportedly
 
Settle
 
Negative”
 
(“APPSN”)
 
transactions
 
and
 
alleged
 
that
 
Popular
 
assesses
 
OD
 
Fees
 
over
 
authorized
transactions
 
for
 
which
 
sufficient
 
funds
 
are
 
held
 
for
 
settlement.
 
In
 
August
 
2020,
 
Popular
 
filed
 
a
 
Motion
 
to
 
Dismiss
 
on
 
several
grounds,
 
including
 
failure
 
to
 
state
 
a
 
claim
 
against
 
Popular,
 
Inc.
 
and
 
improper
 
venue.
 
In
 
October
 
2020,
 
Plaintiff
 
filed
 
a
 
Notice
 
of
Voluntary
 
Dismissal
 
before
 
the
 
U.S.
 
District
 
Court
 
for
 
the
 
Southern
 
District
 
of
 
New
 
York
 
and,
 
simultaneously,
 
filed
 
an
 
identical
complaint in
 
the U.S.
 
District Court for
 
the District
 
of the
 
Virgin Islands
 
against Popular,
 
Inc., Popular Bank
 
and Banco Popular
 
de
Puerto
 
Rico
 
(“BPPR”). In
 
November 2020,
 
Plaintiff
 
filed
 
a
 
Notice of
 
Voluntary
 
Dismissal against
 
Popular,
 
Inc.
 
and Popular
 
Bank
following a Motion to
 
Dismiss filed on behalf
 
of such entities, which argued
 
failure to state
 
a claim and lack
 
of minimum contacts of
such parties with the U.S.V.I.
 
district court jurisdiction. BPPR, the only defendant remaining in
 
the case, was served with process in
November 2020 and filed a Motion to Dismiss
 
in January 2021.
In October 2022, the parties reached a settlement in principle on a class-wide basis subject to final court approval. In January 2023,
the parties filed
 
before the Court a
 
motion for preliminary approval
 
of the settlement
 
agreement and, on March
 
31, 2023, the Court
issued
 
an
 
order
 
granting
 
preliminary
 
approval
 
of
 
the
 
settlement
 
agreement.
 
The
 
Court
 
scheduled
 
the
 
final
 
approval
 
hearing
 
for
September 8, 2023.
On
 
September
 
8,
 
2023,
 
the
 
Court
 
held
 
a
 
hearing
 
to
 
consider
 
the
 
final
 
approval
 
of
 
the
 
class
 
settlement
 
agreement,
 
and,
 
on
September 29, 2023, the Court issued an Opinion and Order granting final approval
 
to the settlement agreement.
 
On December 19,
2023, the Court
 
issued an Order staying
 
all deadlines in the
 
settlement agreement regarding payment
 
of benefit until further
 
notice
after
 
the
 
parties
 
informed
 
the
 
Court
 
that
 
the
 
settlement
 
administrator
 
had
 
mistakenly
 
failed
 
to
 
send
 
the
 
settlement
 
notice
 
to
approximately
 
3,000
 
class
 
members.
 
On
 
February
 
20,
 
2024,
 
the
 
parties
 
filed
 
a
 
Joint
 
Motion
 
for
 
Supplemental
 
Notice
 
that
 
was
approved by the Court on February 20, 2024.
 
The Court scheduled a supplemental fairness hearing
 
for July 8, 2024.
On January
 
31, 2022,
 
Popular was
 
also named
 
as a
 
defendant on a
 
putative class
 
action complaint captioned
 
Lipsett v.
 
Popular,
Inc. d/b/a Banco Popular, filed before the U.S. District Court for the Southern District
 
of New York, seeking damages, restitution and
injunctive relief. Similar to the claims set forth in the
 
aforementioned Golden complaint, Plaintiff alleges breach of contract, including
violations of the covenant of good faith and
 
fair dealing, as a result of Popular’s purported practice
 
of charging OD Fees for APPSN
transactions. The complaint
 
further alleged that
 
Popular assesses OD
 
Fees over
 
authorized transactions for
 
which sufficient funds
are held for settlement. Popular waived service of process
 
and filed a Motion to Compel Arbitration. In response to Popular’s
 
motion,
Plaintiff filed a Notice of Voluntary Dismissal in April 2022.
 
On May
 
13, 2022,
 
Plaintiff in
 
the Lipsett
 
complaint filed
 
a new
 
complaint captioned
 
Lipsett v.
 
Banco Popular
 
North America
 
d/b/a
Popular Community
 
Bank with
 
the same
 
allegations of
 
his previous
 
complaint against
 
Popular.
 
In September
 
2022, after
 
serving
Plaintiff
 
with a
 
written notice
 
of
 
election to
 
arbitrate the
 
claims
 
asserted in
 
the complaint
 
which went
 
unanswered, Popular
 
Bank
(“PB”) filed a new Motion to Compel Arbitration.
On December 9, 2022, the
 
Court issued a Decision and
 
Order denying PB’s Motion to
 
Compel Arbitration. On December 20, 2022,
PB filed a Notice of Appeal with the United
 
States Court of Appeals for the Second Circuit.
 
On January
 
10, 2024,
 
the Court
 
of
 
Appeals entered
 
judgment affirming
 
the trial
 
court’s
 
decision denying
 
PB’s
 
Motion to
 
Compel
Arbitration. After remand to the U.S. District Court, on March 19, 2024, the court issued an Order adjourning all dates and deadlines
including the
 
initial pretrial conference
 
after the
 
parties informed that
 
they have agreed
 
to mediate
 
the matter.
 
During a mediation
hearing held on May 2, 2024, the parties reached
 
a settlement in principle on a class-wide basis
 
subject to final court approval.
 
87
Note 21 – Non-consolidated variable interest
 
entities
 
 
 
The Corporation is
 
involved with
three
 
statutory trusts which
 
it created to
 
issue trust preferred
 
securities to the
 
public. These trusts
are deemed to be variable interest entities (“VIEs”) since the equity investors at risk have no substantial decision-making rights. The
Corporation does not
 
hold any variable
 
interest in the
 
trusts, and therefore,
 
cannot be the
 
trusts’ primary beneficiary.
 
Furthermore,
the
 
Corporation concluded
 
that
 
it did
 
not
 
hold
 
a
 
controlling financial
 
interest
 
in
 
these
 
trusts
 
since the
 
decisions
 
of
 
the
 
trusts
 
are
predetermined through
 
the trust
 
documents and the
 
guarantee of
 
the trust
 
preferred securities is
 
irrelevant since
 
in substance
 
the
sponsor is guaranteeing its own debt.
Also, the
 
Corporation is
 
involved with
 
various special
 
purpose entities
 
mainly in
 
guaranteed mortgage
 
securitization transactions,
including
 
GNMA
 
and
 
FNMA.
The
 
Corporation
 
has
 
also
 
engaged
 
in
 
securitization
 
transactions
 
with
 
FHLMC,
 
but
 
considers
 
its
exposure
 
in
 
the
 
form
 
of
 
servicing
 
fees
 
and
 
servicing
 
advances
 
not
 
to
 
be
 
significant
at
 
March
 
31,
 
2024
.
These
 
special
 
purpose
entities
 
are
 
deemed
 
to
 
be
 
VIEs
 
since
 
they
 
lack
 
equity
 
investments
 
at
 
risk.
 
The
 
Corporation’s
 
continuing
 
involvement
 
in
 
these
guaranteed loan
 
securitizations includes
 
owning certain
 
beneficial interests in
 
the form
 
of securities as
 
well as
 
the servicing
 
rights
retained. The Corporation is not required to provide additional financial support to
 
any of the variable interest entities to which it has
transferred
 
the
 
financial
 
assets.
 
The
 
mortgage-backed
 
securities,
 
to
 
the
 
extent
 
retained,
 
are
 
classified
 
in
 
the
 
Corporation’s
Consolidated
 
Statements
 
of
 
Financial
 
Condition
 
as
 
available-for-sale
 
or
 
trading
 
securities.
 
The
 
Corporation
 
concluded
 
that,
essentially,
 
these
 
entities
 
(FNMA
 
and
 
GNMA)
 
control
 
the
 
design
 
of
 
their
 
respective
 
VIEs,
 
dictate
 
the
 
quality
 
and
 
nature
 
of
 
the
collateral, require
 
the underlying
 
insurance, set
 
the servicing
 
standards via
 
the servicing
 
guides and
 
can change
 
them at
 
will, and
can remove a
 
primary servicer with cause,
 
and without cause in
 
the case of
 
FNMA. Moreover, through
 
their guarantee obligations,
agencies (FNMA and GNMA) have the obligation
 
to absorb losses that could be potentially significant
 
to the VIE.
The
 
Corporation
 
holds
 
variable
 
interests
 
in
 
these
 
VIEs
 
in
 
the
 
form
 
of
 
agency
 
mortgage-backed
 
securities
 
and
 
collateralized
mortgage obligations, including those securities originated by the Corporation and those acquired from
 
third parties. Additionally, the
Corporation holds agency mortgage-backed securities
 
and agency collateralized mortgage obligations
 
issued by third party
 
VIEs in
which
 
it
 
has
 
no
 
other
 
form
 
of
 
continuing
 
involvement. Refer
 
to
 
Note
 
23
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
information on the debt securities outstanding at March 31,
 
2024 and December 31, 2023, which are classified
 
as available-for-sale
and
 
trading
 
securities
 
in
 
the
 
Corporation’s
 
Consolidated
 
Statements
 
of
 
Financial
 
Condition.
 
In
 
addition,
 
the
 
Corporation
 
holds
variable
 
interests
 
in
 
the
 
form
 
of
 
servicing
 
fees,
 
since
 
it
 
retains
 
the
 
right
 
to
 
service
 
the
 
transferred
 
loans
 
in
 
those
 
government-
sponsored special purpose entities (“SPEs”) and may also purchase the right to service loans in other government-sponsored SPEs
that were transferred to those SPEs by a third-party.
 
The following
 
table presents
 
the carrying
 
amount and
 
classification of
 
the assets
 
related to
 
the Corporation’s
 
variable interests
 
in
non-consolidated VIEs
 
and the
 
maximum exposure
 
to loss
 
as a
 
result of
 
the Corporation’s
 
involvement as
 
servicer of
 
GNMA and
FNMA loans at March 31, 2024 and December
 
31, 2023.
 
88
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
March 31,2024
December 31, 2023
Assets
Servicing assets:
Mortgage servicing rights
$
90,254
$
92,999
Total servicing
 
assets
 
$
90,254
$
92,999
Other assets:
Servicing advances
$
6,993
$
6,291
Total other assets
$
6,993
$
6,291
Total assets
$
97,247
$
99,290
Maximum exposure to loss
$
97,247
$
99,290
The size of
 
the non-consolidated VIEs,
 
in which the
 
Corporation has a
 
variable interest in
 
the form
 
of servicing fees,
 
measured as
the total unpaid principal balance of the loans,
 
amounted to $
7.0
 
billion at March 31, 2024 (December 31, 2023 - $
7.2
 
billion).
The Corporation
 
determined that
 
the maximum
 
exposure to
 
loss includes
 
the fair
 
value of
 
the MSRs
 
and the
 
assumption that
 
the
servicing advances at March
 
31, 2024 and December
 
31, 2023, will not
 
be recovered. The agency
 
debt securities are not
 
included
as part of the maximum exposure to loss since
 
they are guaranteed by the related agencies.
ASU 2009-17 requires that an ongoing primary beneficiary assessment should be made to determine whether the Corporation is the
primary beneficiary of any of the VIEs it is
 
involved with. The conclusion on the assessment of these non-consolidated VIEs has not
changed
 
since
 
their
 
initial
 
evaluation.
 
The
 
Corporation
 
concluded
 
that
 
it
 
is
 
still
 
not
 
the
 
primary
 
beneficiary
 
of
 
these
 
VIEs,
 
and
therefore, these VIEs are not required to be consolidated
 
in the Corporation’s financial statements at March 31, 2024.
89
Note 22 – Related party transactions
 
 
Centro Financiero BHD, S.A.
At March 31, 2024, the Corporation had a
15.84
% equity interest in Centro Financiero BHD, S.A. (“BHD”),
 
one of the largest banking
and financial services groups
 
in the Dominican Republic.
 
During the quarter ended
 
March 31, 2024, the
 
Corporation recorded $
7.3
million in equity pickup from its investment in BHD (March 31,
 
2023 - $
9.1
 
million), which had a carrying amount of $
233.2
 
million at
March 31, 2024 (December
 
31, 2023 - $
225.9
 
million). There were
no
 
dividends received by the
 
Corporation from its investment in
BHD León during the quarters ended March 31, 2024
 
and 2023.
 
Investment Companies
The Corporation,
 
through its subsidiary Popular
 
Asset Management LLC (“PAM”),
 
provides advisory services to several
 
investment
companies registered
 
under the
 
Investment Company
 
Act of
 
1940 in
 
exchange for
 
a fee.
 
The Corporation,
 
through its
 
subsidiary
BPPR, also
 
provides transfer
 
agency services to
 
these investment companies.
 
These fees
 
are calculated
 
at an
 
annual rate
 
of the
average net
 
assets of the
 
investment company,
 
as defined in
 
each agreement. Due
 
to its
 
advisory role, the
 
Corporation considers
these investment companies as related parties.
For the quarter ended March 31, 2024, administrative fees charged to these investment companies amounted to $
0.6
 
million (March
31, 2023 -
0.6
 
million) and waived fees amounted to $
0.2
 
million (March 31, 2023 - $
0.2
 
million), for a net fee of $
0.4
 
million (March
31, 2023 - $
0.4
 
million).
90
Note 23 – Fair value measurement
 
ASC Subtopic
 
820-10 “Fair
 
Value
 
Measurements and
 
Disclosures” establishes
 
a fair
 
value hierarchy
 
that prioritizes
 
the inputs
 
to
valuation techniques
 
used to
 
measure fair
 
value into
 
three levels
 
in order
 
to increase
 
consistency and
 
comparability in
 
fair value
measurements and disclosures. The hierarchy is broken
 
down into three levels based on the reliability
 
of inputs as follows:
Level 1
- Unadjusted quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to
access at
 
the measurement date.
 
Valuation
 
on these
 
instruments does not
 
necessitate a
 
significant degree of
 
judgment
since valuations are based on quoted prices that
 
are readily
 
available in an active market.
Level 2
- Quoted prices other than those included in Level 1 that are observable either directly or indirectly.
 
Level 2 inputs
include
 
quoted
 
prices
 
for
 
similar
 
assets
 
or
 
liabilities
 
in
 
active
 
markets,
 
quoted
 
prices
 
for
 
identical
 
or
 
similar
 
assets
 
or
liabilities in
 
markets that
 
are
 
not active,
 
or other
 
inputs that
 
are
 
observable or
 
that can
 
be corroborated
 
by
 
observable
market data for substantially the full term of the
 
financial instrument.
Level
 
3
-
 
Inputs
 
are
 
unobservable
 
and
 
significant
 
to
 
the
 
fair
 
value
 
measurement.
 
Unobservable
 
inputs
 
reflect
 
the
Corporation’s own judgements about assumptions that
 
market participants would use in pricing the asset
 
or liability.
The
 
Corporation
 
maximizes
 
the
 
use
 
of
 
observable
 
inputs
 
and
 
minimizes
 
the
 
use
 
of
 
unobservable
 
inputs
 
by
 
requiring
 
that
 
the
observable inputs be used when
 
available. Fair value is
 
based upon quoted market prices
 
when available. If listed prices
 
or quotes
are
 
not
 
available,
 
the
 
Corporation
 
employs
 
internally-developed
 
models
 
that
 
primarily
 
use
 
market-based
 
inputs
 
including
 
yield
curves, interest rates,
 
volatilities, and credit
 
curves, among others.
 
Valuation
 
adjustments are limited
 
to those necessary
 
to ensure
that the financial instrument’s
 
fair value is adequately representative of
 
the price that would
 
be received or paid
 
in the marketplace.
These adjustments include amounts that reflect counterparty credit quality,
 
the Corporation’s credit standing, constraints on liquidity
and unobservable parameters that are applied consistently.
 
There have been no changes in the
 
Corporation’s methodologies used
to estimate the fair value of assets and liabilities from
 
those disclosed in the 2023 Form 10-K.
The estimated fair
 
value may
 
be subjective in
 
nature and may
 
involve uncertainties and
 
matters of
 
significant judgment for
 
certain
financial instruments. Changes in the underlying assumptions
 
used in calculating fair value could significantly
 
affect the results.
Fair Value on a Recurring and Nonrecurring Basis
The following fair value hierarchy tables
 
present information about the Corporation’s assets
 
and liabilities measured at fair value
 
on
a recurring basis at March 31, 2024 and December
 
31, 2023:
 
 
91
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At March 31, 2024
(In thousands)
Level 1
Level 2
Level 3
Measured at NAV
Total
RECURRING FAIR VALUE
 
MEASUREMENTS
Assets
 
 
 
 
 
 
Debt securities available-for-sale:
U.S. Treasury securities
$
6,262,480
$
6,026,731
$
-
$
-
$
12,289,211
Collateralized mortgage obligations - federal
agencies
-
127,608
-
-
127,608
Mortgage-backed securities
-
5,597,993
607
-
5,598,600
Other
-
5
2,000
-
2,005
Total debt securities
 
available-for-sale
$
6,262,480
$
11,752,337
$
2,607
$
-
$
18,017,424
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
8,316
$
-
$
-
$
-
$
8,316
Obligations of Puerto Rico, States and political
subdivisions
-
60
-
-
60
Collateralized mortgage obligations
-
90
-
-
90
Mortgage-backed securities
-
18,587
84
-
18,671
Other
-
-
166
-
166
Total trading account
 
debt securities, excluding
derivatives
$
8,316
$
18,737
$
250
$
-
$
27,303
Equity securities
$
-
$
40,933
$
-
$
336
$
41,269
Mortgage servicing rights
-
-
114,964
-
114,964
Loans held-for-sale
-
5,352
-
-
5,352
Derivatives
 
-
24,045
-
-
24,045
Total assets measured
 
at fair value on a
recurring basis
$
6,270,796
$
11,841,404
$
117,821
$
336
$
18,230,357
Liabilities
Derivatives
$
-
$
(21,784)
$
-
$
-
$
(21,784)
Total liabilities measured
 
at fair value on a
recurring basis
$
-
$
(21,784)
$
-
$
-
$
(21,784)
 
 
 
92
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2023
(In thousands)
Level 1
Level 2
Level 3
Measured at NAV
Total
RECURRING FAIR VALUE
 
MEASUREMENTS
Assets
 
 
 
 
 
Debt securities available-for-sale:
U.S. Treasury securities
$
3,936,036
$
6,811,025
$
-
$
-
$
10,747,061
Collateralized mortgage obligations - federal
agencies
-
134,686
-
-
134,686
Mortgage-backed securities
-
5,844,180
606
-
5,844,786
Other
-
11
2,500
-
2,511
Total debt securities
 
available-for-sale
$
3,936,036
$
12,789,902
$
3,106
$
-
$
16,729,044
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
16,859
$
-
$
-
$
-
$
16,859
Obligations of Puerto Rico, States and political
subdivisions
-
71
-
-
71
Collateralized mortgage obligations
-
93
5
-
98
Mortgage-backed securities
-
14,261
112
-
14,373
Other
-
-
167
-
167
Total trading account
 
debt securities, excluding
derivatives
$
16,859
$
14,425
$
284
$
-
$
31,568
Equity securities
$
-
$
37,965
$
-
$
310
$
38,275
Mortgage servicing rights
-
-
118,109
-
118,109
Loans held-for-sale
-
3,239
-
-
3,239
Derivatives
 
-
24,419
-
-
24,419
Total assets measured
 
at fair value on a
recurring basis
$
3,952,895
$
12,869,950
$
121,499
$
310
$
16,944,654
Liabilities
 
 
 
Derivatives
$
-
$
(21,103)
$
-
$
-
$
(21,103)
Total liabilities measured
 
at fair value on a
recurring basis
$
-
$
(21,103)
$
-
$
-
$
(21,103)
Beginning in the first quarter of 2023, the Corporation has elected the fair value option for
 
newly originated mortgage loans held-for-
sale. This election better aligns with the management
 
of the portfolio from a business perspective.
 
Loans held-for-sale measured at fair value
 
Loans held-for-sale measured at fair value were priced
 
based on secondary market prices. These loans
 
are classified as Level 2.
The
 
following
 
tables summarize
 
the difference
 
between the
 
aggregate fair
 
value
 
and the
 
aggregate unpaid
 
principal
 
balance
 
for
mortgage loans originated as held-for-sale measured
 
at fair value as of March 31, 2024 and December
 
31, 2023.
 
 
 
 
 
 
(In thousands)
March 31, 2024
Aggregate Unpaid
Fair Value
Principal Balance
Difference
Loans held for sale
$
5,352
$
5,285
$
67
 
 
 
 
 
 
(In thousands)
December 31, 2023
Aggregate Unpaid
Fair Value
Principal Balance
Difference
Loans held for sale
$
3,239
$
3,202
$
37
No
 
loans held-for-sale were 90 or more days past
 
due or on nonaccrual status as of March 31,
 
2024 and December 31, 2023.
 
 
93
For the quarter
 
ended March 31, 2024,
 
changes in the
 
fair value of
 
mortgage loans held-for-sale for
 
which the Corporation
 
elected
the fair value option, were not considered material.
The fair value information included in the following
 
tables is not as of period end, but as
 
of the date that the fair value measurement
was recorded during the quarters ended March 31,
 
2024 and 2023 and excludes nonrecurring
 
fair value measurements of assets no
longer outstanding as of the reporting date.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended March 31, 2024
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE
 
MEASUREMENTS
Assets
 
 
 
 
 
Write-downs
Loans
[1]
$
-
$
-
$
110
$
110
$
(2,172)
Other real estate owned
[2]
-
-
1,416
1,416
(224)
Other foreclosed assets
[2]
-
-
105
105
(41)
Total assets measured
 
at fair value on a nonrecurring basis
$
-
$
-
$
1,631
$
1,631
$
(2,437)
[1] Relates mainly to certain impaired collateral dependent loans.
 
The impairment was measured based on the fair value
 
of the collateral, which is
derived from appraisals that take into consideration prices
 
in observed transactions involving similar assets in similar
 
locations. Costs to sell are
excluded from the reported fair value amount.
[2] Represents the fair value of foreclosed real estate and
 
other collateral owned that were written down to their fair
 
value. Costs to sell are
excluded from the reported fair value amount.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended March 31, 2023
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE
 
MEASUREMENTS
Assets
 
 
 
 
 
Write-downs
Loans
[1]
$
-
$
-
$
1,629
$
1,629
$
(3)
Other real estate owned
[2]
-
-
2,330
2,330
(628)
Other foreclosed assets
[2]
-
-
15
15
(4)
Total assets measured
 
at fair value on a nonrecurring basis
$
-
$
-
$
3,974
$
3,974
$
(635)
[1] Relates mainly to certain impaired collateral dependent loans.
 
The impairment was measured based on the fair value
 
of the collateral, which is
derived from appraisals that take into consideration prices
 
in observed transactions involving similar assets in similar
 
locations. Costs to sell are
excluded from the reported fair value amount.
[2] Represents the fair value of foreclosed real estate and
 
other collateral owned that were written down to their fair
 
value. Costs to sell are
excluded from the reported fair value amount.
The following tables present the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarters
ended March 31, 2024 and 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended March 31, 2024
MBS
Other
CMOs
MBS
Other
classified
securities
classified
classified
securities
as debt
classified as
 
as trading
as trading
classified
securities
 
debt securities
account
account
as trading
Mortgage
available-
available-
 
debt
 
debt
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at December 31, 2023
$
606
$
2,500
$
5
$
112
$
167
$
118,109
$
121,499
Gains (losses) included in earnings
-
(500)
-
-
(1)
(3,439)
(3,940)
Gains (losses) included in OCI
1
-
-
-
-
-
1
Additions
-
-
-
-
-
294
294
Settlements
-
-
(5)
(28)
-
-
(33)
Balance at March 31, 2024
$
607
$
2,000
$
-
$
84
$
166
$
114,964
$
117,821
Changes in unrealized gains (losses) included
in earnings relating to assets still held at March
31, 2024
$
-
$
(500)
$
-
$
-
$
2
$
(1,202)
$
(1,700)
 
 
 
 
 
94
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended March 31, 2023
MBS
Other
Other
classified
securities
CMOs
MBS
securities
as debt
classified as
classified
classified
classified
securities
debt securities
as trading
as trading
as trading
Mortgage
available-
available-
account debt
account debt
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at December 31, 2022
$
711
$
1,000
$
113
$
215
$
207
$
128,350
$
130,596
Gains (losses) included in earnings
-
-
-
(1)
(8)
(1,376)
(1,385)
Gains (losses) included in OCI
(6)
-
-
-
-
-
(6)
Additions
-
-
-
-
-
501
501
Settlements
(50)
-
(25)
(26)
-
-
(101)
Balance at March 31, 2023
$
655
$
1,000
$
88
$
188
$
199
$
127,475
$
129,605
Changes in unrealized gains (losses)
included in earnings relating to assets
still held at March 31, 2023
$
-
$
-
$
-
$
-
$
9
$
1,286
$
1,295
Gains and losses (realized and unrealized) included in earnings for the quarters ended March 31, 2024 and 2023 for
 
Level 3 assets
and liabilities included in the previous tables
 
are reported in the consolidated statements of
 
operations as follows:
 
 
 
 
 
 
 
 
Quarter ended March 31, 2024
Quarter ended March 31, 2023
Changes in unrealized
Changes in unrealized
Total gains
gains (losses) relating to
Total gains
gains (losses) relating to
(losses) included
assets still held at
(losses) included
assets still held at
(In thousands)
in earnings
reporting date
in earnings
reporting date
Mortgage banking activities
$
(3,439)
$
(1,202)
$
(1,376)
$
1,286
Trading account (loss) profit
(1)
2
(9)
9
Provision for credit losses
(500)
(500)
-
-
Total
 
$
(3,940)
$
(1,700)
$
(1,385)
$
1,295
The following
 
tables include
 
quantitative information
 
about significant
 
unobservable inputs
 
used to
 
derive the
 
fair value
 
of Level
 
3
instruments, excluding those instruments
 
for which the
 
unobservable inputs were not
 
developed by the
 
Corporation such as
 
prices
of prior transactions and/or unadjusted third-party pricing
 
sources at March 31, 2024 and 2023.
 
 
 
 
 
 
 
 
 
 
 
Fair value at
 
March 31,
(In thousands)
2024
Valuation technique
Unobservable inputs
Weighted average (range) [1]
Other - trading
$
166
Discounted cash flow model
Weighted average life
2.3
 
years
Yield
12.0%
Prepayment speed
10.8%
Loans held-in-portfolio
$
110
[2]
External appraisal
Haircut applied on
external appraisals
10.0%
[1]
 
Weighted average of significant unobservable inputs
 
used to develop Level 3 fair value measurements
 
were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied
 
to external appraisals were excluded from this table.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value at
 
March 31,
(In thousands)
2023
Valuation technique
Unobservable inputs
Weighted average (range) [1]
CMO's - trading
$
88
Discounted cash flow model
Weighted average life
0.3
 
years (
0.1
 
-
0.5
 
years)
Yield
4.9
% (
4.9
% -
5.4
%)
Prepayment speed
9.2
% (
8.3
% -
27.8
%)
Other - trading
$
199
Discounted cash flow model
Weighted average life
2.5
 
years
Yield
12.0%
Prepayment speed
10.8%
Loans held-in-portfolio
$
1,560
[2]
External appraisal
Haircut applied on
external appraisals
35
.0%
[1]
 
Weighted average of significant unobservable inputs
 
used to develop Level 3 fair value measurements
 
were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied
 
to external appraisals were excluded from this table.
 
95
Note 24 – Fair value of financial instruments
The fair
 
value of
 
financial instruments
 
is the
 
amount at
 
which an
 
asset or
 
obligation could
 
be exchanged
 
in a
 
current transaction
between
 
willing
 
parties,
 
other
 
than
 
in
 
a
 
forced
 
or
 
liquidation
 
sale.
 
For
 
those
 
financial
 
instruments
 
with
 
no
 
quoted
 
market
 
prices
available, fair values have been estimated using present
 
value calculations or other valuation techniques, as well
 
as management’s
best judgment with respect to current economic conditions, including discount rates, estimates of future cash flows, and prepayment
assumptions. Many of these
 
estimates involve various assumptions and
 
may vary significantly from
 
amounts that could be
 
realized
in actual transactions.
The fair values
 
reflected herein have been
 
determined based on the
 
prevailing rate environment at
 
March 31, 2024
 
and December
31, 2023, as applicable. In different interest rate environments,
 
fair value estimates can differ significantly, especially for certain fixed
rate
 
financial
 
instruments.
 
In
 
addition,
 
the
 
fair
 
values
 
presented
 
do
 
not
 
attempt
 
to
 
estimate
 
the
 
value
 
of
 
the
 
Corporation’s
 
fee
generating businesses
 
and anticipated
 
future business
 
activities, that
 
is, they
 
do not
 
represent the
 
Corporation’s value
 
as a
 
going
concern. There have been
 
no changes in the
 
Corporation’s valuation methodologies and inputs
 
used to estimate the
 
fair values for
each class of financial assets and liabilities not measured at
 
fair value.
The following tables present the
 
carrying amount and estimated fair
 
values of financial instruments with their
 
corresponding level in
the fair
 
value hierarchy.
 
The aggregate
 
fair value
 
amounts of
 
the financial
 
instruments disclosed
 
do not
 
represent management’s
estimate of the underlying value of the Corporation.
 
96
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
Carrying
 
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
 
Financial Assets:
Cash and due from banks
$
320,486
$
320,486
$
-
$
-
$
-
$
320,486
Money market investments
5,928,578
5,920,785
7,793
-
-
5,928,578
Trading account debt securities, excluding
 
derivatives
[1]
27,303
8,316
18,737
250
-
27,303
Debt securities available-for-sale
[1]
18,017,424
6,262,480
11,752,337
2,607
-
18,017,424
Debt securities held-to-maturity:
U.S. Treasury securities
$
8,013,952
$
-
$
7,894,800
$
-
$
-
$
7,894,800
Obligations of Puerto Rico, States and political
subdivisions
55,981
-
6,918
49,284
-
56,202
Collateralized mortgage obligation-federal agency
1,536
-
1,364
-
-
1,364
Securities in wholly owned statutory business trusts
5,960
-
5,960
-
-
5,960
Total debt securities
 
held-to-maturity
$
8,077,429
$
-
$
7,909,042
$
49,284
$
-
$
7,958,326
Equity securities:
FHLB stock
$
48,604
$
-
$
48,604
$
-
$
-
$
48,604
FRB stock
99,920
-
99,920
-
-
99,920
Other investments
47,223
-
40,933
6,531
336
47,800
Total equity securities
$
195,747
$
-
$
189,457
$
6,531
$
336
$
196,324
Loans held-for-sale
$
5,352
$
-
$
5,532
$
-
$
-
$
5,532
Loans held-in-portfolio
34,379,194
-
-
33,249,195
-
33,249,195
Mortgage servicing rights
114,964
-
-
114,964
-
114,964
Derivatives
24,045
-
24,045
-
-
24,045
March 31, 2024
Carrying
 
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
 
Financial Liabilities:
Deposits:
Demand deposits
$
55,053,712
$
-
$
55,053,712
$
-
$
-
$
55,053,712
Time deposits
8,755,072
-
8,430,548
-
-
8,430,548
Total deposits
$
63,808,784
$
-
$
63,484,260
$
-
$
-
$
63,484,260
Assets sold under agreements to repurchase
$
66,090
$
-
$
66,088
$
-
$
-
$
66,088
Notes payable:
FHLB advances
$
373,665
$
-
$
358,046
$
-
$
-
$
358,046
Unsecured senior debt securities
394,285
-
410,228
-
-
410,228
Junior subordinated deferrable interest debentures
(related to trust preferred securities)
198,353
-
187,383
-
-
187,383
Total notes payable
$
966,303
$
-
$
955,657
$
-
$
-
$
955,657
Derivatives
$
21,784
$
-
$
21,784
$
-
$
-
$
21,784
[1]
Refer to Note 23 to the Consolidated Financial Statements
 
for the fair value by class of financial asset and its hierarchy
 
level.
 
97
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2023
Carrying
 
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
 
Financial Assets:
Cash and due from banks
$
420,462
$
420,462
$
-
$
-
$
-
$
420,462
Money market investments
6,998,871
6,991,758
7,113
-
-
6,998,871
Trading account debt securities, excluding
 
derivatives
[1]
31,568
16,859
14,425
284
-
31,568
Debt securities available-for-sale
[1]
16,729,044
3,936,036
12,789,902
3,106
-
16,729,044
Debt securities held-to-maturity:
U.S. Treasury securities
$
8,121,411
$
-
$
8,092,339
$
-
$
-
$
8,092,339
Obligations of Puerto Rico, States and political
subdivisions
59,628
-
7,007
52,671
-
59,678
Collateralized mortgage
 
obligation-federal agency
1,556
-
1,395
13
-
1,408
Securities in wholly owned statutory business trusts
5,960
-
5,960
-
-
5,960
Total debt securities
 
held-to-maturity
$
8,188,555
$
-
$
8,106,701
$
52,684
$
-
$
8,159,385
Equity securities:
FHLB stock
$
49,549
$
-
$
49,549
$
-
$
-
$
49,549
FRB stock
98,948
-
98,948
-
-
98,948
Other investments
45,229
-
37,965
7,869
310
46,144
Total equity securities
$
193,726
$
-
$
186,462
$
7,869
$
310
$
194,641
Loans held-for-sale
$
4,301
$
-
$
4,328
$
-
$
-
$
4,328
Loans held-in-portfolio
34,335,630
-
 
-
33,376,255
-
33,376,255
Mortgage servicing rights
118,109
-
 
-
118,109
-
118,109
Derivatives
24,419
-
24,419
-
-
24,419
December 31, 2023
Carrying
 
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
 
Financial Liabilities:
Deposits:
Demand deposits
$
55,116,351
$
-
$
55,116,351
$
-
$
-
$
55,116,351
Time deposits
8,501,892
-
8,154,823
-
-
8,154,823
Total deposits
$
63,618,243
$
-
$
63,271,174
$
-
$
-
$
63,271,174
Assets sold under agreements to repurchase
$
91,384
$
-
$
91,386
$
-
$
-
$
91,386
Notes payable:
FHLB advances
$
394,665
$
-
$
377,851
$
-
$
-
$
377,851
Unsecured senior debt securities
393,937
-
400,848
-
-
400,848
Junior subordinated deferrable interest debentures
(related to trust preferred securities)
198,346
-
180,076
-
-
180,076
Total notes payable
$
986,948
$
-
$
958,775
$
-
$
-
$
958,775
Derivatives
$
21,103
$
-
$
21,103
$
-
$
-
$
21,103
[1]
Refer to Note 23 to the Consolidated Financial Statements
 
for the fair value by class of financial asset and its hierarchy
 
level.
 
The notional
 
amount of
 
commitments to
 
extend credit
 
at March
 
31, 2024
 
and December
 
31, 2023
 
was $
11
 
billion and
 
$
10
 
billion,
respectively, and
 
represented the unused portion of credit
 
facilities granted to customers. The
 
notional amount of letters of
 
credit at
March 31,
 
2024 and
 
December 31,
 
2023 was
 
$
117
 
million and
 
$
82
 
million, respectively,
 
and represented
 
the contractual
 
amount
that is required to be paid in the event of nonperformance. The fair
 
value of commitments to extend credit and letters of credit, which
are based on the fees charged to enter into those
 
agreements, are not material to Popular’s
 
financial statements.
 
 
98
Note 25 – Net income per common share
The following table
 
sets forth the
 
computation of net
 
income per common
 
share (“EPS”), basic
 
and diluted, for
 
the quarters
 
ended
March 31, 2024 and 2023
:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters ended March 31,
(In thousands, except per share information)
2024
2023
Net income
$
103,283
$
158,979
Preferred stock dividends
(353)
(353)
Net income applicable to common stock
$
102,930
$
158,626
Average common shares outstanding
71,869,735
71,541,778
Average potential dilutive common shares
 
97,068
64,418
Average common shares outstanding - assuming dilution
71,966,803
71,606,196
Basic EPS
$
1.43
$
2.22
Diluted EPS
$
1.43
$
2.22
For the quarters
 
ended March 31, 2024 and
 
2023, the Corporation calculated the impact
 
of potential dilutive common shares under
the
 
treasury
 
stock
 
method,
 
consistent
 
with
 
the
 
method
 
used
 
for
 
the
 
preparation
 
of
 
the
 
financial
 
statements
 
for
 
the
 
year
 
ended
December
 
31,
 
2023.
 
For
 
a
 
discussion
 
of
 
the
 
calculation
 
under
 
the
 
treasury
 
stock
 
method,
 
refer
 
to
 
Note
 
31
 
of
 
the
 
Consolidated
Financial Statements included in the 2023 Form 10-K.
99
Note 26 – Revenue from contracts with customers
The
 
following
 
table
 
presents
 
the
 
Corporation’s
 
revenue
 
streams
 
from
 
contracts
 
with
 
customers
 
by
 
reportable
 
segment
 
for
 
the
quarters ended March 31, 2024 and 2023
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters ended March 31,
(In thousands)
2024
2023
BPPR
Popular U.S.
BPPR
Popular U.S.
Service charges on deposit accounts
$
35,016
$
2,426
$
32,152
$
2,526
Other service fees:
Debit card fees
14,049
199
12,948
218
Insurance fees, excluding reinsurance
10,556
1,846
10,798
1,307
Credit card fees, excluding late fees and membership
 
fees
35,800
458
36,174
579
Sale and administration of investment products
7,427
-
6,558
-
Trust fees
6,985
-
5,896
-
Total revenue from
 
contracts with customers
[1]
$
109,833
$
4,929
$
104,526
$
4,630
[1] The amounts include intersegment transactions of $
0.6
 
million and $
1.6
 
million, respectively, for the
 
quarters ended March 31, 2024 and 2023.
Revenue from contracts with
 
customers is recognized when,
 
or as, the performance
 
obligations are satisfied by
 
the Corporation by
transferring the
 
promised services
 
to
 
the customers.
 
A
 
service is
 
transferred to
 
the customer
 
when, or
 
as, the
 
customer obtains
control
 
of
 
that
 
service.
 
A
 
performance obligation
 
may
 
be
 
satisfied over
 
time
 
or
 
at
 
a
 
point
 
in
 
time.
 
Revenue from
 
a
 
performance
obligation satisfied
 
over time
 
is recognized
 
based on
 
the services
 
that have
 
been rendered
 
to date.
 
Revenue from
 
a performance
obligation satisfied at a point in time
 
is recognized when the customer obtains control over the
 
service. The transaction price, or the
amount of revenue
 
recognized, reflects the
 
consideration the Corporation expects
 
to be entitled
 
to in exchange
 
for those promised
services. In determining the transaction price, the Corporation considers the effects of variable consideration. Variable consideration
is included
 
in the
 
transaction price
 
only to
 
the extent
 
it is
 
probable that a
 
significant reversal
 
in the
 
amount of
 
cumulative revenue
recognized will
 
not occur.
 
The Corporation
 
is the
 
principal in
 
a transaction
 
if it
 
obtains control
 
of the
 
specified goods
 
or services
before they
 
are transferred
 
to
 
the customer.
 
If the
 
Corporation acts
 
as principal,
 
revenues are
 
presented in
 
the gross
 
amount of
consideration to which it expects to
 
be entitled and are not
 
netted with any related expenses. On the
 
other hand, the Corporation is
an agent if it does not control
 
the specified goods or services before they are transferred
 
to the customer. If
 
the Corporation acts as
an agent, revenues are presented in the amount
 
of consideration to which it expects to be entitled,
 
net of related expenses.
Following is a description of the nature and timing
 
of revenue streams from contracts with customers:
Service charges on deposit accounts
Service
 
charges
 
on
 
deposit
 
accounts
 
are
 
earned
 
on
 
retail
 
and
 
commercial
 
deposit
 
activities
 
and
 
include,
 
but
 
are
 
not
 
limited
 
to,
nonsufficient fund
 
fees, overdraft
 
fees and
 
checks stop
 
payment fees.
 
These transaction-based
 
fees are
 
recognized at
 
a point
 
in
time,
 
upon
 
occurrence
 
of
 
an
 
activity
 
or
 
event
 
or
 
upon
 
the
 
occurrence
 
of
 
a
 
condition
 
which
 
triggers
 
the
 
fee
 
assessment.
 
The
Corporation is acting as principal in these transactions.
Debit card fees
Debit card fees include, but are not limited to, interchange
 
fees, surcharging income and foreign transaction
 
fees.
 
These transaction-
based fees
 
are recognized at
 
a point in
 
time, upon
 
occurrence of an
 
activity or
 
event or upon
 
the occurrence of
 
a condition which
triggers
 
the
 
fee
 
assessment.
 
Interchange
 
fees
 
are
 
recognized
 
upon
 
settlement
 
of
 
the
 
debit
 
card
 
payment
 
transactions.
 
The
Corporation is acting as principal in these transactions.
Insurance fees
Insurance fees
 
include, but
 
are
 
not limited
 
to, commissions
 
and contingent
 
commissions.
 
Commissions and
 
fees
 
are
 
recognized
when related
 
policies are effective
 
since the Corporation
 
does not
 
have an enforceable
 
right to
 
payment for services
 
completed to
date.
 
An
 
allowance
 
is
 
created
 
for
 
expected
 
adjustments
 
to
 
commissions
 
earned
 
related
 
to
 
policy
 
cancellations.
 
Contingent
commissions
 
are
 
recorded
 
on
 
an
 
accrual
 
basis
 
when
 
the
 
amount
 
to
 
be
 
received
 
is
 
notified
 
by
 
the
 
insurance
 
company.
 
The
100
Corporation is acting
 
as an
 
agent since it
 
arranges for the
 
sale of
 
the policies and
 
receives commissions if,
 
and when, it
 
achieves
the sale.
 
Credit card fees
Credit card
 
fees include,
 
but are
 
not limited
 
to, interchange
 
fees, additional
 
card fees,
 
cash advance
 
fees, balance
 
transfer fees,
foreign transaction fees, and returned payments
 
fees. Credit card fees are
 
recognized at a point in
 
time, upon the occurrence of
 
an
activity or
 
an event.
 
Interchange fees
 
are recognized
 
upon settlement
 
of the
 
credit card
 
payment transactions. The
 
Corporation is
acting as principal in these transactions.
Sale and administration of investment products
Fees from
 
the sale
 
and administration
 
of investment
 
products include,
 
but are
 
not limited
 
to, commission
 
income from
 
the sale
 
of
investment products, asset management fees, underwriting
 
fees, and mutual fund fees.
 
Commission income from investment products is recognized on the trade date since clearing, trade execution, and custody services
are satisfied when
 
the customer acquires
 
or disposes of
 
the rights to
 
obtain the economic
 
benefits of the
 
investment products and
brokerage contracts have no fixed duration and
 
are terminable at will by
 
either party. The
 
Corporation is acting as principal in these
transactions since it
 
performs the service
 
of providing the
 
customer with the
 
ability to acquire
 
or dispose of
 
the rights to
 
obtain the
economic benefits of investment products.
 
Asset
 
management
 
fees
 
are
 
satisfied
 
over
 
time
 
and
 
are
 
recognized
 
in
 
arrears.
 
At
 
contract
 
inception,
 
the
 
estimate
 
of
 
the
 
asset
management fee
 
is constrained
 
from the
 
inclusion in
 
the transaction
 
price since
 
the promised
 
consideration is
 
dependent on
 
the
market and thus
 
is highly susceptible
 
to factors
 
outside the manager’s
 
influence. As advisor,
 
the broker-dealer subsidiary
 
is acting
as principal.
Underwriting fees are
 
recognized at a point
 
in time, when
 
the investment products
 
are sold in
 
the open market at
 
a markup. When
the broker-dealer subsidiary is lead
 
underwriter, it is
 
acting as an agent. In
 
turn, when it is
 
a participating underwriter, it
 
is acting as
principal.
Mutual fund fees,
 
such as distribution fees,
 
are considered variable consideration
 
and are recognized over
 
time, as the
 
uncertainty
of the fees to be
 
received is resolved as NAV
 
is determined and investor activity occurs. The
 
promise to provide distribution-related
services
 
is
 
considered
 
a
 
single
 
performance
 
obligation
 
as
 
it
 
requires
 
the
 
provision
 
of
 
a
 
series
 
of
 
distinct
 
services
 
that
 
are
substantially the same and have the same pattern of
 
transfer. When the broker-dealer subsidiary is acting as a distributor, it is acting
as principal. In turn, when it acts as third-party dealer, it is acting
 
as an agent.
Trust fees
Trust fees
 
are recognized from
 
retirement plan, mutual fund
 
administration, investment management, trustee, escrow,
 
and custody
and
 
safekeeping services.
 
These
 
asset
 
management services
 
are
 
considered
 
a
 
single
 
performance obligation
 
as
 
it
 
requires the
provision of
 
a series
 
of distinct
 
services that
 
are substantially
 
the same
 
and have
 
the same
 
pattern of
 
transfer.
 
The performance
obligation
 
is
 
satisfied
 
over
 
time,
 
except
 
for
 
optional
 
services
 
and
 
certain
 
other
 
services
 
that
 
are
 
satisfied
 
at
 
a
 
point
 
in
 
time.
 
Revenues are recognized in
 
arrears,
 
when, or as,
 
the services are rendered.
 
The Corporation is
 
acting as principal since,
 
as asset
manager, it has the obligation to provide the specified service to the customer and
 
has the ultimate discretion in establishing the fee
paid by the customer for the specified services.
 
 
 
101
Note 27 – Leases
The
 
Corporation enters
 
in
 
the
 
ordinary course
 
of
 
business
 
into
 
operating and
 
finance
 
leases
 
for
 
land,
 
buildings
 
and
 
equipment.
These contracts generally do
 
not include purchase options
 
or residual value guarantees.
 
The remaining lease terms
 
of
0.1
 
to
30.8
years
 
considers options
 
to
 
extend the
 
leases for
 
up
 
to
20
 
years. The
 
Corporation identifies
 
leases when
 
it
 
has
 
both the
 
right to
obtain substantially all of the economic benefits from
 
the use of the asset and the right to direct
 
the use of the asset.
The Corporation
 
recognizes right-of-use
 
assets (“ROU
 
assets”) and
 
lease liabilities
 
related to
 
operating and
 
finance leases
 
in its
Consolidated Statements of Financial Condition under the caption of other assets and other liabilities, respectively. Refer to Note 12
and
 
Note
 
16
 
to
 
the
 
Consolidated Financial
 
Statements,
 
respectively,
 
for
 
information
 
on
 
the
 
balances of
 
these
 
lease
 
assets
 
and
liabilities.
The Corporation uses the
 
incremental borrowing rate for
 
purposes of discounting lease payments
 
for operating and finance leases,
since it
 
does not have
 
enough information to
 
determine the rates
 
implicit in the
 
leases. The discount
 
rates are based
 
on fixed-rate
and
 
fully
 
amortizing
 
borrowing
 
facilities
 
of
 
its
 
banking
 
subsidiaries
 
that
 
are
 
collateralized.
 
For
 
leases
 
held
 
by
 
non-banking
subsidiaries, a credit spread is added to this rate
 
based on financing transactions with a similar
 
credit risk profile.
The following table presents the undiscounted
 
cash flows of operating and finance leases for
 
each of the following periods:
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
(In thousands)
Remaining
 
2024
2025
2026
2027
2028
Later
Years
Total Lease
Payments
Less: Imputed
Interest
Total
Operating Leases
$
23,167
$
28,327
$
19,932
$
14,531
$
12,074
40,740
$
138,771
$
(17,438)
$
121,333
Finance Leases
3,380
4,605
4,374
3,017
2,344
10,434
28,154
(3,257)
24,897
The following table presents the lease cost recognized
 
by the Corporation in the Consolidated
 
Statements of Operations as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters ended March 31,
(In thousands)
2024
2023
Finance lease cost:
Amortization of ROU assets
$
748
$
824
Interest on lease liabilities
237
296
Operating lease cost
7,688
7,854
Short-term lease cost
116
73
Variable lease cost
69
56
Sublease income
(20)
(9)
Total lease cost
[1]
$
8,838
$
9,094
[1]
Total lease cost
 
is recognized as part of net occupancy expense.
 
102
The
 
following
 
table
 
presents
 
supplemental
 
cash
 
flow
 
information
 
and
 
other
 
related
 
information
 
related
 
to
 
operating
 
and
 
finance
leases.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters ended March 31,
(Dollars in thousands)
2024
2023
Cash paid for amounts included in the measurement of
 
lease liabilities:
Operating cash flows from operating leases
$
7,771
$
7,754
Operating cash flows from finance leases
237
296
Financing cash flows from finance leases
881
804
ROU assets obtained in exchange for new lease obligations:
Operating leases
$
1,127
$
967
Finance leases
-
1,796
Weighted-average remaining lease term:
Operating leases
7.2
years
7.3
years
Finance leases
8.2
years
8.2
years
Weighted-average discount rate:
Operating leases
3.3
%
3.0
%
Finance leases
3.8
%
4.1
%
As of March 31, 2024, the Corporation had additional
 
operating leases contracts that have not yet commenced
 
with an undiscounted
contract amount of $
3.9
 
million, which will have lease terms ranging
 
from
10
 
to
20
 
years.
 
103
Note 28 – Pension and postretirement benefits
The
 
Corporation
 
has
 
a
 
non-contributory
 
defined
 
benefit
 
pension
 
plan
 
and
 
supplementary
 
pension
 
benefit
 
restoration
 
plans
 
for
regular employees of
 
certain of its
 
subsidiaries (the “Pension
 
Plans”). The accrual
 
of benefits under
 
the Pension Plans
 
is frozen to
all
 
participants.
 
The
 
Corporation
 
also
 
provides
 
certain
 
postretirement
 
health
 
care
 
benefits
 
for
 
retired
 
employees
 
of
 
certain
subsidiaries (the “OPEB Plan”).
 
The components of net periodic cost for the
 
Pension Plans and the OPEB Plan for the periods presented
 
were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Plans
OPEB Plan
Quarter ended March 31,
Quarter ended March 31,
(In thousands)
2024
2023
2024
2023
Personnel Cost:
 
Service cost
$
-
$
-
$
32
$
48
Other operating expenses:
 
Interest cost
7,558
7,887
1,421
1,520
 
Expected return on plan assets
(8,594)
(8,591)
-
-
 
Amortization of prior service cost/(credit)
-
-
-
-
 
Amortization of net loss
4,166
5,366
(548)
(553)
Total net periodic
 
pension cost
 
$
3,130
$
4,662
$
905
$
1,015
The Corporation paid the following contributions to the plans for the quarter
 
ended March 31, 2024 and expects to pay the following
contributions for the year ending December 31, 2024.
 
 
 
 
 
For the quarter ended
For the year ending
(In thousands)
March 31, 2024
December 31, 2024
Pension Plans
$
57
$
228
OPEB Plan
$
1,597
$
5,744
104
Note 29 - Stock-based compensation
On May 12,
 
2020, the stockholders of
 
the Corporation approved the
 
Popular, Inc.
 
2020 Omnibus Incentive Plan,
 
which permits the
Corporation to
 
issue several
 
types of
 
stock-based compensation
 
to employees
 
and directors
 
of the
 
Corporation and/or
 
any of
 
its
subsidiaries (the
 
“2020 Incentive
 
Plan”). The
 
2020 Incentive
 
Plan replaced
 
the Popular,
 
Inc. 2004
 
Omnibus Incentive
 
Plan, which
was in effect
 
prior to the adoption of
 
the 2020 Incentive Plan (the
 
“2004 Incentive Plan” and, together
 
with the 2020 Incentive
 
Plan,
the “Incentive Plan”). Participants under the Incentive Plan are designated by the Talent and Compensation Committee of the Board
of Directors (or its delegate, as determined by the Board). Under the Incentive Plan, the Corporation has issued restricted stock and
performance shares to its employees and restricted
 
stock and restricted stock units (“RSUs”)
 
to its directors.
 
The restricted
 
stock granted
 
under the
 
Incentive Plan
 
to employees
 
becomes vested
 
based on
 
the employees’
 
continued service
with
 
Popular.
Unless otherwise stated in an agreement, the compensation cost associated with the shares of restricted stock
granted prior to 2021 was determined based on a two-prong vesting schedule. The first part is vested ratably over five or four years
commencing at the date of grant (“the graduated vesting portion”) and the second part is vested at termination of employment after
attainment of 55 years of age and 10 years of service or 60 years of age and 5 years of service (“the retirement vesting portion”).
The graduated vesting portion is accelerated at termination of employment after attaining the earlier of 55 years of age and 10 years
of service or 60 years of age and 5 years of service. Restricted stock granted on or after 2021 will vest ratably in equal annual
installments over a period of 4 years or 3 years, depending on the classification of the employee. The vesting schedule is
accelerated at termination of employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age
and 5 years of service.
 
The
 
performance share
 
awards
 
granted
 
under
 
the
 
Incentive
 
Plan
 
consist
 
of
 
the
 
opportunity
 
to
 
receive
 
shares
 
of
 
Popular,
 
Inc.’s
common stock provided that the Corporation achieves certain goals during a three-year performance cycle.
 
The goals will be based
on
 
two
 
metrics
 
weighted
 
equally:
 
the
 
Relative
 
Total
 
Shareholder
 
Return
 
(“TSR”)
 
and
 
the
 
Absolute
 
Return
 
on
 
Average
 
Tangible
Common Equity
 
(“ROATCE”).
 
The TSR metric
 
is considered to
 
be a
 
market condition under
 
ASC 718.
 
For equity settled
 
awards
based
 
on a
 
market condition,
 
the
 
fair value
 
is
 
determined as
 
of the
 
grant date
 
and
 
is not
 
subsequently revised
 
based on
 
actual
performance.
 
The
 
ROATCE
 
metric
 
is
 
considered
 
to
 
be
 
a
 
performance condition
 
under ASC
 
718.
 
The
 
fair value
 
is
 
determined
based on
 
the probability
 
of achieving
 
the ROATCE
 
goal as
 
of each
 
reporting period.
 
The TSR
 
and ROATCE
 
metrics are
 
equally
weighted and
 
work independently.
 
The number of shares that will ultimately vest ranges from 50% to a 150% of target based on
both market (TSR) and performance (ROATCE) conditions. The performance shares vest at the end of the three-year performance
cycle. If a participant terminates employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age
and 5 years of service, the performance shares shall continue outstanding and vest at the end of the performance cycle.
The
 
following
 
table
 
summarizes
 
the
 
restricted
 
stock
 
and
 
performance
 
shares
 
activity
 
under
 
the
 
Incentive
 
Plan
 
for
 
members
 
of
management.
 
 
105
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Not in thousands)
Shares
Weighted-Average
Grant Date Fair
Value
Non-vested at December 31, 2022
281,963
$
56.50
Granted
257,757
66.01
Performance Shares Quantity Adjustment
19,753
75.32
Vested
 
(243,133)
66.31
Forfeited
(16,444)
55.82
Non-vested at December 31, 2023
299,896
$
58.20
Granted
143,084
85.57
Performance Shares Quantity Adjustment
33,858
88.92
Vested
 
(185,177)
79.81
Forfeited
411
69.92
Non-vested at March 31, 2024
292,072
$
61.48
During the
 
quarter ended
 
March 31,
 
2024,
77,859
 
shares of
 
restricted stock
 
(March 31,
 
2023 -
69,488
) and
65,225
 
performance
shares (March 31, 2023 -
57,715
) were awarded to management under the
 
Incentive Plan.
 
During
 
the
 
quarter
 
ended
 
March
 
31,
 
2024,
 
the
 
Corporation
 
recognized
 
$
6.4
 
million
 
of
 
restricted
 
stock
 
expense
 
related
 
to
management incentive awards, with a tax benefit of $
0.6
 
million (March 31, 2023 - $
4.4
 
million, with a tax benefit of $
0.3
 
million). For
the quarter ended
 
March 31, 2024,
 
the fair market
 
value of the
 
restricted stock and performance
 
shares vested was
 
$
9.5
 
million at
grant date
 
and $
13.2
 
million at
 
vesting date.
 
This excess
 
requires the
 
recognition of
 
a windfall
 
tax benefit
 
of $
1.4
 
million that
 
was
recorded as a
 
reduction in income
 
tax expense. For
 
the quarter ended
 
March 31, 2024,
 
the Corporation recognized
 
$
5.0
 
million of
performance shares expense, with a tax benefit of $
0.3
 
million (March 31, 2023 - $
3.6
 
million, with a tax benefit of $
0.1
 
million). The
total
 
unrecognized
 
compensation
 
cost
 
related
 
to
 
non-vested
 
restricted
 
stock
 
awards
 
and
 
performance
 
shares
 
to
 
members
 
of
management at March 31, 2024 was $
11.4
 
million and is expected to be recognized over
 
a weighted-average period of
1.79
 
years.
The following table summarizes the restricted stock
 
activity under the Incentive Plan for members of
 
the Board of Directors:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Not in thousands)
RSUs / Unrestricted stock
Weighted-Average
 
Grant
Date Fair Value per Unit
Non-vested at December 31, 2022
-
$
-
Granted
39,104
55.30
Vested
 
(39,104)
55.30
Forfeited
-
-
Non-vested at December 31, 2023
-
$
-
Granted
1,195
82.08
Vested
 
(1,195)
82.08
Forfeited
-
-
Non-vested at March 31, 2024
-
$
-
The
 
equity
 
awards
 
granted
 
to
 
members
 
of
 
the
 
Board
 
of
 
Directors
 
of
 
Popular,
 
Inc.
 
(the
 
“Directors”)
 
will
 
vest
 
and
 
become
 
non-
forfeitable on the
 
grant date
 
of such
 
award. Effective in
 
May 2019 all
 
equity awards granted
 
to the
 
Directors may be
 
paid in
 
either
common stock or RSUs, at the Directors’ election. If RSUs are elected
 
the Directors may defer the delivery of the shares of common
stock underlying the RSUs award after their retirement.
 
To
 
the extent that cash dividends are paid
 
on the Corporation’s outstanding
common stock, the Directors
 
will receive an additional number of RSUs
 
that reflect reinvested dividend equivalent.
 
During the quarter ended March 31,
 
2024,
1,195
 
RSUs were granted to the
 
Directors (March 31, 2023 -
1,029
).
 
During this period,
the Corporation
 
recognized $
98
 
thousand of
 
restricted stock
 
expense related
 
to
 
these RSUs,
 
with a
 
tax
 
benefit of
 
$
18
 
thousand
(March 31, 2023
 
- $
67
 
thousand, with a
 
tax benefit of
 
$
13
 
thousand). The fair
 
value at vesting
 
date of the
 
RSUs vested during the
quarter ended March 31, 2024 for Directors was
 
$
98
 
thousand
.
106
Note 30 – Income taxes
 
The reason for the difference between the income
 
tax expense applicable to income before provision
 
for income taxes and the
amount computed by applying the statutory tax rate
 
in Puerto Rico, were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters ended
March 31, 2024
March 31, 2023
(In thousands)
Amount
 
% of pre-tax
income
 
Amount
% of pre-tax
income
Computed income tax expense at statutory rates
 
$
59,569
38
%
$
76,985
38
%
Net benefit of tax exempt interest income
(28,759)
(18)
(21,902)
(11)
Effect of income subject to preferential tax rate
(1,420)
(1)
(855)
-
Deferred tax asset valuation allowance
2,563
1
(4,565)
(2)
Difference in tax rates due to multiple jurisdictions
(673)
-
(5,169)
(3)
Tax on intercompany
 
distributions
[1]
24,325
16
-
-
U.S., States, and local taxes
1,036
-
3,355
2
Others
(1,073)
(1)
(1,535)
(1)
Income tax expense
$
55,568
35
%
$
46,314
23
%
[1]
Includes $
16.5
 
million of out-of-period adjustment.
For the quarter ended March 31, 2024,
 
the Corporation recorded an income tax expense
 
of $
55.6
 
million compared to $
46.3
 
million
for the
 
quarter ended March
 
31, 2023. As
 
discussed in Note
 
2, the tax
 
expense for the
 
first quarter of
 
2024 includes $
23.0
 
million,
related
 
to
 
intercompany distributions,
 
out
 
of
 
which
 
$
16.5
 
million
 
were related
 
to
 
an
 
out-of-period adjustment
 
associated with
 
the
Corporation’s U.S. subsidiary’s non-payment of
 
taxes on certain intercompany distributions
 
to the Bank Holding
 
Company (BHC) in
Puerto Rico,
 
a foreign
 
corporation for
 
U.S. tax
 
purposes. During
 
years 2023
 
and 2022,
 
$
5.5
 
million and
 
$
5.4
 
million, respectively,
should have been
 
recognized as additional income
 
tax expense, and
 
an aggregate of
 
$
5.6
 
million in the
 
years prior to
 
2022.
 
As a
result of
 
this adjustment,
 
the deferred
 
tax assets
 
related to
 
NOL of
 
the BHC
 
and its
 
related valuation
 
allowance was
 
reduced by
$
53.7
 
million. The
 
Corporation also
 
recognized $
6.5
 
million in
 
income tax
 
expense during
 
the quarter
 
ended March
 
31, 2024,
 
to
reflect the U.S. federal tax withholding liability and estimated related Puerto Rico income tax arising from a $
50
 
million dividend paid
during the quarter.
 
During the quarter ended March 31,
 
2023, the Corporation reported a reversal of
 
a valuation allowance on a tax
credit expected to be realized on the U.S. operations.
 
The following table presents a breakdown of the
 
significant components of the Corporation’s deferred tax assets
 
and liabilities.
 
107
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2024
 
(In thousands)
PR
US
Total
Deferred tax assets:
Tax credits available
 
for carryforward
$
263
$
10,749
$
11,012
Net operating loss and other carryforward available
 
53,852
619,457
673,309
Postretirement and pension benefits
37,314
-
37,314
Allowance for credit losses
246,566
29,866
276,432
Depreciation
6,774
6,651
13,425
FDIC-assisted transaction
152,665
-
152,665
Lease liability
28,280
19,272
47,552
Unrealized net loss on investment securities
309,191
20,406
329,597
Difference in outside basis from pass-through entities
44,008
-
44,008
Mortgage Servicing Rights
14,378
-
14,378
Other temporary differences
49,600
10,041
59,641
Total gross deferred
 
tax assets
942,891
716,442
1,659,333
Deferred tax liabilities:
Intangibles
85,564
52,715
138,279
Right of use assets
25,839
16,940
42,779
Deferred loan origination fees/cost
(823)
2,085
1,262
Loans acquired
19,703
-
19,703
Other temporary differences
6,854
422
7,276
 
Total gross deferred
 
tax liabilities
137,137
72,162
209,299
Valuation allowance
71,380
378,910
450,290
Net deferred tax asset
$
734,374
$
265,370
$
999,744
 
December 31, 2023
 
(In thousands)
PR
US
Total
Deferred tax assets:
Tax credits available
 
for carryforward
$
263
$
10,281
$
10,544
Net operating loss and other carryforward available
 
122,634
620,982
743,616
Postretirement and pension benefits
38,121
-
38,121
Allowance for credit losses
244,956
28,222
273,178
Depreciation
6,774
6,578
13,352
FDIC-assisted transaction
152,665
-
152,665
Lease liability
29,070
20,492
49,562
Unrealized net loss on investment securities
312,583
19,037
331,620
Difference in outside basis from pass-through entities
46,056
-
46,056
Mortgage Servicing Rights
14,085
-
14,085
Other temporary differences
47,679
9,625
57,304
Total gross deferred
 
tax assets
1,014,886
715,217
1,730,103
Deferred tax liabilities:
Intangibles
84,635
51,944
136,579
Right of use assets
26,648
18,030
44,678
Deferred loan origination fees/cost
(1,056)
1,486
430
Loans acquired
20,430
-
20,430
Other temporary differences
6,402
422
6,824
 
Total gross deferred
 
tax liabilities
137,059
71,882
208,941
Valuation allowance
139,347
374,035
513,382
Net deferred tax asset
$
738,480
$
269,300
$
1,007,780
108
The net
 
deferred tax
 
assets
 
shown in
 
the table
 
above at
 
March 31,
 
2024, is
 
reflected in
 
the consolidated
 
statements of
 
financial
condition as $
1.0
 
billion in net deferred tax assets in the
 
“Other assets” caption (December 31, 2023 - $
1.0
 
billion) and $
1.3
 
million in
deferred
 
tax
 
liabilities
 
in
 
the
 
“Other
 
liabilities”
 
caption
 
(December 31,
 
2023
 
-
 
$
1.3
 
million),
 
reflecting
 
the
 
aggregate
 
deferred
 
tax
assets
 
or
 
liabilities
 
of
 
individual
 
tax-paying subsidiaries
 
of
 
the
 
Corporation
 
in
 
their
 
respective tax
 
jurisdiction, Puerto
 
Rico
 
or
 
the
United States.
 
At
 
March
 
31,
 
2024,
 
the
 
net
 
deferred
 
tax
 
assets
 
of
 
the
 
U.S.
 
operations
 
amounted
 
to
 
$
644
 
million
 
with
 
a
 
valuation
 
allowance
 
of
approximately $
379
 
million, for
 
net deferred
 
tax
 
assets after
 
valuation allowance
 
of
 
approximately $
265
 
million.
 
The
 
Corporation
evaluates the
 
realization of
 
the deferred
 
tax
 
assets on
 
a quarterly
 
basis by
 
taxing
 
jurisdiction. The
 
U.S.
 
operation has
 
sustained
profitability
 
for
 
the
 
last
 
three
 
calendar
 
years
 
and
 
for
 
the
 
quarter
 
ended
 
March
 
31,
 
2024.
 
These
 
historical
 
financial
 
results
 
are
objectively verifiable positive evidence, evaluated together with
 
the positive evidence of stable credit metrics, in combination with the
length of
 
the expiration
 
of the
 
NOLs. On
 
the other
 
hand, the
 
Corporation evaluated
 
the negative
 
evidence accumulated
 
over the
years, including
 
financial results
 
lower than
 
expectations and
 
challenges to
 
the economy
 
due to
 
inflationary pressures
 
and global
geopolitical uncertainty that have resulted in
 
a trend of reduction of pre-tax
 
income over the last three years.
 
As of March 31, 2024,
after weighting all positive
 
and negative evidence, the
 
Corporation concluded that it is
 
more likely than not
 
that approximately $
265
million
 
of
 
the
 
deferred
 
tax
 
assets
 
from
 
the
 
U.S.
 
operations,
 
comprised
 
mainly
 
of
 
net
 
operating
 
losses,
 
will
 
be
 
realized.
 
The
Corporation
 
based
 
this
 
determination
 
on
 
its
 
estimated
 
earnings
 
available
 
to
 
realize
 
the
 
deferred
 
tax
 
assets
 
for
 
the
 
remaining
carryforward period, together with the historical level
 
of book income adjusted by permanent
 
differences. Management will continue
to
 
monitor
 
and
 
review
 
the
 
U.S.
 
operation’s
 
results,
 
including
 
recent
 
earnings
 
trends,
 
the
 
pre-tax
 
earnings
 
forecast,
 
any
 
new
 
tax
initiative,
 
and
 
other
 
factors,
 
including
 
net
 
income
 
versus
 
forecast,
 
targeted
 
loan
 
growth,
 
net
 
interest
 
income
 
margin,
 
changes
 
in
deposit
 
costs,
 
allowance
 
for
 
credit
 
losses,
 
charge
 
offs,
 
NPLs
 
inflows
 
and
 
NPA
 
balances.
 
Significant
 
adverse
 
changes
 
or
 
a
combination of changes in these factors could impact
 
the future realization of the deferred tax assets.
At March
 
31, 2024, the
 
Corporation’s net
 
deferred tax assets
 
related to its
 
Puerto Rico
 
operations amounted to
 
$
734
 
million.
 
The
Corporation’s Puerto Rico
 
Banking operation has
 
a historical record
 
of profitability.
 
This is considered
 
a strong piece
 
of objectively
verifiable positive evidence that outweighs any
 
negative evidence considered by Management in
 
the evaluation of the realization
 
of
the
 
deferred
 
tax
 
assets.
 
Based
 
on
 
this
 
evidence
 
and
 
management’s
 
estimate
 
of
 
future
 
taxable
 
income,
 
the
 
Corporation
 
has
concluded that it is more likely than not that such net
 
deferred tax assets of the Puerto Rico Banking
 
operations will be realized.
The Holding Company operation has been in a cumulative
 
loss position in recent years.
 
Management expects these losses will be a
trend
 
in
 
future
 
years.
 
This
 
objectively
 
verifiable
 
negative
 
evidence is
 
considered
 
by
 
Management strong
 
negative
 
evidence that
suggests that
 
income in
 
future years
 
will be
 
insufficient to
 
support the
 
realization of
 
all deferred
 
tax assets.
 
After weighting
 
of all
positive
 
and
 
negative evidence
 
Management concluded,
 
as
 
of
 
the reporting
 
date,
 
that
 
it
 
is
 
more
 
likely
 
than
 
not that
 
the
 
Holding
Company will not be
 
able to realize any
 
portion of the deferred tax
 
assets. Accordingly, the
 
Corporation has maintained a valuation
allowance on the deferred tax assets of $
71
 
million as of March 31, 2024.
The reconciliation of unrecognized tax benefits, excluding
 
interest, was as follows:
 
109
 
 
 
 
 
(In millions)
2024
2023
Balance at January 1
$
1.5
$
2.5
Balance at March 31
$
1.5
$
2.5
At March 31,
 
2024, the total amount
 
of accrued interest recognized
 
in the statement
 
of financial condition amounted
 
to $
2.3
 
million
(December 31, 2023 - $
2.3
 
million). The total interest expense recognized
 
at March 31, 2024 was
 
$
30
 
thousand, (March 31, 2023–
$
56
 
thousand). Management
 
determined that
 
at
 
March
 
31,
 
2024 and
 
December 31,
 
2023, there
 
was
no
 
need
 
to
 
accrue for
 
the
payment of penalties. The Corporation’s policy is to report interest related to unrecognized tax benefits in income tax expense, while
the penalties, if any, are reported in other operating expenses in the
 
consolidated statements of operations.
 
After consideration
 
of the
 
effect on
 
U.S. federal
 
tax of
 
unrecognized U.S.
 
state tax
 
benefits, the
 
total amount
 
of unrecognized
 
tax
benefits, including U.S. and Puerto Rico, that if recognized, would affect the Corporation’s effective tax rate, was approximately $
2.9
million at March 31, 2024 (December 31, 2023 - $
2.9
 
million).
The amount of
 
unrecognized tax benefits
 
may increase or
 
decrease in the
 
future for various
 
reasons including adding amounts
 
for
current
 
tax
 
year
 
positions,
 
expiration
 
of
 
open
 
income
 
tax
 
returns
 
due
 
to
 
the
 
statutes
 
of
 
limitation,
 
changes
 
in
 
Management’s
judgment about
 
the level
 
of uncertainty,
 
status of
 
examinations, litigation
 
and legislative
 
activity and
 
the addition
 
or elimination
 
of
uncertain tax positions.
 
The Corporation does not
 
anticipate a reduction
 
in the total
 
amount of unrecognized tax
 
benefits within the
next 12 months.
 
The
 
Corporation and
 
its subsidiaries
 
file
 
income tax
 
returns in
 
Puerto
 
Rico, the
 
U.S. federal
 
jurisdiction, various
 
U.S. states
 
and
political subdivisions,
 
and foreign
 
jurisdictions. At
 
March 31,
 
2024, the
 
following years
 
remain subject
 
to
 
examination in
 
the U.S.
Federal jurisdiction: 2020 and thereafter; and
 
in the Puerto Rico jurisdiction, 2018 and thereafter.
 
 
 
110
Note 31 – Supplemental disclosure on the consolidated
 
statements of cash flows
Additional disclosures on cash flow information and non-cash
 
activities for the quarters ended March 31,
 
2024 and March 31, 2023
are listed in the following table:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
March 31, 2024
March 31, 2023
Non-cash activities:
 
Loans transferred to other real estate
$
16,133
$
18,367
 
Loans transferred to other property
20,224
17,343
 
Total loans transferred
 
to foreclosed assets
36,357
35,710
 
Loans transferred to other assets
13,464
2,778
 
Financed sales of other real estate assets
2,725
3,203
 
Financed sales of other foreclosed assets
13,689
13,232
 
Total financed sales
 
of foreclosed assets
16,414
16,435
 
Financed sale of premises and equipment
22,495
14,105
 
Transfers from loans held-in-portfolio to
 
loans held-for-sale
2,763
2,475
 
Transfers from loans held-for-sale to loans
 
held-in-portfolio
1,722
1,500
 
Loans securitized into investment securities
[1]
2,205
10,966
 
Trades receivable from brokers and counterparties
45
10,307
 
Trades payable to brokers and counterparties
45
402
 
Net change in receivables from investments maturities
125,000
99,620
 
Recognition of mortgage servicing rights on securitizations
 
or asset transfers
294
501
 
Loans booked under the GNMA buy-back option
2,181
855
 
Capitalization of lease right of use asset
1,152
2,699
[1]
Includes loans securitized into trading securities and subsequently
 
sold before quarter end.
The following table provides a reconciliation of
 
cash and due from banks, and restricted cash
 
reported within the Consolidated
Statement of Financial Condition that sum to the total of
 
the same such amounts shown in the Consolidated
 
Statement of Cash
Flows.
 
 
 
 
 
 
 
 
 
(In thousands)
March 31, 2024
March 31, 2023
Cash and due from banks
$
305,869
$
427,160
Restricted cash and due from banks
14,617
34,853
Restricted cash in money market investments
7,793
7,173
Total cash and due
 
from banks, and restricted cash
[2]
$
328,279
$
469,186
[2]
 
Refer to Note 4 - Restrictions on cash and due from banks
 
and certain securities for nature of restrictions.
111
Note 32 – Segment reporting
The
 
Corporation’s
 
corporate
 
structure
 
consists
 
of
two
 
reportable
 
segments
 
Banco Popular de Puerto Rico and Popular U.S.
Management determined the reportable segments based on the internal reporting used to evaluate performance and to assess
where to allocate resources.
 
The segments were
 
determined based on the
 
organizational structure, which focuses
 
primarily on the
markets the segments serve, as well as on the products
 
and services offered by the segments.
Banco Popular de Puerto Rico:
 
The Banco Popular de
 
Puerto Rico reportable segment
 
includes commercial, consumer and retail
 
banking operations conducted at
BPPR, including
 
U.S. based
 
activities conducted
 
through its
 
New York
 
Branch. It
 
also includes
 
the lending
 
operations of
 
Popular
Auto
 
and
 
Popular
 
Mortgage.
 
Other
 
financial
 
services
 
within
 
the
 
BPPR
 
segment
 
include
 
the
 
trust
 
service
 
units
 
of
 
BPPR,
 
asset
management services of Popular Asset
 
Management, the brokerage and investment
 
banking operations of Popular
 
Securities, and
the insurance agency and reinsurance businesses
 
of Popular Insurance, Popular Risk Services, Popular
 
Life Re, and Popular Re.
Popular U.S.:
 
Popular U.S. reportable segment
 
consists of the
 
banking operations of Popular
 
Bank (PB), Popular Insurance
 
Agency, U.S.A.,
 
and
PEF.
 
PB
 
operates through
 
a retail
 
branch network
 
in the
 
U.S. mainland
 
under the
 
name of
 
Popular,
 
and equipment
 
leasing and
financing services through PEF.
 
Popular Insurance Agency,
 
U.S.A. offers investment and insurance
 
services across the PB
 
branch
network.
 
The Corporate group
 
consists primarily of
 
the holding companies
 
Popular, Inc.,
 
Popular North America,
 
Popular International Bank
and certain of the Corporation’s investments accounted for under
 
the equity method, including Centro Financiero BHD, León.
 
The
 
accounting
 
policies
 
of
 
the
 
individual
 
operating
 
segments
 
are
 
the
 
same
 
as
 
those
 
of
 
the
 
Corporation.
 
Transactions
 
between
reportable segments are primarily conducted at market rates, resulting
 
in profits that are eliminated for reporting consolidated results
of operations.
The tables that follow present the results of operations
 
and total assets by reportable segments:
 
 
112
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2024
For the quarter ended March 31, 2024
Intersegment
 
(In thousands)
BPPR
Popular U.S.
Eliminations
Net interest income
$
472,841
$
84,853
$
-
Provision for credit losses
 
(benefit)
60,680
11,435
-
Non-interest income
 
145,669
7,120
(56)
Amortization of intangibles
484
311
-
Depreciation expense
13,009
1,943
-
Other operating expenses
393,805
67,788
(56)
Income tax expense
29,206
3,456
-
Net income
$
121,326
$
7,040
$
-
Segment assets
$
57,250,662
$
13,686,037
$
(359,383)
For the quarter ended March 31, 2024
Reportable
 
(In thousands)
Segments
Corporate
Eliminations
Total Popular,
 
Inc.
Net interest income (expense)
$
557,694
$
(6,950)
$
-
$
550,744
Provision for credit losses
72,115
483
-
72,598
Non-interest income
152,733
11,722
(637)
163,818
Amortization of intangibles
795
-
-
795
Depreciation expense
14,952
409
-
15,361
Other operating expenses
461,537
6,611
(1,191)
466,957
Income tax expense
32,662
22,676
230
55,568
Net income (loss)
$
128,366
$
(25,407)
$
324
$
103,283
Segment assets
$
70,577,316
$
5,723,198
$
(5,363,575)
$
70,936,939
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2023
For the quarter ended March 31, 2023
Intersegment
 
(In thousands)
BPPR
 
Popular U.S.
Eliminations
Net interest income
$
449,820
$
90,086
$
1
Provision for credit losses
45,708
2,065
-
Non-interest income
 
147,471
6,384
(136)
Amortization of intangibles
484
311
-
Depreciation expense
11,669
1,814
-
Other operating expenses
363,715
63,317
(136)
Income tax expense
42,832
3,976
-
Net income
$
132,883
$
24,987
$
1
Segment assets
$
55,770,442
$
12,147,556
$
(541,534)
For the quarter ended March 31, 2023
Reportable
 
(In thousands)
Segments
Corporate
Eliminations
Total Popular,
 
Inc.
Net interest income (expense)
$
539,907
$
(8,251)
$
-
$
531,656
Provision for credit losses (benefit)
47,773
(136)
-
47,637
Non-interest income
153,719
9,714
(1,472)
161,961
Amortization of intangibles
795
-
-
795
Depreciation expense
13,483
359
-
13,842
Other operating expenses
426,896
230
(1,076)
426,050
Income tax expense (benefit)
46,808
(321)
(173)
46,314
Net income
$
157,871
$
1,331
$
(223)
$
158,979
Segment assets
$
67,376,464
$
5,803,751
$
(5,504,456)
$
67,675,759
 
 
113
Geographic Information
The following information presents selected
 
financial information based on the
 
geographic location where the Corporation conducts
its business. The
 
banking operations of BPPR
 
are primarily based in
 
Puerto Rico, where it
 
has the largest retail
 
banking franchise.
BPPR
 
also
 
conducts
 
banking
 
operations
 
in
 
the
 
U.S.
 
Virgin
 
Islands,
 
the
 
British
 
Virgin
 
Islands
 
and
 
New
 
York.
 
BPPR’s
 
banking
operations in
 
the mainland
 
United States
 
include commercial
 
lending activities.
 
BPPR’s commercial
 
lending activities
 
in the
 
U.S.,
through its New York
 
Branch, include periodic loan participations with PB.
 
During the quarter ended March
 
31, 2024, BPPR did
no
t
participate in loans originated
 
by PB (March 31,
 
2023 - $
23
 
million). Total
 
assets for the BPPR
 
segment related to its
 
operations in
the United States amounted to $
1.5
 
billion (December 31, 2023 - $
1.5
 
billion), including $
106
 
million in multifamily loans (December
31, 2023 - $
106
 
million), $
526
 
million in commercial real estate loans (December 31, 2023 -
 
$
528
 
million), $
592
 
million in C&I loans
(December 31, 2023
 
- $
557
 
million), and $
198
 
million in unsecured personal
 
loans (December 31, 2023
 
- $
229
 
million). During the
quarter
 
ended
 
March
 
31,
 
2024,
 
the
 
BPPR
 
segment
 
generated
 
approximately
 
$
29.8
 
million
 
(March
 
31,
 
2023
 
-
 
$
25.4
 
million)
 
in
revenues from
 
its operations
 
in the
 
United States,
 
including net
 
interest income
 
and other
 
service fees.
 
In the
 
Virgin Islands,
 
the
BPPR
 
segment
 
offers
 
banking
 
products, including
 
loans
 
and
 
deposits. The
 
BPPR segment
 
generated $
10.6
 
million
 
in
 
revenues
during the first quarter of 2024 (March 31,
 
2023 - $
11.6
 
million) from its operations in the U.S. and
 
British Virgin Islands.
 
 
 
 
 
 
 
 
 
 
 
 
 
Geographic Information
 
Quarter ended
(In thousands)
March 31, 2024
March 31, 2023
Revenues:
[1]
 
Puerto Rico
 
$
565,744
$
547,903
 
United States
126,741
125,045
 
Other
22,077
20,669
Total consolidated
 
revenues
 
$
714,562
$
693,617
[1]
Total revenues include
 
net interest income, service charges on deposit accounts,
 
other service fees, mortgage banking activities, net
 
gain,
including impairment on equity securities, net gain on trading
 
account debt securities, adjustments to indemnity reserves
 
on loans sold and
other operating income.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selected Balance Sheet Information:
(In thousands)
March 31, 2024
December 31, 2023
Puerto Rico
 
Total assets
$
54,507,722
$
54,181,300
 
Loans
22,649,624
22,519,961
 
Deposits
51,350,879
51,282,007
United States
 
Total assets
$
15,186,839
$
15,343,156
 
Loans
11,931,955
12,006,012
 
Deposits
10,716,008
10,643,602
Other
 
Total assets
$
1,242,378
$
1,233,699
 
Loans
542,511
543,299
 
Deposits
[1]
1,741,897
1,692,634
[1]
Represents deposits from BPPR operations located in the
 
U.S. and British Virgin Islands.
 
 
 
 
114
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 
AND RESULTS OF OPERATIONS
This
 
report
 
includes
 
management’s
 
discussion
 
and
 
analysis
 
(“MD&A”)
 
of
 
the
 
consolidated
 
financial
 
position
 
and
 
financial
performance
 
of
 
Popular,
 
Inc.
 
(the
 
“Corporation”
 
or
 
“Popular”). All
 
accompanying
 
tables,
 
financial
 
statements
 
and
 
notes
 
included
elsewhere in this report should be considered an
 
integral part of this analysis.
 
The Corporation is a
 
diversified, publicly-owned financial holding company subject to the
 
supervision and regulation of the Board
 
of
Governors of the Federal Reserve System. The Corporation has
 
operations in Puerto Rico, the United States (“U.S.”) mainland and
the
 
U.S.
 
and
 
British
 
Virgin
 
Islands.
 
In
 
Puerto
 
Rico,
 
the
 
Corporation
 
provides
 
retail,
 
mortgage
 
and
 
commercial
 
banking
 
services
through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as investment
 
banking, broker-dealer, auto
and
 
equipment
 
leasing
 
and
 
financing,
 
and
 
insurance
 
services
 
through
 
specialized
 
subsidiaries.
 
In
 
the
 
U.S.
 
mainland,
 
the
Corporation provides
 
retail, mortgage
 
and
 
commercial banking
 
services, as
 
well as
 
equipment leasing
 
and
 
financing, through
 
its
New
 
York-chartered
 
banking
 
subsidiary,
 
Popular
 
Bank
 
(“PB”
 
or
 
“Popular U.S.”),
 
which
 
has
 
branches
 
located
 
in
 
New
 
York,
 
New
Jersey
 
and
 
Florida.
 
Note
 
32
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
presents
 
information
 
about
 
the
 
Corporation’s
 
business
segments.
SIGNIFICANT EVENTS
FDIC Special Assessment Increase in Estimate
On
 
November 16,
 
2023,
 
the
 
Federal
 
Deposit
 
Insurance
 
Corporation
 
(“FDIC”)
 
approved
 
a
 
final
 
rule
 
that
 
imposes
 
a
 
special
assessment (the “FDIC
 
Special Assessment”) to recover
 
the losses to
 
the deposit insurance
 
fund resulting from
 
the FDIC’s use,
 
in
March 2023,
 
of the systemic
 
risk exception to
 
the least-cost resolution
 
test under the
 
Federal Deposit Insurance
 
Act in
 
connection
with
 
the
 
receiverships
 
of
 
several
 
failed
 
banks.
 
In
 
connection
 
with
 
this
 
assessment,
 
the
 
Corporation
 
recorded
 
an
 
expense
 
of
$71.4 million, $45.3 million net of tax, in the fourth quarter of 2023, representing the full amount of the estimated assessment at that
time.
During the quarter ended March 31, 2024, the Corporation
 
recorded an additional expense of $14.3 million, $9.1
 
million net of tax, to
reflect the
 
FDIC's higher loss
 
estimate which increased
 
from $16.3 billion,
 
when approved, to
 
$20.4 billion during
 
the quarter.
 
The
special assessment
 
amount and
 
collection period
 
may change
 
as the
 
estimated loss
 
is periodically
 
adjusted or
 
if the
 
total amount
collected varies.
 
Tax impact on Intercompany Distributions
The
 
net
 
income
 
for
 
the
 
quarter
 
ended March 31,
 
2024,
 
included
 
$22.9 million of
 
expenses,
 
of
 
which
 
$16.5 million
 
is
 
reflected
 
in
income tax
 
expense
 
and $6.4
 
million is
 
reflected in
 
other operating
 
expenses,
 
related to
 
an out-of-period
 
adjustment associated
with the
 
Corporation’s U.S. subsidiary’s
 
non-payment of taxes
 
on certain intercompany
 
distributions to the
 
Bank Holding Company
(BHC) in
 
Puerto Rico,
 
a foreign
 
corporation for
 
U.S. tax
 
purposes. The
 
adjustment corrected
 
errors for
 
income tax
 
expense that
should have
 
been recognized
 
of $5.5
 
million and
 
$5.4 million
 
in the
 
years 2023
 
and 2022,
 
respectively,
 
and an
 
aggregate of
 
$5.6
million, in the years prior to 2022. The $6.4 million recognized as other operating expense corresponded to interest due up to March
31, 2024 on
 
the related late
 
payment of the
 
withholding tax, of which
 
approximately $3.0 million correspond
 
to years prior
 
to 2022.
As a result of this adjustment, the deferred
 
tax asset related to NOL of the BHC
 
and its related valuation allowance was reduced by
$53.7
 
million.
 
The
 
Corporation
 
evaluated
 
the
 
impact
 
of
 
the
 
out-of-period
 
adjustment
 
and
 
concluded
 
it
 
was
 
not
 
material
 
to
 
any
previously issued interim or
 
annual consolidated financial statements and
 
the adjustment is
 
not expected to be
 
material to the year
ending December 31, 2024.
The Corporation
 
also recognized
 
$6.5 million
 
in income
 
tax expense
 
during the
 
quarter ended
 
March 31,
 
2024 to
 
reflect the
 
U.S.
federal
 
tax withholding
 
liability and
 
estimated related
 
Puerto Rico
 
income tax
 
arising from
 
a $50
 
million dividend
 
paid during
 
the
quarter.
Dividends from
 
the U.S.
 
subsidiaries to
 
the BHC
 
are subject
 
to a
 
Federal 10%
 
withholding tax
 
and ordinary
 
income tax
 
in Puerto
Rico, subject
 
to
 
foreign tax
 
credits,
 
use of
 
available net
 
operating losses
 
and certain
 
other limitations.
 
The Corporation
 
does
 
not
anticipate the tax treatment of U.S. sourced dividends
 
to the BHC to impact BHC liquidity or future
 
capital actions.
115
OVERVIEW
Table 1 provides selected financial data and performance indicators for the quarters ended
 
March 31, 2024 and 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
116
Table 1 - Financial highlights
Financial Condition Highlights
Ending Balances at
Average for the quarter ended
(In thousands)
March 31,
2024
 
December 31,
2023
Variance
March 31,
2024
March 31,
2023
Variance
Money market investments
$
5,928,578
$
6,998,871
$
(1,070,293)
$
6,483,615
$
5,736,352
$
747,263
Investment securities
26,324,139
25,148,673
1,175,466
27,698,252
28,076,090
(377,838)
Loans
35,124,090
35,069,272
54,818
35,059,391
32,048,055
3,011,336
Earning assets
67,376,807
67,216,816
159,991
69,241,258
65,860,497
3,380,761
Total assets
70,936,939
70,758,155
178,784
72,294,855
68,843,309
3,451,546
Deposits
63,808,784
63,618,243
190,541
64,032,945
61,145,654
2,887,291
Borrowings
1,032,393
1,078,332
(45,939)
1,056,673
1,167,845
(111,172)
Total liabilities
65,759,625
65,611,202
148,423
66,096,115
63,202,001
2,894,114
Stockholders’ equity
5,177,314
5,146,953
30,361
6,198,740
5,641,308
557,432
Note: Average balances exclude unrealized gains or losses on debt securities available-for-sale.
Operating Highlights
Quarter ended March 31,
(In thousands, except per share information)
2024
2023
 
Variance
Net interest income
$
550,744
$
531,656
$
19,088
Provision for credit losses (benefit)
72,598
47,637
24,961
Non-interest income
163,818
161,961
1,857
Operating expenses
483,113
440,687
42,426
Income before income tax
158,851
205,293
(46,442)
Income tax expense
55,568
46,314
9,254
Net income
$
103,283
$
158,979
$
(55,696)
Net income applicable to common stock
$
102,930
$
158,626
$
(55,696)
Net income per common share - basic
$
1.43
$
2.22
$
(0.79)
Net income per common share - diluted
$
1.43
$
2.22
$
(0.79)
Dividends declared per common share
$
0.62
$
0.55
$
0.07
Quarter ended March 31,
Selected Statistical Information
2024
2023
Common Stock Data
 
End market price
$
88.09
$
57.41
 
Book value per common share at period end
71.32
61.82
Profitability Ratios
 
Return on assets
0.57
%
0.93
%
 
Return on common equity
6.07
10.00
 
Net interest spread
2.38
2.68
 
Net interest spread (taxable equivalent) - Non-GAAP
2.60
2.92
 
Net interest margin
3.16
3.22
 
Net interest margin (taxable equivalent) - Non-GAAP
3.38
3.46
Capitalization Ratios
 
Average equity to average assets
8.57
%
8.19
%
 
Common equity Tier 1 capital
16.36
16.73
 
Tier I capital
16.42
16.79
 
Total capital
18.19
18.61
 
Tier 1 leverage
8.45
8.37
 
 
 
 
 
 
 
 
 
 
 
117
Non-GAAP Financial Measures
This Form 10-Q
 
contains financial information
 
prepared under accounting
 
principles generally accepted in
 
the United
States (“U.S.
 
GAAP”) and
 
non-GAAP financial
 
measures. Management
 
uses non-GAAP
 
financial measures
 
when it
has
 
determined
 
that
 
these
 
measures
 
provide
 
meaningful
 
information
 
about
 
the
 
underlying
 
performance
 
of
 
the
Corporation’s ongoing operations.
 
Non-GAAP financial measures used by the
 
Corporation may not be comparable
 
to
similarly named non-GAAP financial measures used by other companies.
Adjusted net income - Non-GAAP Financial Measure
In
 
addition
 
to
 
analyzing
 
the
 
Corporation’s
 
results
 
on
 
a
 
reported
 
basis,
 
management
 
monitors
 
the
 
“Adjusted
 
net
income”
 
of
 
the
 
Corporation
 
and
 
excludes
 
the
 
impact
 
of
 
certain
 
transactions
 
on
 
the
 
results
 
of
 
its
 
operations.
Management
 
believes
 
that
 
the
 
“Adjusted
 
net
 
income”
 
provides
 
meaningful
 
information
 
about
 
the
 
underlying
performance of the Corporation’s ongoing operations. The “Adjusted net income” is a non-GAAP financial measure.
The following
 
table presents
 
the Adjusted
 
net income
 
for the
 
quarter ended
 
of March
 
31, 2024.
 
There were
 
no non-
GAAP adjustments for the quarter ended March 31, 2023.
Table 2 - Adjusted Net Income
 
for the Quarter Ended March 31, 2024 (Non-GAAP)
(Unaudited)
(In thousands)
Income before
 
income tax
Income tax
expense
(benefit)
Total
U.S. GAAP Net income
$158,851
$55,568
$103,283
Non-GAAP Adjustments:
FDIC Special Assessment [1]
14,287
(5,234)
9,053
Adjustments related to intercompany distributions [1]
6,400
16,483
22,883
Adjusted net income (Non-GAAP)
$179,538
$44,319
$135,219
[1] Refer to the Overview section of Management’s Discussion
 
and Analysis included in this Form 10-Q for a description
 
of this item.
 
118
Net interest income on a taxable equivalent basis
 
– Non-GAAP Financial Measure
Net interest
 
income on
 
a taxable
 
equivalent basis
 
is a
 
non-GAAP financial
 
measure. Management
 
believes that
 
this presentation
provides meaningful information since it facilitates the comparison
 
of revenues arising from taxable and tax-exempt sources.
The Corporation’s
 
interest earning
 
assets include
 
investment securities
 
and loans
 
that are
 
exempt from
 
income tax,
 
principally in
Puerto
 
Rico. The
 
main sources
 
of tax-exempt
 
interest income
 
are certain
 
investments in
 
obligations of
 
the
 
U.S. Government,
 
its
agencies and
 
sponsored entities,
 
certain obligations
 
of the
 
Commonwealth of
 
Puerto Rico
 
and/or its
 
agencies and
 
municipalities,
and assets
 
held by the
 
Corporation’s international banking
 
entities. To
 
facilitate the comparison
 
of interest related
 
to these
 
assets,
the
 
interest
 
has
 
been
 
converted
 
to
 
a
 
taxable
 
equivalent
 
basis,
 
using
 
the
 
applicable
 
statutory
 
income
 
tax
 
rates
 
for
 
each
 
period.
 
According to the
 
Puerto Rico tax
 
law, a
 
portion of interest
 
cost, based on
 
an equal proportion
 
of tax-exempt assets to
 
total assets,
and an
 
allocation of
 
general and
 
administrative expenses
 
should be
 
attributed to
 
exempt income,
 
reducing the
 
benefit of
 
the tax
exempt income, and as such
 
the disallowance of such
 
deduction is considered in the
 
taxable equivalent computation. The effective
yield, on
 
a taxable
 
equivalent basis, will
 
vary depending on
 
the level
 
of these
 
expenses that are
 
attributed to the
 
available exempt
income.
Net interest income on
 
a taxable equivalent basis,
 
with its different components,
 
along with the reconciliation to
 
net interest income
(GAAP),
 
for
 
the
 
quarter
 
ended
 
March
 
31,
 
2024
 
as
 
compared
 
with
 
the
 
same
 
period
 
in
 
2023,
 
segregated by
 
major
 
categories
 
of
interest earning assets and interest-bearing
 
liabilities are included in Table 3 of the Operating Results Analysis section below.
Tangible Common Equity and Tangible Assets
Tangible
 
common equity,
 
tangible common equity ratio, tangible
 
assets and tangible book
 
value per common share
 
are non-GAAP
financial measures.
 
Tangible
 
common equity
 
ratio and
 
tangible book
 
value per
 
common share
 
in conjunction
 
with more
 
traditional
bank
 
capital
 
ratios
 
are
 
commonly
 
used
 
by
 
banks
 
and
 
analysts
 
to
 
compare
 
the
 
capital
 
adequacy
 
of
 
banking
 
organizations
 
with
significant amounts
 
of goodwill
 
or other
 
intangible assets,
 
typically stemming
 
from the
 
use of
 
the purchase
 
accounting method
 
for
mergers and acquisitions.
 
Tangible
 
common equity,
 
tangible assets and
 
other related measures
 
should not be
 
used in
 
isolation or
as
 
a
 
substitute
 
for
 
stockholders'
 
equity,
 
total
 
assets
 
or
 
any
 
other
 
measure
 
calculated
 
in
 
accordance
 
with
 
GAAP.
 
Moreover,
 
the
manner in which the Corporation calculates its tangible common
 
equity, tangible assets and
 
other related measures may differ from
that of other companies reporting measures with
 
similar names.
Table
 
9 provides
 
a reconciliation
 
of total
 
stockholders’ equity
 
to tangible
 
common equity
 
and total
 
assets to
 
tangible assets
 
as of
March 31, 2024, and December 31, 2023.
Financial highlights for the quarter ended March 31, 2024
 
For the
 
quarter ended March
 
31, 2024, the
 
Corporation recorded net
 
income of $
 
103.3 million, compared
 
to net
 
income of $
159.0 million for the same quarter of the
 
previous year. Net interest margin for the first
 
quarter of 2024 was 3.16%, a decrease
of 6 basis
 
points when compared to
 
3.22% for the same
 
quarter of the previous
 
year. The
 
decrease was mainly due
 
to higher
deposit costs, principally from
 
the Puerto Rico
 
public sector and from
 
online deposits in the
 
U.S., which was partially
 
offset by
higher yield
 
from money
 
market investments
 
and
 
loans. On
 
a taxable
 
equivalent basis,
 
the net
 
interest margin
 
was 3.38%,
compared to 3.46% for the same quarter of
 
the previous year.
 
 
For the
 
quarter ended
 
March 31,
 
2024, the
 
Corporation recorded
 
a provision
 
for credit
 
losses of
 
$72.6 million,
 
compared to
$47.6 million for the same
 
quarter of the previous year.
 
The higher provision for credit losses
 
was driven by higher reserves in
our commercial
 
and consumer
 
portfolios mostly
 
due to
 
higher loan
 
volumes and
 
changes in
 
the credit
 
ratings and
 
the credit
quality of the US commercial portfolio and the
 
BPPR consumer portfolio.
 
Non-interest income was $163.8 million for the quarter,
 
an increase of $1.9 million when compared to the quarter ended March
31, 2023,
 
mainly due
 
to higher
 
service charges
 
on deposit
 
accounts and
 
other service
 
fees,
 
partially offset
 
by lower
 
income
from mortgage banking activities resulting from the fair
 
value adjustments of mortgage servicing rights.
 
 
Operating expenses for the quarter were higher by
 
$42.4 million when compared to the quarter ended
 
March 31, 2023. Higher
operating expenses were driven mainly
 
by the effect
 
of the increase in
 
loss estimate related to
 
the FDIC Special Assessment,
119
higher personnel costs and higher technology and
 
software expenses.
 
 
Income tax
 
during the
 
quarter was
 
higher by
 
$9.3 million
 
due to
 
the impact
 
of the
 
tax expense
 
recognized on
 
intercompany
distributions from previous
 
periods. Compared to
 
the same quarter
 
in the
 
previous year,
 
income tax expense
 
was also higher
as the results of
 
the first quarter of 2023 included
 
the effect of the
 
reversal of a valuation allowance of
 
a tax credit expected to
be realized on the U. S. Operations.
 
Total
 
assets at March 31, 2024 amounted to $70.9 billion, compared to
 
$70.8 billion, at December 31, 2023. The increase was
driven by an
 
increase in available-for-sale (“AFS”) investment securities,
 
mainly due to purchases
 
of U.S. Treasury Securities,
and
 
loan
 
growth,
 
mainly
 
in
 
the
 
mortgage
 
portfolio
 
and
 
in
 
auto
 
loans,
 
partially
 
offset
 
by
 
a
 
net
 
decrease
 
in cash
 
and
 
money
market investments due to the investments in the
 
debt securities portfolio and loan originations.
Total deposits at March 31, 2024 increased by $190.5 million when compared to deposits at December 31, 2023, mainly due
 
to
higher retail
 
deposits, time deposits
 
and deposits in
 
trust in
 
BPPR, partially offset
 
by a
 
decrease in Puerto
 
Rico public
 
sector
deposits.
 
Stockholders’ equity as
 
of March 31,
 
2024 increased by $30.4
 
million from the
 
December 31, 2023, mainly
 
due to net
 
income
for
 
the
 
quarter of
 
$103.3 million
 
and
 
the
 
amortization of
 
unrealized losses
 
from
 
securities
 
previously reclassified
 
to
 
held-to-
maturity (“HTM”) of $35.2 million, net of
 
taxes, partially offset by the after-tax
 
impact of the increase in net
 
unrealized losses in
the portfolio of
 
AFS securities of
 
$71.1 million and
 
common and preferred
 
dividends declared during
 
the quarter.
 
As of March
31, 2024, the Corporation’s tangible book value per common share was $60.06, an increase of $0.32 from December 31, 2023
due mainly to the increase in stockholders’ equity
 
during the period.
 
 
Regulatory
 
capital
 
ratios
 
remained strong.
 
As
 
of
 
March
 
31,
 
2024,
 
the
 
Corporation’s
 
common
 
equity
 
tier
 
1
 
capital
 
ratio
 
was
16.36%, the tier 1 leverage ratio was 8.45%, and
 
the total capital ratio was 18.19%. Refer to
 
Table 8 for capital ratios.
Refer to
 
the Operating
 
Results Analysis
 
and Financial
 
Condition Analysis
 
within this
 
MD&A for
 
additional discussion
 
of significant
quarterly variances and items impacting the financial performance
 
of the Corporation.
As a financial services company,
 
the Corporation’s earnings are significantly affected
 
by general business and economic conditions
in the
 
markets which
 
we serve.
 
Lending and
 
deposit activities
 
and fee
 
income generation
 
are influenced
 
by the
 
level of
 
business
spending and
 
investment, consumer
 
income, spending
 
and savings,
 
capital market
 
activities, competition,
 
customer preferences,
interest rate conditions and prevailing market rates
 
on competing products.
The Corporation
 
operates in
 
a highly
 
regulated environment
 
and may
 
be adversely
 
affected by
 
changes in
 
federal and
 
local laws
and
 
regulations.
 
Also,
 
competition
 
with
 
other
 
financial
 
institutions,
 
as
 
well
 
as
 
with
 
non-traditional financial
 
service
 
providers
 
and
technology
 
companies
 
that
 
provide
 
electronic
 
and
 
internet-based
 
financial
 
solutions
 
and
 
services,
 
could
 
adversely
 
affect
 
its
profitability.
The
 
Corporation
 
continuously
 
monitors
 
general
 
business
 
and
 
economic
 
conditions,
 
industry-related
 
indicators
 
and
 
trends,
competition, interest rate volatility, credit
 
quality indicators, loan and deposit demand, operational and systems efficiencies,
 
revenue
enhancements and changes in the regulation of financial
 
services companies.
 
The description of the Corporation’s business contained in
 
Item 1 of the 2023 Form 10-K, while not all inclusive,
 
discusses additional
information about the business of the Corporation. Readers should also refer to “Part I - Item 1A” of the 2023 Form 10-K and “Part II
- Item 1A” of this Form 10-Q for a discussion of certain risks and uncertainties to which the Corporation is subject, many
 
beyond the
Corporation’s control that, in addition to the other information in
 
this Form 10-Q, readers should consider.
The Corporation’s common stock is traded on the NASDAQ
 
Global Select Market under the symbol BPOP.
 
 
 
 
120
CRITICAL ACCOUNTING POLICIES / ESTIMATES
 
The accounting
 
and reporting
 
policies followed
 
by the
 
Corporation and
 
its subsidiaries
 
conform to
 
generally accepted
 
accounting
principles
 
in
 
the
 
United
 
States
 
of
 
America
 
and
 
general
 
practices
 
within
 
the
 
financial
 
services
 
industry.
 
Various
 
elements
 
of
 
the
Corporation’s accounting policies, by
 
their nature, are
 
inherently subject to
 
estimation techniques, valuation assumptions and
 
other
subjective assessments.
 
These estimates
 
are made
 
under facts
 
and circumstances
 
at a
 
point in
 
time and
 
changes in
 
those facts
and circumstances could produce actual results that
 
differ from those estimates.
 
Management has discussed
 
the development and
 
selection of the
 
critical accounting policies
 
and estimates with
 
the Corporation’s
Audit
 
Committee.
 
The
 
Corporation
 
has
 
identified
 
as
 
critical
 
accounting
 
policies
 
those
 
related
 
to:
 
(i)
 
Fair
 
Value
 
Measurement
 
of
Financial Instruments; (ii) Loans
 
and Allowance for Credit
 
Losses; (iii) Loans Acquired
 
with Deteriorated Credit Quality;
 
(iv) Income
Taxes;
 
(v) Goodwill and
 
Other Intangible Assets; and
 
(vi) Pension and Postretirement
 
Benefit Obligations. For a
 
summary of these
critical accounting policies and estimates, refer to that particular section in
 
the MD&A included in the 2023 Form
 
10-K. Also, refer to
Note 2
 
to
 
the Consolidated
 
Financial Statements
 
included in
 
the 2023
 
Form 10-K
 
for a
 
summary of
 
the Corporation’s
 
significant
accounting policies and
 
to Note
 
3 to
 
the Consolidated Financial
 
Statements included in
 
this Form
 
10-Q for information
 
on recently
adopted accounting standard updates.
OPERATING RESULTS ANALYSIS
NET INTEREST INCOME
Net interest
 
income for
 
the quarter
 
ended March
 
31, 2024
 
was $550.7
 
million, compared
 
to $531.7
 
million in
 
the same
 
quarter of
2023, an increase of $19.1 million. Net
 
interest income on a taxable equivalent basis for
 
the first quarter of 2024 was
 
$589.6 million
compared to $570.4 million in the first quarter of
 
2023, an increase of $19.2 million.
 
Net interest margin for the quarter was 3.16% compared to 3.22% in the first quarter of 2023 or a decrease of six basis points. On a
taxable equivalent basis,
 
net interest margin
 
for the
 
first quarter
 
of 2024 was
 
3.38%, compared to
 
3.46% for
 
the same
 
quarter the
prior year. The main variances in net interest income on a taxable
 
equivalent basis were:
 
higher interest
 
income from
 
money market,
 
investments, and
 
trading securities
 
by $55.0
 
million mainly
 
driven by
 
higher
average yield by 60 basis points. The increase in
 
yield was driven by a higher interest rate environment and reinvestment
of investment maturities in higher yielding U.S. Treasury bills;
higher interest income
 
from loans
 
by $100.2 million
 
resulting from an
 
increase in
 
average loans by
 
$3.0 billion
 
reflecting
loan
 
increases
 
in
 
both
 
PB
 
and
 
BPPR
 
and
 
across
 
most
 
portfolios
 
and
 
higher
 
yield
 
on
 
loans
 
by
 
51
 
basis
 
points
 
when
compared to the same quarter of 2023 due to origination of loans in a higher
 
interest rate environment and the repricing of
adjustable-rate loans. The portfolio with the highest variances included commercial loans with an increase of $54.0 million
in interest
 
income, or
 
52 basis
 
points, consumer
 
loans with
 
an increase
 
of
 
$15.8 million
 
or 105
 
basis points,
 
and auto
loans which increased $10.6 million or 63 basis
 
points.
Partially offset by:
higher interest expense on deposits by $136.3 million driven by higher
 
cost of deposits by 99 basis points driven by higher
average volume
 
and higher
 
cost of
 
market linked
 
P.R.
 
public deposits
 
by $2.7
 
billion and
 
higher volume
 
of U.S.
 
online
deposits.
Net interest income for the BPPR segment amounted to $472.8
 
million for the first quarter of 2024, compared
 
to $449.8 million in the
first quarter
 
of 2023.
 
Net interest
 
margin increased
 
to 3.33%
 
compared to
 
3.24% in
 
the first
 
quarter of
 
2023. The
 
increase in
 
net
interest income of $23.0 million
 
was driven by higher yield
 
and volume on earning
 
assets partially offset by
 
the increase in the
 
cost
of deposits, mainly from the P.R. public sector.
 
The cost of interest-bearing deposits increased 83 basis points to 2.44% from 1.61%
in the same quarter of 2023. Total
 
deposit costs for the quarter increased by 63 basis points, from
 
1.18% in the first quarter of 2023
to 1.81%.
Net interest income for PB was $84.9 million
 
for the quarter ended March 31, 2024, compared
 
to $90.1 million during the first
quarter of 2023, a decrease of $5.2 million.
 
Net interest margin decreased 75 basis
 
points to 2.59% when compared to 3.34%
 
121
during the first quarter of 2023. The decrease
 
in net interest margin was mostly driven
 
by a higher cost of deposits in all categories,
partially offset by the increase in loan volume and the repricing
 
of adjustable-rate loans driven by the changes
 
in interest rates. The
cost of interest-bearing deposits was 3.86% compared
 
to 2.47% in the first quarter of 2023, or an
 
increase of 139 basis points, while
total deposit cost was 3.40% compared to 2.01%
 
in the first quarter of 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
122
Table 3 - Analysis of Levels & Yields
 
on a Taxable Equivalent Basis
 
(Non-GAAP)
Quarter ended March 31,
Variance
Average Volume
Average Yields / Costs
Interest
Attributable to
2024
2023
Variance
2024
2023
 
Variance
2024
2023
Variance
Rate
Volume
(In millions)
(In thousands)
$
6,484
$
5,736
$
748
5.49
%
4.65
%
0.84
%
Money market investments
$
88,516
$
65,724
$
22,792
$
13,566
$
9,226
28,308
28,862
(554)
2.71
2.22
0.49
Investment securities [1]
191,103
158,914
32,189
35,317
(3,128)
33
31
2
3.75
4.47
(0.72)
Trading securities
 
311
338
(27)
(55)
28
Total money market,
 
investment and trading
34,825
34,629
196
3.23
2.63
0.60
securities
279,930
224,976
54,954
48,828
6,126
Loans:
17,613
15,761
1,852
6.84
6.32
0.52
Commercial
299,504
245,469
54,035
23,691
30,344
992
732
260
8.96
8.40
0.56
Construction
22,100
15,155
6,945
1,215
5,730
1,742
1,588
154
6.74
6.12
0.62
Leasing
29,353
24,282
5,071
2,595
2,476
7,723
7,388
335
5.62
5.46
0.16
Mortgage
108,543
100,773
7,770
3,113
4,657
3,227
3,020
207
13.90
12.85
1.05
Consumer
111,490
95,715
15,775
8,441
7,334
3,763
3,559
204
8.77
8.14
0.63
Auto
82,054
71,407
10,647
6,421
4,226
35,060
32,048
3,012
7.48
6.97
0.51
Total loans
653,044
552,801
100,243
45,476
54,767
$
69,885
$
66,677
$
3,208
5.36
%
4.72
%
0.64
%
Total earning assets
$
932,974
$
777,777
$
155,197
$
94,304
$
60,893
Interest bearing deposits:
$
25,703
$
23,313
$
2,390
3.63
%
2.52
%
1.11
%
NOW and money market [2]
$
232,129
$
144,970
$
87,159
$
70,094
$
17,065
14,700
15,029
(329)
0.93
0.47
0.46
Savings
 
34,171
17,443
16,728
16,240
488
8,547
7,099
1,448
2.97
1.76
1.21
Time deposits
63,196
30,802
32,394
21,831
10,563
48,950
45,441
3,509
2.71
1.72
0.99
Total interest bearing
 
deposits
329,496
193,215
136,281
108,165
28,116
15,083
15,704
(621)
Non-interest bearing demand
deposits
64,033
61,145
2,888
2.07
1.28
0.78
Total deposits
329,496
193,215
136,281
108,165
28,116
84
247
(163)
5.70
4.74
0.96
Short-term borrowings
1,192
2,885
(1,693)
309
(2,002)
Other medium and
 
998
947
51
5.13
4.78
0.35
long-term debt
12,709
11,266
1,443
399
1,044
Total interest bearing
50,032
46,635
3,397
2.76
1.80
0.96
liabilities (excluding demand
deposits)
343,397
207,366
136,031
108,873
27,158
4,770
4,338
432
Other sources of funds
$
69,885
$
66,677
$
3,208
1.98
%
1.26
%
0.72
%
Total source of funds
343,397
207,366
136,031
108,873
27,158
Net interest margin/
 
3.38
%
3.46
%
(0.08)
%
income on a taxable
equivalent basis (Non-
GAAP)
589,577
570,411
19,166
$
(14,569)
$
33,735
2.60
%
2.92
%
(0.32)
%
 
Net interest spread
 
Net interest spread
38,833
38,755
78
Net interest margin/ income
3.16
%
3.22
%
(0.06)
%
non-taxable equivalent basis
(GAAP)
$
550,744
$
531,656
$
19,088
Note: The changes that are not due solely to volume or
 
rate are allocated to volume and rate based on the
 
proportion of the change in each category.
[1] Average balances exclude unrealized gains or losses
 
on debt securities available-for-sale and the unrealized
 
loss related to certain securities transferred from
available-for-sale to held-to-maturity.
[2] Includes interest bearing demand deposits corresponding
 
to certain government entities in Puerto Rico.
123
Provision for Credit Losses - Loans Held-in-Portfolio
 
and Unfunded Commitments
For the
 
quarter ended
 
March 31,
 
2024, the
 
Corporation recorded
 
a provision
 
expense of
 
$72.1 million
 
for credit
 
losses related
 
to
loans held-in-portfolio and
 
unfunded commitments. The provision
 
for credit loss
 
related to the
 
loans-held-in-portfolio for the
 
quarter
ended March 31,
 
2024 was $72.4
 
million, compared to a
 
provision expense of $47.1
 
million for the
 
quarter ended March 31,
 
2023.
The increase
 
in provision
 
expense was
 
driven by
 
the commercial
 
and consumer
 
portfolio, mainly
 
personal loans
 
and credit
 
cards.
Higher
 
loan
 
volumes
 
and
 
changes
 
in
 
credit
 
quality
 
in
 
these
 
portfolios
 
contributed
 
to
 
the
 
higher
 
provision
 
expense.
 
The
 
reserve
release related
 
to unfunded
 
commitments for
 
the first
 
quarter of
 
2024 was
 
$0.2 million,
 
compared to
 
a provision
 
expense of
 
$0.6
million for the same period of 2023.
 
For the quarter ended March 31, 2024,
 
the Corporation recorded $61.0 million in
 
provision expense for loans-held-in-portfolio in the
BPPR segment, compared to a provision expense of $45.2 million for the quarter ended March 31, 2023. The Popular U.S. segment
recorded
 
a
 
provision expense
 
of
 
$11.4
 
million
 
for
 
the
 
quarter
 
ended March
 
31,
 
2024, compared
 
to
 
a
 
provision expense
 
of
 
$1.9
million for the same quarter in 2023.
At March 31,
 
2024, the total
 
allowance for credit
 
losses for loans
 
held-in-portfolio amounted to
 
$739.5 million, compared
 
to $729.3
million as of December 31, 2023. The ratio of the allowance for credit losses
 
to loans held-in-portfolio was 2.11% at March 31, 2024,
compared
 
to
 
2.08%
 
at
 
December 31,
 
2023.
 
As
 
discussed
 
in
 
Note
 
8
 
to
 
the
 
Consolidated
 
Financial Statements,
 
the
 
Corporation
applies probability weightings to the outcomes of simulations using Moody’s Analytics’ Baseline, S3 (pessimistic) and S1 (optimistic)
scenarios to
 
estimate the
 
ACL. The
 
baseline scenario
 
is assigned
 
the highest
 
probability,
 
followed by
 
the pessimistic
 
scenario to
account for
 
uncertainties in
 
the macro-economic
 
outlook and
 
any downside
 
risk. The
 
weight assigned
 
to the
 
pessimistic scenario
decreased this quarter in
 
response to the positive
 
momentum in the economy
 
as expectations for the
 
Federal Reserve achieving a
soft
 
landing
 
have
 
improved.
 
Refer
 
to
 
Note
 
8
 
to
 
the
 
Consolidated
 
Financial
 
Statements,
 
for
 
additional
 
information
 
on
 
the
Corporation’s methodology to estimate
 
its ACL. Refer to
 
the Credit Risk section
 
of this MD&A for
 
a detailed analysis of
 
net charge-
offs, non-performing assets, the allowance for credit losses and
 
selected loan losses statistics.
Provision for Credit Losses – Investment Securities
The
 
Corporation’s
 
provision
 
for
 
credit
 
losses
 
related
 
to
 
its
 
investment
 
securities
 
held-to-maturity
 
is
 
related
 
to
 
the
 
portfolio
 
of
obligations from the
 
Government of Puerto
 
Rico, states and
 
political subdivisions. At March
 
31, 2024, the
 
total allowance for
 
credit
losses
 
for
 
this
 
portfolio
 
amounted
 
to
 
$5.7
 
million,
 
compared
 
to
 
$5.8
 
million
 
as
 
of
 
December
 
31,
 
2023.
 
Refer
 
to
 
Note
 
6
to
Consolidated Financial Statements
for additional information on the ACL for this portfolio.
During the quarter
 
ended March 31.
 
2024, the Corporation
 
recognized a provision
 
of $0.5 million
 
related to a
 
single security within
the “Other” portfolio in its
 
debt securities available-for-sale, that after evaluation was determined to
 
be impaired and as a
 
result was
fully reserved. Refer to Note 5 to Consolidated
 
Financial Statements for additional information on
 
the ACL for this portfolio.
Non-Interest Income
Non-interest
 
income
 
was
 
$163.8 million
 
for
 
the
 
first
 
quarter of
 
2024,
 
an
 
increase
 
of
 
$1.9
 
million
 
when compared
 
with
 
the
 
same
quarter of the previous year. The increase in non-interest income was primarily
 
driven by:
 
 
higher other
 
service fees
 
by
 
$4.2 million
 
mainly
 
due to
 
higher credit
 
card
 
fees, mainly
 
from commercial
 
clients,
 
higher
debit
 
card
 
fees
 
as
 
a
 
result
 
of
 
higher interchange
 
transactional volumes,
 
and
 
higher investment
 
management and
 
trust
fees;
 
higher service charges on deposit accounts by $2.8
 
million mainly due to higher non balance compensation,
 
mainly from
commercial accounts;
partially offset by:
 
lower income from mortgage banking activities by $3.0 million mainly due to an unfavorable variance of $2.1
 
million in the
fair value adjustment of mortgage servicing rights (“MSR”)
 
and lower mortgage servicing fees.
124
Operating Expenses
Operating expenses
 
for the
 
quarter ended
 
March 31,
 
2024
 
increased by
 
$42.4 million
 
when compared
 
with the
 
same
 
quarter of
2023. Excluding
 
the $6.4
 
million of
 
interest accrued
 
related to
 
prior period
 
taxes and
 
the $14.3
 
million impact
 
of the
 
FDIC Special
Assessment total expenses for the
 
first quarter of 2024
 
were $462.4 million, compared to
 
$440.7 million in the first
 
quarter of 2023.
The other factors that contributed to the variance in operating
 
expenses were:
 
higher personnel cost
 
by $16.6 million
 
mainly due to
 
higher salaries expense
 
by $4.0 million
 
as a result
 
of annual salary
revisions
 
that
 
occur
 
after the
 
first
 
quarter,
 
an
 
increase
 
in
 
headcount throughout
 
2023,
 
an
 
increase in
 
health
 
insurance
costs
 
by
 
$2.0
 
million,
 
higher
 
annual
 
incentive
 
awards
 
of
 
performance
 
and
 
restricted
 
shares
 
related
 
expenses
 
by
 
$3.4
million, higher commissions and incentive compensation by $3.8 million, and higher payroll taxes and other compensation
expenses by $3.2 million;
 
 
higher technology
 
and software
 
expenses by
 
$10.9 million
 
mainly due
 
to higher
 
software amortization
 
expense by
 
$3.3
million, an increase of $3.5 million from
 
network management services, and higher IT professional and consulting fees by
$3.1 million;
 
higher business
 
promotion expenses
 
by
 
$2.1 million
 
mainly
 
due to
 
higher customer
 
rewards programs
 
expense in
 
our
credit card business; and
 
higher net occupancy
 
expenses by $2.0
 
million mainly due
 
to higher cleaning
 
costs and higher
 
amortization of buildings’
insurance premiums;
partially offset by:
 
higher other real estate owned (OREO) benefit by
 
$3.6 million mainly due to higher gain on
 
sale of mortgage properties;
 
lower professional fees by $4.5 million mainly due
 
to lower advisory expenses related to corporate
 
initiatives;
 
lower operational losses by $3.2 million mainly related
 
to legal settlements reserves; and
 
lower other
 
taxes expense
 
by $1.9
 
million mainly
 
due to
 
lower accruals
 
in the
 
first quarter
 
of 2024
 
related to
 
regulatory
examination expenses.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
125
Table 4 - Operating Expenses
Quarters ended March 31,
(In thousands)
2024
2023
Variance
Personnel costs:
Salaries
$
129,384
$
125,393
$
3,991
Commissions, incentives and other bonuses
38,611
31,162
7,449
Pension, postretirement and medical insurance
17,385
15,378
2,007
Other personnel costs, including payroll taxes
29,997
26,827
3,170
Total personnel
 
costs
215,377
198,760
16,617
Net occupancy expenses
28,041
26,039
2,002
Equipment expenses
9,567
8,412
1,155
Other taxes
14,375
16,291
(1,916)
Professional fees
28,918
33,431
(4,513)
Technology and
 
software expenses
79,462
68,559
10,903
Processing and transactional services:
Credit and debit cards
12,144
12,550
(406)
Other processing and transactional services
22,050
21,359
691
Total processing
 
and transactional services
34,194
33,909
285
Communications
4,557
4,088
469
Business promotion:
Rewards and customer loyalty programs
14,056
12,348
1,708
Other business promotion
6,933
6,523
410
Total business
 
promotion
20,989
18,871
2,118
FDIC deposit insurance
23,887
8,865
15,022
Other real estate owned (OREO) income
(5,321)
(1,694)
(3,627)
Other operating expenses:
Operational losses
3,561
6,800
(3,239)
All other
24,711
17,561
7,150
Total other operating
 
expenses
28,272
24,361
3,911
Amortization of intangibles
795
795
-
Total operating
 
expenses
$
483,113
$
440,687
$
42,426
Income Taxes
For the quarter
 
ended March 31,
 
2024, the Corporation
 
recorded an income
 
tax expense of
 
$55.6 million with
 
an effective tax
 
rate
(ETR) of 35%,
 
compared to $46.3 million with an ETR of 23% for the same period of 2023.
 
As discussed in Note 30, the income tax
expense for
 
the quarter
 
ended March
 
31, 2024
 
includes $23.0
 
million related
 
to withholding
 
tax liabilities
 
for certain
 
intercompany
distributions,
 
out
 
of
 
which $16.5
 
million
 
was
 
related
 
to
 
distributions
 
between years
 
2014-2023
 
and
 
$6.5
 
million
 
was
 
related
 
to
 
a
distribution completed during
 
the quarter ended
 
March 31,
 
2024. This variance
 
was partially offset
 
due to lower
 
pre-tax income for
the quarter ended March
 
31, 2024.
 
Also, for the
 
quarter ended March 31,
 
2023, the Corporation reported a
 
reversal of a
 
valuation
allowance on a tax credit expected to be realized in the U. S. operations. Based on the Adjusted Net Income, as defined in the Non-
GAAP Financial Measures section of this
 
MD&A, the ETR for the
 
quarter ended March 31, 2024,
 
would have been 24.7%. Refer to
the Significant Events section in this MD&A for more
 
details on Significant Events and Non-GAAP
 
Financial Measures.
At
 
March 31,
 
2024, the
 
Corporation had
 
a net
 
deferred tax
 
asset amounting
 
to
 
$1.0 billion,
 
net of
 
a valuation
 
allowance of
 
$0.5
billion. The net deferred tax asset related to the U.S.
 
operations was $0.3 billion, net of a valuation
 
allowance of $0.4 billion.
Refer to
 
Note 30
 
to the
 
Consolidated Financial
 
Statements for
 
a reconciliation
 
of the
 
statutory income
 
tax rate
 
to the
 
effective tax
rate and additional information on the income tax
 
expense and deferred tax asset balances.
 
 
 
 
 
126
REPORTABLE SEGMENT RESULTS
The Corporation’s
 
reportable segments
 
for managerial
 
reporting purposes
 
consist of
 
Banco Popular
 
de Puerto
 
Rico and
 
Popular
U.S. A Corporate group
 
has also been defined to support the reportable
 
segments.
 
 
For
 
a
 
description
 
of
 
the
 
Corporation’s
 
reportable
 
segments,
 
including
 
additional
 
financial
 
information
 
and
 
the
 
underlying
management accounting process, refer to Note 32
 
to the Consolidated Financial Statements.
 
The Corporate group reported a net loss of $25.4 million for the quarter ended March 31, 2024, compared with a net income of
 
$1.3
million for
 
the same
 
quarter of
 
the previous
 
year.
 
The negative
 
variance was
 
mainly attributed
 
to the
 
$22.9 million
 
adjustment to
recognize the
 
tax impact
 
associated with
 
prior period
 
intercompany distributions
 
and the
 
additional $6.5
 
million recognized
 
for the
tax impact related to intercompany distributions paid
 
during the first quarter of 2024.
 
Highlights on the earnings results for the reportable
 
segments are discussed below:
Banco Popular de Puerto Rico
 
The Banco
 
Popular de
 
Puerto Rico
 
reportable segment’s
 
net income
 
amounted to
 
$121.3 million
 
for the
 
quarter ended
 
March 31,
2024, compared
 
with net
 
income of
 
$132.9 million
 
for the
 
same quarter
 
of
 
the previous
 
year.
 
The factors
 
that contributed
 
to the
variance in the financial results included the following:
 
 
Higher net interest income by $23.0 million mainly
 
due to:
 
higher interest income from money market and investment
 
securities by $38.7 million due to higher yields driven
by
 
the
 
increase
 
in
 
interest
 
rates
 
by
 
the
 
Federal
 
Reserve
 
and
 
higher
 
average
 
balances
 
of
 
U.S.
 
Treasury
securities.
 
higher interest income from loans by $71.2 million mainly
 
due to higher average balances from commercial and
consumer loans, mainly from auto and consumer loans,
partially offset by
 
higher interest
 
expense on deposits
 
by $86.8 million
 
mainly due to
 
higher costs on
 
the market-indexed Puerto
Rico
 
government
 
deposits, and
 
the
 
higher interest
 
rate
 
environment’s
 
impact on
 
the cost
 
of
 
NOW accounts,
time deposits, and savings deposits.
The net
 
interest margin
 
for the
 
quarter ended
 
March
 
31, 2024
 
was 3.33%
 
compared to
 
3.28% for
 
the same
 
quarter in
 
the
previous year.
 
The increase in
 
net interest margin
 
is driven by
 
the earnings assets
 
mix and the
 
higher yields from
 
investment
securities and loans, particularly commercial and consumer loans, due to the increase in rates; partially offset by
 
higher cost of
deposits.
 
A provision
 
for loan
 
losses expense of
 
$60.7 million, compared
 
to a
 
provision expense of
 
$45.7 million in
 
quarter ended
March
 
31,
 
2023,
 
or
 
an
 
unfavorable variance
 
of
 
$15.0
 
million
 
mainly
 
driven
 
by
 
changes
 
in
 
credit
 
quality
 
mostly
 
due
 
to
consumer portfolios and higher volumes;
 
 
Non-interest income was lower by $1.8 million mainly due
 
to:
 
lower
 
other
 
operating
 
income
 
by
 
$3.4
 
million
 
mostly
 
due
 
to
 
an
 
insurance policy
 
reimbursement gain
 
of
 
$7.0
million recorded during the quarter ended March
 
31,2023;
 
lower income
 
from mortgage
 
banking activities
 
by $3.1
 
million mainly
 
due to
 
an unfavorable
 
variance of
 
$2.1
million in the fair value adjustment of mortgage service
 
rights.
 
127
partially offset by
 
Higher service charges on deposit accounts by $2.9
 
million mainly due to higher ACH fees.
 
Higher
 
other
 
service fees
 
by
 
$2.6
 
million
 
mainly
 
due
 
to
 
higher credit
 
card
 
fees
 
of
 
$1.1 million
 
as a
 
result
 
of
higher interchange transactional volumes and an increase
 
of $1.1 million on trust fees; and
 
Higher operating expenses by $31.4 million mostly due
 
to:
 
higher deposit insurance expense by $12.1
 
million mostly due to the FDIC
 
Special Assessment recorded in the
first quarter of 2024;
 
higher personnel costs by $11.4 million driven by higher compensations and incentives, annual salary revisions,
and increase in headcount;
 
higher
 
technology
 
and
 
software
 
expenses
 
by
 
$7.6
 
million
 
mainly
 
due
 
to
 
higher
 
network
 
management
 
fees,
amortization of software costs and higher IT consulting
 
fees.
 
higher
 
business
 
promotions
 
by
 
$2.2
 
million
 
due
 
to
 
higher
 
customer
 
rewards
 
expense
 
from
 
our
 
credit
 
cards
portfolio related to higher transactional volumes;
partially offset by
 
higher net recoveries from OREO by $3.7 million
 
mainly due to higher gain on sale of mortgage
 
properties; and
 
lower other operating taxes by $2.1
 
million mainly due to regulatory examination fees;
 
Lower income tax expense by $13.6 million is mainly
 
due to a lower income before tax.
 
Popular U.S.
For the quarter ended March 31, 2024, the reportable segment of Popular U.S. reported a net income of $7.0 million, compared with
a net income
 
of $25.0 million for
 
the same quarter of
 
the previous year.
 
The factors that contributed
 
to the variance
 
in the financial
results included the following:
 
Lower
 
net interest income by $5.2 million due to:
 
higher interest
 
expense on
 
deposits by
 
$51.3 million
 
mainly
 
due
 
to
 
higher interest
 
rates
 
and
 
higher average
balance of time deposits gathered through online
 
channels,
partially offset by
 
higher interest
 
income from
 
loans by
 
$26.4 million,
 
mainly from
 
growth in
 
the commercial
 
portfolio as
 
well as
higher yields due to increase in rates;
 
and
 
higher interest income from money market and investment securities by $18.1
 
million due to higher volume and
yields due to the increase in market rates.
The net interest
 
margin for the
 
quarter ended March 31,
 
2024 was 2.59% compared
 
to 3.34% for
 
the same quarter in
 
the previous
year driven by the higher cost of deposits.
 
128
 
An
 
unfavorable
 
variance
 
of
 
$9.4
 
million
 
on
 
the
 
provision
 
for
 
loan
 
losses
 
and
 
unfunded
 
commitments
 
mainly
 
due
 
to
changes in internal credit risk ratings in the commercial
 
loan portfolio;
 
Higher operating expenses by $4.6 million mostly
 
due to:
 
 
higher deposit insurance expense by $2.8 million
 
mostly due to FDIC Special Assessment adjustment;
 
higher other
 
operating expense
 
by
 
$1.6 million
 
due to
 
higher charges
 
allocated from
 
the
 
Corporate segment
group by $1.8 million mainly from higher personnel
 
costs.
FINANCIAL CONDITION ANALYSIS
 
Assets
The Corporation’s total
 
assets were $70.9 billion
 
at March 31,
 
2024, compared to $70.8
 
billion at December 31,
 
2023. Refer to the
Consolidated Statements of Financial Condition included
 
in this report for additional information.
 
Money market investments and debt securities available-for-sale
Money market investments decreased by $1.1 billion as
 
of March 31, 2024, when compared to
 
December 31, 2023, as these funds
were used in
 
part for the
 
purchase of debt securities
 
and loan originations.
 
Debt securities available-for-sale increased
 
$1.3 billion,
mainly due
 
to purchases
 
of U.S.
 
Treasury Securities,
 
while debt
 
securities held-to-maturity
 
decreased by
 
$111.1
 
million driven
 
by
maturities of
 
U.S. Treasury
 
securities, partially
 
offset by
 
the amortization
 
of $44.0
 
million of
 
the discount
 
related to
 
U.S. Treasury
securities previously reclassified from the
 
AFS to HTM. Refer
 
to Note 5 and
 
to Note 6 to
 
the Consolidated Financial Statements for
additional information with respect to the Corporation’s debt
 
securities available-for-sale and held-to-maturity.
 
129
Loans
Refer to Table
 
5 for a
 
breakdown of the Corporation’s
 
loan portfolio. Also, refer
 
to Note 7 in
 
the Consolidated Financial Statements
for detailed information about the Corporation’s loan portfolio
 
composition and loan purchases and sales.
 
Loans held-in-portfolio
 
increased by
 
$53.8 million
 
to $35.1
 
billion as
 
of March
 
31, 2024,
 
compared to
 
loans held-in-portfolio
 
as of
December 31, 2023. During the quarter ended March 31, 2024,
 
the BPPR portfolio increased by $123.8 million, driven by
 
the growth
in
 
the mortgage
 
and
 
auto loans
 
portfolio
 
and the
 
PB
 
loan portfolio
 
decreased by
 
$70.1 million,
 
due in
 
part by
 
commercial loans
payoffs, offset by growth in the construction loans portfolio.
The Corporation’s
 
$5.1 billion
 
non-owner occupied commercial
 
real estate
 
portfolio is comprised
 
of $3.0
 
billion in
 
Puerto Rico
 
and
$2.1 billion in the U.S. and is
 
well diversified across a number of tenants in different industries
 
and segments with exposure to retail
(35%
 
of
 
non-owner
 
occupied
 
CRE),
 
hotels
 
(19%)
 
and
 
office
 
space
 
(12%)
 
accounting
 
for
 
two
 
thirds
 
of
 
the
 
total
 
exposure.
 
The
approximate $633 million office space
 
exposure represents only 1.8% of
 
the total loan portfolio
 
and is comprised mainly of
 
mid-rise
properties with diversified tenants with average loan
 
size of $2 million across both the U.S. and
 
Puerto Rico.
Popular’s $2.4 billion commercial multi-family
 
portfolio represents approximately 7% of
 
total loans and is
 
concentrated in New York
Metro ($1.4 billion), South Florida
 
($734 million) and Puerto Rico
 
($197 million). In the New
 
York Metro
 
region, the Corporation has
no
 
exposure
 
to
 
rent
 
controlled
 
buildings.
 
The
 
majority
 
of
 
our
 
multi-family
 
loans
 
in
 
that
 
region
 
are
 
collateralized
 
by
 
underlying
buildings that count on a mix
 
of units subject to rent stabilized (subject
 
to annual capped rent increases) and market-rate
 
units. The
rent stabilized units represent less than 40% of the
 
total units in the loan portfolio with the
 
majority originated after 2019. The mix of
units within
 
a building
 
is common
 
across the
 
New York
 
Metro region
 
due to
 
tax incentives
 
awarded to
 
developers based
 
on rent
stabilized
 
units.
 
In
 
2024,
 
there
 
are
 
approximately $198
 
million
 
in multi-family
 
loans
 
in
 
our
 
New
 
York
 
Metro
 
portfolio expected
 
to
reprice.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
130
Table 5 - Loans Ending Balances
(In thousands)
March 31, 2024
December 31, 2023
Variance
 
Loans held-in-portfolio:
Commercial
 
 
Commercial multi-family
$
2,384,635
$
2,415,620
(30,985)
 
Commercial real estate non-owner occupied
5,057,059
5,087,421
(30,362)
 
Commercial real estate owner occupied
3,117,844
3,080,635
37,209
 
Commercial and industrial
7,025,483
7,126,121
(100,638)
Total Commercial
17,585,021
17,709,797
(124,776)
Construction
1,009,303
959,280
50,023
Leasing
1,765,413
1,731,809
33,604
Mortgage
7,783,662
7,695,917
87,745
Consumer
 
Credit cards
 
1,142,153
1,135,747
6,406
 
Home equity lines of credit
66,717
65,953
764
 
Personal
 
1,897,010
1,945,247
(48,237)
 
Auto
3,706,854
3,660,780
46,074
 
Other
162,605
160,441
2,164
Total Consumer
 
6,975,339
6,968,168
7,171
Total loans held-in
 
-portfolio
$
35,118,738
$
35,064,971
53,767
Loans held-for-sale:
 
Mortgage
$
5,352
$
4,301
1,051
Total loans held-for-sale
$
5,352
$
4,301
1,051
Total loans
$
35,124,090
$
35,069,272
54,818
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
131
Other assets
Other assets
 
amounted to $2.1
 
billion at March
 
31, 2024, compared
 
to $2.0
 
billion at December
 
31, 2023. Refer
 
to Note
 
12 to the
Consolidated Financial
 
Statements for
 
a breakdown
 
of the
 
principal categories
 
that comprise
 
the caption
 
of “Other
 
Assets” in
 
the
Consolidated Statements of Financial Condition at
 
March 31, 2024 and December 31, 2023.
 
Liabilities
The Corporation’s total
 
liabilities were $65.8 billion
 
at March 31,
 
2024, an increase of
 
$148.4 million, when compared to
 
December
31, 2023, mainly due to an increase in deposits
 
as discussed below.
 
Deposits and Borrowings
The composition of the Corporation’s financing to total assets
 
at March 31, 2024 and December 31, 2023
 
is included in Table 6.
Table 6 - Financing to Total
 
Assets
March 31,
December 31,
 
% increase (decrease)
 
% of total assets
(In millions)
2024
2023
from 2023 to 2024
2024
2023
Non-interest bearing deposits
$
15,492
$
15,420
0.5
%
21.8
%
21.8
%
Interest-bearing core deposits
43,463
43,571
(0.3)
61.3
61.6
Other interest-bearing deposits
4,854
4,627
4.9
6.8
6.5
Repurchase agreements
66
91
(27.5)
0.1
0.1
Notes payable
966
987
(2.1)
1.4
1.4
Other liabilities
919
915
0.4
1.3
1.3
Stockholders’ equity
5,177
5,147
0.6
7.3
7.3
Total Deposits
The Corporation’s deposits totaled $63.8 billion as of
 
March 31, 2024, compared to $63.6 billion as
 
of December 31, 2023. The
increase in the retail demand deposits, time deposits
 
and deposits in trust in BPPR, offset in part by
 
the decrease in P.R. public
sector accounts were the main drivers of the $190.5
 
million increase during the period.
 
P.R.
 
Public Sector Deposits
As of March
 
31, 2024, the Puerto
 
Rico public sector
 
deposits amounted to $18.0
 
billion, compared to $18.1
 
billion as of
 
December
31, 2023.
Approximately 28%
 
of the
 
Corporation’s deposits
 
as of
 
March 31,
 
2024 are
 
public fund
 
deposits from
 
the Government
 
of Puerto
Rico, municipalities
 
and government instrumentalities
 
and corporations. P.R
 
public sector deposit
 
costs are
 
indexed to changes
 
in
short-term market
 
rates with
 
a one-quarter
 
lag, in
 
accordance with
 
contractual terms.
 
As a
 
result, these
 
costs may
 
lag in
 
variable
asset
 
repricing.
 
These
 
deposits
 
require
 
that
 
the
 
bank
 
pledge
 
high
 
credit
 
quality
 
securities
 
as
 
collateral;
 
therefore,
 
liquidity
 
risks
arising from
 
public sector
 
deposit outflows
 
are lower.
 
Refer to
 
the Liquidity
 
section in
 
this MD&A
 
for additional
 
information on
 
the
Corporation’s funding sources. Fluctuations of public sector deposit balances are uncertain and difficult to predict. Factors that
 
could
impact public
 
sector deposit
 
balances at
 
any given
 
period, include,
 
but are
 
not limited
 
to the
 
receipt of
 
funds by
 
the Puerto
 
Rico
Government
 
of
 
from
 
federal
 
disaster
 
funding
 
assistance
 
(i.e.
 
hurricane
 
or
 
pandemic
 
related
 
funds)
 
and
 
other
 
events
 
such
 
as
seasonal tax collections which may result in increases of
 
public sector deposit balances at BPPR in the near
 
term. The amount and
timing
 
of
 
reductions
 
in
 
public
 
sector
 
deposit
 
balances,
 
depend
 
on
 
government
 
actions
 
such
 
as,
 
the
 
speed
 
at
 
which
 
federal
assistance is
 
distributed, the
 
financial condition,
 
liquidity and
 
cash management
 
practices of
 
the Puerto
 
Rico Government
 
and its
instrumentalities, and/or the
 
implementation of fiscal
 
and debt
 
adjustment plans approved
 
pursuant to PROMESA
 
or other
 
actions
mandated by the Fiscal Oversight and Management
 
Board for Puerto Rico (the “Oversight Board”).
Refer to Table 7 for a breakdown of the Corporation’s deposits at March 31, 2024 and December
 
31, 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
132
Table 7 - Deposits Ending Balances
(In thousands)
March 31, 2024
December 31, 2023
Variance
Demand deposits
 
[1]
$
26,473,367
$
27,579,054
$
(1,105,687)
Savings, NOW and money market deposits (non-brokered)
27,852,551
26,817,844
1,034,707
Savings, NOW and money market deposits (brokered)
727,794
719,453
8,341
Time deposits (non-brokered)
7,850,459
7,546,138
304,321
Time deposits (brokered CDs)
904,613
955,754
(51,141)
Total deposits
$
63,808,784
$
63,618,243
$
190,541
[1] Includes interest and non-interest bearing demand deposits.
 
Borrowings
The Corporation’s borrowings
 
totaled $1.0 billion
 
at March 31,
 
2024 compared to
 
$1.1 billion at
 
December 31, 2023. Refer
 
to Note
15 to
 
the Consolidated
 
Financial Statements
 
for detailed
 
information on
 
the Corporation’s
 
borrowings. Also,
 
refer to
 
the Liquidity
section in this MD&A for additional information
 
on the Corporation’s funding sources.
Stockholders’ Equity
Stockholders’ equity
 
totaled $5.2
 
billion at
 
March 31,
 
2024, an
 
increase of
 
$30.4 million
 
when compared
 
to
 
December 31,
 
2023,
principally due to net income for
 
the quarter ended March 31, 2024 of
 
$103.3 million and the amortization of
 
unrealized losses from
securities previously reclassified
 
to HTM
 
of $35.2 million,
 
net of
 
taxes, partially offset
 
by the
 
after-tax impact of
 
the increase in
 
net
unrealized
 
losses
 
in
 
the
 
portfolio
 
of
 
AFS
 
securities
 
of
 
$71.1
 
million
 
and
 
common
 
and
 
preferred
 
dividends
 
declared
 
during
 
the
quarter.
 
Refer
 
to
 
the
 
Consolidated Statements
 
of
 
Financial
 
Condition,
 
Comprehensive Income
 
and
 
of
 
Changes
 
in
 
Stockholders’
Equity for information on the composition of
 
stockholders’ equity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
133
REGULATORY CAPITAL
The Corporation, BPPR and PB
 
are subject to regulatory capital
 
requirements established by the Federal Reserve Board.
 
The risk-
based
 
capital
 
standards
 
applicable
 
to
 
the
 
Corporation,
 
BPPR
 
and
 
PB
 
(“Basel
 
III
 
capital
 
rules”)
 
are
 
based
 
on
 
the
 
final
 
capital
framework for strengthening international capital standards, known
 
as Basel III, of the Basel Committee on Banking Supervision.
 
As
of March 31, 2024, the Corporation’s, BPPR’s and
 
PB’s capital ratios continue to exceed the minimum requirements for being
 
“well-
capitalized” under the Basel III capital rules.
 
The risk-based
 
capital ratios
 
presented in
 
Table
 
8,
 
which include
 
common equity
 
tier 1,
 
Tier
 
1 capital,
 
total capital
 
and leverage
capital as of March 31, 2024 and December 31,
 
2023.
Table 8 - Capital Adequacy
 
Data
 
 
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
March 31, 2024
 
 
December 31, 2023
 
Common equity tier 1 capital:
 
 
 
 
 
 
Common stockholders equity - GAAP basis
$
5,155,171
$
5,124,810
CECL transitional amount
 
[1]
42,376
84,751
AOCI related adjustments due to opt-out election
1,864,638
1,831,003
Goodwill, net of associated deferred tax liability (DTL)
(664,799)
(666,538)
Intangible assets, net of associated DTLs
(8,969)
(9,764)
Deferred tax assets and other deductions
 
(306,179)
(310,947)
Common equity tier 1 capital
$
6,082,238
$
6,053,315
Additional tier 1 capital:
Preferred stock
22,143
22,143
Additional tier 1 capital
$
22,143
 
$
22,143
Tier 1 capital
$
6,104,381
 
$
6,075,458
 
Tier 2 capital:
Trust preferred securities subject to phase in as
 
tier 2
192,674
192,674
Other inclusions (deductions), net
467,158
465,833
Tier 2 capital
$
659,832
$
658,507
Total risk-based capital
 
$
6,764,213
 
$
6,733,965
 
Minimum total capital requirement to be well capitalized
$
3,717,730
 
$
3,714,633
 
Excess total capital over minimum well capitalized
$
3,046,483
 
$
3,019,332
 
Total risk-weighted
 
assets
$
37,177,300
 
$
37,146,330
 
Total assets for leverage
 
ratio
$
72,264,347
 
$
71,353,184
 
Risk-based capital ratios:
 
 
 
 
 
 
Common equity tier 1 capital
16.36
%
16.30
%
 
Tier 1 capital
 
 
16.42
 
16.36
 
Total capital
 
18.19
 
 
18.13
 
 
Tier 1 leverage
 
8.45
 
 
8.51
 
[1] The CECL transitional amount includes the impact
 
of Popular's adoption of the new CECL accounting standard
 
on January 1, 2020.
134
The Basel
 
III capital rules
 
provide that a
 
depository institution is
 
deemed to be
 
well capitalized if
 
it maintains a
 
leverage ratio of
 
at
least 5%,
 
a common equity
 
Tier 1
 
ratio of
 
at least 6.5%,
 
a Tier
 
1 capital ratio
 
of at least
 
8% and a
 
total risk-based
 
ratio of at
 
least
10%. The
 
Corporation, BPPR and
 
PB leverage
 
ratio, common equity
 
Tier 1
 
ratio and
 
Tier 1
 
capital ratio,
 
respectively as of
 
March
31, 2024, continue to exceed the minimum requirements
 
for being “well-capitalized” under the Basel III
 
capital rules.
 
Pursuant
 
to
 
the
 
adoption
 
of
 
the
 
CECL
 
accounting
 
standard
 
on
 
January
 
1,
 
2020,
 
the
 
Corporation
 
elected
 
to
 
use
 
the
 
five-year
transition
 
period option
 
as
 
provided in
 
the
 
final
 
interim
 
regulatory capital
 
rules effective
 
March 31,
 
2020.
 
The
 
five-year
 
transition
period provision delayed for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period
to
 
phase
 
out
 
the
 
aggregate
 
amount
 
of
 
the
 
capital
 
benefit
 
provided
 
during
 
the
 
initial
 
two-year
 
delay.
 
As
 
of
 
March
 
31,
 
2024,
 
the
Corporation had phased-in 75% of
 
the cumulative CECL deferral with
 
the remaining impact to
 
be recognized over the
 
remainder of
the three-year transition period.
The increase in the common equity Tier I capital ratio, Tier I capital ratio, and total capital ratio as of March
 
31, 2024 as compared to
December 31, 2023 was
 
mainly due to the
 
three months period earnings. The
 
decrease in leverage capital ratio
 
was mainly due to
higher average
 
assets which are
 
impacted by zero-risk
 
weighted assets that
 
do not
 
have a significant
 
impact on
 
the risk-weighted
assets, partially offset by the period earnings.
Reconciliation to Tangible Common Equity and Tangible Assets
Table
 
9 provides
 
a reconciliation
 
of total
 
stockholders’ equity
 
to tangible
 
common equity
 
and total
 
assets to
 
tangible assets
 
as of
March 31, 2024, and December 31, 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
135
Table 9 - Reconciliation of Tangible
 
Common Equity and Tangible
 
Assets
(In thousands, except share or per share information)
March 31, 2024
December 31, 2023
Total stockholders’
 
equity
$
5,177,314
$
5,146,953
Less: Preferred stock
(22,143)
(22,143)
Less: Goodwill
(804,428)
(804,428)
Less: Other intangibles
(8,969)
(9,764)
Total tangible common
 
equity
$
4,341,774
$
4,310,618
Total assets
 
$
70,936,939
$
70,758,155
Less: Goodwill
(804,428)
(804,428)
Less: Other intangibles
(8,969)
(9,764)
Total tangible assets
$
70,123,542
$
69,943,963
Tangible common
 
equity to tangible assets
6.19
%
6.16
%
Common shares outstanding at end of period
72,284,875
72,153,621
Tangible book value
 
per common share
$
60.06
$
59.74
Quarterly average
Total stockholders’
 
equity [1]
$
6,198,740
$
6,072,871
Average unrealized (gains) losses on AFS securities
 
transferred to HTM
 
639,226
683,077
Adjusted total stockholder's equity
6,837,966
6,755,948
Less: Preferred Stock
(22,143)
(22,143)
Less: Goodwill
(804,427)
(804,427)
Less: Other intangibles
(9,490)
(10,286)
Total tangible common
 
equity
$
6,001,906
$
5,919,092
Return on average tangible common equity
6.90
%
6.32
%
 
[1]
 
Average
 
balances
 
exclude
 
unrealized
 
gains
 
or
 
losses
 
on
 
debt
 
securities
 
available-for-sale
 
and
 
the
 
unrealized
 
loss
 
related
 
to
 
certain
 
securities
transferred from available-for-sale to held-to-maturity.
 
136
RISK MANAGEMENT
Market / Interest Rate Risk
The financial results and capital levels of the
 
Corporation are constantly exposed to market, interest
 
rate and liquidity risks.
Market risk
 
refers to the
 
risk of a
 
reduction in the
 
Corporation’s capital due
 
to changes in
 
the market valuation
 
of its assets
 
and/or
liabilities.
 
Most of the assets
 
subject to market valuation risk
 
are debt securities classified as
 
available-for-sale. Refer to Notes 5
 
and 6 to the
Consolidated Financial
 
Statements for
 
further information
 
on the
 
debt
 
securities available-for-sale
 
and
 
held-to-maturity portfolios.
Debt securities classified
 
as available-for-sale amounted to
 
$18.0 billion as
 
of March 31,
 
2024. Other assets
 
subject to market
 
risk
include loans held-for-sale, which amounted
 
to $5 million, mortgage
 
servicing rights (“MSRs”) which
 
amounted to $115
 
million, and
securities classified as “trading”, which amounted to $27
 
million, as of March 31, 2024.
 
Interest Rate Risk (“IRR”)
The Corporation’s net interest income is subject
 
to various categories of interest rate risk,
 
including repricing, basis, yield curve and
option risks.
 
In managing
 
interest rate
 
risk, management may
 
alter the
 
mix of
 
floating and
 
fixed rate
 
assets and
 
liabilities, change
pricing
 
schedules,
 
adjust
 
maturities
 
through
 
sales
 
and
 
purchases
 
of
 
investment
 
securities,
 
and
 
enter
 
into
 
derivative
 
contracts,
among other alternatives.
 
Interest
 
rate
 
risk
 
management
 
is
 
an
 
active
 
process
 
that
 
encompasses
 
monitoring
 
loan
 
and
 
deposit
 
flows
 
complemented
 
by
investment and funding
 
activities. Effective management of
 
interest rate risk begins
 
with understanding the dynamic
 
characteristics
of assets and
 
liabilities and determining the
 
appropriate rate risk position
 
given line of
 
business forecasts, management objectives,
market expectations and policy constraints.
Management utilizes various tools to assess IRR, including Net Interest
 
Income (“NII”) simulation modeling, static gap analysis, and
Economic Value
 
of Equity
 
(“EVE”). The
 
three methodologies
 
complement each
 
other and
 
are used
 
jointly in
 
the evaluation
 
of the
Corporation’s IRR. NII
 
simulation modeling is
 
prepared for a
 
five-year period, which
 
in conjunction with
 
the EVE analysis,
 
provides
management a better view of long-term IRR.
Net interest
 
income simulation analysis
 
performed by legal
 
entity and on
 
a consolidated basis
 
is a
 
tool used
 
by the
 
Corporation in
estimating the
 
potential change
 
in net
 
interest income
 
resulting from
 
hypothetical changes
 
in interest
 
rates. Sensitivity
 
analysis is
calculated using a simulation model which incorporates
 
actual balance sheet figures detailed by maturity
 
and interest yields or costs.
 
Management assesses
 
interest rate
 
risk by
 
comparing various
 
NII simulations
 
under different
 
interest rate
 
scenarios that
 
differ in
direction of interest
 
rate changes, the
 
degree of change
 
and the projected
 
shape of the
 
yield curve. For
 
example, the types
 
of rate
scenarios processed during the
 
quarter include flat
 
rates, implied forwards, and
 
parallel and non-parallel rate
 
shocks. Management
also performs analyses to isolate and measure basis
 
and prepayment risk exposures.
 
The asset
 
and liability
 
management group
 
performs validation
 
procedures on
 
various assumptions
 
used as
 
part of
 
the simulation
analyses as well as validations
 
of results on a
 
monthly basis. In addition, the
 
model and processes used to
 
assess IRR are subject
to independent validations according to the guidelines
 
established in the Model Governance and
 
Validation policy.
The Corporation processes NII
 
simulations under interest rate
 
scenarios in which the
 
yield curve is assumed
 
to rise and
 
decline by
the same magnitude
 
(parallel shifts). The
 
rate scenarios considered in
 
these market risk
 
simulations include instantaneous parallel
changes of -100, -200,
 
+100, and +200 basis points
 
during the succeeding twelve-month period. Simulation analyses
 
are based on
many assumptions,
 
including that
 
the balance
 
sheet remains
 
flat, the
 
relative levels
 
of market
 
interest rates
 
across all
 
yield curve
points
 
and
 
indexes,
 
interest
 
rate
 
spreads,
 
loan
 
prepayments
 
and
 
deposit
 
elasticity.
 
Thus,
 
they
 
should
 
not
 
be
 
relied
 
upon
 
as
indicative of actual results. Further, the estimates do not
 
contemplate actions that management could take to respond to changes in
interest rates. Additionally, the Corporation is also subject to basis risk in the repricing of its assets and liabilities, including the basis
related to
 
using different
 
rate indexes
 
for the
 
repricing of
 
assets and
 
liabilities, as
 
well as
 
the effect
 
of pricing
 
lags which
 
may be
contractual
 
or
 
due to
 
historical differences
 
in the
 
timing
 
of
 
management responses
 
to
 
changes in
 
the rate
 
environment. By
 
their
nature, these forward-looking computations are only estimates and may be different from
 
what may actually occur in the future. The
following table presents the
 
results of the simulations
 
at March 31, 2024
 
and December 31, 2023,
 
assuming a static balance
 
sheet
and parallel changes over flat spot rates over
 
a one-year time horizon:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
137
Table 10 - Net Interest Income
 
Sensitivity (One Year Projection)
March 31, 2024
December 31, 2023
(Dollars in thousands)
Amount Change
Percent Change
Amount Change
Percent Change
Change in interest rate
+200 basis points
41,091
1.81
20,822
0.92
+100 basis points
22,529
0.99
11,496
0.51
-100 basis points
7,789
0.34
19,589
0.87
-200 basis points
(6,355)
(0.28)
16,971
0.75
As of
 
March 31,
 
2024, NII
 
simulations show
 
the Corporation
 
maintains a
 
neutral to
 
slightly asset
 
sensitive position that
 
marginally
increased as compared to
 
the results as
 
of December 31,
 
2023. The primary
 
reasons for the
 
variation in sensitivity
 
are changes in
balance sheet composition driven by an increase in short-term
 
U.S Treasury Bills (“T-
 
Bills”) partly offset by a reduction in
 
overnight
Fed Funds and U.S
 
Treasury Notes (“T-
 
Notes”) on the asset side, combined
 
with a decrease in Puerto
 
Rico public sector deposits
which
 
are
 
indexed
 
to
 
market
 
rates
 
and
 
slightly
 
higher
 
non-interest
 
bearing
 
deposits.
 
These
 
results suggest
 
that
 
changes
 
in
 
the
Corporation’s net
 
interest income sensitivity
 
are driven by
 
changes in the
 
composition of the
 
investment portfolio as
 
the term
 
bond
portfolio
 
continues
 
to
 
run
 
off
 
and
 
get
 
reinvested,
 
together
 
with
 
excess
 
reserves,
 
in
 
short-term
 
investments
 
such
 
as
 
T-Bills.
Additionally, variations in liability cost, primarily driven by Puerto Rico public sector deposits that represented $18.0 billion or 28% of
deposits as of March 31,
 
2024, as well as changes
 
in the composition and mix
 
of deposits, also impact the sensitivity
 
profile. In the
more extreme declining rate scenarios
 
net interest income would be
 
affected as the repricing
 
of short-term assets and variable rate
loans slightly exceeds
 
the benefit in
 
cost reduction of
 
these deposits. In
 
rising rate scenarios, Popular’s
 
net interest income
 
is also
impacted by its large proportion
 
of Puerto Rico public sector
 
deposit, however the repricing of assets
 
as they either reset
 
or mature
lead to an increase in net interest income.
The Corporation’s
 
loan and
 
investment portfolios
 
are subject
 
to
 
prepayment risk,
 
which results
 
from the
 
ability of
 
a third-party
 
to
repay debt
 
obligations prior
 
to maturity.
 
Prepayment risk
 
also could
 
have a
 
significant impact
 
on the
 
duration of
 
mortgage-backed
securities
 
and
 
collateralized
 
mortgage
 
obligations
 
since
 
prepayments
 
could
 
shorten
 
(or
 
lower
 
prepayments
 
could
 
extend)
 
the
weighted average life of these portfolios.
Trading
 
The Corporation
 
engages in
 
trading activities
 
in the
 
ordinary course
 
of business
 
at its
 
subsidiaries, BPPR
 
and Popular
 
Securities.
Popular Securities’
 
trading activities
 
consist primarily
 
of market-making
 
activities to
 
meet expected
 
customers’ needs
 
related to
 
its
retail brokerage business,
 
and purchases and sales of U.S. Government and
 
government sponsored securities with the objective of
realizing gains
 
from expected
 
short-term price
 
movements. BPPR’s
 
trading activities consist
 
primarily of
 
holding U.S.
 
Government
sponsored
 
mortgage-backed securities
 
classified
 
as
 
“trading” and
 
hedging
 
the
 
related
 
market
 
risk
 
with
 
“TBA”
 
(to-be-announced)
market
 
transactions.
 
The
 
objective
 
is
 
to
 
derive
 
spread
 
income
 
from
 
the
 
portfolio
 
and
 
not
 
to
 
benefit
 
from
 
short-term
 
market
movements. In
 
addition, BPPR
 
uses forward
 
contracts or
 
TBAs to
 
hedge its
 
securitization pipeline.
 
Risks related
 
to variations
 
in
interest rates
 
and market volatility
 
are hedged
 
with TBAs
 
that have
 
characteristics similar to
 
that of
 
the forecasted security
 
and its
conversion timeline.
At March 31,
 
2024, the Corporation held trading
 
securities with a fair
 
value of $27
 
million, representing approximately 0.04% of
 
the
Corporation’s total
 
assets, compared
 
with $32
 
million and
 
0.05%, respectively,
 
at December
 
31, 2023.
 
As shown
 
in Table
 
11,
 
the
trading portfolio consists
 
principally of mortgage-backed
 
securities and U.S.
 
Treasuries, which
 
at March
 
31, 2024 were
 
investment
grade securities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
138
Table 11
 
- Trading Portfolio
March 31, 2024
December 31, 2023
(Dollars in thousands)
Amount
 
Weighted
Average Yield
[1]
Amount
Weighted
Average Yield
[1]
Mortgage-backed securities
 
$
18,671
5.69
%
$
14,373
5.69
%
U.S. Treasury securities
8,316
4.05
16,859
4.29
Collateralized mortgage obligations
90
5.12
98
5.21
Puerto Rico government obligations
60
0.60
71
0.91
Interest-only strips
 
166
12.00
167
12.00
Other (includes related trading derivatives)
5
6.10
-
-
Total
 
$
27,308
5.22
%
$
31,568
4.96
%
[1] Not on a taxable equivalent basis.
The Corporation’s trading activities are
 
limited by internal policies. For each
 
of the two subsidiaries, the
 
market risk assumed under
trading
 
activities
 
is
 
measured
 
by
 
the
 
5-day
 
net
 
value-at-risk
 
(“VAR”),
 
with
 
a
 
confidence
 
level
 
of
 
99%.
 
The
 
VAR
 
measures
 
the
maximum estimated loss that may occur over a
 
5-day holding period, given a 99% probability.
 
The Corporation’s
 
trading portfolio
 
had a
 
5-day VAR
 
of approximately
 
$0.4 million
 
for the
 
last week
 
in March
 
2024. VAR
 
models
include
 
assumptions and
 
estimates thus
 
actual
 
results could
 
differ
 
from
 
the
 
outputs from
 
these
 
models
 
and
 
assumptions. Back-
testing is performed on model
 
results to compare actual results
 
against maximum estimated losses, in order
 
to evaluate model and
assumptions accuracy.
 
In the opinion of management, the size and composition
 
of the trading portfolio does not represent
 
a significant source of market risk
for the Corporation.
Liquidity
 
The objective
 
of effective
 
liquidity management
 
is to
 
ensure that
 
the Corporation
 
has sufficient
 
liquidity to
 
meet all
 
of its
 
financial
obligations, finance
 
expected future
 
growth,
 
fund
 
planned capital
 
distributions and
 
maintain a
 
reasonable safety
 
margin for
 
cash
needs under
 
both normal
 
and stressed market
 
conditions. The Board
 
of Directors
 
is responsible
 
for establishing the
 
Corporation’s
tolerance for liquidity risk,
 
including approving relevant risk limits and
 
policies. The Board of
 
Directors has delegated the monitoring
of
 
these risks
 
to
 
the Board’s
 
Risk Management
 
Committee and
 
the Asset/Liability
 
Management Committee.
 
The management
 
of
liquidity
 
risk,
 
on
 
a
 
long-term
 
and
 
day-to-day
 
basis,
 
is
 
the
 
responsibility
 
of
 
the
 
Corporate
 
Treasury
 
Division.
 
The
 
Corporation’s
Corporate
 
Treasurer
 
is
 
responsible
 
for
 
implementing
 
the
 
policies
 
and
 
procedures
 
approved
 
by
 
the
 
Board
 
of
 
Directors
 
and
 
for
monitoring
 
the
 
Corporation’s
 
liquidity
 
position
 
on
 
an
 
ongoing
 
basis.
 
Also,
 
the
 
Corporate
 
Treasury
 
Division coordinates
 
corporate
wide
 
liquidity
 
management
 
strategies
 
and
 
activities
 
with
 
the
 
reportable
 
segments,
 
oversees
 
policy
 
breaches
 
and
 
manages
 
the
escalation process.
 
The
 
Financial and
 
Operational Risk
 
Management Division
 
is
 
responsible for
 
the independent
 
monitoring and
reporting of adherence with established policies.
An
 
institution’s liquidity
 
may be
 
pressured if,
 
for example,
 
it experiences
 
a sudden
 
and unexpected
 
substantial cash
 
outflow due
deposit
 
outflows,
 
whether due
 
to
 
a
 
loss
 
of confidence
 
by
 
depositors, or
 
other
 
reasons, including
 
exogenous events
 
such
 
as
 
the
COVID-19 pandemic,
 
a downgrading
 
of its
 
credit rating,
 
or some
 
other event
 
that causes
 
counterparties to
 
avoid exposure
 
to the
institution. Factors
 
that the
 
Corporation does
 
not control,
 
such
 
as the
 
economic outlook,
 
adverse ratings
 
of its
 
principal markets,
perceptions of the financial services industry and regulatory
 
changes, could also affect its ability to obtain
 
funding.
 
The Corporation
 
has adopted
 
policies and
 
limits to
 
monitor the
 
Corporation’s liquidity
 
position and
 
that of
 
its banking
 
subsidiaries.
Additionally, contingency funding
 
plans are used to
 
model various stress events
 
of different magnitudes and
 
affecting different time
horizons that assist
 
management in evaluating
 
the size of
 
the liquidity buffers
 
needed if those
 
stress events
 
occur. However,
 
such
models
 
may
 
not
 
predict
 
accurately
 
how
 
the
 
market
 
and
 
customers
 
might
 
react
 
to
 
every
 
event,
 
and
 
are
 
dependent
 
on
 
many
assumptions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
139
Deposits, including
 
customer deposits,
 
brokered deposits
 
and public
 
funds deposits,
 
continue to
 
be the
 
most significant
 
source of
funds for the
 
Corporation, funding
 
90% of the
 
Corporation’s total assets
 
at March 31,
 
2024 and December
 
31, 2023.
 
The ratio of
total
 
ending
 
loans
 
to
 
deposits
 
was
 
55%
 
at
 
March
 
31,
 
2024
 
and
 
December
 
31,
 
2023.
 
In
 
addition
 
to
 
traditional
 
deposits,
 
the
Corporation maintains borrowing arrangements, which amounted to approximately $1.0 billion in
 
outstanding balances at March 31,
2024 (December 31, 2023 -
 
$1.1 billion). A detailed description of
 
the Corporation’s borrowings, including their
 
terms, is included in
Note
 
15
 
to
 
the
 
Consolidated
 
Financial
 
Statements.
 
Also,
 
the
 
Consolidated
 
Statements
 
of
 
Cash
 
Flows
 
in
 
the
 
accompanying
Consolidated Financial Statements provide information
 
on the Corporation’s cash inflows and outflows.
 
The
 
following
 
sections
 
provide
 
further
 
information
 
on
 
the
 
Corporation’s
 
major
 
funding
 
activities
 
and
 
needs,
 
as
 
well
 
as
 
the
 
risks
involved in these activities.
Banking Subsidiaries
Primary
 
sources of
 
funding
 
for the
 
Corporation’s
 
banking subsidiaries
 
(BPPR and
 
PB
 
or,
 
collectively,
 
“the banking
 
subsidiaries”)
include
 
retail,
 
commercial
 
and
 
public
 
sector
 
deposits,
 
brokered
 
deposits,
 
unpledged
 
investment
 
securities,
 
mortgage
 
loan
securitization and, to a lesser extent, loan sales.
 
Refer to Table 7 in this MD&A section for a breakdown of deposits by major types. Core deposits are generated
 
from a large base of
consumer, corporate and
 
public sector customers. Core deposits
 
include certificates of deposit
 
under $250,000, all interest-bearing
transactional deposit accounts,
 
non-interest bearing deposits,
 
and savings deposits.
 
Core deposits exclude
 
brokered deposits and
certificates
 
of
 
deposit
 
over
 
$250,000.
 
Core
 
deposits,
 
excluding
 
P.R.
 
public
 
funds
 
that
 
are
 
fully
 
collateralized,
 
have
 
historically
provided
 
the
 
Corporation with
 
a sizable
 
source
 
of
 
relatively stable
 
and
 
low-cost
 
funds.
 
P.R.
 
public funds,
 
while
 
linked to
 
market
interest rates,
 
provide a stable
 
source of
 
funding with an
 
attractive earnings spread.
 
Core deposits totaled
 
$59.0 billion, or
 
92% of
total
 
deposits,
 
at
 
March
 
31,
 
2024,
 
compared
 
with
 
$59.0
 
billion,
 
or
 
93%
 
of
 
total
 
deposits,
 
at
 
December
 
31,
 
2023.
 
Core
 
deposits
financed 88% of the Corporation’s earning assets at March
 
31, 2024 and December 31, 2023.
In addition, the Corporation maintains borrowing facilities with the FHLB and at the discount window of the Federal Reserve Bank of
New York (the “FRB”) and has a considerable amount of collateral pledged
 
that can be used to raise funds under these
 
facilities.
 
During the first quarter of 2024 the Corporation had
 
no material incremental use of its available liquidity sources. At
 
March 31,2024,
the Corporation’s available liquidity
 
increased to $20.4 billion
 
from $19.5 billion on
 
December 31, 2023. The liquidity
 
sources of the
Corporation at March 31, 2024 are presented
 
in Table 12 below:
Table 12 - Liquidity Sources
March 31, 2024
December 31, 2023
(In thousands)
BPPR
Popular U.S.
Total
BPPR
Popular U.S.
Total
Unpledged securities and unused funding
sources:
Money market (excess funds at the
Federal Reserve Bank)
$
4,473,620
$
1,447,189
$
5,920,809
$
5,516,636
$
1,475,143
$
6,991,779
Unpledged securities
5,749,794
375,470
6,125,264
4,212,480
347,791
4,560,271
FHLB borrowing capacity
2,400,630
1,358,639
3,759,269
2,157,685
1,341,329
3,499,014
Discount window of the Federal Reserve
Bank borrowing capacity
2,674,719
1,917,123
4,591,842
2,605,674
1,818,946
4,424,620
Total available liquidity
$
15,298,763
$
5,098,421
$
20,397,184
$
14,492,475
$
4,983,209
$
19,475,684
Refer
 
to
 
Note
 
15
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
 
information
 
of
 
the
 
Corporation’s
 
borrowing
 
facilities
available through its banking subsidiaries.
 
The principal
 
uses of
 
funds for
 
the banking
 
subsidiaries include
 
loan originations,
 
investment portfolio
 
purchases, loan
 
purchases
and repurchases, repayment of outstanding obligations (including deposits), advances on certain serviced portfolios and operational
expenses. Also, the
 
banking subsidiaries assume liquidity
 
risk related to collateral
 
posting requirements for certain
 
activities mainly
in
 
connection
 
with
 
contractual
 
commitments,
 
recourse
 
provisions,
 
servicing
 
advances,
 
derivatives
 
and
 
credit
 
card
 
licensing
agreements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
140
The banking
 
subsidiaries maintain
 
sufficient funding
 
capacity to
 
address large
 
increases in
 
funding requirements
 
such as
 
deposit
outflows.
 
The
 
Corporation has
 
established
 
liquidity
 
guidelines
 
that
 
require
 
the
 
banking
 
subsidiaries
 
to
 
have
 
sufficient
 
liquidity
 
to
cover all short-term borrowings and a portion of deposits.
 
The Corporation’s ability to compete
 
successfully in the marketplace for
 
deposits, excluding brokered deposits, depends on various
factors, including pricing, service, convenience
 
and financial stability as
 
reflected by operating results and
 
financial condition, credit
ratings (by
 
nationally recognized credit
 
rating agencies), customer
 
confidence, and
 
importantly,
 
FDIC deposit
 
insurance coverage.
Deposits at all of the Corporation’s banking subsidiaries are federally insured
 
(subject to FDIC limits) and this is expected to mitigate
the potential effect of the aforementioned risks.
The distribution by maturity of certificates of deposit with denominations of $250,000 and over at March 31, 2024 is presented in the
table that follows:
Table 13 - Distribution by
 
Maturity of Certificates of Deposit of $250,000 and Over
(In thousands)
3 months or less
$
2,137,053
Over 3 to 12 months
766,629
Over 1 year to 3 years
245,638
Over 3 years
184,847
Total
$
3,334,167
The
 
Corporation
 
had
 
$1.6
 
billion in
 
brokered
 
deposits
 
at
 
March
 
31,
 
2024,
 
which
 
financed
 
approximately
 
2%
 
of
 
its
 
total
 
assets
(December 31, 2023 -
 
$1.7 billion and 2%,
 
respectively).
 
In the event that
 
any of the Corporation’s
 
banking subsidiaries’ regulatory
capital
 
ratios fall
 
below those
 
required by
 
a
 
well-capitalized institution
 
or
 
are
 
subject
 
to
 
capital
 
restrictions by
 
the
 
regulators, the
Corporation would be
 
at risk that
 
such banking subsidiary
 
would not be
 
able to raise
 
or maintain brokered deposits
 
and could also
face limitations
 
on the
 
rate paid
 
on deposits,
 
which may
 
hinder the
 
Corporation’s ability
 
to effectively
 
compete in
 
its retail
 
markets
and could affect its deposit raising efforts.
 
Deposits from the public sector represent an
 
important source of funds for the Corporation.
 
As of March 31, 2024, total
 
Puerto Rico
public sector
 
deposits were
 
$18.0 billion,
 
compared to
 
$18.1 billion
 
at December
 
31, 2023.
 
These deposits
 
require that
 
the bank
pledges
 
high credit quality securities as collateral; therefore, liquidity risks arising from public
 
sector deposit outflows are lower given
that the bank
 
receives its collateral
 
in return. This,
 
now unpledged, collateral
 
can either be
 
financed via repurchase
 
agreements or
sold
 
for
 
cash.
 
However,
 
timing
 
differences
 
between
 
the
 
time
 
the
 
deposit
 
outflow
 
and
 
when
 
the
 
bank
 
receives
 
its
 
collateral
 
may
occur.
 
Additionally,
 
the Corporation
 
uses fixed-rate
 
U.S. Treasury
 
debt securities
 
as collateral
 
that have
 
limited credit
 
risk, but
 
are
nonetheless subject to market value risk based on
 
changes in the interest rate environment.
 
When interest rates increase, the value
of this
 
collateral decreases and
 
could result in
 
the Corporation having
 
to provide additional
 
collateral to cover
 
the same amount
 
of
deposit
 
liabilities.
 
This
 
additional
 
collateral
 
could
 
reduce
 
unpledged
 
securities
 
otherwise
 
available
 
as
 
liquidity
 
sources
 
to
 
the
Corporation.
 
As of
 
March 31,
 
2024, management believes
 
that the
 
banking subsidiaries had
 
sufficient current
 
and projected liquidity
 
sources to
meet their anticipated cash flow obligations,
 
as well as special needs
 
and off-balance sheet commitments, in the
 
ordinary course of
business.
 
Management
 
also
 
believes
 
that
 
as
 
of
 
March
 
31,
 
2024
 
its
 
banking
 
subsidiaries
 
have
 
sufficient
 
liquidity
 
current
 
and
projected resources
 
to address
 
a stress
 
event. Although
 
the banking
 
subsidiaries have
 
historically been
 
able to
 
replace maturing
deposits and advances, no assurance can
 
be given that they would
 
be able to replace those
 
funds in the future if
 
the Corporation’s
financial condition or general market conditions were
 
to deteriorate. The Corporation’s financial flexibility will be severely
 
constrained
if the banking subsidiaries are unable to
 
maintain access to funding or if
 
adequate financing is not available to
 
accommodate future
financing
 
needs
 
at
 
acceptable
 
interest
 
rates.
 
The
 
Corporation’s
 
banking
 
subsidiaries
 
have
 
to
 
meet
 
margin
 
requirements
 
on
repurchase
 
agreements
 
and
 
other
 
collateralized
 
borrowing
 
facilities
 
that
 
include
 
certain
 
required
 
levels
 
of
 
cash
 
deposits
 
and
qualifying
 
securities.
 
To
 
the
 
extent
 
that
 
the
 
value
 
of
 
securities
 
previously
 
pledged
 
as
 
collateral
 
declines
 
below
 
such
 
required
amounts
 
because
 
of
 
market
 
changes,
 
the
 
Corporation
 
is
 
required
 
to
 
deposit
 
additional
 
cash
 
or
 
securities
 
to
 
meet
 
its
 
margin
requirements, thereby adversely
 
affecting its
 
liquidity.
 
Finally,
 
to the
 
extent the
 
Corporation relies more
 
heavily on
 
more expensive
funding sources in order to meet its future growth, revenues
 
may not increase in a manner that is proportionate to cover these
 
costs.
In this case, the Corporation’s profitability would be adversely
 
effected.
141
The Corporation
 
monitors uninsured
 
deposits under
 
applicable FDIC
 
regulations.
 
Additionally,
 
the Corporation
 
monitors accounts
with balances over $250,000.
 
While the Corporation has a
 
diverse deposit base from retail, commercial,
 
corporate and government
clients,
 
as
 
well
 
as
 
wholesale funding
 
sources such
 
as
 
brokered deposits,
 
it
 
considers
 
balance
 
in
 
excess
 
of
 
$250,000 to
 
have a
higher
 
potential
 
liquidity
 
risk.
 
Table
 
14
 
reflects
 
the
 
aggregate
 
balance
 
in
 
deposit
 
accounts
 
in
 
excess
 
of
 
$250,000,
 
including
collateralized public funds and deposits outside of the
 
U.S. and its territories.
 
Collateralized public funds, as presented in Table
 
14,
represent public
 
deposit balances
 
from governmental
 
entities in
 
the U.S.
 
and its
 
territories, including
 
Puerto Rico
 
and the
 
United
States Virgin Islands, collateralized based on such jurisdictions’
 
applicable collateral requirements.
 
On March 31,
 
2024, deposits with balances
 
in excess of
 
$250,000, excluding foreign deposits
 
(mainly deposits in
 
the British Virgin
Islands) intercompany
 
deposits and
 
collateralized public
 
funds, were
 
$ 10.3
 
billion or
 
19% at
 
BPPR and
 
$ 2.5
 
billion or
 
22% at
Popular U.S., compared to available liquidity sources
 
of $ 15.3 billion at BPPR and $ 5.1 billion
 
at Popular U.S.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
142
Table 14 - Deposits
31-Mar-24
Popular, Inc.
(Dollars in thousands)
BPPR
% of Total
Popular U.S.
% of Total
(Consolidated)
% of Total
Deposits:
Deposits balances under $250,000 [1]
$
24,111,245
45
%
$
7,912,597
70
%
$
32,023,842
50
%
Transactional deposits balances over
$250,000
8,119,072
15
%
2,093,183
18
%
10,212,255
16
%
Time deposits balances over $250,000
2,134,917
4
%
416,911
4
%
2,551,828
4
%
Uninsured foreign deposits
419,147
1
%
-
-
%
419,147
1
%
Collateralized public funds
18,307,794
34
%
293,918
3
%
18,601,712
29
%
Intercompany deposits
312,107
1
%
556,450
5
%
-
-
%
Total deposits
$
53,404,282
100
%
$
11,273,059
100
%
$
63,808,784
100
%
[1] Includes the first $250,000 in balances of transactional
 
and time deposit accounts with balances in excess
 
of $250,000.
31-Dec-23
Popular, Inc.
(Dollars in thousands)
BPPR
% of Total
Popular U.S.
% of Total
(Consolidated)
% of Total
Deposits
Deposits balances under $250,000 [1]
$
23,683,475
45
%
$
7,760,363
69
%
$
31,443,838
49
%
Transactional deposits balances over
$250,000
8,632,491
16
%
2,230,978
20
%
10,863,469
17
%
Time deposits balances over $250,000
1,926,005
4
%
361,315
3
%
2,287,320
4
%
Uninsured foreign deposits
418,334
1
%
-
-
%
418,334
1
%
Collateralized public funds
18,313,612
34
%
291,670
3
%
18,605,282
29
%
Intercompany deposits
159,163
-
%
626,312
6
%
-
-
%
Total deposits
$
53,133,080
100
%
$
11,270,638
100
%
$
63,618,243
100
%
[1] Includes the first $250,000 in balances of transactional
 
and time deposit accounts with balances in excess
 
of $250,000.
Bank Holding Companies
The principal
 
sources of
 
funding for
 
the BHCs,
 
which are
 
Popular,
 
Inc.
 
(holding company
 
only) and
 
PNA, include
 
cash on
 
hand,
investment
 
securities,
 
dividends
 
received from
 
banking
 
and
 
non-banking subsidiaries,
 
asset sales,
 
credit
 
facilities
 
available from
affiliate banking subsidiaries and proceeds from potential securities offerings.
 
Dividends from banking and non-banking subsidiaries
are subject to various regulatory limits
 
and authorization requirements that are further described
 
below and that may limit the
 
ability
of those subsidiaries to act as a source of
 
funding to the BHCs.
The
 
principal
 
uses
 
of
 
these
 
funds
 
include
 
the
 
repayment
 
of
 
debt,
 
and
 
interest
 
payments
 
to
 
holders
 
of
 
senior
 
debt
 
and
 
junior
subordinated
 
deferrable
 
interest
 
(related
 
to
 
trust
 
preferred
 
securities),
 
the
 
payment
 
of
 
dividends
 
to
 
common
 
stockholders,
repurchases of the Corporation’s securities and capitalizing its
 
banking subsidiaries.
 
The outstanding balance of notes
 
payable at the BHCs
 
amounted to $593 million at
 
March 31, 2024 and
 
$592 million at December
31, 2023.
The contractual maturities of the BHCs notes payable
 
at March 31, 2024 are presented in Table 15.
 
 
 
 
 
 
 
 
 
 
 
143
Table 15
 
- Distribution of BHC's Notes Payable by Contractual
 
Maturity
Year
(In thousands)
2028
$
394,285
Later years
198,353
Total
$
592,638
As of
 
March 31,
 
2024, the
 
BHCs had
 
cash and
 
money markets
 
investments totaling
 
$541 million
 
and borrowing
 
potential of
 
$228
million
 
from
 
its
 
secured
 
facility
 
with
 
BPPR.
 
The
 
BHCs’
 
liquidity
 
position
 
continues
 
to
 
be
 
adequate
 
with
 
sufficient
 
cash
 
on
 
hand,
investments and
 
other sources of
 
liquidity that are
 
expected to be
 
sufficient to
 
meet all
 
interest payments and
 
dividend obligations
for the
 
foreseeable future.
 
As indicated
 
in Table
 
15 above, the
 
BHC outstanding notes
 
payable relate to
 
$400 million in
 
aggregate
principal
 
amount of
 
7.25% Senior
 
Notes
 
due
 
2028
 
(the “Notes”)
 
issued in
 
an
 
underwritten public
 
offering during
 
March
 
of
 
2023.
Additionally, the Corporation’s latest quarterly dividend was $0.62 per share or approximately
 
$45 million per quarter.
The BHCs have in
 
the past borrowed in the
 
corporate debt market primarily to finance
 
their non-banking subsidiaries and refinance
debt obligations. The issuance of corporate debt as
 
a source of funding is likely more
 
costly due to the fact that
 
two out of the three
principal credit
 
rating agencies
 
rate the
 
Corporation below
 
“investment grade”,
 
which affects
 
the Corporation’s
 
cost
 
and ability
 
to
raise
 
funds
 
in
 
the
 
capital
 
markets.
 
Factors
 
that
 
the
 
Corporation
 
does
 
not
 
control,
 
such
 
as
 
the
 
economic
 
outlook,
 
interest
 
rate
volatility,
 
inflation, disruptions in
 
the debt market,
 
among others, could
 
also affect
 
its ability to
 
obtain funding. The
 
Corporation has
an
 
automatic
 
shelf
 
registration
 
statement
 
filed
 
and
 
effective
 
with
 
the
 
Securities
 
and
 
Exchange
 
Commission,
 
which
 
permits
 
the
Corporation to issue an unspecified amount of debt
 
or equity securities.
Non-Banking Subsidiaries
The
 
principal
 
sources
 
of
 
funding
 
for
 
the
 
non-banking
 
subsidiaries
 
include
 
internally
 
generated
 
cash
 
flows
 
from
 
operations,
 
loan
sales, repurchase agreements, capital
 
injections and borrowed funds
 
from their direct
 
parent companies or the
 
holding companies.
The principal uses of funds for the non-banking
 
subsidiaries include repayment of maturing debt,
 
operational expenses and payment
of dividends to the
 
BHCs. The liquidity needs
 
of the non-banking subsidiaries
 
are minimal since most
 
of them are
 
funded internally
from operating cash flows or from intercompany borrowings
 
or capital contributions from their holding companies.
 
Dividends
During the quarter ended March 31,
 
2024, the Corporation declared cash dividends of
 
$0.62 per common share outstanding ($44.8
million in the
 
aggregate). The dividends for the
 
Corporation’s Series A preferred
 
stock amounted to $0.4
 
million. During the quarter
ended March 31, 2024, the BHCs received dividends and distributions amounting to $150 million from BPPR, $50 million from PNA,
$6 million from Popular Securities and $7 million from its
 
non-banking subsidiaries.
 
Other Funding Sources and Capital
In addition
 
to cash
 
reserves held
 
at the
 
FRB that
 
totaled $
 
5.9 billion
 
at March
 
31, 2024,
 
the debt
 
securities portfolio
 
provides an
additional
 
source
 
of
 
liquidity,
 
which
 
may
 
be
 
realized
 
through
 
either
 
securities
 
sales,
 
collateralized
 
borrowings
 
or
 
repurchase
agreements.
 
The
 
Corporation’s
 
debt
 
securities
 
portfolio
 
consists
 
primarily
 
of
 
liquid
 
U.S.
 
government
 
debt
 
securities,
 
U.S.
government
 
sponsored
 
agency
 
debt
 
securities,
 
U.S.
 
government
 
sponsored
 
agency
 
mortgage-backed
 
securities,
 
and
 
U.S.
government
 
sponsored
 
agency
 
collateralized
 
mortgage
 
obligations
 
that
 
can
 
be
 
used
 
to
 
raise
 
funds
 
in
 
the
 
repo
 
markets.
 
The
availability
 
of
 
the
 
repurchase
 
agreement
 
would
 
be
 
subject
 
to
 
having
 
sufficient
 
unpledged
 
collateral
 
available
 
at
 
the
 
time
 
the
transactions are consummated, in addition to overall liquidity and risk appetite of the various counterparties. In 2023, BPPR became
an
 
approved counterparty
 
in the
 
Federal Reserve’s
 
Standing Repo
 
Facility.
 
This
 
allows approved
 
counterparties to
 
participate in
daily auctions
 
with the
 
Standing Repo
 
Facility for
 
up to
 
$500 billion
 
in aggregate
 
of overnight financing
 
using U.S.
 
Treasuries and
Agency MBS as collateral. The Corporation’s unpledged debt securities amounted
 
to $ 6.1 billion at March 31, 2024 and $ 4.6 billion
at December 31, 2023. A
 
substantial portion of these debt securities
 
could be used to
 
raise financing in the U.S.
 
money markets or
from secured lending sources, subject to changes in
 
their fair market value and customary adjustments (haircuts).
 
Additional liquidity may
 
be provided through
 
loan maturities, prepayments
 
and sales. The
 
loan portfolio can
 
also be used
 
to obtain
funding in the capital markets. In particular,
 
mortgage loans and some types of consumer loans, have
 
secondary markets which the
Corporation could use.
Off-Balance Sheet Arrangements and Other Commitments
 
 
144
In the ordinary course
 
of business, the Corporation
 
engages in financial transactions that
 
are not recorded on
 
the balance sheet or
may be recorded on the balance sheet in amounts that are different than the full contract or notional amount of the transaction. As a
provider of
 
financial services,
 
the Corporation
 
routinely enters
 
into commitments
 
with off-balance
 
sheet risk
 
to meet
 
the financial
needs of
 
its customers. These
 
commitments may include
 
loan commitments and
 
standby letters of
 
credit. These commitments
 
are
subject
 
to
 
the
 
same
 
credit
 
policies
 
and
 
approval
 
process
 
used
 
for
 
on-balance
 
sheet
 
instruments.
 
These
 
instruments
 
involve,
 
to
varying degrees, elements
 
of credit and
 
interest rate risk
 
in excess of
 
the amount recognized
 
in the statement
 
of financial position.
Refer to
 
Note 20
 
to the
 
Consolidated Financial
 
Statements for
 
information on
 
the Corporation’s
 
commitments to
 
extent credit
 
and
other non-credit commitments.
 
Other types
 
of off-balance
 
sheet arrangements
 
that the
 
Corporation enters
 
in the
 
ordinary course
 
of business
 
include derivatives,
operating
 
leases
 
and
 
provision
 
of
 
guarantees,
 
indemnifications,
 
and
 
representation
 
and
 
warranties.
 
Refer
 
to
 
Note
 
27
 
to
 
the
Consolidated Financial Statements for information on operating leases and
 
to Note 19 to the
 
Consolidated Financial Statements for
a
 
detailed
 
discussion
 
related
 
to
 
the
 
Corporation’s
 
obligations
 
under
 
credit
 
recourse
 
and
 
representation
 
and
 
warranties
arrangements.
 
The Corporation monitors its cash requirements, including
 
its contractual obligations and debt commitments.
 
FDIC Special Assessments
 
On
 
November
 
16,
 
2023,
 
the
 
Federal
 
Deposit
 
Insurance
 
Corporation
 
(“FDIC”)
 
approved
 
a
 
final
 
rule
 
that
 
imposes
 
a
 
special
assessment (the “FDIC
 
Special Assessment”) to recover
 
the losses to
 
the deposit insurance
 
fund resulting from
 
the FDIC’s use,
 
in
March
 
2023,
 
of
 
the
 
systemic
 
risk
 
exception. In
 
connection with
 
this assessment,
 
the
 
Corporation recorded
 
an
 
expense of
 
$71.4
million, $45.3 million net of tax,
 
in the fourth quarter of 2023,
 
representing the full amount of the
 
estimated assessment at that time.
The
 
special
 
assessment
 
amount
 
and
 
collection
 
period
 
may
 
change
 
as
 
the
 
estimated
 
loss
 
is
 
periodically
 
adjusted
 
or
 
if
 
the
 
total
amount collected varies. As
 
a result, the Corporation
 
recorded an additional expense
 
of $14.3 million, $9.1
 
million net of tax,
 
in the
first quarter of 2024, based on the updated loss estimates. Refer to the Overview section of Management’s Discussion and Analysis
included in this Form 10-Q for additional information
 
of the FDIC Special Assessment.
Financial Information of Guarantor and Issuers of Registered
 
Guaranteed Securities
The Corporation (not
 
including any of
 
its subsidiaries, “PIHC”)
 
is the parent
 
holding company of
 
Popular North America
 
“PNA” and
has other subsidiaries through which it
 
conducts its financial services operations. PNA is
 
an operating, 100% subsidiary of Popular,
Inc.
 
Holding Company
 
(“PIHC”) and
 
is the
 
holding company
 
of its
 
wholly-owned subsidiaries:
 
Equity One,
 
Inc.
 
and PB,
 
including
PB’s wholly-owned subsidiaries Popular Equipment Finance,
 
LLC, Popular Insurance Agency, U.S.A., and E-LOAN, Inc.
PNA
 
has
 
issued
 
junior
 
subordinated
 
debentures
 
guaranteed
 
by
 
PIHC
 
(together
 
with
 
PNA,
 
the
 
“obligor
 
group”)
 
purchased
 
by
statutory trusts
 
established by
 
the Corporation.
 
These debentures
 
were purchased
 
by the
 
statutory trust
 
using the
 
proceeds from
trust preferred securities issued to the public (referred to as
 
“capital securities”), together with the proceeds of the related issuances
of common securities of the trusts.
PIHC
 
fully
 
and
 
unconditionally
 
guarantees
 
the
 
junior
 
subordinated
 
debentures
 
issued
 
by
 
PNA.
 
PIHC’s
 
obligation
 
to
 
make
 
a
guarantee payment may be satisfied by direct
 
payment of the required amounts to the
 
holders of the applicable capital securities or
by causing the applicable trust to pay such amounts to such holders. Each guarantee does not apply to any payment of distributions
by
 
the
 
applicable
 
trust
 
except
 
to
 
the
 
extent
 
such
 
trust
 
has
 
funds
 
available
 
for
 
such
 
payments.
 
If
 
PIHC
 
does
 
not
 
make
 
interest
payments on the
 
debentures held by such
 
trust, such trust
 
will not pay
 
distributions on the applicable
 
capital securities and
 
will not
have
 
funds
 
available
 
for
 
such
 
payments.
 
PIHC’s
 
guarantee
 
of
 
PNA’s
 
junior
 
subordinated
 
debentures
 
is
 
unsecured
 
and
 
ranks
subordinate and junior in
 
right of payment to
 
all the PIHC’s other
 
liabilities in the same manner
 
as the applicable debentures as
 
set
forth in the applicable indentures; and equally with all other guarantees
 
that the PIHC issues. The guarantee constitutes a guarantee
of
 
payment
 
and
 
not
 
of
 
collection,
 
which means
 
that
 
the
 
guaranteed party
 
may
 
sue
 
the
 
guarantor to
 
enforce its
 
rights
 
under the
respective guarantee without suing any other person
 
or entity.
The
 
principal
 
sources
 
of
 
funding
 
for
 
PIHC
 
and
 
PNA
 
have
 
included
 
dividends
 
received
 
from
 
their
 
banking
 
and
 
non-banking
subsidiaries, asset
 
sales and
 
proceeds from
 
the issuance
 
of debt
 
and equity.
 
As further
 
described below,
 
in the
 
Risk to
 
Liquidity
section, various statutory
 
provisions limit the
 
amount of dividends
 
an insured depository
 
institution may pay
 
to its holding
 
company
without regulatory approval.
 
145
The following
 
summarized financial information
 
presents the financial
 
position of
 
the obligor
 
group, on a
 
combined basis
 
at March
31, 2024 and
 
December 31, 2023,
 
and the results
 
of their operations
 
for the quarters
 
ended March 31,
 
2024 and March
 
31, 2023.
Investments in and
 
equity in the
 
earnings from the
 
other subsidiaries and
 
affiliates that are
 
not members of
 
the obligor group
 
have
been excluded.
The
 
summarized
 
financial
 
information
 
of
 
the
 
obligor
 
group
 
is
 
presented
 
on
 
a
 
combined
 
basis
 
with
 
intercompany
 
balances
 
and
transactions
 
between
 
entities
 
in
 
the
 
obligor
 
group
 
eliminated.
 
The
 
obligor
 
group's
 
amounts
 
due
 
from,
 
amounts
 
due
 
to
 
and
transactions
 
with subsidiaries
 
and
 
affiliates
 
have
 
been
 
presented in
 
separate
 
line
 
items,
 
if
 
they
 
are
 
material.
 
In
 
addition,
 
related
parties transactions are presented separately.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
146
Table 16 - Summarized Statement
 
of Condition
(In thousands)
March 31, 2024
December 31, 2023
Assets
Cash and money market investments
$
541,400
$
388,025
Investment securities
32,470
29,973
Accounts receivables from non-obligor subsidiaries
15,466
14,469
Other loans (net of allowance for credit losses of $34 (2023
 
- $51))
26,603
26,906
Investment in equity method investees
5,267
5,265
Other assets
54,272
51,315
Total assets
$
675,478
$
515,953
Liabilities and Stockholders' deficit
Accounts payable to non-obligor subsidiaries
$
7,953
$
7,023
Notes payable
592,638
592,283
Other liabilities
130,379
114,660
Stockholders' deficit
(55,492)
(198,013)
Total liabilities and
 
stockholders' deficit
$
675,478
$
515,953
Table 17 - Summarized Statement
 
of Operations
For the quarters ended
(In thousands)
March 31, 2024
March 31, 2023
Income:
Dividends from non-obligor subsidiaries
$
163,000
$
50,000
Interest income from non-obligor subsidiaries and affiliates
3,289
810
Earnings from investments in equity method investees
2
-
Other operating income
1,787
1,146
Total income
$
168,078
$
51,956
Expenses:
Services provided by non-obligor subsidiaries and affiliates
 
(net of
reimbursement by subsidiaries for services provided by parent
 
of
$60,996 (2023 - $56,071))
$
3,204
$
4,989
Other expenses
37,010
4,486
Total expenses
$
40,214
$
9,475
Net income
$
127,864
$
42,481
During the quarter ended March 31, 2024, the obligor
 
group recorded a $50.0 million of dividend
 
distributions from a non-
obligor subsidiary wich was recorded as a
 
reduction to the investment.
Risks to Liquidity
 
Total lines of credit outstanding, or available borrowing capacity under lines of credit are not necessarily
 
a measure of the total credit
available
 
on
 
a
 
continuing
 
basis.
 
These
 
lines
 
may
 
be
 
subject
 
to
 
collateral
 
requirements,
 
changes
 
to
 
the
 
value
 
of
 
the
 
collateral,
standards of
 
creditworthiness, leverage ratios
 
and other
 
regulatory requirements, among
 
other factors.
 
Derivatives, such
 
as those
embedded
 
in
 
long-term
 
repurchase
 
transactions
 
or
 
interest
 
rate
 
swaps,
 
and
 
off-balance
 
sheet
 
exposures,
 
such
 
as
 
recourse,
 
147
performance bonds or
 
credit card
 
arrangements, are subject
 
to collateral requirements.
 
As their
 
fair value
 
increases, the collateral
requirements may increase, thereby reducing the
 
balance of unpledged securities.
The importance of
 
the Puerto Rico
 
market for the
 
Corporation is an
 
additional risk factor
 
that could affect
 
its financing activities.
 
In
the case
 
of a
 
deterioration in
 
the outlook
 
and/or credit
 
ratings of
 
its principal
 
markets and/or
 
due to
 
regulatory changes
 
and fiscal
conditions in
 
Puerto Rico
 
that are
 
outside the
 
control of
 
the Corporation,
 
the credit
 
quality of
 
the Corporation
 
could be
 
adversely
affected and result in higher credit costs. These adverse events
 
could also affect the Corporation’s ability to obtain funding.
To
 
plan for the possibility of
 
such a scenario, management adopted contingency
 
plans to address events that could
 
limit or partially
limit important
 
sources of
 
funds that
 
are usually
 
fully available
 
for use.
 
These plans
 
call for
 
using alternate
 
funding mechanisms,
such as the
 
pledging of certain
 
asset classes and accessing
 
secured credit lines
 
and loan facilities
 
put in place
 
with the FHLB
 
and
the
 
FRB.
 
The Corporation
 
is subject
 
to
 
positive tangible
 
capital
 
requirements to
 
utilize secured
 
loan facilities
 
with the
 
FHLB that
could
 
result
 
in
 
a
 
limitation
 
of
 
borrowing
 
amounts
 
or
 
maturity
 
terms,
 
even
 
if
 
the
 
Corporation
 
exceeds
 
well-capitalized
 
regulatory
capital levels.
 
The credit
 
ratings of
 
Popular’s debt
 
obligations are
 
a relevant
 
factor for
 
liquidity because
 
they impact
 
the Corporation’s
 
ability to
borrow
 
in
 
the
 
capital
 
markets,
 
its
 
cost
 
and
 
access
 
to
 
funding
 
sources.
 
Credit
 
ratings
 
are
 
based
 
on
 
the
 
financial
 
strength,
 
credit
quality and
 
concentrations in
 
the loan
 
portfolio, the
 
level and
 
volatility of
 
earnings, capital
 
adequacy,
 
the quality
 
of management,
geographic concentration
 
in Puerto
 
Rico, the
 
liquidity of
 
the balance
 
sheet, the
 
availability of
 
a significant
 
base of
 
core retail
 
and
commercial deposits, and the Corporation’s ability to access
 
a broad array of wholesale funding sources,
 
among other factors.
 
Furthermore,
 
various
 
statutory
 
provisions
 
limit
 
the
 
amount
 
of
 
dividends
 
an
 
insured
 
depository
 
institution
 
may
 
pay
 
to
 
its
 
holding
company without
 
regulatory approval. A
 
member bank must
 
obtain the
 
approval of
 
the Federal
 
Reserve Board
 
for any
 
dividend, if
the total of all dividends declared by the member
 
bank during the calendar year would exceed
 
the combined net income for that year
and the retained net income for
 
the preceding two years, net of
 
those years’ dividend activity,
 
less any required transfers to surplus
or to a
 
fund for the
 
retirement of any
 
preferred stock. In
 
addition, a member
 
bank may not
 
declare or pay
 
a dividend in
 
an amount
greater
 
than
 
its
 
undivided
 
profits
 
as
 
reported
 
in
 
its
 
Report
 
of
 
Condition and
 
Income,
 
unless
 
the
 
member
 
bank
 
has
 
received
 
the
approval of
 
the Federal
 
Reserve Board. A
 
member bank also
 
may not permit
 
any portion of
 
its permanent capital
 
to be
 
withdrawn
unless the withdrawal has been approved by
 
the Federal Reserve Board. The ability of
 
a bank subsidiary to up-stream dividends to
its BHC
 
could thus
 
be impacted
 
by its
 
financial performance
 
and capital,
 
including tangible
 
and regulatory
 
capital, thus
 
potentially
limiting the
 
amount of
 
cash moving
 
up to
 
the BHCs
 
from
 
the banking
 
subsidiaries. This
 
could,
 
in turn,
 
affect
 
the BHCs
 
ability to
declare
 
dividends
 
on
 
its
 
outstanding
 
common
 
and
 
preferred
 
stock,
 
repurchase
 
its
 
securities
 
or
 
meet
 
its
 
debt
 
obligations,
 
for
example.
During the quarter ended March 31, 2024, BPPR declared cash dividends
 
of $150 million to PIHC. As of March 31, 2024, BPPR can
declare a
 
dividend of
 
approximately $410
 
million without
 
prior approval
 
of the
 
Federal Reserve
 
Board due
 
to its
 
retained income,
declared
 
dividend
 
activity
 
and
 
transfers
 
to
 
statutory
 
reserves
 
over the
 
measurement
 
period.
 
Pursuant
 
to
 
the
 
requirements
 
listed
above, PB
 
may
 
not declare
 
or
 
pay
 
a dividend
 
without the
 
prior approval
 
of the
 
Federal Reserve
 
Board and
 
the
 
New York
 
State
Department of Financial Services.
The Corporation’s banking subsidiaries have historically not
 
used unsecured capital market borrowings to finance its operations,
 
and
therefore are less sensitive to the level and
 
changes in the Corporation’s overall credit ratings.
Refer to the
 
Geographic and Government Risk section
 
of this MD&A for
 
some highlights on the
 
status of the Puerto
 
Rico economy
and the ongoing fiscal crisis.
Obligations Subject to Rating Triggers or Collateral Requirements
The
 
Corporation’s
 
banking
 
subsidiaries
 
currently
 
do
 
not
 
issue
 
unsecured
 
senior
 
debt,
 
as
 
these
 
banking
 
subsidiaries
 
are
 
funded
primarily with
 
deposits and
 
secured borrowings.
 
The banking
 
subsidiaries had
 
$7.8 million
 
in deposits
 
at March
 
31, 2024
 
that are
subject to rating triggers.
 
In addition,
 
certain mortgage servicing
 
and custodial agreements
 
that BPPR
 
has with
 
third parties
 
include rating covenants.
 
In the
event of a credit rating downgrade, the third parties have the right to require the institution to engage a substitute cash custodian for
escrow deposits and/or increase collateral levels
 
securing the recourse obligations.
 
As discussed
 
in Note
 
19 to
 
the Consolidated Financial
 
Statements, the Corporation
 
services residential mortgage
 
loans subject
 
to
credit
 
recourse
 
provisions.
 
Certain
 
contractual
 
agreements
 
require
 
the
 
Corporation
 
to
 
post
 
collateral
 
to
 
secure
 
such
 
recourse
obligations if
 
the institution’s
 
required credit
 
ratings are
 
not maintained.
 
Collateral pledged
 
by the
 
Corporation to
 
secure recourse
 
 
 
 
148
obligations
 
amounted
 
to
 
approximately
 
$25.2
 
million
 
at
 
March
 
31,
 
2024.
 
The
 
Corporation
 
could
 
be
 
required
 
to
 
post
 
additional
collateral under the
 
agreements. Management expects that
 
it would be
 
able to meet
 
additional collateral requirements if
 
and when
needed. The requirements to post collateral under certain agreements or the loss of escrow deposits could reduce the Corporation’s
liquidity resources and impact its operating results.
Credit Risk
Geographic and Government Risk
 
The Corporation is exposed to geographic and government risk.
 
The Corporation’s assets and revenue composition by geographical
area and by business segment reporting are presented
 
in Note 32 to the Consolidated Financial Statements.
Commonwealth of Puerto Rico
A
 
significant portion
 
of
 
our financial
 
activities and
 
credit
 
exposure is
 
concentrated in
 
the
 
Commonwealth of
 
Puerto Rico
 
(“Puerto
Rico”), which has faced severe economic and fiscal
 
challenges in the past and may face additional
 
challenges in the future.
 
Economic Performance.
 
Puerto
 
Rico’s
 
economy suffered
 
a
 
severe and
 
prolonged recession
 
from
 
2007
 
to
 
2017,
 
with real
 
gross national
 
product (“GNP”)
contracting approximately 15%
 
during this period.
 
In 2017, Hurricane
 
María caused significant
 
damage and destruction
 
across the
island, resulting in further economic contraction. Puerto Rico’s
 
economy has been gradually recovering since 2018, in
 
part aided by
the large amount
 
of federal disaster
 
relief and recovery
 
assistance funds injected
 
into the Puerto
 
Rico economy in
 
connection with
Hurricane María
 
and other
 
recent natural
 
disasters. This
 
growth was
 
interrupted by
 
the economic
 
shock caused
 
by the
 
COVID-19
pandemic in 2020, but has since resumed, in part
 
aided by additional federal assistance from
 
pandemic-related stimulus measures.
The
 
latest
 
Puerto
 
Rico
 
Economic Activity
 
Index,
 
published
 
by
 
the
 
Economic
 
Development Bank
 
for
 
Puerto
 
Rico
 
(the
 
“Economic
Activity
 
Index”),
 
reflected
 
a
 
0.8%
 
year-over-year
 
decline
 
in
 
March
 
2024,
 
compared
 
to
 
March
 
2023,
 
and
 
essentially
 
remained
unchanged from February
 
2024 to March
 
2024. The Economic
 
Activity Index is
 
a coincident indicator
 
of ongoing economic
 
activity
but
 
not
 
a
 
direct
 
measurement of
 
real
 
GNP.
 
The
 
Puerto
 
Rico
 
Planning Board
 
estimates that
 
Puerto
 
Rico’s
 
real
 
GNP
 
grew
 
0.7%
during fiscal year 2023 (July 2022-June 2023)
 
and projects 2.8% real GNP growth for fiscal
 
year 2024 (July 2023-June-2024).
While the
 
Puerto Rico
 
economy has
 
not directly
 
tracked the
 
United States
 
economy in
 
recent years,
 
many of
 
the external
 
factors
that impact
 
the Puerto
 
Rico economy
 
are affected
 
by the
 
policies and performance
 
of the
 
United States
 
economy.
 
These external
factors include
 
the level
 
of interest
 
rates and
 
the rate
 
of inflation.
 
Inflation in
 
the United
 
States, as
 
measured by the
 
United States
Consumer Price Index (published by the U.S.
 
Bureau of Labor Statistics), increased 3.5% during
 
the 12-month period ended March
2024.
 
Inflation in Puerto Rico,
 
as measured by the
 
Puerto Rico Consumer Price
 
Index (published by the
 
Department of Labor and
Human Resources of Puerto Rico), increased 1.9% during the 12-month period ended February 2024. The rate of inflation gradually
decreased from a mid-2022 peak, as the Federal Reserve
 
implemented a series of benchmark interest
 
rate increases.
 
Fiscal Challenges.
 
As the
 
Puerto Rico
 
economy contracted, the
 
government’s public
 
debt rose
 
rapidly,
 
in part
 
from borrowing to
 
cover deficits
 
to pay
debt service,
 
pension benefits and
 
other government expenditures.
 
By 2016,
 
the Puerto
 
Rico government had
 
over $120
 
billion in
combined debt and unfunded pension liabilities, had
 
lost access to the capital markets, and was in
 
the midst of a fiscal crisis.
Puerto
 
Rico’s
 
escalating fiscal
 
and economic
 
challenges
 
and imminent
 
widespread defaults
 
in
 
its
 
public debt
 
prompted the
 
U.S.
Congress to
 
enact the
 
Puerto Rico
 
Oversight, Management,
 
and Economic
 
Stability Act
 
(“PROMESA”) in
 
June 2016.
 
PROMESA
created the “Oversight Board” with ample powers over Puerto Rico’s fiscal and economic affairs and those of its public corporations,
instrumentalities and municipalities (collectively,
 
“PR Government Entities”). Pursuant
 
to PROMESA, the
 
Oversight Board will be
 
in
place
 
until
 
market
 
access
 
is
 
restored
 
and
 
balanced
 
budgets
 
are
 
produced
 
for
 
at
 
least
 
four
 
consecutive
 
years.
 
PROMESA
 
also
established two
 
mechanisms for
 
the restructuring
 
of the
 
obligations of
 
PR Government
 
Entities: (a)
 
Title III,
 
which provides
 
an in-
court process that incorporates many of the
 
powers and provisions of the U.S. Bankruptcy Code
 
and permits adjustment of a broad
 
 
 
149
range of obligations, and
 
(b) Title VI,
 
which provides for a
 
largely out-of-court process through which
 
modifications to financial debt
can be accepted by a supermajority of creditors
 
and bind holdouts.
Since 2017, Puerto Rico and several
 
of its instrumentalities have availed themselves
 
of the debt restructuring mechanisms of Titles
III and VI of PROMESA. The Puerto Rico government emerged from Title III of PROMESA in March 2022. Several instrumentalities,
including
 
Government
 
Development
 
Bank
 
for
 
Puerto
 
Rico,
 
the
 
Puerto
 
Rico
 
Sales
 
Tax
 
Financing
 
Corporation,
 
the
 
Puerto
 
Rico
Highways
 
and
 
Transportation
 
Authority,
 
and
 
the
 
Puerto
 
Rico
 
Industrial
 
Development
 
Company,
 
have
 
also
 
completed
 
debt
restructurings
 
under
 
Titles
 
III
 
or
 
VI
 
of
 
PROMESA.
 
While
 
the
 
majority
 
of
 
the
 
debt
 
has
 
already
 
been
 
restructured,
 
some
 
PR
Government
 
Entities
 
still
 
face
 
significant
 
fiscal
 
challenges.
 
For
 
example,
 
the
 
Puerto
 
Rico
 
Electric
 
Power
 
Authority
 
is
 
still
 
in
 
the
process of restructuring its debts under Title III of PROMESA.
Municipalities.
 
Puerto Rico’s fiscal and economic challenges have
 
also adversely impacted its municipalities. Budgetary subsidies to municipalities
have
 
gradually declined
 
in recent
 
years
 
and
 
were scheduled
 
to
 
be ultimately
 
eliminated by
 
fiscal year
 
2025
 
as
 
part
 
of the
 
fiscal
measures required
 
by
 
the Oversight
 
Board. However,
 
over the
 
past
 
years, the
 
Oversight Board
 
has
 
authorized and
 
funded
 
new
appropriations
 
and
 
investments
 
to
 
offset
 
the
 
decline
 
in
 
intergovernmental
 
transfers
 
to
 
municipalities.
 
Beyond
 
those
 
sources
 
of
alternate funding, municipalities have
 
also received significant federal
 
disaster and COVID-relief funding in
 
recent years. According
to the
 
latest Puerto
 
Rico fiscal
 
plan certified
 
by the
 
Oversight Board,
 
taken together,
 
the funding
 
available to
 
municipalities in
 
the
near-term is substantial. The fiscal
 
plan notes, however, that
 
the desired progress to achieve
 
fiscal discipline and implement critical
reforms has not been achieved,
 
and that municipalities must work with
 
the Executive branch to analyze
 
the financial needs of
 
each
individual municipality and focus on the necessary enhancements in municipal shared services
 
and other municipal and government
initiatives. Pursuant to
 
the fiscal plan,
 
once the transformational measures
 
and milestones related to
 
these initiatives are
 
achieved,
additional funding from the central government may be
 
made available to municipalities to improve fiscal
 
sustainability.
Municipalities
 
are
 
subject
 
to
 
PROMESA
 
and,
 
at
 
the
 
Oversight
 
Board’s
 
request,
 
are
 
required
 
to
 
submit
 
fiscal
 
plans
 
and
 
annual
budgets
 
to
 
the
 
Oversight
 
Board
 
for
 
its
 
review
 
and
 
approval.
 
They
 
are
 
also
 
required to
 
seek
 
Oversight
 
Board
 
approval
 
to
 
issue,
guarantee
 
or
 
modify
 
their
 
debts
 
and
 
to
 
enter
 
into
 
contracts
 
with an
 
aggregate
 
value
 
of
 
$10
 
million
 
or
 
more.
 
With
 
the
 
Oversight
Board’s approval, municipalities are also eligible to avail themselves of the debt restructuring processes provided by PROMESA. To
date, however, no municipality has been subject to any such debt
 
restructuring process.
Exposure of the Corporation
 
The credit
 
quality of BPPR’s
 
loan portfolio
 
reflects, among other
 
things, the
 
general economic conditions
 
in Puerto
 
Rico and
 
other
adverse conditions affecting Puerto
 
Rico consumers and businesses.
 
Deterioration in the Puerto
 
Rico economy has resulted
 
in the
past, and could
 
result in the future,
 
in higher delinquencies, greater
 
charge-offs and increased losses,
 
which could materially affect
our financial condition and results of operations.
 
At March
 
31, 2024,
 
the Corporation’s
 
direct exposure
 
to PR
 
Government Entities
 
totaled $388
 
million, of
 
which $363
 
million were
outstanding, compared
 
to
 
$362 million
 
at
 
December 31,
 
2023, of
 
which $333
 
million
 
were outstanding.
 
A
 
deterioration in
 
Puerto
Rico’s fiscal and
 
economic situation could adversely
 
affect the value
 
of our Puerto
 
Rico government obligations, resulting
 
in losses
to
 
us.
 
Of
 
the
 
amount
 
outstanding,
 
$348
 
million
 
consists
 
of
 
loans
 
and
 
$16
 
million
 
are
 
securities
 
($314
 
million
 
and
 
$19
 
million,
respectively,
 
at
 
December
 
31,
 
2023).
 
Substantially
 
all
 
of
 
the
 
Corporation’s
 
direct
 
exposure
 
outstanding at
 
March
 
31,
 
2024
 
were
obligations from various
 
Puerto Rico municipalities.
 
In most
 
cases, these were
 
“general obligations” of
 
a municipality,
 
to which
 
the
applicable municipality
 
has
 
pledged its
 
good faith,
 
credit
 
and unlimited
 
taxing
 
power,
 
or “special
 
obligations” of
 
a municipality,
 
to
which the applicable municipality has pledged basic
 
property tax or sales tax revenues. At March 31, 2024,
 
78% of the Corporation’s
exposure to
 
municipal loans
 
and securities
 
was concentrated
 
in the
 
municipalities of
 
San Juan,
 
Guaynabo, Carolina
 
and Caguas.
For
 
additional
 
discussion
 
of
 
the
 
Corporation’s
 
direct
 
exposure
 
to
 
the
 
Puerto
 
Rico
 
government
 
and
 
its
 
instrumentalities
 
and
municipalities, refer to Note 20 – Commitments and
 
Contingencies to the Consolidated Financial
 
Statements.
 
In addition, at March
 
31, 2024, the Corporation had
 
$233 million in loans
 
insured or securities issued by
 
Puerto Rico governmental
entities, but for
 
which the principal source
 
of repayment is
 
non-governmental ($238 million at December 31, 2023).
 
These included
$187 million in
 
residential mortgage loans insured
 
by the Puerto
 
Rico Housing Finance Authority
 
(“HFA”), a
 
PR Government Entity
(December 31, 2023 - $191 million). These mortgage loans are secured
 
by first mortgages on Puerto Rico residential properties and
the
 
HFA
 
insurance
 
covers
 
losses
 
in
 
the
 
event
 
of
 
a
 
borrower
 
default
 
and
 
upon
 
the
 
satisfaction
 
of
 
certain
 
other
 
conditions.
 
The
Corporation also
 
had
 
at
 
March
 
31, 2024,
 
$39
 
million
 
in bonds
 
issued by
 
HFA
 
which
 
are secured
 
by
 
second
 
mortgage
 
loans on
 
 
 
150
Puerto Rico residential properties, and for which HFA also provides insurance to
 
cover losses in the event of a borrower default, and
upon the satisfaction of certain
 
other conditions (December 31, 2023 - $40
 
million). In the event that
 
the mortgage loans insured by
HFA and held
 
by the Corporation directly or those serving
 
as collateral for the HFA
 
bonds default and the collateral is
 
insufficient to
satisfy the outstanding balance of these loans, HFA’s
 
ability to honor its insurance will depend, among other factors, on the financial
condition
 
of
 
HFA
 
at
 
the
 
time
 
such
 
obligations
 
become
 
due
 
and
 
payable.
 
The
 
Corporation
 
does
 
not
 
consider
 
the
 
government
guarantee when estimating the credit losses associated
 
with this portfolio.
 
BPPR’s
 
commercial loan
 
portfolio also
 
includes loans
 
to
 
private borrowers
 
who
 
are service
 
providers, lessors,
 
suppliers or
 
have
other relationships with the government. These borrowers could be negatively
 
affected by a deterioration in the fiscal and
 
economic
situation
 
of
 
PR
 
Government
 
Entities.
 
Similarly,
 
BPPR’s
 
mortgage
 
and
 
consumer
 
loan
 
portfolios
 
include
 
loans
 
to
 
government
employees
 
and
 
retirees,
 
which
 
could
 
also
 
be
 
negatively
 
affected
 
by
 
fiscal
 
measures,
 
such
 
as
 
employee
 
layoffs
 
or
 
furloughs
 
or
reductions in pension benefits, if the fiscal and economic
 
situation deteriorates.
As of March 31, 2024, BPPR had $18.0 billion in deposits from the Puerto Rico government, its instrumentalities, and municipalities.
The
 
rate
 
at
 
which
 
public
 
deposit
 
balances
 
may
 
decline is
 
uncertain and
 
difficult
 
to
 
predict.
 
The
 
amount
 
and
 
timing
 
of
 
any
 
such
reduction is
 
likely to
 
be impacted
 
by,
 
for example,
 
the speed
 
at which
 
federal assistance
 
is distributed
 
and the
 
financial condition,
liquidity and cash management practices of such entities,
 
as well as on the ability of BPPR to
 
maintain these customer relationships.
The
 
Corporation may
 
also have
 
direct
 
exposure with
 
regards to
 
avoidance and
 
other causes
 
of
 
action initiated
 
by the
 
Oversight
Board on behalf of the Commonwealth or other Title III debtors. For additional information regarding such exposure, refer to Note 20
to the Consolidated Financial Statements.
United States Virgin Islands
The
 
Corporation
 
has
 
operations
 
in
 
the
 
United
 
States
 
Virgin
 
Islands
 
(the
 
“USVI”)
 
and
 
has
 
credit
 
exposure
 
to
 
USVI
 
government
entities.
The USVI has
 
been experiencing a
 
number of fiscal
 
and economic challenges,
 
which could adversely
 
affect the
 
ability of its
 
public
corporations and instrumentalities to service their outstanding
 
debt obligations. PROMESA does not apply to the USVI
 
and, as such,
there
 
is
 
currently
 
no
 
federal
 
legislation
 
permitting
 
the
 
restructuring
 
of
 
the
 
debts
 
of
 
the
 
USVI
 
and
 
its
 
public
 
corporations
 
and
instrumentalities.
To
 
the extent that
 
the fiscal condition
 
of the USVI
 
continues to deteriorate, the
 
U.S. Congress or the
 
Government of the
 
USVI may
enact legislation allowing for the restructuring of the
 
financial obligations of USVI government entities or imposing a
 
stay on creditor
remedies, including by making PROMESA applicable
 
to the USVI.
At March
 
31, 2024,
 
the Corporation
 
had approximately
 
$28 million
 
in direct
 
exposure to
 
USVI government
 
entities (December 31,
2023 - $28 million).
 
British Virgin Islands
The
 
Corporation has
 
operations
 
in
 
the
 
British Virgin
 
Islands
 
(“BVI”),
 
which
 
was
 
negatively
 
affected by
 
the
 
COVID-19
 
pandemic,
particularly as
 
a reduction
 
in the
 
tourism activity
 
which accounts
 
for a
 
significant portion
 
of its
 
economy.
 
Although the
 
Corporation
has no
 
significant exposure to
 
a single
 
borrower in the
 
BVI, at
 
March 31,
 
2024, it
 
has a
 
loan portfolio amounting
 
to approximately
$208 million comprised of various retail and commercial
 
clients, compared to a loan portfolio of $205 million
 
at December 31, 2023.
U.S. Government
As further detailed in Notes
 
5 and 6 to the
 
Consolidated Financial Statements, a substantial portion of the
 
Corporation’s investment
securities
 
represented exposure
 
to
 
the
 
U.S.
 
Government in
 
the
 
form
 
of
 
U.S. Government
 
sponsored entities,
 
as
 
well
 
as
 
agency
mortgage-backed and U.S. Treasury securities. In addition, $1.9 billion of residential mortgages, and $92.4 million commercial loans
were insured or guaranteed by
 
the U.S. Government or its
 
agencies at March 31, 2024
 
(compared to $1.9 billion and
 
$89.2 million,
respectively, at December 31, 2023).
Non-Performing Assets
Non-performing assets (“NPAs”)
 
include primarily past-due
 
loans that
 
are no
 
longer accruing interest,
 
renegotiated loans, and
 
real
estate property acquired through foreclosure. A summary, including certain credit
 
quality metrics, is presented in Table 18.
151
During
 
the
 
first
 
quarter
 
of
 
2024,
 
the
 
Corporation
 
reflected
 
stable
 
credit
 
quality
 
when
 
compared
 
to
 
the
 
previous
 
quarter.
 
Non-
performing loans
 
(“NPLs”) and
 
net charge
 
offs (“NCOs”)
 
remained below
 
historical averages
 
and delinquencies
 
improved in
 
most
loan categories from the prior quarter.
 
We continue to closely monitor changes in the macroeconomic environment and on borrower
performance
 
given
 
higher
 
interest
 
rates
 
and
 
inflationary
 
pressures.
 
However,
 
management believes
 
that
 
the
 
improvements over
recent years
 
in risk
 
management practices
 
and the
 
risk profile
 
of the
 
Corporation’s loan
 
portfolios position
 
Popular to
 
continue to
operate successfully under the current challenging
 
environment.
Total
 
NPAs
 
as of
 
March 31,
 
2024 decreased
 
by $3
 
million when
 
compared with
 
December 31,
 
2023. Total
 
non-performing loans
held-in-portfolio
 
(“NPLs”)
 
decreased
 
by
 
$3
 
million
 
from
 
December
 
31,
 
2023.
 
BPPR’s
 
NPLs
 
decreased
 
by
 
$30
 
million,
 
broadly
reflected
 
across most
 
loan categories.
 
The commercial
 
NPLs decrease
 
includes a
 
$5.1 million
 
charge-off
 
related to
 
a
 
previously
reserved $18
 
million relationship. Popular
 
US NPLs
 
increased by
 
$27 million,
 
driven by
 
a $17
 
million increase
 
in mortgage
 
NPLs,
impacted by a single loan. The Corporation has no
 
other credit exposure to this borrower.
 
On March 31,
 
2024 , the
 
ratio of NPLs
 
to total loans
 
held-in-portfolio was 1.0%,
 
flat when compared
 
to December 31,
 
2023. Other
real
 
estate
 
owned
 
loans
 
(“OREOs”)
 
remained
 
flat
 
from
 
December 31,
 
2023.
 
On
 
March
 
31,
 
2024,
 
NPLs
 
secured
 
by
 
real
 
estate
amounted to $211 million in
 
the Puerto Rico operations and $49 million in Popular U.S, compared with $231 million and $24
 
million,
respectively, on December 31, 2023.
The Corporation’s commercial loan
 
portfolio secured by real
 
estate (“CRE”) amounted to
 
$10.6 billion on
 
March 31, 2024,
 
of which
$3.1 billion was secured with owner occupied properties,
 
compared with $10.6 billion and $3.1 billion, respectively, on December 31,
2023. Office space
 
leasing exposure in
 
our non-owner occupied
 
CRE portfolio is
 
limited, representing only
 
1.8% or $633
 
million of
our total loan portfolio.
 
The exposure is mainly comprised of low- to mid- rise properties with average
 
loan size of $2.0 million and is
well diversified across tenant type.
CRE NPLs amounted to $49 million on March 31,
 
2024, compared with $48 million on December 31, 2023. The CRE NPL
 
ratios for
the BPPR and Popular U.S.
 
segments were 0.72% and 0.26%,
 
respectively, on March
 
31, 2024, compared with 0.86% and
 
0.13%,
respectively, on December 31, 2023.
In addition
 
to the
 
NPLs included
 
in Table
 
18, on
 
March 31,
 
2024, there were
 
$513 million
 
of performing
 
loans, mostly
 
commercial
loans, which in management’s opinion, are currently subject to potential future classification as non-performing (December 31, 2023
- $510 million).
For the quarter
 
ended March 31,
 
2024, total inflows
 
of NPLs held-in-portfolio,
 
excluding consumer loans,
 
increased by $10
 
million,
when compared to the inflows for the same period
 
in 2023. Inflows of NPLs held-in-portfolio at the
 
BPPR segment decreased by $17
million,
 
compared
 
to
 
the
 
same
 
period
 
in
 
2023,
 
mainly
 
driven
 
by
 
lower
 
commercial
 
and
 
mortgage
 
inflows
 
by
 
$12
 
million
 
and
 
$5
million, respectively. Inflows of
 
NPLs held-in-portfolio at the Popular U.S. segment increased by $27 million
 
from the same period in
2023, mainly driven by higher mortgage and
 
commercial inflows by $17 million and $9
 
million, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
152
Table 18 - Non-Performing
 
Assets
March 31, 2024
December 31, 2023
(Dollars in thousands)
BPPR
Popular
U.S.
Popular,
Inc.
As a % of
loans HIP
by
category
BPPR
Popular
U.S.
Popular,
Inc.
As a % of
loans HIP
by
category
Commercial
Commercial multi-family
$
106
$
8,700
$
8,806
0.4
%
$
1,991
$
-
$
1,991
0.1
%
Commercial real estate non-owner
occupied
7,922
2,407
10,329
0.2
8,745
1,117
9,862
0.2
Commercial real estate owner
occupied
26,124
3,877
30,001
1.0
29,430
6,274
35,704
1.2
Commercial and industrial
 
29,171
6,423
35,594
0.5
32,826
3,772
36,598
0.5
Total Commercial
 
63,323
21,407
84,730
0.5
72,992
11,163
84,155
0.5
Construction
-
-
-
-
6,378
-
6,378
0.7
Leasing
7,267
-
7,267
0.4
8,632
-
8,632
0.5
Mortgage
166,473
28,071
194,544
2.5
175,106
11,191
186,297
2.4
Consumer
 
 
Home equity lines of credit
-
3,986
3,986
6.0
-
3,733
3,733
5.7
 
Personal
 
19,092
2,068
21,160
1.1
19,031
2,805
21,836
1.1
 
Auto
41,807
-
41,807
1.1
45,615
-
45,615
1.2
 
Other Consumer
 
632
1
633
0.4
964
1
965
0.6
Total Consumer
 
61,531
6,055
67,586
1.0
65,610
6,539
72,149
1.0
Total non-performing
 
loans held-in-
portfolio
298,594
55,533
354,127
1.0
%
328,718
28,893
357,611
1.0
%
Other real estate owned (“OREO”)
80,218
324
80,542
80,176
240
80,416
Total non-performing
 
assets
[1]
$
378,812
$
55,857
$
434,669
$
408,894
$
29,133
$
438,027
Accruing loans past due 90 days or
more
[2]
$
247,330
$
212
$
247,542
$
268,362
$
109
$
268,471
Ratios:
Non-performing assets to total assets
0.68
%
0.37
%
0.61
%
0.74
%
0.19
%
0.62
%
Non-performing loans held-in-portfolio
to loans held-in-portfolio
 
1.21
0.53
1.01
1.34
0.27
1.02
Allowance for credit losses to loans
held-in-portfolio
2.62
0.91
2.11
2.61
0.85
2.08
Allowance for credit losses to non-
performing loans, excluding held-for-
sale
215.79
171.47
208.84
194.65
309.70
203.95
[1] There were no non-performing loans held-for-sale
 
as of March 31, 2024 and December 31, 2023.
[2] It is the Corporation’s policy to report delinquent
 
residential mortgage loans insured by FHA or guaranteed
 
by the VA as accruing
 
loans past due 90
days or
 
more as
 
opposed to
 
non-performing
 
since the
 
principal repayment
 
is insured.
 
These balances
 
include $93
 
million of
 
residential
 
mortgage
loans
 
insured
 
by
 
FHA
 
or
 
guaranteed
 
by
 
the
 
VA
 
that
 
are
 
no
 
longer
 
accruing
 
interest
 
as
 
of
 
March
 
31,
 
2024
 
(December
 
31,
 
2023
 
-
 
$106
 
million).
Furthermore,
 
the Corporation
 
has approximately
 
$37 million
 
in reverse
 
mortgage
 
loans which
 
are guaranteed
 
by
 
FHA, but
 
which are
 
currently
 
not
accruing
 
interest.
 
Due
 
to
 
the guaranteed
 
nature
 
of
 
the loans,
 
it is
 
the Corporation’s
 
policy
 
to
 
exclude
 
these
 
balances
 
from
 
non-performing
 
assets
(December 31, 2023 - $38 million).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
153
Table 19 - Activity in Non
 
-Performing Loans Held-in-Portfolio (Excluding Consumer
 
Loans)
For the quarter ended March 31, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
254,476
$
22,354
$
276,830
Plus:
New non-performing loans
33,503
35,373
68,876
Advances on existing non-performing loans
-
22
22
Less:
Non-performing loans transferred to OREO
(4,109)
-
(4,109)
Non-performing loans charged-off
(8,309)
(950)
(9,259)
Loans returned to accrual status / loan collections
(45,765)
(7,321)
(53,086)
Ending balance -
 
NPLs
$
229,796
$
49,478
$
279,274
Table 20 - Activity in Non
 
-Performing Loans Held-in-Portfolio (Excluding Consumer
 
Loans)
For the quarter ended March 31, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
324,562
$
31,356
$
355,918
Plus:
New non-performing loans
50,613
8,531
59,144
Advances on existing non-performing loans
-
65
65
Less:
Non-performing loans transferred to OREO
(10,873)
(58)
(10,931)
Non-performing loans charged-off
(1,176)
(216)
(1,392)
Loans returned to accrual status / loan collections
(48,099)
(13,911)
(62,010)
Ending balance -
 
NPLs
$
315,027
$
25,767
$
340,794
Table 21 - Activity in Non
 
-Performing Commercial Loans Held-In-Portfolio
For the quarter ended March 31, 2024
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
72,992
$
11,163
$
84,155
Plus:
New non-performing loans
4,343
15,039
19,382
Advances on existing non-performing loans
-
20
20
Less:
Non-performing loans charged-off
(7,999)
(950)
(8,949)
Loans returned to accrual status / loan collections
(6,013)
(3,865)
(9,878)
Ending balance - NPLs
$
63,323
$
21,407
$
84,730
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
154
Table 22 - Activity in Non
 
-Performing Commercial Loans Held-In-Portfolio
For the quarter ended March 31, 2023
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
82,171
$
10,868
$
93,039
Plus:
New non-performing loans
16,594
5,719
22,313
Advances on existing non-performing loans
-
26
26
Less:
Non-performing loans transferred to OREO
(287)
-
(287)
Non-performing loans charged-off
(673)
(216)
(889)
Loans returned to accrual status / loan collections
(6,853)
(5,349)
(12,202)
Ending balance - NPLs
$
90,952
$
11,048
$
102,000
Table
 
23 - Activity in Non-Performing Construction
 
Loans Held-In-Portfolio
For the quarter ended March 31, 2024
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
6,378
$
-
$
6,378
Less:
Loans returned to accrual status / loan collections
(6,378)
-
(6,378)
Ending balance - NPLs
$
-
$
-
$
-
Table 24 - Activity in Non
 
-Performing Mortgage Loans Held-in-Portfolio
For the quarter ended March 31, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
175,106
$
11,191
$
186,297
Plus:
New non-performing loans
29,160
20,334
49,494
Advances on existing non-performing loans
-
2
2
Less:
Non-performing loans transferred to OREO
(4,109)
-
(4,109)
Non-performing loans charged-off
(310)
-
(310)
Loans returned to accrual status / loan collections
(33,374)
(3,456)
(36,830)
Ending balance - NPLs
$
166,473
$
28,071
$
194,544
Table 25 - Activity in Non
 
-Performing Mortgage Loans Held-in-Portfolio
For the quarter ended March 31, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$
242,391
$
20,488
$
262,879
Plus:
New non-performing loans
34,019
2,812
36,831
Advances on existing non-performing loans
-
39
39
Less:
Non-performing loans transferred to OREO
(10,586)
(58)
(10,644)
Non-performing loans charged-off
(503)
-
(503)
Loans returned to accrual status / loan collections
(41,246)
(8,562)
(49,808)
Ending balance - NPLs
$
224,075
$
14,719
$
238,794
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
155
Loan Delinquencies
Another key measure used to evaluate and
 
monitor the Corporation’s asset quality is loan
 
delinquencies. Loans delinquent 30 days
or more, as a percentage of their related portfolio
 
category on March 31, 2024 and December 31, 2023,
 
are presented below.
Table 26 - Loan Delinquencies
(Dollars in thousands)
March 31, 2024
December 31, 2023
Loans delinquent
30 days or more
Total loans
Total delinquencies
 
as a percentage
 
of total loans
Loans delinquent
30 days or more
Total loans
Total delinquencies
 
as a percentage
 
of total loans
Commercial
 
Commercial multi-family
$
33,651
$
2,384,635
1.41
%
$
13,657
$
2,415,620
0.57
%
Commercial real estate
non-owner occupied
18,089
5,057,059
0.36
17,051
5,087,421
0.34
Commercial real estate
owner occupied
62,177
3,117,844
1.99
69,239
3,080,635
2.25
Commercial and industrial
62,536
7,025,483
0.89
58,953
7,126,121
0.83
Total Commercial
 
176,453
17,585,021
1.00
158,900
17,709,797
0.90
Construction
 
8,825
1,009,303
0.87
6,378
959,280
0.66
Leasing
31,955
1,765,413
1.81
35,491
1,731,809
2.05
Mortgage
[1]
800,456
7,783,662
10.28
859,537
7,695,917
11.17
Consumer
 
Credit cards
 
46,420
1,142,153
4.06
46,436
1,135,747
4.09
Home equity lines of credit
5,455
66,717
8.18
5,465
65,953
8.29
Personal
 
56,988
1,897,010
3.00
59,682
1,945,247
3.07
Auto
 
143,184
3,706,854
3.86
173,119
3,660,780
4.73
Other
2,112
162,605
1.30
3,063
160,441
1.91
Total Consumer
 
254,159
6,975,339
3.64
287,765
6,968,168
4.13
Loans held-for-sale
-
5,352
-
-
4,301
-
Total
 
$
1,271,848
$
35,124,090
3.62
%
$
1,348,071
$
35,069,272
3.84
%
[1]
 
Loans delinquent 30 days or more includes $0.4 billion
 
of residential mortgage loans insured by FHA or guaranteed
 
by the VA as of March
 
31,
2024 (December 31, 2023 - $0.5 billion). Refer to Note
 
7 to the Consolidated Financial Statements for additional
 
information of guaranteed loans.
Allowance for Credit Losses Loans Held-in-Portfolio
The ACL,
 
represents management’s
 
estimate of
 
expected credit
 
losses through
 
the remaining
 
contractual life
 
of the
 
different loan
segments, impacted by expected prepayments. The ACL
 
is maintained at a sufficient
 
level to provide for estimated credit
 
losses
 
on
collateral dependent loans as well as loans modified
 
for borrowers with financial difficulties separately from the remainder
 
of the loan
portfolio. The Corporation’s
 
management evaluates the adequacy
 
of the ACL
 
on a quarterly
 
basis. In this
 
evaluation, management
considers current
 
conditions, macroeconomic
 
economic expectations through
 
a reasonable
 
and supportable
 
period, historical
 
loss
experience,
 
portfolio composition
 
by
 
loan
 
type
 
and
 
risk
 
characteristics,
 
results
 
of
 
periodic credit
 
reviews
 
of
 
individual
 
loans,
 
and
regulatory requirements, amongst other factors.
The Corporation must rely on
 
estimates and exercise judgment regarding matters where
 
the ultimate outcome is unknown,
 
such as
economic developments affecting specific
 
customers, industries, or markets.
 
Other factors that can
 
affect management’s estimates
are
 
recalibration
 
of
 
statistical
 
models
 
used
 
to
 
calculate
 
lifetime
 
expected
 
losses,
 
changes
 
in
 
underwriting
 
standards,
 
financial
accounting standards and loan impairment measurements,
 
among others. Changes in the financial condition
 
of individual borrowers,
in economic
 
conditions, and
 
in the
 
condition of
 
the various
 
markets in
 
which collateral
 
may be
 
sold, may
 
also affect
 
the required
level of
 
the allowance
 
for credit
 
losses. Consequently,
 
the business
 
financial condition,
 
liquidity,
 
capital, and
 
results of
 
operations
could also be affected.
156
On March 31, 2024, the ACL increased by $10 million from December
 
31, 2023, to $740 million. The ACL for BPPR increased by $4
million,
 
primarily
 
driven
 
by
 
higher
 
reserves
 
for
 
the
 
consumer
 
portfolios
 
attributable
 
to
 
changes
 
in
 
credit
 
quality.
 
In
 
PB,
 
the
 
ACL
increased by $6 million, when compared to December 31, 2023, mainly
 
driven by higher reserves for the commercial portfolio due to
changes
 
in
 
credit
 
risk
 
ratings.
 
The
 
Corporation’s
 
ratio
 
of
 
the
 
allowance for
 
credit
 
losses
 
to
 
loans
 
held-in-portfolio was
 
2.11%
 
on
March 31,
 
2024, compared to
 
2.08% on December
 
31, 2023.
 
The ratio
 
of the
 
allowance for credit
 
losses to
 
NPLs held-in-portfolio
stood at 208.8%, compared to 204.0% on December
 
31, 2023.
Given that any one
 
economic outlook is inherently uncertain, the
 
Corporation leverages multiple scenarios to estimate
 
its ACL. The
baseline scenario continues to be assigned the highest probability,
 
followed by the pessimistic scenario. The weight assigned to the
pessimistic
 
scenario
 
decreased
 
during
 
the
 
first
 
quarter
 
of
 
2024
 
in
 
response
 
to
 
the
 
positive
 
momentum
 
in
 
the
 
economy
 
as
expectations for
 
the Federal
 
Reserve achieving
 
a soft
 
landing have
 
improved. The
 
Corporation evaluates,
 
at least
 
on an
 
annual
basis, the assumptions tied to the CECL accounting framework. These include
 
the reasonable and supportable period as well as the
reversion window.
The
 
2024
 
annualized GDP
 
growth in
 
the
 
baseline scenario
 
improved to
 
2.0%
 
and
 
2.3%
 
for
 
Puerto
 
Rico
 
and
 
the
 
United
 
States,
respectively, compared to 1.2% and 1.7%
 
in the previous quarter. The 2024 forecasted average unemployment rate for
 
Puerto Rico
and the United States remained stable at 6.5%
 
and 3.9%, respectively, compared to 6.8% and 4.0% in previous forecast.
The provision for credit losses for the period ended March 31,
 
2024, was $72.4 million, compared to an expense of $47.1 million
 
for
the period
 
ended March 31,
 
2023, mostly related
 
to higher
 
NCOs due to
 
credit normalization. Refer
 
to Note
 
8 to
 
the Consolidated
Financial Statements, and to the Provision for Credit
 
Losses section of this MD&A for additional information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
157
Table 27 - Allowance for Credit
 
Losses - Loan Portfolios
March 31, 2024
(Dollars in thousands)
Total ACL
Total loans held-
in-portfolio
ACL to loans held-
in-portfolio
Total non-
performing loans
held-in-portfolio
ACL to non-
performing loans
held-in-portfolio
Commercial
 
Commercial multi-family
$
12,743
$
2,384,635
0.53
%
8,806
144.71
%
 
Commercial real estate non-owner occupied
65,624
5,057,059
1.30
%
10,329
635.34
%
 
Commercial real estate owner occupied
63,807
3,117,844
2.05
%
30,001
212.68
%
 
Commercial and industrial
 
120,418
7,025,483
1.71
%
35,594
338.31
%
Total Commercial
 
$
262,592
$
17,585,021
1.49
%
84,730
309.92
%
Construction
11,139
1,009,303
1.10
%
-
N.M.
Leasing
8,991
1,765,413
0.51
%
7,267
123.72
%
Mortgage
86,438
7,783,662
1.11
%
194,544
44.43
%
Consumer
 
 
Credit cards
88,169
1,142,153
7.72
%
-
N.M.
 
Home equity lines of credit
1,872
66,717
2.81
%
3,986
46.96
%
 
Personal
 
116,077
1,897,010
6.12
%
21,160
548.57
%
 
Auto
157,456
3,706,854
4.25
%
41,807
376.63
%
 
Other Consumer
 
6,810
162,605
4.19
%
633
1,075.83
%
Total Consumer
 
$
370,384
$
6,975,339
5.31
%
67,586
548.02
%
Total
$
739,544
$
35,118,738
2.11
%
354,127
208.84
%
N.M - Not meaningful.
Table 28 - Allowance for Credit
 
Losses - Loan Portfolios
December 31, 2023
(Dollars in thousands)
Total ACL
Total loans held-
in-portfolio
ACL to loans held-
in-portfolio
Total non-
performing loans
held-in-portfolio
ACL to non-
performing loans
held-in-portfolio
Commercial
 
Commercial multi-family
$
13,740
$
2,415,620
0.57
%
1,991
690.11
%
 
Commercial real estate non-owner occupied
65,453
5,087,421
1.29
%
9,862
663.69
%
 
Commercial real estate owner occupied
56,864
3,080,635
1.85
%
35,704
159.27
%
 
Commercial and industrial
 
122,356
7,126,121
1.72
%
36,598
334.32
%
Total Commercial
 
$
258,413
$
17,709,797
1.46
%
84,155
307.07
%
Construction
12,686
959,280
1.32
%
6,378
198.90
%
Leasing
9,708
1,731,809
0.56
%
8,632
112.47
%
Mortgage
83,214
7,695,917
1.08
%
186,297
44.67
%
Consumer
 
 
Credit cards
80,487
1,135,747
7.09
%
-
N.M.
 
Home equity lines of credit
1,978
65,953
3.00
%
3,733
52.99
%
 
Personal
 
117,790
1,945,247
6.06
%
21,836
539.43
%
 
Auto
157,931
3,660,780
4.31
%
45,615
346.23
%
 
Other Consumer
 
7,134
160,441
4.45
%
965
739.27
%
Total Consumer
 
$
365,320
$
6,968,168
5.24
%
72,149
506.34
%
Total
$
729,341
$
35,064,971
2.08
%
357,611
203.95
%
N.M - Not meaningful.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
158
Annualized net charge-offs (recoveries)
The following
 
tables present
 
annualized net charge-offs
 
(recoveries) to average
 
loans held-in-portfolio (“HIP”)
 
by loan
 
category for
the quarters ended March 31, 2024 and 2023.
Table 29
 
- Annualized Net Charge-offs (Recoveries) to
 
Average Loans Held-in-Portfolio
Quarter ended March 31, 2024
Quarter ended March 31, 2023
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Commercial
 
0.30
%
0.04
%
0.18
%
(0.06)
%
(0.13)
%
(0.09)
%
Mortgage
(0.28)
(0.01)
(0.23)
(0.26)
(0.22)
Leasing
0.85
0.85
0.08
0.08
Consumer
2.98
8.43
3.16
2.31
4.81
2.43
Total annualized
 
net charge-offs to
average loans held-in-portfolio
0.92
%
0.21
%
0.71
%
0.56
%
0.06
%
0.41
%
NCOs for the quarter ended March 31, 2024, amounted to $62 million, increasing by $29 million when compared to the same period
in 2023. The BPPR
 
segment increased by $25
 
million mainly driven by
 
higher consumer and commercial NCOs
 
by $14 million and
$8
 
million,
 
respectively.
 
Consumer
 
NCOs
 
increase
 
is
 
reflective
 
of
 
post-pandemic
 
credit
 
normalization
 
The
 
PB
 
segment
 
NCOs
increased by $4 million, mainly driven by higher
 
commercial NCOs by $3 million.
Loan Modifications
For the
 
quarter ended
 
March 31,
 
2024, modified
 
loans to
 
borrowers with
 
financial difficulty
 
amounted to
 
$92 million,
 
of which
 
$83
million were
 
in accruing
 
status. The
 
BPPR segment’s
 
modifications to
 
borrowers with
 
financial difficulty
 
amounted to
 
$92 million,
mainly
 
comprised
 
of
 
commercial
 
and
 
mortgage
 
loans
 
of
 
$73
 
million
 
and
 
$16
 
million,
 
respectively.
 
A
 
total
 
of
 
$11
 
million
 
of
 
the
mortgage modifications were related to
 
government guaranteed loans. The Popular
 
U.S. segment’s modifications to borrowers
 
with
financial difficulty amounted to $188 thousand, mostly
 
comprised of personal loans.
Refer
 
to
 
Note
 
8
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
 
information
 
on
 
modifications
 
made
 
to
 
borrowers
experiencing financial difficulties.
ADOPTION OF NEW ACCOUNTING STANDARDS AND ISSUED BUT NOT
 
YET EFFECTIVE ACCOUNTING STANDARDS
Refer to Note 3, “New Accounting Pronouncements”
 
to the Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About
 
Market Risk
Quantitative and qualitative disclosures for the current
 
period can be found in the Market Risk
 
section of this report, which includes
changes in market risk exposures from disclosures
 
presented in the 2023 Form 10-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Corporation’s management,
 
with the
 
participation of the
 
Corporation’s Chief Executive
 
Officer and Chief
 
Financial Officer,
 
has
evaluated the effectiveness of the Corporation’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based
on such evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer have concluded that,
 
as of the end of such
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
159
period, the Corporation’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a
timely basis,
 
information required to
 
be disclosed
 
by the
 
Corporation in
 
the reports
 
that it
 
files or
 
submits under
 
the Exchange Act
and
 
such
 
information
 
is
 
accumulated
 
and
 
communicated
 
to
 
management,
 
as
 
appropriate,
 
to
 
allow
 
timely
 
decisions
 
regarding
required disclosures.
Internal Control Over Financial Reporting
 
There have been no changes in the Corporation’s internal control over financial reporting (as such term is defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act)
 
that occurred during the quarter ended March
 
31, 2024 that have materially affected,
 
or are
reasonably likely to materially affect, the Corporation’s internal control
 
over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
 
For a discussion of Legal Proceedings, see Note 20
 
to the Consolidated Financial Statements.
Item 1A. Risk Factors
In addition to the other information set forth in
 
this report, you should carefully consider the risk
 
factors discussed under “Part I - Item
1A - Risk Factors” in our 2023 Form
 
10-K. These factors could materially adversely affect our business, financial condition, liquidity,
results of
 
operations and
 
capital position,
 
and could
 
cause our
 
actual results
 
to
 
differ
 
materially from
 
our historical
 
results or
 
the
results contemplated
 
by the
 
forward-looking statements
 
contained in
 
this report.
 
Also refer
 
to the
 
discussion in
 
“Part I
 
- Item
 
2 –
Management’s Discussion
 
and Analysis
 
of Financial
 
Condition and
 
Results of
 
Operations” in
 
this report
 
for additional
 
information
that may supplement or update the discussion
 
of risk factors below and in our 2023 Form 10-K.
There have been no material changes to the risk
 
factors previously disclosed under Item 1A of the
 
Corporation’s 2023 Form 10-K.
The risks described
 
in our 2023 Form
 
10-K and in
 
this report are not
 
the only risks
 
facing us. Additional risks
 
and uncertainties not
currently
 
known
 
to
 
us
 
or
 
that
 
we
 
currently
 
deem
 
to
 
be
 
immaterial
 
also
 
may
 
materially
 
adversely
 
affect
 
our
 
business,
 
financial
condition, liquidity, results of operations and capital position.
Item 2.
 
Unregistered Sales of Equity Securities and
 
Use of Proceeds
 
The Corporation did not have any unregistered
 
sales of equity securities during the quarter ended March
 
31, 2024.
Issuer Purchases of Equity Securities
The following
 
table sets
 
forth the
 
details of
 
purchases of
 
Common Stock
 
by the
 
Corporation during
 
the quarter
 
ended March
 
31,
2024:
Issuer Purchases of Equity Securities
Not in thousands
Period
Total Number of
Shares Purchased [1]
Average Price Paid per
Share
Total Number of
 
Shares
Purchased as Part of Publicly
Announced Plans or Programs
Approximate Dollar Value of
Shares that May Yet be
Purchased Under the Plans or
Programs
January 1 - January 31
-
$
-
-
$-
February 1 - February 29
559
83.46
-
-
March 1 - March 31
42,092
83.47
-
-
Total
 
42,651
$
83.47
-
-
[1]
 
Includes
 
559
 
and
 
42,092
 
shares
 
of
 
the
 
Corporation’s
 
common
 
stock
 
acquired
 
by
 
the
 
Corporation
 
during
 
February
 
2024
 
and
 
March
 
2024,
respectively,
 
in connection
 
with the
 
satisfaction of
 
tax withholding
 
obligations on
 
vested awards
 
of restricted
 
stock or
 
restricted stock
 
units granted
 
to
directors and certain
 
employees under
 
the Corporation’s
 
Omnibus Incentive
 
Plan. The acquired
 
shares of common
 
stock were added
 
back to treasury
stock.
 
 
 
 
160
Item 3.
 
Defaults Upon Senior Securities
None.
 
Item 4.
 
Mine Safety Disclosures
Not applicable.
 
Item 5. Other Information
Rule 10b5-1 Trading Plans or Other Preplanned Trading Arrangements
Certain of our
 
officers or directors have
 
made, and may from
 
time to time make,
 
elections to
participate in
, and are
 
participating in,
our dividend reinvestment and purchase plan, the
 
Company stock fund associated with our 401(k)
 
plans and/or the Company stock
fund associated with
 
our non-qualified deferred compensation
 
plans and have shares
 
withheld to cover
 
withholding taxes upon the
vesting of
 
equity awards, which
 
may be
 
designed to satisfy
 
the affirmative defense
 
conditions of
 
Rule 10b5-1 under
 
the Exchange
Act or may constitute non-Rule 10b5–1
trading arrangements
 
(as defined in Item 408(c) of Regulation
 
S-K).
 
 
 
161
Item 6.
 
Exhibits
 
Exhibit Index
Exhibit No
Exhibit Description
10.1
22.1
31.1
31.2
32.1
32.2
101. INS
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Inline XBRL Taxonomy Extension Calculation Linkbase Document
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104
The cover page of Popular, Inc. Quarterly Report on Form 10-Q for the
 
quarter ended March 31, 2024,
formatted in Inline XBRL (included within the Exhibit
 
101 attachments)
(1)
(1)
 
Included herewith
Popular, Inc. has not filed as exhibits certain instruments defining
 
the rights of holders of debt of Popular, Inc. not
exceeding 10% of the total assets of Popular, Inc. and its consolidated
 
subsidiaries. Popular, Inc. hereby agrees to
furnish upon request to the Commission a copy of
 
each instrument defining the rights of holders
 
of senior and
subordinated debt of Popular, Inc., or of any of its consolidated
 
subsidiaries.
 
 
 
162
SIGNATURES
Pursuant to the
 
requirements of the Securities Exchange
 
Act of 1934, the
 
registrant has duly caused this
 
report to be signed
 
on its
behalf by the undersigned thereunto duly authorized.
POPULAR, INC.
(Registrant)
Date: May 10, 2024
By: /s/ Jorge J. García
Jorge J. García
Executive Vice President &
Chief Financial Officer
Date: May 10, 2024
By: /s/ Denissa M. Rodríguez
Denissa M. Rodríguez
Senior Vice President & Corporate Comptroller

ATTACHMENTS / EXHIBITS

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EX-31.2

EX-32.1

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