v3.25.1
Commitments and contingencies
 3 Months Ended
Mar. 31, 2025
Commitments and Contingencies Disclosure  
Commitments And Contingencies
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, 2025
December 31, 2024
Commitments to extend credit:
Credit card lines
$
6,141,536
$
5,599,823
Commercial lines of credit
4,129,068
3,971,331
Construction lines of credit
1,066,986
1,131,824
Other consumer unused credit commitments
 
262,988
260,121
Commercial letters of credit
7,553
5,002
Standby letters of credit
117,379
144,845
Commitments to originate or fund mortgage loans
40,308
29,604
At March
 
31, 2025
 
and December
 
31, 2024,
 
the
 
Corporation
 
maintained
 
a reserve
 
of approximately
 
$
14
 
million
 
and $
15
 
million,
respectively, for potential losses associated
 
with unfunded loan commitments related to commercial and construction lines of credit.
Other commitments
At March
 
31, 2025
 
and December
 
31, 2024,
 
the Corporation
 
also maintained
 
other non-credit
 
commitments for
 
approximately $
2
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
 
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
 
availed themselves
 
of 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,
 
2025,
 
the
 
Corporation’s
 
direct
 
exposure
 
to
 
the
 
Puerto
 
Rico
 
government
 
and
 
its
 
instrumentalities
 
and
 
municipalities
totaled
 
$
362
 
million,
 
all
 
of
 
which
 
were
 
outstanding
 
($
336
 
million
 
and
 
$
336
 
million
 
at
 
December
 
31,
 
2024).
 
Of
 
the
 
amount
outstanding,
 
$
351
 
million
 
consists
 
of
 
loans
 
and
 
$
11
 
million
 
are
 
securities
 
($
323
 
million
 
and
 
$
13
 
million
 
at
 
December
 
31,
 
2024).
Substantially all
 
of the
 
amount outstanding
 
at March
 
31, 2025
 
and December
 
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 other revenues. At
 
March 31, 2025,
81
% of the Corporation’s
 
exposure to municipal loans
 
and securities was concentrated
in the municipalities of San Juan, Guaynabo, Carolina and Caguas.
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, 2025
:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Investment
Portfolio
Loans
Total Outstanding
Total Exposure
Central Government
Within 1 year
$
45
$
-
$
45
$
45
Total Central Government
45
-
45
45
Municipalities
Within 1 year
2,540
12,764
15,304
15,304
After 1 to 5 years
7,885
147,033
154,918
154,918
After 5 to 10 years
655
146,732
147,387
147,387
After 10 years
-
44,582
44,582
44,582
Total Municipalities
11,080
351,111
362,191
362,191
Total Direct Government Exposure
$
11,125
$
351,111
$
362,236
$
362,236
 
 
 
 
 
 
 
 
 
 
 
 
 
In addition, at
 
March 31, 2025,
 
the Corporation had
 
$
216
 
million in loans
 
insured or securities
 
issued by Puerto
 
Rico governmental
entities but
 
for which
 
the principal
 
source of
 
repayment is
 
non-governmental ($
220
 
million at
 
December 31,
 
2024). These
 
included
$
172
 
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,
 
2024
 
-
 
$
176
 
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, 2025,
 
$
37
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,
 
2024 -
 
$
38
 
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,
 
$
2.2
 
billion
 
of
 
residential
 
mortgages
 
and
 
$
86.5
 
million
 
commercial
 
loans
 
were
 
insured
 
or
 
guaranteed
 
by
 
the
 
U.S.
Government or
 
its agencies
 
at March
 
31, 2025
 
(compared to
 
$
2.1
 
billion and
 
$
87.4
 
million, respectively,
 
at December
 
31, 2024).
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,
 
2025,
 
the
 
Corporation
 
had
 
operations
 
in
 
the
 
United
 
States
 
Virgin
 
Islands
 
(the
 
“USVI”)
 
and
 
had
 
approximately
 
$
28
million
 
in
 
direct
 
exposure
 
to
 
USVI
 
government
 
entities
 
(December
 
31,
 
2024
 
-
 
$
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,
 
2025,
 
the
 
Corporation
 
had
 
operations
 
in
 
the
 
British
 
Virgin
 
Islands
 
(“BVI”)
 
and
 
it
 
had
 
a
 
loan
 
portfolio
 
amounting
 
to
approximately
 
$
196
 
million
 
comprised
 
of
 
various
 
retail
 
and
 
commercial
 
clients,
 
compared
 
to
 
a
 
loan
 
portfolio
 
of
 
$
196
 
million
 
at
December 31, 2024. At March 31, 2025, the Corporation had no significant exposure to a single borrower in the BVI.
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 first quarter of 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,
arbitration, regulatory and
 
governmental investigations, and
legal
 
and
 
administrative
 
cases
 
and
 
proceedings
 
(collectively,
 
“Legal
 
Proceedings”).
 
Popular’s
 
Legal
 
Proceedings
 
may
 
involve
various
 
lines
 
of
 
business
 
and include
 
claims
 
relating
 
to contract,
 
torts, consumer
 
protection,
 
lender’s liability,
 
securities,
 
antitrust,
employment, tax and other laws.
 
The recovery sought in Legal
 
Proceedings may include substantial
 
or indeterminate compensatory
damages,
 
punitive
 
damages,
 
injunctive
 
relief,
 
or
 
recovery
 
on
 
a
 
class-wide
 
basis.
 
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 $
6.3
 
million as of
March 31,
 
2025. 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.