v3.26.1
Commitments and contingencies
 3 Months Ended
Mar. 31, 2026
Commitments and Contingencies Disclosure  
Commitments And Contingencies
Note 18 – 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, 2026
December 31, 2025
Commitments to extend credit:
Credit card lines
$
6,514,524
$
6,415,208
Commercial lines of credit
4,260,637
4,257,505
Construction lines of credit
1,139,056
1,197,319
Other consumer unused credit commitments
 
283,742
277,635
Commercial letters of credit
6,838
21,248
Standby letters of credit
97,235
111,554
Commitments to originate or fund mortgage loans
20,457
20,099
At March
 
31, 2026
 
and December 31,
 
2025, the
 
Corporation maintained a
 
reserve of
 
$
15
 
million and
 
$
14
 
million, respectively,
 
for
potential losses associated with unfunded loan commitments
 
related to commercial and construction lines of
 
credit.
Other commitments
At March
 
31, 2026
 
and December
 
31, 2025,
 
the Corporation
 
also maintained
 
other non-credit
 
commitments for
 
$
5
 
million and
 
$
7
million, respectively, 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 28
 
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,
 
2026, the
 
Corporation’s direct
 
exposure to
 
the Puerto
 
Rico
 
government and
 
its
 
instrumentalities and
 
municipalities
totaled
 
$
390
 
million,
 
of
 
which
 
$
340
 
million
 
were
 
outstanding
 
($
391
 
million
 
and
 
$
342
 
million
 
at
 
December
 
31,
 
2025).
 
Of
 
the
outstanding amount, $
333
 
million consists of loans and $
7
 
million are securities ($
333
 
million and $
9
 
million at December 31, 2025).
Substantially all
 
of the
 
amount outstanding
 
at March
 
31, 2026
 
and December
 
31, 2025
 
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, 2026, approximately
77
% of the Corporation’s exposure to municipal loans and securities
 
was
concentrated in
 
the municipalities
 
of San
 
Juan, Guaynabo,
 
Carolina and
 
Caguas. The
 
Corporation’s exposure
 
at March
 
31, 2026,
included
 
approximately $
47.4
 
million
 
in
 
Automated
 
Clearing House
 
(“ACH”) transaction
 
settlement exposure,
 
none
 
of
 
which was
outstanding.
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, 2026
:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Investment
Portfolio
Loans
Total Outstanding
Total Exposure
Central Government
Within 1 year
$
-
$
-
$
-
$
47,400
After 10 years
41
-
41
41
Total Central
 
Government
41
-
41
47,441
Municipalities
Within 1 year
2,720
11,574
14,294
16,294
After 1 to 5 years
3,910
166,515
170,425
170,425
After 5 to 10 years
450
124,087
124,537
124,537
After 10 years
-
30,991
30,991
30,991
Total Municipalities
7,080
333,167
340,247
342,247
Total Direct Government
 
Exposure
$
7,121
$
333,167
$
340,288
$
389,688
 
 
 
 
 
 
 
 
 
 
 
 
 
In addition, at March
 
31, 2026, the Corporation had
 
$
201
 
million in loans insured
 
or securities issued by
 
Puerto Rico governmental
entities but for
 
which the principal
 
source of
 
repayment is non-governmental
 
($
209
 
million at December
 
31, 2025). These
 
included
$
166
 
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,
 
2025
 
-
 
$
167
 
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, 2026, $
35
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,
 
2025 -
 
$
36
 
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. For example, at March 31, 2026 BPPR had
 
$
178.4
 
million ($
178.6
 
million at December 31,
2025) in
 
exposure
 
to
 
borrowers
 
that
 
are
 
independent
 
power
 
producers
 
that
 
generate
 
and
 
sell
 
energy
 
under
 
Power
 
Purchase
Agreements to the Puerto Rico
 
Electric Power Authority (“PREPA”),
 
which is undergoing a debt
 
restructuring process under Title
 
III
of PROMESA.
 
Borrowers with
 
exposure to
 
the government
 
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,
 
$
2.6
 
billion
 
of
 
residential
 
mortgages
 
and
 
$
84.8
 
million
 
commercial
 
loans
 
were
 
insured
 
or
 
guaranteed
 
by
 
the
 
U.S.
Government or
 
its agencies
 
at March
 
31, 2026
 
(compared to
 
$
2.5
 
billion and
 
$
80.5
 
million, respectively,
 
at December
 
31, 2025).
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, 2026,
 
the Corporation
 
had operations
 
in the
 
United States
 
Virgin Islands
 
(the “USVI”)
 
and had
 
$
28
 
million in
 
direct
exposure to USVI government
 
entities (December 31, 2025
 
- $
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.
 
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.
At March 31, 2026, the Corporation had
 
operations in the British Virgin Islands (“BVI”)
 
and it had a loan portfolio amounting to
 
$
197
million comprised
 
of various
 
retail and
 
commercial clients,
 
compared to
 
a loan
 
portfolio of
 
$
195
 
million at
 
December 31,
 
2025. At
March 31, 2026, the Corporation had
no
 
significant exposure to a single borrower
 
in the BVI.
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, 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,
 
2026. 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.