POPULAR, INC. - Quarter Report: 2022 March (Form 10-Q)

	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, 2022
	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, 76,572,954 shares outstanding as of May 5, 2022.

POPULAR, INC.
INDEX

Part I – Financial Information	Page

Item 1. Financial Statements

Unaudited Consolidated Statements of Financial Condition at March 31, 2022 and
December 31, 2021	6

Unaudited Consolidated Statements of Operations for the quarters
ended March 31, 2022 and 2021	7

Unaudited Consolidated Statements of Comprehensive Income for the
quarters ended March 31, 2022 and 2021	8

Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the
quarters ended March 31, 2022 and 2021	9


Unaudited Consolidated Statements of Cash Flows for the quarters
ended March 31, 2022 and 2021	11

Notes to Unaudited Consolidated Financial Statements	13

Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations	108

Item 3. Quantitative and Qualitative Disclosures about Market Risk	146

Item 4. Controls and Procedures	147

Part II – Other Information

Item 1. Legal Proceedings	147

Item 1A. Risk Factors	147

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	148

Item 3. Defaults Upon Senior Securities	148

Item 4. Mine Safety Disclosures	148

Item 5. Other information	148

Item 6. Exhibits	148

Signatures	150

Forward-Looking Information

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;

 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 debt restructuring 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 in connection with the COVID-19 pandemic and hurricane recovery assistance 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;

 the scope and duration of the COVID-19 pandemic (including the appearance of new strains of the virus), actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on us, our customers, service providers and third parties;

 risks related to Popular’s planned acquisition of certain information technology and related assets currently used by EVERTEC, Inc. to service certain of Banco Popular de Puerto Rico’s key channels, as well as the planned entry into amended and restated commercial agreements and the sale or conversion into non-voting of Popular’s ownership stake in Evertec (the “Transaction”), including: the length of time necessary to consummate the Transaction; the ability to satisfy the conditions to the closing thereof; the receipt of any regulatory approvals necessary to effect the Transaction and the contemplated return to stockholders of net gains resulting from a sale of EVERTEC, Inc. shares; the ability to successfully transition and integrate the assets acquired as part of the Transaction, as well as related operations, employees and third party contractors; unexpected costs, including, without limitation, costs due to exposure to any unrecorded liabilities or issues not identified during due diligence investigation of the Transaction or that are not subject to indemnification or reimbursement by EVERTEC, Inc.; risks that Popular may be affected by operational and other risks arising from the acquisition of the acquired assets, including the transition and integration thereof, or by adverse effects on relationships with customers, employees and service providers; and business and other risks arising from the extension of Popular’s current commercial agreements with EVERTEC, Inc., as well as the sale or conversion of EVERTEC, Inc. shares owned by Popular;

 changes in interest rates and market liquidity, which may reduce interest margins, impact funding sources and affect our ability to originate and distribute financial products in the primary and secondary markets;

 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 and the impact of proposed capital standards on our capital ratios;

 additional Federal Deposit Insurance Corporation (“FDIC”) assessments;

 regulatory approvals that may be necessary to undertake certain actions or consummate strategic transactions such as acquisitions and dispositions;

 unforeseen or catastrophic events, including extreme weather events, other natural disasters, man-made disasters, acts of violence or war or the emergence of pandemics, epidemics and other health-related crises, which could cause a disruption in our operations or other adverse consequences for our business;

 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 borrowers are located;

 the performance of the stock and bond markets;

 competition in the financial services industry;

 possible legislative, tax or regulatory changes; and

 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 other third parties providing services to us, including as a result of cyberattacks, e-fraud, denial-of-services and computer intrusion, that might result in loss or breach of customer data, disruption of services, reputational damage or additional costs to Popular.

Other possible events or factors that could cause our results or performance to differ materially from those expressed in these forward-looking statements include the following:

 negative economic conditions that adversely affect housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of non-performing assets, charge-offs and provision expense;

 changes in market rates and prices which may adversely impact the value of financial assets and liabilities;

 potential judgments, claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory or government actions, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic;

 changes in accounting standards, rules and interpretations;

 our ability to grow our core businesses;

 decisions to downsize, sell or close 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, 2021, as well as “Part II, Item 1A” of our Quarterly Reports on Form 10-Q for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.

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.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

			March 31,		December 31,
(In thousands, except share information)			2022		2021
Assets:
Cash and due from banks			$	439,148	$	428,433
Money market investments:
		Time deposits with other banks		10,069,692		17,536,719
		Total money market investments		10,069,692		17,536,719
Trading account debt securities, at fair value:
		Pledged securities with creditors’ right to repledge		-		-
		Other trading account debt securities		36,042		29,711
Debt securities available-for-sale, at fair value:
		Pledged securities with creditors’ right to repledge		72,639		93,330
		Other debt securities available-for-sale		26,287,276		24,874,939
Debt securities held-to-maturity, at amortized cost (fair value 2022 - $75,882; 2021 - $83,368)				75,984		79,461
		Less – Allowance for credit losses		7,844		8,096
		Debt securities held-to-maturity, net		68,140		71,365
Equity securities (realizable value 2022 - $187,137; 2021 - $192,345)				186,348		189,977
Loans held-for-sale, at lower of cost or fair value				55,150		59,168
Loans held-in-portfolio				29,856,356		29,506,225
		Less – Unearned income		268,166		265,668
		Allowance for credit losses		677,792		695,366
		Total loans held-in-portfolio, net		28,910,398		28,545,191
Premises and equipment, net				488,390		494,240
Other real estate				90,567		85,077
Accrued income receivable				204,466		203,096
Mortgage servicing rights, at fair value				125,358		121,570
Other assets				1,755,847		1,628,571
Goodwill				720,293		720,293
Other intangible assets				15,328		16,219
Total assets			$	69,525,082	$	75,097,899
Liabilities and Stockholders’ Equity
Liabilities:
	Deposits:
		Non-interest bearing	$	16,096,666	$	15,684,482
		Interest bearing		46,765,629		51,320,606
		Total deposits		62,862,295		67,005,088
Assets sold under agreements to repurchase				72,819		91,603
Other short-term borrowings				-		75,000
Notes payable				987,887		988,563
Other liabilities				930,835		968,248
		Total liabilities		64,853,836		69,128,502
Commitments and contingencies (Refer to Note 20)
Stockholders’ equity:
Preferred stock, 30,000,000 shares authorized; 885,726 shares issued and outstanding (2021 - 885,726)				22,143		22,143
Common stock, $0.01 par value; 170,000,000 shares authorized;104,594,794 shares issued (2021 - 104,579,334) and 76,487,523 shares outstanding (2021 - 79,851,169)				1,046		1,046
Surplus				4,571,111		4,650,182
Retained earnings				3,143,004		2,973,745
Treasury stock - at cost, 28,107,271 shares (2021 - 24,728,165)				(1,668,820)		(1,352,650)
Accumulated other comprehensive loss, net of tax				(1,397,238)		(325,069)
		Total stockholders’ equity		4,671,246		5,969,397
Total liabilities and stockholders’ equity			$	69,525,082	$	75,097,899
The accompanying notes are an integral part of these Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

			Quarters ended March 31,
(In thousands, except per share information)				2022		2021
Interest income:
	Loans		$	426,791	$	434,649
	Money market investments			6,464		3,112
	Investment securities			96,466		85,690
		Total interest income		529,721		523,451
Interest expense:
	Deposits			24,783		30,201
	Short-term borrowings			80		143
	Long-term debt			10,546		13,995
		Total interest expense		35,409		44,339
Net interest income				494,312		479,112
Provision for credit losses (benefit)				(15,500)		(82,226)
Net interest income after provision for credit losses (benefit)				509,812		561,338
Service charges on deposit accounts				40,713		39,620
Other service fees				77,134		70,628
Mortgage banking activities (Refer to Note 9)				12,865		17,343
Net (loss) gain, including impairment, on equity securities				(2,094)		421
Net loss on trading account debt securities				(723)		(45)
Indemnity reserves on loans sold expense				(745)		(698)
Other operating income				27,542		26,384
		Total non-interest income		154,692		153,653
Operating expenses:
Personnel costs				166,996		159,479
Net occupancy expenses				24,723		26,013
Equipment expenses				23,479		21,575
Other taxes				15,715		13,959
Professional fees				108,497		99,948
Communications				6,147		6,833
Business promotion				15,083		12,521
FDIC deposit insurance				7,372		5,968
Other real estate owned (OREO) income				(2,713)		(4,533)
Other operating expenses				36,149		32,714
Amortization of intangibles				891		1,051
		Total operating expenses		402,339		375,528
Income before income tax				262,165		339,463
Income tax expense				50,479		76,831
Net Income			$	211,686	$	262,632
Net Income Applicable to Common Stock			$	211,333	$	262,279
Net Income per Common Share - Basic			$	2.69	$	3.13
Net Income per Common Share - Diluted			$	2.69	$	3.12
The accompanying notes are an integral part of these Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

			Quarters ended March 31,
(In thousands)		2022		2021
Net income		$	211,686	$	262,632
Other comprehensive (loss) income before tax:
Foreign currency translation adjustment			(2,858)		569
Adjustment of pension and postretirement benefit plans			2,030		-
Amortization of net losses of pension and postretirement benefit plans			3,911		5,190
Unrealized holding losses on debt securities arising during the period			(1,219,023)		(397,327)
Unrealized net gains on cash flow hedges			3,888		2,223
	Reclassification adjustment for net gains included in net income		(699)		(91)
Other comprehensive loss before tax			(1,212,751)		(389,436)
Income tax benefit			140,582		24,707
Total other comprehensive loss, net of tax			(1,072,169)		(364,729)
Comprehensive loss, net of tax		$	(860,483)	$	(102,097)

Tax effect allocated to each component of other comprehensive loss:			Quarters ended March 31,
(In thousands)		2022		2021
Adjustment of pension and postretirement benefit plans		$	(761)	$	-
Amortization of net losses of pension and postretirement benefit plans			(1,467)		(1,948)
Unrealized holding losses on debt securities arising during the period			143,193		27,382
Unrealized net gains on cash flow hedges			(749)		(866)
	Reclassification adjustment for net gains included in net income		366		139
Income tax benefit		$	140,582	$	24,707
The accompanying notes are an integral part of these Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)


												Accumulated
												other
		Common		Preferred				Retained		Treasury		comprehensive
(In thousands)		stock		stock		Surplus		earnings		stock		income (loss)		Total
Balance at December 31, 2020		$	1,045	$	22,143	$	4,571,534	$	2,260,928	$	(1,016,954)	$	189,991	$	6,028,687
Net income									262,632						262,632
Issuance of stock							1,118								1,118
Dividends declared:
	Common stock^[1]								(33,754)						(33,754)
	Preferred stock								(353)						(353)
Common stock purchases											(3,942)				(3,942)
Stock based compensation							(733)				8,633				7,900
Other comprehensive loss, net of tax													(364,729)		(364,729)
Balance at March 31, 2021		$	1,045	$	22,143	$	4,571,919	$	2,489,453	$	(1,012,263)	$	(174,738)	$	5,897,559
Balance at December 31, 2021		$	1,046	$	22,143	$	4,650,182	$	2,973,745	$	(1,352,650)	$	(325,069)	$	5,969,397
Net income									211,686						211,686
Issuance of stock							1,199								1,199
Dividends declared:
	Common stock^[1]								(42,074)						(42,074)
	Preferred stock								(353)						(353)
Common stock purchases^[2]							(80,000)				(324,920)				(404,920)
Stock based compensation							(270)				8,750				8,480
Other comprehensive loss, net of tax													(1,072,169)		(1,072,169)
Balance at March 31, 2022		$	1,046	$	22,143	$	4,571,111	$	3,143,004	$	(1,668,820)	$	(1,397,238)	$	4,671,246
[1]	Dividends declared per common share during the quarter ended March 31, 2022 - $0.55 (2021 - $0.40).
[2]	During the quarter ended March 31, 2022, the Corporation entered into a $400 million accelerated share repurchase transaction with respect to its common stock. Refer to Note 17 for additional information.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

		For the quarters ended
		March 31,	March 31,
Disclosure of changes in number of shares:		2022	2021
Preferred Stock:
	Balance at beginning and end of period	885,726	885,726
Common Stock – Issued:
	Balance at beginning of period	104,579,334	104,508,290
	Issuance of stock	15,460	20,987
	Balance at end of period	104,594,794	104,529,277
	Treasury stock	(28,107,271)	(20,150,097)
Common Stock – Outstanding		76,487,523	84,379,180

The accompanying notes are an integral part of these Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)




			Quarters ended March 31,
(In thousands)				2022		2021
Cash flows from operating activities:
Net income			$	211,686	$	262,632
Adjustments to reconcile net income to net cash provided by operating activities:
	Provision for credit losses (benefit)			(15,500)		(82,226)
	Amortization of intangibles			891		1,051
	Depreciation and amortization of premises and equipment			13,630		14,738
	Net accretion of discounts and amortization of premiums and deferred fees			15,843		(12,361)
	Interest capitalized on loans subject to the temporary payment moratorium or loss mitigation alternatives			(3,416)		(2,855)
	Share-based compensation			8,276		8,905
	Impairment losses on right-of-use and long-lived assets			-		303
	Fair value adjustments on mortgage servicing rights			(1,017)		(512)
	Adjustments to indemnity reserves on loans sold			745		698
	Earnings from investments under the equity method, net of dividends or distributions			(15,099)		(12,088)
	Deferred income tax expense			22,129		69,633
	(Loss) gain on:
		Disposition of premises and equipment and other productive assets		(2,363)		(4,443)
		Sale of loans, including valuation adjustments on loans held-for-sale and mortgage banking activities		1,534		(4,977)
		Sale of foreclosed assets, including write-downs		(7,566)		(6,090)
	Acquisitions of loans held-for-sale			(55,134)		(63,261)
	Proceeds from sale of loans held-for-sale			19,739		218,483
	Net originations on loans held-for-sale			(98,356)		(327,742)
	Net decrease (increase) in:
		Trading debt securities		136,941		182,659
		Equity securities		(111)		(3,197)
		Accrued income receivable		(1,379)		(6,728)
		Other assets		4,068		(4,942)
	Net decrease in:
		Interest payable		(7,106)		(8,498)
		Pension and other postretirement benefits obligation		(196)		(1,071)
		Other liabilities		(31,053)		(27,714)
Total adjustments				(14,500)		(72,235)
Net cash provided by operating activities				197,186		190,397
Cash flows from investing activities:
	Net decrease in money market investments			7,467,248		72,284
	Purchases of investment securities:
		Available-for-sale		(5,747,659)		(6,828,725)
		Equity		(845)		(1,296)
	Proceeds from calls, paydowns, maturities and redemptions of investment securities:
		Available-for-sale		3,109,090		4,492,494
		Held-to-maturity		4,114		3,339
	Proceeds from sale of investment securities:
		Equity		4,585		64
	Net (disbursements) repayments on loans			(236,365)		290,232
	Proceeds from sale of loans			752		48,156
	Acquisition of loan portfolios			(119,479)		(86,071)
	Return of capital from equity method investments			-		682
	Acquisition of premises and equipment			(15,205)		(17,850)
	Proceeds from sale of:
		Premises and equipment and other productive assets		578		8,497
		Foreclosed assets		23,631		24,968
Net cash provided by (used in) investing activities				4,490,445		(1,993,226)

Cash flows from financing activities:
	Net (decrease) increase in:
		Deposits		(4,141,068)		1,881,314
		Assets sold under agreements to repurchase		(18,784)		(34,469)
		Other short-term borrowings		(75,000)		-
	Payments of notes payable			(1,000)		(1,075)
	Principal payments of finance leases			(833)		(1,133)
	Proceeds from issuance of common stock			1,199		1,118
	Dividends paid			(36,289)		(34,053)
	Net payments for repurchase of common stock			(400,604)		(279)
	Payments related to tax withholding for share-based compensation			(4,316)		(3,663)
Net cash (used in) provided by financing activities				(4,676,695)		1,807,760
Net increase in cash and due from banks, and restricted cash				10,936		4,931
Cash and due from banks, and restricted cash at beginning of period				434,512		497,094
Cash and due from banks, and restricted cash at the end of the period			$	445,448	$	502,025
The accompanying notes are an integral part of these Consolidated Financial Statements.

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	18
Note 5 -	Debt securities available-for-sale	19
Note 6 -	Debt securities held-to-maturity	22
Note 7 -	Loans	25
Note 8 -	Allowance for credit losses – loans held-in-portfolio	33
Note 9 -	Mortgage banking activities	54
Note 10 -	Transfers of financial assets and mortgage servicing assets	55
Note 11 -	Other real estate owned	58
Note 12 -	Other assets	59
Note 13 -	Goodwill and other intangible assets	60
Note 14 -	Deposits	62
Note 15 -	Borrowings	63
Note 16 -	Other liabilities	65
Note 17 -	Stockholders’ equity	66
Note 18 -	Other comprehensive loss	67
Note 19 -	Guarantees	69
Note 20 -	Commitments and contingencies	71
Note 21-	Non-consolidated variable interest entities	78
Note 22 -	Related party transactions	80
Note 23 -	Fair value measurement	83
Note 24 -	Fair value of financial instruments	89
Note 25 -	Net income per common share	92
Note 26 -	Revenue from contracts with customers	93
Note 27 -	Leases	95
Note 28 -	Pension and postretirement benefits	97
Note 29 -	Stock-based compensation	98
Note 30 -	Income taxes	100
Note 31 -	Supplemental disclosure on the consolidated statements of cash flows	104
Note 32 -	Segment reporting	105

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 mainland U.S., the Corporation provides retail, mortgage and commercial banking services 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, and equipment leasing and financing services through Popular Equipment Finance (“PEF”), a wholly-owned subsidiary of PB based in Minnesota.

Note 2 – Basis of Presentation

Basis of Presentation

The consolidated interim financial statements have been prepared without audit. The Consolidated Statement of Financial Condition data at December 31, 2021 was derived from audited financial statements. The unaudited interim 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.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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, 2021, included in the Corporation’s 2021 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.

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.

Note 3 - New accounting pronouncements


Recently Adopted Accounting Standards Updates

Standard	Description	Date of adoption	Effect on the financial statements
FASB ASU 2021-05, Leases (Topic 842), Lessors – Certain Leases with Variable Lease Payments	The FASB issued ASU 2021-05 in July 2021, which amends ASC Topic 842 so that lessors can classify as operating leases those leases with variable lease payments that, prior to these amendments, would have been classified as a sales-type or direct financing lease and at inception a loss would have been recognized.	January 1, 2022	The Corporation was not impacted by the adoption of ASU 2021-05 during the first quarter of 2022 since it does not hold direct financing leases with variable lease payments.
FASB ASU 2021-04, Earnings per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force)	The FASB issued ASU 2021-04 in May 2021, which clarifies the accounting for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after a modification or exchange and the related EPS effects of such transaction if recognized as an adjustment to equity.	January 1, 2022	The Corporation was not impacted by the adoption of ASU 2021-04 during the first quarter of 2022 since it does not hold freestanding equity-classified written call options under the scope of this guidance.
FASB ASU 2020-06, Debt – Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity	The FASB issued ASU 2020-06 in August 2020 which, among other things, simplifies the accounting for convertible instruments and contracts in an entity’s own equity and amends the diluted EPS computation for these instruments.	January 1, 2022	The Corporation adopted ASU 2020-06 during the first quarter of 2022. There was no material impact upon the adoption in the analysis of the accelerated share repurchase transaction discussed in Note 17, which was classified as an equity instrument and the related potential shares were considered in its dilutive earnings per share calculation.


Accounting Standards Updates Not Yet Adopted

Standard	Description	Date of adoption	Effect on the financial statements
FASB ASU 2022-02, Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures	The FASB issued ASU 2022-02 in March 2022, which eliminates the accounting guidance for TDRs in Subtopic 310-40 Receivables—Troubled Debt Restructurings by Creditors and requires to apply the loan refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan. In addition, the ASU enhances the disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty and enhances the vintage disclosure by requiring to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases.	January 1, 2023	The Corporation is currently evaluating the impact that the adoption of this guidance will have on its presentation and disclosures.
FASB ASU 2022-01, Derivatives and Hedging (Topic 815) – Fair Value Hedging—Portfolio Layer Method	The FASB issued ASU 2022-01 in March 2022, which amends ASC Topic 815 by allowing non prepayable financial assets also to be included in a closed portfolio hedged using the portfolio layer method. This amendment permits an entity to apply fair value hedging to a stated amount of a closed portfolio of prepayable and non-prepayable financial assets without considering prepayment risk or credit risk when measuring those assets.	January 1, 2023	The Corporation is currently evaluating the impact of this amendment on its consolidated financial statements.

For other recently issued Accounting Standards Updates not yet effective, refer to Note 3 to the Consolidated Financial Statements included in the 2021 Form 10-K.

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, 2022 (December 31, 2021 - $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, 2022, the Corporation held $92 million in restricted assets in the form of funds deposited in money market accounts, debt securities available for sale and equity securities (December 31, 2021 - $50 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.

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, 2022 and December 31, 2021.

		At March 31, 2022
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
U.S. Treasury securities
	Within 1 year	$	3,330,374	$	7,509	$	3,844	$	3,334,039	0.98	%
	After 1 to 5 years		10,844,508		5,396		416,936		10,432,968	1.17
	After 5 to 10 years		4,704,946		-		292,842		4,412,104	1.32
Total U.S. Treasury securities			18,879,828		12,905		713,622		18,179,111	1.18
Obligations of U.S. Government sponsored entities
	Within 1 year		70		1		-		71	5.59
Total obligations of U.S. Government sponsored entities			70		1		-		71	5.59
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		2,062		-		18		2,044	2.12
	After 5 to 10 years		47,568		6		1,191		46,383	1.56
	After 10 years		146,811		714		4,737		142,788	2.19
Total collateralized mortgage obligations - federal agencies			196,441		720		5,946		191,215	2.04
Mortgage-backed securities
	Within 1 year		3		-		-		3	2.11
	After 1 to 5 years		65,835		256		413		65,678	2.17
	After 5 to 10 years		739,719		668		9,398		730,989	2.06
	After 10 years		7,789,911		9,667		606,841		7,192,737	1.65
Total mortgage-backed securities			8,595,468		10,591		616,652		7,989,407	1.68
Other
	After 1 to 5 years		109		2		-		111	3.62
Total other			109		2		-		111	3.62
Total debt securities available-for-sale^[1]		$	27,671,916	$	24,219	$	1,336,220	$	26,359,915	1.34	%
[1]	Includes $17.7 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 $16.6 billion serve as collateral for public funds.

		At December 31, 2021
				Gross		Gross				Weighted
		Amortized		unrealized		unrealized		Fair		average
(In thousands)		cost		gains		losses		value		yield
U.S. Treasury securities
	Within 1 year	$	1,225,558	$	13,556	$	69	$	1,239,045	2.33	%
	After 1 to 5 years		10,059,163		98,808		65,186		10,092,785	1.18
	After 5 to 10 years		4,563,265		739		36,804		4,527,200	1.22
Total U.S. Treasury securities			15,847,986		113,103		102,059		15,859,030	1.27
Obligations of U.S. Government sponsored entities
	Within 1 year		70		-		-		70	5.63
Total obligations of U.S. Government sponsored entities			70		-		-		70	5.63
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		2,433		42		-		2,475	2.16
	After 5 to 10 years		43,241		295		6		43,530	1.54
	After 10 years		172,176		3,441		357		175,260	2.13
Total collateralized mortgage obligations - federal agencies			217,850		3,778		363		221,265	2.01
Mortgage-backed securities
	Within 1 year		11		1		-		12	4.79
	After 1 to 5 years		65,749		2,380		11		68,118	2.23
	After 5 to 10 years		665,600		17,998		5		683,593	1.97
	After 10 years		8,263,835		68,128		195,910		8,136,053	1.67
Total mortgage-backed securities			8,995,195		88,507		195,926		8,887,776	1.69
Other
	After 1 to 5 years		123		5		-		128	3.62
Total other			123		5		-		128	3.62
Total debt securities available-for-sale^[1]		$	25,061,224	$	205,393	$	298,348	$	24,968,269	1.42	%
[1]	Includes $22.0 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 $20.9 billion serve as collateral for public funds.

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.

There were no debt securities sold during the quarters ended March 31, 2022 and 2021.

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, 2022 and December 31, 2021.

	At March 31, 2022
	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	$	15,249,412	$	681,815	$	553,050	$	31,807	$	15,802,462	$	713,622
Collateralized mortgage obligations - federal agencies		157,384		5,854		997		92		158,381		5,946
Mortgage-backed securities		2,763,780		126,822		4,613,565		489,830		7,377,345		616,652
Total debt securities available-for-sale in an unrealized loss position	$	18,170,576	$	814,491	$	5,167,612	$	521,729	$	23,338,188	$	1,336,220

	At December 31, 2021
	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	$	9,590,448	$	102,059	$	-	$	-	$	9,590,448	$	102,059
Collateralized mortgage obligations - federal agencies		35,533		334		1,084		29		36,617		363
Mortgage-backed securities		5,767,556		170,614		595,051		25,312		6,362,607		195,926
Total debt securities available-for-sale in an unrealized loss position	$	15,393,537	$	273,007	$	596,135	$	25,341	$	15,989,672	$	298,348

As of March 31, 2022, the portfolio of available-for-sale debt securities reflects gross unrealized losses of approximately $1.3 billion, driven mainly by fixed-rate U.S. Treasury Securities and 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 securities is comprised mainly of U.S Treasuries and obligations from the U.S. Government, its agencies or government sponsored entities, including FNMA, FHMLC and GNMA. As discussed in Note 2 to the Consolidated Financial Statements included in Form 10-K for the year ended December 31, 2021, 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 and no ACL for these securities has been established.

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, 2022 and December 31, 2021.

		At March 31, 2022
					Allowance			Gross		Gross				Weighted
		Amortized			for Credit		Net of	unrealized		unrealized		Fair		average
(In thousands)		cost			Losses		Allowance	gains		losses		value		yield
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year	$	4,440	$	13	$	4,427	$	13	$	-	$	4,440	6.10	%
	After 1 to 5 years		13,045		158		12,887		158		-		13,045	6.28
	After 5 to 10 years		9,530		89		9,441		24		1		9,464	1.40
	After 10 years		42,985		7,584		35,401		8,067		520		42,948	1.48
Total obligations of Puerto Rico, States and political subdivisions			70,000		7,844		62,156		8,262		521		69,897	2.66
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		24		-		24		1		-		25	6.44
Total collateralized mortgage obligations - federal agencies			24		-		24		1		-		25	6.44
Securities in wholly owned statutory business trusts
	After 10 years		5,960		-		5,960		-		-		5,960	6.33
Total securities in wholly owned statutory business trusts			5,960		-		5,960		-		-		5,960	6.33
Total debt securities held-to-maturity		$	75,984	$	7,844	$	68,140	$	8,263	$	521	$	75,882	2.95	%

		At December 31, 2021
					Allowance			Gross		Gross				Weighted
		Amortized			for Credit		Net of	unrealized		unrealized		Fair		average
(In thousands)		cost			Losses		Allowance	gains		losses		value		yield
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year	$	4,240	$	7	$	4,233	$	4	$	-	$	4,237	6.07	%
	After 1 to 5 years		14,395		148		14,247		149		-		14,396	6.23
	After 5 to 10 years		11,280		122		11,158		104		-		11,262	2.18
	After 10 years		43,561		7,819		35,742		11,746		-		47,488	1.50
Total obligations of Puerto Rico, States and political subdivisions			73,476		8,096		65,380		12,003		-		77,383	2.79
Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		25		-		25		-		-		25	6.44
Total collateralized mortgage obligations - federal agencies			25		-		25		-		-		25	6.44
Securities in wholly owned statutory business trusts
	After 10 years		5,960		-		5,960		-		-		5,960	6.33
Total securities in wholly owned statutory business trusts			5,960		-		5,960		-		-		5,960	6.33
Total debt securities held-to-maturity		$	79,461	$	8,096	$	71,365	$	12,003	$	-	$	83,368	3.06	%

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 in its’ estimate to develop the allowance for credit losses for investment securities held-to-maturity.

At March 31, 2022 and December 31, 2021, 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 $27 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, 2021 - $30 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.

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, 2022		At December 31, 2021
(In thousands)	Securities issued by Puerto Rico municipalities
Watch	$	15,075	$	16,345
Pass		12,170		13,800
Total	$	27,245	$	30,145

At March 31, 2022, the portfolio of “Obligations of Puerto Rico, States and political subdivisions” also includes $43 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, 2021 - $43 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. At March 31, 2022, the average refreshed FICO score for the representative sample, comprised of 65% of the nominal value of the securities, used for the loss estimate was of 704 (compared to 64% and 704, respectively, at December 31, 2021). 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 further 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 further 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.

Delinquency status

At March 31, 2022 and December 31, 2021, 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, 2022 and March 31, 2021:


	For the quarters ended March 31,
		2022		2021
(In thousands)	Obligations of Puerto Rico, States and political subdivisions
Allowance for credit losses:
Beginning balance	$	8,096	$	10,261
Provision for credit losses (benefit)		(252)		(165)
Securities charged-off		-		-
Recoveries		-		-
Ending balance	$	7,844	$	10,096

The allowance for credit losses for the Obligations of Puerto Rico, States and political subdivisions includes $0.3 million for securities issued by municipalities of Puerto Rico, and $7.5 million for bonds issued by the Puerto Rico HFA, which are secured by second mortgage loans on Puerto Rico residential properties (compared to $0.3 million and $7.8 million, respectively, at December 31, 2021).

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 2021 Form 10-K.

During the quarter ended March 31, 2022, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $82 million including $3 million in Purchased Credit Deteriorated (“PCD”) loans and consumer loans of $91 million; compared to purchases (including repurchases) of mortgage loans of $126 million including $6 million in PCD loans and commercial loans of $21 million, during the quarter ended March 31, 2021.

The Corporation performed whole-loan sales involving approximately $19 million of residential mortgage loans and $1 million of commercial loans during the quarter ended March 31, 2022 (March 31, 2021 - $66 million of residential mortgage loans and $17 million of commercial loans). Also, during the quarter ended March 31, 2022, the Corporation securitized approximately $78 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities and $58 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities, compared to $102 million and $86 million, respectively, during the quarter ended March 31, 2021. Also, the Corporation securitized approximately $7 million of mortgage loans into Federal Home Loan Mortgage Corporation (“FHLMC”) mortgage-backed securities during the quarter ended March 31, 2022.

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, 2022 and December 31, 2021.

March 31, 2022
Puerto Rico

			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		$	2,130	$	189	$	274	$	2,593	$	160,648	$	163,241	$	274	$	-
Commercial real estate:
	Non-owner occupied		3,646		93		20,627		24,366		2,536,174		2,560,540		20,627		-
	Owner occupied		4,024		50		49,732		53,806		1,396,696		1,450,502		49,732		-
Commercial and industrial			1,218		169		48,167		49,554		3,333,918		3,383,472		47,149		1,018
Construction			715		-		-		715		126,610		127,325		-		-
Mortgage			182,397		79,374		736,338		998,109		5,125,554		6,123,663		306,560		429,778
Leasing			9,819		2,446		3,766		16,031		1,410,091		1,426,122		3,766		-
Consumer:
	Credit cards		5,817		3,728		9,049		18,594		896,966		915,560		-		9,049
	Home equity lines of credit		-		-		23		23		3,093		3,116		-		23
	Personal		10,215		6,184		19,157		35,556		1,267,920		1,303,476		19,157		-
	Auto		51,497		11,353		27,514		90,364		3,339,798		3,430,162		27,514		-
	Other		537		37		12,184		12,758		112,322		125,080		12,037		147
Total		$	272,015	$	103,623	$	926,831	$	1,302,469	$	19,709,790	$	21,012,259	$	486,816	$	440,015

March 31, 2022
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		$	-	$	-	$	-	$	-	$	1,865,623	$	1,865,623	$	-	$	-
Commercial real estate:
	Non-owner occupied^[1]		902		740		374		2,016		1,391,874		1,393,890		374		-
	Owner occupied^[1]		6,385		-		677		7,062		1,398,580		1,405,642		677		-
Commercial and industrial			10,925		602		4,891		16,418		1,788,918		1,805,336		4,352		539
Construction			-		-		-		-		617,458		617,458		-		-
Mortgage			13,006		1,069		21,826		35,901		1,166,782		1,202,683		21,826		-
Consumer:
	Credit cards		-		-		-		-		26		26		-		-
	Home equity lines of credit		259		15		5,248		5,522		68,437		73,959		5,248		-
	Personal		739		558		627		1,924		203,381		205,305		627		-
	Other		-		1		1		2		6,007		6,009		1		-
Total		$	32,216	$	2,985	$	33,644	$	68,845	$	8,507,086	$	8,575,931	$	33,105	$	539
[1] During the first quarter of 2022, the Corporation reclassified $0.9 billion of loans from the Commercial Real Estate (“CRE”) Non-Owner-Occupied category to the CRE Owner-Occupied category. The selected loans are primarily to skilled and assisted living nursing homes where the majority of the revenues, which are the basis for the repayment of the loans, are generated from medical and related operational activities. These loans meet the type of business and source requirements as defined in the regulatory guidance allowing this classification.

March 31, 2022
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		$	2,130	$	189	$	274	$	2,593	$	2,026,271	$	2,028,864	$	274	$	-
Commercial real estate:
	Non-owner occupied		4,548		833		21,001		26,382		3,928,048		3,954,430		21,001		-
	Owner occupied		10,409		50		50,409		60,868		2,795,276		2,856,144		50,409		-
Commercial and industrial			12,143		771		53,058		65,972		5,122,836		5,188,808		51,501		1,557
Construction			715		-		-		715		744,068		744,783		-		-
Mortgage^[1]			195,403		80,443		758,164		1,034,010		6,292,336		7,326,346		328,386		429,778
Leasing			9,819		2,446		3,766		16,031		1,410,091		1,426,122		3,766		-
Consumer:
	Credit cards		5,817		3,728		9,049		18,594		896,992		915,586		-		9,049
	Home equity lines of credit		259		15		5,271		5,545		71,530		77,075		5,248		23
	Personal		10,954		6,742		19,784		37,480		1,471,301		1,508,781		19,784		-
	Auto		51,497		11,353		27,514		90,364		3,339,798		3,430,162		27,514		-
	Other		537		38		12,185		12,760		118,329		131,089		12,038		147
Total		$	304,231	$	106,608	$	960,475	$	1,371,314	$	28,216,876	$	29,588,190	$	519,921	$	440,554

[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. The balance of these loans includes $13 million at March 31, 2022 related to the rebooking of loans previously pooled into GNMA securities, in which the Corporation had a buy-back option as further described below. 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 repurchases option are required to be reflected (rebooked) on the financial statements of BPPR with an offsetting liability. These balances include $266 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of March 31, 2022. Furthermore, the Corporation has approximately $45 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 $268 million in unearned income and exclude $55 million in loans held-for-sale.
[3]	Includes $6.4 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $3.0 billion were pledged at the Federal Home Loan Bank ("FHLB") as collateral for borrowings and $1.7 billion at the Federal Reserve Bank ("FRB") for discount window borrowings and $1.7 billion serve as collateral for public funds.

December 31, 2021
Puerto Rico

			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		$	314	$	-	$	272	$	586	$	154,183	$	154,769	$	272	$	-
Commercial real estate:
	Non-owner occupied		2,399		136		20,716		23,251		2,266,672		2,289,923		20,716		-
	Owner occupied		3,329		278		54,335		57,942		1,365,787		1,423,729		54,335		-
Commercial and industrial			3,438		1,727		45,242		50,407		3,478,041		3,528,448		44,724		518
Construction			-		-		485		485		86,626		87,111		485		-
Mortgage			217,830		81,754		805,245		1,104,829		5,147,037		6,251,866		333,887		471,358
Leasing			9,240		2,037		3,102		14,379		1,366,940		1,381,319		3,102		-
Consumer:
	Credit cards		5,768		3,520		8,577		17,865		901,986		919,851		-		8,577
	Home equity lines of credit		46		-		23		69		3,502		3,571		-		23
	Personal		10,027		6,072		21,235		37,334		1,250,726		1,288,060		21,235		-
	Auto		59,128		15,019		23,085		97,232		3,314,955		3,412,187		23,085		-
	Other		432		714		12,621		13,767		110,781		124,548		12,448		173
Total		$	311,951	$	111,257	$	994,938	$	1,418,146	$	19,447,236	$	20,865,382	$	514,289	$	480,649

December 31, 2021
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		$	3,826	$	-	$	-	$	3,826	$	1,804,035	$	1,807,861	$	-	$	-
Commercial real estate:
	Non-owner occupied		5,721		683		622		7,026		2,316,441		2,323,467		622		-
	Owner occupied		1,095		-		1,013		2,108		392,265		394,373		1,013		-
Commercial and industrial			9,410		2,680		4,015		16,105		1,794,026		1,810,131		3,897		118
Construction			-		-		-		-		629,109		629,109		-		-
Mortgage			11,711		2,573		21,969		36,253		1,139,077		1,175,330		21,969		-
Consumer:
	Credit cards		-		-		-		-		10		10		-		-
	Home equity lines of credit		71		34		5,406		5,511		69,780		75,291		5,406		-
	Personal		863		574		681		2,118		152,827		154,945		681		-
	Other		-		-		-		-		4,658		4,658		-		-
Total		$	32,697	$	6,544	$	33,706	$	72,947	$	8,302,228	$	8,375,175	$	33,588	$	118

December 31, 2021
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		$	4,140	$	-	$	272	$	4,412	$	1,958,218	$	1,962,630	$	272	$	-
Commercial real estate:
	Non-owner occupied		8,120		819		21,338		30,277		4,583,113		4,613,390		21,338		-
	Owner occupied		4,424		278		55,348		60,050		1,758,052		1,818,102		55,348		-
Commercial and industrial			12,848		4,407		49,257		66,512		5,272,067		5,338,579		48,621		636
Construction			-		-		485		485		715,735		716,220		485		-
Mortgage^[1]			229,541		84,327		827,214		1,141,082		6,286,114		7,427,196		355,856		471,358
Leasing			9,240		2,037		3,102		14,379		1,366,940		1,381,319		3,102		-
Consumer:
	Credit cards		5,768		3,520		8,577		17,865		901,996		919,861		-		8,577
	Home equity lines of credit		117		34		5,429		5,580		73,282		78,862		5,406		23
	Personal		10,890		6,646		21,916		39,452		1,403,553		1,443,005		21,916		-
	Auto		59,128		15,019		23,085		97,232		3,314,955		3,412,187		23,085		-
	Other		432		714		12,621		13,767		115,439		129,206		12,448		173
Total		$	344,648	$	117,801	$	1,028,644	$	1,491,093	$	27,749,464	$	29,240,557	$	547,877	$	480,767

[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. The balance of these loans includes $13 million at December 31, 2021 related to the rebooking of loans previously pooled into GNMA securities, in which the Corporation had a buy-back option as further described below. 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 repurchases option are required to be reflected (rebooked) on the financial statements of BPPR with an offsetting liability. These balances include $304 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2021. Furthermore, the Corporation has approximately $50 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 $266 million in unearned income and exclude $59 million in loans held-for-sale.
[3]	Includes $6.6 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $3.2 billion were pledged at the FHLB as collateral for borrowings and $1.7 billion at the FRB for discount window borrowings and $1.7 billion serve as collateral for public funds.

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 VA when 15 months delinquent as to principal or interest, since the principal repayment on these loans is insured.

At March 31, 2022, mortgage loans held-in-portfolio include $1.9 billion (December 31, 2021 - $1.9 billion) of loans insured by the FHA, or guaranteed VA of which $0.4 billion (December 31, 2021 - $0.5 billion) are 90 days or more past due. These balances include $721 million in loans modified under a TDR (December 31, 2021 - $716 million), that are presented as accruing loans. The portfolio of guaranteed loans includes $266 million of residential mortgage loans in Puerto Rico that are no longer accruing interest as of March 31, 2022 (December 31, 2021 - $304 million). The Corporation has approximately $45 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at March 31, 2022 (December 31, 2021 - $50 million).

Loans with a delinquency status of 90 days past due as of March 31, 2022 include $13 million in loans previously pooled into GNMA securities (December 31, 2021 - $13 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, 2022 and 2021 by class of loans:

March 31, 2022
	Puerto Rico				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	$	-	$	274	$	-	$	-	$	-	$	274
Commercial real estate non-owner occupied		15,477		5,150		-		374		15,477		5,524
Commercial real estate owner occupied		9,720		40,012		-		677		9,720		40,689
Commercial and industrial		27,536		19,613		-		4,352		27,536		23,965
Mortgage		159,025		147,535		-		21,826		159,025		169,361
Leasing		228		3,538		-		-		228		3,538
Consumer:
HELOCs		-		-		-		5,248		-		5,248
Personal		6,590		12,567		74		553		6,664		13,120
Auto		1,153		26,361		-		-		1,153		26,361
Other		263		11,774		-		1		263		11,775
Total	$	219,992	$	266,824	$	74	$	33,031	$	220,066	$	299,855

December 31, 2021
	Puerto Rico				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	$	-	$	272	$	-	$	-	$	-	$	272
Commercial real estate non-owner occupied		15,819		4,897		-		622		15,819		5,519
Commercial real estate owner occupied		13,491		40,844		-		1,013		13,491		41,857
Commercial and industrial		30,177		14,547		-		3,897		30,177		18,444
Construction		-		485		-		-		-		485
Mortgage		169,827		164,060		29		21,940		169,856		186,000
Leasing		276		2,826		-		-		276		2,826
Consumer:
HELOCs		-		-		-		5,406		-		5,406
Personal		6,279		14,956		81		600		6,360		15,556
Auto		879		22,206		-		-		879		22,206
Other		-		12,448		-		-		-		12,448
Total	$	236,748	$	277,541	$	110	$	33,478	$	236,858	$	311,019

Loans in non-accrual status with no allowance at March 31, 2022 include $220 million in collateral dependent loans (December 31, 2021 - $237 million). The Corporation recognized $4 million in interest income on non-accrual loans during the quarter ended March 31, 2022 (March 31, 2021 - $4 million).

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.

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, 2022 and December 31, 2021:

		March 31, 2022
(In thousands)			Real Estate		Auto		Equipment		Accounts Receivables		Other		Total
Puerto Rico
Commercial multi-family		$	1,367	$	-	$	-	$	-	$	-	$	1,367
Commercial real estate:
	Non-owner occupied		215,343		-		-		-		-		215,343
	Owner occupied		40,200		-		-		-		-		40,200
Commercial and industrial			1,731		-		668		10,250		32,149		44,798
Mortgage			165,879		-		-		-		-		165,879
Leasing			-		652		6		-		-		658
Consumer:
	Personal		6,585		-		-		-		-		6,585
	Auto		-		6,781		-		-		-		6,781
	Other		-		-		-		-		263		263
Total Puerto Rico		$	431,105	$	7,433	$	674	$	10,250	$	32,412	$	481,874
Popular U.S.
Mortgage		$	731		-		-		-		-	$	731
Total Popular U.S.		$	731	$	-	$	-	$	-	$	-	$	731
Popular, Inc.
Commercial multi-family		$	1,367	$	-	$	-	$	-	$	-	$	1,367
Commercial real estate:
	Non-owner occupied		215,343		-		-		-		-		215,343
	Owner occupied		40,200		-		-		-		-		40,200
Commercial and industrial			1,731		-		668		10,250		32,149		44,798
Mortgage			166,610		-		-		-		-		166,610
Leasing			-		652		6		-		-		658
Consumer:
	Personal		6,585		-		-		-		-		6,585
	Auto		-		6,781		-		-		-		6,781
	Other		-		-		-		-		263		263
Total Popular, Inc.		$	431,836	$	7,433	$	674	$	10,250	$	32,412	$	482,605

		December 31, 2021
(In thousands)			Real Estate		Auto		Equipment		Accounts Receivables		Other		Total
Puerto Rico
Commercial multi-family		$	1,374	$	-	$	-	$	-	$	-	$	1,374
Commercial real estate:
	Non-owner occupied		211,026		-		-		-		-		211,026
	Owner occupied		47,268		-		-		-		-		47,268
Commercial and industrial			2,650		-		680		10,675		27,893		41,898
Mortgage			179,774		-		-		-		-		179,774
Leasing			-		574		-		-		-		574
Consumer:
	Personal		6,165		-		-		-		-		6,165
	Auto		-		8,983		-		-		-		8,983
Total Puerto Rico		$	448,257	$	9,557	$	680	$	10,675	$	27,893	$	497,062
Popular U.S.
Mortgage		$	926		-		-		-		-	$	926
Total Popular U.S.		$	926	$	-	$	-	$	-	$	-	$	926
Popular, Inc.
Commercial multi-family		$	1,374	$	-	$	-	$	-	$	-	$	1,374
Commercial real estate:
	Non-owner occupied		211,026		-		-		-		-		211,026
	Owner occupied		47,268		-		-		-		-		47,268
Commercial and industrial			2,650		-		680		10,675		27,893		41,898
Mortgage			180,700		-		-		-		-		180,700
Leasing			-		574		-		-		-		574
Consumer:
	Personal		6,165		-		-		-		-		6,165
	Auto		-		8,983		-		-		-		8,983
Total Popular, Inc.		$	449,183	$	9,557	$	680	$	10,675	$	27,893	$	497,988

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, 2022		March 31, 2021
Purchase price of loans at acquisition	$	2,002	$	4,935
Allowance for credit losses at acquisition		612		1,356
Non-credit discount / (premium) at acquisition		99		121
Par value of acquired loans at acquisition	$	2,713	$	6,412

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 allowance for credit losses (“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 purchased credit deteriorated (“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.

At March 31, 2022, 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 current baseline forecast continues to show a favorable economic scenario. 2022 annualized GDP growth of 3.5% and 3.7% is expected for Puerto Rico and United States, respectively. This represents a reduction for both Puerto Rico and United States since last quarter’s GDP growth forecast was 4.0% and 4.6%, respectively. Changes in assumptions related to fiscal stimulus and higher energy prices contributed to the reduction. The 2022 average unemployment rate is forecasted at 7.3% and 3.6% for Puerto Rico and United States, respectively, consistent with the previous estimate of 7.4% and 3.7%.

The following tables present the changes in the ACL of loans held-in-portfolio and unfunded commitments for the quarters ended March 31, 2022 and 2021.

For the quarter ended March 31, 2022
Puerto Rico


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses - loans:
Beginning balance		$	151,928	$	1,641	$	138,286	$	17,578	$	284,729	$	594,162
	Provision for credit losses (benefit)		(10,687)		357		(10,528)		386		7,811		(12,661)
	Initial allowance for credit losses - PCD Loans		-		-		612		-		-		612
	Charge-offs		(527)		-		(1,321)		(407)		(22,065)		(24,320)
	Recoveries		4,757		416		4,313		841		8,491		18,818
Ending balance - loans		$	145,471	$	2,414	$	131,362	$	18,398	$	278,966	$	576,611
Allowance for credit losses - unfunded commitments:
Beginning balance		$	1,751	$	2,388	$	-	$	-	$	-	$	4,139
	Provision for credit losses (benefit)		(104)		(464)		-		-		-		(568)
Ending balance - unfunded commitments [1]		$	1,647	$	1,924	$	-	$	-	$	-	$	3,571
[1]	Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the quarter ended March 31, 2022
Popular U.S.


(In thousands)		Commercial		Construction		Mortgage		Consumer		Total
Allowance for credit losses - loans:
Beginning balance		$	63,877	$	4,722	$	16,192	$	16,413	$	101,204
	Provision for credit losses (benefit)		(5,332)		(1,725)		1,632		3,681		(1,744)
	Charge-offs		(127)		-		-		(1,305)		(1,432)
	Recoveries		754		1,128		20		1,251		3,153
Ending balance - loans		$	59,172	$	4,125	$	17,844	$	20,040	$	101,181
Allowance for credit losses - unfunded commitments:
Beginning balance		$	1,384	$	2,337	$	-	$	37	$	3,758
	Provision for credit losses (benefit)		(66)		(202)		-		(7)		(275)
Ending balance - unfunded commitments [1]		$	1,318	$	2,135	$	-	$	30	$	3,483
[1]	Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the quarter ended March 31, 2022
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses - loans:
Beginning balance		$	215,805	$	6,363	$	154,478	$	17,578	$	301,142	$	695,366
	Provision for credit losses (benefit)		(16,019)		(1,368)		(8,896)		386		11,492		(14,405)
	Initial allowance for credit losses - PCD Loans		-		-		612		-		-		612
	Charge-offs		(654)		-		(1,321)		(407)		(23,370)		(25,752)
	Recoveries		5,511		1,544		4,333		841		9,742		21,971
Ending balance - loans		$	204,643	$	6,539	$	149,206	$	18,398	$	299,006	$	677,792
Allowance for credit losses - unfunded commitments:
Beginning balance		$	3,135	$	4,725	$	-	$	-	$	37	$	7,897
	Provision for credit losses (benefit)		(170)		(666)		-		-		(7)		(843)
Ending balance - unfunded commitments [1]		$	2,965	$	4,059	$	-	$	-	$	30	$	7,054
[1]	Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the quarter ended March 31, 2021
Puerto Rico


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses - loans:
Beginning balance		$	225,323	$	4,871	$	195,557	$	16,863	$	297,136	$	739,750
	Provision for credit losses (benefit)		(29,646)		1,306		(2,805)		(4,058)		(4,773)		(39,976)
	Initial allowance for credit losses - PCD Loans		-		-		1,356		-		-		1,356
	Charge-offs		(2,883)		(6,619)		(10,381)		(1,058)		(24,029)		(44,970)
	Recoveries		4,317		702		2,078		940		17,459		25,496
Ending balance - loans		$	197,111	$	260	$	185,805	$	12,687	$	285,793	$	681,656
Allowance for credit losses - unfunded commitments:
Beginning balance		$	4,913	$	4,610	$	-	$	-	$	-	$	9,523
	Provision for credit losses (benefit)		(1,000)		(4,365)		-		-		-		(5,365)
Ending balance - unfunded commitments [1]		$	3,913	$	245	$	-	$	-	$	-	$	4,158
[1]	Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the quarter ended March 31, 2021
Popular U.S.


(In thousands)		Commercial		Construction		Mortgage		Consumer		Total
Allowance for credit losses - loans:
Beginning balance		$	108,057	$	9,366	$	20,159	$	18,918	$	156,500
	Provision for credit losses (benefit)		(28,933)		(431)		(3,918)		(2,521)		(35,803)
	Charge-offs		(383)		-		(1)		(3,256)		(3,640)
	Recoveries		367		-		81		1,636		2,084
Ending balance - loans		$	79,108	$	8,935	$	16,321	$	14,777	$	119,141
Allowance for credit losses - unfunded commitments:
Beginning balance		$	1,753	$	4,469	$	-	$	106	$	6,328
	Provision for credit losses (benefit)		(310)		(566)		-		(41)		(917)
Ending balance - unfunded commitments [1]		$	1,443	$	3,903	$	-	$	65	$	5,411
[1]	Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the quarter ended March 31, 2021
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses - loans:
Beginning balance		$	333,380	$	14,237	$	215,716	$	16,863	$	316,054	$	896,250
	Provision for credit losses (benefit)		(58,579)		875		(6,723)		(4,058)		(7,294)		(75,779)
	Initial allowance for credit losses - PCD Loans		-		-		1,356		-		-		1,356
	Charge-offs		(3,266)		(6,619)		(10,382)		(1,058)		(27,285)		(48,610)
	Recoveries		4,684		702		2,159		940		19,095		27,580
Ending balance - loans		$	276,219	$	9,195	$	202,126	$	12,687	$	300,570	$	800,797
Allowance for credit losses - unfunded commitments:
Beginning balance		$	6,666	$	9,079	$	-	$	-	$	106	$	15,851
	Provision for credit losses (benefit)		(1,310)		(4,931)		-		-		(41)		(6,282)
Ending balance - unfunded commitments [1]		$	5,356	$	4,148	$	-	$	-	$	65	$	9,569
[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 of a loan constitutes a troubled debt restructuring when a borrower is experiencing financial difficulty and the modification constitutes a concession. For a summary of the accounting policy related to troubled debt restructurings (“TDRs”), refer to the Summary of Significant Accounting Policies included in Note 2 to the 2021 Form 10-K.

The outstanding balance of loans classified as TDRs amounted to $1.7 billion at March 31, 2022 (December 31, 2021 - $1.7 billion). The amount of outstanding commitments to lend additional funds to debtors owing receivables whose terms have been modified in TDRs amounted to $9 million related to the commercial loan portfolio at March 31, 2022 (December 31, 2021 - $9 million).

The following table presents the outstanding balance of loans classified as TDRs according to their accruing status and the related allowance at March 31, 2022 and December 31, 2021.

	March 31, 2022								December 31, 2021
(In thousands)		Accruing		Non-Accruing		Total		Related Allowance		Accruing		Non-Accruing		Total		Related Allowance
Loans held-in-portfolio:
Commercial	$	302,795	$	66,334	$	369,129	$	21,007	$	261,344	$	64,744	$	326,088	$	24,736
Mortgage^[1]		1,151,887		101,024		1,252,911		60,308		1,143,204		112,509		1,255,713		61,888
Leasing		188		28		216		30		325		47		372		42
Consumer		60,652		10,194		70,846		15,592		64,093		10,556		74,649		16,124
Loans held-in-portfolio	$	1,515,522	$	177,580	$	1,693,102	$	96,937	$	1,468,966	$	187,856	$	1,656,822	$	102,790
[1] At March 31, 2022, accruing mortgage loan TDRs include $721 million guaranteed by U.S. sponsored entities at BPPR, compared to $716 million at December 31, 2021.

The following tables present the loan count by type of modification for those loans modified in a TDR during the quarters ended March 31, 2022 and 2021. Loans modified as TDRs for the U.S. operations are considered insignificant to the Corporation.

For the quarter ended March 31, 2022
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Commercial real estate non-owner occupied	-	-	-	1
Commercial real estate owner occupied	1	1	-	-
Commercial and industrial	1	5	-	11
Mortgage	1	34	288	1
Consumer:
Credit cards	15	-	-	15
Personal	25	20	-	-
Auto	-	1	-	-
Total	43	61	288	28

For the quarter ended March 31, 2021
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Commercial multi-family	-	1	-	-
Commercial real estate non-owner occupied	-	9	-	-
Commercial real estate owner occupied	2	20	-	-
Commercial and industrial	-	8	-	-
Mortgage	8	40	360	-
Leasing	-	-	1	-
Consumer:
Credit cards	52	-	-	14
HELOCs	-	-	1	-
Personal	61	2	1	-
Auto	-	1	2	-
Other	4	-	-	-
Total	127	81	365	14

The following tables present, by class, quantitative information related to loans modified as TDRs during the quarters ended March 31, 2022 and 2021.

Popular, Inc.
For the quarter ended March 31, 2022
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	1	$	3,400	$	3,400	$	-
Commercial real estate owner occupied	2		729		727		-
Commercial and industrial	17		49,346		49,155		2,030
Mortgage	324		34,876		35,592		1,020
Consumer:
Credit cards	30		248		273		5
Personal	45		729		728		130
Auto	1		28		28		5
Total	420	$	89,356	$	89,903	$	3,190

Popular, Inc.
For the quarter ended March 31, 2021
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial multi-family	1	$	87	$	86	$	4
Commercial real estate non-owner occupied	9		3,295		3,281		141
Commercial real estate owner occupied	22		29,750		29,484		572
Commercial and industrial	8		222		218		8
Mortgage	408		47,654		49,729		1,046
Leasing	1		32		32		4
Consumer:
Credit cards	66		824		854		27
HELOCs	1		63		116		28
Personal	64		1,062		1,062		304
Auto	3		48		53		10
Other	4		6		6		1
Total	587	$	83,043	$	84,921	$	2,145

The following tables present, by class, TDRs that were subject to payment default and that had been modified as a TDR during the twelve months preceding the default date. 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 as a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

Defaulted during the quarter ended March 31, 2022
(Dollars in thousands)	Loan count	Recorded investment as of first default date
Mortgage	6	$	1,870
Consumer:
Credit cards	16		127
Personal	12		128
Total	34	$	2,125

Defaulted during the quarter ended March 31, 2021
(Dollars in thousands)	Loan count	Recorded investment as of first default date
Commercial real estate owner occupied	2	$	3,754
Commercial and industrial	2		224
Mortgage	23		1,732
Consumer:
Credit cards	40		535
Personal	6		260
Total	73	$	6,505

Commercial, consumer and mortgage loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the ACL may be increased or partial charge-offs may be taken to further write-down the carrying value of the loan.

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, 2022 and December 31, 2021 by vintage year. For the definitions of the obligor risk ratings, refer to the Credit Quality section of Note 8 to the Consolidated Financial Statements included in the Corporation’s Form 10-K for the year ended December 31, 2021.

March 31, 2022
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2022		2021		2020		2019		2018		Prior Years						Total
Puerto Rico
	Commercial:
		Commercial multi-family
			Watch	$	-	$	-	$	-	$	-	$	-	$	4,418	$	-	$	-	$	4,418
			Special mention		-		-		-		-		-		2,952		-		-		2,952
			Substandard		-		-		-		986		-		6,102		100		-		7,188
			Pass		12,788		24,608		21,061		34,410		25,152		30,451		213		-		148,683
		Total commercial multi-family		$	12,788	$	24,608	$	21,061	$	35,396	$	25,152	$	43,923	$	313	$	-	$	163,241

		Commercial real estate non-owner occupied
			Watch	$	29,903	$	117,431	$	226,357	$	29,725	$	134,641	$	167,332	$	3,087	$	-	$	708,476
			Special Mention		-		26,258		12,015		7,627		-		29,273		-		-		75,173
			Substandard		3,393		4,294		27,555		19,856		37,249		72,503		-		-		164,850
			Pass		181,148		499,552		197,587		87,349		36,193		601,857		8,355		-		1,612,041
		Total commercial real estate non-owner occupied		$	214,444	$	647,535	$	463,514	$	144,557	$	208,083	$	870,965	$	11,442	$	-	$	2,560,540

		Commercial real estate owner occupied
			Watch	$	675	$	7,705	$	6,952	$	7,887	$	7,044	$	108,001	$	-	$	-	$	138,264
			Special Mention		118		5,550		949		7,150		1,412		107,134		-		-		122,313
			Substandard		-		4,999		1,021		988		34,997		108,747		-		-		150,752
			Doubtful		-		-		-		-		-		641		-		-		641
			Pass		29,665		273,843		151,427		48,295		53,440		462,038		19,824		-		1,038,532
		Total commercial real estate owner occupied		$	30,458	$	292,097	$	160,349	$	64,320	$	96,893	$	786,561	$	19,824	$	-	$	1,450,502

	Commercial and industrial
		Watch	$	8,608	$	93,150	$	11,684	$	23,180	$	101,967	$	80,917	$	99,008	$	-	$	418,514
		Special Mention		-		7,878		4,865		12,573		27,081		51,740		52,803		-		156,940
		Substandard		35		2,189		5,933		2,983		23,533		89,083		41,040		-		164,796
		Doubtful		-		-		-		-		-		96		-		-		96
		Pass		224,627		766,346		187,160		272,866		48,585		372,756		770,786		-		2,643,126
	Total commercial and industrial		$	233,270	$	869,563	$	209,642	$	311,602	$	201,166	$	594,592	$	963,637	$	-	$	3,383,472

Construction
		Watch	$	6,644	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	6,644
		Special Mention		1,797		-		-		-		-		-		-		-		1,797
		Pass		184		28,486		58,323		1,903		-		-		29,988		-		118,884
Total construction			$	8,625	$	28,486	$	58,323	$	1,903	$	-	$	-	$	29,988	$	-	$	127,325

Mortgage
		Substandard	$	119	$	108	$	1,224	$	4,780	$	5,402	$	116,846	$	-	$	-	$	128,479
		Pass		59,395		473,279		299,789		217,561		254,971		4,690,189		-		-		5,995,184
Total mortgage			$	59,514	$	473,387	$	301,013	$	222,341	$	260,373	$	4,807,035	$	-	$	-	$	6,123,663

Leasing
		Substandard	$	-	$	678	$	652	$	1,051	$	705	$	631	$	-	$	-	$	3,717
		Loss		-		-		-		-		-		49		-		-		49
		Pass		207,900		526,319		307,398		202,190		119,085		59,464		-		-		1,422,356
Total leasing			$	207,900	$	526,997	$	308,050	$	203,241	$	119,790	$	60,144	$	-	$	-	$	1,426,122

March 31, 2022
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2022		2021		2020		2019		2018		Prior Years						Total
Puerto Rico
	Consumer:
		Credit cards
			Substandard	$	-	$	-	$	-	$	-	$	-	$	-	$	9,049	$	-	$	9,049
			Pass		-		-		-		-		-		-		906,511		-		906,511
	Total credit cards			$	-	$	-	$	-	$	-	$	-	$	-	$	915,560	$	-	$	915,560

		HELOCs
			Substandard	$	-	$	-	$	-	$	-	$	-	$	-	$	23	$	-	$	23
			Pass		-		-		-		-		-		-		3,093		-		3,093
	Total HELOCs			$	-	$	-	$	-	$	-	$	-	$	-	$	3,116	$	-	$	3,116

		Personal
			Substandard	$	630	$	1,078	$	641	$	1,956	$	785	$	13,421	$	-	$	1,321	$	19,832
			Loss		-		-		-		1		3		23		-		-		27
			Pass		168,643		491,177		166,166		192,611		78,207		152,766		-		34,047		1,283,617
	Total Personal			$	169,273	$	492,255	$	166,807	$	194,568	$	78,995	$	166,210	$	-	$	35,368	$	1,303,476

		Auto
			Substandard	$	-	$	5,973	$	8,556	$	9,371	$	4,900	$	3,373	$	-	$	-	$	32,173
			Loss		-		32		33		58		16		14		-		-		153
			Pass		311,670		1,174,172		756,985		580,986		373,406		200,617		-		-		3,397,836
	Total Auto			$	311,670	$	1,180,177	$	765,574	$	590,415	$	378,322	$	204,004	$	-	$	-	$	3,430,162

		Other consumer
			Substandard	$	-	$	-	$	110	$	20	$	537	$	7	$	11,121	$	-	$	11,795
			Loss		-		-		-		-		389		-		-		-		389
			Pass		6,302		22,933		8,908		8,523		5,196		4,352		56,682		-		112,896
	Total Other consumer			$	6,302	$	22,933	$	9,018	$	8,543	$	6,122	$	4,359	$	67,803	$	-	$	125,080
Total Puerto Rico				$	1,254,244	$	4,558,038	$	2,463,351	$	1,776,886	$	1,374,896	$	7,537,793	$	2,011,683	$	35,368	$	21,012,259

March 31, 2022
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2022		2021		2020		2019		2018		Prior Years						Total
Popular U.S.
	Commercial:
		Commercial multi-family
			Watch	$	-	$	8,569	$	43,642	$	40,570	$	20,576	$	123,917	$	-	$	-	$	237,274
			Special mention		-		-		1,217		8,973		29,613		35,180		-		-		74,983
			Substandard		-		-		-		67,018		12,685		16,514		-		-		96,217
			Pass		76,737		422,609		239,450		208,367		143,251		364,174		2,561		-		1,457,149
		Total commercial multi-family		$	76,737	$	431,178	$	284,309	$	324,928	$	206,125	$	539,785	$	2,561	$	-	$	1,865,623

		Commercial real estate non-owner occupied
			Watch	$	-	$	12,704	$	16,909	$	26,886	$	46,012	$	120,879	$	97	$	-	$	223,487
			Special Mention		-		-		-		3,183		1,808		25,948		-		-		30,939
			Substandard		-		2,920		753		-		1,567		35,538		-		-		40,778
			Pass		96,512		206,434		214,871		101,177		95,335		378,221		6,136		-		1,098,686
		Total commercial real estate non-owner occupied		$	96,512	$	222,058	$	232,533	$	131,246	$	144,722	$	560,586	$	6,233	$	-	$	1,393,890

		Commercial real estate owner occupied
			Watch	$	-	$	-	$	5,343	$	7,775	$	12,654	$	60,557	$	4,222	$	-	$	90,551
			Special Mention		-		-		-		-		5,174		15,902		-		-		21,076
			Substandard		-		-		-		7,527		2,300		43,602		-		-		53,429
			Pass		124,847		428,804		142,310		94,258		144,834		301,051		4,482		-		1,240,586
		Total commercial real estate owner occupied		$	124,847	$	428,804	$	147,653	$	109,560	$	164,962	$	421,112	$	8,704	$	-	$	1,405,642

	Commercial and industrial
		Watch	$	691	$	3,210	$	3,104	$	3,187	$	8,894	$	1,041	$	17,121	$	-	$	37,248
		Special Mention		825		2,323		6,896		635		530		207		8,983		-		20,399
		Substandard		114		134		260		4,648		1,212		1,974		369		-		8,711
		Loss		-		433		120		29		14		218		-		-		814
		Pass		20,935		277,342		336,892		205,703		186,778		435,798		274,716		-		1,738,164
	Total commercial and industrial		$	22,565	$	283,442	$	347,272	$	214,202	$	197,428	$	439,238	$	301,189	$	-	$	1,805,336

Construction
		Watch	$	-	$	3,959	$	14,222	$	26,775	$	29,549	$	35,090	$	-	$	-	$	109,595
		Special Mention		-		-		-		-		-		13,655		-		-		13,655
		Substandard		-		-		-		-		15,841		10,184		-		-		26,025
		Pass		7,352		134,447		145,675		136,487		5,650		38,572		-		-		468,183
Total construction			$	7,352	$	138,406	$	159,897	$	163,262	$	51,040	$	97,501	$	-	$	-	$	617,458

Mortgage
		Substandard	$	-	$	1,595	$	4,338	$	4,110	$	1,054	$	10,729	$	-	$	-	$	21,826
		Pass		63,698		318,614		258,525		206,391		60,663		272,966		-		-		1,180,857
Total mortgage			$	63,698	$	320,209	$	262,863	$	210,501	$	61,717	$	283,695	$	-	$	-	$	1,202,683

March 31, 2022
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2022		2021		2020		2019		2018		Prior Years						Total
Popular U.S.
	Consumer:
		Credit cards
			Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	26	$	-	$	26
	Total credit cards			$	-	$	-	$	-	$	-	$	-	$	-	$	26	$	-	$	26

		HELOCs
			Substandard	$	-	$	-	$	-	$	-	$	-	$	2,928	$	-	$	814	$	3,742
			Loss		-		-		-		-		-		161		-		1,345		1,506
			Pass		-		-		-		-		-		10,512		40,677		17,522		68,711
	Total HELOCs			$	-	$	-	$	-	$	-	$	-	$	13,601	$	40,677	$	19,681	$	73,959

		Personal
			Substandard	$	-	$	62	$	73	$	156	$	82	$	151	$	-	$	-	$	524
			Loss		-		5		62		2		-		34		-		-		103
			Pass		75,243		69,809		15,416		31,855		5,688		6,667		-		-		204,678
	Total Personal			$	75,243	$	69,876	$	15,551	$	32,013	$	5,770	$	6,852	$	-	$	-	$	205,305

		Other consumer
			Substandard	$	-	$	-	$	-	$	-	$	-	$	-	$	1	$	-	$	1
			Pass		-		-		-		-		-		-		6,008		-		6,008
	Total Other consumer			$	-	$	-	$	-	$	-	$	-	$	-	$	6,009	$	-	$	6,009
Total Popular U.S.				$	466,954	$	1,893,973	$	1,450,078	$	1,185,712	$	831,764	$	2,362,370	$	365,399	$	19,681	$	8,575,931

March 31, 2022
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2022		2021		2020		2019		2018		Prior Years						Total
Popular, Inc.
	Commercial:
		Commercial multi-family
			Watch	$	-	$	8,569	$	43,642	$	40,570	$	20,576	$	128,335	$	-	$	-	$	241,692
			Special mention		-		-		1,217		8,973		29,613		38,132		-		-		77,935
			Substandard		-		-		-		68,004		12,685		22,616		100		-		103,405
			Pass		89,525		447,217		260,511		242,777		168,403		394,625		2,774		-		1,605,832
		Total commercial multi-family		$	89,525	$	455,786	$	305,370	$	360,324	$	231,277	$	583,708	$	2,874	$	-	$	2,028,864

		Commercial real estate non-owner occupied
			Watch	$	29,903	$	130,135	$	243,266	$	56,611	$	180,653	$	288,211	$	3,184	$	-	$	931,963
			Special Mention		-		26,258		12,015		10,810		1,808		55,221		-		-		106,112
			Substandard		3,393		7,214		28,308		19,856		38,816		108,041		-		-		205,628
			Pass		277,660		705,986		412,458		188,526		131,528		980,078		14,491		-		2,710,727
		Total commercial real estate non-owner occupied		$	310,956	$	869,593	$	696,047	$	275,803	$	352,805	$	1,431,551	$	17,675	$	-	$	3,954,430

		Commercial real estate owner occupied
			Watch	$	675	$	7,705	$	12,295	$	15,662	$	19,698	$	168,558	$	4,222	$	-	$	228,815
			Special Mention		118		5,550		949		7,150		6,586		123,036		-		-		143,389
			Substandard		-		4,999		1,021		8,515		37,297		152,349		-		-		204,181
			Doubtful		-		-		-		-		-		641		-		-		641
			Pass		154,512		702,647		293,737		142,553		198,274		763,089		24,306		-		2,279,118
		Total commercial real estate owner occupied		$	155,305	$	720,901	$	308,002	$	173,880	$	261,855	$	1,207,673	$	28,528	$	-	$	2,856,144

		Commercial and industrial
			Watch	$	9,299	$	96,360	$	14,788	$	26,367	$	110,861	$	81,958	$	116,129	$	-	$	455,762
			Special Mention		825		10,201		11,761		13,208		27,611		51,947		61,786		-		177,339
			Substandard		149		2,323		6,193		7,631		24,745		91,057		41,409		-		173,507
			Doubtful		-		-		-		-		-		96		-		-		96
			Loss		-		433		120		29		14		218		-		-		814
			Pass		245,562		1,043,688		524,052		478,569		235,363		808,554		1,045,502		-		4,381,290
		Total commercial and industrial		$	255,835	$	1,153,005	$	556,914	$	525,804	$	398,594	$	1,033,830	$	1,264,826	$	-	$	5,188,808

March 31, 2022
			Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year
(In thousands)				2022		2021		2020		2019		2018		Prior Years						Total
Popular, Inc.

	Construction
		Watch	$	6,644	$	3,959	$	14,222	$	26,775	$	29,549	$	35,090	$	-	$	-	$	116,239
		Special Mention		1,797		-		-		-		-		13,655		-		-		15,452
		Substandard		-		-		-		-		15,841		10,184		-		-		26,025
		Pass		7,536		162,933		203,998		138,390		5,650		38,572		29,988		-		587,067
	Total construction		$	15,977	$	166,892	$	218,220	$	165,165	$	51,040	$	97,501	$	29,988	$	-	$	744,783

	Mortgage
		Substandard	$	119	$	1,703	$	5,562	$	8,890	$	6,456	$	127,575	$	-	$	-	$	150,305
		Pass		123,093		791,893		558,314		423,952		315,634		4,963,155		-		-		7,176,041
	Total mortgage		$	123,212	$	793,596	$	563,876	$	432,842	$	322,090	$	5,090,730	$	-	$	-	$	7,326,346

	Leasing
		Substandard	$	-	$	678	$	652	$	1,051	$	705	$	631	$	-	$	-	$	3,717
		Loss		-		-		-		-		-		49		-		-		49
		Pass		207,900		526,319		307,398		202,190		119,085		59,464		-		-		1,422,356
	Total leasing		$	207,900	$	526,997	$	308,050	$	203,241	$	119,790	$	60,144	$	-	$	-	$	1,426,122

March 31, 2022
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2022		2021		2020		2019		2018		Prior Years						Total
Popular, Inc.
	Consumer:
		Credit cards
			Substandard	$	-	$	-	$	-	$	-	$	-	$	-	$	9,049	$	-	$	9,049
			Pass		-		-		-		-		-		-		906,537		-		906,537
	Total credit cards			$	-	$	-	$	-	$	-	$	-	$	-	$	915,586	$	-	$	915,586

		HELOCs
			Substandard	$	-	$	-	$	-	$	-	$	-	$	2,928	$	23	$	814	$	3,765
			Loss		-		-		-		-		-		161		-		1,345		1,506
			Pass		-		-		-		-		-		10,512		43,770		17,522		71,804
	Total HELOCs			$	-	$	-	$	-	$	-	$	-	$	13,601	$	43,793	$	19,681	$	77,075

		Personal
			Substandard	$	630	$	1,140	$	714	$	2,112	$	867	$	13,572	$	-	$	1,321	$	20,356
			Loss		-		5		62		3		3		57		-		-		130
			Pass		243,886		560,986		181,582		224,466		83,895		159,433		-		34,047		1,488,295
	Total Personal			$	244,516	$	562,131	$	182,358	$	226,581	$	84,765	$	173,062	$	-	$	35,368	$	1,508,781

		Auto
			Substandard	$	-	$	5,973	$	8,556	$	9,371	$	4,900	$	3,373	$	-	$	-	$	32,173
			Loss		-		32		33		58		16		14		-		-		153
			Pass		311,670		1,174,172		756,985		580,986		373,406		200,617		-		-		3,397,836
	Total Auto			$	311,670	$	1,180,177	$	765,574	$	590,415	$	378,322	$	204,004	$	-	$	-	$	3,430,162

		Other consumer
			Substandard	$	-	$	-	$	110	$	20	$	537	$	7	$	11,122	$	-	$	11,796
			Loss		-		-		-		-		389		-		-		-		389
			Pass		6,302		22,933		8,908		8,523		5,196		4,352		62,690		-		118,904
	Total Other consumer			$	6,302	$	22,933	$	9,018	$	8,543	$	6,122	$	4,359	$	73,812	$	-	$	131,089
Total Popular Inc.				$	1,721,198	$	6,452,011	$	3,913,429	$	2,962,598	$	2,206,660	$	9,900,163	$	2,377,082	$	55,049	$	29,588,190

December 31, 2021
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2021		2020		2019		2018		2017		Prior Years						Total
Puerto Rico
	Commercial:
		Commercial multi-family
			Watch	$	-	$	-	$	-	$	-	$	-	$	4,485	$	-	$	-	$	4,485
			Special mention		-		-		-		-		-		3,025		-		-		3,025
			Substandard		-		-		982		-		-		6,257		100		-		7,339
			Pass		24,936		21,288		34,840		25,311		2,066		31,468		11		-		139,920
		Total commercial multi-family		$	24,936	$	21,288	$	35,822	$	25,311	$	2,066	$	45,235	$	111	$	-	$	154,769

		Commercial real estate non-owner occupied
			Watch	$	100,465	$	228,852	$	25,443	$	137,044	$	2,406	$	205,304	$	3,237	$	-	$	702,751
			Special Mention		18,509		12,563		7,271		-		4,608		24,056		-		-		67,007
			Substandard		30,155		27,790		24,200		25,456		2,770		72,407		-		-		182,778
			Pass		513,087		88,662		88,353		37,999		42,522		557,052		9,712		-		1,337,387
		Total commercial real estate non-owner occupied		$	662,216	$	357,867	$	145,267	$	200,499	$	52,306	$	858,819	$	12,949	$	-	$	2,289,923

		Commercial real estate owner occupied
			Watch	$	8,393	$	8,612	$	8,972	$	6,958	$	3,039	$	121,716	$	-	$	-	$	157,690
			Special Mention		5,573		857		7,598		1,427		2,449		103,472		-		-		121,376
			Substandard		6,960		1,028		1,646		35,529		1,869		113,288		-		-		160,320
			Doubtful		-		-		-		-		76		612		-		-		688
			Pass		238,533		198,442		44,943		23,112		32,585		429,651		16,389		-		983,655
		Total commercial real estate owner occupied		$	259,459	$	208,939	$	63,159	$	67,026	$	40,018	$	768,739	$	16,389	$	-	$	1,423,729

	Commercial and industrial
		Watch	$	186,529	$	12,542	$	21,536	$	103,835	$	14,577	$	90,776	$	108,183	$	-	$	537,978
		Special Mention		7,380		9,936		14,856		28,473		1,012		28,448		60,397		-		150,502
		Substandard		2,190		1,091		3,041		35,826		66,771		45,168		38,003		-		192,090
		Doubtful		-		-		-		-		-		62		-		-		62
		Pass		843,661		335,369		275,357		84,084		72,580		333,869		702,896		-		2,647,816
	Total commercial and industrial		$	1,039,760	$	358,938	$	314,790	$	252,218	$	154,940	$	498,323	$	909,479	$	-	$	3,528,448

Construction
		Substandard		-	$	-	$	485	$	-	$	-	$	-	$	-	$	-		485
		Pass		21,596		41,622		1,148		-		-		-		22,260		-		86,626
Total construction			$	21,596	$	41,622	$	1,633	$	-	$	-	$	-	$	22,260	$	-	$	87,111

Mortgage
		Substandard	$	-	$	954	$	5,212	$	5,613	$	4,310	$	122,690	$	-	$	-	$	138,779
		Pass		463,742		304,780		223,464		265,239		194,982		4,660,880		-		-		6,113,087
Total mortgage			$	463,742	$	305,734	$	228,676	$	270,852	$	199,292	$	4,783,570	$	-	$	-	$	6,251,866

Leasing
		Substandard	$	124	$	618	$	880	$	613	$	613	$	235	$	-	$	-	$	3,083
		Loss		-		-		-		1		16		2		-		-		19
		Pass		613,452		328,085		222,770		133,112		62,881		17,917		-		-		1,378,217
Total leasing			$	613,576	$	328,703	$	223,650	$	133,726	$	63,510	$	18,154	$	-	$	-	$	1,381,319

December 31, 2021
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2021		2020		2019		2018		2017		Prior Years						Total
Puerto Rico
	Consumer:
		Credit cards
			Substandard	$	-	$	-	$	-	$	-	$	-	$	-	$	8,577	$	-	$	8,577
			Pass		-		-		-		-		-		-		911,274		-		911,274
	Total credit cards			$	-	$	-	$	-	$	-	$	-	$	-	$	919,851	$	-	$	919,851

		HELOCs
			Substandard	$	-	$	-	$	-	$	-	$	-	$	-	$	23	$	-	$	23
			Pass		-		-		-		-		-		-		3,548		-		3,548
	Total HELOCs			$	-	$	-	$	-	$	-	$	-	$	-	$	3,571	$	-	$	3,571

		Personal
			Substandard	$	426	$	610	$	2,105	$	866	$	936	$	15,680	$	-	$	1,385	$	22,008
			Loss		30		2		3		-		-		3		-		-		38
			Pass		539,604		197,652		227,328		91,341		53,630		120,065		-		36,394		1,266,014
	Total Personal			$	540,060	$	198,264	$	229,436	$	92,207	$	54,566	$	135,748	$	-	$	37,779	$	1,288,060

		Auto
			Substandard	$	3,080	$	7,520	$	9,498	$	4,739	$	2,210	$	1,422	$	-	$	-	$	28,469
			Loss		42		11		-		-		-		-		-		-		53
			Pass		1,259,800		808,339		637,300		420,293		177,104		80,829		-		-		3,383,665
	Total Auto			$	1,262,922	$	815,870	$	646,798	$	425,032	$	179,314	$	82,251	$	-	$	-	$	3,412,187

		Other consumer
			Substandard	$	-	$	114	$	21	$	487	$	-	$	135	$	11,250	$	-	$	12,007
			Loss		-		-		-		579		-		34		-		-		613
			Pass		24,845		9,781		9,348		5,610		3,914		947		57,483		-		111,928
	Total Other consumer			$	24,845	$	9,895	$	9,369	$	6,676	$	3,914	$	1,116	$	68,733	$	-	$	124,548
Total Puerto Rico				$	4,913,112	$	2,647,120	$	1,898,600	$	1,473,547	$	749,926	$	7,191,955	$	1,953,343	$	37,779	$	20,865,382

December 31, 2021
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2021		2020		2019		2018		2017		Prior Years						Total
Popular U.S.
	Commercial:
		Commercial multi-family
			Watch	$	8,600	$	41,348	$	56,229	$	20,682	$	37,343	$	48,753	$	-	$	-	$	212,955
			Special mention		-		3,752		9,013		30,244		11,071		28,297		-		-		82,377
			Substandard		-		-		67,149		12,748		-		18,644		-		-		98,541
			Pass		422,613		241,805		201,298		144,534		46,809		352,724		4,205		-		1,413,988
		Total commercial multi-family		$	431,213	$	286,905	$	333,689	$	208,208	$	95,223	$	448,418	$	4,205	$	-	$	1,807,861

		Commercial real estate non-owner occupied
			Watch	$	12,716	$	22,109	$	42,067	$	56,576	$	28,604	$	154,289	$	780	$	-	$	317,141
			Special Mention		2,939		-		3,205		7,025		10,573		15,569		-		-		39,311
			Substandard		-		756		6,405		14,544		11,384		60,323		-		-		93,412
			Pass		543,667		356,071		156,925		211,432		250,516		346,606		8,386		-		1,873,603
		Total commercial real estate non-owner occupied		$	559,322	$	378,936	$	208,602	$	289,577	$	301,077	$	576,787	$	9,166	$	-	$	2,323,467

		Commercial real estate owner occupied
			Watch	$	-	$	239	$	7,825	$	8,150	$	1,676	$	17,132	$	4,222	$	-	$	39,244
			Special Mention		-		-		-		-		-		1,800		-		-		1,800
			Substandard		-		-		1,148		2,878		-		20,841		-		-		24,867
			Pass		129,898		46,737		34,355		23,845		26,236		63,463		3,928		-		328,462
		Total commercial real estate owner occupied		$	129,898	$	46,976	$	43,328	$	34,873	$	27,912	$	103,236	$	8,150	$	-	$	394,373

	Commercial and industrial
		Watch	$	3,747	$	4,667	$	4,292	$	9,273	$	5	$	1,530	$	3,925	$	-	$	27,439
		Special Mention		2,504		7,203		670		481		59		215		8,177		-		19,309
		Substandard		537		97		4,559		495		168		1,890		159		-		7,905
		Loss		262		58		108		17		51		191		-		-		687
		Pass		273,254		339,564		211,695		191,086		115,146		339,336		284,710		-		1,754,791
	Total commercial and industrial		$	280,304	$	351,589	$	221,324	$	201,352	$	115,429	$	343,162	$	296,971	$	-	$	1,810,131

Construction
		Watch	$	-	$	14,300	$	23,547	$	28,757	$	34,205	$	-	$	-	$	-	$	100,809
		Special Mention		-		-		-		-		-		13,622		-		-		13,622
		Substandard		-		-		-		15,438		10,231		-		-		-		25,669
		Pass		130,587		136,045		165,105		13,634		36,500		7,138		-		-		489,009
Total construction			$	130,587	$	150,345	$	188,652	$	57,829	$	80,936	$	20,760	$	-	$	-	$	629,109

Mortgage
		Substandard	$	-	$	4,338	$	3,894	$	967	$	217	$	12,680	$	-	$	-	$	22,096
		Pass		326,641		266,212		215,071		61,986		6,376		276,948		-		-		1,153,234
Total mortgage			$	326,641	$	270,550	$	218,965	$	62,953	$	6,593	$	289,628	$	-	$	-	$	1,175,330

December 31, 2021
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2021		2020		2019		2018		2017		Prior Years						Total
Popular U.S.
	Consumer:
		Credit cards
			Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	10	$	-	$	10
	Total credit cards			$	-	$	-	$	-	$	-	$	-	$	-	$	10	$	-	$	10

		HELOCs
			Substandard	$	-	$	-	$	-	$	-	$	-	$	3,006	$	-	$	935	$	3,941
			Loss		-		-		-		-		-		207		-		1,258		1,465
			Pass		-		-		-		-		-		11,423		38,267		20,195		69,885
	Total HELOCs			$	-	$	-	$	-	$	-	$	-	$	14,636	$	38,267	$	22,388	$	75,291

		Personal
			Substandard	$	72	$	81	$	250	$	73	$	17	$	163	$	2	$	-	$	658
			Loss		-		-		4		-		-		19		-		-		23
			Pass		75,538		19,411		43,346		7,418		2,802		5,625		124		-		154,264
	Total Personal			$	75,610	$	19,492	$	43,600	$	7,491	$	2,819	$	5,807	$	126	$	-	$	154,945

		Other consumer
			Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	4,658	$	-	$	4,658
	Total Other consumer			$	-	$	-	$	-	$	-	$	-	$	-	$	4,658	$	-	$	4,658
Total Popular U.S.				$	1,933,575	$	1,504,793	$	1,258,160	$	862,283	$	629,989	$	1,802,434	$	361,553	$	22,388	$	8,375,175

December 31, 2021
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2021		2020		2019		2018		2017		Prior Years						Total
Popular, Inc.
	Commercial:
		Commercial multi-family
			Watch	$	8,600	$	41,348	$	56,229	$	20,682	$	37,343	$	53,238	$	-	$	-	$	217,440
			Special mention		-		3,752		9,013		30,244		11,071		31,322		-		-		85,402
			Substandard		-		-		68,131		12,748		-		24,901		100		-		105,880
			Pass		447,549		263,093		236,138		169,845		48,875		384,192		4,216		-		1,553,908
		Total commercial multi-family		$	456,149	$	308,193	$	369,511	$	233,519	$	97,289	$	493,653	$	4,316	$	-	$	1,962,630

		Commercial real estate non-owner occupied
			Watch	$	113,181	$	250,961	$	67,510	$	193,620	$	31,010	$	359,593	$	4,017	$	-	$	1,019,892
			Special Mention		21,448		12,563		10,476		7,025		15,181		39,625		-		-		106,318
			Substandard		30,155		28,546		30,605		40,000		14,154		132,730		-		-		276,190
			Pass		1,056,754		444,733		245,278		249,431		293,038		903,658		18,098		-		3,210,990
		Total commercial real estate non-owner occupied		$	1,221,538	$	736,803	$	353,869	$	490,076	$	353,383	$	1,435,606	$	22,115	$	-	$	4,613,390

		Commercial real estate owner occupied
			Watch	$	8,393	$	8,851	$	16,797	$	15,108	$	4,715	$	138,848	$	4,222	$	-	$	196,934
			Special Mention		5,573		857		7,598		1,427		2,449		105,272		-		-		123,176
			Substandard		6,960		1,028		2,794		38,407		1,869		134,129		-		-		185,187
			Doubtful		-		-		-		-		76		612		-		-		688
			Pass		368,431		245,179		79,298		46,957		58,821		493,114		20,317		-		1,312,117
		Total commercial real estate owner occupied		$	389,357	$	255,915	$	106,487	$	101,899	$	67,930	$	871,975	$	24,539	$	-	$	1,818,102

		Commercial and industrial
			Watch	$	190,276	$	17,209	$	25,828	$	113,108	$	14,582	$	92,306	$	112,108	$	-	$	565,417
			Special Mention		9,884		17,139		15,526		28,954		1,071		28,663		68,574		-		169,811
			Substandard		2,727		1,188		7,600		36,321		66,939		47,058		38,162		-		199,995
			Doubtful		-		-		-		-		-		62		-		-		62
			Loss		262		58		108		17		51		191		-		-		687
			Pass		1,116,915		674,933		487,052		275,170		187,726		673,205		987,606		-		4,402,607
		Total commercial and industrial		$	1,320,064	$	710,527	$	536,114	$	453,570	$	270,369	$	841,485	$	1,206,450	$	-	$	5,338,579

December 31, 2021
			Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year
(In thousands)				2021		2020		2019		2018		2017		Prior Years						Total
Popular, Inc.

	Construction
		Watch	$	-	$	14,300	$	23,547	$	28,757	$	34,205	$	-	$	-	$	-	$	100,809
		Special Mention		-		-		-		-		-		13,622		-		-		13,622
		Substandard		-		-		485		15,438		10,231		-		-		-		26,154
		Pass		152,183		177,667		166,253		13,634		36,500		7,138		22,260		-		575,635
	Total construction		$	152,183	$	191,967	$	190,285	$	57,829	$	80,936	$	20,760	$	22,260	$	-	$	716,220

	Mortgage
		Substandard	$	-	$	5,292	$	9,106	$	6,580	$	4,527	$	135,370	$	-	$	-	$	160,875
		Pass		790,383		570,992		438,535		327,225		201,358		4,937,828		-		-		7,266,321
	Total mortgage		$	790,383	$	576,284	$	447,641	$	333,805	$	205,885	$	5,073,198	$	-	$	-	$	7,427,196

	Leasing
		Substandard	$	124	$	618	$	880	$	613	$	613	$	235	$	-	$	-	$	3,083
		Loss		-		-		-		1		16		2		-		-		19
		Pass		613,452		328,085		222,770		133,112		62,881		17,917		-		-		1,378,217
	Total leasing		$	613,576	$	328,703	$	223,650	$	133,726	$	63,510	$	18,154	$	-	$	-	$	1,381,319

December 31, 2021
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2021		2020		2019		2018		2017		Prior Years						Total
Popular, Inc.
	Consumer:
		Credit cards
			Substandard	$	-	$	-	$	-	$	-	$	-	$	-	$	8,577	$	-	$	8,577
			Pass		-		-		-		-		-		-		911,284		-		911,284
	Total credit cards			$	-	$	-	$	-	$	-	$	-	$	-	$	919,861	$	-	$	919,861

		HELOCs
			Substandard	$	-	$	-	$	-	$	-	$	-	$	3,006	$	23	$	935	$	3,964
			Loss		-		-		-		-		-		207		-		1,258		1,465
			Pass		-		-		-		-		-		11,423		41,815		20,195		73,433
	Total HELOCs			$	-	$	-	$	-	$	-	$	-	$	14,636	$	41,838	$	22,388	$	78,862

		Personal
			Substandard	$	498	$	691	$	2,355	$	939	$	953	$	15,843	$	2	$	1,385	$	22,666
			Loss		30		2		7		-		-		22		-		-		61
			Pass		615,142		217,063		270,674		98,759		56,432		125,690		124		36,394		1,420,278
	Total Personal			$	615,670	$	217,756	$	273,036	$	99,698	$	57,385	$	141,555	$	126	$	37,779	$	1,443,005

		Auto
			Substandard	$	3,080	$	7,520	$	9,498	$	4,739	$	2,210	$	1,422	$	-	$	-	$	28,469
			Loss		42		11		-		-		-		-		-		-		53
			Pass		1,259,800		808,339		637,300		420,293		177,104		80,829		-		-		3,383,665
	Total Auto			$	1,262,922	$	815,870	$	646,798	$	425,032	$	179,314	$	82,251	$	-	$	-	$	3,412,187

		Other consumer
			Substandard	$	-	$	114	$	21	$	487	$	-	$	135	$	11,250	$	-	$	12,007
			Loss		-		-		-		579		-		34		-		-		613
			Pass		24,845		9,781		9,348		5,610		3,914		947		62,141		-		116,586
	Total Other consumer			$	24,845	$	9,895	$	9,369	$	6,676	$	3,914	$	1,116	$	73,391	$	-	$	129,206
Total Popular Inc.				$	6,846,687	$	4,151,913	$	3,156,760	$	2,335,830	$	1,379,915	$	8,994,389	$	2,314,896	$	60,167	$	29,240,557

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, lower-of-cost-or-market 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)			2022		2021
Mortgage servicing fees, net of fair value adjustments:
	Mortgage servicing fees	$	9,323	$	9,715
	Mortgage servicing rights fair value adjustments		1,088		512
Total mortgage servicing fees, net of fair value adjustments			10,411		10,227
Net (loss) gain on sale of loans, including valuation on loans held-for-sale			(1,534)		4,975
Trading account profit:
	Unrealized gains on outstanding derivative positions		2		-
	Realized profit on closed derivative positions		4,135		2,502
Total trading account profit			4,137		2,502
Losses on repurchased loans, including interest advances			(149)		(361)
Total mortgage banking activities		$	12,865	$	17,343

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, 2022 and 2021 because they did not contain any credit recourse arrangements. During the quarter ended March 31, 2022, the Corporation recorded a net loss of $1.1 million (March 31, 2021 - a net gain of $3.7 million) related to the residential mortgage loans securitized.

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, 2022 and 2021:

		Proceeds Obtained During the Quarter Ended March 31, 2022
(In thousands)	Level 1		Level 2		Level 3		Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA	$	-	$	77,894	$	-	$	77,894
Mortgage-backed securities - FNMA		-		57,690		-		57,690
Mortgage-backed securities - FHLMC		-		7,118		-		7,118
Total trading account debt securities	$	-	$	142,702	$	-	$	142,702
Mortgage servicing rights	$	-	$	-	$	2,409	$	2,409
Total	$	-	$	142,702	$	2,409	$	145,111

		Proceeds Obtained During the Quarter Ended March 31, 2021
(In thousands)	Level 1		Level 2		Level 3		Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA	$	-	$	101,988	$	-	$	101,988
Mortgage-backed securities - FNMA		-		86,280		-		86,280
Total trading account debt securities	$	-	$	188,268	$	-	$	188,268
Mortgage servicing rights	$	-	$	-	$	2,809	$	2,809
Total	$	-	$	188,268	$	2,809	$	191,077

During the quarter ended March 31, 2022, the Corporation retained servicing rights on whole loan sales involving approximately $19 million in principal balance outstanding (March 31, 2021 - $65 million), with net realized gains of approximately $0.2 million (March 31, 2021 - gains of $1.3 million). All loan sales performed during the quarters ended March 31, 2022 and 2021 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, 2022 and 2021.

Residential MSRs
(In thousands)	March 31, 2022		March 31, 2021
Fair value at beginning of period	$	121,570	$	118,395
Additions		2,771		3,636
Changes due to payments on loans^[1]		(2,983)		(4,094)
Reduction due to loan repurchases		(252)		(556)
Changes in fair value due to changes in valuation model inputs or assumptions		4,252		5,162
Fair value at end of period^[2]	$	125,358	$	122,543
[1] Represents changes due to collection / realization of expected cash flows over time.
[2] At March 31, 2022, PB had MSRs amounting to $1.8 million (March 31, 2021 - $1.0 million).

Residential mortgage loans serviced for others were $11.9 billion at March 31, 2022 (December 31, 2021 - $12.1 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. At March 31, 2022, those weighted average mortgage servicing fees were 0.31% (March 31, 2021 - 0.30%). 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, 2022 and 2021 were as follows:

	Quarters ended
	March 31, 2022				March 31, 2021
	BPPR		PB		BPPR		PB
Prepayment speed	5.2	%	10.0	%	8.8	%	21.4	%
Weighted average life (in years)	9.4		6.9		7.2		3.5
Discount rate (annual rate)	10.3	%	10.0	%	10.5	%	11.0	%

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:

		Originated MSRs						Purchased MSRs
		March 31,			December 31,			March 31,			December 31,
(In thousands)		2022			2021			2022			2021
Fair value of servicing rights		$	40,155		$	40,058		$	85,203		$	81,512
Weighted average life (in years)			5.9			7.1			6.2			7.5
Weighted average prepayment speed (annual rate)			7.5	%		7.7	%		7.3	%		7.6	%
	Impact on fair value of 10% adverse change	$	(598)		$	(1,500)		$	(2,186)		$	(1,486)
	Impact on fair value of 20% adverse change	$	(1,376)		$	(2,359)		$	(4,091)		$	(3,495)
Weighted average discount rate (annual rate)			11.2	%		11.2	%		11.0	%		11.0	%
	Impact on fair value of 10% adverse change	$	(1,326)		$	(2,079)		$	(3,726)		$	(2,731)
	Impact on fair value of 20% adverse change	$	(2,754)		$	(3,452)		$	(6,991)		$	(5,832)

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, 2022, the Corporation serviced $0.7 billion in residential mortgage loans with credit recourse to the Corporation (December 31, 2021 - $0.7 billion). 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, 2022, the Corporation had recorded $13 million in mortgage loans on its Consolidated Statements of Financial Condition related to this buy-back option program (December 31, 2021 - $13 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, 2022, the Corporation repurchased approximately $19 million (March 31, 2021 - $44 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 COVID-19 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.

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, 2022 and 2021.

		For the quarter ended March 31, 2022
		OREO		OREO
(In thousands)		Commercial/Construction		Mortgage		Total
Balance at beginning of period	$	15,017	$	70,060	$	85,077
Write-downs in value		(364)		(328)		(692)
Additions		2,687		19,240		21,927
Sales		(1,980)		(13,543)		(15,523)
Other adjustments		108		(330)		(222)
Ending balance	$	15,468	$	75,099	$	90,567

		For the quarter ended March 31, 2021
		OREO		OREO
(In thousands)		Commercial/Construction		Mortgage		Total
Balance at beginning of period	$	13,214	$	69,932	$	83,146
Write-downs in value		(307)		(970)		(1,277)
Additions		3,850		1,873		5,723
Sales		(1,672)		(13,860)		(15,532)
Ending balance	$	15,085	$	56,975	$	72,060

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, 2022		December 31, 2021
Net deferred tax assets (net of valuation allowance)	$	776,243	$	657,597
Investments under the equity method		313,420		298,988
Prepaid taxes		32,147		37,924
Other prepaid expenses		89,245		79,845
Derivative assets		24,848		26,093
Trades receivable from brokers and counterparties		60,497		65,460
Principal, interest and escrow servicing advances		49,877		53,942
Guaranteed mortgage loan claims receivable		94,401		98,001
Operating ROU assets (Note 27)		132,229		141,748
Finance ROU assets (Note 27)		19,479		13,459
Others		163,461		155,514
Total other assets	$	1,755,847	$	1,628,571

The Corporation enters in the ordinary course of business into technology hosting arrangements that are service contracts. These arrangements can include capitalizable implementation costs that are amortized during the term of the hosting arrangement. The Corporation recognizes capitalizable implementation costs related to hosting arrangements that are service contracts within Others in the table above. As of March 31, 2022, the total capitalized implementation costs amounted to $21.6 million with an accumulated amortization of $9.7 million for a net value of $11.9 million, compared to total capitalized implementation costs amounting to $18.4 million with an accumulated amortization of $8.8 million for a net value of $9.6 million as of December 31, 2021. Total amortization expense for all capitalized implementation costs of hosting arrangements that are service contracts for the quarter ended March 31, 2022 was $0.9 million (March 31, 2021 - $0.8 million).

Note 13 – Goodwill and other intangible assets

Goodwill

There were no changes in the carrying amount of goodwill during the quarters ended March 31, 2022 and 2021.

The following tables present the gross amount of goodwill and accumulated impairment losses by reportable segments:


March 31, 2022
	Balance at				Balance at
	March 31,		Accumulated		March 31,
	2022		impairment		2022
(In thousands)	(gross amounts)		losses		(net amounts)
Banco Popular de Puerto Rico	$	324,049	$	3,801	$	320,248
Popular U.S.		564,456		164,411		400,045
Total Popular, Inc.	$	888,505	$	168,212	$	720,293

December 31, 2021
	Balance at				Balance at
	December 31,		Accumulated		December 31,
	2021		impairment		2021
(In thousands)	(gross amounts)		losses		(net amounts)
Banco Popular de Puerto Rico	$	324,049	$	3,801	$	320,248
Popular U.S.		564,456		164,411		400,045
Total Popular, Inc.	$	888,505	$	168,212	$	720,293

Other Intangible Assets

At March 31, 2022 and December 31, 2021, the Corporation had $0.7 million of identifiable intangible assets with indefinite useful lives.

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, 2022
	Core deposits	$	12,810	$	9,074	$	3,736
	Other customer relationships		14,286		3,454		10,832
Total other intangible assets		$	27,096	$	12,528	$	14,568
December 31, 2021
	Core deposits	$	12,810	$	8,754	$	4,056
	Other customer relationships		14,286		2,883		11,403
Total other intangible assets		$	27,096	$	11,637	$	15,459

During the quarter ended March 31, 2022, the Corporation recognized $0.9 million in amortization expense related to other intangible assets with definite useful lives (March 31, 2021 - $1.1 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 2022	$	2,384
Year 2023		3,179
Year 2024		2,938
Year 2025		1,750
Year 2026		1,440
Later years		2,877

Note 14 – Deposits

Total interest bearing deposits as of the end of the periods presented consisted of:

(In thousands)		March 31, 2022		December 31, 2021
Savings accounts		$	16,209,748	$	15,871,998
NOW, money market and other interest bearing demand deposits			23,465,192		28,736,459
Total savings, NOW, money market and other interest bearing demand deposits			39,674,940		44,608,457
Certificates of deposit:
	Under $250,000		4,116,459		4,086,059
	$250,000 and over		2,974,230		2,626,090
Total certificates of deposit			7,090,689		6,712,149
Total interest bearing deposits		$	46,765,629	$	51,320,606

A summary of certificates of deposits by maturity at March 31, 2022 follows:

(In thousands)
2022	$	3,914,729
2023		1,112,216
2024		747,887
2025		573,506
2026		508,775
2027 and thereafter		233,576
Total certificates of deposit	$	7,090,689

At March 31, 2022, the Corporation had brokered deposits amounting to $ 0.9 billion (December 31, 2021 - $ 0.8 billion).

The aggregate amount of overdrafts in demand deposit accounts that were reclassified to loans was $6 million at March 31, 2022 (December 31, 2021 - $6 million)

At March 31, 2022, public sector deposits amounted to $14.8 billion. The receipt by the Puerto Rico Government of additional COVID-19 pandemic and hurricane recovery related Federal assistance, and seasonal tax collections, could increase public deposit balances at BPPR in the near term. However, 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 COVID-19 pandemic and hurricane recovery federal assistance is distributed and the financial condition, liquidity and cash management practices of the Puerto Rico Government and its instrumentalities. During the quarter ended March 31, 2022, approximately $10.1 billion were withdrawn from the public sector deposits held by the Bank to make debt service payments and other administrative payments pursuant to the Plan of Adjustment for Puerto Rico.

Note 15 – Borrowings

Assets sold under agreements to repurchase

Assets sold under agreements to repurchase amounted to $73 million at March 31, 2022 and $92 million December 31, 2021.

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, 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, 2022		December 31, 2021
			Repurchase		Repurchase
(In thousands)			liability		liability
U.S. Treasury securities
	Within 30 days	$	14,525	$	19,538
	After 30 to 90 days		14,975		30,295
	After 90 days		32,867		29,036
Total U.S. Treasury securities			62,367		78,869
Mortgage-backed securities
	Within 30 days		2,763		11,733
	After 90 days		7,395		722
Total mortgage-backed securities			10,158		12,455
Collateralized mortgage obligations
	Within 30 days		294		279
Total collateralized mortgage obligations			294		279
Total		$	72,819	$	91,603

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, 2022, compared to $75 million in FHLB Advances at December 31, 2021.

Notes Payable

The following table presents the composition of notes payable at March 31, 2022 and December 31, 2021.

(In thousands)	March 31, 2022		December 31, 2021
Advances with the FHLB with maturities ranging from 2022 through 2029 paying interest at monthly fixed rates ranging from 0.39% to 3.18%	$	491,429	$	492,429
Unsecured senior debt securities maturing on 2023 paying interest semiannually at a fixed rate of 6.125%, net of debt issuance costs of $1,841		298,159		297,842
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 $335		198,299		198,292
Total notes payable	$	987,887	$	988,563
Note: Refer to the Corporation's 2021 Form 10-K for rates information at December 31, 2021.

A breakdown of borrowings by contractual maturities at March 31, 2022 is included in the table below.

		Assets sold under
(In thousands)		agreements to repurchase		Notes payable	Total
2022	$	72,819	$	102,148	$	174,967
2023		-		341,420		341,420
2024		-		91,943		91,943
2025		-		139,920		139,920
2026		-		74,500		74,500
Later years		-		237,956		237,956
Total borrowings	$	72,819	$	987,887	$	1,060,706

At March 31, 2022 and December 31, 2021, the Corporation had FHLB borrowing facilities whereby the Corporation could borrow up to $2.9 billion and $3.0 billion, respectively, of which $0.5 billion and $0.6 billion, respectively, were used at each period. In addition, at March 31, 2022 and December 31, 2021, the Corporation had placed $0.5 billion and $1.2 billion, respectively, of the available FHLB credit facility as collateral for municipal letters of credit to secure deposits. The FHLB borrowing facilities are collateralized with loans held-in-portfolio, and do not have restrictive covenants or callable features.

Also, at March 31, 2022, the Corporation has a borrowing facility at the discount window of the Federal Reserve Bank of New York amounting to $1.3 billion (2021 - $1.3 billion), which remained unused at March 31, 2022 and December 31, 2021. The facility is a collateralized source of credit that is highly reliable even under difficult market conditions.

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, 2022		December 31, 2021
Accrued expenses	$	285,700	$	308,594
Accrued interest payable		26,121		33,227
Accounts payable		99,866		91,804
Dividends payable		42,074		35,937
Trades payable		10,710		13,789
Liability for GNMA loans sold with an option to repurchase		12,570		12,806
Reserves for loan indemnifications		11,148		12,639
Reserve for operational losses		41,836		43,886
Operating lease liabilities (Note 27)		144,484		154,114
Finance lease liabilities (Note 27)		25,665		19,719
Pension benefit obligation		8,496		8,778
Postretirement benefit obligation		159,940		161,988
Others		62,225		70,967
Total other liabilities	$	930,835	$	968,248

Note 17 – Stockholders’ equity

As of March 31, 2022, stockholder’s equity totaled $4.7 billion. During the quarter ended March 31, 2022, the Corporation declared cash dividends of $0.55 (2021 - $0.40) per common share amounting to $42.0 million (2021 - $33.8 million). The quarterly dividend declared to stockholders of record as of the close of business on March 15, 2022 was paid on April 1, 2022.

Accelerated share repurchase transaction (“ASR”)

On March 1, 2022, the Corporation announced that on February 28, 2022 it entered into an accelerated share repurchase agreement (the “ASR Agreement”) to repurchase an aggregate of $400 million of Corporation’s common stock. Under the terms of the ASR Agreement, on March 2, 2022 the Corporation made an initial payment of $400 million and received an initial delivery of 3,483,942 shares of Corporation’s Common Stock (the “Initial Shares”). The transaction was accounted for as a treasury stock transaction. Furthermore, as a result of the receipt of the Initial Shares, the Corporation recognized in shareholders’ equity approximately $320 million in treasury stock and $80 million as a reduction of capital surplus. Upon the final settlement of the ASR Agreement, the Corporation expects to further adjust its treasury stock and capital surplus accounts to reflect the final delivery or receipt of cash or shares, which will depend on the volume-weighted average price of the Corporation’s common stock during the term of the ASR Agreement, less a discount. The final settlement of the ASR Agreement is expected to occur no later than the third quarter of 2022.

Note 18 – Other comprehensive loss

The following table presents changes in accumulated other comprehensive loss by component for the quarters ended March 31, 2022 and 2021.

	Changes in Accumulated Other Comprehensive Loss by Component [1]
		Quarters ended March 31,
(In thousands)		2022		2021
Foreign currency translation	Beginning Balance	$	(67,307)	$	(71,254)
	Other comprehensive (loss) income		(2,858)		569
	Net change		(2,858)		569
	Ending balance	$	(70,165)	$	(70,685)
Adjustment of pension and postretirement benefit plans	Beginning Balance	$	(158,994)	$	(195,056)
	Other comprehensive loss before reclassifications		1,269		-
	Amounts reclassified from accumulated other comprehensive loss for amortization of net losses		2,444		3,242
	Net change		3,713		3,242
	Ending balance	$	(155,281)	$	(191,814)
Unrealized net holding (losses) gains on debt securities	Beginning Balance	$	(96,120)	$	460,900
	Other comprehensive loss		(1,075,830)		(369,945)
	Net change		(1,075,830)		(369,945)
	Ending balance	$	(1,171,950)	$	90,955
Unrealized net gains (losses) on cash flow hedges	Beginning Balance	$	(2,648)	$	(4,599)
	Other comprehensive income before reclassifications		3,139		1,357
	Amounts reclassified from accumulated other comprehensive gains (losses)		(333)		48
	Net change		2,806		1,405
	Ending balance	$	158	$	(3,194)
	Total	$	(1,397,238)	$	(174,738)
[1] All amounts presented are net of tax.

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss during the quarters ended March 31, 2022 and 2021.

		Reclassifications Out of Accumulated Other Comprehensive Loss
		Affected Line Item in the	Quarters ended March 31,
(In thousands)		Consolidated Statements of Operations	2022		2021

Adjustment of pension and postretirement benefit plans
	Amortization of net losses	Other operating expenses	$	(3,911)	$	(5,190)
		Total before tax		(3,911)		(5,190)
		Income tax benefit		1,467		1,948
		Total net of tax	$	(2,444)	$	(3,242)
Unrealized net gains (losses) on cash flow hedges
	Forward contracts	Mortgage banking activities	$	978	$	370
	Interest rate swaps	Other operating income	$	(279)	$	(279)
		Total before tax		699		91
		Income tax expense		(366)		(139)
		Total net of tax	$	333	$	(48)
		Total reclassification adjustments, net of tax	$	(2,111)	$	(3,290)

Note 19 – Guarantees

At March 31, 2022 the Corporation had a liability of $0.1 million (December 31, 2021 - $0.2 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, 2022, the Corporation serviced $0.7 billion (December 31, 2021 - $0.7 billion) 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, 2022, the Corporation repurchased approximately $3 million of unpaid principal balance in mortgage loans subject to the credit recourse provisions (March 31, 2021 - $8 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, 2022 the Corporation’s liability established to cover the estimated credit loss exposure related to loans sold or serviced with credit recourse amounted to $10 million (December 31, 2021 - $12 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, 2022 and 2021.

		Quarters ended March 31,
(In thousands)		2022		2021
Balance as of beginning of period	$	11,800	$	22,484
Provision for recourse liability		46		817
Net charge-offs		(1,511)		(3,057)
Balance as of end of period	$	10,335	$	20,244

When the Corporation sells or securitizes mortgage loans, it generally makes customary representations and warranties regarding the characteristics of the loans sold. To the extent the loans do not meet specified characteristics, the Corporation may be required to repurchase such loans or indemnify for losses and bear any subsequent loss related to the loans. During the quarter ended March 31, 2022 the Corporation purchased $927 thousand under representation and warranty arrangements. There were no repurchases of loans under representation and warranty arrangements during the quarter ended March 31, 2021. A substantial amount of these loans reinstate to performing status or have mortgage insurance, and thus the ultimate losses on the loans are not deemed significant.

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. The following table presents the changes in the Corporation’s liability for estimated losses associated with indemnifications and representations and warranties related to loans sold by BPPR for the quarters ended March 31, 2022 and 2021.

		Quarters ended March 31,
(In thousands)		2022		2021
Balance as of beginning of period	$	839	$	2,297
Provision (benefit) for representation and warranties		699		(119)
Net charge-offs		(725)		-
Balance as of end of period	$	813	$	2,178

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, 2022, the Corporation serviced $11.9 billion in mortgage loans for third-parties, including the loans serviced with credit recourse (December 31, 2021 - $12.1 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, 2022, the outstanding balance of funds advanced by the Corporation under such mortgage loan servicing agreements was approximately $50 million (December 31, 2021 - $54 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, 2022 and December 31, 2021. In addition, at March 31, 2022 and December 31, 2021, PIHC fully and unconditionally guaranteed on a subordinated basis $193 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 2021 Form 10-K for further information on the trust preferred securities.

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, 2022		December 31, 2021
Commitments to extend credit:
	Credit card lines	$	5,480,888	$	5,382,089
	Commercial and construction lines of credit		3,977,223		3,830,601
	Other consumer unused credit commitments		248,708		250,229
Commercial letters of credit			3,640		3,260
Standby letters of credit			31,643		27,848
Commitments to originate or fund mortgage loans			113,755		95,372

At March 31, 2022 and December 31, 2021, the Corporation maintained a reserve of approximately $7.1 million and $7.9 million, respectively, for potential losses associated with unfunded loan commitments related to commercial and construction lines of credit.

Other commitments

At March 31, 2022, and December 31, 2021, the Corporation also maintained other non-credit commitments for approximately $1.0 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 a Fiscal Oversight and Management Board for Puerto Rico (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, 2022, the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities totaled $364 million, of which $346 million were outstanding ($367 million and $349 million at December 31, 2021). Of the amount outstanding, $319 million consists of loans and $27 million are securities ($319 million and $30 million at December 31, 2021). Substantially all of the amount outstanding at March 31, 2022 and March 31, 2021 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, 2022, 75% of the Corporation’s exposure to municipal loans and securities was concentrated in the municipalities of San Juan, Guaynabo, Carolina and Bayamón.

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, 2022:

(In thousands)		Investment Portfolio		Loans		Total Outstanding		Total Exposure
Central Government
After 1 to 5 years	$	16	$	-	$	16	$	16
After 5 to 10 years		1		-		1		1
After 10 years		35		-		35		35
Total Central Government		52		-		52		52
Municipalities
Within 1 year		4,440		72,065		76,505		94,694
After 1 to 5 years		13,045		67,472		80,517		80,517
After 5 to 10 years		9,530		123,507		133,037		133,037
After 10 years		230		55,257		55,487		55,487
Total Municipalities		27,245		318,301		345,546		363,735
Total Direct Government Exposure	$	27,297	$	318,301	$	345,598	$	363,787

In addition, at March 31, 2022, the Corporation had $268 million in loans insured or securities issued by Puerto Rico governmental entities but for which the principal source of repayment is non-governmental ($275 million at December 31, 2021). These included $225 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, 2021 - $232 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, 2022, $43 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, 2021 - $43 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, $1.6 billion of residential mortgages, $173 million of Small Business Administration (“SBA”) loans under the Paycheck Protection Program (“PPP”) and $67 million commercial loans were insured or guaranteed by the U.S. Government or its agencies at March 31, 2022 (compared to $1.6 billion, $353 million and $67 million, respectively, at December 31, 2021). 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 securities as described in Note 5 to the Consolidated Financial Statements.

At March 31, 2022, the Corporation has operations in the United States Virgin Islands (the “USVI”) and has approximately $70 million in direct exposure to USVI government entities (December 31, 2021 - $70 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, 2022, the Corporation has operations in the British Virgin Islands (“BVI”), which has been 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, it has a loan portfolio amounting to

approximately $218 million comprised of various retail and commercial clients, compared to a loan portfolio of $221 million at December 31, 2021.

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 the 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 $26.9 million as of March 31, 2022. 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.

BANCO POPULAR DE PUERTO RICO

Hazard Insurance Commission-Related Litigation

Popular, Inc., BPPR and Popular Insurance, LLC (the “Popular Defendants”) have been named defendants in a class action complaint captioned Pérez Díaz v. Popular, Inc., et al, filed before the Court of First Instance, Arecibo Part. The complaint originally sought damages and preliminary and permanent injunctive relief on behalf of the class against the Popular Defendants, as well as Antilles Insurance Company and MAPFRE-PRAICO Insurance Company (the “Defendant Insurance Companies”). Plaintiffs allege that the Popular Defendants have been unjustly enriched by failing to reimburse them for commissions paid by the Defendant Insurance Companies to the insurance agent and/or mortgagee for policy years when no claims were filed against their hazard insurance policies. They demand the reimbursement to the purported “class” of an estimated $400 million plus legal interest, for the “good experience” commissions allegedly paid by the Defendant Insurance Companies during the relevant time period, as well as injunctive relief seeking to enjoin the Defendant Insurance Companies from paying commissions to the insurance agent/mortgagee and ordering them to pay those fees directly to the insured. A motion for dismissal on the merits filed by the Defendant Insurance Companies was denied with a right to replead following limited targeted discovery. Each of the Puerto Rico Court of Appeals and the Puerto Rico Supreme Court denied the Popular Defendants’ request to review the lower court’s denial of the motion to dismiss. In December 2017, plaintiffs amended the complaint and, in January 2018, defendants filed an answer thereto. Separately, in October 2017, the Court entered an order whereby it broadly certified the class, after which the Popular Defendants filed a certiorari petition before the Puerto Rico Court of Appeals in relation to the class certification, which the Court declined to entertain. In November 2018 and in January 2019, plaintiffs filed voluntary dismissal petitions against MAPFRE-PRAICO Insurance Company and Antilles Insurance Company, respectively, leaving the Popular Defendants as the sole remaining defendants in the action.

In April 2019, the Court amended the class definition to limit it to individual homeowners whose residential units were subject to a mortgage from BPPR who, in turn, obtained risk insurance policies with Antilles Insurance or MAPFRE Insurance through Popular Insurance from 2002 to 2015, and who did not make insurance claims against said policies during their effective term. The Court approved in September 2020 the notice to the class, which is yet to be published.

In May 2021, the Popular Defendants filed a motion for summary judgment with respect to plaintiffs’ unjust enrichment theory of liability, reserving the right to file an additional motion for summary judgment regarding damages should the court deny the Popular Defendant’s pending motion to exclude an economic expert recently designated by Plaintiffs. Also, in May 2021, Popular, Inc. and BPPR also filed a separate motion for summary judgment alleging that, even taking as true and correct Plaintiffs’ theory of liability, Popular, Inc. and BPPR are not liable to Plaintiffs since they do not receive and are legally prohibited from receiving insurance commissions. In September 27, 2021, the Court held an oral hearing to discuss the pending motions for summary judgment. At such hearing, Plaintiffs notified they did not object the dismissal of the action with prejudice as to Popular, Inc. and BPPR, leaving Popular Insurance, LLC as the sole remaining defendant in the case.

On December 29, 2021, Popular Insurance filed a petition of certiorari to the Puerto Rico Court of Appeals, seeking review from the denial of the motion for summary judgment, which Plaintiffs timely opposed. On February 28, 2022, the Court of Appeals entered a judgment reversing the lower court’s decision, after concluding it was unable to review de novo the denial of the motion for summary judgment since such decision failed to comply with the summary judgment standard. The Court of Appeals remanded the case to the lower court with instructions to enter a summary judgment that identifies the material contested issues of facts that prevents the lower court from granting Popular’s summary judgment motion. On April 22, 2022, the Court of Appeals issued the formal mandate to the Court of First Instance.

Mortgage-Related Litigation

BPPR was named a defendant in a putative class action captioned Yiries Josef Saad Maura v. Banco Popular, et al. on behalf of residential customers of the defendant banks who have allegedly been subject to illegal foreclosures and/or loan modifications through their mortgage servicers. Plaintiffs contend that when they sought to reduce their loan payments, defendants failed to provide them with such reduced loan payments, instead subjecting them to lengthy loss mitigation processes while filing foreclosure claims against them in parallel, all in violation of the Truth In Lending Act (“TILA”), the Real Estate Settlement Procedures Act (“RESPA”), the Equal Credit Opportunity Act (“ECOA”), the Fair Credit Reporting Act (“FCRA”), the Fair Debt Collection Practices Act (“FDCPA”) and other consumer-protection laws and regulations. Plaintiffs did not include a specific amount of damages in their complaint. After waiving service of process, BPPR filed a motion to dismiss the complaint (as did most co-defendants, separately). BPPR further filed a motion to oppose class certification, which the Court granted in September 2018. In April 2019, the Court entered an Opinion and Order granting BPPR’s and several other defendants’ motions to dismiss with prejudice. Plaintiffs filed a Motion for Reconsideration in April 2019, which Popular timely opposed. In September 2019, the Court issued an Amended Opinion and Order dismissing plaintiffs’ claims against all defendants, denying the reconsideration requests and other pending motions, and issuing final judgment. In October 2019, plaintiffs filed a Motion for Reconsideration of the Court’s Amended Opinion and Order, which was denied in December 2019. In January 2020, plaintiffs filed a Notice of Appeal to the U.S. Court of Appeals for the First Circuit. Plaintiffs filed their appeal brief in July 2020, Appellees filed their brief in September 2020, and Appellants filed their reply brief in January 2021. The appeal is now fully briefed and pending resolution.

Insufficient Funds and Overdraft Fees Class Actions

In February 2020, BPPR was served with a putative class action complaint captioned Soto-Melendez v. Banco Popular de Puerto Rico, filed before the United States District Court for the District of Puerto Rico. The complaint alleges breach of contract, breach of the covenant of good faith and fair dealing and unjust enrichment due to BPPR’s purported practice of (a) assessing more than one insufficient funds fee (“NSF Fees”) on the same ACH “item” or transaction and (b) charging both NSF Fees and overdraft fees (“OD Fees”) on the same ACH item or transaction, and is filed on behalf of all persons who during the applicable statute of limitations period were charged NSF Fees and/or OD Fees pursuant to these purported practices. In April 2020, BPPR filed a motion to dismiss the case. In April 2021, the Court issued an order granting in part and denying in part BPPR’s motion to dismiss; the unjust enrichment claim was dismissed, whereas the breach of contract and covenant of good faith and fair dealing claims survived the motion.

On March 3, 2022, BPPR was also named as a defendant on a putative class action complaint captioned Orama-Caraballo v. Banco Popular, filed before the U.S. District Court for the District of Puerto Rico by the same Plaintiffs’ attorneys of the Soto-Melendez complaint. Similar to the claims set forth in the Soto-Melendez complaint, Plaintiffs allege breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment due to the bank’s purported practice of (a) assessing more than one NSF Fee on the same “item” and (b) charging both NSF Fees and OD Fees on the same “item”, but included allegations with respect to “checks” in addition to ACH payments.

During a mediation hearing held on April 5, 2022, the parties in both the Soto Melendez and Orama-Caraballo complaints reached a settlement in principle on a class-wide basis subject to final court approval. On April 28, 2022, the parties filed before the Court a notice of settlement and a request to stay the proceedings in both cases while Plaintiffs submit a motion for the preliminary approval of the class action settlement, which is expected to be filed by June 15, 2022.

Popular was also 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 alleges 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 OD Fees on transactions that, under 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 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.

On October 4, 2021, the District Court, notwithstanding that BPPR’s Motion to Dismiss remains pending resolution, held an initial scheduling conference and, thereafter, issued a trial management order where it scheduled the deadline for all discovery for November 1, 2022, the deadline for the filing of a joint pre-trial brief for June 1, 2023, and the trial for June 20 to June 30, 2023.

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 on April 4, 2022. In response to Popular’s motion, Plaintiff filed a Notice of Voluntary Dismissal on April 27, 2022. This matter is now closed.

POPULAR BANK

Employment-Related Litigation

In July 2019, Popular Bank (“PB”) was served in a putative class complaint in which it was named as a defendant along with five (5) current PB employees (collectively, the “AB Defendants”), captioned Aileen Betances, et al. v. Popular Bank, et al., filed before the Supreme Court of the State of New York (the “AB Action”). The complaint, filed by five (5) current and former PB employees, seeks to recover damages for the AB Defendants' alleged violation of local and state sexual harassment, discrimination and retaliation laws. Additionally, in July 2019, PB was served in a putative class complaint in which it was named as a defendant along with six (6) current PB employees (collectively, the “DR Defendants”), captioned Damian Reyes, et al. v. Popular Bank, et al., filed before the Supreme Court of the State of New York (the “DR Action”). The DR Action, filed by three (3) current and former PB employees, seeks to recover damages for the DR Defendants’ alleged violation of local and state discrimination and retaliation laws. Plaintiffs in both complaints are represented by the same legal counsel, and five of the six named individual defendants in the DR Action are the same named individual defendants in the AB Action. Both complaints are related, among other things, to allegations of purported sexual harassment and/or misconduct by a former PB employee as well as PB’s actions in connection thereto and seek no less than $100 million in damages each. In October 2019, PB and the other defendants filed several Motions to Dismiss. Plaintiffs opposed the motions in December 2019 and PB and the other defendants replied in January 2020. In July 2020, a hearing to discuss the

motions to dismiss filed by PB in both actions was held, at which the Court dismissed one of the causes of action included by plaintiffs in the AB Action.

In June 2021, the Court in the AB Action entered a judgment dismissing all claims except those regarding the principal plaintiff Aileen Betances against PB for retaliation, and Betances’ claim against three (3) other AB Defendants for aiding/abetting the alleged retaliation. Also, in July 2021, the Court in the DR action entered a partial judgment dismissing all claims against the individual DR Defendants, with all surviving claims being against PB and limited to local retaliation claims and local and state discrimination claims. Plaintiffs in both the AB Action and the DR Action have filed notices of appeal of both judgments. On August 11, 2021, PB and the remaining AB Defendants in the AB Action, as well as PB in the DR Action, answered the respective complaints as to the surviving claims. Discovery is ongoing.

On March 25, 2022, Plaintiffs in both the AB Action and the DR Action perfected their appeals seeking to reverse both partial judgments. Popular has until August 10, 2022 to file a reply brief as to both appeals.

POPULAR SECURITIES

Puerto Rico Bonds and Closed-End Investment Funds

The volatility in prices and declines in value that Puerto Rico municipal bonds and closed-end investment companies that invest primarily in Puerto Rico municipal bonds have experienced since August 2013 have led to regulatory inquiries, customer complaints and arbitrations for most broker-dealers in Puerto Rico, including Popular Securities. Popular Securities has received customer complaints and, as of March 31, 2022, was named as a respondent (among other broker-dealers) in 60 pending arbitration proceedings with initial claimed amounts of approximately $51 million in the aggregate. While Popular Securities believes it has meritorious defenses to the claims asserted in these proceedings, it has often determined that it is in its best interest to settle certain claims rather than expend the money and resources required to see such cases to completion. The Puerto Rico Government’s defaults and non-payment of its various debt obligations, as well as the Commonwealth’s and the Financial Oversight Management Board’s (the “Oversight Board”) decision to pursue restructurings under Title III and Title VI of PROMESA, have impacted the number of customer complaints (and claimed damages) filed against Popular Securities concerning Puerto Rico bonds and closed-end investment companies that invest primarily in Puerto Rico bonds. An adverse result in the arbitration proceedings described above, or a significant increase in customer complaints, could have a material adverse effect on Popular.

On October 28, 2021, a panel in an arbitration proceeding with claimed damages arising from trading losses of approximately $30 million ordered Popular Securities to pay claimants approximately $6.9 million in compensatory damages and expenses. On November 4, 2021, the claimants in such arbitration proceeding filed a complaint captioned Trinidad García v. Popular, Inc. et. al. before the United States District Court for the District of Puerto Rico against Popular, Inc., BPPR and Popular Securities (the “Popular Defendants”) alleging, inter alia, that they sustained monetary losses as a result of the Popular Defendants’ anticompetitive, unfair, and predatory practices, including tying arrangements prohibited by the Bank Holding Company Act. Plaintiffs claim that the Popular Defendants caused them to enter a tying arrangement scheme whereby BPPR allegedly would extend secured credit lines to the Plaintiffs on the conditions that they transfer their portfolios to Popular Securities to be used as pledged collateral and obtain additional investment services and products solely from Popular Securities, not from any of its competitors. Plaintiffs also invoke federal court’s supplemental jurisdiction to allege several state law claims against the Popular Defendants, including contractual fault, fault in causing losses in value of the pledge collateral, breach of contract, request for specific compliance thereof, fault in pre-contractual negotiations, emotional distress, and punitive damages. On January 27, 2022, Plaintiffs filed an Amended Complaint and the Popular Defendants were served with summons on that same date. Plaintiffs demand no less than $390 million in damages, plus an award for costs and attorney's fees. The Popular Defendants filed a Motion to Dismiss on March 21, 2022. Plaintiffs are expected to oppose to the Popular Defendants’ motion by May 19, 2022.

PROMESA Title III Proceedings

In 2017, the Oversight Board engaged the law firm of Kobre & Kim to carry out an independent investigation on behalf of the Oversight Board regarding, among other things, the causes of the Puerto Rico financial crisis. Popular, Inc., BPPR and Popular Securities (collectively, the “Popular Companies”) were served by, and cooperated with, the Oversight Board in connection with requests for the preservation and voluntary production of certain documents and witnesses with respect to Kobre & Kim’s independent investigation.

On August 20, 2018, Kobre & Kim issued its Final Report, which contained various references to the Popular Companies, including an allegation that Popular Securities participated as an underwriter in the Commonwealth’s 2014 issuance of government obligation bonds notwithstanding having allegedly advised against it. The report noted that such allegation could give rise to an unjust enrichment claim against the Corporation and could also serve as a basis to equitably subordinate claims filed by the Corporation in the Title III proceeding to other third-party claims.

After the publication of the Final Report, the Oversight Board created a special claims committee (“SCC”) and, before the end of the applicable two-year statute of limitations for the filing of such claims pursuant to the U.S. Bankruptcy Code, the SCC, along with the Commonwealth’s Unsecured Creditors’ Committee (“UCC”), filed various avoidance, fraudulent transfer and other claims against third parties, including government vendors and financial institutions and other professionals involved in bond issuances then being challenged as invalid by the SCC and the UCC. The Popular Companies, the SCC and the UCC entered into a tolling agreement with respect to potential claims the SCC and the UCC, on behalf of the Commonwealth or other Title III debtors, may assert against the Popular Companies for the avoidance and recovery of payments and/or transfers made to the Popular Companies or as a result of any role of the Popular Companies in the offering of the aforementioned challenged bond issuances. On January 12, 2022, the SCC, the UCC and the Popular Companies executed a settlement agreement as to potential claims related to the avoidance and recovery of payments and/or transfers made to the Popular Companies. The tolling agreement as to potential claims the SCC and the UCC may assert against the Popular Companies as a result of any role of the Popular Companies in the offering of certain challenged bond issuances remains in effect.

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, 2022. 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, 2022 and December 31, 2021, 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, 2022 and December 31, 2021.

(In thousands)		March 31, 2022		December 31, 2021
Assets
Servicing assets:
	Mortgage servicing rights	$	97,717	$	94,464
Total servicing assets		$	97,717	$	94,464
Other assets:
	Servicing advances	$	7,283	$	7,968
Total other assets		$	7,283	$	7,968
Total assets		$	105,000	$	102,432
Maximum exposure to loss		$	105,000	$	102,432

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 $8.2 billion at March 31, 2022 (December 31, 2021 - $8.3 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, 2022 and December 31, 2021, 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, 2022.

Note 22 – Related party transactions

The Corporation considers its equity method investees as related parties. The following provides information on transactions with equity method investees considered related parties.

EVERTEC

The Corporation has an investment in EVERTEC, Inc. (“EVERTEC”), which provides various processing and information technology services to the Corporation and its subsidiaries and gives BPPR access to the ATH network owned and operated by EVERTEC. As of March 31, 2022, the Corporation held 11,654,803 shares of EVERTEC, representing an ownership stake of 16.26%. The Corporation continues to have significant influence over EVERTEC. Accordingly, the investment in EVERTEC is accounted for under the equity method and is evaluated for impairment if events or circumstances indicate that a decrease in value of the investment has occurred that is other than temporary.

As disclosed in Note 39 - Subsequent Events - to the financial statements included in Form 10K for the year ended December 31, 2021, on February 24, 2022, the Corporation and BPPR, entered into an Asset Purchase Agreement (the “Purchase Agreement”), with EVERTEC and Evertec Group, LLC, a wholly owned subsidiary of EVERTEC (“EVERTEC Group”), pursuant to which BPPR will purchase from EVERTEC Group certain information technology and related assets currently used by EVERTEC to service certain of BPPR’s key channels (the “Acquired Assets”) under the Amended and Restated Master Service Agreement (the “MSA”), dated September 30, 2010, among the Corporation, BPPR and EVERTEC. In connection with the purchase of the Acquired Assets, BPPR will assume certain liabilities relating to the Acquired Assets (together with the purchase of the Acquired Assets, the “Transaction”). The Transaction is expected to close on or about June 30, 2022, subject to the satisfaction of certain closing conditions.

In connection with the consummation of the Transaction (the “Closing”), the Corporation will transfer to EVERTEC Group, as consideration for the Transaction, shares of EVERTEC’s common stock (“EVERTEC Common Stock”) having an aggregate value of approximately $197 million, subject to certain purchase price adjustments, based on a price per share of $42.84, which value was determined at the time of entering into the Purchase Agreement. As a result of this transfer, the Corporation expects that its percentage ownership of the outstanding shares of EVERTEC Common Stock will be reduced from its current level, which is approximately 16.2%, to approximately 10.5% immediately following the Closing. As part of the transaction, the Corporation has also agreed to reduce its voting interest in EVERTEC below 4.5%, whether through selling shares of EVERTEC common stock or a conversion of such shares into non-voting preferred stock. The Corporation expects to sell down its stake in EVERTEC below 4.5% following the closing and intends to return to shareholders, via common stock repurchases, the after-tax gains resulting from such sale, subject to the receipt of regulatory approvals.

Additionally, as part of the Closing, the Corporation and BPPR will also enter with EVERTEC into, among other commercial agreements, a Second Amended and Restated Master Services Agreement (the “Second A&R MSA”), pursuant to which EVERTEC Group will continue to provide various key information technology and various transaction processing services to the Corporation, BPPR and their respective subsidiaries, which services are provided under the currently effective MSA.

The Corporation recorded $0.6 million in dividends distributions during the quarter ended March 31, 2022 from its investments in EVERTEC (March 31, 2021 - $0.6 million). The Corporation’s equity in EVERTEC is presented in the table which follows and is included as part of “other assets” in the Consolidated Statements of Financial Condition.

(In thousands)		March 31, 2022		December 31, 2021
Equity investment in EVERTEC	$	119,579	$	110,299

The Corporation had the following financial condition balances outstanding with EVERTEC at March 31, 2022 and December 31, 2021. Items that represent liabilities to the Corporation are presented with parenthesis.

(In thousands)	March 31, 2022		December 31, 2021
Accounts receivable (Other assets)	$	5,640	$	5,668
Deposits		(157,209)		(150,737)
Accounts payable (Other liabilities)		(1,242)		(3,431)
Net total	$	(152,811)	$	(148,500)

The Corporation’s proportionate share of income from EVERTEC is included in other operating income in the consolidated statements of operations. The following table presents the Corporation’s proportionate share of EVERTEC’s income and changes in stockholders’ equity for the quarters ended March 31, 2022 and 2021.

		Quarters ended March 31,
(In thousands)		2022		2021
Share of income from investment in EVERTEC	$	6,318	$	5,734
Share of other changes in EVERTEC's stockholders' equity		1,787		178
Share of EVERTEC's changes in equity recognized in income	$	8,105	$	5,912

The following table presents the impact of transactions and service payments between the Corporation and EVERTEC (as an affiliate) and their impact on the results of operations for the quarters ended March 31, 2022 and 2021. Items that represent expenses to the Corporation are presented with parenthesis.

	Quarters ended March 31,
(In thousands)	2022		2021		Category
Interest expense on deposits	$	(132)	$	(89)	Interest expense
ATH and credit cards interchange income from services to EVERTEC		6,683		6,454	Other service fees
Rental income charged to EVERTEC		1,681		1,547	Net occupancy
Processing fees on services provided by EVERTEC		(62,222)		(60,141)	Professional fees
Other services provided to EVERTEC		218		121	Other operating expenses
Total	$	(53,772)	$	(52,108)

Centro Financiero BHD León

At March 31, 2022, the Corporation had a 15.84% equity interest in Centro Financiero BHD León, S.A. (“BHD León”), one of the largest banking and financial services groups in the Dominican Republic. During the quarter ended March 31, 2022, the Corporation recorded $7.4 million in earnings from its investment in BHD León (March 31, 2021 - $6.4 million), which had a carrying amount of $185.3 million at March 31, 2022 (December 31, 2021 - $160.1 million). There were no dividends distributions received by the Corporation from its investment in BHD León, during the quarter ended March 31, 2022 and 2021.

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 administrative, custody and 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, 2022 administrative fees charged to these investment companies amounted to $0.7 million (March 31, 2021 - $1.2 million) and waived fees amounted to $0.3 million (March 31, 2021 - $0.5 million), for a net fee of $0.4 million (March 31, 2021 - $0.7 million).

The Corporation, through its subsidiary BPPR, had also entered into certain uncommitted credit facilities with those investment companies. The aggregate sum of all outstanding balances under all credit facilities that could be made available by BPPR, from time to time, to those investment companies for which PAM acted as investment advisor or co-investment advisor, could have never exceed the lesser of $200 million or 10% of BPPR’s capital. During the year ended December 31, 2021, these credit facilities expired.

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 2021 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, 2022 and December 31, 2021:

At March 31, 2022
(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	$	1,799,951	$	16,379,160	$	-	$	-	$	18,179,111
Obligations of U.S. Government sponsored entities		-		71		-		-		71
Collateralized mortgage obligations - federal agencies		-		191,215		-		-		191,215
Mortgage-backed securities		-		7,988,614		793		-		7,989,407
Other		-		111		-		-		111
Total debt securities available-for-sale	$	1,799,951	$	24,559,171	$	793	$	-	$	26,359,915
Trading account debt securities, excluding derivatives:
U.S. Treasury securities	$	16,686	$	-	$	-	$	-	$	16,686
Obligations of Puerto Rico, States and political subdivisions		-		81		-		-		81
Collateralized mortgage obligations		-		53		174		-		227
Mortgage-backed securities		-		18,779		-		-		18,779
Other		-		-		267		-		267
Total trading account debt securities, excluding derivatives	$	16,686	$	18,913	$	441	$	-	$	36,040
Equity securities	$	-	$	30,872	$	-	$	166	$	31,038
Mortgage servicing rights		-		-		125,358		-		125,358
Derivatives		-		24,848		-		-		24,848
Total assets measured at fair value on a recurring basis	$	1,816,637	$	24,633,804	$	126,592	$	166	$	26,577,199
Liabilities
Derivatives	$	-	$	(20,218)	$	-	$	-	$	(20,218)
Contingent consideration		-		-		(9,241)		-		(9,241)
Total liabilities measured at fair value on a recurring basis	$	-	$	(20,218)	$	(9,241)	$	-	$	(29,459)

At December 31, 2021
(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	$	-	$	15,859,030	$	-	$	-	$	15,859,030
Obligations of U.S. Government sponsored entities		-		70		-		-		70
Collateralized mortgage obligations - federal agencies		-		221,265		-		-		221,265
Mortgage-backed securities		-		8,886,950		826		-		8,887,776
Other		-		128		-		-		128
Total debt securities available-for-sale	$	-	$	24,967,443	$	826	$	-	$	24,968,269
Trading account debt securities, excluding derivatives:
U.S. Treasury securities	$	6,530	$	-	$	-	$	-	$	6,530
Obligations of Puerto Rico, States and political subdivisions		-		85		-		-		85
Collateralized mortgage obligations		-		59		198		-		257
Mortgage-backed securities		-		22,559		-		-		22,559
Other		-		-		280		-		280
Total trading account debt securities, excluding derivatives	$	6,530	$	22,703	$	478	$	-	$	29,711
Equity securities	$	-	$	32,429	$	-	$	77	$	32,506
Mortgage servicing rights		-		-		121,570		-		121,570
Derivatives		-		26,093		-		-		26,093
Total assets measured at fair value on a recurring basis	$	6,530	$	25,048,668	$	122,874	$	77	$	25,178,149
Liabilities
Derivatives	$	-	$	(22,878)	$	-	$	-	$	(22,878)
Contingent consideration		-		-		(9,241)		-		(9,241)
Total liabilities measured at fair value on a recurring basis	$	-	$	(22,878)	$	(9,241)	$	-	$	(32,119)

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, 2022 and 2021 and excludes nonrecurring fair value measurements of assets no longer outstanding as of the reporting date.

Quarter ended March 31, 2022
(In thousands)	Level 1		Level 2		Level 3		Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets										Write-downs
Loans^[1]	$	-	$	-	$	4,891	$	4,891	$	(180)
Loans held-for-sale^[2]		-		-		55,150		55,150		(675)
Other real estate owned^[3]		-		-		1,432		1,432		(495)
Total assets measured at fair value on a nonrecurring basis	$	-	$	-	$	61,473	$	61,473	$	(1,350)
[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] Relates to a quarterly valuation on loans held-for-sale. Costs to sell are excluded from the reported fair value amount.
[3] 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, 2021

(In thousands)	Level 1		Level 2		Level 3		Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets										Write-downs
Loans^[1]	$	-	$	-	$	2,384	$	2,384	$	(406)
Loans held-for-sale^[2]		-		-		3,549		3,549		(846)
Other real estate owned^[3]		-		-		6,205		6,205		(1,073)
Other foreclosed assets^[3]		-		-		48		48		(7)
Long-lived assets held-for-sale^[4]		-		-		2,728		2,728		(303)
Total assets measured at fair value on a nonrecurring basis	$	-	$	-	$	14,914	$	14,914	$	(2,635)
[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] Relates to a quarterly valuation on loans held-for-sale. Costs to sell are excluded from the reported fair value amount.
[3] 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.
[4] Represents the fair value of long-lived assets held-for-sale that were written down to their fair value.

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, 2022 and 2021.

	Quarter ended March 31, 2022
		MBS		CMOs		Other
		classified		classified		securities
		as debt		as trading		classified
		securities		account		as trading		Mortgage
		available-		debt		account debt		servicing		Total		Contingent		Total
(In thousands)		for-sale		securities		securities		rights		assets		consideration		liabilities
Balance at December 31, 2021		$	826	$	198	$	280	$	121,570	$	122,874	$	9,241	$	9,241
Gains (losses) included in earnings			-		(1)		(13)		1,017		1,003		-		-
Gains (losses) included in OCI			(8)		-		-		-		(8)		-		-
Additions			-		2		-		2,771		2,773		-		-
Settlements			(25)		(25)		-		-		(50)		-		-
Balance at March 31, 2022		$	793	$	174	$	267	$	125,358	$	126,592	$	9,241	$	9,241
Changes in unrealized gains (losses) included in earnings relating to assets still held at March 31, 2022		$	-	$	(1)	$	5	$	4,252	$	4,256	$	-	$	-

	Quarter ended March 31, 2021
		MBS				Other
		classified		CMOs		securities
		as investment		classified		classified
		securities		as trading		as trading		Mortgage
		available-		account		account		servicing		Total
(In thousands)		for-sale		securities		securities		rights		assets
Balance at December 31, 2020		$	1,014	$	278	$	381	$	118,395	$	120,068
Gains (losses) included in earnings			-		-		(9)		512		503
Gains (losses) included in OCI			(5)		-		-		-		(5)
Additions			-		1		-		3,636		3,637
Settlements			(75)		(28)		-		-		(103)
Balance at March 31, 2021		$	934	$	251	$	372	$	122,543	$	124,100
Changes in unrealized gains (losses) included in earnings relating to assets still held at March 31, 2021		$	-	$	-	$	4	$	5,162	$	5,166

Gains and losses (realized and unrealized) included in earnings for the quarters ended March 31, 2022 and 2021 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, 2022				Quarter ended March 31, 2021
				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	$	1,017	$	4,252	$	512	$	5,162
Trading account (loss) profit		(14)		4		(9)		4
Total	$	1,003	$	4,256	$	503	$	5,166

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, 2022 and 2021.

			Fair value at
		March 31,
(In thousands)			2022		Valuation technique	Unobservable inputs	Weighted average (range) [1]
CMO's - trading		$	174		Discounted cash flow model	Weighted average life	0.7 years (0.5 - 1.0 years)
						Yield	3.9% (3.9% - 4.5%)
						Prepayment speed	8.4% (0.1% - 15.7%)
Other - trading		$	267		Discounted cash flow model	Weighted average life	2.9 years
						Yield	12.0%
						Prepayment speed	10.8%
Contingent consideration		$	(9,241)		Probability weighted
					discounted cash flows	Discount rate	2.52%
Loans held-in-portfolio		$	4,653	[2]	External appraisal	Haircut applied on
						external appraisals	12.6%
[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)			2021		Valuation technique	Unobservable inputs	Weighted average (range) [1]
CMO's - trading		$	251		Discounted cash flow model	Weighted average life	1.1 years (0.3 - 1.3 years)
						Yield	3.6% (3.6% - 4.1%)
						Prepayment speed	12.9% (10.4% - 18.3%)
Other - trading		$	372		Discounted cash flow model	Weighted average life	3.6 years
						Yield	12.0%
						Prepayment speed	10.8%
Mortgage servicing rights		$	122,543		Discounted cash flow model	Prepayment speed	6.0% (0.4% - 24.6)%)
						Weighted average life	6.3 years (0.1 - 12.8 years)
						Discount rate	11.1% (9.5% - 14.7%)
Loans held-in-portfolio		$	2,162	[2]	External appraisal	Haircut applied on
						external appraisals	16.3% (12.6% - 21.4%)
Other real estate owned		$	5,772	[3]	External appraisal	Haircut applied on
						external appraisals	22.1% (5.0% - 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.
[3]	Other real estate owned in which haircuts were not applied to external appraisals were excluded from this table.

Effective the fourth quarter 2021, the mortgage servicing rights fair value was provided by a third-party valuation specialist. Refer to Note 10 to the Consolidated Financial Statements for additional information on MSRs.

The significant unobservable inputs used in the fair value measurement of the Corporation’s collateralized mortgage obligations and interest-only collateralized mortgage obligation (reported as “other”), which are classified in the “trading” category, are yield, constant prepayment rate, and weighted average life. Significant increases (decreases) in any of those inputs in isolation would result in significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the constant prepayment rate will generate a directionally opposite change in the weighted average life. For example, as the average life is reduced by a higher constant prepayment rate, a lower yield will be realized, and when there is a reduction in the constant prepayment rate, the average life of these collateralized mortgage obligations will extend, thus resulting in a higher yield.

The significant unobservable inputs used in the fair value measurement of the Corporation’s mortgage servicing rights are constant prepayment rates and discount rates. Increases in interest rates may result in lower prepayments. Discount rates vary according to products and / or portfolios depending on the perceived risk. Increases in discount rates result in a lower fair value measurement.

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, 2022 and December 31, 2021, 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.

		March 31, 2022
		Carrying									Measured
(In thousands)		amount		Level 1		Level 2		Level 3			at NAV	Fair value
Financial Assets:
Cash and due from banks		$	439,148	$	439,148	$	-	$	-	$	-	$	439,148
Money market investments			10,069,692		10,063,392		6,300		-		-		10,069,692
Trading account debt securities, excluding derivatives^[1]			36,040		16,686		18,913		441		-		36,040
Debt securities available-for-sale^[1]			26,359,915		1,799,951		24,559,171		793		-		26,359,915
Debt securities held-to-maturity:
	Obligations of Puerto Rico, States and political subdivisions	$	62,156	$	-	$	-	$	69,897	$	-	$	69,897
	Collateralized mortgage obligation-federal agency		24		-		-		25		-		25
	Securities in wholly owned statutory business trusts		5,960		-		5,960		-		-		5,960
Total debt securities held-to-maturity		$	68,140	$	-	$	5,960	$	69,922	$	-	$	75,882
Equity securities:
	FHLB stock	$	55,648	$	-	$	55,648	$	-	$	-	$	55,648
	FRB stock		96,747		-		96,747		-		-		96,747
	Other investments		33,953		-		30,872		3,704		166		34,742
Total equity securities		$	186,348	$	-	$	183,267	$	3,704	$	166	$	187,137
Loans held-for-sale		$	55,150	$	-	$	-	$	55,150	$	-	$	55,150
Loans held-in-portfolio			28,910,398		-		-		28,008,363		-		28,008,363
Mortgage servicing rights			125,358		-		-		125,358		-		125,358
Derivatives			24,848		-		24,848		-		-		24,848
		March 31, 2022
		Carrying									Measured
(In thousands)		amount		Level 1		Level 2		Level 3			at NAV	Fair value
Financial Liabilities:
Deposits:
	Demand deposits	$	55,771,606	$	-	$	55,771,606	$	-	$	-	$	55,771,606
	Time deposits		7,090,689		-		6,912,361		-		-		6,912,361
Total deposits		$	62,862,295	$	-	$	62,683,967	$	-	$	-	$	62,683,967
Assets sold under agreements to repurchase		$	72,819	$	-	$	72,889	$	-	$	-	$	72,889
Notes payable:
	FHLB advances	$	491,429	$	-	$	477,283	$	-	$	-	$	477,283
	Unsecured senior debt securities		298,159		-		312,375		-		-		312,375
	Junior subordinated deferrable interest debentures (related to trust preferred securities)		198,299		-		206,425		-		-		206,425
Total notes payable		$	987,887	$	-	$	996,083	$	-	$	-	$	996,083
Derivatives		$	20,218	$	-	$	20,218	$	-	$	-	$	20,218
Contingent consideration		$	9,241	$	-	$	-	$	9,241	$	-	$	9,241
[1]	Refer to Note 23 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.

		December 31, 2021
		Carrying									Measured
(In thousands)		amount		Level 1		Level 2		Level 3			at NAV	Fair value
Financial Assets:
Cash and due from banks		$	428,433	$	428,433	$	-	$	-	$	-	$	428,433
Money market investments			17,536,719		17,530,640		6,079		-		-		17,536,719
Trading account debt securities, excluding derivatives^[1]			29,711		6,530		22,703		478		-		29,711
Debt securities available-for-sale^[1]			24,968,269		-		24,967,443		826		-		24,968,269
Debt securities held-to-maturity:
	Obligations of Puerto Rico, States and political subdivisions	$	65,380	$	-	$	-	$	77,383	$	-	$	77,383
	Collateralized mortgage obligation-federal agency		25		-		-		25		-		25
	Securities in wholly owned statutory business trusts		5,960		-		5,960		-		-		5,960
Total debt securities held-to-maturity		$	71,365	$	-	$	5,960	$	77,408	$	-		83,368
Equity securities:
	FHLB stock	$	59,918	$	-	$	59,918	$	-	$	-	$	59,918
	FRB stock		96,217		-		96,217		-		-		96,217
	Other investments		33,842		-		32,429		3,704		77		36,210
Total equity securities		$	189,977	$	-	$	188,564	$	3,704	$	77		192,345
Loans held-for-sale		$	59,168	$	-	$	-	$	59,885	$	-	$	59,885
Loans held-in-portfolio			28,545,191		-		-		27,489,583		-		27,489,583
Mortgage servicing rights			121,570		-		-		121,570		-		121,570
Derivatives			26,093		-		26,093		-		-		26,093
		December 31, 2021
		Carrying									Measured
(In thousands)		amount		Level 1		Level 2		Level 3			at NAV		Fair value
Financial Liabilities:
Deposits:
	Demand deposits	$	60,292,939	$	-	$	60,292,939	$	-	$	-	$	60,292,939
	Time deposits		6,712,149		-		6,647,301		-		-		6,647,301
Total deposits		$	67,005,088	$	-	$	66,940,240	$	-	$	-		66,940,240
Assets sold under agreements to repurchase		$	91,603	$	-	$	91,602	$	-	$	-	$	91,602
Other short-term borrowings^[2]		$	75,000	$	-	$	75,000	$	-	$	-	$	75,000
Notes payable:
	FHLB advances	$	492,429	$	-	$	496,091	$	-	$	-	$	496,091
	Unsecured senior debt securities		297,842		-		319,296		-		-		319,296
	Junior subordinated deferrable interest debentures (related to trust preferred securities)		198,292		-		201,879		-		-		201,879
Total notes payable		$	988,563	$	-	$	1,017,266	$	-	$	-		1,017,266
Derivatives		$	22,878	$	-	$	22,878	$	-	$	-	$	22,878
Contingent consideration		$	9,241	$	-	$	-	$	9,241	$	-	$	9,241
[1]	Refer to Note 23 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.
[2]	Refer to Note 15 to the Consolidated Financial Statements for the composition of other short-term borrowings.

The notional amount of commitments to extend credit at March 31, 2022 and December 31, 2021 is $9.7 billion and $9.5 billion, respectively, and represents the unused portion of credit facilities granted to customers. The notional amount of letters of credit at March 31, 2022 and December 31, 2021 is $35 million and $31 million respectively, and represents 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.

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, 2022 and 2021:

		Quarters ended March 31,
(In thousands, except per share information)		2022		2021
Net income	$	211,686	$	262,632
Preferred stock dividends		(353)		(353)
Net income applicable to common stock	$	211,333	$	262,279
Average common shares outstanding		78,443,706		83,899,769
Average potential dilutive common shares		151,757		152,166
Average common shares outstanding - assuming dilution		78,595,463		84,051,935
Basic EPS	$	2.69	$	3.13
Diluted EPS	$	2.69	$	3.12

As disclosed in Note 17 to the Consolidated Financial Statements, during the quarter ended March 31, 2022, the Corporation entered into a $400 million accelerated share repurchase transaction (“ASR”) and, in connection therewith, received an initial delivery of 3,483,942 shares of common stock. The initial share delivery was accounted for as a treasury stock transaction. As part of this transaction, the Corporation entered into a forward contract, which remains outstanding as of March 31, 2022, for which the Corporation expects to receive additional shares upon termination of the ASR agreement. The dilutive EPS computation excludes 1,379,886 shares that at March 31, 2022 were estimated to be received under the ASR since the effect would be antidilutive.

For the quarters ended March 31, 2022 and 2021, 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, 2021. For a discussion of the calculation under the treasury stock method, refer to Note 31 of the Consolidated Financial Statements included in the 2021 Form 10-K.

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, 2022 and 2021.

		Quarters ended March 31,
(In thousands)		2022				2021
			BPPR		Popular U.S.		BPPR		Popular U.S.
Service charges on deposit accounts		$	37,985	$	2,728	$	36,859	$	2,761
Other service fees:
	Debit card fees		11,562		217		11,342		235
	Insurance fees, excluding reinsurance		10,038		1,322		8,238		609
	Credit card fees, excluding late fees and membership fees		30,222		324		25,410		248
	Sale and administration of investment products		5,791		-		5,540		-
	Trust fees		6,149		-		6,015		-
Total revenue from contracts with customers^[1]		$	101,747	$	4,591	$	93,404	$	3,853
[1] The amounts include intersegment transactions of $1.5 million and $0.3 million, respectively, for the quarters ended March 31, 2022 and 2021.

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

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.

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 31.8 years considers options to extend the leases for up to 20.0 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, 2022
(In thousands)		Remaining 2022		2023		2024		2025		2026		Later Years		Total Lease Payments		Less: Imputed Interest		Total
Operating Leases	$	22,112	$	27,896	$	26,483	$	23,555	$	15,113	$	47,965	$	163,124	$	(18,640)	$	144,484
Finance Leases		3,060		4,167		4,264		4,376		4,025		9,668		29,560		(3,895)		25,665

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)		2022		2021
Finance lease cost:
	Amortization of ROU assets	$	759	$	581
	Interest on lease liabilities		308		273
Operating lease cost			7,627		7,055
Short-term lease cost			55		87
Variable lease cost			23		30
Sublease income			(9)		(19)
Total lease cost^[1]		$	8,763	$	8,007
[1]	Total lease cost is recognized as part of net occupancy expense.

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)			2022			2021
Cash paid for amounts included in the measurement of lease liabilities:
	Operating cash flows from operating leases^[1]	$	7,506		$	15,197
	Operating cash flows from finance leases		308			273
	Financing cash flows from finance leases^[1]		833			1,133
ROU assets obtained in exchange for new lease obligations:
	Operating leases	$	1,553		$	2,394
Weighted-average remaining lease term:
	Operating leases		7.6	years		8.2	years
	Finance leases		8.7	years		8.9	years
Weighted-average discount rate:
	Operating leases		2.8	%		3.0	%
	Finance leases		4.4	%		5.1	%
[1]	During the quarter ended March 31, 2021, the Corporation made base lease termination payments amounting to $7.8 million in connection with the closure of nine branches as a result of the strategic realignment of PB’s New York Metro branch network.

As of March 31, 2022, the Corporation has additional operating and finance leases contracts that have not yet commenced with an undiscounted contract amount of $15.3 million and $2.2 million, respectively, which will have lease terms ranging from 10 to 20 years.

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
		Quarters ended March 31,				Quarters ended March 31,
(In thousands)		2022		2021		2022		2021
Personnel Cost:
Service cost	$	-	$	-	$	121	$	159
Other operating expenses:
Interest cost		4,800		3,998		983		893
Expected return on plan assets		(8,847)		(9,670)		-		-
Amortization of prior service cost/(credit)		-		-		-		-
Amortization of net loss		3,911		4,720		-		470
Total net periodic pension cost	$	(136)	$	(952)	$	1,104	$	1,522

The Corporation paid the following contributions to the plans for the three months ended March 31, 2022 and expects to pay the following contributions for the year ending December 31, 2022.

	For the three months ended		For the year ending
(In thousands)	March 31, 2022		December 31, 2022
Pension Plans	$	57	$	227
OPEB Plan	$	1,645	$	5,971

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 for its employees and restricted stock and restricted stock units (“RSU”) 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 award 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, depending on the date of the grant, the Absolute Return on Average Assets (“ROA”) goal or 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 ROA and ROATCE metrics are considered to be a performance condition under ASC 718. The fair value is determined based on the probability of achieving the ROA or ROATCE goal as of each reporting period. The TSR and ROA or 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 (ROA and 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.

(Not in thousands)	Shares		Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2020	358,512	$	41.23
Granted	191,479		69.38
Performance Shares Quantity Adjustment	54,306		54.21
Vested	(273,974)		55.11
Forfeited	(8,440)		43.48
Non-vested at December 31, 2021	321,883	$	47.98
Granted	109,441		87.10
Performance Shares Quantity Adjustment	20,608		77.65
Vested	(169,260)		71.47
Non-vested at March 31, 2022	282,672	$	51.23

During the quarter ended March 31, 2022, 52,584 shares of restricted stock (March 31, 2021 - 53,239) and 56,857 performance shares (March 31, 2021 - 71,374) were awarded to management under the Incentive Plan.

During the quarter ended March 31, 2022, the Corporation recognized $4.5 million of restricted stock expense related to management incentive awards, with a tax benefit of $0.5 million (March 31, 2021 - $3.9 million, with a tax benefit of $0.5 million). For the quarter ended March 31, 2022, the fair market value of the restricted stock and performance shares vested was $8.0 million at grant date and $14.7 million at vesting date. This differential triggers a windfall, of $2.5 million that was recorded as a reduction in income tax expense. For the quarter ended March 31, 2022, the Corporation recognized $3.7 million of performance shares expense, with a tax benefit of $0.3 million (March 31, 2021 - $4.3 million, with a tax benefit of $0.4 million). The total unrecognized compensation cost related to non-vested restricted stock awards and performance shares to members of management at March 31, 2022 was $9.5 million and is expected to be recognized over a weighted-average period of 2.05 years.

The following table summarizes the restricted stock activity under the Incentive Plan for members of the Board of Directors:

(Not in thousands)		Restricted Stock units		Weighted-Average Grant Date Fair Value per Unit
Non-vested at December 31, 2020	$	-	$	-
Granted		20,638		78.20
Vested		(20,638)		78.20
Forfeited		-		-
Non-vested at December 31, 2021	$	-	$	-
Granted		530		82.73
Vested		(530)		82.73
Forfeited		-		-
Non-vested at March 31, 2022	$	-	$	-

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 on May 2019 all equity awards granted to the Directors may be paid in either restricted stocks or RSU, at the Directors’ election. If RSU are elected the Directors may defer the delivery of the shares of common stocks underlying the RSU award after their retirement. To the extent that cash dividends are paid on the Corporation’s outstanding common stocks, the Directors will receive an additional number of RSU that reflect reinvested dividend equivalent.

For 2020, 2021 and 2022, all Directors elected RSU. During the quarter ended March 31, 2022, 530 RSU were granted to the Directors (March 31, 2021 - 524). During this period, the Corporation recognized $44 thousand of restricted stock expense related to these RSU, with a tax benefit of $8 thousand (March 31, 2021 - $29 thousand, with a tax benefit of $5 thousand). The fair value at vesting date of the RSU vested during the quarter ended March 31, 2022 for directors was $44 thousand.

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, 2022				March 31, 2021
(In thousands)		Amount	% of pre-tax income			Amount	% of pre-tax income
Computed income tax expense at statutory rates	$	98,312	38	%	$	127,299	38	%
Net benefit of tax exempt interest income		(36,489)	(14)			(34,163)	(10)
Deferred tax asset valuation allowance		3,891	1			10,321	3
Difference in tax rates due to multiple jurisdictions		(6,493)	(2)			(10,948)	(3)
Effect of income subject to preferential tax rate		(3,945)	(2)			(3,329)	(1)
Adjustment due to estimate on the annual effective rate		(6,380)	(2)			(10,328)	(3)
State and local taxes		3,665	1			61	-
Others		(2,082)	(1)			(2,082)	(1)
Income tax expense	$	50,479	19	%	$	76,831	23	%

For the quarter ended March 31, 2022, the Corporation recorded an income tax expense of $50.5 million compared to $76.8 million for the quarter ended March 31, 2021. The decrease in income tax expense was primarily due to lower pre-tax income and higher tax-exempt income.

The following table presents a breakdown of the significant components of the Corporation’s deferred tax assets and liabilities.

100

			March 31, 2022
(In thousands)			PR		US		Total
Deferred tax assets:
Tax credits available for carryforward		$	261	$	2,781	$	3,042
Net operating loss and other carryforward available			117,016		663,751		780,767
Postretirement and pension benefits			54,701		-		54,701
Deferred loan origination fees/cost			245		-		245
Allowance for credit losses			228,627		30,955		259,582
Accelerated depreciation			5,246		7,350		12,596
FDIC-assisted transaction			152,665		-		152,665
Intercompany deferred gains			1,739		-		1,739
Lease liability			31,292		22,856		54,148
Unrealized net gain on trading and available-for-sale securities			138,994		9,600		148,594
Difference in outside basis from pass-through entities			52,251		-		52,251
Other temporary differences			36,380		8,547		44,927
	Total gross deferred tax assets		819,417		745,840		1,565,257
Deferred tax liabilities:
Indefinite-lived intangibles			77,467		52,012		129,479
Right of use assets			29,103		19,310		48,413
Deferred loan origination fees/cost			-		3,635		3,635
Other temporary differences			44,079		1,530		45,609
	Total gross deferred tax liabilities		150,649		76,487		227,136
Valuation allowance			132,449		430,447		562,896
Net deferred tax asset		$	536,319	$	238,906	$	775,225

			December 31, 2021
(In thousands)			PR		US		Total
Deferred tax assets:
Tax credits available for carryforward		$	261	$	2,781	$	3,042
Net operating loss and other carryforward available			112,331		665,164		777,495
Postretirement and pension benefits			57,002		-		57,002
Deferred loan origination fees/cost			2,788		-		2,788
Allowance for credit losses			233,500		31,872		265,372
Deferred gains			1,642		-		1,642
Accelerated depreciation			5,246		7,422		12,668
FDIC-assisted transaction			152,665		-		152,665
Lease liability			31,211		23,894		55,105
Difference in outside basis from pass-through entities			54,781		-		54,781
Other temporary differences			38,512		8,418		46,930
	Total gross deferred tax assets		689,939		739,551		1,429,490
Deferred tax liabilities:
Indefinite-lived intangibles			76,635		51,150		127,785
Unrealized net gain (loss) on trading and available-for-sale securities			4,329		2,817		7,146
Right of use assets			29,025		20,282		49,307
Deferred loan origination fees/cost			-		3,567		3,567
Other temporary differences			43,856		1,530		45,386
	Total gross deferred tax liabilities		153,845		79,346		233,191
Valuation allowance			128,557		410,970		539,527
Net deferred tax asset		$	407,537	$	249,235	$	656,772

101

The net deferred tax asset shown in the table above at March 31, 2022 is reflected in the consolidated statements of financial condition as $0.8 billion in net deferred tax assets in the “Other assets” caption (December 31, 2021 - $0.7 billion) and $1.0 million in deferred tax liabilities in the “Other liabilities” caption (December 31, 2021 - $825 thousand), 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, 2022 the net deferred tax asset of the U.S. operations amounted to $669 million with a valuation allowance of approximately $430 million, for a net deferred tax asset after valuation allowance of approximately $239 million. The Corporation evaluates the realization of the deferred tax asset by taxing jurisdiction. The U.S. operation had sustained profitability for the year ended December 31, 2021, and the quarter ended March 31, 2022. Years 2020 and 2021 have been impacted by the COVID-19 pandemic and other events. Year 2020 was unfavorably impacted by the ACL reserve build-ups and the impairment of expenses on the branch closures in the New York region. Year 2021 has been favorably impacted by a strong economic recovery that resulted in ACL reserve releases, reversing the year 2020 build-up. The financial results for year December 31,2021 and the quarter ended March 31,2022 is 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 new variants of COVID-19 and geopolitical uncertainty. As of March 31, 2022, after weighting all positive and negative evidence, the Corporation concluded that it is more likely than not that approximately $239 million of the deferred tax asset 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 asset 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 and the pre-tax earnings forecast on a quarterly basis to assess the future realization of the deferred tax asset. Management will closely monitor factors, including, net income versus forecast, targeted loan growth, net interest income margin, allowance for credit losses, charge offs, NPLs inflows and NPA balances. Strong financial results during year 2022 together with the additional income expected from the recent acquisition of K2 assets, along with new tax initiatives could be considered additional positive evidence that, in the future, could overcome totally or partially the negative evidence evaluated as of March 31, 2022, that could result in future adjustments to the valuation allowance.

At March 31, 2022, the Corporation’s net deferred tax assets related to its Puerto Rico operations amounted to $536 million.

The Corporation’s Puerto Rico Banking operation is not in a cumulative loss position and has sustained profitability for the three year period ended March 31, 2022. 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 asset. 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 asset of the Puerto Rico Banking operations will be realized.

The Holding Company operation is in a cumulative loss position, taking into account taxable income exclusive of reversing temporary differences, for the three years period ending March 31, 2022. Management expects these losses will be a trend in future years. This objectively verifiable negative evidence is considered by management strong negative evidence that will suggest 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, considering the criteria of ASC Topic 740. Accordingly, the Corporation has maintained a valuation allowance on the deferred tax asset of $132 million as of March 2022.

The reconciliation of unrecognized tax benefits, excluding interest, was as follows:

102

(In millions)		2022		2021
Balance at January 1	$	3.5	$	14.8
Balance at March 31	$	3.5	$	14.8

At March 31, 2022, the total amount of accrued interest recognized in the statement of financial condition approximated $2.8 million (December 31, 2021 - $2.8 million). The total interest expense recognized at March 31, 2022 was $83 thousand, (March 31, 2021 - $364 thousand). Management determined that at March 31, 2022 and December 31, 2021 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 $5.6 million at March 31, 2022 (December 31, 2021 - $5.5 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 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, 2022, the following years remain subject to examination in the U.S. Federal jurisdiction: 2018 and thereafter; and in the Puerto Rico jurisdiction, 2017 and thereafter. The Corporation anticipates a reduction in the total amount of unrecognized tax benefits within the next 12 months, which could amount to approximately $1.4 million, including interest.

103

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, 2022 and March 31, 2021 are listed in the following table:


(In thousands)			March 31, 2022		March 31, 2021
Non-cash activities:
Loans transferred to other real estate		$	18,647	$	2,900
Loans transferred to other property			13,425		13,029
Total loans transferred to foreclosed assets			32,072		15,929
Loans transferred to other assets			2,228		1,156
Financed sales of other real estate assets			2,109		3,206
Financed sales of other foreclosed assets			9,384		9,417
Total financed sales of foreclosed assets			11,493		12,623
Financed sale of premises and equipment			11,738		-
Transfers from loans held-in-portfolio to loans held-for-sale			7,607		38,959
Transfers from loans held-for-sale to loans held-in-portfolio			786		1,136
Loans securitized into investment securities^[1]			142,702		188,268
Trades receivable from brokers and counterparties			60,186		70,965
Trades payable to brokers and counterparties			10,710		12,180
Recognition of mortgage servicing rights on securitizations or asset transfers			2,771		3,636
Loans booked under the GNMA buy-back option			4,961		7,393
Capitalization of lease right of use asset			3,689		1,774
[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, 2022		March 31, 2021
Cash and due from banks		$	381,658	$	489,084
Restricted cash and due from banks			57,490		6,831
Restricted cash in money market investments			6,300		6,110
Total cash and due from banks, and restricted cash^[2]		$	445,448	$	502,025
[2]	Refer to Note 4 - Restrictions on cash and due from banks and certain securities for nature of restrictions.

104

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. 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 Popular Equipment Finance (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 EVERTEC and 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:

105

2022
For the quarter ended March 31, 2022
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular U.S.		Eliminations
Net interest income			$	415,169	$	86,520	$	1
Provision for credit losses (benefit)				(13,690)		(2,019)		-
Non-interest income				135,862		5,954		(137)
Amortization of intangibles				484		407		-
Depreciation expense				11,517		1,824		-
Other operating expenses				334,878		53,639		(136)
Income tax expense				39,316		11,592		-
Net income			$	178,526	$	27,031	$	-
Segment assets			$	58,708,519	$	10,579,410	$	(167,754)

For the quarter ended March 31, 2022
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	501,690	$	(7,378)	$	-	$	494,312
Provision for credit losses (benefit)		(15,709)		209		-		(15,500)
Non-interest income		141,679		14,265		(1,252)		154,692
Amortization of intangibles		891		-		-		891
Depreciation expense		13,341		289		-		13,630
Other operating expenses		388,381		444		(1,007)		387,818
Income tax expense (benefit)		50,908		(332)		(97)		50,479
Net income	$	205,557	$	6,277	$	(148)	$	211,686
Segment assets	$	69,120,175	$	5,490,318	$	(5,085,411)	$	69,525,082

2021
For the quarter ended March 31, 2021
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular U.S.		Eliminations
Net interest income			$	410,323	$	79,169	$	2
Provision for credit losses (benefit)				(45,361)		(36,720)		-
Non-interest income				135,208		5,666		(138)
Amortization of intangibles				861		166		-
Depreciation expense				12,143		2,328		-
Other operating expenses				306,920		53,194		(136)
Income tax expense				58,813		18,035		-
Net income			$	212,155	$	47,832	$	-
Segment assets			$	55,990,801	$	10,557,751	$	(41,613)

For the quarter ended March 31, 2021
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	489,494	$	(10,382)	$	-	$	479,112
Provision for credit losses (benefit)		(82,081)		(145)		-		(82,226)
Non-interest income		140,736		13,150		(233)		153,653
Amortization of intangibles		1,027		24		-		1,051
Depreciation expense		14,471		267		-		14,738
Other operating expenses		359,978		670		(909)		359,739
Income tax expense (benefit)		76,848		(333)		316		76,831
Net income	$	259,987	$	2,285	$	360	$	262,632
Segment assets	$	66,506,939	$	5,193,058	$	(4,829,729)	$	66,870,268

106

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 United States include E-loan, an online platform used to offer personal loans, co-branded credit cards offerings and an online deposit gathering platform. In the Virgin Islands, the BPPR segment offers banking products, including loans and deposits. During the quarter ended March 31, 2022, the BPPR segment generated approximately $12.0 million (2021- $12.7 million) in revenues from its operations in the United States, including net interest income, service charges on deposit accounts and other service fees. In addition, the BPPR segment generated $10.8 million in revenues (2021- $11.6 million) from its operations in the U.S. and British Virgin Islands. At March 31, 2022, total assets for the BPPR segment related to its operations in the United States amounted to $700 million (December 31, 2021- $589 million).

Geographic Information
			Quarter ended
(In thousands)			March 31, 2022		March 31, 2021
Revenues:^[1]
Puerto Rico		$	527,673	$	518,709
United States			103,174		96,012
Other			18,157		18,044
Total consolidated revenues		$	649,004	$	632,765
[1]	Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net (loss) gain, including impairment on equity securities, net loss on trading account debt securities, indemnity reserves on loans sold expense and other operating income.

Selected Balance Sheet Information:
(In thousands)			March 31, 2022		December 31, 2021
Puerto Rico
	Total assets	$	56,904,970	$	63,221,282
	Loans		19,823,507		19,770,118
	Deposits		53,004,727		57,211,608
United States
	Total assets	$	11,234,624	$	10,986,055
	Loans		9,201,713		8,903,493
	Deposits		7,843,062		7,777,232
Other
	Total assets	$	1,385,488	$	890,562
	Loans		618,120		626,115
	Deposits^[1]		2,014,506		2,016,248
[1]	Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.

107

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. The Corporation’s mortgage origination business is conducted under the brand name Popular Mortgage, a division of BPPR. In the U.S. mainland, the Corporation provides retail, mortgage and commercial banking services through its New York-chartered banking subsidiary, Popular Bank (“PB”), 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.

The Corporation has several investments which it accounts for under the equity method. As of March 31, 2022, the Corporation had a 16.26% interest in EVERTEC, Inc. (“EVERTEC”), whose operating subsidiaries provide transaction processing services throughout the Caribbean and Latin America, and service many of the Corporation’s systems infrastructure and transaction processing businesses. During the quarter ended March 31, 2022, the Corporation recorded $8.1 million in earnings from its investment in EVERTEC, which had a carrying amount of $120 million as of the end of the quarter. Also, the Corporation had a 15.84% equity interest in Centro Financiero BHD León, S.A. (“BHD León”), one of the largest banking and financial services groups in the Dominican Republic. During the quarter ended March 31, 2022, the Corporation recorded $7.4 million in earnings from its investment in BHD León, which had a carrying amount of $185 million, as of the end of the quarter.

SIGNIFICANT EVENTS

Entry into Asset Purchase Agreement with Evertec; Renegotiation and Extension of Commercial Agreements

On February 24, 2022, the Corporation and Banco Popular de Puerto Rico (“BPPR”) entered into an Asset Purchase Agreement (the “Purchase Agreement”), with Evertec, Inc. (“EVERTEC”) and Evertec Group, LLC, a wholly owned subsidiary of EVERTEC (“EVERTEC Group”), pursuant to which BPPR will purchase from EVERTEC Group certain information technology and related assets currently used by EVERTEC to service certain of BPPR’s key channels (the “Acquired Assets”) under the Amended and Restated Master Service Agreement (the “MSA”), dated September 30, 2010, among the Corporation, BPPR and EVERTEC. In connection with the purchase of the Acquired Assets, BPPR will assume certain liabilities relating to the Acquired Assets (together with the purchase of the Acquired Assets, the “Transaction”). The Transaction is expected to close on or about June 30, 2022, subject to the satisfaction of certain closing conditions.

In connection with the consummation of the Transaction (the “Closing”), the Corporation will transfer to EVERTEC Group, as consideration for the Transaction, shares of EVERTEC’s common stock (“EVERTEC Common Stock”) having an aggregate value of approximately $197 million, subject to certain purchase price adjustments, based on a price per share of $42.84, which value was determined at the time of entering into the Purchase Agreement. As a result of this transfer, the Corporation expects that its percentage ownership of the outstanding shares of EVERTEC Common Stock will be reduced from its current level, which is approximately 16.2%, to approximately 10.5% immediately following the Closing. As part of the transaction, the Corporation has also agreed to reduce its voting interest in EVERTEC below 4.5%, whether through selling shares of EVERTEC Common Stock or a conversion of such shares into non-voting preferred stock. The Corporation expects to sell down its stake in EVERTEC below 4.5% following the closing and intends to return to shareholders, via common stock repurchases, the after-tax gains resulting from such sale, subject to the receipt of regulatory approvals.

Additionally, as part of the Closing, the Corporation and BPPR will also enter into with EVERTEC, among other commercial agreements, a Second Amended and Restated Master Services Agreement (the “Second A&R MSA”), pursuant to which EVERTEC Group will continue to provide various key information technology and various transaction processing services to the Corporation, BPPR and their respective subsidiaries, which services are provided under the currently effective MSA.

108

Capital Actions

On March 1, 2022 the Corporation announced that on February 28, 2022 it entered into an accelerated share repurchase agreement (the “ASR Agreement”) to repurchase an aggregate of $400 million of Popular’s common stock. Popular previously disclosed in a press release on January 12, 2022 its plan to repurchase up to $500 million of its common stock as part of its planned capital actions for 2022.

Under the terms of the ASR Agreement, on March 2, 2022 the Corporation made an initial payment of $400 million and received an initial delivery of 3,483,942 shares of Popular’s Common Stock (the “Initial Shares”).

The transaction was accounted for as a treasury stock transaction. Furthermore, as a result of the receipt of the Initial Shares, the Corporation recognized in Stockholders’ equity approximately $320 million in treasury stock and $80 million as a reduction of capital surplus. Upon the final settlement of the ASR Agreement, the Corporation expects to further adjust its treasury stock and capital surplus accounts to reflect the final delivery or receipt of cash or shares, which will depend on the volume-weighted average price of the Corporation’s common stock during the term of the ASR Agreement, less a discount. The final settlement of the ASR Agreement is expected to occur no later than the third quarter of 2022.

Popular expects to execute during the remainder of the year, in the open market or in privately negotiated transactions, the remaining $100 million in common stock repurchases contemplated as part of the Corporation’s 2022 capital actions announced in January 2022. The timing and exact amount of such additional repurchases will be subject to various factors, including market conditions and the Corporation’s capital position and financial performance.

On February 23, 2022, the Corporation’s Board of Directors approved a quarterly cash dividend of $0.55 per share, an increase from the previous $0.45 per share quarterly dividend, on its outstanding common stock. The dividend was paid on April 1, 2022 to stockholders of record at the close of business on March 15, 2022.

OVERVIEW

Table 1 provides selected financial data and performance indicators for the quarters ended March 31, 2022 and 2021.

109

Table 1 - Financial highlights

Financial Condition Highlights		Ending Balances at					Average for the Quarter Ended [1]
(In thousands)		March 31, 2022	December 31, 2021			Variance		March 31, 2022			March 31, 2021			Variance
Money market investments	$	10,069,692	$	17,536,719	$	(7,467,027)	$	14,763,104		$	12,450,533		$	2,312,571
Investment securities		26,658,289		25,267,418		1,390,871		28,540,438			21,305,160			7,235,278
Loans		29,643,340		29,299,725		343,615		29,246,344			29,335,164			(88,820)
Earning assets		66,371,321		72,103,862		(5,732,541)		72,549,886			63,090,857			9,459,029
Total assets		69,525,082		75,097,899		(5,572,817)		75,628,669			66,086,263			9,542,406
Deposits		62,862,295		67,005,088		(4,142,793)		67,601,597			57,696,863			9,904,734
Borrowings		1,060,706		1,155,166		(94,460)		1,079,096			1,322,431			(243,335)
Stockholders’ equity		4,671,246		5,969,397		(1,298,151)		5,983,308			5,693,673			289,635
[1] Average balances exclude unrealized gains or losses on debt securities available-for-sale.

Operating Highlights							First Quarter
(In thousands, except per share information)								2022			2021			Variance
Net interest income							$	494,312		$	479,112		$	15,200
Provision for credit losses (benefit)								(15,500)			(82,226)			66,726
Non-interest income								154,692			153,653			1,039
Operating expenses								402,339			375,528			26,811
Income before income tax								262,165			339,463			(77,298)
Income tax expense								50,479			76,831			(26,352)
Net income							$	211,686		$	262,632		$	(50,946)
Net income applicable to common stock							$	211,333		$	262,279		$	(50,946)
Net income per common share - basic							$	2.69		$	3.13		$	(0.44)
Net income per common share - diluted							$	2.69		$	3.12		$	(0.43)
Dividends declared per common share							$	0.55		$	0.40		$	0.15

							First Quarter
Selected Statistical Information								2022			2021
Common Stock Data
End market price							$	81.74		$	70.32
Book value per common share at period end								60.78			69.63
Profitability Ratios
Return on assets								1.14	%		1.61	%
Return on common equity								14.38			18.76
Net interest spread								2.69			2.96
Net interest spread (taxable equivalent) - Non-GAAP								2.98			3.28
Net interest margin								2.75			3.07
Net interest margin (taxable equivalent) - Non-GAAP								3.05			3.39
Capitalization Ratios
Average equity to average assets								7.91	%		8.62	%
Common equity Tier 1 capital								16.26			17.08
Tier I capital								16.33			17.15
Total capital								18.19			19.62
Tier 1 leverage								6.98			8.06

110

Net interest income on a taxable equivalent basis – Non-GAAP Financial Measure

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 all interest related to these assets, the interest income has been converted to a taxable equivalent basis, using the applicable statutory income tax rates for each period. The taxable equivalent computation considers the interest expense and other related expense disallowances required by Puerto Rico tax law. Thereunder, the exempt interest can be deducted up to the amount of taxable income.

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. Net interest income on a taxable equivalent basis is presented with its different components in Table 2, along with the reconciliation to net interest income (GAAP), for the quarter ended March 31, 2022 as compared with the same period in 2021, segregated by major categories of interest earning assets and interest-bearing liabilities.

Non-GAAP financial measures used by the Corporation may not be comparable to similarly named Non-GAAP financial measures used by other companies.

Financial highlights for the quarter ended March 31, 2022

 For the quarter ended March 31, 2022, the Corporation recorded net income of $ 211.7 million, compared to net income of $ 262.6 million for the same quarter of the previous year. Net interest margin for the first quarter of 2022 was 2.75%, a decrease of 32 basis points when compared to 3.07% for the same quarter of the previous year, mainly due to earning asset mix driven by higher money market and investment securities which carry a low yield, and lower interest from loans under the U.S. Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”), partially offset by lower cost of deposits. On a taxable equivalent basis, the net interest margin was of 3.05%, compared to 3.39% for the same quarter of the previous year. The Corporation recorded a release of $15.5 million on its reserve for credit losses, compared to a reserve release of $82.2 million in the same quarter of 2021, reflecting changes to the economic outlook, qualitative reserves, and portfolio credit quality. Non-interest income remained flat at $154.7 million at March 31, 2022, when compared to $153.7 million at March 31, 2021. Operating expenses were higher by $26.8 million principally due to higher personnel costs and professional fees.

 Total assets at March 31, 2022 amounted to $69.5 billion, compared to $75.1 billion, at December 31, 2021. The decrease was mainly due to lower money market investments, partially offset by higher debt securities available-for-sale.

 Total deposits at March 31, 2022 decreased by $4.1 billion when compared to deposits at December 31, 2021, mainly due to lower Puerto Rico public sector deposits by $5.5 billion at BPPR as a result of the payments made by Puerto Rico pursuant to the Plan of Adjustment for Puerto Rico under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”).

 Total stockholders' equity decreased by $1.3 billion when compared to December 31, 2021, principally due to an increase in accumulated unrealized losses on debt securities available-for-sale by $1.1 billion due to a decline in fair value of fixed-rate debt securities as a result of the rising interest rate environment, the impact of the $400 million ASR and declared quarterly common stock dividends, partially offset by the net income of $211.7 million for the quarter.

 At March 31, 2022, the Corporation’s tangible book value per common share was $51.16.

 Capital ratios continued to be strong. As of March 31, 2022, the Corporation’s common equity tier 1 capital ratio was 16.26%, the tier 1 leverage ratio was 6.98%, and the total capital ratio was 18.19%. Refer to Table 7 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.

111

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 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 Corporation’s 2021 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 2021 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.

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 (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 Popular, Inc.’s 2021 Form 10-K. Also, refer to Note 2 to the Consolidated Financial Statements included in the 2021 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.

112

OPERATING RESULTS ANALYSIS

NET INTEREST INCOME

Net interest income for the first quarter of 2022 was $494.3 million, an increase of $15.2 million when compared to $479.1 million for the same quarter of 2021. Taxable equivalent net interest income was $548.1 million for the first quarter of 2022 compared to $529.8 million in the first quarter of 2021, an increase of $18.3 million.

Net interest margin for the first quarter of 2022 was 2.75%, a decrease of 32 basis points when compared to 3.07% for the same quarter of the previous year. The decrease in the net interest margin is driven by earning asset mix due to a higher proportion of money market and investment securities, resulting from a higher volume of deposits in the quarter, and lower loan fees related to SBA PPP loans, partially offset by a lower cost of deposits. The net interest margin, on a taxable equivalent basis, for the first quarter of 2022 was 3.05%, a decrease of 34 basis points when compared to 3.39% for the same quarter of 2021. The detailed variances of the increase in net interest income are described below:

Positive variances:

 Higher interest income from money market, investment, and trading securities by $17.0 million due a higher volume by $9.5 billion due to purchases of U.S. Treasury securities and a higher volume of money market investments. The increase is associated to a higher volume of deposits of a similar amount. The yield of the portfolio decreased by 17 basis points due to investments in a lower interest rate environment and maturities of higher yielding mortgage-backed securities, partially offset by a higher interest rate received on excess reserves at the Federal Reserve by 8 basis points

 The average auto and lease financing portfolios increased by $435.0 million and reflected higher interest income by $3.5 million driven by a sustained demand for automobiles; and

 Lower interest expense on deposits due to the decrease in interest cost by 8 basis points, mainly at Popular Bank., as a result of the low interest rate environment that has prevailed since March 2020. In the U.S. the cost of interest-bearing deposits decreased 20 basis points when compared to the same quarter in 2021 and in P.R. the decrease was 5 basis points. The impact from lower rates was partially offset by higher average balance of interest-bearing deposits by $7.2 billon when compared with the same quarter in 2021. The Corporation reported increase in most deposits categories in P.R. including public, commercial and retail deposits;

Partially offset by:

 Lower interest income from commercial loans by $6.9 billion resulting from lower PPP loan fees by $12.5 million, partially offset by a higher volume by $117.0 million. The increase in volume over the same quarter in 2021 was mostly in Popular Bank as the BPPR portfolio decreased mainly as a result of the repayment of PPP loans; and

 Lower interest expense on medium and long-term debt due to redemption, in the fourth quarter of 2021, of all outstanding 6.70% Cumulative Monthly Income Trust Preferred Securities ($186.7 million).

Prepayment penalties, late fees collected and the amortization of premiums on purchased loans are included as part of the loan yield. Interest income related to these items for the quarters ended March 31, 2022 and 2021 amounted to $16.3 million and $33.7 million, respectively. The decrease of $17.4 million is mainly related to lower amortized fees resulting from the forgiveness of PPP loans of $10.0 million compared to $20.0 million in the first quarter of 2021 and lower amortization of the fair value discount of loan portfolios acquired in previous years.

113

	Table 2 - Analysis of Levels & Yields on a Taxable Equivalent Basis (Non-GAAP)
	Quarter ended March 31,
																					Variance
	Average Volume					Average Yields / Costs								Interest							Attributable to
	2022		2021	Variance		2022		2021		Variance					2022		2021		Variance		Rate		Volume
	(In millions)														(In thousands)
$	14,763	$	12,451	$	2,312	0.18	%	0.10	%	0.08	%	Money market investments		$	6,464	$	3,112	$	3,352	$	2,688	$	664
	28,471		21,221		7,250	1.95		2.35		(0.40)		Investment securities [1]			137,350		123,665		13,685		(17,819)		31,504
	70		84		(14)	5.90		4.96		0.94		Trading securities			1,019		1,033		(14)		178		(192)
												Total money market,
													investment and trading
	43,304		33,756		9,548	1.35		1.52		(0.17)			securities		144,833		127,810		17,023		(14,953)		31,976
												Loans:
	13,741		13,624		117	5.08		5.33		(0.25)			Commercial		172,128		179,064		(6,936)		(8,460)		1,524
	727		911		(184)	5.45		5.30		0.15			Construction		9,758		11,901		(2,143)		332		(2,475)
	1,393		1,215		178	5.95		6.04		(0.09)			Leasing		20,720		18,354		2,366		(274)		2,640
	7,388		7,869		(481)	5.24		5.00		0.24			Mortgage		96,768		98,429		(1,661)		4,513		(6,174)
	2,537		2,513		24	11.20		11.36		(0.16)			Consumer		70,062		70,401		(339)		(1,334)		995
	3,460		3,203		257	8.12		8.63		(0.51)			Auto		69,252		68,152		1,100		(4,192)		5,292
	29,246		29,335		(89)	6.06		6.15		(0.09)		Total loans			438,688		446,301		(7,613)		(9,415)		1,802
$	72,550	$	63,091	$	9,459	3.25	%	3.67	%	(0.42)	%	Total earning assets		$	583,521	$	574,111	$	9,410	$	(24,368)	$	33,778
												Interest bearing deposits:
$	28,288	$	22,674	$	5,614	0.10	%	0.15	%	(0.05)	%		NOW and money market [2]	$	7,323	$	8,262	$	(939)	$	(2,661)	$	1,722
	16,434		14,364		2,070	0.16		0.20		(0.04)			Savings		6,564		7,020		(456)		(1,633)		1,177
	6,737		7,265		(528)	0.66		0.83		(0.17)			Time deposits		10,896		14,919		(4,023)		(2,649)		(1,374)
	51,459		44,303		7,156	0.20		0.28		(0.08)		Total interest bearing deposits			24,783		30,201		(5,418)		(6,943)		1,525
	91		98		(7)	0.36		0.59		(0.23)		Short-term borrowings			80		143		(63)		(51)		(12)
												Other medium and
	1,013		1,246		(233)	4.18		4.51		(0.33)			long-term debt		10,546		13,995		(3,449)		(268)		(3,181)
												Total interest bearing
	52,563		45,647		6,916	0.27		0.39		(0.12)			liabilities		35,409		44,339		(8,930)		(7,262)		(1,668)
	16,143		13,394		2,749							Demand deposits
	3,844		4,050		(206)							Other sources of funds
$	72,550	$	63,091	$	9,459	0.20	%	0.28	%	(0.08)	%	Total source of funds			35,409		44,339		(8,930)		(7,262)		(1,668)
												Net interest margin/
						3.05	%	3.39	%	(0.34)	%		income on a taxable equivalent basis (Non-GAAP)		548,112		529,772		18,340	$	(17,106)	$	35,446
						2.98	%	3.28	%	(0.30)	%	Net interest spread
												Taxable equivalent adjustment			53,800		50,661		3,139
												Net interest margin/ income
						2.75	%	3.07	%	(0.32)	%		non-taxable equivalent basis (GAAP)	$	494,312	$	479,111	$	15,201
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 outstanding securities balances are based upon amortized cost excluding any unrealized gains or losses on securities available-for-sale.
[2] Includes interest bearing demand deposits corresponding to certain government entities in Puerto Rico.

114

Provision for Credit Losses - Loans Held-in-Portfolio and Unfunded Commitments

For the quarter ended March 31, 2022, the Corporation recorded a release of $15.2 million for its reserve for credit losses related to loans held-in-portfolio and unfunded commitments. The reserve release related to the loans-held-in-portfolio for the quarter ended March 31, 2022 was $14.4 million, compared to a reserve release of $75.8 million for the quarter ended March 31, 2021. The reserve release reflects the improvements in credit quality, changes in the macroeconomic outlook, and changes in qualitative reserves. The reserve release related to unfunded commitments for the first quarter of 2022 was $0.8 million, compared to a reserve release of $6.3 million for the same period of 2021.

For the quarter ended March 31, 2022, the Corporation recorded a release of $12.7 million of its reserve for loans-held-in-portfolio for the BPPR segment, compared to a reserve release of $40.0 million for the quarter ended March 31, 2021. The Popular U.S. segment recorded a reserve release of $1.7 million for the quarter ended March 31, 2022, compared to a reserve release of $35.8 million for the same quarter in 2021.

At March 31, 2022, the total allowance for credit losses for loans held-in-portfolio amounted to $677.8 million, compared to $695.4 million as of December 31, 2021. The ratio of the allowance for credit losses to loans held-in-portfolio was 2.29% at March 31, 2022, compared to 2.38% at December 31, 2021. As discussed in Note 8 to the Consolidated Financial Statements, within the process to estimate its allowance for credit losses (“ACL”), the Corporation applies probability weightings to the outcomes of simulations using Moody’s Analytics’ Baseline, S3 (pessimistic) and S1 (optimistic) scenarios. The baseline scenario is assigned the highest probability, followed by the pessimistic scenario given the uncertainties in the economic outlook and downside risk. Refer to Note 8 to the Consolidated Financial Statements, for additional information on the Corporation’s methodology to estimate its allowance for credit losses (“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. For the quarter ended March 31, 2022, the Corporation recorded a reserve release of $0.3 million, compared to a benefit of $0.2 million for the quarter ended March 31, 2021. At March 31, 2022, the total allowance for credit losses for this portfolio amounted to $7.8 million, compared to $8.1 million as of December 31, 2021. Refer to Note 6 to Consolidated Financial Statements for additional information on the ACL for this portfolio.

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Non-Interest Income

Non-interest income was $154.7 million for the first quarter of 2022, an increase of $1.0 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 $6.5 million mainly due to higher credit card fees by $5.0 million as a result of higher interchange transactional volumes; and

 higher other operating income by $1.2 million mainly due to higher net earnings from the combined portfolio of investments under the equity method;

partially offset by

 lower income from mortgage banking activities by $4.5 million mainly due to an unfavorable variance of $6.5 million in net gains (losses) on the sale and valuation adjustments of mortgage loans due to changes in market rates, partially offset by higher realized gains on closed derivative positions; and

 an unfavorable variance in unrealized net gains on equity securities by $2.5 million mainly on deferred compensation plans that have an offsetting expense in personnel related expenses.

Operating Expenses

Operating expenses for the quarter ended March 31, 2022 increased by $26.8 million when compared with the same quarter of 2021, driven primarily by:

 higher personnel cost by $7.5 million mainly related to higher salaries by $9.3 million due to merit increases and minimum salary adjustments and higher pension, postretirement and medical insurance expense by $1.9 million; partially offset by $3.2 million in lower incentives related to the profit-sharing plan which is tied to the Corporation’s financial performance;

 higher equipment expense by $1.9 million due to higher amortization of software packages;

 higher professional fees by $8.5 million due to higher advisory expenses related to corporate initiatives;

 higher business promotions by $2.6 million due to credit cards rewards expense as a result of transactional volumes;

 lower net recoveries from other real estate owned by $1.8 million mainly due to higher corporate advances in mortgage properties; and

 higher operating expenses by $3.4 million mainly due to higher legal reserves.

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Table 3 - Operating Expenses
		Quarters ended March 31,
(In thousands)		2022		2021		Variance
Personnel costs:
	Salaries	$	98,673	$	89,335	$	9,338
	Commissions, incentives and other bonuses		31,339		33,218		(1,879)
	Pension, postretirement and medical insurance		12,783		10,924		1,859
	Other personnel costs, including payroll taxes		24,201		26,002		(1,801)
	Total personnel costs		166,996		159,479		7,517
Net occupancy expenses			24,723		26,013		(1,290)
Equipment expenses			23,479		21,575		1,904
Other taxes			15,715		13,959		1,756
Professional fees:
	Collections, appraisals and other credit related fees		2,226		3,320		(1,094)
	Programming, processing and other technology services		69,374		66,366		3,008
	Legal fees, excluding collections		3,954		2,365		1,589
	Other professional fees		32,943		27,897		5,046
	Total professional fees		108,497		99,948		8,549
Communications			6,147		6,833		(686)
Business promotion			15,083		12,521		2,562
FDIC deposit insurance			7,372		5,968		1,404
Other real estate owned (OREO) (income) expenses			(2,713)		(4,533)		1,820
Other operating expenses:
	Credit and debit card processing, volume and interchange expenses		12,509		12,454		55
	Operational losses		11,825		7,896		3,929
	All other		11,815		12,364		(549)
	Total other operating expenses		36,149		32,714		3,435
Amortization of intangibles			891		1,051		(160)
Total operating expenses		$	402,339	$	375,528	$	26,811

Income Taxes

For the quarter ended March 31, 2022, the Corporation recorded an income tax expense of $50.5 million with an effective tax rate (“ETR”) of 19%, compared to $76.8 million with an ETR of 23% for the same period of 2021. The income tax expense for the quarter ended March 31, 2022 reflects the impact of lower pre-tax income and higher tax exempt income.

At March 31, 2022, the Corporation had a net deferred tax asset amounting to $0.8 billion, net of a valuation allowance of $0.5 billion. The net deferred tax asset related to the U.S. operations was $0.2 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.

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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 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 income of $6.3 million for the quarter ended March 31, 2022, compared with a net income of $2.3 million for the same quarter of the previous year. The increase in net income was mainly attributed to lower interest expense related to the redemption of $186.7 million in Trust Preferred Securities issued by Popular Capital Trust I in the fourth quarter of 2021 and higher income from the portfolio of equity method investments.

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 $178.5 million for the quarter ended March 31, 2022, compared with net income of $212.2 million for the same quarter of the previous year. The decrease in net income was principally driven by the following:

 Higher net interest income by $4.8 million mainly due to:

 higher interest income from money market and investment securities by $15.6 million due to higher average balances of U.S. Treasury securities, offset by lower yields due to changes in market rates;

 lower interest expense on deposits by $2.1 million mainly due to lower costs, partially offset by higher average balance of deposits;

partially offset by

 lower interest income from loans by $13.0 million mainly from commercial loans due to lower fees from PPP loans.

The net interest margin for the quarter ended March 31, 2022 was 2.67% compared to 3.10% for the same quarter in the previous year. The decrease in net interest margin is driven by earnings assets mix and a lower yield in earning assets, partially offset by a lower cost of deposits.

 Non-interest income was higher by $0.8 million mainly due to:

 Higher other service fees by $6.8 million mainly due to higher credit card fees as a result of higher interchange transactional volumes;

partially offset by

 lower income from mortgage banking activities by $4.3 million mainly due to an unfavorable variance in net gains (losses) on the sale and valuation adjustments of mortgage loans due to changes in market rates, partially offset by higher realized gains on closed derivative positions; and

 lower other operating income by $1.6 million mostly due to a gain of $0.9 million from the sale of fully charged off consumer loans in the first quarter of 2021.

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 Higher operating expenses by $27.1 million mostly due to:

 Higher personnel costs by $7.1 million driven by higher salaries due to merit increases and minimum salary adjustments;

 higher other taxes by $2.0 million, mainly form personal property taxes;

 higher business promotions by $2.6 million due to credit cards rewards expense as a result higher transactional volumes;

 lower net recoveries from OREO by $1.7 million mainly due to higher corporate advances in mortgage properties; and

 higher other operating expenses by $12.8 million due to higher charges allocated from the Corporate segment, mainly advisory services, and higher legal reserves.

 Lower income tax expense by $19.5 million mainly due to lower income before tax and higher tax-exempt income.

Popular U.S.

For the quarter ended March 31, 2022, the reportable segment of Popular U.S. reported a net income of $27.0 million, compared with a net income of $47.8 million for the same quarter of the previous year. The decrease in net income was principally driven by the benefit of $36.7 million in the reserve for credit losses and unfunded commitments recorded in the quarter ended March 31, 2021, compared to a benefit of $2.0 million recorded in the current quarter. The factors that contributed to the variance in the financial results included the following:

 Higher net interest income by $7.4 million due to:

 higher interest income from loans by $5.3 million, mainly from growth in the commercial portfolio; and

 lower interest expense on deposits by $3.2 million mainly due to lower interest rates and lower average balance of time deposits.

partially offset by:

 lower income from debt securities by $1.5 million due to lower average balances.

The net interest margin for the quarter ended March 31, 2022 was 3.56% compared to 3.35% for the same quarter in the previous year.

 an unfavorable variance of $34.7 million on the provision for loan losses and unfunded commitments due to the above-mentioned reserve release of $36.7 million recorded in the quarter ended March 31, 2021, reflective of credit metrics and the macroeconomic outlook;

 non-interest income and operating expenses were relatively flat when compared to the quarter ended March 31, 2021;

 lower income tax expense by $6.4 million due mainly to a lower income before tax.

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FINANCIAL CONDITION ANALYSIS

Assets

The Corporation’s total assets were $69.5 billion at March 31, 2022, compared to $75.1 billion at December 31, 2021. 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 $7.5 billion mainly due to lower Puerto Rico public sector deposits. Debt securities available-for-sale increased by $1.4 billion at March 31, 2022, due to purchases of U.S. Treasury securities. Refer to Note 5 to the Consolidated Financial Statements for additional information with respect to the Corporation’s debt securities available-for-sale.

Loans

Refer to Table 4 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 $0.3 billion to $29.6 billion at March 31, 2022, mainly due to an increase in commercial loans at both BPPR and PB by $0.3 billion.

Table 4 - Loans Ending Balances
(In thousands)		March 31, 2022		December 31, 2021		Variance
Loans held-in-portfolio:
Commercial	$	14,028,246	$	13,732,701	$	295,545
Construction		744,783		716,220		28,563
Leasing		1,426,122		1,381,319		44,803
Mortgage		7,326,346		7,427,196		(100,850)
Auto		3,430,162		3,412,187		17,975
Consumer		2,632,531		2,570,934		61,597
Total loans held-in-portfolio	$	29,588,190	$	29,240,557	$	347,633
Loans held-for-sale:
Mortgage	$	55,150	$	59,168	$	(4,018)
Total loans held-for-sale	$	55,150	$	59,168	$	(4,018)
Total loans	$	29,643,340	$	29,299,725	$	343,615

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Other assets

Other assets amounted to $1.8 billion at March 31, 2022, compared to $1.6 billion at December 31, 2021. 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, 2022 and December 31, 2021.

Liabilities

The Corporation’s total liabilities were $64.9 billion at March 31, 2022, a decrease of $4.2 billion, compared to $69.1 billion at December 31, 2021, mainly due to lower deposits as discussed below.

Deposits and Borrowings

The composition of the Corporation’s financing to total assets at March 31, 2022 and December 31, 2021 is included in Table 5.

Table 5 - Financing to Total Assets
	March 31,		December 31,		% increase (decrease)		% of total assets
(In millions)		2022		2021	from 2020 to 2021		2022		2021
Non-interest bearing deposits	$	16,097	$	15,684	2.6	%	23.2	%	20.9	%
Interest-bearing core deposits		42,911		47,954	(10.5)		61.7		63.9
Other interest-bearing deposits		3,854		3,367	14.5		5.6		4.5
Repurchase agreements		73		92	(20.7)		0.1		0.1
Other short-term borrowings		-		75	N.M.		-		0.1
Notes payable		988		989	(0.1)		1.4		1.3
Other liabilities		931		968	(3.8)		1.3		1.3
Stockholders’ equity		4,671		5,969	(21.7)		6.7		7.9

Deposits

The Corporation’s deposits totaled $62.9 billion at March 31, 2022, compared to $67.0 billion at December 31, 2021. The deposits decrease of $4.1 billion was mainly due to lower Puerto Rico public sector deposits by $5.5 billion at BPPR, as a result of the payments made by Puerto Rico pursuant to the Plan of Adjustment for Puerto Rico under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) which became effective on March 15, 2022. At March 31, 2022, public sector deposits amounted to $14.8 billion. The receipt by the Puerto Rico Government of additional COVID-19 pandemic and hurricane recovery related Federal assistance, and seasonal tax collections, could increase public deposit balances at BPPR in the near term. However, 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 COVID-19 pandemic and hurricane recovery federal assistance is distributed and the financial condition, liquidity and cash management practices of the Puerto Rico Government and its instrumentalities. During the quarter ended March 31, 2022, approximately $10.1 billion were withdrawn from the public sector deposits held by the Bank to make debt service payments and other administrative payments pursuant to the Plan of Adjustment for Puerto Rico.

Refer to Table 6 for a breakdown of the Corporation’s deposits at March 31, 2022 and December 31, 2021.

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Table 6 - Deposits Ending Balances
(In thousands)	March 31, 2022		December 31, 2021		Variance
Demand deposits^[1]	$	25,684,715	$	25,889,732	$	(205,017)
Savings, NOW and money market deposits (non-brokered)		29,318,333		33,674,134		(4,355,801)
Savings, NOW and money market deposits (brokered)		768,558		729,073		39,485
Time deposits (non-brokered)		6,964,848		6,685,938		278,910
Time deposits (brokered CDs)		125,841		26,211		99,630
Total deposits	$	62,862,295	$	67,005,088	$	(4,142,793)
[1] Includes interest and non-interest bearing demand deposits.

Borrowings

The Corporation’s borrowings totaled $1.1 billion at March 31, 2022 and December 31, 2021. 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 $4.7 billion at March 31, 2022, a decrease of $1.3 billion when compared to December 31, 2021, principally due to an increase in accumulated unrealized losses on debt securities available-for-sale by $1.1 billion due to a decline in fair value of fixed-rate debt securities as a result of the rising interest rate environment, the impact of the $400 million ASR and declared quarterly common stock dividends, partially offset by the net income of $211.7 million for 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.

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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, 2022, 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 7, which include common equity tier 1, Tier 1 capital, total capital and leverage capital as of March 31, 2022 and December 31, 2021.

Table 7 - Capital Adequacy Data

(Dollars in thousands)			March 31, 2022			December 31, 2021
Common equity tier 1 capital:
	Common stockholders equity - GAAP basis	$	4,649,103		$	5,947,254
	CECL transitional amount^[1]		127,127			169,502
	AOCI related adjustments due to opt-out election		1,327,073			257,762
	Goodwill, net of associated deferred tax liability (DTL)		(590,227)			(591,703)
	Intangible assets, net of associated DTLs		(15,328)			(16,219)
	Deferred tax assets and other deductions		(280,547)			(290,565)
Common equity tier 1 capital		$	5,217,201		$	5,476,031
Additional tier 1 capital:
	Preferred stock		22,143			22,143
Additional tier 1 capital		$	22,143		$	22,143
Tier 1 capital		$	5,239,344		$	5,498,174
Tier 2 capital:
	Trust preferred securities subject to phase in as tier 2		192,674			192,674
	Other inclusions (deductions), net		401,719			393,257
Tier 2 capital		$	594,393		$	585,931
Total risk-based capital		$	5,833,737		$	6,084,105
Minimum total capital requirement to be well capitalized		$	3,207,795		$	3,144,122
Excess total capital over minimum well capitalized		$	2,625,943		$	2,939,983
Total risk-weighted assets		$	32,077,945		$	31,441,224
Total assets for leverage ratio		$	75,053,225		$	74,238,367
Risk-based capital ratios:
	Common equity tier 1 capital		16.26	%		17.42	%
	Tier 1 capital		16.33			17.49
	Total capital		18.19			19.35
	Tier 1 leverage		6.98			7.41
[1] The CECL transitional amount includes the impact of Popular's adoption of the new CECL accounting standard on January 1, 2020.

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The Basel III capital rules provide that a depository institution will be 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%. Management has determined that as of March 31, 2022, the Corporation, BPPR and PB 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 delays 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, 2022, the Corporation had phased-in 25% of the cumulative CECL deferral with the remaining impact to be recognized over the remainder of the three-year transition period.

On April 9, 2020, federal banking regulators issued an interim final rule to modify the Basel III regulatory capital rules applicable to banking organizations to allow those organizations participating in the Paycheck Protection Program (“PPP”) established under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) to neutralize the regulatory capital effects of participating in the program. Specifically, the agencies have clarified that banking organizations, including the Corporation and its Bank subsidiaries, are permitted to assign a zero percent risk weight to PPP loans for purposes of determining risk-weighted assets and risk-based capital ratios. Additionally, in order to facilitate use of the Paycheck Protection Program Liquidity Facility (the “PPPL Facility”), which provides Federal Reserve Bank loans to eligible financial institutions such as the Corporation’s Bank subsidiaries to fund PPP loans, the agencies further clarified that, for purposes of determining leverage ratios, a banking organization is permitted to exclude from total average assets PPP loans that have been pledged as collateral for a PPPL Facility. As of March 31, 2022, the Corporation has $173 million in PPP loans and no loans were pledge as collateral for PPPL Facilities.

The decrease in the common equity Tier I capital ratio, Tier I capital ratio, and total capital ratio as of March 31, 2022 as compared to December 31, 2021 was mainly attributed to the accelerated share repurchase agreement to repurchase an aggregate of $400 million of Popular’s common stock, and an increase in risk-weighted assets driven by the growth in the commercial loans portfolio, partially offset by the three month period earnings. The decrease in leverage capital ratio was mainly due to the increase in average total assets, which mostly did not have a significant impact on the risk-weighted assets.

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Non-GAAP financial measures

The tangible common equity, tangible common equity ratio, tangible assets and tangible book value per common share, which are presented in the table that follows, are non-GAAP measures. Management and many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with more traditional bank capital ratios 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. Neither tangible common equity nor tangible assets or related measures should be considered 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 any other related measures may differ from that of other companies reporting measures with similar names.

Table 8 provides a reconciliation of total stockholders’ equity to tangible common equity and total assets to tangible assets as of March 31, 2022, and December 31, 2021.

Table 8 - Reconciliation of Tangible Common Equity and Tangible Assets

(In thousands, except share or per share information)		March 31, 2022			December 31, 2021
Total stockholders’ equity	$	4,671,246		$	5,969,397
Less: Preferred stock		(22,143)			(22,143)
Less: Goodwill		(720,293)			(720,293)
Less: Other intangibles		(15,328)			(16,219)
Total tangible common equity	$	3,913,482		$	5,210,742
Total assets	$	69,525,082		$	75,097,899
Less: Goodwill		(720,293)			(720,293)
Less: Other intangibles		(15,328)			(16,219)
Total tangible assets	$	68,789,461		$	74,361,387
Tangible common equity to tangible assets		5.69	%		7.01	%
Common shares outstanding at end of period		76,487,523			79,851,169
Tangible book value per common share	$	51.16		$	65.26


		Quarterly average
Total stockholders’ equity [1]	$	5,983,309		$	5,961,214
Less: Preferred Stock		(22,143)			(22,143)
Less: Goodwill		(720,292)			(706,184)
Less: Other intangibles		(15,881)			(19,889)
Total tangible common equity	$	5,224,993		$	5,212,998
Return on average tangible common equity		16.40	%		15.66	%
[1] Average balances exclude unrealized gains or losses on debt securities available-for-sale.

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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 $26.4 billion as of March 31, 2022. Other assets subject to market risk include loans held-for-sale, which amounted to $55 million, mortgage servicing rights (“MSRs”) which amounted to $125 million and securities classified as “trading”, which amounted to $36 million, as of March 31, 2022.

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 reflect instantaneous parallel changes of -100, -200, +100, +200 and +400 basis points during the succeeding twelve-month period. Simulation analyses are based on many assumptions, including 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. 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, 2022 and December 31, 2021, assuming a static balance sheet and parallel changes over flat spot rates over a one-year time horizon:

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Table 9 - Net Interest Income Sensitivity (One Year Projection)
	March 31, 2022					December 31, 2021
(Dollars in thousands)		Amount Change	Percent Change			Amount Change	Percent Change
Change in interest rate
+400 basis points	$	125,033	6.13	%	$	257,223	13.21	%
+200 basis points		84,308	4.14			197,354	10.14
+100 basis points		66,244	3.25			166,920	8.57
-100 basis points		(90,493)	(4.44)			(78,408)	(4.03)
-200 basis points		(143,311)	(7.03)			(120,661)	(6.20)

As of March 31, 2022, NII simulations show the Corporation maintains an asset sensitive position and is expected to benefit from an overall rising rate environment. The decrease in sensitivity for the period in rising rate scenarios is primarily driven by the reduction of $7.5 billion in money market investments due to lower Puerto Rico public sector deposits as a result of the payments made by Puerto Rico pursuant to the Plan of Adjustment for Puerto Rico under Title III of PROMESA. This reduction in assets that re-price instantaneously when the Federal Reserve adjusts its short term rates was the main contributor to the change in sensitivity. This affects the rising rate scenarios because there are fewer assets that re-price upwards in the simulation horizon thus producing less income than previously simulated. The declining rate scenarios would typically be affected in the opposite direction, but since short term rates were still close to zero at the end of the quarter, the sensitivity effect on these assets is muted in both declining rate scenarios. The slight increase in sensitivity to down rate scenarios is due to rates in the intermediate part of the yield curve being significantly higher at quarter end, and thus being able to fall further in the declining rate scenarios, therefore negatively affecting the assets that reprice based on the other points of the yield curve.

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, 2022, the Corporation held trading securities with a fair value of $36 million, representing approximately 0.05% of the Corporation’s total assets, compared with $30 million and 0.04%, respectively, at December 31, 2021. As shown in Table 10, the trading portfolio consists principally of mortgage-backed securities and U.S. Treasuries, which at March 31, 2022 were investment grade securities. As of March 31, 2022 and December 31, 2021, the trading portfolio also included $0.1 million in Puerto Rico government obligations. Trading instruments are recognized at fair value, with changes resulting from fluctuations in market prices, interest rates or exchange rates reported in current period earnings. The Corporation recognized net trading account losses of $723 thousand and $45 thousand, respectively, for the quarters ended March 31, 2022 and March 31, 2021.

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Table 10 - Trading Portfolio
		March 31, 2022				December 31, 2021
(Dollars in thousands)		Amount	Weighted Average Yield^[1]			Amount	Weighted Average Yield^[1]
Mortgage-backed securities	$	18,779	5.44	%	$	22,559	5.12	%
U.S. Treasury securities		16,686	0.26			6,530	0.03
Collateralized mortgage obligations		227	5.59			257	5.61
Puerto Rico government obligations		81	0.47			85	0.47
Interest-only strips		267	12.00			280	12.00
Other (includes related trading derivatives)		2	4.63			-	-
Total	$	36,042	3.08	%	$	29,711	4.06	%
[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 $0.2 million for the last week in March 2022. There are numerous assumptions and estimates associated with VAR modeling, and actual results could differ from these assumptions and estimates. Backtesting is performed 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 commitments 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 to exogenous events such as the current COVID-19 pandemic, its credit rating is downgraded, or some other event 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 and regulatory changes, could also affect its ability to obtain funding.

Liquidity is managed by the Corporation at the level of the holding companies that own the banking and non-banking subsidiaries. It is also managed at the level of the banking and non-banking subsidiaries. As further explained below, a principal source of liquidity for the bank holding companies (the “BHCs”) are dividends received from banking and non-banking subsidiaries. The Corporation has adopted policies and limits to monitor more effectively the Corporation’s liquidity position and that of the 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.

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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, 2022 and 89% at December 31, 2021. The ratio of total ending loans to deposits was 47% at March 31, 2022, compared to 44% at December 31, 2021. In addition to traditional deposits, the Corporation maintains borrowing arrangements, which amounted to approximately $1.1 billion in outstanding balances at March 31, 2022 (December 31, 2021 - $1.2 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.

As disclosed in Note 17 to the Consolidated Financial Statements, during the quarter ended March 31, 2022, the Corporation entered into a $400 million ASR and received an initial delivery of 3,483,942 shares of common stock.

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. 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.

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, credit card licensing agreements and support to several mutual funds administered by BPPR.

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, credit ratings (by nationally recognized credit rating agencies), and importantly, FDIC deposit insurance. Although a downgrade in the credit ratings of the Corporation’s banking subsidiaries may impact their ability to raise retail and commercial deposits or the rate that it is required to pay on such deposits, management does not believe that the impact should be material. 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 a downgrade in the credit ratings.

Deposits are a key source of funding as they tend to be less volatile than institutional borrowings and their cost is less sensitive to changes in market rates. Refer to Table 6 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 all non-interest bearing deposits, savings deposits and certificates of deposit under $250,000, excluding brokered deposits with denominations under $250,000. Core deposits have historically provided the Corporation with a sizable source of relatively stable and low-cost funds. Core deposits totaled $59.0 billion, or 94% of total deposits, at March 31, 2022, compared with $63.6 billion, or 95% of total deposits, at December 31, 2021. Core deposits financed 89% of the Corporation’s earning assets at March 31, 2022, compared with 88% at December 31, 2021.

The distribution by maturity of certificates of deposits with denominations of $250,000 and over at March 31, 2022 is presented in the table that follows:

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Table 11 - Distribution by Maturity of Certificate of Deposits of $250,000 and Over
(In thousands)
3 months or less	$	2,143,245
Over 3 to 12 months		473,284
Over 1 year to 3 years		226,856
Over 3 years		130,845
Total	$	2,974,230

The Corporation had $0.9 billion in brokered deposits at March 31, 2022, which financed approximately 1% of its total assets (December 31, 2021 - $0.8 billion and 1%, 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, that banking subsidiary faces the risk of not being able to raise or maintain brokered deposits and faces 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, 2022, total public sector deposits were $14.8 billion, compared to $20.3 billion at December 31, 2021. Generally, these deposits require that the bank pledge 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, there are some timing differences between the time the deposit outflow occurs and when the bank receives its collateral.

At March 31, 2022, 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 and have sufficient liquidity 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 banking subsidiaries also are required to deposit cash or qualifying securities to meet margin requirements. To the extent that the value of securities previously pledged as collateral declines because of market changes, the Corporation will be required to deposit additional cash or securities to meet its margin requirements, thereby adversely affecting its liquidity. Finally, if management is required to rely more heavily on more expensive funding sources to meet its future growth, revenues may not increase proportionately to cover costs. In this case, profitability would be adversely affected.

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 use of these funds includes 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 and capitalizing its banking subsidiaries.

The BHCs have in the past borrowed in the money markets and in the corporate debt market primarily to finance their non-banking subsidiaries; however, the cash needs of the Corporation’s non-banking subsidiaries other than to repay indebtedness and interest are now minimal. These sources of funding are 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. 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.

The outstanding balance of notes payable at the BHCs amounted to $496 million at March 31, 2022 and December 31, 2021.

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The contractual maturities of the BHCs notes payable at March 31, 2022 are presented in Table 12.

Table 12 - Distribution of BHC's Notes Payable by Contractual Maturity

Year		(In thousands)
2023	$	298,158
Later years		198,299
Total	$	496,457

Annual debt service at the BHCs is approximately $32 million, and the Corporation’s latest quarterly dividend was $0.55 per share. The BHCs liquidity position continues to be adequate with sufficient cash on hand, investments and other sources of liquidity which are expected to be enough to meet all BHCs obligations during the foreseeable future. As of March 31, 2022, the BHCs had cash and money markets investments totaling $283 million, borrowing potential of $157 million from its secured facility with BPPR. In addition to these liquidity sources, the stake in EVERTEC had a market value of $477 million as of March 31, 2022 and it represents an additional source of contingent liquidity.

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. Popular, Inc. made a capital contribution to its wholly owned subsidiary Popular Securities amounting to $10 million during the first quarter of 2022. Additionally, during the first quarter of 2022, Popular, Inc. made a capital contribution of $25 million to its wholly owned captive insurance subsidiary, Popular Re, Inc.

Dividends

During the quarter ended March 31, 2022, the Corporation declared a cash dividend of $0.55 per common share outstanding ($42.1 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, 2022, the BHC’s received dividends amounting to $450 million from BPPR and $54 million from PNA. Dividends from BPPR constitute Popular, Inc.’s primary source of liquidity.

Other Funding Sources and Capital

The debt securities portfolio provides an additional source of liquidity, which may be realized through either securities sales 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 to be consummated, in addition to overall liquidity and risk appetite of the various counterparties. The Corporation’s unpledged debt securities amounted to $8.7 billion at March 31, 2022 and $3.0 billion at December 31, 2021. A substantial portion of these debt securities could be used to raise financing in the U.S. money markets or from secured lending sources.

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

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

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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. As discussed above, liquidity is managed by the Corporation in order to meet its short- and long-term cash obligations. Note 15 to the Consolidated Financial Statements has information on the Corporation’s borrowings by maturity, which amounted to $1.1 billion at March 31, 2022 (December 31, 2021 - $1.2 billion).

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.

The following summarized financial information presents the financial position of the obligor group, on a combined basis at March 31, 2022 and December 31, 2021, and the results of their operations for the period ended March 31, 2022 and March 31, 2021. 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.

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Table 13 - Summarized Statement of Condition

(In thousands)		March 31, 2022		December 31, 2021
Assets
Cash and money market investments	$	282,853	$	291,540
Investment securities		27,164		25,691
Accounts receivables from non-obligor subsidiaries		38,597		17,634
Accounts receivables from affiliates and related parties		583		-
Other loans (net of allowance for credit losses of $305 (2021 - $96))		28,779		29,349
Investment in equity method investees		124,236		114,955
Other assets		64,740		42,251
Total assets	$	566,952	$	521,420
Liabilities and Stockholders' deficit
Accounts payable to non-obligor subsidiaries	$	7,452	$	6,481
Accounts payable to affiliates and related parties		1,172		1,254
Notes payable		496,458		496,134
Other liabilities		109,582		97,172
Stockholders' deficit		(47,712)		(79,621)
Total liabilities and stockholders' deficit	$	566,952	$	521,420

Table 14 - Summarized Statement of Operations

		For the quarters ended
(In thousands)		March 31, 2022		March 31, 2021
Income:
Dividends from non-obligor subsidiaries	$	450,000	$	2,000
Interest income from non-obligor subsidiaries and affiliates		204		192
Earnings from investments in equity method investees		8,105		6,465
Other operating (expense) income		(755)		908
Total income	$	457,554	$	9,565
Expenses:
Services provided by non-obligor subsidiaries and affiliates (net of reimbursement by subsidiaries for services provided by parent of $120,032 (2021 - $41,438))	$	3,867	$	2,825
Other operating expenses		4,637		8,701
Total expenses	$	8,504	$	11,526
Net income (loss)	$	449,050	$	(1,961)

The Obligor group recorded $0.6 million of dividend receivable from its direct equity method investees for the quarter ended March 31, 2022 (2021 - $0.6 million).

Risks to Liquidity

Total lines of credit outstanding are not necessarily a measure of the total credit available on a continuing basis. Some of these lines could be subject to collateral requirements, standards of creditworthiness, leverage ratios and other regulatory requirements, among

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other factors. Derivatives, such as those embedded in long-term repurchase transactions or interest rate swaps, and off-balance sheet exposures, such as recourse, 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 economic and fiscal conditions in Puerto Rico, the credit quality of the Corporation could be affected and result in higher credit costs. Refer to the Geographic and Government Risk section of this MD&A for some highlights on the current status of the Puerto Rico economy and the ongoing fiscal crisis.

Factors that the Corporation does not control, such as the economic outlook and credit ratings of its principal markets and regulatory changes, could also affect its ability to obtain funding. In order to prepare for the possibility of such scenario, management has adopted contingency plans for raising financing under stress scenarios when important sources of funds that are usually fully available are temporarily unavailable. 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 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 total of its net income for that year, combined with its retained net income for the preceding two years, after considering those years’ dividend activity, less any required transfers to surplus or to a fund for the retirement of any preferred stock. During the quarter ended March 31, 2022, BPPR declared cash dividends of $450 million. At March 31, 2022, BPPR would have needed to obtain prior approval of the Federal Reserve Board before declaring a dividend due to its declared dividend activity and transfers to statutory reserves over the latest three years. 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. Pursuant to these requirements, PB may not declare or pay a dividend without the prior approval of the Federal Reserve Board and the NYSDFS. The ability of a bank subsidiary to up-stream dividends to its BHC could thus be impacted by its financial performance, 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, for example.

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.

Obligations Subject to Rating Triggers or Collateral Requirements

The Corporation’s banking subsidiaries currently do not use borrowings that are rated by the major rating agencies, as these banking subsidiaries are funded primarily with deposits and secured borrowings. The banking subsidiaries had $9 million in deposits at March 31, 2022 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. Also, 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 obligations amounted to approximately $29 million at March 31, 2022. 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.

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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 (the “Commonwealth” or “Puerto Rico”), which faces severe economic and fiscal challenges.

COVID-19 Pandemic

On December 2019, a novel strain of coronavirus (COVID-19) surfaced in Wuhan, China and has since spread globally to other countries and jurisdictions, including the mainland United States and Puerto Rico. In March 2020, the World Health Organization declared COVID-19 a pandemic. The pandemic has significantly disrupted and negatively impacted the global economy, disrupted global supply chains, created significant volatility in financial markets, and increased unemployment levels worldwide, including in the markets in which we do business.

In Puerto Rico, former Governor Wanda Vázquez issued an executive order in March 2020 declaring a health emergency, ordering residents to shelter in place, implementing a mandatory curfew, and requiring the closure of non-essential businesses. Although the most restrictive measures have been eased or lifted, allowing for the gradual reopening of the economy, certain measures remain in place and additional measures may be implemented in the future as a result of a resurgence in the spread of the virus or new strains of the virus. Since the beginning of the pandemic, most businesses have had to make significant adjustments to protect customers and employees, including transitioning to telework and suspending or modifying certain operations in compliance with health and safety guidelines. The Puerto Rico Legislative Assembly enacted legislation in April 2020 requiring financial institutions to offer moratoriums on consumer financial products to clients impacted by the COVID-19 pandemic, which was effective through August 2020. The Federal Government has also approved several economic stimulus measures that seek to cushion the economic fallout of the pandemic, including providing direct subsidies, expanding eligibility for and increasing unemployment benefits and guaranteeing through the SBA PPP loans to small and medium businesses.

The COVID-19 pandemic and the restrictions imposed to curb the spread of the disease have had and may continue to have a material adverse effect on economic activity worldwide, including in Puerto Rico. The extent to which the COVID-19 pandemic will continue to adversely affect economic activity will depend on future developments, which are highly uncertain and difficult to predict, including the scope and duration of the pandemic (including the appearance of new strains of the virus), the restrictions imposed by governmental authorities and other third parties in response to the same, the pace of global vaccination efforts, and the amount of federal and local assistance offered to offset the impact of the pandemic. Pursuant to the 2022 Fiscal Plan (as defined below), economic stimulus measures have more than offset the estimated income loss due to reduced economic activity in Puerto Rico and are estimated to have caused a temporary increase in personal income on a net basis. However, there can be no assurance that these measures will be sufficient to offset the pandemic’s economic impact in the medium- and long-term.

Economic Performance

The Commonwealth’s economy entered a recession in the fourth quarter of fiscal year 2006 and its gross national product (“GNP”) contracted (in real terms) every fiscal year between 2007 and 2018, with the exception of fiscal year 2012. Pursuant to the latest Puerto Rico Planning Board (the “Planning Board”) estimates, dated March 2021, the Commonwealth’s real GNP increased by 1.8% in fiscal year 2019 due to the influx of federal funds and private insurance payments to repair damage caused by Hurricanes Irma and María. However, the Planning Board estimates that the Commonwealth’s real GNP decreased by approximately 3.2% in fiscal year 2020 due primarily to the adverse impact of the COVID-19 pandemic and the measures taken by the government in response to the same. The Planning Board projected that the negative effects of COVID-19 would continue through fiscal year 2021, resulting in a contraction in real GNP of approximately -2%, followed by 0.8% GNP growth in the current fiscal year.

Fiscal Crisis

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The Commonwealth’s central government and many of its instrumentalities, public corporations and municipalities continue to face significant fiscal challenges, which have been primarily the result of economic contraction, persistent and significant budget deficits, a high debt burden, unfunded legacy obligations, and lack of access to the capital markets, among other factors. As a result, the Commonwealth and certain of its instrumentalities defaulted on their debt obligations. The escalating fiscal and economic crisis and imminent widespread defaults prompted the U.S. Congress to enact the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) in June 2016. As further discussed below under “Pending Title III Proceedings,” the Commonwealth and several of its instrumentalities recently emerged from a bankruptcy-like process under PROMESA.

PROMESA

PROMESA, among other things, created a seven-member federally-appointed oversight board (the “Oversight Board”) with ample powers over the fiscal and economic affairs of the Commonwealth, its public corporations, instrumentalities and municipalities and established two mechanisms for the restructuring of the obligations of such entities. Pursuant to PROMESA, the Oversight Board will remain in place until market access is restored and balanced budgets, in accordance with modified accrual accounting, are produced for at least four consecutive years. In August 2016, President Obama appointed the seven original voting members of the Oversight Board through the process established in PROMESA, which authorizes the President to select the members from several lists required to be submitted by congressional leaders. In 2020, when President Donald Trump reappointed three of the original members and appointed four new members to the Oversight Board.

In October 2016, the Oversight Board designated the Commonwealth and all of its public corporations and instrumentalities as “covered entities” under PROMESA. The only Commonwealth government entities that were not subject to such initial designation were the Commonwealth’s municipalities. In May 2019, however, the Oversight Board designated all of the Commonwealth’s municipalities as covered entities. At the Oversight Board’s request, covered entities 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. Finally, covered entities are potentially eligible to avail themselves of the debt restructuring processes provided by PROMESA. For additional discussion of risk factors related to the Puerto Rico fiscal challenges, see “Part I – Item 1A – Risk Factors” in the Corporation’s Form 10-K.

Fiscal Plans

Commonwealth Fiscal Plan. The Oversight Board has certified several fiscal plans for the Commonwealth since 2017. The most recent fiscal plan for the Commonwealth certified by the Oversight Board is dated January 27, 2022 (the “2022 Fiscal Plan”).

Pursuant to the 2022 Fiscal Plan, while the COVID-19 pandemic and the measures taken in response to the same severely reduced economic activity and caused an unprecedented increase in unemployment in Puerto Rico, pandemic-related federal and local stimulus funding have more than offset the estimated income loss due to reduced economic activity and are estimated to have caused a temporary increase in personal income on a net basis. The 2022 Fiscal Plan’s economic projections incorporate adjustments for these short-term income effects for purposes of estimating tax receipts. For example, the 2022 Fiscal Plan estimates that, for fiscal years 2022 and 2023, real GNP will grow 2.6% and 0.9%, respectively, but projects that growth adjusted for income effects for such years will be approximately 5.2% and 0.6%, respectively.

The 2022 Fiscal Plan incorporates the debt service costs of the Commonwealth’s restructured debt as contemplated by the Plan of Adjustment (as defined and further explained below). Therefore, it projects an unrestricted surplus after debt service average of $1 billion annually between fiscal years 2022 to 2031. This surplus declines over time as federal disaster relief funding slows, nominal GNP growth declines, revenues decline, and healthcare expenditures rise. The 2022 Fiscal Plan estimates that fiscal measures could drive approximately $6.3 billion in savings and extra revenue over fiscal years 2022 through 2026 and that structural reforms could drive a cumulative 0.90% increase in growth by fiscal year 2051 (equal to approximately $33 billion).

The 2022 Fiscal Plan provides for the gradual reduction and the ultimate elimination of Commonwealth budgetary subsidies to municipalities, which constitute a material portion of the operating revenues of some municipalities. Since fiscal year 2017, Commonwealth appropriations to municipalities have decreased by approximately 64% (from approximately $370 million in fiscal year 2017 to approximately $132 million in fiscal year 2020). In response to the COVID-19 crisis, reductions in appropriations to municipalities were paused in fiscal year 2021. Municipalities have also received extraordinary appropriations and other funds from federally-funded programs during the current fiscal year, which has helped temporarily offset the impact of the reduced Commonwealth support. However, the 2022 Fiscal Plan contemplates additional reductions in appropriations to municipalities

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starting in fiscal year 2022, before eventually phasing out all appropriations in fiscal year 2025. Further, while the Commonwealth had enacted legislation in 2019 suspending the municipality’s obligations to contribute to the Commonwealth’s health plan and pay-as-you go retirement system, such legislation was challenged by the Oversight Board and eventually declared null by the Title III court in April 2020. As a result, municipalities are required to cover their own employees’ healthcare costs and retirement benefits and had to reimburse the Commonwealth for such costs corresponding to the period during which the law was in effect. Finally, the 2022 Fiscal Plan notes that municipalities have made little or no progress towards implementing fiscal discipline required to reduce reliance on Commonwealth appropriations and that this lack of fiscal management threatens the ability of municipalities to provide necessary services, such as health, sanitation, public safety, and emergency services to their residents, forcing them to prioritize expenditures.

Other Fiscal Plans. Pursuant to PROMESA, the Oversight Board has also requested and certified fiscal plans for several public corporations and instrumentalities. The certified fiscal plan for the Puerto Rico Electric Power Authority (“PREPA”), Puerto Rico’s electric power utility, contemplated the transformation of Puerto Rico’s electric system through, among other things, the establishment of a public-private partnership with respect to PREPA’s transmission and distribution system (the “T&D System”), and calls for significant structural reforms at PREPA. The procurement process for the establishment of a public-private partnership with respect to the T&D System was completed in June 2020. The selected proponent, LUMA Energy LLC (“LUMA”), and PREPA entered into a 15-year agreement whereby, since June 1, 2021, LUMA is responsible for operating, maintaining and modernizing the T&D System.

On April 23, 2021, the Oversight Board certified the latest version of the fiscal plan (the “CRIM Fiscal Plan”) for the Municipal Revenue Collection Center (“CRIM”), the government entity responsible for collecting property taxes and distributing them among the municipalities. The CRIM Fiscal Plan outlines a series of measures centered around improving the competitiveness of Puerto Rico’s property tax regime and the enhancement of property tax collections, including identifying and appraising new properties as well as improvements to existing properties, and implementing operational and technological initiatives.

Pending Title III Proceedings

On May 3, 2017, the Oversight Board, on behalf of the Commonwealth, filed a petition in the U.S. District Court to restructure the Commonwealth’s liabilities under Title III of PROMESA. The Oversight Board subsequently filed analogous petitions with respect to the Puerto Rico Sales Tax Financing Corporation (“COFINA”), the Employees Retirement System of the Government of the Commonwealth of Puerto Rico (“ERS”), the Puerto Rico Highways and Transportation Authority (“HTA”), PREPA and the Puerto Rico Public Buildings Authority (“PBA”). On February 12, 2019, the government completed a restructuring of COFINA’s debts pursuant to a plan of adjustment confirmed by the U.S. District Court.

On November 3, 2021, the Oversight Board filed the Eighth Amended Title III Joint Plan of Adjustment for the Commonwealth, ERS and PBA (the “Plan of Adjustment”). On March 15, 2022 (the “Effective Date”), the Plan of Adjustment became effective. As of the Effective Date, the Plan of Adjustment reduced the Commonwealth’s debt obligations from approximately $34.3 billion of prepetition debt to approximately $7.4 billion in new general obligation bonds and approximately $8.7 billion in new contingent value instruments. This also resulted in a reduction of the Commonwealth’s maximum annual debt service by approximately 73%.

There are still ongoing debt restructuring processes under Title III of PROMESA for the Commonwealth’s highways and electric power authorities (HTA and PREPA).

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. The effects of the prolonged recession have been reflected in limited loan demand, an increase in the rate of foreclosures and delinquencies on loans granted in Puerto Rico. While PROMESA provided a process to address the Commonwealth’s fiscal crisis, the complexity and uncertainty of the Title III proceedings for the Commonwealth and various of its instrumentalities and the adjustment measures required by the fiscal plans still present significant economic risks. In addition, the COVID-19 outbreak has affected many of our individual customers and customers’ businesses. This, when added to Puerto Rico’s ongoing fiscal crisis and recession, could cause credit losses that adversely affect us and may negatively affect consumer confidence, result in reductions in consumer spending, and adversely impact our interest and non-interest revenues. If global or local economic conditions worsen or the Government of Puerto Rico and the Oversight Board are unable to adequately manage the Commonwealth’s fiscal and economic challenges, including by controlling the COVID-19

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pandemic and consummating an orderly restructuring of the Commonwealth’s debt obligations while continuing to provide essential services, these adverse effects could continue or worsen in ways that we are not able to predict.

At March 31, 2022, the Corporation’s direct exposure to the Puerto Rico government’s instrumentalities and municipalities totaled $364 million of which $346 million were outstanding, compared to $367 million at December 31, 2021, of which $349 million were outstanding. Further deterioration of the Commonwealth’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, $319 million consists of loans and $27 million are securities ($319 million and $30 million, respectively, at December 31, 2021). Substantially all of the amount outstanding at March 31, 2022 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, 2022, 75% of the Corporation’s exposure to municipal loans and securities was concentrated in the municipalities of San Juan, Guaynabo, Carolina and Bayamón. 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.

In addition, at March 31, 2022, the Corporation had $268 million in loans insured or securities issued by Puerto Rico governmental entities, but for which the principal source of repayment is non-governmental ($275 million at December 31, 2021). These included $225 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, 2021 - $232 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, 2022, $43 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, 2021 - $43 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. 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.

As of March 31, 2022, BPPR had $14.8 billion in deposits from the Commonwealth, its instrumentalities, and municipalities. During the first quarter of 2022, the amount of government deposits decreased as a result of $10.1 billion cash payments made by the Commonwealth pursuant to the Plan of Adjustment. 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 COVID-19 pandemic and hurricane recovery 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 of 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 have been and maybe be further exacerbated as a result of the effects of the COVID-19 pandemic, and which could adversely affect the ability of its public corporations and

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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, 2022, the Corporation had approximately $70 million in direct exposure to USVI government entities (December 31, 2021 - $70 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.

British Virgin Islands

The Corporation has operations in the British Virgin Islands (“BVI”), which has been 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, 2022 it has a loan portfolio amounting to approximately $218 million comprised of various retail and commercial clients, compared to a loan portfolio of $221 million at December 31, 2021.

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, $1.6 billion of residential mortgages, $173 million of SBA loans under the PPP and $67 million commercial loans were insured or guaranteed by the U.S. Government or its agencies at March 31, 2022 (compared to $1.6 billion, $353 million and $67 million, respectively, at December 31, 2021).

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 15.

During the first quarter of 2022, the Corporation continued to exhibit strong credit quality trends and low credit costs with low level of NCOs and decreasing NPLs. We continue to closely monitor changes on borrower performance and in the pace of economic recovery, given the rising interest rate environment and geopolitical uncertainty. However, management believes that the improvement over the last few years in the risk profile of the Corporation’s loan portfolios positions Popular to operate successfully under the current environment.

Total NPAs decreased by $22 million at March 31, 2022 when compared with December 31, 2021. Total non-performing loans held-in-portfolio (“NPLs”) decreased by $28 million at March 31, 2022 from December 31, 2021. BPPR’s NPLs decreased by $27 million at March 31, 2022, mainly driven by lower mortgage NPLs due to the combined effects of collection efforts, increased foreclosure activity and the on-going low levels of early delinquency compared with pre-pandemic trends. Popular U.S. NPLs remained flat at $33 million from December 31, 2021. At March 31, 2022, the ratio of NPLs to total loans held-in-portfolio was 1.8% compared to 1.9% in the December 31, 2021. Other real estate owned loans (“OREOs”) increased by $5 million at March 31, 2022, mainly due to the end of the COVID-19 related foreclosure moratorium period.

At March 31, 2022, NPLs secured by real estate amounted to $394 million in the Puerto Rico operations and $30 million in Popular U.S. These figures were $428 million and $31 million, respectively, at December 31, 2021.

The Corporation’s commercial loan portfolio secured by real estate (“CRE”) amounted to $8.8 billion at March 31, 2022, of which $2.9 billion was secured with owner occupied properties, compared with $8.4 billion and $1.8 billion, respectively, at December 31, 2021. During the first quarter of 2022, the Corporation reclassified $0.9 billion of loans from the Commercial Real Estate (“CRE”) Non-Owner-Occupied category to the CRE Owner-Occupied category. The selected loans are primarily to skilled and assisted living nursing homes where the majority of the revenues, which are the basis for the repayment of the loans, are generated from medical and related operational activities. These loans meet the type of business and source requirements as defined in the regulatory guidance allowing this classification. CRE NPLs amounted to $72 million at March 31, 2022, compared with $77 million at December

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31, 2021. The CRE NPL ratios for the BPPR and Popular U.S. segments were 1.69% and 0.02%, respectively, at March 31, 2022, compared with 1.95% and 0.04%, respectively, at December 31, 2021.

In addition to the NPLs included in Table 15, at March 31, 2022, there were $260 million of performing loans, mainly commercial loans, which in management’s opinion, were currently subject to potential future classification as non-performing (December 31, 2021 - $214 million).

For the year ended March 31, 2022, total inflows of NPLs held-in-portfolio, excluding consumer loans, decreased by approximately $30 million, when compared to the inflows for the same period in 2021. Inflows of NPLs held-in-portfolio at the BPPR segment decreased by $22 million compared to the same period in 2021, driven by lower mortgage inflows by $20 million. Inflows of NPLs held-in-portfolio at the Popular U.S. segment decreased by $8 million from the same period in 2021.

Table 15 - Non-Performing Assets
	March 31, 2022										December 31, 2021
(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	$	117,782	$	5,403	$	123,185		0.9	%	$	120,047	$	5,532	$	125,579		0.9	%
Construction		-		-		-		-			485		-		485		0.1
Leasing		3,766		-		3,766		0.3			3,102		-		3,102		0.2
Mortgage		306,560		21,826		328,386		4.5			333,887		21,969		355,856		4.8
Auto		27,514		-		27,514		0.8			23,085		-		23,085		0.7
Consumer		31,194		5,876		37,070		1.4			33,683		6,087		39,770		1.5
Total non-performing loans held-in-portfolio		486,816		33,105		519,921		1.8	%		514,289		33,588		547,877		1.9	%
Other real estate owned (“OREO”)		89,023		1,544		90,567					83,618		1,459		85,077
Total non-performing assets^[1]	$	575,839	$	34,649	$	610,488				$	597,907	$	35,047	$	632,954
Accruing loans past due 90 days or more^[2]	$	440,015	$	539	$	440,554				$	480,649	$	118	$	480,767
Ratios:
Non-performing assets to total assets		0.99	%	0.31	%	0.88	%				0.93	%	0.32	%	0.84	%
Non-performing loans held-in-portfolio to loans held-in-portfolio		2.32		0.39		1.76					2.46		0.40		1.87
Allowance for credit losses to loans held-in-portfolio		2.74		1.18		2.29					2.85		1.21		2.38
Allowance for credit losses to non-performing loans, excluding held-for-sale		118.45		305.64		130.36					115.53		301.31		126.92
HIP = “held-in-portfolio”
[1] There were no non-performing loans held-for-sale as of March 31, 2022 and December 31, 2021.
[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. The balance of these loans includes $13 million at March 31, 2022, related to the rebooking of loans previously pooled into GNMA securities, in which the Corporation had a buy-back option as further described below (December 31, 2021 - $13 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 repurchases option are required to be reflected (rebooked) on the financial statements of BPPR with an offsetting liability. These balances include $266 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of March 31, 2022 (December 31, 2021 - $304 million). Furthermore, the Corporation has approximately $45 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, 2021 - $50 million).

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Table 16 - Activity in Non-Performing Loans Held-in-Portfolio (Excluding Consumer Loans)

		For the quarter ended March 31, 2022
(Dollars in thousands)			BPPR		Popular U.S.	Popular, Inc.
Beginning balance		$	454,419	$	27,501	$	481,920
Plus:
	New non-performing loans		44,320		7,799		52,119
	Advances on existing non-performing loans		-		2,639		2,639
Less:
	Non-performing loans transferred to OREO		(13,396)		(85)		(13,481)
	Non-performing loans charged-off		(723)		(73)		(796)
	Loans returned to accrual status / loan collections		(60,278)		(10,552)		(70,830)
Ending balance NPLs		$	424,342	$	27,229	$	451,571

Table 17 - Activity in Non-Performing Loans Held-in-Portfolio (Excluding Consumer Loans)

		For the quarter ended March 31, 2021
(Dollars in thousands)			BPPR		Popular U.S.	Popular, Inc.
Beginning balance		$	639,932	$	28,412	$	668,344
Plus:
	New non-performing loans		66,121		18,157		84,278
	Advances on existing non-performing loans		-		11		11
Less:
	Non-performing loans transferred to OREO		(4,651)		-		(4,651)
	Non-performing loans charged-off		(17,733)		(353)		(18,086)
	Loans returned to accrual status / loan collections		(77,148)		(20,231)		(97,379)
	Loans transferred to held-for-sale		-		(1,773)		(1,773)
Ending balance NPLs		$	606,521	$	24,223	$	630,744

Table 18 - Activity in Non-Performing Commercial Loans Held-In-Portfolio
		For the quarter ended March 31, 2022
(In thousands)			BPPR		Popular U.S.		Popular, Inc.
Beginning balance - NPLs		$	120,047	$	5,532	$	125,579
Plus:
	New non-performing loans		6,127		2,999		9,126
	Advances on existing non-performing loans		-		2,505		2,505
Less:
	Non-performing loans transferred to OREO		(3,052)		-		(3,052)
	Non-performing loans charged-off		(256)		(73)		(329)
	Loans returned to accrual status / loan collections		(5,084)		(5,560)		(10,644)
Ending balance - NPLs		$	117,782	$	5,403	$	123,185

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Table 19 - Activity in Non-Performing Commercial Loans Held-In-Portfolio
		For the quarter ended March 31, 2021
(In thousands)			BPPR		Popular U.S.		Popular, Inc.
Beginning balance - NPLs		$	204,092	$	5,988	$	210,080
Plus:
	New non-performing loans		7,724		1,693		9,417
	Advances on existing non-performing loans		-		6		6
Less:
	Non-performing loans transferred to OREO		(3,850)		-		(3,850)
	Non-performing loans charged-off		(2,391)		(352)		(2,743)
	Loans returned to accrual status / loan collections		(4,712)		(3,655)		(8,367)
	Loans transferred to held-for-sale		-		(1,773)		(1,773)
Ending balance - NPLs		$	200,863	$	1,907	$	202,770

Table 20 - Activity in Non-Performing Construction Loans Held-In-Portfolio

		For the quarter ended March 31, 2022
(In thousands)			BPPR		Popular U.S.		Popular, Inc.
Beginning balance - NPLs		$	485	$	-	$	485
Less:
	Loans returned to accrual status / loan collections		(485)		-		(485)
Ending balance - NPLs		$	-	$	-	$	-

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Table 21 - Activity in Non-Performing Construction Loans Held-In-Portfolio

		For the quarter ended March 31, 2021
(In thousands)			BPPR		Popular U.S.		Popular, Inc.
Beginning balance - NPLs		$	21,497	$	7,560	$	29,057
Plus:
	New non-performing loans		-		12,141		12,141
Less:			-		-
	Non-performing loans charged-off		(6,620)		-		(6,620)
	Loans returned to accrual status / loan collections		-		(12,178)		(12,178)
Ending balance - NPLs		$	14,877	$	7,523	$	22,400

Table 22 - Activity in Non-Performing Mortgage Loans Held-in-Portfolio
		For the quarter ended March 31, 2022
(Dollars in thousands)			BPPR		Popular U.S.		Popular, Inc.
Beginning balance - NPLs		$	333,887	$	21,969	$	355,856
Plus:
	New non-performing loans		38,193		4,800		42,993
	Advances on existing non-performing loans		-		134		134
Less:
	Non-performing loans transferred to OREO		(10,344)		(85)		(10,429)
	Non-performing loans charged-off		(467)		-		(467)
	Loans returned to accrual status / loan collections		(54,709)		(4,992)		(59,701)
Ending balance - NPLs		$	306,560	$	21,826	$	328,386

Table 23 - Activity in Non-Performing Mortgage Loans Held-in-Portfolio
		For the quarter ended March 31, 2021
(Dollars in thousands)			BPPR		Popular U.S.		Popular, Inc.
Beginning balance - NPLs		$	414,343	$	14,864	$	429,207
Plus:
	New non-performing loans		58,397		4,323		62,720
	Advances on existing non-performing loans		-		5		5
Less:
	Non-performing loans transferred to OREO		(801)		-		(801)
	Non-performing loans charged-off		(8,722)		(1)		(8,723)
	Loans returned to accrual status / loan collections		(72,436)		(4,398)		(76,834)
Ending balance - NPLs		$	390,781	$	14,793	$	405,574

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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 at March 31, 2022 and December 31, 2021, are presented below.

Table 24 - Loan Delinquencies

(Dollars in thousands)		March 31, 2022							December 31, 2021
	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	$	155,815	$	14,028,246		1.11	%	$	161,251	$	13,732,701		1.17	%
Construction		715		744,783		0.10			485		716,220		0.07
Leasing		16,031		1,426,122		1.12			14,379		1,381,319		1.04
Mortgage ^[1]		1,034,010		7,326,346		14.11			1,141,082		7,427,196		15.36
Consumer		164,743		6,062,693		2.72			173,896		5,983,121		2.91
Loans held-for-sale		125		55,150		0.23			-		59,168		-
Total	$	1,371,439	$	29,643,340		4.63	%	$	1,491,093	$	29,299,725		5.09	%
[1] Loans delinquent 30 days or more includes $0.6 billion of residential mortgage loans insured by FHA or guaranteed by the VA as of March 31, 2022 (December 31, 2021 - $0.6 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 Corporation adopted the new CECL accounting standard effective on January 1, 2020. The allowance for credit losses (“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 troubled debt restructurings 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.

At March 31, 2022, the allowance for credit losses amounted to $678 million, a decrease of $18 million, when compared with December 31, 2021. The ACL incorporated updated macroeconomic scenarios for Puerto Rico and the United States. Given that any one economic outlook is inherently uncertain, the Corporation uses multiple scenarios to estimate its ACL. The baseline scenario continues to be assigned the highest probability, followed by the pessimistic scenario.

The current baseline forecast continues to show a favorable economic scenario. 2022 annualized GDP growth of 3.5% and 3.7% is expected for Puerto Rico and United States, respectively. This represents a reduction for both Puerto Rico and United States since last quarter’s GDP growth forecast was 4.0% and 4.6%, respectively. Changes in assumptions related to fiscal stimulus and higher energy prices contributed to the reduction. The 2022 average unemployment rate is forecasted at 7.3% and 3.6% for Puerto Rico and United States, respectively. This is consistent with previous expectations for both regions. Puerto Rico’s unemployment rate forecast benefits from the Bureau of Labor Statistics (“BLS”) revisions that show a stronger than expected labor market.

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The ACL for BPPR decreased by $18 million to $577 million at March 31, 2022, when compared to December 31, 2021. The ACL for Popular U.S. remained flat at $101 million at March 31, 2022, when compared to December 31, 2021. The decrease in BPPR’s ACL was mainly driven by reductions in qualitative reserves due to substantial improvements in employment levels in Puerto Rico. Recent updates by the BLS show that employment levels in Puerto Rico have already surpassed pre-pandemic levels. This contributed to a lower commercial, mortgage and consumer loans ACL. The decrease in qualitative reserves was partially offset by the impact of higher loan volumes and changes in the macroeconomic scenario.

The provision for credit losses for the quarter ended March 31, 2022, amounted to a benefit of $14.4 million, an unfavorable variance of $61.4 million from the same period in the prior year. The first quarter of 2021 included the impact of updated economic assumptions which considered a more optimistic view of the economy, prompting substantial reductions in reserves across different portfolios, coupled with improvements in credit quality. Refer to Note 8 – Allowance for credit losses – loans held-in-portfolio, and to the Provision for Credit Losses section of this MD&A for additional information.

Table 25 - Allowance for Credit Losses - Loan Portfolios
March 31, 2022
(Dollars in thousands)	Commercial			Construction			Mortgage			Leasing			Consumer			Total
Total ACL	$	204,643		$	6,539		$	149,206		$	18,398		$	299,006		$	677,792
Total loans held-in-portfolio		14,028,246			744,783			7,326,346			1,426,122			6,062,693			29,588,190
ACL to loans held-in-portfolio		1.46	%		0.88	%		2.04	%		1.29	%		4.93	%		2.29	%
Total non-performing loans held-in-portfolio	$	123,185		$	-		$	328,386		$	3,766		$	64,584		$	519,921
ACL to non-performing loans held-in-portfolio		166.13	%		N.M.			45.44	%		488.53	%		462.97	%		130.36	%
N.M. - Not meaningful.

Table 26 - Allowance for Credit Losses - Loan Portfolios
December 31, 2021
(Dollars in thousands)	Commercial			Construction			Mortgage			Leasing			Consumer			Total
Total ACL	$	215,805		$	6,363		$	154,478		$	17,578		$	301,142		$	695,366
Total loans held-in-portfolio		13,732,701			716,220			7,427,196			1,381,319			5,983,121			29,240,557
ACL to loans held-in-portfolio		1.57	%		0.89	%		2.08	%		1.27	%		5.03	%		2.38	%
Total non-performing loans held-in-portfolio	$	125,579		$	485		$	355,856		$	3,102		$	62,855		$	547,877
ACL to non-performing loans held-in-portfolio		171.85	%		N.M.			43.41	%		566.67	%		479.11	%		126.92	%
N.M. - Not meaningful.

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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, 2022 and 2021.

Table 27 - Annualized Net Charge-offs (Recoveries) to Average Loans Held-in-Portfolio
	Quarter ended March 31, 2022						Quarter ended March 31, 2021
	BPPR		Popular U.S.		Popular, Inc.		BPPR		Popular U.S.		Popular, Inc.
Commercial	(0.23)	%	(0.04)	%	(0.14)	%	(0.07)	%	―	%	(0.04)	%
Construction	(1.61)		(0.72)		(0.85)		14.62		―		2.60
Mortgage	(0.19)		(0.01)		(0.16)		0.50		(0.03)		0.42
Leasing	(0.12)		―		(0.12)		0.04		―		0.04
Consumer	0.95		0.08		0.91		0.48		2.35		0.57
Total annualized net charge-offs to average loans held-in-portfolio	0.11	%	(0.08)	%	0.05	%	0.36	%	0.08	%	0.29	%

NCOs for the quarter ended March 31, 2022 amounted to $3.8 million, a favorable variance by $17.2 million when compared to the same period in 2021. The BPPR segment decreased by $14.0 million mainly driven by lower mortgage and construction NCOs by $11.3 million and $6.3 million, respectively, in part offset by an increase of $7.0 million in the consumer NCOs. The consumer NCOs increase was mainly related to post-pandemic normalization, as NCOs continue at historical low levels. The PB segment NCOs decreased by $3.3 million, mainly driven by lower consumer and construction NCOs by $1.7 million and $1.1 million, respectively. The low level of NCOs was due to the effect of a favorable economic environment and continued borrower performance, as reflected in the ongoing low level of delinquencies and NPLs when compared to pre-pandemic trends.

Troubled Debt Restructurings

The Corporation’s troubled debt restructurings (“TDRs”) loans amounted to $1.7 billion at March 31, 2022, increasing by $36 million, from December 31, 2021. A total of $721 million of these TDRs are related to guaranteed loans, which are in accruing status. TDRs in the BPPR segment amounted to $1.7 billion, an increase of $36 million, mainly related to an increase of $43 million in the commercial TDRs, mainly related to a single $41 million relationship. The Popular U.S. segment TDRs remained flat at $14 million from December 31, 2021. TDRs in accruing status increased by $47 million from December 31, 2021, mainly related to an increase of $41 million in BPPR’s commercial TDRs, related to the abovementioned relationship, while non-accruing TDRs decreased by $10 million, mostly related to mortgage TDRs.

Refer to Note 8 to the Consolidated Financial Statements for additional information on modifications considered TDRs, including certain qualitative and quantitative data about troubled debt restructurings performed in the past twelve months.

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 Corporation’s 2021 Form 10-K.

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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 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 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, 2022 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, Commitments and Contingencies, 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 2021 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 2021 Form 10-K.

There have been no material changes to the risk factors previously disclosed under Item 1A of the Corporation’s 2021 Form 10-K.

The risks described in our 2021 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.

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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, 2022.

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, 2022:

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 (2)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (3)
January 1 - January 31	684	$	81.93	-	$500,000,000
February 1 - February 28	3,483,942		91.85	3,483,942	100,000,000
March 1 - March 31	51,611		89.25	-	100,000,000
Total	3,536,237	$	91.81	3,483,942	$100,000,000
(1) Includes 52,295 shares of the Corporation’s common stock acquired by the Corporation 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.
(2) On February 28, 2022, the Corporation entered into an accelerated share repurchase transaction (“ASR”) of $400 million with respect to its common stock. As part of this transaction, the Corporation received an initial share delivery of 3,483,942 shares of common stock. Such shares are held as treasury stock. The ASR was entered into on February 28, 2022 with a settlement date of March 2, 2022. The final settlement of the ASR Agreement is expected to occur no later than the third quarter of 2022.
(3) As part of its capital plan, in January 2022, the Corporation announced plans to repurchase $500 million in shares. On February 28, 2022, the Corporation entered into an accelerated share repurchase transaction (“ASR”) of $400 million with respect to its common stock. See note (2) above. $100 million remains available for repurchase pursuant to the capital plan.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Index

Exhibit No	Exhibit Description
10.1	Form of Popular, Inc. 2022 Long-Term Equity Incentive Award and Agreement⁽¹⁾

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22.1	Issuers of Guaranteed Securities (Incorporated by reference to Exhibit 22.1 of Popular, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021.)
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002⁽¹⁾
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002⁽¹⁾
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002⁽¹⁾
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002⁽¹⁾
101. INS	XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline Document.
101.SCH	Inline Taxonomy Extension Schema Document⁽¹⁾
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document⁽¹⁾
101.DEF	Inline XBRL Taxonomy Extension Definitions Linkbase Document⁽¹⁾
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document⁽¹⁾
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document⁽¹⁾
104	The cover page of Popular, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL (included within the Exhibit 101 attachments)⁽¹⁾

(1) Included herewith

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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, 2022	By: /s/ Carlos J. Vázquez
	Carlos J. Vázquez
	Executive Vice President &
	Chief Financial Officer

Date: May 10, 2022	By: /s/ Jorge J. García
	Jorge J. García
	Senior Vice President & Corporate Comptroller

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