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POPULAR, INC. - Quarter Report: 2023 September (Form 10-Q)

Form 10-Q
 
 
 
 
 
 
 
 
 
 
 
 
 
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10-Q
[X]
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended
 
September 30, 2023
or
[ ]
 
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number:
 
001-34084
POPULAR, INC.
(Exact name of registrant as specified in its charter)
Puerto Rico
66-0667416
(State or other jurisdiction of Incorporation or
(IRS Employer Identification Number)
organization)
Popular Center Building
209 Muñoz Rivera Avenue
Hato Rey
,
Puerto Rico
00918
(Address of principal executive offices)
(Zip code)
(
787
)
765-9800
(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which
registered
Common Stock ($0.01 par value)
BPOP
The
NASDAQ Stock Market
6.125% Cumulative Monthly Income Trust
Preferred Securities
BPOPM
The
NASDAQ Stock Market
Indicate by check mark whether the registrant (1) has filed all reports
 
required to be filed by Section 13 or 15(d) of the
Securities Exchange
 
Act of
 
1934 during
 
the preceding
 
12 months
 
(or for
 
such shorter
 
period that
 
the registrant
 
was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X]
 
Yes
[
 
]
 
No
Indicate by
 
check mark
 
whether the registrant
 
has submitted electronically
 
every Interactive
 
Data File
 
required to
 
be
submitted pursuant to
 
Rule 405 of
 
Regulation S-T (§
 
232.405 of this
 
chapter) during the
 
preceding 12 months
 
(or for
such shorter period that the registrant was required to submit such files).
[X]
 
Yes
[
 
]
 
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company.
 
See definitions of “large accelerated filer”, “accelerated
filer,” “smaller reporting company,”
 
and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
 
[X]
Accelerated filer [
 
]
Non-accelerated filer [
 
]
Smaller reporting company
[ ]
Emerging growth company
[ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act.
 
[
 
]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[
 
]
 
Yes
[X]
 
No
Indicate
 
the
 
number
 
of
 
shares
 
outstanding
 
of
 
each
 
of
 
the
 
issuer’s
 
classes
 
of
 
common
 
stock,
 
as
 
of
 
the
 
latest
practicable date:
 
Common Stock, $0.01 par value,
72,154,356
 
shares outstanding as of November 7, 2023.
 
 
 
2
POPULAR INC
INDEX
Part I – Financial Information
Page
Item 1. Financial Statements
Unaudited Consolidated Statements of Financial Condition
 
at September 30, 2023
and
December 31, 2022
6
Unaudited Consolidated Statements of Operations for
 
the quarters
 
and nine months ended September 30, 2023
 
and 2022
7
Unaudited Consolidated Statements of Comprehensive
 
Income (Loss) for the
quarters and nine months ended September 30,
 
2023 and 2022
8
Unaudited Consolidated Statements of Changes in
 
Stockholders’ Equity for the
quarters and nine months ended September 30,
 
2023 and 2022
9
Unaudited Consolidated Statements of Cash Flows for
 
the nine months
 
ended September 30, 2023 and 2022
11
Notes to Unaudited Consolidated Financial Statements
13
Item 2. Management’s Discussion and Analysis of Financial
 
Condition and
 
 
Results of Operations
133
Item 3. Quantitative and Qualitative Disclosures about
 
Market Risk
 
182
Item 4. Controls and Procedures
182
Part II – Other Information
Item 1. Legal Proceedings
182
Item 1A. Risk Factors
182
Item 2. Unregistered Sales of Equity Securities and
 
Use of Proceeds
183
Item 3. Defaults Upon Senior Securities
183
Item 4. Mine Safety Disclosures
183
Item 5. Other Information
183
Item 6. Exhibits
183
Signatures
185
3
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;
●
 
adverse
 
economic conditions,
 
including high
 
levels
 
of
 
inflation, that
 
adversely affect
 
housing
 
prices, the
 
job
 
market,
consumer confidence
 
and spending
 
habits which
 
may affect
 
in turn,
 
among other
 
things, our
 
level of
 
non-performing
assets, charge-offs and provision expense;
●
 
changes in interest rates and market liquidity,
 
which may reduce interest margins, impact funding sources, reduce loan
originations, affect
 
our ability
 
to originate
 
and distribute
 
financial products
 
in the
 
primary and
 
secondary markets
 
and
impact the value of our investment portfolio and
 
our ability to return capital to our shareholders;
●
 
the
 
impact
 
of
 
bank
 
failures
 
or
 
adverse
 
developments
 
at
 
other
 
banks
 
and
 
related
 
negative
 
media
 
coverage
 
of
 
the
banking industry in general on investor and depositor
 
sentiment regarding the stability and liquidity of
 
banks;
●
 
the impact of the current fiscal and economic challenges of Puerto Rico and
 
the measures taken and to be taken by the
Puerto
 
Rico
 
Government
 
and
 
the
 
Federally-appointed
 
oversight
 
board
 
on
 
the
 
economy,
 
our
 
customers
 
and
 
our
business;
●
 
the impact of the pending debt
 
restructuring proceedings under Title III of the
 
Puerto Rico Oversight, Management and
Economic
 
Stability
 
Act
 
(“PROMESA”)
 
and
 
of
 
other
 
actions
 
taken
 
or
 
to
 
be
 
taken
 
to
 
address
 
Puerto
 
Rico’s
 
fiscal
challenges on the value of our portfolio of Puerto Rico
 
government securities and loans to governmental entities and of
our
 
commercial,
 
mortgage
 
and
 
consumer
 
loan
 
portfolios
 
where
 
private
 
borrowers
 
could
 
be
 
directly
 
affected
 
by
governmental action;
●
 
the
 
amount of
 
Puerto Rico
 
public sector
 
deposits held
 
at
 
the Corporation,
 
whose future
 
balances are
 
uncertain and
difficult
 
to
 
predict
 
and
 
may
 
be
 
impacted
 
by
 
factors
 
such
 
as
 
the
 
amount
 
of
 
Federal
 
funds
 
received
 
by
 
the
 
P.R.
Government 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;
●
 
unforeseen
 
or
 
catastrophic
 
events,
 
including
 
extreme
 
weather
 
events,
 
including
 
hurricanes,
 
other
 
natural
 
disasters,
man-made disasters,
 
acts of
 
violence or
 
war or
 
pandemics, epidemics
 
and other
 
health-related crises,
 
including any
resurgence of COVID-19, or the fear of any
 
such event occurring, any of which could cause adverse consequences for
our business, including, but not limited to, disruptions
 
in our operations;
4
●
 
our
 
ability
 
to
 
achieve
 
the
 
expected
 
benefits
 
from
 
our
 
transformation
 
initiative,
 
including
 
our
 
ability
 
to
 
achieve
 
our
targeted sustainable return on tangible common equity
 
of 14% by the end of 2025;
●
 
risks related to Popular’s acquisition of certain information technology and related assets formerly used by Evertec, Inc.
to
 
service certain
 
of Banco
 
Popular de
 
Puerto Rico’s
 
key channels,
 
as well
 
as the
 
entry into
 
amended and
 
restated
commercial
 
agreements
 
(the
 
“Evertec
 
Business
 
Acquisition
 
Transaction”),
 
including
 
Popular’s
 
ability
 
to
 
successfully
transition and integrate the assets
 
acquired as part of the
 
Evertec Business Acquisition 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 Evertec Business
Acquisition Transaction or
 
that are not
 
subject to indemnification or
 
reimbursement by Evertec, Inc.;
 
and business and
other risks arising from the extension of Popular’s
 
current commercial agreements with Evertec,
 
Inc.;
●
 
the fiscal and monetary policies of the federal government
 
and its agencies;
●
 
changes in
 
federal
 
bank regulatory
 
and supervisory
 
policies, including
 
required levels
 
of
 
capital, liquidity,
 
resolution-
related requirements and the impact of proposed
 
capital standards on our capital ratios;
●
 
additional or special
 
Federal Deposit Insurance
 
Corporation (“FDIC”) assessments, including
 
the special assessments
being proposed by the FDIC to recover the losses to the deposit insurance fund (“DIF”) resulting from the receiverships
of Silicon Valley Bank and Signature Bank;
●
 
regulatory approvals
 
that may
 
be necessary
 
to undertake
 
certain actions
 
or consummate
 
strategic transactions,
 
such
as acquisitions and dispositions;
●
 
the
 
relative strength
 
or
 
weakness
 
of
 
the
 
consumer and
 
commercial credit
 
sectors
 
and
 
of
 
the
 
real
 
estate markets
 
in
Puerto Rico and the other markets in which
 
our borrowers are located;
●
 
the performance of the stock and bond markets;
●
 
competition in the financial services industry;
●
 
possible legislative, tax or regulatory changes;
●
 
a failure
 
in or
 
breach of
 
our operational
 
or security
 
systems or
 
infrastructure or
 
those of
 
Evertec, Inc.,
 
our provider
 
of
core financial
 
transaction processing and
 
information technology services,
 
or of
 
third parties
 
providing services
 
to us,
including
 
as
 
a
 
result
 
of
 
cyberattacks, e-fraud,
 
denial-of-services and
 
computer intrusion,
 
that
 
might result
 
in,
 
among
other
 
things,
 
loss
 
or
 
breach
 
of
 
customer
 
data,
 
disruption
 
of
 
services,
 
reputational
 
damage
 
or
 
additional
 
costs
 
to
Popular;
●
 
changes in market rates and prices which may
 
adversely impact the value of financial assets
 
and liabilities;
●
 
potential judgments,
 
claims, damages,
 
penalties, fines,
 
enforcement actions
 
and
 
reputational damage
 
resulting from
pending
 
or
 
future
 
litigation
 
and
 
regulatory
 
or
 
government
 
investigations
 
or
 
actions,
 
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 branches or business
 
units or otherwise change our business mix;
 
and
●
 
management’s ability to identify and manage these and
 
other risks.
5
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,
 
2022 (the “2022
 
Form 10-K”), 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF FINANCIAL CONDITION
(UNAUDITED)
[UNAUDITED]
September 30,
December 31,
(In thousands, except share information)
2023
2022
Assets:
Cash and due from banks
$
535,335
$
469,501
Money market investments:
 
Time deposits with other banks
 
6,389,437
5,614,595
Total money market investments
6,389,437
5,614,595
Trading account debt securities, at fair value:
 
Other trading account debt securities
30,988
27,723
Debt securities available-for-sale, at fair
 
value:
Pledged securities with creditors’ right to repledge
 
72,062
129,203
Other debt securities available-for-sale
17,057,796
17,675,171
Debt securities held-to-maturity, at amortized cost:
Pledged securities with creditors’ right to repledge
 
27,047
26,496
Other debt securities held-to-maturity
8,275,035
8,498,870
Debt securities held-to-maturity (fair
 
value 2023 - $
8,065,067
; 2022 - $
8,440,196
)
8,302,082
8,525,366
Less – Allowance for credit losses
6,057
6,911
Debt securities held-to-maturity, net
8,296,025
8,518,455
Equity securities (realizable value 2023 -
 
$
191,605
; 2022 - $
196,665
)
190,688
195,854
Loans held-for-sale, at fair value
5,239
5,381
Loans held-in-portfolio
34,369,775
32,372,925
Less – Unearned income
340,462
295,156
 
Allowance for credit losses
711,068
720,302
Total loans held-in-portfolio, net
33,318,245
31,357,467
Premises and equipment, net
534,384
498,711
Other real estate
82,322
89,126
Accrued income receivable
257,833
240,195
Mortgage servicing rights, at fair value
119,030
128,350
Other assets
2,032,565
1,847,813
Goodwill
804,428
827,428
Other intangible assets
10,559
12,944
Total assets
$
69,736,936
$
67,637,917
Liabilities and Stockholders’ Equity
Liabilities:
 
Deposits:
Non-interest bearing
$
15,201,374
$
15,960,557
Interest bearing
48,136,226
45,266,670
Total deposits
63,337,600
61,227,227
Assets sold under agreements to repurchase
93,071
148,609
Other short-term borrowings
-
365,000
Notes payable
1,004,649
886,710
Other liabilities
844,008
916,946
Total liabilities
65,279,328
63,544,492
Commitments and contingencies (Refer
 
to Note 21)
 
 
Stockholders’ equity:
 
Preferred stock,
30,000,000
 
shares authorized;
885,726
 
shares issued and outstanding (2022 -
885,726
)
22,143
22,143
Common stock, $
0.01
 
par value;
170,000,000
 
shares authorized;
104,740,311
 
shares issued (2022 -
104,657,522
) and
72,127,595
 
shares outstanding (2022 -
71,853,720
)
1,048
1,047
Surplus
4,797,364
4,790,993
Retained earnings
4,189,865
3,834,348
Treasury stock - at cost,
32,612,716
 
shares (2022 -
32,803,802
)
 
(2,018,870)
(2,030,178)
Accumulated other comprehensive loss, net
 
of tax
 
(2,533,942)
(2,524,928)
Total stockholders’ equity
 
4,457,608
4,093,425
Total liabilities and stockholders’ equity
$
69,736,936
$
67,637,917
The accompanying notes are an integral part of
 
these Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF OPERATIONS
(UNAUDITED)
Quarters ended September 30,
Nine months ended September 30,
(In thousands, except per share information)
2023
2022
2023
2022
Interest income:
Loans
$
596,886
$
481,088
$
1,708,216
$
1,354,124
Money market investments
99,286
36,966
265,785
67,172
Investment securities
148,614
133,181
403,814
331,421
Total interest income
844,786
651,235
2,377,815
1,752,717
Interest expense:
 
Deposits
294,121
60,897
730,824
113,507
Short-term borrowings
1,478
921
5,987
1,249
Long-term debt
15,167
9,798
43,660
30,168
Total interest expense
310,766
71,616
780,471
144,924
Net interest income
534,020
579,619
1,597,344
1,607,793
Provision for credit losses
 
45,117
39,637
129,946
33,499
Net interest income after provision for credit losses
 
488,903
539,982
1,467,398
1,574,294
Non-interest income:
 
Service charges on deposit accounts
37,318
40,006
109,777
122,528
Other service fees
93,407
86,402
277,748
244,987
Mortgage banking activities (Refer to Note 10)
5,393
9,448
15,109
35,888
Net (loss) gain, including impairment on equity securities
(1,319)
(1,448)
1,165
(7,651)
Net gain (loss) on trading account debt securities
219
(274)
632
(946)
Net loss on sale of loans on loans held-for-sale, including
valuation adjustments
(44)
-
(44)
-
Adjustments
 
to indemnity reserves on loans sold
(187)
1,715
(31)
1,140
Other operating income
24,762
290,645
77,625
342,651
Total non-interest income
159,549
426,494
481,981
738,597
Operating expenses:
 
Personnel costs
193,152
193,843
583,380
529,627
Net occupancy expenses
28,100
27,420
81,304
78,357
Equipment expenses
8,905
8,735
26,878
25,798
Other taxes
8,590
15,966
41,290
47,461
Professional fees
38,514
47,662
122,077
122,884
Technology and software expenses
 
72,930
68,341
213,843
213,638
Processing and transactional services
37,899
32,368
108,609
94,358
Communications
4,220
3,858
12,483
11,028
Business promotion
23,075
24,348
67,029
60,784
FDIC deposit insurance
8,932
6,610
24,600
20,445
Other real estate owned (OREO) income
(5,189)
(2,444)
(10,197)
(12,963)
Other operating expenses
23,061
39,593
70,274
81,814
Amortization of intangibles
795
795
2,385
2,481
Goodwill impairment charge
23,000
9,000
23,000
9,000
Total operating expenses
465,984
476,095
1,366,955
1,284,712
Income before income tax
182,468
490,381
582,424
1,028,179
Income tax expense
45,859
67,986
135,676
182,677
Net Income
$
136,609
$
422,395
$
446,748
$
845,502
Net Income Applicable to Common Stock
 
$
136,256
$
422,042
$
445,689
$
844,443
Net Income per Common Share – Basic
$
1.90
$
5.71
$
6.22
$
11.09
Net Income per Common Share – Diluted
$
1.90
$
5.70
$
6.21
$
11.07
The accompanying notes are an integral part of
 
these Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
Quarters ended,
 
Nine months ended,
September 30,
September 30,
(In thousands)
2023
2022
2023
2022
Net income
$
136,609
$
422,395
$
446,748
$
845,502
Other comprehensive (loss) income before
 
tax:
Foreign currency translation adjustment
(976)
7,206
(220)
10,346
Adjustment of pension and postretirement
 
benefit plans
-
-
-
2,030
Amortization of net losses of pension and
 
postretirement benefit plans
4,814
3,911
14,440
11,733
Unrealized holding losses on debt securities
 
arising during the period
 
(234,827)
(876,854)
(99,360)
(2,716,474)
Amortization of unrealized losses of debt
 
securities transfer from available-for-
sale to held-to-maturity
43,783
-
128,726
-
Unrealized net (losses) gains on cash flow
 
hedges
-
392
(30)
3,903
Reclassification adjustment for net (gains)
 
losses included in net income
-
828
(41)
(751)
Other comprehensive (loss) income before
 
tax
(187,206)
(864,517)
43,515
(2,689,213)
Income tax (expense) benefit
(18,301)
93,202
(52,529)
289,951
Total other comprehensive loss, net of tax
(205,507)
(771,315)
(9,014)
(2,399,262)
Comprehensive (loss) income, net of tax
$
(68,898)
$
(348,920)
$
437,734
$
(1,553,760)
Tax effect allocated to each component of other comprehensive
 
(loss) income:
Quarters ended
Nine months ended,
September 30,
September 30,
(In thousands)
2023
2022
2023
2022
Adjustment of pension and postretirement
 
benefit plans
$
-
$
-
$
-
$
(761)
Amortization of net losses of pension and
 
postretirement benefit plans
(1,805)
(1,467)
(5,415)
(4,401)
Unrealized holding losses on debt securities
 
arising during the period
 
(7,740)
94,956
(21,396)
295,326
Amortization of unrealized losses of debt
 
securities transfer from available-for-
sale to held-to-maturity
(8,756)
-
(25,744)
-
Unrealized net (losses) gains on cash flow
 
hedges
-
23
11
(681)
Reclassification adjustment for net (gains)
 
losses included in net income
-
(310)
15
468
Income tax (expense) benefit
$
(18,301)
$
93,202
$
(52,529)
$
289,951
The accompanying notes are an integral
 
part of the Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
 
other
Common
Preferred
 
Retained
Treasury
comprehensive
(In thousands)
stock
stock
Surplus
earnings
stock
loss
Total
Balance at June 30, 2022
$
1,046
$
22,143
$
4,576,478
$
3,311,951
$
(1,665,253)
$
(1,953,016)
$
4,293,349
Net income
422,395
422,395
Issuance of stock
1,550
1,550
Dividends declared:
Common stock
[1]
(39,973)
(39,973)
Preferred stock
(353)
(353)
Common stock purchases
[2]
74,118
(305,343)
(231,225)
Stock based compensation
362
48
410
Other comprehensive loss, net of tax
(771,315)
(771,315)
Balance at September 30, 2022
 
$
1,046
$
22,143
$
4,652,508
$
3,694,020
$
(1,970,548)
$
(2,724,331)
$
3,674,838
Balance at June 30, 2023
$
1,047
$
22,143
$
4,795,581
$
4,093,284
$
(2,018,611)
$
(2,328,435)
$
4,565,009
Net income
136,609
136,609
Issuance of stock
1
1,599
1,600
Dividends declared:
Common stock
[1]
(39,675)
(39,675)
Preferred stock
(353)
(353)
Common stock purchases
(250)
(250)
Stock based compensation
184
(9)
175
Other comprehensive loss, net of tax
(205,507)
(205,507)
Balance at September 30, 2023
$
1,048
$
22,143
$
4,797,364
$
4,189,865
$
(2,018,870)
$
(2,533,942)
$
4,457,608
[1]
Dividends declared per common share during the quarter
 
ended September 30, 2023 - $
0.55
 
(2022 - $
0.55
).
[2]
During July 2022,
 
the Corporation completed
 
a $
400
 
million accelerated
 
share repurchase transaction
 
with respect to
 
its common stock.
 
During
August 2022, the Corporation
 
entered into a $
231
 
million accelerated share
 
repurchase transaction with
 
respect to its common
 
stock. Both were
accounted for as treasury stock transactions. Refer to Note
 
18 for additional information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
 
other
Common
Preferred
 
Retained
Treasury
comprehensive
(In thousands)
stock
stock
Surplus
earnings
stock
loss
Total
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
845,502
845,502
Issuance of stock
4,285
4,285
Dividends declared:
Common stock
[1]
(124,168)
(124,168)
Preferred stock
(1,059)
(1,059)
Common stock purchases
[2]
(5,882)
(631,638)
(637,520)
Stock based compensation
3,923
13,740
17,663
Other comprehensive loss, net of tax
(2,399,262)
(2,399,262)
Balance at September 30, 2022
 
$
1,046
$
22,143
$
4,652,508
$
3,694,020
$
(1,970,548)
$
(2,724,331)
$
3,674,838
Balance at December 31, 2022
$
1,047
$
22,143
$
4,790,993
$
3,834,348
$
(2,030,178)
$
(2,524,928)
$
4,093,425
Cumulative effect of accounting change
28,752
28,752
Net income
446,748
446,748
Issuance of stock
1
4,716
4,717
Dividends declared:
Common stock
[1]
(118,924)
(118,924)
Preferred stock
(1,059)
(1,059)
Common stock purchases
(4,491)
(4,491)
Stock based compensation
1,655
15,799
17,454
Other comprehensive loss, net of tax
(9,014)
(9,014)
Balance at September 30, 2023
$
1,048
$
22,143
$
4,797,364
$
4,189,865
$
(2,018,870)
$
(2,533,942)
$
4,457,608
[1]
Dividends declared per common share during the nine months
 
ended September 30, 2023 - $
1.65
 
(2022 - $
1.65
).
[2]
During the
 
nine months
 
ended September
 
30, 2022,
 
the Corporation
 
completed a
 
$
400
 
million
 
accelerated share
 
repurchase transaction
 
with
respect to
 
its common
 
stock and
 
entered into
 
an additional
 
$
231
 
million accelerated
 
share repurchase
 
transaction
 
with respect
 
to its
 
common
stock. Both were accounted for as a treasury stock transaction.
 
Refer to Note 18 for additional information.
For the period ended
September 30,
September 30,
Disclosure of changes in number of shares:
2023
2022
Preferred Stock:
Balance at beginning and end of period
885,726
885,726
Common Stock – Issued:
Balance at beginning of period
104,657,522
104,579,334
Issuance of stock
82,789
55,571
Balance at end of period
104,740,311
104,634,905
Treasury stock
(32,612,716)
(31,961,561)
Common Stock – Outstanding
72,127,595
72,673,344
The accompanying notes are an integral part of these Consolidated
 
Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF CASH FLOWS
(UNAUDITED)
Nine months ended September 30,
(In thousands)
2023
2022
Cash flows from operating activities:
Net income
$
446,748
$
845,502
Adjustments to reconcile net income to net cash provided
 
by operating activities:
Provision for credit losses
129,946
33,499
Goodwill impairment charges
23,000
9,000
Amortization of intangibles
2,385
2,481
Depreciation and amortization of premises and equipment
43,180
41,207
Net accretion of discounts and amortization of premiums and
 
deferred fees
 
(22,495)
39,142
Interest capitalized on loans subject to the temporary payment
 
moratorium or loss mitigation alternatives
(7,956)
(9,249)
Share-based compensation
15,079
14,822
Impairment charges on right-of-use and long-lived assets
-
688
Fair value adjustments on mortgage servicing rights
11,135
(2,776)
Fair value adjustment for contingent consideration
-
(9,241)
Adjustments to indemnity reserves on loans sold
31
(1,140)
Earnings from investments under the equity method, net
 
of dividends or distributions
(17,387)
(22,011)
Deferred income tax (benefit) expense
(13,539)
50,460
(Gain) loss on:
Disposition of premises and equipment and other productive
 
assets
(9,744)
(7,221)
Proceeds from insurance claims
(145)
-
Sale of loans, including valuation adjustments on loans
 
held-for-sale and mortgage banking activities
177
374
Disposition of stock as part of the Evertec Transactions
-
(240,412)
Sale of foreclosed assets, including write-downs
(18,137)
(24,339)
Acquisitions of loans held-for-sale
(6,678)
(118,368)
Proceeds from sale of loans held-for-sale
35,286
51,468
Net originations on loans held-for-sale
(60,285)
(191,570)
Net decrease (increase) in:
Trading debt securities
29,415
338,166
Equity securities
(7,481)
3,633
Accrued income receivable
 
(17,638)
(21,236)
Other assets
(981)
46,812
Net increase (decrease) in:
Interest payable
8,009
(4,936)
Pension and other postretirement benefits obligation
11,985
(2,252)
Other liabilities
(100,887)
(9,095)
Total adjustments
26,275
(32,094)
Net cash provided by operating activities
473,023
813,408
Cash flows from investing activities:
 
Net (increase) decrease in money market investments
(775,597)
13,562,791
Purchases of investment securities:
Available-for-sale
(12,665,449)
(18,142,424)
Held-to-maturity
(8,615)
(1,879,443)
Equity
(18,279)
(34,029)
Proceeds from calls, paydowns, maturities and redemptions
 
of investment securities:
Available-for-sale
13,138,765
12,066,879
Held-to-maturity
308,129
9,185
Proceeds from sale of investment securities:
 
 
Equity
30,926
34,450
Net disbursements on loans
(1,609,387)
(1,762,828)
Proceeds from sale of loans
133,078
56,611
Acquisition of loan portfolios
(556,659)
(580,625)
Return of capital from equity method investments
249
-
Payments to acquire equity method investments
(1,500)
(1,625)
Proceeds from disposition of stock as part of the Evertec Transactions
-
219,883
Acquisition of premises and equipment
(133,598)
(67,887)
Proceeds from insurance claims
145
-
Proceeds from sale of:
Premises and equipment and other productive assets
6,620
8,963
Foreclosed assets
84,446
75,719
Net cash (used in) provided by investing activities
(2,066,726)
3,565,620
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12
Cash flows from financing activities:
 
Net increase (decrease) in:
Deposits
2,085,956
(2,177,088)
Assets sold under agreements to repurchase
 
(55,538)
70,847
Other short-term borrowings
(365,000)
175,000
Payments of notes payable
(321,000)
(101,000)
Principal payments of finance leases
(3,557)
(2,363)
Proceeds from issuance of notes payable
437,411
-
Proceeds from issuance of common stock
4,716
4,285
Dividends paid
(119,715)
(121,190)
Net payments for repurchase of common stock
(414)
(631,749)
Payments related to tax withholding for share-based compensation
(4,077)
(5,771)
Net cash provided by (used in) financing activities
1,658,782
(2,789,029)
Net increase in cash and due from banks, and restricted
 
cash
65,079
1,589,999
Cash and due from banks, and restricted cash at beginning
 
of period
476,159
434,512
Cash and due from banks, and restricted cash at the end of
 
the period
$
541,238
$
2,024,511
The accompanying notes are an integral part of these Consolidated
 
Financial Statements.
13
Notes to Consolidated Financial
 
Statements
 
(Unaudited)
Note 1 -
Nature of operations
14
Note 2 -
Basis of presentation
15
Note 3 -
New accounting pronouncements
16
Note 4 -
Summary of significant accounting policies
 
20
Note 5 -
Restrictions on cash and due from banks and
certain securities
21
Note 6 -
Debt securities available-for-sale
22
Note 7 -
Debt securities held-to-maturity
25
Note 8 -
Loans
29
Note 9 -
Allowance for credit losses – loans held-in-
portfolio
38
Note 10 -
Mortgage banking activities
74
Note 11 -
Transfers of financial assets and mortgage
servicing assets
75
Note 12 -
Other real estate owned
79
Note 13 -
Other assets
80
Note 14 -
Goodwill and other intangible assets
 
81
Note 15 -
Deposits
85
Note 16 -
Borrowings
86
Note 17 -
Other liabilities
88
Note 18 -
Stockholders’ equity
89
Note 19 -
Other comprehensive loss
 
90
Note 20 -
Guarantees
92
Note 21 -
Commitments and contingencies
94
Note 22-
Non-consolidated variable interest entities
99
Note 23 -
Related party transactions
101
Note 24 -
Fair value measurement
103
Note 25 -
Fair value of financial instruments
111
Note 26 -
Net income per common share
114
Note 27 -
Revenue from contracts with customers
115
Note 28 -
Leases
118
Note 29 -
Pension and postretirement benefits
120
Note 30 -
Stock-based compensation
121
Note 31 -
Income taxes
124
Note 32 -
Supplemental disclosure on the consolidated
statements of cash flows
128
Note 33 -
Segment reporting
129
14
Note 1 – Nature of Operations
Popular,
 
Inc. (the
 
“Corporation” or
 
“Popular”) is
 
a diversified,
 
publicly-owned financial
 
holding company
 
subject to
 
the supervision
and
 
regulation
 
of
 
the
 
Board
 
of
 
Governors
 
of
 
the
 
Federal
 
Reserve
 
System.
 
The
 
Corporation
 
has
 
operations
 
in
 
Puerto
 
Rico,
 
the
mainland United
 
States (“U.S.”)
 
and the
 
U.S. and
 
British Virgin
 
Islands. In
 
Puerto Rico,
 
the Corporation
 
provides retail,
 
mortgage,
and
 
commercial
 
banking
 
services,
 
through
 
its
 
principal
 
banking
 
subsidiary,
 
Banco
 
Popular
 
de
 
Puerto
 
Rico
 
(“BPPR”),
 
as
 
well
 
as
investment
 
banking,
 
broker-dealer,
 
auto
 
and
 
equipment
 
leasing
 
and
 
financing,
 
and
 
insurance
 
services
 
through
 
specialized
subsidiaries. In
 
the U.S.
 
mainland, the
 
Corporation provides
 
retail, mortgage,
 
commercial banking
 
services, as
 
well as
 
equipment
leasing
 
and
 
financing,
 
through
 
its
 
New
 
York-chartered
 
banking
 
subsidiary,
 
Popular
 
Bank
 
(“PB”
 
or
 
“Popular
 
U.S.”),
 
which
 
has
branches located in New York, New Jersey, and Florida.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15
Note 2 – Basis of Presentation
Basis of Presentation
The consolidated interim financial statements have been prepared without audit. The Consolidated Statement of Financial Condition
data at
 
December 31,
 
2022 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, 2022, included
 
in the 2022 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.
The Corporation embarked on a
 
broad-based multi-year, technological and
 
business process transformation during the second
 
half
of 2022. The needs and expectations of
 
the Corporation’s clients, as well as
 
the competitive landscape, have evolved, requiring the
Corporation to
 
make
 
important
 
investments
 
in
 
its
 
technological infrastructure
 
and
 
adopt
 
more
 
agile
 
practices.
 
The
 
Corporation’s
technology and business transformation will be
 
a significant priority for the Corporation over the next
 
three years and beyond.
As
 
part
 
of
 
this
 
transformation,
 
the
 
Corporation
 
aims
 
to
 
expand
 
its
 
digital
 
capabilities,
 
modernize
 
its
 
technology
 
platform,
 
and
implement agile and
 
efficient business
 
processes across the
 
entire Corporation. To
 
facilitate the transparency
 
of the
 
progress with
the transformation initiative and to better portray the level of technology
 
related expenses categorized by the nature of the expense,
effective
 
in the
 
fourth quarter
 
of
 
2022,
 
the
 
Corporation has
 
separated technology,
 
professional fees
 
and
 
transactional and
 
items
processing related expenses as standalone expense categories in the
 
accompanying Consolidated Statement of Operations. There
were no
 
changes to
 
the total
 
operating expenses
 
presented.
 
Prior periods
 
amount in
 
the Consolidated
 
Financial Statements
 
and
related disclosures have been reclassified to conform
 
to the current presentation.
 
The following table provides the detail of
 
the reclassifications for each respective quarter:
Quarter ended
Nine months ended
30-Sep-22
30-Sep-22
Financial statement line item
As reported
Adjustments
Adjusted
As reported
Adjustments
Adjusted
Equipment expenses
$
26,626
$
(17,891)
$
8,735
75,193
(49,395)
25,798
Professional fees
112,221
(64,559)
47,662
335,590
(212,706)
122,884
Technology and
 
software expenses
-
68,341
68,341
-
213,638
213,638
Processing and transactional services
-
32,368
32,368
-
94,358
94,358
Communications
6,224
(2,366)
3,858
18,364
(7,336)
11,028
Other operating expenses
55,486
(15,893)
39,593
120,373
(38,559)
81,814
Net effect on operating expenses
$
200,557
$
-
$
200,557
$
549,520
$
-
$
549,520
Use of Estimates in the Preparation of Financial Statements
The preparation of financial
 
statements in conformity with
 
accounting principles generally accepted in
 
the United States
 
of America
requires management to make
 
estimates and assumptions that
 
affect the reported
 
amounts of assets and
 
liabilities and contingent
assets
 
and
 
liabilities
 
at
 
the
 
date
 
of
 
the
 
financial
 
statements,
 
and
 
the
 
reported
 
amounts
 
of
 
revenues
 
and
 
expenses
 
during
 
the
reporting period. Actual results could differ from those estimates.
 
16
Note 3 - New accounting pronouncements
Recently Adopted Accounting Standards Updates
Standard
Description
Date of adoption
Effect on the financial statements
 
FASB ASU 2023-04,
Liabilities (Topic 405)
The
 
Financial Accounting
 
Standards Board
("FASB")
 
issued
 
Accounting
 
Standards
Update
 
(“ASU”)
 
2023-04
 
in
 
August
 
2023
which
 
amends
 
paragraphs
 
within
 
ASC
Topic
 
405
 
to
 
clarify
 
the
 
accounting
 
and
disclosure
 
for
 
obligations
 
to
 
safeguard
Crypto-Assets
 
held
 
by
 
an
 
entity
 
for
 
its
platform users.
August 2023
The
 
Corporation
 
was
 
not
 
impacted
 
by
the
 
adoption of
 
this
 
ASU
 
since
 
it does
not
 
hold
 
Crypto-Assets
 
for
 
its
 
platform
users.
FASB ASU 2023-03,
Presentation of Financial
Statements (Topic 205),
Income Statement—
Reporting Comprehensive
Income (Topic 220),
Distinguishing Liabilities
from Equity (Topic 480),
Equity (505), and
Compensation—Stock
Compensation (Topic 718)
 
The
 
FASB
 
issued
 
ASU
 
2023-03
 
in
 
July
2023 which
 
amends or
 
supersedes various
SEC
 
paragraphs
 
within
 
the
 
Codification
 
to
conform
 
to
 
past
 
SEC
 
announcements
 
and
guidance
 
which
 
updated
 
SAB
 
Topics
 
5.T,
14, and 6. B.
July 1, 2023
The
 
Corporation
 
was
 
not
 
impacted
 
by
the
 
adoption
 
of
 
this
 
ASU
 
since
 
it
codifies previous guidance.
 
FASB ASU 2022-05,
Financial Services -
Insurance (Topic 944)
Transition for Sold
Contracts
The
 
FASB
 
issued
 
ASU
 
2022-05
 
in
December 2022, which
 
allows an insurance
entity to make an
 
accounting policy election
of
 
applying
 
the
 
Long-Duration
 
Contracts
(LDTI) transition guidance
 
on a transaction-
by-transaction
 
basis
 
if
 
the
 
contracts
 
have
been
 
derecognized
 
because
 
of
 
a
 
sale
 
or
disposal
 
and
 
the
 
insurance
 
entity
 
has
 
no
significant
 
continuing
 
involvement
 
with
 
the
derecognized contract.
January 1, 2023
The
 
Corporation
 
was
 
not
 
impacted
 
by
the
 
adoption
 
of
 
ASU
 
2022-05
 
during
the
 
first
 
quarter
 
of
 
2023
 
since
 
it
 
does
not
 
hold
 
Long-Duration
 
Contracts
(LDTI).
FASB ASU 2022-04,
Liabilities—Supplier
Finance Programs
(Subtopic 405-50)
Disclosure of Supplier
Finance Program
Obligations
The
 
FASB
 
issued
 
ASU
 
2022-04
 
in
September 2022, which requires to disclose
information
 
about
 
the
 
use
 
of
 
supplier
finance
 
programs
 
in
 
connection
 
with
 
the
purchase of goods and services.
January 1, 2023
The
 
Corporation
 
was
 
not
 
impacted
 
by
the
 
adoption
 
of
 
ASU
 
2022-04
 
since
 
it
does
 
not
 
use
 
supplier
 
finance
programs.
 
17
Recently Adopted Accounting Standards Updates
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
 
troubled
 
debt
 
restructurings
(“TDRs”) in
 
Subtopic 310-40
 
Receivables—
Troubled
 
Debt
 
Restructurings
 
by
 
Creditors
and
 
requires
 
creditors
 
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
 
the
 
disclosure
 
of
current-period
 
gross
 
write-offs
 
by
 
year
 
of
origination for financing
 
receivables and net
investments in leases.
 
January 1, 2023
The Corporation adopted
 
ASU 2022-02
during
 
the
 
first
 
quarter
 
of
 
2023.
 
The
adoption
 
of
 
this
 
standard
 
resulted
 
in
enhanced disclosure for
 
loans modified
to
 
borrowers
 
with
 
financial
 
difficulties
and
 
the
 
disclosure
 
of
 
period
 
gross
charge
 
offs
 
by
 
vintage
 
year.
 
The
Corporation
 
anticipates
 
that
 
there
 
will
be loans subject to disclosure under the
new standard that
 
did not qualify
 
under
the prior guidance
 
given the removal
 
of
the
 
concession
 
requirement
 
for
 
such
disclosures.
 
The
 
amended
 
guidance
eliminated the
 
requirement to
 
measure
the effect of the concession from a
 
loan
modification, for
 
which the
 
Corporation
used
 
a
 
discounted
 
cash
 
flow
 
(“DCF”)
model. The
 
impact of
 
discontinuing the
use
 
of
 
the
 
DCF model
 
to
 
measure the
concession resulted
 
in a
 
release of
 
the
allowance
 
for
 
credit
 
losses
 
("ACL")
 
of
$
46
 
million, mainly
 
related to
 
mortgage
loans
 
for
 
which
 
modifications
 
mostly
included
 
a
 
reduction
 
in
 
contractual
interest
 
rates
 
and
 
given
 
the
 
extended
maturity
 
term
 
of
 
these
 
loans,
 
this
resulted
 
in
 
an
 
increase
 
in
 
the
 
ACL
 
in
the
 
period
 
of
 
modification.
 
For
 
the
transition
 
method
 
related
 
to
 
the
recognition and measurement of TDRs,
the
 
Corporation
 
has
 
elected
 
to
 
apply
the modified
 
retrospective approach for
the
 
adoption
 
of
 
this
 
standard.
Accordingly,
 
this
 
presented
 
an
adjustment increase
 
of $
29
 
million, net
of
 
tax
 
effect,
 
to
 
the
 
beginning
 
balance
of
 
retained
 
earnings
 
on
 
January
 
1,
2023.
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
 
was
 
not
 
impacted
 
by
the
 
adoption
 
of
 
ASU
 
2022-01
 
since
 
it
does not hold derivatives designated as
fair value hedges.
FASB ASU 2021-08,
Business Combinations
(Topic 805) – Accounting
for Contract Assets and
Contract Liabilities from
Contracts with Customers
The FASB
 
issued ASU
 
2021-08 in
 
October
2021,
 
which
 
amends
 
ASC
 
Topic
 
805
 
by
requiring
 
contract
 
assets
 
and
 
contract
liabilities arising
 
from revenue
 
contract with
customers
 
to
 
be
 
recognized
 
in
 
accordance
with ASC
 
Topic
 
606 on
 
the acquisition date
instead of fair value.
January 1, 2023
The
 
Corporation
 
was
 
not
 
impacted
 
by
the adoption of ASU 2021-08, however,
it
 
will
 
consider
 
this
 
guidance
 
for
revenue
 
contracts
 
with
 
customers
recognized
 
as
 
part
 
of
 
business
combinations
 
entered
 
into
 
on
 
or
 
after
the effective date.
 
18
Accounting Standards Updates Not Yet Adopted
Standard
Description
Date of adoption
Effect on the financial statements
 
FASB ASU 2023-06,
Disclosure Improvements,
Codification Amendments
in Response to the SEC’s
 
Disclosure Update and
Simplification Initiative
The FASB
 
issued ASU
 
2023-06 in
 
October
2023
 
which
 
modifies
 
the
 
disclosure
 
or
presentation
 
requirements
 
of
 
various
subtopics
 
in
 
the
 
Codification
 
with
 
the
purpose of aligning U.S.
 
GAAP requirement
with those of the SEC under Regulation S-X
and S-K.
 
The date on which
the SEC removes
related disclosure
requirements from
Regulation S-X or
Regulation S-K. If by
June 30, 2027, the
SEC has not
removed the
applicable
requirement from
Regulation S-X or
Regulation S-K, the
pending content of
the related
amendment will be
removed from the
Codification and will
not become
 
effective for any
entity.
The Corporation
 
does not
 
expect to
 
be
impacted
 
by
 
the
 
adoption
 
of
 
this
 
ASU
since
 
it
 
is
 
currently
 
subject
 
to
 
SEC's
current
 
disclosure
 
and
 
presentation
requirements under Regulation S-X and
S-K.
FASB ASU 2023-05,
Business Combinations -
Joint Venture Formations
(Subtopic 805-60)
 
Recognition and initial
measurement
The
 
FASB
 
issued
 
ASU
 
2023-05
 
in
 
August
2023,
 
which
 
amends ASC
 
subtopic
 
805-60
to include specific
 
guidance about how
 
joint
ventures
 
should
 
recognize
 
and
 
initially
measure
 
assets
 
contributed
 
and
 
liabilities
assumed.
 
The
 
amendments
 
require
 
that
 
a
joint venture,
 
upon formation, will
 
recognize
and initially measure its assets and liabilities
at fair value.
January 1, 2025
The Corporation
 
does not
 
expect to
 
be
impacted by the adoption of this ASU.
 
FASB ASU 2023-02,
Investments—Equity
Method and Joint
Ventures (Topic 323) -
Accounting for
Investments in Tax Credit
Structures Using the
Proportional Amortization
Method
The
 
FASB
 
issued
 
ASU
 
2023-02
 
in
 
March
2023,
 
which
 
amend
 
topic
 
ASC
 
323
 
by
permitting
 
the
 
election
 
to
 
apply
 
the
proportional amortization method to account
for
 
tax
 
equity
 
investments
 
that
 
generate
income
 
tax
 
credits
 
through
 
investment
 
in
low-income-housing
 
tax
 
credit
 
(LIHTC)
structures
 
and
 
other
 
tax
 
credit
 
programs
 
if
certain
 
conditions
 
are
 
met.
 
The
 
ASU
 
also
eliminates
 
the
 
application
 
of
 
the
 
subtopic
323-740
 
to
 
LIHTC
 
investment
 
not
accounted
 
for
 
using
 
the
 
proportional
amortization
 
method
 
and
 
instead
 
requires
the use of other guidance.
January 1, 2024
The Corporation
 
is currently
 
evaluating
the
 
impact
 
that
 
the
 
adoption
 
of
 
this
guidance
 
will
 
have
 
on
 
its
 
financial
statements
 
and
 
presentation
 
and
disclosures.
 
19
Accounting Standards Updates Not Yet Adopted
Standard
Description
Date of adoption
Effect on the financial statements
 
FASB ASU 2023-01,
Leases (Topic 842),
Lessors – Common
Control Arrangements
The
 
FASB
 
issued
 
ASU
 
2023-01
 
in
 
March
2023,
 
which
 
amends
 
ASC
 
Topic
 
842
 
and
requires
 
to
 
amortize
 
leasehold
improvements
 
associated
 
with
 
common
control
 
leases
 
over
 
the
 
useful
 
life
 
of
 
the
leasehold
 
improvements
 
to
 
the
 
common
control group as long
 
as the lessee controls
the
 
use
 
of
 
the
 
underlying assets
 
through a
lease.
 
In
 
addition,
 
the
 
ASU
 
requires
companies
 
to
 
account
 
for
 
leasehold
improvements
 
associated
 
with
 
common
control leases as a transfer between entities
under
 
common
 
control
 
through
 
an
adjustments
 
to
 
equity
 
if,
 
and
 
when,
 
the
lessee
 
no
 
longer
 
controls
 
the
 
use
 
of
 
the
underlying asset.
January 1, 2024
The Corporation
 
does not
 
expect to
 
be
impacted
 
by
 
the
 
adoption
 
of
 
this
 
ASU
since
 
it
 
does not
 
hold common
 
control
leasehold
 
improvements,
 
however,
 
it
will consider this guidance to
 
determine
the
 
amortization
 
period
 
for
 
and
accounting
 
treatment
 
of
 
leasehold
improvements associated with common
control
 
leases acquired
 
on
 
or
 
after the
effective date.
 
For other recently issued Accounting Standards
 
Updates not yet effective, refer to Note 3 to
 
the Consolidated Financial Statements
included in the 2022 Form 10-K.
20
Note 4 – Summary of significant accounting
 
policies
The
 
accounting
 
and
 
financial
 
reporting
 
policies
 
of
 
Popular,
 
Inc.
 
and
 
its
 
subsidiaries
 
(the
 
“Corporation”) conform
 
with
 
accounting
principles generally accepted
 
in the
 
United States of
 
America and with
 
prevailing practices within
 
the financial services
 
industry.
 
A
description of the significant accounting and
 
financial reporting policies can be found on Note 2
 
to the 2022 Form 10-K.
 
In connection with the implementation of the Accounting Standards Update (“ASU”) 2022-02, the Corporation has modified its policy
related to
 
loan modifications.
 
As discussed
 
in Note
 
3, the
 
new accounting
 
guidance eliminates
 
the recognition
 
and measurement
principle of
 
TDRs. The
 
Corporation has
 
also made
 
changes to
 
certain of
 
its
 
accounting policies
 
related to
 
its
 
loans portfolio
 
and
allowance for credit losses in connection with
 
this accounting standards update.
 
A
 
modification is
 
subject to
 
disclosure under
 
the new
 
ASU when
 
the Corporation
 
separately concludes
 
that both
 
of the
 
following
conditions exist:
 
1) the
 
debtor is experiencing
 
financial difficulties 2)
 
the modification constitutes
 
a reduction
 
in the
 
interest rate
 
on
the loan, a payment extension, a forgiveness of principal, or a more-than-insignificant payment delay. Determination that a borrower
is experiencing
 
financial difficulties
 
involves a
 
degree of
 
judgment. The identification
 
of loan
 
modifications to
 
debtors with
 
financial
difficulties is critical in the determination of the adequacy
 
of the ACL.
 
The
 
ASU
 
also
 
eliminates
 
the
 
requirement to
 
use
 
a
 
DCF
 
approach
 
to
 
estimated
 
credit
 
losses
 
for
 
modified
 
loans
 
with
 
borrowers
experiencing financial difficulties. The
 
entity can apply
 
a methodology similar to
 
the one used for
 
loans that were not
 
modified. The
Corporation applied a modified retrospective transition method for the implementation of ASU 2022-02 which
 
resulted in a reduction
of approximately $
46
 
million, $
29
 
million net of tax, in the reserve which was recorded as an
 
adjustment to the beginning balance of
retained earnings.
A loan
 
modified with
 
financial difficulties
 
is typically
 
in non-accrual
 
status at
 
the time
 
of the
 
modification. These
 
loans continue
 
in
non-accrual status until the borrower has demonstrated a willingness
 
and ability to make the restructured loan payments (at
 
least six
months of sustained performance after the modification (or one year for loans providing for quarterly or semi-annual payments)) and
management has concluded that it is probable
 
that the borrower would not be in payment
 
default in the foreseeable future.
Refer
 
to
 
Note
 
9
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
 
qualitative
 
information
 
on
 
loan
 
modifications
 
and
 
the
Corporation’s determination of the ACL.
Refer below for changes in accounting policies due
 
to the adoption of the new ASU and other
 
policy adoptions:
Loans
 
Effective on January 1, 2023,
 
newly originated mortgage loans held-for-sale are stated at fair
 
value, with changes recorded through
earnings.
 
Previously held-for-sale
 
were carried
 
at
 
the lower
 
of
 
its cost
 
or market
 
value. Fair
 
value is
 
generally determined
 
in the
aggregate and
 
is measured
 
based on
 
current market
 
prices for
 
similar loans,
 
outstanding investor
 
commitments, prices
 
of recent
sales
 
or
 
discounted
 
cash
 
flow
 
analyses
 
which
 
utilize
 
inputs
 
and
 
assumptions
 
which
 
are
 
believed
 
to
 
be
 
consistent
 
with
 
market
participants’ views.
 
Derivative instruments
Effective on
 
January 1,
 
2023, the
 
Corporation discontinued
 
the hedge
 
accounting treatment
 
of certain
 
forward contracts
 
for which
the
 
changes
 
in
 
fair
 
value
 
were
 
recorded,
 
net
 
of
 
taxes,
 
in
 
accumulated
 
other
 
comprehensive
 
income/(loss)
 
and
 
subsequently
reclassified to net
 
income (loss) in
 
the same
 
period that the
 
hedged transaction impacted
 
earnings. As a
 
result of this
 
change, the
changes in the fair
 
value of these forward contracts
 
are being recorded through net
 
income (loss). The Corporation utilizes
 
forward
contracts to hedge the
 
sale of mortgage-backed securities with
 
duration terms over one month.
 
Interest rate forwards are contracts
for the delayed delivery of securities, which the seller agrees to deliver on a specified future
 
date at a specified price or yield. These
forward contracts are hedging a forecasted transaction
 
and thus qualify for cash flow hedge accounting.
 
 
Based
 
on
 
the
 
election
 
to
 
apply
 
fair
 
value
 
accounting
 
for
 
its
 
mortgage
 
loans
 
held
 
for
 
sale,
 
effective
 
on
 
January
 
1,
 
2023,
 
the
Corporation discontinued
 
the
 
hedge accounting
 
since
 
the
 
changes
 
in
 
the
 
fair
 
value
 
of
 
the
 
loans
 
is
 
expected
 
to
 
be
 
offset
 
by
 
the
changes in the fair value of the forward
 
contract, both of which are now recorded through
 
net income (loss).
21
Note 5 - 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 $
2.6
 
billion at
 
September 30,
 
2023 (December
 
31,
2022
 
-
 
$
2.8
 
billion). Cash
 
and
 
due from
 
banks, as
 
well
 
as
 
other highly
 
liquid securities,
 
are
 
used to
 
cover
 
the required
 
average
reserve balances.
 
At
 
September
 
30,
 
2023,
 
the
 
Corporation
 
held
 
$
63
 
million
 
in
 
restricted
 
assets
 
in
 
the
 
form
 
of
 
funds
 
deposited
 
in
 
money
 
market
accounts, debt
 
securities available for
 
sale and
 
equity securities (December
 
31, 2022
 
- $
80
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22
Note 6 – 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 September 30, 2023 and December 31,
 
2022.
 
At September 30, 2023
Gross
Gross
Weighted
Amortized
unrealized
unrealized
Fair
 
average
(In thousands)
cost
gains
 
losses
value
yield
U.S. Treasury securities
Within 1 year
$
7,041,817
$
421
$
67,663
$
6,974,575
3.51
%
After 1 to 5 years
4,364,065
-
271,553
4,092,512
1.36
After 5 to 10 years
307,852
-
45,258
262,594
1.63
Total U.S. Treasury
 
securities
11,713,734
421
384,474
11,329,681
2.65
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
19,312
-
1,163
18,149
1.53
After 5 to 10 years
22,371
-
1,857
20,514
2.26
After 10 years
112,566
7
13,222
99,351
2.54
Total collateralized
 
mortgage obligations - federal agencies
154,249
7
16,242
138,014
2.37
Mortgage-backed securities
Within 1 year
1,302
-
48
1,254
3.56
After 1 to 5 years
79,987
3
4,760
75,230
2.37
After 5 to 10 years
778,578
13
71,731
706,860
2.22
After 10 years
6,264,509
177
1,386,889
4,877,797
1.65
Total mortgage-backed
 
securities
 
7,124,376
193
1,463,428
5,661,141
1.72
Other
Within 1 year
1,022
-
-
1,022
3.99
Total other
 
1,022
-
-
1,022
3.99
Total debt securities
 
available-for-sale
[1]
$
18,993,381
$
621
$
1,864,144
$
17,129,858
2.30
%
[1]
 
Includes $
12.9
 
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 $
12
.0 billion serve as collateral for
public funds.
 
The Corporation had unpledged Available
 
for Sale securities with a fair value of
 
$
4.2
 
billion that could be used to increase its
borrowing facilities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23
At December 31, 2022
Gross
 
Gross
 
Weighted
 
Amortized
 
unrealized
unrealized
Fair
 
average
 
(In thousands)
cost
gains
 
losses
value
yield
U.S. Treasury securities
 
Within 1 year
$
4,576,127
$
506
$
47,156
$
4,529,477
2.42
%
After 1 to 5 years
6,793,739
-
410,858
6,382,881
1.35
After 5 to 10 years
308,854
-
40,264
268,590
1.63
Total U.S. Treasury
 
securities
11,678,720
506
498,278
11,180,948
1.78
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
3,914
-
213
3,701
1.77
After 5 to 10 years
47,979
-
3,428
44,551
1.73
After 10 years
127,639
24
10,719
116,944
2.53
Total collateralized
 
mortgage obligations - federal agencies
179,532
24
14,360
165,196
2.30
Mortgage-backed securities
After 1 to 5 years
74,328
11
3,428
70,911
2.33
After 5 to 10 years
866,757
43
58,997
807,803
2.16
After 10 years
6,762,150
932
1,184,626
5,578,456
1.61
Total mortgage-backed
 
securities
 
7,703,235
986
1,247,051
6,457,170
1.68
Other
After 1 to 5 years
1,062
-
2
1,060
3.98
Total other
 
1,062
-
2
1,060
3.98
Total debt securities
 
available-for-sale
[1]
$
19,562,549
$
1,516
$
1,759,691
$
17,804,374
1.75
%
[1]
Includes $
11.3
 
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 $
10.3
 
billion serve as collateral for
public funds. The Corporation had unpledged Available
 
for Sale securities with a fair value of
 
$
6.4
 
billion that could be used to increase its
borrowing facilities.
The weighted
 
average yield
 
on debt
 
securities available-for-sale
 
is based
 
on amortized
 
cost; therefore,
 
it
 
does not
 
give
 
effect to
changes in fair value.
Securities
 
not
 
due
 
on
 
a
 
single
 
contractual
 
maturity
 
date,
 
such
 
as
 
mortgage-backed
 
securities
 
and
 
collateralized
 
mortgage
obligations,
 
are
 
classified
 
based
 
on
 
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 available-for-sale sold during the nine
 
months ended September 30, 2023 and 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24
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
September 30, 2023 and December 31, 2022.
At September 30, 2023
Less than 12 months
12 months or more
Total
Gross
Gross
Gross
Fair
 
 
unrealized
Fair
 
 
unrealized
Fair
 
 
unrealized
(In thousands)
value
 
losses
value
 
losses
value
 
losses
U.S. Treasury securities
$
350,471
$
8,546
$
7,111,545
$
375,928
$
7,462,016
$
384,474
Collateralized mortgage obligations - federal agencies
 
8,212
214
127,961
16,028
136,173
16,242
Mortgage-backed securities
50,837
1,571
5,595,532
1,461,857
5,646,369
1,463,428
Total debt securities
 
available-for-sale in an unrealized loss position
 
$
409,520
$
10,331
$
12,835,038
$
1,853,813
$
13,244,558
$
1,864,144
At December 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
$
6,027,786
$
288,582
$
3,244,572
$
209,696
$
9,272,358
$
498,278
Collateralized mortgage obligations - federal agencies
 
139,845
10,655
22,661
3,705
162,506
14,360
Mortgage-backed securities
1,740,214
138,071
4,662,195
1,108,980
6,402,409
1,247,051
Other
60
2
-
-
60
2
Total debt securities
 
available-for-sale in an unrealized loss position
 
$
7,907,905
$
437,310
$
7,929,428
$
1,322,381
$
15,837,333
$
1,759,691
As of
 
September 30,
 
2023, the
 
portfolio of
 
available-for-sale debt
 
securities reflects
 
gross unrealized
 
losses of
 
$
1.9
 
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
 
debt
 
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 on the
 
2022 Form 10-K, these
 
securities carry an explicit
or
 
implicit
 
guarantee from
 
the U.S.
 
Government, are
 
highly rated
 
by
 
major
 
rating agencies,
 
and
 
have a
 
long
 
history of
 
no credit
losses. Accordingly, the Corporation applies a zero-credit loss assumption and
 
no ACL for these securities has been established.
 
In October 2022, the
 
Corporation transferred U.S. Treasury securities
 
with a fair value
 
of $
6.5
 
billion (par value of
 
$
7.4
 
billion) from
its available-for-sale portfolio to its held-to-maturity portfolio.
 
Management changed its intent, given its ability to hold these securities
to maturity
 
due to
 
the Corporation’s
 
liquidity position
 
and its
 
intention to
 
reduce the
 
impact on
 
accumulated other
 
comprehensive
income (loss) (“AOCI”) and
 
tangible capital of further
 
increases in interest rates.
 
The securities were reclassified
 
at fair value at
 
the
time of the transfer. At the date of the transfer,
 
these securities had pre-tax unrealized losses of $
873
 
million recorded in AOCI. This
fair value
 
discount is
 
being accreted
 
to
 
interest income
 
and the
 
unrealized loss
 
remaining in
 
AOCI is
 
being amortized,
 
offsetting
each other through the remaining life of the securities.
 
There were no realized gains or losses recorded
 
as a result of this transfer.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25
Note 7 –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 September 30,
 
2023 and
 
December
31, 2022.
At September 30, 2023
Allowance
Carrying
Value
 
Gross
 
Gross
 
Weighted
Amortized
 
Book
[1]
for Credit
Net of
 
unrealized
unrealized
Fair
 
average
(In thousands)
cost
Value
Losses
Allowance
gains
 
losses
value
yield
U.S. Treasury securities
 
Within 1 year
$
597,876
$
597,876
$
-
$
597,876
$
-
$
9,036
$
588,840
2.55
%
After 1 to 5 years
7,516,523
6,900,125
-
6,900,125
-
193,838
6,706,287
1.39
After 5 to 10 years
817,006
730,757
-
730,757
-
26,819
703,938
1.60
Total U.S. Treasury
 
securities
8,931,405
8,228,758
-
8,228,758
-
229,693
7,999,065
1.49
Obligations of Puerto Rico, States and
political subdivisions
Within 1 year
4,820
4,820
13
4,807
2
17
4,792
6.17
After 1 to 5 years
20,191
20,191
154
20,037
67
266
19,838
3.80
After 5 to 10 years
845
845
28
817
-
9
808
5.80
After 10 years
39,946
39,946
5,862
34,084
2,301
3,092
33,293
1.41
Total obligations of
 
Puerto Rico, States and
political subdivisions
65,802
65,802
6,057
59,745
2,370
3,384
58,731
2.55
Collateralized mortgage obligations - federal
agencies
Within 1 year
15
15
-
15
-
-
15
6.44
After 10 years
1,547
1,547
-
1,547
-
251
1,296
2.87
Total collateralized
 
mortgage obligations -
federal agencies
1,562
1,562
-
1,562
-
251
1,311
2.90
Securities in wholly owned statutory business
trusts
After 10 years
5,960
5,960
-
5,960
-
-
5,960
6.33
Total securities
 
in wholly owned statutory
business trusts
5,960
5,960
-
5,960
-
-
5,960
6.33
Total debt securities
 
held-to-maturity [2]
$
9,004,729
$
8,302,082
$
6,057
$
8,296,025
$
2,370
$
233,328
$
8,065,067
1.50
%
[1]
Book value includes $
703
 
million of net unrealized loss which remains in Accumulated
 
other comprehensive income (AOCI) related to certain
securities transferred from available-for-sale securities
 
portfolio to the held-to-maturity securities portfolio as
 
discussed in Note 6.
[2]
Includes $
8.1
 
billion pledged to secure public and trust deposits that
 
the secured parties are not permitted to sell or
 
repledge the collateral.
 
The
Corporation had unpledged held-to-maturities securities with
 
a fair value of
 
$
167
 
million that could be used to increase
 
its borrowing facilities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26
At December 31, 2022
Allowance
 
Carrying
Value
 
Gross
 
Gross
 
Weighted
 
Amortized
 
Book
[1]
for Credit
Net of
unrealized
unrealized
Fair
 
average
 
(In thousands)
cost
Value
Losses
Allowance
gains
 
losses
value
yield
U.S. Treasury securities
 
Within 1 year
$
499,034
$
499,034
$
-
$
499,034
$
-
$
6,203
$
492,831
2.83
%
After 1 to 5 years
6,147,568
5,640,767
-
5,640,767
-
59,806
5,580,961
1.49
After 5 to 10 years
2,638,238
2,313,666
-
2,313,666
-
14,857
2,298,809
1.41
Total U.S. Treasury
 
securities
9,284,840
8,453,467
-
8,453,467
-
80,866
8,372,601
1.54
Obligations of Puerto Rico, States and
political subdivisions
`
Within 1 year
4,530
4,530
8
4,522
5
-
4,527
6.08
%
After 1 to 5 years
19,105
19,105
234
18,871
150
82
18,939
4.24
After 5 to 10 years
1,025
1,025
34
991
34
-
1,025
5.80
After 10 years
41,261
41,261
6,635
34,626
4,729
2,229
37,126
1.40
Total obligations of
 
Puerto Rico, States and
political subdivisions
65,921
65,921
6,911
59,010
4,918
2,311
61,617
2.61
Collateralized mortgage obligations - federal
agencies
After 1 to 5 years
19
19
-
19
-
-
19
6.44
Total collateralized
 
mortgage obligations -
federal agencies
19
19
-
19
-
-
19
6.44
Securities in wholly owned statutory business
trusts
After 10 years
5,959
5,959
-
5,959
-
-
5,959
6.33
Total securities
 
in wholly owned statutory
business trusts
5,959
5,959
-
5,959
-
-
5,959
6.33
Total debt securities
 
held-to-maturity [2]
$
9,356,739
$
8,525,366
$
6,911
$
8,518,455
$
4,918
$
83,177
$
8,440,196
1.55
%
[1]
Book value includes $
831
 
million of net unrealized loss which remains in Accumulated
 
other comprehensive income (AOCI) related to certain
securities transferred from available-for-sale securities
 
portfolio to the held-to-maturity securities portfolio as
 
discussed in Note 6.
[2]
Includes $
6.9
 
billion pledged to secure public and trust deposits that
 
the secured parties are not permitted to sell or repledge
 
the collateral. The
Corporation had unpledged held-to-maturities securities with
 
a fair value of
 
$
1.5
 
billion that could be used to increase its borrowing
 
facilities.
Debt securities not due on a single contractual maturity date,
 
such as collateralized mortgage obligations, are classified in the period
of final
 
contractual maturity.
 
The expected
 
maturities of
 
collateralized mortgage
 
obligations and
 
certain other
 
securities may
 
differ
from their contractual maturities because they may be
 
subject to prepayments or may be called
 
by the issuer.
Credit Quality Indicators
The following describes the credit quality
 
indicators by major security type that
 
the Corporation considers in its’ estimate
 
to develop
the allowance for credit losses for investment securities
 
held-to-maturity.
As discussed in Note
 
2 to the Consolidated Financial
 
Statements on the 2022 Form
 
10-K, U.S. Treasury securities carry
 
an explicit
guarantee
 
from
 
the
 
U.S.
 
Government
 
are
 
highly
 
rated
 
by
 
major
 
rating
 
agencies,
 
and
 
have
 
a
 
long
 
history
 
of
 
no
 
credit
 
losses.
Accordingly, the Corporation applies a zero-credit loss assumption and no ACL for
 
these securities has been established.
At
 
September 30,
 
2023 and
 
December 31,
 
2022, 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
 
$
19
 
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,
 
2022 - $
25
 
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
 
9
 
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:
 
 
 
 
 
 
 
 
 
 
27
At September 30, 2023
At December 31, 2022
(In thousands)
Securities issued by Puerto Rico municipalities
Watch
$
2,255
$
13,735
Pass
16,565
10,925
Total
$
18,820
$
24,660
At September
 
30, 2023,
 
the portfolio
 
of “Obligations
 
of Puerto
 
Rico, States
 
and political
 
subdivisions” also
 
includes $
40
 
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, 2022 -
 
$
42
 
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 September 30,
 
2023, the average
refreshed
 
FICO score
 
for the
 
representative sample,
 
comprised of
67
%
 
of
 
the
 
nominal value
 
of the
 
securities, used
 
for the
 
loss
estimate was
 
of
709
 
(compared to
65
%
 
and
707
,
 
respectively,
 
at December
 
31, 2022).
 
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 21
to the
 
Consolidated Financial
 
Statements
for additional
 
information on
 
the Corporation’s
 
exposure to
 
the Puerto
Rico Government.
At
 
September 30,
 
2023, the
 
portfolio of
 
“Obligations of
 
Puerto Rico,
 
States
 
and political
 
subdivisions” also
 
includes $
7
 
million in
securities
 
issued by
 
the HFA
 
for which
 
the
 
underlying source
 
of
 
payment is
 
U.S. Treasury
 
securities. The
 
Corporation applies
 
a
zero
-credit loss
 
assumption for
 
these securities,
 
and
 
no ACL
 
has been
 
established for
 
these securities
 
given that
 
U.S. Treasury
securities carry an explicit
 
guarantee from the U.S. Government, are
 
highly rated by major rating
 
agencies, and have a
 
long history
of no credit losses. Refer to Note 2 to the Consolidated
 
Financial Statements in the 2022 Form 10-K for
 
further details.
Delinquency status
At September 30, 2023 and December 31, 2022, 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 September 30, 2023 and September 30, 2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28
For the quarters ended September 30,
 
2023
2022
(In thousands)
Obligations of Puerto Rico, States and political subdivisions
Allowance for credit losses:
Beginning balance
$
6,145
$
7,495
Provision for credit losses (benefit)
(88)
(285)
Securities charged-off
-
-
Recoveries
-
-
Ending balance
$
6,057
$
7,210
For the nine months ended September 30,
 
2023
2022
(In thousands)
Obligations of Puerto Rico, States and political subdivisions
Allowance for credit losses:
Beginning balance
$
6,911
$
8,096
Provision for credit losses (benefit)
(854)
(886)
Securities charged-off
-
-
Recoveries
-
-
Ending balance
$
6,057
$
7,210
The
 
allowance
 
for
 
credit
 
losses
 
for
 
the
 
Obligations
 
of
 
Puerto
 
Rico,
 
States
 
and
 
political
 
subdivisions
 
includes
 
$
0.2
 
million
 
for
securities issued by municipalities of
 
Puerto Rico, and $
5.9
 
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 $
6.6
 
million, respectively, at
 
December
31, 2022).
29
Note 8 – Loans
For a
 
summary of
 
the accounting policies
 
related to loans,
 
interest recognition and
 
allowance for credit
 
losses refer to
 
Note 2
 
– to
the Consolidated Financial Statements included
 
in the 2022 Form 10-K.
During the
 
quarter and
 
nine months
 
ended September
 
30, 2023,
 
the Corporation
 
recorded purchases
 
(including repurchases)
 
of
mortgage loans amounting to
 
$
102
 
million and $
274
 
million, respectively,
 
including $
0.2
 
million and $
0.9
 
million in PCD
 
loans, and
consumer loans of
 
$
55
 
million and $
127
 
million, respectively.
 
During the quarter
 
and nine months
 
ended September 30,
 
2023, the
Corporation recorded purchases of $
79
 
million and $
162
 
million, respectively, in commercial loans.
 
During the
 
quarter and
 
nine months
 
ended September
 
30, 2022,
 
the Corporation
 
recorded purchases
 
(including repurchases)
 
of
mortgage
 
loans
 
amounting
 
to
 
$
66
 
million
 
and
 
$
219
 
million,
 
respectively,
 
including
 
$
0.3
 
million
 
and
 
$
4
 
million
 
in
 
PCD
 
loans,
respectively,
 
and
 
consumer
 
loans
 
of
 
$
135
 
million
 
and
 
$
349
 
million,
 
respectively.
 
During
 
the
 
quarter
 
and
 
nine
 
months
 
ended
September 30, 2022, the Corporation recorded purchases
 
of $
106
 
million and $
129
 
million, respectively, in commercial loans.
The
 
Corporation
 
performed
 
whole-loan
 
sales
 
involving
 
approximately
 
$
12
 
million
 
and
 
$
39
 
million
 
of
 
residential
 
mortgage
 
loans
during the
 
quarter and
 
nine months
 
ended September
 
30, 2023,
 
respectively (September
 
30, 2022
 
- $
17
 
million and
 
$
50
 
million,
respectively).
 
During
 
the
 
quarter
 
and
 
nine
 
months
 
ended
 
September
 
30,
 
2023,
 
the
 
Corporation
 
performed
 
sales
 
of
 
commercial
loans, including loan participations amounting to $
45
 
million and $
81
 
million, respectively (September 30, 2022 - $
11
 
million and $
54
million, respectively). During the quarter and nine months ended September 30, 2023, the Corporation performed
 
sales of consumer
loans amounting to $
45
 
million respectively.
Also, the
 
Corporation securitized
 
approximately $
1
 
million and
 
$
2
 
million of
 
mortgage loans
 
into Government
 
National Mortgage
Association (“GNMA”) mortgage-backed securities
 
during the quarter
 
and nine months
 
ended September 30,
 
2023 (for the
 
quarter
and nine months ended September 30, 2022 -
 
$
14
 
million and $
169
 
million, respectively).
 
Furthermore, the Corporation securitized
approximately $
10
 
million and $
33
 
million of mortgage loans into Federal National Mortgage
 
Association (“FNMA”) mortgage-backed
securities during the quarter and nine months ended September 30, 2023, respectively (September 30, 2022 - $
22
 
million and $
117
million, respectively).
 
Also, the
 
Corporation did
no
t securitize
 
any mortgage
 
loans into
 
Federal Home
 
Loan Mortgage
 
Corporation
(“FHLMC”) mortgage-backed securities during the nine months ended September 30, 2023 (September 30, 2022 -
 
$
9
 
million for the
nine months ended).
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
September 30, 2023 and December 31, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30
September 30, 2023
BPPR
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
 
(In thousands)
days
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
4,407
$
176
$
184
$
4,767
$
290,047
$
294,814
$
184
$
-
Commercial real estate:
Non-owner occupied
1,274
-
15,330
16,604
2,932,277
2,948,881
15,330
-
Owner occupied
817
827
35,089
36,733
1,370,820
1,407,553
35,089
-
Commercial and industrial
4,022
1,728
24,733
30,483
4,299,335
4,329,818
21,624
3,109
Construction
-
-
6,578
6,578
163,929
170,507
6,578
-
Mortgage
241,962
100,679
430,430
773,071
5,516,197
6,289,268
187,443
242,987
Leasing
17,915
4,574
6,842
29,331
1,668,783
1,698,114
6,842
-
Consumer:
Credit cards
11,218
8,133
17,719
37,070
1,040,341
1,077,411
-
17,719
Home equity lines of credit
26
-
-
26
2,448
2,474
-
-
Personal
19,586
12,476
18,582
50,644
1,712,358
1,763,002
18,582
-
Auto
89,453
23,019
40,268
152,740
3,480,456
3,633,196
40,268
-
Other
567
388
2,152
3,107
144,425
147,532
1,885
267
Total
$
391,247
$
152,000
$
597,907
$
1,141,154
$
22,621,416
$
23,762,570
$
333,825
$
264,082
September 30, 2023
Popular U.S.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
 
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
1,332
$
-
$
404
$
1,736
$
2,031,883
$
2,033,619
$
404
$
-
Commercial real estate:
Non-owner occupied
2,628
-
734
3,362
2,082,887
2,086,249
734
-
Owner occupied
1,110
923
3,877
5,910
1,631,442
1,637,352
3,877
-
Commercial and industrial
3,000
464
3,709
7,173
2,190,091
2,197,264
3,579
130
Construction
-
-
-
-
751,605
751,605
-
-
Mortgage
946
22,313
11,980
35,239
1,260,604
1,295,843
11,980
-
Consumer:
Credit cards
-
-
-
-
17
17
-
-
Home equity lines of
credit
1,045
335
4,085
5,465
59,560
65,025
4,085
-
Personal
2,581
1,716
2,637
6,934
182,232
189,166
2,637
-
Other
113
-
402
515
10,088
10,603
402
-
Total
$
12,755
$
25,751
$
27,828
$
66,334
$
10,200,409
$
10,266,743
$
27,698
$
130
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31
September 30, 2023
Popular, Inc.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
[2] [3]
loans
loans
Commercial multi-family
$
5,739
$
176
$
588
$
6,503
$
2,321,930
$
2,328,433
$
588
$
-
Commercial real estate:
Non-owner occupied
3,902
-
16,064
19,966
5,015,164
5,035,130
16,064
-
Owner occupied
1,927
1,750
38,966
42,643
3,002,262
3,044,905
38,966
-
Commercial and industrial
7,022
2,192
28,442
37,656
6,489,426
6,527,082
25,203
3,239
Construction
-
-
6,578
6,578
915,534
922,112
6,578
-
Mortgage
[1]
242,908
122,992
442,410
808,310
6,776,801
7,585,111
199,423
242,987
Leasing
17,915
4,574
6,842
29,331
1,668,783
1,698,114
6,842
-
Consumer:
Credit cards
11,218
8,133
17,719
37,070
1,040,358
1,077,428
-
17,719
Home equity lines of credit
1,071
335
4,085
5,491
62,008
67,499
4,085
-
Personal
22,167
14,192
21,219
57,578
1,894,590
1,952,168
21,219
-
Auto
89,453
23,019
40,268
152,740
3,480,456
3,633,196
40,268
-
Other
680
388
2,554
3,622
154,513
158,135
2,287
267
Total
$
404,002
$
177,751
$
625,735
$
1,207,488
$
32,821,825
$
34,029,313
$
361,523
$
264,212
[1]
It is the Corporation’s policy to report delinquent residential
 
mortgage loans insured by Federal Housing Administration
 
(“FHA”) or guaranteed by
the U.S. Department of Veterans Affairs
 
(“VA”) as accruing loans past
 
due 90 days or more as opposed to non-performing
 
since the principal
repayment is insured.
 
These balances include $
115
 
million of residential mortgage loans insured by
 
FHA or guaranteed by the VA that
 
are no
longer accruing interest as of September 30, 2023. Furthermore,
 
the Corporation has approximately $
39
 
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 $
340
 
million in unearned income and exclude $
5
 
million in loans held-for-sale.
[3]
Includes $
13.7
 
billion pledged to secure credit facilities and public funds
 
that the secured parties are not permitted to sell or repledge
 
the collateral,
of which $
6.6
 
billion were pledged at the Federal Home Loan Bank
 
("FHLB") as collateral for borrowings and $
7.1
 
billion at the Federal Reserve
Bank ("FRB") for discount window borrowings. The Corporation
 
had an available borrowing facility with the FHLB and
 
the discount window of
Federal Reserve Bank of New York
 
of $
3.7
 
billion and $
4.6
 
billion, respectively, as of September
 
30, 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32
December 31, 2022
BPPR
Past due
Past due 90 days or more
30-59
60-89
90 days
 
Total
Non-accrual
Accruing
(In thousands)
 
days
 
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
425
$
-
$
242
$
667
$
280,706
$
281,373
$
242
$
-
Commercial real estate:
Non-owner occupied
941
428
23,662
25,031
2,732,296
2,757,327
23,662
-
Owner occupied
729
245
23,990
24,964
1,563,092
1,588,056
23,990
-
Commercial and industrial
3,036
941
35,777
39,754
3,756,754
3,796,508
34,277
1,500
Construction
-
-
-
-
147,041
147,041
-
-
Mortgage
222,926
91,881
579,993
894,800
5,215,479
6,110,279
242,391
337,602
Leasing
11,983
3,563
5,941
21,487
1,564,252
1,585,739
5,941
-
Consumer:
Credit cards
7,106
5,049
11,910
24,065
1,017,766
1,041,831
-
11,910
Home equity lines of credit
-
-
-
-
2,954
2,954
-
-
Personal
13,232
8,752
18,082
40,066
1,545,621
1,585,687
18,082
-
Auto
68,868
19,243
40,978
129,089
3,383,441
3,512,530
40,978
-
Other
487
87
12,682
13,256
124,324
137,580
12,446
236
Total
$
329,733
$
130,189
$
753,257
$
1,213,179
$
21,333,726
$
22,546,905
$
402,009
$
351,248
December 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
$
2,177
$
-
$
-
$
2,177
$
2,038,163
$
2,040,340
$
-
$
-
Commercial real estate:
Non-owner occupied
484
-
1,454
1,938
1,740,405
1,742,343
1,454
-
Owner occupied
-
-
5,095
5,095
1,485,398
1,490,493
5,095
-
Commercial and industrial
12,960
2,205
4,685
19,850
2,022,842
2,042,692
4,319
366
Construction
-
-
-
-
610,943
610,943
-
-
Mortgage
16,131
5,834
20,488
42,453
1,244,739
1,287,192
20,488
-
Consumer:
Credit cards
-
-
-
-
39
39
-
-
Home equity lines of credit
413
161
4,110
4,684
64,278
68,962
4,110
-
Personal
 
1,808
1,467
1,958
5,233
232,659
237,892
1,958
-
Other
-
-
8
8
9,960
9,968
8
-
Total
$
33,973
$
9,667
$
37,798
$
81,438
$
9,449,426
$
9,530,864
$
37,432
$
366
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33
December 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
$
2,602
$
-
$
242
$
2,844
$
2,318,869
$
2,321,713
$
242
$
-
Commercial real estate:
Non-owner occupied
1,425
428
25,116
26,969
4,472,701
4,499,670
25,116
-
Owner occupied
729
245
29,085
30,059
3,048,490
3,078,549
29,085
-
Commercial and industrial
15,996
3,146
40,462
59,604
5,779,596
5,839,200
38,596
1,866
Construction
-
-
-
-
757,984
757,984
-
-
Mortgage
[1]
239,057
97,715
600,481
937,253
6,460,218
7,397,471
262,879
337,602
Leasing
11,983
3,563
5,941
21,487
1,564,252
1,585,739
5,941
-
Consumer:
Credit cards
7,106
5,049
11,910
24,065
1,017,805
1,041,870
-
11,910
Home equity lines of credit
413
161
4,110
4,684
67,232
71,916
4,110
-
Personal
15,040
10,219
20,040
45,299
1,778,280
1,823,579
20,040
-
Auto
68,868
19,243
40,978
129,089
3,383,441
3,512,530
40,978
-
Other
487
87
12,690
13,264
134,284
147,548
12,454
236
Total
$
363,706
$
139,856
$
791,055
$
1,294,617
$
30,783,152
$
32,077,769
$
439,441
$
351,614
[1]
It is the Corporation’s policy to report delinquent residential
 
mortgage loans insured by FHA or guaranteed
 
by the VA as accruing loans
 
past due
90 days or more as opposed to non-performing since
 
the principal repayment is insured.
 
These balances also include $
190
 
million of residential
mortgage loans insured by FHA or guaranteed by the VA
 
that are no longer accruing interest as of December
 
31, 2022. Furthermore, the
Corporation has approximately $
42
 
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 $
295
 
million in unearned income and exclude $
5
 
million in loans held-for-sale.
[3]
Includes $
7.4
 
billion pledged to secure credit facilities and public funds
 
that the secured parties are not permitted to sell or
 
repledge the collateral,
of which $
4.8
 
billion were pledged at the Federal Home Loan Bank
 
(FHLB) as collateral for borrowings and $
2.6
 
billion at the Federal Reserve
Bank (FRB) for discount window borrowings. The Corporation
 
had an available borrowing facility with the FHLB and
 
the discount window of
Federal Reserve Bank of New York
 
of $
2.1
 
billion and $
1.4
 
billion, respectively, as of December
 
31, 2022.
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 September 30,
 
2023, mortgage loans held-in-portfolio
 
include $
2.1
 
billion (December 31, 2022
 
- $
2.0
 
billion) of loans
 
insured by
the
 
FHA,
 
or
 
guaranteed by
 
the
 
VA
 
of
 
which $
0.2
 
billion
 
(December 31,
 
2022
 
-
 
$
0.3
 
billion)
 
are
 
90
 
days
 
or
 
more
 
past
 
due.
 
The
portfolio of guaranteed loans includes
 
$
115
 
million of residential mortgage loans
 
in Puerto Rico that
 
are no longer accruing
 
interest
as of September 30, 2023
 
(December 31, 2022 - $
190
 
million). The Corporation has approximately $
39
 
million in reverse mortgage
loans in Puerto Rico which are guaranteed by FHA,
 
but which are currently not accruing interest at September 30, 2023 (December
31, 2022 - $
42
 
million).
Loans with
 
a delinquency
 
status of
 
90 days
 
past due
 
as of
 
September 30,
 
2023 include
 
$
8
 
million in
 
loans previously
 
pooled into
GNMA securities (December 31, 2022 -
 
$
14
 
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 September 30, 2023
 
and December 31, 2022 by
class of loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34
September 30, 2023
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Commercial multi-family
$
-
$
184
$
-
$
404
$
-
$
588
Commercial real estate non-owner occupied
9,577
5,753
-
734
9,577
6,487
Commercial real estate owner occupied
24,463
10,626
3,877
-
28,340
10,626
Commercial and industrial
8,504
13,120
-
3,579
8,504
16,699
Construction
-
6,578
-
-
-
6,578
Mortgage
90,611
96,832
508
11,472
91,119
108,304
Leasing
294
6,548
-
-
294
6,548
Consumer:
 
HELOCs
-
-
-
4,085
-
4,085
 
Personal
 
4,562
14,020
-
2,637
4,562
16,657
 
Auto
 
1,662
38,606
-
-
1,662
38,606
 
Other
263
1,622
-
402
263
2,024
Total
$
139,936
$
193,889
$
4,385
$
23,313
$
144,321
$
217,202
December 31, 2022
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Commercial multi-family
$
-
$
242
$
-
$
-
$
-
$
242
Commercial real estate non-owner occupied
15,639
8,023
1,454
-
17,093
8,023
Commercial real estate owner occupied
9,070
14,920
5,095
-
14,165
14,920
Commercial and industrial
20,227
14,050
-
4,319
20,227
18,369
Mortgage
119,027
123,364
71
20,417
119,098
143,781
Leasing
458
5,483
-
-
458
5,483
Consumer:
 
HELOCs
-
-
-
4,110
-
4,110
 
Personal
 
4,623
13,459
-
1,958
4,623
15,417
 
Auto
 
1,177
39,801
-
-
1,177
39,801
 
Other
263
12,183
-
8
263
12,191
Total
$
170,484
$
231,525
$
6,620
$
30,812
$
177,104
$
262,337
Loans in non-accrual status with no allowance at September 30, 2023 include $
144
 
million in collateral dependent loans (December
31,
 
2022 -
 
$
177
 
million). The
 
Corporation recognized
 
$
3
 
million in
 
interest income
 
on non-accrual
 
loans
 
during the
 
nine months
ended September 30, 2023 (September 30, 2022
 
- $
3
 
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 September
 
30, 2023
 
and December
 
31,
2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
35
September 30, 2023
(In thousands)
Real Estate
Auto
Equipment
Accounts
Receivables
Other
Total
BPPR
Commercial multi-family
$
1,289
$
-
$
-
$
-
$
-
$
1,289
Commercial real estate:
Non-owner occupied
169,357
-
-
-
-
169,357
Owner occupied
30,507
-
-
-
-
30,507
Commercial and industrial
1,086
-
-
-
19,025
20,111
Construction
8,747
-
-
-
-
8,747
Mortgage
100,127
-
-
-
-
100,127
Leasing
-
1,103
-
-
-
1,103
Consumer:
Personal
4,741
-
-
-
-
4,741
Auto
-
11,941
-
-
-
11,941
Other
-
-
-
-
310
310
Total BPPR
$
315,854
$
13,044
$
-
$
-
$
19,335
$
348,233
Popular U.S.
Commercial real estate:
Owner occupied
$
3,877
$
-
$
-
$
-
$
-
$
3,877
Commercial and industrial
-
-
160
-
1,400
1,560
Construction
5,309
-
-
-
-
5,309
Mortgage
1,073
-
-
-
-
1,073
Total Popular U.S.
$
10,259
$
-
$
160
$
-
$
1,400
$
11,819
Popular, Inc.
Commercial multi-family
$
1,289
$
-
$
-
$
-
$
-
$
1,289
Commercial real estate:
Non-owner occupied
169,357
-
-
-
-
169,357
Owner occupied
34,384
-
-
-
-
34,384
Commercial and industrial
1,086
-
160
-
20,425
21,671
Construction
14,056
-
-
-
-
14,056
Mortgage
101,200
-
-
-
-
101,200
Leasing
-
1,103
-
-
-
1,103
Consumer:
Personal
4,741
-
-
-
-
4,741
Auto
-
11,941
-
-
-
11,941
Other
-
-
-
-
310
310
Total Popular,
 
Inc.
$
326,113
$
13,044
$
160
$
-
$
20,735
$
360,052
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
36
December 31, 2022
(In thousands)
Real Estate
Auto
Equipment
Accounts
Receivables
Other
Total
BPPR
Commercial multi-family
$
1,329
$
-
$
-
$
-
$
-
$
1,329
Commercial real estate:
Non-owner occupied
202,980
-
-
-
-
202,980
Owner occupied
18,234
-
-
-
-
18,234
Commercial and industrial
1,345
-
32
9,853
20,985
32,215
Mortgage
128,069
-
-
-
-
128,069
Leasing
-
1,020
-
-
-
1,020
Consumer:
Personal
5,381
-
-
-
-
5,381
Auto
-
9,556
-
-
-
9,556
Other
-
-
-
-
263
263
Total BPPR
$
357,338
$
10,576
$
32
$
9,853
$
21,248
$
399,047
Popular U.S.
Commercial real estate:
Non-owner occupied
$
1,454
$
-
$
-
$
-
$
-
$
1,454
Owner occupied
5,095
-
-
-
-
5,095
Commercial and industrial
-
-
136
-
-
136
Mortgage
1,104
-
-
-
-
1,104
Total Popular U.S.
$
7,653
$
-
$
136
$
-
$
-
$
7,789
Popular, Inc.
Commercial multi-family
$
1,329
$
-
$
-
$
-
$
-
$
1,329
Commercial real estate:
Non-owner occupied
204,434
-
-
-
-
204,434
Owner occupied
23,329
-
-
-
-
23,329
Commercial and industrial
1,345
-
168
9,853
20,985
32,351
Mortgage
129,173
-
-
-
-
129,173
Leasing
-
1,020
-
-
-
1,020
Consumer:
Personal
5,381
-
-
-
-
5,381
Auto
-
9,556
-
-
-
9,556
Other
-
-
-
-
263
263
Total Popular,
 
Inc.
$
364,991
$
10,576
$
168
$
9,853
$
21,248
$
406,836
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
37
Purchased Credit Deteriorated (PCD) Loans
The Corporation has purchased loans during
 
the quarter and nine months ended September 30,
 
2023 and 2022, 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)
For the quarter ended
September 30, 2023
For the nine months
ended September 30,
2023
Purchase price of loans at acquisition
$
227
$
759
Allowance for credit losses at acquisition
9
87
Non-credit discount / (premium) at acquisition
-
9
Par value of acquired loans at acquisition
$
236
$
855
(In thousands)
For the quarter ended
September 30, 2022
For the nine months
ended September 30,
2022
Purchase price of loans at acquisition
$
247
$
2,840
Allowance for credit losses at acquisition
59
841
Non-credit discount / (premium) at acquisition
6
131
Par value of acquired loans at acquisition
$
312
$
3,812
38
Note 9 – Allowance for credit losses – loans
 
held-in-portfolio
The
Corporation follows
 
the current
 
expected credit
 
loss (“CECL”)
 
model, to
 
establish and
 
evaluate the
 
adequacy of
 
the ACL
 
to
provide for
 
expected losses
 
in the
 
loan portfolio.
 
This model
 
establishes a forward-looking
 
methodology that
 
reflects the
 
expected
credit losses over the lives of financial assets, starting when such
 
assets are first acquired or originated.
 
In addition, CECL provides
that the initial ACL on 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.
 
The
 
Corporation’s
modeling framework includes competing
 
risk models that
 
generate lifetime default and
 
prepayment estimates as well
 
as other loan
level techniques to estimate loss severity.
 
These models combine credit risk factors, which include the
 
impact of loan modifications,
with macroeconomic expectations to derive the
 
lifetime expected loss.
 
As
 
part
 
of
 
the
 
Corporation’s
 
model
 
governance
 
procedures
 
a
 
new
 
model
 
was
 
implemented
 
for
 
the
 
U.S
 
commercial
 
real
 
estate
segment. The
 
new model
 
enhances techniques used
 
to capture
 
default activity
 
within the
 
Corporation’s geographical footprint.
 
As
part
 
of
 
the
 
implementation
 
analysis
 
management
 
evaluated
 
the
 
credit
 
metrics
 
of
 
the
 
portfolio
 
such
 
as
 
risk
 
ratings,
 
delinquency
levels, and low exposure to
 
the commercial office sector.
 
Qualitative reserves continue to be
 
maintained to address risks within
 
the
U. S.
 
commercial real
 
estate segment. The
 
new model
 
including qualitative reserve
 
accounted for
 
$
15
 
million of
 
PB’s reduction
 
in
ACL.
At
 
September
 
30,2023,
 
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
 
baseline
 
scenario
 
continues
 
to
 
be
 
assigned
 
the
highest probability, followed by the
 
pessimistic scenario, and then the optimistic scenario. The Corporation evaluates, at least on
 
an
annual basis,
 
the assumptions
 
tied to
 
the CECL
 
accounting framework.
 
These include
 
the reasonable
 
and supportable
 
period as
well as the reversion window.
The
 
2023
 
annualized GDP
 
growth in
 
the
 
baseline scenario
 
improved to
 
1.7%
 
and
 
2.0%
 
for
 
Puerto
 
Rico
 
and
 
the
 
United
 
States,
respectively, compared to 1.5% and 1.6%
 
in the previous quarter. The 2023 forecasted average unemployment
 
rate for Puerto Rico
improved to
 
6.1% from
 
6.3% in
 
the previous
 
forecast, while
 
in the
 
United States
 
unemployment levels
 
remained at
 
3.6%, stable
when compared to the previous forecast.
GDP growth
 
is expected
 
to slow
 
during 2024
 
for both
 
regions, when
 
compared to
 
2023, as
 
a result
 
of the
 
Fed’s monetary
 
policy.
2024 GDP growth is expected to
 
be 0.90% for Puerto Rico and
 
1.25% for the United States. The average
 
2024 unemployment rate
is expected to increase to 6.80% in Puerto Rico
 
and 4.03% in the United States.
The following tables present the changes in
 
the ACL of loans held-in-portfolio and
 
unfunded commitments for the quarters and nine
months ended September 30, 2023 and 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
39
For the quarter ended September 30, 2023
BPPR
Provision for
Allowance for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balances
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
4,787
$
(1,306)
$
-
$
-
$
-
$
3,481
Commercial real estate non-owner occupied
53,366
(326)
-
(27)
195
53,208
Commercial real estate owner occupied
41,901
(242)
-
(446)
280
41,493
Commercial and industrial
81,637
(4,605)
-
(2,311)
12,858
87,579
Total Commercial
181,691
(6,479)
-
(2,784)
13,333
185,761
Construction
9,554
(1,486)
-
(2,611)
-
5,457
Mortgage
82,899
(6,808)
9
(62)
3,862
79,900
Leasing
13,927
(2,287)
-
(2,292)
850
10,198
Consumer
 
Credit cards
71,408
9,773
-
(10,865)
2,234
72,550
 
Home equity lines of credit
96
(39)
-
(43)
73
87
 
Personal
96,046
28,964
-
(19,260)
1,957
107,707
 
Auto
134,247
30,880
-
(14,553)
4,862
155,436
 
Other
6,240
1,499
-
(494)
193
7,438
Total Consumer
308,037
71,077
-
(45,215)
9,319
343,218
Total - Loans
$
596,108
$
54,017
$
9
$
(52,964)
$
27,364
$
624,534
Allowance for credit losses - unfunded commitments:
Commercial
$
5,288
$
(400)
$
-
$
-
$
-
$
4,888
Construction
3,110
(1,768)
-
-
-
1,342
Ending balance - unfunded commitments [1]
$
8,398
$
(2,168)
$
-
$
-
$
-
$
6,230
[
1
]
[1] Allowance for credit losses of unfunded commitments
 
is presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
40
For the quarter ended September 30, 2023
Popular U.S.
Provision for
 
Beginning
credit losses -
Ending
(In thousands)
Balance
(benefit)
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
21,392
$
(9,651)
$
-
$
1
$
11,742
Commercial real estate non-owner occupied
18,350
(4,475)
-
66
13,941
Commercial real estate owner occupied
9,506
(1,688)
(1,218)
16
6,616
Commercial and industrial
18,014
(1,109)
(1,228)
329
16,006
Total Commercial
67,262
(16,923)
(2,446)
412
48,305
Construction
1,778
3,736
-
-
5,514
Mortgage
13,194
(1,252)
-
62
12,004
Consumer
 
Home equity lines of credit
2,074
238
(224)
212
2,300
 
Personal
19,782
3,659
(5,636)
604
18,409
 
Other
2
39
(43)
4
2
Total Consumer
21,858
3,936
(5,903)
820
20,711
Total - Loans
$
104,092
$
(10,503)
$
(8,349)
$
1,294
$
86,534
Allowance for credit losses - unfunded commitments:
Commercial
$
1,348
$
197
$
-
$
-
$
1,545
Construction
1,797
3,658
-
-
5,455
Consumer
50
4
-
-
54
Ending balance - unfunded commitments [1]
$
3,195
$
3,859
$
-
$
-
$
7,054
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
41
For the quarter ended September 30, 2023
Popular Inc.
Provision for
Allowance
for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
26,179
$
(10,957)
$
-
$
-
$
1
$
15,223
Commercial real estate non-owner occupied
71,716
(4,801)
-
(27)
261
67,149
Commercial real estate owner occupied
51,407
(1,930)
-
(1,664)
296
48,109
Commercial and industrial
99,651
(5,714)
-
(3,539)
13,187
103,585
Total Commercial
248,953
(23,402)
-
(5,230)
13,745
234,066
Construction
11,332
2,250
-
(2,611)
-
10,971
Mortgage
96,093
(8,060)
9
(62)
3,924
91,904
Leasing
13,927
(2,287)
-
(2,292)
850
10,198
Consumer
 
Credit cards
71,408
9,773
-
(10,865)
2,234
72,550
 
Home equity lines of credit
2,170
199
-
(267)
285
2,387
 
Personal
115,828
32,623
-
(24,896)
2,561
126,116
 
Auto
134,247
30,880
-
(14,553)
4,862
155,436
 
Other
6,242
1,538
-
(537)
197
7,440
Total Consumer
329,895
75,013
-
(51,118)
10,139
363,929
Total - Loans
$
700,200
$
43,514
$
9
$
(61,313)
$
28,658
$
711,068
Allowance for credit losses - unfunded commitments:
Commercial
$
6,636
$
(203)
$
-
$
-
$
-
$
6,433
Construction
4,907
1,890
-
-
-
6,797
Consumer
50
4
-
-
-
54
Ending balance - unfunded commitments [1]
$
11,593
$
1,691
$
-
$
-
$
-
$
13,284
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
42
For the nine months ended September 30, 2023
BPPR
Impact of
Provision for
Allowance for
Net write
down
Beginning
Adopting
credit losses
credit losses -
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
PCD Loans
Charge-off
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
5,210
$
-
$
(1,730)
$
-
$
-
$
1
$
-
$
3,481
Commercial real estate non-owner occupied
52,475
-
860
-
(636)
509
-
53,208
Commercial real estate owner occupied
48,393
(1,161)
(7,409)
-
(525)
2,195
-
41,493
Commercial and industrial
68,217
(552)
8,378
-
(4,979)
16,515
-
87,579
Total Commercial
174,295
(1,713)
99
-
(6,140)
19,220
-
185,761
Construction
2,978
-
5,090
-
(2,611)
-
-
5,457
Mortgage
117,344
(33,556)
(15,113)
87
(1,205)
12,343
-
79,900
Leasing
20,618
(35)
(7,023)
-
(6,249)
2,887
-
10,198
Consumer
 
Credit cards
58,670
-
35,901
-
(27,998)
6,578
(601)
72,550
 
Home equity lines of credit
103
-
(107)
-
(111)
202
-
87
 
Personal
96,369
(7,020)
60,347
-
(49,441)
7,452
-
107,707
 
Auto
129,735
(21)
45,108
-
(34,770)
15,384
-
155,436
 
Other
15,433
-
3,297
-
(11,855)
563
-
7,438
Total Consumer
300,310
(7,041)
144,546
-
(124,175)
30,179
(601)
343,218
Total - Loans
$
615,545
$
(42,345)
$
127,599
$
87
$
(140,380)
$
64,629
$
(601)
$
624,534
Allowance for credit losses - unfunded commitments:
Commercial
$
4,336
$
-
$
552
$
-
$
-
$
-
$
-
$
4,888
Construction
2,022
-
(680)
-
-
-
-
1,342
Ending balance - unfunded commitments [1]
$
6,358
$
-
$
(128)
$
-
$
-
$
-
$
-
$
6,230
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
43
For the nine months ended September 30, 2023
Popular U.S.
Impact of
Provision for
 
Beginning
Adopting
credit losses -
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
21,101
$
-
$
(9,363)
$
-
$
4
$
11,742
Commercial real estate non-owner occupied
19,065
-
(7,108)
-
1,984
13,941
Commercial real estate owner occupied
8,688
-
(738)
(1,395)
61
6,616
Commercial and industrial
12,227
-
5,943
(3,808)
1,644
16,006
Total Commercial
61,081
-
(11,266)
(5,203)
3,693
48,305
Construction
1,268
-
4,246
-
-
5,514
Mortgage
17,910
(2,098)
(3,993)
-
185
12,004
Consumer
 
Credit cards
-
-
1
(1)
-
-
 
Home equity lines of credit
2,439
-
(419)
(419)
699
2,300
 
Personal
22,057
(1,140)
10,019
(14,093)
1,566
18,409
 
Other
2
-
134
(143)
9
2
Total Consumer
24,498
(1,140)
9,735
(14,656)
2,274
20,711
Total - Loans
$
104,757
$
(3,238)
$
(1,278)
$
(19,859)
$
6,152
$
86,534
Allowance for credit losses - unfunded commitments:
Commercial
$
1,175
$
-
$
370
$
-
$
-
$
1,545
Construction
1,184
-
4,271
-
-
5,455
Consumer
88
-
(34)
-
-
54
Ending balance - unfunded commitments [1]
$
2,447
$
-
$
4,607
$
-
$
-
$
7,054
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
44
For the nine months ended September 30, 2023
Popular Inc.
Impact
Provision for
Allowance
for
Net write
down
Beginning
of adopting
credit losses
credit losses -
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
26,311
$
-
$
(11,093)
$
-
$
-
$
5
$
-
$
15,223
Commercial real estate non-owner occupied
71,540
-
(6,248)
-
(636)
2,493
-
67,149
Commercial real estate owner occupied
57,081
(1,161)
(8,147)
-
(1,920)
2,256
-
48,109
Commercial and industrial
80,444
(552)
14,321
-
(8,787)
18,159
-
103,585
Total Commercial
235,376
(1,713)
(11,167)
-
(11,343)
22,913
-
234,066
Construction
4,246
-
9,336
-
(2,611)
-
-
10,971
Mortgage
135,254
(35,654)
(19,106)
87
(1,205)
12,528
-
91,904
Leasing
20,618
(35)
(7,023)
-
(6,249)
2,887
-
10,198
Consumer
 
Credit cards
58,670
-
35,902
-
(27,999)
6,578
(601)
72,550
 
Home equity lines of credit
2,542
-
(526)
-
(530)
901
-
2,387
 
Personal
118,426
(8,160)
70,366
-
(63,534)
9,018
-
126,116
 
Auto
129,735
(21)
45,108
-
(34,770)
15,384
-
155,436
 
Other
15,435
-
3,431
-
(11,998)
572
-
7,440
Total Consumer
324,808
(8,181)
154,281
-
(138,831)
32,453
(601)
363,929
Total - Loans
$
720,302
$
(45,583)
$
126,321
$
87
$
(160,239)
$
70,781
$
(601)
$
711,068
Allowance for credit losses - unfunded commitments:
Commercial
$
5,511
$
-
$
922
$
-
$
-
$
-
$
-
$
6,433
Construction
3,206
-
3,591
-
-
-
-
6,797
Consumer
88
-
(34)
-
-
-
-
54
Ending balance - unfunded commitments [1]
$
8,805
$
-
$
4,479
$
-
$
-
$
-
$
-
$
13,284
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
45
For the quarter ended September 30, 2022
BPPR
Provision for
Allowance for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
3,522
$
682
$
-
$
-
$
-
$
4,204
Commercial real estate non-owner occupied
50,393
2,689
-
-
368
53,450
Commercial real estate owner occupied
49,472
(5,438)
-
(24)
2,419
46,429
Commercial and industrial
50,160
9,145
-
(4,794)
3,181
57,692
Total Commercial
153,547
7,078
-
(4,818)
5,968
161,775
Construction
3,074
1,181
-
-
-
4,255
Mortgage
130,030
(11,648)
59
(1,720)
3,885
120,606
Leasing
19,037
2,115
-
(2,191)
853
19,814
Consumer
 
Credit cards
45,339
12,353
-
(6,669)
2,186
53,209
 
Home equity lines of credit
90
(128)
-
-
129
91
 
Personal
74,799
17,139
-
(9,963)
1,736
83,711
 
Auto
137,222
(770)
-
(11,238)
3,863
129,077
 
Other
17,439
1,374
-
(610)
193
18,396
Total Consumer
274,889
29,968
-
(28,480)
8,107
284,484
Total - Loans
$
580,577
$
28,694
$
59
$
(37,209)
$
18,813
$
590,934
Allowance for credit losses - unfunded commitments:
Commercial
$
2,032
$
868
$
-
$
-
$
-
$
2,900
Construction
1,534
349
-
-
-
1,883
Ending balance - unfunded commitments [1]
$
3,566
$
1,217
$
-
$
-
$
-
$
4,783
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
46
For the quarter ended September 30, 2022
Popular U.S.
Provision for
Beginning
credit losses
Ending
(In thousands)
Balance
(benefit)
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
20,571
$
1,138
$
-
$
8
$
21,717
Commercial real estate non-owner occupied
14,284
11,187
-
2
25,473
Commercial real estate owner occupied
9,076
(120)
-
26
8,982
Commercial and industrial
12,152
(717)
(720)
1,195
11,910
Total Commercial
56,083
11,488
(720)
1,231
68,082
Construction
3,839
(1,895)
-
-
1,944
Mortgage
18,275
(370)
-
23
17,928
Consumer
 
Home equity lines of credit
3,455
(1,340)
(47)
954
3,022
 
Personal
19,520
2,901
(1,528)
291
21,184
 
Other
1
41
(48)
8
2
Total Consumer
22,976
1,602
(1,623)
1,253
24,208
Total - Loans
$
101,173
$
10,825
$
(2,343)
$
2,507
$
112,162
Allowance for credit losses - unfunded commitments:
Commercial
$
1,317
$
(201)
$
-
$
-
$
1,116
Construction
1,961
(650)
-
-
1,311
Consumer
60
37
-
-
97
Ending balance - unfunded commitments [1]
$
3,338
$
(814)
$
-
$
-
$
2,524
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
47
For the quarter ended September 30, 2022
Popular Inc.
Provision for
Allowance for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
24,093
$
1,820
$
-
$
-
$
8
$
25,921
Commercial real estate non-owner occupied
64,677
13,876
-
-
370
78,923
Commercial real estate owner occupied
58,548
(5,558)
-
(24)
2,445
55,411
Commercial and industrial
62,312
8,428
-
(5,514)
4,376
69,602
Total Commercial
209,630
18,566
-
(5,538)
7,199
229,857
Construction
6,913
(714)
-
-
-
6,199
Mortgage
148,305
(12,018)
59
(1,720)
3,908
138,534
Leasing
19,037
2,115
-
(2,191)
853
19,814
Consumer
 
Credit cards
45,339
12,353
-
(6,669)
2,186
53,209
 
Home equity lines of credit
3,545
(1,468)
-
(47)
1,083
3,113
 
Personal
94,319
20,040
-
(11,491)
2,027
104,895
 
Auto
137,222
(770)
-
(11,238)
3,863
129,077
 
Other
17,440
1,415
-
(658)
201
18,398
Total Consumer
297,865
31,570
-
(30,103)
9,360
308,692
Total - Loans
$
681,750
$
39,519
$
59
$
(39,552)
$
21,320
$
703,096
Allowance for credit losses - unfunded commitments:
Commercial
$
3,349
$
667
$
-
$
-
$
-
$
4,016
Construction
3,495
(301)
-
-
-
3,194
Consumer
60
37
-
-
-
97
Ending balance - unfunded commitments [1]
$
6,904
$
403
$
-
$
-
$
-
$
7,307
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial
 
Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
48
For the nine months ended September 30, 2022
BPPR
Provision for
Allowance for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
3,050
$
1,154
$
-
$
-
$
-
$
4,204
Commercial real estate non-owner occupied
45,211
7,024
-
(30)
1,245
53,450
Commercial real estate owner occupied
54,176
(13,907)
-
(977)
7,137
46,429
Commercial and industrial
49,491
6,784
-
(5,660)
7,077
57,692
Total Commercial
151,928
1,055
-
(6,667)
15,459
161,775
Construction
1,641
1,803
-
-
811
4,255
Mortgage
138,286
(28,129)
841
(4,408)
14,016
120,606
Leasing
17,578
3,807
-
(4,094)
2,523
19,814
Consumer
 
Credit cards
43,499
21,688
-
(18,770)
6,792
53,209
 
Home equity lines of credit
98
(213)
-
(164)
370
91
 
Personal
71,022
32,353
-
(25,069)
5,405
83,711
 
Auto
154,498
(10,793)
-
(26,766)
12,138
129,077
 
Other
15,612
3,590
-
(1,555)
749
18,396
Total Consumer
284,729
46,625
-
(72,324)
25,454
284,484
Total - Loans
$
594,162
$
25,161
$
841
$
(87,493)
$
58,263
$
590,934
Allowance for credit losses - unfunded commitments:
Commercial
$
1,751
$
1,149
$
-
$
-
$
-
$
2,900
Construction
2,388
(505)
-
-
-
1,883
Ending balance - unfunded commitments [1]
$
4,139
$
644
$
-
$
-
$
-
$
4,783
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
49
For the nine months ended September 30, 2022
Popular U.S.
Provision for
Beginning
credit losses
Ending
(In thousands)
Balance
(benefit)
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
25,418
$
(3,721)
$
-
$
20
$
21,717
Commercial real estate non-owner occupied
22,246
3,208
-
19
25,473
Commercial real estate owner occupied
6,053
2,681
-
248
8,982
Commercial and industrial
10,160
1,036
(1,244)
1,958
11,910
Total Commercial
63,877
3,204
(1,244)
2,245
68,082
Construction
4,722
(3,910)
-
1,132
1,944
Mortgage
16,192
1,756
(68)
48
17,928
Consumer
 
Credit cards
-
(10)
-
10
-
 
Home equity lines of credit
3,708
(2,974)
(99)
2,387
3,022
 
Personal
12,700
11,604
(3,985)
865
21,184
 
Other
5
144
(172)
25
2
Total Consumer
16,413
8,764
(4,256)
3,287
24,208
Total - Loans
$
101,204
$
9,814
$
(5,568)
$
6,712
$
112,162
Allowance for credit losses - unfunded commitments:
Commercial
$
1,384
$
(268)
$
-
$
-
$
1,116
Construction
2,337
(1,026)
-
-
1,311
Consumer
37
60
-
-
97
Ending balance - unfunded commitments [1]
$
3,758
$
(1,234)
$
-
$
-
$
2,524
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50
For the nine months ended September 30, 2022
Popular Inc.
Provision for
Allowance for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
28,468
$
(2,567)
$
-
$
-
$
20
$
25,921
Commercial real estate non-owner occupied
67,457
10,232
-
(30)
1,264
78,923
Commercial real estate owner occupied
60,229
(11,226)
-
(977)
7,385
55,411
Commercial and industrial
59,651
7,820
-
(6,904)
9,035
69,602
Total Commercial
215,805
4,259
-
(7,911)
17,704
229,857
Construction
6,363
(2,107)
-
-
1,943
6,199
Mortgage
154,478
(26,373)
841
(4,476)
14,064
138,534
Leasing
17,578
3,807
-
(4,094)
2,523
19,814
Consumer
 
Credit cards
43,499
21,678
-
(18,770)
6,802
53,209
 
Home equity lines of credit
3,806
(3,187)
-
(263)
2,757
3,113
 
Personal
83,722
43,957
-
(29,054)
6,270
104,895
 
Auto
154,498
(10,793)
-
(26,766)
12,138
129,077
 
Other
15,617
3,734
-
(1,727)
774
18,398
Total Consumer
301,142
55,389
-
(76,580)
28,741
308,692
Total - Loans
$
695,366
$
34,975
$
841
$
(93,061)
$
64,975
$
703,096
Allowance for credit losses - unfunded commitments:
Commercial
$
3,135
$
881
$
-
$
-
$
-
$
4,016
Construction
4,725
(1,531)
-
-
-
3,194
Consumer
37
60
-
-
-
97
Ending balance - unfunded commitments [1]
$
7,897
$
(590)
$
-
$
-
$
-
$
7,307
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
Modifications
A
 
modification
 
constitutes
 
a
 
change
 
in
 
loan
 
terms
 
in
 
the
 
form
 
of
 
principal
 
forgiveness,
 
an
 
interest
 
rate
 
reduction,
 
other
 
than-
insignificant payment delay, term extension or combination of the above made
 
to a borrower experiencing financial difficulty.
The amount
 
of outstanding
 
commitments to
 
lend additional
 
funds to
 
debtors owing
 
receivables whose
 
terms have
 
been modified
during the period ended at September 30, 2023
 
amounted to $
17
 
million related to the commercial loan portfolio.
The following tables show the amortized cost basis of the loans modified to borrowers experiencing financial difficulties at the end of
the reporting period disaggregated by class
 
of financing receivable and type of
 
concession granted for the quarter and
 
nine months
ended
 
September
 
30,2023.
 
Loans
 
modified
 
to
 
borrowers
 
under
 
financial
 
difficulties
 
that
 
were
 
fully
 
paid
 
down,
 
charged-off
 
or
foreclosed upon by period end are not reported.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
51
Loan Modifications Made to Borrowers Experiencing Financial
 
Difficulty for the quarter ended September 30,2023
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at
September
30,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
CRE owner occupied
$
141,807
10.07
%
$
-
-
%
$
141,807
4.66
%
Commercial and industrial
43
-
%
-
-
%
43
-
%
Mortgage
76
-
%
-
-
%
76
-
%
Consumer:
 
Credit cards
154
0.01
%
-
-
%
154
0.01
%
 
Personal
247
0.01
%
-
-
%
247
0.01
%
Total
$
142,327
0.60
%
$
-
-
%
$
142,327
0.42
%
Term Extension
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at
September
30,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
CRE non-owner occupied
$
8,760
0.30
%
$
-
-
%
$
8,760
0.17
%
CRE owner occupied
2,667
0.19
%
10,847
0.66
%
13,514
0.44
%
Commercial and industrial
16,535
0.38
%
-
-
%
16,535
0.25
%
Mortgage
17,057
0.27
%
933
0.07
%
17,990
0.24
%
Consumer:
 
Personal
122
0.01
%
-
-
%
122
0.01
%
Total
$
45,141
0.19
%
$
11,780
0.11
%
$
56,921
0.17
%
Other-Than-Insignificant Payment Delays
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at
September
30,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
CRE owner occupied
$
8,980
0.64
%
$
-
-
%
$
8,980
0.29
%
Commercial and industrial
3,287
0.08
%
-
-
%
3,287
0.05
%
Total
$
12,267
0.05
%
$
-
-
%
$
12,267
0.04
%
Combination - Term extension
 
and Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at
September
30,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
CRE non-owner occupied
$
18,705
0.63
%
$
-
-
%
$
18,705
0.37
%
CRE owner occupied
14,683
1.04
%
-
-
%
14,683
0.48
%
Commercial and industrial
558
0.01
%
-
-
%
558
0.01
%
Mortgage
7,691
0.12
%
-
-
%
7,691
0.10
%
Consumer:
 
Personal
815
0.05
%
11
0.01
%
826
0.04
%
Total
$
42,452
0.18
%
$
11
-
%
$
42,463
0.12
%
Combination -
 
Other-Than-Insignificant Payment Delays and Interest Rate
 
Reduction
Puerto Rico
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at
September
30,2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
CRE non-owner occupied
$
182
0.01
%
$
-
-
%
$
182
-
%
Commercial and industrial
78
-
%
-
-
%
78
-
%
Consumer:
 
Credit cards
195
-
%
-
-
%
195
0.02
%
Total
$
455
-
%
$
-
-
%
$
455
-
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
52
Loan Modifications Made to Borrowers Experiencing Financial
 
Difficulty for the nine months ended September
 
30,2023
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
CRE owner occupied
$
141,807
10.07
%
$
-
-
%
$
141,807
4.66
%
Commercial and industrial
43
-
%
-
-
%
43
-
%
Mortgage
302
-
%
-
-
%
302
-
%
Consumer:
 
Credit cards
565
0.05
%
-
-
%
565
0.05
%
 
Personal
540
0.03
%
3
-
%
543
0.03
%
 
Other
3
-
%
-
-
%
3
-
%
Total
$
143,260
0.60
%
$
3
-
%
$
143,263
0.42
%
Term Extension
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
CRE non-owner occupied
$
33,059
1.12
%
$
-
-
%
$
33,059
0.66
%
CRE owner occupied
4,293
0.30
%
26,509
1.62
%
30,802
1.01
%
Commercial and industrial
38,713
0.89
%
-
-
%
38,713
0.59
%
Construction
2,169
1.27
%
5,309
0.71
%
7,478
0.81
%
Mortgage
41,916
0.67
%
5,423
0.42
%
47,339
0.62
%
Consumer:
 
Personal
196
0.01
%
129
0.07
%
325
0.02
%
 
Auto
36
-
%
-
-
%
36
-
%
Total
$
120,382
0.51
%
$
37,370
0.36
%
$
157,752
0.46
%
Principal Forgiveness
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
CRE owner occupied
$
18
-
%
$
-
-
%
$
18
-
%
Total
$
18
-
%
$
-
-
%
$
18
-
%
Other-Than-Insignificant Payment Delays
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
CRE non-owner occupied
$
1,736
0.06
%
$
-
-
%
$
1,736
0.03
%
CRE owner occupied
12,833
0.91
%
13,556
0.83
%
26,389
0.87
%
Commercial and industrial
4,653
0.11
%
828
0.04
%
5,481
0.08
%
Mortgage
137
-
%
-
-
%
137
-
%
Consumer:
 
Other
31
0.02
%
-
-
%
31
0.02
%
Total
$
19,390
0.08
%
$
14,384
0.14
%
$
33,774
0.10
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
53
Combination - Term extension
 
and Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
CRE non-owner occupied
$
18,705
0.63
%
$
-
-
%
$
18,705
0.37
%
CRE owner occupied
14,784
1.05
%
-
-
%
14,784
0.49
%
Commercial and industrial
614
0.01
%
-
-
%
614
0.01
%
Mortgage
29,044
0.46
%
407
0.03
%
29,451
0.39
%
Consumer:
 
Personal
1,711
0.10
%
43
0.02
%
1,754
0.09
%
 
Auto
27
-
%
-
-
%
27
-
%
Total
$
64,885
0.27
%
$
450
-
%
$
65,335
0.19
%
Combination - Other-Than-Insignificant Payment Delays
 
and Interest Rate Reduction
Puerto Rico
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
CRE non-owner occupied
$
182
0.01
%
$
-
-
%
$
182
-
%
Commercial and industrial
153
-
%
-
-
%
153
-
%
Consumer:
 
Credit cards
587
0.05
%
-
-
%
587
0.05
%
Total
$
922
-
%
$
-
-
%
$
922
-
%
Combination - Other-Than-Insignificant Payment Delays
 
and Principal Forgiveness
Puerto Rico
Popular U.S.
Popular, Inc.
(In thousands)
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at
September
30,2023
% of total class of
Financing
Receivable
CRE owner occupied
$
195
0.01
%
$
-
-
%
$
195
0.01
%
Total
$
195
-
%
$
-
-
%
$
195
-
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
54
The following table describes the financial effect of the
 
modifications made to borrowers experiencing
 
financial difficulties:
For the quarter ended September 30, 2023
Interest rate reduction
Loan Type
Financial Effect
CRE Non-owner occupied
Reduced weighted-average contractual interest rate from
9
.0% to
7.2
%.
CRE Owner occupied
Reduced weighted-average contractual interest rate from
8.4
% to
6.6
%.
Commercial and industrial
Reduced weighted-average contractual interest rate from
12.5
% to
7.6
%.
Mortgage
Reduced weighted-average contractual interest rate from
5.7
% to
4.2
%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
19.6
% to
3.6
%.
Personal
Reduced weighted-average contractual interest rate from
17
.0% to
9.1
%.
Term extension
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
28
 
months to the life of loans.
CRE Owner occupied
Added a weighted-average of
1
 
year to the life of loans.
Commercial and industrial
Added a weighted-average of
3
 
year to the life of loans.
Mortgage
Added a weighted-average of
11
 
years to the life of loans.
Consumer:
Personal
Added a weighted-average of
7
 
years to the life of loans.
Other than insignificant payment delay
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
7
 
months to the life of loans.
CRE Owner occupied
Added a weighted-average of
10
 
months to the life of loans.
Commercial and industrial
Added a weighted-average of
7
 
months to the life of loans.
Consumer:
Credit cards
Added a weighted-average of
29
 
months to the life of loans.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
55
For the nine months ended September 30, 2023
Interest rate reduction
Loan Type
Financial Effect
CRE Non-owner occupied
Reduced weighted-average contractual interest rate from
9
.0% to
7.2
%.
CRE Owner occupied
Reduced weighted-average contractual interest rate from
8.4
% to
6.6
%.
Commercial and industrial
Reduced weighted-average contractual interest rate from
14
.0% to
7.7
%.
Mortgage
Reduced weighted-average contractual interest rate from
5.7
% to
4.2
%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
18
.0% to
4.3
%.
Personal
Reduced weighted-average contractual interest rate from
18
.0% to
9.7
%.
Auto
Reduced weighted-average contractual interest rate from
12.64
% to
12.62
%.
Other
Reduced weighted-average contractual interest rate from
18
.0% to 0.0%.
Term extension
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
19
 
months to the life of loans.
CRE Owner occupied
Added a weighted-average of
1
 
year to the life of loans.
Commercial and industrial
Added a weighted-average of
2
 
years to the life of loans.
Construction
Added a weighted-average of
6
 
months to the life of loans.
Mortgage
Added a weighted-average of
11
 
years to the life of loans.
Consumer:
Personal
Added a weighted-average of
7
 
years to the life of loans.
Auto
Added a weighted-average of
3
 
years to the life of loans.
Principal forgiveness
Loan Type
Financial Effect
CRE Owner occupied
Reduced the amortized cost basis of the loans by $
0.1
 
million.
Other than insignificant payment delay
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
12
 
months to the life of loans.
CRE Owner occupied
Added a weighted-average of
8
 
months to the life of loans.
Commercial and industrial
Added a weighted-average of
8
 
months to the life of loans.
Mortgage
Added a weighted-average of
40
 
months to the life of loans.
Consumer:
Credit cards
Added a weighted-average of
26
 
months to the life of loans.
Other
Added a weighted-average of
11
 
months to the life of loans.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
56
The following table
 
presents, by class, the
 
performance of loans that
 
have been modified in
 
the last nine months
 
at September 30,
2023.
 
The past due 90 days or more categories includes all loans modified classified
 
as non-accruing at the time of the modification.
These loans will continue in non-accrual status, and presented as past
 
due 90 days or more, until the borrower has
 
demonstrated a
willingness and ability to
 
make the restructured loan
 
payments (at least six
 
months of sustained
 
performance after the modification
or one year
 
for loans providing
 
for quarterly or
 
semi-annual payments) and
 
management has concluded that
 
it is probable
 
that the
borrower would not be in payment default in the
 
foreseeable future.
 
BPPR
For the period ended September 30, 2023
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE Non-owner occupied
$
-
$
-
$
122
$
122
$
53,560
$
53,682
$
-
$
122
CRE Owner occupied
-
-
2,488
2,488
171,442
173,930
-
2,488
Commercial and industrial
-
-
1,735
1,735
42,441
44,176
729
1,006
Construction
-
-
-
-
2,169
2,169
-
-
Mortgage
4,913
2,572
22,291
29,776
41,623
71,399
4,196
18,095
Consumer:
 
Credit cards
117
87
130
334
818
1,152
93
37
 
Personal
48
19
550
617
1,830
2,447
-
550
 
Auto
-
-
11
11
52
63
-
11
 
Other
-
-
31
31
3
34
31
-
Total
$
5,078
$
2,678
$
27,358
$
35,114
$
313,938
$
349,052
$
5,049
$
22,309
[1] Loans that were in non-accrual status at the time
 
of modification are presented as past due until the borrower
 
has demonstrated a willingness and ability
to make the restructured loan payments. Payment default
 
is defined as a restructured loan becoming 90 days past
 
due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment
 
as of period end is inclusive of all partial paydowns
 
and charge-offs since the modification
date. Loans modified with financial difficulty that
 
were fully paid down, charged-off or foreclosed upon
 
by period end are not reported.
Popular U.S.
For the period ended September 30, 2023
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE Owner occupied
$
-
$
-
$
-
$
-
$
40,065
$
40,065
$
-
$
-
Commercial and industrial
-
-
-
-
828
828
-
-
Construction
-
-
-
-
5,309
5,309
-
-
Mortgage
-
-
334
334
5,496
5,830
103
231
Consumer:
 
Personal
-
-
129
129
46
175
-
129
Total
$
-
$
-
$
463
$
463
$
51,744
$
52,207
$
103
$
360
[1] Loans that were in non-accrual status at the time
 
of modification are presented as past due until the borrower
 
has demonstrated a willingness and ability
to make the restructured loan payments. Payment default
 
is defined as a restructured loan becoming 90 days past
 
due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment
 
as of period end is inclusive of all partial paydowns
 
and charge-offs since the modification
date. Loans modified with financial difficulty that
 
were fully paid down, charged-off or foreclosed upon
 
by period end are not reported.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
57
Popular Inc.
For the period ended September 30, 2023
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE Non-owner occupied
$
-
$
-
$
122
$
122
$
53,560
$
53,682
$
-
$
122
CRE Owner occupied
-
-
2,488
2,488
211,507
213,995
-
2,488
Commercial and industrial
-
-
1,735
1,735
43,269
45,004
729
1,006
Construction
-
-
-
-
7,478
7,478
-
-
Mortgage
4,913
2,572
22,625
30,110
47,119
77,229
4,299
18,326
Consumer:
 
Credit cards
117
87
130
334
818
1,152
93
37
 
Personal
48
19
679
746
1,876
2,622
-
679
 
Auto
-
-
11
11
52
63
-
11
 
Other
-
-
31
31
3
34
31
-
Total
$
5,078
$
2,678
$
27,821
$
35,577
$
365,682
$
401,259
$
5,152
$
22,669
[1] Loans that were in non-accrual status at the time
 
of modification are presented as past due until the borrower
 
has demonstrated a willingness and ability
to make the restructured loan payments.
 
Payment default is defined as a restructured loan becoming
 
90 days past due after being modified, foreclosed
 
or
charged-off, whichever occurs first. The recorded inve
 
stment as of period end is inclusive of all partial
 
paydowns and charge-offs since the modification
date. Loans modified with financial difficulty that
 
were fully paid down, charged-off or foreclosed upon
 
by period end are not reported.
During
 
the
 
nine
 
months
 
ended September
 
30,
 
2023,
five
 
loans
 
with
 
an
 
aggregate
 
unpaid
 
principal balance
 
of
 
$
6.6
 
million
 
were
restructured into
 
multiple notes
 
(“Note A
 
/ B
 
split”)
,
 
compared to
three
 
loans with
 
an aggregate
 
unpaid principal
 
balance of
 
$
2.7
million during
 
the nine months
 
ended September 30,
 
2022.
No
 
charge-offs were
 
recorded as
 
part of Note
 
A /
 
B splits
 
during 2023
and 2022. These
 
loans were restructured after
 
analyzing the borrowers’ capacity
 
to repay the
 
debt, collateral and ability to
 
perform
under the modified terms.
Payment
 
default
 
is
 
defined
 
as
 
a
 
restructured
 
loan
 
becoming
 
90
 
days
 
past
 
due
 
after
 
being
 
modified,
 
foreclosed
 
or
 
charged-off,
whichever occurs first.
 
During the quarter
 
and nine months
 
ended September 30,
 
2023, the outstanding
 
balance of loans
 
modified
for borrowers
 
under financial difficulties that were subject to payment default during the nine
 
months preceding the default date was
$
5
 
million and $
6
 
million, respectively.
 
For the quarter ended September 30, 2023,
 
extension of maturity and the combination of reduction
 
of interest rate and extension of
maturity
 
amounted
 
to
 
$
4
 
million
 
and
 
$
1
 
million,
 
respectively,
 
of
 
the
 
outstanding
 
balance
 
of
 
loans
 
modified
 
for
 
borrowers
 
under
financial difficulties
 
that were
 
subject to
 
payment default
 
during the
 
nine months
 
preceding the
 
default date.
 
For the
 
nine months
ended
 
September
 
30,
 
2023,
 
extension
 
of
 
maturity
 
and
 
the
 
combination
 
of
 
reduction
 
of
 
interest
 
rate
 
and
 
extension
 
of
 
maturity
amounted
 
to
 
$
5
 
million
 
and
 
$
1
 
million,
 
respectively,
 
of
 
the
 
outstanding
 
balance
 
of
 
loans
 
modified
 
for
 
borrowers
 
under
 
financial
difficulties that were subject to payment default during
 
the nine months preceding the default date.
 
Legacy TDR Modifications
A modification of
 
a loan, prior
 
to ASU 2022-02,
 
constituted a troubled
 
debt restructuring (TDR)
 
when a borrower
 
was experiencing
financial difficulty
 
and the
 
modification constituted
 
a concession.
 
For a
 
summary of
 
the legacy
 
accounting policy
 
related to
 
TDRs,
refer to the Summary of Significant Accounting Policies
 
included in Note 2 to the 2022 Form 10-K.
The outstanding
 
balance of
 
loans classified
 
as TDRs
 
amounted to
 
$
1.6
 
billion at
 
December 31,
 
2022. The
 
amount of
 
outstanding
commitments to
 
lend additional
 
funds to
 
debtors owing
 
loans whose
 
terms have
 
been modified
 
in TDRs
 
amounted to
 
$
12
 
million
related to the commercial loan portfolio at December 31,
 
2022.
The following table presents
 
the outstanding balance of
 
loans classified as TDRs
 
according to their accruing
 
status and the related
allowance at December 31, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
58
December 31, 2022
(In thousands)
Accruing
Non-Accruing
Total
Related
Allowance
Loans held-in-portfolio:
 
Commercial
$
269,784
$
54,641
$
324,425
$
18,451
 
Mortgage
[1]
1,169,976
86,790
1,256,766
58,819
 
Leasing
1,154
24
1,178
43
 
Consumer
54,395
7,883
62,278
13,577
Loans held-in-portfolio
$
1,495,309
$
149,338
$
1,644,647
$
90,890
[1] At December 31, 2022, accruing mortgage loan TDRs include
 
$
725
 
million guaranteed by U.S. sponsored entities
 
at BPPR.
The following
 
table presents
 
the loan
 
count by
 
type of
 
modification for
 
those loans
 
modified in
 
a TDR
 
during the
 
quarter and
 
nine
months ended September 30, 2022. Loans modified
 
as TDRs for the U.S. operations are considered
 
insignificant to the Corporation.
Popular Inc.
For the quarter ended September 30, 2022
For the nine months ended September 30, 2022
Reduction in
interest rate
Extension of
maturity
date
Combination of
reduction in
interest rate and
extension of
maturity date
Other
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
-
-
2
-
-
1
2
2
Commercial real estate owner occupied
1
3
-
2
2
9
1
2
Commercial and industrial
-
3
-
-
3
8
1
11
Mortgage
2
63
210
2
6
128
715
3
Leasing
-
-
-
-
-
-
1
-
Consumer:
 
Credit cards
7
-
-
10
31
-
-
32
 
Personal
28
4
1
-
82
60
1
1
 
Auto
-
-
-
-
-
1
-
-
Total
38
73
213
14
124
207
721
51
The following table presents, by class, quantitative
 
information related to loans modified as TDRs
 
during the quarter and nine
months ended September 30, 2022.
Popular, Inc.
 
For the quarter ended September 30, 2022
(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
2
$
1,327
$
1,326
$
10
Commercial real estate owner occupied
6
2,488
2,471
(47)
Commercial and industrial
3
123
117
7
Mortgage
277
28,990
30,192
1,032
Consumer:
 
Credit cards
17
157
154
1
 
Personal
33
542
539
146
Total
338
$
33,627
$
34,799
$
1,149
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
59
Popular, Inc.
 
For the nine months ended September 30, 2022
(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
5
$
4,779
$
4,777
$
15
Commercial real estate owner occupied
14
15,594
15,567
(2,120)
Commercial and industrial
23
49,625
49,425
2,067
Mortgage
852
93,773
96,918
3,143
Leasing
1
14
12
2
Consumer:
 
Credit cards
63
567
599
8
 
Personal
144
2,223
2,297
411
 
Auto
1
28
28
5
Total
1,103
$
166,603
$
169,623
$
3,531
The following table presents, 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.
 
Popular Inc.
Defaulted during the quarter ended
September 30, 2022
Defaulted during the nine months ended
September 30, 2022
(In thousands)
Loan count
Recorded investment as
of first default date
Loan count
Recorded Investment as of
first default date
Commercial real estate owner occupied
1
$
560
1
$
560
Commercial and industrial
2
1,165
5
3,661
Mortgage
35
3,500
73
9,200
Leasing
1
5
1
5
Consumer:
 
Credit cards
4
32
24
185
 
Personal
15
160
34
558
Total
58
$
5,422
138
$
14,169
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 September
 
30, 2023 and
 
December 31, 2022
 
and the gross
 
write-offs recorded by
vintage year. For
 
the definitions of the obligor risk ratings,
 
refer to the Credit Quality section of
 
Note 9 to the Consolidated Financial
Statements included in the 2022 Form 10-K:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
60
September 30, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
 
Years
Total
BPPR
Commercial:
Commercial multi-family
Watch
$
-
$
-
$
-
$
-
$
4,132
$
4,291
$
-
$
-
$
8,423
Special Mention
-
-
-
-
-
5,817
-
-
5,817
Substandard
-
-
-
-
-
3,048
100
-
3,148
Pass
38,060
139,784
22,604
20,572
29,751
26,368
287
-
277,426
Total commercial
multi-family
$
38,060
$
139,784
$
22,604
$
20,572
$
33,883
$
39,524
$
387
$
-
$
294,814
Commercial real estate non-owner occupied
Watch
$
2,611
$
345
$
14,870
$
22,895
$
14,387
$
42,474
$
-
$
-
$
97,582
Special Mention
652
-
25,120
63
65,283
55,662
3,563
-
150,343
Substandard
19,724
1,356
-
2,243
-
25,986
-
-
49,309
Pass
215,640
881,595
555,185
363,551
44,464
584,724
6,488
-
2,651,647
Total commercial
real estate non-
owner occupied
$
238,627
$
883,296
$
595,175
$
388,752
$
124,134
$
708,846
$
10,051
$
-
$
2,948,881
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
609
$
-
$
27
$
-
$
-
$
636
Commercial real estate owner occupied
Watch
$
1,673
$
11,674
$
25,306
$
8,021
$
3,578
$
65,433
$
900
$
-
$
116,585
Special Mention
-
16,697
6,082
143,558
996
56,793
13,069
-
237,195
Substandard
916
15,967
2,130
324
657
71,111
-
-
91,105
Doubtful
-
-
-
-
-
225
-
-
225
Pass
54,152
188,715
234,029
52,294
26,558
396,965
9,730
-
962,443
Total commercial
real estate owner
occupied
$
56,741
$
233,053
$
267,547
$
204,197
$
31,789
$
590,527
$
23,699
$
-
$
1,407,553
Year-to-Date gross
write-offs
$
-
$
4
$
-
$
-
$
1
$
520
$
-
$
-
$
525
Commercial and industrial
Watch
$
5,085
$
20,271
$
6,051
$
2,791
$
16,548
$
78,294
$
78,361
$
-
$
207,401
Special Mention
85
3,519
3,549
6,157
2,057
42,415
10,696
-
68,478
Substandard
5,698
2,011
6,457
19,449
2,130
34,171
33,556
-
103,472
Doubtful
-
-
-
54
-
30
-
-
84
Loss
-
-
-
-
-
-
354
-
354
Pass
679,029
688,800
522,132
246,230
132,643
265,712
1,415,483
-
3,950,029
Total commercial
and industrial
$
689,897
$
714,601
$
538,189
$
274,681
$
153,378
$
420,622
$
1,538,450
$
-
$
4,329,818
Year-to-Date gross
write-offs
$
784
$
184
$
140
$
317
$
398
$
287
$
2,869
$
-
$
4,979
Construction
Watch
$
-
$
17,156
$
8,693
$
-
$
-
$
-
$
20,485
$
-
$
46,334
Substandard
-
6,578
-
2,169
-
-
$
-
-
8,747
Pass
14,035
21,688
33,249
11,843
2,308
1,056
31,247
-
115,426
Total construction
$
14,035
$
45,422
$
41,942
$
14,012
$
2,308
$
1,056
$
51,732
$
-
$
170,507
Year-to-Date gross
write-offs
$
-
 
$
2,611
$
-
 
$
-
 
$
-
 
$
-
 
$
-
 
$
-
 
$
2,611
Mortgage
Substandard
$
-
$
161
$
515
$
372
$
2,923
$
76,022
$
-
$
-
$
79,993
Pass
537,050
443,989
430,508
262,407
167,447
4,367,874
-
-
6,209,275
Total mortgage
$
537,050
$
444,150
$
431,023
$
262,779
$
170,370
$
4,443,896
$
-
$
-
$
6,289,268
Year-to-Date gross
write-offs
$
-
 
$
-
 
$
-
 
$
-
 
$
-
 
$
1,205
$
-
$
-
$
1,205
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
61
September 30, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
 
Years
Total
BPPR
Leasing
Substandard
$
146
$
2,269
$
1,912
$
923
$
946
$
568
$
-
$
-
$
6,764
Loss
-
48
-
-
29
-
-
-
77
Pass
508,378
522,978
341,119
180,280
101,777
36,741
-
-
1,691,273
Total leasing
$
508,524
$
525,295
$
343,031
$
181,203
$
102,752
$
37,309
$
-
$
-
$
1,698,114
Year-to-Date gross
write-offs
$
391
$
2,638
$
1,871
$
530
$
473
$
346
$
-
$
-
$
6,249
Consumer:
Credit cards
Substandard
$
-
$
-
$
-
$
-
$
-
$
-
$
17,717
$
-
$
17,717
Loss
-
-
-
-
-
-
2
-
2
Pass
-
-
-
-
-
-
1,059,692
-
1,059,692
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,077,411
$
-
$
1,077,411
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
27,998
$
-
$
27,998
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
2,474
$
-
$
2,474
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
-
$
2,474
$
-
$
2,474
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
111
$
-
$
111
Personal
Substandard
$
677
$
4,223
$
2,077
$
604
$
1,217
$
8,854
$
-
$
1,104
$
18,756
Loss
30
10
48
-
25
21
-
-
134
Pass
700,994
562,370
210,731
66,531
71,178
109,046
-
23,262
1,744,112
Total Personal
$
701,701
$
566,603
$
212,856
$
67,135
$
72,420
$
117,921
$
-
$
24,366
$
1,763,002
Year-to-Date gross
write-offs
$
1,055
$
23,867
$
13,973
$
3,395
$
3,834
$
2,305
$
-
$
1,012
$
49,441
Auto
Substandard
$
3,213
$
12,306
$
11,389
$
8,665
$
7,369
$
3,735
$
-
$
-
$
46,677
Loss
11
118
18
55
32
25
-
-
259
Pass
941,464
964,237
770,038
449,165
299,099
162,257
-
-
3,586,260
Total Auto
$
944,688
$
976,661
$
781,445
$
457,885
$
306,500
$
166,017
$
-
$
-
$
3,633,196
Year-to-Date gross
write-offs
$
3,625
$
16,278
$
8,276
$
4,353
$
2,238
$
-
$
-
$
-
$
34,770
Other consumer
Substandard
$
-
$
28
$
-
$
82
$
17
$
1,151
$
267
$
-
$
1,545
Loss
-
-
137
-
-
499
-
-
636
Pass
30,668
24,809
15,498
5,941
3,537
3,843
61,055
-
145,351
Total Other
consumer
$
30,668
$
24,837
$
15,635
$
6,023
$
3,554
$
5,493
$
61,322
$
-
$
147,532
Year-to-Date gross
write-offs
$
20
$
117
$
80
$
133
$
53
$
11,452
$
-
$
-
$
11,855
Total BPPR
$
3,759,991
$
4,553,702
$
3,249,447
$
1,877,239
$
1,001,088
$
6,531,211
$
2,765,526
$
24,366
$
23,762,570
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
62
September 30, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular U.S.
Commercial:
Commercial multi-family
Watch
$
-
$
742
$
-
$
3,672
$
51,264
$
59,944
$
-
$
-
$
115,622
Special Mention
-
-
867
1,178
-
16,681
-
-
18,726
Substandard
-
-
-
-
14,747
16,003
-
-
30,750
Pass
69,117
525,927
367,965
233,949
216,481
450,809
4,273
-
1,868,521
Total commercial
multi-family
$
69,117
$
526,669
$
368,832
$
238,799
$
282,492
$
543,437
$
4,273
$
-
$
2,033,619
Commercial real estate non-owner occupied
Watch
$
-
$
5,500
$
4,228
$
729
$
10,991
$
44,329
$
-
$
-
$
65,777
Special Mention
-
-
-
-
1,333
68,433
-
-
69,766
Substandard
-
-
-
8,112
1,718
3,210
-
-
13,040
Pass
369,327
542,901
205,752
245,659
116,282
447,229
10,516
-
1,937,666
Total commercial
real estate non-
owner occupied
$
369,327
$
548,401
$
209,980
$
254,500
$
130,324
$
563,201
$
10,516
$
-
$
2,086,249
Commercial real estate owner occupied
Watch
$
-
$
-
$
78,483
$
1,177
$
-
$
124,940
$
-
$
-
$
204,600
Special Mention
-
-
-
3,809
6,114
114
-
-
10,037
Substandard
-
481
-
-
7,288
49,957
-
-
57,726
Pass
221,117
357,451
322,609
112,290
76,200
266,381
8,941
-
1,364,989
Total commercial
real estate owner
occupied
$
221,117
$
357,932
$
401,092
$
117,276
$
89,602
$
441,392
$
8,941
$
-
$
1,637,352
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
1,395
$
-
$
-
$
1,395
Commercial and industrial
Watch
$
2,594
$
8,238
$
3,940
$
1,024
$
1,208
$
3,748
$
9,507
$
-
$
30,259
Special Mention
368
621
1,074
37
171
47
-
-
2,318
Substandard
-
259
209
186
1,773
1,867
2,428
-
6,722
Pass
94,717
276,872
366,679
326,315
176,132
495,831
421,419
-
2,157,965
Total commercial
and industrial
$
97,679
$
285,990
$
371,902
$
327,562
$
179,284
$
501,493
$
433,354
$
-
$
2,197,264
Year-to-Date gross
write-offs
$
247
$
221
$
1,994
$
-
$
1,307
$
-
$
39
$
-
$
3,808
Construction
Watch
$
-
$
-
$
18,542
$
-
$
-
$
-
$
-
$
-
$
18,542
Special Mention
-
-
-
-
-
34,562
-
-
34,562
Substandard
-
-
5,213
3,214
-
2,095
-
-
10,522
Pass
180,508
305,886
121,838
28,119
50,844
784
-
-
687,979
Total construction
$
180,508
$
305,886
$
145,593
$
31,333
$
50,844
$
37,441
$
-
$
-
$
751,605
Mortgage
Substandard
$
-
$
-
$
-
$
-
$
2,168
$
9,812
$
-
$
-
$
11,980
Pass
75,875
226,204
291,991
237,859
179,085
272,849
-
-
1,283,863
Total mortgage
$
75,875
$
226,204
$
291,991
$
237,859
$
181,253
$
282,661
$
-
$
-
$
1,295,843
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
63
September 30, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular U.S.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
17
$
-
$
17
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
17
$
-
$
17
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
1
$
-
$
1
HELOCs
Substandard
$
-
$
-
$
-
$
-
$
-
$
1,906
$
-
$
1,046
$
2,952
Loss
-
-
-
-
-
99
-
1,034
1,133
Pass
-
-
-
-
-
7,592
40,796
12,552
60,940
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
9,597
$
40,796
$
14,632
$
65,025
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
419
$
-
$
-
$
419
Personal
Substandard
$
327
$
1,183
$
379
$
88
$
121
$
218
$
-
$
-
$
2,316
Loss
69
13
-
-
-
238
-
-
320
Pass
36,704
110,755
28,371
3,750
5,358
1,592
-
-
186,530
Total Personal
$
37,100
$
111,951
$
28,750
$
3,838
$
5,479
$
2,048
$
-
$
-
$
189,166
Year-to-Date gross
write-offs
$
137
$
9,218
$
3,319
$
518
$
758
$
143
$
-
$
-
$
14,093
Other consumer
Substandard
$
-
$
-
$
-
$
-
$
-
$
-
$
402
$
-
$
402
Pass
20
-
-
-
-
-
10,181
-
10,201
Total Other
consumer
$
20
$
-
$
-
$
-
$
-
$
-
$
10,583
$
-
$
10,603
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
143
$
-
$
143
Total Popular U.S.
$
1,050,743
$
2,363,033
$
1,818,140
$
1,211,167
$
919,278
$
2,381,270
$
508,480
$
14,632
$
10,266,743
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
64
September 30, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular, Inc.
Commercial:
Commercial multi-family
Watch
$
-
$
742
$
-
$
3,672
$
55,396
$
64,235
$
-
$
-
$
124,045
Special Mention
-
-
867
1,178
-
22,498
-
-
24,543
Substandard
-
-
-
-
14,747
19,051
100
-
33,898
Pass
107,177
665,711
390,569
254,521
246,232
477,177
4,560
-
2,145,947
Total commercial
multi-family
$
107,177
$
666,453
$
391,436
$
259,371
$
316,375
$
582,961
$
4,660
$
-
$
2,328,433
Commercial real estate non-owner occupied
Watch
$
2,611
$
5,845
$
19,098
$
23,624
$
25,378
$
86,803
$
-
$
-
$
163,359
Special Mention
652
-
25,120
63
66,616
124,095
3,563
-
220,109
Substandard
19,724
1,356
-
10,355
1,718
29,196
-
-
62,349
Pass
584,967
1,424,496
760,937
609,210
160,746
1,031,953
17,004
-
4,589,313
Total commercial
real estate non-
owner occupied
$
607,954
$
1,431,697
$
805,155
$
643,252
$
254,458
$
1,272,047
$
20,567
$
-
$
5,035,130
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
609
$
-
$
27
$
-
$
-
$
636
Commercial real estate owner occupied
Watch
$
1,673
$
11,674
$
103,789
$
9,198
$
3,578
$
190,373
$
900
$
-
$
321,185
Special Mention
-
16,697
6,082
147,367
7,110
56,907
13,069
-
247,232
Substandard
916
16,448
2,130
324
7,945
121,068
-
-
148,831
Doubtful
-
-
-
-
-
225
-
-
225
Pass
275,269
546,166
556,638
164,584
102,758
663,346
18,671
-
2,327,432
Total commercial
real estate owner
occupied
$
277,858
$
590,985
$
668,639
$
321,473
$
121,391
$
1,031,919
$
32,640
$
-
$
3,044,905
Year-to-Date gross
write-offs
$
-
$
4
$
-
$
-
$
1
$
1,915
$
-
$
-
$
1,920
Commercial and industrial
Watch
$
7,679
$
28,509
$
9,991
$
3,815
$
17,756
$
82,042
$
87,868
$
-
$
237,660
Special Mention
453
4,140
4,623
6,194
2,228
42,462
10,696
-
70,796
Substandard
5,698
2,270
6,666
19,635
3,903
36,038
35,984
-
110,194
Doubtful
-
-
-
54
-
30
-
-
84
Loss
-
-
-
-
-
-
354
-
354
Pass
773,746
965,672
888,811
572,545
308,775
761,543
1,836,902
-
6,107,994
Total commercial
and industrial
$
787,576
$
1,000,591
$
910,091
$
602,243
$
332,662
$
922,115
$
1,971,804
$
-
$
6,527,082
Year-to-Date gross
write-offs
$
1,031
$
405
$
2,134
$
317
$
1,705
$
287
$
2,908
$
-
$
8,787
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
65
September 30, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular, Inc.
Construction
Watch
$
-
$
17,156
$
27,235
$
-
$
-
$
-
$
20,485
$
-
$
64,876
Special Mention
-
-
-
-
-
34,562
-
-
34,562
Substandard
-
6,578
5,213
5,383
-
2,095
-
-
19,269
Pass
194,543
327,574
155,087
39,962
53,152
1,840
31,247
-
803,405
Total construction
$
194,543
$
351,308
$
187,535
$
45,345
$
53,152
$
38,497
$
51,732
$
-
$
922,112
Year-to-Date gross
write-offs
$
-
$
2,611
$
-
$
-
$
-
$
-
$
-
$
-
$
2,611
Mortgage
Substandard
$
-
$
161
$
515
$
372
$
5,091
$
85,834
$
-
$
-
$
91,973
Pass
612,925
670,193
722,499
500,266
346,532
4,640,723
-
-
7,493,138
Total mortgage
$
612,925
$
670,354
$
723,014
$
500,638
$
351,623
$
4,726,557
$
-
$
-
$
7,585,111
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
1,205
$
-
$
-
$
1,205
Leasing
Substandard
$
146
$
2,269
$
1,912
$
923
$
946
$
568
$
-
$
-
$
6,764
Loss
-
48
-
-
29
-
-
-
77
Pass
508,378
522,978
341,119
180,280
101,777
36,741
-
-
1,691,273
Total leasing
$
508,524
$
525,295
$
343,031
$
181,203
$
102,752
$
37,309
$
-
$
-
$
1,698,114
Year-to-Date gross
write-offs
$
391
$
2,638
$
1,871
$
530
$
473
$
346
$
-
$
-
$
6,249
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
66
September 30, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular, Inc.
Consumer:
Credit cards
Substandard
$
-
$
-
$
-
$
-
$
-
$
-
$
17,717
$
-
$
17,717
Loss
-
-
-
-
-
-
2
-
2
Pass
-
-
-
-
-
-
1,059,709
-
1,059,709
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,077,428
$
-
$
1,077,428
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
27,999
$
-
$
27,999
HELOCs
Substandard
$
-
$
-
$
-
$
-
$
-
$
1,906
$
-
$
1,046
$
2,952
Loss
-
-
-
-
-
99
-
1,034
1,133
Pass
-
-
-
-
-
7,592
43,270
12,552
63,414
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
9,597
$
43,270
$
14,632
$
67,499
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
419
$
111
$
-
$
530
Personal
Substandard
$
1,004
$
5,406
$
2,456
$
692
$
1,338
$
9,072
$
-
$
1,104
$
21,072
Loss
99
23
48
-
25
259
-
-
454
Pass
737,698
673,125
239,102
70,281
76,536
110,638
-
23,262
1,930,642
Total Personal
$
738,801
$
678,554
$
241,606
$
70,973
$
77,899
$
119,969
$
-
$
24,366
$
1,952,168
Year-to-Date gross
write-offs
$
1,192
$
33,085
$
17,292
$
3,913
$
4,592
$
2,448
$
-
$
1,012
$
63,534
Auto
Substandard
$
3,213
$
12,306
$
11,389
$
8,665
$
7,369
$
3,735
$
-
$
-
$
46,677
Loss
11
118
18
55
32
25
-
-
259
Pass
941,464
964,237
770,038
449,165
299,099
162,257
-
-
3,586,260
Total Auto
$
944,688
$
976,661
$
781,445
$
457,885
$
306,500
$
166,017
$
-
$
-
$
3,633,196
Year-to-Date gross
write-offs
$
3,625
$
16,278
$
8,276
$
4,353
$
2,238
$
-
$
-
$
-
$
34,770
Other consumer
Substandard
$
-
$
28
$
-
$
82
$
17
$
1,151
$
669
$
-
$
1,947
Loss
-
-
137
-
-
499
-
-
636
Pass
30,688
24,809
15,498
5,941
3,537
3,843
71,236
-
155,552
Total Other
consumer
$
30,688
$
24,837
$
15,635
$
6,023
$
3,554
$
5,493
$
71,905
$
-
$
158,135
Year-to-Date gross
write-offs
$
20
$
117
$
80
$
133
$
53
$
11,452
$
143
$
-
$
11,998
Total Popular Inc.
$
4,810,734
$
6,916,735
$
5,067,587
$
3,088,406
$
1,920,366
$
8,912,481
$
3,274,006
$
38,998
$
34,029,313
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
67
December 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
BPPR
Commercial:
Commercial multi-family
Watch
$
-
$
-
$
-
$
18,508
$
-
$
4,687
$
-
$
-
$
23,195
Special Mention
-
-
-
-
-
2,692
-
-
2,692
Substandard
-
-
-
-
-
3,326
100
-
3,426
Pass
137,411
22,850
20,821
16,145
24,640
30,193
-
-
252,060
Total commercial
multi-family
$
137,411
$
22,850
$
20,821
$
34,653
$
24,640
$
40,898
$
100
$
-
$
281,373
Commercial real estate non-owner occupied
Watch
$
173
$
36,228
$
14,045
$
14,942
$
7,777
$
99,269
$
-
$
-
$
172,434
Special Mention
-
4,361
19,970
7,517
-
25,540
-
-
57,388
Substandard
8,933
-
3,209
19,004
25,490
21,064
-
-
77,700
Pass
855,839
585,690
294,086
94,056
35,105
568,893
16,136
-
2,449,805
Total commercial
real estate non-
owner occupied
$
864,945
$
626,279
$
331,310
$
135,519
$
68,372
$
714,766
$
16,136
$
-
$
2,757,327
Commercial real estate owner occupied
Watch
$
2,296
$
5,271
$
9,447
$
4,275
$
31,649
$
71,568
$
-
$
-
$
124,506
Special Mention
10
284
1,684
6,578
1,076
61,460
-
-
71,092
Substandard
16,205
6,177
802
800
770
84,205
-
-
108,959
Doubtful
-
-
-
-
-
505
-
-
505
Pass
227,404
258,473
274,333
30,691
68,029
407,322
16,742
-
1,282,994
Total commercial
real estate owner
occupied
$
245,915
$
270,205
$
286,266
$
42,344
$
101,524
$
625,060
$
16,742
$
-
$
1,588,056
Commercial and industrial
Watch
$
32,376
$
2,185
$
15,493
$
18,829
$
15,483
$
51,602
$
56,508
$
-
$
192,476
Special Mention
2,537
2,479
5,770
1,139
6,767
46,040
6,283
-
71,015
Substandard
789
1,276
1,600
3,138
11,536
40,636
46,226
-
105,201
Doubtful
-
-
29
-
75
75
-
-
179
Loss
-
-
-
-
-
-
144
-
144
Pass
793,662
684,647
211,013
177,265
65,197
292,173
1,203,536
-
3,427,493
Total commercial
and industrial
$
829,364
$
690,587
$
233,905
$
200,371
$
99,058
$
430,526
$
1,312,697
$
-
$
3,796,508
Construction
Watch
$
35,446
$
3,116
$
98
$
-
$
-
$
-
$
141
$
-
$
38,801
Substandard
-
-
9,629
-
-
-
-
-
9,629
Pass
13,044
34,387
15,961
2,262
-
-
32,957
-
98,611
Total construction
$
48,490
$
37,503
$
25,688
$
2,262
$
-
$
-
$
33,098
$
-
$
147,041
Mortgage
Substandard
$
-
$
574
$
687
$
3,926
$
4,227
$
93,959
$
-
$
-
$
103,373
Pass
449,286
451,027
285,026
204,170
237,007
4,380,390
-
-
6,006,906
Total mortgage
$
449,286
$
451,601
$
285,713
$
208,096
$
241,234
$
4,474,349
$
-
$
-
$
6,110,279
Leasing
Substandard
$
953
$
1,491
$
941
$
1,172
$
1,127
$
215
$
-
$
-
$
5,899
Loss
-
-
-
21
-
21
-
-
42
Pass
672,294
428,889
237,939
146,231
79,451
14,994
-
-
1,579,798
Total leasing
$
673,247
$
430,380
$
238,880
$
147,424
$
80,578
$
15,230
$
-
$
-
$
1,585,739
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
68
December 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
BPPR
Consumer:
Credit cards
Substandard
$
-
$
-
$
-
$
-
$
-
$
-
$
11,907
$
-
$
11,907
Loss
-
-
-
-
-
-
3
-
3
Pass
-
-
-
-
-
-
1,029,921
-
1,029,921
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,041,831
$
-
$
1,041,831
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
2,954
$
-
$
2,954
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
-
$
2,954
$
-
$
2,954
Personal
Substandard
$
1,330
$
2,001
$
764
$
1,774
$
503
$
10,831
$
-
$
1,285
$
18,488
Loss
-
-
53
20
31
10
-
1
115
Pass
841,564
320,809
103,337
117,568
46,555
109,543
-
27,708
1,567,084
Total Personal
$
842,894
$
322,810
$
104,154
$
119,362
$
47,089
$
120,384
$
-
$
28,994
$
1,585,687
Auto
Substandard
$
6,764
$
11,171
$
10,466
$
10,243
$
4,597
$
2,382
$
-
$
-
$
45,623
Loss
23
41
48
25
7
14
-
-
158
Pass
1,156,654
961,571
588,200
426,169
248,328
85,827
-
-
3,466,749
Total Auto
$
1,163,441
$
972,783
$
598,714
$
436,437
$
252,932
$
88,223
$
-
$
-
$
3,512,530
Other consumer
Substandard
$
-
$
-
$
100
$
593
$
543
$
242
$
10,902
$
-
$
12,380
Loss
-
-
-
-
263
40
-
-
303
Pass
29,557
17,439
6,967
4,201
4,553
1,942
60,238
-
124,897
Total Other
consumer
$
29,557
$
17,439
$
7,067
$
4,794
$
5,359
$
2,224
$
71,140
$
-
$
137,580
Total BPPR
$
5,284,550
$
3,842,437
$
2,132,518
$
1,331,262
$
920,786
$
6,511,660
$
2,494,698
$
28,994
$
22,546,905
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
69
December 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
$
750
$
917
$
6,218
$
85,579
$
9,633
$
52,835
$
-
$
-
$
155,932
Special Mention
-
-
1,198
-
14,491
8,372
-
-
24,061
Substandard
-
-
-
9,305
7,373
2,941
-
-
19,619
Pass
503,010
399,397
238,903
210,295
138,723
347,615
2,785
-
1,840,728
Total commercial
multi-family
$
503,760
$
400,314
$
246,319
$
305,179
$
170,220
$
411,763
$
2,785
$
-
$
2,040,340
Commercial real estate non-owner occupied
Watch
$
-
$
2,167
$
13,622
$
3,355
$
26,931
$
29,849
$
-
$
-
$
75,924
Special Mention
-
-
-
1,353
-
75,269
-
-
76,622
Substandard
-
2,864
2,149
3,220
1,429
4,722
-
-
14,384
Pass
552,258
209,338
211,449
109,781
100,065
383,409
9,113
-
1,575,413
Total commercial
real estate non-
owner occupied
$
552,258
$
214,369
$
227,220
$
117,709
$
128,425
$
493,249
$
9,113
$
-
$
1,742,343
Commercial real estate owner occupied
Watch
$
-
$
-
$
1,197
$
1,079
$
6,095
$
55,005
$
-
$
-
$
63,376
Special Mention
-
-
3,886
-
-
901
-
-
4,787
Substandard
-
-
-
7,403
11,165
33,586
-
-
52,154
Pass
363,655
422,959
114,988
82,971
119,565
258,881
7,157
-
1,370,176
Total commercial
real estate owner
occupied
$
363,655
$
422,959
$
120,071
$
91,453
$
136,825
$
348,373
$
7,157
$
-
$
1,490,493
Commercial and industrial
Watch
$
12,328
$
2,218
$
2,022
$
2,049
$
8,438
$
532
$
4,291
$
-
$
31,878
Special Mention
1,262
1,130
314
244
60
-
3
-
3,013
Substandard
260
935
74
4,278
315
1,829
1,408
-
9,099
Loss
292
525
1
75
192
3
-
-
1,088
Pass
185,318
341,855
368,398
202,301
171,528
376,045
352,169
-
1,997,614
Total commercial
and industrial
$
199,460
$
346,663
$
370,809
$
208,947
$
180,533
$
378,409
$
357,871
$
-
$
2,042,692
Construction
Watch
$
-
$
12,085
$
-
$
6,979
$
18,310
$
34,126
$
-
$
-
$
71,500
Special Mention
-
3
-
-
-
-
-
-
3
Substandard
-
-
1,423
-
6,540
2,095
-
-
10,058
Pass
164,272
146,062
91,486
93,118
10,863
23,581
-
-
529,382
Total construction
$
164,272
$
158,150
$
92,909
$
100,097
$
35,713
$
59,802
$
-
$
-
$
610,943
Mortgage
Substandard
$
-
$
2,009
$
3,478
$
4,048
$
1,156
$
9,798
$
-
$
-
$
20,489
Pass
236,595
303,204
243,468
183,846
58,026
241,564
-
-
1,266,703
Total mortgage
$
236,595
$
305,213
$
246,946
$
187,894
$
59,182
$
251,362
$
-
$
-
$
1,287,192
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
70
December 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
$
-
$
-
$
-
$
-
$
-
$
-
$
39
$
-
$
39
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
39
$
-
$
39
HELOCs
Substandard
$
-
$
-
$
-
$
-
$
-
$
2,146
$
20
$
1,402
$
3,568
Loss
-
-
-
-
-
4
-
538
542
Pass
-
-
-
-
-
9,169
41,724
13,959
64,852
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
11,319
$
41,744
$
15,899
$
68,962
Personal
Substandard
$
621
$
454
$
149
$
238
$
70
$
6
$
-
$
-
$
1,538
Loss
-
-
-
-
-
421
-
-
421
Pass
165,153
46,320
7,339
13,443
2,021
1,657
-
-
235,933
Total Personal
$
165,774
$
46,774
$
7,488
$
13,681
$
2,091
$
2,084
$
-
$
-
$
237,892
Other consumer
Substandard
$
-
$
-
$
-
$
-
$
-
$
-
$
8
$
-
$
8
Pass
-
-
-
-
-
-
9,960
-
9,960
Total Other
consumer
$
-
$
-
$
-
$
-
$
-
$
-
$
9,968
$
-
$
9,968
Total Popular U.S.
$
2,185,774
$
1,894,442
$
1,311,762
$
1,024,960
$
712,989
$
1,956,361
$
428,677
$
15,899
$
9,530,864
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
71
December 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
$
750
$
917
$
6,218
$
104,087
$
9,633
$
57,522
$
-
$
-
$
179,127
Special Mention
-
-
1,198
-
14,491
11,064
-
-
26,753
Substandard
-
-
-
9,305
7,373
6,267
100
-
23,045
Pass
640,421
422,247
259,724
226,440
163,363
377,808
2,785
-
2,092,788
Total commercial
multi-family
$
641,171
$
423,164
$
267,140
$
339,832
$
194,860
$
452,661
$
2,885
$
-
$
2,321,713
Commercial real estate non-owner occupied
Watch
$
173
$
38,395
$
27,667
$
18,297
$
34,708
$
129,118
$
-
$
-
$
248,358
Special Mention
-
4,361
19,970
8,870
-
100,809
-
-
134,010
Substandard
8,933
2,864
5,358
22,224
26,919
25,786
-
-
92,084
Pass
1,408,097
795,028
505,535
203,837
135,170
952,302
25,249
-
4,025,218
Total commercial
real estate non-
owner occupied
$
1,417,203
$
840,648
$
558,530
$
253,228
$
196,797
$
1,208,015
$
25,249
$
-
$
4,499,670
Commercial real estate owner occupied
Watch
$
2,296
$
5,271
$
10,644
$
5,354
$
37,744
$
126,573
$
-
$
-
$
187,882
Special Mention
10
284
5,570
6,578
1,076
62,361
-
-
75,879
Substandard
16,205
6,177
802
8,203
11,935
117,791
-
-
161,113
Doubtful
-
-
-
-
-
505
-
-
505
Pass
591,059
681,432
389,321
113,662
187,594
666,203
23,899
-
2,653,170
Total commercial
real estate owner
occupied
$
609,570
$
693,164
$
406,337
$
133,797
$
238,349
$
973,433
$
23,899
$
-
$
3,078,549
Commercial and industrial
Watch
$
44,704
$
4,403
$
17,515
$
20,878
$
23,921
$
52,134
$
60,799
$
-
$
224,354
Special Mention
3,799
3,609
6,084
1,383
6,827
46,040
6,286
-
74,028
Substandard
1,049
2,211
1,674
7,416
11,851
42,465
47,634
-
114,300
Doubtful
-
-
29
-
75
75
-
-
179
Loss
292
525
1
75
192
3
144
-
1,232
Pass
978,980
1,026,502
579,411
379,566
236,725
668,218
1,555,705
-
5,425,107
Total commercial
and industrial
$
1,028,824
$
1,037,250
$
604,714
$
409,318
$
279,591
$
808,935
$
1,670,568
$
-
$
5,839,200
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
72
December 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
$
35,446
$
15,201
$
98
$
6,979
$
18,310
$
34,126
$
141
$
-
$
110,301
Special Mention
-
3
-
-
-
-
-
-
3
Substandard
-
-
11,052
-
6,540
2,095
-
-
19,687
Pass
177,316
180,449
107,447
95,380
10,863
23,581
32,957
-
627,993
Total construction
$
212,762
$
195,653
$
118,597
$
102,359
$
35,713
$
59,802
$
33,098
$
-
$
757,984
Mortgage
Substandard
$
-
$
2,583
$
4,165
$
7,974
$
5,383
$
103,757
$
-
$
-
$
123,862
Pass
685,881
754,231
528,494
388,016
295,033
4,621,954
-
-
7,273,609
Total mortgage
$
685,881
$
756,814
$
532,659
$
395,990
$
300,416
$
4,725,711
$
-
$
-
$
7,397,471
Leasing
Substandard
$
953
$
1,491
$
941
$
1,172
$
1,127
$
215
$
-
$
-
$
5,899
Loss
-
-
-
21
-
21
-
-
42
Pass
672,294
428,889
237,939
146,231
79,451
14,994
-
-
1,579,798
Total leasing
$
673,247
$
430,380
$
238,880
$
147,424
$
80,578
$
15,230
$
-
$
-
$
1,585,739
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
73
December 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
$
-
$
-
$
-
$
-
$
-
$
-
$
11,907
$
-
$
11,907
Loss
-
-
-
-
-
-
3
-
3
Pass
-
-
-
-
-
-
1,029,960
-
1,029,960
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,041,870
$
-
$
1,041,870
HELOCs
Substandard
$
-
$
-
$
-
$
-
$
-
$
2,146
$
20
$
1,402
$
3,568
Loss
-
-
-
-
-
4
-
538
542
Pass
-
-
-
-
-
9,169
44,678
13,959
67,806
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
11,319
$
44,698
$
15,899
$
71,916
Personal
Substandard
$
1,951
$
2,455
$
913
$
2,012
$
573
$
10,837
$
-
$
1,285
$
20,026
Loss
-
-
53
20
31
431
-
1
536
Pass
1,006,717
367,129
110,676
131,011
48,576
111,200
-
27,708
1,803,017
Total Personal
$
1,008,668
$
369,584
$
111,642
$
133,043
$
49,180
$
122,468
$
-
$
28,994
$
1,823,579
Auto
Substandard
$
6,764
$
11,171
$
10,466
$
10,243
$
4,597
$
2,382
$
-
$
-
$
45,623
Loss
23
41
48
25
7
14
-
-
158
Pass
1,156,654
961,571
588,200
426,169
248,328
85,827
-
-
3,466,749
Total Auto
$
1,163,441
$
972,783
$
598,714
$
436,437
$
252,932
$
88,223
$
-
$
-
$
3,512,530
Other consumer
Substandard
$
-
$
-
$
100
$
593
$
543
$
242
$
10,910
$
-
$
12,388
Loss
-
-
-
-
263
40
-
-
303
Pass
29,557
17,439
6,967
4,201
4,553
1,942
70,198
-
134,857
Total Other
consumer
$
29,557
$
17,439
$
7,067
$
4,794
$
5,359
$
2,224
$
81,108
$
-
$
147,548
Total Popular Inc.
$
7,470,324
$
5,736,879
$
3,444,280
$
2,356,222
$
1,633,775
$
8,468,021
$
2,923,375
$
44,893
$
32,077,769
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
74
Note 10 – Mortgage banking activities
Income
 
from
 
mortgage
 
banking
 
activities
 
includes
 
mortgage
 
servicing
 
fees
 
earned
 
in
 
connection
 
with
 
administering
 
residential
mortgage
 
loans
 
and
 
valuation
 
adjustments
 
on
 
mortgage
 
servicing
 
rights.
 
It
 
also
 
includes
 
gain
 
on
 
sales
 
and
 
securitizations
 
of
residential mortgage
 
loans, losses
 
on repurchased
 
loans, including
 
interest advances,
 
and trading
 
gains and
 
losses on
 
derivative
contracts
 
used
 
to
 
hedge
 
the
 
Corporation’s
 
securitization
 
activities.
 
In
 
addition,
 
fair
 
value
 
valuation
 
adjustments
 
to
 
residential
mortgage loans held for sale, if any, are recorded as part of the mortgage
 
banking activities.
The following table presents the components of mortgage
 
banking activities:
Quarters ended September 30,
Nine months ended September 30,
(In thousands)
2023
2022
2023
2022
Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees
$
8,025
$
9,126
$
25,083
$
27,635
Mortgage servicing rights fair value adjustments
(2,793)
(499)
(10,385)
2,846
Total mortgage
 
servicing fees, net of fair value adjustments
5,232
8,627
14,698
30,481
Net (loss) gain on sale of loans, including valuation on
 
loans held-for-sale
(335)
1,124
(133)
(374)
Trading account profit (loss):
Unrealized gains on outstanding derivative positions
45
-
160
-
Realized gains (losses) on closed derivative positions
494
(240)
661
6,325
Total trading account
 
profit (loss)
539
(240)
821
6,325
Losses on repurchased loans, including interest advances
(43)
(63)
(277)
(544)
Total mortgage
 
banking activities
$
5,393
$
9,448
$
15,109
$
35,888
[1]
 
Effective on January 1, 2023, loans held-for-sale
 
are stated at fair value. Prior to such date, loans held-for-sale
 
were stated at lower-of-cost-or-
market.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
75
Note 11 – 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
 
20
 
to
 
the
 
Consolidated
 
Financial
Statements for a description of such arrangements.
 
No
 
liabilities were incurred as a
 
result of these securitizations during the
 
quarters and nine months ended September
 
30, 2023 and
2022 because they did not contain any credit recourse
 
arrangements.
 
The
 
following tables
 
present the
 
initial fair
 
value of
 
the
 
assets obtained
 
as
 
proceeds from
 
residential mortgage
 
loans securitized
during the quarters and nine months ended September
 
30, 2023 and 2022:
 
Proceeds Obtained During the Quarter Ended September
 
30, 2023
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
-
$
1,421
$
-
$
1,421
Mortgage-backed securities - FNMA
-
10,178
-
10,178
Total trading account
 
debt securities
$
-
$
11,599
$
-
$
11,599
Mortgage servicing rights
$
-
$
-
$
301
$
301
Total
 
$
-
$
11,599
$
301
$
11,900
Proceeds Obtained During the Nine months Ended September
 
30, 2023
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
-
$
2,488
$
-
$
2,488
Mortgage-backed securities - FNMA
-
33,470
-
33,470
Total trading account
 
debt securities
$
-
$
35,958
$
-
$
35,958
Mortgage servicing rights
$
-
$
-
$
945
$
945
Total
 
$
-
$
35,958
$
945
$
36,903
Proceeds Obtained During the Quarter Ended September
 
30, 2022
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
-
$
14,190
$
-
$
14,190
Mortgage-backed securities - FNMA
-
21,685
-
21,685
Total trading account
 
debt securities
$
-
$
35,875
$
-
$
35,875
Mortgage servicing rights
$
-
$
-
$
809
$
809
Total
 
$
-
$
35,875
$
809
$
36,684
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
76
Proceeds Obtained During the Nine months Ended September
 
30, 2022
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
-
$
169,352
$
-
$
169,352
Mortgage-backed securities - FNMA
-
117,015
-
117,015
Mortgage-backed securities - FHLMC
-
8,505
-
8,505
Total trading account
 
debt securities
$
-
$
294,872
$
-
$
294,872
Mortgage servicing rights
$
-
$
-
$
5,179
$
5,179
Total
 
$
-
$
294,872
$
5,179
$
300,051
During
 
the
 
nine
 
months
 
ended
 
September
 
30,
 
2023,
 
the
 
Corporation
 
retained
 
servicing
 
rights
 
on
 
whole
 
loan
 
sales
 
involving
approximately
 
$
39
 
million
 
in
 
principal
 
balance
 
outstanding
 
(September
 
30,
 
2022
 
-
 
$
50
 
million),
 
with
 
net
 
realized
 
gains
 
of
approximately $
0.6
 
million
 
(September 30,
 
2022 -
 
gains of
 
$
0.8
 
million). All
 
loan sales
 
performed during
 
the
 
nine months
 
ended
September 30, 2023 and 2022 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 nine months ended September
 
30,
2023 and 2022.
Residential MSRs
(In thousands)
September 30, 2023
September 30, 2022
Fair value at beginning of period
$
128,350
$
121,570
Additions
1,814
6,195
Changes due to payments on loans
 
[1]
(7,569)
(8,178)
Reduction due to loan repurchases
(468)
(646)
Changes in fair value due to changes in valuation model inputs
 
or assumptions
(1,828)
11,556
Other
(1,269)
44
Fair value at end of period
 
[2]
$
119,030
$
130,541
[1] Represents changes due to collection / realization
 
of expected cash flows over time.
[2] At September 30, 2023, PB had MSRs amounting to
 
$
1.9
 
million (September 30, 2022 - $
2.0
 
million).
During the
 
quarter ended June
 
30, 2023
 
the Corporation
 
terminated a servicing
 
agreement,
 
in which it
 
acted as sub-servicer
 
for a
third
 
party,
 
for
 
a
 
portfolio
 
with
 
an
 
unpaid
 
principal
 
balance
 
of
 
approximately
 
$
260
 
million
 
and
 
a
 
related
 
MSR
 
fair
 
value
 
of
approximately $
2
 
million.
 
The transaction did not result in a material
 
effect on the financial results of the Corporation.
Residential mortgage loans serviced for others were $
10.1
 
billion at September 30, 2023 (December 31,
 
2022 -$
11.1
 
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 September
 
30, 2023, those
 
weighted average mortgage servicing
 
fees were
0.31
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
77
(September
 
30,
 
2022
 
-
0.31
%).
 
Under
 
these
 
servicing
 
agreements,
 
the
 
banking
 
subsidiaries
 
do
 
not
 
generally
 
earn
 
significant
prepayment penalty fees on the underlying loans
 
serviced.
The section
 
below includes
 
information on
 
assumptions used
 
in the
 
valuation model
 
of the
 
MSRs, originated
 
and purchased.
 
Key
economic assumptions used
 
in measuring the
 
servicing rights derived
 
from loans securitized
 
or sold by
 
the Corporation during
 
the
quarters and nine months ended September 30,
 
2023 and 2022 were as follows:
 
Quarters ended
Nine months ended
 
September 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
BPPR
PB
BPPR
PB
BPPR
PB
BPPR
PB
Prepayment speed
7.3
%
7.0
%
5.5
%
7.2
%
7.1
%
7.1
%
5.2
%
8.4
%
Weighted average life (in years)
9.2
8.0
9.5
8.2
9.2
8.0
9.7
7.7
Discount rate (annual rate)
9.6
%
11.0
%
10.7
%
10.0
%
9.6
%
10.7
%
10.5
%
9.8
%
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
September 30,
December 31,
September 30,
December 31,
 
(In thousands)
2023
2022
2023
2022
Fair value of servicing rights
$
40,346
$
41,548
$
78,684
$
86,802
Weighted average life (in years)
6.6
6.8
6.7
6.9
Weighted average prepayment speed (annual
 
rate)
6.0
%
5.9
%
7.0
%
7.0
%
Impact on fair value of 10% adverse change
$
(728)
$
(730)
$
(1,491)
$
(1,602)
Impact on fair value of 20% adverse change
$
(1,427)
$
(1,433)
$
(2,924)
$
(3,143)
Weighted average discount rate (annual rate)
11.2
%
11.2
%
10.9
%
11.0
%
Impact on fair value of 10% adverse change
$
(1,387)
$
(1,485)
$
(2,842)
$
(3,256)
Impact on fair value of 20% adverse change
$
(2,688)
$
(2,876)
$
(5,508)
$
(6,304)
78
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 September
 
30, 2023, the
 
Corporation serviced
 
$
0.6
 
billion in
 
residential mortgage loans
 
with credit recourse
 
to the
 
Corporation
(December 31, 2022 - $
0.6
 
billion). Also refer to Note 20 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
September
 
30,
 
2023,
 
the
 
Corporation
 
had
 
recorded
 
$
8
 
million
 
in
 
mortgage
 
loans
 
on
 
its
 
Consolidated
 
Statements
 
of
 
Financial
Condition related to this
 
buy-back option program (December 31,
 
2022 - $
14
 
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 nine months ended
 
September 30, 2023, the Corporation repurchased approximately
 
$
34
 
million (September 30, 2022 -
$
49
 
million) of
 
mortgage loans
 
from its
 
GNMA servicing
 
portfolio. The
 
determination to
 
repurchase these
 
loans was
 
based on
 
the
economic benefits of
 
the transaction, which
 
results in a
 
reduction of the
 
servicing costs for these
 
severely delinquent loans, mainly
related
 
to
 
principal
 
and
 
interest
 
advances.
 
The
 
risk
 
associated
 
with
 
the
 
loans
 
is
 
reduced
 
due
 
to
 
their
 
guaranteed
 
nature.
 
The
Corporation may
 
place these
 
loans under
 
modification programs
 
offered by
 
FHA, VA
 
or United
 
States Department
 
of Agriculture
(USDA) or other loss mitigation
 
programs offered by the Corporation,
 
and once brought back to
 
current status, these may be
 
either
retained in portfolio or re-sold in the secondary
 
market.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
79
Note 12 – Other real estate owned
The following
 
tables present
 
the activity
 
related to
 
Other Real
 
Estate Owned
 
(“OREO”),
 
for the
 
quarters and
 
nine months
 
ended
September 30, 2023 and 2022.
For the quarter ended September 30, 2023
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
11,819
$
74,397
$
86,216
Write-downs in value
(123)
(567)
(690)
Additions
257
14,795
15,052
Sales
(900)
(17,356)
(18,256)
Ending balance
$
11,053
$
71,269
$
82,322
For the quarter ended September 30, 2022
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
14,250
$
77,887
$
92,137
Write-downs in value
(84)
(376)
(460)
Additions
1,711
13,975
15,686
Sales
(1,984)
(12,065)
(14,049)
Other adjustments
-
(75)
(75)
Ending balance
$
13,893
$
79,346
$
93,239
For the nine months ended September 30, 2023
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
12,500
$
76,626
$
89,126
Write-downs in value
(362)
(1,587)
(1,949)
Additions
1,524
54,625
56,149
Sales
(2,626)
(58,277)
(60,903)
Other adjustments
17
(118)
(101)
Ending balance
$
11,053
$
71,269
$
82,322
For the nine months ended September 30, 2022
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
15,017
$
70,060
$
85,077
Write-downs in value
(934)
(949)
(1,883)
Additions
5,230
53,878
59,108
Sales
(5,528)
(43,110)
(48,638)
Other adjustments
108
(533)
(425)
Ending balance
$
13,893
$
79,346
$
93,239
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
80
Note 13 − Other assets
The caption of other assets in the consolidated
 
statements of financial condition consists of the following
 
major categories:
(In thousands)
September 30, 2023
December 31, 2022
Net deferred tax assets (net of valuation allowance)
$
896,426
$
953,676
Investments under the equity method
234,408
210,001
Prepaid taxes
47,837
39,405
Other prepaid expenses
42,977
33,384
Capitalized software costs
79,393
81,862
Derivative assets
23,348
19,229
Trades receivable from brokers and counterparties
37,674
35,099
Receivables from investments maturities
301,000
125,000
Principal, interest and escrow servicing advances
50,881
41,916
Guaranteed mortgage loan claims receivable
44,836
59,659
Operating ROU assets (Note 28)
117,879
125,573
Finance ROU assets (Note 28)
17,917
18,884
Others
137,989
104,125
Total other assets
$
2,032,565
$
1,847,813
The Corporation regularly incurs in
 
capitalizable costs associated with software development or
 
licensing which are recorded within
the Other Assets line item in the accompanying Consolidated Statements of Financial Condition.
 
In addition, the Corporation incurs
costs
 
associated
 
with
 
hosting
 
arrangements
 
that
 
are
 
service
 
contracts
 
that
 
are
 
also
 
recorded
 
within
 
Other
 
Assets.
 
The
 
hosting
arrangements can
 
include capitalizable
 
implementation costs
 
that are
 
amortized during
 
the term
 
of the
 
hosting arrangement.
The
following
 
table
 
summarizes
 
the
 
composition
 
of
 
acquired
 
or
 
developed
 
software
 
costs
 
as
 
well
 
as
 
costs
 
related
 
to
 
hosting
arrangements:
 
Gross Carrying
Accumulated
Net
Carrying
(In thousands)
Amount
Amortization
Value
September 30, 2023
Software development costs
$
69,318
$
24,920
$
44,398
Software license costs
47,747
25,006
22,741
Cloud computing arrangements
22,771
10,517
12,254
Total Capitalized
 
software costs [1] [2]
$
139,836
$
60,443
$
79,393
December 31, 2022
Software development costs
$
63,609
$
16,803
$
46,806
Software license costs
37,165
14,164
23,001
Cloud computing arrangements
20,745
8,690
12,055
Total Capitalized
 
software costs [1] [2]
$
121,519
$
39,657
$
81,862
[1]
Software intangible assets are presented as part of Other
 
Assets in the Consolidated Statements of Financial Condition.
[2]
The tables above excludes assets which have been fully
 
amortized.
Total
 
amortization expense for
 
all capitalized software
 
and hosting arrangement
 
cost, reflected as
 
part of
 
technology and software
expenses in the consolidated statement of operations,
 
is as follows:
Quarters ended September 30,
Nine months ended September 30,
(In thousands)
2023
2022
2023
2022
Software development and license costs
$
16,820
$
14,589
$
47,962
$
39,357
Cloud computing arrangements
923
983
2,685
3,010
Total amortization
 
expense
$
17,743
$
15,572
$
50,647
$
42,367
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
81
Note 14 – Goodwill and other intangible assets
The changes in
 
the carrying amount
 
of goodwill for
 
the nine months
 
ended September 30, 2023
 
and 2022, allocated
 
by reportable
segments, were as follows (refer to Note 33 for
 
the definition of the Corporation’s reportable segments):
 
September 30, 2023
Balance at
 
Goodwill on
Goodwill
Balance at
(In thousands)
January 1, 2023
 
acquisition
 
impairment
September 30, 2023
Banco Popular de Puerto Rico
$
436,383
$
-
$
-
$
436,383
Popular U.S.
391,045
-
(23,000)
368,045
Total Popular,
 
Inc.
 
$
827,428
$
-
$
(23,000)
$
804,428
September 30, 2022
Balance at
 
Goodwill on
Goodwill
Balance at
(In thousands)
January 1, 2022
 
acquisition
 
impairment
September 30, 2022
Banco Popular de Puerto Rico
$
320,248
$
116,135
$
-
$
436,383
Popular U.S.
400,045
-
(9,000)
391,045
Total Popular,
 
Inc.
 
$
720,293
$
116,135
$
(9,000)
$
827,428
The goodwill recognized during the quarter
 
ended September 30, 2022 in the
 
reportable segment of Banco Popular de Puerto
 
Rico
of $
116.1
 
million was related to
 
the Evertec Transactions,
 
as defined in Note 23
 
to the Consolidated Financial Statements
 
included
in this Form 10-Q.
 
During the third quarter
 
of 2023, the Corporation recorded
 
an impairment of
 
$
23
 
million as a result
 
of its annual
goodwill impairment test
 
related to its
 
U.S. based equipment
 
leasing subsidiary,
 
Popular Equipment Finance
 
(“PEF”),
 
due to lower
forecasted cash flows
 
and an increase
 
in the rate
 
used to discount
 
cash flows.
 
During 2022 the
 
Corporation recognized a
 
goodwill
impairment of $
9
 
million related to
 
Popular Equipment Finance
 
(“PEF”) , as
 
a result of
 
a decrease in
 
the projected earnings
 
of this
business unit.
Other Intangible Assets
The following table reflects the components of
 
other intangible assets subject to amortization:
Gross Carrying
Accumulated
Net
Carrying
(In thousands)
Amount
Amortization
Value
September 30, 2023
Core deposits
$
12,810
$
10,995
$
1,815
Other customer relationships
14,286
6,302
7,984
Total other intangible
 
assets
$
27,096
$
17,297
$
9,799
December 31, 2022
Core deposits
$
12,810
$
10,034
$
2,776
Other customer relationships
14,286
4,878
9,408
Total other intangible
 
assets
$
27,096
$
14,912
$
12,184
During the
 
quarter ended
 
September 30,
 
2023, the
 
Corporation recognized
 
$
0.8
 
million in
 
amortization expense
 
related to
 
other
intangible assets with definite useful lives (September 30, 2022 - $
0.8
 
million). During the nine months ended September 30, 2023,
the Corporation
 
recognized $
2.4
 
million in
 
amortization related to
 
other intangible assets
 
with definite useful
 
lives (September 30,
2022 - $
2.5
 
million).
 
 
 
 
 
 
 
 
 
 
82
The following
 
table presents
 
the estimated
 
amortization of
 
the intangible
 
assets with
 
definite useful
 
lives for
 
each of
 
the following
periods:
(In thousands)
Remaining 2023
$
794
Year 2024
2,938
Year 2025
1,750
Year 2026
1,440
Year 2027
959
Later years
1,918
Results of the Annual Goodwill Impairment Test
 
The Corporation’s goodwill and
 
other identifiable intangible assets having
 
an indefinite useful life
 
are tested for impairment,
 
at least
annually and
 
on a
 
more frequent basis
 
if events
 
or circumstances indicate
 
impairment could have
 
taken place. Such
 
events could
include,
 
among others,
 
a significant
 
adverse change
 
in the
 
business climate,
 
an adverse
 
action by
 
a regulator,
 
an unanticipated
change in the competitive environment and a decision
 
to change the operations or dispose of a
 
reporting unit.
 
Management
 
monitors
 
events
 
or
 
changes
 
in
 
circumstances
 
between
 
annual
 
tests
 
to
 
determine
 
if
 
these
 
events
 
or
 
changes
 
in
circumstances would more likely than not reduce
 
the fair value of its reporting units below their carrying
 
amounts.
The Corporation
 
performed the
 
annual goodwill
 
impairment evaluation
 
for the
 
entire organization
 
during the
 
third quarter
 
of 2023
using July 31, 2023 as the annual evaluation date. The reporting units
 
utilized for this evaluation were those that are one level below
the business segments,
 
which are the
 
legal entities within the
 
reportable segment. The Corporation
 
follows push-down accounting,
as such all goodwill is assigned to the reporting
 
units when carrying out a business combination.
In determining the fair value of each reporting unit, the Corporation generally uses a combination of methods, including market price
multiples
 
of
 
comparable
 
companies
 
and
 
transactions,
 
as
 
well
 
as
 
discounted
 
cash
 
flow
 
analysis.
 
Management
 
evaluates
 
the
particular circumstances
 
of each
 
reporting unit
 
in order
 
to determine
 
the most
 
appropriate valuation methodology
 
and the
 
weights
applied
 
to
 
each
 
valuation
 
methodology,
 
as
 
applicable.
 
The
 
Corporation
 
evaluates
 
the
 
results
 
obtained
 
under
 
each
 
valuation
methodology to
 
identify and
 
understand the
 
key
 
value drivers
 
in order
 
to
 
ascertain that
 
the
 
results obtained
 
are
 
reasonable and
appropriate
 
under
 
the
 
circumstances.
 
Elements
 
considered
 
include
 
current
 
market
 
and
 
economic
 
conditions,
 
developments
 
in
specific lines of business, and any particular
 
features in the individual reporting units.
 
The computations
 
require management
 
to make
 
estimates and
 
assumptions. Critical
 
assumptions that
 
are used
 
as part
 
of these
evaluations include:
●
 
a selection of comparable publicly traded companies,
 
based on nature of business, location and
 
size;
●
 
a selection of comparable acquisitions;
●
 
the discount rate applied to future earnings, based
 
on an estimate of the cost of equity;
●
 
the potential future earnings of the reporting unit;
 
and
●
 
the market growth and new business assumptions.
For purposes of the market comparable companies’ approach, valuations were determined by calculating
 
average price multiples of
relevant value drivers from a group of
 
companies that are comparable to the reporting
 
unit being analyzed and applying those price
multiples
 
to
 
the
 
value
 
drivers
 
of
 
the
 
reporting
 
unit.
 
Management
 
uses
 
judgment
 
in
 
the
 
determination
 
of
 
which
 
value
 
drivers
 
are
considered more appropriate for each reporting unit.
 
Comparable companies’ price multiples represent minority-based multiples and
thus, a
 
control premium
 
adjustment is
 
added to
 
the comparable
 
companies’ market
 
multiples applied
 
to the
 
reporting unit’s
 
value
drivers.
 
For purposes
 
of the
 
market comparable transactions’
 
approach, valuations had
 
been previously determined
 
by the
 
Corporation by
calculating
 
average
 
price
 
multiples
 
of
 
relevant
 
value
 
drivers
 
from
 
a
 
group
 
of
 
transactions
 
for
 
which
 
the
 
target
 
companies
 
are
comparable to the reporting unit being analyzed and
 
applying those price multiples to the value drivers
 
of the reporting unit.
83
For purposes
 
of the
 
discounted cash flows
 
(“DCF”) approach, the
 
valuation is
 
based on
 
estimated future cash
 
flows. The
 
financial
projections
 
used
 
in
 
the
 
DCF
 
valuation
 
analysis
 
for
 
each
 
reporting
 
unit
 
are
 
based
 
on
 
the
 
most
 
recent
 
(as
 
of
 
the
 
valuation
 
date)
financial
 
projections presented
 
to
 
the
 
Corporation’s Asset
 
/
 
Liability Management
 
Committee (“ALCO”).
 
The
 
growth assumptions
included
 
in
 
these
 
projections
 
are
 
based
 
on
 
management’s
 
expectations for
 
each
 
reporting
 
unit’s
 
financial
 
prospects
 
considering
economic and industry conditions as well
 
as particular plans of each entity
 
(i.e. restructuring plans, de-leveraging, etc.). The cost
 
of
equity used to
 
discount the cash flows
 
was calculated using the
 
Ibbotson Build-Up Method and
 
ranged from
12.30
% to
16.96
% for
the 2023 analysis. The Ibbotson Build-Up Method
 
builds up a cost of equity
 
starting with the rate of
 
return of a “risk-free” asset (20-
year U.S. Treasury
 
note) and adds
 
to it additional
 
risk elements such as
 
equity risk premium, size
 
premium, industry risk
 
premium,
and a
 
specific geographic risk
 
premium (as applicable).
 
The resulting discount
 
rates were
 
analyzed in terms
 
of reasonability given
the current market conditions.
The results of the BPPR annual goodwill impairment test as of July 31, 2023
 
indicated that the average estimated fair value using all
valuation methodologies exceeded BPPR’s equity value by approximately $
3.7
 
billion or
468
% compared to $
3.1
 
billion or
245
%, for
the annual
 
goodwill impairment test
 
completed as
 
of July
 
31, 2022. PB’s
 
annual goodwill impairment
 
test results
 
as of
 
such dates
indicated that the average estimated fair value using all valuation methodologies exceeded PB’s equity value by approximately $
129
million or
8
%, compared to $
670
 
million or
41
%, for the annual goodwill impairment test completed as of July 31, 2022. Accordingly,
no impairment was recognized for BPPR or PB. The goodwill balance of BPPR and PB, as legal entities, represented approximately
93
% of the Corporation’s total goodwill balance as of
 
the July 31, 2023 valuation date.
An
 
impairment of
 
$
23
 
million was
 
recognized by
 
the Corporation
 
from the
 
annual test
 
as of
 
July 31,
 
2023 related
 
to PEF
 
due to
lower forecasted
 
cash flows
 
and an
 
increase in
 
the rate
 
used to
 
discount cash
 
flows.
 
During 2022
 
the Corporation
 
recognized a
goodwill impairment of $
9
 
million related to PEF,
 
as a result of
 
a decrease in the
 
projected earnings of this
 
business unit. The PEF
goodwill balance as of September 30, 2023 amounted
 
to $
17
 
million (December 31, 2022 - $
40
 
million).
Furthermore,
 
as
 
part
 
of
 
the
 
analyses,
 
management
 
performed
 
a
 
reconciliation
 
of
 
the
 
aggregate
 
fair
 
values
 
determined
 
for
 
the
reporting units to the market capitalization of the Corporation concluding that the
 
fair value results determined for the reporting units
in the July 31, 2023 annual assessment were reasonable.
The goodwill
 
impairment evaluation
 
process requires
 
the Corporation
 
to
 
make estimates
 
and assumptions
 
with regard
 
to the
 
fair
value
 
of
 
the
 
reporting
 
units.
 
Actual
 
values
 
may
 
differ
 
significantly
 
from
 
these
 
estimates.
 
Such
 
differences
 
could
 
result
 
in
 
future
impairment of goodwill that would, in turn, negatively
 
impact the Corporation’s results of operations and the
 
reporting units where the
goodwill is recorded. Particularly for reporting units with recognized impairments or where the
 
estimated fair value approximates the
equity value,
 
future decreases
 
in fair
 
value estimates
 
could result
 
in additional
 
impairment charges.
 
Additionally,
 
declines in
 
the
Corporation’s
 
market
 
capitalization and
 
adverse economic
 
conditions
 
sustained
 
over
 
a
 
longer
 
period of
 
time
 
negatively
 
affecting
forecasted earnings could increase the risk of goodwill
 
impairment in the future.
 
A decline in
 
the Corporation’s stock
 
price related to
 
global and/or regional macroeconomic
 
conditions, a deterioration in
 
the Puerto
Rico
 
or
 
the
 
U.S.
 
economies,
 
increases
 
in
 
the
 
rate
 
to
 
discount
 
future
 
cash
 
flows,
 
and
 
lower
 
future
 
earnings
 
estimates
 
could,
individually or
 
in the
 
aggregate, have a
 
material impact on
 
the determination of
 
the fair value
 
of our reporting
 
units, which could
 
in
turn
 
result
 
in
 
an
 
impairment of
 
goodwill in
 
the
 
future.
 
An
 
impairment of
 
goodwill would
 
result
 
in
 
a non-cash
 
expense,
 
net
 
of
 
tax
impact. A charge to earnings related to a goodwill
 
impairment would not materially impact regulatory
 
capital calculations.
The following tables present the gross amount
 
of goodwill and accumulated impairment losses
 
by reportable segments.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
84
September 30, 2023
Balance at
Balance at
September 30,
Accumulated
September 30,
2023
impairment
 
2023
(In thousands)
 
(gross amounts)
losses
 
(net amounts)
Banco Popular de Puerto Rico
$
440,184
$
3,801
$
436,383
Popular U.S.
564,456
196,411
368,045
Total Popular,
 
Inc.
 
$
1,004,640
$
200,212
$
804,428
December 31, 2022
 
Balance at
 
 
Balance at
 
December 31,
Accumulated
December 31,
2022
impairment
 
2022
(In thousands)
 
(gross amounts)
losses
 
(net amounts)
Banco Popular de Puerto Rico
$
440,184
$
3,801
$
436,383
Popular U.S.
564,456
173,411
391,045
Total Popular,
 
Inc.
 
$
1,004,640
$
177,212
$
827,428
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
85
Note 15 – Deposits
Total deposits as of the end of the periods presented consisted of:
(In thousands)
September 30, 2023
December 31, 2022
Savings accounts
$
15,305,838
$
14,746,329
NOW, money market and other interest
 
bearing demand deposits
24,622,430
23,738,940
Total savings, NOW,
 
money market and other interest bearing demand
 
deposits
39,928,268
38,485,269
Certificates of deposit:
Under $250,000
5,263,696
4,235,651
$250,000 and over
2,944,262
2,545,750
 
Total certificates
 
of deposit
8,207,958
6,781,401
Total interest bearing
 
deposits
$
48,136,226
$
45,266,670
Non- interest bearing deposits
$
15,201,374
$
15,960,557
Total deposits
$
63,337,600
$
61,227,227
A summary of certificates of deposits by maturity at
 
September 30, 2023 follows:
 
(In thousands)
2023
$
2,635,150
2024
2,819,295
2025
975,844
2026
752,202
2027
406,993
2028 and thereafter
618,474
Total certificates of
 
deposit
$
8,207,958
At September 30, 2023, the Corporation had brokered
 
deposits amounting to $
1.7
 
billion (December 31, 2022 - $
1.1
 
billion).
The aggregate amount
 
of overdrafts in
 
demand deposit accounts that
 
were reclassified to loans
 
was $
3.5
 
million at September
 
30,
2023 (December 31, 2022 - $
6.3
 
million).
At September 30, 2023, Puerto Rico public sector deposits amounted to $
17.8
 
billion. Puerto Rico public sector deposits are interest
bearing
 
accounts.
 
Public
 
deposit
 
balances
 
are
 
difficult
 
to
 
predict.
 
For
 
example,
 
the
 
receipt
 
by
 
the
 
Puerto
 
Rico
 
Government
 
of
hurricane recovery related Federal assistance and seasonal
 
tax collections could increase public deposit balances at BPPR.
 
On the
other hand,
 
the amount and
 
timing of
 
reductions in balances
 
are likely to
 
be impacted by,
 
for example, the
 
speed at
 
which federal
assistance is
 
distributed, the
 
financial condition,
 
liquidity and
 
cash management
 
practices of
 
the Puerto
 
Rico Government
 
and its
instrumentalities
 
and
 
the
 
implementation
 
of
 
fiscal
 
and
 
debt
 
adjustment
 
plans
 
approved
 
pursuant
 
to
 
PROMESA
 
or
 
other
 
actions
mandated
 
by
 
the
 
Fiscal
 
Oversight
 
and
 
Management
 
Board
 
for
 
Puerto
 
Rico
 
(the
 
“Oversight
 
Board”).
 
Generally,
 
these
 
deposits
require
 
that
 
the
 
bank
 
pledge
 
high
 
credit
 
quality
 
securities
 
as
 
collateral, therefore,
 
liquidity
 
risk
 
arising from
 
public sector
 
deposit
outflows are lower.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
86
Note 16 – Borrowings
Assets sold under agreements to repurchase
Assets sold under agreements to repurchase amounted
 
to $
93
 
million at September 30, 2023 and $
149
 
million at December 31,
2022.
The Corporation’s
 
repurchase transactions are
 
overcollateralized with the
 
securities detailed in
 
the table
 
below.
 
The Corporation’s
repurchase
 
agreements
 
have
 
a
 
right
 
of
 
set-off
 
with
 
the
 
respective
 
counterparty
 
under
 
the
 
supplemental
 
terms
 
of
 
the
 
master
repurchase agreements.
 
In an
 
event of
 
default,
 
each party
 
has a
 
right of
 
set-off
 
against the
 
other party
 
for amounts
 
owed in
 
the
related
 
agreement
 
and
 
any
 
other
 
amount
 
or
 
obligation
 
owed
 
in
 
respect
 
of
 
any
 
other
 
agreement
 
or
 
transaction
 
between
 
them.
Pursuant to the
 
Corporation’s accounting policy,
 
the repurchase agreements
 
are not offset
 
with other repurchase
 
agreements held
with the same counterparty.
The following table
 
presents information related to
 
the Corporation’s repurchase
 
transactions accounted for as
 
secured borrowings
that are collateralized with
 
debt securities available-for-sale, debt securities
 
held-to-maturity, other assets
 
held-for-trading purposes
or which have been obtained under agreements to resell.
 
It is the Corporation’s policy to maintain effective control over assets sold
under agreements
 
to repurchase;
 
accordingly,
 
such securities
 
continue to
 
be carried
 
on the
 
Consolidated Statements
 
of Financial
Condition.
Repurchase agreements accounted for as secured borrowings
September 30, 2023
December 31, 2022
Repurchase
Repurchase
(In thousands)
 
liability
 
liability
U.S. Treasury securities
Within 30 days
$
12,736
$
410
After 30 to 90 days
13,199
30,739
After 90 days
18,180
17,521
Total U.S. Treasury
 
securities
44,115
48,670
Mortgage-backed securities
 
Within 30 days
28,211
98,984
 
After 30 to 90 days
-
791
 
After 90 days
20,499
-
Total mortgage-backed
 
securities
48,710
99,775
Collateralized mortgage obligations
 
Within 30 days
246
164
Total collateralized
 
mortgage obligations
246
164
Total
$
93,071
$
148,609
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 September
 
30, 2023,
 
compared to
 
$
365
 
million in
 
FHLB Advances
 
at
December 31, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
87
Notes Payable
The following table presents the composition of notes
 
payable at September 30, 2023 and December
 
31, 2022.
(In thousands)
September 30, 2023
December 31, 2022
Advances with the FHLB with maturities ranging from
2023
 
through
2029
 
paying interest at
monthly
fixed rates ranging from
0.39
% to
4.17
%
$
412,632
$
389,282
Unsecured senior debt securities
 
maturing on
2028
 
paying interest
semiannually
 
at a fixed rate of
7.25
%, net of debt issuance costs of $
6,322
[1]
393,678
299,109
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 $
295
198,339
198,319
Total notes payable
$
1,004,649
$
886,710
Note: Refer to the 2022 Form 10-K for rates information
 
at December 31, 2022.
[1] On March 13, 2023, the Corporation issued $
400
 
million aggregate principal amount of
7.25
% Senior Notes due
2028
 
(the “2028 Notes”) in an
underwritten public offering. The Corporation used a
 
portion of the net proceeds of the 2028 Notes offering
 
to redeem, on August 14, 2023, the
outstanding $
300
 
million aggregate principal amount of its
6.125
% Senior Notes which were due on September
2023
. The redemption price was
equal to
100
% of the principal amount plus accrued and unpaid
 
interest through the redemption date.
A breakdown of borrowings by contractual maturities
 
at September 30, 2023 is included in the table
 
below.
 
Assets sold under
 
(In thousands)
agreements to
repurchase
Notes payable
Total
2023
$
54,393
$
22,261
$
76,654
2024
38,678
91,943
130,621
2025
-
139,920
139,920
2026
-
74,500
74,500
Later years
-
676,025
676,025
Total borrowings
$
93,071
$
1,004,649
$
1,097,720
At
 
September
 
30,
 
2023
 
and
 
December 31,
 
2022,
 
the
 
Corporation had
 
FHLB
 
borrowing facilities
 
whereby the
 
Corporation could
borrow up to
 
$
4.4
 
billion and $
3.3
 
billion, respectively,
 
of which $
0.4
 
billion and $
0.8
 
billion, respectively,
 
were used. In
 
addition, at
September 30, 2023 and December 31,
 
2022, the Corporation had placed $
0.3
 
billion and $
0.4
 
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 securities and loans held-in-portfolio, and do
 
not have restrictive covenants or callable
 
features.
 
Also, at September
 
30, 2023, the Corporation
 
has a borrowing
 
facility at the
 
discount window of the
 
Federal Reserve Bank of
 
New
York
 
amounting to
 
$
4.6
 
billion (December 31,
 
2022 -
 
$
1.4
 
billion), which remained
 
unused at
 
September 30, 2023
 
and December
31, 2022.
 
The facility is a collateralized source of credit
 
that is highly reliable even under difficult market
 
conditions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
88
Note 17 − Other liabilities
The caption of other liabilities in the consolidated
 
statements of financial condition consists of the following
 
major categories:
(In thousands)
September 30, 2023
December 31, 2022
Accrued expenses
$
266,300
$
337,284
Accrued interest payable
47,297
39,288
Accounts payable
84,501
76,456
Dividends payable
39,793
39,525
Trades payable
14,761
9,461
Liability for GNMA loans sold with an option to repurchase
8,298
14,271
Reserves for loan indemnifications
6,941
7,520
Reserve for operational losses
28,723
39,266
Operating lease liabilities (Note 28)
129,023
137,290
Finance lease liabilities (Note 28)
23,180
24,737
Pension benefit obligation
6,050
8,290
Postretirement benefit obligation
118,121
118,336
Others
71,020
65,222
Total other liabilities
$
844,008
$
916,946
89
Note 18 – Stockholders’ equity
 
As
 
of
 
September
 
30,
 
2023,
 
stockholders’
 
equity
 
totaled
 
$
4.5
 
billion.
 
During
 
the
 
nine
 
months
 
ended
 
September
 
30,
 
2023,
 
the
Corporation declared cash dividends of $
1.65
 
(2022 - $
1.65
) per common share amounting to $
118.9
 
million (2022 - $
124.2
 
million).
The quarterly dividend declared to stockholders of record as of the close of business on
September 8, 2023
 
was paid on
October 2,
2023
.
Accelerated share repurchase transaction (“ASR”)
 
On August
 
24, 2022,
 
the Corporation
 
entered into
 
a $
231
 
million ASR
 
transaction with
 
respect to
 
its common
 
stock (the
 
“August
ASR Agreement”), which
 
was accounted for
 
as a treasury
 
transaction. As a
 
result of the
 
receipt of the
 
initial
2,339,241
 
shares, the
Corporation recognized in stockholders’ equity approximately $
185
 
million in treasury stock and $
46
 
million as a reduction of capital
surplus. The Corporation completed the transaction on December 7, 2022 and received
840,024
 
additional shares of common stock
and
 
recognized
 
approximately
 
$
60
 
million
 
as
 
treasury
 
stock
 
with
 
a
 
corresponding
 
increase
 
in
 
its
 
capital
 
surplus.
 
In
 
total,
 
the
Corporation repurchased a total of
3,179,265
 
shares at an average purchased price of $
72.6583
 
under the August ASR Agreement.
On
 
March
 
1,
 
2022,
 
the
 
Corporation announced
 
that
 
on
 
February 28,
 
2022
 
it
 
entered
 
into
 
a
 
$
400
 
million
 
ASR
 
transactions
 
with
respect to
 
its common
 
stock (the
 
“March ASR
 
Agreement”),
 
which was
 
accounted for
 
as a
 
treasury transaction. As
 
a result
 
of the
receipt
 
of
 
the
 
initial
3,483,942
 
shares,
 
the
 
Corporation recognized
 
in
 
stockholders’
 
equity
 
approximately $
320
 
million
 
in
 
treasury
stock and
 
$
80
 
million as
 
a reduction
 
of capital
 
surplus. The
 
Corporation completed the
 
transaction on
 
July 12,
 
2022 and
 
received
1,582,922
 
additional shares
 
of common
 
stock and
 
recognized $
120
 
million in
 
treasury stock
 
with a
 
corresponding increase
 
in its
capital surplus. In total,
 
the Corporation repurchased a
 
total of
5,066,864
 
shares at an
 
average purchased price of
 
$
78.9443
 
under
the ASR.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
90
Note 19 – Other comprehensive loss
 
The following
 
table presents
 
changes in
 
accumulated other
 
comprehensive loss
 
by component
 
for the
 
quarters and
 
nine months
ended September 30, 2023 and 2022.
Changes in Accumulated Other Comprehensive Loss
 
by Component [1]
Quarters ended
Nine months ended
September 30,
September 30,
(In thousands)
2023
2022
2023
2022
Foreign currency translation
Beginning Balance
$
(55,979)
$
(64,167)
$
(56,735)
$
(67,307)
Other comprehensive (loss) income
(976)
7,206
(220)
10,346
Net change
(976)
7,206
(220)
10,346
Ending balance
$
(56,955)
$
(56,961)
$
(56,955)
$
(56,961)
Adjustment of pension and
postretirement benefit plans
Beginning Balance
$
(138,319)
$
(152,837)
$
(144,335)
$
(158,994)
Other comprehensive income before reclassifications
-
-
-
1,269
Amounts reclassified from accumulated other
comprehensive loss for amortization of net losses
3,009
2,444
9,025
7,332
Net change
3,009
2,444
9,025
8,601
Ending balance
$
(135,310)
$
(150,393)
$
(135,310)
$
(150,393)
Unrealized net holding losses
on debt securities
Beginning Balance
$
(2,134,137)
$
(1,735,370)
$
(2,323,903)
$
(96,120)
Other comprehensive loss
(242,567)
(781,898)
(120,756)
(2,421,148)
Amounts reclassified from accumulated other
comprehensive loss for amortization of net unrealized
losses of debt securities transferred from available-for-
sale to held-to-maturity
35,027
-
102,982
-
Net change
(207,540)
(781,898)
(17,774)
(2,421,148)
Ending balance
$
(2,341,677)
$
(2,517,268)
$
(2,341,677)
$
(2,517,268)
Unrealized net (losses) gains
on cash flow hedges
Beginning Balance
$
-
$
(642)
$
45
$
(2,648)
Other comprehensive (loss) income before
reclassifications
-
415
(19)
3,222
Amounts reclassified from accumulated other
comprehensive income (loss)
-
518
(26)
(283)
Net change
-
933
(45)
2,939
Ending balance
$
-
$
291
$
-
$
291
Total
 
$
(2,533,942)
$
(2,724,331)
$
(2,533,942)
$
(2,724,331)
[1]
 
All amounts presented are net of tax.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
91
The following table
 
presents the amounts
 
reclassified out of
 
each component of
 
accumulated other comprehensive loss
 
during the
quarters and nine months ended September 30,
 
2023 and 2022.
Reclassifications Out of Accumulated Other Comprehensive
 
Loss
Quarters ended
 
Nine months ended
Affected Line Item in the
 
September 30,
September 30,
(In thousands)
Consolidated Statements of Operations
2023
2022
2023
2022
Adjustment of pension and postretirement benefit plans
Amortization of net losses
Other operating expenses
$
(4,814)
$
(3,911)
$
(14,440)
$
(11,733)
Total before tax
(4,814)
(3,911)
(14,440)
(11,733)
Income tax benefit
1,805
1,467
5,415
4,401
Total net of tax
$
(3,009)
$
(2,444)
$
(9,025)
$
(7,332)
Unrealized net holding losses on debt securities
Amortization of unrealized net losses of debt
securities transferred to held-to-maturity
Interest income from investment securities
$
(43,783)
$
-
$
(128,726)
$
-
Total before tax
(43,783)
-
(128,726)
-
Income tax expense
8,756
-
25,744
-
Total net of tax
$
(35,027)
$
-
$
(102,982)
$
-
Unrealized net (losses) gains on cash flow hedges
Forward contracts
Mortgage banking activities
$
-
$
(609)
$
41
$
1,249
Interest rate swaps
Other operating income
-
(219)
-
(498)
Total before tax
-
(828)
41
751
Income tax benefit
-
310
(15)
(468)
Total net of tax
$
-
$
(518)
$
26
$
283
Total reclassification
 
adjustments, net of tax
$
(38,036)
$
(2,962)
$
(111,981)
$
(7,049)
 
 
 
 
 
 
 
 
 
 
 
 
92
Note 20 – Guarantees
At September 30,
 
2023, the Corporation
 
recorded a liability
 
of $
1
 
million (December 31,
 
2022 - $
0.3
 
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 September 30, 2023,
 
the Corporation serviced $
0.6
 
billion
(December 31,
 
2022 -
 
$
0.6
 
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 and
 
nine months ended September
 
30, 2023,
the Corporation repurchased
 
approximately $
0.4
 
million and $
2
 
million, respectively,
 
of unpaid principal
 
balance in mortgage
 
loans
subject
 
to
 
the
 
credit
 
recourse
 
provisions
 
(September
 
30,
 
2022
-
$
1
 
million
 
and
 
$
6
 
million,
 
respectively).
 
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 September
 
30, 2023,
 
the Corporation’s
 
liability established
 
to cover
 
the estimated
credit loss exposure related to loans sold or serviced
 
with credit recourse amounted to $
6
 
million (December 31, 2022 - $
7
 
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 and nine months
 
ended September 30, 2023 and 2022.
 
Quarters ended September 30,
Nine months ended September 30,
(In thousands)
2023
2022
2023
2022
Balance as of beginning of period
$
6,223
$
9,095
$
6,897
$
11,800
Provision (benefit) for recourse liability
228
(1,718)
52
(2,067)
Net charge-offs
(54)
(184)
(552)
(2,540)
Balance as of end of period
$
6,397
$
7,193
$
6,397
$
7,193
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 loan
 
repurchase activity under
 
these indemnity
 
agreements
for
 
the
 
quarter
 
and
 
nine
 
months ended
 
September
 
30,
 
2023
 
as
 
well
 
as
 
the
 
liability
 
for
 
estimated
 
losses
 
at
 
period
 
end
 
was
 
not
considered material for the Corporation.
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 September 30, 2023, the
Corporation serviced
 
$
10.1
 
billion in
 
mortgage loans
 
for third-parties,
 
including the
 
loans serviced
 
with credit
 
recourse (December
31, 2022
 
- $
11.1
 
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
September
 
30,
 
2023,
 
the
 
outstanding
 
balance
 
of
 
funds
 
advanced
 
by
 
the
 
Corporation
 
under
 
such
 
mortgage
 
loan
 
servicing
agreements
 
was approximately
 
$
51
 
million
 
(December 31,
 
2022
 
- $
42
 
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.
93
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
 
September 30,
 
2023 and
 
December 31,
 
2022. In
 
addition, at
September 30,
 
2023 and
 
December 31,
 
2022, 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 2022
 
Form 10-K for
 
further information on
the trust preferred securities.
 
 
 
 
 
 
 
 
 
 
 
 
 
94
Note 21 – 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)
September 30, 2023
December 31, 2022
Commitments to extend credit:
Credit card lines
$
5,720,469
$
5,853,990
Commercial and construction lines of credit
4,374,553
4,425,825
Other consumer unused credit commitments
 
250,571
250,271
Commercial letters of credit
3,083
3,351
Standby letters of credit
53,089
27,868
Commitments to originate or fund mortgage loans
25,104
45,170
At
 
September 30,
 
2023
 
and
 
December 31,
 
2022, the
 
Corporation maintained
 
a
 
reserve of
 
approximately $
13.3
 
million
 
and
 
$
8.8
million, respectively, for potential losses associated with unfunded loan commitments related to
 
commercial and construction lines of
credit.
Other commitments
At September 30,
 
2023 and December
 
31, 2022, the
 
Corporation also maintained
 
other non-credit commitments
 
for approximately
$
3.3
 
million and $
4.8
 
million, respectively, primarily for the acquisition of other investments.
 
Business concentration
Since the Corporation’s business activities are concentrated primarily in Puerto Rico, its results of operations and financial condition
are dependent
 
upon the
 
general trends
 
of the
 
Puerto Rico
 
economy and,
 
in particular,
 
the residential
 
and commercial
 
real estate
markets. The concentration
 
of the Corporation’s
 
operations in Puerto Rico
 
exposes it to
 
greater risk than other
 
banking companies
with a wider geographic base. Its
 
asset and revenue composition by geographical area
 
is presented in Note 33
 
to the Consolidated
Financial Statements.
 
Puerto
 
Rico
 
has
 
faced
 
significant
 
fiscal
 
and
 
economic
 
challenges
 
for
 
over
 
a
 
decade.
 
In
 
response
 
to
 
such
 
challenges,
 
the
 
U.S.
Congress enacted the
 
Puerto Rico Oversight
 
Management and Economic Stability
 
Act (“PROMESA”) in
 
2016, which, among
 
other
things,
 
established
 
the
 
Oversight
 
Board
 
and
 
a
 
framework
 
for
 
the
 
restructuring
 
of
 
the
 
debts
 
of
 
the
 
Commonwealth,
 
its
instrumentalities and
 
municipalities.
 
The
 
Commonwealth and
 
several
 
of
 
its
 
instrumentalities have
 
commenced
 
debt
 
restructuring
proceedings under
 
PROMESA. As
 
of the
 
date of
 
this report,
 
while municipalities
 
have been
 
designated as
 
covered entities
 
under
PROMESA,
 
no
 
municipality
 
has
 
commenced,
 
or
 
has
 
been
 
authorized
 
by
 
the
 
Oversight
 
Board
 
to
 
commence,
 
any
 
such
 
debt
restructuring proceeding under PROMESA.
At September 30, 2023, the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities
totaled $
362
 
million, of which
 
$
333
 
million were outstanding
 
($
374
 
million and $
327
 
million at December
 
31, 2022). Of
 
the amount
outstanding,
 
$
314
 
million
 
consists
 
of
 
loans
 
and
 
$
19
 
million
 
are
 
securities
 
($
302
 
million
 
and
 
$
25
 
million
 
at
 
December 31,
 
2022).
Substantially all
 
of the
 
amount outstanding
 
at September
 
30, 2023
 
and December
 
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
 
September
 
30,
 
2023,
76
%
 
of
 
the
 
Corporation’s
 
exposure
 
to
 
municipal
 
loans
 
and
securities was concentrated in the municipalities of
 
San Juan, Guaynabo, Carolina and Caguas.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
95
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 September 30, 2023:
(In thousands)
Investment
Portfolio
Loans
Total Outstanding
Total Exposure
Central Government
After 1 to 5 years
$
10
$
-
$
10
$
10
After 5 to 10 years
1
-
1
1
After 10 years
29
-
29
29
Total Central
 
Government
40
-
40
40
Municipalities
Within 1 year
4,820
13,217
18,037
43,037
After 1 to 5 years
13,155
141,519
154,674
158,674
After 5 to 10 years
845
112,169
113,014
113,014
After 10 years
-
46,823
46,823
46,823
Total Municipalities
18,820
313,728
332,548
361,548
Total Direct Government
 
Exposure
$
18,860
$
313,728
$
332,588
$
361,588
In
 
addition,
 
at
 
September
 
30,
 
2023,
 
the
 
Corporation
 
had
 
$
242
 
million
 
in
 
loans
 
insured
 
or
 
securities
 
issued
 
by
 
Puerto
 
Rico
governmental entities
 
but for
 
which the
 
principal source
 
of repayment
 
is non-governmental
 
($
251
 
million at
 
December 31,
 
2022).
These
 
included
 
$
195
 
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,
 
2022 -
 
$
209
 
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 September
 
30,
2023, $
40
 
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, 2022
 
- $
42
 
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, $
1.7
 
billion of
 
residential mortgages,
 
$
10
 
million of
 
Small Business
 
Administration (“SBA”)
 
loans under
 
the Paycheck
Protection Program (“PPP”) and
 
$
72
 
million commercial loans were
 
insured or guaranteed
 
by the U.S.
 
Government or its agencies
at September 30, 2023 (compared to $
1.6
 
billion, $
38
 
million and $
72
 
million, respectively, at December 31, 2022). The Corporation
also had U.S. Treasury and obligations from the U.S. Government,
 
its agencies or government sponsored entities
 
within the portfolio
of available-for-sale and held-to-maturity securities as described
 
in Note 6 and 7 to the Consolidated
 
Financial Statements.
At September 30, 2023, the
 
Corporation has operations in the
 
United States Virgin Islands (the
 
“USVI”) and has approximately $
28
million
 
in
 
direct
 
exposure
 
to
 
USVI
 
government
 
entities
 
(December
 
31,
 
2022
 
-
 
$
28
 
million).
 
The
 
USVI
 
has
 
been
 
experiencing
 
a
number of
 
fiscal and
 
economic challenges
 
that could
 
adversely affect
 
the ability
 
of its
 
public corporations
 
and instrumentalities
 
to
service their outstanding debt obligations.
 
At September
 
30, 2023,
 
the Corporation
 
has operations
 
in the
 
British Virgin
 
Islands (“BVI”),
 
which was
 
negatively affected
 
by the
COVID-19
 
pandemic,
 
particularly
 
as
 
a
 
reduction
 
in
 
the
 
tourism
 
activity
 
which
 
accounts
 
for
 
a
 
significant
 
portion
 
of
 
its
 
economy.
Although
 
the
 
Corporation
 
has
 
no
 
significant
 
exposure
 
to
 
a
 
single
 
borrower
 
in
 
the
 
BVI,
 
it
 
has
 
a
 
loan
 
portfolio
 
amounting
 
to
96
approximately
 
$
201
 
million
 
comprised
 
of
 
various
 
retail
 
and
 
commercial
 
clients,
 
compared
 
to
 
a
 
loan
 
portfolio
 
of
 
$
214
 
million
 
at
December 31, 2022.
Legal Proceedings
The
 
nature
 
of
 
Popular’s
 
business
 
ordinarily
 
generates
 
claims,
 
litigation,
 
investigations,
 
and
 
legal
 
and
 
administrative
 
cases
 
and
proceedings
 
(collectively,
 
“Legal Proceedings”).
 
When the
 
Corporation determines
 
that
 
it
 
has
 
meritorious
 
defenses to
 
the
 
claims
asserted, it vigorously defends itself. The Corporation will consider the settlement of cases (including cases where it has meritorious
defenses) when, in management’s judgment, it
 
is in the best
 
interest of the Corporation and
 
its stockholders to do so.
 
On at least a
quarterly basis, Popular assesses its liabilities and contingencies relating
 
to outstanding Legal Proceedings utilizing the most current
information
 
available.
 
For
 
matters
 
where
 
it
 
is
 
probable
 
that
 
the
 
Corporation
 
will
 
incur
 
a
 
material
 
loss
 
and
 
the
 
amount
 
can
 
be
reasonably estimated,
 
the Corporation
 
establishes an
 
accrual for
 
the loss.
 
Once established,
 
the accrual
 
is adjusted
 
on at
 
least a
quarterly
 
basis
 
to
 
reflect
 
any
 
relevant
 
developments,
 
as
 
appropriate.
 
For
 
matters
 
where
 
a
 
material
 
loss
 
is
 
not
 
probable,
 
or
 
the
amount of the loss cannot be reasonably estimated,
 
no accrual is established.
 
In certain cases,
 
exposure to loss
 
exists in
 
excess of any
 
accrual to the
 
extent such loss
 
is reasonably possible,
 
but not
 
probable.
Management believes and
 
estimates that the
 
range of reasonably
 
possible losses (with
 
respect to those
 
matters where such
 
limits
may be determined, in excess of amounts accrued)
 
for current Legal Proceedings ranged from $
0
 
to approximately $
18.4
 
million as
of
 
September
 
30,
 
2023.
 
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
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
97
brief in January 2021.
 
On March 13, 2023, the U.S. Court of Appeals for the First Circuit entered judgment affirming the
 
trial court’s
order dismissing the complaint. On March 23, 2023,
 
Plaintiffs filed a Petition for Rehearing and/or Rehearing
en Banc
.
 
On August 29, 2023, the U.S. Court of Appeals for the First Circuit entered an Order denying Plaintiff’s Petition for Rehearing and/or
Rehearing
 
en
 
Banc.
 
The
 
formal
 
mandate
 
of
 
the
 
U.S.
 
Court
 
of
 
Appeals
 
remanding
 
the
 
case
 
to
 
the
 
lower
 
court
 
was
 
issued
 
on
September 6, 2023. This matter is now closed.
Insufficient Funds and Overdraft Fees Class Actions
Popular
 
was
 
named
 
as
 
a
 
defendant on
 
a
 
putative class
 
action
 
complaint captioned
 
Golden
 
v.
 
Popular,
 
Inc.
 
filed
 
in
 
March
 
2020
before
 
the
 
U.S.
 
District
 
Court
 
for
 
the
 
Southern
 
District
 
of
 
New
 
York,
 
seeking
 
damages,
 
restitution
 
and
 
injunctive
 
relief.
 
Plaintiff
alleged breach
 
of contract,
 
violation
 
of
 
the covenant
 
of
 
good faith
 
and
 
fair
 
dealing, unjust
 
enrichment and
 
violation
 
of
 
New York
consumer
 
protection law
 
due
 
to
 
Popular’s purported
 
practice of
 
charging
 
overdraft fees
 
(“OD
 
Fees”) on
 
transactions that,
 
under
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.
In
 
October
 
2021,
 
the
 
District
 
Court,
 
notwithstanding that
 
BPPR’s
 
Motion
 
to
 
Dismiss
 
remained
 
pending
 
resolution,
 
held
 
an
 
initial
scheduling
 
conference
 
and,
 
thereafter,
 
issued
 
a
 
trial
 
management
 
order
 
where
 
it
 
scheduled
 
the
 
deadline
 
for
 
all
 
discovery
 
for
November
 
2022,
 
and
 
several
 
other
 
trial-related
 
deadlines
 
for
 
June
 
2023.
 
During
 
a
 
mediation
 
hearing held
 
in
 
October
 
2022,
 
the
parties
 
reached a
 
settlement in
 
principle on
 
a class-wide
 
basis subject
 
to
 
final
 
court
 
approval. In
 
January 2023,
 
the
 
parties filed
before the Court a
 
motion for preliminary approval
 
of the settlement agreement
 
and, on March 31,
 
2023, the Court issued
 
an order
granting preliminary approval of the settlement agreement.
 
The Court scheduled the final approval hearing
 
for September 8, 2023.
On
 
September
 
8,
 
2023,
 
the
 
Court
 
held
 
a
 
hearing
 
to
 
consider
 
the
 
final
 
approval
 
of
 
the
 
class
 
settlement
 
agreement
 
and,
 
on
September 29, 2023, the Court issued an Opinion and Order granting final approval to the settlement agreement. The matter is now
closed.
On January
 
31, 2022,
 
Popular was
 
also named
 
as a
 
defendant on a
 
putative class
 
action complaint captioned
 
Lipsett v.
 
Popular,
Inc. d/b/a Banco Popular, filed before the U.S. District Court for the Southern District
 
of New York, seeking damages, restitution and
injunctive relief. Similar to the claims set forth in the
 
aforementioned Golden complaint, Plaintiff alleges breach of contract, including
violations of the covenant of good faith and
 
fair dealing, as a result of Popular’s purported practice of
 
charging OD Fees for APPSN
transactions. The complaint
 
further alleged that
 
Popular assesses OD
 
Fees over
 
authorized transactions for
 
which sufficient funds
are held for settlement. Popular waived service of process
 
and filed a Motion to Compel Arbitration. In response to Popular’s
 
motion,
Plaintiff filed a Notice of Voluntary Dismissal in April 2022.
 
On May
 
13, 2022,
 
Plaintiff in
 
the Lipsett
 
complaint filed
 
a new
 
complaint captioned
 
Lipsett v.
 
Banco Popular
 
North America
 
d/b/a
Popular Community Bank
 
with the same
 
allegations of his
 
previous complaint against
 
Popular. In
 
June 2022, after
 
serving Plaintiff
with a written notice of election to arbitrate the claims asserted in the complaint which went unanswered, Popular Bank (“PB”) filed a
Pre-Motion Conference motion related to a new Motion to Compel Arbitration. After Plaintiff responded to the Pre-Motion
 
conference
motion, the Court allowed PB
 
to file its Motion
 
to Compel Arbitration, which it
 
did in September 2022. Plaintiff
 
opposed such motion
in October 2022, and PB filed its reply in November
 
2022.
 
On December 9, 2022, the
 
Court issued a Decision and
 
Order denying PB’s Motion to
 
Compel Arbitration. On December 20, 2022,
PB filed a Notice of
 
Appeal with the United States
 
Court of Appeals for the Second
 
Circuit. PB filed its appeal brief
 
on April 5, 2023
and Plaintiff
 
filed his opposition
 
brief on July
 
5, 2023. PB
 
filed its
 
reply brief on
 
July 26,
 
2023.
 
The matter is
 
now fully briefed
 
and
pending resolution.
98
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
 
experienced following
 
August 2013
 
led to
 
regulatory inquiries,
 
customer complaints
 
and
arbitrations for
 
most broker-dealers
 
in Puerto
 
Rico, including
 
Popular Securities.
 
Popular Securities
 
received numerous
 
customer
complaints since 2013 and, as
 
of September 30, 2023, remained
 
named as a respondent in
 
six (
6
) pending arbitration proceedings
with
 
initial
 
claimed
 
amounts
 
of
 
approximately $
5.88
 
million
 
in
 
the
 
aggregate.
 
Popular
 
Securities
 
and
 
claimants
 
in
 
five
 
(
5
)
 
of
 
the
pending six (
6
) arbitration proceedings, however,
 
have reached settlements in
 
principle and agreements related
 
thereto have been
executed with two (
2
) of such claimants. Popular Securities expects
 
to complete the execution of the
 
remaining agreements, and to
resolve the one (
1
) pending unsettled arbitration proceeding ($
1.3
 
million in claimed amounts) by the end
 
of the first quarter of 2024.
99
Note 22 – 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 September 30,
 
2023
.
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
 
24
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
information on the debt securities outstanding at September 30, 2023 and December 31, 2022, 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 September 30, 2023 and
 
December 31, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100
(In thousands)
September 30, 2023
December 31, 2022
Assets
Servicing assets:
Mortgage servicing rights
$
93,884
$
99,614
Total servicing
 
assets
 
$
93,884
$
99,614
Other assets:
Servicing advances
$
6,419
$
6,157
Total other assets
$
6,419
$
6,157
Total assets
$
100,303
$
105,771
Maximum exposure to loss
$
100,303
$
105,771
The size of
 
the non-consolidated VIEs,
 
in which the
 
Corporation has a
 
variable interest in
 
the form
 
of servicing fees,
 
measured as
the total unpaid principal balance of the loans,
 
amounted to $
7.4
 
billion at September 30, 2023 (December 31, 2022
 
- $
7.7
 
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
 
September 30,
 
2023
 
and
 
December 31,
 
2022,
 
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 September 30,
 
2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101
Note 23 – 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
Until
 
August
 
15,
 
2022,
 
the
 
Corporation
 
had
 
an
 
investment
 
in
 
Evertec,
 
Inc.
 
(“Evertec”)
 
which
 
provides
 
various
 
processing
 
and
information
 
technology services
 
to
 
the
 
Corporation and
 
its
 
subsidiaries
 
and
 
gave
 
BPPR
 
access to
 
the
 
ATH
 
network owned
 
and
operated
 
by
 
Evertec.
 
This
 
investment
 
was
 
accounted
 
for
 
under
 
the
 
equity
 
method.
 
The
 
Corporation
 
recorded
 
$
1.5
 
million
 
in
dividends from its investment in Evertec during
 
the nine months ended September 30, 2022.
On July
 
1, 2022,
 
BPPR completed
 
the acquisition
 
of certain
 
assets from
 
Evertec Group,
 
LLC (“Evertec
 
Group”) to
 
service certain
BPPR channels, in exchange for shares of Evertec held by BPPR. The transaction was accounted for as a business combination. In
connection with this transaction, BPPR also entered into amended and restated service agreements with Evertec Group pursuant to
which Evertec
 
Group continues
 
to provide
 
various information
 
technology and
 
transaction processing
 
services to
 
Popular,
 
BPPR
and their respective subsidiaries. As part of the transaction, BPPR and
 
Evertec entered into a revenue sharing structure for BPPR in
connection with
 
its
 
merchant acquiring
 
relationship with
 
Evertec. On
 
August
 
15, 2022,
 
the
 
Corporation completed
 
the sale
 
of
 
its
remaining shares of common
 
stock of Evertec,
 
together with the
 
aforementioned business acquisition (the
 
"Evertec Transactions").
As
 
a
 
result,
 
the
 
Corporation
 
discontinued
 
accounting
 
for
 
its
 
proportionate
 
share
 
of
 
Evertec’s
 
income
 
(loss)
 
and
 
changes
 
in
stockholder’s
 
equity under the equity method of accounting in the
 
third quarter of 2022. In connection with the
 
Evertec Transactions
and
 
related
 
accounting adjustments,
 
the
 
Corporation recorded
 
an aggregate
 
pre-tax
 
gain of
 
$
257.7
 
million considering
 
the initial
exchange of Evertec shares as well as the
 
sale of the remaining shares.
The following
 
table presents
 
the Corporation’s
 
proportionate share
 
of Evertec’s
 
income (loss)
 
and changes
 
in stockholders’
 
equity
for the quarter and nine months ended September
 
30, 2022.
Quarter ended
Nine months ended
(In thousands)
September 30, 2022
September 30, 2022
Share of income from the investment in Evertec [1]
$
257,712
$
269,539
Share of other changes in Evertec's stockholders' equity
-
3,168
Share of Evertec's changes in equity recognized in income
$
257,712
$
272,707
[1]
 
The
 
Gain
 
from
 
Evertec
 
Transactions
 
and
 
related
 
accounting
 
adjustments
 
are
 
reflected
 
within
 
other
 
operating
 
income
 
in
 
the
 
accompanying
consolidated financial
 
statements.
 
The Corporation
 
recognized an
 
additional $
17.3
 
million as an
 
operating expense
 
in connection with
 
the Evertec
Transactions.
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 nine
 
months ended September 30,
 
2022. Items that represent
 
expenses to the
Corporation are presented with parenthesis.
Nine months ended
(In thousands)
September 30, 2022 [1]
Category
Interest expense on deposits
$
(267)
Interest expense
ATH and credit cards interchange
 
income from services to Evertec
13,955
Other service fees
Rental income charged to Evertec
3,258
Net occupancy
Processing fees on services provided by Evertec
(128,681)
Professional fees
Other services provided to Evertec
420
Other operating expenses
Total
$
(111,315)
[1] Includes activity through June 30, 2022.
Centro Financiero BHD, S.A.
 
102
At September
 
30, 2023,
 
the Corporation
 
had a
15.84
% equity
 
interest in
 
Centro Financiero BHD,
 
S.A. (“BHD”),
 
one of
 
the largest
banking
 
and
 
financial
 
services
 
groups
 
in
 
the
 
Dominican
 
Republic.
 
During
 
the
 
nine
 
months
 
ended
 
September
 
30,
 
2023,
 
the
Corporation recorded
 
$
38
 
million
 
in
 
equity
 
pickup
 
from
 
its
 
investment
 
in
 
BHD
 
(September
 
30,
 
2022
 
-
 
$
28
 
million),
 
which
 
had
 
a
carrying amount
 
of $
223.7
 
million at
 
September 30,
 
2023 (December
 
31, 2022
 
- $
199.8
 
million). The
 
Corporation received
 
$
14.1
million in cash dividend distributions and
 
$
2.1
 
million in stock dividends during the
 
nine months ended September 30,
 
2023 from its
investment in BHD (September 30, 2022 - $
16
 
million cash dividends).
 
Investment Companies
The Corporation,
 
through its subsidiary Popular
 
Asset Management LLC (“PAM”),
 
provides advisory services to several
 
investment
companies registered
 
under the
 
Investment Company
 
Act of
 
1940 in
 
exchange for
 
a fee.
 
The Corporation,
 
through its
 
subsidiary
BPPR, also
 
provides transfer
 
agency services to
 
these investment companies.
 
These fees
 
are calculated
 
at an
 
annual rate
 
of the
average net
 
assets of the
 
investment company,
 
as defined in
 
each agreement. Due
 
to its
 
advisory role, the
 
Corporation considers
these investment companies as related parties.
For
 
the
 
nine
 
months
 
ended September
 
30,
 
2023
 
administrative fees
 
charged
 
to
 
these
 
investment
 
companies
 
amounted
 
to
 
$
1.7
million (September 30,
 
2022 -
1.9
 
million) and waived
 
fees amounted to
 
$
0.7
 
million (September 30,
 
2022 - $
0.7
 
million), for a
 
net
fee of $
1
 
million (September 30, 2022 - $
1.2
 
million).
103
Note 24 – 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 2022 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 September 30, 2023 and December
 
31, 2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
104
At September 30, 2023
(In thousands)
Level 1
Level 2
Level 3
Measured at NAV
Total
RECURRING FAIR VALUE
 
MEASUREMENTS
Assets
 
 
 
 
 
 
Debt securities available-for-sale:
U.S. Treasury securities
$
3,871,643
$
7,458,038
$
-
$
-
$
11,329,681
Collateralized mortgage obligations - federal
agencies
-
138,014
-
-
138,014
Mortgage-backed securities
-
5,660,488
653
-
5,661,141
Other
-
22
1,000
-
1,022
Total debt securities
 
available-for-sale
$
3,871,643
$
13,256,562
$
1,653
$
-
$
17,129,858
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
15,644
$
-
$
-
$
-
$
15,644
Obligations of Puerto Rico, States and political
subdivisions
-
57
-
-
57
Collateralized mortgage obligations
-
42
10
-
52
Mortgage-backed securities
-
14,747
137
-
14,884
Other
-
-
188
-
188
Total trading account
 
debt securities, excluding
derivatives
$
15,644
$
14,846
$
335
$
-
$
30,825
Equity securities
$
-
$
35,026
$
-
$
286
$
35,312
Mortgage servicing rights
-
-
119,030
-
119,030
Loans held-for-sale
-
5,239
-
-
5,239
Derivatives
 
-
23,511
-
-
23,511
Total assets measured
 
at fair value on a
recurring basis
$
3,887,287
$
13,335,184
$
121,018
$
286
$
17,343,775
Liabilities
Derivatives
$
-
$
(21,747)
$
-
$
-
$
(21,747)
Total liabilities measured
 
at fair value on a
recurring basis
$
-
$
(21,747)
$
-
$
-
$
(21,747)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
105
At December 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
$
1,908,589
$
9,272,359
$
-
$
-
$
11,180,948
Collateralized mortgage obligations - federal
agencies
-
165,196
-
-
165,196
Mortgage-backed securities
-
6,456,459
711
-
6,457,170
Other
-
60
1,000
-
1,060
Total debt securities
 
available-for-sale
$
1,908,589
$
15,894,074
$
1,711
$
-
$
17,804,374
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
13,069
$
-
$
-
$
-
$
13,069
Obligations of Puerto Rico, States and political
subdivisions
-
64
-
-
64
Collateralized mortgage obligations
-
47
113
-
160
Mortgage-backed securities
-
14,008
215
-
14,223
Other
-
-
207
-
207
Total trading account
 
debt securities, excluding
derivatives
$
13,069
$
14,119
$
535
$
-
$
27,723
Equity securities
$
-
$
29,302
$
-
$
330
$
29,632
Mortgage servicing rights
-
-
128,350
-
128,350
Derivatives
 
-
19,229
-
-
19,229
Total assets measured
 
at fair value on a
recurring basis
$
1,921,658
$
15,956,724
$
130,596
$
330
$
18,009,308
Liabilities
 
 
 
Derivatives
$
-
$
(17,000)
$
-
$
-
$
(17,000)
Total liabilities measured
 
at fair value on a
recurring basis
$
-
$
(17,000)
$
-
$
-
$
(17,000)
Beginning in the first quarter
 
of 2023, the Corporation has elected the
 
fair value option for BPPR mortgage loans
 
held for sale. This
election better aligns with the
 
management of the portfolio from
 
a business perspective. As of
 
December 31, 2022, the Corporation
had not elected the fair value option for any
 
of the loans in the held for sale portfolio.
Loans held-for-sale measured at fair value
 
Loans held-for-sale measured at fair value were priced
 
based on secondary market prices. These loans are
 
classified as Level 2.
The
 
following
 
table summarizes
 
the difference
 
between the
 
aggregate fair
 
value
 
and the
 
aggregate unpaid
 
principal
 
balance
 
for
mortgage loans held for sale measured at fair value
 
as of September 30,2023.
(In thousands)
September 30, 2023
Aggregate Unpaid
Fair Value
Principal Balance
Difference
Loans held for sale
$
5,239
$
5,364
$
(125)
No
 
loans held for sell were 90 or more days past
 
due or on nonaccrual status as of September 30,2023.
During the quarter and nine months ended September 30,2023, the Corporation recognized an unrealized gain of $
23
 
thousand and
an unrealized loss of $
104
 
thousand, respectively, for changes in the fair value of mortgage loans held for sale for
 
which we elected
the fair value
 
option, that was
 
offset by the
 
changes in the
 
fair value of
 
the related hedging
 
instrument, both of
 
which are recorded
within the mortgage banking activities line item of
 
the accompanying Statement of Operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
106
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
 
and
 
nine
 
months
 
ended
 
September
 
30,
 
2023
 
and
 
2022
 
and
 
excludes
 
nonrecurring fair
 
value
measurements of assets no longer outstanding as of
 
the reporting date.
Nine months ended September 30, 2023
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE
 
MEASUREMENTS
Assets
 
 
 
 
 
Write-downs
Loans
[1]
$
-
$
-
$
9,113
$
9,113
$
(3,087)
Other real estate owned
[2]
-
-
5,457
5,457
(1,012)
Other foreclosed assets
[2]
-
-
44
44
(14)
Total assets measured
 
at fair value on a nonrecurring basis
$
-
$
-
$
14,614
$
14,614
$
(4,113)
[1] Relates mainly to certain impaired collateral dependent loans.
 
The impairment was measured based on the fair value
 
of the collateral, which is
derived from appraisals that take into consideration prices
 
in observed transactions involving similar assets in similar
 
locations. Costs to sell are
excluded from the reported fair value amount.
[2] Represents the fair value of foreclosed real estate and
 
other collateral owned that were written down to their fair
 
value. Costs to sell are
excluded from the reported fair value amount.
Nine months ended September 30, 2022
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE
 
MEASUREMENTS
Assets
 
 
 
 
 
Write-downs
Loans
[1]
$
-
$
-
$
9,933
$
9,933
$
(9,580)
Loans held-for-sale
[2]
-
-
8,080
8,080
(224)
Other real estate owned
[3]
-
-
3,067
3,067
(940)
Other foreclosed assets
[3]
-
-
30
30
(1)
Long-lived assets held-for-sale
[4]
-
-
686
686
(688)
Total assets measured
 
at fair value on a nonrecurring basis
$
-
$
-
$
21,796
$
21,796
$
(11,433)
[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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
107
The following tables present the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarters
 
and nine months ended September 30, 2023 and
 
2022.
Quarter ended September 30, 2023
MBS
Other
CMOs
MBS
Other
classified
securities
classified
classified
securities
as debt
classified as
 
as trading
as trading
classified
securities
 
debt securities
account
account
as trading
Mortgage
available-
available-
 
debt
 
debt
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at June 30, 2023
$
655
$
1,000
$
56
$
163
$
191
$
121,249
$
123,314
Gains (losses) included in earnings
-
-
-
-
(3)
(2,793)
(2,796)
Gains (losses) included in OCI
(2)
-
-
-
-
-
(2)
Additions
-
-
-
-
-
574
574
Settlements
-
-
(46)
(26)
-
-
(72)
Balance at September 30, 2023
$
653
$
1,000
$
10
$
137
$
188
$
119,030
$
121,018
Changes in unrealized gains (losses) included
in earnings relating to assets still held at
September 30, 2023
$
-
$
-
$
-
$
-
$
4
$
(381)
$
(377)
Nine months ended September 30, 2023
MBS
Other
MBS
Other
classified
securities
CMOs
classified
securities
as debt
classified as
 
classified
as trading
classified
securities
 
debt securities
as trading
account
as trading
Mortgage
available-
available-
account debt
 
debt
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at January 1, 2023
$
711
$
1,000
$
113
$
215
$
207
$
128,350
$
130,596
Gains (losses) included in earnings
-
-
-
(2)
(19)
(10,386)
(10,407)
Gains (losses) included in OCI
(8)
-
-
-
-
-
(8)
Additions
-
-
4
-
-
1,814
1,818
Sales
-
-
-
-
-
(1,269)
(1,269)
Settlements
(50)
-
(107)
(76)
-
521
288
Balance at September 30, 2023
$
653
$
1,000
$
10
137
$
188
$
119,030
$
121,018
Changes in unrealized gains (losses) included
in earnings relating to assets still held at
September 30, 2023
$
-
$
-
$
-
$
(1)
$
22
$
(1,828)
$
(1,807)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
108
Quarter ended September 30, 2022
MBS
Other
Other
classified
securities
CMOs
securities
as debt
classified as
classified
classified
securities
debt securities
as trading
as trading
Mortgage
available-
available-
account debt
account debt
servicing
Total
Contingent
Total
(In thousands)
for-sale
for-sale
securities
securities
rights
assets
consideration
liabilities
Balance at
 
June 30, 2022
$
779
$
500
$
152
$
264
$
129,877
$
131,572
$
(9,241)
$
(9,241)
Gains (losses) included in earnings
-
-
(1)
(9)
(499)
(509)
9,241
9,241
Gains (losses) included in OCI
(18)
-
-
-
-
(18)
-
-
Additions
-
500
3
-
1,163
1,666
-
-
Settlements
(50)
-
(19)
-
-
(69)
-
-
Balance at September 30, 2022
$
711
$
1,000
$
135
$
255
$
130,541
$
132,642
$
-
$
-
Changes in unrealized gains
(losses) included in earnings
relating to assets still held at
September 30, 2022
$
-
$
-
$
(1)
$
7
$
1,984
$
1,990
$
-
$
-
Nine months ended September 30, 2022
MBS
Other
Other
classified
securities
CMOs
securities
as debt
classified as
classified
classified
securities
debt securities
as trading
as trading
Mortgage
available-
available-
account debt
account debt
servicing
Total
Contingent
Total
(In thousands)
for-sale
for-sale
securities
securities
rights
assets
consideration
liabilities
Balance at January 1,
 
2022
$
826
$
-
$
198
$
280
$
121,570
$
122,874
$
(9,241)
$
(9,241)
Gains (losses) included in earnings
-
-
(2)
(25)
2,776
2,749
9,241
9,241
Gains (losses) included in OCI
(15)
-
-
-
-
(15)
-
-
Additions
-
1,000
5
-
6,195
7,200
-
-
Settlements
(100)
-
(66)
-
-
(166)
-
-
Balance at September 30, 2022
$
711
$
1,000
$
135
$
255
$
130,541
$
132,642
$
-
$
-
Changes in unrealized gains
(losses) included in earnings
relating to assets still held at
September 30, 2022
$
-
$
-
$
(2)
$
14
$
11,556
$
11,568
$
-
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
109
Gains and losses
 
(realized and unrealized)
 
included in earnings
 
for the
 
quarters
 
and nine months
 
ended September 30,
 
2023 and
2022 for
 
Level 3
 
assets and
 
liabilities included
 
in the
 
previous tables
 
are reported
 
in the
 
consolidated statement
 
of operations
 
as
follows:
Quarter ended September 30, 2023
Nine months ended September 30, 2023
Changes in unrealized
Changes in unrealized
Total gains
gains (losses) relating to
Total gains
gains (losses) relating to
(losses) included
assets still held at
(losses) included
assets still held at
(In thousands)
in earnings
reporting date
in earnings
reporting date
Mortgage banking activities
$
(2,793)
$
(381)
$
(10,386)
$
(1,828)
Trading account profit (loss)
(3)
4
(21)
21
Total
 
$
(2,796)
$
(377)
$
(10,407)
$
(1,807)
Quarter ended September 30, 2022
Nine months ended September 30, 2022
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
$
(499)
$
1,984
$
2,776
$
11,556
Trading account profit (loss)
(10)
6
(27)
12
Other operating income
9,241
-
9,241
-
Total
 
$
8,732
$
1,990
$
11,990
$
11,568
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
110
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 September 30, 2023 and 2022.
Fair value at
 
September 30,
(In thousands)
2023
Valuation technique
Unobservable inputs
Weighted average (range) [1]
CMO's - trading
$
10
Discounted cash flow model
Weighted average life
0.2
 
years (
0.2
 
-
0.3
 
years)
Yield
4.9
%
Prepayment speed
7.3
%
Other - trading
$
188
Discounted cash flow model
Weighted average life
2.5
 
years
Yield
12.0%
Prepayment speed
10.8%
Loans held-in-portfolio
$
9,044
[2]
External appraisal
Haircut applied on
external appraisals
7.2
% (
5.0
% -
10.0
%)
Other real estate owned
$
325
[3]
External appraisal
Haircut applied on
external appraisals
35
.0%
[1]
 
Weighted average of significant unobservable inputs
 
used to develop Level 3 fair value measurements
 
were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied
 
to external appraisals were excluded from this table.
 
[3]
Other real estate owned in which haircuts were not applied
 
to external appraisals were excluded from this table.
Fair value at
 
September 30,
(In thousands)
2022
Valuation technique
Unobservable inputs
Weighted average (range) [1]
CMO's - trading
$
135
Discounted cash flow model
Weighted average life
0.5
 
years (
0.2
 
-
0.7
 
years)
Yield
4.9
% (
4.9
% -
5.4
%)
Prepayment speed
10.7
% (
10.1
% -
18.5
%)
Other - trading
$
255
Discounted cash flow model
Weighted average life
2.9
 
years
Yield
12.0%
Prepayment speed
10.8%
Loans held-in-portfolio
$
4,473
[2]
External appraisal
Haircut applied on
external appraisals
16.1
% (
5
.0% -
25
.0%)
Other real estate owned
$
289
[3]
External appraisal
Haircut applied on
external appraisals
27
% (
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.
111
Note 25 – 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
 
September
 
30,
 
2023
 
and
December 31, 2022, 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
112
September 30, 2023
Carrying
 
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
 
Financial Assets:
Cash and due from banks
$
535,335
$
535,335
$
-
$
-
$
-
$
535,335
Money market investments
6,389,437
6,383,534
5,903
-
-
6,389,437
Trading account debt securities, excluding
 
derivatives
[1]
30,825
15,644
14,846
335
-
30,825
Debt securities available-for-sale
[1]
17,129,858
3,871,643
13,256,562
1,653
-
17,129,858
Debt securities held-to-maturity:
U.S. Treasury securities
$
8,228,758
$
-
$
7,999,065
$
-
$
-
$
7,999,065
Obligations of Puerto Rico, States and political
subdivisions
59,745
-
6,866
51,865
-
58,731
Collateralized mortgage obligation-federal agency
1,562
-
1,296
15
-
1,311
Securities in wholly owned statutory business trusts
5,960
-
5,960
-
-
5,960
Total debt securities
 
held-to-maturity
$
8,296,025
$
-
$
8,013,187
$
51,880
$
-
$
8,065,067
Equity securities:
FHLB stock
$
50,358
$
-
$
50,358
$
-
$
-
$
50,358
FRB stock
99,064
-
99,064
-
-
99,064
Other investments
41,266
-
35,026
6,871
286
42,183
Total equity securities
$
190,688
$
-
$
184,448
$
6,871
$
286
$
191,605
Loans held-for-sale
$
5,239
$
-
$
5,239
$
-
$
-
$
5,239
Loans held-in-portfolio
33,318,245
-
-
31,646,073
-
31,646,073
Mortgage servicing rights
119,030
-
-
119,030
-
119,030
Derivatives
23,511
-
23,511
-
-
23,511
September 30, 2023
Carrying
 
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
 
Financial Liabilities:
Deposits:
Demand deposits
$
55,129,643
$
-
$
55,129,643
$
-
$
-
$
55,129,643
Time deposits
8,207,957
-
7,835,985
-
-
7,835,985
Total deposits
$
63,337,600
$
-
$
62,965,628
$
-
$
-
$
62,965,628
Assets sold under agreements to repurchase
$
93,071
$
-
$
93,050
$
-
$
-
$
93,050
Notes payable:
FHLB advances
$
412,632
$
-
$
388,483
$
-
$
-
$
388,483
Unsecured senior debt securities
393,678
-
402,324
-
-
402,324
Junior subordinated deferrable interest debentures
(related to trust preferred securities)
198,339
-
180,183
-
-
180,183
Total notes payable
$
1,004,649
$
-
$
970,990
$
-
$
-
$
970,990
Derivatives
$
21,747
$
-
$
21,747
$
-
$
-
$
21,747
[1]
Refer to Note 24 to the Consolidated Financial Statements
 
for the fair value by class of financial asset and its hierarchy
 
level.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
113
December 31, 2022
Carrying
 
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
 
Financial Assets:
Cash and due from banks
$
469,501
$
469,501
$
-
$
-
$
-
$
469,501
Money market investments
5,614,595
5,607,937
6,658
-
-
5,614,595
Trading account debt securities, excluding
 
derivatives
[1]
27,723
13,069
14,119
535
-
27,723
Debt securities available-for-sale
[1]
17,804,374
1,908,589
15,894,074
1,711
-
17,804,374
Debt securities held-to-maturity:
U.S. Treasury securities
$
8,453,467
$
-
$
8,372,601
$
-
$
-
$
8,372,601
Obligations of Puerto Rico, States and political
subdivisions
59,010
-
-
61,617
-
61,617
Collateralized mortgage
 
obligation-federal agency
19
-
-
19
-
19
Securities in wholly owned statutory business trusts
5,959
-
5,959
-
-
5,959
Total debt securities
 
held-to-maturity
$
8,518,455
$
-
$
8,378,560
$
61,636
$
-
$
8,440,196
Equity securities:
FHLB stock
$
65,861
$
-
$
65,861
$
-
$
-
$
65,861
FRB stock
96,206
-
96,206
-
-
96,206
Other investments
33,787
-
29,302
4,966
330
34,598
Total equity securities
$
195,854
$
-
$
191,369
$
4,966
$
330
$
196,665
Loans held-for-sale
$
5,381
$
-
$
-
$
5,404
$
-
$
5,404
Loans held-in-portfolio
31,357,467
-
-
29,366,365
-
29,366,365
Mortgage servicing rights
128,350
-
-
128,350
-
128,350
Derivatives
19,229
-
19,229
-
-
19,229
December 31, 2022
Carrying
 
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
 
Financial Liabilities:
Deposits:
Demand deposits
$
54,445,825
$
-
$
54,445,825
$
-
$
-
$
54,445,825
Time deposits
6,781,402
-
6,464,943
-
-
6,464,943
Total deposits
$
61,227,227
$
-
$
60,910,768
$
-
$
-
$
60,910,768
Assets sold under agreements to repurchase
$
148,609
$
-
$
148,566
$
-
$
-
$
148,566
Other short-term borrowings
[2]
365,000
-
365,000
-
-
365,000
Notes payable:
FHLB advances
$
389,282
$
-
$
361,951
$
-
$
-
$
361,951
Unsecured senior debt securities
299,109
-
300,027
-
-
300,027
Junior subordinated deferrable interest debentures
(related to trust preferred securities)
198,319
-
173,938
-
-
173,938
Total notes payable
$
886,710
$
-
$
835,916
$
-
$
-
$
835,916
Derivatives
$
17,000
$
-
$
17,000
$
-
$
-
$
17,000
[1]
Refer to Note 24 to the Consolidated Financial Statements
 
for the fair value by class of financial asset and its hierarchy
 
level.
 
[2]
Refer to Note 16 to the Consolidated Financial Statements
 
for the composition of other short-term borrowings.
 
The notional
 
amount of
 
commitments to
 
extend credit
 
at September
 
30, 2023
 
and December
 
31, 2022
 
is $
10.3
 
billion and
 
$
10.5
billion, respectively,
 
and represents
 
the unused
 
portion of
 
credit facilities
 
granted to
 
customers. The
 
notional amount
 
of letters
 
of
credit at
 
September 30,
 
2023 and
 
December 31,
 
2022 is
 
$
56
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
114
Note 26 – 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 and nine
months ended September 30, 2023 and 2022:
Quarters ended September 30,
Nine months ended September 30,
(In thousands, except per share information)
2023
2022
2023
2022
Net income
$
136,609
$
422,395
$
446,748
$
845,502
Preferred stock dividends
(353)
(353)
(1,059)
(1,059)
Net income applicable to common stock
$
136,256
$
422,042
$
445,689
$
844,443
Average common shares outstanding
71,794,934
73,955,184
71,676,630
76,173,783
Average potential dilutive common shares
 
23,168
102,148
59,884
130,436
Average common shares outstanding - assuming dilution
71,818,102
74,057,332
71,736,514
76,304,219
Basic EPS
$
1.90
$
5.71
$
6.22
$
11.09
Diluted EPS
$
1.90
$
5.70
$
6.21
$
11.07
For the quarters
 
and nine months
 
ended September 30,
 
2023 and 2022,
 
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, 2022.
 
For a
 
discussion of
 
the calculation
 
under the
 
treasury stock
 
method, refer
 
to Note
 
31 of
 
the
Consolidated Financial Statements included in the
 
2022 Form 10-K.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
115
Note 27 – Revenue from contracts with customers
The
 
following
 
table
 
presents
 
the
 
Corporation’s
 
revenue
 
streams
 
from
 
contracts
 
with
 
customers
 
by
 
reportable
 
segment
 
for
 
the
quarters and nine months ended September 30,
 
2023 and 2022
.
Quarter ended September 30,
Nine months ended September 30,
(In thousands)
2023
2023
BPPR
Popular U.S.
BPPR
Popular U.S.
Service charges on deposit accounts
$
34,740
$
2,578
$
102,145
$
7,632
Other service fees:
Debit card fees
13,364
213
39,689
654
Insurance fees, excluding reinsurance
11,487
1,535
34,437
4,130
Credit card fees, excluding late fees and membership
 
fees
36,362
340
110,928
1,255
Sale and administration of investment products
6,820
-
19,454
-
Trust fees
6,540
-
19,304
-
Total revenue from
 
contracts with customers [1]
$
109,313
$
4,666
$
325,957
$
13,671
[1]
The amounts include intersegment transactions of $
1.2
 
million and $
5
 
million, respectively, for the
 
quarter and nine months ended September 30,
2023.
Quarter ended September 30,
Nine months ended September 30,
(In thousands)
2022
2022
BPPR
Popular U.S.
BPPR
Popular U.S.
Service charges on deposit accounts
$
37,047
$
2,959
$
114,025
$
8,503
Other service fees:
Debit card fees
11,912
221
36,134
660
Insurance fees, excluding reinsurance
9,985
1,210
30,005
3,906
Credit card fees, excluding late fees and membership
 
fees
34,369
313
99,376
948
Sale and administration of investment products
5,952
-
17,760
-
Trust
 
fees
5,680
-
18,187
-
Total revenue from
 
contracts with customers [1]
$
104,945
$
4,703
$
315,487
$
14,017
[1]
The amounts include intersegment transactions of $(
0.6
) million and $
4.4
 
million, respectively, for the quarter
 
and nine months ended September
30, 2022.
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
116
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
117
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
118
Note 28 – 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
31.30
years
 
considers options
 
to
 
extend the
 
leases for
 
up
 
to
20
 
years. The
 
Corporation identifies
 
leases when
 
it
 
has
 
both the
 
right to
obtain substantially all of the economic benefits from
 
the use of the asset and the right to direct
 
the use of the asset.
The Corporation
 
recognizes right-of-use
 
assets (“ROU
 
assets”) and
 
lease liabilities
 
related to
 
operating and
 
finance leases
 
in its
Consolidated Statements of Financial Condition under the caption of other assets and other liabilities, respectively. Refer to Note 13
and
 
Note
 
17
 
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:
September 30, 2023
(In thousands)
Remaining
2023
2024
2025
2026
2027
Later
Years
Total Lease
Payments
Less:
Imputed
Interest
Total
Operating Leases
$
7,690
$
30,084
$
27,214
$
18,806
$
13,571
$
50,056
$
147,421
$
(18,398)
$
129,023
Finance Leases
2,061
3,991
4,084
3,839
2,468
9,346
25,789
(2,609)
23,180
The following table presents the lease cost recognized
 
by the Corporation in the Consolidated
 
Statements of Operations as follows:
Quarters ended September 30,
Nine months ended September 30,
(In thousands)
2023
2022
2023
2022
Finance lease cost:
Amortization of ROU assets
$
1,071
$
643
$
2,966
$
2,088
Interest on lease liabilities
219
261
749
848
Operating lease cost
7,924
7,498
23,578
22,785
Short-term lease cost
101
231
322
399
Variable lease cost
49
33
150
86
Sublease income
(20)
(9)
(46)
(28)
Total lease cost
[1]
$
9,344
$
8,657
$
27,719
$
26,178
[1]
Total lease cost
 
is recognized as part of net occupancy expense, except
 
for the net gain recognized from sale and leaseback
 
transactions which
was included as part of other operating income.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
119
The
 
following
 
table
 
presents
 
supplemental
 
cash
 
flow
 
information
 
and
 
other
 
related
 
information
 
related
 
to
 
operating
 
and
 
finance
leases.
Nine months ended September 30,
(Dollars in thousands)
2023
2022
Cash paid for amounts included in the measurement of
 
lease liabilities:
Operating cash flows from operating leases
$
23,218
$
22,389
Operating cash flows from finance leases
749
848
Financing cash flows from finance leases
3,557
2,363
ROU assets obtained in exchange for new lease obligations:
Operating leases
$
4,864
$
1,937
Finance leases
1,796
556
Weighted-average remaining lease term:
Operating leases
7.3
years
7.4
years
Finance leases
7.8
years
8.4
years
Weighted-average discount rate:
Operating leases
3.2
%
2.8
%
Finance leases
3.8
%
4.3
%
As
 
of
 
September
 
30,
 
2023,
 
the
 
Corporation
 
has
 
additional
 
operating
 
leases
 
contracts
 
that
 
have
 
not
 
yet
 
commenced
 
with
 
an
undiscounted contract amount of $
4.1
 
million, which will have lease terms ranging
 
from
10
 
to
20
 
years.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
120
Note 29 – Pension and postretirement benefits
The
 
Corporation
 
has
 
a
 
non-contributory
 
defined
 
benefit
 
pension
 
plan
 
and
 
supplementary
 
pension
 
benefit
 
restoration
 
plans
 
for
regular employees of
 
certain of its
 
subsidiaries (the “Pension
 
Plans”). The accrual
 
of benefits under
 
the Pension Plans
 
is frozen to
all
 
participants.
 
The
 
Corporation
 
also
 
provides
 
certain
 
postretirement
 
health
 
care
 
benefits
 
for
 
retired
 
employees
 
of
 
certain
subsidiaries (the “OPEB Plan”).
 
The components of net periodic cost for the Pension
 
Plans and the OPEB Plan for the periods presented
 
were as follows:
Pension Plans
OPEB Plan
Quarter ended September 30,
Quarter ended September 30,
(In thousands)
2023
2022
2023
2022
Personnel Cost:
 
Service cost
$
-
$
-
$
48
$
121
Other operating expenses:
 
Interest cost
7,886
4,800
1,520
983
 
Expected return on plan assets
(8,591)
(8,847)
-
-
 
Amortization of prior service cost/(credit)
-
-
-
-
 
Amortization of net loss
5,367
3,911
(553)
-
Total net periodic
 
pension cost
 
$
4,662
$
(136)
$
1,015
$
1,104
Pension Plans
OPEB Plan
Nine months ended September 30,
Nine months ended September 30,
(In thousands)
2023
2022
2023
2022
Personnel Cost:
 
Service cost
$
-
$
-
$
143
$
364
Other operating expenses:
 
Interest cost
23,661
14,399
4,561
2,948
 
Expected return on plan assets
(25,774)
(26,541)
-
-
 
Amortization prior service cost/(credit)
-
-
-
-
 
Amortization of net loss
16,099
11,733
(1,659)
-
Total net periodic
 
pension cost
$
13,986
$
(409)
$
3,045
$
3,312
The Corporation paid the following contributions to the plans for the nine months ended September 30, 2023 and expects to pay the
following contributions for the year ending December
 
31, 2023.
For the nine months ended
For the year ending
(In thousands)
September 30, 2023
December 31, 2023
Pension Plans
$
171
$
228
OPEB Plan
$
4,896
$
5,924
121
Note 30 - Stock-based compensation
Incentive Plan
On May 12, 2020,
 
the shareholders of the
 
Corporation approved the Popular,
 
Inc. 2020 Omnibus Incentive Plan,
 
which permits the
Corporation to
 
issue several
 
types of
 
stock-based compensation
 
to employees
 
and directors
 
of the
 
Corporation and/or
 
any of
 
its
subsidiaries (the
 
“2020 Incentive
 
Plan”). The
 
2020 Incentive
 
Plan replaced
 
the Popular,
 
Inc. 2004
 
Omnibus Incentive
 
Plan, which
was in effect
 
prior to the adoption of
 
the 2020 Incentive Plan (the
 
“2004 Incentive Plan” and, together
 
with the 2020 Incentive
 
Plan,
the “Incentive Plan”). Participants under the Incentive Plan are designated by the Talent and Compensation Committee of the Board
of Directors (or its delegate, as determined by the Board). Under the Incentive Plan, the Corporation has issued restricted stock and
performance shares to its employees and restricted
 
stock and restricted stock units (“RSUs”)
 
to its directors.
The restricted
 
stock granted
 
under the
 
Incentive Plan
 
to employees
 
becomes vested
 
based on
 
the employees’
 
continued service
with
 
Popular.
Unless otherwise stated in an agreement, the compensation cost associated with the shares of restricted stock
granted prior to 2021 was determined based on a two-prong vesting schedule. The first part is vested ratably over five or four years
commencing at the date of grant (“the graduated vesting portion”) and the second part is vested at termination of employment after
attainment of 55 years of age and 10 years of service or 60 years of age and 5 years of service (“the retirement vesting portion”).
The graduated vesting portion is accelerated at termination of employment after attaining 55 years of age and 10 years of service or
60 years of age and 5 years of service. Restricted stock granted on or after 2021 will vest ratably in equal annual installments over
a period of 4 years or 3 years, depending on the classification of the employee. The vesting schedule is accelerated at termination
of employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service.
The
 
performance share
 
awards
 
granted
 
under
 
the
 
Incentive
 
Plan
 
consist
 
of
 
the
 
opportunity
 
to
 
receive
 
shares
 
of
 
Popular,
 
Inc.’s
common stock provided that the Corporation achieves certain goals during a three-year performance cycle.
 
The goals will be based
on
 
two
 
metrics
 
weighted
 
equally:
 
the
 
Relative
 
Total
 
Shareholder
 
Return
 
(“TSR”)
 
and
 
the
 
Absolute
 
Return
 
on
 
Average
 
Tangible
Common
 
Equity (“ROATCE”)
 
goal.
 
The
 
TSR
 
metric is
 
considered to
 
be
 
a market
 
condition under
 
ASC
 
718.
 
For
 
equity settled
awards based
 
on a
 
market condition,
 
the fair
 
value is
 
determined as
 
of the
 
grant date
 
and is
 
not subsequently
 
revised based
 
on
actual
 
performance.
 
The
 
ROATCE
 
metric
 
is
 
considered
 
to
 
be
 
a
 
performance
 
condition
 
under
 
ASC
 
718.
 
The
 
fair
 
value
 
is
determined based on the probability of achieving the ROATCE goal as of each reporting period.
 
The TSR and ROATCE metrics are
equally
 
weighted and
 
work independently.
 
The number of shares that will ultimately vest ranges from 50% to a 150% of target
based on both market (TSR) and performance (ROATCE) conditions. The performance shares vest at the end of the three-year
performance cycle. If a participant terminates employment after attaining the earlier of 55 years of age and 10 years of service or 60
years of age and 5 years of service, the performance shares shall continue outstanding and vest at the end of the performance
cycle.
The
 
following
 
table
 
summarizes
 
the
 
restricted
 
stock
 
and
 
performance
 
shares
 
activity
 
under
 
the
 
Incentive
 
Plan
 
for
 
members
 
of
management.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
122
(Not in thousands)
Shares
Weighted-Average
Grant Date Fair
Value
Non-vested at December 31, 2021
321,883
$
47.98
Granted
194,791
84.29
Performance Shares Quantity Adjustment
6,947
78.02
Vested
 
(240,033)
66.11
Forfeited
(1,625)
78.86
Non-vested at December 31, 2022
281,963
$
56.50
Granted
251,658
66.79
Performance Shares Quantity Adjustment
16,374
76.07
Vested
 
(232,717)
66.38
Forfeited
(16,082)
55.56
Non-vested at September 30, 2023
301,196
$
58.14
During
 
the
 
quarter
 
ended
 
September
 
30,
 
2023,
no
 
shares
 
of
 
restricted
 
stock
 
(September
 
30,
 
2022
 
–
1,888
)
 
were
 
awarded
 
to
management under
 
the Incentive
 
Plan.
 
During the
 
quarters ended
 
September
 
30, 2023
 
and
 
2022,
no
 
performance shares
 
were
awarded to management
 
under the Incentive
 
Plan.
 
For the nine
 
months ended September
 
30, 2023,
200,303
 
shares of
 
restricted
stock
 
(September
 
30,
 
2022
 
–
137,934
)
 
and
51,355
 
performance
 
shares
 
(September
 
30,
 
2022
 
-
56,857
)
 
were
 
awarded
 
to
management under the Incentive Plan.
 
During
 
the
 
quarter
 
ended
 
September
 
30,
 
2023,
 
the
 
Corporation
 
recognized
 
$
2.0
 
million
 
of
 
restricted
 
stock
 
expense
 
related
 
to
management
 
incentive
 
awards,
 
with
 
a
 
tax
 
benefit
 
of
 
$
0.4
 
million
 
(September
 
30,
 
2022
 
-
 
$
1.5
 
million,
 
with
 
a
 
tax
 
benefit
 
of
 
$
0.3
million). For the nine months ended September 30, 2023,
 
the Corporation recognized $
9.7
 
million of restricted stock expense related
to management
 
incentive awards,
 
with a
 
tax benefit
 
of $
1.5
 
million (September
 
30, 2022
 
- $
8.9
 
million, with
 
a tax
 
benefit of
 
$
1.5
million).
 
For
 
the
 
nine
 
months
 
ended September
 
30,
 
2023,
 
the
 
fair
 
market
 
value
 
of
 
the
 
restricted
 
stock
 
and
 
performance shares
vested was $
11.3
 
million at grant
 
date and $
14.1
 
million at vesting date.
 
This differential triggers
 
a windfall of
 
$
1.0
 
million that was
recorded as
 
a reduction
 
on income
 
tax expense.
 
During the
 
quarter ended
 
September 30,
 
2023 the
 
Corporation recognized
 
$
0.1
million of performance shares benefit, with
 
a tax expense of $
8
 
thousand due to performance shares target adjustment
 
(September
30,
 
2022
 
-
 
$
0.3
 
million,
 
with
 
a
 
tax
 
benefit of
 
$
13
 
thousand).
 
For
 
the
 
nine
 
months
 
ended
 
September 30,
 
2023, the
 
Corporation
recognized $
3.6
 
million of performance shares expense, with a tax
 
benefit of $
0.1
 
million (September 30, 2022 - $
4.3
 
million, with a
tax
 
benefit
 
of
 
$
0.3
 
million).
 
The
 
total
 
unrecognized
 
compensation
 
cost
 
related
 
to
 
non-vested
 
restricted
 
stock
 
awards
 
and
performance shares to members of management at September 30, 2023 was $
13.6
 
million and is expected to be recognized over a
weighted-average period of
1.6
 
years.
The following table summarizes the restricted stock
 
activity under the Incentive Plan for members of
 
the Board of Directors:
(Not in thousands)
RSUs / Unrestricted
stock
Weighted-Average
 
Grant Date Fair
Value per Unit
Non-vested at December 31, 2021
$
-
$
-
Granted
25,321
77.48
Vested
 
(25,321)
77.48
Forfeited
-
-
Non-vested at December 31, 2022
$
-
$
-
Granted
37,712
55.05
Vested
 
(37,712)
55.05
Forfeited
-
-
Non-vested at September 30, 2023
$
-
$
-
123
The
 
equity
 
awards
 
granted
 
to
 
members
 
of
 
the
 
Board
 
of
 
Directors
 
of
 
Popular,
 
Inc.
 
(the
 
“Directors”)
 
will
 
vest
 
and
 
become
 
non-
forfeitable on the
 
grant date of
 
such award. Effective
 
in May 2019,
 
all equity awards
 
granted to the
 
Directors may be
 
paid in either
unrestricted stock
 
or RSUs
 
at each
 
Directors election.
 
If RSUs
 
are elected,
 
the Directors
 
may defer
 
the delivery
 
of the
 
shares of
common stock
 
underlying the
 
RSUs award
 
until their
 
retirement. To
 
the extent
 
that cash
 
dividends are
 
paid on
 
the Corporation’s
outstanding common stock, the Directors
 
will receive an additional number of RSUs
 
that reflect a reinvested dividend
 
equivalent.
 
For 2023
 
and 2022,
 
Directors elected
 
RSUs and
 
unrestricted stock.
 
During the
 
quarter ended
 
September 30,
 
2023,
1,384
 
RSUs
and
no
 
unrestricted
 
stocks
 
were
 
granted
 
to
 
the
 
Directors
 
(September
 
30,
 
2022
 
-
857
 
RSUs)
 
and
 
the
 
Corporation
 
recognized
expense related
 
to these
 
shares of
 
$
0.1
 
million with
 
a tax
 
benefit of
 
$
16
 
thousand (September
 
30, 2022
 
- $
0.1
 
million with
 
a tax
benefit
 
of
 
$
25
 
thousand).
 
For
 
the
 
nine
 
months
 
ended
 
September
 
30,
 
2023,
 
the
 
Corporation
granted
35,412
 
RSUs
 
and
2,300
unrestricted stocks
 
to the
 
Directors (September 30,
 
2022 -
24,409
 
RSUs) and
 
the Corporation
 
recognized $
2.1
 
million of
 
expense
related to these shares, with
 
a tax benefit of $
0.4
 
million, (September 30, 2022 - $
1.9
 
million, with a tax benefit
 
of $
0.4
 
million). The
fair value at vesting date of the shares vested
 
during the nine months ended September 30, 2023
 
for the Directors was $
2.1
 
million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
124
Note 31 – 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
September 30, 2023
September 30, 2022
(In thousands)
Amount
 
% of pre-tax
income
 
Amount
% of pre-tax
income
Computed income tax expense at statutory rates
 
$
68,426
38
%
$
183,893
38
%
Net benefit of tax exempt interest income
(22,862)
(13)
(35,403)
(8)
Effect of income subject to preferential tax rate
(199)
-
(109,588)
(22)
Deferred tax asset valuation allowance
1,355
1
3,724
1
Difference in tax rates due to multiple jurisdictions
(2,839)
(2)
(7,147)
(2)
Unrecognized tax benefits
-
-
(1,503)
-
State and local taxes
2,436
1
3,726
1
Others
(458)
-
30,284
6
Income tax expense
$
45,859
25
%
$
67,986
14
%
Nine months ended
September 30, 2023
September 30, 2022
(In thousands)
Amount
 
% of pre-tax
income
 
Amount
% of pre-tax
income
 
Computed income tax expense at statutory rates
 
$
218,409
38
%
$
385,567
38
%
Net benefit of tax exempt interest income
(72,080)
(13)
(112,669)
(12)
Effect of income subject to preferential tax rate
(775)
-
(116,630)
(11)
Deferred tax asset valuation allowance
(2,217)
-
9,662
1
Difference in tax rates due to multiple jurisdictions
(11,879)
(3)
(20,457)
(2)
Unrecognized tax benefits
-
-
(1,503)
-
State and local taxes
8,829
2
10,957
1
Others
(4,611)
(1)
27,750
3
Income tax expense
$
135,676
23
%
$
182,677
18
%
For the quarter and nine months
 
ended September 30, 2023, the Corporation recorded an income
 
tax expense of $
45.9
 
million and
$
135.7
 
million,
 
respectively,
 
compared
 
to
 
$
68.0
 
million
 
and
 
$
182.7
 
million
 
for
 
the
 
respective
 
periods
 
of
 
2022.
 
The
 
decrease
 
in
income tax
 
expense was
 
due in
 
essence to
 
a lower
 
pre-tax income,
 
including lower
 
volume of
 
income subject
 
to preferential
 
tax
rates, for the quarter and nine months ended September
 
30, 2023.
The following table presents a breakdown of the
 
significant components of the Corporation’s deferred tax assets
 
and liabilities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
125
September 30, 2023
 
(In thousands)
PR
US
Total
Deferred tax assets:
Tax credits available
 
for carryforward
$
261
$
10,754
$
11,015
Net operating loss and other carryforward available
 
123,196
644,007
767,203
Postretirement and pension benefits
46,823
-
46,823
Allowance for credit losses
242,095
26,366
268,461
Depreciation
5,972
6,445
12,417
FDIC-assisted transaction
152,665
-
152,665
Lease liability
29,056
20,237
49,293
Unrealized net loss on investment securities
 
218,866
27,119
245,985
Difference in outside basis from pass-through entities
38,439
-
38,439
Mortgage Servicing Rights
14,685
-
14,685
Other temporary differences
30,804
7,395
38,199
Total gross deferred
 
tax assets
902,862
742,323
1,645,185
Deferred tax liabilities:
Intangibles
83,961
50,392
134,353
Right of use assets
26,655
17,506
44,161
Deferred loan origination fees/cost
1,990
1,944
3,934
Loans acquired
19,698
-
19,698
Other temporary differences
6,053
422
6,475
 
Total gross deferred
 
tax liabilities
138,357
70,264
208,621
Valuation allowance
140,033
401,318
541,351
Net deferred tax asset
$
624,472
$
270,741
$
895,213
 
December 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
 
121,742
661,144
782,886
Postretirement and pension benefits
47,122
-
47,122
Allowance for credit losses
250,615
32,688
283,303
Depreciation
5,972
6,309
12,281
FDIC-assisted transaction
152,665
-
152,665
Lease liability
28,290
23,521
51,811
Unrealized net loss on investment securities
265,955
23,913
289,868
Difference in outside basis from pass-through entities
40,602
-
40,602
Mortgage Servicing Rights
13,711
-
13,711
Other temporary differences
17,122
7,815
24,937
Total gross deferred
 
tax assets
944,057
758,171
1,702,228
Deferred tax liabilities:
Intangibles
81,174
54,623
135,797
Right of use assets
26,015
20,262
46,277
Deferred loan origination fees/cost
1,076
2,961
4,037
Loans acquired
23,353
-
23,353
Other temporary differences
1,531
-
1,531
 
Total gross deferred
 
tax liabilities
133,149
77,846
210,995
Valuation allowance
137,863
402,333
540,196
Net deferred tax asset
$
673,045
$
277,992
$
951,037
126
The net deferred tax asset
 
shown in the table above
 
at September 30, 2023, is
 
reflected in the consolidated statements of financial
condition as $
0.9
 
billion in net deferred tax assets in the “Other
 
assets” caption (December 31, 2022 - $
1.0
 
billion) and $
1.2
 
million in
deferred
 
tax
 
liabilities
 
in
 
the
 
“Other
 
liabilities”
 
caption
 
(December 31,
 
2022
 
-
 
$
2.6
 
million),
 
reflecting
 
the
 
aggregate
 
deferred
 
tax
assets
 
or
 
liabilities
 
of
 
individual
 
tax-paying subsidiaries
 
of
 
the
 
Corporation
 
in
 
their
 
respective tax
 
jurisdiction, Puerto
 
Rico
 
or
 
the
United States.
 
At September
 
30, 2023
 
the net
 
deferred tax
 
asset of
 
the U.S.
 
operations amounted
 
to $
672
 
million with
 
a valuation
 
allowance of
approximately $
401
 
million, for
 
a net
 
deferred tax
 
asset after
 
valuation allowance
 
of approximately
 
$
271
 
million. The
 
Corporation
evaluates
 
the
 
realization
 
of
 
the
 
deferred tax
 
asset
 
on
 
a
 
quarterly
 
basis
 
by
 
taxing
 
jurisdiction. The
 
U.S.
 
operation has
 
sustained
profitability for last three calendar years and for the
 
period ended September 30, 2023. While the pre-tax income for the
 
nine-month
period ended in
 
September 2023 is
 
lower when compared
 
to the same
 
period last year,
 
these results, when
 
combined with recent
historical results, still demonstrated
 
financial stability for the U.S. operations.
 
The historical financial results are objectively verifiable
positive
 
evidence,
 
evaluated
 
together
 
with
 
the
 
positive
 
evidence
 
of
 
stable
 
credit
 
metrics,
 
in
 
combination
 
with
 
the
 
length
 
of
 
the
expiration of the NOLs.
 
On the other hand,
 
the Corporation evaluated the negative
 
evidence accumulated over the years,
 
including
financial
 
results
 
lower
 
than
 
expectations
 
and
 
challenges
 
to
 
the
 
economy
 
due
 
to
 
inflationary
 
pressures
 
and
 
global
 
geopolitical
uncertainty,
 
that have
 
resulted in
 
a reduction
 
of pre-tax
 
income for
 
the year
 
2023. As
 
of September
 
30, 2023,
 
after weighting
 
all
positive
 
and
 
negative
 
evidence,
 
the
 
Corporation concluded
 
that
 
it
 
is
 
more
 
likely
 
than
 
not
 
that
 
approximately
 
$
271
 
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, the pre-tax earnings forecast, any new
 
tax initiative, and other factors, including net income
 
versus forecast,
targeted loan
 
growth, net
 
interest income margin,
 
changes in
 
deposit costs,
 
allowance for credit
 
losses, charge
 
offs, NPLs
 
inflows
and NPA balances, to assess the future realization of the deferred tax asset.
At September 30, 2023, the Corporation’s net deferred tax
 
assets related to its Puerto Rico operations
 
amounted to $
624
 
million.
The Corporation’s Puerto Rico Banking operation is not in a cumulative loss position and has sustained profitability for the last three
calendar years
 
and for
 
the period
 
ended September
 
30, 2023.
 
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
 
last three calendar years
 
and for the period
 
ended September 30, 2023.
 
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. Accordingly,
 
the Corporation has maintained
a valuation allowance on the deferred tax asset
 
of $
140
 
million as of September 30, 2023.
The reconciliation of unrecognized tax benefits, excluding
 
interest, was as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
127
(In millions)
2023
2022
Balance at
 
January 1
$
2.5
$
3.5
Balance at
 
March 31
$
2.5
$
3.5
Balance at
 
June 30
$
2.5
$
3.5
Reduction as a result of lapse of statute of limitations
 
- July through September
-
(1.1)
Balance at September 30
$
2.5
$
2.4
At September
 
30, 2023,
 
the total
 
amount of
 
accrued interest
 
recognized in
 
the statement
 
of financial
 
condition amounted
 
to $
2.7
million
 
(December
 
31,
 
2022
 
-
 
$
2.6
 
million).
 
The
 
total
 
interest
 
expense
 
recognized
 
at
 
September
 
30,
 
2023
 
was
 
$
79
 
thousand,
(September 30, 2022– $
202
 
thousand). Management determined that at September 30, 2023 and December 31, 2022 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 $
4.4
million at September 30, 2023 (December 31, 2022
 
- $
4.3
 
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 anticipates a
 
reduction in the
 
total amount of
 
unrecognized tax benefits within
 
the next
 
12
months amounting to $
1.5
 
million.
 
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 September 30, 2023,
 
the following years remain subject to examination in the U.S.
Federal jurisdiction: 2019 and thereafter; and in
 
the Puerto Rico jurisdiction, 2018 and thereafter.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
128
Note 32 – Supplemental disclosure on the consolidated
 
statements of cash flows
Additional disclosures on cash flow information and
 
non-cash activities for the nine months ended
 
September 30, 2023 and
September 30, 2022 are listed in the following table:
(In thousands)
September 30, 2023
September 30, 2022
Non-cash activities:
 
Loans transferred to other real estate
$
48,704
$
50,359
 
Loans transferred to other property
53,021
38,066
 
Total loans transferred
 
to foreclosed assets
101,725
88,425
 
Loans transferred to other assets
15,738
6,631
 
Financed sales of other real estate assets
7,617
6,231
 
Financed sales of other foreclosed assets
38,136
29,505
 
Total financed sales
 
of foreclosed assets
45,753
35,736
 
Financed sale of premises and equipment
59,345
31,894
 
Transfers from premises and equipment to
 
long-lived assets held-for-sale
-
1,126
 
Transfers from loans held-in-portfolio to
 
loans held-for-sale
55,497
11,522
 
Transfers from loans held-for-sale to loans
 
held-in-portfolio
3,772
25,706
 
Loans securitized into investment securities
[1]
35,958
294,872
 
Trades receivable from brokers and counterparties
11,823
12,973
 
Trades payable to brokers and counterparties
14,761
5,793
 
Net change in receivables from investments maturities
176,000
-
 
Recognition of mortgage servicing rights on securitizations
 
or asset transfers
1,814
6,195
 
Loans booked under the GNMA buy-back option
2,805
3,984
 
Capitalization of lease right of use asset
14,672
4,453
 
Acquisition of software intangible assets
-
28,650
 
Goodwill on acquisition
-
116,135
 
Total stock consideration
 
related to Evertec transactions
-
144,785
[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)
September 30, 2023
September 30, 2022
Cash and due from banks
$
509,538
$
1,937,638
Restricted cash and due from banks
25,797
79,674
Restricted cash in money market investments
5,903
7,199
Total cash and due
 
from banks, and restricted cash
[2]
$
541,238
$
2,024,511
[2]
 
Refer to Note 5 - Restrictions on cash and due from banks
 
and certain securities for nature of restrictions.
129
Note 33 – Segment reporting
The
 
Corporation’s
 
corporate
 
structure
 
consists
 
of
two
 
reportable
 
segments
 
–
Banco Popular de Puerto Rico and Popular U.S.
Management determined the reportable segments based on the internal reporting used to evaluate performance and to assess
where to allocate resources.
 
The segments were
 
determined based on the
 
organizational structure, which focuses
 
primarily on the
markets the segments serve, as well as on the products
 
and services offered by the segments.
Banco Popular de Puerto Rico:
 
The Banco Popular de
 
Puerto Rico reportable segment
 
includes commercial, consumer and retail
 
banking operations conducted at
BPPR, including
 
U.S. based
 
activities conducted
 
through its
 
New York
 
Branch. It
 
also includes
 
the lending
 
operations of
 
Popular
Auto
 
and
 
Popular
 
Mortgage.
 
Other
 
financial
 
services
 
within
 
the
 
BPPR
 
segment
 
include
 
the
 
trust
 
service
 
units
 
of
 
BPPR,
 
asset
management services of Popular Asset
 
Management, the brokerage and investment
 
banking operations of Popular Securities,
 
and
the insurance agency and reinsurance businesses
 
of Popular Insurance, Popular Risk Services, Popular
 
Life Re, and Popular Re.
Popular U.S.:
 
Popular U.S. reportable segment
 
consists of the
 
banking operations of Popular
 
Bank (PB), Popular Insurance
 
Agency, U.S.A.,
 
and
PEF.
 
PB
 
operates through
 
a retail
 
branch network
 
in the
 
U.S. mainland
 
under the
 
name of
 
Popular,
 
and equipment
 
leasing and
financing services through PEF.
 
Popular Insurance Agency,
 
U.S.A. offers investment and insurance
 
services across the PB
 
branch
network.
 
The Corporate group
 
consists primarily of
 
the holding companies
 
Popular, Inc.,
 
Popular North America,
 
Popular International Bank
and certain of
 
the Corporation’s
 
investments accounted for
 
under the equity
 
method, including Evertec,
 
until August 15,
 
2022, 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:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
130
2023
For the quarter ended September 30, 2023
Intersegment
 
(In thousands)
BPPR
Popular U.S.
Eliminations
Net interest income
$
453,879
$
87,445
$
1
Provision for credit losses (benefit)
51,899
(6,644)
-
Non-interest income
 
144,691
5,894
(134)
Amortization of intangibles
484
311
-
Goodwill impairment charge
-
23,000
-
Depreciation expense
12,880
1,962
-
Other operating expenses
369,738
58,341
(134)
Income tax expense
40,861
5,358
-
Net income
$
122,708
$
11,011
$
1
Segment assets
$
57,039,000
$
12,806,630
$
(448,100)
For the quarter ended September 30, 2023
Reportable
 
(In thousands)
Segments
Corporate
Eliminations
Total Popular,
 
Inc.
Net interest income (expense)
$
541,325
$
(7,305)
$
-
$
534,020
Provision for credit losses (benefit)
45,255
(138)
-
45,117
Non-interest income
150,451
10,179
(1,081)
159,549
Amortization of intangibles
795
-
-
795
Goodwill impairment charge
23,000
-
-
23,000
Depreciation expense
14,842
381
-
15,223
Other operating expenses
427,945
180
(1,159)
426,966
Income tax expense (benefit)
46,219
(396)
36
45,859
Net income
$
133,720
$
2,847
$
42
$
136,609
Segment assets
$
69,397,530
$
5,554,370
$
(5,214,964)
$
69,736,936
For the nine months ended September 30, 2023
Intersegment
 
(In thousands)
BPPR
Popular U.S.
Eliminations
Net interest income
$
1,356,774
$
265,033
$
2
Provision for credit losses
126,952
3,328
-
Non-interest income
 
435,966
18,165
(404)
Amortization of intangibles
1,453
932
-
Goodwill impairment charge
-
23,000
-
Depreciation expense
36,424
5,661
-
Other operating expenses
1,119,522
182,809
(404)
Income tax expense
120,996
16,184
-
Net income
$
387,393
$
51,284
$
2
Segment assets
$
57,039,000
$
12,806,630
$
(448,100)
For the nine months ended September 30, 2023
Reportable
Total
(In thousands)
 
Segments
Corporate
Eliminations
Popular, Inc.
Net interest income (expense)
$
1,621,809
$
(24,465)
$
-
$
1,597,344
Provision for credit losses (benefit)
130,280
(334)
-
129,946
Non-interest income
453,727
32,905
(4,651)
481,981
Amortization of intangibles
2,385
-
-
2,385
Goodwill impairment charge
23,000
-
-
23,000
Depreciation expense
42,085
1,095
-
43,180
Other operating expenses
1,301,927
(146)
(3,391)
1,298,390
Income tax expense (benefit)
137,180
(1,006)
(498)
135,676
Net income
$
438,679
$
8,831
$
(762)
$
446,748
Segment assets
$
69,397,530
$
5,554,370
$
(5,214,964)
$
69,736,936
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
131
2022
For the quarter ended September 30, 2022
Intersegment
 
(In thousands)
BPPR
 
Popular U.S.
Eliminations
Net interest income
$
488,123
$
98,874
$
1
Provision for credit losses
29,813
10,011
-
Non-interest income
 
262,587
15,203
(137)
Amortization of intangibles
484
311
-
Goodwill impairment charge
-
9,000
-
Depreciation expense
11,862
1,693
-
Other operating expenses
396,655
57,127
(135)
Income tax expense
48,209
10,628
-
Net income
$
263,687
$
25,307
$
(1)
Segment assets
$
59,640,784
$
11,106,409
$
(319,999)
For the quarter ended September 30, 2022
Reportable
 
(In thousands)
Segments
Corporate
Eliminations
Total Popular,
 
Inc.
Net interest income (expense)
$
586,998
$
(7,379)
$
-
$
579,619
Provision for credit losses (benefit)
39,824
(187)
-
39,637
Non-interest income
277,653
148,228
613
426,494
Amortization of intangibles
795
-
-
795
Goodwill impairment charge
9,000
-
-
9,000
Depreciation expense
13,555
298
-
13,853
Other operating expenses
453,647
(46)
(1,154)
452,447
Income tax expense
58,837
8,469
680
67,986
Net income
$
288,993
$
132,315
$
1,087
$
422,395
Segment assets
$
70,427,194
$
5,341,051
$
(5,038,570)
$
70,729,675
For the nine months ended September 30, 2022
Intersegment
(In thousands)
BPPR
Popular U.S.
 
Eliminations
Net interest income
$
1,351,086
$
278,825
$
3
Provision for credit losses
24,941
8,580
-
Non-interest income
 
542,826
26,076
(410)
Amortization of intangibles
1,453
1,028
-
Goodwill impairment charge
-
9,000
-
Depreciation expense
35,054
5,272
-
Other operating expenses
1,069,512
166,677
(407)
Income tax expense
141,113
33,917
-
Net income
$
621,839
$
80,427
$
-
Segment assets
$
59,640,784
$
11,106,409
$
(319,999)
For the nine months ended September 30, 2022
Reportable
Total
(In thousands)
 
Segments
Corporate
Eliminations
Popular, Inc.
Net interest income (expense)
$
1,629,914
$
(22,121)
$
-
$
1,607,793
Provision for credit losses (benefit)
33,521
(22)
-
33,499
Non-interest income
568,492
174,060
(3,955)
738,597
Amortization of intangibles
2,481
-
-
2,481
Goodwill impairment charge
9,000
-
-
9,000
Depreciation expense
40,326
881
-
41,207
Other operating expenses
1,235,782
(149)
(3,609)
1,232,024
Income tax expense
175,030
7,802
(155)
182,677
Net income
$
702,266
$
143,427
$
(191)
$
845,502
Segment assets
$
70,427,194
$
5,341,051
$
(5,038,570)
$
70,729,675
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
132
Geographic Information
The following information presents selected
 
financial information based on the
 
geographic location where the Corporation conducts
its business. The
 
banking operations of BPPR
 
are primarily based in
 
Puerto Rico, where it
 
has the largest retail
 
banking franchise.
BPPR
 
also
 
conducts
 
banking
 
operations
 
in
 
the
 
U.S.
 
Virgin
 
Islands,
 
the
 
British
 
Virgin
 
Islands
 
and
 
New
 
York.
 
BPPR’s
 
banking
operations in
 
the mainland
 
United States
 
include commercial
 
lending activities.
 
BPPR’s commercial
 
lending activities
 
in the
 
U.S.,
through
 
its
 
New
 
York
 
Branch,
 
include
 
periodic
 
loan
 
participations
 
with
 
PB.
 
During
 
the
 
quarter
 
and
 
nine
 
months
 
ended,
 
BPPR
participated
 
in
 
loans
 
originated
 
by
 
PB
 
totaling
 
$
10
million
 
and
 
$
33
 
million,
 
respectively
 
(2022
 
-
 
$
69
 
million
 
and
 
$
160
 
million,
respectively). At September 30, 2023, total assets
 
for the BPPR segment related to
 
its operations in the United States
 
amounted to
$
1.4
 
billion (December 31,
 
2022 - $
1.2
 
billion). During the
 
nine months ended
 
September 30, 2023,
 
the BPPR segment
 
generated
approximately $
86.0
 
million (2022 - $
45.0
 
million) in revenues from its operations in the
 
United States, including net interest income
and other service
 
fees. In the
 
Virgin Islands, the
 
BPPR segment offers
 
banking products, including
 
loans and deposits.
 
The BPPR
segment
 
generated $
33.6
 
million in
 
revenues during
 
the
 
nine months
 
ended September
 
30, 2023
 
(2022 -
 
$
34.6
 
million) from
 
its
operations in the U.S. and British Virgin Islands.
 
Geographic Information
Quarter ended
Nine months ended
(In thousands)
September 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Revenues:
[1]
 
Puerto Rico
 
$
539,985
$
852,149
$
1,623,963
$
1,940,457
 
United States
131,698
133,071
389,463
347,614
 
Other
21,886
20,893
65,899
58,319
Total consolidated
 
revenues
 
$
693,569
$
1,006,113
$
2,079,325
$
2,346,390
[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 gain (loss) on
 
trading account debt securities, net loss on sale of loans,
 
including valuation
adjustments on loans held-for-sale, adjustments to indemnity
 
reserves on loans sold, and other operating income.
Selected Balance Sheet Information:
(In thousands)
September 30, 2023
December 31, 2022
Puerto Rico
 
Total assets
$
54,259,904
$
53,541,427
 
Loans
21,866,754
20,884,442
 
Deposits
52,035,227
51,138,790
United States
 
Total assets
$
14,218,288
$
12,718,775
 
Loans
11,625,969
10,643,964
 
Deposits
9,605,215
8,182,702
Other
 
Total assets
$
1,258,744
$
1,377,715
 
Loans
541,829
554,744
 
Deposits
[1]
1,697,158
1,905,735
[1]
Represents deposits from BPPR operations located in the
 
U.S. and British Virgin Islands.
133
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 
AND RESULTS OF OPERATIONS
This
 
report
 
includes
 
management’s
 
discussion
 
and
 
analysis
 
(“MD&A”)
 
of
 
the
 
consolidated
 
financial
 
position
 
and
 
financial
performance
 
of
 
Popular,
 
Inc.
 
(the
 
“Corporation”
 
or
 
“Popular”). All
 
accompanying
 
tables,
 
financial
 
statements
 
and
 
notes
 
included
elsewhere in this report should be considered an
 
integral part of this analysis.
 
The Corporation is a
 
diversified, publicly-owned financial holding company subject to the
 
supervision and regulation of the Board
 
of
Governors of the Federal Reserve System. The Corporation has
 
operations in Puerto Rico, the United States (“U.S.”) mainland and
the
 
U.S.
 
and
 
British
 
Virgin
 
Islands.
 
In
 
Puerto
 
Rico,
 
the
 
Corporation
 
provides
 
retail,
 
mortgage
 
and
 
commercial
 
banking
 
services
through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as investment
 
banking, broker-dealer, auto
and
 
equipment
 
leasing
 
and
 
financing,
 
and
 
insurance
 
services
 
through
 
specialized
 
subsidiaries.
 
In
 
the
 
U.S.
 
mainland,
 
the
Corporation provides
 
retail, mortgage
 
and
 
commercial banking
 
services, as
 
well as
 
equipment leasing
 
and
 
financing, through
 
its
New
 
York-chartered
 
banking
 
subsidiary,
 
Popular
 
Bank
 
(“PB”
 
or
 
“Popular U.S.”),
 
which
 
has
 
branches
 
located
 
in
 
New
 
York,
 
New
Jersey
 
and
 
Florida.
 
Note
 
33
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
presents
 
information
 
about
 
the
 
Corporation’s
 
business
segments.
OVERVIEW
Table 1 provides selected financial data and performance indicators for the quarters ended
 
September 30, 2023 and 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
134
Table 1 - Financial Highlights
Financial Condition Highlights
Ending balances at
 
Average for the nine months ended
(In thousands)
September
30, 2023
December 31,
2022
Variance
September
30, 2023
September
30, 2022
Variance
Money market investments
$
6,389,437
$
5,614,595
$
774,842
$
6,965,588
$
10,969,361
$
(4,003,773)
Investment securities
25,653,616
26,553,317
(899,701)
27,463,370
29,429,998
(1,966,628)
Loans
34,034,552
32,083,150
1,951,402
32,732,877
29,965,064
2,767,813
Earning assets
66,077,605
64,251,062
1,826,543
67,161,835
70,364,423
(3,202,588)
Total assets
69,736,936
67,637,917
2,099,019
70,209,477
73,456,562
(3,247,085)
Deposits
63,337,600
61,227,227
2,110,373
62,304,083
65,486,523
(3,182,440)
Borrowings
1,097,720
1,400,319
(302,599)
1,274,682
1,046,350
228,332
Total liabilities
65,279,328
63,544,492
1,734,836
64,430,204
67,498,698
(3,068,494)
Stockholders’ equity
4,457,608
4,093,425
364,183
5,779,273
5,957,864
(178,591)
Note: Average balances exclude unrealized gains or losses on debt securities available-for-sale and the unrealized loss related to certain securities transferred from available-
for-sale to held-to-maturity.
 
Operating Highlights
Quarters ended September 30,
Nine months ended September 30,
(In thousands, except per share information)
2023
2022
Variance
2023
2022
Variance
Net interest income
 
$
534,020
$
579,619
$
(45,599)
$
1,597,344
$
1,607,793
$
(10,449)
Provision for credit losses
 
(benefit)
45,117
39,637
5,480
129,946
33,499
96,447
Non-interest income
159,549
426,494
(266,945)
481,981
738,597
(256,616)
Operating expenses
465,984
476,095
(10,111)
1,366,955
1,284,712
82,243
Income before income tax
182,468
490,381
(307,913)
582,424
1,028,179
(445,755)
Income tax expense
45,859
67,986
(22,127)
135,676
182,677
(47,001)
Net income
$
136,609
$
422,395
$
(285,786)
$
446,748
$
845,502
$
(398,754)
Net income applicable to common stock
$
136,256
$
422,042
$
(285,786)
$
445,689
$
844,443
$
(398,754)
Net income per common share – basic
$
1.90
$
5.71
$
(3.81)
$
6.22
$
11.09
$
(4.87)
Net income per common share – diluted
$
1.90
$
5.70
$
(3.80)
$
6.21
$
11.07
$
(4.86)
Dividends declared per common share
$
0.55
$
0.55
$
―
$
1.65
$
1.65
$
―
Quarters ended September 30,
Nine months ended September 30,
Selected Statistical Information
2023
2022
2023
2022
Common Stock Data
 
End market price
$
63.01
72.06
$
63.01
72.06
 
Book value per common share at period end
61.49
50.26
61.49
50.26
Profitability Ratios
 
Return on assets
0.75
%
2.31
%
0.84
%
1.54
%
 
Return on common equity
8.17
27.72
9.13
19.02
 
Net interest spread
2.37
3.16
2.52
2.95
 
Net interest spread (taxable equivalent) - Non-GAAP
2.54
3.55
2.70
3.29
 
Net interest margin
3.07
3.32
3.14
3.05
 
Net interest margin (taxable equivalent) - Non-GAAP
3.24
3.71
3.32
3.39
Capitalization Ratios
 
Average equity to average assets
8.26
%
8.36
%
8.23
%
8.11
%
 
Common equity Tier 1 capital
16.81
16.04
16.81
16.04
 
Tier I capital
 
16.88
16.10
16.88
16.10
 
Total capital
18.67
17.92
18.67
17.92
 
Tier 1 leverage
8.41
7.65
8.41
7.65
 
135
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 interest related
 
to these assets,
the
 
interest
 
has
 
been
 
converted
 
to
 
a
 
taxable
 
equivalent
 
basis,
 
using
 
the
 
applicable
 
statutory
 
income
 
tax
 
rates
 
for
 
each
 
period.
 
According to the
 
Puerto Rico
 
tax law,
 
a portion of
 
interest cost, based
 
on an equal
 
proportion of tax-exempt assets
 
to total assets,
and an
 
allocation of
 
general and
 
administrative expenses
 
should be
 
attributed to
 
exempt income,
 
reducing the
 
benefit of
 
the tax
exempt income, and as such
 
the disallowance of such
 
deduction is considered in the
 
taxable equivalent computation. The effective
yield, on
 
a taxable
 
equivalent basis, will
 
vary depending on
 
the level
 
of these expenses
 
that are
 
attributed to the
 
available exempt
income.
Net interest
 
income on
 
a taxable
 
equivalent basis
 
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
 
Tables
 
2
 
and
 
3,
 
along
 
with
 
the
reconciliation to net interest income (GAAP), for the quarter ended September 30, 2023
 
as compared with the same period in 2022,
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 September 30, 2023
●
 
For the quarter ended September 30, 2023, the Corporation recorded net income of $ 136.6 million, compared to net income of
$ 422.4
 
million for
 
the same
 
quarter of
 
the previous
 
year.
 
Net interest
 
margin for
 
the second
 
quarter of
 
2023 was
 
3.07%, a
decrease of 25 basis points when compared to
 
3.32% for the same quarter of the previous year,
 
mainly due to higher deposits
cost,
 
principally from
 
the
 
Puerto Rico
 
public sector
 
and
 
in
 
the
 
U.S.
 
,
 
which was
 
partially
 
offset
 
by
 
higher yield
 
from
 
money
market investments
 
and loans. On
 
a taxable
 
equivalent basis, the
 
net interest margin
 
was 3.24%, compared
 
to 3.71% for
 
the
same quarter of the
 
previous year. For
 
the quarter ended September 30, 2023,
 
the Corporation recorded a provision for
 
credit
losses of
 
$45.1 million, compared
 
to $39.6
 
million for the
 
same quarter of
 
the previous year.
 
The higher provision
 
for 2023
 
is
attributed to
 
higher loan
 
volumes, migrations
 
in credit
 
scores
 
and changes
 
in
 
economic variables
 
related to
 
consumer loan
portfolios. Non-interest income was
 
$159.5 million for the
 
quarter,
 
a decrease of
 
$266.9 million when compared
 
to the quarter
ended September 30,
 
2022, mainly due
 
to lower other
 
operating income, driven
 
by the gain
 
of $257.7 million
 
from the sale
 
of
Evertec
 
Inc.
 
shares
 
in
 
connection
 
with
 
the
 
business
 
acquisition
 
in
 
exchange
 
for
 
shares
 
and
 
the
 
Corporation’s
 
sale
 
of
 
its
remaining Evertec
 
shares,
 
(together the
 
“Evertec Transaction
 
s”)
 
recognized during
 
the
 
quarter ended
 
September 30,
 
2022.
Operating expenses were lower by $10.1 million
 
principally due to lower other operating
 
expenses and professional fees.
●
 
Total
 
assets at September 30, 2023 amounted to $69.7 billion, compared to $67.6 billion, at
 
December 31, 2022. The increase
was mainly
 
due to
 
higher money
 
market investments,
 
driven by
 
the increase
 
in deposits,
 
and loan
 
growth,
 
partially offset
 
by
lower debt securities available-for-sale and held-to-maturity.
●
Total
 
deposits at September 30, 2023 increased by $2.1 billion when
 
compared to deposits at December 31, 2022, mainly due
to higher Puerto Rico public sector deposits by
 
$2.6 billion.
●
 
Stockholders’ equity totaled $4.5
 
billion at September 30, 2023, an increase of $364.2 million when compared to December 31,
2022, principally
 
due to
 
net income for
 
the nine-months
 
ended September 30,
 
2023 of
 
$446.7 million, the
 
amortization of the
unrealized losses from securities
 
previously reclassified to HTM
 
as described above of
 
$103.0 million, and the
 
positive impact
from the
 
adoption of a
 
new accounting standard
 
during the year
 
of $28.8 million,
 
partially offset
 
by dividends declared
 
for the
nine-month period and the after-tax impact of
 
the unfavorable variance in net unrealized
 
losses in the portfolio of available-for-
sale securities of $120.8 million. At September 30, 2023, the Corporation’s tangible book value per common share was $50.20,
an increase of $5.23 from December 31, 2022 due
 
mainly to the increase in Stockholders’ equity during
 
the period.
 
136
●
 
Regulatory capital ratios continued to be strong. As of September
 
30, 2023, the Corporation’s common equity tier 1 capital ratio
was 16.81%, the tier 1 leverage ratio was 8.41%,
 
and the total capital ratio was 18.67%. Refer
 
to Table 9 for capital ratios.
Refer to
 
the Operating
 
Results Analysis
 
and Financial
 
Condition Analysis
 
within this
 
MD&A for
 
additional discussion
 
of significant
quarterly variances and items impacting the financial performance
 
of the Corporation.
As a financial services company,
 
the Corporation’s earnings are significantly affected
 
by general business and economic conditions
in the
 
markets which
 
we serve.
 
Lending and
 
deposit activities
 
and fee
 
income generation
 
are influenced
 
by the
 
level of
 
business
spending and
 
investment, consumer
 
income, spending
 
and savings,
 
capital market
 
activities, competition,
 
customer preferences,
interest rate conditions and prevailing market rates on
 
competing products.
The Corporation
 
operates in
 
a highly
 
regulated environment
 
and may
 
be adversely
 
affected by
 
changes in
 
federal and
 
local laws
and regulations. Also, competition with other financial institutions
 
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 2022 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 2022 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.
137
CRITICAL ACCOUNTING POLICIES / ESTIMATES
 
The accounting
 
and reporting
 
policies followed
 
by the
 
Corporation and
 
its subsidiaries
 
conform to
 
generally accepted
 
accounting
principles
 
in
 
the
 
United
 
States
 
of
 
America
 
and
 
general
 
practices
 
within
 
the
 
financial
 
services
 
industry.
 
Various
 
elements
 
of
 
the
Corporation’s accounting policies, by
 
their nature, are
 
inherently subject to
 
estimation techniques, valuation assumptions and
 
other
subjective assessments.
 
These estimates
 
are made
 
under facts
 
and circumstances
 
at a
 
point in
 
time and
 
changes in
 
those facts
and circumstances could produce actual results that
 
differ from those estimates.
 
Management has discussed
 
the development and
 
selection of the
 
critical accounting policies
 
and estimates with
 
the Corporation’s
Audit
 
Committee.
 
The
 
Corporation
 
has
 
identified
 
as
 
critical
 
accounting
 
policies
 
those
 
related
 
to:
 
(i)
 
Fair
 
Value
 
Measurement
 
of
Financial Instruments; (ii) Loans
 
and Allowance for Credit
 
Losses; (iii) Loans Acquired
 
with Deteriorated Credit Quality;
 
(iv) Income
Taxes;
 
(v) Goodwill and
 
Other Intangible Assets; and
 
(vi) Pension and Postretirement
 
Benefit Obligations. For a
 
summary of these
critical accounting policies and estimates, refer to that particular section in
 
the MD&A included in the 2022 Form
 
10-K. Also, refer to
Note 2
 
to
 
the Consolidated
 
Financial Statements
 
included in
 
the 2022
 
Form 10-K
 
for a
 
summary of
 
the Corporation’s
 
significant
accounting policies and
 
to Note
 
3 to
 
the Consolidated Financial
 
Statements included in
 
this Form
 
10-Q for information
 
on recently
adopted accounting standard updates.
OPERATING RESULTS ANALYSIS
NET INTEREST INCOME
Net interest income for
 
the quarter ended September
 
30, 2023 was $534.0
 
million, compared to $579.6
 
million in the same
 
quarter
of
 
2022, a
 
decrease of
 
$45.6 million.
 
Net interest
 
income on
 
a taxable
 
equivalent basis
 
for the
 
third quarter
 
of 2023
 
was $563.7
million compared to $646.6 million in the third
 
quarter of 2022. The decrease in the taxable equivalent net
 
interest income is related
to lower income from tax free
 
investment securities and higher disallowed interest expense in the Puerto
 
Rico tax computation. The
latter results from the increase in the Corporation’s interest
 
expense that is attributable to the tax-exempt
 
income.
 
Net interest margin for the quarter was 3.07% compared to 3.32% in the third quarter of 2022 or a decrease of 25 basis points. On a
taxable equivalent basis,
 
net interest margin for
 
the third quarter
 
of 2023 was
 
3.24%, compared to
 
3.71% for the
 
same quarter the
prior year. The main variances in net interest income on a taxable
 
equivalent basis were:
Negative variances:
 
●
Higher interest
 
expense on
 
deposits by
 
$233.2 million
 
due to
 
the increase
 
in interest
 
rates that
 
has resulted
 
in a
 
higher
cost in
 
most deposit
 
categories in
 
both BPPR
 
and PB;
 
but particularly
 
from Puerto
 
Rico government
 
deposits for
 
BPPR
which are mostly market linked
 
Partially offset by:
●
Higher interest income
 
from money market,
 
investment, and trading securities
 
by $40.5 million
 
driven mainly by
 
a higher
yield of money market
 
investments, which reflects the increase in
 
the Federal funds rate
 
of 525 basis points
 
since March
2022, partially offset by
 
a lower average volume of
 
$2.9 billion, driven by a higher
 
volume of loans and a
 
lower volume of
deposits
●
Higher
 
interest
 
income
 
from
 
loans
 
by
 
$115.7
 
million
 
resulting
 
from
 
an
 
increase
 
in
 
average
 
loans
 
by
 
$2.7
billion reflecting increases
 
in both PB and
 
BPPR and across most
 
major lending segments. Loan
 
origination
in a
 
higher interest
 
rate environment
 
and the
 
repricing of
 
adjustable-rate loans
 
resulted in a
 
higher yield
 
on
loans by 85
 
basis points. The categories
 
with the highest impact
 
were commercial loans with
 
an increase of
$72.7 million
 
in interest
 
income, or
 
112
 
basis points,
 
and consumer
 
loans which
 
increased $21.6
 
million in
interest income, or 165 basis points.
 
Net interest income
 
for the BPPR
 
segment amounted to
 
$453.9 million for
 
the third quarter
 
of 2023, compared
 
to $488.1 million
 
in
the third quarter of
 
2022. Net interest margin decreased
 
to 3.14% compared to
 
3.27% in the third
 
quarter of 2022. The decrease
 
in
net interest income
 
of $34.2 million
 
was mainly driven
 
by a higher
 
interest expense on
 
deposits by $182.3
 
million, mainly from
 
the
P.R.
 
public sector
 
deposits,
 
partially offset
 
by higher
 
volume and
 
yield on
 
loans and
 
higher yield
 
on investment
 
securities, money
market investments and trading securities. The cost of
 
interest-bearing deposits increased 180 basis points to 2.25% from
 
0.45% in
138
the same
 
quarter of
 
2022. Total
 
deposit costs
 
for the
 
quarter increased
 
by 134
 
basis points,
 
from 0.34%
 
in the
 
second quarter
 
of
2022 to 1.68%.
Net interest income for PB was $87.4 million
 
for the quarter ended September 30, 2023,
 
compared to $98.9 million during the third
quarter of 2022, a decrease of $11.4 million. Net interest margin decreased
 
94 basis points when compared to the
 
third quarter of
2022 to 2.90%. The decrease in net interest
 
margin was mostly driven by a higher
 
cost of deposits, partially offset by the increase in
loan volume and yield of loans due to origination
 
of loans in a higher interest rate environment
 
and the repricing of adjustable-rate
loans. The cost of interest-bearing deposits was
 
3.31% compared to 0.85%, or an increase of
 
246 basis points, while total deposit
cost was 2.84% compared to 0.67% in the
 
third quarter of 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
139
Table 2 - Analysis of Levels & Yields
 
on a Taxable Equivalent Basis
 
(Non-GAAP)
Quarter ended September 30,
Variance
Average Volume
Average Yields / Costs
Interest
Attributable to
2023
2022
Variance
2023
2022
 
Variance
2023
2022
Variance
Rate
Volume
(In millions)
(In thousands)
$
7,292
$
6,721
$
571
5.40
%
2.18
%
3.22
%
Money market investments
$
99,285
$
36,966
$
62,319
$
58,920
$
3,399
28,396
31,859
(3,463)
2.31
2.33
(0.02)
Investment securities [1]
165,319
186,847
(21,528)
(1,510)
(20,018)
34
40
(6)
4.43
6.09
(1.66)
Trading securities
 
375
617
(242)
(150)
(92)
Total money market,
 
investment and trading
35,722
38,620
(2,898)
2.95
2.31
0.64
securities
264,979
224,430
40,549
57,260
(16,711)
Loans:
16,611
14,750
1,861
6.64
5.52
1.12
Commercial
277,977
205,237
72,740
44,889
27,851
865
835
30
8.99
6.38
2.61
Construction
19,580
13,431
6,149
5,667
482
1,669
1,503
166
6.50
5.90
0.60
Leasing
27,142
22,154
4,988
2,405
2,583
7,504
7,264
240
5.42
5.42
-
Mortgage
101,700
98,348
3,352
93
3,259
3,147
2,818
329
13.39
11.74
1.65
Consumer
105,042
83,407
21,635
11,164
10,471
3,657
3,562
95
8.47
7.93
0.54
Auto
78,055
71,226
6,829
4,889
1,940
33,453
30,732
2,721
7.24
6.39
0.85
Total loans
609,496
493,803
115,693
69,107
46,586
$
69,175
$
69,352
$
(177)
5.02
%
4.12
%
0.90
%
Total earning assets
$
874,475
$
718,233
$
156,242
$
126,367
$
29,875
Interest bearing deposits:
$
25,652
$
25,993
$
(341)
3.31
%
0.56
%
2.75
%
NOW and money market [2]
$
213,957
$
36,448
$
177,509
$
178,787
$
(1,278)
14,875
15,514
(639)
0.73
0.20
0.53
Savings
 
27,373
7,966
19,407
20,380
(973)
7,986
6,957
1,029
2.62
0.94
1.68
Time deposits
52,791
16,484
36,307
29,147
7,160
48,513
48,464
49
2.41
0.50
1.91
Total interest bearing
 
deposits
294,121
60,898
233,223
228,314
4,909
15,038
15,872
(834)
Non-interest bearing demand
deposits
63,551
64,336
(785)
1.84
0.38
1.46
Total deposits
294,121
60,898
233,223
228,314
4,909
108
155
(47)
5.45
2.36
3.09
Short-term borrowings
1,478
921
557
976
(419)
Other medium and
 
1,172
913
259
5.20
4.29
0.91
long-term debt
15,167
9,798
5,369
1,050
4,319
Total interest bearing
49,793
49,532
261
2.48
0.57
1.91
liabilities (excluding demand
deposits)
310,766
71,617
239,149
230,340
8,809
4,344
3,948
396
Other sources of funds
$
69,175
$
69,352
$
(177)
1.78
%
0.41
%
1.37
%
Total source of funds
310,766
71,617
239,149
230,340
8,809
Net interest margin/
 
3.24
%
3.71
%
(0.47)
%
income on a taxable
equivalent basis (Non-
GAAP)
563,709
646,616
(82,907)
$
(103,973)
$
21,066
2.54
%
3.55
%
(1.01)
%
 
Net interest spread
 
Net interest spread
29,689
66,997
(37,308)
Net interest margin/ income
3.07
%
3.32
%
(0.25)
%
non-taxable equivalent basis
(GAAP)
$
534,020
$
579,619
$
(45,599)
Note: The changes that are not due solely to volume or
 
rate are allocated to volume and rate based on the
 
proportion of the change in each category.
[1] Average balances exclude unrealized gains or losses
 
on debt securities available-for-sale and the unrealized
 
loss related to certain securities transferred from
available-for-sale to held-to-maturity.
[2] Includes interest bearing demand deposits corresponding
 
to certain government entities in Puerto Rico.
140
Net interest
 
income for
 
the nine-months
 
period ended
 
September 30,
 
2023 was
 
$1.6 billion,
 
or $10.4
 
million lower
 
than the
 
same
period in
 
2022. Taxable
 
equivalent net
 
interest income
 
was $1.7
 
billion, a
 
decrease of
 
$97.8 million
 
when compared
 
to the
 
same
period in 2022. Net interest margin was 3.14%, an increase of 9
 
basis points when compared to 3.05% in 2022. The increase in net
interest margin was mainly driven by a higher yield on earning assets due to a higher interest rate environment. Net interest margin,
on
 
a
 
taxable
 
equivalent basis,
 
for
 
the
 
nine-months ended
 
September
 
30,
 
2023,
 
was 3.32%,
 
a
 
decrease
 
of
 
7
 
basis
 
points
 
when
compared to the 3.39%
 
for the same period
 
of 2022. The drivers
 
of the variances in
 
net interest income for
 
the nine-months period
are:
 
Negative variances:
●
 
Higher interest
 
expense from
 
deposits by
 
$617.3 million
 
mainly due
 
to the
 
increase in
 
interest rates
 
that has
 
resulted in
 
a
higher cost in most deposit categories in both BPPR and PB; but particularly from Puerto Rico government deposits for BPPR
which are mostly market linked.
Partially offset by:
●
 
Higher interest
 
income from
 
investment securities,
 
trading
 
and money
 
market investments
 
by
 
$182.5 resulting
 
from
 
higher
yield of the
 
portfolio by 96
 
basis points mainly
 
driven by money
 
market investments, driven
 
by the short-term
 
investments in
rising rate interest environment.
●
 
Higher interest income from commercial loans by
 
$227.0 million due to higher yield by
 
124 basis points and higher volume of
$2.0 billion, increasing in BPPR and PB.
●
 
Higher interest
 
income from
 
consumer loans
 
by $73.6
 
million mostly
 
due to
 
a higher
 
average volume of
 
personal loans
 
and
credit cards.
●
 
Higher interest income from construction loans by
 
$16.9 million due to higher yield by 292 basis
 
points.
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
 
nine-months ended September 30, 2023, amounted
 
to $16.9 million, compared
to $36.3 million in the same period of 2022.
 
The decrease of $19.4 million is mainly related
 
to lower amortized fees resulting from
the forgiveness of PPP loans during 2022, lower amortization
 
of premium on auto loans purchased and
 
resulting from the
cancellation of PCD loans.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
141
Table 3 – Analysis of Levels & Yields
 
on a Taxable Equivalent Basis
 
from Continuing Operations (Non-GAAP)
For the nine months ended September 30,
Variance
Average Volume
Average Yields / Costs
Interest
Attributable to
2023
2022
Variance
2023
2022
 
Variance
2023
2022
Variance
Rate
Volume
(In millions)
(In thousands)
$
6,966
$
10,969
$
(4,003)
5.10
%
0.82
%
4.28
%
Money market investments
$
265,785
$
67,172
$
198,613
$
231,496
$
(32,883)
28,205
29,371
(1,166)
2.18
2.16
0.02
Investment securities [1]
460,641
475,088
(14,447)
4,862
(19,309)
32
59
(27)
4.52
6.23
(1.71)
Trading securities
 
1,084
2,725
(1,641)
(621)
(1,020)
Total money market,
 
investment and trading
35,203
40,399
(5,196)
2.76
1.80
0.96
securities
727,510
544,985
182,525
235,737
(53,212)
Loans:
16,206
14,245
1,961
6.50
5.26
1.24
Commercial
 
787,381
560,408
226,973
143,107
83,866
778
781
(3)
8.79
5.87
2.92
Construction
51,178
34,305
16,873
17,017
(144)
1,630
1,447
183
6.31
5.92
0.39
Leasing
77,135
64,225
12,910
4,440
8,470
7,434
7,315
119
5.45
5.33
0.12
Mortgage
303,777
292,253
11,524
6,712
4,812
3,082
2,670
412
13.10
11.44
1.66
Consumer
302,050
228,401
73,649
35,342
38,307
3,603
3,507
96
8.31
8.03
0.28
Auto
223,929
210,623
13,306
7,455
5,851
32,733
29,965
2,768
7.13
6.20
0.93
Total loans
1,745,450
1,390,215
355,235
214,073
141,162
$
67,936
$
70,364
$
(2,428)
4.86
%
3.67
%
1.19
%
Total earning assets
$
2,472,960
$
1,935,200
$
537,760
$
449,810
$
87,950
Interest bearing deposits:
$
24,407
$
26,385
$
(1,978)
2.93
%
0.26
%
2.67
%
NOW and money market [2]
$
534,567
$
52,072
$
482,495
$
488,704
$
(6,209)
14,889
16,100
(1,211)
0.62
0.18
0.44
Savings
 
69,262
21,430
47,832
52,158
(4,326)
7,603
6,913
690
2.23
0.77
1.46
Time deposits
126,995
40,005
86,990
71,425
15,565
46,899
49,398
(2,499)
2.08
0.31
1.77
Total interest bearing
 
deposits
730,824
113,507
617,317
612,287
5,030
15,405
16,088
(683)
Non-interest bearing demand
deposits
62,304
65,486
(3,182)
1.57
0.23
1.34
Total deposits
730,824
113,507
617,317
612,287
5,030
160
124
36
5.02
1.34
3.68
Short-term borrowings
5,987
1,249
4,738
4,298
440
Other medium and
 
1,140
948
192
5.12
4.25
0.87
long-term debt
43,660
30,168
13,492
7,506
5,986
Total interest bearing
48,199
50,470
(2,271)
2.16
0.38
1.78
liabilities (excluding demand
deposits)
780,471
144,924
635,547
624,091
11,456
4,332
3,806
526
Other sources of funds
$
67,936
$
70,364
$
(2,428)
1.54
%
0.28
%
1.26
%
Total source of funds
780,471
144,924
635,547
624,091
11,456
3.32
%
3.39
%
(0.07)
%
Net interest margin/ income
on a taxable equivalent basis
(Non-GAAP)
1,692,489
1,790,276
(97,787)
$
(174,281)
$
76,494
2.70
%
3.29
%
(0.59)
%
Net interest spread
Taxable equivalent
adjustment
95,145
182,483
(87,338)
3.14
%
3.05
%
0.09
%
Net interest margin/ income
non-taxable equivalent basis
(GAAP)
$
1,597,344
$
1,607,793
$
(10,449)
Note: The changes that are not due solely to volume or
 
rate are allocated to volume and rate based on the
 
proportion of the change in each category.
[1] Average balances exclude unrealized gains or losses
 
on debt securities available-for-sale and the unrealized
 
loss related to certain securities transferred
from available-for-sale to held-to-maturity.
142
Provision for Credit Losses - Loans Held-in-Portfolio
 
and Unfunded Commitments
For the
 
quarter ended
 
September 30,
 
2023, the
 
Corporation recorded an
 
expense of
 
$45.2 million
 
for its
 
reserve for
 
credit losses
related to
 
loans held-in-portfolio
 
and unfunded
 
commitments. The
 
provision for
 
credit loss
 
related to
 
the loans-held-in-portfolio
 
for
the quarter
 
ended September 30,
 
2023 was
 
$43.5 million, compared
 
to a
 
provision expense of
 
$39.5 million for
 
the quarter
 
ended
September 30, 2022.
 
The provision expense
 
was driven by
 
the consumer loan
 
portfolio, mainly Auto and
 
Personal Loans, partially
offset by reductions in the provision expense for
 
commercial loans. Changes in credit quality,
 
higher volumes, and the impact of the
macroeconomic scenario contributed to the higher provision
 
expense for the consumer loans segment. The implementation
 
of a new
ACL
 
model
 
for
 
the
 
U.
 
S.
 
commercial
 
real
 
estate
 
loan
 
segments,
 
as
 
well
 
as
 
higher
 
recoveries,
 
contributed
 
to
 
the
 
reduction
 
in
provision expense
 
for the
 
commercial loan
 
segment. The
 
provision related
 
to unfunded
 
commitments for
 
the third
 
quarter of
 
2023
was $1.7 million, compared to a provision expense
 
of $0.4 million for the same period of 2022.
 
As
 
part
 
of
 
the
 
Corporation’s
 
model
 
governance
 
procedures
 
a
 
new
 
model
 
was
 
implemented
 
for
 
the
 
U.S
 
commercial
 
real
 
estate
segment. The
 
new model
 
enhances techniques used
 
to capture
 
default activity
 
within the
 
Corporation’s geographical footprint.
 
As
part
 
of
 
the
 
implementation
 
analysis
 
management
 
evaluated
 
the
 
credit
 
metrics
 
of
 
the
 
portfolio
 
such
 
as
 
risk
 
ratings,
 
delinquency
levels, and low exposure to
 
the commercial office sector.
 
Qualitative reserves continue to be
 
maintained to address risks within
 
the
U. S.
 
commercial real
 
estate segment. The
 
new model
 
including qualitative reserve
 
accounted for $15
 
million of
 
PB’s reduction
 
in
ACL.
For the
 
quarter ended
 
September 30,
 
2023, the
 
Corporation recorded
 
a provision
 
for credit
 
loss of
 
$54.0 million
 
for loans-held-in-
portfolio for the
 
BPPR segment, compared to
 
a provision expense of
 
$28.7 million for
 
the quarter ended
 
September 30, 2022.
 
The
Popular
 
U.S.
 
segment
 
recorded
 
a
 
reserve
 
release
 
of
 
$10.5
 
million
 
for
 
the
 
quarter
 
ended
 
September
 
30,
 
2023,
 
compared
 
to
 
a
provision of $10.8 million for the same quarter in
 
2022.
For the nine-months ended September 30,2023, the Corporation recorded a
 
provision for credit loss of $130.8 million for its
 
reserve
for credit
 
losses related
 
to loans
 
held-in-portfolio and
 
unfunded commitments.
 
The provision
 
expense related
 
to the
 
loans-held-in-
portfolio for
 
the nine-months
 
ended September 30,2023
 
was $126.3
 
million, compared
 
to a
 
provision of
 
$35.0 million for
 
the nine-
months ended September
 
30,2022. The higher
 
provision in 2023
 
is attributable to
 
higher loan volumes,
 
migrations in credit
 
scores
and changes in economic
 
variables related to consumer loan
 
portfolios, partially offset by changes
 
in economic variables related to
mortgage
 
loan
 
portfolios.
 
The
 
provision
 
for
 
unfunded
 
commitments
 
for
 
the
 
nine-months
 
ended
 
September
 
30,2023
 
reflected
 
an
expense of $4.5 million, compared to a provision
 
benefit of $0.6 million for the same period
 
of 2022.
The
 
provision for
 
credit
 
losses
 
for
 
the
 
BPPR
 
segment
 
was
 
an
 
expense
 
of
 
$127.6
 
million
 
for
 
the
 
nine-months ended
 
September
30,2023,
 
compared
 
to
 
a
 
provision
 
of
 
$25.2
 
million
 
for
 
the
 
nine-months
 
ended
 
September
 
30,2022.
 
The
 
Popular
 
U.S.
 
segment
recorded a reserve release of $1.3 million for the
 
nine-months ended September 30,2023, compared to a provision expense of $9.8
million for the same period in 2022.
 
At
 
September 30,
 
2023, the
 
total
 
allowance for
 
credit
 
losses for
 
loans held-in-portfolio
 
amounted to
 
$711.1
 
million, compared
 
to
$720.3
 
million
 
as
 
of
 
December
 
31,
 
2022.
 
The
 
ratio
 
of
 
the
 
allowance
 
for
 
credit
 
losses
 
to
 
loans
 
held-in-portfolio
 
was
 
2.09%
 
at
September 30,
 
2023, compared
 
to 2.25%
 
at December
 
31, 2022.
 
During the
 
first quarter,
 
the Corporation
 
adopted ASU
 
2022-02
which resulted in a reduction of approximately $46 million, $29 million net of tax, in the reserve related to TDRs
 
which was recorded
as an adjustment
 
to the beginning
 
balance of retained
 
earnings. As discussed
 
in Note 9
 
to the Consolidated
 
Financial Statements,
within the process to estimate its
 
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
 
9
 
to
 
the
Consolidated Financial
 
Statements, for
 
additional information
 
on the
 
Corporation’s methodology
 
to estimate
 
its ACL.
 
Refer to
 
the
Credit Risk
 
section of
 
this MD&A
 
for a
 
detailed analysis
 
of net
 
charge-offs, non-performing
 
assets, the
 
allowance for
 
credit losses
and selected loan losses statistics.
Provision for Credit Losses – Investment Securities
At September 30, 2023,
 
the total allowance for
 
credit losses for this
 
portfolio amounted to $6.1
 
million, compared to $6.9
 
million as
of December 31, 2022. Refer to Note 7
to Consolidated Financial Statements
for additional information on the ACL for this portfolio.
143
Non-Interest Income
Non-interest
 
income
 
amounted to
 
$159.5
 
million
 
for
 
the
 
quarter ended
 
September
 
30,
 
2023, compared
 
to
 
$426.5 million
 
for
 
the
same quarter of the previous year. The main factors that contributed
 
to the variance in non-interest income were:
●
 
lower other operating income by $265.9 million mainly due
 
to the gain on sale related to the investment
 
in Evertec Transactions
recognized in July 2022; and
●
 
an unfavorable variance of $4.1 million mainly due
 
to fair value adjustments of mortgage servicing
 
rights (“MSRs”);
partially offset by:
●
 
higher other service fees by $7.0 million mainly due
 
to an increase in credit cards transaction volume related
 
fee income.
Non-interest income amounted to $482.0 million for the nine months ended September 30, 2023, compared to $738.6 million for the
same period
 
of the
 
previous year.
 
Non-Interest income
 
was impacted
 
by Evertec
 
Transactions and
 
the related
 
adjustment. Other
factors that contributed to the variance
 
in non-interest income were:
 
●
 
an unfavorable variance of $20.8 million mainly due
 
to fair value adjustments of mortgage servicing rights
 
(“MSRs”);
partially offset by:
●
 
higher other service fees by $32.8 million mainly due
 
to an increase in credit cards transaction volume
 
related fee income.
144
Operating Expenses
Operating
 
expenses
 
amounted
 
to
 
$466.0
 
million
 
for
 
the
 
quarter
 
ended
 
September
 
30,
 
2023,
 
a
 
decrease
 
of
 
$10.1
 
million,
 
when
compared with the same quarter of 2022. The
 
variance in operating expenses was driven primarily
 
by:
●
 
lower incentive compensation and profit-sharing accrual
 
by $14.5 million;
●
 
lower other
 
taxes expense
 
by $7.4
 
million mainly
 
due to
 
the reversal
 
of an
 
accrual related
 
to regulatory
 
examination fees
 
in
BPPR by $8.2 million;
●
 
lower professional
 
fees
 
by $9.1
 
million mainly
 
due to
 
lower advisory
 
expenses by
 
$7.2 million
 
resulting from
 
an increase
 
in
projects related to the Corporation’s transformation initiative
 
that are being managed with internal personnel; and
●
 
lower other
 
operating expenses
 
by $14.9
 
million mainly
 
due to
 
the effect
 
of prior
 
year expense
 
of $17.3 million
 
related to
 
the
Evertec Transactions;
 
partially offset
 
by
 
higher pension
 
plan cost
 
by
 
$4.8 million
 
as a
 
result
 
of
 
annual changes
 
in actuarial
assumptions;
partially offset by:
●
 
higher salaries
 
expense by
 
$11.9
 
million as
 
a result
 
of merit
 
and market
 
related increases,
 
minimum salary
 
increases during
the first quarter of 2023 and higher headcount;
●
 
higher technology
 
and software
 
expenses by $4.6
 
million mainly
 
due to
 
higher software amortization
 
expense by
 
$1.7 million
and higher programming services and application hosting
 
expenses by $1.9 million;
 
●
 
higher processing and
 
transactional services by
 
$5.5 million mainly due
 
to incentives received
 
during July 2022
 
related to the
ATH Network Participation Agreement entered into in connection with the Evertec
 
Business Acquisition Transaction;
 
and
●
 
the
 
goodwill impairment
 
charge
 
related
 
to
 
our
 
U.S.
 
based
 
leasing
 
subsidiary
 
of
 
$23
 
million
 
recorded in
 
2023,
 
due
 
to
 
lower
forecasted
 
cash
 
flows
 
and
 
an
 
increase
 
in
 
the
 
rate
 
used
 
to
 
discount
 
cash
 
flows,
 
compared
 
to
 
an
 
impairment
 
of
 
$9
 
million
recorded in 2022, an unfavorable variance of $14
 
million.
Operating expenses
 
amounted to
 
$1.4 billion
 
for the
 
nine months
 
ended September
 
30, 2023,
 
an increase
 
of $82.2
 
million when
compared with the same period of 2022, driven primarily
 
by:
●
 
higher personnel costs
 
by $53.8 million
 
mainly due
 
to higher
 
salaries by
 
$61.7 million
 
as a
 
result of merit
 
and market related
increases, minimum
 
salary increases
 
during the
 
first quarter
 
of 2023
 
and higher
 
headcount, an
 
increase in
 
health insurance
costs
 
by
 
$6.5
 
million,
 
and
 
higher
 
payroll
 
taxes
 
and
 
other
 
compensation
 
expenses
 
by
 
$16.1
 
million;
 
partially
 
offset
 
by
 
a
decrease in incentive compensation and profit-sharing
 
accrual by $30.3 million;
 
●
 
higher processing and transactional services expenses by $14.3 million mainly due
 
to broad based retail customers' debit card
replacement costs
 
incurred during the
 
second quarter
 
of 2023
 
of $2.8
 
million, higher credit
 
and debit card
 
processing related
fees by
 
$2.7 million
 
and higher
 
merchant processing
 
fees by
 
$5.6 million
 
mainly due
 
to incentives
 
received during July
 
2022
related
 
to
 
the
 
ATH
 
Network
 
Participation
 
Agreement
 
entered
 
into
 
in
 
connection
 
with
 
the
 
Evertec
 
Business
 
Acquisition
Transaction;
●
 
higher business
 
promotion expenses
 
by $6.2
 
million mainly
 
due to
 
higher customer
 
rewards programs
 
expense in
 
our credit
card business by $6.7 million;
 
●
 
higher FDIC deposit
 
insurance expense by
 
$4.2 million mainly
 
due to amendments
 
to the Deposit
 
Insurance Fund restoration
plan implemented
 
by the
 
FDIC that
 
increased base
 
deposit assessment
 
rate by
 
2 basis
 
points, annually;
 
partially offset
 
by a
decrease
 
in
 
the
 
assessment
 
rate
 
driven
 
by
 
the
 
adoption
 
of
 
the
 
Financial
 
Accounting
 
Standards
 
Board
 
(‘’FASB’’)
 
issued
Accounting Standards Update (‘’ASU’’) 2022-02; and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
145
●
 
a higher goodwill impairment charge by $14.0 million
 
as discussed above.
partially offset by:
●
 
lower other
 
taxes expense
 
by $6.2
 
million mainly
 
due to
 
the reversal
 
of an
 
accrual related
 
to regulatory
 
examination fees
 
in
BPPR; and
●
 
lower
 
other
 
operating
 
expenses
 
by
 
$11.5
 
million
 
mainly
 
due
 
to
 
the
 
effect
 
of
 
prior
 
year
 
expense
 
related
 
to
 
the
 
Evertec
Transactions
 
of
 
$17.3 million
 
and
 
$6.4
 
million
 
of
 
lower sundry
 
losses;
 
partially
 
offset
 
by
 
higher
 
pension plan
 
cost
 
by
 
$14.4
million due to changes in actuarial assumption.
The Corporation embarked on a
 
broad-based multi-year, technological and
 
business process transformation during the second
 
half
of 2022. As part of this transformation, we
 
aim to expand our digital capabilities, modernize our technology platform, and
 
implement
agile
 
and
 
efficient
 
business
 
processes
 
across
 
the
 
entire
 
Corporation.
 
To
 
facilitate
 
the
 
transparency
 
of
 
the
 
progress
 
with
 
the
transformation initiative
 
and to
 
better portray
 
the level
 
of technology
 
related expenses
 
categorized by
 
the nature
 
of the
 
expense,
effective
 
in the
 
fourth quarter
 
of
 
2022,
 
the
 
Corporation has
 
separated technology,
 
professional fees
 
and
 
transactional and
 
items
processing related expenses
 
as standalone expense categories
 
in the accompanying
 
Consolidated statement of
 
operations. There
were
 
no
 
changes
 
to
 
the
 
total
 
operating
 
expenses
 
presented.
 
Prior
 
periods
 
amount
 
in
 
the
 
financial
 
statements
 
and
 
related
disclosures have been reclassified to conform to
 
the current presentation.
Table 4 - Operating Expenses
Quarters ended September 30,
Nine months ended September 30,
(In thousands)
2023
2022
Variance
2023
2022
Variance
Personnel costs:
Salaries
$
127,832
$
115,887
$
11,945
$
378,126
$
316,407
$
61,719
Commissions, incentives and other bonuses
27,670
42,209
(14,539)
86,025
116,319
(30,294)
Pension, postretirement and medical insurance
16,985
17,120
(135)
49,871
43,633
6,238
Other personnel costs, including payroll taxes
20,665
18,627
2,038
69,358
53,268
16,090
Total personnel
 
costs
193,152
193,843
(691)
583,380
529,627
53,753
Net occupancy expenses
28,100
27,420
680
81,304
78,357
2,947
Equipment expenses
8,905
8,735
170
26,878
25,798
1,080
Other taxes
8,590
15,966
(7,376)
41,290
47,461
(6,171)
Professional fees
38,514
47,662
(9,148)
122,077
122,884
(807)
Technology and
 
software expenses
72,930
68,341
4,589
213,843
213,638
205
Processing and transactional services:
Credit and debit cards
13,762
13,531
231
37,896
35,177
2,719
Other processing and transactional services
24,137
18,837
5,300
70,713
59,181
11,532
Total processing
 
and transactional services
37,899
32,368
5,531
108,609
94,358
14,251
Communications
4,220
3,858
362
12,483
11,028
1,455
Business promotion:
Rewards and customer loyalty programs
15,988
14,344
1,644
44,962
38,294
6,668
Other business promotion
7,087
10,004
(2,917)
22,067
22,490
(423)
Total business
 
promotion
23,075
24,348
(1,273)
67,029
60,784
6,245
FDIC deposit insurance
8,932
6,610
2,322
24,600
20,445
4,155
Other real estate owned (OREO) income
(5,189)
(2,444)
(2,745)
(10,197)
(12,963)
2,766
Other operating expenses:
Operational losses
5,504
7,145
(1,641)
16,584
23,031
(6,447)
All other
17,557
32,448
(14,891)
53,690
58,783
(5,093)
Total other operating
 
expenses
23,061
39,593
(16,532)
70,274
81,814
(11,540)
Amortization of intangibles
795
795
-
2,385
2,481
(96)
Goodwill impairment charge
23,000
9,000
14,000
23,000
9,000
14,000
Total operating
 
expenses
$
465,984
$
476,095
$
(10,111)
$
1,366,955
$
1,284,712
$
82,243
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
146
Table 5 - Operating Expenses
 
Reclassification
Quarter ended
Nine months ended
30-Sep-22
30-Sep-22
Financial statement line item
As reported
Adjustments
Adjusted
As reported
Adjustments
Adjusted
Equipment expenses
$
26,626
$
(17,891)
$
8,735
$
75,193
$
(49,395)
$
25,798
Professional fees
112,221
(64,559)
47,662
335,590
(212,706)
122,884
Technology and
 
software expenses
-
68,341
68,341
-
213,638
213,638
Processing and transactional services
-
32,368
32,368
-
94,358
94,358
Communications
6,224
(2,366)
3,858
18,364
(7,336)
11,028
Other operating expenses
55,486
(15,893)
39,593
120,373
$
(38,559)
$
81,814
Net effect on other operating expenses
$
200,557
$
-
$
200,557
$
549,520
$
-
$
549,520
Income Taxes
For the quarter and nine months ended September 30, 2023, the Corporation recorded an income tax expense of $45.9
 
and $135.7
million, respectively, with an effective
 
tax rate (ETR) of 25.1%, and $23.3%, respectively, compared
 
to income tax expense of $68.0
million and $182.7 million with an effective tax rate of
 
13.9% and 17.8% for the quarter and nine
 
months ended September 30, 2022,
respectively.
 
The decrease in
 
income tax expense
 
for the
 
quarter and nine
 
months period ended
 
September 30, 2023,
 
reflects the
impact of lower pre-tax income, including lower
 
volume of income subject to preferential tax rates.
At September 30, 2023, the Corporation had
 
a net deferred tax asset amounting to
 
$0.9 billion, net of a valuation
 
allowance of $0.5
billion. The net deferred tax asset related to the U.S.
 
operations was $0.3 billion, net of a valuation
 
allowance of $0.4 billion.
Refer to
 
Note 31
 
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.
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 33
 
to the Consolidated Financial Statements.
 
The Corporate group reported a net
 
income of $2.8 million for the
 
quarter ended September 30, 2023, compared with
 
a net income
of $132.3 million for the same quarter of the previous
 
year. The decrease in net income was mainly attributed to the $128.8
 
million in
after-tax gains
 
recognized by
 
the Corporation
 
as a
 
result of
 
the Evertec
 
stock sale
 
and related
 
accounting adjustments during
 
the
quarter ended September
 
30, 2022. For
 
the nine months
 
ended September 30,
 
2023, the Corporate
 
group reported net
 
income of
$8.8 million, compared to a
 
net income of $143.4 million for
 
the same period of the
 
previous year. The decrease
 
in net income was
due to
 
impact on 2022
 
of the
 
Evertec Stock Sale
 
and related accounting
 
adjustments; and attributed
 
to the
 
equity pickup of
 
$21.2
million
 
for
 
the
 
nine
 
months
 
ended
 
September
 
30,2022
 
from
 
the
 
investment
 
in
 
Evertec,
 
Inc.
 
that
 
is
 
not
 
reflected
 
in
 
2023
 
as
 
the
Corporation sold its entire ownership stake in
 
Evertec in August 2022.
 
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
 
$122.7 million for
 
the quarter ended
 
September
30, 2023, compared with
 
net income of $263.7
 
million for the same
 
quarter of the previous year.
 
The factors that contributed to
 
the
variance in the financial results included the following:
 
●
 
Lower net interest income by $34.2 million mainly
 
due to:
147
●
 
higher interest
 
expense on
 
deposits by
 
$182.3 million
 
mainly due
 
to higher
 
costs on
 
the market-linked
 
Puerto
Rico
 
government
 
deposits, and
 
the
 
higher interest
 
rate
 
environment’s
 
impact on
 
the cost
 
of
 
NOW accounts,
time deposits, and savings deposits,
partially offset by
●
 
higher
 
interest
 
income
 
from
 
money
 
market
 
and
 
investment
 
securities
 
by
 
$67.4
 
million
 
mainly
 
due
 
to
 
higher
yields driven by the increase in interest rates,
●
 
higher interest income
 
from loans by
 
$80.8 million mainly
 
due to higher
 
yields from commercial
 
and consumer
loans,
 
primarily
 
personal
 
loans,
 
credit
 
cards
 
and
 
auto
 
loans
 
due
 
to
 
the
 
increase
 
in
 
rates,
 
as
 
well
 
as
 
higher
average balances across all portfolios except construction
 
loans,
The net interest margin
 
for the quarter ended
 
September 30, 2023 was 3.14%
 
compared to 3.27% for the
 
same quarter in the
previous year. The decrease in net interest margin is driven by higher
 
cost of deposits and the
 
earnings assets mix;
●
 
A provision
 
for loan
 
losses expense of
 
$51.9 million, compared
 
to a
 
provision expense of
 
$29.8 million in
 
quarter ended
September 30,
 
2022, or
 
an unfavorable
 
variance of
 
$22.1 million
 
mainly driven
 
by the
 
consumer loan
 
segment, mainly
auto and personal loans; partially offset by reductions
 
in the provision for commercial loans;
 
●
 
Non-interest income was lower by $117.7 million mainly due to:
●
 
lower
 
other
 
operating
 
income
 
by
 
$118.4
 
million
 
mostly
 
due
 
to
 
lower
 
earnings
 
as
 
a
 
result
 
of
 
the
 
Evertec
Transactions
 
during the quarter ended September 30,2022;
●
 
lower income
 
from mortgage
 
banking activities
 
by $4.0
 
million mainly
 
due to
 
an unfavorable
 
variance of
 
$3.4
million in the fair value adjustment of mortgage service
 
rights.
 
●
 
lower service charges on
 
deposit accounts by $2.3
 
million, mainly due to
 
lower ACH fees due
 
to the change in
policy of eliminating insufficient fund fees and modifying
 
overdraft fees implemented in the third quarter
 
of 2022,
partially offset by
●
 
Higher other
 
service fees
 
by $8.4
 
million mainly
 
due to
 
higher credit
 
card fees
 
by $2.9
 
million and
 
debit card
fees by
 
$1.5 million mainly
 
as a result
 
of higher transactional volume
 
and higher merchant
 
acquiring fees from
the revenue sharing agreement with Evertec Inc. by
 
$0.4 million.
●
 
Lower operating expenses by $25.7 million mostly
 
due to:
●
 
lower other
 
operating expenses
 
by
 
$27.9 million
 
mainly due
 
to
 
a $17.3
 
million charge
 
related to
 
the Evertec
Transactions
 
on the
 
third quarter
 
of 2022
 
and lower
 
charges allocated
 
from the
 
Corporate segment
 
group by
$9.3 million; partially offset by $4.4 million of higher pension
 
expense based on actuarial assumptions;
●
 
lower
 
other
 
operating
 
taxes
 
expenses
 
by
 
$7.7
 
million
 
mainly
 
due
 
to
 
the
 
reversal
 
of
 
an
 
accrual
 
related
 
to
regulatory examination fees in BPPR by $8.2 million;
●
 
lower personnel costs by $0.1 million driven by
 
lower profit-sharing expense by $8.3 million;
●
 
lower business
 
promotions by
 
$0.5 million
 
mainly due
 
to lower
 
donations expense
 
related to
 
natural disasters
response and other donations;
●
 
higher net recoveries from OREO by $2.6 million
 
mainly due to an increase in units sold;
148
partially offset by
●
 
higher
 
processing
 
and
 
transactional
 
services
 
by
 
$5.3
 
million
 
mainly
 
due
 
to
 
higher
 
credit
 
and
 
debit
 
card
processing expense as result of higher transactional
 
volumes;
 
●
 
higher technology
 
and software
 
expenses by
 
$2.8 million
 
in part
 
due to
 
expense savings
 
associated with
 
the
acquired services from Evertec during the quarter ended
 
September 30,2022;
●
 
higher professional fees of $3.8 million mainly due
 
to costs associated with regulatory and compliance
 
efforts;
 
●
 
Lower income tax expense by $7.3 million is
 
mainly due lower income before tax.
 
For
 
the
 
nine
 
months
 
ended
 
September
 
30,2023,
 
the
 
BPPR
 
segment
 
recorded
 
net
 
income
 
of
 
$387.4
 
million
 
compared
 
to
 
a
 
net
income of $621.8 million for the same period of the previous year. The results for the nine months ended September 30,2023 reflect
a provision
 
expense of the
 
reserve for credit
 
losses of $127.0
 
million, reflective of
 
higher loan volumes,
 
migrations in credit
 
scores
and changes
 
in economic
 
variables related
 
to consumer
 
loan portfolios,
 
compared to
 
a provision
 
expense of
 
$24.9 million
 
for the
nine months-period ended September 30,2022.
 
The other factors that contributed to the variance in the financial results
 
included the
following:
●
 
Higher net interest income by $5.7 million mainly
 
due to:
●
 
higher
 
interest
 
income
 
from
 
money market
 
and
 
investment securities
 
by
 
$249.3 million
 
mainly
 
due
 
to
 
higher
yields
 
from
 
money market
 
investments,
 
U.S.
 
Treasury
 
securities and
 
mortgage
 
backed
 
securities due
 
to
 
the
increase in rates,
●
 
higher interest
 
income from
 
loans by
 
$246.5 million
 
mainly due
 
to higher
 
average balance
 
from
 
all portfolios
except construction loans and higher yields due to the
 
increase in rates;
 
partially offset by
●
 
higher interest
 
expense on
 
deposits by
 
$489.5 million
 
mainly due
 
to higher
 
costs on
 
the market-linked
 
Puerto
Rico
 
government
 
deposits, and
 
the
 
higher interest
 
rate
 
environment’s
 
impact on
 
the cost
 
of
 
NOW accounts,
time deposits, and savings deposits.
The net interest margin for the nine
 
months ended September 30,2023 was 2.67% compared to 2.49% for the
 
same quarter in
the previous
 
year.
 
The increase
 
in net
 
interest margin
 
is driven
 
by the
 
earning assets
 
mix;
 
partially offset
 
by higher
 
cost
 
of
deposits.
●
 
An unfavorable variance of $102.0 million on the provision for loan
 
losses, due to higher loan volumes, migrations in credit
scores and changes in economic variables related
 
to consumer loan portfolios,
 
●
 
Non-interest income was lower by $106.9 million mainly
 
due to:
●
 
Lower other operating income by $109.7 million
 
mostly as result of the Evertec Transactions on 2022;
●
 
Lower income from mortgage banking activities by $20.3 million mainly due to an unfavorable variance of $15.3
million
 
in
 
the
 
fair
 
value
 
adjustment
 
of
 
mortgage
 
service
 
rights
 
and
 
lower
 
gains
 
of
 
$5.5
 
million
 
on
 
hedging
activities.
●
 
Lower
 
service
 
charges
 
on
 
deposit
 
accounts
 
by
 
$11.9
 
million
 
principally
 
due
 
to
 
lower
 
returned
 
ACH
 
fees
 
by
$10.6
 
million
 
due
 
to
 
the
 
change
 
in
 
policy
 
of
 
eliminating
 
insufficient
 
fund
 
fees
 
and
 
modifying
 
overdraft
 
fees
implemented in the third quarter of 2022.
 
149
partially offset by
●
 
higher other service fees by $32.7 million mainly due to higher credit card fees by $14.0 million and higher debit
card fees by $3.5 million as a result of higher interchange transactional volumes; and higher merchant acquiring
fees related to the revenue sharing agreement with
 
Evertec by $7.9 million;
 
●
 
Higher operating expenses by $51.4 million mostly due
 
to:
●
 
higher
 
personnel
 
costs
 
by
 
$36.5 million
 
due
 
to
 
salaries
 
adjustments
 
as
 
a
 
result
 
of
 
merit
 
and
 
market
 
related
adjustments, minimum
 
salaries increases
 
during the
 
first quarter
 
2023, higher
 
headcount, higher
 
payroll taxes
and
 
increase
 
in
 
pension
 
and
 
health
 
insurance
 
costs
 
by
 
$5.5
 
million;
 
partially
 
offset
 
by
 
a
 
decrease
 
in
 
profit
sharing accrual by $19.9 million and a decrease
 
in incentive compensation by $1.3 million;
●
 
higher professional fees
 
by $13.8 million
 
mainly due
 
to costs
 
associated with initiatives
 
focused on
 
regulatory,
compliance and cyber security efforts as well as the transformation
 
initiative;
●
 
higher
 
business
 
promotions
 
by
 
$6.4
 
million
 
due
 
to
 
higher
 
customer
 
rewards
 
expense
 
related
 
to
 
higher
transactional volumes;
partially offset by
●
 
lower other
 
operating expenses
 
by
 
$17.4 million
 
mainly due
 
to
 
a $17.3
 
million charge
 
related to
 
the Evertec
Transactions
 
for the nine months ended
 
September 30,2022 and lower sundry
 
losses mortgage by $5.2 million
mainly due
 
to
 
a reserve
 
release adjustment
 
recorded in
 
2022; partially
 
offset
 
by higher
 
pension plan
 
cost
 
by
$13.2
 
million
 
due
 
to
 
changes
 
in
 
actuarial
 
assumptions
 
and
 
higher
 
charges
 
allocated
 
from
 
the
 
Corporate
segment group by $1.2 million, mainly from higher
 
personnel costs;
 
●
 
lower net recoveries from
 
OREO by $3.2 million
 
mainly due to lower
 
gain on sale
 
of mortgage and commercial
properties;
●
 
higher
 
processing
 
and
 
transactional
 
services
 
by
 
$14.1
 
million
 
mainly
 
due
 
to
 
higher
 
credit
 
and
 
debit
 
card
processing expense as result of higher transactional
 
volumes,
 
partially offset by
●
 
lower
 
other
 
operating
 
taxes
 
expenses
 
by
 
$6.8
 
million
 
mostly
 
due
 
to
 
the
 
reversal
 
of
 
an
 
accrual
 
related
 
to
regulatory examination fees in BPPR by $8.2 million;
●
 
lower technology
 
and software
 
expenses by
 
$3.3 million
 
due
 
in part
 
to savings
 
associated with
 
the acquired
services from Evertec during 2022.
●
 
Lower income tax expense by $20.1 million is mainly
 
due lower income before tax.
 
Popular U.S.
For
 
the
 
quarter
 
ended
 
September
 
30,
 
2023,
 
the
 
reportable
 
segment
 
of
 
Popular
 
U.S.
 
reported
 
a
 
net
 
income
 
of
 
$11.0
 
million,
compared with a net income of $25.3 million for
 
the same quarter of the previous year. The factors that contributed to
 
the variance in
the financial results included the following:
●
 
Lower
 
net interest income by $11.4 million due to:
150
●
 
higher interest
 
expense on
 
deposits by
 
$58.6 million
 
mainly
 
due
 
to
 
higher interest
 
rates
 
and
 
higher average
balance of time deposits primarily gathered through
 
its direct online channel,
partially offset by
●
 
higher interest
 
income from
 
loans by
 
$35.0 million,
 
mainly from
 
growth in
 
the commercial
 
portfolio as
 
well as
higher yields due to increase in rates;
 
and
●
 
higher interest income
 
from money market
 
and investment securities
 
by $12.9 million
 
due to
 
higher yields due
to the increase in market rates.
The
 
net
 
interest
 
margin
 
for
 
the
 
quarter ended
 
September
 
30,
 
2023
 
was
 
2.90%
 
compared
 
to
 
3.84%
 
for
 
the
 
same
 
quarter in
 
the
previous year.
●
 
An unfavorable variance of
 
$16.7 million on the
 
provision for loan losses
 
and unfunded commitments reflecting a
 
release
for
 
credit
 
losses
 
of
 
$6.6
 
million
 
for
 
the
 
third
 
quarter
 
of
 
2023
 
due
 
to
 
the
 
implementation
 
of
 
a
 
new
 
model
 
for
 
the
 
U.S.
commercial
 
real
 
estate
 
portfolio,
 
compared
 
to
 
a
 
provision
 
expense
 
of
 
$10.0
 
million
 
recorded
 
in
 
the
 
quarter
 
ended
September 30,2022;
●
 
Higher operating expenses by $15.5 million mostly due
 
to:
 
●
 
the goodwill impairment
 
charge related to
 
our U.S. based
 
leasing subsidiary of
 
$23.0 million recorded
 
in 2023,
due to
 
lower forecasted
 
cash flows
 
and an
 
increase in
 
the rate
 
used to
 
discount cash
 
flows, compared
 
to an
impairment of $9.0 million recorded in 2022, an
 
unfavorable variance of $14.0 million;
●
 
higher
 
other
 
operating
 
expenses
 
by
 
$0.6
 
million
 
mainly
 
due
 
to
 
a
 
reversal
 
in
 
sundry
 
loss
 
reserve
 
registered
during
 
the
 
quarter
 
ended
 
September
 
30,2022;
 
partially
 
offset
 
by
 
a
 
lower
 
charges
 
allocated
 
from
 
Corporate
segment group by $0.7 million;
partially offset by
●
 
lower personnel costs by $0.8 million due to
 
lower commissions and incentive expense;
●
 
Lower income tax expense by $5.3 million is related
 
to a lower income before tax.
For the
 
nine months
 
ended September
 
30, 2023,
 
the reportable
 
segment of
 
Popular U.S.
 
recorded a
 
net income
 
of $51.3
 
million,
compared with a net income of $80.4 million for the same period of the previous year.
 
The factors that contributed to the variance in
the financial results included the following:
●
 
Lowest net interest income by $13.8 million due
 
to:
●
 
higher interest expense on deposits by $150.2 million mainly due to higher rates and higher average balance of
time deposits primarily gathered through its direct online
 
channel;
 
partially offset by
●
 
higher interest
 
income from
 
loans by
 
$107.7 million, mainly
 
from growth
 
in the
 
commercial portfolio as
 
well as
higher yields due to increase in rates;
 
and
●
 
higher income
 
from money
 
market and
 
investment securities
 
by $32.3
 
million due
 
to higher
 
yields and
 
higher
average balance;
 
151
The net
 
interest margin for
 
the nine
 
months ended September
 
30,2023 was 3.08%
 
compared to
 
3.72%
 
for the
 
same period
 
in the
previous year.
●
 
An
 
unfavorable variance
 
of
 
$5.3
 
million
 
on
 
the
 
provision for
 
loan
 
losses
 
and
 
unfunded
 
commitments,
 
reflective
 
of
 
the
updated
 
macroeconomic
 
scenarios
 
offset
 
by
 
the
 
reserve
 
decrease
 
due
 
to
 
the
 
implementation
 
of
 
the
 
new
 
model
 
for
commercial real estate loans, as discussed above;
 
●
 
Higher operating expenses by $30.4 million mostly due
 
to:
●
 
the goodwill impairment
 
charge related to
 
our U.S. based
 
leasing subsidiary of
 
$23.0 million recorded
 
in 2023,
due to
 
lower forecasted
 
cash flows
 
and an
 
increase in
 
the rate
 
used to
 
discount cash
 
flows, compared
 
to an
impairment of $9.0 million recorded in 2022,
 
an unfavorable variance of $14.0 million;
●
 
higher personnel costs by $4.9 million due to salary adjustments;
●
 
higher other
 
operating expenses
 
by $6.0
 
million due
 
to higher
 
charges allocated
 
from the
 
Corporate segment
group by $2.3 million, mainly from higher personnel
 
costs.
●
 
Lower income tax expense by $17.7 million due
 
to a lower income before tax.
FINANCIAL CONDITION ANALYSIS
 
Assets
The Corporation’s total assets were $69.7
 
billion at September 30, 2023,
 
compared to $67.6 billion at December
 
31, 2022. 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 increased
 
by approximately
 
$774.8 million
 
at September
 
30, 2023,
 
compared to
 
December 31,
 
2022,
mainly
 
due to
 
the
 
increase deposits.
 
Debt securities
 
available-for-sale decreased
 
$674.5 million
 
reflecting repayment,
 
maturities,
and an increase in
 
the unrealized loss of
 
$105.3 million. Debt securities held-to-maturity decreased by
 
$222.4 million at September
30, 2023, reflecting maturities of U.S. Treasury securities, and the amortization of
 
$128.7 million of the discount related to securities
previously reclassified from
 
the available-for-sale to
 
held-to-maturity,
 
which have an
 
offsetting unrealized loss
 
included within other
comprehensive income
 
that is
 
also being
 
accreted, resulting
 
in a
 
neutral effect
 
to earnings.
 
Refer to
 
Note 6
 
and to
 
Note 7
 
to the
Consolidated Financial Statements for additional
 
information with respect to
 
the Corporation’s debt securities
 
available-for-sale and
held-to-maturity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
152
Loans
Refer to Table
 
6 for a
 
breakdown of the Corporation’s
 
loan portfolio. Also, refer
 
to Note 8 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 approximately
 
$2.0 billion to $34.0
 
billion at September 30,
 
2023,
 
mainly due to an
 
increase in
commercial loans at both BPPR and U.S. as well
 
as consumer and lease financing at BPPR.
 
Table 6 - Loans Ending Balances
(In thousands)
September 30, 2023
December 31, 2022
Variance
 
Loans held-in-portfolio:
Commercial
 
 
Commercial multi-family
$
2,328,433
$
2,321,713
$
6,720
 
Commercial real estate non-owner occupied
5,035,130
4,499,670
535,460
 
Commercial real estate owner occupied
3,044,905
3,078,549
(33,644)
 
Commercial and industrial
6,527,082
5,839,200
687,882
Total Commercial
16,935,550
15,739,132
1,196,418
Construction
922,112
757,984
164,128
Leasing
1,698,114
1,585,739
112,375
Mortgage
7,585,111
7,397,471
187,640
Consumer
 
Credit cards
 
1,077,428
1,041,870
35,558
 
Home equity lines of credit
67,499
71,916
(4,417)
 
Personal
 
1,952,168
1,823,579
128,589
 
Auto
3,633,196
3,512,530
120,666
 
Other
158,135
147,548
10,587
Total Consumer
 
6,888,426
6,597,443
290,983
Total loans held-in
 
-portfolio
$
34,029,313
$
32,077,769
$
1,951,544
Loans held-for-sale:
 
Mortgage
$
5,239
$
5,381
$
(142)
Total loans held-for-sale
$
5,239
$
5,381
$
(142)
Total loans
$
34,034,552
$
32,083,150
$
1,951,402
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
153
Other assets
Other assets amounted to
 
$2.0 billion at
 
September 30, 2023, compared to
 
$1.8 billion at
 
December 31, 2022. Refer
 
to Note 13
 
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
 
September 30, 2023 and December 31, 2022.
 
Liabilities
The Corporation’s total
 
liabilities were $65.3 billion
 
at September 30,
 
2023, an increase of
 
$1.7 billion, compared to
 
$63.5 billion at
December 31, 2022, mainly due to an increase in
 
deposits as discussed below.
 
Deposits and Borrowings
The composition of the Corporation’s financing to total assets
 
at September 30, 2023 and December 31,
 
2022 is included in Table 7.
Table 7 - Financing to Total
 
Assets
September 30,
December 31,
 
% increase (decrease)
 
% of total assets
(In millions)
2023
2022
from 2022 to 2023
2023
2022
Non-interest bearing deposits
$
15,201
$
15,960
(4.8)
%
21.8
%
23.6
%
Interest-bearing core deposits
43,599
41,600
4.8
62.5
61.5
Other interest-bearing deposits
4,537
3,667
23.7
6.5
5.4
Repurchase agreements
93
149
(37.6)
0.1
0.2
Other short-term borrowings
-
365
N.M.
-
0.5
Notes payable
1,005
887
13.3
1.5
1.3
Other liabilities
844
917
(8.0)
1.2
1.4
Stockholders’ equity
4,458
4,093
8.9
6.4
6.1
Deposits
The
 
Corporation’s
 
deposits
 
totaled
 
$63.3
 
billion
 
at
 
September
 
30,
 
2023,
 
compared
 
to
 
$61.2
 
billion
 
at
 
December
 
31,
 
2022.
 
The
deposits increase
 
of
 
$2.1 billion
 
was
 
mainly
 
in public
 
sector accounts
 
at
 
BPPR coupled
 
with an
 
increase in
 
time
 
deposits at
 
PB
gathered through
 
its direct
 
channel,
 
partially offset
 
by a
 
decrease in
 
non-interest bearing
 
demand deposit
 
accounts at
 
both BPPR
and
 
PB.
 
At September
 
30, 2023,
 
Puerto Rico
 
public sector
 
deposits amounted
 
to
 
$17.8 billion.
 
The rate
 
at
 
which public
 
deposit
balances
 
may
 
change
 
is
 
uncertain
 
and
 
difficult
 
to
 
predict.
 
The
 
receipt
 
by
 
the
 
Puerto
 
Rico
 
Government
 
of
 
additional
 
hurricane
recovery related Federal assistance and seasonal tax collections, could increase
 
public deposit balances at BPPR in the near
 
term.
The amount and timing of any reduction is likely
 
to be impacted by, for example, the speed at which federal assistance
 
is distributed,
the financial
 
condition, liquidity
 
and cash
 
management practices
 
of the
 
Puerto Rico
 
Government and
 
its instrumentalities
 
and the
implementation
 
of
 
fiscal
 
and
 
debt
 
adjustment
 
plans
 
approved
 
pursuant
 
to
 
PROMESA
 
or
 
other
 
actions
 
mandated
 
by
 
the
 
Fiscal
Oversight and Management Board for Puerto Rico (the
 
“Oversight Board”).
 
As
 
of
 
September
 
30,
 
2023,
 
approximately
 
28%
 
of
 
the
 
Corporation’s
 
deposits
 
are
 
public
 
fund
 
deposits
 
from
 
the
 
Government
 
of
Puerto
 
Rico, municipalities
 
and government
 
instrumentalities and
 
corporations. These
 
deposits are
 
indexed to
 
short-term
 
market
rates and
 
fluctuate in
 
cost with
 
changes in
 
those rates
 
with a
 
one-quarter lag,
 
in accordance
 
with contractual
 
terms. As
 
a result,
these deposits’
 
costs have
 
generally lagged
 
variable asset
 
repricing. 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.
 
Refer
 
to
 
the
Liquidity section in this MD&A for additional information
 
on the Corporation’s funding sources.
Refer to Table 8 for a breakdown of the Corporation’s deposits at September 30, 2023 and
 
December 31, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
154
Table 8 - Deposits Ending Balances
(In thousands)
September 30, 2023
December 31, 2022
Variance
Demand deposits
 
[1]
$
27,942,782
$
26,382,605
$
1,560,177
Savings, NOW and money market deposits (non-brokered)
26,452,382
27,265,156
(812,774)
Savings, NOW and money market deposits (brokered)
734,479
798,064
(63,585)
Time deposits (non-brokered)
7,264,156
6,442,886
821,270
Time deposits (brokered CDs)
943,801
338,516
605,285
Total deposits
$
63,337,600
$
61,227,227
$
2,110,373
[1] Includes interest and non-interest bearing demand deposits.
 
At September 30, 2023, non-interest bearing
 
deposits were $15.2 billion (December
31, 2022-$16.0 billion)
Borrowings
The Corporation’s
 
borrowings totaled $1.1
 
billion at September
 
30, 2023 compared
 
to $1.4
 
billion at December
 
31, 2022. Refer
 
to
Note
 
16
 
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 $4.5
 
billion
 
at September
 
30,
 
2023, an
 
increase of
 
$364.2 million
 
when compared
 
to
 
December 31,
2022,
 
principally
 
due
 
to
 
net
 
income
 
for
 
the
 
nine-months
 
ended
 
September
 
30,
 
2023
 
of
 
$446.7
 
million,
 
the
 
amortization
 
of
 
the
unrealized losses
 
from securities
 
previously reclassified
 
to held-to-maturity
 
as described
 
above of
 
$103.0 million,
 
and the
 
positive
impact
 
from
 
the
 
adoption of
 
the new
 
accounting standard
 
related to
 
loan
 
modifications during
 
the year
 
of
 
$28.8
 
million, partially
offset by dividends declared
 
for the nine-month period and
 
the after-tax impact of the
 
unfavorable variance in net unrealized losses
in
 
the
 
portfolio
 
of
 
available-for-sale
 
securities
 
of
 
$120.8
 
million.
 
Refer
 
to
 
the
 
Consolidated
 
Statements
 
of
 
Financial
 
Condition,
Comprehensive Income and of Changes in Stockholders’
 
Equity for information on the composition of
 
stockholders’ equity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
155
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 September 30,
 
2023, 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
 
9,
 
which include
 
common equity
 
tier 1,
 
Tier
 
1 capital,
 
total capital
 
and leverage
capital as of September 30, 2023 and December
 
31, 2022.
Table 9 - Capital Adequacy
 
Data
 
 
 
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
September 30, 2023
 
 
December 31, 2022
 
Common equity tier 1 capital:
 
 
 
 
 
 
Common stockholders equity - GAAP basis
$
4,435,465
$
4,071,282
CECL transitional amount
 
[1]
84,751
127,127
AOCI related adjustments due to opt-out election
2,476,987
2,468,193
Goodwill, net of associated deferred tax liability (DTL)
(668,764)
(691,560)
Intangible assets, net of associated DTLs
(10,559)
(12,944)
Deferred tax assets and other deductions
 
(311,164)
(322,412)
Common equity tier 1 capital
$
6,006,716
$
5,639,686
Additional tier 1 capital:
Preferred stock
22,143
22,143
Additional tier 1 capital
$
22,143
 
$
22,143
Tier 1 capital
$
6,028,859
 
$
5,661,829
 
Tier 2 capital:
Trust preferred securities subject to phase in as
 
tier 2
192,674
192,674
Other inclusions (deductions), net
448,137
431,144
Tier 2 capital
$
640,811
$
623,818
Total risk-based capital
 
$
6,669,670
 
$
6,285,647
 
Minimum total capital requirement to be well capitalized
$
3,573,131
 
$
3,441,589
 
Excess total capital over minimum well capitalized
$
3,096,539
 
$
2,844,058
 
Total risk-weighted
 
assets
$
35,731,312
 
$
34,415,889
 
Total assets for leverage
 
ratio
$
71,695,320
 
$
70,287,610
 
Risk-based capital ratios:
 
 
 
 
 
 
Common equity tier 1 capital
16.81
%
16.39
%
 
Tier 1 capital
 
 
16.87
 
16.45
 
Total capital
 
18.67
 
 
18.26
 
 
Tier 1 leverage
 
8.41
 
 
8.06
 
[1] The CECL transitional amount includes the impact
 
of Popular's adoption of the new CECL accounting standard
 
on January 1, 2020.
156
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 September 30, 2023, 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 September
 
30, 2023, the
Corporation had phased-in 50% 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 September 30, 2023,
the Corporation has $10 million in PPP loans and no
 
loans were pledged as collateral for PPPL
 
Facilities.
The
 
increase
 
in
 
the
 
common
 
equity
 
Tier
 
I
 
capital
 
ratio,
 
Tier
 
I
 
capital
 
ratio,
 
and
 
total
 
capital
 
ratio
 
as
 
of
 
September
 
30,
 
2023
 
as
compared to December 31, 2022 was mainly due
 
to the nine months period earnings, partially offset
 
by higher risk-weighted assets
driven by the increase in loans held-in-portfolio.
 
The increase in leverage capital ratio was mainly
 
due to the period earnings.
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
 
10 provides
 
a reconciliation of
 
total stockholders’ equity
 
to tangible common
 
equity and total
 
assets to
 
tangible assets
 
as of
September 30, 2023, and December 31, 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
157
Table 10 - Reconciliation
 
of Tangible Common Equity
 
and Tangible Assets
(In thousands, except share or per share information)
September 30, 2023
December 31, 2022
Total stockholders’
 
equity
$
4,457,608
$
4,093,425
Less: Preferred stock
(22,143)
(22,143)
Less: Goodwill
(804,428)
(827,428)
Less: Other intangibles
(10,559)
(12,944)
Total tangible common
 
equity
$
3,620,478
$
3,230,910
Total assets
 
$
69,736,936
$
67,637,917
Less: Goodwill
(804,428)
(827,428)
Less: Other intangibles
(10,559)
(12,944)
Total tangible assets
$
68,921,949
$
66,797,545
Tangible common
 
equity to tangible assets
5.25
%
4.84
%
Common shares outstanding at end of period
72,127,595
71,853,720
Tangible book value
 
per common share
$
50.20
$
44.97
Quarterly average
Total stockholders’
 
equity [1]
$
6,636,364
$
6,161,634
Less: Preferred Stock
(22,143)
(22,143)
Less: Goodwill
(827,177)
(827,427)
Less: Other intangibles
(11,083)
(13,440)
Total tangible common
 
equity
$
5,775,961
$
5,298,624
Return on average tangible common equity
9.36
%
19.23
%
[1] Average balances exclude unrealized gains or losses
 
on debt securities available-for-sale and the unrealized
 
loss related to certain securities
transferred from available-for-sale to held-to-maturity.
 
158
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 6
 
and 7 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 $17.1 billion
 
as of September 30,
 
2023. Other assets subject
 
to market
risk include loans
 
held-for-sale, which amounted to
 
$5 million, mortgage servicing
 
rights (“MSRs”) which amounted
 
to $119
 
million,
and securities classified as “trading”, which amounted
 
to $31 million, as of September 30, 2023.
 
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.
 
Additionally,
 
the
Corporation is also subject to
 
basis risk in the
 
repricing of its assets and
 
liabilities, including the basis related
 
to using different rate
indexes for
 
the repricing
 
of assets and
 
liabilities, as
 
well as
 
the effect
 
of pricing
 
lags which
 
may be
 
contractual or
 
due to
 
historical
differences
 
in
 
the
 
timing
 
of
 
management
 
responses
 
to
 
changes
 
in
 
the
 
rate
 
environment.
 
By
 
their
 
nature,
 
these
 
forward-looking
computations are only
 
estimates and may
 
be different from
 
what may actually
 
occur in the
 
future. The following
 
table presents the
results of
 
the simulations
 
at September
 
30, 2023
 
and December
 
31, 2022,
 
assuming a
 
static balance
 
sheet and
 
parallel changes
over flat spot rates over a one-year time horizon:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
159
Table 11
 
- Net Interest Income Sensitivity (One Year
 
Projection)
September 30, 2023
December 31, 2022
(Dollars in thousands)
Amount Change
Percent Change
Amount Change
Percent Change
Change in interest rate
+400 basis points
$
26,390
1.21
%
$
(38,402)
(1.75)
%
+200 basis points
13,661
0.63
(18,003)
(0.82)
+100 basis points
7,426
0.34
(7,748)
(0.35)
-100 basis points
25,732
1.18
8,778
0.40
-200 basis points
28,315
1.30
9,296
0.42
The
 
results
 
of
 
the
 
NII
 
simulations
 
at
 
December
 
31,
 
2022
 
in
 
the
 
table
 
above
 
have
 
been
 
adjusted
 
from
 
those
 
reported
 
in
 
the
Corporation’s
 
Form
 
10-K
 
to
 
reflect
 
the
 
effect
 
of
 
changes
 
in
 
modeling
 
assumptions
 
in
 
down
 
rate
 
scenario
 
simulations
 
for
 
certain
variable
 
rate
 
loans.
 
Specifically,
 
the
 
yield
 
on
 
certain
 
variable
 
rate
 
loans
 
that
 
did
 
not
 
have
 
contractual
 
periodic
 
floors,
 
were
 
not
correctly repricing in the down rate simulations.
Although as a result of such adjustment the magnitude of the Corporation’s sensitivity to decreases in interest rates becomes lower,
as
 
of
 
December
 
31,
 
2022,
 
the
 
NII
 
simulations
 
continue
 
to
 
show
 
that
 
the
 
Corporation
 
had
 
a
 
neutral
 
to
 
slightly
 
liability
 
sensitive
position driven
 
by the
 
rapid increase
 
in short-term
 
interest rates
 
throughout the
 
year and
 
its impact
 
on Puerto
 
Rico public
 
sector
deposits which are indexed to
 
market rates, as well
 
as the deployment of cash
 
to fund loan growth
 
and purchase investments. The
results as
 
of such
 
date suggest
 
that changes
 
in net
 
interest income
 
are driven
 
by changes
 
in liability
 
costs, primarily
 
Puerto Rico
public sector
 
deposits. In
 
declining rate
 
scenarios net
 
interest income
 
would increase
 
as the
 
decline in
 
the cost
 
of these
 
deposits
generates a greater benefit than the changes in
 
asset yields. In rising rate scenarios Popular’s sensitivity profile is also impacted
 
by
its large proportion of Puerto Rico public sector deposits
 
which are indexed to market rates.
As of September 30, 2023, NII simulations show the Corporation
 
has a relatively neutral sensitivity position as
 
compared to a slightly
liability sensitive position as of December 31, 2022. The primary reasons for the variation in sensitivity are changes in balance sheet
composition driven
 
by an
 
increase in
 
overnight Fed
 
Funds and
 
short-term U.S
 
Treasury Bills
 
(“T- Bills”)
 
on the
 
asset side
 
partially
offset by
 
higher Puerto
 
Rico public
 
sector deposits
 
which are
 
indexed to
 
market rates.
 
These results
 
suggest that
 
changes in
 
the
Corporation’s net
 
interest income sensitivity
 
are driven by
 
changes in the
 
composition of the
 
investment portfolio as
 
the term
 
bond
portfolio
 
continues
 
to
 
run
 
off
 
and
 
get
 
reinvested in
 
short-term
 
investments such
 
as
 
T-Bills.
 
Additionally,
 
variation
 
in
 
liability cost,
primarily driven by
 
Puerto Rico public
 
sector deposits that
 
represented $17.8 billion
 
or 28% of
 
deposits as of
 
September 30, 2023,
also impact the sensitivity
 
profile.
 
In declining rate scenarios net
 
interest income would increase as
 
the decline in the cost
 
of these
deposit generates a greater benefit than
 
the changes in assets yields.
 
In rising rate scenarios, Popular’s net
 
interest income is also
impacted by its large proportion
 
of Puerto Rico public sector
 
deposit, however the repricing of assets
 
as they either reset
 
or mature
lead to an increase in net interest income.
The Corporation’s
 
loan and
 
investment portfolios
 
are subject
 
to
 
prepayment risk,
 
which results
 
from the
 
ability of
 
a third-party
 
to
repay debt
 
obligations prior
 
to maturity.
 
Prepayment risk
 
also could
 
have a
 
significant impact
 
on the
 
duration of
 
mortgage-backed
securities
 
and
 
collateralized
 
mortgage
 
obligations
 
since
 
prepayments
 
could
 
shorten
 
(or
 
lower
 
prepayments
 
could
 
extend)
 
the
weighted average life of these portfolios.
Trading
 
The Corporation
 
engages in
 
trading activities
 
in the
 
ordinary course
 
of business
 
at its
 
subsidiaries, BPPR
 
and Popular
 
Securities.
Popular Securities’
 
trading activities
 
consist primarily
 
of market-making
 
activities to
 
meet expected
 
customers’ needs
 
related to
 
its
retail brokerage business,
 
and purchases and sales of U.S. Government and
 
government sponsored securities with the objective of
realizing gains
 
from expected
 
short-term price
 
movements. BPPR’s
 
trading activities consist
 
primarily of
 
holding U.S.
 
Government
sponsored
 
mortgage-backed securities
 
classified
 
as
 
“trading” and
 
hedging
 
the
 
related
 
market
 
risk
 
with
 
“TBA”
 
(to-be-announced)
market
 
transactions.
 
The
 
objective
 
is
 
to
 
derive
 
spread
 
income
 
from
 
the
 
portfolio
 
and
 
not
 
to
 
benefit
 
from
 
short-term
 
market
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
160
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 September 30, 2023, the Corporation held trading securities
 
with a fair value of $31 million, representing approximately 0.04%
 
of
the Corporation’s total assets,
 
compared with $28 million and 0.04%, respectively, at December 31, 2022. As shown
 
in Table 12, the
trading
 
portfolio
 
consists
 
principally
 
of
 
mortgage-backed
 
securities
 
and
 
U.S.
 
Treasuries,
 
which
 
at
 
September
 
30,
 
2023
 
were
investment grade securities.
 
Table 12 - Trading
 
Portfolio
September 30, 2023
December 31, 2022
(Dollars in thousands)
Amount
 
Weighted
Average Yield
[1]
Amount
Weighted
Average Yield
[1]
Mortgage-backed securities
 
$
14,884
5.70
%
$
14,223
5.79
%
U.S. Treasury securities
15,644
4.71
13,069
3.26
Collateralized mortgage obligations
52
5.28
160
5.51
Puerto Rico government obligations
57
0.43
64
0.45
Interest-only strips
 
188
12.00
207
12.00
Other (includes related trading derivatives)
163
5.60
-
-
Total
 
$
30,988
5.23
%
$
27,723
4.63
%
[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 $0.3
 
million for the
 
last week in
 
September 2023. 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
needs under
 
both normal
 
and stressed market
 
conditions. The Board
 
of Directors
 
is responsible
 
for establishing the
 
Corporation’s
tolerance for liquidity risk,
 
including approving relevant risk limits and
 
policies. The Board of
 
Directors has delegated the monitoring
of
 
these risks
 
to
 
the Board’s
 
Risk Management
 
Committee and
 
the Asset/Liability
 
Management Committee.
 
The management
 
of
liquidity
 
risk,
 
on
 
a
 
long-term
 
and
 
day-to-day
 
basis,
 
is
 
the
 
responsibility
 
of
 
the
 
Corporate
 
Treasury
 
Division.
 
The
 
Corporation’s
Corporate
 
Treasurer
 
is
 
responsible
 
for
 
implementing
 
the
 
policies
 
and
 
procedures
 
approved
 
by
 
the
 
Board
 
of
 
Directors
 
and
 
for
monitoring
 
the
 
Corporation’s
 
liquidity
 
position
 
on
 
an
 
ongoing
 
basis.
 
Also,
 
the
 
Corporate
 
Treasury
 
Division coordinates
 
corporate
wide
 
liquidity
 
management
 
strategies
 
and
 
activities
 
with
 
the
 
reportable
 
segments,
 
oversees
 
policy
 
breaches
 
and
 
manages
 
the
escalation process.
 
The
 
Financial and
 
Operational Risk
 
Management Division
 
is
 
responsible for
 
the independent
 
monitoring and
reporting of adherence with established policies.
An
 
institution’s liquidity
 
may be
 
pressured if,
 
for example,
 
it experiences
 
a sudden
 
and unexpected
 
substantial cash
 
outflow due
deposit
 
outflows,
 
whether due
 
to a
 
loss of
 
confidence by
 
depositors, or
 
other reasons
 
exogenous events
 
such as
 
the COVID-19
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
161
pandemic,
 
a downgrading
 
of its
 
credit rating,
 
or some
 
other event
 
that causes
 
counterparties to
 
avoid exposure
 
to the
 
institution.
Factors that the Corporation does not control, such as the
 
economic outlook, adverse ratings of its principal markets, perceptions of
the financial services industry and regulatory changes,
 
could also affect its ability to obtain funding.
 
The Corporation
 
has adopted
 
policies and
 
limits to
 
monitor the
 
Corporation’s liquidity
 
position and
 
that of
 
its banking
 
subsidiaries.
Additionally, contingency funding
 
plans are used to
 
model various stress events
 
of different magnitudes and
 
affecting different time
horizons that assist
 
management in evaluating
 
the size of
 
the liquidity buffers
 
needed if those
 
stress events
 
occur. However,
 
such
models
 
may
 
not
 
predict
 
accurately
 
how
 
the
 
market
 
and
 
customers
 
might
 
react
 
to
 
every
 
event,
 
and
 
are
 
dependent
 
on
 
many
assumptions.
Deposits, including
 
customer deposits,
 
brokered deposits
 
and public
 
funds deposits,
 
continue to
 
be the
 
most significant
 
source of
funds for the Corporation, funding
 
91% of the Corporation’s total assets at September 30, 2023 and December 31, 2022.
 
The ratio
of
 
total
 
ending
 
loans
 
to
 
deposits
 
was
 
54%
 
at
 
September
 
30,
 
2023
 
and
 
52%
 
at
 
December
 
31,
 
2022.
 
In
 
addition
 
to
 
traditional
deposits, the Corporation maintains borrowing arrangements, which amounted to approximately $1.1 billion in outstanding balances
at September
 
30, 2023
 
(December 31,
 
2022 -
 
$1.4 billion).
 
A detailed
 
description of
 
the Corporation’s
 
borrowings, including
 
their
terms, is
 
included
 
in Note
 
16 to
 
the Consolidated
 
Financial Statements.
 
Also, the
 
Consolidated Statements
 
of Cash
 
Flows in
 
the
accompanying Consolidated Financial Statements provide
 
information on the Corporation’s cash inflows and outflows.
 
The
 
following
 
sections
 
provide
 
further
 
information
 
on
 
the
 
Corporation’s
 
major
 
funding
 
activities
 
and
 
needs,
 
as
 
well
 
as
 
the
 
risks
involved in these activities.
Banking Subsidiaries
Primary
 
sources of
 
funding
 
for the
 
Corporation’s
 
banking subsidiaries
 
(BPPR and
 
PB
 
or,
 
collectively,
 
“the banking
 
subsidiaries”)
include
 
retail,
 
commercial
 
and
 
public
 
sector
 
deposits,
 
brokered
 
deposits,
 
unpledged
 
investment
 
securities,
 
mortgage
 
loan
securitization and, to a lesser extent, loan sales. In
 
addition, the Corporation maintains borrowing facilities with the FHLB and at the
discount window
 
of the
 
Federal Reserve
 
Bank of
 
New York
 
(the “FRB”)
 
and has
 
a considerable
 
amount of
 
collateral pledged
 
that
can be used to raise funds under these facilities.
 
During the
 
third quarter
 
of 2023
 
the Corporation
 
had no
 
material incremental
 
use of
 
its available
 
liquidity sources.
 
At September
30,2023,
 
the
 
Corporation’s
 
available
 
liquidity
 
increased
 
to
 
$18.8
 
billion
 
from
 
$17.0
 
billion
 
on
 
December
 
31,
 
2022.
 
The
 
liquidity
sources of the Corporation at September 30,2023
 
are presented in Table 13:
Table 13 - Liquidity Sources
30-Sep-23
31-Dec-22
(Dollars in thousands)
BPPR
Popular U.S.
Total
BPPR
Popular U.S.
Total
Unpledged securities and unused funding
sources:
Money market (excess funds at the
Federal Reserve Bank)
$
5,533,314
$
850,248
$
6,383,562
$
5,240,100
$
367,966
$
5,608,066
Unpledged securities
3,927,353
273,313
4,200,666
7,494,189
326,599
7,820,788
FHLB borrowing capacity
2,236,318
1,420,913
3,657,231
1,389,579
722,005
2,111,584
Discount window of the Federal Reserve
Bank borrowing capacity
2,559,938
1,994,936
4,554,874
1,090,308
329,385
1,419,693
Total available liquidity
$
14,256,923
$
4,539,410
$
18,796,333
$
15,214,176
$
1,745,955
$
16,960,131
Refer
 
to
 
Note
 
16
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
 
information
 
of
 
the
 
Corporation’s
 
borrowing
 
facilities
available through its banking subsidiaries.
 
The principal
 
uses of
 
funds for
 
the banking
 
subsidiaries include
 
loan originations,
 
investment portfolio
 
purchases, loan
 
purchases
and repurchases, repayment of outstanding obligations (including deposits), advances on certain serviced portfolios and operational
expenses. Also, the
 
banking subsidiaries assume liquidity
 
risk related to collateral
 
posting requirements for certain
 
activities mainly
in
 
connection
 
with
 
contractual
 
commitments,
 
recourse
 
provisions,
 
servicing
 
advances,
 
derivatives
 
and
 
credit
 
card
 
licensing
agreements.
 
 
 
 
 
 
 
 
 
 
162
The banking
 
subsidiaries maintain
 
sufficient funding
 
capacity to
 
address large
 
increases in
 
funding requirements
 
such as
 
deposit
outflows.
 
The
 
Corporation has
 
established
 
liquidity
 
guidelines
 
that
 
require
 
the
 
banking
 
subsidiaries
 
to
 
have
 
sufficient
 
liquidity
 
to
cover all short-term borrowings and a portion of deposits.
 
The Corporation’s ability to compete
 
successfully in the marketplace for
 
deposits, excluding brokered deposits, depends on various
factors, including pricing, service, convenience
 
and financial stability as
 
reflected by operating results and
 
financial condition, credit
ratings (by
 
nationally recognized credit
 
rating agencies), customer
 
confidence, and
 
importantly,
 
FDIC deposit
 
insurance coverage.
Deposits at all of the Corporation’s banking subsidiaries are federally insured
 
(subject to FDIC limits) and this is expected to mitigate
the potential effect of the aforementioned risks.
Deposits are
 
a key
 
source of
 
funding. Refer
 
to Table
 
8 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 certificate of
 
deposit under $250,000,
all
 
interest-bearing
 
transactional
 
deposit
 
accounts,
 
non-interest
 
bearing
 
deposits,
 
and
 
savings
 
deposits.
 
Core
 
deposits
 
exclude
brokered deposits and certificate of
 
deposits over $250,000. Core
 
deposits, excluding P.R.
 
public funds that are
 
fully collateralized,
have
 
historically
 
provided
 
the
 
Corporation with
 
a
 
sizable
 
source
 
of
 
relatively stable
 
and
 
low-cost funds.
 
P.R.
 
public funds,
 
while
linked to
 
market interest
 
rates, provide
 
a stable
 
source of
 
funding with
 
an attractive
 
earnings spread.
 
Core deposits
 
totaled $58.8
billion, or
 
93% of
 
total deposits,
 
at September
 
30, 2023,
 
compared with
 
$57.6 billion,
 
or 94%
 
of total
 
deposits, at
 
December 31,
2022. Core
 
deposits financed
 
89% of
 
the Corporation’s
 
earning assets
 
at September
 
30, 2023,
 
compared with
 
90% at
 
December
31, 2022.
 
The distribution by maturity of certificates of deposits with denominations of $250,000 and
 
over at September 30, 2023 is presented
in the table that follows:
Table 14 - Distribution by
 
Maturity of Certificate of Deposits of $250,000 and Over
(In thousands)
3 months or less
$
1,836,911
Over 3 to 12 months
723,996
Over 1 year to 3 years
217,399
Over 3 years
165,956
Total
$
2,944,262
The Corporation had
 
$1.7 billion in
 
brokered deposits at September
 
30, 2023, which
 
financed approximately
 
2% of its
 
total assets
(December 31, 2022 -
 
$1.1 billion and 2%,
 
respectively).
 
In the event that
 
any of the Corporation’s
 
banking subsidiaries’ regulatory
capital
 
ratios fall
 
below those
 
required by
 
a well-capitalized
 
institution or
 
are subject
 
to capital
 
restrictions by
 
the regulators,
 
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 September 30,
 
2023, total public
sector deposits were $17.8 billion,
 
compared to $15.8 billion at December 31, 2022. 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.
 
Additionally,
 
the
 
Corporation
 
mainly
 
utilizes
 
fixed-rate
 
U.S.
 
Treasury
 
debt
 
securities
 
as
 
collateral.
 
While
 
these
securities have
 
limited credit risk,
 
they are
 
subject to
 
market value
 
risk based on
 
changes in
 
the interest rate
 
environment.
 
When
interest
 
rates
 
increase,
 
the
 
value
 
of
 
this
 
collateral
 
decreases
 
and
 
could
 
result
 
in
 
the
 
Corporation
 
having
 
to
 
provide
 
additional
collateral
 
to
 
cover
 
the
 
same
 
amount
 
of
 
deposit
 
liabilities.
 
This
 
additional
 
collateral
 
could
 
reduce
 
unpledged
 
securities
 
otherwise
available as liquidity sources to the Corporation.
 
At September 30, 2023, 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
163
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 on repurchase
 
agreements and other collateralized borrowing facilities. 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.
The Corporation
 
monitors uninsured
 
deposits under
 
applicable FDIC
 
regulations.
 
Additionally,
 
the Corporation
 
monitors accounts
with balances over $250,000.
 
While the Corporation has a
 
diverse deposit base from retail, commercial,
 
corporate and government
clients,
 
as
 
well
 
as
 
wholesale funding
 
sources such
 
as
 
brokered deposits,
 
it
 
considers
 
balance
 
in
 
excess
 
of
 
$250,000 to
 
have a
higher
 
potential
 
liquidity
 
risk.
 
Table
 
15
 
reflects
 
the
 
aggregate
 
balance
 
in
 
deposit
 
accounts
 
in
 
excess
 
of
 
$250,000,
 
including
collateralized public funds and deposits outside of the
 
U.S. and its territories.
 
Collateralized public funds, as presented in Table
 
15,
represent public
 
deposit balances from
 
governmental entities in
 
the U.S. and
 
its territories, including
 
Puerto Rico
 
and the U.S.V.I.,
that
 
are
 
collateralized
 
based
 
on
 
such
 
jurisdictions’
 
applicable
 
collateral
 
requirements.
 
On
 
September
 
30,2023,
 
deposits
 
with
balances in excess of $250,000, excluding foreign deposits (mainly deposits in the British Virgin Islands) intercompany deposits and
collateralized
 
public
 
funds,
 
were
 
$11.3
 
billion
 
or
 
21%
 
at
 
BPPR
 
and
 
$2.4
 
billion
 
or
 
23%
 
at
 
Popular
 
U.S.,
 
compared
 
to
 
available
liquidity sources of $ 14.3 billion at BPPR and
 
$ 4.5 billion at Popular U.S.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
164
Table 15 - Deposits
30-Sep-23
Popular, Inc.
(Dollars in thousands)
BPPR
% of Total
Popular U.S.
% of Total
(Consolidated)
% of Total
Deposits:
Deposits balances under $250,000 [1]
$
23,971,025
45
%
$
6,965,757
67
%
$
30,936,782
49
%
Transactional deposits balances over
$250,000
9,396,047
17
%
2,056,655
20
%
11,452,702
18
%
Time deposits balances over $250,000
1,948,475
4
%
297,277
3
%
2,245,752
3
%
Uninsured foreign deposits
403,206
1
%
-
-
%
403,206
1
%
Collateralized public funds
18,012,588
33
%
286,570
3
%
18,299,158
29
%
Intercompany deposits
107,293
-
%
696,101
7
%
-
-
%
Total deposits
$
53,838,634
100
%
$
10,302,360
100
%
$
63,337,600
100
%
[1] Includes the first $250,000 in balances of transactional
 
and time deposit accounts with balances in excess
 
of $250,000.
31-Dec-22
Popular, Inc.
(Dollars in thousands)
BPPR
% of Total
Popular U.S.
% of Total
(Consolidated)
% of Total
Deposits
Deposits balances under $250,000 [1]
$
24,505,697
46
%
$
5,231,417
60
%
$
29,737,114
49
%
Transactional deposits balances over
$250,000
9,957,877
19
%
2,674,841
31
%
12,632,718
21
%
Time deposits balances over $250,000
1,920,455
4
%
167,067
2
%
2,087,522
3
%
Uninsured foreign deposits
425,855
1
%
-
-
%
425,855
1
%
Collateralized public funds
16,233,342
31
%
110,676
1
%
16,344,018
27
%
Intercompany deposits
135,172
-
%
482,167
6
%
-
-
%
Total deposits
$
53,178,398
100
%
$
8,666,168
100
%
$
61,227,227
100
%
[1] Includes the first $250,000 in balances of transactional
 
and time deposit accounts with balances in excess
 
of $250,000.
Bank Holding Companies
The principal
 
sources of
 
funding for
 
the BHCs,
 
which are
 
Popular,
 
Inc.
 
(holding company
 
only) and
 
PNA, include
 
cash on
 
hand,
investment
 
securities,
 
dividends
 
received from
 
banking
 
and
 
non-banking subsidiaries,
 
asset sales,
 
credit
 
facilities
 
available from
affiliate banking subsidiaries and proceeds from potential securities offerings.
 
Dividends from banking and non-banking subsidiaries
are subject to various regulatory limits
 
and authorization requirements that are further described
 
below and that may limit the
 
ability
of those subsidiaries to act as a source of
 
funding to the BHCs.
The
 
principal
 
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,
repurchases of the Corporation’s securities and capitalizing its
 
banking subsidiaries.
 
The
 
outstanding
 
balance
 
of
 
notes
 
payable
 
at
 
the
 
BHCs
 
amounted
 
to
 
$592
 
million
 
at
 
September
 
30,
 
2023
 
and
 
$497
 
million
 
at
December 31, 2022.
The contractual maturities of the BHCs notes payable
 
at September 30, 2023 are presented in Table 16.
 
 
 
 
 
 
 
 
 
 
165
Table 16
 
- Distribution of BHC's Notes Payable by Contractual
 
Maturity
Year
(In thousands)
2028
$
393,678
Later years
198,339
Total
$
592,017
As of
 
September 30,
 
2023, the
 
BHCs had
 
cash and
 
money markets
 
investments totaling
 
$368 million
 
and borrowing
 
potential of
$222 million from its
 
secured facility with BPPR. The BHCs’
 
liquidity position continues to be adequate with sufficient cash
 
on hand,
investments and other sources
 
of liquidity which are
 
expected to be enough
 
to meet all
 
interest payments and
 
dividend obligations
during the foreseeable future. On March 13,
 
2023, the Corporation issued $400 million aggregate principal
 
amount of 7.25% Senior
Notes due
 
2028 (the
 
“Notes”) in
 
an underwritten
 
public offering.
 
The Corporation
 
used a
 
portion of
 
the net
 
proceeds of
 
the 2028
Notes offering
 
to redeem,
 
on August 14,
 
2023, the outstanding
 
$300 million aggregate
 
principal amount of
 
its outstanding 6.125%
Senior Notes which were
 
due on September 2023.
 
For the remainder of
 
year 2023, debt service
 
at the BHCs is
 
approximately $11
million. Additionally, the Corporation’s latest quarterly dividend was $0.55 per share or
 
approximately $40 million per quarter.
The BHCs have in
 
the past borrowed in the
 
corporate debt market primarily to finance
 
their non-banking subsidiaries and refinance
debt obligations. 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.
Factors that the Corporation
 
does not control, such
 
as the economic outlook,
 
interest rate volatility,
 
inflation, disruptions in the
 
debt
market, among others,
 
could also affect
 
its ability to
 
obtain funding. The
 
Corporation has an
 
automatic shelf registration
 
statement
filed and effective
 
with the Securities and Exchange
 
Commission, which permits the Corporation
 
to issue an
 
unspecified amount of
debt or equity securities.
Non-Banking Subsidiaries
The
 
principal
 
sources
 
of
 
funding
 
for
 
the
 
non-banking
 
subsidiaries
 
include
 
internally
 
generated
 
cash
 
flows
 
from
 
operations,
 
loan
sales, repurchase agreements, capital
 
injections and borrowed funds
 
from their direct
 
parent companies or the
 
holding companies.
The principal uses of funds for the non-banking
 
subsidiaries include repayment of maturing debt,
 
operational expenses and payment
of dividends to the
 
BHCs. The liquidity needs
 
of the non-banking subsidiaries
 
are minimal since most
 
of them are
 
funded internally
from operating
 
cash flows
 
or from
 
intercompany borrowings or
 
capital contributions
 
from their
 
holding companies.
 
During the
 
nine
months
 
ended
 
September
 
30,
 
2023,
 
Popular,
 
Inc.
 
made
 
capital
 
contributions
 
to
 
its
 
wholly
 
owned
 
subsidiaries
 
of
 
$1.3
 
million
 
to
Popular Impact Fund and $0.2 million to Popular
 
Global Solutions.
 
Dividends
During
 
the
 
nine
 
months
 
ended
 
September
 
30,
 
2023,
 
the
 
Corporation
 
declared
 
cash
 
dividends
 
of
 
$1.65
 
per
 
common
 
share
outstanding ($118.9 million in the aggregate). The dividends for the Corporation’s Series A preferred stock amounted to $1.1 million.
During the nine months ended September 30, 2023, the BHCs received
 
dividends amounting to $150 million from BPPR, $50 million
from PNA and $4 million from its non-banking
 
subsidiaries. In addition, during the nine months ended September 30,
 
2023, Popular
International Bank Inc.,
 
wholly owned subsidiary of
 
Popular, Inc.,
 
received $14.1 million in
 
cash dividends and
 
$2.1 million in
 
stock
dividends from its investment in BHD.
 
Dividends from BPPR constitute Popular, Inc.’s primary source of liquidity.
 
Other Funding Sources and Capital
In addition to cash reserves held at the FRB that totaled $ 6.4 billion at September 30,2023,
 
the debt securities portfolio provides an
additional
 
source
 
of
 
liquidity,
 
which
 
may
 
be
 
realized
 
through
 
either
 
securities
 
sales,
 
collateralized
 
borrowings
 
or
 
repurchase
agreements.
 
The
 
Corporation’s
 
debt
 
securities
 
portfolio
 
consists
 
primarily
 
of
 
liquid
 
U.S.
 
government
 
debt
 
securities,
 
U.S.
government
 
sponsored
 
agency
 
debt
 
securities,
 
U.S.
 
government
 
sponsored
 
agency
 
mortgage-backed
 
securities,
 
and
 
U.S.
government
 
sponsored
 
agency
 
collateralized
 
mortgage
 
obligations
 
that
 
can
 
be
 
used
 
to
 
raise
 
funds
 
in
 
the
 
repo
 
markets.
 
The
availability
 
of
 
the
 
repurchase
 
agreement
 
would
 
be
 
subject
 
to
 
having
 
sufficient
 
unpledged
 
collateral
 
available
 
at
 
the
 
time
 
the
transactions are to be consummated, in addition to overall liquidity and risk appetite of the various counterparties. The Corporation’s
unpledged debt
 
securities amounted to
 
$ 4.2
 
billion at
 
September 30,
 
2023 and
 
$ 7.8
 
billion at
 
December 31,
 
2022. A
 
substantial
portion of these debt securities could be used to raise financing in the U.S. money markets or from secured lending sources,
 
subject
to changes in their fair market value and customary
 
adjustments (haircuts).
 
 
 
 
166
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
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 21
 
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
 
28
 
to
 
the
Consolidated Financial Statements for information on operating leases and
 
to Note 20 to the
 
Consolidated Financial Statements for
a
 
detailed
 
discussion
 
related
 
to
 
the
 
Corporation’s
 
obligations
 
under
 
credit
 
recourse
 
and
 
representation
 
and
 
warranties
arrangements.
 
The Corporation monitors its cash requirements, including
 
its contractual obligations and debt commitments.
 
FDIC Special Assessments
 
On
 
May
 
11,
 
2023,
 
the
 
Federal
 
Deposit
 
Insurance
 
Corporation
 
(“FDIC”)
 
released
 
a
 
proposed
 
rule
 
that
 
would
 
impose
 
special
assessments
 
to
 
recover
 
the
 
losses
 
to
 
the
 
deposit
 
insurance
 
fund
 
(“DIF”)
 
resulting
 
from
 
the
 
FDIC’s
 
use,
 
in
 
March
 
2023,
 
of
 
the
systemic risk exception to the least-cost resolution test under
 
the Federal Deposit Insurance Act in connection with the receiverships
of Silicon Valley Bank and Signature Bank.
 
The
 
FDIC
 
stated
 
that
 
it
 
currently
 
estimates
 
those
 
assessed
 
losses
 
to
 
total
 
$15.8
 
billion
 
and
 
that
 
the
 
amount
 
of
 
the
 
special
assessments would be adjusted as the loss
 
estimate changes. Under the proposed rule, the assessment base would
 
be an insured
depository institution’s (“IDI”)
 
estimated uninsured deposits, as
 
reported in the
 
IDI’s December 31,
 
2022 Call Report,
 
excluding the
first
 
$5
 
billion
 
in
 
estimated
 
uninsured
 
deposits.
 
For
 
a
 
holding
 
company
 
that
 
has
 
more
 
than
 
one
 
IDI
 
subsidiary,
 
such
 
as
 
the
Corporation, the $5 billion exclusion would be
 
allocated among the company’s IDI subsidiaries
 
in proportion to each IDI’s
 
estimated
uninsured deposits. The special assessments would be collected at an
 
annual rate of approximately 12.5 basis points per year (3.13
basis points per quarter) over eight quarters in 2024 and 2025, with the first assessment period beginning January 1, 2024 (with
 
the
first
 
assessment
 
payment
 
due
 
by
 
June
 
28,
 
2024).
 
Under
 
the
 
proposed
 
rule,
 
the
 
estimated
 
loss
 
pursuant
 
to
 
the
 
systemic
 
risk
determination
 
would be
 
periodically adjusted,
 
and
 
the
 
FDIC
 
would retain
 
the
 
ability to
 
cease
 
collection
 
early,
 
extend the
 
special
assessment collection period and impose
 
a final shortfall special
 
assessment on a one-time basis. In
 
their December 31, 2022
 
Call
Reports, BPPR and PB reported estimated uninsured deposits of approximately $28.1 billion and $3.5 billion, respectively.
 
Although
the proposal could be changed, the assessments, as proposed, would
 
be recorded as an expense in the period in which this
 
change
is enacted.
 
Such expense
 
would significantly affect
 
noninterest expense and
 
the results
 
of operations for
 
the quarter
 
in which
 
it is
recognized. If the
 
final rule is
 
adopted as proposed,
 
the special assessment
 
for the
 
Corporation is estimated
 
at approximately $66
million. The actual assessment may vary as a result
 
of the final rule, including any changes to the calculation
 
methodology.
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
167
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
September 30, 2023
 
and December 31,
 
2022, and the
 
results of their
 
operations for the
 
nine months period
 
ended September 30,
2023
 
and
 
September
 
30,
 
2022.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
168
Table 17 - Summarized Statement
 
of Condition
(In thousands)
September 30, 2023
December 31, 2022
Assets
Cash and money market investments
$
367,808
$
203,083
Investment securities
28,426
24,815
Accounts receivables from non-obligor subsidiaries
12,296
16,853
Other loans (net of allowance for credit losses of $17 (2022
 
- $370))
27,255
27,826
Investment in equity method investees
5,268
5,350
Other assets
56,678
45,278
Total assets
$
497,731
$
323,205
Liabilities and Stockholders' deficit
Accounts payable to non-obligor subsidiaries
$
11,302
$
3,709
Notes payable
592,017
497,428
Other liabilities
108,535
112,847
Stockholders' deficit
(214,123)
(290,779)
Total liabilities and
 
stockholders' deficit
$
497,731
$
323,205
Table 18 - Summarized Statement
 
of Operations
For the period ended
(In thousands)
September 30, 2023
September 30, 2022
Income:
Dividends from non-obligor subsidiaries
$
154,000
$
454,000
Interest income from non-obligor subsidiaries and affiliates
12,280
594
(Losses) earnings from investments in equity method investees
(82)
15,698
Other operating income
2,293
136,140
Total income
$
168,491
$
606,432
Expenses:
Services provided by non-obligor subsidiaries and affiliates
 
(net of
reimbursement by subsidiaries for services provided by parent
 
of
$161,333 (2022 - $157,754))
$
16,593
$
12,697
Other operating expenses
20,706
19,399
Total expenses
$
37,299
$
32,096
Net income
$
131,192
$
574,336
During the nine months period ended
 
September 30, 2022, the Obligor group recorded
 
$1.5 million of distributions from
 
its
direct equity
 
method investees.
 
During the
 
nine months
 
period ended
 
September 30,
 
2023, the
 
obligor group
 
recorded a
$50.0
 
million
 
of
 
dividend
 
dsitribution from
 
a
 
non-obligor subsidiary
 
wich
 
was
 
recorded as
 
a
 
reduction to
 
the
 
investment
(2022 - $53.5 million).
Risks to Liquidity
 
Total lines of credit outstanding, or available borrowing capacity under lines of credit are not necessarily
 
a measure of the total credit
available
 
on
 
a
 
continuing
 
basis.
 
Some
 
of
 
these
 
lines
 
could
 
be
 
subject
 
to
 
collateral
 
requirements,
 
changes
 
to
 
the
 
value
 
of
 
the
 
169
collateral, standards of
 
creditworthiness, leverage ratios
 
and other regulatory
 
requirements, among other factors.
 
Derivatives, such
as
 
those
 
embedded
 
in
 
long-term
 
repurchase
 
transactions
 
or
 
interest
 
rate
 
swaps,
 
and
 
off-balance
 
sheet
 
exposures,
 
such
 
as
recourse, 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
 
Corporation is
subject to
 
positive tangible
 
capital
 
requirements to
 
utilize secured
 
loan facilities
 
with the
 
FHLB that
 
could
 
result in
 
a limitation
 
of
borrowing amounts or maturity terms, even if the Corporation
 
exceeds well-capitalized regulatory capital levels.
 
The credit
 
ratings of
 
Popular’s debt
 
obligations are
 
a relevant
 
factor for
 
liquidity because
 
they impact
 
the Corporation’s
 
ability to
borrow
 
in
 
the
 
capital
 
markets,
 
its
 
cost
 
and
 
access
 
to
 
funding
 
sources.
 
Credit
 
ratings
 
are
 
based
 
on
 
the
 
financial
 
strength,
 
credit
quality and
 
concentrations in
 
the loan
 
portfolio, the
 
level and
 
volatility of
 
earnings, capital
 
adequacy,
 
the quality
 
of management,
geographic concentration
 
in Puerto
 
Rico, the
 
liquidity of
 
the balance
 
sheet, the
 
availability of
 
a significant
 
base of
 
core retail
 
and
commercial deposits, and the Corporation’s ability to access
 
a broad array of wholesale funding sources,
 
among other factors.
 
Furthermore,
 
various
 
statutory
 
provisions
 
limit
 
the
 
amount
 
of
 
dividends
 
an
 
insured
 
depository
 
institution
 
may
 
pay
 
to
 
its
 
holding
company without
 
regulatory approval. A
 
member bank must
 
obtain the
 
approval of
 
the Federal
 
Reserve Board
 
for any
 
dividend, if
the total
 
of all
 
dividends declared
 
by the
 
member bank
 
during the
 
calendar year
 
would exceed
 
the 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 nine
 
months ended
 
September 30,
2023, BPPR declared cash dividends
 
of $150 million. At September
 
30, 2023, BPPR can declare
 
a dividend of approximately $402
million without
 
prior approval
 
of the
 
Federal Reserve
 
Board due
 
to its
 
retained income,
 
declared dividend activity
 
and transfers
 
to
statutory
 
reserves
 
over
 
the
 
measurement
 
period.
 
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
 
and
 
capital,
 
including
 
tangible
 
and
 
regulatory
capital, thus potentially limiting the
 
amount of cash moving
 
up to the BHCs from
 
the banking subsidiaries. This could,
 
in turn, affect
the
 
BHCs
 
ability to
 
declare dividends
 
on
 
its
 
outstanding common
 
and
 
preferred stock,
 
repurchase its
 
securities
 
or meet
 
its
 
debt
obligations, for example.
 
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
 
issue
 
unsecured
 
senior
 
debt,
 
as
 
these
 
banking
 
subsidiaries
 
are
 
funded
primarily with
 
deposits and secured
 
borrowings. The banking
 
subsidiaries had $7.8
 
million in
 
deposits at
 
September 30, 2023
 
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
 
20
 
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
 
$27.8
 
million
 
at
 
September
 
30,
 
2023.
 
The
 
Corporation
 
could
 
be
 
required
 
to
 
post
 
additional
 
collateral
 
under
 
the
 
 
 
170
agreements.
 
Management
 
expects
 
that
 
it
 
would
 
be
 
able
 
to
 
meet
 
additional
 
collateral
 
requirements
 
if
 
and
 
when
 
needed.
 
The
requirements
 
to
 
post
 
collateral under
 
certain
 
agreements or
 
the
 
loss
 
of
 
escrow deposits
 
could
 
reduce
 
the
 
Corporation’s
 
liquidity
resources and impact its operating results.
Credit Risk
Geographic and Government Risk
 
The Corporation is exposed to geographic and government risk.
 
The Corporation’s assets and revenue composition by geographical
area and by business segment reporting are presented
 
in Note 33 to the Consolidated Financial Statements.
Commonwealth of Puerto Rico
A
 
significant portion
 
of
 
our financial
 
activities and
 
credit
 
exposure is
 
concentrated in
 
the
 
Commonwealth of
 
Puerto Rico
 
(“Puerto
Rico”), which has faced severe economic and fiscal
 
challenges in the past and may face additional
 
challenges in the future.
 
Economic Performance.
 
Puerto
 
Rico’s
 
economy suffered
 
a
 
severe and
 
prolonged recession
 
from
 
2007
 
to
 
2017,
 
with real
 
gross national
 
product (“GNP”)
contracting approximately 15%
 
during this period.
 
In 2017, Hurricane
 
María caused significant
 
damage and destruction
 
across the
island, resulting in further economic contraction. Puerto Rico’s
 
economy has been gradually recovering since 2018, in
 
part aided by
the large amount
 
of federal disaster
 
relief and recovery
 
assistance funds injected
 
into the Puerto
 
Rico economy in
 
connection with
Hurricane María
 
and other
 
recent natural
 
disasters. This
 
growth was
 
interrupted by
 
the economic
 
shock caused
 
by the
 
COVID-19
pandemic in 2020, but has since resumed, in part
 
aided by additional federal assistance from
 
pandemic-related stimulus measures.
The
 
latest
 
Puerto
 
Rico
 
Economic Activity
 
Index,
 
published
 
by
 
the
 
Economic
 
Development Bank
 
for
 
Puerto
 
Rico
 
(the
 
“Economic
Activity Index”),
 
reflected a
 
3.3% year-over-year increase
 
and a
 
0.2% month-over-month decrease
 
in August
 
2023. The
 
Economic
Activity Index is a coincident indicator of ongoing economic activity but not a direct measurement of real GNP. In February 2023, the
Puerto Rico
 
Planning Board
 
revised its
 
real GNP
 
forecast for
 
the current
 
fiscal year
 
(July 2022-June
 
2023) from
 
1.7% growth
 
to
0.7% growth, citing an anticipated deacceleration in the
 
global economy.
 
While the
 
Puerto Rico
 
economy has
 
not directly
 
tracked the
 
United States
 
economy in
 
recent years,
 
many of
 
the external
 
factors
that impact
 
the Puerto
 
Rico economy
 
are affected
 
by the
 
policies and performance
 
of the
 
United States
 
economy.
 
These external
factors include
 
the level
 
of interest
 
rates and
 
the rate
 
of inflation.
 
Inflation in
 
the United
 
States, as
 
measured by the
 
United States
Consumer
 
Price
 
Index
 
(published
 
by
 
the
 
U.S.
 
Bureau
 
of
 
Labor
 
Statistics),
 
increased
 
3.7%
 
during
 
the
 
12-month
 
period
 
ended
September 2023.
 
Inflation in Puerto Rico, as measured by
 
the Puerto Rico Consumer Price Index
 
(published by the Department of
Labor
 
and
 
Human
 
Resources of
 
Puerto
 
Rico),
 
increased 3.3%
 
during the
 
12-month
 
period
 
ended September
 
2023.
 
The
 
rate
 
of
inflation has
 
gradually decreased from
 
a mid-2022
 
peak, as the
 
Federal Reserve has
 
implemented a series
 
of benchmark interest
rate increases. The speed and scope of the inflation
 
slowdown will inform if and how much interest rates
 
will continue to increase, as
well how these changes will impact the United
 
States and Puerto Rico economies.
Fiscal Challenges.
 
As the
 
Puerto Rico
 
economy contracted, the
 
government’s public
 
debt rose
 
rapidly,
 
in part
 
from borrowing to
 
cover deficits
 
to pay
debt service,
 
pension benefits and
 
other government
 
expenditures. By 2016,
 
the Puerto
 
Rico government had
 
over $120
 
billion in
combined debt and unfunded pension liabilities, had
 
lost access to the capital markets, and was in
 
the midst of a fiscal crisis.
Puerto
 
Rico’s
 
escalating fiscal
 
and economic
 
challenges
 
and imminent
 
widespread defaults
 
in
 
its
 
public debt
 
prompted the
 
U.S.
Congress to
 
enact the
 
Puerto Rico
 
Oversight, Management,
 
and Economic
 
Stability Act
 
(“PROMESA”) in
 
June 2016.
 
PROMESA
created the “Oversight Board” with ample powers over Puerto Rico’s fiscal and economic affairs and those of its public corporations,
instrumentalities and municipalities (collectively,
 
“PR Government Entities”). Pursuant
 
to PROMESA, the
 
Oversight Board will be
 
in
place
 
until
 
market
 
access
 
is
 
restored
 
and
 
balanced
 
budgets
 
are
 
produced
 
for
 
at
 
least
 
four
 
consecutive
 
years.
 
PROMESA
 
also
established two
 
mechanisms for
 
the restructuring
 
of the
 
obligations of
 
PR Government
 
Entities: (a)
 
Title III,
 
which provides
 
an in-
 
 
171
court process that incorporates many of the
 
powers and provisions of the U.S. Bankruptcy Code
 
and permits adjustment of a broad
range of obligations, and
 
(b) Title VI,
 
which provides for a
 
largely out-of-court process through which
 
modifications to financial debt
can be accepted by a supermajority of creditors
 
and bind holdouts.
Since 2017, Puerto Rico and several
 
of its instrumentalities have availed themselves
 
of the debt restructuring mechanisms of Titles
III and VI of PROMESA. The Puerto Rico government emerged from Title III of PROMESA in March 2022. Several instrumentalities,
including Government
 
Development Bank for
 
Puerto Rico,
 
the Puerto
 
Rico Sales
 
Tax
 
Financing Corporation, and
 
the Puerto
 
Rico
Highways
 
and
 
Transportation
 
Authority,
 
have
 
also
 
completed
 
debt
 
restructurings
 
under
 
Titles
 
III
 
or
 
VI
 
of
 
PROMESA.
 
While
 
the
majority
 
of
 
the
 
debt
 
has
 
already
 
been
 
restructured,
 
some
 
PR
 
Government
 
Entities
 
still
 
face
 
significant
 
fiscal
 
challenges.
 
For
example, the Puerto Rico Electric Power Authority is still in the process
 
of restructuring its debts under Title III of PROMESA and the
Puerto
 
Rico
 
Industrial
 
Development
 
Company
 
recently
 
commenced
 
a
 
solicitation
 
process
 
to
 
restructure
 
its
 
revenue
 
bonds
 
in
 
a
proceeding under Title VI of PROMESA.
 
Municipalities.
 
Puerto Rico’s fiscal and economic challenges have
 
also adversely impacted its municipalities. Budgetary subsidies to municipalities
have
 
gradually declined
 
in recent
 
years
 
and
 
were scheduled
 
to
 
be ultimately
 
eliminated by
 
fiscal year
 
2025
 
as
 
part
 
of the
 
fiscal
measures required
 
by
 
the Oversight
 
Board. However,
 
over the
 
past
 
years, the
 
Oversight Board
 
has
 
authorized and
 
funded
 
new
appropriations
 
and
 
investments
 
to
 
offset
 
the
 
decline
 
in
 
intergovernmental
 
transfers
 
to
 
municipalities.
 
Beyond
 
those
 
sources
 
of
alternate funding, municipalities have
 
also received significant federal
 
disaster and COVID-relief funding in
 
recent years. According
to the
 
latest Puerto
 
Rico fiscal
 
plan certified
 
by the
 
Oversight Board,
 
taken together,
 
the funding
 
available to
 
municipalities in
 
the
near-term is substantial. The fiscal
 
plan notes, however, that
 
the desired progress to achieve
 
fiscal discipline and implement critical
reforms has not been achieved,
 
and that municipalities must work with
 
the Executive branch to analyze
 
the financial needs of
 
each
individual municipality and focus on the necessary enhancements in municipal shared services and other
 
municipal and government
initiatives. Pursuant to
 
the fiscal plan,
 
once the transformational measures
 
and milestones related to
 
these initiatives are
 
achieved,
additional funding from the central government may be
 
made available to municipalities to improve fiscal
 
sustainability.
Municipalities
 
are
 
subject
 
to
 
PROMESA
 
and,
 
at
 
the
 
Oversight
 
Board’s
 
request,
 
are
 
required
 
to
 
submit
 
fiscal
 
plans
 
and
 
annual
budgets
 
to
 
the
 
Oversight
 
Board
 
for
 
its
 
review
 
and
 
approval.
 
They
 
are
 
also
 
required to
 
seek
 
Oversight
 
Board
 
approval
 
to
 
issue,
guarantee
 
or
 
modify
 
their
 
debts
 
and
 
to
 
enter
 
into
 
contracts
 
with an
 
aggregate
 
value
 
of
 
$10
 
million
 
or
 
more.
 
With
 
the
 
Oversight
Board’s approval, municipalities are also eligible to avail themselves of the debt restructuring processes provided by PROMESA. To
date, however, no municipality has been subject to any such debt restructuring
 
process.
Exposure of the Corporation
 
The credit
 
quality of BPPR’s
 
loan portfolio
 
reflects, among other
 
things, the
 
general economic conditions
 
in Puerto
 
Rico and
 
other
adverse conditions affecting Puerto
 
Rico consumers and businesses.
 
Deterioration in the Puerto
 
Rico economy has resulted
 
in the
past, and could
 
result in the future,
 
in higher delinquencies, greater
 
charge-offs and increased losses,
 
which could materially affect
our financial condition and results of operations.
 
At September
 
30, 2023,
 
the Corporation’s
 
direct exposure
 
to PR
 
Government Entities
 
totaled $362
 
million, of
 
which $333
 
million
were
 
outstanding,
 
compared
 
to
 
$374
 
million
 
at
 
December
 
31,
 
2022,
 
of
 
which
 
$327
 
million
 
were
 
outstanding.
 
A
 
deterioration
 
in
Puerto Rico’s fiscal
 
and economic situation could adversely
 
affect the value of
 
our Puerto Rico government
 
obligations, resulting in
losses to us. Of
 
the amount outstanding, $314 million
 
consists of loans and
 
$19 million are securities ($302
 
million and $25 million,
respectively,
 
at December 31,
 
2022). All
 
of the
 
Corporation’s direct exposure
 
outstanding at September
 
30, 2023
 
were obligations
from various
 
Puerto Rico
 
municipalities. In
 
most cases,
 
these were
 
“general obligations”
 
of a
 
municipality,
 
to which
 
the applicable
municipality
 
has
 
pledged its
 
good
 
faith, credit
 
and unlimited
 
taxing power,
 
or
 
“special obligations”
 
of
 
a municipality,
 
to
 
which the
applicable municipality
 
has
 
pledged basic
 
property tax
 
or sales
 
tax
 
revenues. At
 
September 30,
 
2023,
 
76% of
 
the Corporation’s
exposure to
 
municipal loans
 
and securities
 
was concentrated
 
in the
 
municipalities of
 
San Juan,
 
Guaynabo, Carolina
 
and Caguas.
For
 
additional
 
discussion
 
of
 
the
 
Corporation’s
 
direct
 
exposure
 
to
 
the
 
Puerto
 
Rico
 
government
 
and
 
its
 
instrumentalities
 
and
municipalities, refer to Note 21 – Commitments and
 
Contingencies to the Consolidated Financial Statements.
 
In
 
addition,
 
at
 
September
 
30,
 
2023,
 
the
 
Corporation
 
had
 
$242
 
million
 
in
 
loans
 
insured
 
or
 
securities
 
issued
 
by
 
Puerto
 
Rico
governmental entities,
 
but for
 
which the
 
principal source
 
of repayment
 
is non-governmental
 
($251 million at
 
December 31, 2022).
These
 
included
 
$195
 
million
 
in
 
residential mortgage
 
loans
 
insured by
 
the
 
Puerto
 
Rico
 
Housing
 
Finance Authority
 
(“HFA”),
 
a PR
Government
 
Entity
 
(December
 
31,
 
2022
 
-
 
$209 million).
 
These
 
mortgage
 
loans
 
are
 
secured
 
by
 
first
 
mortgages
 
on
 
Puerto
 
Rico
 
 
 
172
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
 
September
 
30,
 
2023,
 
$40
 
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, 2022 - $42 million).
 
In the event that
the mortgage loans insured by HFA and held by the Corporation directly or those
 
serving as collateral for the HFA bonds default and
the collateral is insufficient to satisfy the outstanding balance of these loans, HFA’s
 
ability to honor its insurance will depend, among
other factors,
 
on the
 
financial condition
 
of HFA
 
at the
 
time such
 
obligations become
 
due and
 
payable. The
 
Corporation does
 
not
consider the government guarantee when estimating
 
the credit losses associated with this portfolio.
 
BPPR’s
 
commercial loan
 
portfolio also
 
includes loans
 
to
 
private borrowers
 
who
 
are service
 
providers, lessors,
 
suppliers or
 
have
other relationships with the government. These borrowers could be negatively
 
affected by a deterioration in the fiscal and
 
economic
situation
 
of
 
PR
 
Government
 
Entities.
 
Similarly,
 
BPPR’s
 
mortgage
 
and
 
consumer
 
loan
 
portfolios
 
include
 
loans
 
to
 
government
employees
 
and
 
retirees,
 
which
 
could
 
also
 
be
 
negatively
 
affected
 
by
 
fiscal
 
measures,
 
such
 
as
 
employee
 
layoffs
 
or
 
furloughs
 
or
reductions in pension benefits, if the fiscal and economic
 
situation deteriorates.
As
 
of
 
September
 
30,
 
2023,
 
BPPR
 
had
 
$17.8
 
billion
 
in
 
deposits
 
from
 
the
 
Puerto
 
Rico
 
government,
 
its
 
instrumentalities,
 
and
municipalities. The rate at
 
which public deposit balances may
 
decline is uncertain and
 
difficult to predict. The
 
amount and timing of
any such
 
reduction is
 
likely to
 
be impacted
 
by,
 
for example,
 
the speed
 
at which
 
federal assistance
 
is distributed
 
and the
 
financial
condition, liquidity
 
and cash
 
management practices of
 
such entities,
 
as well
 
as on
 
the ability
 
of BPPR
 
to maintain
 
these customer
relationships.
The
 
Corporation may
 
also have
 
direct
 
exposure with
 
regards to
 
avoidance and
 
other causes
 
of
 
action initiated
 
by the
 
Oversight
Board on behalf of the Commonwealth or other Title III debtors. For additional information regarding such exposure, refer to Note 21
to the Consolidated Financial Statements.
United States Virgin Islands
The
 
Corporation
 
has
 
operations
 
in
 
the
 
United
 
States
 
Virgin
 
Islands
 
(the
 
“USVI”)
 
and
 
has
 
credit
 
exposure
 
to
 
USVI
 
government
entities.
The USVI has
 
been experiencing a
 
number of fiscal
 
and economic challenges,
 
which could adversely
 
affect the
 
ability of its
 
public
corporations and instrumentalities to service their outstanding
 
debt obligations. PROMESA does not apply to the USVI
 
and, as such,
there
 
is
 
currently
 
no
 
federal
 
legislation
 
permitting
 
the
 
restructuring
 
of
 
the
 
debts
 
of
 
the
 
USVI
 
and
 
its
 
public
 
corporations
 
and
instrumentalities.
To
 
the extent that
 
the fiscal condition
 
of the USVI
 
continues to deteriorate, the
 
U.S. Congress or the
 
Government of the
 
USVI may
enact legislation allowing for the restructuring of the
 
financial obligations of USVI government entities or imposing a
 
stay on creditor
remedies, including by making PROMESA applicable
 
to the USVI.
At September 30,
 
2023, the Corporation
 
had approximately $28
 
million in direct
 
exposure to USVI
 
government entities (December
31, 2022 - $28 million).
 
British Virgin Islands
The
 
Corporation has
 
operations
 
in
 
the
 
British Virgin
 
Islands
 
(“BVI”),
 
which
 
was
 
negatively
 
affected by
 
the
 
COVID-19
 
pandemic,
particularly as
 
a reduction
 
in the
 
tourism activity
 
which accounts
 
for a
 
significant portion
 
of its
 
economy.
 
Although the
 
Corporation
has
 
no
 
significant
 
exposure
 
to
 
a
 
single
 
borrower
 
in
 
the
 
BVI,
 
at
 
September
 
30,
 
2023,
 
it
 
has
 
a
 
loan
 
portfolio
 
amounting
 
to
approximately
 
$201
 
million
 
comprised
 
of
 
various
 
retail
 
and
 
commercial
 
clients,
 
compared
 
to
 
a
 
loan
 
portfolio
 
of
 
$214
 
million
 
at
December 31, 2022.
U.S. Government
As further detailed in Notes
 
6 and 7 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, $1.7 billion
 
of residential mortgages, $10 million of SBA loans under the
Paycheck Protection Program (“PPP”) and $72 million
 
commercial loans were insured or guaranteed by
 
the U.S. Government or its
agencies at September 30, 2023 (compared to
 
$1.6 billion, $38 million and $72 million, respectively, at December 31,
 
2022).
173
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 21.
During the
 
third quarter
 
of 2023,
 
the Corporation
 
continued to
 
reflect stable
 
credit quality
 
metrics. Non-performing
 
loans (“NPLs”)
and net charge offs (“NCOs”) continued below historical pre-pandemic averages. Consumer portfolios, however, reflected increased
delinquencies and NCOs for the quarter primarily due
 
to the expected continued credit normalization.
 
We continue to closely monitor
changes in the macroeconomic environment and on
 
borrower performance, especially our unsecured consumer loans, given higher
interest
 
rates
 
and
 
inflationary
 
pressures.
 
However,
 
management
 
believes
 
that
 
the
 
improvements
 
over
 
recent
 
years
 
in
 
risk
management practices and the
 
risk profile of
 
the Corporation’s loan portfolios
 
positions Popular to continue
 
to operate successfully
under the current environment.
 
Total
 
NPAs
 
decreased
 
by
 
$85
 
million
 
when
 
compared
 
with
 
December
 
31,
 
2022.
 
Total
 
non-performing
 
loans
 
held-in-portfolio
(“NPLs”)
 
decreased
 
by
 
$78
 
million
 
from
 
December
 
31,
 
2022.
 
BPPR’s
 
NPLs
 
decreased
 
by
 
$68
 
million,
 
mainly
 
driven
 
by
 
lower
mortgage,
 
consumer
 
and
 
commercial
 
NPLs
 
by
 
$55
 
million,
 
$11
 
million,
 
and
 
$10
 
million
 
respectively,
 
in
 
part
 
offset
 
by
 
higher
construction NPLs
 
by $7
 
million.
 
The consumer
 
NPLs decrease
 
was mostly
 
driven by
 
a $11
 
million line
 
of credit
 
charge-off on
 
a
single relationship,
 
while the
 
construction NPLs
 
increase was
 
driven by
 
a $9
 
million relationship,
 
which impairment
 
amount of
 
$3
million was
 
charged-off during
 
the third
 
quarter of
 
2023.
 
Popular U.S.
 
NPLs decreased
 
by $10
 
million from
 
December 31,
 
2022,
mainly driven by
 
lower mortgage NPLs by
 
$9 million. On September
 
30, 2023, the
 
ratio of NPLs to
 
total loans held-in-portfolio was
1.1% compared to 1.4%, at December 31,
 
2022. Other real estate owned loans (“OREOs”) decreased by
 
$7 million. On September
30,
 
2023,
 
NPLs secured
 
by
 
real estate
 
amounted to
 
$255 million
 
in
 
the Puerto
 
Rico
 
operations and
 
$23
 
million
 
in Popular
 
U.S,
compared with $303 million and $33 million, respectively, at December
 
31, 2022.
 
The Corporation’s
 
commercial loan
 
portfolio secured
 
by real
 
estate (“CRE”)
 
amounted to
 
$10.4 billion
 
at September
 
30, 2023,
 
of
which
 
$3.0
 
billion
 
was
 
secured
 
with
 
owner
 
occupied
 
properties,
 
compared
 
with
 
$9.9
 
billion
 
and
 
$3.1
 
billion,
 
respectively,
 
at
December 31,
 
2022. Office
 
space leasing exposure
 
in our
 
non-owner occupied CRE
 
portfolio is limited,
 
representing only 1.9%
 
or
$635 million
 
of our
 
total loan
 
portfolio.
 
The exposure is
 
mainly comprised of
 
low- to
 
mid- rise
 
properties with average
 
loan size
 
of
$2.1 million and is well diversified across tenant
 
type.
CRE NPLs amounted to $56 million at September 30, 2023, compared with $54 million at December 31, 2022. The
 
CRE NPL ratios
for the BPPR
 
and Popular U.S. segments were
 
1.09% and 0.09%, respectively,
 
at September 30, 2023, compared
 
with 1.04% and
0.12%, respectively, at December 31, 2022.
In
 
addition
 
to
 
the
 
NPLs
 
included
 
in
 
Table
 
21,
 
at
 
September
 
30,
 
2023,
 
there
 
were
 
$519
 
million
 
of
 
performing
 
loans,
 
mostly
commercial
 
loans,
 
which
 
in
 
management’s
 
opinion,
 
are
 
currently
 
subject
 
to
 
potential
 
future
 
classification
 
as
 
non-performing
(December 31, 2022 - $374 million).
For the
 
quarter ended
 
September 30,
 
2023, total
 
inflows of
 
NPLs held-in-portfolio,
 
excluding consumer
 
loans, decreased
 
by $12
million, when compared to the inflows for the same period in 2022. Inflows of NPLs held-in-portfolio at the BPPR segment increased
slightly by $2 million, compared to the same period in
 
2022. Inflows of NPLs held-in-portfolio at the Popular
 
U.S. segment decreased
by $14 million from the same period in 2022,
 
mainly driven by lower commercial inflows.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
174
Table 19 - Non-Performing
 
Assets
September 30, 2023
December 31, 2022
(Dollars in thousands)
BPPR
Popular
U.S.
Popular,
Inc.
As a % of
loans HIP
by
category
BPPR
Popular
U.S.
Popular,
Inc.
As a % of
loans HIP
by
category
Commercial
Commercial multi-family
$
184
$
404
$
588
-
%
$
242
$
-
$
242
-
%
Commercial real estate non-owner
occupied
15,330
734
16,064
0.3
23,662
1,454
25,116
0.6
Commercial real estate owner
occupied
35,089
3,877
38,966
1.3
23,990
5,095
29,085
0.9
Commercial and industrial
 
21,624
3,579
25,203
0.4
34,277
4,319
38,596
0.7
Total Commercial
 
72,227
8,594
80,821
0.5
82,171
10,868
93,039
0.6
Construction
6,578
-
6,578
0.7
-
-
-
-
Leasing
6,842
-
6,842
0.4
5,941
-
5,941
0.4
Mortgage
187,443
11,980
199,423
2.6
242,391
20,488
262,879
3.6
Consumer
 
 
Home equity lines of credit
-
4,085
4,085
6.1
-
4,110
4,110
5.7
 
Personal
 
18,582
2,637
21,219
1.1
18,082
1,958
20,040
1.1
 
Auto
40,268
-
40,268
1.1
40,978
-
40,978
1.2
 
Other Consumer
 
1,885
402
2,287
1.4
12,446
8
12,454
8.4
Total Consumer
 
60,735
7,124
67,859
1.0
71,506
6,076
77,582
1.2
Total non-performing
 
loans held-in-
portfolio
333,825
27,698
361,523
1.1
%
402,009
37,432
439,441
1.4
%
Other real estate owned (“OREO”)
82,115
207
82,322
88,773
353
89,126
Total non-performing
 
assets
[1]
$
415,940
$
27,905
$
443,845
$
490,782
$
37,785
$
528,567
Accruing loans past due 90 days or
more
[2]
$
264,082
$
130
$
264,212
$
351,248
$
366
$
351,614
Ratios:
Non-performing assets to total assets
0.75
%
0.20
%
0.64
%
0.89
%
0.30
%
0.78
%
Non-performing loans held-in-portfolio
to loans held-in-portfolio
 
1.40
0.27
1.06
1.78
0.39
1.37
Allowance for credit losses to loans
held-in-portfolio
2.63
0.84
2.09
2.73
1.10
2.25
Allowance for credit losses to non-
performing loans, excluding held-for-
sale
187.08
312.42
196.69
153.12
279.86
163.91
[1] There were no non-performing loans held-for-sale
 
as of September 30, 2023 and December 31, 2022.
[2] It is the Corporation’s policy to report delinquent
 
residential mortgage loans insured by FHA or guaranteed
 
by the VA as accruing
 
loans past due 90
days or
 
more as
 
opposed to
 
non-performing since
 
the principal
 
repayment is
 
insured.
 
These balances
 
include $115
 
million of
 
residential mortgage
loans insured
 
by FHA
 
or guaranteed
 
by the
 
VA
 
that are
 
no longer
 
accruing interest
 
as of
 
September 30,
 
2023 (December
 
31, 2022
 
- $190
 
million).
Furthermore,
 
the Corporation
 
has approximately
 
$39 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, 2022 - $42 million).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
175
Table 20 - Activity in Non
 
-Performing Loans Held-in-Portfolio (Excluding Consumer
 
Loans)
For the quarter ended September 30, 2023
For the nine months ended September 30, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
292,219
$
26,187
$
318,406
$
324,562
$
31,356
$
355,918
Plus:
New non-performing loans
37,393
5,827
43,220
128,011
23,446
151,457
Advances on existing non-performing loans
-
12
12
-
155
155
Less:
Non-performing loans transferred to OREO
(5,657)
-
(5,657)
(25,777)
(58)
(25,835)
Non-performing loans charged-off
(3,354)
(2,446)
(5,800)
(4,854)
(4,837)
(9,691)
Loans returned to accrual status / loan collections
(54,353)
(9,006)
(63,359)
(155,694)
(29,488)
(185,182)
Ending balance NPLs
$
266,248
$
20,574
$
286,822
$
266,248
$
20,574
$
286,822
Table 21 - Activity in Non
 
-Performing Loans Held-in-Portfolio (Excluding Consumer
 
Loans)
For the quarter ended September 30, 2022
For the nine months ended September 30, 2022
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
381,163
$
27,638
$
408,801
$
454,419
$
27,501
$
481,920
Plus:
New non-performing loans
35,258
19,704
54,962
117,909
38,621
156,530
Advances on existing non-performing loans
-
67
67
-
2,817
2,817
Less:
Non-performing loans transferred to OREO
(5,956)
-
(5,956)
(30,893)
(85)
(30,978)
Non-performing loans charged-off
(5,223)
(48)
(5,271)
(7,192)
(337)
(7,529)
Loans returned to accrual status / loan collections
(65,021)
(9,400)
(74,421)
(194,022)
(30,556)
(224,578)
Ending balance NPLs
$
340,221
$
37,961
$
378,182
$
340,221
$
37,961
$
378,182
Table 22 - Activity in Non
 
-Performing Commercial Loans Held-in-Portfolio
For the quarter ended September 30, 2023
For the nine months ended September 30, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
 
BPPR
Popular U.S.
Popular, Inc.
 
Beginning balance
$
88,716
$
11,610
$
100,326
$
82,171
$
10,868
$
93,039
Plus:
New non-performing loans
2,736
1,324
4,060
22,533
11,674
34,207
Advances on existing non-performing loans
-
7
7
-
35
35
Less:
Non-performing loans transferred to OREO
(138)
-
(138)
(446)
-
(446)
Non-performing loans charged-off
(969)
(2,446)
(3,415)
(2,237)
(4,837)
(7,074)
Loans returned to accrual status / loan
collections
(18,118)
(1,901)
(20,019)
(29,794)
(9,146)
(38,940)
Ending balance NPLs
$
72,227
$
8,594
$
80,821
$
72,227
$
8,594
$
80,821
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
176
Table 23 - Activity in Non
 
-Performing Commercial Loans Held-in-Portfolio
For the quarter ended September 30, 2022
For the nine months ended September 30, 2022
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
 
BPPR
Popular U.S.
Popular, Inc.
 
Beginning balance
$
96,493
$
7,446
$
103,939
$
120,047
$
5,532
$
125,579
Plus:
New non-performing loans
5,913
14,965
20,878
13,706
25,289
38,995
Advances on existing non-performing loans
-
12
12
-
2,518
2,518
Less:
Non-performing loans transferred to OREO
(352)
-
(352)
(4,318)
-
(4,318)
Non-performing loans charged-off
(4,534)
(48)
(4,582)
(5,741)
(210)
(5,951)
Loans returned to accrual status / loan collections
(10,072)
(5,947)
(16,019)
(36,246)
(16,701)
(52,947)
Ending balance NPLs
$
87,448
$
16,428
$
103,876
$
87,448
$
16,428
$
103,876
Table 24 - Activity in Non
 
-Performing Construction Loans Held-in-Portfolio
 
For the quarter ended September 30, 2023
For the nine months ended September 30, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
 
BPPR
Popular U.S.
Popular, Inc.
 
Beginning balance
$
9,284
$
-
$
9,284
$
-
$
-
$
-
Plus:
New non-performing loans
-
-
-
9,284
-
9,284
Less:
Non-performing loans charged-off
(2,537)
-
(2,537)
(2,537)
-
(2,537)
Loans returned to accrual status / loan collections
(169)
-
(169)
(169)
-
(169)
Ending balance NPLs
$
6,578
$
-
$
6,578
$
6,578
$
-
$
6,578
Table 25 - Activity in Non
 
-Performing Construction Loans Held-in-Portfolio
For the quarter ended September 30, 2022
For the nine months ended September 30, 2022
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
 
BPPR
Popular U.S.
Popular, Inc.
 
Beginning balance
$
-
$
-
$
-
$
485
$
-
$
485
Less:
Loans returned to accrual status / loan collections
-
-
-
(485)
-
(485)
Ending balance NPLs
$
-
$
-
$
-
$
-
$
-
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
177
Table 26 - Activity in Non
 
-Performing Mortgage Loans Held-in-Portfolio
For the quarter ended September 30, 2023
For the nine months ended
 
September 30,
2023
(Dollars in thousands)
BPPR
Popular
U.S.
Popular, Inc.
 
BPPR
Popular U.S.
Popular, Inc.
 
Beginning balance
$
194,219
$
14,577
$
208,796
$
242,391
$
20,488
$
262,879
Plus:
New non-performing loans
34,657
4,503
39,160
96,194
11,772
107,966
Advances on existing non-performing loans
-
5
5
-
120
120
Less:
Non-performing loans transferred to OREO
(5,519)
-
(5,519)
(25,331)
(58)
(25,389)
Non-performing loans charged-off
152
-
152
(80)
-
(80)
Loans returned to accrual status / loan
collections
(36,066)
(7,105)
(43,171)
(125,731)
(20,342)
(146,073)
Ending balance NPLs
$
187,443
$
11,980
$
199,423
$
187,443
$
11,980
$
199,423
Table 27 - Activity in Non
 
-Performing Mortgage Loans Held-in-Portfolio
For the quarter ended September 30, 2022
For the nine months ended September 30, 2022
(Dollars in thousands)
BPPR
Popular
U.S.
Popular, Inc.
 
BPPR
Popular U.S.
Popular, Inc.
 
Beginning balance
$
284,670
$
20,192
$
304,862
$
333,887
$
21,969
$
355,856
Plus:
New non-performing loans
29,345
4,739
34,084
104,203
13,332
117,535
Advances on existing non-performing loans
-
55
55
-
299
299
Less:
Non-performing loans transferred to OREO
(5,604)
-
(5,604)
(26,575)
(85)
(26,660)
Non-performing loans charged-off
(689)
-
(689)
(1,451)
(127)
(1,578)
Loans returned to accrual status / loan collections
(54,949)
(3,453)
(58,402)
(157,291)
(13,855)
(171,146)
Ending balance NPLs
$
252,773
$
21,533
$
274,306
$
252,773
$
21,533
$
274,306
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
178
Loan Delinquencies
Another key measure used to evaluate and
 
monitor the Corporation’s asset quality is loan
 
delinquencies. Loans delinquent 30 days
or more, as a percentage of their related portfolio
 
category on September 30, 2023 and December 31,
 
2022, are presented below.
Table 28 - Loan Delinquen
 
cies
(Dollars in thousands)
September 30, 2023
December 31, 2022
Loans delinquent
30 days or more
Total loans
Total delinquencies
 
as a percentage
 
of total loans
Loans delinquent
30 days or more
Total loans
Total delinquencies
 
as a percentage
 
of total loans
Commercial
 
Commercial multi-family
$
6,503
$
2,328,433
0.28
%
$
2,844
$
2,321,713
0.12
%
Commercial real estate
non-owner occupied
19,966
5,035,130
0.40
26,969
4,499,670
0.60
Commercial real estate
owner occupied
42,643
3,044,905
1.40
30,059
3,078,549
0.98
Commercial and industrial
37,656
6,527,082
0.58
59,604
5,839,200
1.02
Total Commercial
 
106,768
16,935,550
0.63
119,476
15,739,132
0.76
Construction
 
6,578
922,112
0.71
-
757,984
-
Leasing
29,331
1,698,114
1.73
21,487
1,585,739
1.36
Mortgage
[1]
808,310
7,585,111
10.66
937,253
7,397,471
12.67
Consumer
 
Credit cards
 
37,070
1,077,428
3.44
24,065
1,041,870
2.31
Home equity lines of credit
5,491
67,499
8.13
4,684
71,916
6.51
Personal
 
57,578
1,952,168
2.95
45,299
1,823,579
2.48
Auto
 
152,740
3,633,196
4.20
129,089
3,512,530
3.68
Other
3,622
158,135
2.29
13,264
147,548
8.99
Total Consumer
 
256,501
6,888,426
3.72
216,401
6,597,443
3.28
Loans held-for-sale
-
5,239
-
-
5,381
-
Total
 
$
1,207,488
$
34,034,552
3.55
%
$
1,294,617
$
32,083,150
4.04
%
[1]
 
Loans delinquent 30 days or more includes $0.4 billion
 
of residential mortgage loans insured by FHA or guaranteed
 
by the VA as of September
30, 2023 (December 31, 2022 - $0.5 billion). Refer to Note
 
8 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
 
loans
 
modified
 
to
 
borrowers
 
with
 
financial
 
difficulty,
 
including
 
legacy
 
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 evaluates, at
 
least
on an
 
annual basis, the
 
assumptions tied to
 
the CECL
 
accounting framework, including
 
the reasonable and
 
supportable period as
well as the reversion window.
 
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
179
level of
 
the allowance
 
for credit
 
losses. Consequently,
 
the business
 
financial condition,
 
liquidity,
 
capital, and
 
results of
 
operations
could also be affected.
The
 
ACL
 
incorporated
 
updates macroeconomic
 
scenarios
 
for
 
Puerto
 
Rico
 
and
 
the
 
United
 
States.
 
Given
 
that
 
any
 
one
 
economic
outlook is inherently uncertain, the Corporation leverages multiple scenarios to estimate its ACL. The baseline scenario continues to
be assigned the highest probability, followed by the pessimistic scenario,
 
and then the optimistic scenario.
The
 
2023
 
annualized GDP
 
growth in
 
the
 
baseline scenario
 
improved to
 
1.7%
 
and
 
2.0%
 
for
 
Puerto
 
Rico
 
and
 
the
 
United
 
States,
respectively, compared to 1.5% and 1.6%
 
in the previous quarter. The 2023 forecasted average unemployment rate for
 
Puerto Rico
improved to
 
6.1% from
 
6.3% in
 
the previous
 
forecast, while
 
in the
 
United States
 
unemployment levels
 
remained at
 
3.6%, stable
when compared to the previous forecast.
 
At September
 
30, 2023,
 
the allowance
 
for credit
 
losses amounted
 
to $711
 
million, a
 
decrease of
 
$9 million,
 
when compared
 
with
December 31, 2022.
 
In PB the
 
ACL decreased by
 
$18 million from
 
December 31, 2022,
 
while in BPPR
 
the ACL increased
 
by $9
million. The Financial Accounting Standards Board
 
(“FASB”) issued Accounting Standards
 
Update (“ASU”) 2022-02 in March
 
2022,
which eliminates the
 
accounting guidance for troubled
 
debt restructures (“TDRs”) and
 
the requirement to
 
measure the effect
 
of the
concession from a loan modification, for which the Corporation used a discounted cash flow (“DCF”) method. This impact resulted in
a release in the ACL
 
of approximately $46 million presented as
 
an adjustment to the beginning balance
 
of retained earnings, net of
tax effect.
 
Excluding
 
ASU
 
2022-02
 
impact,
 
the
 
ACL
 
for
 
BPPR
 
increased by
 
$51
 
million,
 
while the
 
ACL
 
for
 
Popular
 
U.S
 
decreased
 
by
 
$15
million
 
from
 
December 31,
 
2022. The
 
increase in
 
BPPR
 
were mostly
 
driven by
 
higher reserves
 
for the
 
auto
 
and personal
 
loans
portfolios attributable to
 
credit normalization, changes
 
in macroeconomic scenarios,
 
and loan growth,
 
partially offset by
 
changes in
the
 
assignments
 
of
 
probability
 
weights
 
to
 
macroeconomic
 
scenarios,
 
as
 
previously
 
mentioned,
 
and
 
reductions
 
in
 
qualitative
reserves.
 
In
 
PB,
 
the
 
ACL
 
decrease was
 
mostly
 
due
 
to
 
the
 
implementation of
 
a
 
new
 
model for
 
the U.S.
 
commercial real
 
estate
portfolio. The new model is based on more granular regional
 
information for the Corporation’s portfolio and accounted for $15 million
of PB’s reduction in ACL.
As
 
part
 
of
 
the
 
Corporation’s
 
model
 
governance
 
procedures
 
a
 
new
 
model
 
was
 
implemented
 
for
 
the
 
U.S
 
commercial
 
real
 
estate
segment. The new model
 
enhances techniques used to capture default
 
activity within the Corporation’s geographical footprint.
 
This
enhancement is considered a change
 
in estimate. As part of
 
the implementation analysis management evaluated the
 
credit metrics
of
 
the
 
portfolio
 
such
 
as
 
risk
 
ratings,
 
delinquency
 
levels,
 
and
 
low
 
exposure
 
to
 
the
 
commercial
 
office
 
sector.
 
Qualitative
 
reserves
continue to be maintained to address risks within
 
the U. S. commercial real estate segment.
The Corporation’s ratio of the allowance for
 
credit losses to loans held-in-portfolio was 2.09% on
 
September 30, 2023, compared to
2.25% on December 31,
 
2022.
 
The ratio of the
 
allowance for credit losses
 
to NPLs held-in-portfolio stood at
 
196.7%, compared to
163.9% on December 31, 2022.
The provision for
 
credit losses for
 
the period ended
 
September 30, 2023,
 
amounted to an
 
expense of $44
 
million, compared to
 
an
expense of $40 million for the period ended September 30, 2022. The provision expense related to the loans-held-in-portfolio for the
nine-month period ended
 
September 30, 2023
 
was $126 million,
 
compared to an
 
expense of $35
 
million for the
 
nine-month period
ended
 
September
 
30,2022,
 
as
 
the
 
prior
 
period
 
included
 
reductions
 
in
 
reserves
 
due
 
to
 
post-pandemic
 
improvements
 
in
 
the
macroeconomic outlook and lower NCOs.
 
Refer to Note 9 – Allowance for credit losses – loans held-in-portfolio to the Consolidated
Financial Statements, and to the Provision for Credit
 
Losses section of this MD&A for additional information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
180
Table 29 - Allowance for Credit
 
Losses - Loan Portfolios
September 30, 2023
(Dollars in thousands)
Total ACL
Total loans held-
in-portfolio
ACL to loans held-
in-portfolio
Total non-
performing loans
held-in-portfolio
ACL to non-
performing loans
held-in-portfolio
Commercial
 
Commercial multi-family
$
15,223
$
2,328,433
0.65
%
588
N.M.
 
Commercial real estate non-owner occupied
67,149
5,035,130
1.33
%
16,064
418.01
%
 
Commercial real estate owner occupied
48,109
3,044,905
1.58
%
38,966
123.46
%
 
Commercial and industrial
 
103,585
6,527,082
1.59
%
25,203
411.00
%
Total Commercial
 
$
234,066
$
16,935,550
1.38
%
80,821
289.61
%
Construction
10,971
922,112
1.19
%
6,578
166.78
%
Leasing
10,198
1,698,114
0.60
%
6,842
149.05
%
Mortgage
91,904
7,585,111
1.21
%
199,423
46.08
%
Consumer
 
 
Credit cards
72,550
1,077,428
6.73
%
-
N.M.
%
 
Home equity lines of credit
2,387
67,499
3.54
%
4,085
58.43
%
 
Personal
 
126,116
1,952,168
6.46
%
21,219
594.35
%
 
Auto
155,436
3,633,196
4.28
%
40,268
386.00
%
 
Other Consumer
 
7,440
158,135
4.70
%
2,287
325.32
%
Total Consumer
 
$
363,929
$
6,888,426
5.28
%
67,859
536.30
%
Total
$
711,068
$
34,029,313
2.09
%
361,523
196.69
%
N.M - Not meaningful.
Table 30 - Allowance for Credit
 
Losses - Loan Portfolios
December 31, 2022
(Dollars in thousands)
Total ACL
Total loans held-
in-portfolio
ACL to loans held-
in-portfolio
Total non-
performing loans
held-in-portfolio
ACL to non-
performing loans
held-in-portfolio
Commercial
 
Commercial multi-family
$
26,311
$
2,321,713
1.13
%
242
N.M.
 
Commercial real estate non-owner occupied
71,540
4,499,670
1.59
%
25,116
284.84
%
 
Commercial real estate owner occupied
57,081
3,078,549
1.85
%
29,085
196.26
%
 
Commercial and industrial
 
80,444
5,839,200
1.38
%
38,596
208.43
%
Total Commercial
 
$
235,376
$
15,739,132
1.50
%
93,039
252.99
%
Construction
4,246
757,984
0.56
%
-
N.M.
Leasing
20,618
1,585,739
1.30
%
5,941
347.05
%
Mortgage
135,254
7,397,471
1.83
%
262,879
51.45
%
Consumer
 
 
Credit cards
58,670
1,041,870
5.63
%
-
N.M.
 
Home equity lines of credit
2,542
71,916
3.53
%
4,110
61.85
%
 
Personal
 
118,426
1,823,579
6.49
%
20,040
590.95
%
 
Auto
129,735
3,512,530
3.69
%
40,978
316.60
%
 
Other Consumer
 
15,435
147,548
10.46
%
12,454
123.94
%
Total Consumer
 
$
324,808
$
6,597,443
4.92
%
77,582
418.66
%
Total
$
720,302
$
32,077,769
2.25
%
439,441
163.91
%
N.M - Not meaningful.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
181
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 and nine months ended September 30, 2023
 
and 2022.
Table 31 - Annualized Net Charge
 
-offs (Recoveries) to Average Loans
 
Held-in-Portfolio
Quarters ended
September 30, 2023
September 30, 2022
BPPR
Popular U.S.
Popular Inc.
BPPR
Popular U.S.
Popular Inc.
Commercial
 
(0.48)
%
0.10
%
(0.21)
%
(0.06)
%
(0.03)
%
(0.05)
%
Construction
6.11
―
1.21
―
―
―
Mortgage
(0.25)
(0.02)
(0.21)
(0.14)
(0.01)
(0.12)
Leasing
0.35
―
0.35
0.36
―
0.36
Consumer
2.20
7.42
2.41
1.34
0.47
1.30
Total annualized
 
net charge-offs
(recoveries) to average loans held-in-
portfolio
0.44
%
0.28
%
0.39
%
0.34
%
(0.01)
%
0.24
%
Nine months ended
September 30, 2023
September 30, 2022
BPPR
Popular U.S.
Popular Inc.
BPPR
Popular U.S.
Popular Inc.
Commercial
 
(0.20)
%
0.03
%
(0.10)
%
(0.15)
%
(0.02)
%
(0.09)
%
Construction
2.14
―
0.45
(0.67)
(0.24)
(0.33)
Mortgage
(0.24)
(0.02)
(0.20)
(0.21)
―
(0.18)
Leasing
0.28
―
0.28
0.14
―
0.14
Consumer
1.96
5.65
2.12
1.06
0.44
1.03
Total annualized
 
net charge-offs
(recoveries) to average loans held-in-
portfolio
0.44
%
0.19
%
0.36
%
0.18
%
(0.02)
%
0.13
%
NCOs for
 
the quarter
 
ended September 30,
 
2023 amounted to
 
$33 million, increasing
 
by $15
 
million when compared
 
to the
 
same
period in
 
2022. The
 
BPPR segment
 
increased by
 
$7 million
 
mainly driven
 
by higher
 
consumer NCOs
 
by $16
 
million, reflective
 
of
post-pandemic credit
 
normalization, in
 
part offset
 
by lower
 
commercial NCOs
 
by $9
 
million, mainly
 
due to
 
$10.8 million
 
recovery
from a
 
commercial loan pay-off
 
during the third
 
quarter of 2023.
 
The PB segment
 
NCOs increased by
 
$7 million,
 
mainly driven by
higher consumer and commercial NCOs by $5 million
 
and $3 million, respectively.
NCOs for
 
the nine
 
months ended
 
September 30,
 
2023 amounted
 
to $89
 
million, increasing
 
by $61
 
million when
 
compared to
 
the
same period in 2022. The BPPR segment increased by $47
 
million mainly driven by higher consumer NCOs by $47 million, primarily
due
 
to
 
the
 
expected continued
 
credit
 
normalization, coupled
 
with
 
an $11
 
million
 
line
 
of
 
credit
 
charge-off
 
on
 
a single
 
relationship
during the first
 
quarter of 2023.
 
The PB segment
 
NCOs increased by
 
$15 million, mainly
 
driven by higher
 
consumer NCOs by
 
$11
million.
Loan Modifications
For the
 
nine months
 
ended September
 
30, 2023,
 
modified loans
 
to borrowers
 
with financial
 
difficulty amounted
 
to $401
 
million, of
which $377 million are in accruing status. The BPPR segment’s modifications to borrowers with financial difficulty amounted to $349
million, mainly comprised
 
of commercial and
 
mortgage loans of
 
$272
 
million and
 
$71 million, respectively.
 
A total
 
of $48 million
 
of
 
 
 
 
182
the mortgage modifications
 
were related to
 
government guaranteed loans.
 
The Popular U.S.
 
segment’s modifications to
 
borrowers
with financial difficulty amounted to $52 million, of
 
which $41 million were commercial loans.
Refer
 
to
 
Note
 
9
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
 
information
 
on
 
modifications
 
made
 
to
 
borrowers
experiencing financial difficulties.
ADOPTION OF NEW ACCOUNTING STANDARDS AND ISSUED BUT NOT
 
YET EFFECTIVE ACCOUNTING STANDARDS
Refer to Note 3, “New Accounting Pronouncements”
 
to the Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About
 
Market Risk
Quantitative and qualitative disclosures for the current period
 
can be found in the Market Risk section of this
 
report, which includes
changes in market risk exposures from disclosures presented
 
in the 2022 Form 10-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Corporation’s management,
 
with the
 
participation of the
 
Corporation’s Chief Executive
 
Officer and Chief
 
Financial Officer,
 
has
evaluated the effectiveness of the Corporation’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based
on such evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer have concluded that,
 
as of the end of such
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 September 30, 2023 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 21,
 
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 2022 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 2022 Form
 
10-K.
There have been no material changes to the risk
 
factors previously disclosed under Item 1A of the
 
Corporation’s 2022 Form 10-K.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
183
The risks described
 
in our 2022 Form
 
10-K and in
 
this report are not
 
the only risks
 
facing us. Additional risks
 
and uncertainties not
currently
 
known
 
to
 
us
 
or
 
that
 
we
 
currently
 
deem
 
to
 
be
 
immaterial
 
also
 
may
 
materially
 
adversely
 
affect
 
our
 
business,
 
financial
condition, liquidity, results of operations and capital position.
Item 2.
 
Unregistered Sales of Equity Securities and
 
Use of Proceeds
 
The Corporation did not have any unregistered
 
sales of equity securities during the quarter ended September
 
30, 2023.
Issuer Purchases of Equity Securities
The following table sets forth the details of purchases of Common Stock by the Corporation
 
during the quarter ended September 30,
2023:
Issuer Purchases of Equity Securities
Not in thousands
Period
Total Number of
Shares Purchased [1]
Average Price Paid per
Share
Total Number of
 
Shares
Purchased as Part of Publicly
Announced Plans or Programs
Approximate Dollar Value of
Shares that May Yet be
Purchased Under the Plans or
Programs
July 1 - July 31
3,744
$
59.12
-
$-
August 1 - August 31
-
-
-
-
September 1 - September 30
272
67.94
-
-
Total
 
4,016
$
59.72
-
-
[1] Includes 3,744 and 272
 
shares of the Corporation’s
 
common stock acquired by
 
the Corporation during July
 
2023 and September 2023,
 
respectively,
in connection
 
with the
 
satisfaction of
 
tax withholding
 
obligations on
 
vested awards
 
of restricted
 
stock or
 
restricted stock
 
units granted
 
to directors
 
and
certain employees under the Corporation’s Omnibus Incentive
 
Plan. The acquired shares of common stock were added
 
back to treasury stock.
 
Item 3.
 
Defaults Upon Senior Securities
None.
Item 4.
 
Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans or Other Preplanned Trading Arrangements
Certain
 
of
 
our
 
officers
 
or
 
directors have
 
made
 
elections to
participate in
,
 
and are
 
participating in,
 
our dividend
 
reinvestment and
purchase plan, the Company
 
stock fund associated with
 
our 401(k) plans and/or
 
the Company stock fund
 
associated with our non-
qualified
 
deferred
 
compensation plans
 
and
 
have
 
shares
 
withheld
 
to
 
cover
 
withholding
 
taxes
 
upon
 
the
 
vesting
 
of
 
equity
 
awards,
which may be designed to satisfy
 
the affirmative defense conditions of
 
Rule 10b5-1 under the Exchange Act
 
or may constitute non-
Rule 10b5–1
trading arrangements
 
(as defined in Item 408(c) of Regulation
 
S-K).
 
 
184
Item 6.
 
Exhibits
 
Exhibit Index
Exhibit No
Exhibit Description
3.1
22.1
31.1
31.2
32.1
32.2
101. INS
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104
The cover page of Popular, Inc. Quarterly Report on Form 10-Q for the
 
quarter ended September 30,
2023, formatted in Inline XBRL (included within the Exhibit
 
101 attachments)
(1)
(1)
 
Included herewith
Popular, Inc. has not filed as exhibits certain instruments defining
 
the rights of holders of debt of Popular, Inc. not
exceeding 10% of the total assets of Popular, Inc. and its consolidated
 
subsidiaries. Popular, Inc. hereby agrees to
furnish upon request to the Commission a copy of
 
each instrument defining the rights of holders
 
of senior and
subordinated debt of Popular, Inc., or of any of its consolidated
 
subsidiaries.
 
 
 
185
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: November 9, 2023
By: /s/ Carlos J. Vázquez
Carlos J. Vázquez
Executive Vice President &
Chief Financial Officer
Date: November 9, 2023
By: /s/ Jorge J. García
Jorge J. García
Senior Vice President & Corporate Comptroller