POPULAR, INC. (BPOP)

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,

commercial banking services and auto

and equipment

leasing and

financing through its

principal banking subsidiary,

Banco Popular de

Puerto Rico

(“BPPR”), as

well as

broker-dealer and

insurance services

through specialized

subsidiaries. In

the

U.S. mainland,

the

Corporation provides

retail 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

28

to

the

Consolidated Financial Statements presents information

about the Corporation’s business segments.

As a financial services company,

the Corporation’s earnings are significantly affected

by general business and economic conditions

in the

markets which

we serve.

Lending and

deposit activities

and fee

income generation

are influenced

by the

level of

business

spending and

investment, consumer

income, spending

and savings,

capital market

activities, competition,

customer preferences,

interest rate conditions and prevailing market rates

on competing products.

The Corporation

operates in

a highly

regulated environment

and may

be adversely

affected by

changes in

federal and

local laws

and

regulations.

Also,

competition

with

other

financial

institutions,

as

well

as

with

non-traditional financial

service

providers

and

technology

companies

that

provide

electronic

and

internet-based

financial

solutions

and

services,

could

adversely

affect

its

profitability.

The

Corporation

continuously

monitors

general

business

and

economic

conditions,

industry-related

indicators

and

trends,

competition, interest rate volatility, credit quality indicators, loan, and deposit demand, operational and systems efficiencies, revenue

enhancements and changes in the regulation of financial

services companies.

The description of the Corporation’s business contained in

Item 1 of the 2025 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 2025 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.

OVERVIEW

Financial highlights for the quarter ended March 31, 2026

The Corporation’s net income

for the quarter ended March

31, 2026 amounted to $245.7

million, an increase of

$68.2 million when

compared to a

net income of

$177.5 million for the

quarter ended March

31, 2025. Higher net

income was mainly

driven by higher

net interest income of $64.6 million and lower

operating expenses

by $3.7 million.

Financial highlights for the quarter ended March 31, 2026

include:

●

Net interest income amounted to $670.2

million, an increase of $64.6 million

when compared to the quarter ended March

31, 2025, driven

by loan growth

and investments in

U.S. Treasury securities

at higher yields,

and lower cost

of deposits,

mainly

P.R.

public

deposits,

partially

offset

by

lower

money

market

investments.

Net

interest

income

on

a

taxable

equivalent

basis

for

the

first

quarter

of

2026

was

$757.8

million,

an

increase

of

$93.9

million.

Net

interest

margin

expanded by 26 basis points to 3.66%. On

a taxable equivalent basis, net interest margin expanded by

41 basis points to

4.14%.

106

●

The

provision for

credit

losses amounted

to

$75.9 million

for the

quarter ended

March 31,

2026, an

increase of

$11.8

million when compared to the quarter ended March 31, 2025, driven by a higher provision at BPPR in the commercial and

mortgage

loans

portfolio,

partially

offset

by

a

lower

provision

for

the

leases

and

consumer

loans

portfolio

due

to

improvements in credit

quality metrics. Provision

for credit losses

decreased at PB

primarily due to

the higher qualitative

reserves

established

during

the

first

quarter

of

2025

to

maintain

adequate

ACL

coverage,

for

certain

portfolios,

and

improvements in overall credit quality.

●

Non-interest income amounted to $165.6 million, an increase of $13.6 million when compared to the quarter ended March

31, 2025, mainly driven by

higher credit and debit card fee income,

higher asset management fees, and higher insurance

fees.

●

Operating expenses

amounted to

$467.3

million for

the quarter,

reflecting a

decrease of

$3.7 million

when compared

to

the

quarter

ended

March

31,

2025.

The

decrease

was

mainly

driven

by

lower

operational

loss

reserves

and

lower

professional services

expense, partially

offset by

higher technology

and software

expenses as

a result

of our

continued

investment in technology and higher personnel costs, mainly related to salaries, as well as

the valuation of securities held

for deferred benefit plans.

●

Income tax expense of $46.9 million with an effective tax rate (“ETR”) of 16.0%

during the quarter ended March 31, 2026,

compared to an income

tax expense of $45.1

million with an ETR

of 20.2% for the

quarter ended March 31,

2025 due to

higher income before tax, partially offset by higher exempt

income.

●

At March

31, 2026,

the Corporation’s

total assets

amounted to

$76.1 billion, compared

to $75.3

billion at

December 31,

2025.

The

increase

of

$782.8

million

was

primarily

due

to

higher

balance

in

the

available-for-sale

(“AFS”)

securities

portfolio,

driven

by

reinvestment in

U.S.

Treasury

securities,

and

an

increase

in

money market

investments and

other

assets, partially

offset

by a

decrease in

held-to-maturity (“HTM”)

investment securities

and a

decrease in

loan portfolio

balances, mainly at PB.

●

Deposits

amounted

to

$67.6

billion

at

March

31,

2026,

an

increase

of

$1.4

billion

from

December 31,

2025,

primarily

driven by growth at BPPR across retail, corporate,

and P.R. public deposits.

●

Stockholders’ equity

amounted to

$6.3 billion

at March

31, 2026,

compared to

$6.2 billion

at December

31, 2025.

The

Corporation and its banking subsidiaries continue

to be well capitalized. As

of March 31, 2026, the

Corporation’s tangible

book value

per common

share was

$84.98, an

increase of

$2.33 from

December 31,

2025. The

Common Equity

Tier

1

Capital ratio at March 31, 2026 was 15.92%,

compared to 15.72% at December 31, 2025.

Refer to Table 1 for selected financial data for the quarters ended March 31, 2026 and March

31, 2025.

107

Table 1 - Financial highlights

Financial Condition Highlights

Ending Balances at

Average for the quarter ended

(In thousands)

March 31, 2026

December 31,

2025

Variance

March 31, 2026

March 31,

2025

Variance

Money market investments

$

4,655,699

$

4,626,506

$

29,193

$

4,850,141

$

6,379,085

$

(1,528,944)

Investment securities

28,943,544

28,168,918

774,626

29,008,686

28,446,090

562,596

Loans

[1]

39,295,305

39,337,516

(42,211)

39,270,501

37,006,149

2,264,352

Earning assets

72,894,548

72,132,940

761,608

73,129,328

71,831,324

1,298,004

Total assets

76,131,018

75,348,267

782,751

77,089,305

74,951,813

2,137,492

Deposits

67,611,316

66,190,093

1,421,223

67,364,627

65,858,092

1,506,535

Borrowings

1,119,557

1,448,578

(329,021)

1,335,239

959,211

376,028

Total liabilities

69,819,932

69,099,188

720,744

69,688,807

67,795,911

1,892,896

Stockholders’ equity

6,311,086

6,249,079

62,007

6,289,337

7,155,902

(866,565)

Note: Average balances, for balances prior to the period ended March 31, 2026, 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

Quarter ended March 31,

(In thousands, except per share information)

2026

2025

Variance

Net interest income

$

670,180

$

605,597

$

64,583

Provision for credit losses

75,886

64,081

11,805

Non-interest income

165,626

152,061

13,565

Operating expenses

467,310

471,012

(3,702)

Income before income tax

292,610

222,565

70,045

Income tax expense

46,936

45,063

1,873

Net income

$

245,674

$

177,502

$

68,172

Net income applicable to common stock

$

245,321

$

177,149

$

68,172

Net income per common share - basic

$

3.78

$

2.56

$

1.22

Net income per common share - diluted

$

3.78

$

2.56

$

1.22

Dividends declared per common share

$

0.75

$

0.70

$

0.05

Quarter ended March 31,

Selected Statistical Information

2026

2025

Common Stock Data

End market price

$

134.17

$

92.37

Book value per common share at period end

97.27

83.75

Profitability Ratios

Return on average assets

1.29

%

0.96

%

Return on average common equity

13.76

10.07

Net interest spread (non-taxable equivalent basis)

3.09

2.74

Net interest spread (taxable equivalent basis) -non-GAAP

3.57

3.07

Net interest margin (non-taxable equivalent basis)

3.66

3.40

Net interest margin (taxable equivalent basis) -non-GAAP

4.14

3.73

Capitalization Ratios

Average equity to average assets

9.41

%

8.99

%

Common equity Tier 1 capital

15.92

16.11

Tangible common

book value per common share (non-GAAP)

[2]

84.98

72.02

Return on average tangible common equity

[2]

15.46

11.36

Tier 1 capital

15.98

16.17

Total capital

17.71

17.92

Tier 1 leverage

8.60

8.50

[1] Includes loans held-for-sale.

108

[2] Refer to Table 10 for reconciliation to GAAP financial measures.

Non-GAAP Financial Measures

This Form 10-Q

contains financial information

prepared under accounting

principles generally accepted in

the United States

(“U.S.

GAAP”) and

non-GAAP financial

measures. Management

uses non-GAAP

financial measures

when it

has determined

that these

measures provide

meaningful information

about the

underlying performance

of the

Corporation’s ongoing

operations. Non-GAAP

financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by

other

companies.

Adjusted net income - Non-GAAP Financial Measure

In

addition to

analyzing the

Corporation’s results

on

a reported

basis, management

monitors whether

the

impact of

certain non-

recurring or

infrequent transactions

need to

be excluded

from the

results of

operations to

present what

[Excerpt truncated for page length; source filing is linked above.]

Management’s

Discussion

and

Analysis

included

in this

Form

10-K

for

information

on

recent

significant

events that have

impacted or

will impact

our current and

future operations.

Human Capital Management

Popular seeks

to embody our

values and

behaviors throughout

our human capital

management practices.

Attracting,

developing,

and retaining

top talent

in an

environment

that promotes

wellness, inclusion,

respect, continuous

learning,

and transparency

are

fundamental

pillars of

the Corporation’s

long-term strategy.

As of December

31, 2025, Popular

employed 9,427

individuals,

none

of whom were

represented

by a collective

bargaining group.

Nurturing Well

-Being: Employee

Health & Financial

Security

Popular

believes

that the

health and

financial

wellness

of our

employees

is fundamental

to delivering

high-quality

service

to our

customers

and

contributing

positively

to

the

communities

in

which

we

operate.

Accordingly,

the

Corporation

offers

a

comprehensive

health and

wellness program

that includes

medical, pharmacy,

vision, and

dental insurance,

as well as additional

wellness initiatives.

Our programs

are designed

to ensure that

healthcare is

both accessible

and affordable

for our employees,

with Popular covering

up to 78%

of health

insurance premiums,

a figure that

surpasses regional

benchmarks.

In 2025,

we strengthened

our health

and

wellness

offerings

by opening

a state-of-the-art

fitness center

in our San

Juan, Puerto

Rico campus,

to encourage

an active

and

balanced

lifestyle.

As of

December

2025,

the fitness

center

had

a total

of 2,030

members,

including

active

employees,

eligible

family members

and retirees.

Additionally,

the

Corporation

promotes

employee

health

and

well-being

by

encouraging

annual

physical

examinations

and

operating

a comprehensive

health and

wellness center

at its Puerto

Rico corporate

offices, staffed

with healthcare

providers and

enhanced

by

the

addition

of

an

on-site

psychologist

to

provide

mental

health

support.

The

center

received

over

15,000

visits

from employees

during 2025.

Popular

also seeks

to foster

work-life

balance

by offering

paid time

off

benefits

to our

employees,

including

community

service

leave,

paid

parental

leave,

and

flexible

work

arrangements.

Our

hybrid

work

model,

available

to

approximately

half

of

our

workforce,

is

designed

to

strike

an

appropriate

balance

between

employee

flexibility

and

business

needs,

reinforcing

our

commitment

to

a flexible

and

productive

work

environment.

In

addition,

we regularly

offer

activities

and

workshops

focused

on

physical fitness

and personal financial

management.

Popular

further

offers

a 401(k)

savings

and

investment

plan,

in

which

98%

of

employees

participate.

Under

the

plan,

Popular

11

matches

$0.50 for

every

dollar

contributed

by an

employee,

up to

8% of

the employee’s

salary.

Moreover,

Popular

maintains

a

profit-sharing

plan, contingent

upon the

achievement

of pre-established

financial

goals, to

further

align employee

compensation

with

the

Corporation’s

overall

performance.

Under

the

profit-sharing

plan,

employees

may

receive

up

to

8%

of

their

eligible

compensation

(capped

at $70,000),

with the

first

4% paid

in cash

and any

amount

above that

threshold

paid to

the employee’s

savings

and

investment

plan

account.

Additionally,

Popular

regularly

reviews

employees’

base

compensation

to

remain

competitive

with market salaries

for comparable

positions.

Empowering Growth:

Our Commitment

to Talent

Developmen

t

We

are committed

to fostering

the continuous

development

and upskilling

of our

employees

and

believe

this

is fundamental

to

maintaining

our competitive

advantage.

Towards

that end,

Popular

offers

development

opportunities

designed

to strengthen

our

employees’

knowledge,

capabilities

and

skills,

supporting

their

personal

growth

while

enhancing

Popular’s

business

strategies

and organizational

effectiveness.

Our 40,000

square foot

development

center in

San Juan,

Puerto Rico,

and our satellite

facilities

in New York,

South Florida,

and

the

Virgin

Islands,

offer

year-round

training

sessions,

activities

and

workshops.

In

2025,

there

were

approximately

6,700

registered

participations

in corporate

academy

voluntary

courses,

new

employee

orientations,

health

coordinator

certifications,

and

manager

onboarding

programs—an

increase

of

approximately

2,500

compared

to

the

participation

levels

in

2024.

These

courses

offer

instructor-led

training

experiences

for

employees

to

develop

and

apply

critical

core

and

technical

skills.

Our

commitment

to

continuous

learning

is

further

supported

through

employee

access

to

LinkedIn

Learning,

which

provides

an

extensive

library

of

over

16,000

e-learning

courses,

enabling

employees

to

pursue

self-directed

learning

aligned

with

both

professional

development goals

and business

needs.

Our

focus

on

training

and

development

has

provided

internal

growth

opportunities

for

our

workforce.

As

a

result,

the

Corporation’s

internal

mobility

rate in

2025 was

47%, reflecting

employees

who applied

for or

were selected

for open

positions,

received

promotions,

or made

lateral

moves

within

the

organization.

Additionally,

we continued

strengthening

key skills

across

accelerated

development

programs

focused

on

data

science,

agile

methodologies,

analytics,

process

efficiency,

and

product

management.

During

2025,

approximately

400

employees

participated

in these

programs,

further

enhancing

the

organization’s

talent.

During

2025,

Popular

successfully

implemented

the Executive

Development

Program,

engaging

over

80 executive

leaders

in a

comprehensive

initiative

focused

on strengthening

key

behaviors,

including

agility,

accountability,

collaboration,

and leadership

mindset,

aligned

with

our

company

values.

In

addition,

we

introduced

the

Middle

Management

Development

Program,

a two-

year

development

journey

for

over

1,700

leaders

designed

to

reinforce

alignment

with

the

Corporation’s

values

and

expected

behaviors

while

fostering

sustainable

organizational

transformation.

Furthermore,

we provided

our

leaders

with

advanced

tools

to support more

effective and

impactful performance

discussions.

Our

organizational

effectiveness

strategy

was

crucial

in

advancing

organizational

development

through

targeted

initiatives,

including

assessments,

team

integration

activities,

new

manager

integration

facilitations,

and

team

alignment

sessions.

These

efforts

are

designed

to

foster

a

cohesive,

agile,

and

adaptable

workforce

capable

of

supporting

the

Corporation’s

evolving

business objectives.

Enhancing Leadership

Continuity through

Strategic Succession

Planning

Popular’s

business

strategy

integrates

succession

planning

to

ensure

effective

and

orderly

leadership

transitions.

Succession

plans

for senior

management

are

developed

by the

Chief

Executive

Officer

and

presented

to the

Board

of Directors.

Popular’s

succession

planning

also

leverages

our

Executive

Talent

Management

Program

to

identify

high-potential

and

high-performing

managers,

providing

them

with

targeted

learning

opportunities

to

enhance

their

skills

and

prepare

them

for

future

senior

management positions.

Employee Experience

Popular

is

committed

to

providing

an

exceptional

employee

experience

that

inspires

our

employees

to

deliver

outstanding

service

to

our

customers

and

communities.

We

recognize

the

evolving

nature

of

our

employees’

needs

and

expectations

and

have

a

robust

approach

to

measuring

and

understanding

their

journey.

Our

employee

engagement

and

experience

survey

program

includes

biannual

pulse surveys,

an annual

enterprise-wide

survey,

and additional

surveys

that assess

the end

-to-end

employee

journey.

We believe

that these

insights

contributed

to our

ability

to maintain

a stable

employee

turnover

rate of

8.5%

as

of

the

end

of

2025.

Furthermore,

our

employee-experience

efforts

are

reflected

in

record

participation

rate

of

77%

and

a

sustained

employee-loyalty

score of

81%, positioning

us above

the 50th

percentile

of the Qualtrics

global benchmark

and above

the financial

services industry

average benchmark.

12

Board Oversight

in Human Capital

The

Talent

and

Compensation

Committee

of

the

Corporation’s

Board

of

Directors

has

oversight

responsibility

for

the

Corporation’s

human

capital

management

practices.

As

part

of

its

responsibilities,

the

Talent

and

Compensation

Committee

reviews

and

advises

management

on

the

Corporation’s

overall

compensation

philosophy,

programs

and

policies,

and

on

the

Corporation’s

talent

acquisition

and

development,

workforce

engagement,

succession

planning,

and

corporate

culture,

among

other human capital

matters.

We

encourage

you

to

review

our Corporate

Sustainability

Report

published

on www.popular.com

for more

detailed

information

regarding

the Corporation’s

human capital

management

programs

and initiatives.

The information

on the

Corporation’s

website,

including

the

Corporation’s

Corporate

Sustainability

Report,

is

not,

and

will

not

be

deemed

to

be,

a

part

of

this

Form

10-K

or

incorporated

into any of the

Corporation’s

filings with

the SEC.

Regulation and Supervision

Described below are the material elements of selected laws and regulations applicable to Popular, Popular North America

(“PNA”)

and

their

respective

subsidiaries.

Such

laws

and

regulations

are

continually

under

review

by

Congress

and

state

legislatures

and

federal

and

state

regulatory

agencies.

Any

change

in

the

laws

and

regulations

applicable

to

Popular

and

its

subsidiaries could have a material effect on the

business of Popular and its subsidiaries. We will continue to

assess our businesses

and risk management and compliance practices

to conform to developments in the regulatory

environment.

General

Popular and PNA are bank holding companies subject to consolidated supervision and

regulation by the Federal Reserve

Board under

the Bank

Holding Company Act

of 1956

(as amended, the

“BHC Act”). BPPR

and PB

are subject to

supervision and

examination by applicable

federal and state

banking agencies including,

in the

case of BPPR,

the Federal Reserve

Board and the

Office of

the Commissioner

of Financial

Institutions of

Puerto Rico

(the “Office

of the

Commissioner”), and, in

the case

of PB,

the

Federal

Reserve

Board

and

the

New

York

State

Department

of

Financial

Services

(the

“NYSDFS”).

Popular’s

broker-dealer

/

investment adviser

subsidiary,

Popular Securities,

LLC (“PS”)

and investment

adviser subsidiary

Popular Asset

Management LLC

(“PAM”)

are subject

to

regulation by

the SEC,

the Financial

Industry

Regulatory Authority

(“FINRA”), and

the Securities

Investor

Protection Corporation, among others. Other of our non-bank subsidiaries conduct reinsurance and

insurance producer and agency

activities, which are

subject to other

federal, state and

Puerto Rico laws

and regulations as

well as licensing

and regulation by

the

Puerto Rico Office of the Commissioner of Insurance and,

for one insurance agency subsidiary, the NYSDFS.

Enhanced Prudential Standards

Under

the

Dodd-Frank

Wall

Street

Reform

and

Consumer

Protection

Act

(the

“Dodd-Frank

Act”),

as

modified

by

the

Economic

Growth,

Regulatory

Relief,

and

Consumer

Protection

Act

and

the

federal

banking

regulators’

2019

“Tailoring

Rules,”

banking

organizations are

categorized based

on status

as

a U.S.

G-SIB,

size

and four

other risk-based

indicators. Among

bank

holding companies with $100

billion or more in

total consolidated assets, the

most stringent standards apply

to U.S. G-SIBs,

which

are subject to Category I standards,

and the least stringent standards apply to Category IV organizations, which have between $100

billion and $250 billion in total consolidated assets and less than $75 billion in all four other risk-based indicators and

which are also

not U.S. G-SIBs. Bank holding companies with total consolidated assets of $50 billion or more are subject to risk committee and risk

management requirements. As of December 31, 2025,

Popular had total consolidated assets of $75.3 billion.

13

Transactions with Affiliates

BPPR

and

PB

are

subject

to

restrictions

that

limit

the

amount

of

extensions

of

credit

and

certain

other

“covered

transactions” (as defined in Section

23A of the Federal

Reserve Act) between BPPR or

PB, on the

one hand, and Popular,

PNA or

any

of

our

other

non-banking

subsidiaries,

on

the

other

hand,

and

that

impose

collateralization

requirements

on

such

credit

extensions. A bank may not engage in any covered transaction if the aggregate amount of the bank’s covered transactions with that

affiliate would exceed 10% of

the bank’s capital stock and

surplus or the aggregate amount of

the bank’s covered transactions with

all non-bank affiliates would exceed 20%

of the bank’s capital stock and

surplus. In addition, any transaction between BPPR

or PB,

on the one

hand, and Popular,

PNA or any

of our other

non-banking subsidiaries, on

the other,

is required to

be carried out

on an

arm’s length basis.

Source of Financial Strength

The

Dodd-Frank Act

requires bank

holding companies,

such

as Popular

and

PNA, to

act

as

a source

of

financial

and

managerial strength to their subsidiary banks. Popular

and PNA are expected to commit resources

to support their subsidiary banks,

including at times when Popular

and PNA may not be

in a financial position to

provide such resources. Any capital loans

by a bank

holding company

to any

of its

subsidiary depository

institutions are

subordinated in

right of

payment to

depositors and

to certain

other indebtedness of such subsidiary depository institution. In the

event of a bank holding company’s bankruptcy,

any commitment

by

the

bank

holding

company

to

a

federal

banking

agency

to

maintain

the

capital

of

a

subsidiary

depository

institution

will

be

assumed by

the bankruptcy

trustee and

entitled to

a priority

of payment.

BPPR and

PB are

currently the

only insured

depository

institution subsidiaries of Popular and PNA.

Resolution Planning and Resolution-Related Requirements

A

bank holding

company with

$250 billion

or more

in total

consolidated assets

(or that

is a

Category III

firm based

on

certain risk-based indicators described in the Tailoring

Rules) is required to report periodically to the FDIC

and the Federal Reserve

Board

such

company’s

plan

for

its

rapid

and

orderly

resolution

in

the

event

of

material

financial

distress

or

failure.

In

addition,

insured depository institutions with total

assets of $50 billion or

more are required to

submit to the FDIC

periodic contingency plans

for

resolution

in

the

event

of

the

institution’s

failure.

In

June

2024,

the

FDIC

finalized

amendments

to

the

resolution

planning

requirements for insured depository institutions with

$50 billion or more in

total assets. The amendments require insured

depository

institutions with

between $50

billion and $100

billion in

assets to submit

informational filings on

a three-year cycle,

with an

interim

supplement updating key information submitted in the off years. These amendments

became effective October 1, 2024, and BPPR’s

first submission under the new rule is due by

April 1, 2026.

On August

29, 2023,

the Federal

Reserve Board,

FDIC and

Office of

the Comptroller

of the

Currency (“OCC”)

issued a

proposed

rule

that

would

require

bank

holding

companies

and

insured

depository

institutions

with

$100

billion

or

more

in

consolidated assets (as well as their insured depository institution affiliates) to maintain minimum

amounts of eligible long-term debt

(generally, debt

that is unsecured, has

a maturity greater than one

year from issuance and satisfies

additional criteria), subject to a

three-year phase-in

period. The

proposal would

also apply

“clean holding

company” requirements

to Category

II through

IV bank

holding companies,

which would,

among other

things, prohibit

those holding

companies from

entering into

derivatives and

certain

other financial

contracts with

third parties.

As of

December 31,

2025, Popular,

PNA, BPPR

and PB’s

total assets

were below

the

thresholds for applicability

of these rules,

except that BPPR

is subject to

the FDIC’s resolution

planning requirements applicable to

insured depository institutions with more than $50

billion but less than $100 billion in assets.

FDIC Insurance

Substantially all the deposits of BPPR and PB are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of

the

FDIC,

and

BPPR

and

PB

are

subject

to

FDIC

deposit

insurance

assessments

to

maintain

the

DIF.

Deposit

insurance

assessments are

based on

the average

consolidated total

assets of

the insured

depository institution

minus the

average tangible

equity of the institution during the assessment period. For larger

depository institutions with over $10 billion in assets,

such as BPPR

and PB, the FDIC uses a “scorecard” methodology, which considers CAMELS ratings, among

other measures, that seeks to capture

both the probability that an individual large institution will

fail and the magnitude of the impact on the DIF

if such a failure occurs. The

FDIC has the ability

to make discretionary adjustments to the

total score based upon significant

risk factors that are not

adequately

captured in the calculations. The initial base deposit insurance assessment rate for larger depository institutions ranges from 3 to 30

basis

points

on

an

annualized

basis.

Taking

into

account the

adjustments the

FDIC

may

make

to

the

base

rate,

the

total

base

assessment rate could range from 1.5 to 40 basis points

on an annualized basis.

In

October

2022,

the

FDIC

finalized

a

rule

that

increased

initial

base

deposit

insurance

assessment

rates

by

2

basis

points, beginning with the first quarterly assessment period of 2023. The FDIC, as required under the Federal Deposit Insurance Act

14

(“FDIA”), established

a plan

in September

2020 to

restore the

DIF reserve

ratio to

meet or

exceed the

statutory minimum

of 1.35

percent within

eight years. The

increased assessment is

intended to improve

the likelihood that

the DIF

reserve ratio would

reach

the required minimum by the statutory deadline

of September 30, 2028.

As of December 31, 2025, BPPR and

PB had a DIF average total asset

less average tangible equity assessment base of

$69 billion.

On

November 16,

2023,

the

FDIC finalized

a

rule

that

imposes

a special

assessment to

recover the

costs to

the

DIF

resulting

from

the

FDIC’s

use,

in

March

2023,

of

the systemic

risk

exception to

the

least-cost resolution

test

under the

FDIA

in

connection with the

receiverships of Silicon

Valley Bank

and Signature Bank.

The FDIC estimated

in approving the

rule that those

assessed losses total $16.3 billion. The rule provides

that this loss estimate will be periodically adjusted,

which will affect the amount

of

the special

assessment. Under

the rule,

the assessment

base is

the

estimated uninsured

deposits that

an insured

depository

institution reported in its Consolidated Reports of Condition and Income (“Call Report”) at December 31, 2022,

excluding the first $5

billion

in estimated

uninsured deposits.

For

a holding

company

that

has

more than

one

insured depository

institution subsidiary,

such as Popular,

the $5 billion

exclusion is allocated

among the company’s

insured depository institution subsidiaries

in proportion

to each

insured depository

institution’s estimated

uninsured deposits.

The special

assessments were

to be

collected at

an annual

rate of approximately 13.4 basis points per

year (3.36 basis points per quarter) over

eight quarters,

with the first assessment period

having begun

January 1,

2024. In

June 2024,

due to

the increase

in the

estimate of

losses, the

FDIC announced that

it projected

that the special

assessment would be collected

for an additional

two quarters beyond the

initial eight quarter collection

period, at a

lower rate.

In December

2025, the

FDIC reduced

the rate

at which

the assessment

is collected,

with an

invoice payment

date of

March 30, 2026, from 3.36 basis points to

2.97 basis points,

and also reduced the collection period back

to eight quarters.

Brokered Deposits

The FDIA

and regulations

adopted thereunder

restrict the

use of

brokered deposits

and the

rate of

interest payable

on

deposits for institutions

that are less

than well capitalized.

Popular does not

believe the brokered

deposits regulations have

had or

will have a material effect on the funding or liquidity

of BPPR and PB.

Capital Adequacy

Popular, PNA,

BPPR and PB are

each required to comply

with applicable capital adequacy standards

established by the

federal

banking

agencies

(the

“Capital

Rules”),

which

implement

the

Basel

III

framework

set

forth

by

the

Basel

Committee

on

Banking Supervision (the “Basel Committee”) as

well as certain provisions of the Dodd-Frank

Act.

Among other

matters, the

Capital Rules:

(i) impose

a capital

measure called

“Common Equity

Tier

1” (“CET1”)

and the

related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1

capital” instruments meeting

certain revised requirements;

and (iii) mandate

that most deductions/adjustments to

regulatory capital

measures be made

to CET1

and not to

the other components

of capital.

Under the Capital

Rules, for most

banking organizations,

including

Popular,

the

most

common

form

of

Additional

Tier

1

capital

is

non-cumulative

perpetual preferred

stock

and

the

most

common form of Tier

2 capital is subordinated notes and

a portion of the

allocation for loan and lease losses,

in each case, subject

to the Capital Rules’ specific requirements.

Pursuant to the Capital Rules, the minimum

capital ratios are:

4.5% CET1 to risk-weighted assets;

6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted

assets;

8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

4% Tier 1 capital to average consolidated assets as reported

on consolidated financial statements (known

as the

“leverage ratio”).

The Capital Rules also impose

a “capital conservation buffer,”

composed entirely of CET1, on top

of these minimum risk-

weighted

asset

ratios. The

capital

conservation

buffer

is

designed

to

absorb

losses

during

periods

of

economic stress.

Banking

institutions

with

a

ratio

of

CET1

to

risk-weighted

assets

above

the

minimum

but

below

the

capital

conservation

buffer

will

face

constraints on

dividends, equity repurchases

and compensation based

on the

amount of

the shortfall and

eligible retained

income

(that is, four

quarter trailing net income, net

of distributions and tax effects

not reflected in net

income). Popular, BPPR

and PB are

therefore required to maintain such additional capital

conservation buffer of 2.5% of CET1,

effectively resulting in minimum ratios of

(i) CET1

to risk-weighted

assets of

at least

7%, (ii)

Tier

1 capital

to risk-weighted

assets of

at least

8.5%, and

(iii) Total

capital to

15

risk-weighted assets of at least 10.5%.

Pursuant

to

the

Capital

Rules,

the

effects

of

certain

accumulated other

comprehensive income

or

loss

(“AOCI”)

items

included in stockholders’ equity

(for example, marks-to-market of securities

held in the available

for sale portfolio) are

not excluded

from

regulatory

capital

ratios;

however,

banking

organizations

that

are

not

subject

to

Categories

I

or

II

standards

under

the

framework for

banking organizations

with $100

billion or

more in

assets, including

Popular,

BPPR and

PB, may

make a

one-time

permanent election to continue to

exclude these items. Popular,

BPPR and PB have

made this election in order

to avoid significant

variations in

the level

of capital

depending upon

the impact

of interest

rate fluctuations

on the

fair value

of their

available for

sale

securities portfolios.

On July

27, 2023,

the federal

banking regulators

proposed revisions

to the

Capital Rules

to implement

the

Basel Committee’s 2017 standards, described

below, and make

other changes to the

Capital Rules, including the ability

of banking

organizations in Categories III and IV to elect not to recognize most elements of AOCI in regulatory capital. The proposal introduces

revised credit risk, equity risk, operational risk, credit valuation adjustment risk and market risk requirements, among other changes.

However, the

revised capital requirements

of the

proposed rule would

not apply

to Popular,

BPPR, or

PB because

they have

less

than $100 billion in total consolidated assets and trading

assets and liabilities below the threshold for market risk requirements. The

federal

banking

regulators have

subsequently indicated

that

they

expect to

issue

a

revised

proposal, the

timing

and contents

of

which are uncertain.

The

Capital

Rules

preclude certain

hybrid

securities, such

as

trust

preferred

securities, from

inclusion

in

bank

holding

companies’

Tier

1

capital.

Trust

preferred

securities

not

included

in

Popular’s

Tier

1

capital

may

nonetheless

be

included

as

a

component of

Tier 2 capital.

Popular has

not issued

any trust

preferred securities since

May 19,

2010. As

of December

31, 2025,

Popular has

$193 million

of trust

preferred securities

outstanding which

no longer

qualify for

Tier

1 capital

treatment, but

instead

qualify for Tier 2 capital treatment.

The Capital Rules also provide for a number of deductions

from and adjustments to CET1.

Banking organizations that are

not subject to Category

I or II standards

are subject to rules that

provide for simplified capital requirements relating

to the threshold

deductions

for

certain

mortgage

servicing

assets,

deferred

tax

assets,

investments

in

the

capital

of

unconsolidated

financial

institutions and inclusion of minority interests

in regulatory capital.

Failure

to

meet

capital

guidelines

could

subject

Popular

and

its

depository

institution

subsidiaries

to

a

variety

of

enforcement remedies, including the termination of deposit insurance by the FDIC

and to certain restrictions on our business. Refer

to “Prompt Corrective Action” below for further

discussion.

In

December 2017,

the Basel

Committee published

standards that

it

described as

the finalization

of the

Basel III

post-

crisis regulatory

reforms. Among other

things, these

standards revise

the Basel

Committee’s standardized approach

for credit

risk

(including

by

recalibrating

risk

weights

and

introducing

new

capital

requirements

for

certain

“unconditionally

cancellable

commitments,” such

as

unused credit

card

lines of

credit) and

provide

a new

standardized approach

for operational

risk capital.

Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to Category I and Category II

banking organizations and not to Popular, BPPR and PB.

In 2020, federal bank regulators adopted a rule

that allowed banking organizations to elect to delay

temporarily the

estimated effects of adopting the Current Expected Credit

Loss (“CECL”) model of ASU 2016-13 on regulatory

capital until January

2022 and subsequently to phase in the effects through

January 2025. The Corporation’s capital ratios

at December 31, 2025 reflect

the full phased in impact from the adoption of CECL.

Refer to

the Consolidated

Financial Statements

in this

Form 10-K.,

Note 20

and Table

10 of

Management’s Discussion

and Analysis for the

capital ratios of Popular,

BPPR and PB

under Basel III. Refer

to the Consolidated Financial Statements

in this

Form 10-K Note 2 for more information regarding

CECL.

Prompt Corrective Action

The

FDIA

requires,

among

other

things,

the

federal

banking

agencies

to

take

prompt

corrective

action

in

respect

of

insured

depository

institutions

that

do

not

meet

minimum

capital

requirements.

The

FDIA

establishes

five

capital

tiers:

“well

capitalized,”

“adequately

capitalized,”

“undercapitalized,”

“significantly

undercapitalized,”

and

“critically

undercapitalized”.

A

depository institution’s capital tier will depend upon how its

capital levels compare with various relevant capital

measures and certain

other factors.

16

An insured

depository institution will

be deemed

to be

(i) “well

capitalized” if

the institution

has a

total risk-based

capital

ratio of 10.0% or greater, a CET1 capital ratio of 6.5%

or greater, a Tier 1

risk-based capital ratio of 8.0% or greater, and a leverage

ratio of 5.0% or

greater, and is

not subject to any order

or written directive by

any such regulatory authority to

meet and maintain a

specific capital level for any capital

measure; (ii) “adequately capitalized” if the institution

has a total risk-based capital ratio

of 8.0%

or greater, a

CET1 capital ratio of 4.5%

or greater, a

Tier 1 risk-based capital

ratio of 6.0% or greater,

and a leverage ratio of

4.0%

or greater

and is

not “well

capitalized”; (iii)

“undercapitalized” if

the institution

has a

total risk-based

capital ratio

that is

less than

8.0%, a CET1 capital

ratio less than 4.5%,

a Tier 1

risk-based capital ratio of

less than 6.0% or

a leverage ratio of

less than 4.0%;

(iv) “significantly

undercapitalized” if

the institution

has a

total risk-based

capital ratio

of less

than 6.0%,

a CET1

capital ratio

less

than 3%, a Tier

1 risk-based capital ratio of less than 4.0% or

a leverage ratio of less than 3.0%;

and (v) “critically undercapitalized”

if

the

institution’s

tangible

equity

is

equal

to

or

less

than

2.0%

of

average

quarterly

tangible

assets.

An

institution

may

be

downgraded to, or deemed

to be in, a

capital category that is

lower than indicated by

its capital ratios if

it is determined to

be in an

unsafe

or

unsound

condition

or

if

it

receives

an

unsatisfactory

examination

rating

with

respect

to

certain

matters.

An

insured

depository institution’s capital category is determined solely for the purpose of applying prompt corrective action

regulations, and the

capital category

may not

constitute an

accurate representation

of the

institution’s overall

financial condition

or prospects

for other

purposes.

The FDIA generally prohibits an insured depository institution from making any capital

distribution (including payment of a

dividend) or

paying any

management fee to

its holding

company, if

the depository

institution would thereafter

be undercapitalized.

Undercapitalized

depository

institutions

are

subject

to

restrictions

on

borrowing

from

the

Federal

Reserve

System.

In

addition,

undercapitalized

depository

institutions

are

subject

to

growth

limitations

and

are

required

to

submit

capital

restoration

plans.

A

depository institution’s

holding company must

guarantee the capital

restoration plan, up

to an

amount equal to

the lesser

of 5%

of

the

depository

institution’s

assets

at

the

time

it

becomes

undercapitalized

or

the

amount

of

the

capital

deficiency,

when

the

institution fails to comply with the

plan. The federal banking agencies may not

accept a capital restoration plan without determining,

among other things,

that the plan

is based

on realistic assumptions

and is

likely to succeed

in restoring the

depository institution’s

capital. If a depository institution fails to submit an

acceptable plan, it is treated as if it is

significantly undercapitalized.

Significantly

undercapitalized

depository

institutions

may

be

subject

to

a

number

of

requirements

and

restrictions,

including orders to

sell sufficient voting

stock to become

adequately capitalized, requirements to

reduce total assets

and cessation

of receipt

of deposits

from correspondent

banks. Critically

undercapitalized depository

institutions are

subject to

appointment of

a

receiver or conservator.

The capital-based prompt

corrective action provisions

of the FDIA

apply to

the FDIC-insured depository

institutions such

as

BPPR

and

PB,

but

they

are

not

directly

applicable

to

holding

companies

such

as

Popular

and

PNA,

which

control

such

institutions. As of December 31, 2025,

both BPPR and PB met the quantitative requirements

for ‘well capitalized’ status.

Restrictions on Dividends and Repurchases

The

principal

sources

of

funding

for

Popular

and

PNA

have

included

dividends

received

from

their

banking

and

non-

banking subsidiaries, asset sales

and proceeds from

the issuance of

debt and equity.

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 year

ended December 31, 2025, BPPR declared

cash dividends of $575

million, a portion of

which was

used by Popular for the payments of the cash dividends on its

outstanding common stock. At December 31, 2025, BPPR needed to

obtain prior approval of the Federal Reserve Board before declaring a dividend

in excess of $191 million due to its

retained income,

declared dividend activity and transfers to statutory reserves over the three years ended December 31, 2025. 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.

During the

year ended

December 31,

2025, Popular

received cash

dividends of

$23 million

from Popular

International

Bank, Inc. (“PIBI”) and $22 million from its other

non-banking subsidiaries.

It is Federal Reserve Board policy that bank holding companies generally should pay dividends on common

stock only out

17

of net

income available to

common shareholders

over the past

year and

only if

the prospective rate

of earnings retention

appears

consistent with the organization’s current and

expected future capital needs, asset quality

and overall financial condition. Moreover,

under Federal Reserve Board policy, a bank

holding company should not maintain dividend levels that place undue pressure on the

capital of depository

institution subsidiaries or that

may undermine the bank

holding company’s ability to

be a source

of strength to

its

banking subsidiaries.

Federal Reserve

policy

also

provides that

a

bank

holding company

should

inform

the

Federal

Reserve

reasonably in advance of declaring or paying a dividend that

exceeds earnings for the period for which the dividend is

being paid or

that could result in a material adverse change

to the bank holding company’s capital structure.

The

Federal Reserve

Board

also restricts

the

ability of

banking

organizations to

conduct stock

repurchases. In

certain

circumstances, a banking organization’s repurchases

of its common stock may

be subject to a

prior approval or notice requirement

under other regulations or policies of the Federal Reserve. Any redemption or

repurchase of preferred stock or subordinated debt is

subject to the prior approval of the Federal Reserve.

Subject to compliance with certain conditions, distributions of U.S. sourced dividends to a corporation

organized under the

laws

of the

Commonwealth of

Puerto Rico

are subject

to

a withholding

tax

of 10%

instead of

the 30%

applied to

other “foreign”

corporations. Accordingly, dividends from current or accumulated earnings and profits

paid by PNA to Popular, Inc. sourced from the

U.S. operations of PB are subject to a 10% tax withholding.

A corporation organized under the laws of the Commonwealth of Puerto

Rico that is engaged in a U.S. trade or business is generally subject to a branch profits tax of 30% on its earnings and profits

for the

taxable year that are “effectively connected” with

such U.S. trade or business, adjusted as

provided by U.S. federal income tax law.

Accordingly,

to

the extent

BPPR’s

U.S. operations

generate effectively

connected earnings

and profits

that

are not

reinvested in

such U.S. operations

(and that are

not otherwise adjusted

as provided by

U.S. federal income tax

law), such effectively

connected

earnings and profits will generally be subject

to a branch profits tax of 30%.

Refer to

Part II,

Item 5,

“Market for

Registrant’s Common

Equity,

Related Stockholder

Matters and

Issuer Purchases

of

Equity Securities” for further information on Popular’s

distribution of dividends and repurchases of equity

securities.

See

“Puerto

Rico

Regulation”

below

for

a

description

of

certain

restrictions

on

BPPR’s

ability

to

pay

dividends

under

Puerto Rico law.

Interstate Branching

The Dodd-Frank

Act amended

the Riegle-Neal

Interstate Banking

and Branching

Efficiency Act

of 1994

(the “Interstate

Banking

Act”)

to

authorize

national

banks

and

state

banks

to

branch

interstate

through

de

novo

branches. For

purposes

of

the

Interstate Banking Act, BPPR is treated as a state bank and is subject to the same restrictions on interstate branching as other state

banks.

Activities and Acquisitions

In general, the BHC Act limits the activities

permissible for bank holding companies to the business of banking, managing

or controlling banks and such other activities as the Federal Reserve Board has determined to be so closely related to banking as to

be

properly

incidental

thereto.

A

company

that

meets

management

and

capital

standards

and

whose

subsidiary

depository

institutions meet management,

capital and

Community Reinvestment Act

(“CRA”) standards may

elect to

be treated

as a

financial

holding company

and engage

in a

substantially broader

range of

nonbanking financial

activities, including

securities underwriting

and dealing, insurance underwriting and making

merchant banking investments in nonfinancial

companies.

In order for a bank holding company to elect to be treated as a financial

holding company, (i) all of its depository institution

subsidiaries

must

be

well capitalized

(as described

above)

and

well managed

and

(ii)

it

must

file a

declaration with

the Federal

Reserve Board that it elects to be a “financial holding

company.” As noted above, a bank

holding company electing to be a financial

holding company must itself be and remain

well capitalized and well managed. The Federal Reserve Board’s

regulations applicable

to bank holding companies separately define

“well capitalized” for bank holding companies,

such as Popular,

to require maintaining

a tier 1 capital

ratio of at least

6% and a total capital

ratio of at least 10%.

Popular and PNA have elected

to be treated as

financial

holding

companies.

A

depository

institution

is

deemed

to

be

“well

managed”

if,

at

its

most

recent

inspection,

examination

or

subsequent review

by the

appropriate federal banking

agency (or

the appropriate state

banking agency), the

depository institution

received

at

least

a

“satisfactory”

composite

rating

and

at

least

a

“satisfactory”

rating

for

the

management

component

of

the

composite

rating.

If,

after

becoming

a

financial

holding

company,

the

company

fails

to

continue

to

meet

any

of

the

capital

or

management requirements

for financial

holding company

status, the

company

must

enter into

a confidential

agreement with

the

Federal

Reserve

Board

to

comply

with

all

applicable capital

and

management

requirements.

If

the

company

does

not

return

to

18

compliance

within

180

days,

the

Federal

Reserve

Board

may

extend

the

agreement

or

may

order

the

company

to

divest

its

subsidiary banks or the

company may discontinue, or

divest investments in companies

engaged in, activities permissible only

for a

bank holding company that has elected to be treated as a financial

holding company. In addition, if a depository institution subsidiary

controlled by a financial holding company does not

maintain a CRA rating of at least “satisfactory,” the financial holding company

will

be subject to restrictions on certain new activities

and acquisitions.

The Federal Reserve Board

may in certain circumstances limit

our ability to conduct

activities and make acquisitions that

would otherwise be permissible for

a financial holding company.

Furthermore, a financial holding company must obtain

prior written

approval from the Federal Reserve Board before acquiring a nonbank company with $10 billion or more in total consolidated assets.

In addition, we

are required to

obtain prior Federal

Reserve Board approval

before engaging in

certain banking and

other financial

activities both in the United States and abroad.

The “Volcker

Rule” adopted

as part

of the

Dodd-Frank Act

restricts the

ability of

Popular and

its subsidiaries,

including

BPPR and PB as

well as non-banking subsidiaries, to

sponsor or invest in

“covered funds,” including private funds,

or to engage in

certain types

of proprietary

trading. Popular

and its

subsidiaries generally

do not

engage in

the businesses

subject to

the Volcker

Rule; therefore, the Volcker Rule does not have a material effect on our

operations.

Anti-Money Laundering Initiative and the USA PATRIOT Act

A major focus of governmental policy relating to financial institutions in

recent years has been aimed at combating money

laundering and

terrorist financing.

The USA

PATRIOT

Act of

2001 (the

“USA PATRIOT

Act”) strengthened

the ability

of the

U.S.

government to help prevent, detect and prosecute international money

laundering and the financing of terrorism. Title

III of the USA

PATRIOT

Act imposed

significant compliance

and due

diligence obligations,

created new

crimes and

penalties and

expanded the

extra-territorial jurisdiction of the United States. Failure of a financial institution to comply with the USA PATRIOT Act’s requirements

could have serious legal and reputational consequences

for the institution.

The

Anti-Money

Laundering

Act

of

2020

(“AMLA”),

which

amended

the

Bank

Secrecy

Act

(the

“BSA”),

is

intended

to

comprehensively

reform

and

modernize

U.S.

anti-money

laundering

laws.

Among

other

things,

the

AMLA

codifies

a

risk-based

approach to anti-money laundering compliance for financial institutions; requires the U.S. Department of the Treasury to

promulgate

priorities

for

anti-money

laundering

and

countering

the

financing

of

terrorism

policy;

requires

the

development

of

standards

for

testing technology and

internal processes for BSA

compliance; expands enforcement-

and investigation-related authority,

including

a

significant

expansion

in

the

available

sanctions

for

certain

BSA

violations;

and

expands

BSA

whistleblower

incentives

and

protections.

Many

of

the

statutory

provisions

in

the

AMLA

require

additional

rulemakings,

reports

and

other

measures,

and

the

impact

of

the

AMLA

will

depend on,

among

other

things,

rulemaking and

implementation guidance.

In

June

2021,

the

Financial

Crimes Enforcement Network, a bureau of

the U.S. Department of the

Treasury,

issued the priorities for anti-money laundering

and

countering the

financing of

terrorism policy

required under AMLA.

The priorities

include: corruption, cybercrime,

terrorist financing,

fraud, transnational crime, drug trafficking, human trafficking and

proliferation financing.

Federal regulators

regularly examine BSA/Anti-Money

Laundering and sanctions

compliance to

enhance their

adequacy

and effectiveness, and the frequency and extent of such examinations

and related remedial actions have been

increasing.

Community Reinvestment Act

The

CRA

requires

banks

to

help

serve

the

credit

needs

of

their

communities,

including

extending

credit

to

low-

and

moderate-income individuals

and geographies.

Should

Popular

or our

bank

subsidiaries

fail

to

serve

adequately

the community,

potential penalties may include regulatory denials of applications to expand branches, relocate offices or branches, add subsidiaries

and affiliates, expand into new financial activities and merge

with or purchase other financial institutions.

Interchange Fees Regulation

The Federal Reserve Board

has established standards for

debit card interchange fees

and prohibited network exclusivity

arrangements and routing restrictions. The

maximum permissible interchange fee that

an issuer may receive

for an electronic debit

transaction is

the sum

of

21 cents

per transaction

and 5

basis points

multiplied by

the value

of

the transaction.

Additionally,

the

Federal Reserve

Board allows

for an

upward adjustment

of

no more

than 1

cent

to

an issuer’s

debit card

interchange fee

if the

issuer develops and implements policies and procedures

reasonably designed to achieve certain fraud-prevention

standards.

In

October

2023,

the

Federal

Reserve

Board

proposed

amendments

to

its

rules

on

interchange

fees.

If

adopted,

the

19

proposed changes

would establish

a maximum

permissible interchange

fee of

no more

than 14.4

cents per

transaction plus

four

basis

points

multiplied

by

the

value

of

the

transaction.

The

fraud

prevention

adjustment

would

be

increased

to

1.3

cents

per

transaction. The proposed changes would also establish an automatic update of

the interchange fee cap every other year based on

a survey of debit card issuers.

Consumer Financial Protection Act of 2010

The Consumer

Financial Protection

Bureau (the

“CFPB”) supervises

“covered persons”

(broadly defined

to include

any

person offering or

providing a consumer financial

product or service and

any affiliated service

provider) for compliance with

federal

consumer financial laws. The CFPB

also has the broad power

to prescribe rules applicable to

a covered person or service

provider

identifying

as

unlawful,

unfair,

deceptive,

or

abusive

acts

or

practices

in

connection

with

any

transaction

with

a

consumer

for

a

consumer financial product or service, or the offering of

a consumer financial product or service. We are subject to examination and

regulation by the CFPB. During 2025, the CFPB reduced its staff by over 80%. The

reduction in force is the subject of litigation, and

the

staffing

cuts

are

currently

stayed

pending

the

federal

circuit

court’s

en

banc

rehearing

of

the

case.

The

impact

of

these

developments

on

banking

organizations

subject

to

CFPB

regulation

and

supervision,

including

us,

is

uncertain.

The

Consumer

Financial Protection Act permits states to adopt consumer protection laws and standards that are more stringent than those adopted

at

the federal

level and,

in certain

circumstances, permits

state attorneys

general to

enforce compliance

with both

the state

and

federal laws and regulations. States and state attorneys general

may increase regulatory, investigative and enforcement activity with

respect to consumer protection, in

response to changes in regulation, supervision

and enforcement of consumer protection laws

by

federal regulators.

On October 22, 2024, the CFPB finalized a new rule to implement Section 1033 of the Consumer Financial Protection Act

that

requires

a

provider

of

payment

accounts

or

products,

such

as

a

bank,

to

make

data

available

to

consumers

upon

request

regarding the

products or

services they

obtain from

the provider.

Any such

data provider

also has

to make

such data

available to

third parties, with the consumer’s express authorization and

through an interface that satisfies formatting, performance

and security

standards,

for

the

purpose

of

such

third

parties

providing

the

consumer

with

financial

products

or

services

requested

by

the

consumer. Data required to be made available under the rule includes

transaction information, account balance, account and routing

numbers,

terms

and

conditions,

upcoming

bill

information,

and

certain

account

verification

data.

The

rule

is

intended

to

give

consumers

control

over

their

financial

data,

including

with

whom

it

is

shared,

and

encourage

competition

in

the

provision

of

consumer financial

products or

services. For

banks with

at least

$10 billion

and less

than $250

billion in

total assets,

compliance

with the rule’s requirements is required beginning on

April 1, 2027. The rule is the subject of litigation,

which is currently stayed while

the CFPB considers revisions to the rule.

Office of Foreign Assets Control Regulation

The

U.S.

Treasury

Department

Office

of

Foreign

Assets

Control

(“OFAC”)

administers

economic

sanctions

that

affect

transactions

with

designated

foreign

countries,

nationals

and

others.

The

OFAC-administered

sanctions

targeting

countries

take

many

different

forms.

Generally,

however,

they

contain

one

or

more

of

the

following

elements:

(i)

restrictions

on

trade

with

or

investment in a sanctioned country; and (ii) a blocking

of assets in which the government of the

sanctioned country or other specially

designated nationals have an interest, by prohibiting

transfers of property subject to U.S. jurisdiction (including

property in the United

States or the possession or control of U.S.

persons outside of the United States). Blocked assets (e.g., property

and bank deposits)

cannot

be

paid

out,

withdrawn, set

off

or

transferred

in

any

manner without

a

license

from

OFAC.

Failure

to

comply

with these

sanctions

could

have

serious

legal

and

reputational

consequences,

including

denial

by

federal

regulators

of

proposed

merger,

acquisition, restructuring, or other expansionary activity.

Protection of Customer Personal Information and