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, 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 26 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.

SIGNIFICANT EVENTS

Capital Actions

On July 23, 2026, the Corporation announced the following capital actions:

•an increase in the Corporation’s quarterly common stock dividend from $0.75 to $0.90 per share, commencing with the dividend

payable in the fourth quarter of 2026, subject to the approval of the Corporation’s Board of Directors; and

•a new common stock repurchase authorization of up to $1 billion.

The Corporation’s planned common stock repurchases may be executed in open market transactions, privately negotiated transactions,

block trades or any other manner determined by the Corporation. The Corporation has repurchased approximately $280 million in common

stock to date in 2026 and, as of June 30, 2026, had fully utilized the $500 million common stock repurchase authorization approved in 2025.

The timing, quantity and price of the Corporation's common stock repurchases will be subject to various factors, including market conditions,

the Corporation’s capital position, liquidity and financial performance, the capital impact of strategic initiatives and tax and regulatory

considerations, including regulatory approvals for subsidiary dividends. The common stock repurchase authorization does not require the

Corporation to acquire a specific dollar amount or number of shares and may be modified, suspended or terminated at any time without prior

notice.

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OVERVIEW

Financial highlights for the quarter ended June 30, 2026

The Corporation’s net income for the quarter ended June 30, 2026 amounted to $278.2 million, an increase of $67.8 million when compared

to net income of $210.4 million for the quarter ended June 30, 2025. Higher net income was mainly driven by higher net interest income,

higher non-interest income, and lower operating expenses partially offset by an increase in the provision for credit losses.

Financial highlights for the quarter ended June 30, 2026 include:

•Net interest income amounted to $693.4 million, an increase of $61.9 million when compared to the quarter ended June 30, 2025

driven by higher investments in U.S. Treasury securities at higher yields, loan growth 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

second quarter of 2026 was $788.8 million, an increase of $91.6 million when compared to the same quarter for 2025. Net interest

margin expanded by 17 basis points to 3.66% when compared to the same period in 2025. On a taxable equivalent basis, net

interest margin expanded by 32 basis points to 4.17% when compared to the same period in 2025.

•The provision for credit losses amounted to $65.5 million for the quarter ended June 30, 2026, an increase of $17.1 million when

compared to the quarter ended June 30, 2025, driven by higher specific reserves in the BPPR commercial loan portfolio

associated with the unreserved portion of a $155 million nonperforming loan held-in-portfolio ("NPL") transferred to loans held-for-

sale ("LHFS") with a resulting $71 million charge-off and specific reserves related to two commercial and industrial relationships

totaling $129 million that were classified as NPLs during the quarter, partially offset by lower provisions for certain consumer loan

portfolios attributable to improved credit metrics, improved macroeconomic assumptions, net recoveries in the mortgage portfolio

and lower volumes in the auto loan portfolio. Provision for credit losses decreased at PB primarily due to the higher qualitative

reserves established during the second quarter of 2025, compared to 2026, to maintain adequate ACL coverage as well as an

overall  improvement in credit quality.

•Non-interest income amounted to $180.5 million, an increase of $12.1 million when compared to the quarter ended June 30,

2025, mainly driven by higher credit and debit card fee income driven by higher activity and purchase volumes including those of

commercial credit cards that benefited from the recent launch of new corporate-focused products.

•Operating expenses amounted to $484.1 million for the quarter, reflecting a decrease of $8.6 million when compared to the

quarter ended June 30, 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 business promotion expenses.

•Income tax expense of $45.7 million with an effective tax rate (“ETR”) of 14.1% during the quarter ended June 30, 2026,

compared to an income tax expense of $47.9 million with an ETR of 18.5% for the quarter ended June 30, 2025 due to higher

exempt income and other tax benefits, including the vesting of stock awards, the purchase of tax credits, and income subject to

preferential tax rates.

•At June 30, 2026, the Corporation’s total assets amounted to $79.0 billion, compared to $75.3 billion at December 31, 2025. The

increase of $3.7 billion was primarily due to an increase in the available-for-sale (“AFS”) securities portfolio, driven by

reinvestment in U.S. Treasury securities, and higher loans held-in-portfolio partially offset by a decrease in held-to-maturity

(“HTM”) investment securities driven by maturities and principal paydowns.

•Deposits amounted to $70.2 billion at June 30, 2026, an increase of $4.0 billion from December 31, 2025, primarily driven by

growth at BPPR, mainly in P.R. public deposits and commercial deposits.

•Stockholders’ equity amounted to $6.4 billion at June 30, 2026, compared to $6.2 billion at December 31, 2025. The Corporation

and its banking subsidiaries continue to be well capitalized. As of June 30, 2026, the Corporation’s tangible book value per

common share was $87.94, an increase of $5.29 from December 31, 2025. The Common Equity Tier 1 Capital Ratio at June 30,

2026 was 16.08%, compared to 15.72% at December 31, 2025.

Refer to Table 1 for selected financial data for the quarters and for the six months ended June 30, 2026 and June 30, 2025.

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Table 1 - Financial Highlights

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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

Institution

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