# POPULAR, INC. (BPOP) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from POPULAR, INC.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/763901/000119312525043848/d924089d10k.htm
Accession: 0001193125-25-043848
Filing date: 2025-03-03
Report date: 2024-12-31
Extracted from a later financial-section MD&A body after the formal Item 7 span was a short reference.
Confidence: high

Company profile: /company/BPOP/
All MD&A years: /company/BPOP/mda/
Previous year: /company/BPOP/mda/fy2023/ (FY 2023)
Next year: /company/BPOP/mda/fy2025/ (FY 2025)

Management’s
 
Discussion
 
and
 
Analysis
 
included
 
in
 
this
 
Form
 
10-K
 
for

information on
 
the approval
 
of policies
 
to manage
 
liquidity risk.
 
Additionally,
 
contingency funding
 
plans are
 
used to
 
model various

stressful
 
events
 
of
 
different
 
magnitudes
 
that
 
affect
 
different
 
time
 
horizons,
 
to
 
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. 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.

Sources of Liquidity

Deposits, including
 
customer deposits,
 
brokered deposits
 
and public
 
funds deposits,
 
continue to
 
be the
 
most significant
 
source of

funds
 
for
 
the
 
Corporation,
 
representing
 
89%
 
and
 
90%
 
of
 
funding
 
of
 
the
 
Corporation’s
 
total
 
assets
 
at
 
December
 
31,
 
2024
 
and

December 31, 2023, respectively.
 
The ratio of total ending loans to deposits was 57% at December 31, 2024 and 55% at December

31, 2023.
 
In addition to
 
traditional deposits, the
 
Corporation maintains borrowing arrangements, which
 
amounted to approximately

$1.2
 
billion
 
in
 
outstanding
 
balances
 
at
 
December
 
31,
 
2024
 
(December
 
31,
 
2023
 
-
 
$1.1
 
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 fourth quarter of 2024 the Corporation had no material incremental use of its available liquidity sources. At December 31,

2024, the Corporation’s available liquidity increased to
 
$ 21.6 billion from $19.5 billion
 
on December 31, 2023. The liquidity sources

of the Corporation at December 31, 2024 are
 
presented in Table 17 below:

Table 17 - Liquidity Sources

December 31, 2024

December 31, 2023

(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)

$

4,882,358

$

1,488,857

$

6,371,215

$

5,516,636

$

1,475,143

$

6,991,779

Unpledged securities

3,806,066

522,869

4,328,935

4,212,480

347,791

4,560,271

FHLB borrowing capacity

2,777,090

1,058,921

3,836,011

2,157,685

1,341,329

3,499,014

Discount window of the Federal Reserve

Bank borrowing capacity

4,839,388

2,178,646

7,018,034

2,605,674

1,818,946

4,424,620

Total available liquidity

$

16,304,902

$

5,249,293

$

21,554,195

$

14,492,475

$

4,983,209

$

19,475,684

85

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.

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.

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 certificates
 
of deposit under $250,000,

all
 
interest-bearing
 
transactional
 
deposit
 
accounts,
 
non-interest-bearing
 
deposits,
 
and
 
savings
 
deposits.
 
Core
 
deposits
 
exclude

brokered
 
deposits
 
and
 
certificates
 
of
 
deposit
 
over
 
$250,000.
 
Core
 
deposits,
 
excluding
 
P.R.
 
public
 
funds,
 
which
 
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 earning spread. As of December 31,

2024, total Puerto Rico public sector deposits were
 
$19.5 billion, compared to $18.1 billion at
 
December 31, 2023.

Core deposits
 
totaled $59.9
 
billion, or
 
92% of
 
total deposits,
 
at December
 
31, 2024,
 
compared with
 
$59.0 billion,
 
or 93%
 
of total

deposits, at December 31, 2023. Core deposits financed 86% of the Corporation’s earning assets at December 31, 2024, compared

with 88% at December 31, 2023.

The distribution by maturity of certificates of deposit with denominations of $250,000 and over at December 31, 2024 is presented in

the table that follows:

Table 18 - Distribution by
 
Maturity of Certificates of Deposit of $250,000 and Over

(In thousands)

3 months or less

$

2,313,814

Over 3 to 12 months

934,934

Over 1 year to 3 years

204,776

Over 3 years

176,027

Total

$

3,629,551

For the
 
years ended
 
December 31,
 
2024 and
 
2023, average
 
deposits, including
 
brokered deposits,
 
represented 92%
 
of average

earning assets. Table 19 summarizes average deposits for the past two years.

86

Table 19 - Average
 
Total Deposits

For the years ended December 31,

(In thousands)

2024

2023

Deposits excluding P.R.
 
government deposits:

Demand deposits

$

15,065,039

$

15,307,152

Savings, NOW and money market deposits (non-brokered)

21,228,157

21,914,790

Savings, NOW and money market deposits (brokered)

764,696

756,343

Time deposits (non-brokered)

7,227,460

6,470,210

Time deposits (brokered CDs)

956,223

722,328

Sub-total deposits excluding P.R.
 
government
 
deposits

45,241,575

45,170,823

P.R. government
 
deposits:

Demand deposits

[1]

11,754,910

11,997,257

Savings, NOW and money market deposits (non-brokered)

6,728,781

4,795,092

Time deposits (non-brokered)

719,017

583,308

Sub-total P.R.
 
government
 
deposits

19,202,708

17,375,657

Average total deposits

$

64,444,283

$

62,546,480

[1] Includes interest bearing demand deposits.

The Corporation had
 
$1.6 billion in
 
brokered deposits at
 
December 31, 2024,
 
which financed approximately
 
2% of its
 
total assets

(December 31, 2023 - $1.7 billion and 2%,
 
respectively).

As of
 
December 31,
 
2024, the
 
banking subsidiaries
 
had sufficient
 
current and
 
projected liquidity
 
sources to
 
meet their
 
anticipated

cash flow
 
obligations, as
 
well as
 
special needs
 
and off-balance
 
sheet commitments,
 
in the
 
ordinary course
 
of business
 
and have

sufficient
 
liquidity
 
resources to
 
address
 
a
 
stress
 
event.
 
Although the
 
banking
 
subsidiaries
 
have
 
historically
 
been
 
able
 
to
 
replace

maturing
 
deposits and
 
advances, no
 
assurance can
 
be given
 
that
 
they
 
would be
 
able to
 
replace those
 
funds
 
in the
 
future if
 
the

Corporation’s
 
financial condition
 
or
 
general market
 
conditions
 
were to
 
deteriorate. The
 
Corporation’s financial
 
flexibility would
 
be

severely constrained if
 
the banking subsidiaries
 
are unable to
 
maintain access to
 
funding or if
 
adequate funding 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,
 
deposit
 
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 or collateral requirements and would need

to
 
rely
 
more
 
heavily
 
on
 
alternative
 
funding
 
sources.
 
In
 
these
 
scenarios,
 
the
 
Corporation’s
 
financial
 
flexibility
 
and
 
ability
 
to
 
grow

revenues may not increase proportionately to cover costs and
 
profitability would be adversely affected.

The Corporation considers balances in
 
excess of $250,000 to have a
 
higher potential liquidity risk.
 
Table
 
20 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 20, represent public deposit balances from governmental
 
entities in the

U.S.
 
and
 
its
 
territories,
 
including
 
Puerto
 
Rico
 
and
 
the
 
United
 
States
 
Virgin
 
Islands,
 
collateralized
 
based
 
on
 
such
 
jurisdictions’

applicable collateral requirements.

87

Table 20 - Deposits

31-Dec-24

Popular, Inc.

(Dollars in thousands)

BPPR

% of Total

Popular U.S.

% of Total

(Consolidated)

% of Total

Deposits:

Deposits balances under $250,000 [1]

$

23,588,937

44

%

$

7,961,334

68

%

$

31,550,271

49

%

Transactional deposits balances over

$250,000

8,046,175

15

%

1,944,674

16

%

9,990,849

15

%

Time deposits balances over $250,000

1,991,934

4

%

813,424

7

%

2,805,358

4

%

Uninsured foreign deposits

450,068

1

%

-

-

%

450,068

1

%

Collateralized public funds

19,771,083

36

%

316,716

3

%

20,087,799

31

%

Intercompany deposits

205,839

-

%

667,839

6

%

-

-

%

Total deposits

$

54,054,036

100

%

$

11,703,987

100

%

$

64,884,345

100

%

[1] Includes the first $250,000 in balances of transactional
 
and time deposit accounts with balances in excess
 
of $250,000.

31-Dec-23

Popular, Inc.

(Dollars in thousands)

BPPR

% of Total

Popular U.S.

% of Total

(Consolidated)

% of Total

Deposits

Deposits balances under $250,000 [1]

$

23,683,475

45

%

$

7,760,363

69

%

$

31,443,838

49

%

Transactional deposits balances over

$250,000

8,632,491

16

%

2,230,978

20

%

10,863,469

17

%

Time deposits balances over $250,000

1,926,005

4

%

361,315

3

%

2,287,320

4

%

Uninsured foreign deposits

418,334

1

%

-

-

%

418,334

1

%

Collateralized public funds

18,313,612

34

%

291,670

3

%

18,605,282

29

%

Intercompany deposits

159,163

-

%

626,312

5

%

-

-

%

Total deposits

$

53,133,080

100

%

$

11,270,638

100

%

$

63,618,243

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 imposed
 
by banking
 
regulators, including
 
the FED
 
and the

NYDFS, that may limit the ability of those subsidiaries
 
to act as a source of funding to the BHCs.

The principal uses of these funds include the repayment of debt, interest payments to holders of senior debt and junior subordinated

deferrable interest debentures (related to trust preferred securities), the payment of dividends to common stockholders,
 
repurchases

of the Corporation’s securities and capitalizing its subsidiaries.

The
 
outstanding
 
balance
 
of
 
notes
 
payable
 
at
 
the
 
BHCs
 
amounted
 
to
 
$594
 
million
 
at
 
December
 
31,
 
2024
 
and
 
$592
 
million
 
at

December 31, 2023.

The contractual maturities of the BHCs notes payable
 
at December 31, 2024 are presented in
 
Table 21.

Table 21
 
- Distribution of BHC's Notes Payable by Contractual
 
Maturity

Year

(In thousands)

2028

$

395,198

Later years

198,373

Total

$

593,571

88

As
 
of December
 
31, 2024,
 
the BHCs
 
had cash
 
and money
 
markets investments
 
totaling $635
 
million and
 
borrowing potential
 
of

$165 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 that are
 
expected to be
 
sufficient to
 
meet all
 
interest payments and
 
dividend obligations

for the foreseeable future.
 
Additionally, the Corporation’s
 
latest quarterly dividend was $0.70 per share
 
or approximately $49 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
 
given
 
that
 
two
 
out
 
of
 
three
 
principal
 
credit
 
rating
 
agencies
 
rate
 
the

Corporation’s
 
debt
 
securities
 
below “investment
 
grade”.
 
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.
 
During the
 
year ended
 
December 31,
 
2024,
 
Popular,
 
Inc. made
 
capital contributions
 
of $1.7
 
million to

Popular Impact Fund, its wholly owned subsidiary.

Dividends

During
 
the
 
year
 
ended
 
December
 
31,
 
2024,
 
the
 
Corporation
 
declared
 
cash
 
dividends
 
of
 
$2.56
 
per
 
common
 
share
 
outstanding

($183.9 million in the aggregate). The dividends for the Corporation’s Series A preferred stock amounted to $1.4 million. On July 24,

2024, the corporation announced an
 
increase in the Corporation’s
 
quarterly common stock dividend from
 
$0.62 to $0.70 per
 
share,

commencing with the dividend payable in the first
 
quarter of 2025.

During the
 
year ended December
 
31, 2024,
 
the BHCs
 
received dividends and
 
distributions amounting to
 
$600 million from
 
BPPR,

$50
 
million
 
from
 
PNA
 
and
 
$23
 
million
 
from
 
its
 
other
 
non-banking
 
subsidiaries.
 
Dividends
 
from
 
BPPR
 
constitute
 
Popular,
 
Inc.’s

primary source of
 
liquidity. In
 
addition, during the year
 
ended December 31, 2024,
 
Popular International Bank Inc.,
 
a wholly owned

subsidiary of Popular, Inc., received $19.4 million in cash dividends
 
and $2.9 million in stock dividends from its investment
 
in BHD.

Other Funding Sources and Capital

In addition to cash reserves held at the FRB that totaled $ 6.4 billion at December 31, 2024, 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
 
repurchase
 
agreements
 
would
 
be
 
subject
 
to
 
having
 
sufficient
 
unpledged
 
collateral
 
available
 
at
 
the
 
time
 
the

transactions are
 
consummated, in addition
 
to overall
 
liquidity and
 
risk appetite
 
of the
 
various counterparties.
 
Refer to
 
Table
 
17 for

details of
 
the Corporation’s
 
unpledged debt
 
securities and
 
available credit
 
facilities with
 
the FHLB
 
and the
 
discount window
 
of the

Federal Reserve Bank. 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).

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. 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.

89

Refer to
 
Note 23
 
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
 
32
 
to
 
the

Consolidated
 
Financial
 
Statements
 
for
 
more
 
information
 
on
 
operating
 
leases
 
and
 
to
 
Note
 
22
 
to
 
the
 
Consolidated
 
Financial

Statements for
 
a detailed
 
discussion related
 
to the
 
Corporation’s guarantees,
 
indemnifications obligations, and
 
representation and

warranties arrangements.

The Corporation monitors its cash requirements, including
 
its contractual obligations and debt commitments.

Financial Information of Guarantor and Issuers of Registered
 
Guaranteed Securities

The principal sources of funding for Popular, Inc. Holding Company (“PIHC”) and Popular North America, Inc. (“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 dividends
 
an insured
 
depository

institution may pay to its holding company without
 
regulatory approval.

The Corporation ("PIHC") is
 
the parent holding company
 
of Popular North America (“PNA”)
 
and operates financial services through

its subsidiaries. PNA, a wholly owned subsidiary of Popular, Inc., manages entities such as Equity One, Inc., and PB, including PB’s

subsidiaries: Popular Equipment Finance, LLC,
 
Popular Insurance Agency, U.S.A., and E-LOAN, Inc.

PNA has issued junior subordinated debentures guaranteed by PIHC (the “obligor group”), purchased by statutory
 
trusts established

by the Corporation using proceeds from trust preferred
 
securities (“capital securities”) and common securities
 
of the trusts.

PIHC guarantees
 
the junior
 
subordinated debentures
 
issued by
 
PNA. If
 
PIHC fails
 
to make
 
interest payments
 
on the
 
debentures

held by the trust,
 
the trust will not
 
distribute payments on the
 
capital securities. The guarantee
 
ranks subordinate and junior
 
in right

of
 
payment to
 
all
 
other liabilities
 
of
 
PIHC and
 
equally with
 
all
 
other PIHC-issued
 
guarantees, allowing
 
direct
 
legal
 
action against

PIHC without involving other entities.

Funding
 
for
 
PIHC
 
and
 
PNA
 
includes
 
dividends
 
from
 
subsidiaries,
 
asset
 
sales,
 
and
 
proceeds
 
from
 
debt
 
and
 
equity
 
issuance.

Statutory provisions limit the dividends an insured
 
depository institution can pay to its holding
 
company without regulatory approval.

The summarized financial
 
information below shows
 
the combined financial
 
position of the
 
obligor group as
 
of December 31,
 
2024,

and December 31, 2023, and their operations for the years ending on those dates. Excluded are investments and equity in earnings

from subsidiaries and affiliates outside the obligor group.

Intercompany balances
 
and transactions
 
within the
 
obligor group
 
have been
 
eliminated. Material
 
amounts due
 
from, due
 
to, and

transactions with subsidiaries and affiliates are shown separately. Related party transactions
 
are also presented separately.

90

Table 22 - Summarized Statement
 
of Condition

(In thousands)

December 31, 2024

December 31, 2023

Assets

Cash and money market investments

$

634,809

$

388,025

Investment securities

35,150

29,973

Accounts receivables from non-obligor subsidiaries

14,602

14,469

Other loans (net of allowance for credit losses of $281 (2023
 
- $51))

25,381

26,906

Investment in equity method investees

5,279

5,265

Other assets

65,483

51,315

Total assets

$

780,704

$

515,953

Liabilities and Stockholders' equity

Accounts payable to non-obligor subsidiaries

$

12,163

$

7,023

Notes payable

593,571

592,283

Other liabilities

126,718

114,660

Stockholders' equity (deficit)

48,252

(198,013)

Total liabilities and
 
stockholders' equity

$

780,704

$

515,953

Table 23 - Summarized Statement
 
of Operations

For the years ended

(In thousands)

December 31, 2024

December 31, 2023

Income:

Dividends from non-obligor subsidiaries

$

623,000

$

208,000

Interest income from non-obligor subsidiaries and affiliates

9,784

15,579

Earnings (losses) from investments in equity method investees

15

(84)

Other operating income

2,399

4,664

Total income

$

635,198

$

228,159

Expenses:

Services provided by non-obligor subsidiaries and affiliates
 
(net of

reimbursement by subsidiaries for services provided by parent
 
of

$172,449 (2023 - $161,333))

$

13,328

$

13,513

Other expenses

37,391

36,216

Income tax expense (benefit)

[1]

20,725

(1,238)

Total expenses

$

71,444

$

48,491

Net income

$

563,754

$

179,668

[1] As discussed
 
in Note 1
 
to the Consolidated
 
Financial Statements, the
 
net income for
 
the year ended
 
December 31, 2024,
 
included $22.9

million of expenses,
 
of which $16.5
 
million was
 
reflected in income
 
tax expense
 
and $6.4 million
 
was reflected
 
in other operating
 
expenses,

related
 
to
 
an
 
out-of-period
 
adjustment
 
associated
 
with
 
the
 
Corporation’s
 
U.S.
 
subsidiary’s
 
non-payment
 
of
 
taxes
 
on
 
certain
 
intercompany

distributions to the Bank Holding Company (BHC) in Puerto Rico,
 
a foreign corporation for U.S. tax purposes.

In addition to
 
the dividend income
 
reflected in the
 
Statement of Operations
 
table above, during
 
the year ended
 
December

31, 2024, the
 
obligor group recorded a
 
$67.4 million of
 
capital distributions from
 
non-obligor subsidiaries which were
 
in an

accumulated loss position and accordingly were
 
recorded as a reduction to the investments
 
(2023 - $64.0 million).

91

Risk to Liquidity

The
 
Corporation’s
 
liquidity
 
may
 
come
 
under
 
pressure
 
if
 
it
 
experiences
 
significant
 
unexpected
 
cash
 
outflows
 
due
 
to
 
deposit

withdrawals,
 
which
 
could
 
arise
 
from
 
various
 
factors
 
like
 
loss
 
of
 
depositor
 
confidence,
 
exogenous events,
 
a
 
downgrade
 
in
 
credit

rating, or other events causing counterparties to avoid
 
exposure. The Corporation’s liquidity risk is impacted by
 
the following:

●

External factors such as the
 
economic outlook (the P.R.
 
market poses additional risk factors, refer to
 
the Geographic and

Government Risk
 
section of
 
this MD&A
 
for highlights
 
regarding Puerto
 
Rico's economy
 
and fiscal
 
status),
 
interest rate

volatility,
 
inflation,
 
debt
 
market
 
disruptions, and
 
regulatory
 
changes
 
(e.g.
 
if
 
regulatory
 
capital
 
ratios
 
fall
 
below
 
required

thresholds,
 
the
 
Corporation’s
 
banking
 
subsidiaries
 
may
 
face
 
challenges
 
raising
 
or
 
retaining
 
brokered
 
deposits
 
and

limitations on deposit interest rates) can impact
 
funding ability.

●

Management has
 
contingency plans
 
involving alternate
 
funding mechanisms
 
like pledging
 
asset classes
 
and accessing

secured credit lines and loan facilities with the FHLB
 
and FRB, subject to positive tangible capital requirements.

●

The Corporation’s ability to compete in the
 
deposit market relies on pricing, service, convenience, financial stability,
 
credit

ratings, customer confidence, and FDIC deposit insurance
 
coverage.

●

Public sector
 
deposits require
 
high-credit-quality securities
 
as collateral;
 
hence, liquidity
 
risks from
 
public sector
 
deposit

outflows
 
are
 
mitigated
 
as
 
the
 
bank
 
receives
 
its
 
collateral
 
back.
 
The
 
Corporation
 
uses
 
fixed-rate
 
U.S.
 
Treasury
 
debt

securities as collateral, which are subject to market value fluctuations based on interest rate changes. Rate increases can

reduce collateral value, requiring additional collateral,
 
thus decreasing unpledged securities.

●

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.

Investors should refer to
 
Liquidity Risk section of
 
“Part I, Item
 
1A” of this
 
Form 10-K for
 
an additional discussion of
 
liquidity risks to

which the Corporation is subject.

In addition to regulatory limits previously discussed, 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. During the year ended

December 31,
 
2024, BPPR
 
declared cash
 
dividends of
 
$600 million
 
to PIHC
 
and could
 
declare a
 
dividend of
 
up to
 
approximately

$318 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, pursuant
 
to the
 
FRB requirements,
 
PB may
 
not declare
 
or pay
 
a

dividend without the prior approval of the Federal
 
Reserve Board and the NYSDFS.

The Corporation’s
 
banking subsidiaries have
 
historically not used
 
unsecured capital market
 
borrowings to finance
 
their operations,

and therefore are less sensitive to the level and
 
changes in the Corporation’s overall credit ratings.

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 36 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

92

Puerto Rico's economy
 
is closely linked
 
to the United
 
States (“U.S.”) economy,
 
as most of
 
the external factors
 
that influence
 
it are

shaped by U.S.
 
policies and economic performance,
 
including federal transfer payments, tax
 
policies, interest rates, inflation,
 
trade

policies, and geopolitical developments.

Puerto Rico’s economy
 
historically followed the
 
economic trends of the
 
U.S. economy.
 
However, from
 
2007 to 2017,
 
Puerto Rico’s

economy suffered
 
a severe
 
recession, with
 
real gross
 
national product
 
(“GNP”) contracting
 
approximately 15%
 
during this
 
period.

The recession was exacerbated by the damaged caused by Hurricane María in 2017. Since 2018, Puerto Rico’s economy has been

gradually recovering,
 
with a
 
temporary interruption
 
in 2020
 
due to
 
the COVID-19
 
pandemic, in
 
part aided
 
by the
 
large amount
 
of

federal
 
disaster
 
relief
 
and
 
recovery
 
assistance
 
funds
 
received
 
in
 
connection
 
with
 
recent
 
natural
 
disasters
 
and
 
the
 
COVID-19

pandemic. Future
 
growth depends
 
on multiple
 
factors, including
 
the level
 
of
 
ongoing federal
 
assistance and
 
the timetable
 
for
 
its

deployment. Estimates
 
from the
 
Puerto Rico
 
Planning Board
 
indicated that
 
real GNP
 
grew by
 
2.8% during
 
fiscal year
 
2024 (July

2023-June
 
2024)
 
and
 
is
 
projected to
 
grow by
 
1.4%
 
in
 
fiscal
 
year 2025
 
(July
 
2024-June 2025).
 
However,
 
the
 
latest Puerto
 
Rico

Economic Activity Index showed a 1.1% year-over-year
 
decline and a 0.1% month-over-month decline in November
 
2024. While this

index is not a direct measure of real GNP, it is an indicator of ongoing economic
 
activity.

In
 
2021
 
and
 
2022,
 
inflation
 
rose
 
sharply
 
in
 
the
 
U.S.
 
and
 
Puerto
 
Rico
 
due
 
to
 
post-pandemic
 
demand
 
and
 
supply
 
chain
 
issues.

Inflation
 
began
 
to
 
decrease
 
by
 
mid-2022
 
as
 
the
 
Federal
 
Reserve
 
raised
 
interest
 
rates,
 
largely
 
stabilizing
 
by
 
September
 
2024,

leading to a series of rate reductions by the Federal Reserve for the first
 
time in four years. As of January 2025, the U.S. Consumer

Price Index
 
showed a
 
3.0% year-over-year
 
increase, still
 
above the
 
Federal Reserve’s
 
2% target.
 
In Puerto
 
Rico, the
 
Consumer

Price Index increased by 1.7% over the 12
 
months ending in November 2024.

Fiscal Challenges of Puerto Rico and its Municipalities

As
 
Puerto Rico’s
 
economy contracted
 
in the
 
2000s, public
 
debt
 
increased rapidly
 
due to
 
borrowing to
 
cover
 
deficits to
 
pay
 
debt

service, pension benefits,
 
and other expenditures.
 
By 2016, the
 
government had over
 
$120 billion in
 
combined debt and
 
unfunded

pension liabilities, lost access to capital markets, and
 
faced a fiscal crisis.

In response, the U.S. Congress enacted the Puerto Rico Oversight,
 
Management, and Economic Stability Act (“PROMESA”) in June

2016. PROMESA
 
established an Oversight
 
Board with
 
significant control
 
over Puerto
 
Rico’s fiscal
 
and economic
 
affairs, including

those of
 
its public
 
corporations,
 
instrumentalities and
 
municipalities (collectively,
 
“PR Government
 
Entities”). The
 
Oversight Board

will
 
remain
 
in
 
place
 
until
 
market
 
access
 
is
 
restored
 
and
 
balanced
 
budgets
 
are
 
achieved
 
for
 
at
 
least
 
four
 
consecutive
 
years.

PROMESA also established
 
two mechanisms for
 
the restructuring of
 
the obligations of
 
PR Government Entities:
 
(a) Title
 
III, an
 
in-

court process akin
 
to that of
 
the U.S. Bankruptcy Code
 
and which permits
 
adjustment of a broad
 
range of obligations, and
 
(b) Title

VI, a largely out-of-court process through which a
 
supermajority of creditors can accept modifications to
 
debt and bind holdouts.

Since
 
2017,
 
Puerto
 
Rico
 
and
 
several
 
of
 
its
 
instrumentalities
 
have
 
availed
 
themselves
 
of
 
these
 
mechanisms.
 
The
 
Puerto
 
Rico

government exited Title III in March 2022, and several instrumentalities, such as the Government Development Bank and the Puerto

Rico Highways and Transportation
 
Authority have also completed
 
debt restructurings under Titles
 
III or VI
 
of PROMESA. However,

the Puerto Rico Electric Power Authority is still undergoing
 
its debt restructuring.

Puerto
 
Rico's economic
 
difficulties
 
have also
 
impacted its
 
municipalities. Historically,
 
the central
 
government provided
 
significant

municipal subsidies.
 
However,
 
these, have
 
decreased pursuant
 
to fiscal
 
measures required
 
by the
 
Oversight Board.
 
This decline

has been partly offset by federal disaster and COVID-relief funding received
 
by municipalities in recent years. The latest Puerto Rico

fiscal plan proposes a
 
restructured grant system to enhance
 
municipal services and encourage accountability through
 
performance

metrics.

Municipalities
 
are
 
subject
 
to
 
PROMESA,
 
and
 
the
 
Oversight
 
Board
 
has
 
required
 
certain
 
municipalities
 
to
 
submit
 
fiscal
 
plans
 
and

annual budgets
 
for review
 
and approval.
 
Municipalities are
 
also required
 
to seek
 
Oversight Board
 
approval to
 
issue, guarantee
 
or

modify
 
their
 
debts
 
and
 
to
 
enter
 
into
 
significant
 
contracts.
 
To
 
date
 
no
 
municipality
 
has
 
availed
 
itself
 
of
 
the
 
debt
 
restructuring

mechanisms available to them under PROMESA.

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

93

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
 
December
 
31,
 
2024,
 
the
 
Corporation’s
 
direct
 
exposure
 
to
 
PR
 
Government
 
Entities
 
totaled
 
$336
 
million,
 
all
 
of
 
which
 
were

outstanding,
 
compared
 
to
 
$362
 
million,
 
of
 
which
 
$333
 
million
 
were
 
outstanding,
 
at
 
December
 
31,
 
2023.
 
Substantially
 
all
 
of
 
the

Corporation’s direct exposure
 
outstanding at December 31,
 
2024 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
 
December
 
31,
 
2024,
 
80%
 
of
 
the
 
Corporation’s
 
exposure
 
to
 
municipal
 
loans
 
and
 
securities
 
was

concentrated in the municipalities of San
 
Juan, Guaynabo, Carolina and Caguas.
 
In July 2024, the
 
Corporation received scheduled

principal payments
 
amounting to
 
$40 million
 
from various
 
obligations from
 
Puerto Rico
 
municipalities. For
 
additional discussion
 
of

the
 
Corporation’s
 
direct
 
exposure to
 
the
 
Puerto
 
Rico
 
government and
 
its
 
instrumentalities and
 
municipalities, refer
 
to
 
Note
 
23
 
–

Commitments and Contingencies to the Consolidated
 
Financial Statements.

In
 
addition, at
 
December 31,
 
2024,
 
the
 
Corporation had
 
$220
 
million
 
in
 
loans
 
insured
 
or
 
securities issued
 
by
 
PR
 
Governmental

Entities, but for
 
which the principal source
 
of repayment is non-governmental ($238 million
 
at December 31, 2023). These included

$176 million in
 
residential mortgage loans insured
 
by the Puerto
 
Rico Housing Finance Authority
 
(“HFA”), a
 
PR Government Entity

(December 31, 2023
 
- $191
 
million). The Corporation
 
also had,
 
at December 31,
 
2024, $38 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,
 
2023 -
 
$40 million).

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
 
PR
 
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
 
December
 
31,
 
2024,
 
BPPR
 
had
 
$19.5
 
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
 
level of federal
 
assistance, the speed
 
at which
 
such 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.

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 December
 
31, 2024,
 
the Corporation
 
had approximately $28
 
million in
 
direct exposure to
 
USVI government
 
entities (December

31, 2023 - $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
 
December
 
31,
 
2024,
 
it
 
has
 
a
 
loan
 
portfolio
 
amounting
 
to

approximately
 
$196
 
million
 
comprised
 
of
 
various
 
retail
 
and
 
commercial
 
clients,
 
compared
 
to
 
a
 
loan
 
portfolio
 
of
 
$205
 
million
 
at

December 31, 2023.

94

U.S. Government

As further detailed in Notes
 
5 and 6 to the
 
Consolidated Financial Statements, a substantial portion of the
 
Corporation’s investment

securities
 
represented exposure
 
to
 
the
 
U.S.
 
Government in
 
the
 
form
 
of
 
U.S. Government
 
sponsored entities,
 
as
 
well
 
as
 
agency

mortgage-backed and U.S. Treasury securities. In
 
addition, $2.1 billion of residential mortgages and $87.4 million commercial
 
loans

were insured
 
or guaranteed
 
by the
 
U.S. Government
 
or its
 
agencies at
 
December 31,
 
2024 (compared
 
to
 
$1.9 billion
 
and $89.2

million, respectively, at December 31, 2023).

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 24.

The Corporation’s
 
credit quality
 
metrics remained
 
stable during
 
2024, when
 
compared to
 
the previous
 
year.
 
While non-performing

loans
 
(“NPLs”),
 
net
 
charge
 
offs
 
(“NCOs”)
 
and
 
inflows
 
to
 
NPLs
 
remained
 
near
 
or
 
below
 
historical averages,
 
consumer
 
portfolios

reflected
 
increased
 
delinquencies
 
and
 
NCOs.
 
The
 
mortgage
 
and
 
commercial
 
portfolios
 
continued
 
to
 
operate
 
with
 
low
 
levels
 
of

delinquencies and NCOs. The
 
Corporation continues to actively monitor
 
changes in the macroeconomic environment
 
and borrower

performance given higher
 
interest rates and
 
inflationary pressures. Management believes
 
that the improvements
 
over recent years

in risk management practices
 
and the overall risk
 
profile of the Corporation’s
 
loan portfolios position Popular to
 
continue to operate

successfully under the current environment.

Total
 
NPAs
 
decreased
 
by
 
$30.0
 
million
 
when
 
compared
 
with
 
December
 
31,
 
2023.
 
Total
 
NPLs
 
decreased
 
by
 
$6.8
 
million
 
from

December
 
31,
 
2023.
 
BPPR’s
 
NPLs
 
decreased
 
by
 
$36.6
 
million,
 
across
 
most
 
loan
 
categories,
 
except
 
consumer
 
NPLs
 
which

reflected an
 
increase of
 
$7.4 million,
 
mostly driven
 
by the
 
auto portfolio.
 
Popular U.S.
 
NPLs increased
 
by $29.8
 
million, driven
 
by

higher commercial and mortgage NPLs
 
by $12.5 million and
 
$18.7 million, respectively.
 
The mortgage NPL increase
 
was impacted

by a single loan amounting to $17.1 million.

On December
 
31, 2024,
 
the ratio
 
of NPLs
 
to total
 
loans held-in-portfolio
 
was 0.95%,
 
compared to
 
1.02%, at
 
December 31,
 
2023.

Other real estate owned loans (“OREOs”) decreased
 
by $23.1 million from December 31, 2023. The
 
decrease in OREO was driven

by the
 
sale of
 
residential properties. On
 
December 31, 2024,
 
NPLs secured by
 
real estate
 
amounted to $200
 
million in the
 
Puerto

Rico operations and $56 million in Popular U.S,
 
compared with $231 million and $24 million,
 
respectively, on December 31, 2023.

The Corporation’s
 
commercial loan
 
portfolio secured
 
by real
 
estate (“CRE”)
 
amounted to
 
$10.9 billion
 
on December
 
31, 2024,
 
of

which
 
$3.2
 
billion
 
was
 
secured
 
with
 
owner
 
occupied
 
properties,
 
compared
 
with
 
$10.6
 
billion
 
and
 
$3.1
 
billion,
 
respectively,
 
on

December 31,
 
2023. Office
 
space leasing exposure
 
in our
 
non-owner occupied CRE
 
portfolio is limited,
 
representing only 1.9%
 
or

$714 million of our total loan portfolio. The
 
exposure is mainly comprised of low- to mid- rise properties with an
 
average loan size of

$2.4 million and is well diversified across tenant
 
type.

CRE NPLs
 
amounted to
 
$53.7 million
 
at December
 
31, 2024,
 
compared with
 
$47.6 million
 
at December
 
31, 2023.
 
The CRE
 
NPL

ratios for the BPPR and Popular U.S. segments were 0.64% and 0.37%, respectively,
 
at December 31, 2024, compared with 0.86%

and 0.13%, respectively, at December 31, 2023.

In addition to the NPLs included in Table 24, at December 31, 2024, there were $596 million of performing loans, mostly commercial

loans, which in management’s opinion, are currently subject to potential future classification as non-performing (December 31, 2023

- $510 million).

The following table presents the Corporation’s NPAs as of December 31, 2024
 
and 2023:

95

Table 24 - Non-Performing
 
Assets

December 31, 2024

December 31, 2023

(Dollars in thousands)

BPPR

Popular U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Non-accrual loans:

Commercial

Commercial multi-family

$

79

$

8,700

$

8,779

$

1,991

$

-

$

1,991

Commercial real estate non-owner

occupied

6,429

8,015

14,444

8,745

1,117

9,862

Commercial real estate owner occupied

25,258

5,191

30,449

29,430

6,274

35,704

Commercial and industrial

19,335

1,748

21,083

32,826

3,772

36,598

Total Commercial

51,101

23,654

74,755

72,992

11,163

84,155

Construction

-

-

-

6,378

-

6,378

Leasing

9,588

-

9,588

8,632

-

8,632

Mortgage

158,442

29,890

188,332

175,106

11,191

186,297

Consumer

Home equity lines of credit

-

3,393

3,393

-

3,733

3,733

Personal

20,269

1,741

22,010

19,031

2,805

21,836

Auto

51,792

-

51,792

45,615

-

45,615

Other

899

11

910

964

1

965

Total Consumer

72,960

5,145

78,105

65,610

6,539

72,149

Total non-performing
 
loans held-in-portfolio

292,091

58,689

350,780

328,718

28,893

357,611

Other real estate owned (“OREO”)

57,197

71

57,268

80,176

240

80,416

Total non-performing
 
assets

[1]

$

349,288

$

58,760

$

408,048

$

408,894

$

29,133

$

438,027

Accruing loans past due 90 days or more

[2]

$

242,250

$

190

$

242,440

$

268,362

$

109

$

268,471

Non-performing loans
 
to loans held-in-

portfolio

0.95

%

1.02

%

Interest Lost

15,565

18,697

[1] There were no non-performing loans held-for-sale
 
as of December 31, 2024 and December 31, 2023.

[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 $65
 
million of
 
residential
 
mortgage

loans insured
 
by FHA
 
or guaranteed
 
by the
 
VA
 
that are
 
no longer
 
accruing interest
 
as of
 
December 31,
 
2024 (December
 
31, 2023
 
- $106
 
million).

Furthermore,
 
at
 
December
 
31,2024
 
the
 
Corporation
 
had
 
approximately
 
$31
 
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 fr
 
om non-

performing assets (December 31, 2023 - $38 million).

For
 
the
 
year
 
ended
 
December
 
31,
 
2024,
 
total
 
inflows
 
of
 
NPLs
 
held-in-portfolio,
 
excluding
 
consumer
 
loans,
 
increased
 
by
 
$44.6

million, compared
 
to the
 
same period
 
in 2023.
 
Inflows of
 
NPLs held-in-portfolio at
 
the BPPR
 
segment decreased
 
by $21.7
 
million,

compared to the same period in 2023, mainly driven by lower commercial and construction inflows by $28.8 million and $9.3 million,

respectively, in part offset by higher mortgage inflows by $16.4 million. Inflows of NPLs held-in-portfolio at the Popular U.S. segment

increased by $66.3 million from the same period in 2023, mainly driven by higher commercial and mortgage inflows by $33.0 million

and $33.3
 
million,
 
respectively.
 
The increase
 
in commercial
 
NPL inflows
 
was primarily
 
driven by
 
a single
 
$17.3 million
 
loan sold

during the fourth quarter of 2024. Meanwhile,
 
the rise in mortgage NPL inflows included the
 
impact of a recurring $17.1 million loan.

Tables 25 to 32 present the Corporation’s inflows to NPLs for the years ended 2024 and 2023.

96

Table 25 - Activity in Non
 
-Performing Loans Held-in-Portfolio (Excluding Consumer
 
Loans)

For the year ended December 31, 2024

(In thousands)

BPPR

Popular U.S.

Popular, Inc.

Beginning balance
 
- NPLs

$

254,476

$

22,354

$

276,830

Plus:

New non-performing loans

158,713

98,088

256,801

Advances on existing non-performing loans

-

382

382

Less:

Non-performing loans transferred to OREO

(16,572)

(24)

(16,596)

Non-performing loans charged-off

(18,643)

(1,885)

(20,528)

Loans returned to accrual status / loan collections

(168,431)

(65,371)

(233,802)

Ending balance - NPLs

$

209,543

$

53,544

$

263,087

Table 26 - Activity in Non
 
-Performing Loans Held-in-Portfolio (Excluding Consumer
 
Loans)

For the year ended December 31, 2023

(In thousands)

BPPR

Popular U.S.

Popular, Inc.

Beginning balance - NPLs

$

324,562

$

31,356

$

355,918

Plus:

New non-performing loans

180,426

31,484

211,910

Advances on existing non-performing loans

-

681

681

Less:

Non-performing loans transferred to OREO

(36,684)

(58)

(36,742)

Non-performing loans charged-off

(10,128)

(4,837)

(14,965)

Loans returned to accrual status / loan collections

(203,700)

(36,272)

(239,972)

Ending balance -
 
NPLs

$

254,476

$

22,354

$

276,830

97

Table 27 - Activity in Non
 
-Performing Commercial Loans Held-In-Portfolio

For the year ended December 31, 2024

(In thousands)

BPPR

Popular U.S.

Popular, Inc.

Beginning balance - NPLs

$72,992

$11,163

$84,155

Plus:

New non-performing loans

15,749

48,764

64,513

Advances on existing non-performing loans

-

314

314

Less:

Non-performing loans transferred to OREO

(358)

-

(358)

Non-performing loans charged-off

(18,485)

(1,867)

(20,352)

Loans returned to accrual status / loan collections

(18,797)

(34,720)

(53,517)

Ending balance - NPLs

$51,101

$23,654

$74,755

Table 28 - Activity in Non
 
-Performing Commercial Loans Held-in-Portfolio

For the year ended December 31, 2023

(In thousands)

BPPR

Popular U.S.

Popular, Inc.

Beginning balance - NPLs

$82,171

10,868

$93,039

Plus:

New non-performing loans

44,542

15,533

60,075

Advances on existing non-performing loans

-

550

550

Less:

Non-performing loans transferred to OREO

(5,930)

-

(5,930)

Non-performing loans charged-off

(7,664)

(4,837)

(12,501)

Loans returned to accrual status / loan collections

(40,127)

(10,951)

(51,078)

Ending balance - NPLs

$72,992

$11,163

$84,155

Table 29
 
-
 
Activity in Non-Performing Construction Loans Held-In
 
-Portfolio

For the year ended December 31, 2024

(In thousands)

BPPR

Popular U.S.

Popular, Inc.

Beginning balance - NPLs

$6,378

$-

$6,378

Less:

Loans returned to accrual status / loan collections

(6,378)

-

(6,378)

Ending balance - NPLs

$-

$-

$-

98

Table 30 -
 
Activity in Non-Performing Construction Loans Held-in
 
-Portfolio

For the year ended December 31, 2023

(In thousands)

BPPR

Popular U.S.

Popular, Inc.

Beginning balance - NPLs

$-

$-

$-

Plus:

New non-performing loans

9,284

-

9,284

Less:

Non-performing loans charged-off

(2,537)

-

(2,537)

Loans returned to accrual status / loan collections

(369)

-

(369)

Ending balance - NPLs

$6,378

$-

$6,378

Table 31 - Activity in Non
 
-Performing Mortgage Loans Held-in-Portfolio

For the year ended December 31,
 
2024

(In thousands)

BPPR

Popular U.S.

Popular, Inc.

Beginning balance - NPLs

$175,106

$11,191

$186,297

Plus:

New non-performing loans

142,964

49,324

192,288

Advances on existing non-performing loans

-

68

68

Less:

Non-performing loans transferred to OREO

(16,214)

(24)

(16,238)

Non-performing loans charged-off

(158)

(18)

(176)

Loans returned to accrual status / loan collections

(143,256)

(30,651)

(173,907)

Ending balance - NPLs

$158,442

$29,890

$188,332

Table 32 - Activity in Non
 
-Performing Mortgage Loans Held-in-Portfolio

For the year ended December 31,
 
2023

(In thousands)

BPPR

Popular U.S.

Popular, Inc.

Beginning balance - NPLs

$242,391

$20,488

$262,879

Plus:

New non-performing loans

126,600

15,951

142,551

Advances on existing non-performing loans

-

131

131

Less:

Non-performing loans transferred to OREO

(30,754)

(58)

(30,812)

Non-performing loans charged-off

73

-

73

Loans returned to accrual status / loan collections

(163,204)

(25,321)

(188,525)

Ending balance - NPLs

$175,106

$11,191

$186,297

99

Loan Delinquencies

Another key measure used to evaluate and
 
monitor the Corporation’s asset quality is loan
 
delinquencies. Loans delinquent 30 days

or
 
more
 
and
 
delinquencies, as
 
a
 
percentage
 
of
 
their
 
related
 
portfolio
 
category
 
at
 
December
 
31,
 
2024
 
and
 
2023,
 
are
 
presented

below.

Table 33 - Loan Delinquencies

(Dollars in thousands)

December 31, 2024

December 31, 2023

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

$

15,826

$

2,399,620

0.66

%

$

13,657

$

2,415,620

0.57

%

Commercial real estate

non-owner occupied

24,925

5,363,235

0.46

17,051

5,087,421

0.34

Commercial real estate

owner occupied

42,311

3,157,746

1.34

69,239

3,080,635

2.25

Commercial and industrial

49,942

7,741,562

0.65

58,953

7,126,121

0.83

Total Commercial

133,004

18,662,163

0.71

158,900

17,709,797

0.90

Construction

1,039

1,263,792

0.08

6,378

959,280

0.66

Leasing

39,641

1,925,405

2.06

35,491

1,731,809

2.05

Mortgage

[1]

798,130

8,114,183

9.84

859,537

7,695,917

11.17

Consumer

Credit cards

59,078

1,218,079

4.85

46,436

1,135,747

4.09

Home equity lines of credit

5,054

73,571

6.87

5,465

65,953

8.29

Personal

57,835

1,855,244

3.12

59,682

1,945,247

3.07

Auto

191,008

3,823,437

5.00

173,119

3,660,780

4.73

Other

3,930

171,778

2.29

3,063

160,441

1.91

Total Consumer

316,905

7,142,109

4.44

287,765

6,968,168

4.13

Loans held-for-sale

-

5,423

-

-

4,301

-

Total

$

1,288,719

$

37,113,075

3.47

%

$

1,348,071

$

35,069,272

3.84

%

[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 December

31, 2024 (December 31, 2023 - $0.5 billion). Refer to Note
 
7 to the Consolidated Financial Statements for additional information
 
of guaranteed loans.

Allowance for Credit Losses (“ACL”)

The 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
 
for borrowers with financial difficulties separately from the remainder
 
of the loan

portfolio. The Corporation’s
 
management evaluates the adequacy
 
of the ACL
 
on a quarterly
 
basis. In this
 
evaluation, management

considers current
 
conditions, macroeconomic
 
economic expectations through
 
a reasonable
 
and supportable
 
period, historical
 
loss

experience,
 
portfolio composition
 
by
 
loan
 
type
 
and
 
risk
 
characteristics,
 
results
 
of
 
periodic credit
 
reviews
 
of
 
individual loans,
 
and

regulatory requirements, amongst other factors.

The Corporation must rely on
 
estimates and exercise judgment regarding matters where
 
the ultimate outcome is unknown, such
 
as

economic developments affecting specific
 
customers, industries, or markets.
 
Other factors that can
 
affect management’s estimates

are
 
recalibration
 
of
 
statistical
 
models
 
used
 
to
 
calculate
 
lifetime
 
expected
 
losses,
 
changes
 
in
 
underwriting
 
standards,
 
financial

accounting standards and loan impairment measurements,
 
among others. Changes in the financial condition
 
of individual borrowers,

in economic
 
conditions, and
 
in the
 
condition of
 
the various
 
markets in
 
which collateral
 
may be
 
sold, may
 
also affect
 
the required

level of
 
the allowance
 
for credit
 
losses. Consequently,
 
the business
 
financial condition,
 
liquidity,
 
capital, and
 
results of
 
operations

could also be affected.

100

On
 
December
 
31,
 
2024,
 
the
 
ACL
 
increased
 
by
 
$16.7
 
million
 
from
 
December
 
31,
 
2023
 
to
 
$746.0
 
million.
 
The
 
ACL
 
for
 
BPPR

increased by
 
$30.8 million,
 
driven by
 
a combined
 
$23.4 million
 
increase in
 
reserves for
 
the consumer
 
and lease
 
portfolios and
 
an

increase of $9.5
 
million in reserves
 
for commercial loans.
 
These increases were
 
mainly due to
 
a combination of
 
growth across the

different segments
 
and changes
 
in credit
 
quality trends
 
for the
 
credit cards
 
portfolios. In
 
PB, the
 
ACL decreased
 
by $14.1
 
million,

when compared
 
to December
 
31, 2023,
 
mainly due
 
to lower
 
reserves for
 
the commercial
 
portfolio resulting
 
from improvements
 
in

credit
 
quality,
 
as
 
well as
 
lower balances
 
in the
 
consumer portfolios.
 
The Corporation’s
 
ratio of
 
the allowance
 
for credit
 
losses to

loans held-in-portfolio was 2.01% on December 31, 2024, compared to 2.08% on December 31, 2023. The ratio of the allowance for

credit losses to NPLs held-in-portfolio stood at 212.68%,
 
compared to 203.95% on December 31, 2023.

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. The weight assigned to the

pessimistic
 
scenario
 
decreased
 
during
 
the
 
first
 
quarter
 
of
 
2024
 
in
 
response
 
to
 
the
 
positive
 
momentum
 
in
 
the
 
economy
 
as

expectations for
 
the Federal
 
Reserve achieving
 
a soft
 
landing have
 
improved. 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
 
provision for
 
credit
 
losses
 
related
 
to
 
the
 
loans
 
held-in-portfolio for
 
the year
 
ended December
 
31,
 
2024,
 
was
 
$258.4 million,

compared to $201.5 million for the year ended December 30, 2023, largely driven by higher NCOs due to credit quality changes and

commercial
 
loan
 
growth.
 
Refer
 
to
 
Note
 
8
 
–
 
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.

Tables 34 to 35 details the allowance for credit losses by loan categories and the percentage
 
it represents of total loans held-in-

portfolio and NPLs. The breakdown is made for analytical
 
purposes, and it is not necessarily indicative of the
 
categories in which

future loan losses may occur.

101

Table 34 - Allowance for Credit
 
Losses - Loan Portfolios

December 31, 2024

(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

$

9,236

$

2,399,620

0.38

%

$

8,779

105.21

%

Commercial real estate non-owner occupied

54,494

5,363,235

1.02

%

14,444

377.28

%

Commercial real estate owner occupied

49,828

3,157,746

1.58

%

30,449

163.64

%

Commercial and industrial

146,006

7,741,562

1.89

%

21,083

692.53

%

Total Commercial

$

259,564

$

18,662,163

1.39

%

$

74,755

347.22

%

Construction

11,264

1,263,792

0.89

%

-

N.M.

Leasing

16,419

1,925,405

0.85

%

9,588

171.25

%

Mortgage

82,409

8,114,183

1.02

%

188,332

43.76

%

Consumer

Credit cards

99,130

1,218,079

8.14

%

-

N.M.

Home equity lines of credit

1,503

73,571

2.04

%

3,393

44.30

%

Personal

102,736

1,855,244

5.54

%

22,010

466.77

%

Auto

165,995

3,823,437

4.34

%

51,792

320.50

%

Other

7,004

171,778

4.08

%

910

769.67

%

Total Consumer

$

376,368

$

7,142,109

5.27

%

$

78,105

481.87

%

Total

$

746,024

$

37,107,652

2.01

%

$

350,780

212.68

%

N.M. - Not meaningful.

Table 35 - Allowance for Credit
 
Losses - Loan Portfolios

December 31, 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

$

13,740

$

2,415,620

0.57

%

$

1,991

690.11

%

Commercial real estate non-owner occupied

65,453

5,087,421

1.29

%

9,862

663.69

%

Commercial real estate owner occupied

56,864

3,080,635

1.85

%

35,704

159.27

%

Commercial and industrial

122,356

7,126,121

1.72

%

36,598

334.32

%

Total Commercial

$

258,413

$

17,709,797

1.46

%

$

84,155

307.07

%

Construction

12,686

959,280

1.32

%

6,378

198.90

%

Leasing

9,708

1,731,809

0.56

%

8,632

112.47

%

Mortgage

83,214

7,695,917

1.08

%

186,297

44.67

%

Consumer

Credit cards

80,487

1,135,747

7.09

%

-

N.M.

Home equity lines of credit

1,978

65,953

3.00

%

3,733

52.99

%

Personal

117,790

1,945,247

6.06

%

21,836

539.43

%

Auto

157,931

3,660,780

4.31

%

45,615

346.23

%

Other

7,134

160,441

4.45

%

965

739.27

%

Total Consumer

$

365,320

$

6,968,168

5.24

%

$

72,149

506.34

%

Total

$

729,341

$

35,064,971

2.08

%

$

357,611

203.95

%

N.M. - Not meaningful.

Table
 
36
 
details
 
the
 
breakdown
 
of
 
the
 
allowance
 
for
 
credit
 
losses
 
by
 
loan
 
categories.
 
The
 
breakdown
 
is
 
made
 
for
 
analytical

purposes, and it is not necessarily indicative of
 
the categories in which future loan losses may occur.

102

Table 36 - Allocation of the
 
Allowance for Credit Losses - Loans

At December 31,

2024

2023

% of loans

% of loans

in each

in each

category to

category to

(Dollars in millions)

ACL

total loans

ACL

total loans

Commercial

Commercial multi-family

$9.2

6.5

%

$13.7

6.9

%

Commercial real estate non-owner occupied

54.5

14.5

65.4

14.5

Commercial real estate owner occupied

49.9

8.5

56.9

8.8

Commercial and industrial

146.0

20.8

122.4

20.3

Total Commercial

$259.6

50.3

%

$258.4

50.5

%

Construction

11.3

3.4

12.7

2.7

Leasing

16.4

5.2

9.7

5.0

Mortgage

82.4

21.9

83.2

21.9

Consumer

Credit cards

99.1

3.3

80.5

3.2

Home equity lines of credit

1.5

0.2

2.0

0.2

Personal

102.7

5.0

117.8

5.5

Auto

166.0

10.2

157.9

10.4

Other Consumer

7.0

0.5

7.1

0.6

Total Consumer

$376.3

19.2

%

$365.3

19.9

%

Total

[1]

$746.0

100.0

%

$729.3

100.0

%

[1] Note: For purposes of this table the term loans refers to
 
loans held-in-portfolio excluding loans held-for-sale.

The following
 
table presents
 
net charge-offs
 
to average
 
loans held-in-portfolio
 
(“HIP”) ratios
 
by loan
 
category for
 
the years
 
ended

December 31, 2024 and 2023:

Table 37 - Net Charge-Offs
 
(Recoveries) to Average Loans HIP

December 31, 2024

December 31, 2023

BPPR

Popular U.S.

Popular Inc.

BPPR

Popular U.S.

Popular Inc.

Commercial

0.17

%

0.04

%

0.11

%

(0.10)

%

0.02

%

(0.05)

%

Construction

(0.59)

(0.01)

(0.10)

1.59

-

0.32

Mortgage

(0.21)

(0.01)

(0.18)

(0.22)

(0.02)

(0.19)

Leasing

0.67

-

0.67

0.43

-

0.43

Consumer

3.06

7.44

3.20

2.18

6.20

2.35

Total

0.89

%

0.18

%

0.68

%

0.55

%

0.19

%

0.44

%

NCOs for the year ended December 31, 2024,
 
amounted to $241.8 million, increasing by $95.4 million when compared to the
 
same

period in 2023.
 
The BPPR segment
 
increased by $95.4
 
million mainly driven
 
by higher consumer
 
and commercial NCOs
 
by $68.6

103

million and $25.4 million, respectively. The consumer NCOs continue to gradually
 
increase mainly due to credit quality changes. The

PB segment NCOs remained flat year-over-year.

Loan Modifications

For the twelve months ended December 31, 2024,
 
modified loans to borrowers with financial difficulty
 
amounted to $455 million, of

which $430 million were in accruing status. The
 
BPPR segment’s modifications to borrowers with financial
 
difficulty amounted to

$441 million, mainly comprised of commercial and mortgage
 
loans of $358 million and $66 million, respectively. A total of $44
 
million

of the mortgage modifications were related to government
 
guaranteed loans. The Popular U.S. segment’s modifications
 
to

borrowers with financial difficulty amounted to $14 million,
 
of which $12 million were commercial loans.

Refer
 
to
 
Note
 
8
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
 
information
 
on
 
modifications
 
made
 
to
 
borrowers

experiencing financial difficulties.

Enterprise Risk Management

The Corporation’s
 
Board of
 
Directors has
 
established a
 
Risk Management
 
Committee (“RMC”)
 
to, among
 
other things,
 
assist the

Board in its (i) oversight of the Corporation’s overall risk framework and (ii)
 
to monitor, review, and approve policies to measure, limit

and manage the Corporation’s risks.

The
 
Corporation
 
has
 
established
 
a
 
three
 
lines
 
of
 
defense
 
framework:
 
(a)
 
business
 
line
 
management constitutes
 
the
 
first
 
line
 
of

defense by identifying
 
and managing the
 
risks associated with
 
business activities, (b) components
 
of the Risk
 
Management Group

and
 
the
 
Corporate
 
Security
 
Group,
 
among
 
others,
 
act
 
as
 
the
 
second
 
line
 
of
 
defense
 
by,
 
among
 
other
 
things,
 
measuring
 
and

reporting on the Corporation’s risk activities, and (c) the Corporate Auditing Division

,

as the third line of defense, reporting directly to

the Audit Committee of the Board, by independently providing
 
assurance regarding the effectiveness of the risk
 
framework.

The Enterprise Risk Management Committee (the “ERM Committee”)
 
is a management committee whose purpose is to oversee and

monitor Market, Interest, Liquidity,
 
Regulatory and Financial Compliance, BSA/AML & Sanctions, Regulatory,
 
Strategic, Operational

(including
 
Fraud
 
and
 
Third
 
Party
 
Risk,
 
among
 
others),
 
Information
 
Technology
 
and
 
Cyber
 
Security,
 
Legal,
 
Credit,
 
Climate
 
and

Reputational risks, as
 
defined in the
 
Risk Appetite Statement
 
(“RAS”) of the
 
Risk Management Policy
 
and within the
 
Corporation’s

Enterprise Risk
 
Management (“ERM”)
 
framework. The
 
ERM
 
Committee and
 
the Enterprise
 
Risk Management
 
Department in
 
the

Financial and Operational
 
Risk Management Division
 
(the “FORM Division”),
 
in coordination with
 
the Chief Risk
 
Officer,
 
create the

framework to identify and manage multiple and cross-enterprise
 
risks, and to articulate the RAS and supporting
 
metrics.

The
 
Enterprise
 
Risk
 
Management
 
Department
 
has
 
established
 
a
 
process
 
to
 
ensure
 
that
 
an
 
appropriate
 
standard
 
readiness

assessment is performed before we launch a new product or service. Similar procedures are performed by the Treasury Division for

transactions involving
 
the purchase
 
and sale
 
of assets,
 
and by
 
the Mergers
 
and Acquisitions
 
Division for
 
acquisition transactions.

The Enterprise Risk Management Department has a Corporate Issues
 
Management Policy to promote on time remediation of issues

and increase the
 
governance and transparency around
 
the number and
 
the severity of
 
issues identified for each
 
business unit and

corporate
 
function
 
by
 
all
 
sources.
 
The
 
Enterprise
 
Risk
 
Management
 
Department
 
also
 
has
 
a
 
Corporate
 
Regulatory
 
Change

Management Program
 
to
 
oversee,
 
on
 
a
 
risk
 
basis,
 
the
 
implementation of
 
laws
 
and
 
regulations by
 
the
 
appropriate
 
business and

support areas.

The Asset/Liability
 
Committee (“ALCO”),
 
composed of
 
senior management
 
representatives from
 
the business
 
lines and
 
corporate

functions, and the Corporate Finance Group, are responsible for planning and executing the
 
Corporation’s market, interest rate risk,

funding
 
activities
 
and
 
strategy,
 
as
 
well
 
as
 
for
 
implementing
 
approved
 
policies
 
and
 
procedures.
 
The
 
ALCO
 
also
 
reviews
 
the

Corporation’s
 
capital
 
policy
 
and
 
the
 
attainment
 
of
 
the
 
capital
 
management
 
objectives.
 
In
 
addition,
 
the
 
Financial
 
Risk,
 
Corporate

Insurance & Advisory Department independently measures,
 
monitors and reports compliance with
 
liquidity and market risk policies,

and oversees controls surrounding interest risk measurements.

The Corporate Compliance
 
Committee, comprised of
 
senior management team
 
members and representatives
 
from the Regulatory

and Financial
 
Compliance Division
 
and the
 
Financial Crimes
 
Compliance Division,
 
among others,
 
are responsible
 
for overseeing

and
 
assessing
 
the
 
adequacy
 
of
 
the
 
risk
 
management
 
processes
 
that
 
support
 
Popular’s
 
compliance
 
program
 
for
 
identifying,

assessing,
 
measuring,
 
monitoring,
 
testing,
 
mitigating,
 
and
 
reporting
 
compliance
 
risks.
 
They
 
also
 
supervise
 
Popular’s
 
reporting

obligations
 
under
 
the
 
compliance
 
program
 
to
 
assess
 
the
 
adequacy,
 
consistency
 
and
 
timeliness
 
of
 
the
 
reporting
 
of
 
compliance-

related risks across the Corporation.

104

The Regulatory Affairs
 
team is responsible
 
for maintaining an
 
open dialog with
 
the banking regulatory
 
agencies to have
 
regulatory

risks properly identified, measured, monitored, as well as communicated to
 
the appropriate regulatory agency as necessary to keep

them apprised of material matters within the purview
 
of these agencies.

The
 
Credit
 
Strategy
 
Committee,
 
composed
 
of
 
senior
 
level
 
management
 
representatives
 
from
 
the
 
business
 
lines
 
and
 
corporate

functions, and the Corporate Credit Risk Management Division,
 
are responsible for monitoring credit risk management
 
activities both

at
 
the corporate
 
level
 
and
 
across all
 
Popular subsidiaries
 
providing for
 
the
 
development and
 
consistent
 
application of
 
credit
 
risk

policies, processes
 
and procedures
 
that measure,
 
limit and
 
manage credit
 
risks, while
 
seeking to
 
maintain the
 
effectiveness and

efficiency of the operating and businesses processes.

The Corporation’s Operational Risk Committee (“ORCO”) composed of senior
 
level management representatives from the business

lines
 
and
 
corporate
 
functions,
 
provide
 
executive
 
oversight
 
of
 
the
 
operational
 
risk
 
management
 
activities
 
of
 
Popular
 
and
 
its

subsidiaries providing
 
for the
 
development and
 
consistent application
 
of operational
 
risk policies,
 
processes, and
 
procedures that

measure,
 
limit,
 
and
 
manage
 
operational
 
risks
 
while
 
maintaining
 
the
 
effectiveness
 
and
 
efficiency
 
of
 
the
 
operating
 
and
 
business

processes.
 
The
 
FORM
 
Division,
 
within
 
the
 
Risk
 
Management
 
Group,
 
serves
 
as
 
ORCO’s
 
operating
 
arm
 
and
 
is
 
responsible
 
for

establishing baseline processes to measure, monitor, limit and manage
 
operational risk.

The Corporate Security Group (“CSG”), under the direction of the
 
Chief Security Officer, leads
 
all efforts pertaining to cybersecurity,

enterprise fraud and data
 
privacy, including
 
developing strategies and oversight processes with
 
policies and programs that mitigate

compliance, operational,
 
strategic, financial
 
and reputational
 
risks associated
 
with the
 
Corporation’s and
 
our customers’
 
data and

assets.

The Information Technology
 
and Cyber Risk
 
Committee, composed of senior
 
management representatives from the
 
business lines

and
 
corporate
 
functions,
 
the
 
Information
 
Technology
 
Division
 
and
 
the
 
CSG,
 
are
 
responsible
 
for
 
the
 
oversight
 
and
 
monitoring
 
of

information
 
technology
 
and
 
cybersecurity
 
risks,
 
mitigation
 
strategies,
 
actions
 
and
 
controls,
 
key
 
risk
 
metrics,
 
and
 
information

technology and cyber incidents that may result in operational, compliance and reputational risks.

The Chief Security Officer also co-

chairs the Information Technology & Cyber Security Risk Committee along with the Chief Information
 
& Digital Strategy Officer.

The Corporate Legal Division, in this context, has the responsibility
 
of assessing, monitoring, managing and reporting with respect to

legal risks, including those related to litigation, investigations
 
and other material legal matters.

The
 
Corporation has
 
also
 
established
 
a
 
Corporate Sustainability
 
Committee
 
whose
 
purpose
 
and
 
responsibility is
 
to
 
oversee the

Corporation’s sustainability efforts and support the development and consistent application of policies, strategies and guidelines that

measure and
 
manage sustainability
 
matters and
 
risks. The
 
Corporate Sustainability
 
Committee also
 
assesses environmental
 
and

social considerations
 
with respect
 
to certain
 
commercial credit
 
applications, in
 
accordance with
 
the applicable
 
Commercial Credit

Policy and Commercial Credit Manuals of BPPR
 
and PB.

The processes
 
of strategic
 
risk planning
 
and the
 
evaluation of
 
reputational risk
 
are on-going
 
processes through
 
which continuous

data gathering and analysis are performed. In order to have strategic risks properly identified and monitored, the Corporate Strategy

and Transformation Division, which
 
reports to the Corporation’s
 
Chief Operations Officer,
 
performs periodic assessments regarding

corporate strategic priority initiatives, such as the Corporation’s transformation initiative and other emerging issues. The Acquisitions

and Corporate Investments Division continuously assesses potential
 
strategic transactions. The Corporate Communications Division

is responsible for the monitoring, management and
 
implementation of action plans with respect to reputational
 
risk issues.

Popular’s capital planning process integrates the Corporation’s risk profile
 
as well as its strategic focus, operating
 
environment, and

other factors
 
that could
 
materially affect
 
capital adequacy
 
in hypothetical
 
highly-stressed business
 
scenarios. Capital
 
ratio targets

and triggers take into consideration the different risks evaluated
 
under Popular’s risk management framework.

In
 
addition to
 
establishing a
 
formal process
 
to manage
 
risk, our
 
corporate culture
 
is also
 
critical to
 
an effective
 
risk management

function.
 
Through our Code
 
of Ethics, the
 
Corporation provides a framework
 
for all our
 
employees to conduct themselves
 
with the

highest integrity.

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.

105

Statistical Summary 2024-2023

Statements of Financial Condition

At December 31,

(In thousands)

2024

2023

Assets:

Cash and due from banks

$

419,638

$

420,462

Money market investments:

Time deposits with other banks

6,380,948

6,998,871

Total money market investments

6,380,948

6,998,871

Trading account debt securities, at fair value

32,831

31,568

Debt securities available-for-sale, at fair
 
value

18,245,903

16,729,044

Debt securities held-to-maturity, at amortized cost

7,758,077

8,194,335

Less – Allowance for credit losses

5,317

5,780

Debt securities held-to-maturity, net

7,752,760

8,188,555

Equity securities

208,166

193,726

Loans held-for-sale, at fair value

5,423

4,301

Loans held-in-portfolio:

Loans held-in-portfolio

37,522,995

35,420,879

Less – Unearned income

415,343

355,908

Allowance for credit losses

746,024

729,341

Total loans held-in-portfolio, net

36,361,628

34,335,630

Premises and equipment, net

601,787

565,284

Other real estate

57,268

80,416

Accrued income receivable

263,389

263,433

Mortgage servicing rights, at fair value

108,103

118,109

Other assets

1,797,759

2,014,564

Goodwill

802,954

804,428

Other intangible assets

6,826

9,764

Total assets

$

73,045,383

$

70,758,155

Liabilities and Stockholders’ Equity

Liabilities:

Deposits:

Non-interest bearing

$

15,139,555

$

15,419,624

Interest bearing

49,744,790

48,198,619

Total deposits

64,884,345

63,618,243

Assets sold under agreements to repurchase

54,833

91,384

Other short-term borrowings

225,000

-

Notes payable

896,293

986,948

Other liabilities

1,371,846

914,627

Total liabilities

67,432,317

65,611,202

Stockholders’ equity:

Preferred stock

22,143

22,143

Common stock

1,048

1,048

Surplus

4,908,693

4,843,399

Retained earnings

4,570,957

4,194,851

Treasury stock – at cost

(2,228,535)

(2,018,957)

Accumulated other comprehensive loss, net
 
of tax

(1,661,240)

(1,895,531)

Total stockholders’ equity

5,613,066

5,146,953

Total liabilities and stockholders’ equity

$

73,045,383

$

70,758,155

106

Statistical Summary 2022-2024

Statements of Operations

For the years ended December 31,

(In thousands)

2024

2023

2022

Interest income:

Loans

$

2,626,058

$

2,331,654

$

1,876,166

Money market investments

352,195

366,625

118,080

Investment securities

695,010

547,028

471,665

Total interest income

3,673,263

3,245,307

2,465,911

Less - Interest expense

1,390,975

1,113,783

298,552

Net interest income

2,282,288

2,131,524

2,167,359

Provision for credit losses

256,942

208,609

83,030

Net interest income after provision for
 
credit losses

2,025,346

1,922,915

2,084,329

Mortgage banking activities

19,059

21,497

42,450

Net (loss) gain, including impairment, on
 
equity securities

(1,583)

3,482

(7,334)

Net gain (loss) on trading account debt securities

1,445

1,382

(784)

Net gain (loss) on sale of loans, including
 
valuation adjustments on loans held-for-sale

440

(115)

-

Adjustment to indemnity reserves on loans
 
sold

1,266

2,319

919

Other non-interest income

638,282

622,159

861,811

Total non-interest income

658,909

650,724

897,062

Operating expenses:

Personnel costs

820,451

778,045

719,764

All other operating expenses

1,067,186

1,120,055

1,026,656

Total operating expenses

1,887,637

1,898,100

1,746,420

Income before income tax

796,618

675,539

1,234,971

Income tax expense

182,406

134,197

132,330

Net Income

$

614,212

$

541,342

$

1,102,641

Net Income Applicable to Common Stock

$

612,800

$

539,930

$

1,101,229

107

Statistical Summary 2024-2022

Average Balance Sheet and Summary of
 
Net Interest Income

On a Taxable Equivalent
 
Basis*

2024

2023

2022

(Dollars in thousands)

Average

Balance

Interest

Average

Rate

Average

Balance

Interest

Average

Rate

Average

Balance

Interest

Average

Rate

Assets

Interest earning assets:

Money market investments

$

6,640,514

$

352,195

5.30

%

$

7,051,718

$

366,625

5.20

%

$

9,530,698

$

118,079

1.24

%

U.S.
 
Treasury securities

21,047,129

654,712

3.11

20,305,488

441,179

2.17

21,141,431

448,961

2.12

Obligations of U.S.
 
Government

sponsored entities

-

-

-

-

-

-

41

2

5.66

Obligations of Puerto Rico, States

and political subdivisions

59,668

6,215

10.42

64,682

5,863

9.06

67,965

7,824

11.51

Collateralized mortgage obligations and

mortgage-backed securities

6,642,953

136,016

2.05

7,360,071

157,196

2.14

8,342,672

198,566

2.38

Other

205,711

11,514

5.60

196,226

11,519

5.87

190,489

8,925

4.68

Total investment securities

27,955,461

808,457

2.89

27,926,467

615,757

2.20

29,742,598

664,278

2.23

Trading account securities

30,250

1,583

5.23

31,876

1,377

4.32

51,357

3,049

5.94

Loans (net of unearned income)

35,701,240

2,684,598

7.52

33,164,961

2,387,351

7.20

30,405,280

1,924,895

6.33

Total interest earning
 
assets/Interest

income

$

70,327,465

$

3,846,833

5.47

%

$

68,175,022

$

3,371,110

4.94

%

$

69,729,933

$

2,710,301

3.89

%

Total non-interest
 
earning assets

3,072,814

3,059,214

3,078,671

Total assets

$

73,400,279

$

71,234,236

$

72,808,604

Liabilities and Stockholders' Equity

Interest bearing liabilities:

Savings, NOW,
 
money market and

other

interest bearing demand accounts

$

40,476,544

$

1,046,100

2.58

%

$

39,463,481

$

862,981

2.19

%

$

41,769,576

$

191,064

0.46

%

Time deposits

8,902,700

290,021

3.26

7,775,846

187,043

2.41

6,853,127

61,781

0.90

Federal funds purchased

6,011

322

5.36

6

-

5.25

7

-

3.92

Securities purchased under agreement

to resell

70,145

3,900

5.56

115,808

6,019

5.20

107,305

2,309

2.15

Other short-term borrowings

8,402

454

5.40

27,302

1,310

4.80

99,083

3,428

3.46

Notes payable

961,886

50,178

5.22

1,109,163

56,430

5.09

938,778

39,970

4.26

Total interest bearing
 
liabilities/Interest

expense

50,425,688

1,390,975

2.76

48,491,606

1,113,783

2.30

49,767,876

298,552

0.60

Total non-interest
 
bearing liabilities

15,921,398

16,142,027

17,031,503

Total liabilities

66,347,086

64,633,633

66,799,379

Stockholders' equity

7,053,193

6,600,603

6,009,225

Total liabilities and
 
stockholders' equity

$

73,400,279

$

71,234,236

$

72,808,604

Net interest income on a taxable

equivalent basis

$

2,455,858

$

2,257,327

$

2,411,749

Cost of funding earning assets

1.98

%

1.63

%

0.43

%

Net interest margin

3.49

%

3.31

%

3.46

%

Effect of the taxable equivalent

adjustment

173,570

125,803

244,390

Net interest income per books

$

2,282,288

$

2,131,524

$

2,167,359

*
 
Shows
 
the
 
effect
 
of
 
the
 
tax
 
exempt
 
status
 
of
 
some
 
loans
 
and
 
investments
 
on
 
their
 
yield,
 
using
 
the
 
applicable
 
statutory
 
income
 
tax
 
rates.
 
The

computation considers
 
the interest
 
expense disallowance
 
required by
 
the Puerto
 
Rico Internal
 
Revenue Code.
 
This adjustment
 
is shown
 
in order
 
to

compare the yields of the tax exempt and taxable assets
 
on a taxable basis.

Note: Average loan
 
balances include the
 
average balance of
 
non-accruing loans. No
 
interest income is
 
recognized for these
 
loans in accordance
 
with

the Corporation’s
 
policy.
 
Average
 
balances
 
exclude
 
unrealized
 
gains
 
or
 
losses
 
on
 
debt
 
securities
 
available-for-sale
 
and
 
unrealized
 
losses
 
on
 
debt

securities transfer to held-to-maturities.

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