POPULAR, INC. (BPOP) FY 2024 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
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.
108