POPULAR, INC. (BPOP) FY 2025 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
recent
significant
events that have
impacted or
will impact
our current and
future operations.
Human Capital Management
Popular seeks
to embody our
values and
behaviors throughout
our human capital
management practices.
Attracting,
developing,
and retaining
top talent
in an
environment
that promotes
wellness, inclusion,
respect, continuous
learning,
and transparency
are
fundamental
pillars of
the Corporation’s
long-term strategy.
As of December
31, 2025, Popular
employed 9,427
individuals,
none
of whom were
represented
by a collective
bargaining group.
Nurturing Well
-Being: Employee
Health & Financial
Security
Popular
believes
that the
health and
financial
wellness
of our
employees
is fundamental
to delivering
high-quality
service
to our
customers
and
contributing
positively
to
the
communities
in
which
we
operate.
Accordingly,
the
Corporation
offers
a
comprehensive
health and
wellness program
that includes
medical, pharmacy,
vision, and
dental insurance,
as well as additional
wellness initiatives.
Our programs
are designed
to ensure that
healthcare is
both accessible
and affordable
for our employees,
with Popular covering
up to 78%
of health
insurance premiums,
a figure that
surpasses regional
benchmarks.
In 2025,
we strengthened
our health
and
wellness
offerings
by opening
a state-of-the-art
fitness center
in our San
Juan, Puerto
Rico campus,
to encourage
an active
and
balanced
lifestyle.
As of
December
2025,
the fitness
center
had
a total
of 2,030
members,
including
active
employees,
eligible
family members
and retirees.
Additionally,
the
Corporation
promotes
employee
health
and
well-being
by
encouraging
annual
physical
examinations
and
operating
a comprehensive
health and
wellness center
at its Puerto
Rico corporate
offices, staffed
with healthcare
providers and
enhanced
by
the
addition
of
an
on-site
psychologist
to
provide
mental
health
support.
The
center
received
over
15,000
visits
from employees
during 2025.
Popular
also seeks
to foster
work-life
balance
by offering
paid time
off
benefits
to our
employees,
including
community
service
leave,
paid
parental
leave,
and
flexible
work
arrangements.
Our
hybrid
work
model,
available
to
approximately
half
of
our
workforce,
is
designed
to
strike
an
appropriate
balance
between
employee
flexibility
and
business
needs,
reinforcing
our
commitment
to
a flexible
and
productive
work
environment.
In
addition,
we regularly
offer
activities
and
workshops
focused
on
physical fitness
and personal financial
management.
Popular
further
offers
a 401(k)
savings
and
investment
plan,
in
which
98%
of
employees
participate.
Under
the
plan,
Popular
11
matches
$0.50 for
every
dollar
contributed
by an
employee,
up to
8% of
the employee’s
salary.
Moreover,
Popular
maintains
a
profit-sharing
plan, contingent
upon the
achievement
of pre-established
financial
goals, to
further
align employee
compensation
with
the
Corporation’s
overall
performance.
Under
the
profit-sharing
plan,
employees
may
receive
up
to
8%
of
their
eligible
compensation
(capped
at $70,000),
with the
first
4% paid
in cash
and any
amount
above that
threshold
paid to
the employee’s
savings
and
investment
plan
account.
Additionally,
Popular
regularly
reviews
employees’
base
compensation
to
remain
competitive
with market salaries
for comparable
positions.
Empowering Growth:
Our Commitment
to Talent
Developmen
t
We
are committed
to fostering
the continuous
development
and upskilling
of our
employees
and
believe
this
is fundamental
to
maintaining
our competitive
advantage.
Towards
that end,
Popular
offers
development
opportunities
designed
to strengthen
our
employees’
knowledge,
capabilities
and
skills,
supporting
their
personal
growth
while
enhancing
Popular’s
business
strategies
and organizational
effectiveness.
Our 40,000
square foot
development
center in
San Juan,
Puerto Rico,
and our satellite
facilities
in New York,
South Florida,
and
the
Virgin
Islands,
offer
year-round
training
sessions,
activities
and
workshops.
In
2025,
there
were
approximately
6,700
registered
participations
in corporate
academy
voluntary
courses,
new
employee
orientations,
health
coordinator
certifications,
and
manager
onboarding
programs—an
increase
of
approximately
2,500
compared
to
the
participation
levels
in
2024.
These
courses
offer
instructor-led
training
experiences
for
employees
to
develop
and
apply
critical
core
and
technical
skills.
Our
commitment
to
continuous
learning
is
further
supported
through
employee
access
to
Learning,
which
provides
an
extensive
library
of
over
16,000
e-learning
courses,
enabling
employees
to
pursue
self-directed
learning
aligned
with
both
professional
development goals
and business
needs.
Our
focus
on
training
and
development
has
provided
internal
growth
opportunities
for
our
workforce.
As
a
result,
the
Corporation’s
internal
mobility
rate in
2025 was
47%, reflecting
employees
who applied
for or
were selected
for open
positions,
received
promotions,
or made
lateral
moves
within
the
organization.
Additionally,
we continued
strengthening
key skills
across
accelerated
development
programs
focused
on
data
science,
agile
methodologies,
analytics,
process
efficiency,
and
product
management.
During
2025,
approximately
400
employees
participated
in these
programs,
further
enhancing
the
organization’s
talent.
During
2025,
Popular
successfully
implemented
the Executive
Development
Program,
engaging
over
80 executive
leaders
in a
comprehensive
initiative
focused
on strengthening
key
behaviors,
including
agility,
accountability,
collaboration,
and leadership
mindset,
aligned
with
our
company
values.
In
addition,
we
introduced
the
Middle
Management
Development
Program,
a two-
year
development
journey
for
over
1,700
leaders
designed
to
reinforce
alignment
with
the
Corporation’s
values
and
expected
behaviors
while
fostering
sustainable
organizational
transformation.
Furthermore,
we provided
our
leaders
with
advanced
tools
to support more
effective and
impactful performance
discussions.
Our
organizational
effectiveness
strategy
was
crucial
in
advancing
organizational
development
through
targeted
initiatives,
including
assessments,
team
integration
activities,
new
manager
integration
facilitations,
and
team
alignment
sessions.
These
efforts
are
designed
to
foster
a
cohesive,
agile,
and
adaptable
workforce
capable
of
supporting
the
Corporation’s
evolving
business objectives.
Enhancing Leadership
Continuity through
Strategic Succession
Planning
Popular’s
business
strategy
integrates
succession
planning
to
ensure
effective
and
orderly
leadership
transitions.
Succession
plans
for senior
management
are
developed
by the
Chief
Executive
Officer
and
presented
to the
Board
of Directors.
Popular’s
succession
planning
also
leverages
our
Executive
Talent
Management
Program
to
identify
high-potential
and
high-performing
managers,
providing
them
with
targeted
learning
opportunities
to
enhance
their
skills
and
prepare
them
for
future
senior
management positions.
Employee Experience
Popular
is
committed
to
providing
an
exceptional
employee
experience
that
inspires
our
employees
to
deliver
outstanding
service
to
our
customers
and
communities.
We
recognize
the
evolving
nature
of
our
employees’
needs
and
expectations
and
have
a
robust
approach
to
measuring
and
understanding
their
journey.
Our
employee
engagement
and
experience
survey
program
includes
biannual
pulse surveys,
an annual
enterprise-wide
survey,
and additional
surveys
that assess
the end
-to-end
employee
journey.
We believe
that these
insights
contributed
to our
ability
to maintain
a stable
employee
turnover
rate of
8.5%
as
of
the
end
of
2025.
Furthermore,
our
employee-experience
efforts
are
reflected
in
record
participation
rate
of
77%
and
a
sustained
employee-loyalty
score of
81%, positioning
us above
the 50th
percentile
of the Qualtrics
global benchmark
and above
the financial
services industry
average benchmark.
12
Board Oversight
in Human Capital
The
Talent
and
Compensation
Committee
of
the
Corporation’s
Board
of
Directors
has
oversight
responsibility
for
the
Corporation’s
human
capital
management
practices.
As
part
of
its
responsibilities,
the
Talent
and
Compensation
Committee
reviews
and
advises
management
on
the
Corporation’s
overall
compensation
philosophy,
programs
and
policies,
and
on
the
Corporation’s
talent
acquisition
and
development,
workforce
engagement,
succession
planning,
and
corporate
culture,
among
other human capital
matters.
We
encourage
you
to
review
our Corporate
Sustainability
Report
published
on www.popular.com
for more
detailed
information
regarding
the Corporation’s
human capital
management
programs
and initiatives.
The information
on the
Corporation’s
website,
including
the
Corporation’s
Corporate
Sustainability
Report,
is
not,
and
will
not
be
deemed
to
be,
a
part
of
this
Form
10-K
or
incorporated
into any of the
Corporation’s
filings with
the SEC.
Regulation and Supervision
Described below are the material elements of selected laws and regulations applicable to Popular, Popular North America
(“PNA”)
and
their
respective
subsidiaries.
Such
laws
and
regulations
are
continually
under
review
by
Congress
and
state
legislatures
and
federal
and
state
regulatory
agencies.
Any
change
in
the
laws
and
regulations
applicable
to
Popular
and
its
subsidiaries could have a material effect on the
business of Popular and its subsidiaries. We will continue to
assess our businesses
and risk management and compliance practices
to conform to developments in the regulatory
environment.
General
Popular and PNA are bank holding companies subject to consolidated supervision and
regulation by the Federal Reserve
Board under
the Bank
Holding Company Act
of 1956
(as amended, the
“BHC Act”). BPPR
and PB
are subject to
supervision and
examination by applicable
federal and state
banking agencies including,
in the
case of BPPR,
the Federal Reserve
Board and the
Office of
the Commissioner
of Financial
Institutions of
Puerto Rico
(the “Office
of the
Commissioner”), and, in
the case
of PB,
the
Federal
Reserve
Board
and
the
New
York
State
Department
of
Financial
Services
(the
“NYSDFS”).
Popular’s
broker-dealer
/
investment adviser
subsidiary,
Popular Securities,
LLC (“PS”)
and investment
adviser subsidiary
Popular Asset
Management LLC
(“PAM”)
are subject
to
regulation by
the SEC,
the Financial
Industry
Regulatory Authority
(“FINRA”), and
the Securities
Investor
Protection Corporation, among others. Other of our non-bank subsidiaries conduct reinsurance and
insurance producer and agency
activities, which are
subject to other
federal, state and
Puerto Rico laws
and regulations as
well as licensing
and regulation by
the
Puerto Rico Office of the Commissioner of Insurance and,
for one insurance agency subsidiary, the NYSDFS.
Enhanced Prudential Standards
Under
the
Dodd-Frank
Wall
Street
Reform
and
Consumer
Protection
Act
(the
“Dodd-Frank
Act”),
as
modified
by
the
Economic
Growth,
Regulatory
Relief,
and
Consumer
Protection
Act
and
the
federal
banking
regulators’
2019
“Tailoring
Rules,”
banking
organizations are
categorized based
on status
as
a U.S.
G-SIB,
size
and four
other risk-based
indicators. Among
bank
holding companies with $100
billion or more in
total consolidated assets, the
most stringent standards apply
to U.S. G-SIBs,
which
are subject to Category I standards,
and the least stringent standards apply to Category IV organizations, which have between $100
billion and $250 billion in total consolidated assets and less than $75 billion in all four other risk-based indicators and
which are also
not U.S. G-SIBs. Bank holding companies with total consolidated assets of $50 billion or more are subject to risk committee and risk
management requirements. As of December 31, 2025,
Popular had total consolidated assets of $75.3 billion.
13
Transactions with Affiliates
BPPR
and
PB
are
subject
to
restrictions
that
limit
the
amount
of
extensions
of
credit
and
certain
other
“covered
transactions” (as defined in Section
23A of the Federal
Reserve Act) between BPPR or
PB, on the
one hand, and Popular,
PNA or
any
of
our
other
non-banking
subsidiaries,
on
the
other
hand,
and
that
impose
collateralization
requirements
on
such
credit
extensions. A bank may not engage in any covered transaction if the aggregate amount of the bank’s covered transactions with that
affiliate would exceed 10% of
the bank’s capital stock and
surplus or the aggregate amount of
the bank’s covered transactions with
all non-bank affiliates would exceed 20%
of the bank’s capital stock and
surplus. In addition, any transaction between BPPR
or PB,
on the one
hand, and Popular,
PNA or any
of our other
non-banking subsidiaries, on
the other,
is required to
be carried out
on an
arm’s length basis.
Source of Financial Strength
The
Dodd-Frank Act
requires bank
holding companies,
such
as Popular
and
PNA, to
act
as
a source
of
financial
and
managerial strength to their subsidiary banks. Popular
and PNA are expected to commit resources
to support their subsidiary banks,
including at times when Popular
and PNA may not be
in a financial position to
provide such resources. Any capital loans
by a bank
holding company
to any
of its
subsidiary depository
institutions are
subordinated in
right of
payment to
depositors and
to certain
other indebtedness of such subsidiary depository institution. In the
event of a bank holding company’s bankruptcy,
any commitment
by
the
bank
holding
company
to
a
federal
banking
agency
to
maintain
the
capital
of
a
subsidiary
depository
institution
will
be
assumed by
the bankruptcy
trustee and
entitled to
a priority
of payment.
BPPR and
PB are
currently the
only insured
depository
institution subsidiaries of Popular and PNA.
Resolution Planning and Resolution-Related Requirements
A
bank holding
company with
$250 billion
or more
in total
consolidated assets
(or that
is a
Category III
firm based
on
certain risk-based indicators described in the Tailoring
Rules) is required to report periodically to the FDIC
and the Federal Reserve
Board
such
company’s
plan
for
its
rapid
and
orderly
resolution
in
the
event
of
material
financial
distress
or
failure.
In
addition,
insured depository institutions with total
assets of $50 billion or
more are required to
submit to the FDIC
periodic contingency plans
for
resolution
in
the
event
of
the
institution’s
failure.
In
June
2024,
the
FDIC
finalized
amendments
to
the
resolution
planning
requirements for insured depository institutions with
$50 billion or more in
total assets. The amendments require insured
depository
institutions with
between $50
billion and $100
billion in
assets to submit
informational filings on
a three-year cycle,
with an
interim
supplement updating key information submitted in the off years. These amendments
became effective October 1, 2024, and BPPR’s
first submission under the new rule is due by
April 1, 2026.
On August
29, 2023,
the Federal
Reserve Board,
FDIC and
Office of
the Comptroller
of the
Currency (“OCC”)
issued a
proposed
rule
that
would
require
bank
holding
companies
and
insured
depository
institutions
with
$100
billion
or
more
in
consolidated assets (as well as their insured depository institution affiliates) to maintain minimum
amounts of eligible long-term debt
(generally, debt
that is unsecured, has
a maturity greater than one
year from issuance and satisfies
additional criteria), subject to a
three-year phase-in
period. The
proposal would
also apply
“clean holding
company” requirements
to Category
II through
IV bank
holding companies,
which would,
among other
things, prohibit
those holding
companies from
entering into
derivatives and
certain
other financial
contracts with
third parties.
As of
December 31,
2025, Popular,
PNA, BPPR
and PB’s
total assets
were below
the
thresholds for applicability
of these rules,
except that BPPR
is subject to
the FDIC’s resolution
planning requirements applicable to
insured depository institutions with more than $50
billion but less than $100 billion in assets.
FDIC Insurance
Substantially all the deposits of BPPR and PB are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of
the
FDIC,
and
BPPR
and
PB
are
subject
to
FDIC
deposit
insurance
assessments
to
maintain
the
DIF.
Deposit
insurance
assessments are
based on
the average
consolidated total
assets of
the insured
depository institution
minus the
average tangible
equity of the institution during the assessment period. For larger
depository institutions with over $10 billion in assets,
such as BPPR
and PB, the FDIC uses a “scorecard” methodology, which considers CAMELS ratings, among
other measures, that seeks to capture
both the probability that an individual large institution will
fail and the magnitude of the impact on the DIF
if such a failure occurs. The
FDIC has the ability
to make discretionary adjustments to the
total score based upon significant
risk factors that are not
adequately
captured in the calculations. The initial base deposit insurance assessment rate for larger depository institutions ranges from 3 to 30
basis
points
on
an
annualized
basis.
Taking
into
account the
adjustments the
FDIC
may
make
to
the
base
rate,
the
total
base
assessment rate could range from 1.5 to 40 basis points
on an annualized basis.
In
October
2022,
the
FDIC
finalized
a
rule
that
increased
initial
base
deposit
insurance
assessment
rates
by
2
basis
points, beginning with the first quarterly assessment period of 2023. The FDIC, as required under the Federal Deposit Insurance Act
14
(“FDIA”), established
a plan
in September
2020 to
restore the
DIF reserve
ratio to
meet or
exceed the
statutory minimum
of 1.35
percent within
eight years. The
increased assessment is
intended to improve
the likelihood that
the DIF
reserve ratio would
reach
the required minimum by the statutory deadline
of September 30, 2028.
As of December 31, 2025, BPPR and
PB had a DIF average total asset
less average tangible equity assessment base of
$69 billion.
On
November 16,
2023,
the
FDIC finalized
a
rule
that
imposes
a special
assessment to
recover the
costs to
the
DIF
resulting
from
the
FDIC’s
use,
in
March
2023,
of
the systemic
risk
exception to
the
least-cost resolution
test
under the
FDIA
in
connection with the
receiverships of Silicon
Valley Bank
and Signature Bank.
The FDIC estimated
in approving the
rule that those
assessed losses total $16.3 billion. The rule provides
that this loss estimate will be periodically adjusted,
which will affect the amount
of
the special
assessment. Under
the rule,
the assessment
base is
the
estimated uninsured
deposits that
an insured
depository
institution reported in its Consolidated Reports of Condition and Income (“Call Report”) at December 31, 2022,
excluding the first $5
billion
in estimated
uninsured deposits.
For
a holding
company
that
has
more than
one
insured depository
institution subsidiary,
such as Popular,
the $5 billion
exclusion is allocated
among the company’s
insured depository institution subsidiaries
in proportion
to each
insured depository
institution’s estimated
uninsured deposits.
The special
assessments were
to be
collected at
an annual
rate of approximately 13.4 basis points per
year (3.36 basis points per quarter) over
eight quarters,
with the first assessment period
having begun
January 1,
2024. In
June 2024,
due to
the increase
in the
estimate of
losses, the
FDIC announced that
it projected
that the special
assessment would be collected
for an additional
two quarters beyond the
initial eight quarter collection
period, at a
lower rate.
In December
2025, the
FDIC reduced
the rate
at which
the assessment
is collected,
with an
invoice payment
date of
March 30, 2026, from 3.36 basis points to
2.97 basis points,
and also reduced the collection period back
to eight quarters.
Brokered Deposits
The FDIA
and regulations
adopted thereunder
restrict the
use of
brokered deposits
and the
rate of
interest payable
on
deposits for institutions
that are less
than well capitalized.
Popular does not
believe the brokered
deposits regulations have
had or
will have a material effect on the funding or liquidity
of BPPR and PB.
Capital Adequacy
Popular, PNA,
BPPR and PB are
each required to comply
with applicable capital adequacy standards
established by the
federal
banking
agencies
(the
“Capital
Rules”),
which
implement
the
Basel
III
framework
set
forth
by
the
Basel
Committee
on
Banking Supervision (the “Basel Committee”) as
well as certain provisions of the Dodd-Frank
Act.
Among other
matters, the
Capital Rules:
(i) impose
a capital
measure called
“Common Equity
Tier
1” (“CET1”)
and the
related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1
capital” instruments meeting
certain revised requirements;
and (iii) mandate
that most deductions/adjustments to
regulatory capital
measures be made
to CET1
and not to
the other components
of capital.
Under the Capital
Rules, for most
banking organizations,
including
Popular,
the
most
common
form
of
Additional
Tier
1
capital
is
non-cumulative
perpetual preferred
stock
and
the
most
common form of Tier
2 capital is subordinated notes and
a portion of the
allocation for loan and lease losses,
in each case, subject
to the Capital Rules’ specific requirements.
Pursuant to the Capital Rules, the minimum
capital ratios are:
4.5% CET1 to risk-weighted assets;
6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted
assets;
8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and
4% Tier 1 capital to average consolidated assets as reported
on consolidated financial statements (known
as the
“leverage ratio”).
The Capital Rules also impose
a “capital conservation buffer,”
composed entirely of CET1, on top
of these minimum risk-
weighted
asset
ratios. The
capital
conservation
buffer
is
designed
to
absorb
losses
during
periods
of
economic stress.
Banking
institutions
with
a
ratio
of
CET1
to
risk-weighted
assets
above
the
minimum
but
below
the
capital
conservation
buffer
will
face
constraints on
dividends, equity repurchases
and compensation based
on the
amount of
the shortfall and
eligible retained
income
(that is, four
quarter trailing net income, net
of distributions and tax effects
not reflected in net
income). Popular, BPPR
and PB are
therefore required to maintain such additional capital
conservation buffer of 2.5% of CET1,
effectively resulting in minimum ratios of
(i) CET1
to risk-weighted
assets of
at least
7%, (ii)
Tier
1 capital
to risk-weighted
assets of
at least
8.5%, and
(iii) Total
capital to
15
risk-weighted assets of at least 10.5%.
Pursuant
to
the
Capital
Rules,
the
effects
of
certain
accumulated other
comprehensive income
or
loss
(“AOCI”)
items
included in stockholders’ equity
(for example, marks-to-market of securities
held in the available
for sale portfolio) are
not excluded
from
regulatory
capital
ratios;
however,
banking
organizations
that
are
not
subject
to
Categories
I
or
II
standards
under
the
framework for
banking organizations
with $100
billion or
more in
assets, including
Popular,
BPPR and
PB, may
make a
one-time
permanent election to continue to
exclude these items. Popular,
BPPR and PB have
made this election in order
to avoid significant
variations in
the level
of capital
depending upon
the impact
of interest
rate fluctuations
on the
fair value
of their
available for
sale
securities portfolios.
On July
27, 2023,
the federal
banking regulators
proposed revisions
to the
Capital Rules
to implement
the
Basel Committee’s 2017 standards, described
below, and make
other changes to the
Capital Rules, including the ability
of banking
organizations in Categories III and IV to elect not to recognize most elements of AOCI in regulatory capital. The proposal introduces
revised credit risk, equity risk, operational risk, credit valuation adjustment risk and market risk requirements, among other changes.
However, the
revised capital requirements
of the
proposed rule would
not apply
to Popular,
BPPR, or
PB because
they have
less
than $100 billion in total consolidated assets and trading
assets and liabilities below the threshold for market risk requirements. The
federal
banking
regulators have
subsequently indicated
that
they
expect to
issue
a
revised
proposal, the
timing
and contents
of
which are uncertain.
The
Capital
Rules
preclude certain
hybrid
securities, such
as
trust
preferred
securities, from
inclusion
in
bank
holding
companies’
Tier
1
capital.
Trust
preferred
securities
not
included
in
Popular’s
Tier
1
capital
may
nonetheless
be
included
as
a
component of
Tier 2 capital.
Popular has
not issued
any trust
preferred securities since
May 19,
2010. As
of December
31, 2025,
Popular has
$193 million
of trust
preferred securities
outstanding which
no longer
qualify for
Tier
1 capital
treatment, but
instead
qualify for Tier 2 capital treatment.
The Capital Rules also provide for a number of deductions
from and adjustments to CET1.
Banking organizations that are
not subject to Category
I or II standards
are subject to rules that
provide for simplified capital requirements relating
to the threshold
deductions
for
certain
mortgage
servicing
assets,
deferred
tax
assets,
investments
in
the
capital
of
unconsolidated
financial
institutions and inclusion of minority interests
in regulatory capital.
Failure
to
meet
capital
guidelines
could
subject
Popular
and
its
depository
institution
subsidiaries
to
a
variety
of
enforcement remedies, including the termination of deposit insurance by the FDIC
and to certain restrictions on our business. Refer
to “Prompt Corrective Action” below for further
discussion.
In
December 2017,
the Basel
Committee published
standards that
it
described as
the finalization
of the
Basel III
post-
crisis regulatory
reforms. Among other
things, these
standards revise
the Basel
Committee’s standardized approach
for credit
risk
(including
by
recalibrating
risk
weights
and
introducing
new
capital
requirements
for
certain
“unconditionally
cancellable
commitments,” such
as
unused credit
card
lines of
credit) and
provide
a new
standardized approach
for operational
risk capital.
Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to Category I and Category II
banking organizations and not to Popular, BPPR and PB.
In 2020, federal bank regulators adopted a rule
that allowed banking organizations to elect to delay
temporarily the
estimated effects of adopting the Current Expected Credit
Loss (“CECL”) model of ASU 2016-13 on regulatory
capital until January
2022 and subsequently to phase in the effects through
January 2025. The Corporation’s capital ratios
at December 31, 2025 reflect
the full phased in impact from the adoption of CECL.
Refer to
the Consolidated
Financial Statements
in this
Form 10-K.,
Note 20
and Table
10 of
Management’s Discussion
and Analysis for the
capital ratios of Popular,
BPPR and PB
under Basel III. Refer
to the Consolidated Financial Statements
in this
Form 10-K Note 2 for more information regarding
CECL.
Prompt Corrective Action
The
FDIA
requires,
among
other
things,
the
federal
banking
agencies
to
take
prompt
corrective
action
in
respect
of
insured
depository
institutions
that
do
not
meet
minimum
capital
requirements.
The
FDIA
establishes
five
capital
tiers:
“well
capitalized,”
“adequately
capitalized,”
“undercapitalized,”
“significantly
undercapitalized,”
and
“critically
undercapitalized”.
A
depository institution’s capital tier will depend upon how its
capital levels compare with various relevant capital
measures and certain
other factors.
16
An insured
depository institution will
be deemed
to be
(i) “well
capitalized” if
the institution
has a
total risk-based
capital
ratio of 10.0% or greater, a CET1 capital ratio of 6.5%
or greater, a Tier 1
risk-based capital ratio of 8.0% or greater, and a leverage
ratio of 5.0% or
greater, and is
not subject to any order
or written directive by
any such regulatory authority to
meet and maintain a
specific capital level for any capital
measure; (ii) “adequately capitalized” if the institution
has a total risk-based capital ratio
of 8.0%
or greater, a
CET1 capital ratio of 4.5%
or greater, a
Tier 1 risk-based capital
ratio of 6.0% or greater,
and a leverage ratio of
4.0%
or greater
and is
not “well
capitalized”; (iii)
“undercapitalized” if
the institution
has a
total risk-based
capital ratio
that is
less than
8.0%, a CET1 capital
ratio less than 4.5%,
a Tier 1
risk-based capital ratio of
less than 6.0% or
a leverage ratio of
less than 4.0%;
(iv) “significantly
undercapitalized” if
the institution
has a
total risk-based
capital ratio
of less
than 6.0%,
a CET1
capital ratio
less
than 3%, a Tier
1 risk-based capital ratio of less than 4.0% or
a leverage ratio of less than 3.0%;
and (v) “critically undercapitalized”
if
the
institution’s
tangible
equity
is
equal
to
or
less
than
2.0%
of
average
quarterly
tangible
assets.
An
institution
may
be
downgraded to, or deemed
to be in, a
capital category that is
lower than indicated by
its capital ratios if
it is determined to
be in an
unsafe
or
unsound
condition
or
if
it
receives
an
unsatisfactory
examination
rating
with
respect
to
certain
matters.
An
insured
depository institution’s capital category is determined solely for the purpose of applying prompt corrective action
regulations, and the
capital category
may not
constitute an
accurate representation
of the
institution’s overall
financial condition
or prospects
for other
purposes.
The FDIA generally prohibits an insured depository institution from making any capital
distribution (including payment of a
dividend) or
paying any
management fee to
its holding
company, if
the depository
institution would thereafter
be undercapitalized.
Undercapitalized
depository
institutions
are
subject
to
restrictions
on
borrowing
from
the
Federal
Reserve
System.
In
addition,
undercapitalized
depository
institutions
are
subject
to
growth
limitations
and
are
required
to
submit
capital
restoration
plans.
A
depository institution’s
holding company must
guarantee the capital
restoration plan, up
to an
amount equal to
the lesser
of 5%
of
the
depository
institution’s
assets
at
the
time
it
becomes
undercapitalized
or
the
amount
of
the
capital
deficiency,
when
the
institution fails to comply with the
plan. The federal banking agencies may not
accept a capital restoration plan without determining,
among other things,
that the plan
is based
on realistic assumptions
and is
likely to succeed
in restoring the
depository institution’s
capital. If a depository institution fails to submit an
acceptable plan, it is treated as if it is
significantly undercapitalized.
Significantly
undercapitalized
depository
institutions
may
be
subject
to
a
number
of
requirements
and
restrictions,
including orders to
sell sufficient voting
stock to become
adequately capitalized, requirements to
reduce total assets
and cessation
of receipt
of deposits
from correspondent
banks. Critically
undercapitalized depository
institutions are
subject to
appointment of
a
receiver or conservator.
The capital-based prompt
corrective action provisions
of the FDIA
apply to
the FDIC-insured depository
institutions such
as
BPPR
and
PB,
but
they
are
not
directly
applicable
to
holding
companies
such
as
Popular
and
PNA,
which
control
such
institutions. As of December 31, 2025,
both BPPR and PB met the quantitative requirements
for ‘well capitalized’ status.
Restrictions on Dividends and Repurchases
The
principal
sources
of
funding
for
Popular
and
PNA
have
included
dividends
received
from
their
banking
and
non-
banking subsidiaries, asset sales
and proceeds from
the issuance of
debt and equity.
Various statutory
provisions limit the amount
of
dividends an
insured depository
institution may
pay to
its
holding company
without regulatory
approval. A
member bank
must
obtain the approval of the
Federal Reserve Board for any
dividend, if the total of
all dividends declared by the
member bank during
the calendar year would exceed the total of its net income for that year,
combined with its retained net income for the preceding two
years, after
considering those
years’ dividend
activity,
less any
required transfers to
surplus or
to a
fund for
the retirement
of any
preferred stock. During the year
ended December 31, 2025, BPPR declared
cash dividends of $575
million, a portion of
which was
used by Popular for the payments of the cash dividends on its
outstanding common stock. At December 31, 2025, BPPR needed to
obtain prior approval of the Federal Reserve Board before declaring a dividend
in excess of $191 million due to its
retained income,
declared dividend activity and transfers to statutory reserves over the three years ended December 31, 2025. In addition, a member
bank may
not declare
or pay
a dividend
in an
amount greater
than its
undivided profits
as reported
in its
Report of
Condition and
Income, unless the member bank has received the approval of
the Federal Reserve Board. A member bank also may not permit
any
portion of its permanent capital to
be withdrawn unless the withdrawal has
been approved by the Federal Reserve Board.
Pursuant
to
these
requirements, PB
may
not
declare
or
pay
a
dividend without
the
prior
approval
of
the
Federal
Reserve
Board
and
the
NYSDFS.
During the
year ended
December 31,
2025, Popular
received cash
dividends of
$23 million
from Popular
International
Bank, Inc. (“PIBI”) and $22 million from its other
non-banking subsidiaries.
It is Federal Reserve Board policy that bank holding companies generally should pay dividends on common
stock only out
17
of net
income available to
common shareholders
over the past
year and
only if
the prospective rate
of earnings retention
appears
consistent with the organization’s current and
expected future capital needs, asset quality
and overall financial condition. Moreover,
under Federal Reserve Board policy, a bank
holding company should not maintain dividend levels that place undue pressure on the
capital of depository
institution subsidiaries or that
may undermine the bank
holding company’s ability to
be a source
of strength to
its
banking subsidiaries.
Federal Reserve
policy
also
provides that
a
bank
holding company
should
inform
the
Federal
Reserve
reasonably in advance of declaring or paying a dividend that
exceeds earnings for the period for which the dividend is
being paid or
that could result in a material adverse change
to the bank holding company’s capital structure.
The
Federal Reserve
Board
also restricts
the
ability of
banking
organizations to
conduct stock
repurchases. In
certain
circumstances, a banking organization’s repurchases
of its common stock may
be subject to a
prior approval or notice requirement
under other regulations or policies of the Federal Reserve. Any redemption or
repurchase of preferred stock or subordinated debt is
subject to the prior approval of the Federal Reserve.
Subject to compliance with certain conditions, distributions of U.S. sourced dividends to a corporation
organized under the
laws
of the
Commonwealth of
Puerto Rico
are subject
to
a withholding
tax
of 10%
instead of
the 30%
applied to
other “foreign”
corporations. Accordingly, dividends from current or accumulated earnings and profits
paid by PNA to Popular, Inc. sourced from the
U.S. operations of PB are subject to a 10% tax withholding.
A corporation organized under the laws of the Commonwealth of Puerto
Rico that is engaged in a U.S. trade or business is generally subject to a branch profits tax of 30% on its earnings and profits
for the
taxable year that are “effectively connected” with
such U.S. trade or business, adjusted as
provided by U.S. federal income tax law.
Accordingly,
to
the extent
BPPR’s
U.S. operations
generate effectively
connected earnings
and profits
that
are not
reinvested in
such U.S. operations
(and that are
not otherwise adjusted
as provided by
U.S. federal income tax
law), such effectively
connected
earnings and profits will generally be subject
to a branch profits tax of 30%.
Refer to
Part II,
Item 5,
“Market for
Registrant’s Common
Equity,
Related Stockholder
Matters and
Issuer Purchases
of
Equity Securities” for further information on Popular’s
distribution of dividends and repurchases of equity
securities.
See
“Puerto
Rico
Regulation”
below
for
a
description
of
certain
restrictions
on
BPPR’s
ability
to
pay
dividends
under
Puerto Rico law.
Interstate Branching
The Dodd-Frank
Act amended
the Riegle-Neal
Interstate Banking
and Branching
Efficiency Act
of 1994
(the “Interstate
Banking
Act”)
to
authorize
national
banks
and
state
banks
to
branch
interstate
through
de
novo
branches. For
purposes
of
the
Interstate Banking Act, BPPR is treated as a state bank and is subject to the same restrictions on interstate branching as other state
banks.
Activities and Acquisitions
In general, the BHC Act limits the activities
permissible for bank holding companies to the business of banking, managing
or controlling banks and such other activities as the Federal Reserve Board has determined to be so closely related to banking as to
be
properly
incidental
thereto.
A
company
that
meets
management
and
capital
standards
and
whose
subsidiary
depository
institutions meet management,
capital and
Community Reinvestment Act
(“CRA”) standards may
elect to
be treated
as a
financial
holding company
and engage
in a
substantially broader
range of
nonbanking financial
activities, including
securities underwriting
and dealing, insurance underwriting and making
merchant banking investments in nonfinancial
companies.
In order for a bank holding company to elect to be treated as a financial
holding company, (i) all of its depository institution
subsidiaries
must
be
well capitalized
(as described
above)
and
well managed
and
(ii)
it
must
file a
declaration with
the Federal
Reserve Board that it elects to be a “financial holding
company.” As noted above, a bank
holding company electing to be a financial
holding company must itself be and remain
well capitalized and well managed. The Federal Reserve Board’s
regulations applicable
to bank holding companies separately define
“well capitalized” for bank holding companies,
such as Popular,
to require maintaining
a tier 1 capital
ratio of at least
6% and a total capital
ratio of at least 10%.
Popular and PNA have elected
to be treated as
financial
holding
companies.
A
depository
institution
is
deemed
to
be
“well
managed”
if,
at
its
most
recent
inspection,
examination
or
subsequent review
by the
appropriate federal banking
agency (or
the appropriate state
banking agency), the
depository institution
received
at
least
a
“satisfactory”
composite
rating
and
at
least
a
“satisfactory”
rating
for
the
management
component
of
the
composite
rating.
If,
after
becoming
a
financial
holding
company,
the
company
fails
to
continue
to
meet
any
of
the
capital
or
management requirements
for financial
holding company
status, the
company
must
enter into
a confidential
agreement with
the
Federal
Reserve
Board
to
comply
with
all
applicable capital
and
management
requirements.
If
the
company
does
not
return
to
18
compliance
within
180
days,
the
Federal
Reserve
Board
may
extend
the
agreement
or
may
order
the
company
to
divest
its
subsidiary banks or the
company may discontinue, or
divest investments in companies
engaged in, activities permissible only
for a
bank holding company that has elected to be treated as a financial
holding company. In addition, if a depository institution subsidiary
controlled by a financial holding company does not
maintain a CRA rating of at least “satisfactory,” the financial holding company
will
be subject to restrictions on certain new activities
and acquisitions.
The Federal Reserve Board
may in certain circumstances limit
our ability to conduct
activities and make acquisitions that
would otherwise be permissible for
a financial holding company.
Furthermore, a financial holding company must obtain
prior written
approval from the Federal Reserve Board before acquiring a nonbank company with $10 billion or more in total consolidated assets.
In addition, we
are required to
obtain prior Federal
Reserve Board approval
before engaging in
certain banking and
other financial
activities both in the United States and abroad.
The “Volcker
Rule” adopted
as part
of the
Dodd-Frank Act
restricts the
ability of
Popular and
its subsidiaries,
including
BPPR and PB as
well as non-banking subsidiaries, to
sponsor or invest in
“covered funds,” including private funds,
or to engage in
certain types
of proprietary
trading. Popular
and its
subsidiaries generally
do not
engage in
the businesses
subject to
the Volcker
Rule; therefore, the Volcker Rule does not have a material effect on our
operations.
Anti-Money Laundering Initiative and the USA PATRIOT Act
A major focus of governmental policy relating to financial institutions in
recent years has been aimed at combating money
laundering and
terrorist financing.
The USA
PATRIOT
Act of
2001 (the
“USA PATRIOT
Act”) strengthened
the ability
of the
U.S.
government to help prevent, detect and prosecute international money
laundering and the financing of terrorism. Title
III of the USA
PATRIOT
Act imposed
significant compliance
and due
diligence obligations,
created new
crimes and
penalties and
expanded the
extra-territorial jurisdiction of the United States. Failure of a financial institution to comply with the USA PATRIOT Act’s requirements
could have serious legal and reputational consequences
for the institution.
The
Anti-Money
Laundering
Act
of
2020
(“AMLA”),
which
amended
the
Bank
Secrecy
Act
(the
“BSA”),
is
intended
to
comprehensively
reform
and
modernize
U.S.
anti-money
laundering
laws.
Among
other
things,
the
AMLA
codifies
a
risk-based
approach to anti-money laundering compliance for financial institutions; requires the U.S. Department of the Treasury to
promulgate
priorities
for
anti-money
laundering
and
countering
the
financing
of
terrorism
policy;
requires
the
development
of
standards
for
testing technology and
internal processes for BSA
compliance; expands enforcement-
and investigation-related authority,
including
a
significant
expansion
in
the
available
sanctions
for
certain
BSA
violations;
and
expands
BSA
whistleblower
incentives
and
protections.
Many
of
the
statutory
provisions
in
the
AMLA
require
additional
rulemakings,
reports
and
other
measures,
and
the
impact
of
the
AMLA
will
depend on,
among
other
things,
rulemaking and
implementation guidance.
In
June
2021,
the
Financial
Crimes Enforcement Network, a bureau of
the U.S. Department of the
Treasury,
issued the priorities for anti-money laundering
and
countering the
financing of
terrorism policy
required under AMLA.
The priorities
include: corruption, cybercrime,
terrorist financing,
fraud, transnational crime, drug trafficking, human trafficking and
proliferation financing.
Federal regulators
regularly examine BSA/Anti-Money
Laundering and sanctions
compliance to
enhance their
adequacy
and effectiveness, and the frequency and extent of such examinations
and related remedial actions have been
increasing.
Community Reinvestment Act
The
CRA
requires
banks
to
help
serve
the
credit
needs
of
their
communities,
including
extending
credit
to
low-
and
moderate-income individuals
and geographies.
Should
Popular
or our
bank
subsidiaries
fail
to
serve
adequately
the community,
potential penalties may include regulatory denials of applications to expand branches, relocate offices or branches, add subsidiaries
and affiliates, expand into new financial activities and merge
with or purchase other financial institutions.
Interchange Fees Regulation
The Federal Reserve Board
has established standards for
debit card interchange fees
and prohibited network exclusivity
arrangements and routing restrictions. The
maximum permissible interchange fee that
an issuer may receive
for an electronic debit
transaction is
the sum
of
21 cents
per transaction
and 5
basis points
multiplied by
the value
of
the transaction.
Additionally,
the
Federal Reserve
Board allows
for an
upward adjustment
of
no more
than 1
cent
to
an issuer’s
debit card
interchange fee
if the
issuer develops and implements policies and procedures
reasonably designed to achieve certain fraud-prevention
standards.
In
October
2023,
the
Federal
Reserve
Board
proposed
amendments
to
its
rules
on
interchange
fees.
If
adopted,
the
19
proposed changes
would establish
a maximum
permissible interchange
fee of
no more
than 14.4
cents per
transaction plus
four
basis
points
multiplied
by
the
value
of
the
transaction.
The
fraud
prevention
adjustment
would
be
increased
to
1.3
cents
per
transaction. The proposed changes would also establish an automatic update of
the interchange fee cap every other year based on
a survey of debit card issuers.
Consumer Financial Protection Act of 2010
The Consumer
Financial Protection
Bureau (the
“CFPB”) supervises
“covered persons”
(broadly defined
to include
any
person offering or
providing a consumer financial
product or service and
any affiliated service
provider) for compliance with
federal
consumer financial laws. The CFPB
also has the broad power
to prescribe rules applicable to
a covered person or service
provider
identifying
as
unlawful,
unfair,
deceptive,
or
abusive
acts
or
practices
in
connection
with
any
transaction
with
a
consumer
for
a
consumer financial product or service, or the offering of
a consumer financial product or service. We are subject to examination and
regulation by the CFPB. During 2025, the CFPB reduced its staff by over 80%. The
reduction in force is the subject of litigation, and
the
staffing
cuts
are
currently
stayed
pending
the
federal
circuit
court’s
en
banc
rehearing
of
the
case.
The
impact
of
these
developments
on
banking
organizations
subject
to
CFPB
regulation
and
supervision,
including
us,
is
uncertain.
The
Consumer
Financial Protection Act permits states to adopt consumer protection laws and standards that are more stringent than those adopted
at
the federal
level and,
in certain
circumstances, permits
state attorneys
general to
enforce compliance
with both
the state
and
federal laws and regulations. States and state attorneys general
may increase regulatory, investigative and enforcement activity with
respect to consumer protection, in
response to changes in regulation, supervision
and enforcement of consumer protection laws
by
federal regulators.
On October 22, 2024, the CFPB finalized a new rule to implement Section 1033 of the Consumer Financial Protection Act
that
requires
a
provider
of
payment
accounts
or
products,
such
as
a
bank,
to
make
data
available
to
consumers
upon
request
regarding the
products or
services they
obtain from
the provider.
Any such
data provider
also has
to make
such data
available to
third parties, with the consumer’s express authorization and
through an interface that satisfies formatting, performance
and security
standards,
for
the
purpose
of
such
third
parties
providing
the
consumer
with
financial
products
or
services
requested
by
the
consumer. Data required to be made available under the rule includes
transaction information, account balance, account and routing
numbers,
terms
and
conditions,
upcoming
bill
information,
and
certain
account
verification
data.
The
rule
is
intended
to
give
consumers
control
over
their
financial
data,
including
with
whom
it
is
shared,
and
encourage
competition
in
the
provision
of
consumer financial
products or
services. For
banks with
at least
$10 billion
and less
than $250
billion in
total assets,
compliance
with the rule’s requirements is required beginning on
April 1, 2027. The rule is the subject of litigation,
which is currently stayed while
the CFPB considers revisions to the rule.
Office of Foreign Assets Control Regulation
The
U.S.
Treasury
Department
Office
of
Foreign
Assets
Control
(“OFAC”)
administers
economic
sanctions
that
affect
transactions
with
designated
foreign
countries,
nationals
and
others.
The
OFAC-administered
sanctions
targeting
countries
take
many
different
forms.
Generally,
however,
they
contain
one
or
more
of
the
following
elements:
(i)
restrictions
on
trade
with
or
investment in a sanctioned country; and (ii) a blocking
of assets in which the government of the
sanctioned country or other specially
designated nationals have an interest, by prohibiting
transfers of property subject to U.S. jurisdiction (including
property in the United
States or the possession or control of U.S.
persons outside of the United States). Blocked assets (e.g., property
and bank deposits)
cannot
be
paid
out,
withdrawn, set
off
or
transferred
in
any
manner without
a
license
from
OFAC.
Failure
to
comply
with these
sanctions
could
have
serious
legal
and
reputational
consequences,
including
denial
by
federal
regulators
of
proposed
merger,
acquisition, restructuring, or other expansionary activity.
Protection of Customer Personal Information and
Cybersecurity
The privacy
provisions of
the Gramm-Leach-Bliley Act
of 1999
generally prohibit financial
institutions, including
us, from
disclosing nonpublic personal financial information of consumer customers to third
parties for certain purposes (primarily marketing)
unless
customers
have
the
opportunity
to
opt
out
of
the
disclosure.
The
Fair
Credit
Reporting
Act
restricts
information
sharing
among affiliates for marketing purposes and governs
the use and provision of information to consumer
reporting agencies.
The federal banking regulators have also issued guidance and rules regarding cybersecurity that are intended to enhance
cyber risk management standards among financial institutions. A financial institution is expected to establish lines
of defense and to
maintain risk management processes that are designed to address the risk posed by compromised customer credentials. A financial
institution’s
management
is
expected
to
maintain
sufficient
business
continuity
planning
processes
for
the
rapid
recovery,
resumption and maintenance of
the institution’s operations
after a cyber-attack involving
destructive malware. A financial
institution
20
is
also
expected
to
develop
appropriate
processes
to
enable
recovery
of
data
and
business
operations
and
address
rebuilding
network capabilities and restoring data if the institution or its critical service
providers fall victim to this type of cyber-attack. If we
fail
to observe the
regulatory guidance, we could
be subject to various
regulatory sanctions, including financial
penalties. In November
2021, the U.S.
federal bank regulatory agencies
issued a final
rule requiring banking organizations,
including Popular,
PNA, BPPR
and PB, to notify
their primary federal banking regulator
within 36 hours of determining
that a “notification incident” has
occurred. A
notification incident
is a
“computer-security incident” that
has materially
disrupted or degraded,
or is
reasonably likely to
materially
disrupt or
degrade, the
banking organization’s
ability to
deliver services
to a
material portion
of its
customer base,
jeopardize the
viability
of
key
operations
of
the
banking
organization,
or
impact
the
stability
of
the
financial
sector.
The
final
rule
also
requires
specific and immediate notifications by bank
service providers that become aware of similar
incidents.
State and foreign regulators
have also been increasingly active
in implementing privacy and cybersecurity
standards and
regulations. Several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and
providing detailed requirements with respect to these
programs, including data encryption requirements. In New York,
the NYSDFS
requires
financial
institutions
regulated
by
the
NYSDFS,
including
PB,
to,
among
other
things,
(i)
establish
and
maintain
a
cybersecurity program designed
to enhance the
confidentiality, integrity
and availability of
their information systems;
(ii) implement
and maintain a written
cyber security policy setting forth
policies and procedures for the
protection of their information systems
and
nonpublic
information;
and
(iii)
designate
a
Chief
Information
Security
Officer.
On
November
1,
2023,
the
NYSDFS
adopted
amendments to
its
cybersecurity regulations
that
represent
a
significant
update
to
the
regulation of
cybersecurity practices.
The
amendments
generally
fall
within
the
following
five
categories:
(i)
increased
mandatory
controls
associated
with
common
attack
vectors,
(ii)
enhanced
requirements
for
privileged
accounts,
(iii)
enhanced
notification
obligations,
(iv)
expansion
of
cyber
governance practices and (v) additional cybersecurity
requirements for larger companies.
On
July
6,
2023,
the
SEC
adopted
new
rules
that
would
require
registrants,
such
as
Popular,
to
(i)
report
material
cybersecurity incidents
on Form
8-K and,
(ii) disclose
in Annual
Report on
Form 10-K
cybersecurity policies
and procedures
and
governance practices, including at the board and
management levels.
Many states and foreign
governments have also recently implemented or
modified their data breach notification
and data
privacy
requirements. The
California Consumer
Privacy Act
(“CCPA”)
imposes privacy
compliance obligations
with regard
to
the
collection,
use
and
disclosure of
personal
information of
California residents,
and the
November 2020
amendment to
the
CCPA
creates the California Privacy Protection Agency, a watchdog privacy agency, and further expands the scope of businesses covered
by the law
and certain rights relating
to personal information. The
substantive obligations under the
2020 amendment to the
CCPA
became effective on January 1, 2023. In the European Union, the General Data Protection Regulation heightens privacy compliance
obligations and
imposes strict
standards for
reporting data
breaches. We
continue to
monitor these
developments to
comply with
applicable requirements.
See
“Puerto
Rico
Regulation”
below
for
a
description
of
legislations
and
regulations
on
information
privacy
and
cybersecurity in Puerto Rico.
Climate-Related and ESG Developments
In recent years, certain lawmakers and regulators in and outside the United States have increased their focus on financial
institutions’
and
other
companies’
risk
oversight,
disclosures
and
practices
in
connection
with
climate
change
and
other
environmental,
social
and
governance (“ESG”)
matters.
For
example,
in
2023,
the
NYSDFS
issued
guidance
on
climate-related
financial
risk
management
applicable
to
NYSDFS-regulated
banking
and
mortgage
organizations,
including
PB.
The
guidance
addresses material
financial
risks related
to
climate change
faced by
these
organizations in
the context
of
risk assessment,
risk
management,
and
risk
appetite
setting.
In
2023,
California
enacted
climate-related
disclosure
laws
requiring
certain
companies
doing business in
California to make
certain climate-related disclosures
beginning in 2026,
including but not
limited to greenhouse
gas
emissions data
and climate-related
risks. On
the other
hand, certain
states
have enacted,
or have
proposed to
enact, “anti-
ESG”
statutes,
regulations
or
policies, including
statutes
that
prohibit
financial
institutions from
denying or
canceling products
or
services to
a person,
or otherwise discriminating
against a
person in making
available products or
services, on
the basis
of social
credit scores and certain other factors. Additionally, in August 2025, President Trump signed Executive Order 14331, “Guaranteeing
Fair Banking
Access for
All Americans,”
which states
that it
is the
policy of
the United
States that
no American
should be
denied
access
to
financial
services
because
of
their
constitutionally
or
statutorily
protected
beliefs,
affiliations,
or
political
views.
The
Executive
Order
directs
the
Treasury
Secretary
and
federal
banking
regulators
to
address
politicized
or
unlawful
debanking
activities.
21
Incentive Compensation
The Federal Reserve Board reviews, as
part of its regular,
risk-focused examination process, the incentive compensation
arrangements of
banking organizations, such
as Popular,
that are
not “large,
complex banking
organizations.” Deficiencies will
be
incorporated into
the
organization’s supervisory
ratings, which
can
affect
the
organization’s ability
to
make
acquisitions and
take
other
actions. Enforcement
actions may
be taken
against
a
banking
organization if
its
incentive compensation
arrangements, or
related
risk-management
control
or
governance
processes,
pose
a
risk
to
the
organization’s
safety
and
soundness
and
the
organization is not taking prompt and effective measures
to correct the deficiencies.
The
Federal
Reserve
Board,
OCC
and
FDIC
have
issued
comprehensive
final
guidance
on
incentive
compensation
policies intended to discourage excessive risk-taking in
the incentive compensation policies of banking organizations
in order to not
undermine
the
safety
and
soundness
of
such
organizations.
The
guidance,
which
covers
all
employees
that
have
the
ability
to
materially affect
the risk
profile of an
organization, either individually
or as
part of
a group,
is based
upon the key
principles that
a
banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond
the
organization’s
ability
to
effectively
identify
and
manage
risks,
(ii)
be
compatible
with
effective
internal
controls
and
risk
management, and (iii)
be supported by
strong corporate governance,
including active and
effective oversight
by the
organization’s
board of directors.
The Dodd-Frank Act requires the U.S. financial regulators, including the Federal Reserve Board, the other federal banking
agencies
and
the
SEC,
to
adopt
rules
prohibiting
incentive-based
payment
arrangements that
encourage
inappropriate
risks
by
providing excessive
compensation or
that could
lead to
a material
financial loss
at specified
regulated entities
having at
least $1
billion in total
assets (including Popular,
PNA, BPPR and
PB). The U.S.
financial regulators proposed revised
rules in 2016,
which
have not been finalized.
In October
2022, the SEC
adopted a final
rule requiring securities
exchanges to adopt
rules mandating, in
the case of
a
restatement, the
recovery or
“clawback” of
excess incentive-based
compensation paid
to current
or former
executive officers
and
requiring listed
issuers to
disclose any
recovery analysis where
recovery is
triggered by
a restatement.
The excess
compensation
would be based
on the amount
the executive officer
would have received
had the incentive-based
compensation been determined
using the restated
financials. The Nasdaq
Stock Market’s listing
standards pursuant to the
SEC’s rule became
effective October 2,
2023. Popular’s clawback policy adopted in accordance
with these listing standards is included as