Popular 10K 2022 Annual report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

10-K

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR

15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the Fiscal Year Ended

December 31, 2022

[ ]

Transition report pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

Commission File Number:

001-34084

POPULAR, INC.

Incorporated in the Commonwealth of

Puerto Rico

IRS Employer Identification No.

66-0667416

Principal Executive Offices

209 Muñoz Rivera Avenue

Hato Rey

Puerto Rico

00918

Telephone Number: (

787

)

765-9800

Securities registered pursuant to Section 12(b)

of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which

registered

Common Stock ($0.01 par value)

BPOP

The

Nasdaq Global Select Stock Market

6.125% Cumulative Monthly Income Trust Preferred

Securities

BPOPM

The

Nasdaq Global Select Stock Market

SECURITIES REGISTERED PURSUANT TO SECTION 12(g)

OF THE ACT:

None

Indicate by check mark if the registrant is a well-known

seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes

X No

Indicate by check mark if the registrant is not required

to file reports pursuant to Section 13 or Section

15(d) of the Act. Yes

Indicate by check mark whether the registrant (1) has

filed all reports required to be filed by

Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12

months (or for such shorter period that the

registrant was required to file such reports), and

(2) has been subject to such filing requirements for the

past 90 days.

Yes

X No

Indicate by check mark whether the registrant has

submitted electronically every Interactive Data File required

to be submitted pursuant to

Rule 405 of Regulation S-T (§232.405 of this chapter)

during the preceding 12 months (or for such

shorter period that the registrant was

required to submit such files).

Yes

X No

Indicate by check mark whether the registrant is a

large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting

company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting

company”

and “emerging growth company” in Rule 12b-2

of the Exchange Act.

Large accelerated filer

[X]

Accelerated filer [

]

Non-accelerated filer [

]

Smaller reporting company

[ ]

Emerging growth company

[ ]

If an emerging growth company, indicate by check mark if the registrant

has elected not to use the extended

transition period for

complying with any new or revised financial accounting

standards provided pursuant to Section 13(a)

of the Exchange Act.

☐

Indicate by check mark whether the registrant has filed a report on

and attestation to its management’s assessment of the effectiveness of

its internal

control over

financial reporting

under Section

404(b) of

the Sarbanes-Oxley Act

(15 U.S.C.

7262(b)) by

the registered

public

accounting firm that prepared or issued its audit

report. [

]

If securities are registered

pursuant to Section 12(b)

of the Act, indicate

by check mark whether

the financial statements of

the registrant

included in the filing reflect the correction of an

error to previously issued financial statements.

☐

Indicate

check

mark

whether any

those

error

corrections

are

restatements

that

required

recovery

analysis

incentive-based

compensation received by any of the registrant’s executive

officers during the relevant recovery period pursuant to

§240.10D-1(b).

☐

Indicate by check mark whether the registrant is a

shell company (as defined in Rule 12b-2 of the

Act). Yes

As of June 30, 2022, the aggregate market

value of the Common Stock held by non-affiliates of

Popular, Inc. was approximately $

5.8

billion based upon the reported closing price of $76.93

on the Nasdaq Global Select Market on that

date.

As of February 24, 2023, there were

71,867,263

shares of Popular, Inc.’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Popular,

Inc.’s definitive proxy

statement relating to the

2023 Annual Meeting

of Stockholders of Popular,

Inc. (the “Proxy

Statement”) are incorporated herein by reference in response to Items 10 through

14 of Part III. The Proxy Statement will be

filed with

the Securities and Exchange Commission (the “SEC”)

on or about March 29, 2023.

Forward-Looking Statements

This

Form

10-K contains

“forward-looking statements”

within the

meaning

the

U.S. Private

Securities Litigation

Reform Act

1995,

including,

without

limitation,

statements

about

Popular,

Inc.’s

(the

“Corporation,”

“Popular,”

“we,”

“us,”

“our”)

business,

financial condition, results

of operations, plans,

objectives and future

performance. These statements

are not

guarantees of future

performance,

are

based

management’s

current

expectations

and,

their

nature,

involve

risks,

uncertainties,

estimates

and

assumptions. Potential

factors, some

of which

are beyond

the Corporation’s

control, could

cause actual

results to

differ materially

from those expressed in, or implied by, such forward-looking statements. Risks and uncertainties include without limitation the effect

of competitive and

economic factors, and our

reaction to those factors,

the adequacy of

the allowance for loan

losses, delinquency

trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity,

and the effect

of legal and regulatory proceedings and new accounting

standards on the Corporation’s financial condition and

results of operations.

All statements

contained herein

that are

not clearly

historical in

nature are

forward-looking, and

the words

“anticipate,” “believe,”

“continues,” “expect,”

“estimate,” “intend,”

“project” and

similar expressions

and future

or conditional

verbs such

as “will,”

“would,”

“should,” “could,” “might,” “can,” “may” or similar

expressions are generally intended to identify

forward-looking statements.

Various factors, some of which

are beyond Popular’s control, could cause actual results to differ materially from those expressed in,

or implied by, such forward-looking statements. Factors that might cause such a

difference include, but are not limited to:

●

the

rate

growth

decline

the

economy

and

employment

levels,

well

general

business

and

economic

conditions

the

geographic

areas

serve

and,

particular,

the

Commonwealth

Puerto

Rico

(the

“Commonwealth” or “Puerto Rico”), where a significant

portion of our business is concentrated

●

adverse

economic conditions,

including high

levels

and

ongoing increases

inflation

rates,

that

adversely

affect

housing prices, the job market, consumer confidence

and spending habits which may affect in turn, among

other things,

our level of non-performing assets, charge-offs and provision

expense;

●

changes in interest rates and market liquidity,

which may reduce interest margins, impact funding sources, reduce loan

originations,

affect our

ability to

originate and

distribute financial

products in

the primary

and secondary

markets and

impact the value of our investment portfolio and

our ability to return capital to our shareholders;

●

the impact of the current fiscal and economic challenges of Puerto Rico and

the measures taken and to be taken by the

Puerto

Rico

Government

and

the

Federally-appointed

oversight

board

the

economy,

our

customers

and

our

business;

●

the impact of the pending debt

restructuring proceedings under Title III of the

Puerto Rico Oversight, Management and

Economic

Stability

Act

(“PROMESA”)

and

other

actions

taken

address

Puerto

Rico’s

fiscal

challenges on the value of our portfolio of Puerto Rico

government securities and loans to governmental entities and of

our

commercial,

mortgage

and

consumer

loan

portfolios

where

private

borrowers

could

directly

affected

governmental action;

●

the

amount of

Puerto Rico

public sector

deposits held

the Corporation,

whose future

balances are

uncertain and

difficult

predict

and

may

impacted

factors

such

the

amount

Federal

funds

received

the

P.R.

Government in connection with the COVID-19 pandemic and hurricane recovery assistance and the rate of expenditure

such

funds,

well

the

financial

condition,

liquidity

and

cash

management

practices

the

Puerto

Rico

Government and its instrumentalities;

●

unforeseen

catastrophic

events,

including

extreme

weather

events,

including

hurricanes,

other

natural

disasters,

man-made disasters,

acts of

violence or

war or

pandemics, epidemics

and other

health-related crises,

including any

resurgence of COVID-19, or the fear of any

such event occurring, any of which could cause adverse consequences for

our business, including, but not limited to, disruptions

in our operations;

●

our

ability

achieve

the

expected

benefits

from

our

transformation

initiative,

including

our

ability

achieve

our

targeted sustainable return on tangible common equity

of 14% by the end of 2025;

●

risks related to Popular’s acquisition of certain information technology and related assets formerly used by Evertec, Inc.

service certain

of Banco

Popular de

Puerto Rico’s

key channels,

as well

as the

entry into

amended and

restated

commercial

agreements

(the

“Evertec

Business

Acquisition

Transaction”),

including

Popular’s

ability

successfully

transition and integrate the assets

acquired as part of the

Evertec Business Acquisition Transaction, as

well as related

operations,

employees

and

third

party

contractors;

unexpected

costs,

including,

without

limitation,

costs

due

exposure to any unrecorded liabilities or issues not identified during due diligence investigation of the Evertec Business

Acquisition Transaction or

that are not

subject to indemnification or

reimbursement by Evertec, Inc.;

and business and

other risks arising from the extension of Popular’s

current commercial agreements with Evertec,

Inc.;

●

the fiscal and monetary policies of the federal government

and its agencies;

●

changes

federal

bank

regulatory

and

supervisory

policies,

including

required

levels

capital

and

the

impact

proposed capital standards on our capital ratios;

●

additional Federal Deposit Insurance Corporation (“FDIC”)

assessments;

●

regulatory approvals

that may

be necessary

to undertake

certain actions

or consummate

strategic transactions,

such

as acquisitions and dispositions;

●

the

relative strength

weakness

the

consumer and

commercial credit

sectors

and

the

real

estate markets

Puerto Rico and the other markets in which

our borrowers are located;

●

the performance of the stock and bond markets;

●

competition in the financial services industry;

●

possible legislative, tax or regulatory changes;

●

a failure

in or

breach of

our operational

or security

systems or

infrastructure or

those of

Evertec, Inc.,

our provider

core financial

transaction processing and

information technology services,

or of

third parties

providing services

to us,

including

result

cyberattacks, e-fraud,

denial-of-services and

computer intrusion,

that

might result

in,

among

other

things,

loss

breach

customer

data,

disruption

services,

reputational

damage

additional

costs

Popular;

●

changes in market rates and prices which may

adversely impact the value of financial assets

and liabilities;

●

potential judgments,

claims, damages,

penalties, fines,

enforcement actions

and

reputational damage

resulting from

pending

future

litigation

and

regulatory

government

investigations

actions,

including

result

our

participation in and execution of government programs

related to the COVID-19 pandemic;

●

changes in accounting standards, rules and interpretations;

●

our ability to grow our core businesses;

●

decisions to downsize, sell or close branches or business

units or otherwise change our business mix;

and

●

management’s ability to identify and manage these and

other risks.

Moreover,

the

outcome

legal

and

regulatory

proceedings,

discussed

“Part

Item

Legal

Proceedings,”

inherently

uncertain and depends on judicial interpretations of law and the findings of regulators, judges and/or juries. Investors should refer to

“Part I, Item 1A” of this Form 10-K for a discussion

of certain risks and uncertainties to which

the Corporation is subject.

All forward-looking

statements included

in this

Form 10-K

are based

upon information

available to

Popular as

of the

date of

this

Form 10- K, and other than as required by law,

including the requirements of applicable securities laws, we assume no obligation to

update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date

of such statements.

TABLE OF CONTENTS

PART I

Page

Item 1

Business

Item 1A

Risk Factors

Item 1B

Unresolved Staff Comments

Item 2

Properties

Item 3

Legal Proceedings

Item 4

Mine Safety Disclosures

PART II

Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities

Item 6

[Reserved]

Item 7

Management’s Discussion and Analysis of Financial Condition

and Results of

Operations

Item 7A

Quantitative and Qualitative Disclosures About Market

Risk

Item 8

Financial Statements and Supplementary Data

Item 9

Changes in and Disagreements with Accountants

on Accounting and Financial

Disclosure

Item 9A

Controls and Procedures

Item 9B

Other Information

Item 9C

Disclosure Regarding Foreign Jurisdictions that Prevent

Inspections

PART III

Item 10

Directors, Executive Officers and Corporate Governance

Item 11

Executive Compensation

Item 12

Security Ownership of Certain Beneficial Owners

and Management and

Related Stockholder Matters

Item 13

Certain Relationships and Related Transactions, and Director

Independence

Item 14

Principal Accountant Fees and Services

PART IV

Item 15

Exhibits and Financial Statement Schedules

Item 16

Form 10-K Summary

PART I POPULAR, INC.

ITEM 1. BUSINESS

General

Popular

a diversified,

publicly-owned financial

holding company,

registered under

the Bank

Holding Company

Act

1956, as

amended (the “BHC Act”), and subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the

“Federal Reserve Board”). Popular was incorporated in 1984 under the laws of the Commonwealth of Puerto Rico and is the

largest

financial institution

based in Puerto

Rico, with

consolidated assets of

$67.6 billion, total

deposits of

$61.2 billion

and stockholders’

equity of $4.1 billion at

December 31, 2022. At December 31,

2022, we ranked among the

50 largest U.S. bank holding companies

based on total assets according to information gathered

and disclosed by the Federal Reserve Board.

We operate in two principal markets:

●

Puerto Rico:

provide retail,

mortgage and

commercial banking

services through

our principal

banking subsidiary,

Banco

Popular

Puerto

Rico

(“Banco

Popular”

“BPPR”),

well

auto

and

equipment

leasing

and

financing,

investment

banking,

broker-dealer

and

insurance

services

through

specialized

subsidiaries.

BPPR’s

deposits

are

insured

under

the

Deposit Insurance

Fund (“DIF”)

of the

Federal Deposit

Insurance Corporation (“FDIC”).

The banking

operations of

BPPR are

primarily based in Puerto Rico, where BPPR has the

largest retail banking franchise.

●

Mainland

United

States:

provide

retail,

mortgage

and

commercial

banking

services

through

our

New

York-chartered

banking subsidiary,

Popular Bank (“PB” or

“Popular U.S.”), which has

branches in New York,

New Jersey and Florida;

as well

as commercial

direct financing

leases through

a specialized

subsidiary,

Popular Equipment

Finance LLC

in Minnesota.

PB’s

deposits are insured under the DIF of the FDIC.

●

BPPR

also

conducts

banking

operations

the

U.S.

Virgin

Islands,

the

British

Virgin

Islands

and

New

York.

addition

BPPR’s commercial

banking operations

in New

York

that include

direct loan

origination and

participating loans

originated by

PB,

BPPR

offers

holds

financial

products

National

scale

the

U.S.

market,

including

personal

loans

previously

originated

under

the

E-Loan

brand,

purchased

personal

loans

originated

third

parties,

issuing

co-branded

credit

cards

offerings

and

gathering

insured

institutional

deposits

via

online

deposit

gathering

platforms.

the

U.S.

and

British

Virgin

Islands, BPPR offers a range of banking products,

including loans and deposits to both retail

and commercial customers.

For further information about the Corporation’s results segregated by

its reportable segments, see “Reportable Segment Results” in

the Management’s Discussion

and Analysis of

Financial Condition and Results

of Operations section

(“MD&A”) and Note

37 to the

Consolidated Financial Statements included in this Form

10-K.

Transformation Initiative:

The

Corporation

launched

significant,

multi-year,

broad-based

technological

and

business

process

transformation

during

the

second half of 2022.

The needs and expectations of our clients, as well

as the competitive landscape, have evolved, compelling us

to make important investments in our technological infrastructure and adopt more agile practices. We

believe these investments will

result in an enhanced digital experience for our clients, as

well as better technology and more efficient processes for our employees,

and make us a more efficient and

profitable company, allowing us to

achieve a 14% return on tangible common equity target by

the

end of 2025.

Our technology and business transformation

will be a significant

priority for the Corporation over

the next three years

and beyond. Refer to the Overview section

of Management’s Discussion and Analysis included in

this Form 10-K for information on

this transformation initiative and other recent significant

events that have impacted or will impact

our current and future operations.

Lending Activities

We concentrate our lending activities in the following areas:

(1) Commercial.

Commercial loans are comprised of (i) commercial and industrial (“C&I”) loans and leases to commercial customers

for

use

normal

business

operations

and

finance

working

capital

needs,

equipment

purchases

other

projects,

and

(ii)

commercial real

estate (“CRE”) loans

(excluding construction loans)

for income-producing real

estate properties as

well as

owner-

occupied properties. C&I

loans are underwritten

individually and usually

secured with the

assets of the

company and the

personal

guarantee

the

business

owners. CRE

loans consist

loans

for

income-producing real

estate

properties and

the financing

owner-occupied facilities

if there

is real

estate as

collateral. Non-owner-occupied

CRE loans

are generally

made to

finance office

and

industrial buildings,

healthcare facilities,

multifamily buildings

and

retail shopping

centers

and are

repaid through

cash

flows

related to the operation, sale or refinancing of the

property.

(2) Mortgage. Mortgage

loans include residential

mortgage loans to

consumers for the

purchase or refinancing

of a

residence and

also include residential construction loans made

to individuals for the construction of refurbishment

of their residence.

(3) Consumer.

Consumer loans are mainly

comprised of personal loans,

credit cards, and automobile

loans, and to

a lesser extent

home equity lines of credit (“HELOCs”) and other

loans made by banks to individual borrowers.

(4)

Construction.

Construction

loans

are

CRE

loans

companies

developers

used

for

the

construction

commercial

residential property for which repayment will be generated by the sale

or permanent financing of the property.

Our construction loan

portfolio primarily consists of retail, residential (land and

condominiums), office and warehouse product types.

(5) Lease Financings.

Lease financings are offered by BPPR and are

primarily comprised of automobile loans/leases made through

automotive dealerships and equipment lease financings.

Business Concentration

Since our

business activities

are currently concentrated

primarily in

Puerto Rico,

our results

of operations

and financial

condition are dependent upon the general trends of

the Puerto Rico economy and, in particular,

the residential and commercial real

estate markets. The concentration of our

operations in Puerto Rico exposes us

to greater risk than other

banking companies with a

wider

geographic

base.

Our

asset

and

revenue

composition

geographical

area

presented

“Financial

Information

about

Geographic Areas” below and in Note 37 to the Consolidated

Financial Statements included in this Form 10-K.

Our loan portfolio is diversified by loan category.

However, approximately 57% of our loan portfolio at December 31, 2022 consisted

of real estate-related

loans, including residential

mortgage loans, construction

loans and commercial

loans secured by

commercial

real estate. The table below presents the distribution

of our loan portfolio by loan category at

December 31, 2022.

Loan category

(Dollars in millions)

BPPR

POPULAR

C&I

$3,796

$2,043

$5,839

CRE

4,627

5,273

9,900

Construction

147

611

758

Leasing

1,586

Consumer

6,281

317

6,598

Mortgage

6,110

1,287

7,397

Total

$22,547

100

$9,531

100

$32,078

100

Except for

the Corporation’s

exposure to

the Puerto

Rico Government

sector,

no individual

or single

group of

related accounts

considered material

in relation

to our

total assets

or deposits,

or in

relation to

our overall

business.

For a

discussion of

our loan

portfolio, our

deposits portfolio

and our

exposure to

the Government

of Puerto

Rico, see

“Financial Condition

– Loans”,

“Financial

Condition

–

Deposits”

and

“Credit

Risk

–

Geographical and

Government

Risk” in

the

MD&A

and

Note

Commitment and

Contingencies to the Consolidated Financial Statements

included in this

Form 10-K.

Credit

Administration

and

Credit

Policies

Interest

from our

loan portfolios

is our

principal source

of revenue.

Whenever we

make loans,

we expose

ourselves

credit

risk.

Credit

risk

controlled

and

monitored

through

active

asset

quality

management,

including

the

use

lending

standards,

thorough

review

potential

borrowers

and through

active

asset quality

administration.

Business

activities

that

expose

us to

credit

risk are

managed

within

the

Board

of Director’s

Risk Management policy,

and the Credit Risk Tolerance

Limits policy,

which establishe

limits

that

consider

factors

such

as maintainin

a prudent

balance

of risk-taking

across

diversified

risk types

and business

units,

compliance

with regulator

guidance,

and

controlling

the

exposure

to lower

credit

quality

assets.

We maintain

comprehensive

credit policies

for all lines of

business in order

to mitigate credit

risk. Our credit

policies

are

approved by

our Board

of Directors.

These policies set

forth,

among

other

things,

the objectives, scope and

responsibilities of the

credit

management cycle.

Our

internal

written

procedures

establish

underwriting

standards

and

procedures

for

monitoring

and

evaluating

loan

portfolio

quality

and

require

prompt

identificatio

and

quantificatio

asset

quality

deterioration

potential

loss

ensure

the

adequacy

the

allowance

for

credit

losses.

These

written

procedures

establish

various

approval

and

lending

limit

levels,

ranging

from

bank

branch

department

officers

managerial

and

senior

management

levels.

Approval

levels are

primarily

determined

by the

amount,

type

of loan

and risk

characteristics

of the credit

facility.

Our

credit

policies

and

procedures

establish

documentation

requirements

for

each

loan

and

collateral

type,

when

applicable,

during

the

underwriting,

closing

and

monitoring

phases.

For

commercial

and

construction

loans,

during

the

initial

loan

underwriting

process,

the

credit

policies

require,

minimum,

historical

financial

statements

tax

returns

the

borrower,

an analysis

of financial

information

contained

credit

approval

package,

risk

rating

determination

and

reports

from

credit

agencies

and appraisal

for

real

estate-related

loans when applicable

The credit

policies

also

set

forth

the

required

closing

documentation

depending

on the

loan

and the

collateral

type.

Although

we originat

most

of our

loans

internally

in both

the

Puerto

Rico

and mainlan

United

States

markets,

occasionally

purchase

participate

loans

originated

other

financial

institutions.

When

purchase

participate

loans

originated

others,

conduct

the

same

underwriting

analysis

the borrower

and apply

the

same

criteria

as we do

for

loans

originated

by us. This also

includes

a review

of the

applicable

legal

documentation.

Refer

the

Credit

Risk

section

the

MD&A

included

this

Form

10-K

for

information

management

committees and divisions with responsibilities for establishing

policies and monitoring the Corporation’s credit risk.

Loan

extensions

renewals

and restructurings

Loans with

satisfactory

credit

profiles

can be

extended,

renewed

or restructured

Many commercia

loan facilities

are

structured

as lines

of credit, which

are mainly

one year

in term

and therefore

are required

to be renewed

annually.

Other

facilities

may be restructure

or extended

from time

to time based

upon changes

in the

borrower’s

business

needs,

use

funds,

timing

completion

projects

and

other

factors.

the

borrower

not

deemed

have

financial

difficulties

extensions,

renewals

and restructuring

are done

in the

normal

course

of busines

and the

loans

continue

to be recorde

as performing.

evaluate

various

factors

determine

borrower

experiencing

financial

difficulties.

Indicators

that

the

borrower

experiencing

financial difficultie

include,

for example:

(i)

the borrower

is currently

in default on

any of its debt

or it is

probable tha

the borrower

would be

in payment

default on

any of

its debt

in th

foreseeable

future

without

the modificatio

(ii)

the

borrower

has declare

or is in

the

process

of declarin

bankruptcy;

(iii)

there

is significan

doubt

as to

whether

the

borrower

will

continue

going

concern;

(iv)

the

borrower

has

securities

that

have

been

delisted,

are

the

process

being

delisted,

are

under threa

of bein

delisted

from

an exchange

;

(v) based

on estimate

and projection

that

only

encompass

the

current

business

capabilities

the

borrower

forecasts

that

its

entity-specifi

cash

flows

will

insufficien

service

the

debt

(both

interest

and

principal)

accordance

with

the

contractual

terms

the

existing

agreement

through

maturity;

and

(vi)

absent

the

current

modification,

the

borrower

cannot

obtain

funds

from

sources

other

than

the

existing

creditors

effective

interest

rate

equal to the current market

interest

rate for similar

debt for a non-trouble

debtor.

have

specialized

workout

officers

who

handle

the majority

commercial

loans

that

are

past

due

days

and

over,

borrowers

experiencing

financial

difficulties

and loans

that

are considere

problem

loans

based

on their

risk profile

As a

general

policy,

not

advance

additional

money

borrowers

who

have

loans

that

are

days

past

due

over.

commercial

and

construction

loans,

certain

exceptions

may

be approve

under

certain

circumstances,

including

(i) when

past

due

status

is administrativ

in nature,

such

as expiration

of a loan

facility

before

the

new documentatio

is executed,

and not as

a result

of paymen

or credit

issues;

(ii) to

improve

our collateral

position

otherwise

maximize

recovery

mitigate

potential

future

losses;

and

(iii)

with

respect

certain

entities

that,

although

through

common

ownership

are

not

cross

defaulted

nor

cross-collateralized

and

are

performing

satisfactorily

under

their

respective

loan

facilities.

Such

advances

are

underwritten

and

approved

following

our

credit

policy

guidelines

and

limits,

which

are

dependent

the

borrower’s

financial

condition,

collateral

and guarantee,

among

others.

In addition

to the legal

lending limit

established under

applicable

state banking

law, discusse

in detail

below,

business

activities

that

expose the

Corporation to

credit

risk

are managed

within

guidelines described

in the

Credit

Risk Tolerance

Limits

policy.

Limits are defined for

loss and credit

performance metrics, portfolio composition and

concentration, and industry and

name-

level,

which

monitors

lending

concentration

single

borrower

group

borrowers,

including

specific

lending

limits

based

on industr

or other

criteria,

such

as a percentage

of the

banks’

capital.

Refer to Note 2 and Note 9 to the Consolidated Financial Statements included

in this Form 10-K, for additional information

on troubled debt restructuring (“TDRs”).

Competition

The

financial

services

industry

which

operate

highly

competitive.

Puerto

Rico,

our

primary

market,

the

banking

business

highly

competitive

with

respect

originatin

loans,

acquiring

deposits

and

providing

other

banking

services.

Most

our

direct

competitio

for

our

products

and

services

comes

from

commercial

banks and

credit unions.

The

principal

competitors

for

BPPR

include

locally

based

commercial

banks

and

few

large

U.S.

and

foreign

banks

with

operations

in Puerto

Rico.

While

the

number

banking

competitors

Puerto

Rico

has

been

reduced

recent

years

result

consolidations,

these

transactions

have

allowed

some

our

competitors

gain

greater

resources,

such

broader

range of

products

and services.

also

compete

with

specialized

players

in th

local

financial

industry

that

are

not subje

the

same

regulatory

restrictions

as domestic

banks

and bank holdin

companies.

Those

competitors

include

brokerage

firms,

mortgage

companies,

insurance

companies,

automobile

and

equipment

finance

companies,

local

and

federal

credit

unions

(locally

known

“cooperativas”

credit car

companies,

consumer

finance

companies,

institutional

lenders

and other

financial

and non-financia

institutions

and

entities.

Credit

unions

generally

provide

basic

consumer

financial

services.

These

competitors

collectively

represent a significant

portion of the

market and have

a lower cost structure

and fewer regulatory

constraints.

the

United

States

continue

face

substantial

competitive

pressure

our

footprint

resides

the

two

large,

metropolitan markets of

New York

City / Northern

New Jersey and

the greater Miami

area.

There is a

large number of

community

and

regional

banks

along

with

national

banking

institutions

present

both

markets,

many

which

have

larger

amount

resources than us.

In both

Puerto Rico

and the

United States,

the primary

factors in

competing

for business

include

pricing,

convenience

of branch

locations

and other

delivery

methods,

range of

products offered,

and the

level of

service delivered.

We must

compete

effectively

along

all

these

parameters

successful.

experience

pricing

pressure

some

our

competitors

seek

increase

market

reducing

prices

for

services

the

rates

charged

loans,

increasing

the

interest

rates

offered

deposits

or offering

more flexible

terms. Increased

competition

could require

that we

increase

the rates

offered

on deposits

and

lower the rates

charged on loans,

which could adversely

affect our profitability.

Economic

factors,

along

with

legislative

and

technological

changes,

have

ongoing

impact

the

competitive

environment

within

the financia

services

industry.

We work

to anticipat

and adap

to dynamic

competitive

conditions

whether

through developing

and marketing

innovative

products

and services,

adopting

or developin

new technologie

that

differentiat

our product

and

services

cross-marketing

providing

personalized

banking

services.

strive

distinguish

ourselves

from

other

banks

and

financial

services

providers

in our

marketplace

by providin

a high

level

of service

to enhance

customer

loyalty

and to attrac

and retain

business.

However,

we can

provide

no assuranc

the

effectivenes

these

effort

our

future

busines

results

operations

and

our

continue

ability

anticipat

and

adapt

changing

conditions,

and

sufficientl

improve

our

services

and/or

banking

products,

order

successfully

compete

our

primary

service

areas.

Human Capital Management

Attracting, developing, and retaining top

talent in an environment that

promotes wellness, inclusion, learning, and transparency

is a

fundamental pillar of our long-term strategy.

As of December 31, 2022, Popular

employed approximately 8,900 employees, none of

whom are represented by a collective bargaining group

Employee Well-Being & Safety

We are

cognizant that

our journey

to become

a better

organization is

dependent on

fostering our

employees’ health

and financial

wellbeing. The health and wellness of our employees are the foundation of our ability to support our customers and the communities

we serve. The

Corporation offers our employees

a comprehensive benefits package, including,

but not limited to,

health insurance,

paid time off,

and wellness initiatives. Our full

and part-time employees have access

to affordable healthcare with Popular

covering

90%

the

premium. Additionally,

the

Corporation promotes

employee

health

encouraging annual

physical

exams and

maintaining

Health

and

Wellness

Center

its

Puerto

Rico-based

corporate

offices

staffed

with

healthcare

providers,

where

employees and eligible dependents can complete their physical exam,

receive acute care or visit a nutritionist or psychologist free of

charge. The

Health and

Wellness Center

received more

than 18,600

in-person and

virtual visits

from employees

during 2022

and

acted as a key component to effectively manage the

challenges imposed by the COVID-19 pandemic.

The

Corporation

also

provides

targeted

benefits

aimed

promoting

work-life

balance.

For

example,

the

Corporation’s

time

off

program includes

community service

leave, paid

parental leave

(including for

childbirth, adoption,

and bonding

time)

and flexible

work arrangements. In

addition, the Corporation

implemented a hybrid

work model, for

which 49%

of our

population is eligible.

support

our

employees’

emotional

well-being

during

the

pandemic,

have

continued

enhancing

our

Well-Being

Academy

adapting our Employee Assistance Program to offer virtual mental health sessions geared at managing work and

life challenges.

addition,

the

Corporation

offers

physical

fitness

events

and

breaks,

well

employee

workshops

personal

financial

management.

Popular also

offers a

401(k) savings and

investment plan. Popular

matches $0.50 for

every dollar the

employee contributes to

the

401(k) plan, up to 8%

of their salary.

Moreover, the organization offers

a profit-sharing plan, which depends on the

achievement of

certain

predetermined

financial

goals,

through

which

employees

may

receive

eligible

compensation

(capped

$70,000), partially

in cash

and partially

as a

401(k) contribution.

Furthermore, since

2017 we

have invested

in our

compensation

strategy,

introducing a

job leveling

framework, adjusting

salaries to

better compete

with the

market, offering

merit increases,

and

raising our base salary to $13

per hour in Puerto Rico, $15

per hour in the Virgin Islands,

$17 per hour in Florida, and $20

per hour

in New York

and New Jersey.

During January 2023, there

was an additional

increase to $15

per hour for

Puerto Rico and

$16 per

hour in the Virgin Islands.

Talent Development

Popular strives

to develop

the skills

of its

employees and

leaders to

sustain the

Corporation’s competitive

advantage. Employees

are subject to

mandatory trainings in

connection with regulatory compliance

matters and other

key topics throughout

the year.

Our

40,000 square

foot Development

Center in

San Juan,

Puerto Rico

offers training

sessions, activities,

and workshops

year-round.

During

2022,

the

Corporation

continued

offering

virtual

training

after

effectively

transitioning

most

sessions

provided

the

Development Center to a virtual setting to continue impacting employee growth despite the pandemic. More than 300 sessions were

delivered,

with

around

6,500

participating

employees.

Our

English

Program

helps

employees

whose

first

language

Spanish

strengthen

their

English

language

skills

and

feel

confident

speaking,

reading,

and

writing

business

personal

settings.

Additionally, the

English Placement Test

revealed that in 2022

the number of

intermediate learners increased from 4%

to 17% and

advanced learners

from 45%

to 53%,

compared to

2021.

Popular also

continues to

promote the

use of

LinkedIn Learning,

which

features over 16,000 on-demand e-learning courses

available anytime and anywhere, to strengthen

and advance the Corporation’s

development

strategies

for

all

its

employees.The

organization’s

strong

training

and

development

framework

has

contributed

internal growth opportunities for our employees. As

a result, the Corporation’s internal mobility

rate in 2022 was 33%. This

included

employees who applied or were selected for

vacancies, were promoted, or had lateral movements.

Popular received

the BAI

Innovation in

Learning &

Development Award for

being a

Talent

Lab &

Skills Accelerator.

This year,

performed an internal talent

and skills inventory of

83% of employees to

reveal underutilized skills and

education. The organization

invested in

the development

of 126

practitioners who

went through

Accelerated Development

Programs focused

on data

science

and analytics, process excellence and program management,

among other topics.

Recognizing that leadership development is crucial to driving

results, keeping employees engaged, and achieving the Corporation’s

strategic

goals, Popular

has

implemented programs

aimed

strengthening and

developing leadership

skills

and

effective

talent

management. As part of the Corporation’s Executive Leadership Development

strategy, readiness courses are offered to employees

in topics such as change management, conscious inclusion, leading

hybrid teams, and better conversations focused on the return to

office scenarios.

Our

organizational

development

strategy

aimed

creating

organizational

and

leadership

effectiveness,

while

advancing

organizational readiness

to succeed

based on

our future

needs. There

were more

than 80

organizational development

and team

interventions

and

exercises

facilitated

during

2022,

spanning

the

areas

change

management,

team

alignment

and

leader

effectiveness.

Diversity, Equity, and Inclusion

At Popular,

we value our

differences and strive

to improve the

workplace experience for

all. As of

December 31, 2022, 65%

of the

Corporation’s employees

were female,

while 35%

were male.

Women accounted

for 64%

of first

and mid-level

management and

33%

executive-level management

of such

date. The

Corporation also

maintains

a multidisciplinary

council,

headed by

our

Corporate

Diversity

Officer,

which

helps

develop

and

implement

initiatives

support

the

Corporation’s

Diversity,

Equity,

and

Inclusion (DE&I)

policy and

strategy.

The Corporation’s

DE&I strategy

seeks to

broaden the

inclusion, employment

advancement

and development

of underrepresented

communities in

the workplace,

as well

as the

utilization of

suppliers owned,

controlled, or

operated by

women or

diverse racial

or ethnic

groups. In

addition, this

strategy seeks

to prepare

the Corporation’s

employees to

recognize and value the differences of those we

serve.

We are

committed to

fair pay

and conduct

analyses on

such matter

on an

annual basis.

The 2022

company-wide market

salary

adjustments resulted

in an

overall improvement

to our

gender gap

of +1.5

percentage points,

compared to

the end

of 2021.

Our

gender

pay

gap

continues

narrow

improving

3.1

percentage

points

over

the

last

five

years.

Additionally,

for

the

second

consecutive year (2022-2023), Popular was honored to

be included in the Bloomberg Gender Equality

Index (GEI).

The Corporation has

also expressed public

support for

movements advocating for

equality such as

Pride Month.

In 2021,

Popular

established its first Employee Resource Group (ERG) for

our LGBTQ+ employees to better serve the interests of

the community and

create awareness

and engagement

among employees.

During 2022, this

group was composed

of 245

members and

performed 6

activities

within

the

organization

and

community.

Furthermore,

during

2022

the

following

two

additional

ERGs

were

launched:

Women’s

and

Functional

Diversity.

Popular

also

supports

victims

gender-based

violence

and

has

Gender

and

Domestic

Violence Policy, which grants a paid 15-day leave due to gender or domestic

violence, stalking and sexual harassment.

Employee Experience

Popular aims to

provide an excellent

employee experience that

inspires its employees to

provide customers and

communities with

the best

service. To

understand its

employees’ experience, the

Corporation conducts

anonymous pulse

and engagement

surveys

(including the

Great Place

Work survey)

as well

an exit

survey to

identify areas

opportunity and

set

and monitor

action

plans.

The

2022

employee satisfaction

scores

increased 2

points from

2020

and

points

since

2016.

seek

continuously

measure and improve the employee experience with aims to increase employee productivity while contributing to enhance customer

satisfaction and improve business results.

The

Corporation

capitalizes

interactive

dashboard

that

encompasses

data

surrounding

different

people-related

topics

support

the

people

strategy,

data-driven

decision-making

and

environmental,

social

and

governance

(“ESG”)

monitoring.

The

dashboard provides

senior management

with visibility

over people

metrics such

as workforce

demographics, hiring,

turnover,

and

Diversity, Equity, and Inclusion.

As of year-end 2022, our turnover rate was 10.8%, improving 1.9 percentage points since 2021. Additionally, voluntary turnover rate

was 8.8%, improving 2.3 percentage points since 2021.Throughout 2022, the Corporation saw

a stabilization in turnover, which

had

been

increasing

for

the

past

seven

quarters.

The

dashboard

metrics,

such

turnover,

help

shape

our

attraction

and

retention

strategy.

Board Oversight

The Talent

and Compensation Committee

of the Corporation’s

Board of Directors

has oversight responsibility for

the Corporation’s

human

capital

management.

part

its

responsibilities,

the

Talent

and

Compensation

Committee

reviews

and

advises

management

the

Corporation’s

general

compensation

philosophy,

programs,

and

policies,

and

the

Corporation’s

talent

acquisition

and

development,

workforce

engagement,

succession

planning,

culture,

diversity,

equity

(including

pay

equity)

and

inclusion, among other human capital topics.

encourage

you

review

our

Corporate

Sustainability

Report

published

www.popular.com

for

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,

not,

and

will

not

deemed

be,

part

this

Form

10-K

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

Congress

and

state

legislatures

and

federal

and

state

regulatory

agencies.

Any

change

the

laws

and

regulations

applicable

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

1956

(as

amended,

the

“BHC

Act”).

BPPR

and

are

subject

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

Financial

Services

(the

“NYSDFS”).

Popular’s

broker-dealer

investment adviser

subsidiary,

Popular Securities,

LLC (“PS”)

and investment

advisor subsidiary

Popular Asset

Management LLC

(“PAM”)

are subject

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”),

modified

the

Economic

Growth,

Regulatory

Relief,

and

Consumer

Protection

Act

and

the

federal

banking

regulators’

2019

“Tailoring

Rules,”

banking

organizations are

categorized based

on status

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, 2022, Popular

had total consolidated assets of $67.6 billion.

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 affiliates

would

exceed

20%

the

bank’s

capital

stock

and

surplus.

addition,

any

transaction

between

BPPR

PB,

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

a source

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

the

bank

holding

company

federal

banking

agency

maintain

the

capital

subsidiary

depository

institution

will

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

bank holding

company with

$250 billion

or more

in total

consolidated assets

(or that

is a

Category III

firm based

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

the

event

material

financial

distress

failure.

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 2021,

the FDIC

issued a

Statement on

Resolution Plans

for Insured

Depository Institutions,

which, among

other things,

establishes a three-year

filing cycle

for banks

with $100

billion or

sponsored

entities,

and

certain

obligations

the

Commonwealth

Puerto

Rico

and

its

agencies

and

assets

held

the

Corporation’s international

banking entities.

facilitate the

comparison of

all interest

related to

these assets,

the interest

income

has

been

converted

taxable

equivalent

basis,

using

the

applicable

statutory

income

tax

rates

for

each

period.

The

taxable

equivalent computation

considers the

interest expense

and other

related expense

disallowances required

by the

Puerto Rico

tax

law. Under Puerto Rico tax law,

the exempt interest can be deducted up to the amount of taxable

income. Net interest income, on a

taxable

equivalent

basis,

non-GAAP

financial

measure.

Management

believes

that

this

presentation

provides

meaningful

information since it facilitates the comparison of revenues

arising from taxable and exempt sources.

Net interest

income, on

a taxable

equivalent basis,

as used

by the

Corporation may

not be

comparable to

similarly named

non-

GAAP financial measures used by other companies.

Financial highlights for the year ended December 31,

2022

The Corporation’s net income for the year ended December 31, 2022 amounted to

$1.1 billion, compared to a net income of $934.9

million for 2021.

The discussion

that follows

provides highlights

of the

Corporation’s results

operations for

the year

ended December

31, 2022

compared to the results of

operations of 2021. It also

provides some highlights with respect to

the Corporation’s financial condition,

credit

quality,

capital and

liquidity.

Table

2 presents

a three-year

summary of

the components

net income

as a

percentage of

average total

assets. For

a discussion

of our

2021 results

of operations compared

with 2020,

see “Management’s

Discussion and

Analysis of

Financial Condition

and Results

of Operations”

in our

Annual Report

on Form

10-K for

the year

ended December

31,

2021.

Table 2 - Components of Net

Income as a Percentage of Average Total

Assets

2022

2021

2020

Net interest income

2.98

2.75

3.12

Provision for credit (losses) benefit

(0.11)

0.27

(0.49)

Mortgage banking activities

0.06

0.07

0.02

Net (loss) gain and valuation adjustments on investment

securities

(0.01)

0.01

Other non-interest income

1.18

0.83

Total net interest

income and non-interest income, net of provision

for credit losses

4.10

3.92

3.49

Operating expenses

(2.40)

(2.18)

(2.45)

Income before income tax

1.70

1.74

1.04

Income tax expense

(0.19)

(0.43)

(0.19)

Net income

1.51

1.31

0.85

Net interest income for the

year ended December 31, 2022 was

$2.2 billion, an increase of $209.8

million when compared to 2021.

The

increase in

net interest

income was

mainly

driven

higher interest

income

from

money market

investments due

higher

interest rates,

higher income

from investment

securities and

higher interest

income from

commercial and

consumer loans

due to

higher volumes and

yields. The

net interest margin

for the year

ended December 31,

2022 was 3.11

compared to 2.88%

for the

same period in 2021, driven by higher average volume of earning assets

and higher interest rates as the Federal Reserve increased

the Federal Funds Rate

during 2022.

On a taxable equivalent

basis, net interest margin was

3.46% in 2022, compared to

3.19% in

2021. Refer to the Net Interest Income section

of this MD&A for additional information.

The

Corporation’s total

provision for

credit losses

reflected an

expense of

$83.0 million

for the

year ended

December 31,

2022,

compared to

a reserve

release of

$193.5 million

for

2021. The

expense for

the year

2022

was mostly

driven by

changes in

the

economic scenario, higher loan volumes

and changes in credit

quality.

The Corporation continued to exhibit

favorable credit quality

trends

with

low

levels

net

charge-offs

and

decreasing

non-performing loans.

Non-performing assets

totaled

$528.6

million

December 31, 2022, reflecting a decrease of $104.4 million when compared to December 31, 2021. Refer to the Provision for Credit

Losses and

Credit Risk

sections of

this MD&A

for information

on the

allowance for

credit losses,

non-performing assets,

troubled

debt restructurings, net charge-offs and credit quality metrics.

Non-interest

income

for

the

year

ended

December

31,

2022

amounted

$897.1

million,

increase

$254.9

million,

when

compared with 2021, mostly due to:

the $257.7 million gain related to the

Evertec Transactions and related accounting adjustments

and

higher

service

fees

due

higher credit

card

fees

and

merchant

network

business fees

result

the

revenue sharing

agreement entered

into

in connection

with the

Evertec Transactions.

Refer to

the

Non-Interest Income

section of

this

MD&A for

additional information on the major variances of

the different categories of non-interest income.

Total

operating expenses amounted to $1.7 billion for the year 2022, reflecting an increase of

$197.1 million, when compared to the

same period

in 2021,

mainly due

to higher

personnel costs

reflecting salary increases

and a

higher headcount,

professional fees,

technology

and

software

expenses,

reflecting

the

impact

the

investment

the

transformation

initiative,

higher

business

promotions expense

driven by

customer loyalty

programs and

a $17.3

million expense

associated with

the Evertec

Transactions.

Refer to the Operating Expenses section of this MD&A

for additional information.

Income tax expense

amounted to $132.3 million

for the year

ended December 31, 2022,

compared with an

income tax expense of

$309.0 million

for the

previous year.

The decrease

in income

tax expense

for the

year is

mainly due

the impact

of the

partial

reversal of the deferred tax asset valuation allowance of the U.S. Operations and, higher taxable income that was exempt or subject

to preferential tax rates. Refer to

the Income Taxes

section in this MD&A and

Note 35 to the Consolidated Financial

Statements for

additional information

on income taxes.

At December

31, 2022,

the Corporation’s

total assets

were $67.6

billion, compared

with $75.1

billion at

December 31,

2021. The

decrease of $7.5 billion is mainly driven by lower money market

investments due to a decrease in deposits mainly

in the Puerto Rico

public sector, partially offset

by an increase in loans held-in-portfolio mainly in the commercial and

consumer portfolios.

Refer to the

Statement of Financial Condition Analysis section of

this MD&A for additional information.

Deposits amounted to

$61.2 billion at

December 31, 2022,

compared with $67.0

billion at December

31, 2021. Table

8 presents a

breakdown of deposits

by major categories. The

decrease in deposits was

mainly due to

lower Puerto Rico

public sector deposits.

The

Corporation’s

borrowings

amounted

$1.4

billion

December 31,

2022,

compared

$1.2

billion at

December 31,

2021.

Refer to Note 17 to the Consolidated Financial

Statements for detailed information on the Corporation’s

borrowings.

Refer

Table

the

Statement

Financial

Condition

Analysis

section

this

MD&A

for

the

percentage

allocation

the

composition of the Corporation’s financing to total assets.

Stockholders’ equity amounted to $4.1 billion at December 31, 2022, compared to

$6.0 billion at December 31, 2021. The decrease

was principally due to

higher accumulated unrealized losses on debt

securities available-for-sale and the impact of

two accelerated

repurchase

transactions

completed

during

2022,

declared

dividends,

partially

offset

net

income

for

the

year.

The

Corporation and its

banking subsidiaries continue to

be well-capitalized at December

31, 2022. The Common

Equity Tier

1 Capital

ratio at December 31, 2022 was 16.39%, compared

to 17.42% at December 31, 2021.

For further discussion of operating results, financial

condition and business risks refer to the narrative

and tables included

herein.

The shares of the Corporation’s common stock are traded

on the Nasdaq Global Select Market under the symbol

BPOP.

CRITICAL ACCOUNTING POLICIES / ESTIMATES

The accounting and

reporting policies followed by

the Corporation and its

subsidiaries conform with generally

accepted accounting

principles in

the United

States of America

(“GAAP”) and

general practices within

the financial services

industry. The

Corporation’s

significant

accounting policies

are described

detail in

Note 2

to the

Consolidated Financial

Statements and

should

read in

conjunction with this section.

Critical accounting policies

require management to

make estimates and

assumptions, which involve significant

judgment about the

effect of matters

that are inherently uncertain

and that involve a

high degree of subjectivity.

These estimates are made

under facts

and circumstances

at a

point in

time and

changes in

those facts

and circumstances

could produce

actual results

that differ

from

those

estimates. The

following MD&A

section is

a summary

of what

management considers

the Corporation’s

critical accounting

policies and estimates.

Fair Value Measurement of Financial Instruments

The Corporation

currently measures

at fair

value on

a recurring

basis its

trading debt

securities, debt

securities available-for-sale,

certain equity securities,

derivatives and mortgage servicing

rights. Occasionally,

the Corporation is

required to record

at fair value

other assets

on a

nonrecurring basis,

such as

loans held-for-sale, loans

held-in-portfolio that

are collateral

dependent and

certain

other assets. These nonrecurring fair value

adjustments typically result from the application of lower of

cost or fair value accounting

or write-downs of individual assets.

The

Corporation categorizes

its

assets and

liabilities measured

at fair

value under

the three-level

hierarchy.

The level

within the

hierarchy is based on whether the inputs to

the valuation methodology used for fair value measurement

are observable.

The

Corporation

requires

the

use

observable

inputs

when

available,

order

minimize

the

use

unobservable

inputs

determine fair value. The inputs or methodologies used for valuing securities are

not necessarily an indication of the risk associated

with investing

in those

securities. The

amount of

judgment involved

in estimating

the fair

value of

a financial

instrument depends

upon the availability of

quoted market prices or observable market

parameters. In addition, it may

be affected by other

factors such

as the

type of instrument,

the liquidity of

the market for

the instrument, transparency

around the inputs

to the valuation,

as well

the

contractual

characteristics

the

instrument.

Broker

quotes

used

for

fair

value

measurements

inherently

reflect

any

lack

liquidity in the market since they represent an exit

price from the perspective of the market participants.

Trading Debt Securities and Debt Securities Available-for-Sale

The

majority

the

values

for

trading

debt

securities

and

debt

securities

available-for-sale

are

obtained

from

third-party

pricing

services and

are validated

with alternate

pricing sources

when available.

Securities not

priced by

a secondary

pricing source

are

documented

and

validated

internally

according

their

significance

the

Corporation’s

financial

statements.

Management

has

established materiality thresholds according to the investment class to monitor and investigate material deviations in prices obtained

from the primary pricing service provider and the

secondary pricing source used as support for

the valuation results.

Inputs are evaluated to

ascertain that they consider current

market conditions, including the

relative liquidity of the

market. When a

market quote

for a

specific security

is not

available, the

pricing service

provider generally

uses observable

data to

derive an

exit

price

for

the

instrument,

such

benchmark

yield

curves

and

trade

data

for

similar

products.

the

extent

trading

data

not

available, the

pricing service provider

relies on specific

information including dialogue

with brokers,

buy side clients,

credit ratings,

spreads to

established benchmarks and

transactions on similar

securities, to

draw correlations based

on the

characteristics of

the

evaluated instrument. If

for any

reason the pricing

service provider cannot

observe data required

to feed

its model,

it discontinues

pricing the instrument.

Furthermore, management assesses the fair value of its

portfolio of investment securities at least on a quarterly

basis. Securities are

classified

the

fair

value

hierarchy

according

product

type,

characteristics

and

market

liquidity.

the

end

each

period,

management assesses the valuation hierarchy for each asset or liability measured. The fair

value measurement analysis performed

the

Corporation

includes

validation

procedures

and

review

market

changes,

pricing

methodology,

assumption

and

level

hierarchy changes, and evaluation of distressed transactions.

Refer to

Note 28

to the

Consolidated Financial Statements for

a description of

the Corporation’s

valuation methodologies used

for

the assets and liabilities measured at fair value.

Loans and Allowance for Credit Losses

Interest on loans is accrued and recorded as

interest income based upon the principal amount

outstanding.

Non-accrual loans are those loans on which the

accrual of interest is discontinued. When a loan is

placed on non-accrual status, all

previously

accrued

and

unpaid interest

charged against

interest

income

and

the

loan

accounted for

either

a cash-basis

method or

on the

cost-recovery method.

Loans designated

as non-accruing

are returned

to accrual

status when

the Corporation

expects repayment of the remaining contractual principal and interest.

The determination as to the ultimate collectability of the loan’s

balance may involve management’s judgment in the evaluation of

the borrower’s financial condition and

prospects for repayment.

Refer to

the MD&A

section titled

Credit Risk,

particularly the

Non-performing assets

sub-section, for

a detailed

description of

the

Corporation’s non-accruing and charge-off policies by major loan

categories.

One of

the most

critical and

complex accounting

estimates is

associated with

the determination

of the

allowance for

credit losses

(“ACL”).

The

Corporation

establishes

ACL

for

its

loan

portfolio

based

its

estimate

credit

losses

over

the

remaining

contractual term

of the

loans, adjusted

for expected

prepayments, in

accordance with

Accounting Standards

Codification (“ASC”)

Topic

326.

ACL

recognized

for

all

loans

including

originated

and

purchased

loans,

since

inception,

with

corresponding

charge

the

provision

for

credit

losses,

except

for

purchased

credit

deteriorated

(“PCD”)

loans

explained

below.

The

Corporation follows a methodology to establish the ACL which includes a reasonable and

supportable forecast period for estimating

credit

losses,

considering

quantitative

and

qualitative

factors

well

the

economic

outlook.

part

this

methodology,

management evaluates

various macroeconomic

scenarios provided

by third

parties. At

December 31,

2022, management

applied

probability weights to the outcome of the selected

scenarios.

The

Corporation

has

designated

collateral

dependent

loans

secured

collateral

when

foreclosure

probable

when

foreclosure is

not probable but

the practical expedient

is used.

The practical expedient

is used

when repayment is

expected to

provided

substantially

the

sale

operation

the

collateral

and

the

borrower is

experiencing financial

difficulty.

The

ACL

collateral dependent loans

is measured based

on the fair

value of the

collateral less costs

to sell. The

fair value of

the collateral is

based on appraisals, which may be adjusted due to their

age, and the type, location, and condition of the

property or area or general

market conditions to reflect the expected change in value between the effective date of the appraisal and the measurement date.

addition, refer

to the

Credit Risk

section of

this MD&A

for detailed

information on

the Corporation’s

collateral value

estimation for

other real estate.

A restructuring constitutes a TDR when the Corporation

separately concludes that the restructuring constitutes a

concession and the

debtor

experiencing financial

difficulties.

For

information on

the Corporation’s

TDR

policy,

refer

Note

the

Consolidated

Financial Statements. The established framework captures the impact of

concessions through discounting modified contractual cash

flows,

both

principal

and

interest,

the

loan’s

original

effective

rate.

The

impact

these

concessions

combined

with

the

expected credit losses generated by the quantitative loss

models in order to arrive at the ACL.

Loans Acquired with Deteriorated Credit Quality

PCD loans are defined as those with evidence of a more-than-insignificant

deterioration in credit quality since origination. PCD loans

are initially recorded

at its purchase

price plus an

estimated ACL. Upon

the acquisition of

a PCD loan,

the Corporation recognizes

the

estimate

the

expected

credit

losses

over

the

remaining

contractual

term

each

individual

loan

ACL

with

corresponding addition to the

loan purchase price. The

amount of the purchased

premium or discount which

is not related to

credit

risk

amortized

over

the

life

the

loan

through

net

interest

income

using

the

effective

interest

method

that

approximates the effective interest method. Changes in

expected credit losses are recorded as an

increase or decrease to the ACL

with a corresponding charge

(reverse) to the provision

for credit losses in

the Consolidated Statements of

Operations. These loans

follow the same nonaccrual policies as non-PCD loans. Modifications of PCD

loans that meet the definition of a

TDR are accounted

and reported as such following the same processes

as non-PCD loans.

Income Taxes

Income

taxes

are

accounted

for

using

the

asset

and

liability

method.

Under

this

method,

deferred

tax

assets

and

liabilities

are

recognized based

on the

future tax

consequences attributable

to temporary

differences

between the

financial statement

carrying

amounts

existing

assets

and

liabilities

and

their

respective

tax

basis,

and

attributable

operating

loss

and

tax

credit

carryforwards. Deferred tax assets

and liabilities are measured

using enacted tax rates

expected to apply in

the years in

which the

temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates

is recognized in earnings in the period when

the changes are enacted.

The

calculation

periodic

income

taxes

complex

and

requires

the

use

estimates

and

judgments.

The

Corporation

has

recorded

two

accruals

for

income

taxes:

(i)

the

net

estimated

amount

currently

due

received

from

taxing

jurisdictions,

including

any

reserve

for

potential

examination

issues,

and

(ii)

deferred

income

tax

that

represents

the

estimated

impact

temporary differences between how the Corporation recognizes assets and

liabilities under accounting principles generally accepted

the

United

States

(GAAP),

and

how

such

assets

and

liabilities

are

recognized

under

the

tax

code.

Differences

the

actual

outcome of these future tax consequences could impact the Corporation’s financial position or its results of operations. In estimating

taxes, management assesses the relative

merits and risks of

the appropriate tax treatment of

transactions taking into consideration

statutory, judicial and regulatory guidance.

A deferred

tax asset

should be

reduced by

a valuation

allowance if based

on the

weight of

all available evidence,

it is

more likely

than

not

likelihood

than

50%)

that

some

portion

the

entire

deferred

tax

asset

will

not

realized.

The

valuation

allowance

should

sufficient

reduce

the

deferred

tax

asset

the

amount

that

likely

than

not

realized.

The

determination of whether a deferred

tax asset is realizable is

based on weighting all

available evidence, including both positive and

negative evidence.

The realization

of deferred

tax assets,

including carryforwards

and deductible

temporary differences,

depends

upon the existence of sufficient taxable income of the same character during the carryback or carryforward period. The realization of

deferred tax assets requires

the consideration of all

sources of taxable income

available to realize the

deferred tax asset, including

the

future

reversal

existing

temporary

differences,

future

taxable

income

exclusive

reversing

temporary

differences

and

carryforwards, taxable income in carryback years and

tax-planning strategies.

Management evaluates the

realization of the

deferred tax asset

by taxing

jurisdiction. The U.S.

mainland operations are

evaluated

a whole

since a

consolidated income

tax return

is filed;

on the

other

hand, the

deferred tax

asset related

to the

Puerto

Rico

operations

is evaluated

on an

entity by

entity basis,

since

no consolidation

allowed in

the income

tax filing.

Accordingly,

this

evaluation

composed

three

major

components:

U.S.

mainland

operations,

Puerto

Rico

banking

operations

and

Holding

Company.

For the

evaluation of

the realization

of the

deferred tax

asset by

taxing jurisdiction,

refer to

Note 35

to the

Consolidated Financial

Statements.

Under the Puerto Rico Internal Revenue Code, the

Corporation and its subsidiaries are treated as separate taxable

entities and are

not entitled to file

consolidated tax returns. The Code

provides a dividends-received deduction of 100%

on dividends received from

“controlled” subsidiaries subject to taxation in Puerto Rico

and 85% on dividends received from other

taxable domestic corporations.

Changes in

the Corporation’s

estimates can occur

due to changes

in tax

rates, new business

strategies, newly

enacted guidance,

and resolution

of issues

with taxing

authorities regarding

previously taken tax

positions. Such

changes could

affect the

amount of

accrued taxes. The Corporation has made

tax payments in accordance with

estimated tax payments rules. Any remaining

payment

will not have any significant impact on liquidity

and capital resources.

The valuation

of deferred

tax assets

requires judgment

in assessing

the likely

future tax

consequences of

events that

have been

recognized

the

financial

statements

tax

returns

and

future

profitability.

The

accounting

for

deferred

tax

consequences

represents management’s best

estimate of those

future events. Changes

in management’s current

estimates, due to

unanticipated

events, could have a material impact on the

Corporation’s financial condition and results of operations.

The Corporation establishes tax liabilities or reduces tax assets for uncertain tax positions when, despite its assessment that the tax

return positions are appropriate and supportable under local tax law, the Corporation believes it may not succeed in realizing the tax

benefit of certain

positions if challenged.

In evaluating

a tax position,

the Corporation determines

whether it is

more likely than

not

that the position will be sustained upon examination, including resolution

of any related appeals or litigation processes, based on the

technical

merits

the

position.

The

Corporation’s

estimate

the

ultimate

tax

liability

contains

assumptions

based

past

experiences, and judgments

about potential actions

by taxing jurisdictions

as well as

judgments about the

likely outcome of

issues

that have been raised by taxing jurisdictions. The tax

position is measured as the largest amount of benefit

that is greater than 50%

likely of being

realized upon ultimate settlement.

The Corporation evaluates these

uncertain tax positions each

quarter and adjusts

the related tax liabilities or

assets in light of changing

facts and circumstances, such as the

progress of a tax audit

or the expiration

of a

statute of

limitations. The Corporation

believes the

estimates and assumptions

used to

support its

evaluation of

uncertain tax

positions are reasonable.

The amount of

unrecognized tax benefits

may increase or

decrease in the

future for various

reasons including adding amounts

for

current

tax

year

positions,

expiration

open

income

tax

returns

due

the

statutes

limitation,

changes

management’s

judgment about

the level

of uncertainty,

status of

examinations, litigation

and legislative

activity and

the addition

or elimination

uncertain tax

positions. Although

the

outcome of

tax audits

is uncertain,

the Corporation

believes that

adequate amounts

of tax,

interest and penalties

have been provided

for any adjustments

that are expected

to result from

open years. From

time to time,

the

Corporation is audited

by various federal, state

and local authorities regarding

income tax matters. Although

management believes

its

approach

determining the

appropriate

tax

treatment

supportable

and

accordance

with

the

accounting standards,

possible that the final tax

authority will take a tax position that

is different than the tax

position reflected in the Corporation’s income

tax provision and other tax reserves. As each audit is conducted, adjustments, if any,

are appropriately recorded in the consolidated

financial

statement

the

period

determined.

Such

differences

could

have

adverse

effect

the

Corporation’s

income

tax

provision or

benefit, or

other tax

reserves, in

the reporting

period in

which such

determination is

made and,

consequently,

on the

Corporation’s results of operations, financial position and

/ or cash flows for such period.

Goodwill and Other Intangible Assets

The

Corporation’s

goodwill

and

other

identifiable

intangible

assets

having

indefinite

useful

life

are

tested

for

impairment.

Intangibles

with

indefinite

lives

are

evaluated

for

impairment

least

annually,

and

frequent

basis,

events

circumstances indicate impairment could have taken place.

Such events could include, among others, a

significant adverse change

in the business climate, an adverse action by a regulator,

an unanticipated change in the competitive environment and a decision to

change

the

operations

dispose

reporting

unit.

Other

identifiable

intangible

assets

with

finite

useful

life

are

evaluated

periodically for impairment when events or changes

in circumstances indicate that the carrying amount

may not be recoverable.

Goodwill impairment is recognized when the carrying amount of any

of the reporting units exceeds its fair value up

to the amount of

the

goodwill.

The

Corporation

estimates

the

fair

value

each

reporting

unit,

consistent

with

the

requirements

the

fair

value

measurements

accounting

standard,

generally

using

combination

methods,

including

market

price

multiples

comparable

companies and

transactions, as

well as

discounted cash

flow analyses.

Subsequent reversal

of goodwill

impairment losses

is not

permitted under applicable accounting standards. For a detailed description of the annual goodwill impairment evaluation performed

by the Corporation during the third quarter of 2022,

refer to Note 15 to the Consolidated Financial

Statements.

Pension and Postretirement Benefit Obligations

The Corporation provides pension and

restoration benefit plans for certain employees

of various subsidiaries. The Corporation also

provides certain

health care

benefits for

retired employees of

BPPR. The

non-contributory defined pension

and benefit

restoration

plans (“the Pension Plans”) are frozen with regards

to all future benefit accruals.

The estimated

benefit costs

and obligations

of the

Pension Plans and

Postretirement Health

Care Benefit Plan

(“OPEB Plan”) are

impacted by

the use

of subjective

assumptions, which can

materially affect

recorded amounts, including

expected returns on

plan

assets,

discount

rates,

termination

rates,

retirement

rates

and

health

care

trend

rates.

Management

applies

judgment

the

determination of these factors, which normally undergo evaluation against current industry practice and the

actual experience of the

Corporation.

The

Corporation

uses

independent

actuarial

firm

for

assistance

the

determination

the

Pension

Plans

and

OPEB Plan

costs and

obligations. Detailed information

on the Plans

and related valuation

assumptions are included

in Note

30 to

the Consolidated Financial Statements.

The Corporation periodically reviews its assumption for the long-term expected return on Pension Plans

assets. The Pension Plans’

assets

fair

value

December

31,

2022

was

$619.9

million.

The

expected

return

plan

assets

determined

considering

various factors, including a total fund return estimate based on a weighted-average

of estimated returns for each asset class in each

plan.

Asset

class

returns

are

estimated

using

current

and

projected

economic

and

market

factors

such

real

rates

return,

inflation, credit spreads, equity risk premiums and

excess return expectations.

As part of the review,

the Corporation’s independent consulting actuaries performed an analysis of expected returns

based on each

plan’s expected asset

allocation for the year

2023 using the

Willis Towers

Watson US Expected

Return Estimator.

This analysis is

reviewed by the Corporation

and used as a

tool to develop expected

rates of return, together

with other data. This

forecast reflects

the actuarial firm’s view of

expected long-term rates of return for each significant asset

class or economic indicator as of January

2023;

for

example, 8.5%

for

large

cap

stocks,

8.8% for

small cap

stocks,

9.0% for

international stocks,

6.1% for

long

corporate

bonds

and

4.9%

for

long

Treasury

bonds.

range

expected

investment

returns

developed,

and

this

range

relies

both

forecasts and on broad-market historical benchmarks

for expected returns, correlations, and volatilities

for each asset class.

As a consequence of recent

reviews, the Corporation increased its expected return

on plan assets for year

2023 to 5.9% and 6.5%

for the Pension

Plans. Expected rates

of return of

4.3% and 5.4%

had been used

for 2022 and

4.6% and 5.5%

had been used

for

2021 for the Pension Plans. Since the expected return assumption is on a long-term basis, it is not materially impacted by the yearly

fluctuations (either positive or negative) in the actual

return on assets. The expected return can be materially

impacted by a change

in the plan’s asset allocation.

Net Periodic

Benefit Cost

(“pension expense”)

for the

Pension Plans

amounted to

a net

benefit of

$0.5 million

in 2022.

The total

pension expense included a benefit of $35.4 million

for the expected return on assets.

Pension expense is sensitive

to changes in the

expected return on assets.

For example, decreasing the expected

rate of return for

2022 from

5.9% to

5.65% would

increase the

projected 2023

pension expense

for the

Banco Popular

de Puerto

Rico Retirement

Plan, the Corporation’s largest plan, by approximately

$1.4 million.

the

projected

benefit

obligation

exceeds

the

fair

value

plan

assets,

the

Corporation

shall

recognize

liability

equal

the

unfunded projected

benefit obligation

and vice

versa, if

the fair

value of

plan assets

exceeds the

projected benefit

obligation, the

Corporation recognizes an asset equal to the overfunded projected

benefit obligation. This asset or liability may result

in a taxable or

deductible temporary difference and its

tax effect shall be

recognized as an income tax

expense or benefit which

shall be allocated

to various

components of

the financial

statements, including

other comprehensive

income.

The determination

of the

fair value

pension

plan

obligations

involves

judgment,

and

any

changes

those

estimates

could

impact

the

Corporation’s

Consolidated

Statements of Financial

Condition. Management believes that

the fair value

estimates of the

Pension Plans assets

are reasonable

given

the

valuation

methodologies

used

measure

the

investments

fair

value

described

Note

the

Consolidated

Financial

Statements.

Also,

the

compositions

the

plan

assets

are

primarily

equity

and

debt

securities,

which

have

readily

determinable quoted market prices. The Corporation

had recorded a pension liability of $8.3

million at December 31, 2022.

The Corporation uses

the spot rate

yield curve from

the Willis Towers

Watson RATE:

Link (10/90) Model

to discount the

expected

projected

cash

flows

the

plans.

The

equivalent

single

weighted

average

discount

rate

ranged

from

5.34%

5.37%

for

the

Pension Plans and 5.42% for the OPEB Plan to determine

the benefit obligations at December 31, 2022.

A 50

basis point

decrease to

each of

the rates

in the

December 31,

2022 Willis

Towers

Watson RATE:

Link (10/90)

Model would

increase the

projected 2023

expense for

the Banco

Popular de

Puerto Rico

Retirement Plan

by approximately

$1.8 million.

The

change would not affect the minimum required contribution

to the Pension Plans.

The OPEB Plan was unfunded (no assets were held by the plan) at December 31, 2022. The Corporation had recorded a liability for

the underfunded postretirement benefit obligation of

$118.3 million at December 31, 2022.

STATEMENT

OF OPERATIONS ANALYSIS

Net Interest Income

Net interest income is the interest earned from loans, debt securities and money market investments, including loan fees, minus

the

interest cost of deposits and borrowed money.

Various risk factors

affect net interest income including the economic environment in

which we operate, market related events, the mix

and size of the earning assets and

related funding, changes in volumes, repricing

characteristics,

loan

fees

collected,

moratoriums granted

loan

payments

and

delay

charges,

interest

collected

nonaccrual

loans, as well as strategic decisions made by the

Corporation’s management.

Net

interest

income

for

the

year

ended

December

31,

2022

was $2.2

billion

$209.8

million

higher than

2021.

Net

interest

income, on a taxable equivalent basis, for

the year ended December 31, 2022 was $2.4 billion

compared to $2.2 billion in 2021.

The average key index rates for the years 2022 and

2021 were as follows:

2022

2021

Prime rate………………………………………………………………………………………………….

4.86%

3.25%

Fed funds rate…………………………………………………………………………………………….

1.86

0.25

3-month Treasury Bill…………………………………………………………………………………….

2.01

0.03

10-year Treasury………………………………………………………………………………………….

2.95

1.44

FNMA 30-year…………………………………………………………………………………………….

4.26

1.84

Average

outstanding securities

balances are

based upon

amortized cost

excluding any

unrealized gains

or losses

on securities.

Non-accrual

loans

have

been

included

the

respective

average

loans

and

leases

categories.

Loan

fees

collected,

and

costs

incurred

the

origination

loans

are

deferred

and

amortized

over

the

term

the

loan

adjustment

interest

yield.

Prepayment penalties, late fees

collected and the

amortization of premiums /

discounts on purchased loans,

including the discount

accretion on purchased credit

deteriorated loans (“PCD”), are

also included as

part of the

loan yield. Interest income

for the period

ended December 31,

2022, included $44.6

million related to

those items, compared

to $131.5 million

for the

same period in

2021.

The year over

year decrease is

related to lower

amortized fees resulting from

the forgiveness of

PPP loans by

$55.7 million, lower

discount amortization on commercial loans by $16.3 million mainly driven by lower

interest from cancellation of PCD loans and $6.6

million lower amortization of the fair value discount

of the auto portfolios acquired in previous

years.

Table

3 presents

the

different

components

the

Corporation’s

net

interest

income,

taxable

equivalent

basis,

for

the

year

ended December 31,

2022, as compared

with the same

period in 2021,

segregated by major

categories of interest

earning assets

and

interest-bearing

liabilities.

Net

interest

margin

was

3.11%

2022

basis

points

higher

than

the

2.88%

reported

2021. The

higher

net

interest

margin

for

the

year

driven

$1.6

billion

higher

average

volume

earning

assets

and

higher

interest rates as

the Federal Reserve

increased the Federal

Funds Rate by

425 basis points

during 2022. On

a taxable equivalent

basis, net interest margin

was 3.46% in 2022, compared to 3.19%

in 2021, an increase

of 27 basis points.

The main drivers for the

increase in net interest income on a taxable equivalent

basis were:

Positive variances:

●

Higher interest income

from money market

investments by $96.9

million due to

higher interest rates

by 111

basis points,

partially offset by lower volume by $6.5 billion,

as part of the liquidity was deployed to

purchase investment securities and

fund loan growth;

●

Higher interest income from investment securities by

$156.1 million due to a higher volume

by $6.8 million;

●

Higher interest income from loans by $130.1

million due to:

●

Increase in commercial loan Interest

income by $71.4 million driven

by a higher average

volume of loans by

$1.1

billion

and

higher

yield

basis

points

the

origination

loans

occurs

higher

interest

rate

scenario and

the positive

impact on

the repricing

of adjustable-rate

loans, partially

offset by

lower amortized

fees

resulting

from

the

forgiveness

PPP

loans

$55.7

million

and

lower

discount

amortization

commercial loans by $16.3 million mainly from

cancellation of PCD loans;

●

Higher interest income from

consumer loans by $44.8

million resulting from a

higher volume by $280

million

and higher

yield by

49 basis

points, driven

by the

increase in

personal loans

year over

year and

increase in

credit cards volume.

Partially offset by:

●

Higher interest

expense on

deposits by

$141.2

million

due to

the increase

in interest

cost

29 basis

points

resulting

mainly from a

higher cost of

the fully indexed

Puerto Rico government

deposits and the

increase in cost

of Popular U.S.

deposits.

Under the

terms

BPPR’s

deposit pricing

agreement with

Puerto

Rico

public sector,

public funds

rates

are

market linked

with a

lag minus

a specified

spread. As

such, if

short-term interest

rates continue

increase, we

would

expect the costs

of public funds

to continue to

increase. This source

of funding still

results in an

attractive spread under

market rates.

Table 3 – Analysis of Levels & Yields

on a Taxable Equivalent Basis

from Continuing Operations (Non-GAAP)

Year ended December 31,

Variance

Average Volume

Average Yields / Costs

Interest

Attributable to

2022

2021

Variance

2022

2021

Variance

2022

2021

Variance

Rate

Volume

(In millions)

(In thousands)

9,531

16,000

(6,469)

1.24

0.13

1.11

Money market investments

118,079

21,147

96,932

108,780

(11,848)

29,743

22,931

6,812

2.23

2.22

0.01

Investment securities [1]

664,278

508,131

156,147

16,116

140,031

(33)

5.94

5.16

0.78

Trading securities

3,049

4,339

(1,290)

600

(1,890)

Total money market,

investment and trading

39,325

39,015

310

2.00

1.37

0.63

securities

785,406

533,617

251,789

125,496

126,293

Loans:

14,562

13,455

1,107

5.46

5.39

0.07

Commercial

795,115

723,765

71,350

10,997

60,353

778

849

(71)

6.29

5.41

0.88

Construction

48,920

45,821

3,099

7,172

(4,073)

1,475

1,289

186

5.92

6.00

(0.08)

Leasing

87,274

77,356

9,918

(1,093)

11,011

7,322

7,696

(374)

5.34

5.09

0.25

Mortgage

391,133

392,047

(914)

18,584

(19,498)

2,743

2,463

280

11.66

11.17

0.49

Consumer

319,920

275,078

44,842

11,546

33,296

3,525

3,322

203

8.02

8.47

(0.45)

Auto

282,533

280,722

1,811

(14,833)

16,644

30,405

29,074

1,331

6.33

6.19

0.14

Total loans

1,924,895

1,794,789

130,106

32,373

97,733

69,730

68,089

1,641

3.89

3.43

0.46

Total earning assets

2,710,301

2,328,406

381,895

157,869

224,026

Interest bearing deposits:

25,884

25,959

(75)

0.61

0.12

0.49

NOW and money market [2]

158,664

31,911

126,753

127,953

(1,200)

15,886

15,429

457

0.20

0.18

0.02

Savings

32,400

27,123

5,277

4,983

294

6,853

7,028

(175)

0.90

0.75

0.15

Time deposits

61,781

52,587

9,194

10,241

(1,047)

48,623

48,416

207

0.52

0.23

0.29

Total interest bearing

deposits

252,845

111,621

141,224

143,177

(1,953)

206

114

2.78

0.35

2.43

Short-term borrowings

5,737

318

5,419

2,030

3,389

Other medium and

939

1,185

(246)

4.26

4.49

(0.23)

long-term debt

39,970

53,107

(13,137)

(13,200)

Total interest bearing

49,768

49,693

0.60

0.33

0.27

liabilities

298,552

165,046

133,506

145,270

(11,764)

16,094

14,687

1,407

Demand deposits

3,868

3,709

159

Other sources of funds

69,730

68,089

1,641

0.43

0.24

0.19

Total source of funds

298,552

165,046

133,506

145,270

(11,764)

3.46

3.19

0.27

Net interest margin/ income

on a taxable equivalent basis

(Non-GAAP)

2,411,749

2,163,360

248,389

12,599

235,790

3.29

3.10

0.19

Net interest spread

Taxable equivalent

adjustment

244,390

205,770

38,620

3.11

2.88

0.23

Net interest margin/ income

non-taxable equivalent basis

(GAAP)

2,167,359

1,957,590

209,769

Note: The changes that are not due solely to volume or

rate are allocated to volume and rate based on the

proportion of the change in each category.

[1] Average balances exclude unrealized gains or losses

on debt securities available-for-sale and the unrealized

loss related to certain securities transferred

from available-for-sale to held-to-maturity.

[2] Includes interest bearing demand deposits corresponding

to certain government entities in Puerto Rico.

Provision for Credit Losses - Loans Held-in-Portfolio

and Unfunded Commitments

For the

year ended

December 31,

2022, the

Corporation recorded

an expense

of $84.2

million for

its allowance

for credit

losses

(“ACL”) related to loans held-in-portfolio and unfunded commitments, compared with a reserve release of $191.3 million for the year

ended

December

31,

2021.

The

provision

expense

the

loans-held-in-portfolio

for

the

year

2022

was

$83.3

million,

compared

reserve

release

$183.3

million

for

the

year

2021.

The

reserve

increase

mostly

driven

changes

the

economic scenario, higher loan

volumes and changes in

credit quality.

The updated economic scenarios

used to estimate the

ACL

on December

31, 2022

considered an

expected slowdown in

the economy

as a

result of

tight monetary

policy,

weaker job

growth

and persistent inflation. The reserve release recorded in 2021 was driven

by the release of Covid-related reserves recorded in 2020.

The provision for

unfunded commitments for

the year 2022

reflected an expense

of $0.9 million,

compared to a

reserve release of

$8.0 million for the same period of 2021.

The provision expense related

to loans held-in-portfolio for

the BPPR segment was

$69.5 million for the

year ended December 31,

2022, compared to

a reserve release

of $129.0 million

for the

year ended December

31, 2021, an

unfavorable variance of

$198.6

million. The provision expense related to loans held-in-portfolio for

the Popular U.S. segment was $13.8 million for the year 2022, an

unfavorable variance of $68.1 million, compared to

a reserve release of $54.3 million for

the year 2021.

December

31,

2022,

the

total

allowance

for

credit

losses

for

loans

held-in-portfolio amounted

$720.3

million,

compared

$695.4

million

December

31,

2021.

The

ratio

the

allowance

for

credit

losses

loans

held-in-portfolio

was

2.25%

December

31,

2022, compared

2.38%

December 31,

2021. Refer

Note

the

Consolidated Financial

Statements, for

additional information on the Corporation’s methodology to estimate its ACL. As discussed therein, within the process to estimate its

ACL, the Corporation applies probability weights to the

outcomes of simulations using Moody’s Analytics’ Baseline, S3 (pessimistic)

and

(optimistic) scenarios.

The baseline

scenario is

assigned the

highest probability,

followed

by the

pessimistic scenario.

addition,

refer

the

Credit

Risk

section

this

MD&A

for

detailed

analysis

net

charge-offs,

non-performing

assets,

the

allowance for credit losses and selected loan

losses statistics.

Provision for Credit Losses – Investment Securities

The

Corporation’s

provision

for

credit

losses

its

investment

securities

held-to-maturity

the

portfolio

obligations

from

the

Government

Puerto

Rico,

states

and

political

subdivisions.

For

the

year

ended

December

31,

2022,

the

Corporation recorded a reserve release of

$1.2 million, compared to a reserve

release of $2.2 million for the

year ended December

31, 2021. At

December 31, 2022,

the total allowance

for credit losses

for this portfolio

amounted to $6.9

million, compared to

$8.1

million as of December 31, 2021. Refer to Note 7 to the Consolidated Financial Statements for additional information on the ACL for

this portfolio.

Non-Interest Income

For the

year ended December

31, 2022, non-interest

income increased by

$254.9 million, when

compared with the

previous year.

The results for the year 2022 included a $257.7 million gain related to the Evertec

Transactions and related accounting adjustments.

Other factors that contributed to the variance in non-interest

income were:

●

higher other service fees by $22.8 million, principally at the BPPR segment, due to higher credit card fees by $18.9 million

mainly in interchange income resulting from higher customer purchase activity and higher fees from the merchant network

business by $6.7 million due to the revenue sharing

agreement entered into in connection with

the Evertec Transactions;

●

favorable

adjustment

$9.2

million

the

fair

value

the

contingent

consideration

purchase

price

adjustments

for

the

acquisition

the

Capital

Group

LLC

business

2021

(‘’K2

Acquisition’’),

the

Corporation

updated its estimates related to the ability to realize

the earnings targets for the contingent payment; and

●

a gain of $8.2 million from the sale of an

investment which had been previously written off;

partially offset by:

●

lower service charges on deposit accounts by $5.5 million, mainly at BPPR, due to lower overdraft related charges, in part

due to the

Corporation’s determination of

eliminating insufficient funds

fees and modifying

overdraft fees effective

on the

third quarter of 2022 and lower cash management service charges from commercial clients due to higher earnings credits

on transactional accounts driven by the current interest

rate environment;

●

lower

income

from

mortgage

banking

activities

7.7

million

mainly

due

lower

gains

from

loan

securitization

and

valuation adjustments

on loans

held for

sale

$21.9 million,

impacted by

the

Corporation’s determination

in the

third

quarter of 2022 to

retain certain guaranteed loans as

held for investment; partially offset

by a favorable variance of

$10.4

million in the

fair value adjustments for

mortgage servicing rights driven

by slower projected prepayments

in the serviced

portfolio and higher gains from closed derivative

positions by $5.3 million;

●

an unfavorable variance of $7.5 million on the fair value adjustments to the portfolio of equity securities related to deferred

benefit plans, which have an offsetting effect recorded as

lower personnel costs; and

●

the gain of $7.0 million recognized in the third

quarter of 2021 by BPPR as a result of

the sale and partial leaseback of two

corporate office buildings.

Operating Expenses

As discussed

in the

significant events

section of

this MD&A,

to facilitate

the transparency

of the

progress with

the transformation

initiative and

to better

portray the

level of

technology related

expenses categorized

by the

nature of

the expense,

effective in

the

fourth

quarter

2022,

the

Corporation

has

separated

technology,

professional

fees

and

transactional

activities

standalone

expense categories

in the

accompanying Consolidated

Statements

Operations. There

were no

changes to

the total

operating

expenses presented.

Prior periods amount in the financial

statements and related disclosures have been reclassified to conform

the current presentation.

Table 4 provides the detail of the reclassifications for each respective year.

Table 4 - Operating Expen

ses Reclassification

2021

2020

Financial statement line item

As reported

Adjustments

Adjusted

As reported

Adjustments

Adjusted

Equipment expenses

92,097

(59,178)

32,919

88,932

(56,418)

32,514

Professional services

410,865

(284,144)

126,721

394,122

(261,708)

132,414

Technology and

software expenses

277,979

263,886

Processing and transactional services

121,367

112,039

Communications

25,234

(11,205)

14,029

23,496

(10,266)

13,230

Other expenses

136,988

(44,819)

92,169

128,882

(47,533)

81,349

Net effect on operating expenses

665,184

635,432

Table 5 provides a breakdown of operating expenses by major categories.

Table 5 - Operating Expenses

Years ended December

31,

(In thousands)

2022

2021

2020

Personnel costs:

Salaries

432,910

371,644

370,179

Commissions, incentives and other bonuses

155,889

142,212

78,582

Pension, postretirement and medical insurance

56,085

52,077

44,123

Other personnel costs, including payroll taxes

74,880

65,869

71,321

Total personnel

costs

719,764

631,802

564,205

Net occupancy expenses

106,169

102,226

119,345

Equipment expenses

35,626

32,919

32,514

Other taxes

63,603

56,783

54,454

Professional fees

172,043

126,721

132,414

Technology and

software expenses

291,902

277,979

263,886

Processing and transactional services:

Credit and debit cards

45,455

40,383

40,903

Other processing and transactional services

81,690

80,984

71,136

Total processing

and transactional services

127,145

121,367

112,039

Communications

14,885

14,029

13,230

Business promotion:

Rewards and customer loyalty programs

51,832

38,919

30,380

Other business promotion

37,086

34,062

27,228

Total business

promotion

88,918

72,981

57,608

FDIC deposit insurance

26,787

25,579

23,868

Other real estate owned (OREO) income

(22,143)

(14,414)

(3,480)

Other operating expenses:

Operational losses

32,049

38,391

26,331

All other

77,397

53,778

55,018

Total other operating

expenses

109,446

92,169

81,349

Amortization of intangibles

3,275

9,134

6,397

Goodwill impairment charge

9,000

Total operating

expenses

1,746,420

1,549,275

1,457,829

Personnel costs to average assets

0.99

0.89

0.95

Operating expenses to average assets

2.40

2.18

2.45

Employees (full-time equivalent)

8,813

8,351

8,522

Average assets per employee (in millions)

$8.26

$8.52

$6.99

Operating expenses

for the

year ended

December 31,

2022 increased

by $197.1

million, when

compared with

the previous

year.

The increase in operating expenses was driven

primarily by:

●

Higher

personnel

costs

$88.0

million

mainly

due

higher

salaries

expense

$61.3

million

result

market

adjustments,

annual salary

revisions and

an increase

in headcount,

higher commission

and incentives

by $13.7

million,

due to higher headcount, salary revisions and, in part, profit-sharing expense and higher payroll taxes and fringe benefits,

including health and retirement benefits, reflecting

the overall increase in salary base;

●

Higher net occupancy expense by $3.9 million mainly due to BPPR’s lower rental income

due to the sale of two corporate

office buildings during the third quarter of 2021,

coupled with higher rent expense related to the space remaining occupied

by BPPR;

●

Higher other taxes by

$6.8 million mainly due to

an increase in personal property

tax expense and a higher

base used to

estimate an annual Puerto Rico regulatory license

fee;

●

Higher professional fees by $45.3 million primarily due

to Corporate initiatives including $22 million related to

a multi-year

corporate transformation

initiative to

expand the

Corporation’s digital

capabilities, modernize

its technology

platform and

implement agile and efficient business processes;

●

Higher technology and software

expenses by $13.9

million mainly due

to higher software

amortization expense by $10.3

million, including

$2.4 million

related to

the software

intangible assets acquired

as part

of the

Evertec Transactions,

and

higher

professional

fees

and

network

management

expense

$15.5

million

due

various

ongoing

technology

projects; partially offset

by a decrease in

charges related to internet

banking of $9.6 million

and lower application hosting

expense reflecting savings as a result of the Evertec

Transactions;

●

Higher

processing

and

transactional

services

$5.8

million

mainly

due

higher

credit

and

debit

card

processing

expense as

a result

of higher transactional

volumes, reflecting

an increase in

customer purchase activity;

partially offset

by lower merchant processing

due to higher incentives received

during the year related to

the ATH

Network Participation

Agreement entered into in connection with the

Evertec Transactions;

●

Higher business promotion expense by $15.9 million mainly due to higher customer reward program expense in our credit

card business by $12.9

million, reflecting an increase

in customer purchase activity,

higher sponsorship expense by $1.5

million and higher donations by $1.2

million, including hurricane related donations;

●

Higher

total

other

operating

expenses,

including

operational

losses,

$17.3

million

mainly

due

the

$17.3

million

expense related to the Evertec Transactions;

net of $6.9 million in credits received in

connection with this transaction and

higher gain on sale of foreclosed auto units by

$6.6 million; offset by $6.5 million of lower sundry

losses;

and

●

a goodwill impairment charge of $9.0 million due

to a decrease in Popular Equipment Finance’s (PEF) projected earnings

considered as part of the Corporation’s annual goodwill

impairment analysis.

These variances were partially offset by:

●

Higher

other

real

estate

owned

(OREO)

income

$7.7

million

mainly

due

higher

gain

sale

commercial

properties;

and

●

Lower amortization

of intangibles

by $5.9

million due

to an

impairment write-down

of $5.4

million of

a trademark

during

2021.

Income Taxes

For the

year ended

December 31,

2022, the

Corporation recorded an

income tax

expense of

$132.3 million,

compared to

$309.0

million for

the same

period of

2021.

The income

tax expense

for the

year ended

December 31,

2022, reflects

the impact

of the

reversal of a portion of the deferred tax asset valuation allowance of the U. S. Operations amounting to $68.2 million, higher taxable

income

subject

preferential tax

rates,

primarily attributed

the

gain

from

the

sale

Evertec shares,

and

higher tax

exempt

income recorded during this year.

At December

31, 2022,

the Corporation

had a

net deferred

tax asset

amounting to

$1 billion,

net of

a valuation

allowance of

$0.5

billion. The net deferred tax asset related to the U.S.

operations was $0.3 billion, net of a valuation

allowance of $0.4 billion.

The Inflation

Reduction Act

of 2022 imposes

a new

corporate alternative minimum

tax (“AMT”),

effective for

taxable year

2023, to

corporations that meet a dual three-year average adjusted financial statement income (“AFSI”)

threshold of $1 billion on a worldwide

basis and $100

million for its

U.S. operations.

The AFSI is,

in general, the

GAAP net income

per financial statements

with certain

adjustments, including

foreign taxes

and tax

depreciation.

The Corporation

is still

evaluating the

application of

these adjustments

that could be

decisive in whether Popular

is subject to

the corporate AMT.

If it is

determined that the Corporation

is subject to

the

corporate AMT, it is not expected to have a material impact on the financial statements

of the Corporation.

Refer to

Note 35

to the

Consolidated Financial

Statements for

a reconciliation

of the

statutory income

tax rate

to the

effective tax

rate and additional information on the income

tax expense and deferred tax asset balances.

Fourth Quarter Results

The Corporation recognized net income of $257.1 million for the

quarter ended December 31, 2022, compared with a net income

$206.1 million for the same quarter of 2021.

Net interest income for the fourth quarter of

2022 amounted to $559.6 million, compared with $501.3 million for the

fourth quarter of

2021, an increase of $58.3 million.

The increase in net interest income was mainly due higher interest rates as the Federal Reserve

increased the Federal

Funds Rate by

425 basis points

during 2022 and

higher average balance

of loans resulting

from the growth

during 2022

at both

BPPR and

PB. The

net interest

margin increased

by 50

basis points

to 3.28%

due to

an increase

in market

rates

and

the

earning

assets

mix,

that

had

higher

concentration on

loans

which

carry

higher

yield

than

money

market

and

investment securities. On a taxable equivalent

basis, the net interest margin for the

fourth quarter of 2022 was 3.64%, compared

3.02% for the fourth quarter of 2021.

The provision

for credit

losses was

a $49.5

million for

the fourth

quarter of

2022, compared

to a

reserve release

benefit of

$33.1

million for the fourth quarter of 2021. The provision expense

recorded in the fourth quarter or 2022 reflects

changes in credit metrics,

portfolio growth

as well

as changes

in the

macroeconomic outlook

and considers

expected slowdown

in the

economy during

2023, as

a result

of weaker

job growth,

monetary policy

and the

persistent inflation.

The benefit

recorded in

the fourth

quarter of

2021

was

reflective

improvements

the

credit

metrics

and

the

macroeconomic

outlook

well

releases

qualitative

reserves.

Non-interest income

amounted to

$158.5 million

for the

quarter ended

December 31,

2022, compared

with $164.7

million for

the

same quarter in 2021. The

decrease of $6.2 million was mainly

due lower income from mortgage banking activities by

$10.5 million

due to

an unfavorable

variance of

$4.1 million

in the

fair value

adjustments of

mortgage servicing

rights and

lower gains

from the

sale and securitization of

mortgage loans as the

Corporation made the determination to

retain certain guaranteed loans

as held for

investment. In addition,

service charges on

deposit accounts were

lower by $6.9

million, due to

lower overdraft related

charges, in

part due

to the

Corporation’s determination of

eliminating insufficient funds

fees and

modifying overdraft fees

effective on

the third

quarter

2022

and

lower

cash

management

service

charges

from

commercial

clients

due

higher

earnings

credits

transactional accounts.

Operating expenses

totaled $461.7

million for

the quarter

ended December

31, 2022,

compared with

$417.4 million

for the

same

quarter in

the previous

year.

The increase

of $44.3

million is

mainly related

to higher

personnel costs

by $29.7

million, due

higher

headcount

and

market

and

annual

salary

revisions

well

higher

incentives

and

commissions;

higher

professional

services expense

by $16.6

million due

to various

corporate projects,

including the

transformation initiative;

higher technology

and

software expenses by $7.3

million due to various

ongoing technology projects and

software amortization, including from the

assets

acquired from Evertec; partially offset by higher benefit from OREO related activity by $5.3 million due to gains on sale of foreclosed

properties; lower operational losses by $7.8 million and lower

amortization of intangibles by $5.3 million due to an

impairment write-

down of $5.4 million of a trademark during 2021.

For the quarter ended December

31, 2022, the Corporation recorded

an income tax benefit of

$50.3 million, compared with income

tax expense of $75.6 million for

the same quarter of 2021. The

favorable variance in income tax expense was mainly

attributable to

partial

reversal

the

deferred tax

asset valuation

allowance

the

U.S.

operation during

the

fourth

quarter

2022

$68.2

million and lower

income before tax,

higher benefit from

tax-exempt income, including true-up

adjustment of $9.5 million

in relation

to the

fiscal year

2021 tax

returns for

the P.R.

subsidiaries filed

in the

fourth quarter

and related

year-to-date adjustments

for the

same concept.

REPORTABLE SEGMENT RESULTS

The Corporation’s

reportable segments

for managerial

reporting purposes

consist of

Banco Popular

de Puerto

Rico and

Popular

U.S. A Corporate group has been defined to

support the reportable segments.

For

description

the

Corporation’s

reportable

segments,

including

additional

financial

information

and

the

underlying

management accounting process, refer to Note 37

to the Consolidated Financial Statements.

The Corporate group reported a net income of $150.1

million for the year ended December 31, 2022,

compared with a net income of

$13.4

million

for

the

year.

The

increase

net

income

was

mainly

attributed

the

$128.8

million

after-tax

gains

recognized by the Corporation as

a result of the

Evertec Stock Sale and related

accounting adjustments; lower interest expense by

$10.4 million

from the

redemption in

the fourth

quarter of

2021 of

$186.7 million

in Trust

Preferred Securities

issued by

Popular

Capital Trust I; and higher earnings from equity method investments.

Highlights on the earnings results for the reportable

segments are discussed below:

Banco Popular de Puerto Rico

The Banco Popular

de Puerto Rico reportable

segment’s net income

amounted to $782.0

million for the

year ended December 31,

2022, compared with $787.5 million for

the year ended December 31, 2021.

The principal factors that contributed to the

variance in

the financial results included the following:

●

Higher

net

interest

income

$148.9

million

due

higher

income

from

money

market

and

investment

securities

$218.3

million mainly

due to

higher yields

driven by

the increase

in rates

by the

Federal Reserve

and

higher

average

balances of

U.S. Treasury

securities;

higher interest

income from

loans by

$54.7 million,

mainly due

to higher

average

balances from consumer, leasing and

commercial loans; partially offset by

higher interest expense on deposits by $123.7

million

mainly

due to

higher costs

on the

market- indexed

Puerto Rico

government deposits,

NOW accounts

and time

deposits.

The

BPPR

segment’s

net

interest margin

was

3.05%

for

2022

compared

with

2.86% for

the

same

period in

2021.

●

A provision for loan losses expenses of $70.3 million in 2022, compared to a reserve release of $136.4 million for the year

ended 2021,

an unfavorable

variance of

$206.7 million.

The provision

for loan

losses for

2022

reflects an

expected

slowdown in the economy in

2023. During 2021, BPPR recorded a

reserve for credit losses release of

$136.4 million due

to improved credit metrics and Covid-related macroeconomic

outlook and

changes in qualitative reserves;

●

Higher non-interest income by $115.0 million mainly due to:

●

Higher other operating income by $112.0 million mostly due to the benefit related to the Evertec Business Acquisition

Transaction,

●

Higher

other

service

fees

$21.3

million

due

higher

merchant

acquiring

fees

the

revenue

sharing

agreement

entered

connection with

the

Evertec

Transactions

and

higher

credit

card

fees

result

higher

interchange transaction volumes.

●

Higher operating expenses by $167.8 million, mainly

due to:

●

Higher other

expenses by $75.5

million mainly due

to higher allocations

from the

Corporate group by

$56.0 million,

mainly advisory and other professional services, and

a $17.3 million expense related to Evertec Transactions;

●

Higher personnel costs by $71.8 million driven

by higher salaries and benefits due to market

salary adjustments and

annual salary revisions

and a higher

headcount; higher incentive compensation,

higher profit sharing expenses

and

higher fringe benefits;

●

Higher

business

promotions

$15.6

million

mainly

due

higher

customer

rewards

expense

higher

transactional volumes and higher sponsorships and donations,

including hurricane related assistance;

●

Higher

technology and

software expenses

$5.7

million

including $2.4

million

the software

intangible

assets acquired as part of the Evertec Transactions, and costs

associated with several ongoing projects;

●

Higher processing

and transactional

services by

$5.8 million

mainly due

to higher

credit and

debit card

processing

expense as

a result

of higher

transactional volumes,

reflecting an

increase in

customer purchase

activity;

partially

offset by

lower merchant

processing due

to higher

incentives received

during the

year related

to the

ATH

Network

Participation Agreement entered into in connection with

the Evertec Transactions;

Partially offset by:

●

Higher OREO income by $7.4 million mainly due

to higher gain on sale of OREO of $5.9

million.

●

Lower professional fees by $3.8 million mainly due

to lower consulting fees related to ongoing projects.

●

Lower

income

tax

expense

$105.1

million

due

lower

income

before

tax

and

higher

income

that

was

exempt

subject to preferential tax rates.

Popular U.S.

For the

year ended

December 31, 2022, the

reportable segment of

Popular U.S.

reported net income

of $170.3

million, compared

with a net

income of $134.1 million for

the year ended December

31, 2021. The principal

factors that contributed to

the variance in

the financial results included the following:

●

Higher net interest income by $51.8 million mainly due to higher interest income from loans by $74.2 million mainly due to

higher

average

balances from

commercial

loans as

well

higher yields

due

increase

rates; and

higher

interest

income from money market investment securities by $2.9 million due to

higher rates,

partially offset by lower income from

debt securities by

$1.6 million and higher

cost of deposits

by $22.9 million due

to higher interest rates.

The Popular U.S.

reportable segment’s net interest margin was 3.68%

for 2022 compared with 3.39% for the same period

in 2021;

●

An unfavorable variance of

$69.3 million on the

provision for loan losses

and unfunded commitments, due to

the reserve

release

$56.9

million

2021,

which

reflected

improvements

credit

metrics

and

Covid-related

economic

outlook,

compared to

a provision

expense of

$12.5 million

recorded in

2022 which

reflected an

expected economic

slowdown in

2023;

●

Higher non-interest income by

$7.4 million mainly due

to the positive adjustment

of $9.2 million on

the contingent liability

related to the K-2 Acquisition;

●

Higher operating expenses by $35.4 million mainly due

to:

●

Higher personnel costs by $10.2 million due to

salary market and annual adjustments;

●

Higher

other

expenses

$7.4

million

due

higher

charges

allocated from

the

Corporate segment,

mainly

professional fees; and

●

The goodwill impairment charge of $9.0 million recorded

at PEF.

●

Lower

income

tax

expense

$81.7

million

due

mainly

lower

income

before

tax

and

the

partial

reversal

the

deferred tax asset valuation allowance recorded during

the fourth quarter of 2022 of $68.2 million.

STATEMENT

OF FINANCIAL CONDITION ANALYSIS

Assets

The Corporation’s total

assets were $67.6 billion

at December 31, 2022,

compared to $75.1 billion

at December 31, 2021.

Refer to

the Corporation’s Consolidated Statements of Financial Condition at December 31, 2022 and 2021 included in this 2022 Form 10-K.

Also, refer to the Statistical Summary 2022-2021

in this MD&A for Condensed Statements of Financial

Condition.

Money market investments and debt securities

Money market

investments decreased

by $11

.9 billion

at December

31, 2022,

when compared

to December

31, 2021.

This was

impacted

the

decrease

deposits of

$5.8

billion,

mainly

in the

Puerto

Rico

Public

sector,

and

the deployment

liquidity to

purchase

debt

securities.

Debt

securities

available-for-sale

decreased

$7.2

billion,

while

debt

securities

held-to-maturity

increased by $8.4 billion. As previously mentioned, during

2022 the Corporation transferred U.S. Treasury securities with

a fair value

of $6.5 billion (par

value of $7.4 billion)

from its available-for-sale portfolio to

its held-to-maturity portfolio. Refer to

Notes 6 and 7

the Consolidated Financial

Statements for additional

information with respect

to the

Corporation’s debt securities

available-for-sale

and held-to-maturity.

Loans

Refer to Table

6 for a breakdown of

the Corporation’s loan portfolio. Also,

refer to Note 8

to the Consolidated Financial Statements

for detailed information about the Corporation’s loan portfolio

composition and loan purchases and sales.

Loans

held-in-portfolio increased

$2.8

billion to

$32.1

billion

December

31,

2022,

mainly

due

growth in

the

commercial

portfolio

$2.0

billion,

reflected

both

BPPR

and

approximately $1.0

billion,

each

segment

and

consumer

loans

BPPR.

The

commercial

loans

growth

includes

U.S.

region

loans

participated

between

BPPR

and

PB.

During

the

year

ended

December

31,

2022, BPPR

participated in

loans

originated by

totaling

$184

million.

Consumer loans

BPPR

increased

$532.4 million in the aggregate including credit

cards, personal loans and auto loans.

The increase in BPPR’s consumer portfolio is

aligned with the increase in

retail sales and consumer spending in

Puerto Rico during 2022 and

the purchase of national consumer

loans through

its U.S.

branch. The

auto loans

portfolio at

BPPR benefited

from the

sustained level

of auto

sales, which

although

lower than 2021, remained a higher than 2020. In addition, though mortgage loans declined by $29.7 million from the previous year,

this was

impacted by

management’s determination

to retain

certain guaranteed

loans in

the portfolio,

which reduced

the portfolio

attrition.

The

allowance

for

credit

losses

for

the

loan

portfolio

increased

$24.9

million

mainly

due

changes

the

macroeconomic

outlook, credit quality metrics and portfolio

growth. Refer to the Credit

Quality section of the MD&A

for additional information on the

Allowance for credit losses for the loan portfolio.

Table 6 - Loans Ending Balances

At December 31,

(In thousands)

2022

2021

Loans held-in-portfolio:

Commercial

15,739,132

13,732,701

Construction

757,984

716,220

Leasing

1,585,739

1,381,319

Mortgage

7,397,471

7,427,196

Auto

3,512,530

3,412,187

Consumer

3,084,913

2,570,934

Total loans held-in

-portfolio

32,077,769

29,240,557

Loans held-for-sale:

Mortgage

5,381

59,168

Total loans held-for-sale

5,381

59,168

Total loans

32,083,150

29,299,725

Other assets

Other assets amounted to $1.8

billion at December 31, 2022, an

increase of $0.2 billion when compared

to December 31, 2021. At

December 31,

2022, this

includes $125

million in

cash receivable

from the

maturities of

investment securities

near the

end of

the

year and

$28.7 million

in software

intangibles acquired

as part

of the

Evertec Transactions.

Refer to

Note 14

to the

Consolidated

Financial Statements

for a

breakdown of

the principal

categories that

comprise the

caption of

“Other Assets”

in the

Consolidated

Statements of Financial Condition at December

31, 2022 and 2021.

Liabilities

The Corporation’s

total liabilities

were $63.5

billion at

December 31,

2022, a

decrease of

$5.6 billion

compared to

$69.1 billion

December 31, 2021, mainly due to a

decrease in deposits as discussed below.

Refer to the Corporation’s Consolidated Statements

of Financial Condition included in this Form 10-K.

Deposits and Borrowings

The composition of the Corporation’s financing to total assets

at December 31, 2022 and 2021 is included

in Table 7.

Table 7 - Financing to Total

Assets

December 31,

% increase (decrease)

% of total assets

(In millions)

2022

2021

from 2021 to 2022

2022

2021

Non-interest bearing deposits

15,960

15,684

1.8

23.6

20.9

Interest-bearing core deposits

41,600

47,954

(13.3)

61.5

63.9

Other interest-bearing deposits

3,667

3,367

8.9

5.4

4.5

Repurchase agreements

149

62.0

0.2

0.1

Other short-term borrowings

365

N.M.

0.5

0.1

Notes payable

887

989

(10.3)

1.3

Other liabilities

917

968

(5.3)

1.4

1.3

Stockholders’ equity

4,093

5,969

(31.4)

6.1

7.9

Deposits

The

Corporation’s

deposits

totaled

$61.2

billion

December

31,

2022,

compared

$67.0

billion

December

31,

2021.The

deposits decrease

of $5.8

billion was mainly

due to

lower Puerto Rico

public sector

deposits by

$5.2 billion.

Public sector

deposit

balances

amounted

$15.2

billion

December

31,

2022.

The

receipt

the

Puerto

Rico

Government

additional

Federal

assistance, and

seasonal tax

collections, could

increase public

deposit balances

at BPPR

in the

near term.

However,

the rate

which public deposit balances may decline is uncertain and difficult to predict. The

amount and timing of any such reduction is likely

impacted

by,

for

example,

the

speed

which

federal

assistance

distributed,

the

financial

condition,

liquidity

and

cash

management

practices

the

Puerto

Rico

Government

and

its

instrumentalities

and

the

implementation

fiscal

and

debt

adjustment plans approved

pursuant to PROMESA

or other actions

mandated by the

Fiscal Oversight and

Management Board for

Puerto Rico (the “Oversight Board”).

Approximately 25% of the

Corporation’s deposits are public

fund deposits from the

Government of Puerto Rico,

municipalities and

government instrumentalities and corporations (‘’public funds’’).

These public funds deposits are

indexed to short term market

rates

and fluctuate

in cost

with changes

in those

rates with

a one-quarter

lag, in

accordance with

contractual terms.

As a

result, these

public

funds

deposits’

costs

have

generally

lagged

variable

asset

repricing.

During

2022,

the

deposit

costs

for

public

funds

increased by 61% when compared

to 2021.

We expect these costs

to continue to increase if

short-term rates continue their recent

trend.

For example, we

expect an increase

in costs on

these public funds

by approximately 120

basis points in

the first quarter

2023 when compared to the last quarter in 2022.

Refer to Table 8 for a breakdown of the Corporation’s deposits at December 31, 2022 and 2021.

Table 8 - Deposits Ending Balances

(In thousands)

2022

2021

Demand deposits

[1]

26,382,605

25,889,732

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

27,265,156

33,674,134

Savings, NOW and money market deposits (brokered)

798,064

729,073

Time deposits (non-brokered)

6,442,886

6,685,938

Time deposits (brokered CDs)

338,516

26,211

Total deposits

61,227,227

67,005,088

[1] Includes interest and non-interest bearing demand deposits.

Borrowings

The

Corporation’s

borrowings

amounted

$1.4

billion

December 31,

2022,

compared

$1.2

billion at

December

31,

2021.

Refer to

Note 17

to the

Consolidated Financial Statements

for detailed

information on

the Corporation’s

borrowings. Also,

refer to

the Liquidity section in this MD&A for additional information

on the Corporation’s funding sources.

Other liabilities

The Corporation’s

other liabilities

amounted to

$1.0 billion

at December

31, 2022,

a decrease

of $51.3

million when

compared to

December 31, 2021.

Stockholders’ Equity

Stockholders’ equity totaled

$4.1 billion at

December 31, 2022,

a decrease of

$1.9 billion when

compared to

December 31, 2021.

The decrease

was principally due

to higher

accumulated unrealized losses on

debt securities available-for-sale

by $2.2 billion

and

the impact of

$631.0 million from the

two accelerated share repurchase

transactions completed during 2022,

declared dividends of

$163.7 million on

common stock and

$1.4 million

in dividends on

preferred stock, partially

offset by

net income for

the year ended

December 31,

2022

of $1.1

billion. Refer

the Consolidated

Statements of

Financial Condition,

Comprehensive Income

and

Changes

Stockholders’

Equity

for

information

the

composition

stockholders’

equity.

Also,

refer

Note

the

Consolidated

Financial

Statements

for

detail

accumulated

other

comprehensive

loss

(income),

integral

component

stockholders’ equity.

REGULATORY CAPITAL

The Corporation and its bank subsidiaries are subject to capital adequacy

standards established by the Federal Reserve Board. The

risk-based capital standards

applicable to Popular,

Inc. and the

Banks, BPPR

and PB, are

based on the

final capital framework

Basel III. The

capital rules of

Basel III include

a “Common Equity Tier

1” (“CET1”) capital

measure and specifies

that Tier

1 capital

consist of

CET1 and “Additional

Tier 1

Capital” instruments meeting

specified requirements. Note

21 to the

Consolidated Financial

Statements presents further

information on the

Corporation’s regulatory capital requirements,

including the regulatory capital

ratios

of its depository institutions, BPPR and PB.

An institution

is considered “well-capitalized”

if it

maintains a total

capital ratio

of 10%,

a Tier

1 capital ratio

of 8%,

a CET1 capital

ratio

6.5%

and

leverage

ratio

5%.

The

Corporation’s

ratios

presented

Table

show

that

the

Corporation

was

“well

capitalized” for

regulatory purposes,

the highest

classification, under

Basel III

for years

2022 and

2021. BPPR

and PB

were also

well-capitalized for all years presented.

The Basel III Capital Rules also require an additional 2.5% “capital conservation buffer”, composed entirely of CET1, on top of these

minimum risk-weighted asset ratios, which excludes the leverage ratio. 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. Popular,

BPPR and

PB are

required to

maintain this

additional capital

conservation buffer

of 2.5%

of CET1,

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 risk-weighted assets of at least 10.5%.

Table 9 presents the Corporation’s capital adequacy

information for the years 2022 and 2021.

Table 9 - Capital Adequacy

Data

At December 31,

(Dollars in thousands)

2022

2021

Risk-based capital:

Common Equity Tier 1 capital

5,639,686

5,476,031

Additional Tier 1 Capital

22,143

Tier 1 capital

5,661,829

5,498,174

Supplementary (Tier 2) capital

623,818

585,931

Total

capital

6,285,647

6,084,105

Total

risk-weighted assets

34,415,889

31,441,224

Adjusted average quarterly assets

70,287,610

74,238,367

Ratios:

Common Equity Tier 1 capital

16.39

17.42

Tier 1 capital

16.45

17.49

Total capital

18.26

19.35

Leverage ratio

8.06

7.41

Average equity to assets

8.25

8.12

Average tangible equity to assets

7.27

7.20

Average equity to loans

19.76

19.87

On April 1, 2020, the Corporation adopted the final rule issued by the federal banking regulatory agencies pursuant to the Economic

Growth and

Regulatory Paperwork

Reduction Act

of 1996

that simplified

several requirements

in the

agencies’ regulatory

capital

rules. These

rules simplified

the regulatory

capital requirement

for mortgage

servicing assets

(MSAs), deferred

tax assets

arising

from

temporary

differences

and

investments in

the

capital

unconsolidated financial

institutions

raising

the

CET1

deduction

threshold

from

10%

25%.

The

15%

CET1

deduction

threshold

which

applies

the

aggregate

amount

such

items

was

eliminated. The

rule also

requires, among

other changes,

increasing from

100% to

250% the

risk weight

to MSAs

and temporary

difference deferred

tax asset

not deducted

from capital.

For investments

in the

capital of

unconsolidated financial

institutions, the

risk weight would be based on the exposure category

of the investment.

The decrease in the CET1 capital ratio,

Tier 1 capital ratio

and, total capital ratio as of

December 31, 2022, compared to December

31,

2021,

was

mostly

due

increase

risk

weighted

assets

driven

the

growth

the

commercial

and

consumer

loan

portfolios, partially offset by the annual earnings net of the accelerated share

repurchase agreements to repurchase an aggregate of

$400 million and

$231 million of Popular’s common

stock. The increase in

leverage capital ratio was

mainly due to the

decrease in

average total assets, driven by the reduction

in zero-risk weighted investments in money market FED accounts

and zero or low-risk

weighted debt securities, that therefore did not have

a significant impact on the risk-weighted assets.

Pursuant

the

adoption

CECL

January

2020,

the

Corporation elected

use

the

five-year

transition

period

option

provided in the final

interim regulatory

capital rules effective March 31,2020.

The five-year transition period provision

delays for two

years the

estimated impact

CECL on

regulatory capital,

followed by

a three-year

transition period

phase out

the aggregate

amount of

the capital benefits

provided during the

initial two-year delay.

As of

December 31, 2022,

the Corporation had

phased-in

25% of the cumulative CECL deferral with the remaining impact to be

recognized over the remaining two years. In the first quarter of

2023, the Corporation will phase in a cumulative

50% of the deferral.

August

26,

2020,

federal

banking

regulators

issued

final

rule

modify

the

Basel

III

regulatory

capital

rules

applicable

banking organizations to allow

those organizations participating in

the Paycheck Protection Program

(“PPP”) established under the

Coronavirus Aid, Relief

and Economic Security

Act (the

“CARES Act”) to

neutralize the regulatory

capital effects

of participating in

the

program.

Specifically,

the

agencies

have

clarified

that

banking

organizations,

including

the

Corporation

and

its

Bank

subsidiaries, are permitted to

assign a zero

percent risk weight to

PPP loans for

purposes of determining risk-weighted

assets and

risk-based

capital

ratios.

Additionally,

order

facilitate

use

the

Paycheck

Protection

Program

Liquidity

Facility

(the

“PPPL

Facility”), which provides Federal Reserve Bank loans to eligible financial institutions such as the Corporation’s Bank subsidiaries to

fund PPP loans, the

agencies further clarified that,

for purposes of determining

leverage ratios, a banking

organization is permitted

to exclude from total average assets PPP loans that have been pledged as collateral for a

PPPL Facility. As of December 31,

2022,

the Corporation has $38 million in PPP loans and no

loans were pledged as collateral for PPPL

Facilities.

Table 10 reconciles the Corporation’s total common stockholders’ equity to common equity Tier 1 capital.

Table 10 - Reconciliation Common

Equity Tier 1 Capital

At December 31,

(In thousands)

2022

2021

Common stockholders’ equity

4,198,409

6,116,756

AOCI related adjustments due to opt-out election

2,468,193

257,762

Goodwill, net of associated deferred tax liability

(DTL)

(691,560)

(591,703)

Intangible assets, net of associated DTLs

(12,944)

(16,219)

Deferred tax assets and other deductions

(322,412)

(290,565)

Common equity tier 1 capital

5,639,686

5,476,031

Common equity tier 1 capital to risk-weighted assets

16.39

17.42

Non-GAAP financial measures

The tangible

common equity

ratio and

tangible book

value per

common share,

which are

presented in

the table

that follows,

are

non-GAAP measures.

Management and

many stock

analysts use

the tangible

common equity

ratio and

tangible book

value per

common share in conjunction with more traditional bank

capital ratios to compare the capital adequacy of banking

organizations with

significant amounts

of goodwill

or other

intangible assets,

typically stemming

from the

use of

the purchase

accounting method

accounting

for

mergers

and

acquisitions.

Neither

tangible

common

equity

nor

tangible

assets

measures

should

considered in

isolation or

as a

substitute for stockholders’

equity,

total assets

or any

other measure calculated

in accordance with

generally accepted accounting principles in the United

States of America (“GAAP”). Moreover,

the manner in which the

Corporation

calculates

its

tangible

common

equity,

tangible

assets

and

any

other related

measures may

differ

from

that

other

companies

reporting measures with similar names.

The decrease

in the

Tangible

common

equity to

tangible assets

ratio during

2022 was

mainly related

to the

decrease in

the fair

value of

the Corporation’s

fixed rate

available for sale

debt securities

portfolio and

its impact

on the

unrealized loss component

accumulated

other

comprehensive

income

(loss)

(‘’AOCI’’).

Given

its

ability

due

the

Corporation’s

liquidity

position

and

its

intention to reduce the

impact on AOCI and tangible

capital of further increases in

interest rates, management changed its intent

hold certain securities to maturity.

Therefore, in October 2022, the Corporation transferred U.S.

Treasury securities with a fair

value

of $6.5 billion (par value of $7.4 billion) from

its available-for-sale portfolio to its held-to-maturity portfolio.

The

securities

were reclassified

fair value

at the

time

the transfer.

the

date of

the transfer,

these

securities

had

pre-tax

unrealized

losses

$873.0

million

recorded

AOCI.

This

fair

value

discount

being

accreted

interest

income

and

the

unrealized loss remaining in

AOCI is being amortized,

offsetting each other through

the remaining life of

the securities. There were

no realized gains or losses recorded as a result

of this transfer.

While changes

in the

amount of

unrealized gains

and losses

in AOCI

have an

impact on

the Corporation’s

and its

wholly-owned

banking

subsidiaries’

tangible

capital

ratios,

they

not

impact

regulatory

capital

ratios,

accordance

with

the

regulatory

framework.

Refer

Note

the

Consolidated

Financial

Statements

which

presents

information

about

the

Corporation’s

Debt

Securities Held-to-Maturity for additional details.

Table

provides

reconciliation of

total

stockholders’

equity

tangible

common

equity

and

total

assets

tangible

assets

December 31, 2022 and 2021.

Table 11

- Reconciliation of Tangible

Common Equity and Tangible

Assets

At December 31,

(In thousands, except share or per share information)

2022

2021

Total stockholders’

equity

4,093,425

5,969,397

Less: Preferred stock

(22,143)

Less: Goodwill

(827,428)

(720,293)

Less: Other intangibles

(12,944)

(16,219)

Total tangible common

equity

3,230,910

5,210,742

Total assets

67,637,917

75,097,899

Less: Goodwill

(827,428)

(720,293)

Less: Other intangibles

(12,944)

(16,219)

Total tangible assets

66,797,545

74,361,387

Tangible common

equity to tangible assets

4.84

7.01

Common shares outstanding at end of period

71,853,720

79,851,169

Tangible book value

per common share

44.97

65.26

Year-to-date average

Total stockholders’

equity [1]

6,009,225

5,777,652

Less: Preferred Stock

(22,143)

Less: Goodwill

(757,133)

(679,959)

Less: Other intangibles

(17,113)

(20,861)

Total tangible common

equity

5,212,836

5,054,689

Average return on tangible common equity

21.13

18.47

[1] Average balances exclude unrealized gains or losses

on debt securities available-for-sale and unrealized losses

on debt

securities transfer to held-

to-maturities.

RISK MANAGEMENT

Market / Interest Rate Risk

The financial results and capital levels of the

Corporation are constantly exposed to market, interest

rate and liquidity risks.

Market risk

refers to the

risk of a

reduction in the

Corporation’s capital due

to changes in

the market valuation

of its assets

and/or

liabilities.

Most of the assets

subject to market valuation risk

are debt securities classified as

available-for-sale. Refer to Notes 6

and 7 to the

Consolidated Financial

Statements for

further information

on the

debt

securities available-for-sale

and

held-to-maturity portfolios.

Debt securities classified

as available-for-sale amounted

to $17.8 billion

as of December

31, 2022. Other

assets subject to

market

risk include loans

held-for-sale, which amounted

to $5

million, mortgage servicing

rights (“MSRs”) which

amounted to $128

million

and securities classified as “trading”, which amounted

to $28 million, as of December 31, 2022.

Interest Rate Risk (“IRR”)

The Corporation’s net interest income is subject

to various categories of interest rate

risk, including repricing, basis, yield curve and

option risks.

In managing

interest rate

risk, management may

alter the

mix of

floating and

fixed rate

assets and

liabilities, change

pricing

schedules,

adjust

maturities

through

sales

and

purchases

investment

securities,

and

enter

into

derivative

contracts,

among other alternatives.

Interest

rate

risk

management

active

process

that

encompasses

monitoring

loan

and

deposit

flows

complemented

investment and funding

activities. Effective management of

interest rate risk begins

with understanding the dynamic

characteristics

of assets and

liabilities and determining the

appropriate rate risk position

given line of

business forecasts, management objectives,

market expectations and policy constraints.

Management utilizes various tools to assess IRR, including Net Interest

Income (“NII”) simulation modeling, static gap analysis, and

Economic Value

of Equity

(“EVE”). The

three methodologies

complement each

other and

are used

jointly in

the evaluation

of the

Corporation’s IRR. NII

simulation modeling is

prepared for a

five-year period, which

in conjunction with

the EVE analysis,

provides

management a better view of long-term IRR.

Net interest

income simulation analysis

performed by legal

entity and on

a consolidated basis

is a

tool used

by the

Corporation in

estimating the

potential change

in net

interest income

resulting from

hypothetical changes

in interest

rates. Sensitivity

analysis is

calculated using a simulation model which incorporates

actual balance sheet figures detailed by maturity

and interest yields or costs.

Management assesses

interest rate

risk by

comparing various

NII simulations

under different

interest rate

scenarios that

differ in

direction of interest

rate changes, the

degree of change

and the projected

shape of the

yield curve. For

example, the types

of rate

scenarios processed during the

quarter include flat rates,

implied forwards, and parallel

and non-parallel rate shocks.

Management

also performs analyses to isolate and measure basis

and prepayment risk exposures.

The asset

and liability

management group

performs validation

procedures on

various assumptions

used as

part of

the simulation

analyses as well as validations

of results on a

monthly basis. In addition, the

model and processes used to

assess IRR are subject

to independent validations according to the guidelines

established in the Model Governance and Validation policy.

The Corporation processes NII

simulations under interest rate

scenarios in which the

yield curve is assumed

to rise and

decline by

the same

magnitude (parallel

shifts). The

rate scenarios

considered in

these market

risk simulations

reflect instantaneous

parallel

changes

-100,

-200,

+100,

+200

and

+400

basis

points

during the

succeeding

twelve-month

period.

Simulation

analyses

are

based on many assumptions, including relative levels of market interest rates across all yield curve points

and indexes, interest rate

spreads, loan prepayments

and deposit elasticity.

Thus, they should

not be

relied upon as

indicative of actual

results. Further,

the

estimates

not

contemplate

actions

that

management

could

take

respond

changes

interest

rates.

Additionally,

the

Corporation is also subject to

basis risk in the

repricing of its assets and

liabilities, including the basis related

to using different

rate

indexes for

the repricing

of assets and

liabilities, as

well as

the effect

of pricing

lags which

may be

contractual or

due to

historical

differences

the

timing

management

responses

changes

the

rate

environment.

their

nature,

these

forward-looking

computations are only

estimates and may

be different from

what may actually

occur in the

future. The following

table presents the

results of

the simulations

at December

31, 2022

and December

31, 2021,

assuming a

static balance

sheet and

parallel changes

over flat spot rates over a one-year time horizon:

Table 12 - Net Interest Income

Sensitivity (One Year Projection)

December 31, 2022

December 31, 2021

(Dollars in thousands)

Amount Change

Percent Change

Amount Change

Percent Change

Change in interest rate

+400 basis points

(38,548)

(1.75)

257,223

13.21

+200 basis points

(18,078)

(0.82)

197,354

10.14

+100 basis points

(7,787)

(0.35)

166,920

8.57

-100 basis points

41,763

1.90

(78,408)

(4.03)

-200 basis points

78,381

3.56

(120,661)

(6.20)

As of December 31, 2022, NII simulations show the Corporation

has a neutral to slightly liability sensitive position driven by the

rapid

increase in short-term

interest rates throughout the

year and its

impact on Puerto

Rico public sector deposits

which are indexed to

market rates, as well as the deployment of cash to fund loan growth and purchase investments. These results suggest that changes

in net interest income are driven by changes in liability

costs, primarily Puerto Rico public sector deposits. In

declining rate scenarios

net interest income would increase as the decline in

the cost of these deposits generates a greater benefit

than the changes in asset

yields.

rising

rate

scenarios

Popular’s

sensitivity

profile

also

impacted

its

large

proportion

Puerto

Rico

public

sector

deposits which

are indexed to

market rates. As

short-term rates

have risen, the

cost of these

deposits now increases

in sync

with

market rates and

therefore reduce the

benefit banks typically

have in

rising rate environments.

As of

December 31, 2022,

Popular

has a more neutral

position as compared to a

substantially asset sensitive position as

of December 31, 2021. The

primary reasons

for the

reduction in sensitivity

are i)

the realization of

much of the

expected benefit in

net interest income

given the

higher interest

rates observed

during 2022,

ii) a

decrease in

cash balances

(which reprice

instantaneously) via

the deployment

into longer

term

investments and

loans, and iii)

the market

indexed nature of

Puerto Rico

public sector deposits

which represented $15.2

billion or

25% of deposits as of December 31, 2022.

The Corporation’s

loan and

investment portfolios

are subject

prepayment risk,

which results

from the

ability of

a third-party

repay debt

obligations prior

to maturity.

Prepayment risk

also could

have a

significant impact

on the

duration of

mortgage-backed

securities

and

collateralized

mortgage

obligations

since

prepayments

could

shorten

(or

lower

prepayments

could

extend)

the

weighted average life of these portfolios.

Table 13 - Interest Rate Sensitivity

At December 31, 2022

By repricing dates

(Dollars in thousands)

0-30 days

Within 31 -

90 days

After three

months but

within six

months

After six

months but

within nine

months

After nine

months but

within one

year

After one

year but

within two

years

After two

years

Non-

interest

bearing

assets /

liabilities

Total

Assets:

Money market investments

5,614,595

Investment and trading securities

2,085,332

750,646

1,026,603

1,076,243

1,116,553

4,590,807

16,292,815

(392,593)

26,546,406

Loans

5,090,409

2,875,448

1,436,637

1,248,850

1,256,549

4,559,631

15,718,001

(102,375)

32,083,150

Other assets

3,393,766

Total

12,790,336

3,626,094

2,463,240

2,325,093

2,373,102

9,150,438

32,010,816

2,898,798

67,637,917

Liabilities and stockholders' equity:

Savings, NOW and money market and

other interest bearing demand

deposits

17,880,089

794,797

1,115,771

1,031,454

954,856

3,178,624

13,529,678

38,485,269

Certificates of deposit

1,921,505

468,312

640,081

452,482

496,747

1,194,998

1,607,276

6,781,401

Federal funds purchased and assets

sold under agreements to

repurchase

99,558

31,530

17,521

148,609

Other short-term borrowings

365,000

Notes payable

1,000

20,000

299,109

22,261

91,943

452,397

886,710

Non-interest bearing deposits

15,960,557

Other non-interest bearing liabilities

916,946

Stockholders' equity

4,093,425

Total

20,267,152

1,294,639

1,793,373

1,783,045

1,473,864

4,465,565

15,589,351

20,970,928

67,637,917

Interest rate sensitive gap

(7,476,816)

2,331,455

669,867

542,048

899,238

4,684,873

16,421,465

(18,072,130)

Cumulative interest rate sensitive gap

(7,476,816)

(5,145,361)

(4,475,494)

(3,933,446)

(3,034,208)

1,650,665

18,072,130

Cumulative interest rate sensitive gap

to earning assets

(11.55)

(7.95)

(6.91)

(6.08)

(4.69)

2.55

27.92

Table 14, which presents the maturity distribution of earning assets, takes into consideration

prepayment assumptions.

Table 14 - Maturity Distribution

of Earning Assets

As of December 31, 2022

Maturities

After one year

After five years

through five years

through fifteen years

After fifteen years

One year

Fixed

Variable

Fixed

Variable

Fixed

Variable

(In thousands)

or less

interest rates

Total

Money market securities

5,614,595

Investment and trading

securities

5,972,315

15,917,065

12,593

4,474,589

3,287

26,379,849

Loans:

Commercial

4,609,900

5,335,022

3,628,170

1,092,038

930,166

45,176

98,659

15,739,132

Construction

469,212

45,911

193,334

8,261

34,232

7,033

757,984

Leasing

426,138

1,127,923

31,678

1,585,739

Consumer

1,845,426

3,584,443

298,977

187,647

595,179

85,770

6,597,443

Mortgage

581,384

2,074,029

107,067

3,759,026

54,812

826,508

7,402,852

Subtotal loans

7,932,060

12,167,328

4,227,549

5,078,651

1,614,390

957,454

105,718

32,083,150

Total earning assets

19,518,969

28,084,393

4,240,142

9,553,241

1,617,677

957,454

105,718

64,077,594

Note: Equity securities available-for-sale and other investment

securities, including Federal Reserve Bank stock and

Federal Home Loan Bank stock

held by the Corporation, are not included in this table.

Loans held-for-sale have been allocated according to the

expected sale date.

Trading

The Corporation

engages in

trading activities

in the

ordinary course

of business

at its

subsidiaries, BPPR

and Popular

Securities.

Popular Securities’

trading activities

consist primarily

of market-making

activities to

meet expected

customers’ needs

related to

its

retail brokerage business,

and purchases and sales of U.S. Government and

government sponsored securities with the objective of

realizing gains

from expected

short-term price

movements. BPPR’s

trading activities consist

primarily of

holding U.S.

Government

sponsored

mortgage-backed securities

classified

“trading” and

hedging

the

market

risk

with

“TBA”

(to-be-announced)

market

transactions.

The

objective

derive

spread

income

from

the

portfolio

and

not

benefit

from

short-term

market

movements. In

addition, BPPR

uses forward

contracts or

TBAs to

hedge its

securitization pipeline.

Risks related

to variations

interest rates

and market volatility

are hedged

with TBAs

that have

characteristics similar to

that of

the forecasted security

and its

conversion timeline.

At December 31, 2022,

the Corporation held trading securities

with a fair value

of $28 million, representing approximately 0.04%

the Corporation’s total assets,

compared with $30 million and 0.04%, respectively, at December 31, 2021. As

shown in Table 15, the

trading

portfolio

consists

principally

mortgage-backed

securities

and

U.S.

Treasuries,

which

December

31,

2022

were

investment grade

securities. As

of December

31, 2022

and December

31, 2021,

the trading

portfolio also

included $0.1

million in

Puerto Rico

government obligations.

Trading

instruments are

recognized at

fair value,

with changes

resulting from

fluctuations in

market prices, interest rates or exchange rates

reported in current period earnings. The Corporation recognized net

trading account

loss of $784

thousand and a net

trading account loss of

$389 thousand, respectively,

for the years ended

December 31, 2022 and

2021.

Table 15 - Trading

Portfolio

December 31, 2022

December 31, 2021

(Dollars in thousands)

Amount

Weighted

Average Yield

[1]

Amount

Weighted

Average Yield

[1]

Mortgage-backed securities

14,223

5.79

22,559

5.12

U.S. Treasury securities

13,069

3.26

6,530

0.03

Collateralized mortgage obligations

160

5.51

257

5.61

Puerto Rico government obligations

0.45

0.47

Interest-only strips

207

12.00

280

12.00

Total

27,723

4.63

29,711

4.06

[1] Not on a taxable equivalent basis.

The Corporation’s trading activities are

limited by internal policies. For each

of the two subsidiaries, the

market risk assumed under

trading

activities

measured

the

5-day

net

value-at-risk

(“VAR”),

with

confidence

level

99%.

The

VAR

measures

the

maximum estimated loss that may occur over a

5-day holding period, given a 99% probability.

The Corporation’s

trading portfolio

had a

5-day VAR

of approximately

$0.2 million

for the

last week

in December

31, 2022.

There

are numerous

assumptions and

estimates associated

with VAR

modeling, and

actual results

could differ

from these

assumptions

and estimates.

Backtesting is performed

to compare

actual results against

maximum estimated losses,

in order

to evaluate

model

and assumptions accuracy.

In the opinion of management, the size and composition

of the trading portfolio does not represent

a significant source of market risk

for the Corporation.

Derivatives

Derivatives may

used by

the Corporation

part

its

overall interest

rate risk

management strategy

minimize significant

unexpected

fluctuations

earnings

and

cash

flows

that

are

caused

interest

rate

volatility.

Derivative

instruments

that

the

Corporation may use

include, among others,

interest rate caps,

indexed options, and

forward contracts. The

Corporation does not

use highly leveraged derivative instruments in its interest rate risk management strategy. Credit risk embedded in these transactions

reduced

requiring

appropriate

collateral

from

counterparties

and

entering

into

netting

agreements

whenever

possible.

All

outstanding derivatives are

recognized in the

Corporation’s Consolidated Statements

of Condition at

their fair

value. Refer

to Note

26 to

the Consolidated Financial

Statements for further

information on the

Corporation’s involvement in

derivative instruments and

hedging activities.

Cash Flow Hedges

The

Corporation

manages

the

variability

cash

payments

due

interest

rate

fluctuations

the

effective

use

derivatives

designated

cash

flow

hedges

and

that

are

linked

specified

hedged

assets

and

liabilities.

The

cash

flow

hedges

relate

forward

contracts

TBA

mortgage-backed securities

that

are

sold

and

bought

for

future

settlement to

hedge

mortgage-backed

securities

and

loans

prior

securitization.

The

seller

agrees

deliver

specified

future

date

specified

instrument

specified price or

yield. These securities

are hedging a

forecasted transaction and

are designated for

cash flow hedge

accounting.

The notional

amount of

derivatives designated as

cash flow

hedges at December

31, 2022

amounted to $

15 million

(2021 -

$ 88

million).

Refer

Note

the

Consolidated

Financial

Statements

for

additional

quantitative

information

these

derivative

contracts.

Fair Value Hedges

The

Corporation did

not

have

any

derivatives designated

fair value

hedges

during the

years

ended December

31,

2022

and

2021.

Trading and Non-Hedging Derivative Activities

The Corporation enters into derivative positions based on market expectations or to benefit from price differentials between financial

instruments

and

markets

mostly

economically

hedge

asset

liability.

The

Corporation

also

enters

into

various

derivatives to provide these

types of derivative products to

customers. These free-standing derivatives are carried

at fair value with

changes in fair value recorded as part of the results of

operations for the period.

Following

description

the

most

significant

the

Corporation’s

derivative

activities

that

are

not

designated

for

hedge

accounting.

The Corporation

has over-the-counter

option contracts

which are

utilized in

order to

limit the

Corporation’s exposure

on customer

deposits whose returns are tied

to the S&P 500

or to certain other

equity securities or commodity indexes. In

these certificates, the

customer’s

principal

guaranteed

the

Corporation

and

insured

the

FDIC

the

maximum

extent

permitted

law.

The

instruments pay a return based

on the increase of these

indexes, as applicable, during the term

of the instrument. Accordingly,

this

product

gives

customers

the

opportunity

invest

product

that

protects

the

principal

invested

but

allows

the

customer

the

potential to earn a return

based on the performance of the indexes. The

risk of issuing certificates of deposit

with returns tied to the

applicable indexes is economically hedged by the Corporation. Indexed

options are purchased from financial institutions with strong

credit standings, whose

return is designed

to match the

return payable on

the certificates of

deposit issued. By

hedging the risk

this manner,

the effective cost of

these deposits is fixed.

The contracts have a maturity

and an index equal to

the terms of the

pool

of retail deposits that they are economically hedging.

The purchased

indexed options

are used

to economically

hedge the

bifurcated embedded

option. These

option contracts

do not

qualify

for

hedge

accounting,

and

therefore,

cannot

designated

accounting

hedges.

December

31,

2022,

the

notional

amount of

the indexed

options on deposits

approximated $

85 million

(2021 -

$ 79

million) with

a fair

value of

$ 18

million (asset)

(2021 - $

26 million) while the

embedded options had a

notional value of

$ 79 million

(2021 - $

72 million) with

a fair value

of $ 16

million (liability) (2021 - $ 23 million).

Refer to Note 26 to

the Consolidated Financial Statements for a

description of other non-hedging derivative activities utilized

by the

Corporation during 2022 and 2021.

Foreign Exchange

The Corporation holds

an interest in

BHD León

in the

Dominican Republic, which

is an investment

accounted for under

the equity

method. The

Corporation’s carrying value

of the

equity interest in

BHD León

approximated $

199.8 million at

December 31, 2022.

This business is conducted in

the country’s foreign currency.

The resulting foreign currency translation

adjustment, from operations

for

which

the

functional

currency

other

than

the

U.S.

dollar,

reported

accumulated

other

comprehensive

loss

the

consolidated

statements

condition,

except

for

highly-inflationary

environments

which

the

effects

would

included

the

consolidated statements

operations. At

December 31,

2022, the

Corporation had

approximately $

57 million in

an unfavorable

foreign currency translation

adjustment as part

of accumulated other

comprehensive income (loss),

compared with an

unfavorable

adjustment of $ 67 million at December 31,

2021 and $ 71 million at December 31,

2020.

Liquidity

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

commitments

under

both

normal

and

stressed

market

conditions.

The

Board

Directors

responsible

for

establishing

the

Corporation’s tolerance for

liquidity risk, including

approving relevant risk

limits and policies.

The Board of

Directors has

delegated

the

monitoring

these

risks

the

Board’s

Risk

Management

Committee

and

the

Asset/Liability

Management

Committee.

The

management

liquidity

risk,

long-term

and

day-to-day

basis,

the

responsibility of

the

Corporate

Treasury

Division.

The

Corporation’s Corporate Treasurer

is responsible for implementing

the policies and

procedures approved by the

Board of Directors

and

for

monitoring

the

Corporation’s

liquidity

position

ongoing

basis.

Also,

the

Corporate

Treasury

Division

coordinates

corporate wide liquidity management strategies and activities with the reportable segments, oversees policy breaches and manages

the escalation process. The Financial and Operational Risk Management Division is responsible for the independent monitoring and

reporting of adherence with established policies.

An institution’s liquidity

may be pressured

if, for example,

it experiences a

sudden and unexpected

substantial cash outflow

due to

exogenous events such

as the COVID-19

pandemic,

its credit rating

is downgraded, or

some other event

causes counterparties to

avoid exposure to the institution. Factors that the Corporation does not control,

such as the economic outlook, adverse ratings of its

principal markets and regulatory changes, could also affect

its ability to obtain funding.

Liquidity is managed by the Corporation at the level of

the holding companies that own the banking and non-banking subsidiaries. It

is also managed at the

level of the banking and

non-banking subsidiaries. As further explained below,

a principal source of liquidity

for the

bank holding

companies (the “BHCs”)

are dividends

received from

banking and

non-banking subsidiaries. The

Corporation

has adopted

policies and limits

to monitor

more effectively

the Corporation’s

liquidity position

and that of

the banking subsidiaries.

Additionally, contingency funding

plans are used to

model various stress events

of different magnitudes and

affecting different time

horizons that 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

every

event,

and

are

dependent

many

assumptions.

Deposits, including

customer deposits,

brokered deposits

and public

funds deposits,

continue to

be the

most significant

source of

funds for

the Corporation,

funding

91% of

the Corporation’s

total assets

at December

31, 2022

and 89%

at December

31, 2021.

The ratio of total ending loans to deposits was

52% at December 31, 2022, compared to 44% at December 31, 2021.

In addition to

traditional deposits, the Corporation maintains borrowing

arrangements, which amounted to approximately

$1.4 billion in outstanding

balances at December 31, 2022 (December 31, 2021 - $1.2 billion). A detailed

description of the Corporation’s borrowings, including

their terms,

is included

in Note

17 to

the Consolidated

Financial Statements.

Also, the

Consolidated Statements of

Cash Flows

the accompanying Consolidated Financial Statements provide

information on the Corporation’s cash inflows and outflows.

July

12,

2022,

the

Corporation

completed

ASR

program

for

the

repurchase

aggregate

$400

million

Popular’s

common stock,

for which

an initial

3,483,942 shares

were delivered

in March

2022 (the

“March ASR

Agreement”). Upon

the final

settlement

the

March

ASR

Agreement,

the

Corporation

received

additional

1,582,922

common

stock.

The

Corporation repurchased a

total of

5,066,864 shares

at an

average purchase

price of

$78.9443, which

were recorded

as treasury

stock by $440 million under the March ASR Agreement.

On December

7, 2022,

the Corporation

completed the

settlement of

another ASR

Agreement for

the repurchase

of an

aggregate

$231

million

Popular’s common

stock,

for

which

initial

2,339,241 shares

were

delivered

August

26,

2022

(the

“August

ASR”). Upon the

final settlement of

the ASR Agreement,

the Corporation received

an additional 840,024

shares of common

stock.

The Corporation repurchased a total of

3,179,265 shares at an average purchase price of

$72.66, which were recorded as treasury

stock by

$245 million under

the August ASR

Agreement.

Refer to Note

20 to

the Consolidated Financial

Statements for

additional

information.

The

following

sections

provide

further

information

the

Corporation’s

major

funding

activities

and

needs,

well

the

risks

involved in these activities.

Banking Subsidiaries

Primary

sources of

funding

for the

Corporation’s

banking subsidiaries

(BPPR and

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.

Refer

Note

the

Consolidated

Financial

Statements,

for

additional

information

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

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

have

sufficient

liquidity

cover all short-term borrowings and a portion of deposits.

The Corporation’s ability to compete

successfully in the marketplace for

deposits, excluding brokered deposits, depends on various

factors, including

pricing, service,

convenience and

financial stability

as reflected

by operating

results, credit

ratings (by

nationally

recognized

credit

rating

agencies),

and

importantly,

FDIC

deposit

insurance.

Although

downgrade

the

credit

ratings

the

Corporation’s banking

subsidiaries may

impact their

ability to

raise retail

and commercial

deposits or

the rate

that it

is required

pay on such deposits, management does not believe that the impact should be material. Deposits at all of the Corporation’s banking

subsidiaries are federally insured

(subject to FDIC

limits) and this

is expected to

mitigate the potential effect

of a downgrade

in the

credit ratings.

Deposits are a

key source of

funding as they

tend to be

less volatile than institutional

borrowings and their

cost is less

sensitive to

changes in

market rates.

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 all non-interest bearing deposits, savings

deposits

and certificates

of deposit

under $250,000,

excluding brokered

deposits with

denominations under

$250,000. Core

deposits have

historically provided the Corporation with a sizable source of relatively stable and low-cost funds. Core deposits totaled $57.6 billion,

94% of total deposits, at December 31, 2022, compared with $63.6 billion, or 95% of

total deposits, at December 31, 2021. Core

deposits financed 90% of the Corporation’s earning assets

at December 31, 2022, compared with 88%

at December 31, 2021.

The distribution by maturity of

certificates of deposits with denominations of

$250,000 and over at December 31,

2022 is presented

in the table that follows:

Table 16 - Distribution by

Maturity of Certificate of Deposits of $250,000 and Over

(In thousands)

3 months or less

1,809,781

Over 3 to 12 months

333,648

Over 1 year to 3 years

282,506

Over 3 years

119,815

Total

2,545,750

For the

years ended

December 31,

2022 and

2021, average

deposits, including

brokered deposits,

represented

93% of

average

earning assets. Table 17 summarizes average deposits for the past three years.

Table 17 - Average

Total Deposits

For the years ended December 31,

(In thousands)

2022

2021

Non-interest bearing demand deposits

16,093,704

14,687,093

Savings accounts

16,242,457

15,753,630

NOW, money market and other interest

bearing demand accounts

25,539,909

25,648,707

Certificates of deposit

6,840,334

7,013,486

Total interest bearing

deposits

48,622,700

48,415,823

Total average deposits

64,716,404

63,102,916

The Corporation

had $1.1

billion in

brokered deposits

at December

31, 2022,

which financed

approximately 2%

of its

total assets

(December 31, 2021 -

$0.8 billion and 1%,

respectively).

In the event that

any of the Corporation’s

banking subsidiaries’ regulatory

capital

ratios fall

below those

required by

a well-capitalized

institution or

are subject

to capital

restrictions by

the regulators,

that

banking subsidiary faces

the risk of

not being able

to raise or

maintain brokered deposits

and faces limitations

on the rate

paid on

deposits, which

may hinder

the Corporation’s

ability to

effectively compete

in its

retail markets

and could

affect its

deposit raising

efforts.

Deposits from

the public

sector represent an

important source of

funds for

the Corporation.

As of

December 31, 2022,

total public

sector deposits were $15.2 billion,

compared to $20.3 billion at December 31, 2021. Generally,

these deposits require that the bank

pledge high credit quality securities as

collateral;

therefore, liquidity risks arising from public sector

deposit outflows are lower given

that the bank

receives its collateral

in return. This,

now unpledged, collateral

can either be

financed via repurchase

agreements or

sold for cash. However, there are some

timing differences between the time the deposit outflow occurs and when the

bank receives

its

collateral.

Additionally,

the

Corporation

mainly

utilizes

fixed-rate

U.S.

Treasury

debt

securities

collateral.

While

these

securities have

limited credit risk,

they are

subject to

market value

risk based on

changes in

the interest rate

environment.

When

interest

rates

increase,

the

value

this

collateral

decreases

and

could

result

the

Corporation

having

provide

additional

collateral

cover

the

same

amount

deposit

liabilities.

This

additional

collateral

could

reduce

unpledged

securities

otherwise

available as liquidity sources to the Corporation.

At December 31, 2022,

management believes that 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

will

severely constrained

the

banking subsidiaries

are

unable to

maintain access

funding

adequate financing

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 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

required to

deposit additional cash

or securities to

meet its

margin requirements, thereby

adversely affecting its

liquidity. Finally,

management

required

rely

heavily

expensive

funding

sources

meet

its

future

growth,

revenues

may

not

increase proportionately to cover costs. In this case,

profitability would be adversely affected.

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 that are further described

below and that may limit the

ability

of those subsidiaries to act as a source of

funding to the BHCs.

The

principal

use

these

funds

includes

the

repayment

debt,

and

interest

payments

holders

senior

debt

and

junior

subordinated

deferrable

interest

(related

trust

preferred

securities),

the

payment

dividends

common

stockholders,

repurchases of the Corporation’s securities and capitalizing its

banking subsidiaries.

The

outstanding

balance

notes

payable

the

BHCs

amounted

$497

million

December

31,

2022

and

$496

million

December 31, 2021.

The contractual maturities of the BHCs notes payable

at December 31, 2022 are presented in

Table 18.

Table 18

- Distribution of BHC's Notes Payable by Contractual

Maturity

Year

(In thousands)

2023

299,109

Later years

198,319

Total

497,428

The Corporation’s

6.125% unsecured senior

debt securities mature

in the

September of 2023.

Annual debt service

at the BHCs

approximately $32

million,

and

the

Corporation’s

latest

quarterly dividend

was

$0.55

per share

approximately $40

million

per

quarter.

December

31,

2022,

the

BHCs

had

cash

and

money

markets

investments

totaling

$203

million

and

borrowing

potential of

$169 million

from its

secured facility

with BPPR.

The BHCs’

liquidity position

continues to

be adequate

with sufficient

cash

hand,

investments

and

other

sources

liquidity

which

are

expected

enough

meet

all

interest

payments

and

dividend obligations during the

foreseeable future. The Corporation

intends to refinance

the 6.125% unsecured senior

debt prior to

its

maturity in

September.

we are

unable to

refinance these

notes, we

could have

declare extraordinary

dividends from

our

banking and other operating

subsidiaries to repay such

notes. Our ability to

declare such dividends could

be subject to

approval of

the Federal Reserve Board.

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

due to the

fact that two

out of the

three principal credit

rating agencies

rate the Corporation below “investment grade”, which

affects the Corporation’s cost and

ability to raise funds in

the capital markets.

Factors that the Corporation

does not control, such

as the economic outlook,

interest rate volatility,

inflation, disruptions in the

debt

market, among others,

could also affect

its ability to

obtain funding. 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.

On July 1,

2022, the Corporation exchanged a

portion of Evertec shares as

part of a transaction

in which it acquired

certain critical

channels from Evertec and renegotiated several service agreements. The Corporation completed the sale of its remaining shares of

Evertec on August 15, 2022. Following the

Evertec Stock Sale, Popular no longer owns any

Evertec common stock.

Non-Banking Subsidiaries

The

principal

sources

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. The liquidity needs

of the non-banking subsidiaries

are minimal since most

of them are

funded internally

from operating cash flows or from

intercompany borrowings or capital contributions from their holding

companies. During the period

ended December

31, 2022,

Popular, Inc.

made capital

contributions to its

wholly owned subsidiaries

of $25

million to

Popular Re,

Inc., $10 million to Popular Securities,

LLC and $3 million to Popular Impact Fund, LLC.

Dividends

During

the

year

ended

December

31,

2022,

the

Corporation

declared

cash

dividends

$2.20

per

common

outstanding

($163.7 million in the aggregate). The

dividends for the Corporation’s Series

A preferred stock amounted to $1.4

million. During the

year ended

December 31,

2022, the

BHCs received

dividends amounting

to $450

million from

BPPR, $54

million from

PNA,

$19

million

from

PIBI,

$8 million

in dividends

from

its

non-banking subsidiaries

and

$2 million

dividends from

Evertec.

addition,

during the year ended December 31, 2022, Popular International

Bank Inc., a wholly owned subsidiary of Popular, Inc., received $16

million in dividends from its investment in BHD.

Dividends from BPPR constitute Popular, Inc.’s primary source of liquidity.

Other Funding Sources and Capital

The

debt

securities

portfolio

provides

additional

source

liquidity,

which

may

realized

through

either

securities

sales

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

used

raise

funds

the

repo

markets.

The

availability

the

repurchase

agreement

would

subject

having

sufficient

unpledged

collateral

available

the

time

the

transactions are to be consummated, in addition to overall liquidity and risk appetite of the various counterparties. The Corporation’s

unpledged debt

securities amounted

$8.0

billion at

December 31,

2022

and

$3.0 billion

December 31,

2021. A

substantial

portion of these debt securities could be used to

raise financing in the U.S. money markets or

from secured lending sources.

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. In particular,

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

the

same

credit

policies

and

approval

process

used

for

on-balance

sheet

instruments.

These

instruments

involve,

varying degrees, elements

of credit and

interest rate risk

in excess of

the amount recognized

in the statement

of financial position.

Refer to

Note 24

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

guarantees,

indemnifications,

and

representation

and

warranties.

Refer

Note

the

Consolidated Financial Statements for information on operating leases and

to Note 23 to the

Consolidated Financial Statements for

detailed

discussion

the

Corporation’s

obligations

under

credit

recourse

and

representation

and

warranties

arrangements.

The Corporation monitors

its cash requirements,

including its contractual obligations

and debt commitments.

As discussed above,

liquidity

managed

the

Corporation in

order to

meet

its

short-

and

long-term cash

obligations. Note

the

Consolidated

Financial Statements has information on

the Corporation’s borrowings by maturity,

which amounted to $1.4

billion at December 31,

2022 (December 31, 2021 - $1.2 billion).

Financial information of guarantor and issuers of registered

guaranteed securities

The Corporation (not

including any of

its subsidiaries, “PIHC”)

is the parent

holding company of

Popular North America

“PNA” and

has other subsidiaries through which it

conducts its financial services operations. PNA is

an operating, 100% subsidiary of Popular,

Inc.

Holding Company

(“PIHC”) and

is the

holding company

of its

wholly-owned subsidiaries:

Equity One,

Inc.

and PB,

including

PB’s wholly-owned subsidiaries Popular Equipment Finance,

LLC, Popular Insurance Agency, U.S.A., and E-LOAN, Inc.

PNA

has

issued

junior

subordinated

debentures

guaranteed

PIHC

(together

with

PNA,

the

“obligor

group”)

purchased

statutory trusts

established by

the Corporation.

These debentures

were purchased

by the

statutory trust

using the

proceeds from

trust preferred securities issued to the public (referred to as

“capital securities”), together with the proceeds of the related issuances

of common securities of the trusts.

PIHC

fully

and

unconditionally

guarantees

the

junior

subordinated

debentures

issued

PNA.

PIHC’s

obligation

make

guarantee payment may be satisfied by direct

payment of the required amounts to the

holders of the applicable capital securities or

by causing the applicable trust to pay such amounts to such holders. Each guarantee does not apply to any payment of distributions

the

applicable

trust

except

the

extent

such

trust

has

funds

available

for

such

payments.

PIHC

does

not

make

interest

payments on the

debentures held by such

trust, such trust

will not pay

distributions on the applicable

capital securities and

will not

have

funds

available

for

such

payments.

PIHC’s

guarantee

PNA’s

junior

subordinated

debentures

unsecured

and

ranks

subordinate and junior in

right of payment to

all the PIHC’s other

liabilities in the same manner

as the applicable debentures as

set

forth in the applicable indentures; and equally with all other guarantees

that the PIHC issues. The guarantee constitutes a guarantee

payment

and

not

collection,

which means

that

the

guaranteed party

may

sue

the

guarantor to

enforce its

rights

under the

respective guarantee without suing any other person

or entity.

The

principal

sources

funding

for

PIHC

and

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

amount of dividends

an insured depository

institution may pay

to its holding

company

without regulatory approval.

The

following

summarized

financial

information

presents

the

financial

position

the

obligor

group,

combined

basis

December

31,

2022

and

December 31,

2021,

and

the

results

their

operations

for

the

period

ended December

31,

2022

and

December 31,

2021. Investments in and equity in the earnings from the other subsidiaries and affiliates that are not members of the

obligor group have been excluded.

The

summarized

financial

information

the

obligor

group

presented

combined

basis

with

intercompany

balances

and

transactions

between

entities

the

obligor

group

eliminated.

The

obligor

group's

amounts

due

from,

amounts

due

and

transactions with

subsidiaries and

affiliates

have been

presented in

separate line

items, if

they are

material.

addition, related

parties transactions are presented separately.

Table 19 - Summarized Statement

of Condition

(In thousands)

December 31, 2022

December 31, 2021

Assets

Cash and money market investments

203,083

291,540

Investment securities

24,815

25,691

Accounts receivables from non-obligor subsidiaries

16,853

17,634

Other loans (net of allowance for credit losses of $370 (2021

- $96))

27,826

29,349

Investment in equity method investees

5,350

114,955

Other assets

45,278

42,251

Total assets

323,205

521,420

Liabilities and Stockholders' deficit

Accounts payable to non-obligor subsidiaries

3,709

6,481

Accounts payable to affiliates and related parties

1,254

Notes payable

497,428

496,134

Other liabilities

112,847

97,172

Stockholders' deficit

(290,779)

(79,621)

Total liabilities and

stockholders' deficit

323,205

521,420

Table 20 - Summarized Statement

of Operations

For the years ended

(In thousands)

December 31, 2022

December 31, 2021

Income:

Dividends from non-obligor subsidiaries

458,000

792,000

Interest income from non-obligor subsidiaries and affiliates

705

848

Earnings from investments in equity method investees

15,688

29,387

Other operating income

145,295

3,136

Total income

619,688

825,371

Expenses:

Services provided by non-obligor subsidiaries and affiliates

(net of

reimbursement by subsidiaries for services provided by parent

$222,935 (2021 - $162,019))

18,467

13,594

Other operating expenses

23,607

33,524

Total expenses

42,074

47,118

Net income (loss)

577,614

778,253

During the year ended

December 31, 2022, the Obligor

group recorded $1.5 million of

dividend distributions from its direct

equity method investees, and $72.0 million of dividend distributions from non-obligor subsidiaries which were recorded as a

reduction

the

investments.

During

the

year

ended

December

31,

2021,

the

Obligor

group

recorded

$3.0

million

distributions from its direct equity method investees,

of which $2.3 million were related to dividend

distributions.

addition, during

the year

ending December

31, 2022,

the Obligor

group recorded

$228.1 million

in proceeds

from the

sale of two of its direct equity method investees (2021-

$0).

Risks to Liquidity

Total lines of credit outstanding are not necessarily a measure of the total credit available on a continuing

basis. Some of these lines

could be subject to collateral requirements, standards of creditworthiness, leverage ratios and other regulatory

requirements, among

other factors.

Derivatives, such

as those

embedded in

long-term repurchase

transactions or

interest rate

swaps, and

off-balance

sheet exposures, such as recourse, performance bonds or credit card arrangements, are subject to collateral requirements. As their

fair value increases, the collateral requirements may increase,

thereby reducing the balance of unpledged

securities.

The importance of

the Puerto Rico

market for the

Corporation is an

additional risk factor

that could affect

its financing activities.

the case

of a

deterioration in economic

and fiscal conditions

in Puerto Rico,

the credit quality

of the

Corporation could be

affected

and result

in higher

credit costs.

Refer to

the Geographic

and Government

Risk section

of this

MD&A for

some highlights

on the

current status of the Puerto Rico economy and the ongoing

fiscal crisis.

Factors that the Corporation does not control, such as the economic

outlook and credit ratings of its principal markets and regulatory

changes,

could also

affect

its

ability to

obtain funding.

order to

prepare for

the

possibility of

such scenario,

management has

adopted

contingency

plans

for

raising

financing

under

stress

scenarios

when

important

sources

funds

that

are

usually

fully

available

are

temporarily

unavailable. These

plans call

for

using

alternate

funding

mechanisms,

such

the

pledging

certain

asset classes

and accessing

secured credit

lines and

loan facilities

put in

place with

the FHLB

and the

FRB. The

Corporation is

subject to

positive tangible

capital

requirements to

utilize secured

loan facilities

with the

FHLB that

could

result in

a limitation

borrowing amounts or maturity terms, even if the Corporation

exceeds well-capitalized regulatory capital levels.

The credit

ratings of

Popular’s debt

obligations are

a relevant

factor for

liquidity because

they impact

the Corporation’s

ability to

borrow

the

capital

markets,

its

cost

and

access

funding

sources.

Credit

ratings

are

based

the

financial

strength,

credit

quality and

concentrations in

the loan

portfolio, the

level and

volatility of

earnings, capital

adequacy,

the quality

of management,

geographic concentration

in Puerto

Rico, the

liquidity of

the balance

sheet, the

availability of

a significant

base of

core retail

and

commercial deposits, and the Corporation’s ability

to access a broad array of wholesale funding

sources, among other factors.

Furthermore,

various

statutory

provisions

limit

the

amount

dividends

insured

depository

institution

may

pay

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, 2022, BPPR

declared

cash

dividends of

$450 million,

portion of

which was

used by

Popular for

the

payments of

the

cash

dividends on

its

outstanding common stock and $231 million in accelerated

stock repurchases.

At December 31, 2022, BPPR needed to obtain prior

approval of the Federal Reserve Board before

declaring a dividend in excess of $53 million

due to its declared dividend activity and

transfers to statutory reserves over the three years ended

December 31, 2022. 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

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. 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

its

outstanding common

and

preferred stock,

repurchase its

securities

or meet

its

debt

obligations, for example.

The Corporation’s banking subsidiaries have historically not

used unsecured capital market borrowings to finance its operations,

and

therefore are less sensitive to the level and

changes in the Corporation’s overall credit ratings.

Obligations Subject to Rating Triggers or Collateral Requirements

The

Corporation’s

banking

subsidiaries

currently

not

use

borrowings

that

are

rated

the

major

rating

agencies,

these

banking subsidiaries are funded primarily with deposits and secured borrowings. The banking subsidiaries had $9 million in deposits

at December 31, 2022 that are subject to

rating triggers.

In addition, certain

mortgage servicing and custodial

agreements that BPPR has

with third parties

include rating covenants.

In the

event of a credit rating downgrade, the third parties have the right to require the institution to engage a substitute cash custodian for

escrow

deposits

and/or

increase

collateral

levels

securing

the

recourse

obligations.

Also,

discussed

Note

the

Consolidated

Financial

Statements,

the

Corporation

services

residential

mortgage

loans

subject

credit

recourse

provisions.

Certain

contractual

agreements

require

the

Corporation

post

collateral

secure

such

recourse

obligations

the

institution’s

required

credit

ratings

are

not

maintained.

Collateral

pledged

the

Corporation

secure

recourse

obligations

amounted

approximately

$29

million

December

31,

2022.

The

Corporation

could

required

post

additional

collateral

under

the

agreements.

Management

expects

that

would

able

meet

additional

collateral

requirements

and

when

needed.

The

requirements

post

collateral under

certain

agreements or

the

loss

escrow deposits

could

reduce

the

Corporation’s liquidity

resources and impact its operating results.

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 37 to the Consolidated Financial Statements.

Commonwealth of Puerto Rico

significant portion

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.

Puerto

Rico’s

economy suffered

severe and

prolonged recession

from

2007

2017,

with real

gross national

product (“GNP”)

contracting approximately 15% during this

period.

In 2017, Hurricane María

caused significant damage and destruction

across the

island, resulting in further economic contraction.

Puerto Rico’s economy has been gradually recovering since 2018, in part aided by

the large amount

of federal disaster

relief and recovery

assistance funds injected

into the Puerto

Rico economy in

connection with

Hurricane María

and other

recent natural

disasters. This

growth was

interrupted by

the economic

shock caused

by the

COVID-19

pandemic in 2020, but has since resumed, in part

aided by additional federal assistance from

pandemic-related stimulus measures.

The

latest

Puerto

Rico

Economic Activity

Index,

published

the

Economic

Development Bank

for

Puerto

Rico

(the

“Economic

Activity

Index”),

reflected

0.6%

increase

December

2022,

compared

December

2021.

During

calendar

year

2022,

the

Economic Activity Index increased by 1.8%,

compared to the same period in

calendar year 2021.

The Economic Activity Index is

coincident indicator of ongoing economic activity but not a

direct measurement of real GNP.

According to the Puerto Rico Planning

Board’s latest economic forecast (dated August 2021), Puerto Rico’s

real GNP is projected to increase 1.7% during the

current fiscal

year (July 2022-June 2023).

While the

Puerto Rico

economy has

not directly

tracked the

United States

economy in

recent years,

many of

the external

factors

that impact the

Puerto Rico economy

are affected by

the policies and

performance of the

United States economy.

These external

factors include

the level

of interest

rates and

the rate

of inflation.

Inflation in

the United

States, as

measured by the

United States

Consumer Price Index

(published by the

U.S. Bureau of

Labor Statistics), increased

6.5% in calendar

year 2022, mainly

driven by

pent-up

demand

and

supply-chain

disruptions

caused

the

pandemic.

During

the

same

period,

inflation

Puerto

Rico,

measured by the Puerto Rico Consumer Price Index (published by the Department of Labor and Human Resources of Puerto Rico),

increased 6.1%

for similar

reasons.

The rate

of inflation

has slowed

down in

recent months,

following a

mid-2022 peak,

as the

Federal Reserve has

implemented a series

of benchmark interest

rate increases.

The speed

and scope of

the inflation slowdown

will inform

if and

how much

interest rates

will continue

to increase,

as well

how these

changes will

impact the

United States

and

Puerto Rico economies.

Fiscal Challenges.

As the

Puerto Rico

economy contracted, the

government’s public

debt rose

rapidly,

in part

from borrowing to

cover deficits

to pay

debt service, pension

benefits and other

government expenditures.

By 2016, the

Puerto Rico government

had over $120

billion in

combined debt and unfunded

pension liabilities, had lost access to the capital

markets, and was in the midst of a fiscal

crisis.

Puerto

Rico’s

escalating fiscal

and economic

challenges

and imminent

widespread defaults

its

public debt

prompted the

U.S.

Congress to

enact the

Puerto Rico

Oversight, Management,

and Economic

Stability Act

(“PROMESA”) in

June 2016.

PROMESA

created the “Oversight Board” with ample powers over Puerto Rico’s fiscal and economic affairs and those of its public corporations,

instrumentalities and municipalities (collectively, “PR

Government Entities”).

Pursuant to PROMESA, the Oversight Board will

be in

place

until

market

access

restored

and

balanced

budgets

are

produced

for

least

four

consecutive

years.

PROMESA

also

established two

mechanisms for

the restructuring

of the

obligations of

PR Government

Entities: (a)

Title III,

which provides

an in-

court process that incorporates many of the

powers and provisions of the U.S. Bankruptcy Code

and permits adjustment of a broad

range of obligations, and

(b) Title VI,

which provides for a

largely out-of-court process through which

modifications to financial debt

can be accepted by a supermajority of creditors

and bind holdouts.

Since 2017, Puerto Rico and several

of its instrumentalities have availed themselves

of the debt restructuring mechanisms of Titles

III and VI of PROMESA. The Puerto Rico government emerged from Title III of PROMESA in March 2022. Several instrumentalities,

including Government

Development Bank for

Puerto Rico,

the Puerto

Rico Sales

Tax

Financing Corporation, and

the Puerto

Rico

Highways

and

Transportation

Authority,

have

also

completed

debt

restructurings

under

Titles

III

PROMESA.

While

the

majority

the

debt

has

already

been

restructured,

some

Government

Entities

still

face

significant

fiscal

challenges.

For

example, the

Puerto Rico

Electric Power

Authority is

still in

the process

of restructuring

its debts

under Title

III of

PROMESA and

other PR Government

Entities, such as

the Puerto Rico

Industrial Development Company,

have defaulted on

their bonds but

have

not commenced debt restructuring proceedings under

PROMESA.

Municipalities.

Puerto Rico’s fiscal and economic challenges have

also adversely impacted its municipalities. Budgetary subsidies to municipalities

have

gradually

declined

recent

years

and

are

scheduled

ultimately

eliminated

fiscal

year

2025

part

the

fiscal

measures

required

the

Oversight

Board.

According

the

latest

Puerto

Rico

fiscal

plan

certified

the

Oversight

Board,

municipalities

have

made

little

progress

towards

implementing

the

fiscal

discipline

required

reduce

reliance

these

budgetary appropriations and this

lack of fiscal

management may threaten the

ability of certain

municipalities to provide

necessary

services, such as health, sanitation, public safety

and emergency services to their residents, forcing them

to prioritize expenditures.

Municipalities

are

subject

PROMESA

and,

the

Oversight

Board’s

request,

are

required

submit

fiscal

plans

and

annual

budgets

the

Oversight

Board

for

its

review

and

approval.

They

are

also

required to

seek

Oversight

Board

approval

issue,

guarantee

modify

their

debts

and

enter

into

contracts

with an

aggregate

value

$10

million

more.

With

the

Oversight

Board’s approval, municipalities are also eligible to avail themselves of the debt restructuring processes provided by PROMESA. To

date, however, no municipality has been subject to any such debt

restructuring process.

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

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.

December 31,

2022, the

Corporation’s direct

exposure to

PR Government

Entities totaled

$374

million, of

which $327

million

were

outstanding,

compared

$367

million

December

31,

2021,

which

$349

million

were

outstanding.

deterioration

Puerto Rico’s fiscal

and economic situation could adversely

affect the value of

our Puerto Rico government

obligations, resulting in

losses to us. Of

the amount outstanding, $302 million

consists of loans and

$25 million are securities ($319

million and $30 million,

respectively,

at December

31, 2021).

All of

the Corporation’s

direct exposure

outstanding at

December 31,

2022 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,

“special obligations”

a municipality,

which the

applicable

municipality

has

pledged basic

property tax

sales

tax

revenues. At

December 31,

2022,

73%

the

Corporation’s

exposure to municipal loans

and securities was concentrated in

the municipalities of San Juan,

Guaynabo, Carolina and Bayamón.

For

additional

discussion

the

Corporation’s

direct

exposure

the

Puerto

Rico

government

and

its

instrumentalities

and

municipalities, refer to Note 24 – Commitments and

Contingencies to the Consolidated Financial Statements.

addition,

December

31,

2022,

the

Corporation

had

$251

million

loans

insured

securities

issued

Puerto

Rico

governmental entities,

but for

which the

principal source

of repayment

is non-governmental

($275 million at

December 31, 2021).

These

included

$209

million

residential mortgage

loans

insured by

the

Puerto

Rico

Housing

Finance Authority

(“HFA”),

Government

Entity

(December

31,

2021

$232 million).

These

mortgage

loans

are

secured

first

mortgages

Puerto

Rico

residential properties

and the

HFA insurance

covers losses

in the

event of

a borrower

default and

upon the

satisfaction of

certain

other

conditions.

The

Corporation also

had,

December

31,

2022,

$42

million

bonds

issued

HFA

which

are

secured

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, 2021 - $43 million).

In the event that

the mortgage loans insured by HFA and held by the Corporation directly or those

serving as collateral for the HFA bonds default and

the collateral is insufficient to satisfy the outstanding balance of these loans, 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

private borrowers

who

are service

providers, lessors,

suppliers or

have

other relationships with the government. These borrowers could be negatively

affected by a deterioration in the fiscal and

economic

situation

Government

Entities.

Similarly,

BPPR’s

mortgage

and

consumer

loan

portfolios

include

loans

government

employees

and

retirees,

which

could

also

negatively

affected

fiscal

measures,

such

employee

layoffs

furloughs

reductions in pension benefits, if the fiscal and economic

situation deteriorates.

December

31,

2022,

BPPR

had

$15.2

billion

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 speed

at which

federal 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.

The

Corporation may

also have

direct

exposure with

regards to

avoidance and

other causes

action initiated

by the

Oversight

Board on behalf of the Commonwealth or other Title III debtors. For additional information regarding such exposure, refer to Note 24

to the Consolidated Financial Statements.

United States Virgin Islands

The

Corporation

has

operations

the

United

States

Virgin

Islands

(the

“USVI”)

and

has

credit

exposure

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

currently

federal

legislation

permitting

the

restructuring

the

debts

the

USVI

and

its

public

corporations

and

instrumentalities.

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, 2022,

the Corporation

had approximately $28

million in

direct exposure to

USVI government

entities (December

31, 2021 - $70 million).

British Virgin Islands

The Corporation has operations in the British Virgin Islands (“BVI”), which has been 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, 2022 it has a loan portfolio amounting to approximately

$214 million comprised of various retail and commercial

clients, compared to a loan portfolio of $221 million

at December 31, 2021.

U.S. Government

As further detailed in Notes

6 and 7 to the

Consolidated Financial Statements, a substantial portion of the

Corporation’s investment

securities

represented exposure

the

U.S.

Government in

the

form

U.S. Government

sponsored

entities,

including

FNMA,

FHMLC and GNMA.

As discussed in

Note 2 to

the Consolidated Financial

Statements, these securities

carry an

explicit or implicit

guarantee

from

the

U.S.

Government,

are

highly

rated

major

rating

agencies,

and

have

long

history

credit

losses.

Accordingly, the Corporation applies a zero-credit loss assumption and no ACL for

these securities has been established.

In October 2022, the

Corporation transferred U.S. Treasury securities

with a fair value

of $

6.5

billion (par value of

7.4

billion) from

its available-for-sale portfolio to its held-to-maturity portfolio.

Management changed its intent, given its ability to hold these securities

to maturity

due to

the Corporation’s

liquidity position

and its

intention to

reduce the

impact on

accumulated other

comprehensive

income (loss) (“AOCI”) and

tangible capital of further

increases in interest rates.

The securities were reclassified

at fair value at

the

time of

the transfer.

At the

date of

the transfer,

these securities

had pre-tax

unrealized losses of

873.0

million recorded

in AOCI.

This fair value discount is being accreted to interest income and the unrealized loss remaining in AOCI is being amortized, offsetting

each other through the remaining life of the securities.

There were no realized gains or losses recorded

as a result of this transfer.

145

Note 7 –Debt securities held-to-maturity

The following

tables present

the amortized

cost, allowance

for credit

losses, gross

unrealized gains

and losses,

approximate fair

value, weighted average yield and contractual

maturities of debt securities held-to-maturity at December

31, 2022 and 2021.

At December 31, 2022

Allowance

Carrying

Value

Gross

Weighted

Amortized

Book

[1]

for Credit

Net of

unrealized

Fair

average

(In thousands)

cost

Value

Losses

Allowance

gains

losses

value

yield

U.S. Treasury securities

Within 1 year

499,034

6,203

492,831

2.83

After 1 to 5 years

6,147,568

5,640,767

59,806

5,580,961

1.49

After 5 to 10 years

2,638,238

2,313,666

14,857

2,298,809

1.41

Total U.S. Treasury

securities

9,284,840

8,453,467

80,866

8,372,601

1.54

Obligations of Puerto Rico, States and

political subdivisions

Within 1 year

4,530

4,522

4,527

6.08

After 1 to 5 years

19,105

234

18,871

150

18,939

4.24

After 5 to 10 years

1,025

991

1,025

5.80

After 10 years

41,261

6,635

34,626

4,729

2,229

37,126

1.40

Total obligations of

Puerto Rico, States and

political subdivisions

65,921

6,911

59,010

4,918

2,311

61,617

2.61

Collateralized mortgage obligations - federal

agencies

After 1 to 5 years

6.44

Total collateralized

mortgage obligations -

federal agencies

6.44

Securities in wholly owned statutory business

trusts

After 10 years

5,959

6.33

Total securities

in wholly owned statutory

business trusts

5,959

6.33

Total debt securities

held-to-maturity [2]

9,356,739

8,525,366

6,911

8,518,455

4,918

83,177

8,440,196

1.55

[1]

Book value includes $

831

million of net unrealized loss which remains in Accumulated

other comprehensive income (AOCI) related to certain

securities transferred from available-for-sale securities

portfolio to the held-to-maturity securities portfolio as

discussed in Note 6.

[2]

Includes $

6.9

million pledged to secure public and trust deposits

that the secured parties are not permitted to sell or repledge

the collateral.

At December 31, 2021

Allowance

Gross

Weighted

Amortized

for Credit

Net of

unrealized

Fair

average

(In thousands)

cost

Losses

Allowance

gains

losses

value

yield

Obligations of Puerto Rico, States and political

subdivisions

Within 1 year

4,240

4,233

4,237

6.07

After 1 to 5 years

14,395

148

14,247

149

14,396

6.23

After 5 to 10 years

11,280

122

11,158

104

11,262

2.18

After 10 years

43,561

7,819

35,742

11,746

47,488

1.50

Total obligations of

Puerto Rico, States and political

subdivisions

73,476

8,096

65,380

12,003

77,383

2.79

Collateralized mortgage obligations - federal agencies

After 1 to 5 years

6.44

Total collateralized

mortgage obligations - federal

agencies

6.44

Securities in wholly owned statutory business trusts

After 10 years

5,960

6.33

Total securities

in wholly owned statutory business

trusts

5,960

6.33

Total debt securities

held-to-maturity

79,461

8,096

71,365

12,003

83,368

3.06

Securities not due

on a single

contractual maturity date,

such as collateralized

mortgage obligations, are classified

in the

period of

final contractual maturity. The

expected maturities of collateralized mortgage obligations and certain other securities may differ from

their contractual maturities because they may be

subject to prepayments or may be called by

the issuer.

146

The following

table presents the

aggregate amortized cost

and fair value

of debt securities

held-to-maturity at December

31, 2022

by contractual maturity.

(In thousands)

Amortized cost

Book Value

Fair value

Within 1 year

503,564

497,358

After 1 to 5 years

6,166,692

5,659,891

5,599,919

After 5 to 10 years

2,639,263

2,314,691

2,299,834

After 10 years

47,220

43,085

Total debt securities

held-to-maturity

9,356,739

8,525,366

8,440,196

Credit Quality Indicators

The following describes the credit quality

indicators by major security type that

the Corporation considers in its’ estimate

to develop

the allowance for credit losses for investment securities

held-to-maturity.

As discussed in Note 2 to the Consolidated Financial Statements, U.S. Treasury securities carry

an explicit guarantee from the U.S.

Government are

highly rated

by major

rating agencies,

and have

a long

history of

no credit

losses. Accordingly,

the Corporation

applies a zero-credit loss assumption and no ACL

for these securities has been established.

At December 31, 2022 and December 31, 2021, the “Obligations

of Puerto Rico, States and political subdivisions” classified

as held-

to-maturity,

includes securities

issued by

municipalities of

Puerto Rico

that are

generally not

rated by

a credit

rating agency.

This

includes $

million of general and special obligation bonds issued by three municipalities of Puerto Rico, that

are payable primarily

from

certain

property

taxes

imposed

the

issuing

municipality

(December

31,

2021

million).

the

case

general

obligations, they

also benefit

from a

pledge of

the full

faith, credit

and unlimited

taxing power

of the

issuing municipality,

which is

required by law to levy property taxes in an amount sufficient for the payment of

debt service on such general obligation bonds. The

Corporation performs periodic credit quality

reviews of these securities and

internally assigns standardized credit risk ratings based

on its evaluation.

The Corporation considers these ratings

in its estimate to

develop the allowance for credit

losses associated with

these

securities.

For

the

definitions

the

obligor

risk

ratings,

refer

the

Credit

Quality

section

Note

the

Consolidated

Financial Statements.

The

following

presents

the

amortized

cost

basis

securities

held

the

Corporation

issued

municipalities

Puerto

Rico

aggregated by the internally assigned standardized

credit risk rating:

At December 31, 2022

At December 31, 2021

(In thousands)

Securities issued by Puerto Rico municipalities

Watch

13,735

16,345

Pass

10,925

13,800

Total

24,660

30,145

At December

31, 2022,

the portfolio

of “Obligations

of Puerto

Rico, States

and political

subdivisions” also

includes $

million in

securities

issued

the

Puerto

Rico

Housing

Finance

Authority

(“HFA”),

government

instrumentality,

for

which

the

underlying

source of payment is second mortgage loans in Puerto Rico

residential properties (not the government), but for which HFA, provides

a guarantee

in the

event of default

and upon the

satisfaction of certain

other conditions (December

31, 2021 -

million). These

securities

are

not

rated

credit

rating

agency.

The

Corporation assesses

the

credit

risk

associated

with

these

securities

evaluating the refreshed

FICO scores of

a representative sample of

the underlying borrowers.

At December 31,

2022, the average

refreshed FICO

score

for the

representative sample,

comprised of

the

nominal value

of the

securities, used

for the

loss

estimate was

707

(compared to

and

704

respectively,

at December

31, 2021).

The

loss estimates

for this

portfolio was

based on the methodology established under CECL

for similar loan obligations. The Corporation does not

consider the government

guarantee when estimating the credit losses associated

with this portfolio.

147

further

deterioration

the

Puerto

Rico

economy

the

fiscal

health

the

Government

Puerto

Rico

and/or

its

instrumentalities (including if any of

the issuing municipalities become subject to

a debt restructuring proceeding under PROMESA)

could further affect the value of these securities, resulting in losses

to the Corporation.

Refer to

Note 24

to the

Consolidated Financial

Statements

for additional

information on

the Corporation’s

exposure to

the Puerto

Rico Government.

Delinquency status

At December 31, 2022 and December 31, 2021,

there were

securities held-to-maturity in past due or non-performing

status.

Allowance for credit losses on debt securities held-to-maturity

The following table provides the

activity in the allowance for

credit losses related to debt securities

held-to-maturity by security type

at December 31, 2022 and December 31, 2021:

For the year ended December 31,

2022

2021

(In thousands)

Obligations of Puerto Rico, States and political subdivisions

Allowance for credit losses:

Beginning balance

8,096

10,261

Provision for credit losses (benefit)

(1,185)

(2,165)

Securities charged-off

Recoveries

Ending balance

6,911

8,096

The

allowance

for

credit

losses

for

the

Obligations

Puerto

Rico,

States

and

political

subdivisions

includes

0.3

million

for

securities issued by municipalities of

Puerto Rico, and $

6.6

million for bonds issued by

the Puerto Rico HFA,

which are secured by

second mortgage loans on

Puerto Rico residential properties (compared to

0.3

million and $

7.8

million, respectively, at

December

31, 2021).

148

Note 8 – Loans

For

summary

of the

accounting policies

related to

loans, interest

recognition

and

allowance for

credit

losses

refer to

Note

Summary of Significant Accounting Policies of this Form

10-K.

During the year ended December 31, 2022, the Corporation recorded purchases (including repurchases) of mortgage loans

of $

299

million, which

include $

million in

Purchased Credit

Deteriorated (“PCD”)

loans, consumer

loans of

433

million and

commercial

loans of $

142

million; compared to purchases (including repurchases)

of mortgage loans of $

393

million, which include $

million in

PCD loans, consumer loans of $

million and commercial loans of $

139

million during the year ended December 31, 2021.

The Corporation performed

whole-loan sales involving

approximately $

million of

residential mortgage loans

and $

138

million of

commercial and

construction loans

during the

year ended

December 31,

2022 (December

31, 2021

- $

145

million of

residential

mortgage

loans

and

131

million

commercial

and

construction loans).

Also,

during

the

year

ended December

31,

2022,

the

Corporation securitized

approximately $

169

million of

mortgage loans

into Government

National Mortgage

Association (“GNMA”)

mortgage-backed securities

and $

122

million of

mortgage loans

into Federal

National Mortgage

Association (“FNMA”)

mortgage-

backed securities, compared

to $

380

million and $

330

million, respectively,

during the year

ended December 31,

2021. Also, the

Corporation

securitized

approximately

million

mortgage

loans

into

Federal

Home

Loan

Mortgage

Corporation

(“FHLMC”)

mortgage-backed securities during the year ended December

31, 2022.

Delinquency status

The following tables present the

amortized cost basis of loans

held-in-portfolio (“HIP”), net of unearned

income, by past due status,

and by loan class including those that are in non-performing status or that are accruing

interest but are past due 90 days or more at

December 31, 2022 and 2021.

149

December 31, 2022

BPPR

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

or more

past due

Current

Loans HIP

loans

Commercial multi-family

425

242

667

280,706

281,373

242

Commercial real estate:

Non-owner occupied

941

428

23,662

25,031

2,732,296

2,757,327

23,662

Owner occupied

729

245

23,990

24,964

1,563,092

1,588,056

23,990

Commercial and industrial

3,036

941

35,777

39,754

3,756,754

3,796,508

34,277

1,500

Construction

147,041

Mortgage

222,926

91,881

579,993

894,800

5,215,479

6,110,279

242,391

337,602

Leasing

11,983

3,563

5,941

21,487

1,564,252

1,585,739

5,941

Consumer:

Credit cards

7,106

5,049

11,910

24,065

1,017,766

1,041,831

11,910

Home equity lines of credit

2,954

Personal

13,232

8,752

18,082

40,066

1,545,621

1,585,687

18,082

Auto

68,868

19,243

40,978

129,089

3,383,441

3,512,530

40,978

Other

487

12,682

13,256

124,324

137,580

12,446

236

Total

329,733

130,189

753,257

1,213,179

21,333,726

22,546,905

402,009

351,248

December 31, 2022

Popular U.S.

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

or more

past due

Current

Loans HIP

loans

Commercial multi-family

2,177

2,038,163

2,040,340

Commercial real estate:

Non-owner occupied

484

1,454

1,938

1,740,405

1,742,343

1,454

Owner occupied

5,095

1,485,398

1,490,493

5,095

Commercial and industrial

12,960

2,205

4,685

19,850

2,022,842

2,042,692

4,319

366

Construction

610,943

Mortgage

16,131

5,834

20,488

42,453

1,244,739

1,287,192

20,488

Consumer:

Credit cards

Home equity lines of

credit

413

161

4,110

4,684

64,278

68,962

4,110

Personal

1,808

1,467

1,958

5,233

232,659

237,892

1,958

Other

9,960

9,968

Total

33,973

9,667

37,798

81,438

9,449,426

9,530,864

37,432

366

150

December 31, 2022

Popular, Inc.

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

or more

past due

Current

Loans HIP

[2] [3]

loans

Commercial multi-family

2,602

242

2,844

2,318,869

2,321,713

242

Commercial real estate:

Non-owner occupied

1,425

428

25,116

26,969

4,472,701

4,499,670

25,116

Owner occupied

729

245

29,085

30,059

3,048,490

3,078,549

29,085

Commercial and industrial

15,996

3,146

40,462

59,604

5,779,596

5,839,200

38,596

1,866

Construction

757,984

Mortgage

[1]

239,057

97,715

600,481

937,253

6,460,218

7,397,471

262,879

337,602

Leasing

11,983

3,563

5,941

21,487

1,564,252

1,585,739

5,941

Consumer:

Credit cards

7,106

5,049

11,910

24,065

1,017,805

1,041,870

11,910

Home equity lines of credit

413

161

4,110

4,684

67,232

71,916

4,110

Personal

15,040

10,219

20,040

45,299

1,778,280

1,823,579

20,040

Auto

68,868

19,243

40,978

129,089

3,383,441

3,512,530

40,978

Other

487

12,690

13,264

134,284

147,548

12,454

236

Total

363,706

139,856

791,055

1,294,617

30,783,152

32,077,769

439,441

351,614

[1]

It is the Corporation’s policy to report delinquent residential

mortgage loans insured by Federal Housing Administration

(“FHA”) or guaranteed by

the U.S. Department of Veterans Affairs

(“VA”) as accruing loans past

due 90 days or more as opposed to non-performing

since the principal

repayment is insured.

The balance of these loans includes $

million at December 31, 2022 related to the rebooking

of loans previously pooled

into GNMA securities, in which the Corporation had a

buy-back option. Under the GNMA program, issuers such

as BPPR have the option but not

the obligation to repurchase loans that are 90 days or more

past due. For accounting purposes, these loans subject to

repurchases option are

required to be reflected (rebooked) on the financial statements

of BPPR with an offsetting liability.

These balances also include $

190

million of

residential mortgage loans insured by FHA or guaranteed by

the VA that are no longer accruing

interest as of December 31, 2022. Furthermore,

the Corporation has approximately $

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

from non-performing

assets.

[2]

Loans held-in-portfolio are net of $

295

million in unearned income and exclude $

million in loans held-for-sale.

[3]

Includes $

7.4

billion pledged to secure credit facilities and public funds

that the secured parties are not permitted to sell or

repledge the collateral,

of which $

4.8

billion were pledged at the Federal Home Loan Bank

("FHLB") as collateral for borrowings and $

2.6

billion at the Federal Reserve

Bank ("FRB") for discount window borrowings.

151

December 31, 2021

BPPR

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

or more

past due

Current

Loans HIP

loans

Commercial multi-family

314

272

586

154,183

154,769

272

Commercial real estate:

Non-owner occupied

2,399

136

20,716

23,251

2,266,672

2,289,923

20,716

Owner occupied

3,329

278

54,335

57,942

1,365,787

1,423,729

54,335

Commercial and industrial

3,438

1,727

45,242

50,407

3,478,041

3,528,448

44,724

518

Construction

485

86,626

87,111

485

Mortgage

217,830

81,754

805,245

1,104,829

5,147,037

6,251,866

333,887

471,358

Leasing

9,240

2,037

3,102

14,379

1,366,940

1,381,319

3,102

Consumer:

Credit cards

5,768

3,520

8,577

17,865

901,986

919,851

8,577

Home equity lines of credit

3,502

3,571

Personal

10,027

6,072

21,235

37,334

1,250,726

1,288,060

21,235

Auto

59,128

15,019

23,085

97,232

3,314,955

3,412,187

23,085

Other

432

714

12,621

13,767

110,781

124,548

12,448

173

Total

311,951

111,257

994,938

1,418,146

19,447,236

20,865,382

514,289

480,649

December 31, 2021

Popular U.S.

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

or more

past due

Current

Loans HIP

loans

Commercial multi-family

3,826

1,804,035

1,807,861

Commercial real estate:

Non-owner occupied

5,721

683

622

7,026

2,316,441

2,323,467

622

Owner occupied

1,095

1,013

2,108

392,265

394,373

1,013

Commercial and industrial

9,410

2,680

4,015

16,105

1,794,026

1,810,131

3,897

118

Construction

629,109

Mortgage

11,711

2,573

21,969

36,253

1,139,077

1,175,330

21,969

Consumer:

Credit cards

Home equity lines of credit

5,406

5,511

69,780

75,291

5,406

Personal

863

574

681

2,118

152,827

154,945

681

Other

4,658

Total

32,697

6,544

33,706

72,947

8,302,228

8,375,175

33,588

118

152

December 31, 2021

Popular, Inc.

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

or more

past due

Current

Loans HIP

[2]

[3]

loans

Commercial multi-family

4,140

272

4,412

1,958,218

1,962,630

272

Commercial real estate:

Non-owner occupied

8,120

819

21,338

30,277

4,583,113

4,613,390

21,338

Owner occupied

4,424

278

55,348

60,050

1,758,052

1,818,102

55,348

Commercial and industrial

12,848

4,407

49,257

66,512

5,272,067

5,338,579

48,621

636

Construction

485

715,735

716,220

485

Mortgage

[1]

229,541

84,327

827,214

1,141,082

6,286,114

7,427,196

355,856

471,358

Leasing

9,240

2,037

3,102

14,379

1,366,940

1,381,319

3,102

Consumer:

Credit cards

5,768

3,520

8,577

17,865

901,996

919,861

8,577

Home equity lines of credit

117

5,429

5,580

73,282

78,862

5,406

Personal

10,890

6,646

21,916

39,452

1,403,553

1,443,005

21,916

Auto

59,128

15,019

23,085

97,232

3,314,955

3,412,187

23,085

Other

432

714

12,621

13,767

115,439

129,206

12,448

173

Total

344,648

117,801

1,028,644

1,491,093

27,749,464

29,240,557

547,877

480,767

[1]

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.

The balance of these loans includes $

million at

December 31, 2021 related to the rebooking of loans

previously pooled into GNMA securities, in which the Corporation

had a buy-back option.

Under the GNMA program, issuers such as BPPR have the

option but not the obligation to repurchase loans

that are 90 days or more past due.

For accounting purposes, these loans subject to repurchases

option are required to be reflected (rebooked) on

the financial statements of BPPR

with an offsetting liability. These

balances also include $

304

million of residential mortgage loans insured by

FHA or guaranteed by the VA

that are

no longer accruing interest as of December 31, 2021.

Furthermore, the Corporation has approximately $

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 from non-performing assets.

[2]

Loans held-in-portfolio are net of $

266

million in unearned income and exclude $

million in loans held-for-sale.

[3]

Includes $

6.6

billion pledged to secure credit facilities and public funds

that the secured parties are not permitted to sell or

repledge the collateral,

of which $

3.2

billion were pledged at the FHLB as collateral for borrowings

and $

1.7

billion at the FRB for discount window borrowings

and $

1.7

billion serve as collateral for public funds.

Recognition of interest income on mortgage loans is generally discontinued when loans are 90 days or more in arrears on payments

of principal or interest. The Corporation discontinues the recognition of interest income on residential mortgage loans insured by the

FHA or

guaranteed by

when 15

months delinquent

as to

principal or

interest, since

the principal

repayment on

these loans

insured.

At December

31, 2022, mortgage

loans held-in-portfolio include

2.0

billion (December 31,

2021 -

1.9

billion) of loans

insured by

the FHA,

or guaranteed

by the

of which

0.3

billion (December

31, 2021

- $

0.5

billion) are

90 days

or more

past due.

These

balances include

725

million in

loans modified

under a

TDR (December

31, 2021

- $

716

million), that

are presented

as accruing

loans.

The

portfolio

guaranteed

loans

includes

190

million

residential

mortgage

loans

Puerto

Rico

that

are

longer

accruing interest

as of

December 31, 2022

(December 31, 2021

- $

304

million). The

Corporation has approximately

million in

reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at December 31,

2022 (December 31, 2021 - $

million).

Loans with

a delinquency status

of 90

days past due

as of

December 31, 2022

include $

million in loans

previously pooled into

GNMA securities (December 31, 2021 -

million). Under the GNMA program, issuers

such as BPPR have the

option but not the

obligation to repurchase loans

that are 90

days or more

past due. For

accounting purposes, these loans

subject to the

repurchase

option

are

required to

reflected on

the

financial statements

of BPPR

with

offsetting

liability.

Loans

our

serviced

GNMA

portfolio benefit

from payment

forbearance programs

but continue

to reflect

the contractual

delinquency until

the borrower

repays

deferred payments or completes a payment deferral

modification or other borrower assistance alternative.

The components of the net financing leases,

including finance leases within the C&I category,

receivable at December 31, 2022 and

2021 were as follows:

153

(In thousands)

2022

2021

Total minimum lease

payments

1,336,173

1,190,545

Estimated residual value of leased property

605,638

518,670

Deferred origination costs, net of fees

24,909

21,474

Less - Unearned financing income

293,091

257,738

Net minimum lease payments

1,673,629

1,472,951

Less - Allowance for credit losses

22,216

18,581

Net minimum lease payments, net of allowance for credit losses

1,651,413

1,454,370

At December 31, 2022, future minimum lease payments

are expected to be received as follows:

(In thousands)

2023

111,779

2024

132,371

2025

177,836

2026

303,773

2027

402,035

2028 and thereafter

208,379

Total

1,336,173

The following tables present the amortized cost basis

of non-accrual loans as of December 31, 2022

and 2021 by class of loans:

154

December 31, 2022

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Non-accrual

with no

allowance

Non-accrual

with

allowance

Non-accrual

with no

allowance

Non-accrual

with

allowance

Non-accrual

with no

allowance

Non-accrual

with

allowance

Commercial multi-family

242

Commercial real estate non-owner occupied

15,639

8,023

1,454

17,093

8,023

Commercial real estate owner occupied

9,070

14,920

5,095

14,165

14,920

Commercial and industrial

20,227

14,050

4,319

20,227

18,369

Mortgage

119,027

123,364

20,417

119,098

143,781

Leasing

458

5,483

458

5,483

Consumer:

HELOCs

4,110

Personal

4,623

13,459

1,958

4,623

15,417

Auto

1,177

39,801

1,177

39,801

Other

263

12,183

263

12,191

Total

170,484

231,525

6,620

30,812

177,104

262,337

December 31, 2021

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Non-accrual

with no

allowance

Non-accrual

with

allowance

Non-accrual

with no

allowance

Non-accrual

with

allowance

Non-accrual

with no

allowance

Non-accrual

with

allowance

Commercial multi-family

272

Commercial real estate non-owner occupied

15,819

4,897

622

15,819

5,519

Commercial real estate owner occupied

13,491

40,844

1,013

13,491

41,857

Commercial and industrial

30,177

14,547

3,897

30,177

18,444

Construction

485

Mortgage

169,827

164,060

21,940

169,856

186,000

Leasing

276

2,826

276

2,826

Consumer:

HELOCs

5,406

Personal

6,279

14,956

600

6,360

15,556

Auto

879

22,206

879

22,206

Other

12,448

Total

236,748

277,541

110

33,478

236,858

311,019

Loans in non-accrual status with no

allowance at December 31, 2022 include

177

million in collateral dependent loans (December

31,

2021

237

million).

The

Corporation recognized

million

interest

income

non-accrual loans

during

the

year

ended

December 31, 2022 (December 31, 2021 - $

million).

The Corporation has

designated loans classified as

collateral dependent for

which the ACL

is measured based

on the fair

value of

the collateral less

cost to sell,

when foreclosure is

probable or when

the repayment is

expected to be

provided substantially by the

sale or

operation of

the collateral

and the

borrower is

experiencing financial

difficulty.

The fair

value of

the collateral

is based

appraisals, which may be

adjusted due to their

age, and the

type, location, and condition

of the property

or area or general

market

conditions to reflect the expected change in value between the effective date

of the appraisal and the measurement date. Appraisals

are updated every one to two years depending on

the type of loan and the total exposure of

the borrower.

The following tables present the amortized cost basis

of collateral-dependent loans, for which the ACL was measured

based on the

fair value of the collateral less cost to sell, by class

of loans and type of collateral as of December

31, 2022 and 2021:

155

December 31, 2022

(In thousands)

Real Estate

Auto

Equipment

Accounts

Receivables

Other

Total

BPPR

Commercial multi-family

1,329

Commercial real estate:

Non-owner occupied

202,980

Owner occupied

18,234

Commercial and industrial

1,345

9,853

20,985

32,215

Mortgage

128,069

Leasing

1,020

Consumer:

Personal

5,381

Auto

9,556

Other

263

Total BPPR

357,338

10,576

9,853

21,248

399,047

Popular U.S.

Commercial real estate:

Non-owner occupied

1,454

Owner occupied

5,095

Commercial and industrial

136

Mortgage

1,104

Total Popular U.S.

7,653

136

7,789

Popular, Inc.

Commercial multi-family

1,329

Commercial real estate:

Non-owner occupied

204,434

Owner occupied

23,329

Commercial and industrial

1,345

168

9,853

20,985

32,351

Mortgage

129,173

Leasing

1,020

Consumer:

Personal

5,381

Auto

9,556

Other

263

Total Popular,

Inc.

364,991

10,576

168

9,853

21,248

406,836

156

December 31, 2021

(In thousands)

Real Estate

Auto

Equipment

Accounts

Receivables

Other

Total

BPPR

Commercial multi-family

1,374

Commercial real estate:

Non-owner occupied

211,026

Owner occupied

47,268

Commercial and industrial

2,650

680

10,675

27,893

41,898

Mortgage

179,774

Leasing

574

Consumer:

Personal

6,165

Auto

8,983

Total BPPR

448,257

9,557

680

10,675

27,893

497,062

Popular U.S.

Mortgage

926

Total Popular U.S.

926

Popular, Inc.

Commercial multi-family

1,374

Commercial real estate:

Non-owner occupied

211,026

Owner occupied

47,268

Commercial and industrial

2,650

680

10,675

27,893

41,898

Mortgage

180,700

Leasing

574

Consumer:

Personal

6,165

Auto

8,983

Total Popular,

Inc.

449,183

9,557

680

10,675

27,893

497,988

Purchased Credit Deteriorated (PCD) Loans

The Corporation has purchased loans during

the year for which there was, at acquisition, evidence

of more than insignificant

deterioration of credit quality since origination. The

carrying amount of those loans is as follows:

(In thousands)

December 31, 2022

December 31, 2021

Purchase price of loans at acquisition

3,144

10,995

Allowance for credit losses at acquisition

915

3,142

Non-credit discount / (premium) at acquisition

140

446

Par value of acquired loans at acquisition

4,199

14,583

157

Note 9 – Allowance for credit losses – loans

held-in-portfolio

The

Corporation follows the current

expected credit loss (“CECL”)

model, to establish

and evaluate the adequacy

of the allowance

for credit losses

(“ACL”) to provide for

expected losses in the

loan portfolio. This model

establishes a forward-looking methodology

that reflects the expected credit losses over the lives of financial

assets, starting when such assets are first acquired or

originated. In

addition, CECL provides that the initial ACL on purchased credit deteriorated (“PCD”) financial assets be recorded as an increase to

the purchase

price, with

subsequent changes

to the

allowance recorded

as a

credit loss

expense. The

provision for

credit losses

recorded in current operations is based on this methodology. Loan losses are

charged and recoveries are credited to the ACL.

December

31,

2022,

the

Corporation

estimated

the

ACL

weighting

the

outputs

optimistic,

baseline,

and

pessimistic

scenarios. Among

the three

scenarios used

to estimate

the ACL,

the baseline

is assigned

the highest

probability,

followed by

the

pessimistic

scenario

given

the

uncertainties

the

economic

outlook

and

downside

risk.

The

weightings

applied

are

subject

evaluation on

a quarterly

basis as

part of

the ACL’s

governance process. The

Corporation evaluates, at

least on

an annual

basis,

the

assumptions

tied

the

CECL

accounting

framework.

These

include

the

reasonable

and

supportable

period

well

the

reversion

window.

During the

third

quarter

2022,

part

its

evaluation

procedures, the

Corporation decided

extend

the

reversion

window

from

year

years.

The

extension

the

reversion

window

results

better

representation

historical

movements for

key macroeconomic

variables that

impact the

ACL. This

change in

assumptions contributed

to a

reduction of

million in the ACL. The reasonable and supportable

period assumptions remained unchanged at 2-

years.

The baseline scenario assumes a 2023 annualized

GDP growth for Puerto Rico and

the United States of 1.3% and

0.7%. For 2022

annualized expected growth

was 2.6% and

1.8% for Puerto

Rico and United

States, respectively.

The reduction in

2023 is due

the expected slowdown in the economy as a

result of tight monetary policy, weaker job growth and persistent inflation.

The 2023 average unemployment rate is forecasted at 7.8% and 4.0% for Puerto Rico and United States, respectively, compared to

2022 average level 6.4% for Puerto Rico and 3.7% for the United States. In 2023, weaker job growth due to the expected slowdown

in the economy will contribute to an increase

in the unemployment rate.

The

following

tables

present

the

changes

the

ACL

loans

held-in-portfolio

and

unfunded

commitments

for

the

years

ended

December 31, 2022 and 2021.

For the year ended December 31, 2022

BPPR

(In thousands)

Commercial

Construction

Mortgage

Leasing

Consumer

Total

Allowance for credit losses - loans:

Beginning balance

151,928

1,641

138,286

17,578

284,729

594,162

Provision for credit losses (benefit)

11,475

526

(37,600)

6,832

88,311

69,544

Initial allowance for credit losses - PCD Loans

915

Charge-offs

(7,238)

(5,105)

(7,107)

(106,752)

(126,202)

Recoveries

18,130

811

20,848

3,315

34,022

77,126

Ending balance - loans

174,295

2,978

117,344

20,618

300,310

615,545

Allowance for credit losses - unfunded commitments:

Beginning balance

1,751

2,388

4,139

Provision for credit losses (benefit)

2,585

(366)

2,219

Ending balance - unfunded commitments [1]

4,336

2,022

6,358

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

158

For the year ended December 31, 2022

Popular U.S.

(In thousands)

Commercial

Construction

Mortgage

Consumer

Total

Allowance for credit losses - loans:

Beginning balance

63,877

4,722

16,192

16,413

101,204

Provision for credit losses (benefit)

4,597

(4,586)

1,706

12,046

13,763

Charge-offs

(10,012)

(68)

(8,036)

(18,116)

Recoveries

2,619

1,132

4,075

7,906

Ending balance - loans

61,081

1,268

17,910

24,498

104,757

Allowance for credit losses - unfunded commitments:

Beginning balance

1,384

2,337

3,758

Provision for credit losses (benefit)

(209)

(1,153)

(1,311)

Ending balance - unfunded commitments [1]

1,175

1,184

2,447

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

For the year ended December 31, 2022

Popular, Inc.

(In thousands)

Commercial

Construction

Mortgage

Leasing

Consumer

Total

Allowance for credit losses - loans:

Beginning balance

215,805

6,363

154,478

17,578

301,142

695,366

Provision for credit losses (benefit)

16,072

(4,060)

(35,894)

6,832

100,357

83,307

Initial allowance for credit losses - PCD Loans

915

Charge-offs

(17,250)

(5,173)

(7,107)

(114,788)

(144,318)

Recoveries

20,749

1,943

20,928

3,315

38,097

85,032

Ending balance - loans

235,376

4,246

135,254

20,618

324,808

720,302

Allowance for credit losses - unfunded commitments:

Beginning balance

3,135

4,725

7,897

Provision for credit losses (benefit)

2,376

(1,519)

908

Ending balance - unfunded commitments [1]

5,511

3,206

8,805

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

159

For the year ended December 31, 2021

BPPR

(In thousands)

Commercial

Construction

Mortgage

Leasing

Consumer

Total

Allowance for credit losses - loans:

Beginning balance

225,323

4,871

195,557

16,863

297,136

739,750

Provision for credit losses (benefit)

(91,695)

(1,533)

(57,684)

2,094

19,800

(129,018)

Initial allowance for credit losses - PCD Loans

3,142

Charge-offs

(17,180)

(6,620)

(17,656)

(4,637)

(78,047)

(124,140)

Recoveries

35,480

4,923

14,927

3,258

45,840

104,428

Ending balance - loans

151,928

1,641

138,286

17,578

284,729

594,162

Allowance for credit losses - unfunded commitments:

Beginning balance

4,913

4,610

9,523

Provision for credit losses (benefit)

(3,162)

(2,222)

(5,384)

Ending balance - unfunded commitments [1]

1,751

2,388

4,139

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

For the year ended December 31, 2021

Popular U.S.

(In thousands)

Commercial

Construction

Mortgage

Consumer

Total

Allowance for credit losses - loans:

Beginning balance

108,057

9,366

20,159

18,918

156,500

Provision for credit losses (benefit)

(45,427)

(4,764)

(3,949)

(187)

(54,327)

Charge-offs

(1,177)

(523)

(605)

(8,732)

(11,037)

Recoveries

2,424

643

587

6,414

10,068

Ending balance - loans

63,877

4,722

16,192

16,413

101,204

Allowance for credit losses - unfunded commitments:

Beginning balance

1,753

4,469

106

6,328

Provision for credit losses (benefit)

(369)

(2,132)

(69)

(2,570)

Ending balance - unfunded commitments [1]

1,384

2,337

3,758

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

160

For the year ended December 31, 2021

Popular, Inc.

(In thousands)

Commercial

Construction

Mortgage

Leasing

Consumer

Total

Allowance for credit losses - loans:

Beginning balance

333,380

14,237

215,716

16,863

316,054

896,250

Provision for credit losses (benefit)

(137,122)

(6,297)

(61,633)

2,094

19,613

(183,345)

Initial allowance for credit losses - PCD Loans

3,142

Charge-offs

(18,357)

(7,143)

(18,261)

(4,637)

(86,779)

(135,177)

Recoveries

37,904

5,566

15,514

3,258

52,254

114,496

Ending balance - loans

215,805

6,363

154,478

17,578

301,142

695,366

Allowance for credit losses - unfunded commitments:

Beginning balance

6,666

9,079

106

15,851

Provision for credit losses (benefit)

(3,531)

(4,354)

(69)

(7,954)

Ending balance - unfunded commitments [1]

3,135

4,725

7,897

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

Modifications

modification

loan

constitutes

troubled

debt

restructuring

when

borrower

experiencing

financial

difficulty

and

the

modification constitutes a concession. For a summary of the accounting policy related to troubled debt restructurings (“TDRs”), refer

to the Summary of Significant Accounting Policies

included in Note 2 to these Consolidated Financial

Statements.

The outstanding

balance of

loans classified

as TDRs

amounted to

1.6

billion at

December 31,

2022 (December

31, 2021

- $

1.7

billion).

The amount

of outstanding

commitments to

lend additional

funds to

debtors owing

receivables whose

terms have

been

modified in TDRs amounted to

million related to the commercial

loan portfolio at December 31,

2022 (December 31, 2021 -

million).

The following table presents

the outstanding balance of

loans classified as TDRs

according to their accruing

status and the related

allowance at December 31, 2022 and 2021.

The Corporation has offered to clients impacted by the hurricanes Fiona

a moratorium of up to three monthly payments on personal

and commercial credit cards, auto loans, leases, and personal loans,

subject to certain eligibility requirements. Mortgage clients also

benefited from

different

payment relief

alternatives available,

depending on

their type

loan. Loan

relief options

for commercial

clients were reviewed on a

case-by-case basis. As of December 31,

2022, approximately 2,428 loans with

a $94.8 loans amortized

cost were granted a moratorium of which 218

loans with a $7.7 million amortized cost have

been classified as TDR.

December 31, 2022

December 31, 2021

(In thousands)

Accruing

Non-

Accruing

Total

Allowance

Accruing

Non-

Accruing

Total

Allowance

Loans held-in-portfolio:

Commercial

269,784

54,641

324,425

18,451

261,344

64,744

326,088

24,736

Mortgage

[1]

1,169,976

86,790

1,256,766

58,819

1,143,204

112,509

1,255,713

61,888

Leasing

1,154

1,178

325

372

Consumer

54,395

7,883

62,278

13,577

64,093

10,556

74,649

16,124

Loans held-in-portfolio

1,495,309

149,338

1,644,647

90,890

1,468,966

187,856

1,656,822

102,790

[1] At December 31, 2022, accruing mortgage loan TDRs include

725

million guaranteed by U.S. sponsored entities

at BPPR, compared to $

716

million at December 31, 2021.

The

following

tables

present

the

loan

count

type

modification

for

those

loans

modified

TDR

during

the

years

ended

December 31, 2022 and 2021. Loans modified

as TDRs for the U.S. operations are considered

insignificant to the Corporation.

161

For the year ended December 31, 2022

Reduction in

interest rate

Extension of

maturity date

Combination of

reduction in interest

rate and extension of

maturity date

Other

Commercial real estate non-owner occupied

Commercial real estate owner occupied

Commercial and industrial

Mortgage

217

881

Leasing

Consumer:

Credit cards

HELOCs

Personal

111

Auto

129

Other

Total

174

352

890

290

For the year ended December 31, 2021

Reduction in

interest rate

Extension of

maturity date

Combination of

reduction in interest

rate and extension of

maturity date

Other

Commercial multi-family

Commercial real estate non-owner occupied

Commercial real estate owner occupied

Commercial and industrial

Mortgage

140

1,590

Leasing

Consumer:

Credit cards

134

HELOCs

Personal

183

117

Auto

Other

Total

372

313

1,604

During the year ended December 31, 2022,

three

loans with an aggregate unpaid principal balance of $

2.7

million were restructured

into multiple notes (“Note A / B split”)

compared to

five

loans with an aggregate unpaid principal balance of $

10.2

million during the

year ended December 31,

2021.

charge-offs were recorded as part of Note A / B splits during 2022 and

2021. These loans were

restructured after analyzing the borrowers’ capacity

to repay the debt, collateral and ability to perform

under the modified terms.

162

The following tables present,

by class, quantitative information related

to loans modified as TDRs during the years

ended December

31, 2022 and 2021.

Popular, Inc.

For the year ended December 31, 2022

(Dollars in thousands)

Loan count

Pre-modification

outstanding recorded

investment

Post-modification

outstanding recorded

investment

Increase (decrease) in the

allowance for credit losses

as a result of modification

Commercial real estate non-owner occupied

6,530

6,527

Commercial real estate owner occupied

19,192

19,165

(2,078)

Commercial and industrial

51,139

50,929

2,120

Mortgage

1,110

128,581

125,875

4,447

Leasing

1,181

1,180

Consumer:

Credit cards

866

898

HELOCs

245

236

Personal

265

3,581

3,479

671

Auto

130

1,631

Other

Total

1,706

212,954

209,928

5,316

Popular, Inc.

For the year ended December 31, 2021

(Dollars in thousands)

Loan count

Pre-modification

outstanding recorded

investment

Post-modification

outstanding recorded

investment

Increase (decrease) in the

allowance for credit losses

as a result of modification

Commercial multi-family

246

211

Commercial real estate non-owner occupied

3,612

3,604

177

Commercial real estate owner occupied

95,354

90,096

1,577

Commercial and industrial

6,573

5,719

745

Mortgage

1,774

213,661

214,367

6,632

Leasing

Consumer:

Credit cards

178

2,223

2,136

HELOCs

176

228

Personal

303

4,222

4,217

899

Auto

199

206

Other

305

303

124

Total

2,373

326,611

321,125

10,346

The following tables present,

by class, TDRs that were subject

to payment default and that

had been modified as a TDR

during the

twelve months preceding the default date.

Payment default is defined as a restructured loan becoming 90 days past due after being

modified,

foreclosed

charged-off,

whichever

occurs

first.

The

recorded

investment

period

end

inclusive

all

partial

paydowns

and

charge-offs

since

the

modification

date.

Loans

modified

TDR

that

were

fully

paid

down,

charged-off

foreclosed upon by period end are not reported..

Defaulted during the year ended December 31, 2022

(Dollars in thousands)

Loan count

Recorded investment as of first default date

Commercial real estate owner occupied

620

Commercial and industrial

6,639

Mortgage

9,391

Leasing

Consumer:

Credit cards

249

Personal

918

Total

163

17,822

163

Defaulted during the year ended December 31, 2021

(Dollars in thousands)

Loan count

Recorded investment as of first default date

Commercial real estate non-owner occupied

8,421

Commercial real estate owner occupied

4,500

Commercial and industrial

317

Mortgage

104

10,543

Consumer:

Credit cards

979

Personal

723

Total

225

25,483

164

Commercial,

consumer

and

mortgage

loans

modified

TDR

are

closely

monitored

for

delinquency

early

indicator

possible future default.

If loans modified in a TDR

subsequently default, the allowance for credit losses

may be increased or partial

charge-offs may be taken to further write-down the carrying

value of the loan.

Credit Quality

The

Corporation

has

defined

risk

rating

system

assign

rating

all

credit

exposures,

particularly

for

the

commercial

and

construction loan

portfolios. Risk

ratings in

the aggregate

provide the

Corporation’s management

the asset

quality profile

for

the

loan portfolio. The risk rating system provides for the

assignment of ratings at the obligor level based

on the financial condition of the

borrower. The risk rating analysis process is performed at least

once a year or more frequently if events or conditions change which

may

deteriorate

the

credit

quality.

the

case

consumer

and

mortgage

loans,

these

loans

are

classified

considering

their

delinquency status at the end of the reporting period.

The Corporation’s obligor risk rating scales range from rating 1 (Excellent) to rating 14 (Loss). The obligor risk rating reflects the risk

of payment default of a borrower in the ordinary

course of business.

Pass Credit Classifications:

Pass (Scales 1 through 8)

– Loans classified as

pass have a well defined

primary source of repayment, with no

apparent

risk, strong financial position, minimal operating risk, profitability, liquidity and strong

capitalization.

Watch

(Scale 9)

– Loans

classified as

watch have

acceptable business

credit,

but borrower’s

operations, cash

flow or

financial condition evidence more than average risk, requires above

average levels of supervision and attention from Loan

Officers.

Special Mention (Scale 10) -

Loans classified as special mention have

potential weaknesses that deserve management’s

close attention.

If left uncorrected, these potential weaknesses may result

in deterioration of the repayment prospects for

the loan or of the Corporation’s credit position at

some future date.

Adversely Classified Classifications:

Substandard

(Scales

and

12)

Loans

classified

substandard

are

deemed

inadequately

protected

the

current net worth

and payment capacity

of the obligor

or of the

collateral pledged, if

any.

Loans classified as

such have

well-defined weaknesses that jeopardize the liquidation of

the debt.

They are characterized by the

distinct possibility that

the institution will sustain some loss if the deficiencies

are not corrected.

Doubtful (Scale

13) - Loans

classified as

doubtful have

all the

weaknesses inherent

in those

classified as

substandard,

with the

additional characteristic

that the

weaknesses make

the collection

or liquidation

in full,

on the

basis of

currently

existing facts, conditions, and values, highly questionable

and improbable.

Loss

(Scale

14)

Uncollectible

and

such

little

value

that

continuance

bankable

asset

not

warranted.

This

classification does

not mean

that the

asset has

absolutely no

recovery or

salvage value,

but rather

it is

not practical

desirable to defer writing off this asset even though partial

recovery may be effected in the future.

Risk

ratings scales

through

conform

regulatory

ratings.

The

assignment

the

obligor

risk

rating

based

relevant

information about the ability of borrowers to

service their debts such as current

financial information, historical payment experience,

credit documentation, public information, and

current economic trends, among other factors.

The following tables present the amortized cost basis, net of unearned income, of

loans held-in-portfolio based on the Corporation’s

assignment of obligor risk ratings as defined at

December 31, 2022 and 2021 by vintage year.

165

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

BPPR

Commercial:

Commercial multi-family

Watch

18,508

4,687

23,195

Special mention

2,692

Substandard

3,326

100

3,426

Pass

137,411

22,850

20,821

16,145

24,640

30,193

252,060

Total commercial

multi-family

137,411

22,850

20,821

34,653

24,640

40,898

100

281,373

Commercial real estate non-owner occupied

Watch

173

36,228

14,045

14,942

7,777

99,269

172,434

Special Mention

4,361

19,970

7,517

25,540

57,388

Substandard

8,933

3,209

19,004

25,490

21,064

77,700

Pass

855,839

585,690

294,086

94,056

35,105

568,893

16,136

2,449,805

Total commercial

real estate non-

owner occupied

864,945

626,279

331,310

135,519

68,372

714,766

16,136

2,757,327

Commercial real estate owner occupied

Watch

2,296

5,271

9,447

4,275

31,649

71,568

124,506

Special Mention

284

1,684

6,578

1,076

61,460

71,092

Substandard

16,205

6,177

802

800

770

84,205

108,959

Doubtful

505

Pass

227,404

258,473

274,333

30,691

68,029

407,322

16,742

1,282,994

Total commercial

real estate owner

occupied

245,915

270,205

286,266

42,344

101,524

625,060

16,742

1,588,056

Commercial and industrial

Watch

32,376

2,185

15,493

18,829

15,483

51,602

56,508

192,476

Special Mention

2,537

2,479

5,770

1,139

6,767

46,040

6,283

71,015

Substandard

789

1,276

1,600

3,138

11,536

40,636

46,226

105,201

Doubtful

179

Loss

144

Pass

793,662

684,647

211,013

177,265

65,197

292,173

1,203,536

3,427,493

Total commercial

and industrial

829,364

690,587

233,905

200,371

99,058

430,526

1,312,697

3,796,508

Construction

Watch

35,446

3,116

141

38,801

Substandard

9,629

Pass

13,044

34,387

15,961

2,262

32,957

98,611

Total construction

48,490

37,503

25,688

2,262

33,098

147,041

Mortgage

Substandard

574

687

3,926

4,227

93,959

103,373

Pass

449,286

451,027

285,026

204,170

237,007

4,380,390

6,006,906

Total mortgage

449,286

451,601

285,713

208,096

241,234

4,474,349

6,110,279

Leasing

Substandard

953

1,491

941

1,172

1,127

215

5,899

Loss

Pass

672,294

428,889

237,939

146,231

79,451

14,994

1,579,798

Total leasing

673,247

430,380

238,880

147,424

80,578

15,230

1,585,739

166

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

BPPR

Consumer:

Credit cards

Substandard

11,907

Loss

Pass

1,029,921

Total credit cards

1,041,831

HELOCs

Pass

2,954

Total HELOCs

2,954

Personal

Substandard

1,330

2,001

764

1,774

503

10,831

1,285

18,488

Loss

115

Pass

841,564

320,809

103,337

117,568

46,555

109,543

27,708

1,567,084

Total Personal

842,894

322,810

104,154

119,362

47,089

120,384

28,994

1,585,687

Auto

Substandard

6,764

11,171

10,466

10,243

4,597

2,382

45,623

Loss

158

Pass

1,156,654

961,571

588,200

426,169

248,328

85,827

3,466,749

Total Auto

1,163,441

972,783

598,714

436,437

252,932

88,223

3,512,530

Other consumer

Substandard

100

593

543

242

10,902

12,380

Loss

263

303

Pass

29,557

17,439

6,967

4,201

4,553

1,942

60,238

124,897

Total Other

consumer

29,557

17,439

7,067

4,794

5,359

2,224

71,140

137,580

Total Puerto Rico

5,284,550

3,842,437

2,132,518

1,331,262

920,786

6,511,660

2,494,698

28,994

22,546,905

167

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

Popular U.S.

Commercial:

Commercial multi-family

Watch

750

917

6,218

85,579

9,633

52,835

155,932

Special mention

1,198

14,491

8,372

24,061

Substandard

9,305

7,373

2,941

19,619

Pass

503,010

399,397

238,903

210,295

138,723

347,615

2,785

1,840,728

Total commercial

multi-family

503,760

400,314

246,319

305,179

170,220

411,763

2,785

2,040,340

Commercial real estate non-owner occupied

Watch

2,167

13,622

3,355

26,931

29,849

75,924

Special Mention

1,353

75,269

76,622

Substandard

2,864

2,149

3,220

1,429

4,722

14,384

Pass

552,258

209,338

211,449

109,781

100,065

383,409

9,113

1,575,413

Total commercial

real estate non-

owner occupied

552,258

214,369

227,220

117,709

128,425

493,249

9,113

1,742,343

Commercial real estate owner occupied

Watch

1,197

1,079

6,095

55,005

63,376

Special Mention

3,886

901

4,787

Substandard

7,403

11,165

33,586

52,154

Pass

363,655

422,959

114,988

82,971

119,565

258,881

7,157

1,370,176

Total commercial

real estate owner

occupied

363,655

422,959

120,071

91,453

136,825

348,373

7,157

1,490,493

Commercial and industrial

Watch

12,328

2,218

2,022

2,049

8,438

532

4,291

31,878

Special Mention

1,262

1,130

314

244

3,013

Substandard

260

935

4,278

315

1,829

1,408

9,099

Loss

292

525

192

1,088

Pass

185,318

341,855

368,398

202,301

171,528

376,045

352,169

1,997,614

Total commercial

and industrial

199,460

346,663

370,809

208,947

180,533

378,409

357,871

2,042,692

Construction

Watch

12,085

6,979

18,310

34,126

71,500

Special Mention

Substandard

1,423

6,540

2,095

10,058

Pass

164,272

146,062

91,486

93,118

10,863

23,581

529,382

Total construction

164,272

158,150

92,909

100,097

35,713

59,802

610,943

Mortgage

Substandard

2,009

3,478

4,048

1,156

9,798

20,489

Pass

236,595

303,204

243,468

183,846

58,026

241,564

1,266,703

Total mortgage

236,595

305,213

246,946

187,894

59,182

251,362

1,287,192

168

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

Popular U.S.

Consumer:

Credit cards

Pass

Total credit cards

HELOCs

Substandard

2,146

1,402

3,568

Loss

538

542

Pass

9,169

41,724

13,959

64,852

Total HELOCs

11,319

41,744

15,899

68,962

Personal

Substandard

621

454

149

238

1,538

Loss

421

Pass

165,153

46,320

7,339

13,443

2,021

1,657

235,933

Total Personal

165,774

46,774

7,488

13,681

2,091

2,084

237,892

Other consumer

Substandard

Pass

9,960

Total Other

consumer

9,968

Total Popular U.S.

2,185,774

1,894,442

1,311,762

1,024,960

712,989

1,956,361

428,677

15,899

9,530,864

169

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

Popular, Inc.

Commercial:

Commercial multi-family

Watch

750

917

6,218

104,087

9,633

57,522

179,127

Special mention

1,198

14,491

11,064

26,753

Substandard

9,305

7,373

6,267

100

23,045

Pass

640,421

422,247

259,724

226,440

163,363

377,808

2,785

2,092,788

Total commercial

multi-family

641,171

423,164

267,140

339,832

194,860

452,661

2,885

2,321,713

Commercial real estate non-owner occupied

Watch

173

38,395

27,667

18,297

34,708

129,118

248,358

Special Mention

4,361

19,970

8,870

100,809

134,010

Substandard

8,933

2,864

5,358

22,224

26,919

25,786

92,084

Pass

1,408,097

795,028

505,535

203,837

135,170

952,302

25,249

4,025,218

Total commercial

real estate non-

owner occupied

1,417,203

840,648

558,530

253,228

196,797

1,208,015

25,249

4,499,670

Commercial real estate owner occupied

Watch

2,296

5,271

10,644

5,354

37,744

126,573

187,882

Special Mention

284

5,570

6,578

1,076

62,361

75,879

Substandard

16,205

6,177

802

8,203

11,935

117,791

161,113

Doubtful

505

Pass

591,059

681,432

389,321

113,662

187,594

666,203

23,899

2,653,170

Total commercial

real estate owner

occupied

609,570

693,164

406,337

133,797

238,349

973,433

23,899

3,078,549

Commercial and industrial

Watch

44,704

4,403

17,515

20,878

23,921

52,134

60,799

224,354

Special Mention

3,799

3,609

6,084

1,383

6,827

46,040

6,286

74,028

Substandard

1,049

2,211

1,674

7,416

11,851

42,465

47,634

114,300

Doubtful

179

Loss

292

525

192

144

1,232

Pass

978,980

1,026,502

579,411

379,566

236,725

668,218

1,555,705

5,425,107

Total commercial

and industrial

1,028,824

1,037,250

604,714

409,318

279,591

808,935

1,670,568

5,839,200

170

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

Popular, Inc.

Construction

Watch

35,446

15,201

6,979

18,310

34,126

141

110,301

Special Mention

Substandard

11,052

6,540

2,095

19,687

Pass

177,316

180,449

107,447

95,380

10,863

23,581

32,957

627,993

Total construction

212,762

195,653

118,597

102,359

35,713

59,802

33,098

757,984

Mortgage

Substandard

2,583

4,165

7,974

5,383

103,757

123,862

Pass

685,881

754,231

528,494

388,016

295,033

4,621,954

7,273,609

Total mortgage

685,881

756,814

532,659

395,990

300,416

4,725,711

7,397,471

Leasing

Substandard

953

1,491

941

1,172

1,127

215

5,899

Loss

Pass

672,294

428,889

237,939

146,231

79,451

14,994

1,579,798

Total leasing

673,247

430,380

238,880

147,424

80,578

15,230

1,585,739

171

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

Popular, Inc.

Consumer:

Credit cards

Substandard

11,907

Loss

Pass

1,029,960

Total credit cards

1,041,870

HELOCs

Substandard

2,146

1,402

3,568

Loss

538

542

Pass

9,169

44,678

13,959

67,806

Total HELOCs

11,319

44,698

15,899

71,916

Personal

Substandard

1,951

2,455

913

2,012

573

10,837

1,285

20,026

Loss

431

536

Pass

1,006,717

367,129

110,676

131,011

48,576

111,200

27,708

1,803,017

Total Personal

1,008,668

369,584

111,642

133,043

49,180

122,468

28,994

1,823,579

Auto

Substandard

6,764

11,171

10,466

10,243

4,597

2,382

45,623

Loss

158

Pass

1,156,654

961,571

588,200

426,169

248,328

85,827

3,466,749

Total Auto

1,163,441

972,783

598,714

436,437

252,932

88,223

3,512,530

Other consumer

Substandard

100

593

543

242

10,910

12,388

Loss

263

303

Pass

29,557

17,439

6,967

4,201

4,553

1,942

70,198

134,857

Total Other

consumer

29,557

17,439

7,067

4,794

5,359

2,224

81,108

147,548

Total Popular Inc.

7,470,324

5,736,879

3,444,280

2,356,222

1,633,775

8,468,021

2,923,375

44,893

32,077,769

172

December 31, 2021

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2021

2020

2019

2018

2017

Prior

Years

Total

BPPR

Commercial:

Commercial multi-family

Watch

4,485

Special mention

3,025

Substandard

982

6,257

100

7,339

Pass

24,936

21,288

34,840

25,311

2,066

31,468

139,920

Total commercial

multi-family

24,936

21,288

35,822

25,311

2,066

45,235

111

154,769

Commercial real estate non-owner occupied

Watch

100,465

228,852

25,443

137,044

2,406

205,304

3,237

702,751

Special Mention

18,509

12,563

7,271

4,608

24,056

67,007

Substandard

30,155

27,790

24,200

25,456

2,770

72,407

182,778

Pass

513,087

88,662

88,353

37,999

42,522

557,052

9,712

1,337,387

Total commercial

real estate non-

owner occupied

662,216

357,867

145,267

200,499

52,306

858,819

12,949

2,289,923

Commercial real estate owner occupied

Watch

8,393

8,612

8,972

6,958

3,039

121,716

157,690

Special Mention

5,573

857

7,598

1,427

2,449

103,472

121,376

Substandard

6,960

1,028

1,646

35,529

1,869

113,288

160,320

Doubtful

612

688

Pass

238,533

198,442

44,943

23,112

32,585

429,651

16,389

983,655

Total commercial

real estate owner

occupied

259,459

208,939

63,159

67,026

40,018

768,739

16,389

1,423,729

Commercial and industrial

Watch

186,529

12,542

21,536

103,835

14,577

90,776

108,183

537,978

Special Mention

7,380

9,936

14,856

28,473

1,012

28,448

60,397

150,502

Substandard

2,190

1,091

3,041

35,826

66,771

45,168

38,003

192,090

Doubtful

Pass

843,661

335,369

275,357

84,084

72,580

333,869

702,896

2,647,816

Total commercial

and industrial

1,039,760

358,938

314,790

252,218

154,940

498,323

909,479

3,528,448

Construction

Substandard

485

Pass

21,596

41,622

1,148

22,260

86,626

Total construction

21,596

41,622

1,633

22,260

87,111

Mortgage

Substandard

954

5,212

5,613

4,310

122,690

138,779

Pass

463,742

304,780

223,464

265,239

194,982

4,660,880

6,113,087

Total mortgage

463,742

305,734

228,676

270,852

199,292

4,783,570

6,251,866

Leasing

Substandard

124

618

880

613

235

3,083

Loss

Pass

613,452

328,085

222,770

133,112

62,881

17,917

1,378,217

Total leasing

613,576

328,703

223,650

133,726

63,510

18,154

1,381,319

173

December 31, 2021

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2021

2020

2019

2018

2017

Prior

Years

Total

BPPR

Consumer:

Credit cards

Substandard

8,577

Pass

911,274

Total credit cards

919,851

HELOCs

Substandard

Pass

3,548

Total HELOCs

3,571

Personal

Substandard

426

610

2,105

866

936

15,680

1,385

22,008

Loss

Pass

539,604

197,652

227,328

91,341

53,630

120,065

36,394

1,266,014

Total Personal

540,060

198,264

229,436

92,207

54,566

135,748

37,779

1,288,060

Auto

Substandard

3,080

7,520

9,498

4,739

2,210

1,422

28,469

Loss

Pass

1,259,800

808,339

637,300

420,293

177,104

80,829

3,383,665

Total Auto

1,262,922

815,870

646,798

425,032

179,314

82,251

3,412,187

Other consumer

Substandard

114

487

135

11,250

12,007

Loss

579

613

Pass

24,845

9,781

9,348

5,610

3,914

947

57,483

111,928

Total Other

consumer

24,845

9,895

9,369

6,676

3,914

1,116

68,733

124,548

Total Puerto Rico

4,913,112

2,647,120

1,898,600

1,473,547

749,926

7,191,955

1,953,343

37,779

20,865,382

174

December 31, 2021

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2021

2020

2019

2018

2017

Prior

Years

Total

Popular U.S.

Commercial:

Commercial multi-family

Watch

8,600

41,348

56,229

20,682

37,343

48,753

212,955

Special mention

3,752

9,013

30,244

11,071

28,297

82,377

Substandard

67,149

12,748

18,644

98,541

Pass

422,613

241,805

201,298

144,534

46,809

352,724

4,205

1,413,988

Total commercial

multi-family

431,213

286,905

333,689

208,208

95,223

448,418

4,205

1,807,861

Commercial real estate non-owner occupied

Watch

12,716

22,109

42,067

56,576

28,604

154,289

780

317,141

Special Mention

2,939

3,205

7,025

10,573

15,569

39,311

Substandard

756

6,405

14,544

11,384

60,323

93,412

Pass

543,667

356,071

156,925

211,432

250,516

346,606

8,386

1,873,603

Total commercial

real estate non-

owner occupied

559,322

378,936

208,602

289,577

301,077

576,787

9,166

2,323,467

Commercial real estate owner occupied

Watch

239

7,825

8,150

1,676

17,132

4,222

39,244

Special Mention

1,800

Substandard

1,148

2,878

20,841

24,867

Pass

129,898

46,737

34,355

23,845

26,236

63,463

3,928

328,462

Total commercial

real estate owner

occupied

129,898

46,976

43,328

34,873

27,912

103,236

8,150

394,373

Commercial and industrial

Watch

3,747

4,667

4,292

9,273

1,530

3,925

27,439

Special Mention

2,504

7,203

670

481

215

8,177

19,309

Substandard

537

4,559

495

168

1,890

159

7,905

Loss

262

108

191

687

Pass

273,254

339,564

211,695

191,086

115,146

339,336

284,710

1,754,791

Total commercial

and industrial

280,304

351,589

221,324

201,352

115,429

343,162

296,971

1,810,131

Construction

Watch

14,300

23,547

28,757

34,205

100,809

Special Mention

13,622

Substandard

15,438

10,231

25,669

Pass

130,587

136,045

165,105

13,634

36,500

7,138

489,009

Total construction

130,587

150,345

188,652

57,829

80,936

20,760

629,109

Mortgage

Substandard

4,338

3,894

967

217

12,680

22,096

Pass

326,641

266,212

215,071

61,986

6,376

276,948

1,153,234

Total mortgage

326,641

270,550

218,965

62,953

6,593

289,628

1,175,330

175

December 31, 2021

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2021

2020

2019

2018

2017

Prior

Years

Total

Popular U.S.

Consumer:

Credit cards

Pass

Total credit cards

HELOCs

Substandard

3,006

935

3,941

Loss

207

1,258

1,465

Pass

11,423

38,267

20,195

69,885

Total HELOCs

14,636

38,267

22,388

75,291

Personal

Substandard

250

163

658

Loss

Pass

75,538

19,411

43,346

7,418

2,802

5,625

124

154,264

Total Personal

75,610

19,492

43,600

7,491

2,819

5,807

126

154,945

Other consumer

Pass

4,658

Total Other

consumer

4,658

Total Popular U.S.

1,933,575

1,504,793

1,258,160

862,283

629,989

1,802,434

361,553

22,388

8,375,175

176

December 31, 2021

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2021

2020

2019

2018

2017

Prior

Years

Total

Popular, Inc.

Commercial:

Commercial multi-family

Watch

8,600

41,348

56,229

20,682

37,343

53,238

217,440

Special mention

3,752

9,013

30,244

11,071

31,322

85,402

Substandard

68,131

12,748

24,901

100

105,880

Pass

447,549

263,093

236,138

169,845

48,875

384,192

4,216

1,553,908

Total commercial

multi-family

456,149

308,193

369,511

233,519

97,289

493,653

4,316

1,962,630

Commercial real estate non-owner occupied

Watch

113,181

250,961

67,510

193,620

31,010

359,593

4,017

1,019,892

Special Mention

21,448

12,563

10,476

7,025

15,181

39,625

106,318

Substandard

30,155

28,546

30,605

40,000

14,154

132,730

276,190

Pass

1,056,754

444,733

245,278

249,431

293,038

903,658

18,098

3,210,990

Total commercial

real estate non-

owner occupied

1,221,538

736,803

353,869

490,076

353,383

1,435,606

22,115

4,613,390

Commercial real estate owner occupied

Watch

8,393

8,851

16,797

15,108

4,715

138,848

4,222

196,934

Special Mention

5,573

857

7,598

1,427

2,449

105,272

123,176

Substandard

6,960

1,028

2,794

38,407

1,869

134,129

185,187

Doubtful

612

688

Pass

368,431

245,179

79,298

46,957

58,821

493,114

20,317

1,312,117

Total commercial

real estate owner

occupied

389,357

255,915

106,487

101,899

67,930

871,975

24,539

1,818,102

Commercial and industrial

Watch

190,276

17,209

25,828

113,108

14,582

92,306

112,108

565,417

Special Mention

9,884

17,139

15,526

28,954

1,071

28,663

68,574

169,811

Substandard

2,727

1,188

7,600

36,321

66,939

47,058

38,162

199,995

Doubtful

Loss

262

108

191

687

Pass

1,116,915

674,933

487,052

275,170

187,726

673,205

987,606

4,402,607

Total commercial

and industrial

1,320,064

710,527

536,114

453,570

270,369

841,485

1,206,450

5,338,579

177

December 31, 2021

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2021

2020

2019

2018

2017

Prior

Years

Total

Popular, Inc.

Construction

Watch

14,300

23,547

28,757

34,205

100,809

Special Mention

13,622

Substandard

485

15,438

10,231

26,154

Pass

152,183

177,667

166,253

13,634

36,500

7,138

22,260

575,635

Total construction

152,183

191,967

190,285

57,829

80,936

20,760

22,260

716,220

Mortgage

Substandard

5,292

9,106

6,580

4,527

135,370

160,875

Pass

790,383

570,992

438,535

327,225

201,358

4,937,828

7,266,321

Total mortgage

790,383

576,284

447,641

333,805

205,885

5,073,198

7,427,196

Leasing

Substandard

124

618

880

613

235

3,083

Loss

Pass

613,452

328,085

222,770

133,112

62,881

17,917

1,378,217

Total leasing

613,576

328,703

223,650

133,726

63,510

18,154

1,381,319

178

December 31, 2021

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2021

2020

2019

2018

2017

Prior

Years

Total

Popular, Inc.

Consumer:

Credit cards

Substandard

8,577

Pass

911,284

Total credit cards

919,861

HELOCs

Substandard

3,006

935

3,964

Loss

207

1,258

1,465

Pass

11,423

41,815

20,195

73,433

Total HELOCs

14,636

41,838

22,388

78,862

Personal

Substandard

498

691

2,355

939

953

15,843

1,385

22,666

Loss

Pass

615,142

217,063

270,674

98,759

56,432

125,690

124

36,394

1,420,278

Total Personal

615,670

217,756

273,036

99,698

57,385

141,555

126

37,779

1,443,005

Auto

Substandard

3,080

7,520

9,498

4,739

2,210

1,422

28,469

Loss

Pass

1,259,800

808,339

637,300

420,293

177,104

80,829

3,383,665

Total Auto

1,262,922

815,870

646,798

425,032

179,314

82,251

3,412,187

Other consumer

Substandard

114

487

135

11,250

12,007

Loss

579

613

Pass

24,845

9,781

9,348

5,610

3,914

947

62,141

116,586

Total Other

consumer

24,845

9,895

9,369

6,676

3,914

1,116

73,391

129,206

Total Popular Inc.

6,846,687

4,151,913

3,156,760

2,335,830

1,379,915

8,994,389

2,314,896

60,167

29,240,557

179

Note 10 – Mortgage banking activities

Income

from

mortgage

banking

activities

includes

mortgage

servicing

fees

earned

connection

with

administering

residential

mortgage

loans

and

valuation

adjustments

mortgage

servicing

rights.

also

includes

gain

sales

and

securitizations

residential mortgage

loans, losses

on repurchased

loans, including

interest advances,

and trading

gains and

losses on

derivative

contracts

used

hedge

the

Corporation’s

securitization

activities.

addition,

lower-of-cost-or-market

valuation

adjustments

residential mortgage loans held for sale, if any, are recorded as part

of the mortgage banking activities.

The following table presents the components of mortgage

banking activities:

Years ended December

31,

(In thousands)

2022

2021

2020

Mortgage servicing fees, net of fair value adjustments:

Mortgage servicing fees

36,487

38,105

43,234

Mortgage servicing rights fair value adjustments

236

(10,206)

(42,055)

Total mortgage

servicing fees, net of fair value adjustments

36,723

27,899

1,179

Net (loss) gain on sale of loans, including valuation on

loans held for sale

(251)

21,684

31,215

Trading account profit (loss):

Realized gains (losses) on closed derivative positions

6,635

1,323

(10,586)

Total trading account

profit (loss)

6,635

1,323

(10,586)

Losses on repurchased loans, including interest advances [1]

(657)

(773)

(11,407)

Total mortgage

banking activities

42,450

50,133

10,401

[1]

The Corporation, from time to time, repurchases delinquent

loans from its GNMA servicing portfolio, in compliance

with Guarantor guidelines, and

may incur in losses related to previously advanced interest

on delinquent loans. During the quarter ended September

30, 2020 the Corporation

repurchased $

687.9

million of GNMA loans and recorded a loss of $

10.5

million for previously advanced interest on delinquent

loans. Effective for

the quarter ended September 30, 2020, the Corporation

has determined to present these losses as part of its

Mortgage Banking Activities, which

were previously presented within the indemnity reserves on loans

sold component of non-interest income.

180

Note 11 – Transfers of financial assets and mortgage servicing assets

The

Corporation

typically

transfers

conforming

residential

mortgage

loans

conjunction

with

GNMA,

FNMA

and

FHLMC

securitization transactions

whereby the

loans are

exchanged for

cash or

securities and

servicing rights.

As seller,

the Corporation

has made

certain representations

and warranties

with respect

to the

originally transferred

loans and,

in the

past,

has sold

certain

loans

with

credit

recourse

government-sponsored

entity,

namely

FNMA.

Refer

Note

the

Consolidated

Financial

Statements for a description of such arrangements.

liabilities were incurred

as a result

of these securitizations

during the years

ended December 31, 2022

and 2021 because

they

did

not

contain

any

credit

recourse

arrangements.

The

Corporation recorded

net

loss

1.8

million

and

net

gain

18.4

million, respectively, during the years ended December 31, 2022 and 2021

related to the residential mortgage loans securitized.

The

following tables

present the

initial fair

value of

the

assets obtained

proceeds from

residential mortgage

loans securitized

during the years ended December 31, 2022 and

2021:

Proceeds Obtained During the Year

Ended December 31, 2022

(In thousands)

Level 1

Level 2

Level 3

Initial fair value

Assets

Trading account debt securities:

Mortgage-backed securities - GNMA

169,352

Mortgage-backed securities - FNMA

122,422

Mortgage-backed securities - FHLMC

8,505

Total trading account

debt securities

300,279

Mortgage servicing rights

5,318

Total

300,279

5,318

305,597

Proceeds Obtained During the Year

Ended December 31, 2021

(In thousands)

Level 1

Level 2

Level 3

Initial fair value

Assets

Trading account debt securities:

Mortgage-backed securities - GNMA

380,228

Mortgage-backed securities - FNMA

329,617

Mortgage-backed securities - FHLMC

22,688

Total trading account

debt securities

732,533

Mortgage servicing rights

11,314

Total

732,533

11,314

743,847

During the

year ended

December 31,

2022, the

Corporation retained

servicing rights

on whole

loan sales

involving approximately

114

million in principal balance outstanding (2021 - $

144

million), with net realized gains of approximately $

1.8

million (2021 - $

3.2

million). All loan sales performed during the

years ended December 31, 2022 and 2021 were without

credit recourse agreements.

The Corporation recognizes as assets the rights to service loans for others,

whether these rights are purchased or result from asset

transfers such as sales and securitizations. These mortgage

servicing rights (“MSRs”) are measured at fair value.

The

Corporation

uses

discounted

cash

flow

model

estimate

the

fair

value

MSRs.

The

discounted

cash

flow

model

incorporates

assumptions

that

market

participants

would

use

estimating

future

net

servicing

income,

including

estimates

prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, prepayment and late

fees, among other considerations. Prepayment speeds are

adjusted for the loans’ characteristics and portfolio behavior.

The following table

presents the changes

in MSRs measured

using the fair

value method for

the years ended

December 31, 2022

and 2021.

181

Residential MSRs

(In thousands)

December 31, 2022

December 31, 2021

Fair value at beginning of period

121,570

118,395

Additions

6,614

13,391

Changes due to payments on loans

[1]

(11,063)

(15,383)

Reduction due to loan repurchases

(779)

(1,233)

Changes in fair value due to changes in valuation model inputs

or assumptions

12,845

6,410

Other

(837)

(10)

Fair value at end of period

[2]

128,350

121,570

[1] Represents changes due to collection / realization

of expected cash flows over time.

[2] At December 31, 2022, PB had MSRs amounting to $

2.0

million (December 31, 2021 - $

1.6

million).

Residential mortgage loans serviced for others were $

11.1

billion at December 31, 2022 (2021 - $

12.1

billion).

Net mortgage servicing fees, a component of mortgage banking activities in the Consolidated Statements of Operations, include the

changes from period to period in the fair value of the MSRs, including changes due to collection / realization of expected cash flows.

The banking

subsidiaries receive servicing

fees based

on a

percentage of the

outstanding loan balance.

These servicing fees

are

credited to

income when they

are collected. At

December 31,

2022, those

weighted average mortgage

servicing fees

were

0.31

(2021 –

0.30

%). Under these

servicing agreements, the

banking subsidiaries do

not generally earn

significant prepayment penalty

fees on the underlying loans serviced.

The section

below includes

information on

assumptions used

in the

valuation model

of the

MSRs, originated

and purchased.

Key

economic assumptions used

in measuring the

servicing rights derived

from loans securitized

or sold by

the Corporation during

the

years ended December 31, 2022 and 2021 were

as follows:

Years ended

December 31, 2022

December 31, 2021

BPPR

Prepayment speed

5.4

8.1

6.8

19.0

Weighted average life (in years)

9.5

7.8

8.3

20.9

Discount rate (annual rate)

10.5

9.9

10.5

10.7

Key

economic

assumptions

used

estimate

the

fair

value

MSRs

derived

from

sales

and

securitizations

mortgage

loans

performed

the

banking

subsidiaries

and

servicing

rights

purchased

from

other

financial

institutions,

and

the

sensitivity

immediate changes in those assumptions, were as follows

as of the end of the periods reported:

Originated MSRs

Purchased MSRs

December 31,

(In thousands)

2022

2021

2022

2021

Fair value of servicing rights

41,548

40,058

86,802

81,512

Weighted average life (in years)

6.8

7.1

6.9

7.5

Weighted average prepayment speed (annual

rate)

5.9

7.7

7.0

7.6

Impact on fair value of 10% adverse change

(730)

(1,500)

(1,602)

(1,486)

Impact on fair value of 20% adverse change

(1,433)

(2,359)

(3,143)

(3,495)

Weighted average discount rate (annual rate)

11.2

11.0

Impact on fair value of 10% adverse change

(1,485)

(2,079)

(3,256)

(2,731)

Impact on fair value of 20% adverse change

(2,876)

(3,452)

(6,304)

(5,832)

182

The sensitivity analyses presented in the table above for servicing rights are hypothetical and should be used with caution. As the

figures indicate, changes in fair value based on a 10 and 20 percent variation in assumptions generally cannot be extrapolated

because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the sensitivity tables

included herein, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without

changing any other assumption. In reality, changes in one factor may result in changes in another (for example, increases in market

interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities.

At December 31, 2022, the Corporation serviced $

0.6

billion (2021 - $

0.7

billion) in residential mortgage loans with credit recourse

the Corporation, from which $

million was 60 days or

more past due (2021 - $

million). Also refer to Note

23 for information on

changes in the Corporation’s liability of estimated losses

related to loans serviced with credit recourse.

Under the GNMA

securitizations, the Corporation, as

servicer, has

the right to

repurchase (but not the

obligation), at its

option and

without

GNMA’s

prior

authorization,

any

loan

that

collateral

for

GNMA

guaranteed

mortgage-backed

security

when

certain

delinquency

criteria

are

met.

the

time

that

individual

loans

meet

GNMA’s

specified

delinquency

criteria

and

are

eligible

for

repurchase, the Corporation is deemed to have regained effective control over these loans if the Corporation was the pool issuer. At

December

31,

2022,

the

Corporation

had

recorded

million

mortgage

loans

its

Consolidated

Statements

Financial

Condition related to this

buy-back option program (2021 -

million). Loans in

our serviced GNMA portfolio

benefit from payment

forbearance programs but continue to reflect the contractual delinquency until

the borrower repays deferred payments or completes

a payment deferral modification

or other borrower assistance

alternative. As long as

the Corporation continues to service

the loans

that continue to be collateral in a GNMA guaranteed

mortgage-backed security, the MSR is recognized by the Corporation.

During

the

year

ended

December

31,

2022,

the

Corporation

repurchased

approximately

million

mortgage

loans

from

its

GNMA servicing portfolio (2021 - $

million). The determination to repurchase these loans

was based on the economic benefits

the transaction, which results in a reduction of the servicing costs for

these severely delinquent loans, mostly related to principal and

interest advances. The

risk associated with

the loans is

reduced due to

their guaranteed nature.

The Corporation may place

these

loans under modification

programs offered by

FHA, VA

or United States

Department of Agriculture (USDA)

or other loss

mitigation

programs offered by the Corporation, and once brought back to

current status, these may be either retained in portfolio or re-sold

the secondary market.

183

Note 12 - Premises and equipment

Premises and equipment are stated at cost less accumulated

depreciation and amortization as follows:

(In thousands)

Useful life in years

2022

2021

Premises and equipment:

Land

90,625

94,246

Buildings

482,030

468,293

Equipment

388,911

374,192

Leasehold improvements

89,693

87,406

960,634

929,891

Less - Accumulated depreciation and amortization

586,479

559,234

Subtotal

374,155

370,657

Construction in progress

33,931

29,337

Premises and equipment, net

498,711

494,240

Depreciation and

amortization of premises

and equipment for

the year 2022

was $

55.1

million (2021 -

55.1

million; 2020

- $

58.4

million), of

which $

24.8

million (2021

- $

25.2

million; 2020

- $

27.2

million) was

charged to

occupancy expense

and $

30.3

million

(2021

29.8

million;

2020

31.2

million)

was charged

equipment, technology

and

software

and

other

operating expenses.

Occupancy expense of premises and equipment

is net of rental income

of $

13.1

million (2021 - $

13.4

million; 2020 - $

15.5

million).

For information related to the amortization expense

of finance leases, refer to Note 33 - Leases.

184

Note 13 – Other real estate owned

The following

tables present

the activity

related to

Other Real

Estate Owned

(“OREO”), for

the years

ended December

31, 2022,

2021 and 2020.

For the year ended December 31, 2022

OREO

(In thousands)

Commercial/Construction

Mortgage

Total

Balance at beginning of period

15,017

70,060

85,077

Write-downs in value

(959)

(1,517)

(2,476)

Additions

5,787

70,069

75,856

Sales

(7,453)

(61,453)

(68,906)

Other adjustments

108

(533)

(425)

Ending balance

12,500

76,626

89,126

For the year ended December 31, 2021

OREO

(In thousands)

Commercial/Construction

Mortgage

Total

Balance at beginning of period

13,214

69,932

83,146

Write-downs in value

(1,058)

(2,161)

(3,219)

Additions

9,746

55,898

65,644

Sales

(7,282)

(52,666)

(59,948)

Other adjustments

397

(943)

(546)

Ending balance

15,017

70,060

85,077

For the year ended December 31, 2020

OREO

(In thousands)

Commercial/ Construction

Mortgage

Total

Balance at beginning of period

16,959

105,113

122,072

Write-downs in value

(1,564)

(3,060)

(4,624)

Additions

2,223

17,785

20,008

Sales

(4,359)

(49,797)

(54,156)

Other adjustments

(45)

(109)

(154)

Ending balance

13,214

69,932

83,146

185

Note 14 − Other assets

The caption of other assets in the consolidated

statements of financial condition consists of the following

major categories:

(In thousands)

December 31, 2022

December 31, 2021

Net deferred tax assets (net of valuation allowance)

953,676

657,597

Investments under the equity method

210,001

298,988

Prepaid taxes

39,405

37,924

Other prepaid expenses

33,384

34,937

Capitalized software costs

81,862

44,908

Derivative assets

19,229

26,093

Trades receivable from brokers and counterparties

35,099

65,460

Receivables from investments maturities

125,000

Principal, interest and escrow servicing advances

41,916

53,942

Guaranteed mortgage loan claims receivable

59,659

98,001

Operating ROU assets (Note 33)

125,573

141,748

Finance ROU assets (Note 33)

18,884

13,459

Others

104,125

155,514

Total other assets

1,847,813

1,628,571

The Corporation regularly incurs in

capitalizable costs associated with software development or

licensing which are recorded within

the Other Assets line item in the accompanying Consolidated Statements of Financial Condition.

In addition, the Corporation incurs

costs

associated

with

hosting

arrangements

that

are

service

contracts

that

are

also

recorded

within

Other

Assets.

The

hosting

arrangements can

include capitalizable

implementation costs

that are

amortized during

the term

of the

hosting arrangement.

The

following

table

summarizes

the

composition

acquired

developed

software

costs

well

costs

hosting

arrangements:

Gross Carrying

Accumulated

Net

Carrying

(In thousands)

Amount

Amortization

Value

December 31, 2022

Software development costs [1]

63,609

16,803

46,806

Software license costs

37,165

14,164

23,001

Cloud computing arrangements

20,745

8,690

12,055

Total Capitalized

software costs [2]

121,519

39,657

81,862

December 31, 2021

Software development costs

40,033

18,972

21,061

Software license costs

168,862

154,571

14,291

Cloud computing arrangements

18,346

8,790

9,556

Total Capitalized

software costs

227,241

182,333

44,908

[1]

Software development costs includes $

28.7

million acquired as part of the Evertec Transactions.

[2]

At December 31, 2022 the table above excludes assets which

have been fully amortized.

Total

amortization expense for

all capitalized software

and hosting arrangement

cost, reflected as

part of

technology and software

expenses in the consolidated statement of operations,

is as follows:

Year ended December

31,

(In thousands)

2022

2021

2020

Software development and license costs

55,011

45,577

43,259

Cloud computing arrangements

3,805

3,867

2,206

Total amortization

expense

58,816

49,444

45,465

186

Note 15 – Goodwill and other intangible assets

The

changes

the

carrying

amount

goodwill

for

the

years

ended

December

31,

2022

and

2021,

allocated

reportable

segments, were as follows (refer to Note 37 for

the definition of the Corporation’s reportable segments):

2022

Balance at

Goodwill on

Goodwill

Balance at

(In thousands)

January 1, 2022

acquisition

impairment

December 31, 2022

Banco Popular de Puerto Rico

320,248

116,135

436,383

Popular U.S.

400,045

(9,000)

391,045

Total Popular,

Inc.

720,293

116,135

(9,000)

827,428

2021

Balance at

Goodwill on

Goodwill

Balance at

(In thousands)

January 1, 2021

acquisition

impairment

December 31, 2021

Banco Popular de Puerto Rico

320,248

Popular U.S.

350,874

49,171

400,045

Total Popular,

Inc.

671,122

49,171

720,293

The goodwill recognized during

the year ended

December 31, 2022 in

the reportable segment of

Banco Popular de Puerto

Rico of

116.1

million

was

the

Evertec

Business

Acquisition

Transaction.

The

goodwill

recognized

during

the

year

ended

December 31,

2021 in

the reportable

segment of

Popular U.S.

of $

million was

related to

the PEF

Acquired Business.

Refer to

Note

Business

combination,

for

additional

information

the

assets

acquired

and

liabilities

assumed

result

business combinations, including

goodwill and other intangible assets. The goodwill impairment in Popular U.S. of

million during

the year ended December 31, 2022 was recognized by the Corporation

from the annual test as of July 31, 2022 related to PEF, as a

result of a decrease in the projected earnings

of this business unit.

At December 31, 2022 and 2021, the Corporation

had $

0.7

million of identifiable intangible assets with indefinite

useful lives.

The following table reflects the components of

other intangible assets subject to amortization:

Gross

Net

Carrying

Accumulated

Carrying

(In thousands)

Amount

Amortization

Value

December 31, 2022

Core deposits

12,810

10,034

2,776

Other customer relationships

14,286

4,878

9,408

Total other intangible

assets

27,096

14,912

12,184

December 31, 2021

Core deposits

12,810

8,754

4,056

Other customer relationships

14,286

2,883

11,403

Total other intangible

assets

27,096

11,637

15,459

During

the

year

ended

December

31,

2022,

the

Corporation

recognized

3.3

million

amortization

expense

other

intangible assets with definite useful lives (2021

- $

9.1

million; 2020 - $

6.4

million).

187

The following

table presents

the estimated

amortization of

the intangible

assets with

definite useful

lives for

each of

the following

periods:

(In thousands)

Year 2023

3,179

Year 2024

2,938

Year 2025

1,750

Year 2026

1,440

Year 2027

959

Later years

1,918

Results of the Annual Goodwill Impairment Test

The Corporation’s goodwill and

other identifiable intangible assets having

an indefinite useful life

are tested for impairment,

at least

annually and

on a

more frequent basis

if events

or circumstances indicate

impairment could have

taken place. Such

events could

include,

among others,

a significant

adverse change

in the

business climate,

an adverse

action by

a regulator,

an unanticipated

change in the competitive environment and a decision

to change the operations or dispose of a

reporting unit.

Management

monitors

events

changes

circumstances

between

annual

tests

determine

these

events

changes

circumstances would more likely than not reduce

the fair value of its

reporting units below their carrying amounts.

The Corporation

performed the

annual goodwill

impairment evaluation

for the

entire organization

during the

third quarter

of 2022

using July 31, 2022 as the annual evaluation date. The reporting units

utilized for this evaluation were those that are one level below

the business segments,

which are the

legal entities within the

reportable segment. The Corporation

follows push-down accounting,

as such all goodwill is assigned to the reporting

units when carrying out a business combination.

In determining the fair value of each reporting unit, the Corporation generally uses a combination of methods, including market price

multiples

comparable

companies

and

transactions,

well

discounted

cash

flow

analysis.

Management

evaluates

the

particular circumstances

of each

reporting unit

in order

to determine

the most

appropriate valuation methodology

and the

weights

applied

each

valuation

methodology,

applicable.

The

Corporation

evaluates

the

results

obtained

under

each

valuation

methodology to

identify and

understand the

key

value drivers

in order

ascertain that

the

results obtained

are

reasonable and

appropriate

under

the

circumstances.

Elements

considered

include

current

market

and

economic

conditions,

developments

specific lines of business, and any particular

features in the individual reporting units.

The computations

require management

to make

estimates and

assumptions. Critical

assumptions that

are used

as part

of these

evaluations include:

●

a selection of comparable publicly traded companies,

based on nature of business, location and

size;

●

a selection of comparable acquisitions;

●

the discount rate applied to future earnings, based

on an estimate of the cost of equity;

●

the potential future earnings of the reporting unit;

and

●

the market growth and new business assumptions.

For purposes of the market comparable companies’ approach, valuations were determined by calculating

average price multiples of

relevant value drivers from a group of

companies that are comparable to the reporting

unit being analyzed and applying those price

multiples

the

value

drivers

the

reporting

unit.

Management

uses

judgment

the

determination

which

value

drivers

are

considered more appropriate for each reporting unit.

Comparable companies’ price multiples represent minority-based multiples and

thus, a

control premium

adjustment is

added to

the comparable

companies’ market

multiples applied

to the

reporting unit’s

value

drivers.

For purposes

of the

market comparable transactions’

approach, valuations had

been previously determined

by the

Corporation by

calculating

average

price

multiples

relevant

value

drivers

from

group

transactions

for

which

the

target

companies

are

comparable to the reporting unit being analyzed and

applying those price multiples to the value drivers

of the reporting unit.

188

For purposes

of the

discounted cash flows

(“DCF”) approach, the

valuation is

based on

estimated future cash

flows. The

financial

projections

used

the

DCF

valuation

analysis

for

each

reporting

unit

are

based

the

most

recent

(as

the

valuation

date)

financial

projections presented

the

Corporation’s Asset

Liability Management

Committee (“ALCO”).

The

growth assumptions

included

these

projections

are

based

management’s

expectations for

each

reporting

unit’s

financial

prospects

considering

economic and industry conditions as well

as particular plans of each entity

(i.e. restructuring plans, de-leveraging, etc.). The cost

equity used to

discount the cash flows

was calculated using the

Ibbotson Build-Up Method and

ranged from

12.51

% to

15.73

% for

the 2022 analysis. The Ibbotson Build-Up Method

builds up a cost of equity

starting with the rate of

return of a “risk-free” asset (20-

year U.S. Treasury

note) and adds

to it additional

risk elements such as

equity risk premium, size

premium, industry risk

premium,

and a

specific geographic risk

premium (as applicable).

The resulting discount

rates were

analyzed in terms

of reasonability given

the current market conditions.

The results of the BPPR annual goodwill impairment test as of July 31, 2022

indicated that the average estimated fair value using all

valuation methodologies exceeded BPPR’s equity

value by approximately $

3.1

billion or

245

% compared to $

1.5

billion or

%, for

the annual

goodwill impairment test

completed as

of July

31, 2021. PB’s

annual goodwill impairment

test results

as of

such dates

indicated that the average estimated fair value using all valuation methodologies exceeded PB’s equity value by approximately $

670

million

compared

412

million

for

the

annual

goodwill

impairment

test

completed

July

31,

2021.

Accordingly, no

impairment was recognized for

BPPR or PB.

The goodwill balance

of BPPR and PB,

as legal entities,

represented

approximately

% of the Corporation’s total goodwill balance as of

the July 31, 2022 valuation date.

An impairment of $

million was recognized by the Corporation from the annual test as of July 31, 2022 related to PEF as a result of

a decrease in the projected earnings of this

business unit.

Furthermore,

part

the

analyses,

management

performed

reconciliation

the

aggregate

fair

values

determined

for

the

reporting units to the market capitalization of the Corporation concluding that the

fair value results determined for the reporting units

in the July 31, 2022 annual assessment were reasonable.

The goodwill

impairment evaluation

process requires

the Corporation

make estimates

and assumptions

with regard

to the

fair

value

the

reporting

units.

Actual

values

may

differ

significantly

from

these

estimates.

Such

differences

could

result

future

impairment of goodwill that would, in turn, negatively

impact the Corporation’s results of operations and the

reporting units where the

goodwill is

recorded. Declines in

the Corporation’s

market capitalization and

adverse economic conditions

sustained over a

longer

period of time negatively affecting forecasted cash flows could

increase the risk of goodwill impairment in

the future.

A decline in

the Corporation’s stock

price related to

global and/or regional macroeconomic

conditions, a deterioration in

the Puerto

Rico

economy

and

fiscal

situation,

reduced

future

earnings

estimates,

additional

expenses

and

higher

credit

losses,

and

the

continuance

the

current

interest

rate

environment

could,

individually

the

aggregate,

have

material

impact

the

determination

the

fair

value

our

reporting

units,

which

could

turn

result

impairment

goodwill

the

future.

impairment of goodwill would result in a non-cash expense, net

of tax impact. A charge to earnings related to a

goodwill impairment

would not impact regulatory capital calculations.

The following tables present the gross amount

of goodwill and accumulated impairment losses

by reportable segments.

December 31, 2022

Balance at

December 31,

Accumulated

December 31,

2022

impairment

2022

(In thousands)

(gross amounts)

losses

(net amounts)

Banco Popular de Puerto Rico

440,184

3,801

436,383

Popular U.S.

564,456

173,411

391,045

Total Popular,

Inc.

1,004,640

177,212

827,428

189

December 31, 2021

Balance at

December 31,

Accumulated

December 31,

2021

impairment

2021

(In thousands)

(gross amounts)

losses

(net amounts)

Banco Popular de Puerto Rico

324,049

3,801

320,248

Popular U.S.

564,456

164,411

400,045

Total Popular,

Inc.

888,505

168,212

720,293

190

Note 16 – Deposits

Total interest bearing deposits as of the end of the periods presented consisted of:

(In thousands)

December 31, 2022

December 31, 2021

Savings accounts

14,746,329

15,871,998

NOW, money market and other interest

bearing demand deposits

23,738,940

28,736,459

Total savings, NOW,

money market and other interest bearing demand

deposits

38,485,269

44,608,457

Certificates of deposit:

Under $250,000

4,235,651

4,086,059

$250,000 and over

2,545,750

2,626,090

Total certificates

of deposit

6,781,401

6,712,149

Total interest bearing

deposits

45,266,670

51,320,606

A summary of certificates of deposits by maturity at

December 31, 2022 follows:

(In thousands)

2023

3,949,235

2024

1,102,195

2025

743,799

2026

416,106

2027

486,738

2028 and thereafter

83,328

Total certificates of

deposit

6,781,401

At December 31, 2022, the Corporation had brokered

deposits amounting to $

1.1

billion (December 31, 2021 - $

0.8

billion).

The aggregate amount

of overdrafts in

demand deposit accounts

that were reclassified

to loans

was $

6.3

million at

December 31,

2022 (December 31, 2021 - $

6.0

million).

December

31,

2022,

public

sector

deposits

amounted

15.2

billion.

Public

deposit

balances

are

difficult

predict.

For

example, the receipt by

the Puerto Rico Government of

hurricane recovery related Federal assistance and

seasonal tax collections

could increase public

deposit balances at BPPR.

On the other

hand, the amount

and timing of

reductions in balances are

likely to

impacted

by,

for

example,

the

speed

which

federal

assistance

distributed,

the

financial

condition,

liquidity

and

cash

management

practices

the

Puerto

Rico

Government

and

its

instrumentalities

and

the

implementation

fiscal

and

debt

adjustment plans approved

pursuant to PROMESA

or other actions

mandated by the

Fiscal Oversight and

Management Board for

Puerto Rico (the “Oversight Board”).

191

Note 17 – Borrowings

Assets sold under agreements to repurchase

Assets sold under agreements to repurchase amounted

to $

149

million at December 31, 2022 and $

million at December 31,

2021.

The Corporation’s

repurchase transactions are

overcollateralized with the

securities detailed in

the table

below.

The Corporation’s

repurchase

agreements

have

right

set-off

with

the

respective

counterparty

under

the

supplemental

terms

the

master

repurchase agreements.

an event

default each

party has

a right

set-off

against the

other party

for amounts

owed in

the

agreement

and

any

other

amount

obligation

owed

respect

any

other

agreement

transaction

between

them.

Pursuant to the

Corporation’s accounting policy,

the repurchase agreements

are not offset

with other repurchase

agreements held

with the same counterparty.

The following table

presents information related to

the Corporation’s repurchase

transactions accounted for as

secured borrowings

that are collateralized with

debt securities available-for-sale, debt securities

held-to-maturity, other assets

held-for-trading purposes

or which have been obtained under agreements to resell.

It is the Corporation’s policy to maintain effective control over assets sold

under agreements

to repurchase;

accordingly,

such securities

continue to

be carried

on the

Consolidated Statements

of Financial

Condition.

Repurchase agreements accounted for as secured borrowings

December 31, 2022

December 31, 2021

Repurchase liability

Repurchase

weighted average

Repurchase

weighted average

(Dollars in thousands)

liability

interest rate

liability

interest rate

U.S. Treasury securities

Within 30 days

410

4.40

19,538

0.30

After 30 to 90 days

30,739

3.79

30,295

0.21

After 90 days

17,521

4.39

29,036

0.29

Total U.S. Treasury

securities

48,670

4.01

78,869

0.26

Mortgage-backed securities

Within 30 days

98,984

4.27

11,733

0.26

After 30 to 90 days

791

3.27

After 90 days

722

0.16

Total mortgage-backed

securities

99,775

4.26

12,455

0.26

Collateralized mortgage obligations

Within 30 days

164

4.25

279

0.25

Total collateralized

mortgage obligations

164

4.25

279

0.25

Total

148,609

4.18

91,603

0.26

Repurchase agreements in this portfolio

are generally short-term, often overnight.

As such our risk

is very limited.

We manage the

liquidity risks arising from secured

funding by sourcing funding globally from

a diverse group of counterparties, providing

a range of

securities collateral and pursuing longer durations,

when appropriate.

192

(Dollars in thousands)

2022

2021

Maximum aggregate balance outstanding at any month-end

162,450

92,101

Average monthly aggregate balance outstanding

107,305

91,394

Weighted average interest rate:

For the year

2.15

0.35

At December 31

4.23

0.26

Other short-term borrowings

At December 31, 2022 and December 31, 2021,

other short-term borrowings consisted of $

365

million and $

million, respectively,

in FHLB Advances.

The following table presents additional information

related to the Corporation’s other short-term borrowings

for

the years ended December 31, 2022 and December

31, 2021.

(Dollars in thousands)

2022

2021

Maximum aggregate balance outstanding at any month-end

375,000

75,000

Average monthly aggregate balance outstanding

99,083

343

Weighted average interest rate:

For the year

3.46

0.35

At December 31

4.47

0.35

193

Notes Payable

The following table presents the composition of notes

payable at December 31, 2022 and December

31, 2021.

(In thousands)

December 31, 2022

December 31, 2021

Advances with the FHLB with maturities ranging from

2023

through

2029

paying interest at monthly

fixed rates ranging from

0.39

% to

3.18

(2021 -

0.39

% to

3.18

389,282

492,429

Unsecured senior debt securities maturing on September

2023

paying interest

semiannually

at a fixed

rate of

6.125

%, net of debt issuance costs of $

891

(2021 - $

2,158

)

299,109

297,842

Junior subordinated deferrable interest debentures (related to

trust preferred securities) maturing on

2034

with fixed interest rates ranging from

6.125

% to

6.564

% (2021 -

6.125

% to

6.564

%), net of debt

issuance costs of $

315

(2021 - $

342

)

198,319

198,292

Total notes payable

886,710

988,563

A breakdown of borrowings by contractual maturities

at December 31, 2022 is included in

the table below.

Assets sold under

Short-term

(In thousands)

agreements to

repurchase

borrowings

Notes payable

Total

2023

148,609

365,000

342,370

855,979

2024

91,944

2025

139,920

2026

74,500

Later years

237,976

Total borrowings

148,609

365,000

886,710

1,400,319

December

31,

2022

and

December

31,

2021,

the

Corporation had

FHLB

borrowing

facilities

whereby

the

Corporation could

borrow up to

3.3

billion and $

3.0

billion, respectively,

of which $

0.8

billion and $

0.6

billion, respectively,

were used. In

addition, at

December 31, 2022 and

December 31, 2021, the

Corporation had placed $

0.4

billion and $

1.2

billion, respectively,

of the available

FHLB credit

facility as

collateral for

municipal letters

of credit

to secure

deposits. The

FHLB borrowing

facilities are

collateralized

with loans held-in-portfolio, and do not have restrictive

covenants or callable features.

Also, at

December 31, 2022,

the Corporation has

a borrowing facility

at the discount

window of the

Federal Reserve Bank

of New

York amounting to $

1.4

billion (December 31, 2021 - $

1.3

billion), which remained unused at December 31, 2022

and December 31,

2021.

The facility is a collateralized source

of credit that is highly reliable even under difficult

market conditions.

194

Note 18 – Trust preferred securities

Statutory trusts established by the Corporation (Popular North America

Capital Trust I and Popular

Capital Trust II) had issued

trust

preferred

securities

(also

referred

“capital

securities”)

the

public.

The

proceeds

from

such

issuances,

together

with

the

proceeds of the related issuances of common securities of the trusts (the “common securities”), were used by the trusts to purchase

junior subordinated deferrable interest debentures (the

“junior subordinated debentures”) issued by the

Corporation.

The sole

assets of

the trusts

consisted of

the junior

subordinated debentures

of the

Corporation and

the related

accrued interest

receivable. These trusts are not consolidated

by the Corporation pursuant to accounting

principles generally accepted in the United

States of America.

The junior subordinated

debentures are included

by the Corporation

as notes payable

in the Consolidated

Statements of Financial

Condition, while

the common

securities issued

by the

issuer trusts

are included

as debt

securities held-to-maturity.

The common

securities of each trust are wholly-owned, or indirectly

wholly-owned, by the Corporation.

On November 1,

2021, the

Corporation redeemed

all

outstanding trust

preferred securities

issued by

the Popular

Capital Trust

amounting to approximately $

187

million (or approximately $

181

million after excluding the Corporation’s participation in the Trust of

approximately $

million) in the aggregate.

The following table presents financial data pertaining

to the different trusts at December 31, 2022 and 2021.

(Dollars in thousands)

December 31, 2022 and 2021

Popular

North America

Popular

Issuer

Capital Trust I

Capital Trust Il

Capital securities

91,651

101,023

Distribution rate

6.564

6.125

Common securities

2,835

3,125

Junior subordinated debentures aggregate liquidation amount

94,486

104,148

Stated maturity date

September 2034

December 2034

Reference notes

[1],[3],[5]

[2],[4],[5]

[1] Statutory business trust that is wholly-owned by

PNA and indirectly wholly-owned by the Corporation.

[2] Statutory business trust that is wholly-owned by

the Corporation.

[3] The obligation of PNA under the junior subordinated

debenture and its guarantees of the capital securities under

the trust is fully and unconditionally

guaranteed on a subordinated basis by the Corporation

to the extent set forth in the guarantee agreement.

[4] These capital securities are fully and unconditionally guaranteed

on a subordinated basis by the Corporation to the extent

set forth in the guarantee

agreement.

[5] The Corporation has the right, subject to any required

prior approval from the Federal Reserve, to redeem

after certain dates or upon the

occurrence of certain events mentioned below,

the junior subordinated debentures at a redemption

price equal to 100% of the principal amount, plus

accrued and unpaid interest to the date of redemption. The

maturity of the junior subordinated debentures may

be shortened at the option of the

Corporation prior to their stated maturity dates (i) on or

after the stated optional redemption dates stipulated in

the agreements, in whole at any time or

in part from time to time, or (ii) in whole, but not in part,

at any time within 90 days following the occurrence

and during the continuation of a tax event,

an investment company event or a capital treatment event

as set forth in the indentures relating to the capital securities,

in each case subject to

regulatory approval.

December

31,

2022,

the

Corporation’s

193

million

trust

preferred

securities

outstanding

not

qualify

for

Tier

capital

treatment, but instead qualify for Tier 2 capital treatment compared

to $

193

million at December 31, 2021.

195

Note 19 − Other liabilities

The caption of other liabilities in the consolidated

statements of financial condition consists of the following

major categories:

(In thousands)

December 31, 2022

December 31, 2021

Accrued expenses

337,284

308,594

Accrued interest payable

39,288

33,227

Accounts payable

76,456

91,804

Dividends payable

39,525

35,937

Trades payable

9,461

13,789

Liability for GNMA loans sold with an option to repurchase

14,271

12,806

Reserves for loan indemnifications

7,520

12,639

Reserve for operational losses

39,266

43,886

Operating lease liabilities (Note 33)

137,290

154,114

Finance lease liabilities (Note 33)

24,737

19,719

Pension benefit obligation

8,290

8,778

Postretirement benefit obligation

118,336

161,988

Others

65,222

70,967

Total other liabilities

916,946

968,248

196

Note 20 – Stockholders’ equity

The Corporation’s common stock ranks junior to all series of

preferred stock as to dividend rights and / or as

to rights on liquidation,

dissolution

winding

the

Corporation.

Dividends

preferred

stock

are

payable

declared.

The

Corporation’s

ability

declare or

pay dividends

on, or

purchase, redeem

or otherwise

acquire, its

common stock

is subject

to certain

restrictions in

the

event that the

Corporation fails to pay

or set aside

full dividends on the

preferred stock for the

latest dividend period. The

ability of

the Corporation to

pay dividends in

the future is

limited by regulatory

requirements, legal availability of

funds, recent and

projected

financial results, capital levels and liquidity of the Corporation, general

business conditions and other factors deemed relevant by

the

Corporation’s Board of Directors.

The Corporation’s

common stock

trades on

the Nasdaq

Global Select

Market (the

“Nasdaq”) under

the symbol

BPOP.

The 2003

Series A Preferred Stock are not listed on Nasdaq.

Preferred stocks

The Corporation has

30,000,000

shares of authorized

preferred stock that may

be issued in

one or more

series, and the

shares of

each series shall have such rights and preferences as shall be fixed by the Board of Directors when authorizing the issuance of that

particular series. The Corporation’s shares of preferred stock at

December 31, 2022 consisted of:

●

6.375

% non-cumulative monthly income preferred stock, 2003 Series

A, no par value, liquidation

preference value of $

per share. Holders on record of the 2003 Series A Preferred Stock are entitled to

receive, when, as and if declared by the

Board of

Directors of

the Corporation

or an

authorized

committee thereof,

out of

funds legally

available, non-cumulative

cash dividends at the

annual rate per share

6.375

% of their

liquidation preference value, or

0.1328125

per share per

month.

These

preferred

stock

are

perpetual,

nonconvertible,

have

preferential

rights

purchase

any

securities of the

Corporation and are redeemable solely

at the option of

the Corporation with the

consent of the Board

Governors

the

Federal

Reserve

System.

The

redemption

price

per

25.00

The

2003

Series

Preferred Stock have no voting

rights, except for certain rights in

instances when the Corporation does not

pay dividends

for a defined period. These

shares are not subject to

any sinking fund requirement. Cash dividends declared and

paid on

the 2003

Series A

Preferred Stock

amounted to

1.4

million for

the years

ended December

31, 2022,

2021 and

2020.

Outstanding shares of 2003 Series A Preferred Stock amounted

885,726

at December 31, 2022, 2021 and 2020.

On February 24, 2020, the

Corporation redeemed all the outstanding shares of the

2008 Series B Preferred Stock. The

redemption

price of

the 2008

Series B

Preferred Stock

was $

25.00

per share,

plus $

0.1375

(representing the

amount of

accrued and

unpaid

dividends for the current monthly dividend period to

the redemption date), for a total payment per

share in the amount of $

25.1375

Common stock

Dividends

During

the

year

2022,

cash

dividends

2.20

(2021

1.75

;

2020

1.60

)

per

common

outstanding

were

declared

amounting to $

163.7

million (2021 - $

142.3

million; 2020 -

136.6

million) of which

39.5

million were payable to

stockholders of

common

stock

December

31,

2022

(2021

35.9

million;

2020

33.7

million).

The

quarterly

dividend

0.55

per

declared to stockholders of record as of the close of business on

December 7, 2022

, was paid on

January 3, 2023

. On February 28,

2023, the Corporation’s Board of Directors approved a quarterly cash dividend of $

0.55

per share on its outstanding common stock,

payable on

April 3, 2023

to stockholders of record at the close of business

March 20, 2023

Accelerated share repurchase transaction (“ASR”)

On August

24, 2022,

the Corporation

entered into

a $

231

million ASR

transaction with

respect to

its common

stock (the

“August

ASR Agreement”), which was accounted for as

a treasury transaction. As a result of the

receipt of the initial

2,339,241

shares,

the

Corporation recognized in stockholders’ equity approximately $

185

million in treasury stock and $

million as a reduction of capital

surplus. The Corporation completed the transaction on December 7, 2022 and received

840,024

additional shares of common stock

and

recognized

approximately

million

treasury

stock

with

corresponding

increase

its

capital

surplus.

total

the

Corporation repurchase a total of

3,179,265

shares at an average purchased price of $

72.6583

under the August ASR Agreement.

March

2022,

the

Corporation

announced

that

February 28,

2022

entered

into

400

million

ASR

transactions

with

respect to

its common

stock (the

“March ASR

Agreement”), which was

accounted for

as a

treasury transaction. As

a result

of the

receipt

the

initial

3,483,942

shares,

the

Corporation recognized

stockholders’

equity

approximately $

320

million

treasury

stock and

million as

a reduction

of capital

surplus. The

Corporation completed the

transaction on

July 12,

2022 and

received

197

1,582,922

additional shares

of common

stock and

recognized $

120

million in

treasury stock

with a

corresponding increase

in its

capital surplus. In

total the Corporation

repurchased a total

5,066,864

shares at an

average purchased price

of $

78.9443

under

the March ASR Agreement.

May

2021,

the

Corporation

entered

into

350

million

ASR

transaction

with

respect

its

common

stock,

which

was

accounted for as a treasury stock transaction. As a result of the receipt of the initial

3,785,831

shares, the Corporation recognized in

stockholders’ equity approximately $

280

million in treasury stock

and $

million as a

reduction in capital surplus.

The Corporation

completed the

transaction on

September 9,

2021 and

received

828,965

additional shares

common stock

and

recognized $

million in treasury

stock with a

corresponding increase in

capital surplus. In

total, the Corporation

repurchased a total

4,614,796

shares at an average price of $

75.8430

under the ASR Agreement.

On January

30, 2020,

the Corporation

entered into

a $

500

million ASR

transaction with

respect to

its common

stock, which

was

accounted for as a treasury stock transaction. As a result of the receipt of the initial

7,055,919

shares, the Corporation recognized in

stockholders’ equity

approximately $

400

million in

treasury stock

and $

100

million as

a reduction

in capital

surplus. On

March 19,

2020 (the

“early termination

date”), the

dealer counterparty

to the

ASR exercised

its right

to terminate

the ASR

as a

result of

the

trading price of the

Corporation’s common stock falling below a

specified level due to the

effects of the COVID-19 pandemic

on the

global markets. As a result of such early

termination, the final settlement of the ASR, which was

expected to occur during the fourth

quarter

2020,

occurred during

the

second

quarter

2020.

The

Corporation completed

the

transaction on

May

27,

2020

and

received

4,763,216

additional

common

stock

after

the

early

termination

date.

total

the

Corporation

repurchased

11,819,135

shares at an average price per share of

42.3043

under the ASR.

Statutory reserve

The

Banking

Act

the

Commonwealth of

Puerto

Rico

requires that

a minimum of 10% of BPPR’s net income

for

the

year

transferred to

a statutory

reserve account

until such

statutory reserve

equals the

total of

paid-in capital

on common

and preferred

stock. Any losses

incurred by a

bank must first

be charged to

retained earnings and then

to the reserve

fund. Amounts credited

the

reserve

fund

may

not

used

pay

dividends

without

the

prior

consent

the

Puerto

Rico

Commissioner

Financial

Institutions.

The

failure

maintain

sufficient

statutory

reserves

would

preclude

BPPR

from

paying

dividends.

BPPR’s

statutory

reserve fund

amounted to $

863

million at

December 31, 2022

(2021 - $

786

million; 2020 -

708

million). During

2022, $

million

was transferred to the statutory reserve account (2021 - $

million, 2020 - $

million). BPPR was in compliance with the statutory

reserve requirement in 2022, 2021 and 2020.

198

Note 21 – Regulatory capital requirements

The Corporation,

BPPR and

PB are

subject to

various regulatory

capital requirements

imposed by

the federal

banking agencies.

Failure to meet minimum capital requirements can

lead to certain mandatory and additional

discretionary actions by regulators that,

if undertaken,

could have

a direct

material effect

on the

Corporation’s consolidated financial

statements. Popular,

Inc., BPPR

and

PB are

subject to

Basel III

capital requirements,

including minimum

and well

capitalized regulatory

capital ratios

and compliance

with the standardized approach for determining

risk-weighted assets.

The Basel III Capital

Rules established a Common Equity

Tier I (“CET1”) capital

measure and related regulatory capital ratio

CET1

to risk-weighted assets.

The Basel III Capital Rules provide that a

depository institution will be deemed to be well capitalized if

it maintained a leverage ratio

of at

least

%, a

CET1 ratio of

at least

6.5

%, a Tier

1 risk-based capital

ratio of at

least

% and

a total risk-based

ratio of

at least

Management

has

determined

that

December

31,

2022

and

2021,

the

Corporation

exceeded

all

capital

adequacy

requirements to which it is subject.

The Corporation

has

been designated

by the

Federal Reserve

Board as

a Financial

Holding Company

(“FHC”) and

is eligible

engage in certain financial activities permitted under

the Gramm-Leach-Bliley Act of 1999.

Pursuant to the adoption of the CECL accounting standard on

January 1, 2020, the Corporation elected to use a five-year

transition

period

option

permitted

the

final

interim

regulatory

capital

rules

effective

March

31,

2020.

The

five-year

transition

period

provision delays for two years the estimated impact of the adoption of the CECL accounting standard on regulatory capital, followed

by a three-year transition period to phase out

the aggregate amount of the capital benefit provided

during the initial two-year delay.

August

26,

2020,

federal

banking

regulators

issued

final

rule

modify

the

Basel

III

regulatory

capital

rules

applicable

banking organizations to allow

those organizations participating in

the Paycheck Protection Program

(“PPP”) established under the

Coronavirus Aid, Relief

and Economic Security

Act (the

“CARES Act”) to

neutralize the regulatory

capital effects

of participating in

the

program.

Specifically,

the

agencies

have

clarified

that

banking

organizations,

including

the

Corporation

and

its

Bank

subsidiaries, are permitted to

assign a zero

percent risk weight to

PPP loans for

purposes of determining risk-weighted

assets and

risk-based

capital

ratios.

Additionally,

order

facilitate

use

the

Paycheck

Protection

Program

Liquidity

Facility

(the

“PPPL

Facility”), which provides Federal Reserve Bank loans to eligible financial institutions such as the Corporation’s Bank subsidiaries to

fund PPP loans, the

agencies further clarified that,

for purposes of determining

leverage ratios, a banking

organization is permitted

to exclude from total average assets PPP loans that have been pledged as collateral for a

PPPL Facility. As of December 31,

2022,

the Corporation has $

million in PPP loans and

loans were pledged as collateral for PPPL

Facilities.

At December 31, 2022 and 2021, BPPR and

PB were well-capitalized under the regulatory

framework for prompt corrective action.

The following

tables present

the Corporation’s

risk-based capital

and leverage

ratios at

December 31,

2022 and

2021 under

the

Basel III regulatory guidance.

199

Actual

Capital adequacy minimum

requirement (including

conservation capital buffer) [1]

(Dollars in thousands)

Amount

Ratio

Amount

Ratio

2022

Total Capital (to Risk-Weighted

Assets):

Corporation

6,285,648

18.26

3,613,668

10.500

BPPR

4,541,915

18.34

2,599,872

10.500

1,463,511

15.59

985,510

10.500

Common Equity Tier I Capital (to Risk-Weighted

Assets):

Corporation

5,639,686

16.39

2,409,112

7.000

BPPR

4,230,820

17.09

1,733,248

7.000

1,395,272

14.87

657,007

7.000

Tier I Capital (to Risk-Weighted Assets):

Corporation

5,661,829

16.45

2,925,351

8.500

BPPR

4,230,820

17.09

2,104,658

8.500

1,395,272

14.87

797,794

8.500

Tier I Capital (to Average Assets):

Corporation

5,661,829

8.06

2,811,504

BPPR

4,230,820

7.10

2,383,478

1,395,272

13.08

426,832

[1] The conservation capital buffer included for these

ratios is

2.5

%, except for the Tier I to Average

Asset ratio for which the buffer is not applicable

and therefore the capital adequacy minimum of

% is presented.

200

Actual

Capital adequacy minimum

requirement (including

conservation capital buffer)

(Dollars in thousands)

Amount

Ratio

Amount

Ratio

2021

Total Capital (to Risk-Weighted

Assets):

Corporation

6,084,105

19.35

3,301,329

10.500

BPPR

4,281,930

18.92

2,376,184

10.500

1,361,911

16.78

852,032

10.500

Common Equity Tier I Capital (to Risk-Weighted

Assets):

Corporation

5,476,031

17.42

2,200,886

7.000

BPPR

3,998,102

17.67

1,584,123

7.000

1,309,398

16.14

568,021

7.000

Tier I Capital (to Risk-Weighted Assets):

Corporation

5,498,174

17.49

2,672,504

8.500

BPPR

3,998,102

17.67

1,923,577

8.500

1,309,398

16.14

689,740

8.500

Tier I Capital (to Average Assets):

Corporation

5,498,174

7.41

2,969,535

BPPR

3,998,102

6.24

2,561,003

1,309,398

13.44

389,736

The following table presents the minimum amounts

and ratios for the Corporation’s banks to be

categorized as well-capitalized.

2022

2021

(Dollars in thousands)

Amount

Ratio

Amount

Ratio

Total Capital (to Risk-Weighted

Assets):

BPPR

2,476,068

2,263,032

938,581

811,459

Common Equity Tier I Capital (to Risk-Weighted

Assets):

BPPR

1,609,444

6.5

1,470,971

6.5

610,078

6.5

527,448

6.5

Tier I Capital (to Risk-Weighted Assets):

BPPR

1,980,855

1,810,426

750,865

649,167

Tier I Capital (to Average Assets):

BPPR

2,979,348

3,201,254

533,540

487,171

201

Note 22 – Other comprehensive (loss) income

The

following

table

presents

changes

accumulated

other

comprehensive

(loss)

income

component

for

the

years

ended

December 31, 2022, 2021 and 2020.

Changes in Accumulated Other Comprehensive (Loss) Income

by Component [1]

Years ended December

31,

(In thousands)

2022

2021

2020

Foreign currency translation

Beginning Balance

(67,307)

(71,254)

(56,783)

Other comprehensive income (loss)

10,572

3,947

(14,471)

Net change

10,572

3,947

(14,471)

Ending balance

(56,735)

(67,307)

(71,254)

Adjustment of pension and

postretirement benefit plans

Beginning Balance

(158,994)

(195,056)

(202,816)

Other comprehensive income (loss) before reclassifications

4,882

23,094

(5,645)

Amounts reclassified from accumulated other comprehensive loss

for

amortization of net losses

9,777

12,968

13,405

Net change

14,659

36,062

7,760

Ending balance

(144,335)

(158,994)

(195,056)

Unrealized net holding

(losses) gains on debt

securities

Beginning Balance

(96,120)

460,900

92,155

Other comprehensive (loss) income before reclassifications

(2,261,097)

(557,002)

368,780

Amounts reclassified from accumulated other comprehensive

(loss)

income for gains on securities

(18)

(35)

Amounts reclassified from accumulated other comprehensive

(loss)

income for amortization of net unrealized losses of debt securities

transferred from available-for-sale to held-to-maturity

33,314

Net change

(2,227,783)

(557,020)

368,745

Ending balance

(2,323,903)

(96,120)

460,900

Unrealized net gains (losses)

on cash flow hedges

Beginning Balance

(2,648)

(4,599)

(2,494)

Other comprehensive income (loss) before reclassifications

3,107

367

(6,400)

Amounts reclassified from accumulated other comprehensive income

(loss)

(414)

1,584

4,295

Net change

2,693

1,951

(2,105)

Ending balance

(2,648)

(4,599)

Total

(2,524,928)

(325,069)

189,991

[1] All amounts presented are net of tax.

202

The following table presents the amounts reclassified out of each component of accumulated other comprehensive (loss) income for

the years ended December 31, 2022, 2021, and

2020.

Reclassifications Out of Accumulated Other Comprehensive

(Loss) Income

Affected Line Item in the

Years ended December

31,

(In thousands)

Consolidated Statements of Operations

2022

2021

2020

Adjustment of pension and postretirement benefit plans

Amortization of net losses

Other operating expenses

(15,644)

(20,749)

(21,447)

Total before tax

(15,644)

(20,749)

(21,447)

Income tax benefit

5,867

7,781

8,042

Total net of tax

(9,777)

(12,968)

(13,405)

Unrealized net holding (losses) gains on debt securities

Realized gain on sale of debt securities

Net gain (loss) on sale of debt securities

Amortization of unrealized net losses of debt

securities transferred to held-to-maturity

Investment securities [1]

(41,642)

Total before tax

(41,642)

Income tax benefit (expense)

8,328

(5)

(6)

Total net of tax

(33,314)

Unrealized net gains (losses) losses on cash flow

hedges

Forward contracts

Mortgage banking activities

1,458

(704)

(5,559)

Interest rate swaps

Other operating income

(498)

(1,143)

(820)

Total before tax

960

(1,847)

(6,379)

Income tax (expense) benefit

(546)

263

2,084

Total net of tax

414

(1,584)

(4,295)

Total reclassification

adjustments, net of tax

(42,677)

(14,534)

(17,665)

[1]

In October 2022, the Corporation transferred U.S. Treasury

securities with a fair value of $

6.5

billion (par value of $

7.4

billion) from its available-for-

sale portfolio to its held-to-maturity portfolio. Refer to Note 7 to

the Consolidated Financial Statements for additional

information.

203

Note 23 – Guarantees

The Corporation

has obligations

upon the

occurrence of

certain events

under financial

guarantees provided

in certain

contractual

agreements as summarized below.

The

Corporation

issues

financial

standby

letters

credit

and

has

risk

participation

standby

letters

credit

issued

other

financial institutions, in each case to guarantee the performance of various

customers to third parties. If the customers failed to meet

its financial

or performance

obligation to

the third

party under

the terms

of the

contract, then,

upon their

request, the

Corporation

would be obligated to make the payment to the guaranteed party. At December 31, 2022, the Corporation recorded a liability of $

0.3

million (December

31, 2021

- $

0.2

million), which

represents the

unamortized balance of

the obligations undertaken

in issuing

the

guarantees under the standby

letters of credit.

In accordance with the

provisions of ASC Topic

460, the Corporation recognizes at

fair value the obligation at

inception of the standby letters

of credit. The fair value

approximates the fee received from the

customer

for issuing such commitments. These fees are deferred and are recognized over the commitment period. The contracted amounts

standby letters of

credit outstanding at

December 31, 2022

and 2021, shown

in Note 24,

represent the maximum

potential amount

of future

��

payments that

the Corporation

could be

required to

make under

the guarantees

in the

event of

nonperformance by

the

customers. These

standby letters

of credit

are used

by the

customers as

��

a credit

enhancement and

typically expire

without being

drawn

upon.

The

Corporation’s

standby

letters

credit

are

generally

secured,

and

the

event

nonperformance

the

customers, the Corporation has rights to the underlying

collateral provided, which normally includes cash,

marketable securities, real

estate, receivables, and others. Management does

not anticipate any material losses related to these

instruments.

Also, from

time to

time, the

Corporation securitized mortgage

loans into

guaranteed mortgage-backed securities

subject in

certain

instances, to lifetime

credit recourse on

the loans that

serve as collateral

for the

mortgage-backed securities. The Corporation

has

not sold

any mortgage

loans subject

to credit

recourse since

2009. Also,

from time

to time,

the Corporation

may sell,

in bulk

sale

transactions, residential mortgage loans

and Small Business Administration

(“SBA”) commercial loans subject

to credit recourse

to certain representations

and warranties from the

Corporation to the purchaser.

These representations and warranties

may relate,

for example, to borrower creditworthiness, loan documentation, collateral, prepayment and early payment defaults.

The Corporation

may be required to repurchase the loans under

the credit recourse agreements or representation

and warranties.

December

31,

2022,

the

Corporation

serviced

0.6

billion

(December

31,

2021

0.7

billion)

residential

mortgage

loans

subject to

credit recourse

provisions, principally loans

associated with

FNMA and

FHLMC residential

mortgage loan

securitization

programs. In the event

of any customer default, pursuant to

the credit recourse provided, the

Corporation is required to repurchase

the

loan

reimburse

the

third

party

investor

for

the

incurred

loss.

The

maximum

potential

amount of

future

payments

that

the

Corporation

would

required

make

under

the

recourse

arrangements

the

event

nonperformance

the

borrowers

equivalent

the

total

outstanding

balance

the

residential

mortgage

loans

serviced

with

recourse

and

interest,

applicable.

During 2022,

the Corporation

repurchased approximately

million of

unpaid principal

balance in

mortgage loans

subject to

the

credit recourse

provisions (2021

- $

million). In

the event

of nonperformance

by the

borrower, the

Corporation has

rights to

the

underlying

collateral

securing

the

mortgage

loan.

The

Corporation

suffers

losses

these

loans

when

the

proceeds

from

foreclosure sale

of the

property underlying

a defaulted

mortgage loan

are less

than the

outstanding principal

balance of

the loan

plus any

uncollected interest

advanced and

the costs

of holding

and disposing

the related

property.

December 31,

2022, the

Corporation’s liability

established to cover

the estimated credit

loss exposure

related to loans

sold or serviced

with credit

recourse

amounted to

million (December

31, 2021

- $

million).

The following

table shows

the changes

in the

Corporation’s liability

estimated losses from

these credit recourses agreements,

included in the

consolidated statements of financial

condition during the

years ended December 31, 2022 and 2021.

Years ended December

31,

(In thousands)

2022

2021

Balance as of beginning of period

11,800

22,484

Provision (benefit) for recourse liability

(1,715)

(2,948)

Net charge-offs

(3,188)

(7,736)

Balance as of end of period

6,897

11,800

204

The estimated losses to be absorbed under the credit

recourse arrangements are recorded as a liability when

the loans are sold and

are updated by

accruing or reversing expense

(categorized in the line

item “Adjustments (expense)

to indemnity reserves on

loans

sold”

the

consolidated

statements

operations)

throughout

the

life

the

loan,

necessary,

when

additional

relevant

information becomes available. The

methodology used to

estimate the recourse

liability is a

function of the

recourse arrangements

given and

considers a

variety of

factors, which

include actual

defaults and

historical loss

experience, foreclosure

rate, estimated

future defaults

and the

probability that

a loan

would be

delinquent. Statistical

methods are

used to

estimate the

recourse liability.

Expected loss

rates are

applied to

different loan

segmentations. The

expected loss,

which represents

the amount

expected to

lost on a given loan, considers the

probability of default and loss severity.

The probability of default represents the probability that

loan in

good standing

would become

90 days

delinquent within

the following

twelve-month period.

Regression analysis

quantifies

the relationship

between the

default event

and loan-specific

characteristics, including

credit scores,

loan-to-value ratios,

and loan

aging, among others.

When the

Corporation sells or

securitizes mortgage loans,

it generally makes

customary representations and

warranties regarding

the characteristics

of the

loans sold. The

Corporation’s mortgage operations

in Puerto

Rico group conforming

mortgage loans into

pools which are

exchanged for FNMA and

GNMA mortgage-backed securities, which are

generally sold to

private investors, or are

sold directly

to FNMA

for cash.

As required

under the

government agency

programs, quality

review procedures

are performed

the Corporation to

ensure that asset

guideline qualifications are met.

the extent the

loans do not

meet specified characteristics,

the

Corporation may

be required

repurchase such

loans or

indemnify for

losses and

bear any

subsequent loss

related to

the

loans.

During

the

year

ended

December

31,

2022,

the

Corporation

purchased

million

under

representation

and

warranty

arrangements.

There

were

repurchases

under

BPPR’s

representation

and

warranty

arrangements

during

the

year

ended

December 31, 2021.

A substantial amount

of these loans

reinstate to performing

status or

have mortgage insurance,

and thus the

ultimate losses on the loans are not deemed

significant.

From

time

time, the

Corporation sells

loans and

agrees to

indemnify the

purchaser for

credit

losses

any

breach

certain

representations and

warranties made

in connection

with the

sale. At

December 31,

2022, the

Corporation’s liability

for estimated

losses associated with indemnifications and representations and warranties related to loans sold by BPPR

amounted to $

0.6

million

(December 31, 2021 - $

0.8

million).

205

Servicing agreements

relating to

the mortgage-backed

securities

programs of

FNMA and

GNMA, and

mortgage loans

sold

serviced to

certain other

investors, including

FHLMC, require

the Corporation

advance funds

to make

scheduled payments

principal, interest, taxes

and insurance,

if such

payments have not

been received

from the

borrowers. At

December 31,

2022, the

Corporation serviced

11.1

billion in

mortgage loans

for third-parties,

including the

loans serviced

with credit

recourse (December

31, 2021

- $

12.1

billion). The

Corporation generally

recovers funds

advanced pursuant

to these

arrangements from

the mortgage

owner, from

liquidation proceeds when the

mortgage loan is foreclosed

or, in

the case of

FHA/VA loans,

under the applicable FHA

and

insurance

and

guarantees

programs.

However,

the

meantime,

the

Corporation

must

absorb

the

cost

the

funds

advances

during

the

time

the

advance

outstanding.

The

Corporation

must

also

bear

the

costs

attempting

collect

delinquent and defaulted mortgage loans. In

addition, if a defaulted loan

is not cured, the mortgage

loan would be canceled as

part

the

foreclosure

proceedings

and

the

Corporation would

not

receive

any

future

servicing

income

with

respect

that

loan.

December

31,

2022,

the

outstanding

balance

funds

advanced

the

Corporation

under

such

mortgage

loan

servicing

agreements

was approximately

million

(December 31,

2021

- $

million).

the extent

the mortgage

loans underlying

the

Corporation’s servicing portfolio experience increased delinquencies, the

Corporation would be required to dedicate

additional cash

resources

comply

with

its

obligation to

advance

funds

well as

incur

additional

administrative costs

increases

collection efforts.

Popular,

Inc. Holding

Company (“PIHC”) fully

and unconditionally guarantees

certain borrowing

obligations issued by

certain of

its

100

% owned consolidated subsidiaries amounting to

million at both December 31,

2022 and December 31, 2021, respectively.

In addition, at both December 31, 2022 and December 31, 2021, PIHC

fully and unconditionally guaranteed on a subordinated basis

193

million of capital securities (trust preferred securities) issued by wholly-owned issuing trust entities to the extent set forth in the

applicable

guarantee

agreement.

Refer

Note

the

consolidated

financial

statements

for

further

information

the

trust

preferred securities.

206

Note 24 – Commitments and contingencies

Off-balance sheet risk

The Corporation

is a

party to

financial instruments

with off-balance

sheet credit

risk in

the normal

course of

business to

meet the

financial needs of its customers. These financial instruments

include loan commitments, letters of credit and standby

letters of credit.

These instruments involve,

to varying

degrees, elements of

credit and

interest rate

risk in

excess of

the amount

recognized in

the

consolidated statements of financial condition.

The

Corporation’s

exposure

credit

loss

the

event

nonperformance

the

other

party

the

financial

instrument

for

commitments to extend credit, standby

letters of credit and financial

guarantees is represented by the

contractual notional amounts

of those instruments. The

Corporation uses the same

credit policies in

making these commitments and conditional

obligations as it

does for those reflected on the consolidated statements

of financial condition.

Financial instruments with

off-balance sheet credit

risk, whose contract

amounts represent potential credit

risk as of

the end of

the

periods presented were as follows:

(In thousands)

December 31, 2022

December 31, 2021

Commitments to extend credit:

Credit card lines

5,853,990

5,382,089

Commercial and construction lines of credit

4,425,825

3,830,601

Other consumer unused credit commitments

250,271

250,229

Commercial letters of credit

3,351

3,260

Standby letters of credit

27,868

27,848

Commitments to originate or fund mortgage loans

45,170

95,372

December

31,

2022

and

December

31,

2021,

the

Corporation

maintained

reserve

approximately

8.8

million

and

7.9

million, respectively, for potential losses associated with unfunded loan commitments related to

commercial and construction lines of

credit.

Other commitments

At December 31,

2022, and December

31, 2021, the

Corporation also maintained

other non-credit commitments

for approximately

4.8

million and $

1.0

million, respectively, primarily for the acquisition of other investments.

Business concentration

Since the Corporation’s business activities are concentrated primarily in Puerto Rico, its results of operations and financial condition

are dependent

upon the

general trends

of the

Puerto Rico

economy and,

in particular,

the residential

and commercial

real estate

markets. The concentration

of the Corporation’s

operations in Puerto Rico

exposes it to

greater risk than other

banking companies

with a wider geographic base. Its

asset and revenue composition by geographical area

is presented in Note 37

to the Consolidated

Financial Statements.

Puerto

Rico

has

faced

significant

fiscal

and

economic

challenges

for

over

decade.

response

such

challenges,

the

U.S.

Congress enacted the

Puerto Rico Oversight

Management and Economic Stability

Act (“PROMESA”) in

2016, which, among

other

things,

established

the

Oversight

Board

and

framework

for

the

restructuring

the

debts

the

Commonwealth,

its

instrumentalities and

municipalities.

The

Commonwealth and

several

its

instrumentalities have

commenced

debt

restructuring

proceedings under

PROMESA. As

of the

date of

this report,

while municipalities

have been

designated as

covered entities

under

PROMESA,

municipality

has

commenced,

has

been

authorized

the

Oversight

Board

commence,

any

such

debt

restructuring proceeding under PROMESA.

At December 31, 2022, the Corporation’s direct exposure to the

Puerto Rico government and its instrumentalities and municipalities

totaled $

374

million, of which

327

million were outstanding

367

million and $

349

million at December

31, 2021). Of

the amount

outstanding,

302

million

consists

loans

and

million

are

securities

319

million

and

million

December 31,

2021).

Substantially all

of the

amount outstanding

at December

31, 2022

and December

31, 2021

were obligations

from various

Puerto

Rico

municipalities.

most

cases,

these

were

“general

obligations”

municipality,

which

the

applicable

municipality

has

pledged

its

good

faith,

credit

and

unlimited

taxing

power,

“special

obligations”

municipality,

which

the

applicable

municipality

has

pledged

other

revenues.

December

31,

2022,

the

Corporation’s

exposure

municipal

loans

and

securities was concentrated in the municipalities of

San Juan, Guaynabo, Carolina and Bayamón.

207

The following table details the loans and investments representing the Corporation’s direct exposure to

the Puerto Rico government

according to their maturities as of December 31, 2022:

(In thousands)

Investment

Portfolio

Loans

Total Outstanding

Total Exposure

Central Government

After 1 to 5 years

After 5 to 10 years

After 10 years

Total Central

Government

Municipalities

Within 1 year

4,530

20,243

24,773

42,962

After 1 to 5 years

19,105

101,009

120,114

149,114

After 5 to 10 years

1,025

131,202

132,227

After 10 years

49,831

Total Municipalities

24,660

302,285

326,945

374,134

Total Direct Government

Exposure

24,702

302,285

326,987

374,176

addition,

December

31,

2022,

the

Corporation

had

251

million

loans

insured

securities

issued

Puerto

Rico

governmental entities

but for

which the

principal source

of repayment

is non-governmental

275

million at

December 31,

2021).

These

included

209

million

residential

mortgage

loans

insured

the

Puerto

Rico

Housing

Finance

Authority

(“HFA”),

governmental instrumentality that

has been

designated as a

covered entity under

PROMESA (December 31,

2021 -

232

million).

These mortgage loans are secured by first mortgages on Puerto Rico residential properties and the HFA

insurance covers losses in

the event

of a

borrower default

and upon

the satisfaction

of certain

other conditions.

The Corporation

also had

at December

31,

2022, $

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, 2021

- $

million). In

the event

that the

mortgage loans

insured by

HFA

and held

by the

Corporation

directly or those serving as collateral for the HFA

bonds default and the collateral is insufficient to satisfy the

outstanding balance of

these loans, 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.

Although

the

Governor

currently

authorized

local

legislation

impose

temporary

moratorium on the financial obligations of the HFA, a moratorium on

such obligations has not been imposed as of

the date hereof.

BPPR’s

commercial loan

portfolio also

includes loans

private borrowers

who

are service

providers, lessors,

suppliers or

have

other relationships with the government. These

borrowers could be negatively affected by

the Commonwealth’s fiscal crisis and

the

ongoing

Title

III

proceedings

under

PROMESA.

Similarly,

BPPR’s

mortgage

and

consumer

loan

portfolios

include

loans

government

employees

and

retirees,

which

could

also

negatively

affected

fiscal

measures

such

employee

layoffs

furloughs or reductions in pension benefits.

addition, $

1.6

billion of

residential mortgages,

million of

Small Business

Administration (“SBA”)

loans under

the Paycheck

Protection Program (“PPP”) and

million commercial loans were

insured or guaranteed

by the U.S.

Government or its agencies

at December 31, 2022 (compared to $

1.6

billion, $

353

million and $

million, respectively, at December 31, 2021). The Corporation

also had U.S. Treasury and obligations from the U.S. Government,

its agencies or government sponsored entities

within the portfolio

of available-for-sale and held-to-maturity securities as described

in Note 6 and 7 to the Consolidated

Financial Statements.

At December 31,

2022, the Corporation has

operations in the United

States Virgin Islands

(the “USVI”) and

has approximately $

million

direct

exposure

USVI

government

entities

(December

31,

2021

million).

The

USVI

has

been

experiencing

number of

fiscal and

economic challenges

that could

adversely affect

the ability

of its

public corporations

and instrumentalities

service their outstanding

debt obligations.

At December

31, 2022, the

Corporation has

operations in the

British Virgin

Islands (“BVI”),

which has

been negatively affected

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

significant

exposure

single

borrower

the

BVI,

has

loan

portfolio

amounting

208

approximately

214

million

comprised

various

retail

and

commercial

clients,

compared

loan

portfolio

221

million

December 31, 2021.

Legal Proceedings

The

nature

Popular’s

business

ordinarily

generates

claims,

litigation,

investigations,

and

legal

and

administrative

cases

and

proceedings

(collectively,

“Legal Proceedings”).

When the

Corporation determines

that

has

meritorious

defenses to

the

claims

asserted, it vigorously defends itself. The Corporation will consider the settlement of cases (including cases where it has meritorious

defenses) when, in management’s judgment, it

is in the best

interest of the Corporation and

its stockholders to do so.

On at least a

quarterly basis, Popular assesses its liabilities and contingencies relating

to outstanding Legal Proceedings utilizing the most current

information

available.

For

matters

where

probable

that

the

Corporation

will

incur

material

loss

and

the

amount

can

reasonably estimated,

the Corporation

establishes an

accrual for

the loss.

Once established,

the accrual

is adjusted

on at

least a

quarterly

basis

reflect

any

relevant

developments,

appropriate.

For

matters

where

material

loss

not

probable,

the

amount of the loss cannot be reasonably estimated,

no accrual is established.

In certain

cases, exposure

to loss

exists in

excess of

the accrual

to the

extent such

loss is

reasonably possible, but

not probable.

Management believes and

estimates that the

range of reasonably

possible losses (with

respect to those

matters where such

limits

may be determined, in excess of amounts accrued)

for current Legal Proceedings ranged from $

to approximately $

20.6

million as

December

31,

2022.

certain

cases,

management cannot

reasonably

estimate

the

possible

loss

this

time.

Any

estimate

involves significant judgment, given the

varying stages of the

Legal Proceedings (including the fact

that many of them

are currently

in preliminary stages), the

existence of multiple

defendants in several of

the current Legal Proceedings

whose share of liability

has

yet to be determined, the numerous unresolved issues in

many of the Legal Proceedings, and the inherent uncertainty

of the various

potential

outcomes

such

Legal

Proceedings.

Accordingly,

management’s

estimate

will

change

from

time-to-time,

and

actual

losses may be more or less than the current estimate.

While the

outcome of

Legal Proceedings

is inherently

uncertain, based

on information

currently available,

advice of

counsel, and

available

insurance

coverage,

management

believes

that

the

amount

has

already

accrued

adequate

and

any

incremental

liability arising from

the Legal Proceedings

in matters in

which a loss

amount can be

reasonably estimated will not

have a material

adverse effect

on the Corporation’s

consolidated financial position.

However, in

the event

of unexpected future

developments, it is

possible that

the ultimate

resolution of

these matters

in a

reporting period, if

unfavorable, could have

a material

adverse effect

the Corporation’s consolidated financial position for that period.

Set forth below is a description of the Corporation’s

significant Legal Proceedings.

BANCO POPULAR DE PUERTO RICO

Hazard Insurance Commission-Related Litigation

Popular,

Inc., BPPR

and Popular

Insurance, LLC

(the “Popular

Defendants”) were

named defendants

in a

class action

complaint

captioned Pérez

Díaz v.

Popular, Inc.,

et al,

filed before

the Court

of First

Instance, Arecibo

Part. The

complaint originally

sought

damages and preliminary and

permanent injunctive relief on behalf

of the class

against the Popular Defendants, as

well as Antilles

Insurance Company and MAPFRE-PRAICO Insurance Company (the “Defendant

Insurance Companies”). Plaintiffs alleged that the

Popular

Defendants

were

unjustly

enriched

failing

reimburse

them

for

commissions

paid

the

Defendant

Insurance

Companies

the

insurance

agent

and/or

mortgagee for

policy years

when

claims

were

filed

against

their

hazard

insurance

policies. They demanded

the reimbursement to

the purported “class”

of an

estimated $

400

million plus legal

interest, for the

“good

experience”

commissions

allegedly

paid

the

Defendant

Insurance

Companies

during

the

relevant

time

period,

well

injunctive relief seeking to

enjoin the Defendant Insurance

Companies from paying commissions to

the insurance agent/mortgagee

and ordering them

to pay

those fees

directly to the

insured. A motion

for dismissal

on the merits

filed by

the Defendant Insurance

Companies

was

denied and

each

the

Puerto

Rico

Court

Appeals and

the

Puerto

Rico

Supreme

Court

denied the

Popular

Defendants’ request to review the lower court’s denial of the motion to dismiss. In December 2017, plaintiffs amended the complaint

and,

January

2018,

defendants

filed

answer

thereto.

Separately,

October

2017,

the

Court

entered

order

whereby

broadly certified the

class, after

which the Popular

Defendants filed a

certiorari petition before

the Puerto Rico

Court of Appeals

relation

the

class

certification,

which

the

Court

declined

entertain.

November

2018

and

January

2019,

plaintiffs

filed

voluntary dismissal petitions against MAPFRE-PRAICO Insurance Company and

Antilles Insurance Company,

respectively, leaving

the Popular Defendants as the sole remaining

defendants in the action.

209

In April

2019, the Court

amended the class

definition to limit

it to

individual homeowners whose

residential units were

subject to

mortgage from BPPR

who, in turn,

obtained risk insurance

policies with Antilles

Insurance or MAPFRE

Insurance through Popular

Insurance, LLC

from 2002

to 2015,

and who

did not

make insurance

claims against

said policies

during their

effective term.

The

Court approved in September 2020 the notice

to the class, which was never published.

May 2021,

the Popular

Defendants filed

a motion

for summary

judgment with

respect to

plaintiffs’ unjust

enrichment theory

liability,

reserving the right

to file an

additional motion for

summary judgment regarding

damages. Also, in

May 2021, Popular,

Inc.

and BPPR

filed a

separate motion

for summary

judgment for

failure to

state a

claim against

such entities.

During an

oral hearing

held in September 2021 to discuss the pending motions for summary judgment, Plaintiffs notified they did not object the dismissal of

the action with prejudice as to Popular,

Inc. and BPPR, leaving Popular Insurance, LLC (“Popular Insurance”) as the sole

remaining

defendant in the case. In October 2021, the Court

issued a resolution denying Popular Insurance’s Motion

for Summary Judgment.

December 2021,

Popular Insurance

filed

petition

of certiorari

the

Puerto Rico

Court

Appeals, seeking

review from

the

denial of the motion for summary judgment,

and on February 28, 2022, the Court of Appeals entered a judgment reversing the lower

court’s

decision,

after

concluding

was

unable

review

novo

the

denial

the

motion

for

summary

judgment

since

such

decision failed

to comply

with the

summary judgment standard.

The Court

of Appeals

remanded the

case to

the lower

court with

instructions to

enter a

summary judgment

that identifies

the material

contested issues

of facts

that prevents

the lower

court from

granting Popular Insurance’s summary judgment motion.

May

2022,

the

trial

court

issued

amended

resolution

denying

for

second

time

Popular

Insurance’s

Motion

for

Summary

Judgment.

On June 14,

2022, Popular Insurance

filed a

petition of Certiorari

to the

Puerto Rico

Court of Appeals,

seeking review

from the

denial of

the Motion

for Summary

Judgment. On

August 12,

2022, the

Court of

Appeals reversed

the trial

court’s ruling,

granted summary

judgment in

favor of

Popular Insurance,

and ordered

the dismissal

of the

case in

its entirety.

After the

Court of

Appeals denied

a Motion

for Reconsideration

filed by

Plaintiffs, on

October 13,

2022, Plaintiffs

filed a

certiorari petition

before the

Puerto Rico Supreme Court seeking review of the

Court of Appeals judgment.

Popular Insurance

filed its

opposition brief

to Plaintiff’s

certiorari petition

on October

24, 2022.

On December

4, 2022,

the Puerto

Rico

Supreme

Court

issued

order denying

the

certiorari

petition.

The

judgment

ordering the

dismissal of

the

complaint

its

entirety became final and unappealable on December

19, 2022. This matter is now closed.

Mortgage-Related Litigation

BPPR was

named a

defendant in

a putative

class action

captioned Yiries

Josef Saad

Maura v.

Banco Popular,

et al.

on behalf

residential

customers

the

defendant

banks

who

have

allegedly

been

subject

illegal

foreclosures

and/or

loan

modifications

through

their

mortgage

servicers.

Plaintiffs

contend

that

when

they

sought

reduce

their

loan

payments,

defendants

failed

provide them with such reduced loan payments, instead subjecting them to lengthy loss mitigation processes while filing foreclosure

claims

against

them

parallel,

all

violation

the

Truth

Lending

Act

(“TILA”),

the

Real

Estate

Settlement

Procedures

Act

(“RESPA”),

the Equal

Credit Opportunity Act

(“ECOA”), the

Fair Credit

Reporting Act

(“FCRA”), the

Fair Debt

Collection Practices

Act (“FDCPA”)

and other consumer-protection laws

and regulations. Plaintiffs did

not include a specific

amount of damages in

their

complaint. After waiving service

of process, BPPR filed

a motion to

dismiss the complaint

(as did most

co-defendants, separately).

BPPR

further

filed

motion

oppose

class

certification,

which the

Court

granted

September

2018.

April

2019,

the

Court

entered an

Opinion and

Order granting

BPPR’s and

several other

defendants’ motions

to dismiss

with prejudice.

Plaintiffs filed

Motion for Reconsideration in April 2019, which Popular timely opposed. In September 2019, the Court issued an Amended Opinion

and Order dismissing plaintiffs’ claims against all

defendants, denying the reconsideration requests and other pending motions, and

issuing final

judgment.

In October

2019, plaintiffs

filed a

Motion for

Reconsideration of

the Court’s

Amended Opinion

and Order,

which was denied

in December 2019.

In January

2020, plaintiffs filed

a Notice

of Appeal to

the U.S. Court

of Appeals for

the First

Circuit.

Plaintiffs filed their

appeal brief in

July 2020, Appellees

filed their brief

in September 2020,

and Appellants filed

their reply

brief in January 2021. The appeal is now fully briefed

and pending resolution.

Insufficient Funds and Overdraft Fees Class Actions

In February

2020, BPPR

was served

with a

putative class

action complaint captioned

Soto-Melendez v.

Banco Popular

de Puerto

Rico, filed before the United States District

Court for the District of Puerto Rico.

The complaint alleges breach of contract, breach of

210

the covenant of good faith and fair dealing

and unjust enrichment due to BPPR’s purported practice of (a)

assessing more than one

insufficient funds fee (“NSF Fees”) on the

same ACH “item” or transaction and (b) charging

both NSF Fees and overdraft fees (“OD

Fees”) on

the same

ACH item

or transaction,

and is

filed on

behalf of

all persons

who during

the applicable

statute of

limitations

period

were

charged

NSF

Fees

and/or

Fees

pursuant

these

purported

practices.

April

2020,

BPPR

filed

motion

dismiss the case. In April

2021, the Court issued an order granting

in part and denying in part

BPPR’s motion to dismiss; the

unjust

enrichment claim

was dismissed,

whereas the

breach of

contract and

covenant of

good faith

and fair

dealing claims

survived the

motion.

In March

2022, BPPR

was also

named as

a defendant

on a

putative class

action complaint captioned

Orama-Caraballo v.

Banco

Popular,

filed before

the U.S.

District Court

for the

District of

Puerto Rico

by the

same Plaintiffs’

attorneys of

the Soto-Melendez

complaint. Similar to the claims set forth in the Soto-Melendez complaint, Plaintiffs allege breach of contract, breach of the covenant

of good faith and

fair dealing, and unjust enrichment

due to the bank’s

purported practice of (a) assessing more

than one NSF Fee

the

same

“item” and

(b)

charging

both

NSF

Fees

and

Fees

the

same

“item”

but

included

allegations

with

respect

“checks” in addition to ACH payments.

During a

mediation hearing

held in

April 2022,

the parties

in both

the Soto

Melendez and

Orama-Caraballo complaints

reached a

settlement in principle on a

class-wide basis subject to final court

approval. The parties filed before the

Court a notice of settlement

and a

request to

stay the

proceedings in

both cases

and, on

August 15,

2022, the

parties submitted

the class

action settlement

agreement for the Court's preliminary

approval.

On November 23, 2022, the

court issued an order

granting preliminary approval of

the settlement agreement and scheduled the

final approval hearing for March 14, 2023.

Popular was also named as

a defendant on a putative class

action complaint captioned Golden v.

Popular, Inc. filed

in March 2020

before

the

U.S.

District

Court

for

the

Southern

District

New

York,

seeking

damages,

restitution

and

injunctive

relief.

Plaintiff

alleged breach

of contract,

violation

the covenant

good faith

and

fair

dealing, unjust

enrichment and

violation

New York

consumer protection law

due to Popular’s

purported practice of

charging OD Fees

on transactions that,

under plaintiffs’

theory,

not overdraw the

account. Plaintiff described Popular’s

purported practice of charging

OD Fees as

“Authorize Positive, Purportedly

Settle

Negative”

(“APPSN”)

transactions

and

alleged

that

Popular

assesses

Fees

over

authorized

transactions

for

which

sufficient funds

are held for

settlement.

In August 2020,

Popular filed a

Motion to Dismiss

on several grounds,

including failure to

state a

claim against

Popular,

Inc. and

improper venue.

In October

2020, Plaintiff

filed a

Notice of

Voluntary

Dismissal before

the

U.S. District Court for the Southern District of New York and, simultaneously, filed an identical complaint in the U.S. District Court for

the

District

the

Virgin

Islands

against

Popular,

Inc.,

Popular

Bank

and

BPPR.

November

2020,

Plaintiff

filed

Notice

Voluntary

Dismissal against

Popular,

Inc.

and Popular

Bank following

a Motion

Dismiss filed

on behalf

of such

entities, which

argued failure

to state

a claim

and lack

of minimum

contacts of

such parties

with the

U.S.V.I.

district court

jurisdiction. BPPR,

the

only defendant remaining in the case, was served

with process in November 2020 and filed

a Motion to Dismiss in January 2021.

October

2021,

the

District

Court,

notwithstanding that

BPPR’s

Motion

Dismiss

remained

pending

resolution,

held

initial

scheduling

conference

and,

thereafter,

issued

trial

management

order

where

scheduled

the

deadline

for

all

discovery

for

November 1,

2022, the

deadline for

the filing

of a

joint pre-trial

brief for

June 1,

2023, and

the trial

for June

20 to

June 30,

2023.

During a

status

hearing held

on June

2022, the

District Court

entered an

amended scheduling

order extending

the

discovery

deadline to

March 31,

2023, and

granting plaintiffs

until April

14, 2023,

to file

a motion

for class

certification. During

a mediation

hearing held on October 14, 2022, the parties in the Golden action reached a settlement in principle on a class-wide basis subject to

final

court

approval.

October

19,

2022,

the

parties

filed

before

the

Court

notice

settlement

and

request

stay

the

proceedings while

Plaintiffs submit

a motion

for the

preliminary approval of

the class

action settlement. On

January 19,

2023, the

parties filed the motion for preliminary approval of

the settlement agreement, which is pending resolution.

On January

31, 2022,

Popular was

also named

as a

defendant on a

putative class

action complaint captioned

Lipsett v.

Popular,

Inc. d/b/a Banco Popular, filed before the U.S. District Court for the Southern District

of New York, seeking damages, restitution and

injunctive relief. Similar to the claims set forth in the

aforementioned Golden complaint, Plaintiff alleges breach of contract, including

violations of the covenant of good faith and

fair dealing, as a result of Popular’s purported practice of

charging OD Fees for APPSN

transactions.

The complaint further alleged that

Popular assesses OD Fees

over authorized transactions for

which sufficient funds

are held for settlement. Popular

waived service of process and filed

a Motion to Compel Arbitration

on April 4, 2022. In

response to

Popular’s motion, Plaintiff filed a Notice of Voluntary Dismissal on

April 27, 2022.

211

On May

13, 2022,

Plaintiff in

the Lipsett

complaint filed

a new

complaint captioned

Lipsett v.

Banco Popular

North America

d/b/a

Popular

Community Bank

with the

same

allegations of

his

previous complaint

against Popular.

On June

10, 2022,

after serving

Plaintiff with a written notice of election to

arbitrate the claims asserted in the complaint which went unanswered, Popular Bank filed

Pre-Motion

Conference

motion

new

Motion

Compel

Arbitration.

After

Plaintiff

responded

the

Pre-Motion

conference motion, on

September 2, 2022,

the Court allowed

Popular Bank to

file its Motion

to Compel Arbitration,

which it did

September 8, 2022. Plaintiff opposed to such motion on

October 13, 2022, and PB filed its reply on

November 3, 2022.

On December

9, 2022, the

Court issued a

Decision and Order

denying Popular’s Motion

to Compel Arbitration.

On December

20,

2022, Popular Bank filed

a Notice of Appeal

with the United States

Court of Appeals for

the Second Circuit.

On January 31, 2022,

the

Court

Appeals

issued

briefing

schedule

granting Popular

Bank

until

April

2023

file

its

appeal

brief.

The

Court

Appeals also scheduled a “CAMP” mediation conference, which was held

on February 21, 2023. No settlement was reached during

the mediation.

Cyber Incident Related Litigation

BPPR was named

defendant in a

putative class action

complaint filed before

the U.S. District

Court for the

District of Puerto

Rico,

captioned

Rosa

Rivera

Marrero

Banco

Popular

Puerto

Rico.

Plaintiff

contends

BPPR

failed

properly

secure

and

safeguard

the

class

members’

personally

identifiable

information

(“PII”)

which

was

purportedly

exposed

through

data

breach

experienced

BPPR’s

vendor

June

2021.

Such

data

breach,

which

alleged

involved

BPPR’s

files,

occurred

via

the

exploitation

alleged vulnerability

in Accellion

FTA,

legacy software

product

developed by

Accellion, Inc

used by

BPPR’s

vendor. Plaintiff

further alleges that, during the data

breach, an unauthorized actor removed one

or more documents that contained

PII of the plaintiff

and purported class members. Plaintiff demands injunctive relief

requesting, among other things, BPPR to

protect

all data

collected through

the course

of its

business in

accordance with

all applicable

regulations, industry

standards and

federal,

state or local laws, as well as

an award for damages, attorneys’ fees, costs and litigation expenses. BPPR was served with

process

on May 27, 2022

and, on August 1, 2022,

filed a Motion to

Dismiss. On August 15,

2022, Plaintiff filed her

opposition to the Motion

to Dismiss

and, on

September 14,

2022, BPPR

filed a

reply in

support of

its Motion

to Dismiss.

BPPR’s Motion

to Dismiss

is fully

briefed and pending resolution.

POPULAR BANK

Employment-Related Litigation

July 2019,

was served

in a

putative class

complaint in

which it

was named

as a

defendant along

with five

(

) current

employees (collectively,

the “AB

Defendants”),

captioned Aileen

Betances, et

al. v.

Popular Bank,

et al.,

filed before

the Supreme

Court of the State of New York (the “AB Action”). The complaint, filed by five (

) current and former PB employees, seeks to recover

damages

for

the

Defendants'

alleged

violation

local

and

state

sexual

harassment,

discrimination

and

retaliation

laws.

Additionally,

in July

2019, PB

was served

in a

putative class

complaint in

which it

was named

as a

defendant along

with six

(

)

current PB

employees (collectively,

the “DR

Defendants”), captioned Damian

Reyes, et

al. v.

Popular Bank,

et al.,

filed before the

Supreme Court

of the

State of

New York

(the “DR

Action”). The

DR Action,

filed by

three (

) current

and former

PB employees,

seeks to recover damages for the DR Defendants’

alleged violation of local and state discrimination and retaliation laws. Plaintiffs in

both complaints are represented by the same legal counsel, and

five of the six named individual defendants in the DR

Action are the

same named

individual defendants

in the

AB Action.

Both complaints

are related,

among other

things, to

allegations of

purported

sexual harassment and/or misconduct by a former PB employee as

well as PB’s actions in connection thereto and seek no less than

100

million in

damages each. In

October 2019,

PB and

the other

defendants filed several

Motions to

Dismiss. Plaintiffs

opposed

the motions

in December

2019 and

PB and

the other

defendants replied

in January

2020. In

July 2020,

a hearing

to discuss

the

motions

dismiss filed

both

actions

was

held, at

which

the

Court

dismissed one

the causes

action

included

plaintiffs in the AB Action.

June

2021,

the

Court

in the

Action

entered a

judgment dismissing

all

claims

except those

regarding the

principal

plaintiff

Aileen Betances against PB for retaliation, and Betances’ claim against

three (

) other AB Defendants for aiding/abetting the alleged

retaliation. Also, in July

2021, the Court

in the DR

action entered a partial

judgment dismissing all claims

against the individual DR

Defendants,

with

all

surviving

claims

being

against

and

limited

local

retaliation

claims

and

local

and

state

discrimination

claims. Plaintiffs in both the AB Action and the DR Action filed notices of appeal of both judgments. On August 11, 2021, PB and the

remaining AB Defendants in the

AB Action, as well as

PB in the DR

Action, answered the respective complaints as

to the surviving

claims.

212

March

25,

2022,

Plaintiffs

both

the

Action

and

the

Action

perfected

their

appeals

seeking

reverse

both

partial

judgments. PB

filed opposition

briefs as

to both

appeals on

August 10,

2022. However,

on October

24, 2022,

PB and

all but

the

principal plaintiff

in the

AB Action,

Aileen Betances,

reached an

agreement in

principle subject to

final documentation,

to settle

all

their claims

included in

the AB

Action. Also,

on that

same

date, PB

and all

Plaintiffs

in the

DR Action

reached an

agreement in

principle subject to final documentation, to settle all claims

included in the DR Action.

December 2022,

after reaching

a settlement

agreement with

the principal

plaintiff in

the AB

Action, the

parties in

both the

Action and the DR Action executed settlement agreements that disposed

of both actions.

On December 22, 2022, the parties filed a

Stipulation of Dismissal with Prejudice with the

court in both actions. These matters are now closed.

POPULAR SECURITIES

Puerto Rico Bonds and Closed-End Investment

Funds

The volatility

in prices

and declines

in value

that Puerto

Rico municipal

bonds and

closed-end investment

companies that

invest

primarily in

Puerto Rico

municipal bonds experienced

following August

2013 have

led to

regulatory inquiries, customer

complaints

and

arbitrations

for

most

broker-dealers

Puerto

Rico,

including

Popular

Securities.

Popular

Securities

has

received

customer

complaints

and,

December 31,

2022,

was named

respondent (among

other

broker-dealers) in

pending arbitration

proceedings with

initial claimed

amounts of

approximately $

13.4

million in

the aggregate.

While Popular

Securities believes

it has

meritorious defenses to the claims asserted in these proceedings,

it has often determined that it is in its best interest to settle certain

claims

rather

than

expend

the

money

and

resources required

see

such

cases

completion.

The

Puerto

Rico

Government’s

defaults and

non-payment of

its various

debt obligations,

as well

as the

Oversight Board

decision to

pursue restructurings

under

Title III and

Title VI of

PROMESA, have impacted the number of

customer complaints (and claimed damages) filed

against Popular

Securities concerning Puerto Rico bonds and closed-end investment companies that invest primarily in Puerto

Rico bonds. Adverse

results

the

arbitration

proceedings

described

above,

significant

increase

customer

complaints,

could

have

material

adverse effect on Popular.

In October 2021, a panel in an arbitration proceeding with claimed damages arising from trading losses of approximately $

million

ordered

Popular

Securities to

pay

claimants

approximately $

6.9

million

compensatory

damages and

expenses. In

November,

2021,

the

claimants

in such

arbitration proceeding

filed

a complaint

captioned Trinidad

García v.

Popular,

Inc.

et.

al.

before

the

United

States

District

Court

for

the

District

Puerto

Rico

against

Popular,

Inc.,

BPPR

and

Popular

Securities

(the

“Popular

Defendants”) alleging, inter alia,

that they sustained monetary

losses as a

result of the Popular

Defendants’ anticompetitive,

unfair,

and

predatory

practices,

including

tying

arrangements

prohibited

the

Bank

Holding

Company

Act.

Plaintiffs

claim

that

the

Popular Defendants caused them to

enter a tying arrangement scheme whereby

BPPR allegedly would extend secured credit

lines

to the Plaintiffs on

the conditions that they transfer

their portfolios to Popular

Securities to be used

as pledged collateral and

obtain

additional investment

services and

products solely

from Popular

Securities, not

from any

of its

competitors. Plaintiffs

also invoke

federal

court’s

supplemental jurisdiction

allege

several

state

law claims

against

the Popular

Defendants, including

contractual

fault, fault in causing losses in value of the pledge collateral, breach of contract, request for specific compliance thereof, fault in pre-

contractual negotiations, emotional distress, and punitive damages. In January 2022, Plaintiffs filed an Amended Complaint, and the

Popular Defendants were served with summons on that same date. Plaintiffs demand no less than $

390

million in damages, plus an

award for costs and attorney's fees. The

Popular Defendants filed a Motion to Dismiss

on March 21, 2022, which Plaintiffs

opposed

on June 10, 2022. Popular

filed its reply in support

of the Motion to Dismiss

on June 30, 2022, and

Plaintiffs sur-replied on July 27,

2022.

February 9,

2023, the

Popular Defendants

executed a

global

settlement agreement

with Plaintiffs

resolving all

controversies

between

the

parties,

including

those

arising

from

the

aforementioned

case.

After

the

parties

filed

stipulation

dismissal,

February 15, 2023, the United States District Court for the District of Puerto Rico issued an order dismissing the case

with prejudice

and stating that a judgment shall be entered accordingly.

This matter is now closed.

PROMESA Title III Proceedings

2017,

the

Oversight

Board

engaged

the

law

firm

Kobre &

Kim

carry

out

independent

investigation

behalf

the

Oversight Board

regarding, among

other things,

the causes

of the

Puerto Rico

financial crisis.

Popular,

Inc.,

BPPR and

Popular

Securities

(collectively,

the

“Popular Companies”)

were

served

by,

and

cooperated

with,

the

Oversight

Board

connection with

213

requests

for

the

preservation

and

voluntary

production

certain

documents

and

witnesses

with

respect

Kobre

Kim’s

independent investigation.

In August

2018, Kobre & Kim

issued its

Final Report,

which contained various

references to

the Popular

Companies, including

allegation that

Popular Securities

participated as

an underwriter

in the

Commonwealth’s 2014

issuance of

government obligation

bonds

notwithstanding

having

allegedly

advised

against

it.

The

report

noted

that

such

allegation

could

give

rise

unjust

enrichment claim against the Corporation and could also serve as a basis to equitably subordinate claims filed by the Corporation in

the Title III proceeding to other third-party claims.

After the publication of the Final Report, the Oversight Board created a special claims committee (“SCC”) and, before the end of the

applicable two-year statute of limitations for the filing of such claims pursuant

to the U.S. Bankruptcy Code, the SCC, along with the

Commonwealth’s

Unsecured Creditors’

Committee (“UCC”),

filed

various

avoidance, fraudulent

transfer and

other claims

against

third parties, including government vendors and

financial institutions and other professionals involved in

bond issuances then being

challenged as

invalid by the

SCC and

the UCC.

The Popular

Companies, the SCC

and the

UCC entered into

a tolling

agreement

with respect to potential claims the SCC and the UCC,

on behalf of the Commonwealth or other Title III

debtors, may assert against

the Popular Companies for the avoidance and recovery of payments and/or transfers made to the Popular Companies or as a result

of any role

of the Popular Companies

in the offering

of the aforementioned challenged

bond issuances. In January

2022, the SCC,

the UCC and the Popular Companies executed a settlement agreement as to potential claims related to the avoidance and recovery

of payments and/or

transfers made to the

Popular Companies. Potential claims

being pursued by

the SCC and

the UCC, including

claims tolled

under existing tolling

agreements, were transferred

to a

newly created Puerto

Rico Avoidance Action

Trust as

part of

the approval

of the

Commonwealth of Puerto

Rico’s Plan

of Adjustment. The

tolling agreement

as to

potential claims

that may

asserted

against

the

Popular

Companies

the

Puerto

Rico

Avoidance

Action

Trust

result

any

role

the

Popular

Companies in the offering of certain challenged bond

issuances remains in effect.

214

Note 25 – Non-consolidated variable interest

entities

The Corporation

is involved

with three

statutory trusts

which it

established to

issue trust

preferred securities

to the

public. These

trusts

are

deemed to

variable

interest

entities (“VIEs”)

since

the

equity

investors at

risk

have no

substantial decision-making

rights. The

Corporation does

not hold

any variable

interest in

the trusts,

and therefore,

cannot be

the trusts’

primary beneficiary.

Furthermore, the Corporation

concluded that it

did not hold

a controlling financial

interest in these

trusts since the

decisions of the

trusts

are

predetermined

through

the

trust

documents

and

the

guarantee

the

trust

preferred

securities

irrelevant

since

substance the sponsor is guaranteeing its own debt.

Also, the

Corporation is

involved with

various special

purpose entities

mainly in

guaranteed mortgage

securitization transactions,

including

GNMA

and

FNMA.

The

Corporation

has

also

engaged

securitization

transactions

with

FHLMC,

but

considers

its

exposure in the

form of servicing

fees and servicing

advances not to be

significant at December

31, 2022.

These special purpose

entities

are

deemed

VIEs

since

they

lack

equity

investments

risk.

The

Corporation’s

continuing

involvement

these

guaranteed loan

securitizations includes

owning certain

beneficial interests in

the form

of securities as

well as

the servicing

rights

retained. The Corporation is not required to provide additional financial support to

any of the variable interest entities to which it has

transferred

the

financial

assets.

The

mortgage-backed

securities,

the

extent

retained,

are

classified

the

Corporation’s

Consolidated

Statements

Financial

Condition

available-for-sale

trading

securities.

The

Corporation

concluded

that,

essentially,

these

entities

(FNMA

and

GNMA)

control

the

design

their

respective

VIEs,

dictate

the

quality

and

nature

the

collateral, require

the underlying

insurance, set

the servicing

standards via

the servicing

guides and

can change

them at

will, and

can remove a

primary servicer with cause,

and without cause in

the case of

FNMA. Moreover, through

their guarantee obligations,

agencies (FNMA and GNMA) have the obligation

to absorb losses that could be potentially significant

to the VIE.

The

Corporation

holds

variable

interests

these

VIEs

the

form

agency

mortgage-backed

securities

and

collateralized

mortgage obligations, including those securities originated by the Corporation and those acquired from

third parties. Additionally, the

Corporation holds agency mortgage-backed securities

and agency collateralized mortgage obligations

issued by third party

VIEs in

which

has

other

form

continuing

involvement.

Refer

Note

the

Consolidated

Financial

Statements

for

additional

information

the

debt

securities

outstanding

December

31,

2022

and

2021,

which

are

classified

available-for-sale

and

trading securities

in the

Corporation’s Consolidated

Statements of

Financial Condition.

In addition,

the Corporation

holds variable

interests

the

form

servicing fees,

since

retains

the

right

service

the

transferred

loans

those

government-sponsored

special purpose entities (“SPEs”) and

may also purchase the

right to service loans

in other government-sponsored SPEs that

were

transferred to those SPEs by a third-party.

The following

table presents

the carrying

amount and

classification of

the assets

related to

the Corporation’s

variable interests

non-consolidated VIEs

and the

maximum exposure

to loss

as a

result of

the Corporation’s

involvement as

servicer of

GNMA and

FNMA loans at December 31, 2022 and 2021.

215

(In thousands)

December 31, 2022

December 31, 2021

Assets

Servicing assets:

Mortgage servicing rights

99,614

94,464

Total servicing

assets

99,614

94,464

Other assets:

Servicing advances

6,157

7,968

Total other assets

6,157

7,968

Total assets

105,771

102,432

Maximum exposure to loss

105,771

102,432

The size of

the non-consolidated VIEs,

in which the

Corporation has a

variable interest in

the form

of servicing fees,

measured as

the total unpaid principal balance of the loans,

amounted to $

7.7

billion at December 31, 2022 (December

31, 2021 - $

8.3

billion).

The Corporation

determined that

the maximum

exposure to

loss includes

the fair

value of

the MSRs

and the

assumption that

the

servicing advances

at December 31,

2022 and

2021 will

not be

recovered. The agency

debt securities are

not included as

part of

the maximum exposure to loss since they are guaranteed

by the related agencies.

ASU 2009-17 requires that an ongoing primary beneficiary assessment should be made to determine whether the Corporation is the

primary beneficiary of any of the VIEs it is

involved with. The conclusion on the assessment of these non-consolidated VIEs has not

changed

since

their

initial

evaluation.

The

Corporation

concluded

that

still

not

the

primary

beneficiary

these

VIEs,

and

therefore, these VIEs are not required to be consolidated

in the Corporation’s financial statements at December 31,

2022.

216

Note 26 – Derivative instruments and hedging

activities

The

use

derivatives

incorporated

part

the

Corporation’s

overall

interest

rate

risk

management

strategy

minimize

significant unplanned fluctuations in

earnings and cash flows

that are caused

by interest rate volatility.

The Corporation’s goal

is to

manage interest

rate sensitivity by

modifying the repricing

or maturity characteristics

of certain

balance sheet assets

and liabilities

that the

net interest

income is

not materially

affected

by movements

in interest

rates. The

Corporation uses

derivatives in

its

trading activities

to facilitate

customer transactions,

and as

a means

of risk

management. As

a result

of interest

rate fluctuations,

hedged fixed and

variable interest rate

assets and liabilities

will appreciate or

depreciate in fair

value. The effect

of this

unrealized

appreciation or depreciation is expected to be substantially

offset by the Corporation’s gains or

losses on the derivative instruments

that are linked to these hedged assets and liabilities. As a matter of policy,

the Corporation does not use highly leveraged derivative

instruments for interest rate risk management.

The credit

risk attributed to

the counterparty’s

nonperformance risk is

incorporated in the

fair value

of the

derivatives. Additionally,

the

fair value

the

Corporation’s own

credit

standing is

considered in

the fair

value

of the

derivative liabilities.

During the

year

ended December

31, 2022, inclusion

of the

credit risk

in the

fair value

of the

derivatives resulted in

a loss

of $

0.5

million from the

Corporation’s credit standing adjustment.

During the years ended December 31,

2021 and 2020, the Corporation recognized a

loss

of $

0.3

million and a gain of $

0.7

million, respectively, from the Corporation’s credit standing adjustment.

The Corporation’s derivatives are subject to agreements which allow a right of set-off with each respective counterparty.

In an event

of default, each party has a right of set-off

against the other party for amounts owed in the related agreement and any other amount

or obligation owed in respect of any

other agreement or transaction between them.

Pursuant to the Corporation’s accounting policy,

the

fair

value

derivatives

not

offset

with

the

fair

value

other

derivatives

held

with

the

same

counterparty

even

these

agreements allow

a right

of set-off.

addition,

the fair

value of

derivatives is

not offset

with the

amounts for

the right

reclaim

financial collateral or the obligation to return financial

collateral.

Financial

instruments

designated as

cash

flow

hedges

non-hedging derivatives

outstanding at

December 31,

2022

and

2021

were as follows:

217

Notional amount

Derivative assets

Derivative liabilities

Statement of

Fair value at

Statement of

Fair value at

At December 31,

condition

December 31,

condition

December 31,

(In thousands)

2022

2021

classification

2022

2021

classification

2022

2021

Derivatives designated as

hedging instruments:

Forward contracts

15,100

87,900

Other assets

Other liabilities

125

Total derivatives designated

as hedging instruments

15,100

87,900

125

Derivatives not designated

as hedging instruments:

Interest rate caps

150,000

27,866

Other assets

1,045

Other liabilities

1,045

Indexed options on deposits

85,414

79,114

Other assets

18,091

26,075

Bifurcated embedded options

78,972

72,352

Interest

bearing

deposits

15,933

22,753

Total derivatives not

designated as

hedging instruments

314,386

179,332

19,136

26,075

16,978

22,753

Total derivative assets

and liabilities

329,486

267,232

19,229

26,093

17,000

22,878

Cash Flow Hedges

The Corporation

utilizes forward

contracts to

hedge the

sale

of mortgage-backed

securities with

duration terms

over one

month.

Interest rate forwards are contracts for the delayed delivery of securities,

which the seller agrees to deliver on a specified future date

a specified

price or

yield.

These forward

contracts are

hedging a

forecasted transaction

and thus

qualify for

cash flow

hedge

accounting. Changes in the fair value of the derivatives are recorded in other comprehensive (loss)

income.

The amount included in

accumulated other comprehensive (loss) income corresponding to these forward contracts is expected to be reclassified to earnings

in the next twelve months. These contracts have

a maximum remaining maturity of

days at December 31, 2022.

For cash flow hedges,

net gains (losses) on

derivative contracts that are

reclassified from accumulated other comprehensive

(loss)

income to current period

earnings are included in the

line item in which the

hedged item is recorded and

during the period in

which

the forecasted transaction impacts earnings, as

presented in the tables below.

Year ended December

31, 2022

(In thousands)

Amount of net gain (loss)

recognized in OCI on

derivatives (effective

portion)

Classification in the statement of

operations of the net gain (loss)

reclassified from AOCI into income

(effective portion and ineffective

portion)

Amount of net gain

(loss) reclassified from

AOCI into income

(effective portion)

Amount of net gain

(loss) recognized in

income on derivatives

(ineffective portion)

Forward contracts

1,636

Mortgage banking activities

1,458

Total

1,636

1,458

218

Year ended December

31, 2021

(In thousands)

Amount of net gain (loss)

recognized in OCI on

derivatives (effective

portion)

Classification in the statement of

operations of the net gain (loss)

reclassified from AOCI into income

(effective portion and ineffective

portion)

Amount of net gain

(loss) reclassified from

AOCI into income

(effective portion)

Amount of net gain

(loss) recognized in

income on derivatives

(ineffective portion)

Forward contracts

456

Mortgage banking activities

(704)

Total

456

(704)

Year ended December

31, 2020

(In thousands)

Amount of net gain (loss)

recognized in OCI on

derivatives (effective

portion)

Classification in the statement of

operations of the net gain (loss)

reclassified from AOCI into income

(effective portion and ineffective

portion)

Amount of net gain

(loss) reclassified from

AOCI into income

(effective portion)

Amount of net gain

(loss) recognized in

income on derivatives

(ineffective portion)

Forward contracts

(6,594)

Mortgage banking activities

(5,559)

Total

(6,594)

(5,559)

Fair Value Hedges

At December 31, 2022 and 2021, there were

derivatives designated as fair value hedges.

Non-Hedging Activities

For the year ended December 31, 2022, the

Corporation recognized a gain of $

7.7

million (2021 –gain of $

2.3

million; 2020 – loss

of $

3.0

million) related to its non-hedging derivatives, as

detailed in the table below.

Amount of Net Gain (Loss) Recognized in Income on Derivatives

Year ended

Classification of Net Gain (Loss)

December 31,

(In thousands)

Recognized in Income on Derivatives

2022

2021

2020

Forward contracts

Mortgage banking activities

8,094

2,027

(5,027)

Indexed options on deposits

Interest expense

(5,290)

6,824

5,462

Bifurcated embedded options

Interest expense

4,942

(6,538)

(3,417)

Total

7,746

2,313

(2,982)

Forward Contracts

The Corporation has forward contracts to sell

mortgage-backed securities, which are accounted for as trading

derivatives. Changes

in their fair value are recognized in mortgage banking

activities.

Interest Rate Caps

The

Corporation enters

into

interest rate

caps as

an intermediary

behalf of

its customers

and simultaneously

takes offsetting

positions under the same terms and conditions, thus

minimizing its market and credit risks.

Indexed and Embedded Options

The Corporation offers certain customers’ deposits whose return

are tied to the performance of the Standard

and Poor’s (“S&P 500”)

stock

market

indexes,

and

other

deposits

whose

returns

are

tied

other

stock

market

indexes

other

equity

securities

performance. The

Corporation bifurcated the

related options embedded

within these

customers’ deposits from

the host

contract in

accordance with

ASC Subtopic

815-15. In

order to

limit the

Corporation’s exposure

to changes

in these

indexes, the

Corporation

purchases indexed options which

returns are tied to

the same indexes from

major broker dealer companies

in the over the

counter

market. Accordingly, the embedded options and the related indexed options are

marked-to-market through earnings.

219

Note 27 – Related party transactions

The Corporation grants loans to its directors, executive officers, including

certain related individuals or organizations, and affiliates in

the ordinary course of business. The activity and balance

of these loans were as follows:

(In thousands)

Balance at December 31, 2020

124,891

New loans

3,182

Payments

(28,208)

Other changes, including existing loans to new related parties

2,714

Balance at December 31, 2021

102,579

New loans

11,090

Payments

(15,402)

Other changes, including existing loans to new related parties

27,070

Balance at December 31, 2022

125,337

New loans and payments include disbursements and collections

from existing lines of credit.

The Corporation has had loan transactions with

the Corporation’s directors, executive officers, including certain related

individuals or

organizations, and affiliates, and

proposes to continue such

transactions in the ordinary

course of its business,

on substantially the

same terms, including interest rates and collateral, as those prevailing for comparable loan transactions with third parties. Except as

discussed

below,

the extensions

credit

have not

involved and

do not

currently

involve more

than normal

risks of

collection

present other unfavorable features.

In 2010,

as part

of the

Westernbank FDIC

assisted transaction,

BPPR acquired

five commercial

loans made

to entities

that were

wholly

owned

one

brother-in-law

director

the

Corporation.

The

loans

were

secured

real

estate

and

personally

guaranteed

the

director’s

brother-in-law.

The

loans

were

originated

Westernbank

between

2001

and

2005

and

had

aggregate outstanding principal

balance of approximately

33.5

million when they

were acquired by BPPR

in 2010. Between

2011

and 2014,

the loans

were restructured to

consist of

(i)

five

notes with

an aggregate

outstanding principal

balance of

19.8

million

with

annual interest

rate

(“Notes A”)

and

(ii)

five

notes

with

aggregate outstanding

balance

13.5

million

with a

annual interest

rate, to

be paid

upon maturity

(“Notes B”).

The restructured

notes had

an original

maturity of

September 30,

2016

and, thereafter, various

interim renewals were approved to allow

for the re-negotiation of a

longer-term extension. The last of these

interim

renewals,

among

other

things,

extended the

maturity

date until

April

2022,

decreased

the

interest

rate

applicable

the

Notes A

4.25

% and

maintained the

Notes B at

an interest

rate of

%. In

March and July

2022, the Audit

Committee authorized

two

separate

90-day interim

maturity extensions

provide additional

time

for

the Bank

analyze and

negotiate the

terms

and

conditions

for

longer-term

renewal

the

credit

facilities.

November

2022,

BPPR

and

parties

the

Corporation’s

director entered into a three-year extension of

the loans, until November 2025, which, among

other things: (i) increased the interest

rate applicable to Notes A to

5.25

% and maintained the Notes B

at an interest rate of

% and (ii) established a

principal repayment

schedule for

Notes A,

including a $

0.7

million mandatory prepayment.

The three-year extension

of the

loans was

approved by the

Audit Committee in accordance with the Related Party

Policy. The aggregate outstanding

balance on the loans as of December

31,

2022 was approximately $

29.3

million, of which approximately $

15.8

million corresponded to Notes A

and $

13.5

million to Notes B.

During 2022, the borrower paid approximately $

1.4

million and $

0.7

million in principal and interest, respectively.

In April 2010, in

connection with the acquisition of

the Westernbank assets from the

FDIC, as receiver,

BPPR acquired a term

loan

to a

corporate borrower

partially owned

by an

investment corporation

in which

the Corporation’s

Chairman, at

that time

the Chief

Executive Officer, as well as certain of his

family members, are the owners. In addition, the Chairman’s sister and brother-in-law are

owners of an

entity that holds

an ownership interest

in the borrower.

At the time

the loan was

acquired by BPPR, it

had an unpaid

principal balance of $

40.2

million. In May 2017, this loan

was sold by BPPR to Popular,

Inc., holding company (“PIHC”). At the time

of sale, the loan had an unpaid principal balance of $

37.9

million. PIHC paid $

37.9

million to BPPR for the loan, of which $

6.0

million

was recognized by BPPR as a capital contribution representing the difference

between the fair value and the book value of the

loan

at the

time of

transfer.

Immediately upon

being acquired

by PIHC,

the loan’s

maturity was

extended by

90 days

(under the

same

terms as

originally contracted) to

provide the PIHC

additional time to

evaluate a refinancing

or long-term extension

of the loan.

August 2017, the credit

facility was refinanced with

a stated maturity in

February 2019.

During 2017, the facility

was subject to the

220

loan payment moratorium offered as part of the hurricane relief efforts. As such,

interest payments amounting to approximately $

0.5

million

were

deferred

and

capitalized

part

the

loan

balance.

February

2019,

the

Audit

Committee

approved,

under

the

Related Party Policy, a

-month renewal of the loan at an interest rate of

5.75

% and a

-year amortization schedule. In

December

2021, the Corporation refinanced the then-current $

36.0

million principal balance of the loan

at an interest rate of

4.50

%, a maturity

date of December

2026 and a

-year amortization schedule. Payments

of principal and

interest of approximately

1.2

million and

1.5

million,

respectively,

were

made

during

2022.

December

31,

2022,

the

outstanding

balance

the

loan

was

approximately $

33.6

million. The borrower is current on its payments.

At December 31,

2022, the Corporation’s

banking subsidiaries held deposits

from related parties

amounting to approximately $

628

million (2020 - $

700

million).

From

time

time,

the

Corporation,

the

ordinary

course

business,

obtains

services

from

parties

that

have

some

association with the

Corporation. Management believes the

terms of such

arrangements are consistent with

arrangements entered

into with independent third parties.

For

the

year

ended

December

31,

2022,

the

Corporation made

contributions

approximately

4.8

million

Fundación

Banco

Popular and

Popular Bank

Foundation, which

are not-for-profit

corporations dedicated

to philanthropic

work (2021

- $

4.5

million).

The Corporation also provided

human and operational resources to

support the activities of

the Fundación Banco Popular

which in

2022 amounted to approximately $

1.5

million (2021- $

1.3

million).

Related party transactions with Evertec,

as an affiliate

Until August 15, 2022, the Corporation had an investment in Evertec, which provides various processing and information technology

services to the Corporation

and its subsidiaries and gave

BPPR access to the

ATH network

owned and operated by Evertec.

As of

December

31,

2021,

the

Corporation

held

11,654,803

Evertec,

representing

ownership

stake

16.19

This

investment was

accounted for

under the

equity method.

The Corporation

recorded $

1.5

million in

dividends from

its investment

Evertec during the year ended December 31, 2022

(December 31, 2021 - $

2.3

million).

As discussed

in Note

4, Business

combination, on

July 1,

2022, BPPR

completed its

previously announced

acquisition of

certain

assets from Evertec

Group to service certain

BPPR channels. In connection

with the Business Acquisition

Transaction, BPPR also

entered

into

amended

and

restated

service

agreements

with

Evertec

Group

pursuant

which

Evertec

Group

will

continue

provide various information technology

and transaction processing services

to Popular,

BPPR and their

respective subsidiaries. As

part

the

transaction,

BPPR

and

Evertec

entered

into

revenue

sharing

structure

for

BPPR

connection

with

its

merchant

acquiring relationship

with Evertec.

As consideration

for the

Business Acquisition

Transaction,

BPPR delivered

to Evertec

Group

4,589,169

shares of Evertec common stock valued at

closing at $

169.2

million (based on Evertec’s stock price

on June 30, 2022 of

36.88

). As a result of the exchange of shares, the

Corporation recognized a pre-tax gain of $

119.9

million.

Additionally, on August 15, 2022, the Corporation completed the sale of its remaining

7,065,634

shares of common stock of Evertec,

Inc..

Following

the

Evertec

Stock

Sale,

Popular

longer

owns

any

Evertec

common

stock.

result,

the

Corporation

discontinued accounting for its

proportionate share of Evertec’s

income (loss) and changes in

stockholder’s equity under the equity

method of

accounting in the

third quarter of

2022. The Corporation

recognized a pre-tax

gain on the

Evertec Stock Sale

of $

137.8

million, including related accounting adjustments.

The following

table presents

the Corporation’s

proportionate share

of Evertec’s

income (loss)

and changes

in stockholders’

equity

for the years ended December 31, 2022 and 2021,

including

the effects of the gains recognized related to the Evertec

Transactions.

221

Years ended December

31,

(In thousands)

2022

2021

2020

Share of Evertec income and Gain from the Evertec

Transactions and related accounting adjustments

[1]

269,539

26,096

16,936

Share of other changes in Evertec's stockholders' equity

3,168

865

Share of Evertec's changes in equity recognized in income

and

Gain from the Evertec Transaction and

related accounting

adjustments

272,707

26,149

17,801

[1]

The

Gain

from

the

Evertec

Transactions

and

accounting

adjustments

are

reflected

within

other

operating

income

the

accompanying

consolidated

financial

statements.

discussed

Note

the

Corporation

recognized

additional

17.3

million

operating

expense

connection with the Business Acquisition Transaction.

The following tables present the

impact of transactions and service payments

between the Corporation and Evertec (as

an affiliate)

and

their

impact

the

results

operations

for

the

years

ended

December

31,

2022,

2021

and

2020.

Items

that

represent

expenses to the Corporation are presented with

parenthesis.

Years ended December

31,

(In thousands)

2022 [1]

2021

2020

sponsored

entities

Collateralized mortgage obligations - federal

agencies

221,265

Mortgage-backed securities

8,886,950

826

8,887,776

Other

128

Total debt securities

available-for-sale

24,967,443

826

24,968,269

Trading account debt securities, excluding

derivatives:

U.S. Treasury securities

6,530

Obligations of Puerto Rico, States and political

subdivisions

Collateralized mortgage obligations

198

257

Mortgage-backed securities

22,559

Other

280

Total trading account

debt securities, excluding

derivatives

6,530

22,703

478

29,711

Equity securities

32,429

32,506

Mortgage servicing rights

121,570

Derivatives

26,093

Total assets measured

at fair value on a

recurring basis

6,530

25,048,668

122,874

25,178,149

Liabilities

Derivatives

(22,878)

Contingent consideration

(9,241)

Total liabilities measured

at fair value on a

recurring basis

(22,878)

(9,241)

(32,119)

The fair value information included in the following

tables is not as of period end, but as

of the date that the fair value measurement

was recorded during the years ended December 31, 2022,

2021 and 2020

and excludes nonrecurring fair value measurements

assets no longer outstanding

as of the reporting date.

225

Year ended December

31, 2022

(In thousands)

Level 1

Level 2

Level 3

Total

NONRECURRING FAIR VALUE

MEASUREMENTS

Assets

Write-downs

Loans

[1]

11,215

(2,067)

Other real estate owned

[2]

3,992

(1,026)

Other foreclosed assets

[2]

(1)

Long-lived assets held-for-sale

[3]

1,178

(2,155)

Total assets measured

at fair value on a nonrecurring basis

16,398

(5,249)

[1] Relates mainly to certain impaired collateral dependent loans.

The impairment was measured based on the fair value

of the collateral, which is

derived from appraisals that take into consideration prices

in observed transactions involving similar assets in similar

locations. Costs to sell are

excluded from the reported fair value amount.

[2] Represents the fair value of foreclosed real estate and

other collateral owned that were written down to their fair

value. Costs to sell are

excluded from the reported fair value amount.

[3] Represents the fair value of long-lived assets held-for-sale

that were written down to their fair value.

Year ended December

31, 2021

(In thousands)

Level 1

Level 2

Level 3

Total

NONRECURRING FAIR VALUE

MEASUREMENTS

Assets

Write-downs

Loans

[1]

21,167

(3,721)

Other real estate owned

[2]

7,727

(1,579)

Other foreclosed assets

[2]

(33)

Long-lived assets held-for-sale

[3]

9,007

(5,320)

Trademark

[4]

156

(5,404)

Total assets measured

at fair value on a nonrecurring basis

38,125

(16,057)

[1] Relates mainly to certain impaired collateral dependent loans.

The impairment was measured based on the fair value

of the collateral, which is

derived from appraisals that take into consideration prices

in observed transactions involving similar assets in similar

locations. Costs to sell are

excluded from the reported fair value amount.

[2] Represents the fair value of foreclosed real estate and

other collateral owned that were written down to their fair

value. Costs to sell are

excluded from the reported fair value amount.

[3] Represents the fair value of long-lived assets held-for-sale

that were written down to their fair value.

[4] Represents the fair value of a trademark due to a write-down

on impairment.

226

Year ended December

31, 2020

(In thousands)

Level 1

Level 2

Level 3

Total

NONRECURRING FAIR VALUE

MEASUREMENTS

Assets

Write-downs

Loans

[1]

74,511

(15,290)

Loans held-for-sale

[2]

2,738

(1,311)

Other real estate owned

[3]

20,123

(3,325)

Other foreclosed assets

[3]

116

(148)

ROU assets

[4]

446

(15,920)

Leasehold improvements

[4]

126

(2,084)

Total assets measured

at fair value on a nonrecurring basis

98,060

(38,078)

[1] Relates mostly to certain impaired collateral dependent loans.

The impairment was measured based on the fair value

of the collateral, which

is derived from appraisals that take into consideration

prices in observed transactions involving similar assets

in similar locations. Costs to sell are

excluded from the reported fair value amount.

[2] Relates to a quarterly valuation on loans held-for-sale.

Costs to sell are excluded from the reported fair value amount.

[3] Represents the fair value of foreclosed real estate and

other collateral owned that were written down to their fair

value. Costs to sell are

excluded from the reported fair value amount.

[4] The impairment was measured based on the sublease

rental value of the branches that were subject to the strategic

realignment of PB's New

Metro Branch network.

The following tables present the changes in Level

3 assets and liabilities measured at fair

value on a recurring basis for the years

ended December 31, 2022, 2021, and 2020.

Year ended December

31, 2022

MBS

Other

classified

CMOs

MBS

Other

as debt

classified

securities

as trading

classified as

Mortgage

available-

account debt

trading account

servicing

Total

Contingent

Total

(In thousands)

for-sale

securities

debt securities

rights

assets

Consideration

liabilities

Balance at January 1,

2022

826

198

280

121,570

122,874

(9,241)

Gains (losses) included in

earnings

(2)

(73)

166

9,241

Gains (losses) included in OCI

(15)

Additions

1,000

211

6,614

7,830

Settlements

(100)

(88)

(188)

Balance at December 31, 2022

711

1,000

113

215

207

128,350

130,596

Changes in unrealized gains

(losses) included in earnings

relating to assets still held at

December 31, 2022

(2)

(23)

11,964

11,943

227

Year ended December

31, 2021

MBS

Other

classified

CMOs

securities

as debt

classified

securities

as trading

Mortgage

available-

account debt

servicing

Total

Contingent

Total

(In thousands)

for-sale

securities

rights

assets

Consideration

liabilities

Balance at January 1, 2021

1,014

278

381

118,395

120,068

Gains (losses) included in earnings

(1)

(101)

(10,216)

(10,318)

Gains (losses) included in OCI

(13)

Additions

13,391

13,419

(9,241)

Settlements

(175)

(107)

(282)

Balance at December 31, 2021

826

198

280

121,570

122,874

(9,241)

Changes in unrealized gains (losses) included in

earnings relating to assets still held at December 31,

2021

(1)

(45)

6,410

6,364

Year ended December

31, 2020

MBS

Other

classified

CMOs

securities

as debt

classified

securities

as trading

Mortgage

available-

account debt

servicing

Total

(In thousands)

for-sale

securities

rights

assets

Balance at January 1,

2020

1,182

530

440

150,906

153,058

Gains (losses) included in earnings

(1)

(59)

(42,055)

(42,115)

Gains (losses) included in OCI

(18)

Additions

9,544

9,548

Settlements

(150)

(255)

(405)

Balance at December 31, 2020

1,014

278

381

118,395

120,068

Changes in unrealized gains (losses) included in earnings

relating to assets still

held at December 31, 2020

(19,327)

(19,300)

Gains and losses (realized and

unrealized) included in earnings for the

years ended December 31, 2022,

2021, and 2020 for Level

3 assets and liabilities included in the previous

tables are reported in the consolidated statement

of operations as follows:

2022

2021

2020

Total

Changes in unrealized

Total

Changes in unrealized

Total

Changes in unrealized

gains (losses)

included

relating to assets still

included

relating to assets still

included

relating to assets still

(In thousands)

in earnings

held at reporting date

in earnings

held at reporting date

in earnings

held at reporting date

Mortgage banking activities

166

11,964

(10,216)

6,410

(42,055)

(19,327)

Trading account (loss) profit

(71)

(21)

(102)

(46)

(60)

Other operating income

9,241

Total

9,336

11,943

(10,318)

6,364

(42,115)

(19,300)

228

The following

tables include

quantitative information

about significant

unobservable inputs

used to

derive the

fair value

of Level

instruments, excluding those instruments

for which the

unobservable inputs were not

developed by the

Corporation such as

prices

of prior transactions and/or unadjusted third-party pricing

sources at December 31, 2022 and 2021.

Fair value at

December 31,

(In thousands)

2022

Valuation technique

Unobservable inputs

Weighted average (range) [1]

CMO's - trading

113

Discounted cash flow model

Weighted average life

0.4

years (

0.1

0.6

years)

Yield

4.9

% (

4.9

% -

5.4

Prepayment speed

10.2

% (

9.1

% -

Other - trading

207

Discounted cash flow model

Weighted average life

2.5

years

Yield

12.0%

Prepayment speed

10.8%

Loans held-in-portfolio

5,087

[2]

External appraisal

Haircut applied on

external appraisals

8.3

% (

5.0

% -

10.4

Other real estate owned

528

[3]

External appraisal

Haircut applied on

external appraisals

18.4

% (

5.0

% -

[1]

Weighted average of significant unobservable inputs

used to develop Level 3 fair value measurements

were calculated by relative fair value.

[2]

Loans held-in-portfolio in which haircuts were not applied

to external appraisals were excluded from this table.

[3]

Other real estate owned in which haircuts were not applied

to external appraisals were excluded from this table.

Fair value at

December 31,

(In thousands)

2021

Valuation technique

Unobservable inputs

Weighted average (range) [1]

CMO's - trading

198

Discounted cash flow model

Weighted average life

0.8

years (

0.4

years)

Yield

3.6

% (

3.6

% -

4.1

Prepayment speed

11.4

% (

10.1

% -

17.2

Other - trading

280

Discounted cash flow model

Weighted average life

2.9

years

Yield

12.0%

Prepayment speed

10.8%

Loans held-in-portfolio

20,041

[2]

External appraisal

Haircut applied on

external appraisals

.0%

Other real estate owned

3,631

[3]

External appraisal

Haircut applied on

external appraisals

22.3

% (

5.0

% -

35.0

[1]

Weighted average of significant unobservable inputs

used to develop Level 3 fair value measurements

were calculated by relative fair value.

[2]

Loans held-in-portfolio in which haircuts were not applied

to external appraisals were excluded from this table.

[3]

Other real estate owned in which haircuts were not applied

to external appraisals were excluded from this table.

Effective the fourth quarter 2021, the mortgage

servicing rights fair value was provided by

a third-party valuation specialist. Refer to

Note 11 to the Consolidated Financial Statements for additional information on

MSRs.

The significant unobservable inputs used in the fair value measurement of the Corporation’s collateralized mortgage obligations and

interest-only collateralized mortgage obligation (reported as “other”), which are classified in the “trading” category, are yield,

constant prepayment rate, and weighted average life. Significant increases (decreases) in any of those inputs in isolation would

result in significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the constant

prepayment rate will generate a directionally opposite change in the weighted average life. For example, as the average life is

reduced by a higher constant prepayment rate, a lower yield will be realized, and when there is a reduction in the constant

prepayment rate, the average life of these collateralized mortgage obligations will extend, thus resulting in a higher yield.

The

significant unobservable inputs used in the fair value measurement of the Corporation’s mortgage servicing rights are constant

prepayment rates and discount rates. Increases in interest rates may result in lower prepayments. Discount rates vary according to

products and / or portfolios depending on the perceived risk. Increases in discount rates result in a lower fair value measurement

Following is

a description

of the

Corporation’s valuation

methodologies used

for assets

and liabilities

measured at

fair value.

The

disclosure requirements exclude certain financial instruments and all

non-financial instruments. Accordingly, the aggregate fair value

amounts of the financial instruments disclosed do

not represent management’s estimate of the underlying

value of the Corporation.

Trading account debt securities and debt securities available-for-sale

229

●

U.S. Treasury securities:

The fair value

of U.S. Treasury

notes is based

on yields that

are interpolated from the

constant

maturity treasury curve.

These securities are classified

as Level 2.

U.S. Treasury

bills are classified as

Level 1 given the

high volume of trades and pricing based on those

trades.

●

Obligations of U.S.

Government sponsored entities: The

Obligations of U.S. Government

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
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