Popular 10Q 2023 Q3 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

10-Q

[X]

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended

September 30, 2023

[ ]

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number:

001-34084

POPULAR, INC.

(Exact name of registrant as specified in its charter)

Puerto Rico

66-0667416

(State or other jurisdiction of Incorporation or

(IRS Employer Identification Number)

organization)

Popular Center Building

209 Muñoz Rivera Avenue

Hato Rey

Puerto Rico

00918

(Address of principal executive offices)

(Zip code)

(

787

)

765-9800

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

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 Stock Market

6.125% Cumulative Monthly Income Trust

Preferred Securities

BPOPM

The

NASDAQ Stock Market

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.

[X]

Yes

[

]

Indicate by

check mark

whether the registrant

has submitted electronically

every Interactive

Data File

required to

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).

[X]

Yes

[

]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,

smaller reporting company, or an emerging growth company.

See 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[

]

Yes

[X]

Indicate

the

number

outstanding

each

the

issuer’s

classes

common

stock,

the

latest

practicable date:

Common Stock, $0.01 par value,

72,154,356

shares outstanding as of November 7, 2023.

POPULAR INC

INDEX

Part I – Financial Information

Page

Item 1. Financial Statements

Unaudited Consolidated Statements of Financial Condition

at September 30, 2023

and

December 31, 2022

Unaudited Consolidated Statements of Operations for

the quarters

and nine months ended September 30, 2023

and 2022

Unaudited Consolidated Statements of Comprehensive

Income (Loss) for the

quarters and nine months ended September 30,

2023 and 2022

Unaudited Consolidated Statements of Changes in

Stockholders’ Equity for the

quarters and nine months ended September 30,

2023 and 2022

Unaudited Consolidated Statements of Cash Flows for

the nine months

ended September 30, 2023 and 2022

Notes to Unaudited Consolidated Financial Statements

Item 2. Management’s Discussion and Analysis of Financial

Condition and

Results of Operations

133

Item 3. Quantitative and Qualitative Disclosures about

Market Risk

182

Item 4. Controls and Procedures

182

Part II – Other Information

Item 1. Legal Proceedings

182

Item 1A. Risk Factors

182

Item 2. Unregistered Sales of Equity Securities and

Use of Proceeds

183

Item 3. Defaults Upon Senior Securities

183

Item 4. Mine Safety Disclosures

183

Item 5. Other Information

183

Item 6. Exhibits

183

Signatures

185

Forward-Looking Information

This

Form 10-Q

contains “forward-looking

statements” within

the meaning

of 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

inflation, 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

bank

failures

adverse

developments

other

banks

and

negative

media

coverage

the

banking industry in general on investor and depositor

sentiment regarding the stability and liquidity of

banks;

●

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 in

federal

bank regulatory

and supervisory

policies, including

required levels

capital, liquidity,

resolution-

related requirements and the impact of proposed

capital standards on our capital ratios;

●

additional or special

Federal Deposit Insurance

Corporation (“FDIC”) assessments, including

the special assessments

being proposed by the FDIC to recover the losses to the deposit insurance fund (“DIF”) resulting from the receiverships

of Silicon Valley Bank and Signature Bank;

●

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

II,

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

the Corporation’s Annual

Report on Form

10-K for the

year ended December 31,

2022 (the “2022

Form 10-K”), as

well as “Part

II,

Item 1A”

of our

Quarterly Reports

on Form

10-Q for

a discussion

of such

factors and

certain risks

and uncertainties

to which

the

Corporation is subject.

All forward-looking

statements included

in this

Form 10-Q

are based

upon information

available to

Popular as

of the

date of

this

Form 10-Q, 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.

POPULAR, INC.

CONSOLIDATED STATEMENTS

OF FINANCIAL CONDITION

(UNAUDITED)

[UNAUDITED]

September 30,

December 31,

(In thousands, except share information)

2023

2022

Assets:

Cash and due from banks

535,335

469,501

Money market investments:

Time deposits with other banks

6,389,437

5,614,595

Total money market investments

6,389,437

5,614,595

Trading account debt securities, at fair value:

Other trading account debt securities

30,988

27,723

Debt securities available-for-sale, at fair

value:

Pledged securities with creditors’ right to repledge

72,062

129,203

Other debt securities available-for-sale

17,057,796

17,675,171

Debt securities held-to-maturity, at amortized cost:

Pledged securities with creditors’ right to repledge

27,047

26,496

Other debt securities held-to-maturity

8,275,035

8,498,870

Debt securities held-to-maturity (fair

value 2023 - $

8,065,067

; 2022 - $

8,440,196

)

8,302,082

8,525,366

Less – Allowance for credit losses

6,057

6,911

Debt securities held-to-maturity, net

8,296,025

8,518,455

Equity securities (realizable value 2023 -

191,605

; 2022 - $

196,665

)

190,688

195,854

Loans held-for-sale, at fair value

5,239

5,381

Loans held-in-portfolio

34,369,775

32,372,925

Less – Unearned income

340,462

295,156

Allowance for credit losses

711,068

720,302

Total loans held-in-portfolio, net

33,318,245

31,357,467

Premises and equipment, net

534,384

498,711

Other real estate

82,322

89,126

Accrued income receivable

257,833

240,195

Mortgage servicing rights, at fair value

119,030

128,350

Other assets

2,032,565

1,847,813

Goodwill

804,428

827,428

Other intangible assets

10,559

12,944

Total assets

69,736,936

67,637,917

Liabilities and Stockholders’ Equity

Liabilities:

Deposits:

Non-interest bearing

15,201,374

15,960,557

Interest bearing

48,136,226

45,266,670

Total deposits

63,337,600

61,227,227

Assets sold under agreements to repurchase

93,071

148,609

Other short-term borrowings

365,000

Notes payable

1,004,649

886,710

Other liabilities

844,008

916,946

Total liabilities

65,279,328

63,544,492

Commitments and contingencies (Refer

to Note 21)

Stockholders’ equity:

Preferred stock,

30,000,000

shares authorized;

885,726

shares issued and outstanding (2022 -

885,726

)

22,143

Common stock, $

0.01

par value;

170,000,000

shares authorized;

104,740,311

shares issued (2022 -

104,657,522

) and

72,127,595

shares outstanding (2022 -

71,853,720

)

1,048

1,047

Surplus

4,797,364

4,790,993

Retained earnings

4,189,865

3,834,348

Treasury stock - at cost,

32,612,716

shares (2022 -

32,803,802

)

(2,018,870)

(2,030,178)

Accumulated other comprehensive loss, net

of tax

(2,533,942)

(2,524,928)

Total stockholders’ equity

4,457,608

4,093,425

Total liabilities and stockholders’ equity

69,736,936

67,637,917

The accompanying notes are an integral part of

these Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS

OF OPERATIONS

(UNAUDITED)

Quarters ended September 30,

Nine months ended September 30,

(In thousands, except per share information)

2023

2022

2023

2022

Interest income:

Loans

596,886

481,088

1,708,216

1,354,124

Money market investments

99,286

36,966

265,785

67,172

Investment securities

148,614

133,181

403,814

331,421

Total interest income

844,786

651,235

2,377,815

1,752,717

Interest expense:

Deposits

294,121

60,897

730,824

113,507

Short-term borrowings

1,478

921

5,987

1,249

Long-term debt

15,167

9,798

43,660

30,168

Total interest expense

310,766

71,616

780,471

144,924

Net interest income

534,020

579,619

1,597,344

1,607,793

Provision for credit losses

45,117

39,637

129,946

33,499

Net interest income after provision for credit losses

488,903

539,982

1,467,398

1,574,294

Non-interest income:

Service charges on deposit accounts

37,318

40,006

109,777

122,528

Other service fees

93,407

86,402

277,748

244,987

Mortgage banking activities (Refer to Note 10)

5,393

9,448

15,109

35,888

Net (loss) gain, including impairment on equity securities

(1,319)

(1,448)

1,165

(7,651)

Net gain (loss) on trading account debt securities

219

(274)

632

(946)

Net loss on sale of loans on loans held-for-sale, including

valuation adjustments

(44)

Adjustments

to indemnity reserves on loans sold

(187)

1,715

(31)

1,140

Other operating income

24,762

290,645

77,625

342,651

Total non-interest income

159,549

426,494

481,981

738,597

Operating expenses:

Personnel costs

193,152

193,843

583,380

529,627

Net occupancy expenses

28,100

27,420

81,304

78,357

Equipment expenses

8,905

8,735

26,878

25,798

Other taxes

8,590

15,966

41,290

47,461

Professional fees

38,514

47,662

122,077

122,884

Technology and software expenses

72,930

68,341

213,843

213,638

Processing and transactional services

37,899

32,368

108,609

94,358

Communications

4,220

3,858

12,483

11,028

Business promotion

23,075

24,348

67,029

60,784

FDIC deposit insurance

8,932

6,610

24,600

20,445

Other real estate owned (OREO) income

(5,189)

(2,444)

(10,197)

(12,963)

Other operating expenses

23,061

39,593

70,274

81,814

Amortization of intangibles

795

2,385

2,481

Goodwill impairment charge

23,000

9,000

23,000

9,000

Total operating expenses

465,984

476,095

1,366,955

1,284,712

Income before income tax

182,468

490,381

582,424

1,028,179

Income tax expense

45,859

67,986

135,676

182,677

Net Income

136,609

422,395

446,748

845,502

Net Income Applicable to Common Stock

136,256

422,042

445,689

844,443

Net Income per Common Share – Basic

1.90

5.71

6.22

11.09

Net Income per Common Share – Diluted

1.90

5.70

6.21

11.07

The accompanying notes are an integral part of

these Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

Quarters ended,

Nine months ended,

September 30,

(In thousands)

2023

2022

2023

2022

Net income

136,609

422,395

446,748

845,502

Other comprehensive (loss) income before

tax:

Foreign currency translation adjustment

(976)

7,206

(220)

10,346

Adjustment of pension and postretirement

benefit plans

2,030

Amortization of net losses of pension and

postretirement benefit plans

4,814

3,911

14,440

11,733

Unrealized holding losses on debt securities

arising during the period

(234,827)

(876,854)

(99,360)

(2,716,474)

Amortization of unrealized losses of debt

securities transfer from available-for-

sale to held-to-maturity

43,783

128,726

Unrealized net (losses) gains on cash flow

hedges

392

(30)

3,903

Reclassification adjustment for net (gains)

losses included in net income

828

(41)

(751)

Other comprehensive (loss) income before

tax

(187,206)

(864,517)

43,515

(2,689,213)

Income tax (expense) benefit

(18,301)

93,202

(52,529)

289,951

Total other comprehensive loss, net of tax

(205,507)

(771,315)

(9,014)

(2,399,262)

Comprehensive (loss) income, net of tax

(68,898)

(348,920)

437,734

(1,553,760)

Tax effect allocated to each component of other comprehensive

(loss) income:

Quarters ended

Nine months ended,

September 30,

(In thousands)

2023

2022

2023

2022

Adjustment of pension and postretirement

benefit plans

(761)

Amortization of net losses of pension and

postretirement benefit plans

(1,805)

(1,467)

(5,415)

(4,401)

Unrealized holding losses on debt securities

arising during the period

(7,740)

94,956

(21,396)

295,326

Amortization of unrealized losses of debt

securities transfer from available-for-

sale to held-to-maturity

(8,756)

(25,744)

Unrealized net (losses) gains on cash flow

hedges

(681)

Reclassification adjustment for net (gains)

losses included in net income

(310)

468

Income tax (expense) benefit

(18,301)

93,202

(52,529)

289,951

The accompanying notes are an integral

part of the Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

Accumulated

other

Common

Preferred

Retained

Treasury

comprehensive

(In thousands)

stock

Surplus

earnings

stock

loss

Total

Balance at June 30, 2022

1,046

22,143

4,576,478

3,311,951

(1,665,253)

(1,953,016)

4,293,349

Net income

422,395

Issuance of stock

1,550

Dividends declared:

Common stock

[1]

(39,973)

Preferred stock

(353)

Common stock purchases

[2]

74,118

(305,343)

(231,225)

Stock based compensation

362

410

Other comprehensive loss, net of tax

(771,315)

Balance at September 30, 2022

1,046

22,143

4,652,508

3,694,020

(1,970,548)

(2,724,331)

3,674,838

Balance at June 30, 2023

1,047

22,143

4,795,581

4,093,284

(2,018,611)

(2,328,435)

4,565,009

Net income

136,609

Issuance of stock

1,599

1,600

Dividends declared:

Common stock

[1]

(39,675)

Preferred stock

(353)

Common stock purchases

(250)

Stock based compensation

184

(9)

175

Other comprehensive loss, net of tax

(205,507)

Balance at September 30, 2023

1,048

22,143

4,797,364

4,189,865

(2,018,870)

(2,533,942)

4,457,608

[1]

Dividends declared per common share during the quarter

ended September 30, 2023 - $

0.55

(2022 - $

0.55

[2]

During July 2022,

the Corporation completed

a $

400

million accelerated

share repurchase transaction

with respect to

its common stock.

During

August 2022, the Corporation

entered into a $

231

million accelerated share

repurchase transaction with

respect to its common

stock. Both were

accounted for as treasury stock transactions. Refer to Note

18 for additional information.

POPULAR, INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

Accumulated

other

Common

Preferred

Retained

Treasury

comprehensive

(In thousands)

stock

Surplus

earnings

stock

loss

Total

Balance at December 31, 2021

1,046

22,143

4,650,182

2,973,745

(1,352,650)

(325,069)

5,969,397

Net income

845,502

Issuance of stock

4,285

Dividends declared:

Common stock

[1]

(124,168)

Preferred stock

(1,059)

Common stock purchases

[2]

(5,882)

(631,638)

(637,520)

Stock based compensation

3,923

13,740

17,663

Other comprehensive loss, net of tax

(2,399,262)

Balance at September 30, 2022

1,046

22,143

4,652,508

3,694,020

(1,970,548)

(2,724,331)

3,674,838

Balance at December 31, 2022

1,047

22,143

4,790,993

3,834,348

(2,030,178)

(2,524,928)

4,093,425

Cumulative effect of accounting change

28,752

Net income

446,748

Issuance of stock

4,716

4,717

Dividends declared:

Common stock

[1]

(118,924)

Preferred stock

(1,059)

Common stock purchases

(4,491)

Stock based compensation

1,655

15,799

17,454

Other comprehensive loss, net of tax

(9,014)

Balance at September 30, 2023

1,048

22,143

4,797,364

4,189,865

(2,018,870)

(2,533,942)

4,457,608

[1]

Dividends declared per common share during the nine months

ended September 30, 2023 - $

1.65

(2022 - $

1.65

[2]

During the

nine months

ended September

30, 2022,

the Corporation

completed a

400

million

accelerated share

repurchase transaction

with

respect to

its common

stock and

entered into

an additional

231

million accelerated

share repurchase

transaction

with respect

to its

common

stock. Both were accounted for as a treasury stock transaction.

Refer to Note 18 for additional information.

For the period ended

September 30,

Disclosure of changes in number of shares:

2023

2022

Preferred Stock:

Balance at beginning and end of period

885,726

Common Stock – Issued:

Balance at beginning of period

104,657,522

104,579,334

Issuance of stock

82,789

55,571

Balance at end of period

104,740,311

104,634,905

Treasury stock

(32,612,716)

(31,961,561)

Common Stock – Outstanding

72,127,595

72,673,344

The accompanying notes are an integral part of these Consolidated

Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS

OF CASH FLOWS

(UNAUDITED)

Nine months ended September 30,

(In thousands)

2023

2022

Cash flows from operating activities:

Net income

446,748

845,502

Adjustments to reconcile net income to net cash provided

by operating activities:

Provision for credit losses

129,946

33,499

Goodwill impairment charges

23,000

9,000

Amortization of intangibles

2,385

2,481

Depreciation and amortization of premises and equipment

43,180

41,207

Net accretion of discounts and amortization of premiums and

deferred fees

(22,495)

39,142

Interest capitalized on loans subject to the temporary payment

moratorium or loss mitigation alternatives

(7,956)

(9,249)

Share-based compensation

15,079

14,822

Impairment charges on right-of-use and long-lived assets

688

Fair value adjustments on mortgage servicing rights

11,135

(2,776)

Fair value adjustment for contingent consideration

(9,241)

Adjustments to indemnity reserves on loans sold

(1,140)

Earnings from investments under the equity method, net

of dividends or distributions

(17,387)

(22,011)

Deferred income tax (benefit) expense

(13,539)

50,460

(Gain) loss on:

Disposition of premises and equipment and other productive

assets

(9,744)

(7,221)

Proceeds from insurance claims

(145)

Sale of loans, including valuation adjustments on loans

held-for-sale and mortgage banking activities

177

374

Disposition of stock as part of the Evertec Transactions

(240,412)

Sale of foreclosed assets, including write-downs

(18,137)

(24,339)

Acquisitions of loans held-for-sale

(6,678)

(118,368)

Proceeds from sale of loans held-for-sale

35,286

51,468

Net originations on loans held-for-sale

(60,285)

(191,570)

Net decrease (increase) in:

Trading debt securities

29,415

338,166

Equity securities

(7,481)

3,633

Accrued income receivable

(17,638)

(21,236)

Other assets

(981)

46,812

Net increase (decrease) in:

Interest payable

8,009

(4,936)

Pension and other postretirement benefits obligation

11,985

(2,252)

Other liabilities

(100,887)

(9,095)

Total adjustments

26,275

(32,094)

Net cash provided by operating activities

473,023

813,408

Cash flows from investing activities:

Net (increase) decrease in money market investments

(775,597)

13,562,791

Purchases of investment securities:

Available-for-sale

(12,665,449)

(18,142,424)

Held-to-maturity

(8,615)

(1,879,443)

Equity

(18,279)

(34,029)

Proceeds from calls, paydowns, maturities and redemptions

of investment securities:

Available-for-sale

13,138,765

12,066,879

Held-to-maturity

308,129

9,185

Proceeds from sale of investment securities:

Equity

30,926

34,450

Net disbursements on loans

(1,609,387)

(1,762,828)

Proceeds from sale of loans

133,078

56,611

Acquisition of loan portfolios

(556,659)

(580,625)

Return of capital from equity method investments

249

Payments to acquire equity method investments

(1,500)

(1,625)

Proceeds from disposition of stock as part of the Evertec Transactions

219,883

Acquisition of premises and equipment

(133,598)

(67,887)

Proceeds from insurance claims

145

Proceeds from sale of:

Premises and equipment and other productive assets

6,620

8,963

Foreclosed assets

84,446

75,719

Net cash (used in) provided by investing activities

(2,066,726)

3,565,620

Cash flows from financing activities:

Net increase (decrease) in:

Deposits

2,085,956

(2,177,088)

Assets sold under agreements to repurchase

(55,538)

70,847

Other short-term borrowings

(365,000)

175,000

Payments of notes payable

(321,000)

(101,000)

Principal payments of finance leases

(3,557)

(2,363)

Proceeds from issuance of notes payable

437,411

Proceeds from issuance of common stock

4,716

4,285

Dividends paid

(119,715)

(121,190)

Net payments for repurchase of common stock

(414)

(631,749)

Payments related to tax withholding for share-based compensation

(4,077)

(5,771)

Net cash provided by (used in) financing activities

1,658,782

(2,789,029)

Net increase in cash and due from banks, and restricted

cash

65,079

1,589,999

Cash and due from banks, and restricted cash at beginning

of period

476,159

434,512

Cash and due from banks, and restricted cash at the end of

the period

541,238

2,024,511

The accompanying notes are an integral part of these Consolidated

Financial Statements.

Notes to Consolidated Financial

Statements

(Unaudited)

Note 1 -

Nature of operations

Note 2 -

Basis of presentation

Note 3 -

New accounting pronouncements

Note 4 -

Summary of significant accounting policies

Note 5 -

Restrictions on cash and due from banks and

certain securities

Note 6 -

Debt securities available-for-sale

Note 7 -

Debt securities held-to-maturity

Note 8 -

Loans

Note 9 -

Allowance for credit losses – loans held-in-

portfolio

Note 10 -

Mortgage banking activities

Note 11 -

Transfers of financial assets and mortgage

servicing assets

Note 12 -

Other real estate owned

Note 13 -

Other assets

Note 14 -

Goodwill and other intangible assets

Note 15 -

Deposits

Note 16 -

Borrowings

Note 17 -

Other liabilities

Note 18 -

Stockholders’ equity

Note 19 -

Other comprehensive loss

Note 20 -

Guarantees

Note 21 -

Commitments and contingencies

Note 22-

Non-consolidated variable interest entities

Note 23 -

Related party transactions

101

Note 24 -

Fair value measurement

103

Note 25 -

Fair value of financial instruments

111

Note 26 -

Net income per common share

114

Note 27 -

Revenue from contracts with customers

115

Note 28 -

Leases

118

Note 29 -

Pension and postretirement benefits

120

Note 30 -

Stock-based compensation

121

Note 31 -

Income taxes

124

Note 32 -

Supplemental disclosure on the consolidated

statements of cash flows

128

Note 33 -

Segment reporting

129

Note 1 – Nature of Operations

Popular,

Inc. (the

“Corporation” or

“Popular”) is

a diversified,

publicly-owned financial

holding company

subject to

the supervision

and

regulation

the

Board

Governors

the

Federal

Reserve

System.

The

Corporation

has

operations

Puerto

Rico,

the

mainland United

States (“U.S.”)

and the

U.S. and

British Virgin

Islands. In

Puerto Rico,

the Corporation

provides retail,

mortgage,

and

commercial

banking

services,

through

its

principal

banking

subsidiary,

Banco

Popular

Puerto

Rico

(“BPPR”),

well

investment

banking,

broker-dealer,

auto

and

equipment

leasing

and

financing,

and

insurance

services

through

specialized

subsidiaries. In

the U.S.

mainland, the

Corporation provides

retail, mortgage,

commercial banking

services, as

well as

equipment

leasing

and

financing,

through

its

New

York-chartered

banking

subsidiary,

Popular

Bank

(“PB”

“Popular

U.S.”),

which

has

branches located in New York, New Jersey, and Florida.

Note 2 – Basis of Presentation

Basis of Presentation

The consolidated interim financial statements have been prepared without audit. The Consolidated Statement of Financial Condition

data at

December 31,

2022 was

derived from

audited financial

statements. The

unaudited interim

financial statements

are, in

the

opinion

management,

fair

statement

the

results

for

the

periods

reported

and

include

all

necessary

adjustments,

all

normal recurring nature, for a fair statement of

such results.

Certain

information

and

note

disclosures

normally

included

financial

statements

prepared

accordance

with

accounting

principles

generally

accepted

the

United

States

America

have

been

condensed

omitted

from

the

unaudited

financial

statements

pursuant

the

rules

and

regulations

the

Securities

and

Exchange

Commission.

Accordingly,

these

financial

statements should be read in conjunction

with the audited Consolidated Financial Statements of the

Corporation for the year ended

December 31, 2022, included

in the 2022 Form

10-K. Operating results for

the interim periods disclosed herein

are not necessarily

indicative of the results that may be expected for

a full year or any future period.

The Corporation embarked on a

broad-based multi-year, technological and

business process transformation during the second

half

of 2022. The needs and expectations of

the Corporation’s clients, as well as

the competitive landscape, have evolved, requiring the

Corporation to

make

important

investments

its

technological infrastructure

and

adopt

agile

practices.

The

Corporation’s

technology and business transformation will be

a significant priority for the Corporation over the next

three years and beyond.

part

this

transformation,

the

Corporation

aims

expand

its

digital

capabilities,

modernize

its

technology

platform,

and

implement agile and

efficient business

processes across the

entire Corporation. 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 and

items

processing related expenses as standalone expense categories in the

accompanying Consolidated Statement of Operations. There

were no

changes to

the total

operating expenses

presented.

Prior periods

amount in

the Consolidated

Financial Statements

and

related disclosures have been reclassified to conform

to the current presentation.

The following table provides the detail of

the reclassifications for each respective quarter:

Quarter ended

Nine months ended

30-Sep-22

Financial statement line item

As reported

Adjustments

Adjusted

As reported

Adjustments

Adjusted

Equipment expenses

26,626

(17,891)

8,735

75,193

(49,395)

25,798

Professional fees

112,221

(64,559)

47,662

335,590

(212,706)

122,884

Technology and

software expenses

68,341

213,638

Processing and transactional services

32,368

94,358

Communications

6,224

(2,366)

3,858

18,364

(7,336)

11,028

Other operating expenses

55,486

(15,893)

39,593

120,373

(38,559)

81,814

Net effect on operating expenses

200,557

549,520

Use of Estimates in the Preparation of Financial Statements

The preparation of financial

statements in conformity with

accounting principles generally accepted in

the United States

of America

requires management to make

estimates and assumptions that

affect the reported

amounts of assets and

liabilities and contingent

assets

and

liabilities

the

date

the

financial

statements,

and

the

reported

amounts

revenues

and

expenses

during

the

reporting period. Actual results could differ from those estimates.

Note 3 - New accounting pronouncements

Recently Adopted Accounting Standards Updates

Standard

Description

Date of adoption

Effect on the financial statements

FASB ASU 2023-04,

Liabilities (Topic 405)

The

Financial Accounting

Standards Board

("FASB")

issued

Accounting

Standards

Update

(“ASU”)

2023-04

August

2023

which

amends

paragraphs

within

ASC

Topic

405

clarify

the

accounting

and

disclosure

for

obligations

safeguard

Crypto-Assets

held

entity

for

its

platform users.

August 2023

The

Corporation

was

not

impacted

the

adoption of

this

ASU

since

it does

not

hold

Crypto-Assets

for

its

platform

users.

FASB ASU 2023-03,

Presentation of Financial

Statements (Topic 205),

Income Statement—

Reporting Comprehensive

Income (Topic 220),

Distinguishing Liabilities

from Equity (Topic 480),

Equity (505), and

Compensation—Stock

Compensation (Topic 718)

The

FASB

issued

ASU

2023-03

July

2023 which

amends or

supersedes various

SEC

paragraphs

within

the

Codification

conform

past

SEC

announcements

and

guidance

which

updated

SAB

Topics

5.T,

14, and 6. B.

July 1, 2023

The

Corporation

was

not

impacted

the

adoption

this

ASU

since

codifies previous guidance.

FASB ASU 2022-05,

Financial Services -

Insurance (Topic 944)

Transition for Sold

Contracts

The

FASB

issued

ASU

2022-05

December 2022, which

allows an insurance

entity to make an

accounting policy election

applying

the

Long-Duration

Contracts

(LDTI) transition guidance

on a transaction-

by-transaction

basis

the

contracts

have

been

derecognized

because

sale

disposal

and

the

insurance

entity

has

significant

continuing

involvement

with

the

derecognized contract.

January 1, 2023

The

Corporation

was

not

impacted

the

adoption

ASU

2022-05

during

the

first

quarter

2023

since

does

not

hold

Long-Duration

Contracts

(LDTI).

FASB ASU 2022-04,

Liabilities—Supplier

Finance Programs

(Subtopic 405-50)

Disclosure of Supplier

Finance Program

Obligations

The

FASB

issued

ASU

2022-04

September 2022, which requires to disclose

information

about

the

use

supplier

finance

programs

connection

with

the

purchase of goods and services.

January 1, 2023

The

Corporation

was

not

impacted

the

adoption

ASU

2022-04

since

does

not

use

supplier

finance

programs.

Recently Adopted Accounting Standards Updates

Standard

Description

Date of adoption

Effect on the financial statements

FASB ASU 2022-02,

Financial Instruments—

Credit Losses (Topic 326)

Troubled Debt

Restructurings and

Vintage Disclosures

The

FASB

issued

ASU

2022-02

March

2022,

which

eliminates

the

accounting

guidance

for

troubled

debt

restructurings

(“TDRs”) in

Subtopic 310-40

Receivables—

Troubled

Debt

Restructurings

Creditors

and

requires

creditors

apply

the

loan

refinancing

and

restructuring

guidance

determine whether

a modification

results in

a new

loan or

a continuation

of an

existing

loan.

addition,

the

ASU

enhances

the

disclosure

requirements

for

certain

loan

refinancing

and

restructurings

creditors

when

borrower

experiencing

financial

difficulty

and

enhances

the

vintage

disclosure

requiring

the

disclosure

current-period

gross

write-offs

year

origination for financing

receivables and net

investments in leases.

January 1, 2023

The Corporation adopted

ASU 2022-02

during

the

first

quarter

2023.

The

adoption

this

standard

resulted

enhanced disclosure for

loans modified

borrowers

with

financial

difficulties

and

the

disclosure

period

gross

charge

offs

vintage

year.

The

Corporation

anticipates

that

there

will

be loans subject to disclosure under the

new standard that

did not qualify

under

the prior guidance

given the removal

the

concession

requirement

for

such

disclosures.

The

amended

guidance

eliminated the

requirement to

measure

the effect of the concession from a

loan

modification, for

which the

Corporation

used

discounted

cash

flow

(“DCF”)

model. The

impact of

discontinuing the

use

the

DCF model

measure the

concession resulted

in a

release of

the

allowance

for

credit

losses

("ACL")

million, mainly

related to

mortgage

loans

for

which

modifications

mostly

included

reduction

contractual

interest

rates

and

given

the

extended

maturity

term

these

loans,

this

resulted

increase

the

ACL

the

period

modification.

For

the

transition

method

the

recognition and measurement of TDRs,

the

Corporation

has

elected

apply

the modified

retrospective approach for

the

adoption

this

standard.

Accordingly,

this

presented

adjustment increase

of $

million, net

tax

effect,

the

beginning

balance

retained

earnings

January

2023.

FASB ASU 2022-01,

Derivatives and Hedging

(Topic 815) – Fair Value

Hedging—Portfolio Layer

Method

The

FASB

issued

ASU

2022-01

March

2022,

which

amends

ASC

Topic

815

allowing

non

prepayable

financial

assets

also

included

closed

portfolio

hedged

using

the

portfolio

layer

method.

This

amendment permits

an entity

apply

fair

value

hedging to

stated

amount

closed

portfolio

prepayable

and

non-

prepayable

financial

assets

without

considering

prepayment

risk

credit

risk

when measuring those assets.

January 1, 2023

The

Corporation

was

not

impacted

the

adoption

ASU

2022-01

since

does not hold derivatives designated as

fair value hedges.

FASB ASU 2021-08,

Business Combinations

(Topic 805) – Accounting

for Contract Assets and

Contract Liabilities from

Contracts with Customers

The FASB

issued ASU

2021-08 in

October

2021,

which

amends

ASC

Topic

805

requiring

contract

assets

and

contract

liabilities arising

from revenue

contract with

customers

recognized

accordance

with ASC

Topic

606 on

the acquisition date

instead of fair value.

January 1, 2023

The

Corporation

was

not

impacted

the adoption of ASU 2021-08, however,

will

consider

this

guidance

for

revenue

contracts

with

customers

recognized

part

business

combinations

entered

into

after

the effective date.

Accounting Standards Updates Not Yet Adopted

Standard

Description

Date of adoption

Effect on the financial statements

FASB ASU 2023-06,

Disclosure Improvements,

Codification Amendments

in Response to the SEC’s

Disclosure Update and

Simplification Initiative

The FASB

issued ASU

2023-06 in

October

2023

which

modifies

the

disclosure

presentation

requirements

various

subtopics

the

Codification

with

the

purpose of aligning U.S.

GAAP requirement

with those of the SEC under Regulation S-X

and S-K.

The date on which

the SEC removes

related disclosure

requirements from

Regulation S-X or

Regulation S-K. If by

June 30, 2027, the

SEC has not

removed the

applicable

requirement from

Regulation S-X or

Regulation S-K, the

pending content of

the related

amendment will be

removed from the

Codification and will

not become

effective for any

entity.

The Corporation

does not

expect to

impacted

the

adoption

this

ASU

since

currently

subject

SEC's

current

disclosure

and

presentation

requirements under Regulation S-X and

S-K.

FASB ASU 2023-05,

Business Combinations -

Joint Venture Formations

(Subtopic 805-60)

Recognition and initial

measurement

The

FASB

issued

ASU

2023-05

August

2023,

which

amends ASC

subtopic

805-60

to include specific

guidance about how

joint

ventures

should

recognize

and

initially

measure

assets

contributed

and

liabilities

assumed.

The

amendments

require

that

joint venture,

upon formation, will

recognize

and initially measure its assets and liabilities

at fair value.

January 1, 2025

The Corporation

does not

expect to

impacted by the adoption of this ASU.

FASB ASU 2023-02,

Investments—Equity

Method and Joint

Ventures (Topic 323) -

Accounting for

Investments in Tax Credit

Structures Using the

Proportional Amortization

Method

The

FASB

issued

ASU

2023-02

March

2023,

which

amend

topic

ASC

323

permitting

the

election

apply

the

proportional amortization method to account

for

tax

equity

investments

that

generate

income

tax

credits

through

investment

low-income-housing

tax

credit

(LIHTC)

structures

and

other

tax

credit

programs

certain

conditions

are

met.

The

ASU

also

eliminates

the

application

the

subtopic

323-740

LIHTC

investment

not

accounted

for

using

the

proportional

amortization

method

and

instead

requires

the use of other guidance.

January 1, 2024

The Corporation

is currently

evaluating

the

impact

that

the

adoption

this

guidance

will

have

its

financial

statements

and

presentation

and

disclosures.

Accounting Standards Updates Not Yet Adopted

Standard

Description

Date of adoption

Effect on the financial statements

FASB ASU 2023-01,

Leases (Topic 842),

Lessors – Common

Control Arrangements

The

FASB

issued

ASU

2023-01

March

2023,

which

amends

ASC

Topic

842

and

requires

amortize

leasehold

improvements

associated

with

common

control

leases

over

the

useful

life

the

leasehold

improvements

the

common

control group as long

as the lessee controls

the

use

the

underlying assets

through a

lease.

addition,

the

ASU

requires

companies

account

for

leasehold

improvements

associated

with

common

control leases as a transfer between entities

under

common

control

through

adjustments

equity

if,

and

when,

the

lessee

longer

controls

the

use

the

underlying asset.

January 1, 2024

The Corporation

does not

expect to

impacted

the

adoption

this

ASU

since

does not

hold common

control

leasehold

improvements,

however,

will consider this guidance to

determine

the

amortization

period

for

and

accounting

treatment

leasehold

improvements associated with common

control

leases acquired

after the

effective date.

For other recently issued Accounting Standards

Updates not yet effective, refer to Note 3 to

the Consolidated Financial Statements

included in the 2022 Form 10-K.

Note 4 – Summary of significant accounting

policies

The

accounting

and

financial

reporting

policies

Popular,

Inc.

and

its

subsidiaries

(the

“Corporation”) conform

with

accounting

principles generally accepted

in the

United States of

America and with

prevailing practices within

the financial services

industry.

description of the significant accounting and

financial reporting policies can be found on Note 2

to the 2022 Form 10-K.

In connection with the implementation of the Accounting Standards Update (“ASU”) 2022-02, the Corporation has modified its policy

related to

loan modifications.

As discussed

in Note

3, the

new accounting

guidance eliminates

the recognition

and measurement

principle of

TDRs. The

Corporation has

also made

changes to

certain of

its

accounting policies

related to

its

loans portfolio

and

allowance for credit losses in connection with

this accounting standards update.

modification is

subject to

disclosure under

the new

ASU when

the Corporation

separately concludes

that both

of the

following

conditions exist:

1) the

debtor is experiencing

financial difficulties 2)

the modification constitutes

a reduction

in the

interest rate

the loan, a payment extension, a forgiveness of principal, or a more-than-insignificant payment delay. Determination that a borrower

is experiencing

financial difficulties

involves a

degree of

judgment. The identification

of loan

modifications to

debtors with

financial

difficulties is critical in the determination of the adequacy

of the ACL.

The

ASU

also

eliminates

the

requirement to

use

DCF

approach

estimated

credit

losses

for

modified

loans

with

borrowers

experiencing financial difficulties. The

entity can apply

a methodology similar to

the one used for

loans that were not

modified. The

Corporation applied a modified retrospective transition method for the implementation of ASU 2022-02 which

resulted in a reduction

of approximately $

million, $

million net of tax, in the reserve which was recorded as an

adjustment to the beginning balance of

retained earnings.

A loan

modified with

financial difficulties

is typically

in non-accrual

status at

the time

of the

modification. These

loans continue

non-accrual status until the borrower has demonstrated a willingness

and ability to make the restructured loan payments (at

least six

months of sustained performance after the modification (or one year for loans providing for quarterly or semi-annual payments)) and

management has concluded that it is probable

that the borrower would not be in payment

default in the foreseeable future.

Refer

Note

the

Consolidated

Financial

Statements

for

additional

qualitative

information

loan

modifications

and

the

Corporation’s determination of the ACL.

Refer below for changes in accounting policies due

to the adoption of the new ASU and other

policy adoptions:

Loans

Effective on January 1, 2023,

newly originated mortgage loans held-for-sale are stated at fair

value, with changes recorded through

earnings.

Previously held-for-sale

were carried

the lower

its cost

or market

value. Fair

value is

generally determined

in the

aggregate and

is measured

based on

current market

prices for

similar loans,

outstanding investor

commitments, prices

of recent

sales

discounted

cash

flow

analyses

which

utilize

inputs

and

assumptions

which

are

believed

consistent

with

market

participants’ views.

Derivative instruments

Effective on

January 1,

2023, the

Corporation discontinued

the hedge

accounting treatment

of certain

forward contracts

for which

the

changes

fair

value

were

recorded,

net

taxes,

accumulated

other

comprehensive

income/(loss)

and

subsequently

reclassified to net

income (loss) in

the same

period that the

hedged transaction impacted

earnings. As a

result of this

change, the

changes in the fair

value of these forward contracts

are being recorded through net

income (loss). 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 at a specified price or yield. These

forward contracts are hedging a forecasted transaction

and thus qualify for cash flow hedge accounting.

Based

the

election

apply

fair

value

accounting

for

its

mortgage

loans

held

for

sale,

effective

January

2023,

the

Corporation discontinued

the

hedge accounting

since

the

changes

the

fair

value

the

loans

expected

offset

the

changes in the fair value of the forward

contract, both of which are now recorded through

net income (loss).

Note 5 - Restrictions on cash and due from

banks and certain securities

BPPR is

required by

regulatory agencies

to maintain

average reserve

balances with

the Federal

Reserve Bank

of New

York

(the

“Fed”) or

other banks.

Those required

average reserve

balances amounted

to $

2.6

billion at

September 30,

2023 (December

31,

2022

2.8

billion). Cash

and

due from

banks, as

well

other highly

liquid securities,

are

used to

cover

the required

average

reserve balances.

September

30,

2023,

the

Corporation

held

million

restricted

assets

the

form

funds

deposited

money

market

accounts, debt

securities available for

sale and

equity securities (December

31, 2022

- $

million).

The restricted

assets held

debt securities available for

sale and equity securities

consist primarily of assets

held for the Corporation’s

non-qualified retirement

plans and fund deposits guaranteeing possible liens

or encumbrances over the title of insured

properties.

Note 6 – Debt securities available-for-sale

The following tables present

the amortized cost, gross

unrealized gains and losses,

approximate fair value, weighted

average yield

and contractual maturities of debt securities available-for-sale

at September 30, 2023 and December 31,

2022.

At September 30, 2023

Gross

Weighted

Amortized

unrealized

Fair

average

(In thousands)

cost

gains

losses

value

yield

U.S. Treasury securities

Within 1 year

7,041,817

421

67,663

6,974,575

3.51

After 1 to 5 years

4,364,065

271,553

4,092,512

1.36

After 5 to 10 years

307,852

45,258

262,594

1.63

Total U.S. Treasury

securities

11,713,734

421

384,474

11,329,681

2.65

Collateralized mortgage obligations - federal agencies

After 1 to 5 years

19,312

1,163

18,149

1.53

After 5 to 10 years

22,371

1,857

20,514

2.26

After 10 years

112,566

13,222

99,351

2.54

Total collateralized

mortgage obligations - federal agencies

154,249

16,242

138,014

2.37

Mortgage-backed securities

Within 1 year

1,302

1,254

3.56

After 1 to 5 years

79,987

4,760

75,230

2.37

After 5 to 10 years

778,578

71,731

706,860

2.22

After 10 years

6,264,509

177

1,386,889

4,877,797

1.65

Total mortgage-backed

securities

7,124,376

193

1,463,428

5,661,141

1.72

Other

Within 1 year

1,022

3.99

Total other

1,022

3.99

Total debt securities

available-for-sale

[1]

18,993,381

621

1,864,144

17,129,858

2.30

[1]

Includes $

12.9

billion pledged to secure government and trust

deposits, assets sold under agreements to repurchase, credit

facilities and loan

servicing agreements that the secured parties are not permitted

to sell or repledge the collateral, of which $

.0 billion serve as collateral for

public funds.

The Corporation had unpledged Available

for Sale securities with a fair value of

4.2

billion that could be used to increase its

borrowing facilities.

At December 31, 2022

Gross

Weighted

Amortized

unrealized

Fair

average

(In thousands)

cost

gains

losses

value

yield

U.S. Treasury securities

Within 1 year

4,576,127

506

47,156

4,529,477

2.42

After 1 to 5 years

6,793,739

410,858

6,382,881

1.35

After 5 to 10 years

308,854

40,264

268,590

1.63

Total U.S. Treasury

securities

11,678,720

506

498,278

11,180,948

1.78

Collateralized mortgage obligations - federal agencies

After 1 to 5 years

3,914

213

3,701

1.77

After 5 to 10 years

47,979

3,428

44,551

1.73

After 10 years

127,639

10,719

116,944

2.53

Total collateralized

mortgage obligations - federal agencies

179,532

14,360

165,196

2.30

Mortgage-backed securities

After 1 to 5 years

74,328

3,428

70,911

2.33

After 5 to 10 years

866,757

58,997

807,803

2.16

After 10 years

6,762,150

932

1,184,626

5,578,456

1.61

Total mortgage-backed

securities

7,703,235

986

1,247,051

6,457,170

1.68

Other

After 1 to 5 years

1,062

1,060

3.98

Total other

1,062

1,060

3.98

Total debt securities

available-for-sale

[1]

19,562,549

1,516

1,759,691

17,804,374

1.75

[1]

Includes $

11.3

billion pledged to secure government and trust deposits,

assets sold under agreements to repurchase, credit facilities

and loan

servicing agreements that the secured parties are not permitted

to sell or repledge the collateral, of which $

10.3

billion serve as collateral for

public funds. The Corporation had unpledged Available

for Sale securities with a fair value of

6.4

billion that could be used to increase its

borrowing facilities.

The weighted

average yield

on debt

securities available-for-sale

is based

on amortized

cost; therefore,

does not

give

effect to

changes in fair value.

Securities

not

due

single

contractual

maturity

date,

such

mortgage-backed

securities

and

collateralized

mortgage

obligations,

are

classified

based

the

period

final

contractual

maturity.

The

expected

maturities

collateralized

mortgage

obligations, mortgage-backed securities

and certain

other securities

may differ

from their

contractual maturities

because they

may

be subject to prepayments or may be called

by the issuer.

There were

debt securities available-for-sale sold during the nine

months ended September 30, 2023 and 2022.

The

following

tables

present

the

Corporation’s

fair

value

and

gross

unrealized

losses

debt

securities

available-for-sale,

aggregated by investment category and length of

time that individual securities have been in a

continuous unrealized loss position at

September 30, 2023 and December 31, 2022.

At September 30, 2023

Less than 12 months

12 months or more

Total

Gross

Fair

unrealized

Fair

unrealized

Fair

unrealized

(In thousands)

value

losses

value

losses

value

losses

U.S. Treasury securities

350,471

8,546

7,111,545

375,928

7,462,016

384,474

Collateralized mortgage obligations - federal agencies

8,212

214

127,961

16,028

136,173

16,242

Mortgage-backed securities

50,837

1,571

5,595,532

1,461,857

5,646,369

1,463,428

Total debt securities

available-for-sale in an unrealized loss position

409,520

10,331

12,835,038

1,853,813

13,244,558

1,864,144

At December 31, 2022

Less than 12 months

12 months or more

Total

Gross

Fair

unrealized

Fair

unrealized

Fair

unrealized

(In thousands)

value

losses

value

losses

value

losses

U.S. Treasury securities

6,027,786

288,582

3,244,572

209,696

9,272,358

498,278

Collateralized mortgage obligations - federal agencies

139,845

10,655

22,661

3,705

162,506

14,360

Mortgage-backed securities

1,740,214

138,071

4,662,195

1,108,980

6,402,409

1,247,051

Other

Total debt securities

available-for-sale in an unrealized loss position

7,907,905

437,310

7,929,428

1,322,381

15,837,333

1,759,691

As of

September 30,

2023, the

portfolio of

available-for-sale debt

securities reflects

gross unrealized

losses of

1.9

billion, driven

mainly by fixed-rate U.S.

Treasury Securities and

mortgage-backed securities, which have been

impacted by a decline

in fair value

result

the

rising

interest

rate

environment.

The

portfolio

available-for-sale

debt

securities

comprised

mainly

U.S

Treasuries and obligations from the U.S. Government, its agencies or government sponsored entities, including FNMA, FHMLC and

GNMA. As discussed in

Note 2 to the

Consolidated Financial Statements on the

2022 Form 10-K, these

securities carry an explicit

implicit

guarantee from

the U.S.

Government, are

highly rated

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.

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

million recorded in AOCI. This

fair value

discount is

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.

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 September 30,

2023 and

December

31, 2022.

At September 30, 2023

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

597,876

9,036

588,840

2.55

After 1 to 5 years

7,516,523

6,900,125

193,838

6,706,287

1.39

After 5 to 10 years

817,006

730,757

26,819

703,938

1.60

Total U.S. Treasury

securities

8,931,405

8,228,758

229,693

7,999,065

1.49

Obligations of Puerto Rico, States and

political subdivisions

Within 1 year

4,820

4,807

4,792

6.17

After 1 to 5 years

20,191

154

20,037

266

19,838

3.80

After 5 to 10 years

845

817

808

5.80

After 10 years

39,946

5,862

34,084

2,301

3,092

33,293

1.41

Total obligations of

Puerto Rico, States and

political subdivisions

65,802

6,057

59,745

2,370

3,384

58,731

2.55

Collateralized mortgage obligations - federal

agencies

Within 1 year

6.44

After 10 years

1,547

251

1,296

2.87

Total collateralized

mortgage obligations -

federal agencies

1,562

251

1,311

2.90

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 [2]

9,004,729

8,302,082

6,057

8,296,025

2,370

233,328

8,065,067

1.50

[1]

Book value includes $

703

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 $

8.1

billion pledged to secure public and trust deposits that

the secured parties are not permitted to sell or

repledge the collateral.

The

Corporation had unpledged held-to-maturities securities with

a fair value of

167

million that could be used to increase

its borrowing facilities.

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

billion pledged to secure public and trust deposits that

the secured parties are not permitted to sell or repledge

the collateral. The

Corporation had unpledged held-to-maturities securities with

a fair value of

1.5

billion that could be used to increase its borrowing

facilities.

Debt 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.

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 on the 2022 Form

10-K, U.S. Treasury securities carry

an explicit

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.

September 30,

2023 and

December 31,

2022, 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 by the

issuing municipality (December 31,

2022 - $

million). In the

case of 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 September 30, 2023

At December 31, 2022

(In thousands)

Securities issued by Puerto Rico municipalities

Watch

2,255

13,735

Pass

16,565

10,925

Total

18,820

24,660

At September

30, 2023,

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, 2022 -

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 September 30,

2023, the average

refreshed

FICO score

for the

representative sample,

comprised of

the

nominal value

of the

securities, used

for the

loss

estimate was

709

(compared to

and

707

respectively,

at December

31, 2022).

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.

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 21

to the

Consolidated Financial

Statements

for additional

information on

the Corporation’s

exposure to

the Puerto

Rico Government.

September 30,

2023, the

portfolio of

“Obligations of

Puerto Rico,

States

and political

subdivisions” also

includes $

million in

securities

issued by

the HFA

for which

the

underlying source

payment is

U.S. Treasury

securities. The

Corporation applies

zero

-credit loss

assumption for

these securities,

and

no ACL

has been

established for

these securities

given that

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. Refer to Note 2 to the Consolidated

Financial Statements in the 2022 Form 10-K for

further details.

Delinquency status

At September 30, 2023 and December 31, 2022, 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 September 30, 2023 and September 30, 2022:

For the quarters ended September 30,

2023

2022

(In thousands)

Obligations of Puerto Rico, States and political subdivisions

Allowance for credit losses:

Beginning balance

6,145

7,495

Provision for credit losses (benefit)

(88)

(285)

Securities charged-off

Recoveries

Ending balance

6,057

7,210

For the nine months ended September 30,

2023

2022

(In thousands)

Obligations of Puerto Rico, States and political subdivisions

Allowance for credit losses:

Beginning balance

6,911

8,096

Provision for credit losses (benefit)

(854)

(886)

Securities charged-off

Recoveries

Ending balance

6,057

7,210

The

allowance

for

credit

losses

for

the

Obligations

Puerto

Rico,

States

and

political

subdivisions

includes

0.2

million

for

securities issued by municipalities of

Puerto Rico, and $

5.9

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 $

6.6

million, respectively, at

December

31, 2022).

Note 8 – Loans

For a

summary of

the accounting policies

related to loans,

interest recognition and

allowance for credit

losses refer to

Note 2

– to

the Consolidated Financial Statements included

in the 2022 Form 10-K.

During the

quarter and

nine months

ended September

30, 2023,

the Corporation

recorded purchases

(including repurchases)

mortgage loans amounting to

102

million and $

274

million, respectively,

including $

0.2

million and $

0.9

million in PCD

loans, and

consumer loans of

million and $

127

million, respectively.

During the quarter

and nine months

ended September 30,

2023, the

Corporation recorded purchases of $

million and $

162

million, respectively, in commercial loans.

During the

quarter and

nine months

ended September

30, 2022,

the Corporation

recorded purchases

(including repurchases)

mortgage

loans

amounting

million

and

219

million,

respectively,

including

0.3

million

and

million

PCD

loans,

respectively,

and

consumer

loans

135

million

and

349

million,

respectively.

During

the

quarter

and

nine

months

ended

September 30, 2022, the Corporation recorded purchases

of $

106

million and $

129

million, respectively, in commercial loans.

The

Corporation

performed

whole-loan

sales

involving

approximately

million

and

million

residential

mortgage

loans

during the

quarter and

nine months

ended September

30, 2023,

respectively (September

30, 2022

- $

million and

million,

respectively).

During

the

quarter

and

nine

months

ended

September

30,

2023,

the

Corporation

performed

sales

commercial

loans, including loan participations amounting to $

million and $

million, respectively (September 30, 2022 - $

million and $

million, respectively). During the quarter and nine months ended September 30, 2023, the Corporation performed

sales of consumer

loans amounting to $

million respectively.

Also, the

Corporation securitized

approximately $

million and

million of

mortgage loans

into Government

National Mortgage

Association (“GNMA”) mortgage-backed securities

during the quarter

and nine months

ended September 30,

2023 (for the

quarter

and nine months ended September 30, 2022 -

million and $

169

million, respectively).

Furthermore, the Corporation securitized

approximately $

million and $

million of mortgage loans into Federal National Mortgage

Association (“FNMA”) mortgage-backed

securities during the quarter and nine months ended September 30, 2023, respectively (September 30, 2022 - $

million and $

117

million, respectively).

Also, the

Corporation did

t securitize

any mortgage

loans into

Federal Home

Loan Mortgage

Corporation

(“FHLMC”) mortgage-backed securities during the nine months ended September 30, 2023 (September 30, 2022 -

million for the

nine months ended).

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

September 30, 2023 and December 31, 2022.

September 30, 2023

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

4,407

176

184

4,767

290,047

294,814

184

Commercial real estate:

Non-owner occupied

1,274

15,330

16,604

2,932,277

2,948,881

15,330

Owner occupied

817

827

35,089

36,733

1,370,820

1,407,553

35,089

Commercial and industrial

4,022

1,728

24,733

30,483

4,299,335

4,329,818

21,624

3,109

Construction

6,578

163,929

170,507

6,578

Mortgage

241,962

100,679

430,430

773,071

5,516,197

6,289,268

187,443

242,987

Leasing

17,915

4,574

6,842

29,331

1,668,783

1,698,114

6,842

Consumer:

Credit cards

11,218

8,133

17,719

37,070

1,040,341

1,077,411

17,719

Home equity lines of credit

2,448

2,474

Personal

19,586

12,476

18,582

50,644

1,712,358

1,763,002

18,582

Auto

89,453

23,019

40,268

152,740

3,480,456

3,633,196

40,268

Other

567

388

2,152

3,107

144,425

147,532

1,885

267

Total

391,247

152,000

597,907

1,141,154

22,621,416

23,762,570

333,825

264,082

September 30, 2023

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

1,332

404

1,736

2,031,883

2,033,619

404

Commercial real estate:

Non-owner occupied

2,628

734

3,362

2,082,887

2,086,249

734

Owner occupied

1,110

923

3,877

5,910

1,631,442

1,637,352

3,877

Commercial and industrial

3,000

464

3,709

7,173

2,190,091

2,197,264

3,579

130

Construction

751,605

Mortgage

946

22,313

11,980

35,239

1,260,604

1,295,843

11,980

Consumer:

Credit cards

Home equity lines of

credit

1,045

335

4,085

5,465

59,560

65,025

4,085

Personal

2,581

1,716

2,637

6,934

182,232

189,166

2,637

Other

113

402

515

10,088

10,603

402

Total

12,755

25,751

27,828

66,334

10,200,409

10,266,743

27,698

130

September 30, 2023

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

5,739

176

588

6,503

2,321,930

2,328,433

588

Commercial real estate:

Non-owner occupied

3,902

16,064

19,966

5,015,164

5,035,130

16,064

Owner occupied

1,927

1,750

38,966

42,643

3,002,262

3,044,905

38,966

Commercial and industrial

7,022

2,192

28,442

37,656

6,489,426

6,527,082

25,203

3,239

Construction

6,578

915,534

922,112

6,578

Mortgage

[1]

242,908

122,992

442,410

808,310

6,776,801

7,585,111

199,423

242,987

Leasing

17,915

4,574

6,842

29,331

1,668,783

1,698,114

6,842

Consumer:

Credit cards

11,218

8,133

17,719

37,070

1,040,358

1,077,428

17,719

Home equity lines of credit

1,071

335

4,085

5,491

62,008

67,499

4,085

Personal

22,167

14,192

21,219

57,578

1,894,590

1,952,168

21,219

Auto

89,453

23,019

40,268

152,740

3,480,456

3,633,196

40,268

Other

680

388

2,554

3,622

154,513

158,135

2,287

267

Total

404,002

177,751

625,735

1,207,488

32,821,825

34,029,313

361,523

264,212

[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.

These balances include $

115

million of residential mortgage loans insured by

FHA or guaranteed by the VA that

are no

longer accruing interest as of September 30, 2023. 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 $

340

million in unearned income and exclude $

million in loans held-for-sale.

[3]

Includes $

13.7

billion pledged to secure credit facilities and public funds

that the secured parties are not permitted to sell or repledge

the collateral,

of which $

6.6

billion were pledged at the Federal Home Loan Bank

("FHLB") as collateral for borrowings and $

7.1

billion at the Federal Reserve

Bank ("FRB") for discount window borrowings. The Corporation

had an available borrowing facility with the FHLB and

the discount window of

Federal Reserve Bank of New York

of $

3.7

billion and $

4.6

billion, respectively, as of September

30, 2023.

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

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 FHA or guaranteed

by the VA as accruing loans

past due

90 days or more as opposed to non-performing since

the principal repayment is insured.

These balances 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. The Corporation

had an available borrowing facility with the FHLB and

the discount window of

Federal Reserve Bank of New York

of $

2.1

billion and $

1.4

billion, respectively, as of December

31, 2022.

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 September 30,

2023, mortgage loans held-in-portfolio

include $

2.1

billion (December 31, 2022

- $

2.0

billion) of loans

insured by

the

FHA,

guaranteed by

the

which $

0.2

billion

(December 31,

2022

0.3

billion)

are

days

past

due.

The

portfolio of guaranteed loans includes

115

million of residential mortgage loans

in Puerto Rico that

are no longer accruing

interest

as of September 30, 2023

(December 31, 2022 - $

190

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 September 30, 2023 (December

31, 2022 - $

million).

Loans with

a delinquency

status of

90 days

past due

as of

September 30,

2023 include

million in

loans previously

pooled into

GNMA securities (December 31, 2022 -

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 following tables present the amortized cost basis

of non-accrual loans as of September 30, 2023

and December 31, 2022 by

class of loans:

September 30, 2023

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

184

404

588

Commercial real estate non-owner occupied

9,577

5,753

734

9,577

6,487

Commercial real estate owner occupied

24,463

10,626

3,877

28,340

10,626

Commercial and industrial

8,504

13,120

3,579

8,504

16,699

Construction

6,578

Mortgage

90,611

96,832

508

11,472

91,119

108,304

Leasing

294

6,548

294

6,548

Consumer:

HELOCs

4,085

Personal

4,562

14,020

2,637

4,562

16,657

Auto

1,662

38,606

1,662

38,606

Other

263

1,622

402

263

2,024

Total

139,936

193,889

4,385

23,313

144,321

217,202

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

Loans in non-accrual status with no allowance at September 30, 2023 include $

144

million in collateral dependent loans (December

31,

2022 -

177

million). The

Corporation recognized

million in

interest income

on non-accrual

loans

during the

nine months

ended September 30, 2023 (September 30, 2022

- $

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 September

30, 2023

and December

31,

2022:

September 30, 2023

(In thousands)

Real Estate

Auto

Equipment

Accounts

Receivables

Other

Total

BPPR

Commercial multi-family

1,289

Commercial real estate:

Non-owner occupied

169,357

Owner occupied

30,507

Commercial and industrial

1,086

19,025

20,111

Construction

8,747

Mortgage

100,127

Leasing

1,103

Consumer:

Personal

4,741

Auto

11,941

Other

310

Total BPPR

315,854

13,044

19,335

348,233

Popular U.S.

Commercial real estate:

Owner occupied

3,877

Commercial and industrial

160

1,400

1,560

Construction

5,309

Mortgage

1,073

Total Popular U.S.

10,259

160

1,400

11,819

Popular, Inc.

Commercial multi-family

1,289

Commercial real estate:

Non-owner occupied

169,357

Owner occupied

34,384

Commercial and industrial

1,086

160

20,425

21,671

Construction

14,056

Mortgage

101,200

Leasing

1,103

Consumer:

Personal

4,741

Auto

11,941

Other

310

Total Popular,

Inc.

326,113

13,044

160

20,735

360,052

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

Purchased Credit Deteriorated (PCD) Loans

The Corporation has purchased loans during

the quarter and nine months ended September 30,

2023 and 2022, 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)

For the quarter ended

September 30, 2023

For the nine months

ended September 30,

2023

Purchase price of loans at acquisition

227

759

Allowance for credit losses at acquisition

Non-credit discount / (premium) at acquisition

Par value of acquired loans at acquisition

236

855

(In thousands)

For the quarter ended

September 30, 2022

For the nine months

ended September 30,

2022

Purchase price of loans at acquisition

247

2,840

Allowance for credit losses at acquisition

841

Non-credit discount / (premium) at acquisition

131

Par value of acquired loans at acquisition

312

3,812

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 ACL

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

the

allowance

recorded

credit

loss

expense.

The

provision

for

credit

losses

recorded

current

operations

based

this

methodology.

Loan

losses

are

charged

and

recoveries

are

credited

the

ACL.

The

Corporation’s

modeling framework includes competing

risk models that

generate lifetime default and

prepayment estimates as well

as other loan

level techniques to estimate loss severity.

These models combine credit risk factors, which include the

impact of loan modifications,

with macroeconomic expectations to derive the

lifetime expected loss.

part

the

Corporation’s

model

governance

procedures

new

model

was

implemented

for

the

U.S

commercial

real

estate

segment. The

new model

enhances techniques used

to capture

default activity

within the

Corporation’s geographical footprint.

part

the

implementation

analysis

management

evaluated

the

credit

metrics

the

portfolio

such

risk

ratings,

delinquency

levels, and low exposure to

the commercial office sector.

Qualitative reserves continue to be

maintained to address risks within

the

U. S.

commercial real

estate segment. The

new model

including qualitative reserve

accounted for

million of

PB’s reduction

ACL.

September

30,2023,

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

quarterly

basis

part

the

ACL’s

governance process.

The

baseline

scenario

continues

assigned

the

highest probability, followed by the

pessimistic scenario, and then the optimistic scenario. The Corporation evaluates, at least on

annual basis,

the assumptions

tied to

the CECL

accounting framework.

These include

the reasonable

and supportable

period as

well as the reversion window.

The

2023

annualized GDP

growth in

the

baseline scenario

improved to

1.7%

and

2.0%

for

Puerto

Rico

and

the

United

States,

respectively, compared to 1.5% and 1.6%

in the previous quarter. The 2023 forecasted average unemployment

rate for Puerto Rico

improved to

6.1% from

6.3% in

the previous

forecast, while

in the

United States

unemployment levels

remained at

3.6%, stable

when compared to the previous forecast.

GDP growth

is expected

to slow

during 2024

for both

regions, when

compared to

2023, as

a result

of the

Fed’s monetary

policy.

2024 GDP growth is expected to

be 0.90% for Puerto Rico and

1.25% for the United States. The average

2024 unemployment rate

is expected to increase to 6.80% in Puerto Rico

and 4.03% in the United States.

The following tables present the changes in

the ACL of loans held-in-portfolio and

unfunded commitments for the quarters and nine

months ended September 30, 2023 and 2022.

For the quarter ended September 30, 2023

BPPR

Provision for

Allowance for

Beginning

credit losses

credit losses -

Ending

(In thousands)

Balance

(benefit)

PCD Loans

Charge-offs

Recoveries

Balances

Allowance for credit losses - loans:

Commercial

Commercial multi-family

4,787

(1,306)

3,481

Commercial real estate non-owner occupied

53,366

(326)

(27)

195

53,208

Commercial real estate owner occupied

41,901

(242)

(446)

280

41,493

Commercial and industrial

81,637

(4,605)

(2,311)

12,858

87,579

Total Commercial

181,691

(6,479)

(2,784)

13,333

185,761

Construction

9,554

(1,486)

(2,611)

5,457

Mortgage

82,899

(6,808)

(62)

3,862

79,900

Leasing

13,927

(2,287)

(2,292)

850

10,198

Consumer

Credit cards

71,408

9,773

(10,865)

2,234

72,550

Home equity lines of credit

(39)

(43)

Personal

96,046

28,964

(19,260)

1,957

107,707

Auto

134,247

30,880

(14,553)

4,862

155,436

Other

6,240

1,499

(494)

193

7,438

Total Consumer

308,037

71,077

(45,215)

9,319

343,218

Total - Loans

596,108

54,017

(52,964)

27,364

624,534

Allowance for credit losses - unfunded commitments:

Commercial

5,288

(400)

4,888

Construction

3,110

(1,768)

1,342

Ending balance - unfunded commitments [1]

8,398

(2,168)

6,230

[

]

[1] Allowance for credit losses of unfunded commitments

is presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

For the quarter ended September 30, 2023

Popular U.S.

Provision for

Beginning

credit losses -

Ending

(In thousands)

Balance

(benefit)

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

21,392

(9,651)

11,742

Commercial real estate non-owner occupied

18,350

(4,475)

13,941

Commercial real estate owner occupied

9,506

(1,688)

(1,218)

6,616

Commercial and industrial

18,014

(1,109)

(1,228)

329

16,006

Total Commercial

67,262

(16,923)

(2,446)

412

48,305

Construction

1,778

3,736

5,514

Mortgage

13,194

(1,252)

12,004

Consumer

Home equity lines of credit

2,074

238

(224)

212

2,300

Personal

19,782

3,659

(5,636)

604

18,409

Other

(43)

Total Consumer

21,858

3,936

(5,903)

820

20,711

Total - Loans

104,092

(10,503)

(8,349)

1,294

86,534

Allowance for credit losses - unfunded commitments:

Commercial

1,348

197

1,545

Construction

1,797

3,658

5,455

Consumer

Ending balance - unfunded commitments [1]

3,195

3,859

7,054

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

For the quarter ended September 30, 2023

Popular Inc.

Provision for

Allowance

for

Beginning

credit losses

credit losses -

Ending

(In thousands)

Balance

(benefit)

PCD Loans

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

26,179

(10,957)

15,223

Commercial real estate non-owner occupied

71,716

(4,801)

(27)

261

67,149

Commercial real estate owner occupied

51,407

(1,930)

(1,664)

296

48,109

Commercial and industrial

99,651

(5,714)

(3,539)

13,187

103,585

Total Commercial

248,953

(23,402)

(5,230)

13,745

234,066

Construction

11,332

2,250

(2,611)

10,971

Mortgage

96,093

(8,060)

(62)

3,924

91,904

Leasing

13,927

(2,287)

(2,292)

850

10,198

Consumer

Credit cards

71,408

9,773

(10,865)

2,234

72,550

Home equity lines of credit

2,170

199

(267)

285

2,387

Personal

115,828

32,623

(24,896)

2,561

126,116

Auto

134,247

30,880

(14,553)

4,862

155,436

Other

6,242

1,538

(537)

197

7,440

Total Consumer

329,895

75,013

(51,118)

10,139

363,929

Total - Loans

700,200

43,514

(61,313)

28,658

711,068

Allowance for credit losses - unfunded commitments:

Commercial

6,636

(203)

6,433

Construction

4,907

1,890

6,797

Consumer

Ending balance - unfunded commitments [1]

11,593

1,691

13,284

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

For the nine months ended September 30, 2023

BPPR

Impact of

Provision for

Allowance for

Net write

down

Beginning

Adopting

credit losses

credit losses -

Ending

(In thousands)

Balance

ASU 2022-02

(benefit)

PCD Loans

Charge-off

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

5,210

(1,730)

3,481

Commercial real estate non-owner occupied

52,475

860

(636)

509

53,208

Commercial real estate owner occupied

48,393

(1,161)

(7,409)

(525)

2,195

41,493

Commercial and industrial

68,217

(552)

8,378

(4,979)

16,515

87,579

Total Commercial

174,295

(1,713)

(6,140)

19,220

185,761

Construction

2,978

5,090

(2,611)

5,457

Mortgage

117,344

(33,556)

(15,113)

(1,205)

12,343

79,900

Leasing

20,618

(35)

(7,023)

(6,249)

2,887

10,198

Consumer

Credit cards

58,670

35,901

(27,998)

6,578

(601)

72,550

Home equity lines of credit

103

(107)

(111)

202

Personal

96,369

(7,020)

60,347

(49,441)

7,452

107,707

Auto

129,735

(21)

45,108

(34,770)

15,384

155,436

Other

15,433

3,297

(11,855)

563

7,438

Total Consumer

300,310

(7,041)

144,546

(124,175)

30,179

(601)

343,218

Total - Loans

615,545

(42,345)

127,599

(140,380)

64,629

(601)

624,534

Allowance for credit losses - unfunded commitments:

Commercial

4,336

552

4,888

Construction

2,022

(680)

1,342

Ending balance - unfunded commitments [1]

6,358

(128)

6,230

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

For the nine months ended September 30, 2023

Popular U.S.

Impact of

Provision for

Beginning

Adopting

credit losses -

Ending

(In thousands)

Balance

ASU 2022-02

(benefit)

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

21,101

(9,363)

11,742

Commercial real estate non-owner occupied

19,065

(7,108)

1,984

13,941

Commercial real estate owner occupied

8,688

(738)

(1,395)

6,616

Commercial and industrial

12,227

5,943

(3,808)

1,644

16,006

Total Commercial

61,081

(11,266)

(5,203)

3,693

48,305

Construction

1,268

4,246

5,514

Mortgage

17,910

(2,098)

(3,993)

185

12,004

Consumer

Credit cards

(1)

Home equity lines of credit

2,439

(419)

699

2,300

Personal

22,057

(1,140)

10,019

(14,093)

1,566

18,409

Other

134

(143)

Total Consumer

24,498

(1,140)

9,735

(14,656)

2,274

20,711

Total - Loans

104,757

(3,238)

(1,278)

(19,859)

6,152

86,534

Allowance for credit losses - unfunded commitments:

Commercial

1,175

370

1,545

Construction

1,184

4,271

5,455

Consumer

(34)

Ending balance - unfunded commitments [1]

2,447

4,607

7,054

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

For the nine months ended September 30, 2023

Popular Inc.

Impact

Provision for

Allowance

for

Net write

down

Beginning

of adopting

credit losses

credit losses -

Ending

(In thousands)

Balance

ASU 2022-02

(benefit)

PCD Loans

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

26,311

(11,093)

15,223

Commercial real estate non-owner occupied

71,540

(6,248)

(636)

2,493

67,149

Commercial real estate owner occupied

57,081

(1,161)

(8,147)

(1,920)

2,256

48,109

Commercial and industrial

80,444

(552)

14,321

(8,787)

18,159

103,585

Total Commercial

235,376

(1,713)

(11,167)

(11,343)

22,913

234,066

Construction

4,246

9,336

(2,611)

10,971

Mortgage

135,254

(35,654)

(19,106)

(1,205)

12,528

91,904

Leasing

20,618

(35)

(7,023)

(6,249)

2,887

10,198

Consumer

Credit cards

58,670

35,902

(27,999)

6,578

(601)

72,550

Home equity lines of credit

2,542

(526)

(530)

901

2,387

Personal

118,426

(8,160)

70,366

(63,534)

9,018

126,116

Auto

129,735

(21)

45,108

(34,770)

15,384

155,436

Other

15,435

3,431

(11,998)

572

7,440

Total Consumer

324,808

(8,181)

154,281

(138,831)

32,453

(601)

363,929

Total - Loans

720,302

(45,583)

126,321

(160,239)

70,781

(601)

711,068

Allowance for credit losses - unfunded commitments:

Commercial

5,511

922

6,433

Construction

3,206

3,591

6,797

Consumer

(34)

Ending balance - unfunded commitments [1]

8,805

4,479

13,284

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

For the quarter ended September 30, 2022

BPPR

Provision for

Allowance for

Beginning

credit losses

credit losses -

Ending

(In thousands)

Balance

(benefit)

PCD Loans

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

3,522

682

4,204

Commercial real estate non-owner occupied

50,393

2,689

368

53,450

Commercial real estate owner occupied

49,472

(5,438)

(24)

2,419

46,429

Commercial and industrial

50,160

9,145

(4,794)

3,181

57,692

Total Commercial

153,547

7,078

(4,818)

5,968

161,775

Construction

3,074

1,181

4,255

Mortgage

130,030

(11,648)

(1,720)

3,885

120,606

Leasing

19,037

2,115

(2,191)

853

19,814

Consumer

Credit cards

45,339

12,353

(6,669)

2,186

53,209

Home equity lines of credit

(128)

129

Personal

74,799

17,139

(9,963)

1,736

83,711

Auto

137,222

(770)

(11,238)

3,863

129,077

Other

17,439

1,374

(610)

193

18,396

Total Consumer

274,889

29,968

(28,480)

8,107

284,484

Total - Loans

580,577

28,694

(37,209)

18,813

590,934

Allowance for credit losses - unfunded commitments:

Commercial

2,032

868

2,900

Construction

1,534

349

1,883

Ending balance - unfunded commitments [1]

3,566

1,217

4,783

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

For the quarter ended September 30, 2022

Popular U.S.

Provision for

Beginning

credit losses

Ending

(In thousands)

Balance

(benefit)

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

20,571

1,138

21,717

Commercial real estate non-owner occupied

14,284

11,187

25,473

Commercial real estate owner occupied

9,076

(120)

8,982

Commercial and industrial

12,152

(717)

(720)

1,195

11,910

Total Commercial

56,083

11,488

(720)

1,231

68,082

Construction

3,839

(1,895)

1,944

Mortgage

18,275

(370)

17,928

Consumer

Home equity lines of credit

3,455

(1,340)

(47)

954

3,022

Personal

19,520

2,901

(1,528)

291

21,184

Other

(48)

Total Consumer

22,976

1,602

(1,623)

1,253

24,208

Total - Loans

101,173

10,825

(2,343)

2,507

112,162

Allowance for credit losses - unfunded commitments:

Commercial

1,317

(201)

1,116

Construction

1,961

(650)

1,311

Consumer

Ending balance - unfunded commitments [1]

3,338

(814)

2,524

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

For the quarter ended September 30, 2022

Popular Inc.

Provision for

Allowance for

Beginning

credit losses

credit losses -

Ending

(In thousands)

Balance

(benefit)

PCD Loans

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

24,093

1,820

25,921

Commercial real estate non-owner occupied

64,677

13,876

370

78,923

Commercial real estate owner occupied

58,548

(5,558)

(24)

2,445

55,411

Commercial and industrial

62,312

8,428

(5,514)

4,376

69,602

Total Commercial

209,630

18,566

(5,538)

7,199

229,857

Construction

6,913

(714)

6,199

Mortgage

148,305

(12,018)

(1,720)

3,908

138,534

Leasing

19,037

2,115

(2,191)

853

19,814

Consumer

Credit cards

45,339

12,353

(6,669)

2,186

53,209

Home equity lines of credit

3,545

(1,468)

(47)

1,083

3,113

Personal

94,319

20,040

(11,491)

2,027

104,895

Auto

137,222

(770)

(11,238)

3,863

129,077

Other

17,440

1,415

(658)

201

18,398

Total Consumer

297,865

31,570

(30,103)

9,360

308,692

Total - Loans

681,750

39,519

(39,552)

21,320

703,096

Allowance for credit losses - unfunded commitments:

Commercial

3,349

667

4,016

Construction

3,495

(301)

3,194

Consumer

Ending balance - unfunded commitments [1]

6,904

403

7,307

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial

Condition.

For the nine months ended September 30, 2022

BPPR

Provision for

Allowance for

Beginning

credit losses

credit losses -

Ending

(In thousands)

Balance

(benefit)

PCD Loans

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

3,050

1,154

4,204

Commercial real estate non-owner occupied

45,211

7,024

(30)

1,245

53,450

Commercial real estate owner occupied

54,176

(13,907)

(977)

7,137

46,429

Commercial and industrial

49,491

6,784

(5,660)

7,077

57,692

Total Commercial

151,928

1,055

(6,667)

15,459

161,775

Construction

1,641

1,803

811

4,255

Mortgage

138,286

(28,129)

841

(4,408)

14,016

120,606

Leasing

17,578

3,807

(4,094)

2,523

19,814

Consumer

Credit cards

43,499

21,688

(18,770)

6,792

53,209

Home equity lines of credit

(213)

(164)

370

Personal

71,022

32,353

(25,069)

5,405

83,711

Auto

154,498

(10,793)

(26,766)

12,138

129,077

Other

15,612

3,590

(1,555)

749

18,396

Total Consumer

284,729

46,625

(72,324)

25,454

284,484

Total - Loans

594,162

25,161

841

(87,493)

58,263

590,934

Allowance for credit losses - unfunded commitments:

Commercial

1,751

1,149

2,900

Construction

2,388

(505)

1,883

Ending balance - unfunded commitments [1]

4,139

644

4,783

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

For the nine months ended September 30, 2022

Popular U.S.

Provision for

Beginning

credit losses

Ending

(In thousands)

Balance

(benefit)

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

25,418

(3,721)

21,717

Commercial real estate non-owner occupied

22,246

3,208

25,473

Commercial real estate owner occupied

6,053

2,681

248

8,982

Commercial and industrial

10,160

1,036

(1,244)

1,958

11,910

Total Commercial

63,877

3,204

(1,244)

2,245

68,082

Construction

4,722

(3,910)

1,132

1,944

Mortgage

16,192

1,756

(68)

17,928

Consumer

Credit cards

(10)

Home equity lines of credit

3,708

(2,974)

(99)

2,387

3,022

Personal

12,700

11,604

(3,985)

865

21,184

Other

144

(172)

Total Consumer

16,413

8,764

(4,256)

3,287

24,208

Total - Loans

101,204

9,814

(5,568)

6,712

112,162

Allowance for credit losses - unfunded commitments:

Commercial

1,384

(268)

1,116

Construction

2,337

(1,026)

1,311

Consumer

Ending balance - unfunded commitments [1]

3,758

(1,234)

2,524

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

For the nine months ended September 30, 2022

Popular Inc.

Provision for

Allowance for

Beginning

credit losses

credit losses -

Ending

(In thousands)

Balance

(benefit)

PCD Loans

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

28,468

(2,567)

25,921

Commercial real estate non-owner occupied

67,457

10,232

(30)

1,264

78,923

Commercial real estate owner occupied

60,229

(11,226)

(977)

7,385

55,411

Commercial and industrial

59,651

7,820

(6,904)

9,035

69,602

Total Commercial

215,805

4,259

(7,911)

17,704

229,857

Construction

6,363

(2,107)

1,943

6,199

Mortgage

154,478

(26,373)

841

(4,476)

14,064

138,534

Leasing

17,578

3,807

(4,094)

2,523

19,814

Consumer

Credit cards

43,499

21,678

(18,770)

6,802

53,209

Home equity lines of credit

3,806

(3,187)

(263)

2,757

3,113

Personal

83,722

43,957

(29,054)

6,270

104,895

Auto

154,498

(10,793)

(26,766)

12,138

129,077

Other

15,617

3,734

(1,727)

774

18,398

Total Consumer

301,142

55,389

(76,580)

28,741

308,692

Total - Loans

695,366

34,975

841

(93,061)

64,975

703,096

Allowance for credit losses - unfunded commitments:

Commercial

3,135

881

4,016

Construction

4,725

(1,531)

3,194

Consumer

Ending balance - unfunded commitments [1]

7,897

(590)

7,307

[1]

Allowance for credit losses of unfunded commitments is

presented as part of Other Liabilities in the Consolidated

Statements of Financial Condition.

Modifications

modification

constitutes

change

loan

terms

the

form

principal

forgiveness,

interest

rate

reduction,

other

than-

insignificant payment delay, term extension or combination of the above made

to a borrower experiencing financial difficulty.

The amount

of outstanding

commitments to

lend additional

funds to

debtors owing

receivables whose

terms have

been modified

during the period ended at September 30, 2023

amounted to $

million related to the commercial loan portfolio.

The following tables show the amortized cost basis of the loans modified to borrowers experiencing financial difficulties at the end of

the reporting period disaggregated by class

of financing receivable and type of

concession granted for the quarter and

nine months

ended

September

30,2023.

Loans

modified

borrowers

under

financial

difficulties

that

were

fully

paid

down,

charged-off

foreclosed upon by period end are not reported.

Loan Modifications Made to Borrowers Experiencing Financial

Difficulty for the quarter ended September 30,2023

Interest Rate Reduction

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class

of Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE owner occupied

141,807

10.07

141,807

4.66

Commercial and industrial

Mortgage

Consumer:

Credit cards

154

0.01

154

0.01

Personal

247

0.01

247

0.01

Total

142,327

0.60

142,327

0.42

Term Extension

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class

of Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

8,760

0.30

8,760

0.17

CRE owner occupied

2,667

0.19

10,847

0.66

13,514

0.44

Commercial and industrial

16,535

0.38

16,535

0.25

Mortgage

17,057

0.27

933

0.07

17,990

0.24

Consumer:

Personal

122

0.01

122

0.01

Total

45,141

0.19

11,780

0.11

56,921

0.17

Other-Than-Insignificant Payment Delays

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class

of Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE owner occupied

8,980

0.64

8,980

0.29

Commercial and industrial

3,287

0.08

3,287

0.05

Total

12,267

0.05

12,267

0.04

Combination - Term extension

and Interest Rate Reduction

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class

of Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

18,705

0.63

18,705

0.37

CRE owner occupied

14,683

1.04

14,683

0.48

Commercial and industrial

558

0.01

558

0.01

Mortgage

7,691

0.12

7,691

0.10

Consumer:

Personal

815

0.05

0.01

826

0.04

Total

42,452

0.18

42,463

0.12

Combination -

Other-Than-Insignificant Payment Delays and Interest Rate

Reduction

Puerto Rico

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class

of Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

182

0.01

182

Commercial and industrial

Consumer:

Credit cards

195

0.02

Total

455

Loan Modifications Made to Borrowers Experiencing Financial

Difficulty for the nine months ended September

30,2023

Interest Rate Reduction

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE owner occupied

141,807

10.07

141,807

4.66

Commercial and industrial

Mortgage

302

Consumer:

Credit cards

565

0.05

565

0.05

Personal

540

0.03

543

0.03

Other

Total

143,260

0.60

143,263

0.42

Term Extension

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

33,059

1.12

33,059

0.66

CRE owner occupied

4,293

0.30

26,509

1.62

30,802

1.01

Commercial and industrial

38,713

0.89

38,713

0.59

Construction

2,169

1.27

5,309

0.71

7,478

0.81

Mortgage

41,916

0.67

5,423

0.42

47,339

0.62

Consumer:

Personal

196

0.01

129

0.07

325

0.02

Auto

Total

120,382

0.51

37,370

0.36

157,752

0.46

Principal Forgiveness

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE owner occupied

Total

Other-Than-Insignificant Payment Delays

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

1,736

0.06

1,736

0.03

CRE owner occupied

12,833

0.91

13,556

0.83

26,389

0.87

Commercial and industrial

4,653

0.11

828

0.04

5,481

0.08

Mortgage

137

Consumer:

Other

0.02

Total

19,390

0.08

14,384

0.14

33,774

0.10

Combination - Term extension

and Interest Rate Reduction

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

18,705

0.63

18,705

0.37

CRE owner occupied

14,784

1.05

14,784

0.49

Commercial and industrial

614

0.01

614

0.01

Mortgage

29,044

0.46

407

0.03

29,451

0.39

Consumer:

Personal

1,711

0.10

0.02

1,754

0.09

Auto

Total

64,885

0.27

450

65,335

0.19

Combination - Other-Than-Insignificant Payment Delays

and Interest Rate Reduction

Puerto Rico

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

182

0.01

182

Commercial and industrial

153

Consumer:

Credit cards

587

0.05

587

0.05

Total

922

Combination - Other-Than-Insignificant Payment Delays

and Principal Forgiveness

Puerto Rico

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE owner occupied

195

0.01

195

0.01

Total

195

The following table describes the financial effect of the

modifications made to borrowers experiencing

financial difficulties:

For the quarter ended September 30, 2023

Interest rate reduction

Loan Type

Financial Effect

CRE Non-owner occupied

Reduced weighted-average contractual interest rate from

.0% to

7.2

CRE Owner occupied

Reduced weighted-average contractual interest rate from

8.4

% to

6.6

Commercial and industrial

Reduced weighted-average contractual interest rate from

12.5

% to

7.6

Mortgage

Reduced weighted-average contractual interest rate from

5.7

% to

4.2

Consumer:

Credit cards

Reduced weighted-average contractual interest rate from

19.6

% to

3.6

Personal

Reduced weighted-average contractual interest rate from

.0% to

9.1

Term extension

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

year to the life of loans.

Commercial and industrial

Added a weighted-average of

year to the life of loans.

Mortgage

Added a weighted-average of

years to the life of loans.

Consumer:

Personal

Added a weighted-average of

years to the life of loans.

Other than insignificant payment delay

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

months to the life of loans.

Commercial and industrial

Added a weighted-average of

months to the life of loans.

Consumer:

Credit cards

Added a weighted-average of

months to the life of loans.

For the nine months ended September 30, 2023

Interest rate reduction

Loan Type

Financial Effect

CRE Non-owner occupied

Reduced weighted-average contractual interest rate from

.0% to

7.2

CRE Owner occupied

Reduced weighted-average contractual interest rate from

8.4

% to

6.6

Commercial and industrial

Reduced weighted-average contractual interest rate from

.0% to

7.7

Mortgage

Reduced weighted-average contractual interest rate from

5.7

% to

4.2

Consumer:

Credit cards

Reduced weighted-average contractual interest rate from

.0% to

4.3

Personal

Reduced weighted-average contractual interest rate from

.0% to

9.7

Auto

Reduced weighted-average contractual interest rate from

12.64

% to

12.62

Other

Reduced weighted-average contractual interest rate from

.0% to 0.0%.

Term extension

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

year to the life of loans.

Commercial and industrial

Added a weighted-average of

years to the life of loans.

Construction

Added a weighted-average of

months to the life of loans.

Mortgage

Added a weighted-average of

years to the life of loans.

Consumer:

Personal

Added a weighted-average of

years to the life of loans.

Auto

Added a weighted-average of

years to the life of loans.

Principal forgiveness

Loan Type

Financial Effect

CRE Owner occupied

Reduced the amortized cost basis of the loans by $

0.1

million.

Other than insignificant payment delay

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

months to the life of loans.

Commercial and industrial

Added a weighted-average of

months to the life of loans.

Mortgage

Added a weighted-average of

months to the life of loans.

Consumer:

Credit cards

Added a weighted-average of

months to the life of loans.

Other

Added a weighted-average of

months to the life of loans.

The following table

presents, by class, the

performance of loans that

have been modified in

the last nine months

at September 30,

2023.

The past due 90 days or more categories includes all loans modified classified

as non-accruing at the time of the modification.

These loans will continue in non-accrual status, and presented as past

due 90 days or more, until the borrower has

demonstrated a

willingness and ability to

make the restructured loan

payments (at least six

months of sustained

performance after the modification

or one year

for loans providing

for quarterly or

semi-annual payments) and

management has concluded that

it is probable

that the

borrower would not be in payment default in the

foreseeable future.

BPPR

For the period ended September 30, 2023

Past Due 90 days or more [1]

(In thousands)

30-59 days

60-89 days

Past due 90

days or more

Total past

due

Current

Total

With Payment

Default

Without

Payment Default

CRE Non-owner occupied

122

53,560

53,682

122

CRE Owner occupied

2,488

171,442

173,930

2,488

Commercial and industrial

1,735

42,441

44,176

729

1,006

Construction

2,169

Mortgage

4,913

2,572

22,291

29,776

41,623

71,399

4,196

18,095

Consumer:

Credit cards

117

130

334

818

1,152

Personal

550

617

1,830

2,447

550

Auto

Other

Total

5,078

2,678

27,358

35,114

313,938

349,052

5,049

22,309

[1] Loans that were in non-accrual status at the time

of modification are presented as past due until the borrower

has demonstrated a willingness and ability

to make the restructured loan payments. Payment default

is defined as a restructured loan becoming 90 days past

due after being modified, foreclosed or

charged-off, whichever occurs first. The recorded investment

as of period end is inclusive of all partial paydowns

and charge-offs since the modification

date. Loans modified with financial difficulty that

were fully paid down, charged-off or foreclosed upon

by period end are not reported.

Popular U.S.

For the period ended September 30, 2023

Past Due 90 days or more [1]

(In thousands)

30-59 days

60-89 days

Past due 90

days or more

Total past

due

Current

Total

With Payment

Default

Without

Payment Default

CRE Owner occupied

40,065

Commercial and industrial

828

Construction

5,309

Mortgage

334

5,496

5,830

103

231

Consumer:

Personal

129

175

129

Total

463

51,744

52,207

103

360

[1] Loans that were in non-accrual status at the time

of modification are presented as past due until the borrower

has demonstrated a willingness and ability

to make the restructured loan payments. Payment default

is defined as a restructured loan becoming 90 days past

due after being modified, foreclosed or

charged-off, whichever occurs first. The recorded investment

as of period end is inclusive of all partial paydowns

and charge-offs since the modification

date. Loans modified with financial difficulty that

were fully paid down, charged-off or foreclosed upon

by period end are not reported.

Popular Inc.

For the period ended September 30, 2023

Past Due 90 days or more [1]

(In thousands)

30-59 days

60-89 days

Past due 90

days or more

Total past

due

Current

Total

With Payment

Default

Without

Payment Default

CRE Non-owner occupied

122

53,560

53,682

122

CRE Owner occupied

2,488

211,507

213,995

2,488

Commercial and industrial

1,735

43,269

45,004

729

1,006

Construction

7,478

Mortgage

4,913

2,572

22,625

30,110

47,119

77,229

4,299

18,326

Consumer:

Credit cards

117

130

334

818

1,152

Personal

679

746

1,876

2,622

679

Auto

Other

Total

5,078

2,678

27,821

35,577

365,682

401,259

5,152

22,669

[1] Loans that were in non-accrual status at the time

of modification are presented as past due until the borrower

has demonstrated a willingness and ability

to make the restructured loan payments.

Payment default is defined as a restructured loan becoming

90 days past due after being modified, foreclosed

charged-off, whichever occurs first. The recorded inve

stment as of period end is inclusive of all partial

paydowns and charge-offs since the modification

date. Loans modified with financial difficulty that

were fully paid down, charged-off or foreclosed upon

by period end are not reported.

During

the

nine

months

ended September

30,

2023,

five

loans

with

aggregate

unpaid

principal balance

6.6

million

were

restructured into

multiple notes

(“Note A

/ B

split”)

compared to

three

loans with

an aggregate

unpaid principal

balance of

2.7

million during

the nine months

ended September 30,

2022.

charge-offs were

recorded as

part of Note

A /

B splits

during 2023

and 2022. These

loans were restructured after

analyzing the borrowers’ capacity

to repay the

debt, collateral and ability to

perform

under the modified terms.

Payment

default

defined

restructured

loan

becoming

days

past

due

after

being

modified,

foreclosed

charged-off,

whichever occurs first.

During the quarter

and nine months

ended September 30,

2023, the outstanding

balance of loans

modified

for borrowers

under financial difficulties that were subject to payment default during the nine

months preceding the default date was

million and $

million, respectively.

For the quarter ended September 30, 2023,

extension of maturity and the combination of reduction

of interest rate and extension of

maturity

amounted

million

and

million,

respectively,

the

outstanding

balance

loans

modified

for

borrowers

under

financial difficulties

that were

subject to

payment default

during the

nine months

preceding the

default date.

For the

nine months

ended

September

30,

2023,

extension

maturity

and

the

combination

reduction

interest

rate

and

extension

maturity

amounted

million

and

million,

respectively,

the

outstanding

balance

loans

modified

for

borrowers

under

financial

difficulties that were subject to payment default during

the nine months preceding the default date.

Legacy TDR Modifications

A modification of

a loan, prior

to ASU 2022-02,

constituted a troubled

debt restructuring (TDR)

when a borrower

was experiencing

financial difficulty

and the

modification constituted

a concession.

For a

summary of

the legacy

accounting policy

related to

TDRs,

refer to the Summary of Significant Accounting Policies

included in Note 2 to the 2022 Form 10-K.

The outstanding

balance of

loans classified

as TDRs

amounted to

1.6

billion at

December 31,

2022. The

amount of

outstanding

commitments to

lend additional

funds to

debtors owing

loans whose

terms have

been modified

in TDRs

amounted to

million

related to the commercial loan portfolio at December 31,

2022.

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.

December 31, 2022

(In thousands)

Accruing

Non-Accruing

Total

Allowance

Loans held-in-portfolio:

Commercial

269,784

54,641

324,425

18,451

Mortgage

[1]

1,169,976

86,790

1,256,766

58,819

Leasing

1,154

1,178

Consumer

54,395

7,883

62,278

13,577

Loans held-in-portfolio

1,495,309

149,338

1,644,647

90,890

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

725

million guaranteed by U.S. sponsored entities

at BPPR.

The following

table presents

the loan

count by

type of

modification for

those loans

modified in

a TDR

during the

quarter and

nine

months ended September 30, 2022. Loans modified

as TDRs for the U.S. operations are considered

insignificant to the Corporation.

Popular Inc.

For the quarter ended September 30, 2022

For the nine months ended September 30, 2022

Reduction in

interest rate

Extension of

maturity

date

Combination of

reduction in

interest rate and

extension of

maturity date

Other

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

210

128

715

Leasing

Consumer:

Credit cards

Personal

Auto

Total

213

124

207

721

The following table presents, by class, quantitative

information related to loans modified as TDRs

during the quarter and nine

months ended September 30, 2022.

Popular, Inc.

For the quarter ended September 30, 2022

(In thousands)

Loan count

Pre-modification outstanding

recorded investment

Post-modification

outstanding recorded

investment

Increase (decrease) in the

allowance for loan losses as

a result of modification

Commercial real estate non-owner occupied

1,327

1,326

Commercial real estate owner occupied

2,488

2,471

(47)

Commercial and industrial

123

117

Mortgage

277

28,990

30,192

1,032

Consumer:

Credit cards

157

154

Personal

542

539

146

Total

338

33,627

34,799

1,149

Popular, Inc.

For the nine months ended September 30, 2022

(In thousands)

Loan count

Pre-modification outstanding

recorded investment

Post-modification

outstanding recorded

investment

Increase (decrease) in the

allowance for loan losses as

a result of modification

Commercial real estate non-owner occupied

4,779

4,777

Commercial real estate owner occupied

15,594

15,567

(2,120)

Commercial and industrial

49,625

49,425

2,067

Mortgage

852

93,773

96,918

3,143

Leasing

Consumer:

Credit cards

567

599

Personal

144

2,223

2,297

411

Auto

Total

1,103

166,603

169,623

3,531

The following table presents, 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.

Popular Inc.

Defaulted during the quarter ended

September 30, 2022

Defaulted during the nine months ended

September 30, 2022

(In thousands)

Loan count

Recorded investment as

of first default date

Loan count

Recorded Investment as of

first default date

Commercial real estate owner occupied

560

Commercial and industrial

1,165

3,661

Mortgage

3,500

9,200

Leasing

Consumer:

Credit cards

185

Personal

160

558

Total

5,422

138

14,169

Credit Quality

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

performed at

least

once a

year

or more

frequently if

events or

conditions change

which may

deteriorate the credit quality.

In the case of

consumer and mortgage loans, these

loans are classified considering their

delinquency

status at the end of the reporting period.

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 September

30, 2023 and

December 31, 2022

and the gross

write-offs recorded by

vintage year. For

the definitions of the obligor risk ratings,

refer to the Credit Quality section of

Note 9 to the Consolidated Financial

Statements included in the 2022 Form 10-K:

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

BPPR

Commercial:

Commercial multi-family

Watch

4,132

4,291

8,423

Special Mention

5,817

Substandard

3,048

100

3,148

Pass

38,060

139,784

22,604

20,572

29,751

26,368

287

277,426

Total commercial

multi-family

38,060

139,784

22,604

20,572

33,883

39,524

387

294,814

Commercial real estate non-owner occupied

Watch

2,611

345

14,870

22,895

14,387

42,474

97,582

Special Mention

652

25,120

65,283

55,662

3,563

150,343

Substandard

19,724

1,356

2,243

25,986

49,309

Pass

215,640

881,595

555,185

363,551

44,464

584,724

6,488

2,651,647

Total commercial

real estate non-

owner occupied

238,627

883,296

595,175

388,752

124,134

708,846

10,051

2,948,881

Year-to-Date gross

write-offs

609

636

Commercial real estate owner occupied

Watch

1,673

11,674

25,306

8,021

3,578

65,433

900

116,585

Special Mention

16,697

6,082

143,558

996

56,793

13,069

237,195

Substandard

916

15,967

2,130

324

657

71,111

91,105

Doubtful

225

Pass

54,152

188,715

234,029

52,294

26,558

396,965

9,730

962,443

Total commercial

real estate owner

occupied

56,741

233,053

267,547

204,197

31,789

590,527

23,699

1,407,553

Year-to-Date gross

write-offs

520

525

Commercial and industrial

Watch

5,085

20,271

6,051

2,791

16,548

78,294

78,361

207,401

Special Mention

3,519

3,549

6,157

2,057

42,415

10,696

68,478

Substandard

5,698

2,011

6,457

19,449

2,130

34,171

33,556

103,472

Doubtful

Loss

354

Pass

679,029

688,800

522,132

246,230

132,643

265,712

1,415,483

3,950,029

Total commercial

and industrial

689,897

714,601

538,189

274,681

153,378

420,622

1,538,450

4,329,818

Year-to-Date gross

write-offs

784

184

140

317

398

287

2,869

4,979

Construction

Watch

17,156

8,693

20,485

46,334

Substandard

6,578

2,169

8,747

Pass

14,035

21,688

33,249

11,843

2,308

1,056

31,247

115,426

Total construction

14,035

45,422

41,942

14,012

2,308

1,056

51,732

170,507

Year-to-Date gross

write-offs

2,611

Mortgage

Substandard

161

515

372

2,923

76,022

79,993

Pass

537,050

443,989

430,508

262,407

167,447

4,367,874

6,209,275

Total mortgage

537,050

444,150

431,023

262,779

170,370

4,443,896

6,289,268

Year-to-Date gross

write-offs

1,205

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

BPPR

Leasing

Substandard

146

2,269

1,912

923

946

568

6,764

Loss

Pass

508,378

522,978

341,119

180,280

101,777

36,741

1,691,273

Total leasing

508,524

525,295

343,031

181,203

102,752

37,309

1,698,114

Year-to-Date gross

write-offs

391

2,638

1,871

530

473

346

6,249

Consumer:

Credit cards

Substandard

17,717

Loss

Pass

1,059,692

Total credit cards

1,077,411

Year-to-Date gross

write-offs

27,998

HELOCs

Pass

2,474

Total HELOCs

2,474

Year-to-Date gross

write-offs

111

Personal

Substandard

677

4,223

2,077

604

1,217

8,854

1,104

18,756

Loss

134

Pass

700,994

562,370

210,731

66,531

71,178

109,046

23,262

1,744,112

Total Personal

701,701

566,603

212,856

67,135

72,420

117,921

24,366

1,763,002

Year-to-Date gross

write-offs

1,055

23,867

13,973

3,395

3,834

2,305

1,012

49,441

Auto

Substandard

3,213

12,306

11,389

8,665

7,369

3,735

46,677

Loss

118

259

Pass

941,464

964,237

770,038

449,165

299,099

162,257

3,586,260

Total Auto

944,688

976,661

781,445

457,885

306,500

166,017

3,633,196

Year-to-Date gross

write-offs

3,625

16,278

8,276

4,353

2,238

34,770

Other consumer

Substandard

1,151

267

1,545

Loss

137

499

636

Pass

30,668

24,809

15,498

5,941

3,537

3,843

61,055

145,351

Total Other

consumer

30,668

24,837

15,635

6,023

3,554

5,493

61,322

147,532

Year-to-Date gross

write-offs

117

133

11,452

11,855

Total BPPR

3,759,991

4,553,702

3,249,447

1,877,239

1,001,088

6,531,211

2,765,526

24,366

23,762,570

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

Popular U.S.

Commercial:

Commercial multi-family

Watch

742

3,672

51,264

59,944

115,622

Special Mention

867

1,178

16,681

18,726

Substandard

14,747

16,003

30,750

Pass

69,117

525,927

367,965

233,949

216,481

450,809

4,273

1,868,521

Total commercial

multi-family

69,117

526,669

368,832

238,799

282,492

543,437

4,273

2,033,619

Commercial real estate non-owner occupied

Watch

5,500

4,228

729

10,991

44,329

65,777

Special Mention

1,333

68,433

69,766

Substandard

8,112

1,718

3,210

13,040

Pass

369,327

542,901

205,752

245,659

116,282

447,229

10,516

1,937,666

Total commercial

real estate non-

owner occupied

369,327

548,401

209,980

254,500

130,324

563,201

10,516

2,086,249

Commercial real estate owner occupied

Watch

78,483

1,177

124,940

204,600

Special Mention

3,809

6,114

114

10,037

Substandard

481

7,288

49,957

57,726

Pass

221,117

357,451

322,609

112,290

76,200

266,381

8,941

1,364,989

Total commercial

real estate owner

occupied

221,117

357,932

401,092

117,276

89,602

441,392

8,941

1,637,352

Year-to-Date gross

write-offs

1,395

Commercial and industrial

Watch

2,594

8,238

3,940

1,024

1,208

3,748

9,507

30,259

Special Mention

368

621

1,074

171

2,318

Substandard

259

209

186

1,773

1,867

2,428

6,722

Pass

94,717

276,872

366,679

326,315

176,132

495,831

421,419

2,157,965

Total commercial

and industrial

97,679

285,990

371,902

327,562

179,284

501,493

433,354

2,197,264

Year-to-Date gross

write-offs

247

221

1,994

1,307

3,808

Construction

Watch

18,542

Special Mention

34,562

Substandard

5,213

3,214

2,095

10,522

Pass

180,508

305,886

121,838

28,119

50,844

784

687,979

Total construction

180,508

305,886

145,593

31,333

50,844

37,441

751,605

Mortgage

Substandard

2,168

9,812

11,980

Pass

75,875

226,204

291,991

237,859

179,085

272,849

1,283,863

Total mortgage

75,875

226,204

291,991

237,859

181,253

282,661

1,295,843

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

Popular U.S.

Consumer:

Credit cards

Pass

Total credit cards

Year-to-Date gross

write-offs

HELOCs

Substandard

1,906

1,046

2,952

Loss

1,034

1,133

Pass

7,592

40,796

12,552

60,940

Total HELOCs

9,597

40,796

14,632

65,025

Year-to-Date gross

write-offs

419

Personal

Substandard

327

1,183

379

121

218

2,316

Loss

238

320

Pass

36,704

110,755

28,371

3,750

5,358

1,592

186,530

Total Personal

37,100

111,951

28,750

3,838

5,479

2,048

189,166

Year-to-Date gross

write-offs

137

9,218

3,319

518

758

143

14,093

Other consumer

Substandard

402

Pass

10,181

10,201

Total Other

consumer

10,583

10,603

Year-to-Date gross

write-offs

143

Total Popular U.S.

1,050,743

2,363,033

1,818,140

1,211,167

919,278

2,381,270

508,480

14,632

10,266,743

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

Popular, Inc.

Commercial:

Commercial multi-family

Watch

742

3,672

55,396

64,235

124,045

Special Mention

867

1,178

22,498

24,543

Substandard

14,747

19,051

100

33,898

Pass

107,177

665,711

390,569

254,521

246,232

477,177

4,560

2,145,947

Total commercial

multi-family

107,177

666,453

391,436

259,371

316,375

582,961

4,660

2,328,433

Commercial real estate non-owner occupied

Watch

2,611

5,845

19,098

23,624

25,378

86,803

163,359

Special Mention

652

25,120

66,616

124,095

3,563

220,109

Substandard

19,724

1,356

10,355

1,718

29,196

62,349

Pass

584,967

1,424,496

760,937

609,210

160,746

1,031,953

17,004

4,589,313

Total commercial

real estate non-

owner occupied

607,954

1,431,697

805,155

643,252

254,458

1,272,047

20,567

5,035,130

Year-to-Date gross

write-offs

609

636

Commercial real estate owner occupied

Watch

1,673

11,674

103,789

9,198

3,578

190,373

900

321,185

Special Mention

16,697

6,082

147,367

7,110

56,907

13,069

247,232

Substandard

916

16,448

2,130

324

7,945

121,068

148,831

Doubtful

225

Pass

275,269

546,166

556,638

164,584

102,758

663,346

18,671

2,327,432

Total commercial

real estate owner

occupied

277,858

590,985

668,639

321,473

121,391

1,031,919

32,640

3,044,905

Year-to-Date gross

write-offs

1,915

1,920

Commercial and industrial

Watch

7,679

28,509

9,991

3,815

17,756

82,042

87,868

237,660

Special Mention

453

4,140

4,623

6,194

2,228

42,462

10,696

70,796

Substandard

5,698

2,270

6,666

19,635

3,903

36,038

35,984

110,194

Doubtful

Loss

354

Pass

773,746

965,672

888,811

572,545

308,775

761,543

1,836,902

6,107,994

Total commercial

and industrial

787,576

1,000,591

910,091

602,243

332,662

922,115

1,971,804

6,527,082

Year-to-Date gross

write-offs

1,031

405

2,134

317

1,705

287

2,908

8,787

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

Popular, Inc.

Construction

Watch

17,156

27,235

20,485

64,876

Special Mention

34,562

Substandard

6,578

5,213

5,383

2,095

19,269

Pass

194,543

327,574

155,087

39,962

53,152

1,840

31,247

803,405

Total construction

194,543

351,308

187,535

45,345

53,152

38,497

51,732

922,112

Year-to-Date gross

write-offs

2,611

Mortgage

Substandard

161

515

372

5,091

85,834

91,973

Pass

612,925

670,193

722,499

500,266

346,532

4,640,723

7,493,138

Total mortgage

612,925

670,354

723,014

500,638

351,623

4,726,557

7,585,111

Year-to-Date gross

write-offs

1,205

Leasing

Substandard

146

2,269

1,912

923

946

568

6,764

Loss

Pass

508,378

522,978

341,119

180,280

101,777

36,741

1,691,273

Total leasing

508,524

525,295

343,031

181,203

102,752

37,309

1,698,114

Year-to-Date gross

write-offs

391

2,638

1,871

530

473

346

6,249

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

Popular, Inc.

Consumer:

Credit cards

Substandard

17,717

Loss

Pass

1,059,709

Total credit cards

1,077,428

Year-to-Date gross

write-offs

27,999

HELOCs

Substandard

1,906

1,046

2,952

Loss

1,034

1,133

Pass

7,592

43,270

12,552

63,414

Total HELOCs

9,597

43,270

14,632

67,499

Year-to-Date gross

write-offs

419

111

530

Personal

Substandard

1,004

5,406

2,456

692

1,338

9,072

1,104

21,072

Loss

259

454

Pass

737,698

673,125

239,102

70,281

76,536

110,638

23,262

1,930,642

Total Personal

738,801

678,554

241,606

70,973

77,899

119,969

24,366

1,952,168

Year-to-Date gross

write-offs

1,192

33,085

17,292

3,913

4,592

2,448

1,012

63,534

Auto

Substandard

3,213

12,306

11,389

8,665

7,369

3,735

46,677

Loss

118

259

Pass

941,464

964,237

770,038

449,165

299,099

162,257

3,586,260

Total Auto

944,688

976,661

781,445

457,885

306,500

166,017

3,633,196

Year-to-Date gross

write-offs

3,625

16,278

8,276

4,353

2,238

34,770

Other consumer

Substandard

1,151

669

1,947

Loss

137

499

636

Pass

30,688

24,809

15,498

5,941

3,537

3,843

71,236

155,552

Total Other

consumer

30,688

24,837

15,635

6,023

3,554

5,493

71,905

158,135

Year-to-Date gross

write-offs

117

133

11,452

143

11,998

Total Popular Inc.

4,810,734

6,916,735

5,067,587

3,088,406

1,920,366

8,912,481

3,274,006

38,998

34,029,313

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

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 BPPR

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

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

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

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

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

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

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,

fair

value

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:

Quarters ended September 30,

Nine months ended September 30,

(In thousands)

2023

2022

2023

2022

Mortgage servicing fees, net of fair value adjustments:

Mortgage servicing fees

8,025

9,126

25,083

27,635

Mortgage servicing rights fair value adjustments

(2,793)

(499)

(10,385)

2,846

Total mortgage

servicing fees, net of fair value adjustments

5,232

8,627

14,698

30,481

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

loans held-for-sale

(335)

1,124

(133)

(374)

Trading account profit (loss):

Unrealized gains on outstanding derivative positions

160

Realized gains (losses) on closed derivative positions

494

(240)

661

6,325

Total trading account

profit (loss)

539

(240)

821

6,325

Losses on repurchased loans, including interest advances

(43)

(63)

(277)

(544)

Total mortgage

banking activities

5,393

9,448

15,109

35,888

[1]

Effective on January 1, 2023, loans held-for-sale

are stated at fair value. Prior to such date, loans held-for-sale

were stated at lower-of-cost-or-

market.

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

quarters and nine months ended September

30, 2023 and

2022 because they did not contain any credit recourse

arrangements.

The

following tables

present the

initial fair

value of

the

assets obtained

proceeds from

residential mortgage

loans securitized

during the quarters and nine months ended September

30, 2023 and 2022:

Proceeds Obtained During the Quarter Ended September

30, 2023

(In thousands)

Level 1

Level 2

Level 3

Initial Fair Value

Assets

Trading account debt securities:

Mortgage-backed securities - GNMA

1,421

Mortgage-backed securities - FNMA

10,178

Total trading account

debt securities

11,599

Mortgage servicing rights

301

Total

11,599

301

11,900

Proceeds Obtained During the Nine months Ended September

30, 2023

(In thousands)

Level 1

Level 2

Level 3

Initial Fair Value

Assets

Trading account debt securities:

Mortgage-backed securities - GNMA

2,488

Mortgage-backed securities - FNMA

33,470

Total trading account

debt securities

35,958

Mortgage servicing rights

945

Total

35,958

945

36,903

Proceeds Obtained During the Quarter Ended September

30, 2022

(In thousands)

Level 1

Level 2

Level 3

Initial Fair Value

Assets

Trading account debt securities:

Mortgage-backed securities - GNMA

14,190

Mortgage-backed securities - FNMA

21,685

Total trading account

debt securities

35,875

Mortgage servicing rights

809

Total

35,875

809

36,684

Proceeds Obtained During the Nine months Ended September

30, 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

117,015

Mortgage-backed securities - FHLMC

8,505

Total trading account

debt securities

294,872

Mortgage servicing rights

5,179

Total

294,872

5,179

300,051

During

the

nine

months

ended

September

30,

2023,

the

Corporation

retained

servicing

rights

whole

loan

sales

involving

approximately

million

principal

balance

outstanding

(September

30,

2022

million),

with

net

realized

gains

approximately $

0.6

million

(September 30,

2022 -

gains of

0.8

million). All

loan sales

performed during

the

nine months

ended

September 30, 2023 and 2022 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 nine months ended September

30,

2023 and 2022.

Residential MSRs

(In thousands)

September 30, 2023

September 30, 2022

Fair value at beginning of period

128,350

121,570

Additions

1,814

6,195

Changes due to payments on loans

[1]

(7,569)

(8,178)

Reduction due to loan repurchases

(468)

(646)

Changes in fair value due to changes in valuation model inputs

or assumptions

(1,828)

11,556

Other

(1,269)

Fair value at end of period

[2]

119,030

130,541

[1] Represents changes due to collection / realization

of expected cash flows over time.

[2] At September 30, 2023, PB had MSRs amounting to

1.9

million (September 30, 2022 - $

2.0

million).

During the

quarter ended June

30, 2023

the Corporation

terminated a servicing

agreement,

in which it

acted as sub-servicer

for a

third

party,

for

portfolio

with

unpaid

principal

balance

approximately

260

million

and

MSR

fair

value

approximately $

million.

The transaction did not result in a material

effect on the financial results of the Corporation.

Residential mortgage loans serviced for others were $

10.1

billion at September 30, 2023 (December 31,

2022 -$

11.1

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 September

30, 2023, those

weighted average mortgage servicing

fees were

0.31

(September

30,

2022

0.31

%).

Under

these

servicing

agreements,

the

banking

subsidiaries

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

quarters and nine months ended September 30,

2023 and 2022 were as follows:

Quarters ended

Nine months ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

BPPR

Prepayment speed

7.3

7.0

5.5

7.2

7.1

5.2

8.4

Weighted average life (in years)

9.2

8.0

9.5

8.2

9.2

8.0

9.7

7.7

Discount rate (annual rate)

9.6

11.0

10.7

10.0

9.6

10.7

10.5

9.8

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

September 30,

December 31,

September 30,

December 31,

(In thousands)

2023

2022

2023

2022

Fair value of servicing rights

40,346

41,548

78,684

86,802

Weighted average life (in years)

6.6

6.8

6.7

6.9

Weighted average prepayment speed (annual

rate)

6.0

5.9

7.0

Impact on fair value of 10% adverse change

(728)

(730)

(1,491)

(1,602)

Impact on fair value of 20% adverse change

(1,427)

(1,433)

(2,924)

(3,143)

Weighted average discount rate (annual rate)

11.2

10.9

11.0

Impact on fair value of 10% adverse change

(1,387)

(1,485)

(2,842)

(3,256)

Impact on fair value of 20% adverse change

(2,688)

(2,876)

(5,508)

(6,304)

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 September

30, 2023, the

Corporation serviced

0.6

billion in

residential mortgage loans

with credit recourse

to the

Corporation

(December 31, 2022 - $

0.6

billion). Also refer to Note 20 to the Consolidated Financial Statements 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

September

30,

2023,

the

Corporation

had

recorded

million

mortgage

loans

its

Consolidated

Statements

Financial

Condition related to this

buy-back option program (December 31,

2022 - $

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

completes

payment

deferral modification

other

borrower assistance

alternative. As

long

the

Corporation

continues

service the

loans that

continue to

be collateral

in a

GNMA guaranteed

mortgage-backed security,

the MSR

is recognized

by the

Corporation.

During the nine months ended

September 30, 2023, the Corporation repurchased approximately

million (September 30, 2022 -

million) of

mortgage loans

from its

GNMA servicing

portfolio. The

determination to

repurchase these

loans was

based on

the

economic benefits of

the transaction, which

results in a

reduction of the

servicing costs for these

severely delinquent loans, mainly

principal

and

interest

advances.

The

risk

associated

with

the

loans

reduced

due

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 in the secondary

market.

Note 12 – Other real estate owned

The following

tables present

the activity

related to

Other Real

Estate Owned

(“OREO”),

for the

quarters and

nine months

ended

September 30, 2023 and 2022.

For the quarter ended September 30, 2023

OREO

(In thousands)

Commercial/Construction

Mortgage

Total

Balance at beginning of period

11,819

74,397

86,216

Write-downs in value

(123)

(567)

(690)

Additions

257

14,795

15,052

Sales

(900)

(17,356)

(18,256)

Ending balance

11,053

71,269

82,322

For the quarter ended September 30, 2022

OREO

(In thousands)

Commercial/Construction

Mortgage

Total

Balance at beginning of period

14,250

77,887

92,137

Write-downs in value

(84)

(376)

(460)

Additions

1,711

13,975

15,686

Sales

(1,984)

(12,065)

(14,049)

Other adjustments

(75)

Ending balance

13,893

79,346

93,239

For the nine months ended September 30, 2023

OREO

(In thousands)

Commercial/Construction

Mortgage

Total

Balance at beginning of period

12,500

76,626

89,126

Write-downs in value

(362)

(1,587)

(1,949)

Additions

1,524

54,625

56,149

Sales

(2,626)

(58,277)

(60,903)

Other adjustments

(118)

(101)

Ending balance

11,053

71,269

82,322

For the nine months ended September 30, 2022

OREO

(In thousands)

Commercial/Construction

Mortgage

Total

Balance at beginning of period

15,017

70,060

85,077

Write-downs in value

(934)

(949)

(1,883)

Additions

5,230

53,878

59,108

Sales

(5,528)

(43,110)

(48,638)

Other adjustments

108

(533)

(425)

Ending balance

13,893

79,346

93,239

Note 13 − Other assets

The caption of other assets in the consolidated

statements of financial condition consists of the following

major categories:

(In thousands)

September 30, 2023

December 31, 2022

Net deferred tax assets (net of valuation allowance)

896,426

953,676

Investments under the equity method

234,408

210,001

Prepaid taxes

47,837

39,405

Other prepaid expenses

42,977

33,384

Capitalized software costs

79,393

81,862

Derivative assets

23,348

19,229

Trades receivable from brokers and counterparties

37,674

35,099

Receivables from investments maturities

301,000

125,000

Principal, interest and escrow servicing advances

50,881

41,916

Guaranteed mortgage loan claims receivable

44,836

59,659

Operating ROU assets (Note 28)

117,879

125,573

Finance ROU assets (Note 28)

17,917

18,884

Others

137,989

104,125

Total other assets

2,032,565

1,847,813

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

September 30, 2023

Software development costs

69,318

24,920

44,398

Software license costs

47,747

25,006

22,741

Cloud computing arrangements

22,771

10,517

12,254

Total Capitalized

software costs [1] [2]

139,836

60,443

79,393

December 31, 2022

Software development costs

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 [1] [2]

121,519

39,657

81,862

[1]

Software intangible assets are presented as part of Other

Assets in the Consolidated Statements of Financial Condition.

[2]

The tables 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:

Quarters ended September 30,

Nine months ended September 30,

(In thousands)

2023

2022

2023

2022

Software development and license costs

16,820

14,589

47,962

39,357

Cloud computing arrangements

923

983

2,685

3,010

Total amortization

expense

17,743

15,572

50,647

42,367

Note 14 – Goodwill and other intangible assets

The changes in

the carrying amount

of goodwill for

the nine months

ended September 30, 2023

and 2022, allocated

by reportable

segments, were as follows (refer to Note 33 for

the definition of the Corporation’s reportable segments):

September 30, 2023

Balance at

Goodwill on

Goodwill

Balance at

(In thousands)

January 1, 2023

acquisition

impairment

September 30, 2023

Banco Popular de Puerto Rico

436,383

Popular U.S.

391,045

(23,000)

368,045

Total Popular,

Inc.

827,428

(23,000)

804,428

September 30, 2022

Balance at

Goodwill on

Goodwill

Balance at

(In thousands)

January 1, 2022

acquisition

impairment

September 30, 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

The goodwill recognized during the quarter

ended September 30, 2022 in the

reportable segment of Banco Popular de Puerto

Rico

of $

116.1

million was related to

the Evertec Transactions,

as defined in Note 23

to the Consolidated Financial Statements

included

in this Form 10-Q.

During the third quarter

of 2023, the Corporation recorded

an impairment of

million as a result

of its annual

goodwill impairment test

related to its

U.S. based equipment

leasing subsidiary,

Popular Equipment Finance

(“PEF”),

due to lower

forecasted cash flows

and an increase

in the rate

used to discount

cash flows.

During 2022 the

Corporation recognized a

goodwill

impairment of $

million related to

Popular Equipment Finance

(“PEF”) , as

a result of

a decrease in

the projected earnings

of this

business unit.

Other Intangible Assets

The following table reflects the components of

other intangible assets subject to amortization:

Gross Carrying

Accumulated

Net

Carrying

(In thousands)

Amount

Amortization

Value

September 30, 2023

Core deposits

12,810

10,995

1,815

Other customer relationships

14,286

6,302

7,984

Total other intangible

assets

27,096

17,297

9,799

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

During the

quarter ended

September 30,

2023, the

Corporation recognized

0.8

million in

amortization expense

related to

other

intangible assets with definite useful lives (September 30, 2022 - $

0.8

million). During the nine months ended September 30, 2023,

the Corporation

recognized $

2.4

million in

amortization related to

other intangible assets

with definite useful

lives (September 30,

2022 - $

2.5

million).

The following

table presents

the estimated

amortization of

the intangible

assets with

definite useful

lives for

each of

the following

periods:

(In thousands)

Remaining 2023

794

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 2023

using July 31, 2023 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.

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

12.30

% to

16.96

% for

the 2023 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, 2023

indicated that the average estimated fair value using all

valuation methodologies exceeded BPPR’s equity value by approximately $

3.7

billion or

468

% compared to $

3.1

billion or

245

%, for

the annual

goodwill impairment test

completed as

of July

31, 2022. 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 $

129

million or

%, compared to $

670

million or

%, for the annual goodwill impairment test completed as of July 31, 2022. 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, 2023 valuation date.

impairment of

million was

recognized by

the Corporation

from the

annual test

as of

July 31,

2023 related

to PEF

due to

lower forecasted

cash flows

and an

increase in

the rate

used to

discount cash

flows.

During 2022

the Corporation

recognized a

goodwill impairment of $

million related to PEF,

as a result of

a decrease in the

projected earnings of this

business unit. The PEF

goodwill balance as of September 30, 2023 amounted

to $

million (December 31, 2022 - $

million).

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, 2023 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. Particularly for reporting units with recognized impairments or where the

estimated fair value approximates the

equity value,

future decreases

in fair

value estimates

could result

in additional

impairment charges.

Additionally,

declines in

the

Corporation’s

market

capitalization and

adverse economic

conditions

sustained

over

longer

period of

time

negatively

affecting

forecasted earnings 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

the

U.S.

economies,

increases

the

rate

discount

future

cash

flows,

and

lower

future

earnings

estimates

could,

individually or

in the

aggregate, have a

material impact on

the determination of

the fair value

of our reporting

units, which could

turn

result

impairment of

goodwill in

the

future.

impairment of

goodwill would

result

a non-cash

expense,

net

tax

impact. A charge to earnings related to a goodwill

impairment would not materially impact regulatory

capital calculations.

The following tables present the gross amount

of goodwill and accumulated impairment losses

by reportable segments.

September 30, 2023

Balance at

September 30,

Accumulated

September 30,

2023

impairment

2023

(In thousands)

(gross amounts)

losses

(net amounts)

Banco Popular de Puerto Rico

440,184

3,801

436,383

Popular U.S.

564,456

196,411

368,045

Total Popular,

Inc.

1,004,640

200,212

804,428

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

Note 15 – Deposits

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

(In thousands)

September 30, 2023

December 31, 2022

Savings accounts

15,305,838

14,746,329

NOW, money market and other interest

bearing demand deposits

24,622,430

23,738,940

Total savings, NOW,

money market and other interest bearing demand

deposits

39,928,268

38,485,269

Certificates of deposit:

Under $250,000

5,263,696

4,235,651

$250,000 and over

2,944,262

2,545,750

Total certificates

of deposit

8,207,958

6,781,401

Total interest bearing

deposits

48,136,226

45,266,670

Non- interest bearing deposits

15,201,374

15,960,557

Total deposits

63,337,600

61,227,227

A summary of certificates of deposits by maturity at

September 30, 2023 follows:

(In thousands)

2023

2,635,150

2024

2,819,295

2025

975,844

2026

752,202

2027

406,993

2028 and thereafter

618,474

Total certificates of

deposit

8,207,958

At September 30, 2023, the Corporation had brokered

deposits amounting to $

1.7

billion (December 31, 2022 - $

1.1

billion).

The aggregate amount

of overdrafts in

demand deposit accounts that

were reclassified to loans

was $

3.5

million at September

30,

2023 (December 31, 2022 - $

6.3

million).

At September 30, 2023, Puerto Rico public sector deposits amounted to $

17.8

billion. Puerto Rico public sector deposits are interest

bearing

accounts.

Public

deposit

balances

are

difficult

predict.

For

example,

the

receipt

the

Puerto

Rico

Government

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

be impacted by,

for example, the

speed at

which federal

assistance is

distributed, the

financial condition,

liquidity and

cash management

practices of

the Puerto

Rico Government

and its

instrumentalities

and

the

implementation

fiscal

and

debt

adjustment

plans

approved

pursuant

PROMESA

other

actions

mandated

the

Fiscal

Oversight

and

Management

Board

for

Puerto

Rico

(the

“Oversight

Board”).

Generally,

these

deposits

require

that

the

bank

pledge

high

credit

quality

securities

collateral, therefore,

liquidity

risk

arising from

public sector

deposit

outflows are lower.

Note 16 – Borrowings

Assets sold under agreements to repurchase

Assets sold under agreements to repurchase amounted

to $

million at September 30, 2023 and $

149

million at December 31,

2022.

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.

In an

event of

default,

each party

has a

right of

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

September 30, 2023

December 31, 2022

Repurchase

(In thousands)

liability

U.S. Treasury securities

Within 30 days

12,736

410

After 30 to 90 days

13,199

30,739

After 90 days

18,180

17,521

Total U.S. Treasury

securities

44,115

48,670

Mortgage-backed securities

Within 30 days

28,211

98,984

After 30 to 90 days

791

After 90 days

20,499

Total mortgage-backed

securities

48,710

99,775

Collateralized mortgage obligations

Within 30 days

246

164

Total collateralized

mortgage obligations

246

164

Total

93,071

148,609

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.

Other short-term borrowings

There were

other short-term

borrowings outstanding

at September

30, 2023,

compared to

365

million in

FHLB Advances

December 31, 2022.

Notes Payable

The following table presents the composition of notes

payable at September 30, 2023 and December

31, 2022.

(In thousands)

September 30, 2023

December 31, 2022

Advances with the FHLB with maturities ranging from

2023

through

2029

paying interest at

monthly

fixed rates ranging from

0.39

% to

4.17

412,632

389,282

Unsecured senior debt securities

maturing on

2028

paying interest

semiannually

at a fixed rate of

7.25

%, net of debt issuance costs of $

6,322

[1]

393,678

299,109

Junior subordinated deferrable interest debentures (related to

trust preferred securities) maturing on

2034

with fixed interest rates ranging from

6.125

% to

6.564

%, net of debt issuance costs of $

295

198,339

198,319

Total notes payable

1,004,649

886,710

Note: Refer to the 2022 Form 10-K for rates information

at December 31, 2022.

[1] On March 13, 2023, the Corporation issued $

400

million aggregate principal amount of

7.25

% Senior Notes due

2028

(the “2028 Notes”) in an

underwritten public offering. The Corporation used a

portion of the net proceeds of the 2028 Notes offering

to redeem, on August 14, 2023, the

outstanding $

300

million aggregate principal amount of its

6.125

% Senior Notes which were due on September

2023

. The redemption price was

equal to

100

% of the principal amount plus accrued and unpaid

interest through the redemption date.

A breakdown of borrowings by contractual maturities

at September 30, 2023 is included in the table

below.

Assets sold under

(In thousands)

agreements to

repurchase

Notes payable

Total

2023

54,393

22,261

76,654

2024

38,678

91,943

130,621

2025

139,920

2026

74,500

Later years

676,025

Total borrowings

93,071

1,004,649

1,097,720

September

30,

2023

and

December 31,

2022,

the

Corporation had

FHLB

borrowing facilities

whereby the

Corporation could

borrow up to

4.4

billion and $

3.3

billion, respectively,

of which $

0.4

billion and $

0.8

billion, respectively,

were used. In

addition, at

September 30, 2023 and December 31,

2022, the Corporation had placed $

0.3

billion and $

0.4

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 securities and loans held-in-portfolio, and do

not have restrictive covenants or callable

features.

Also, at September

30, 2023, the Corporation

has a borrowing

facility at the

discount window of the

Federal Reserve Bank of

New

York

amounting to

4.6

billion (December 31,

2022 -

1.4

billion), which remained

unused at

September 30, 2023

and December

31, 2022.

The facility is a collateralized source of credit

that is highly reliable even under difficult market

conditions.

Note 17 − Other liabilities

The caption of other liabilities in the consolidated

statements of financial condition consists of the following

major categories:

(In thousands)

September 30, 2023

December 31, 2022

Accrued expenses

266,300

337,284

Accrued interest payable

47,297

39,288

Accounts payable

84,501

76,456

Dividends payable

39,793

39,525

Trades payable

14,761

9,461

Liability for GNMA loans sold with an option to repurchase

8,298

14,271

Reserves for loan indemnifications

6,941

7,520

Reserve for operational losses

28,723

39,266

Operating lease liabilities (Note 28)

129,023

137,290

Finance lease liabilities (Note 28)

23,180

24,737

Pension benefit obligation

6,050

8,290

Postretirement benefit obligation

118,121

118,336

Others

71,020

65,222

Total other liabilities

844,008

916,946

Note 18 – Stockholders’ equity

September

30,

2023,

stockholders’

equity

totaled

4.5

billion.

During

the

nine

months

ended

September

30,

2023,

the

Corporation declared cash dividends of $

1.65

(2022 - $

1.65

) per common share amounting to $

118.9

million (2022 - $

124.2

million).

The quarterly dividend declared to stockholders of record as of the close of business on

September 8, 2023

was paid on

October 2,

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 repurchased 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

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 of

5,066,864

shares at an

average purchased price of

78.9443

under

the ASR.

Note 19 – Other comprehensive loss

The following

table presents

changes in

accumulated other

comprehensive loss

by component

for the

quarters and

nine months

ended September 30, 2023 and 2022.

Changes in Accumulated Other Comprehensive Loss

by Component [1]

Quarters ended

Nine months ended

September 30,

(In thousands)

2023

2022

2023

2022

Foreign currency translation

Beginning Balance

(55,979)

(64,167)

(56,735)

(67,307)

Other comprehensive (loss) income

(976)

7,206

(220)

10,346

Net change

(976)

7,206

(220)

10,346

Ending balance

(56,955)

(56,961)

(56,955)

(56,961)

Adjustment of pension and

postretirement benefit plans

Beginning Balance

(138,319)

(152,837)

(144,335)

(158,994)

Other comprehensive income before reclassifications

1,269

Amounts reclassified from accumulated other

comprehensive loss for amortization of net losses

3,009

2,444

9,025

7,332

Net change

3,009

2,444

9,025

8,601

Ending balance

(135,310)

(150,393)

(135,310)

(150,393)

Unrealized net holding losses

on debt securities

Beginning Balance

(2,134,137)

(1,735,370)

(2,323,903)

(96,120)

Other comprehensive loss

(242,567)

(781,898)

(120,756)

(2,421,148)

Amounts reclassified from accumulated other

comprehensive loss for amortization of net unrealized

losses of debt securities transferred from available-for-

sale to held-to-maturity

35,027

102,982

Net change

(207,540)

(781,898)

(17,774)

(2,421,148)

Ending balance

(2,341,677)

(2,517,268)

(2,341,677)

(2,517,268)

Unrealized net (losses) gains

on cash flow hedges

Beginning Balance

(642)

(2,648)

Other comprehensive (loss) income before

reclassifications

415

(19)

3,222

Amounts reclassified from accumulated other

comprehensive income (loss)

518

(26)

(283)

Net change

933

(45)

2,939

Ending balance

291

Total

(2,533,942)

(2,724,331)

(2,533,942)

(2,724,331)

[1]

All amounts presented are net of tax.

The following table

presents the amounts

reclassified out of

each component of

accumulated other comprehensive loss

during the

quarters and nine months ended September 30,

2023 and 2022.

Reclassifications Out of Accumulated Other Comprehensive

Loss

Quarters ended

Nine months ended

Affected Line Item in the

September 30,

(In thousands)

Consolidated Statements of Operations

2023

2022

2023

2022

Adjustment of pension and postretirement benefit plans

Amortization of net losses

Other operating expenses

(4,814)

(3,911)

(14,440)

(11,733)

Total before tax

(4,814)

(3,911)

(14,440)

(11,733)

Income tax benefit

1,805

1,467

5,415

4,401

Total net of tax

(3,009)

(2,444)

(9,025)

(7,332)

Unrealized net holding losses on debt securities

Amortization of unrealized net losses of debt

securities transferred to held-to-maturity

Interest income from investment securities

(43,783)

(128,726)

Total before tax

(43,783)

(128,726)

Income tax expense

8,756

25,744

Total net of tax

(35,027)

(102,982)

Unrealized net (losses) gains on cash flow hedges

Forward contracts

Mortgage banking activities

(609)

1,249

Interest rate swaps

Other operating income

(219)

(498)

Total before tax

(828)

751

Income tax benefit

310

(15)

(468)

Total net of tax

(518)

283

Total reclassification

adjustments, net of tax

(38,036)

(2,962)

(111,981)

(7,049)

Note 20 – Guarantees

At September 30,

2023, the Corporation

recorded a liability

of $

million (December 31,

2022 - $

0.3

million), which represents

the

unamortized balance of the obligations

undertaken in issuing the

guarantees under the standby letters of

credit. Management does

not anticipate any material losses related to these

instruments.

From time to time, the Corporation securitized mortgage loans into guaranteed mortgage-backed securities subject to limited, and in

certain instances, 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. At September 30, 2023,

the Corporation serviced $

0.6

billion

(December 31,

2022 -

0.6

billion) in 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 or

reimburse the

third party

investor for

the incurred

loss.

The

maximum

potential

amount

future

payments

that

the

Corporation

would

required

make

under

the

recourse

arrangements

the

event

nonperformance by

the

borrowers

equivalent

the

total

outstanding

balance

the

residential

mortgage loans serviced

with recourse and

interest, if applicable. During

the quarter and

nine months ended September

30, 2023,

the Corporation repurchased

approximately $

0.4

million and $

million, respectively,

of unpaid principal

balance in mortgage

loans

subject

the

credit

recourse

provisions

(September

30,

2022

million

and

million,

respectively).

the

event

nonperformance

the

borrower,

the

Corporation

has

rights

the

underlying

collateral

securing

the

mortgage

loan.

The

Corporation suffers ultimate losses on these loans when the proceeds from a 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

holding and

disposing the

related property.

At September

30, 2023,

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, 2022 - $

million).

The following table shows the changes in the Corporation’s liability of estimated losses related to loans serviced with credit recourse

provisions during the quarters and nine months

ended September 30, 2023 and 2022.

Quarters ended September 30,

Nine months ended September 30,

(In thousands)

2023

2022

2023

2022

Balance as of beginning of period

6,223

9,095

6,897

11,800

Provision (benefit) for recourse liability

228

(1,718)

(2,067)

Net charge-offs

(54)

(184)

(552)

(2,540)

Balance as of end of period

6,397

7,193

6,397

7,193

From time

time, the

Corporation sells

loans and

agrees to

indemnify the

purchaser for

credit

losses or

any

breach of

certain

representations and warranties

made in

connection with

the sale.

The loan

repurchase activity under

these indemnity

agreements

for

the

quarter

and

nine

months ended

September

30,

2023

well

the

liability

for

estimated

losses

period

end

was

not

considered material for the Corporation.

Servicing agreements

relating to

the mortgage-backed

securities programs

of FNMA,

FHLMC and

GNMA, and

to mortgage

loans

sold or serviced to certain other investors, including FHLMC,

require the Corporation to advance funds to

make scheduled payments

of principal, interest, taxes and insurance, if such payments have not

been received from the borrowers. At September 30, 2023, the

Corporation serviced

10.1

billion in

mortgage loans

for third-parties,

including the

loans serviced

with credit

recourse (December

31, 2022

- $

11.1

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.

September

30,

2023,

the

outstanding

balance

funds

advanced

the

Corporation

under

such

mortgage

loan

servicing

agreements

was approximately

million

(December 31,

2022

- $

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

million at

September 30,

2023 and

December 31,

2022. In

addition, at

September 30,

2023 and

December 31,

2022, 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 to

Note 18 to

the Consolidated Financial Statements

in the 2022

Form 10-K for

further information on

the trust preferred securities.

Note 21 – 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)

September 30, 2023

December 31, 2022

Commitments to extend credit:

Credit card lines

5,720,469

5,853,990

Commercial and construction lines of credit

4,374,553

4,425,825

Other consumer unused credit commitments

250,571

250,271

Commercial letters of credit

3,083

3,351

Standby letters of credit

53,089

27,868

Commitments to originate or fund mortgage loans

25,104

45,170

September 30,

2023

and

December 31,

2022, the

Corporation maintained

reserve of

approximately $

13.3

million

and

8.8

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

commercial and construction lines of

credit.

Other commitments

At September 30,

2023 and December

31, 2022, the

Corporation also maintained

other non-credit commitments

for approximately

3.3

million and $

4.8

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 33

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 September 30, 2023, the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities

totaled $

362

million, of which

333

million were outstanding

374

million and $

327

million at December

31, 2022). Of

the amount

outstanding,

314

million

consists

loans

and

million

are

securities

302

million

and

million

December 31,

2022).

Substantially all

of the

amount outstanding

at September

30, 2023

and December

31, 2022

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.

September

30,

2023,

the

Corporation’s

exposure

municipal

loans

and

securities was concentrated in the municipalities of

San Juan, Guaynabo, Carolina and Caguas.

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 September 30, 2023:

(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

4,820

13,217

18,037

43,037

After 1 to 5 years

13,155

141,519

154,674

158,674

After 5 to 10 years

845

112,169

113,014

After 10 years

46,823

Total Municipalities

18,820

313,728

332,548

361,548

Total Direct Government

Exposure

18,860

313,728

332,588

361,588

addition,

September

30,

2023,

the

Corporation

had

242

million

loans

insured

securities

issued

Puerto

Rico

governmental entities

but for

which the

principal source

of repayment

is non-governmental

251

million at

December 31,

2022).

These

included

195

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,

2022 -

209

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 September

30,

2023, $

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, 2022

- $

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, $

1.7

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 September 30, 2023 (compared to $

1.6

billion, $

million and $

million, respectively, at December 31, 2022). 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 September 30, 2023, the

Corporation has operations in the

United States Virgin Islands (the

“USVI”) and has approximately $

million

direct

exposure

USVI

government

entities

(December

31,

2022

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 September

30, 2023,

the Corporation

has operations

in the

British Virgin

Islands (“BVI”),

which was

negatively affected

by the

COVID-19

pandemic,

particularly

reduction

the

tourism

activity

which

accounts

for

significant

portion

its

economy.

Although

the

Corporation

has

significant

exposure

single

borrower

the

BVI,

has

loan

portfolio

amounting

approximately

201

million

comprised

various

retail

and

commercial

clients,

compared

loan

portfolio

214

million

December 31, 2022.

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 any

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 $

18.4

million as

September

30,

2023.

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

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.

On March 13, 2023, the U.S. Court of Appeals for the First Circuit entered judgment affirming the

trial court’s

order dismissing the complaint. On March 23, 2023,

Plaintiffs filed a Petition for Rehearing and/or Rehearing

en Banc

On August 29, 2023, the U.S. Court of Appeals for the First Circuit entered an Order denying Plaintiff’s Petition for Rehearing and/or

Rehearing

Banc.

The

formal

mandate

the

U.S.

Court

Appeals

remanding

the

case

the

lower

court

was

issued

September 6, 2023. This matter is now closed.

Insufficient Funds and Overdraft Fees Class Actions

Popular

was

named

defendant on

putative class

action

complaint captioned

Golden

Popular,

Inc.

filed

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

Popular’s purported

practice of

charging

overdraft fees

(“OD

Fees”) on

transactions that,

under

plaintiffs’ theory,

do 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.

August

2020,

Popular

filed

Motion

Dismiss

several

grounds,

including

failure

state

claim

against

Popular,

Inc.

and

improper

venue.

October

2020,

Plaintiff

filed

Notice

Voluntary

Dismissal

before

the

U.S.

District

Court

for

the

Southern

District

New

York

and,

simultaneously,

filed

identical

complaint in the U.S. District Court for the

District of the Virgin Islands against Popular,

Inc., Popular Bank and BPPR. In November

2020, Plaintiff

filed a

Notice of

Voluntary

Dismissal against

Popular, Inc.

and Popular

Bank following

a Motion

to 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

2022,

and

several

other

trial-related

deadlines

for

June

2023.

During

mediation

hearing held

October

2022,

the

parties

reached a

settlement in

principle on

a class-wide

basis subject

final

court

approval. In

January 2023,

the

parties filed

before the Court a

motion for preliminary approval

of the settlement agreement

and, on March 31,

2023, the Court issued

an order

granting preliminary approval of the settlement agreement.

The Court scheduled the final approval hearing

for September 8, 2023.

September

2023,

the

Court

held

hearing

consider

the

final

approval

the

class

settlement

agreement

and,

September 29, 2023, the Court issued an Opinion and Order granting final approval to the settlement agreement. The matter is now

closed.

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. In response to Popular’s

motion,

Plaintiff filed a Notice of Voluntary Dismissal in April 2022.

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. In

June 2022, after

serving Plaintiff

with a written notice of election to arbitrate the claims asserted in the complaint which went unanswered, Popular Bank (“PB”) filed a

Pre-Motion Conference motion related to a new Motion to Compel Arbitration. After Plaintiff responded to the Pre-Motion

conference

motion, the Court allowed PB

to file its Motion

to Compel Arbitration, which it

did in September 2022. Plaintiff

opposed such motion

in October 2022, and PB filed its reply in November

2022.

On December 9, 2022, the

Court issued a Decision and

Order denying PB’s Motion to

Compel Arbitration. On December 20, 2022,

PB filed a Notice of

Appeal with the United States

Court of Appeals for the Second

Circuit. PB filed its appeal brief

on April 5, 2023

and Plaintiff

filed his opposition

brief on July

5, 2023. PB

filed its

reply brief on

July 26,

2023.

The matter is

now fully briefed

and

pending resolution.

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

led to

regulatory inquiries,

customer complaints

and

arbitrations for

most broker-dealers

in Puerto

Rico, including

Popular Securities.

Popular Securities

received numerous

customer

complaints since 2013 and, as

of September 30, 2023, remained

named as a respondent in

six (

) pending arbitration proceedings

with

initial

claimed

amounts

approximately $

5.88

million

the

aggregate.

Popular

Securities

and

claimants

five

(

)

the

pending six (

) arbitration proceedings, however,

have reached settlements in

principle and agreements related

thereto have been

executed with two (

) of such claimants. Popular Securities expects

to complete the execution of the

remaining agreements, and to

resolve the one (

) pending unsettled arbitration proceeding ($

1.3

million in claimed amounts) by the end

of the first quarter of 2024.

Note 22 – Non-consolidated variable interest

entities

The Corporation is

involved with

three

statutory trusts which

it created to

issue trust preferred

securities to the

public. These trusts

are deemed to be 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

controlling financial

interest

these

trusts

since the

decisions

the

trusts

are

predetermined through

the trust

documents and the

guarantee of

the trust

preferred securities is

irrelevant since

in 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 September 30,

2023

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 on the debt securities outstanding at September 30, 2023 and December 31, 2022, which are classified as 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 September 30, 2023 and

December 31, 2022.

100

(In thousands)

September 30, 2023

December 31, 2022

Assets

Servicing assets:

Mortgage servicing rights

93,884

99,614

Total servicing

assets

93,884

99,614

Other assets:

Servicing advances

6,419

6,157

Total other assets

6,419

6,157

Total assets

100,303

105,771

Maximum exposure to loss

100,303

105,771

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 $

7.4

billion at September 30, 2023 (December 31, 2022

- $

7.7

billion).

The Corporation

determined that

the maximum

exposure to

loss includes

the fair

value of

the MSRs

and the

assumption that

the

servicing

advances

September 30,

2023

and

December 31,

2022,

will

not

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 September 30,

2023.

101

Note 23 – Related party transactions

The Corporation

considers its

equity method

investees as

related parties.

The following

provides information

on transactions

with

equity method investees considered related parties.

EVERTEC

Until

August

15,

2022,

the

Corporation

had

investment

Evertec,

Inc.

(“Evertec”)

which

provides

various

processing

and

information

technology services

the

Corporation and

its

subsidiaries

and

gave

BPPR

access to

the

ATH

network owned

and

operated

Evertec.

This

investment

was

accounted

for

under

the

equity

method.

The

Corporation

recorded

1.5

million

dividends from its investment in Evertec during

the nine months ended September 30, 2022.

On July

1, 2022,

BPPR completed

the acquisition

of certain

assets from

Evertec Group,

LLC (“Evertec

Group”) to

service certain

BPPR channels, in exchange for shares of Evertec held by BPPR. The transaction was accounted for as a business combination. In

connection with this transaction, BPPR also entered into amended and restated service agreements with Evertec Group pursuant to

which Evertec

Group continues

to provide

various information

technology and

transaction processing

services to

Popular,

BPPR

and their respective subsidiaries. As part of the transaction, BPPR and

Evertec entered into a revenue sharing structure for BPPR in

connection with

its

merchant acquiring

relationship with

Evertec. On

August

15, 2022,

the

Corporation completed

the sale

its

remaining shares of common

stock of Evertec,

together with the

aforementioned business acquisition (the

"Evertec Transactions").

result,

the

Corporation

discontinued

accounting

for

its

proportionate

Evertec’s

income

(loss)

and

changes

stockholder’s

equity under the equity method of accounting in the

third quarter of 2022. In connection with the

Evertec Transactions

and

accounting adjustments,

the

Corporation recorded

an aggregate

pre-tax

gain of

257.7

million considering

the initial

exchange of Evertec shares as well as the

sale of the remaining shares.

The following

table presents

the Corporation’s

proportionate share

of Evertec’s

income (loss)

and changes

in stockholders’

equity

for the quarter and nine months ended September

30, 2022.

Quarter ended

Nine months ended

(In thousands)

September 30, 2022

Share of income from the investment in Evertec [1]

257,712

269,539

Share of other changes in Evertec's stockholders' equity

3,168

Share of Evertec's changes in equity recognized in income

257,712

272,707

[1]

The

Gain

from

Evertec

Transactions

and

accounting

adjustments

are

reflected

within

other

operating

income

the

accompanying

consolidated financial

statements.

The Corporation

recognized an

additional $

17.3

million as an

operating expense

in connection with

the Evertec

Transactions.

The following table presents

the impact of transactions and

service payments between the Corporation and Evertec

(as an affiliate)

and their impact

on the results of

operations for the nine

months ended September 30,

2022. Items that represent

expenses to the

Corporation are presented with parenthesis.

Nine months ended

(In thousands)

September 30, 2022 [1]

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

160

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 September 30, 2023, the Corporation held trading securities

with a fair value of $31 million, representing approximately 0.04%

the Corporation’s total assets,

compared with $28 million and 0.04%, respectively, at December 31, 2022. As shown

in Table 12, the

trading

portfolio

consists

principally

mortgage-backed

securities

and

U.S.

Treasuries,

which

September

30,

2023

were

investment grade securities.

Table 12 - Trading

Portfolio

September 30, 2023

December 31, 2022

(Dollars in thousands)

Amount

Weighted

Average Yield

[1]

Amount

Weighted

Average Yield

[1]

Mortgage-backed securities

14,884

5.70

14,223

5.79

U.S. Treasury securities

15,644

4.71

13,069

3.26

Collateralized mortgage obligations

5.28

160

5.51

Puerto Rico government obligations

0.43

0.45

Interest-only strips

188

12.00

207

12.00

Other (includes related trading derivatives)

163

5.60

Total

30,988

5.23

27,723

4.63

[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 $0.3

million for the

last week in

September 2023. 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.

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

needs under

both normal

and stressed market

conditions. The Board

of Directors

is 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

the

Corporate

Treasury

Division.

The

Corporation’s

Corporate

Treasurer

responsible

for

implementing

the

policies

and

procedures

approved

the

Board

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

responsible for

the independent

monitoring and

reporting of adherence with established policies.

institution’s liquidity

may be

pressured if,

for example,

it experiences

a sudden

and unexpected

substantial cash

outflow due

deposit

outflows,

whether due

to a

loss of

confidence by

depositors, or

other reasons

exogenous events

such as

the COVID-19

161

pandemic,

a downgrading

of its

credit rating,

or some

other event

that 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, perceptions of

the financial services industry and regulatory changes,

could also affect its ability to obtain funding.

The Corporation

has adopted

policies and

limits to

monitor the

Corporation’s liquidity

position and

that of

its 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 September 30, 2023 and December 31, 2022.

The ratio

total

ending

loans

deposits

was

54%

September

30,

2023

and

52%

December

31,

2022.

addition

traditional

deposits, the Corporation maintains borrowing arrangements, which amounted to approximately $1.1 billion in outstanding balances

at September

30, 2023

(December 31,

2022 -

$1.4 billion).

A detailed

description of

the Corporation’s

borrowings, including

their

terms, is

included

in Note

16 to

the Consolidated

Financial Statements.

Also, the

Consolidated Statements

of Cash

Flows in

the

accompanying Consolidated Financial Statements provide

information on the Corporation’s cash inflows and outflows.

The

following

sections

provide

further

information

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.

During the

third quarter

of 2023

the Corporation

had no

material incremental

use of

its available

liquidity sources.

At September

30,2023,

the

Corporation’s

available

liquidity

increased

$18.8

billion

from

$17.0

billion

December

31,

2022.

The

liquidity

sources of the Corporation at September 30,2023

are presented in Table 13:

Table 13 - Liquidity Sources

30-Sep-23

31-Dec-22

(Dollars in thousands)

BPPR

Popular U.S.

Total

BPPR

Popular U.S.

Total

Unpledged securities and unused funding

sources:

Money market (excess funds at the

Federal Reserve Bank)

5,533,314

850,248

6,383,562

5,240,100

367,966

5,608,066

Unpledged securities

3,927,353

273,313

4,200,666

7,494,189

326,599

7,820,788

FHLB borrowing capacity

2,236,318

1,420,913

3,657,231

1,389,579

722,005

2,111,584

Discount window of the Federal Reserve

Bank borrowing capacity

2,559,938

1,994,936

4,554,874

1,090,308

329,385

1,419,693

Total available liquidity

14,256,923

4,539,410

18,796,333

15,214,176

1,745,955

16,960,131

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.

162

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 and

financial condition, credit

ratings (by

nationally recognized credit

rating agencies), customer

confidence, and

importantly,

FDIC deposit

insurance coverage.

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 the aforementioned risks.

Deposits are

a key

source of

funding. Refer

to Table

8 for

a breakdown

of deposits

by major

types. Core

deposits are

generated

from a large base of consumer,

corporate and public sector customers. Core deposits include certificate of

deposit under $250,000,

all

interest-bearing

transactional

deposit

accounts,

non-interest

bearing

deposits,

and

savings

deposits.

Core

deposits

exclude

brokered deposits and certificate of

deposits over $250,000. Core

deposits, excluding P.R.

public funds that are

fully collateralized,

have

historically

provided

the

Corporation with

sizable

source

relatively stable

and

low-cost funds.

P.R.

public funds,

while

linked to

market interest

rates, provide

a stable

source of

funding with

an attractive

earnings spread.

Core deposits

totaled $58.8

billion, or

93% of

total deposits,

at September

30, 2023,

compared with

$57.6 billion,

or 94%

of total

deposits, at

December 31,

2022. Core

deposits financed

89% of

the Corporation’s

earning assets

at September

30, 2023,

compared with

90% at

December

31, 2022.

The distribution by maturity of certificates of deposits with denominations of $250,000 and

over at September 30, 2023 is presented

in the table that follows:

Table 14 - Distribution by

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

(In thousands)

3 months or less

1,836,911

Over 3 to 12 months

723,996

Over 1 year to 3 years

217,399

Over 3 years

165,956

Total

2,944,262

The Corporation had

$1.7 billion in

brokered deposits at September

30, 2023, which

financed approximately

2% of its

total assets

(December 31, 2022 -

$1.1 billion and 2%,

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 September 30,

2023, total public

sector deposits were $17.8 billion,

compared to $15.8 billion at December 31, 2022. 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 September 30, 2023, 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

163

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.

The Corporation

monitors uninsured

deposits under

applicable FDIC

regulations.

Additionally,

the Corporation

monitors accounts

with balances over $250,000.

While the Corporation has a

diverse deposit base from retail, commercial,

corporate and government

clients,

well

wholesale funding

sources such

brokered deposits,

considers

balance

excess

$250,000 to

have a

higher

potential

liquidity

risk.

Table

reflects

the

aggregate

balance

deposit

accounts

excess

$250,000,

including

collateralized public funds and deposits outside of the

U.S. and its territories.

Collateralized public funds, as presented in Table

15,

represent public

deposit balances from

governmental entities in

the U.S. and

its territories, including

Puerto Rico

and the U.S.V.I.,

that

are

collateralized

based

such

jurisdictions’

applicable

collateral

requirements.

September

30,2023,

deposits

with

balances in excess of $250,000, excluding foreign deposits (mainly deposits in the British Virgin Islands) intercompany deposits and

collateralized

public

funds,

were

$11.3

billion

21%

BPPR

and

$2.4

billion

23%

Popular

U.S.,

compared

available

liquidity sources of $ 14.3 billion at BPPR and

$ 4.5 billion at Popular U.S.

164

Table 15 - Deposits

30-Sep-23

Popular, Inc.

(Dollars in thousands)

BPPR

% of Total

Popular U.S.

% of Total

(Consolidated)

% of Total

Deposits:

Deposits balances under $250,000 [1]

23,971,025

6,965,757

30,936,782

Transactional deposits balances over

$250,000

9,396,047

2,056,655

11,452,702

Time deposits balances over $250,000

1,948,475

297,277

2,245,752

Uninsured foreign deposits

403,206

Collateralized public funds

18,012,588

286,570

18,299,158

Intercompany deposits

107,293

696,101

Total deposits

53,838,634

100

10,302,360

100

63,337,600

100

[1] Includes the first $250,000 in balances of transactional

and time deposit accounts with balances in excess

of $250,000.

31-Dec-22

Popular, Inc.

(Dollars in thousands)

BPPR

% of Total

Popular U.S.

% of Total

(Consolidated)

% of Total

Deposits

Deposits balances under $250,000 [1]

24,505,697

5,231,417

29,737,114

Transactional deposits balances over

$250,000

9,957,877

2,674,841

12,632,718

Time deposits balances over $250,000

1,920,455

167,067

2,087,522

Uninsured foreign deposits

425,855

Collateralized public funds

16,233,342

110,676

16,344,018

Intercompany deposits

135,172

482,167

Total deposits

53,178,398

100

8,666,168

100

61,227,227

100

[1] Includes the first $250,000 in balances of transactional

and time deposit accounts with balances in excess

of $250,000.

Bank Holding Companies

The principal

sources of

funding for

the BHCs,

which are

Popular,

Inc.

(holding company

only) and

PNA, include

cash on

hand,

investment

securities,

dividends

received from

banking

and

non-banking subsidiaries,

asset sales,

credit

facilities

available from

affiliate banking subsidiaries and proceeds from potential securities offerings.

Dividends from banking and non-banking subsidiaries

are subject to various regulatory limits

and authorization requirements 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

$592

million

September

30,

2023

and

$497

million

December 31, 2022.

The contractual maturities of the BHCs notes payable

at September 30, 2023 are presented in Table 16.

165

Table 16

- Distribution of BHC's Notes Payable by Contractual

Maturity

Year

(In thousands)

2028

393,678

Later years

198,339

Total

592,017

As of

September 30,

2023, the

BHCs had

cash and

money markets

investments totaling

$368 million

and borrowing

potential of

$222 million from its

secured facility with BPPR. The BHCs’

liquidity position continues to be adequate with sufficient cash

on hand,

investments and other sources

of liquidity which are

expected to be enough

to meet all

interest payments and

dividend obligations

during the foreseeable future. On March 13,

2023, the Corporation issued $400 million aggregate principal

amount of 7.25% Senior

Notes due

2028 (the

“Notes”) in

an underwritten

public offering.

The Corporation

used a

portion of

the net

proceeds of

the 2028

Notes offering

to redeem,

on August 14,

2023, the outstanding

$300 million aggregate

principal amount of

its outstanding 6.125%

Senior Notes which were

due on September 2023.

For the remainder of

year 2023, debt service

at the BHCs is

approximately $11

million. Additionally, the Corporation’s latest quarterly dividend was $0.55 per share or

approximately $40 million per quarter.

The BHCs have in

the past borrowed in the

corporate debt market primarily to finance

their non-banking subsidiaries and refinance

debt obligations. These

sources of funding

are more costly

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.

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

nine

months

ended

September

30,

2023,

Popular,

Inc.

made

capital

contributions

its

wholly

owned

subsidiaries

$1.3

million

Popular Impact Fund and $0.2 million to Popular

Global Solutions.

Dividends

During

the

nine

months

ended

September

30,

2023,

the

Corporation

declared

cash

dividends

$1.65

per

common

outstanding ($118.9 million in the aggregate). The dividends for the Corporation’s Series A preferred stock amounted to $1.1 million.

During the nine months ended September 30, 2023, the BHCs received

dividends amounting to $150 million from BPPR, $50 million

from PNA and $4 million from its non-banking

subsidiaries. In addition, during the nine months ended September 30,

2023, Popular

International Bank Inc.,

wholly owned subsidiary of

Popular, Inc.,

received $14.1 million in

cash dividends and

$2.1 million in

stock

dividends from its investment in BHD.

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

Other Funding Sources and Capital

In addition to cash reserves held at the FRB that totaled $ 6.4 billion at September 30,2023,

the debt securities portfolio provides an

additional

source

liquidity,

which

may

realized

through

either

securities

sales,

collateralized

borrowings

repurchase

agreements.

The

Corporation’s

debt

securities

portfolio

consists

primarily

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 to

$ 4.2

billion at

September 30,

2023 and

$ 7.8

billion at

December 31,

2022. A

substantial

portion of these debt securities could be used to raise financing in the U.S. money markets or from secured lending sources,

subject

to changes in their fair market value and customary

adjustments (haircuts).

166

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 21

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 20 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.

FDIC Special Assessments

May

11,

2023,

the

Federal

Deposit

Insurance

Corporation

(“FDIC”)

released

proposed

rule

that

would

impose

special

assessments

recover

the

losses

the

deposit

insurance

fund

(“DIF”)

resulting

from

the

FDIC’s

use,

March

2023,

the

systemic risk exception to the least-cost resolution test under

the Federal Deposit Insurance Act in connection with the receiverships

of Silicon Valley Bank and Signature Bank.

The

FDIC

stated

that

currently

estimates

those

assessed

losses

total

$15.8

billion

and

that

the

amount

the

special

assessments would be adjusted as the loss

estimate changes. Under the proposed rule, the assessment base would

be an insured

depository institution’s (“IDI”)

estimated uninsured deposits, as

reported in the

IDI’s December 31,

2022 Call Report,

excluding the

first

billion

estimated

uninsured

deposits.

For

holding

company

that

has

than

one

IDI

subsidiary,

such

the

Corporation, the $5 billion exclusion would be

allocated among the company’s IDI subsidiaries

in proportion to each IDI’s

estimated

uninsured deposits. The special assessments would be collected at an

annual rate of approximately 12.5 basis points per year (3.13

basis points per quarter) over eight quarters in 2024 and 2025, with the first assessment period beginning January 1, 2024 (with

the

first

assessment

payment

due

June

28,

2024).

Under

the

proposed

rule,

the

estimated

loss

pursuant

the

systemic

risk

determination

would be

periodically adjusted,

and

the

FDIC

would retain

the

ability to

cease

collection

early,

extend the

special

assessment collection period and impose

a final shortfall special

assessment on a one-time basis. In

their December 31, 2022

Call

Reports, BPPR and PB reported estimated uninsured deposits of approximately $28.1 billion and $3.5 billion, respectively.

Although

the proposal could be changed, the assessments, as proposed, would

be recorded as an expense in the period in which this

change

is enacted.

Such expense

would significantly affect

noninterest expense and

the results

of operations for

the quarter

in which

it is

recognized. If the

final rule is

adopted as proposed,

the special assessment

for the

Corporation is estimated

at approximately $66

million. The actual assessment may vary as a result

of the final rule, including any changes to the calculation

methodology.

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

167

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

September 30, 2023

and December 31,

2022, and the

results of their

operations for the

nine months period

ended September 30,

2023

and

September

30,

2022.

Investments in

and

equity

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.

168

Table 17 - Summarized Statement

of Condition

(In thousands)

September 30, 2023

December 31, 2022

Assets

Cash and money market investments

367,808

203,083

Investment securities

28,426

24,815

Accounts receivables from non-obligor subsidiaries

12,296

16,853

Other loans (net of allowance for credit losses of $17 (2022

- $370))

27,255

27,826

Investment in equity method investees

5,268

5,350

Other assets

56,678

45,278

Total assets

497,731

323,205

Liabilities and Stockholders' deficit

Accounts payable to non-obligor subsidiaries

11,302

3,709

Notes payable

592,017

497,428

Other liabilities

108,535

112,847

Stockholders' deficit

(214,123)

(290,779)

Total liabilities and

stockholders' deficit

497,731

323,205

Table 18 - Summarized Statement

of Operations

For the period ended

(In thousands)

September 30, 2023

September 30, 2022

Income:

Dividends from non-obligor subsidiaries

154,000

454,000

Interest income from non-obligor subsidiaries and affiliates

12,280

594

(Losses) earnings from investments in equity method investees

(82)

15,698

Other operating income

2,293

136,140

Total income

168,491

606,432

Expenses:

Services provided by non-obligor subsidiaries and affiliates

(net of

reimbursement by subsidiaries for services provided by parent

$161,333 (2022 - $157,754))

16,593

12,697

Other operating expenses

20,706

19,399

Total expenses

37,299

32,096

Net income

131,192

574,336

During the nine months period ended

September 30, 2022, the Obligor group recorded

$1.5 million of distributions from

its

direct equity

method investees.

During the

nine months

period ended

September 30,

2023, the

obligor group

recorded a

$50.0

million

dividend

dsitribution from

non-obligor subsidiary

wich

was

recorded as

reduction to

the

investment

(2022 - $53.5 million).

Risks to Liquidity

Total lines of credit outstanding, or available borrowing capacity under lines of credit are not necessarily

a measure of the total credit

available

continuing

basis.

Some

these

lines

could

subject

collateral

requirements,

changes

the

value

the

169

collateral, standards of

creditworthiness, leverage ratios

and other regulatory

requirements, among other factors.

Derivatives, such

those

embedded

long-term

repurchase

transactions

interest

rate

swaps,

and

off-balance

sheet

exposures,

such

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 nine

months ended

September 30,

2023, BPPR declared cash dividends

of $150 million. At September

30, 2023, BPPR can declare

a dividend of approximately $402

million without

prior approval

of the

Federal Reserve

Board due

to its

retained income,

declared dividend activity

and transfers

statutory

reserves

over

the

measurement

period.

addition,

member

bank

may

not

declare

pay

dividend

amount

greater

than

its

undivided

profits

reported

its

Report

Condition and

Income,

unless

the

member

bank

has

received

the

approval of

the Federal

Reserve Board. A

member bank also

may not permit

any portion of

its permanent capital

to be

withdrawn

unless the

withdrawal has been

approved by

the Federal

Reserve Board.

Pursuant to

these requirements, PB

may not

declare or

pay a

dividend without

the prior

approval of

the Federal

Reserve Board

and the

NYSDFS. The

ability of

a bank

subsidiary to

up-

stream

dividends

its

BHC

could

thus

impacted

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

issue

unsecured

senior

debt,

these

banking

subsidiaries

are

funded

primarily with

deposits and secured

borrowings. The banking

subsidiaries had $7.8

million in

deposits at

September 30, 2023

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

$27.8

million

September

30,

2023.

The

Corporation

could

required

post

additional

collateral

under

the

170

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 33 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 a

3.3% year-over-year increase

and a

0.2% month-over-month decrease

in August

2023. The

Economic

Activity Index is a coincident indicator of ongoing economic activity but not a direct measurement of real GNP. In February 2023, the

Puerto Rico

Planning Board

revised its

real GNP

forecast for

the current

fiscal year

(July 2022-June

2023) from

1.7% growth

0.7% growth, citing an anticipated deacceleration in the

global economy.

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

the

U.S.

Bureau

Labor

Statistics),

increased

3.7%

during

the

12-month

period

ended

September 2023.

Inflation in Puerto Rico, as measured by

the Puerto Rico Consumer Price Index

(published by the Department of

Labor

and

Human

Resources of

Puerto

Rico),

increased 3.3%

during the

12-month

period

ended September

2023.

The

rate

inflation has

gradually decreased from

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

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-

171

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 the

Puerto

Rico

Industrial

Development

Company

recently

commenced

solicitation

process

restructure

its

revenue

bonds

proceeding under Title VI of PROMESA.

Municipalities.

Puerto Rico’s fiscal and economic challenges have

also adversely impacted its municipalities. Budgetary subsidies to municipalities

have

gradually declined

in recent

years

and

were scheduled

be ultimately

eliminated by

fiscal year

2025

part

of the

fiscal

measures required

the Oversight

Board. However,

over the

past

years, the

Oversight Board

has

authorized and

funded

new

appropriations

and

investments

offset

the

decline

intergovernmental

transfers

municipalities.

Beyond

those

sources

alternate funding, municipalities have

also received significant federal

disaster and COVID-relief funding in

recent years. According

to the

latest Puerto

Rico fiscal

plan certified

by the

Oversight Board,

taken together,

the funding

available to

municipalities in

the

near-term is substantial. The fiscal

plan notes, however, that

the desired progress to achieve

fiscal discipline and implement critical

reforms has not been achieved,

and that municipalities must work with

the Executive branch to analyze

the financial needs of

each

individual municipality and focus on the necessary enhancements in municipal shared services and other

municipal and government

initiatives. Pursuant to

the fiscal plan,

once the transformational measures

and milestones related to

these initiatives are

achieved,

additional funding from the central government may be

made available to municipalities to improve fiscal

sustainability.

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.

At September

30, 2023,

the Corporation’s

direct exposure

to PR

Government Entities

totaled $362

million, of

which $333

million

were

outstanding,

compared

$374

million

December

31,

2022,

which

$327

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, $314 million

consists of loans and

$19 million are securities ($302

million and $25 million,

respectively,

at December 31,

2022). All

of the

Corporation’s direct exposure

outstanding at September

30, 2023

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

or sales

tax

revenues. At

September 30,

2023,

76% of

the Corporation’s

exposure to

municipal loans

and securities

was concentrated

in the

municipalities of

San Juan,

Guaynabo, Carolina

and Caguas.

For

additional

discussion

the

Corporation’s

direct

exposure

the

Puerto

Rico

government

and

its

instrumentalities

and

municipalities, refer to Note 21 – Commitments and

Contingencies to the Consolidated Financial Statements.

addition,

September

30,

2023,

the

Corporation

had

$242

million

loans

insured

securities

issued

Puerto

Rico

governmental entities,

but for

which the

principal source

of repayment

is non-governmental

($251 million at

December 31, 2022).

These

included

$195

million

residential mortgage

loans

insured by

the

Puerto

Rico

Housing

Finance Authority

(“HFA”),

a PR

Government

Entity

(December

31,

2022

$209 million).

These

mortgage

loans

are

secured

first

mortgages

Puerto

Rico

172

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

September

30,

2023,

$40

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, 2022 - $42 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.

September

30,

2023,

BPPR

had

$17.8

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 21

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 September 30,

2023, the Corporation

had approximately $28

million in direct

exposure to USVI

government entities (December

31, 2022 - $28 million).

British Virgin Islands

The

Corporation has

operations

the

British Virgin

Islands

(“BVI”),

which

was

negatively

affected by

the

COVID-19

pandemic,

particularly as

a reduction

in the

tourism activity

which accounts

for a

significant portion

of its

economy.

Although the

Corporation

has

significant

exposure

single

borrower

the

BVI,

September

30,

2023,

has

loan

portfolio

amounting

approximately

$201

million

comprised

various

retail

and

commercial

clients,

compared

loan

portfolio

$214

million

December 31, 2022.

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

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