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1
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
June 30, 2024
or
[ ]
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
[ ] No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit such files).
[X]
Yes
[ ] No
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
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 of shares outstanding of each of the issuer’s classes of common stock, as of the latest
practicable date: Common Stock, $0.01 par value,
72,335,174
2
POPULAR INC
INDEX
Part I – Financial Information
Page
Item 1. Financial Statements
Unaudited Consolidated Statements of Financial Condition at June 30, 2024
and December 31, 2023
6
Unaudited Consolidated Statements of Operations for the quarters
and six months ended June 30, 2024 and 2023
7
Unaudited Consolidated Statements of Comprehensive Income (Loss) for the
quarters and six months ended June 30, 2024 and 2023
8
Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the
quarters and six months ended June 30, 2024 and 2023
9
Unaudited Consolidated Statements of Cash Flows for the six months
ended June 30, 2024 and 2023
11
Notes to Unaudited Consolidated Financial Statements
13
Item 2. Management’s Discussion and Analysis of Financial Condition and
129
Item 3. Quantitative and Qualitative Disclosures about Market Risk
178
Item 4. Controls and Procedures
178
Part II – Other Information
Item 1. Legal Proceedings
178
Item 1A. Risk Factors
178
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
178
Item 3. Defaults Upon Senior Securities
179
Item 4. Mine Safety Disclosures
179
Item 5. Other Information
179
Item 6. Exhibits
179
Signatures
181
3
Forward-Looking Statements
This Form 10-Q contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of
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 on management’s current expectations and, by 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:
●
conditions in the geographic areas we serve and, in particular, in the Commonwealth of Puerto Rico (the
“Commonwealth” or “Puerto Rico”), where a significant portion of our business is concentrated;
●
consumer confidence and spending habits which may affect in turn, among other things, our level of non-performing
assets, charge-offs and provision expense;
●
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;
●
banking industry in general on investor and depositor sentiment regarding the stability and liquidity of banks;
●
Puerto Rico Government and the Federally-appointed oversight board on the economy, our customers and our
business;
●
Economic Stability Act (“PROMESA”) and of other actions taken or to be taken to 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 be directly affected by
governmental action;
●
difficult to predict and may be impacted by factors such as the amount of Federal funds received by the P.R.
Government and the rate of expenditure of such funds, as well as the financial condition, liquidity and cash
management practices of the Puerto Rico Government and its instrumentalities;
●
man-made disasters, acts of violence or war or pandemics, epidemics and other health-related crises, 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;
4
●
earnings, efficiencies and our targeted sustainable return on tangible common equity of 14% by the end of 2025;
●
to 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”);
●
●
related requirements and the impact of other proposed capital standards on our capital ratios;
●
by the FDIC to recover the losses to the deposit insurance fund (“DIF”) resulting from the receiverships of Silicon Valley
Bank and Signature Bank;
●
as acquisitions and dispositions;
●
Puerto Rico and the other markets in which our borrowers are located;
●
●
●
●
●
core financial transaction processing and information technology services, or of third parties providing services to us,
including as a result of cyberattacks, e-fraud, denial-of-services and computer intrusion, resulting in, among other
things, loss or breach of customer data, disruption of services, reputational damage or additional costs to Popular;
●
●
pending or future litigation and regulatory or government investigations or actions;
●
●
●
●
Moreover, the outcome of legal and regulatory proceedings, as discussed in “Part II, Item 1. Legal Proceedings,” is 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, 2023 (the “2023 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.
5
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.
6
POPULAR, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
[UNAUDITED]
June 30,
December 31,
(In thousands, except share information)
2024
2023
Assets:
Cash and due from banks
$
359,973
$
420,462
Money market investments:
Time deposits with other banks
6,851,394
6,998,871
Total money market investments
6,851,394
6,998,871
Trading account debt securities, at fair value:
Other trading account debt securities
28,045
31,568
Debt securities available-for-sale, at fair value:
Pledged securities with creditors’ right to repledge
82,233
72,827
Other debt securities available-for-sale
18,461,046
16,656,217
Debt securities available-for-sale
18,543,279
16,729,044
Less – Allowance for credit losses
500
-
Debt securities available-for-sale, net
18,542,779
16,729,044
Debt securities held-to-maturity, at amortized cost:
Pledged securities with creditors’ right to repledge
26,742
27,083
Other debt securities held-to-maturity
7,948,782
8,167,252
Debt securities held-to-maturity (fair value 2024 - $
7,833,216
; 2023 - $
8,159,385
)
7,975,524
8,194,335
Less – Allowance for credit losses
6,251
5,780
Debt securities held-to-maturity, net
7,969,273
8,188,555
Equity securities (realizable value 2024 - $
196,482
; 2023 - $
194,641
)
195,791
193,726
Loans held-for-sale, at fair value
8,225
4,301
Loans held-in-portfolio
35,978,602
35,420,879
Less – Unearned income
386,982
355,908
730,077
729,341
Total loans held-in-portfolio, net
34,861,543
34,335,630
Premises and equipment, net
599,058
565,284
Other real estate
70,225
80,416
Accrued income receivable
260,162
263,433
Mortgage servicing rights, at fair value
113,386
118,109
Other assets
2,172,555
2,014,564
Goodwill
804,428
804,428
Other intangible assets
8,235
9,764
Total assets
$
72,845,072
$
70,758,155
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing
$
15,470,082
$
15,419,624
Interest bearing
50,060,780
48,198,619
Total deposits
65,530,862
63,618,243
Assets sold under agreements to repurchase
105,684
91,384
Notes payable
941,580
986,948
Other liabilities
894,268
914,627
Total liabilities
67,472,394
65,611,202
Commitments and contingencies (Refer to Note 20)
Stockholders’ equity:
Preferred stock,
30,000,000
885,726
-
885,726
)
22,143
22,143
Common stock, $
0.01
170,000,000
104,811,971
104,767,348
) and
72,365,926
72,153,621
)
1,048
1,048
Surplus
4,852,747
4,843,399
Retained earnings
4,385,522
4,194,851
Treasury stock - at cost,
32,446,045
32,613,727
)
(2,010,500)
(2,018,957)
Accumulated other comprehensive loss, net of tax
(1,878,282)
(1,895,531)
Total stockholders’ equity
5,372,678
5,146,953
Total liabilities and stockholders’ equity
$
72,845,072
$
70,758,155
The accompanying notes are an integral part of these Consolidated Financial Statements.
7
POPULAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Quarters ended June 30,
Six months ended June 30,
(In thousands, except per share information)
2024
2023
2024
2023
Interest income:
Loans
$
648,739
$
570,120
$
1,287,469
$
1,111,330
Money market investments
88,316
100,775
176,832
166,499
Investment securities
184,852
123,112
351,747
255,200
Total interest income
921,907
794,007
1,816,048
1,533,029
Interest expense:
Deposits
339,939
243,488
669,435
436,703
Short-term borrowings
1,126
1,624
2,318
4,509
Long-term debt
12,530
17,227
25,239
28,493
Total interest expense
353,595
262,339
696,992
469,705
Net interest income
568,312
531,668
1,119,056
1,063,324
Provision for credit losses
46,794
37,192
119,392
84,829
Net interest income after provision for credit losses
521,518
494,476
999,664
978,495
Non-interest income:
Service charges on deposit accounts
37,526
37,781
74,968
72,459
Other service fees
96,863
94,265
191,135
184,341
Mortgage banking activities (Refer to Note 9)
5,723
2,316
10,083
9,716
Net gain, including impairment on equity securities
319
1,384
1,422
2,484
Net gain on trading account debt securities
277
35
638
413
Adjustments to indemnity reserves on loans sold
212
(456)
(25)
156
Other operating income
25,386
25,146
51,903
52,863
Total non-interest income
166,306
160,471
330,124
322,432
Operating expenses:
Personnel costs
197,424
191,468
412,801
390,228
Net occupancy expenses
27,692
27,165
55,733
53,204
Equipment expenses
9,662
9,561
19,229
17,973
Other taxes
15,333
16,409
29,708
32,700
Professional fees
37,744
50,132
66,662
83,563
Technology and software expenses
79,752
72,354
159,214
140,913
Processing and transactional services
39,096
36,801
73,290
70,710
Communications
4,357
4,175
8,914
8,263
Business promotion
25,449
25,083
46,438
43,954
Deposit insurance
10,581
6,803
34,468
15,668
Other real estate owned (OREO) income
(5,750)
(3,314)
(11,071)
(5,008)
Other operating expenses
27,502
22,852
55,774
47,213
Amortization of intangibles
734
795
1,529
1,590
Total operating expenses
469,576
460,284
952,689
900,971
Income before income tax
218,248
194,663
377,099
399,956
Income tax expense
40,459
43,503
96,027
89,817
Net Income
$
177,789
$
151,160
$
281,072
$
310,139
Net Income Applicable to Common Stock
$
177,436
$
150,807
$
280,366
$
309,433
Net Income per Common Share – Basic
$
2.47
$
2.10
$
3.90
$
4.32
Net Income per Common Share – Diluted
$
2.46
$
2.10
$
3.90
$
4.32
The accompanying notes are an integral part of these Consolidated Financial Statements.
8
POPULAR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
Quarters ended,
Six months ended,
June 30,
June 30,
(In thousands)
2024
2023
2024
2023
Net income
$
177,789
$
151,160
$
281,072
$
310,139
Other comprehensive income (loss) before tax:
Foreign currency translation adjustment
165
6,001
(3,855)
756
Amortization of net losses of pension and postretirement benefit plans
3,618
4,813
7,236
9,626
Unrealized holding gains (losses) on debt securities arising during the period
22,422
(77,851)
(50,608)
135,467
Amortization of unrealized losses of debt securities transfer from available-for-
sale to held-to-maturity
44,421
42,903
88,430
84,943
Unrealized net gains (losses) on cash flow hedges
-
-
-
(30)
Reclassification adjustment for net gains( losses) included in net income
-
-
-
(41)
Other comprehensive income (loss) before tax
70,626
(24,134)
41,203
230,721
Income tax expense
(15,722)
(2,476)
(23,954)
(34,228)
Total other comprehensive income (loss), net of tax
54,904
(26,610)
17,249
196,493
Comprehensive income, net of tax
$
232,693
$
124,550
$
298,321
$
506,632
Tax effect allocated to each component of other comprehensive income (loss):
Quarters ended
Six months ended,
June 30,
June 30,
(In thousands)
2024
2023
2024
2023
Adjustment of pension and postretirement benefit plans
$
-
$
-
$
-
$
-
Amortization of net losses of pension and postretirement benefit plans
(1,357)
(1,805)
(2,714)
(3,610)
Unrealized holding losses on debt securities arising during the period
(5,481)
7,910
(3,555)
(13,656)
Amortization of unrealized losses of debt securities transfer from available-for-
sale to held-to-maturity
(8,884)
(8,581)
(17,685)
(16,988)
Unrealized net (losses) gains on cash flow hedges
-
-
-
11
Reclassification adjustment for net (gains) losses included in net income
-
-
-
15
Income tax expense
$
(15,722)
$
(2,476)
$
(23,954)
$
(34,228)
The accompanying notes are an integral part of the Consolidated Financial Statements.
9
POPULAR, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
other
Common
Preferred
Retained
Treasury
comprehensive
(In thousands)
stock
stock
Surplus
earnings
stock
(loss) income
Total
Balance at March 31, 2023
$
1,047
$
22,143
$
4,792,619
$
3,982,140
$
(2,025,399)
$
(2,301,825)
$
4,470,725
Net income
151,160
151,160
Issuance of stock
1,550
1,550
Dividends declared:
Common stock
[1]
(39,663)
(39,663)
Preferred stock
(353)
(353)
Common stock purchases
(1,271)
(1,271)
Stock based compensation
1,412
8,059
9,471
Other comprehensive loss, net of tax
(26,610)
(26,610)
Balance at June 30, 2023
$
1,047
$
22,143
$
4,795,581
$
4,093,284
$
(2,018,611)
$
(2,328,435)
$
4,565,009
Balance at March 31, 2024
$
1,048
$
22,143
$
4,847,466
$
4,253,030
$
(2,013,187)
$
(1,933,186)
$
5,177,314
Net income
177,789
177,789
Issuance of stock
1,768
1,768
Dividends declared:
Common stock
[1]
(44,944)
(44,944)
Preferred stock
(353)
(353)
Common stock purchases
(3,200)
(3,200)
Stock based compensation
3,513
5,887
9,400
Other comprehensive income, net of tax
54,904
54,904
Balance at June 30, 2024
$
1,048
$
22,143
$
4,852,747
$
4,385,522
$
(2,010,500)
$
(1,878,282)
$
5,372,678
[1]
Dividends declared per common share during the quarter ended June 30, 2024 - $
0.62
0.55
).
10
POPULAR, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
other
Common
Preferred
Retained
Treasury
comprehensive
(In thousands)
stock
stock
Surplus
earnings
stock
(loss) income
Total
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
28,752
Net income
310,139
310,139
Issuance of stock
3,117
3,117
Dividends declared:
Common stock
[1]
(79,249)
(79,249)
Preferred stock
(706)
(706)
Common stock purchases
(4,241)
(4,241)
Stock based compensation
1,471
15,808
17,279
Other comprehensive income, net of tax
196,493
196,493
Balance at June 30, 2023
$
1,047
$
22,143
$
4,795,581
$
4,093,284
$
(2,018,611)
$
(2,328,435)
$
4,565,009
Balance at December 31, 2023
$
1,048
$
22,143
$
4,843,399
$
4,194,851
$
(2,018,957)
$
(1,895,531)
$
5,146,953
Net income
281,072
281,072
Issuance of stock
3,567
3,567
Dividends declared:
Common stock
[1]
(89,695)
(89,695)
Preferred stock
(706)
(706)
Common stock purchases
(6,776)
(6,776)
Stock based compensation
5,781
15,233
21,014
Other comprehensive income, net of tax
17,249
17,249
Balance at June 30, 2024
$
1,048
$
22,143
$
4,852,747
$
4,385,522
$
(2,010,500)
$
(1,878,282)
$
5,372,678
[1]
Dividends declared per common share during the six months ended June 30, 2024 - $
1.24
1.10
).
For the period ended
June 30,
June 30,
Disclosure of changes in number of shares:
2024
2023
Preferred Stock:
Balance at beginning and end of period
885,726
885,726
Common Stock – Issued:
Balance at beginning of period
104,767,348
104,657,522
Issuance of stock
44,623
54,908
Balance at end of period
104,811,971
104,712,430
Treasury stock
(32,446,045)
(32,608,461)
Common Stock – Outstanding
72,365,926
72,103,969
The accompanying notes are an integral part of these Consolidated Financial Statements.
11
POPULAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended June 30,
(In thousands)
2024
2023
Cash flows from operating activities:
Net income
$
281,072
$
310,139
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
119,392
84,829
Amortization of intangibles
1,529
1,590
Depreciation and amortization of premises and equipment
31,249
27,957
Net accretion of discounts and amortization of premiums and deferred fees
(127,770)
1,568
Interest capitalized on loans subject to the temporary payment moratorium or loss mitigation alternatives
(4,047)
(5,275)
Share-based compensation
16,391
13,331
Fair value adjustments on mortgage servicing rights
5,384
8,342
Adjustments to indemnity reserves on loans sold
25
(156)
Earnings from investments under the equity method, net of dividends or distributions
(2,871)
(6,540)
Deferred income tax expense (benefit)
19,702
(1,007)
Gain on:
Disposition of premises and equipment and other productive assets
(6,295)
(5,643)
Sale of loans, including valuation adjustments on loans held-for-sale and mortgage banking activities
(76)
(202)
Sale of foreclosed assets, including write-downs
(10,575)
(11,674)
Acquisitions of loans held-for-sale
(1,767)
(6,153)
Proceeds from sale of loans held-for-sale
19,358
24,808
Net originations on loans held-for-sale
(22,580)
(45,005)
Net decrease (increase) in:
Trading debt securities
6,735
17,484
Equity securities
(4,445)
(7,962)
Accrued income receivable
(17,340)
138
Other assets
(8,463)
17,306
Net increase (decrease) in:
Interest payable
3,145
16,815
Pension and other postretirement benefits obligation
3,732
7,983
Other liabilities
(59,481)
(91,321)
Total adjustments
(39,068)
41,213
Net cash provided by operating activities
242,004
351,352
Cash flows from investing activities:
Net decrease (increase) in money market investments
147,650
(2,979,482)
Purchases of investment securities:
Available-for-sale
(17,231,900)
(7,257,079)
Held-to-maturity
-
(6,037)
Equity
(1,667)
(15,999)
Proceeds from calls, paydowns, maturities and redemptions of investment securities:
Available-for-sale
15,375,714
8,067,613
Held-to-maturity
304,653
204,587
Proceeds from sale of investment securities:
Equity
4,046
27,442
Net disbursements on loans
(287,684)
(776,383)
Proceeds from sale of loans
17,640
40,759
Acquisition of loan portfolios
(384,479)
(322,512)
Return of capital from equity method investments
279
249
Acquisition of premises and equipment and other productive assets
(95,412)
(85,341)
Proceeds from sale of:
Premises and equipment and other productive assets
4,409
3,200
Foreclosed assets
58,979
57,226
Net cash used in investing activities
(2,087,772)
(3,041,757)
12
Cash flows from financing activities:
Net increase (decrease) in:
Deposits
1,912,286
2,754,305
Assets sold under agreements to repurchase
14,300
(25,405)
Other short-term borrowings
-
(365,000)
Payments of notes payable
(46,000)
(21,000)
Principal payments of finance leases
(1,774)
(2,645)
Proceeds from issuance of notes payable
-
437,631
Proceeds from issuance of common stock
3,567
3,117
Dividends paid
(90,151)
(79,816)
Net payments for repurchase of common stock
(452)
(364)
Payments related to tax withholding for share-based compensation
(6,324)
(3,877)
Net cash provided by financing activities
1,785,452
2,696,946
Net (decrease) increase in cash and due from banks, and restricted cash
(60,316)
6,541
Cash and due from banks, and restricted cash at beginning of period
427,575
476,159
Cash and due from banks, and restricted cash at the end of the period
$
367,259
$
482,700
The accompanying notes are an integral part of these Consolidated Financial Statements.
13
Notes to Consolidated Financial
Statements (Unaudited)
Note 1 -
Nature of operations
14
Note 2 -
Basis of presentation
15
Note 3 -
New accounting pronouncements
16
Note 4 -
Restrictions on cash and due from banks and
certain securities
19
Note 5 -
Debt securities available-for-sale
20
Note 6 -
Debt securities held-to-maturity
23
Note 7 -
Loans
27
Note 8 -
Allowance for credit losses – loans held-in-
portfolio
36
Note 9 -
Mortgage banking activities
76
Note 10 -
Transfers of financial assets and mortgage
servicing assets
77
Note 11 -
Other real estate owned
81
Note 12 -
Other assets
82
Note 13 -
Goodwill and other intangible assets
83
Note 14 -
Deposits
85
Note 15 -
Borrowings
86
Note 16 -
Other liabilities
88
Note 17 -
Stockholders’ equity
89
Note 18 -
Other comprehensive income (loss)
90
Note 19 -
Guarantees
92
Note 20 -
Commitments and contingencies
94
Note 21-
Non-consolidated variable interest entities
98
Note 22 -
Related party transactions
100
Note 23 -
Fair value measurement
101
Note 24 -
Fair value of financial instruments
108
Note 25 -
Net income per common share
111
Note 26 -
Revenue from contracts with customers
112
Note 27 -
Leases
114
Note 28 -
Pension and postretirement benefits
116
Note 29 -
Stock-based compensation
117
Note 30 -
Income taxes
120
Note 31 -
Supplemental disclosure on the consolidated
statements of cash flows
124
Note 32 -
Segment reporting
125
14
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 of the Board of Governors of the Federal Reserve System. The Corporation has operations in 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 de Puerto Rico (“BPPR”), as well as
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” or “Popular U.S.”), which has
branches located in New York, New Jersey, and Florida.
15
Note 2 – Basis of Presentation
Basis of Presentation
The (unaudited) interim Consolidated Financial Statements are, in the opinion of management, a fair statement of the results for the
periods reported and include all necessary adjustments, all of a normal recurring nature, for a fair statement of such results. The
consolidated statement of financial condition presented as of December 31, 2023 was derived from audited Consolidated Financial
Statements of the Corporation for the year ended December 31, 2023.
Certain information and notes to the financial statements disclosures which would normally be included in financial statements
prepared in accordance with Accounting Principles Generally Accepted in the United States of America (US GAAP), have been
condensed or omitted from the unaudited financial statements pursuant to the rules and regulations of 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, 2023, included in the 2023 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
Tax impact on Intercompany Distributions
The net income for the six months ended June 30, 2024, included $
22.9
16.5
income tax expense and $
6.4
with the Corporation’s U.S. subsidiary’s non-payment of taxes on certain intercompany distributions to the Bank Holding Company
(BHC) in Puerto Rico, a foreign corporation for U.S. tax purposes. The adjustment corrected errors for income tax expense that
should have been recognized of $
5.5
5.4
5.6
million, in the years prior to 2022. The $
6.4
31, 2024 on the related late payment of the withholding tax, of which approximately $
3.0
As a result of this adjustment, the deferred tax asset related to NOL of the BHC and its related valuation allowance was reduced by
$
53.7
previously issued interim or annual consolidated financial statements and the adjustment is not expected to be material to the year
ending December 31, 2024.
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 at the date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
16
Note 3 - New accounting pronouncements
Recently Adopted Accounting Standards Updates
Standard
Description
Date of adoption
Effect on the financial statements
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 Financial Accounting Standards Board
("FASB") issued Accounting Standard
Update ("ASU") 2023-02 in March 2023,
which amends Accounting Standards
Codification ("ASC") Topic 323 by
permitting the election to apply the
proportional amortization method to account
for tax equity investments that generate
income tax credits through investment in
low-income-housing tax credit (LIHTC)
structures and other tax credit programs if
certain conditions are met. The ASU also
eliminates the application of the ASC
Subtopic 323-740 to LIHTC investments not
accounted for using the proportional
amortization method and instead requires
the use of other guidance.
January 1, 2024
The Corporation was not impacted by
the adoption of this ASU since it does
not hold investments in tax equity
investments.
FASB ASU 2023-01,
Leases (Topic 842) -
Common Control
Arrangements
The FASB issued ASU 2023-01 in March
2023, which amends ASC Topic 842 and
requires the amortization leasehold
improvements associated with common
control leases over the useful life of the
leasehold improvements to the common
control group as long as the lessee controls
the use of the underlying assets through a
lease. In addition, the ASU requires
companies to account for leasehold
improvements associated with common
control leases as a transfer between entities
under common control through an
adjustments to equity if, and when, the
lessee no longer controls the use of the
underlying asset.
January 1, 2024
The Corporation was not impacted by
the adoption of this ASU since it does
not hold common control leasehold
improvements, however, it will consider
this guidance to determine the
amortization period for and accounting
treatment of leasehold improvements
associated with common control leases
acquired on or after the effective date.
FASB ASU 2022-03, Fair
Value Measurement
(Topic 820) - Fair Value
Measurement of Equity
Securities Subject to
Contractual Sale
Restriction
The FASB issued ASU 2022-03 in June
2022, which clarifies that a contractual
restriction that prohibits the sale of an equity
security is not considered part of the unit of
account of the equity security, therefore, is
not considered in measuring its fair value.
The ASU also provides enhanced
disclosures for equity securities subject to a
contractual sale restriction.
January 1, 2024
The Corporation was not impacted by
the adoption of this accounting
pronouncement since it does not hold
equity securities measured at fair value
with sale restrictions.
17
Accounting Standards Updates Not Yet Adopted
Standard
Description
Date of adoption
Effect on the financial statements
FASB ASU 2024-02,
Codification
Improvements—
Amendments to Remove
References to the
Concepts Statements
The FASB issued ASU 2024-02 in March
2024, which removes various references to
concept statements from the FASB
Accounting Standards Codification. The
ASU intends to simplify the Codification
and distinguish between nonauthoritative
and authoritative guidance.
January 1, 2025
The Corporation is currently evaluating
any impact that the adoption of this
guidance will have on its financial
statements and presentation and
disclosures.
FASB ASU 2024-01,
Compensation - Stock
Compensation (Topic 718)
- Scope Application of
Profits Interest and Similar
Awards
The FASB issued ASU 2024-01 in March
2024, which amends ASC Topic 718 by
including an illustrative example to
demonstrate how an entity would apply the
scope guidance in paragraph 718-10-15-3
to determine whether profits interest awards
should be accounted for in accordance with
ASC Topic 718. The ASU is intended to
reduce complexity and diversity in practice.
January 1, 2025
The Corporation is currently evaluating
any impact that the adoption of this
guidance will have on its financial
statements and presentation and
disclosures.
FASB ASU 2023-09,
Income Tax (Topic 740) -
Improvements to Income
Tax Disclosures
The FASB issued ASU 2023-09 in
December 2023, which amends ASC Topic
740 by enhancing disclosures regarding
rate reconciliation and requiring the
disclosure of income taxes paid, income (or
loss) from continuing operations before
income tax expense and income tax
expense disaggregated by national, state
and foreign level. Disclosures that no longer
were considered cost beneficial or relevant
were removed from ASC Topic 740.
January 1, 2025
The Corporation is currently evaluating
any impact that the adoption of this
guidance will have on its financial
statements and presentation and
disclosures.
FASB ASU 2023-08,
Intangibles - Goodwill and
Other - Crypto Assets
(Subtopic 350-60) -
Accounting for and
Disclosure of Crypto
Assets
The FASB issued ASU 2023-08 in
December 2023, which amends ASC
Subtopic 350-60 by requiring that crypto
assets are measured at fair value in the
statement of financial position each
reporting period with changes from
remeasurement being recognized in net
income. The ASU also requires enhanced
disclosures for both annual and interim
reporting periods to provide investors with
relevant information to analyze and assess
the exposure and risk of significant
individual crypto asset holdings.
January 1, 2025
The Corporation does not expect to be
impacted by the adoption of this ASU
since it does not hold crypto-assets.
FASB ASU 2023-07,
Segment Reporting (Topic
280) - Improvements to
Reportable Segment
Disclosures
The FASB issued ASU 2023-07 in
November 2023, which amends ASC Topic
280 by requiring additional disclosures
about significant segment expenses.
For fiscal years
beginning on
January 1, 2024
For interim periods
within fiscal years
beginning after
January 1, 2025
The Corporation is currently evaluating
any impact that the adoption of this
guidance will have on its financial
statements and presentation and
disclosures.
18
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 or
presentation requirements of various
subtopics in the Codification with the
purpose of aligning U.S. GAAP
requirements 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
requirements 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 be
impacted by the adoption of this ASU
since it is currently subject to 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 in 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 a
joint venture, upon formation, recognize and
initially measure its assets and liabilities at
fair value.
January 1, 2025
Upon adoption of this ASU, the
Corporation will consider this guidance
for the initial measure of assets and
liabilities of newly created joint
ventures.
19
Note 4 - 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. Average reserve balances in BPPR amounted to $
2.7
2.7
billion). Cash and due from banks, as well as other highly liquid securities, are used to cover these required average reserve
balances.
At June 30, 2024, the Corporation held $
59
debt securities available for sale and equity securities (December 31, 2023 - $
78
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.
20
Note 5 – 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 June 30, 2024 and December 31, 2023.
At June 30, 2024
Allowance
Gross
Gross
Weighted
Amortized
for credit
unrealized
unrealized
Fair
average
(In thousands)
cost
losses
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
10,828,370
$
-
$
34
$
61,019
$
10,767,385
4.00
%
After 1 to 5 years
2,275,875
-
51
123,554
2,152,372
1.33
After 5 to 10 years
99,526
-
-
11,897
87,629
1.72
Total U.S. Treasury securities
13,203,771
-
85
196,470
13,007,386
3.52
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
14,014
-
-
669
13,345
1.54
After 5 to 10 years
17,931
-
-
1,214
16,717
2.30
After 10 years
111,701
-
91
10,001
101,791
2.76
Total collateralized mortgage obligations - federal agencies
143,646
-
91
11,884
131,853
2.59
Mortgage-backed securities - federal agencies
Within 1 year
1,323
-
-
21
1,302
1.75
After 1 to 5 years
73,250
-
5
3,403
69,852
2.40
After 5 to 10 years
828,760
-
140
57,755
771,145
2.35
After 10 years
5,712,046
-
223
1,153,028
4,559,241
1.64
Total mortgage-backed securities - federal agencies
6,615,379
-
368
1,214,207
5,401,540
1.74
Other
Within 1 year
1,000
500
-
-
500
5.00
After 1 to 5 years
1,500
-
-
-
1,500
8.50
Total other
2,500
500
-
-
2,000
7.10
Total debt securities available-for-sale
[1]
$
19,965,296
$
500
$
544
$
1,422,561
$
18,542,779
2.92
%
[1]
13.8
agreements that the secured parties are not permitted to sell or repledge the collateral, of which $
12.8
Corporation had unpledged Available for Sale securities with a fair value of $
4.7
21
At December 31, 2023
Gross
Gross
Weighted
Amortized
unrealized
unrealized
Fair
average
(In thousands)
cost
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
7,103,518
$
526
$
59,415
$
7,044,629
3.51
%
After 1 to 5 years
3,598,209
84
170,209
3,428,084
1.35
After 5 to 10 years
307,512
-
33,164
274,348
1.63
Total U.S. Treasury securities
11,009,239
610
262,788
10,747,061
2.75
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
17,899
-
838
17,061
1.55
After 5 to 10 years
20,503
2
1,321
19,184
2.28
After 10 years
108,280
29
9,868
98,441
2.54
Total collateralized mortgage obligations - federal agencies
146,682
31
12,027
134,686
2.38
Mortgage-backed securities - federal agencies
Within 1 year
637
-
3
634
3.72
After 1 to 5 years
82,310
11
3,536
78,785
2.34
After 5 to 10 years
792,431
75
48,250
744,256
2.28
After 10 years
6,067,353
667
1,046,909
5,021,111
1.64
Total mortgage-backed securities - federal agencies
6,942,731
753
1,098,698
5,844,786
1.72
Other
Within 1 year
1,011
-
-
1,011
4.00
After 1 to 5 years
1,500
-
-
1,500
8.50
Total other
2,511
-
-
2,511
6.69
Total debt securities available-for-sale
[1]
$
18,101,163
$
1,394
$
1,373,513
$
16,729,044
2.35
%
[1]
Includes $
12
servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $
11.1
public funds. The Corporation had unpledged Available for Sale securities with a fair value of $
4.6
borrowing facilities.
The weighted average yield on debt securities available-for-sale is based on amortized cost; therefore, it does not give effect to
changes in fair value.
Securities not due on a single contractual maturity date, such as mortgage-backed securities and collateralized mortgage
obligations, are classified based on the period of final contractual maturity. The expected maturities of 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.
At June 30, 2024, the Corporation did not intend to sell or believed it was more likely than not that it would be required to sell debt
securities classified as available-for-sale. There were
no
30, 2024 and 2023.
22
The following tables present the Corporation’s fair value and gross unrealized losses of 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
June 30, 2024 and December 31, 2023.
At June 30, 2024
Less than 12 months
12 months or more
Total
Gross
Gross
Gross
Fair
Fair
Fair
(In thousands)
value
losses
value
losses
value
losses
U.S. Treasury securities
$
6,003,623
$
4,122
$
5,111,232
$
192,348
$
11,114,855
$
196,470
Collateralized mortgage obligations - federal agencies
6,982
26
116,418
11,858
123,400
11,884
Mortgage-backed securities
43,617
662
5,337,896
1,213,545
5,381,513
1,214,207
Total debt securities available-for-sale in an unrealized loss position
$
6,054,222
$
4,810
$
10,565,546
$
1,417,751
$
16,619,768
$
1,422,561
At December 31, 2023
Less than 12 months
12 months or more
Total
Gross
Gross
Gross
Fair
Fair
Fair
(In thousands)
value
losses
value
losses
value
losses
U.S. Treasury securities
$
244,925
$
5,126
$
6,550,941
$
257,662
$
6,795,866
$
262,788
Collateralized mortgage obligations - federal agencies
5,234
35
124,930
11,992
130,164
12,027
Mortgage-backed securities
37,118
405
5,779,260
1,098,293
5,816,378
1,098,698
Total debt securities available-for-sale in an unrealized loss position
$
287,277
$
5,566
$
12,455,131
$
1,367,947
$
12,742,408
$
1,373,513
As of June 30, 2024, the portfolio of available-for-sale debt securities reflects gross unrealized losses of $
1.4
by mortgage-backed securities, which have been impacted by a decline in fair value as a result of the rising interest rate
environment. The portfolio of available-for-sale debt securities is comprised mainly of U.S Treasuries and obligations from the U.S.
Government, its agencies or government sponsored entities, including Federal National Mortgage Association (“FNMA”), Federal
Home Loan Mortgage Corporation (“FHLMC”) and Government National Mortgage Association (“GNMA”). As discussed in Note 2 of
the 2023 Form 10-K, these securities carry an explicit or implicit guarantee from the U.S. Government, are highly rated by major
rating agencies, and have a long history of no credit losses. Accordingly, the Corporation applies a zero-credit loss assumption.
23
Note 6 –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 June 30, 2024 and December 31,
2023.
At June 30, 2024
Allowance
Carrying
Value
Gross
Gross
Weighted
Amortized
Book
[1]
for Credit
Net of
unrealized
unrealized
Fair
average
(In thousands)
cost
Value
Losses
Allowance
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
598,695
$
598,695
$
-
$
598,695
$
-
$
7,917
$
590,778
2.66
%
After 1 to 5 years
7,878,042
7,307,981
-
7,307,981
-
128,694
7,179,287
1.34
Total U.S. Treasury securities
8,476,737
7,906,676
-
7,906,676
-
136,611
7,770,065
1.43
Obligations of Puerto Rico, States and
political subdivisions
Within 1 year
3,055
3,055
6
3,049
2
-
3,051
6.23
After 1 to 5 years
18,595
18,595
112
18,483
52
148
18,387
3.60
After 5 to 10 years
845
845
28
817
20
-
837
5.80
After 10 years
38,866
38,866
6,105
32,761
2,781
1,967
33,575
1.42
Total obligations of Puerto Rico, States and
political subdivisions
61,361
61,361
6,251
55,110
2,855
2,115
55,850
2.38
Collateralized mortgage obligations - federal
agencies
After 10 years
1,527
1,527
-
1,527
-
186
1,341
2.87
Total collateralized mortgage obligations -
federal agencies
1,527
1,527
-
1,527
-
186
1,341
2.87
Securities in wholly owned statutory business
trusts
After 10 years
5,960
5,960
-
5,960
-
-
5,960
6.33
Total securities in wholly owned statutory
business trusts
5,960
5,960
-
5,960
-
-
5,960
6.33
Total debt securities held-to-maturity [2]
$
8,545,585
$
7,975,524
$
6,251
$
7,969,273
$
2,855
$
138,912
$
7,833,216
1.44
%
[1]
Book value includes $
570
certain securities previously transferred from available-for-sale securities portfolio to the held-to-maturity securities portfolio.
[2]
Includes $
7.9
Corporation had unpledged held-to-maturities securities with a fair value of $
69.7
24
At December 31, 2023
Allowance
Carrying
Value
Gross
Gross
Weighted
Amortized
Book
[1]
for Credit
Net of
unrealized
unrealized
Fair
average
(In thousands)
cost
Value
Losses
Allowance
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
597,768
$
597,768
$
-
$
597,768
$
-
$
7,526
$
590,242
2.58
%
After 1 to 5 years
7,971,072
7,335,159
-
7,335,159
637
21,996
7,313,800
1.39
After 5 to 10 years
211,061
188,484
-
188,484
-
187
188,297
1.50
Total U.S. Treasury securities
8,779,901
8,121,411
-
8,121,411
637
29,709
8,092,339
1.47
Obligations of Puerto Rico, States and
political subdivisions
`
Within 1 year
4,820
4,820
9
4,811
3
-
4,814
6.17
After 1 to 5 years
20,171
20,171
147
20,024
96
125
19,995
3.80
After 5 to 10 years
845
845
28
817
28
-
845
5.80
After 10 years
39,572
39,572
5,596
33,976
2,814
2,766
34,024
1.41
Total obligations of Puerto Rico, States and
political subdivisions
65,408
65,408
5,780
59,628
2,941
2,891
59,678
2.55
Collateralized mortgage obligations - federal
agencies
Within 1 year
13
13
-
13
-
-
13
6.44
After 10 years
1,543
1,543
-
1,543
-
148
1,395
2.87
Total collateralized mortgage obligations -
federal agencies
1,556
1,556
-
1,556
-
148
1,408
2.90
Securities in wholly owned statutory business
trusts
After 10 years
5,960
5,960
-
5,960
-
-
5,960
6.33
Total securities in wholly owned statutory
business trusts
5,960
5,960
-
5,960
-
-
5,960
6.33
Total debt securities held-to-maturity [2]
$
8,852,825
$
8,194,335
$
5,780
$
8,188,555
$
3,578
$
32,748
$
8,159,385
1.48
%
[1]
Book value includes $
658
securities transferred from available-for-sale securities portfolio to the held-to-maturity securities portfolio as discussed in Note 6 of the 2023 Form
10-K.
[2]
Includes $
8.1
Corporation had unpledged held-to-maturities securities with a fair value of $
67.3
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 to develop the estimate of
the allowance for credit losses for investment securities held-to-maturity.
As discussed in Note 2 of 2023 Form 10-K, U.S. Treasury securities carry an explicit guarantee from the U.S. Government are
highly rated by major rating agencies and have a long history of no credit losses. Accordingly, the Corporation applies a zero-credit
loss assumption and no allowance for credit losses (“ACL”) for these securities has been established.
At June 30, 2024 and December 31, 2023, 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 $
16
from certain property taxes imposed by the issuing municipality (December 31, 2023 - $
19
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 of the obligor risk ratings, refer to the Credit Quality section of Note 8 to the Consolidated
Financial Statements.
25
The following presents the amortized cost basis of securities held by the Corporation issued by municipalities of Puerto Rico
aggregated by the internally assigned standardized credit risk rating:
At June 30, 2024
At December 31, 2023
(In thousands)
Securities issued by Puerto Rico municipalities
Watch
$
2,255
$
2,255
Pass
13,265
16,565
Total
$
15,520
$
18,820
At June 30, 2024, the portfolio of “Obligations of Puerto Rico, States and political subdivisions” also includes $
39
issued by the Puerto Rico Housing Finance Authority (“HFA”), a 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, 2023 - $
40
securities are not rated by a credit rating agency.
The Corporation assesses the credit risk associated with these securities by evaluating the refreshed FICO scores of a
representative sample of the underlying borrowers. As of June 30, 2024, the average refreshed FICO score for the sample,
comprised of
69
% of the nominal value of the securities, used for the loss estimate was of
672
67
% and
708
,
respectively, at December 31, 2023). 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.
A
deterioration of the Puerto Rico economy or of the fiscal health of the Government of Puerto Rico and/or its instrumentalities
(including if any of the issuing municipalities become subject to a debt restructuring proceeding under PROMESA) could adversely
affect the value of these securities, resulting in losses to the Corporation.
Refer to Note 20
to the Consolidated Financial Statements
for additional information on the Corporation’s exposure to the Puerto
Rico Government.
At June 30, 2024 and December 31, 2023, the portfolio of “Obligations of Puerto Rico, States and political subdivisions” also
includes $
7
Corporation applies a
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 of 2023 Form 10-K for further details.
Delinquency status
At June 30, 2024 and December 31, 2023, there were
no
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
for the quarters and six months ended June 30, 2024 and June 30, 2023:
26
For the quarters ended June 30,
2024
2023
(In thousands)
Obligations of Puerto Rico, States and political subdivisions
Allowance for credit losses:
Beginning balance
$
5,731
$
6,792
Provision for credit losses (benefit)
520
(647)
Securities charged-off
-
-
Recoveries
-
-
Ending balance
$
6,251
$
6,145
For the six months ended June 30,
2024
2023
(In thousands)
Obligations of Puerto Rico, States and political subdivisions
Allowance for credit losses:
Beginning balance
$
5,780
$
6,911
Provision for credit losses (benefit)
471
(766)
Securities charged-off
-
-
Recoveries
-
-
Ending balance
$
6,251
$
6,145
The allowance for credit losses for the Obligations of Puerto Rico, States and political subdivisions includes $
0.2
securities issued by municipalities of Puerto Rico, and $
6.1
second mortgage loans on Puerto Rico residential properties (compared to $
0.2
5.6
31, 2023).
27
Note 7 – Loans
For a summary of the accounting policies related to loans, interest recognition and allowance for credit losses refer to Note 2 –
Summary of Significant Accounting Policies of the 2023 Form 10-K.
During the quarter and six months ended June 30, 2024, the Corporation recorded purchases (including repurchases) of mortgage
loans amounting to $
85
171
96
172
Corporation did
no
t purchase consumer loans during the period ended June 30, 2024 (during the quarter and six months ended
June 30, 2023 - $
45
72
recorded purchases of $
159
215
38
83
commercial loans.
The Corporation performed whole-loan sales involving approximately $
13
24
during the quarter and six months ended June 30, 2024, respectively (June 30, 2023 - $
17
27
During the six months ended June 30, 2024, the Corporation performed sales of commercial loans, including loan participations
amounting to $
12
no
t perform sales of commercial loans during the quarter ended June 30, 2024
(during the quarter and six months ended June 30, 2023 - $
34
36
ended June 30, 2024, the Corporation securitized approximately $
1
securities and $
4
1
23
respectively, during the six months ended June 30, 2023.
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
June 30, 2024 and December 31, 2023.
28
June 30, 2024
BPPR
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
233
$
-
$
443
$
676
$
304,235
$
304,911
$
443
$
-
Commercial real estate:
Non-owner occupied
1,713
-
7,484
9,197
2,970,430
2,979,627
7,484
-
Owner occupied
1,770
232
25,285
27,287
1,389,825
1,417,112
25,285
-
Commercial and industrial
5,387
2,097
26,560
34,044
4,968,740
5,002,784
22,958
3,602
Construction
5,479
-
-
5,479
178,460
183,939
-
-
Mortgage
287,468
105,266
373,306
766,040
5,824,480
6,590,520
163,790
209,516
Leasing
20,631
5,071
7,059
32,761
1,795,287
1,828,048
7,059
-
Consumer:
Credit cards
15,032
9,436
23,931
48,399
1,114,140
1,162,539
-
23,931
Home equity lines of credit
-
-
-
-
2,216
2,216
-
-
Personal
21,535
12,755
19,650
53,940
1,690,933
1,744,873
19,650
-
Auto
103,873
24,943
39,333
168,149
3,605,143
3,773,292
39,333
-
Other
976
258
1,207
2,441
151,092
153,533
885
322
Total
$
464,097
$
160,058
$
524,258
$
1,148,413
$
23,994,981
$
25,143,394
$
286,887
$
237,371
June 30, 2024
Popular U.S.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
2,962
$
-
$
8,700
$
11,662
$
2,067,907
$
2,079,569
$
8,700
$
-
Commercial real estate:
Non-owner occupied
2,494
2,783
1,025
6,302
2,018,543
2,024,845
1,025
-
Owner occupied
-
17,095
22,256
39,351
1,687,354
1,726,705
22,256
-
Commercial and industrial
5,181
304
5,992
11,477
2,181,096
2,192,573
5,782
210
Construction
-
-
-
-
921,820
921,820
-
-
Mortgage
1,309
23,479
11,554
36,342
1,256,864
1,293,206
11,554
-
Consumer:
Credit cards
-
-
-
-
18
18
-
-
Home equity lines of
credit
890
462
3,780
5,132
61,644
66,776
3,780
-
Personal
1,770
1,689
1,851
5,310
129,436
134,746
1,851
-
Other
1,204
-
-
1,204
6,764
7,968
-
-
Total
$
15,810
$
45,812
$
55,158
$
116,780
$
10,331,446
$
10,448,226
$
54,948
$
210
29
June 30, 2024
Popular, Inc.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
[2] [3]
loans
loans
Commercial multi-family
$
3,195
$
-
$
9,143
$
12,338
$
2,372,142
$
2,384,480
$
9,143
$
-
Commercial real estate:
Non-owner occupied
4,207
2,783
8,509
15,499
4,988,973
5,004,472
8,509
-
Owner occupied
1,770
17,327
47,541
66,638
3,077,179
3,143,817
47,541
-
Commercial and industrial
10,568
2,401
32,552
45,521
7,149,836
7,195,357
28,740
3,812
Construction
5,479
-
-
5,479
1,100,280
1,105,759
-
-
Mortgage
[1]
288,777
128,745
384,860
802,382
7,081,344
7,883,726
175,344
209,516
Leasing
20,631
5,071
7,059
32,761
1,795,287
1,828,048
7,059
-
Consumer:
Credit cards
15,032
9,436
23,931
48,399
1,114,158
1,162,557
-
23,931
Home equity lines of credit
890
462
3,780
5,132
63,860
68,992
3,780
-
Personal
23,305
14,444
21,501
59,250
1,820,369
1,879,619
21,501
-
Auto
103,873
24,943
39,333
168,149
3,605,143
3,773,292
39,333
-
Other
2,180
258
1,207
3,645
157,856
161,501
885
322
Total
$
479,907
$
205,870
$
579,416
$
1,265,193
$
34,326,427
$
35,591,620
$
341,835
$
237,581
[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 $
81
longer accruing interest as of June 30, 2024. Furthermore, as of June 30, 2024, the Corporation had approximately $
34
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 $
387
8
[3]
Includes $
13.6
of which $
7.2
6.4
Bank ("FRB") for discount window borrowings. As of June 30, 2024, the Corporation had an available borrowing facility with the FHLB and the
discount window of Federal Reserve Bank of New York of $
3.9
4.7
30
December 31, 2023
BPPR
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
524
$
-
$
1,991
$
2,515
$
289,427
$
291,942
$
1,991
$
-
Commercial real estate:
Non-owner occupied
5,510
77
8,745
14,332
2,990,922
3,005,254
8,745
-
Owner occupied
2,726
249
29,430
32,405
1,365,978
1,398,383
29,430
-
Commercial and industrial
6,998
3,352
36,210
46,560
4,749,666
4,796,226
32,826
3,384
Construction
-
-
6,378
6,378
163,479
169,857
6,378
-
Mortgage
260,897
114,282
416,528
791,707
5,600,117
6,391,824
175,106
241,422
Leasing
20,140
6,719
8,632
35,491
1,696,318
1,731,809
8,632
-
Consumer:
Credit cards
13,243
9,912
23,281
46,436
1,089,292
1,135,728
-
23,281
Home equity lines of credit
230
-
26
256
2,392
2,648
-
26
Personal
19,065
14,611
19,031
52,707
1,723,603
1,776,310
19,031
-
Auto
100,061
27,443
45,615
173,119
3,487,661
3,660,780
45,615
-
Other
1,641
204
1,213
3,058
147,104
150,162
964
249
Total
$
431,035
$
176,849
$
597,080
$
1,204,964
$
23,305,959
$
24,510,923
$
328,718
$
268,362
December 31, 2023
Popular U.S.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
9,141
$
2,001
$
-
$
11,142
$
2,112,536
$
2,123,678
$
-
$
-
Commercial real estate:
Non-owner occupied
566
1,036
1,117
2,719
2,079,448
2,082,167
1,117
-
Owner occupied
30,560
-
6,274
36,834
1,645,418
1,682,252
6,274
-
Commercial and industrial
7,815
697
3,881
12,393
2,317,502
2,329,895
3,772
109
Construction
-
-
-
-
789,423
789,423
-
-
Mortgage
48,818
7,821
11,191
67,830
1,236,263
1,304,093
11,191
-
Consumer:
Credit cards
-
-
-
-
19
19
-
-
Home equity lines of credit
1,472
4
3,733
5,209
58,096
63,305
3,733
-
Personal
2,222
1,948
2,805
6,975
161,962
168,937
2,805
-
Other
4
-
1
5
10,274
10,279
1
-
Total
$
100,598
$
13,507
$
29,002
$
143,107
$
10,410,941
$
10,554,048
$
28,893
$
109
31
December 31, 2023
Popular, Inc.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
or more
past due
Current
Loans HIP
[2]
[3]
loans
loans
Commercial multi-family
$
9,665
$
2,001
$
1,991
$
13,657
$
2,401,963
$
2,415,620
$
1,991
$
-
Commercial real estate:
Non-owner occupied
6,076
1,113
9,862
17,051
5,070,370
5,087,421
9,862
-
Owner occupied
33,286
249
35,704
69,239
3,011,396
3,080,635
35,704
-
Commercial and industrial
14,813
4,049
40,091
58,953
7,067,168
7,126,121
36,598
3,493
Construction
-
-
6,378
6,378
952,902
959,280
6,378
-
Mortgage
[1]
309,715
122,103
427,719
859,537
6,836,380
7,695,917
186,297
241,422
Leasing
20,140
6,719
8,632
35,491
1,696,318
1,731,809
8,632
-
Consumer:
Credit cards
13,243
9,912
23,281
46,436
1,089,311
1,135,747
-
23,281
Home equity lines of credit
1,702
4
3,759
5,465
60,488
65,953
3,733
26
Personal
21,287
16,559
21,836
59,682
1,885,565
1,945,247
21,836
-
Auto
100,061
27,443
45,615
173,119
3,487,661
3,660,780
45,615
-
Other
1,645
204
1,214
3,063
157,378
160,441
965
249
Total
$
531,633
$
190,356
$
626,082
$
1,348,071
$
33,716,900
$
35,064,971
$
357,611
$
268,471
[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 include $
106
mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2023. Furthermore, as of
December 31, 2023, the Corporation had approximately $
38
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 $
356
4
[3]
Includes $
14.2
of which $
7.0
7.2
Bank (FRB) for discount window borrowings. As of December 31, 2023, the Corporation had an available borrowing facility with the FHLB and the
discount window of Federal Reserve Bank of New York of $
3.5
4.4
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 the VA when 15 months delinquent as to principal or interest, since the principal repayment on these loans is
insured.
At June 30, 2024, mortgage loans held-in-portfolio include $
2.4
2.2
guarantees from the FHA or the VA of which $
209.7
241.6
portfolio of guaranteed loans includes $
81
of June 30, 2024 (December 31, 2023 - $
106
34
Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at June 30, 2024 (December 31, 2023 - $
38
million).
Loans with a delinquency status of 90 days past due as of June 30, 2024 include $
10
securities (December 31, 2023 - $
11
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 be reflected on the financial statements of BPPR with an offsetting liability. Loans in our serviced GNMA
portfolio benefit from payment forbearance programs but continue to reflect the contractual delinquency until the borrower repays
deferred payments or completes a payment deferral modification or other borrower assistance alternative.
The following tables present the amortized cost basis of non-accrual loans as of June 30, 2024 and December 31, 2023 by class of
loans:
32
June 30, 2024
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
$
-
$
443
$
8,700
$
-
$
8,700
$
443
Commercial real estate non-owner occupied
3,574
3,910
-
1,025
3,574
4,935
Commercial real estate owner occupied
16,822
8,463
22,256
-
39,078
8,463
Commercial and industrial
13,512
9,446
-
5,782
13,512
15,228
Mortgage
72,290
91,500
468
11,086
72,758
102,586
Leasing
590
6,469
-
-
590
6,469
Consumer:
-
-
-
3,780
-
3,780
3,715
15,935
-
1,851
3,715
17,786
1,898
37,435
-
-
1,898
37,435
-
885
-
-
-
885
Total
$
112,401
$
174,486
$
31,424
$
23,524
$
143,825
$
198,010
December 31, 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
$
-
$
1,991
$
-
$
-
$
-
$
1,991
Commercial real estate non-owner occupied
3,695
5,050
-
1,117
3,695
6,167
Commercial real estate owner occupied
20,432
8,998
3,877
2,397
24,309
11,395
Commercial and industrial
6,991
25,835
-
3,772
6,991
29,607
Construction
-
6,378
-
-
-
6,378
Mortgage
84,677
90,429
120
11,071
84,797
101,500
Leasing
481
8,151
-
-
481
8,151
Consumer:
-
-
-
3,733
-
3,733
3,589
15,442
-
2,805
3,589
18,247
1,833
43,782
-
-
1,833
43,782
263
701
-
1
263
702
Total
$
121,961
$
206,757
$
3,997
$
24,896
$
125,958
$
231,653
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 on
appraisals, which may be adjusted due to their age, and the type, location, and condition of the property or area or general market
conditions to reflect the expected change in value between the effective date of the appraisal and the measurement date. Appraisals
are updated every one to two years depending on the type of loan and the total exposure of the borrower.
Loans in non-accrual status with no allowance at June 30, 2024 include $
144
2023 - $
126
2
June 30, 2024 (June 30, 2023 - $
4
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 June 30, 2024 and December 31, 2023:
33
June 30, 2024
(In thousands)
Real Estate
Auto
Equipment
Other
Total
BPPR
Commercial multi-family
$
1,309
$
-
$
-
$
-
$
1,309
Commercial real estate:
Non-owner occupied
213,560
-
-
-
213,560
Owner occupied
22,581
-
-
-
22,581
Commercial and industrial
3,332
-
-
16,949
20,281
Mortgage
71,670
-
-
-
71,670
Leasing
-
1,668
1
-
1,669
Consumer:
Personal
3,791
-
-
-
3,791
Auto
-
14,577
-
-
14,577
Other
-
-
-
38
38
Total BPPR
$
316,243
$
16,245
$
1
$
16,987
$
349,476
Popular U.S.
Commercial multi-family
$
8,700
$
-
$
-
$
-
$
8,700
Commercial real estate:
Owner occupied
22,256
$
-
-
-
22,256
Commercial and industrial
-
-
53
3,072
3,125
Mortgage
1,065
-
-
-
1,065
Total Popular U.S.
$
32,021
$
-
$
53
$
3,072
$
35,146
Popular, Inc.
Commercial multi-family
$
10,009
$
-
$
-
$
-
$
10,009
Commercial real estate:
Non-owner occupied
213,560
-
-
-
213,560
Owner occupied
44,837
-
-
-
44,837
Commercial and industrial
3,332
-
53
20,021
23,406
Mortgage
72,735
-
-
-
72,735
Leasing
-
1,668
1
-
1,669
Consumer:
Personal
3,791
-
-
-
3,791
Auto
-
14,577
-
-
14,577
Other
-
-
-
38
38
Total Popular, Inc.
$
348,264
$
16,245
$
54
$
20,059
$
384,622
34
December 31, 2023
(In thousands)
Real Estate
Auto
Equipment
Other
Total
BPPR
Commercial multi-family
$
1,339
$
-
$
-
$
-
$
1,339
Commercial real estate:
Non-owner occupied
160,555
-
-
-
160,555
Owner occupied
25,848
-
-
-
25,848
Commercial and industrial
1,103
-
-
30,287
31,390
Construction
6,378
-
-
-
6,378
Mortgage
85,113
-
-
-
85,113
Leasing
-
1,373
-
-
1,373
Consumer:
Personal
4,338
-
-
-
4,338
Auto
-
12,965
-
-
12,965
Other
-
-
-
305
305
Total BPPR
$
284,674
$
14,338
$
-
$
30,592
$
329,604
Popular U.S.
Commercial real estate:
Owner occupied
$
3,877
$
-
$
-
$
-
$
3,877
Commercial and industrial
-
-
105
400
505
Construction
5,990
-
-
-
5,990
Mortgage
1,303
-
-
-
1,303
Total Popular U.S.
$
11,170
$
-
$
105
$
400
$
11,675
Popular, Inc.
Commercial multi-family
$
1,339
$
-
$
-
$
-
$
1,339
Commercial real estate:
Non-owner occupied
160,555
-
-
-
160,555
Owner occupied
29,725
-
-
-
29,725
Commercial and industrial
1,103
-
105
30,687
31,895
Construction
12,368
-
-
-
12,368
Mortgage
86,416
-
-
-
86,416
Leasing
-
1,373
-
-
1,373
Consumer:
Personal
4,338
-
-
-
4,338
Auto
-
12,965
-
-
12,965
Other
-
-
-
305
305
Total Popular, Inc.
$
295,844
$
14,338
$
105
$
30,992
$
341,279
35
Purchased Credit Deteriorated (PCD) Loans
The Corporation has purchased loans during the quarter and six months ended June 30, 2024 and 2023, 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
June 30, 2024
For the six months
ended June 30, 2024
Purchase price of loans at acquisition
$
150
$
576
Allowance for credit losses at acquisition
6
23
Par value of acquired loans at acquisition
$
156
$
599
(In thousands)
For the quarter ended
June 30, 2023
For the six months
ended June 30, 2023
Purchase price of loans at acquisition
$
277
$
532
Allowance for credit losses at acquisition
10
78
Non-credit discount / (premium) at acquisition
-
9
Par value of acquired loans at acquisition
$
287
$
619
36
Note 8 – 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 to
provide for expected losses in the loan portfolio. This model establishes a forward-looking methodology that reflects the expected
credit losses over the lives of financial assets, starting when such assets are first acquired or originated. In addition, CECL provides
that the initial ACL on PCD financial assets be recorded as an increase to the purchase price, with subsequent changes to the
allowance recorded as a credit loss expense. The provision for credit losses recorded in current operations is based on this
methodology. Loan losses are charged, and recoveries are credited to the ACL. 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.
At June 30, 2024, the Corporation estimated the ACL by weighting the outputs of 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 in the economic outlook and downside risk. The weightings applied are subject to evaluation on a
quarterly basis as part of the ACL’s governance process. The Corporation evaluates, at least on an annual basis, the assumptions
tied to the CECL accounting framework. These include the reasonable and supportable period as well as the reversion window.
The following tables present the changes in the ACL of loans held-in-portfolio and unfunded commitments for the quarter and six
months ended June 30, 2024 and 2023.
37
For the quarter ended June 30, 2024
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
$
3,567
$
(264)
$
-
$
-
$
-
$
3,303
53,666
(324)
-
-
44
53,386
43,537
(5,296)
-
-
1,134
39,375
102,844
14,440
-
(8,072)
2,051
111,263
203,614
8,556
-
(8,072)
3,229
207,327
Construction
3,114
524
-
-
-
3,638
Mortgage
76,564
(6,419)
6
(26)
3,775
73,900
Leasing
8,991
8,094
-
(3,841)
1,141
14,385
Consumer
88,169
11,856
-
(16,419)
2,707
86,313
102
22
-
(94)
53
83
99,504
15,492
-
(23,293)
2,318
94,021
157,456
10,250
-
(16,609)
6,352
157,449
6,808
210
-
(680)
151
6,489
352,039
37,830
-
(57,095)
11,581
344,355
Total - Loans
$
644,322
$
48,585
$
6
$
(69,034)
$
19,726
$
643,605
Allowance for credit losses - unfunded commitments:
Commercial
$
4,942
$
598
$
-
$
-
$
-
$
5,540
Construction
1,441
654
-
-
-
2,095
Ending balance - unfunded commitments [1]
$
6,383
$
1,252
$
-
$
-
$
-
$
7,635
[1] Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
38
For the quarter ended June 30, 2024
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
$
9,176
$
(1,303)
$
-
$
4
$
7,877
Commercial real estate non-owner occupied
11,958
(1,151)
-
42
10,849
Commercial real estate owner occupied
20,270
(1,514)
-
59
18,815
Commercial and industrial
17,574
(1,367)
(1,195)
207
15,219
Total Commercial
58,978
(5,335)
(1,195)
312
52,760
Construction
8,025
1,126
-
100
9,251
Mortgage
9,874
(502)
(18)
35
9,389
Consumer
Home equity lines of credit
1,770
(510)
(14)
397
1,643
Personal
16,573
795
(4,596)
655
13,427
Other
2
(2)
(18)
20
2
Total Consumer
18,345
283
(4,628)
1,072
15,072
Total - Loans
$
95,222
$
(4,428)
$
(5,841)
$
1,519
$
86,472
Allowance for credit losses - unfunded commitments:
Commercial
$
2,542
$
308
$
-
$
-
$
2,850
Construction
7,837
562
-
-
8,399
Consumer
5
(5)
-
-
-
Ending balance - unfunded commitments [1]
$
10,384
$
865
$
-
$
-
$
11,249
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
39
For the quarter ended June 30, 2024
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
$
12,743
$
(1,567)
$
-
$
-
$
4
$
11,180
Commercial real estate non-owner occupied
65,624
(1,475)
-
-
86
64,235
Commercial real estate owner occupied
63,807
(6,810)
-
-
1,193
58,190
Commercial and industrial
120,418
13,073
-
(9,267)
2,258
126,482
Total Commercial
262,592
3,221
-
(9,267)
3,541
260,087
Construction
11,139
1,650
-
-
100
12,889
Mortgage
86,438
(6,921)
6
(44)
3,810
83,289
Leasing
8,991
8,094
-
(3,841)
1,141
14,385
Consumer
Credit cards
88,169
11,856
-
(16,419)
2,707
86,313
Home equity lines of credit
1,872
(488)
-
(108)
450
1,726
Personal
116,077
16,287
-
(27,889)
2,973
107,448
Auto
157,456
10,250
-
(16,609)
6,352
157,449
Other
6,810
208
-
(698)
171
6,491
Total Consumer
370,384
38,113
-
(61,723)
12,653
359,427
Total - Loans
$
739,544
$
44,157
$
6
$
(74,875)
$
21,245
$
730,077
Allowance for credit losses - unfunded commitments:
Commercial
$
7,484
$
906
$
-
$
-
$
-
$
8,390
Construction
9,278
1,216
-
-
-
10,494
Consumer
5
(5)
-
-
-
-
Ending balance - unfunded commitments [1]
$
16,767
$
2,117
$
-
$
-
$
-
$
18,884
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
40
For the six months ended June 30, 2024
BPPR
Provision for
Allowance for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-off
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
3,614
$
(312)
$
-
$
-
$
1
$
3,303
Commercial real estate non-owner occupied
53,754
(737)
-
-
369
53,386
Commercial real estate owner occupied
40,637
(149)
-
(2,785)
1,672
39,375
Commercial and industrial
107,577
14,816
-
(14,741)
3,611
111,263
Total Commercial
205,582
13,618
-
(17,526)
5,653
207,327
Construction
5,294
(1,656)
-
-
-
3,638
Mortgage
72,440
(6,738)
23
(791)
8,966
73,900
Leasing
9,708
11,062
-
(8,691)
2,306
14,385
Consumer
Credit cards
80,487
33,496
-
(32,815)
5,145
86,313
Home equity lines of credit
103
125
-
(291)
146
83
Personal
101,181
35,755
-
(47,642)
4,727
94,021
Auto
157,931
23,621
-
(36,776)
12,673
157,449
Other
7,132
310
-
(1,344)
391
6,489
Total Consumer
346,834
93,307
-
(118,868)
23,082
344,355
Total - Loans
$
639,858
$
109,593
$
23
$
(145,876)
$
40,007
$
643,605
Allowance for credit losses - unfunded commitments:
Commercial
$
5,062
$
478
$
-
$
-
$
-
$
5,540
Construction
1,618
477
-
-
-
2,095
Ending balance - unfunded commitments [1]
$
6,680
$
955
$
-
$
-
$
-
$
7,635
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
41
For the six months ended June 30, 2024
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
$
10,126
$
(1,813)
$
(441)
$
5
$
7,877
Commercial real estate non-owner occupied
11,699
(956)
-
106
10,849
Commercial real estate owner occupied
16,227
2,505
-
83
18,815
Commercial and industrial
14,779
1,836
(1,759)
363
15,219
Total Commercial
52,831
1,572
(2,200)
557
52,760
Construction
7,392
1,759
-
100
9,251
Mortgage
10,774
(1,427)
(18)
60
9,389
Consumer
Home equity lines of credit
1,875
(763)
(21)
552
1,643
Personal
16,609
5,786
(10,308)
1,340
13,427
Other
2
23
(49)
26
2
Total Consumer
18,486
5,046
(10,378)
1,918
15,072
Total - Loans
$
89,483
$
6,950
$
(12,596)
$
2,635
$
86,472
Allowance for credit losses - unfunded commitments:
Commercial
$
1,851
$
999
$
-
$
-
$
2,850
Construction
8,446
(47)
-
-
8,399
Consumer
29
(29)
-
-
-
Ending balance - unfunded commitments [1]
$
10,326
$
923
$
-
$
-
$
11,249
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
42
For the six months ended June 30, 2024
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
$
13,740
$
(2,125)
$
-
$
(441)
$
6
$
11,180
Commercial real estate non-owner occupied
65,453
(1,693)
-
-
475
64,235
Commercial real estate owner occupied
56,864
2,356
-
(2,785)
1,755
58,190
Commercial and industrial
122,356
16,652
-
(16,500)
3,974
126,482
Total Commercial
258,413
15,190
-
(19,726)
6,210
260,087
Construction
12,686
103
-
-
100
12,889
Mortgage
83,214
(8,165)
23
(809)
9,026
83,289
Leasing
9,708
11,062
-
(8,691)
2,306
14,385
Consumer
Credit cards
80,487
33,496
-
(32,815)
5,145
86,313
Home equity lines of credit
1,978
(638)
-
(312)
698
1,726
Personal
117,790
41,541
-
(57,950)
6,067
107,448
Auto
157,931
23,621
-
(36,776)
12,673
157,449
Other
7,134
333
-
(1,393)
417
6,491
Total Consumer
365,320
98,353
-
(129,246)
25,000
359,427
Total - Loans
$
729,341
$
116,543
$
23
$
(158,472)
$
42,642
$
730,077
Allowance for credit losses - unfunded commitments:
Commercial
$
6,913
$
1,477
$
-
$
-
$
-
$
8,390
Construction
10,064
430
-
-
-
10,494
Consumer
29
(29)
-
-
-
-
Ending balance - unfunded commitments [1]
$
17,006
$
1,878
$
-
$
-
$
-
$
18,884
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
43
For the quarter ended June 30, 2023
BPPR
Provision for
Allowance for
Beginning
credit losses
credit losses -
Net Write
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
down
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
4,756
$
30
$
-
$
-
$
1
$
-
$
4,787
Commercial real estate non-owner occupied
53,894
(98)
-
(609)
179
-
53,366
Commercial real estate owner occupied
46,009
(4,437)
-
(76)
405
-
41,901
Commercial and industrial
77,042
3,164
-
(1,061)
2,492
-
81,637
Total Commercial
181,701
(1,341)
-
(1,746)
3,077
-
181,691
Construction
3,072
6,482
-
-
-
-
9,554
Mortgage
89,077
(9,572)
10
(297)
3,681
-
82,899
Leasing
20,990
(5,470)
-
(2,540)
947
-
13,927
Consumer
Credit cards
67,953
10,558
-
(8,457)
1,955
(601)
71,408
Home equity lines of credit
100
(29)
-
(35)
60
-
96
Personal
88,408
20,279
-
(16,601)
3,960
-
96,046
Auto
130,829
5,909
-
(8,099)
5,608
-
134,247
Other
4,877
1,563
-
(354)
154
-
6,240
Total Consumer
292,167
38,280
-
(33,546)
11,737
(601)
308,037
Total - Loans
$
587,007
$
28,379
$
10
$
(38,129)
$
19,442
$
(601)
$
596,108
Allowance for credit losses - unfunded commitments:
Commercial
$
4,900
$
388
$
-
$
-
$
-
$
-
$
5,288
Construction
1,946
1,164
-
-
-
-
3,110
Ending balance - unfunded commitments [1]
$
6,846
$
1,552
$
-
$
-
$
-
$
-
$
8,398
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
44
For the quarter ended June 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
$
20,610
$
781
$
-
$
1
$
21,392
Commercial real estate non-owner occupied
17,956
328
-
66
18,350
Commercial real estate owner occupied
8,488
1,174
(177)
21
9,506
Commercial and industrial
15,224
4,524
(2,081)
347
18,014
Total Commercial
62,278
6,807
(2,258)
435
67,262
Construction
1,258
520
-
-
1,778
Mortgage
15,400
(2,315)
-
109
13,194
Consumer
Home equity lines of credit
1,853
55
(52)
218
2,074
Personal
21,321
2,169
(4,287)
579
19,782
Other
3
46
(47)
-
2
Total Consumer
23,177
2,270
(4,386)
797
21,858
Total - Loans
$
102,113
$
7,282
$
(6,644)
$
1,341
$
104,092
Allowance for credit losses - unfunded commitments:
Commercial
$
1,229
$
119
$
-
$
-
$
1,348
Construction
1,278
519
-
-
1,797
Consumer
62
(12)
-
-
50
Ending balance - unfunded commitments [1]
$
2,569
$
626
$
-
$
-
$
3,195
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
45
For the quarter ended June 30, 2023
Popular Inc.
Provision for
Allowance for
Beginning
credit losses
credit losses -
Net write
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
down
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
25,366
$
811
$
-
$
-
$
2
$
-
$
26,179
Commercial real estate non-owner occupied
71,850
230
-
(609)
245
-
71,716
Commercial real estate owner occupied
54,497
(3,263)
-
(253)
426
-
51,407
Commercial and industrial
92,266
7,688
-
(3,142)
2,839
-
99,651
Total Commercial
243,979
5,466
-
(4,004)
3,512
-
248,953
Construction
4,330
7,002
-
-
-
-
11,332
Mortgage
104,477
(11,887)
10
(297)
3,790
-
96,093
Leasing
20,990
(5,470)
-
(2,540)
947
-
13,927
Consumer
Credit cards
67,953
10,558
-
(8,457)
1,955
(601)
71,408
Home equity lines of credit
1,953
26
-
(87)
278
-
2,170
Personal
109,729
22,448
-
(20,888)
4,539
-
115,828
Auto
130,829
5,909
-
(8,099)
5,608
-
134,247
Other
4,880
1,609
-
(401)
154
-
6,242
Total Consumer
315,344
40,550
-
(37,932)
12,534
(601)
329,895
Total - Loans
$
689,120
$
35,661
$
10
$
(44,773)
$
20,783
$
(601)
$
700,200
Allowance for credit losses - unfunded commitments:
Commercial
$
6,129
$
507
$
-
$
-
$
-
$
-
$
6,636
Construction
3,224
1,683
-
-
-
-
4,907
Consumer
62
(12)
-
-
-
-
50
Ending balance - unfunded commitments [1]
$
9,415
$
2,178
$
-
$
-
$
-
$
-
$
11,593
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
46
For the six months ended June 30, 2023
BPPR
Impact of
Provision for
Allowance for
Beginning
Adopting
credit losses
credit losses -
Net write
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
PCD Loans
Charge-offs
Recoveries
down
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
5,210
$
-
$
(424)
$
-
$
-
$
1
$
-
$
4,787
Commercial real estate non-owner occupied
52,475
-
1,186
-
(609)
314
-
53,366
Commercial real estate owner occupied
48,393
(1,161)
(7,167)
-
(79)
1,915
-
41,901
Commercial and industrial
68,217
(552)
12,983
-
(2,668)
3,657
-
81,637
Total Commercial
174,295
(1,713)
6,578
-
(3,356)
5,887
-
181,691
Construction
2,978
-
6,576
-
-
-
-
9,554
Mortgage
117,344
(33,556)
(8,305)
78
(1,143)
8,481
-
82,899
Leasing
20,618
(35)
(4,736)
-
(3,957)
2,037
-
13,927
Consumer
Credit cards
58,670
-
26,128
-
(17,133)
4,344
(601)
71,408
Home equity lines of credit
103
-
(68)
-
(68)
129
-
96
Personal
96,369
(7,020)
31,383
-
(30,181)
5,495
-
96,046
Auto
129,735
(21)
14,228
-
(20,217)
10,522
-
134,247
Other
15,433
-
1,798
-
(11,361)
370
-
6,240
Total Consumer
300,310
(7,041)
73,469
-
(78,960)
20,860
(601)
308,037
Total - Loans
$
615,545
$
(42,345)
$
73,582
$
78
$
(87,416)
$
37,265
$
(601)
$
596,108
Allowance for credit losses - unfunded commitments:
Commercial
$
4,336
$
-
$
952
$
-
$
-
$
-
$
-
$
5,288
Construction
2,022
-
1,088
-
-
-
-
3,110
Ending balance - unfunded commitments [1]
$
6,358
$
-
$
2,040
$
-
$
-
$
-
$
-
$
8,398
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
47
For the six months ended June 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
$
-
$
288
$
-
$
3
$
21,392
Commercial real estate non-owner occupied
19,065
-
(2,633)
-
1,918
18,350
Commercial real estate owner occupied
8,688
-
950
(177)
45
9,506
Commercial and industrial
12,227
-
7,052
(2,580)
1,315
18,014
Total Commercial
61,081
-
5,657
(2,757)
3,281
67,262
Construction
1,268
-
510
-
-
1,778
Mortgage
17,910
(2,098)
(2,741)
-
123
13,194
Consumer
Credit cards
-
-
1
(1)
-
-
Home equity lines of credit
2,439
-
(657)
(195)
487
2,074
Personal
22,057
(1,140)
6,360
(8,457)
962
19,782
Other
2
-
95
(100)
5
2
Total Consumer
24,498
(1,140)
5,799
(8,753)
1,454
21,858
Total - Loans
$
104,757
$
(3,238)
$
9,225
$
(11,510)
$
4,858
$
104,092
Allowance for credit losses - unfunded commitments:
Commercial
$
1,175
$
-
$
173
$
-
$
-
$
1,348
Construction
1,184
-
613
-
-
1,797
Consumer
88
-
(38)
-
-
50
Ending balance - unfunded commitments [1]
$
2,447
$
-
$
748
$
-
$
-
$
3,195
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
48
For the six months ended June 30, 2023
Popular Inc.
Impact
Provision for
Allowance
for
Beginning
of adopting
credit losses
credit losses
-
Net write
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
PCD Loans
Charge-
offs
Recoverie
s
down
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
26,311
$
-
$
(136)
$
-
$
-
$
4
$
-
$
26,179
Commercial real estate non-owner occupied
71,540
-
(1,447)
-
(609)
2,232
-
71,716
Commercial real estate owner occupied
57,081
(1,161)
(6,217)
-
(256)
1,960
-
51,407
Commercial and industrial
80,444
(552)
20,035
-
(5,248)
4,972
-
99,651
Total Commercial
235,376
(1,713)
12,235
-
(6,113)
9,168
-
248,953
Construction
4,246
-
7,086
-
-
-
-
11,332
Mortgage
135,254
(35,654)
(11,046)
78
(1,143)
8,604
-
96,093
Leasing
20,618
(35)
(4,736)
-
(3,957)
2,037
-
13,927
Consumer
Credit cards
58,670
-
26,129
-
(17,134)
4,344
(601)
71,408
Home equity lines of credit
2,542
-
(725)
-
(263)
616
-
2,170
Personal
118,426
(8,160)
37,743
-
(38,638)
6,457
-
115,828
Auto
129,735
(21)
14,228
-
(20,217)
10,522
-
134,247
Other
15,435
-
1,893
-
(11,461)
375
-
6,242
Total Consumer
324,808
(8,181)
79,268
-
(87,713)
22,314
(601)
329,895
Total - Loans
$
720,302
$
(45,583)
$
82,807
$
78
$
(98,926)
$
42,123
$
(601)
$
700,200
Allowance for credit losses - unfunded commitments:
Commercial
$
5,511
$
-
$
1,125
$
-
$
-
$
-
$
-
$
6,636
Construction
3,206
-
1,701
-
-
-
-
4,907
Consumer
88
-
(38)
-
-
-
-
50
Ending balance - unfunded commitments [1]
$
8,805
$
-
$
2,788
$
-
$
-
$
-
$
-
$
11,593
[1]
Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.
Modifications
A modification constitutes a change in loan terms in the form of principal forgiveness, an 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 with financial difficulties owing receivables whose terms
have been modified during the quarters ended June 30, 2024 and June 30, 2023 amounted to $
70.2
5.0
respectively, related to the commercial loan portfolios.
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 quarters and six months
ended June 30, 2024 and June 30, 2023. Loans modified to borrowers under financial difficulties that were fully paid down, charged-
off or foreclosed upon by period end are not reported.
49
Loan Modifications Made to Borrowers Experiencing Financial Difficulty for the quarter ended June 30, 2024
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June
30, 2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at June
30, 2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June
30, 2024
% of total class of
Financing
Receivable
CRE owner occupied
$
33
-
%
$
-
-
%
$
33
-
%
Commercial and industrial
1,747
0.03
%
-
-
%
1,747
0.02
%
Mortgage
42
-
%
-
-
%
42
-
%
Consumer:
422
0.04
%
-
-
%
422
0.04
%
848
0.05
%
-
-
%
848
0.05
%
25
0.02
%
-
-
%
25
0.02
%
Total
$
3,117
0.01
%
$
-
-
%
$
3,117
0.01
%
Term Extension
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June
30, 2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at June
30, 2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June
30, 2024
% of total class of
Financing
Receivable
CRE non-owner occupied
$
3,084
0.10
%
$
-
-
%
$
3,084
0.06
%
CRE owner occupied
1,134
0.08
%
6,071
0.35
%
7,205
0.23
%
Commercial and industrial
23,059
0.46
%
-
-
%
23,059
0.32
%
Mortgage
16,933
0.26
%
642
0.05
%
17,575
0.22
%
Consumer:
238
0.01
%
136
0.10
%
374
0.02
%
56
-
%
-
-
%
56
-
%
Total
$
44,504
0.18
%
$
6,849
0.07
%
$
51,353
0.14
%
Other-Than-Insignificant Payment Delays
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June
30, 2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at June
30, 2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June
30, 2024
% of total class of
Financing
Receivable
CRE non-owner occupied
$
57,071
1.92
%
$
-
-
%
$
57,071
1.14
%
CRE owner occupied
6,230
0.44
%
-
-
%
6,230
0.20
%
Commercial and industrial
52,124
1.04
%
-
-
%
52,124
0.72
%
Mortgage
127
-
%
-
-
%
127
-
%
Total
$
115,552
0.46
%
$
-
-
%
$
115,552
0.32
%
Combination - Term Extension and Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June
30, 2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at June
30, 2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June
30, 2024
% of total class of
Financing
Receivable
Commercial and industrial
$
490
0.01
%
$
-
-
%
$
490
0.01
%
Mortgage
5,246
0.08
%
31
-
%
5,277
0.07
%
Consumer:
2,190
0.13
%
-
-
%
2,190
0.12
%
Total
$
7,926
0.03
%
$
31
-
%
$
7,957
0.02
%
Combination - Other-Than-Insignificant Payment Delays and Interest Rate Reduction
Puerto Rico
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June
30, 2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at June
30, 2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June
30, 2024
% of total class of
Financing
Receivable
Commercial and industrial
$
89
-
%
$
-
-
%
$
89
-
%
Consumer:
243
0.02
%
-
-
%
243
0.02
%
Total
$
332
-
%
$
-
-
%
$
332
-
%
50
Loan Modifications Made to Borrowers Experiencing Financial Difficulty for the six months ended June 30, 2024
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
CRE owner occupied
$
33
-
%
$
-
-
%
$
33
-
%
Commercial and industrial
2,122
0.04
%
-
-
%
2,122
0.03
%
Mortgage
42
-
%
-
-
%
42
-
%
Consumer:
549
0.05
%
-
-
%
549
0.05
%
1,085
0.06
%
-
-
%
1,085
0.06
%
25
0.02
%
-
-
%
25
0.02
%
Total
$
3,856
0.02
%
$
-
-
%
$
3,856
0.01
%
Term Extension
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
CRE non-owner occupied
$
39,484
1.33
%
$
-
-
%
$
39,484
0.79
%
CRE owner occupied
11,718
0.83
%
6,071
0.35
%
17,789
0.57
%
Commercial and industrial
23,767
0.48
%
-
-
%
23,767
0.33
%
Mortgage
29,868
0.45
%
642
0.05
%
30,510
0.39
%
Consumer:
436
0.02
%
141
0.10
%
577
0.03
%
56
-
%
-
-
%
56
-
%
Total
$
105,329
0.42
%
$
6,854
0.07
%
$
112,183
0.32
%
Other-Than-Insignificant Payment Delays
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
CRE non-owner occupied
$
57,071
1.92
%
$
-
-
%
$
57,071
1.14
%
CRE owner occupied
16,207
1.14
%
-
-
%
16,207
0.52
%
Commercial and industrial
56,477
1.13
%
-
-
%
56,477
0.78
%
Mortgage
127
-
%
-
-
%
127
-
%
Total
$
129,882
0.52
%
$
-
-
%
$
129,882
0.36
%
Combination - Term Extension and Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
CRE non-owner occupied
$
890
0.03
%
$
-
-
%
$
890
0.02
%
Commercial and industrial
586
0.01
%
-
-
%
586
0.01
%
Mortgage
8,655
0.13
%
68
0.01
%
8,723
0.11
%
Consumer:
3,234
0.19
%
144
0.11
%
3,378
0.18
%
Total
$
13,365
0.05
%
$
212
-
%
$
13,577
0.04
%
Combination - Other-Than-Insignificant Payment Delays and Interest Rate Reduction
Puerto Rico
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Commercial and industrial
$
89
-
%
$
-
-
%
$
89
-
%
Consumer:
539
0.05
%
-
-
%
539
0.05
%
Total
$
628
-
%
$
-
-
%
$
628
-
%
51
Loan Modifications Made to Borrowers Experiencing Financial Difficulty for the quarter ended June 30, 2023
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(Dollar in thousands)
Amortized Cost
Basis at June 30,
2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Consumer:
$
222
0.02
%
$
-
-
%
$
222
0.02
%
196
0.01
%
3
-
%
199
0.01
%
Total
$
418
-
%
$
3
-
%
$
421
-
%
Term Extension
BPPR
Popular U.S.
Popular, Inc.
(Dollar in thousands)
Amortized Cost
Basis at June 30,
2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
CRE non-owner occupied
$
24,978
0.86
%
$
-
-
%
$
24,978
0.53
%
CRE owner occupied
1,434
0.10
%
15,715
0.97
%
17,149
0.56
%
Commercial and industrial
21,610
0.54
%
-
-
%
21,610
0.35
%
Construction
5,422
3.12
%
-
-
%
5,422
0.66
%
Mortgage
10,694
0.17
%
2,676
0.21
%
13,370
0.18
%
Consumer:
48
-
%
113
0.05
%
161
0.01
%
38
-
%
-
-
%
38
-
%
Total
$
64,224
0.28
%
$
18,504
0.19
%
$
82,728
0.25
%
Other-Than-Insignificant Payment Delays
BPPR
Popular U.S.
Popular, Inc.
(Dollar in thousands)
Amortized Cost
Basis at June 30,
2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
CRE owner occupied
$
748
0.05
%
$
-
-
%
$
748
0.02
%
Mortgage
137
-
%
-
-
%
137
-
%
Total
$
885
-
%
$
-
-
%
$
885
-
%
Combination - Term Extension and Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(Dollar in thousands)
Amortized Cost
Basis at June 30,
2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Commercial and industrial
$
58
-
%
$
-
-
%
$
58
-
%
Mortgage
11,372
0.18
%
81
0.01
%
11,453
0.15
%
Consumer:
489
0.03
%
-
-
%
489
0.03
%
Total
$
11,919
0.05
%
$
81
-
%
$
12,000
0.04
%
Combination - Other-Than-Insignificant Payment Delays and Interest Rate Reduction
Puerto Rico
Popular U.S.
Popular, Inc.
(Dollar in thousands)
Amortized Cost
Basis at June 30,
2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Commercial and industrial
$
78
-
%
$
-
-
%
$
78
-
%
Consumer:
190
0.02
%
-
-
%
190
0.02
%
Total
$
268
-
%
$
-
-
%
$
268
-
%
52
Loan Modifications Made to Borrowers Experiencing Financial Difficulty for the six months ended June 30, 2023
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Mortgage
$
226
-
%
$
-
-
%
$
226
-
%
Consumer:
427
0.04
%
-
-
%
427
0.04
%
313
0.02
%
3
-
%
316
0.02
%
3
-
%
-
-
%
3
-
%
Total
$
969
-
%
$
3
-
%
$
972
-
%
Term Extension
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
CRE non-owner occupied
$
24,978
0.86
%
$
-
-
%
$
24,978
0.53
%
CRE owner occupied
3,159
0.22
%
15,715
0.97
%
18,874
0.62
%
Commercial and industrial
25,069
0.62
%
-
-
%
25,069
0.40
%
Construction
5,422
3.12
%
4,700
0.73
%
10,122
1.23
%
Mortgage
25,100
0.41
%
4,515
0.35
%
29,615
0.40
%
Consumer:
74
-
%
165
0.08
%
239
0.01
%
38
-
%
-
-
%
38
-
%
Total
$
83,840
0.36
%
$
25,095
0.25
%
$
108,935
0.33
%
Other-Than-Insignificant Payment Delays
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
CRE non-owner occupied
$
1,743
0.06
%
$
-
-
%
$
1,743
0.04
%
CRE owner occupied
13,812
0.97
%
13,650
0.85
%
27,462
0.90
%
Commercial and industrial
1,395
0.03
%
822
0.04
%
2,217
0.04
%
Mortgage
137
-
%
-
-
%
137
-
%
Total
$
17,087
0.07
%
$
14,472
0.15
%
$
31,559
0.10
%
Combination - Term Extension and Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
CRE owner occupied
$
101
0.01
%
$
-
-
%
$
101
0.01
%
Commercial and industrial
58
-
%
-
-
%
58
-
%
Mortgage
21,805
0.35
%
408
0.03
%
22,213
0.30
%
Consumer:
907
0.05
%
-
-
%
907
0.05
%
28
-
%
-
-
%
28
-
%
Total
$
22,899
0.10
%
$
408
-
%
$
23,307
0.07
%
Combination - Other-Than-Insignificant Payment Delays and Interest Rate Reduction
Puerto Rico
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Commercial and industrial
$
78
0.00%
$
-
-
$
78
0.00%
Consumer:
445
0.04%
-
-
445
0.04%
Total
$
523
0.00%
$
-
-
$
523
0.00%
53
The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulties:
For the quarter ended June 30, 2024
Interest rate reduction
Loan Type
Financial Effect
CRE Owner occupied
Reduced weighted-average contractual interest rate from
12.0
% to
5
.0%
Commercial and industrial
Reduced weighted-average contractual interest rate from
18
.0% to
9.3
%.
Mortgage
Reduced weighted-average contractual interest rate from
6.35
% to
4.44
%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
19.73
% to
4.16
%.
Personal
Reduced weighted-average contractual interest rate from
19.2
% to
10.1
%.
Other
Reduced weighted-average contractual interest rate from
18
.0% to
0
%.
Term extension
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
2
CRE Owner occupied
Added a weighted-average of
8
Commercial and industrial
Added a weighted-average of
11
Mortgage
Added a weighted-average of
13
Consumer:
Personal
Added a weighted-average of
10
Auto
Added a weighted-average of
4
Other than insignificant payment delays
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
12
CRE Owner occupied
Added a weighted-average of
8
Commercial and industrial
Added a weighted-average of
11
Mortgage
Added a weighted-average of
30
Consumer:
Credit cards
Added a weighted-average of
24
54
For the six months ended June 30, 2024
Interest rate reduction
Loan Type
Financial Effect
CRE Non-owner occupied
Reduced weighted-average contractual interest rate from
10.1
% to
8.3
%.
CRE Owner occupied
Reduced weighted-average contractual interest rate from
12.0
% to
5
.0%.
Commercial and industrial
Reduced weighted-average contractual interest rate from
19.2
% to
9.4
%.
Mortgage
Reduced weighted-average contractual interest rate from
6.2
% to
4.5
%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
20.2
% to
5
.0%.
Personal
Reduced weighted-average contractual interest rate from
18.8
% to
10
.0%.
Other
Reduced weighted-average contractual interest rate from
18
.0% to
0
%.
Term extension
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
11
CRE Owner occupied
Added a weighted-average of
8
Commercial and industrial
Added a weighted-average of
11
Mortgage
Added a weighted-average of
13
Consumer:
Personal
Added a weighted-average of
10
Auto
Added a weighted-average of
4
Other than insignificant payment delay
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
12
CRE Owner occupied
Added a weighted-average of
11
Commercial and industrial
Added a weighted-average of
11
Mortgage
Added a weighted-average of
30
Consumer:
Credit cards
Added a weighted-average of
23
55
For the quarter ended June 30, 2023
Interest rate reduction
Loan Type
Financial Effect
Commercial and industrial
Reduced weighted-average contractual interest rate from
21.7
% to
8
.0%.
Mortgage
Reduced weighted-average contractual interest rate from
5.6
% to
4.1
%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
17.6
% to
4.7
%.
Personal
Reduced weighted-average contractual interest rate from
20.3
% to
10.7
%.
Term extension
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
10
CRE Owner occupied
Added a weighted-average of
1
Commercial and industrial
Added a weighted-average of
1
Construction
Added a weighted-average of
6
Mortgage
Added a weighted-average of
12
Consumer:
Personal
Added a weighted-average of
6
Auto
Added a weighted-average of
3
Other than insignificant payment delay
Loan Type
Financial Effect
CRE Owner occupied
Added a weighted-average of
24
Commercial and industrial
Added a weighted-average of
24
Mortgage
Added a weighted-average of
40
Consumer:
Credit cards
Added a weighted-average of
24
56
For the six months ended June 30, 2023
Interest rate reduction
Loan Type
Financial Effect
CRE Owner occupied
Reduced weighted-average contractual interest rate from
6
.0% to
5.3
%.
Commercial and industrial
Reduced weighted-average contractual interest rate from
21.7
% to
8
.0%.
Mortgage
Reduced weighted-average contractual interest rate from
5.7
% to
4.2
%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
17.6
% to
4.6
%.
Personal
Reduced weighted-average contractual interest rate from
18.9
% to
10.3
%.
Auto
Reduced weighted-average contractual interest rate from
12.64
% to
12.62
%.
Other
Reduced weighted-average contractual interest rate from
18
.0% to
0
%.
Term extension
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
10
CRE Owner occupied
Added a weighted-average of
1
Commercial and industrial
Added a weighted-average of
1
Construction
Added a weighted-average of
6
Mortgage
Added a weighted-average of
11
Consumer:
Personal
Added a weighted-average of
6
Auto
Added a weighted-average of
3
Other than insignificant payment delay
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
12
CRE Owner occupied
Added a weighted-average of
8
Commercial and industrial
Added a weighted-average of
9
Mortgage
Added a weighted-average of
40
Consumer:
Credit cards
Added a weighted-average of
24
57
The following tables present, by class, the performance of loans that have been modified during the twelve months preceding June
30, 2024.
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
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
Commercial multi-family
$
-
$
-
$
64
$
64
$
-
$
64
$
-
$
64
CRE non-owner occupied
176
-
2,847
3,023
123,280
126,303
-
2,847
CRE owner occupied
335
-
1,976
2,311
187,369
189,680
-
1,976
Commercial and industrial
379
27
16,325
16,731
81,051
97,782
11,994
4,331
Mortgage
8,969
3,596
23,535
36,100
46,337
82,437
4,833
18,702
Consumer:
81
174
113
368
1,269
1,637
79
34
78
172
1,461
1,711
5,085
6,796
232
1,229
-
-
48
48
59
107
-
48
-
-
25
25
4
29
-
25
Total
$
10,018
$
3,969
$
46,394
$
60,381
$
444,454
$
504,835
$
17,138
$
29,256
[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.
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
$
-
$
-
$
-
$
-
$
48,948
$
48,948
$
-
$
-
Mortgage
-
-
772
772
919
1,691
-
772
Consumer:
19
24
110
153
164
317
3
107
Total
$
19
$
24
$
882
$
925
$
50,031
$
50,956
$
3
$
879
[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.
58
Popular Inc.
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
Commercial multi-family
$
-
$
-
$
64
$
64
$
-
$
64
$
-
$
64
CRE non-owner occupied
176
-
2,847
3,023
123,280
126,303
-
2,847
CRE owner occupied
335
-
1,976
2,311
236,317
238,628
-
1,976
Commercial and industrial
379
27
16,325
16,731
81,051
97,782
11,994
4,331
Mortgage
8,969
3,596
24,307
36,872
47,256
84,128
4,833
19,474
Consumer:
81
174
113
368
1,269
1,637
79
34
97
196
1,571
1,864
5,249
7,113
235
1,336
-
-
48
48
59
107
-
48
-
-
25
25
4
29
-
25
Total
$
10,037
$
3,993
$
47,276
$
61,306
$
494,485
$
555,791
$
17,141
$
30,135
[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.
59
The following tables present, by class, the performance of loans that have been modified during the six months ended June 30,
2023.
BPPR
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
$
-
$
-
$
428
$
428
$
26,293
$
26,721
$
-
$
428
CRE owner occupied
-
-
2,338
2,338
14,752
17,090
-
2,338
Commercial and industrial
-
-
872
872
25,728
26,600
114
758
Construction
-
-
-
-
5,422
5,422
-
-
Mortgage
3,158
1,611
16,213
20,982
26,286
47,268
1,047
15,166
Consumer:
36
50
91
177
695
872
51
40
30
-
331
361
933
1,294
8
323
-
-
12
12
54
66
-
12
-
-
-
-
3
3
-
-
Total
$
3,224
$
1,661
$
20,285
$
25,170
$
100,166
$
125,336
$
1,220
$
19,065
[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.
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
$
-
$
-
$
-
$
-
$
29,365
$
29,365
$
-
$
-
Commercial and industrial
-
-
-
-
822
822
-
-
Construction
-
-
-
-
4,700
4,700
-
-
Mortgage
-
-
340
340
4,583
4,923
104
236
Consumer:
-
-
132
132
36
168
-
132
Total
$
-
$
-
$
472
$
472
$
39,506
$
39,978
$
104
$
368
[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.
60
Popular Inc.
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
$
-
$
-
$
428
$
428
$
26,293
$
26,721
$
-
$
428
CRE owner occupied
-
-
2,338
2,338
44,117
46,455
-
2,338
Commercial and industrial
-
-
872
872
26,550
27,422
114
758
Construction
-
-
-
-
10,122
10,122
-
-
Mortgage
3,158
1,611
16,553
21,322
30,869
52,191
1,151
15,402
Consumer:
36
50
91
177
695
872
51
40
30
-
463
493
969
1,462
8
455
-
-
12
12
54
66
-
12
-
-
-
-
3
3
-
-
Total
$
3,224
$
1,661
$
20,757
$
25,642
$
139,672
$
165,314
$
1,324
$
19,433
[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.
Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or charged-off,
whichever occurs first. During the quarter and six months ended June 30, 2024, the outstanding balance of loans modified for
borrowers under financial difficulties that were subject to payment default and that had been modified during the twelve months
preceding the default date was $
7
22
six months ended June 30, 2023.
For the quarter ended June 30, 2024, extension of maturity and the combination of interest rate reduction and extension of maturity
amounted to $
5
1
difficulties that were subject to payment default during the year preceding the default date. For the six months ended June 30, 2024,
extension of maturity and the combination of interest rate reduction and extension of maturity amounted to $
19
2
million, respectively of the outstanding balance of loans modified for borrowers under financial difficulties that were subject to
payment default during the year preceding the default date
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 is 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 June 30, 2024 and December 31, 2023 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 2023 Form 10-K:
61
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
BPPR
Commercial:
Commercial multi-family
Pass
$
44,388
$
37,606
$
137,410
$
21,152
$
20,313
$
27,850
$
-
$
-
$
288,719
Watch
-
-
-
-
-
5,892
-
-
5,892
Special Mention
-
-
550
-
-
4,704
-
-
5,254
Substandard
-
-
-
-
-
5,046
-
-
5,046
Total commercial
multi-family
$
44,388
$
37,606
$
137,960
$
21,152
$
20,313
$
43,492
$
-
$
-
$
304,911
Commercial real estate non-owner occupied
Pass
$
36,743
$
309,981
$
849,864
$
555,370
$
344,017
$
571,249
$
6,770
$
-
$
2,673,994
Watch
-
2,013
702
4,978
30,125
44,203
-
-
82,021
Special Mention
-
41,841
7,046
24,527
-
70,888
-
-
144,302
Substandard
-
1,009
1,256
176
2,094
69,960
4,815
-
79,310
Total commercial
real estate non-
owner occupied
$
36,743
$
354,844
$
858,868
$
585,051
$
376,236
$
756,300
$
11,585
$
-
$
2,979,627
Commercial real estate owner occupied
Pass
$
75,302
$
95,573
$
151,548
$
220,420
$
48,868
$
347,176
$
10,003
$
-
$
948,890
Watch
848
1,943
40,641
8,979
4,477
86,911
3
-
143,802
Special Mention
-
924
19,723
20,479
897
21,180
1,324
-
64,527
Substandard
161
1,177
20,834
4,844
142,327
77,726
12,730
-
259,799
Doubtful
-
-
-
-
-
94
-
-
94
Total commercial
real estate owner
occupied
$
76,311
$
99,617
$
232,746
$
254,722
$
196,569
$
533,087
$
24,060
$
-
$
1,417,112
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
2,785
$
-
$
-
$
2,785
Commercial and industrial
Pass
$
477,695
$
940,843
$
626,694
$
324,125
$
230,338
$
359,336
$
1,169,333
$
-
$
4,128,364
Watch
18,325
55,880
48,329
158,512
3,602
75,664
221,013
-
581,325
Special Mention
4,889
13,700
5,188
3,697
2,779
41,292
36,044
-
107,589
Substandard
3,610
995
34,030
6,261
15,544
24,855
100,141
-
185,436
Doubtful
-
-
-
-
52
18
-
-
70
Total commercial
and industrial
$
504,519
$
1,011,418
$
714,241
$
492,595
$
252,315
$
501,165
$
1,526,531
$
-
$
5,002,784
Year-to-Date gross
write-offs
$
345
$
158
$
305
$
122
$
24
$
10,495
$
3,292
$
-
$
14,741
Construction
Pass
$
25,686
$
40,086
$
25,319
$
20,051
$
10,634
$
1,011
$
34,577
$
-
$
157,364
Watch
-
-
13,485
5,752
-
-
$
124
-
19,361
Special Mention
-
-
-
7,214
-
-
-
-
7,214
Total construction
$
25,686
$
40,086
$
38,804
$
33,017
$
10,634
$
1,011
$
34,701
$
-
$
183,939
Mortgage
Pass
$
413,438
$
743,023
$
425,050
$
420,488
$
246,273
$
4,265,755
$
-
$
-
$
6,514,027
Substandard
-
1,309
629
254
349
73,952
-
-
76,493
Total mortgage
$
413,438
$
744,332
$
425,679
$
420,742
$
246,622
$
4,339,707
$
-
$
-
$
6,590,520
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
791
$
-
$
-
$
791
62
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
BPPR
Leasing
Pass
$
400,436
$
538,440
$
425,174
$
263,168
$
132,626
$
61,146
$
-
$
-
$
1,820,990
Substandard
-
1,349
2,301
1,630
680
1,062
-
-
7,022
Loss
-
36
-
-
-
-
-
-
36
Total leasing
$
400,436
$
539,825
$
427,475
$
264,798
$
133,306
$
62,208
$
-
$
-
$
1,828,048
Year-to-Date gross
write-offs
$
178
$
2,200
$
3,012
$
2,340
$
306
$
655
$
-
$
-
$
8,691
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
1,138,608
$
-
$
1,138,608
Substandard
-
-
-
-
-
-
23,891
-
23,891
Loss
-
-
-
-
-
-
40
-
40
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,162,539
$
-
$
1,162,539
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
32,815
$
-
$
32,815
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
2,216
$
-
$
2,216
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
-
$
2,216
$
-
$
2,216
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
291
$
-
$
291
Personal
Pass
$
380,718
$
666,660
$
359,821
$
137,380
$
40,992
$
117,620
$
-
$
21,471
$
1,724,662
Substandard
138
4,026
3,828
1,311
421
9,115
-
1,108
19,947
Loss
-
102
106
43
10
3
-
-
264
Total Personal
$
380,856
$
670,788
$
363,755
$
138,734
$
41,423
$
126,738
$
-
$
22,579
$
1,744,873
Year-to-Date gross
write-offs
$
18
$
15,510
$
21,112
$
6,114
$
1,782
$
2,304
$
-
$
802
$
47,642
Auto
Pass
$
690,115
$
1,078,214
$
783,574
$
602,107
$
329,200
$
243,514
$
-
$
-
$
3,726,724
Substandard
901
11,772
11,837
8,971
6,415
6,553
-
-
46,449
Loss
-
25
60
23
7
4
-
-
119
Total Auto
$
691,016
$
1,090,011
$
795,471
$
611,101
$
335,622
$
250,071
$
-
$
-
$
3,773,292
Year-to-Date gross
write-offs
$
791
$
17,837
$
9,631
$
5,185
$
2,480
$
852
$
-
$
-
$
36,776
Other consumer
Pass
$
16,622
$
31,077
$
21,348
$
12,152
$
5,106
$
4,482
$
61,517
$
-
$
152,304
Substandard
-
238
23
550
34
62
322
-
1,229
Total Other
consumer
$
16,622
$
31,315
$
21,371
$
12,702
$
5,140
$
4,544
$
61,839
$
-
$
153,533
Year-to-Date gross
write-offs
$
7
$
119
$
79
$
48
$
109
$
982
$
-
$
-
$
1,344
Total BPPR
$
2,590,015
$
4,619,842
$
4,016,370
$
2,834,614
$
1,618,180
$
6,618,323
$
2,823,471
$
22,579
$
25,143,394
63
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular U.S.
Commercial:
Commercial multi-family
Pass
$
32,785
$
154,256
$
468,630
$
347,730
$
191,155
$
629,870
$
5,427
$
-
$
1,829,853
Watch
-
-
67,643
10,238
37,761
110,305
-
-
225,947
Special Mention
-
-
-
-
-
2,172
-
-
2,172
Substandard
-
-
-
-
-
21,597
-
-
21,597
Total commercial
multi-family
$
32,785
$
154,256
$
536,273
$
357,968
$
228,916
$
763,944
$
5,427
$
-
$
2,079,569
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
441
$
-
$
-
$
441
Commercial real estate non-owner occupied
Pass
$
24,268
$
395,880
$
493,349
$
150,889
$
223,208
$
477,685
$
11,171
$
-
$
1,776,450
Watch
-
-
14,673
31,660
18,644
73,443
-
-
138,420
Special Mention
-
-
-
2,390
-
63,324
-
-
65,714
Substandard
-
-
2,693
2,783
7,937
30,848
-
-
44,261
Total commercial
real estate non-
owner occupied
$
24,268
$
395,880
$
510,715
$
187,722
$
249,789
$
645,300
$
11,171
$
-
$
2,024,845
Commercial real estate owner occupied
Pass
$
97,509
$
289,013
$
204,162
$
217,184
$
57,293
$
262,894
$
5,390
$
-
$
1,133,445
Watch
-
13,859
34,236
37,529
50,930
96,991
1,905
-
235,450
Special Mention
-
-
79,973
114,080
4,890
10,970
-
-
209,913
Substandard
-
-
31,245
2,396
-
114,256
-
-
147,897
Total commercial
real estate owner
occupied
$
97,509
$
302,872
$
349,616
$
371,189
$
113,113
$
485,111
$
7,295
$
-
$
1,726,705
Commercial and industrial
Pass
$
62,829
$
253,424
$
314,793
$
336,229
$
261,171
$
508,963
$
202,861
$
-
$
1,940,270
Watch
24
172
38,455
35,454
33,688
91,116
21,509
-
220,418
Special Mention
75
857
5,844
827
13
317
12,501
-
20,434
Substandard
1,891
760
284
112
2,644
2,082
3,678
-
11,451
Total commercial
and industrial
$
64,819
$
255,213
$
359,376
$
372,622
$
297,516
$
602,478
$
240,549
$
-
$
2,192,573
Year-to-Date gross
write-offs
$
1,103
$
80
$
190
$
272
$
5
$
44
$
65
$
-
$
1,759
Construction
Pass
$
90,270
$
401,442
$
223,884
$
53,149
$
-
$
25,027
$
4,791
$
-
$
798,563
Watch
-
-
41,923
14,210
-
7,286
-
-
63,419
Special Mention
-
2,567
6,076
-
-
-
-
-
8,643
Substandard
-
-
7,713
9,133
-
34,349
-
-
51,195
Total construction
$
90,270
$
404,009
$
279,596
$
76,492
$
-
$
66,662
$
4,791
$
-
$
921,820
Mortgage
Pass
$
42,953
$
93,273
$
219,949
$
279,757
$
223,253
$
422,468
$
-
$
-
$
1,281,653
Substandard
-
-
-
352
642
10,559
-
-
11,553
Total mortgage
$
42,953
$
93,273
$
219,949
$
280,109
$
223,895
$
433,027
$
-
$
-
$
1,293,206
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
18
$
-
$
-
$
18
64
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular U.S.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
18
$
-
$
18
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
18
$
-
$
18
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
6,437
$
43,896
$
12,663
$
62,996
Substandard
-
-
-
-
-
1,885
17
855
2,757
Loss
-
-
-
-
-
99
-
924
1,023
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
8,421
$
43,913
$
14,442
$
66,776
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
21
$
-
$
-
$
21
Personal
Pass
$
17,596
$
31,715
$
64,685
$
14,788
$
1,596
$
2,514
$
-
$
-
$
132,894
Substandard
-
460
869
167
17
326
-
-
1,839
Loss
-
9
-
-
4
-
-
-
13
Total Personal
$
17,596
$
32,184
$
65,554
$
14,955
$
1,617
$
2,840
$
-
$
-
$
134,746
Year-to-Date gross
write-offs
$
50
$
1,779
$
6,523
$
1,578
$
139
$
239
$
-
$
-
$
10,308
Other consumer
Pass
$
17
$
-
$
-
$
-
$
-
$
-
$
7,951
$
-
$
7,968
Total Other
consumer
$
17
$
-
$
-
$
-
$
-
$
-
$
7,951
$
-
$
7,968
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
49
$
-
$
49
Total Popular U.S.
$
370,217
$
1,637,687
$
2,321,079
$
1,661,057
$
1,114,846
$
3,007,783
$
321,115
$
14,442
$
10,448,226
65
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular, Inc.
Commercial:
Commercial multi-family
Pass
$
77,173
$
191,862
$
606,040
$
368,882
$
211,468
$
657,720
$
5,427
$
-
$
2,118,572
Watch
-
-
67,643
10,238
37,761
116,197
-
-
231,839
Special Mention
-
-
550
-
-
6,876
-
-
7,426
Substandard
-
-
-
-
-
26,643
-
-
26,643
Total commercial
multi-family
$
77,173
$
191,862
$
674,233
$
379,120
$
249,229
$
807,436
$
5,427
$
-
$
2,384,480
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
441
$
-
$
-
$
441
Commercial real estate non-owner occupied
Pass
$
61,011
$
705,861
$
1,343,213
$
706,259
$
567,225
$
1,048,934
$
17,941
$
-
$
4,450,444
Watch
-
2,013
15,375
36,638
48,769
117,646
-
-
220,441
Special Mention
-
41,841
7,046
26,917
-
134,212
-
-
210,016
Substandard
-
1,009
3,949
2,959
10,031
100,808
4,815
-
123,571
Total commercial
real estate non-
owner occupied
$
61,011
$
750,724
$
1,369,583
$
772,773
$
626,025
$
1,401,600
$
22,756
$
-
$
5,004,472
Commercial real estate owner occupied
Pass
$
172,811
$
384,586
$
355,710
$
437,604
$
106,161
$
610,070
$
15,393
$
-
$
2,082,335
Watch
848
15,802
74,877
46,508
55,407
183,902
1,908
-
379,252
Special Mention
-
924
99,696
134,559
5,787
32,150
1,324
-
274,440
Substandard
161
1,177
52,079
7,240
142,327
191,982
12,730
-
407,696
Doubtful
-
-
-
-
-
94
-
-
94
Total commercial
real estate owner
occupied
$
173,820
$
402,489
$
582,362
$
625,911
$
309,682
$
1,018,198
$
31,355
$
-
$
3,143,817
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
2,785
$
-
$
-
$
2,785
Commercial and industrial
Pass
$
540,524
$
1,194,267
$
941,487
$
660,354
$
491,509
$
868,299
$
1,372,194
$
-
$
6,068,634
Watch
18,349
56,052
86,784
$
193,966
$
37,290
$
166,780
$
242,522
$
-
$
801,743
Special Mention
4,964
14,557
11,032
4,524
2,792
41,609
48,545
-
128,023
Substandard
5,501
1,755
34,314
6,373
18,188
26,937
103,819
-
196,887
Doubtful
-
-
-
-
52
18
-
-
70
Total commercial
and industrial
$
569,338
$
1,266,631
$
1,073,617
$
865,217
$
549,831
$
1,103,643
$
1,767,080
$
-
$
7,195,357
Year-to-Date gross
write-offs
$
1,448
$
238
$
495
$
394
$
29
$
10,539
$
3,357
$
-
$
16,500
66
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular, Inc.
Construction
Pass
$
115,956
$
441,528
$
249,203
$
73,200
$
10,634
$
26,038
$
39,368
$
-
$
955,927
Watch
-
-
55,408
19,962
-
7,286
124
-
82,780
Special Mention
-
2,567
6,076
7,214
-
-
-
-
15,857
Substandard
-
-
7,713
9,133
-
34,349
-
-
51,195
Total construction
$
115,956
$
444,095
$
318,400
$
109,509
$
10,634
$
67,673
$
39,492
$
-
$
1,105,759
Mortgage
Pass
$
456,391
$
836,296
$
644,999
$
700,245
$
469,526
$
4,688,223
$
-
$
-
$
7,795,680
Substandard
-
1,309
629
606
991
84,511
-
-
88,046
Total mortgage
$
456,391
$
837,605
$
645,628
$
700,851
$
470,517
$
4,772,734
$
-
$
-
$
7,883,726
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
809
$
-
$
-
$
809
Leasing
Pass
$
400,436
$
538,440
$
425,174
$
263,168
$
132,626
$
61,146
$
-
$
-
$
1,820,990
Substandard
-
1,349
2,301
1,630
680
1,062
-
-
7,022
Loss
-
36
-
-
-
-
-
-
36
Total leasing
$
400,436
$
539,825
$
427,475
$
264,798
$
133,306
$
62,208
$
-
$
-
$
1,828,048
Year-to-Date gross
write-offs
$
178
$
2,200
$
3,012
$
2,340
$
306
$
655
$
-
$
-
$
8,691
67
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular, Inc.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
1,138,626
$
-
$
1,138,626
Substandard
-
-
-
-
-
-
23,891
-
23,891
Loss
-
-
-
-
-
-
40
-
40
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,162,557
$
-
$
1,162,557
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
32,815
$
-
$
32,815
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
6,437
$
46,112
$
12,663
$
65,212
Substandard
-
-
-
-
-
1,885
17
855
2,757
Loss
-
-
-
-
-
99
-
924
1,023
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
8,421
$
46,129
$
14,442
$
68,992
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
21
$
291
$
-
$
312
Personal
Pass
$
398,314
$
698,375
$
424,506
$
152,168
$
42,588
$
120,134
$
-
$
21,471
$
1,857,556
Substandard
138
4,486
4,697
1,478
438
9,441
-
1,108
21,786
Loss
-
111
106
43
14
3
-
-
277
$
398,452
$
702,972
$
429,309
$
153,689
$
43,040
$
129,578
$
-
$
22,579
$
1,879,619
Year-to-Date gross
write-offs
$
68
$
17,289
$
27,635
$
7,692
$
1,921
$
2,543
$
-
$
802
$
57,950
Auto
Pass
$
690,115
$
1,078,214
$
783,574
$
602,107
$
329,200
$
243,514
$
-
$
-
$
3,726,724
Substandard
901
11,772
11,837
8,971
6,415
6,553
-
-
46,449
Loss
-
25
60
23
7
4
-
-
119
Total Auto
$
691,016
$
1,090,011
$
795,471
$
611,101
$
335,622
$
250,071
$
-
$
-
$
3,773,292
Year-to-Date gross
write-offs
$
791
$
17,837
$
9,631
$
5,185
$
2,480
$
852
$
-
$
-
$
36,776
Other consumer
Pass
$
16,639
$
31,077
$
21,348
$
12,152
$
5,106
$
4,482
$
69,468
$
-
$
160,272
Substandard
-
238
23
550
34
62
322
-
1,229
Total Other
consumer
$
16,639
$
31,315
$
21,371
$
12,702
$
5,140
$
4,544
$
69,790
$
-
$
161,501
Year-to-Date gross
write-offs
$
7
$
119
$
79
$
48
$
109
$
982
$
49
$
-
$
1,393
Total Popular Inc.
$
2,960,232
$
6,257,529
$
6,337,449
$
4,495,671
$
2,733,026
$
9,626,106
$
3,144,586
$
37,021
$
35,591,620
68
December 31, 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
Pass
$
37,976
$
138,619
$
21,334
$
20,487
$
32,554
$
24,248
$
306
$
-
$
275,524
Watch
-
-
-
-
1,068
5,179
-
-
6,247
Special Mention
-
559
-
-
-
4,780
-
-
5,339
Substandard
-
-
-
-
-
4,832
-
-
4,832
Total commercial
multi-family
$
37,976
$
139,178
$
21,334
$
20,487
$
33,622
$
39,039
$
306
$
-
$
291,942
Commercial real estate non-owner occupied
Pass
$
305,243
$
871,191
$
560,785
$
359,853
$
41,262
$
563,794
$
7,042
$
-
$
2,709,170
Watch
1,959
882
5,205
22,211
5,938
27,015
-
-
63,210
Special Mention
43,020
5,413
24,730
-
15,843
68,368
-
-
157,374
Substandard
1,016
1,307
180
2,231
53,729
12,968
4,069
-
75,500
Total commercial
real estate non-
owner occupied
$
351,238
$
878,793
$
590,900
$
384,295
$
116,772
$
672,145
$
11,111
$
-
$
3,005,254
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
609
$
-
$
521
$
-
$
-
$
1,130
Commercial real estate owner occupied
Pass
$
92,234
$
155,819
$
227,246
$
51,038
$
24,184
$
357,429
$
9,146
$
-
$
917,096
Watch
2,947
45,106
9,913
4,285
5,017
62,217
1,000
-
130,485
Special Mention
-
16,860
20,741
1,462
887
44,069
-
-
84,019
Substandard
1,316
15,710
5,080
143,696
845
87,383
12,617
-
266,647
Doubtful
-
-
-
-
-
136
-
-
136
Total commercial
real estate owner
occupied
$
96,497
$
233,495
$
262,980
$
200,481
$
30,933
$
551,234
$
22,763
$
-
$
1,398,383
Year-to-Date gross
write-offs
$
-
$
4
$
-
$
-
$
1
$
4,432
$
-
$
-
$
4,437
Commercial and industrial
Pass
$
1,109,898
$
634,401
$
511,912
$
241,452
$
123,458
$
258,872
$
1,343,885
$
-
$
4,223,878
Watch
28,841
95,785
6,111
4,043
15,560
65,360
182,756
-
398,456
Special Mention
6,401
3,269
276
3,200
2,088
41,289
9,410
-
65,933
Substandard
731
1,760
8,644
22,065
1,922
32,087
40,670
-
107,879
Doubtful
-
-
-
54
-
26
-
-
80
Total commercial
and industrial
$
1,145,871
$
735,215
$
526,943
$
270,814
$
143,028
$
397,634
$
1,576,721
$
-
$
4,796,226
Year-to-Date gross
write-offs
$
896
$
184
$
215
$
335
$
555
$
1,086
$
4,468
$
-
$
7,739
Construction
Pass
$
26,662
$
24,462
$
27,364
$
10,758
$
1,944
$
1,049
$
38,720
$
-
$
130,959
Watch
-
16,546
5,458
-
-
-
9,506
-
31,510
Special Mention
-
-
1,009
-
-
-
1
-
1,010
Substandard
-
6,378
-
-
-
-
-
-
6,378
Total construction
$
26,662
$
47,386
$
33,831
$
10,758
$
1,944
$
1,049
$
48,227
$
-
$
169,857
Year-to-Date gross
write-offs
$
-
$
2,611
$
-
$
-
$
-
$
-
$
-
$
-
$
2,611
Mortgage
Pass
$
751,532
$
439,373
$
421,297
$
259,412
$
164,438
$
4,280,509
$
-
$
-
$
6,316,561
Substandard
96
161
162
345
2,606
71,893
-
-
75,263
Total mortgage
$
751,628
$
439,534
$
421,459
$
259,757
$
167,044
$
4,352,402
$
-
$
-
$
6,391,824
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
1,638
$
-
$
-
$
1,638
69
December 31, 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
Pass
$
647,659
$
488,506
$
313,133
$
163,189
$
88,983
$
21,706
$
-
$
-
$
1,723,176
Substandard
806
2,516
3,053
906
818
517
-
-
8,616
Loss
-
-
-
-
-
17
-
-
17
Total leasing
$
648,465
$
491,022
$
316,186
$
164,095
$
89,801
$
22,240
$
-
$
-
$
1,731,809
Year-to-Date gross
write-offs
$
1,065
$
4,424
$
2,878
$
849
$
976
$
687
$
-
$
-
$
10,879
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
1,112,447
$
-
$
1,112,447
Substandard
-
-
-
-
-
-
23,259
-
23,259
Loss
-
-
-
-
-
-
22
-
22
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,135,728
$
-
$
1,135,728
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
41,007
$
-
$
41,007
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
2,622
$
-
$
2,622
Substandard
-
-
-
-
-
-
26
-
26
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
-
$
2,648
$
-
$
2,648
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
213
$
-
$
213
Personal
Pass
$
859,434
$
480,771
$
181,483
$
57,227
$
58,849
$
96,956
$
-
$
22,034
$
1,756,754
Substandard
1,815
4,985
1,939
493
933
8,322
-
1,006
19,493
Loss
-
-
14
-
12
37
-
-
63
Total Personal
$
861,249
$
485,756
$
183,436
$
57,720
$
59,794
$
105,315
$
-
$
23,040
$
1,776,310
Year-to-Date gross
write-offs
$
4,458
$
35,915
$
18,076
$
4,210
$
4,891
$
2,952
$
-
$
1,475
$
71,977
Auto
Pass
$
1,210,622
$
899,797
$
711,439
$
405,768
$
260,355
$
120,318
$
-
$
-
$
3,608,299
Substandard
6,980
14,049
11,916
9,157
7,051
3,199
-
-
52,352
Loss
9
44
45
16
9
6
-
-
129
Total Auto
$
1,217,611
$
913,890
$
723,400
$
414,941
$
267,415
$
123,523
$
-
$
-
$
3,660,780
Year-to-Date gross
write-offs
$
10,170
$
23,849
$
11,820
$
5,914
$
3,553
$
-
$
-
$
-
$
55,306
Other consumer
Pass
$
36,144
$
24,238
$
14,942
$
5,618
$
3,433
$
2,753
$
61,796
$
-
$
148,924
Substandard
244
25
-
73
16
131
249
-
738
Loss
-
-
137
-
-
363
-
-
500
Total Other
consumer
$
36,388
$
24,263
$
15,079
$
5,691
$
3,449
$
3,247
$
62,045
$
-
$
150,162
Year-to-Date gross
write-offs
$
47
$
154
$
125
$
164
$
88
$
11,876
$
-
$
-
$
12,454
Total BPPR
$
5,173,585
$
4,388,532
$
3,095,548
$
1,789,039
$
913,802
$
6,267,828
$
2,859,549
$
23,040
$
24,510,923
70
December 31, 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
Pass
$
166,410
$
417,169
$
326,047
$
164,887
$
182,528
$
410,836
$
5,112
$
-
$
1,672,989
Watch
-
116,794
39,319
71,237
93,239
98,365
-
-
418,954
Special Mention
-
-
862
1,171
-
3,377
-
-
5,410
Substandard
-
-
-
-
5,545
20,780
-
-
26,325
Total commercial
multi-family
$
166,410
$
533,963
$
366,228
$
237,295
$
281,312
$
533,358
$
5,112
$
-
$
2,123,678
Commercial real estate non-owner occupied
Pass
$
396,712
$
490,316
$
170,074
$
201,225
$
86,595
$
394,455
$
6,086
$
-
$
1,745,463
Watch
-
39,721
38,713
43,705
39,908
91,922
4,557
-
258,526
Special Mention
-
-
-
-
1,327
63,365
-
-
64,692
Substandard
-
-
-
8,054
1,702
3,730
-
-
13,486
Total commercial
real estate non-
owner occupied
$
396,712
$
530,037
$
208,787
$
252,984
$
129,532
$
553,472
$
10,643
$
-
$
2,082,167
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
193
$
-
$
-
$
193
Commercial real estate owner occupied
Pass
$
303,202
$
278,380
$
226,289
$
58,505
$
47,083
$
204,888
$
9,753
$
-
$
1,128,100
Watch
-
69,894
84,218
53,066
14,057
98,502
1,905
-
321,642
Special Mention
-
-
77,912
4,955
6,074
11,224
-
-
100,165
Substandard
-
477
2,430
-
21,763
107,675
-
-
132,345
Total commercial
real estate owner
occupied
$
303,202
$
348,751
$
390,849
$
116,526
$
88,977
$
422,289
$
11,658
$
-
$
1,682,252
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
1,395
$
-
$
-
$
1,395
71
December 31, 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 and industrial
Pass
$
196,959
$
278,238
$
346,428
$
268,835
$
148,502
$
379,635
$
414,883
$
-
$
2,033,480
Watch
198
37,022
47,299
44,939
23,493
93,299
32,497
-
278,747
Special Mention
208
889
1,021
30
151
39
8,674
-
11,012
Substandard
636
628
152
1,152
730
1,841
1,517
-
6,656
Total commercial
and industrial
$
198,001
$
316,777
$
394,900
$
314,956
$
172,876
$
474,814
$
457,571
$
-
$
2,329,895
Year-to-Date gross
write-offs
$
247
$
221
$
1,994
$
44
$
1,320
$
-
$
49
$
-
$
3,875
Construction
Pass
$
280,188
$
251,627
$
89,450
$
14,733
$
25,254
$
-
$
-
$
-
$
661,252
Watch
-
22,867
12,869
-
21,896
782
-
-
58,414
Special Mention
2,120
13,151
-
-
-
-
-
-
15,271
Substandard
-
1
13,997
3,895
-
36,593
-
-
54,486
Total construction
$
282,308
$
287,646
$
116,316
$
18,628
$
47,150
$
37,375
$
-
$
-
$
789,423
Mortgage
Pass
$
99,296
$
229,720
$
288,767
$
233,805
$
177,245
$
264,069
$
-
$
-
$
1,292,902
Substandard
-
235
-
646
2,102
8,208
-
-
11,191
Total mortgage
$
99,296
$
229,955
$
288,767
$
234,451
$
179,347
$
272,277
$
-
$
-
$
1,304,093
72
December 31, 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
$
-
$
-
$
-
$
-
$
-
$
-
$
19
$
-
$
19
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
19
$
-
$
19
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
1
$
-
$
1
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
7,394
$
39,925
$
12,253
$
59,572
Substandard
-
-
-
-
-
1,849
-
966
2,815
Loss
-
-
-
-
-
99
-
819
918
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
9,342
$
39,925
$
14,038
$
63,305
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
471
$
-
$
-
$
471
Personal
Pass
$
41,016
$
93,759
$
23,325
$
2,993
$
3,597
$
1,441
$
-
$
-
$
166,131
Substandard
333
1,630
325
50
126
211
-
-
2,675
Loss
-
-
-
-
1
130
-
-
131
Total Personal
$
41,349
$
95,389
$
23,650
$
3,043
$
3,724
$
1,782
$
-
$
-
$
168,937
Year-to-Date gross
write-offs
$
735
$
13,136
$
4,450
$
618
$
872
$
160
$
-
$
-
$
19,971
Other consumer
Pass
$
19
$
-
$
-
$
-
$
-
$
-
$
10,259
$
-
$
10,278
Substandard
-
-
-
-
-
-
1
-
1
Total Other
consumer
$
19
$
-
$
-
$
-
$
-
$
-
$
10,260
$
-
$
10,279
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
171
$
-
$
171
Total Popular U.S.
$
1,487,297
$
2,342,518
$
1,789,497
$
1,177,883
$
902,918
$
2,304,709
$
535,188
$
14,038
$
10,554,048
73
December 31, 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
Pass
$
204,386
$
555,788
$
347,381
$
185,374
$
215,082
$
435,084
$
5,418
$
-
$
1,948,513
Watch
-
116,794
39,319
71,237
94,307
103,544
-
-
425,201
Special Mention
-
559
862
1,171
-
8,157
-
-
10,749
Substandard
-
-
-
-
5,545
25,612
-
-
31,157
Total commercial
multi-family
$
204,386
$
673,141
$
387,562
$
257,782
$
314,934
$
572,397
$
5,418
$
-
$
2,415,620
Commercial real estate non-owner occupied
Pass
$
701,955
$
1,361,507
$
730,859
$
561,078
$
127,857
$
958,249
$
13,128
$
-
$
4,454,633
Watch
1,959
40,603
43,918
65,916
45,846
118,937
4,557
-
321,736
Special Mention
43,020
5,413
24,730
-
17,170
131,733
-
-
222,066
Substandard
1,016
1,307
180
10,285
55,431
16,698
4,069
-
88,986
Total commercial
real estate non-
owner occupied
$
747,950
$
1,408,830
$
799,687
$
637,279
$
246,304
$
1,225,617
$
21,754
$
-
$
5,087,421
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
609
$
-
$
714
$
-
$
-
$
1,323
Commercial real estate owner occupied
Pass
$
395,436
$
434,199
$
453,535
$
109,543
$
71,267
$
562,317
$
18,899
$
-
$
2,045,196
Watch
2,947
115,000
94,131
57,351
19,074
160,719
2,905
-
452,127
Special Mention
-
16,860
98,653
6,417
6,961
55,293
-
-
184,184
Substandard
1,316
16,187
7,510
143,696
22,608
195,058
12,617
-
398,992
Doubtful
-
-
-
-
-
136
-
-
136
Total commercial
real estate owner
occupied
$
399,699
$
582,246
$
653,829
$
317,007
$
119,910
$
973,523
$
34,421
$
-
$
3,080,635
Year-to-Date gross
write-offs
$
-
$
4
$
-
$
-
$
1
$
5,827
$
-
$
-
$
5,832
Commercial and industrial
Pass
$
1,306,857
$
912,639
$
858,340
$
510,287
$
271,960
$
638,507
$
1,758,768
$
-
$
6,257,358
Watch
29,039
132,807
53,410
48,982
39,053
158,659
215,253
-
677,203
Special Mention
6,609
4,158
1,297
3,230
2,239
41,328
18,084
-
76,945
Substandard
1,367
2,388
8,796
23,217
2,652
33,928
42,187
-
114,535
Doubtful
-
-
-
54
-
26
-
-
80
Total commercial
and industrial
$
1,343,872
$
1,051,992
$
921,843
$
585,770
$
315,904
$
872,448
$
2,034,292
$
-
$
7,126,121
Year-to-Date gross
write-offs
$
1,143
$
405
$
2,209
$
379
$
1,875
$
1,086
$
4,517
$
-
$
11,614
74
December 31, 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
Pass
$
306,850
$
276,089
$
116,814
$
25,491
$
27,198
$
1,049
$
38,720
$
-
$
792,211
Watch
-
39,413
18,327
-
21,896
782
9,506
-
89,924
Special Mention
2,120
13,151
1,009
-
-
-
1
-
16,281
Substandard
-
6,379
13,997
3,895
-
36,593
-
-
60,864
Total construction
$
308,970
$
335,032
$
150,147
$
29,386
$
49,094
$
38,424
$
48,227
$
-
$
959,280
Year-to-Date gross
write-offs
$
-
$
2,611
$
-
$
-
$
-
$
-
$
-
$
-
$
2,611
Mortgage
Pass
$
850,828
$
669,093
$
710,064
$
493,217
$
341,683
$
4,544,578
$
-
$
-
$
7,609,463
Substandard
96
396
162
991
4,708
80,101
-
-
86,454
Total mortgage
$
850,924
$
669,489
$
710,226
$
494,208
$
346,391
$
4,624,679
$
-
$
-
$
7,695,917
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
1,638
$
-
$
-
$
1,638
Leasing
Pass
$
647,659
$
488,506
$
313,133
$
163,189
$
88,983
$
21,706
$
-
$
-
$
1,723,176
Substandard
806
2,516
3,053
906
818
517
-
-
8,616
Loss
-
-
-
-
-
17
-
-
17
Total leasing
$
648,465
$
491,022
$
316,186
$
164,095
$
89,801
$
22,240
$
-
$
-
$
1,731,809
Year-to-Date gross
write-offs
$
1,065
$
4,424
$
2,878
$
849
$
976
$
687
$
-
$
-
$
10,879
75
December 31, 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
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
1,112,466
$
-
$
1,112,466
Substandard
-
-
-
-
-
-
23,259
-
23,259
Loss
-
-
-
-
-
-
22
-
22
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,135,747
$
-
$
1,135,747
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
-
$
41,008
$
-
$
41,008
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
7,394
$
42,547
$
12,253
$
62,194
Substandard
-
-
-
-
-
1,849
26
966
2,841
Loss
-
-
-
-
-
99
-
819
918
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
9,342
$
42,573
$
14,038
$
65,953
Year-to-Date gross
write-offs
$
-
$
-
$
-
$
-
$
-
$
471
$
213
$
-
$
684
Personal
Pass
$
900,450
$
574,530
$
204,808
$
60,220
$
62,446
$
98,397
$
-
$
22,034
$
1,922,885
Substandard
2,148
6,615
2,264
543
1,059
8,533
-
1,006
22,168
Loss
$
-
$
-
$
14
$
-
$
13
$
167
$
-
$
-
$
194
Total Personal
$
902,598
$
581,145
$
207,086
$
60,763
$
63,518
$
107,097
$
-
$
23,040
$
1,945,247
Year-to-Date gross
write-offs
$
5,193
$
49,051
$
22,526
$
4,828
$
5,763
$
3,112
$
-
$
1,475
$
91,948
Auto
Pass
$
1,210,622
$
899,797
$
711,439
$
405,768
$
260,355
$
120,318
$
-
$
-
$
3,608,299
Substandard
6,980
14,049
11,916
9,157
7,051
3,199
-
-
52,352
Loss
9
44
45
16
9
6
-
-
129
Total Auto
$
1,217,611
$
913,890
$
723,400
$
414,941
$
267,415
$
123,523
$
-
$
-
$
3,660,780
Year-to-Date gross
write-offs
$
10,170
$
23,849
$
11,820
$
5,914
$
3,553
$
-
$
-
$
-
$
55,306
Other consumer
Pass
$
36,163
$
24,238
$
14,942
$
5,618
$
3,433
$
2,753
$
72,055
$
-
$
159,202
Substandard
244
25
-
73
16
131
250
-
739
Loss
-
-
137
-
-
363
-
-
500
Total Other
consumer
$
36,407
$
24,263
$
15,079
$
5,691
$
3,449
$
3,247
$
72,305
$
-
$
160,441
Year-to-Date gross
write-offs
$
47
$
154
$
125
$
164
$
88
$
11,876
$
171
$
-
$
12,625
Total Popular Inc.
$
6,660,882
$
6,731,050
$
4,885,045
$
2,966,922
$
1,816,720
$
8,572,537
$
3,394,737
$
37,078
$
35,064,971
76
Note 9 – Mortgage banking activities
Income from mortgage banking activities includes mortgage servicing fees earned in connection with administering residential
mortgage loans and valuation adjustments on mortgage servicing rights. It also includes gain on sales and securitizations of
residential mortgage loans, losses on repurchased loans, including interest advances, and trading gains and losses on derivative
contracts used to hedge the Corporation’s securitization activities. In addition, fair value valuation adjustments to 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 June 30,
Six months ended June 30,
(In thousands)
2024
2023
2024
2023
Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees
$
7,602
$
8,369
$
15,353
$
17,058
Mortgage servicing rights fair value adjustments
(1,945)
(6,216)
(5,384)
(7,592)
Total mortgage servicing fees, net of fair value adjustments
5,657
2,153
9,969
9,466
Net gain (loss) on sale of loans, including valuation on loans held-for-sale
2
(61)
76
202
Trading account profit:
Unrealized gains on outstanding derivative positions
56
246
157
115
Realized gains on closed derivative positions
9
111
12
167
Total trading account profit
65
357
169
282
Losses on repurchased loans, including interest advances
(1)
(133)
(131)
(234)
Total mortgage banking activities
$
5,723
$
2,316
$
10,083
$
9,716
[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.
77
Note 10 – Transfers of financial assets and mortgage servicing assets
The Corporation typically transfers conforming residential mortgage loans in 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 to a government-sponsored entity, namely FNMA. Refer to Note 19 to the Consolidated Financial
Statements for a description of such arrangements.
No
because they did not contain any credit recourse arrangements. The securitizations completed by the Corporation during the
quarters and six months ended June 30, 2024 and 2023 were completed without credit recourse.
The following tables present the initial fair value of the assets obtained as proceeds from residential mortgage loans securitized
during the quarters and six months ended June 30, 2024 and 2023:
Proceeds Obtained During the Quarter Ended June 30, 2024
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - FNMA
$
-
$
2,601
$
-
$
2,601
Total trading account debt securities
$
-
$
2,601
$
-
$
2,601
Mortgage servicing rights
$
-
$
-
$
72
$
72
Total
$
-
$
2,601
$
72
$
2,673
Proceeds Obtained During the Six months Ended June 30, 2024
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
-
$
1,100
$
-
$
1,100
Mortgage-backed securities - FNMA
-
3,706
-
3,706
Total trading account debt securities
$
-
$
4,806
$
-
$
4,806
Mortgage servicing rights
$
-
$
-
$
117
$
117
Total
$
-
$
4,806
$
117
$
4,923
Proceeds Obtained During the Quarter Ended June 30, 2023
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - FNMA
$
-
$
13,393
$
-
$
13,393
Total trading account debt securities
$
-
$
13,393
$
-
$
13,393
Mortgage servicing rights
$
-
$
-
$
366
$
366
Total
$
-
$
13,393
$
366
$
13,759
78
Proceeds Obtained During the Six months Ended June 30, 2023
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
-
$
1,067
$
-
$
1,067
Mortgage-backed securities - FNMA
-
23,292
-
23,292
Total trading account debt securities
$
-
$
24,359
$
-
$
24,359
Mortgage servicing rights
$
-
$
-
$
644
$
644
Total
$
-
$
24,359
$
644
$
25,003
During the six months ended June 30, 2024, the Corporation retained servicing rights on whole loan sales involving approximately
$
23
27
0.5
30, 2023 - gains of $
0.5
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 a discounted cash flow model to estimate the fair value of MSRs. The discounted cash flow model
incorporates assumptions that market participants would use in estimating future net servicing income, including estimates of
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 six months ended June 30, 2024
and 2023.
79
Residential MSRs
(In thousands)
June 30, 2024
June 30, 2023
Fair value at beginning of period
$
118,109
$
128,350
Additions
661
1,240
Changes due to payments on loans
(4,435)
(5,288)
Reduction due to loan repurchases
(247)
(338)
Changes in fair value due to changes in valuation model inputs or assumptions
(702)
(1,446)
Other
-
(1,269)
Fair value at end of period
$
113,386
$
121,249
[1] Represents changes due to collection / realization of expected cash flows over time.
[2] At June 30, 2024, PB had MSRs amounting to $
1.9
1.9
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 a portfolio with an unpaid principal balance of approximately $
260
approximately $
2
Residential mortgage loans serviced for others were $
9.4
9.9
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 June 30, 2024, those weighted average mortgage servicing fees were
0.32
% (June
30, 2023 -
0.31
%). Under these servicing agreements, the banking subsidiaries do not generally earn significant prepayment penalty
fees on the underlying loans serviced.
The section below includes information on assumptions used in the valuation model of the MSRs, originated and purchased. Key
economic assumptions used in measuring the servicing rights derived from loans securitized or sold by the Corporation during the
quarters and six months ended June 30, 2024 and 2023 were as follows:
Quarters ended
Six months ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
BPPR
PB
BPPR
PB
BPPR
PB
BPPR
PB
Prepayment speed
6.9
%
6.3
%
7.4
%
7.1
%
6.4
%
6.2
%
7.0
%
7.2
%
Weighted average life (in years)
9.2
8.6
9.7
8.1
9.4
8.7
9.1
8.0
Discount rate (annual rate)
9.8
%
12.9
%
9.5
%
10.5
%
9.6
%
12.7
%
9.5
%
10.5
%
Key economic assumptions used to estimate the fair value of MSRs derived from sales and securitizations of mortgage loans
performed by the banking subsidiaries and servicing rights purchased from other financial institutions, and the sensitivity to
immediate changes in those assumptions, were as follows as of the end of the periods reported:
80
Originated MSRs
Purchased MSRs
June 30,
December 31,
June 30,
December 31,
(In thousands)
2024
2023
2024
2023
Fair value of servicing rights
$
37,997
$
39,757
$
75,389
$
78,352
Weighted average life (in years)
6.4
6.6
6.6
6.8
Weighted average prepayment speed (annual rate)
5.8
%
5.9
%
6.9
%
7.0
%
Impact on fair value of 10% adverse change
$
(725)
$
(696)
$
(1,425)
$
(1,440)
Impact on fair value of 20% adverse change
$
(1,422)
$
(1,365)
$
(2,794)
$
(2,827)
Weighted average discount rate (annual rate)
11.3
%
11.3
%
10.9
%
10.9
%
Impact on fair value of 10% adverse change
$
(1,408)
$
(1,387)
$
(2,735)
$
(2,871)
Impact on fair value of 20% adverse change
$
(2,725)
$
(2,686)
$
(5,300)
$
(5,562)
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 June 30, 2024, the Corporation serviced $
527
(December 31, 2023 - $
561
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 is collateral for a GNMA guaranteed mortgage-backed security when certain
delinquency criteria are met. At 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
June 30, 2024, the Corporation had recorded $
10
related to this buy-back option program (December 31, 2023 - $
11
payment forbearance programs but continue to reflect the contractual delinquency until the borrower repays deferred payments or
completes a payment deferral modification or other borrower assistance alternative. As long as the Corporation continues to service
the loans that continue to be collateral in a GNMA guaranteed mortgage-backed security, the MSR is recognized by the
Corporation.
During the six months ended June 30, 2024, the Corporation repurchased approximately $
18
24
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 related to
principal and interest advances. The risk associated with the loans is reduced due to their guaranteed nature. The Corporation may
place these loans under modification programs offered by FHA, VA or United States Department of Agriculture (USDA) or other loss
mitigation programs offered by the Corporation, and once brought back to current status, these may be either retained in portfolio or
re-sold in the secondary market.
81
Note 11 – Other real estate owned
The following tables present the activity related to Other Real Estate Owned (“OREO”), for the quarters and six months ended June
30, 2024 and 2023.
For the quarter ended June 30, 2024
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
15,962
$
64,580
$
80,542
Write-downs in value
(1,039)
(427)
(1,466)
Additions
516
12,146
12,662
Sales
(6,011)
(15,502)
(21,513)
Ending balance
$
9,428
$
60,797
$
70,225
For the quarter ended June 30, 2023
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
12,388
$
79,333
$
91,721
Write-downs in value
(45)
(269)
(314)
Additions
244
21,155
21,399
Sales
(785)
(25,822)
(26,607)
Other adjustments
17
-
17
Ending balance
$
11,819
$
74,397
$
86,216
For the six months ended June 30, 2024
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
11,189
$
69,227
$
80,416
Write-downs in value
(1,064)
(711)
(1,775)
Additions
5,860
24,782
30,642
Sales
(6,557)
(32,436)
(38,993)
Other adjustments
-
(65)
(65)
Ending balance
$
9,428
$
60,797
$
70,225
For the six months ended June 30, 2023
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
12,500
$
76,626
$
89,126
Write-downs in value
(239)
(1,020)
(1,259)
Additions
1,267
39,830
41,097
Sales
(1,726)
(40,921)
(42,647)
Other adjustments
17
(118)
(101)
Ending balance
$
11,819
$
74,397
$
86,216
82
Note 12 − Other assets
The caption of other assets in the consolidated statements of financial condition consists of the following major categories:
(In thousands)
June 30, 2024
December 31, 2023
Net deferred tax assets (net of valuation allowance)
$
979,304
$
1,009,068
Investments under the equity method
234,512
236,485
Prepaid taxes
61,760
39,052
Other prepaid expenses
32,486
29,338
Capitalized software costs
107,671
93,404
Derivative assets
25,195
24,419
Trades receivable from brokers and counterparties
47,171
23,102
Receivables from investments maturities
300,000
176,000
Principal, interest and escrow servicing advances
43,058
48,557
Guaranteed mortgage loan claims receivable
20,698
29,648
Operating ROU assets (Note 27)
104,797
116,106
Finance ROU assets (Note 27)
19,596
21,093
Assets for pension benefit
25,407
23,404
Others
170,900
144,888
Total other assets
$
2,172,555
$
2,014,564
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 of acquired or developed software costs as well as costs related to hosting
arrangements:
Gross Carrying
Accumulated
Net
Carrying
(In thousands)
Amount
Amortization
Value
June 30, 2024
Software development costs
$
80,578
$
26,782
$
53,796
Software license costs
46,146
24,669
21,477
Cloud computing arrangements
39,142
6,744
32,398
Total Capitalized software costs [1] [2]
$
165,866
$
58,195
$
107,671
December 31, 2023
Software development costs
$
76,497
$
22,086
$
54,411
Software license costs
42,868
18,048
24,820
Cloud computing arrangements
23,623
9,450
14,173
Total Capitalized software costs [1] [2]
$
142,988
$
49,584
$
93,404
[1]
Software intangible assets are presented as part of Other Assets in the Consolidated Statements of Financial Condition.
[2]
The tables above excludes assets that 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 June 30,
Six months ended June 30,
(In thousands)
2024
2023
2024
2023
Software development and license costs
$
18,612
$
16,151
$
36,313
$
31,142
Cloud computing arrangements
666
778
1,538
1,762
Total amortization expense
$
19,278
$
16,929
$
37,851
$
32,904
83
Note 13 – Goodwill and other intangible assets
Goodwill
There were
no
The following tables present the gross amount of goodwill and accumulated impairment losses by reportable segments:
June 30, 2024
Balance at
Balance at
June 30,
Accumulated
June 30,
2024
impairment
2024
(In thousands)
losses
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, 2023
December 31,
Accumulated
December 31,
2023
impairment
2023
(In thousands)
losses
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
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
June 30, 2024
Core deposits
$
12,810
$
11,956
$
854
Other customer relationships
14,286
7,665
6,621
Total other intangible assets
$
27,096
$
19,621
$
7,475
December 31, 2023
Core deposits
$
12,810
$
11,315
$
1,495
Other customer relationships
14,286
6,777
7,509
Total other intangible assets
$
27,096
$
18,092
$
9,004
During the quarter ended June 30, 2024, the Corporation recognized $
0.7
assets with definite useful lives (June 30, 2023 - $
0.8
recognized $
1.5
1.6
The following table presents the estimated amortization of the intangible assets with definite useful lives for each of the following
periods:
84
(In thousands)
Remaining 2024
$
1,409
Year 2025
1,750
Year 2026
1,440
Year 2027
959
Year 2028
959
Later years
958
85
Note 14 – Deposits
Total deposits as of the end of the periods presented consisted of:
(In thousands)
June 30, 2024
December 31, 2023
Savings accounts
$
14,518,299
$
14,602,411
NOW, money market and other interest bearing demand deposits
26,344,824
25,094,316
Total savings, NOW, money market and other interest bearing demand deposits
40,863,123
39,696,727
Certificates of deposit:
Under $250,000
5,521,194
5,443,062
$250,000 and over
3,676,463
3,058,830
9,197,657
8,501,892
Total interest bearing deposits
$
50,060,780
$
48,198,619
Non- interest bearing deposits
$
15,470,082
$
15,419,624
Total deposits
$
65,530,862
$
63,618,243
A summary of certificates of deposits by maturity at June 30, 2024 follows:
(In thousands)
2024
$
4,240,872
2025
2,494,654
2026
866,715
2027
604,989
2028
609,143
2029 and thereafter
381,284
Total certificates of deposit
$
9,197,657
At June 30, 2024, the Corporation had brokered deposits amounting to $
1.7
1.7
The aggregate amount of overdrafts in demand deposit accounts that were reclassified to loans was $
11.7
(December 31, 2023 - $
9.1
At June 30, 2024, Puerto Rico public sector deposits amounted to $
19.7
bearing accounts. These public sector deposits are indexed to short-term market rates and fluctuate in cost with changes in those
rates, in accordance with contractual terms. Public deposit balances are difficult to predict. For example, the receipt by the Puerto
Rico Government of hurricane recovery related Federal assistance and seasonal tax collections could increase public deposit
balances at BPPR. On the other hand, the amount and timing of reductions in balances are likely to 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 of fiscal and debt adjustment plans approved pursuant to
PROMESA or other actions mandated by the Fiscal Oversight and Management Board for Puerto Rico (the “Oversight Board”).
Generally, these deposits require that the bank pledge high credit quality securities as collateral, therefore, liquidity risk arising from
public sector deposit outflows are lower.
86
Note 15 – Borrowings
Assets sold under agreements to repurchase
Assets sold under agreements to repurchase amounted to $
106
91
The Corporation’s repurchase transactions are overcollateralized with the securities detailed in the table below. The Corporation’s
repurchase agreements have a right of set-off with the respective counterparty under the supplemental terms of 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
related agreement and any other amount or obligation owed in respect of any other agreement or transaction between them.
Pursuant to the Corporation’s accounting policy, the 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
June 30, 2024
December 31, 2023
Repurchase
Repurchase
(In thousands)
U.S. Treasury securities
Within 30 days
$
49,922
$
16,931
After 30 to 90 days
4,251
18,369
After 90 days
8,523
8,292
Total U.S. Treasury securities
62,696
43,592
Mortgage-backed securities
38,171
27,171
4,817
20,394
Total mortgage-backed securities
42,988
47,565
Collateralized mortgage obligations
-
227
Total collateralized mortgage obligations
-
227
Total
$
105,684
$
91,384
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
no
87
Notes Payable
The following table presents the composition of notes payable at June 30, 2024 and December 31, 2023.
(In thousands)
June 30, 2024
December 31, 2023
Advances with the FHLB with maturities ranging from
2024
2029
monthly
fixed rates ranging from
0.44
% to
5.26
%
$
348,665
$
394,665
Unsecured senior debt securities maturing on
2028
semiannually
7.25
%, net of debt issuance costs of $
5,444
[1]
394,556
393,937
Junior subordinated deferrable interest debentures (related to trust preferred securities) maturing on
2034
6.125
% to
6.564
%, net of debt issuance costs of $
275
198,359
198,346
Total notes payable
$
941,580
$
986,948
Note: Refer to the 2023 Form 10-K for rates information at December 31, 2023.
[1] On March 13, 2023, the Corporation issued $
400
7.25
% Senior Notes due
2028
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
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 June 30, 2024 is included in the table below.
Assets sold under
(In thousands)
agreements to
repurchase
Notes payable
Total
2024
$
105,684
$
45,943
$
151,627
2025
-
144,214
144,214
2026
-
74,500
74,500
2028
-
438,906
438,906
Later years
-
238,017
238,017
Total borrowings
$
105,684
$
941,580
$
1,047,264
At June 30, 2024 and December 31, 2023, the Corporation had FHLB borrowing facilities whereby the Corporation could borrow up
to $
4.5
4.2
0.3
0.4
2024 and December 31, 2023, the Corporation had placed $
0.3
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 June 30, 2024, the Corporation had borrowing facilities at the discount window of the Federal Reserve Bank of New York
amounting to $
4.7
4.4
The facilities are a collateralized source of credit that is highly reliable even under difficult market conditions.
88
Note 16 − Other liabilities
The caption of other liabilities in the consolidated statements of financial condition consists of the following major categories:
(In thousands)
June 30, 2024
December 31, 2023
Accrued expenses
$
288,806
$
337,695
Accrued interest payable
62,247
59,102
Accounts payable
97,479
89,339
Dividends payable
44,991
44,741
Trades payable
24,603
31
Liability for GNMA loans sold with an option to repurchase
9,848
10,960
Reserves for loan indemnifications
4,239
4,408
Reserve for operational losses
29,171
27,994
Operating lease liabilities (Note 27)
115,184
126,946
Finance lease liabilities (Note 27)
24,004
25,778
Pension benefit obligation
6,619
6,772
Postretirement benefit obligation
115,698
117,045
Others
71,379
63,816
Total other liabilities
$
894,268
$
914,627
89
Note 17 – Stockholders’ equity
As of June 30, 2024, stockholders’ equity totaled $
5.4
cash dividends of $
1.24
1.10
) per common share amounting to $
89.7
79.2
declared to stockholders of record as of the close of business on
May 30, 2024
July 1, 2024
.
On July 24, 2024, the Corporation announced the following actions as part of its capital plan: (i) up to $
500
repurchases, and (ii) an increase in its quarterly common stock dividend from $
0.62
0.70
first quarter of 2025, subject to approval by its Board of Directors.
90
Note 18 – Other comprehensive income (loss)
The following table presents changes in accumulated other comprehensive income (loss) by component for the quarters ended June
30, 2024 and, 2023.
Changes in Accumulated Other Comprehensive Loss by Component [1]
Quarters ended
Six months ended
June 30,
June 30,
(In thousands)
2024
2023
2024
2023
Foreign currency translation
Beginning Balance
$
(68,548)
$
(61,980)
$
(64,528)
$
(56,735)
Other comprehensive income (loss)
165
6,001
(3,855)
756
Net change
165
6,001
(3,855)
756
Ending balance
$
(68,383)
$
(55,979)
$
(68,383)
$
(55,979)
Adjustment of pension and
postretirement benefit plans
Beginning Balance
$
(115,632)
$
(141,327)
$
(117,894)
$
(144,335)
Amounts reclassified from accumulated other
comprehensive loss for amortization of net losses
2,261
3,008
4,522
6,016
Net change
2,261
3,008
4,522
6,016
Ending balance
$
(113,371)
$
(138,319)
$
(113,372)
$
(138,319)
Unrealized net holding losses
on debt securities
Beginning Balance
$
(1,749,006)
$
(2,098,518)
$
(1,713,109)
$
(2,323,903)
Other comprehensive income (loss)
16,941
(69,941)
(54,163)
121,811
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
35,537
34,322
70,745
67,955
Net change
52,478
(35,619)
16,582
189,766
Ending balance
$
(1,696,528)
$
(2,134,137)
$
(1,696,527)
$
(2,134,137)
Unrealized net (losses) gains
on cash flow hedges
Beginning Balance
$
-
$
-
$
-
$
45
Other comprehensive (loss) income before
reclassifications
-
-
-
(19)
Amounts reclassified from accumulated other
comprehensive income (loss)
-
-
-
(26)
Net change
-
-
-
(45)
Total
$
(1,878,282)
$
(2,328,435)
$
(1,878,282)
$
(2,328,435)
[1]
All amounts presented are net of tax.
91
The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss during the
quarters and six months ended June 30, 2024 and 2023.
Reclassifications Out of Accumulated Other Comprehensive Loss
Quarters ended
Six months ended
Affected Line Item in the
June 30,
June 30,
(In thousands)
Consolidated Statements of Operations
2024
2023
2024
2023
Adjustment of pension and postretirement benefit plans
Amortization of net losses
Other operating expenses
$
(3,618)
$
(4,813)
$
(7,236)
$
(9,626)
Total before tax
(3,618)
(4,813)
(7,236)
(9,626)
Income tax benefit
1,357
1,805
2,714
3,610
Total net of tax
$
(2,261)
$
(3,008)
$
(4,522)
$
(6,016)
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
$
(44,421)
$
(42,903)
$
(88,430)
$
(84,943)
Total before tax
(44,421)
(42,903)
(88,430)
(84,943)
Income tax expense
8,884
8,581
17,685
16,988
Total net of tax
$
(35,537)
$
(34,322)
$
(70,745)
$
(67,955)
Unrealized net (losses) gains on cash flow hedges
Forward contracts
Mortgage banking activities
$
-
$
-
$
-
$
41
Total before tax
-
-
-
41
Income tax benefit
-
-
-
(15)
Total net of tax
$
-
$
-
$
-
$
26
Total reclassification adjustments, net of tax
$
(37,798)
$
(37,330)
$
(75,267)
$
(73,945)
92
Note 19 – Guarantees
At June 30, 2024, the Corporation recorded a liability of $
1
1
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 June 30, 2024, the Corporation serviced $
527
(December 31, 2023 - $
561
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 of future payments that the Corporation would be required to make under the recourse
arrangements in the event of nonperformance by the borrowers is equivalent to the total outstanding balance of the residential
mortgage loans serviced with recourse and interest, if applicable. During the quarter and six months ended June 30, 2024, the
Corporation repurchased approximately $
0.5
1.1
subject to the credit recourse provisions (June 30, 2023
-
$
0.6
1.4
nonperformance by the borrower, the Corporation has rights to 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 of
holding and disposing the related property. At June 30, 2024, the Corporation’s liability established to cover the estimated credit
loss exposure related to loans sold or serviced with credit recourse amounted to $
4
4
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 six months ended June 30, 2024 and 2023.
Quarters ended June 30,
Six months ended June 30,
(In thousands)
2024
2023
2024
2023
Balance as of beginning of period
$
4,353
$
5,864
$
4,211
$
6,897
Provision (benefit) for recourse liability
(204)
478
40
(176)
Net charge-offs
(91)
(119)
(193)
(498)
Balance as of end of period
$
4,058
$
6,223
$
4,058
$
6,223
From time to 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.
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 June 30, 2024, the
Corporation serviced $
9.4
2023 - $
9.9
from liquidation proceeds when the mortgage loan is foreclosed or, in the case of FHA/VA loans, under the applicable FHA and
VA
insurance and guarantees programs. However, in the meantime, the Corporation must absorb the cost of the funds it advances
during the time the advance is outstanding. The Corporation must also bear the costs of attempting to collect on delinquent and
defaulted mortgage loans. In addition, if a defaulted loan is not cured, the mortgage loan would be canceled as part of the
foreclosure proceedings and the Corporation would not receive any future servicing income with respect to that loan. At June 30,
2024, the outstanding balance of funds advanced by the Corporation under such mortgage loan servicing agreements was
approximately $
43
49
servicing portfolio experience increased delinquencies, the Corporation would be required to dedicate additional cash resources to
comply with its obligation to advance funds as well as incur additional administrative costs related to increases in collection efforts.
Popular, Inc. Holding Company (“PIHC”) fully and unconditionally guarantees certain borrowing obligations issued by certain of its
100
% owned consolidated subsidiaries amounting to $
94
at both June 30, 2024 and December 31, 2023, PIHC fully and unconditionally guaranteed on a subordinated basis $
193
capital securities (trust preferred securities) issued by wholly-owned issuing trust entities to the extent set forth in the applicable
93
guarantee agreement. Refer to Note 18 to the Consolidated Financial Statements in the 2023 Form 10-K for further information on
the trust preferred securities.
94
Note 20 – 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 to credit loss in the event of nonperformance by the other party to 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)
June 30, 2024
December 31, 2023
Commitments to extend credit:
Credit card lines
$
5,520,771
$
6,108,939
Commercial lines of credit
3,894,891
3,626,269
Construction lines of credit
1,285,440
1,287,679
Other consumer unused credit commitments
259,296
256,610
Commercial letters of credit
1,564
1,404
Standby letters of credit
109,613
80,889
Commitments to originate or fund mortgage loans
22,352
32,968
At June 30, 2024 and December 31, 2023, the Corporation maintained a reserve of approximately $
18.9
17
respectively, for potential losses associated with unfunded loan commitments related to commercial and construction lines of credit.
Other commitments
At June 30, 2024 and December 31, 2023, the Corporation also maintained other non-credit commitments for approximately $
3.2
million and $
3.3
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 32 to the Consolidated
Financial Statements.
Puerto Rico has faced significant fiscal and economic challenges for over a decade. In response to 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 a framework for the restructuring of the debts of the Commonwealth, its
instrumentalities and municipalities. The Commonwealth and several of 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, no municipality has commenced, or has been authorized by the Oversight Board to commence, any such debt
restructuring proceeding under PROMESA.
At June 30, 2024, the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities
totaled $
376
376
362
333
outstanding, $
360
16
314
19
Substantially all of the amount outstanding at June 30, 2024 and December 31, 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, or “special obligations” of a municipality, to which the applicable municipality has
pledged other revenues. At June 30, 2024,
79
% of the Corporation’s exposure to municipal loans and securities was concentrated in
95
the municipalities of San Juan, Guaynabo, Carolina and Caguas.
In July 2024, the Corporation received scheduled principal
payments amounting to $
40
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 June 30, 2024:
(In thousands)
Investment
Portfolio
Loans
Total Outstanding
Total Exposure
Central Government
After 1 to 5 years
$
3
$
-
$
3
$
3
After 5 to 10 years
1
-
1
1
After 10 years
42
-
42
42
Total Central Government
46
-
46
46
Municipalities
Within 1 year
3,055
13,218
16,273
16,273
After 1 to 5 years
11,620
141,519
153,139
153,139
After 5 to 10 years
845
158,988
159,833
159,833
After 10 years
-
46,823
46,823
46,823
Total Municipalities
15,520
360,548
376,068
376,068
Total Direct Government Exposure
$
15,566
$
360,548
$
376,114
$
376,114
In addition, at June 30, 2024, the Corporation had $
229
entities but for which the principal source of repayment is non-governmental ($
238
$
183
instrumentality that has been designated as a covered entity under PROMESA (December 31, 2023 - $
191
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 June 30, 2024, $
39
million in bonds issued by HFA which are secured by second mortgage loans on Puerto Rico residential properties, and for which
HFA also provides insurance to cover losses in the event of a borrower default and upon the satisfaction of certain other conditions
(December 31, 2023 - $
40
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 is currently authorized by local legislation to impose a 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 to 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 to
government employees and retirees, which could also be negatively affected by fiscal measures such as employee layoffs or
furloughs or reductions in pension benefits.
In addition, $
2.0
90.9
Government or its agencies at June 30, 2024 (compared to $
1.9
89.2
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 5 and 6 to the Consolidated Financial
Statements.
At June 30, 2024, the Corporation had operations in the United States Virgin Islands (the “USVI”) and has approximately $
28
in direct exposure to USVI government entities (December 31, 2023 - $
28
fiscal and economic challenges that could adversely affect the ability of its public corporations and instrumentalities to service their
outstanding debt obligations.
96
At June 30, 2024, the Corporation had operations in the British Virgin Islands (“BVI”), which islands were negatively affected by the
COVID-19 pandemic, particularly due to a reduction in the tourism activity which accounts for a significant portion of their economy.
Although the Corporation has no significant exposure to a single borrower in the BVI, at June 30, 2024, it had a loan portfolio
amounting to approximately $
201
205
million at December 31, 2023.
FDIC Special Assessment
On November 16, 2023, the Federal Deposit Insurance Corporation (“FDIC”) approved a final rule that imposes a special
assessment (the “FDIC Special Assessment”) to recover the losses to the deposit insurance fund resulting from the FDIC’s use, in
March 2023, of the systemic risk exception to the least-cost resolution test under the Federal Deposit Insurance Act in connection
with the receiverships of several failed banks. In connection with this assessment, the Corporation recorded an expense of $
71.4
million, $
45.3
During the first quarter of 2024, the Corporation recorded an additional expense of $
14.3
9.1
FDIC's higher loss estimate which increased from $
16.3
20.4
assessment amount and collection period may change as the estimated loss is periodically adjusted or if the total amount collected
varies.
Legal Proceedings
The nature of Popular’s business ordinarily generates claims, litigation, regulatory and governmental investigations, and legal and
administrative cases and proceedings (collectively, “Legal Proceedings”). When the Corporation determines that it 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 it is probable that the Corporation will incur a material loss and the
amount can be reasonably estimated, the Corporation establishes an accrual for the loss. Once established, the accrual is adjusted
on at least a quarterly basis to reflect any relevant developments, as appropriate. For matters where a material loss is not probable,
or 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 $
0
6.48
of June 30, 2024. In certain cases, management cannot reasonably estimate the possible loss at 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 of 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 it has already accrued is 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 on
the Corporation’s consolidated financial position for that period.
Set forth below is a description of the Corporation’s significant Legal Proceedings.
Insufficient Funds and Overdraft Fees Class Actions
97
Popular, Inc. was named as a defendant on a putative class action complaint captioned Golden v. Popular, Inc. filed in March 2020
before the U.S. District Court for the Southern District of New York, seeking damages, restitution and injunctive relief. Plaintiff
alleged breach of contract, violation of the covenant of good faith and fair dealing, unjust enrichment and violation of New York
consumer protection law due to 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 OD Fees over authorized
transactions for which sufficient funds are held for settlement. In August 2020, Popular filed a Motion to Dismiss on several
grounds, including failure to state a claim against Popular, Inc. and improper venue. In October 2020, Plaintiff filed a Notice of
Voluntary Dismissal before the U.S. District Court for the Southern District of New York and, simultaneously, filed an identical
complaint in the U.S. District Court for the District of the Virgin Islands against Popular, Inc., Popular Bank and Banco Popular de
Puerto Rico (“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.
In October 2022, the parties reached a settlement in principle on a class-wide basis subject to 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.
On September 8, 2023, the Court held a hearing to consider the final approval of the class settlement agreement, and, on
September 29, 2023, the Court issued an Opinion and Order granting final approval to the settlement agreement. On December 19,
2023, the Court issued an Order staying all deadlines in the settlement agreement regarding payment of benefit until further notice
after the parties informed the Court that the settlement administrator had mistakenly failed to send the settlement notice to
approximately 3,000 class members. On February 20, 2024, the parties filed a Joint Motion for Supplemental Notice that was
approved by the Court on February 20, 2024.
On July 8, 2024, the Court held the Supplemental Fairness Hearing, and, on July 9, 2024, the Court issued an Amended Opinion
and Order granting final approval to the settlement agreement. On July 22, 2024, the Court entered final judgment dismissing the
complaint with prejudice and retaining jurisdiction to enforce the terms of the settlement agreement. This 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 September 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 new Motion to Compel Arbitration.
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.
On January 10, 2024, the Court of Appeals entered judgment affirming the trial court’s decision denying PB’s Motion to Compel
Arbitration.
After remand to the U.S. District Court, on March 19, 2024, the court issued an Order adjourning all dates and deadlines including
the initial pretrial conference after the parties informed that they have agreed to mediate the matter. During a mediation hearing
held on May 2, 2024, the parties reached a settlement in principle on a class-wide basis.
On July 25, 2024, the parties filed before
the Court a motion for preliminary approval of the settlement agreement, and, on July 26, 2024, the Court issued an order granting
preliminary approval of the settlement agreement. The Court scheduled the final approval hearing for January 27, 2025.
98
Note 21 – Non-consolidated variable interest entities
The Corporation is involved with
three
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 a controlling financial interest in these trusts since the decisions of 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 in securitization transactions with FHLMC, but considers its
exposure in the form of servicing fees and servicing advances not to be significant
at June 30, 2024
.
These special purpose entities
are deemed to be VIEs since they lack equity investments at risk. The Corporation’s continuing involvement in 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, to the extent retained, are classified in the Corporation’s Consolidated
Statements of Financial Condition as available-for-sale or trading securities. The Corporation concluded that, essentially, these
entities (FNMA and GNMA) control the design of their respective VIEs, dictate the quality and nature of 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 in these VIEs in the form of 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 it has no other form of continuing involvement. Refer to Note 23 to the Consolidated Financial Statements for additional
information on the debt securities outstanding at June 30, 2024 and December 31, 2023, 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 in the form of servicing fees, since it retains the right to service the transferred loans in 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 in
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 June 30, 2024 and December 31, 2023.
99
(In thousands)
June 30, 2024
December 31, 2023
Assets
Servicing assets:
Mortgage servicing rights
$
88,782
$
92,999
Total servicing assets
$
88,782
$
92,999
Other assets:
Servicing advances
$
6,900
$
6,291
Total other assets
$
6,900
$
6,291
Total assets
$
95,682
$
99,290
Maximum exposure to loss
$
95,682
$
99,290
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 $
6.9
7.2
The Corporation determined that the maximum exposure to loss includes the fair value of the MSRs and the assumption that the
servicing advances at June 30, 2024 and December 31, 2023, will not be recovered. The agency debt securities are not included as
part of the maximum exposure to loss since they are guaranteed by the related agencies.
ASU 2009-17 requires that an ongoing primary beneficiary assessment should be made to determine whether the Corporation is the
primary beneficiary of any of the VIEs it is involved with. The conclusion on the assessment of these non-consolidated VIEs has not
changed since their initial evaluation. The Corporation concluded that it is still not the primary beneficiary of these VIEs, and
therefore, these VIEs are not required to be consolidated in the Corporation’s financial statements at June 30, 2024.
100
Note 22 – Related party transactions
Centro Financiero BHD, S.A.
At June 30, 2024, the Corporation had a
15.84
% equity interest in Centro Financiero BHD, S.A. (“BHD”), one of the largest banking
and financial services groups in the Dominican Republic. During the six months ended June 30, 2024, the Corporation recorded
$
17.4
component of Other Comprehensive Income, from its investment in BHD (June 30, 2023 - $
32.3
amount of $
223.9
225.9
19.4
dividend distributions and $
2.9
14.1
dividends and $
2.1
Investment Companies
The Corporation, through its subsidiary Popular Asset Management LLC (“PAM”), provides advisory services to several investment
companies registered under the Investment Company Act of 1940 in exchange for a fee. The Corporation, through its subsidiary
BPPR, also provides transfer agency services to these investment companies. These fees are calculated at an annual rate of the
average net assets of the investment company, as defined in each agreement. Due to its advisory role, the Corporation considers
these investment companies as related parties.
For the six months ended June 30, 2024, administrative fees charged to these investment companies amounted to $
1.1
(June 30, 2023 - $
1.1
0.4
0.4
0.7
(June 30, 2023 - $
0.7
101
Note 23 – Fair value measurement
ASC Subtopic 820-10 “Fair Value Measurements and Disclosures” establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three levels in order to increase consistency and comparability in fair value
measurements and disclosures. The hierarchy is broken down into three levels based on the reliability of inputs as follows:
●
Level 1
- Unadjusted quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to
access at the measurement date. Valuation on these instruments does not necessitate a significant degree of judgment since
valuations are based on quoted prices that are readily available in an active market.
●
Level 2
- Quoted prices other than those included in Level 1 that are observable either directly or indirectly. Level 2 inputs
include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in
markets that are not active, or other inputs that are observable or that can be corroborated by observable market data for
substantially the full term of the financial instrument.
●
Level 3
- Inputs are unobservable and significant to the fair value measurement. Unobservable inputs reflect the Corporation’s
own judgements about assumptions that market participants would use in pricing the asset or liability.
The Corporation maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the
observable inputs be used when available. Fair value is based upon quoted market prices when available. If listed prices or quotes
are not available, the Corporation employs internally-developed models that primarily use market-based inputs including yield
curves, interest rates, volatilities, and credit curves, among others. Valuation adjustments are limited to those necessary to ensure
that the financial instrument’s fair value is adequately representative of the price that would be received or paid in the marketplace.
These adjustments include amounts that reflect counterparty credit quality, the Corporation’s credit standing, constraints on liquidity
and unobservable parameters that are applied consistently. There have been no changes in the Corporation’s methodologies used
to estimate the fair value of assets and liabilities from those disclosed in the 2023 Form 10-K.
The estimated fair value may be subjective in nature and may involve uncertainties and matters of significant judgment for certain
financial instruments. Changes in the underlying assumptions used in calculating fair value could significantly affect the results.
Fair Value on a Recurring and Nonrecurring Basis
The following fair value hierarchy tables present information about the Corporation’s assets and liabilities measured at fair value on
a recurring basis at June 30, 2024 and December 31, 2023:
102
At June 30, 2024
(In thousands)
Level 1
Level 2
Level 3
Measured at NAV
Total
RECURRING FAIR VALUE MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities
$
7,751,165
$
5,256,221
$
-
$
-
$
13,007,386
Collateralized mortgage obligations - federal
agencies
-
131,853
-
-
131,853
Mortgage-backed securities
-
5,400,959
581
-
5,401,540
Other
-
-
2,000
-
2,000
Total debt securities available-for-sale
$
7,751,165
$
10,789,033
$
2,581
$
-
$
18,542,779
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
7,064
$
-
$
-
$
-
$
7,064
Obligations of Puerto Rico, States and political
subdivisions
-
59
-
-
59
Collateralized mortgage obligations
-
87
-
-
87
Mortgage-backed securities
-
20,560
84
-
20,644
Other
-
-
158
-
158
Total trading account debt securities, excluding
derivatives
$
7,064
$
20,706
$
242
$
-
$
28,012
Equity securities
$
-
$
43,081
$
-
$
388
$
43,469
Mortgage servicing rights
-
-
113,386
-
113,386
Loans held-for-sale
-
5,197
-
-
5,197
Derivatives
-
25,228
-
-
25,228
Total assets measured at fair value on a
recurring basis
$
7,758,229
$
10,883,245
$
116,209
$
388
$
18,758,071
Liabilities
Derivatives
$
-
$
(23,198)
$
-
$
-
$
(23,198)
Total liabilities measured at fair value on a
recurring basis
$
-
$
(23,198)
$
-
$
-
$
(23,198)
103
At December 31, 2023
(In thousands)
Level 1
Level 2
Level 3
Measured at NAV
Total
RECURRING FAIR VALUE MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities
$
3,936,036
$
6,811,025
$
-
$
-
$
10,747,061
Collateralized mortgage obligations - federal
agencies
-
134,686
-
-
134,686
Mortgage-backed securities
-
5,844,180
606
-
5,844,786
Other
-
11
2,500
-
2,511
Total debt securities available-for-sale
$
3,936,036
$
12,789,902
$
3,106
$
-
$
16,729,044
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
16,859
$
-
$
-
$
-
$
16,859
Obligations of Puerto Rico, States and political
subdivisions
-
71
-
-
71
Collateralized mortgage obligations
-
93
5
-
98
Mortgage-backed securities
-
14,261
112
-
14,373
Other
-
-
167
-
167
Total trading account debt securities, excluding
derivatives
$
16,859
$
14,425
$
284
$
-
$
31,568
Equity securities
$
-
$
37,965
$
-
$
310
$
38,275
Mortgage servicing rights
-
-
118,109
-
118,109
Loans held-for-sale
-
3,239
-
-
3,239
Derivatives
-
24,419
-
-
24,419
Total assets measured at fair value on a
recurring basis
$
3,952,895
$
12,869,950
$
121,499
$
310
$
16,944,654
Liabilities
Derivatives
$
-
$
(21,103)
$
-
$
-
$
(21,103)
Total liabilities measured at fair value on a
recurring basis
$
-
$
(21,103)
$
-
$
-
$
(21,103)
Beginning in the first quarter of 2023, the Corporation has elected the fair value option for newly originated mortgage loans held-for-
sale. This election better aligns with the management of the portfolio from a business perspective.
Loans held-for-sale measured at fair value
Loans held-for-sale measured at fair value were priced based on secondary market prices. These loans are classified as Level 2.
The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for
mortgage loans originated as held-for-sale measured at fair value as of June 30, 2024 and December 31, 2023.
(In thousands)
June 30, 2024
Aggregate Unpaid
Fair Value
Principal Balance
Difference
Loans held for sale
$
5,197
$
5,139
$
58
(In thousands)
December 31, 2023
Aggregate Unpaid
Fair Value
Principal Balance
Difference
Loans held for sale
$
3,239
$
3,202
$
37
No
104
For the six months ended June 30, 2024, changes in the fair value of mortgage loans held-for-sale for which the Corporation elected
the fair value option, were not considered material.
The fair value information included in the following tables is not as of period end, but as of the date that the fair value measurement
was recorded during the quarters and six months ended June 30, 2024 and 2023 and excludes nonrecurring fair value
measurements of assets no longer outstanding as of the reporting date.
Six months ended June 30, 2024
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets
Write-downs
Loans
[1]
$
-
$
-
$
2,039
$
2,039
$
(329)
Loans held-for-sale
[2]
-
3,028
-
3,028
(38)
Other real estate owned
[3]
-
-
4,426
4,426
(1,602)
Other foreclosed assets
[3]
-
-
211
211
(46)
Total assets measured at fair value on a nonrecurring basis
$
-
$
3,028
$
6,676
$
9,704
$
(2,015)
[1] Relates mainly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is
derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations. Costs to sell are
excluded from the reported fair value amount.
[2] Relates to a quarterly valuation on loans held-for-sale. Costs to sell are excluded from the reported fair value amount.
[3] Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are
excluded from the reported fair value amount.
Six months ended June 30, 2023
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets
Write-downs
Loans
[1]
$
-
$
-
$
18,923
$
18,923
$
(7,092)
Other real estate owned
[2]
-
-
2,815
2,815
(656)
Other foreclosed assets
[2]
-
-
41
41
(9)
Total assets measured at fair value on a nonrecurring basis
$
-
$
-
$
21,779
$
21,779
$
(7,757)
[1] Relates mainly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is
derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations. Costs to sell are
excluded from the reported fair value amount.
[2] Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are
excluded from the reported fair value amount.
105
The following tables present the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarters
and six months ended June 30, 2024 and 2023.
Quarter ended June 30, 2024
MBS
Other
MBS
Other
classified
securities
classified
securities
as debt
classified as
as trading
classified
securities
account
as trading
Mortgage
available-
available-
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
rights
assets
Balance at March 31, 2024
$
607
$
2,000
$
84
$
166
$
114,964
$
117,821
Gains (losses) included in earnings
-
-
-
(8)
(1,945)
(1,953)
Gains (losses) included in OCI
(1)
-
-
-
-
(1)
Additions
-
-
-
-
367
367
Settlements
(25)
-
-
-
-
(25)
Balance at June 30, 2024
$
581
$
2,000
$
84
$
158
$
113,386
$
116,209
Changes in unrealized gains (losses) included in
earnings relating to assets still held at June 30,
2024
$
-
$
-
$
-
$
10
$
500
$
510
Six months ended June 30, 2024
MBS
Other
MBS
Other
classified
securities
CMOs
classified
securities
as debt
classified as
classified
as trading
classified
securities
as trading
account
as trading
Mortgage
available-
available-
account debt
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at January 1, 2024
$
606
$
2,500
$
5
$
112
$
167
$
118,109
$
121,499
Gains (losses) included in earnings
-
(500)
-
-
(9)
(5,384)
(5,893)
Additions
-
-
-
-
-
661
661
Settlements
(25)
-
(5)
(28)
-
-
(58)
Balance at June 30, 2024
$
581
$
2,000
$
-
$
84
$
158
$
113,386
$
116,209
Changes in unrealized gains (losses) included
in earnings relating to assets still held at June
30, 2024
$
-
$
(500)
$
-
$
-
$
12
$
(702)
$
(1,190)
106
Quarter ended June 30, 2023
MBS
Other
Other
classified
securities
CMOs
MBS
securities
as debt
classified as
classified
classified
classified
securities
debt securities
as trading
as trading
as trading
Mortgage
available-
available-
account debt
account debt
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at March 31, 2023
$
655
$
1,000
$
88
$
188
$
199
$
127,475
$
129,605
Gains (losses) included in earnings
-
-
-
-
(8)
(6,217)
(6,225)
Additions
-
-
4
-
-
739
743
Sales
-
-
-
-
-
(1,269)
(1,269)
Settlements
-
-
(36)
(25)
-
521
460
Balance at June 30, 2023
$
655
$
1,000
$
56
$
163
$
191
$
121,249
$
123,314
Changes in unrealized gains (losses)
included in earnings relating to assets
still held at June 30, 2023
$
-
$
-
$
-
$
-
$
9
$
(2,732)
$
(2,723)
Six months ended June 30, 2023
MBS
Other
Other
classified
securities
CMOs
securities
as debt
classified as
classified
MBS
classified
securities
debt securities
as trading
classified as
as trading
Mortgage
available-
available-
account debt
trading account
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at January 1, 2023
$
711
$
1,000
$
113
$
215
$
207
$
128,350
$
130,596
Gains (losses) included in earnings
-
-
-
(2)
(16)
(7,593)
(7,611)
Gains (losses) included in OCI
(6)
-
-
-
-
-
(6)
Additions
-
-
4
-
-
1,240
1,244
Sales
-
-
-
-
-
(1,269)
(1,269)
Settlements
(50)
-
(61)
(50)
-
521
360
Balance at June 30, 2023
$
655
$
1,000
$
56
$
163
$
191
$
121,249
$
123,314
Changes in unrealized gains (losses)
included in earnings relating to assets
still held at June 30, 2023
$
-
$
-
$
-
$
(1)
$
18
$
(1,447)
$
(1,430)
107
Gains and losses (realized and unrealized) included in earnings for the quarters and six months ended June 30, 2024 and 2023 for
Level 3 assets and liabilities included in the previous tables are reported in the consolidated statement of operations as follows:
Quarter ended June 30, 2024
Six months ended June 30, 2024
Changes in unrealized
Changes in unrealized
Total gains
gains (losses) relating to
Total gains
gains (losses) relating to
(losses) included
assets still held at
(losses) included
assets still held at
(In thousands)
in earnings
reporting date
in earnings
reporting date
Mortgage banking activities
$
(1,945)
$
500
$
(5,384)
$
(702)
Trading account profit (loss)
(8)
10
(9)
12
Provision for credit losses
-
-
(500)
(500)
Total
$
(1,953)
$
510
$
(5,893)
$
(1,190)
Quarter ended June 30, 2023
Six months ended June 30, 2023
Changes in unrealized
Changes in unrealized
Total gains
gains (losses) relating to
Total gains
gains (losses) relating to
(losses) included
assets still held at
(losses) included
assets still held at
(In thousands)
in earnings
reporting date
in earnings
reporting date
Mortgage banking activities
$
(6,217)
$
(2,732)
$
(7,593)
$
(1,447)
Trading account profit (loss)
(8)
9
(18)
17
Total
$
(6,225)
$
(2,723)
$
(7,611)
$
(1,430)
The following tables include quantitative information about significant unobservable inputs used to derive the fair value of Level 3
instruments, excluding those instruments for which the unobservable inputs were not developed by the Corporation such as prices
of prior transactions and/or unadjusted third-party pricing sources at June 30, 2024 and 2023.
Fair value at
(In thousands)
2024
Valuation technique
Unobservable inputs
Weighted average (range) [1]
Other - trading
$
158
Discounted cash flow model
Weighted average life
2.3
Yield
12.0%
Prepayment speed
10.8%
Loans held-in-portfolio
$
2,039
[2]
External appraisal
Haircut applied on
external appraisals
10.0%
[1]
Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.
Fair value at
(In thousands)
2023
Valuation technique
Unobservable inputs
Weighted average (range) [1]
CMO's - trading
$
56
Discounted cash flow model
Weighted average life
0.2
0.2
0.4
Yield
4.9
% (
4.9
% -
5.4
%)
Prepayment speed
7.9
% (
7.7
% -
25
%)
Other - trading
$
191
Discounted cash flow model
Weighted average life
2.5
Yield
12.0%
Prepayment speed
10.8%
Loans held-in-portfolio
$
18,854
[2]
External appraisal
Haircut applied on
external appraisals
12
.0% (
5
.0% -
20
.0%)
[1]
Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.
108
Note 24 – Fair value of financial instruments
The fair value of financial instruments is the amount at which an asset or obligation could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. For those financial instruments with no quoted market prices
available, fair values have been estimated using present value calculations or other valuation techniques, as well as management’s
best judgment with respect to current economic conditions, including discount rates, estimates of future cash flows, and prepayment
assumptions. Many of these estimates involve various assumptions and may vary significantly from amounts that could be realized
in actual transactions.
The fair values reflected herein have been determined based on the prevailing rate environment at June 30, 2024 and December
31, 2023, as applicable. In different interest rate environments, fair value estimates can differ significantly, especially for certain fixed
rate financial instruments. In addition, the fair values presented do not attempt to estimate the value of the Corporation’s fee
generating businesses and anticipated future business activities, that is, they do not represent the Corporation’s value as a going
concern. There have been no changes in the Corporation’s valuation methodologies and inputs used to estimate the fair values for
each class of financial assets and liabilities not measured at fair value.
The following tables present the carrying amount and estimated fair values of financial instruments with their corresponding level in
the fair value hierarchy. The aggregate fair value amounts of the financial instruments disclosed do not represent management’s
estimate of the underlying value of the Corporation.
109
June 30, 2024
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Assets:
Cash and due from banks
$
359,973
$
359,973
$
-
$
-
$
-
$
359,973
Money market investments
6,851,394
6,844,108
7,286
-
-
6,851,394
Trading account debt securities, excluding derivatives
[1]
28,012
7,064
20,706
242
-
28,012
Debt securities available-for-sale
[1]
18,542,779
7,751,165
10,789,033
2,581
-
18,542,779
Debt securities held-to-maturity:
U.S. Treasury securities
$
7,906,676
$
-
$
7,770,065
$
-
$
-
$
7,770,065
Obligations of Puerto Rico, States and political
subdivisions
55,110
-
6,881
48,969
-
55,850
Collateralized mortgage obligation-federal agency
1,527
-
1,341
-
-
1,341
Securities in wholly owned statutory business trusts
5,960
-
5,960
-
-
5,960
Total debt securities held-to-maturity
$
7,969,273
$
-
$
7,784,247
$
48,969
$
-
$
7,833,216
Equity securities:
FHLB stock
$
47,729
$
-
$
47,729
$
-
$
-
$
47,729
FRB stock
98,389
-
98,389
-
-
98,389
Other investments
49,673
-
43,081
6,895
388
50,364
Total equity securities
$
195,791
$
-
$
189,199
$
6,895
$
388
$
196,482
Loans held-for-sale
$
8,225
$
-
$
8,225
$
-
$
-
$
8,225
Loans held-in-portfolio
34,861,543
-
-
33,644,881
-
33,644,881
Mortgage servicing rights
113,386
-
-
113,386
-
113,386
Derivatives
25,228
-
25,228
-
-
25,228
June 30, 2024
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Liabilities:
Deposits:
Demand deposits
$
56,333,205
$
-
$
56,333,205
$
-
$
-
$
56,333,205
Time deposits
9,197,657
-
8,877,178
-
-
8,877,178
Total deposits
$
65,530,862
$
-
$
65,210,383
$
-
$
-
$
65,210,383
Assets sold under agreements to repurchase
$
105,684
$
-
$
105,681
$
-
$
-
$
105,681
Notes payable:
FHLB advances
$
348,665
$
-
$
335,115
$
-
$
-
$
335,115
Unsecured senior debt securities
394,556
-
407,608
-
-
407,608
Junior subordinated deferrable interest debentures
(related to trust preferred securities)
198,359
-
187,842
-
-
187,842
Total notes payable
$
941,580
$
-
$
930,565
$
-
$
-
$
930,565
Derivatives
$
23,198
$
-
$
23,198
$
-
$
-
$
23,198
[1]
Refer to Note 23 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.
110
December 31, 2023
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Assets:
Cash and due from banks
$
420,462
$
420,462
$
-
$
-
$
-
$
420,462
Money market investments
6,998,871
6,991,758
7,113
-
-
6,998,871
Trading account debt securities, excluding derivatives
[1]
31,568
16,859
14,425
284
-
31,568
Debt securities available-for-sale
[1]
16,729,044
3,936,036
12,789,902
3,106
-
16,729,044
Debt securities held-to-maturity:
U.S. Treasury securities
$
8,121,411
$
-
$
8,092,339
$
-
$
-
$
8,092,339
Obligations of Puerto Rico, States and political
subdivisions
59,628
-
7,007
52,671
-
59,678
Collateralized mortgage obligation-federal agency
1,556
-
1,395
13
-
1,408
Securities in wholly owned statutory business trusts
5,960
-
5,960
-
-
5,960
Total debt securities held-to-maturity
$
8,188,555
$
-
$
8,106,701
$
52,684
$
-
$
8,159,385
Equity securities:
FHLB stock
$
49,549
$
-
$
49,549
$
-
$
-
$
49,549
FRB stock
98,948
-
98,948
-
-
98,948
Other investments
45,229
-
37,965
7,869
310
46,144
Total equity securities
$
193,726
$
-
$
186,462
$
7,869
$
310
$
194,641
Loans held-for-sale
$
4,301
$
-
$
4,328
$
-
$
-
$
4,328
Loans held-in-portfolio
34,335,630
-
-
33,376,255
-
33,376,255
Mortgage servicing rights
118,109
-
-
118,109
-
118,109
Derivatives
24,419
-
24,419
-
-
24,419
December 31, 2023
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Liabilities:
Deposits:
Demand deposits
$
55,116,351
$
-
$
55,116,351
$
-
$
-
$
55,116,351
Time deposits
8,501,892
-
8,154,823
-
-
8,154,823
Total deposits
$
63,618,243
$
-
$
63,271,174
$
-
$
-
$
63,271,174
Assets sold under agreements to repurchase
$
91,384
$
-
$
91,386
$
-
$
-
$
91,386
Notes payable:
FHLB advances
$
394,665
$
-
$
377,851
$
-
$
-
$
377,851
Unsecured senior debt securities
393,937
-
400,848
-
-
400,848
Junior subordinated deferrable interest debentures
(related to trust preferred securities)
198,346
-
180,076
-
-
180,076
Total notes payable
$
986,948
$
-
$
958,775
$
-
$
-
$
958,775
Derivatives
$
21,103
$
-
$
21,103
$
-
$
-
$
21,103
[1]
Refer to Note 23 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.
The notional amount of commitments to extend credit at June 30, 2024 and December 31, 2023 was $
11
10
respectively, and represented the unused portion of credit facilities granted to customers. The notional amount of letters of credit at
June 30, 2024 and December 31, 2023 was $
111
82
is required to be paid in the event of nonperformance. The fair value of commitments to extend credit and letters of credit, which are
based on the fees charged to enter into those agreements, are not material to Popular’s financial statements.
111
Note 25 – Net income per common share
The following table sets forth the computation of net income per common share (“EPS”), basic and diluted, for the quarters and six
months ended June 30, 2024 and 2023:
Quarters ended June 30,
Six months ended June 30,
(In thousands, except per share information)
2024
2023
2024
2023
Net income
$
177,789
$
151,160
$
281,072
$
310,139
Preferred stock dividends
(353)
(353)
(706)
(706)
Net income applicable to common stock
$
177,436
$
150,807
$
280,366
$
309,433
Average common shares outstanding
71,970,773
71,690,396
71,920,254
71,616,498
Average potential dilutive common shares
21,138
18,807
17,180
47,805
Average common shares outstanding - assuming dilution
71,991,911
71,709,203
71,937,434
71,664,303
Basic EPS
$
2.47
$
2.10
$
3.90
$
4.32
Diluted EPS
$
2.46
$
2.10
$
3.90
$
4.32
For the quarters and six months ended June 30, 2024 and 2023, the Corporation calculated the impact of potential dilutive common
shares under the treasury stock method, consistent with the method used for the preparation of the financial statements for the year
ended December 31, 2023. For a discussion of the calculation under the treasury stock method, refer to Note 31 of the Consolidated
Financial Statements included in the 2023 Form 10-K.
112
Note 26 – Revenue from contracts with customers
The following table presents the Corporation’s revenue streams from contracts with customers by reportable segment for the
quarters and six months ended June 30, 2024 and 2023
.
Quarter ended June 30,
Six months ended June 30,
(In thousands)
2024
2024
BPPR
Popular U.S.
BPPR
Popular U.S.
Service charges on deposit accounts
$
35,055
$
2,471
$
70,071
$
4,897
Other service fees:
Debit card fees
16,098
200
30,147
399
Insurance fees, excluding reinsurance
11,708
1,600
22,264
3,446
Credit card fees, excluding late fees and membership fees
37,003
368
72,803
826
Sale and administration of investment products
7,850
-
15,277
-
Trust fees
6,923
-
13,908
-
Total revenue from contracts with customers [1]
$
114,637
$
4,639
$
224,470
$
9,568
[1]
The amounts include intersegment transactions of $
2.7
3.3
Quarter ended June 30,
Six months ended June 30,
(In thousands)
2023
2023
BPPR
Popular U.S.
BPPR
Popular U.S.
Service charges on deposit accounts
$
35,253
$
2,528
$
67,405
$
5,054
Other service fees:
Debit card fees
13,377
223
26,325
441
Insurance fees, excluding reinsurance
12,152
1,288
22,950
2,595
Credit card fees, excluding late fees and membership fees
38,392
336
74,566
915
Sale and administration of investment products
6,076
-
12,634
-
Trust fees
6,868
-
12,764
-
Total revenue from contracts with customers [1]
$
112,118
$
4,375
$
216,644
$
9,005
[1]
The amounts include intersegment transactions of $
2.2
3.8
Revenue from contracts with customers is recognized when, or as, the performance obligations are satisfied by the Corporation by
transferring the promised services to the customers. A service is transferred to the customer when, or as, the customer obtains
control of that service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance
obligation satisfied over time is recognized based on the services that have been rendered to date. Revenue from a performance
obligation satisfied at a point in time is recognized when the customer obtains control over the service. The transaction price, or the
amount of revenue recognized, reflects the consideration the Corporation expects to be entitled to in exchange for those promised
services. In determining the transaction price, the Corporation considers the effects of variable consideration. Variable consideration
is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur. The Corporation is the principal in a transaction if it obtains control of the specified goods or services
before they are transferred to the customer. If the Corporation acts as principal, revenues are presented in the gross amount of
consideration to which it expects to be entitled and are not netted with any related expenses. On the other hand, the Corporation is
an agent if it does not control the specified goods or services before they are transferred to the customer. If the Corporation acts as
an agent, revenues are presented in the amount of consideration to which it expects to be entitled, net of related expenses.
Following is a description of the nature and timing of revenue streams from contracts with customers:
Service charges on deposit accounts
Service charges on deposit accounts are earned on retail and commercial deposit activities and include, but are not limited to,
nonsufficient fund fees, overdraft fees and checks stop payment fees. These transaction-based fees are recognized at a point in
time, upon occurrence of an activity or event or upon the occurrence of a condition which triggers the fee assessment. The
Corporation is acting as principal in these transactions.
113
Debit card fees
Debit card fees include, but are not limited to, interchange fees, surcharging income and foreign transaction fees. These transaction-
based fees are recognized at a point in time, upon occurrence of an activity or event or upon the occurrence of a condition which
triggers the fee assessment. Interchange fees are recognized upon settlement of the debit card payment transactions. The
Corporation is acting as principal in these transactions.
Insurance fees
Insurance fees include, but are not limited to, commissions and contingent commissions. Commissions and fees are recognized
when related policies are effective since the Corporation does not have an enforceable right to payment for services completed to
date. An allowance is created for expected adjustments to commissions earned related to policy cancellations. Contingent
commissions are recorded on an accrual basis when the amount to be received is notified by the insurance company. The
Corporation is acting as an agent since it arranges for the sale of the policies and receives commissions if, and when, it achieves
the sale.
Credit card fees
Credit card fees include, but are not limited to, interchange fees, additional card fees, cash advance fees, balance transfer fees,
foreign transaction fees, and returned payments fees. Credit card fees are recognized at a point in time, upon the occurrence of an
activity or an event. Interchange fees are recognized upon settlement of the credit card payment transactions. The Corporation is
acting as principal in these transactions.
Sale and administration of investment products
Fees from the sale and administration of investment products include, but are not limited to, commission income from the sale of
investment products, asset management fees, underwriting fees, and mutual fund fees.
Commission income from investment products is recognized on the trade date since clearing, trade execution, and custody services
are satisfied when the customer acquires or disposes of the rights to obtain the economic benefits of the investment products and
brokerage contracts have no fixed duration and are terminable at will by either party. The Corporation is acting as principal in these
transactions since it performs the service of providing the customer with the ability to acquire or dispose of the rights to obtain the
economic benefits of investment products.
Asset management fees are satisfied over time and are recognized in arrears. At contract inception, the estimate of the asset
management fee is constrained from the inclusion in the transaction price since the promised consideration is dependent on the
market and thus is highly susceptible to factors outside the manager’s influence. As advisor, the broker-dealer subsidiary is acting
as principal.
Underwriting fees are recognized at a point in time, when the investment products are sold in the open market at a markup. When
the broker-dealer subsidiary is lead underwriter, it is acting as an agent. In turn, when it is a participating underwriter, it is acting as
principal.
Mutual fund fees, such as distribution fees, are considered variable consideration and are recognized over time, as the uncertainty
of the fees to be received is resolved as NAV is determined and investor activity occurs. The promise to provide distribution-related
services is considered a single performance obligation as it requires the provision of a series of distinct services that are
substantially the same and have the same pattern of transfer. When the broker-dealer subsidiary is acting as a distributor, it is acting
as principal. In turn, when it acts as third-party dealer, it is acting as an agent.
Trust fees
Trust fees are recognized from retirement plan, mutual fund administration, investment management, trustee, escrow, and custody
and safekeeping services. These asset management services are considered a single performance obligation as it requires the
provision of a series of distinct services that are substantially the same and have the same pattern of transfer. The performance
obligation is satisfied over time, except for optional services and certain other services that are satisfied at a point in time.
Revenues are recognized in arrears, when, or as, the services are rendered. The Corporation is acting as principal since, as asset
manager, it has the obligation to provide the specified service to the customer and has the ultimate discretion in establishing the fee
paid by the customer for the specified services.
114
Note 27 – Leases
The Corporation enters in the ordinary course of business into operating and finance leases for land, buildings and equipment.
These contracts generally do not include purchase options or residual value guarantees. The remaining lease terms of
0.2
30.5
years considers options to extend the leases for up to
20
obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.
The Corporation recognizes right-of-use assets (“ROU assets”) and lease liabilities related to operating and finance leases in its
Consolidated Statements of Financial Condition under the caption of other assets and other liabilities, respectively. Refer to Note 12
and Note 16 to the Consolidated Financial Statements, respectively, for information on the balances of these lease assets and
liabilities.
The Corporation uses the incremental borrowing rate for purposes of discounting lease payments for operating and finance leases,
since it does not have enough information to determine the rates implicit in the leases. The discount rates are based on fixed-rate
and fully amortizing borrowing facilities of its banking subsidiaries that are collateralized. For leases held by non-banking
subsidiaries, a credit spread is added to this rate based on financing transactions with a similar credit risk profile.
The following table presents the undiscounted cash flows of operating and finance leases for each of the following periods:
June 30, 2024
(In thousands)
Remaining
2024
2025
2026
2027
2028
Later
Years
Total Lease
Payments
Less: Imputed
Interest
Total
Operating Leases
$
15,604
$
28,445
$
20,048
$
14,640
$
12,181
40,793
$
131,711
$
(16,527)
$
115,184
Finance Leases
2,262
4,605
4,374
3,017
2,344
10,433
27,035
(3,031)
24,004
The following table presents the lease cost recognized by the Corporation in the Consolidated Statements of Operations as follows:
Quarters ended June 30,
Six months ended June 30,
(In thousands)
2024
2023
2024
2023
Finance lease cost:
Amortization of ROU assets
$
749
$
1,071
$
1,497
$
1,895
Interest on lease liabilities
226
234
463
530
Operating lease cost
7,650
7,800
15,338
15,654
Short-term lease cost
120
148
236
221
Variable lease cost
70
45
139
101
Sublease income
(21)
(17)
(41)
(26)
Total lease cost
[1]
$
8,794
$
9,281
$
17,632
$
18,375
[1]
Total lease cost is recognized as part of net occupancy expense, except for the net gain recognized from sale and leaseback transactions which
was included as part of other operating income.
115
The following table presents supplemental cash flow information and other related information related to operating and finance
leases.
Six months ended June 30,
(Dollars in thousands)
2024
2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
15,689
$
15,480
Operating cash flows from finance leases
463
530
Financing cash flows from finance leases
1,774
2,645
ROU assets obtained in exchange for new lease obligations:
Operating leases
$
1,463
$
1,623
Finance leases
-
1,796
Weighted-average remaining lease term:
Operating leases
7.2
years
7.4
years
Finance leases
8.0
years
8.0
years
Weighted-average discount rate:
Operating leases
3.3
%
3.1
%
Finance leases
3.8
%
3.9
%
As of June 30, 2024, the Corporation had additional operating leases contracts that have not yet commenced with an undiscounted
contract amount of $
3.9
10
20
116
Note 28 – Pension and postretirement benefits
The Corporation has a non-contributory defined benefit pension plan and supplementary pension benefit restoration plans for
regular employees of certain of its subsidiaries (the “Pension Plans”). The accrual of benefits under the Pension Plans is frozen to
all participants. The Corporation also provides certain postretirement health care benefits for retired employees of certain
subsidiaries (the “OPEB Plan”).
The components of net periodic cost for the Pension Plans and the OPEB Plan for the periods presented were as follows:
Pension Plans
OPEB Plan
Quarter ended June 30,
Quarter ended June 30,
(In thousands)
2024
2023
2024
2023
Personnel Cost:
$
-
$
-
$
32
$
48
Other operating expenses:
7,558
7,887
1,421
1,520
(8,594)
(8,591)
-
-
-
-
-
-
4,166
5,366
(548)
(553)
Total net periodic pension cost
$
3,130
$
4,662
$
905
$
1,015
Pension Plans
OPEB Plan
Six months ended June 30,
Six months ended June 30,
(In thousands)
2024
2023
2024
2023
Personnel Cost:
$
-
$
-
$
63
$
95
Other operating expenses:
15,117
15,774
2,843
3,041
(17,188)
(17,183)
-
-
-
-
-
-
8,332
10,732
(1,096)
(1,106)
Total net periodic pension cost
$
6,261
$
9,323
$
1,810
$
2,030
The Corporation paid the following contributions to the plans for the six months ended June 30, 2024 and expects to pay the
following contributions for the year ending December 31, 2024.
For the six months ended
For the year ending
(In thousands)
June 30, 2024
December 31, 2024
Pension Plans
$
114
$
228
OPEB Plan
$
3,217
$
5,744
117
Note 29 - Stock-based compensation
Incentive Plan
On May 12, 2020, the shareholders of the Corporation approved the Popular, Inc. 2020 Omnibus Incentive Plan, which permits the
Corporation to issue several types of stock-based compensation to employees and directors of the Corporation and/or any of its
subsidiaries (the “2020 Incentive Plan”). The 2020 Incentive Plan replaced the Popular, Inc. 2004 Omnibus Incentive Plan, which
was in effect prior to the adoption of the 2020 Incentive Plan (the “2004 Incentive Plan” and, together with the 2020 Incentive Plan,
the “Incentive Plan”). Participants under the Incentive Plan are designated by the Talent and Compensation Committee of the Board
of Directors (or its delegate, as determined by the Board). Under the Incentive Plan, the Corporation has issued restricted stock and
performance shares to its employees and restricted stock and restricted stock units (“RSUs”) to its directors.
The restricted stock granted under the Incentive Plan to employees becomes vested based on the employees’ continued service
with Popular.
Unless otherwise stated in an agreement, the compensation cost associated with the shares of restricted stock
granted prior to 2021 was determined based on a two-prong vesting schedule. The first part is vested ratably over five or four years
commencing at the date of grant (“the graduated vesting portion”) and the second part is vested at termination of employment after
attainment of 55 years of age and 10 years of service or 60 years of age and 5 years of service (“the retirement vesting portion”).
The graduated vesting portion is accelerated at termination of employment after attaining the earlier of 55 years of age and 10 years
of service or 60 years of age and 5 years of service. Restricted stock granted on or after 2021 will vest ratably in equal annual
installments over a period of 4 years or 3 years, depending on the classification of the employee. The vesting schedule is
accelerated at termination of employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age
and 5 years of service.
The performance share awards granted under the Incentive Plan consist of the opportunity to receive shares of Popular, Inc.’s
common stock provided that the Corporation achieves certain goals during a three-year performance cycle. The goals will be based
on two metrics weighted equally: the Relative Total Shareholder Return (“TSR”) and the Absolute Return on Average Tangible
Common Equity (“ROATCE”). The TSR metric is considered to be a market condition under ASC 718. For equity settled awards
based on a market condition, the fair value is determined as of the grant date and is not subsequently revised based on actual
performance. The ROATCE metric is considered to be a performance condition under ASC 718. The fair value is determined
based on the probability of achieving the ROATCE goal as of each reporting period. The TSR and ROATCE metrics are equally
weighted and work independently.
The number of shares that will ultimately vest ranges from 50% to a 150% of target based on
both market (TSR) and performance (ROATCE) conditions. The performance shares vest at the end of the three-year performance
cycle. If a participant terminates employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age
and 5 years of service, the performance shares shall continue outstanding and vest at the end of the performance cycle.
The following table summarizes the restricted stock and performance shares activity under the Incentive Plan for members of
management.
118
(Not in thousands)
Shares
Weighted-Average
Grant Date Fair
Value
Non-vested at December 31, 2022
281,963
$
56.50
Granted
257,757
66.01
Performance Shares Quantity Adjustment
19,753
75.32
Vested
(243,133)
66.31
Forfeited
(16,444)
55.82
Non-vested at December 31, 2023
299,896
$
58.20
Granted
240,816
86.53
Performance Shares Quantity Adjustment
17,551
86.44
Vested
(284,249)
75.59
Forfeited
(2,553)
63.21
Non-vested at June 30, 2024
271,461
$
67.53
During the quarter ended June 30, 2024,
97,732
130,815
) were awarded to
management under the Incentive Plan. During the quarters ended June 30, 2024 and 2023,
no
to management under the Incentive Plan. For the six months ended June 30, 2024,
175,591
2023 –
200,303
) and
65,225
57,715
) were awarded to management under the Incentive Plan.
During the quarter ended June 30, 2024, the Corporation recognized $
4.1
incentive awards, with a tax benefit of $
1.0
3.3
0.8
ended June 30, 2024, the Corporation recognized $
10.5
awards, with a tax benefit of $
1.7
7.7
1.1
June 30, 2024, the fair market value of the restricted stock and performance shares vested was $
16.2
$
22.3
2.2
expense. During the quarter ended June 30, 2024, the Corporation recognized $
(0.9)
tax benefit of $
(55)
(0.1)
(4)
thousand). For the six months ended June 30, 2024, the Corporation recognized $
4.1
a tax benefit of $
0.3
3.5
0.1
cost related to non-vested restricted stock awards and performance shares to members of management at June 30, 2024 was $
15.7
million and is expected to be recognized over a weighted-average period of
1.7
The following table summarizes the restricted stock activity under the Incentive Plan for members of the Board of Directors:
(Not in thousands)
RSUs / Unrestricted stock
Weighted-Average Grant
Date Fair Value per Unit
Non-vested at December 31, 2022
-
$
-
Granted
39,104
55.30
Vested
(39,104)
55.30
Forfeited
-
-
Non-vested at December 31, 2023
-
$
-
Granted
22,998
89.28
Vested
(22,998)
89.28
Forfeited
-
-
Non-vested at June 30, 2024
-
$
-
The equity awards granted to members of the Board of Directors of Popular, Inc. (the “Directors”) will vest and become non-
forfeitable on the grant date of such award. Effective in May 2019, all equity awards granted to the Directors may be paid in either
119
unrestricted stock or RSUs at each Directors election. If RSUs are elected, the Directors may defer the delivery of the shares of
common stock underlying the RSUs award until their retirement. To the extent that cash dividends are paid on the Corporation’s
outstanding common stock, the Directors will receive an additional number of RSUs that reflect a reinvested dividend equivalent.
For 2024 and 2023, Directors elected RSUs and unrestricted stock. During the quarter ended June 30, 2024,
20,411
1,392
32,999
2,300
stock) and the Corporation recognized expense related to these shares of $
1.9
0.4
2023 - $
1.9
0.4
granted
21,606
RSUs and
1,392
34,028
2,300
and the Corporation recognized $
2.1
0.4
$
2.0
0.4
30, 2024 for the Directors was $
2.1
120
Note 30 – Income taxes
The reason for the difference between the income tax expense applicable to income before provision for income taxes and the
amount computed by applying the statutory tax rate in Puerto Rico, were as follows:
Quarters ended
June 30, 2024
June 30, 2023
(In thousands)
Amount
% of pre-tax
income
Amount
% of pre-tax
income
Computed income tax expense at statutory rates
$
81,843
38
%
$
72,998
38
%
Net benefit of tax exempt interest income
(33,220)
(15)
(27,316)
(14)
Effect of income subject to preferential tax rate
1,272
-
278
-
Deferred tax asset valuation allowance
(235)
-
994
1
Difference in tax rates due to multiple jurisdictions
(4,456)
(2)
(3,869)
(2)
Other tax benefits
(4,500)
(2)
-
-
U.S., States, and local taxes
2,204
1
3,037
2
Others
(2,449)
(1)
(2,619)
(2)
Income tax expense
$
40,459
19
%
$
43,503
22
%
Six months ended
June 30, 2024
June 30, 2023
(In thousands)
Amount
% of pre-tax
income
Amount
% of pre-tax
income
Computed income tax expense at statutory rates
$
141,412
38
%
$
149,983
38
%
Net benefit of tax exempt interest income
(61,979)
(16)
(49,218)
(12)
Effect of income subject to preferential tax rate
(148)
-
(576)
-
Deferred tax asset valuation allowance
2,328
-
(3,572)
(1)
Difference in tax rates due to multiple jurisdictions
(5,129)
(1)
(9,039)
(2)
Other tax benefits
(4,500)
(1)
-
-
Tax on intercompany distributions
[1]
24,325
6
-
-
U.S., States, and local taxes
3,240
1
6,392
2
Others
(3,522)
(1)
(4,153)
(1)
Income tax expense
$
96,027
26
%
$
89,817
24
%
[1]
Includes $
16.5
For the quarter and six months ended June 30, 2024, the Corporation recorded an income tax expense of $
40.5
96.0
million respectively, compared to $
43.5
89.8
the Corporation recorded a tax expense related to tax withholding on certain intercompany distributions, amounting to $
22.9
out of which $
16.5
6.5
period ended March 31, 2024, as previously disclosed. As a result of this adjustment, the deferred tax assets related to NOL of the
Bank Holding Company (BHC) and its related valuation allowance was reduced by $
53.7
The following table presents a breakdown of the significant components of the Corporation’s deferred tax assets and liabilities.
121
June 30, 2024
PR
US
Total
Deferred tax assets:
Tax credits available for carryforward
$
263
$
14,204
$
14,467
Net operating loss and other carryforward available
53,942
616,080
670,022
Postretirement and pension benefits
37,219
-
37,219
Allowance for credit losses
242,722
27,591
270,313
Depreciation
6,774
6,746
13,520
FDIC-assisted transaction
152,665
-
152,665
Lease liability
27,196
18,099
45,295
Unrealized net loss on investment securities
294,942
20,304
315,246
Difference in outside basis from pass-through entities
45,207
-
45,207
Mortgage Servicing Rights
14,063
-
14,063
Other temporary differences
47,615
9,882
57,497
Total gross deferred tax assets
922,608
712,906
1,635,514
Deferred tax liabilities:
Intangibles
86,493
53,485
139,978
Right of use assets
24,764
15,911
40,675
Deferred loan origination fees/cost
(749)
2,069
1,320
Loans acquired
18,229
-
18,229
Other temporary differences
6,931
422
7,353
Total gross deferred tax liabilities
135,668
71,887
207,555
Valuation allowance
71,145
378,912
450,057
Net deferred tax asset
$
715,795
$
262,107
$
977,902
PR
US
Total
Deferred tax assets:
Tax credits available for carryforward
$
263
$
10,281
$
10,544
Net operating loss and other carryforward available
122,634
620,982
743,616
Postretirement and pension benefits
38,121
-
38,121
Allowance for credit losses
244,956
28,222
273,178
Depreciation
6,774
6,578
13,352
FDIC-assisted transaction
152,665
-
152,665
Lease liability
29,070
20,492
49,562
Unrealized net loss on investment securities
312,583
19,037
331,620
Difference in outside basis from pass-through entities
46,056
-
46,056
Mortgage Servicing Rights
14,085
-
14,085
Other temporary differences
47,679
9,625
57,304
Total gross deferred tax assets
1,014,886
715,217
1,730,103
Deferred tax liabilities:
Intangibles
84,635
51,944
136,579
Right of use assets
26,648
18,030
44,678
Deferred loan origination fees/cost
(1,056)
1,486
430
Loans acquired
20,430
-
20,430
Other temporary differences
6,402
422
6,824
Total gross deferred tax liabilities
137,059
71,882
208,941
Valuation allowance
139,347
374,035
513,382
Net deferred tax asset
$
738,480
$
269,300
$
1,007,780
122
The net deferred tax assets shown in the table above at June 30, 2024, is reflected in the consolidated statements of financial
condition as $
1.0
1.0
1.4
deferred tax liabilities in the “Other liabilities” caption (December 31, 2023 - $
1.3
assets or liabilities of individual tax-paying subsidiaries of the Corporation in their respective tax jurisdiction, Puerto Rico or the
United States.
At June 30, 2024, the net deferred tax assets of the U.S. operations amounted to $
641
approximately $
379
262
evaluates the realization of the deferred tax assets on a quarterly basis by taxing jurisdiction. The U.S. operation has sustained
profitability for the last three calendar years and for the period ended June 30, 2024. These historical financial results are objectively
verifiable positive evidence, evaluated together with the positive evidence of stable credit metrics, in combination with the length of
the expiration of the NOLs. On the other hand, the Corporation evaluated the negative evidence accumulated over the years,
including financial results lower than expectations and challenges to the economy due to inflationary pressures and global
geopolitical uncertainty that have resulted in a trend of reduction of pre-tax income over the last three years. As of June 30, 2024,
after weighting all positive and negative evidence, the Corporation concluded that it is more likely than not that approximately $
262
million of the deferred tax assets from the U.S. operations, comprised mainly of net operating losses, will be realized. The
Corporation based this determination on its estimated earnings available to realize the deferred tax assets for the remaining
carryforward period, together with the historical level of book income adjusted by permanent differences. Management will continue
to monitor and review the U.S. operation’s results, including recent earnings trends, the pre-tax earnings forecast, any new tax
initiative, and other factors, including net income versus forecast, targeted loan growth, net interest income margin, changes in
deposit costs, allowance for credit losses, charge offs, NPLs inflows and NPA balances. Significant adverse changes or a
combination of changes in these factors could impact the future realization of the deferred tax assets.
At June 30, 2024, the Corporation’s net deferred tax assets related to its Puerto Rico operations amounted to $
716
Corporation’s Puerto Rico Banking operation has a historical record of profitability. This is considered a strong piece of objectively
verifiable positive evidence that outweighs any negative evidence considered by Management in the evaluation of the realization of
the deferred tax assets. Based on this evidence and management’s estimate of future taxable income, the Corporation has
concluded that it is more likely than not that such net deferred tax assets of the Puerto Rico Banking operations will be realized.
The Holding Company operation has been in a cumulative loss position in recent years. Management expects these losses will be a
trend in future years. This objectively verifiable negative evidence is considered by Management strong negative evidence that
suggests that income in future years will be insufficient to support the realization of all deferred tax assets. After weighting of all
positive and negative evidence Management concluded, as of the reporting date, that it is more likely than not that the Holding
Company will not be able to realize any portion of the deferred tax assets. Accordingly, the Corporation has maintained a valuation
allowance on the deferred tax assets of $
71
The reconciliation of unrecognized tax benefits, excluding interest, was as follows:
123
(In millions)
2024
2023
Balance at January 1
$
1.5
$
2.5
Balance at March 31
$
1.5
$
2.5
Balance at June 30
$
1.5
$
2.5
At June 30, 2024, the total amount of accrued interest recognized in the statement of financial condition amounted to $
2.4
(December 31, 2023 - $
2.3
60
53
thousand). Management determined that at June 30, 2024 and December 31, 2023, there was
no
penalties. The Corporation’s policy is to report interest related to unrecognized tax benefits in income tax expense, while the
penalties, if any, are reported in other operating expenses in the consolidated statements of operations.
After consideration of the effect on U.S. federal tax of unrecognized U.S. state tax benefits, the total amount of unrecognized tax
benefits, including U.S. and Puerto Rico, that if recognized, would affect the Corporation’s effective tax rate, was approximately $
3.0
million at June 30, 2024 (December 31, 2023 - $
2.9
The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for
current tax year positions, expiration of open income tax returns due to the statutes of limitation, changes in Management’s
judgment about the level of uncertainty, status of examinations, litigation and legislative activity and the addition or elimination of
uncertain tax positions. The Corporation does not anticipate a reduction in the total amount of unrecognized tax benefits within the
next 12 months.
The Corporation and its subsidiaries file income tax returns in Puerto Rico, the U.S. federal jurisdiction, various U.S. states and
political subdivisions, and foreign jurisdictions. At June 30, 2024, the following years remain subject to examination in the U.S.
Federal jurisdiction: 2020 and thereafter; and in the Puerto Rico jurisdiction, 2018 and thereafter.
124
Note 31 – Supplemental disclosure on the consolidated statements of cash flows
Additional disclosures on cash flow information and non-cash activities for the six months ended June 30, 2024 and June 30, 2023
are listed in the following table:
(In thousands)
June 30, 2024
June 30, 2023
Non-cash activities:
$
25,922
$
35,133
38,867
34,497
64,789
69,630
25,427
6,363
6,220
5,075
26,894
25,409
33,114
30,484
38,715
35,492
7,505
49,361
2,896
2,150
[1]
4,806
24,359
26,198
6,460
24,603
1,022
124,000
124,708
661
1,240
3,437
1,165
1,946
10,006
[1]
Includes loans securitized into trading securities and subsequently sold before quarter end.
The following table provides a reconciliation of cash and due from banks, and restricted cash reported within the Consolidated
Statement of Financial Condition that sum to the total of the same such amounts shown in the Consolidated Statement of Cash
Flows.
(In thousands)
June 30, 2024
June 30, 2023
Cash and due from banks
$
348,170
$
450,125
Restricted cash and due from banks
11,803
26,517
Restricted cash in money market investments
7,286
6,058
Total cash and due from banks, and restricted cash
[2]
$
367,259
$
482,700
[2]
Refer to Note 4 - Restrictions on cash and due from banks and certain securities for nature of restrictions.
125
Note 32 – Segment reporting
The Corporation’s corporate structure consists of
two
Banco Popular de Puerto Rico and Popular U.S.
Management determined the reportable segments based on the internal reporting used to evaluate performance and to assess
where to allocate resources.
markets the segments serve, as well as on the products and services offered by the segments.
Banco Popular de Puerto Rico:
The Banco Popular de Puerto Rico reportable segment includes commercial, consumer and retail banking operations conducted at
BPPR, including U.S. based activities conducted through its New York Branch. It also includes the lending operations of Popular
Auto and Popular Mortgage. Other financial services within the BPPR segment include the trust service units of BPPR, asset
management services of Popular Asset Management, the brokerage and investment banking operations of Popular Securities, and
the insurance agency and reinsurance businesses of Popular Insurance, Popular Risk Services, Popular Life Re, and Popular Re.
Popular U.S.:
Popular U.S. reportable segment consists of the banking operations of Popular Bank (PB), Popular Insurance Agency, U.S.A., and
PEF. PB operates through a retail branch network in the U.S. mainland under the name of Popular, and equipment leasing and
financing services through PEF. Popular Insurance Agency, U.S.A. offers investment and insurance services across the PB branch
network.
The Corporate group consists primarily of the holding companies Popular, Inc., Popular North America, Popular International Bank
and certain of the Corporation’s investments accounted for under the equity method, including BHD.
The accounting policies of the individual operating segments are the same as those of the Corporation. Transactions between
reportable segments are primarily conducted at market rates, resulting in profits that are eliminated for reporting consolidated results
of operations.
The tables that follow present the results of operations and total assets by reportable segments:
126
2024
For the quarter ended June 30, 2024
Intersegment
(In thousands)
BPPR
Popular U.S.
Eliminations
Net interest income
$
488,745
$
85,851
$
-
Provision for credit losses (benefit)
50,382
(3,563)
-
Non-interest income
152,354
6,000
-
Amortization of intangibles
424
310
-
Depreciation expense
13,317
2,204
-
Other operating expenses
386,231
67,163
-
Income tax expense
33,540
7,989
-
Net income
$
157,205
$
17,748
$
-
Segment assets
$
58,464,408
$
14,287,739
$
(264,040)
For the quarter ended June 30, 2024
Reportable
(In thousands)
Segments
Corporate
Eliminations
Total Popular, Inc.
Net interest income (expense)
$
574,596
$
(6,284)
$
-
$
568,312
Provision for credit losses (benefit)
46,819
(25)
-
46,794
Non-interest income
158,354
10,716
(2,764)
166,306
Amortization of intangibles
734
-
-
734
Depreciation expense
15,521
367
-
15,888
Other operating expenses
453,394
784
(1,224)
452,954
Income tax expense (benefit)
41,529
(476)
(594)
40,459
Net income
$
174,953
$
3,782
$
(946)
$
177,789
Segment assets
$
72,488,107
$
5,828,667
$
(5,471,702)
$
72,845,072
For the six months ended June 30, 2024
Intersegment
(In thousands)
BPPR
Popular U.S.
Eliminations
Net interest income
$
961,586
$
170,704
$
-
Provision for credit losses
111,062
7,872
-
Non-interest income
298,023
13,120
(56)
Amortization of intangibles
908
621
-
Depreciation expense
26,326
4,147
-
Other operating expenses
780,036
134,951
(56)
Income tax expense
62,746
11,445
-
Net income
$
278,531
$
24,788
$
-
Segment assets
$
58,464,408
$
14,287,739
$
(264,040)
For the six months ended June 30, 2024
Reportable
Total
(In thousands)
Corporate
Eliminations
Popular, Inc.
Net interest income (expense)
$
1,132,290
$
(13,234)
$
-
$
1,119,056
Provision for credit losses
118,934
458
-
119,392
Non-interest income
311,087
22,438
(3,401)
330,124
Amortization of intangibles
1,529
-
-
1,529
Depreciation expense
30,473
776
-
31,249
Other operating expenses
914,931
7,395
(2,415)
919,911
Income tax expense
74,191
22,200
(364)
96,027
Net income (loss)
$
303,319
$
(21,625)
$
(622)
$
281,072
Segment assets
$
72,488,107
$
5,828,667
$
(5,471,702)
$
72,845,072
127
2023
For the quarter ended June 30, 2023
Intersegment
(In thousands)
BPPR
Eliminations
Net interest income
$
453,075
$
87,502
$
-
Provision for credit losses
29,345
7,907
-
Non-interest income
143,804
5,887
(134)
Amortization of intangibles
485
310
-
Depreciation expense
11,875
1,885
-
Other operating expenses
386,069
61,151
(134)
Income tax expense
37,303
6,850
-
Net income
$
131,802
$
15,286
$
-
Segment assets
$
58,392,177
$
12,549,742
$
(442,125)
For the quarter ended June 30, 2023
Reportable
(In thousands)
Segments
Corporate
Eliminations
Total Popular, Inc.
Net interest income (expense)
$
540,577
$
(8,909)
$
-
$
531,668
Provision for credit losses (benefit)
37,252
(60)
-
37,192
Non-interest income
149,557
13,012
(2,098)
160,471
Amortization of intangibles
795
-
-
795
Depreciation expense
13,760
355
-
14,115
Other operating expenses
447,086
(556)
(1,156)
445,374
Income tax expense (benefit)
44,153
(289)
(361)
43,503
Net income
$
147,088
$
4,653
$
(581)
$
151,160
Segment assets
$
70,499,794
$
5,844,554
$
(5,506,082)
$
70,838,266
For the six months ended June 30, 2023
Intersegment
(In thousands)
BPPR
Popular U.S.
Net interest income
$
902,895
$
177,588
$
1
Provision for credit losses
75,053
9,972
-
Non-interest income
291,275
12,271
(270)
Amortization of intangibles
969
621
-
Depreciation expense
23,544
3,699
-
Other operating expenses
749,784
124,468
(270)
Income tax expense
80,135
10,826
-
Net income
$
264,685
$
40,273
$
1
Segment assets
$
58,392,177
$
12,549,742
$
(442,125)
For the six months ended June 30, 2023
Reportable
Total
(In thousands)
Corporate
Eliminations
Popular, Inc.
Net interest income (expense)
$
1,080,484
$
(17,160)
$
-
$
1,063,324
Provision for credit losses (benefit)
85,025
(196)
-
84,829
Non-interest income
303,276
22,726
(3,570)
322,432
Amortization of intangibles
1,590
-
-
1,590
Depreciation expense
27,243
714
-
27,957
Other operating expenses
873,982
(326)
(2,232)
871,424
Income tax expense (benefit)
90,961
(610)
(534)
89,817
Net income
$
304,959
$
5,984
$
(804)
$
310,139
Segment assets
$
70,499,794
$
5,844,554
$
(5,506,082)
$
70,838,266
128
Geographic Information
The following information presents selected financial information based on the geographic location where the Corporation conducts
its business. The banking operations of BPPR are primarily based in Puerto Rico, where it has the largest retail banking franchise.
BPPR also conducts banking operations in the U.S. Virgin Islands, the British Virgin Islands and New York. BPPR’s banking
operations in the mainland United States include commercial lending activities. BPPR’s commercial lending activities in the U.S.,
through its New York Branch, include periodic loan participations with PB. During the quarter and six months ended June 30, 2024,
BPPR did
no
t participate in loans originated by PB (2023 – $
3
23
for the BPPR segment related to its operations in the United States amounted to $
1.6
1.5
including $
105
106
524
(December 31, 2023 - $
528
718
557
168
personal loans (December 31, 2023 - $
229
approximately $
60.1
55.5
service charge on deposit accounts and other service fees. In the Virgin Islands, the BPPR segment offers banking products,
including loans and deposits. At June 30, 2024, total assets for the BPPR segment related to its operations in the U.S. and British
Virgin Islands amounted to $
1.0
1.0
21.3
during the six months ended June 30, 2024 (2023 - $
22.7
Geographic Information
Quarter ended
Six months ended
(In thousands)
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Revenues:
[1]
$
586,338
$
536,075
$
1,152,082
$
1,083,978
127,011
132,720
253,752
257,765
21,269
23,344
43,346
44,013
Total consolidated revenues
$
734,618
$
692,139
$
1,449,180
$
1,385,756
[1]
Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net gain,
including impairment losses, on equity securities, net gain on trading account debt securities, adjustments to indemnity reserves on loans sold,
and other operating income.
Selected Balance Sheet Information:
(In thousands)
June 30, 2024
December 31, 2023
Puerto Rico
Total assets
$
55,739,609
$
54,181,300
Loans
23,081,402
22,519,961
Deposits
52,684,734
51,282,007
United States
Total assets
$
15,883,084
$
15,343,156
Loans
11,983,492
12,006,012
Deposits
11,097,236
10,643,602
Other
Total assets
$
1,222,379
$
1,233,699
Loans
[1]
534,951
543,299
Deposits
[2]
1,748,892
1,692,634
[1]
Represents loans from BPPR operations located in the U.S. and British Virgin Islands.
[2]
Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.
129
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report includes management’s discussion and analysis (“MD&A”) of the consolidated financial position and financial
performance of Popular, Inc. (the “Corporation” or “Popular”). All accompanying tables, financial statements and notes included
elsewhere in this report should be considered an integral part of this analysis.
The Corporation is a diversified, publicly-owned financial holding company subject to the supervision and regulation of the Board of
Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the United States (“U.S.”) mainland 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 de Puerto Rico (“BPPR”), as well as 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 and commercial banking services, as well as equipment leasing and financing, through its
New York-chartered banking subsidiary, Popular Bank (“PB” or “Popular U.S.”), which has branches located in New York, New
Jersey and Florida. Note 32 to the Consolidated Financial Statements presents information about the Corporation’s business
segments.
SIGNIFICANT EVENTS
Capital Actions
On July 24, 2024, the Corporation announced the following capital actions:
●
common stock repurchases of up to $500 million; and
●
an increase in the Corporation’s quarterly common stock dividend from $0.62 to $0.70 per share, commencing with the
dividend payable in the first quarter of 2025, subject to the approval by the Corporation’s Board of Directors.
The Corporation’s planned common stock repurchases may be executed in open market transactions, privately negotiated
transactions, block trades or any other manner determined by the Corporation. The timing, quantity and price of such repurchases
will be subject to various factors, including market conditions, the Corporation’s capital position and financial performance, the
capital impact of strategic initiatives and regulatory and tax considerations. The common stock repurchase program does not require
the Corporation to acquire a specific dollar amount or number of shares and may be modified, suspended or terminated at any time
without prior notice.
OVERVIEW
Table 1 provides selected financial data and performance indicators for the quarters ended June 30, 2024 and 2023.
130
Table 1 - Financial Highlights
Financial Condition Highlights
Ending balances at
Average for the six months ended
(In thousands)
June 30,
2024
December 31,
2023
Variance
June 30,
2024
June 30,
2023
Variance
Money market investments
$
6,851,394
$
6,998,871
$
(147,477)
$
6,477,180
$
6,799,452
$
(322,272)
Investment securities
26,742,639
25,148,673
1,593,966
28,034,347
27,343,940
690,407
Loans
35,599,845
35,069,272
530,573
35,226,488
32,367,113
2,859,375
Earning assets
69,193,878
67,216,816
1,977,062
69,738,015
66,510,505
3,227,510
Total assets
72,845,072
70,758,155
2,086,917
72,800,664
69,519,264
3,281,400
Deposits
65,530,862
63,618,243
1,912,619
64,529,716
61,669,930
2,859,786
Borrowings
1,047,264
1,078,332
(31,068)
1,045,181
1,284,454
(239,273)
Total liabilities
67,472,394
65,611,202
1,861,192
66,549,458
63,806,260
2,743,198
Stockholders’ equity
5,372,678
5,146,953
225,725
6,251,206
5,713,004
538,202
Note: Average balances exclude unrealized gains or losses on debt securities available-for-sale and the unrealized loss related to certain securities transferred from available-
for-sale to held-to-maturity.
Operating Highlights
Quarters ended June 30,
Six months ended June 30,
(In thousands, except per share information)
2024
2023
Variance
2024
2023
Variance
Net interest income
$
568,312
$
531,668
$
36,644
$
1,119,056
$
1,063,324
$
55,732
Provision for credit losses
46,794
37,192
9,602
119,392
84,829
34,563
Non-interest income
166,306
160,471
5,835
330,124
322,432
7,692
Operating expenses
469,576
460,284
9,292
952,689
900,971
51,718
Income before income tax
218,248
194,663
23,585
377,099
399,956
(22,857)
Income tax expense
40,459
43,503
(3,044)
96,027
89,817
6,210
Net income
$
177,789
$
151,160
$
26,629
$
281,072
$
310,139
$
(29,067)
Net income applicable to common stock
$
177,436
$
150,807
$
26,629
$
280,366
$
309,433
$
(29,067)
Net income per common share – basic
$
2.47
$
2.10
$
0.37
$
3.90
$
4.32
$
(0.42)
Net income per common share – diluted
$
2.46
$
2.10
$
0.36
$
3.90
$
4.32
$
(0.42)
Dividends declared per common share
$
0.62
$
0.55
$
0.07
$
1.24
$
1.10
$
0.14
Quarters ended June 30,
Six months ended June 30,
Selected Statistical Information
2024
2023
2024
2023
Common Stock Data
$
88.43
60.52
$
88.43
60.52
73.94
63.00
73.94
63.00
Profitability Ratios
0.97
%
0.85
%
0.77
%
0.89
%
10.38
9.26
8.24
9.63
2.44
2.50
2.41
2.59
2.70
2.65
2.65
2.78
3.22
3.14
3.20
3.18
3.48
3.29
3.44
3.37
Capitalization Ratios
8.60
%
8.24
%
8.59
%
8.22
%
16.48
16.87
16.48
16.87
16.54
16.93
16.54
16.93
18.30
18.74
18.30
18.74
8.53
8.40
8.53
8.40
131
Non-GAAP Financial Measures
This Form 10-Q contains financial information prepared under accounting principles generally accepted in the United States (“U.S.
GAAP”) and non-GAAP financial measures. Management uses non-GAAP financial measures when it has determined that these
measures provide meaningful information about the underlying performance of the Corporation’s ongoing operations. Non-GAAP
financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other
companies.
Adjusted net income - Non-GAAP Financial Measure
In addition to analyzing the Corporation’s results on a reported basis, management monitors the “adjusted net income” of the
Corporation and excludes the impact of certain transactions on the results of its operations. Management believes that the “adjusted
net income” provides meaningful information about the underlying performance of the Corporation’s ongoing operations. The
“adjusted net income” is a non-GAAP financial measure.
The following table presents the adjusted net income for the six months ended of June 30, 2024. There were no non-GAAP
adjustments for the six months ended June 30, 2023.
Table 2 - Adjusted Net Income for the Six Months Ended June 30, 2024 (Non-GAAP)
(Unaudited)
(In thousands)
Income before
income tax
Income tax
expense
(benefit)
Total
U.S. GAAP Net income
$377,099
$96,027
$281,072
Non-GAAP Adjustments:
FDIC Special Assessment [1]
14,287
(5,234)
9,053
Adjustments related to intercompany distributions [2]
6,400
16,483
22,883
Adjusted net income (Non-GAAP)
$397,786
$84,778
$313,008
[1] Expense related to the November 16, 2023 FDIC Special Assessment to recover the losses to the deposit insurance fund used by the FDIC in
connection with the receiverships of several failed banks. The special assessment amount and collection period may change as the estimated loss is
periodically adjusted or if the total amount collected varies.
[2] Income tax expense and other related expenses from prior periods related to withholding taxes on certain distributions from U.S. subsidiaries.
132
Net interest income on a taxable equivalent basis – Non-GAAP Financial Measure
Net interest income on a taxable equivalent basis is a non-GAAP financial measure. Management believes that this presentation
provides meaningful information since it facilitates the comparison of revenues arising from taxable and tax-exempt sources.
The Corporation’s interest earning assets include investment securities and loans that are exempt from income tax, principally in
Puerto Rico. The main sources of tax-exempt interest income are certain investments in obligations of the U.S. Government, its
agencies and sponsored entities, certain obligations of the Commonwealth of Puerto Rico and/or its agencies and municipalities,
and assets held by the Corporation’s international banking entities. To facilitate the comparison of interest related to these assets,
the interest has been converted to a taxable equivalent basis, using the applicable statutory income tax rates for each period.
According to the Puerto Rico tax law, a portion of interest cost, based on an equal proportion of tax-exempt assets to total assets,
and an allocation of general and administrative expenses should be attributed to exempt income, reducing the benefit of the tax
exempt income, and as such the disallowance of such deduction is considered in the taxable equivalent computation. The effective
yield, on a taxable equivalent basis, will vary depending on the level of these expenses that are attributed to the available exempt
income.
Net interest income on a taxable equivalent basis, with its different components, along with the reconciliation to net interest income
(GAAP), for the quarter ended June 30, 2024 as compared with the same period in 2023, segregated by major categories of interest
earning assets and interest-bearing liabilities are included in Table 3 of the Operating Results Analysis section below.
Tangible Common Equity and Tangible Assets
Tangible common equity, tangible common equity ratio, tangible assets and tangible book value per common share are non-GAAP
financial measures. Tangible common equity ratio and tangible book value per common share in conjunction with more traditional
bank capital ratios are commonly used by banks and analysts to compare the capital adequacy of banking organizations with
significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase accounting method for
mergers and acquisitions. Tangible common equity, tangible assets and other related measures should not be used in isolation or
as a substitute for stockholders' equity, total assets or any other measure calculated in accordance with GAAP. Moreover, the
manner in which the Corporation calculates its tangible common equity, tangible assets and other related measures may differ from
that of other companies reporting measures with similar names.
Table 10 provides a reconciliation of total stockholders’ equity to tangible common equity and total assets to tangible assets as of
June 30, 2024, and December 31, 2023.
Financial highlights for the quarter ended June 30, 2024
●
151.2 million for the same quarter of the previous year. Net interest margin for the second quarter of 2024 was 3.22%, an
increase of 8 basis points when compared to 3.14% for the same quarter of the previous year. The increase was mainly due to
the reinvestment of maturities in higher yielding U.S. Treasury bills and due to higher average loan balances and higher yields
in all loans portfolios, which was partially offset by higher deposit costs, principally due to higher average volume and higher
cost of interest-bearing deposits and time deposits. On a taxable equivalent basis, the net interest margin was 3.48%,
compared to 3.29% for the same quarter of the previous year.
●
$37.2 million for the same quarter of the previous year. The increase in provision for credit losses was driven by loan growth in
BPPR and higher reserves in the auto leasing portfolio resulting from recent loss history, partially offset by lower reserves in
the PB commercial portfolio mainly due to improvements in credit ratings.
●
30, 2023, mainly due to higher income from mortgage banking activities resulting from the fair value adjustments of mortgage
servicing rights and higher other service fees.
●
133
2023
. Higher operating expenses were driven mainly by higher technology and software expenses, personnel costs, other
operating expenses, FDIC deposit insurance expense and processing and transactional services expenses.
●
●
driven by an increase in available-for-sale (“AFS”) investment securities, mainly due to purchases of U.S. Treasury bills and
loan growth, mainly in the commercial portfolio, partially offset by a decrease in held-to-maturity (“HTM”) investment securities
driven by maturities of U.S. Treasury securities.
●
Total deposits at June 30, 2024 increased by $1.9 billion when compared to deposits at December 31, 2023, mainly due to an
increase in Puerto Rico public sector deposits and higher deposits in PB, mainly those captured via the online channel.
●
for the six months ended June 30, 2023 of $281.1 million and the amortization of unrealized losses from securities previously
reclassified to held-to-maturity (“HTM”) of $70.7 million, net of taxes, partially offset by the after-tax impact of the increase in
net unrealized losses in the portfolio of AFS securities of $54.2 million and common and preferred dividends declared during
the period of $90.4 million. As of June 30, 2024, the Corporation’s tangible book value per common share was $62.71, an
increase of $2.97 from December 31, 2023.
●
tier 1 leverage ratio was 8.53%, and the total capital ratio was 18.30%. Refer to Table 9 for capital ratios.
Refer to the Operating Results Analysis and Financial Condition Analysis within this MD&A for additional discussion of significant
quarterly variances and items impacting the financial performance of the Corporation.
As a financial services company, the Corporation’s earnings are significantly affected by general business and economic conditions
in the markets which we serve. Lending and deposit activities and fee income generation are influenced by the level of business
spending and investment, consumer income, spending and savings, capital market activities, competition, customer preferences,
interest rate conditions and prevailing market rates on competing products.
The Corporation operates in a highly regulated environment and may be adversely affected by changes in federal and local laws
and regulations. Also, competition with other financial institutions, as well as with non-traditional financial service providers and
technology companies that provide electronic and internet-based financial solutions and services, could adversely affect its
profitability.
The Corporation continuously monitors general business and economic conditions, industry-related indicators and trends,
competition, interest rate volatility, credit quality indicators, loan and deposit demand, operational and systems efficiencies, revenue
enhancements and changes in the regulation of financial services companies.
The description of the Corporation’s business contained in Item 1 of the 2023 Form 10-K, while not all inclusive, discusses additional
information about the business of the Corporation. Readers should also refer to “Part I - Item 1A” of the 2023 Form 10-K and “Part II
- Item 1A” of this Form 10-Q for a discussion of certain risks and uncertainties to which the Corporation is subject, many beyond the
Corporation’s control that, in addition to the other information in this Form 10-Q, readers should consider.
The Corporation’s common stock is traded on the NASDAQ Global Select Market under the symbol BPOP.
134
CRITICAL ACCOUNTING POLICIES / ESTIMATES
The accounting and reporting policies followed by the Corporation and its subsidiaries conform to generally accepted accounting
principles in the United States of America and general practices within the financial services industry. Various elements of the
Corporation’s accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other
subjective assessments. These estimates are made under facts and circumstances at a point in time and changes in those facts
and circumstances could produce actual results that differ from those estimates.
Management has discussed the development and selection of the critical accounting policies and estimates with the Corporation’s
Audit Committee. The Corporation has identified as critical accounting policies those related to: (i) Fair Value Measurement of
Financial Instruments; (ii) Loans and Allowance for Credit Losses; (iii) Loans Acquired with Deteriorated Credit Quality; (iv) Income
Taxes; (v) Goodwill and Other Intangible Assets; and (vi) Pension and Postretirement Benefit Obligations. For a summary of these
critical accounting policies and estimates, refer to that particular section in the MD&A included in the 2023 Form 10-K. Also, refer to
Note 2 to the Consolidated Financial Statements included in the 2023 Form 10-K for a summary of the Corporation’s significant
accounting policies and to Note 3 to the Consolidated Financial Statements included in this Form 10-Q for information on recently
adopted accounting standard updates.
OPERATING RESULTS ANALYSIS
NET INTEREST INCOME
Net interest income for the quarter ended June 30, 2024 was $568.3 million, compared to $531.7 million in the same quarter of
2023, an increase of $36.6 million. Net interest income on a taxable equivalent basis for the second quarter of 2024 was $614.8
million compared to $558.4 million in the second quarter of 2023, an increase of $56.4 million.
Net interest margin for the quarter was 3.22% compared to 3.14% in the second quarter of 2023 or an increase of eight basis points.
On a taxable equivalent basis, net interest margin for the second quarter of 2024 was 3.48%, compared to 3.29% for the same
quarter the prior year. The main variances in net interest income on a taxable equivalent basis were:
●
higher interest income from investment securities by $80.5 million mainly driven by higher volume by $1.6 billion driven by
the deployment of liquidity to invest in short-term treasury bills, whose interest is tax exempt in Puerto Rico. Also, a higher
yield by 101 basis points, driven by a higher interest rate environment and reinvestment of investment maturities in higher
yielding U.S. Treasury bills;
●
higher interest income from loans by $79.6 million resulting from an increase in average loans by $2.7 billion reflecting
loan increases in both PB and BPPR and across most portfolios and higher yield on loans by 37 basis points when
compared to the same quarter of 2023 due to origination of loans in a higher interest rate environment and the repricing of
adjustable-rate loans. The portfolio with the highest variances included commercial loans with an increase of $38.1 million
in interest income, or 34 basis points. Mortgage loans, auto loans and consumer loans increased approximately $9 million
each in interest income, while construction loans increased $7.8 million. All loan portfolios showed increases in volume
and yield
Partially offset by:
●
higher interest expense on deposits by $96.5 million driven by higher cost of deposits by 65 basis points due to higher
average volume and higher cost of market linked interest-bearing P.R. public deposits by $2.1 billion and higher volume of
U.S. deposits, mainly those captured via the online channel.
Net interest income for the BPPR segment amounted to $488.7 million for the second quarter of 2024, compared to $453.1 million in
the second quarter of 2023. Net interest margin increased to 3.40% compared to 3.21% in the second quarter of 2023. The increase
in net interest income of $35.6 million was driven by higher yield and volume of earning assets partially offset by the increase in the
cost of deposits, mainly from the P.R. public sector. The cost of interest-bearing deposits increased 52 basis points to 2.47% from
1.95% in the same quarter of 2023. Total deposit costs for the quarter increased by 39 basis points, from 1.44% in the second
quarter of 2023 to 1.83%.
135
Net interest income for PB was $85.9 million for the quarter ended June 30, 2024, compared to $87.5 million during the second
quarter of 2023, a decrease of $1.6 million. Net interest margin decreased 41 basis points to 2.60% when compared to 3.01%
during the second quarter of 2023. The decrease in net interest margin was mostly driven by a higher cost of deposits in all interest-
bearing categories, partially offset by the increase in loan volume and the repricing of adjustable-rate loans driven by the changes in
interest rates. The cost of interest-bearing deposits was 3.89% compared to 3.02% in the second quarter of 2023, or an increase of
87 basis points, while total deposit cost was 3.43% compared to 2.55% in the second quarter of 2023.
136
Table 3 - Analysis of Levels & Yields on a Taxable Equivalent Basis (Non-GAAP)
Quarter ended June 30,
Variance
Average Volume
Average Yields / Costs
Interest
Attributable to
2024
2023
Variance
2024
2023
2024
2023
Variance
Rate
Volume
(In millions)
(In thousands)
$
6,471
$
7,851
$
(1,380)
5.49
%
5.15
%
0.34
%
Money market investments
$
88,316
$
100,776
$
(12,460)
$
6,081
$
(18,541)
28,943
27,362
1,581
3.01
2.00
1.01
Investment securities [1]
216,922
136,408
80,514
72,325
8,189
26
32
(6)
5.69
4.65
1.04
Trading securities
367
370
(3)
73
(76)
Total money market,
investment and trading
35,440
35,245
195
3.47
2.70
0.77
securities
305,605
237,554
68,051
78,479
(10,428)
Loans:
17,707
16,237
1,470
6.86
6.52
0.34
Commercial
302,003
263,934
38,069
13,404
24,665
1,070
737
333
9.11
8.95
0.16
Construction
24,224
16,442
7,782
242
7,540
1,789
1,632
157
6.86
6.30
0.56
Leasing
30,697
25,711
4,986
2,394
2,592
7,817
7,409
408
5.66
5.47
0.19
Mortgage
110,673
101,304
9,369
3,666
5,703
3,192
3,075
117
13.97
13.21
0.76
Consumer
110,906
101,295
9,611
5,103
4,508
3,819
3,593
226
8.88
8.31
0.57
Auto
84,268
74,467
9,801
4,970
4,831
35,394
32,683
2,711
7.52
7.15
0.37
Total loans
662,771
583,153
79,618
29,779
49,839
$
70,834
$
67,928
$
2,906
5.49
%
4.84
%
0.65
%
Total earning assets
$
968,376
$
820,707
$
147,669
$
108,258
$
39,411
Interest bearing deposits:
$
26,105
$
24,230
$
1,875
3.60
%
2.91
%
0.69
%
NOW and money market [2]
$
233,345
$
175,640
$
57,705
$
43,783
$
13,922
14,732
14,763
(31)
0.92
0.66
0.26
Savings
33,795
24,446
9,349
7,966
1,383
9,014
7,715
1,299
3.25
2.26
0.99
Time deposits
72,799
43,402
29,397
18,707
10,690
49,851
46,708
3,143
2.74
2.09
0.65
Total interest bearing deposits
339,939
243,488
96,451
70,456
25,995
15,176
15,480
(304)
Non-interest bearing demand
deposits
65,027
62,188
2,839
2.10
1.57
0.53
Total deposits
339,939
243,488
96,451
70,456
25,995
80
125
(45)
5.64
5.19
0.45
Short-term borrowings
1,126
1,624
(498)
129
(627)
Other medium and
978
1,299
(321)
5.16
5.33
(0.17)
long-term debt
12,530
17,227
(4,697)
1,007
(5,704)
Total interest bearing
50,909
48,132
2,777
2.79
2.19
0.60
liabilities (excluding demand
deposits)
353,595
262,339
91,256
71,592
19,664
4,749
4,316
433
Other sources of funds
$
70,834
$
67,928
$
2,906
2.01
%
1.55
%
0.46
%
Total source of funds
353,595
262,339
91,256
71,592
19,664
Net interest margin/
3.48
%
3.29
%
0.19
%
income on a taxable
equivalent basis (Non-
GAAP)
614,781
558,368
56,413
$
36,666
$
19,747
2.70
%
2.65
%
0.05
%
46,469
26,700
19,769
Net interest margin/ income
3.22
%
3.14
%
0.08
%
non-taxable equivalent basis
(GAAP)
$
568,312
$
531,668
$
36,644
Note: The changes that are not due solely to volume or rate are allocated to volume and rate based on the proportion of the change in each category.
[1] Average balances exclude unrealized gains or losses on debt securities available-for-sale and the unrealized loss related to certain securities transferred from
available-for-sale to held-to-maturity.
[2] Includes interest bearing demand deposits corresponding to certain government entities in Puerto Rico.
137
Net interest income for the six-month period ended June 30, 2024 was $1.1 billion, or $55.7 million higher than the same period in
2023. Taxable equivalent net interest income was $1.2 billion, an increase of $75.6 million when compared to the same period in
2023. Net interest margin was 3.20%, an increase of 2 basis points when compared to 3.18% in 2023. The increase in net interest
margin was mainly driven by a higher yield on earning assets due to the reinvestment of investment securities maturities,
adjustable-rate loans and higher volume of earning assets in a higher interest rate environment. Net interest margin, on a taxable
equivalent basis, for the six months ended June 30, 2024, was 3.44%, an increase of 7 basis points when compared to the 3.37%
for the same period of 2023. The drivers of the variances in net interest income for the six-month period are:
Positive variances:
●
points driven by the re-investment of maturities and deployment of liquidity to higher yield short-term treasury bills, whose
interest is tax exempt in Puerto Rico;
●
adjustable rate loans and higher volume of $1.7 billion, increasing in BPPR and PB; and
●
yield and volume of personal loans and credit cards driven by the increase in market rates of approximately 150 basis points
throughout 2023.
Partially offset by:
●
higher cost in most deposit categories in both BPPR and PB; but particularly from Puerto Rico government deposits that
are market-linked and PB online deposits.
138
Table 4 – Analysis of Levels & Yields on a Taxable Equivalent Basis from Continuing Operations (Non-GAAP)
Period ended June 30,
Variance
Average Volume
Average Yields / Costs
Interest
Attributable to
2024
2023
Variance
2024
2023
Variance
2024
2023
Variance
Rate
Volume
(In millions)
(In thousands)
$
6,477
$
6,800
$
(323)
5.49
%
4.94
%
0.55
%
Money market investments
$
176,832
$
166,500
$
10,332
$
18,468
$
(8,136)
28,626
28,108
518
2.86
2.11
0.75
Investment securities [1]
408,024
295,322
112,702
107,442
5,260
30
31
(1)
4.60
4.56
0.04
Trading securities
678
708
(30)
7
(37)
Total money market,
investment and trading
35,133
34,939
194
3.35
2.67
0.68
securities
585,534
462,530
123,004
125,917
(2,913)
Loans:
17,660
16,000
1,660
6.85
6.42
0.43
Commercial
601,507
509,403
92,104
37,134
54,970
1,031
734
297
9.04
8.68
0.36
Construction
46,324
31,598
14,726
1,454
13,272
1,766
1,610
156
6.80
6.21
0.59
Leasing
60,051
49,993
10,058
4,994
5,064
7,770
7,398
372
5.64
5.46
0.18
Mortgage
219,216
202,076
17,140
6,783
10,357
3,208
3,049
159
13.94
13.03
0.91
Consumer
222,396
197,010
25,386
13,546
11,840
3,791
3,576
215
8.82
8.23
0.59
Auto
166,322
145,874
20,448
11,419
9,029
35,226
32,367
2,859
7.50
7.06
0.44
Total loans
1,315,816
1,135,954
179,862
75,330
104,532
$
70,359
$
67,306
$
3,053
5.43
%
4.78
%
0.65
%
Total earning assets
$
1,901,350
$
1,598,484
$
302,866
$
201,247
$
101,619
Interest bearing deposits:
$
25,904
$
23,774
$
2,130
3.61
%
2.72
%
0.89
%
NOW and money market [2]
$
465,474
$
320,610
$
144,864
$
113,900
$
30,964
14,716
14,895
(179)
0.93
0.57
0.36
Savings
67,966
41,889
26,077
24,160
1,917
8,780
7,409
1,371
3.11
2.02
1.09
Time deposits
135,995
74,204
61,791
40,371
21,420
49,400
46,078
3,322
2.73
1.91
0.82
Total interest bearing deposits
669,435
436,703
232,732
178,431
54,301
15,129
15,592
(463)
Non-interest bearing demand
deposits
64,529
61,670
2,859
2.09
1.43
0.66
Total deposits
669,435
436,703
232,732
178,431
54,301
82
186
(104)
5.67
4.89
0.78
Short-term borrowings
2,318
4,509
(2,191)
1,603
(3,794)
Other medium and
988
1,124
(136)
5.13
5.10
0.03
long-term debt
25,239
28,493
(3,254)
14
(3,268)
Total interest bearing
50,470
47,388
3,082
2.78
2.00
0.78
liabilities (excluding demand
deposits)
696,992
469,705
227,287
180,048
47,239
4,760
4,326
434
Other sources of funds
$
70,359
$
67,306
$
3,053
1.99
%
1.41
%
0.58
%
Total source of funds
696,992
469,705
227,287
180,048
47,239
3.44
%
3.37
%
0.07
%
Net interest margin/ income
on a taxable equivalent basis
(Non-GAAP)
1,204,358
1,128,779
75,579
$
21,199
$
54,380
2.65
%
2.78
%
(0.13)
%
Net interest spread
Taxable equivalent
adjustment
85,302
65,455
19,847
3.20
%
3.18
%
0.02
%
Net interest margin/ income
non-taxable equivalent basis
(GAAP)
$
1,119,056
$
1,063,324
$
55,732
Note: The changes that are not due solely to volume or rate are allocated to volume and rate based on the proportion of the change in each category.
[1] Average balances exclude unrealized gains or losses on debt securities available-for-sale and the unrealized loss related to certain securities transferred from
available-for-sale to held-to-maturity.
139
Provision for Credit Losses - Loans Held-in-Portfolio and Unfunded Commitments
For the quarter ended June 30, 2024, the Corporation recorded a provision expense of $46.3 million for credit losses related to
loans held-in-portfolio and unfunded commitments. The provision for loan losses for the quarter ended June 30, 2024 was $44.2
million, compared to a provision expense of $35.7 million for the quarter ended June 30, 2023. The reserve related to unfunded
commitments for the second quarter of 2024 was $2.1 million, compared to a provision expense of $2.2 million for the same period
of 2023. The drivers of the variance in the provision for loan losses by business segments when comparing the quarter ended June
30, 2024, to the same quarter in 2023 were as follows:
●
compared to a provision expense of $28.4 million for the quarter ended June 30, 2023, driven by loan growth in BPPR
and higher reserves in our auto leasing portfolio resulting from recent loss history.
●
provision expense of $7.3 million for the same quarter in 2023, driven by improvements in commercial credit ratings in PB.
For the six months ended June 30, 2024, the Corporation recorded a provision for credit loss of $118.4 million for its reserve for
credit losses related to loans held-in-portfolio and unfunded commitments. The provision for loan losses expense for the six months
ended June 30, 2024 was $116.5 million, compared to an expense of $82.8 million for the six months ended June 30, 2023. The
provision for unfunded commitments for the six months ended June 30, 2024 reflected an expense of $1.9 million, compared to a
provision expense of $2.8 million for the same period of 2023.
●
2024, compared to an expense of $73.6 million for the six months ended June 30, 2023, attributable to higher reserves in
our auto leasing portfolio mostly due to the recent loss history and changes in the credit quality of the BPPR consumer
portfolio.
●
30, 2024, compared to an expense of $9.2 million for the same period in 2023. The lower provision was driven by an
improvement in commercial credit ratings in PB.
At June 30, 2024, the total allowance for credit losses for loans held-in-portfolio amounted to $730.1 million, compared to $729.3
million as of December 31, 2023. The ratio of the allowance for credit losses to loans held-in-portfolio was 2.05% at June 30, 2024,
compared to 2.08% at December 31, 2023. As discussed in Note 8 to the Consolidated Financial Statements, the Corporation
applies probability weightings to the outcomes of simulations using Moody’s Analytics’ Baseline, S3 (pessimistic) and S1 (optimistic)
scenarios to estimate the ACL. The baseline scenario is assigned the highest probability, followed by the pessimistic scenario to
account for uncertainties in the macro-economic outlook and any downside risk. The weight assigned to the pessimistic scenario
decreased during the first quarter of 2024 in response to the positive momentum in the economy as expectations for the Federal
Reserve achieving a soft landing have improved. Refer to Note 8 to the Consolidated Financial Statements, for additional
information on the Corporation’s methodology to estimate its ACL. Refer to the Credit Risk section of this MD&A for a detailed
analysis of net charge-offs, non-performing assets, the allowance for credit losses and selected loan losses statistics.
Provision for Credit Losses – Investment Securities
The Corporation’s provision for credit losses related to its investment securities held-to-maturity is related to the portfolio of
obligations from the Government of Puerto Rico, states and political subdivisions. At June 30, 2024, the total allowance for credit
losses for this portfolio amounted to $6.3 million, compared to $5.8 million as of December 31, 2023. Refer to Note 6
to
Consolidated Financial Statements
for additional information on the ACL for this portfolio.
Non-Interest Income
Non-interest income amounted to $166.3 million for the quarter ended June 30, 2024, compared to $160.5 million for the same
quarter of the previous year. The main factors that contributed to the variance in non-interest income were:
140
●
rights (“MSRs”); and
●
transactions.
Non-interest income amounted to $330.1 million for the six months ended June 30, 2024, compared to $322.4 million for the same
period of the previous year. The main factors that contributed to the variance in non-interest income were:
●
higher credit card fees as a result of higher interchange transactional volumes; and
●
compensation in commercial deposits.
141
Operating Expenses
Operating expenses amounted to $469.6 million for the quarter ended June 30, 2024, an increase of $9.3 million, when compared
with the same quarter of 2023. The variance in operating expenses was driven primarily by:
●
million and higher software amortization expense by $2.5 million;
●
increase in headcount, and higher commissions and incentive compensation by $3.4 million;
●
lower pension plan costs as a result of annual changes in actuarial assumptions;
●
●
as a result of higher volume of transactions;
partially offset by:
●
regulatory, compliance and cyber security efforts, as well as those related to the Corporation's transformation initiative; and
●
Operating expenses amounted to $952.7 million for the six months ended June 30, 2024, an increase of $51.7 million when
compared with the same period of 2023. Excluding the $6.4 million of interest accrued related to prior period tax withholdings and
the $14.3 million impact of the FDIC Special Assessment, total expenses for six months ended June 30, 2024, were $932.0 million,
an increase of $31.0 million, when compared with the same period of 2023. The main drivers of the $31.0 million variance were:
●
revisions and an increase in headcount, higher commissions and incentive compensation by $7.3 million, an increase in
restricted stock expense by $2.8 million, and higher payroll taxes by $2.1 million;
●
higher IT professional fees by $5.3 million, an increase of $4.8 million from network management services and an increase of
$1.9 million in application processing and hosting services;
●
lower pension plan costs as a result of annual changes in actuarial assumptions;
●
a result of higher volume of transactions; and
●
card business;
partially offset by:
●
regulatory, compliance and cyber security efforts, as well as those related to the Corporation's transformation initiative;
142
●
during the six months ended June 30, 2023; and
●
properties and a reduction in corporate advances on mortgage loans.
Table 5 - Operating Expenses
Quarters ended June 30,
Six months ended June 30,
(In thousands)
2024
2023
Variance
2024
2023
Variance
Personnel costs:
Salaries
$
128,634
$
124,901
$
3,733
$
258,018
$
250,294
$
7,724
Commissions, incentives and other bonuses
30,626
27,193
3,433
69,237
58,355
10,882
Pension, postretirement and medical insurance
16,619
17,508
(889)
34,004
32,886
1,118
Other personnel costs, including payroll taxes
21,545
21,866
(321)
51,542
48,693
2,849
Total personnel costs
197,424
191,468
5,956
412,801
390,228
22,573
Net occupancy expenses
27,692
27,165
527
55,733
53,204
2,529
Equipment expenses
9,662
9,561
101
19,229
17,973
1,256
Other taxes
15,333
16,409
(1,076)
29,708
32,700
(2,992)
Professional fees
37,744
50,132
(12,388)
66,662
83,563
(16,901)
Technology and software expenses
79,752
72,354
7,398
159,214
140,913
18,301
Processing and transactional services:
Credit and debit cards
13,739
11,584
2,155
25,883
24,134
1,749
Other processing and transactional services
25,357
25,217
140
47,407
46,576
831
Total processing and transactional services
39,096
36,801
2,295
73,290
70,710
2,580
Communications
4,357
4,175
182
8,914
8,263
651
Business promotion:
Rewards and customer loyalty programs
16,406
16,626
(220)
30,462
28,974
1,488
Other business promotion
9,043
8,457
586
15,976
14,980
996
Total business promotion
25,449
25,083
366
46,438
43,954
2,484
Deposit insurance
10,581
6,803
3,778
34,468
15,668
18,800
Other real estate owned (OREO) income
(5,750)
(3,314)
(2,436)
(11,071)
(5,008)
(6,063)
Other operating expenses:
Operational losses
11,823
4,280
7,543
15,384
11,080
4,304
All other
15,679
18,572
(2,893)
40,390
36,133
4,257
Total other operating expenses
27,502
22,852
4,650
55,774
47,213
8,561
Amortization of intangibles
734
795
(61)
1,529
1,590
(61)
Total operating expenses
$
469,576
$
460,284
$
9,292
$
952,689
$
900,971
$
51,718
Income Taxes
For the quarter and six months ended June 30, 2024, the Corporation recorded an income tax expense of $40.5 million and $96.0
million with an effective tax rate (ETR) of 19% and 26%, respectively, compared to $43.5 million and $89.8 million with an ETR of
22% and 24% for the respective periods of 2023. The variance in income tax expense for the quarter ended June 30, 2024, reflects
the impact of higher exempt income and other tax credits when compared to the same quarter of year 2023. For the six-month
period ended June 30, 2024, the higher income tax reflects the tax withholding expense recorded during the first quarter on certain
intercompany distributions, amounting to $22.9 million, out of which $16.5 million corresponded to years 2014-2023 and $6.5 million
was related to a distribution completed during the period ended March 31, 2024; this negative variance was partially offset by the
higher exempt income and other tax credits recorded this year, compared with the same period of year 2023. Based on the Adjusted
Net Income, as defined in the non-GAAP Financial Measures section of this MD&A, the ETR for the six-month period ended June
30, 2024, would have been 21.3%. Refer to the Non- GAAP Financial Measures section in this MD&A for more details on Adjusted
Net Income.
At June 30, 2024, the Corporation had a net deferred tax asset amounting to $1.0 billion, net of a valuation allowance of $0.5 billion.
The net deferred tax asset related to the U.S. operations was $0.3 billion, net of a valuation allowance of $0.4 billion.
Refer to Note 30 to the Consolidated Financial Statements for a reconciliation of the statutory income tax rate to the effective tax
rate and additional information on the income tax expense and deferred tax asset balances.
143
REPORTABLE SEGMENT RESULTS
The Corporation’s reportable segments for managerial reporting purposes consist of Banco Popular de Puerto Rico and Popular
U.S. A Corporate group has also been defined to support the reportable segments.
For a description of the Corporation’s reportable segments, including additional financial information and the underlying
management accounting process, refer to Note 32 to the Consolidated Financial Statements.
The Corporate group reported a net income of $3.8 million for the quarter ended June 30, 2024, compared with a net income of $4.7
million for the same quarter of the previous year. For the six months ended June 30, 2024, the Corporate group reported net loss of
$21.6 million, compared to a net income of $6.0 million for the same period of the previous year. The negative variance was mainly
attributed to the $22.9 million adjustment to recognize the tax impact associated with prior period intercompany distributions and the
additional $6.5 million recognized for the tax impact related to intercompany distributions paid during the first quarter of 2024.
Highlights on the earnings results for the reportable segments are discussed below:
Banco Popular de Puerto Rico
The Banco Popular de Puerto Rico reportable segment’s net income amounted to $157.2 million for the quarter ended June 30,
2024, compared with net income of $131.8 million for the same quarter of the previous year. The factors that contributed to the
variance in the financial results included the following:
●
●
by the increase in interest rates by the Federal Reserve and higher average balances of U.S. Treasury
securities; and
●
consumer loans, reflected in auto loans, credit cards and personal loans;
partially offset by
●
Rico government deposits, and the higher interest rate environment’s impact on the cost of interest-bearing
demand accounts and time deposits.
The net interest margin for the quarter ended June 30, 2024 was 3.40% compared to 3.21% for the same quarter in the
previous year. The increase in net interest margin is driven by the earnings assets mix and the higher yields from investment
securities and loans, particularly commercial and consumer loans, due to the increase in rates; partially offset by higher cost of
deposits.
●
June 30, 2023, or an unfavorable variance of $21.0 million mainly driven by higher reserves in auto leasing portfolio
mostly due to the recent loss history and loan growth;
●
●
million in the fair value adjustment of mortgage service rights;
●
customer transactions; and
144
●
mortgage portfolios;
●
●
lower pension plan expense as a result of annual changes in actuarial assumptions;
●
expense as result of higher customer transactional volumes;
●
●
●
fees, higher amortization of software costs and higher network management fees;
partially offset by
●
and cyber security efforts as well the Corporations transformation initiatives;
●
properties;
●
For the six months ended June 30, 2024, the BPPR segment recorded net income of $278.5 million compared to a net income of
$264.7 million for the same period of the previous year. The factors that contributed to the variance in the financial results included
the following:
●
●
by the re-investments of maturities and deployment of liquidity to higher yield short-term treasury bills, whose
interest is tax exempt in Puerto Rico.
●
and consumer loans,
partially offset by
●
Rico government deposits, and the higher interest rate environment’s impact on the cost of interest-bearing
demand accounts, time deposits, and savings deposits.
The net interest margin for the six months ended June 30, 2024 was 3.36% compared to 3.26% for the same quarter in the previous
year. The increase in net interest margin is driven by the earnings assets mix and the higher yields from investment securities and
loans, particularly commercial and consumer loans, due to the increase in rates; partially offset by higher cost of deposits.
145
●
leasing portfolio and changes in credit quality mostly due to consumer portfolios;
●
●
volume of customer transactions;
●
●
●
●
Assessment recorded in the first quarter of 2024, and higher average total assets;
●
transactional volumes and higher donations expenses;
●
by $5.4 million, mainly from higher personnel costs and advisory services, higher reserves for operational
losses by $3.4 million; partially offset by $3.0 million due to lower pension plan expense as a result of annual
charges in actuarial assumptions;
●
expense as result of higher customer transactional volumes;
●
higher amortization of software costs and higher IT consulting fees;
partially offset by
●
regulatory, compliance and cyber security efforts as well as the transformation initiative;
●
commercial properties;
●
during this period.
Popular U.S.
For the quarter ended June 30, 2024, the reportable segment of Popular U.S. reported a net income of $17.7 million, compared with
a net income of $15.3 million for the same quarter of the previous year. The factors that contributed to the variance in the financial
results included the following:
●
146
●
balance;
partially offset by:
●
higher yields due to increase in rates; and
●
The net interest margin for the quarter ended June 30, 2024 was 2.60% compared to 3.01% for the same quarter in the previous
year driven by the higher cost of deposits.
●
the reserve for credit losses of $3.6 million for the second quarter of 2024 mostly due to improvements in commercial
credit ratings, compared to a provision expense of $7.9 million recorded in the quarter ended June 30, 2023;
●
●
group by $1.6 million mainly from higher personnel costs and higher consulting fees.
●
For the six months ended June 30, 2024, the reportable segment of Popular U.S. recorded a net income of $24.8 million, compared
with a net income of $40.3 million for the same period of the previous year. The factors that contributed to the variance in the
financial results included the following:
●
●
balance;
partially offset by:
●
higher yields due to increase in rates; and
●
higher average balance.
The net interest margin for the six months ended June 30, 2024 was 2.60% compared to 3.17% for the same quarter in the previous
year.
●
improvement in credit quality;
●
●
group by $3.4 million, mainly from higher personnel costs.
●
tax.
147
FINANCIAL CONDITION ANALYSIS
Assets
The Corporation’s total assets were $72.8 billion at June 30, 2024, compared to $70.8 billion at December 31, 2023. Refer to the
Consolidated Statements of Financial Condition included in this report for additional information.
Money market investments and debt securities available-for-sale
Money market investments decreased by $147.5 million as of June 30, 2024, when compared to December 31, 2023, as these
funds were used in part for the purchase of debt securities and loan originations. Debt securities available-for-sale increased $1.8
billion, mainly due to purchases of U.S. Treasury Securities. Debt securities held-to-maturity decreased by $218.8 million driven by
maturities of U.S. Treasury securities, partially offset by the accretion of $88.4 million of the discount related to U.S. Treasury
securities previously reclassified from the AFS to HTM. Refer to Note 5 and to Note 6 to the Consolidated Financial Statements for
additional information with respect to the Corporation’s debt securities available-for-sale and held-to-maturity.
148
Loans
Refer to Table 6 for a breakdown of the Corporation’s loan portfolio. Also, refer to Note 7 in the Consolidated Financial Statements
for detailed information about the Corporation’s loan portfolio composition and loan purchases and sales.
Loans held-in-portfolio increased by $526.6 million to $35.6 billion as of June 30, 2024, compared to loans held-in-portfolio as of
December 31, 2023. The BPPR portfolio increased by $632.5 million, driven by the growth in the commercial, mortgage and auto
loans portfolio, and the PB loan portfolio decreased by $105.8 million, due in part by commercial loans payoffs, offset by growth in
the construction loans portfolio.
The Corporation’s $5.0 billion non-owner occupied commercial real estate portfolio is comprised of $3.0 billion in BPPR and $2.0
billion in Popular U.S. and is well diversified across a number of tenants in different industries and segments with exposure to retail
(35% of non-owner occupied CRE), hotels (20%) and office space (13%) accounting for two thirds of the total exposure. The
approximate $624 million office space exposure represents only 1.8% of the total loan portfolio and is comprised mainly of mid-rise
properties with diversified tenants with average loan size of $2 million across both BPPR and Popular U.S.
Popular’s $2.4 billion commercial multi-family portfolio represents approximately 7% of total loans and is concentrated in New York
Metro ($1.4 billion), South Florida ($739 million) and Puerto Rico ($191 million). In the New York Metro region, the Corporation has
no exposure to rent controlled buildings. The majority of our multi-family loans in that region are collateralized by underlying
buildings that count on a mix of units subject to rent stabilized (subject to annual capped rent increases) and market-rate units. The
rent stabilized units represent less than 40% of the total units in the loan portfolio with the majority originated after 2019. The mix of
units within a building is common across the New York Metro region due to tax incentives awarded to developers based on rent
stabilized units. In 2024, there are approximately $191 million in multi-family loans in our New York Metro portfolio expected to
reprice.
149
Table 6 - Loans Ending Balances
(In thousands)
June 30, 2024
December 31, 2023
Variance
Loans held-in-portfolio:
Commercial
$
2,384,480
$
2,415,620
$
(31,140)
5,004,472
5,087,421
(82,949)
3,143,817
3,080,635
63,182
7,195,357
7,126,121
69,236
Total Commercial
17,728,126
17,709,797
18,329
Construction
1,105,759
959,280
146,479
Leasing
1,828,048
1,731,809
96,239
Mortgage
7,883,726
7,695,917
187,809
Consumer
1,162,557
1,135,747
26,810
68,992
65,953
3,039
1,879,619
1,945,247
(65,628)
3,773,292
3,660,780
112,512
161,501
160,441
1,060
Total Consumer
7,045,961
6,968,168
77,793
Total loans held-in -portfolio
$
35,591,620
$
35,064,971
$
526,649
Loans held-for-sale:
$
8,225
$
4,301
$
3,924
Total loans held-for-sale
$
8,225
$
4,301
$
3,924
Total loans
$
35,599,845
$
35,069,272
$
530,573
150
Other assets
Other assets amounted to $2.2 billion at June 30, 2024, compared to $2.0 billion at December 31, 2023. The increase in other
assets was driven by U.S. Treasury bills maturities and the accrual of interest payments that were received after quarter end. Refer
to Note 12 to the Consolidated Financial Statements for a breakdown of the principal categories that comprise the caption of “Other
Assets” in the Consolidated Statements of Financial Condition at June 30, 2024 and December 31, 2023.
Liabilities
The Corporation’s total liabilities were $67.5 billion at June 30, 2024, an increase of $1.9 billion, when compared to December 31,
2023, mainly due to an increase in deposits as discussed below.
Deposits and Borrowings
The composition of the Corporation’s financing to total assets at June 30, 2024 and December 31, 2023 is included in Table 7.
Table 7 - Financing to Total Assets
June 30,
December 31,
% increase (decrease)
% of total assets
(In millions)
2024
2023
from 2023 to 2024
2024
2023
Non-interest bearing core deposits
$
15,470
$
15,420
0.3
%
21.2
%
21.8
%
Interest-bearing core deposits
44,803
43,571
2.8
61.5
61.6
Interest-bearing other deposits
5,258
4,627
13.6
7.2
6.5
Repurchase agreements
106
91
16.5
0.2
0.1
Notes payable
941
987
(4.7)
1.3
1.4
Other liabilities
894
915
(2.3)
1.2
1.3
Stockholders’ equity
5,373
5,147
4.4
7.4
7.3
Total Deposits
The Corporation’s deposits totaled $65.5 billion as of June 30, 2024, compared to $63.6 billion as of December 31, 2023. An
increase in the P.R. public sector, as well as increases in retail demand deposits and time deposits in PB, were the main drivers of
the $1.9 billion increase during the period.
P.R. Public Sector Deposits
As of June 30, 2024, the Puerto Rico public sector deposits amounted to $19.7 billion, compared to $18.1 billion as of December 31,
2023.
Approximately 30% of the Corporation’s deposits as of June 30, 2024 are funds deposited by the Government of Puerto Rico,
municipalities and government instrumentalities and corporations. P.R public sector deposit costs are indexed to changes in short-
term market rates with a one-quarter lag, in accordance with contractual terms. As a result, these costs may lag in variable asset
repricing. These deposits require that the bank pledge high credit quality securities as collateral; therefore, liquidity risks arising from
deposit outflows are lower. Refer to the Liquidity section in this MD&A for additional information on the Corporation’s funding
sources. Fluctuations of public sector deposit balances are uncertain and difficult to predict. Factors that could impact these
balances include, but are not limited to, the receipt of funds by the Puerto Rico Government from federal disaster funding assistance
(i.e. hurricane or pandemic related funds) and other events such as seasonal tax collections which may result in increases of public
sector deposit balances at BPPR in the near term. The amount and timing of reductions in deposit balances depend on government
actions such as 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/or the implementation of fiscal and debt adjustment plans
approved pursuant to PROMESA or other actions mandated by the Fiscal Oversight and Management Board for Puerto Rico (the
“Oversight Board”).
Refer to Table 8 for a breakdown of the Corporation’s deposits at June 30, 2024 and December 31, 2023.
151
Table 8 - Deposits Ending Balances
(In thousands)
June 30, 2024
December 31, 2023
Variance
Demand deposits
$
25,879,406
$
27,579,054
$
(1,699,648)
Savings, NOW and money market deposits (non-brokered)
29,724,473
26,817,844
2,906,629
Savings, NOW and money market deposits (brokered)
729,326
719,453
9,873
Time deposits (non-brokered)
8,225,750
7,546,138
679,612
Time deposits (brokered CDs)
971,907
955,754
16,153
Total deposits
$
65,530,862
$
63,618,243
$
1,912,619
[1] Includes interest and non-interest bearing demand deposits.
Borrowings
The Corporation’s borrowings totaled $1.0 billion at June 30, 2024 compared to $1.1 billion at December 31, 2023. Refer to Note 15
to the Consolidated Financial Statements for detailed information on the Corporation’s borrowings. Also, refer to the Liquidity section
in this MD&A for additional information on the Corporation’s funding sources.
Stockholders’ Equity
Stockholders’ equity totaled $5.4 billion at June 30, 2024, an increase of $225.7 million when compared to December 31, 2023,
principally due to net income for the six months ended June 30, 2024 of $281.1 million and the change in the accumulated other
comprehensive loss driven by the amortization of unrealized losses from securities previously reclassified to HTM of $70.7 million,
net of taxes, partially offset by the after-tax impact of the increase in net unrealized losses in the portfolio of AFS securities of $54.2
million and common and preferred dividends declared during the six-month period of $90.4 million. Refer to the Consolidated
Statements of Financial Condition, Comprehensive Income and of Changes in Stockholders’ Equity for information on the
composition of stockholders’ equity.
152
REGULATORY CAPITAL
The Corporation, BPPR and PB are subject to regulatory capital requirements established by the Federal Reserve Board. The risk-
based capital standards applicable to the Corporation, BPPR and PB (“Basel III capital rules”) are based on the final capital
framework for strengthening international capital standards, known as Basel III, of the Basel Committee on Banking Supervision. As
of June 30, 2024, the Corporation’s, BPPR’s and PB’s capital ratios continue to exceed the minimum requirements for being “well-
capitalized” under the Basel III capital rules.
The risk-based capital ratios presented in Table 9, which include common equity tier 1, Tier 1 capital, total capital and leverage
capital as of June 30, 2024 and December 31, 2023.
Table 9 - Capital Adequacy Data
(Dollars in thousands)
June 30, 2024
December 31, 2023
Common equity tier 1 capital:
Common stockholders equity - GAAP basis
$
5,350,535
$
5,124,810
CECL transitional amount
42,376
84,751
AOCI related adjustments due to opt-out election
1,809,899
1,831,003
Goodwill, net of associated deferred tax liability (DTL)
(663,058)
(666,538)
Intangible assets, net of associated DTLs
(8,235)
(9,764)
Deferred tax assets and other deductions
(303,259)
(310,947)
Common equity tier 1 capital
$
6,228,258
$
6,053,315
Additional tier 1 capital:
Preferred stock
22,143
22,143
Additional tier 1 capital
$
22,143
$
22,143
Tier 1 capital
$
6,250,401
$
6,075,458
Tier 2 capital:
Trust preferred securities subject to phase in as tier 2
192,674
192,674
Other inclusions (deductions), net
474,675
465,833
Tier 2 capital
$
667,349
$
658,507
Total risk-based capital
$
6,917,750
$
6,733,965
Minimum total capital requirement to be well capitalized
$
3,779,409
$
3,714,633
Excess total capital over minimum well capitalized
$
3,138,341
$
3,019,332
Total risk-weighted assets
$
37,794,091
$
37,146,330
Total assets for leverage ratio
$
73,240,055
$
71,353,184
Risk-based capital ratios:
Common equity tier 1 capital
16.48
%
16.30
%
Tier 1 capital
16.54
16.36
Total capital
18.30
18.13
Tier 1 leverage
8.53
8.51
[1] The CECL transitional amount includes the impact of Popular's adoption of the new CECL accounting standard on January 1, 2020.
153
The Basel III capital rules provide that a depository institution is deemed to be well capitalized if it maintains a leverage ratio of at
least 5%, a common equity Tier 1 ratio of at least 6.5%, a Tier 1 capital ratio of at least 8% and a total risk-based ratio of at least
10%. The Corporation, BPPR and PB leverage ratio, common equity Tier 1 ratio and Tier 1 capital ratio, respectively as of June 30,
2024, continue to exceed the minimum requirements for being “well-capitalized” under the Basel III capital rules.
Pursuant to the adoption of the CECL accounting standard on January 1, 2020, the Corporation elected to use the five-year
transition period option as provided in the final interim regulatory capital rules effective March 31, 2020. The five-year transition
period provision delayed for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period
to phase out the aggregate amount of the capital benefit provided during the initial two-year delay. As of June 30, 2024, the
Corporation had phased-in 75% of the cumulative CECL deferral with the remaining impact to be recognized over the remainder of
the three-year transition period.
The increase in the common equity Tier I capital ratio, Tier I capital ratio, and total capital ratio as of June 30, 2024 as compared to
December 31, 2023 was mainly due to the six months period earnings. The increase in leverage capital ratio was mainly due to the
period earnings, partially offset by higher average assets which are impacted by zero-risk weighted assets that do not have a
significant impact on the risk-weighted assets.
Reconciliation to Tangible Common Equity and Tangible Assets
Table 10 provides a reconciliation of total stockholders’ equity to tangible common equity and total assets to tangible assets as of
June 30, 2024, and December 31, 2023.
154
Table 10 - Reconciliation of Tangible Common Equity and Tangible Assets
(In thousands, except share or per share information)
June 30, 2024
December 31, 2023
Total stockholders’ equity
$
5,372,678
$
5,146,953
Less: Preferred stock
(22,143)
(22,143)
Less: Goodwill
(804,428)
(804,428)
Less: Other intangibles
(8,235)
(9,764)
Total tangible common equity
$
4,537,872
$
4,310,618
Total assets
$
72,845,072
$
70,758,155
Less: Goodwill
(804,428)
(804,428)
Less: Other intangibles
(8,235)
(9,764)
Total tangible assets
$
72,032,409
$
69,943,963
Tangible common equity to tangible assets
6.30
%
6.16
%
Common shares outstanding at end of period
72,365,926
72,153,621
Tangible book value per common share
$
62.71
$
59.74
Quarterly average
Total stockholders’ equity [1]
$
6,303,672
$
6,072,871
Average unrealized (gains) losses on AFS securities transferred to HTM
595,362
683,077
Adjusted total stockholder's equity
6,899,034
6,755,948
Less: Preferred Stock
(22,143)
(22,143)
Less: Goodwill
(804,427)
(804,427)
Less: Other intangibles
(8,706)
(10,286)
Total tangible common equity
$
6,063,758
$
5,919,092
Return on average tangible common equity
11.77
%
6.32
%
155
RISK MANAGEMENT
Market / Interest Rate Risk
The financial results and capital levels of the Corporation are constantly exposed to market, interest rate and liquidity risks.
Market risk refers to the risk of a reduction in the Corporation’s capital due to changes in the market valuation of its assets and/or
liabilities.
Most of the assets subject to market valuation risk are debt securities classified as available-for-sale. Refer to Notes 5 and 6 to the
Consolidated Financial Statements for further information on the debt securities available-for-sale and held-to-maturity portfolios.
Debt securities classified as available-for-sale amounted to $18.5 billion as of June 30, 2024. Other assets subject to market risk
include loans held-for-sale, which amounted to $8 million, mortgage servicing rights (“MSRs”) which amounted to $113 million, and
securities classified as “trading”, which amounted to $28 million, as of June 30, 2024.
Interest Rate Risk (“IRR”)
The Corporation’s net interest income is subject to various categories of interest rate risk, including repricing, basis, yield curve and
option risks. In managing interest rate risk, management may alter the mix of floating and fixed rate assets and liabilities, change
pricing schedules, adjust maturities through sales and purchases of investment securities, and enter into derivative contracts,
among other alternatives.
Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by
investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics
of assets and liabilities and determining the appropriate rate risk position given line of business forecasts, management objectives,
market expectations and policy constraints.
Management utilizes various tools to assess IRR, including Net Interest Income (“NII”) simulation modeling, static gap analysis, and
Economic Value of Equity (“EVE”). The three methodologies complement each other and are used jointly in the evaluation of the
Corporation’s IRR. NII simulation modeling is prepared for a five-year period, which in conjunction with the EVE analysis, provides
management a better view of long-term IRR.
Net interest income simulation analysis performed by legal entity and on a consolidated basis is a tool used by the Corporation in
estimating the potential change in net interest income resulting from hypothetical changes in interest rates. Sensitivity analysis is
calculated using a simulation model which incorporates actual balance sheet figures detailed by maturity and interest yields or costs.
Management assesses interest rate risk by comparing various NII simulations under different interest rate scenarios that differ in
direction of interest rate changes, the degree of change and the projected shape of the yield curve. For example, the types of rate
scenarios processed during the quarter include flat rates, implied forwards, and parallel and non-parallel rate shocks. Management
also performs analyses to isolate and measure basis and prepayment risk exposures.
The asset and liability management group performs validation procedures on various assumptions used as part of the simulation
analyses as well as validations of results on a monthly basis. In addition, the model and processes used to assess IRR are subject
to independent validations according to the guidelines established in the Model Governance and Validation policy.
The Corporation processes NII simulations under interest rate scenarios in which the yield curve is assumed to rise and decline by
the same magnitude (parallel shifts). The rate scenarios considered in these market risk simulations include instantaneous parallel
changes of -100, -200, +100, and +200 basis points during the succeeding twelve-month period. Simulation analyses are based on
many assumptions, including that the balance sheet remains flat, the relative levels of market interest rates across all yield curve
points and indexes, interest rate spreads, loan prepayments and deposit elasticity. Thus, they should not be relied upon as
indicative of actual results. Further, the estimates do not contemplate actions that management could take to respond to changes in
interest rates. Additionally, the Corporation is also subject to basis risk in the repricing of its assets and liabilities, including the basis
related to using different rate indexes for the repricing of assets and liabilities, as well as the effect of pricing lags which may be
contractual or due to historical differences in the timing of management responses to changes in the rate environment. By their
nature, these forward-looking computations are only estimates and may be different from what may actually occur in the future. The
following table presents the results of the simulations at June 30, 2024 and December 31, 2023, assuming a static balance sheet
and parallel changes over flat spot rates over a one-year time horizon:
156
Table 11 - Net Interest Income Sensitivity (One Year Projection)
June 30, 2024
December 31, 2023
(Dollars in thousands)
Amount Change
Percent Change
Amount Change
Percent Change
Change in interest rate
+200 basis points
54,953
2.32
20,822
0.92
+100 basis points
29,332
1.24
11,496
0.51
-100 basis points
1,442
0.06
19,589
0.87
-200 basis points
(17,583)
(0.74)
16,971
0.75
As of June 30, 2024, NII simulations show the Corporation maintains an asset sensitive position that slightly increased as compared
to the results as of December 31, 2023. The primary reasons for the variation in sensitivity are changes in balance sheet
composition driven by an increase in short-term U.S Treasury Bills (“T- Bills”) partly offset by a reduction in overnight Fed Funds and
U.S Treasury Notes (“T- Notes”) coupled with a larger loan portfolio on the asset side, combined with an increase in Puerto Rico
public sector deposits which are indexed to market rates and higher time deposits. These results suggest that changes in the
Corporation’s net interest income sensitivity are driven by changes in the composition of the investment portfolio as the term bond
portfolio continues to run off and get reinvested, together with excess reserves, in short-term investments such as T-Bills.
Additionally, variations in liability cost, primarily driven by Puerto Rico public sector deposits that represented $19.7 billion or 30% of
deposits as of June 30, 2024, as well as changes in the composition and mix of deposits, also impact the sensitivity profile. In the
more extreme declining rate scenarios, net interest income would be affected as the repricing of short-term assets and variable rate
loans slightly exceeds the benefit in cost reduction of these deposits. In rising rate scenarios, Popular’s net interest income is also
impacted by its large proportion of Puerto Rico public sector deposit, however the repricing of assets as they either reset or mature
lead to an increase in net interest income.
The Corporation’s loan and investment portfolios are subject to prepayment risk, which results from the ability of a third-party to
repay debt obligations prior to maturity. Prepayment risk also could have a significant impact on the duration of mortgage-backed
securities and collateralized mortgage obligations since prepayments could shorten (or lower prepayments could extend) the
weighted average life of these portfolios.
Trading
The Corporation engages in trading activities in the ordinary course of business at its subsidiaries, BPPR and Popular Securities.
Popular Securities’ trading activities consist primarily of market-making activities to meet expected customers’ needs related to its
retail brokerage business, and purchases and sales of U.S. Government and government sponsored securities with the objective of
realizing gains from expected short-term price movements. BPPR’s trading activities consist primarily of holding U.S. Government
sponsored mortgage-backed securities classified as “trading” and hedging the related market risk with “TBA” (to-be-announced)
market transactions. The objective is to derive spread income from the portfolio and not to benefit from short-term market
movements. In addition, BPPR uses forward contracts or TBAs to hedge its securitization pipeline. Risks related to variations in
interest rates and market volatility are hedged with TBAs that have characteristics similar to that of the forecasted security and its
conversion timeline.
At June 30, 2024, the Corporation held trading securities with a fair value of $28 million, representing approximately 0.04% of the
Corporation’s total assets, compared with $32 million and 0.05%, respectively, at December 31, 2023. As shown in Table 12, the
trading portfolio consists principally of mortgage-backed securities and U.S. Treasuries, which at June 30, 2024 were investment
grade securities.
157
Table 12 - Trading Portfolio
June 30, 2024
December 31, 2023
(Dollars in thousands)
Amount
Weighted
Average Yield
[1]
Amount
Weighted
Average Yield
[1]
Mortgage-backed securities
$
20,644
5.59
%
$
14,373
5.69
%
U.S. Treasury securities
7,064
4.15
16,859
4.29
Collateralized mortgage obligations
87
5.12
98
5.21
Puerto Rico government obligations
59
0.59
71
0.91
Interest-only strips
158
12.00
167
12.00
Other (includes related trading derivatives)
33
5.94
-
-
Total
$
28,045
5.25
%
$
31,568
4.96
%
[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 is measured by the 5-day net value-at-risk (“VAR”), with a confidence level of 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 $0.4 million for the last week in June 2024. VAR models
include assumptions and estimates thus actual results could differ from the outputs from these models and assumptions. Back-
testing is performed on model results 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
of these risks to the Board’s Risk Management Committee and the Asset/Liability Management Committee. The management of
liquidity risk, on a long-term and day-to-day basis, is the responsibility of the Corporate Treasury Division. The Corporation’s
Corporate Treasurer is responsible for implementing the policies and procedures approved by the Board of Directors and for
monitoring the Corporation’s liquidity position on an ongoing basis. Also, the Corporate Treasury Division coordinates corporate
wide liquidity management strategies and activities with the reportable segments, oversees policy breaches and manages the
escalation process. The Financial and Operational Risk Management Division is responsible for the independent monitoring and
reporting of adherence with established policies.
An institution’s liquidity may be pressured if, for example, it experiences a sudden and unexpected substantial cash outflow due
deposit outflows, whether due to a loss of confidence by depositors, or other reasons, including exogenous events such as the
COVID-19 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 to every event, and are dependent on many
assumptions.
158
Deposits, including customer deposits, brokered deposits and public funds deposits, continue to be the most significant source of
funds for the Corporation, funding 90% of the Corporation’s total assets at June 30, 2024 and December 31, 2023. The ratio of total
ending loans to deposits was 54% at June 30, 2024 and 55% at December 31, 2023. In addition to traditional deposits, the
Corporation maintains borrowing arrangements, which amounted to approximately $1.0 billion in outstanding balances at June 30,
2024 (December 31, 2023 - $1.1 billion). A detailed description of the Corporation’s borrowings, including their terms, is included in
Note 15 to the Consolidated Financial Statements. Also, the Consolidated Statements of Cash Flows in the accompanying
Consolidated Financial Statements provide information on the Corporation’s cash inflows and outflows.
The following sections provide further information on the Corporation’s major funding activities and needs, as well as the risks
involved in these activities.
Banking Subsidiaries
Primary sources of funding for the Corporation’s banking subsidiaries (BPPR and PB or, collectively, “the banking subsidiaries”)
include retail, commercial and public sector deposits, brokered deposits, unpledged investment securities, mortgage loan
securitization and, to a lesser extent, loan sales.
Refer to Table 8 in this MD&A section for a breakdown of deposits by major types. Core deposits are generated from a large base of
consumer, corporate and public sector customers. Core deposits include certificates of deposit under $250,000, all interest-bearing
transactional deposit accounts, non-interest bearing deposits, and savings deposits. Core deposits exclude brokered deposits and
certificates of deposit over $250,000. Core deposits, excluding P.R. public funds that are fully collateralized, have historically
provided the Corporation with a sizable source of relatively stable and low-cost funds. P.R. public funds, while linked to market
interest rates, provide a stable source of funding with an attractive earnings spread. Core deposits totaled $60.3 billion, or 92% of
total deposits, at June 30, 2024, compared with $59.0 billion, or 93% of total deposits, at December 31, 2023. Core deposits
financed 87% of the Corporation’s earning assets at June 30, 2024, compared with 88% at December 31, 2023.
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 second quarter of 2024 the Corporation had no material incremental use of its available liquidity sources. At June 30,
2024, the Corporation’s available liquidity increased to $ 20.1 billion from $19.5 billion on December 31, 2023. The liquidity sources
of the Corporation at June 30, 2024 are presented in Table 13 below:
Table 13 - Liquidity Sources
June 30, 2024
December 31, 2023
(In thousands)
BPPR
Popular U.S.
Total
BPPR
Popular U.S.
Total
Unpledged securities and unused funding
sources:
Money market (excess funds at the
Federal Reserve Bank)
$
4,761,986
$
2,082,135
$
6,844,121
$
5,516,636
$
1,475,143
$
6,991,779
Unpledged securities
4,238,735
375,069
4,613,804
4,212,480
347,791
4,560,271
FHLB borrowing capacity
2,567,107
1,311,033
3,878,140
2,157,685
1,341,329
3,499,014
Discount window of the Federal Reserve
Bank borrowing capacity
3,237,668
1,491,137
4,728,805
2,605,674
1,818,946
4,424,620
Total available liquidity
$
14,805,496
$
5,259,374
$
20,064,870
$
14,492,475
$
4,983,209
$
19,475,684
Refer to Note 15 to the Consolidated Financial Statements for additional information of the Corporation’s borrowing facilities
available through its banking subsidiaries.
The principal uses of funds for the banking subsidiaries include loan originations, investment portfolio purchases, loan purchases
and repurchases, repayment of outstanding obligations (including deposits), advances on certain serviced portfolios and operational
expenses. Also, the banking subsidiaries assume liquidity risk related to collateral posting requirements for certain activities mainly
in connection with contractual commitments, recourse provisions, servicing advances, derivatives and credit card licensing
agreements.
159
The banking subsidiaries maintain sufficient funding capacity to address large increases in funding requirements such as deposit
outflows. The Corporation has established liquidity guidelines that require the banking subsidiaries to have sufficient liquidity to
cover all short-term borrowings and a portion of deposits.
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.
The distribution by maturity of certificates of deposit with denominations of $250,000 and over at June 30, 2024 is presented in the
table that follows:
Table 14 - Distribution by Maturity of Certificates of Deposit of $250,000 and Over
(In thousands)
3 months or less
$
2,291,275
Over 3 to 12 months
993,898
Over 1 year to 3 years
212,210
Over 3 years
179,080
Total
$
3,676,463
The Corporation had $1.7 billion in brokered deposits at June 30, 2024, which financed approximately 2% of its total assets
(December 31, 2023 - $1.7 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, the
Corporation would be at risk that such banking subsidiary would not be able to raise or maintain brokered deposits and could also
face 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 June 30, 2024, total Puerto Rico
public sector deposits were $19.7 billion, compared to $18.1 billion at December 31, 2023. These deposits require that the bank
pledges 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, timing differences between the time the deposit outflow and when the bank receives its collateral may
occur. Additionally, the Corporation uses fixed-rate U.S. Treasury debt securities as collateral that have limited credit risk, but are
nonetheless subject to market value risk based on changes in the interest rate environment. When interest rates increase, the value
of this collateral decreases and could result in the Corporation having to provide additional collateral to cover the same amount of
deposit liabilities. This additional collateral could reduce unpledged securities otherwise available as liquidity sources to the
Corporation.
As of June 30, 2024, 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. Management also believes that as of June 30, 2024 its banking subsidiaries have sufficient liquidity current and projected
resources to address a stress event. Although the banking subsidiaries have historically been able to replace maturing deposits and
advances, no assurance can be given that they would be able to replace those funds in the future if the Corporation’s financial
condition or general market conditions were to deteriorate. The Corporation’s financial flexibility will be severely constrained if the
banking subsidiaries are unable to maintain access to funding or if adequate financing is not available to accommodate future
financing needs at acceptable interest rates. The Corporation’s banking subsidiaries have to meet margin requirements on
repurchase agreements and other collateralized borrowing facilities that include certain required levels of cash deposits and
qualifying securities. To the extent that the value of securities previously pledged as collateral declines below such required
amounts because of market changes, the Corporation is required to deposit additional cash or securities to meet its margin
requirements, thereby adversely affecting its liquidity. Finally, to the extent the Corporation relies more heavily on more expensive
funding sources in order to meet its future growth, revenues may not increase in a manner that is proportionate to cover these costs.
In this case, the Corporation’s profitability would be adversely effected.
160
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, as well as wholesale funding sources such as brokered deposits, it considers balance in excess of $250,000 to have a
higher potential liquidity risk. Table 15 reflects the aggregate balance in deposit accounts in excess of $250,000, including
collateralized public funds and deposits outside of the U.S. and its territories. Collateralized public funds, as presented in Table 15,
represent public deposit balances from governmental entities in the U.S. and its territories, including Puerto Rico and the United
States Virgin Islands, collateralized based on such jurisdictions’ applicable collateral requirements.
On June 30, 2024, 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 $ 10.2 billion or 19% at BPPR and $ 2.7 billion or 24% at
Popular U.S., compared to available liquidity sources of $ 14.8 billion at BPPR and $ 5.3 billion at Popular U.S.
Table 15 - Deposits
30-Jun-24
Popular, Inc.
(Dollars in thousands)
BPPR
% of Total
Popular U.S.
% of Total
(Consolidated)
% of Total
Deposits:
Deposits balances under $250,000 [1]
$
23,784,175
43
%
$
8,074,913
68
%
$
31,859,088
49
%
Transactional deposits balances over
$250,000
7,999,569
15
%
2,096,387
18
%
10,095,956
15
%
Time deposits balances over $250,000
2,201,823
4
%
650,324
6
%
2,852,146
4
%
Uninsured foreign deposits
451,363
1
%
-
-
%
451,363
1
%
Collateralized public funds
19,995,906
37
%
276,403
2
%
20,272,309
31
%
Intercompany deposits
115,385
-
%
762,811
6
%
-
-
%
Total deposits
$
54,548,221
100
%
$
11,860,838
100
%
$
65,530,862
100
%
[1] Includes the first $250,000 in balances of transactional and time deposit accounts with balances in excess of $250,000.
31-Dec-23
Popular, Inc.
(Dollars in thousands)
BPPR
% of Total
Popular U.S.
% of Total
(Consolidated)
% of Total
Deposits
Deposits balances under $250,000 [1]
$
23,683,475
45
%
$
7,760,363
69
%
$
31,443,838
49
%
Transactional deposits balances over
$250,000
8,632,491
16
%
2,230,978
20
%
10,863,469
17
%
Time deposits balances over $250,000
1,926,005
4
%
361,315
3
%
2,287,320
4
%
Uninsured foreign deposits
418,334
1
%
-
-
%
418,334
1
%
Collateralized public funds
18,313,612
34
%
291,670
3
%
18,605,282
29
%
Intercompany deposits
159,163
-
%
626,312
6
%
-
-
%
Total deposits
$
53,133,080
100
%
$
11,270,638
100
%
$
63,618,243
100
%
[1] Includes the first $250,000 in balances of transactional and time deposit accounts with balances in excess of $250,000.
Bank Holding Companies
The principal sources of funding for the BHCs, which are Popular, Inc. (holding company only) and PNA, include cash on hand,
investment securities, dividends received from banking and non-banking subsidiaries, asset sales, credit facilities available from
affiliate banking subsidiaries and proceeds from potential securities offerings. Dividends from banking and non-banking subsidiaries
161
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 uses of these funds include the repayment of debt, and interest payments to holders of senior debt and junior
subordinated deferrable interest (related to trust preferred securities), the payment of dividends to common stockholders,
repurchases of the Corporation’s securities and capitalizing its banking subsidiaries.
The outstanding balance of notes payable at the BHCs amounted to $593 million at June 30, 2024 and $592 million at December
31, 2023.
The contractual maturities of the BHCs notes payable at June 30, 2024 are presented in Table 16.
Table 16 - Distribution of BHC's Notes Payable by Contractual Maturity
Year
(In thousands)
2028
$
394,556
Later years
198,359
Total
$
592,915
As of June 30, 2024, the BHCs had cash and money markets investments totaling $622 million and borrowing potential of $165
million from its secured facility with BPPR. The BHCs’ liquidity position continues to be adequate with sufficient cash on hand,
investments and other sources of liquidity that are expected to be sufficient to meet all interest payments and dividend obligations
for the foreseeable future. As indicated in Table 16 above, the BHC outstanding notes payable relate to $400 million in aggregate
principal amount of 7.25% Senior Notes due 2028 (the “Notes”) issued in an underwritten public offering during March of 2023.
Additionally, the Corporation’s latest quarterly dividend was $0.62 per share or approximately $45 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. The issuance of corporate debt as a source of funding is likely 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 of funding for the non-banking subsidiaries include internally generated cash flows from operations, loan
sales, repurchase agreements, capital injections and borrowed funds from their direct parent companies or the holding companies.
The principal uses of funds for the non-banking subsidiaries include repayment of maturing debt, operational expenses and payment
of dividends to the BHCs. 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 six
months ended June 30, 2024, Popular, Inc. made capital contributions of $0.3 million to Popular Impact Fund, its wholly owned
subsidiary.
Dividends
During the six months ended June 30, 2024, the Corporation declared cash dividends of $1.24 per common share outstanding
($89.7 million in the aggregate). The dividends for the Corporation’s Series A preferred stock amounted to $0.7 million. On July 24,
2024, the corporation announced an increase in the Corporation’s quarterly common stock dividend from $0.62 to $0.70 per share,
commencing with the dividend payable in the first quarter of 2025, subject to the approval by the Corporation’s Board of Directors.
During the six months ended June 30, 2024, the BHCs received dividends and distributions amounting to $300 million from BPPR,
$50 million from PNA, $6 million from Popular Securities and $7 million from its other non-banking subsidiaries. Dividends from
BPPR constitute Popular, Inc.’s primary source of liquidity. In addition, during the six months ended June 30, 2024, Popular
International Bank Inc., wholly owned subsidiary of Popular, Inc., received $19.4 million in cash dividends and $2.9 million in stock
dividends from its investment in BHD.
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Other Funding Sources and Capital
In addition to cash reserves held at the FRB that totaled $ 6.8 billion at June 30, 2024, the debt securities portfolio provides an
additional source of liquidity, which may be realized through either securities sales, collateralized borrowings or repurchase
agreements. The Corporation’s debt securities portfolio consists primarily of liquid U.S. government debt securities, U.S.
government sponsored agency debt securities, U.S. government sponsored agency mortgage-backed securities, and U.S.
government sponsored agency collateralized mortgage obligations that can be used to raise funds in the repo markets. The
availability of the repurchase agreement would be subject to having sufficient unpledged collateral available at the time the
transactions are consummated, in addition to overall liquidity and risk appetite of the various counterparties. In 2023, BPPR became
an approved counterparty in the Federal Reserve’s Standing Repo Facility. This allows approved counterparties to participate in
daily auctions with the Standing Repo Facility for up to $500 billion in aggregate of overnight financing using U.S. Treasuries and
Agency MBS as collateral. The Corporation’s unpledged debt securities amounted to $ 4.6 billion at June 30, 2024 and December
31, 2023. A substantial portion of these debt securities could be used to raise financing in the U.S. money markets or from secured
lending sources, subject to changes in their fair market value and customary adjustments (haircuts).
Additional liquidity may be provided through loan maturities, prepayments and sales. The loan portfolio can also be used to obtain
funding in the capital markets. 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 to the same credit policies and approval process used for on-balance sheet instruments. These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial position.
Refer to Note 20 to the Consolidated Financial Statements for information on the Corporation’s commitments to extent credit and
other non-credit commitments.
Other types of off-balance sheet arrangements that the Corporation enters in the ordinary course of business include derivatives,
operating leases and provision of guarantees, indemnifications, and representation and warranties. Refer to Note 27 to the
Consolidated Financial Statements for information on operating leases and to Note 19 to the Consolidated Financial Statements for
a detailed discussion related to 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
On November 16, 2023, the Federal Deposit Insurance Corporation (“FDIC”) approved a final rule that imposes a special
assessment (the “FDIC Special Assessment”) to recover the losses to the deposit insurance fund resulting from the FDIC’s use, in
March 2023, of the systemic risk exception. In connection with this assessment, the Corporation recorded an expense of $71.4
million, $45.3 million net of tax, in the fourth quarter of 2023, representing the full amount of the estimated assessment at that time.
The special assessment amount and collection period may change as the estimated loss is periodically adjusted or if the total
amount collected varies. As a result, the Corporation recorded an additional expense of $14.3 million, $9.1 million net of tax, in the
first quarter of 2024, based on the updated loss estimates.
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 by PIHC (together with PNA, the “obligor group”) purchased by
statutory trusts established by the Corporation. These debentures were purchased by the statutory trust using the proceeds from
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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 by PNA. PIHC’s obligation to make a
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
by the applicable trust except to the extent such trust has funds available for such payments. If 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 of PNA’s junior subordinated debentures is 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
of payment and not of 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 of 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 of the obligor group, on a combined basis at June 30,
2024 and December 31, 2023, and the results of their operations for the six-month period ended June 30, 2024 and June 30, 2023.
Investments in and equity in the earnings from the other subsidiaries and affiliates that are not members of the obligor group have
been excluded.
The summarized financial information of the obligor group is presented on a combined basis with intercompany balances and
transactions between entities in the obligor group eliminated. The obligor group's amounts due from, amounts due to and
transactions with subsidiaries and affiliates have been presented in separate line items, if they are material. In addition, related
parties transactions are presented separately.
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Table 17 - Summarized Statement of Condition
(In thousands)
June 30, 2024
December 31, 2023
Assets
Cash and money market investments
$
621,924
$
388,025
Investment securities
33,412
29,973
Accounts receivables from non-obligor subsidiaries
22,699
14,469
Other loans (net of allowance for credit losses of $9 (2023 - $51))
26,309
26,906
Investment in equity method investees
5,255
5,265
Other assets
77,731
51,315
Total assets
$
787,330
$
515,953
Liabilities and Stockholders' equity (deficit)
Accounts payable to non-obligor subsidiaries
$
7,210
$
7,023
Notes payable
592,915
592,283
Other liabilities
120,300
114,660
Stockholders' equity (deficit)
66,905
(198,013)
Total liabilities and stockholders' equity (deficit)
$
787,330
$
515,953
Table 18 - Summarized Statement of Operations
For the period ended
(In thousands)
June 30, 2024
June 30, 2023
Income:
Dividends from non-obligor subsidiaries
$
313,000
$
104,000
Interest income from non-obligor subsidiaries and affiliates
7,106
6,950
Losses from investments in equity method investees
(10)
(78)
Other operating income
2,439
2,585
Total income
$
322,535
$
113,457
Expenses:
Services provided by non-obligor subsidiaries and affiliates (net of
reimbursement by subsidiaries for services provided by parent of
$120,987 (2023 - $112,210))
$
6,447
$
10,898
Other expenses
44,893
13,358
Total expenses
$
51,340
$
24,256
Net income
$
271,195
$
89,201
In addition to the dividend income reflected in the Statement of Operations table above, during the six months ended June
30, 2024, the obligor group recorded a $67.4 million of capital distributions from non-obligor subsidiaries which were in an
accumulated loss position and accordingly were recorded as a reduction to the investments.
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 on a continuing basis. These lines may be subject to collateral requirements, changes to the value of the collateral,
standards of creditworthiness, leverage ratios and other regulatory requirements, among other factors. Derivatives, such as those
embedded in long-term repurchase transactions or interest rate swaps, and off-balance sheet exposures, such as recourse,
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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. In
the case of a deterioration in the outlook and/or credit ratings of its principal markets and/or due to regulatory changes and fiscal
conditions in Puerto Rico that are outside the control of the Corporation, the credit quality of the Corporation could be adversely
affected and result in higher credit costs. These adverse events could also affect the Corporation’s ability to obtain funding.
To plan for the possibility of such a scenario, management adopted contingency plans to address events that could limit or partially
limit important sources of funds that are usually fully available for use. These plans call for using alternate funding mechanisms,
such as the pledging of 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 of 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 in the capital markets, its cost and access to funding sources. Credit ratings are based on 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 of dividends an insured depository institution may pay to its holding
company without regulatory approval. A member bank must obtain the approval of the Federal Reserve Board for any dividend, if
the total of all dividends declared by the member bank during the calendar year would exceed the combined net income for that year
and the retained net income for the preceding two years, net of those years’ dividend activity, less any required transfers to surplus
or to a fund for the retirement of any preferred stock. In addition, a member bank may not declare or pay a dividend in an amount
greater than its undivided profits as reported in its Report of Condition and Income, unless the member bank has received the
approval of the Federal Reserve Board. A member bank also may not permit any portion of its permanent capital to be withdrawn
unless the withdrawal has been approved by the Federal Reserve Board. The ability of a bank subsidiary to up-stream dividends to
its BHC could thus be impacted by its financial performance and capital, including tangible and regulatory capital, thus potentially
limiting the amount of cash moving up to the BHCs from the banking subsidiaries. This could, in turn, affect the BHCs ability to
declare dividends on its outstanding common and preferred stock, repurchase its securities or meet its debt obligations, for
example.
During the six months ended June 30, 2024, BPPR declared cash dividends of $300 million to PIHC. As of June 30, 2024, BPPR
can declare a dividend of approximately $409 million without prior approval of the Federal Reserve Board due to its retained income,
declared dividend activity and transfers to statutory reserves over the measurement period. Pursuant to the requirements listed
above, PB may not declare or pay a dividend without the prior approval of the Federal Reserve Board and the New York State
Department of Financial Services.
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.
Refer to the Geographic and Government Risk section of this MD&A for some highlights on the status of the Puerto Rico economy
and the ongoing fiscal crisis.
Obligations Subject to Rating Triggers or Collateral Requirements
The Corporation’s banking subsidiaries currently do not issue unsecured senior debt, as these banking subsidiaries are funded
primarily with deposits and secured borrowings. The banking subsidiaries had $7.8 million in deposits at June 30, 2024 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.
As discussed in Note 19 to the Consolidated Financial Statements, the Corporation services residential mortgage loans subject to
credit recourse provisions. Certain contractual agreements require the Corporation to post collateral to secure such recourse
obligations if the institution’s required credit ratings are not maintained. Collateral pledged by the Corporation to secure recourse
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obligations amounted to approximately $26.4 million at June 30, 2024. The Corporation could be required to post additional
collateral under the agreements. Management expects that it would be able to meet additional collateral requirements if and when
needed. The requirements to post collateral under certain agreements or the loss of 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 32 to the Consolidated Financial Statements.
Commonwealth of Puerto Rico
A significant portion of our financial activities and credit exposure is concentrated in the Commonwealth of Puerto Rico (“Puerto
Rico”), which has faced severe economic and fiscal challenges in the past and may face additional challenges in the future.
Economic Performance.
Puerto Rico’s economy suffered a severe and prolonged recession from 2007 to 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 by the Economic Development Bank for Puerto Rico (the “Economic
Activity Index”), reflected a 2.0% year-over-year decline and a 0.6% month-over-month decline in April 2024. The Economic Activity
Index is a coincident indicator of ongoing economic activity but not a direct measurement of real GNP. The Puerto Rico Planning
Board estimates that Puerto Rico’s real GNP grew 2.8% during fiscal year 2024 (July 2023-June 2024) and projects 1.4% real GNP
growth for fiscal year 2025 (July 2024-June 2025).
While the Puerto Rico economy has not directly tracked the United States economy in recent years, many of the external factors
that impact the Puerto Rico economy are affected by the policies and performance of the United States economy. These external
factors include the level of interest rates and the rate of inflation. Inflation in the United States, as measured by the United States
Consumer Price Index (published by the U.S. Bureau of Labor Statistics), increased 3.0% during the 12-month period ended June
2024. 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 2.5% during the 12-month period ended April 2024. The rate of inflation gradually
decreased from a mid-2022 peak, as the Federal Reserve implemented a series of benchmark interest rate increases.
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 in its public debt prompted the U.S.
Congress to enact the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) in June 2016. PROMESA
created the “Oversight Board” with ample powers over Puerto Rico’s fiscal and economic affairs and those of its public corporations,
instrumentalities and municipalities (collectively, “PR Government Entities”). Pursuant to PROMESA, the Oversight Board will be in
place until market access is restored and balanced budgets are produced for at least four consecutive years. PROMESA also
established two mechanisms for the restructuring of the obligations of PR Government Entities: (a) Title III, which provides an in-
court process that incorporates many of the powers and provisions of the U.S. Bankruptcy Code and permits adjustment of a broad
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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, the Puerto Rico
Highways and Transportation Authority, and the Puerto Rico Industrial Development Company, have also completed debt
restructurings under Titles III or VI of PROMESA. While the majority of the debt has already been restructured, some PR
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.
Municipalities.
Puerto Rico’s fiscal and economic challenges have also adversely impacted its municipalities. Historically, the central government
provided significant annual subsidies to municipalities based on a statutory formula. However, as part of the fiscal measures
required by the Oversight Board, municipal subsidies have decreased significantly over several years and are now approved
through specific, non-recurring appropriations. This decrease has been partially offset by substantial non-recurring federal disaster
and COVID-relief funding received by municipalities in recent years. The latest Puerto Rico fiscal plan certified by the Oversight
Board provides for the implementation of a restructured grant and transfer system through which the Commonwealth would award
specific service grants to municipalities to augment existing municipal service delivery, while also incentivizing performance and
enhanced accountability through the monitoring of outcome metrics.
Municipalities are subject to PROMESA, and the Oversight Board has the authority to require them to submit fiscal plans and annual
budgets for review and approval. The Oversight Board has imposed this requirement for certain municipalities. Municipalities are
also required to seek Oversight Board approval to issue, guarantee or modify their debts and to enter into contracts with an
aggregate value of $10 million or 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 June 30, 2024, the Corporation’s direct exposure to PR Government Entities totaled $376 million, of which $376 million were
outstanding, compared to $362 million at December 31, 2023, of which $333 million were outstanding. A deterioration in 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, $360 million consists of loans and $16 million are securities ($314 million and $19 million,
respectively, at December 31, 2023). Substantially all of the Corporation’s direct exposure outstanding at June 30, 2024 were
obligations from various Puerto Rico municipalities. In most cases, these were “general obligations” of a municipality, to which the
applicable municipality has pledged its good faith, credit and unlimited taxing power, or “special obligations” of a municipality, to
which the applicable municipality has pledged basic property tax or sales tax revenues.
At June 30, 2024, 79% of the Corporation’s
exposure to municipal loans and securities was concentrated in the municipalities of San Juan, Guaynabo, Carolina and Caguas. In
July 2024, the Corporation received scheduled principal payments amounting to $40 million from various obligations from Puerto
Rico municipalities. For additional discussion of the Corporation’s direct exposure to the Puerto Rico government and its
instrumentalities and municipalities, refer to Note 20 – Commitments and Contingencies to the Consolidated Financial Statements.
In addition, at June 30, 2024, the Corporation had $229 million in loans insured or securities issued by Puerto Rico governmental
entities, but for which the principal source of repayment is non-governmental ($238 million at December 31, 2023). These included
$183 million in residential mortgage loans insured by the Puerto Rico Housing Finance Authority (“HFA”), a PR Government Entity
(December 31, 2023 - $191 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 June 30, 2024, $39 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
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the satisfaction of certain other conditions (December 31, 2023 - $40 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 to 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 of PR Government Entities. Similarly, BPPR’s mortgage and consumer loan portfolios include loans to government
employees and retirees, which could also be negatively affected by fiscal measures, such as employee layoffs or furloughs or
reductions in pension benefits, if the fiscal and economic situation deteriorates.
As of June 30, 2024, BPPR had $19.7 billion in deposits from the Puerto Rico government, its instrumentalities, and municipalities.
The rate at which public deposit balances may decline is uncertain and difficult to predict. The amount and timing of any such
reduction is likely to be impacted by, for example, the 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.
United States Virgin Islands
The Corporation has operations in the United States Virgin Islands (the “USVI”) and has credit exposure to USVI government
entities.
The USVI has been experiencing a number of fiscal and economic challenges, which could adversely affect the ability of its public
corporations and instrumentalities to service their outstanding debt obligations. PROMESA does not apply to the USVI and, as such,
there is currently no federal legislation permitting the restructuring of the debts of the USVI and its public corporations and
instrumentalities.
To the extent that the fiscal condition of the USVI continues to deteriorate, the U.S. Congress or the Government of the USVI may
enact legislation allowing for the restructuring of the financial obligations of USVI government entities or imposing a stay on creditor
remedies, including by making PROMESA applicable to the USVI.
At June 30, 2024, the Corporation had approximately $28 million in direct exposure to USVI government entities (December 31,
2023 - $28 million).
British Virgin Islands
The Corporation has operations in the British Virgin Islands (“BVI”), which was negatively affected by the COVID-19 pandemic,
particularly as a reduction in the tourism activity which accounts for a significant portion of its economy. Although the Corporation
has no significant exposure to a single borrower in the BVI, at June 30, 2024, it has a loan portfolio amounting to approximately
$201 million comprised of various retail and commercial clients, compared to a loan portfolio of $205 million at December 31, 2023.
U.S. Government
As further detailed in Notes 5 and 6 to the Consolidated Financial Statements, a substantial portion of the Corporation’s investment
securities represented exposure to the U.S. Government in the form of U.S. Government sponsored entities, as well as agency
mortgage-backed and U.S. Treasury securities. In addition, $2.0 billion of residential mortgages, and $90.9 million commercial loans
were insured or guaranteed by the U.S. Government or its agencies at June 30, 2024 (compared to $1.9 billion and $89.2 million,
respectively, at December 31, 2023).
Non-Performing Assets
Non-performing assets (“NPAs”) include primarily past-due loans that are no longer accruing interest, renegotiated loans, and real
estate property acquired through foreclosure. A summary, including certain credit quality metrics, is presented in Table 19.
Credit quality metrics in the second quarter of 2024 improved when compared to the previous quarter. We continue to closely
monitor changes in the macroeconomic environment and on borrower performance given higher interest rates and inflationary
pressures. However, management believes that the improvements over recent years in risk management practices and the risk
profile of the Corporation’s loan portfolios position Popular to continue to operate successfully under the current environment.
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Total NPAs as of June 30, 2024 decreased by $26 million when compared with December 31, 2023. Total non-performing loans
held-in-portfolio (“NPLs”) decreased by $16 million from December 31, 2023. BPPR’s NPLs decreased by $42 million, broadly
reflected across most loan categories. Popular U.S. NPLs increased by $26 million, driven by higher commercial NPLs by $27
million, mostly impacted by a single $17 million loan.
On June 30, 2024, the ratio of NPLs to total loans held-in-portfolio was 1.0%, flat when compared to December 31, 2023. Other real
estate owned loans (“OREOs”) decreased by $10 million from December 31, 2023. The decrease in OREO was driven by the sale
of a commercial property in BPPR. On June 30, 2024, NPLs secured by real estate amounted to $207 million in the Puerto Rico
operations and $49 million in Popular U.S, compared with $231 million and $24 million, respectively, on December 31, 2023.
The Corporation’s commercial loan portfolio secured by real estate (“CRE”) amounted to $10.5 billion on June 30, 2024, of which
$3.1 billion was secured with owner occupied properties, compared with $10.6 billion and $3.1 billion, respectively, on December 31,
2023. Office space leasing exposure in our non-owner occupied CRE portfolio is limited, representing only 1.8% or $624 million of
our total loan portfolio. The exposure is mainly comprised of low- to mid- rise properties with average loan size of $2.0 million and is
well diversified across tenant type.
CRE NPLs amounted to $65 million on June 30, 2024, compared with $48 million on December 31, 2023, driven by the single $17
million loan mentioned above. The CRE NPL ratios for the BPPR and Popular U.S. segments were 0.71% and 0.55%, respectively,
on June 30, 2024, compared with 0.86% and 0.13%, respectively, on December 31, 2023.
In addition to the NPLs included in Table 19, on June 30, 2024, there were $624 million of performing loans, mostly commercial
loans, which in management’s opinion, are currently subject to potential future classification as non-performing (December 31, 2023
- $510 million).
For the quarter ended June 30, 2024, total inflows of NPLs held-in-portfolio, excluding consumer loans, increased by $18 million,
when compared to the inflows for the same period in 2023. Inflows of NPLs held-in-portfolio at the BPPR segment remained flat,
compared to the same period in 2023. Inflows of NPLs held-in-portfolio at the Popular U.S. segment increased by $17 million from
the same period in 2023, mainly driven by higher commercial inflows by $18 million driven by abovementioned $17 million loan.
170
Table 19 - Non-Performing Assets
June 30, 2024
December 31, 2023
(Dollars in thousands)
BPPR
Popular
U.S.
Popular,
Inc.
As a % of
loans HIP
by
category
BPPR
Popular
U.S.
Popular,
Inc.
As a % of
loans HIP
by
category
Commercial
Commercial multi-family
$
443
$
8,700
$
9,143
0.4
%
$
1,991
$
-
$
1,991
0.1
%
Commercial real estate non-owner
occupied
7,484
1,025
8,509
0.2
8,745
1,117
9,862
0.2
Commercial real estate owner
occupied
25,285
22,256
47,541
1.5
29,430
6,274
35,704
1.2
Commercial and industrial
22,958
5,782
28,740
0.4
32,826
3,772
36,598
0.5
Total Commercial
56,170
37,763
93,933
0.5
72,992
11,163
84,155
0.5
Construction
-
-
-
-
6,378
-
6,378
0.7
Leasing
7,059
-
7,059
0.4
8,632
-
8,632
0.5
Mortgage
163,790
11,554
175,344
2.2
175,106
11,191
186,297
2.4
Consumer
-
3,780
3,780
5.5
-
3,733
3,733
5.7
19,650
1,851
21,501
1.1
19,031
2,805
21,836
1.1
39,333
-
39,333
1.0
45,615
-
45,615
1.2
885
-
885
0.5
964
1
965
0.6
Total Consumer
59,868
5,631
65,499
0.9
65,610
6,539
72,149
1.0
Total non-performing loans held-in-
portfolio
286,887
54,948
341,835
1.0
%
328,718
28,893
357,611
1.0
%
Other real estate owned (“OREO”)
69,769
456
70,225
80,176
240
80,416
Total non-performing assets
[1]
$
356,656
$
55,404
$
412,060
$
408,894
$
29,133
$
438,027
Accruing loans past due 90 days or
more
[2]
$
237,371
$
210
$
237,581
$
268,362
$
109
$
268,471
Ratios:
Non-performing assets to total assets
0.63
%
0.35
%
0.57
%
0.74
%
0.19
%
0.62
%
Non-performing loans held-in-portfolio
to loans held-in-portfolio
1.14
0.53
0.96
1.34
0.27
1.02
Allowance for credit losses to loans
held-in-portfolio
2.56
0.83
2.05
2.61
0.85
2.08
Allowance for credit losses to non-
performing loans, excluding held-for-
sale
224.34
157.37
213.58
194.65
309.70
203.95
[1] There were no non-performing loans held-for-sale as of June 30, 2024 and December 31, 2023.
[2] It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90
days or more as opposed to non-performing since the principal repayment is insured. These balances include $81 million of residential mortgage
loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of June 30, 2024 (December 31, 2023 - $106 million).
Furthermore, the Corporation has approximately $34 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
(December 31, 2023 - $38 million).
171
Table 20 - Activity in Non -Performing Loans Held-in-Portfolio (Excluding Consumer Loans)
For the quarter ended June 30, 2024
For the six months ended June 30, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
229,796
$
49,478
$
279,274
$
254,476
$
22,354
$
276,830
Plus:
New non-performing loans
41,040
25,907
66,947
74,543
61,280
135,823
Advances on existing non-performing loans
-
298
298
-
320
320
Less:
Non-performing loans transferred to OREO
(4,540)
(24)
(4,564)
(8,649)
(24)
(8,673)
Non-performing loans charged-off
(5,590)
(18)
(5,608)
(13,899)
(968)
(14,867)
Loans returned to accrual status / loan collections
(40,746)
(26,324)
(67,070)
(86,511)
(33,645)
(120,156)
Ending balance NPLs
$
219,960
$
49,317
$
269,277
$
219,960
$
49,317
$
269,277
Table 21 - Activity in Non -Performing Loans Held-in-Portfolio (Excluding Consumer Loans)
For the quarter ended June 30, 2023
For the six months ended June 30, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
315,027
$
25,767
$
340,794
$
324,562
$
31,356
$
355,918
Plus:
New non-performing loans
40,005
9,088
49,093
90,618
17,619
108,237
Advances on existing non-performing loans
-
78
78
-
143
143
Less:
Non-performing loans transferred to OREO
(9,247)
-
(9,247)
(20,120)
(58)
(20,178)
Non-performing loans charged-off
(324)
(2,175)
(2,499)
(1,500)
(2,391)
(3,891)
Loans returned to accrual status / loan collections
(53,242)
(6,571)
(59,813)
(101,341)
(20,482)
(121,823)
Ending balance NPLs
$
292,219
$
26,187
$
318,406
$
292,219
$
26,187
$
318,406
Table 22 - Activity in Non -Performing Commercial Loans Held-in-Portfolio
For the quarter ended June 30, 2024
For the six months ended June 30, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
63,323
$
21,407
$
84,730
$
72,992
$
11,163
$
84,155
Plus:
New non-performing loans
4,031
21,940
25,971
8,374
36,979
45,353
Advances on existing non-performing loans
-
282
282
-
302
302
Less:
Non-performing loans transferred to OREO
(280)
-
(280)
(280)
-
(280)
Non-performing loans charged-off
(5,700)
-
(5,700)
(13,699)
(950)
(14,649)
Loans returned to accrual status / loan
collections
(5,204)
(5,866)
(11,070)
(11,217)
(9,731)
(20,948)
Ending balance NPLs
$
56,170
$
37,763
$
93,933
$
56,170
$
37,763
$
93,933
172
Table 23 - Activity in Non -Performing Commercial Loans Held-in-Portfolio
For the quarter ended June 30, 2023
For the six months ended June 30, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
90,952
$
11,048
$
102,000
$
82,171
$
10,868
$
93,039
Plus:
New non-performing loans
3,203
4,631
7,834
19,797
10,350
30,147
Advances on existing non-performing loans
-
2
2
-
28
28
Less:
Non-performing loans transferred to OREO
(21)
-
(21)
(308)
-
(308)
Non-performing loans charged-off
(595)
(2,175)
(2,770)
(1,268)
(2,391)
(3,659)
Loans returned to accrual status / loan collections
(4,823)
(1,896)
(6,719)
(11,676)
(7,245)
(18,921)
Ending balance NPLs
$
88,716
$
11,610
$
100,326
$
88,716
$
11,610
$
100,326
Table 24 - Activity in Non -Performing Construction Loans Held-in-Portfolio
For the quarter ended June 30, 2024
For the six months ended June 30, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
-
$
-
$
-
$
6,378
$
-
$
6,378
Less:
Loans returned to accrual status / loan collections
-
-
-
(6,378)
-
(6,378)
Ending balance NPLs
$
-
$
-
$
-
$
-
$
-
$
-
Table 25 - Activity in Non -Performing Construction Loans Held-in-Portfolio
For the quarter ended June 30, 2023
For the six months ended June 30, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
-
$
-
$
-
$
-
$
-
$
-
Plus:
New non-performing loans
9,284
-
9,284
9,284
-
9,284
Ending balance NPLs
$
9,284
$
-
$
9,284
$
9,284
$
-
$
9,284
173
Table 26 - Activity in Non -Performing Mortgage Loans Held-in-Portfolio
For the quarter ended June 30, 2024
For the six months ended June 30, 2024
(Dollars in thousands)
BPPR
Popular
U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
166,473
$
28,071
$
194,544
$
175,106
$
11,191
$
186,297
Plus:
New non-performing loans
37,009
3,967
40,976
66,169
24,301
90,470
Advances on existing non-performing loans
-
16
16
-
18
18
Less:
Non-performing loans transferred to OREO
(4,260)
(24)
(4,284)
(8,369)
(24)
(8,393)
Non-performing loans charged-off
110
(18)
92
(200)
(18)
(218)
Loans returned to accrual status / loan
collections
(35,542)
(20,458)
(56,000)
(68,916)
(23,914)
(92,830)
Ending balance NPLs
$
163,790
$
11,554
$
175,344
$
163,790
$
11,554
$
175,344
Table 27 - Activity in Non -Performing Mortgage Loans Held-in-Portfolio
For the quarter ended June 30, 2023
For the six months ended June 30, 2023
(Dollars in thousands)
BPPR
Popular
U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
224,075
$
14,719
$
238,794
$
242,391
$
20,488
$
262,879
Plus:
New non-performing loans
27,518
4,457
31,975
61,537
7,269
68,806
Advances on existing non-performing loans
-
76
76
-
115
115
Less:
Non-performing loans transferred to OREO
(9,226)
-
(9,226)
(19,812)
(58)
(19,870)
Non-performing loans charged-off
271
-
271
(232)
-
(232)
Loans returned to accrual status / loan collections
(48,419)
(4,675)
(53,094)
(89,665)
(13,237)
(102,902)
Ending balance NPLs
$
194,219
$
14,577
$
208,796
$
194,219
$
14,577
$
208,796
174
Loan Delinquencies
Another key measure used to evaluate and monitor the Corporation’s asset quality is loan delinquencies. Loans delinquent 30 days
or more, as a percentage of their related portfolio category on June 30, 2024 and December 31, 2023, are presented below.
Table 28 - Loan Delinquencies
(Dollars in thousands)
June 30, 2024
December 31, 2023
Loans delinquent
30 days or more
Total loans
Total delinquencies
as a percentage
Loans delinquent
30 days or more
Total loans
Total delinquencies
as a percentage
Commercial
Commercial multi-family
$
12,338
$
2,384,480
0.52
%
$
13,657
$
2,415,620
0.57
%
Commercial real estate
non-owner occupied
15,499
5,004,472
0.31
17,051
5,087,421
0.34
Commercial real estate
owner occupied
66,638
3,143,817
2.12
69,239
3,080,635
2.25
Commercial and industrial
45,521
7,195,357
0.63
58,953
7,126,121
0.83
Total Commercial
139,996
17,728,126
0.79
158,900
17,709,797
0.90
Construction
5,479
1,105,759
0.50
6,378
959,280
0.66
Leasing
32,761
1,828,048
1.79
35,491
1,731,809
2.05
Mortgage
[1]
802,382
7,883,726
10.18
859,537
7,695,917
11.17
Consumer
Credit cards
48,399
1,162,557
4.16
46,436
1,135,747
4.09
Home equity lines of credit
5,132
68,992
7.44
5,465
65,953
8.29
Personal
59,250
1,879,619
3.15
59,682
1,945,247
3.07
Auto
168,149
3,773,292
4.46
173,119
3,660,780
4.73
Other
3,645
161,501
2.26
3,063
160,441
1.91
Total Consumer
284,575
7,045,961
4.04
287,765
6,968,168
4.13
Loans held-for-sale
-
8,225
-
-
4,301
-
Total
$
1,265,193
$
35,599,845
3.55
%
$
1,348,071
$
35,069,272
3.84
%
[1] Loans delinquent 30 days or more includes $0.4 billion of residential mortgage loans insured by FHA or guaranteed by the VA as of June 30,
2024 (December 31, 2023 - $0.5 billion). Refer to Note 7 to the Consolidated Financial Statements for additional information of guaranteed loans.
Allowance for Credit Losses Loans Held-in-Portfolio
The ACL, represents management’s estimate of expected credit losses through the remaining contractual life of the different loan
segments, impacted by expected prepayments. The ACL is maintained at a sufficient level to provide for estimated credit losses on
collateral dependent loans as well as loans modified for borrowers with financial difficulties separately from the remainder of the loan
portfolio. The Corporation’s management evaluates the adequacy of the ACL on a quarterly basis. In this evaluation, management
considers current conditions, macroeconomic economic expectations through a reasonable and supportable period, historical loss
experience, portfolio composition by loan type and risk characteristics, results of periodic credit reviews of individual loans, and
regulatory requirements, amongst other factors.
The Corporation must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown, such as
economic developments affecting specific customers, industries, or markets. Other factors that can affect management’s estimates
are recalibration of statistical models used to calculate lifetime expected losses, changes in underwriting standards, financial
accounting standards and loan impairment measurements, among others. Changes in the financial condition of individual borrowers,
in economic conditions, and in the condition of the various markets in which collateral may be sold, may also affect the required
level of the allowance for credit losses. Consequently, the business financial condition, liquidity, capital, and results of operations
could also be affected.
175
On June 30, 2024, the ACL was flat from December 31, 2023, at $730 million. The ACL for BPPR increased by $4 million, driven by
higher commercial and auto loan volume, higher qualitative reserves and changes in credit quality, in part offset by changes in
macroeconomic scenarios and lower NCOs. In PB, the ACL decreased by $3 million, when compared to December 31, 2023, mainly
driven by lower consumer loan volumes. The Corporation’s ratio of the allowance for credit losses to loans held-in-portfolio was
2.05% on June 30, 2024, compared to 2.08% on December 31, 2023. The ratio of the allowance for credit losses to NPLs held-in-
portfolio stood at 213.6%, compared to 204.0% on December 31, 2023.
Given that any one economic outlook is inherently uncertain, the Corporation leverages multiple scenarios to estimate its ACL. The
baseline scenario continues to be assigned the highest probability, followed by the pessimistic scenario. The weight assigned to the
pessimistic scenario decreased during the first quarter of 2024 in response to the positive momentum in the economy as
expectations for the Federal Reserve achieving a soft landing have improved. The Corporation evaluates, at least on an annual
basis, the assumptions tied to the CECL accounting framework. These include the reasonable and supportable period as well as the
reversion window.
The provision for credit losses for the period ended June 30, 2024, was $44.2 million, compared to an expense of $35.7 million for
the period ended June 30, 2023, mostly related to higher NCOs due to credit normalization. The provision expense related to the
loans-held-in-portfolio for the six-month period ended June 30, 2024 was $116.5 million, compared to the provision expense of
$82.8 million for the six-month period ended June 30, 2023. Refer to Note 8 to the Consolidated Financial Statements, and to the
Provision for Credit Losses section of this MD&A for additional information.
176
Table 29 - Allowance for Credit Losses - Loan Portfolios
June 30, 2024
(Dollars in thousands)
Total ACL
Total loans held-
in-portfolio
ACL to loans held-
in-portfolio
Total non-
performing loans
held-in-portfolio
ACL to non-
performing loans
held-in-portfolio
Commercial
$
11,180
$
2,384,480
0.47
%
$
9,143
122.28
%
64,235
5,004,472
1.28
%
8,509
754.91
%
58,190
3,143,817
1.85
%
47,541
122.40
%
126,482
7,195,357
1.76
%
28,740
440.09
%
Total Commercial
$
260,087
$
17,728,126
1.47
%
$
93,933
276.89
%
Construction
12,889
1,105,759
1.17
%
-
N.M.
Leasing
14,385
1,828,048
0.79
%
7,059
203.78
%
Mortgage
83,289
7,883,726
1.06
%
175,344
47.50
%
Consumer
86,313
1,162,557
7.42
%
-
N.M.
1,726
68,992
2.50
%
3,780
45.66
%
107,448
1,879,619
5.72
%
21,501
499.73
%
157,449
3,773,292
4.17
%
39,333
400.30
%
6,491
161,501
4.02
%
885
733.45
%
Total Consumer
$
359,427
$
7,045,961
5.10
%
$
65,499
548.75
%
Total
$
730,077
$
35,591,620
2.05
%
$
341,835
213.58
%
N.M - Not meaningful.
Table 30 - Allowance for Credit Losses - Loan Portfolios
December 31, 2023
(Dollars in thousands)
Total ACL
Total loans held-
in-portfolio
ACL to loans held-
in-portfolio
Total non-
performing loans
held-in-portfolio
ACL to non-
performing loans
held-in-portfolio
Commercial
$
13,740
$
2,415,620
0.57
%
$
1,991
690.11
%
65,453
5,087,421
1.29
%
9,862
663.69
%
56,864
3,080,635
1.85
%
35,704
159.27
%
122,356
7,126,121
1.72
%
36,598
334.32
%
Total Commercial
$
258,413
$
17,709,797
1.46
%
$
84,155
307.07
%
Construction
12,686
959,280
1.32
%
6,378
198.90
%
Leasing
9,708
1,731,809
0.56
%
8,632
112.47
%
Mortgage
83,214
7,695,917
1.08
%
186,297
44.67
%
Consumer
80,487
1,135,747
7.09
%
-
N.M.
1,978
65,953
3.00
%
3,733
52.99
%
117,790
1,945,247
6.06
%
21,836
539.43
%
157,931
3,660,780
4.31
%
45,615
346.23
%
7,134
160,441
4.45
%
965
739.27
%
Total Consumer
$
365,320
$
6,968,168
5.24
%
$
72,149
506.34
%
Total
$
729,341
$
35,064,971
2.08
%
$
357,611
203.95
%
N.M - Not meaningful.
177
Annualized net charge-offs (recoveries)
The following tables present annualized net charge-offs (recoveries) to average loans held-in-portfolio (“HIP”) by loan category for
the quarters and six months ended June 30, 2024 and 2023.
Table 31 - Annualized Net Charge -offs (Recoveries) to Average Loans Held-in-Portfolio
Quarters ended
June 30, 2024
June 30, 2023
BPPR
Popular U.S.
Popular Inc.
BPPR
Popular U.S.
Popular Inc.
Commercial
0.20
%
0.04
%
0.13
%
(0.06)
%
0.10
%
0.01
%
Construction
―
(0.04)
(0.04)
―
―
―
Mortgage
(0.23)
(0.01)
(0.19)
(0.22)
(0.03)
(0.19)
Leasing
0.60
―
0.60
0.39
―
0.39
Consumer
2.68
6.58
2.80
1.37
4.87
1.52
Total annualized net charge-offs
(recoveries) to average loans held-in-
portfolio
0.79
%
0.16
%
0.61
%
0.33
%
0.22
%
0.29
%
Six months ended
June 30, 2024
June 30, 2023
BPPR
Popular U.S.
Popular Inc.
BPPR
Popular U.S.
Popular Inc.
Commercial
0.25
%
0.04
%
0.15
%
(0.06)
%
(0.01)
%
(0.04)
%
Construction
―
(0.02)
(0.02)
―
―
―
Mortgage
(0.25)
(0.01)
(0.21)
(0.24)
(0.02)
(0.20)
Leasing
0.72
―
0.72
0.24
―
0.24
Consumer
2.83
7.54
2.98
1.84
4.84
1.97
Total annualized net charge-offs
(recoveries) to average loans held-in-
portfolio
0.86
%
0.19
%
0.66
%
0.44
%
0.14
%
0.35
%
NCOs for the quarter ended June 30, 2024, amounted to $53.6 million, increasing by $29.6 million when compared to the same
period in 2023. The BPPR segment increased by $30.6 million mainly driven by higher consumer and commercial NCOs by $23.7
million and $6.2 million, respectively. The consumer NCOs increase is reflective of credit normalization. The PB segment NCOs
decreased by $1 million, mainly driven by lower commercial NCOs.
NCOs for the six months ended June 30, 2024, amounted to $115.8 million, increasing by $59.0 million when compared to the same
period in 2023. The BPPR segment increased by $55.7 million mainly driven by higher consumer and commercial NCOs by $37.7
million and $14.4 million, respectively. The consumer NCOs increase is reflective of credit normalization. The PB segment NCOs
increased by $3.3 million, mainly driven by higher commercial NCOs by $2.2 million.
Loan Modifications
For the quarter ended June 30, 2024, modified loans to borrowers with financial difficulty amounted to $178 million, of which $164
million were in accruing status. The BPPR segment’s modifications to borrowers with financial difficulty amounted to $171 million,
mainly comprised of commercial and mortgage loans of $145 million and $22 million, respectively. A total of $14 million of the
mortgage modifications were related to government guaranteed loans. The Popular U.S. segment’s modifications to borrowers with
financial difficulty amounted to $7 million, mostly comprised of commercial loans.
Refer to Note 8 to the Consolidated Financial Statements for additional information on modifications made to borrowers
experiencing financial difficulties.
178
ADOPTION OF NEW ACCOUNTING STANDARDS AND ISSUED BUT NOT YET EFFECTIVE ACCOUNTING STANDARDS
Refer to Note 3, “New Accounting Pronouncements” to the Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures for the current period can be found in the Market Risk section of this report, which includes
changes in market risk exposures from disclosures presented in the 2023 Form 10-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Corporation’s management, with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of the Corporation’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based
on such evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such
period, the Corporation’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a
timely basis, information required to be disclosed by the Corporation in the reports that it files or submits under the Exchange Act
and such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding
required disclosures.
Internal Control Over Financial Reporting
There have been no changes in the Corporation’s internal control over financial reporting (as such term is defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2024 that have materially affected, or are
reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
For a discussion of Legal Proceedings, see Note 20 to the Consolidated Financial Statements.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed under “Part I - Item
1A - Risk Factors” in our 2023 Form 10-K. These factors could materially adversely affect our business, financial condition, liquidity,
results of operations and capital position, and could cause our actual results to differ materially from our historical results or the
results contemplated by the forward-looking statements contained in this report. Also refer to the discussion in “Part I - Item 2 –
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report for additional information
that may supplement or update the discussion of risk factors below and in our 2023 Form 10-K.
There have been no material changes to the risk factors previously disclosed under Item 1A of the Corporation’s 2023 Form 10-K.
The risks described in our 2023 Form 10-K and in this report are not the only risks facing us. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial
condition, liquidity, results of operations and capital position.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
179
The Corporation did not have any unregistered sales of equity securities during the quarter ended June 30, 2024.
Issuer Purchases of Equity Securities
The following table sets forth the details of purchases of Common Stock by the Corporation during the quarter ended June 30, 2024:
Issuer Purchases of Equity Securities
Not in thousands
Period
Total Number of
Shares Purchased [1]
Average Price Paid per
Share
Total Number of Shares
Purchased as Part of Publicly
Announced Plans or Programs
Approximate Dollar Value of
Shares that May Yet be
Purchased Under the Plans or
Programs
April 1 - April 30
5,770
$
88.09
-
$-
May 1 - May 31
30,908
86.80
-
-
June 1 - June 30
-
-
-
-
Total
36,678
$
87.00
-
$-
[1] Includes 5,770 and 30,908 shares of the Corporation’s common stock acquired by the Corporation during April 2024 and May 2024, respectively, in
connection with the satisfaction of tax withholding obligations on vested awards of restricted stock or restricted stock units granted to directors and
certain employees under the Corporation’s Omnibus Incentive Plan. The acquired shares of common stock were added back to treasury stock.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans or Other Preplanned Trading Arrangements
Certain of our officers or directors have made, and may from time to time make, elections to
participate in
, and are participating in,
our dividend reinvestment and purchase plan, the Company stock fund associated with our 401(k) plans and/or the Company stock
fund associated with our non-qualified deferred compensation plans and have shares withheld to cover withholding taxes upon the
vesting of equity awards, which may be designed to satisfy the affirmative defense conditions of Rule 10b5-1 under the Exchange
Act or may constitute non-Rule 10b5–1
trading arrangements
180
Item 6. Exhibits
Exhibit Index
Exhibit No
Exhibit Description
3.1
22.1
31.1
31.2
32.1
32.2
101. INS
XBRL Instance Document – the instance document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline Document.
101.SCH
Inline Taxonomy Extension Schema Document
(1)
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
(1)
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document
(1)
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
(1)
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
(1)
104
The cover page of Popular, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2024,
formatted in Inline XBRL (included within the Exhibit 101 attachments)
(1)
(1)
Popular, Inc. has not filed as exhibits certain instruments defining the rights of holders of debt of Popular, Inc. not
exceeding 10% of the total assets of Popular, Inc. and its consolidated subsidiaries. Popular, Inc. hereby agrees to
furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and
subordinated debt of Popular, Inc., or of any of its consolidated subsidiaries.
181
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
POPULAR, INC.
(Registrant)
Date: August 9, 2024
By: /s/ Jorge J. García
Jorge J. García
Executive Vice President &
Chief Financial Officer
Date: August 9, 2024
By: /s/ Denissa M. Rodríguez
Denissa M. Rodríguez
Senior Vice President & Corporate Comptroller