Popular 10Q 2024 Q2 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

10-Q

[X]

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

For the quarterly period ended

June 30, 2024

[ ]

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

Commission File Number:

001-34084

POPULAR, INC.

(Exact name of registrant as specified in its charter)

Puerto Rico

66-0667416

(State or other jurisdiction of Incorporation or

(IRS Employer Identification Number)

organization)

Popular Center Building

209 Muñoz Rivera Avenue

Hato Rey

Puerto Rico

00918

(Address of principal executive offices)

(Zip code)

(

787

)

765-9800

(Registrant’s telephone number, including area code)

NOT APPLICABLE

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which

registered

Common Stock ($0.01 par value)

BPOP

The

NASDAQ Stock Market

6.125% Cumulative Monthly Income Trust

Preferred Securities

BPOPM

The

NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports

required to be filed by Section 13 or 15(d) of the

Securities Exchange

Act of

1934 during

the preceding

12 months

(or for

such shorter

period that

the registrant

was

required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X]

Yes

[

]

Indicate by

check mark

whether the registrant

has submitted electronically

every Interactive

Data File

required to

submitted pursuant to

Rule 405 of

Regulation S-T (§

232.405 of this

chapter) during the

preceding 12 months

(or for

such shorter period that the registrant was required to submit such files).

[X]

Yes

[

]

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

smaller reporting company, or an emerging growth company.

See definitions of “large accelerated filer”, “accelerated

filer,” “smaller reporting company,”

and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

[X]

Accelerated filer [

]

Non-accelerated filer [

]

Smaller reporting company

[ ]

Emerging growth company

[ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended

transition period for complying with any new or revised financial accounting standards provided pursuant to Section

13(a) of the Exchange Act.

[

]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[

]

Yes

[X]

Indicate

the

number

outstanding

each

the

issuer’s

classes

common

stock,

the

latest

practicable date:

Common Stock, $0.01 par value,

72,335,174

shares outstanding as of August 7, 2024.

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

Unaudited Consolidated Statements of Operations for

the quarters

and six months ended June 30, 2024 and 2023

Unaudited Consolidated Statements of Comprehensive

Income (Loss) for the

quarters and six months ended June 30, 2024 and

2023

Unaudited Consolidated Statements of Changes in

Stockholders’ Equity for the

quarters and six months ended June 30, 2024 and

2023

Unaudited Consolidated Statements of Cash Flows for

the six months

ended June 30, 2024 and 2023

Notes to Unaudited Consolidated Financial Statements

Item 2. Management’s Discussion and Analysis of Financial

Condition and

Results of Operations

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

Forward-Looking Statements

This

Form 10-Q

contains “forward-looking

statements” within

the meaning

of the

U.S. Private

Securities Litigation

Reform Act

1995,

including,

without

limitation,

statements

about

Popular,

Inc.’s

(the

“Corporation,”

“Popular,”

“we,”

“us,”

“our”)

business,

financial condition, results

of operations, plans,

objectives and future

performance. These statements

are not

guarantees of future

performance,

are

based

management’s

current

expectations

and,

their

nature,

involve

risks,

uncertainties,

estimates

and

assumptions. Potential

factors, some

of which

are beyond

the Corporation’s

control, could

cause actual

results to

differ materially

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

of competitive and

economic factors, and our

reaction to those factors,

the adequacy of

the allowance for loan

losses, delinquency

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

and the effect

of legal and regulatory proceedings and new accounting

standards on the Corporation’s financial condition and

results of operations.

All statements

contained herein

that are

not clearly

historical in

nature are

forward-looking, and

the words

“anticipate,” “believe,”

“continues,” “expect,”

“estimate,” “intend,”

“project” and

similar expressions

and future

or conditional

verbs such

as “will,”

“would,”

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

expressions are generally intended to identify

forward-looking statements.

Various factors, some of which

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

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

difference include, but are not limited to:

●

the

rate

growth

decline

the

economy

and

employment

levels,

well

general

business

and

economic

conditions

the

geographic

areas

serve

and,

particular,

the

Commonwealth

Puerto

Rico

(the

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

portion of our business is concentrated;

●

adverse

economic conditions,

including high

levels

inflation, that

adversely affect

housing

prices, the

job

market,

consumer confidence

and spending

habits which

may affect

in turn,

among other

things, our

level of

non-performing

assets, charge-offs and provision expense;

●

changes in interest rates and market liquidity,

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

originations, affect

our ability

to originate

and distribute

financial products

in the

primary and

secondary markets

and

impact the value of our investment portfolio and

our ability to return capital to our shareholders;

●

the

impact

bank

failures

adverse

developments

other

banks

and

negative

media

coverage

the

banking industry in general on investor and depositor

sentiment regarding the stability and liquidity of

banks;

●

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

taken and to be taken by the

Puerto

Rico

Government

and

the

Federally-appointed

oversight

board

the

economy,

our

customers

and

our

business;

●

the impact of the pending debt

restructuring proceedings under Title III of the

Puerto Rico Oversight, Management and

Economic

Stability

Act

(“PROMESA”)

and

other

actions

taken

address

Puerto

Rico’s

fiscal

challenges on the value of our portfolio of Puerto Rico government securities and

loans to governmental entities and of

our

commercial,

mortgage

and

consumer

loan

portfolios

where

private

borrowers

could

directly

affected

governmental action;

●

the

amount of

Puerto Rico

public sector

deposits held

the Corporation,

whose future

balances are

uncertain and

difficult

predict

and

may

impacted

factors

such

the

amount

Federal

funds

received

the

P.R.

Government

and

the

rate

expenditure

such

funds,

well

the

financial

condition,

liquidity

and

cash

management practices of the Puerto Rico Government

and its instrumentalities;

●

unforeseen

catastrophic

events,

including

extreme

weather

events,

including

hurricanes,

other

natural

disasters,

man-made disasters, acts of violence or war or

pandemics, epidemics and other health-related

crises, or the fear of any

such event

occurring, any of

which could cause

adverse consequences for

our business, including,

but not

limited to,

disruptions in our operations;

●

our ability to

achieve the expected

benefits from our

transformation initiative, including

our ability to

achieve projected

earnings, efficiencies and our targeted sustainable return on

tangible common equity of 14% by the end

of 2025;

●

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

service certain

of Banco

Popular de

Puerto Rico’s

key channels,

as well

as the

entry into

amended and

restated

commercial agreements (the “Evertec Business Acquisition

Transaction”);

●

the fiscal and monetary policies of the federal government

and its agencies;

●

changes in

federal

bank regulatory

and supervisory

policies, including

required levels

capital, liquidity,

resolution-

related requirements and the impact of other proposed

capital standards on our capital ratios;

●

additional Federal Deposit Insurance Corporation (“FDIC”) assessments,

such as the special assessment implemented

by the FDIC to recover the losses to the deposit insurance fund (“DIF”)

resulting from the receiverships of Silicon Valley

Bank and Signature Bank;

●

regulatory approvals

that may

be necessary

to undertake

certain actions

or consummate

strategic transactions,

such

as acquisitions and dispositions;

●

the

relative strength

weakness

the

consumer and

commercial credit

sectors

and

the

real

estate markets

Puerto Rico and the other markets in which

our borrowers are located;

●

a deterioration in the credit quality of our

clients, customers and counterparties;

●

the performance of the stock and bond markets;

●

competition in the financial services industry;

●

possible legislative, tax or regulatory changes;

●

a failure

in or

breach of

our operational

or security

systems or

infrastructure or

those of

Evertec, Inc.,

our provider

core financial

transaction processing and

information technology services,

or of

third parties

providing services

to us,

including

result

cyberattacks,

e-fraud,

denial-of-services

and

computer

intrusion,

resulting

in,

among

other

things, loss or breach of customer data, disruption

of services, reputational damage or additional

costs to Popular;

●

changes in market rates and prices which may

adversely impact the value of financial assets

and liabilities;

●

potential judgments,

claims, damages,

penalties, fines,

enforcement actions

and

reputational damage

resulting from

pending or future litigation and regulatory or government

investigations or actions;

●

changes in accounting standards, rules and interpretations;

●

our ability to grow our core businesses;

●

decisions to downsize, sell or close branches or business

units or otherwise change our business mix;

and

●

management’s ability to identify and manage these and

other risks.

Moreover,

the

outcome

legal

and

regulatory

proceedings,

discussed

“Part

II,

Item

Legal

Proceedings,”

inherently

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

the Corporation’s Annual

Report on Form

10-K for the

year ended December 31,

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.

All forward-looking

statements included

in this

Form 10-Q

are based

upon information

available to

Popular as

of the

date of

this

Form 10-Q, and other than as

required by law, including the

requirements of applicable securities laws, we assume no

obligation to

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

of such statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS

OF FINANCIAL CONDITION

(UNAUDITED)

[UNAUDITED]

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

Allowance for credit losses

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

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

shares authorized;

885,726

shares issued and outstanding (2023

885,726

)

22,143

Common stock, $

0.01

par value;

170,000,000

shares authorized;

104,811,971

shares issued (2023 -

104,767,348

) and

72,365,926

shares outstanding (2023 -

72,153,621

)

1,048

Surplus

4,852,747

4,843,399

Retained earnings

4,385,522

4,194,851

Treasury stock - at cost,

32,446,045

shares (2023 -

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.

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

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.

POPULAR, INC.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

Quarters ended,

Six months ended,

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,

(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

Reclassification adjustment for net (gains)

losses included in net income

Income tax expense

(15,722)

(2,476)

(23,954)

(34,228)

The accompanying notes are an integral

part of the Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

Accumulated

other

Common

Preferred

Retained

Treasury

comprehensive

(In thousands)

stock

Surplus

earnings

stock

(loss) 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

Issuance of stock

1,550

Dividends declared:

Common stock

[1]

(39,663)

Preferred stock

(353)

Common stock purchases

(1,271)

Stock based compensation

1,412

8,059

9,471

Other comprehensive loss, net of tax

(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

Issuance of stock

1,768

Dividends declared:

Common stock

[1]

(44,944)

Preferred stock

(353)

Common stock purchases

(3,200)

Stock based compensation

3,513

5,887

9,400

Other comprehensive income, net of tax

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

(2023 - $

0.55

POPULAR, INC.

CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

Accumulated

other

Common

Preferred

Retained

Treasury

comprehensive

(In thousands)

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

Net income

310,139

Issuance of stock

3,117

Dividends declared:

Common stock

[1]

(79,249)

Preferred stock

(706)

Common stock purchases

(4,241)

Stock based compensation

1,471

15,808

17,279

Other comprehensive income, net of tax

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

Issuance of stock

3,567

Dividends declared:

Common stock

[1]

(89,695)

Preferred stock

(706)

Common stock purchases

(6,776)

Stock based compensation

5,781

15,233

21,014

Other comprehensive income, net of tax

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

(2023 - $

1.10

For the period ended

June 30,

Disclosure of changes in number of shares:

2024

2023

Preferred Stock:

Balance at beginning and end of period

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.

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

(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)

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.

Notes to Consolidated Financial

Statements

(Unaudited)

Note 1 -

Nature of operations

Note 2 -

Basis of presentation

Note 3 -

New accounting pronouncements

Note 4 -

Restrictions on cash and due from banks and

certain securities

Note 5 -

Debt securities available-for-sale

Note 6 -

Debt securities held-to-maturity

Note 7 -

Loans

Note 8 -

Allowance for credit losses – loans held-in-

portfolio

Note 9 -

Mortgage banking activities

Note 10 -

Transfers of financial assets and mortgage

servicing assets

Note 11 -

Other real estate owned

Note 12 -

Other assets

Note 13 -

Goodwill and other intangible assets

Note 14 -

Deposits

Note 15 -

Borrowings

Note 16 -

Other liabilities

Note 17 -

Stockholders’ equity

Note 18 -

Other comprehensive income (loss)

Note 19 -

Guarantees

Note 20 -

Commitments and contingencies

Note 21-

Non-consolidated variable interest entities

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

Note 1 – Nature of Operations

Popular,

Inc. (the

“Corporation” or

“Popular”) is

a diversified,

publicly-owned financial

holding company

subject to

the supervision

and

regulation

the

Board

Governors

the

Federal

Reserve

System.

The

Corporation

has

operations

Puerto

Rico,

the

mainland United

States (“U.S.”)

and the

U.S. and

British Virgin

Islands. In

Puerto Rico,

the Corporation

provides retail,

mortgage,

and

commercial

banking

services,

through

its

principal

banking

subsidiary,

Banco

Popular

Puerto

Rico

(“BPPR”),

well

investment

banking,

broker-dealer,

auto

and

equipment

leasing

and

financing,

and

insurance

services

through

specialized

subsidiaries. In

the U.S.

mainland, the

Corporation provides

retail, mortgage,

commercial banking

services, as

well as

equipment

leasing

and

financing,

through

its

New

York-chartered

banking

subsidiary,

Popular

Bank

(“PB”

“Popular

U.S.”),

which

has

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

Note 2 – Basis of Presentation

Basis of Presentation

The (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

the

financial

statements

disclosures

which

would

normally

included

financial

statements

prepared in

accordance

with Accounting

Principles

Generally Accepted

the

United

States

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

read

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

million of expenses, of which $

16.5

million was reflected in

income tax

expense and $

6.4

million was

reflected in

other operating expenses,

related to an

out-of-period adjustment associated

with the

Corporation’s U.S. subsidiary’s

non-payment of taxes

on certain intercompany

distributions to the

Bank Holding Company

(BHC) in

Puerto Rico,

a foreign

corporation for

U.S. tax

purposes. The

adjustment corrected

errors for

income tax

expense that

should have

been recognized

of $

5.5

million and

5.4

million in

the years

2023 and

2022, respectively,

and an

aggregate of

5.6

million, in the years prior to 2022. The $

6.4

million recognized as other operating expense corresponded to interest due up to March

31, 2024 on

the related late

payment of the

withholding tax, of which

approximately $

3.0

million correspond to years

prior to 2022.

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

million.

The

Corporation

evaluated

the

impact

the

out-of-period

adjustment

and

concluded

was

not

material

any

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

the

date

the

financial

statements,

and

the

reported

amounts

revenues

and

expenses

during

the

reporting period. Actual results could differ from those estimates.

Note 3 - New accounting pronouncements

Recently Adopted Accounting Standards Updates

Standard

Description

Date of adoption

Effect on the financial statements

FASB ASU 2023-02,

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

March

2023,

which

amends

Accounting

Standards

Codification

("ASC")

Topic

323

permitting the election to apply the

proportional amortization method to account

for

tax

equity

investments

that

generate

income

tax

credits

through

investment

low-income-housing

tax

credit

(LIHTC)

structures

and

other

tax

credit

programs

certain

conditions

are

met.

The

ASU

also

eliminates

the

application

the

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

the

adoption of

this

ASU

since

it does

not

hold

investments

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

the

adoption of

this

ASU

since

it does

not

hold

common

control

leasehold

improvements, however, it

will consider

this

guidance

determine

the

amortization

period for

and

accounting

treatment

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

the

adoption

this

accounting

pronouncement

since

does

not

hold

equity securities measured at

fair value

with sale restrictions.

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

March

2024, which

removes various

references to

concept

statements

from

the

FASB

Accounting

Standards

Codification.

The

ASU

intends

simplify

the

Codification

and

distinguish

between

nonauthoritative

and authoritative guidance.

January 1, 2025

The Corporation

is currently

evaluating

any

impact

that

the

adoption

this

guidance

will

have

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

intended

reduce complexity and diversity in practice.

January 1, 2025

The Corporation

is currently

evaluating

any

impact

that

the

adoption

this

guidance

will

have

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

December 2023,

which amends

ASC Topic

740

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

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

this

guidance

will

have

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

December

2023,

which

amends

ASC

Subtopic

350-60

requiring

that

crypto

assets

are

measured

fair

value

the

statement

financial

position

each

reporting

period

with

changes

from

remeasurement

being

recognized

net

income.

The

ASU

also

requires

enhanced

disclosures

for

both

annual

and

interim

reporting

periods

provide

investors

with

relevant information

analyze and

assess

the

exposure

and

risk

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

November 2023,

which amends

ASC Topic

280

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

this

guidance

will

have

its

financial

statements

and

presentation

and

disclosures.

Accounting Standards Updates Not Yet Adopted

Standard

Description

Date of adoption

Effect on the financial statements

FASB ASU 2023-06,

Disclosure Improvements -

Codification Amendments

in Response to the SEC’s

Disclosure Update and

Simplification Initiative

The FASB

issued ASU

2023-06 in

October

2023

which

modifies

the

disclosure

presentation

requirements

various

subtopics

the

Codification

with

the

purpose

aligning

U.S.

GAAP

requirements

with

those

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

impacted

the

adoption

this

ASU

since

currently

subject

SEC's

current

disclosure

and

presentation

requirements under Regulation S-X and

S-K.

FASB ASU 2023-05,

Business Combinations -

Joint Venture Formations

(Subtopic 805-60) -

Recognition and initial

measurement

The

FASB

issued

ASU

2023-05

August

2023, which

amends ASC

Subtopic 805-60

to include specific

guidance about how

joint

ventures

should

recognize

and

initially

measure

assets

contributed

and

liabilities

assumed.

The

amendments

require

that

joint venture, upon formation, recognize and

initially

measure

its

assets

and

liabilities at

fair value.

January 1, 2025

Upon

adoption

this

ASU,

the

Corporation will

consider this

guidance

for

the

initial

measure

assets

and

liabilities

newly

created

joint

ventures.

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

billion at

June 30,

2024 (December

31, 2023

- $

2.7

billion).

Cash

and

due

from

banks,

well

other

highly

liquid

securities,

are

used

cover

these

required

average

reserve

balances.

At June

30, 2024,

the Corporation

held $

million in

restricted assets

in the

form of

funds deposited

in money

market accounts,

debt

securities

available

for

sale

and

equity

securities

(December

31,

2023

million).

The

restricted

assets

held

debt

securities available for sale and equity securities consist primarily of assets

held for the Corporation’s non-qualified retirement plans

and fund deposits guaranteeing possible liens or encumbrances

over the title of insured properties.

Note 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

Weighted

Amortized

for credit

unrealized

Fair

average

(In thousands)

cost

losses

gains

losses

value

yield

U.S. Treasury securities

Within 1 year

10,828,370

61,019

10,767,385

4.00

After 1 to 5 years

2,275,875

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

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

10,001

101,791

2.76

Total collateralized

mortgage obligations - federal agencies

143,646

11,884

131,853

2.59

Mortgage-backed securities - federal agencies

Within 1 year

1,323

1,302

1.75

After 1 to 5 years

73,250

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

5.00

After 1 to 5 years

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]

Includes $

13.8

billion pledged to secure government and trust deposits, assets

sold under agreements to repurchase, credit facilities

and loan servicing

agreements that the secured parties are not permitted

to sell or repledge the collateral, of which $

12.8

billion serve as collateral for public funds.

The

Corporation had unpledged Available for Sale securities

with a fair value of

4.7

billion that could be used to increase its borrowing

facilities.

At December 31, 2023

Gross

Weighted

Amortized

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

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

1,321

19,184

2.28

After 10 years

108,280

9,868

98,441

2.54

Total collateralized

mortgage obligations - federal agencies

146,682

12,027

134,686

2.38

Mortgage-backed securities - federal agencies

Within 1 year

637

634

3.72

After 1 to 5 years

82,310

3,536

78,785

2.34

After 5 to 10 years

792,431

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

4.00

After 1 to 5 years

1,500

8.50

Total other

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 $

billion pledged to secure government and trust deposits,

assets sold under agreements to repurchase, credit facilities

and loan

servicing agreements that the secured parties are not permitted

to sell or repledge the collateral, of which $

11.1

billion serve as collateral for

public funds. The Corporation had unpledged Available

for Sale securities with a fair value of

4.6

billion that could be used to increase its

borrowing facilities.

The weighted

average yield

on debt

securities available-for-sale

is based

on amortized

cost; therefore,

does not

give

effect to

changes in fair value.

Securities

not

due

single

contractual

maturity

date,

such

mortgage-backed

securities

and

collateralized

mortgage

obligations,

are

classified

based

the

period

final

contractual

maturity.

The

expected

maturities

collateralized

mortgage

obligations, mortgage-backed securities

and certain

other securities

may differ

from their

contractual maturities

because they

may

be subject to prepayments or may be called

by the issuer.

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

debt securities

available-for-sale sold

during the

six months

ended June

30, 2024 and 2023.

The

following

tables

present

the

Corporation’s

fair

value

and

gross

unrealized

losses

debt

securities

available-for-sale,

aggregated by investment category and length of

time that individual securities have been in a continuous

unrealized loss position at

June 30, 2024 and December 31, 2023.

At June 30, 2024

Less than 12 months

12 months or more

Total

Gross

Fair

unrealized

Fair

unrealized

Fair

unrealized

(In thousands)

value

losses

value

losses

value

losses

U.S. Treasury securities

6,003,623

4,122

5,111,232

192,348

11,114,855

196,470

Collateralized mortgage obligations - federal agencies

6,982

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

Fair

unrealized

Fair

unrealized

Fair

unrealized

(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

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

billion, driven mainly

mortgage-backed

securities,

which

have

been

impacted

decline

fair

value

result

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.

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

Weighted

Amortized

Book

[1]

for Credit

Net of

unrealized

Fair

average

(In thousands)

cost

Value

Losses

Allowance

gains

losses

value

yield

U.S. Treasury securities

Within 1 year

598,695

7,917

590,778

2.66

After 1 to 5 years

7,878,042

7,307,981

128,694

7,179,287

1.34

Total U.S. Treasury

securities

8,476,737

7,906,676

136,611

7,770,065

1.43

Obligations of Puerto Rico, States and

political subdivisions

Within 1 year

3,055

3,049

3,051

6.23

After 1 to 5 years

18,595

112

18,483

148

18,387

3.60

After 5 to 10 years

845

817

837

5.80

After 10 years

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

6,251

55,110

2,855

2,115

55,850

2.38

Collateralized mortgage obligations - federal

agencies

After 10 years

1,527

186

1,341

2.87

Total collateralized

mortgage obligations -

federal agencies

1,527

186

1,341

2.87

Securities in wholly owned statutory business

trusts

After 10 years

5,960

6.33

Total securities

in wholly owned statutory

business trusts

5,960

6.33

Total debt securities

held-to-maturity [2]

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

million of net unrealized loss which remains in

Accumulated other comprehensive (loss) income

(AOCI) related to

certain securities previously transferred from available-for-sale

securities portfolio to the held-to-maturity securities portfolio.

[2]

Includes $

7.9

billion pledged to secure public and trust deposits that

the secured parties are not permitted to sell or repledge

the collateral.

The

Corporation had unpledged held-to-maturities securities with

a fair value of $

69.7

million that could be used to increase its borrowing facilities.

At December 31, 2023

Allowance

Carrying

Value

Gross

Weighted

Amortized

Book

[1]

for Credit

Net of

unrealized

Fair

average

(In thousands)

cost

Value

Losses

Allowance

gains

losses

value

yield

U.S. Treasury securities

Within 1 year

597,768

7,526

590,242

2.58

After 1 to 5 years

7,971,072

7,335,159

637

21,996

7,313,800

1.39

After 5 to 10 years

211,061

188,484

187

188,297

1.50

Total U.S. Treasury

securities

8,779,901

8,121,411

637

29,709

8,092,339

1.47

Obligations of Puerto Rico, States and

political subdivisions

Within 1 year

4,820

4,811

4,814

6.17

After 1 to 5 years

20,171

147

20,024

125

19,995

3.80

After 5 to 10 years

845

817

845

5.80

After 10 years

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

5,780

59,628

2,941

2,891

59,678

2.55

Collateralized mortgage obligations - federal

agencies

Within 1 year

6.44

After 10 years

1,543

148

1,395

2.87

Total collateralized

mortgage obligations -

federal agencies

1,556

148

1,408

2.90

Securities in wholly owned statutory business

trusts

After 10 years

5,960

6.33

Total securities

in wholly owned statutory

business trusts

5,960

6.33

Total debt securities

held-to-maturity [2]

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

million of net unrealized loss which remains in Accumulated

other comprehensive (loss) income (AOCI)

related to certain

securities transferred from available-for-sale securities

portfolio to the held-to-maturity securities portfolio as

discussed in Note 6 of the 2023 Form

10-K.

[2]

Includes $

8.1

billion pledged to secure public and trust deposits that

the secured parties are not permitted to sell or repledge

the collateral. The

Corporation had unpledged held-to-maturities securities with

a fair value of

67.3

million that could be used to increase its borrowing

facilities.

Debt securities not due on a single contractual maturity date,

such as collateralized mortgage obligations, are classified in the period

of final

contractual maturity.

The expected

maturities of

collateralized mortgage

obligations and

certain other

securities may

differ

from their contractual maturities because they may be

subject to prepayments or may be called

by the issuer.

Credit Quality Indicators

The following describes the credit quality indicators by major security

type that the Corporation considers to develop the

estimate of

the allowance for credit losses for investment securities

held-to-maturity.

discussed in

Note

2023 Form

10-K,

U.S. Treasury

securities

carry

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

Puerto

Rico

that

are

generally

not

rated

credit

rating

agency.

This

includes $

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

are payable primarily

from

certain

property

taxes

imposed

the

issuing

municipality

(December

31,

2023

million).

the

case

general

obligations, they

also benefit

from a

pledge of

the full

faith, credit

and unlimited

taxing power

of the

issuing municipality,

which is

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

debt service on such general obligation bonds. The

Corporation performs periodic credit quality

reviews of these securities and internally

assigns standardized credit risk ratings based

on its evaluation. The

Corporation considers these ratings in

its estimate to develop the

allowance for credit losses

associated with

these

securities.

For

the

definitions

the

obligor

risk

ratings,

refer

the

Credit

Quality

section

Note

the

Consolidated

Financial Statements.

The

following

presents

the

amortized

cost

basis

securities

held

the

Corporation

issued

municipalities

Puerto

Rico

aggregated by the internally assigned standardized

credit risk rating:

At June 30, 2024

At December 31, 2023

(In thousands)

Securities issued by Puerto Rico municipalities

Watch

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 $

million in securities

issued

the

Puerto

Rico

Housing Finance

Authority

(“HFA”),

government

instrumentality,

for

which the

underlying source

payment

second

mortgage

loans

Puerto

Rico

residential

properties

(not

the

government),

but

for

which

HFA,

provides

guarantee in

the event

of default

and upon

the satisfaction

of certain

other conditions

(December 31,

2023 -

million). These

securities are not rated by a credit rating agency.

The

Corporation

assesses

the

credit

risk

associated

with

these

securities

evaluating

the

refreshed

FICO

scores

representative

sample

the

underlying

borrowers.

June

30,

2024,

the

average

refreshed

FICO

score

for

the

sample,

comprised

the

nominal

value

the

securities,

used

for

the

loss

estimate

was

672

(compared

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.

deterioration of

the Puerto

Rico economy

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.

June

30,

2024

and

December

31,

2023,

the

portfolio

“Obligations

Puerto

Rico,

States

and

political

subdivisions”

also

includes

million

in securities

issued

by the

HFA

for

which the

underlying source

payment

is U.S.

Treasury

securities.

The

Corporation applies 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

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

status.

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

The following table provides the

activity in the allowance for

credit losses related to debt securities

held-to-maturity by security type

for the quarters and six months ended June 30,

2024 and June 30, 2023:

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

Puerto

Rico,

States

and

political

subdivisions

includes

0.2

million

for

securities issued by municipalities of

Puerto Rico, and $

6.1

million for bonds issued by

the Puerto Rico HFA,

which are secured by

second mortgage loans on

Puerto Rico residential properties (compared to

0.2

million and $

5.6

million, respectively, at

December

31, 2023).

Note 7 – Loans

For

a summary

the accounting

policies related

loans, interest

recognition and

allowance for

credit

losses

refer to

Note

–

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

million

and

171

million,

respectively

(June 30,

2023

million

and

172

million,

respectively). The

Corporation did

t purchase

consumer loans

during the

period ended

June 30,

2024 (during

the quarter

and six

months ended

June 30, 2023 - $

million and $

million, respectively). During the quarter and six months ended June

30, 2024, the Corporation

recorded purchases

of $

159

million and

215

million,

respectively (June

30, 2023

- $

million

and $

million,

respectively), in

commercial loans.

The

Corporation

performed

whole-loan

sales

involving

approximately

million

and

million

residential

mortgage

loans

during the

quarter and

six months

ended June

30, 2024,

respectively (June

30, 2023

- $

million and

million, respectively).

During the

six

months

ended June

30, 2024,

the

Corporation performed

sales of

commercial loans,

including loan

participations

amounting

million.

The

Corporation did

perform

sales

commercial

loans

during

the

quarter

ended

June

30,

2024

(during the

quarter and

six months

ended June

30, 2023

- $

million and

million, respectively).

Also, during

the six

months

ended

June

30,

2024,

the

Corporation

securitized

approximately

million

mortgage

loans

into

GNMA

mortgage-backed

securities

and

million

mortgage

loans

into

FNMA

mortgage-backed

securities,

compared

million

and

million,

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.

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

or more

past due

Current

Loans HIP

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

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

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

or more

past due

Current

Loans HIP

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

Mortgage

1,309

23,479

11,554

36,342

1,256,864

1,293,206

11,554

Consumer:

Credit cards

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

6,764

7,968

Total

15,810

45,812

55,158

116,780

10,331,446

10,448,226

54,948

210

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

or more

past due

Current

Loans HIP

[2] [3]

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

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 $

million of residential mortgage loans insured by FHA

or guaranteed by the VA

that are no

longer accruing interest as of June 30, 2024. Furthermore,

as of June 30, 2024, the Corporation had approximately

million in reverse

mortgage loans which are guaranteed by FHA, but which

are currently not accruing interest. Due to the guaranteed

nature of the loans, it is the

Corporation’s policy to exclude these balances from

non-performing assets.

[2]

Loans held-in-portfolio are net of $

387

million in unearned income and exclude $

million in loans held-for-sale.

[3]

Includes $

13.6

billion pledged to secure credit facilities and public funds

that the secured parties are not permitted to sell or repledge

the collateral,

of which $

7.2

billion were pledged at the Federal Home Loan Bank

("FHLB") as collateral for borrowings and $

6.4

billion at the Federal Reserve

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

billion and $

4.7

billion, respectively.

December 31, 2023

BPPR

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

or more

past due

Current

Loans HIP

loans

Commercial multi-family

524

1,991

2,515

289,427

291,942

1,991

Commercial real estate:

Non-owner occupied

5,510

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

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

256

2,392

2,648

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)

days

or more

past due

Current

Loans HIP

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

Mortgage

48,818

7,821

11,191

67,830

1,236,263

1,304,093

11,191

Consumer:

Credit cards

Home equity lines of credit

1,472

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

10,274

10,279

Total

100,598

13,507

29,002

143,107

10,410,941

10,554,048

28,893

109

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)

days

or more

past due

Current

Loans HIP

[2]

[3]

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

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

3,759

5,465

60,488

65,953

3,733

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

million of residential

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

million in reverse mortgage loans which are guaranteed

by FHA, but which are

currently not accruing interest. Due to the guaranteed nature

of the loans, it is the Corporation’s policy to exclude

these balances from non-

performing assets.

[2]

Loans held-in-portfolio are net of $

356

million in unearned income and exclude $

million in loans held-for-sale.

[3]

Includes $

14.2

billion pledged to secure credit facilities and public funds

that the secured parties are not permitted to sell or repledge

the collateral,

of which $

7.0

billion were pledged at the Federal Home Loan Bank

(FHLB) as collateral for borrowings and $

7.2

billion at the Federal Reserve

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

billion and $

4.4

billion, respectively.

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

billion (December 31, 2023 -

2.2

billion) of loans that

carry certain

guarantees from the FHA or the VA of which $

209.7

million (December 31, 2023 - $

241.6

million) are 90 days or more past due. The

portfolio of guaranteed loans includes $

million of residential mortgage loans in Puerto Rico

that are no longer accruing interest as

of June 30,

2024 (December 31, 2023 -

106

million). The Corporation has

approximately $

million in reverse mortgage

loans in

Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at June 30, 2024 (December 31, 2023 - $

million).

Loans with a delinquency status of

90 days past due as

of June 30, 2024 include

million in loans previously pooled into GNMA

securities

(December

31,

2023

million).

Under

the

GNMA

program,

issuers

such

BPPR

have

the

option

but

not

the

obligation to repurchase loans

that are 90

days or more

past due. For

accounting purposes, these loans

subject to the

repurchase

option

are

required to

reflected on

the

financial statements

of BPPR

with

offsetting

liability.

Loans

our

serviced

GNMA

portfolio benefit

from payment

forbearance programs

but continue

to reflect

the contractual

delinquency until

the borrower

repays

deferred payments or completes a payment deferral

modification or other borrower assistance alternative.

The following tables present the amortized cost basis

of non-accrual loans as of June 30, 2024 and

December 31, 2023 by class of

loans:

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

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:

HELOCs

3,780

Personal

3,715

15,935

1,851

3,715

17,786

Auto

1,898

37,435

1,898

37,435

Other

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

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

Mortgage

84,677

90,429

120

11,071

84,797

101,500

Leasing

481

8,151

481

8,151

Consumer:

HELOCs

3,733

Personal

3,589

15,442

2,805

3,589

18,247

Auto

1,833

43,782

1,833

43,782

Other

263

701

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

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

million in

collateral dependent loans

(December 31,

2023 -

126

million). The

Corporation recognized $

million in

interest income

on non-accrual

loans during

the six

months ended

June 30, 2024 (June 30, 2023 - $

million).

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:

June 30, 2024

(In thousands)

Real Estate

Auto

Equipment

Other

Total

BPPR

Commercial multi-family

1,309

Commercial real estate:

Non-owner occupied

213,560

Owner occupied

22,581

Commercial and industrial

3,332

16,949

20,281

Mortgage

71,670

Leasing

1,668

1,669

Consumer:

Personal

3,791

Auto

14,577

Other

Total BPPR

316,243

16,245

16,987

349,476

Popular U.S.

Commercial multi-family

8,700

Commercial real estate:

Owner occupied

22,256

Commercial and industrial

3,072

3,125

Mortgage

1,065

Total Popular U.S.

32,021

3,072

35,146

Popular, Inc.

Commercial multi-family

10,009

Commercial real estate:

Non-owner occupied

213,560

Owner occupied

44,837

Commercial and industrial

3,332

20,021

23,406

Mortgage

72,735

Leasing

1,668

1,669

Consumer:

Personal

3,791

Auto

14,577

Other

Total Popular,

Inc.

348,264

16,245

20,059

384,622

December 31, 2023

(In thousands)

Real Estate

Auto

Equipment

Other

Total

BPPR

Commercial multi-family

1,339

Commercial real estate:

Non-owner occupied

160,555

Owner occupied

25,848

Commercial and industrial

1,103

30,287

31,390

Construction

6,378

Mortgage

85,113

Leasing

1,373

Consumer:

Personal

4,338

Auto

12,965

Other

305

Total BPPR

284,674

14,338

30,592

329,604

Popular U.S.

Commercial real estate:

Owner occupied

3,877

Commercial and industrial

105

400

505

Construction

5,990

Mortgage

1,303

Total Popular U.S.

11,170

105

400

11,675

Popular, Inc.

Commercial multi-family

1,339

Commercial real estate:

Non-owner occupied

160,555

Owner occupied

29,725

Commercial and industrial

1,103

105

30,687

31,895

Construction

12,368

Mortgage

86,416

Leasing

1,373

Consumer:

Personal

4,338

Auto

12,965

Other

305

Total Popular,

Inc.

295,844

14,338

105

30,992

341,279

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

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

Non-credit discount / (premium) at acquisition

Par value of acquired loans at acquisition

287

619

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

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

increase to

the

purchase price,

with subsequent

changes to

the

allowance

recorded

credit

loss

expense.

The

provision

for

credit

losses

recorded

current

operations

based

this

methodology.

Loan losses

are charged,

and recoveries

are credited

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

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.

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

Commercial multi-family

3,567

(264)

3,303

Commercial real estate non-owner occupied

53,666

(324)

53,386

Commercial real estate owner occupied

43,537

(5,296)

1,134

39,375

Commercial and industrial

102,844

14,440

(8,072)

2,051

111,263

Total Commercial

203,614

8,556

(8,072)

3,229

207,327

Construction

3,114

524

3,638

Mortgage

76,564

(6,419)

(26)

3,775

73,900

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

102

(94)

Personal

99,504

15,492

(23,293)

2,318

94,021

Auto

157,456

10,250

(16,609)

6,352

157,449

Other

6,808

210

(680)

151

6,489

Total Consumer

352,039

37,830

(57,095)

11,581

344,355

Total - Loans

644,322

48,585

(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.

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)

7,877

Commercial real estate non-owner occupied

11,958

(1,151)

10,849

Commercial real estate owner occupied

20,270

(1,514)

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)

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)

(18)

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)

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.

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)

11,180

Commercial real estate non-owner occupied

65,624

(1,475)

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)

(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

(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)

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.

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)

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)

(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

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

(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.

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)

7,877

Commercial real estate non-owner occupied

11,699

(956)

106

10,849

Commercial real estate owner occupied

16,227

2,505

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)

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

(49)

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)

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.

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)

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)

(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

(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)

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.

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

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)

(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)

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

(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.

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

21,392

Commercial real estate non-owner occupied

17,956

328

18,350

Commercial real estate owner occupied

8,488

1,174

(177)

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

(52)

218

2,074

Personal

21,321

2,169

(4,287)

579

19,782

Other

(47)

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

(12)

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.

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

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)

(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

(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

(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

(12)

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.

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)

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)

(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)

129

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

(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.

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

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)

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)

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

(100)

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

(38)

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.

For the six months ended June 30, 2023

Popular Inc.

Impact

Provision for

Allowance

for

Beginning

of adopting

credit losses

Net write

Ending

(In thousands)

Balance

ASU 2022-02

(benefit)

PCD Loans

Charge-

offs

Recoverie

down

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

26,311

(136)

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)

(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

(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

(38)

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

modification

constitutes

change

loan

terms

the

form

principal

forgiveness,

interest

rate

reduction,

other

than-

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

to a borrower experiencing financial difficulty.

The amount of outstanding commitments to lend additional funds to debtors with financial difficulties owing receivables whose terms

have

been

modified

during

the

quarters

ended

June

30,

2024

and

June

30,

2023

amounted

70.2

million

and

5.0

million,

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.

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

Commercial and industrial

1,747

0.03

1,747

0.02

Mortgage

Consumer:

Credit cards

422

0.04

422

0.04

Personal

848

0.05

848

0.05

Other

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:

Personal

238

0.01

136

0.10

374

0.02

Auto

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

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

5,277

0.07

Consumer:

Personal

2,190

0.13

2,190

0.12

Total

7,926

0.03

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

Consumer:

Credit cards

243

0.02

243

0.02

Total

332

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

Commercial and industrial

2,122

0.04

2,122

0.03

Mortgage

Consumer:

Credit cards

549

0.05

549

0.05

Personal

1,085

0.06

1,085

0.06

Other

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:

Personal

436

0.02

141

0.10

577

0.03

Auto

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

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

0.01

8,723

0.11

Consumer:

Personal

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

Consumer:

Credit cards

539

0.05

539

0.05

Total

628

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:

Credit cards

222

0.02

222

0.02

Personal

196

0.01

199

0.01

Total

418

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:

Personal

113

0.05

161

0.01

Auto

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

Total

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

Mortgage

11,372

0.18

0.01

11,453

0.15

Consumer:

Personal

489

0.03

489

0.03

Total

11,919

0.05

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

Consumer:

Credit cards

190

0.02

190

0.02

Total

268

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

Consumer:

Credit cards

427

0.04

427

0.04

Personal

313

0.02

316

0.02

Other

Total

969

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:

Personal

165

0.08

239

0.01

Auto

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

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

Mortgage

21,805

0.35

408

0.03

22,213

0.30

Consumer:

Personal

907

0.05

907

0.05

Auto

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

0.00%

Consumer:

Credit cards

445

0.04%

445

0.04%

Total

523

0.00%

523

0.00%

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

.0%

Commercial and industrial

Reduced weighted-average contractual interest rate from

.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

.0% to

Term extension

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

months to the life of loans.

Commercial and industrial

Added a weighted-average of

months to the life of loans.

Mortgage

Added a weighted-average of

years to the life of loans.

Consumer:

Personal

Added a weighted-average of

years to the life of loans.

Auto

Added a weighted-average of

years to the life of loans.

Other than insignificant payment delays

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

months to the life of loans.

Commercial and industrial

Added a weighted-average of

months to the life of loans.

Mortgage

Added a weighted-average of

months to the life of loans.

Consumer:

Credit cards

Added a weighted-average of

months to the life of loans.

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

.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

.0%.

Personal

Reduced weighted-average contractual interest rate from

18.8

% to

.0%.

Other

Reduced weighted-average contractual interest rate from

.0% to

Term extension

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

months to the life of loans.

Commercial and industrial

Added a weighted-average of

months to the life of loans.

Mortgage

Added a weighted-average of

years to the life of loans.

Consumer:

Personal

Added a weighted-average of

years to the life of loans.

Auto

Added a weighted-average of

years to the life of loans.

Other than insignificant payment delay

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

months to the life of loans.

Commercial and industrial

Added a weighted-average of

months to the life of loans.

Mortgage

Added a weighted-average of

months to the life of loans.

Consumer:

Credit cards

Added a weighted-average of

months to the life of loans.

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

.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

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

year to the life of loans.

Commercial and industrial

Added a weighted-average of

month to the life of loans.

Construction

Added a weighted-average of

months to the life of loans.

Mortgage

Added a weighted-average of

years to the life of loans.

Consumer:

Personal

Added a weighted-average of

years to the life of loans.

Auto

Added a weighted-average of

years to the life of loans.

Other than insignificant payment delay

Loan Type

Financial Effect

CRE Owner occupied

Added a weighted-average of

months to the life of loans.

Commercial and industrial

Added a weighted-average of

months to the life of loans.

Mortgage

Added a weighted-average of

months to the life of loans.

Consumer:

Credit cards

Added a weighted-average of

months to the life of loans.

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

.0% to

5.3

Commercial and industrial

Reduced weighted-average contractual interest rate from

21.7

% to

.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

.0% to

Term extension

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

year to the life of loans.

Commercial and industrial

Added a weighted-average of

year to the life of loans.

Construction

Added a weighted-average of

months to the life of loans.

Mortgage

Added a weighted-average of

years to the life of loans.

Consumer:

Personal

Added a weighted-average of

years to the life of loans.

Auto

Added a weighted-average of

years to the life of loans.

Other than insignificant payment delay

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

months to the life of loans.

Commercial and industrial

Added a weighted-average of

months to the life of loans.

Mortgage

Added a weighted-average of

months to the life of loans.

Consumer:

Credit cards

Added a weighted-average of

months to the life of loans.

The following tables present, by

class, the performance of loans

that have been modified

during the twelve months

preceding June

30,

2024.

The

past

due

days

sponsored

mortgage-backed securities

classified

“trading” and

hedging

the

market

risk

with

“TBA”

(to-be-announced)

market

transactions.

The

objective

derive

spread

income

from

the

portfolio

and

not

benefit

from

short-term

market

movements. In

addition, BPPR

uses forward

contracts or

TBAs to

hedge its

securitization pipeline.

Risks related

to variations

interest rates

and market volatility

are hedged

with TBAs

that have

characteristics similar to

that of

the forecasted security

and its

conversion timeline.

At 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

5.12

5.21

Puerto Rico government obligations

0.59

0.91

Interest-only strips

158

12.00

167

12.00

Other (includes related trading derivatives)

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

measured

the

5-day

net

value-at-risk

(“VAR”),

with

confidence

level

99%.

The

VAR

measures

the

maximum estimated loss that may occur over a

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

The

Corporation’s trading

portfolio

had

5-day VAR

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

these risks

the Board’s

Risk Management

Committee and

the Asset/Liability

Management Committee.

The management

liquidity

risk,

long-term

and

day-to-day

basis,

the

responsibility

the

Corporate

Treasury

Division.

The

Corporation’s

Corporate

Treasurer

responsible

for

implementing

the

policies

and

procedures

approved

the

Board

Directors

and

for

monitoring

the

Corporation’s

liquidity

position

ongoing

basis.

Also,

the

Corporate

Treasury

Division coordinates

corporate

wide

liquidity

management

strategies

and

activities

with

the

reportable

segments,

oversees

policy

breaches

and

manages

the

escalation process.

The

Financial and

Operational Risk

Management Division

responsible for

the independent

monitoring and

reporting of adherence with established policies.

institution’s liquidity

may be

pressured if,

for example,

it experiences

a sudden

and unexpected

substantial cash

outflow due

deposit

outflows,

whether due

loss

of confidence

depositors, or

other

reasons, including

exogenous events

such

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

every

event,

and

are

dependent

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

deposits

was

54%

June

30,

2024

and

55%

December

31,

2023.

addition

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

the

Consolidated

Financial

Statements.

Also,

the

Consolidated

Statements

Cash

Flows

the

accompanying

Consolidated Financial Statements provide information

on the Corporation’s cash inflows and outflows.

The

following

sections

provide

further

information

the

Corporation’s

major

funding

activities

and

needs,

well

the

risks

involved in these activities.

Banking Subsidiaries

Primary

sources of

funding

for the

Corporation’s

banking subsidiaries

(BPPR and

or,

collectively,

“the banking

subsidiaries”)

include

retail,

commercial

and

public

sector

deposits,

brokered

deposits,

unpledged

investment

securities,

mortgage

loan

securitization and, to a lesser extent, loan sales.

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

deposit

over

$250,000.

Core

deposits,

excluding

P.R.

public

funds

that

are

fully

collateralized,

have

historically

provided

the

Corporation with

a sizable

source

relatively stable

and

low-cost

funds.

P.R.

public funds,

while

linked to

market

interest rates,

provide a stable

source of

funding with an

attractive earnings spread.

Core deposits totaled

$60.3 billion,

or 92% of

total

deposits,

June

30,

2024,

compared

with

$59.0

billion,

93%

total

deposits,

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

Note

the

Consolidated

Financial

Statements

for

additional

information

the

Corporation’s

borrowing

facilities

available through its banking subsidiaries.

The principal

uses of

funds for

the banking

subsidiaries include

loan originations,

investment portfolio

purchases, loan

purchases

and repurchases, repayment of outstanding obligations (including deposits), advances on certain serviced portfolios and operational

expenses. Also, the

banking subsidiaries assume liquidity

risk related to collateral

posting requirements for certain

activities mainly

connection

with

contractual

commitments,

recourse

provisions,

servicing

advances,

derivatives

and

credit

card

licensing

agreements.

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

have

sufficient

liquidity

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

The Corporation’s ability to compete

successfully in the marketplace for

deposits, excluding brokered deposits, depends on various

factors, including pricing, service, convenience

and financial stability as

reflected by operating results and

financial condition, credit

ratings (by

nationally recognized credit

rating agencies), customer

confidence, and

importantly,

FDIC deposit

insurance coverage.

Deposits at all of the Corporation’s banking subsidiaries are federally insured

(subject to FDIC limits) and this is expected to mitigate

the potential effect of the aforementioned risks.

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

brokered

deposits

June

30,

2024,

which

financed

approximately

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

well-capitalized institution

are

subject

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

deposit

liabilities.

This

additional

collateral

could

reduce

unpledged

securities

otherwise

available

liquidity

sources

the

Corporation.

As of

June 30,

2024, management

believes that

the banking

subsidiaries had

sufficient current

and projected

liquidity sources

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

the future

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

maintain

access

funding

adequate

financing

not

available

accommodate

future

financing

needs

acceptable

interest

rates.

The

Corporation’s

banking

subsidiaries

have

meet

margin

requirements

repurchase

agreements

and

other

collateralized

borrowing

facilities

that

include

certain

required

levels

cash

deposits

and

qualifying

securities.

the

extent

that

the

value

securities

previously

pledged

collateral

declines

below

such

required

amounts

because

market

changes,

the

Corporation

required

deposit

additional

cash

securities

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,

well

wholesale funding

sources such

brokered deposits,

considers

balance

excess

$250,000 to

have a

higher

potential

liquidity

risk.

Table

reflects

the

aggregate

balance

deposit

accounts

excess

$250,000,

including

collateralized public funds and deposits outside of the

U.S. and its territories.

Collateralized public funds, as presented in Table

15,

represent public

deposit balances

from governmental

entities in

the U.S.

and its

territories, including

Puerto Rico

and the

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

8,074,913

31,859,088

Transactional deposits balances over

$250,000

7,999,569

2,096,387

10,095,956

Time deposits balances over $250,000

2,201,823

650,324

2,852,146

Uninsured foreign deposits

451,363

Collateralized public funds

19,995,906

276,403

20,272,309

Intercompany deposits

115,385

762,811

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

7,760,363

31,443,838

Transactional deposits balances over

$250,000

8,632,491

2,230,978

10,863,469

Time deposits balances over $250,000

1,926,005

361,315

2,287,320

Uninsured foreign deposits

418,334

Collateralized public funds

18,313,612

291,670

18,605,282

Intercompany deposits

159,163

626,312

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

these

funds

include

the

repayment

debt,

and

interest

payments

holders

senior

debt

and

junior

subordinated

deferrable

interest

(related

trust

preferred

securities),

the

payment

dividends

common

stockholders,

repurchases of the Corporation’s securities and capitalizing its

banking subsidiaries.

The outstanding balance

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

adequate

with

sufficient

cash

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

underwritten public

offering during

March

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

raise

funds

the

capital

markets.

Factors

that

the

Corporation

does

not

control,

such

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

automatic

shelf

registration

statement

filed

and

effective

with

the

Securities

and

Exchange

Commission,

which

permits

the

Corporation to issue an unspecified amount of debt

or equity securities.

Non-Banking Subsidiaries

The

principal

sources

funding

for

the

non-banking

subsidiaries

include

internally

generated

cash

flows

from

operations,

loan

sales, repurchase agreements, capital

injections and borrowed funds

from their direct

parent companies or the

holding companies.

The principal uses of funds for the non-banking

subsidiaries include repayment of maturing debt,

operational expenses and payment

of dividends to the

BHCs. The liquidity needs

of the non-banking subsidiaries

are minimal since most

of them are

funded internally

from

operating cash

flows

or from

intercompany borrowings

or capital

contributions from

their holding

companies. During

the six

months

ended June

30, 2024,

Popular,

Inc.

made capital

contributions of

$0.3 million

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

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

liquidity.

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.

162

Other Funding Sources and Capital

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

liquidity,

which

may

realized

through

either

securities

sales,

collateralized

borrowings

repurchase

agreements.

The

Corporation’s

debt

securities

portfolio

consists

primarily

liquid

U.S.

government

debt

securities,

U.S.

government

sponsored

agency

debt

securities,

U.S.

government

sponsored

agency

mortgage-backed

securities,

and

U.S.

government

sponsored

agency

collateralized

mortgage

obligations

that

can

used

raise

funds

the

repo

markets.

The

availability

the

repurchase

agreement

would

subject

having

sufficient

unpledged

collateral

available

the

time

the

transactions are consummated, in addition to overall liquidity and risk appetite of the various counterparties. In 2023, BPPR became

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

may be recorded on the balance sheet in amounts that are different than the full contract or notional amount of the transaction. As a

provider of

financial services,

the Corporation

routinely enters

into commitments

with off-balance

sheet risk

to meet

the financial

needs of

its customers. These

commitments may include

loan commitments and

standby letters of

credit. These commitments

are

subject

the

same

credit

policies

and

approval

process

used

for

on-balance

sheet

instruments.

These

instruments

involve,

varying degrees, elements

of credit and

interest rate risk

in excess of

the amount recognized

in the statement

of financial position.

Refer to

Note 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

guarantees,

indemnifications,

and

representation

and

warranties.

Refer

Note

the

Consolidated Financial Statements for information on operating leases and

to Note 19 to the

Consolidated Financial Statements for

detailed

discussion

the

Corporation’s

obligations

under

credit

recourse

and

representation

and

warranties

arrangements.

The Corporation monitors its cash requirements, including

its contractual obligations and debt commitments.

FDIC Special Assessments

November

16,

2023,

the

Federal

Deposit

Insurance

Corporation

(“FDIC”)

approved

final

rule

that

imposes

special

assessment (the “FDIC

Special Assessment”) to recover

the losses to

the deposit insurance

fund resulting from

the FDIC’s use,

March

2023,

the

systemic

risk

exception. In

connection with

this assessment,

the

Corporation recorded

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

the

estimated

loss

periodically

adjusted

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

PIHC

(together

with

PNA,

the

“obligor

group”)

purchased

statutory trusts

established by

the Corporation.

These debentures

were purchased

by the

statutory trust

using the

proceeds from

163

trust preferred securities issued to the public (referred to as

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

of common securities of the trusts.

PIHC

fully

and

unconditionally

guarantees

the

junior

subordinated

debentures

issued

PNA.

PIHC’s

obligation

make

guarantee payment may be satisfied by direct

payment of the required amounts to the

holders of the applicable capital securities or

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

the

applicable

trust

except

the

extent

such

trust

has

funds

available

for

such

payments.

PIHC

does

not

make

interest

payments on the

debentures held by such

trust, such trust

will not pay

distributions on the applicable

capital securities and

will not

have

funds

available

for

such

payments.

PIHC’s

guarantee

PNA’s

junior

subordinated

debentures

unsecured

and

ranks

subordinate and junior in

right of payment to

all the PIHC’s other

liabilities in the same manner

as the applicable debentures as

set

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

that the PIHC issues. The guarantee constitutes a guarantee

payment

and

not

collection,

which means

that

the

guaranteed party

may

sue

the

guarantor to

enforce its

rights

under the

respective guarantee without suing any other person

or entity.

The

principal

sources

funding

for

PIHC

and

PNA

have

included

dividends

received

from

their

banking

and

non-banking

subsidiaries, asset

sales and

proceeds from

the issuance

of debt

and equity.

As further

described below,

in the

Risk to

Liquidity

section, various statutory

provisions limit the

amount of dividends

an insured depository

institution may pay

to its holding

company

without regulatory approval.

The following summarized financial information presents the financial position 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

the

obligor

group

presented

combined

basis

with

intercompany

balances

and

transactions

between

entities

the

obligor

group

eliminated.

The

obligor

group's

amounts

due

from,

amounts

due

and

transactions

with subsidiaries

and

affiliates

have

been

presented in

separate

line

items,

they

are

material.

addition,

parties transactions are presented separately.

164

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

$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

continuing

basis.

These

lines

may

subject

collateral

requirements,

changes

the

value

the

collateral,

standards of

creditworthiness, leverage ratios

and other

regulatory requirements, among

other factors.

Derivatives, such

as those

embedded

long-term

repurchase

transactions

interest

rate

swaps,

and

off-balance

sheet

exposures,

such

recourse,

165

performance bonds or

credit card

arrangements, are subject

to collateral requirements.

As their

fair value

increases, the collateral

requirements may increase, thereby reducing the

balance of unpledged securities.

The importance of

the Puerto Rico

market for the

Corporation is an

additional risk factor

that could affect

its financing activities.

the case

of a

deterioration in

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.

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

positive tangible

capital

requirements to

utilize secured

loan facilities

with the

FHLB that

could

result

limitation

borrowing

amounts

maturity

terms,

even

the

Corporation

exceeds

well-capitalized

regulatory

capital levels.

The credit

ratings of

Popular’s debt

obligations are

a relevant

factor for

liquidity because

they impact

the Corporation’s

ability to

borrow

the

capital

markets,

its

cost

and

access

funding

sources.

Credit

ratings

are

based

the

financial

strength,

credit

quality and

concentrations in

the loan

portfolio, the

level and

volatility of

earnings, capital

adequacy,

the quality

of management,

geographic concentration

in Puerto

Rico, the

liquidity of

the balance

sheet, the

availability of

a significant

base of

core retail

and

commercial deposits, and the Corporation’s ability to access

a broad array of wholesale funding sources,

among other factors.

Furthermore,

various

statutory

provisions

limit

the

amount

dividends

insured

depository

institution

may

pay

its

holding

company without

regulatory approval. A

member bank must

obtain the

approval of

the Federal

Reserve Board

for any

dividend, if

the total of all dividends declared by the member

bank during the calendar year would exceed

the 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

reported

its

Report

Condition and

Income,

unless

the

member

bank

has

received

the

approval of

the Federal

Reserve Board. A

member bank also

may not permit

any portion of

its permanent capital

to be

withdrawn

unless the withdrawal has been approved by

the Federal Reserve Board. The ability of

a bank subsidiary to up-stream dividends to

its BHC

could thus

be impacted

by its

financial performance

and capital,

including tangible

and regulatory

capital, thus

potentially

limiting the

amount of

cash moving

up to

the BHCs

from

the banking

subsidiaries. This

could,

in turn,

affect

the BHCs

ability to

declare

dividends

its

outstanding

common

and

preferred

stock,

repurchase

its

securities

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

statutory

reserves

over the

measurement

period.

Pursuant

the

requirements

listed

above, PB

may

not declare

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

not

issue

unsecured

senior

debt,

these

banking

subsidiaries

are

funded

primarily with

deposits and

secured borrowings.

The banking

subsidiaries had

$7.8 million

in deposits

at 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

credit

recourse

provisions.

Certain

contractual

agreements

require

the

Corporation

post

collateral

secure

such

recourse

obligations if

the institution’s

required credit

ratings are

not maintained.

Collateral pledged

by the

Corporation to

secure recourse

166

obligations

amounted

approximately

$26.4

million

June

30,

2024.

The

Corporation

could

required

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

significant portion

our financial

activities and

credit

exposure is

concentrated in

the

Commonwealth of

Puerto Rico

(“Puerto

Rico”), which has faced severe economic and fiscal

challenges in the past and may face additional

challenges in the future.

Economic Performance.

Puerto

Rico’s

economy suffered

severe and

prolonged recession

from

2007

2017,

with real

gross national

product (“GNP”)

contracting approximately 15%

during this period.

In 2017, Hurricane

María caused significant

damage and destruction

across the

island, resulting in further economic contraction. Puerto Rico’s

economy has been gradually recovering since 2018, in

part aided by

the large amount

of federal disaster

relief and recovery

assistance funds injected

into the Puerto

Rico economy in

connection with

Hurricane María

and other

recent natural

disasters. This

growth was

interrupted by

the economic

shock caused

by the

COVID-19

pandemic in 2020, but has since resumed, in part

aided by additional federal assistance from

pandemic-related stimulus measures.

The

latest

Puerto

Rico

Economic Activity

Index,

published

the

Economic

Development Bank

for

Puerto

Rico

(the

“Economic

Activity Index”), reflected a 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

its

public debt

prompted the

U.S.

Congress to

enact the

Puerto Rico

Oversight, Management,

and Economic

Stability Act

(“PROMESA”) in

June 2016.

PROMESA

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

instrumentalities and municipalities (collectively,

“PR Government Entities”). Pursuant

to PROMESA, the

Oversight Board will be

place

until

market

access

restored

and

balanced

budgets

are

produced

for

least

four

consecutive

years.

PROMESA

also

established two

mechanisms for

the restructuring

of the

obligations of

PR Government

Entities: (a)

Title III,

which provides

an in-

court process that incorporates many of the

powers and provisions of the U.S. Bankruptcy Code

and permits adjustment of a broad

167

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

PROMESA.

While

the

majority

the

debt

has

already

been

restructured,

some

Government

Entities

still

face

significant

fiscal

challenges.

For

example,

the

Puerto

Rico

Electric

Power

Authority

still

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

municipalities

based

statutory

formula.

However,

part

the

fiscal

measures

required

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

seek

Oversight

Board

approval

issue,

guarantee

modify

their

debts

and

enter

into

contracts

with

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

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

Government Entities

totaled $376

million, of

which $376

million were

outstanding, compared

$362 million

December 31,

2023, of

which $333

million

were outstanding.

deterioration in

Puerto

Rico’s fiscal and

economic situation could adversely

affect the value

of our Puerto

Rico government obligations, resulting

in losses

us.

the

amount

outstanding,

$360

million

consists

loans

and

$16

million

are

securities

($314

million

and

$19

million,

respectively,

December

31,

2023).

Substantially

all

the

Corporation’s

direct

exposure

outstanding

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,

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.

July 2024,

the Corporation

received scheduled

principal payments

amounting to

$40 million

from various

obligations from

Puerto

Rico

municipalities.

For

additional

discussion

the

Corporation’s

direct

exposure

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

the

event

borrower

default

and

upon

the

satisfaction

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

168

the satisfaction of certain

other conditions (December 31, 2023

- $40 million). In

the event that the

mortgage loans insured by

HFA

and

held

the

Corporation directly

those

serving

collateral for

the

HFA

bonds

default and

the

collateral is

insufficient

satisfy the outstanding balance of these loans, HFA’s

ability to honor its insurance will depend, among other factors, on the financial

condition

HFA

the

time

such

obligations

become

due

and

payable.

The

Corporation

does

not

consider

the

government

guarantee when estimating the credit losses associated

with this portfolio.

BPPR’s

commercial loan

portfolio also

includes loans

private borrowers

who

are service

providers, lessors,

suppliers or

have

other relationships with the government. These borrowers could be negatively

affected by a deterioration in the fiscal and

economic

situation

Government

Entities.

Similarly,

BPPR’s

mortgage

and

consumer

loan

portfolios

include

loans

government

employees

and

retirees,

which

could

also

negatively

affected

fiscal

measures,

such

employee

layoffs

furloughs

reductions in pension benefits, if the fiscal and economic

situation deteriorates.

As of June

30, 2024, BPPR had

$19.7 billion in deposits from

the Puerto Rico government, its

instrumentalities, and municipalities.

The

rate

which

public

deposit

balances

may

decline is

uncertain and

difficult

predict.

The

amount

and

timing

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

the

United

States

Virgin

Islands

(the

“USVI”)

and

has

credit

exposure

USVI

government

entities.

The USVI has

been experiencing a

number of fiscal

and economic challenges,

which could adversely

affect the

ability of its

public

corporations and instrumentalities to service their outstanding

debt obligations. PROMESA does not apply to the USVI

and, as such,

there

currently

federal

legislation

permitting

the

restructuring

the

debts

the

USVI

and

its

public

corporations

and

instrumentalities.

the extent that

the fiscal condition

of the USVI

continues to deteriorate, the

U.S. Congress or the

Government of the

USVI may

enact legislation allowing for the restructuring of the

financial obligations of USVI government entities or imposing a

stay on creditor

remedies, including by making PROMESA applicable

to the USVI.

At 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

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

the

U.S.

Government in

the

form

U.S. Government

Positive
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