POPULAR INC
10-Qs and 10-Ks
PROXIES
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended
or
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of Incorporation or
(IRS Employer Identification Number)
organization)
,
(Address of principal executive offices)
(Zip code)
(
)
(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
The
The
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]
[
]
No
Indicate by
check mark
whether the registrant
has submitted electronically
every Interactive
Data File
required to
be
submitted pursuant to
Rule 405 of
Regulation S-T (§
232.405 of this
chapter) during the
preceding 12 months
(or for
such shorter period that the registrant was required to submit such files).
[X]
[
]
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company.
See definitions of “large accelerated filer”, “accelerated
filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
Accelerated filer [
]
Non-accelerated filer [
]
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act.
[
]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[
]
Yes
Indicate
the
number
of
shares
outstanding
of
each
of
the
issuer’s
classes
of
common
stock,
as
of
the
latest
practicable date:
Common Stock, $0.01 par value,
2
POPULAR INC
INDEX
Part I – Financial Information
Page
Item 1. Financial Statements
Unaudited Consolidated Statements of Financial Condition
at June 30, 2024
and December 31, 2023
6
Unaudited Consolidated Statements of Operations for
the quarters
and six months ended June 30, 2024 and 2023
7
Unaudited Consolidated Statements of Comprehensive
Income (Loss) for the
quarters and six months ended June 30, 2024 and
2023
8
Unaudited Consolidated Statements of Changes in
Stockholders’ Equity for the
quarters and six months ended June 30, 2024 and
2023
9
Unaudited Consolidated Statements of Cash Flows for
the six months
ended June 30, 2024 and 2023
11
Notes to Unaudited Consolidated Financial Statements
13
Item 2. Management’s Discussion and Analysis of Financial
Condition and
129
Item 3. Quantitative and Qualitative Disclosures about
Market Risk
178
Item 4. Controls and Procedures
178
Part II – Other Information
Item 1. Legal Proceedings
178
Item 1A. Risk Factors
178
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds
178
Item 3. Defaults Upon Senior Securities
179
Item 4. Mine Safety Disclosures
179
Item 5. Other Information
179
Item 6. Exhibits
179
Signatures
181
3
Forward-Looking Statements
This
Form 10-Q
contains “forward-looking
statements” within
the meaning
of the
U.S. Private
Securities Litigation
Reform Act
of
1995,
including,
without
limitation,
statements
about
Popular,
Inc.’s
(the
“Corporation,”
“Popular,”
“we,”
“us,”
“our”)
business,
financial condition, results
of operations, plans,
objectives and future
performance. These statements
are not
guarantees of future
performance,
are
based
on
management’s
current
expectations
and,
by
their
nature,
involve
risks,
uncertainties,
estimates
and
assumptions. Potential
factors, some
of which
are beyond
the Corporation’s
control, could
cause actual
results to
differ materially
from those expressed in, or implied by, such forward-looking statements. Risks and uncertainties include without limitation the effect
of competitive and
economic factors, and our
reaction to those factors,
the adequacy of
the allowance for loan
losses, delinquency
trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity,
and the effect
of legal and regulatory proceedings and new accounting
standards on the Corporation’s financial condition and
results of operations.
All statements
contained herein
that are
not clearly
historical in
nature are
forward-looking, and
the words
“anticipate,” “believe,”
“continues,” “expect,”
“estimate,” “intend,”
“project” and
similar expressions
and future
or conditional
verbs such
as “will,”
“would,”
“should,” “could,” “might,” “can,” “may” or similar
expressions are generally intended to identify
forward-looking statements.
Various factors, some of which
are beyond Popular’s control, could cause actual results to differ materially from those expressed in,
or implied by, such forward-looking statements. Factors that might cause such a
difference include, but are not limited to:
●
conditions
in
the
geographic
areas
we
serve
and,
in
particular,
in
the
Commonwealth
of
Puerto
Rico
(the
“Commonwealth” or “Puerto Rico”), where a significant
portion of our business is concentrated;
●
consumer confidence
and spending
habits which
may affect
in turn,
among other
things, our
level of
non-performing
assets, charge-offs and provision expense;
●
originations, affect
our ability
to originate
and distribute
financial products
in the
primary and
secondary markets
and
impact the value of our investment portfolio and
our ability to return capital to our shareholders;
●
banking industry in general on investor and depositor
sentiment regarding the stability and liquidity of
banks;
●
Puerto
Rico
Government
and
the
Federally-appointed
oversight
board
on
the
economy,
our
customers
and
our
business;
●
Economic
Stability
Act
(“PROMESA”)
and
of
other
actions
taken
or
to
be
taken
to
address
Puerto
Rico’s
fiscal
challenges on the value of our portfolio of Puerto Rico government securities and
loans to governmental entities and of
our
commercial,
mortgage
and
consumer
loan
portfolios
where
private
borrowers
could
be
directly
affected
by
governmental action;
●
difficult
to
predict
and
may
be
impacted
by
factors
such
as
the
amount
of
Federal
funds
received
by
the
P.R.
Government
and
the
rate
of
expenditure
of
such
funds,
as
well
as
the
financial
condition,
liquidity
and
cash
management practices of the Puerto Rico Government
and its instrumentalities;
●
man-made disasters, acts of violence or war or
pandemics, epidemics and other health-related
crises, or the fear of any
such event
occurring, any of
which could cause
adverse consequences for
our business, including,
but not
limited to,
disruptions in our operations;
4
●
earnings, efficiencies and our targeted sustainable return on
tangible common equity of 14% by the end
of 2025;
●
to
service certain
of Banco
Popular de
Puerto Rico’s
key channels,
as well
as the
entry into
amended and
restated
commercial agreements (the “Evertec Business Acquisition
Transaction”);
●
●
related requirements and the impact of other proposed
capital standards on our capital ratios;
●
by the FDIC to recover the losses to the deposit insurance fund (“DIF”)
resulting from the receiverships of Silicon Valley
Bank and Signature Bank;
●
as acquisitions and dispositions;
●
Puerto Rico and the other markets in which
our borrowers are located;
●
●
●
●
●
core financial
transaction processing and
information technology services,
or of
third parties
providing services
to us,
including
as
a
result
of
cyberattacks,
e-fraud,
denial-of-services
and
computer
intrusion,
resulting
in,
among
other
things, loss or breach of customer data, disruption
of services, reputational damage or additional
costs to Popular;
●
●
pending or future litigation and regulatory or government
investigations or actions;
●
●
●
●
Moreover,
the
outcome
of
legal
and
regulatory
proceedings,
as
discussed
in
“Part
II,
Item
1.
Legal
Proceedings,”
is
inherently
uncertain and depends on judicial interpretations of law and the findings of regulators, judges and/or juries. Investors should refer to
the Corporation’s Annual
Report on Form
10-K for the
year ended December 31,
2023 (the “2023
Form 10-K”), as
well as “Part
II,
Item 1A”
of our
Quarterly Reports
on Form
10-Q for
a discussion
of such
factors and
certain risks
and uncertainties
to which
the
Corporation is subject.
5
All forward-looking
statements included
in this
Form 10-Q
are based
upon information
available to
Popular as
of the
date of
this
Form 10-Q, and other than as
required by law, including the
requirements of applicable securities laws, we assume no
obligation to
update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date
of such statements.
6
POPULAR, INC.
CONSOLIDATED STATEMENTS
OF FINANCIAL CONDITION
(UNAUDITED)
[UNAUDITED]
June 30,
December 31,
(In thousands, except share information)
2024
2023
Assets:
Cash and due from banks
$
$
Money market investments:
Time deposits with other banks
Total money market investments
Trading account debt securities, at fair value:
Other trading account debt securities
Debt securities available-for-sale, at fair
value:
Pledged securities with creditors’ right to repledge
Other debt securities available-for-sale
Debt securities available-for-sale
Less – Allowance for credit losses
Debt securities available-for-sale, net
Debt securities held-to-maturity, at amortized cost:
Pledged securities with creditors’ right to repledge
Other debt securities held-to-maturity
Debt securities held-to-maturity (fair
value 2024 - $
; 2023 - $
)
Less – Allowance for credit losses
Debt securities held-to-maturity, net
Equity securities (realizable value 2024 -
$
; 2023 - $
)
Loans held-for-sale, at fair value
Loans held-in-portfolio
Less – Unearned income
Total loans held-in-portfolio, net
Premises and equipment, net
Other real estate
Accrued income receivable
Mortgage servicing rights, at fair value
Other assets
Goodwill
Other intangible assets
Total assets
$
$
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Non-interest bearing
$
$
Interest bearing
Total deposits
Assets sold under agreements to repurchase
Notes payable
Other liabilities
Total liabilities
Commitments and contingencies (Refer
to Note 20)
Stockholders’ equity:
Preferred stock,
-
)
Common stock, $
) and
)
Surplus
Retained earnings
Treasury stock - at cost,
)
(
2,010,500
)
(
2,018,957
)
Accumulated other comprehensive loss, net
of tax
(
1,878,282
)
(
1,895,531
)
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
$
The accompanying notes are an integral part of
these Consolidated Financial Statements.
7
POPULAR, INC.
CONSOLIDATED STATEMENTS
OF OPERATIONS
(UNAUDITED)
Quarters ended June 30,
Six months ended June 30,
(In thousands, except per share information)
2024
2023
2024
2023
Interest income:
Loans
$
$
$
$
Money market investments
Investment securities
Total interest income
Interest expense:
Deposits
Short-term borrowings
Long-term debt
Total interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Non-interest income:
Service charges on deposit accounts
Other service fees
Mortgage banking activities (Refer to Note 9)
Net gain, including impairment on equity securities
Net gain
on trading account debt securities
Adjustments to indemnity reserves on loans sold
(
456
)
(
25
)
Other operating income
Total non-interest income
Operating expenses:
Personnel costs
Net occupancy expenses
Equipment expenses
Other taxes
Professional fees
Technology and software expenses
Processing and transactional services
Communications
Business promotion
Deposit insurance
Other real estate owned (OREO) income
(
5,750
)
(
3,314
)
(
11,071
)
(
5,008
)
Other operating expenses
Amortization of intangibles
Total operating expenses
Income before income tax
Income tax expense
Net Income
$
$
$
$
Net Income Applicable to Common Stock
$
$
$
$
Net Income per Common Share – Basic
$
$
$
$
Net Income per Common Share – Diluted
$
$
$
$
The accompanying notes are an integral part of
these Consolidated Financial Statements.
8
POPULAR, INC.
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
Quarters ended,
Six months ended,
June 30,
June 30,
(In thousands)
2024
2023
2024
2023
Net income
$
$
$
$
Other comprehensive income (loss) before
tax:
Foreign currency translation adjustment
(
3,855
)
Amortization of net losses of pension and
postretirement benefit plans
Unrealized holding gains (losses) on debt securities
arising during the period
(
77,851
)
(
50,608
)
Amortization of unrealized losses of debt
securities transfer from available-for-
sale to held-to-maturity
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
(
24,134
)
Income tax expense
(
15,722
)
(
2,476
)
(
23,954
)
(
34,228
)
Total other comprehensive income (loss), net of tax
(
26,610
)
Comprehensive income, net of tax
$
$
$
$
Tax effect allocated to each component of other comprehensive
income (loss):
Quarters ended
Six months ended,
June 30,
June 30,
(In thousands)
2024
2023
2024
2023
Adjustment of pension and postretirement
benefit plans
$
$
$
$
Amortization of net losses of pension and
postretirement benefit plans
(
1,357
)
(
1,805
)
(
2,714
)
(
3,610
)
Unrealized holding losses on debt securities
arising during the period
(
5,481
)
(
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.
9
POPULAR, INC.
CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
other
Common
Preferred
Retained
Treasury
comprehensive
(In thousands)
stock
stock
Surplus
earnings
stock
(loss) income
Total
Balance at March 31, 2023
$
$
$
$
$
(
2,025,399
)
$
(
2,301,825
)
$
Net income
Issuance of stock
Dividends declared:
Common stock
[1]
(
39,663
)
(
39,663
)
Preferred stock
(
353
)
(
353
)
Common stock purchases
(
1,271
)
(
1,271
)
Stock based compensation
Other comprehensive loss, net of tax
(
26,610
)
(
26,610
)
Balance at June 30, 2023
$
$
$
$
$
(
2,018,611
)
$
(
2,328,435
)
$
Balance at March 31, 2024
$
$
$
$
$
(
2,013,187
)
$
(
1,933,186
)
$
Net income
Issuance of stock
Dividends declared:
Common stock
[1]
(
44,944
)
(
44,944
)
Preferred stock
(
353
)
(
353
)
Common stock purchases
(
3,200
)
(
3,200
)
Stock based compensation
Other comprehensive income, net of tax
Balance at June 30, 2024
$
$
$
$
$
(
2,010,500
)
$
(
1,878,282
)
$
[1]
Dividends declared per common share during the quarter
ended June 30, 2024 - $
).
10
POPULAR, INC.
CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
other
Common
Preferred
Retained
Treasury
comprehensive
(In thousands)
stock
stock
Surplus
earnings
stock
(loss) income
Total
Balance at December 31, 2022
$
$
$
$
$
(
2,030,178
)
$
(
2,524,928
)
$
Cumulative effect of accounting change
Net income
Issuance of stock
Dividends declared:
Common stock
[1]
(
79,249
)
(
79,249
)
Preferred stock
(
706
)
(
706
)
Common stock purchases
(
4,241
)
(
4,241
)
Stock based compensation
Other comprehensive income, net of tax
Balance at June 30, 2023
$
$
$
$
$
(
2,018,611
)
$
(
2,328,435
)
$
Balance at December 31, 2023
$
$
$
$
$
(
2,018,957
)
$
(
1,895,531
)
$
Net income
Issuance of stock
Dividends declared:
Common stock
[1]
(
89,695
)
(
89,695
)
Preferred stock
(
706
)
(
706
)
Common stock purchases
(
6,776
)
(
6,776
)
Stock based compensation
Other comprehensive income, net of tax
Balance at June 30, 2024
$
$
$
$
$
(
2,010,500
)
$
(
1,878,282
)
$
[1]
Dividends declared per common share during the six months
ended June 30, 2024 - $
).
For the period ended
June 30,
June 30,
Disclosure of changes in number of shares:
2024
2023
Preferred Stock:
Balance at beginning and end of period
Common Stock – Issued:
Balance at beginning of period
Issuance of stock
Balance at end of period
Treasury stock
(
32,446,045
)
(
32,608,461
)
Common Stock – Outstanding
The accompanying notes are an integral part of these Consolidated
Financial Statements.
11
POPULAR, INC.
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(UNAUDITED)
Six months ended June 30,
(In thousands)
2024
2023
Cash flows from operating activities:
Net income
$
$
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for credit losses
Amortization of intangibles
Depreciation and amortization of premises and equipment
Net accretion of discounts and amortization of premiums and
deferred fees
(
127,770
)
Interest capitalized on loans subject to the temporary payment
moratorium or loss mitigation alternatives
(
4,047
)
(
5,275
)
Share-based compensation
Fair value adjustments on mortgage servicing rights
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)
(
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
Net originations on loans held-for-sale
(
22,580
)
(
45,005
)
Net decrease (increase) in:
Trading debt securities
Equity securities
(
4,445
)
(
7,962
)
Accrued income receivable
(
17,340
)
Other assets
(
8,463
)
Net increase (decrease) in:
Interest payable
Pension and other postretirement benefits obligation
Other liabilities
(
59,481
)
(
91,321
)
Total adjustments
(
39,068
)
Net cash provided by operating activities
Cash flows from investing activities:
Net decrease (increase) in money market investments
(
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
Held-to-maturity
Proceeds from sale of investment securities:
Equity
Net disbursements on loans
(
287,684
)
(
776,383
)
Proceeds from sale of loans
Acquisition of loan portfolios
(
384,479
)
(
322,512
)
Return of capital from equity method investments
Acquisition of premises and equipment and other productive
assets
(
95,412
)
(
85,341
)
Proceeds from sale of:
Premises and equipment and other productive assets
Foreclosed assets
Net cash used in investing activities
(
2,087,772
)
(
3,041,757
)
12
Cash flows from financing activities:
Net increase (decrease) in:
Deposits
Assets sold under agreements to repurchase
(
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
Proceeds from issuance of common stock
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
Net (decrease) increase in cash and due from banks, and
restricted cash
(
60,316
)
Cash and due from banks, and restricted cash at beginning
of period
Cash and due from banks, and restricted cash at the end of
the period
$
$
The accompanying notes are an integral part of these Consolidated
Financial Statements.
13
Notes to Consolidated Financial
Statements
(Unaudited)
Note 1 -
Nature of operations
14
Note 2 -
Basis of presentation
15
Note 3 -
New accounting pronouncements
16
Note 4 -
Restrictions on cash and due from banks and
certain securities
19
Note 5 -
Debt securities available-for-sale
20
Note 6 -
Debt securities held-to-maturity
23
Note 7 -
Loans
27
Note 8 -
Allowance for credit losses – loans held-in-
portfolio
36
Note 9 -
Mortgage banking activities
76
Note 10 -
Transfers of financial assets and mortgage
servicing assets
77
Note 11 -
Other real estate owned
81
Note 12 -
Other assets
82
Note 13 -
Goodwill and other intangible assets
83
Note 14 -
Deposits
85
Note 15 -
Borrowings
86
Note 16 -
Other liabilities
88
Note 17 -
Stockholders’ equity
89
Note 18 -
Other comprehensive income (loss)
90
Note 19 -
Guarantees
92
Note 20 -
Commitments and contingencies
94
Note 21-
Non-consolidated variable interest entities
98
Note 22 -
Related party transactions
100
Note 23 -
Fair value measurement
101
Note 24 -
Fair value of financial instruments
108
Note 25 -
Net income per common share
111
Note 26 -
Revenue from contracts with customers
112
Note 27 -
Leases
114
Note 28 -
Pension and postretirement benefits
116
Note 29 -
Stock-based compensation
117
Note 30 -
Income taxes
120
Note 31 -
Supplemental disclosure on the consolidated
statements of cash flows
124
Note 32 -
Segment reporting
125
14
Note 1 – Nature of Operations
Popular,
Inc. (the
“Corporation” or
“Popular”) is
a diversified,
publicly-owned financial
holding company
subject to
the supervision
and
regulation
of
the
Board
of
Governors
of
the
Federal
Reserve
System.
The
Corporation
has
operations
in
Puerto
Rico,
the
mainland United
States (“U.S.”)
and the
U.S. and
British Virgin
Islands. In
Puerto Rico,
the Corporation
provides retail,
mortgage,
and
commercial
banking
services,
through
its
principal
banking
subsidiary,
Banco
Popular
de
Puerto
Rico
(“BPPR”),
as
well
as
investment
banking,
broker-dealer,
auto
and
equipment
leasing
and
financing,
and
insurance
services
through
specialized
subsidiaries. In
the U.S.
mainland, the
Corporation provides
retail, mortgage,
commercial banking
services, as
well as
equipment
leasing
and
financing,
through
its
New
York-chartered
banking
subsidiary,
Popular
Bank
(“PB”
or
“Popular
U.S.”),
which
has
branches located in New York, New Jersey, and Florida.
15
Note 2 – Basis of Presentation
Basis of Presentation
The (unaudited) interim Consolidated Financial Statements are, in the opinion of management, a fair statement of the results
for the
periods reported
and include
all necessary
adjustments, all
of a
normal recurring
nature, for
a fair
statement of
such results.
The
consolidated statement of financial
condition presented as of
December 31, 2023 was
derived from audited Consolidated Financial
Statements of the Corporation for the year ended
December 31, 2023.
Certain
information
and
notes
to
the
financial
statements
disclosures
which
would
normally
be
included
in
financial
statements
prepared in
accordance
with Accounting
Principles
Generally Accepted
in
the
United
States
of
America
(US
GAAP), have
been
condensed or omitted from the unaudited financial statements pursuant
to the rules and regulations of the
Securities and Exchange
Commission.
Accordingly,
these
financial
statements
should
be
read
in
conjunction
with
the
audited
Consolidated
Financial
Statements of
the Corporation
for the
year ended
December 31,
2023,
included in
the 2023
Form 10-K.
Operating results
for the
interim periods disclosed herein are not necessarily
indicative of the results that may be expected
for a full year or any future period
Tax impact on Intercompany Distributions
The net income for the six months
ended June 30, 2024, included $
income tax
expense and $
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 $
million, in the years prior to 2022. The $
31, 2024 on
the related late
payment of the
withholding tax, of which
approximately $
As a result of this adjustment, the deferred
tax asset related to NOL of the BHC
and its related valuation allowance was reduced by
$
previously issued interim or
annual consolidated financial statements and
the adjustment is
not expected to be
material to the
year
ending December 31, 2024.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial
statements in conformity with
accounting principles generally accepted in
the United States
of America
requires management to make
estimates and assumptions that
affect the reported
amounts of assets and
liabilities and contingent
assets
and
liabilities
at
the
date
of
the
financial
statements,
and
the
reported
amounts
of
revenues
and
expenses
during
the
reporting period. Actual results could differ from those estimates.
16
Note 3 - New accounting pronouncements
Recently Adopted Accounting Standards Updates
Standard
Description
Date of adoption
Effect on the financial statements
FASB ASU 2023-02,
Investments—Equity
Method and Joint
Ventures (Topic 323) -
Accounting for
Investments in Tax Credit
Structures Using the
Proportional Amortization
Method
The
Financial Accounting
Standards Board
("FASB")
issued
Accounting
Standard
Update
("ASU")
2023-02
in
March
2023,
which
amends
Accounting
Standards
Codification
("ASC")
Topic
323
by
permitting the election to apply the
proportional amortization method to account
for
tax
equity
investments
that
generate
income
tax
credits
through
investment
in
low-income-housing
tax
credit
(LIHTC)
structures
and
other
tax
credit
programs
if
certain
conditions
are
met.
The
ASU
also
eliminates
the
application
of
the
ASC
Subtopic 323-740 to LIHTC investments not
accounted
for
using
the
proportional
amortization
method
and
instead
requires
the use of other guidance.
January 1, 2024
The
Corporation
was
not
impacted
by
the
adoption of
this
ASU
since
it does
not
hold
investments
in
tax
equity
investments.
FASB ASU 2023-01,
Leases (Topic 842) -
Common Control
Arrangements
The FASB issued ASU 2023-01 in March
2023, which amends ASC Topic 842 and
requires the amortization leasehold
improvements associated with common
control leases over the useful life of the
leasehold improvements to the common
control group as long as the lessee controls
the use of the underlying assets through a
lease. In addition, the ASU requires
companies to account for leasehold
improvements associated with common
control leases as a transfer between entities
under common control through an
adjustments to equity if, and when, the
lessee no longer controls the use of the
underlying asset.
January 1, 2024
The
Corporation
was
not
impacted
by
the
adoption of
this
ASU
since
it does
not
hold
common
control
leasehold
improvements, however, it
will consider
this
guidance
to
determine
the
amortization
period for
and
accounting
treatment
of
leasehold
improvements
associated with common control
leases
acquired on or after the effective date.
FASB ASU 2022-03, Fair
Value Measurement
(Topic 820) - Fair Value
Measurement of Equity
Securities Subject to
Contractual Sale
Restriction
The FASB issued ASU 2022-03 in June
2022, which clarifies that a contractual
restriction that prohibits the sale of an equity
security is not considered part of the unit of
account of the equity security, therefore, is
not considered in measuring its fair value.
The ASU also provides enhanced
disclosures for equity securities subject to a
contractual sale restriction.
January 1, 2024
The
Corporation
was
not
impacted
by
the
adoption
of
this
accounting
pronouncement
since
it
does
not
hold
equity securities measured at
fair value
with sale restrictions.
17
Accounting Standards Updates Not Yet Adopted
Standard
Description
Date of adoption
Effect on the financial statements
FASB ASU 2024-02,
Codification
Improvements—
Amendments to Remove
References to the
Concepts Statements
The
FASB
issued
ASU
2024-02
in
March
2024, which
removes various
references to
concept
statements
from
the
FASB
Accounting
Standards
Codification.
The
ASU
intends
to
simplify
the
Codification
and
distinguish
between
nonauthoritative
and authoritative guidance.
January 1, 2025
The Corporation
is currently
evaluating
any
impact
that
the
adoption
of
this
guidance
will
have
on
its
financial
statements
and
presentation
and
disclosures.
FASB ASU 2024-01,
Compensation - Stock
Compensation (Topic 718)
- Scope Application of
Profits Interest and Similar
Awards
The FASB issued ASU 2024-01 in March
2024, which amends ASC Topic 718 by
including an illustrative example to
demonstrate how an entity would apply the
scope guidance in paragraph 718-10-15-3
to determine whether profits interest awards
should be accounted for in accordance with
ASC
Topic
718.
The
ASU
is
intended
to
reduce complexity and diversity in practice.
January 1, 2025
The Corporation
is currently
evaluating
any
impact
that
the
adoption
of
this
guidance
will
have
on
its
financial
statements
and
presentation
and
disclosures.
FASB ASU 2023-09,
Income Tax (Topic
740) -
Improvements to Income
Tax Disclosures
The
FASB
issued
ASU
2023-09
in
December 2023,
which amends
ASC Topic
740
by
enhancing
disclosures
regarding
rate
reconciliation
and
requiring
the
disclosure of
income taxes paid, income (or
loss)
from
continuing
operations
before
income
tax
expense
and
income
tax
expense
disaggregated
by
national,
state
and foreign level. Disclosures that no longer
were considered
cost
beneficial or
relevant
were removed from ASC Topic 740.
January 1, 2025
The Corporation
is currently
evaluating
any
impact
that
the
adoption
of
this
guidance
will
have
on
its
financial
statements
and
presentation
and
disclosures.
FASB ASU 2023-08,
Intangibles - Goodwill and
Other - Crypto Assets
(Subtopic 350-60) -
Accounting for and
Disclosure of Crypto
Assets
The
FASB
issued
ASU
2023-08
in
December
2023,
which
amends
ASC
Subtopic
350-60
by
requiring
that
crypto
assets
are
measured
at
fair
value
in
the
statement
of
financial
position
each
reporting
period
with
changes
from
remeasurement
being
recognized
in
net
income.
The
ASU
also
requires
enhanced
disclosures
for
both
annual
and
interim
reporting
periods
to
provide
investors
with
relevant information
to
analyze and
assess
the
exposure
and
risk
of
significant
individual crypto asset holdings.
January 1, 2025
The Corporation does not expect to be
impacted by the adoption of this ASU
since it does not hold crypto-assets.
FASB ASU 2023-07,
Segment Reporting (Topic
280) - Improvements to
Reportable Segment
Disclosures
The
FASB
issued
ASU
2023-07
in
November 2023,
which amends
ASC Topic
280
by
requiring
additional
disclosures
about significant segment expenses.
For fiscal years
beginning on
January 1, 2024
For interim periods
within fiscal years
beginning after
January 1, 2025
The Corporation
is currently
evaluating
any
impact
that
the
adoption
of
this
guidance
will
have
on
its
financial
statements
and
presentation
and
disclosures.
18
Accounting Standards Updates Not Yet Adopted
Standard
Description
Date of adoption
Effect on the financial statements
FASB ASU 2023-06,
Disclosure Improvements -
Codification Amendments
in Response to the SEC’s
Disclosure Update and
Simplification Initiative
The FASB
issued ASU
2023-06 in
October
2023
which
modifies
the
disclosure
or
presentation
requirements
of
various
subtopics
in
the
Codification
with
the
purpose
of
aligning
U.S.
GAAP
requirements
with
those
of
the
SEC
under
Regulation S-X and S-K.
The date on which
the SEC removes
related disclosure
requirements from
Regulation S-X or
Regulation S-K. If by
June 30, 2027, the
SEC has not
removed the
applicable
requirements from
Regulation S-X or
Regulation S-K, the
pending content of
the related
amendment will be
removed from the
Codification and will
not become
effective for any
entity.
The Corporation
does not
expect to
be
impacted
by
the
adoption
of
this
ASU
since
it
is
currently
subject
to
SEC's
current
disclosure
and
presentation
requirements under Regulation S-X and
S-K.
FASB ASU 2023-05,
Business Combinations -
Joint Venture Formations
(Subtopic 805-60) -
Recognition and initial
measurement
The
FASB
issued
ASU
2023-05
in
August
2023, which
amends ASC
Subtopic 805-60
to include specific
guidance about how
joint
ventures
should
recognize
and
initially
measure
assets
contributed
and
liabilities
assumed.
The
amendments
require
that
a
joint venture, upon formation, recognize and
initially
measure
its
assets
and
liabilities at
fair value.
January 1, 2025
Upon
adoption
of
this
ASU,
the
Corporation will
consider this
guidance
for
the
initial
measure
of
assets
and
liabilities
of
newly
created
joint
ventures.
19
Note 4 - Restrictions on cash and due from
banks and certain securities
BPPR is
required by
regulatory agencies
to maintain
average reserve
balances with
the Federal
Reserve Bank
of New
York
(the
“Fed”) or
other banks.
Average reserve
balances in
BPPR amounted
to $
billion).
Cash
and
due
from
banks,
as
well
as
other
highly
liquid
securities,
are
used
to
cover
these
required
average
reserve
balances.
At June
30, 2024,
the Corporation
held $
debt
securities
available
for
sale
and
equity
securities
(December
31,
2023
-
$
securities available for sale and equity securities consist primarily of assets
held for the Corporation’s non-qualified retirement plans
and fund deposits guaranteeing possible liens or encumbrances
over the title of insured properties.
20
Note 5 – Debt securities available-for-sale
The following tables present
the amortized cost, gross
unrealized gains and losses,
approximate fair value, weighted average
yield
and contractual maturities of debt securities available-for-sale
at June 30, 2024 and December 31, 2023.
At June 30, 2024
Allowance
Gross
Gross
Weighted
Amortized
for credit
unrealized
unrealized
Fair
average
(In thousands)
cost
losses
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
$
$
$
$
%
After 1 to 5 years
After 5 to 10 years
Total U.S. Treasury
securities
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
After 5 to 10 years
After 10 years
Total collateralized
mortgage obligations - federal agencies
Mortgage-backed securities - federal agencies
Within 1 year
After 1 to 5 years
After 5 to 10 years
After 10 years
Total mortgage-backed
securities - federal agencies
Other
Within 1 year
After 1 to 5 years
Total other
Total debt securities
available-for-sale
[1]
$
$
$
$
$
%
[1]
agreements that the secured parties are not permitted
to sell or repledge the collateral, of which $
Corporation had unpledged Available for Sale securities
with a fair value of
$
21
At December 31, 2023
Gross
Gross
Weighted
Amortized
unrealized
unrealized
Fair
average
(In thousands)
cost
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
$
$
$
%
After 1 to 5 years
After 5 to 10 years
Total U.S. Treasury
securities
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
After 5 to 10 years
After 10 years
Total collateralized
mortgage obligations - federal agencies
Mortgage-backed securities - federal agencies
Within 1 year
After 1 to 5 years
After 5 to 10 years
After 10 years
Total mortgage-backed
securities - federal agencies
Other
Within 1 year
After 1 to 5 years
Total other
Total debt securities
available-for-sale
[1]
$
$
$
$
%
[1]
Includes $
servicing agreements that the secured parties are not permitted
to sell or repledge the collateral, of which $
public funds. The Corporation had unpledged Available
for Sale securities with a fair value of
$
borrowing facilities.
The weighted
average yield
on debt
securities available-for-sale
is based
on amortized
cost; therefore,
it
does not
give
effect to
changes in fair value.
Securities
not
due
on
a
single
contractual
maturity
date,
such
as
mortgage-backed
securities
and
collateralized
mortgage
obligations,
are
classified
based
on
the
period
of
final
contractual
maturity.
The
expected
maturities
of
collateralized
mortgage
obligations, mortgage-backed securities
and certain
other securities
may differ
from their
contractual maturities
because they
may
be subject to prepayments or may be called
by the issuer.
At June 30,
2024, the Corporation did not
intend to sell or
believed it was more
likely than not that
it would be required
to sell debt
securities classified
as available-for-sale.
There were
30, 2024 and 2023.
22
The
following
tables
present
the
Corporation’s
fair
value
and
gross
unrealized
losses
of
debt
securities
available-for-sale,
aggregated by investment category and length of
time that individual securities have been in a continuous
unrealized loss position at
June 30, 2024 and December 31, 2023.
At June 30, 2024
Less than 12 months
12 months or more
Total
Gross
Gross
Gross
Fair
Fair
Fair
(In thousands)
value
losses
value
losses
value
losses
U.S. Treasury securities
$
$
$
$
$
$
Collateralized mortgage obligations - federal agencies
Mortgage-backed securities
Total debt securities
available-for-sale in an unrealized loss position
$
$
$
$
$
$
At December 31, 2023
Less than 12 months
12 months or more
Total
Gross
Gross
Gross
Fair
Fair
Fair
(In thousands)
value
losses
value
losses
value
losses
U.S. Treasury securities
$
$
$
$
$
$
Collateralized mortgage obligations - federal agencies
Mortgage-backed securities
Total debt securities
available-for-sale in an unrealized loss position
$
$
$
$
$
$
As of
June 30, 2024,
the portfolio of
available-for-sale debt securities
reflects gross unrealized
losses of $
by
mortgage-backed
securities,
which
have
been
impacted
by
a
decline
in
fair
value
as
a
result
of
the
rising
interest
rate
environment.
The portfolio of
available-for-sale debt securities is comprised
mainly of U.S Treasuries
and obligations from the
U.S.
Government, its
agencies or
government sponsored
entities, including
Federal National
Mortgage Association
(“FNMA”), Federal
Home Loan Mortgage Corporation (“FHLMC”) and Government National Mortgage Association (“GNMA”). As discussed in Note 2 of
the 2023
Form 10-K,
these securities
carry an
explicit or
implicit guarantee
from the
U.S. Government,
are highly
rated by
major
rating agencies, and have a long history of
no credit losses. Accordingly, the Corporation applies a zero-credit loss assumption.
23
Note 6 –Debt securities held-to-maturity
The following
tables present
the amortized
cost, allowance
for credit
losses, gross
unrealized gains
and losses,
approximate fair
value,
weighted average
yield
and contractual
maturities of
debt securities
held-to-maturity at
June 30,
2024
and
December 31,
2023.
At June 30, 2024
Allowance
Carrying
Value
Gross
Gross
Weighted
Amortized
Book
[1]
for Credit
Net of
unrealized
unrealized
Fair
average
(In thousands)
cost
Value
Losses
Allowance
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
$
$
$
$
$
$
%
After 1 to 5 years
Total U.S. Treasury
securities
Obligations of Puerto Rico, States and
political subdivisions
Within 1 year
After 1 to 5 years
After 5 to 10 years
After 10 years
Total obligations of
Puerto Rico, States and
political subdivisions
Collateralized mortgage obligations - federal
agencies
After 10 years
Total collateralized
mortgage obligations -
federal agencies
Securities in wholly owned statutory business
trusts
After 10 years
Total securities
in wholly owned statutory
business trusts
Total debt securities
held-to-maturity [2]
$
$
$
$
$
$
$
%
[1]
Book value includes $
certain securities previously transferred from available-for-sale
securities portfolio to the held-to-maturity securities portfolio.
[2]
Includes $
Corporation had unpledged held-to-maturities securities with
a fair value of $
24
At December 31, 2023
Allowance
Carrying
Value
Gross
Gross
Weighted
Amortized
Book
[1]
for Credit
Net of
unrealized
unrealized
Fair
average
(In thousands)
cost
Value
Losses
Allowance
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
$
$
$
$
$
$
%
After 1 to 5 years
After 5 to 10 years
Total U.S. Treasury
securities
Obligations of Puerto Rico, States and
political subdivisions
`
Within 1 year
After 1 to 5 years
After 5 to 10 years
After 10 years
Total obligations of
Puerto Rico, States and
political subdivisions
Collateralized mortgage obligations - federal
agencies
Within 1 year
After 10 years
Total collateralized
mortgage obligations -
federal agencies
Securities in wholly owned statutory business
trusts
After 10 years
Total securities
in wholly owned statutory
business trusts
Total debt securities
held-to-maturity [2]
$
$
$
$
$
$
$
%
[1]
Book value includes $
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 $
Corporation had unpledged held-to-maturities securities with
a fair value of
$
Debt securities not due on a single contractual maturity date,
such as collateralized mortgage obligations, are classified in the period
of final
contractual maturity.
The expected
maturities of
collateralized mortgage
obligations and
certain other
securities may
differ
from their contractual maturities because they may be
subject to prepayments or may be called
by the issuer.
Credit Quality Indicators
The following describes the credit quality indicators by major security
type that the Corporation considers to develop the
estimate of
the allowance for credit losses for investment securities
held-to-maturity.
As
discussed in
Note
2
of
2023 Form
10-K,
U.S. Treasury
securities
carry
an
explicit
guarantee from
the
U.S. Government
are
highly rated by major rating
agencies and have a long
history of no credit losses. Accordingly,
the Corporation applies a zero-credit
loss assumption and no allowance for credit losses
(“ACL”) for these securities has been established.
At June
30, 2024
and December 31,
2023, the “Obligations
of Puerto
Rico, States and
political subdivisions” classified
as held-to-
maturity,
includes
securities
issued by
municipalities
of
Puerto
Rico
that
are
generally
not
rated
by
a
credit
rating
agency.
This
includes $
from
certain
property
taxes
imposed
by
the
issuing
municipality
(December
31,
2023
-
$
obligations, they
also benefit
from a
pledge of
the full
faith, credit
and unlimited
taxing power
of the
issuing municipality,
which is
required by law to levy property taxes in an amount sufficient for the payment of
debt service on such general obligation bonds. The
Corporation performs periodic credit quality
reviews of these securities and internally
assigns standardized credit risk ratings based
on its evaluation. The
Corporation considers these ratings in
its estimate to develop the
allowance for credit losses
associated with
these
securities.
For
the
definitions
of
the
obligor
risk
ratings,
refer
to
the
Credit
Quality
section
of
Note
8
to
the
Consolidated
Financial Statements.
25
The
following
presents
the
amortized
cost
basis
of
securities
held
by
the
Corporation
issued
by
municipalities
of
Puerto
Rico
aggregated by the internally assigned standardized
credit risk rating:
At June 30, 2024
At December 31, 2023
(In thousands)
Securities issued by Puerto Rico municipalities
Watch
$
$
Pass
Total
$
$
At June 30, 2024, the portfolio of “Obligations of Puerto Rico, States
and political subdivisions” also includes $
issued
by
the
Puerto
Rico
Housing Finance
Authority
(“HFA”),
a
government
instrumentality,
for
which the
underlying source
of
payment
is
second
mortgage
loans
in
Puerto
Rico
residential
properties
(not
the
government),
but
for
which
HFA,
provides
a
guarantee in
the event
of default
and upon
the satisfaction
of certain
other conditions
(December 31,
2023 -
$
securities are not rated by a credit rating agency.
The
Corporation
assesses
the
credit
risk
associated
with
these
securities
by
evaluating
the
refreshed
FICO
scores
of
a
representative
sample
of
the
underlying
borrowers.
As
of
June
30,
2024,
the
average
refreshed
FICO
score
for
the
sample,
comprised
of
%
of
the
nominal
value
of
the
securities,
used
for
the
loss
estimate
was
of
%
and
,
respectively, at
December 31, 2023).
The loss estimates
for this portfolio
was based on
the methodology established
under CECL
for
similar
loan
obligations.
The
Corporation
does
not
consider
the
government
guarantee
when
estimating
the
credit
losses
associated with this portfolio.
A
deterioration of
the Puerto
Rico economy
or
of
the fiscal
health of
the
Government of
Puerto Rico
and/or
its
instrumentalities
(including if any
of the issuing municipalities
become subject to a
debt restructuring proceeding under
PROMESA) could adversely
affect the value of these securities, resulting in losses to
the Corporation.
Refer to
Note 20
to the
Consolidated Financial
Statements
for additional
information on
the Corporation’s
exposure to
the Puerto
Rico Government.
At
June
30,
2024
and
December
31,
2023,
the
portfolio
of
“Obligations
of
Puerto
Rico,
States
and
political
subdivisions”
also
includes
$
Corporation applies a
-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
Allowance for credit losses on debt securities held-to-maturity
The following table provides the
activity in the allowance for
credit losses related to debt securities
held-to-maturity by security type
for the quarters and six months ended June 30,
2024 and June 30, 2023:
26
For the quarters ended June 30,
2024
2023
(In thousands)
Obligations of Puerto Rico, States and political subdivisions
Allowance for credit losses:
Beginning balance
$
$
Provision for credit losses (benefit)
(
647
)
Securities charged-off
Recoveries
Ending balance
$
$
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
$
$
Provision for credit losses (benefit)
(
766
)
Securities charged-off
Recoveries
Ending balance
$
$
The
allowance
for
credit
losses
for
the
Obligations
of
Puerto
Rico,
States
and
political
subdivisions
includes
$
securities issued by municipalities of
Puerto Rico, and $
second mortgage loans on
Puerto Rico residential properties (compared to
$
31, 2023).
27
Note 7 – Loans
For
a summary
of
the accounting
policies related
to
loans, interest
recognition and
allowance for
credit
losses
refer to
Note
2
–
Summary of Significant Accounting Policies of the 2023
Form 10-K.
During the quarter
and six months ended
June 30, 2024, the
Corporation recorded purchases (including repurchases)
of mortgage
loans
amounting
to
$
Corporation did
t purchase
consumer loans
during the
period ended
June 30,
2024 (during
the quarter
and six
months ended
June 30, 2023 - $
recorded purchases
of $
commercial loans.
The
Corporation
performed
whole-loan
sales
involving
approximately
$
during the
quarter and
six months
ended June
30, 2024,
respectively (June
30, 2023
- $
During the
six
months
ended June
30, 2024,
the
Corporation performed
sales of
commercial loans,
including loan
participations
amounting
to
$
t
perform
sales
of
commercial
loans
during
the
quarter
ended
June
30,
2024
(during the
quarter and
six months
ended June
30, 2023
- $
ended
June
30,
2024,
the
Corporation
securitized
approximately
$
securities
and
$
respectively, during the six months ended June 30, 2023.
Delinquency status
The following tables present the
amortized cost basis of loans
held-in-portfolio (“HIP”), net of unearned
income, by past due status,
and by loan class including those that are in non-performing status or that are accruing
interest but are past due 90 days or more at
June 30, 2024 and December 31, 2023.
28
June 30, 2024
BPPR
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
$
$
$
$
$
$
$
Commercial real estate:
Non-owner occupied
Owner occupied
Commercial and industrial
Construction
Mortgage
Leasing
Consumer:
Credit cards
Home equity lines of credit
Personal
Auto
Other
Total
$
$
$
$
$
$
$
$
June 30, 2024
Popular U.S.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
$
$
$
$
$
$
$
Commercial real estate:
Non-owner occupied
Owner occupied
Commercial and industrial
Construction
Mortgage
Consumer:
Credit cards
Home equity lines of
credit
Personal
Other
Total
$
$
$
$
$
$
$
$
29
June 30, 2024
Popular, Inc.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
days
days
or more
past due
Current
Loans HIP
[2] [3]
loans
loans
Commercial multi-family
$
$
$
$
$
$
$
$
Commercial real estate:
Non-owner occupied
Owner occupied
Commercial and industrial
Construction
Mortgage
[1]
Leasing
Consumer:
Credit cards
Home equity lines of credit
Personal
Auto
Other
Total
$
$
$
$
$
$
$
$
[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 $
longer accruing interest as of June 30, 2024. Furthermore,
as of June 30, 2024, the Corporation had approximately
$
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 $
[3]
Includes $
of which $
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 $
30
December 31, 2023
BPPR
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
$
$
$
$
$
$
$
Commercial real estate:
Non-owner occupied
Owner occupied
Commercial and industrial
Construction
Mortgage
Leasing
Consumer:
Credit cards
Home equity lines of credit
Personal
Auto
Other
Total
$
$
$
$
$
$
$
$
December 31, 2023
Popular U.S.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
or more
past due
Current
Loans HIP
loans
loans
Commercial multi-family
$
$
$
$
$
$
$
$
Commercial real estate:
Non-owner occupied
Owner occupied
Commercial and industrial
Construction
Mortgage
Consumer:
Credit cards
Home equity lines of credit
Personal
Other
Total
$
$
$
$
$
$
$
$
31
December 31, 2023
Popular, Inc.
Past due
Past due 90 days or more
30-59
60-89
90 days
Total
Non-accrual
Accruing
(In thousands)
or more
past due
Current
Loans HIP
[2]
[3]
loans
loans
Commercial multi-family
$
$
$
$
$
$
$
$
Commercial real estate:
Non-owner occupied
Owner occupied
Commercial and industrial
Construction
Mortgage
[1]
Leasing
Consumer:
Credit cards
Home equity lines of credit
Personal
Auto
Other
Total
$
$
$
$
$
$
$
$
[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 $
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
$
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 $
[3]
Includes $
of which $
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 $
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
$
guarantees from the FHA or the VA of which $
portfolio of guaranteed loans includes $
of June 30,
2024 (December 31, 2023 -
$
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
$
securities
(December
31,
2023
-
$
obligation to repurchase loans
that are 90
days or more
past due. For
accounting purposes, these loans
subject to the
repurchase
option
are
required to
be
reflected on
the
financial statements
of BPPR
with
an
offsetting
liability.
Loans
in
our
serviced
GNMA
portfolio benefit
from payment
forbearance programs
but continue
to reflect
the contractual
delinquency until
the borrower
repays
deferred payments or completes a payment deferral
modification or other borrower assistance alternative.
The following tables present the amortized cost basis
of non-accrual loans as of June 30, 2024 and
December 31, 2023 by class of
loans:
32
June 30, 2024
BPPR
Popular U.S.
Popular, Inc.
(In thousands)
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Non-accrual
with no
allowance
Non-accrual
with
allowance
Commercial multi-family
$
$
$
$
$
$
Commercial real estate non-owner occupied
Commercial real estate owner occupied
Commercial and industrial
Mortgage
Leasing
Consumer:
Total
$
$
$
$
$
$
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
$
$
$
$
$
$
Commercial real estate non-owner occupied
Commercial real estate owner occupied
Commercial and industrial
Construction
Mortgage
Leasing
Consumer:
Total
$
$
$
$
$
$
The Corporation has
designated loans classified as
collateral dependent for
which the ACL
is measured based
on the fair
value of
the collateral less
cost to sell,
when foreclosure is
probable or when
the repayment is
expected to be
provided substantially by the
sale or
operation of
the collateral
and the
borrower is
experiencing financial
difficulty.
The fair
value of
the collateral
is based
on
appraisals, which may be
adjusted due to their
age, and the
type, location, and condition
of the property
or area or general
market
conditions to reflect the expected change in value between the effective date
of the appraisal and the measurement date. Appraisals
are updated every one to two years depending on
the type of loan and the total exposure of
the borrower.
Loans in
non-accrual status with
no allowance
at June
30, 2024 include
$
2023 -
$
June 30, 2024 (June 30, 2023 - $
The following tables present the amortized cost basis
of collateral-dependent loans, for which the ACL was measured
based on the
fair value of the collateral less cost to sell, by class
of loans and type of collateral as of June 30,
2024 and December 31, 2023:
33
June 30, 2024
(In thousands)
Real Estate
Auto
Equipment
Other
Total
BPPR
Commercial multi-family
$
$
$
$
$
Commercial real estate:
Non-owner occupied
Owner occupied
Commercial and industrial
Mortgage
Leasing
Consumer:
Personal
Auto
Other
Total BPPR
$
$
$
$
$
Popular U.S.
Commercial multi-family
$
$
$
$
$
Commercial real estate:
Owner occupied
$
Commercial and industrial
Mortgage
Total Popular U.S.
$
$
$
$
$
Popular, Inc.
Commercial multi-family
$
$
$
$
$
Commercial real estate:
Non-owner occupied
Owner occupied
Commercial and industrial
Mortgage
Leasing
Consumer:
Personal
Auto
Other
Total Popular,
Inc.
$
$
$
$
$
34
December 31, 2023
(In thousands)
Real Estate
Auto
Equipment
Other
Total
BPPR
Commercial multi-family
$
$
$
$
$
Commercial real estate:
Non-owner occupied
Owner occupied
Commercial and industrial
Construction
Mortgage
Leasing
Consumer:
Personal
Auto
Other
Total BPPR
$
$
$
$
$
Popular U.S.
Commercial real estate:
Owner occupied
$
$
$
$
$
Commercial and industrial
Construction
Mortgage
Total Popular U.S.
$
$
$
$
$
Popular, Inc.
Commercial multi-family
$
$
$
$
$
Commercial real estate:
Non-owner occupied
Owner occupied
Commercial and industrial
Construction
Mortgage
Leasing
Consumer:
Personal
Auto
Other
Total Popular,
Inc.
$
$
$
$
$
35
Purchased Credit Deteriorated (PCD) Loans
The Corporation has purchased loans during
the quarter and six months ended June 30, 2024 and
2023, for which there was, at
acquisition, evidence of more than insignificant deterioration
of credit quality since origination. The carrying amount
of those loans is
as follows:
(In thousands)
For the quarter ended
June 30, 2024
For the six months
ended June 30, 2024
Purchase price of loans at acquisition
$
$
Allowance for credit losses at acquisition
Par value of acquired loans at acquisition
$
$
(In thousands)
For the quarter ended
June 30, 2023
For the six months
ended June 30, 2023
Purchase price of loans at acquisition
$
$
Allowance for credit losses at acquisition
Non-credit discount / (premium) at acquisition
Par value of acquired loans at acquisition
$
$
36
Note 8 – Allowance for credit losses – loans
held-in-portfolio
The
Corporation follows
the current
expected credit
loss (“CECL”)
model, to
establish and
evaluate the
adequacy of
the ACL
to
provide for
expected losses
in the
loan portfolio.
This model
establishes a forward-looking
methodology that
reflects the
expected
credit losses over the lives of financial assets, starting when such
assets are first acquired or originated. In addition, CECL provides
that
the
initial ACL
on PCD
financial
assets be
recorded as
an
increase to
the
purchase price,
with subsequent
changes to
the
allowance
recorded
as
a
credit
loss
expense.
The
provision
for
credit
losses
recorded
in
current
operations
is
based
on
this
methodology.
Loan losses
are charged,
and recoveries
are credited
to the
ACL. The
Corporation’s modeling
framework includes
competing risk
models that
generate lifetime
default and
prepayment estimates as
well as
other loan
level techniques
to estimate
loss
severity.
These
models
combine
credit
risk
factors,
which
include
the
impact
of
loan
modifications,
with
macroeconomic
expectations to derive the lifetime expected loss.
At June
30, 2024,
the Corporation
estimated the
ACL by
weighting the
outputs of
optimistic, baseline,
and pessimistic
scenarios.
Among the
three scenarios used
to estimate
the ACL, the
baseline is
assigned the highest
probability,
followed by the
pessimistic
scenario given the
uncertainties in the
economic outlook and
downside risk. The
weightings applied are
subject to
evaluation on a
quarterly basis as
part of the
ACL’s governance
process. The Corporation evaluates,
at least on
an annual basis, the
assumptions
tied to the CECL accounting framework. These
include the reasonable and supportable period
as well as the reversion window.
The following
tables present
the changes
in the
ACL of
loans held-in-portfolio
and unfunded
commitments for
the quarter
and six
months ended June 30, 2024 and 2023.
37
For the quarter ended June 30, 2024
BPPR
Provision for
Allowance for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balances
Allowance for credit losses - loans:
Commercial
$
$
(
264
)
$
$
$
$
(
324
)
(
5,296
)
(
8,072
)
(
8,072
)
Construction
Mortgage
(
6,419
)
(
26
)
Leasing
(
3,841
)
Consumer
(
16,419
)
(
94
)
(
23,293
)
(
16,609
)
(
680
)
(
57,095
)
Total - Loans
$
$
$
$
(
69,034
)
$
$
Allowance for credit losses - unfunded commitments:
Commercial
$
$
$
$
$
$
Construction
Ending balance - unfunded commitments [1]
$
$
$
$
$
$
[1] Allowance for credit losses of unfunded commitments
is presented as part of Other Liabilities in the Consolidated
Statements of Financial Condition.
38
For the quarter ended June 30, 2024
Popular U.S.
Provision for
Beginning
credit losses -
Ending
(In thousands)
Balance
(benefit)
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
$
(
1,303
)
$
$
$
Commercial real estate non-owner occupied
(
1,151
)
Commercial real estate owner occupied
(
1,514
)
Commercial and industrial
(
1,367
)
(
1,195
)
Total Commercial
(
5,335
)
(
1,195
)
Construction
Mortgage
(
502
)
(
18
)
Consumer
Home equity lines of credit
(
510
)
(
14
)
Personal
(
4,596
)
Other
(
2
)
(
18
)
Total Consumer
(
4,628
)
Total - Loans
$
$
(
4,428
)
$
(
5,841
)
$
$
Allowance for credit losses - unfunded commitments:
Commercial
$
$
$
$
$
Construction
Consumer
(
5
)
Ending balance - unfunded commitments [1]
$
$
$
$
$
[1]
Allowance for credit losses of unfunded commitments is
presented as part of Other Liabilities in the Consolidated
Statements of Financial Condition.
39
For the quarter ended June 30, 2024
Popular Inc.
Provision for
Allowance for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
$
(
1,567
)
$
$
$
$
Commercial real estate non-owner occupied
(
1,475
)
Commercial real estate owner occupied
(
6,810
)
Commercial and industrial
(
9,267
)
Total Commercial
(
9,267
)
Construction
Mortgage
(
6,921
)
(
44
)
Leasing
(
3,841
)
Consumer
Credit cards
(
16,419
)
Home equity lines of credit
(
488
)
(
108
)
Personal
(
27,889
)
Auto
(
16,609
)
Other
(
698
)
Total Consumer
(
61,723
)
Total - Loans
$
$
$
$
(
74,875
)
$
$
Allowance for credit losses - unfunded commitments:
Commercial
$
$
$
$
$
$
Construction
Consumer
(
5
)
Ending balance - unfunded commitments [1]
$
$
$
$
$
$
[1]
Allowance for credit losses of unfunded commitments is
presented as part of Other Liabilities in the Consolidated
Statements of Financial Condition.
40
For the six months ended June 30, 2024
BPPR
Provision for
Allowance for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-off
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
$
(
312
)
$
$
$
$
Commercial real estate non-owner occupied
(
737
)
Commercial real estate owner occupied
(
149
)
(
2,785
)
Commercial and industrial
(
14,741
)
Total Commercial
(
17,526
)
Construction
(
1,656
)
Mortgage
(
6,738
)
(
791
)
Leasing
(
8,691
)
Consumer
Credit cards
(
32,815
)
Home equity lines of credit
(
291
)
Personal
(
47,642
)
Auto
(
36,776
)
Other
(
1,344
)
Total Consumer
(
118,868
)
Total - Loans
$
$
$
$
(
145,876
)
$
$
Allowance for credit losses - unfunded commitments:
Commercial
$
$
$
$
$
$
Construction
Ending balance - unfunded commitments [1]
$
$
$
$
$
$
[1]
Allowance for credit losses of unfunded commitments is
presented as part of Other Liabilities in the Consolidated
Statements of Financial Condition.
41
For the six months ended June 30, 2024
Popular U.S.
Provision for
Beginning
credit losses -
Ending
(In thousands)
Balance
(benefit)
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
$
(
1,813
)
$
(
441
)
$
$
Commercial real estate non-owner occupied
(
956
)
Commercial real estate owner occupied
Commercial and industrial
(
1,759
)
Total Commercial
(
2,200
)
Construction
Mortgage
(
1,427
)
(
18
)
Consumer
Home equity lines of credit
(
763
)
(
21
)
Personal
(
10,308
)
Other
(
49
)
Total Consumer
(
10,378
)
Total - Loans
$
$
$
(
12,596
)
$
$
Allowance for credit losses - unfunded commitments:
Commercial
$
$
$
$
$
Construction
(
47
)
Consumer
(
29
)
Ending balance - unfunded commitments [1]
$
$
$
$
$
[1]
Allowance for credit losses of unfunded commitments is
presented as part of Other Liabilities in the Consolidated
Statements of Financial Condition.
42
For the six months ended June 30, 2024
Popular Inc.
Provision for
Allowance for
Beginning
credit losses
credit losses -
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
$
(
2,125
)
$
$
(
441
)
$
$
Commercial real estate non-owner occupied
(
1,693
)
Commercial real estate owner occupied
(
2,785
)
Commercial and industrial
(
16,500
)
Total Commercial
(
19,726
)
Construction
Mortgage
(
8,165
)
(
809
)
Leasing
(
8,691
)
Consumer
Credit cards
(
32,815
)
Home equity lines of credit
(
638
)
(
312
)
Personal
(
57,950
)
Auto
(
36,776
)
Other
(
1,393
)
Total Consumer
(
129,246
)
Total - Loans
$
$
$
$
(
158,472
)
$
$
Allowance for credit losses - unfunded commitments:
Commercial
$
$
$
$
$
$
Construction
Consumer
(
29
)
Ending balance - unfunded commitments [1]
$
$
$
$
$
$
[1]
Allowance for credit losses of unfunded commitments is
presented as part of Other Liabilities in the Consolidated
Statements of Financial Condition.
43
For the quarter ended June 30, 2023
BPPR
Provision for
Allowance for
Beginning
credit losses
credit losses -
Net Write
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
down
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
$
$
$
$
$
$
Commercial real estate non-owner occupied
(
98
)
(
609
)
Commercial real estate owner occupied
(
4,437
)
(
76
)
Commercial and industrial
(
1,061
)
Total Commercial
(
1,341
)
(
1,746
)
Construction
Mortgage
(
9,572
)
(
297
)
Leasing
(
5,470
)
(
2,540
)
Consumer
Credit cards
(
8,457
)
(
601
)
Home equity lines of credit
(
29
)
(
35
)
Personal
(
16,601
)
Auto
(
8,099
)
Other
(
354
)
Total Consumer
(
33,546
)
(
601
)
Total - Loans
$
$
$
$
(
38,129
)
$
$
(
601
)
$
Allowance for credit losses - unfunded commitments:
Commercial
$
$
$
$
$
$
$
Construction
Ending balance - unfunded commitments [1]
$
$
$
$
$
$
$
[1]
Allowance for credit losses of unfunded commitments is
presented as part of Other Liabilities in the Consolidated
Statements of Financial Condition.
44
For the quarter ended June 30, 2023
Popular U.S.
Provision for
Beginning
credit losses
Ending
(In thousands)
Balance
(benefit)
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
$
$
$
$
Commercial real estate non-owner occupied
Commercial real estate owner occupied
(
177
)
Commercial and industrial
(
2,081
)
Total Commercial
(
2,258
)
Construction
Mortgage
(
2,315
)
Consumer
Home equity lines of credit
(
52
)
Personal
(
4,287
)
Other
(
47
)
Total Consumer
(
4,386
)
Total - Loans
$
$
$
(
6,644
)
$
$
Allowance for credit losses - unfunded commitments:
Commercial
$
$
$
$
$
Construction
Consumer
(
12
)
Ending balance - unfunded commitments [1]
$
$
$
$
$
[1]
Allowance for credit losses of unfunded commitments is
presented as part of Other Liabilities in the Consolidated
Statements of Financial Condition.
45
For the quarter ended June 30, 2023
Popular Inc.
Provision for
Allowance for
Beginning
credit losses
credit losses -
Net write
Ending
(In thousands)
Balance
(benefit)
PCD Loans
Charge-offs
Recoveries
down
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
$
$
$
$
$
$
Commercial real estate non-owner occupied
(
609
)
Commercial real estate owner occupied
(
3,263
)
(
253
)
Commercial and industrial
(
3,142
)
Total Commercial
(
4,004
)
Construction
Mortgage
(
11,887
)
(
297
)
Leasing
(
5,470
)
(
2,540
)
Consumer
Credit cards
(
8,457
)
(
601
)
Home equity lines of credit
(
87
)
Personal
(
20,888
)
Auto
(
8,099
)
Other
(
401
)
Total Consumer
(
37,932
)
(
601
)
Total - Loans
$
$
$
$
(
44,773
)
$
$
(
601
)
$
Allowance for credit losses - unfunded commitments:
Commercial
$
$
$
$
$
$
$
Construction
Consumer
(
12
)
Ending balance - unfunded commitments [1]
$
$
$
$
$
$
$
[1]
Allowance for credit losses of unfunded commitments is
presented as part of Other Liabilities in the Consolidated
Statements of Financial Condition.
46
For the six months ended June 30, 2023
BPPR
Impact of
Provision for
Allowance for
Beginning
Adopting
credit losses
credit losses -
Net write
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
PCD Loans
Charge-offs
Recoveries
down
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
$
$
(
424
)
$
$
$
$
$
Commercial real estate non-owner occupied
(
609
)
Commercial real estate owner occupied
(
1,161
)
(
7,167
)
(
79
)
Commercial and industrial
(
552
)
(
2,668
)
Total Commercial
(
1,713
)
(
3,356
)
Construction
Mortgage
(
33,556
)
(
8,305
)
(
1,143
)
Leasing
(
35
)
(
4,736
)
(
3,957
)
Consumer
Credit cards
(
17,133
)
(
601
)
Home equity lines of credit
(
68
)
(
68
)
Personal
(
7,020
)
(
30,181
)
Auto
(
21
)
(
20,217
)
Other
(
11,361
)
Total Consumer
(
7,041
)
(
78,960
)
(
601
)
Total - Loans
$
$
(
42,345
)
$
$
$
(
87,416
)
$
$
(
601
)
$
Allowance for credit losses - unfunded commitments:
Commercial
$
$
$
$
$
$
$
$
Construction
Ending balance - unfunded commitments [1]
$
$
$
$
$
$
$
$
[1]
Allowance for credit losses of unfunded commitments is
presented as part of Other Liabilities in the Consolidated
Statements of Financial Condition.
47
For the six months ended June 30, 2023
Popular U.S.
Impact of
Provision for
Beginning
Adopting
credit losses
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
Charge-offs
Recoveries
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
$
$
$
$
$
Commercial real estate non-owner occupied
(
2,633
)
Commercial real estate owner occupied
(
177
)
Commercial and industrial
(
2,580
)
Total Commercial
(
2,757
)
Construction
Mortgage
(
2,098
)
(
2,741
)
Consumer
Credit cards
(
1
)
Home equity lines of credit
(
657
)
(
195
)
Personal
(
1,140
)
(
8,457
)
Other
(
100
)
Total Consumer
(
1,140
)
(
8,753
)
Total - Loans
$
$
(
3,238
)
$
$
(
11,510
)
$
$
Allowance for credit losses - unfunded commitments:
Commercial
$
$
$
$
$
$
Construction
Consumer
(
38
)
Ending balance - unfunded commitments [1]
$
$
$
$
$
$
[1]
Allowance for credit losses of unfunded commitments is
presented as part of Other Liabilities in the Consolidated
Statements of Financial Condition.
48
For the six months ended June 30, 2023
Popular Inc.
Impact
Provision for
Allowance
for
Beginning
of adopting
credit losses
credit losses
-
Net write
Ending
(In thousands)
Balance
ASU 2022-02
(benefit)
PCD Loans
Charge-
offs
Recoverie
s
down
Balance
Allowance for credit losses - loans:
Commercial
Commercial multi-family
$
$
$
(
136
)
$
$
$
$
$
Commercial real estate non-owner occupied
(
1,447
)
(
609
)
Commercial real estate owner occupied
(
1,161
)
(
6,217
)
(
256
)
Commercial and industrial
(
552
)
(
5,248
)
Total Commercial
(
1,713
)
(
6,113
)
Construction
Mortgage
(
35,654
)
(
11,046
)
(
1,143
)
Leasing
(
35
)
(
4,736
)
(
3,957
)
Consumer
Credit cards
(
17,134
)
(
601
)
Home equity lines of credit
(
725
)
(
263
)
Personal
(
8,160
)
(
38,638
)
Auto
(
21
)
(
20,217
)
Other
(
11,461
)
Total Consumer
(
8,181
)
(
87,713
)
(
601
)
Total - Loans
$
$
(
45,583
)
$
$
$
(
98,926
)
$
$
(
601
)
$
Allowance for credit losses - unfunded commitments:
Commercial
$
$
$
$
$
$
$
$
Construction
Consumer
(
38
)
Ending balance - unfunded commitments [1]
$
$
$
$
$
$
$
$
[1]
Allowance for credit losses of unfunded commitments is
presented as part of Other Liabilities in the Consolidated
Statements of Financial Condition.
Modifications
A
modification
constitutes
a
change
in
loan
terms
in
the
form
of
principal
forgiveness,
an
interest
rate
reduction,
other
than-
insignificant payment delay, term extension or combination of the above made
to a borrower experiencing financial difficulty.
The amount of outstanding commitments to lend additional funds to debtors with financial difficulties owing receivables whose terms
have
been
modified
during
the
quarters
ended
June
30,
2024
and
June
30,
2023
amounted
to
$
respectively, related to the commercial loan portfolios.
The following tables show the amortized cost basis of the loans modified to borrowers experiencing financial difficulties at the end of
the reporting period disaggregated by
class of financing receivable and
type of concession granted
for the quarters and
six months
ended June 30, 2024 and June 30, 2023. Loans modified to borrowers under
financial difficulties that were fully paid down, charged-
off or foreclosed upon by period end are not reported.
49
Loan Modifications Made to Borrowers Experiencing Financial
Difficulty for the quarter ended June 30, 2024
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June
30, 2024
% of total class
of Financing
Receivable
Amortized Cost
Basis at June
30, 2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June
30, 2024
% of total class of
Financing
Receivable
CRE owner occupied
$
%
$
%
$
%
Commercial and industrial
%
%
%
Mortgage
%
%
%
Consumer:
%
%
%
%
%
%
%
%
%
Total
$
%
$
%
$
%
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
$
%
$
%
$
%
CRE owner occupied
%
%
%
Commercial and industrial
%
%
%
Mortgage
%
%
%
Consumer:
%
%
%
%
%
%
Total
$
%
$
%
$
%
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
$
%
$
%
$
%
CRE owner occupied
%
%
%
Commercial and industrial
%
%
%
Mortgage
%
%
%
Total
$
%
$
%
$
%
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
$
%
$
%
$
%
Mortgage
%
%
%
Consumer:
%
%
%
Total
$
%
$
%
$
%
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:
%
%
%
Total
$
%
$
%
$
%
50
Loan Modifications Made to Borrowers Experiencing Financial
Difficulty for the six months ended June 30,
2024
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2024
% of total class of
Financing
Receivable
CRE owner occupied
$
%
$
%
$
%
Commercial and industrial
%
%
%
Mortgage
%
%
%
Consumer:
%
%
%
%
%
%
%
%
%
Total
$
%
$
%
$
%
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
$
%
$
%
$
%
CRE owner occupied
%
%
%
Commercial and industrial
%
%
%
Mortgage
%
%
%
Consumer:
%
%
%
%
%
%
Total
$
%
$
%
$
%
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
$
%
$
%
$
%
CRE owner occupied
%
%
%
Commercial and industrial
%
%
%
Mortgage
%
%
%
Total
$
%
$
%
$
%
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
$
%
$
%
$
%
Commercial and industrial
%
%
%
Mortgage
%
%
%
Consumer:
%
%
%
Total
$
%
$
%
$
%
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:
%
%
%
Total
$
%
$
%
$
%
51
Loan Modifications Made to Borrowers Experiencing Financial
Difficulty for the quarter ended June 30, 2023
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(Dollar in thousands)
Amortized Cost
Basis at June 30,
2023
% of total class
of Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Consumer:
$
%
$
%
$
%
%
%
%
Total
$
%
$
%
$
%
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
$
%
$
%
$
%
CRE owner occupied
%
%
%
Commercial and industrial
%
%
%
Construction
%
%
%
Mortgage
%
%
%
Consumer:
%
%
%
%
%
%
Total
$
%
$
%
$
%
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
$
%
$
%
$
%
Mortgage
%
%
%
Total
$
%
$
%
$
%
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
%
%
%
Consumer:
%
%
%
Total
$
%
$
%
$
%
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:
%
%
%
Total
$
%
$
%
$
%
52
Loan Modifications Made to Borrowers Experiencing Financial
Difficulty for the six months ended June 30,
2023
Interest Rate Reduction
BPPR
Popular U.S.
Popular, Inc.
(Dollars in thousands)
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Amortized Cost
Basis at June 30,
2023
% of total class of
Financing
Receivable
Mortgage
$
%
$
%
$
%
Consumer:
%
%
%
%
%
%
%
%
%
Total
$
%
$
%
$
%
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
$
%
$
%
$
%
CRE owner occupied
%
%
%
Commercial and industrial
%
%
%
Construction
%
%
%
Mortgage
%
%
%
Consumer:
%
%
%
%
%
%
Total
$
%
$
%
$
%
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
$
%
$
%
$
%
CRE owner occupied
%
%
%
Commercial and industrial
%
%
%
Mortgage
%
%
%
Total
$
%
$
%
$
%
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
$
%
$
%
$
%
Commercial and industrial
%
%
%
Mortgage
%
%
%
Consumer:
%
%
%
%
%
%
Total
$
%
$
%
$
%
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
$
$
$
Consumer:
Total
$
$
$
53
The following tables describe the financial effect of the
modifications made to borrowers experiencing
financial difficulties:
For the quarter ended June 30, 2024
Interest rate reduction
Loan Type
Financial Effect
CRE Owner occupied
Reduced weighted-average contractual interest rate from
% to
.0%
Commercial and industrial
Reduced weighted-average contractual interest rate from
.0% to
%.
Mortgage
Reduced weighted-average contractual interest rate from
% to
%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
% to
%.
Personal
Reduced weighted-average contractual interest rate from
% to
%.
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
CRE Owner occupied
Added a weighted-average of
Commercial and industrial
Added a weighted-average of
Mortgage
Added a weighted-average of
Consumer:
Personal
Added a weighted-average of
Auto
Added a weighted-average of
Other than insignificant payment delays
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
CRE Owner occupied
Added a weighted-average of
Commercial and industrial
Added a weighted-average of
Mortgage
Added a weighted-average of
Consumer:
Credit cards
Added a weighted-average of
54
For the six months ended June 30, 2024
Interest rate reduction
Loan Type
Financial Effect
CRE Non-owner occupied
Reduced weighted-average contractual interest rate from
% to
%.
CRE Owner occupied
Reduced weighted-average contractual interest rate from
% to
.0%.
Commercial and industrial
Reduced weighted-average contractual interest rate from
% to
%.
Mortgage
Reduced weighted-average contractual interest rate from
% to
%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
% to
.0%.
Personal
Reduced weighted-average contractual interest rate from
% 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
CRE Owner occupied
Added a weighted-average of
Commercial and industrial
Added a weighted-average of
Mortgage
Added a weighted-average of
Consumer:
Personal
Added a weighted-average of
Auto
Added a weighted-average of
Other than insignificant payment delay
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
CRE Owner occupied
Added a weighted-average of
Commercial and industrial
Added a weighted-average of
Mortgage
Added a weighted-average of
Consumer:
Credit cards
Added a weighted-average of
55
For the quarter ended June 30, 2023
Interest rate reduction
Loan Type
Financial Effect
Commercial and industrial
Reduced weighted-average contractual interest rate from
% to
.0%.
Mortgage
Reduced weighted-average contractual interest rate from
% to
%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
% to
%.
Personal
Reduced weighted-average contractual interest rate from
% to
%.
Term extension
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
CRE Owner occupied
Added a weighted-average of
Commercial and industrial
Added a weighted-average of
Construction
Added a weighted-average of
Mortgage
Added a weighted-average of
Consumer:
Personal
Added a weighted-average of
Auto
Added a weighted-average of
Other than insignificant payment delay
Loan Type
Financial Effect
CRE Owner occupied
Added a weighted-average of
Commercial and industrial
Added a weighted-average of
Mortgage
Added a weighted-average of
Consumer:
Credit cards
Added a weighted-average of
56
For the six months ended June 30, 2023
Interest rate reduction
Loan Type
Financial Effect
CRE Owner occupied
Reduced weighted-average contractual interest rate from
.0% to
%.
Commercial and industrial
Reduced weighted-average contractual interest rate from
% to
.0%.
Mortgage
Reduced weighted-average contractual interest rate from
% to
%.
Consumer:
Credit cards
Reduced weighted-average contractual interest rate from
% to
%.
Personal
Reduced weighted-average contractual interest rate from
% to
%.
Auto
Reduced weighted-average contractual interest rate from
% to
%.
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
CRE Owner occupied
Added a weighted-average of
Commercial and industrial
Added a weighted-average of
Construction
Added a weighted-average of
Mortgage
Added a weighted-average of
Consumer:
Personal
Added a weighted-average of
Auto
Added a weighted-average of
Other than insignificant payment delay
Loan Type
Financial Effect
CRE Non-owner occupied
Added a weighted-average of
CRE Owner occupied
Added a weighted-average of
Commercial and industrial
Added a weighted-average of
Mortgage
Added a weighted-average of
Consumer:
Credit cards
Added a weighted-average of
57
The following tables present, by
class, the performance of loans
that have been modified
during the twelve months
preceding June
30,
2024.
modification. These
loans will
continue in
non-accrual status,
and presented
as past
due 90
days or
more, until
the borrower
has
demonstrated a willingness and
ability to make
the restructured loan payments
(at least six
months of sustained
performance after
the modification
or one
year for
loans providing
for quarterly
or semi-annual
payments) and
management has
concluded that
it is
probable that the borrower would not be in payment
default in the foreseeable future.
BPPR
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
Commercial multi-family
$
$
$
$
$
$
$
$
CRE non-owner occupied
CRE owner occupied
Commercial and industrial
Mortgage
Consumer:
Total
$
$
$
$
$
$
$
$
[1] Loans that were in non-accrual status at the time
of modification are presented as past due until the borrower
has demonstrated a willingness and ability
to make the restructured loan payments. Payment default
is defined as a restructured loan becoming 90 days past
due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment
as of period end is inclusive of all partial paydowns
and charge-offs since the modification
date. Loans modified with financial difficulty that
were fully paid down, charged-off or foreclosed upon
by period end are not reported.
Popular U.S.
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE owner occupied
$
$
$
$
$
$
$
$
Mortgage
Consumer:
Total
$
$
$
$
$
$
$
$
[1] Loans that were in non-accrual status at the time
of modification are presented as past due until the borrower
has demonstrated a willingness and ability
to make the restructured loan payments. Payment default
is defined as a restructured loan becoming 90 days past
due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment
as of period end is inclusive of all partial paydowns
and charge-offs since the modification
date. Loans modified with financial difficulty that
were fully paid down, charged-off or foreclosed upon
by period end are not reported.
58
Popular Inc.
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
Commercial multi-family
$
$
$
$
$
$
$
$
CRE non-owner occupied
CRE owner occupied
Commercial and industrial
Mortgage
Consumer:
Total
$
$
$
$
$
$
$
$
[1] Loans that were in non-accrual status at the time
of modification are presented as past due until the borrower
has demonstrated a willingness and ability
to make the restructured loan payments.
Payment default is defined as a restructured loan becoming
90 days past due after being modified, foreclosed
or
charged-off, whichever occurs first. The recorded investment
as of period end is inclusive of all partial paydowns
and charge-offs since the modification
date. Loans modified with financial difficulty that
were fully paid down, charged-off or foreclosed upon
by period end are not reported.
59
The following
tables present,
by class,
the performance
of loans
that have
been modified
during the
six months
ended June
30,
2023.
BPPR
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE non-owner occupied
$
$
$
$
$
$
$
$
CRE owner occupied
Commercial and industrial
Construction
Mortgage
Consumer:
Total
$
$
$
$
$
$
$
$
[1] Loans that were in non-accrual status at the time
of modification are presented as past due until the borrower
has demonstrated a willingness and ability
to make the restructured loan payments. Payment default
is defined as a restructured loan becoming 90 days past
due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment
as of period end is inclusive of all partial paydowns
and charge-offs since the modification
date. Loans modified with financial difficulty that
were fully paid down, charged-off or foreclosed upon
by period end are not reported.
Popular U.S.
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE owner occupied
$
$
$
$
$
$
$
$
Commercial and industrial
Construction
Mortgage
Consumer:
Total
$
$
$
$
$
$
$
$
[1] Loans that were in non-accrual status at the time
of modification are presented as past due until the borrower
has demonstrated a willingness and ability
to make the restructured loan payments. Payment default
is defined as a restructured loan becoming 90 days past
due after being modified, foreclosed or
charged-off, whichever occurs first. The recorded investment
as of period end is inclusive of all partial paydowns
and charge-offs since the modification
date. Loans modified with financial difficulty that
were fully paid down, charged-off or foreclosed upon
by period end are not reported.
60
Popular Inc.
Past Due 90 days or more [1]
(In thousands)
30-59 days
60-89 days
Past due 90
days or more
Total past
due
Current
Total
With Payment
Default
Without
Payment Default
CRE non-owner occupied
$
$
$
$
$
$
$
$
CRE owner occupied
Commercial and industrial
Construction
Mortgage
Consumer:
Total
$
$
$
$
$
$
$
$
[1] Loans that were in non-accrual status at the time
of modification are presented as past due until the borrower
has demonstrated a willingness and ability
to make the restructured loan payments.
Payment default is defined as a restructured loan becoming
90 days past due after being modified, foreclosed
or
charged-off, whichever occurs first. The recorded investment
as of period end is inclusive of all partial paydowns
and charge-offs since the modification
date. Loans modified with financial difficulty that
were fully paid down, charged-off or foreclosed upon
by period end are not reported.
Payment
default
is
defined
as
a
restructured
loan
becoming
90
days
past
due
after
being
modified,
foreclosed
or
charged-off,
whichever
occurs
first.
During
the
quarter
and
six
months
ended
June
30,
2024,
the
outstanding balance
of
loans
modified
for
borrowers under
financial
difficulties
that
were subject
to
payment default
and that
had
been modified
during the
twelve months
preceding the default date was $
six months ended June 30, 2023.
For the quarter ended June 30,
2024, extension of maturity and the combination of
interest rate reduction and extension of maturity
amounted
to
$
difficulties that were subject to payment default during the year preceding the default date. For the six months ended June 30, 2024,
extension
of
maturity
and
the
combination
of
interest
rate
reduction
and
extension
of
maturity
amounted
to
$
million,
respectively
of
the
outstanding
balance
of
loans
modified
for
borrowers
under
financial
difficulties
that
were
subject
to
payment default during the year preceding the default
date
Credit Quality
The risk
rating system
provides for
the assignment
of ratings
at the
obligor level
based on
the financial
condition of
the borrower.
The
risk rating
analysis process
is
performed at
least
once a
year
or more
frequently if
events or
conditions change
which may
deteriorate the credit quality.
In the case of
consumer and mortgage loans, these
loans are classified considering their
delinquency
status at the end of the reporting period.
The following tables present the amortized cost basis, net of unearned income, of
loans held-in-portfolio based on the Corporation’s
assignment of obligor risk ratings as defined at June 30,
2024 and December 31, 2023 and the gross write-offs
recorded by vintage
year.
For
the
definitions
of
the
obligor
risk
ratings,
refer
to
the
Credit
Quality
section
of
Note
9
to
the
Consolidated
Financial
Statements included in the 2023 Form 10-K:
61
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
BPPR
Commercial:
Commercial multi-family
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
multi-family
$
$
$
$
$
$
$
$
$
Commercial real estate non-owner occupied
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
real estate non-
owner occupied
$
$
$
$
$
$
$
$
$
Commercial real estate owner occupied
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Doubtful
Total commercial
real estate owner
occupied
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Commercial and industrial
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Doubtful
Total commercial
and industrial
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Construction
Pass
$
$
$
$
$
$
$
$
$
Watch
$
Special Mention
Total construction
$
$
$
$
$
$
$
$
$
Mortgage
Pass
$
$
$
$
$
$
$
$
$
Substandard
Total mortgage
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
62
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
BPPR
Leasing
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total leasing
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Consumer:
Credit cards
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total credit cards
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
HELOCs
Pass
$
$
$
$
$
$
$
$
$
Total HELOCs
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Personal
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total Personal
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Auto
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total Auto
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Other consumer
Pass
$
$
$
$
$
$
$
$
$
Substandard
Total Other
consumer
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Total BPPR
$
$
$
$
$
$
$
$
$
63
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular U.S.
Commercial:
Commercial multi-family
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
multi-family
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Commercial real estate non-owner occupied
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
real estate non-
owner occupied
$
$
$
$
$
$
$
$
$
Commercial real estate owner occupied
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
real estate owner
occupied
$
$
$
$
$
$
$
$
$
Commercial and industrial
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
and industrial
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Construction
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total construction
$
$
$
$
$
$
$
$
$
Mortgage
Pass
$
$
$
$
$
$
$
$
$
Substandard
Total mortgage
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
64
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular U.S.
Consumer:
Credit cards
Pass
$
$
$
$
$
$
$
$
$
Total credit cards
$
$
$
$
$
$
$
$
$
HELOCs
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total HELOCs
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Personal
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total Personal
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Other consumer
Pass
$
$
$
$
$
$
$
$
$
Total Other
consumer
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Total Popular U.S.
$
$
$
$
$
$
$
$
$
65
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular, Inc.
Commercial:
Commercial multi-family
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
multi-family
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Commercial real estate non-owner occupied
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
real estate non-
owner occupied
$
$
$
$
$
$
$
$
$
Commercial real estate owner occupied
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Doubtful
Total commercial
real estate owner
occupied
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Commercial and industrial
Pass
$
$
$
$
$
$
$
$
$
Watch
$
$
$
$
$
$
Special Mention
Substandard
Doubtful
Total commercial
and industrial
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
66
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular, Inc.
Construction
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total construction
$
$
$
$
$
$
$
$
$
Mortgage
Pass
$
$
$
$
$
$
$
$
$
Substandard
Total mortgage
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Leasing
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total leasing
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
67
June 30, 2024
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2024
2023
2022
2021
2020
Prior
Years
Total
Popular, Inc.
Consumer:
Credit cards
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total credit cards
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
HELOCs
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total HELOCs
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Personal
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total Personal
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Auto
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total Auto
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Other consumer
Pass
$
$
$
$
$
$
$
$
$
Substandard
Total Other
consumer
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Total Popular Inc.
$
$
$
$
$
$
$
$
$
68
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
BPPR
Commercial:
Commercial multi-family
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
multi-family
$
$
$
$
$
$
$
$
$
Commercial real estate non-owner occupied
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
real estate non-
owner occupied
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Commercial real estate owner occupied
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Doubtful
Total commercial
real estate owner
occupied
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Commercial and industrial
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Doubtful
Total commercial
and industrial
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Construction
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total construction
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Mortgage
Pass
$
$
$
$
$
$
$
$
$
Substandard
Total mortgage
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
69
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
BPPR
Leasing
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total leasing
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Consumer:
Credit cards
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total credit cards
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
HELOCs
Pass
$
$
$
$
$
$
$
$
$
Substandard
Total HELOCs
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Personal
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total Personal
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Auto
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total Auto
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Other consumer
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total Other
consumer
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Total BPPR
$
$
$
$
$
$
$
$
$
70
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular U.S.
Commercial:
Commercial multi-family
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
multi-family
$
$
$
$
$
$
$
$
$
Commercial real estate non-owner occupied
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
real estate non-
owner occupied
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Commercial real estate owner occupied
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
real estate owner
occupied
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
71
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular U.S.
Commercial and industrial
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
and industrial
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Construction
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total construction
$
$
$
$
$
$
$
$
$
Mortgage
Pass
$
$
$
$
$
$
$
$
$
Substandard
Total mortgage
$
$
$
$
$
$
$
$
$
72
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular U.S.
Consumer:
Credit cards
Pass
$
$
$
$
$
$
$
$
$
Total credit cards
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
HELOCs
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total HELOCs
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Personal
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total Personal
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Other consumer
Pass
$
$
$
$
$
$
$
$
$
Substandard
Total Other
consumer
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Total Popular U.S.
$
$
$
$
$
$
$
$
$
73
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular, Inc.
Commercial:
Commercial multi-family
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
multi-family
$
$
$
$
$
$
$
$
$
Commercial real estate non-owner occupied
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total commercial
real estate non-
owner occupied
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Commercial real estate owner occupied
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Doubtful
Total commercial
real estate owner
occupied
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Commercial and industrial
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Doubtful
Total commercial
and industrial
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
74
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular, Inc.
Construction
Pass
$
$
$
$
$
$
$
$
$
Watch
Special Mention
Substandard
Total construction
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Mortgage
Pass
$
$
$
$
$
$
$
$
$
Substandard
Total mortgage
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Leasing
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total leasing
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
75
December 31, 2023
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2023
2022
2021
2020
2019
Prior
Years
Total
Popular, Inc.
Consumer:
Credit cards
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total credit cards
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
HELOCs
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total HELOCs
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Personal
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
$
$
$
$
$
$
$
$
$
Total Personal
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Auto
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total Auto
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Other consumer
Pass
$
$
$
$
$
$
$
$
$
Substandard
Loss
Total Other
consumer
$
$
$
$
$
$
$
$
$
Year-to-Date gross
write-offs
$
$
$
$
$
$
$
$
$
Total Popular Inc.
$
$
$
$
$
$
$
$
$
76
Note 9 – Mortgage banking activities
Income
from
mortgage
banking
activities
includes
mortgage
servicing
fees
earned
in
connection
with
administering
residential
mortgage
loans
and
valuation
adjustments
on
mortgage
servicing
rights.
It
also
includes
gain
on
sales
and
securitizations
of
residential mortgage
loans, losses
on repurchased
loans, including
interest advances,
and trading
gains and
losses on
derivative
contracts
used
to
hedge
the
Corporation’s
securitization
activities.
In
addition,
fair
value
valuation
adjustments
to
residential
mortgage loans held for sale, if any, are recorded as part of the mortgage
banking activities.
The following table presents the components of mortgage
banking activities:
Quarters ended June 30,
Six months ended June 30,
(In thousands)
2024
2023
2024
2023
Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees
$
$
$
$
Mortgage servicing rights fair value adjustments
(
1,945
)
(
6,216
)
(
5,384
)
(
7,592
)
Total mortgage
servicing fees, net of fair value adjustments
Net gain (loss) on sale of loans, including valuation on loans
held-for-sale
(
61
)
Trading account profit:
Unrealized gains on outstanding derivative positions
Realized gains on closed derivative positions
Total trading account
profit
Losses on repurchased loans, including interest advances
(
1
)
(
133
)
(
131
)
(
234
)
Total mortgage
banking activities
$
$
$
$
[1]
Effective on January 1, 2023, loans held-for-sale
are stated at fair value. Prior to such date, loans held-for-sale
were stated at lower-of-cost-or-
market.
77
Note 10 – Transfers of financial assets and mortgage servicing assets
The
Corporation
typically
transfers
conforming
residential
mortgage
loans
in
conjunction
with
GNMA,
FNMA
and
FHLMC
securitization transactions
whereby the
loans are
exchanged for
cash or
securities and
servicing rights.
As seller,
the Corporation
has made
certain representations
and warranties
with respect
to the
originally transferred
loans and,
in the
past,
has sold
certain
loans
with
credit
recourse
to
a
government-sponsored
entity,
namely
FNMA.
Refer
to
Note
19
to
the
Consolidated
Financial
Statements for a description of such arrangements.
because
they
did
not
contain
any
credit
recourse
arrangements.
The
securitizations
completed
by
the
Corporation
during
the
quarters and six months ended June 30, 2024 and
2023 were completed without credit recourse.
The
following tables
present the
initial fair
value of
the
assets obtained
as
proceeds from
residential mortgage
loans securitized
during the quarters and six months ended June 30,
2024 and 2023:
Proceeds Obtained During the Quarter Ended June 30, 2024
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - FNMA
$
$
$
$
Total trading account
debt securities
$
$
$
$
Mortgage servicing rights
$
$
$
$
Total
$
$
$
$
Proceeds Obtained During the Six months Ended June
30, 2024
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
$
$
$
Mortgage-backed securities - FNMA
Total trading account
debt securities
$
$
$
$
Mortgage servicing rights
$
$
$
$
Total
$
$
$
$
Proceeds Obtained During the Quarter Ended June 30, 2023
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - FNMA
$
$
$
$
Total trading account
debt securities
$
$
$
$
Mortgage servicing rights
$
$
$
$
Total
$
$
$
$
78
Proceeds Obtained During the Six months Ended June
30, 2023
(In thousands)
Level 1
Level 2
Level 3
Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
$
$
$
Mortgage-backed securities - FNMA
Total trading account
debt securities
$
$
$
$
Mortgage servicing rights
$
$
$
$
Total
$
$
$
$
During the six
months ended June
30, 2024, the
Corporation retained servicing
rights on whole
loan sales involving
approximately
$
30, 2023 - gains of
$
recourse agreements.
The Corporation recognizes as assets the rights to service loans for others,
whether these rights are purchased or result from asset
transfers such as sales and securitizations. These mortgage
servicing rights (“MSRs”) are measured at
fair value.
The
Corporation
uses
a
discounted
cash
flow
model
to
estimate
the
fair
value
of
MSRs.
The
discounted
cash
flow
model
incorporates
assumptions
that
market
participants
would
use
in
estimating
future
net
servicing
income,
including
estimates
of
prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, prepayment and late
fees, among other considerations. Prepayment speeds are
adjusted for the loans’ characteristics and portfolio behavior.
The following table
presents the changes
in MSRs measured
using the fair
value method for
the six months
ended June 30,
2024
and 2023.
79
Residential MSRs
(In thousands)
June 30, 2024
June 30, 2023
Fair value at beginning of period
$
$
Additions
Changes due to payments on loans
(
4,435
)
(
5,288
)
Reduction due to loan repurchases
(
247
)
(
338
)
Changes in fair value due to changes in valuation model inputs
or assumptions
(
702
)
(
1,446
)
Other
(
1,269
)
Fair value at end of period
$
$
[1] Represents changes due to collection / realization
of expected cash flows over time.
[2] At June 30, 2024, PB had MSRs amounting to $
During the quarter
ended June 30,
2023, the Corporation terminated
a servicing agreement,
in which it
acted as sub-servicer
for a
third
party,
for
a
portfolio
with
an
unpaid
principal
balance
of
approximately
$
approximately $
Residential mortgage loans serviced for others were $
Net mortgage servicing fees, a component of mortgage banking activities in the Consolidated Statements of Operations, include the
changes from period to period in the fair value of the MSRs, including changes due to collection / realization of expected cash flows.
The banking
subsidiaries receive servicing
fees based
on a
percentage of the
outstanding loan balance.
These servicing fees
are
credited to income
when they are collected.
At June 30,
2024, those weighted average
mortgage servicing fees were
% (June
30, 2023 -
%). Under these servicing agreements, the banking
subsidiaries do not generally earn significant prepayment
penalty
fees on the underlying loans serviced.
The section
below includes
information on
assumptions used
in the
valuation model
of the
MSRs, originated
and purchased.
Key
economic assumptions used
in measuring the
servicing rights derived
from loans securitized
or sold by
the Corporation during
the
quarters and six months ended June 30, 2024 and
2023 were as follows:
Quarters ended
Six months ended
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
BPPR
PB
BPPR
PB
BPPR
PB
BPPR
PB
Prepayment speed
%
%
%
%
%
%
%
%
Weighted average life (in years)
Discount rate (annual rate)
%
%
%
%
%
%
%
%
Key
economic
assumptions
used
to
estimate
the
fair
value
of
MSRs
derived
from
sales
and
securitizations
of
mortgage
loans
performed
by
the
banking
subsidiaries
and
servicing
rights
purchased
from
other
financial
institutions,
and
the
sensitivity
to
immediate changes in those assumptions, were as follows
as of the end of the periods reported:
80
Originated MSRs
Purchased MSRs
June 30,
December 31,
June 30,
December 31,
(In thousands)
2024
2023
2024
2023
Fair value of servicing rights
$
$
$
$
Weighted average life (in years)
Weighted average prepayment speed (annual
rate)
%
%
%
%
Impact on fair value of 10% adverse change
$
(
725
)
$
(
696
)
$
(
1,425
)
$
(
1,440
)
Impact on fair value of 20% adverse change
$
(
1,422
)
$
(
1,365
)
$
(
2,794
)
$
(
2,827
)
Weighted average discount rate (annual rate)
%
%
%
%
Impact on fair value of 10% adverse change
$
(
1,408
)
$
(
1,387
)
$
(
2,735
)
$
(
2,871
)
Impact on fair value of 20% adverse change
$
(
2,725
)
$
(
2,686
)
$
(
5,300
)
$
(
5,562
)
At
June
30,
2024,
the
Corporation
serviced
$
(December 31, 2023
- $
the Corporation’s liability of estimated losses related
to loans serviced with credit recourse.
Under the GNMA
securitizations, the Corporation, as
servicer, has
the right to
repurchase (but not the
obligation), at its
option and
without
GNMA’s
prior
authorization,
any
loan
that
is
collateral
for
a
GNMA
guaranteed
mortgage-backed
security
when
certain
delinquency
criteria
are
met.
At
the
time
that
individual
loans
meet
GNMA’s
specified
delinquency
criteria
and
are
eligible
for
repurchase, the Corporation is deemed to have regained effective control over these loans if the Corporation was the pool issuer. At
June 30,
2024, the Corporation
had recorded $
related
to
this
buy-back
option
program
(December
31,
2023
-
$
payment forbearance programs
but continue to
reflect the contractual
delinquency until the
borrower repays deferred
payments or
completes a payment deferral modification or other borrower assistance alternative. As long as the Corporation continues to service
the
loans
that
continue
to
be
collateral
in
a
GNMA
guaranteed
mortgage-backed
security,
the
MSR
is
recognized
by
the
Corporation.
During the six months ended June 30, 2024, the Corporation repurchased approximately $
mortgage
loans
from
its
GNMA
servicing
portfolio.
The
determination
to
repurchase
these
loans
was
based
on
the
economic
benefits of the
transaction, which results in
a reduction of
the servicing costs
for these severely
delinquent loans, mainly
related to
principal and interest advances. The risk associated with
the loans is reduced due to their
guaranteed nature. The Corporation may
place these loans under modification programs offered by FHA, VA or United States Department of Agriculture (USDA)
or other loss
mitigation programs offered by the Corporation, and once brought back to current status, these may be either retained in portfolio or
re-sold in the secondary market.
81
Note 11 – Other real estate owned
The following tables present the activity related to Other
Real Estate Owned (“OREO”),
for the quarters
and six months ended June
30, 2024 and 2023.
For the quarter ended June 30, 2024
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
$
$
Write-downs in value
(
1,039
)
(
427
)
(
1,466
)
Additions
Sales
(
6,011
)
(
15,502
)
(
21,513
)
Ending balance
$
$
$
For the quarter ended June 30, 2023
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
$
$
Write-downs in value
(
45
)
(
269
)
(
314
)
Additions
Sales
(
785
)
(
25,822
)
(
26,607
)
Other adjustments
Ending balance
$
$
$
For the six months ended June 30, 2024
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
$
$
Write-downs in value
(
1,064
)
(
711
)
(
1,775
)
Additions
Sales
(
6,557
)
(
32,436
)
(
38,993
)
Other adjustments
(
65
)
(
65
)
Ending balance
$
$
$
For the six months ended June 30, 2023
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
$
$
Write-downs in value
(
239
)
(
1,020
)
(
1,259
)
Additions
Sales
(
1,726
)
(
40,921
)
(
42,647
)
Other adjustments
(
118
)
(
101
)
Ending balance
$
$
$
82
Note 12 − Other assets
The caption of other assets in the consolidated
statements of financial condition consists of the following
major categories:
(In thousands)
June 30, 2024
December 31, 2023
Net deferred tax assets (net of valuation allowance)
$
$
Investments under the equity method
Prepaid taxes
Other prepaid expenses
Capitalized software costs
Derivative assets
Trades receivable from brokers and counterparties
Receivables from investments maturities
Principal, interest and escrow servicing advances
Guaranteed mortgage loan claims receivable
Operating ROU assets (Note 27)
Finance ROU assets (Note 27)
Assets for pension benefit
Others
Total other assets
$
$
The Corporation regularly incurs in
capitalizable costs associated with software development or
licensing which are recorded within
the Other Assets line item in the accompanying Consolidated Statements of Financial Condition.
In addition, the Corporation incurs
costs
associated
with
hosting
arrangements
that
are
service
contracts
that
are
also
recorded
within
Other
Assets.
The
hosting
arrangements can
include capitalizable
implementation costs
that are
amortized during
the term
of the
hosting arrangement.
The
following
table
summarizes
the
composition
of
acquired
or
developed
software
costs
as
well
as
costs
related
to
hosting
arrangements:
Gross Carrying
Accumulated
Net
Carrying
(In thousands)
Amount
Amortization
Value
June 30, 2024
Software development costs
$
$
$
Software license costs
Cloud computing arrangements
Total Capitalized
software costs [1] [2]
$
$
$
December 31, 2023
Software development costs
$
$
$
Software license costs
Cloud computing arrangements
Total Capitalized
software costs [1] [2]
$
$
$
[1]
Software intangible assets are presented as part of Other
Assets in the Consolidated Statements of Financial Condition.
[2]
The tables above excludes assets that have been fully
amortized.
Total
amortization expense for
all capitalized software
and hosting arrangement
cost, reflected as
part of
technology and software
expenses in the consolidated statement of operations,
is as follows:
Quarters ended June 30,
Six
months ended June 30,
(In thousands)
2024
2023
2024
2023
Software development and license costs
$
$
$
$
Cloud computing arrangements
Total amortization
expense
$
$
$
$
83
Note 13 – Goodwill and other intangible assets
Goodwill
There were
The following tables present the gross amount of
goodwill and accumulated impairment losses by
reportable segments:
June 30, 2024
Balance at
Balance at
June 30,
Accumulated
June 30,
2024
impairment
2024
(In thousands)
losses
Banco Popular de Puerto Rico
$
$
$
Popular U.S.
Total Popular,
Inc.
$
$
$
December 31, 2023
December 31,
Accumulated
December 31,
2023
impairment
2023
(In thousands)
losses
Banco Popular de Puerto Rico
$
$
$
Popular U.S.
Total Popular,
Inc.
$
$
$
Other Intangible Assets
The following table reflects the components of
other intangible assets subject to amortization:
Gross Carrying
Accumulated
Net
Carrying
(In thousands)
Amount
Amortization
Value
June 30, 2024
Core deposits
$
$
$
Other customer relationships
Total other intangible
assets
$
$
$
December 31, 2023
Core deposits
$
$
$
Other customer relationships
Total other intangible
assets
$
$
$
During the quarter ended June 30, 2024, the Corporation recognized
$
assets
with
definite
useful
lives
(June
30,
2023
-
$
recognized $
The following
table presents
the estimated
amortization of
the intangible
assets with
definite useful
lives for
each of
the following
periods:
84
(In thousands)
Remaining 2024
$
Year 2025
Year 2026
Year 2027
Year 2028
Later years
85
Note 14 – Deposits
Total deposits as of the end of the periods presented consisted of:
(In thousands)
June 30, 2024
December 31, 2023
Savings accounts
$
$
NOW, money market and other interest
bearing demand deposits
Total savings, NOW,
money market and other interest bearing demand
deposits
Certificates of deposit:
Under $250,000
$250,000 and over
Total interest bearing
deposits
$
$
Non- interest bearing deposits
$
$
Total deposits
$
$
A summary of certificates of deposits by maturity at
June 30, 2024 follows:
(In thousands)
2024
$
2025
2026
2027
2028
2029 and thereafter
Total certificates of
deposit
$
At June 30, 2024, the Corporation had brokered
deposits amounting to $
The aggregate amount of overdrafts in
demand deposit accounts that were reclassified to
loans was $
(December 31, 2023 - $
At
June
30,
2024,
Puerto
Rico
public sector
deposits
amounted to
$
bearing accounts. These
public sector deposits
are indexed to
short-term market rates
and fluctuate in
cost with changes
in those
rates, in
accordance with contractual
terms. Public
deposit balances are
difficult to
predict. For example,
the receipt
by the Puerto
Rico
Government
of
hurricane
recovery
related
Federal
assistance
and
seasonal
tax
collections
could
increase
public
deposit
balances at BPPR.
On the other hand,
the amount and
timing of reductions
in balances are
likely to be
impacted by,
for example,
the speed at
which federal assistance
is distributed,
the financial condition,
liquidity and cash
management practices of the
Puerto
Rico
Government
and
its
instrumentalities
and
the
implementation
of
fiscal
and
debt
adjustment
plans
approved
pursuant
to
PROMESA or
other
actions
mandated by
the
Fiscal
Oversight and
Management Board
for Puerto
Rico
(the
“Oversight Board”).
Generally, these deposits require that
the bank pledge high credit quality securities as collateral, therefore,
liquidity risk arising from
public sector deposit outflows are lower.
86
Note 15 – Borrowings
Assets sold under agreements to repurchase
Assets sold under agreements to repurchase amounted
to $
The Corporation’s
repurchase transactions are
overcollateralized with the
securities detailed in
the table
below.
The Corporation’s
repurchase
agreements
have
a
right
of
set-off
with
the
respective
counterparty
under
the
supplemental
terms
of
the
master
repurchase agreements.
In an
event of
default,
each party
has a
right of
set-off
against the
other party
for amounts
owed in
the
related
agreement
and
any
other
amount
or
obligation
owed
in
respect
of
any
other
agreement
or
transaction
between
them.
Pursuant to the
Corporation’s accounting policy,
the repurchase agreements
are not offset
with other repurchase
agreements held
with the same counterparty.
The following table
presents information related to
the Corporation’s repurchase
transactions accounted for as
secured borrowings
that are collateralized with
debt securities available-for-sale, debt securities
held-to-maturity, other assets
held-for-trading purposes
or which have been obtained under agreements to resell.
It is the Corporation’s policy to maintain effective control over assets sold
under agreements
to repurchase;
accordingly,
such securities
continue to
be carried
on the
Consolidated Statements
of Financial
Condition.
Repurchase agreements accounted for as secured borrowings
June 30, 2024
December 31, 2023
Repurchase
Repurchase
(In thousands)
U.S. Treasury securities
Within 30 days
$
$
After 30 to 90 days
After 90 days
Total U.S. Treasury
securities
Mortgage-backed securities
Total mortgage-backed
securities
Collateralized mortgage obligations
Total collateralized
mortgage obligations
Total
$
$
Repurchase agreements in this portfolio
are generally short-term, often overnight.
As such our risk
is very limited.
We manage the
liquidity risks arising from secured
funding by sourcing funding globally from
a diverse group of counterparties, providing
a range of
securities collateral and pursuing longer durations,
when appropriate.
Other short-term borrowings
There were
87
Notes Payable
The following table presents the composition of notes
payable at June 30, 2024 and December
31, 2023.
(In thousands)
June 30, 2024
December 31, 2023
Advances with the FHLB with maturities ranging from
fixed rates ranging from
% to
%
$
$
Unsecured senior debt securities maturing on
%, net of debt issuance costs of $
[1]
Junior subordinated deferrable interest debentures (related to
trust preferred securities) maturing on
% to
%, net of debt issuance costs of $
Total notes payable
$
$
Note: Refer to the 2023 Form 10-K for rates information
at December 31, 2023.
[1] On March 13, 2023, the Corporation issued $
% Senior Notes due
underwritten public offering. The Corporation used a
portion of the net proceeds of the 2028 Notes offering
to redeem, on August 14, 2023, the
outstanding $
% Senior Notes which were due on September
. The redemption price was
equal to
% of the principal amount plus accrued and unpaid
interest through the redemption date.
A breakdown of borrowings by contractual maturities
at June 30, 2024 is included in the
table below.
Assets sold under
(In thousands)
agreements to
repurchase
Notes payable
Total
2024
$
$
$
2025
2026
2028
Later years
Total borrowings
$
$
$
At June 30, 2024 and December 31,
2023, the Corporation had FHLB borrowing facilities whereby the Corporation could
borrow up
to $
2024 and December 31, 2023, the Corporation had placed $
letters of credit to secure deposits. The FHLB borrowing facilities are collateralized with securities and loans held-in-portfolio, and do
not have restrictive covenants or callable features.
Also, at
June 30,
2024, the Corporation
had borrowing facilities
at the
discount window of
the Federal
Reserve Bank of
New York
amounting to
$
The facilities are a collateralized source of credit
that is highly reliable even under difficult market
conditions.
88
Note 16 − Other liabilities
The caption of other liabilities in the consolidated
statements of financial condition consists of the following
major categories:
(In thousands)
June 30, 2024
December 31, 2023
Accrued expenses
$
$
Accrued interest payable
Accounts payable
Dividends payable
Trades payable
Liability for GNMA loans sold with an option to repurchase
Reserves for loan indemnifications
Reserve for operational losses
Operating lease liabilities (Note 27)
Finance lease liabilities (Note 27)
Pension benefit obligation
Postretirement benefit obligation
Others
Total other liabilities
$
$
89
Note 17 – Stockholders’ equity
As of June 30, 2024, stockholders’ equity totaled $
cash dividends of $
) per common share amounting to
$
declared to stockholders of record as of the close
of business on
.
On July 24, 2024, the Corporation announced the following actions as
part of its capital plan: (i) up to $
repurchases, and (ii)
an increase in its
quarterly common stock dividend
from $
first quarter of 2025, subject to approval by
its Board of Directors.
90
Note 18 – Other comprehensive income (loss)
The following table presents changes in accumulated other
comprehensive income (loss) by component for the quarters
ended June
30, 2024 and, 2023.
Changes in Accumulated Other Comprehensive Loss
by Component [1]
Quarters ended
Six
months ended
June 30,
June 30,
(In thousands)
2024
2023
2024
2023
Foreign currency translation
Beginning Balance
$
(
68,548
)
$
(
61,980
)
$
(
64,528
)
$
(
56,735
)
Other comprehensive income (loss)
(
3,855
)
Net change
(
3,855
)
Ending balance
$
(
68,383
)
$
(
55,979
)
$
(
68,383
)
$
(
55,979
)
Adjustment of pension and
postretirement benefit plans
Beginning Balance
$
(
115,632
)
$
(
141,327
)
$
(
117,894
)
$
(
144,335
)
Amounts reclassified from accumulated other
comprehensive loss for amortization of net losses
Net change
Ending balance
$
(113,371)
$
(
138,319
)
$
(113,372)
$
(
138,319
)
Unrealized net holding losses
on debt securities
Beginning Balance
$
(
1,749,006
)
$
(
2,098,518
)
$
(
1,713,109
)
$
(
2,323,903
)
Other comprehensive income (loss)
(
69,941
)
(
54,163
)
Amounts reclassified from accumulated other
comprehensive loss for amortization of net unrealized
losses of debt securities transferred from available-for-
sale to held-to-maturity
Net change
(
35,619
)
Ending balance
$
(1,696,528)
$
(
2,134,137
)
$
(1,696,527)
$
(
2,134,137
)
Unrealized net (losses) gains
on cash flow hedges
Beginning Balance
$
$
$
$
Other comprehensive (loss) income before
reclassifications
(
19
)
Amounts reclassified from accumulated other
comprehensive income (loss)
(
26
)
Net change
(
45
)
Total
$
(
1,878,282
)
$
(
2,328,435
)
$
(
1,878,282
)
$
(
2,328,435
)
[1]
All amounts presented are net of tax.
91
The following table
presents the amounts
reclassified out of
each component of
accumulated other comprehensive loss
during the
quarters and six months ended June 30, 2024 and
2023.
Reclassifications Out of Accumulated Other Comprehensive
Loss
Quarters ended
Six
months ended
Affected Line Item in the
June 30,
June 30,
(In thousands)
Consolidated Statements of Operations
2024
2023
2024
2023
Adjustment of pension and postretirement benefit plans
Amortization of net losses
Other operating expenses
$
(
3,618
)
$
(
4,813
)
$
(
7,236
)
$
(
9,626
)
Total before tax
(
3,618
)
(
4,813
)
(
7,236
)
(
9,626
)
Income tax benefit
Total net of tax
$
(
2,261
)
$
(
3,008
)
$
(
4,522
)
$
(
6,016
)
Unrealized net holding losses on debt securities
Amortization of unrealized net losses of debt
securities transferred to held-to-maturity
Interest income from investment securities
$
(
44,421
)
$
(
42,903
)
$
(
88,430
)
$
(
84,943
)
Total before tax
(
44,421
)
(
42,903
)
(
88,430
)
(
84,943
)
Income tax expense
Total net of tax
$
(
35,537
)
$
(
34,322
)
$
(
70,745
)
$
(
67,955
)
Unrealized net (losses) gains on cash flow hedges
Forward contracts
Mortgage banking activities
$
$
$
$
Total before tax
Income tax benefit
(
15
)
Total net of tax
$
$
$
$
Total reclassification
adjustments, net of tax
$
(
37,798
)
$
(
37,330
)
$
(
75,267
)
$
(
73,945
)
92
Note 19 – Guarantees
At
June
30,
2024,
the
Corporation
recorded
a
liability
of
$
unamortized balance of the obligations
undertaken in issuing the
guarantees under the standby letters of
credit. Management does
not anticipate any material losses related to these
instruments.
From time to time, the Corporation securitized mortgage loans into guaranteed mortgage-backed securities subject to limited, and in
certain instances, lifetime credit
recourse on the loans
that serve as
collateral for the
mortgage-backed securities. The Corporation
has
not sold
any mortgage
loans subject
to credit
recourse since
2009. At
June 30,
2024, the
Corporation serviced
$
(December 31, 2023 -
$
with FNMA
and FHLMC
residential mortgage
loan securitization
programs. In
the event
of any
customer default,
pursuant to
the
credit recourse
provided, the
Corporation is
required to
repurchase the
loan or
reimburse the
third party
investor for
the incurred
loss.
The
maximum
potential
amount
of
future
payments
that
the
Corporation
would
be
required
to
make
under
the
recourse
arrangements
in
the
event
of
nonperformance by
the
borrowers
is
equivalent
to
the
total
outstanding
balance
of
the
residential
mortgage
loans serviced
with
recourse
and
interest, if
applicable. During
the
quarter and
six
months
ended June
30,
2024,
the
Corporation repurchased
approximately $
subject
to
the
credit
recourse
provisions
(June
30,
2023
-
$
nonperformance
by
the
borrower,
the
Corporation
has
rights
to
the
underlying
collateral
securing
the
mortgage
loan.
The
Corporation suffers ultimate losses on these loans when the proceeds from a foreclosure sale of the property underlying a defaulted
mortgage loan are
less than the
outstanding principal balance
of the
loan plus any
uncollected interest advanced
and the costs
of
holding and
disposing the
related property.
At June
30, 2024,
the Corporation’s
liability established
to cover
the estimated
credit
loss exposure related to loans sold or serviced
with credit recourse amounted to $
The following table shows the changes in the Corporation’s liability of estimated losses related to loans serviced with credit recourse
provisions during the quarters and six months ended
June 30, 2024 and 2023.
Quarters ended June 30,
Six months ended June 30,
(In thousands)
2024
2023
2024
2023
Balance as of beginning of period
$
$
$
$
Provision (benefit) for recourse liability
(
204
)
(
176
)
Net charge-offs
(
91
)
(
119
)
(
193
)
(
498
)
Balance as of end of period
$
$
$
$
From time
to
time, the
Corporation sells
loans and
agrees to
indemnify the
purchaser for
credit
losses or
any
breach of
certain
representations and warranties made in connection
with the sale.
Servicing agreements
relating to
the mortgage-backed
securities programs
of FNMA,
FHLMC and
GNMA, and
to mortgage
loans
sold or serviced to certain other investors, including FHLMC,
require the Corporation to advance funds to
make scheduled payments
of
principal, interest,
taxes
and
insurance, if
such
payments have
not
been
received from
the
borrowers. At
June
30,
2024, the
Corporation serviced $
2023 - $
from liquidation proceeds when the mortgage
loan is foreclosed or,
in the case of FHA/VA
loans, under the applicable FHA
and
VA
insurance
and guarantees
programs. However,
in the
meantime, the
Corporation must
absorb the
cost
of the
funds
it
advances
during the
time the
advance is
outstanding. The
Corporation must
also bear
the costs
of attempting
to collect
on delinquent
and
defaulted
mortgage
loans.
In
addition,
if
a
defaulted
loan
is
not
cured,
the
mortgage
loan
would
be
canceled
as
part
of
the
foreclosure proceedings
and the
Corporation would
not receive
any future
servicing income
with respect
to that
loan. At
June 30,
2024,
the
outstanding
balance
of
funds
advanced
by
the
Corporation
under
such
mortgage
loan
servicing
agreements
was
approximately
$
servicing portfolio experience
increased delinquencies, the Corporation
would be required
to dedicate additional
cash resources to
comply with its obligation to advance funds as well
as incur additional administrative costs related
to increases in collection efforts.
Popular,
Inc. Holding
Company (“PIHC”) fully
and unconditionally guarantees
certain borrowing
obligations issued by
certain of
its
% owned consolidated subsidiaries amounting to $
at both June
30, 2024 and December
31, 2023, PIHC fully
and unconditionally guaranteed on a
subordinated basis $
capital securities
(trust preferred
securities) issued
by wholly-owned
issuing trust
entities to
the extent
set forth
in the
applicable
93
guarantee agreement. Refer to
Note 18 to
the Consolidated Financial Statements
in the 2023
Form 10-K for
further information on
the trust preferred securities.
94
Note 20 – Commitments and contingencies
Off-balance sheet risk
The Corporation
is a
party to
financial instruments
with off-balance
sheet credit
risk in
the normal
course of
business to
meet the
financial needs of its customers. These financial instruments
include loan commitments, letters of credit and standby
letters of credit.
These instruments involve,
to varying
degrees, elements of
credit and
interest rate
risk in
excess of
the amount
recognized in
the
consolidated statements of financial condition.
The
Corporation’s
exposure
to
credit
loss
in
the
event
of
nonperformance
by
the
other
party
to
the
financial
instrument
for
commitments to extend credit, standby
letters of credit and financial
guarantees is represented by the
contractual notional amounts
of those instruments. The
Corporation uses the same
credit policies in
making these commitments and conditional
obligations as it
does for those reflected on the consolidated statements
of financial condition.
Financial instruments with
off-balance sheet credit
risk, whose contract
amounts represent potential credit
risk as of
the end of
the
periods presented were as follows:
(In thousands)
June 30, 2024
December 31, 2023
Commitments to extend credit:
Credit card lines
$
$
Commercial lines of credit
Construction lines of credit
Other consumer unused credit commitments
Commercial letters of credit
Standby letters of credit
Commitments to originate or fund mortgage loans
At June
30, 2024
and December
31, 2023,
the Corporation
maintained a
reserve of
approximately $
respectively, for potential losses associated with unfunded loan commitments
related to commercial and construction lines
of credit.
Other commitments
At June
30, 2024
and December 31,
2023, the
Corporation also
maintained other
non-credit commitments for
approximately $
million and $
Business concentration
Since the Corporation’s business activities are concentrated primarily in Puerto Rico, its results of operations and financial condition
are dependent
upon the
general trends
of the
Puerto Rico
economy and,
in particular,
the residential
and commercial
real estate
markets. The concentration
of the Corporation’s
operations in Puerto Rico
exposes it to
greater risk than other
banking companies
with a wider geographic base. Its
asset and revenue composition by geographical area
is presented in Note 32
to the Consolidated
Financial Statements.
Puerto
Rico
has
faced
significant
fiscal
and
economic
challenges
for
over
a
decade.
In
response
to
such
challenges,
the
U.S.
Congress enacted the
Puerto Rico Oversight
Management and Economic Stability
Act (“PROMESA”) in
2016, which, among
other
things,
established
the
Oversight
Board
and
a
framework
for
the
restructuring
of
the
debts
of
the
Commonwealth,
its
instrumentalities and
municipalities.
The
Commonwealth and
several
of
its
instrumentalities have
commenced
debt
restructuring
proceedings under
PROMESA. As
of the
date of
this report,
while municipalities
have been
designated as
covered entities
under
PROMESA,
no
municipality
has
commenced,
or
has
been
authorized
by
the
Oversight
Board
to
commence,
any
such
debt
restructuring proceeding under PROMESA.
At
June
30,
2024,
the
Corporation’s
direct
exposure
to
the
Puerto
Rico
government
and
its
instrumentalities and
municipalities
totaled $
outstanding,
$
Substantially all
of the
amount outstanding
at June
30, 2024
and December
31, 2023
were obligations
from various
Puerto Rico
municipalities. In most cases, these were “general obligations” of a municipality, to which
the applicable municipality has pledged its
good
faith,
credit
and
unlimited taxing
power,
or
“special
obligations”
of
a
municipality,
to
which
the
applicable
municipality
has
pledged other revenues. At June 30, 2024,
% of the Corporation’s exposure to municipal loans and
securities was concentrated in
95
the
municipalities
of
San
Juan,
Guaynabo,
Carolina
and
Caguas.
In
July
2024,
the
Corporation
received
scheduled
principal
payments amounting to $
The following table details the loans and investments representing the Corporation’s direct exposure to
the Puerto Rico government
according to their maturities as of June 30, 2024:
(In thousands)
Investment
Portfolio
Loans
Total Outstanding
Total Exposure
Central Government
After 1 to 5 years
$
$
$
$
After 5 to 10 years
After 10 years
Total Central
Government
Municipalities
Within 1 year
After 1 to 5 years
After 5 to 10 years
After 10 years
Total Municipalities
Total Direct Government
Exposure
$
$
$
$
In addition,
at June
30, 2024,
the Corporation had
$
entities but for
which the principal
source of
repayment is non-governmental
($
$
instrumentality
that
has
been
designated
as
a
covered
entity
under
PROMESA
(December
31,
2023
-
$
mortgage loans
are secured
by first
mortgages on
Puerto Rico
residential properties
and the
HFA
insurance covers
losses in
the
event of
a borrower default
and upon
the satisfaction
of certain
other conditions. The
Corporation also had
at June
30, 2024,
$
million in
bonds issued by
HFA which
are secured by
second mortgage loans
on Puerto Rico
residential properties, and
for which
HFA also provides
insurance to cover losses in the
event of a borrower default and
upon the satisfaction of certain other
conditions
(December 31,
2023 -
$
those serving
as collateral
for the
HFA
bonds default
and the
collateral is
insufficient to
satisfy the
outstanding balance
of these
loans,
HFA’s
ability
to
honor
its
insurance
will
depend, among
other factors,
on
the
financial
condition
of
HFA
at
the
time
such
obligations
become
due
and
payable. The
Corporation does
not consider
the
government guarantee
when
estimating the
credit
losses
associated
with
this
portfolio.
Although
the
Governor
is
currently
authorized
by
local
legislation
to
impose
a
temporary
moratorium on the financial obligations of the HFA, a moratorium on
such obligations has not been imposed as of
the date hereof.
BPPR’s
commercial loan
portfolio also
includes loans
to
private borrowers
who
are service
providers, lessors,
suppliers or
have
other relationships with the government. These
borrowers could be negatively affected by
the Commonwealth’s fiscal crisis and
the
ongoing
Title
III
proceedings
under
PROMESA.
Similarly,
BPPR’s
mortgage
and
consumer
loan
portfolios
include
loans
to
government
employees
and
retirees,
which
could
also
be
negatively
affected
by
fiscal
measures
such
as
employee
layoffs
or
furloughs or reductions in pension benefits.
In
addition,
$
Government or its agencies at June 30,
2024 (compared to $
Corporation also had U.S. Treasury and obligations from the U.S.
Government, its agencies or government sponsored
entities within
the
portfolio
of
available-for-sale
and
held-to-maturity
securities
as
described
in
Note
5
and
6
to
the
Consolidated
Financial
Statements.
At June 30, 2024, the Corporation had operations in the United States Virgin Islands (the “USVI”) and has approximately $
in direct
exposure to
USVI government entities
(December 31, 2023
- $
fiscal and economic challenges
that could adversely
affect the ability
of its public
corporations and instrumentalities to
service their
outstanding debt obligations.
96
At June 30, 2024, the
Corporation had operations in the British
Virgin Islands (“BVI”), which islands
were negatively affected by the
COVID-19 pandemic, particularly due to a reduction in
the tourism activity which accounts for a significant
portion of their economy.
Although
the
Corporation has
no
significant
exposure to
a
single
borrower
in
the
BVI,
at
June
30,
2024,
it
had
a
loan
portfolio
amounting to
approximately $
million at December 31, 2023.
FDIC Special Assessment
On
November
16,
2023,
the
Federal
Deposit
Insurance
Corporation
(“FDIC”)
approved
a
final
rule
that
imposes
a
special
assessment (the “FDIC
Special Assessment”) to recover
the losses to
the deposit insurance
fund resulting from
the FDIC’s use,
in
March 2023,
of the systemic
risk exception to
the least-cost resolution
test under the
Federal Deposit Insurance
Act in
connection
with the
receiverships of
several failed
banks. In
connection with
this assessment,
the Corporation
recorded an
expense of
$
million, $
During the first quarter of 2024, the Corporation recorded an additional expense of $
FDIC's
higher
loss
estimate
which increased
from
$
assessment amount and collection period may
change as the estimated loss
is periodically adjusted or if
the total amount collected
varies.
Legal Proceedings
The nature
of Popular’s business
ordinarily generates
claims, litigation,
regulatory and
governmental investigations, and
legal and
administrative cases
and proceedings (collectively,
“Legal Proceedings”). When
the Corporation
determines that it
has meritorious
defenses to the claims
asserted, it vigorously defends
itself. The Corporation will
consider the settlement of
cases (including cases
where it has meritorious defenses) when, in management’s judgment,
it is in the best interest of the Corporation and
its stockholders
to do so.
On at least
a quarterly basis,
Popular assesses its
liabilities and contingencies
relating to outstanding Legal
Proceedings
utilizing the most current information available. For
matters where it is probable that the Corporation will
incur a material loss and the
amount can be reasonably estimated, the Corporation establishes an accrual for
the loss. Once established, the accrual is
adjusted
on at least a quarterly basis to reflect any relevant
developments, as appropriate. For matters where a material loss is not probable,
or the amount of the loss cannot be reasonably
estimated, no accrual is established.
In certain cases,
exposure to loss
exists in
excess of any
accrual to the
extent such loss
is reasonably possible,
but not
probable.
Management believes and
estimates that the
range of reasonably
possible losses (with
respect to those
matters where such
limits
may be determined in
excess of amounts accrued) for
current Legal Proceedings ranged from
$
of June
30, 2024.
In certain
cases, management cannot
reasonably estimate the
possible loss
at this
time. Any
estimate involves
significant
judgment,
given
the
varying
stages
of
the
Legal
Proceedings
(including
the
fact
that
many
of
them
are
currently
in
preliminary stages), the existence of multiple defendants in several of the current Legal Proceedings whose share of liability has yet
to be
determined, the
numerous unresolved issues
in many
of the
Legal Proceedings,
and the
inherent uncertainty
of the
various
potential
outcomes
of
such
Legal
Proceedings.
Accordingly,
management’s
estimate
will
change
from
time-to-time,
and
actual
losses may be more or less than the current estimate.
While the
outcome of
Legal Proceedings
is inherently
uncertain, based
on information
currently available,
advice of
counsel, and
available
insurance
coverage,
management
believes
that
the
amount
it
has
already
accrued
is
adequate
and
any
incremental
liability arising from
the Legal Proceedings
in matters in
which a loss
amount can be
reasonably estimated will not
have a material
adverse effect
on the Corporation’s
consolidated financial position.
However, in
the event
of unexpected future
developments, it is
possible that
the ultimate
resolution of
these matters
in a
reporting period, if
unfavorable, could have
a material
adverse effect
on
the Corporation’s consolidated financial position for that period.
Set forth below is a description of the Corporation’s
significant Legal Proceedings.
Insufficient Funds and Overdraft Fees Class Actions
97
Popular, Inc. was
named as a defendant on a
putative class action complaint captioned Golden v.
Popular, Inc. filed
in March 2020
before
the
U.S.
District
Court
for
the
Southern
District
of
New
York,
seeking
damages,
restitution
and
injunctive
relief.
Plaintiff
alleged breach
of contract,
violation
of
the covenant
of
good faith
and
fair
dealing, unjust
enrichment and
violation
of
New York
consumer
protection law
due
to
Popular’s purported
practice of
charging
overdraft fees
(“OD
Fees”) on
transactions that,
under
plaintiffs’ theory,
do not
overdraw the
account. Plaintiff
described Popular’s purported
practice of
charging OD
Fees as
“Authorize
Positive,
Purportedly
Settle
Negative”
(“APPSN”)
transactions
and
alleged
that
Popular
assesses
OD
Fees
over
authorized
transactions
for
which
sufficient
funds
are
held
for
settlement.
In
August
2020,
Popular
filed
a
Motion
to
Dismiss
on
several
grounds,
including
failure
to
state
a
claim
against
Popular,
Inc.
and
improper
venue.
In
October
2020,
Plaintiff
filed
a
Notice
of
Voluntary
Dismissal
before
the
U.S.
District
Court
for
the
Southern
District
of
New
York
and,
simultaneously,
filed
an
identical
complaint in
the U.S.
District Court for
the District
of the
Virgin Islands
against Popular,
Inc., Popular Bank
and Banco Popular
de
Puerto
Rico
(“BPPR”). In
November 2020,
Plaintiff
filed
a
Notice of
Voluntary
Dismissal against
Popular,
Inc.
and Popular
Bank
following a Motion to
Dismiss filed on behalf
of such entities, which argued
failure to state
a claim and lack
of minimum contacts of
such parties with the U.S.V.I.
district court jurisdiction. BPPR, the only defendant remaining in
the case, was served with process in
November 2020 and filed a Motion to Dismiss
in January 2021.
In October 2022, the parties reached a settlement in principle on a class-wide basis subject to final court approval. In January 2023,
the parties filed
before the Court a
motion for preliminary approval
of the settlement
agreement and, on March
31, 2023, the
Court
issued an order granting preliminary approval
of the settlement agreement.
On
September
8,
2023,
the
Court
held
a
hearing
to
consider
the
final
approval
of
the
class
settlement
agreement,
and,
on
September 29, 2023, the Court issued an Opinion and Order granting
final approval to the settlement agreement.
On December 19,
2023, the Court
issued an Order staying
all deadlines in the
settlement agreement regarding payment
of benefit until further
notice
after
the
parties
informed
the
Court
that
the
settlement
administrator
had
mistakenly
failed
to
send
the
settlement
notice
to
approximately
3,000
class
members.
On
February
20,
2024,
the
parties
filed
a
Joint
Motion
for
Supplemental
Notice
that
was
approved by the Court on February 20, 2024.
On July
8, 2024, the
Court held the
Supplemental Fairness Hearing,
and, on
July 9,
2024, the
Court issued an
Amended Opinion
and Order
granting final
approval to
the settlement
agreement. On July
22, 2024,
the Court
entered final
judgment dismissing the
complaint with prejudice and retaining jurisdiction
to enforce the terms of the settlement agreement.
This matter is now closed.
On January
31, 2022,
Popular was
also named
as a
defendant on a
putative class
action complaint captioned
Lipsett v.
Popular,
Inc. d/b/a Banco Popular, filed before the U.S. District Court for the Southern District
of New York, seeking damages, restitution and
injunctive relief. Similar to the claims set forth in the
aforementioned Golden complaint, Plaintiff alleges breach of contract, including
violations of the covenant of good faith and
fair dealing, as a result of Popular’s purported practice of
charging OD Fees for APPSN
transactions. The complaint
further alleged that
Popular assesses OD
Fees over
authorized transactions for
which sufficient funds
are held for settlement. Popular waived service of process
and filed a Motion to Compel Arbitration. In response to Popular’s
motion,
Plaintiff filed a Notice of Voluntary Dismissal in April 2022.
On May
13, 2022,
Plaintiff in
the Lipsett
complaint filed
a new
complaint captioned
Lipsett v.
Banco Popular
North America
d/b/a
Popular Community
Bank with
the same
allegations of
his previous
complaint against
Popular.
In September
2022, after
serving
Plaintiff
with a
written notice
of
election to
arbitrate the
claims
asserted in
the complaint
which went
unanswered, Popular
Bank
(“PB”) filed a new Motion to Compel Arbitration.
On December 9, 2022, the
Court issued a Decision and
Order denying PB’s Motion to
Compel Arbitration. On December 20, 2022,
PB filed a Notice of Appeal with the United
States Court of Appeals for the Second Circuit.
On January
10, 2024,
the Court
of
Appeals entered
judgment affirming
the trial
court’s
decision denying
PB’s
Motion to
Compel
Arbitration.
After remand to
the U.S. District
Court, on March
19, 2024, the
court issued an
Order adjourning all
dates and deadlines
including
the initial
pretrial conference
after the
parties informed
that they
have agreed
to mediate
the matter.
During a
mediation hearing
held on May
2, 2024, the parties
reached a settlement in
principle on a class-wide basis.
On July 25, 2024,
the parties filed before
the Court a motion
for preliminary approval of
the settlement agreement, and, on
July 26, 2024, the
Court issued an order
granting
preliminary approval of the settlement agreement. The
Court scheduled the final approval hearing for January
27, 2025.
98
Note 21 – Non-consolidated variable interest
entities
The Corporation is
involved with
are deemed to be variable interest entities (“VIEs”) since the equity investors at risk have no substantial decision-making rights. The
Corporation does not
hold any variable
interest in the
trusts, and therefore,
cannot be the
trusts’ primary beneficiary.
Furthermore,
the
Corporation concluded
that
it did
not
hold
a
controlling financial
interest
in
these
trusts
since the
decisions
of
the
trusts
are
predetermined through
the trust
documents and the
guarantee of
the trust
preferred securities is
irrelevant since
in substance
the
sponsor is guaranteeing its own debt.
Also, the
Corporation is
involved with
various special
purpose entities
mainly in
guaranteed mortgage
securitization transactions,
including
GNMA
and
FNMA.
The
Corporation
has
also
engaged
in
securitization
transactions
with
FHLMC,
but
considers
its
exposure in the form of servicing fees and servicing advances not to be significant
at June 30, 2024
.
These special purpose entities
are deemed
to be
VIEs since
they lack
equity investments
at risk.
The Corporation’s
continuing involvement in
these guaranteed
loan securitizations includes owning certain beneficial interests
in the form of securities as
well as the servicing rights
retained. The
Corporation is
not required to
provide additional financial
support to
any of
the variable
interest entities
to which
it has
transferred
the
financial
assets.
The
mortgage-backed
securities,
to
the
extent
retained,
are
classified
in
the
Corporation’s
Consolidated
Statements
of
Financial
Condition
as
available-for-sale
or
trading
securities.
The
Corporation
concluded
that,
essentially,
these
entities (FNMA
and GNMA)
control the
design of
their respective
VIEs, dictate
the quality
and nature
of the
collateral, require
the
underlying insurance, set
the servicing standards
via the servicing
guides and can
change them at
will, and can
remove a primary
servicer with cause,
and without cause
in the
case of
FNMA. Moreover,
through their guarantee
obligations, agencies (FNMA
and
GNMA) have the obligation to absorb losses that
could be potentially significant to the VIE.
The
Corporation
holds
variable
interests
in
these
VIEs
in
the
form
of
agency
mortgage-backed
securities
and
collateralized
mortgage obligations, including those securities originated by the Corporation and those acquired from
third parties. Additionally, the
Corporation holds agency mortgage-backed securities
and agency collateralized mortgage obligations
issued by third party
VIEs in
which
it
has
no
other
form
of
continuing
involvement. Refer
to
Note
23
to
the
Consolidated
Financial
Statements
for
additional
information on the
debt securities outstanding at
June 30, 2024
and December 31,
2023, which are
classified as available-for-sale
and
trading
securities
in
the
Corporation’s
Consolidated
Statements
of
Financial
Condition.
In
addition,
the
Corporation
holds
variable
interests
in
the
form
of
servicing
fees,
since
it
retains
the
right
to
service
the
transferred
loans
in
those
government-
sponsored special purpose entities (“SPEs”) and may also purchase the right to service loans in other government-sponsored SPEs
that were transferred to those SPEs by a third-party.
The following
table presents
the carrying
amount and
classification of
the assets
related to
the Corporation’s
variable interests
in
non-consolidated VIEs
and the
maximum exposure
to loss
as a
result of
the Corporation’s
involvement as
servicer of
GNMA and
FNMA loans at June 30, 2024 and December 31,
2023.
99
(In thousands)
June 30, 2024
December 31, 2023
Assets
Servicing assets:
Mortgage servicing rights
$
$
Total servicing
assets
$
$
Other assets:
Servicing advances
$
$
Total other assets
$
$
Total assets
$
$
Maximum exposure to loss
$
$
The size of
the non-consolidated VIEs,
in which the
Corporation has a
variable interest in
the form
of servicing fees,
measured as
the total unpaid principal balance of the loans,
amounted to $
The Corporation
determined that
the maximum
exposure to
loss includes
the fair
value of
the MSRs
and the
assumption that
the
servicing advances at June 30, 2024 and December 31, 2023, will not be recovered. The agency debt securities are not included as
part of the maximum exposure to loss since they
are guaranteed by the related agencies.
ASU 2009-17 requires that an ongoing primary beneficiary assessment should be made to determine whether the Corporation is the
primary beneficiary of any of the VIEs it is
involved with. The conclusion on the assessment of these non-consolidated VIEs has not
changed
since
their
initial
evaluation.
The
Corporation
concluded
that
it
is
still
not
the
primary
beneficiary
of
these
VIEs,
and
therefore, these VIEs are not required to be consolidated
in the Corporation’s financial statements at June 30, 2024.
100
Note 22 – Related party transactions
Centro Financiero BHD, S.A.
At June 30, 2024, the Corporation had
a
% equity interest in Centro Financiero BHD,
S.A. (“BHD”), one of the largest banking
and financial
services groups
in the
Dominican Republic.
During the
six months
ended June
30, 2024,
the Corporation
recorded
$
component
of
Other
Comprehensive Income,
from
its
investment
in
BHD
(June
30,
2023
-
$
amount of
$
dividend distributions and $
dividends and $
Investment Companies
The Corporation,
through its subsidiary Popular
Asset Management LLC (“PAM”),
provides advisory services to
several investment
companies registered
under the
Investment Company
Act of
1940 in
exchange for
a fee.
The Corporation,
through its
subsidiary
BPPR, also
provides transfer
agency services to
these investment companies.
These fees
are calculated
at an
annual rate
of the
average net
assets of the
investment company,
as defined in
each agreement. Due
to its
advisory role, the
Corporation considers
these investment companies as related parties.
For
the six
months
ended June
30,
2024,
administrative fees
charged
to
these
investment companies
amounted
to
$
(June 30, 2023
- $
(June 30, 2023 - $
101
Note 23 – Fair value measurement
ASC Subtopic
820-10 “Fair
Value
Measurements and
Disclosures” establishes
a fair
value hierarchy
that prioritizes
the inputs
to
valuation techniques
used to
measure fair
value into
three levels
in order
to increase
consistency and
comparability in
fair value
measurements and disclosures. The hierarchy is broken
down into three levels based on the reliability
of inputs as follows:
●
Level
1
- Unadjusted
quoted prices
in
active markets
for identical
assets
or liabilities
that
the Corporation
has the
ability to
access at the
measurement date. Valuation
on these instruments
does not necessitate a
significant degree of judgment
since
valuations are based on quoted prices that are
readily available in an active market.
●
Level 2
- Quoted
prices other
than those
included in
Level 1
that are
observable either
directly or
indirectly.
Level 2
inputs
include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in
markets
that
are
not
active,
or
other inputs
that
are
observable
or that
can
be
corroborated by
observable market
data
for
substantially the full term of the financial instrument.
●
Level 3
- Inputs are unobservable and significant
to the fair value measurement.
Unobservable inputs reflect the Corporation’s
own judgements about assumptions that market participants
would use in pricing the asset or liability.
The
Corporation
maximizes
the
use
of
observable
inputs
and
minimizes
the
use
of
unobservable
inputs
by
requiring
that
the
observable inputs be used when
available. Fair value is
based upon quoted market prices
when available. If listed prices
or quotes
are
not
available,
the
Corporation
employs
internally-developed
models
that
primarily
use
market-based
inputs
including
yield
curves, interest rates,
volatilities, and credit
curves, among others.
Valuation
adjustments are limited
to those necessary
to ensure
that the financial instrument’s
fair value is adequately representative of
the price that would
be received or paid
in the marketplace.
These adjustments include amounts that reflect counterparty credit quality,
the Corporation’s credit standing, constraints on liquidity
and unobservable parameters that are applied consistently.
There have been no changes in the
Corporation’s methodologies used
to estimate the fair value of assets and liabilities from
those disclosed in the 2023 Form 10-K.
The estimated fair
value may
be subjective in
nature and may
involve uncertainties and
matters of
significant judgment for
certain
financial instruments. Changes in the underlying assumptions
used in calculating fair value could significantly
affect the results.
Fair Value on a Recurring and Nonrecurring Basis
The following fair value hierarchy tables
present information about the Corporation’s assets
and liabilities measured at fair value
on
a recurring basis at June 30, 2024 and December
31, 2023:
102
At June 30, 2024
(In thousands)
Level 1
Level 2
Level 3
Measured at NAV
Total
RECURRING FAIR VALUE
MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities
$
$
$
$
$
Collateralized mortgage obligations - federal
agencies
Mortgage-backed securities
Other
Total debt securities
available-for-sale
$
$
$
$
$
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
$
$
$
$
Obligations of Puerto Rico, States and political
subdivisions
Collateralized mortgage obligations
Mortgage-backed securities
Other
Total trading account
debt securities, excluding
derivatives
$
$
$
$
$
Equity securities
$
$
$
$
$
Mortgage servicing rights
Loans held-for-sale
Derivatives
Total assets measured
at fair value on a
recurring basis
$
$
$
$
$
Liabilities
Derivatives
$
$
(
23,198
)
$
$
$
(
23,198
)
Total liabilities measured
at fair value on a
recurring basis
$
$
(
23,198
)
$
$
$
(
23,198
)
103
At December 31, 2023
(In thousands)
Level 1
Level 2
Level 3
Measured at NAV
Total
RECURRING FAIR VALUE
MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities
$
$
$
$
$
Collateralized mortgage obligations - federal
agencies
Mortgage-backed securities
Other
Total debt securities
available-for-sale
$
$
$
$
$
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
$
$
$
$
Obligations of Puerto Rico, States and political
subdivisions
Collateralized mortgage obligations
Mortgage-backed securities
Other
Total trading account
debt securities, excluding
derivatives
$
$
$
$
$
Equity securities
$
$
$
$
$
Mortgage servicing rights
Loans held-for-sale
Derivatives
Total assets measured
at fair value on a
recurring basis
$
$
$
$
$
Liabilities
Derivatives
$
$
(
21,103
)
$
$
$
(
21,103
)
Total liabilities measured
at fair value on a
recurring basis
$
$
(
21,103
)
$
$
$
(
21,103
)
Beginning in the first quarter of 2023, the Corporation has elected the fair value option for
newly originated mortgage loans held-for-
sale. This election better aligns with the management
of the portfolio from a business perspective.
Loans held-for-sale measured at fair value
Loans held-for-sale measured at fair value were priced
based on secondary market prices. These loans
are classified as Level 2.
The
following
tables summarize
the difference
between the
aggregate fair
value
and the
aggregate unpaid
principal
balance
for
mortgage loans originated as held-for-sale measured
at fair value as of June 30, 2024 and December
31, 2023.
(In thousands)
June 30, 2024
Aggregate Unpaid
Fair Value
Principal Balance
Difference
Loans held for sale
$
$
$
(In thousands)
December 31, 2023
Aggregate Unpaid
Fair Value
Principal Balance
Difference
Loans held for sale
$
$
$
104
For the six months ended June 30, 2024, changes in the fair value of
mortgage loans held-for-sale for which the Corporation elected
the fair value option, were not considered material.
The fair value information included in the following tables is
not as of period end, but as of
the date that the fair value measurement
was
recorded
during
the
quarters
and
six
months
ended
June
30,
2024
and
2023
and
excludes
nonrecurring
fair
value
measurements of assets no longer outstanding as of
the reporting date.
Six months ended June 30, 2024
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE
MEASUREMENTS
Assets
Write-downs
Loans
[1]
$
$
$
$
$
(
329
)
Loans held-for-sale
[2]
(
38
)
Other real estate owned
[3]
(
1,602
)
Other foreclosed assets
[3]
(
46
)
Total assets measured
at fair value on a nonrecurring basis
$
$
$
$
$
(
2,015
)
[1] Relates mainly to certain impaired collateral dependent loans.
The impairment was measured based on the fair value
of the collateral, which is
derived from appraisals that take into consideration prices
in observed transactions involving similar assets in similar
locations. Costs to sell are
excluded from the reported fair value amount.
[2] Relates to a quarterly valuation on loans held-for-sale.
Costs to sell are excluded from the reported fair value amount.
[3] Represents the fair value of foreclosed real estate and
other collateral owned that were written down to their fair
value. Costs to sell are
excluded from the reported fair value amount.
Six months ended June 30, 2023
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE
MEASUREMENTS
Assets
Write-downs
Loans
[1]
$
$
$
$
$
(
7,092
)
Other real estate owned
[2]
(
656
)
Other foreclosed assets
[2]
(
9
)
Total assets measured
at fair value on a nonrecurring basis
$
$
$
$
$
(
7,757
)
[1] Relates mainly to certain impaired collateral dependent loans.
The impairment was measured based on the fair value
of the collateral, which is
derived from appraisals that take into consideration prices
in observed transactions involving similar assets in similar
locations. Costs to sell are
excluded from the reported fair value amount.
[2] Represents the fair value of foreclosed real estate and
other collateral owned that were written down to their fair
value. Costs to sell are
excluded from the reported fair value amount.
105
The following tables present the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarters
and six months ended June 30, 2024 and 2023.
Quarter ended June 30, 2024
MBS
Other
MBS
Other
classified
securities
classified
securities
as debt
classified as
as trading
classified
securities
account
as trading
Mortgage
available-
available-
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
rights
assets
Balance at March 31, 2024
$
$
$
$
$
$
Gains (losses) included in earnings
(
8
)
(
1,945
)
(
1,953
)
Gains (losses) included in OCI
(
1
)
(
1
)
Additions
Settlements
(
25
)
(
25
)
Balance at June 30, 2024
$
$
$
$
$
$
Changes in unrealized gains (losses) included in
earnings relating to assets still held at June 30,
2024
$
$
$
$
$
$
Six months ended June 30, 2024
MBS
Other
MBS
Other
classified
securities
CMOs
classified
securities
as debt
classified as
classified
as trading
classified
securities
as trading
account
as trading
Mortgage
available-
available-
account debt
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at January 1, 2024
$
$
$
$
$
$
$
Gains (losses) included in earnings
(
500
)
(
9
)
(
5,384
)
(
5,893
)
Additions
Settlements
(
25
)
(
5
)
(
28
)
(
58
)
Balance at June 30, 2024
$
$
$
$
$
$
$
Changes in unrealized gains (losses) included
in earnings relating to assets still held at June
30, 2024
$
$
(
500
)
$
$
$
$
(
702
)
$
(
1,190
)
106
Quarter ended June 30, 2023
MBS
Other
Other
classified
securities
CMOs
MBS
securities
as debt
classified as
classified
classified
classified
securities
debt securities
as trading
as trading
as trading
Mortgage
available-
available-
account debt
account debt
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at March 31, 2023
$
$
$
$
$
$
$
Gains (losses) included in earnings
(
8
)
(
6,217
)
(
6,225
)
Additions
Sales
(
1,269
)
(
1,269
)
Settlements
(
36
)
(
25
)
Balance at June 30, 2023
$
$
$
$
$
$
$
Changes in unrealized gains (losses)
included in earnings relating to assets
still held at June 30, 2023
$
$
$
$
$
$
(
2,732
)
$
(
2,723
)
Six months ended June 30, 2023
MBS
Other
Other
classified
securities
CMOs
securities
as debt
classified as
classified
MBS
classified
securities
debt securities
as trading
classified as
as trading
Mortgage
available-
available-
account debt
trading account
account debt
servicing
Total
(In thousands)
for-sale
for-sale
securities
securities
securities
rights
assets
Balance at January 1,
2023
$
$
$
$
$
$
$
Gains (losses) included in earnings
(
2
)
(
16
)
(
7,593
)
(
7,611
)
Gains (losses) included in OCI
(
6
)
(
6
)
Additions
Sales
(
1,269
)
(
1,269
)
Settlements
(
50
)
(
61
)
(
50
)
Balance at June 30, 2023
$
$
$
$
$
$
$
Changes in unrealized gains (losses)
included in earnings relating to assets
still held at June 30, 2023
$
$
$
$
(
1
)
$
$
(
1,447
)
$
(
1,430
)
107
Gains and losses (realized and
unrealized) included in earnings for the quarters
and six months ended June 30,
2024 and 2023 for
Level 3 assets and liabilities included in the
previous tables are reported in the consolidated
statement of operations as follows:
Quarter ended June 30, 2024
Six months ended June 30, 2024
Changes in unrealized
Changes in unrealized
Total gains
gains (losses) relating to
Total gains
gains (losses) relating to
(losses) included
assets still held at
(losses) included
assets still held at
(In thousands)
in earnings
reporting date
in earnings
reporting date
Mortgage banking activities
$
(
1,945
)
$
$
(
5,384
)
$
(
702
)
Trading account profit (loss)
(
8
)
(
9
)
Provision for credit losses
(
500
)
(
500
)
Total
$
(
1,953
)
$
$
(
5,893
)
$
(
1,190
)
Quarter ended June 30, 2023
Six months ended June 30, 2023
Changes in unrealized
Changes in unrealized
Total gains
gains (losses) relating to
Total gains
gains (losses) relating to
(losses) included
assets still held at
(losses) included
assets still held at
(In thousands)
in earnings
reporting date
in earnings
reporting date
Mortgage banking activities
$
(
6,217
)
$
(
2,732
)
$
(
7,593
)
$
(
1,447
)
Trading account profit (loss)
(
8
)
(
18
)
Total
$
(
6,225
)
$
(
2,723
)
$
(
7,611
)
$
(
1,430
)
The following
tables include
quantitative information
about significant
unobservable inputs
used to
derive the
fair value
of Level
3
instruments, excluding those instruments
for which the
unobservable inputs were not
developed by the
Corporation such as
prices
of prior transactions and/or unadjusted third-party pricing
sources at June 30, 2024 and 2023.
Fair value at
(In thousands)
2024
Valuation technique
Unobservable inputs
Weighted average (range) [1]
Other - trading
$
Discounted cash flow model
Weighted average life
Yield
Prepayment speed
Loans held-in-portfolio
$
[2]
External appraisal
Haircut applied on
external appraisals
[1]
Weighted average of significant unobservable inputs
used to develop Level 3 fair value measurements
were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied
to external appraisals were excluded from this table.
Fair value at
(In thousands)
2023
Valuation technique
Unobservable inputs
Weighted average (range) [1]
CMO's - trading
$
Discounted cash flow model
Weighted average life
Yield
% (
% -
%)
Prepayment speed
% (
% -
%)
Other - trading
$
Discounted cash flow model
Weighted average life
Yield
Prepayment speed
Loans held-in-portfolio
$
[2]
External appraisal
Haircut applied on
external appraisals
.0% (
.0% -
.0%)
[1]
Weighted average of significant unobservable inputs
used to develop Level 3 fair value measurements
were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied
to external appraisals were excluded from this table.
108
Note 24 – Fair value of financial instruments
The fair
value of
financial instruments
is the
amount at
which an
asset or
obligation could
be exchanged
in a
current transaction
between
willing
parties,
other
than
in
a
forced
or
liquidation
sale.
For
those
financial
instruments
with
no
quoted
market
prices
available, fair values have been estimated using present
value calculations or other valuation techniques, as well
as management’s
best judgment with respect to current economic conditions, including discount rates, estimates of future cash flows, and prepayment
assumptions. Many of these
estimates involve various assumptions and
may vary significantly from
amounts that could be
realized
in actual transactions.
The fair
values reflected
herein have
been determined
based on
the prevailing
rate environment at
June 30,
2024 and
December
31, 2023, as applicable. In different interest rate environments,
fair value estimates can differ significantly, especially for certain fixed
rate
financial
instruments.
In
addition,
the
fair
values
presented
do
not
attempt
to
estimate
the
value
of
the
Corporation’s
fee
generating businesses
and anticipated
future business
activities, that
is, they
do not
represent the
Corporation’s value
as a
going
concern. There have been
no changes in the
Corporation’s valuation methodologies and inputs
used to estimate the
fair values for
each class of financial assets and liabilities not measured
at fair value.
The following tables present the
carrying amount and estimated fair
values of financial instruments with their
corresponding level in
the fair
value hierarchy.
The aggregate
fair value
amounts of
the financial
instruments disclosed
do not
represent management’s
estimate of the underlying value of the Corporation.
109
June 30, 2024
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Assets:
Cash and due from banks
$
$
$
$
$
$
Money market investments
Trading account debt securities, excluding
derivatives
[1]
Debt securities available-for-sale
[1]
Debt securities held-to-maturity:
U.S. Treasury securities
$
$
$
$
$
$
Obligations of Puerto Rico, States and political
subdivisions
Collateralized mortgage obligation-federal agency
Securities in wholly owned statutory business trusts
Total debt securities
held-to-maturity
$
$
$
$
$
$
Equity securities:
FHLB stock
$
$
$
$
$
$
FRB stock
Other investments
Total equity securities
$
$
$
$
$
$
Loans held-for-sale
$
$
$
$
$
$
Loans held-in-portfolio
Mortgage servicing rights
Derivatives
June 30, 2024
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Liabilities:
Deposits:
Demand deposits
$
$
$
$
$
$
Time deposits
Total deposits
$
$
$
$
$
$
Assets sold under agreements to repurchase
$
$
$
$
$
$
Notes payable:
FHLB advances
$
$
$
$
$
$
Unsecured senior debt securities
Junior subordinated deferrable interest debentures
(related to trust preferred securities)
Total notes payable
$
$
$
$
$
$
Derivatives
$
$
$
$
$
$
[1]
Refer to Note 23 to the Consolidated Financial Statements
for the fair value by class of financial asset and its hierarchy
level.
110
December 31, 2023
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Assets:
Cash and due from banks
$
$
$
$
$
$
Money market investments
Trading account debt securities, excluding
derivatives
[1]
Debt securities available-for-sale
[1]
Debt securities held-to-maturity:
U.S. Treasury securities
$
$
$
$
$
$
Obligations of Puerto Rico, States and political
subdivisions
Collateralized mortgage obligation-federal agency
Securities in wholly owned statutory business trusts
Total debt securities
held-to-maturity
$
$
$
$
$
$
Equity securities:
FHLB stock
$
$
$
$
$
$
FRB stock
Other investments
Total equity securities
$
$
$
$
$
$
Loans held-for-sale
$
$
$
$
$
$
Loans held-in-portfolio
Mortgage servicing rights
Derivatives
December 31, 2023
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Liabilities:
Deposits:
Demand deposits
$
$
$
$
$
$
Time deposits
Total deposits
$
$
$
$
$
$
Assets sold under agreements to repurchase
$
$
$
$
$
$
Notes payable:
FHLB advances
$
$
$
$
$
$
Unsecured senior debt securities
Junior subordinated deferrable interest debentures
(related to trust preferred securities)
Total notes payable
$
$
$
$
$
$
Derivatives
$
$
$
$
$
$
[1]
Refer to Note 23 to the Consolidated Financial Statements
for the fair value by class of financial asset and its hierarchy
level.
The notional
amount of
commitments to
extend credit
at June
30, 2024
and December
31, 2023
was $
respectively, and
represented the unused portion of credit
facilities granted to customers. The
notional amount of letters of
credit at
June 30, 2024 and December 31, 2023 was $
is required to be paid in the event of nonperformance. The fair value of commitments to extend credit and letters of credit, which are
based on the fees charged to enter into those
agreements, are not material to Popular’s
financial statements.
111
Note 25 – Net income per common share
The following table sets
forth the computation of
net income per common
share (“EPS”), basic and
diluted, for the quarters
and six
months ended June 30, 2024 and 2023:
Quarters ended June 30,
Six
months ended June 30,
(In thousands, except per share information)
2024
2023
2024
2023
Net income
$
$
$
$
Preferred stock dividends
(
353
)
(
353
)
(
706
)
(
706
)
Net income applicable to common stock
$
$
$
$
Average common shares outstanding
Average potential dilutive common shares
Average common shares outstanding - assuming dilution
Basic EPS
$
$
$
$
Diluted EPS
$
$
$
$
For the quarters
and six months ended June 30, 2024 and 2023, the
Corporation calculated the impact of potential dilutive common
shares under the treasury stock method, consistent with the method used for the preparation of the financial statements for the year
ended December 31, 2023. For a discussion of the
calculation under the treasury stock method, refer
to Note 31 of the Consolidated
Financial Statements included in the 2023 Form 10-K.
112
Note 26 – Revenue from contracts with customers
The
following
table
presents
the
Corporation’s
revenue
streams
from
contracts
with
customers
by
reportable
segment
for
the
quarters and six months ended June 30, 2024 and
2023
.
Quarter ended June 30,
Six
months ended June 30,
(In thousands)
2024
2024
BPPR
Popular U.S.
BPPR
Popular U.S.
Service charges on deposit accounts
$
$
$
$
Other service fees:
Debit card fees
Insurance fees, excluding reinsurance
Credit card fees, excluding late fees and membership
fees
Sale and administration of investment products
Trust fees
Total revenue from
contracts with customers [1]
$
$
$
$
[1]
The amounts include intersegment transactions of $
Quarter ended June 30,
Six
months ended June 30,
(In thousands)
2023
2023
BPPR
Popular U.S.
BPPR
Popular U.S.
Service charges on deposit accounts
$
$
$
$
Other service fees:
Debit card fees
Insurance fees, excluding reinsurance
Credit card fees, excluding late fees and membership
fees
Sale and administration of investment products
Trust fees
Total revenue from
contracts with customers [1]
$
$
$
$
[1]
The amounts include intersegment transactions of $
Revenue from contracts with
customers is recognized when,
or as, the performance
obligations are satisfied by
the Corporation by
transferring the
promised services
to
the customers.
A
service is
transferred to
the customer
when, or
as, the
customer obtains
control
of
that
service.
A
performance obligation
may
be
satisfied over
time
or
at
a
point
in
time.
Revenue from
a
performance
obligation satisfied
over time
is recognized
based on
the services
that have
been rendered
to date.
Revenue from
a performance
obligation satisfied at a point in time
is recognized when the customer obtains control over the
service. The transaction price, or the
amount of revenue
recognized, reflects the
consideration the Corporation expects
to be entitled
to in exchange
for those promised
services. In determining the transaction price, the Corporation considers the effects of variable consideration. Variable consideration
is included
in the
transaction price
only to
the extent
it is
probable that a
significant reversal
in the
amount of
cumulative revenue
recognized will
not occur.
The Corporation
is the
principal in
a transaction
if it
obtains control
of the
specified goods
or services
before they
are transferred
to
the customer.
If the
Corporation acts
as principal,
revenues are
presented in
the gross
amount of
consideration to which it expects to
be entitled and are not
netted with any related expenses. On the
other hand, the Corporation is
an agent if it does not control
the specified goods or services before they are transferred
to the customer. If
the Corporation acts as
an agent, revenues are presented in the amount
of consideration to which it expects to be entitled,
net of related expenses.
Following is a description of the nature and timing
of revenue streams from contracts with customers:
Service charges on deposit accounts
Service
charges
on
deposit
accounts
are
earned
on
retail
and
commercial
deposit
activities
and
include,
but
are
not
limited
to,
nonsufficient fund
fees, overdraft
fees and
checks stop
payment fees.
These transaction-based
fees are
recognized at
a point
in
time,
upon
occurrence
of
an
activity
or
event
or
upon
the
occurrence
of
a
condition
which
triggers
the
fee
assessment.
The
Corporation is acting as principal in these transactions.
113
Debit card fees
Debit card fees include, but are not limited to, interchange
fees, surcharging income and foreign transaction
fees.
These transaction-
based fees
are recognized at
a point in
time, upon
occurrence of an
activity or
event or upon
the occurrence of
a condition which
triggers
the
fee
assessment.
Interchange
fees
are
recognized
upon
settlement
of
the
debit
card
payment
transactions.
The
Corporation is acting as principal in these transactions.
Insurance fees
Insurance fees
include, but
are
not limited
to, commissions
and contingent
commissions.
Commissions and
fees
are
recognized
when related
policies are effective
since the Corporation
does not
have an enforceable
right to
payment for services
completed to
date.
An
allowance
is
created
for
expected
adjustments
to
commissions
earned
related
to
policy
cancellations.
Contingent
commissions
are
recorded
on
an
accrual
basis
when
the
amount
to
be
received
is
notified
by
the
insurance
company.
The
Corporation is acting
as an
agent since it
arranges for the
sale of
the policies and
receives commissions if,
and when, it
achieves
the sale.
Credit card fees
Credit card
fees include,
but are
not limited
to, interchange
fees, additional
card fees,
cash advance
fees, balance
transfer fees,
foreign transaction fees, and returned payments
fees. Credit card fees are
recognized at a point in
time, upon the occurrence of an
activity or
an event.
Interchange fees
are recognized
upon settlement
of the
credit card
payment transactions. The
Corporation is
acting as principal in these transactions.
Sale and administration of investment products
Fees from
the sale
and administration
of investment
products include,
but are
not limited
to, commission
income from
the sale
of
investment products, asset management fees, underwriting
fees, and mutual fund fees.
Commission income from investment products is recognized on the trade date since clearing, trade execution, and custody services
are satisfied when
the customer acquires
or disposes of
the rights to
obtain the economic
benefits of the
investment products and
brokerage contracts have no fixed duration and
are terminable at will by
either party. The
Corporation is acting as principal in these
transactions since it
performs the service
of providing the
customer with the
ability to acquire
or dispose of
the rights to
obtain the
economic benefits of investment products.
Asset
management
fees
are
satisfied
over
time
and
are
recognized
in
arrears.
At
contract
inception,
the
estimate
of
the
asset
management fee
is constrained
from the
inclusion in
the transaction
price since
the promised
consideration is
dependent on
the
market and thus
is highly susceptible
to factors
outside the manager’s
influence. As advisor,
the broker-dealer subsidiary
is acting
as principal.
Underwriting fees are
recognized at a point
in time, when
the investment products
are sold in
the open market at
a markup. When
the broker-dealer subsidiary is lead
underwriter, it is
acting as an agent. In
turn, when it is
a participating underwriter, it
is acting as
principal.
Mutual fund fees,
such as distribution fees,
are considered variable consideration
and are recognized over
time, as the
uncertainty
of the fees to be
received is resolved as NAV
is determined and investor activity occurs. The
promise to provide distribution-related
services
is
considered
a
single
performance
obligation
as
it
requires
the
provision
of
a
series
of
distinct
services
that
are
substantially the same and have the same pattern of
transfer. When the broker-dealer subsidiary is acting as a distributor, it is acting
as principal. In turn, when it acts as third-party dealer, it is acting
as an agent.
Trust fees
Trust fees
are recognized from
retirement plan, mutual fund
administration, investment management, trustee, escrow,
and custody
and
safekeeping services.
These
asset
management services
are
considered
a
single
performance obligation
as
it
requires the
provision of
a series
of distinct
services that
are substantially
the same
and have
the same
pattern of
transfer.
The performance
obligation
is
satisfied
over
time,
except
for
optional
services
and
certain
other
services
that
are
satisfied
at
a
point
in
time.
Revenues are recognized in
arrears,
when, or as,
the services are rendered.
The Corporation is
acting as principal since,
as asset
manager, it has the obligation to provide the specified service to the customer and
has the ultimate discretion in establishing the fee
paid by the customer for the specified services.
114
Note 27 – Leases
The
Corporation enters
in
the
ordinary course
of
business
into
operating and
finance
leases
for
land,
buildings
and
equipment.
These contracts generally do
not include purchase options
or residual value guarantees.
The remaining lease terms
of
years
considers options
to
extend the
leases for
up
to
obtain substantially all of the economic benefits from
the use of the asset and the right to direct
the use of the asset.
The Corporation
recognizes right-of-use
assets (“ROU
assets”) and
lease liabilities
related to
operating and
finance leases
in its
Consolidated Statements of Financial Condition under the caption of other assets and other liabilities, respectively. Refer to Note 12
and
Note
16
to
the
Consolidated Financial
Statements,
respectively,
for
information
on
the
balances of
these
lease
assets
and
liabilities.
The Corporation uses the
incremental borrowing rate for
purposes of discounting lease payments
for operating and finance leases,
since it
does not have
enough information to
determine the rates
implicit in the
leases. The discount
rates are based
on fixed-rate
and
fully
amortizing
borrowing
facilities
of
its
banking
subsidiaries
that
are
collateralized.
For
leases
held
by
non-banking
subsidiaries, a credit spread is added to this rate
based on financing transactions with a
similar credit risk profile.
The following table presents the undiscounted
cash flows of operating and finance leases for
each of the following periods:
June 30, 2024
(In thousands)
Remaining
2024
2025
2026
2027
2028
Later
Years
Total Lease
Payments
Less: Imputed
Interest
Total
Operating Leases
$
$
$
$
$
$
$
(
16,527
)
$
Finance Leases
(
3,031
)
The following table presents the lease cost recognized
by the Corporation in the Consolidated
Statements of Operations as follows:
Quarters ended June 30,
Six
months ended June 30,
(In thousands)
2024
2023
2024
2023
Finance lease cost:
Amortization of ROU assets
$
$
$
$
Interest on lease liabilities
Operating lease cost
Short-term lease cost
Variable lease cost
Sublease income
(
21
)
(
17
)
(
41
)
(
26
)
Total lease cost
[1]
$
$
$
$
[1]
Total lease cost
is recognized as part of net occupancy expense, except
for the net gain recognized from sale and leaseback
transactions which
was included as part of other operating income.
115
The
following
table
presents
supplemental
cash
flow
information
and
other
related
information
related
to
operating
and
finance
leases.
Six months ended June 30,
(Dollars in thousands)
2024
2023
Cash paid for amounts included in the measurement of
lease liabilities:
Operating cash flows from operating leases
$
$
Operating cash flows from finance leases
Financing cash flows from finance leases
ROU assets obtained in exchange for new lease obligations:
Operating leases
$
$
Finance leases
Weighted-average remaining lease term:
Operating leases
years
years
Finance leases
years
years
Weighted-average discount rate:
Operating leases
%
%
Finance leases
%
%
As of June 30, 2024,
the Corporation had additional operating leases contracts that
have not yet commenced with an
undiscounted
contract amount of $
116
Note 28 – Pension and postretirement benefits
The
Corporation
has
a
non-contributory
defined
benefit
pension
plan
and
supplementary
pension
benefit
restoration
plans
for
regular employees of
certain of its
subsidiaries (the “Pension
Plans”). The accrual
of benefits under
the Pension Plans
is frozen to
all
participants.
The
Corporation
also
provides
certain
postretirement
health
care
benefits
for
retired
employees
of
certain
subsidiaries (the “OPEB Plan”).
The components of net periodic cost for the
Pension Plans and the OPEB Plan for the periods presented
were as follows:
Pension Plans
OPEB Plan
Quarter ended June 30,
Quarter ended June 30,
(In thousands)
2024
2023
2024
2023
Personnel Cost:
$
$
$
$
Other operating expenses:
(
8,594
)
(
8,591
)
(
548
)
(
553
)
Total net periodic
pension cost
$
$
$
$
Pension Plans
OPEB Plan
Six months ended June 30,
Six months ended June 30,
(In thousands)
2024
2023
2024
2023
Personnel Cost:
$
$
$
$
Other operating expenses:
(
17,188
)
(
17,183
)
(
1,096
)
(
1,106
)
Total net periodic
pension cost
$
$
$
$
The
Corporation
paid
the
following
contributions
to
the
plans
for
the
six
months
ended
June
30,
2024
and
expects
to
pay
the
following contributions for the year ending December
31, 2024.
For the six months ended
For the year ending
(In thousands)
June 30, 2024
December 31, 2024
Pension Plans
$
$
OPEB Plan
$
$
117
Note 29 - Stock-based compensation
Incentive Plan
On May 12, 2020,
the shareholders of the
Corporation approved the Popular,
Inc. 2020 Omnibus Incentive Plan,
which permits the
Corporation to
issue several
types of
stock-based compensation
to employees
and directors
of the
Corporation and/or
any of
its
subsidiaries (the
“2020 Incentive
Plan”). The
2020 Incentive
Plan replaced
the Popular,
Inc. 2004
Omnibus Incentive
Plan, which
was in effect
prior to the adoption of
the 2020 Incentive Plan (the
“2004 Incentive Plan” and, together
with the 2020 Incentive
Plan,
the “Incentive Plan”). Participants under the Incentive Plan are designated by the Talent and Compensation Committee of the Board
of Directors (or its delegate, as determined by the Board). Under the Incentive Plan, the Corporation has issued restricted stock and
performance shares to its employees and restricted
stock and restricted stock units (“RSUs”)
to its directors.
The restricted
stock granted
under the
Incentive Plan
to employees
becomes vested
based on
the employees’
continued service
with
Popular.
The
performance share
awards
granted
under
the
Incentive
Plan
consist
of
the
opportunity
to
receive
shares
of
Popular,
Inc.’s
common stock provided that the Corporation achieves certain goals during a three-year performance cycle.
The goals will be based
on
two
metrics
weighted
equally:
the
Relative
Total
Shareholder
Return
(“TSR”)
and
the
Absolute
Return
on
Average
Tangible
Common Equity
(“ROATCE”). The
TSR metric
is considered
to be
a market
condition under
ASC 718.
For equity
settled awards
based
on a
market condition,
the
fair value
is
determined as
of the
grant date
and
is not
subsequently revised
based on
actual
performance.
The
ROATCE
metric
is
considered
to
be
a
performance condition
under ASC
718.
The
fair value
is
determined
based on
the probability
of achieving
the ROATCE
goal as
of each
reporting period.
The TSR
and ROATCE
metrics are
equally
weighted and
work independently.
The
following
table
summarizes
the
restricted
stock
and
performance
shares
activity
under
the
Incentive
Plan
for
members
of
management.
118
(Not in thousands)
Shares
Weighted-Average
Grant Date Fair
Value
Non-vested at December 31, 2022
$
Granted
Performance Shares Quantity Adjustment
Vested
(
243,133
)
Forfeited
(
16,444
)
Non-vested at December 31, 2023
$
Granted
Performance Shares Quantity Adjustment
Vested
(
284,249
)
Forfeited
(
2,553
)
Non-vested at June 30, 2024
$
During
the
quarter
ended
June
30,
2024,
)
were
awarded
to
management under the Incentive
Plan. During the
quarters ended June 30,
2024 and 2023,
to management
under the
Incentive Plan.
For the
six months
ended June
30, 2024,
2023 –
) and
) were awarded to management under the
Incentive Plan.
During the quarter ended June 30, 2024, the Corporation recognized
$
incentive awards, with a tax benefit of $
ended
June
30,
2024,
the
Corporation
recognized
$
awards, with a tax
benefit of $
June 30,
2024, the
fair market
value of
the
restricted stock
and performance
shares vested
was
$
$
expense. During the
quarter ended June
30, 2024, the
Corporation recognized $
(
0.9
)
tax benefit of $
(
55
)
(
0.1
)
(
4
)
thousand).
For the six months ended June
30, 2024, the Corporation recognized $
a tax benefit
of $
cost related to non-vested restricted stock awards
and performance shares to members of management
at June 30, 2024 was $
million and is expected to be recognized over a
weighted-average period of
The following table summarizes the restricted stock
activity under the Incentive Plan for members of
the Board of Directors:
(Not in thousands)
RSUs / Unrestricted stock
Weighted-Average
Grant
Date Fair Value per Unit
Non-vested at December 31, 2022
$
Granted
Vested
(
39,104
)
Forfeited
Non-vested at December 31, 2023
$
Granted
Vested
(
22,998
)
Forfeited
Non-vested at June 30, 2024
$
The
equity
awards
granted
to
members
of
the
Board
of
Directors
of
Popular,
Inc.
(the
“Directors”)
will
vest
and
become
non-
forfeitable on the
grant date of
such award. Effective
in May 2019,
all equity awards
granted to the
Directors may be
paid in either
119
unrestricted stock
or RSUs
at each
Directors election.
If RSUs
are elected,
the Directors
may defer
the delivery
of the
shares of
common stock
underlying the
RSUs award
until their
retirement. To
the extent
that cash
dividends are
paid on
the Corporation’s
outstanding common stock, the Directors
will receive an additional number of RSUs
that reflect a reinvested dividend equivalent.
For 2024
and 2023,
Directors elected
RSUs and
unrestricted stock.
During the
quarter ended
June 30,
2024,
stock) and
the Corporation
recognized expense
related to
these shares
of $
2023
-
$
granted
RSUs and
and the Corporation
recognized $
$
30, 2024 for the Directors was $
120
Note 30 – Income taxes
The reason for the difference between the income
tax expense applicable to income before provision
for income taxes and the
amount computed by applying the statutory tax rate
in Puerto Rico, were as follows:
Quarters ended
June 30, 2024
June 30, 2023
(In thousands)
Amount
% of pre-tax
income
Amount
% of pre-tax
income
Computed income tax expense at statutory rates
$
%
$
%
Net benefit of tax exempt interest income
(
33,220
)
(
15
)
(
27,316
)
(
14
)
Effect of income subject to preferential tax rate
Deferred tax asset valuation allowance
(
235
)
Difference in tax rates due to multiple jurisdictions
(
4,456
)
(
2
)
(
3,869
)
(
2
)
Other tax benefits
(
4,500
)
(
2
)
U.S., States, and local taxes
Others
(
2,449
)
(
1
)
(
2,619
)
(
2
)
Income tax expense
$
%
$
%
Six months ended
June 30, 2024
June 30, 2023
(In thousands)
Amount
% of pre-tax
income
Amount
% of pre-tax
income
Computed income tax expense at statutory rates
$
%
$
%
Net benefit of tax exempt interest income
(
61,979
)
(
16
)
(
49,218
)
(
12
)
Effect of income subject to preferential tax rate
(
148
)
(
576
)
Deferred tax asset valuation allowance
(
3,572
)
(
1
)
Difference in tax rates due to multiple jurisdictions
(
5,129
)
(
1
)
(
9,039
)
(
2
)
Other tax benefits
(
4,500
)
(
1
)
Tax on intercompany
distributions
[1]
U.S., States, and local taxes
Others
(
3,522
)
(
1
)
(
4,153
)
(
1
)
Income tax expense
$
%
$
%
[1]
Includes $
For the quarter
and six months
ended June 30,
2024, the Corporation
recorded an income
tax expense of
$
million respectively, compared to
$
the Corporation recorded a tax expense related to tax
withholding on certain intercompany distributions, amounting to $
out
of
which $
period ended March 31, 2024, as previously disclosed.
As a result of this adjustment, the
deferred tax assets related to NOL of the
Bank Holding Company (BHC) and its related
valuation allowance was reduced by $
The following table presents a breakdown of the
significant components of the Corporation’s deferred tax assets
and liabilities.
121
June 30, 2024
PR
US
Total
Deferred tax assets:
Tax credits available
for carryforward
$
$
$
Net operating loss and other carryforward available
Postretirement and pension benefits
Allowance for credit losses
Depreciation
FDIC-assisted transaction
Lease liability
Unrealized net loss on investment securities
Difference in outside basis from pass-through entities
Mortgage Servicing Rights
Other temporary differences
Total gross deferred
tax assets
Deferred tax liabilities:
Intangibles
Right of use assets
Deferred loan origination fees/cost
(
749
)
Loans acquired
Other temporary differences
Total gross deferred
tax liabilities
Valuation allowance
Net deferred tax asset
$
$
$
PR
US
Total
Deferred tax assets:
Tax credits available
for carryforward
$
$
$
Net operating loss and other carryforward available
Postretirement and pension benefits
Allowance for credit losses
Depreciation
FDIC-assisted transaction
Lease liability
Unrealized net loss on investment securities
Difference in outside basis from pass-through entities
Mortgage Servicing Rights
Other temporary differences
Total gross deferred
tax assets
Deferred tax liabilities:
Intangibles
Right of use assets
Deferred loan origination fees/cost
(
1,056
)
Loans acquired
Other temporary differences
Total gross deferred
tax liabilities
Valuation allowance
Net deferred tax asset
$
$
$
122
The
net
deferred tax
assets shown
in
the
table
above
at
June
30,
2024, is
reflected
in the
consolidated statements
of
financial
condition as $
deferred
tax
liabilities
in
the
“Other
liabilities”
caption
(December 31,
2023
-
$
assets
or
liabilities
of
individual
tax-paying subsidiaries
of
the
Corporation
in
their
respective tax
jurisdiction, Puerto
Rico
or
the
United States.
At
June
30,
2024,
the
net
deferred
tax
assets
of
the
U.S.
operations
amounted
to
$
approximately $
evaluates the
realization of
the deferred
tax
assets on
a quarterly
basis by
taxing
jurisdiction. The
U.S.
operation has
sustained
profitability for the last three calendar years and for the period ended June 30, 2024. These historical financial results are objectively
verifiable positive evidence, evaluated together
with the positive evidence
of stable credit metrics,
in combination with the
length of
the
expiration
of
the
NOLs.
On
the
other
hand,
the
Corporation
evaluated
the
negative
evidence
accumulated
over
the
years,
including
financial
results
lower
than
expectations
and
challenges
to
the
economy
due
to
inflationary
pressures
and
global
geopolitical uncertainty that
have resulted in
a trend of
reduction of pre-tax
income over the
last three years.
As of June
30, 2024,
after weighting all positive
and negative evidence, the
Corporation concluded that it is
more likely than not
that approximately $
million
of
the
deferred
tax
assets
from
the
U.S.
operations,
comprised
mainly
of
net
operating
losses,
will
be
realized.
The
Corporation
based
this
determination
on
its
estimated
earnings
available
to
realize
the
deferred
tax
assets
for
the
remaining
carryforward period, together with the historical level
of book income adjusted by permanent
differences. Management will continue
to
monitor
and
review
the
U.S.
operation’s
results,
including
recent
earnings
trends,
the
pre-tax
earnings
forecast,
any
new
tax
initiative,
and
other
factors,
including
net
income
versus
forecast,
targeted
loan
growth,
net
interest
income
margin,
changes
in
deposit
costs,
allowance
for
credit
losses,
charge
offs,
NPLs
inflows
and
NPA
balances.
Significant
adverse
changes
or
a
combination of changes in these factors could impact
the future realization of the deferred tax assets.
At June
30, 2024,
the Corporation’s
net deferred
tax assets
related to
its Puerto
Rico operations
amounted to
$
Corporation’s Puerto Rico
Banking operation has
a historical record
of profitability.
This is considered
a strong piece
of objectively
verifiable positive evidence that outweighs any
negative evidence considered by Management in
the evaluation of the realization
of
the
deferred
tax
assets.
Based
on
this
evidence
and
management’s
estimate
of
future
taxable
income,
the
Corporation
has
concluded that it is more likely than not that such net
deferred tax assets of the Puerto Rico Banking
operations will be realized.
The Holding Company operation has been in a cumulative
loss position in recent years.
Management expects these losses will be a
trend
in
future
years.
This
objectively
verifiable
negative
evidence is
considered
by
Management strong
negative
evidence that
suggests that
income in
future years
will be
insufficient to
support the
realization of
all deferred
tax assets.
After weighting
of all
positive
and
negative evidence
Management concluded,
as
of
the reporting
date,
that
it
is
more
likely
than
not that
the
Holding
Company will not be
able to realize any
portion of the deferred tax
assets. Accordingly, the
Corporation has maintained a valuation
allowance on the deferred tax assets of $
The reconciliation of unrecognized tax benefits, excluding
interest, was as follows:
123
(In millions)
2024
2023
Balance at
January 1
$
$
Balance at
March 31
$
$
Balance at
June 30
$
$
At June
30, 2024,
the total
amount of
accrued interest
recognized in the
statement of
financial condition
amounted to
$
(December 31, 2023 - $
thousand). Management determined that at June 30, 2024 and December 31, 2023, there was
penalties.
The
Corporation’s
policy
is
to
report
interest
related
to
unrecognized
tax
benefits
in
income
tax
expense,
while
the
penalties, if any, are reported in other operating expenses in the consolidated
statements of operations.
After consideration
of the
effect on
U.S. federal
tax of
unrecognized U.S.
state tax
benefits, the
total amount
of unrecognized
tax
benefits, including U.S. and Puerto Rico, that if recognized, would affect the Corporation’s effective tax rate, was approximately $
million at June 30, 2024 (December 31, 2023 - $
The amount of
unrecognized tax benefits
may increase or
decrease in the
future for various
reasons including adding amounts
for
current
tax
year
positions,
expiration
of
open
income
tax
returns
due
to
the
statutes
of
limitation,
changes
in
Management’s
judgment about
the level
of uncertainty,
status of
examinations, litigation
and legislative
activity and
the addition
or elimination
of
uncertain tax positions.
The Corporation does not
anticipate a reduction
in the total
amount of unrecognized tax
benefits within the
next 12 months.
The
Corporation and
its subsidiaries
file
income tax
returns in
Puerto
Rico, the
U.S. federal
jurisdiction, various
U.S. states
and
political
subdivisions,
and
foreign
jurisdictions.
At
June
30,
2024,
the
following
years
remain
subject
to
examination
in
the
U.S.
Federal jurisdiction: 2020 and thereafter; and in
the Puerto Rico jurisdiction, 2018 and thereafter.
124
Note 31 – Supplemental disclosure on the consolidated
statements of cash flows
Additional disclosures on cash flow information and
non-cash activities for the six months ended June
30, 2024 and June 30, 2023
are listed in the following table:
(In thousands)
June 30, 2024
June 30, 2023
Non-cash activities:
$
$
[1]
[1]
Includes loans securitized into trading securities and subsequently
sold before quarter end.
The following table provides a reconciliation of
cash and due from banks, and restricted cash
reported within the Consolidated
Statement of Financial Condition that sum to the total of
the same such amounts shown in the Consolidated
Statement of Cash
Flows.
(In thousands)
June 30, 2024
June 30, 2023
Cash and due from banks
$
$
Restricted cash and due from banks
Restricted cash in money market investments
Total cash and due
from banks, and restricted cash
[2]
$
$
[2]
Refer to Note 4 - Restrictions on cash and due from banks
and certain securities for nature of restrictions.
125
Note 32 – Segment reporting
The
Corporation’s
corporate
structure
consists
of
markets the segments serve, as well as on the products
and services offered by the segments.
Banco Popular de Puerto Rico:
The Banco Popular de
Puerto Rico reportable segment
includes commercial, consumer and retail
banking operations conducted at
BPPR, including
U.S. based
activities conducted
through its
New York
Branch. It
also includes
the lending
operations of
Popular
Auto
and
Popular
Mortgage.
Other
financial
services
within
the
BPPR
segment
include
the
trust
service
units
of
BPPR,
asset
management services of Popular Asset
Management, the brokerage and investment
banking operations of Popular Securities,
and
the insurance agency and reinsurance businesses
of Popular Insurance, Popular Risk Services, Popular
Life Re, and Popular Re.
Popular U.S.:
Popular U.S. reportable segment
consists of the
banking operations of Popular
Bank (PB), Popular Insurance
Agency, U.S.A.,
and
PEF.
PB
operates through
a retail
branch network
in the
U.S. mainland
under the
name of
Popular,
and equipment
leasing and
financing services through PEF.
Popular Insurance Agency,
U.S.A. offers investment and insurance
services across the PB
branch
network.
The Corporate group
consists primarily of
the holding companies
Popular, Inc.,
Popular North America,
Popular International Bank
and certain of the Corporation’s investments accounted for under
the equity method, including BHD.
The
accounting
policies
of
the
individual
operating
segments
are
the
same
as
those
of
the
Corporation.
Transactions
between
reportable segments are primarily conducted at market rates, resulting
in profits that are eliminated for reporting consolidated results
of operations.
The tables that follow present the results of operations
and total assets by reportable segments:
126
2024
For the quarter ended June 30, 2024
Intersegment
(In thousands)
BPPR
Popular U.S.
Eliminations
Net interest income
$
$
$
Provision for credit losses (benefit)
(
3,563
)
Non-interest income
Amortization of intangibles
Depreciation expense
Other operating expenses
Income tax expense
Net income
$
$
$
Segment assets
$
$
$
(
264,040
)
For the quarter ended June 30, 2024
Reportable
(In thousands)
Segments
Corporate
Eliminations
Total Popular,
Inc.
Net interest income (expense)
$
$
(
6,284
)
$
$
Provision for credit losses (benefit)
(
25
)
Non-interest income
(
2,764
)
Amortization of intangibles
Depreciation expense
Other operating expenses
(
1,224
)
Income tax expense (benefit)
(
476
)
(
594
)
Net income
$
$
$
(
946
)
$
Segment assets
$
$
$
(
5,471,702
)
$
For the six months ended June 30, 2024
Intersegment
(In thousands)
BPPR
Popular U.S.
Eliminations
Net interest income
$
$
$
Provision for credit losses
Non-interest income
(
56
)
Amortization of intangibles
Depreciation expense
Other operating expenses
(
56
)
Income tax expense
Net income
$
$
$
Segment assets
$
$
$
(
264,040
)
For the six months ended June 30, 2024
Reportable
Total
(In thousands)
Corporate
Eliminations
Popular, Inc.
Net interest income (expense)
$
$
(
13,234
)
$
$
Provision for credit losses
Non-interest income
(
3,401
)
Amortization of intangibles
Depreciation expense
Other operating expenses
(
2,415
)
Income tax expense
(
364
)
Net income (loss)
$
$
(
21,625
)
$
(
622
)
$
Segment assets
$
$
$
(
5,471,702
)
$
127
2023
For the quarter ended June 30, 2023
Intersegment
(In thousands)
BPPR
Eliminations
Net interest income
$
$
$
Provision for credit losses
Non-interest income
(
134
)
Amortization of intangibles
Depreciation expense
Other operating expenses
(
134
)
Income tax expense
Net income
$
$
$
Segment assets
$
$
$
(
442,125
)
For the quarter ended June 30, 2023
Reportable
(In thousands)
Segments
Corporate
Eliminations
Total Popular,
Inc.
Net interest income (expense)
$
$
(
8,909
)
$
$
Provision for credit losses (benefit)
(
60
)
Non-interest income
(
2,098
)
Amortization of intangibles
Depreciation expense
Other operating expenses
(
556
)
(
1,156
)
Income tax expense (benefit)
(
289
)
(
361
)
Net income
$
$
$
(
581
)
$
Segment assets
$
$
$
(
5,506,082
)
$
For the six months ended June 30, 2023
Intersegment
(In thousands)
BPPR
Popular U.S.
Net interest income
$
$
$
Provision for credit losses
Non-interest income
(
270
)
Amortization of intangibles
Depreciation expense
Other operating expenses
(
270
)
Income tax expense
Net income
$
$
$
Segment assets
$
$
$
(
442,125
)
For the six months ended June 30, 2023
Reportable
Total
(In thousands)
Corporate
Eliminations
Popular, Inc.
Net interest income (expense)
$
$
(
17,160
)
$
$
Provision for credit losses (benefit)
(
196
)
Non-interest income
(
3,570
)
Amortization of intangibles
Depreciation expense
Other operating expenses
(
326
)
(
2,232
)
Income tax expense (benefit)
(
610
)
(
534
)
Net income
$
$
$
(
804
)
$
Segment assets
$
$
$
(
5,506,082
)
$
128
Geographic Information
The following information presents selected
financial information based on the
geographic location where the Corporation conducts
its business. The
banking operations of BPPR
are primarily based in
Puerto Rico, where it
has the largest retail
banking franchise.
BPPR
also
conducts
banking
operations
in
the
U.S.
Virgin
Islands,
the
British
Virgin
Islands
and
New
York.
BPPR’s
banking
operations in
the mainland
United States
include commercial
lending activities.
BPPR’s commercial
lending activities
in the
U.S.,
through its New York
Branch, include periodic loan participations with PB.
During the quarter and six months
ended June 30, 2024,
BPPR did
t participate in
loans originated by PB
(2023 – $
for the
BPPR segment
related to
its
operations in
the United
States amounted
to $
including
$
(December 31, 2023
- $
personal loans
(December 31,
2023 -
$
approximately $
service
charge
on
deposit
accounts
and
other
service
fees.
In
the
Virgin
Islands,
the
BPPR
segment
offers
banking
products,
including loans and
deposits. At June
30, 2024, total
assets for the
BPPR segment related
to its operations
in the U.S.
and British
Virgin Islands amounted to $
during the six months ended June 30, 2024 (2023
- $
Geographic Information
Quarter ended
Six months ended
(In thousands)
June 30, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Revenues:
[1]
$
$
$
$
Total consolidated
revenues
$
$
$
$
[1]
Total revenues include
net interest income, service charges on deposit accounts,
other service fees, mortgage banking activities, net
gain,
including impairment losses, on equity securities, net
gain on trading account debt securities, adjustments to indemnity
reserves on loans sold,
and other operating income.
Selected Balance Sheet Information:
(In thousands)
June 30, 2024
December 31, 2023
Puerto Rico
Total assets
$
$
Loans
Deposits
United States
Total assets
$
$
Loans
Deposits
Other
Total assets
$
$
Loans
[1]
Deposits
[2]
[1]
Represents loans from BPPR operations located in the U.S.
and British Virgin Islands.
[2]
Represents deposits from BPPR operations located in the
U.S. and British Virgin Islands.
129
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This
report
includes
management’s
discussion
and
analysis
(“MD&A”)
of
the
consolidated
financial
position
and
financial
performance
of
Popular,
Inc.
(the
“Corporation”
or
“Popular”). All
accompanying
tables,
financial
statements
and
notes
included
elsewhere in this report should be considered an
integral part of this analysis.
The Corporation is a
diversified, publicly-owned financial holding company subject to the
supervision and regulation of the Board
of
Governors of the Federal Reserve System. The Corporation has
operations in Puerto Rico, the United States (“U.S.”) mainland and
the
U.S.
and
British
Virgin
Islands.
In
Puerto
Rico,
the
Corporation
provides
retail,
mortgage
and
commercial
banking
services
through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as investment
banking, broker-dealer, auto
and
equipment
leasing
and
financing,
and
insurance
services
through
specialized
subsidiaries.
In
the
U.S.
mainland,
the
Corporation provides
retail, mortgage
and
commercial banking
services, as
well as
equipment leasing
and
financing, through
its
New
York-chartered
banking
subsidiary,
Popular
Bank
(“PB”
or
“Popular U.S.”),
which
has
branches
located
in
New
York,
New
Jersey
and
Florida.
Note
32
to
the
Consolidated
Financial
Statements
presents
information
about
the
Corporation’s
business
segments.
SIGNIFICANT EVENTS
Capital Actions
On July 24, 2024, the Corporation announced
the following capital actions:
●
common stock repurchases of up to $500 million;
and
●
an increase
in the
Corporation’s quarterly
common stock
dividend from
$0.62 to
$0.70 per
share, commencing
with the
dividend payable in the first quarter of 2025, subject
to the approval by the Corporation’s Board of Directors.
The
Corporation’s
planned
common
stock
repurchases
may
be
executed
in
open
market
transactions,
privately
negotiated
transactions, block trades
or any other
manner determined by
the Corporation. The
timing, quantity and
price of such
repurchases
will
be
subject
to
various
factors,
including
market
conditions,
the
Corporation’s
capital
position
and
financial
performance,
the
capital impact of strategic initiatives and regulatory and tax considerations.
The common stock repurchase program does not require
the Corporation to acquire a specific dollar amount or
number of shares and may be modified, suspended or terminated
at any time
without prior notice.
OVERVIEW
Table 1 provides selected financial data and performance indicators for the quarters ended
June 30, 2024 and 2023.
130
Table 1 - Financial Highlights
Financial Condition Highlights
Ending balances at
Average for the six months ended
(In thousands)
June 30,
2024
December 31,
2023
Variance
June 30,
2024
June 30,
2023
Variance
Money market investments
$
6,851,394
$
6,998,871
$
(147,477)
$
6,477,180
$
6,799,452
$
(322,272)
Investment securities
26,742,639
25,148,673
1,593,966
28,034,347
27,343,940
690,407
Loans
35,599,845
35,069,272
530,573
35,226,488
32,367,113
2,859,375
Earning assets
69,193,878
67,216,816
1,977,062
69,738,015
66,510,505
3,227,510
Total assets
72,845,072
70,758,155
2,086,917
72,800,664
69,519,264
3,281,400
Deposits
65,530,862
63,618,243
1,912,619
64,529,716
61,669,930
2,859,786
Borrowings
1,047,264
1,078,332
(31,068)
1,045,181
1,284,454
(239,273)
Total liabilities
67,472,394
65,611,202
1,861,192
66,549,458
63,806,260
2,743,198
Stockholders’ equity
5,372,678
5,146,953
225,725
6,251,206
5,713,004
538,202
Note: Average balances exclude unrealized gains or losses on debt securities available-for-sale and the unrealized loss related to certain securities transferred from available-
for-sale to held-to-maturity.
Operating Highlights
Quarters ended June 30,
Six months ended June 30,
(In thousands, except per share information)
2024
2023
Variance
2024
2023
Variance
Net interest income
$
568,312
$
531,668
$
36,644
$
1,119,056
$
1,063,324
$
55,732
Provision for credit losses
46,794
37,192
9,602
119,392
84,829
34,563
Non-interest income
166,306
160,471
5,835
330,124
322,432
7,692
Operating expenses
469,576
460,284
9,292
952,689
900,971
51,718
Income before income tax
218,248
194,663
23,585
377,099
399,956
(22,857)
Income tax expense
40,459
43,503
(3,044)
96,027
89,817
6,210
Net income
$
177,789
$
151,160
$
26,629
$
281,072
$
310,139
$
(29,067)
Net income applicable to common stock
$
177,436
$
150,807
$
26,629
$
280,366
$
309,433
$
(29,067)
Net income per common share – basic
$
2.47
$
2.10
$
0.37
$
3.90
$
4.32
$
(0.42)
Net income per common share – diluted
$
2.46
$
2.10
$
0.36
$
3.90
$
4.32
$
(0.42)
Dividends declared per common share
$
0.62
$
0.55
$
0.07
$
1.24
$
1.10
$
0.14
Quarters ended June 30,
Six months ended June 30,
Selected Statistical Information
2024
2023
2024
2023
Common Stock Data
$
88.43
60.52
$
88.43
60.52
73.94
63.00
73.94
63.00
Profitability Ratios
0.97
%
0.85
%
0.77
%
0.89
%
10.38
9.26
8.24
9.63
2.44
2.50
2.41
2.59
2.70
2.65
2.65
2.78
3.22
3.14
3.20
3.18
3.48
3.29
3.44
3.37
Capitalization Ratios
8.60
%
8.24
%
8.59
%
8.22
%
16.48
16.87
16.48
16.87
16.54
16.93
16.54
16.93
18.30
18.74
18.30
18.74
8.53
8.40
8.53
8.40
131
Non-GAAP Financial Measures
This Form 10-Q
contains financial information
prepared under accounting
principles generally accepted in
the United States
(“U.S.
GAAP”) and
non-GAAP financial
measures. Management
uses non-GAAP
financial measures
when it
has determined
that these
measures provide
meaningful information
about the
underlying performance
of the
Corporation’s ongoing
operations. Non-GAAP
financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by
other
companies.
Adjusted net income - Non-GAAP Financial Measure
In
addition
to
analyzing
the
Corporation’s
results
on
a
reported
basis,
management
monitors
the
“adjusted
net
income”
of
the
Corporation and excludes the impact of certain transactions on the results of its operations. Management believes that the “adjusted
net
income”
provides
meaningful
information
about
the
underlying
performance
of
the
Corporation’s
ongoing
operations.
The
“adjusted net income” is a non-GAAP financial measure.
The
following
table
presents
the
adjusted
net
income
for
the
six
months
ended
of
June
30,
2024.
There
were
no
non-GAAP
adjustments for the six months ended June 30, 2023.
Table 2 - Adjusted Net Income
for the Six Months Ended June 30, 2024 (Non-GAAP)
(Unaudited)
(In thousands)
Income before
income tax
Income tax
expense
(benefit)
Total
U.S. GAAP Net income
$377,099
$96,027
$281,072
Non-GAAP Adjustments:
FDIC Special Assessment [1]
14,287
(5,234)
9,053
Adjustments related to intercompany distributions [2]
6,400
16,483
22,883
Adjusted net income (Non-GAAP)
$397,786
$84,778
$313,008
[1] Expense related to the November 16, 2023 FDIC Special
Assessment to recover the losses to the deposit insurance
fund used by the FDIC in
connection with the receiverships of several failed banks. The
special assessment amount and collection period
may change as the estimated loss is
periodically adjusted or if the total amount collected
varies.
[2] Income tax expense and other related expenses from
prior periods related to withholding taxes on certain
distributions from U.S. subsidiaries.
132
Net interest income on a taxable equivalent basis
– Non-GAAP Financial Measure
Net interest
income on
a taxable
equivalent basis
is a
non-GAAP financial
measure. Management
believes that
this presentation
provides meaningful information since it facilitates the comparison
of revenues arising from taxable and tax-exempt sources.
The Corporation’s
interest earning
assets include
investment securities
and loans
that are
exempt from
income tax,
principally in
Puerto
Rico. The
main sources
of tax-exempt
interest income
are certain
investments in
obligations of
the
U.S. Government,
its
agencies and
sponsored entities,
certain obligations
of the
Commonwealth of
Puerto Rico
and/or its
agencies and
municipalities,
and assets
held by the
Corporation’s international banking
entities. To
facilitate the comparison
of interest related
to these
assets,
the
interest
has
been
converted
to
a
taxable
equivalent
basis,
using
the
applicable
statutory
income
tax
rates
for
each
period.
According to the
Puerto Rico tax
law, a
portion of interest
cost, based on
an equal proportion
of tax-exempt assets to
total assets,
and an
allocation of
general and
administrative expenses
should be
attributed to
exempt income,
reducing the
benefit of
the tax
exempt income, and as such
the disallowance of such
deduction is considered in the
taxable equivalent computation. The effective
yield, on
a taxable
equivalent basis, will
vary depending on
the level
of these expenses
that are
attributed to the
available exempt
income.
Net interest income on
a taxable equivalent basis,
with its different components,
along with the reconciliation to
net interest income
(GAAP), for the quarter ended June 30, 2024 as compared with the same period in 2023, segregated by major categories of interest
earning assets and interest-bearing liabilities are
included in Table 3 of the Operating Results Analysis section below.
Tangible Common Equity and Tangible Assets
Tangible
common equity,
tangible common equity ratio, tangible
assets and tangible book value
per common share are
non-GAAP
financial measures.
Tangible
common equity
ratio and
tangible book
value per
common share
in conjunction
with more
traditional
bank
capital
ratios
are
commonly
used
by
banks
and
analysts
to
compare
the
capital
adequacy
of
banking
organizations
with
significant amounts
of goodwill
or other
intangible assets,
typically stemming
from the
use of
the purchase
accounting method
for
mergers and acquisitions.
Tangible
common equity,
tangible assets and
other related measures
should not be
used in
isolation or
as
a
substitute
for
stockholders'
equity,
total
assets
or
any
other
measure
calculated
in
accordance
with
GAAP.
Moreover,
the
manner in which the Corporation calculates its tangible common
equity, tangible assets and
other related measures may differ from
that of other companies reporting measures with
similar names.
Table
10 provides
a reconciliation of
total stockholders’ equity
to tangible common
equity and total
assets to tangible
assets
as of
June 30, 2024, and December 31, 2023.
Financial highlights for the quarter ended June 30, 2024
●
151.2
million for
the same
quarter of
the
previous year.
Net interest
margin for
the second
quarter of
2024
was 3.22%,
an
increase of 8 basis points when compared to 3.14% for the same quarter of the previous year.
The increase was mainly due to
the reinvestment of maturities in higher yielding
U.S. Treasury bills and due
to higher average loan balances and
higher yields
in all
loans portfolios,
which was partially
offset by
higher deposit
costs, principally
due to
higher average volume
and higher
cost
of
interest-bearing
deposits
and
time
deposits.
On
a
taxable
equivalent
basis,
the
net
interest
margin
was
3.48%,
compared to 3.29% for the same quarter of
the previous year.
●
$37.2 million for the same quarter of the previous year.
The increase in provision for credit losses was driven by loan growth in
BPPR and
higher reserves
in the
auto leasing
portfolio resulting
from recent
loss history,
partially offset
by lower
reserves in
the PB commercial portfolio mainly due to improvements
in credit ratings.
●
30, 2023, mainly
due to higher
income from mortgage banking
activities resulting from the
fair value adjustments
of mortgage
servicing rights and higher other service fees.
●
133
2023
.
Higher
operating
expenses
were
driven
mainly
by
higher
technology
and
software
expenses,
personnel
costs,
other
operating expenses,
FDIC deposit insurance expense and processing
and transactional services expenses.
●
●
driven by
an increase
in available-for-sale
(“AFS”) investment
securities, mainly
due to
purchases of
U.S. Treasury
bills and
loan growth, mainly in
the commercial portfolio,
partially offset by a
decrease in held-to-maturity (“HTM”) investment
securities
driven by maturities of U.S. Treasury securities.
●
Total
deposits at June 30, 2024 increased by
$1.9 billion when compared to deposits at
December 31, 2023, mainly due to
an
increase in Puerto Rico public sector deposits and higher
deposits in PB, mainly those captured via the online channel.
●
for the six
months ended June
30, 2023 of
$281.1 million and
the amortization of unrealized
losses from securities
previously
reclassified to
held-to-maturity (“HTM”) of
$70.7 million,
net of
taxes, partially
offset by
the after-tax
impact of
the increase
in
net unrealized
losses in
the portfolio
of AFS
securities of
$54.2 million and
common and
preferred dividends declared
during
the
period of
$90.4 million.
As
of
June 30,
2024, the
Corporation’s tangible
book value
per common
share was
$62.71, an
increase of $2.97 from December 31, 2023.
●
tier 1 leverage ratio was 8.53%, and the
total capital ratio was 18.30%. Refer to Table 9 for capital ratios.
Refer to
the Operating
Results Analysis
and Financial
Condition Analysis
within this
MD&A for
additional discussion
of significant
quarterly variances and items impacting the financial performance
of the Corporation.
As a financial services company,
the Corporation’s earnings are significantly affected
by general business and economic conditions
in the
markets which
we serve.
Lending and
deposit activities
and fee
income generation
are influenced
by the
level of
business
spending and
investment, consumer
income, spending
and savings,
capital market
activities, competition,
customer preferences,
interest rate conditions and prevailing market rates
on competing products.
The Corporation
operates in
a highly
regulated environment
and may
be adversely
affected by
changes in
federal and
local laws
and
regulations.
Also,
competition
with
other
financial
institutions,
as
well
as
with
non-traditional financial
service
providers
and
technology
companies
that
provide
electronic
and
internet-based
financial
solutions
and
services,
could
adversely
affect
its
profitability.
The
Corporation
continuously
monitors
general
business
and
economic
conditions,
industry-related
indicators
and
trends,
competition, interest rate volatility, credit
quality indicators, loan and deposit demand, operational and systems efficiencies,
revenue
enhancements and changes in the regulation of financial
services companies.
The description of the Corporation’s business contained in
Item 1 of the 2023 Form 10-K, while not all inclusive,
discusses additional
information about the business of the Corporation. Readers should also refer to “Part I - Item 1A” of the 2023 Form 10-K and “Part II
- Item 1A” of this Form 10-Q for a discussion of certain risks and uncertainties to which the Corporation is subject, many
beyond the
Corporation’s control that, in addition to the other information in
this Form 10-Q, readers should consider.
The Corporation’s common stock is traded on the NASDAQ
Global Select Market under the symbol BPOP.
134
CRITICAL ACCOUNTING POLICIES / ESTIMATES
The accounting
and reporting
policies followed
by the
Corporation and
its subsidiaries
conform to
generally accepted
accounting
principles
in
the
United
States
of
America
and
general
practices
within
the
financial
services
industry.
Various
elements
of
the
Corporation’s accounting policies, by
their nature, are
inherently subject to
estimation techniques, valuation assumptions and
other
subjective assessments.
These estimates
are made
under facts
and circumstances
at a
point in
time and
changes in
those facts
and circumstances could produce actual results that
differ from those estimates.
Management has discussed
the development and
selection of the
critical accounting policies
and estimates with
the Corporation’s
Audit
Committee.
The
Corporation
has
identified
as
critical
accounting
policies
those
related
to:
(i)
Fair
Value
Measurement
of
Financial Instruments; (ii) Loans
and Allowance for Credit
Losses; (iii) Loans Acquired
with Deteriorated Credit Quality;
(iv) Income
Taxes;
(v) Goodwill and
Other Intangible Assets; and
(vi) Pension and Postretirement
Benefit Obligations. For a
summary of these
critical accounting policies and estimates, refer to that particular section in
the MD&A included in the 2023 Form
10-K. Also, refer to
Note 2
to
the Consolidated
Financial Statements
included in
the 2023
Form 10-K
for a
summary of
the Corporation’s
significant
accounting policies and
to Note
3 to
the Consolidated Financial
Statements included in
this Form
10-Q for information
on recently
adopted accounting standard updates.
OPERATING RESULTS ANALYSIS
NET INTEREST INCOME
Net interest
income for
the quarter
ended June
30, 2024
was $568.3
million, compared
to
$531.7 million
in the
same quarter
of
2023, an
increase of
$36.6 million.
Net interest
income on
a taxable
equivalent basis
for the
second quarter
of 2024
was $614.8
million compared to $558.4 million in the second quarter
of 2023, an increase of $56.4 million.
Net interest margin for the quarter was 3.22% compared to 3.14%
in the second quarter of 2023 or an increase of eight basis
points.
On a
taxable
equivalent basis,
net interest
margin for
the second
quarter of
2024 was
3.48%, compared
to
3.29% for
the same
quarter the prior year. The main variances in net interest income on
a taxable equivalent basis were:
●
higher interest income from investment securities by $80.5 million mainly driven by higher volume by $1.6 billion driven by
the deployment of liquidity to invest in short-term treasury bills, whose interest is tax exempt in Puerto Rico. Also, a higher
yield by 101 basis points,
driven by a higher interest rate environment and reinvestment of investment maturities in higher
yielding U.S. Treasury bills;
●
higher interest
income from
loans by
$79.6 million
resulting from
an increase
in average
loans by
$2.7 billion
reflecting
loan
increases
in
both
PB
and
BPPR
and
across
most
portfolios
and
higher
yield
on
loans
by
37
basis
points
when
compared to the same quarter of 2023 due to origination of loans in
a higher interest rate environment and the repricing of
adjustable-rate loans. The portfolio with the highest variances included commercial loans with an increase of $38.1 million
in interest income, or 34 basis points. Mortgage loans, auto loans and consumer loans increased approximately $9 million
each in
interest income,
while construction
loans increased
$7.8 million.
All loan
portfolios showed
increases in
volume
and yield
Partially offset by:
●
higher interest
expense on
deposits by
$96.5 million
driven by
higher cost
of deposits
by 65
basis points
due to
higher
average volume and higher cost of market linked interest-bearing
P.R.
public deposits by $2.1 billion and higher volume of
U.S. deposits, mainly those captured via the online
channel.
Net interest income for the BPPR segment amounted to $488.7
million for the second quarter of 2024, compared to $453.1
million in
the second quarter of 2023. Net interest margin increased to 3.40%
compared to 3.21% in the second quarter of 2023. The increase
in net interest income of $35.6 million was
driven by higher yield and volume of earning assets
partially offset by the increase in the
cost of deposits,
mainly from the
P.R.
public sector.
The cost of
interest-bearing deposits increased 52
basis points to
2.47% from
1.95%
in the
same
quarter of
2023. Total
deposit costs
for
the quarter
increased by
39 basis
points, from
1.44% in
the second
quarter of 2023 to 1.83%.
135
Net interest
income for
PB was
$85.9 million
for the
quarter ended
June 30,
2024, compared
to $87.5
million during
the second
quarter
of
2023,
a
decrease
of
$1.6
million.
Net
interest margin
decreased
41
basis
points
to
2.60%
when compared
to
3.01%
during the second quarter of 2023. The decrease in net interest margin was mostly driven by a higher cost of deposits in all interest-
bearing categories, partially offset by the increase in loan volume and the repricing of adjustable-rate loans driven by the changes in
interest rates. The cost of interest-bearing deposits was 3.89% compared to
3.02% in the second quarter of 2023, or
an increase of
87 basis points, while total deposit cost was
3.43% compared to 2.55% in the second quarter
of 2023.
136
Table 3 - Analysis of Levels & Yields
on a Taxable Equivalent Basis
(Non-GAAP)
Quarter ended June 30,
Variance
Average Volume
Average Yields / Costs
Interest
Attributable to
2024
2023
Variance
2024
2023
2024
2023
Variance
Rate
Volume
(In millions)
(In thousands)
$
6,471
$
7,851
$
(1,380)
5.49
%
5.15
%
0.34
%
Money market investments
$
88,316
$
100,776
$
(12,460)
$
6,081
$
(18,541)
28,943
27,362
1,581
3.01
2.00
1.01
Investment securities [1]
216,922
136,408
80,514
72,325
8,189
26
32
(6)
5.69
4.65
1.04
Trading securities
367
370
(3)
73
(76)
Total money market,
investment and trading
35,440
35,245
195
3.47
2.70
0.77
securities
305,605
237,554
68,051
78,479
(10,428)
Loans:
17,707
16,237
1,470
6.86
6.52
0.34
Commercial
302,003
263,934
38,069
13,404
24,665
1,070
737
333
9.11
8.95
0.16
Construction
24,224
16,442
7,782
242
7,540
1,789
1,632
157
6.86
6.30
0.56
Leasing
30,697
25,711
4,986
2,394
2,592
7,817
7,409
408
5.66
5.47
0.19
Mortgage
110,673
101,304
9,369
3,666
5,703
3,192
3,075
117
13.97
13.21
0.76
Consumer
110,906
101,295
9,611
5,103
4,508
3,819
3,593
226
8.88
8.31
0.57
Auto
84,268
74,467
9,801
4,970
4,831
35,394
32,683
2,711
7.52
7.15
0.37
Total loans
662,771
583,153
79,618
29,779
49,839
$
70,834
$
67,928
$
2,906
5.49
%
4.84
%
0.65
%
Total earning assets
$
968,376
$
820,707
$
147,669
$
108,258
$
39,411
Interest bearing deposits:
$
26,105
$
24,230
$
1,875
3.60
%
2.91
%
0.69
%
NOW and money market [2]
$
233,345
$
175,640
$
57,705
$
43,783
$
13,922
14,732
14,763
(31)
0.92
0.66
0.26
Savings
33,795
24,446
9,349
7,966
1,383
9,014
7,715
1,299
3.25
2.26
0.99
Time deposits
72,799
43,402
29,397
18,707
10,690
49,851
46,708
3,143
2.74
2.09
0.65
Total interest bearing
deposits
339,939
243,488
96,451
70,456
25,995
15,176
15,480
(304)
Non-interest bearing demand
deposits
65,027
62,188
2,839
2.10
1.57
0.53
Total deposits
339,939
243,488
96,451
70,456
25,995
80
125
(45)
5.64
5.19
0.45
Short-term borrowings
1,126
1,624
(498)
129
(627)
Other medium and
978
1,299
(321)
5.16
5.33
(0.17)
long-term debt
12,530
17,227
(4,697)
1,007
(5,704)
Total interest bearing
50,909
48,132
2,777
2.79
2.19
0.60
liabilities (excluding demand
deposits)
353,595
262,339
91,256
71,592
19,664
4,749
4,316
433
Other sources of funds
$
70,834
$
67,928
$
2,906
2.01
%
1.55
%
0.46
%
Total source of funds
353,595
262,339
91,256
71,592
19,664
Net interest margin/
3.48
%
3.29
%
0.19
%
income on a taxable
equivalent basis (Non-
GAAP)
614,781
558,368
56,413
$
36,666
$
19,747
2.70
%
2.65
%
0.05
%
46,469
26,700
19,769
Net interest margin/ income
3.22
%
3.14
%
0.08
%
non-taxable equivalent basis
(GAAP)
$
568,312
$
531,668
$
36,644
Note: The changes that are not due solely to volume or
rate are allocated to volume and rate based on the
proportion of the change in each category.
[1] Average balances exclude unrealized gains or losses
on debt securities available-for-sale and the unrealized
loss related to certain securities transferred from
available-for-sale to held-to-maturity.
[2] Includes interest bearing demand deposits corresponding
to certain government entities in Puerto Rico.
137
Net interest income for
the six-month period ended
June 30, 2024
was $1.1 billion,
or $55.7 million higher
than the same
period in
2023. Taxable
equivalent net
interest income
was $1.2
billion, an
increase of
$75.6 million
when compared
to the
same period
in
2023. Net interest margin
was 3.20%, an increase
of 2 basis
points when compared to
3.18% in 2023. The
increase in net interest
margin
was
mainly
driven
by
a
higher
yield
on
earning
assets
due
to
the
reinvestment
of
investment
securities
maturities,
adjustable-rate loans
and higher volume
of earning
assets in
a higher interest
rate environment. Net
interest margin,
on a
taxable
equivalent basis, for
the six months
ended June 30,
2024, was 3.44%,
an increase of
7 basis points when
compared to the
3.37%
for the same period of 2023. The drivers of
the variances in net interest income for the
six-month period are:
Positive variances:
●
points
driven by
the re-investment
of
maturities and
deployment of
liquidity to
higher yield
short-term treasury
bills,
whose
interest is tax exempt in Puerto Rico;
●
adjustable rate loans and higher volume of $1.7
billion, increasing in BPPR and PB; and
●
yield and volume of
personal loans and credit cards
driven by the increase in
market rates of approximately 150
basis points
throughout 2023.
Partially offset by:
●
higher cost in
most deposit categories
in both BPPR
and PB; but
particularly from Puerto
Rico government deposits
that
are market-linked and PB online deposits.
138
Table 4 – Analysis of Levels & Yields
on a Taxable Equivalent Basis
from Continuing Operations (Non-GAAP)
Period ended June 30,
Variance
Average Volume
Average Yields / Costs
Interest
Attributable to
2024
2023
Variance
2024
2023
Variance
2024
2023
Variance
Rate
Volume
(In millions)
(In thousands)
$
6,477
$
6,800
$
(323)
5.49
%
4.94
%
0.55
%
Money market investments
$
176,832
$
166,500
$
10,332
$
18,468
$
(8,136)
28,626
28,108
518
2.86
2.11
0.75
Investment securities [1]
408,024
295,322
112,702
107,442
5,260
30
31
(1)
4.60
4.56
0.04
Trading securities
678
708
(30)
7
(37)
Total money market,
investment and trading
35,133
34,939
194
3.35
2.67
0.68
securities
585,534
462,530
123,004
125,917
(2,913)
Loans:
17,660
16,000
1,660
6.85
6.42
0.43
Commercial
601,507
509,403
92,104
37,134
54,970
1,031
734
297
9.04
8.68
0.36
Construction
46,324
31,598
14,726
1,454
13,272
1,766
1,610
156
6.80
6.21
0.59
Leasing
60,051
49,993
10,058
4,994
5,064
7,770
7,398
372
5.64
5.46
0.18
Mortgage
219,216
202,076
17,140
6,783
10,357
3,208
3,049
159
13.94
13.03
0.91
Consumer
222,396
197,010
25,386
13,546
11,840
3,791
3,576
215
8.82
8.23
0.59
Auto
166,322
145,874
20,448
11,419
9,029
35,226
32,367
2,859
7.50
7.06
0.44
Total loans
1,315,816
1,135,954
179,862
75,330
104,532
$
70,359
$
67,306
$
3,053
5.43
%
4.78
%
0.65
%
Total earning assets
$
1,901,350
$
1,598,484
$
302,866
$
201,247
$
101,619
Interest bearing deposits:
$
25,904
$
23,774
$
2,130
3.61
%
2.72
%
0.89
%
NOW and money market [2]
$
465,474
$
320,610
$
144,864
$
113,900
$
30,964
14,716
14,895
(179)
0.93
0.57
0.36
Savings
67,966
41,889
26,077
24,160
1,917
8,780
7,409
1,371
3.11
2.02
1.09
Time deposits
135,995
74,204
61,791
40,371
21,420
49,400
46,078
3,322
2.73
1.91
0.82
Total interest bearing
deposits
669,435
436,703
232,732
178,431
54,301
15,129
15,592
(463)
Non-interest bearing demand
deposits
64,529
61,670
2,859
2.09
1.43
0.66
Total deposits
669,435
436,703
232,732
178,431
54,301
82
186
(104)
5.67
4.89
0.78
Short-term borrowings
2,318
4,509
(2,191)
1,603
(3,794)
Other medium and
988
1,124
(136)
5.13
5.10
0.03
long-term debt
25,239
28,493
(3,254)
14
(3,268)
Total interest bearing
50,470
47,388
3,082
2.78
2.00
0.78
liabilities (excluding demand
deposits)
696,992
469,705
227,287
180,048
47,239
4,760
4,326
434
Other sources of funds
$
70,359
$
67,306
$
3,053
1.99
%
1.41
%
0.58
%
Total source of funds
696,992
469,705
227,287
180,048
47,239
3.44
%
3.37
%
0.07
%
Net interest margin/ income
on a taxable equivalent basis
(Non-GAAP)
1,204,358
1,128,779
75,579
$
21,199
$
54,380
2.65
%
2.78
%
(0.13)
%
Net interest spread
Taxable equivalent
adjustment
85,302
65,455
19,847
3.20
%
3.18
%
0.02
%
Net interest margin/ income
non-taxable equivalent basis
(GAAP)
$
1,119,056
$
1,063,324
$
55,732
Note: The changes that are not due solely to volume or
rate are allocated to volume and rate based on the
proportion of the change in each category.
[1] Average balances exclude unrealized gains or losses
on debt securities available-for-sale and the unrealized
loss related to certain securities transferred from
available-for-sale to held-to-maturity.
139
Provision for Credit Losses - Loans Held-in-Portfolio
and Unfunded Commitments
For
the quarter
ended June
30, 2024,
the Corporation
recorded a
provision expense
of
$46.3 million
for credit
losses related
to
loans held-in-portfolio
and unfunded
commitments. The
provision for
loan losses
for the
quarter ended
June 30,
2024 was
$44.2
million, compared
to
a provision
expense of
$35.7 million
for the
quarter ended
June 30,
2023. The
reserve related
to unfunded
commitments for the second quarter
of 2024 was $2.1 million,
compared to a provision
expense of $2.2 million for
the same period
of 2023. The drivers of the variance
in the provision for loan losses by
business segments when comparing the quarter ended June
30, 2024, to the same quarter in 2023 were as
follows:
●
compared to
a provision
expense of
$28.4 million
for the
quarter ended
June 30,
2023, driven
by loan
growth in
BPPR
and higher reserves in our auto leasing portfolio
resulting from recent loss history.
●
provision expense of $7.3 million for the same quarter
in 2023, driven by improvements in commercial credit ratings
in PB.
For the
six months
ended June
30, 2024,
the Corporation
recorded a
provision for
credit loss
of $118.4
million for
its reserve
for
credit losses related to loans held-in-portfolio and unfunded commitments. The
provision for loan losses expense for the six
months
ended June
30, 2024
was $116.5
million, compared
to an
expense of
$82.8 million
for the
six months
ended June
30, 2023.
The
provision for
unfunded commitments for
the six
months ended June
30, 2024
reflected an
expense of
$1.9 million,
compared to
a
provision expense of $2.8 million for the same period
of 2023.
●
2024, compared to an expense of $73.6 million for
the six months ended June 30, 2023, attributable to higher reserves
in
our auto
leasing portfolio
mostly due
to the
recent loss
history and
changes in
the credit
quality of
the BPPR
consumer
portfolio.
●
30, 2024,
compared to
an expense
of
$9.2 million
for the
same
period in
2023. The
lower provision
was driven
by an
improvement in commercial credit ratings in PB.
At June
30, 2024,
the total
allowance for
credit losses
for loans
held-in-portfolio amounted to
$730.1 million,
compared to
$729.3
million as of December 31, 2023.
The ratio of the allowance for
credit losses to loans held-in-portfolio was
2.05% at June 30, 2024,
compared
to
2.08%
at
December 31,
2023.
As
discussed
in
Note
8
to
the
Consolidated
Financial Statements,
the
Corporation
applies probability weightings to the outcomes of simulations using Moody’s Analytics’ Baseline, S3 (pessimistic) and S1 (optimistic)
scenarios to
estimate the
ACL. The
baseline scenario
is assigned
the highest
probability,
followed by
the pessimistic
scenario to
account for
uncertainties in
the macro-economic
outlook and
any downside
risk. The
weight assigned
to the
pessimistic scenario
decreased during
the first
quarter of
2024 in
response to
the positive
momentum in
the economy
as expectations
for the
Federal
Reserve
achieving
a
soft
landing
have
improved.
Refer
to
Note
8
to
the
Consolidated
Financial
Statements,
for
additional
information
on
the
Corporation’s methodology
to
estimate its
ACL.
Refer
to
the
Credit
Risk
section
of
this
MD&A
for
a
detailed
analysis of net charge-offs, non-performing assets, the allowance
for credit losses and selected loan losses statistics.
Provision for Credit Losses – Investment Securities
The
Corporation’s
provision
for
credit
losses
related
to
its
investment
securities
held-to-maturity
is
related
to
the
portfolio
of
obligations from
the Government
of Puerto
Rico, states
and political
subdivisions. At
June 30,
2024, the
total allowance
for credit
losses
for
this
portfolio
amounted
to
$6.3
million,
compared
to
$5.8
million
as
of
December
31,
2023.
Refer
to
Note
6
to
Consolidated Financial Statements
for additional information on the ACL for this portfolio.
Non-Interest Income
Non-interest
income
amounted to
$166.3
million
for the
quarter ended
June
30,
2024, compared
to
$160.5
million
for the
same
quarter of the previous year. The main factors that contributed to the variance
in non-interest income were:
140
●
rights (“MSRs”); and
●
transactions.
Non-interest income amounted to
$330.1 million for
the six months ended
June 30, 2024,
compared to $322.4 million
for the same
period of the previous year. The main factors that contributed to the
variance in non-interest income were:
●
higher credit card fees as a result of higher interchange
transactional volumes;
and
●
compensation in commercial deposits.
141
Operating Expenses
Operating expenses amounted to
$469.6 million for
the quarter ended
June 30, 2024,
an increase of
$9.3 million, when
compared
with the same quarter of 2023. The variance
in operating expenses was driven primarily by:
●
million and higher software amortization expense by
$2.5 million;
●
increase in headcount, and higher commissions and
incentive compensation by $3.4 million;
●
lower pension plan costs as a result of annual
changes in actuarial assumptions;
●
●
as a result of higher volume of transactions;
partially offset by:
●
regulatory, compliance and cyber security efforts, as well as those related to the Corporation's
transformation initiative; and
●
Operating
expenses
amounted
to
$952.7
million
for
the
six
months
ended
June
30,
2024,
an
increase
of
$51.7
million
when
compared with the
same period of
2023. Excluding the
$6.4 million of
interest accrued related
to prior period
tax withholdings and
the $14.3 million impact of the
FDIC Special Assessment, total expenses for six
months ended June 30, 2024, were
$932.0 million,
an increase of $31.0 million, when compared
with the same period of 2023. The main drivers
of the $31.0 million variance were:
●
revisions
and
an
increase
in
headcount,
higher
commissions
and
incentive
compensation
by
$7.3
million,
an
increase
in
restricted stock expense by $2.8 million, and higher payroll
taxes by $2.1 million;
●
higher IT professional fees
by $5.3 million,
an increase of $4.8
million from network management
services and an increase
of
$1.9 million in application processing and hosting
services;
●
lower pension plan costs as a result of annual
changes in actuarial assumptions;
●
a result of higher volume of transactions; and
●
card business;
partially offset by:
●
regulatory, compliance and cyber security efforts, as well as those related to the Corporation's
transformation initiative;
142
●
during the six months ended June 30, 2023; and
●
properties and a reduction in corporate advances
on mortgage loans.
Table 5 - Operating Expenses
Quarters ended June 30,
Six months ended June 30,
(In thousands)
2024
2023
Variance
2024
2023
Variance
Personnel costs:
Salaries
$
128,634
$
124,901
$
3,733
$
258,018
$
250,294
$
7,724
Commissions, incentives and other bonuses
30,626
27,193
3,433
69,237
58,355
10,882
Pension, postretirement and medical insurance
16,619
17,508
(889)
34,004
32,886
1,118
Other personnel costs, including payroll taxes
21,545
21,866
(321)
51,542
48,693
2,849
Total personnel
costs
197,424
191,468
5,956
412,801
390,228
22,573
Net occupancy expenses
27,692
27,165
527
55,733
53,204
2,529
Equipment expenses
9,662
9,561
101
19,229
17,973
1,256
Other taxes
15,333
16,409
(1,076)
29,708
32,700
(2,992)
Professional fees
37,744
50,132
(12,388)
66,662
83,563
(16,901)
Technology and
software expenses
79,752
72,354
7,398
159,214
140,913
18,301
Processing and transactional services:
Credit and debit cards
13,739
11,584
2,155
25,883
24,134
1,749
Other processing and transactional services
25,357
25,217
140
47,407
46,576
831
Total processing
and transactional services
39,096
36,801
2,295
73,290
70,710
2,580
Communications
4,357
4,175
182
8,914
8,263
651
Business promotion:
Rewards and customer loyalty programs
16,406
16,626
(220)
30,462
28,974
1,488
Other business promotion
9,043
8,457
586
15,976
14,980
996
Total business
promotion
25,449
25,083
366
46,438
43,954
2,484
Deposit insurance
10,581
6,803
3,778
34,468
15,668
18,800
Other real estate owned (OREO) income
(5,750)
(3,314)
(2,436)
(11,071)
(5,008)
(6,063)
Other operating expenses:
Operational losses
11,823
4,280
7,543
15,384
11,080
4,304
All other
15,679
18,572
(2,893)
40,390
36,133
4,257
Total other operating
expenses
27,502
22,852
4,650
55,774
47,213
8,561
Amortization of intangibles
734
795
(61)
1,529
1,590
(61)
Total operating
expenses
$
469,576
$
460,284
$
9,292
$
952,689
$
900,971
$
51,718
Income Taxes
For the quarter
and six months
ended June 30,
2024, the Corporation recorded
an income tax
expense of $40.5
million and $96.0
million with
an effective tax
rate (ETR) of
19% and 26%,
respectively, compared
to $43.5 million
and $89.8 million
with an ETR
of
22% and 24% for the respective periods of 2023.
The variance in income tax expense for the quarter ended June 30, 2024, reflects
the
impact of
higher exempt
income and
other tax
credits when
compared to
the same
quarter of
year
2023. For
the six-month
period ended June 30,
2024, the higher income
tax reflects the tax withholding
expense recorded during the first
quarter on certain
intercompany distributions, amounting to $22.9 million, out of which $16.5 million corresponded to years 2014-2023 and $6.5 million
was related
to a
distribution completed during
the period
ended March
31, 2024;
this negative variance
was partially
offset by
the
higher exempt income and other tax credits recorded this
year, compared with the same period of year 2023. Based on the Adjusted
Net Income, as
defined in the
non-GAAP Financial Measures
section of
this MD&A, the
ETR for
the six-month period
ended June
30, 2024, would have
been 21.3%. Refer to the
Non- GAAP Financial Measures section in
this MD&A for more
details on Adjusted
Net Income.
At June 30, 2024, the Corporation had a net deferred tax asset amounting to $1.0 billion, net of a valuation allowance of $0.5 billion.
The net deferred tax asset related to the U.S.
operations was $0.3 billion, net of
a valuation allowance of $0.4 billion.
Refer to
Note 30
to the
Consolidated Financial
Statements for
a reconciliation
of the
statutory income
tax rate
to the
effective tax
rate and additional information on the income
tax expense and deferred tax asset balances.
143
REPORTABLE SEGMENT RESULTS
The Corporation’s
reportable segments
for managerial
reporting purposes
consist of
Banco Popular
de Puerto
Rico and
Popular
U.S. A Corporate group
has also been defined to support the reportable
segments.
For
a
description
of
the
Corporation’s
reportable
segments,
including
additional
financial
information
and
the
underlying
management accounting process, refer to Note 32
to the Consolidated Financial Statements.
The Corporate group reported a net income of $3.8 million for the quarter
ended June 30, 2024, compared with a net income of $4.7
million for the same quarter of the previous year.
For the six months ended June 30, 2024, the Corporate group reported net
loss of
$21.6 million, compared to a net
income of $6.0 million for the
same period of the previous year.
The negative variance was mainly
attributed to the $22.9 million adjustment to recognize the tax impact associated with prior period intercompany distributions and the
additional $6.5 million recognized for the tax
impact related to intercompany distributions paid
during the first quarter of 2024.
Highlights on the earnings results for the reportable
segments are discussed below:
Banco Popular de Puerto Rico
The Banco
Popular de
Puerto Rico
reportable segment’s
net income
amounted to
$157.2 million
for the
quarter ended
June 30,
2024, compared
with net
income of
$131.8 million
for the
same quarter
of
the previous
year.
The factors
that contributed
to the
variance in the financial results included the following:
●
●
by
the
increase
in
interest
rates
by
the
Federal
Reserve
and
higher
average
balances
of
U.S.
Treasury
securities; and
●
consumer loans, reflected in auto loans, credit cards
and personal loans;
partially offset by
●
Rico
government
deposits,
and
the
higher
interest
rate
environment’s
impact
on
the
cost
of
interest-bearing
demand accounts and time deposits.
The
net
interest
margin
for
the
quarter
ended
June
30,
2024
was
3.40%
compared
to
3.21%
for
the
same
quarter
in
the
previous year.
The increase in
net interest margin
is driven by
the earnings assets
mix and the
higher yields from
investment
securities and loans, particularly commercial and consumer loans, due to the increase in rates; partially offset by
higher cost of
deposits.
●
June
30,
2023,
or
an
unfavorable
variance
of
$21.0
million
mainly
driven
by
higher
reserves
in
auto
leasing
portfolio
mostly due to the recent loss history and loan
growth;
●
●
million in the fair value adjustment of mortgage service
rights;
●
customer transactions;
and
144
●
mortgage portfolios;
●
●
lower pension plan expense as a result of
annual changes in actuarial assumptions;
●
expense as result of higher customer transactional
volumes;
●
●
●
fees, higher amortization of software costs and higher
network management fees;
partially offset by
●
and cyber security efforts as well the Corporations
transformation initiatives;
●
properties;
●
For the
six months
ended June 30,
2024, the BPPR
segment recorded net
income of $278.5
million compared to
a net
income of
$264.7 million for the
same period of the
previous year. The
factors that contributed to the
variance in the financial
results included
the following:
●
●
by the
re-investments of
maturities and
deployment of
liquidity to
higher yield
short-term treasury
bills, whose
interest is tax exempt in Puerto Rico.
●
and consumer loans,
partially offset by
●
Rico
government
deposits,
and
the
higher
interest
rate
environment’s
impact
on
the
cost
of
interest-bearing
demand accounts, time deposits, and savings deposits.
The net interest margin for the six months ended June 30, 2024 was 3.36% compared to 3.26% for the same quarter in the previous
year. The
increase in net
interest margin is driven
by the earnings assets
mix and the
higher yields from
investment securities and
loans, particularly commercial and consumer loans,
due to the increase in rates; partially offset by
higher cost of deposits.
145
●
leasing portfolio and changes in credit quality
mostly due to consumer portfolios;
●
●
volume of customer transactions;
●
●
●
●
Assessment recorded in the first quarter of 2024,
and higher average total assets;
●
transactional volumes and higher donations expenses;
●
by
$5.4
million,
mainly
from
higher
personnel
costs
and
advisory
services,
higher
reserves
for
operational
losses by
$3.4 million;
partially offset
by $3.0
million due
to lower
pension plan
expense as
a result
of annual
charges in actuarial assumptions;
●
expense as result of higher customer transactional
volumes;
●
higher amortization of software costs and higher IT
consulting fees;
partially offset by
●
regulatory, compliance and cyber security efforts as well as the transformation initiative;
●
commercial properties;
●
during this period.
Popular U.S.
For the quarter ended June 30, 2024, the reportable segment of Popular U.S. reported a net income of $17.7 million, compared with
a net income
of $15.3 million for
the same quarter of
the previous year.
The factors that contributed
to the variance
in the financial
results included the following:
●
146
●
balance;
partially offset by:
●
higher yields due to increase in rates;
and
●
The net
interest margin for
the quarter
ended June
30, 2024
was 2.60%
compared to
3.01% for
the same
quarter in
the previous
year driven by the higher cost of deposits.
●
the reserve
for credit
losses of
$3.6 million
for the
second quarter
of
2024 mostly
due to
improvements in
commercial
credit ratings,
compared to a provision expense of $7.9 million
recorded in the quarter ended June 30, 2023;
●
●
group by $1.6 million mainly from higher personnel costs
and higher consulting fees.
●
For the six months ended June 30, 2024, the reportable segment of Popular
U.S. recorded a net income of $24.8 million, compared
with
a
net
income
of
$40.3
million
for
the
same
period
of
the
previous
year.
The
factors
that
contributed
to
the
variance
in
the
financial results included the following:
●
●
balance;
partially offset by:
●
higher yields due to increase in rates; and
●
higher average balance.
The net interest margin for the six months ended June 30, 2024 was 2.60% compared to 3.17% for the same quarter in the previous
year.
●
improvement in credit quality;
●
●
group by $3.4 million, mainly from higher
personnel costs.
●
tax.
147
FINANCIAL CONDITION ANALYSIS
Assets
The Corporation’s
total assets
were $72.8
billion at
June 30,
2024, compared to
$70.8 billion
at December
31, 2023.
Refer to
the
Consolidated Statements of Financial Condition included
in this report for additional information.
Money market investments and debt securities available-for-sale
Money market
investments decreased
by
$147.5 million
as
of
June 30,
2024, when
compared to
December 31,
2023,
as these
funds were
used in
part for
the purchase of
debt securities and
loan originations. Debt
securities available-for-sale increased
$1.8
billion, mainly due to
purchases of U.S. Treasury
Securities.
Debt securities held-to-maturity decreased by
$218.8 million driven by
maturities
of
U.S.
Treasury
securities,
partially
offset
by
the
accretion
of
$88.4
million
of
the
discount
related
to
U.S.
Treasury
securities previously reclassified from the
AFS to HTM. Refer
to Note 5 and
to Note 6 to
the Consolidated Financial Statements for
additional information with respect to the Corporation’s debt
securities available-for-sale and held-to-maturity.
148
Loans
Refer to Table
6 for a
breakdown of the Corporation’s
loan portfolio. Also, refer
to Note 7 in
the Consolidated Financial Statements
for detailed information about the Corporation’s loan portfolio
composition and loan purchases and sales.
Loans held-in-portfolio
increased by
$526.6 million
to $35.6
billion as
of June
30, 2024,
compared to
loans held-in-portfolio
as of
December 31,
2023. The
BPPR portfolio
increased by
$632.5 million,
driven by
the growth
in the
commercial, mortgage
and auto
loans portfolio,
and the PB
loan portfolio decreased by
$105.8 million, due in
part by commercial
loans payoffs, offset
by growth in
the construction loans portfolio.
The Corporation’s
$5.0 billion
non-owner occupied
commercial real
estate portfolio
is comprised
of $3.0
billion in
BPPR and
$2.0
billion in Popular U.S. and
is well diversified across a number
of tenants in different industries
and segments with exposure to retail
(35%
of
non-owner
occupied
CRE),
hotels
(20%)
and
office
space
(13%)
accounting
for
two
thirds
of
the
total
exposure.
The
approximate $624 million office space
exposure represents only 1.8% of
the total loan portfolio
and is comprised mainly of
mid-rise
properties with diversified tenants with average loan
size of $2 million across both BPPR and Popular
U.S.
Popular’s $2.4 billion commercial multi-family
portfolio represents approximately 7% of
total loans and is
concentrated in New York
Metro ($1.4 billion),
South Florida ($739 million) and
Puerto Rico ($191 million). In
the New York
Metro region, the Corporation has
no
exposure
to
rent
controlled
buildings.
The
majority
of
our
multi-family
loans
in
that
region
are
collateralized
by
underlying
buildings that count on a mix
of units subject to rent stabilized (subject
to annual capped rent increases) and market-rate
units. The
rent stabilized units represent less than 40% of the
total units in the loan portfolio with the
majority originated after 2019. The mix of
units within
a building
is common
across the
New York
Metro region
due to
tax incentives
awarded to
developers based
on rent
stabilized
units.
In
2024,
there
are
approximately $191
million
in multi-family
loans
in
our
New
York
Metro
portfolio expected
to
reprice.
149
Table 6 - Loans Ending Balances
(In thousands)
June 30, 2024
December 31, 2023
Variance
Loans held-in-portfolio:
Commercial
$
2,384,480
$
2,415,620
$
(31,140)
5,004,472
5,087,421
(82,949)
3,143,817
3,080,635
63,182
7,195,357
7,126,121
69,236
Total Commercial
17,728,126
17,709,797
18,329
Construction
1,105,759
959,280
146,479
Leasing
1,828,048
1,731,809
96,239
Mortgage
7,883,726
7,695,917
187,809
Consumer
1,162,557
1,135,747
26,810
68,992
65,953
3,039
1,879,619
1,945,247
(65,628)
3,773,292
3,660,780
112,512
161,501
160,441
1,060
Total Consumer
7,045,961
6,968,168
77,793
Total loans held-in
-portfolio
$
35,591,620
$
35,064,971
$
526,649
Loans held-for-sale:
$
8,225
$
4,301
$
3,924
Total loans held-for-sale
$
8,225
$
4,301
$
3,924
Total loans
$
35,599,845
$
35,069,272
$
530,573
150
Other assets
Other
assets
amounted to
$2.2 billion
at
June
30, 2024,
compared to
$2.0
billion at
December 31,
2023.
The
increase in
other
assets was driven by U.S. Treasury
bills maturities and the accrual of interest
payments that were received after quarter end. Refer
to Note 12 to the Consolidated Financial Statements for
a breakdown of the principal categories that comprise the caption
of “Other
Assets” in the Consolidated Statements of Financial
Condition at June 30, 2024 and December
31, 2023.
Liabilities
The Corporation’s total
liabilities were $67.5
billion at June
30, 2024, an
increase of $1.9
billion, when compared
to December 31,
2023, mainly due to an increase in deposits as
discussed below.
Deposits and Borrowings
The composition of the Corporation’s financing to total assets
at June 30, 2024 and December 31, 2023
is included in Table 7.
Table 7 - Financing to Total
Assets
June 30,
December 31,
% increase (decrease)
% of total assets
(In millions)
2024
2023
from 2023 to 2024
2024
2023
Non-interest bearing core deposits
$
15,470
$
15,420
0.3
%
21.2
%
21.8
%
Interest-bearing core deposits
44,803
43,571
2.8
61.5
61.6
Interest-bearing other deposits
5,258
4,627
13.6
7.2
6.5
Repurchase agreements
106
91
16.5
0.2
0.1
Notes payable
941
987
(4.7)
1.3
1.4
Other liabilities
894
915
(2.3)
1.2
1.3
Stockholders’ equity
5,373
5,147
4.4
7.4
7.3
Total Deposits
The Corporation’s deposits totaled $65.5 billion as of
June 30, 2024, compared to $63.6 billion as of December
31, 2023. An
increase in the P.R. public sector, as well as increases in retail demand deposits and time deposits in PB, were the
main drivers of
the $1.9 billion increase during the period.
P.R.
Public Sector Deposits
As of June 30, 2024, the Puerto Rico public sector deposits amounted
to $19.7 billion, compared to $18.1 billion as of December
31,
2023.
Approximately
30%
of
the
Corporation’s
deposits
as
of
June
30,
2024
are
funds
deposited
by
the
Government
of
Puerto
Rico,
municipalities and government
instrumentalities and corporations. P.R
public sector deposit
costs are indexed
to changes in
short-
term market
rates with
a one-quarter
lag, in
accordance with contractual
terms. As
a result,
these costs
may lag
in variable
asset
repricing. These deposits require that the bank pledge high credit quality securities as collateral; therefore, liquidity
risks arising from
deposit
outflows
are
lower.
Refer
to
the
Liquidity
section
in
this
MD&A
for
additional
information
on
the
Corporation’s
funding
sources.
Fluctuations
of
public
sector
deposit
balances
are
uncertain
and
difficult
to
predict.
Factors
that
could
impact
these
balances include, but are not limited to, the receipt of funds by the Puerto
Rico Government from federal disaster funding assistance
(i.e. hurricane or pandemic related funds) and other
events such as seasonal tax collections which may result
in increases of public
sector deposit balances at BPPR in the near term. The amount and timing of reductions in
deposit balances depend on government
actions
such
as
the
speed
at
which
federal
assistance
is
distributed,
the
financial
condition,
liquidity
and
cash
management
practices of
the Puerto
Rico Government
and its
instrumentalities, and/or
the implementation
of fiscal
and debt
adjustment plans
approved pursuant
to PROMESA or
other actions
mandated by
the Fiscal
Oversight and Management
Board for
Puerto Rico
(the
“Oversight Board”).
Refer to Table 8 for a breakdown of the Corporation’s deposits at June 30, 2024 and December
31, 2023.
151
Table 8 - Deposits Ending Balances
(In thousands)
June 30, 2024
December 31, 2023
Variance
Demand deposits
$
25,879,406
$
27,579,054
$
(1,699,648)
Savings, NOW and money market deposits (non-brokered)
29,724,473
26,817,844
2,906,629
Savings, NOW and money market deposits (brokered)
729,326
719,453
9,873
Time deposits (non-brokered)
8,225,750
7,546,138
679,612
Time deposits (brokered CDs)
971,907
955,754
16,153
Total deposits
$
65,530,862
$
63,618,243
$
1,912,619
[1] Includes interest and non-interest bearing demand deposits.
Borrowings
The Corporation’s borrowings totaled $1.0 billion at June 30, 2024 compared to $1.1 billion at December 31, 2023. Refer to Note 15
to the Consolidated Financial Statements for detailed information
on the Corporation’s borrowings. Also, refer to the Liquidity section
in this MD&A for additional information on the Corporation’s
funding sources.
Stockholders’ Equity
Stockholders’ equity
totaled $5.4
billion at
June 30,
2024, an
increase of
$225.7 million
when compared
to
December 31,
2023,
principally due
to net
income for
the six
months ended
June 30,
2024 of
$281.1 million
and the
change in
the accumulated
other
comprehensive loss driven
by the amortization
of unrealized losses
from securities previously
reclassified to HTM
of $70.7 million,
net of taxes, partially offset by the
after-tax impact of the increase in net unrealized losses in the
portfolio of AFS securities of $54.2
million
and
common
and
preferred
dividends
declared
during
the
six-month
period
of
$90.4
million.
Refer
to
the
Consolidated
Statements
of
Financial
Condition,
Comprehensive
Income
and
of
Changes
in
Stockholders’
Equity
for
information
on
the
composition of stockholders’ equity.
152
REGULATORY CAPITAL
The Corporation, BPPR and PB
are subject to regulatory capital
requirements established by the Federal Reserve Board.
The risk-
based
capital
standards
applicable
to
the
Corporation,
BPPR
and
PB
(“Basel
III
capital
rules”)
are
based
on
the
final
capital
framework for strengthening international capital standards, known
as Basel III, of the Basel Committee on Banking Supervision.
As
of June 30,
2024, the Corporation’s, BPPR’s
and PB’s capital
ratios continue to
exceed the minimum requirements
for being “well-
capitalized” under the Basel III capital rules.
The risk-based
capital ratios
presented in
Table
9,
which include
common equity
tier 1,
Tier
1 capital,
total capital
and leverage
capital as of June 30, 2024 and December
31, 2023.
Table 9 - Capital Adequacy
Data
(Dollars in thousands)
June 30, 2024
December 31, 2023
Common equity tier 1 capital:
Common stockholders equity - GAAP basis
$
5,350,535
$
5,124,810
CECL transitional amount
42,376
84,751
AOCI related adjustments due to opt-out election
1,809,899
1,831,003
Goodwill, net of associated deferred tax liability (DTL)
(663,058)
(666,538)
Intangible assets, net of associated DTLs
(8,235)
(9,764)
Deferred tax assets and other deductions
(303,259)
(310,947)
Common equity tier 1 capital
$
6,228,258
$
6,053,315
Additional tier 1 capital:
Preferred stock
22,143
22,143
Additional tier 1 capital
$
22,143
$
22,143
Tier 1 capital
$
6,250,401
$
6,075,458
Tier 2 capital:
Trust preferred securities subject to phase in as
tier 2
192,674
192,674
Other inclusions (deductions), net
474,675
465,833
Tier 2 capital
$
667,349
$
658,507
Total risk-based capital
$
6,917,750
$
6,733,965
Minimum total capital requirement to be well capitalized
$
3,779,409
$
3,714,633
Excess total capital over minimum well capitalized
$
3,138,341
$
3,019,332
Total risk-weighted
assets
$
37,794,091
$
37,146,330
Total assets for leverage
ratio
$
73,240,055
$
71,353,184
Risk-based capital ratios:
Common equity tier 1 capital
16.48
%
16.30
%
Tier 1 capital
16.54
16.36
Total capital
18.30
18.13
Tier 1 leverage
8.53
8.51
[1] The CECL transitional amount includes the impact
of Popular's adoption of the new CECL accounting standard
on January 1, 2020.
153
The Basel
III capital rules
provide that a
depository institution is
deemed to be
well capitalized if
it maintains a
leverage ratio of
at
least 5%,
a common equity
Tier 1
ratio of
at least 6.5%,
a Tier
1 capital ratio
of at least
8% and a
total risk-based
ratio of at
least
10%. The Corporation, BPPR and PB leverage ratio, common equity
Tier 1 ratio and Tier
1 capital ratio, respectively as of June 30,
2024, continue to exceed the minimum requirements
for being “well-capitalized” under the Basel III
capital rules.
Pursuant
to
the
adoption
of
the
CECL
accounting
standard
on
January
1,
2020,
the
Corporation
elected
to
use
the
five-year
transition
period option
as
provided in
the
final
interim
regulatory capital
rules effective
March 31,
2020.
The
five-year
transition
period provision delayed for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period
to
phase
out
the
aggregate
amount
of
the
capital
benefit
provided
during
the
initial
two-year
delay.
As
of
June
30,
2024,
the
Corporation had phased-in 75% of
the cumulative CECL deferral with
the remaining impact to
be recognized over the
remainder of
the three-year transition period.
The increase in the common equity Tier
I capital ratio, Tier I
capital ratio, and total capital ratio as
of June 30, 2024 as compared to
December 31, 2023 was mainly due to
the six months period earnings. The increase in
leverage capital ratio was mainly due to
the
period
earnings,
partially
offset
by
higher
average
assets
which
are
impacted
by
zero-risk
weighted
assets
that
do
not
have
a
significant impact on the risk-weighted assets.
Reconciliation to Tangible Common Equity and Tangible Assets
Table
10 provides
a reconciliation of
total stockholders’ equity
to tangible common
equity and total
assets to tangible
assets
as of
June 30, 2024, and December 31, 2023.
154
Table 10 - Reconciliation
of Tangible Common Equity
and Tangible Assets
(In thousands, except share or per share information)
June 30, 2024
December 31, 2023
Total stockholders’
equity
$
5,372,678
$
5,146,953
Less: Preferred stock
(22,143)
(22,143)
Less: Goodwill
(804,428)
(804,428)
Less: Other intangibles
(8,235)
(9,764)
Total tangible common
equity
$
4,537,872
$
4,310,618
Total assets
$
72,845,072
$
70,758,155
Less: Goodwill
(804,428)
(804,428)
Less: Other intangibles
(8,235)
(9,764)
Total tangible assets
$
72,032,409
$
69,943,963
Tangible common
equity to tangible assets
6.30
%
6.16
%
Common shares outstanding at end of period
72,365,926
72,153,621
Tangible book value
per common share
$
62.71
$
59.74
Quarterly average
Total stockholders’
equity [1]
$
6,303,672
$
6,072,871
Average unrealized (gains) losses on AFS securities
transferred to HTM
595,362
683,077
Adjusted total stockholder's equity
6,899,034
6,755,948
Less: Preferred Stock
(22,143)
(22,143)
Less: Goodwill
(804,427)
(804,427)
Less: Other intangibles
(8,706)
(10,286)
Total tangible common
equity
$
6,063,758
$
5,919,092
Return on average tangible common equity
11.77
%
6.32
%
155
RISK MANAGEMENT
Market / Interest Rate Risk
The financial results and capital levels of the
Corporation are constantly exposed to market, interest
rate and liquidity risks.
Market risk
refers to the
risk of a
reduction in the
Corporation’s capital due
to changes in
the market valuation
of its assets
and/or
liabilities.
Most of the assets
subject to market valuation risk
are debt securities classified as
available-for-sale. Refer to Notes 5
and 6 to the
Consolidated Financial
Statements for
further information
on the
debt
securities available-for-sale
and
held-to-maturity portfolios.
Debt securities
classified as
available-for-sale amounted
to $18.5
billion as
of June
30, 2024.
Other assets
subject to
market risk
include loans held-for-sale, which amounted
to $8 million, mortgage
servicing rights (“MSRs”) which
amounted to $113
million, and
securities classified as “trading”, which amounted to $28
million, as of June 30, 2024.
Interest Rate Risk (“IRR”)
The Corporation’s net interest income is subject
to various categories of interest rate risk,
including repricing, basis, yield curve and
option risks.
In managing
interest rate
risk, management may
alter the
mix of
floating and
fixed rate
assets and
liabilities, change
pricing
schedules,
adjust
maturities
through
sales
and
purchases
of
investment
securities,
and
enter
into
derivative
contracts,
among other alternatives.
Interest
rate
risk
management
is
an
active
process
that
encompasses
monitoring
loan
and
deposit
flows
complemented
by
investment and funding
activities. Effective management of
interest rate risk begins
with understanding the dynamic
characteristics
of assets and
liabilities and determining the
appropriate rate risk position
given line of
business forecasts, management objectives,
market expectations and policy constraints.
Management utilizes various tools to assess IRR, including Net Interest
Income (“NII”) simulation modeling, static gap analysis, and
Economic Value
of Equity
(“EVE”). The
three methodologies
complement each
other and
are used
jointly in
the evaluation
of the
Corporation’s IRR. NII
simulation modeling is
prepared for a
five-year period, which
in conjunction with
the EVE analysis,
provides
management a better view of long-term IRR.
Net interest
income simulation analysis
performed by legal
entity and on
a consolidated basis
is a
tool used
by the
Corporation in
estimating the
potential change
in net
interest income
resulting from
hypothetical changes
in interest
rates. Sensitivity
analysis is
calculated using a simulation model which incorporates
actual balance sheet figures detailed by maturity
and interest yields or costs.
Management assesses
interest rate
risk by
comparing various
NII simulations
under different
interest rate
scenarios that
differ in
direction of interest
rate changes, the
degree of change
and the projected
shape of the
yield curve. For
example, the types
of rate
scenarios processed during the
quarter include flat rates,
implied forwards, and parallel
and non-parallel rate shocks.
Management
also performs analyses to isolate and measure basis
and prepayment risk exposures.
The asset
and liability
management group
performs validation
procedures on
various assumptions
used as
part of
the simulation
analyses as well as validations
of results on a
monthly basis. In addition, the
model and processes used to
assess IRR are subject
to independent validations according to the guidelines
established in the Model Governance and
Validation policy.
The Corporation processes NII
simulations under interest rate
scenarios in which the
yield curve is assumed
to rise and
decline by
the same magnitude
(parallel shifts). The
rate scenarios considered in
these market risk
simulations include instantaneous parallel
changes of -100, -200,
+100, and +200 basis points
during the succeeding twelve-month period. Simulation analyses
are based on
many assumptions,
including that
the balance
sheet remains
flat, the
relative levels
of market
interest rates
across all
yield curve
points
and
indexes,
interest
rate
spreads,
loan
prepayments
and
deposit
elasticity.
Thus,
they
should
not
be
relied
upon
as
indicative of actual results. Further, the estimates do not
contemplate actions that management could take to respond to changes in
interest rates. Additionally, the Corporation is also subject to basis risk in the repricing of its assets and liabilities, including the basis
related to
using different
rate indexes
for the
repricing of
assets and
liabilities, as
well as
the effect
of pricing
lags which
may be
contractual
or
due to
historical differences
in the
timing
of
management responses
to
changes in
the rate
environment. By
their
nature, these forward-looking computations are only estimates and may be different from
what may actually occur in the future. The
following table
presents the
results of
the simulations
at June
30, 2024
and December
31, 2023,
assuming a
static balance sheet
and parallel changes over flat spot rates over
a one-year time horizon:
156
Table 11
- Net Interest Income Sensitivity (One Year
Projection)
June 30, 2024
December 31, 2023
(Dollars in thousands)
Amount Change
Percent Change
Amount Change
Percent Change
Change in interest rate
+200 basis points
54,953
2.32
20,822
0.92
+100 basis points
29,332
1.24
11,496
0.51
-100 basis points
1,442
0.06
19,589
0.87
-200 basis points
(17,583)
(0.74)
16,971
0.75
As of June 30, 2024, NII simulations show the Corporation maintains an asset sensitive position that slightly increased as compared
to
the
results
as
of
December
31,
2023.
The
primary
reasons
for
the
variation
in
sensitivity
are
changes
in
balance
sheet
composition driven by an increase in short-term U.S Treasury Bills (“T-
Bills”) partly offset by a reduction in overnight Fed Funds and
U.S Treasury
Notes (“T-
Notes”) coupled
with a
larger loan
portfolio on
the asset
side, combined
with an
increase in
Puerto Rico
public
sector
deposits
which
are
indexed
to
market
rates
and
higher
time
deposits.
These
results
suggest
that
changes
in
the
Corporation’s net
interest income sensitivity
are driven by
changes in the
composition of the
investment portfolio as
the term
bond
portfolio
continues
to
run
off
and
get
reinvested,
together
with
excess
reserves,
in
short-term
investments
such
as
T-Bills.
Additionally, variations in liability cost, primarily driven by Puerto Rico public sector deposits that represented $19.7 billion or 30% of
deposits as
of June 30,
2024, as well
as changes in
the composition and
mix of
deposits, also impact
the sensitivity profile.
In the
more extreme declining rate scenarios,
net interest income would be affected as the repricing of
short-term assets and variable rate
loans slightly exceeds
the benefit in
cost reduction of
these deposits. In
rising rate scenarios, Popular’s
net interest income
is also
impacted by its large proportion
of Puerto Rico public sector
deposit, however the repricing of assets
as they either reset
or mature
lead to an increase in net interest income.
The Corporation’s
loan and
investment portfolios
are subject
to
prepayment risk,
which results
from the
ability of
a third-party
to
repay debt
obligations prior
to maturity.
Prepayment risk
also could
have a
significant impact
on the
duration of
mortgage-backed
securities
and
collateralized
mortgage
obligations
since
prepayments
could
shorten
(or
lower
prepayments
could
extend)
the
weighted average life of these portfolios.
Trading
The Corporation
engages in
trading activities
in the
ordinary course
of business
at its
subsidiaries, BPPR
and Popular
Securities.
Popular Securities’
trading activities
consist primarily
of market-making
activities to
meet expected
customers’ needs
related to
its
retail brokerage business,
and purchases and sales of U.S. Government and
government sponsored securities with the objective of
realizing gains
from expected
short-term price
movements. BPPR’s
trading activities consist
primarily of
holding U.S.
Government
sponsored
mortgage-backed securities
classified
as
“trading” and
hedging
the
related
market
risk
with
“TBA”
(to-be-announced)
market
transactions.
The
objective
is
to
derive
spread
income
from
the
portfolio
and
not
to
benefit
from
short-term
market
movements. In
addition, BPPR
uses forward
contracts or
TBAs to
hedge its
securitization pipeline.
Risks related
to variations
in
interest rates
and market volatility
are hedged
with TBAs
that have
characteristics similar to
that of
the forecasted security
and its
conversion timeline.
At June
30, 2024,
the Corporation held
trading securities
with a
fair value
of $28
million, representing approximately
0.04% of the
Corporation’s total
assets, compared
with $32
million and
0.05%, respectively,
at December
31, 2023.
As shown
in Table
12, the
trading portfolio
consists principally
of mortgage-backed
securities and
U.S. Treasuries,
which at
June 30,
2024 were
investment
grade securities.
157
Table 12 - Trading
Portfolio
June 30, 2024
December 31, 2023
(Dollars in thousands)
Amount
Weighted
Average Yield
[1]
Amount
Weighted
Average Yield
[1]
Mortgage-backed securities
$
20,644
5.59
%
$
14,373
5.69
%
U.S. Treasury securities
7,064
4.15
16,859
4.29
Collateralized mortgage obligations
87
5.12
98
5.21
Puerto Rico government obligations
59
0.59
71
0.91
Interest-only strips
158
12.00
167
12.00
Other (includes related trading derivatives)
33
5.94
-
-
Total
$
28,045
5.25
%
$
31,568
4.96
%
[1] Not on a taxable equivalent basis.
The Corporation’s trading activities are
limited by internal policies. For each
of the two subsidiaries, the
market risk assumed under
trading
activities
is
measured
by
the
5-day
net
value-at-risk
(“VAR”),
with
a
confidence
level
of
99%.
The
VAR
measures
the
maximum estimated loss that may occur over a
5-day holding period, given a 99% probability.
The
Corporation’s trading
portfolio
had
a
5-day VAR
of
approximately $0.4
million
for
the
last
week in
June
2024. VAR
models
include
assumptions and
estimates thus
actual
results could
differ
from
the
outputs from
these
models
and
assumptions. Back-
testing is performed on model
results to compare actual results
against maximum estimated losses, in order
to evaluate model and
assumptions accuracy.
In the opinion of management, the size and composition
of the trading portfolio does not represent
a significant source of market risk
for the Corporation.
Liquidity
The objective
of effective
liquidity management
is to
ensure that
the Corporation
has sufficient
liquidity to
meet all
of its
financial
obligations, finance
expected future
growth,
fund
planned capital
distributions and
maintain a
reasonable safety
margin for
cash
needs under
both normal
and stressed market
conditions. The Board
of Directors
is responsible
for establishing the
Corporation’s
tolerance for liquidity risk,
including approving relevant risk limits and
policies. The Board of
Directors has delegated the monitoring
of
these risks
to
the Board’s
Risk Management
Committee and
the Asset/Liability
Management Committee.
The management
of
liquidity
risk,
on
a
long-term
and
day-to-day
basis,
is
the
responsibility
of
the
Corporate
Treasury
Division.
The
Corporation’s
Corporate
Treasurer
is
responsible
for
implementing
the
policies
and
procedures
approved
by
the
Board
of
Directors
and
for
monitoring
the
Corporation’s
liquidity
position
on
an
ongoing
basis.
Also,
the
Corporate
Treasury
Division coordinates
corporate
wide
liquidity
management
strategies
and
activities
with
the
reportable
segments,
oversees
policy
breaches
and
manages
the
escalation process.
The
Financial and
Operational Risk
Management Division
is
responsible for
the independent
monitoring and
reporting of adherence with established policies.
An
institution’s liquidity
may be
pressured if,
for example,
it experiences
a sudden
and unexpected
substantial cash
outflow due
deposit
outflows,
whether due
to
a
loss
of confidence
by
depositors, or
other
reasons, including
exogenous events
such
as
the
COVID-19 pandemic,
a downgrading
of its
credit rating,
or some
other event
that causes
counterparties to
avoid exposure
to the
institution. Factors
that the
Corporation does
not control,
such
as the
economic outlook,
adverse ratings
of its
principal markets,
perceptions of the financial services industry and regulatory
changes, could also affect its ability to obtain
funding.
The Corporation
has adopted
policies and
limits to
monitor the
Corporation’s liquidity
position and
that of
its banking
subsidiaries.
Additionally, contingency funding
plans are used to
model various stress events
of different magnitudes and
affecting different time
horizons that assist
management in evaluating
the size of
the liquidity buffers
needed if those
stress events
occur. However,
such
models
may
not
predict
accurately
how
the
market
and
customers
might
react
to
every
event,
and
are
dependent
on
many
assumptions.
158
Deposits, including
customer deposits,
brokered deposits
and public
funds deposits,
continue to
be the
most significant
source of
funds for the Corporation, funding 90% of the Corporation’s total assets at June 30, 2024 and December 31, 2023.
The ratio of total
ending
loans
to
deposits
was
54%
at
June
30,
2024
and
55%
at
December
31,
2023.
In
addition
to
traditional
deposits,
the
Corporation maintains borrowing
arrangements, which amounted
to approximately $1.0
billion in outstanding
balances at June
30,
2024 (December 31, 2023 -
$1.1 billion). A detailed description of
the Corporation’s borrowings, including their
terms, is included in
Note
15
to
the
Consolidated
Financial
Statements.
Also,
the
Consolidated
Statements
of
Cash
Flows
in
the
accompanying
Consolidated Financial Statements provide information
on the Corporation’s cash inflows and outflows.
The
following
sections
provide
further
information
on
the
Corporation’s
major
funding
activities
and
needs,
as
well
as
the
risks
involved in these activities.
Banking Subsidiaries
Primary
sources of
funding
for the
Corporation’s
banking subsidiaries
(BPPR and
PB
or,
collectively,
“the banking
subsidiaries”)
include
retail,
commercial
and
public
sector
deposits,
brokered
deposits,
unpledged
investment
securities,
mortgage
loan
securitization and, to a lesser extent, loan sales.
Refer to Table 8 in this MD&A section for a breakdown of deposits by major types. Core deposits are generated
from a large base of
consumer, corporate and
public sector customers. Core deposits
include certificates of deposit
under $250,000, all interest-bearing
transactional deposit accounts,
non-interest bearing deposits,
and savings deposits.
Core deposits exclude
brokered deposits and
certificates
of
deposit
over
$250,000.
Core
deposits,
excluding
P.R.
public
funds
that
are
fully
collateralized,
have
historically
provided
the
Corporation with
a sizable
source
of
relatively stable
and
low-cost
funds.
P.R.
public funds,
while
linked to
market
interest rates,
provide a stable
source of
funding with an
attractive earnings spread.
Core deposits totaled
$60.3 billion,
or 92% of
total
deposits,
at
June
30,
2024,
compared
with
$59.0
billion,
or
93%
of
total
deposits,
at
December
31,
2023.
Core
deposits
financed 87% of the Corporation’s earning assets at June
30, 2024, compared with 88% at December 31,
2023.
In addition, the Corporation maintains borrowing facilities with the FHLB and at the discount window of the Federal Reserve Bank of
New York (the “FRB”) and has a considerable amount of collateral pledged
that can be used to raise funds under these
facilities.
During the
second quarter
of 2024
the Corporation
had no
material incremental
use of
its available
liquidity sources.
At June
30,
2024, the Corporation’s available liquidity increased to
$ 20.1 billion from $19.5 billion
on December 31, 2023. The liquidity sources
of the Corporation at June 30, 2024 are presented
in Table 13 below:
Table 13 - Liquidity Sources
June 30, 2024
December 31, 2023
(In thousands)
BPPR
Popular U.S.
Total
BPPR
Popular U.S.
Total
Unpledged securities and unused funding
sources:
Money market (excess funds at the
Federal Reserve Bank)
$
4,761,986
$
2,082,135
$
6,844,121
$
5,516,636
$
1,475,143
$
6,991,779
Unpledged securities
4,238,735
375,069
4,613,804
4,212,480
347,791
4,560,271
FHLB borrowing capacity
2,567,107
1,311,033
3,878,140
2,157,685
1,341,329
3,499,014
Discount window of the Federal Reserve
Bank borrowing capacity
3,237,668
1,491,137
4,728,805
2,605,674
1,818,946
4,424,620
Total available liquidity
$
14,805,496
$
5,259,374
$
20,064,870
$
14,492,475
$
4,983,209
$
19,475,684
Refer
to
Note
15
to
the
Consolidated
Financial
Statements
for
additional
information
of
the
Corporation’s
borrowing
facilities
available through its banking subsidiaries.
The principal
uses of
funds for
the banking
subsidiaries include
loan originations,
investment portfolio
purchases, loan
purchases
and repurchases, repayment of outstanding obligations (including deposits), advances on certain serviced portfolios and operational
expenses. Also, the
banking subsidiaries assume liquidity
risk related to collateral
posting requirements for certain
activities mainly
in
connection
with
contractual
commitments,
recourse
provisions,
servicing
advances,
derivatives
and
credit
card
licensing
agreements.
159
The banking
subsidiaries maintain
sufficient funding
capacity to
address large
increases in
funding requirements
such as
deposit
outflows.
The
Corporation has
established
liquidity
guidelines
that
require
the
banking
subsidiaries
to
have
sufficient
liquidity
to
cover all short-term borrowings and a portion of deposits.
The Corporation’s ability to compete
successfully in the marketplace for
deposits, excluding brokered deposits, depends on various
factors, including pricing, service, convenience
and financial stability as
reflected by operating results and
financial condition, credit
ratings (by
nationally recognized credit
rating agencies), customer
confidence, and
importantly,
FDIC deposit
insurance coverage.
Deposits at all of the Corporation’s banking subsidiaries are federally insured
(subject to FDIC limits) and this is expected to mitigate
the potential effect of the aforementioned risks.
The distribution by maturity
of certificates of deposit
with denominations of $250,000 and
over at June 30,
2024 is presented in
the
table that follows:
Table 14 - Distribution by
Maturity of Certificates of Deposit of $250,000 and Over
(In thousands)
3 months or less
$
2,291,275
Over 3 to 12 months
993,898
Over 1 year to 3 years
212,210
Over 3 years
179,080
Total
$
3,676,463
The
Corporation
had
$1.7
billion
in
brokered
deposits
at
June
30,
2024,
which
financed
approximately
2%
of
its
total
assets
(December 31, 2023 -
$1.7 billion and 2%,
respectively).
In the event that
any of the Corporation’s
banking subsidiaries’ regulatory
capital
ratios fall
below those
required by
a
well-capitalized institution
or
are
subject
to
capital
restrictions by
the
regulators, the
Corporation would be
at risk that
such banking subsidiary
would not be
able to raise
or maintain brokered deposits
and could also
face limitations
on the
rate paid
on deposits,
which may
hinder the
Corporation’s ability
to effectively
compete in
its retail
markets
and could affect its deposit raising efforts.
Deposits from the
public sector represent
an important source
of funds for
the Corporation.
As of June
30, 2024, total
Puerto Rico
public sector
deposits were
$19.7 billion,
compared to
$18.1 billion
at December
31, 2023.
These deposits
require that
the bank
pledges
high credit quality securities as collateral; therefore, liquidity risks arising from public
sector deposit outflows are lower given
that the bank
receives its collateral
in return. This,
now unpledged, collateral
can either be
financed via repurchase
agreements or
sold
for
cash.
However,
timing
differences
between
the
time
the
deposit
outflow
and
when
the
bank
receives
its
collateral
may
occur.
Additionally,
the Corporation
uses fixed-rate
U.S. Treasury
debt securities
as collateral
that have
limited credit
risk, but
are
nonetheless subject to market value risk based on
changes in the interest rate environment.
When interest rates increase, the value
of this
collateral decreases and
could result in
the Corporation having
to provide additional
collateral to cover
the same amount
of
deposit
liabilities.
This
additional
collateral
could
reduce
unpledged
securities
otherwise
available
as
liquidity
sources
to
the
Corporation.
As of
June 30,
2024, management
believes that
the banking
subsidiaries had
sufficient current
and projected
liquidity sources
to
meet their anticipated cash flow obligations,
as well as special needs
and off-balance sheet commitments, in the
ordinary course of
business.
Management also believes that as of June 30,
2024 its banking subsidiaries have sufficient liquidity current and projected
resources to address a stress event. Although the banking subsidiaries have historically been able to replace maturing deposits and
advances,
no assurance
can
be given
that
they
would be
able to
replace
those funds
in
the future
if
the
Corporation’s financial
condition or
general market
conditions were
to deteriorate.
The Corporation’s
financial flexibility
will be
severely constrained
if the
banking
subsidiaries
are
unable
to
maintain
access
to
funding
or
if
adequate
financing
is
not
available
to
accommodate
future
financing
needs
at
acceptable
interest
rates.
The
Corporation’s
banking
subsidiaries
have
to
meet
margin
requirements
on
repurchase
agreements
and
other
collateralized
borrowing
facilities
that
include
certain
required
levels
of
cash
deposits
and
qualifying
securities.
To
the
extent
that
the
value
of
securities
previously
pledged
as
collateral
declines
below
such
required
amounts
because
of
market
changes,
the
Corporation
is
required
to
deposit
additional
cash
or
securities
to
meet
its
margin
requirements, thereby adversely
affecting its
liquidity.
Finally,
to the
extent the
Corporation relies more
heavily on
more expensive
funding sources in order to meet its future growth, revenues
may not increase in a manner that is proportionate to cover these
costs.
In this case, the Corporation’s profitability would be adversely
effected.
160
The Corporation
monitors uninsured
deposits under
applicable FDIC
regulations.
Additionally,
the Corporation
monitors accounts
with balances over $250,000.
While the Corporation has a
diverse deposit base from retail, commercial,
corporate and government
clients,
as
well
as
wholesale funding
sources such
as
brokered deposits,
it
considers
balance
in
excess
of
$250,000 to
have a
higher
potential
liquidity
risk.
Table
15
reflects
the
aggregate
balance
in
deposit
accounts
in
excess
of
$250,000,
including
collateralized public funds and deposits outside of the
U.S. and its territories.
Collateralized public funds, as presented in Table
15,
represent public
deposit balances
from governmental
entities in
the U.S.
and its
territories, including
Puerto Rico
and the
United
States Virgin Islands, collateralized based on such jurisdictions’
applicable collateral requirements.
On June
30, 2024,
deposits with
balances in
excess of
$250,000, excluding
foreign deposits
(mainly deposits
in the
British Virgin
Islands) intercompany
deposits and
collateralized public
funds, were
$ 10.2
billion or
19% at
BPPR and
$ 2.7
billion or
24% at
Popular U.S., compared to available liquidity sources
of $ 14.8 billion at BPPR and $ 5.3 billion
at Popular U.S.
Table 15 - Deposits
30-Jun-24
Popular, Inc.
(Dollars in thousands)
BPPR
% of Total
Popular U.S.
% of Total
(Consolidated)
% of Total
Deposits:
Deposits balances under $250,000 [1]
$
23,784,175
43
%
$
8,074,913
68
%
$
31,859,088
49
%
Transactional deposits balances over
$250,000
7,999,569
15
%
2,096,387
18
%
10,095,956
15
%
Time deposits balances over $250,000
2,201,823
4
%
650,324
6
%
2,852,146
4
%
Uninsured foreign deposits
451,363
1
%
-
-
%
451,363
1
%
Collateralized public funds
19,995,906
37
%
276,403
2
%
20,272,309
31
%
Intercompany deposits
115,385
-
%
762,811
6
%
-
-
%
Total deposits
$
54,548,221
100
%
$
11,860,838
100
%
$
65,530,862
100
%
[1] Includes the first $250,000 in balances of transactional
and time deposit accounts with balances in excess
of $250,000.
31-Dec-23
Popular, Inc.
(Dollars in thousands)
BPPR
% of Total
Popular U.S.
% of Total
(Consolidated)
% of Total
Deposits
Deposits balances under $250,000 [1]
$
23,683,475
45
%
$
7,760,363
69
%
$
31,443,838
49
%
Transactional deposits balances over
$250,000
8,632,491
16
%
2,230,978
20
%
10,863,469
17
%
Time deposits balances over $250,000
1,926,005
4
%
361,315
3
%
2,287,320
4
%
Uninsured foreign deposits
418,334
1
%
-
-
%
418,334
1
%
Collateralized public funds
18,313,612
34
%
291,670
3
%
18,605,282
29
%
Intercompany deposits
159,163
-
%
626,312
6
%
-
-
%
Total deposits
$
53,133,080
100
%
$
11,270,638
100
%
$
63,618,243
100
%
[1] Includes the first $250,000 in balances of transactional
and time deposit accounts with balances in excess
of $250,000.
Bank Holding Companies
The principal
sources of
funding for
the BHCs,
which are
Popular,
Inc.
(holding company
only) and
PNA, include
cash on
hand,
investment
securities,
dividends
received from
banking
and
non-banking subsidiaries,
asset sales,
credit
facilities
available from
affiliate banking subsidiaries and proceeds from potential securities offerings.
Dividends from banking and non-banking subsidiaries
161
are subject to various regulatory limits
and authorization requirements that are further described
below and that may limit the
ability
of those subsidiaries to act as a source of
funding to the BHCs.
The
principal
uses
of
these
funds
include
the
repayment
of
debt,
and
interest
payments
to
holders
of
senior
debt
and
junior
subordinated
deferrable
interest
(related
to
trust
preferred
securities),
the
payment
of
dividends
to
common
stockholders,
repurchases of the Corporation’s securities and capitalizing its
banking subsidiaries.
The outstanding balance
of notes payable
at the
BHCs amounted to
$593 million at
June 30,
2024 and $592
million at December
31, 2023.
The contractual maturities of the BHCs notes payable
at June 30, 2024 are presented in Table 16.
Table 16
- Distribution of BHC's Notes Payable by Contractual
Maturity
Year
(In thousands)
2028
$
394,556
Later years
198,359
Total
$
592,915
As of
June 30,
2024, the
BHCs had
cash and
money markets
investments totaling
$622 million
and borrowing
potential of
$165
million
from
its
secured
facility
with
BPPR.
The
BHCs’
liquidity
position
continues
to
be
adequate
with
sufficient
cash
on
hand,
investments and
other sources of
liquidity that are
expected to be
sufficient to
meet all
interest payments and
dividend obligations
for the
foreseeable future.
As indicated
in Table
16 above, the
BHC outstanding notes
payable relate to
$400 million in
aggregate
principal
amount of
7.25% Senior
Notes
due
2028
(the “Notes”)
issued in
an
underwritten public
offering during
March
of
2023.
Additionally, the Corporation’s latest quarterly dividend was $0.62 per share or approximately
$45 million per quarter.
The BHCs have in
the past borrowed in the
corporate debt market primarily to finance
their non-banking subsidiaries and refinance
debt obligations. The issuance of corporate debt as
a source of funding is likely more
costly due to the fact that
two out of the three
principal credit
rating agencies
rate the
Corporation below
“investment grade”,
which affects
the Corporation’s
cost
and ability
to
raise
funds
in
the
capital
markets.
Factors
that
the
Corporation
does
not
control,
such
as
the
economic
outlook,
interest
rate
volatility,
inflation, disruptions in
the debt market,
among others, could
also affect
its ability to
obtain funding. The
Corporation has
an
automatic
shelf
registration
statement
filed
and
effective
with
the
Securities
and
Exchange
Commission,
which
permits
the
Corporation to issue an unspecified amount of debt
or equity securities.
Non-Banking Subsidiaries
The
principal
sources
of
funding
for
the
non-banking
subsidiaries
include
internally
generated
cash
flows
from
operations,
loan
sales, repurchase agreements, capital
injections and borrowed funds
from their direct
parent companies or the
holding companies.
The principal uses of funds for the non-banking
subsidiaries include repayment of maturing debt,
operational expenses and payment
of dividends to the
BHCs. The liquidity needs
of the non-banking subsidiaries
are minimal since most
of them are
funded internally
from
operating cash
flows
or from
intercompany borrowings
or capital
contributions from
their holding
companies. During
the six
months
ended June
30, 2024,
Popular,
Inc.
made capital
contributions of
$0.3 million
to
Popular Impact
Fund,
its
wholly owned
subsidiary.
Dividends
During
the
six
months
ended June
30,
2024,
the
Corporation declared
cash
dividends of
$1.24
per
common
share
outstanding
($89.7 million in the
aggregate). The dividends for the
Corporation’s Series A preferred stock
amounted to $0.7 million. On
July 24,
2024, the corporation announced an
increase in the Corporation’s
quarterly common stock dividend from
$0.62 to $0.70 per
share,
commencing with the dividend payable in the first
quarter of 2025, subject to the approval by
the Corporation’s Board of Directors.
During the six
months ended June 30,
2024, the BHCs
received dividends and distributions
amounting to $300 million
from BPPR,
$50
million
from
PNA,
$6 million
from
Popular Securities
and
$7 million
from
its
other non-banking
subsidiaries. Dividends
from
BPPR
constitute
Popular,
Inc.’s
primary
source
of
liquidity.
In
addition,
during
the
six
months
ended
June
30,
2024,
Popular
International Bank Inc.,
wholly owned subsidiary of
Popular, Inc.,
received $19.4 million in
cash dividends and
$2.9 million in
stock
dividends from its investment in BHD.
162
Other Funding Sources and Capital
In
addition to
cash reserves
held at
the
FRB that
totaled $
6.8 billion
at June
30, 2024,
the debt
securities portfolio
provides an
additional
source
of
liquidity,
which
may
be
realized
through
either
securities
sales,
collateralized
borrowings
or
repurchase
agreements.
The
Corporation’s
debt
securities
portfolio
consists
primarily
of
liquid
U.S.
government
debt
securities,
U.S.
government
sponsored
agency
debt
securities,
U.S.
government
sponsored
agency
mortgage-backed
securities,
and
U.S.
government
sponsored
agency
collateralized
mortgage
obligations
that
can
be
used
to
raise
funds
in
the
repo
markets.
The
availability
of
the
repurchase
agreement
would
be
subject
to
having
sufficient
unpledged
collateral
available
at
the
time
the
transactions are consummated, in addition to overall liquidity and risk appetite of the various counterparties. In 2023, BPPR became
an
approved counterparty
in the
Federal Reserve’s
Standing Repo
Facility.
This
allows approved
counterparties to
participate in
daily auctions
with the
Standing Repo
Facility for
up to
$500 billion
in aggregate
of overnight financing
using U.S.
Treasuries and
Agency MBS as
collateral. The Corporation’s
unpledged debt securities
amounted to $
4.6 billion at
June 30, 2024
and December
31, 2023. A substantial portion of
these debt securities could be used to
raise financing in the U.S. money
markets or from secured
lending sources,
subject to changes in their fair market value and customary adjustments
(haircuts).
Additional liquidity may
be provided through
loan maturities, prepayments
and sales. The
loan portfolio can
also be used
to obtain
funding in the capital markets. In particular,
mortgage loans and some types of consumer loans, have
secondary markets which the
Corporation could use.
Off-Balance Sheet Arrangements and Other Commitments
In the ordinary course
of business, the Corporation
engages in financial transactions
that are not recorded
on the balance sheet
or
may be recorded on the balance sheet in amounts that are different than the full contract or notional amount of the transaction. As a
provider of
financial services,
the Corporation
routinely enters
into commitments
with off-balance
sheet risk
to meet
the financial
needs of
its customers. These
commitments may include
loan commitments and
standby letters of
credit. These commitments
are
subject
to
the
same
credit
policies
and
approval
process
used
for
on-balance
sheet
instruments.
These
instruments
involve,
to
varying degrees, elements
of credit and
interest rate risk
in excess of
the amount recognized
in the statement
of financial position.
Refer to
Note 20
to the
Consolidated Financial
Statements for
information on
the Corporation’s
commitments to
extent credit
and
other non-credit commitments.
Other types
of off-balance
sheet arrangements
that the
Corporation enters
in the
ordinary course
of business
include derivatives,
operating
leases
and
provision
of
guarantees,
indemnifications,
and
representation
and
warranties.
Refer
to
Note
27
to
the
Consolidated Financial Statements for information on operating leases and
to Note 19 to the
Consolidated Financial Statements for
a
detailed
discussion
related
to
the
Corporation’s
obligations
under
credit
recourse
and
representation
and
warranties
arrangements.
The Corporation monitors its cash requirements, including
its contractual obligations and debt commitments.
FDIC Special Assessments
On
November
16,
2023,
the
Federal
Deposit
Insurance
Corporation
(“FDIC”)
approved
a
final
rule
that
imposes
a
special
assessment (the “FDIC
Special Assessment”) to recover
the losses to
the deposit insurance
fund resulting from
the FDIC’s use,
in
March
2023,
of
the
systemic
risk
exception. In
connection with
this assessment,
the
Corporation recorded
an
expense of
$71.4
million, $45.3 million net of tax,
in the fourth quarter of 2023,
representing the full amount of the
estimated assessment at that time.
The
special
assessment
amount
and
collection
period
may
change
as
the
estimated
loss
is
periodically
adjusted
or
if
the
total
amount collected varies. As
a result, the Corporation
recorded an additional expense
of $14.3 million, $9.1
million net of tax,
in the
first quarter of 2024, based on the updated
loss estimates.
Financial Information of Guarantor and Issuers of Registered
Guaranteed Securities
The Corporation (not
including any of
its subsidiaries, “PIHC”)
is the parent
holding company of
Popular North America
“PNA” and
has other subsidiaries through which it
conducts its financial services operations. PNA is
an operating, 100% subsidiary of Popular,
Inc.
Holding Company
(“PIHC”) and
is the
holding company
of its
wholly-owned subsidiaries:
Equity One,
Inc.
and PB,
including
PB’s wholly-owned subsidiaries Popular Equipment Finance,
LLC, Popular Insurance Agency, U.S.A., and E-LOAN, Inc.
PNA
has
issued
junior
subordinated
debentures
guaranteed
by
PIHC
(together
with
PNA,
the
“obligor
group”)
purchased
by
statutory trusts
established by
the Corporation.
These debentures
were purchased
by the
statutory trust
using the
proceeds from
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
by
PNA.
PIHC’s
obligation
to
make
a
guarantee payment may be satisfied by direct
payment of the required amounts to the
holders of the applicable capital securities or
by causing the applicable trust to pay such amounts to such holders. Each guarantee does not apply to any payment of distributions
by
the
applicable
trust
except
to
the
extent
such
trust
has
funds
available
for
such
payments.
If
PIHC
does
not
make
interest
payments on the
debentures held by such
trust, such trust
will not pay
distributions on the applicable
capital securities and
will not
have
funds
available
for
such
payments.
PIHC’s
guarantee
of
PNA’s
junior
subordinated
debentures
is
unsecured
and
ranks
subordinate and junior in
right of payment to
all the PIHC’s other
liabilities in the same manner
as the applicable debentures as
set
forth in the applicable indentures; and equally with all other guarantees
that the PIHC issues. The guarantee constitutes a guarantee
of
payment
and
not
of
collection,
which means
that
the
guaranteed party
may
sue
the
guarantor to
enforce its
rights
under the
respective guarantee without suing any other person
or entity.
The
principal
sources
of
funding
for
PIHC
and
PNA
have
included
dividends
received
from
their
banking
and
non-banking
subsidiaries, asset
sales and
proceeds from
the issuance
of debt
and equity.
As further
described below,
in the
Risk to
Liquidity
section, various statutory
provisions limit the
amount of dividends
an insured depository
institution may pay
to its holding
company
without regulatory approval.
The following summarized financial information presents the financial position of the obligor group, on a combined basis at
June 30,
2024 and December 31, 2023, and the results of
their operations for the six-month period ended June 30,
2024 and June 30, 2023.
Investments in and
equity in the
earnings from the
other subsidiaries and
affiliates that are
not members of
the obligor group
have
been excluded.
The
summarized
financial
information
of
the
obligor
group
is
presented
on
a
combined
basis
with
intercompany
balances
and
transactions
between
entities
in
the
obligor
group
eliminated.
The
obligor
group's
amounts
due
from,
amounts
due
to
and
transactions
with subsidiaries
and
affiliates
have
been
presented in
separate
line
items,
if
they
are
material.
In
addition,
related
parties transactions are presented separately.
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
of
$120,987 (2023 - $112,210))
$
6,447
$
10,898
Other expenses
44,893
13,358
Total expenses
$
51,340
$
24,256
Net income
$
271,195
$
89,201
In addition to the dividend income reflected in
the Statement of Operations table above, during
the six months ended June
30, 2024, the obligor group recorded a $67.4
million of capital distributions from non-obligor
subsidiaries which were in an
accumulated loss position and accordingly were
recorded as a reduction to the investments.
Risks to Liquidity
Total lines of credit outstanding, or available borrowing capacity under lines of credit are not necessarily
a measure of the total credit
available
on
a
continuing
basis.
These
lines
may
be
subject
to
collateral
requirements,
changes
to
the
value
of
the
collateral,
standards of
creditworthiness, leverage ratios
and other
regulatory requirements, among
other factors.
Derivatives, such
as those
embedded
in
long-term
repurchase
transactions
or
interest
rate
swaps,
and
off-balance
sheet
exposures,
such
as
recourse,
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.
In
the case
of a
deterioration in
the outlook
and/or credit
ratings of
its principal
markets and/or
due to
regulatory changes
and fiscal
conditions in
Puerto Rico
that are
outside the
control of
the Corporation,
the credit
quality of
the Corporation
could be
adversely
affected and result in higher credit costs. These adverse events
could also affect the Corporation’s ability to obtain funding.
To
plan for the possibility of
such a scenario, management adopted contingency
plans to address events that could
limit or partially
limit important
sources of
funds that
are usually
fully available
for use.
These plans
call for
using alternate
funding mechanisms,
such as the
pledging of certain
asset classes and accessing
secured credit lines
and loan facilities
put in place
with the FHLB
and
the
FRB.
The Corporation
is subject
to
positive tangible
capital
requirements to
utilize secured
loan facilities
with the
FHLB that
could
result
in
a
limitation
of
borrowing
amounts
or
maturity
terms,
even
if
the
Corporation
exceeds
well-capitalized
regulatory
capital levels.
The credit
ratings of
Popular’s debt
obligations are
a relevant
factor for
liquidity because
they impact
the Corporation’s
ability to
borrow
in
the
capital
markets,
its
cost
and
access
to
funding
sources.
Credit
ratings
are
based
on
the
financial
strength,
credit
quality and
concentrations in
the loan
portfolio, the
level and
volatility of
earnings, capital
adequacy,
the quality
of management,
geographic concentration
in Puerto
Rico, the
liquidity of
the balance
sheet, the
availability of
a significant
base of
core retail
and
commercial deposits, and the Corporation’s ability to access
a broad array of wholesale funding sources,
among other factors.
Furthermore,
various
statutory
provisions
limit
the
amount
of
dividends
an
insured
depository
institution
may
pay
to
its
holding
company without
regulatory approval. A
member bank must
obtain the
approval of
the Federal
Reserve Board
for any
dividend, if
the total of all dividends declared by the member
bank during the calendar year would exceed
the combined net income for that year
and the retained net income for
the preceding two years, net of
those years’ dividend activity,
less any required transfers to surplus
or to a
fund for the
retirement of any
preferred stock. In
addition, a member
bank may not
declare or pay
a dividend in
an amount
greater
than
its
undivided
profits
as
reported
in
its
Report
of
Condition and
Income,
unless
the
member
bank
has
received
the
approval of
the Federal
Reserve Board. A
member bank also
may not permit
any portion of
its permanent capital
to be
withdrawn
unless the withdrawal has been approved by
the Federal Reserve Board. The ability of
a bank subsidiary to up-stream dividends to
its BHC
could thus
be impacted
by its
financial performance
and capital,
including tangible
and regulatory
capital, thus
potentially
limiting the
amount of
cash moving
up to
the BHCs
from
the banking
subsidiaries. This
could,
in turn,
affect
the BHCs
ability to
declare
dividends
on
its
outstanding
common
and
preferred
stock,
repurchase
its
securities
or
meet
its
debt
obligations,
for
example.
During the six
months ended June
30, 2024, BPPR
declared cash dividends
of $300
million to PIHC.
As of
June 30,
2024, BPPR
can declare a dividend of approximately $409 million
without prior approval of the Federal Reserve
Board due to its retained income,
declared
dividend
activity
and
transfers
to
statutory
reserves
over the
measurement
period.
Pursuant
to
the
requirements
listed
above, PB
may
not declare
or
pay
a dividend
without the
prior approval
of the
Federal Reserve
Board and
the
New York
State
Department of Financial Services.
The Corporation’s banking subsidiaries have historically not
used unsecured capital market borrowings to finance
its operations, and
therefore are less sensitive to the level and
changes in the Corporation’s overall credit ratings.
Refer to the
Geographic and Government Risk section
of this MD&A for
some highlights on the
status of the Puerto
Rico economy
and the ongoing fiscal crisis.
Obligations Subject to Rating Triggers or Collateral Requirements
The
Corporation’s
banking
subsidiaries
currently
do
not
issue
unsecured
senior
debt,
as
these
banking
subsidiaries
are
funded
primarily with
deposits and
secured borrowings.
The banking
subsidiaries had
$7.8 million
in deposits
at June
30, 2024
that are
subject to rating triggers.
In addition,
certain mortgage servicing
and custodial agreements
that BPPR
has with
third parties
include rating covenants.
In the
event of a credit rating downgrade, the third parties have the right to require the institution to engage a substitute cash custodian for
escrow deposits and/or increase collateral levels
securing the recourse obligations.
As discussed
in Note
19 to
the Consolidated Financial
Statements, the Corporation
services residential mortgage
loans subject
to
credit
recourse
provisions.
Certain
contractual
agreements
require
the
Corporation
to
post
collateral
to
secure
such
recourse
obligations if
the institution’s
required credit
ratings are
not maintained.
Collateral pledged
by the
Corporation to
secure recourse
166
obligations
amounted
to
approximately
$26.4
million
at
June
30,
2024.
The
Corporation
could
be
required
to
post
additional
collateral under the
agreements. Management expects that
it would be
able to meet
additional collateral requirements if
and when
needed. The requirements to post collateral under certain agreements or the loss of escrow deposits could reduce the Corporation’s
liquidity resources and impact its operating results.
Credit Risk
Geographic and Government Risk
The Corporation is exposed to geographic and government risk.
The Corporation’s assets and revenue composition by geographical
area and by business segment reporting are presented
in Note 32 to the Consolidated Financial Statements.
Commonwealth of Puerto Rico
A
significant portion
of
our financial
activities and
credit
exposure is
concentrated in
the
Commonwealth of
Puerto Rico
(“Puerto
Rico”), which has faced severe economic and fiscal
challenges in the past and may face additional
challenges in the future.
Economic Performance.
Puerto
Rico’s
economy suffered
a
severe and
prolonged recession
from
2007
to
2017,
with real
gross national
product (“GNP”)
contracting approximately 15%
during this period.
In 2017, Hurricane
María caused significant
damage and destruction
across the
island, resulting in further economic contraction. Puerto Rico’s
economy has been gradually recovering since 2018, in
part aided by
the large amount
of federal disaster
relief and recovery
assistance funds injected
into the Puerto
Rico economy in
connection with
Hurricane María
and other
recent natural
disasters. This
growth was
interrupted by
the economic
shock caused
by the
COVID-19
pandemic in 2020, but has since resumed, in part
aided by additional federal assistance from
pandemic-related stimulus measures.
The
latest
Puerto
Rico
Economic Activity
Index,
published
by
the
Economic
Development Bank
for
Puerto
Rico
(the
“Economic
Activity Index”), reflected a 2.0% year-over-year decline and a
0.6% month-over-month decline in April 2024. The Economic Activity
Index is
a coincident
indicator of
ongoing economic
activity but
not a
direct measurement
of real
GNP.
The Puerto
Rico Planning
Board estimates that Puerto Rico’s real GNP grew 2.8%
during fiscal year 2024 (July 2023-June 2024) and projects 1.4% real GNP
growth for fiscal year 2025 (July 2024-June 2025).
While the
Puerto Rico
economy has
not directly
tracked the
United States
economy in
recent years,
many of
the external
factors
that impact
the Puerto
Rico economy
are affected
by the
policies and performance
of the
United States
economy.
These external
factors include
the level
of interest
rates and
the rate
of inflation.
Inflation in
the United
States, as
measured by the
United States
Consumer Price Index
(published by the
U.S. Bureau of
Labor Statistics), increased
3.0% during the
12-month period ended
June
2024.
Inflation in Puerto Rico,
as measured by the
Puerto Rico Consumer Price
Index (published by the
Department of Labor and
Human Resources
of Puerto
Rico), increased
2.5%
during the
12-month period
ended April
2024. The
rate of
inflation gradually
decreased from a mid-2022 peak, as the Federal Reserve
implemented a series of benchmark interest
rate increases.
Fiscal Challenges.
As the
Puerto Rico
economy contracted, the
government’s public
debt rose
rapidly,
in part
from borrowing to
cover deficits
to pay
debt service,
pension benefits and
other government expenditures.
By 2016,
the Puerto
Rico government had
over $120
billion in
combined debt and unfunded pension liabilities, had
lost access to the capital markets, and was in
the midst of a fiscal crisis.
Puerto
Rico’s
escalating fiscal
and economic
challenges
and imminent
widespread defaults
in
its
public debt
prompted the
U.S.
Congress to
enact the
Puerto Rico
Oversight, Management,
and Economic
Stability Act
(“PROMESA”) in
June 2016.
PROMESA
created the “Oversight Board” with ample powers over Puerto Rico’s fiscal and economic affairs and those of its public corporations,
instrumentalities and municipalities (collectively,
“PR Government Entities”). Pursuant
to PROMESA, the
Oversight Board will be
in
place
until
market
access
is
restored
and
balanced
budgets
are
produced
for
at
least
four
consecutive
years.
PROMESA
also
established two
mechanisms for
the restructuring
of the
obligations of
PR Government
Entities: (a)
Title III,
which provides
an in-
court process that incorporates many of the
powers and provisions of the U.S. Bankruptcy Code
and permits adjustment of a broad
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
or
VI
of
PROMESA.
While
the
majority
of
the
debt
has
already
been
restructured,
some
PR
Government
Entities
still
face
significant
fiscal
challenges.
For
example,
the
Puerto
Rico
Electric
Power
Authority
is
still
in
the
process of restructuring its debts under Title III of PROMESA.
Municipalities.
Puerto Rico’s
fiscal and
economic challenges
have also
adversely impacted its
municipalities. Historically,
the central
government
provided
significant
annual
subsidies
to
municipalities
based
on
a
statutory
formula.
However,
as
part
of
the
fiscal
measures
required
by
the
Oversight
Board,
municipal
subsidies
have
decreased
significantly
over
several
years
and
are
now
approved
through specific, non-recurring
appropriations. This decrease
has been partially
offset by
substantial non-recurring federal
disaster
and
COVID-relief funding
received by
municipalities in
recent years.
The latest
Puerto Rico
fiscal plan
certified by
the Oversight
Board provides for
the implementation of
a restructured grant
and transfer system
through which the
Commonwealth would award
specific
service
grants to
municipalities to
augment
existing municipal
service
delivery,
while also
incentivizing performance
and
enhanced accountability through the monitoring of outcome
metrics.
Municipalities are subject to PROMESA, and the Oversight Board
has the authority to require them to submit fiscal plans and annual
budgets for
review and
approval. The
Oversight Board
has imposed
this requirement
for certain
municipalities. Municipalities
are
also
required
to
seek
Oversight
Board
approval
to
issue,
guarantee
or
modify
their
debts
and
to
enter
into
contracts
with
an
aggregate value of
$10 million or
more. With the
Oversight Board’s approval,
municipalities are also
eligible to avail
themselves of
the
debt
restructuring processes
provided
by
PROMESA. To
date,
however,
no municipality
has
been
subject to
any
such
debt
restructuring process.
Exposure of the Corporation
The credit
quality of BPPR’s
loan portfolio
reflects, among other
things, the
general economic conditions
in Puerto
Rico and
other
adverse conditions affecting Puerto
Rico consumers and businesses.
Deterioration in the Puerto
Rico economy has resulted
in the
past, and could
result in the future,
in higher delinquencies, greater
charge-offs and increased losses,
which could materially affect
our financial condition and results of operations.
At June
30, 2024,
the Corporation’s
direct exposure
to
PR
Government Entities
totaled $376
million, of
which $376
million were
outstanding, compared
to
$362 million
at
December 31,
2023, of
which $333
million
were outstanding.
A
deterioration in
Puerto
Rico’s fiscal and
economic situation could adversely
affect the value
of our Puerto
Rico government obligations, resulting
in losses
to
us.
Of
the
amount
outstanding,
$360
million
consists
of
loans
and
$16
million
are
securities
($314
million
and
$19
million,
respectively,
at
December
31,
2023).
Substantially
all
of
the
Corporation’s
direct
exposure
outstanding
at
June
30,
2024
were
obligations from various
Puerto Rico municipalities.
In most
cases, these were
“general obligations” of
a municipality,
to which
the
applicable municipality
has
pledged its
good faith,
credit
and unlimited
taxing
power,
or “special
obligations” of
a municipality,
to
which the applicable municipality has pledged basic property tax or sales tax
revenues.
At June 30, 2024, 79% of the
Corporation’s
exposure to municipal loans and securities was concentrated in the municipalities of San Juan,
Guaynabo, Carolina and Caguas.
In
July 2024,
the Corporation
received scheduled
principal payments
amounting to
$40 million
from various
obligations from
Puerto
Rico
municipalities.
For
additional
discussion
of
the
Corporation’s
direct
exposure
to
the
Puerto
Rico
government
and
its
instrumentalities and municipalities, refer to Note
20 – Commitments and Contingencies to the
Consolidated Financial Statements.
In addition,
at June
30, 2024,
the Corporation had
$229 million
in loans
insured or
securities issued by
Puerto Rico
governmental
entities, but for
which the principal source
of repayment is
non-governmental ($238 million at December 31, 2023).
These included
$183 million in
residential mortgage loans insured
by the Puerto
Rico Housing Finance Authority
(“HFA”), a
PR Government Entity
(December 31, 2023 - $191 million). These mortgage loans are secured
by first mortgages on Puerto Rico residential properties and
the
HFA
insurance
covers
losses
in
the
event
of
a
borrower
default
and
upon
the
satisfaction
of
certain
other
conditions.
The
Corporation also had at June 30, 2024, $39 million in bonds issued by HFA which are secured by second mortgage loans on Puerto
Rico residential properties, and for which
HFA also provides insurance
to cover losses in the
event of a borrower default,
and upon
168
the satisfaction of certain
other conditions (December 31, 2023
- $40 million). In
the event that the
mortgage loans insured by
HFA
and
held
by
the
Corporation directly
or
those
serving
as
collateral for
the
HFA
bonds
default and
the
collateral is
insufficient
to
satisfy the outstanding balance of these loans, HFA’s
ability to honor its insurance will depend, among other factors, on the financial
condition
of
HFA
at
the
time
such
obligations
become
due
and
payable.
The
Corporation
does
not
consider
the
government
guarantee when estimating the credit losses associated
with this portfolio.
BPPR’s
commercial loan
portfolio also
includes loans
to
private borrowers
who
are service
providers, lessors,
suppliers or
have
other relationships with the government. These borrowers could be negatively
affected by a deterioration in the fiscal and
economic
situation
of
PR
Government
Entities.
Similarly,
BPPR’s
mortgage
and
consumer
loan
portfolios
include
loans
to
government
employees
and
retirees,
which
could
also
be
negatively
affected
by
fiscal
measures,
such
as
employee
layoffs
or
furloughs
or
reductions in pension benefits, if the fiscal and economic
situation deteriorates.
As of June
30, 2024, BPPR had
$19.7 billion in deposits from
the Puerto Rico government, its
instrumentalities, and municipalities.
The
rate
at
which
public
deposit
balances
may
decline is
uncertain and
difficult
to
predict.
The
amount
and
timing
of
any
such
reduction is
likely to
be impacted
by,
for example,
the speed
at which
federal assistance
is distributed
and the
financial condition,
liquidity and cash management practices of such entities,
as well as on the ability of BPPR to
maintain these customer relationships.
United States Virgin Islands
The
Corporation
has
operations
in
the
United
States
Virgin
Islands
(the
“USVI”)
and
has
credit
exposure
to
USVI
government
entities.
The USVI has
been experiencing a
number of fiscal
and economic challenges,
which could adversely
affect the
ability of its
public
corporations and instrumentalities to service their outstanding
debt obligations. PROMESA does not apply to the USVI
and, as such,
there
is
currently
no
federal
legislation
permitting
the
restructuring
of
the
debts
of
the
USVI
and
its
public
corporations
and
instrumentalities.
To
the extent that
the fiscal condition
of the USVI
continues to deteriorate, the
U.S. Congress or the
Government of the
USVI may
enact legislation allowing for the restructuring of the
financial obligations of USVI government entities or imposing a
stay on creditor
remedies, including by making PROMESA applicable
to the USVI.
At June
30, 2024,
the Corporation
had approximately
$28 million
in direct
exposure to
USVI government
entities (December
31,
2023 - $28 million).
British Virgin Islands
The
Corporation has
operations
in
the
British Virgin
Islands
(“BVI”),
which
was
negatively
affected by
the
COVID-19
pandemic,
particularly as
a reduction
in the
tourism activity
which accounts
for a
significant portion
of its
economy.
Although the
Corporation
has no
significant exposure
to a
single borrower
in the
BVI, at
June 30,
2024, it
has a
loan portfolio
amounting to
approximately
$201 million comprised of various retail and commercial
clients, compared to a loan portfolio of $205 million
at December 31, 2023.
U.S. Government
As further detailed in Notes
5 and 6 to the
Consolidated Financial Statements, a substantial portion of the
Corporation’s investment
securities
represented exposure
to
the
U.S.
Government in
the
form
of
U.S. Government
sponsored entities,
as
well
as
agency
mortgage-backed and U.S. Treasury securities. In addition, $2.0 billion of residential mortgages, and $90.9 million commercial loans
were insured
or guaranteed by
the U.S. Government
or its agencies
at June 30,
2024 (compared to
$1.9 billion
and $89.2 million,
respectively, at December 31, 2023).
Non-Performing Assets
Non-performing assets (“NPAs”)
include primarily past-due
loans that
are no
longer accruing interest,
renegotiated loans, and
real
estate property acquired through foreclosure. A summary, including certain credit
quality metrics, is presented in Table 19.
Credit
quality
metrics
in
the
second
quarter
of
2024
improved
when
compared
to
the
previous
quarter.
We
continue
to
closely
monitor
changes
in
the
macroeconomic
environment
and
on
borrower
performance
given
higher
interest
rates
and
inflationary
pressures.
However,
management believes
that
the
improvements over
recent years
in
risk management
practices and
the
risk
profile of the Corporation’s loan portfolios position Popular
to continue to operate successfully under the
current environment.
169
Total
NPAs
as of
June 30,
2024 decreased
by $26
million when
compared with
December 31,
2023. Total
non-performing loans
held-in-portfolio
(“NPLs”)
decreased
by
$16
million
from
December
31,
2023.
BPPR’s
NPLs
decreased
by
$42
million,
broadly
reflected
across
most
loan
categories.
Popular
U.S.
NPLs
increased
by
$26
million,
driven
by
higher
commercial
NPLs
by
$27
million, mostly impacted by a single $17 million loan.
On June 30, 2024, the ratio of NPLs to total loans held-in-portfolio was 1.0%, flat when compared to December 31, 2023. Other real
estate owned loans (“OREOs”)
decreased by $10 million
from December 31, 2023.
The decrease in OREO
was driven by
the sale
of a
commercial property
in BPPR.
On June
30, 2024,
NPLs secured
by real
estate amounted
to $207
million in
the Puerto
Rico
operations and $49 million in Popular U.S,
compared with $231 million and $24 million, respectively, on December 31,
2023.
The Corporation’s
commercial loan
portfolio secured
by real
estate (“CRE”)
amounted to
$10.5 billion
on June
30, 2024,
of which
$3.1 billion was secured with owner occupied properties,
compared with $10.6 billion and $3.1 billion, respectively, on December 31,
2023. Office space
leasing exposure in
our non-owner occupied
CRE portfolio is
limited, representing only
1.8% or $624
million of
our total loan portfolio. The exposure is mainly comprised of low- to mid- rise properties with average loan size of
$2.0 million and is
well diversified across tenant type.
CRE NPLs amounted to
$65 million on June
30, 2024, compared with
$48 million on December
31, 2023, driven by
the single $17
million loan mentioned above. The CRE NPL
ratios for the BPPR and Popular U.S.
segments were 0.71% and 0.55%, respectively,
on June 30, 2024, compared with 0.86% and
0.13%, respectively, on December 31, 2023.
In addition
to the
NPLs included
in Table
19, on
June 30,
2024, there
were $624
million of
performing loans,
mostly commercial
loans, which in management’s opinion, are currently subject to potential future classification as non-performing (December 31, 2023
- $510 million).
For the
quarter ended
June 30,
2024, total
inflows of
NPLs held-in-portfolio,
excluding consumer
loans, increased
by $18
million,
when compared
to the
inflows for
the same
period in
2023. Inflows
of NPLs
held-in-portfolio at
the BPPR
segment remained
flat,
compared to the
same period in
2023. Inflows of
NPLs held-in-portfolio at the
Popular U.S. segment
increased by $17 million
from
the same period in 2023, mainly driven by higher
commercial inflows by $18 million driven by abovementioned
$17 million loan.
170
Table 19 - Non-Performing
Assets
June 30, 2024
December 31, 2023
(Dollars in thousands)
BPPR
Popular
U.S.
Popular,
Inc.
As a % of
loans HIP
by
category
BPPR
Popular
U.S.
Popular,
Inc.
As a % of
loans HIP
by
category
Commercial
Commercial multi-family
$
443
$
8,700
$
9,143
0.4
%
$
1,991
$
-
$
1,991
0.1
%
Commercial real estate non-owner
occupied
7,484
1,025
8,509
0.2
8,745
1,117
9,862
0.2
Commercial real estate owner
occupied
25,285
22,256
47,541
1.5
29,430
6,274
35,704
1.2
Commercial and industrial
22,958
5,782
28,740
0.4
32,826
3,772
36,598
0.5
Total Commercial
56,170
37,763
93,933
0.5
72,992
11,163
84,155
0.5
Construction
-
-
-
-
6,378
-
6,378
0.7
Leasing
7,059
-
7,059
0.4
8,632
-
8,632
0.5
Mortgage
163,790
11,554
175,344
2.2
175,106
11,191
186,297
2.4
Consumer
-
3,780
3,780
5.5
-
3,733
3,733
5.7
19,650
1,851
21,501
1.1
19,031
2,805
21,836
1.1
39,333
-
39,333
1.0
45,615
-
45,615
1.2
885
-
885
0.5
964
1
965
0.6
Total Consumer
59,868
5,631
65,499
0.9
65,610
6,539
72,149
1.0
Total non-performing
loans held-in-
portfolio
286,887
54,948
341,835
1.0
%
328,718
28,893
357,611
1.0
%
Other real estate owned (“OREO”)
69,769
456
70,225
80,176
240
80,416
Total non-performing
assets
[1]
$
356,656
$
55,404
$
412,060
$
408,894
$
29,133
$
438,027
Accruing loans past due 90 days or
more
[2]
$
237,371
$
210
$
237,581
$
268,362
$
109
$
268,471
Ratios:
Non-performing assets to total assets
0.63
%
0.35
%
0.57
%
0.74
%
0.19
%
0.62
%
Non-performing loans held-in-portfolio
to loans held-in-portfolio
1.14
0.53
0.96
1.34
0.27
1.02
Allowance for credit losses to loans
held-in-portfolio
2.56
0.83
2.05
2.61
0.85
2.08
Allowance for credit losses to non-
performing loans, excluding held-for-
sale
224.34
157.37
213.58
194.65
309.70
203.95
[1] There were no non-performing loans held-for-sale
as of June 30, 2024 and December 31, 2023.
[2] It is the Corporation’s policy to report delinquent
residential mortgage loans insured by FHA or guaranteed
by the VA as accruing
loans past due 90
days or
more as
opposed to
non-performing
since the
principal repayment
is insured.
These balances
include $81
million of
residential
mortgage
loans
insured
by
FHA
or
guaranteed
by
the
VA
that
are
no
longer
accruing
interest
as
of
June
30,
2024
(December
31,
2023
-
$106
million).
Furthermore,
the Corporation
has approximately
$34 million
in reverse
mortgage
loans which
are
guaranteed
by
FHA, but
which are
currently
not
accruing
interest.
Due
to
the guaranteed
nature
of
the loans,
it is
the Corporation’s
policy
to
exclude
these
balances
from
non-performing
assets
(December 31, 2023 - $38 million).
171
Table 20 - Activity in Non
-Performing Loans Held-in-Portfolio (Excluding Consumer
Loans)
For the quarter ended June 30, 2024
For the six months ended June 30, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
229,796
$
49,478
$
279,274
$
254,476
$
22,354
$
276,830
Plus:
New non-performing loans
41,040
25,907
66,947
74,543
61,280
135,823
Advances on existing non-performing loans
-
298
298
-
320
320
Less:
Non-performing loans transferred to OREO
(4,540)
(24)
(4,564)
(8,649)
(24)
(8,673)
Non-performing loans charged-off
(5,590)
(18)
(5,608)
(13,899)
(968)
(14,867)
Loans returned to accrual status / loan collections
(40,746)
(26,324)
(67,070)
(86,511)
(33,645)
(120,156)
Ending balance NPLs
$
219,960
$
49,317
$
269,277
$
219,960
$
49,317
$
269,277
Table 21 - Activity in Non
-Performing Loans Held-in-Portfolio (Excluding Consumer
Loans)
For the quarter ended June 30, 2023
For the six months ended June 30, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
315,027
$
25,767
$
340,794
$
324,562
$
31,356
$
355,918
Plus:
New non-performing loans
40,005
9,088
49,093
90,618
17,619
108,237
Advances on existing non-performing loans
-
78
78
-
143
143
Less:
Non-performing loans transferred to OREO
(9,247)
-
(9,247)
(20,120)
(58)
(20,178)
Non-performing loans charged-off
(324)
(2,175)
(2,499)
(1,500)
(2,391)
(3,891)
Loans returned to accrual status / loan collections
(53,242)
(6,571)
(59,813)
(101,341)
(20,482)
(121,823)
Ending balance NPLs
$
292,219
$
26,187
$
318,406
$
292,219
$
26,187
$
318,406
Table 22 - Activity in Non
-Performing Commercial Loans Held-in-Portfolio
For the quarter ended June 30, 2024
For the six months ended June 30, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
63,323
$
21,407
$
84,730
$
72,992
$
11,163
$
84,155
Plus:
New non-performing loans
4,031
21,940
25,971
8,374
36,979
45,353
Advances on existing non-performing loans
-
282
282
-
302
302
Less:
Non-performing loans transferred to OREO
(280)
-
(280)
(280)
-
(280)
Non-performing loans charged-off
(5,700)
-
(5,700)
(13,699)
(950)
(14,649)
Loans returned to accrual status / loan
collections
(5,204)
(5,866)
(11,070)
(11,217)
(9,731)
(20,948)
Ending balance NPLs
$
56,170
$
37,763
$
93,933
$
56,170
$
37,763
$
93,933
172
Table 23 - Activity in Non
-Performing Commercial Loans Held-in-Portfolio
For the quarter ended June 30, 2023
For the six months ended June 30, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
90,952
$
11,048
$
102,000
$
82,171
$
10,868
$
93,039
Plus:
New non-performing loans
3,203
4,631
7,834
19,797
10,350
30,147
Advances on existing non-performing loans
-
2
2
-
28
28
Less:
Non-performing loans transferred to OREO
(21)
-
(21)
(308)
-
(308)
Non-performing loans charged-off
(595)
(2,175)
(2,770)
(1,268)
(2,391)
(3,659)
Loans returned to accrual status / loan collections
(4,823)
(1,896)
(6,719)
(11,676)
(7,245)
(18,921)
Ending balance NPLs
$
88,716
$
11,610
$
100,326
$
88,716
$
11,610
$
100,326
Table 24 - Activity in Non
-Performing Construction Loans Held-in-Portfolio
For the quarter ended June 30, 2024
For the six months ended June 30, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
-
$
-
$
-
$
6,378
$
-
$
6,378
Less:
Loans returned to accrual status / loan collections
-
-
-
(6,378)
-
(6,378)
Ending balance NPLs
$
-
$
-
$
-
$
-
$
-
$
-
Table 25 - Activity in Non
-Performing Construction Loans Held-in-Portfolio
For the quarter ended June 30, 2023
For the six months ended June 30, 2023
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
-
$
-
$
-
$
-
$
-
$
-
Plus:
New non-performing loans
9,284
-
9,284
9,284
-
9,284
Ending balance NPLs
$
9,284
$
-
$
9,284
$
9,284
$
-
$
9,284
173
Table 26 - Activity in Non
-Performing Mortgage Loans Held-in-Portfolio
For the quarter ended June 30, 2024
For the six months ended
June 30, 2024
(Dollars in thousands)
BPPR
Popular
U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
166,473
$
28,071
$
194,544
$
175,106
$
11,191
$
186,297
Plus:
New non-performing loans
37,009
3,967
40,976
66,169
24,301
90,470
Advances on existing non-performing loans
-
16
16
-
18
18
Less:
Non-performing loans transferred to OREO
(4,260)
(24)
(4,284)
(8,369)
(24)
(8,393)
Non-performing loans charged-off
110
(18)
92
(200)
(18)
(218)
Loans returned to accrual status / loan
collections
(35,542)
(20,458)
(56,000)
(68,916)
(23,914)
(92,830)
Ending balance NPLs
$
163,790
$
11,554
$
175,344
$
163,790
$
11,554
$
175,344
Table 27 - Activity in Non
-Performing Mortgage Loans Held-in-Portfolio
For the quarter ended June 30, 2023
For the six months ended June 30, 2023
(Dollars in thousands)
BPPR
Popular
U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
224,075
$
14,719
$
238,794
$
242,391
$
20,488
$
262,879
Plus:
New non-performing loans
27,518
4,457
31,975
61,537
7,269
68,806
Advances on existing non-performing loans
-
76
76
-
115
115
Less:
Non-performing loans transferred to OREO
(9,226)
-
(9,226)
(19,812)
(58)
(19,870)
Non-performing loans charged-off
271
-
271
(232)
-
(232)
Loans returned to accrual status / loan collections
(48,419)
(4,675)
(53,094)
(89,665)
(13,237)
(102,902)
Ending balance NPLs
$
194,219
$
14,577
$
208,796
$
194,219
$
14,577
$
208,796
174
Loan Delinquencies
Another key measure used to evaluate and
monitor the Corporation’s asset quality is loan
delinquencies. Loans delinquent 30 days
or more, as a percentage of their related portfolio
category on June 30, 2024 and December 31, 2023,
are presented below.
Table 28 - Loan Delinquencies
(Dollars in thousands)
June 30, 2024
December 31, 2023
Loans delinquent
30 days or more
Total loans
Total delinquencies
as a percentage
Loans delinquent
30 days or more
Total loans
Total delinquencies
as a percentage
Commercial
Commercial multi-family
$
12,338
$
2,384,480
0.52
%
$
13,657
$
2,415,620
0.57
%
Commercial real estate
non-owner occupied
15,499
5,004,472
0.31
17,051
5,087,421
0.34
Commercial real estate
owner occupied
66,638
3,143,817
2.12
69,239
3,080,635
2.25
Commercial and industrial
45,521
7,195,357
0.63
58,953
7,126,121
0.83
Total Commercial
139,996
17,728,126
0.79
158,900
17,709,797
0.90
Construction
5,479
1,105,759
0.50
6,378
959,280
0.66
Leasing
32,761
1,828,048
1.79
35,491
1,731,809
2.05
Mortgage
[1]
802,382
7,883,726
10.18
859,537
7,695,917
11.17
Consumer
Credit cards
48,399
1,162,557
4.16
46,436
1,135,747
4.09
Home equity lines of credit
5,132
68,992
7.44
5,465
65,953
8.29
Personal
59,250
1,879,619
3.15
59,682
1,945,247
3.07
Auto
168,149
3,773,292
4.46
173,119
3,660,780
4.73
Other
3,645
161,501
2.26
3,063
160,441
1.91
Total Consumer
284,575
7,045,961
4.04
287,765
6,968,168
4.13
Loans held-for-sale
-
8,225
-
-
4,301
-
Total
$
1,265,193
$
35,599,845
3.55
%
$
1,348,071
$
35,069,272
3.84
%
[1]
Loans delinquent 30 days or more includes $0.4 billion
of residential mortgage loans insured by FHA or guaranteed
by the VA as of June
30,
2024 (December 31, 2023 - $0.5 billion). Refer to Note
7 to the Consolidated Financial Statements for additional
information of guaranteed loans.
Allowance for Credit Losses Loans Held-in-Portfolio
The ACL,
represents management’s
estimate of
expected credit
losses through
the remaining
contractual life
of the
different loan
segments, impacted by expected prepayments. The ACL
is maintained at a sufficient
level to provide for estimated credit
losses on
collateral dependent loans as well as loans modified
for borrowers with financial difficulties separately from the remainder
of the loan
portfolio. The Corporation’s
management evaluates the adequacy
of the ACL
on a quarterly
basis. In this
evaluation, management
considers current
conditions, macroeconomic
economic expectations through
a reasonable
and supportable
period, historical
loss
experience,
portfolio composition
by
loan
type
and
risk
characteristics,
results
of
periodic credit
reviews
of
individual loans,
and
regulatory requirements, amongst other factors.
The Corporation must rely on
estimates and exercise judgment regarding matters where
the ultimate outcome is unknown, such
as
economic developments affecting specific
customers, industries, or markets.
Other factors that can
affect management’s estimates
are
recalibration
of
statistical
models
used
to
calculate
lifetime
expected
losses,
changes
in
underwriting
standards,
financial
accounting standards and loan impairment measurements,
among others. Changes in the financial condition
of individual borrowers,
in economic
conditions, and
in the
condition of
the various
markets in
which collateral
may be
sold, may
also affect
the required
level of
the allowance
for credit
losses. Consequently,
the business
financial condition,
liquidity,
capital, and
results of
operations
could also be affected.
175
On June 30, 2024, the ACL was flat from December 31, 2023, at $730 million. The ACL for BPPR increased by $4 million, driven by
higher
commercial
and
auto
loan
volume,
higher
qualitative reserves
and
changes
in credit
quality,
in
part
offset
by
changes
in
macroeconomic scenarios and lower NCOs. In PB, the
ACL decreased by $3 million, when compared to
December 31, 2023, mainly
driven
by
lower consumer
loan volumes.
The Corporation’s
ratio of
the allowance
for credit
losses to
loans held-in-portfolio
was
2.05% on June
30, 2024, compared to
2.08% on December
31, 2023. The
ratio of the
allowance for credit losses
to NPLs held-in-
portfolio stood at 213.6%, compared to 204.0% on
December 31, 2023.
Given that any one
economic outlook is inherently uncertain, the
Corporation leverages multiple scenarios to estimate
its ACL. The
baseline scenario continues to be assigned the highest probability,
followed by the pessimistic scenario. The weight assigned to the
pessimistic
scenario
decreased
during
the
first
quarter
of
2024
in
response
to
the
positive
momentum
in
the
economy
as
expectations for
the Federal
Reserve achieving
a soft
landing have
improved. The
Corporation evaluates,
at least
on an
annual
basis, the assumptions tied to the CECL accounting framework. These include
the reasonable and supportable period as well as the
reversion window.
The provision for
credit losses for the
period ended June 30,
2024, was $44.2 million,
compared to an expense
of $35.7 million
for
the period
ended June
30, 2023, mostly
related to
higher NCOs
due to
credit normalization.
The provision
expense related to
the
loans-held-in-portfolio for
the
six-month
period
ended
June
30,
2024
was
$116.5
million,
compared
to
the
provision
expense
of
$82.8 million for
the six-month period
ended June
30, 2023. Refer
to Note
8 to
the Consolidated Financial
Statements, and to
the
Provision for Credit Losses section of this MD&A
for additional information.
176
Table 29 - Allowance for Credit
Losses - Loan Portfolios
June 30, 2024
(Dollars in thousands)
Total ACL
Total loans held-
in-portfolio
ACL to loans held-
in-portfolio
Total non-
performing loans
held-in-portfolio
ACL to non-
performing loans
held-in-portfolio
Commercial
$
11,180
$
2,384,480
0.47
%
$
9,143
122.28
%
64,235
5,004,472
1.28
%
8,509
754.91
%
58,190
3,143,817
1.85
%
47,541
122.40
%
126,482
7,195,357
1.76
%
28,740
440.09
%
Total Commercial
$
260,087
$
17,728,126
1.47
%
$
93,933
276.89
%
Construction
12,889
1,105,759
1.17
%
-
N.M.
Leasing
14,385
1,828,048
0.79
%
7,059
203.78
%
Mortgage
83,289
7,883,726
1.06
%
175,344
47.50
%
Consumer
86,313
1,162,557
7.42
%
-
N.M.
1,726
68,992
2.50
%
3,780
45.66
%
107,448
1,879,619
5.72
%
21,501
499.73
%
157,449
3,773,292
4.17
%
39,333
400.30
%
6,491
161,501
4.02
%
885
733.45
%
Total Consumer
$
359,427
$
7,045,961
5.10
%
$
65,499
548.75
%
Total
$
730,077
$
35,591,620
2.05
%
$
341,835
213.58
%
N.M - Not meaningful.
Table 30 - Allowance for Credit
Losses - Loan Portfolios
December 31, 2023
(Dollars in thousands)
Total ACL
Total loans held-
in-portfolio
ACL to loans held-
in-portfolio
Total non-
performing loans
held-in-portfolio
ACL to non-
performing loans
held-in-portfolio
Commercial
$
13,740
$
2,415,620
0.57
%
$
1,991
690.11
%
65,453
5,087,421
1.29
%
9,862
663.69
%
56,864
3,080,635
1.85
%
35,704
159.27
%
122,356
7,126,121
1.72
%
36,598
334.32
%
Total Commercial
$
258,413
$
17,709,797
1.46
%
$
84,155
307.07
%
Construction
12,686
959,280
1.32
%
6,378
198.90
%
Leasing
9,708
1,731,809
0.56
%
8,632
112.47
%
Mortgage
83,214
7,695,917
1.08
%
186,297
44.67
%
Consumer
80,487
1,135,747
7.09
%
-
N.M.
1,978
65,953
3.00
%
3,733
52.99
%
117,790
1,945,247
6.06
%
21,836
539.43
%
157,931
3,660,780
4.31
%
45,615
346.23
%
7,134
160,441
4.45
%
965
739.27
%
Total Consumer
$
365,320
$
6,968,168
5.24
%
$
72,149
506.34
%
Total
$
729,341
$
35,064,971
2.08
%
$
357,611
203.95
%
N.M - Not meaningful.
177
Annualized net charge-offs (recoveries)
The following
tables present
annualized net charge-offs
(recoveries) to average
loans held-in-portfolio (“HIP”)
by loan
category for
the quarters and six months ended June 30, 2024 and
2023.
Table 31 - Annualized Net Charge
-offs (Recoveries) to Average Loans
Held-in-Portfolio
Quarters ended
June 30, 2024
June 30, 2023
BPPR
Popular U.S.
Popular Inc.
BPPR
Popular U.S.
Popular Inc.
Commercial
0.20
%
0.04
%
0.13
%
(0.06)
%
0.10
%
0.01
%
Construction
―
(0.04)
(0.04)
―
―
―
Mortgage
(0.23)
(0.01)
(0.19)
(0.22)
(0.03)
(0.19)
Leasing
0.60
―
0.60
0.39
―
0.39
Consumer
2.68
6.58
2.80
1.37
4.87
1.52
Total annualized
net charge-offs
(recoveries) to average loans held-in-
portfolio
0.79
%
0.16
%
0.61
%
0.33
%
0.22
%
0.29
%
Six months ended
June 30, 2024
June 30, 2023
BPPR
Popular U.S.
Popular Inc.
BPPR
Popular U.S.
Popular Inc.
Commercial
0.25
%
0.04
%
0.15
%
(0.06)
%
(0.01)
%
(0.04)
%
Construction
―
(0.02)
(0.02)
―
―
―
Mortgage
(0.25)
(0.01)
(0.21)
(0.24)
(0.02)
(0.20)
Leasing
0.72
―
0.72
0.24
―
0.24
Consumer
2.83
7.54
2.98
1.84
4.84
1.97
Total annualized
net charge-offs
(recoveries) to average loans held-in-
portfolio
0.86
%
0.19
%
0.66
%
0.44
%
0.14
%
0.35
%
NCOs for
the quarter
ended June
30, 2024,
amounted to
$53.6 million,
increasing by
$29.6 million
when compared
to the
same
period in 2023.
The BPPR segment
increased by $30.6
million mainly driven
by higher consumer
and commercial NCOs
by $23.7
million
and $6.2
million, respectively.
The consumer
NCOs increase
is
reflective of
credit normalization.
The PB
segment
NCOs
decreased by $1 million, mainly driven by lower
commercial NCOs.
NCOs for the six months ended June 30, 2024, amounted to $115.8 million, increasing by $59.0 million
when compared to the same
period in 2023.
The BPPR segment
increased by $55.7
million mainly driven
by higher consumer
and commercial NCOs
by $37.7
million and
$14.4 million,
respectively.
The consumer
NCOs increase
is reflective
of credit
normalization.
The PB
segment NCOs
increased by $3.3 million, mainly driven by higher
commercial NCOs by $2.2 million.
Loan Modifications
For the quarter
ended June 30,
2024, modified loans
to borrowers with
financial difficulty amounted
to $178 million,
of which $164
million were
in accruing
status. The
BPPR segment’s
modifications to
borrowers with
financial difficulty
amounted to
$171 million,
mainly
comprised
of
commercial and
mortgage
loans
of
$145
million
and
$22
million,
respectively.
A
total
of
$14
million
of
the
mortgage modifications were related to
government guaranteed loans. The Popular
U.S. segment’s modifications to borrowers
with
financial difficulty amounted to $7 million, mostly comprised
of commercial loans.
Refer
to
Note
8
to
the
Consolidated
Financial
Statements
for
additional
information
on
modifications
made
to
borrowers
experiencing financial difficulties.
178
ADOPTION OF NEW ACCOUNTING STANDARDS AND ISSUED BUT NOT
YET EFFECTIVE ACCOUNTING STANDARDS
Refer to Note 3, “New Accounting Pronouncements”
to the Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Quantitative and qualitative disclosures for the current
period can be found in the Market Risk
section of this report, which includes
changes in market risk exposures from disclosures presented
in the 2023 Form 10-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Corporation’s management,
with the
participation of the
Corporation’s Chief Executive
Officer and Chief
Financial Officer,
has
evaluated the effectiveness of the Corporation’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based
on such evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer have concluded that,
as of the end of such
period, the Corporation’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a
timely basis,
information required to
be disclosed
by the
Corporation in
the reports
that it
files or
submits under
the Exchange Act
and
such
information
is
accumulated
and
communicated
to
management,
as
appropriate,
to
allow
timely
decisions
regarding
required disclosures.
Internal Control Over Financial Reporting
There have been no changes in the Corporation’s internal control over financial reporting (as such term is defined in Rules 13a-15(f)
and 15d-15(f) under
the Exchange Act)
that occurred during
the quarter ended
June 30,
2024 that have
materially affected, or
are
reasonably likely to materially affect, the Corporation’s internal control
over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
For a discussion of Legal Proceedings, see Note 20
to the Consolidated Financial Statements.
Item 1A. Risk Factors
In addition to the other information set forth in
this report, you should carefully consider the risk
factors discussed under “Part I - Item
1A - Risk Factors” in our 2023 Form
10-K. These factors could materially adversely affect our business, financial condition, liquidity,
results of
operations and
capital position,
and could
cause our
actual results
to
differ
materially from
our historical
results or
the
results contemplated
by the
forward-looking statements
contained in
this report.
Also refer
to the
discussion in
“Part I
- Item
2 –
Management’s Discussion
and Analysis
of Financial
Condition and
Results of
Operations” in
this report
for additional
information
that may supplement or update the discussion
of risk factors below and in our 2023 Form 10-K.
There have been no material changes to the risk
factors previously disclosed under Item 1A of the
Corporation’s 2023 Form 10-K.
The risks described
in our 2023 Form
10-K and in
this report are not
the only risks
facing us. Additional risks
and uncertainties not
currently
known
to
us
or
that
we
currently
deem
to
be
immaterial
also
may
materially
adversely
affect
our
business,
financial
condition, liquidity, results of operations and capital position.
Item 2.
Unregistered Sales of Equity Securities and
Use of Proceeds
179
The Corporation did not have any unregistered
sales of equity securities during the quarter ended
June 30, 2024.
Issuer Purchases of Equity Securities
The following table sets forth the details of
purchases of Common Stock by the Corporation
during the quarter ended June 30, 2024:
Issuer Purchases of Equity Securities
Not in thousands
Period
Total Number of
Shares Purchased [1]
Average Price Paid per
Share
Total Number of
Shares
Purchased as Part of Publicly
Announced Plans or Programs
Approximate Dollar Value of
Shares that May Yet be
Purchased Under the Plans or
Programs
April
1 - April 30
5,770
$
88.09
-
$-
May 1 - May 31
30,908
86.80
-
-
June 1 - June 30
-
-
-
-
Total
36,678
$
87.00
-
$-
[1] Includes 5,770 and
30,908 shares of
the Corporation’s common
stock acquired by
the Corporation during
April 2024 and
May 2024, respectively,
in
connection
with the
satisfaction
of tax
withholding
obligations
on vested
awards of
restricted
stock
or restricted
stock
units
granted to
directors
and
certain employees under the Corporation’s Omnibus Incentive
Plan. The acquired shares of common stock were added
back to treasury stock.
Item 3.
Defaults Upon Senior Securities
None.
Item 4.
Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans or Other Preplanned Trading Arrangements
Certain of our
officers or directors have
made, and may from
time to time make,
elections to
, and are
participating in,
our dividend reinvestment and purchase plan, the
Company stock fund associated with our 401(k)
plans and/or the Company stock
fund associated with
our non-qualified deferred compensation
plans and have shares
withheld to cover
withholding taxes upon the
vesting of
equity awards, which
may be
designed to satisfy
the affirmative defense
conditions of Rule
10b5-1 under the
Exchange
Act or may constitute non-Rule 10b5–1
180
Item 6.
Exhibits
Exhibit Index
Exhibit No
Exhibit Description
3.1
22.1
31.1
31.2
32.1
32.2
101. INS
XBRL Instance Document – the instance document does not
appear in the Interactive Data File because
its XBRL tags are embedded within the Inline Document.
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Inline Taxonomy Extension Schema Document
(1)
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
(1)
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Inline XBRL Taxonomy Extension Definitions Linkbase Document
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Inline XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
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104
The cover page of Popular, Inc. Quarterly Report on Form 10-Q for the
quarter ended June 30, 2024,
formatted in Inline XBRL (included within the Exhibit
101 attachments)
(1)
(1)
Popular, Inc. has not filed as exhibits certain instruments defining
the rights of holders of debt of Popular, Inc. not
exceeding 10% of the total assets of Popular, Inc. and its consolidated
subsidiaries. Popular, Inc. hereby agrees to
furnish upon request to the Commission a copy of
each instrument defining the rights of holders
of senior and
subordinated debt of Popular, Inc., or of any of its consolidated
subsidiaries.
181
SIGNATURES
Pursuant to the
requirements of the Securities Exchange
Act of 1934, the
registrant has duly caused this
report to be signed
on its
behalf by the undersigned thereunto duly authorized.
POPULAR, INC.
(Registrant)
Date: August 9, 2024
By: /s/ Jorge J. García
Jorge J. García
Executive Vice President &
Chief Financial Officer
Date: August 9, 2024
By: /s/ Denissa M. Rodríguez
Denissa M. Rodríguez
Senior Vice President & Corporate Comptroller
TABLE OF CONTENTS
Part I Financial InformationprintItem 1. Financial StatementsprintItem 2. Management S Discussion and Analysis Of Financial Condition andprintItem 3. Quantitative and Qualitative Disclosures About Market RiskprintItem 4. Controls and ProceduresprintPart II Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 3. Defaults Upon Senior SecuritiesprintItem 4. Mine Safety DisclosuresprintItem 5. Other InformationprintItem 6. ExhibitsprintItem 1A Of Our Quarterly Reports on Form 10-q For A Discussion Of Such Factors and Certain Risks and Uncertainties To Which TheprintNote 1 Nature Of OperationsprintNote 2 Basis Of PresentationprintNote 3 - New Accounting PronouncementsprintNote 4 - Restrictions on Cash and Due From Banks and Certain SecuritiesprintNote 5 Debt Securities Available-for-saleprintNote 6 Debt Securities Held-to-maturityprintNote 7 LoansprintNote 8 Allowance For Credit Losses Loans Held-in-portfolioprintNote 9 Mortgage Banking ActivitiesprintNote 10 Transfers Of Financial Assets and Mortgage Servicing AssetsprintNote 11 Other Real Estate OwnedprintNote 12 Other AssetsprintNote 13 Goodwill and Other Intangible AssetsprintNote 14 Deposits Total Deposits As Of The End Of The Periods Presented Consisted Of:printNote 14 DepositsprintNote 15 BorrowingsprintNote 16 Other LiabilitiesprintNote 17 Stockholders EquityprintNote 18 Other Comprehensive Income (loss)printNote 19 GuaranteesprintNote 20 Commitments and ContingenciesprintNote 21 Non-consolidated Variable Interest EntitiesprintNote 22 Related Party TransactionsprintNote 23 Fair Value MeasurementprintNote 24 Fair Value Of Financial InstrumentsprintNote 25 Net Income Per Common ShareprintNote 26 Revenue From Contracts with CustomersprintNote 27 LeasesprintNote 28 Pension and Postretirement BenefitsprintNote 29 - Stock-based CompensationprintNote 30 Income TaxesprintNote 31 Supplemental Disclosure on The Consolidated Statements Of Cash FlowsprintNote 32 Segment ReportingprintItem 2. Management's Discussion and Analysis Of Financial Condition and Results Of OperationsprintNote 2 To The Consolidated Financial Statements Included in The 2023 Form 10-k For A Summary Of The Corporation S SignificantprintNote 15 To The Consolidated Financial Statements. Also, The Consolidated Statements Of Cash Flows in The AccompanyingprintPart II - Other Informationprint