Popular, Inc.: Form 10-Q for the period ended Sep 30, 2023

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 33 to the Consolidated Financial Statements presents information about the Corporation’s business

segments.

OVERVIEW

Table 1 provides selected financial data and performance indicators for the quarters ended September 30, 2023 and 2022.

Table 1 - Financial Highlights

Financial Condition Highlights

Ending balances at

Average for the nine months ended

(In thousands)

September

30, 2023

December 31,

2022

Variance

September

30, 2023

September

30, 2022

Variance

Money market investments

6,389,437

5,614,595

774,842

6,965,588

10,969,361

(4,003,773)

Investment securities

25,653,616

26,553,317

(899,701)

27,463,370

29,429,998

(1,966,628)

Loans

34,034,552

32,083,150

1,951,402

32,732,877

29,965,064

2,767,813

Earning assets

66,077,605

64,251,062

1,826,543

67,161,835

70,364,423

(3,202,588)

Total assets

69,736,936

67,637,917

2,099,019

70,209,477

73,456,562

(3,247,085)

Deposits

63,337,600

61,227,227

2,110,373

62,304,083

65,486,523

(3,182,440)

Borrowings

1,097,720

1,400,319

(302,599)

1,274,682

1,046,350

228,332

Total liabilities

65,279,328

63,544,492

1,734,836

64,430,204

67,498,698

(3,068,494)

Stockholders’ equity

4,457,608

4,093,425

364,183

5,779,273

5,957,864

(178,591)

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 September 30,

Nine months ended September 30,

(In thousands, except per share information)

2023

2022

Variance

2023

2022

Variance

Net interest income

534,020

579,619

(45,599)

1,597,344

1,607,793

(10,449)

Provision for credit losses

(benefit)

45,117

39,637

5,480

129,946

33,499

96,447

Non-interest income

159,549

426,494

(266,945)

481,981

738,597

(256,616)

Operating expenses

465,984

476,095

(10,111)

1,366,955

1,284,712

82,243

Income before income tax

182,468

490,381

(307,913)

582,424

1,028,179

(445,755)

Income tax expense

45,859

67,986

(22,127)

135,676

182,677

(47,001)

Net income

136,609

422,395

(285,786)

446,748

845,502

(398,754)

Net income applicable to common stock

136,256

422,042

(285,786)

445,689

844,443

(398,754)

Net income per common share – basic

1.90

5.71

(3.81)

6.22

11.09

(4.87)

Net income per common share – diluted

1.90

5.70

(3.80)

6.21

11.07

(4.86)

Dividends declared per common share

0.55

0.55

1.65

1.65

Quarters ended September 30,

Nine months ended September 30,

Selected Statistical Information

2023

2022

2023

2022

Common Stock Data

End market price

63.01

72.06

63.01

72.06

Book value per common share at period end

61.49

50.26

61.49

50.26

Profitability Ratios

Return on assets

0.75

2.31

0.84

1.54

Return on common equity

8.17

27.72

9.13

19.02

Net interest spread

2.37

3.16

2.52

2.95

Net interest spread (taxable equivalent) - Non-GAAP

2.54

3.55

2.70

3.29

Net interest margin

3.07

3.32

3.14

3.05

Net interest margin (taxable equivalent) - Non-GAAP

3.24

3.71

3.32

3.39

Capitalization Ratios

Average equity to average assets

8.26

8.36

8.23

8.11

Common equity Tier 1 capital

16.81

16.04

16.81

16.04

Tier I capital

16.88

16.10

16.88

16.10

Total capital

18.67

17.92

18.67

17.92

Tier 1 leverage

8.41

7.65

8.41

7.65

Net interest income on a taxable equivalent basis – Non-GAAP Financial Measure

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 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. Net

interest income on a taxable equivalent basis is presented with its different components in Tables 2 and 3, along with the

reconciliation to net interest income (GAAP), for the quarter ended September 30, 2023 as compared with the same period in 2022,

segregated by major categories of interest earning assets and interest-bearing liabilities.

Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures

used by other companies.

Financial highlights for the quarter ended September 30, 2023

For the quarter ended September 30, 2023, the Corporation recorded net income of $ 136.6 million, compared to net income of

$ 422.4 million for the same quarter of the previous year. Net interest margin for the second quarter of 2023 was 3.07%, a

decrease of 25 basis points when compared to 3.32% for the same quarter of the previous year, mainly due to higher deposits

cost, principally from the Puerto Rico public sector and in the U.S. , which was partially offset by higher yield from money

market investments and loans. On a taxable equivalent basis, the net interest margin was 3.24%, compared to 3.71% for the

same quarter of the previous year. For the quarter ended September 30, 2023, the Corporation recorded a provision for credit

losses of $45.1 million, compared to $39.6 million for the same quarter of the previous year. The higher provision for 2023 is

attributed to higher loan volumes, migrations in credit scores and changes in economic variables related to consumer loan

portfolios. Non-interest income was $159.5 million for the quarter, a decrease of $266.9 million when compared to the quarter

ended September 30, 2022, mainly due to lower other operating income, driven by the gain of $257.7 million from the sale of

Evertec Inc. shares in connection with the business acquisition in exchange for shares and the Corporation’s sale of its

remaining Evertec shares, (together the “Evertec Transaction s”) recognized during the quarter ended September 30, 2022.

Operating expenses were lower by $10.1 million principally due to lower other operating expenses and professional fees.

Total assets at September 30, 2023 amounted to $69.7 billion, compared to $67.6 billion, at December 31, 2022. The increase

was mainly due to higher money market investments, driven by the increase in deposits, and loan growth, partially offset by

lower debt securities available-for-sale and held-to-maturity.

Total deposits at September 30, 2023 increased by $2.1 billion when compared to deposits at December 31, 2022, mainly due

to higher Puerto Rico public sector deposits by $2.6 billion.

Stockholders’ equity totaled $4.5 billion at September 30, 2023, an increase of $364.2 million when compared to December 31,

2022, principally due to net income for the nine-months ended September 30, 2023 of $446.7 million, the amortization of the

unrealized losses from securities previously reclassified to HTM as described above of $103.0 million, and the positive impact

from the adoption of a new accounting standard during the year of $28.8 million, partially offset by dividends declared for the

nine-month period and the after-tax impact of the unfavorable variance in net unrealized losses in the portfolio of available-for-

sale securities of $120.8 million. At September 30, 2023, the Corporation’s tangible book value per common share was $50.20,

an increase of $5.23 from December 31, 2022 due mainly to the increase in Stockholders’ equity during the period.

Regulatory capital ratios continued to be strong. As of September 30, 2023, the Corporation’s common equity tier 1 capital ratio

was 16.81%, the tier 1 leverage ratio was 8.41%, and the total capital ratio was 18.67%. 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 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 2022 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 2022 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.

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 2022 Form 10-K. Also, refer to

Note 2 to the Consolidated Financial Statements included in the 2022 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 September 30, 2023 was $534.0 million, compared to $579.6 million in the same quarter

of 2022, a decrease of $45.6 million. Net interest income on a taxable equivalent basis for the third quarter of 2023 was $563.7

million compared to $646.6 million in the third quarter of 2022. The decrease in the taxable equivalent net interest income is related

to lower income from tax free investment securities and higher disallowed interest expense in the Puerto Rico tax computation. The

latter results from the increase in the Corporation’s interest expense that is attributable to the tax-exempt income.

Net interest margin for the quarter was 3.07% compared to 3.32% in the third quarter of 2022 or a decrease of 25 basis points. On a

taxable equivalent basis, net interest margin for the third quarter of 2023 was 3.24%, compared to 3.71% for the same quarter the

prior year. The main variances in net interest income on a taxable equivalent basis were:

Negative variances:

Higher interest expense on deposits by $233.2 million due to the increase in interest rates that has resulted in a higher

cost in most deposit categories in both BPPR and PB; but particularly from Puerto Rico government deposits for BPPR

which are mostly market linked

Partially offset by:

Higher interest income from money market, investment, and trading securities by $40.5 million driven mainly by a higher

yield of money market investments, which reflects the increase in the Federal funds rate of 525 basis points since March

2022, partially offset by a lower average volume of $2.9 billion, driven by a higher volume of loans and a lower volume of

deposits

Higher interest income from loans by $115.7 million resulting from an increase in average loans by $2.7

billion reflecting increases in both PB and BPPR and across most major lending segments. Loan origination

in a higher interest rate environment and the repricing of adjustable-rate loans resulted in a higher yield on

loans by 85 basis points. The categories with the highest impact were commercial loans with an increase of

$72.7 million in interest income, or 112 basis points, and consumer loans which increased $21.6 million in

interest income, or 165 basis points.

Net interest income for the BPPR segment amounted to $453.9 million for the third quarter of 2023, compared to $488.1 million in

the third quarter of 2022. Net interest margin decreased to 3.14% compared to 3.27% in the third quarter of 2022. The decrease in

net interest income of $34.2 million was mainly driven by a higher interest expense on deposits by $182.3 million, mainly from the

P.R. public sector deposits, partially offset by higher volume and yield on loans and higher yield on investment securities, money

market investments and trading securities. The cost of interest-bearing deposits increased 180 basis points to 2.25% from 0.45% in the same quarter of 2022. Total deposit costs for the quarter increased by 134 basis points, from 0.34% in the second quarter of

2022 to 1.68%.

Net interest income for PB was $87.4 million for the quarter ended September 30, 2023, compared to $98.9 million during the third

quarter of 2022, a decrease of $11.4 million. Net interest margin decreased 94 basis points when compared to the third quarter of

2022 to 2.90%. The decrease in net interest margin was mostly driven by a higher cost of deposits, partially offset by the increase in

loan volume and yield of loans due to origination of loans in a higher interest rate environment and the repricing of adjustable-rate

loans. The cost of interest-bearing deposits was 3.31% compared to 0.85%, or an increase of 246 basis points, while total deposit

cost was 2.84% compared to 0.67% in the third quarter of 2022.

Table 2 - Analysis of Levels & Yields on a Taxable Equivalent Basis (Non-GAAP)

Quarter ended September 30,

Variance

Average Volume

Average Yields / Costs

Interest

Attributable to

2023

2022

Variance

2023

2022

Variance

2023

2022

Variance

Rate

Volume

(In millions)

(In thousands)

7,292

6,721

571

5.40

2.18

3.22

Money market investments

99,285

36,966

62,319

58,920

3,399

28,396

31,859

(3,463)

2.31

2.33

(0.02)

Investment securities [1]

165,319

186,847

(21,528)

(1,510)

(20,018)

34

40

(6)

4.43

6.09

(1.66)

Trading securities

375

617

(242)

(150)

(92)

Total money market,

investment and trading

35,722

38,620

(2,898)

2.95

2.31

0.64

securities

264,979

224,430

40,549

57,260

(16,711)

Loans:

16,611

14,750

1,861

6.64

5.52

1.12

Commercial

277,977

205,237

72,740

44,889

27,851

865

835

30

8.99

6.38

2.61

Construction

19,580

13,431

6,149

5,667

482

1,669

1,503

166

6.50

5.90

0.60

Leasing

27,142

22,154

4,988

2,405

2,583

7,504

7,264

240

5.42

5.42

Mortgage

101,700

98,348

3,352

93

3,259

3,147

2,818

329

13.39

11.74

1.65

Consumer

105,042

83,407

21,635

11,164

10,471

3,657

3,562

95

8.47

7.93

0.54

Auto

78,055

71,226

6,829

4,889

1,940

33,453

30,732

2,721

7.24

6.39

0.85

Total loans

609,496

493,803

115,693

69,107

46,586

69,175

69,352

(177)

5.02

4.12

0.90

Total earning assets

874,475

718,233

156,242

126,367

29,875

Interest bearing deposits:

25,652

25,993

(341)

3.31

0.56

2.75

NOW and money market [2]

213,957

36,448

177,509

178,787

(1,278)

14,875

15,514

(639)

0.73

0.20

0.53

Savings

27,373

7,966

19,407

20,380

(973)

7,986

6,957

1,029

2.62

0.94

1.68

Time deposits

52,791

16,484

36,307

29,147

7,160

48,513

48,464

49

2.41

0.50

1.91

Total interest bearing deposits

294,121

60,898

233,223

228,314

4,909

15,038

15,872

(834)

Non-interest bearing demand

deposits

63,551

64,336

(785)

1.84

0.38

1.46

Total deposits

294,121

60,898

233,223

228,314

4,909

108

155

(47)

5.45

2.36

3.09

Short-term borrowings

1,478

921

557

976

(419)

Other medium and

1,172

913

259

5.20

4.29

0.91

long-term debt

15,167

9,798

5,369

1,050

4,319

Total interest bearing

49,793

49,532

261

2.48

0.57

1.91

liabilities (excluding demand

deposits)

310,766

71,617

239,149

230,340

8,809

4,344

3,948

396

Other sources of funds

69,175

69,352

(177)

1.78

0.41

1.37

Total source of funds

310,766

71,617

239,149

230,340

8,809

Net interest margin/

3.24

3.71

(0.47)

income on a taxable

equivalent basis (Non-

GAAP)

563,709

646,616

(82,907)

(103,973)

21,066

2.54

3.55

(1.01)

Net interest spread

Net interest spread

29,689

66,997

(37,308)

Net interest margin/ income

3.07

3.32

(0.25)

non-taxable equivalent basis

(GAAP)

534,020

579,619

(45,599)

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.

Net interest income for the nine-months period ended September 30, 2023 was $1.6 billion, or $10.4 million lower than the same

period in 2022. Taxable equivalent net interest income was $1.7 billion, a decrease of $97.8 million when compared to the same

period in 2022. Net interest margin was 3.14%, an increase of 9 basis points when compared to 3.05% in 2022. The increase in net

interest margin was mainly driven by a higher yield on earning assets due to a higher interest rate environment. Net interest margin,

on a taxable equivalent basis, for the nine-months ended September 30, 2023, was 3.32%, a decrease of 7 basis points when

compared to the 3.39% for the same period of 2022. The drivers of the variances in net interest income for the nine-months period

are:

Negative variances:

Higher interest expense from deposits by $617.3 million mainly due to the increase in interest rates that has resulted in a

higher cost in most deposit categories in both BPPR and PB; but particularly from Puerto Rico government deposits for BPPR

which are mostly market linked.

Partially offset by:

Higher interest income from investment securities, trading and money market investments by $182.5 resulting from higher

yield of the portfolio by 96 basis points mainly driven by money market investments, driven by the short-term investments in

rising rate interest environment.

Higher interest income from commercial loans by $227.0 million due to higher yield by 124 basis points and higher volume of

$2.0 billion, increasing in BPPR and PB.

Higher interest income from consumer loans by $73.6 million mostly due to a higher average volume of personal loans and

credit cards.

Higher interest income from construction loans by $16.9 million due to higher yield by 292 basis points.

Prepayment penalties, late fees collected and the amortization of premiums on purchased loans are included as part of the loan

yield. Interest income related to these items for the nine-months ended September 30, 2023, amounted to $16.9 million, compared

to $36.3 million in the same period of 2022. The decrease of $19.4 million is mainly related to lower amortized fees resulting from

the forgiveness of PPP loans during 2022, lower amortization of premium on auto loans purchased and resulting from the

cancellation of PCD loans.

Table 3 – Analysis of Levels & Yields on a Taxable Equivalent Basis from Continuing Operations (Non-GAAP)

For the nine months ended September 30,

Variance

Average Volume

Average Yields / Costs

Interest

Attributable to

2023

2022

Variance

2023

2022

Variance

2023

2022

Variance

Rate

Volume

(In millions)

(In thousands)

6,966

10,969

(4,003)

5.10

0.82

4.28

Money market investments

265,785

67,172

198,613

231,496

(32,883)

28,205

29,371

(1,166)

2.18

2.16

0.02

Investment securities [1]

460,641

475,088

(14,447)

4,862

(19,309)

32

59

(27)

4.52

6.23

(1.71)

Trading securities

1,084

2,725

(1,641)

(621)

(1,020)

Total money market,

investment and trading

35,203

40,399

(5,196)

2.76

1.80

0.96

securities

727,510

544,985

182,525

235,737

(53,212)

Loans:

16,206

14,245

1,961

6.50

5.26

1.24

Commercial

787,381

560,408

226,973

143,107

83,866

778

781

(3)

8.79

5.87

2.92

Construction

51,178

34,305

16,873

17,017

(144)

1,630

1,447

183

6.31

5.92

0.39

Leasing

77,135

64,225

12,910

4,440

8,470

7,434

7,315

119

5.45

5.33

0.12

Mortgage

303,777

292,253

11,524

6,712

4,812

3,082

2,670

412

13.10

11.44

1.66

Consumer

302,050

228,401

73,649

35,342

38,307

3,603

3,507

96

8.31

8.03

0.28

Auto

223,929

210,623

13,306

7,455

5,851

32,733

29,965

2,768

7.13

6.20

0.93

Total loans

1,745,450

1,390,215

355,235

214,073

141,162

67,936

70,364

(2,428)

4.86

3.67

1.19

Total earning assets

2,472,960

1,935,200

537,760

449,810

87,950

Interest bearing deposits:

24,407

26,385

(1,978)

2.93

0.26

2.67

NOW and money market [2]

534,567

52,072

482,495

488,704

(6,209)

14,889

16,100

(1,211)

0.62

0.18

0.44

Savings

69,262

21,430

47,832

52,158

(4,326)

7,603

6,913

690

2.23

0.77

1.46

Time deposits

126,995

40,005

86,990

71,425

15,565

46,899

49,398

(2,499)

2.08

0.31

1.77

Total interest bearing deposits

730,824

113,507

617,317

612,287

5,030

15,405

16,088

(683)

Non-interest bearing demand

deposits

62,304

65,486

(3,182)

1.57

0.23

1.34

Total deposits

730,824

113,507

617,317

612,287

5,030

160

124

36

5.02

1.34

3.68

Short-term borrowings

5,987

1,249

4,738

4,298

440

Other medium and

1,140

948

192

5.12

4.25

0.87

long-term debt

43,660

30,168

13,492

7,506

5,986

Total interest bearing

48,199

50,470

(2,271)

2.16

0.38

1.78

liabilities (excluding demand

deposits)

780,471

144,924

635,547

624,091

11,456

4,332

3,806

526

Other sources of funds

67,936

70,364

(2,428)

1.54

0.28

1.26

Total source of funds

780,471

144,924

635,547

624,091

11,456

3.32

3.39

(0.07)

Net interest margin/ income

on a taxable equivalent basis

(Non-GAAP)

1,692,489

1,790,276

(97,787)

(174,281)

76,494

2.70

3.29

(0.59)

Net interest spread

Taxable equivalent

adjustment

95,145

182,483

(87,338)

3.14

3.05

0.09

Net interest margin/ income

non-taxable equivalent basis

(GAAP)

1,597,344

1,607,793

(10,449)

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.

Provision for Credit Losses - Loans Held-in-Portfolio and Unfunded Commitments

For the quarter ended September 30, 2023, the Corporation recorded an expense of $45.2 million for its reserve for credit losses

related to loans held-in-portfolio and unfunded commitments. The provision for credit loss related to the loans-held-in-portfolio for

the quarter ended September 30, 2023 was $43.5 million, compared to a provision expense of $39.5 million for the quarter ended

September 30, 2022. The provision expense was driven by the consumer loan portfolio, mainly Auto and Personal Loans, partially

offset by reductions in the provision expense for commercial loans. Changes in credit quality, higher volumes, and the impact of the

macroeconomic scenario contributed to the higher provision expense for the consumer loans segment. The implementation of a new

ACL model for the U. S. commercial real estate loan segments, as well as higher recoveries, contributed to the reduction in

provision expense for the commercial loan segment. The provision related to unfunded commitments for the third quarter of 2023

was $1.7 million, compared to a provision expense of $0.4 million for the same period of 2022.

As part of the Corporation’s model governance procedures a new model was implemented for the U.S commercial real estate

segment. The new model enhances techniques used to capture default activity within the Corporation’s geographical footprint. As

part of the implementation analysis management evaluated the credit metrics of the portfolio such as risk ratings, delinquency

levels, and low exposure to the commercial office sector. Qualitative reserves continue to be maintained to address risks within the

U. S. commercial real estate segment. The new model including qualitative reserve accounted for $15 million of PB’s reduction in

ACL.

For the quarter ended September 30, 2023, the Corporation recorded a provision for credit loss of $54.0 million for loans-held-in-

portfolio for the BPPR segment, compared to a provision expense of $28.7 million for the quarter ended September 30, 2022. The

Popular U.S. segment recorded a reserve release of $10.5 million for the quarter ended September 30, 2023, compared to a

provision of $10.8 million for the same quarter in 2022.

For the nine-months ended September 30,2023, the Corporation recorded a provision for credit loss of $130.8 million for its reserve

for credit losses related to loans held-in-portfolio and unfunded commitments. The provision expense related to the loans-held-in-

portfolio for the nine-months ended September 30,2023 was $126.3 million, compared to a provision of $35.0 million for the nine-

months ended September 30,2022. The higher provision in 2023 is attributable to higher loan volumes, migrations in credit scores

and changes in economic variables related to consumer loan portfolios, partially offset by changes in economic variables related to

mortgage loan portfolios. The provision for unfunded commitments for the nine-months ended September 30,2023 reflected an

expense of $4.5 million, compared to a provision benefit of $0.6 million for the same period of 2022.

The provision for credit losses for the BPPR segment was an expense of $127.6 million for the nine-months ended September

30,2023, compared to a provision of $25.2 million for the nine-months ended September 30,2022. The Popular U.S. segment

recorded a reserve release of $1.3 million for the nine-months ended September 30,2023, compared to a provision expense of $9.8

million for the same period in 2022.

At September 30, 2023, the total allowance for credit losses for loans held-in-portfolio amounted to $711.1 million, compared to

$720.3 million as of December 31, 2022. The ratio of the allowance for credit losses to loans held-in-portfolio was 2.09% at

September 30, 2023, compared to 2.25% at December 31, 2022. During the first quarter, the Corporation adopted ASU 2022-02

which resulted in a reduction of approximately $46 million, $29 million net of tax, in the reserve related to TDRs which was recorded

as an adjustment to the beginning balance of retained earnings. As discussed in Note 9 to the Consolidated Financial Statements,

within the process to estimate its ACL, the Corporation applies probability weightings to the outcomes of simulations using Moody’s

Analytics’ Baseline, S3 (pessimistic) and S1 (optimistic) scenarios. The baseline scenario is assigned the highest probability,

followed by the pessimistic scenario given the uncertainties in the economic outlook and downside risk. Refer to Note 9 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

At September 30, 2023, the total allowance for credit losses for this portfolio amounted to $6.1 million, compared to $6.9 million as

of December 31, 2022. Refer to Note 7

to Consolidated Financial Statements

for additional information on the ACL for this portfolio.

Non-Interest Income

Non-interest income amounted to $159.5 million for the quarter ended September 30, 2023, compared to $426.5 million for the

same quarter of the previous year. The main factors that contributed to the variance in non-interest income were:

lower other operating income by $265.9 million mainly due to the gain on sale related to the investment in Evertec Transactions

recognized in July 2022; and

an unfavorable variance of $4.1 million mainly due to fair value adjustments of mortgage servicing rights (“MSRs”);

partially offset by:

higher other service fees by $7.0 million mainly due to an increase in credit cards transaction volume related fee income.

Non-interest income amounted to $482.0 million for the nine months ended September 30, 2023, compared to $738.6 million for the

same period of the previous year. Non-Interest income was impacted by Evertec Transactions and the related adjustment. Other

factors that contributed to the variance in non-interest income were:

an unfavorable variance of $20.8 million mainly due to fair value adjustments of mortgage servicing rights (“MSRs”);

partially offset by:

higher other service fees by $32.8 million mainly due to an increase in credit cards transaction volume related fee income.

Operating Expenses

Operating expenses amounted to $466.0 million for the quarter ended September 30, 2023, a decrease of $10.1 million, when

compared with the same quarter of 2022. The variance in operating expenses was driven primarily by:

lower incentive compensation and profit-sharing accrual by $14.5 million;

lower other taxes expense by $7.4 million mainly due to the reversal of an accrual related to regulatory examination fees in

BPPR by $8.2 million;

lower professional fees by $9.1 million mainly due to lower advisory expenses by $7.2 million resulting from an increase in

projects related to the Corporation’s transformation initiative that are being managed with internal personnel; and

lower other operating expenses by $14.9 million mainly due to the effect of prior year expense of $17.3 million related to the

Evertec Transactions; partially offset by higher pension plan cost by $4.8 million as a result of annual changes in actuarial

assumptions;

partially offset by:

higher salaries expense by $11.9 million as a result of merit and market related increases, minimum salary increases during

the first quarter of 2023 and higher headcount;

higher technology and software expenses by $4.6 million mainly due to higher software amortization expense by $1.7 million

and higher programming services and application hosting expenses by $1.9 million;

higher processing and transactional services by $5.5 million mainly due to incentives received during July 2022 related to the

ATH Network Participation Agreement entered into in connection with the Evertec Business Acquisition Transaction; and

the goodwill impairment charge related to our U.S. based leasing subsidiary of $23 million recorded in 2023, due to lower

forecasted cash flows and an increase in the rate used to discount cash flows, compared to an impairment of $9 million

recorded in 2022, an unfavorable variance of $14 million.

Operating expenses amounted to $1.4 billion for the nine months ended September 30, 2023, an increase of $82.2 million when

compared with the same period of 2022, driven primarily by:

higher personnel costs by $53.8 million mainly due to higher salaries by $61.7 million as a result of merit and market related

increases, minimum salary increases during the first quarter of 2023 and higher headcount, an increase in health insurance

costs by $6.5 million, and higher payroll taxes and other compensation expenses by $16.1 million; partially offset by a

decrease in incentive compensation and profit-sharing accrual by $30.3 million;

higher processing and transactional services expenses by $14.3 million mainly due to broad based retail customers' debit card

replacement costs incurred during the second quarter of 2023 of $2.8 million, higher credit and debit card processing related

fees by $2.7 million and higher merchant processing fees by $5.6 million mainly due to incentives received during July 2022

related to the ATH Network Participation Agreement entered into in connection with the Evertec Business Acquisition

Transaction;

higher business promotion expenses by $6.2 million mainly due to higher customer rewards programs expense in our credit

card business by $6.7 million;

higher FDIC deposit insurance expense by $4.2 million mainly due to amendments to the Deposit Insurance Fund restoration

plan implemented by the FDIC that increased base deposit assessment rate by 2 basis points, annually; partially offset by a

decrease in the assessment rate driven by the adoption of the Financial Accounting Standards Board (‘’FASB’’) issued

Accounting Standards Update (‘’ASU’’) 2022-02; and a higher goodwill impairment charge by $14.0 million as discussed above.

partially offset by:

lower other taxes expense by $6.2 million mainly due to the reversal of an accrual related to regulatory examination fees in

BPPR; and

lower other operating expenses by $11.5 million mainly due to the effect of prior year expense related to the Evertec

Transactions of $17.3 million and $6.4 million of lower sundry losses; partially offset by higher pension plan cost by $14.4

million due to changes in actuarial assumption.

The Corporation embarked on a broad-based multi-year, technological and business process transformation during the second half

of 2022. As part of this transformation, we aim to expand our digital capabilities, modernize our technology platform, and implement

agile and efficient business processes across the entire Corporation. To facilitate the transparency of the progress with the

transformation initiative and to better portray the level of technology related expenses categorized by the nature of the expense,

effective in the fourth quarter of 2022, the Corporation has separated technology, professional fees and transactional and items

processing related expenses as standalone expense categories in the accompanying Consolidated statement of operations. There

were no changes to the total operating expenses presented. Prior periods amount in the financial statements and related

disclosures have been reclassified to conform to the current presentation.

Table 4 - Operating Expenses

Quarters ended September 30,

Nine months ended September 30,

(In thousands)

2023

2022

Variance

2023

2022

Variance

Personnel costs:

Salaries

127,832

115,887

11,945

378,126

316,407

61,719

Commissions, incentives and other bonuses

27,670

42,209

(14,539)

86,025

116,319

(30,294)

Pension, postretirement and medical insurance

16,985

17,120

(135)

49,871

43,633

6,238

Other personnel costs, including payroll taxes

20,665

18,627

2,038

69,358

53,268

16,090

Total personnel costs

193,152

193,843

(691)

583,380

529,627

53,753

Net occupancy expenses

28,100

27,420

680

81,304

78,357

2,947

Equipment expenses

8,905

8,735

170

26,878

25,798

1,080

Other taxes

8,590

15,966

(7,376)

41,290

47,461

(6,171)

Professional fees

38,514

47,662

(9,148)

122,077

122,884

(807)

Technology and software expenses

72,930

68,341

4,589

213,843

213,638

205

Processing and transactional services:

Credit and debit cards

13,762

13,531

231

37,896

35,177

2,719

Other processing and transactional services

24,137

18,837

5,300

70,713

59,181

11,532

Total processing and transactional services

37,899

32,368

5,531

108,609

94,358

14,251

Communications

4,220

3,858

362

12,483

11,028

1,455

Business promotion:

Rewards and customer loyalty programs

15,988

14,344

1,644

44,962

38,294

6,668

Other business promotion

7,087

10,004

(2,917)

22,067

22,490

(423)

Total business promotion

23,075

24,348

(1,273)

67,029

60,784

6,245

FDIC deposit insurance

8,932

6,610

2,322

24,600

20,445

4,155

Other real estate owned (OREO) income

(5,189)

(2,444)

(2,745)

(10,197)

(12,963)

2,766

Other operating expenses:

Operational losses

5,504

7,145

(1,641)

16,584

23,031

(6,447)

All other

17,557

32,448

(14,891)

53,690

58,783

(5,093)

Total other operating expenses

23,061

39,593

(16,532)

70,274

81,814

(11,540)

Amortization of intangibles

795

795

2,385

2,481

(96)

Goodwill impairment charge

23,000

9,000

14,000

23,000

9,000

14,000

Total operating expenses

465,984

476,095

(10,111)

1,366,955

1,284,712

82,243

Table 5 - Operating Expenses Reclassification

Quarter ended

Nine months ended

30-Sep-22

30-Sep-22

Financial statement line item

As reported

Adjustments

Adjusted

As reported

Adjustments

Adjusted

Equipment expenses

26,626

(17,891)

8,735

75,193

(49,395)

25,798

Professional fees

112,221

(64,559)

47,662

335,590

(212,706)

122,884

Technology and software expenses

68,341

68,341

213,638

213,638

Processing and transactional services

32,368

32,368

94,358

94,358

Communications

6,224

(2,366)

3,858

18,364

(7,336)

11,028

Other operating expenses

55,486

(15,893)

39,593

120,373

(38,559)

81,814

Net effect on other operating expenses

200,557

200,557

549,520

549,520

Income Taxes

For the quarter and nine months ended September 30, 2023, the Corporation recorded an income tax expense of $45.9 and $135.7

million, respectively, with an effective tax rate (ETR) of 25.1%, and $23.3%, respectively, compared to income tax expense of $68.0

million and $182.7 million with an effective tax rate of 13.9% and 17.8% for the quarter and nine months ended September 30, 2022,

respectively. The decrease in income tax expense for the quarter and nine months period ended September 30, 2023, reflects the

impact of lower pre-tax income, including lower volume of income subject to preferential tax rates.

At September 30, 2023, the Corporation had a net deferred tax asset amounting to $0.9 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 31 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.

REPORTABLE SEGMENT RESULTS

The Corporation’s reportable segments for managerial reporting purposes consist of Banco Popular de Puerto Rico and Popular

U.S. A Corporate group has been defined to support the reportable segments.

For a description of the Corporation’s reportable segments, including additional financial information and the underlying

management accounting process, refer to Note 33 to the Consolidated Financial Statements.

The Corporate group reported a net income of $2.8 million for the quarter ended September 30, 2023, compared with a net income

of $132.3 million for the same quarter of the previous year. The decrease in net income was mainly attributed to the $128.8 million in

after-tax gains recognized by the Corporation as a result of the Evertec stock sale and related accounting adjustments during the

quarter ended September 30, 2022. For the nine months ended September 30, 2023, the Corporate group reported net income of

$8.8 million, compared to a net income of $143.4 million for the same period of the previous year. The decrease in net income was

due to impact on 2022 of the Evertec Stock Sale and related accounting adjustments; and attributed to the equity pickup of $21.2

million for the nine months ended September 30,2022 from the investment in Evertec, Inc. that is not reflected in 2023 as the

Corporation sold its entire ownership stake in Evertec in August 2022.

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 $122.7 million for the quarter ended September

30, 2023, compared with net income of $263.7 million for the same quarter of the previous year. The factors that contributed to the

variance in the financial results included the following:

Lower net interest income by $34.2 million mainly due to:

higher interest expense on deposits by $182.3 million mainly due to higher costs on the market-linked Puerto

Rico government deposits, and the higher interest rate environment’s impact on the cost of NOW accounts,

time deposits, and savings deposits,

partially offset by

higher interest income from money market and investment securities by $67.4 million mainly due to higher

yields driven by the increase in interest rates,

higher interest income from loans by $80.8 million mainly due to higher yields from commercial and consumer

loans, primarily personal loans, credit cards and auto loans due to the increase in rates, as well as higher

average balances across all portfolios except construction loans,

The net interest margin for the quarter ended September 30, 2023 was 3.14% compared to 3.27% for the same quarter in the

previous year. The decrease in net interest margin is driven by higher cost of deposits and the earnings assets mix;

A provision for loan losses expense of $51.9 million, compared to a provision expense of $29.8 million in quarter ended

September 30, 2022, or an unfavorable variance of $22.1 million mainly driven by the consumer loan segment, mainly

auto and personal loans; partially offset by reductions in the provision for commercial loans;

Non-interest income was lower by $117.7 million mainly due to:

lower other operating income by $118.4 million mostly due to lower earnings as a result of the Evertec

Transactions during the quarter ended September 30,2022;

lower income from mortgage banking activities by $4.0 million mainly due to an unfavorable variance of $3.4

million in the fair value adjustment of mortgage service rights.

lower service charges on deposit accounts by $2.3 million, mainly due to lower ACH fees due to the change in

policy of eliminating insufficient fund fees and modifying overdraft fees implemented in the third quarter of 2022,

partially offset by

Higher other service fees by $8.4 million mainly due to higher credit card fees by $2.9 million and debit card

fees by $1.5 million mainly as a result of higher transactional volume and higher merchant acquiring fees from

the revenue sharing agreement with Evertec Inc. by $0.4 million.

Lower operating expenses by $25.7 million mostly due to:

lower other operating expenses by $27.9 million mainly due to a $17.3 million charge related to the Evertec

Transactions on the third quarter of 2022 and lower charges allocated from the Corporate segment group by

$9.3 million; partially offset by $4.4 million of higher pension expense based on actuarial assumptions;

lower other operating taxes expenses by $7.7 million mainly due to the reversal of an accrual related to

regulatory examination fees in BPPR by $8.2 million;

lower personnel costs by $0.1 million driven by lower profit-sharing expense by $8.3 million;

lower business promotions by $0.5 million mainly due to lower donations expense related to natural disasters

response and other donations;

higher net recoveries from OREO by $2.6 million mainly due to an increase in units sold;

partially offset by

higher processing and transactional services by $5.3 million mainly due to higher credit and debit card

processing expense as result of higher transactional volumes;

higher technology and software expenses by $2.8 million in part due to expense savings associated with the

acquired services from Evertec during the quarter ended September 30,2022;

higher professional fees of $3.8 million mainly due to costs associated with regulatory and compliance efforts;

Lower income tax expense by $7.3 million is mainly due lower income before tax.

For the nine months ended September 30,2023, the BPPR segment recorded net income of $387.4 million compared to a net

income of $621.8 million for the same period of the previous year. The results for the nine months ended September 30,2023 reflect

a provision expense of the reserve for credit losses of $127.0 million, reflective of higher loan volumes, migrations in credit scores

and changes in economic variables related to consumer loan portfolios, compared to a provision expense of $24.9 million for the

nine months-period ended September 30,2022. The other factors that contributed to the variance in the financial results included the

following:

Higher net interest income by $5.7 million mainly due to:

higher interest income from money market and investment securities by $249.3 million mainly due to higher

yields from money market investments, U.S. Treasury securities and mortgage backed securities due to the

increase in rates,

higher interest income from loans by $246.5 million mainly due to higher average balance from all portfolios

except construction loans and higher yields due to the increase in rates;

partially offset by

higher interest expense on deposits by $489.5 million mainly due to higher costs on the market-linked Puerto

Rico government deposits, and the higher interest rate environment’s impact on the cost of NOW accounts,

time deposits, and savings deposits.

The net interest margin for the nine months ended September 30,2023 was 2.67% compared to 2.49% for the same quarter in

the previous year. The increase in net interest margin is driven by the earning assets mix; partially offset by higher cost of

deposits.

An unfavorable variance of $102.0 million on the provision for loan losses, due to higher loan volumes, migrations in credit

scores and changes in economic variables related to consumer loan portfolios,

Non-interest income was lower by $106.9 million mainly due to:

Lower other operating income by $109.7 million mostly as result of the Evertec Transactions on 2022;

Lower income from mortgage banking activities by $20.3 million mainly due to an unfavorable variance of $15.3

million in the fair value adjustment of mortgage service rights and lower gains of $5.5 million on hedging

activities.

Lower service charges on deposit accounts by $11.9 million principally due to lower returned ACH fees by

$10.6 million due to the change in policy of eliminating insufficient fund fees and modifying overdraft fees

implemented in the third quarter of 2022.

partially offset by

higher other service fees by $32.7 million mainly due to higher credit card fees by $14.0 million and higher debit

card fees by $3.5 million as a result of higher interchange transactional volumes; and higher merchant acquiring

fees related to the revenue sharing agreement with Evertec by $7.9 million;

Higher operating expenses by $51.4 million mostly due to:

higher personnel costs by $36.5 million due to salaries adjustments as a result of merit and market related

adjustments, minimum salaries increases during the first quarter 2023, higher headcount, higher payroll taxes

and increase in pension and health insurance costs by $5.5 million; partially offset by a decrease in profit

sharing accrual by $19.9 million and a decrease in incentive compensation by $1.3 million;

higher professional fees by $13.8 million mainly due to costs associated with initiatives focused on regulatory,

compliance and cyber security efforts as well as the transformation initiative;

higher business promotions by $6.4 million due to higher customer rewards expense related to higher

transactional volumes;

partially offset by

lower other operating expenses by $17.4 million mainly due to a $17.3 million charge related to the Evertec

Transactions for the nine months ended September 30,2022 and lower sundry losses mortgage by $5.2 million

mainly due to a reserve release adjustment recorded in 2022; partially offset by higher pension plan cost by

$13.2 million due to changes in actuarial assumptions and higher charges allocated from the Corporate

segment group by $1.2 million, mainly from higher personnel costs;

lower net recoveries from OREO by $3.2 million mainly due to lower gain on sale of mortgage and commercial

properties;

higher processing and transactional services by $14.1 million mainly due to higher credit and debit card

processing expense as result of higher transactional volumes,

partially offset by

lower other operating taxes expenses by $6.8 million mostly due to the reversal of an accrual related to

regulatory examination fees in BPPR by $8.2 million;

lower technology and software expenses by $3.3 million due in part to savings associated with the acquired

services from Evertec during 2022.

Lower income tax expense by $20.1 million is mainly due lower income before tax.

Popular U.S.

For the quarter ended September 30, 2023, the reportable segment of Popular U.S. reported a net income of $11.0 million,

compared with a net income of $25.3 million for the same quarter of the previous year. The factors that contributed to the variance in

the financial results included the following:

Lower net interest income by $11.4 million due to:

higher interest expense on deposits by $58.6 million mainly due to higher interest rates and higher average

balance of time deposits primarily gathered through its direct online channel,

partially offset by

higher interest income from loans by $35.0 million, mainly from growth in the commercial portfolio as well as

higher yields due to increase in rates; and

higher interest income from money market and investment securities by $12.9 million due to higher yields due

to the increase in market rates.

The net interest margin for the quarter ended September 30, 2023 was 2.90% compared to 3.84% for the same quarter in the

previous year.

An unfavorable variance of $16.7 million on the provision for loan losses and unfunded commitments reflecting a release

for credit losses of $6.6 million for the third quarter of 2023 due to the implementation of a new model for the U.S.

commercial real estate portfolio, compared to a provision expense of $10.0 million recorded in the quarter ended

September 30,2022;

Higher operating expenses by $15.5 million mostly due to:

the goodwill impairment charge related to our U.S. based leasing subsidiary of $23.0 million recorded in 2023,

due to lower forecasted cash flows and an increase in the rate used to discount cash flows, compared to an

impairment of $9.0 million recorded in 2022, an unfavorable variance of $14.0 million;

higher other operating expenses by $0.6 million mainly due to a reversal in sundry loss reserve registered

during the quarter ended September 30,2022; partially offset by a lower charges allocated from Corporate

segment group by $0.7 million;

partially offset by

lower personnel costs by $0.8 million due to lower commissions and incentive expense;

Lower income tax expense by $5.3 million is related to a lower income before tax.

For the nine months ended September 30, 2023, the reportable segment of Popular U.S. recorded a net income of $51.3 million,

compared with a net income of $80.4 million for the same period of the previous year. The factors that contributed to the variance in

the financial results included the following:

Lowest net interest income by $13.8 million due to:

higher interest expense on deposits by $150.2 million mainly due to higher rates and higher average balance of

time deposits primarily gathered through its direct online channel;

partially offset by

higher interest income from loans by $107.7 million, mainly from growth in the commercial portfolio as well as

higher yields due to increase in rates; and

higher income from money market and investment securities by $32.3 million due to higher yields and higher

average balance;

The net interest margin for the nine months ended September 30,2023 was 3.08% compared to 3.72% for the same period in the

previous year.

An unfavorable variance of $5.3 million on the provision for loan losses and unfunded commitments, reflective of the

updated macroeconomic scenarios offset by the reserve decrease due to the implementation of the new model for

commercial real estate loans, as discussed above;

Higher operating expenses by $30.4 million mostly due to:

the goodwill impairment charge related to our U.S. based leasing subsidiary of $23.0 million recorded in 2023,

due to lower forecasted cash flows and an increase in the rate used to discount cash flows, compared to an

impairment of $9.0 million recorded in 2022, an unfavorable variance of $14.0 million;

higher personnel costs by $4.9 million due to salary adjustments;

higher other operating expenses by $6.0 million due to higher charges allocated from the Corporate segment

group by $2.3 million, mainly from higher personnel costs.

Lower income tax expense by $17.7 million due to a lower income before tax.

FINANCIAL CONDITION ANALYSIS

Assets

The Corporation’s total assets were $69.7 billion at September 30, 2023, compared to $67.6 billion at December 31, 2022. 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 increased by approximately $774.8 million at September 30, 2023, compared to December 31, 2022,

mainly due to the increase deposits. Debt securities available-for-sale decreased $674.5 million reflecting repayment, maturities,

and an increase in the unrealized loss of $105.3 million. Debt securities held-to-maturity decreased by $222.4 million at September

30, 2023, reflecting maturities of U.S. Treasury securities, and the amortization of $128.7 million of the discount related to securities

previously reclassified from the available-for-sale to held-to-maturity, which have an offsetting unrealized loss included within other

comprehensive income that is also being accreted, resulting in a neutral effect to earnings. Refer to Note 6 and to Note 7 to the

Consolidated Financial Statements for additional information with respect to the Corporation’s debt securities available-for-sale and

held-to-maturity.

Loans

Refer to Table 6 for a breakdown of the Corporation’s loan portfolio. Also, refer to Note 8 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 approximately $2.0 billion to $34.0 billion at September 30, 2023, mainly due to an increase in

commercial loans at both BPPR and U.S. as well as consumer and lease financing at BPPR.

Table 6 - Loans Ending Balances

(In thousands)

September 30, 2023

December 31, 2022

Variance

Loans held-in-portfolio:

Commercial

Commercial multi-family

2,328,433

2,321,713

6,720

Commercial real estate non-owner occupied

5,035,130

4,499,670

535,460

Commercial real estate owner occupied

3,044,905

3,078,549

(33,644)

Commercial and industrial

6,527,082

5,839,200

687,882

Total Commercial

16,935,550

15,739,132

1,196,418

Construction

922,112

757,984

164,128

Leasing

1,698,114

1,585,739

112,375

Mortgage

7,585,111

7,397,471

187,640

Consumer

Credit cards

1,077,428

1,041,870

35,558

Home equity lines of credit

67,499

71,916

(4,417)

Personal

1,952,168

1,823,579

128,589

Auto

3,633,196

3,512,530

120,666

Other

158,135

147,548

10,587

Total Consumer

6,888,426

6,597,443

290,983

Total loans held-in -portfolio

34,029,313

32,077,769

1,951,544

Loans held-for-sale:

Mortgage

5,239

5,381

(142)

Total loans held-for-sale

5,239

5,381

(142)

Total loans

34,034,552

32,083,150

1,951,402

Other assets

Other assets amounted to $2.0 billion at September 30, 2023, compared to $1.8 billion at December 31, 2022. Refer to Note 13 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 September 30, 2023 and December 31, 2022.

Liabilities

The Corporation’s total liabilities were $65.3 billion at September 30, 2023, an increase of $1.7 billion, compared to $63.5 billion at

December 31, 2022, mainly due to an increase in deposits as discussed below.

Deposits and Borrowings

The composition of the Corporation’s financing to total assets at September 30, 2023 and December 31, 2022 is included in Table 7.

Table 7 - Financing to Total Assets

September 30,

December 31,

% increase (decrease)

% of total assets

(In millions)

2023

2022

from 2022 to 2023

2023

2022

Non-interest bearing deposits

15,201

15,960

(4.8)

21.8

23.6

Interest-bearing core deposits

43,599

41,600

4.8

62.5

61.5

Other interest-bearing deposits

4,537

3,667

23.7

6.5

5.4

Repurchase agreements

93

149

(37.6)

0.1

0.2

Other short-term borrowings

365

N.M.

0.5

Notes payable

1,005

887

13.3

1.5

1.3

Other liabilities

844

917

(8.0)

1.2

1.4

Stockholders’ equity

4,458

4,093

8.9

6.4

6.1

Deposits

The Corporation’s deposits totaled $63.3 billion at September 30, 2023, compared to $61.2 billion at December 31, 2022. The

deposits increase of $2.1 billion was mainly in public sector accounts at BPPR coupled with an increase in time deposits at PB

gathered through its direct channel, partially offset by a decrease in non-interest bearing demand deposit accounts at both BPPR

and PB. At September 30, 2023, Puerto Rico public sector deposits amounted to $17.8 billion. The rate at which public deposit

balances may change is uncertain and difficult to predict. The receipt by the Puerto Rico Government of additional hurricane

recovery related Federal assistance and seasonal tax collections, could increase public deposit balances at BPPR in the near term.

The amount and timing of any reduction is 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”).

As of September 30, 2023, approximately 28% of the Corporation’s deposits are public fund deposits from the Government of

Puerto Rico, municipalities and government instrumentalities and corporations. These deposits are indexed to short-term market

rates and fluctuate in cost with changes in those rates with a one-quarter lag, in accordance with contractual terms. As a result,

these deposits’ costs have generally lagged variable asset repricing. Generally, these deposits require that the bank pledge high

credit quality securities as collateral; therefore, liquidity risks arising from public sector deposit outflows are lower. Refer to the

Liquidity section in this MD&A for additional information on the Corporation’s funding sources.

Refer to Table 8 for a breakdown of the Corporation’s deposits at September 30, 2023 and December 31, 2022.

Table 8 - Deposits Ending Balances

(In thousands)

September 30, 2023

December 31, 2022

Variance

Demand deposits

[1]

27,942,782

26,382,605

1,560,177

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

26,452,382

27,265,156

(812,774)

Savings, NOW and money market deposits (brokered)

734,479

798,064

(63,585)

Time deposits (non-brokered)

7,264,156

6,442,886

821,270

Time deposits (brokered CDs)

943,801

338,516

605,285

Total deposits

63,337,600

61,227,227

2,110,373

[1] Includes interest and non-interest bearing demand deposits. At September 30, 2023, non-interest bearing deposits were $15.2 billion (December

31, 2022-$16.0 billion)

Borrowings

The Corporation’s borrowings totaled $1.1 billion at September 30, 2023 compared to $1.4 billion at December 31, 2022. Refer to

Note 16 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 $4.5 billion at September 30, 2023, an increase of $364.2 million when compared to December 31,

2022, principally due to net income for the nine-months ended September 30, 2023 of $446.7 million, the amortization of the

unrealized losses from securities previously reclassified to held-to-maturity as described above of $103.0 million, and the positive

impact from the adoption of the new accounting standard related to loan modifications during the year of $28.8 million, partially

offset by dividends declared for the nine-month period and the after-tax impact of the unfavorable variance in net unrealized losses

in the portfolio of available-for-sale securities of $120.8 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.

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 September 30, 2023, 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 September 30, 2023 and December 31, 2022.

Table 9 - Capital Adequacy Data

(Dollars in thousands)

September 30, 2023

December 31, 2022

Common equity tier 1 capital:

Common stockholders equity - GAAP basis

4,435,465

4,071,282

CECL transitional amount

[1]

84,751

127,127

AOCI related adjustments due to opt-out election

2,476,987

2,468,193

Goodwill, net of associated deferred tax liability (DTL)

(668,764)

(691,560)

Intangible assets, net of associated DTLs

(10,559)

(12,944)

Deferred tax assets and other deductions

(311,164)

(322,412)

Common equity tier 1 capital

6,006,716

5,639,686

Additional tier 1 capital:

Preferred stock

22,143

22,143

Additional tier 1 capital

22,143

22,143

Tier 1 capital

6,028,859

5,661,829

Tier 2 capital:

Trust preferred securities subject to phase in as tier 2

192,674

192,674

Other inclusions (deductions), net

448,137

431,144

Tier 2 capital

640,811

623,818

Total risk-based capital

6,669,670

6,285,647

Minimum total capital requirement to be well capitalized

3,573,131

3,441,589

Excess total capital over minimum well capitalized

3,096,539

2,844,058

Total risk-weighted assets

35,731,312

34,415,889

Total assets for leverage ratio

71,695,320

70,287,610

Risk-based capital ratios:

Common equity tier 1 capital

16.81

16.39

Tier 1 capital

16.87

16.45

Total capital

18.67

18.26

Tier 1 leverage

8.41

8.06

[1] The CECL transitional amount includes the impact of Popular's adoption of the new CECL accounting standard on January 1, 2020.

The Basel III capital rules provide that a depository institution will be 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%. Management has determined that as of September 30, 2023, the Corporation, BPPR and PB 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 delays 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 September 30, 2023, the

Corporation had phased-in 50% of the cumulative CECL deferral with the remaining impact to be recognized over the remainder of

the three-year transition period.

On April 9, 2020, federal banking regulators issued an interim final rule to modify the Basel III regulatory capital rules applicable to

banking organizations to allow those organizations participating in the Paycheck Protection Program (“PPP”) established under the

Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) to neutralize the regulatory capital effects of participating in

the program. Specifically, the agencies have clarified that banking organizations, including the Corporation and its Bank

subsidiaries, are permitted to assign a zero percent risk weight to PPP loans for purposes of determining risk-weighted assets and

risk-based capital ratios. Additionally, in order to facilitate use of the Paycheck Protection Program Liquidity Facility (the “PPPL

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

fund PPP loans, the agencies further clarified that, for purposes of determining leverage ratios, a banking organization is permitted

to exclude from total average assets PPP loans that have been pledged as collateral for a PPPL Facility. As of September 30, 2023,

the Corporation has $10 million in PPP loans and no loans were pledged as collateral for PPPL Facilities.

The increase in the common equity Tier I capital ratio, Tier I capital ratio, and total capital ratio as of September 30, 2023 as

compared to December 31, 2022 was mainly due to the nine months period earnings, partially offset by higher risk-weighted assets

driven by the increase in loans held-in-portfolio. The increase in leverage capital ratio was mainly due to the period earnings.

Non-GAAP financial measures

The tangible common equity, tangible common equity ratio, tangible assets and tangible book value per common share, which are

presented in the table that follows, are non-GAAP measures. Management and many stock analysts use the tangible common

equity ratio and tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital

adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of

the purchase accounting method for mergers and acquisitions. Neither tangible common equity nor tangible assets or related

measures should be considered 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 any 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

September 30, 2023, and December 31, 2022.

Table 10 - Reconciliation of Tangible Common Equity and Tangible Assets

(In thousands, except share or per share information)

September 30, 2023

December 31, 2022

Total stockholders’ equity

4,457,608

4,093,425

Less: Preferred stock

(22,143)

(22,143)

Less: Goodwill

(804,428)

(827,428)

Less: Other intangibles

(10,559)

(12,944)

Total tangible common equity

3,620,478

3,230,910

Total assets

69,736,936

67,637,917

Less: Goodwill

(804,428)

(827,428)

Less: Other intangibles

(10,559)

(12,944)

Total tangible assets

68,921,949

66,797,545

Tangible common equity to tangible assets

5.25

4.84

Common shares outstanding at end of period

72,127,595

71,853,720

Tangible book value per common share

50.20

44.97

Quarterly average

Total stockholders’ equity [1]

6,636,364

6,161,634

Less: Preferred Stock

(22,143)

(22,143)

Less: Goodwill

(827,177)

(827,427)

Less: Other intangibles

(11,083)

(13,440)

Total tangible common equity

5,775,961

5,298,624

Return on average tangible common equity

9.36

19.23

[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.

RISK MANAGEMENT

Market / Interest Rate Risk

The financial results and capital levels of the Corporation are constantly exposed to market, interest rate and liquidity risks.

Market risk refers to the risk of a reduction in the Corporation’s capital due to changes in the market valuation of its assets and/or

liabilities.

Most of the assets subject to market valuation risk are debt securities classified as available-for-sale. Refer to Notes 6 and 7 to the

Consolidated Financial Statements for further information on the debt securities available-for-sale and held-to-maturity portfolios.

Debt securities classified as available-for-sale amounted to $17.1 billion as of September 30, 2023. Other assets subject to market

risk include loans held-for-sale, which amounted to $5 million, mortgage servicing rights (“MSRs”) which amounted to $119 million,

and securities classified as “trading”, which amounted to $31 million, as of September 30, 2023.

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 reflect instantaneous parallel

changes of -100, -200, +100, +200 and +400 basis points during the succeeding twelve-month period. Simulation analyses are

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

spreads, loan prepayments and deposit elasticity. Thus, they should not be relied upon as indicative of actual results. Further, the

estimates 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 September 30, 2023 and December 31, 2022, assuming a static balance sheet and parallel changes

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

Table 11 - Net Interest Income Sensitivity (One Year Projection)

September 30, 2023

December 31, 2022

(Dollars in thousands)

Amount Change

Percent Change

Amount Change

Percent Change

Change in interest rate

+400 basis points

26,390

1.21

(38,402)

(1.75)

+200 basis points

13,661

0.63

(18,003)

(0.82)

+100 basis points

7,426

0.34

(7,748)

(0.35)

-100 basis points

25,732

1.18

8,778

0.40

-200 basis points

28,315

1.30

9,296

0.42

The results of the NII simulations at December 31, 2022 in the table above have been adjusted from those reported in the

Corporation’s Form 10-K to reflect the effect of changes in modeling assumptions in down rate scenario simulations for certain

variable rate loans. Specifically, the yield on certain variable rate loans that did not have contractual periodic floors, were not

correctly repricing in the down rate simulations.

Although as a result of such adjustment the magnitude of the Corporation’s sensitivity to decreases in interest rates becomes lower,

as of December 31, 2022, the NII simulations continue to show that the Corporation had a neutral to slightly liability sensitive

position driven by the rapid increase in short-term interest rates throughout the year and its impact on Puerto Rico public sector

deposits which are indexed to market rates, as well as the deployment of cash to fund loan growth and purchase investments. The

results as of such date suggest that changes in net interest income are driven by changes in liability costs, primarily Puerto Rico

public sector deposits. In declining rate scenarios net interest income would increase as the decline in the cost of these deposits

generates a greater benefit than the changes in asset yields. In rising rate scenarios Popular’s sensitivity profile is also impacted by

its large proportion of Puerto Rico public sector deposits which are indexed to market rates.

As of September 30, 2023, NII simulations show the Corporation has a relatively neutral sensitivity position as compared to a slightly

liability sensitive position as of December 31, 2022. The primary reasons for the variation in sensitivity are changes in balance sheet

composition driven by an increase in overnight Fed Funds and short-term U.S Treasury Bills (“T- Bills”) on the asset side partially

offset by higher Puerto Rico public sector deposits which are indexed to market rates. 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 in short-term investments such as T-Bills. Additionally, variation in liability cost,

primarily driven by Puerto Rico public sector deposits that represented $17.8 billion or 28% of deposits as of September 30, 2023,

also impact the sensitivity profile. In declining rate scenarios net interest income would increase as the decline in the cost of these

deposit generates a greater benefit than the changes in assets yields. 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 September 30, 2023, the Corporation held trading securities with a fair value of $31 million, representing approximately 0.04% of

the Corporation’s total assets, compared with $28 million and 0.04%, respectively, at December 31, 2022. As shown in Table 12, the

trading portfolio consists principally of mortgage-backed securities and U.S. Treasuries, which at September 30, 2023 were

investment grade securities.

Table 12 - Trading Portfolio

September 30, 2023

December 31, 2022

(Dollars in thousands)

Amount

Weighted

Average Yield

[1]

Amount

Weighted

Average Yield

[1]

Mortgage-backed securities

14,884

5.70

14,223

5.79

U.S. Treasury securities

15,644

4.71

13,069

3.26

Collateralized mortgage obligations

52

5.28

160

5.51

Puerto Rico government obligations

57

0.43

64

0.45

Interest-only strips

188

12.00

207

12.00

Other (includes related trading derivatives)

163

5.60

Total

30,988

5.23

27,723

4.63

[1] Not on a taxable equivalent basis.

The Corporation’s trading activities are limited by internal policies. For each of the two subsidiaries, the market risk assumed under

trading activities 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 $0.3 million for the last week in September 2023. There are

numerous assumptions and estimates associated with VAR modeling, and actual results could differ from these assumptions and

estimates. Backtesting is performed to compare actual results against maximum estimated losses, in order to evaluate model and

assumptions accuracy.

In the opinion of management, the size and composition of the trading portfolio does not represent a significant source of market risk

for the Corporation.

Liquidity

The objective of effective liquidity management is to ensure that the Corporation has sufficient liquidity to meet all of its financial

obligations, finance expected future growth, fund planned capital distributions and maintain a reasonable safety margin for cash

needs under both normal and stressed market conditions. The Board of Directors is responsible for establishing the Corporation’s

tolerance for liquidity risk, including approving relevant risk limits and policies. The Board of Directors has delegated the monitoring

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 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.

Deposits, including customer deposits, brokered deposits and public funds deposits, continue to be the most significant source of

funds for the Corporation, funding 91% of the Corporation’s total assets at September 30, 2023 and December 31, 2022. The ratio

of total ending loans to deposits was 54% at September 30, 2023 and 52% at December 31, 2022. In addition to traditional

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

at September 30, 2023 (December 31, 2022 - $1.4 billion). A detailed description of the Corporation’s borrowings, including their

terms, is included in Note 16 to the Consolidated Financial Statements. Also, the Consolidated Statements of Cash Flows in the

accompanying Consolidated Financial Statements provide information on the Corporation’s cash inflows and outflows.

The following sections provide further information 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. In addition, the Corporation maintains borrowing facilities with the FHLB and at the

discount window of the Federal Reserve Bank of New York (the “FRB”) and has a considerable amount of collateral pledged that

can be used to raise funds under these facilities.

During the third quarter of 2023 the Corporation had no material incremental use of its available liquidity sources. At September

30,2023, the Corporation’s available liquidity increased to $18.8 billion from $17.0 billion on December 31, 2022. The liquidity

sources of the Corporation at September 30,2023 are presented in Table 13:

Table 13 - Liquidity Sources

30-Sep-23

31-Dec-22

(Dollars in thousands)

BPPR

Popular U.S.

Total

BPPR

Popular U.S.

Total

Unpledged securities and unused funding

sources:

Money market (excess funds at the

Federal Reserve Bank)

5,533,314

850,248

6,383,562

5,240,100

367,966

5,608,066

Unpledged securities

3,927,353

273,313

4,200,666

7,494,189

326,599

7,820,788

FHLB borrowing capacity

2,236,318

1,420,913

3,657,231

1,389,579

722,005

2,111,584

Discount window of the Federal Reserve

Bank borrowing capacity

2,559,938

1,994,936

4,554,874

1,090,308

329,385

1,419,693

Total available liquidity

14,256,923

4,539,410

18,796,333

15,214,176

1,745,955

16,960,131

Refer to Note 16 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.

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.

Deposits are a key source of funding. Refer to Table 8 for a breakdown of deposits by major types. Core deposits are generated

from a large base of consumer, corporate and public sector customers. Core deposits include certificate of deposit under $250,000,

all interest-bearing transactional deposit accounts, non-interest bearing deposits, and savings deposits. Core deposits exclude

brokered deposits and certificate of deposits over $250,000. Core deposits, excluding P.R. public funds that are fully collateralized,

have historically provided the Corporation with 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 $58.8

billion, or 93% of total deposits, at September 30, 2023, compared with $57.6 billion, or 94% of total deposits, at December 31,

2022. Core deposits financed 89% of the Corporation’s earning assets at September 30, 2023, compared with 90% at December

31, 2022.

The distribution by maturity of certificates of deposits with denominations of $250,000 and over at September 30, 2023 is presented

in the table that follows:

Table 14 - Distribution by Maturity of Certificate of Deposits of $250,000 and Over

(In thousands)

3 months or less

1,836,911

Over 3 to 12 months

723,996

Over 1 year to 3 years

217,399

Over 3 years

165,956

Total

2,944,262

The Corporation had $1.7 billion in brokered deposits at September 30, 2023, which financed approximately 2% of its total assets

(December 31, 2022 - $1.1 billion and 2%, respectively). In the event that any of the Corporation’s banking subsidiaries’ regulatory

capital ratios fall below those required by a well-capitalized institution or are subject to capital restrictions by the regulators, that

banking subsidiary faces the risk of not being able to raise or maintain brokered deposits and faces limitations on the rate paid on

deposits, which may hinder the Corporation’s ability to effectively compete in its retail markets and could affect its deposit raising

efforts.

Deposits from the public sector represent an important source of funds for the Corporation. As of September 30, 2023, total public

sector deposits were $17.8 billion, compared to $15.8 billion at December 31, 2022. Generally, these deposits require that the bank

pledge high credit quality securities as collateral; therefore, liquidity risks arising from public sector deposit outflows are lower given

that the bank receives its collateral in return. This, now unpledged, collateral can either be financed via repurchase agreements or

sold for cash. However, there are some timing differences between the time the deposit outflow occurs and when the bank receives

its collateral. Additionally, the Corporation mainly utilizes fixed-rate U.S. Treasury debt securities as collateral. While these

securities have limited credit risk, they are subject to market value risk based on changes in the interest rate environment. When

interest rates increase, the value 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.

At September 30, 2023, management believes that the banking subsidiaries had sufficient current and projected liquidity sources to

meet their anticipated cash flow obligations, as well as special needs and off-balance sheet commitments, in the ordinary course of

business and have sufficient liquidity resources to address a stress event. Although the banking subsidiaries have historically been

able to replace maturing deposits and advances, no assurance can be given that they would be able to replace those funds in the 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 banking subsidiaries also are required to deposit cash or qualifying securities to meet margin requirements on repurchase agreements and other collateralized borrowing facilities. To the extent that the value of securities previously pledged as collateral declines because of market changes, the Corporation will be required to deposit additional cash or securities to meet its margin requirements, thereby adversely affecting its liquidity. Finally, if management is required to rely more heavily on more expensive funding sources to meet its future growth, revenues may not increase proportionately to cover costs. In this case, profitability would be adversely affected.

The Corporation monitors uninsured deposits under applicable FDIC regulations. Additionally, the Corporation monitors accounts

with balances over $250,000. While the Corporation has a diverse deposit base from retail, commercial, corporate and government

clients, 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 U.S.V.I.,

that are collateralized based on such jurisdictions’ applicable collateral requirements. On September 30,2023, deposits with

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

collateralized public funds, were $11.3 billion or 21% at BPPR and $2.4 billion or 23% at Popular U.S., compared to available

liquidity sources of $ 14.3 billion at BPPR and $ 4.5 billion at Popular U.S.

Table 15 - Deposits

30-Sep-23

Popular, Inc.

(Dollars in thousands)

BPPR

% of Total

Popular U.S.

% of Total

(Consolidated)

% of Total

Deposits:

Deposits balances under $250,000 [1]

23,971,025

45

6,965,757

67

30,936,782

49

Transactional deposits balances over

$250,000

9,396,047

17

2,056,655

20

11,452,702

18

Time deposits balances over $250,000

1,948,475

4

297,277

3

2,245,752

3

Uninsured foreign deposits

403,206

1

403,206

1

Collateralized public funds

18,012,588

33

286,570

3

18,299,158

29

Intercompany deposits

107,293

696,101

7

Total deposits

53,838,634

100

10,302,360

100

63,337,600

100

[1] Includes the first $250,000 in balances of transactional and time deposit accounts with balances in excess of $250,000.

31-Dec-22

Popular, Inc.

(Dollars in thousands)

BPPR

% of Total

Popular U.S.

% of Total

(Consolidated)

% of Total

Deposits

Deposits balances under $250,000 [1]

24,505,697

46

5,231,417

60

29,737,114

49

Transactional deposits balances over

$250,000

9,957,877

19

2,674,841

31

12,632,718

21

Time deposits balances over $250,000

1,920,455

4

167,067

2

2,087,522

3

Uninsured foreign deposits

425,855

1

425,855

1

Collateralized public funds

16,233,342

31

110,676

1

16,344,018

27

Intercompany deposits

135,172

482,167

6

Total deposits

53,178,398

100

8,666,168

100

61,227,227

100

[1] Includes the first $250,000 in balances of transactional and time deposit accounts with balances in excess of $250,000.

Bank Holding Companies

The principal sources of funding for the BHCs, which are Popular, Inc. (holding company only) and PNA, include cash on hand,

investment securities, dividends received from banking and non-banking subsidiaries, asset sales, credit facilities available from

affiliate banking subsidiaries and proceeds from potential securities offerings. Dividends from banking and non-banking subsidiaries

are subject to various regulatory limits and authorization requirements that are further described below and that may limit the ability

of those subsidiaries to act as a source of funding to the BHCs.

The principal use of these funds includes 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 $592 million at September 30, 2023 and $497 million at

December 31, 2022.

The contractual maturities of the BHCs notes payable at September 30, 2023 are presented in Table 16.

Table 16 - Distribution of BHC's Notes Payable by Contractual Maturity

Year

(In thousands)

2028

393,678

Later years

198,339

Total

592,017

As of September 30, 2023, the BHCs had cash and money markets investments totaling $368 million and borrowing potential of

$222 million from its secured facility with BPPR. The BHCs’ liquidity position continues to be adequate with sufficient cash on hand,

investments and other sources of liquidity which are expected to be enough to meet all interest payments and dividend obligations

during the foreseeable future. On March 13, 2023, the Corporation issued $400 million aggregate principal amount of 7.25% Senior

Notes due 2028 (the “Notes”) in an underwritten public offering. The Corporation used a portion of the net proceeds of the 2028

Notes offering to redeem, on August 14, 2023, the outstanding $300 million aggregate principal amount of its outstanding 6.125%

Senior Notes which were due on September 2023. For the remainder of year 2023, debt service at the BHCs is approximately $11

million. Additionally, the Corporation’s latest quarterly dividend was $0.55 per share or approximately $40 million per quarter.

The BHCs have in the past borrowed in the corporate debt market primarily to finance their non-banking subsidiaries and refinance

debt obligations. These sources of funding are more costly due to the fact that two out of the three principal credit rating agencies

rate the Corporation below “investment grade”, which affects the Corporation’s cost and ability to raise funds in the capital markets.

Factors that the Corporation does not control, such as the economic outlook, interest rate volatility, inflation, disruptions in the debt

market, among others, could also affect its ability to obtain funding. The Corporation has an automatic shelf registration statement

filed and effective with the Securities and Exchange Commission, which permits the Corporation to issue an unspecified amount of

debt or equity securities.

Non-Banking Subsidiaries

The principal sources 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 nine

months ended September 30, 2023, Popular, Inc. made capital contributions to its wholly owned subsidiaries of $1.3 million to

Popular Impact Fund and $0.2 million to Popular Global Solutions.

Dividends

During the nine months ended September 30, 2023, the Corporation declared cash dividends of $1.65 per common share

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

During the nine months ended September 30, 2023, the BHCs received dividends amounting to $150 million from BPPR, $50 million

from PNA and $4 million from its non-banking subsidiaries. In addition, during the nine months ended September 30, 2023, Popular

International Bank Inc., wholly owned subsidiary of Popular, Inc., received $14.1 million in cash dividends and $2.1 million in stock

dividends from its investment in BHD. Dividends from BPPR constitute Popular, Inc.’s primary source of liquidity.

Other Funding Sources and Capital

In addition to cash reserves held at the FRB that totaled $ 6.4 billion at September 30,2023, the debt securities portfolio provides an

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

unpledged debt securities amounted to $ 4.2 billion at September 30, 2023 and $ 7.8 billion at December 31, 2022. A substantial

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

to changes in their fair market value and customary adjustments (haircuts).

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 21 to the Consolidated Financial Statements for information on the Corporation’s commitments to extent credit and

other non-credit commitments.

Other types of off-balance sheet arrangements that the Corporation enters in the ordinary course of business include derivatives,

operating leases and provision of guarantees, indemnifications, and representation and warranties. Refer to Note 28 to the

Consolidated Financial Statements for information on operating leases and to Note 20 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 May 11, 2023, the Federal Deposit Insurance Corporation (“FDIC”) released a proposed rule that would impose special

assessments to recover the losses to the deposit insurance fund (“DIF”) 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 Silicon Valley Bank and Signature Bank.

The FDIC stated that it currently estimates those assessed losses to total $15.8 billion and that the amount of the special

assessments would be adjusted as the loss estimate changes. Under the proposed rule, the assessment base would be an insured

depository institution’s (“IDI”) estimated uninsured deposits, as reported in the IDI’s December 31, 2022 Call Report, excluding the

first $5 billion in estimated uninsured deposits. For a holding company that has more than one IDI subsidiary, such as the

Corporation, the $5 billion exclusion would be allocated among the company’s IDI subsidiaries in proportion to each IDI’s estimated

uninsured deposits. The special assessments would be collected at an annual rate of approximately 12.5 basis points per year (3.13

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

first assessment payment due by June 28, 2024). Under the proposed rule, the estimated loss pursuant to the systemic risk

determination would be periodically adjusted, and the FDIC would retain the ability to cease collection early, extend the special

assessment collection period and impose a final shortfall special assessment on a one-time basis. In their December 31, 2022 Call

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

the proposal could be changed, the assessments, as proposed, would be recorded as an expense in the period in which this change

is enacted. Such expense would significantly affect noninterest expense and the results of operations for the quarter in which it is

recognized. If the final rule is adopted as proposed, the special assessment for the Corporation is estimated at approximately $66

million. The actual assessment may vary as a result of the final rule, including any changes to the calculation methodology.

Financial information of guarantor and issuers of registered guaranteed securities

The Corporation (not including any of its subsidiaries, “PIHC”) is the parent holding company of Popular North America “PNA” and

has other subsidiaries through which it conducts its financial services operations. PNA is an operating, 100% subsidiary of Popular,

Inc. Holding Company (“PIHC”) and is the holding company of its wholly-owned subsidiaries: Equity One, Inc. and PB, including

PB’s wholly-owned subsidiaries Popular Equipment Finance, LLC, Popular Insurance Agency, U.S.A., and E-LOAN, Inc.

PNA has issued junior subordinated debentures guaranteed 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 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

September 30, 2023 and December 31, 2022, and the results of their operations for the nine months period ended September 30,

2023 and September 30, 2022. Investments in and equity 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.

Table 17 - Summarized Statement of Condition

(In thousands)

September 30, 2023

December 31, 2022

Assets

Cash and money market investments

367,808

203,083

Investment securities

28,426

24,815

Accounts receivables from non-obligor subsidiaries

12,296

16,853

Other loans (net of allowance for credit losses of $17 (2022 - $370))

27,255

27,826

Investment in equity method investees

5,268

5,350

Other assets

56,678

45,278

Total assets

497,731

323,205

Liabilities and Stockholders' deficit

Accounts payable to non-obligor subsidiaries

11,302

3,709

Notes payable

592,017

497,428

Other liabilities

108,535

112,847

Stockholders' deficit

(214,123)

(290,779)

Total liabilities and stockholders' deficit

497,731

323,205

Table 18 - Summarized Statement of Operations

For the period ended

(In thousands)

September 30, 2023

September 30, 2022

Income:

Dividends from non-obligor subsidiaries

154,000

454,000

Interest income from non-obligor subsidiaries and affiliates

12,280

594

(Losses) earnings from investments in equity method investees

(82)

15,698

Other operating income

2,293

136,140

Total income

168,491

606,432

Expenses:

Services provided by non-obligor subsidiaries and affiliates (net of

reimbursement by subsidiaries for services provided by parent of

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

16,593

12,697

Other operating expenses

20,706

19,399

Total expenses

37,299

32,096

Net income

131,192

574,336

During the nine months period ended September 30, 2022, the Obligor group recorded $1.5 million of distributions from its

direct equity method investees. During the nine months period ended September 30, 2023, the obligor group recorded a

$50.0 million of dividend dsitribution from a non-obligor subsidiary wich was recorded as a reduction to the investment

(2022 - $53.5 million).

Risks to Liquidity

Total lines of credit outstanding, or available borrowing capacity under lines of credit are not necessarily a measure of the total credit

available on a continuing basis. Some of these lines could 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, 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 economic and fiscal conditions in Puerto Rico, the credit quality of the Corporation could be affected

and result in higher credit costs. Refer to the Geographic and Government Risk section of this MD&A for some highlights on the

current status of the Puerto Rico economy and the ongoing fiscal crisis.

Factors that the Corporation does not control, such as the economic outlook and credit ratings of its principal markets and regulatory

changes, could also affect its ability to obtain funding. In order to prepare for the possibility of such scenario, management has

adopted contingency plans for raising financing under stress scenarios when important sources of funds that are usually fully

available are temporarily unavailable. 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 total of its net income for that

year, combined with its retained net income for the preceding two years, after considering those years’ dividend activity, less any

required transfers to surplus or to a fund for the retirement of any preferred stock. During the nine months ended September 30,

2023, BPPR declared cash dividends of $150 million. At September 30, 2023, BPPR can declare a dividend of approximately $402

million without prior approval of the Federal Reserve Board due to its retained income, declared dividend activity and transfers to

statutory reserves over the measurement period. 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. Pursuant to these requirements, PB may not declare or

pay a dividend without the prior approval of the Federal Reserve Board and the NYSDFS. The ability of a bank subsidiary to up-

stream dividends to its BHC could thus be impacted by its financial performance and capital, including tangible and regulatory

capital, thus potentially limiting the amount of cash moving up to the BHCs from the banking subsidiaries. This could, in turn, affect

the BHCs ability to declare dividends on its outstanding common and preferred stock, repurchase its securities or meet its debt

obligations, for example.

The Corporation’s banking subsidiaries have historically not used unsecured capital market borrowings to finance its operations, and

therefore are less sensitive to the level and changes in the Corporation’s overall credit ratings.

Obligations Subject to Rating Triggers or Collateral Requirements

The Corporation’s banking subsidiaries currently 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 September 30, 2023 that

are subject to rating triggers.

In addition, certain mortgage servicing and custodial agreements that BPPR has with third parties include rating covenants. In the

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

escrow deposits and/or increase collateral levels securing the recourse obligations. Also, as discussed in Note 20 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 obligations amounted to

approximately $27.8 million at September 30, 2023. 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 33 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 3.3% year-over-year increase and a 0.2% month-over-month decrease in August 2023. The Economic

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

Puerto Rico Planning Board revised its real GNP forecast for the current fiscal year (July 2022-June 2023) from 1.7% growth to

0.7% growth, citing an anticipated deacceleration in the global economy.

While the Puerto Rico economy has not directly tracked the United States economy in recent years, many of the external factors

that impact the Puerto Rico economy are affected by the policies and performance of the United States economy. These external

factors include the level of interest rates and the rate of inflation. Inflation in the United States, as measured by the United States

Consumer Price Index (published by the U.S. Bureau of Labor Statistics), increased 3.7% during the 12-month period ended

September 2023. Inflation in Puerto Rico, as measured by the Puerto Rico Consumer Price Index (published by the Department of

Labor and Human Resources of Puerto Rico), increased 3.3% during the 12-month period ended September 2023. The rate of

inflation has gradually decreased from a mid-2022 peak, as the Federal Reserve has implemented a series of benchmark interest

rate increases. The speed and scope of the inflation slowdown will inform if and how much interest rates will continue to increase, as

well how these changes will impact the United States and Puerto Rico economies.

Fiscal Challenges.

As the Puerto Rico economy contracted, the government’s public debt rose rapidly, in part from borrowing to cover deficits to pay

debt service, pension benefits and other government expenditures. By 2016, the Puerto Rico government had over $120 billion in

combined debt and unfunded pension liabilities, had lost access to the capital markets, and was in the midst of a fiscal crisis.

Puerto Rico’s escalating fiscal and economic challenges and imminent widespread defaults 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 range of obligations, and (b) Title VI, which provides for a largely out-of-court process through which modifications to financial debt can be accepted by a supermajority of creditors and bind holdouts.

Since 2017, Puerto Rico and several of its instrumentalities have availed themselves of the debt restructuring mechanisms of Titles

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

including Government Development Bank for Puerto Rico, the Puerto Rico Sales Tax Financing Corporation, and the Puerto Rico

Highways and Transportation Authority, have also completed debt restructurings under Titles III 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 and the

Puerto Rico Industrial Development Company recently commenced a solicitation process to restructure its revenue bonds in a

proceeding under Title VI of PROMESA.

Municipalities.

Puerto Rico’s fiscal and economic challenges have also adversely impacted its municipalities. Budgetary subsidies to municipalities

have gradually declined in recent years and were scheduled to be ultimately eliminated by fiscal year 2025 as part of the fiscal

measures required by the Oversight Board. However, over the past years, the Oversight Board has authorized and funded new

appropriations and investments to offset the decline in intergovernmental transfers to municipalities. Beyond those sources of

alternate funding, municipalities have also received significant federal disaster and COVID-relief funding in recent years. According

to the latest Puerto Rico fiscal plan certified by the Oversight Board, taken together, the funding available to municipalities in the

near-term is substantial. The fiscal plan notes, however, that the desired progress to achieve fiscal discipline and implement critical

reforms has not been achieved, and that municipalities must work with the Executive branch to analyze the financial needs of each

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

initiatives. Pursuant to the fiscal plan, once the transformational measures and milestones related to these initiatives are achieved,

additional funding from the central government may be made available to municipalities to improve fiscal sustainability.

Municipalities are subject to PROMESA and, at the Oversight Board’s request, are required to submit fiscal plans and annual

budgets to the Oversight Board for its review and approval. They 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 September 30, 2023, the Corporation’s direct exposure to PR Government Entities totaled $362 million, of which $333 million

were outstanding, compared to $374 million at December 31, 2022, of which $327 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, $314 million consists of loans and $19 million are securities ($302 million and $25 million,

respectively, at December 31, 2022). All of the Corporation’s direct exposure outstanding at September 30, 2023 were obligations

from various Puerto Rico municipalities. In most cases, these were “general obligations” of a municipality, to which the applicable

municipality has pledged its good faith, credit and unlimited taxing power, or “special obligations” of a municipality, to which the

applicable municipality has pledged basic property tax or sales tax revenues. At September 30, 2023, 76% of the Corporation’s

exposure to municipal loans and securities was concentrated in the municipalities of San Juan, Guaynabo, Carolina and Caguas.

For additional discussion of the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and

municipalities, refer to Note 21 – Commitments and Contingencies to the Consolidated Financial Statements.

In addition, at September 30, 2023, the Corporation had $242 million in loans insured or securities issued by Puerto Rico

governmental entities, but for which the principal source of repayment is non-governmental ($251 million at December 31, 2022).

These included $195 million in residential mortgage loans insured by the Puerto Rico Housing Finance Authority (“HFA”), a PR

Government Entity (December 31, 2022 - $209 million). These mortgage loans are secured by first mortgages on Puerto Rico residential properties and the HFA insurance covers losses in the event of a borrower default and upon the satisfaction of certain other conditions. The Corporation also had at September 30, 2023, $40 million in bonds issued by HFA which are secured by second mortgage loans on Puerto Rico residential properties, and for which HFA also provides insurance to cover losses in the event of a borrower default, and upon the satisfaction of certain other conditions (December 31, 2022 - $42 million). In the event that the mortgage loans insured by HFA and held by the Corporation directly or those serving as collateral for the HFA bonds default and the collateral is insufficient to satisfy the outstanding balance of these loans, HFA’s ability to honor its insurance will depend, among other factors, on the financial condition of HFA at the time such obligations become due and payable. The Corporation does not consider the government guarantee when estimating the credit losses associated with this portfolio.

BPPR’s commercial loan portfolio also includes loans 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 September 30, 2023, BPPR had $17.8 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.

The Corporation may also have direct exposure with regards to avoidance and other causes of action initiated by the Oversight

Board on behalf of the Commonwealth or other Title III debtors. For additional information regarding such exposure, refer to Note 21

to the Consolidated Financial Statements.

United States Virgin Islands

The Corporation has operations 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 September 30, 2023, the Corporation had approximately $28 million in direct exposure to USVI government entities (December

31, 2022 - $28 million).

British Virgin Islands

The Corporation has operations 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 September 30, 2023, it has a loan portfolio amounting to

approximately $201 million comprised of various retail and commercial clients, compared to a loan portfolio of $214 million at

December 31, 2022.

U.S. Government

As further detailed in Notes 6 and 7 to the Consolidated Financial Statements, a substantial portion of the Corporation’s investment

securities represented exposure 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, $1.7 billion of residential mortgages, $10 million of SBA loans under the

Paycheck Protection Program (“PPP”) and $72 million commercial loans were insured or guaranteed by the U.S. Government or its

agencies at September 30, 2023 (compared to $1.6 billion, $38 million and $72 million, respectively, at December 31, 2022).

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 21.

During the third quarter of 2023, the Corporation continued to reflect stable credit quality metrics. Non-performing loans (“NPLs”)

and net charge offs (“NCOs”) continued below historical pre-pandemic averages. Consumer portfolios, however, reflected increased

delinquencies and NCOs for the quarter primarily due to the expected continued credit normalization. We continue to closely monitor

changes in the macroeconomic environment and on borrower performance, especially our unsecured consumer loans, 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 positions Popular to continue to operate successfully

under the current environment.

Total NPAs decreased by $85 million when compared with December 31, 2022. Total non-performing loans held-in-portfolio

(“NPLs”) decreased by $78 million from December 31, 2022. BPPR’s NPLs decreased by $68 million, mainly driven by lower

mortgage, consumer and commercial NPLs by $55 million, $11 million, and $10 million respectively, in part offset by higher

construction NPLs by $7 million. The consumer NPLs decrease was mostly driven by a $11 million line of credit charge-off on a

single relationship, while the construction NPLs increase was driven by a $9 million relationship, which impairment amount of $3

million was charged-off during the third quarter of 2023. Popular U.S. NPLs decreased by $10 million from December 31, 2022,

mainly driven by lower mortgage NPLs by $9 million. On September 30, 2023, the ratio of NPLs to total loans held-in-portfolio was

1.1% compared to 1.4%, at December 31, 2022. Other real estate owned loans (“OREOs”) decreased by $7 million. On September

30, 2023, NPLs secured by real estate amounted to $255 million in the Puerto Rico operations and $23 million in Popular U.S,

compared with $303 million and $33 million, respectively, at December 31, 2022.

The Corporation’s commercial loan portfolio secured by real estate (“CRE”) amounted to $10.4 billion at September 30, 2023, of

which $3.0 billion was secured with owner occupied properties, compared with $9.9 billion and $3.1 billion, respectively, at

December 31, 2022. Office space leasing exposure in our non-owner occupied CRE portfolio is limited, representing only 1.9% or

$635 million of our total loan portfolio. The exposure is mainly comprised of low- to mid- rise properties with average loan size of

$2.1 million and is well diversified across tenant type.

CRE NPLs amounted to $56 million at September 30, 2023, compared with $54 million at December 31, 2022. The CRE NPL ratios

for the BPPR and Popular U.S. segments were 1.09% and 0.09%, respectively, at September 30, 2023, compared with 1.04% and

0.12%, respectively, at December 31, 2022.

In addition to the NPLs included in Table 21, at September 30, 2023, there were $519 million of performing loans, mostly

commercial loans, which in management’s opinion, are currently subject to potential future classification as non-performing

(December 31, 2022 - $374 million).

For the quarter ended September 30, 2023, total inflows of NPLs held-in-portfolio, excluding consumer loans, decreased by $12

million, when compared to the inflows for the same period in 2022. Inflows of NPLs held-in-portfolio at the BPPR segment increased

slightly by $2 million, compared to the same period in 2022. Inflows of NPLs held-in-portfolio at the Popular U.S. segment decreased

by $14 million from the same period in 2022, mainly driven by lower commercial inflows.

Table 19 - Non-Performing Assets

September 30, 2023

December 31, 2022

(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

184

404

588

242

242

Commercial real estate non-owner

occupied

15,330

734

16,064

0.3

23,662

1,454

25,116

0.6

Commercial real estate owner

occupied

35,089

3,877

38,966

1.3

23,990

5,095

29,085

0.9

Commercial and industrial

21,624

3,579

25,203

0.4

34,277

4,319

38,596

0.7

Total Commercial

72,227

8,594

80,821

0.5

82,171

10,868

93,039

0.6

Construction

6,578

6,578

0.7

Leasing

6,842

6,842

0.4

5,941

5,941

0.4

Mortgage

187,443

11,980

199,423

2.6

242,391

20,488

262,879

3.6

Consumer

Home equity lines of credit

4,085

4,085

6.1

4,110

4,110

5.7

Personal

18,582

2,637

21,219

1.1

18,082

1,958

20,040

1.1

Auto

40,268

40,268

1.1

40,978

40,978

1.2

Other Consumer

1,885

402

2,287

1.4

12,446

8

12,454

8.4

Total Consumer

60,735

7,124

67,859

1.0

71,506

6,076

77,582

1.2

Total non-performing loans held-in-

portfolio

333,825

27,698

361,523

1.1

402,009

37,432

439,441

1.4

Other real estate owned (“OREO”)

82,115

207

82,322

88,773

353

89,126

Total non-performing assets

[1]

415,940

27,905

443,845

490,782

37,785

528,567

Accruing loans past due 90 days or

more

[2]

264,082

130

264,212

351,248

366

351,614

Ratios:

Non-performing assets to total assets

0.75

0.20

0.64

0.89

0.30

0.78

Non-performing loans held-in-portfolio

to loans held-in-portfolio

1.40

0.27

1.06

1.78

0.39

1.37

Allowance for credit losses to loans

held-in-portfolio

2.63

0.84

2.09

2.73

1.10

2.25

Allowance for credit losses to non-

performing loans, excluding held-for-

sale

187.08

312.42

196.69

153.12

279.86

163.91

[1] There were no non-performing loans held-for-sale as of September 30, 2023 and December 31, 2022.

[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 $115 million of residential mortgage

loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of September 30, 2023 (December 31, 2022 - $190 million).

Furthermore, the Corporation has approximately $39 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, 2022 - $42 million).

Table 20 - Activity in Non -Performing Loans Held-in-Portfolio (Excluding Consumer Loans)

For the quarter ended September 30, 2023

For the nine months ended September 30, 2023

(Dollars in thousands)

BPPR

Popular U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Beginning balance

292,219

26,187

318,406

324,562

31,356

355,918

Plus:

New non-performing loans

37,393

5,827

43,220

128,011

23,446

151,457

Advances on existing non-performing loans

12

12

155

155

Less:

Non-performing loans transferred to OREO

(5,657)

(5,657)

(25,777)

(58)

(25,835)

Non-performing loans charged-off

(3,354)

(2,446)

(5,800)

(4,854)

(4,837)

(9,691)

Loans returned to accrual status / loan collections

(54,353)

(9,006)

(63,359)

(155,694)

(29,488)

(185,182)

Ending balance NPLs

266,248

20,574

286,822

266,248

20,574

286,822

Table 21 - Activity in Non -Performing Loans Held-in-Portfolio (Excluding Consumer Loans)

For the quarter ended September 30, 2022

For the nine months ended September 30, 2022

(Dollars in thousands)

BPPR

Popular U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Beginning balance

381,163

27,638

408,801

454,419

27,501

481,920

Plus:

New non-performing loans

35,258

19,704

54,962

117,909

38,621

156,530

Advances on existing non-performing loans

67

67

2,817

2,817

Less:

Non-performing loans transferred to OREO

(5,956)

(5,956)

(30,893)

(85)

(30,978)

Non-performing loans charged-off

(5,223)

(48)

(5,271)

(7,192)

(337)

(7,529)

Loans returned to accrual status / loan collections

(65,021)

(9,400)

(74,421)

(194,022)

(30,556)

(224,578)

Ending balance NPLs

340,221

37,961

378,182

340,221

37,961

378,182

Table 22 - Activity in Non -Performing Commercial Loans Held-in-Portfolio

For the quarter ended September 30, 2023

For the nine months ended September 30, 2023

(Dollars in thousands)

BPPR

Popular U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Beginning balance

88,716

11,610

100,326

82,171

10,868

93,039

Plus:

New non-performing loans

2,736

1,324

4,060

22,533

11,674

34,207

Advances on existing non-performing loans

7

7

35

35

Less:

Non-performing loans transferred to OREO

(138)

(138)

(446)

(446)

Non-performing loans charged-off

(969)

(2,446)

(3,415)

(2,237)

(4,837)

(7,074)

Loans returned to accrual status / loan

collections

(18,118)

(1,901)

(20,019)

(29,794)

(9,146)

(38,940)

Ending balance NPLs

72,227

8,594

80,821

72,227

8,594

80,821

Table 23 - Activity in Non -Performing Commercial Loans Held-in-Portfolio

For the quarter ended September 30, 2022

For the nine months ended September 30, 2022

(Dollars in thousands)

BPPR

Popular U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Beginning balance

96,493

7,446

103,939

120,047

5,532

125,579

Plus:

New non-performing loans

5,913

14,965

20,878

13,706

25,289

38,995

Advances on existing non-performing loans

12

12

2,518

2,518

Less:

Non-performing loans transferred to OREO

(352)

(352)

(4,318)

(4,318)

Non-performing loans charged-off

(4,534)

(48)

(4,582)

(5,741)

(210)

(5,951)

Loans returned to accrual status / loan collections

(10,072)

(5,947)

(16,019)

(36,246)

(16,701)

(52,947)

Ending balance NPLs

87,448

16,428

103,876

87,448

16,428

103,876

Table 24 - Activity in Non -Performing Construction Loans Held-in-Portfolio

For the quarter ended September 30, 2023

For the nine months ended September 30, 2023

(Dollars in thousands)

BPPR

Popular U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Beginning balance

9,284

9,284

Plus:

New non-performing loans

9,284

9,284

Less:

Non-performing loans charged-off

(2,537)

(2,537)

(2,537)

(2,537)

Loans returned to accrual status / loan collections

(169)

(169)

(169)

(169)

Ending balance NPLs

6,578

6,578

6,578

6,578

Table 25 - Activity in Non -Performing Construction Loans Held-in-Portfolio

For the quarter ended September 30, 2022

For the nine months ended September 30, 2022

(Dollars in thousands)

BPPR

Popular U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Beginning balance

485

485

Less:

Loans returned to accrual status / loan collections

(485)

(485)

Ending balance NPLs

Table 26 - Activity in Non -Performing Mortgage Loans Held-in-Portfolio

For the quarter ended September 30, 2023

For the nine months ended September 30,

2023

(Dollars in thousands)

BPPR

Popular

U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Beginning balance

194,219

14,577

208,796

242,391

20,488

262,879

Plus:

New non-performing loans

34,657

4,503

39,160

96,194

11,772

107,966

Advances on existing non-performing loans

5

5

120

120

Less:

Non-performing loans transferred to OREO

(5,519)

(5,519)

(25,331)

(58)

(25,389)

Non-performing loans charged-off

152

152

(80)

(80)

Loans returned to accrual status / loan

collections

(36,066)

(7,105)

(43,171)

(125,731)

(20,342)

(146,073)

Ending balance NPLs

187,443

11,980

199,423

187,443

11,980

199,423

Table 27 - Activity in Non -Performing Mortgage Loans Held-in-Portfolio

For the quarter ended September 30, 2022

For the nine months ended September 30, 2022

(Dollars in thousands)

BPPR

Popular

U.S.

Popular, Inc.

BPPR

Popular U.S.

Popular, Inc.

Beginning balance

284,670

20,192

304,862

333,887

21,969

355,856

Plus:

New non-performing loans

29,345

4,739

34,084

104,203

13,332

117,535

Advances on existing non-performing loans

55

55

299

299

Less:

Non-performing loans transferred to OREO

(5,604)

(5,604)

(26,575)

(85)

(26,660)

Non-performing loans charged-off

(689)

(689)

(1,451)

(127)

(1,578)

Loans returned to accrual status / loan collections

(54,949)

(3,453)

(58,402)

(157,291)

(13,855)

(171,146)

Ending balance NPLs

252,773

21,533

274,306

252,773

21,533

274,306

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 September 30, 2023 and December 31, 2022, are presented below.

Table 28 - Loan Delinquen cies

(Dollars in thousands)

September 30, 2023

December 31, 2022

Loans delinquent

30 days or more

Total loans

Total delinquencies

as a percentage

of total loans

Loans delinquent

30 days or more

Total loans

Total delinquencies

as a percentage

of total loans

Commercial

Commercial multi-family

6,503

2,328,433

0.28

2,844

2,321,713

0.12

Commercial real estate

non-owner occupied

19,966

5,035,130

0.40

26,969

4,499,670

0.60

Commercial real estate

owner occupied

42,643

3,044,905

1.40

30,059

3,078,549

0.98

Commercial and industrial

37,656

6,527,082

0.58

59,604

5,839,200

1.02

Total Commercial

106,768

16,935,550

0.63

119,476

15,739,132

0.76

Construction

6,578

922,112

0.71

757,984

Leasing

29,331

1,698,114

1.73

21,487

1,585,739

1.36

Mortgage

[1]

808,310

7,585,111

10.66

937,253

7,397,471

12.67

Consumer

Credit cards

37,070

1,077,428

3.44

24,065

1,041,870

2.31

Home equity lines of credit

5,491

67,499

8.13

4,684

71,916

6.51

Personal

57,578

1,952,168

2.95

45,299

1,823,579

2.48

Auto

152,740

3,633,196

4.20

129,089

3,512,530

3.68

Other

3,622

158,135

2.29

13,264

147,548

8.99

Total Consumer

256,501

6,888,426

3.72

216,401

6,597,443

3.28

Loans held-for-sale

5,239

5,381

Total

1,207,488

34,034,552

3.55

1,294,617

32,083,150

4.04

[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 September

30, 2023 (December 31, 2022 - $0.5 billion). Refer to Note 8 to the Consolidated Financial Statements for additional information of guaranteed loans.

Allowance for Credit Losses Loans Held-in-Portfolio

The Corporation adopted the new CECL accounting standard effective on January 1, 2020. The allowance for credit losses (“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 to borrowers with financial difficulty, including legacy troubled debt restructurings,

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 evaluates, at least

on an annual basis, the assumptions tied to the CECL accounting framework, including the reasonable and supportable period as

well as the reversion window.

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.

The ACL incorporated updates macroeconomic scenarios for Puerto Rico and the United States. 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, and then the optimistic scenario.

The 2023 annualized GDP growth in the baseline scenario improved to 1.7% and 2.0% for Puerto Rico and the United States,

respectively, compared to 1.5% and 1.6% in the previous quarter. The 2023 forecasted average unemployment rate for Puerto Rico

improved to 6.1% from 6.3% in the previous forecast, while in the United States unemployment levels remained at 3.6%, stable

when compared to the previous forecast.

At September 30, 2023, the allowance for credit losses amounted to $711 million, a decrease of $9 million, when compared with

December 31, 2022. In PB the ACL decreased by $18 million from December 31, 2022, while in BPPR the ACL increased by $9

million. The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02 in March 2022,

which eliminates the accounting guidance for troubled debt restructures (“TDRs”) and the requirement to measure the effect of the

concession from a loan modification, for which the Corporation used a discounted cash flow (“DCF”) method. This impact resulted in

a release in the ACL of approximately $46 million presented as an adjustment to the beginning balance of retained earnings, net of

tax effect.

Excluding ASU 2022-02 impact, the ACL for BPPR increased by $51 million, while the ACL for Popular U.S decreased by $15

million from December 31, 2022. The increase in BPPR were mostly driven by higher reserves for the auto and personal loans

portfolios attributable to credit normalization, changes in macroeconomic scenarios, and loan growth, partially offset by changes in

the assignments of probability weights to macroeconomic scenarios, as previously mentioned, and reductions in qualitative

reserves. In PB, the ACL decrease was mostly due to the implementation of a new model for the U.S. commercial real estate

portfolio. The new model is based on more granular regional information for the Corporation’s portfolio and accounted for $15 million

of PB’s reduction in ACL.

As part of the Corporation’s model governance procedures a new model was implemented for the U.S commercial real estate

segment. The new model enhances techniques used to capture default activity within the Corporation’s geographical footprint. This

enhancement is considered a change in estimate. As part of the implementation analysis management evaluated the credit metrics

of the portfolio such as risk ratings, delinquency levels, and low exposure to the commercial office sector. Qualitative reserves

continue to be maintained to address risks within the U. S. commercial real estate segment.

The Corporation’s ratio of the allowance for credit losses to loans held-in-portfolio was 2.09% on September 30, 2023, compared to

2.25% on December 31, 2022. The ratio of the allowance for credit losses to NPLs held-in-portfolio stood at 196.7%, compared to

163.9% on December 31, 2022.

The provision for credit losses for the period ended September 30, 2023, amounted to an expense of $44 million, compared to an

expense of $40 million for the period ended September 30, 2022. The provision expense related to the loans-held-in-portfolio for the

nine-month period ended September 30, 2023 was $126 million, compared to an expense of $35 million for the nine-month period

ended September 30,2022, as the prior period included reductions in reserves due to post-pandemic improvements in the

macroeconomic outlook and lower NCOs. Refer to Note 9 – Allowance for credit losses – loans held-in-portfolio to the Consolidated

Financial Statements, and to the Provision for Credit Losses section of this MD&A for additional information.

Table 29 - Allowance for Credit Losses - Loan Portfolios

September 30, 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

Commercial multi-family

15,223

2,328,433

0.65

588

N.M.

Commercial real estate non-owner occupied

67,149

5,035,130

1.33

16,064

418.01

Commercial real estate owner occupied

48,109

3,044,905

1.58

38,966

123.46

Commercial and industrial

103,585

6,527,082

1.59

25,203

411.00

Total Commercial

234,066

16,935,550

1.38

80,821

289.61

Construction

10,971

922,112

1.19

6,578

166.78

Leasing

10,198

1,698,114

0.60

6,842

149.05

Mortgage

91,904

7,585,111

1.21

199,423

46.08

Consumer

Credit cards

72,550

1,077,428

6.73

N.M.

Home equity lines of credit

2,387

67,499

3.54

4,085

58.43

Personal

126,116

1,952,168

6.46

21,219

594.35

Auto

155,436

3,633,196

4.28

40,268

386.00

Other Consumer

7,440

158,135

4.70

2,287

325.32

Total Consumer

363,929

6,888,426

5.28

67,859

536.30

Total

711,068

34,029,313

2.09

361,523

196.69

N.M - Not meaningful.

Table 30 - Allowance for Credit Losses - Loan Portfolios

December 31, 2022

(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

Commercial multi-family

26,311

2,321,713

1.13

242

N.M.

Commercial real estate non-owner occupied

71,540

4,499,670

1.59

25,116

284.84

Commercial real estate owner occupied

57,081

3,078,549

1.85

29,085

196.26

Commercial and industrial

80,444

5,839,200

1.38

38,596

208.43

Total Commercial

235,376

15,739,132

1.50

93,039

252.99

Construction

4,246

757,984

0.56

N.M.

Leasing

20,618

1,585,739

1.30

5,941

347.05

Mortgage

135,254

7,397,471

1.83

262,879

51.45

Consumer

Credit cards

58,670

1,041,870

5.63

N.M.

Home equity lines of credit

2,542

71,916

3.53

4,110

61.85

Personal

118,426

1,823,579

6.49

20,040

590.95

Auto

129,735

3,512,530

3.69

40,978

316.60

Other Consumer

15,435

147,548

10.46

12,454

123.94

Total Consumer

324,808

6,597,443

4.92

77,582

418.66

Total

720,302

32,077,769

2.25

439,441

163.91

N.M - Not meaningful.

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 nine months ended September 30, 2023 and 2022.

Table 31 - Annualized Net Charge -offs (Recoveries) to Average Loans Held-in-Portfolio

Quarters ended

September 30, 2023

September 30, 2022

BPPR

Popular U.S.

Popular Inc.

BPPR

Popular U.S.

Popular Inc.

Commercial

(0.48)

0.10

(0.21)

(0.06)

(0.03)

(0.05)

Construction

6.11

1.21

Mortgage

(0.25)

(0.02)

(0.21)

(0.14)

(0.01)

(0.12)

Leasing

0.35

0.35

0.36

0.36

Consumer

2.20

7.42

2.41

1.34

0.47

1.30

Total annualized net charge-offs

(recoveries) to average loans held-in-

portfolio

0.44

0.28

0.39

0.34

(0.01)

0.24

Nine months ended

September 30, 2023

September 30, 2022

BPPR

Popular U.S.

Popular Inc.

BPPR

Popular U.S.

Popular Inc.

Commercial

(0.20)

0.03

(0.10)

(0.15)

(0.02)

(0.09)

Construction

2.14

0.45

(0.67)

(0.24)

(0.33)

Mortgage

(0.24)

(0.02)

(0.20)

(0.21)

(0.18)

Leasing

0.28

0.28

0.14

0.14

Consumer

1.96

5.65

2.12

1.06

0.44

1.03

Total annualized net charge-offs

(recoveries) to average loans held-in-

portfolio

0.44

0.19

0.36

0.18

(0.02)

0.13

NCOs for the quarter ended September 30, 2023 amounted to $33 million, increasing by $15 million when compared to the same

period in 2022. The BPPR segment increased by $7 million mainly driven by higher consumer NCOs by $16 million, reflective of

post-pandemic credit normalization, in part offset by lower commercial NCOs by $9 million, mainly due to $10.8 million recovery

from a commercial loan pay-off during the third quarter of 2023. The PB segment NCOs increased by $7 million, mainly driven by

higher consumer and commercial NCOs by $5 million and $3 million, respectively.

NCOs for the nine months ended September 30, 2023 amounted to $89 million, increasing by $61 million when compared to the

same period in 2022. The BPPR segment increased by $47 million mainly driven by higher consumer NCOs by $47 million, primarily

due to the expected continued credit normalization, coupled with an $11 million line of credit charge-off on a single relationship

during the first quarter of 2023. The PB segment NCOs increased by $15 million, mainly driven by higher consumer NCOs by $11

million.

Loan Modifications

For the nine months ended September 30, 2023, modified loans to borrowers with financial difficulty amounted to $401 million, of

which $377 million are in accruing status. The BPPR segment’s modifications to borrowers with financial difficulty amounted to $349

million, mainly comprised of commercial and mortgage loans of $272 million and $71 million, respectively. A total of $48 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 $52 million, of which $41 million were commercial loans.

Refer to Note 9 to the Consolidated Financial Statements for additional information on modifications made to borrowers

experiencing financial difficulties.

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.

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 2022 Form 10-K.

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 September 30, 2023 that have materially affected, or

are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

Corporation is subject.

All forward-looking statements included in this Form 10-Q are based upon information available to Popular as of the date of this

Form 10-Q, and other than as required by law, including the requirements of applicable securities laws, we assume no obligation to

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

of such statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

[UNAUDITED]

September 30,

December 31,

(In thousands, except share information)

2023

2022

Assets:

Cash and due from banks

535,335

469,501

Money market investments:

Time deposits with other banks

6,389,437

5,614,595

Total money market investments

6,389,437

5,614,595

Trading account debt securities, at fair value:

Other trading account debt securities

30,988

27,723

Debt securities available-for-sale, at fair value:

Pledged securities with creditors’ right to repledge

72,062

129,203

Other debt securities available-for-sale

17,057,796

17,675,171

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

Pledged securities with creditors’ right to repledge

27,047

26,496

Other debt securities held-to-maturity

8,275,035

8,498,870

Debt securities held-to-maturity (fair value 2023 - $

8,065,067

; 2022 - $

8,440,196

8,302,082

8,525,366

Less – Allowance for credit losses

6,057

6,911

Debt securities held-to-maturity, net

8,296,025

8,518,455

Equity securities (realizable value 2023 - $

191,605

; 2022 - $

196,665

190,688

195,854

Loans held-for-sale, at fair value

5,239

5,381

Loans held-in-portfolio

34,369,775

32,372,925

Less – Unearned income

340,462

295,156

Allowance for credit losses

711,068

720,302

Total loans held-in-portfolio, net

33,318,245

31,357,467

Premises and equipment, net

534,384

498,711

Other real estate

82,322

89,126

Accrued income receivable

257,833

240,195

Mortgage servicing rights, at fair value

119,030

128,350

Other assets

2,032,565

1,847,813

Goodwill

804,428

827,428

Other intangible assets

10,559

12,944

Total assets

69,736,936

67,637,917

Liabilities and Stockholders’ Equity

Liabilities:

Deposits:

Non-interest bearing

15,201,374

15,960,557

Interest bearing

48,136,226

45,266,670

Total deposits

63,337,600

61,227,227

Assets sold under agreements to repurchase

93,071

148,609

Other short-term borrowings

365,000

Notes payable

1,004,649

886,710

Other liabilities

844,008

916,946

Total liabilities

65,279,328

63,544,492

Commitments and contingencies (Refer to Note 21)

Stockholders’ equity:

Preferred stock,

30,000,000

shares authorized;

885,726

shares issued and outstanding (2022 -

885,726

22,143

22,143

Common stock, $

0.01

par value;

170,000,000

shares authorized;

104,740,311

shares issued (2022 -

104,657,522

) and

72,127,595

shares outstanding (2022 -

71,853,720

1,048

1,047

Surplus

4,797,364

4,790,993

Retained earnings

4,189,865

3,834,348

Treasury stock - at cost,

32,612,716

shares (2022 -

32,803,802

(2,018,870)

(2,030,178)

Accumulated other comprehensive loss, net of tax

(2,533,942)

(2,524,928)

Total stockholders’ equity

4,457,608

4,093,425

Total liabilities and stockholders’ equity

69,736,936

67,637,917

The accompanying notes are an integral part of these Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Quarters ended September 30,

Nine months ended September 30,

(In thousands, except per share information)

2023

2022

2023

2022

Interest income:

Loans

596,886

481,088

1,708,216

1,354,124

Money market investments

99,286

36,966

265,785

67,172

Investment securities

148,614

133,181

403,814

331,421

Total interest income

844,786

651,235

2,377,815

1,752,717

Interest expense:

Deposits

294,121

60,897

730,824

113,507

Short-term borrowings

1,478

921

5,987

1,249

Long-term debt

15,167

9,798

43,660

30,168

Total interest expense

310,766

71,616

780,471

144,924

Net interest income

534,020

579,619

1,597,344

1,607,793

Provision for credit losses

45,117

39,637

129,946

33,499

Net interest income after provision for credit losses

488,903

539,982

1,467,398

1,574,294

Non-interest income:

Service charges on deposit accounts

37,318

40,006

109,777

122,528

Other service fees

93,407

86,402

277,748

244,987

Mortgage banking activities (Refer to Note 10)

5,393

9,448

15,109

35,888

Net (loss) gain, including impairment on equity securities

(1,319)

(1,448)

1,165

(7,651)

Net gain (loss) on trading account debt securities

219

(274)

632

(946)

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

valuation adjustments

(44)

(44)

Adjustments to indemnity reserves on loans sold

(187)

1,715

(31)

1,140

Other operating income

24,762

290,645

77,625

342,651

Total non-interest income

159,549

426,494

481,981

738,597

Operating expenses:

Personnel costs

193,152

193,843

583,380

529,627

Net occupancy expenses

28,100

27,420

81,304

78,357

Equipment expenses

8,905

8,735

26,878

25,798

Other taxes

8,590

15,966

41,290

47,461

Professional fees

38,514

47,662

122,077

122,884

Technology and software expenses

72,930

68,341

213,843

213,638

Processing and transactional services

37,899

32,368

108,609

94,358

Communications

4,220

3,858

12,483

11,028

Business promotion

23,075

24,348

67,029

60,784

FDIC deposit insurance

8,932

6,610

24,600

20,445

Other real estate owned (OREO) income

(5,189)

(2,444)

(10,197)

(12,963)

Other operating expenses

23,061

39,593

70,274

81,814

Amortization of intangibles

795

795

2,385

2,481

Goodwill impairment charge

23,000

9,000

23,000

9,000

Total operating expenses

465,984

476,095

1,366,955

1,284,712

Income before income tax

182,468

490,381

582,424

1,028,179

Income tax expense

45,859

67,986

135,676

182,677

Net Income

136,609

422,395

446,748

845,502

Net Income Applicable to Common Stock

136,256

422,042

445,689

844,443

Net Income per Common Share – Basic

1.90

5.71

6.22

11.09

Net Income per Common Share – Diluted

1.90

5.70

6.21

11.07

The accompanying notes are an integral part of these Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Quarters ended,

Nine months ended,

September 30,

September 30,

(In thousands)

2023

2022

2023

2022

Net income

136,609

422,395

446,748

845,502

Other comprehensive (loss) income before tax:

Foreign currency translation adjustment

(976)

7,206

(220)

10,346

Adjustment of pension and postretirement benefit plans

2,030

Amortization of net losses of pension and postretirement benefit plans

4,814

3,911

14,440

11,733

Unrealized holding losses on debt securities arising during the period

(234,827)

(876,854)

(99,360)

(2,716,474)

Amortization of unrealized losses of debt securities transfer from available-for-

sale to held-to-maturity

43,783

128,726

Unrealized net (losses) gains on cash flow hedges

392

(30)

3,903

Reclassification adjustment for net (gains) losses included in net income

828

(41)

(751)

Other comprehensive (loss) income before tax

(187,206)

(864,517)

43,515

(2,689,213)

Income tax (expense) benefit

(18,301)

93,202

(52,529)

289,951

Total other comprehensive loss, net of tax

(205,507)

(771,315)

(9,014)

(2,399,262)

Comprehensive (loss) income, net of tax

(68,898)

(348,920)

437,734

(1,553,760)

Tax effect allocated to each component of other comprehensive (loss) income:

Quarters ended

Nine months ended,

September 30,

September 30,

(In thousands)

2023

2022

2023

2022

Adjustment of pension and postretirement benefit plans

(761)

Amortization of net losses of pension and postretirement benefit plans

(1,805)

(1,467)

(5,415)

(4,401)

Unrealized holding losses on debt securities arising during the period

(7,740)

94,956

(21,396)

295,326

Amortization of unrealized losses of debt securities transfer from available-for-

sale to held-to-maturity

(8,756)

(25,744)

Unrealized net (losses) gains on cash flow hedges

23

11

(681)

Reclassification adjustment for net (gains) losses included in net income

(310)

15

468

Income tax (expense) benefit

(18,301)

93,202

(52,529)

289,951

The accompanying notes are an integral part of the Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Accumulated

other

Common

Preferred

Retained

Treasury

comprehensive

(In thousands)

stock

stock

Surplus

earnings

stock

loss

Total

Balance at June 30, 2022

1,046

22,143

4,576,478

3,311,951

(1,665,253)

(1,953,016)

4,293,349

Net income

422,395

422,395

Issuance of stock

1,550

1,550

Dividends declared:

Common stock

[1]

(39,973)

(39,973)

Preferred stock

(353)

(353)

Common stock purchases

[2]

74,118

(305,343)

(231,225)

Stock based compensation

362

48

410

Other comprehensive loss, net of tax

(771,315)

(771,315)

Balance at September 30, 2022

1,046

22,143

4,652,508

3,694,020

(1,970,548)

(2,724,331)

3,674,838

Balance at June 30, 2023

1,047

22,143

4,795,581

4,093,284

(2,018,611)

(2,328,435)

4,565,009

Net income

136,609

136,609

Issuance of stock

1

1,599

1,600

Dividends declared:

Common stock

[1]

(39,675)

(39,675)

Preferred stock

(353)

(353)

Common stock purchases

(250)

(250)

Stock based compensation

184

(9)

175

Other comprehensive loss, net of tax

(205,507)

(205,507)

Balance at September 30, 2023

1,048

22,143

4,797,364

4,189,865

(2,018,870)

(2,533,942)

4,457,608

[1]

Dividends declared per common share during the quarter ended September 30, 2023 - $

0.55

(2022 - $

0.55

[2]

During July 2022, the Corporation completed a $

400

million accelerated share repurchase transaction with respect to its common stock. During

August 2022, the Corporation entered into a $

231

million accelerated share repurchase transaction with respect to its common stock. Both were

accounted for as treasury stock transactions. Refer to Note 18 for additional information.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Accumulated

other

Common

Preferred

Retained

Treasury

comprehensive

(In thousands)

stock

stock

Surplus

earnings

stock

loss

Total

Balance at December 31, 2021

1,046

22,143

4,650,182

2,973,745

(1,352,650)

(325,069)

5,969,397

Net income

845,502

845,502

Issuance of stock

4,285

4,285

Dividends declared:

Common stock

[1]

(124,168)

(124,168)

Preferred stock

(1,059)

(1,059)

Common stock purchases

[2]

(5,882)

(631,638)

(637,520)

Stock based compensation

3,923

13,740

17,663

Other comprehensive loss, net of tax

(2,399,262)

(2,399,262)

Balance at September 30, 2022

1,046

22,143

4,652,508

3,694,020

(1,970,548)

(2,724,331)

3,674,838

Balance at December 31, 2022

1,047

22,143

4,790,993

3,834,348

(2,030,178)

(2,524,928)

4,093,425

Cumulative effect of accounting change

28,752

28,752

Net income

446,748

446,748

Issuance of stock

1

4,716

4,717

Dividends declared:

Common stock

[1]

(118,924)

(118,924)

Preferred stock

(1,059)

(1,059)

Common stock purchases

(4,491)

(4,491)

Stock based compensation

1,655

15,799

17,454

Other comprehensive loss, net of tax

(9,014)

(9,014)

Balance at September 30, 2023

1,048

22,143

4,797,364

4,189,865

(2,018,870)

(2,533,942)

4,457,608

[1]

Dividends declared per common share during the nine months ended September 30, 2023 - $

1.65

(2022 - $

1.65

[2]

During the nine months ended September 30, 2022, the Corporation completed a $

400

million accelerated share repurchase transaction with

respect to its common stock and entered into an additional $

231

million accelerated share repurchase transaction with respect to its common

stock. Both were accounted for as a treasury stock transaction. Refer to Note 18 for additional information.

For the period ended

September 30,

September 30,

Disclosure of changes in number of shares:

2023

2022

Preferred Stock:

Balance at beginning and end of period

885,726

885,726

Common Stock – Issued:

Balance at beginning of period

104,657,522

104,579,334

Issuance of stock

82,789

55,571

Balance at end of period

104,740,311

104,634,905

Treasury stock

(32,612,716)

(31,961,561)

Common Stock – Outstanding

72,127,595

72,673,344

The accompanying notes are an integral part of these Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended September 30,

(In thousands)

2023

2022

Cash flows from operating activities:

Net income

446,748

845,502

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses

129,946

33,499

Goodwill impairment charges

23,000

9,000

Amortization of intangibles

2,385

2,481

Depreciation and amortization of premises and equipment

43,180

41,207

Net accretion of discounts and amortization of premiums and deferred fees

(22,495)

39,142

Interest capitalized on loans subject to the temporary payment moratorium or loss mitigation alternatives

(7,956)

(9,249)

Share-based compensation

15,079

14,822

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

688

Fair value adjustments on mortgage servicing rights

11,135

(2,776)

Fair value adjustment for contingent consideration

(9,241)

Adjustments to indemnity reserves on loans sold

31

(1,140)

Earnings from investments under the equity method, net of dividends or distributions

(17,387)

(22,011)

Deferred income tax (benefit) expense

(13,539)

50,460

(Gain) loss on:

Disposition of premises and equipment and other productive assets

(9,744)

(7,221)

Proceeds from insurance claims

(145)

Sale of loans, including valuation adjustments on loans held-for-sale and mortgage banking activities

177

374

Disposition of stock as part of the Evertec Transactions

(240,412)

Sale of foreclosed assets, including write-downs

(18,137)

(24,339)

Acquisitions of loans held-for-sale

(6,678)

(118,368)

Proceeds from sale of loans held-for-sale

35,286

51,468

Net originations on loans held-for-sale

(60,285)

(191,570)

Net decrease (increase) in:

Trading debt securities

29,415

338,166

Equity securities

(7,481)

3,633

Accrued income receivable

(17,638)

(21,236)

Other assets

(981)

46,812

Net increase (decrease) in:

Interest payable

8,009

(4,936)

Pension and other postretirement benefits obligation

11,985

(2,252)

Other liabilities

(100,887)

(9,095)

Total adjustments

26,275

(32,094)

Net cash provided by operating activities

473,023

813,408

Cash flows from investing activities:

Net (increase) decrease in money market investments

(775,597)

13,562,791

Purchases of investment securities:

Available-for-sale

(12,665,449)

(18,142,424)

Held-to-maturity

(8,615)

(1,879,443)

Equity

(18,279)

(34,029)

Proceeds from calls, paydowns, maturities and redemptions of investment securities:

Available-for-sale

13,138,765

12,066,879

Held-to-maturity

308,129

9,185

Proceeds from sale of investment securities:

Equity

30,926

34,450

Net disbursements on loans

(1,609,387)

(1,762,828)

Proceeds from sale of loans

133,078

56,611

Acquisition of loan portfolios

(556,659)

(580,625)

Return of capital from equity method investments

249

Payments to acquire equity method investments

(1,500)

(1,625)

Proceeds from disposition of stock as part of the Evertec Transactions

219,883

Acquisition of premises and equipment

(133,598)

(67,887)

Proceeds from insurance claims

145

Proceeds from sale of:

Premises and equipment and other productive assets

6,620

8,963

Foreclosed assets

84,446

75,719

Net cash (used in) provided by investing activities

(2,066,726)

3,565,620

Cash flows from financing activities:

Net increase (decrease) in:

Deposits

2,085,956

(2,177,088)

Assets sold under agreements to repurchase

(55,538)

70,847

Other short-term borrowings

(365,000)

175,000

Payments of notes payable

(321,000)

(101,000)

Principal payments of finance leases

(3,557)

(2,363)

Proceeds from issuance of notes payable

437,411

Proceeds from issuance of common stock

4,716

4,285

Dividends paid

(119,715)

(121,190)

Net payments for repurchase of common stock

(414)

(631,749)

Payments related to tax withholding for share-based compensation

(4,077)

(5,771)

Net cash provided by (used in) financing activities

1,658,782

(2,789,029)

Net increase in cash and due from banks, and restricted cash

65,079

1,589,999

Cash and due from banks, and restricted cash at beginning of period

476,159

434,512

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

541,238

2,024,511

The accompanying notes are an integral part of these Consolidated Financial Statements.

Notes to Consolidated Financial

Statements (Unaudited)

Note 1 -

Nature of operations

14

Note 2 -

Basis of presentation

15

Note 3 -

New accounting pronouncements

16

Note 4 -

Summary of significant accounting policies

20

Note 5 -

Restrictions on cash and due from banks and

certain securities

21

Note 6 -

Debt securities available-for-sale

22

Note 7 -

Debt securities held-to-maturity

25

Note 8 -

Loans

29

Note 9 -

Allowance for credit losses – loans held-in-

portfolio

38

Note 10 -

Mortgage banking activities

74

Note 11 -

Transfers of financial assets and mortgage

servicing assets

75

Note 12 -

Other real estate owned

79

Note 13 -

Other assets

80

Note 14 -

Goodwill and other intangible assets

81

Note 15 -

Deposits

85

Note 16 -

Borrowings

86

Note 17 -

Other liabilities

88

Note 18 -

Stockholders’ equity

89

Note 19 -

Other comprehensive loss

90

Note 20 -

Guarantees

92

Note 21 -

Commitments and contingencies

94

Note 22-

Non-consolidated variable interest entities

99

Note 23 -

Related party transactions

101

Note 24 -

Fair value measurement

103

Note 25 -

Fair value of financial instruments

111

Note 26 -

Net income per common share

114

Note 27 -

Revenue from contracts with customers

115

Note 28 -

Leases

118

Note 29 -

Pension and postretirement benefits

120

Note 30 -

Stock-based compensation

121

Note 31 -

Income taxes

124

Note 32 -

Supplemental disclosure on the consolidated

statements of cash flows

128

Note 33 -

Segment reporting

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.

Note 2 – Basis of Presentation

Basis of Presentation

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

data at December 31, 2022 was derived from audited financial statements. The unaudited interim financial statements are, in the

opinion 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.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting

principles generally accepted in the United States of America 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, 2022, included in the 2022 Form 10-K. Operating results for the interim periods disclosed herein are not necessarily

indicative of the results that may be expected for a full year or any future period.

The Corporation embarked on a broad-based multi-year, technological and business process transformation during the second half

of 2022. The needs and expectations of the Corporation’s clients, as well as the competitive landscape, have evolved, requiring the

Corporation to make important investments in its technological infrastructure and adopt more agile practices. The Corporation’s

technology and business transformation will be a significant priority for the Corporation over the next three years and beyond.

As part of this transformation, the Corporation aims to expand its digital capabilities, modernize its technology platform, and

implement agile and efficient business processes across the entire Corporation. To facilitate the transparency of the progress with

the transformation initiative and to better portray the level of technology related expenses categorized by the nature of the expense,

effective in the fourth quarter of 2022, the Corporation has separated technology, professional fees and transactional and items

processing related expenses as standalone expense categories in the accompanying Consolidated Statement of Operations. There

were no changes to the total operating expenses presented. Prior periods amount in the Consolidated Financial Statements and

related disclosures have been reclassified to conform to the current presentation.

The following table provides the detail of the reclassifications for each respective quarter:

Quarter ended

Nine months ended

30-Sep-22

30-Sep-22

Financial statement line item

As reported

Adjustments

Adjusted

As reported

Adjustments

Adjusted

Equipment expenses

26,626

(17,891)

8,735

75,193

(49,395)

25,798

Professional fees

112,221

(64,559)

47,662

335,590

(212,706)

122,884

Technology and software expenses

68,341

68,341

213,638

213,638

Processing and transactional services

32,368

32,368

94,358

94,358

Communications

6,224

(2,366)

3,858

18,364

(7,336)

11,028

Other operating expenses

55,486

(15,893)

39,593

120,373

(38,559)

81,814

Net effect on operating expenses

200,557

200,557

549,520

549,520

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America

requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent

assets and liabilities 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.

Note 3 - New accounting pronouncements

Recently Adopted Accounting Standards Updates

Standard

Description

Date of adoption

Effect on the financial statements

FASB ASU 2023-04,

Liabilities (Topic 405)

The Financial Accounting Standards Board

("FASB") issued Accounting Standards

Update (“ASU”) 2023-04 in August 2023

which amends paragraphs within ASC

Topic 405 to clarify the accounting and

disclosure for obligations to safeguard

Crypto-Assets held by an entity for its

platform users.

August 2023

The Corporation was not impacted by

the adoption of this ASU since it does

not hold Crypto-Assets for its platform

users.

FASB ASU 2023-03,

Presentation of Financial

Statements (Topic 205),

Income Statement—

Reporting Comprehensive

Income (Topic 220),

Distinguishing Liabilities

from Equity (Topic 480),

Equity (505), and

Compensation—Stock

Compensation (Topic 718)

The FASB issued ASU 2023-03 in July

2023 which amends or supersedes various

SEC paragraphs within the Codification to

conform to past SEC announcements and

guidance which updated SAB Topics 5.T,

14, and 6. B.

July 1, 2023

The Corporation was not impacted by

the adoption of this ASU since it

codifies previous guidance.

FASB ASU 2022-05,

Financial Services -

Insurance (Topic 944)

Transition for Sold

Contracts

The FASB issued ASU 2022-05 in

December 2022, which allows an insurance

entity to make an accounting policy election

of applying the Long-Duration Contracts

(LDTI) transition guidance on a transaction-

by-transaction basis if the contracts have

been derecognized because of a sale or

disposal and the insurance entity has no

significant continuing involvement with the

derecognized contract.

January 1, 2023

The Corporation was not impacted by

the adoption of ASU 2022-05 during

the first quarter of 2023 since it does

not hold Long-Duration Contracts

(LDTI).

FASB ASU 2022-04,

Liabilities—Supplier

Finance Programs

(Subtopic 405-50)

Disclosure of Supplier

Finance Program

Obligations

The FASB issued ASU 2022-04 in

September 2022, which requires to disclose

information about the use of supplier

finance programs in connection with the

purchase of goods and services.

January 1, 2023

The Corporation was not impacted by

the adoption of ASU 2022-04 since it

does not use supplier finance

programs.

Recently Adopted Accounting Standards Updates

Standard

Description

Date of adoption

Effect on the financial statements

FASB ASU 2022-02,

Financial Instruments—

Credit Losses (Topic 326)

Troubled Debt

Restructurings and

Vintage Disclosures

The FASB issued ASU 2022-02 in March

2022, which eliminates the accounting

guidance for troubled debt restructurings

(“TDRs”) in Subtopic 310-40 Receivables—

Troubled Debt Restructurings by Creditors

and requires creditors to apply the loan

refinancing and restructuring guidance to

determine whether a modification results in

a new loan or a continuation of an existing

loan. In addition, the ASU enhances the

disclosure requirements for certain loan

refinancing and restructurings by creditors

when a borrower is experiencing financial

difficulty and enhances the vintage

disclosure by requiring the disclosure of

current-period gross write-offs by year of

origination for financing receivables and net

investments in leases.

January 1, 2023

The Corporation adopted ASU 2022-02

during the first quarter of 2023. The

adoption of this standard resulted in

enhanced disclosure for loans modified

to borrowers with financial difficulties

and the disclosure of period gross

charge offs by vintage year. The

Corporation anticipates that there will

be loans subject to disclosure under the

new standard that did not qualify under

the prior guidance given the removal of

the concession requirement for such

disclosures. The amended guidance

eliminated the requirement to measure

the effect of the concession from a loan

modification, for which the Corporation

used a discounted cash flow (“DCF”)

model. The impact of discontinuing the

use of the DCF model to measure the

concession resulted in a release of the

allowance for credit losses ("ACL") of

46

million, mainly related to mortgage

loans for which modifications mostly

included a reduction in contractual

interest rates and given the extended

maturity term of these loans, this

resulted in an increase in the ACL in

the period of modification. For the

transition method related to the

recognition and measurement of TDRs,

the Corporation has elected to apply

the modified retrospective approach for

the adoption of this standard.

Accordingly, this presented an

adjustment increase of $

29

million, net

of tax effect, to the beginning balance

of retained earnings on January 1,

FASB ASU 2022-01,

Derivatives and Hedging

(Topic 815) – Fair Value

Hedging—Portfolio Layer

Method

The FASB issued ASU 2022-01 in March

2022, which amends ASC Topic 815 by

allowing non prepayable financial assets

also to be included in a closed portfolio

hedged using the portfolio layer method.

This amendment permits an entity to apply

fair value hedging to a stated amount of a

closed portfolio of prepayable and non-

prepayable financial assets without

considering prepayment risk or credit risk

when measuring those assets.

January 1, 2023

The Corporation was not impacted by

the adoption of ASU 2022-01 since it

does not hold derivatives designated as

fair value hedges.

FASB ASU 2021-08,

Business Combinations

(Topic 805) – Accounting

for Contract Assets and

Contract Liabilities from

Contracts with Customers

The FASB issued ASU 2021-08 in October

2021, which amends ASC Topic 805 by

requiring contract assets and contract

liabilities arising from revenue contract with

customers to be recognized in accordance

with ASC Topic 606 on the acquisition date

instead of fair value.

January 1, 2023

The Corporation was not impacted by

the adoption of ASU 2021-08, however,

it will consider this guidance for

revenue contracts with customers

recognized as part of business

combinations entered into on or after

the effective date.

Accounting Standards Updates Not Yet Adopted

Standard

Description

Date of adoption

Effect on the financial statements

FASB ASU 2023-06,

Disclosure Improvements,

Codification Amendments

in Response to the SEC’s

Disclosure Update and

Simplification Initiative

The FASB issued ASU 2023-06 in October

2023 which modifies the disclosure or

presentation requirements of various

subtopics in the Codification with the

purpose of aligning U.S. GAAP requirement

with those of the SEC under Regulation S-X

and S-K.

The date on which

the SEC removes

related disclosure

requirements from

Regulation S-X or

Regulation S-K. If by

June 30, 2027, the

SEC has not

removed the

applicable

requirement from

Regulation S-X or

Regulation S-K, the

pending content of

the related

amendment will be

removed from the

Codification and will

not become

effective for any

entity.

The Corporation does not expect to 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, will recognize

and initially measure its assets and liabilities

at fair value.

January 1, 2025

The Corporation does not expect to be

impacted by the adoption of this ASU.

FASB ASU 2023-02,

Investments—Equity

Method and Joint

Ventures (Topic 323) -

Accounting for

Investments in Tax Credit

Structures Using the

Proportional Amortization

Method

The FASB issued ASU 2023-02 in March

2023, which amend topic ASC 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 subtopic

323-740 to LIHTC investment not

accounted for using the proportional

amortization method and instead requires

the use of other guidance.

January 1, 2024

The Corporation is currently evaluating

the impact that the adoption of this

guidance will have on its financial

statements and presentation and

disclosures.

Accounting Standards Updates Not Yet Adopted

Standard

Description

Date of adoption

Effect on the financial statements

FASB ASU 2023-01,

Leases (Topic 842),

Lessors – Common

Control Arrangements

The FASB issued ASU 2023-01 in March

2023, which amends ASC Topic 842 and

requires to amortize 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 does not expect to be

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.

For other recently issued Accounting Standards Updates not yet effective, refer to Note 3 to the Consolidated Financial Statements

included in the 2022 Form 10-K.

Note 4 – Summary of significant accounting policies

The accounting and financial reporting policies of Popular, Inc. and its subsidiaries (the “Corporation”) conform with accounting

principles generally accepted in the United States of America and with prevailing practices within the financial services industry. A

description of the significant accounting and financial reporting policies can be found on Note 2 to the 2022 Form 10-K.

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

related to loan modifications. As discussed in Note 3, the new accounting guidance eliminates the recognition and measurement

principle of TDRs. The Corporation has also made changes to certain of its accounting policies related to its loans portfolio and

allowance for credit losses in connection with this accounting standards update.

A modification is subject to disclosure under the new ASU when the Corporation separately concludes that both of the following

conditions exist: 1) the debtor is experiencing financial difficulties 2) the modification constitutes a reduction in the interest rate on

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

is experiencing financial difficulties involves a degree of judgment. The identification of loan modifications to debtors with financial

difficulties is critical in the determination of the adequacy of the ACL.

The ASU also eliminates the requirement to use a DCF approach to estimated credit losses for modified loans with borrowers

experiencing financial difficulties. The entity can apply a methodology similar to the one used for loans that were not modified. The

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

of approximately $

46

million, $

29

million net of tax, in the reserve which was recorded as an adjustment to the beginning balance of

retained earnings.

A loan modified with financial difficulties is typically in non-accrual status at the time of the modification. These loans continue in

non-accrual status until the borrower has demonstrated a willingness and ability to make the restructured loan payments (at least six

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

management has concluded that it is probable that the borrower would not be in payment default in the foreseeable future.

Refer to Note 9 to the Consolidated Financial Statements for additional qualitative information on loan modifications and the

Corporation’s determination of the ACL.

Refer below for changes in accounting policies due to the adoption of the new ASU and other policy adoptions:

Loans

Effective on January 1, 2023, newly originated mortgage loans held-for-sale are stated at fair value, with changes recorded through

earnings. Previously held-for-sale were carried at the lower of its cost or market value. Fair value is generally determined in the

aggregate and is measured based on current market prices for similar loans, outstanding investor commitments, prices of recent

sales or discounted cash flow analyses which utilize inputs and assumptions which are believed to be consistent with market

participants’ views.

Derivative instruments

Effective on January 1, 2023, the Corporation discontinued the hedge accounting treatment of certain forward contracts for which

the changes in fair value were recorded, net of taxes, in accumulated other comprehensive income/(loss) and subsequently

reclassified to net income (loss) in the same period that the hedged transaction impacted earnings. As a result of this change, the

changes in the fair value of these forward contracts are being recorded through net income (loss). The Corporation utilizes forward

contracts to hedge the sale of mortgage-backed securities with duration terms over one month. Interest rate forwards are contracts

for the delayed delivery of securities, which the seller agrees to deliver on a specified future date at a specified price or yield. These

forward contracts are hedging a forecasted transaction and thus qualify for cash flow hedge accounting.

Based on the election to apply fair value accounting for its mortgage loans held for sale, effective on January 1, 2023, the

Corporation discontinued the hedge accounting since the changes in the fair value of the loans is expected to be offset by the

changes in the fair value of the forward contract, both of which are now recorded through net income (loss).

Note 5 - Restrictions on cash and due from banks and certain securities

BPPR is required by regulatory agencies to maintain average reserve balances with the Federal Reserve Bank of New York (the

“Fed”) or other banks. Those required average reserve balances amounted to $

2.6

billion at September 30, 2023 (December 31,

2022 - $

2.8

billion). Cash and due from banks, as well as other highly liquid securities, are used to cover the required average

reserve balances.

At September 30, 2023, the Corporation held $

63

million in restricted assets in the form of funds deposited in money market

accounts, debt securities available for sale and equity securities (December 31, 2022 - $

80

million). The restricted assets held in

debt securities available for sale and equity securities consist primarily of assets held for the Corporation’s non-qualified retirement

plans and fund deposits guaranteeing possible liens or encumbrances over the title of insured properties.

Note 6 – Debt securities available-for-sale

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield

and contractual maturities of debt securities available-for-sale at September 30, 2023 and December 31, 2022.

At September 30, 2023

Gross

Gross

Weighted

Amortized

unrealized

unrealized

Fair

average

(In thousands)

cost

gains

losses

value

yield

U.S. Treasury securities

Within 1 year

7,041,817

421

67,663

6,974,575

3.51

After 1 to 5 years

4,364,065

271,553

4,092,512

1.36

After 5 to 10 years

307,852

45,258

262,594

1.63

Total U.S. Treasury securities

11,713,734

421

384,474

11,329,681

2.65

Collateralized mortgage obligations - federal agencies

After 1 to 5 years

19,312

1,163

18,149

1.53

After 5 to 10 years

22,371

1,857

20,514

2.26

After 10 years

112,566

7

13,222

99,351

2.54

Total collateralized mortgage obligations - federal agencies

154,249

7

16,242

138,014

2.37

Mortgage-backed securities

Within 1 year

1,302

48

1,254

3.56

After 1 to 5 years

79,987

3

4,760

75,230

2.37

After 5 to 10 years

778,578

13

71,731

706,860

2.22

After 10 years

6,264,509

177

1,386,889

4,877,797

1.65

Total mortgage-backed securities

7,124,376

193

1,463,428

5,661,141

1.72

Other

Within 1 year

1,022

1,022

3.99

Total other

1,022

1,022

3.99

Total debt securities available-for-sale

[1]

18,993,381

621

1,864,144

17,129,858

2.30

[1]

Includes $

12.9

billion pledged to secure government and trust deposits, assets sold under agreements to repurchase, credit facilities and loan

servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $

12

.0 billion serve as collateral for

public funds. The Corporation had unpledged Available for Sale securities with a fair value of $

4.2

billion that could be used to increase its

borrowing facilities.

At December 31, 2022

Gross

Gross

Weighted

Amortized

unrealized

unrealized

Fair

average

(In thousands)

cost

gains

losses

value

yield

U.S. Treasury securities

Within 1 year

4,576,127

506

47,156

4,529,477

2.42

After 1 to 5 years

6,793,739

410,858

6,382,881

1.35

After 5 to 10 years

308,854

40,264

268,590

1.63

Total U.S. Treasury securities

11,678,720

506

498,278

11,180,948

1.78

Collateralized mortgage obligations - federal agencies

After 1 to 5 years

3,914

213

3,701

1.77

After 5 to 10 years

47,979

3,428

44,551

1.73

After 10 years

127,639

24

10,719

116,944

2.53

Total collateralized mortgage obligations - federal agencies

179,532

24

14,360

165,196

2.30

Mortgage-backed securities

After 1 to 5 years

74,328

11

3,428

70,911

2.33

After 5 to 10 years

866,757

43

58,997

807,803

2.16

After 10 years

6,762,150

932

1,184,626

5,578,456

1.61

Total mortgage-backed securities

7,703,235

986

1,247,051

6,457,170

1.68

Other

After 1 to 5 years

1,062

2

1,060

3.98

Total other

1,062

2

1,060

3.98

Total debt securities available-for-sale

[1]

19,562,549

1,516

1,759,691

17,804,374

1.75

[1]

Includes $

11.3

billion pledged to secure government and trust deposits, assets sold under agreements to repurchase, credit facilities and loan

servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $

10.3

billion serve as collateral for

public funds. The Corporation had unpledged Available for Sale securities with a fair value of $

6.4

billion that could be used to increase its

borrowing facilities.

The weighted average yield on debt securities available-for-sale is based on amortized cost; therefore, 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.

There were

no

debt securities available-for-sale sold during the nine months ended September 30, 2023 and 2022.

The following tables present the Corporation’s fair value and gross unrealized losses 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

September 30, 2023 and December 31, 2022.

At September 30, 2023

Less than 12 months

12 months or more

Total

Gross

Gross

Gross

Fair

unrealized

Fair

unrealized

Fair

unrealized

(In thousands)

value

losses

value

losses

value

losses

U.S. Treasury securities

350,471

8,546

7,111,545

375,928

7,462,016

384,474

Collateralized mortgage obligations - federal agencies

8,212

214

127,961

16,028

136,173

16,242

Mortgage-backed securities

50,837

1,571

5,595,532

1,461,857

5,646,369

1,463,428

Total debt securities available-for-sale in an unrealized loss position

409,520

10,331

12,835,038

1,853,813

13,244,558

1,864,144

At December 31, 2022

Less than 12 months

12 months or more

Total

Gross

Gross

Gross

Fair

unrealized

Fair

unrealized

Fair

unrealized

(In thousands)

value

losses

value

losses

value

losses

U.S. Treasury securities

6,027,786

288,582

3,244,572

209,696

9,272,358

498,278

Collateralized mortgage obligations - federal agencies

139,845

10,655

22,661

3,705

162,506

14,360

Mortgage-backed securities

1,740,214

138,071

4,662,195

1,108,980

6,402,409

1,247,051

Other

60

2

60

2

Total debt securities available-for-sale in an unrealized loss position

7,907,905

437,310

7,929,428

1,322,381

15,837,333

1,759,691

As of September 30, 2023, the portfolio of available-for-sale debt securities reflects gross unrealized losses of $

1.9

billion, driven

mainly by fixed-rate U.S. Treasury Securities and mortgage-backed securities, which have been impacted by a decline in fair value

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 FNMA, FHMLC and

GNMA. As discussed in Note 2 to the Consolidated Financial Statements on the 2022 Form 10-K, these securities carry an explicit

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 and no ACL for these securities has been established.

In October 2022, the Corporation transferred U.S. Treasury securities with a fair value of $

6.5

billion (par value of $

7.4

billion) from

its available-for-sale portfolio to its held-to-maturity portfolio. Management changed its intent, given its ability to hold these securities

to maturity due to the Corporation’s liquidity position and its intention to reduce the impact on accumulated other comprehensive

income (loss) (“AOCI”) and tangible capital of further increases in interest rates. The securities were reclassified at fair value at the

time of the transfer. At the date of the transfer, these securities had pre-tax unrealized losses of $

873

million recorded in AOCI. This

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

each other through the remaining life of the securities. There were no realized gains or losses recorded as a result of this transfer.

Note 7 –Debt securities held-to-maturity

The following tables present the amortized cost, allowance for credit losses, gross unrealized gains and losses, approximate fair

value, weighted average yield and contractual maturities of debt securities held-to-maturity at September 30, 2023 and December

31, 2022.

At September 30, 2023

Allowance

Carrying

Value

Gross

Gross

Weighted

Amortized

Book

[1]

for Credit

Net of

unrealized

unrealized

Fair

average

(In thousands)

cost

Value

Losses

Allowance

gains

losses

value

yield

U.S. Treasury securities

Within 1 year

597,876

597,876

597,876

9,036

588,840

2.55

After 1 to 5 years

7,516,523

6,900,125

6,900,125

193,838

6,706,287

1.39

After 5 to 10 years

817,006

730,757

730,757

26,819

703,938

1.60

Total U.S. Treasury securities

8,931,405

8,228,758

8,228,758

229,693

7,999,065

1.49

Obligations of Puerto Rico, States and

political subdivisions

Within 1 year

4,820

4,820

13

4,807

2

17

4,792

6.17

After 1 to 5 years

20,191

20,191

154

20,037

67

266

19,838

3.80

After 5 to 10 years

845

845

28

817

9

808

5.80

After 10 years

39,946

39,946

5,862

34,084

2,301

3,092

33,293

1.41

Total obligations of Puerto Rico, States and

political subdivisions

65,802

65,802

6,057

59,745

2,370

3,384

58,731

2.55

Collateralized mortgage obligations - federal

agencies

Within 1 year

15

15

15

15

6.44

After 10 years

1,547

1,547

1,547

251

1,296

2.87

Total collateralized mortgage obligations -

federal agencies

1,562

1,562

1,562

251

1,311

2.90

Securities in wholly owned statutory business

trusts

After 10 years

5,960

5,960

5,960

5,960

6.33

Total securities in wholly owned statutory

business trusts

5,960

5,960

5,960

5,960

6.33

Total debt securities held-to-maturity [2]

9,004,729

8,302,082

6,057

8,296,025

2,370

233,328

8,065,067

1.50

[1]

Book value includes $

703

million of net unrealized loss which remains in Accumulated other comprehensive income (AOCI) related to certain

securities transferred from available-for-sale securities portfolio to the held-to-maturity securities portfolio as discussed in Note 6.

[2]

Includes $

8.1

billion pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral. The

Corporation had unpledged held-to-maturities securities with a fair value of $

million that could be used to increase its borrowing facilities.

At December 31, 2022

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

499,034

499,034

499,034

6,203

492,831

2.83

After 1 to 5 years

6,147,568

5,640,767

5,640,767

59,806

5,580,961

1.49

After 5 to 10 years

2,638,238

2,313,666

2,313,666

14,857

2,298,809

1.41

Total U.S. Treasury securities

9,284,840

8,453,467

8,453,467

80,866

8,372,601

1.54

Obligations of Puerto Rico, States and

political subdivisions

Within 1 year

4,530

4,530

8

4,522

5

4,527

6.08

After 1 to 5 years

19,105

19,105

234

18,871

150

82

18,939

4.24

After 5 to 10 years

1,025

1,025

34

991

34

1,025

5.80

After 10 years

41,261

41,261

6,635

34,626

4,729

2,229

37,126

1.40

Total obligations of Puerto Rico, States and

political subdivisions

65,921

65,921

6,911

59,010

4,918

2,311

61,617

2.61

Collateralized mortgage obligations - federal

agencies

After 1 to 5 years

19

19

19

19

6.44

Total collateralized mortgage obligations -

federal agencies

19

19

19

19

6.44

Securities in wholly owned statutory business

trusts

After 10 years

5,959

5,959

5,959

5,959

6.33

Total securities in wholly owned statutory

business trusts

5,959

5,959

5,959

5,959

6.33

Total debt securities held-to-maturity [2]

9,356,739

8,525,366

6,911

8,518,455

4,918

83,177

8,440,196

1.55

[1]

Book value includes $

831

million of net unrealized loss which remains in Accumulated other comprehensive income (AOCI) related to certain

securities transferred from available-for-sale securities portfolio to the held-to-maturity securities portfolio as discussed in Note 6.

[2]

Includes $

6.9

billion pledged to secure public and trust deposits that the secured parties are not permitted to sell or repledge the collateral. The

Corporation had unpledged held-to-maturities securities with a fair value of $

1.5

billion that could be used to increase its borrowing facilities.

Debt securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period

of final contractual maturity. The expected maturities of collateralized mortgage obligations and certain other securities may differ

from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

Credit Quality Indicators

The following describes the credit quality indicators by major security type that the Corporation considers in its’ estimate to develop

the allowance for credit losses for investment securities held-to-maturity.

As discussed in Note 2 to the Consolidated Financial Statements on the 2022 Form 10-K, U.S. Treasury securities carry an explicit

guarantee from the U.S. Government are highly rated by major rating agencies, and have a long history of no credit losses.

Accordingly, the Corporation applies a zero-credit loss assumption and no ACL for these securities has been established.

At September 30, 2023 and December 31, 2022, the “Obligations of Puerto Rico, States and political subdivisions” classified as

held-to-maturity, includes securities issued by municipalities of Puerto Rico that are generally not rated by a credit rating agency.

This includes $

19

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

primarily from certain property taxes imposed by the issuing municipality (December 31, 2022 - $

25

million). In the case of general

obligations, they also benefit from a pledge of the full faith, credit and unlimited taxing power of the issuing municipality, which is

required by law to levy property taxes in an amount sufficient for the payment of debt service on such general obligation bonds. The

Corporation performs periodic credit quality reviews of these securities and internally assigns standardized credit risk ratings based

on its evaluation. The Corporation considers these ratings in its estimate to develop the allowance for credit losses associated with

these securities. For the definitions of the obligor risk ratings, refer to the Credit Quality section of Note 9 to the Consolidated

Financial Statements.

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 September 30, 2023

At December 31, 2022

(In thousands)

Securities issued by Puerto Rico municipalities

Watch

2,255

13,735

Pass

16,565

10,925

Total

18,820

24,660

At September 30, 2023, the portfolio of “Obligations of Puerto Rico, States and political subdivisions” also includes $

40

million in

securities 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, 2022 - $

42

million). These

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. At September 30, 2023, the average

refreshed FICO score for the representative sample, comprised of

67

% of the nominal value of the securities, used for the loss

estimate was of

709

(compared to

65

% and

707

, respectively, at December 31, 2022). The loss estimates for this portfolio was

based on the methodology established under CECL for similar loan obligations. The Corporation does not consider the government

guarantee when estimating the credit losses associated with this portfolio.

A further 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 further affect the value of these securities, resulting in losses to the Corporation.

Refer to Note 21

to the Consolidated Financial Statements

for additional information on the Corporation’s exposure to the Puerto

Rico Government.

At September 30, 2023, the portfolio of “Obligations of Puerto Rico, States and political subdivisions” also includes $

7

million in

securities issued by the HFA for which the underlying source of payment is U.S. Treasury securities. The Corporation applies a

zero

-credit loss assumption for these securities, and no ACL has been established for these securities given that U.S. Treasury

securities carry an explicit guarantee from the U.S. Government, are highly rated by major rating agencies, and have a long history

of no credit losses. Refer to Note 2 to the Consolidated Financial Statements in the 2022 Form 10-K for further details.

Delinquency status

At September 30, 2023 and December 31, 2022, there were

no

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

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

The following table provides the activity in the allowance for credit losses related to debt securities held-to-maturity by security type

at September 30, 2023 and September 30, 2022:

For the quarters ended September 30,

2023

2022

(In thousands)

Obligations of Puerto Rico, States and political subdivisions

Allowance for credit losses:

Beginning balance

6,145

7,495

Provision for credit losses (benefit)

(88)

(285)

Securities charged-off

Recoveries

Ending balance

6,057

7,210

For the nine months ended September 30,

2023

2022

(In thousands)

Obligations of Puerto Rico, States and political subdivisions

Allowance for credit losses:

Beginning balance

6,911

8,096

Provision for credit losses (benefit)

(854)

(886)

Securities charged-off

Recoveries

Ending balance

6,057

7,210

The allowance for credit losses for the Obligations of Puerto Rico, States and political subdivisions includes $

0.2

million for

securities issued by municipalities of Puerto Rico, and $

5.9

million for bonds issued by the Puerto Rico HFA, which are secured by

second mortgage loans on Puerto Rico residential properties (compared to $

0.3

million and $

6.6

million, respectively, at December

31, 2022).

Note 8 – Loans

For a summary of the accounting policies related to loans, interest recognition and allowance for credit losses refer to Note 2 – to

the Consolidated Financial Statements included in the 2022 Form 10-K.

During the quarter and nine months ended September 30, 2023, the Corporation recorded purchases (including repurchases) of

mortgage loans amounting to $

102

million and $

274

million, respectively, including $

0.2

million and $

0.9

million in PCD loans, and

consumer loans of $

55

million and $

127

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

Corporation recorded purchases of $

79

million and $

162

million, respectively, in commercial loans.

During the quarter and nine months ended September 30, 2022, the Corporation recorded purchases (including repurchases) of

mortgage loans amounting to $

66

million and $

219

million, respectively, including $

0.3

million and $

4

million in PCD loans,

respectively, and consumer loans of $

135

million and $

349

million, respectively. During the quarter and nine months ended

September 30, 2022, the Corporation recorded purchases of $

106

million and $

129

million, respectively, in commercial loans.

The Corporation performed whole-loan sales involving approximately $

12

million and $

39

million of residential mortgage loans

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

17

million and $

50

million,

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

loans, including loan participations amounting to $

45

million and $

81

million, respectively (September 30, 2022 - $

11

million and $

54

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

loans amounting to $

45

million respectively.

Also, the Corporation securitized approximately $

1

million and $

2

million of mortgage loans into Government National Mortgage

Association (“GNMA”) mortgage-backed securities during the quarter and nine months ended September 30, 2023 (for the quarter

and nine months ended September 30, 2022 - $

14

million and $

169

million, respectively). Furthermore, the Corporation securitized

approximately $

10

million and $

33

million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed

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

22

million and $

117

million, respectively). Also, the Corporation did

no

t securitize any mortgage loans into Federal Home Loan Mortgage Corporation

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

9

million for the

nine months ended).

Delinquency status

The following tables present the amortized cost basis of loans held-in-portfolio (“HIP”), net of unearned income, by past due status,

and by loan class including those that are in non-performing status or that are accruing interest but are past due 90 days or more at

September 30, 2023 and December 31, 2022.

September 30, 2023

BPPR

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

days

or more

past due

Current

Loans HIP

loans

loans

Commercial multi-family

4,407

176

184

4,767

290,047

294,814

184

Commercial real estate:

Non-owner occupied

1,274

15,330

16,604

2,932,277

2,948,881

15,330

Owner occupied

817

827

35,089

36,733

1,370,820

1,407,553

35,089

Commercial and industrial

4,022

1,728

24,733

30,483

4,299,335

4,329,818

21,624

3,109

Construction

6,578

6,578

163,929

170,507

6,578

Mortgage

241,962

100,679

430,430

773,071

5,516,197

6,289,268

187,443

242,987

Leasing

17,915

4,574

6,842

29,331

1,668,783

1,698,114

6,842

Consumer:

Credit cards

11,218

8,133

17,719

37,070

1,040,341

1,077,411

17,719

Home equity lines of credit

26

26

2,448

2,474

Personal

19,586

12,476

18,582

50,644

1,712,358

1,763,002

18,582

Auto

89,453

23,019

40,268

152,740

3,480,456

3,633,196

40,268

Other

567

388

2,152

3,107

144,425

147,532

1,885

267

Total

391,247

152,000

597,907

1,141,154

22,621,416

23,762,570

333,825

264,082

September 30, 2023

Popular U.S.

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

days

or more

past due

Current

Loans HIP

loans

loans

Commercial multi-family

1,332

404

1,736

2,031,883

2,033,619

404

Commercial real estate:

Non-owner occupied

2,628

734

3,362

2,082,887

2,086,249

734

Owner occupied

1,110

923

3,877

5,910

1,631,442

1,637,352

3,877

Commercial and industrial

3,000

464

3,709

7,173

2,190,091

2,197,264

3,579

130

Construction

751,605

751,605

Mortgage

946

22,313

11,980

35,239

1,260,604

1,295,843

11,980

Consumer:

Credit cards

17

17

Home equity lines of

credit

1,045

335

4,085

5,465

59,560

65,025

4,085

Personal

2,581

1,716

2,637

6,934

182,232

189,166

2,637

Other

113

402

515

10,088

10,603

402

Total

12,755

25,751

27,828

66,334

10,200,409

10,266,743

27,698

September 30, 2023

Popular, Inc.

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

days

or more

past due

Current

Loans HIP

[2] [3]

loans

loans

Commercial multi-family

5,739

176

588

6,503

2,321,930

2,328,433

588

Commercial real estate:

Non-owner occupied

3,902

16,064

19,966

5,015,164

5,035,130

16,064

Owner occupied

1,927

1,750

38,966

42,643

3,002,262

3,044,905

38,966

Commercial and industrial

7,022

2,192

28,442

37,656

6,489,426

6,527,082

25,203

3,239

Construction

6,578

6,578

915,534

922,112

6,578

Mortgage

[1]

242,908

122,992

442,410

808,310

6,776,801

7,585,111

199,423

242,987

Leasing

17,915

4,574

6,842

29,331

1,668,783

1,698,114

6,842

Consumer:

Credit cards

11,218

8,133

17,719

37,070

1,040,358

1,077,428

17,719

Home equity lines of credit

1,071

335

4,085

5,491

62,008

67,499

4,085

Personal

22,167

14,192

21,219

57,578

1,894,590

1,952,168

21,219

Auto

89,453

23,019

40,268

152,740

3,480,456

3,633,196

40,268

Other

680

388

2,554

3,622

154,513

158,135

2,287

267

Total

404,002

177,751

625,735

1,207,488

32,821,825

34,029,313

361,523

264,212

[1]

It is the Corporation’s policy to report delinquent residential mortgage loans insured by Federal Housing Administration (“FHA”) or guaranteed by

the U.S. Department of Veterans Affairs (“VA”) as accruing loans past due 90 days or more as opposed to non-performing since the principal

repayment is insured. These balances include $

115

million of residential mortgage loans insured by FHA or guaranteed by the VA that are no

longer accruing interest as of September 30, 2023. Furthermore, the Corporation has approximately $

39

million in reverse mortgage loans which

are guaranteed by FHA, but which are currently not accruing interest. Due to the guaranteed nature of the loans, it is the Corporation’s policy to

exclude these balances from non-performing assets.

[2]

Loans held-in-portfolio are net of $

340

million in unearned income and exclude $

5

million in loans held-for-sale.

[3]

Includes $

13.7

billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral,

of which $

6.6

billion were pledged at the Federal Home Loan Bank ("FHLB") as collateral for borrowings and $

7.1

billion at the Federal Reserve

Bank ("FRB") for discount window borrowings. The Corporation had an available borrowing facility with the FHLB and the discount window of

Federal Reserve Bank of New York of $

3.7

billion and $

4.6

billion, respectively, as of September 30, 2023.

December 31, 2022

BPPR

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

days

or more

past due

Current

Loans HIP

loans

loans

Commercial multi-family

425

242

667

280,706

281,373

242

Commercial real estate:

Non-owner occupied

941

428

23,662

25,031

2,732,296

2,757,327

23,662

Owner occupied

729

245

23,990

24,964

1,563,092

1,588,056

23,990

Commercial and industrial

3,036

941

35,777

39,754

3,756,754

3,796,508

34,277

1,500

Construction

147,041

147,041

Mortgage

222,926

91,881

579,993

894,800

5,215,479

6,110,279

242,391

337,602

Leasing

11,983

3,563

5,941

21,487

1,564,252

1,585,739

5,941

Consumer:

Credit cards

7,106

5,049

11,910

24,065

1,017,766

1,041,831

11,910

Home equity lines of credit

2,954

2,954

Personal

13,232

8,752

18,082

40,066

1,545,621

1,585,687

18,082

Auto

68,868

19,243

40,978

129,089

3,383,441

3,512,530

40,978

Other

487

87

12,682

13,256

124,324

137,580

12,446

236

Total

329,733

130,189

753,257

1,213,179

21,333,726

22,546,905

402,009

351,248

December 31, 2022

Popular U.S.

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

days

or more

past due

Current

Loans HIP

loans

loans

Commercial multi-family

2,177

2,177

2,038,163

2,040,340

Commercial real estate:

Non-owner occupied

484

1,454

1,938

1,740,405

1,742,343

1,454

Owner occupied

5,095

5,095

1,485,398

1,490,493

5,095

Commercial and industrial

12,960

2,205

4,685

19,850

2,022,842

2,042,692

4,319

366

Construction

610,943

610,943

Mortgage

16,131

5,834

20,488

42,453

1,244,739

1,287,192

20,488

Consumer:

Credit cards

39

39

Home equity lines of credit

413

161

4,110

4,684

64,278

68,962

4,110

Personal

1,808

1,467

1,958

5,233

232,659

237,892

1,958

Other

8

8

9,960

9,968

8

Total

33,973

9,667

37,798

81,438

9,449,426

9,530,864

37,432

December 31, 2022

Popular, Inc.

Past due

Past due 90 days or more

30-59

60-89

90 days

Total

Non-accrual

Accruing

(In thousands)

days

days

or more

past due

Current

Loans HIP

[2]

[3]

loans

loans

Commercial multi-family

2,602

242

2,844

2,318,869

2,321,713

242

Commercial real estate:

Non-owner occupied

1,425

428

25,116

26,969

4,472,701

4,499,670

25,116

Owner occupied

729

245

29,085

30,059

3,048,490

3,078,549

29,085

Commercial and industrial

15,996

3,146

40,462

59,604

5,779,596

5,839,200

38,596

1,866

Construction

757,984

757,984

Mortgage

[1]

239,057

97,715

600,481

937,253

6,460,218

7,397,471

262,879

337,602

Leasing

11,983

3,563

5,941

21,487

1,564,252

1,585,739

5,941

Consumer:

Credit cards

7,106

5,049

11,910

24,065

1,017,805

1,041,870

11,910

Home equity lines of credit

413

161

4,110

4,684

67,232

71,916

4,110

Personal

15,040

10,219

20,040

45,299

1,778,280

1,823,579

20,040

Auto

68,868

19,243

40,978

129,089

3,383,441

3,512,530

40,978

Other

487

87

12,690

13,264

134,284

147,548

12,454

236

Total

363,706

139,856

791,055

1,294,617

30,783,152

32,077,769

439,441

351,614

[1]

It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due

90 days or more as opposed to non-performing since the principal repayment is insured. These balances also include $

190

million of residential

mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2022. Furthermore, the

Corporation has approximately $

42

million in reverse mortgage loans which are guaranteed by FHA, but which are currently not accruing interest.

Due to the guaranteed nature of the loans, it is the Corporation’s policy to exclude these balances from non-performing assets.

[2]

Loans held-in-portfolio are net of $

295

million in unearned income and exclude $

5

million in loans held-for-sale.

[3]

Includes $

7.4

billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral,

of which $

4.8

billion were pledged at the Federal Home Loan Bank (FHLB) as collateral for borrowings and $

2.6

billion at the Federal Reserve

Bank (FRB) for discount window borrowings. The Corporation had an available borrowing facility with the FHLB and the discount window of

Federal Reserve Bank of New York of $

2.1

billion and $

1.4

billion, respectively, as of December 31, 2022.

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

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

FHA or guaranteed by VA when 15 months delinquent as to principal or interest, since the principal repayment on these loans is

insured.

At September 30, 2023, mortgage loans held-in-portfolio include $

2.1

billion (December 31, 2022 - $

2.0

billion) of loans insured by

the FHA, or guaranteed by the VA of which $

0.2

billion (December 31, 2022 - $

0.3

billion) are 90 days or more past due. The

portfolio of guaranteed loans includes $

115

million of residential mortgage loans in Puerto Rico that are no longer accruing interest

as of September 30, 2023 (December 31, 2022 - $

190

million). The Corporation has approximately $

39

million in reverse mortgage

loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at September 30, 2023 (December

31, 2022 - $

42

million).

Loans with a delinquency status of 90 days past due as of September 30, 2023 include $

8

million in loans previously pooled into

GNMA securities (December 31, 2022 - $

14

million). Under the GNMA program, issuers such as BPPR have the option but not the

obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase

option are required to 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 September 30, 2023 and December 31, 2022 by

class of loans:

September 30, 2023

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Non-accrual

with no

allowance

Non-accrual

with

allowance

Non-accrual

with no

allowance

Non-accrual

with

allowance

Non-accrual

with no

allowance

Non-accrual

with

allowance

Commercial multi-family

184

404

588

Commercial real estate non-owner occupied

9,577

5,753

734

9,577

6,487

Commercial real estate owner occupied

24,463

10,626

3,877

28,340

10,626

Commercial and industrial

8,504

13,120

3,579

8,504

16,699

Construction

6,578

6,578

Mortgage

90,611

96,832

508

11,472

91,119

108,304

Leasing

294

6,548

294

6,548

Consumer:

HELOCs

4,085

4,085

Personal

4,562

14,020

2,637

4,562

16,657

Auto

1,662

38,606

1,662

38,606

Other

263

1,622

402

263

2,024

Total

139,936

193,889

4,385

23,313

144,321

217,202

December 31, 2022

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Non-accrual

with no

allowance

Non-accrual

with

allowance

Non-accrual

with no

allowance

Non-accrual

with

allowance

Non-accrual

with no

allowance

Non-accrual

with

allowance

Commercial multi-family

242

242

Commercial real estate non-owner occupied

15,639

8,023

1,454

17,093

8,023

Commercial real estate owner occupied

9,070

14,920

5,095

14,165

14,920

Commercial and industrial

20,227

14,050

4,319

20,227

18,369

Mortgage

119,027

123,364

71

20,417

119,098

143,781

Leasing

458

5,483

458

5,483

Consumer:

HELOCs

4,110

4,110

Personal

4,623

13,459

1,958

4,623

15,417

Auto

1,177

39,801

1,177

39,801

Other

263

12,183

8

263

12,191

Total

170,484

231,525

6,620

30,812

177,104

262,337

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

144

million in collateral dependent loans (December

31, 2022 - $

177

million). The Corporation recognized $

3

million in interest income on non-accrual loans during the nine months

ended September 30, 2023 (September 30, 2022 - $

3

million).

The Corporation has designated loans classified as collateral dependent for which the ACL is measured based on the fair value of

the collateral less cost to sell, when foreclosure is probable or when the repayment is expected to be provided substantially by the

sale or operation of the collateral and the borrower is experiencing financial difficulty. The fair value of the collateral is based 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.

The following tables present the amortized cost basis of collateral-dependent loans, for which the ACL was measured based on the

fair value of the collateral less cost to sell, by class of loans and type of collateral as of September 30, 2023 and December 31,

2022:

September 30, 2023

(In thousands)

Real Estate

Auto

Equipment

Accounts

Receivables

Other

Total

BPPR

Commercial multi-family

1,289

1,289

Commercial real estate:

Non-owner occupied

169,357

169,357

Owner occupied

30,507

30,507

Commercial and industrial

1,086

19,025

20,111

Construction

8,747

8,747

Mortgage

100,127

100,127

Leasing

1,103

1,103

Consumer:

Personal

4,741

4,741

Auto

11,941

11,941

Other

310

310

Total BPPR

315,854

13,044

19,335

348,233

Popular U.S.

Commercial real estate:

Owner occupied

3,877

3,877

Commercial and industrial

160

1,400

1,560

Construction

5,309

5,309

Mortgage

1,073

1,073

Total Popular U.S.

10,259

160

1,400

11,819

Popular, Inc.

Commercial multi-family

1,289

1,289

Commercial real estate:

Non-owner occupied

169,357

169,357

Owner occupied

34,384

34,384

Commercial and industrial

1,086

160

20,425

21,671

Construction

14,056

14,056

Mortgage

101,200

101,200

Leasing

1,103

1,103

Consumer:

Personal

4,741

4,741

Auto

11,941

11,941

Other

310

310

Total Popular, Inc.

326,113

13,044

160

20,735

360,052

December 31, 2022

(In thousands)

Real Estate

Auto

Equipment

Accounts

Receivables

Other

Total

BPPR

Commercial multi-family

1,329

1,329

Commercial real estate:

Non-owner occupied

202,980

202,980

Owner occupied

18,234

18,234

Commercial and industrial

1,345

32

9,853

20,985

32,215

Mortgage

128,069

128,069

Leasing

1,020

1,020

Consumer:

Personal

5,381

5,381

Auto

9,556

9,556

Other

263

263

Total BPPR

357,338

10,576

32

9,853

21,248

399,047

Popular U.S.

Commercial real estate:

Non-owner occupied

1,454

1,454

Owner occupied

5,095

5,095

Commercial and industrial

136

136

Mortgage

1,104

1,104

Total Popular U.S.

7,653

136

7,789

Popular, Inc.

Commercial multi-family

1,329

1,329

Commercial real estate:

Non-owner occupied

204,434

204,434

Owner occupied

23,329

23,329

Commercial and industrial

1,345

168

9,853

20,985

32,351

Mortgage

129,173

129,173

Leasing

1,020

1,020

Consumer:

Personal

5,381

5,381

Auto

9,556

9,556

Other

263

263

Total Popular, Inc.

364,991

10,576

168

9,853

21,248

406,836

Purchased Credit Deteriorated (PCD) Loans

The Corporation has purchased loans during the quarter and nine months ended September 30, 2023 and 2022, for which there

was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those

loans is as follows:

(In thousands)

For the quarter ended

September 30, 2023

For the nine months

ended September 30,

2023

Purchase price of loans at acquisition

227

759

Allowance for credit losses at acquisition

9

87

Non-credit discount / (premium) at acquisition

9

Par value of acquired loans at acquisition

236

855

(In thousands)

For the quarter ended

September 30, 2022

For the nine months

ended September 30,

2022

Purchase price of loans at acquisition

247

2,840

Allowance for credit losses at acquisition

59

841

Non-credit discount / (premium) at acquisition

6

131

Par value of acquired loans at acquisition

312

3,812

Note 9 – Allowance for credit losses – loans held-in-portfolio

The

Corporation follows the current expected credit loss (“CECL”) model, to establish and evaluate the adequacy of the ACL to

provide for expected losses in the loan portfolio. This model establishes a forward-looking methodology that reflects the expected

credit losses over the lives of financial assets, starting when such assets are first acquired or originated. In addition, CECL provides

that the initial ACL on purchased credit deteriorated (“PCD”) financial assets be recorded as an increase to the purchase price, with

subsequent changes to the allowance recorded as a credit loss expense. The provision for credit losses recorded in current

operations is based on this methodology. Loan losses are charged and recoveries are credited to the ACL. 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.

As part of the Corporation’s model governance procedures a new model was implemented for the U.S commercial real estate

segment. The new model enhances techniques used to capture default activity within the Corporation’s geographical footprint. As

part of the implementation analysis management evaluated the credit metrics of the portfolio such as risk ratings, delinquency

levels, and low exposure to the commercial office sector. Qualitative reserves continue to be maintained to address risks within the

U. S. commercial real estate segment. The new model including qualitative reserve accounted for $

15

million of PB’s reduction in

ACL.

At September 30,2023, 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 baseline scenario continues to be assigned the

highest probability, followed by the pessimistic scenario, and then the optimistic scenario. 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 2023 annualized GDP growth in the baseline scenario improved to 1.7% and 2.0% for Puerto Rico and the United States,

respectively, compared to 1.5% and 1.6% in the previous quarter. The 2023 forecasted average unemployment rate for Puerto Rico

improved to 6.1% from 6.3% in the previous forecast, while in the United States unemployment levels remained at 3.6%, stable

when compared to the previous forecast.

GDP growth is expected to slow during 2024 for both regions, when compared to 2023, as a result of the Fed’s monetary policy.

2024 GDP growth is expected to be 0.90% for Puerto Rico and 1.25% for the United States. The average 2024 unemployment rate

is expected to increase to 6.80% in Puerto Rico and 4.03% in the United States.

The following tables present the changes in the ACL of loans held-in-portfolio and unfunded commitments for the quarters and nine

months ended September 30, 2023 and 2022.

For the quarter ended September 30, 2023

BPPR

Allowance for

Beginning

credit losses

credit losses -

Ending

(In thousands)

Balance

(benefit)

PCD Loans

Charge-offs

Recoveries

Balances

Allowance for credit losses - loans:

Commercial

Commercial multi-family

4,787

(1,306)

3,481

Commercial real estate non-owner occupied

53,366

(326)

(27)

195

53,208

Commercial real estate owner occupied

41,901

(242)

(446)

280

41,493

Commercial and industrial

81,637

(4,605)

(2,311)

12,858

87,579

Total Commercial

181,691

(6,479)

(2,784)

13,333

185,761

Construction

9,554

(1,486)

(2,611)

5,457

Mortgage

82,899

(6,808)

9

(62)

3,862

79,900

Leasing

13,927

(2,287)

(2,292)

850

10,198

Consumer

Credit cards

71,408

9,773

(10,865)

2,234

72,550

Home equity lines of credit

96

(39)

(43)

73

87

Personal

96,046

28,964

(19,260)

1,957

107,707

Auto

134,247

30,880

(14,553)

4,862

155,436

Other

6,240

1,499

(494)

193

7,438

Total Consumer

308,037

71,077

(45,215)

9,319

343,218

Total - Loans

596,108

54,017

9

(52,964)

27,364

624,534

Allowance for credit losses - unfunded commitments:

Commercial

5,288

(400)

4,888

Construction

3,110

(1,768)

1,342

Ending balance - unfunded commitments [1]

8,398

(2,168)

6,230

1

[1] Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the quarter ended September 30, 2023

Popular U.S.

Beginning

credit losses -

Ending

(In thousands)

Balance

(benefit)

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

21,392

(9,651)

1

11,742

Commercial real estate non-owner occupied

18,350

(4,475)

66

13,941

Commercial real estate owner occupied

9,506

(1,688)

(1,218)

16

6,616

Commercial and industrial

18,014

(1,109)

(1,228)

329

16,006

Total Commercial

67,262

(16,923)

(2,446)

412

48,305

Construction

1,778

3,736

5,514

Mortgage

13,194

(1,252)

62

12,004

Consumer

Home equity lines of credit

2,074

238

(224)

212

2,300

Personal

19,782

3,659

(5,636)

604

18,409

Other

2

39

(43)

4

2

Total Consumer

21,858

3,936

(5,903)

820

20,711

Total - Loans

104,092

(10,503)

(8,349)

1,294

86,534

Allowance for credit losses - unfunded commitments:

Commercial

1,348

197

1,545

Construction

1,797

3,658

5,455

Consumer

50

4

54

Ending balance - unfunded commitments [1]

3,195

3,859

7,054

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the quarter ended September 30, 2023

Popular Inc.

Allowance

for

Beginning

credit losses

credit losses -

Ending

(In thousands)

Balance

(benefit)

PCD Loans

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

26,179

(10,957)

1

15,223

Commercial real estate non-owner occupied

71,716

(4,801)

(27)

261

67,149

Commercial real estate owner occupied

51,407

(1,930)

(1,664)

296

48,109

Commercial and industrial

99,651

(5,714)

(3,539)

13,187

103,585

Total Commercial

248,953

(23,402)

(5,230)

13,745

234,066

Construction

11,332

2,250

(2,611)

10,971

Mortgage

96,093

(8,060)

9

(62)

3,924

91,904

Leasing

13,927

(2,287)

(2,292)

850

10,198

Consumer

Credit cards

71,408

9,773

(10,865)

2,234

72,550

Home equity lines of credit

2,170

199

(267)

285

2,387

Personal

115,828

32,623

(24,896)

2,561

126,116

Auto

134,247

30,880

(14,553)

4,862

155,436

Other

6,242

1,538

(537)

197

7,440

Total Consumer

329,895

75,013

(51,118)

10,139

363,929

Total - Loans

700,200

43,514

9

(61,313)

28,658

711,068

Allowance for credit losses - unfunded commitments:

Commercial

6,636

(203)

6,433

Construction

4,907

1,890

6,797

Consumer

50

4

54

Ending balance - unfunded commitments [1]

11,593

1,691

13,284

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the nine months ended September 30, 2023

BPPR

Impact of

Provision for

Allowance for

Net write

down

Beginning

Adopting

credit losses

credit losses -

Ending

(In thousands)

Balance

ASU 2022-02

(benefit)

PCD Loans

Charge-off

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

5,210

(1,730)

1

3,481

Commercial real estate non-owner occupied

52,475

860

(636)

509

53,208

Commercial real estate owner occupied

48,393

(1,161)

(7,409)

(525)

2,195

41,493

Commercial and industrial

68,217

(552)

8,378

(4,979)

16,515

87,579

Total Commercial

174,295

(1,713)

99

(6,140)

19,220

185,761

Construction

2,978

5,090

(2,611)

5,457

Mortgage

117,344

(33,556)

(15,113)

87

(1,205)

12,343

79,900

Leasing

20,618

(35)

(7,023)

(6,249)

2,887

10,198

Consumer

Credit cards

58,670

35,901

(27,998)

6,578

(601)

72,550

Home equity lines of credit

103

(107)

(111)

202

87

Personal

96,369

(7,020)

60,347

(49,441)

7,452

107,707

Auto

129,735

(21)

45,108

(34,770)

15,384

155,436

Other

15,433

3,297

(11,855)

563

7,438

Total Consumer

300,310

(7,041)

144,546

(124,175)

30,179

(601)

343,218

Total - Loans

615,545

(42,345)

127,599

87

(140,380)

64,629

(601)

624,534

Allowance for credit losses - unfunded commitments:

Commercial

4,336

552

4,888

Construction

2,022

(680)

1,342

Ending balance - unfunded commitments [1]

6,358

(128)

6,230

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the nine months ended September 30, 2023

Popular U.S.

Impact of

Provision for

Beginning

Adopting

credit losses -

Ending

(In thousands)

Balance

ASU 2022-02

(benefit)

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

21,101

(9,363)

4

11,742

Commercial real estate non-owner occupied

19,065

(7,108)

1,984

13,941

Commercial real estate owner occupied

8,688

(738)

(1,395)

61

6,616

Commercial and industrial

12,227

5,943

(3,808)

1,644

16,006

Total Commercial

61,081

(11,266)

(5,203)

3,693

48,305

Construction

1,268

4,246

5,514

Mortgage

17,910

(2,098)

(3,993)

185

12,004

Consumer

Credit cards

1

(1)

Home equity lines of credit

2,439

(419)

(419)

699

2,300

Personal

22,057

(1,140)

10,019

(14,093)

1,566

18,409

Other

2

134

(143)

9

2

Total Consumer

24,498

(1,140)

9,735

(14,656)

2,274

20,711

Total - Loans

104,757

(3,238)

(1,278)

(19,859)

6,152

86,534

Allowance for credit losses - unfunded commitments:

Commercial

1,175

370

1,545

Construction

1,184

4,271

5,455

Consumer

88

(34)

54

Ending balance - unfunded commitments [1]

2,447

4,607

7,054

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the nine months ended September 30, 2023

Popular Inc.

Impact

Provision for

Allowance

for

Net write

down

Beginning

of adopting

credit losses

credit losses -

Ending

(In thousands)

Balance

ASU 2022-02

(benefit)

PCD Loans

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

26,311

(11,093)

5

15,223

Commercial real estate non-owner occupied

71,540

(6,248)

(636)

2,493

67,149

Commercial real estate owner occupied

57,081

(1,161)

(8,147)

(1,920)

2,256

48,109

Commercial and industrial

80,444

(552)

14,321

(8,787)

18,159

103,585

Total Commercial

235,376

(1,713)

(11,167)

(11,343)

22,913

234,066

Construction

4,246

9,336

(2,611)

10,971

Mortgage

135,254

(35,654)

(19,106)

87

(1,205)

12,528

91,904

Leasing

20,618

(35)

(7,023)

(6,249)

2,887

10,198

Consumer

Credit cards

58,670

35,902

(27,999)

6,578

(601)

72,550

Home equity lines of credit

2,542

(526)

(530)

901

2,387

Personal

118,426

(8,160)

70,366

(63,534)

9,018

126,116

Auto

129,735

(21)

45,108

(34,770)

15,384

155,436

Other

15,435

3,431

(11,998)

572

7,440

Total Consumer

324,808

(8,181)

154,281

(138,831)

32,453

(601)

363,929

Total - Loans

720,302

(45,583)

126,321

87

(160,239)

70,781

(601)

711,068

Allowance for credit losses - unfunded commitments:

Commercial

5,511

922

6,433

Construction

3,206

3,591

6,797

Consumer

88

(34)

54

Ending balance - unfunded commitments [1]

8,805

4,479

13,284

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the quarter ended September 30, 2022

BPPR

Allowance for

Beginning

credit losses

credit losses -

Ending

(In thousands)

Balance

(benefit)

PCD Loans

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

3,522

682

4,204

Commercial real estate non-owner occupied

50,393

2,689

368

53,450

Commercial real estate owner occupied

49,472

(5,438)

(24)

2,419

46,429

Commercial and industrial

50,160

9,145

(4,794)

3,181

57,692

Total Commercial

153,547

7,078

(4,818)

5,968

161,775

Construction

3,074

1,181

4,255

Mortgage

130,030

(11,648)

59

(1,720)

3,885

120,606

Leasing

19,037

2,115

(2,191)

853

19,814

Consumer

Credit cards

45,339

12,353

(6,669)

2,186

53,209

Home equity lines of credit

90

(128)

129

91

Personal

74,799

17,139

(9,963)

1,736

83,711

Auto

137,222

(770)

(11,238)

3,863

129,077

Other

17,439

1,374

(610)

193

18,396

Total Consumer

274,889

29,968

(28,480)

8,107

284,484

Total - Loans

580,577

28,694

59

(37,209)

18,813

590,934

Allowance for credit losses - unfunded commitments:

Commercial

2,032

868

2,900

Construction

1,534

349

1,883

Ending balance - unfunded commitments [1]

3,566

1,217

4,783

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the quarter ended September 30, 2022

Popular U.S.

Beginning

credit losses

Ending

(In thousands)

Balance

(benefit)

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

20,571

1,138

8

21,717

Commercial real estate non-owner occupied

14,284

11,187

2

25,473

Commercial real estate owner occupied

9,076

(120)

26

8,982

Commercial and industrial

12,152

(717)

(720)

1,195

11,910

Total Commercial

56,083

11,488

(720)

1,231

68,082

Construction

3,839

(1,895)

1,944

Mortgage

18,275

(370)

23

17,928

Consumer

Home equity lines of credit

3,455

(1,340)

(47)

954

3,022

Personal

19,520

2,901

(1,528)

291

21,184

Other

1

41

(48)

8

2

Total Consumer

22,976

1,602

(1,623)

1,253

24,208

Total - Loans

101,173

10,825

(2,343)

2,507

112,162

Allowance for credit losses - unfunded commitments:

Commercial

1,317

(201)

1,116

Construction

1,961

(650)

1,311

Consumer

60

37

97

Ending balance - unfunded commitments [1]

3,338

(814)

2,524

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the quarter ended September 30, 2022

Popular Inc.

Allowance for

Beginning

credit losses

credit losses -

Ending

(In thousands)

Balance

(benefit)

PCD Loans

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

24,093

1,820

8

25,921

Commercial real estate non-owner occupied

64,677

13,876

370

78,923

Commercial real estate owner occupied

58,548

(5,558)

(24)

2,445

55,411

Commercial and industrial

62,312

8,428

(5,514)

4,376

69,602

Total Commercial

209,630

18,566

(5,538)

7,199

229,857

Construction

6,913

(714)

6,199

Mortgage

148,305

(12,018)

59

(1,720)

3,908

138,534

Leasing

19,037

2,115

(2,191)

853

19,814

Consumer

Credit cards

45,339

12,353

(6,669)

2,186

53,209

Home equity lines of credit

3,545

(1,468)

(47)

1,083

3,113

Personal

94,319

20,040

(11,491)

2,027

104,895

Auto

137,222

(770)

(11,238)

3,863

129,077

Other

17,440

1,415

(658)

201

18,398

Total Consumer

297,865

31,570

(30,103)

9,360

308,692

Total - Loans

681,750

39,519

59

(39,552)

21,320

703,096

Allowance for credit losses - unfunded commitments:

Commercial

3,349

667

4,016

Construction

3,495

(301)

3,194

Consumer

60

37

97

Ending balance - unfunded commitments [1]

6,904

403

7,307

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial

Condition.

For the nine months ended September 30, 2022

BPPR

Allowance for

Beginning

credit losses

credit losses -

Ending

(In thousands)

Balance

(benefit)

PCD Loans

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

3,050

1,154

4,204

Commercial real estate non-owner occupied

45,211

7,024

(30)

1,245

53,450

Commercial real estate owner occupied

54,176

(13,907)

(977)

7,137

46,429

Commercial and industrial

49,491

6,784

(5,660)

7,077

57,692

Total Commercial

151,928

1,055

(6,667)

15,459

161,775

Construction

1,641

1,803

811

4,255

Mortgage

138,286

(28,129)

841

(4,408)

14,016

120,606

Leasing

17,578

3,807

(4,094)

2,523

19,814

Consumer

Credit cards

43,499

21,688

(18,770)

6,792

53,209

Home equity lines of credit

98

(213)

(164)

370

91

Personal

71,022

32,353

(25,069)

5,405

83,711

Auto

154,498

(10,793)

(26,766)

12,138

129,077

Other

15,612

3,590

(1,555)

749

18,396

Total Consumer

284,729

46,625

(72,324)

25,454

284,484

Total - Loans

594,162

25,161

841

(87,493)

58,263

590,934

Allowance for credit losses - unfunded commitments:

Commercial

1,751

1,149

2,900

Construction

2,388

(505)

1,883

Ending balance - unfunded commitments [1]

4,139

644

4,783

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the nine months ended September 30, 2022

Popular U.S.

Beginning

credit losses

Ending

(In thousands)

Balance

(benefit)

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

25,418

(3,721)

20

21,717

Commercial real estate non-owner occupied

22,246

3,208

19

25,473

Commercial real estate owner occupied

6,053

2,681

248

8,982

Commercial and industrial

10,160

1,036

(1,244)

1,958

11,910

Total Commercial

63,877

3,204

(1,244)

2,245

68,082

Construction

4,722

(3,910)

1,132

1,944

Mortgage

16,192

1,756

(68)

48

17,928

Consumer

Credit cards

(10)

10

Home equity lines of credit

3,708

(2,974)

(99)

2,387

3,022

Personal

12,700

11,604

(3,985)

865

21,184

Other

5

144

(172)

25

2

Total Consumer

16,413

8,764

(4,256)

3,287

24,208

Total - Loans

101,204

9,814

(5,568)

6,712

112,162

Allowance for credit losses - unfunded commitments:

Commercial

1,384

(268)

1,116

Construction

2,337

(1,026)

1,311

Consumer

37

60

97

Ending balance - unfunded commitments [1]

3,758

(1,234)

2,524

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the nine months ended September 30, 2022

Popular Inc.

Allowance for

Beginning

credit losses

credit losses -

Ending

(In thousands)

Balance

(benefit)

PCD Loans

Charge-offs

Recoveries

Balance

Allowance for credit losses - loans:

Commercial

Commercial multi-family

28,468

(2,567)

20

25,921

Commercial real estate non-owner occupied

67,457

10,232

(30)

1,264

78,923

Commercial real estate owner occupied

60,229

(11,226)

(977)

7,385

55,411

Commercial and industrial

59,651

7,820

(6,904)

9,035

69,602

Total Commercial

215,805

4,259

(7,911)

17,704

229,857

Construction

6,363

(2,107)

1,943

6,199

Mortgage

154,478

(26,373)

841

(4,476)

14,064

138,534

Leasing

17,578

3,807

(4,094)

2,523

19,814

Consumer

Credit cards

43,499

21,678

(18,770)

6,802

53,209

Home equity lines of credit

3,806

(3,187)

(263)

2,757

3,113

Personal

83,722

43,957

(29,054)

6,270

104,895

Auto

154,498

(10,793)

(26,766)

12,138

129,077

Other

15,617

3,734

(1,727)

774

18,398

Total Consumer

301,142

55,389

(76,580)

28,741

308,692

Total - Loans

695,366

34,975

841

(93,061)

64,975

703,096

Allowance for credit losses - unfunded commitments:

Commercial

3,135

881

4,016

Construction

4,725

(1,531)

3,194

Consumer

37

60

97

Ending balance - unfunded commitments [1]

7,897

(590)

7,307

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

Modifications

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 owing receivables whose terms have been modified

during the period ended at September 30, 2023 amounted to $

17

million related to the commercial loan portfolio.

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

the reporting period disaggregated by class of financing receivable and type of concession granted for the quarter and nine months

ended September 30,2023. Loans modified to borrowers under financial difficulties that were fully paid down, charged-off or

foreclosed upon by period end are not reported.

Loan Modifications Made to Borrowers Experiencing Financial Difficulty for the quarter ended September 30,2023

Interest Rate Reduction

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class

of Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE owner occupied

141,807

10.07

141,807

4.66

Commercial and industrial

43

43

Mortgage

76

76

Consumer:

Credit cards

154

0.01

154

0.01

Personal

247

0.01

247

0.01

Total

142,327

0.60

142,327

0.42

Term Extension

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class

of Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

8,760

0.30

8,760

0.17

CRE owner occupied

2,667

0.19

10,847

0.66

13,514

0.44

Commercial and industrial

16,535

0.38

16,535

0.25

Mortgage

17,057

0.27

933

0.07

17,990

0.24

Consumer:

Personal

122

0.01

122

0.01

Total

45,141

0.19

11,780

0.11

56,921

0.17

Other-Than-Insignificant Payment Delays

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class

of Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE owner occupied

8,980

0.64

8,980

0.29

Commercial and industrial

3,287

0.08

3,287

0.05

Total

12,267

0.05

12,267

0.04

Combination - Term extension and Interest Rate Reduction

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class

of Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

18,705

0.63

18,705

0.37

CRE owner occupied

14,683

1.04

14,683

0.48

Commercial and industrial

558

0.01

558

0.01

Mortgage

7,691

0.12

7,691

0.10

Consumer:

Personal

815

0.05

11

0.01

826

0.04

Total

42,452

0.18

11

42,463

0.12

Combination - Other-Than-Insignificant Payment Delays and Interest Rate Reduction

Puerto Rico

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class

of Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

182

0.01

182

Commercial and industrial

78

78

Consumer:

Credit cards

195

195

0.02

Total

455

455

Loan Modifications Made to Borrowers Experiencing Financial Difficulty for the nine months ended September 30,2023

Interest Rate Reduction

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE owner occupied

141,807

10.07

141,807

4.66

Commercial and industrial

43

43

Mortgage

302

302

Consumer:

Credit cards

565

0.05

565

0.05

Personal

540

0.03

3

543

0.03

Other

3

3

Total

143,260

0.60

3

143,263

0.42

Term Extension

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

33,059

1.12

33,059

0.66

CRE owner occupied

4,293

0.30

26,509

1.62

30,802

1.01

Commercial and industrial

38,713

0.89

38,713

0.59

Construction

2,169

1.27

5,309

0.71

7,478

0.81

Mortgage

41,916

0.67

5,423

0.42

47,339

0.62

Consumer:

Personal

196

0.01

129

0.07

325

0.02

Auto

36

36

Total

120,382

0.51

37,370

0.36

157,752

0.46

Principal Forgiveness

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE owner occupied

18

18

Total

18

18

Other-Than-Insignificant Payment Delays

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

1,736

0.06

1,736

0.03

CRE owner occupied

12,833

0.91

13,556

0.83

26,389

0.87

Commercial and industrial

4,653

0.11

828

0.04

5,481

0.08

Mortgage

137

137

Consumer:

Other

31

0.02

31

0.02

Total

19,390

0.08

14,384

0.14

33,774

0.10

Combination - Term extension and Interest Rate Reduction

BPPR

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

18,705

0.63

18,705

0.37

CRE owner occupied

14,784

1.05

14,784

0.49

Commercial and industrial

614

0.01

614

0.01

Mortgage

29,044

0.46

407

0.03

29,451

0.39

Consumer:

Personal

1,711

0.10

43

0.02

1,754

0.09

Auto

27

27

Total

64,885

0.27

450

65,335

0.19

Combination - Other-Than-Insignificant Payment Delays and Interest Rate Reduction

Puerto Rico

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE non-owner occupied

182

0.01

182

Commercial and industrial

153

153

Consumer:

Credit cards

587

0.05

587

0.05

Total

922

922

Combination - Other-Than-Insignificant Payment Delays and Principal Forgiveness

Puerto Rico

Popular U.S.

Popular, Inc.

(In thousands)

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

Amortized Cost

Basis at

September

30,2023

% of total class of

Financing

Receivable

CRE owner occupied

195

0.01

195

0.01

Total

195

195

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulties:

For the quarter ended September 30, 2023

Interest rate reduction

Loan Type

Financial Effect

CRE Non-owner occupied

Reduced weighted-average contractual interest rate from

9

.0% to

7.2

CRE Owner occupied

Reduced weighted-average contractual interest rate from

8.4

% to

6.6

Commercial and industrial

Reduced weighted-average contractual interest rate from

12.5

% to

7.6

Mortgage

Reduced weighted-average contractual interest rate from

5.7

% to

4.2

Consumer:

Credit cards

Reduced weighted-average contractual interest rate from

19.6

% to

3.6

Personal

Reduced weighted-average contractual interest rate from

17

.0% to

9.1

Term extension

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

28

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

1

year to the life of loans.

Commercial and industrial

Added a weighted-average of

3

year to the life of loans.

Mortgage

Added a weighted-average of

11

years to the life of loans.

Consumer:

Personal

Added a weighted-average of

7

years to the life of loans.

Other than insignificant payment delay

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

7

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

10

months to the life of loans.

Commercial and industrial

Added a weighted-average of

7

months to the life of loans.

Consumer:

Credit cards

Added a weighted-average of

months to the life of loans.

For the nine months ended September 30, 2023

Interest rate reduction

Loan Type

Financial Effect

CRE Non-owner occupied

Reduced weighted-average contractual interest rate from

9

.0% to

7.2

CRE Owner occupied

Reduced weighted-average contractual interest rate from

8.4

% to

6.6

Commercial and industrial

Reduced weighted-average contractual interest rate from

14

.0% to

7.7

Mortgage

Reduced weighted-average contractual interest rate from

5.7

% to

4.2

Consumer:

Credit cards

Reduced weighted-average contractual interest rate from

18

.0% to

4.3

Personal

Reduced weighted-average contractual interest rate from

18

.0% to

9.7

Auto

Reduced weighted-average contractual interest rate from

12.64

% to

12.62

Other

Reduced weighted-average contractual interest rate from

18

.0% to 0.0%.

Term extension

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

19

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

1

year to the life of loans.

Commercial and industrial

Added a weighted-average of

2

years to the life of loans.

Construction

Added a weighted-average of

6

months to the life of loans.

Mortgage

Added a weighted-average of

11

years to the life of loans.

Consumer:

Personal

Added a weighted-average of

7

years to the life of loans.

Auto

Added a weighted-average of

3

years to the life of loans.

Principal forgiveness

Loan Type

Financial Effect

CRE Owner occupied

Reduced the amortized cost basis of the loans by $

0.1

million.

Other than insignificant payment delay

Loan Type

Financial Effect

CRE Non-owner occupied

Added a weighted-average of

12

months to the life of loans.

CRE Owner occupied

Added a weighted-average of

8

months to the life of loans.

Commercial and industrial

Added a weighted-average of

8

months to the life of loans.

Mortgage

Added a weighted-average of

40

months to the life of loans.

Consumer:

Credit cards

Added a weighted-average of

26

months to the life of loans.

Other

Added a weighted-average of

months to the life of loans.

The following table presents, by class, the performance of loans that have been modified in the last nine months at September 30,

The past due 90 days or more categories includes all loans modified classified as non-accruing at the time of the modification.

These loans will continue in non-accrual status, and presented as past due 90 days or more, until the borrower has demonstrated a

willingness and ability to make the restructured loan payments (at least six months of sustained performance after the modification

or one year for loans providing for quarterly or semi-annual payments) and management has concluded that it is probable that the

borrower would not be in payment default in the foreseeable future.

BPPR

For the period ended September 30, 2023

Past Due 90 days or more [1]

(In thousands)

30-59 days

60-89 days

Past due 90

days or more

Total past

due

Current

Total

With Payment

Default

Without

Payment Default

CRE Non-owner occupied

122

122

53,560

53,682

122

CRE Owner occupied

2,488

2,488

171,442

173,930

2,488

Commercial and industrial

1,735

1,735

42,441

44,176

729

1,006

Construction

2,169

2,169

Mortgage

4,913

2,572

22,291

29,776

41,623

71,399

4,196

18,095

Consumer:

Credit cards

117

87

130

334

818

1,152

93

37

Personal

48

19

550

617

1,830

2,447

550

Auto

11

11

52

63

11

Other

31

31

3

34

31

Total

5,078

2,678

27,358

35,114

313,938

349,052

5,049

22,309

[1] Loans that were in non-accrual status at the time of modification are presented as past due until the borrower has demonstrated a willingness and ability

to make the restructured loan payments. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or

charged-off, whichever occurs first. The recorded investment as of period end is inclusive of all partial paydowns and charge-offs since the modification

date. Loans modified with financial difficulty that were fully paid down, charged-off or foreclosed upon by period end are not reported.

Popular U.S.

For the period ended September 30, 2023

Past Due 90 days or more [1]

(In thousands)

30-59 days

60-89 days

Past due 90

days or more

Total past

due

Current

Total

With Payment

Default

Without

Payment Default

CRE Owner occupied

40,065

40,065

Commercial and industrial

828

828

Construction

5,309

5,309

Mortgage

334

334

5,496

5,830

103

231

Consumer:

Personal

129

129

46

175

129

Total

463

463

51,744

52,207

103

360

[1] Loans that were in non-accrual status at the time of modification are presented as past due until the borrower has demonstrated a willingness and ability

to make the restructured loan payments. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or

charged-off, whichever occurs first. The recorded investment as of period end is inclusive of all partial paydowns and charge-offs since the modification

date. Loans modified with financial difficulty that were fully paid down, charged-off or foreclosed upon by period end are not reported.

Popular Inc.

For the period ended September 30, 2023

Past Due 90 days or more [1]

(In thousands)

30-59 days

60-89 days

Past due 90

days or more

Total past

due

Current

Total

With Payment

Default

Without

Payment Default

CRE Non-owner occupied

122

122

53,560

53,682

122

CRE Owner occupied

2,488

2,488

211,507

213,995

2,488

Commercial and industrial

1,735

1,735

43,269

45,004

729

1,006

Construction

7,478

7,478

Mortgage

4,913

2,572

22,625

30,110

47,119

77,229

4,299

18,326

Consumer:

Credit cards

117

87

130

334

818

1,152

93

37

Personal

48

19

679

746

1,876

2,622

679

Auto

11

11

52

63

11

Other

31

31

3

34

31

Total

5,078

2,678

27,821

35,577

365,682

401,259

5,152

22,669

[1] Loans that were in non-accrual status at the time of modification are presented as past due until the borrower has demonstrated a willingness and ability

to make the restructured loan payments. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or

charged-off, whichever occurs first. The recorded inve stment as of period end is inclusive of all partial paydowns and charge-offs since the modification

date. Loans modified with financial difficulty that were fully paid down, charged-off or foreclosed upon by period end are not reported.

During the nine months ended September 30, 2023,

five

loans with an aggregate unpaid principal balance of $

6.6

million were

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

compared to

three

loans with an aggregate unpaid principal balance of $

2.7

million during the nine months ended September 30, 2022.

No

charge-offs were recorded as part of Note A / B splits during 2023

and 2022. These loans were restructured after analyzing the borrowers’ capacity to repay the debt, collateral and ability to perform

under the modified terms.

Payment default 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 nine months ended September 30, 2023, the outstanding balance of loans modified

for borrowers under financial difficulties that were subject to payment default during the nine months preceding the default date was

5

million and $

6

million, respectively.

For the quarter ended September 30, 2023, extension of maturity and the combination of reduction of interest rate and extension of

maturity amounted to $

4

million and $

1

million, respectively, of the outstanding balance of loans modified for borrowers under

financial difficulties that were subject to payment default during the nine months preceding the default date. For the nine months

ended September 30, 2023, extension of maturity and the combination of reduction of interest rate and extension of maturity

amounted to $

5

million and $

1

million, respectively, of the outstanding balance of loans modified for borrowers under financial

difficulties that were subject to payment default during the nine months preceding the default date.

Legacy TDR Modifications

A modification of a loan, prior to ASU 2022-02, constituted a troubled debt restructuring (TDR) when a borrower was experiencing

financial difficulty and the modification constituted a concession. For a summary of the legacy accounting policy related to TDRs,

refer to the Summary of Significant Accounting Policies included in Note 2 to the 2022 Form 10-K.

The outstanding balance of loans classified as TDRs amounted to $

1.6

billion at December 31, 2022. The amount of outstanding

commitments to lend additional funds to debtors owing loans whose terms have been modified in TDRs amounted to $

12

million

related to the commercial loan portfolio at December 31, 2022.

The following table presents the outstanding balance of loans classified as TDRs according to their accruing status and the related

allowance at December 31, 2022.

December 31, 2022

(In thousands)

Accruing

Non-Accruing

Total

Related

Allowance

Loans held-in-portfolio:

Commercial

269,784

54,641

324,425

18,451

Mortgage

[1]

1,169,976

86,790

1,256,766

58,819

Leasing

1,154

24

1,178

43

Consumer

54,395

7,883

62,278

13,577

Loans held-in-portfolio

1,495,309

149,338

1,644,647

90,890

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

725

million guaranteed by U.S. sponsored entities at BPPR.

The following table presents the loan count by type of modification for those loans modified in a TDR during the quarter and nine

months ended September 30, 2022. Loans modified as TDRs for the U.S. operations are considered insignificant to the Corporation.

Popular Inc.

For the quarter ended September 30, 2022

For the nine months ended September 30, 2022

Reduction in

interest rate

Extension of

maturity

date

Combination of

reduction in

interest rate and

extension of

maturity date

Other

Reduction

in interest

rate

Extension of

maturity

date

Combination of

reduction in

interest rate and

extension of

maturity date

Other

Commercial real estate non-owner occupied

2

1

2

2

Commercial real estate owner occupied

1

3

2

2

9

1

2

Commercial and industrial

3

3

8

1

11

Mortgage

2

63

210

2

6

128

715

3

Leasing

1

Consumer:

Credit cards

7

10

31

32

Personal

28

4

1

82

60

1

1

Auto

1

Total

38

73

213

14

124

207

721

51

The following table presents, by class, quantitative information related to loans modified as TDRs during the quarter and nine

months ended September 30, 2022.

Popular, Inc.

For the quarter ended September 30, 2022

(In thousands)

Loan count

Pre-modification outstanding

recorded investment

Post-modification

outstanding recorded

investment

Increase (decrease) in the

allowance for loan losses as

a result of modification

Commercial real estate non-owner occupied

2

1,327

1,326

10

Commercial real estate owner occupied

6

2,488

2,471

(47)

Commercial and industrial

3

123

117

7

Mortgage

277

28,990

30,192

1,032

Consumer:

Credit cards

17

157

154

1

Personal

33

542

539

146

Total

338

33,627

34,799

1,149

Popular, Inc.

For the nine months ended September 30, 2022

(In thousands)

Loan count

Pre-modification outstanding

recorded investment

Post-modification

outstanding recorded

investment

Increase (decrease) in the

allowance for loan losses as

a result of modification

Commercial real estate non-owner occupied

5

4,779

4,777

15

Commercial real estate owner occupied

14

15,594

15,567

(2,120)

Commercial and industrial

23

49,625

49,425

2,067

Mortgage

852

93,773

96,918

3,143

Leasing

1

14

12

2

Consumer:

Credit cards

63

567

599

8

Personal

144

2,223

2,297

411

Auto

1

28

28

5

Total

1,103

166,603

169,623

3,531

The following table presents, by class, TDRs that were subject to payment default and that had been modified as a TDR during the

twelve months preceding the default date. Payment default is defined as a restructured loan becoming 90 days past due after being

modified, foreclosed 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 as a TDR that were fully paid down, charged-off or

foreclosed upon by period end are not reported.

Popular Inc.

Defaulted during the quarter ended

September 30, 2022

Defaulted during the nine months ended

September 30, 2022

(In thousands)

Loan count

Recorded investment as

of first default date

Loan count

Recorded Investment as of

first default date

Commercial real estate owner occupied

1

560

1

560

Commercial and industrial

2

1,165

5

3,661

Mortgage

35

3,500

73

9,200

Leasing

1

5

1

5

Consumer:

Credit cards

4

32

24

185

Personal

15

160

34

558

Total

58

5,422

138

14,169

Credit Quality

The risk rating system provides for the assignment of ratings at the obligor level based on the financial condition of the borrower.

The risk rating analysis process 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 September 30, 2023 and December 31, 2022 and the gross write-offs recorded by

vintage year. For the definitions of the obligor risk ratings, refer to the Credit Quality section of Note 9 to the Consolidated Financial

Statements included in the 2022 Form 10-K:

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

BPPR

Commercial:

Commercial multi-family

Watch

4,132

4,291

8,423

Special Mention

5,817

5,817

Substandard

3,048

100

3,148

Pass

38,060

139,784

22,604

20,572

29,751

26,368

287

277,426

Total commercial

multi-family

38,060

139,784

22,604

20,572

33,883

39,524

387

294,814

Commercial real estate non-owner occupied

Watch

2,611

345

14,870

22,895

14,387

42,474

97,582

Special Mention

652

25,120

63

65,283

55,662

3,563

150,343

Substandard

19,724

1,356

2,243

25,986

49,309

Pass

215,640

881,595

555,185

363,551

44,464

584,724

6,488

2,651,647

Total commercial

real estate non-

owner occupied

238,627

883,296

595,175

388,752

124,134

708,846

10,051

2,948,881

Year-to-Date gross

write-offs

609

27

636

Commercial real estate owner occupied

Watch

1,673

11,674

25,306

8,021

3,578

65,433

900

116,585

Special Mention

16,697

6,082

143,558

996

56,793

13,069

237,195

Substandard

916

15,967

2,130

324

657

71,111

91,105

Doubtful

225

225

Pass

54,152

188,715

234,029

52,294

26,558

396,965

9,730

962,443

Total commercial

real estate owner

occupied

56,741

233,053

267,547

204,197

31,789

590,527

23,699

1,407,553

Year-to-Date gross

write-offs

4

1

520

525

Commercial and industrial

Watch

5,085

20,271

6,051

2,791

16,548

78,294

78,361

207,401

Special Mention

85

3,519

3,549

6,157

2,057

42,415

10,696

68,478

Substandard

5,698

2,011

6,457

19,449

2,130

34,171

33,556

103,472

Doubtful

54

30

84

Loss

354

354

Pass

679,029

688,800

522,132

246,230

132,643

265,712

1,415,483

3,950,029

Total commercial

and industrial

689,897

714,601

538,189

274,681

153,378

420,622

1,538,450

4,329,818

Year-to-Date gross

write-offs

784

184

140

317

398

287

2,869

4,979

Construction

Watch

17,156

8,693

20,485

46,334

Substandard

6,578

2,169

8,747

Pass

14,035

21,688

33,249

11,843

2,308

1,056

31,247

115,426

Total construction

14,035

45,422

41,942

14,012

2,308

1,056

51,732

170,507

Year-to-Date gross

write-offs

2,611

2,611

Mortgage

Substandard

161

515

372

2,923

76,022

79,993

Pass

537,050

443,989

430,508

262,407

167,447

4,367,874

6,209,275

Total mortgage

537,050

444,150

431,023

262,779

170,370

4,443,896

6,289,268

Year-to-Date gross

write-offs

1,205

1,205

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

BPPR

Leasing

Substandard

146

2,269

1,912

923

946

568

6,764

Loss

48

29

77

Pass

508,378

522,978

341,119

180,280

101,777

36,741

1,691,273

Total leasing

508,524

525,295

343,031

181,203

102,752

37,309

1,698,114

Year-to-Date gross

write-offs

391

2,638

1,871

530

473

346

6,249

Consumer:

Credit cards

Substandard

17,717

17,717

Loss

2

2

Pass

1,059,692

1,059,692

Total credit cards

1,077,411

1,077,411

Year-to-Date gross

write-offs

27,998

27,998

HELOCs

Pass

2,474

2,474

Total HELOCs

2,474

2,474

Year-to-Date gross

write-offs

111

111

Personal

Substandard

677

4,223

2,077

604

1,217

8,854

1,104

18,756

Loss

30

10

48

25

21

134

Pass

700,994

562,370

210,731

66,531

71,178

109,046

23,262

1,744,112

Total Personal

701,701

566,603

212,856

67,135

72,420

117,921

24,366

1,763,002

Year-to-Date gross

write-offs

1,055

23,867

13,973

3,395

3,834

2,305

1,012

49,441

Auto

Substandard

3,213

12,306

11,389

8,665

7,369

3,735

46,677

Loss

11

118

18

55

32

25

259

Pass

941,464

964,237

770,038

449,165

299,099

162,257

3,586,260

Total Auto

944,688

976,661

781,445

457,885

306,500

166,017

3,633,196

Year-to-Date gross

write-offs

3,625

16,278

8,276

4,353

2,238

34,770

Other consumer

Substandard

28

82

17

1,151

267

1,545

Loss

137

499

636

Pass

30,668

24,809

15,498

5,941

3,537

3,843

61,055

145,351

Total Other

consumer

30,668

24,837

15,635

6,023

3,554

5,493

61,322

147,532

Year-to-Date gross

write-offs

20

117

80

133

53

11,452

11,855

Total BPPR

3,759,991

4,553,702

3,249,447

1,877,239

1,001,088

6,531,211

2,765,526

24,366

23,762,570

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

Popular U.S.

Commercial:

Commercial multi-family

Watch

742

3,672

51,264

59,944

115,622

Special Mention

867

1,178

16,681

18,726

Substandard

14,747

16,003

30,750

Pass

69,117

525,927

367,965

233,949

216,481

450,809

4,273

1,868,521

Total commercial

multi-family

69,117

526,669

368,832

238,799

282,492

543,437

4,273

2,033,619

Commercial real estate non-owner occupied

Watch

5,500

4,228

729

10,991

44,329

65,777

Special Mention

1,333

68,433

69,766

Substandard

8,112

1,718

3,210

13,040

Pass

369,327

542,901

205,752

245,659

116,282

447,229

10,516

1,937,666

Total commercial

real estate non-

owner occupied

369,327

548,401

209,980

254,500

130,324

563,201

10,516

2,086,249

Commercial real estate owner occupied

Watch

78,483

1,177

124,940

204,600

Special Mention

3,809

6,114

114

10,037

Substandard

481

7,288

49,957

57,726

Pass

221,117

357,451

322,609

112,290

76,200

266,381

8,941

1,364,989

Total commercial

real estate owner

occupied

221,117

357,932

401,092

117,276

89,602

441,392

8,941

1,637,352

Year-to-Date gross

write-offs

1,395

1,395

Commercial and industrial

Watch

2,594

8,238

3,940

1,024

1,208

3,748

9,507

30,259

Special Mention

368

621

1,074

37

171

47

2,318

Substandard

259

209

186

1,773

1,867

2,428

6,722

Pass

94,717

276,872

366,679

326,315

176,132

495,831

421,419

2,157,965

Total commercial

and industrial

97,679

285,990

371,902

327,562

179,284

501,493

433,354

2,197,264

Year-to-Date gross

write-offs

247

221

1,994

1,307

39

3,808

Construction

Watch

18,542

18,542

Special Mention

34,562

34,562

Substandard

5,213

3,214

2,095

10,522

Pass

180,508

305,886

121,838

28,119

50,844

784

687,979

Total construction

180,508

305,886

145,593

31,333

50,844

37,441

751,605

Mortgage

Substandard

2,168

9,812

11,980

Pass

75,875

226,204

291,991

237,859

179,085

272,849

1,283,863

Total mortgage

75,875

226,204

291,991

237,859

181,253

282,661

1,295,843

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

Popular U.S.

Consumer:

Credit cards

Pass

17

17

Total credit cards

17

17

Year-to-Date gross

write-offs

1

1

HELOCs

Substandard

1,906

1,046

2,952

Loss

99

1,034

1,133

Pass

7,592

40,796

12,552

60,940

Total HELOCs

9,597

40,796

14,632

65,025

Year-to-Date gross

write-offs

419

419

Personal

Substandard

327

1,183

379

88

121

218

2,316

Loss

69

13

238

320

Pass

36,704

110,755

28,371

3,750

5,358

1,592

186,530

Total Personal

37,100

111,951

28,750

3,838

5,479

2,048

189,166

Year-to-Date gross

write-offs

137

9,218

3,319

518

758

143

14,093

Other consumer

Substandard

402

402

Pass

20

10,181

10,201

Total Other

consumer

20

10,583

10,603

Year-to-Date gross

write-offs

143

143

Total Popular U.S.

1,050,743

2,363,033

1,818,140

1,211,167

919,278

2,381,270

508,480

14,632

10,266,743

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

Popular, Inc.

Commercial:

Commercial multi-family

Watch

742

3,672

55,396

64,235

124,045

Special Mention

867

1,178

22,498

24,543

Substandard

14,747

19,051

100

33,898

Pass

107,177

665,711

390,569

254,521

246,232

477,177

4,560

2,145,947

Total commercial

multi-family

107,177

666,453

391,436

259,371

316,375

582,961

4,660

2,328,433

Commercial real estate non-owner occupied

Watch

2,611

5,845

19,098

23,624

25,378

86,803

163,359

Special Mention

652

25,120

63

66,616

124,095

3,563

220,109

Substandard

19,724

1,356

10,355

1,718

29,196

62,349

Pass

584,967

1,424,496

760,937

609,210

160,746

1,031,953

17,004

4,589,313

Total commercial

real estate non-

owner occupied

607,954

1,431,697

805,155

643,252

254,458

1,272,047

20,567

5,035,130

Year-to-Date gross

write-offs

609

27

636

Commercial real estate owner occupied

Watch

1,673

11,674

103,789

9,198

3,578

190,373

900

321,185

Special Mention

16,697

6,082

147,367

7,110

56,907

13,069

247,232

Substandard

916

16,448

2,130

324

7,945

121,068

148,831

Doubtful

225

225

Pass

275,269

546,166

556,638

164,584

102,758

663,346

18,671

2,327,432

Total commercial

real estate owner

occupied

277,858

590,985

668,639

321,473

121,391

1,031,919

32,640

3,044,905

Year-to-Date gross

write-offs

4

1

1,915

1,920

Commercial and industrial

Watch

7,679

28,509

9,991

3,815

17,756

82,042

87,868

237,660

Special Mention

453

4,140

4,623

6,194

2,228

42,462

10,696

70,796

Substandard

5,698

2,270

6,666

19,635

3,903

36,038

35,984

110,194

Doubtful

54

30

84

Loss

354

354

Pass

773,746

965,672

888,811

572,545

308,775

761,543

1,836,902

6,107,994

Total commercial

and industrial

787,576

1,000,591

910,091

602,243

332,662

922,115

1,971,804

6,527,082

Year-to-Date gross

write-offs

1,031

405

2,134

317

1,705

287

2,908

8,787

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

Popular, Inc.

Construction

Watch

17,156

27,235

20,485

64,876

Special Mention

34,562

34,562

Substandard

6,578

5,213

5,383

2,095

19,269

Pass

194,543

327,574

155,087

39,962

53,152

1,840

31,247

803,405

Total construction

194,543

351,308

187,535

45,345

53,152

38,497

51,732

922,112

Year-to-Date gross

write-offs

2,611

2,611

Mortgage

Substandard

161

515

372

5,091

85,834

91,973

Pass

612,925

670,193

722,499

500,266

346,532

4,640,723

7,493,138

Total mortgage

612,925

670,354

723,014

500,638

351,623

4,726,557

7,585,111

Year-to-Date gross

write-offs

1,205

1,205

Leasing

Substandard

146

2,269

1,912

923

946

568

6,764

Loss

48

29

77

Pass

508,378

522,978

341,119

180,280

101,777

36,741

1,691,273

Total leasing

508,524

525,295

343,031

181,203

102,752

37,309

1,698,114

Year-to-Date gross

write-offs

391

2,638

1,871

530

473

346

6,249

September 30, 2023

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2023

2022

2021

2020

2019

Prior

Years

Total

Popular, Inc.

Consumer:

Credit cards

Substandard

17,717

17,717

Loss

2

2

Pass

1,059,709

1,059,709

Total credit cards

1,077,428

1,077,428

Year-to-Date gross

write-offs

27,999

27,999

HELOCs

Substandard

1,906

1,046

2,952

Loss

99

1,034

1,133

Pass

7,592

43,270

12,552

63,414

Total HELOCs

9,597

43,270

14,632

67,499

Year-to-Date gross

write-offs

419

111

530

Personal

Substandard

1,004

5,406

2,456

692

1,338

9,072

1,104

21,072

Loss

99

23

48

25

259

454

Pass

737,698

673,125

239,102

70,281

76,536

110,638

23,262

1,930,642

Total Personal

738,801

678,554

241,606

70,973

77,899

119,969

24,366

1,952,168

Year-to-Date gross

write-offs

1,192

33,085

17,292

3,913

4,592

2,448

1,012

63,534

Auto

Substandard

3,213

12,306

11,389

8,665

7,369

3,735

46,677

Loss

11

118

18

55

32

25

259

Pass

941,464

964,237

770,038

449,165

299,099

162,257

3,586,260

Total Auto

944,688

976,661

781,445

457,885

306,500

166,017

3,633,196

Year-to-Date gross

write-offs

3,625

16,278

8,276

4,353

2,238

34,770

Other consumer

Substandard

28

82

17

1,151

669

1,947

Loss

137

499

636

Pass

30,688

24,809

15,498

5,941

3,537

3,843

71,236

155,552

Total Other

consumer

30,688

24,837

15,635

6,023

3,554

5,493

71,905

158,135

Year-to-Date gross

write-offs

20

117

80

133

53

11,452

143

11,998

Total Popular Inc.

4,810,734

6,916,735

5,067,587

3,088,406

1,920,366

8,912,481

3,274,006

38,998

34,029,313

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

BPPR

Commercial:

Commercial multi-family

Watch

18,508

4,687

23,195

Special Mention

2,692

2,692

Substandard

3,326

100

3,426

Pass

137,411

22,850

20,821

16,145

24,640

30,193

252,060

Total commercial

multi-family

137,411

22,850

20,821

34,653

24,640

40,898

100

281,373

Commercial real estate non-owner occupied

Watch

173

36,228

14,045

14,942

7,777

99,269

172,434

Special Mention

4,361

19,970

7,517

25,540

57,388

Substandard

8,933

3,209

19,004

25,490

21,064

77,700

Pass

855,839

585,690

294,086

94,056

35,105

568,893

16,136

2,449,805

Total commercial

real estate non-

owner occupied

864,945

626,279

331,310

135,519

68,372

714,766

16,136

2,757,327

Commercial real estate owner occupied

Watch

2,296

5,271

9,447

4,275

31,649

71,568

124,506

Special Mention

10

284

1,684

6,578

1,076

61,460

71,092

Substandard

16,205

6,177

802

800

770

84,205

108,959

Doubtful

505

505

Pass

227,404

258,473

274,333

30,691

68,029

407,322

16,742

1,282,994

Total commercial

real estate owner

occupied

245,915

270,205

286,266

42,344

101,524

625,060

16,742

1,588,056

Commercial and industrial

Watch

32,376

2,185

15,493

18,829

15,483

51,602

56,508

192,476

Special Mention

2,537

2,479

5,770

1,139

6,767

46,040

6,283

71,015

Substandard

789

1,276

1,600

3,138

11,536

40,636

46,226

105,201

Doubtful

29

75

75

179

Loss

144

144

Pass

793,662

684,647

211,013

177,265

65,197

292,173

1,203,536

3,427,493

Total commercial

and industrial

829,364

690,587

233,905

200,371

99,058

430,526

1,312,697

3,796,508

Construction

Watch

35,446

3,116

98

141

38,801

Substandard

9,629

9,629

Pass

13,044

34,387

15,961

2,262

32,957

98,611

Total construction

48,490

37,503

25,688

2,262

33,098

147,041

Mortgage

Substandard

574

687

3,926

4,227

93,959

103,373

Pass

449,286

451,027

285,026

204,170

237,007

4,380,390

6,006,906

Total mortgage

449,286

451,601

285,713

208,096

241,234

4,474,349

6,110,279

Leasing

Substandard

953

1,491

941

1,172

1,127

215

5,899

Loss

21

21

42

Pass

672,294

428,889

237,939

146,231

79,451

14,994

1,579,798

Total leasing

673,247

430,380

238,880

147,424

80,578

15,230

1,585,739

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

BPPR

Consumer:

Credit cards

Substandard

11,907

11,907

Loss

3

3

Pass

1,029,921

1,029,921

Total credit cards

1,041,831

1,041,831

HELOCs

Pass

2,954

2,954

Total HELOCs

2,954

2,954

Personal

Substandard

1,330

2,001

764

1,774

503

10,831

1,285

18,488

Loss

53

20

31

10

1

115

Pass

841,564

320,809

103,337

117,568

46,555

109,543

27,708

1,567,084

Total Personal

842,894

322,810

104,154

119,362

47,089

120,384

28,994

1,585,687

Auto

Substandard

6,764

11,171

10,466

10,243

4,597

2,382

45,623

Loss

23

41

48

25

7

14

158

Pass

1,156,654

961,571

588,200

426,169

248,328

85,827

3,466,749

Total Auto

1,163,441

972,783

598,714

436,437

252,932

88,223

3,512,530

Other consumer

Substandard

100

593

543

242

10,902

12,380

Loss

263

40

303

Pass

29,557

17,439

6,967

4,201

4,553

1,942

60,238

124,897

Total Other

consumer

29,557

17,439

7,067

4,794

5,359

2,224

71,140

137,580

Total BPPR

5,284,550

3,842,437

2,132,518

1,331,262

920,786

6,511,660

2,494,698

28,994

22,546,905

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

Popular U.S.

Commercial:

Commercial multi-family

Watch

750

917

6,218

85,579

9,633

52,835

155,932

Special Mention

1,198

14,491

8,372

24,061

Substandard

9,305

7,373

2,941

19,619

Pass

503,010

399,397

238,903

210,295

138,723

347,615

2,785

1,840,728

Total commercial

multi-family

503,760

400,314

246,319

305,179

170,220

411,763

2,785

2,040,340

Commercial real estate non-owner occupied

Watch

2,167

13,622

3,355

26,931

29,849

75,924

Special Mention

1,353

75,269

76,622

Substandard

2,864

2,149

3,220

1,429

4,722

14,384

Pass

552,258

209,338

211,449

109,781

100,065

383,409

9,113

1,575,413

Total commercial

real estate non-

owner occupied

552,258

214,369

227,220

117,709

128,425

493,249

9,113

1,742,343

Commercial real estate owner occupied

Watch

1,197

1,079

6,095

55,005

63,376

Special Mention

3,886

901

4,787

Substandard

7,403

11,165

33,586

52,154

Pass

363,655

422,959

114,988

82,971

119,565

258,881

7,157

1,370,176

Total commercial

real estate owner

occupied

363,655

422,959

120,071

91,453

136,825

348,373

7,157

1,490,493

Commercial and industrial

Watch

12,328

2,218

2,022

2,049

8,438

532

4,291

31,878

Special Mention

1,262

1,130

314

244

60

3

3,013

Substandard

260

935

74

4,278

315

1,829

1,408

9,099

Loss

292

525

1

75

192

3

1,088

Pass

185,318

341,855

368,398

202,301

171,528

376,045

352,169

1,997,614

Total commercial

and industrial

199,460

346,663

370,809

208,947

180,533

378,409

357,871

2,042,692

Construction

Watch

12,085

6,979

18,310

34,126

71,500

Special Mention

3

3

Substandard

1,423

6,540

2,095

10,058

Pass

164,272

146,062

91,486

93,118

10,863

23,581

529,382

Total construction

164,272

158,150

92,909

100,097

35,713

59,802

610,943

Mortgage

Substandard

2,009

3,478

4,048

1,156

9,798

20,489

Pass

236,595

303,204

243,468

183,846

58,026

241,564

1,266,703

Total mortgage

236,595

305,213

246,946

187,894

59,182

251,362

1,287,192

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

Popular U.S.

Consumer:

Credit cards

Pass

39

39

Total credit cards

39

39

HELOCs

Substandard

2,146

20

1,402

3,568

Loss

4

538

542

Pass

9,169

41,724

13,959

64,852

Total HELOCs

11,319

41,744

15,899

68,962

Personal

Substandard

621

454

149

238

70

6

1,538

Loss

421

421

Pass

165,153

46,320

7,339

13,443

2,021

1,657

235,933

Total Personal

165,774

46,774

7,488

13,681

2,091

2,084

237,892

Other consumer

Substandard

8

8

Pass

9,960

9,960

Total Other

consumer

9,968

9,968

Total Popular U.S.

2,185,774

1,894,442

1,311,762

1,024,960

712,989

1,956,361

428,677

15,899

9,530,864

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

Popular, Inc.

Commercial:

Commercial multi-family

Watch

750

917

6,218

104,087

9,633

57,522

179,127

Special Mention

1,198

14,491

11,064

26,753

Substandard

9,305

7,373

6,267

100

23,045

Pass

640,421

422,247

259,724

226,440

163,363

377,808

2,785

2,092,788

Total commercial

multi-family

641,171

423,164

267,140

339,832

194,860

452,661

2,885

2,321,713

Commercial real estate non-owner occupied

Watch

173

38,395

27,667

18,297

34,708

129,118

248,358

Special Mention

4,361

19,970

8,870

100,809

134,010

Substandard

8,933

2,864

5,358

22,224

26,919

25,786

92,084

Pass

1,408,097

795,028

505,535

203,837

135,170

952,302

25,249

4,025,218

Total commercial

real estate non-

owner occupied

1,417,203

840,648

558,530

253,228

196,797

1,208,015

25,249

4,499,670

Commercial real estate owner occupied

Watch

2,296

5,271

10,644

5,354

37,744

126,573

187,882

Special Mention

10

284

5,570

6,578

1,076

62,361

75,879

Substandard

16,205

6,177

802

8,203

11,935

117,791

161,113

Doubtful

505

505

Pass

591,059

681,432

389,321

113,662

187,594

666,203

23,899

2,653,170

Total commercial

real estate owner

occupied

609,570

693,164

406,337

133,797

238,349

973,433

23,899

3,078,549

Commercial and industrial

Watch

44,704

4,403

17,515

20,878

23,921

52,134

60,799

224,354

Special Mention

3,799

3,609

6,084

1,383

6,827

46,040

6,286

74,028

Substandard

1,049

2,211

1,674

7,416

11,851

42,465

47,634

114,300

Doubtful

29

75

75

179

Loss

292

525

1

75

192

3

144

1,232

Pass

978,980

1,026,502

579,411

379,566

236,725

668,218

1,555,705

5,425,107

Total commercial

and industrial

1,028,824

1,037,250

604,714

409,318

279,591

808,935

1,670,568

5,839,200

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

Popular, Inc.

Construction

Watch

35,446

15,201

98

6,979

18,310

34,126

141

110,301

Special Mention

3

3

Substandard

11,052

6,540

2,095

19,687

Pass

177,316

180,449

107,447

95,380

10,863

23,581

32,957

627,993

Total construction

212,762

195,653

118,597

102,359

35,713

59,802

33,098

757,984

Mortgage

Substandard

2,583

4,165

7,974

5,383

103,757

123,862

Pass

685,881

754,231

528,494

388,016

295,033

4,621,954

7,273,609

Total mortgage

685,881

756,814

532,659

395,990

300,416

4,725,711

7,397,471

Leasing

Substandard

953

1,491

941

1,172

1,127

215

5,899

Loss

21

21

42

Pass

672,294

428,889

237,939

146,231

79,451

14,994

1,579,798

Total leasing

673,247

430,380

238,880

147,424

80,578

15,230

1,585,739

December 31, 2022

Term Loans

Revolving

Loans

Amortized

Cost Basis

Revolving

Loans

Converted to

Term Loans

Amortized

Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2022

2021

2020

2019

2018

Prior

Years

Total

Popular, Inc.

Consumer:

Credit cards

Substandard

11,907

11,907

Loss

3

3

Pass

1,029,960

1,029,960

Total credit cards

1,041,870

1,041,870

HELOCs

Substandard

2,146

20

1,402

3,568

Loss

4

538

542

Pass

9,169

44,678

13,959

67,806

Total HELOCs

11,319

44,698

15,899

71,916

Personal

Substandard

1,951

2,455

913

2,012

573

10,837

1,285

20,026

Loss

53

20

31

431

1

536

Pass

1,006,717

367,129

110,676

131,011

48,576

111,200

27,708

1,803,017

Total Personal

1,008,668

369,584

111,642

133,043

49,180

122,468

28,994

1,823,579

Auto

Substandard

6,764

11,171

10,466

10,243

4,597

2,382

45,623

Loss

23

41

48

25

7

14

158

Pass

1,156,654

961,571

588,200

426,169

248,328

85,827

3,466,749

Total Auto

1,163,441

972,783

598,714

436,437

252,932

88,223

3,512,530

Other consumer

Substandard

100

593

543

242

10,910

12,388

Loss

263

40

303

Pass

29,557

17,439

6,967

4,201

4,553

1,942

70,198

134,857

Total Other

consumer

29,557

17,439

7,067

4,794

5,359

2,224

81,108

147,548

Total Popular Inc.

7,470,324

5,736,879

3,444,280

2,356,222

1,633,775

8,468,021

2,923,375

44,893

32,077,769

Note 10 – Mortgage banking activities

Income from mortgage banking activities includes mortgage servicing fees earned 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 September 30,

Nine months ended September 30,

(In thousands)

2023

2022

2023

2022

Mortgage servicing fees, net of fair value adjustments:

Mortgage servicing fees

8,025

9,126

25,083

27,635

Mortgage servicing rights fair value adjustments

(2,793)

(499)

(10,385)

2,846

Total mortgage servicing fees, net of fair value adjustments

5,232

8,627

14,698

30,481

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

(335)

1,124

(133)

(374)

Trading account profit (loss):

Unrealized gains on outstanding derivative positions

45

160

Realized gains (losses) on closed derivative positions

494

(240)

661

6,325

Total trading account profit (loss)

539

(240)

821

6,325

Losses on repurchased loans, including interest advances

(43)

(63)

(277)

(544)

Total mortgage banking activities

5,393

9,448

15,109

35,888

[1]

Effective on January 1, 2023, loans held-for-sale are stated at fair value. Prior to such date, loans held-for-sale were stated at lower-of-cost-or-

market.

Note 11 – Transfers of financial assets and mortgage servicing assets

The Corporation typically transfers conforming residential mortgage loans 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 20 to the Consolidated Financial

Statements for a description of such arrangements.

No

liabilities were incurred as a result of these securitizations during the quarters and nine months ended September 30, 2023 and

2022 because they did not contain any credit recourse arrangements.

The following tables present the initial fair value of the assets obtained as proceeds from residential mortgage loans securitized

during the quarters and nine months ended September 30, 2023 and 2022:

Proceeds Obtained During the Quarter Ended September 30, 2023

(In thousands)

Level 1

Level 2

Level 3

Initial Fair Value

Assets

Trading account debt securities:

Mortgage-backed securities - GNMA

1,421

1,421

Mortgage-backed securities - FNMA

10,178

10,178

Total trading account debt securities

11,599

11,599

Mortgage servicing rights

301

301

Total

11,599

301

11,900

Proceeds Obtained During the Nine months Ended September 30, 2023

(In thousands)

Level 1

Level 2

Level 3

Initial Fair Value

Assets

Trading account debt securities:

Mortgage-backed securities - GNMA

2,488

2,488

Mortgage-backed securities - FNMA

33,470

33,470

Total trading account debt securities

35,958

35,958

Mortgage servicing rights

945

945

Total

35,958

945

36,903

Proceeds Obtained During the Quarter Ended September 30, 2022

(In thousands)

Level 1

Level 2

Level 3

Initial Fair Value

Assets

Trading account debt securities:

Mortgage-backed securities - GNMA

14,190

14,190

Mortgage-backed securities - FNMA

21,685

21,685

Total trading account debt securities

35,875

35,875

Mortgage servicing rights

809

809

Total

35,875

809

36,684

Proceeds Obtained During the Nine months Ended September 30, 2022

(In thousands)

Level 1

Level 2

Level 3

Initial Fair Value

Assets

Trading account debt securities:

Mortgage-backed securities - GNMA

169,352

169,352

Mortgage-backed securities - FNMA

117,015

117,015

Mortgage-backed securities - FHLMC

8,505

8,505

Total trading account debt securities

294,872

294,872

Mortgage servicing rights

5,179

5,179

Total

294,872

5,179

300,051

During the nine months ended September 30, 2023, the Corporation retained servicing rights on whole loan sales involving

approximately $

39

million in principal balance outstanding (September 30, 2022 - $

50

million), with net realized gains of

approximately $

0.6

million (September 30, 2022 - gains of $

0.8

million). All loan sales performed during the nine months ended

September 30, 2023 and 2022 were without credit recourse agreements.

The Corporation recognizes as assets the rights to service loans for others, whether these rights are purchased or result from asset

transfers such as sales and securitizations. These mortgage servicing rights (“MSRs”) are measured at fair value.

The Corporation uses 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 nine months ended September 30,

2023 and 2022.

Residential MSRs

(In thousands)

September 30, 2023

September 30, 2022

Fair value at beginning of period

128,350

121,570

Additions

1,814

6,195

Changes due to payments on loans

[1]

(7,569)

(8,178)

Reduction due to loan repurchases

(468)

(646)

Changes in fair value due to changes in valuation model inputs or assumptions

(1,828)

11,556

Other

(1,269)

44

Fair value at end of period

[2]

119,030

130,541

[1] Represents changes due to collection / realization of expected cash flows over time.

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

1.9

million (September 30, 2022 - $

2.0

million).

During the quarter ended June 30, 2023 the Corporation terminated a servicing agreement, in which it acted as sub-servicer for a

third party, for a portfolio with an unpaid principal balance of approximately $

260

million and a related MSR fair value of

approximately $

2

million. The transaction did not result in a material effect on the financial results of the Corporation.

Residential mortgage loans serviced for others were $

10.1

billion at September 30, 2023 (December 31, 2022 -$

11.1

billion).

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

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

The banking subsidiaries receive servicing fees based on a percentage of the outstanding loan balance. These servicing fees are

credited to income when they are collected. At September 30, 2023, those weighted average mortgage servicing fees were

0.31

(September 30, 2022 -

0.31

%). Under these servicing agreements, the banking subsidiaries 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 nine months ended September 30, 2023 and 2022 were as follows:

Quarters ended

Nine months ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

BPPR

PB

BPPR

PB

BPPR

PB

BPPR

PB

Prepayment speed

7.3

7.0

5.5

7.2

7.1

7.1

5.2

8.4

Weighted average life (in years)

9.2

8.0

9.5

8.2

9.2

8.0

9.7

7.7

Discount rate (annual rate)

9.6

11.0

10.7

10.0

9.6

10.7

10.5

9.8

Key economic assumptions used 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:

Originated MSRs

Purchased MSRs

September 30,

December 31,

September 30,

December 31,

(In thousands)

2023

2022

2023

2022

Fair value of servicing rights

40,346

41,548

78,684

86,802

Weighted average life (in years)

6.6

6.8

6.7

6.9

Weighted average prepayment speed (annual rate)

6.0

5.9

7.0

7.0

Impact on fair value of 10% adverse change

(728)

(730)

(1,491)

(1,602)

Impact on fair value of 20% adverse change

(1,427)

(1,433)

(2,924)

(3,143)

Weighted average discount rate (annual rate)

11.2

11.2

10.9

11.0

Impact on fair value of 10% adverse change

(1,387)

(1,485)

(2,842)

(3,256)

Impact on fair value of 20% adverse change

(2,688)

(2,876)

(5,508)

(6,304)

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

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

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

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

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

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

At September 30, 2023, the Corporation serviced $

0.6

billion in residential mortgage loans with credit recourse to the Corporation

(December 31, 2022 - $

0.6

billion). Also refer to Note 20 to the Consolidated Financial Statements for information on changes in the

Corporation’s liability of estimated losses related to loans serviced with credit recourse.

Under the GNMA securitizations, the Corporation, as servicer, has the right to repurchase (but not the obligation), at its option and

without GNMA’s prior authorization, any loan that 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

September 30, 2023, the Corporation had recorded $

8

million in mortgage loans on its Consolidated Statements of Financial

Condition related to this buy-back option program (December 31, 2022 - $

14

million). Loans in our serviced GNMA portfolio benefit

from payment forbearance programs but continue to reflect the contractual delinquency until the borrower repays deferred payments

or completes a payment deferral modification or other borrower assistance alternative. As long as the Corporation continues to

service the loans that continue to be collateral in a GNMA guaranteed mortgage-backed security, the MSR is recognized by the

Corporation.

During the nine months ended September 30, 2023, the Corporation repurchased approximately $

34

million (September 30, 2022 -

49

million) of mortgage loans from its GNMA servicing portfolio. The determination to repurchase these loans was based on the

economic benefits of the transaction, which results in a reduction of the servicing costs for these severely delinquent loans, mainly

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.

Note 12 – Other real estate owned

The following tables present the activity related to Other Real Estate Owned (“OREO”), for the quarters and nine months ended

September 30, 2023 and 2022.

For the quarter ended September 30, 2023

OREO

OREO

(In thousands)

Commercial/Construction

Mortgage

Total

Balance at beginning of period

11,819

74,397

86,216

Write-downs in value

(123)

(567)

(690)

Additions

257

14,795

15,052

Sales

(900)

(17,356)

(18,256)

Ending balance

11,053

71,269

82,322

For the quarter ended September 30, 2022

OREO

OREO

(In thousands)

Commercial/Construction

Mortgage

Total

Balance at beginning of period

14,250

77,887

92,137

Write-downs in value

(84)

(376)

(460)

Additions

1,711

13,975

15,686

Sales

(1,984)

(12,065)

(14,049)

Other adjustments

(75)

(75)

Ending balance

13,893

79,346

93,239

For the nine months ended September 30, 2023

OREO

OREO

(In thousands)

Commercial/Construction

Mortgage

Total

Balance at beginning of period

12,500

76,626

89,126

Write-downs in value

(362)

(1,587)

(1,949)

Additions

1,524

54,625

56,149

Sales

(2,626)

(58,277)

(60,903)

Other adjustments

17

(118)

(101)

Ending balance

11,053

71,269

82,322

For the nine months ended September 30, 2022

OREO

OREO

(In thousands)

Commercial/Construction

Mortgage

Total

Balance at beginning of period

15,017

70,060

85,077

Write-downs in value

(934)

(949)

(1,883)

Additions

5,230

53,878

59,108

Sales

(5,528)

(43,110)

(48,638)

Other adjustments

108

(533)

(425)

Ending balance

13,893

79,346

93,239

Note 13 − Other assets

The caption of other assets in the consolidated statements of financial condition consists of the following major categories:

(In thousands)

September 30, 2023

December 31, 2022

Net deferred tax assets (net of valuation allowance)

896,426

953,676

Investments under the equity method

234,408

210,001

Prepaid taxes

47,837

39,405

Other prepaid expenses

42,977

33,384

Capitalized software costs

79,393

81,862

Derivative assets

23,348

19,229

Trades receivable from brokers and counterparties

37,674

35,099

Receivables from investments maturities

301,000

125,000

Principal, interest and escrow servicing advances

50,881

41,916

Guaranteed mortgage loan claims receivable

44,836

59,659

Operating ROU assets (Note 28)

117,879

125,573

Finance ROU assets (Note 28)

17,917

18,884

Others

137,989

104,125

Total other assets

2,032,565

1,847,813

The Corporation regularly incurs in capitalizable costs associated with software development or licensing which are recorded within

the Other Assets line item in the accompanying Consolidated Statements of Financial Condition. In addition, the Corporation incurs

costs associated with hosting arrangements that are service contracts that are also recorded within Other Assets. The hosting

arrangements can include capitalizable implementation costs that are amortized during the term of the hosting arrangement.

The

following table summarizes the composition of acquired or developed software costs as well as costs related to hosting

arrangements:

Gross Carrying

Accumulated

Net

Carrying

(In thousands)

Amount

Amortization

Value

September 30, 2023

Software development costs

69,318

24,920

44,398

Software license costs

47,747

25,006

22,741

Cloud computing arrangements

22,771

10,517

12,254

Total Capitalized software costs [1] [2]

139,836

60,443

79,393

December 31, 2022

Software development costs

63,609

16,803

46,806

Software license costs

37,165

14,164

23,001

Cloud computing arrangements

20,745

8,690

12,055

Total Capitalized software costs [1] [2]

121,519

39,657

81,862

[1]

Software intangible assets are presented as part of Other Assets in the Consolidated Statements of Financial Condition.

[2]

The tables above excludes assets which have been fully amortized.

Total amortization expense for all capitalized software and hosting arrangement cost, reflected as part of technology and software

expenses in the consolidated statement of operations, is as follows:

Quarters ended September 30,

Nine months ended September 30,

(In thousands)

2023

2022

2023

2022

Software development and license costs

16,820

14,589

47,962

39,357

Cloud computing arrangements

923

983

2,685

3,010

Total amortization expense

17,743

15,572

50,647

42,367

Note 14 – Goodwill and other intangible assets

The changes in the carrying amount of goodwill for the nine months ended September 30, 2023 and 2022, allocated by reportable

segments, were as follows (refer to Note 33 for the definition of the Corporation’s reportable segments):

September 30, 2023

Balance at

Goodwill on

Goodwill

Balance at

(In thousands)

January 1, 2023

acquisition

impairment

September 30, 2023

Banco Popular de Puerto Rico

436,383

436,383

Popular U.S.

391,045

(23,000)

368,045

Total Popular, Inc.

827,428

(23,000)

804,428

September 30, 2022

Balance at

Goodwill on

Goodwill

Balance at

(In thousands)

January 1, 2022

acquisition

impairment

September 30, 2022

Banco Popular de Puerto Rico

320,248

116,135

436,383

Popular U.S.

400,045

(9,000)

391,045

Total Popular, Inc.

720,293

116,135

(9,000)

827,428

The goodwill recognized during the quarter ended September 30, 2022 in the reportable segment of Banco Popular de Puerto Rico

of $

116.1

million was related to the Evertec Transactions, as defined in Note 23 to the Consolidated Financial Statements included

in this Form 10-Q. During the third quarter of 2023, the Corporation recorded an impairment of $

23

million as a result of its annual

goodwill impairment test related to its U.S. based equipment leasing subsidiary, Popular Equipment Finance (“PEF”), due to lower

forecasted cash flows and an increase in the rate used to discount cash flows. During 2022 the Corporation recognized a goodwill

impairment of $

9

million related to Popular Equipment Finance (“PEF”) , as a result of a decrease in the projected earnings of this

business unit.

Other Intangible Assets

The following table reflects the components of other intangible assets subject to amortization:

Gross Carrying

Accumulated

Net

Carrying

(In thousands)

Amount

Amortization

Value

September 30, 2023

Core deposits

12,810

10,995

1,815

Other customer relationships

14,286

6,302

7,984

Total other intangible assets

27,096

17,297

9,799

December 31, 2022

Core deposits

12,810

10,034

2,776

Other customer relationships

14,286

4,878

9,408

Total other intangible assets

27,096

14,912

12,184

During the quarter ended September 30, 2023, the Corporation recognized $

0.8

million in amortization expense related to other

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

0.8

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

the Corporation recognized $

2.4

million in amortization related to other intangible assets with definite useful lives (September 30,

2022 - $

2.5

million).

The following table presents the estimated amortization of the intangible assets with definite useful lives for each of the following

periods:

(In thousands)

Remaining 2023

794

Year 2024

2,938

Year 2025

1,750

Year 2026

1,440

Year 2027

959

Later years

1,918

Results of the Annual Goodwill Impairment Test

The Corporation’s goodwill and other identifiable intangible assets having an indefinite useful life are tested for impairment, at least

annually and on a more frequent basis if events or circumstances indicate impairment could have taken place. Such events could

include, among others, a significant adverse change in the business climate, an adverse action by a regulator, an unanticipated

change in the competitive environment and a decision to change the operations or dispose of a reporting unit.

Management monitors events or changes in circumstances between annual tests to determine if these events or changes in

circumstances would more likely than not reduce the fair value of its reporting units below their carrying amounts.

The Corporation performed the annual goodwill impairment evaluation for the entire organization during the third quarter of 2023

using July 31, 2023 as the annual evaluation date. The reporting units utilized for this evaluation were those that are one level below

the business segments, which are the legal entities within the reportable segment. The Corporation follows push-down accounting,

as such all goodwill is assigned to the reporting units when carrying out a business combination.

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

multiples of comparable companies and transactions, as well as discounted cash flow analysis. Management evaluates the

particular circumstances of each reporting unit in order to determine the most appropriate valuation methodology and the weights

applied to each valuation methodology, as applicable. The Corporation evaluates the results obtained under each valuation

methodology to identify and understand the key value drivers in order to ascertain that the results obtained are reasonable and

appropriate under the circumstances. Elements considered include current market and economic conditions, developments in

specific lines of business, and any particular features in the individual reporting units.

The computations require management to make estimates and assumptions. Critical assumptions that are used as part of these

evaluations include:

a selection of comparable publicly traded companies, based on nature of business, location and size;

a selection of comparable acquisitions;

the discount rate applied to future earnings, based on an estimate of the cost of equity;

the potential future earnings of the reporting unit; and

the market growth and new business assumptions.

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

relevant value drivers from a group of companies that are comparable to the reporting unit being analyzed and applying those price

multiples to the value drivers of the reporting unit. Management uses judgment in the determination of which value drivers are

considered more appropriate for each reporting unit. Comparable companies’ price multiples represent minority-based multiples and

thus, a control premium adjustment is added to the comparable companies’ market multiples applied to the reporting unit’s value

drivers.

For purposes of the market comparable transactions’ approach, valuations had been previously determined by the Corporation by

calculating average price multiples of relevant value drivers from a group of transactions for which the target companies are

comparable to the reporting unit being analyzed and applying those price multiples to the value drivers of the reporting unit.

For purposes of the discounted cash flows (“DCF”) approach, the valuation is based on estimated future cash flows. The financial

projections used in the DCF valuation analysis for each reporting unit are based on the most recent (as of the valuation date)

financial projections presented to the Corporation’s Asset / Liability Management Committee (“ALCO”). The growth assumptions

included in these projections are based on management’s expectations for each reporting unit’s financial prospects considering

economic and industry conditions as well as particular plans of each entity (i.e. restructuring plans, de-leveraging, etc.). The cost of

equity used to discount the cash flows was calculated using the Ibbotson Build-Up Method and ranged from

12.30

% to

16.96

% for

the 2023 analysis. The Ibbotson Build-Up Method builds up a cost of equity starting with the rate of return of a “risk-free” asset (20-

year U.S. Treasury note) and adds to it additional risk elements such as equity risk premium, size premium, industry risk premium,

and a specific geographic risk premium (as applicable). The resulting discount rates were analyzed in terms of reasonability given

the current market conditions.

The results of the BPPR annual goodwill impairment test as of July 31, 2023 indicated that the average estimated fair value using all

valuation methodologies exceeded BPPR’s equity value by approximately $

3.7

billion or

468

% compared to $

3.1

billion or

245

%, for

the annual goodwill impairment test completed as of July 31, 2022. PB’s annual goodwill impairment test results as of such dates

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

129

million or

8

%, compared to $

670

million or

41

%, for the annual goodwill impairment test completed as of July 31, 2022. Accordingly,

no impairment was recognized for BPPR or PB. The goodwill balance of BPPR and PB, as legal entities, represented approximately

93

% of the Corporation’s total goodwill balance as of the July 31, 2023 valuation date.

An impairment of $

23

million was recognized by the Corporation from the annual test as of July 31, 2023 related to PEF due to

lower forecasted cash flows and an increase in the rate used to discount cash flows. During 2022 the Corporation recognized a

goodwill impairment of $

9

million related to PEF, as a result of a decrease in the projected earnings of this business unit. The PEF

goodwill balance as of September 30, 2023 amounted to $

17

million (December 31, 2022 - $

40

million).

Furthermore, as part of the analyses, management performed a reconciliation of the aggregate fair values determined for the

reporting units to the market capitalization of the Corporation concluding that the fair value results determined for the reporting units

in the July 31, 2023 annual assessment were reasonable.

The goodwill impairment evaluation process requires the Corporation to make estimates and assumptions with regard to the fair

value of the reporting units. Actual values may differ significantly from these estimates. Such differences could result in future

impairment of goodwill that would, in turn, negatively impact the Corporation’s results of operations and the reporting units where the

goodwill is recorded. Particularly for reporting units with recognized impairments or where the estimated fair value approximates the

equity value, future decreases in fair value estimates could result in additional impairment charges. Additionally, declines in the

Corporation’s market capitalization and adverse economic conditions sustained over a longer period of time negatively affecting

forecasted earnings could increase the risk of goodwill impairment in the future.

A decline in the Corporation’s stock price related to global and/or regional macroeconomic conditions, a deterioration in the Puerto

Rico or the U.S. economies, increases in the rate to discount future cash flows, and lower future earnings estimates could,

individually or in the aggregate, have a material impact on the determination of the fair value of our reporting units, which could in

turn result in an impairment of goodwill in the future. An impairment of goodwill would result in a non-cash expense, net of tax

impact. A charge to earnings related to a goodwill impairment would not materially impact regulatory capital calculations.

The following tables present the gross amount of goodwill and accumulated impairment losses by reportable segments.

September 30, 2023

Balance at

Balance at

September 30,

Accumulated

September 30,

2023

impairment

2023

(In thousands)

(gross amounts)

losses

(net amounts)

Banco Popular de Puerto Rico

440,184

3,801

436,383

Popular U.S.

564,456

196,411

368,045

Total Popular, Inc.

1,004,640

200,212

804,428

December 31, 2022

Balance at

Balance at

December 31,

Accumulated

December 31,

2022

impairment

2022

(In thousands)

(gross amounts)

losses

(net amounts)

Banco Popular de Puerto Rico

440,184

3,801

436,383

Popular U.S.

564,456

173,411

391,045

Total Popular, Inc.

1,004,640

177,212

827,428

Note 15 – Deposits

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

(In thousands)

September 30, 2023

December 31, 2022

Savings accounts

15,305,838

14,746,329

NOW, money market and other interest bearing demand deposits

24,622,430

23,738,940

Total savings, NOW, money market and other interest bearing demand deposits

39,928,268

38,485,269

Certificates of deposit:

Under $250,000

5,263,696

4,235,651

$250,000 and over

2,944,262

2,545,750

Total certificates of deposit

8,207,958

6,781,401

Total interest bearing deposits

48,136,226

45,266,670

Non- interest bearing deposits

15,201,374

15,960,557

Total deposits

63,337,600

61,227,227

A summary of certificates of deposits by maturity at September 30, 2023 follows:

(In thousands)

2023

2,635,150

2024

2,819,295

2025

975,844

2026

752,202

2027

406,993

2028 and thereafter

618,474

Total certificates of deposit

8,207,958

At September 30, 2023, the Corporation had brokered deposits amounting to $

1.7

billion (December 31, 2022 - $

1.1

billion).

The aggregate amount of overdrafts in demand deposit accounts that were reclassified to loans was $

3.5

million at September 30,

2023 (December 31, 2022 - $

6.3

million).

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

17.8

billion. Puerto Rico public sector deposits are interest

bearing accounts. Public deposit balances are difficult 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.

Note 16 – Borrowings

Assets sold under agreements to repurchase

Assets sold under agreements to repurchase amounted to $

93

million at September 30, 2023 and $

149

million at December 31,

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

September 30, 2023

December 31, 2022

Repurchase

Repurchase

(In thousands)

liability

liability

U.S. Treasury securities

Within 30 days

12,736

410

After 30 to 90 days

13,199

30,739

After 90 days

18,180

17,521

Total U.S. Treasury securities

44,115

48,670

Mortgage-backed securities

Within 30 days

28,211

98,984

After 30 to 90 days

791

After 90 days

20,499

Total mortgage-backed securities

48,710

99,775

Collateralized mortgage obligations

Within 30 days

246

164

Total collateralized mortgage obligations

246

164

Total

93,071

148,609

Repurchase agreements in this portfolio are generally short-term, often overnight. As such our risk is very limited. We manage the

liquidity risks arising from secured funding by sourcing funding globally from a diverse group of counterparties, providing a range of

securities collateral and pursuing longer durations, when appropriate.

Other short-term borrowings

There were

no

other short-term borrowings outstanding at September 30, 2023, compared to $

365

million in FHLB Advances at

December 31, 2022.

Notes Payable

The following table presents the composition of notes payable at September 30, 2023 and December 31, 2022.

(In thousands)

September 30, 2023

December 31, 2022

Advances with the FHLB with maturities ranging from

2023

through

2029

paying interest at

monthly

fixed rates ranging from

0.39

% to

4.17

412,632

389,282

Unsecured senior debt securities maturing on

2028

paying interest

semiannually

at a fixed rate of

7.25

%, net of debt issuance costs of $

6,322

[1]

393,678

299,109

Junior subordinated deferrable interest debentures (related to trust preferred securities) maturing on

2034

with fixed interest rates ranging from

6.125

% to

6.564

%, net of debt issuance costs of $

295

198,339

198,319

Total notes payable

1,004,649

886,710

Note: Refer to the 2022 Form 10-K for rates information at December 31, 2022.

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

400

million aggregate principal amount of

7.25

% Senior Notes due

2028

(the “2028 Notes”) in an

underwritten public offering. The Corporation used a portion of the net proceeds of the 2028 Notes offering to redeem, on August 14, 2023, the

outstanding $

300

million aggregate principal amount of its

6.125

% Senior Notes which were due on September

2023

. The redemption price was

equal to

100

% of the principal amount plus accrued and unpaid interest through the redemption date.

A breakdown of borrowings by contractual maturities at September 30, 2023 is included in the table below.

Assets sold under

(In thousands)

agreements to

repurchase

Notes payable

Total

2023

54,393

22,261

76,654

2024

38,678

91,943

130,621

2025

139,920

139,920

2026

74,500

74,500

Later years

676,025

676,025

Total borrowings

93,071

1,004,649

1,097,720

At September 30, 2023 and December 31, 2022, the Corporation had FHLB borrowing facilities whereby the Corporation could

borrow up to $

4.4

billion and $

3.3

billion, respectively, of which $

0.4

billion and $

0.8

billion, respectively, were used. In addition, at

September 30, 2023 and December 31, 2022, the Corporation had placed $

0.3

billion and $

0.4

billion, respectively, of the available

FHLB credit facility as collateral for municipal letters of credit to secure deposits. The FHLB borrowing facilities are collateralized

with securities and loans held-in-portfolio, and do not have restrictive covenants or callable features.

Also, at September 30, 2023, the Corporation has a borrowing facility at the discount window of the Federal Reserve Bank of New

York amounting to $

4.6

billion (December 31, 2022 - $

1.4

billion), which remained unused at September 30, 2023 and December

31, 2022. The facility is a collateralized source of credit that is highly reliable even under difficult market conditions.

Note 17 − Other liabilities

The caption of other liabilities in the consolidated statements of financial condition consists of the following major categories:

(In thousands)

September 30, 2023

December 31, 2022

Accrued expenses

266,300

337,284

Accrued interest payable

47,297

39,288

Accounts payable

84,501

76,456

Dividends payable

39,793

39,525

Trades payable

14,761

9,461

Liability for GNMA loans sold with an option to repurchase

8,298

14,271

Reserves for loan indemnifications

6,941

7,520

Reserve for operational losses

28,723

39,266

Operating lease liabilities (Note 28)

129,023

137,290

Finance lease liabilities (Note 28)

23,180

24,737

Pension benefit obligation

6,050

8,290

Postretirement benefit obligation

118,121

118,336

Others

71,020

65,222

Total other liabilities

844,008

916,946

Note 18 – Stockholders’ equity

As of September 30, 2023, stockholders’ equity totaled $

4.5

billion. During the nine months ended September 30, 2023, the

Corporation declared cash dividends of $

1.65

(2022 - $

1.65

) per common share amounting to $

118.9

million (2022 - $

124.2

million).

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

September 8, 2023

was paid on

October 2,

2023

Accelerated share repurchase transaction (“ASR”)

On August 24, 2022, the Corporation entered into a $

231

million ASR transaction with respect to its common stock (the “August

ASR Agreement”), which was accounted for as a treasury transaction. As a result of the receipt of the initial

2,339,241

shares, the

Corporation recognized in stockholders’ equity approximately $

185

million in treasury stock and $

46

million as a reduction of capital

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

840,024

additional shares of common stock

and recognized approximately $

60

million as treasury stock with a corresponding increase in its capital surplus. In total, the

Corporation repurchased a total of

3,179,265

shares at an average purchased price of $

72.6583

under the August ASR Agreement.

On March 1, 2022, the Corporation announced that on February 28, 2022 it entered into a $

400

million ASR transactions with

respect to its common stock (the “March ASR Agreement”), which was accounted for as a treasury transaction. As a result of the

receipt of the initial

3,483,942

shares, the Corporation recognized in stockholders’ equity approximately $

320

million in treasury

stock and $

80

million as a reduction of capital surplus. The Corporation completed the transaction on July 12, 2022 and received

1,582,922

additional shares of common stock and recognized $

120

million in treasury stock with a corresponding increase in its

capital surplus. In total, the Corporation repurchased a total of

5,066,864

shares at an average purchased price of $

78.9443

under

the ASR.

Note 19 – Other comprehensive loss

The following table presents changes in accumulated other comprehensive loss by component for the quarters and nine months

ended September 30, 2023 and 2022.

Changes in Accumulated Other Comprehensive Loss by Component [1]

Quarters ended

Nine months ended

September 30,

September 30,

(In thousands)

2023

2022

2023

2022

Foreign currency translation

Beginning Balance

(55,979)

(64,167)

(56,735)

(67,307)

Other comprehensive (loss) income

(976)

7,206

(220)

10,346

Net change

(976)

7,206

(220)

10,346

Ending balance

(56,955)

(56,961)

(56,955)

(56,961)

Adjustment of pension and

postretirement benefit plans

Beginning Balance

(138,319)

(152,837)

(144,335)

(158,994)

Other comprehensive income before reclassifications

1,269

Amounts reclassified from accumulated other

comprehensive loss for amortization of net losses

3,009

2,444

9,025

7,332

Net change

3,009

2,444

9,025

8,601

Ending balance

(135,310)

(150,393)

(135,310)

(150,393)

Unrealized net holding losses

on debt securities

Beginning Balance

(2,134,137)

(1,735,370)

(2,323,903)

(96,120)

Other comprehensive loss

(242,567)

(781,898)

(120,756)

(2,421,148)

Amounts reclassified from accumulated other

comprehensive loss for amortization of net unrealized

losses of debt securities transferred from available-for-

sale to held-to-maturity

35,027

102,982

Net change

(207,540)

(781,898)

(17,774)

(2,421,148)

Ending balance

(2,341,677)

(2,517,268)

(2,341,677)

(2,517,268)

Unrealized net (losses) gains

on cash flow hedges

Beginning Balance

(642)

45

(2,648)

Other comprehensive (loss) income before

reclassifications

415

(19)

3,222

Amounts reclassified from accumulated other

comprehensive income (loss)

518

(26)

(283)

Net change

933

(45)

2,939

Ending balance

291

291

Total

(2,533,942)

(2,724,331)

(2,533,942)

(2,724,331)

[1]

All amounts presented are net of tax.

The following table presents the amounts reclassified out of each component of accumulated other comprehensive loss during the

quarters and nine months ended September 30, 2023 and 2022.

Reclassifications Out of Accumulated Other Comprehensive Loss

Quarters ended

Nine months ended

Affected Line Item in the

September 30,

September 30,

(In thousands)

Consolidated Statements of Operations

2023

2022

2023

2022

Adjustment of pension and postretirement benefit plans

Amortization of net losses

Other operating expenses

(4,814)

(3,911)

(14,440)

(11,733)

Total before tax

(4,814)

(3,911)

(14,440)

(11,733)

Income tax benefit

1,805

1,467

5,415

4,401

Total net of tax

(3,009)

(2,444)

(9,025)

(7,332)

Unrealized net holding losses on debt securities

Amortization of unrealized net losses of debt

securities transferred to held-to-maturity

Interest income from investment securities

(43,783)

(128,726)

Total before tax

(43,783)

(128,726)

Income tax expense

8,756

25,744

Total net of tax

(35,027)

(102,982)

Unrealized net (losses) gains on cash flow hedges

Forward contracts

Mortgage banking activities

(609)

41

1,249

Interest rate swaps

Other operating income

(219)

(498)

Total before tax

(828)

41

751

Income tax benefit

310

(15)

(468)

Total net of tax

(518)

26

283

Total reclassification adjustments, net of tax

(38,036)

(2,962)

(111,981)

(7,049)

Note 20 – Guarantees

At September 30, 2023, the Corporation recorded a liability of $

1

million (December 31, 2022 - $

0.3

million), which represents the

unamortized balance of the obligations undertaken in issuing the guarantees under the standby letters of credit. Management does

not anticipate any material losses related to these instruments.

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

certain instances, lifetime credit recourse on the loans that serve as collateral for the mortgage-backed securities. The Corporation

has not sold any mortgage loans subject to credit recourse since 2009. At September 30, 2023, the Corporation serviced $

0.6

billion

(December 31, 2022 - $

0.6

billion) in residential mortgage loans subject to credit recourse provisions, principally loans associated

with FNMA and FHLMC residential mortgage loan securitization programs. In the event of any customer default, pursuant to the

credit recourse provided, the Corporation is required to repurchase the loan or reimburse the third party investor for the incurred

loss. The maximum potential amount 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 nine months ended September 30, 2023,

the Corporation repurchased approximately $

0.4

million and $

2

million, respectively, of unpaid principal balance in mortgage loans

subject to the credit recourse provisions (September 30, 2022

1

million and $

6

million, respectively). In the event of

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 September 30, 2023, the Corporation’s liability established to cover the estimated

credit loss exposure related to loans sold or serviced with credit recourse amounted to $

6

million (December 31, 2022 - $

7

million).

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

provisions during the quarters and nine months ended September 30, 2023 and 2022.

Quarters ended September 30,

Nine months ended September 30,

(In thousands)

2023

2022

2023

2022

Balance as of beginning of period

6,223

9,095

6,897

11,800

Provision (benefit) for recourse liability

228

(1,718)

52

(2,067)

Net charge-offs

(54)

(184)

(552)

(2,540)

Balance as of end of period

6,397

7,193

6,397

7,193

From time 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. The loan repurchase activity under these indemnity agreements

for the quarter and nine months ended September 30, 2023 as well as the liability for estimated losses at period end was not

considered material for the Corporation.

Servicing agreements relating to the mortgage-backed securities programs of FNMA, FHLMC and GNMA, and to mortgage loans

sold or serviced to certain other investors, including FHLMC, require the Corporation to advance funds to make scheduled payments

of principal, interest, taxes and insurance, if such payments have not been received from the borrowers. At September 30, 2023, the

Corporation serviced $

10.1

billion in mortgage loans for third-parties, including the loans serviced with credit recourse (December

31, 2022 - $

11.1

billion). The Corporation generally recovers funds advanced pursuant to these arrangements from the mortgage

owner, from liquidation proceeds when the mortgage loan is foreclosed or, in the case of FHA/VA loans, under the applicable FHA

and 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

September 30, 2023, the outstanding balance of funds advanced by the Corporation under such mortgage loan servicing

agreements was approximately $

51

million (December 31, 2022 - $

42

million). To the extent the mortgage loans underlying the

Corporation’s servicing portfolio experience increased delinquencies, the Corporation would be required to dedicate additional cash

resources to comply with its obligation to advance funds as well as incur additional administrative costs related to increases in

collection efforts.

Popular, Inc. Holding Company (“PIHC”) fully and unconditionally guarantees certain borrowing obligations issued by certain of its

100

% owned consolidated subsidiaries amounting to $

94

million at September 30, 2023 and December 31, 2022. In addition, at

September 30, 2023 and December 31, 2022, PIHC fully and unconditionally guaranteed on a subordinated basis $

193

million of

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

guarantee agreement. Refer to Note 18 to the Consolidated Financial Statements in the 2022 Form 10-K for further information on

the trust preferred securities.

Note 21 – Commitments and contingencies

Off-balance sheet risk

The Corporation is a party to financial instruments with off-balance sheet credit risk in the normal course of business to meet the

financial needs of its customers. These financial instruments include loan commitments, letters of credit and standby letters of credit.

These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the

consolidated statements of financial condition.

The Corporation’s exposure 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)

September 30, 2023

December 31, 2022

Commitments to extend credit:

Credit card lines

5,720,469

5,853,990

Commercial and construction lines of credit

4,374,553

4,425,825

Other consumer unused credit commitments

250,571

250,271

Commercial letters of credit

3,083

3,351

Standby letters of credit

53,089

27,868

Commitments to originate or fund mortgage loans

25,104

45,170

At September 30, 2023 and December 31, 2022, the Corporation maintained a reserve of approximately $

13.3

million and $

8.8

million, respectively, for potential losses associated with unfunded loan commitments related to commercial and construction lines of

credit.

Other commitments

At September 30, 2023 and December 31, 2022, the Corporation also maintained other non-credit commitments for approximately

3.3

million and $

4.8

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

Business concentration

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

are dependent upon the general trends of the Puerto Rico economy and, in particular, the residential and commercial real estate

markets. The concentration of the Corporation’s operations in Puerto Rico exposes it to greater risk than other banking companies

with a wider geographic base. Its asset and revenue composition by geographical area is presented in Note 33 to the Consolidated

Financial Statements.

Puerto Rico has faced significant fiscal and economic challenges for over 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 September 30, 2023, the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities

totaled $

362

million, of which $

333

million were outstanding ($

374

million and $

327

million at December 31, 2022). Of the amount

outstanding, $

314

million consists of loans and $

19

million are securities ($

302

million and $

25

million at December 31, 2022).

Substantially all of the amount outstanding at September 30, 2023 and December 31, 2022 were obligations from various Puerto

Rico municipalities. In most cases, these were “general obligations” of a municipality, to which the applicable municipality has

pledged its good faith, credit and unlimited taxing power, or “special obligations” of a municipality, to which the applicable

municipality has pledged other revenues. At September 30, 2023,

76

% of the Corporation’s exposure to municipal loans and

securities was concentrated in the municipalities of San Juan, Guaynabo, Carolina and Caguas.

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

according to their maturities as of September 30, 2023:

(In thousands)

Investment

Portfolio

Loans

Total Outstanding

Total Exposure

Central Government

After 1 to 5 years

10

10

10

After 5 to 10 years

1

1

1

After 10 years

29

29

29

Total Central Government

40

40

40

Municipalities

Within 1 year

4,820

13,217

18,037

43,037

After 1 to 5 years

13,155

141,519

154,674

158,674

After 5 to 10 years

845

112,169

113,014

113,014

After 10 years

46,823

46,823

46,823

Total Municipalities

18,820

313,728

332,548

361,548

Total Direct Government Exposure

18,860

313,728

332,588

361,588

In addition, at September 30, 2023, the Corporation had $

242

million in loans insured or securities issued by Puerto Rico

governmental entities but for which the principal source of repayment is non-governmental ($

251

million at December 31, 2022).

These included $

195

million in residential mortgage loans insured by the Puerto Rico Housing Finance Authority (“HFA”), a

governmental instrumentality that has been designated as a covered entity under PROMESA (December 31, 2022 - $

209

million).

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

the event of a borrower default and upon the satisfaction of certain other conditions. The Corporation also had at September 30,

2023, $

40

million in bonds issued by HFA which are secured by second mortgage loans on Puerto Rico residential properties, and

for which HFA also provides insurance to cover losses in the event of a borrower default and upon the satisfaction of certain other

conditions (December 31, 2022 - $

42

million). In the event that the mortgage loans insured by HFA and held by the Corporation

directly or those serving as collateral for the HFA bonds default and the collateral is insufficient to satisfy the outstanding balance of

these loans, HFA’s ability to honor its insurance will depend, among other factors, on the financial condition of HFA at the time such

obligations become due and payable. The Corporation does not consider the government guarantee when estimating the credit

losses associated with this portfolio. 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, $

1.7

billion of residential mortgages, $

10

million of Small Business Administration (“SBA”) loans under the Paycheck

Protection Program (“PPP”) and $

72

million commercial loans were insured or guaranteed by the U.S. Government or its agencies

at September 30, 2023 (compared to $

1.6

billion, $

38

million and $

72

million, respectively, at December 31, 2022). The Corporation

also had U.S. Treasury and obligations from the U.S. Government, its agencies or government sponsored entities within the portfolio

of available-for-sale and held-to-maturity securities as described in Note 6 and 7 to the Consolidated Financial Statements.

At September 30, 2023, the Corporation has operations in the United States Virgin Islands (the “USVI”) and has approximately $

28

million in direct exposure to USVI government entities (December 31, 2022 - $

28

million). The USVI has been experiencing a

number of fiscal and economic challenges that could adversely affect the ability of its public corporations and instrumentalities to

service their outstanding debt obligations.

At September 30, 2023, the Corporation has operations in the British Virgin Islands (“BVI”), which was negatively affected by the

COVID-19 pandemic, particularly 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, it has a loan portfolio amounting to approximately $

201

million comprised of various retail and commercial clients, compared to a loan portfolio of $

214

million at

December 31, 2022.

Legal Proceedings

The nature of Popular’s business ordinarily generates claims, litigation, investigations, and legal and administrative cases and

proceedings (collectively, “Legal Proceedings”). When the Corporation determines that it has meritorious defenses to the claims

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

defenses) when, in management’s judgment, it is in the best interest of the Corporation and its stockholders to do so. On at least a

quarterly basis, Popular assesses its liabilities and contingencies relating to outstanding Legal Proceedings utilizing the most current

information available. For matters where it is probable that the Corporation will incur a material loss and the amount can be

reasonably estimated, the Corporation establishes an accrual for the loss. Once established, the accrual is adjusted on at least a

quarterly basis to reflect any relevant developments, as appropriate. For matters where a material loss is not probable, or the

amount of the loss cannot be reasonably estimated, no accrual is established.

In certain cases, exposure to loss exists in excess of any accrual to the extent such loss is reasonably possible, but not probable.

Management believes and estimates that the range of reasonably possible losses (with respect to those matters where such limits

may be determined, in excess of amounts accrued) for current Legal Proceedings ranged from $

0

to approximately $

18.4

million as

of September 30, 2023. 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.

BANCO POPULAR DE PUERTO RICO

Mortgage-Related Litigation

BPPR was named a defendant in a putative class action captioned Yiries Josef Saad Maura v. Banco Popular, et al. on behalf of

residential customers of the defendant banks who have allegedly been subject to illegal foreclosures and/or loan modifications

through their mortgage servicers. Plaintiffs contend that when they sought to reduce their loan payments, defendants failed to

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

claims against them in parallel, all in violation of the Truth In Lending Act (“TILA”), the Real Estate Settlement Procedures Act

(“RESPA”), the Equal Credit Opportunity Act (“ECOA”), the Fair Credit Reporting Act (“FCRA”), the Fair Debt Collection Practices

Act (“FDCPA”) and other consumer-protection laws and regulations. Plaintiffs did not include a specific amount of damages in their

complaint. After waiving service of process, BPPR filed a motion to dismiss the complaint (as did most co-defendants, separately).

BPPR further filed a motion to oppose class certification, which the Court granted in September 2018. In April 2019, the Court

entered an Opinion and Order granting BPPR’s and several other defendants’ motions to dismiss with prejudice. Plaintiffs filed a

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

and Order dismissing plaintiffs’ claims against all defendants, denying the reconsideration requests and other pending motions, and

issuing final judgment. In October 2019, plaintiffs filed a Motion for Reconsideration of the Court’s Amended Opinion and Order,

which was denied in December 2019. In January 2020, plaintiffs filed a Notice of Appeal to the U.S. Court of Appeals for the First

Circuit. Plaintiffs filed their appeal brief in July 2020, Appellees filed their brief in September 2020, and Appellants filed their reply brief in January 2021. On March 13, 2023, the U.S. Court of Appeals for the First Circuit entered judgment affirming the trial court’s order dismissing the complaint. On March 23, 2023, Plaintiffs filed a Petition for Rehearing and/or Rehearing

en Banc

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

Rehearing en Banc. The formal mandate of the U.S. Court of Appeals remanding the case to the lower court was issued on

September 6, 2023. This matter is now closed.

Insufficient Funds and Overdraft Fees Class Actions

Popular 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 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 2021, the District Court, notwithstanding that BPPR’s Motion to Dismiss remained pending resolution, held an initial

scheduling conference and, thereafter, issued a trial management order where it scheduled the deadline for all discovery for

November 2022, and several other trial-related deadlines for June 2023. During a mediation hearing held 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. The Court scheduled the final approval hearing for September 8, 2023.

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. The matter is now

closed.

On January 31, 2022, Popular was also named as a defendant on a putative class action complaint captioned Lipsett v. Popular,

Inc. d/b/a Banco Popular, filed before the U.S. District Court for the Southern District of New York, seeking damages, restitution and

injunctive relief. Similar to the claims set forth in the aforementioned Golden complaint, Plaintiff alleges breach of contract, including

violations of the covenant of good faith and fair dealing, as a result of Popular’s purported practice of charging OD Fees for APPSN

transactions. The complaint further alleged that Popular assesses OD Fees over authorized transactions for which sufficient funds

are held for settlement. Popular waived service of process and filed a Motion to Compel Arbitration. In response to Popular’s motion,

Plaintiff filed a Notice of Voluntary Dismissal in April 2022.

On May 13, 2022, Plaintiff in the Lipsett complaint filed a new complaint captioned Lipsett v. Banco Popular North America d/b/a

Popular Community Bank with the same allegations of his previous complaint against Popular. In June 2022, after serving Plaintiff

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

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

motion, the Court allowed PB to file its Motion to Compel Arbitration, which it did in September 2022. Plaintiff opposed such motion

in October 2022, and PB filed its reply in November 2022.

On December 9, 2022, the Court issued a Decision and Order denying PB’s Motion to Compel Arbitration. On December 20, 2022,

PB filed a Notice of Appeal with the United States Court of Appeals for the Second Circuit. PB filed its appeal brief on April 5, 2023

and Plaintiff filed his opposition brief on July 5, 2023. PB filed its reply brief on July 26, 2023. The matter is now fully briefed and

pending resolution.

POPULAR SECURITIES

Puerto Rico Bonds and Closed-End Investment Funds

The volatility in prices and declines in value that Puerto Rico municipal bonds and closed-end investment companies that invest

primarily in Puerto Rico municipal bonds experienced following August 2013 led to regulatory inquiries, customer complaints and

arbitrations for most broker-dealers in Puerto Rico, including Popular Securities. Popular Securities received numerous customer

complaints since 2013 and, as of September 30, 2023, remained named as a respondent in six (

6

) pending arbitration proceedings

with initial claimed amounts of approximately $

5.88

million in the aggregate. Popular Securities and claimants in five (

5

) of the

pending six (

6

) arbitration proceedings, however, have reached settlements in principle and agreements related thereto have been

executed with two (

2

) of such claimants. Popular Securities expects to complete the execution of the remaining agreements, and to

resolve the one (

1

) pending unsettled arbitration proceeding ($

1.3

million in claimed amounts) by the end of the first quarter of 2024.

Note 22 – Non-consolidated variable interest entities

The Corporation is involved with

three

statutory trusts which it created to issue trust preferred securities to the public. These trusts

are deemed to be variable interest entities (“VIEs”) since the equity investors at risk have no substantial decision-making rights. The

Corporation does not hold any variable interest in the trusts, and therefore, cannot be the trusts’ primary beneficiary. Furthermore,

the Corporation concluded that it did not hold 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 September 30, 2023

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 24 to the Consolidated Financial Statements for additional

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

sale and trading securities in the Corporation’s Consolidated Statements of Financial Condition. In addition, the Corporation holds

variable interests 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 September 30, 2023 and December 31, 2022.

(In thousands)

September 30, 2023

December 31, 2022

Assets

Servicing assets:

Mortgage servicing rights

93,884

99,614

Total servicing assets

93,884

99,614

Other assets:

Servicing advances

6,419

6,157

Total other assets

6,419

6,157

Total assets

100,303

105,771

Maximum exposure to loss

100,303

105,771

The size of the non-consolidated VIEs, in which the Corporation has a variable interest in the form of servicing fees, measured as

the total unpaid principal balance of the loans, amounted to $

7.4

billion at September 30, 2023 (December 31, 2022 - $

7.7

billion).

The Corporation determined that the maximum exposure to loss includes the fair value of the MSRs and the assumption that the

servicing advances at September 30, 2023 and December 31, 2022, 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 September 30, 2023.

Note 23 – Related party transactions

The Corporation considers its equity method investees as related parties. The following provides information on transactions with

equity method investees considered related parties.

EVERTEC

Until August 15, 2022, the Corporation had an investment in Evertec, Inc. (“Evertec”) which provides various processing and

information technology services to the Corporation and its subsidiaries and gave BPPR access to the ATH network owned and

operated by Evertec. This investment was accounted for under the equity method. The Corporation recorded $

1.5

million in

dividends from its investment in Evertec during the nine months ended September 30, 2022.

On July 1, 2022, BPPR completed the acquisition of certain assets from Evertec Group, LLC (“Evertec Group”) to service certain

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

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

which Evertec Group continues to provide various information technology and transaction processing services to Popular, BPPR

and their respective subsidiaries. As part of the transaction, BPPR and Evertec entered into a revenue sharing structure for BPPR in

connection with its merchant acquiring relationship with Evertec. On August 15, 2022, the Corporation completed the sale of its

remaining shares of common stock of Evertec, together with the aforementioned business acquisition (the "Evertec Transactions").

As a result, the Corporation discontinued accounting for its proportionate share of Evertec’s income (loss) and changes in

stockholder’s equity under the equity method of accounting in the third quarter of 2022. In connection with the Evertec Transactions

and related accounting adjustments, the Corporation recorded an aggregate pre-tax gain of $

257.7

million considering the initial

exchange of Evertec shares as well as the sale of the remaining shares.

The following table presents the Corporation’s proportionate share of Evertec’s income (loss) and changes in stockholders’ equity

for the quarter and nine months ended September 30, 2022.

Quarter ended

Nine months ended

(In thousands)

September 30, 2022

September 30, 2022

Share of income from the investment in Evertec [1]

257,712

269,539

Share of other changes in Evertec's stockholders' equity

3,168

Share of Evertec's changes in equity recognized in income

257,712

272,707

[1] The Gain from Evertec Transactions and related accounting adjustments are reflected within other operating income in the accompanying

consolidated financial statements. The Corporation recognized an additional $

17.3

million as an operating expense in connection with the Evertec

Transactions.

The following table presents the impact of transactions and service payments between the Corporation and Evertec (as an affiliate)

and their impact on the results of operations for the nine months ended September 30, 2022. Items that represent expenses to the

Corporation are presented with parenthesis.

Nine months ended

(In thousands)

September 30, 2022 [1]

Category

Interest expense on deposits

(267)

Interest expense

ATH and credit cards interchange income from services to Evertec

13,955

Other service fees

Rental income charged to Evertec

3,258

Net occupancy

Processing fees on services provided by Evertec

(128,681)

Professional fees

Other services provided to Evertec

420

Other operating expenses

Total

(111,315)

[1] Includes activity through June 30, 2022.

Centro Financiero BHD, S.A.

At September 30, 2023, the Corporation had a

15.84

% equity interest in Centro Financiero BHD, S.A. (“BHD”), one of the largest

banking and financial services groups in the Dominican Republic. During the nine months ended September 30, 2023, the

Corporation recorded $

38

million in equity pickup from its investment in BHD (September 30, 2022 - $

28

million), which had a

carrying amount of $

223.7

million at September 30, 2023 (December 31, 2022 - $

199.8

million). The Corporation received $

14.1

million in cash dividend distributions and $

2.1

million in stock dividends during the nine months ended September 30, 2023 from its

investment in BHD (September 30, 2022 - $

16

million cash dividends).

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 nine months ended September 30, 2023 administrative fees charged to these investment companies amounted to $

1.7

million (September 30, 2022 -

1.9

million) and waived fees amounted to $

0.7

million (September 30, 2022 - $

0.7

million), for a net

fee of $

1

million (September 30, 2022 - $

1.2

million).

Note 24 – 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 2022 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 September 30, 2023 and December 31, 2022:

At September 30, 2023

(In thousands)

Level 1

Level 2

Level 3

Measured at NAV

Total

RECURRING FAIR VALUE MEASUREMENTS

Assets

Debt securities available-for-sale:

U.S. Treasury securities

3,871,643

7,458,038

11,329,681

Collateralized mortgage obligations - federal

agencies

138,014

138,014

Mortgage-backed securities

5,660,488

653

5,661,141

Other

22

1,000

1,022

Total debt securities available-for-sale

3,871,643

13,256,562

1,653

17,129,858

Trading account debt securities, excluding

derivatives:

U.S. Treasury securities

15,644

15,644

Obligations of Puerto Rico, States and political

subdivisions

57

57

Collateralized mortgage obligations

42

10

52

Mortgage-backed securities

14,747

137

14,884

Other

188

188

Total trading account debt securities, excluding

derivatives

15,644

14,846

335

30,825

Equity securities

35,026

286

35,312

Mortgage servicing rights

119,030

119,030

Loans held-for-sale

5,239

5,239

Derivatives

23,511

23,511

Total assets measured at fair value on a

recurring basis

3,887,287

13,335,184

121,018

286

17,343,775

Liabilities

Derivatives

(21,747)

(21,747)

Total liabilities measured at fair value on a

recurring basis

(21,747)

(21,747)

At December 31, 2022

(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

1,908,589

9,272,359

11,180,948

Collateralized mortgage obligations - federal

agencies

165,196

165,196

Mortgage-backed securities

6,456,459

711

6,457,170

Other

60

1,000

1,060

Total debt securities available-for-sale

1,908,589

15,894,074

1,711

17,804,374

Trading account debt securities, excluding

derivatives:

U.S. Treasury securities

13,069

13,069

Obligations of Puerto Rico, States and political

subdivisions

64

64

Collateralized mortgage obligations

47

113

160

Mortgage-backed securities

14,008

215

14,223

Other

207

207

Total trading account debt securities, excluding

derivatives

13,069

14,119

535

27,723

Equity securities

29,302

330

29,632

Mortgage servicing rights

128,350

128,350

Derivatives

19,229

19,229

Total assets measured at fair value on a

recurring basis

1,921,658

15,956,724

130,596

330

18,009,308

Liabilities

Derivatives

(17,000)

(17,000)

Total liabilities measured at fair value on a

recurring basis

(17,000)

(17,000)

Beginning in the first quarter of 2023, the Corporation has elected the fair value option for BPPR mortgage loans held for sale. This

election better aligns with the management of the portfolio from a business perspective. As of December 31, 2022, the Corporation

had not elected the fair value option for any of the loans in the held for sale portfolio.

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 table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for

mortgage loans held for sale measured at fair value as of September 30,2023.

(In thousands)

September 30, 2023

Aggregate Unpaid

Fair Value

Principal Balance

Difference

Loans held for sale

5,239

5,364

(125)

No

loans held for sell were 90 or more days past due or on nonaccrual status as of September 30,2023.

During the quarter and nine months ended September 30,2023, the Corporation recognized an unrealized gain of $

23

thousand and

an unrealized loss of $

104

thousand, respectively, for changes in the fair value of mortgage loans held for sale for which we elected

the fair value option, that was offset by the changes in the fair value of the related hedging instrument, both of which are recorded

within the mortgage banking activities line item of the accompanying Statement of Operations.

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 nine months ended September 30, 2023 and 2022 and excludes nonrecurring fair value

measurements of assets no longer outstanding as of the reporting date.

Nine months ended September 30, 2023

(In thousands)

Level 1

Level 2

Level 3

Total

NONRECURRING FAIR VALUE MEASUREMENTS

Assets

Write-downs

Loans

[1]

9,113

9,113

(3,087)

Other real estate owned

[2]

5,457

5,457

(1,012)

Other foreclosed assets

[2]

44

44

(14)

Total assets measured at fair value on a nonrecurring basis

14,614

14,614

(4,113)

[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.

Nine months ended September 30, 2022

(In thousands)

Level 1

Level 2

Level 3

Total

NONRECURRING FAIR VALUE MEASUREMENTS

Assets

Write-downs

Loans

[1]

9,933

9,933

(9,580)

Loans held-for-sale

[2]

8,080

8,080

(224)

Other real estate owned

[3]

3,067

3,067

(940)

Other foreclosed assets

[3]

30

30

(1)

Long-lived assets held-for-sale

[4]

686

686

(688)

Total assets measured at fair value on a nonrecurring basis

21,796

21,796

(11,433)

[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.

[4] Represents the fair value of long-lived assets held-for-sale that were written down to their fair value.

The following tables present the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarters

and nine months ended September 30, 2023 and 2022.

Quarter ended September 30, 2023

MBS

Other

CMOs

MBS

Other

classified

securities

classified

classified

securities

as debt

classified as

as trading

as trading

classified

securities

debt securities

account

account

as trading

Mortgage

available-

available-

debt

debt

account debt

servicing

Total

(In thousands)

for-sale

for-sale

securities

securities

securities

rights

assets

Balance at June 30, 2023

655

1,000

56

163

191

121,249

123,314

Gains (losses) included in earnings

(3)

(2,793)

(2,796)

Gains (losses) included in OCI

(2)

(2)

Additions

574

574

Settlements

(46)

(26)

(72)

Balance at September 30, 2023

653

1,000

10

137

188

119,030

121,018

Changes in unrealized gains (losses) included

in earnings relating to assets still held at

September 30, 2023

4

(381)

(377)

Nine months ended September 30, 2023

MBS

Other

MBS

Other

classified

securities

CMOs

classified

securities

as debt

classified as

classified

as trading

classified

securities

debt securities

as trading

account

as trading

Mortgage

available-

available-

account debt

debt

account debt

servicing

Total

(In thousands)

for-sale

for-sale

securities

securities

securities

rights

assets

Balance at January 1, 2023

711

1,000

113

215

207

128,350

130,596

Gains (losses) included in earnings

(2)

(19)

(10,386)

(10,407)

Gains (losses) included in OCI

(8)

(8)

Additions

4

1,814

1,818

Sales

(1,269)

(1,269)

Settlements

(50)

(107)

(76)

521

288

Balance at September 30, 2023

653

1,000

10

137

188

119,030

121,018

Changes in unrealized gains (losses) included

in earnings relating to assets still held at

September 30, 2023

(1)

22

(1,828)

(1,807)

Quarter ended September 30, 2022

MBS

Other

Other

classified

securities

CMOs

securities

as debt

classified as

classified

classified

securities

debt securities

as trading

as trading

Mortgage

available-

available-

account debt

account debt

servicing

Total

Contingent

Total

(In thousands)

for-sale

for-sale

securities

securities

rights

assets

consideration

liabilities

Balance at June 30, 2022

779

500

152

264

129,877

131,572

(9,241)

(9,241)

Gains (losses) included in earnings

(1)

(9)

(499)

(509)

9,241

9,241

Gains (losses) included in OCI

(18)

(18)

Additions

500

3

1,163

1,666

Settlements

(50)

(19)

(69)

Balance at September 30, 2022

711

1,000

135

255

130,541

132,642

Changes in unrealized gains

(losses) included in earnings

relating to assets still held at

September 30, 2022

(1)

7

1,984

1,990

Nine months ended September 30, 2022

MBS

Other

Other

classified

securities

CMOs

securities

as debt

classified as

classified

classified

securities

debt securities

as trading

as trading

Mortgage

available-

available-

account debt

account debt

servicing

Total

Contingent

Total

(In thousands)

for-sale

for-sale

securities

securities

rights

assets

consideration

liabilities

Balance at January 1, 2022

826

198

280

121,570

122,874

(9,241)

(9,241)

Gains (losses) included in earnings

(2)

(25)

2,776

2,749

9,241

9,241

Gains (losses) included in OCI

(15)

(15)

Additions

1,000

5

6,195

7,200

Settlements

(100)

(66)

(166)

Balance at September 30, 2022

711

1,000

135

255

130,541

132,642

Changes in unrealized gains

(losses) included in earnings

relating to assets still held at

September 30, 2022

(2)

14

11,556

11,568

Gains and losses (realized and unrealized) included in earnings for the quarters and nine months ended September 30, 2023 and

2022 for Level 3 assets and liabilities included in the previous tables are reported in the consolidated statement of operations as

follows:

Quarter ended September 30, 2023

Nine months ended September 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

(2,793)

(381)

(10,386)

(1,828)

Trading account profit (loss)

(3)

4

(21)

21

Total

(2,796)

(377)

(10,407)

(1,807)

Quarter ended September 30, 2022

Nine months ended September 30, 2022

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

(499)

1,984

2,776

11,556

Trading account profit (loss)

(10)

6

(27)

12

Other operating income

9,241

9,241

Total

8,732

1,990

11,990

11,568

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 September 30, 2023 and 2022.

Fair value at

September 30,

(In thousands)

2023

Valuation technique

Unobservable inputs

Weighted average (range) [1]

CMO's - trading

10

Discounted cash flow model

Weighted average life

0.2

years (

0.2

0.3

years)

Yield

4.9

Prepayment speed

7.3

Other - trading

188

Discounted cash flow model

Weighted average life

2.5

years

Yield

12.0%

Prepayment speed

10.8%

Loans held-in-portfolio

9,044

[2]

External appraisal

Haircut applied on

external appraisals

7.2

5.0

10.0

Other real estate owned

325

[3]

External appraisal

Haircut applied on

external appraisals

35

.0%

[1]

Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.

[2]

Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.

[3]

Other real estate owned in which haircuts were not applied to external appraisals were excluded from this table.

Fair value at

September 30,

(In thousands)

2022

Valuation technique

Unobservable inputs

Weighted average (range) [1]

CMO's - trading

135

Discounted cash flow model

Weighted average life

0.5

years (

0.2

0.7

years)

Yield

4.9

4.9

5.4

Prepayment speed

10.7

10.1

18.5

Other - trading

255

Discounted cash flow model

Weighted average life

2.9

years

Yield

12.0%

Prepayment speed

10.8%

Loans held-in-portfolio

4,473

[2]

External appraisal

Haircut applied on

external appraisals

16.1

5

.0% -

25

.0%)

Other real estate owned

289

[3]

External appraisal

Haircut applied on

external appraisals

27

5

.0% -

35

.0%)

[1]

Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.

[2]

Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.

[3]

Other real estate owned in which haircuts were not applied to external appraisals were excluded from this table.

Note 25 – 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 September 30, 2023 and

December 31, 2022, 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.

September 30, 2023

Carrying

Measured

(In thousands)

amount

Level 1

Level 2

Level 3

at NAV

Fair value

Financial Assets:

Cash and due from banks

535,335

535,335

535,335

Money market investments

6,389,437

6,383,534

5,903

6,389,437

Trading account debt securities, excluding derivatives

[1]

30,825

15,644

14,846

335

30,825

Debt securities available-for-sale

[1]

17,129,858

3,871,643

13,256,562

1,653

17,129,858

Debt securities held-to-maturity:

U.S. Treasury securities

8,228,758

7,999,065

7,999,065

Obligations of Puerto Rico, States and political

subdivisions

59,745

6,866

51,865

58,731

Collateralized mortgage obligation-federal agency

1,562

1,296

15

1,311

Securities in wholly owned statutory business trusts

5,960

5,960

5,960

Total debt securities held-to-maturity

8,296,025

8,013,187

51,880

8,065,067

Equity securities:

FHLB stock

50,358

50,358

50,358

FRB stock

99,064

99,064

99,064

Other investments

41,266

35,026

6,871

286

42,183

Total equity securities

190,688

184,448

6,871

286

191,605

Loans held-for-sale

5,239

5,239

5,239

Loans held-in-portfolio

33,318,245

31,646,073

31,646,073

Mortgage servicing rights

119,030

119,030

119,030

Derivatives

23,511

23,511

23,511

September 30, 2023

Carrying

Measured

(In thousands)

amount

Level 1

Level 2

Level 3

at NAV

Fair value

Financial Liabilities:

Deposits:

Demand deposits

55,129,643

55,129,643

55,129,643

Time deposits

8,207,957

7,835,985

7,835,985

Total deposits

63,337,600

62,965,628

62,965,628

Assets sold under agreements to repurchase

93,071

93,050

93,050

Notes payable:

FHLB advances

412,632

388,483

388,483

Unsecured senior debt securities

393,678

402,324

402,324

Junior subordinated deferrable interest debentures

(related to trust preferred securities)

198,339

180,183

180,183

Total notes payable

1,004,649

970,990

970,990

Derivatives

21,747

21,747

21,747

[1]

Refer to Note 24 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.

December 31, 2022

Carrying

Measured

(In thousands)

amount

Level 1

Level 2

Level 3

at NAV

Fair value

Financial Assets:

Cash and due from banks

469,501

469,501

469,501

Money market investments

5,614,595

5,607,937

6,658

5,614,595

Trading account debt securities, excluding derivatives

[1]

27,723

13,069

14,119

535

27,723

Debt securities available-for-sale

[1]

17,804,374

1,908,589

15,894,074

1,711

17,804,374

Debt securities held-to-maturity:

U.S. Treasury securities

8,453,467

8,372,601

8,372,601

Obligations of Puerto Rico, States and political

subdivisions

59,010

61,617

61,617

Collateralized mortgage obligation-federal agency

19

19

19

Securities in wholly owned statutory business trusts

5,959

5,959

5,959

Total debt securities held-to-maturity

8,518,455

8,378,560

61,636

8,440,196

Equity securities:

FHLB stock

65,861

65,861

65,861

FRB stock

96,206

96,206

96,206

Other investments

33,787

29,302

4,966

330

34,598

Total equity securities

195,854

191,369

4,966

330

196,665

Loans held-for-sale

5,381

5,404

5,404

Loans held-in-portfolio

31,357,467

29,366,365

29,366,365

Mortgage servicing rights

128,350

128,350

128,350

Derivatives

19,229

19,229

19,229

December 31, 2022

Carrying

Measured

(In thousands)

amount

Level 1

Level 2

Level 3

at NAV

Fair value

Financial Liabilities:

Deposits:

Demand deposits

54,445,825

54,445,825

54,445,825

Time deposits

6,781,402

6,464,943

6,464,943

Total deposits

61,227,227

60,910,768

60,910,768

Assets sold under agreements to repurchase

148,609

148,566

148,566

Other short-term borrowings

[2]

365,000

365,000

365,000

Notes payable:

FHLB advances

389,282

361,951

361,951

Unsecured senior debt securities

299,109

300,027

300,027

Junior subordinated deferrable interest debentures

(related to trust preferred securities)

198,319

173,938

173,938

Total notes payable

886,710

835,916

835,916

Derivatives

17,000

17,000

17,000

[1]

Refer to Note 24 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.

[2]

Refer to Note 16 to the Consolidated Financial Statements for the composition of other short-term borrowings.

The notional amount of commitments to extend credit at September 30, 2023 and December 31, 2022 is $

10.3

billion and $

10.5

billion, respectively, and represents the unused portion of credit facilities granted to customers. The notional amount of letters of

credit at September 30, 2023 and December 31, 2022 is $

56

million and $

31

million, respectively, and represents the contractual

amount that 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.

Note 26 – 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 nine

months ended September 30, 2023 and 2022:

Quarters ended September 30,

Nine months ended September 30,

(In thousands, except per share information)

2023

2022

2023

2022

Net income

136,609

422,395

446,748

845,502

Preferred stock dividends

(353)

(353)

(1,059)

(1,059)

Net income applicable to common stock

136,256

422,042

445,689

844,443

Average common shares outstanding

71,794,934

73,955,184

71,676,630

76,173,783

Average potential dilutive common shares

23,168

102,148

59,884

130,436

Average common shares outstanding - assuming dilution

71,818,102

74,057,332

71,736,514

76,304,219

Basic EPS

1.90

5.71

6.22

11.09

Diluted EPS

1.90

5.70

6.21

11.07

For the quarters and nine months ended September 30, 2023 and 2022, 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, 2022. For a discussion of the calculation under the treasury stock method, refer to Note 31 of the

Consolidated Financial Statements included in the 2022 Form 10-K.

Note 27 – 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 nine months ended September 30, 2023 and 2022

Quarter ended September 30,

Nine months ended September 30,

(In thousands)

2023

2023

BPPR

Popular U.S.

BPPR

Popular U.S.

Service charges on deposit accounts

34,740

2,578

102,145

7,632

Other service fees:

Debit card fees

13,364

213

39,689

654

Insurance fees, excluding reinsurance

11,487

1,535

34,437

4,130

Credit card fees, excluding late fees and membership fees

36,362

340

110,928

1,255

Sale and administration of investment products

6,820

19,454

Trust fees

6,540

19,304

Total revenue from contracts with customers [1]

109,313

4,666

325,957

13,671

[1]

The amounts include intersegment transactions of $

1.2

million and $

5

million, respectively, for the quarter and nine months ended September 30,

Quarter ended September 30,

Nine months ended September 30,

(In thousands)

2022

2022

BPPR

Popular U.S.

BPPR

Popular U.S.

Service charges on deposit accounts

37,047

2,959

114,025

8,503

Other service fees:

Debit card fees

11,912

221

36,134

660

Insurance fees, excluding reinsurance

9,985

1,210

30,005

3,906

Credit card fees, excluding late fees and membership fees

34,369

313

99,376

948

Sale and administration of investment products

5,952

17,760

Trust fees

5,680

18,187

Total revenue from contracts with customers [1]

104,945

4,703

315,487

14,017

[1]

The amounts include intersegment transactions of $(

0.6

) million and $

4.4

million, respectively, for the quarter and nine months ended September

30, 2022.

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.

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.

Note 28 – Leases

The Corporation enters in the ordinary course of business into operating and finance leases for land, buildings and equipment.

These contracts generally do not include purchase options or residual value guarantees. The remaining lease terms of

0.1

to

31.30

years considers options to extend the leases for up to

20

years. The Corporation identifies leases when it has both the right 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 13

and Note 17 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:

September 30, 2023

(In thousands)

Remaining

2023

2024

2025

2026

2027

Later

Years

Total Lease

Payments

Less:

Imputed

Interest

Total

Operating Leases

7,690

30,084

27,214

18,806

13,571

50,056

147,421

(18,398)

129,023

Finance Leases

2,061

3,991

4,084

3,839

2,468

9,346

25,789

(2,609)

23,180

The following table presents the lease cost recognized by the Corporation in the Consolidated Statements of Operations as follows:

Quarters ended September 30,

Nine months ended September 30,

(In thousands)

2023

2022

2023

2022

Finance lease cost:

Amortization of ROU assets

1,071

643

2,966

2,088

Interest on lease liabilities

219

261

749

848

Operating lease cost

7,924

7,498

23,578

22,785

Short-term lease cost

101

231

322

399

Variable lease cost

49

33

150

86

Sublease income

(20)

(9)

(46)

(28)

Total lease cost

[1]

9,344

8,657

27,719

26,178

[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.

The following table presents supplemental cash flow information and other related information related to operating and finance

leases.

Nine months ended September 30,

(Dollars in thousands)

2023

2022

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

23,218

22,389

Operating cash flows from finance leases

749

848

Financing cash flows from finance leases

3,557

2,363

ROU assets obtained in exchange for new lease obligations:

Operating leases

4,864

1,937

Finance leases

1,796

556

Weighted-average remaining lease term:

Operating leases

7.3

years

7.4

years

Finance leases

7.8

years

8.4

years

Weighted-average discount rate:

Operating leases

3.2

2.8

Finance leases

3.8

4.3

As of September 30, 2023, the Corporation has additional operating leases contracts that have not yet commenced with an

undiscounted contract amount of $

4.1

million, which will have lease terms ranging from

10

to

years.

Note 29 – 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 September 30,

Quarter ended September 30,

(In thousands)

2023

2022

2023

2022

Personnel Cost:

Service cost

48

121

Other operating expenses:

Interest cost

7,886

4,800

1,520

983

Expected return on plan assets

(8,591)

(8,847)

Amortization of prior service cost/(credit)

Amortization of net loss

5,367

3,911

(553)

Total net periodic pension cost

4,662

(136)

1,015

1,104

Pension Plans

OPEB Plan

Nine months ended September 30,

Nine months ended September 30,

(In thousands)

2023

2022

2023

2022

Personnel Cost:

Service cost

143

364

Other operating expenses:

Interest cost

23,661

14,399

4,561

2,948

Expected return on plan assets

(25,774)

(26,541)

Amortization prior service cost/(credit)

Amortization of net loss

16,099

11,733

(1,659)

Total net periodic pension cost

13,986

(409)

3,045

3,312

The Corporation paid the following contributions to the plans for the nine months ended September 30, 2023 and expects to pay the

following contributions for the year ending December 31, 2023.

For the nine months ended

For the year ending

(In thousands)

September 30, 2023

December 31, 2023

Pension Plans

171

228

OPEB Plan

4,896

5,924

Note 30 - Stock-based compensation

Incentive Plan

On May 12, 2020, the shareholders of the Corporation approved the Popular, Inc. 2020 Omnibus Incentive Plan, which permits the

Corporation to issue several types of stock-based compensation to employees and directors of the Corporation and/or any of its

subsidiaries (the “2020 Incentive Plan”). The 2020 Incentive Plan replaced the Popular, Inc. 2004 Omnibus Incentive Plan, which

was in effect prior to the adoption of the 2020 Incentive Plan (the “2004 Incentive Plan” and, together with the 2020 Incentive Plan,

the “Incentive Plan”). Participants under the Incentive Plan are designated by the Talent and Compensation Committee of the Board

of Directors (or its delegate, as determined by the Board). Under the Incentive Plan, the Corporation has issued restricted stock and

performance shares to its employees and restricted stock and restricted stock units (“RSUs”) to its directors.

The restricted stock granted under the Incentive Plan to employees becomes vested based on the employees’ continued service

with Popular.

Unless otherwise stated in an agreement, the compensation cost associated with the shares of restricted stock

granted prior to 2021 was determined based on a two-prong vesting schedule. The first part is vested ratably over five or four years

commencing at the date of grant (“the graduated vesting portion”) and the second part is vested at termination of employment after

attainment of 55 years of age and 10 years of service or 60 years of age and 5 years of service (“the retirement vesting portion”).

The graduated vesting portion is accelerated at termination of employment after attaining 55 years of age and 10 years of service or

60 years of age and 5 years of service. Restricted stock granted on or after 2021 will vest ratably in equal annual installments over

a period of 4 years or 3 years, depending on the classification of the employee. The vesting schedule is accelerated at termination

of employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service.

The performance share awards granted under the Incentive Plan consist of the opportunity to receive shares of Popular, Inc.’s

common stock provided that the Corporation achieves certain goals during a three-year performance cycle. The goals will be based

on two metrics weighted equally: the Relative Total Shareholder Return (“TSR”) and the Absolute Return on Average Tangible

Common Equity (“ROATCE”) goal. The TSR metric is considered to be a market condition under ASC 718. For equity settled

awards based on a market condition, the fair value is determined as of the grant date and is not subsequently revised based on

actual performance. The ROATCE metric is considered to be a performance condition under ASC 718. The fair value is

determined based on the probability of achieving the ROATCE goal as of each reporting period. The TSR and ROATCE metrics are

equally weighted and work independently.

The number of shares that will ultimately vest ranges from 50% to a 150% of target

based on both market (TSR) and performance (ROATCE) conditions. The performance shares vest at the end of the three-year

performance cycle. If a participant terminates employment after attaining the earlier of 55 years of age and 10 years of service or 60

years of age and 5 years of service, the performance shares shall continue outstanding and vest at the end of the performance

cycle.

The following table summarizes the restricted stock and performance shares activity under the Incentive Plan for members of

management.

(Not in thousands)

Shares

Weighted-Average

Grant Date Fair

Value

Non-vested at December 31, 2021

321,883

47.98

Granted

194,791

84.29

Performance Shares Quantity Adjustment

6,947

78.02

Vested

(240,033)

66.11

Forfeited

(1,625)

78.86

Non-vested at December 31, 2022

281,963

56.50

Granted

251,658

66.79

Performance Shares Quantity Adjustment

16,374

76.07

Vested

(232,717)

66.38

Forfeited

(16,082)

55.56

Non-vested at September 30, 2023

301,196

58.14

During the quarter ended September 30, 2023,

no

shares of restricted stock (September 30, 2022 –

1,888

) were awarded to

management under the Incentive Plan. During the quarters ended September 30, 2023 and 2022,

no

performance shares were

awarded to management under the Incentive Plan. For the nine months ended September 30, 2023,

200,303

shares of restricted

stock (September 30, 2022 –

137,934

) and

51,355

performance shares (September 30, 2022 -

56,857

) were awarded to

management under the Incentive Plan.

During the quarter ended September 30, 2023, the Corporation recognized $

2.0

million of restricted stock expense related to

management incentive awards, with a tax benefit of $

0.4

million (September 30, 2022 - $

1.5

million, with a tax benefit of $

0.3

million). For the nine months ended September 30, 2023, the Corporation recognized $

9.7

million of restricted stock expense related

to management incentive awards, with a tax benefit of $

1.5

million (September 30, 2022 - $

8.9

million, with a tax benefit of $

1.5

million). For the nine months ended September 30, 2023, the fair market value of the restricted stock and performance shares

vested was $

11.3

million at grant date and $

14.1

million at vesting date. This differential triggers a windfall of $

1.0

million that was

recorded as a reduction on income tax expense. During the quarter ended September 30, 2023 the Corporation recognized $

0.1

million of performance shares benefit, with a tax expense of $

8

thousand due to performance shares target adjustment (September

30, 2022 - $

0.3

million, with a tax benefit of $

13

thousand). For the nine months ended September 30, 2023, the Corporation

recognized $

3.6

million of performance shares expense, with a tax benefit of $

0.1

million (September 30, 2022 - $

4.3

million, with a

tax benefit of $

0.3

million). The total unrecognized compensation cost related to non-vested restricted stock awards and

performance shares to members of management at September 30, 2023 was $

13.6

million and is expected to be recognized over a

weighted-average period of

1.6

years.

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, 2021

Granted

25,321

77.48

Vested

(25,321)

77.48

Forfeited

Non-vested at December 31, 2022

Granted

37,712

55.05

Vested

(37,712)

55.05

Forfeited

Non-vested at September 30, 2023

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

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 2023 and 2022, Directors elected RSUs and unrestricted stock. During the quarter ended September 30, 2023,

1,384

RSUs

and

no

unrestricted stocks were granted to the Directors (September 30, 2022 -

857

RSUs) and the Corporation recognized

expense related to these shares of $

0.1

million with a tax benefit of $

16

thousand (September 30, 2022 - $

0.1

million with a tax

benefit of $

25

thousand). For the nine months ended September 30, 2023, the Corporation

granted

35,412

RSUs and

2,300

unrestricted stocks to the Directors (September 30, 2022 -

24,409

RSUs) and the Corporation recognized $

2.1

million of expense

related to these shares, with a tax benefit of $

0.4

million, (September 30, 2022 - $

1.9

million, with a tax benefit of $

0.4

million). The

fair value at vesting date of the shares vested during the nine months ended September 30, 2023 for the Directors was $

2.1

million.

Note 31 – 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

September 30, 2023

September 30, 2022

(In thousands)

Amount

% of pre-tax

income

Amount

% of pre-tax

income

Computed income tax expense at statutory rates

68,426

38

183,893

38

Net benefit of tax exempt interest income

(22,862)

(13)

(35,403)

(8)

Effect of income subject to preferential tax rate

(199)

(109,588)

(22)

Deferred tax asset valuation allowance

1,355

1

3,724

1

Difference in tax rates due to multiple jurisdictions

(2,839)

(2)

(7,147)

(2)

Unrecognized tax benefits

(1,503)

State and local taxes

2,436

1

3,726

1

Others

(458)

30,284

6

Income tax expense

45,859

25

67,986

14

Nine months ended

September 30, 2023

September 30, 2022

(In thousands)

Amount

% of pre-tax

income

Amount

% of pre-tax

income

Computed income tax expense at statutory rates

218,409

38

385,567

38

Net benefit of tax exempt interest income

(72,080)

(13)

(112,669)

(12)

Effect of income subject to preferential tax rate

(775)

(116,630)

(11)

Deferred tax asset valuation allowance

(2,217)

9,662

1

Difference in tax rates due to multiple jurisdictions

(11,879)

(3)

(20,457)

(2)

Unrecognized tax benefits

(1,503)

State and local taxes

8,829

2

10,957

1

Others

(4,611)

(1)

27,750

3

Income tax expense

135,676

23

182,677

18

For the quarter and nine months ended September 30, 2023, the Corporation recorded an income tax expense of $

45.9

million and

135.7

million, respectively, compared to $

68.0

million and $

182.7

million for the respective periods of 2022. The decrease in

income tax expense was due in essence to a lower pre-tax income, including lower volume of income subject to preferential tax

rates, for the quarter and nine months ended September 30, 2023.

The following table presents a breakdown of the significant components of the Corporation’s deferred tax assets and liabilities.

September 30, 2023

(In thousands)

PR

US

Total

Deferred tax assets:

Tax credits available for carryforward

261

10,754

11,015

Net operating loss and other carryforward available

123,196

644,007

767,203

Postretirement and pension benefits

46,823

46,823

Allowance for credit losses

242,095

26,366

268,461

Depreciation

5,972

6,445

12,417

FDIC-assisted transaction

152,665

152,665

Lease liability

29,056

20,237

49,293

Unrealized net loss on investment securities

218,866

27,119

245,985

Difference in outside basis from pass-through entities

38,439

38,439

Mortgage Servicing Rights

14,685

14,685

Other temporary differences

30,804

7,395

38,199

Total gross deferred tax assets

902,862

742,323

1,645,185

Deferred tax liabilities:

Intangibles

83,961

50,392

134,353

Right of use assets

26,655

17,506

44,161

Deferred loan origination fees/cost

1,990

1,944

3,934

Loans acquired

19,698

19,698

Other temporary differences

6,053

422

6,475

Total gross deferred tax liabilities

138,357

70,264

208,621

Valuation allowance

140,033

401,318

541,351

Net deferred tax asset

624,472

270,741

895,213

December 31, 2022

(In thousands)

PR

US

Total

Deferred tax assets:

Tax credits available for carryforward

261

2,781

3,042

Net operating loss and other carryforward available

121,742

661,144

782,886

Postretirement and pension benefits

47,122

47,122

Allowance for credit losses

250,615

32,688

283,303

Depreciation

5,972

6,309

12,281

FDIC-assisted transaction

152,665

152,665

Lease liability

28,290

23,521

51,811

Unrealized net loss on investment securities

265,955

23,913

289,868

Difference in outside basis from pass-through entities

40,602

40,602

Mortgage Servicing Rights

13,711

13,711

Other temporary differences

17,122

7,815

24,937

Total gross deferred tax assets

944,057

758,171

1,702,228

Deferred tax liabilities:

Intangibles

81,174

54,623

135,797

Right of use assets

26,015

20,262

46,277

Deferred loan origination fees/cost

1,076

2,961

4,037

Loans acquired

23,353

23,353

Other temporary differences

1,531

1,531

Total gross deferred tax liabilities

133,149

77,846

210,995

Valuation allowance

137,863

402,333

540,196

Net deferred tax asset

673,045

277,992

951,037

The net deferred tax asset shown in the table above at September 30, 2023, is reflected in the consolidated statements of financial

condition as $

0.9

billion in net deferred tax assets in the “Other assets” caption (December 31, 2022 - $

1.0

billion) and $

1.2

million in

deferred tax liabilities in the “Other liabilities” caption (December 31, 2022 - $

2.6

million), reflecting the aggregate deferred tax

assets or liabilities of individual tax-paying subsidiaries of the Corporation in their respective tax jurisdiction, Puerto Rico or the

United States.

At September 30, 2023 the net deferred tax asset of the U.S. operations amounted to $

672

million with a valuation allowance of

approximately $

401

million, for a net deferred tax asset after valuation allowance of approximately $

271

million. The Corporation

evaluates the realization of the deferred tax asset on a quarterly basis by taxing jurisdiction. The U.S. operation has sustained

profitability for last three calendar years and for the period ended September 30, 2023. While the pre-tax income for the nine-month

period ended in September 2023 is lower when compared to the same period last year, these results, when combined with recent

historical results, still demonstrated financial stability for the U.S. operations. The 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 reduction of pre-tax income for the year 2023. As of September 30, 2023, after weighting all

positive and negative evidence, the Corporation concluded that it is more likely than not that approximately $

271

million of the

deferred tax asset 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 asset 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, 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, to assess the future realization of the deferred tax asset.

At September 30, 2023, the Corporation’s net deferred tax assets related to its Puerto Rico operations amounted to $

624

million.

The Corporation’s Puerto Rico Banking operation is not in a cumulative loss position and has sustained profitability for the last three

calendar years and for the period ended September 30, 2023. 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

asset. 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 asset of the Puerto Rico Banking operations will be realized.

The Holding Company operation is in a cumulative loss position, taking into account taxable income exclusive of reversing

temporary differences, for the last three calendar years and for the period ended September 30, 2023. Management expects these

losses will be a trend in future years. This objectively verifiable negative evidence is considered by management strong negative

evidence that will suggest 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 asset of $

140

million as of September 30, 2023.

The reconciliation of unrecognized tax benefits, excluding interest, was as follows:

(In millions)

2023

2022

Balance at January 1

2.5

3.5

Balance at March 31

2.5

3.5

Balance at June 30

2.5

3.5

Reduction as a result of lapse of statute of limitations - July through September

(1.1)

Balance at September 30

2.5

2.4

At September 30, 2023, the total amount of accrued interest recognized in the statement of financial condition amounted to $

2.7

million (December 31, 2022 - $

2.6

million). The total interest expense recognized at September 30, 2023 was $

79

thousand,

(September 30, 2022– $

202

thousand). Management determined that at September 30, 2023 and December 31, 2022 there was

no

need to accrue for the payment of 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 $

4.4

million at September 30, 2023 (December 31, 2022 - $

4.3

million).

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 anticipates a reduction in the total amount of unrecognized tax benefits within the next 12

months amounting to $

1.5

million.

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 September 30, 2023, the following years remain subject to examination in the U.S.

Federal jurisdiction: 2019 and thereafter; and in the Puerto Rico jurisdiction, 2018 and thereafter.

Note 32 – Supplemental disclosure on the consolidated statements of cash flows

Additional disclosures on cash flow information and non-cash activities for the nine months ended September 30, 2023 and

September 30, 2022 are listed in the following table:

(In thousands)

September 30, 2023

September 30, 2022

Non-cash activities:

Loans transferred to other real estate

48,704

50,359

Loans transferred to other property

53,021

38,066

Total loans transferred to foreclosed assets

101,725

88,425

Loans transferred to other assets

15,738

6,631

Financed sales of other real estate assets

7,617

6,231

Financed sales of other foreclosed assets

38,136

29,505

Total financed sales of foreclosed assets

45,753

35,736

Financed sale of premises and equipment

59,345

31,894

Transfers from premises and equipment to long-lived assets held-for-sale

1,126

Transfers from loans held-in-portfolio to loans held-for-sale

55,497

11,522

Transfers from loans held-for-sale to loans held-in-portfolio

3,772

25,706

Loans securitized into investment securities

[1]

35,958

294,872

Trades receivable from brokers and counterparties

11,823

12,973

Trades payable to brokers and counterparties

14,761

5,793

Net change in receivables from investments maturities

176,000

Recognition of mortgage servicing rights on securitizations or asset transfers

1,814

6,195

Loans booked under the GNMA buy-back option

2,805

3,984

Capitalization of lease right of use asset

14,672

4,453

Acquisition of software intangible assets

28,650

Goodwill on acquisition

116,135

Total stock consideration related to Evertec transactions

144,785

[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)

September 30, 2023

September 30, 2022

Cash and due from banks

509,538

1,937,638

Restricted cash and due from banks

25,797

79,674

Restricted cash in money market investments

5,903

7,199

Total cash and due from banks, and restricted cash

[2]

541,238

2,024,511

[2]

Refer to Note 5 - Restrictions on cash and due from banks and certain securities for nature of restrictions.

Note 33 – Segment reporting

The Corporation’s corporate structure consists of

two

reportable segments –

Banco Popular de Puerto Rico and Popular U.S.

Management determined the reportable segments based on the internal reporting used to evaluate performance and to assess

where to allocate resources.

The segments were determined based on the organizational structure, which focuses primarily on the

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 Evertec, until August 15, 2022, and

Centro Financiero BHD, León.

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:

2023

For the quarter ended September 30, 2023

Intersegment

(In thousands)

BPPR

Popular U.S.

Eliminations

Net interest income

453,879

87,445

1

Provision for credit losses (benefit)

51,899

(6,644)

Non-interest income

144,691

5,894

(134)

Amortization of intangibles

484

311

Goodwill impairment charge

23,000

Depreciation expense

12,880

1,962

Other operating expenses

369,738

58,341

(134)

Income tax expense

40,861

5,358

Net income

122,708

11,011

1

Segment assets

57,039,000

12,806,630

(448,100)

For the quarter ended September 30, 2023

Reportable

(In thousands)

Segments

Corporate

Eliminations

Total Popular, Inc.

Net interest income (expense)

541,325

(7,305)

534,020

Provision for credit losses (benefit)

45,255

(138)

45,117

Non-interest income

150,451

10,179

(1,081)

159,549

Amortization of intangibles

795

795

Goodwill impairment charge

23,000

23,000

Depreciation expense

14,842

381

15,223

Other operating expenses

427,945

180

(1,159)

426,966

Income tax expense (benefit)

46,219

(396)

36

45,859

Net income

133,720

2,847

42

136,609

Segment assets

69,397,530

5,554,370

(5,214,964)

69,736,936

For the nine months ended September 30, 2023

Intersegment

(In thousands)

BPPR

Popular U.S.

Eliminations

Net interest income

1,356,774

265,033

2

Provision for credit losses

126,952

3,328

Non-interest income

435,966

18,165

(404)

Amortization of intangibles

1,453

932

Goodwill impairment charge

23,000

Depreciation expense

36,424

5,661

Other operating expenses

1,119,522

182,809

(404)

Income tax expense

120,996

16,184

Net income

387,393

51,284

2

Segment assets

57,039,000

12,806,630

(448,100)

For the nine months ended September 30, 2023

Reportable

Total

(In thousands)

Segments

Corporate

Eliminations

Popular, Inc.

Net interest income (expense)

1,621,809

(24,465)

1,597,344

Provision for credit losses (benefit)

130,280

(334)

129,946

Non-interest income

453,727

32,905

(4,651)

481,981

Amortization of intangibles

2,385

2,385

Goodwill impairment charge

23,000

23,000

Depreciation expense

42,085

1,095

43,180

Other operating expenses

1,301,927

(146)

(3,391)

1,298,390

Income tax expense (benefit)

137,180

(1,006)

(498)

135,676

Net income

438,679

8,831

(762)

446,748

Segment assets

69,397,530

5,554,370

(5,214,964)

69,736,936

2022

For the quarter ended September 30, 2022

Intersegment

(In thousands)

BPPR

Popular U.S.

Eliminations

Net interest income

488,123

98,874

1

Provision for credit losses

29,813

10,011

Non-interest income

262,587

15,203

(137)

Amortization of intangibles

484

311

Goodwill impairment charge

9,000

Depreciation expense

11,862

1,693

Other operating expenses

396,655

57,127

(135)

Income tax expense

48,209

10,628

Net income

263,687

25,307

(1)

Segment assets

59,640,784

11,106,409

(319,999)

For the quarter ended September 30, 2022

Reportable

(In thousands)

Segments

Corporate

Eliminations

Total Popular, Inc.

Net interest income (expense)

586,998

(7,379)

579,619

Provision for credit losses (benefit)

39,824

(187)

39,637

Non-interest income

277,653

148,228

613

426,494

Amortization of intangibles

795

795

Goodwill impairment charge

9,000

9,000

Depreciation expense

13,555

298

13,853

Other operating expenses

453,647

(46)

(1,154)

452,447

Income tax expense

58,837

8,469

680

67,986

Net income

288,993

132,315

1,087

422,395

Segment assets

70,427,194

5,341,051

(5,038,570)

70,729,675

For the nine months ended September 30, 2022

Intersegment

(In thousands)

BPPR

Popular U.S.

Eliminations

Net interest income

1,351,086

278,825

3

Provision for credit losses

24,941

8,580

Non-interest income

542,826

26,076

(410)

Amortization of intangibles

1,453

1,028

Goodwill impairment charge

9,000

Depreciation expense

35,054

5,272

Other operating expenses

1,069,512

166,677

(407)

Income tax expense

141,113

33,917

Net income

621,839

80,427

Segment assets

59,640,784

11,106,409

(319,999)

For the nine months ended September 30, 2022

Reportable

Total

(In thousands)

Segments

Corporate

Eliminations

Popular, Inc.

Net interest income (expense)

1,629,914

(22,121)

1,607,793

Provision for credit losses (benefit)

33,521

(22)

33,499

Non-interest income

568,492

174,060

(3,955)

738,597

Amortization of intangibles

2,481

2,481

Goodwill impairment charge

9,000

9,000

Depreciation expense

40,326

881

41,207

Other operating expenses

1,235,782

(149)

(3,609)

1,232,024

Income tax expense

175,030

7,802

(155)

182,677

Net income

702,266

143,427

(191)

845,502

Segment assets

70,427,194

5,341,051

(5,038,570)

70,729,675

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 nine months ended, BPPR

participated in loans originated by PB totaling $

10

million and $

33

million, respectively (2022 - $

69

million and $

160

million,

respectively). At September 30, 2023, total assets for the BPPR segment related to its operations in the United States amounted to

1.4

billion (December 31, 2022 - $

1.2

billion). During the nine months ended September 30, 2023, the BPPR segment generated

approximately $

86.0

million (2022 - $

45.0

million) in revenues from its operations in the United States, including net interest income

and other service fees. In the Virgin Islands, the BPPR segment offers banking products, including loans and deposits. The BPPR

segment generated $

33.6

million in revenues during the nine months ended September 30, 2023 (2022 - $

34.6

million) from its

operations in the U.S. and British Virgin Islands.

Geographic Information

Quarter ended

Nine months ended

(In thousands)

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

Revenues:

[1]

Puerto Rico

539,985

852,149

1,623,963

1,940,457

United States

131,698

133,071

389,463

347,614

Other

21,886

20,893

65,899

58,319

Total consolidated revenues

693,569

1,006,113

2,079,325

2,346,390

[1]

Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net (loss) gain,

including impairment on equity securities, net gain (loss) on trading account debt securities, net loss on sale of loans, including valuation

adjustments on loans held-for-sale, adjustments to indemnity reserves on loans sold, and other operating income.

Selected Balance Sheet Information:

(In thousands)

September 30, 2023

December 31, 2022

Puerto Rico

Total assets

54,259,904

53,541,427

Loans

21,866,754

20,884,442

Deposits

52,035,227

51,138,790

United States

Total assets

14,218,288

12,718,775

Loans

11,625,969

10,643,964

Deposits

9,605,215

8,182,702

Other

Total assets

1,258,744

1,377,715

Loans

541,829

554,744

Deposits

[1]

1,697,158

1,905,735

[1]

Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.