00007639010.01False--12-31Large Accelerated Filer17000000030000000FY000016.8http://fasb.org/us-gaap/2021-01-31#OtherLiabilitieshttp://fasb.org/us-gaap/2021-01-31#OtherLiabilitieshttp://fasb.org/us-gaap/2021-01-31#OtherLiabilitieshttp://fasb.org/us-gaap/2021-01-31#OtherLiabilitieshttp://fasb.org/us-gaap/2021-01-31#OtherAssetshttp://fasb.org/us-gaap/2021-01-31#OtherAssetshttp://fasb.org/us-gaap/2021-01-31#OtherAssetshttp://fasb.org/us-gaap/2021-01-31#OtherAssets 0000763901 2021-01-01 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember 2021-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:CapitalAdequacyMinimumRequirementPlusCapitalConservationBufferbaselMember 2020-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember 2021-01-01 2021-12-31 0000763901 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763901 us-gaap:CustomerRelationshipsMember 2020-12-31 0000763901 us-gaap:FairValueInputsLevel2Member 2021-01-01 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember 2020-12-31 0000763901 us-gaap:SecuredDebtMember us-gaap:MaturityUpTo30DaysMember us-gaap:CollateralizedMortgageObligationsMember 2020-12-31 0000763901 2020-01-01 2020-12-31 0000763901 us-gaap:CommitmentsToExtendCreditMember bpop:CommercialAndConstructionLinesOfCreditMember 2021-12-31 0000763901 country:PR 2021-12-31 0000763901 bpop:EVERTECIncMember 2021-01-01 2021-12-31 0000763901 bpop:ForeignCommingledTrustFundMember 2021-12-31 0000763901 country:PR 2020-01-01 2020-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:SecuredDebtMember us-gaap:MaturityUpTo30DaysMember 2020-12-31 0000763901 us-gaap:SecuredDebtMember 2020-12-31 0000763901 bpop:MortgageBankingActivitiesMember us-gaap:ForwardContractsMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:ExchangeTradedFundsMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2020-12-31 0000763901 country:PR 2020-12-31 0000763901 us-gaap:ResidentialMortgageMember bpop:PurchasedMortgageServicingRightsMSRMember 2020-12-31 0000763901 us-gaap:TreasuryStockMember 2020-12-31 0000763901 2020-12-31 0000763901 bpop:ServicingAssetAtFairValueAmountMember 2021-01-01 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:CommercialBankingMember 2021-01-01 2021-12-31 0000763901 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2021-01-01 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel1Member 2021-01-01 2021-12-31 0000763901 us-gaap:OtherDebtSecuritiesMember 2021-12-31 0000763901 us-gaap:MaterialReconcilingItemsMember 2021-01-01 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember 2021-12-31 0000763901 bpop:CapitalAdequacyMinimumRequirementPlusCapitalConservationBufferbaselMember us-gaap:CorporateMember 2021-12-31 0000763901 us-gaap:MaterialReconcilingItemsMember 2020-01-01 2020-12-31 0000763901 us-gaap:InterestRateCapMember us-gaap:NondesignatedMember 2020-12-31 0000763901 us-gaap:FairValueInputsLevel2Member bpop:MutualFundsMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember 2020-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2020-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0000763901 us-gaap:CollateralizedMortgageObligationsMember bpop:TradingAccountDebtSecuritiesMember 2020-01-01 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember 2021-01-01 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2021-12-31 0000763901 us-gaap:OperatingSegmentsMember bpop:PopularBankMember 2020-01-01 2020-12-31 0000763901 us-gaap:IntersegmentEliminationMember 2019-12-31 0000763901 us-gaap:FairValueInputsLevel1Member us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember us-gaap:SecuritiesInvestmentMember bpop:MoreThanOneAndWithinFiveYearsFromBalanceSheetDateMember 2021-12-31 0000763901 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2020-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember 2021-12-31 0000763901 us-gaap:ResidentialMortgageMember bpop:PurchasedMortgageServicingRightsMSRMember 2021-12-31 0000763901 bpop:BpnaMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:InsuranceFeesMember 2021-01-01 2021-12-31 0000763901 bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2021-12-31 0000763901 country:PR 2021-01-01 2021-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember 2021-12-31 0000763901 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2021-12-31 0000763901 bpop:BpnaMember bpop:CreditCardFeesExcludingLateFeesAndMembershipFeesMember 2021-01-01 2021-12-31 0000763901 bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember 2020-12-31 0000763901 us-gaap:ResidentialMortgageMember bpop:OriginatedMortgageServicingRightsMSRMember 2020-12-31 0000763901 bpop:MortgageBankingActivitiesMember 2021-01-01 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember us-gaap:LoansMember bpop:MoreThanTenYearsFromBalanceSheetDateMember 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember 2020-12-31 0000763901 us-gaap:DesignatedAsHedgingInstrumentMember 2021-12-31 0000763901 bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2020-12-31 0000763901 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:OtherDebtSecuritiesMember 2020-01-01 2020-12-31 0000763901 bpop:RelatedPartyWithInvestmentCompaniesMember 2020-01-01 2020-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember 2020-01-01 2020-12-31 0000763901 us-gaap:CorporateMember 2020-12-31 0000763901 bpop:MortgageLoanCommitmentsMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:Basel3Member 2020-12-31 0000763901 us-gaap:CoreDepositsMember 2020-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember 2020-12-31 0000763901 bpop:ForeignCommingledTrustFundMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 bpop:PopularBankMember 2021-12-31 0000763901 bpop:RelatedPartyWithInvestmentCompaniesMember 2021-01-01 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:OtherDebtSecuritiesMember 2020-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2021-12-31 0000763901 us-gaap:OperatingSegmentsMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:MortgageBackedSecuritiesMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:CreditCardFeesExcludingLateFeesAndMembershipFeesMember 2020-01-01 2020-12-31 0000763901 country:US 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2021-12-31 0000763901 us-gaap:OperatingSegmentsMember 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember 2020-01-01 2020-12-31 0000763901 us-gaap:IntersegmentEliminationMember 2020-01-01 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember 2021-01-01 2021-12-31 0000763901 us-gaap:TreasuryStockMember 2021-01-01 2021-12-31 0000763901 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2020-01-01 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember us-gaap:IntersubsegmentEliminationsMember 2021-01-01 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0000763901 bpop:FixedRateWithMaturitiesOn2023Member us-gaap:UnsecuredDebtMember 2020-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 bpop:PopularBankMember 2020-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember 2020-12-31 0000763901 us-gaap:FinancialGuaranteeMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:US 2021-12-31 0000763901 srt:DirectorMember us-gaap:RestrictedStockMember 2020-01-01 2020-12-31 0000763901 bpop:BpnaMember bpop:ServiceChargesOnDepositAccountsMember 2021-01-01 2021-12-31 0000763901 bpop:EVERTECIncMember us-gaap:OtherExpenseMember 2021-01-01 2021-12-31 0000763901 bpop:TradingGainsLossesMember 2021-01-01 2021-12-31 0000763901 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2020-12-31 0000763901 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0000763901 bpop:CapitalAdequacyMinimumRequirementPlusCapitalConservationBufferbaselMember bpop:PopularBankMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:MortgageBackedSecuritiesMember 2020-12-31 0000763901 us-gaap:EquityMember 2021-12-31 0000763901 us-gaap:CommitmentsToExtendCreditMember 2021-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2021-12-31 0000763901 country:US 2020-12-31 0000763901 bpop:OtherCountriesMember 2021-01-01 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromPrCentralGovernmentMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:IndemnificationGuaranteeMember 2019-12-31 0000763901 srt:ParentCompanyMember 2021-01-01 2021-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember srt:MaximumMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763901 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ForwardContractsMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:OtherServicesMember 2020-01-01 2020-12-31 0000763901 us-gaap:EquitySecuritiesMember 2020-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:OtherDebtSecuritiesMember 2021-01-01 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0000763901 us-gaap:CorporateNonSegmentMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2019-12-31 0000763901 srt:DirectorMember us-gaap:RestrictedStockMember 2021-01-01 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:TrustfeesMember 2021-01-01 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:AvailableforsaleSecuritiesMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:OtherDebtSecuritiesMember 2021-12-31 0000763901 srt:MaximumMember bpop:PopularRelatedSecuritiesMember 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763901 us-gaap:CollateralizedMortgageObligationsMember bpop:TradingAccountDebtSecuritiesMember 2021-01-01 2021-12-31 0000763901 us-gaap:IntersegmentEliminationMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member bpop:TradingAccountDebtSecuritiesMember us-gaap:OtherDebtSecuritiesMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:AvailableforsaleSecuritiesMember 2020-01-01 2020-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:SecuredDebtMember us-gaap:Maturity30To90DaysMember 2020-12-31 0000763901 us-gaap:PreferredStockMember 2020-12-31 0000763901 bpop:OtherCountriesMember 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember us-gaap:IntersubsegmentEliminationsMember 2020-01-01 2020-12-31 0000763901 us-gaap:ExchangeTradedFundsMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember us-gaap:SecuritiesInvestmentMember bpop:MoreThanTenYearsFromBalanceSheetDateMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember bpop:WithinOneYearFromBalanceSheetDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:CollateralizedMortgageObligationsMember bpop:TradingAccountDebtSecuritiesMember 2020-12-31 0000763901 us-gaap:OtherLiabilitiesMember 2020-12-31 0000763901 us-gaap:TrademarksMember bpop:ELoanMember 2021-12-31 0000763901 us-gaap:ConstructionLoansMember 2021-12-31 0000763901 bpop:ForeignCommingledTrustFundMember 2020-12-31 0000763901 us-gaap:ExchangeTradedFundsMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0000763901 us-gaap:ResidentialMortgageMember bpop:PurchasedMortgageServicingRightsMSRMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:PR us-gaap:SubstandardMember 2021-12-31 0000763901 2018-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 us-gaap:CommitmentsToExtendCreditMember us-gaap:CreditCardMember 2020-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2019-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:PrivateEquityFundsMember 2020-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember srt:WeightedAverageMember bpop:ValuationTechniqueExternalAppraisalMember us-gaap:RealEstateAcquiredInSatisfactionOfDebtMember 2021-01-01 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0000763901 srt:MinimumMember us-gaap:DebtSecuritiesMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member 2021-01-01 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:AvailableforsaleSecuritiesMember 2020-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:AccruedIncomeReceivableMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:DebitCardFeesMember 2021-01-01 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:MoreThanOneAndWithinFiveYearsFromBalanceSheetDateMember us-gaap:LoansMember bpop:FromPrCentralGovernmentMember 2021-12-31 0000763901 bpop:ServicingAssetAtFairValueAmountMember 2020-01-01 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember 2021-12-31 0000763901 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:OtherLiabilitiesMember us-gaap:ForwardContractsMember 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:SecuredDebtMember us-gaap:Maturity30To90DaysMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromPrCentralGovernmentMember 2021-01-01 2021-12-31 0000763901 bpop:OtherCountriesMember 2020-01-01 2020-12-31 0000763901 bpop:EVERTECIncMember bpop:OtherFeeRevenueMember 2021-01-01 2021-12-31 0000763901 us-gaap:PerformanceSharesMember 2018-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2020-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember srt:MaximumMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel3Member 2019-12-31 0000763901 us-gaap:InterestExpenseMember us-gaap:EmbeddedDerivativeFinancialInstrumentsMember 2020-01-01 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:OtherServicesMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommitmentsToExtendCreditMember bpop:CommercialAndConstructionLinesOfCreditMember 2020-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:ValuationTechniqueDiscountedCashFlowMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:OtherDebtSecuritiesMember 2021-01-01 2021-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember 2019-12-31 0000763901 bpop:ServicingAssetAtFairValueAmountMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember 2020-01-01 2020-12-31 0000763901 us-gaap:PerformanceSharesMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0000763901 us-gaap:FairValueInputsLevel2Member bpop:ForeignCommingledTrustFundMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:OtherDebtSecuritiesMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 us-gaap:InterestRateCapMember us-gaap:OtherLiabilitiesMember us-gaap:NondesignatedMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:DebitCardFeesMember 2020-01-01 2020-12-31 0000763901 srt:MaximumMember us-gaap:EquipmentMember 2021-01-01 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember 2021-12-31 0000763901 bpop:BpnaMember bpop:CreditCardFeesExcludingLateFeesAndMembershipFeesMember 2020-01-01 2020-12-31 0000763901 us-gaap:LongTermDebtMember 2021-12-31 0000763901 bpop:PopularBankMember bpop:Basel3Member 2020-12-31 0000763901 us-gaap:CorporateMember 2021-12-31 0000763901 us-gaap:FederalHomeLoanBankAdvancesMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:ConsumerAndRetailBankingMember 2020-01-01 2020-12-31 0000763901 bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember 2021-12-31 0000763901 country:US 2019-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member bpop:ServicingAssetAtFairValueAmountMember srt:MaximumMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:AutomobileLoanMember 2020-12-31 0000763901 us-gaap:OtherIncomeMember us-gaap:InterestRateCapMember 2021-01-01 2021-12-31 0000763901 us-gaap:CashFlowHedgingMember 2021-01-01 2021-12-31 0000763901 us-gaap:LetterOfCreditMember 2021-12-31 0000763901 bpop:SavingsPlansMember 2021-12-31 0000763901 us-gaap:AvailableforsaleSecuritiesMember 2021-01-01 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 us-gaap:DesignatedAsHedgingInstrumentMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 bpop:ServicingAssetAtFairValueAmountMember us-gaap:FairValueInputsLevel1Member 2021-01-01 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:CommercialBankingMember 2020-01-01 2020-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:EquitySecuritiesMember 2021-12-31 0000763901 us-gaap:RestrictedStockUnitsRSUMember srt:ManagementMember 2021-01-01 2021-12-31 0000763901 2019-12-31 0000763901 us-gaap:TrademarksMember 2020-12-31 0000763901 us-gaap:RetainedEarningsMember 2021-01-01 2021-12-31 0000763901 country:US 2021-01-01 2021-12-31 0000763901 us-gaap:CommonStockMember 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember bpop:WithinOneYearFromBalanceSheetDateMember 2021-12-31 0000763901 bpop:EVERTECIncMember 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:SecuredDebtMember us-gaap:MaturityUpTo30DaysMember 2020-12-31 0000763901 us-gaap:RestrictedStockUnitsRSUMember srt:ManagementMember 2019-01-01 2019-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member bpop:ServicingAssetAtFairValueAmountMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR 2021-01-01 2021-12-31 0000763901 us-gaap:RestrictedStockUnitsRSUMember srt:DirectorMember 2021-01-01 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0000763901 country:PR 2019-12-31 0000763901 us-gaap:PreferredStockMember 2018-12-31 0000763901 us-gaap:StandbyLettersOfCreditMember 2021-12-31 0000763901 bpop:OtherServicesMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:CashAndCashEquivalentsMember 2020-12-31 0000763901 us-gaap:EquityMember srt:MinimumMember 2021-12-31 0000763901 us-gaap:NondesignatedMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:TrustfeesMember 2020-01-01 2020-12-31 0000763901 us-gaap:NondesignatedMember us-gaap:EmbeddedDerivativeFinancialInstrumentsMember us-gaap:InterestBearingDepositsMember 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:MoreThanOneAndWithinFiveYearsFromBalanceSheetDateMember bpop:FromPrCentralGovernmentMember 2021-01-01 2021-12-31 0000763901 us-gaap:CorporateNonSegmentMember 2020-01-01 2020-12-31 0000763901 bpop:MutualFundsMember 2020-12-31 0000763901 us-gaap:NondesignatedMember bpop:IndexedOptionsOnDepositsMember us-gaap:OtherAssetsMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:SecuritiesInvestmentMember 2020-12-31 0000763901 us-gaap:InterestRateCapMember us-gaap:NondesignatedMember us-gaap:OtherAssetsMember 2021-12-31 0000763901 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:PR us-gaap:SpecialMentionMember 2021-12-31 0000763901 us-gaap:SecuritiesSoldUnderAgreementsToRepurchaseMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:CollateralizedMortgageObligationsMember bpop:TradingAccountDebtSecuritiesMember us-gaap:ValuationTechniqueDiscountedCashFlowMember srt:MinimumMember 2020-01-01 2020-12-31 0000763901 us-gaap:CashAndCashEquivalentsMember 2021-12-31 0000763901 srt:MaximumMember us-gaap:PerformanceSharesMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateNonOwnerOccupiedMember 2021-12-31 0000763901 us-gaap:OtherDebtSecuritiesMember 2020-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember 2021-12-31 0000763901 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ForwardContractsMember us-gaap:OtherAssetsMember 2020-12-31 0000763901 bpop:EVERTECIncMember 2020-12-31 0000763901 us-gaap:CommonStockMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommonStockMember 2021-01-01 2021-12-31 0000763901 bpop:CumulativePreferredStockSixPointOneTwoFivePercentMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel1Member us-gaap:CashAndCashEquivalentsMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:RealEstateAcquiredInSatisfactionOfDebtMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:CollateralizedMortgageObligationsMember bpop:TradingAccountDebtSecuritiesMember us-gaap:ValuationTechniqueDiscountedCashFlowMember srt:WeightedAverageMember 2020-01-01 2020-12-31 0000763901 bpop:ForeignCommingledTrustFundMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel2Member bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:SalesAndAdministrationOfInvestmentProductsMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:PassMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 us-gaap:ConstructionLoansMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:SpecialMentionMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:CollateralizedMortgageObligationsMember 2020-12-31 0000763901 us-gaap:ResidentialMortgageMember bpop:OriginatedMortgageServicingRightsMSRMember 2021-01-01 2021-12-31 0000763901 us-gaap:AccruedIncomeReceivableMember 2020-12-31 0000763901 bpop:TaxYear2033Member 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:MoreThanTenYearsFromBalanceSheetDateMember bpop:FromPrCentralGovernmentMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:CommercialLoanMember bpop:RelatedPartyTransactionLoanSoldBetweenBpprAndPopularIncMember 2019-02-15 0000763901 us-gaap:FinancialStandbyLetterOfCreditMember 2020-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember srt:MaximumMember 2021-12-31 0000763901 us-gaap:OperatingSegmentsMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel1Member 2021-01-01 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2021-12-31 0000763901 us-gaap:TreasuryStockMember 2018-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:AccruedIncomeReceivableMember 2020-12-31 0000763901 bpop:EVERTECIncMember bpop:RentalIncomeMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:PassMember 2021-12-31 0000763901 srt:DirectorMember us-gaap:RestrictedStockMember 2019-01-01 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:SubstandardMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel1Member us-gaap:CashAndCashEquivalentsMember 2020-12-31 0000763901 us-gaap:EmployeeStockOptionMember 2021-01-01 2021-12-31 0000763901 us-gaap:SecuredDebtMember us-gaap:CollateralizedMortgageObligationsMember 2020-12-31 0000763901 us-gaap:FairValueInputsLevel3Member bpop:ForeignCommingledTrustFundMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 us-gaap:FairValueInputsLevel1Member us-gaap:EquitySecuritiesMember 2020-12-31 0000763901 us-gaap:FairValueInputsLevel2Member bpop:ServicingAssetAtFairValueAmountMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:BondsMember 2021-12-31 0000763901 us-gaap:StandbyLettersOfCreditMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2021-01-01 2021-12-31 0000763901 us-gaap:FinancialGuaranteeMember 2020-12-31 0000763901 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:OtherCountriesMember 2021-01-01 2021-12-31 0000763901 us-gaap:RestrictedStockUnitsRSUMember srt:DirectorMember 2019-01-01 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:SpecialMentionMember 2021-12-31 0000763901 us-gaap:PerformanceSharesMember 2019-01-01 2019-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember us-gaap:SecuritiesInvestmentMember bpop:MoreThanFiveAndWithinTenYearsFromBalanceSheetDateMember 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:ValuationTechniqueDiscountedCashFlowMember srt:WeightedAverageMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember 2021-01-01 2021-12-31 0000763901 bpop:EVERTECIncMember 2020-01-01 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:PassMember 2021-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:OtherDebtSecuritiesMember 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:MortgageBackedSecuritiesMember 2019-12-31 0000763901 us-gaap:CommercialLoanMember bpop:RelatedPartyTransactionLoanSoldBetweenBpprAndPopularIncMember 2019-01-01 2019-02-15 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:OtherDebtSecuritiesMember 2021-12-31 0000763901 bpop:OtherCountriesMember 2020-12-31 0000763901 us-gaap:ExchangeTradedFundsMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 bpop:CapitalAdequacyMinimumRequirementPlusCapitalConservationBufferbaselMember us-gaap:CorporateMember 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember bpop:MoreThanTenYearsFromBalanceSheetDateMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 us-gaap:RetainedEarningsMember 2020-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2021-12-31 0000763901 bpop:MortgageLoanCommitmentsMember 2020-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember srt:MinimumMember 2020-12-31 0000763901 srt:MaximumMember us-gaap:BuildingMember 2021-01-01 2021-12-31 0000763901 bpop:PopularBankMember bpop:Basel3Member 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:CashAndCashEquivalentsMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:US us-gaap:SpecialMentionMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:EquitySecuritiesMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:SecuritiesInvestmentMember bpop:MoreThanOneAndWithinFiveYearsFromBalanceSheetDateMember bpop:FromPrCentralGovernmentMember 2021-12-31 0000763901 srt:ParentCompanyMember 2020-01-01 2020-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember srt:MinimumMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember bpop:MoreThanTenYearsFromBalanceSheetDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:AvailableforsaleSecuritiesMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:SubstandardMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2021-12-31 0000763901 bpop:ServicedMortgageLoansMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:US us-gaap:SubstandardMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:US bpop:WatchMember 2021-12-31 0000763901 us-gaap:SecuredDebtMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:ConsumerAndRetailBankingMember 2021-01-01 2021-12-31 0000763901 bpop:PopularBankMember us-gaap:OperatingSegmentsMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember 2019-12-31 0000763901 bpop:IntersegmentTransactionMember 2021-01-01 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0000763901 bpop:MortgageBankingActivitiesMember us-gaap:ForwardContractsMember 2020-01-01 2020-12-31 0000763901 bpop:FixedRateWithMaturitiesOn2023Member us-gaap:UnsecuredDebtMember 2021-01-01 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:OtherDebtSecuritiesMember 2018-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:HomeEquityMember 2020-12-31 0000763901 us-gaap:AvailableforsaleSecuritiesMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:CreditCardReceivablesMember 2021-12-31 0000763901 bpop:FixedRateAdvancesDue2022To2029Member 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:OtherDebtSecuritiesMember 2020-12-31 0000763901 srt:DirectorMember us-gaap:RestrictedStockMember 2018-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:PreferredStockMember us-gaap:SeriesBPreferredStockMember 2020-02-24 0000763901 us-gaap:LandMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember bpop:WatchMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:CollateralizedMortgageObligationsMember bpop:TradingAccountDebtSecuritiesMember srt:MaximumMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2020-01-01 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:PassMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember us-gaap:LoansMember 2021-12-31 0000763901 srt:ManagementMember 2021-01-01 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:MoreThanOneAndWithinFiveYearsFromBalanceSheetDateMember bpop:FromPrCentralGovernmentMember 2021-12-31 0000763901 bpop:IndexedOptionsOnDepositsMember us-gaap:NondesignatedMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2021-01-01 2021-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember 2020-12-31 0000763901 us-gaap:AccruedIncomeReceivableMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:SpecialMentionMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:DoubtfulMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:SpecialMentionMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 us-gaap:CommitmentsToExtendCreditMember bpop:OtherLoanCommitmentsMember 2021-12-31 0000763901 us-gaap:RetainedEarningsMember 2020-01-01 2020-12-31 0000763901 us-gaap:SecuredDebtMember us-gaap:MaturityUpTo30DaysMember us-gaap:CollateralizedMortgageObligationsMember 2021-12-31 0000763901 us-gaap:InterestRateCapMember us-gaap:NondesignatedMember 2021-12-31 0000763901 us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 us-gaap:ConstructionLoansMember country:PR 2021-12-31 0000763901 us-gaap:ConstructionLoansMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:PR us-gaap:PassMember 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:SecuredDebtMember us-gaap:MaturityOver90DaysMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:SubstandardMember bpop:CommercialRealEstateOwnerOccupiedMember 2021-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:SubstandardMember us-gaap:MortgageReceivablesMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember 2019-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:SubstandardMember 2021-12-31 0000763901 bpop:BpprFoundationMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0000763901 us-gaap:ConstructionLoansMember country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 us-gaap:ForwardContractsMember us-gaap:CashFlowHedgingMember 2019-01-01 2019-12-31 0000763901 srt:DirectorMember 2021-01-01 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember country:US 2020-01-01 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:PassMember 2021-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:WatchMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 bpop:MutualFundsMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2020-01-01 2020-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0000763901 bpop:EVERTECIncMember bpop:ProcessingFeesMember 2020-01-01 2020-12-31 0000763901 bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:EquipmentMember 2021-12-31 0000763901 country:PR us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2021-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember srt:MaximumMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:SubstandardMember 2021-12-31 0000763901 us-gaap:ConsumerLoanMember 2020-01-01 2020-12-31 0000763901 us-gaap:AvailableforsaleSecuritiesMember us-gaap:MortgageBackedSecuritiesMember 2018-12-31 0000763901 bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:PR bpop:WatchMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember 2021-12-31 0000763901 country:US us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:CommercialAndIndustrialSectorMember us-gaap:EquipmentMember 2021-12-31 0000763901 bpop:BhdLeonMember 2020-01-01 2020-12-31 0000763901 country:US us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel1Member us-gaap:PrivateEquityFundsMember 2021-12-31 0000763901 country:US us-gaap:ConstructionLoansMember bpop:WatchMember 2021-12-31 0000763901 us-gaap:PreferredStockMember 2019-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember 2021-01-01 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:SecuredDebtMember us-gaap:MaturityOver90DaysMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:ServiceChargesOnDepositAccountsMember 2021-01-01 2021-12-31 0000763901 bpop:ServiceChargesOnDepositAccountsMember 2020-01-01 2020-12-31 0000763901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0000763901 bpop:EVERTECIncMember us-gaap:OtherExpenseMember 2020-01-01 2020-12-31 0000763901 country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:FinanceLeasesPortfolioSegmentMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:ResidentialMortgageMember bpop:OriginatedMortgageServicingRightsMSRMember 2021-12-31 0000763901 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ForwardContractsMember us-gaap:OtherAssetsMember 2021-12-31 0000763901 bpop:BpnaMember bpop:DebitCardFeesMember 2020-01-01 2020-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0000763901 bpop:MortgageBankingActivitiesMember 2020-01-01 2020-12-31 0000763901 us-gaap:FinancialGuaranteeMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 bpop:EVERTECIncMember us-gaap:InterestExpenseMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember 2021-01-01 2021-12-31 0000763901 bpop:BuyBackOptionProgramMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member bpop:ForeignCommingledTrustFundMember 2020-12-31 0000763901 us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember us-gaap:CommercialLoanMember bpop:NoteBReceivableMember 2011-01-01 2014-12-31 0000763901 bpop:BpnaMember bpop:SalesAndAdministrationOfInvestmentProductsMember 2020-01-01 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:OtherCollateralMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:CommercialAndIndustrialSectorMember bpop:WatchMember 2021-12-31 0000763901 bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:CommercialPortfolioSegmentMember 2021-01-01 2021-12-31 0000763901 us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:PassMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US bpop:CommercialRealEstateOwnerOccupiedMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:SpecialMentionMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 us-gaap:PrivateEquityFundsMember 2020-12-31 0000763901 bpop:TaxYear2034Member 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:ConstructionLoansMember bpop:NonAccrualMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2021-12-31 0000763901 srt:ParentCompanyMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:RealEstateMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:SubstandardMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember 2021-01-01 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromPrCentralGovernmentMember bpop:MoreThanFiveAndWithinTenYearsFromBalanceSheetDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:SubstandardMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 us-gaap:PerformanceSharesMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember bpop:WatchMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:CommercialAndIndustrialSectorMember bpop:WatchMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2021-12-31 0000763901 country:US 2020-01-01 2020-12-31 0000763901 us-gaap:ConstructionLoansMember country:PR 2021-01-01 2021-12-31 0000763901 bpop:BpnaMember bpop:DebitCardFeesMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:SubstandardMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2021-12-31 0000763901 country:US us-gaap:ConstructionLoansMember 2021-01-01 2021-12-31 0000763901 srt:MinimumMember us-gaap:EquipmentMember 2021-01-01 2021-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:PassMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member bpop:ServicingAssetAtFairValueAmountMember us-gaap:ValuationTechniqueDiscountedCashFlowMember srt:MinimumMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel1Member us-gaap:PrivateEquityFundsMember 2020-12-31 0000763901 us-gaap:PerformanceSharesMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateOwnerOccupiedMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:PrivateEquityFundsMember 2020-12-31 0000763901 bpop:TradingGainsLossesMember 2020-01-01 2020-12-31 0000763901 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ForwardContractsMember 2021-12-31 0000763901 us-gaap:TreasuryStockMember 2019-12-31 0000763901 us-gaap:MortgageReceivablesMember 2021-01-01 2021-12-31 0000763901 bpop:PopularBankMember 2021-07-31 0000763901 bpop:LoansHeldForInvestmentMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember 2021-12-31 0000763901 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-12-31 0000763901 bpop:BpnaMember bpop:InsuranceFeesMember 2021-01-01 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:HomeEquityMember 2020-12-31 0000763901 2019-01-01 2019-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:SubstandardMember bpop:CommercialRealEstateOwnerOccupiedMember 2021-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:CommercialAndIndustrialSectorMember us-gaap:DoubtfulMember 2021-12-31 0000763901 country:PR us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 country:PR us-gaap:SubstandardMember us-gaap:FinanceLeasesPortfolioSegmentMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:PR 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:ValuationTechniqueDiscountedCashFlowMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember srt:MaximumMember 2021-01-01 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:CommercialAndIndustrialSectorMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember 2021-01-01 2021-12-31 0000763901 us-gaap:CashAndCashEquivalentsMember 2020-12-31 0000763901 us-gaap:CorporateNonSegmentMember 2019-12-31 0000763901 us-gaap:PreferredStockMember us-gaap:SeriesBPreferredStockMember 2020-01-01 2020-02-24 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 us-gaap:SubstandardMember us-gaap:MortgageReceivablesMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2021-12-31 0000763901 bpop:EVERTECIncMember bpop:RentalIncomeMember 2020-01-01 2020-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0000763901 us-gaap:InterestExpenseMember bpop:IndexedOptionsOnDepositsMember 2021-01-01 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember us-gaap:SecuritiesInvestmentMember bpop:WithinOneYearFromBalanceSheetDateMember 2021-12-31 0000763901 us-gaap:BuildingMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel1Member us-gaap:EquitySecuritiesMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:CommercialRealEstateOwnerOccupiedMember 2020-12-31 0000763901 bpop:PopularBankMember 2020-07-31 0000763901 srt:DirectorMember us-gaap:RestrictedStockMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2021-01-01 2021-12-31 0000763901 srt:DirectorMember us-gaap:RestrictedStockMember 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:SubstandardMember bpop:CommercialRealEstateOwnerOccupiedMember 2021-12-31 0000763901 country:PR us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2021-12-31 0000763901 us-gaap:FinancialGuaranteeMember 2019-12-31 0000763901 srt:ParentCompanyMember us-gaap:UnderlyingOtherMember us-gaap:GuaranteeTypeOtherMember 2020-12-31 0000763901 country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember us-gaap:SecuritiesInvestmentMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:OtherCollateralMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US bpop:CommercialRealEstateOwnerOccupiedMember bpop:WatchMember 2021-12-31 0000763901 us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:SubstandardMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember bpop:AccrualMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:SpecialMentionMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:DoubtfulMember 2021-12-31 0000763901 bpop:BpnaMember bpop:TrustfeesMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:PassMember 2021-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:SpecialMentionMember 2021-12-31 0000763901 us-gaap:InterestRateCapMember us-gaap:NondesignatedMember us-gaap:OtherAssetsMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:CapitalAdequacyMinimumRequirementPlusCapitalConservationBufferbaselMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:CreditCardFeesExcludingLateFeesAndMembershipFeesMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConstructionLoansMember bpop:NonAccrualMember 2020-12-31 0000763901 us-gaap:OtherIncomeMember us-gaap:InterestRateCapMember 2020-01-01 2020-12-31 0000763901 country:US us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:MortgageReceivablesMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2021-01-01 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:EquitySecuritiesMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:OtherCollateralMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:FinanceLeasesPortfolioSegmentMember 2020-12-31 0000763901 bpop:IndexedOptionsOnDepositsMember us-gaap:NondesignatedMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember bpop:NonAccrualMember 2020-12-31 0000763901 bpop:PopularRelatedSecuritiesMember 2021-12-31 0000763901 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:FinanceLeasesPortfolioSegmentMember 2021-12-31 0000763901 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:OtherDebtSecuritiesMember 2020-12-31 0000763901 srt:DirectorMember us-gaap:RestrictedStockMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:WatchMember 2021-12-31 0000763901 srt:ManagementMember us-gaap:PerformanceSharesMember 2021-01-01 2021-12-31 0000763901 bpop:ServicingAssetAtFairValueAmountMember 2019-12-31 0000763901 bpop:PrGovernmentIndirectExposureMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:CommercialRealEstateOwnerOccupiedMember 2021-12-31 0000763901 country:PR us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2021-12-31 0000763901 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:Basel3Member 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:WatchMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:AutomobileLoanMember 2021-12-31 0000763901 us-gaap:NondesignatedMember bpop:IndexedOptionsOnDepositsMember us-gaap:OtherAssetsMember 2020-12-31 0000763901 bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2020-12-31 0000763901 us-gaap:CommercialLoanMember bpop:RelatedPartyTransactionLoanSoldBetweenBpprAndPopularIncMember 2017-05-31 0000763901 us-gaap:CommonStockMember 2020-01-01 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromPrCentralGovernmentMember bpop:MoreThanFiveAndWithinTenYearsFromBalanceSheetDateMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:LoansMember bpop:FromPrCentralGovernmentMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember 2021-01-01 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:NondesignatedMember us-gaap:EmbeddedDerivativeFinancialInstrumentsMember 2021-12-31 0000763901 bpop:PrGovernmentIndirectExposureMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 us-gaap:ForwardContractsMember us-gaap:CashFlowHedgingMember 2021-01-01 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:SecuredDebtMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member bpop:ServicingAssetAtFairValueAmountMember us-gaap:ValuationTechniqueDiscountedCashFlowMember srt:WeightedAverageMember 2020-01-01 2020-12-31 0000763901 bpop:EVERTECIncMember us-gaap:InterestExpenseMember 2020-01-01 2020-12-31 0000763901 us-gaap:BondsMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:SecuredDebtMember us-gaap:MaturityUpTo30DaysMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:InsuranceFeesMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2021-12-31 0000763901 us-gaap:ResidentialMortgageMember 2021-01-01 2021-12-31 0000763901 bpop:MortgageBankingActivitiesMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:EquitySecuritiesMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 bpop:MutualFundsMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:WatchMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:IndemnificationGuaranteeMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2020-01-01 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:LoansMember bpop:MoreThanTenYearsFromBalanceSheetDateMember bpop:FromPrCentralGovernmentMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel1Member us-gaap:BondsMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember 2021-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember srt:MinimumMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 bpop:BpnaMember 2020-01-01 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:SubstandardMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember bpop:MoreThanOneAndWithinFiveYearsFromBalanceSheetDateMember us-gaap:LoansMember 2021-12-31 0000763901 us-gaap:LeaseholdsAndLeaseholdImprovementsMember 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember 2021-01-01 2021-12-31 0000763901 bpop:ServiceChargesOnDepositAccountsMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:PassMember 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:OtherDebtSecuritiesMember 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember us-gaap:IntersubsegmentEliminationsMember 2019-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 bpop:TaxYear2032Member 2021-12-31 0000763901 us-gaap:ResidentialMortgageMember 2020-01-01 2020-12-31 0000763901 us-gaap:NondesignatedMember us-gaap:EmbeddedDerivativeFinancialInstrumentsMember us-gaap:InterestBearingDepositsMember 2021-12-31 0000763901 bpop:PrGovernmentIndirectExposureMember us-gaap:BondsMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:SpecialMentionMember 2021-12-31 0000763901 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:OtherLiabilitiesMember us-gaap:ForwardContractsMember 2020-12-31 0000763901 us-gaap:BondsMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:CommercialRealEstateOwnerOccupiedMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember 2019-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:CollateralizedMortgageObligationsMember 2018-12-31 0000763901 us-gaap:RetainedEarningsMember 2019-12-31 0000763901 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:LoansReceivableMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:PassMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember 2021-12-31 0000763901 bpop:ServicingAssetAtFairValueAmountMember us-gaap:FairValueInputsLevel3Member 2021-01-01 2021-12-31 0000763901 us-gaap:NondesignatedMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:DoubtfulMember 2021-12-31 0000763901 bpop:ValuationTechniqueExternalAppraisalMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember srt:WeightedAverageMember us-gaap:LoansReceivableMember 2020-01-01 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember bpop:MoreThanOneAndWithinFiveYearsFromBalanceSheetDateMember 2021-01-01 2021-12-31 0000763901 bpop:TaxYear2029Member 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:PassMember 2021-12-31 0000763901 country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:MortgageReceivablesMember 2020-12-31 0000763901 bpop:BpnaMember bpop:ServiceChargesOnDepositAccountsMember 2020-01-01 2020-12-31 0000763901 srt:ManagementMember us-gaap:PerformanceSharesMember 2020-01-01 2020-12-31 0000763901 us-gaap:PerformanceSharesMember 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 srt:ParentCompanyMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:MortgageBackedSecuritiesMember 2021-12-31 0000763901 us-gaap:OperatingSegmentsMember bpop:PopularBankMember 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:US us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:CollateralizedMortgageObligationsMember 2021-12-31 0000763901 bpop:BpnaMember bpop:AileenBetancesEtAlVPopularBankEtAlMember 2019-07-01 2019-07-30 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:SecuritiesInvestmentMember bpop:MoreThanTenYearsFromBalanceSheetDateMember bpop:FromPrCentralGovernmentMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:SecuritiesInvestmentMember bpop:FromPrCentralGovernmentMember bpop:MoreThanFiveAndWithinTenYearsFromBalanceSheetDateMember 2021-12-31 0000763901 bpop:CommercialLettersOfCreditMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:SecuritiesInvestmentMember bpop:FromPrCentralGovernmentMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:HomeEquityMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:HomeEquityMember 2021-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2020-12-31 0000763901 us-gaap:FairValueInputsLevel2Member 2020-12-31 0000763901 country:PR us-gaap:CollateralPledgedMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:OtherDebtSecuritiesMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateOwnerOccupiedMember bpop:WatchMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member bpop:ForeignCommingledTrustFundMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember country:PR 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:IndemnificationGuaranteeMember 2021-01-01 2021-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:PassMember 2021-12-31 0000763901 bpop:SavingsPlansMember 2020-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:RealEstateMember 2021-12-31 0000763901 us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:SpecialMentionMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US bpop:CommercialRealEstateNonOwnerOccupiedMember 2021-12-31 0000763901 us-gaap:EquipmentMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:PassMember 2021-12-31 0000763901 country:US us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember bpop:MunisNotGuaranteedByPuertoRicoCentralGovernmentMember 2021-12-31 0000763901 bpop:TaxYear2026Member 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:LoansMember bpop:FromPrCentralGovernmentMember bpop:MoreThanFiveAndWithinTenYearsFromBalanceSheetDateMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:RealEstateMember 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:ValuationTechniqueDiscountedCashFlowMember us-gaap:FairValueMeasurementsRecurringMember srt:MinimumMember us-gaap:CollateralizedMortgageObligationsMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:CreditCardReceivablesMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:CommercialBankingMember 2019-12-31 0000763901 bpop:LoansWithRecourseMember 2020-12-31 0000763901 us-gaap:InterestExpenseMember us-gaap:EmbeddedDerivativeFinancialInstrumentsMember 2021-01-01 2021-12-31 0000763901 srt:ParentCompanyMember us-gaap:DebtSecuritiesPayableMember 2020-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 bpop:CapitalAdequacyMinimumRequirementPlusCapitalConservationBufferbaselMember bpop:PopularBankMember 2020-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:BondsMember 2020-12-31 0000763901 bpop:MortgageBankingActivitiesMember 2020-01-01 2020-12-31 0000763901 srt:MaximumMember us-gaap:EquityMember 2021-12-31 0000763901 us-gaap:TreasuryStockMember 2020-01-01 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember country:US 2021-01-01 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:HomeEquityMember 2021-12-31 0000763901 country:US us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 srt:ParentCompanyMember us-gaap:LongTermDebtMember 2021-12-31 0000763901 bpop:EVERTECIncMember bpop:OtherFeeRevenueMember 2020-01-01 2020-12-31 0000763901 us-gaap:EquityMember 2020-12-31 0000763901 bpop:UsviGovernmentDirectExposureMember bpop:FromUsviGovernmentAndPublicCorporationsMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member srt:MaximumMember us-gaap:FairValueMeasurementsNonrecurringMember bpop:ValuationTechniqueExternalAppraisalMember us-gaap:RealEstateAcquiredInSatisfactionOfDebtMember 2020-01-01 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:CommercialRealEstateOwnerOccupiedMember 2020-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:RealEstateAcquiredInSatisfactionOfDebtMember 2020-12-31 0000763901 us-gaap:EquitySecuritiesMember 2021-12-31 0000763901 2019-10-01 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:SecuredDebtMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember bpop:OtherCollateralMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:CreditCardReceivablesMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:SpecialMentionMember 2021-12-31 0000763901 country:US us-gaap:SubstandardMember us-gaap:MortgageReceivablesMember 2021-12-31 0000763901 us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember us-gaap:CommercialLoanMember bpop:NoteBReceivableMember 2014-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateOwnerOccupiedMember bpop:OtherCollateralMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember bpop:NonAccrualMember 2021-12-31 0000763901 us-gaap:MaterialReconcilingItemsMember 2019-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember bpop:MoreThanOneAndWithinFiveYearsFromBalanceSheetDateMember 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel2Member bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 bpop:TaxYear2022Member 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:BondsMember 2020-12-31 0000763901 bpop:PopularRelatedSecuritiesMember srt:MinimumMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2020-12-31 0000763901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:HomeEquityMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConstructionLoansMember country:PR us-gaap:PassMember 2021-12-31 0000763901 bpop:ServicedMortgageLoansMember bpop:LoansWithRecourseMember 2021-01-01 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:CreditCardReceivablesMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember bpop:OtherCollateralMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel1Member us-gaap:BondsMember 2021-12-31 0000763901 country:US us-gaap:ConstructionLoansMember 2020-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel2Member bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember 2020-12-31 0000763901 bpop:EVERTECIncMember bpop:ProcessingFeesMember 2021-01-01 2021-12-31 0000763901 bpop:CommercialLettersOfCreditMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:OtherCountriesMember 2019-01-01 2019-12-31 0000763901 srt:MinimumMember bpop:FixedRateAdvancesDue2022To2029Member 2020-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:ExchangeTradedFundsMember 2021-12-31 0000763901 us-gaap:ConstructionLoansMember country:PR us-gaap:SubstandardMember 2021-12-31 0000763901 bpop:TaxYear2030Member 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR 2019-12-31 0000763901 us-gaap:CommonStockMember 2019-12-31 0000763901 srt:MaximumMember us-gaap:DebtSecuritiesMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2021-12-31 0000763901 bpop:FixedRateJuniorSubordinatedDeferrableInterestDebenturesMaturitiesOn2034Member us-gaap:JuniorSubordinatedDebtMember 2021-01-01 2021-12-31 0000763901 bpop:HazardInsuranceCommisionRelatedLitigationMember 2021-01-01 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2021-12-31 0000763901 us-gaap:CommonStockMember 2018-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2021-01-01 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember 2020-07-31 0000763901 country:PR us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:CommercialAndIndustrialSectorMember bpop:OtherCollateralMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2020-01-01 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:ExchangeTradedFundsMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:RealEstateMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:CommercialRealEstateOwnerOccupiedMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:CreditCardReceivablesMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember country:US 2020-12-31 0000763901 bpop:AccrualMember 2021-12-31 0000763901 bpop:TaxYear2027Member 2021-12-31 0000763901 bpop:BhdLeonMember 2021-01-01 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember us-gaap:LoansMember bpop:MoreThanFiveAndWithinTenYearsFromBalanceSheetDateMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember 2019-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember srt:MinimumMember 2020-01-01 2020-12-31 0000763901 us-gaap:NondesignatedMember us-gaap:EmbeddedDerivativeFinancialInstrumentsMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:SpecialMentionMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember 2020-01-01 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember 2019-12-31 0000763901 bpop:SavingsPlansMember 2021-01-01 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:MoreThanTenYearsFromBalanceSheetDateMember bpop:FromPrCentralGovernmentMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:WatchMember 2021-12-31 0000763901 bpop:CommercialMultiFamilyMember country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0000763901 bpop:PrGovernmentIndirectExposureMember us-gaap:BondsMember 2020-12-31 0000763901 country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:MortgageReceivablesMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:AccrualMember 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2020-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel3Member 2021-01-01 2021-12-31 0000763901 country:PR bpop:OtherCollateralMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 bpop:CommercialMultiFamilyMember us-gaap:CommercialPortfolioSegmentMember 2021-01-01 2021-12-31 0000763901 us-gaap:HeldtomaturitySecuritiesMember 2021-01-01 2021-12-31 0000763901 country:PR us-gaap:AccountsReceivableMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:AutomobileLoanMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember country:US 2021-01-01 2021-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:BuildingMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:SalesAndAdministrationOfInvestmentProductsMember 2020-01-01 2020-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0000763901 us-gaap:ConstructionLoansMember bpop:AccrualMember 2021-12-31 0000763901 bpop:CommercialMultiFamilyMember bpop:OtherCollateralMember country:PR us-gaap:CommercialPortfolioSegmentMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member bpop:TradingAccountDebtSecuritiesMember 2021-01-01 2021-12-31 0000763901 bpop:PopularBankMember us-gaap:ResidentialMortgageMember 2021-01-01 2021-12-31 0000763901 us-gaap:PreferredStockMember us-gaap:SeriesBPreferredStockMember 2019-01-01 2019-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:CashAndCashEquivalentsMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember us-gaap:LoansMember bpop:WithinOneYearFromBalanceSheetDateMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember 2019-12-31 0000763901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:SpecialMentionMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:MortgageBackedSecuritiesMember 2020-12-31 0000763901 bpop:NoteABSplitMember 2021-12-31 0000763901 us-gaap:RestrictedStockUnitsRSUMember srt:ManagementMember bpop:ShareVestingOnGrantDateMember 2021-01-01 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:MortgageBackedSecuritiesMember 2018-12-31 0000763901 us-gaap:InterestExpenseMember bpop:IndexedOptionsOnDepositsMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:BondsMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2020-01-01 2020-12-31 0000763901 country:US us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:ResidentialMortgageMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel1Member us-gaap:AccruedIncomeReceivableMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember 2021-01-01 2021-12-31 0000763901 bpop:BpnaMember bpop:SalesAndAdministrationOfInvestmentProductsMember 2021-01-01 2021-12-31 0000763901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:AccrualMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:EquipmentMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0000763901 bpop:CommercialMultiFamilyMember us-gaap:CommercialPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 country:PR bpop:ResidentialMortgageLoansInsuredByFhaMember 2020-12-31 0000763901 us-gaap:InterestRateCapMember us-gaap:OtherLiabilitiesMember us-gaap:NondesignatedMember 2020-12-31 0000763901 srt:MaximumMember bpop:FixedRateAdvancesDue2022To2029Member 2020-12-31 0000763901 us-gaap:PrivateEquityFundsMember 2021-12-31 0000763901 us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2021-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember 2020-12-31 0000763901 bpop:BancoPopularFoundationMember 2021-01-01 2021-12-31 0000763901 country:PR us-gaap:RealEstateMember 2021-12-31 0000763901 us-gaap:CollateralPledgedMember 2021-12-31 0000763901 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:MortgageReceivablesMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:NonAccrualMember 2020-12-31 0000763901 us-gaap:DebtSecuritiesMember 2020-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:EstimateOfFairValueFairValueDisclosureMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:ServiceChargesOnDepositAccountsMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:AccrualMember 2020-12-31 0000763901 us-gaap:CommitmentsToExtendCreditMember 2020-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:RealEstateMember 2021-12-31 0000763901 country:US us-gaap:RealEstateMember 2021-12-31 0000763901 us-gaap:FederalReserveBankAdvancesMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US 2021-01-01 2021-12-31 0000763901 us-gaap:TreasuryStockMember bpop:AccelerateShareRepurchaseMember 2019-01-01 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:PassMember us-gaap:CommercialAndIndustrialSectorMember 2021-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:RealEstateMember 2021-12-31 0000763901 us-gaap:RestrictedStockUnitsRSUMember srt:ManagementMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel3Member srt:MaximumMember us-gaap:FairValueMeasurementsNonrecurringMember bpop:ValuationTechniqueExternalAppraisalMember us-gaap:RealEstateAcquiredInSatisfactionOfDebtMember 2021-01-01 2021-12-31 0000763901 bpop:BhdLeonMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763901 us-gaap:LeaseholdsAndLeaseholdImprovementsMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:SecuredDebtMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2020-12-31 0000763901 us-gaap:LandMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 bpop:MutualFundsMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0000763901 us-gaap:CommercialLoanMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 srt:MaximumMember us-gaap:LeaseholdsAndLeaseholdImprovementsMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel1Member us-gaap:AccruedIncomeReceivableMember 2020-12-31 0000763901 us-gaap:AccountsReceivableMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:LoansMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember bpop:AccrualMember 2020-12-31 0000763901 us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:RealEstateMember 2021-12-31 0000763901 country:US us-gaap:FinanceLeasesPortfolioSegmentMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 us-gaap:PreferredStockMember us-gaap:SeriesBPreferredStockMember 2019-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember bpop:ValuationTechniqueExternalAppraisalMember us-gaap:RealEstateAcquiredInSatisfactionOfDebtMember srt:MinimumMember 2020-01-01 2020-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember 2019-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:PassMember 2021-12-31 0000763901 us-gaap:FederalReserveBankAdvancesMember 2020-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:US us-gaap:PassMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:EquipmentMember 2021-12-31 0000763901 country:US bpop:OtherCollateralMember 2021-12-31 0000763901 country:US us-gaap:ConstructionLoansMember 2019-12-31 0000763901 us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:CommercialRealEstateOwnerOccupiedMember 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel2Member bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:AccrualMember 2020-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 us-gaap:ConstructionLoansMember 2019-12-31 0000763901 bpop:AccelerateShareRepurchaseMember bpop:Covid19Member 2020-05-01 2020-05-27 0000763901 bpop:BancoPopularDePuertoRicoMember country:US 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 bpop:MutualFundsMember 2021-12-31 0000763901 us-gaap:RetainedEarningsMember 2019-01-01 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:US us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:AccruedIncomeReceivableMember 2021-12-31 0000763901 bpop:PurchasedCreditDeteriorationLoanMember 2021-01-01 2021-12-31 0000763901 us-gaap:SubstandardMember us-gaap:FinanceLeasesPortfolioSegmentMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000763901 bpop:BpnaMember bpop:DamianReyesEtAlVPopularBankEtAlMember 2019-07-01 2019-07-30 0000763901 us-gaap:RestrictedStockUnitsRSUMember srt:DirectorMember 2020-01-01 2020-12-31 0000763901 bpop:TaxYear2025Member 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember 2020-01-01 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:SecuredDebtMember us-gaap:MaturityUpTo30DaysMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:TroubledDebtRestructuringMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:RealEstateMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember 2021-12-31 0000763901 us-gaap:RestrictedStockUnitsRSUMember srt:DirectorMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:CreditCardReceivablesMember 2020-12-31 0000763901 bpop:OtherCollateralMember 2021-12-31 0000763901 bpop:NoncreditCommitmentMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:PrivateEquityFundsMember 2021-12-31 0000763901 srt:MinimumMember 2021-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember 2020-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember bpop:AccrualMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:OtherDebtSecuritiesMember 2021-12-31 0000763901 srt:MinimumMember us-gaap:CashAndCashEquivalentsMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2020-01-01 2020-12-31 0000763901 us-gaap:ExchangeTradedFundsMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:AccruedIncomeReceivableMember 2021-12-31 0000763901 country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 country:US us-gaap:AccountsReceivableMember 2021-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:EquipmentMember 2021-12-31 0000763901 country:US us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:MortgageReceivablesMember 2021-12-31 0000763901 bpop:AccelerateShareRepurchaseMember 2020-01-01 2020-01-30 0000763901 bpop:ConsumerOtherMember us-gaap:ConsumerPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember bpop:MoreThanFiveAndWithinTenYearsFromBalanceSheetDateMember 2021-01-01 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember bpop:WatchMember bpop:MunisPayableFromRealAndPersonalPropertyTaxesMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:ResidentialMortgageMember 2020-01-01 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember 2020-01-01 2020-12-31 0000763901 us-gaap:RetainedEarningsMember 2018-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:CollateralizedMortgageObligationsMember 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:OtherCollateralMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 bpop:TaxYear2024Member 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:CommercialAndIndustrialSectorMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2021-12-31 0000763901 bpop:PopularRelatedSecuritiesMember 2020-12-31 0000763901 bpop:BpnaMember bpop:InsuranceFeesMember 2020-01-01 2020-12-31 0000763901 bpop:PopularBankMember us-gaap:ResidentialMortgageMember 2020-01-01 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:LoansReceivableMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:CommercialAndIndustrialSectorMember us-gaap:RealEstateMember 2021-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember 2020-12-31 0000763901 bpop:CommercialMultiFamilyMember country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:RestrictedStockUnitsRSUMember srt:DirectorMember 2018-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:AccrualMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel1Member us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2020-12-31 0000763901 bpop:NonAccrualMember 2021-12-31 0000763901 bpop:BancopopulardepuertoricoandpopularbankmemberMember 2021-07-31 0000763901 bpop:BpnaMember srt:MinimumMember bpop:PbEmploymentRelatedLitigationMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:PassMember 2021-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 us-gaap:RestrictedStockMember 2021-01-01 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:RealEstateMember 2021-12-31 0000763901 bpop:NoteABSplitMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:RealEstateMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2021-12-31 0000763901 bpop:CommercialMultiFamilyMember country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:RealEstateMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member us-gaap:CashAndCashEquivalentsMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:NonAccrualMember 2021-12-31 0000763901 srt:MaximumMember us-gaap:CashAndCashEquivalentsMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member bpop:MutualFundsMember 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:SecuredDebtMember 2021-12-31 0000763901 us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember us-gaap:CommercialLoanMember us-gaap:NotesReceivableMember 2011-01-01 2014-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:PrivateEquityFundsMember 2021-12-31 0000763901 country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:FinanceLeasesPortfolioSegmentMember 2021-12-31 0000763901 bpop:OtherServicesMember 2020-01-01 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 us-gaap:RealEstateMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:NonAccrualMember 2021-12-31 0000763901 us-gaap:RestrictedStockUnitsRSUMember srt:DirectorMember 2020-12-31 0000763901 bpop:CommercialMultiFamilyMember country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 bpop:OtherCollateralMember country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2021-12-31 0000763901 us-gaap:ResidentialMortgageMember us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember 2010-04-01 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember bpop:OtherCollateralMember 2021-12-31 0000763901 bpop:FixedRateJuniorSubordinatedDeferrableInterestDebenturesMaturitiesOn2034Member us-gaap:JuniorSubordinatedDebtMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:CollateralizedMortgageObligationsMember 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember bpop:FromMunicipalitiesMember bpop:MoreThanFiveAndWithinTenYearsFromBalanceSheetDateMember 2021-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:CashFlowHedgingMember 2019-01-01 2019-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:AutomobileLoanMember 2021-12-31 0000763901 us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:ConstructionLoansMember country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:RestrictedStockUnitsRSUMember srt:DirectorMember 2019-12-31 0000763901 bpop:AccelerateShareRepurchaseMember 2020-01-30 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:NonAccrualMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR 2020-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2020-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:SecuredDebtMember us-gaap:Maturity30To90DaysMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:TroubledDebtRestructuringMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US 2020-12-31 0000763901 us-gaap:CommitmentsToExtendCreditMember us-gaap:CreditCardMember 2021-12-31 0000763901 bpop:TaxYear2031Member 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 bpop:PopularBankMember us-gaap:FacilityClosingMember 2021-01-01 2021-03-31 0000763901 bpop:SavingsPlansMember 2020-01-01 2020-12-31 0000763901 bpop:AccelerateShareRepurchaseMember 2021-09-30 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 bpop:FixedRateJuniorSubordinatedDeferrableInterestDebenturesMaturitiesOn2034Member us-gaap:JuniorSubordinatedDebtMember 2021-12-31 0000763901 2021-01-01 2021-07-31 0000763901 srt:ParentCompanyMember bpop:BpprandsubsidiariesmemberMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:TroubledDebtRestructuringMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 us-gaap:AdditionalPaidInCapitalMember bpop:AccelerateShareRepurchaseMember 2019-01-01 2019-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember bpop:MunisPayableFromRealAndPersonalPropertyTaxesMember 2021-12-31 0000763901 bpop:BhdLeonMember 2020-12-31 0000763901 bpop:CommercialMultiFamilyMember country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2021-12-31 0000763901 us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:ResidentialMortgageMember 2021-12-31 0000763901 us-gaap:ResidentialMortgageMember us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember 2010-01-01 2010-04-01 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember country:US 2020-01-01 2020-12-31 0000763901 us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember us-gaap:CommercialLoanMember us-gaap:NotesReceivableMember 2014-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:RealEstateMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2021-12-31 0000763901 us-gaap:SecuredDebtMember us-gaap:CollateralizedMortgageObligationsMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:AvailableforsaleSecuritiesMember 2019-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:RealEstateMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 us-gaap:DebtSecuritiesMember 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:SecuredDebtMember us-gaap:MaturityOver90DaysMember 2020-12-31 0000763901 srt:ParentCompanyMember bpop:PopularnorthamericaandsubsidiariesmemberMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:TroubledDebtRestructuringMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 us-gaap:FederalReserveBankAdvancesMember bpop:FixedRateWithMaturitiesOn2022Member 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 srt:ParentCompanyMember bpop:OthernonbanksubsidiariesmemberMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember 2019-12-31 0000763901 us-gaap:ResidentialMortgageMember us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember 2021-12-31 0000763901 country:US us-gaap:ConstructionLoansMember 2020-01-01 2020-12-31 0000763901 bpop:RelatedPartyTransactionLoanSoldBetweenBpprAndPopularIncMember us-gaap:CommercialLoanMember 2021-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 bpop:NoteABSplitMember 2021-01-01 2021-12-31 0000763901 bpop:TroubledDebtRestructuringMember 2020-12-31 0000763901 bpop:FixedRateWithMaturitiesOn2023Member us-gaap:UnsecuredDebtMember 2021-12-31 0000763901 country:PR us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2020-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember bpop:ValuationTechniqueExternalAppraisalMember us-gaap:RealEstateAcquiredInSatisfactionOfDebtMember srt:MinimumMember 2021-01-01 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:ConsumerAndRetailBankingMember 2019-12-31 0000763901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000763901 us-gaap:CommitmentsToExtendCreditMember bpop:OtherLoanCommitmentsMember 2020-12-31 0000763901 us-gaap:CommercialLoanMember 2020-12-31 0000763901 bpop:RelatedPartyTransactionLoanSoldBetweenBpprAndPopularIncMember us-gaap:CommercialLoanMember 2017-05-01 2017-05-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000763901 bpop:FixedRateAdvancesDue2022To2029Member 2020-12-31 0000763901 us-gaap:ExchangeTradedFundsMember us-gaap:FairValueInputsLevel1Member 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember 2021-12-31 0000763901 srt:MinimumMember us-gaap:PerformanceSharesMember 2021-12-31 0000763901 bpop:AccelerateShareRepurchaseMember 2021-05-03 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:NonAccrualMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 bpop:OtherCollateralMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2021-12-31 0000763901 us-gaap:LetterOfCreditMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:OtherCollateralMember 2021-12-31 0000763901 bpop:TroubledDebtRestructuringMember us-gaap:ConstructionLoansMember 2020-12-31 0000763901 country:US us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR 2020-01-01 2020-12-31 0000763901 bpop:NoteBReceivableMember us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember us-gaap:CommercialLoanMember 2021-12-31 0000763901 bpop:NoteBReceivableMember us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember us-gaap:CommercialLoanMember 2020-12-31 0000763901 bpop:OtherCollateralMember country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2021-12-31 0000763901 srt:ParentCompanyMember bpop:OthernonbanksubsidiariesmemberMember 2021-12-31 0000763901 bpop:NoteABSplitMember 2020-01-01 2020-12-31 0000763901 bpop:ServicedMortgageLoansMember bpop:LoansWithRecourseMember bpop:BulkLoanRepurchaseMember 2020-01-01 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:TroubledDebtRestructuringMember 2021-12-31 0000763901 us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember us-gaap:CommercialLoanMember us-gaap:NotesReceivableMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:US 2020-01-01 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:SecuredDebtMember us-gaap:Maturity30To90DaysMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:RealEstateMember 2021-12-31 0000763901 bpop:TaxYear2023Member 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 us-gaap:CommercialLoanMember bpop:InsuredOrGuaranteedByTheUsGovernmentOrItsAgenciesMember 2020-12-31 0000763901 us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember us-gaap:CommercialLoanMember us-gaap:NotesReceivableMember 2021-12-31 0000763901 bpop:TroubledDebtRestructuringMember 2021-12-31 0000763901 bpop:IntersegmentTransactionMember 2020-01-01 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember srt:WeightedAverageMember bpop:ValuationTechniqueExternalAppraisalMember us-gaap:RealEstateAcquiredInSatisfactionOfDebtMember 2020-01-01 2020-12-31 0000763901 bpop:NonAccrualMember 2020-12-31 0000763901 srt:MinimumMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember country:US 2021-12-31 0000763901 srt:ParentCompanyMember bpop:PopularnorthamericaandsubsidiariesmemberMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 bpop:LoansWithRecourseMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 bpop:AccrualMember 2020-12-31 0000763901 us-gaap:ValuationTechniqueDiscountedCashFlowMember srt:MaximumMember 2021-12-31 0000763901 srt:MinimumMember us-gaap:BuildingMember 2021-01-01 2021-12-31 0000763901 us-gaap:ResidentialMortgageMember 2020-12-31 0000763901 bpop:TroubledDebtRestructuringMember us-gaap:ConstructionLoansMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR us-gaap:CommercialAndIndustrialSectorMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 bpop:SmallBusinessAdministrationLoanMemberMember 2020-12-31 0000763901 bpop:MutualFundsMember us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763901 2019-01-01 2019-03-31 0000763901 bpop:TroubledDebtRestructuringMember us-gaap:FinanceLeasesPortfolioSegmentMember 2021-12-31 0000763901 bpop:BpnaMember bpop:TrustfeesMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConstructionLoansMember 2020-01-01 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember country:PR 2021-12-31 0000763901 us-gaap:CommercialLoanMember bpop:InsuredOrGuaranteedByTheUsGovernmentOrItsAgenciesMember 2021-12-31 0000763901 us-gaap:FederalReserveBankAdvancesMember bpop:FixedRateWithMaturitiesOn2022Member 2021-12-31 0000763901 srt:ParentCompanyMember bpop:BpprandsubsidiariesmemberMember 2020-12-31 0000763901 srt:MinimumMember us-gaap:LeaseholdsAndLeaseholdImprovementsMember 2021-01-01 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember country:US 2020-01-01 2020-12-31 0000763901 us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember us-gaap:CommercialLoanMember 2010-04-01 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:CommercialLoanMember 2021-12-31 0000763901 us-gaap:ImmediateFamilyMemberOfManagementOrPrincipalOwnerMember us-gaap:CommercialLoanMember 2021-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember 2020-01-01 2020-12-31 0000763901 us-gaap:FederalReserveBankAdvancesMember bpop:FixedRateWithMaturitiesOn2022Member 2020-12-31 0000763901 bpop:RelatedPartyTransactionLoanSoldBetweenBpprAndPopularIncMember us-gaap:CommercialLoanMember 2010-04-01 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:TroubledDebtRestructuringMember 2020-12-31 0000763901 bpop:OtherCollateralMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:NonAccrualMember 2021-12-31 0000763901 us-gaap:EmployeeStockOptionMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:AccrualMember 2021-12-31 0000763901 srt:MaximumMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:OtherServicesMember 2019-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0000763901 bpop:ServicingAssetAtFairValueAmountMember 2018-12-31 0000763901 bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember us-gaap:CarryingReportedAmountFairValueDisclosureMember 2021-12-31 0000763901 country:US us-gaap:CollateralPledgedMember 2021-12-31 0000763901 bpop:TaxYear2028Member 2021-12-31 0000763901 us-gaap:GovernmentSectorMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember bpop:WatchMember bpop:MunisPayableFromRealAndPersonalPropertyTaxesMember 2020-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember bpop:MunisPayableFromRealAndPersonalPropertyTaxesMember 2020-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember bpop:MunisNotGuaranteedByPuertoRicoCentralGovernmentMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 country:US us-gaap:FinanceLeasesPortfolioSegmentMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:EquipmentMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:OtherCollateralMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:EquipmentMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:OtherCollateralMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:EquipmentMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember bpop:OtherCollateralMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:EquipmentMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:OtherCollateralMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:RealEstateMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:EquipmentMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:OtherCollateralMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:RealEstateMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:EquipmentMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:OtherCollateralMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:RealEstateMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:EquipmentMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:OtherCollateralMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:RealEstateMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:EquipmentMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:OtherCollateralMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:RealEstateMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:EquipmentMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember bpop:OtherCollateralMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:RealEstateMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:EquipmentMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:OtherCollateralMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:RealEstateMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:EquipmentMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember bpop:OtherCollateralMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:RealEstateMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:EquipmentMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:OtherCollateralMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:RealEstateMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:EquipmentMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember bpop:OtherCollateralMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:RealEstateMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:EquipmentMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember bpop:OtherCollateralMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:RealEstateMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:EquipmentMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember bpop:OtherCollateralMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:RealEstateMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:EquipmentMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember bpop:OtherCollateralMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:RealEstateMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:EquipmentMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember bpop:OtherCollateralMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:RealEstateMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:EquipmentMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember bpop:OtherCollateralMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:RealEstateMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:EquipmentMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember bpop:OtherCollateralMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:RealEstateMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:EquipmentMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember bpop:OtherCollateralMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:ExtendedMaturityMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:LoanModificationOtherMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:ExtendedMaturityMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:LoanModificationOtherMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:ExtendedMaturityMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember bpop:LoanModificationOtherMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:ExtendedMaturityMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:LoanModificationOtherMember 2021-01-01 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:ExtendedMaturityMember 2021-01-01 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:LoanModificationOtherMember 2021-01-01 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:ExtendedMaturityMember 2021-01-01 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember bpop:LoanModificationOtherMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:ExtendedMaturityMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember bpop:LoanModificationOtherMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:ExtendedMaturityMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember bpop:LoanModificationOtherMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:ExtendedMaturityMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember bpop:LoanModificationOtherMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:ExtendedMaturityMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember bpop:LoanModificationOtherMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:ExtendedMaturityMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2021-01-01 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember bpop:LoanModificationOtherMember 2021-01-01 2021-12-31 0000763901 us-gaap:ContractualInterestRateReductionMember 2021-01-01 2021-12-31 0000763901 us-gaap:ExtendedMaturityMember 2021-01-01 2021-12-31 0000763901 bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2021-01-01 2021-12-31 0000763901 bpop:LoanModificationOtherMember 2021-01-01 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:RealEstateMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:RealEstateMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:RealEstateMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:RealEstateMember 2020-12-31 0000763901 country:PR us-gaap:RealEstateMember 2020-12-31 0000763901 country:PR us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:PR us-gaap:EquipmentMember 2020-12-31 0000763901 country:PR bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:PR us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:PR bpop:OtherCollateralMember 2020-12-31 0000763901 country:PR us-gaap:CollateralPledgedMember 2020-12-31 0000763901 country:US us-gaap:RealEstateMember 2020-12-31 0000763901 country:US us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 country:US us-gaap:EquipmentMember 2020-12-31 0000763901 country:US bpop:TaxiMedallionsMember 2020-12-31 0000763901 country:US us-gaap:AccountsReceivableMember 2020-12-31 0000763901 country:US bpop:OtherCollateralMember 2020-12-31 0000763901 us-gaap:RealEstateMember 2020-12-31 0000763901 us-gaap:CollateralizedAutoLoansMember 2020-12-31 0000763901 us-gaap:EquipmentMember 2020-12-31 0000763901 bpop:TaxiMedallionsMember 2020-12-31 0000763901 us-gaap:AccountsReceivableMember 2020-12-31 0000763901 bpop:OtherCollateralMember 2020-12-31 0000763901 country:US us-gaap:CollateralPledgedMember 2020-12-31 0000763901 us-gaap:CollateralPledgedMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:IndemnificationGuaranteeMember 2021-12-31 0000763901 us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember 2021-12-31 0000763901 us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember 2020-12-31 0000763901 2020-10-01 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:WatchMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:SpecialMentionMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:SubstandardMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:PassMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:WatchMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:SpecialMentionMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:SubstandardMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:PassMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember bpop:WatchMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:SpecialMentionMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:SubstandardMember bpop:CommercialRealEstateOwnerOccupiedMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:DoubtfulMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:PassMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:WatchMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:SpecialMentionMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:SubstandardMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:DoubtfulMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:PassMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember bpop:WatchMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:SubstandardMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:PassMember 2020-12-31 0000763901 country:PR us-gaap:SubstandardMember us-gaap:MortgageReceivablesMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:PassMember 2020-12-31 0000763901 country:PR us-gaap:SubstandardMember us-gaap:FinanceLeasesPortfolioSegmentMember 2020-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:PassMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2020-12-31 0000763901 country:PR us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:PassMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:PassMember 2020-12-31 0000763901 country:PR us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:PassMember 2020-12-31 0000763901 country:PR us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:PassMember 2020-12-31 0000763901 country:PR us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:PassMember 2020-12-31 0000763901 country:US us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:PassMember 2020-12-31 0000763901 country:US us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:PassMember 2020-12-31 0000763901 country:US us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:PassMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:PassMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember bpop:WatchMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:SpecialMentionMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:SubstandardMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:PassMember 2020-12-31 0000763901 country:US us-gaap:SubstandardMember us-gaap:MortgageReceivablesMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:PassMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:WatchMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:SpecialMentionMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:SubstandardMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:PassMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:WatchMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:SpecialMentionMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:SubstandardMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:PassMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:PassMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:WatchMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:SpecialMentionMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:SubstandardMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember bpop:WatchMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:SpecialMentionMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:SubstandardMember bpop:CommercialRealEstateOwnerOccupiedMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:PassMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember bpop:WatchMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:SpecialMentionMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:SubstandardMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:PassMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:WatchMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:SpecialMentionMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:SubstandardMember bpop:CommercialRealEstateNonOwnerOccupiedMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:PassMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember bpop:WatchMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:SpecialMentionMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:SubstandardMember bpop:CommercialRealEstateOwnerOccupiedMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:DoubtfulMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:PassMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember bpop:WatchMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:SpecialMentionMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:SubstandardMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:DoubtfulMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:PassMember us-gaap:CommercialAndIndustrialSectorMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember bpop:WatchMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:SpecialMentionMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:SubstandardMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:PassMember 2020-12-31 0000763901 us-gaap:SubstandardMember us-gaap:MortgageReceivablesMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:PassMember 2020-12-31 0000763901 us-gaap:SubstandardMember us-gaap:FinanceLeasesPortfolioSegmentMember 2020-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:PassMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2020-12-31 0000763901 us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:PassMember 2020-12-31 0000763901 us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:PassMember 2020-12-31 0000763901 us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:PassMember 2020-12-31 0000763901 us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:PassMember 2020-12-31 0000763901 us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:PassMember 2020-12-31 0000763901 bpop:RetailAndCommericalLoansMember country:VG 2020-12-31 0000763901 bpop:RetailAndCommericalLoansMember country:VG 2021-12-31 0000763901 country:VG bpop:LoanWithBviGovernmentMember 2020-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember bpop:TroubledDebtRestructuringMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:AccrualMember bpop:GuaranteedByUsSponsoredEntitiesMember 2020-12-31 0000763901 us-gaap:IndemnificationGuaranteeMember bpop:SecuritizationMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member 2020-01-01 2020-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel1Member 2020-01-01 2020-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel3Member 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel1Member 2020-01-01 2020-12-31 0000763901 bpop:ServicingAssetAtFairValueAmountMember us-gaap:FairValueInputsLevel1Member 2020-01-01 2020-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel3Member 2020-01-01 2020-12-31 0000763901 bpop:ServicingAssetAtFairValueAmountMember us-gaap:FairValueInputsLevel3Member 2020-01-01 2020-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel2Member 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel2Member bpop:ServicingAssetAtFairValueAmountMember 2020-01-01 2020-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember 2020-01-01 2020-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember 2019-12-31 0000763901 bpop:ServicedMortgageLoansMember bpop:LoansWithRecourseMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialOrConstructionMember 2020-12-31 0000763901 bpop:CommercialOrConstructionMember 2021-01-01 2021-12-31 0000763901 bpop:CommercialOrConstructionMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember 2021-01-01 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember 2019-12-31 0000763901 us-gaap:MortgageReceivablesMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialOrConstructionMember 2019-12-31 0000763901 bpop:CommercialOrConstructionMember 2020-01-01 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:IndemnificationGuaranteeMember 2020-01-01 2020-12-31 0000763901 bpop:SecuritizationMember us-gaap:IndemnificationGuaranteeMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2020-01-01 2020-12-31 0000763901 bpop:LoanModificationOtherMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2020-01-01 2020-12-31 0000763901 bpop:LoanModificationOtherMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2020-01-01 2020-12-31 0000763901 bpop:LoanModificationOtherMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2020-01-01 2020-12-31 0000763901 bpop:LoanModificationOtherMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember 2020-01-01 2020-12-31 0000763901 bpop:ConsumerOtherMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 bpop:ConsumerOtherMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:ConsumerOtherMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember us-gaap:ConsumerPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 bpop:ConsumerOtherMember bpop:LoanModificationOtherMember us-gaap:ConsumerPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember us-gaap:FinanceLeasesPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 bpop:LoanModificationOtherMember us-gaap:FinanceLeasesPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember us-gaap:MortgageReceivablesMember 2020-01-01 2020-12-31 0000763901 bpop:LoanModificationOtherMember us-gaap:MortgageReceivablesMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:CommercialPortfolioSegmentMember us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:CommercialPortfolioSegmentMember us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember us-gaap:CommercialPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialRealEstateNonOwnerOccupiedMember bpop:LoanModificationOtherMember us-gaap:CommercialPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:CommercialPortfolioSegmentMember us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:CommercialPortfolioSegmentMember us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialRealEstateOwnerOccupiedMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember us-gaap:CommercialPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialRealEstateOwnerOccupiedMember bpop:LoanModificationOtherMember us-gaap:CommercialPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember 2020-01-01 2020-12-31 0000763901 bpop:LoanModificationOtherMember us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember 2020-01-01 2020-12-31 0000763901 us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember 2020-01-01 2020-12-31 0000763901 bpop:LoanModificationOtherMember 2020-01-01 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:UsGovernmentAgencyInsuredLoansMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:UsGovernmentAgencyInsuredLoansMember 2020-12-31 0000763901 bpop:PurchasedCreditDeteriorationLoanMember 2020-01-01 2020-12-31 0000763901 us-gaap:CommercialLoanMember 2020-01-01 2020-12-31 0000763901 us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember bpop:ServicingAssetAtFairValueAmountMember 2021-12-31 0000763901 us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember bpop:ServicingAssetAtFairValueAmountMember 2020-12-31 0000763901 us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember bpop:MortgageServicingRightsMember 2021-12-31 0000763901 us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember bpop:MortgageServicingRightsMember 2020-12-31 0000763901 us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember us-gaap:OtherAssetsMember 2021-12-31 0000763901 us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember us-gaap:OtherAssetsMember 2020-12-31 0000763901 us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember bpop:OtherAdvancesMember 2021-12-31 0000763901 us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember bpop:OtherAdvancesMember 2020-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember bpop:MunisPayableFromRealAndPersonalPropertyTaxesMember us-gaap:PassMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember bpop:MunisPayableFromRealAndPersonalPropertyTaxesMember us-gaap:PassMember 2020-12-31 0000763901 2021-10-01 2021-12-31 0000763901 us-gaap:PreferredStockMember 2020-01-01 2020-12-31 0000763901 bpop:ValuationTechniqueExternalAppraisalMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember srt:MinimumMember us-gaap:LoansReceivableMember 2020-01-01 2020-12-31 0000763901 bpop:ValuationTechniqueExternalAppraisalMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:LoansReceivableMember srt:MaximumMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialMultiFamilyMember us-gaap:CommercialPortfolioSegmentMember us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialMultiFamilyMember us-gaap:CommercialPortfolioSegmentMember us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialMultiFamilyMember bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember us-gaap:CommercialPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 bpop:CommercialMultiFamilyMember bpop:LoanModificationOtherMember us-gaap:CommercialPortfolioSegmentMember 2020-01-01 2020-12-31 0000763901 bpop:PopularBankMember us-gaap:FacilityClosingMember 2020-10-27 0000763901 srt:MinimumMember 2021-01-01 2021-12-31 0000763901 srt:MaximumMember 2021-01-01 2021-12-31 0000763901 bpop:PopularBankMember us-gaap:FacilityClosingMember 2020-10-01 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 bpop:ConsumerOtherMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 bpop:ConsumerOtherMember country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 bpop:BpnaMember bpop:AileenBetancesEtAlVPopularBankEtAlMember 2021-06-01 2021-06-28 0000763901 bpop:BuyBackOptionProgramMember 2020-12-31 0000763901 bpop:CreditCardPortfolioAcquisitionMember us-gaap:CustomerRelationshipsMember 2021-01-01 2021-12-31 0000763901 bpop:AccelerateShareRepurchaseMember 2021-09-01 2021-09-09 0000763901 bpop:AccelerateShareRepurchaseMember 2021-05-01 2021-05-03 0000763901 bpop:BancoPopularDePuertoRicoMember 2021-07-31 0000763901 bpop:AccelerateShareRepurchaseMember us-gaap:TreasuryStockMember 2021-09-01 2021-09-09 0000763901 bpop:AccelerateShareRepurchaseMember 2021-07-01 2021-09-30 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:RealEstateMember 2021-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:EquipmentMember 2021-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 bpop:OtherCollateralMember country:PR us-gaap:FinanceLeasesPortfolioSegmentMember 2021-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:CollateralPledgedMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:RealEstateMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:CollateralizedAutoLoansMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:EquipmentMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:AccountsReceivableMember 2021-12-31 0000763901 bpop:OtherCollateralMember us-gaap:FinanceLeasesPortfolioSegmentMember 2021-12-31 0000763901 bpop:CorporateOfficeBuildingsMember 2021-09-30 0000763901 us-gaap:ConstructionLoansMember us-gaap:ContractualInterestRateReductionMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:ExtendedMaturityMember 2020-01-01 2020-12-31 0000763901 bpop:CombinationOfReductionInInterestRateAndExtensionOfMaturityDateMember us-gaap:ConstructionLoansMember 2020-01-01 2020-12-31 0000763901 bpop:LoanModificationOtherMember us-gaap:ConstructionLoansMember 2020-01-01 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember 2020-12-31 0000763901 bpop:PrGovernmentDirectExposureMember 2021-07-01 2021-07-02 0000763901 bpop:RelatedPartyWithInvestmentCompaniesMember 2020-12-31 0000763901 us-gaap:FederalReserveBankAdvancesMember 2021-12-31 0000763901 bpop:PublicFundsMember 2021-12-31 0000763901 us-gaap:CumulativePreferredStockMember bpop:TrustPreferredSecuritiesRedemptionMember bpop:PopularCapitalTrustIMember 2021-01-01 2021-11-01 0000763901 us-gaap:CumulativePreferredStockMember bpop:TrustPreferredSecuritiesRedemptionMember bpop:PopularCapitalTrustIMember 2021-11-01 0000763901 bpop:CommercialAndConstructionLoanMember 2021-01-01 2021-12-31 0000763901 bpop:ServiceChargesOnDepositAccountsMember 2019-01-01 2019-12-31 0000763901 bpop:OtherServicesMember 2019-01-01 2019-12-31 0000763901 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-12-31 0000763901 us-gaap:CommonStockMember 2019-01-01 2019-12-31 0000763901 us-gaap:TreasuryStockMember 2019-01-01 2019-12-31 0000763901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-12-31 0000763901 us-gaap:RetainedEarningsMember 2021-12-31 0000763901 us-gaap:AdditionalPaidInCapitalMember 2021-12-31 0000763901 us-gaap:TreasuryStockMember 2021-12-31 0000763901 us-gaap:CommonStockMember 2021-12-31 0000763901 us-gaap:PreferredStockMember 2021-12-31 0000763901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-12-31 0000763901 us-gaap:USTreasurySecuritiesMember 2020-01-01 2020-12-31 0000763901 country:PR bpop:ResidentialMortgageLoansInsuredByFhaMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember bpop:AccrualMember bpop:GuaranteedByUsSponsoredEntitiesMember 2021-12-31 0000763901 bpop:MortgageBankingActivitiesMember 2019-01-01 2019-12-31 0000763901 bpop:ServicedMortgageLoansMember 2021-12-31 0000763901 us-gaap:CoreDepositsMember 2021-12-31 0000763901 us-gaap:CustomerRelationshipsMember 2021-12-31 0000763901 bpop:FixedRateJuniorSubordinatedDeferrableInterestDebenturesMaturitiesOn2034Member srt:MinimumMember us-gaap:JuniorSubordinatedDebtMember 2021-12-31 0000763901 bpop:FixedRateJuniorSubordinatedDeferrableInterestDebenturesMaturitiesOn2034Member us-gaap:JuniorSubordinatedDebtMember srt:MaximumMember 2021-12-31 0000763901 bpop:FixedRateAdvancesDue2022To2029Member 2021-12-31 0000763901 bpop:FixedRateAdvancesDue2022To2029Member srt:MaximumMember 2021-12-31 0000763901 srt:MinimumMember bpop:FixedRateAdvancesDue2022To2029Member 2021-12-31 0000763901 us-gaap:FederalHomeLoanBankAdvancesMember 2021-12-31 0000763901 us-gaap:FederalReserveBankAdvancesMember 2021-12-31 0000763901 us-gaap:FinancialGuaranteeMember 2021-12-31 0000763901 srt:ParentCompanyMember us-gaap:DebtSecuritiesPayableMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:LoansMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:SecuritiesInvestmentMember 2021-12-31 0000763901 bpop:SmallBusinessAdministrationLoanMemberMember 2021-12-31 0000763901 us-gaap:InterestExpenseMember us-gaap:EmbeddedDerivativeFinancialInstrumentsMember 2019-01-01 2019-12-31 0000763901 bpop:MortgageBankingActivitiesMember us-gaap:ForwardContractsMember 2019-01-01 2019-12-31 0000763901 us-gaap:OtherIncomeMember us-gaap:InterestRateCapMember 2019-01-01 2019-12-31 0000763901 us-gaap:InterestExpenseMember bpop:IndexedOptionsOnDepositsMember 2019-01-01 2019-12-31 0000763901 bpop:EVERTECIncMember 2019-01-01 2019-12-31 0000763901 bpop:EVERTECIncMember bpop:ProcessingFeesMember 2019-01-01 2019-12-31 0000763901 bpop:EVERTECIncMember us-gaap:OtherExpenseMember 2019-01-01 2019-12-31 0000763901 bpop:EVERTECIncMember bpop:RentalIncomeMember 2019-01-01 2019-12-31 0000763901 bpop:EVERTECIncMember us-gaap:InterestExpenseMember 2019-01-01 2019-12-31 0000763901 bpop:EVERTECIncMember bpop:OtherFeeRevenueMember 2019-01-01 2019-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:CollateralizedMortgageObligationsMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsNonrecurringMember 2019-01-01 2019-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:AvailableforsaleSecuritiesMember 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:OtherDebtSecuritiesMember 2021-12-31 0000763901 us-gaap:CollateralizedMortgageObligationsMember bpop:TradingAccountDebtSecuritiesMember 2021-12-31 0000763901 bpop:ServicingAssetAtFairValueAmountMember 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember bpop:TradingAccountDebtSecuritiesMember 2019-01-01 2019-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:OtherDebtSecuritiesMember 2019-01-01 2019-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:AvailableforsaleSecuritiesMember 2019-01-01 2019-12-31 0000763901 bpop:ServicingAssetAtFairValueAmountMember 2019-01-01 2019-12-31 0000763901 us-gaap:CollateralizedMortgageObligationsMember bpop:TradingAccountDebtSecuritiesMember 2019-01-01 2019-12-31 0000763901 bpop:TradingGainsLossesMember 2019-01-01 2019-12-31 0000763901 bpop:MortgageBankingActivitiesMember 2019-01-01 2019-12-31 0000763901 us-gaap:FairValueInputsLevel3Member 2021-12-31 0000763901 us-gaap:PerformanceSharesMember 2020-01-01 2020-12-31 0000763901 us-gaap:OtherLiabilitiesMember 2021-12-31 0000763901 us-gaap:CorporateNonSegmentMember 2021-12-31 0000763901 us-gaap:OperatingSegmentsMember 2021-12-31 0000763901 bpop:PopularBankMember us-gaap:OperatingSegmentsMember 2021-12-31 0000763901 us-gaap:MaterialReconcilingItemsMember 2021-12-31 0000763901 us-gaap:IntersegmentEliminationMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:OtherServicesMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:CommercialBankingMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:ConsumerAndRetailBankingMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember us-gaap:IntersubsegmentEliminationsMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember 2020-12-31 0000763901 us-gaap:IntersegmentEliminationMember 2020-12-31 0000763901 bpop:PopularBankMember us-gaap:OperatingSegmentsMember 2020-12-31 0000763901 us-gaap:OperatingSegmentsMember 2020-12-31 0000763901 us-gaap:MaterialReconcilingItemsMember 2020-12-31 0000763901 us-gaap:CorporateNonSegmentMember 2020-12-31 0000763901 us-gaap:MaterialReconcilingItemsMember 2019-01-01 2019-12-31 0000763901 us-gaap:OperatingSegmentsMember bpop:PopularBankMember 2019-01-01 2019-12-31 0000763901 us-gaap:OperatingSegmentsMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember 2019-01-01 2019-12-31 0000763901 us-gaap:IntersegmentEliminationMember 2019-01-01 2019-12-31 0000763901 us-gaap:CorporateNonSegmentMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:CommercialBankingMember us-gaap:OperatingSegmentsMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember us-gaap:IntersubsegmentEliminationsMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:OtherServicesMember us-gaap:OperatingSegmentsMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:ConsumerAndRetailBankingMember us-gaap:OperatingSegmentsMember 2020-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:OtherServicesMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember us-gaap:IntersubsegmentEliminationsMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:ConsumerAndRetailBankingMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember us-gaap:OperatingSegmentsMember bpop:CommercialBankingMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember country:US 2021-12-31 0000763901 bpop:OtherCountriesMember 2021-12-31 0000763901 srt:ParentCompanyMember 2019-01-01 2019-12-31 0000763901 bpop:K2CapitalGroupLlcMember 2021-10-15 0000763901 bpop:K2CapitalGroupLlcMember bpop:BookValueBeforeAcquisitionAdjustmentMember 2021-10-15 0000763901 bpop:K2CapitalGroupLlcMember bpop:FairValueAdjustmentMember 2021-10-15 0000763901 2021-06-30 0000763901 2022-02-24 0000763901 bpop:CommercialOrConstructionMember 2018-12-31 0000763901 us-gaap:MortgageReceivablesMember 2018-12-31 0000763901 bpop:CommercialOrConstructionMember 2019-01-01 2019-12-31 0000763901 us-gaap:MortgageReceivablesMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:CreditCardFeesExcludingLateFeesAndMembershipFeesMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:DebitCardFeesMember 2019-01-01 2019-12-31 0000763901 bpop:BpnaMember bpop:CreditCardFeesExcludingLateFeesAndMembershipFeesMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:TrustfeesMember 2019-01-01 2019-12-31 0000763901 bpop:BpnaMember bpop:DebitCardFeesMember 2019-01-01 2019-12-31 0000763901 bpop:BpnaMember bpop:SalesAndAdministrationOfInvestmentProductsMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:InsuranceFeesMember 2019-01-01 2019-12-31 0000763901 bpop:BpnaMember 2019-01-01 2019-12-31 0000763901 bpop:BpnaMember bpop:ServiceChargesOnDepositAccountsMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:SalesAndAdministrationOfInvestmentProductsMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:ServiceChargesOnDepositAccountsMember 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember 2019-01-01 2019-12-31 0000763901 bpop:BpnaMember bpop:InsuranceFeesMember 2019-01-01 2019-12-31 0000763901 bpop:BpnaMember bpop:TrustfeesMember 2019-01-01 2019-12-31 0000763901 bpop:IntersegmentTransactionMember 2019-01-01 2019-12-31 0000763901 country:PR 2019-01-01 2019-12-31 0000763901 us-gaap:USTreasurySecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:OtherDebtSecuritiesMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:ConstructionLoansMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:MortgageReceivablesMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConstructionLoansMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:US us-gaap:MortgageReceivablesMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConstructionLoansMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:PR us-gaap:MortgageReceivablesMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember us-gaap:AutomobileLoanMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:CreditCardReceivablesMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember us-gaap:ConsumerLoanMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:US us-gaap:ConsumerPortfolioSegmentMember bpop:ConsumerOtherMember us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialMultiFamilyMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateNonOwnerOccupiedMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:PR us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:PR us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:PR us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 country:PR us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:PR us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:PR us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:US us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 country:US us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 country:US us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 country:US us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 country:US us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 country:US us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-12-31 0000763901 us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-12-31 0000763901 us-gaap:FinancialAssetPastDueMember 2020-12-31 0000763901 us-gaap:FinancialAssetNotPastDueMember 2020-12-31 0000763901 us-gaap:FinancingReceivables30To59DaysPastDueMember 2021-12-31 0000763901 us-gaap:FinancingReceivables60To89DaysPastDueMember 2021-12-31 0000763901 us-gaap:FinancialAssetPastDueMember 2021-12-31 0000763901 us-gaap:FinancialAssetNotPastDueMember 2021-12-31 0000763901 bpop:NoteABSplitMember bpop:DiscountedPayoffMember 2020-01-01 2020-12-31 0000763901 bpop:NoteABSplitMember bpop:DiscountedPayoffMember 2020-12-31 0000763901 us-gaap:RetainedEarningsMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2018-12-31 0000763901 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2018-12-31 0000763901 us-gaap:RetainedEarningsMember srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-12-31 0000763901 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2019-12-31 0000763901 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:MortgageReceivablesMember us-gaap:UsGovernmentAgencyInsuredLoansMember 2021-12-31 0000763901 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:MortgageReceivablesMember us-gaap:UsGovernmentAgencyInsuredLoansMember 2020-12-31 0000763901 us-gaap:FinancialAssetNotPastDueMember bpop:ReverseMortgagesMember 2021-12-31 0000763901 us-gaap:FinancialAssetNotPastDueMember bpop:ReverseMortgagesMember 2020-12-31 0000763901 us-gaap:FinancialStandbyLetterOfCreditMember 2021-12-31 0000763901 srt:ManagementMember us-gaap:PerformanceSharesMember 2019-01-01 2019-12-31 0000763901 us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2020-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2020-12-31 0000763901 us-gaap:BondsMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2020-12-31 0000763901 us-gaap:EquitySecuritiesMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2020-12-31 0000763901 us-gaap:ExchangeTradedFundsMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2020-12-31 0000763901 bpop:ForeignCommingledTrustFundMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2020-12-31 0000763901 bpop:MutualFundsMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2020-12-31 0000763901 us-gaap:PrivateEquityFundsMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2020-12-31 0000763901 us-gaap:CashAndCashEquivalentsMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2020-12-31 0000763901 us-gaap:AccruedIncomeReceivableMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2020-12-31 0000763901 us-gaap:BondsMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:EquitySecuritiesMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:ExchangeTradedFundsMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 bpop:ForeignCommingledTrustFundMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 bpop:MutualFundsMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:PrivateEquityFundsMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:CashAndCashEquivalentsMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:AccruedIncomeReceivableMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:DefinedBenefitPlanEquitySecuritiesCommonStockMember 2021-12-31 0000763901 us-gaap:DefinedBenefitPlanEquitySecuritiesCommonStockMember 2020-12-31 0000763901 us-gaap:DefinedBenefitPlanEquitySecuritiesCommonStockMember 2020-01-01 2020-12-31 0000763901 us-gaap:DefinedBenefitPlanEquitySecuritiesCommonStockMember 2021-01-01 2021-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember 2019-01-01 2019-12-31 0000763901 us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-01-01 2019-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember srt:MaximumMember 2019-01-01 2019-12-31 0000763901 us-gaap:PensionPlansDefinedBenefitMember srt:MinimumMember 2019-01-01 2019-12-31 0000763901 bpop:SavingsPlansMember 2019-01-01 2019-12-31 0000763901 bpop:BuyBackOptionProgramMember 2020-01-01 2020-12-31 0000763901 us-gaap:ResidentialMortgageMember bpop:OriginatedMortgageServicingRightsMSRMember 2020-01-01 2020-12-31 0000763901 us-gaap:ResidentialMortgageMember bpop:PurchasedMortgageServicingRightsMSRMember 2020-01-01 2020-12-31 0000763901 us-gaap:TrademarksMember bpop:ELoanMember 2020-12-31 0000763901 us-gaap:TrademarksMember bpop:ELoanMember 2021-01-01 2021-12-31 0000763901 us-gaap:MortgageBackedSecuritiesMember us-gaap:SecuredDebtMember us-gaap:MaturityOver90DaysMember 2021-12-31 0000763901 bpop:FixedRateJuniorSubordinatedDeferrableInterestDebenturesMaturitiesOn2034Member us-gaap:JuniorSubordinatedDebtMember srt:MinimumMember 2020-12-31 0000763901 srt:MaximumMember bpop:FixedRateJuniorSubordinatedDeferrableInterestDebenturesMaturitiesOn2034Member us-gaap:JuniorSubordinatedDebtMember 2020-12-31 0000763901 us-gaap:ShortTermDebtMember 2021-12-31 0000763901 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2020-12-31 0000763901 us-gaap:PreferredStockMember us-gaap:SeriesAPreferredStockMember 2019-12-31 0000763901 bpop:NoncreditCommitmentMember 2020-12-31 0000763901 bpop:TrustPreferredSecuritiesRedemptionMember bpop:PopularNorthAmericaCapitalTrustIMember 2021-12-31 0000763901 bpop:TrustPreferredSecuritiesRedemptionMember bpop:PopularCapitalTrustIiMember 2021-12-31 0000763901 bpop:TrustPreferredSecuritiesRedemptionMember bpop:PopularNorthAmericaCapitalTrustIMember 2021-01-01 2021-12-31 0000763901 bpop:TrustPreferredSecuritiesRedemptionMember bpop:PopularCapitalTrustIiMember 2021-01-01 2021-12-31 0000763901 us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember 2021-12-31 0000763901 us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember 2020-12-31 0000763901 us-gaap:FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember 2021-12-31 0000763901 us-gaap:FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember 2020-12-31 0000763901 bpop:BulkLoanRepurchaseMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-07-01 2020-09-30 0000763901 us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-07-01 2020-09-30 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel1Member us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member bpop:TradingAccountDebtSecuritiesMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member bpop:TradingAccountDebtSecuritiesMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2021-01-01 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel1Member us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member bpop:TradingAccountDebtSecuritiesMember us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member bpop:TradingAccountDebtSecuritiesMember us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember 2021-01-01 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel1Member us-gaap:FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel2Member bpop:TradingAccountDebtSecuritiesMember us-gaap:FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember 2021-01-01 2021-12-31 0000763901 us-gaap:FairValueInputsLevel3Member bpop:TradingAccountDebtSecuritiesMember us-gaap:FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember 2021-01-01 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2021-01-01 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember 2021-01-01 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember 2021-01-01 2021-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel1Member us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel2Member bpop:TradingAccountDebtSecuritiesMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel3Member bpop:TradingAccountDebtSecuritiesMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-01-01 2020-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FairValueInputsLevel1Member us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel2Member bpop:TradingAccountDebtSecuritiesMember us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember 2020-01-01 2020-12-31 0000763901 us-gaap:FairValueInputsLevel3Member bpop:TradingAccountDebtSecuritiesMember us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember 2020-01-01 2020-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-01-01 2020-12-31 0000763901 bpop:TradingAccountDebtSecuritiesMember us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember 2020-01-01 2020-12-31 0000763901 bpop:BuyBackOptionProgramMember 2021-12-31 0000763901 bpop:Basel3Member us-gaap:StandardizedApproachMember 2021-12-31 0000763901 bpop:PaycheckProtectionProgramMember 2021-12-31 0000763901 srt:ParentCompanyMember us-gaap:UnderlyingOtherMember us-gaap:GuaranteeTypeOtherMember 2021-12-31 0000763901 bpop:UsviGovernmentDirectExposureMember bpop:FromUsviGovernmentAndPublicCorporationsMember 2020-01-01 2020-12-31 0000763901 bpop:BpprFoundationMember 2020-01-01 2020-12-31 0000763901 bpop:BancoPopularFoundationMember 2020-01-01 2020-12-31 0000763901 bpop:OtherCountriesMember 2019-01-01 2019-12-31 0000763901 country:US 2019-01-01 2019-12-31 0000763901 us-gaap:CashFlowHedgingMember 2020-01-01 2020-12-31 0000763901 us-gaap:ForwardContractsMember us-gaap:CashFlowHedgingMember 2020-01-01 2020-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 bpop:PuertoRicoStatesAndPoliticalSubdivisionsDebtSecuritiesMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:CollateralizedMortgageObligationsIssuedByUSGovernmentSponsoredEnterprisesAndUSGovernmentMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 us-gaap:EstimateOfFairValueFairValueDisclosureMember bpop:SecuritiesInWhollyOwnedStatutoryBusinessTrustsMember us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember 2021-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember country:US 2019-01-01 2019-12-31 0000763901 bpop:BancoPopularDePuertoRicoMember bpop:OtherCountriesMember 2020-01-01 2020-12-31 0000763901 bpop:TrustPreferredSecuritiesRedemptionMember bpop:PopularNorthAmericaCapitalTrustIMember 2020-01-01 2020-12-31 0000763901 bpop:TrustPreferredSecuritiesRedemptionMember bpop:PopularCapitalTrustIiMember 2020-01-01 2020-12-31 0000763901 bpop:TaxYear2035Member 2021-12-31 0000763901 bpop:TaxYear2036Member 2021-12-31 0000763901 srt:ParentCompanyMember 2019-12-31 0000763901 srt:ParentCompanyMember 2018-12-31 0000763901 srt:ParentCompanyMember bpop:BhdLeonMember 2021-01-01 2021-12-31 0000763901 srt:ParentCompanyMember bpop:BhdLeonMember 2020-01-01 2020-12-31 0000763901 srt:ParentCompanyMember bpop:BhdLeonMember 2019-01-01 2019-12-31 0000763901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember bpop:ValuationTechniqueExternalAppraisalMember us-gaap:LoansReceivableMember 2021-01-01 2021-12-31 0000763901 bpop:BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedContingentLiabilityMember 2021-01-01 2021-12-31 0000763901 bpop:BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedContingentLiabilityMember 2021-12-31 0000763901 bpop:BusinessCombinationRecognizedIdentifiableAssetsAcquiredAndLiabilitiesAssumedContingentLiabilityMember 2020-12-31 0000763901 bpop:BulkLoanRepurchaseMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-01-01 2020-12-31 0000763901 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember bpop:BulkLoanRepurchaseMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-01-01 2020-12-31 0000763901 us-gaap:ConsumerLoanMember 2021-01-01 2021-12-31 0000763901 us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2021-01-01 2021-12-31 0000763901 us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember 2021-01-01 2021-12-31 0000763901 us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-01-01 2020-12-31 0000763901 us-gaap:FederalNationalMortgageAssociationCertificatesAndObligationsFNMAMember 2020-01-01 2020-12-31 0000763901 us-gaap:FederalHomeLoanMortgageCorporationCertificatesAndObligationsFHLMCMember 2021-01-01 2021-12-31 0000763901 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:MortgageReceivablesMember bpop:BuyBackOptionProgramMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-12-31 0000763901 us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:MortgageReceivablesMember bpop:BuyBackOptionProgramMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2021-12-31 0000763901 country:PR us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:MortgageReceivablesMember bpop:BuyBackOptionProgramMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-12-31 0000763901 bpop:TrustPreferredSecuritiesRedemptionMember bpop:PopularNorthAmericaCapitalTrustIMember 2020-12-31 0000763901 bpop:TrustPreferredSecuritiesRedemptionMember bpop:PopularCapitalTrustIiMember 2020-12-31 0000763901 us-gaap:SubsequentEventMember 2022-01-01 2022-02-23 0000763901 bpop:RelatedPartyExcludeEvertecMember 2021-12-31 0000763901 bpop:RelatedPartyExcludeEvertecMember 2020-12-31 0000763901 country:PR us-gaap:FinancialAssetNotPastDueMember bpop:ReverseMortgagesMember 2021-12-31 0000763901 country:PR us-gaap:FinancialAssetNotPastDueMember bpop:ReverseMortgagesMember 2020-12-31 0000763901 us-gaap:CommercialLoanMember bpop:K2CapitalGroupLlcMember 2021-10-15 0000763901 bpop:K2CapitalGroupLlcMember bpop:BookValueBeforeAcquisitionAdjustmentMember bpop:DirectFinancingLeasesMember 2021-10-15 0000763901 bpop:K2CapitalGroupLlcMember bpop:BookValueBeforeAcquisitionAdjustmentMember bpop:WorkingCapitalMember 2021-10-15 0000763901 us-gaap:SubsequentEventMember 2022-01-01 2022-01-12 0000763901 bpop:TrustPreferredSecuritiesRedemptionMember bpop:PopularCapitalTrustIMember 2020-12-31 0000763901 bpop:TrustPreferredSecuritiesRedemptionMember bpop:PopularCapitalTrustIMember 2020-01-01 2020-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember 2021-01-01 2021-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember 2020-01-01 2020-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember 2019-01-01 2019-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:OtherOperatingIncomeExpenseMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember 2021-01-01 2021-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:OtherOperatingIncomeExpenseMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember 2020-01-01 2020-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:OtherOperatingIncomeExpenseMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember 2019-01-01 2019-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember bpop:GainLossOnSaleOfDebtSecuritiesMember 2021-01-01 2021-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember bpop:GainLossOnSaleOfDebtSecuritiesMember 2020-01-01 2020-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember bpop:GainLossOnSaleOfDebtSecuritiesMember 2019-01-01 2019-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember 2021-01-01 2021-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember 2020-01-01 2020-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetInvestmentGainLossIncludingPortionAttributableToNoncontrollingInterestMember 2019-01-01 2019-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember 2021-01-01 2021-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember 2020-01-01 2020-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember 2019-01-01 2019-12-31 0000763901 bpop:MortgageBankingActivitiesMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:ForwardContractsMember us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember 2021-01-01 2021-12-31 0000763901 bpop:MortgageBankingActivitiesMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:ForwardContractsMember us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember 2020-01-01 2020-12-31 0000763901 bpop:MortgageBankingActivitiesMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:ForwardContractsMember us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember 2019-01-01 2019-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:OtherOperatingIncomeExpenseMember us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember us-gaap:InterestRateSwapMember 2021-01-01 2021-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:OtherOperatingIncomeExpenseMember us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember us-gaap:InterestRateSwapMember 2020-01-01 2020-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:OtherOperatingIncomeExpenseMember us-gaap:AccumulatedGainLossCashFlowHedgeIncludingNoncontrollingInterestMember us-gaap:InterestRateSwapMember 2019-01-01 2019-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-12-31 0000763901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-12-31 0000763901 us-gaap:CommercialLoanMember bpop:RelatedPartyTransactionLoanSoldBetweenBpprAndPopularIncMember 2021-01-01 2021-12-31 0000763901 bpop:PopularSecuritiesMember bpop:OneArbitrationWithClaimedDamagesMember bpop:TrinidadGarcaVPopularIncEtAlMember 2021-10-01 2021-10-28 0000763901 bpop:PopularSecuritiesMember bpop:AggregateArbitrationsWithClaimedDamagesMember 2021-12-31 0000763901 bpop:PopularSecuritiesMember bpop:AggregateArbitrationsWithClaimedDamagesMember 2021-01-01 2021-12-31 0000763901 bpop:PopularSecuritiesMember bpop:OneArbitrationWithClaimedDamagesMember us-gaap:SubsequentEventMember bpop:TrinidadGarcaVPopularIncEtAlMember 2022-01-27 0000763901 bpop:BuyBackOptionProgramMember us-gaap:GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-06-30 0000763901 country:PR us-gaap:SubstandardMember us-gaap:ConsumerPortfolioSegmentMember us-gaap:HomeEquityMember 2021-12-31 0000763901 country:US us-gaap:CommercialPortfolioSegmentMember us-gaap:CommercialAndIndustrialSectorMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-12-31 0000763901 us-gaap:MeasurementInputCounterpartyCreditRiskMember 2021-01-01 2021-12-31 0000763901 us-gaap:CustomerRelationshipsMember bpop:CreditCardPortfolioAcquisitionMember 2021-12-31 0000763901 bpop:PopularBankMember bpop:K2CapitalGroupLlcMember 2021-01-01 2021-12-31 0000763901 bpop:PopularBankMember 2021-01-01 2021-12-31 0000763901 us-gaap:AdditionalPaidInCapitalMember bpop:AccelerateShareRepurchaseMember 2020-01-01 2020-01-30 0000763901 us-gaap:AdditionalPaidInCapitalMember bpop:AccelerateShareRepurchaseMember 2021-05-01 2021-05-03 0000763901 us-gaap:TreasuryStockMember bpop:AccelerateShareRepurchaseMember 2020-01-01 2020-01-30 0000763901 us-gaap:TreasuryStockMember bpop:AccelerateShareRepurchaseMember 2021-05-01 2021-05-03 0000763901 bpop:LoansHeldInPortfolioMember 2020-01-01 2020-01-02 0000763901 us-gaap:UnfundedLoanCommitmentMember 2020-01-01 2020-01-02 0000763901 bpop:SCSubtopic31030Member 2020-01-01 2020-01-02 0000763901 us-gaap:TreasuryStockMember bpop:AccelerateShareRepurchaseMember us-gaap:SubsequentEventMember 2022-01-01 2022-02-28 0000763901 us-gaap:AdditionalPaidInCapitalMember bpop:AccelerateShareRepurchaseMember us-gaap:SubsequentEventMember 2022-01-01 2022-02-28 0000763901 bpop:AccelerateShareRepurchaseMember us-gaap:SubsequentEventMember 2022-02-28 0000763901 bpop:K2CapitalGroupLlcMember 2021-01-01 2021-12-31 0000763901 us-gaap:SubsequentEventMember bpop:EvertecAssetsMember us-gaap:ServiceAgreementsMember 2022-01-01 2022-02-24 0000763901 us-gaap:SubsequentEventMember bpop:EvertecAssetsMember us-gaap:ServiceAgreementsMember 2022-02-24 0000763901 us-gaap:SubsequentEventMember bpop:EvertecAssetsMember bpop:AmendedServiceAgreementMember bpop:ServicePeriodPhaseOneMember 2022-01-01 2022-02-24 0000763901 us-gaap:SubsequentEventMember bpop:EvertecAssetsMember bpop:AmendedServiceAgreementMember bpop:ServicePeriodPhaseTwoMember 2022-01-01 2022-02-24 0000763901 us-gaap:SubsequentEventMember bpop:EvertecAssetsMember bpop:AmendedServiceAgreementMember bpop:ServicePeriodPhaseThreeMember 2022-01-01 2022-02-24 0000763901 us-gaap:SubsequentEventMember bpop:EvertecAssetsMember bpop:AmendedServiceAgreementMember bpop:ServicePeriodPhaseTwoMember 2022-02-24 0000763901 us-gaap:SubsequentEventMember bpop:EvertecAssetsMember bpop:AmendedServiceAgreementMember 2022-01-01 2022-02-24 0000763901 us-gaap:SubsequentEventMember bpop:EvertecAssetsMember bpop:RegistrationRightsAgreementMember 2022-02-24 0000763901 us-gaap:SubsequentEventMember bpop:EvertecAssetsMember bpop:OtherCommercialAgreementMember 2022-01-01 2022-02-24 0000763901 us-gaap:SubsequentEventMember bpop:EvertecAssetsMember bpop:RegistrationRightsAgreementMember 2022-01-01 2022-02-24 0000763901 us-gaap:SubsequentEventMember bpop:EvertecAssetsMember bpop:AmendedServiceAgreementMember bpop:ServicePeriodPhaseOneMember 2022-02-24 0000763901 us-gaap:SubsequentEventMember bpop:EvertecAssetsMember bpop:AmendedServiceAgreementMember bpop:ServicePeriodPhaseFourMember 2022-02-24 0000763901 bpop:EvertecAssetsMember us-gaap:ServiceAgreementsMember 2021-12-31 0000763901 bpop:PrGovernmentDirectExposureMember us-gaap:LoansMember bpop:RoundingAdjustmentMember 2021-12-31 0000763901 srt:ParentCompanyMember us-gaap:EquityMethodInvesteeMember 2019-01-01 2019-12-31 0000763901 srt:ParentCompanyMember us-gaap:EquityMethodInvesteeMember 2020-01-01 2020-12-31 0000763901 srt:ParentCompanyMember us-gaap:EquityMethodInvesteeMember 2021-01-01 2021-12-31 0000763901 bpop:CapitalAdequacyMinimumRequirementPlusCapitalConservationBufferbaselMember 2021-12-31 0000763901 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2020-01-02 0000763901 2020-01-02 iso4217:USD xbrli:pure xbrli:shares iso4217:USD xbrli:shares bpop:loans bpop:claims bpop:units bpop:Plaintiff bpop:Defendant bpop:score bpop:Branches

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2021

Or

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

Commission File Number: 001-34084

POPULAR, INC.

Incorporated in the Commonwealth of Puerto Rico

IRS Employer Identification No. 66-0667416

 

Principal Executive Offices

209 Muñoz Rivera Avenue

Hato Rey, Puerto Rico 00918

Telephone Number: (787) 765-9800

 

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

 

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock ($0.01 par value)

BPOP

The NASDAQ Stock Market

6.125% Cumulative Monthly Income Trust Preferred Securities

BPOPM

The NASDAQ Stock Market

 

 

 

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes X No .

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No X.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No .

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes X No .

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [X]

Accelerated filer [ ]

Non-accelerated filer [ ]

Smaller reporting company [ ]

Emerging growth company [ ]

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No X

 

As of June 30, 2021, the aggregate market value of the Common Stock held by non-affiliates of Popular, Inc. was approximately $5.9 billion based upon the reported closing price of $75.05 on the NASDAQ Global Select Market on that date.

 

As of February 24, 2022, there were 79,917,972 shares of Popular, Inc.’s Common Stock outstanding.

 

1


 

DOCUMENTS INCORPORATED BY REFERENCE

 

 

(1) Portions of Popular, Inc.’s definitive proxy statement relating to the 2022 Annual Meeting of Stockholders of Popular, Inc. (the “Proxy Statement”) are incorporated herein by reference in response to Items 10 through 14 of Part III. The Proxy Statement will be filed with the Securities and Exchange Commission (the “SEC”) on or about March 30, 2022.

 

2


 

Forward-Looking Statements

This Form 10-K contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including, without limitation, statements about Popular Inc.’s (the “Corporation,” “Popular,” “we,” “us,” “our”) business, financial condition, results of operations, plans, objectives and future performance. These statements are not guarantees of future performance, are based on management’s current expectations and, by their nature, involve risks, uncertainties, estimates and assumptions. Potential factors, some of which are beyond the Corporation’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Risks and uncertainties include without limitation the effect of competitive and economic factors, and our reaction to those factors, the adequacy of the allowance for loan losses, delinquency trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect of legal and regulatory proceedings and new accounting standards on the Corporation’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions are generally intended to identify forward-looking statements.

 

Various factors, some of which are beyond Popular’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Factors that might cause such a difference include, but are not limited to:

 

the rate of growth or decline in the economy and employment levels, as well as general business and economic conditions in the geographic areas we serve and, in particular, in the Commonwealth of Puerto Rico (the “Commonwealth” or “Puerto Rico”), where a significant portion of our business is concentrated;

 

the impact of the current fiscal and economic challenges of Puerto Rico and the measures taken and to be taken by the Puerto Rico Government and the Federally-appointed oversight board on the economy, our customers and our business;

 

the impact of the pending debt restructuring proceedings under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”) and of other actions taken or to be taken to address Puerto Rico’s fiscal challenges on the value of our portfolio of Puerto Rico government securities and loans to governmental entities and of our commercial, mortgage and consumer loan portfolios where private borrowers could be directly affected by governmental action;

 

the amount of Puerto Rico public sector deposits held at the Corporation, whose future balances are uncertain and difficult to predict and may be impacted by factors such as the amount of Federal funds received by the P.R. Government in connection with the COVID-19 pandemic and the rate of expenditure of such funds, as well as the timeline and implementation of the Plan of Adjustment for the Puerto Rico debt restructuring under Title III of PROMESA;

 

risks related to Popular’s planned acquisition of certain information technology and related assets currently used by EVERTEC, Inc. to service certain of Banco Popular de Puerto Rico’s key channels, as well as the planned entry into amended and restated commercial agreements and the sale or conversion into non-voting of Popular’s ownership stake in Evertec (the “Transaction”), including: the length of time necessary to consummate the Transaction; the ability to satisfy the conditions to the closing thereof; the receipt of any regulatory approvals necessary to effect the Transaction and the contemplated return to shareholders of net gains resulting from a sale of EVERTEC, Inc. shares; the ability to successfully transition and integrate the assets acquired as part of the Transaction, as well as related operations, employees and third party contractors; unexpected costs, including, without limitation, costs due to exposure to any unrecorded liabilities or issues not identified during due diligence investigation of the Transaction or that are not subject to indemnification or reimbursement by EVERTEC, Inc.; risks that Popular may be affected by operational and other risks arising from the acquisition of the acquired assets, including the transition and integration thereof, or by adverse effects on relationships with customers, employees and service providers; and business and other risks arising from the extension of Popular’s current commercial agreements with EVERTEC, Inc., as well as the sale or conversion of EVERTEC, Inc. shares owned by Popular;

 

3


 

the scope and duration of the COVID-19 pandemic (including the appearance of new strains of the virus), actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on us, our customers, service providers and third parties;

 

changes in interest rates and market liquidity, which may reduce interest margins, impact funding sources and affect our ability to originate and distribute financial products in the primary and secondary markets;

 

the fiscal and monetary policies of the federal government and its agencies;

 

changes in federal bank regulatory and supervisory policies, including required levels of capital and the impact of proposed capital standards on our capital ratios;

 

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

 

regulatory approvals that may be necessary to undertake certain actions or consummate strategic transactions, such as acquisitions and dispositions;

 

unforeseen or catastrophic events, including extreme weather events, other natural disasters, man-made disasters, acts of violence or war or the emergence of pandemics, epidemics and other health-related crises, which could cause a disruption in our operations or other adverse consequences for our business;

 

the relative strength or weakness of the consumer and commercial credit sectors and of the real estate markets in Puerto Rico and the other markets in which borrowers are located;

 

the performance of the stock and bond markets;

 

competition in the financial services industry;

 

possible legislative, tax or regulatory changes; and

 

a failure in or breach of our operational or security systems or infrastructure or those of EVERTEC, Inc., our provider of core financial transaction processing and information technology services, or of other third parties providing services to us, including as a result of cyberattacks, e-fraud, denial-of-services and computer intrusion, that might result in loss or breach of customer data, disruption of services, reputational damage or additional costs to Popular.

 

Other possible events or factors that could cause our results or performance to differ materially from those expressed in these forward-looking statements include the following:

 

negative economic conditions that adversely affect housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of non-performing assets, charge-offs and provision expense;

 

changes in market rates and prices which may adversely impact the value of financial assets and liabilities;

 

potential judgments, claims, damages, penalties, fines, enforcement actions and reputational damage resulting from pending or future litigation and regulatory or government investigations or actions, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic;

 

changes in accounting standards, rules and interpretations;

 

our ability to grow our core businesses;

 

decisions to downsize, sell or close units or otherwise change our business mix; and

 

management’s ability to identify and manage these and other risks.

4


 

Moreover, the outcome of legal and regulatory proceedings, as discussed in “Part I, Item 3. Legal Proceedings,” is inherently uncertain and depends on judicial interpretations of law and the findings of regulators, judges and/or juries. Investors should refer to “Part I, Item 1A” of this Form 10-K for a discussion of certain risks and uncertainties to which the Corporation is subject.

 

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

5


 

TABLE OF CONTENTS

PART I

 

Page

Item 1

Business

7

Item 1A

Risk Factors

21

Item 1B

Unresolved Staff Comments

39

Item 2

Properties

39

Item 3

Legal Proceedings

40

Item 4

Mine Safety Disclosures

40

 

 

 

PART II

 

 

Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

40

Item 6

[Reserved]

43

Item 7

Management’s Discussion and Analysis of Financial Condition and Results of Operations

43

Item 7A

Quantitative and Qualitative Disclosures About Market Risk

43

Item 8

Financial Statements and Supplementary Data

44

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

44

Item 9A

Controls and Procedures

44

Item 9B

Other Information

44

Item 9C

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

44

 

 

 

PART III

 

 

Item 10

Directors, Executive Officers and Corporate Governance

44

Item 11

Executive Compensation

45

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

45

Item 13

Certain Relationships and Related Transactions, and Director Independence

45

Item 14

Principal Accountant Fees and Services

45

 

 

 

PART IV

 

 

Item 15

Exhibits and Financial Statement Schedules

45

Item 16

Form 10-K Summary

46

6


 

PART I POPULAR, INC.

ITEM 1. BUSINESS

General

Popular is a diversified, publicly-owned financial holding company, registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”) and subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). Popular was incorporated in 1984 under the laws of the Commonwealth of Puerto Rico and is the largest financial institution based in Puerto Rico, with consolidated assets of $75.1 billion, total deposits of $67.0 billion and stockholders’ equity of $6.0 billion at December 31, 2021. At December 31, 2021, we ranked among the 50 largest U.S. bank holding companies based on total assets according to information gathered and disclosed by the Federal Reserve Board.

We operate in two principal markets:

Puerto Rico: We provide retail, mortgage and commercial banking services through our principal banking subsidiary, Banco Popular de Puerto Rico (“Banco Popular” or “BPPR”), as well as auto and equipment leasing and financing, investment banking, broker-dealer and insurance services through specialized subsidiaries. BPPR’s deposits are insured under the Deposit Insurance Fund (“DIF”) of the Federal Deposit Insurance Corporation (“FDIC”). The banking operations of BPPR are primarily based in Puerto Rico, where BPPR has the largest retail banking franchise.

 

Mainland United States: We provide retail, mortgage and commercial banking services through our New York-chartered banking subsidiary, Popular Bank (“PB” or “Popular U.S.”), which has branches in New York, New Jersey and Florida; as well as commercial direct financing leases through a specialized subsidiary, Popular Equipment Finance LLC in Minnesota. PB’s deposits are insured under the DIF of the FDIC.

 

BPPR also conducts banking operations in the U.S. Virgin Islands, the British Virgin Islands and New York. In addition to BPPR’s commercial banking operations in New York, BPPR offers financial products on a National scale in the U.S. market, including by operating an online platform used to originate personal loans under the E-Loan brand, issuing several co-branded credit cards offerings and gathering insured institutional deposits via online deposit gathering platforms. In the U.S. and British Virgin Islands, BPPR offers a range of banking products, including loans and deposits to both retail and commercial customers.

 

For further information about the Corporation’s results segregated by its reportable segments, see “Reportable Segment Results” in the Management’s Discussion and Analysis section of the Annual Report and Note 37 included in the Annual Report in this Form 10-K.

 

Refer to the Overview section of Management’s Discussion and Analysis, in the Annual Report in this Form 10-K., for information on recent significant events that have impacted or will impact our current and future operations.

 

Lending Activities

 

We concentrate our lending activities in the following areas:

 

(1) Commercial. Commercial loans are comprised of (i) commercial and industrial (C&I) loans and leases to commercial customers for use in normal business operations and to finance working capital needs, equipment purchases or other projects, and (ii) commercial real estate (CRE) loans (excluding construction loans) for income-producing real estate properties as well as owner-occupied properties. C&I loans are underwritten individually and usually secured with the assets of the company and the personal guarantee of the business owners. CRE loans consist of loans for income-producing real estate properties and the financing of owner-occupied facilities if there is real estate as collateral. Non-owner-occupied CRE loans are generally made to finance office and industrial buildings, healthcare facilities, multifamily buildings and retail shopping centers and are repaid through cash flows related to the operation, sale or refinancing of the property.

 

7


 

(2) Mortgage. Mortgage loans include residential mortgage loans to consumers for the purchase or refinancing of a residence and also include residential construction loans made to individuals for the construction of refurbishment of their residence.

 

(3) Consumer. Consumer loans are mainly comprised of personal loans, credit cards, and automobile loans, and to a lesser extent home equity lines of credit (“HELOCs”) and other loans made by banks to individual borrowers.

 

(4) Construction. Construction loans are CRE loans to companies or developers used for the construction of a commercial or residential property for which repayment will be generated by the sale or permanent financing of the property. Our construction loan portfolio primarily consists of retail, residential (land and condominiums), office and warehouse product types.

 

(5) Lease Financings. Lease financings are offered by BPPR and are primarily comprised of automobile loans/leases made through automotive dealerships and equipment lease financings.

 

Business Concentration

 

Since our business activities are currently concentrated primarily in Puerto Rico, our 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 our operations in Puerto Rico exposes us to greater risk than other banking companies with a wider geographic base. Our asset and revenue composition by geographical area is presented in “Financial Information about Geographic Areas” below and in Note 37 in the Annual Report in this Form 10-K.

 

Our loan portfolio is diversified by loan category. However, approximately 57% of our loan portfolio at December 31, 2021 consisted of real estate-related loans, including residential mortgage loans, construction loans and commercial loans secured by commercial real estate. The table below presents the distribution of our loan portfolio by loan category at December 31, 2021.

 

Loan category

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in millions)

BPPR

%

 

PB

%

 

POPULAR

%

C&I

$3,529

17

 

$1,811

22

 

$5,340

18

CRE

3,868

18

 

4,526

54

 

8,394

29

Construction

87

-

 

629

7

 

716

2

Leasing

1,381

7

 

-

-

 

1,381

5

Consumer

5,748

28

 

235

3

 

5,983

21

Mortgage

6,252

30

 

1,175

14

 

7,427

25

Total

$20,865

100

 

$8,376

100

 

$29,241

100

 

Except for the Corporation’s exposure to the Puerto Rico Government sector, no individual or single group of related accounts is considered material in relation to our total assets or deposits, or in relation to our overall business. For a discussion of our loan portfolio and our exposure to the Government of Puerto Rico, see “Financial Condition – Loans” and “Credit Risk – Geographical and Government Risk” in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report in this Form 10-K.

 

Credit Administration and Credit Policies

 

Interest from our loan portfolios is our principal source of revenue. Whenever we make loans, we expose ourselves to credit risk. Credit risk is controlled and monitored through active asset quality management, including the use of lending standards, thorough review of potential borrowers and active asset quality administration.

 

Business activities that expose us to credit risk are managed within the Board of Director’s Risk Management policy, and the Credit Risk Tolerance Limits policy, which establishes limits that consider factors such as maintaining a prudent balance of risk-taking across diversified risk types and business units, compliance with regulatory guidance, controlling the exposure to lower credit quality assets, and limiting growth in, and overall exposure to, any product or risk segment where we do not have sufficient experience and a proven ability to predict credit losses.

8


 

 

We maintain comprehensive credit policies for all lines of business in order to mitigate credit risk. Our credit policies are approved by our Board of Directors. These policies set forth, among other things, the objectives, scope and responsibilities of the credit management cycle. Our internal written procedures establish underwriting standards and procedures for monitoring and evaluating loan portfolio quality and require prompt identification and quantification of asset quality deterioration or potential loss to ensure the adequacy of the allowance for credit losses. These written procedures establish various approval and lending limit levels, ranging from bank branch or department officers to managerial and senior management levels. Approval levels are primarily determined by the amount, type of loan and risk characteristics of the credit facility.

 

Our credit policies and procedures establish documentation requirements for each loan and related collateral type, when applicable, during the underwriting, closing and monitoring phases. For commercial and construction loans, during the initial loan underwriting process, the credit policies require, at a minimum, historical financial statements or tax returns of the borrower and any guarantor, an analysis of financial information contained in a credit approval package, a risk rating determination and reports from credit agencies and appraisals for real estate-related loans. The credit policies also set forth the required closing documentation depending on the loan and the collateral type.

 

Although we originate most of our loans internally in both the Puerto Rico and mainland United States markets, we occasionally purchase or participate in loans originated by other financial institutions. When we purchase or participate in loans originated by others, we conduct the same underwriting analysis of the borrowers and apply the same criteria as we do for loans originated by us. This also includes a review of the applicable legal documentation.

 

Refer to the Credit Risk section of Management’s Discussion and Analysis, in the Annual Report in this Form 10-K for information related to management committees and divisions with responsibilities for establishing policies and monitoring the Corporation’s credit risk.

 

Loan extensions, renewals and restructurings

 

Loans with satisfactory credit profiles can be extended, renewed or restructured. Many commercial loan facilities are structured as lines of credit, which are mainly one year in term and therefore are required to be renewed annually. Other facilities may be restructured or extended from time to time based upon changes in the borrower’s business needs, use of funds, timing of completion of projects and other factors. If the borrower is not deemed to have financial difficulties, extensions, renewals and restructurings are done in the normal course of business and are not considered concessions, and the loans continue to be recorded as performing.

 

We evaluate various factors to determine if a borrower is experiencing financial difficulties. Indicators that the borrower is experiencing financial difficulties include, for example: (i) the borrower is currently in default on any of its debt or it is probable that the borrower would be in payment default on any of its debt in the foreseeable future without the modification; (ii) the borrower has declared or is in the process of declaring bankruptcy; (iii) there is significant doubt as to whether the borrower will continue to be a going concern; (iv) currently, the borrower has securities that have been delisted, are in the process of being delisted, or are under threat of being delisted from an exchange; and (v) based on estimates and projections that only encompass the current business capabilities, the borrower forecasts that its entity-specific cash flows will be insufficient to service the debt (both interest and principal) in accordance with the contractual terms of the existing agreement through maturity; and absent the current modification, the borrower cannot obtain funds from sources other than the existing creditors at an effective interest rate equal to the current market interest rate for similar debt for a non-troubled debtor.

 

We have specialized workout officers who handle the majority of commercial loans that are past due 90 days and over, borrowers experiencing financial difficulties, and those that are considered problem loans based on their risk profile. As a general policy, we do not advance additional money to borrowers that are 90 days past due or over. In commercial and construction loans, certain exceptions may be approved under certain circumstances, including (i) when past due status is administrative in nature, such as expiration of a loan facility before the new documentation is executed, and not as a result of payment or credit issues; (ii) to improve our collateral position or otherwise maximize recovery or mitigate potential future losses; and (iii) with respect to certain entities that, although related through common ownership, are not cross defaulted nor cross-collateralized and are performing satisfactorily under their respective loan facilities.

9


 

Such advances are underwritten and approved following our credit policy guidelines and limits, which are dependent on the borrower’s financial condition, collateral and guarantee, among others.

 

In addition to the legal lending limit established under applicable state banking law, discussed in detail below, business activities that expose the Corporation to credit risk should be managed within guidelines described in the Credit Risk Tolerance Limits policy. Limits are defined for loss and credit performance metrics, portfolio composition and concentration, and industry and name-level, which monitors lending concentration to a single borrower or a group of related borrowers, including specific lending limits based on industry or other criteria, such as a percentage of the banks capital.

 

Refer to Note 2 and Note 9 to the Consolidated Financial Statements, in the Annual Report in this Form 10-K, for additional information on troubled debt restructuring (“TDRs”).

 

Competition

 

The financial services industry in which we operate is highly competitive. In Puerto Rico, our primary market, the banking business is highly competitive with respect to originating loans, acquiring deposits and providing other banking services. Most of our direct competition for our products and services comes from commercial banks and credit unions. The principal competitors for BPPR include locally based commercial banks and a few large U.S. and foreign banks with operations in Puerto Rico. While the number of banking competitors in Puerto Rico has been reduced in recent years as a result of consolidations, these transactions have allowed some of our competitors to gain greater resources, such as a broader range of products and services.

 

We also compete with specialized players in the local financial industry that are not subject to the same regulatory restrictions as domestic banks and bank holding companies. Those competitors include brokerage firms, mortgage companies, insurance companies, automobile and equipment finance companies, local and federal credit unions (locally known as “cooperativas”), credit card companies, consumer finance companies, institutional lenders and other financial and non-financial institutions and entities. Credit unions generally provide basic consumer financial services. These competitors collectively represent a significant portion of the market and have lower cost structure and fewer regulatory constraints.

 

In the United States we continue to face substantial competitive pressure as our footprint resides in the two large, metropolitan markets of New York City / Northern New Jersey and the greater Miami area. There is a large number of community and regional banks along with national banking institutions present in both markets, many of which have a larger amount of resources than us.

 

In both Puerto Rico and the United States, the primary factors in competing for business include pricing, convenience of branch locations and other delivery methods, range of products offered, and the level of service delivered. We must compete effectively along all these parameters to be successful. We may experience pricing pressure as some of our competitors seek to increase market share by reducing prices or offering more flexible terms. Competition is particularly acute in the market for deposits, where pricing is very aggressive. Increased competition could require that we increase the rates offered on deposits or lower the rates charged on loans, which could adversely affect our profitability.

 

Economic factors, along with legislative and technological changes, will have an ongoing impact on the competitive environment within the financial services industry. We work to anticipate and adapt to dynamic competitive conditions whether it may be developing and marketing innovative products and services, adopting or developing new technologies that differentiate our products and services, cross-marketing, or providing personalized banking services. We strive to distinguish ourselves from other community banks and financial services providers in our marketplace by providing a high level of service to enhance customer loyalty and to attract and retain business. However, we can provide no assurance as to the effectiveness of these efforts on our future business or results of operations, and as to our continued ability to anticipate and adapt to changing conditions, and to sufficiently improve our services and/or banking products, in order to successfully compete in our primary service areas.

 

Human Capital Management

 

Attracting, developing, and retaining top talent in an environment that promotes wellness, inclusion, learning, and transparency is a

10


 

fundamental pillar of our long-term strategy. As of December 31, 2021, Popular employed approximately 8,500 employees, none of which are represented by a collective bargaining group.

 

Employee Well-Being & Safety

 

We are cognizant that our journey to become a better organization is dependent on our employees’ wellbeing. It is the foundation of our ability to fulfill our commitment to support our customers and the communities we serve. The Corporation offers its employees a comprehensive benefits package, including, but not limited to, health insurance, leaves and wellness initiatives. Our full and part-time employees have access to affordable healthcare with Popular covering 88% of the premium in Puerto Rico and the Virgin Islands, and 80% of the premium in the mainland United States. In both regions, the amount Popular covers is better than the benchmark. Additionally, the Corporation promotes employee health by encouraging annual physical exams and maintaining a Health and Wellness Center staffed with doctors, nurses, and other healthcare professionals at its Puerto Rico-based corporate offices, where employees can complete their physical exam, come in for acute care or visit a nutritionist or psychologist free of charge. The Health and Wellness Center received more than 13,164 in-person and virtual visits from employees during 2021, a key component to effectively manage the challenges provoked by the pandemic.

 

We also provide targeted benefits aimed at promoting work-life balance. For example, the Corporation’s time off program includes community service leave, paid parental leave (including for childbirth, adoption, and bonding time) and flexible work arrangements. In addition, in response to the COVID-19 pandemic, a Hybrid Work Model pilot was launched in 2021 for which 45% of the Corporation’s positions are eligible. To support our employees’ emotional well-being during the pandemic, we continued enhancing our Well-Being Academy by adapting our Employee Assistance Program to offer virtual mental health conversations geared at managing work and life challenges. In addition, the Corporation offers physical fitness events and breaks, as well as employee workshops on personal financial management.

 

To provide for the safety of our colleagues, we have continuously monitored COVID-19 infections among our employee population throughout the pandemic. Popular’s effective implementation of its established COVID-19 protocols has contributed to the health and safety of our customers, employees, and their families. Vaccination clinics were also hosted during 2021 to help our employees and their families receive the first and second dose of the COVID-19 vaccine. Approximately 2,900 employees and 1,220 dependents benefited from these efforts. Supported by our vaccination mandate, Popular reached a vaccination rate among its employees of 96.7% as of December 31, 2021.

 

Talent Development

 

Popular seeks to develop the skills of its employees and leaders to sustain the Corporation’s competitive advantage. Employees are subject to mandatory trainings in connection with regulatory compliance matters and other key topics throughout the year. Our 40,000 square foot Development Center in San Juan, Puerto Rico offers training sessions, activities, and workshops year-round. In 2021, the Corporation remained offering virtual training sessions after effectively transitioning most offerings provided in the Development Center to a virtual setting to continue impacting employee growth despite the pandemic. More than 215 sessions were delivered, with 5,204 participating employees. Popular also launched LinkedIn Learning, which features over 16,000 on-demand e-learning programs to strengthen and advance the Corporation’s development strategies for all its employees. The Corporation is proud to have received the Brandon Hall Group’s 2021 Excellence Award in Technology for its Targeted English Program. This program helps employees whose first language is Spanish to strengthen their English language skills and feel confident speaking, reading, and writing in business or personal settings. Popular’s strong training and development framework has contributed to increased internal growth opportunities for our employees. As a result, 44% of employees had mobility opportunities in 2021.

 

Recognizing that leadership development is crucial to driving results, keeping employees engaged, and achieving the Corporation’s strategic goals, Popular has implemented programs aimed at strengthening and developing leadership skills and effective talent management. For example, during 2021 our leaders received virtual readiness trainings to help them support their teams to adapt to new working environments and ways of working resulting from the effects of the COVID-19 pandemic. As part of the Corporation’s Executive Leadership Development strategy, readiness courses were offered to employees in topics such as change management, conscious inclusion, leading hybrid teams, and better conversations focused on the return to office scenarios.

 

Diversity, Equity, and Inclusion

 

11


 

At Popular, we value our differences and strive to improve the workplace experience for all. As of December 31, 2021, 66% of the Corporation’s employees were female, while 34% were male. Women accounted for 63% of first and mid-level management and 30% of executive-level management as of such date. The Corporation also maintains a multidisciplinary council, headed by our Corporate Diversity Officer, which helps develop and implement initiatives to support the Corporation’s Diversity, Equity, and Inclusion (DE&I) Policy and strategy. The Corporation’s DE&I strategy seeks to broaden the inclusion, employment advancement and development of minorities and women in the workplace, as well as the utilization of suppliers owned, controlled, or operated by minorities and/or women. In addition, this strategy seeks to prepare the Corporation’s employees to recognize and value the differences of those we serve.

 

During 2021, Popular was honored to be included in the 2022 Bloomberg Gender Equality Index (GEI). Popular was also listed as one of the 15 best workplaces for women in the Caribbean and Central America by Great Place to Work® in 2021.

 

Popular is an organization committed to fair pay and conducts analyses on an annual basis with related pay adjustment strategies to address gender gaps. As a result, our gender pay gap continues to narrow and is now lower than the nationwide median, according to data from the US Census Bureau.

 

The Corporation has also expressed public support of movements advocating for equality such as Pride Month. In 2021, Popular established its first Employee Resource Group for our LGBT+ employees to better serve the interests of the community and create awareness and engagement among employees. Popular also introduced the Gender and Domestic Violence Policy which grants a paid 15-day leave for victims of gender violence, domestic violence, stalking and/or sexual harassment.

 

Employee Experience

 

Popular aims to provide an excellent employee experience that inspires its employees to provide customers and communities with the best service. To understand its employees’ experience, the Corporation conducts anonymous pulse and engagement surveys (including the Great Place to Work survey) as well as exit interviews to identify areas of opportunity and set and monitor action plans. In 2021, Popular was listed as one of the top 15 best workplaces in the Caribbean by Great Place to Work®. We seek to continuously measure and improve the employee experience with aims to increase employee productivity while contributing to enhance customer satisfaction and improve business results.

 

The Corporation launched an interactive dashboard that encompasses data surrounding different people-related topics to support the people strategy, data-driven decision-making and environmental, social and governance (“ESG”) monitoring. The dashboard provides senior management with visibility of people metrics. As of year-end 2021, our voluntary turnover rate was 11%.

 

Board Oversight

 

The Talent and Compensation Committee of the Corporation’s Board of Directors has oversight responsibility for the Corporation’s human capital management. As part of its responsibilities, the Talent and Compensation Committee reviews and advises management on the Corporation’s general compensation philosophy, programs, and policies, and on the Corporation’s talent development, succession planning, culture, diversity, equity (including pay equity) and inclusion, among other human capital topics.

 

We encourage you to review our Corporate Sustainability information published on www.popular.com for more detailed information regarding the Corporation’s human capital management programs and initiatives. The information on the Corporation’s website, including the Corporation’s Corporate Sustainability Reports, is not, and will not be deemed to be, a part of this annual report on Form 10-K or incorporated into any of the Corporation’s filings with the SEC.

 

Regulation and Supervision

 

Described below are the material elements of selected laws and regulations applicable to Popular, Popular North America (“PNA”) and their respective subsidiaries. Such laws and regulations are continually under review by Congress and state legislatures and federal and state regulatory agencies. Any change in the laws and regulations applicable to Popular and its subsidiaries could have a material effect on the business of Popular and its subsidiaries. We will continue to assess our businesses

12


 

and risk management and compliance practices to conform to developments in the regulatory environment.

General

Popular and PNA are bank holding companies subject to consolidated supervision and regulation by the Federal Reserve Board under the BHC Act. BPPR and PB are subject to supervision and examination by applicable federal and state banking agencies including, in the case of BPPR, the Federal Reserve Board and the Office of the Commissioner of Financial Institutions of Puerto Rico (the “Office of the Commissioner”), and, in the case of PB, the Federal Reserve Board and the New York State Department of Financial Services (the “NYSDFS”).

Enhanced Prudential Standards

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), as modified by the Economic Growth, Regulatory Relief, and Consumer Protection Act and the federal banking regulators’ 2019 “Tailoring Rules,” banking organizations are categorized based on status as a U.S. G-SIB, size and four other risk-based indicators. Among bank holding companies with $100 billion or more in total consolidated assets, the most stringent standards apply to U.S. G-SIBs, which are subject to Category I standards and the least stringent standards apply to Category IV organizations, which have between $100 billion and $250 billion in total consolidated assets and less than $75 billion in all four other risk-based indicators and which are also not U.S. G-SIBs. Bank holding companies with total consolidated assets of $50 billion or more are subject to risk committee and risk management requirements. As of December 31, 2021, Popular had total consolidated assets of $75.1 billion.

Transactions with Affiliates

BPPR and PB are subject to restrictions that limit the amount of extensions of credit and certain other “covered transactions” (as defined in Section 23A of the Federal Reserve Act) between BPPR or PB, on the one hand, and Popular, PNA or any of our other non-banking subsidiaries, on the other, and that impose collateralization requirements on such credit extensions. A bank may not engage in any covered transaction if the aggregate amount of the bank’s covered transactions with that affiliate would exceed 10% of the bank’s capital stock and surplus or the aggregate amount of the bank’s covered transactions with all affiliates would exceed 20% of the bank’s capital stock and surplus. In addition, any transaction between BPPR or PB, on the one hand, and Popular, PNA or any of our other non-banking subsidiaries, on the other, is required to be carried out on an arm’s length basis.

 

Source of Financial Strength

The Dodd-Frank Act requires bank holding companies, such as Popular and PNA, to act as a source of financial and managerial strength to their subsidiary banks. Popular and PNA are expected to commit resources to support their subsidiary banks, including at times when Popular and PNA may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary depository institutions are subordinated in right of payment to depositors and to certain other indebtedness of such subsidiary depository institution. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal banking agency to maintain the capital of a subsidiary depository institution will be assumed by the bankruptcy trustee and entitled to a priority of payment. BPPR and PB are currently the only insured depository institution subsidiaries of Popular and PNA.

Resolution Planning

A bank holding company with $250 billion or more in total consolidated assets (or that is a Category III firm based on certain risk-based indicators described in the Tailoring Rules) is required to report periodically to the FDIC and the Federal Reserve Board such company’s plan for its rapid and orderly resolution in the event of material financial distress or failure. In addition, insured depository institutions with total assets of $50 billion or more are required to submit to the FDIC periodic contingency plans for resolution in the event of the institution’s failure. In June 2021, the FDIC issued a Statement on Resolution Plans for Insured Depository Institutions, which, among other things, establishes a three-year filing cycle for banks with $100 billion or more in total assets and provides details regarding the content that filers will be expected to prepare.

As of December 31, 2021, Popular, PNA, BPPR and PB’s total assets were below the thresholds for applicability of these rules.

FDIC Insurance

Substantially all the deposits of BPPR and PB are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of the FDIC, and BPPR and PB are subject to FDIC deposit insurance assessments to maintain the DIF. Deposit insurance assessments are based on the average consolidated total assets of the insured depository institution minus the average tangible equity of the institution during the assessment period. For larger depository institutions with over $10 billion in assets, such as BPPR

13


 

and PB, the FDIC uses a “scorecard” methodology, which considers CAMELS ratings, among other measures, that seeks to capture both the probability that an individual large institution will fail and the magnitude of the impact on the DIF if such a failure occurs. The FDIC has the ability to make discretionary adjustments to the total score based upon significant risk factors that are not adequately captured in the calculations. The initial base deposit insurance assessment rate for larger depository institutions ranges from 3 to 30 basis points on an annualized basis. After the effect of potential base-rate adjustments, the total base assessment rate could range from 1.5 to 40 basis points on an annualized basis.

 

As of December 31, 2021, we had a DIF average total asset less average tangible equity assessment base of approximately $69 billion.

 

Brokered Deposits

The FDIA and regulations adopted thereunder restrict the use of brokered deposits and the rate of interest payable on deposits for institutions that are less than well capitalized. There are no such restrictions on a bank that is well capitalized (see “Prompt Corrective Action” below for a description of the standard of “well capitalized”). Popular does not believe the brokered deposits regulations, and the proposed amendments, have had or will have a material effect on the funding or liquidity of BPPR and PB.

Capital Adequacy

Popular, Popular, BPPR and PB are each required to comply with applicable capital adequacy standards established by the federal banking agencies (the “Capital Rules”), which implement the Basel III framework set forth by Basel Committee on Banking Supervision (the “Basel Committee”) as well as certain provisions of the Dodd-Frank Act.

 

Among other matters, the Capital Rules: (i) impose a capital measure called “Common Equity Tier 1” (“CET1”) and the related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain revised requirements; and (iii) mandate that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital. Under the Capital Rules, for most banking organizations, including Popular, the most common form of Additional Tier 1 capital is non-cumulative perpetual preferred stock and the most common form of Tier 2 capital is subordinated notes and a portion of the allocation for loan and lease losses, in each case, subject to the Capital Rules’ specific requirements.

 

Pursuant to the Capital Rules, the minimum capital ratios are:

4.5% CET1 to risk-weighted assets;

6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;

8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

4% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).

 

The Capital Rules also impose a “capital conservation buffer,” composed entirely of CET1, on top of these minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall and eligible retained income (that is, four quarter trailing net income, net of distributions and tax effects not reflected in net income). Thus, Popular, BPPR and PB are required to maintain such additional capital conservation buffer of 2.5% of CET1, effectively resulting in minimum ratios of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, and (iii) Total capital to risk-weighted assets of at least 10.5%.

In addition, under prior risk-based capital rules, the effects of accumulated other comprehensive income or loss (“AOCI”) items included in stockholders’ equity (for example, marks-to-market of securities held in the available for sale portfolio) under U.S. GAAP were reversed for the purposes of determining regulatory capital ratios. Pursuant to the Basel III Capital Rules, the effects of certain AOCI items are not excluded; however, non-advanced approaches banking organizations, including Popular, BPPR and PB, may make a one-time permanent election to continue to exclude these items. Popular, BPPR and PB have made this election in order to avoid significant variations in the level of capital depending upon the impact of interest rate fluctuations on the fair value of their securities portfolios.

14


 

The Capital Rules preclude certain hybrid securities, such as trust preferred securities, from inclusion in bank holding companies’ Tier 1 capital. Trust preferred securities no longer included in Popular’s Tier 1 capital may nonetheless be included as a component of Tier 2 capital. Popular has not issued any trust preferred securities since May 19, 2010. At December 31, 2021, Popular has $193 million of trust preferred securities outstanding which no longer qualify for Tier 1 capital treatment, but instead qualify for Tier 2 capital treatment.

The Capital Rules also provide for a number of deductions from and adjustments to CET1. Non-advanced approaches banking organizations are subject to rules that provide for simplified capital requirements relating to the threshold deductions for certain mortgage servicing assets, deferred tax assets, investments in the capital of unconsolidated financial institutions and inclusion of minority interests in regulatory capital.

Failure to meet capital guidelines could subject Popular and its depository institution subsidiaries to a variety of enforcement remedies, including the termination of deposit insurance by the FDIC and to certain restrictions on our business. Refer to “Prompt Corrective Action” below for further discussion.

In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms. Among other things, these standards revise the Basel Committee’s standardized approach for credit risk (including by recalibrating risk weights and introducing new capital requirements for certain “unconditionally cancellable commitments,” such as unused credit card lines of credit) and provide a new standardized approach for operational risk capital. These standards will generally be effective on January 1, 2023, with an aggregate output floor phasing in through January 1, 2028. Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to advanced approaches institutions, and not to Popular, BPPR and PB. The impact of these standards on us will depend on the manner in which they are implemented by the federal bank regulators.

In December 2018, the federal banking agencies approved a final rule modifying their regulatory capital rules and providing an option to phase in over a period of three years the day-one regulatory capital effects of the Current Expected Credit Loss (“CECL”) model of ASU 2016-13. The final rule also revised the agencies’ other rules to reflect the update to the accounting standards. Popular has availed itself of the option to phase in over a period of three years the day one effects on regulatory capital from the adoption of CECL. In 2020, federal bank regulators adopted a rule that allowed banking organizations to elect to delay temporarily the estimated effects of adopting the current expected credit losses accounting standard (“CECL”) on regulatory capital until January 2022 and subsequently to phase in the effects through January 2025. Under the rule, during 2020 and 2021, the adjustment to CET1 capital reflects the change in retained earnings upon adoption of CECL at January 1, 2020, plus 25% of the increase in the allowance for credit losses since January 1, 2020.

Refer to the Consolidated Financial Statements in the Annual Report in this Form 10-K., Note 21 and Table 8 of Management’s Discussion and Analysis for the capital ratios of Popular, BPPR and PB under Basel III. Refer to the Consolidated Financial Statements in the Annual Report in this Form 10-K Note 3 for more information regarding CECL.

 

Prompt Corrective Action

The Federal Deposit Insurance Act (the “FDIA”) requires, among other things, the federal banking agencies to take prompt corrective action in respect of insured depository institutions that do not meet minimum capital requirements. The FDIA establishes five capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized”. A depository institution’s capital tier will depend upon how its capital levels compare with various relevant capital measures and certain other factors.

An insured depository institution will be deemed to be (i) “well capitalized” if the institution has a total risk-based capital ratio of 10.0% or greater, a CET1 capital ratio of 6.5% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, and a leverage ratio of 5.0% or greater, and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if the institution has a total risk-based capital ratio of 8.0% or greater, a CET1 capital ratio of 4.5% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, and a leverage ratio of 4.0% or greater and is not “well capitalized”; (iii) “undercapitalized” if the institution has a total risk-based capital ratio that is less than 8.0%, a CET1 capital ratio less than 4.5%, a Tier 1 risk-based capital ratio of less than 6.0% or a leverage ratio of less than 4.0%; (iv) “significantly undercapitalized” if the institution has a total risk-based capital ratio of less than 6.0%, a CET1 capital ratio less than 3%, a Tier 1 risk-based capital ratio of less than 4.0% or a leverage ratio of less than 3.0%; and (v) “critically undercapitalized” if the institution’s tangible equity is equal to or less than 2.0% of average quarterly tangible assets. An institution may be

15


 

downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. An insured depository institution’s capital category is determined solely for the purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the institution’s overall financial condition or prospects for other purposes.

The FDIC generally prohibits an insured depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company, if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System. In addition, undercapitalized depository institutions are subject to growth limitations and are required to submit capital restoration plans. A depository institution’s holding company must guarantee the capital restoration plan, up to an amount equal to the lesser of 5% of the depository institution’s assets at the time it becomes undercapitalized or the amount of the capital deficiency, when the institution fails to comply with the plan. The federal banking agencies may not accept a capital restoration plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.

Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized depository institutions are subject to appointment of a receiver or conservator.

The capital-based prompt corrective action provisions of the FDIA apply to the FDIC-insured depository institutions such as BPPR and PB, but they are not directly applicable to holding companies such as Popular and PNA, which control such institutions. As of December 31, 2021, both BPPR and PB were well capitalized.

Restrictions on Dividends and Repurchases

The principal sources of funding for Popular and PNA have included dividends received from their banking and non-banking subsidiaries, asset sales and proceeds from the issuance of debt and equity. 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 year ended December 31, 2021, BPPR declared cash dividends of $761 million, a portion of which was used by Popular for the payments of the cash dividends on its outstanding common stock, $350 million in accelerated stock repurchases and $181 million in the redemption of trust preferred securities. At December 31, 2021, BPPR have needed to obtain prior approval of the Federal Reserve Board before declaring a dividend due to its declared dividend activity and transfers to statutory reserves over the three year’s ended December 31, 2021. 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.

It is Federal Reserve Board policy that bank holding companies generally should pay dividends on common stock only out of net income available to common shareholders over the past year and only if the prospective rate of earnings retention appears consistent with the organization’s current and expected future capital needs, asset quality and overall financial condition. Moreover, under Federal Reserve Board policy, a bank holding company should not maintain dividend levels that place undue pressure on the capital of depository institution subsidiaries or that may undermine the bank holding company’s ability to be a source of strength to its banking subsidiaries. Federal Reserve policy also provides that a bank holding company should inform the Federal Reserve reasonably in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the bank holding company's capital structure.

The Federal Reserve Board also restricts the ability of banking organizations to conduct stock repurchases. In certain circumstances, a banking organization’s repurchases of its common stock may be subject to a prior approval or notice requirement under other regulations or policies of the Federal Reserve. Any redemption or repurchase of preferred stock or subordinated debt is subject to the prior approval of the Federal Reserve.

16


 

Subject to compliance with certain conditions, distributions of U.S. sourced dividends to a corporation organized under the laws of the Commonwealth of Puerto Rico are subject to a withholding tax of 10% instead of the 30% applied to other “foreign” corporations.

Refer to Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” for further information on Popular’s distribution of dividends and repurchases of equity securities.

See “Puerto Rico Regulation” below for a description of certain restrictions on BPPR’s ability to pay dividends under Puerto Rico law.

Interstate Branching

The Dodd-Frank Act amended the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Banking Act”) to authorize national banks and state banks to branch interstate through de novo branches. For purposes of the Interstate Banking Act, BPPR is treated as a state bank and is subject to the same restrictions on interstate branching as are other state banks.

 

Activities and Acquisitions

In general, the BHC Act limits the activities permissible for bank holding companies to the business of banking, managing or controlling banks and such other activities as the Federal Reserve Board has determined to be so closely related to banking as to be properly incidental thereto. A company who meets management and capital standards and whose subsidiary depository institutions meet management, capital and Community Reinvestment Act (“CRA”) standards may elect to be treated as a financial holding company and engage in a substantially broader range of nonbanking financial activities, including securities underwriting and dealing, insurance underwriting and making merchant banking investments in nonfinancial companies.

In order for a bank holding company to elect to be treated as a financial holding company, (i) all of its depository institution subsidiaries must be well capitalized (as described above) and well managed and (ii) it must file a declaration with the Federal Reserve Board that it elects to be a “financial holding company.” As noted above, a bank holding company electing to be a financial holding company must be and remain well capitalized and well managed. Popular and PNA have elected to be treated as financial holding companies. A depository institution is deemed to be “well managed” if, at its most recent inspection, examination or subsequent review by the appropriate federal banking agency (or the appropriate state banking agency), the depository institution received at least a “satisfactory” composite rating and at least a “satisfactory” rating for the management component of the composite rating. If, after becoming a financial holding company, the company fails to continue to meet any of the capital or management requirements for financial holding company status, the company must enter into a confidential agreement with the Federal Reserve Board to comply with all applicable capital and management requirements. If the company does not return to compliance within 180 days, the Federal Reserve Board may extend the agreement or may order the company to divest its subsidiary banks or the company may discontinue, or divest investments in companies engaged in, activities permissible only for a bank holding company that has elected to be treated as a financial holding company. In addition, if a depository institution subsidiary controlled by a financial holding company does not maintain a CRA rating of at least “satisfactory,” the financial holding company will be subject to restrictions on certain new activities and acquisitions.

The Federal Reserve Board may in certain circumstances limit our ability to conduct activities and make acquisitions that would otherwise be permissible for a financial holding company. Furthermore, a financial holding company must obtain prior written approval from the Federal Reserve Board before acquiring a nonbank company with $10 billion or more in total consolidated assets. In addition, we are required to obtain prior Federal Reserve Board approval before engaging in certain banking and other financial activities both in the United States and abroad.

The “Volcker Rule” adopted as part of the Dodd-Frank Act restricts the ability of Popular and its subsidiaries, including BPPR and PB as well as non-banking subsidiaries, to sponsor or invest in "covered funds," including private funds, or to engage in certain types of proprietary trading. Popular and its subsidiaries generally do not engage in the businesses subject to the Volcker Rule; therefore, the Volcker Rule does not have a material effect on our operations.

 

Anti-Money Laundering Initiative and the USA PATRIOT Act

A major focus of governmental policy relating to financial institutions in recent years has been aimed at combating money laundering and terrorist financing. The USA PATRIOT Act of 2001 (the “USA PATRIOT Act”) strengthened the ability of the U.S. government to help prevent, detect and prosecute international money laundering and the financing of terrorism. Title III of the USA

17


 

PATRIOT Act imposed significant compliance and due diligence obligations, created new crimes and penalties and expanded the extra-territorial jurisdiction of the United States. Failure of a financial institution to comply with the USA PATRIOT Act’s requirements could have serious legal and reputational consequences for the institution.

 

In January 2021, the Anti-Money Laundering Act of 2020 (“AMLA”), which amends the Bank Secrecy Act (the “BSA”), was enacted. The AMLA is intended to comprehensively reform and modernize U.S. anti-money laundering laws. Among other things, the AMLA codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the U.S. Department of the Treasury to promulgate priorities for anti-money laundering and countering the financing of terrorism policy; requires the development of standards for testing technology and internal processes for BSA compliance; expands enforcement- and investigation-related authority, including a significant expansion in the available sanctions for certain BSA violations; and expands BSA whistleblower incentives and protections. Many of the statutory provisions in the AMLA will require additional rulemakings, reports and other measures, and the impact of the AMLA will depend on, among other things, rulemaking and implementation guidance. In June 2021, the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury, issued the priorities for anti-money laundering and countering the financing of terrorism policy required under AMLA. The priorities include: corruption, cybercrime, terrorist financing, fraud, transnational crime, drug trafficking, human trafficking and proliferation financing.

 

Community Reinvestment Act

The CRA requires banks to help serve the credit needs of their communities, including extending credit to low- and moderate-income individuals and geographies. Should Popular or our bank subsidiaries fail to serve adequately the community, potential penalties may include regulatory denials of applications to expand branches, relocate offices or branches, add subsidiaries and affiliates, expand into new financial activities and merge with or purchase other financial institutions. In September 2020, the Federal Reserve issued an advance notice of proposed rulemaking that seeks public comment on ways to modernize the Federal Reserve’s CRA regulations. The effects on Popular of any potential change to the CRA rules will depend on the final form of any Federal Reserve rulemaking and cannot be predicted at this time.

 

Interchange Fees Regulation

The Federal Reserve Board has established standards for debit card interchange fees and prohibited network exclusivity arrangements and routing restrictions. The maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction. Additionally, the Federal Reserve Board allows for an upward adjustment of no more than 1 cent to an issuer’s debit card interchange fee if the issuer develops and implements policies and procedures reasonably designed to achieve certain fraud-prevention standards.

 

Consumer Financial Protection Act of 2010

The Consumer Financial Protection Bureau (the “CFPB”) supervises “covered persons” (broadly defined to include any person offering or providing a consumer financial product or service and any affiliated service provider) for compliance with federal consumer financial laws. The CFPB also has the broad power to prescribe rules applicable to a covered person or service provider identifying as unlawful, unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. We are subject to examination and regulation by the CFPB.

 

Office of Foreign Assets Control Regulation

The U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) administers economic sanctions that affect transactions with designated foreign countries, nationals and others. The OFAC-administered sanctions targeting countries take many different forms. Generally, however, they contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country; and (ii) a blocking of assets in which the government of the sanctioned country or other specially designated nationals have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the United States or the possession or control of U.S. persons outside of the United States). Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.

 

Protection of Customer Personal Information and Cybersecurity

The privacy provisions of the Gramm-Leach-Bliley Act of 1999 generally prohibit financial institutions, including us, from disclosing nonpublic personal financial information of consumer customers to third parties for certain purposes (primarily marketing)

18


 

unless customers have the opportunity to opt out of the disclosure. The Fair Credit Reporting Act restricts information sharing among affiliates for marketing purposes and governs the use and provision of information to consumer reporting agencies.

The federal banking regulators have also issued guidance and proposed rules regarding cybersecurity that are intended to enhance cyber risk management standards among financial institutions. A financial institution is expected to establish lines of defense and to ensure that its risk management processes address the risk posed by compromised customer credentials. A financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack involving destructive malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack. If we fail to observe the regulatory guidance, we could be subject to various regulatory sanctions, including financial penalties. In November 2021, the U.S. federal bank regulatory agencies issued a final rule requiring banking organizations, including Popular, PNA, BPPR and PB, to notify their primary federal banking regulator within 36 hours of determining that a “notification incident” has occurred. A notification incident is a “computer-security incident” that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector. The final rule also requires specific and immediate notifications by bank service providers that become aware of similar incidents.

State and foreign regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. In New York, the NYDFS requires financial institutions regulated by the NYDFS, including PB, to, among other things, (i) establish and maintain a cybersecurity program designed to ensure the confidentiality, integrity and availability of their information systems; (ii) implement and maintain a written cyber security policy setting forth policies and procedures for the protection of their information systems and nonpublic information; and (iii) designate a Chief Information Security Officer.

Many states and foreign governments have also recently implemented or modified their data breach notification and data privacy requirements. The California Consumer Privacy Act (“CCPA”) became effective on January 1, 2020 and imposes privacy compliance obligations with regard to the personal information of California residents, and the November 2020 amendment to the CCPA creates the California Privacy Protection Agency, a watchdog privacy agency, and further expands the scope of businesses covered by the law and certain rights relating to personal information. The substantive obligations under the 2020 amendment to the CCPA will become effective on January 1, 2023. In European Union, the General Data Protection Regulation heightens privacy compliance obligations and imposes strict standards for reporting data breaches. We expect this trend to continue and are continually monitoring developments in the jurisdictions in which we operate.

See “Puerto Rico Regulation” below for a description of legislations and regulations on information privacy and cybersecurity in Puerto Rico.

Incentive Compensation

The Federal Reserve Board reviews, as part of its regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as Popular, that are not “large, complex banking organizations.” Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

The Federal Reserve Board, OCC and FDIC have issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

19


 

The Dodd-Frank Act requires the U.S. financial regulators, including the Federal Reserve Board, the other federal banking agencies and the SEC, to adopt rules prohibiting incentive-based payment arrangements that encourage inappropriate risks by providing excessive compensation or that could lead to a material financial loss at specified regulated entities having at least $1 billion in total assets (including Popular, PNA, BPPR and PB). The U.S. financial regulators proposed revised rules in 2016, which have not been finalized. In addition, the SEC proposed in 2015, but has not adopted in final form, rules directing national securities exchanges and associations to establish listing standards requiring companies to adopt policies that require executive officers to pay back incentive-based compensation that they were awarded erroneously. In October 2021, the SEC reopened comment period on this proposal.

Puerto Rico Regulation

As a commercial bank organized under the laws of Puerto Rico, BPPR is subject to supervision, examination and regulation by the Office of the Commissioner of Financial Institutions, pursuant to the Puerto Rico Banking Act of 1933, as amended (the “Banking Law”).

Section 27 of the Banking Law requires that at least ten percent (10%) of the yearly net income of BPPR be credited annually to a reserve fund. The apportionment must be done every year until the reserve fund is equal to the total of paid-in capital on common and preferred stock. During 2021, $ 78.4 million was transferred to the statutory reserve account.

Section 27 of the Banking Law also provides that when the expenditures of a bank are greater than its receipts, the excess of the former over the latter must be charged against the undistributed profits of the bank, and the balance, if any, must be charged against the reserve fund. If the reserve fund is not sufficient to cover such balance in whole or in part, the outstanding amount must be charged against the capital account and no dividend may be declared until capital has been restored to its original amount and the reserve fund to 20% of the original capital.

Section 16 of the Banking Law requires every bank to maintain a legal reserve that, except as otherwise provided by the Office of the Commissioner, may not be less than 20% of its demand liabilities, excluding government deposits (federal, state and municipal) that are secured by collateral. If a bank is authorized to establish one or more bank branches in a state of the United States or in a foreign country, where such branches are subject to the reserve requirements of that state or country, the Office of the Commissioner may exempt said branch or branches from the reserve requirements of Section 16. Pursuant to an order of the Federal Reserve Board dated November 24, 1982, BPPR has been exempted from the reserve requirements of the Federal Reserve System with respect to deposits payable in Puerto Rico. Accordingly, BPPR is subject to the reserve requirement prescribed by the Banking Law. During 2020, BPPR was in compliance with the statutory reserve requirement.

Section 17 of the Banking Law permits a bank to make loans to any one person, firm, partnership or corporation, up to an aggregate amount of fifteen percent (15%) of the paid-in capital and reserve fund of the bank. As of December 31, 2021, the legal lending limit for BPPR under this provision was approximately $315 million. In the case of loans which are secured by collateral worth at least 25% more than the amount of the loan, the maximum aggregate amount is increased to one third of the paid-in capital of the bank, plus its reserve fund. If the institution is well capitalized and had been rated 1 in the last examination performed by the Office of the Commissioner or any regulatory agency, its legal lending limit shall also include 15% of 50% of its undivided profits and for loans secured by collateral worth at least 25% more than the amount of the loan, the capital of the bank shall also include 33 1/3% of 50% of its undivided profits. Institutions rated 2 in their last regulatory examination may include this additional component in their legal lending limit only with the previous authorization of the Office of the Commissioner. There are no restrictions under Section 17 on the amount of loans that are wholly secured by bonds, securities and other evidence of indebtedness of the Government of the United States or Puerto Rico, or by current debt bonds, not in default, of municipalities or instrumentalities of Puerto Rico. During 2020, BPPR was in compliance with the lending limit requirements of Section 17 of the Banking law.

Section 14 of the Banking Law authorizes a bank to conduct certain financial and related activities directly or through subsidiaries, including finance leasing of personal property and originating and servicing mortgage loans. BPPR engages in finance leasing through its wholly-owned subsidiary, Popular Auto, LLC, which is organized and operates in Puerto Rico. The origination and servicing of mortgage loans is conducted by Popular Mortgage, a division of BPPR.

 

On information privacy, Puerto Rico law requires businesses to implement information security controls to protect consumers’ personal information from breaches, as well as to provide notice of any breach to affected customers.

20


 

 

Available Information

We maintain an Internet website at www.popular.com. Via the “Investor Relations” link at our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available, free of charge, as soon as reasonably practicable after such forms are electronically filed with, or furnished to, the SEC. The SEC also maintains an internet website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. You may obtain copies of our filings on the SEC site.

We have adopted a written code of ethics that applies to all directors, officers and employees of Popular, including our principal executive officer and senior financial officers, in accordance with Section 406 of the Sarbanes-Oxley Act of 2002 and the rules of the SEC promulgated thereunder. Our Code of Ethics is available on our corporate website, www.popular.com, in the section entitled “Corporate Governance.” In the event that we make changes in, or provide waivers from, the provisions of this Code of Ethics that the SEC requires us to disclose, we intend to disclose these events on our corporate website in such section. In the Corporate Governance section of our corporate website, we have also posted the charters for our Audit Committee, Talent and Compensation Committee, Risk Management Committee, Corporate Governance and Nominating Committee and Technology Committee, as well as our Corporate Governance Guidelines. In addition, information concerning purchases and sales of our equity securities by our executive officers and directors is posted on our website.

All website addresses given in this document are for information only and are not intended to be active links or to incorporate any website information into this document.

 

ITEM 1A. RISK FACTORS

 

We, like other financial institutions, face risks inherent to our business, financial condition, liquidity, results of operations and capital position. These risks could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report.

The risks described in this report are not the only risks we face. Additional risks and uncertainties not currently known by us or that we currently deem to be immaterial, or that are generally applicable to all financial institutions, also may materially adversely affect our business, financial condition, liquidity, results of operations or capital position.

Summary

The risk factors that could adversely affect our business, financial condition, liquidity, results of operations and capital position include:

RISKS RELATING TO THE BUSINESS AND ECONOMIC ENVIRONMENT AND OUR INDUSTRY

The coronavirus (COVID-19) pandemic has significantly disrupted the global economy and the markets in which we operate, which adversely impacted, and may continue to adversely impact, our business, financial condition and results of operation.

A significant portion of our business is concentrated in Puerto Rico, where economic and fiscal challenges have adversely impacted and may continue to adversely impact us.

Further deterioration in collateral values of properties securing our commercial, mortgage loan and construction portfolios would result in increased credit losses and continue to harm our results of operations.

Legislative and regulatory reforms may have a significant impact on our business and results of operations.

 

RISKS RELATING TO OUR BUSINESS

The fiscal and economic challenges of some of the jurisdictions in which we operate could materially adversely affect the value and performance of our portfolio of government securities and our loans to government entities in such jurisdictions, as well as the value and performance of commercial, mortgage and consumer loans to private borrowers who have significant relationships with the government or could be directly affected by government action in such jurisdictions. A reduction in Puerto Rico government deposits could also adversely affect our net interest income.

21


 

Our businesses are subject to extensive regulation and we from time to time receive requests for information from departments of the U.S. and Puerto Rico governments, including those that investigate compliance with consumer protection laws and regulations.

We are exposed to credit risk from mortgage loans that have been sold or are being serviced subject to recourse arrangements.

Defective and repurchased loans may harm our business and financial condition.

As a holding company, we depend on dividends and distributions from our subsidiaries for liquidity.

Increases in FDIC insurance premiums may have a material adverse effect on our earnings.

Our business is susceptible to interest rate risk because a significant portion of our business involves borrowing and lending money, and investing in financial instruments. Reforms to and uncertainty regarding the London InterBank Offered Rate (LIBOR) also may adversely affect our business, financial condition and results of operations.

If our goodwill, deferred tax assets or amortizable intangible assets become impaired, it may adversely affect our financial condition and future results of operations.

Our compensation practices are subject to oversight by applicable regulators.

We are subject to risk related to our own credit rating; actions by the rating agencies or having capital levels below well-capitalized could raise the cost of our obligations, which could affect our ability to borrow or to enter into hedging agreements in the future and may have other adverse effects on our business.

We are subject to regulatory capital adequacy guidelines, and if we fail to meet these guidelines our business and financial condition will be adversely affected.

The resolution of pending litigation and regulatory proceedings, if unfavorable, could have material adverse financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects.

Complying with economic and trade sanctions programs and anti-money laundering laws and regulations can increase our operational and compliance costs and risks. If we, and our subsidiaries, affiliates or third-party service providers, are found to have failed to comply with applicable economic and trade sanctions programs and anti-money laundering laws and regulations, we could be exposed to fines, sanctions and penalties, and other regulatory actions, as well as governmental investigations.

 

RISKS RELATING TO OUR OPERATIONS

We are subject to a variety of cybersecurity risks that, if realized, may have an adverse effect on our business and results of operations. These cybersecurity risks have been heightened by the increase on our employees’ remote work capabilities and in the use of digital channels by our customers as a result of the COVID-19 pandemic.

We rely on other companies to provide key components of our business infrastructure.

Unforeseen or catastrophic events, including extreme weather events and other natural disasters, man-made disasters, acts of violence or war, or the emergence of pandemics or epidemics, could cause a disruption in our operations or other consequences that could have a material adverse effect on our financial condition and results of operations. Climate change could also have a material adverse impact on our business operations and that of our clients and customers.

 

RISKS RELATED TO ACQUISITION TRANSACTIONS

Potential acquisitions of businesses or loan portfolios could increase some of the risks that we face, and may be delayed or prohibited due to regulatory constraints.

RISKS RELATING TO OUR RELATIONSHIP WITH EVERTEC

We are dependent on EVERTEC, Inc. for certain of our core financial transaction processing and information technology and security services, which exposes us to a number of operational risks that could have a material adverse effect on us.

Popular faces significant and increasing competition in the rapidly evolving financial services industry. If EVERTEC, Inc. is unable to meet constant technological changes and react quickly to meet new industry standards, we may be unable to enhance our current services and introduce new products and services in a timely and cost-effective manner, placing us at a competitive disadvantage and significantly affecting our business, financial condition and results of operations.

The transition to new financial services technology providers, and the replacement of services currently provided to us by EVERTEC, Inc., will be lengthy and complex.

The value of our remaining ownership interest in EVERTEC, Inc., and the revenues we derive from EVERTEC, Inc., could be materially reduced if we decided not to renew our agreements with EVERTEC, Inc. or were to terminate them before the expiration of their term. The EVERTEC Transaction (as defined below) could also result in a material reduction in the value of

22


 

our ownership interest in EVERTEC, Inc., will eliminate our rights to nominate directors to EVERTEC, Inc.’s board of directors and is expected to result in the elimination of the income we report from this investment.

The proposed EVERTEC Transaction is subject to closing conditions and subjects Popular to additional risks.

 

RISKS RELATING TO AN INVESTMENT IN OUR SECURITIES

Dividends on our Common Stock and Preferred Stock may be suspended and stockholders may not receive funds in connection with their investment in our Common Stock or Preferred Stock without selling their shares.

Certain of the provisions contained in our Certificate of Incorporation have the effect of making it more difficult to change the Board of Directors, and may make the Board of Directors less responsive to stockholder control.

 

The above summary is subject in its entirety to the discussion of the risk factors set forth below.

 

Risk Factors

RISKS RELATING TO THE BUSINESS and economic ENVIRONMENT AND OUR INDUSTRY

 

The coronavirus (COVID-19) pandemic has significantly disrupted the global economy and the markets in which we operate, which adversely impacted, and may continue to adversely impact, our business, financial condition and results of operation. Its continued impact will depend on future developments, which are highly uncertain and difficult to predict, including the scope and duration of the pandemic, the direct and indirect impact of the pandemic on our employees, customers, clients, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic.

The COVID-19 pandemic has significantly disrupted and negatively impacted the global economy, disrupted global supply chains, created significant volatility in the financial markets, significantly increased unemployment levels worldwide and decreased consumer confidence and commercial activity generally, including in the markets in which we do business, leading to an increased risk of delinquencies, defaults and foreclosures. The COVID-19 pandemic also contributed to higher and more volatile credit loss expense and potential for increased charge-offs; loan and credit ratings downgrades; credit deterioration and defaults in many industries; a significant increase in the volatility of equity, fixed income and commodity markets; and a decrease in the rates and yields on U.S. Treasury securities and other investment securities, which led to decreased net interest income.

 

In response to the pandemic, governments across the world, including the governments of Puerto Rico (our primary market), the United States Virgin Islands (“USVI”) and the British Virgin Islands (“BVI”), as well as state governments in the United States mainland, including New York, New Jersey and Florida, where Popular Bank (“PB”) has branches, initially ordered the temporary closure of many businesses, implemented mandatory curfews and the institution of social distancing, shelter in place and other health and safety requirements. Although many of these restrictive measures have been eased or lifted, certain restrictive measures remain in place and additional restrictive measures may be implemented in the future as a result of a resurgence in the spread of the virus or new strains of the virus. The restrictions imposed by governments in response to the outbreak caused significant disruption to economic activity and an increase in unemployment in the markets in which we operate, including Puerto Rico, which has been facing significant fiscal and economic challenges for over a decade. For more information, refer to the Geographic and Government Risk section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) section in the Annual Report on this Form 10-K. Further deterioration of the Puerto Rico, USVI, BVI and the broader U.S. economy would be expected to adversely affect the ability of our borrowers to comply with their financial obligations and adversely impact demand for our products and services. The disruption in economic activity could also adversely affect the financial condition of government entities in Puerto Rico, the USVI and BVI to which we have exposure.

The COVID-19 pandemic also significantly disrupted our operations and negatively impacted our business and financial condition. Many of BPPR’s and PB’s branches were temporarily closed in response to the pandemic. Currently, all BPPR’s and PB’s branches are operating, subject to measures to preserve the health and safety of our employees and customers. To protect the health and safety of our workforce, we have facilitated a significant portion of our workforce to work remotely, which further exposes the Corporation to heightened risks with respect to cybersecurity, information security and other operational incidents, as well as our ability to maintain an effective system of internal controls. Furthermore, although we have implemented a remote work protocol for many of our workers and instituted health and safety measures to protect employees that cannot work remotely, a disruption to our ability to deliver financial products or services to, or interact with, our customers could also result in losses or increased operational costs, regulatory fines, penalties and other sanctions, or harm our reputation.

23


 

Furthermore, in response to the pandemic, the Corporation implemented temporary measures to provide financial relief to customers through programs such as payment moratoriums, suspensions of foreclosures and other collection activity, as well as waivers of certain fees and service charges. By the end of the third quarter of 2020, the Corporation had reinstated the imposition of these fees and service charges and resumed its delinquent loan collection efforts. The Federal Government also approved several economic stimulus measures, including the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, to cushion the economic fallout of the pandemic, including guaranteeing loans to small and medium-sized businesses through the Small Business Administration’s (“SBA”) Paycheck Protection Program (the “PPP”). However, there can be no assurance that measures taken by governmental authorities will be sufficient to offset the pandemic’s economic impact. In addition, moratoriums imposed by Federal or state law or provided voluntarily by the Corporation may limit our ability to determine the impact of the COVID-19 pandemic on the financial condition of certain of our customers and the credit quality of our loan portfolio until borrowers that benefit from such moratoriums are required to resume loan repayments. Such moratorium and stimulus programs have also imposed significant operational burdens on the Corporation, which also heighten the risk of operational incidents, including fraud and undetected errors. Our participation (or lack of participation) in certain governmental programs enacted in response to the pandemic, including the PPP, could further result in reputational harm, litigation and regulatory and other government action against the Corporation. For example, the Corporation may be exposed to the risk of litigation, from both customers and non-customers that approached the Corporation regarding PPP loans, regarding its process and procedures used in processing applications under the PPP and may be exposed to adverse action for the improper conduct of its employees in connection with such loans. Furthermore, the Corporation may also have credit risk with respect to PPP loans if the SBA determines that there have been deficiencies in the way a PPP loan was originated, funded, or serviced by the Corporation, and denies its liability under the guaranty, reduces the amount of the guaranty or, if it has already paid under the guaranty, seeks recovery of any loss related to the deficiency from the Corporation.

The extent to which the COVID-19 pandemic continues to impact our business, results of operations and financial condition (including our provision for credit losses, net charge offs, regulatory capital, liquidity ratios and the liquidity of the bank holding company and its operating subsidiaries), as well as the operations of our clients, customers, service providers and suppliers, will depend on future developments, which are highly uncertain and difficult to predict at this time, including the scope and duration of the pandemic, the appearance of new strains of the virus and actions taken by governmental authorities and other third parties in response to the pandemic, such as the speed and effectiveness of vaccination programs and the nature and length of economic stimulus initiatives. To the extent the pandemic continues to adversely affect our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in this section.

A significant portion of our business is concentrated in Puerto Rico, where economic and fiscal challenges have adversely impacted and may continue to adversely impact us.

Our credit exposure is concentrated in Puerto Rico, which accounted as of December 31, 2021 for approximately 84% of our total assets, 85% of our deposits and 82% of our revenues for the year ended December 31, 2021. As such, our financial condition and results of operations are dependent upon the general trends of the Puerto Rico economy and, in particular, the residential and commercial real estate markets and asset values in Puerto Rico. Puerto Rico entered recession in the fourth quarter of fiscal year 2006 and its gross national product (GNP) thereafter contracted in real terms every year between fiscal years 2007 and 2018 (inclusive), except fiscal year 2012. Pursuant to the latest Puerto Rico Planning Board (the “Planning Board”) estimates, published in March 2021, the Commonwealth’s real GNP increased by 1.8% in fiscal year 2019 due to the influx of federal funds and private insurance payments to repair damage caused by Hurricanes Irma and María. However, the planning Board estimates that the Commonwealth’s real GNP decreased by approximately 3.2% in fiscal year 2020 due primarily to the adverse impact of the COVID-19 pandemic and the measures taken by the government in response to the same. The Planning Board projected that the negative effects of COVID-19 would continue through fiscal year 2021, resulting in a contraction in real GNP of approximately -2%, followed by 0.8% GNP growth in the current fiscal year.

 

The Commonwealth’s government has also been facing significant fiscal challenges that may have been exacerbated by the COVID-19 pandemic. The historical structural imbalance between revenues and expenditures, on the one hand, and unfunded legacy pension obligations, on the other hand, coupled with the Commonwealth’s inability to access financing in the capital markets or from private lenders, resulted in the Commonwealth and various public corporations defaulting on and eventually seeking to restructure their debts and for the U.S. Congress to enact the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”) in June 2016. PROMESA, among other things, established a seven-member federally-appointed oversight board (the “Oversight Board”) with broad powers over the finances of the Commonwealth and its instrumentalities and provided to the Commonwealth, its public corporations and municipalities, broad-based restructuring authority, including through a bankruptcy-type process similar to that of Chapter 9 of the U.S. Bankruptcy Code. For a discussion of risks related to the Corporation’s credit

24


 

exposure to the Commonwealth and its instrumentalities, see the Geographic and Government Risk section in the MD&A section of the Annual Report on this Form 10-K.

The credit quality of BPPR’s loan portfolio necessarily reflects, among other things, the general economic conditions in Puerto Rico and other adverse conditions affecting Puerto Rico consumers and businesses. The Commonwealth’s prolonged recession resulted in limited loan demand and in an increase in the rate of foreclosures and delinquencies on loans granted in Puerto Rico. The measures taken to address the fiscal crisis and those that may have to be taken in the future could affect many of our individual customers and customers’ businesses, which could cause credit losses that adversely affect us. Fiscal adjustments have resulted and may continue to result in significant resistance from local politicians and other stakeholders, which may lead to social and political instability. Any reduction in consumer spending because of these issues may also adversely impact our interest and non-interest revenues.

If global or local economic conditions worsen, including as a result of the COVID-19 pandemic, or the Government of Puerto Rico is unable to manage its fiscal crisis, including completing an orderly restructuring of its debt obligations while continuing to provide essential services, those adverse effects could continue or worsen in ways that we are not able to predict and that are outside of our control. Under such circumstances, we could experience an increase in the level of provision for loan losses, nonperforming assets, net charge-offs and reserve for credit losses. These factors could have a material adverse impact on our earnings and financial condition.

Further deterioration in collateral values of properties securing our commercial, mortgage loan and construction portfolios would result in increased credit losses and continue to harm our results of operations.

The value of properties in some of the markets we serve, in particular in Puerto Rico, declined during the past decade as a result of adverse economic conditions, although the value of properties in some of these markets have recently showed signs of recovery. The deterioration of the value of real estate collateral securing our commercial, mortgage loan and construction loan portfolios resulted in increased credit losses. As of December 31, 2021, approximately 29%, 25% and 2%, of our loan portfolio consisted of commercial loans secured by real estate, mortgage loans and construction loans, respectively.

 

Substantially our entire loan portfolio is located within the boundaries of the U.S. economy. Whether the collateral is in Puerto Rico, the USVI, the BVI or the U.S. mainland, the performance of our loan portfolio and the collateral value backing the transactions are dependent upon the performance of and conditions within each specific real estate market. General economic conditions in Puerto Rico (as impacted by the COVID-19 pandemic) and fiscal reforms aimed at addressing the current fiscal crisis could cause a further deterioration of the value of the real estate collateral securing our loan portfolios.

A further deterioration of the fair value of real estate properties for collateral dependent impaired loans would require increases in our provision for loan losses and allowance for loan losses. Any such increase would have an adverse effect on our future financial condition and results of operations. For more information on the credit quality of our construction, commercial and mortgage portfolio, see the Credit Risk section of the MD&A included in the Annual Report on this Form 10-K.

 

Legislative and regulatory reforms may have a significant impact on our business and results of operations.

Popular is subject to extensive regulation, supervision and examination by federal, New York and Puerto Rico banking authorities. Any change in applicable federal, New York or Puerto Rico laws or regulations (or laws and regulations in other jurisdictions in which we may do business, such as California) could have a substantial impact on our operations. Additional laws and regulations may be enacted or adopted in the future that could significantly affect our powers, authority and operations, which could have a material adverse effect on our financial condition and results of operations. Further, regulators in the performance of their supervisory and enforcement duties, have significant discretion and power to prevent or remedy unsafe and unsound practices or violations of laws by banks and bank holding companies. The exercise of this regulatory discretion and power could have a negative impact on Popular. Furthermore, the Commonwealth has enacted various reforms in response to its fiscal and economic problems and is likely to implement additional reforms as part of its obligations under PROMESA.

 

RISKS RELATING TO OUR BUSINESS

The fiscal and economic challenges of some of the jurisdictions in which we operate could materially adversely affect the value and performance of our portfolio of government securities and our loans to government entities in such jurisdictions, as well as the value and performance of commercial, mortgage and consumer loans to private borrowers

25


 

who have significant relationships with the government or could be directly affected by government action in such jurisdictions. A reduction in Puerto Rico government deposits could also adversely affect our net interest income.

We have direct and indirect lending and investment exposure to the Puerto Rico government, its public corporations and municipalities. A deterioration of the Commonwealth’s fiscal and economic condition, including as a result of the COVID-19 pandemic and/or actions taken by the Commonwealth government or the Oversight Board to address Puerto Rico’s fiscal crisis, could materially adversely affect the value and performance of our Puerto Rico government obligations, as well as the value and performance of commercial, mortgage and consumer loans to private borrowers who have significant relationships with the government or could be directly affected by government action, resulting in losses to us.

 

At December 31, 2021, our direct exposure to Puerto Rico government obligations was limited to obligations from various municipalities and amounted to $367 million. In addition, at December 31, 2021, the Corporation had $275 million in loans insured or securities issued by Puerto Rico governmental entities but for which the principal source of repayment is non-governmental. For additional discussion of the Corporation’s exposure to the Puerto Rico government and its instrumentalities and municipalities, refer to the Geographic and Government Risk section in the MD&A section of the Annual Report on this Form 10-K.

 

BPPR’s commercial loan portfolio also includes loans to private borrowers who are service providers, lessors, suppliers or have other relationships with the Puerto Rico government. These borrowers could be negatively affected by the fiscal measures to be implemented to address the Commonwealth’s fiscal crisis and the ongoing debt restructuring proceedings under PROMESA. Similarly, BPPR’s mortgage and consumer loan portfolios include loans to government employees which could also be negatively affected by fiscal measures such as employee layoffs or furloughs.

 

Furthermore, BPPR has a significant amount of deposits from the Commonwealth, its instrumentalities, and municipalities. The amount of such deposits may fluctuate depending on the financial condition and liquidity of such entities, as well as on the ability of BPPR to maintain these customer relationships. A significant portion of the Commonwealth’s deposits are expected be used by the Commonwealth pursuant to the Plan of Adjustment for the Commonwealth confirmed by the PROMESA Title III Court, which is expected to become effective on or about March 15, 2022. While a significant decrease in these deposits should not materially affect our liquidity since such deposits are collateralized, a significant decrease in the amount of such deposits could adversely affect our net interest income.

 

BPPR also has operations in the USVI and has credit exposure to USVI government entities. At December 31, 2021, BPPR’s direct exposure to USVI instrumentalities and public corporations amounted to approximately $70 million, of which $68 million is outstanding. The USVI has been experiencing several fiscal and economic challenges that could adversely affect the ability of its public corporations and instrumentalities to service their outstanding debt obligations. For additional information on the Corporation’s exposure to the USVI government, refer to the Geographic and Government Risk section in the MD&A section of the Annual Report on Form 10-K.

Our businesses are subject to extensive regulation and we from time to time receive requests for information from departments of the U.S. and Puerto Rico governments, including those that investigate compliance with consumer protection laws and regulations.

Our businesses are subject to extensive regulation and we from time to time self-report compliance matters to, or receive requests for information from, departments of the U.S. and Puerto Rico governments, including with respect to compliance with consumer protection laws and regulations. For example, BPPR has in the past received subpoenas and other requests for information from the departments of the U.S. government that investigate mortgage-related conduct, mainly concerning real estate appraisals and residential and construction loans in Puerto Rico. BPPR has also self-identified and reported to applicable regulators matters with respect to mortgage and other consumer lending practices.

 

Incidents of this nature and investigations or examinations by governmental authorities may result in judgments, settlements, fines, enforcement actions, penalties or other sanctions adverse to the Corporation which could materially and adversely affect the Corporation’s business, financial condition or results of operations, or cause serious reputational harm.

 

We are exposed to credit risk from mortgage loans that have been sold or are being serviced subject to recourse arrangements.

Popular is generally at risk for mortgage loan defaults from the time it funds a loan until the time the loan is sold or securitized into a mortgage-backed security. We have furthermore retained, through recourse arrangements, part of the credit

26


 

risk on sales of mortgage loans, and we also service certain mortgage loan portfolios with recourse. At December 31, 2021, we serviced $0.7 billion in residential mortgage loans subject to credit recourse provisions, principally loans associated with Fannie Mae and Freddie Mac programs. In the event of any customer default, pursuant to the credit recourse provided, we are required to repurchase the loan or reimburse the third-party investor for the incurred loss. The maximum potential amount of future payments that we 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 2021, we repurchased approximately $19 million in mortgage loans subject to credit recourse provisions. In the event of nonperformance by the borrower, we have rights to the underlying collateral securing the mortgage loan. As of December 31, 2021, our liability established to cover the estimated credit loss exposure related to loans sold or serviced with credit recourse amounted to $12 million. We may suffer 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 of the related property.

 

Defective and repurchased loans may harm our business and financial condition.

In connection with the sale and securitization of loans, we are required to make a variety of customary representations and warranties regarding Popular and the loans being sold or securitized. Our obligations with respect to these representations and warranties are generally outstanding for the life of the loan, and they relate to, among other things, compliance with laws and regulations, underwriting standards, the accuracy of information in the loan documents and loan file and the characteristics and enforceability of the loan.

 

A loan that does not comply with these representations and warranties may take longer to sell, may impact our ability to obtain third party financing for the loan, and be unsalable or salable only at a significant discount. If such a loan is sold before we detect non-compliance, we may be obligated to repurchase the loan and bear any associated loss directly, or we may be obligated to indemnify the purchaser against any loss, either of which could reduce our cash available for operations and liquidity. Management believes that it has established controls to ensure that loans are originated in accordance with the secondary market’s requirements, but mistakes may be made, or certain employees may deliberately violate our lending policies. We seek to minimize repurchases and losses from defective loans by correcting flaws, if possible, and selling or re-selling such loans. We have established specific reserves for probable losses related to repurchases resulting from representations and warranty violations on specific portfolios. At December 31, 2021, our reserve for estimated losses from representation and warranty arrangements amounted to $839 thousand, which was included as part of other liabilities in the consolidated statement of financial condition. Nonetheless, we do not expect any such losses to be significant, although if they were to occur, they would adversely impact our results of operations and financial condition.

 

As a holding company, we depend on dividends and distributions from our subsidiaries for liquidity.

We are a bank holding company and depend primarily on dividends from our banking and other operating subsidiaries to fund our cash needs. These obligations and needs include declaring dividends to our shareholders of our common stock, capitalizing subsidiaries, repaying maturing debt and paying debt service on outstanding debt. Our banking subsidiaries, BPPR and PB, are limited by law in their ability to make dividend payments and other distributions to us based on their earnings and capital position. Based on its current financial condition, PB may not declare or pay a dividend without the prior approval of the Federal Reserve Board and the NYSDFS. A failure by our banking subsidiaries to generate sufficient income and free cash flow to make dividend payments to us may have a negative impact on our financial condition, liquidity, results of operation and capital position and may affect our ability to pay dividends to our shareholders and to repurchase shares of our common stock. Additionally, adverse macroeconomic conditions caused by the COVID-19 pandemic could also result in restrictions from regulators on dividends and repurchases of our common stock, which could limit the capital we return to our shareholders. Also, a failure by the bank holding company to access sufficient liquidity resources to meet all projected cash needs in the ordinary course of business may have a detrimental impact on our financial condition and ability to compete in the market.

 

Increases in FDIC insurance premiums may have a material adverse effect on our earnings.

Substantially all the deposits of BPPR and PB are insured up to applicable limits by the FDIC’s DIF and, as a result, BPPR and PB are subject to FDIC deposit insurance assessments. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional bank or financial institution failures, our level of non-performing assets increases, or our risk profile changes or our capital position is impaired, we may be required to pay even higher FDIC premiums. Any future increases or special assessments may materially adversely affect our results of operations. See the

27


 

“Supervision and Regulation—FDIC Insurance” discussion in Item 1. Business of this Form 10-K for additional information related to the FDIC’s deposit insurance assessments applicable to BPPR and PB.

 

Our business is susceptible to interest rate risk because a significant portion of our business involves borrowing and lending money, and investing in financial instruments. Reforms to and uncertainty regarding the London InterBank Offered Rate (LIBOR) also may adversely affect our business, financial condition and results of operations.

Our business and financial performance are impacted by market interest rates and movements in those rates. Since a high percentage of our assets and liabilities are interest bearing or otherwise sensitive in value to changes in interest rates, changes in rates, in the shape of the yield curve or in spreads between different types of rates can have a material impact on our results of operations and the values of our assets and liabilities. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Interest rates are also highly sensitive to many factors over which we have no control and which we may not be able to anticipate adequately, including general economic conditions and the monetary and tax policies of various governmental bodies, particularly the Federal Reserve. For a discussion of the Corporation’s interest rate sensitivity, please refer to the “Risk Management” section of the MD&A of the Annual Report on this Form 10-K.

 

On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), publicly announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. On November 30, 2020, the LIBOR administration announced that it would consider continuing publication of certain US dollar LIBOR settings until June 30, 2023, subject to applicable regulations. In response to this announcement, Federal regulators issued a statement that, among other things, encouraged all financial institutions to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. It is expected that a transition away from the widespread use of LIBOR to alternative rates will occur over the course of the next several years. As a result of this transition, interest rates on floating rate obligations, loans, deposits, derivatives and other financial instruments held by the Corporation and tied to LIBOR rates, as well as the revenue and expenses associated with those financial instruments, may be adversely affected. Any failure by market participants and regulators to successfully implement benchmark rates to replace LIBOR and effectively establish transitional arrangements to address the discontinuation of LIBOR could also result in disruption in the financial markets. Further, any uncertainty regarding the continued use and reliability of LIBOR as a benchmark interest rate could adversely affect the value of our floating rate obligations, loans, deposits, derivatives, and other financial instruments tied to LIBOR rates.

 

Regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee) have, among other things, published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., the Secured Overnight Financing Rate as the recommended alternative to U.S. Dollar LIBOR), and proposed implementations of the recommended alternatives in floating rate instruments. At this time, it is difficult to predict whether these recommendations and proposals will be broadly accepted, whether they will continue to evolve, and what the effect of their implementation may be on the markets for floating-rate financial instruments. The Corporation has adopted fallback language for LIBOR-linked financial instruments and is implementing alternative rates for the origination of new loans. However, certain contractual documents governing the Corporation’s LIBOR-linked financial instruments may not provide effective fallback language in the event LIBOR rates cease to be published, which may present the Corporation with legal and regulatory risk if, for example, the Corporation is unable to amend these financial instruments prior to such cessation.

 

If our goodwill, deferred tax assets or amortizable intangible assets become impaired, it may adversely affect our financial condition and future results of operations.

As of December 31, 2021, we had approximately $ 720 million, $657 million and $15 million, respectively, of goodwill, net deferred tax assets and amortizable intangible assets recorded on our balance sheet. If our goodwill, deferred tax assets or amortizable intangible assets become impaired, we may be required to record a significant charge to earnings.

 

Under GAAP, we review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is tested for impairment at least annually. Factors that may be considered a change in circumstances, indicating that the carrying value of the goodwill or amortizable intangible assets may not be recoverable, include a decline in Popular’s stock price related to macroeconomic conditions in the global market as well as the weakness in the Puerto Rico economy and fiscal situation, declines in our market capitalization, reduced future earnings estimates, continuance of a low interest rate environment and the continued impact of the COVID-19 pandemic, which may exacerbate these and other circumstances, could in turn result in an impairment of goodwill. The goodwill impairment evaluation

28


 

process requires us to make estimates and assumptions with regards to the fair value of our 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 our results of operations and the reporting unit where the goodwill is recorded.

 

The determination of whether a deferred tax asset is realizable is based on weighting all available evidence. The realization of deferred tax assets, including carryforwards and deductible temporary differences, depends upon the existence of sufficient taxable income of the same character during the carryback or carryforward period. The analysis considers all sources of taxable income available to realize the deferred tax asset, including the future reversal of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback years and tax-planning strategies. Similarly, the COVID-19 pandemic’s impact on the expected profitability of our businesses may affect the realizability of our deferred tax assets in our Puerto Rico and U.S. operations.

 

If we are required to record a charge to earnings in our consolidated financial statements because an impairment of the goodwill, deferred tax assets or amortizable intangible assets is determined, our financial condition and results of operations would be adversely affected.

 

Our compensation practices are subject to oversight by applicable regulators.

Our success depends, in large part, on our ability to retain key senior leaders, and competition for such senior leaders can be intense in most areas of our business. Our compensation practices are subject to review and oversight by the Federal Reserve Board. We also may be subject to limitations on compensation practices by the FDIC or other regulators, which may or may not affect our competitors.

 

The Dodd-Frank Act requires the U.S. financial regulators, including the Federal Reserve Board, the other federal banking agencies and the SEC, to adopt rules prohibiting incentive-based payment arrangements that encourage inappropriate risks by providing excessive compensation or that could lead to a material financial loss at specified regulated entities having at least $1 billion in total assets (including Popular, PNA, BPPR and PB). The U.S. financial regulators proposed revised rules in 2016, which have not been finalized. Compliance with such revised rules may substantially affect the way in which we structure compensation for our executives and other employees. In addition, in 2015, the SEC proposed rules directing national securities exchanges and associations to establish listing standards requiring companies to adopt policies that require executive officers to pay back incentive-based compensation that they were awarded erroneously. Those rules have not been adopted. In October 2021, the SEC reopened the comment period on these proposed rules. For a more detailed discussion of these proposed rules, see the “Supervision and Regulation—Incentive Compensation” section in Item 1. Business of this Form 10-K.

 

The scope and content of the U.S. banking regulators policies on executive compensation are continuing to develop and are likely to continue evolving. It cannot be determined at this time whether compliance with such policies will adversely affect the ability of Popular and our subsidiaries to hire, retain and motivate key employees. Limitations on our compensation practices could have a negative impact on our ability to attract and retain talented senior leaders in support of our long-term strategy.

 

We are subject to risk related to our own credit rating; actions by the rating agencies or having capital levels below well-capitalized could raise the cost of our obligations, which could affect our ability to borrow or to enter into hedging agreements in the future and may have other adverse effects on our business.

Actions by the rating agencies could raise the cost of our borrowings since lower rated securities are usually required by the market to pay higher rates than obligations of higher credit quality. Our credit ratings were reduced substantially in 2009, and, although one of the three major rating agencies upgraded our senior unsecured rating back to “investment grade” during 2021, the remaining two rating agencies have not upgraded their current “non-investment grade” rating. The market for non-investment grade securities is much smaller and less liquid than for investment grade securities. Therefore, if we were to attempt to issue preferred stock or debt securities into the capital markets, it is possible that there would not be sufficient demand to complete a transaction and the cost could be substantially higher than for more highly rated securities.

 

In addition, changes in our ratings and capital levels below well-capitalized could affect our relationships with some creditors and business counterparties. For example, a portion of our hedging transactions include ratings triggers or well-capitalized language that permit counterparties to either request additional collateral or terminate our agreements with them based on our

29


 

below investment grade ratings. Although we have been able to meet any additional collateral requirements thus far and expect that we would be able to enter into agreements with substitute counterparties if any of our existing agreements were terminated, changes in our ratings or capital levels below well capitalized could create additional costs for our businesses.

 

Our banking subsidiaries have servicing, licensing and custodial agreements with third parties that include ratings covenants. Upon failure to maintain the required credit ratings, the third parties could have the right to require us to engage a substitute fund custodian and increase collateral levels securing the recourse obligations. Popular services residential mortgage loans subject to credit recourse provisions. Certain contractual agreements require us to post collateral to secure such recourse obligations if our required credit ratings are not maintained. Collateral pledged by us to secure recourse obligations approximated $32 million at December 31, 2021. We could be required to post additional collateral under the agreements. Management expects that we would be able to meet additional collateral requirements if and when needed. The requirements to post collateral under certain agreements or the loss of custodian funds could reduce our liquidity resources and impact its operating results. The termination of those agreements or the inability to realize servicing income for our businesses could have an adverse effect on those businesses. Other counterparties are also sensitive to the risk of a ratings downgrade and the implications for our businesses and may be less likely to engage in transactions with us, or may only engage in them at a substantially higher cost, if our ratings remain below investment grade.

 

We are subject to regulatory capital adequacy guidelines, and if we fail to meet these guidelines our business and financial condition will be adversely affected.

Under regulatory capital adequacy guidelines, and other regulatory requirements, Popular and our banking subsidiaries must meet guidelines that include quantitative measures of assets, liabilities and certain off-balance sheet items, subject to qualitative judgments by regulators regarding components, risk weightings and other factors. If we fail to meet these minimum capital guidelines and other regulatory requirements, our business and financial condition will be materially and adversely affected. If a financial holding company fails to maintain well-capitalized status under the regulatory framework, or is deemed not well managed under regulatory exam procedures, or if it experiences certain regulatory violations, its status as a financial holding company and its related eligibility for a streamlined review process for acquisition proposals, and its ability to offer certain financial products, may be compromised and its financial condition and results of operations could be adversely affected.

 

In addition, the Basel Committee on Banking Supervision published Basel IV in December 2017. Basel IV significantly revises the Basel capital framework, and the impact on us will depend on the way the revisions are implemented in the U.S. See the “Supervision and Regulation – Capital Adequacy” discussion in Item 1. Business of this Form 10-K for additional information related to the Basel III Capital Rules and Basel IV.

 

The resolution of pending litigation and regulatory proceedings, if unfavorable, could have material adverse financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects.

We face legal risks in our businesses, and the volume of claims and amount of damages and penalties claimed in litigation and regulatory proceedings against financial institutions remain high. Substantial legal liability or significant regulatory action against us could have material adverse financial effects or cause significant reputational harm to us, which in turn could seriously harm our business prospects. For further information relating to our legal risk, see Note 24 - Commitments & Contingencies”, to the Consolidated Financial Statements in the Annual Report on this Form 10-K.

 

Complying with economic and trade sanctions programs and anti-money laundering laws and regulations can increase our operational and compliance costs and risks. If we, and our subsidiaries, affiliates or third-party service providers, are found to have failed to comply with applicable economic and trade sanctions programs and anti-money laundering laws and regulations, we could be exposed to fines, sanctions and penalties, and other regulatory actions, as well as governmental investigations.

As a federally regulated financial institution, we must comply with regulations and economic and trade sanctions and embargo programs administered by the Office of Foreign Assets Control (“OFAC”) of the U.S. Treasury, as well as anti-money laundering laws and regulations, including those under the Bank Secrecy Act.

 

Economic and trade sanctions regulations and programs administered by OFAC prohibit U.S.-based entities from entering into or facilitating unlicensed transactions with, for the benefit of, or in some cases involving the property and property interests of, persons, governments or countries designated by the U.S. government under one or more sanctions regimes, and

30


 

also prohibit transactions that provide a benefit that is received in a country designated under one or more sanctions regimes. We are also subject to a variety of reporting and other requirements under the Bank Secrecy Act, including the requirement to file suspicious activity and currency transaction reports, that are designed to assist in the detection and prevention of money laundering, terrorist financing and other criminal activities. In addition, as a financial institution we are required to, among other things, identify our customers, adopt formal and comprehensive anti-money laundering programs, scrutinize or altogether prohibit certain transactions of special concern, and be prepared to respond to inquiries from U.S. law enforcement agencies concerning our customers and their transactions. Failure by the Corporation, its subsidiaries, affiliates or third-party service providers to comply with these laws and regulations could have serious legal and reputational consequences for the Corporation, including the possibility of regulatory enforcement or other legal action, including significant civil and criminal penalties. We can also incur higher costs and face greater compliance risks in structuring and operating our businesses to comply with these requirements. The markets in which we operate heighten these costs and risks.

We have established risk-based policies and procedures designed to assist us and our personnel in complying with these applicable laws and regulations. With respect to OFAC regulations and economic and trade sanction programs, these policies and procedures employ software to screen transactions for evidence of sanctioned-country and person’s involvement. Consistent with a risk-based approach and the difficulties in identifying and where applicable, blocking and rejecting transactions of our customers or our customers’ customers that may involve a sanctioned person, government or country, there can be no assurance that our policies and procedures will prevent us from violating applicable laws and regulations in transactions in which we engage, and such violations could adversely affect our reputation, business, financial condition and results of operations.

 

From time to time we have identified and voluntarily self-disclosed to OFAC transactions that were not timely identified, blocked or rejected by our policies, controls and procedures for screening transactions that might violate the regulations and economic and trade sanctions programs administered by OFAC. There can be no assurances that any failure to comply with U.S. sanctions and embargoes, or with anti-money laundering laws and regulations, will not result in material fines, sanctions or other penalties being imposed on us.

 

Furthermore, if the policies, controls, and procedures of one of the Corporation’s third-party service providers do not prevent it from violating applicable laws and regulations in transactions in which it engages, such violations could adversely affect its ability to provide services to us, and, in the case of EVERTEC, could adversely affect the value of our investment in EVERTEC.

 

RISKS RELATING TO OUR OPERATIONS

We are subject to a variety of cybersecurity risks that, if realized, may have an adverse effect on our business and results of operations. These cybersecurity risks have been heightened by the increase on our employees’ remote work capabilities and in the use of digital channels by our customers as a result of the COVID-19 pandemic.

Information security risks for large financial institutions such as Popular have increased significantly in recent years in part because of the proliferation of new technologies, such as Internet and mobile banking to conduct instant financial transactions anywhere globally, and the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, hacktivists and other parties. In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to transmit and store sensitive data. We employ a layered defensive approach that employs people, processes and technology to manage and maintain cybersecurity controls through a variety of preventative and detective tools that monitor, block, and provide alerts regarding suspicious activity and identify suspected advanced persistent threats. Notwithstanding our defensive measures and the significant resources we devote to protect the security of our systems, there is no assurance that all of our security measures will be effective at all times, especially as the threats from cyber-attacks is continuous and severe. The risk of a security breach due to a cyber attack could increase in the future as we continue to expand our mobile banking and other internet-based product offerings and Popular’s internal use of internet-based products and applications.

 

We continue to detect and identify attacks that are becoming more sophisticated and increasing in volume, as well as attackers that respond rapidly to changes in defensive countermeasures. We have been the target of phishing attacks in the past, targeting both our customers and employees through brand and email impersonation, that have compromised the email accounts of certain of our customers and employees. We continually monitor and address those vulnerabilities and continue to enhance our security measures to detect and prevent such incidents, while enhancing employee and customer trainings and awareness campaigns. There can be no assurances, however, that there will not be further compromises of sensitive customer information in the future. Furthermore, increased use of remote access and third-party video conferencing solutions during the COVID-19

31


 

pandemic, to enable work-from-home arrangements for employees, and facilitating the use of digital channels by our customers, has increased our exposure to cyber attacks. In addition, a third party could misappropriate confidential information obtained by intercepting signals or communications from mobile devices used by Popular’s customers or employees.

 

The most significant cyber-attack risks that we may face are e-fraud, denial-of-service (DDoS), ransomware, computer intrusion and the exploitation of software zero-day vulnerabilities that might result in disruption of services and in the exposure or loss of customer or proprietary data. Loss from e-fraud occurs when cybercriminals compromise our systems or the systems of our customers and extract funds from customer’s credit cards or bank accounts. Denial-of-service disrupts services available to our customers through our on-line banking system. Computer intrusion attempts might result in the compromise of sensitive customer data, such as account numbers, credit cards and social security numbers, and could present significant reputational, legal and regulatory costs to Popular if successful. Additionally, cyber-security risks have been recently exacerbated by the discovery of zero-day vulnerabilities in widely distributed third party software, as seen in the Apache log4j vulnerability reported in December 2021, which could affect Popular’s or any of its service provider’s systems. Recent events have also illustrated increased geo-political factors and the risks related to supply-chain compromises and de-stabilizing activities linked to nation-state sponsored activity as an increasing trend to monitor actively. Risks and exposures related to cyber security attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, including the rise in the use of cyber-attacks as geopolitical weapons, as well as the expanding use of digital channels for banking, such as mobile banking and other technology-based products and services used by us and our customers. Although we are regularly targeted by unauthorized threat-actor activity, we have not, to date, experienced any material losses as a result of any cyber-attacks.

 

A successful compromise or circumvention of the security of our systems could have serious negative consequences for us, including significant disruption of our operations and those of our clients, customers and counterparties, misappropriation of confidential information of us or that of our clients, customers, counterparties or employees, or damage to computers or systems used by us or by our clients, customers and counterparties, and could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, significant litigation exposure and harm to our reputation, all of which could have a material adverse effect on us. For example, if personal, non-public, confidential or proprietary information in our possession were to be mishandled, misused or stolen, we could suffer significant regulatory consequences, reputational damage and financial loss. The extent of a particular cyber attack and the steps that we may need to take to investigate the attack may not be immediately clear, and it may take a significant amount of time before such an investigation can be completed. While such an investigation is ongoing, Popular may not necessarily know the full extent of the harm caused by the cyber attack, and that damage may continue to spread. These factors may inhibit our ability to provide rapid, full and reliable information about the cyber attack to our clients, customers, counterparties and regulators, as well as the public. Furthermore, it may not be clear how best to contain and remediate the potential harm caused by the cyber attack, and certain errors or actions could be repeated or compounded before they are discovered and remediated. Any or all of these factors could further increase the impact of the incident and thereby the costs and consequences of a cyber attack. For a discussion of the guidance that federal banking regulators have released regarding cybersecurity and cyber risk management standards, see “Regulation and Supervision” in Part I, Item 1 — Business, included in this Form 10-K. Such mishandling or misuse could include, for example, if such information were erroneously provided to parties who are not permitted to have the information, either by fault of our systems, employees, or counterparties, or where such information is intercepted or otherwise inappropriately taken by third parties.

 

We also rely on third parties for the performance of a significant portion of our information technology functions and the provision of information security, technology and business process services. As a result, a successful compromise or circumvention of the security of the systems of these third-party service providers could have serious negative consequences for us, including misappropriation of confidential information of us or that of our clients, customers, counterparties or employees, or other negative implications identified above with respect to a cyber-attack on our systems, which could have a material adverse effect on us. The most important of these third-party service providers for us is EVERTEC, and certain risks particular to EVERTEC are discussed under “Risks Relating to our Relationship with Evertec”. During 2021, we determined that, as a result of the widely reported breach of Accellion, Inc.’s File Transfer Appliance tool, which was being used at the time of such breach by a U.S.-based third-party advisory services vendor of Popular, personal information of certain Popular customers was compromised. As a result, Popular notified, as required or otherwise deemed appropriate, customers identified as affected by the incident. Although we are not aware of fraudulent activity in connection with this incident, Popular’s networks and systems were not impacted, and our third-party service provider agreed to cover external remediation costs associated with the incident. A compromise of the personal information of our customers maintained by third party vendors could result in significant regulatory consequences, reputational

32


 

damage and financial loss to us. The success of our business depends in part on the continuing ability of these (and other) third parties to perform these functions and services in a timely and satisfactory manner, which performance could be disrupted or otherwise adversely affected due to failures or other information security events originating at the third parties or at the third parties’ suppliers or vendors (so-called “fourth party risk”). We may not be able to effectively monitor or mitigate fourth-party risk, in particular as it relates to the use of common suppliers or vendors by the third parties that perform functions and services for us.

 

As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our layers of defense or to investigate and remediate any information security vulnerabilities or incidents. System enhancements and updates may also create risks associated with implementing new systems and integrating them with existing ones, including risks associated with supply chain compromises and the software development lifecycle of the systems used by us and our service providers. Due to the complexity and interconnectedness of information technology systems, the process of enhancing our layers of defense can itself create a risk of systems disruptions and security issues. In addition, addressing certain information security vulnerabilities, such as hardware-based vulnerabilities, may affect the performance of our information technology systems. The ability of our hardware and software providers to deliver patches and updates to mitigate vulnerabilities in a timely manner can introduce additional risks, particularly when a vulnerability is being actively exploited by threat actors. Moreover, our ability to timely mitigate vulnerabilities and manage such risks, given the rise in number of required patches and third-party software “zero-day vulnerabilities”, may impact our day-to-day operations, the availability of our systems and delay the deployment of technology enhancements and innovation.

 

If Popular’s operational systems, or those of external parties on which Popular’s businesses depend, are unable to meet the requirements of our businesses and operations or bank regulatory standards, or if they fail or have other significant shortcomings, Popular could be materially and adversely affected.

 

We rely on other companies to provide key components of our business infrastructure.

Third parties provide key components of our business operations such as data processing, information security, recording and monitoring transactions, online banking interfaces and services, Internet connections and network access. The most important of these third-party service providers for us is EVERTEC, and certain risks particular to EVERTEC are discussed below under “Risks Relating to Our Relationship with EVERTEC.” While we select third-party vendors carefully, we do not control their actions and we may also be subject to long-term contracts with certain of these vendors (including EVERTEC) that, for example, limit our ability to replace these vendors. Any problems caused by these third parties, including those resulting from disruptions in services provided by a vendor, breaches of a vendor’s systems, failure of a vendor to handle current or higher volumes, failure of a vendor to provide services for any reason or poor performance of services, or failure of a vendor to notify us of a reportable event, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business. Financial or operational difficulties of a third-party vendor could also hurt our operations if those difficulties interfere with the vendor’s ability to serve us. Replacing these third-party vendors, when possible, could also create significant delay and expense. Accordingly, use of such third parties creates an unavoidable inherent risk to our business operations. In addition, the assessment and management by financial institutions of the risks associated with third party vendors have been subject to greater regulatory scrutiny. We expect to incur additional costs and expenses in connection with our oversight of third-party relationships, especially those involving significant banking functions, shared services or other critical activities. Our failure to properly manage risks associated to our third-party relationships could result in potential liability to clients and customers, fines, penalties or judgments imposed by our regulators, increased operating expenses and harm to our reputation, any of which could materially and adversely affect us.

 

Unforeseen or catastrophic events, including extreme weather events and other natural disasters, man-made disasters, acts of violence or war, or the emergence of pandemics or epidemics, could cause a disruption in our operations or other consequences that could have a material adverse effect on our financial condition and results of operations. Climate change could also have a material adverse impact on our business operations and that of our clients and customers.

The occurrence of unforeseen or catastrophic events in the markets in which we do business, including extreme weather events and other natural disasters, man-made disasters, acts of violence or war, or the emergence of pandemics could cause a disruption in our operations and have a material adverse effect on our financial condition and results of operations. A significant portion of our operations are located in Puerto Rico, the USVI and BVI, a region susceptible to hurricanes, earthquakes and other similar events. For example, in 2017, our operations in Puerto Rico, the USVI and BVI were significantly disrupted by the impact of Hurricanes Irma and Maria. In January 2020, Puerto Rico was impacted by a magnitude 6.4 earthquake which caused island-wide power outages and significant damage to infrastructure and property in the southwest region of the island. Future natural disasters

33


 

can again cause disruption to our operations and could have a material adverse effect on our business, financial condition or results of operations. We maintain insurance against natural disasters including coverage for lost profits and extra expense; however, there is no insurance against the disruption that a catastrophic natural disaster could produce to the markets that we serve and the potential negative impact to economic activity. Further, future natural disasters in any of our market areas could adversely impact the ability of borrowers to timely repay their loans and may further adversely impact the value of any collateral held by us. Man-made disasters, pandemics, epidemics and other events connected with the regions in which we operate could have similar effects. The frequency, severity and impact of future hurricanes, earthquakes, pandemics, epidemics and other similar events are difficult to predict. Any actual or threatened war, terrorist activity, geopolitical events or other acts of violence, both in the markets in which we do business or globally, could result in economic disruption, heightened volatility in financial markets and diminished consumer, business and investor confidence, among others, adversely impacting our business, financial condition and results of operation.

 

Furthermore, we operate in regions, countries and communities where our business and the activities and operations of our clients and customers may be further disrupted by global climate change. Potential physical risks from climate change include the increase in the frequency and severity of weather events, such as storms and hurricanes, and long-term shifts in climate patterns, such as sustained higher and lower temperatures, sea level rise, heat waves and droughts, among others. These events may cause disruptions in our business and operations and the destruction of our properties and assets. Furthermore, these severe weather events may also disrupt the businesses and operations of our clients and customers and damage the properties and assets of our borrowers, adversely affecting the financial condition of our clients and customers and the value of any collateral held by us. Losses resulting from these disasters and severe weather events may make it more difficult for our borrowers to timely repay their loans. If these events occur, we may experience a decrease in the value of our loan portfolio and our revenue, and may incur in additional operational expenses, each of which could have a material adverse effect on our financial condition and results of operations. Additionally, the impact of climate change in the markets that we operate and in other global markets may have the effect of increasing the costs or reducing the availability of insurance needed for our business operations. Climate change may also create transitional risks resulting from a shift to a low-carbon economy. These transition risks, which we may be subject to, may include changes in the legal and regulatory landscape, technology, consumer sentiment and preferences, and market demands that seek to mitigate the effects of climate change. These climate driven changes could have a material adverse impact on asset values and on our business and financial performance and those of our clients and customers.

 

risks related to acquisition transactions

 

Potential acquisitions of businesses or loan portfolios could increase some of the risks that we face, and may be delayed or prohibited due to regulatory constraints.

To the extent permitted by our applicable regulators, we may pursue strategic acquisition opportunities. Acquiring other banks or businesses, however, involves various risks commonly associated with acquisitions, including, among other things, potential exposure to unknown or contingent liabilities of the target company, exposure to potential asset quality issues of the target company, potential disruption to our business, the possible loss of key employees and customers of the target company, and difficulty in estimating the value of the target company. If in connection with an acquisition we pay a premium over book or market value, some dilution of our tangible book value and net income per common share may occur in connection with any future transaction. Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, or other projected benefits from an acquisition could have a material adverse effect on our business, financial condition and results of operations.

 

Similarly, acquiring loan portfolios involves various risks. When acquiring loan portfolios, management makes various assumptions and judgments about the collectability of the loans, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of secured loans. In estimating the extent of the losses, we analyze the loan portfolio based on historical loss experience, volume and classification of loans, volume and trends in delinquencies and nonaccruals, local economic conditions, and other pertinent information. If our assumptions are incorrect, however, our actual losses could be higher than estimated and increased loss reserves may be needed to respond to different economic conditions or adverse developments in the acquired loan portfolios, which would negatively affect our operating results.

 

Finally, certain acquisitions by financial institutions, including us, are subject to approval by a variety of federal and state regulatory agencies. Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new

34


 

regulatory issues we have. We may fail to pursue, evaluate or complete strategic and competitively significant acquisition opportunities as a result of our inability, or perceived or anticipated inability, to obtain regulatory approvals in a timely manner, under reasonable conditions or at all. Difficulties associated with potential acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations.

 

RISKS RELATING TO OUR RELATIONSHIP WITH EVERTEC

We are dependent on EVERTEC for certain of our core financial transaction processing and information technology and security services, which exposes us to a number of operational risks that could have a material adverse effect on us.

In connection with the sale of a 51% ownership interest in EVERTEC in the third quarter of 2010, we entered into a long-term Amended and Restated Master Services Agreement (the “Current MSA”) with EVERTEC, pursuant to which we agreed to receive from EVERTEC, on an exclusive basis, certain core banking and financial transaction processing and information technology and security services. The term of the Current MSA extends until September 30, 2025. Under the Current MSA, we also granted EVERTEC a right of first refusal over certain services or products and development projects related to the services thereunder provided. We also entered into several other agreements, generally coterminous with the Current MSA, pursuant to which BPPR agreed to sponsor EVERTEC as an independent sales organization with respect to certain credit card associations, agreed to certain exclusivity and non-solicitation restrictions with respect to merchant services (the “Current ISO Agreement”), and agreed to support the ATH brand and network (the “Current ATH Agreement”), among other matters. As a result, we are dependent on EVERTEC for the provision of essential services to our business, including our core banking business, and there can be no assurances that the quality of the services will be appropriate or that EVERTEC will be able to continue to provide us with the necessary financial transaction processing, security and technology services. As a result, our relationship with EVERTEC exposes us to operational, cybersecurity and business risks that could have a material adverse effect on us.

 

As a result of our agreements with EVERTEC, we are particularly exposed to the operational risks of EVERTEC, including those relating to a breakdown or failure of EVERTEC’s systems or internal controls environment, including as a result of security breaches or attacks, employee error or malfeasance, system breakdowns, vulnerabilities, obsolescence or otherwise. Over the term of the Current MSA, we have experienced various interruptions and delays in key services provided by EVERTEC, as well as cyber breaches, as a result of system breakdowns, misconfigurations and instances of application obsolescence, which has led in the past to exposure of BPPR customer information. There can be no assurances that there will not be further compromises of sensitive customer information in the future because of the aforementioned causes. The continuance or increase in service delays or interruptions, vulnerabilities in EVERTEC’s information systems, or cyberattacks to, or breaches to the confidentiality of the information that resides in such systems, could harm our business by disrupting our delivery of services, expose us to regulatory, legal and compliance risk and damage our reputation, which could have a material adverse impact on our financial condition and results of operations. For further information regarding our cybersecurity risks, refer to the “We are subject to a variety of cybersecurity risks that, if realized, could adversely affect how we conduct our business” risk factor. Our ability to recover from EVERTEC for breach of the Current MSA, including the failure to meet the service levels provided for therein, may not fully compensate us for the damages we may suffer as a result of such breach.

 

As previously announced and as described in our Current Report on Form 8-K filed with the SEC on February 24, 2022, on February 24, 2022, we and BPPR entered into an Asset Purchase Agreement (the “Purchase Agreement”), pursuant to which we agreed to purchase from EVERTEC certain information technology and related assets used by EVERTEC to service certain of BPPR’s key channels (the “Acquired Assets”) under the Current MSA and assume certain liabilities relating thereto (the “EVERTEC Transaction”). Upon consummation of the EVERTEC Transaction (the “EVERTEC Transaction Closing”), the parties to the EVERTEC Transaction will enter into certain commercial agreements, including an amendment and restatement of the Current MSA in substantially the form attached to the Purchase Agreement (the “Second A&R MSA”). A copy of the form of the Second A&R MSA is included in Exhibit 2.1 to our Current Report on Form 8-K filed with the SEC on February 24, 2022. The term of the Second A&R MSA will expire on September 30, 2028, which would be a three-year extension of the term of the Current MSA. In addition, upon the EVERTEC Transaction Closing, the term of the Current ISO Agreement will be extended for a ten-year period and the term of the Current ATH Agreement will be extended for a five-year period. These extensions would prolong the duration of time during which we will be exposed to operational, cybersecurity and business risks arising out of our relationship with EVERTEC. However, we would no longer be subject to the exclusivity obligations of the Current MSA, nor would EVERTEC have the right of first refusal with respect to certain services or products and development projects that it has under the Current MSA. As a result, we expect that the scope of services for which we are dependent on EVERTEC will decrease following the EVERTEC Transaction Closing, subject to the successful completion of the EVERTEC Transaction and the risk factors related thereto (as discussed below).

35


 

 

Popular faces significant and increasing competition in the rapidly evolving financial services industry. If EVERTEC is unable to meet constant technological changes and react quickly to meet new industry standards, we may be unable to enhance our current services and introduce new products and services in a timely and cost-effective manner, placing us at a competitive disadvantage and significantly affecting our business, financial condition and results of operations.

We operate in a highly competitive environment in which we must evolve and adapt to the significant changes as a result of technological advances. For example, technological advances and the growth of e-commerce have made it possible for non-depository institutions to offer products and services that traditionally were banking products. We compete on the basis of the quality and variety of products and services offered, innovation, price, ease of use, reputation and transaction execution. To compete effectively, we need to constantly enhance and modify our products and services and introduce new products and services to attract and retain clients or to match products and services offered by our competitors, including technology companies and other nonbank firms that are engaged in providing similar products and services. These enhancements and new products and services require the delivery of technology services by EVERTEC pursuant to the Current MSA, making our success dependent on EVERTEC’s ability to timely complete and introduce these enhancements and new products and services in a cost-effective manner. This dependence will continue following the EVERTEC Transaction Closing, but the completion of the EVERTEC Transaction is expected to improve our ability to manage and control the development of the customer channels supported by the Acquired Assets and would eliminate certain provisions of the Current MSA that currently require us to use EVERTEC to develop and implement new or enhanced products and services, including with respect to such customer channels.

 

Some of our competitors rely on financial services technology and outsourcing companies that are much larger than EVERTEC and that may have better technological capabilities and product offerings. Furthermore, financial services technology companies typically make capital investments to develop and modify their product and service offerings to facilitate their customers’ compliance with the extensive and evolving regulatory and industry requirements, and in most cases such costs are borne by the technology provider. Because of our contractual relationship with EVERTEC, however, we have in the past borne the full cost of such developments and modifications and may be required to do so in the future, subject to the terms of the Current MSA (or if the Evertec Transaction Closing occurs, the Second A&R MSA).

 

Moreover, the terms, speed, scalability and functionality of certain of EVERTEC’s technology services are not competitive when compared to offerings from its competitors. Evertec’s failure to sufficiently invest in and upscale its technology and services infrastructure to meet the rapidly changing technology demands of our industry may result in us being unable to meet customer expectations and attract or retain customers. Any such impact could, in turn, reduce Popular’s revenues, place us in a competitive disadvantage and significantly affect our business, financial condition and results of operations. While the EVERTEC Transaction Closing is expected to result in a narrowing of the scope of services which we are dependent on EVERTEC to obtain and in releasing us from exclusivity restrictions that limit our ability to engage other third-party providers of financial technology services, it would also result in extensions of certain existing commercial agreements with EVERTEC and, as a result, would prolong the duration of our exposure to the risks presented by EVERTEC’s technological capabilities and its failures to enhance its products and services and otherwise meet evolving demands.

 

The transition to new financial services technology providers, and the replacement of services currently provided to us by EVERTEC, will be lengthy and complex.

Switching from one vendor of core bank processing and related technology and security services to a new vendor is a complex process that carries business and financial risks, even where such a switch can be accomplished without violating our contractual obligations to EVERTEC. The implementation cycle for such a transition can be lengthy and require significant financial and management resources from us. Such a transition can also expose us, and our clients, to increased costs (including conversion costs), business disruption, as well as operational and cybersecurity risks. Upon the transition of all or a portion of existing services provided by EVERTEC to a new financial services technology provider, either (i) at the end of the term of the Current MSA (or, following the EVERTEC Transaction Closing, the Second A&R MSA) and related agreements or (ii) earlier upon the occurrence of an early termination thereunder (or, following the EVERTEC Transaction Closing, upon the termination of any service for convenience under the Second A&R MSA), these transition risks could result in an adverse effect on our business, financial condition and results of operations. Although EVERTEC has agreed to provide certain transition assistance to us in connection with the termination of the Current MSA (or, following the EVERTEC Transaction Closing, the Second A&R MSA), we are ultimately dependent on their ability to provide those services in a responsive and competent manner. Furthermore, we may require transition assistance from EVERTEC beyond the term of the Current MSA (or, following the EVERTEC Transaction Closing, the Second A&R MSA), delaying and lengthening any transition process away from EVERTEC while increasing related costs.

36


 

 

Under the Current MSA, we are required to provide written notice of non-renewal no less than one year prior to the relevant termination date avoid an automatic three-year renewal. Following the EVERTEC Transaction Closing, the automatic renewal of the Current MSA would be eliminated and we will be able to terminate services under the Second A&R MSA for convenience with 180 day prior notice. We would expect to exercise during the term of the Second A&R MSA the right to terminate certain services for convenience and to transition such services to other service providers prior to the expiration of the Second A&R MSA, subject to complying with the revenue minimums contemplated in the Second A&R MSA and certain other conditions. In practice, in order to switch to a new provider for a particular service, we will have to commence procuring and working on a transition process for such service significantly in advance of its termination and, in any case, much earlier than the automatic renewal notice date or the expiration date of the Second A&R MSA, and such process may extend beyond the current term of the Current MSA (or, following the EVERTEC Transaction Closing, the Second A&R MSA). Furthermore, if we were unsuccessful or decided not to complete the transition after expending significant funds and management resources, it could also result in an adverse effect on our business, financial condition and results of operations.

The value of our remaining ownership interest in EVERTEC, and the revenues we derive from EVERTEC, could be materially reduced if we decided not to renew our agreements with EVERTEC or were to terminate them before the expiration of their term. The EVERTEC Transaction could also result in a material reduction in the value of our ownership interest in EVERTEC, will eliminate our rights to nominate directors to EVERTEC’s board of directors and is expected to result in the elimination of the income we report from this investment.

We continue to have a 16.19% ownership interest in EVERTEC (though this interest would be reduced to approximately 10.5% upon the EVERTEC Transaction Closing) and account for this investment under the equity method. As a result, we include our investment in EVERTEC in other assets and our proportionate share of income or loss is included in other operating income in our consolidated statements of operations. For 2021, our share of EVERTEC’s changes in equity recognized in income was $26 million. The carrying value of our investment in EVERTEC was, as of December 31, 2021, approximately $110 million. Meanwhile, the services EVERTEC delivers to us represent a significant portion of EVERTEC’s revenues (approximately 41% for 2021). As a result, if we were not to renew the MSA and our other current agreements with EVERTEC, or otherwise terminate them before the end of their terms, EVERTEC’s financial position and results of operations could be materially adversely affected and the value of our remaining ownership interest in EVERTEC, and the income we report from this investment, may be materially reduced. Furthermore, revenue from EVERTEC’s merchant acquiring business, which constitutes approximately 24% of EVERTEC’s revenues, depends, in part, on EVERTEC’s alliance with BPPR. If such relationship were to suffer, or be terminated, EVERTEC’s business may be adversely affected.

 

Future sales of our EVERTEC common stock, or the perception that these sales could occur, could also adversely affect the market price of EVERTEC common stock and thus the value we may be able to realize on the sale of our remaining holdings. In particular, in connection with the EVERTEC Transaction, we have agreed to enter into a Registration Rights and Sell-Down Agreement at the EVERTEC Transaction Closing, pursuant to which we will be required to use commercially reasonable efforts to sell to third parties a sufficient number of our shares of EVERTEC common stock so as to reduce our ownership of shares of EVERTEC common stock to no more than 4.99% of the total number of shares of EVERTEC common stock outstanding within ninety days of the EVERTEC Transaction Closing. In addition, the Registration Rights and Sell-Down Agreement provides that any shares of EVERTEC common stock we own in excess of 4.5% at the end of such ninety day period will be converted into shares of EVERTEC non-voting preferred stock that convert back into common stock when transferred in a widespread public distribution or in certain other qualifying transfers.

 

The market price of EVERTEC common stock—and thus, the value we may be able to realize on the sale of our remaining holdings—could be negatively affected by the announcement of the EVERTEC Transaction, the fact that we would be disposing of shares of EVERTEC common stock representing at least approximately 5.7% of the total outstanding shares of EVERTEC common stock at the EVERTEC Transaction Closing, as well as by the perception that further sales by us could occur as contemplated by the Registration Rights and Sell-Down Agreement, among other factors. Furthermore, the termination of the existing Stockholder Agreement between Popular and EVERTEC, which will result in the elimination of Popular’s rights to nominate two directors to EVERTEC’s board of directors, among other rights, and Popular’s commitment under the Registration Rights and Sell-Down Agreement to reduce, within ninety days of the EVERTEC Transaction Closing, its ownership of shares of EVERTEC common stock to no more than 4.99% of the total number of shares of EVERTEC common stock outstanding, is expected to eliminate Popular’s earnings from its equity investment in Evertec and subject the valuation of any remaining stake in Evertec to mark-to-market accounting and consequent exposure to market risk.

37


 

 

The proposed EVERTEC Transaction is subject to closing conditions.

The EVERTEC Transaction Closing is subject to various conditions including, among others, (i) regulatory approvals, (ii) the absence of certain legal proceedings, (iii) completion of a network segmentation project with respect to the Acquired Assets and certain other migration and technology projects relating to BPPR’s post-closing operation of the Acquired Assets, (iv) the occurrence of specified events that would materially and adversely affect the ability of the parties to comply with certain of their obligations under existing commercial agreements, and (v) certain other customary conditions. Additionally, the Evertec Transaction Closing is subject to Popular receiving a non-control determination from the Board of Governors of the Federal Reserve System with respect to EVERTEC, which is expected to be conditioned upon, among other things, Popular terminating the existing Stockholder Agreement between Popular and EVERTEC and Popular reducing, within ninety days of the EVERTEC Transaction Closing, its ownership of shares of EVERTEC common stock to no more than 4.99% of the total number of shares of EVERTEC common stock outstanding. We may not receive the required non-control determination, or other conditions to closing may not be met, or they may not be met in a timely manner, which may affect our ability to complete the transaction in a timely manner, or at all, or the regulatory clearances may be received subject to terms, conditions or restrictions that may cause a failure of the closing conditions set forth in the Asset Purchase Agreement, could have a material detrimental impact on the Acquired Assets and/or could significantly diminish the benefits of the EVERTEC Transaction.

 

We are subject to additional risks relating to the pending EVERTEC Transaction.

There are numerous additional risks and uncertainties associated with the EVERTEC Transaction, including:

we may incur significant transaction costs in connection with the EVERTEC Transaction, which costs may exceed those currently anticipated;

unforeseen events, including the COVID-19 pandemic, may delay or prevent the completion of the EVERTEC Transaction or materially diminish the expected benefits of the EVERTEC Transaction;

the parties to the Asset Purchase Agreement may terminate the Asset Purchase Agreement under certain circumstances;

we will be required to devote significant attention and resources to the integration of the Acquired Assets, both in the form of preparatory efforts that occur prior to the EVERTEC Transaction Closing as well as post-closing implementation and integration efforts, and such efforts will involve a significant degree of technological complexity and reliance on EVERTEC and other third parties, including with respect to the receipt of any necessary consents to transfer third-party vendor licenses (or obtain new such licenses) and the post-closing set-up of developer tools required to manage the Acquired Assets;

we may be unable to retain the employees and third-party contractors expected to be hired or engaged by us in connection with the EVERTEC Transaction and who are necessary to operate and integrate the Acquired Assets;

we may be subject to incremental operational and security risks arising from the transfer of the Acquired Assets to BPPR, including those risks arising from, among other things, the activities required to execute network segmentation, the possibility of misconfiguration of access or security services during the transition period and during the implementation of new processes or security controls, the possibility of mismanagement of security services during the transition phase, and the need to develop a robust internal control framework;

the anticipated benefits of the EVERTEC Transaction could be limited if EVERTEC fails to deliver to BPPR, in a timely manner or in a manner that meets BPPR’s requirements, the core application programming interfaces (APIs) that EVERTEC has committed to develop (subject to the scope and timeline provided by an independent third-party) in order for BPPR to connect the Acquired Assets (and any future enhancements or substitute channel applications thereto) to existing EVERTEC Group core applications, which is expected to enable BPPR’s ability to enhance and innovate in such channels in the future;

we may be exposed to heightened business risks as a result of the extension until 2035 of BPPR’s exclusivity with EVERTEC in connection with its merchant acquiring business, as well as the extension until 2030 of BPPR’s commitment with respect to the ATH Network, in light of the pace of technology changes and competition in the payments industry;

resources from Popular and EVERTEC may be diverted from other critical Popular projects to complete the EVERTEC Transaction, while EVERTEC’s strategy and investments after the EVERTEC Transaction Closing may be refocused away from Popular towards other strategic initiatives;

we may be unable to successfully execute the EVERTEC Transaction and, as a result, may fail to realize the anticipated benefits of the EVERTEC Transaction in the intended timeframe, or at all; and

we may not be able to execute the contemplated sell down of EVERTEC shares or otherwise receive any required regulatory approvals to effect a return to shareholders, via common stock repurchases, of any after-tax gains resulting from such sale.

 

Any of the foregoing risks and uncertainties could have a material adverse effect on our earnings, cash flows, financial condition, and/or stock price.

38


 

 

RISKS RELATING TO AN INVESTMENT IN OUR SECURITIES

 

Dividends on our Common Stock and Preferred Stock may be suspended and stockholders may not receive funds in connection with their investment in our Common Stock or Preferred Stock without selling their shares.

Holders of our Common Stock and Preferred Stock are only entitled to receive such dividends as our Board of Directors may declare out of funds legally available for such payments. During 2009, we suspended dividend payments on our Common Stock and Preferred Stock. We resumed payment of dividends on our Preferred Stock in December 2010 and on our Common Stock in October 2015. There can be no assurance that any dividends will be declared on the Preferred Stock or Common Stock in any future periods.

 

This could adversely affect the market price of our Common Stock and Preferred Stock. Also, we are a bank holding company and our ability to declare and pay dividends is dependent on certain Federal regulatory considerations, including the guidelines of the Federal Reserve Board regarding capital adequacy and dividends. It is Federal Reserve Board policy that bank holding companies should pay dividends on common stock only out of the net income available to common stock over the past year and only if the prospective rate of earnings retention appears consistent with the organization’s current and expected future capital needs, asset quality and overall financial condition.

 

In addition, the terms of our outstanding junior subordinated debt securities held by trusts that have issued trust preferred securities, prohibit us from declaring or paying any dividends or distributions on our capital stock, including our Common Stock and Preferred Stock, or from purchasing, acquiring, or making a liquidation payment on such stock, if we have given notice of our election to defer interest payments but the related deferral period has not yet commenced or a deferral period is continuing.

 

Accordingly, stockholders may have to sell some or all of their shares of our Common Stock or Preferred Stock in order to generate cash flow from their investment. Stockholders may not realize a gain on their investment when they sell the Common Stock or Preferred Stock and may lose the entire amount of their investment.

 

Certain of the provisions contained in our Certificate of Incorporation have the effect of making it more difficult to change the Board of Directors, and may make the Board of Directors less responsive to stockholder control.

Until our existing classified Board of Directors structure is fully phased out beginning with our 2023 annual meeting of stockholders, our certificate of incorporation provides that the members of the Board of Directors are divided into three classes. At the 2021 annual meeting of stockholders, one-third of the members of the Board of Directors was elected for a term expiring at the 2022 annual meeting of stockholders, at the 2022 annual meeting of stockholders, two-thirds of the members of the Board of Directors will be elected for a term expiring at the 2023 annual meeting of stockholders, and thereafter directors will be elected annually. Therefore, until our 2022 annual meeting of stockholders, control of the Board of Directors cannot be changed in one year, and at least two annual meetings must be held before a majority of the members of the Board of Directors can be changed. Our certificate of incorporation also provides that a director, or the entire Board of Directors, may be removed by the stockholders only for cause by a vote of at least two -thirds of the combined voting power of the outstanding capital stock entitled to vote for the election of directors. These provisions have the effect of making it more difficult to change the Board of Directors, and may make the Board of Directors less responsive to stockholder control. These provisions also may tend to discourage attempts by third parties to acquire Popular because of the additional time and expense involved and a greater possibility of failure, and, as a result, may adversely affect the price that a potential purchaser would be willing to pay for the capital stock, thereby reducing the amount a stockholder might realize in, for example, a tender offer for our capital stock.

 

For further information of other risks faced by Popular please refer to the MD&A section of the Annual Report on Form 10-K.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

39


 

As of December 31, 2021, BPPR operated 169 branches, of which 67 were owned and 102 were leased premises, and PB operated 39 branches of which 3 were owned and 36 were on leased premises. Also, the Corporation had 616 ATMs operating in Puerto Rico, 23 in Virgin Islands and 91 in the U.S. Mainland. On October 27, 2020, Popular Bank authorized and approved a strategic realignment of its New York Metro branch network that resulted in eleven (11) branch closures and related staffing reductions. The branch closures were completed on January 29, 2021. Refer to additional information on Management’s Discussion and Analysis included in this Form 10-K. The principal properties owned by Popular for banking operations and other services are described below. Our management believes that each of our facilities is well maintained and suitable for its purpose.

Puerto Rico

Popular Center, the twenty-story Popular and BPPR headquarters building, located at 209 Muñoz Rivera Avenue, Hato Rey, Puerto Rico.

Popular Center North Building, a three-story building, on the same block as Popular Center.

Popular Street Building, a parking and office building located at Ponce de León Avenue and Popular Street, Hato Rey, Puerto Rico.

Cupey Center Complex, one building, three-stories high, two buildings, two-stories high each, and two buildings three-stories high each located in Cupey, Río Piedras, Puerto Rico.

Old San Juan Building, a twelve-story structure located in Old San Juan, Puerto Rico.

Guaynabo Corporate Office Park Building, a two-story building located in Guaynabo, Puerto Rico.

Altamira Building, a nine-story office building located in Guaynabo, Puerto Rico.

El Señorial Center, a four-story office building and a two-story branch building located in Río Piedras, Puerto Rico.

Ponce de León 167 Building, a five-story office building located in Hato Rey, Puerto Rico.

U.S. & British Virgin Islands

BPPR Virgin Islands Center, a three-story building located in St. Thomas, U.S. Virgin Islands.

Popular Center -Tortola, a four-story building located in Tortola, British Virgin Islands.

 

ITEM 3. LEGAL PROCEEDINGS

 

For a discussion of Legal proceedings, see Note 24, “Commitments and Contingencies”, to the Consolidated Financial Statements in the Annual Report in this Form 10-K.

 

ITEM 4. MINE SAFETY DISCLOSURE

 

Not applicable.

 

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Common Stock

Popular’s Common Stock is traded on the NASDAQ Global Select Market under the symbol “BPOP”.

 

During 2021, the Corporation declared cash dividends in the total amount of $1.75 per common share outstanding, for an aggregate amount of $ 142.3 million. The Common Stock ranks junior to all series of Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of Popular. Our ability to declare or pay dividends on, or purchase, redeem or otherwise acquire, the Common Stock is subject to certain restrictions in the event that Popular fails to pay or set aside full

40


 

dividends on the Preferred Stock for the latest dividend period.

 

On September 9, 2021, the Corporation completed an accelerated share repurchase (“ASR”) program for the repurchase of an aggregate $350 million of Popular’s common stock. Under the terms of the accelerated share repurchase agreement (the “ASR Agreement”), on May 4, 2021, the Corporation made an initial payment of $350 million and received an initial delivery of 3,785,831 shares of Popular’s Common Stock (the “Initial Shares”). The transaction was accounted for as a treasury stock transaction. As a result of the receipt of the Initial Shares, the Corporation recognized in shareholders’ equity approximately $280 million in treasury stock and $70 million as a reduction in capital surplus. Upon the final settlement of the ASR Agreement, the Corporation received an additional 828,965 shares and recognized $61 million as treasury stock with a corresponding increase in its capital surplus account. The Corporation repurchased a total of 4,614,796 shares at an average purchase price of $75.84 under the ASR Agreement.

 

On May 27, 2020, the Corporation completed a $500 million ASR with respect to its common stock. On March 19, 2020 (the “early termination date”), the dealer counterparty to the ASR exercised its right under the ASR agreement to terminate the transaction because the trading price of the Corporation’s common stock fell below a specified level due to the effects of the COVID-19 pandemic on the global markets. As a result of such early termination, the final settlement of the ASR, which was originally expected to occur during the fourth quarter of 2020, occurred during the second quarter of 2020. Under the ASR, the Corporation prepaid $500 million and received from the dealer counterparty an initial delivery of 7,055,919 shares of common stock on February 3, 2020. As part of the final settlement of the ASR, the Corporation received an additional 4,763,216 shares of common stock after the early termination date. In total, the Corporation repurchased 11,819,135 shares at an average price per share of $42.3043 under the ASR. The Corporation accounted for the ASR as a treasury stock transaction. This transaction increased by $2.20 the Corporation’s tangible book value per share.

 

Additional information concerning legal or regulatory restrictions on the payment of dividends by Popular, BPPR and PB is contained under the caption “Regulation and Supervision” in Item 1 herein.

 

As of February 24, 2022, Popular had 6,645 stockholders of record of the Common Stock, not including beneficial owners whose shares are held in record names of brokers or other nominees. The last sales price for the Common Stock on that date was $87.13 per share.

 

Preferred Stock

 

Popular has 30,000,000 shares of authorized Preferred Stock that may be issued in one or more series, and the shares of each series shall have such rights and preferences as shall be fixed by the Board of Directors when authorizing the issuance of that particular series. Popular’s Preferred Stock issued and outstanding at December 31, 2021 consisted of:

 

885,726 shares of 6.375% non-cumulative monthly income Preferred Stock, Series A, no par value, liquidation preference value of $25 per share.

 

All series of Preferred Stock are pari passu. Dividends on each series of Preferred Stock are payable if declared by our Board of Directors. Our ability to declare and pay dividends on the Preferred Stock is dependent on certain Federal regulatory considerations, including the guidelines of the Federal Reserve Board regarding capital adequacy and dividends. The Board of Directors is not obligated to declare dividends and dividends do not accumulate in the event they are not paid.

Monthly dividends on the Preferred Stock amounted to a total of $1.4 million for the year 2021. There can be no assurance that any dividends will be declared on the Preferred Stock in any future periods.

 

Dividend Reinvestment and Stock Purchase Plan

 

Popular offers a dividend reinvestment and stock purchase plan for our stockholders that allows them to reinvest their dividends in shares of the Common Stock at a 5% discount from the average market price at the time of the issuance, as well as purchase shares of Common Stock directly from Popular by making optional cash payments at prevailing market prices.

 

Equity Based Plans

41


 

 

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. As of December 31, 2021, the maximum number of shares of common stock remaining available for future issuance under this plan was 3,677,820. For information about the securities remaining available for issuance under our equity-based plans, refer to Part III, Item 12.

 

Purchases of Equity Securities

 

The following table sets forth the details of purchases of Common Stock by the Corporation during the quarter ended December 31, 2021:

 

Issuer Purchases of Equity Securities

 

 

 

 

 

 

 

 

Not in thousands

 

 

 

Period

 

Total Number of Shares Purchased (1)

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs

October 1 – October 31

742

$77.67

-

-

November 1 – November 30

-

-

-

-

December 1 – December 31

210

83.81

-

-

Total December 31, 2021

952

$79.03

-

-

(1) Includes 952 shares of common stock acquired by the Corporation in connection with the satisfaction of tax withholding obligations on vested awards of restricted stock or restricted stock units granted to directors and certain employees under the Corporation’s Omnibus Incentive Plan. The acquired shares of common stock were added back to treasury stock.

 

Equity Compensation Plans

 

For information about our equity compensation plans, refer to Part III, Item 12.

 

Stock Performance Graph (1)

 

The graph below compares the cumulative total stockholder return during the measurement period with the cumulative total return, assuming reinvestment of dividends, of the Nasdaq Bank Index and the Nasdaq Composite Index.

 

The cumulative total stockholder return was obtained by dividing (i) the cumulative amount of dividends per share, assuming dividend reinvestment since the measurement point, December 31, 2016, plus (ii) the change in the per share price since the measurement date, by the share price at the measurement date.

42


 

COMPARISON OF FIVE YEAR CUMULATIVE RETURN

Total Return of December 31

December 31, 2016 =100

 

Picture 3

 

 

 

(1) Unless Popular specifically states otherwise, this Stock Performance Graph shall not be deemed to be incorporated by reference and shall not constitute soliciting material or otherwise be considered filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.

 

ITEM 6. [RESERVED]

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The information required by this item included in this Form 10-K, commencing on page 53.

 

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The information regarding the market risk of our investments appears under the caption “Risk Management”, on page 78 within Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K.

 

43


 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The information required by this item appears in under the caption “Statistical Summaries” on pages 106 to 108 included in this Form 10-K.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

Not Applicable.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by Popular in the reports that we file or submit under the Exchange Act and such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosures.

 

Assessment on Internal Control over Financial Reporting

 

The information under the captions “Report of Management on Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting Firm” are located in pages 109 and 110 in this Form 10-K.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our 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 on December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None

 

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 

Not applicable.

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

The information contained under the captions “Security Ownership of Certain Beneficial Owners and Management”, “Delinquent Section 16(a) Reports”, “Corporate Governance”, “Nominees for Election as Directors and Other Directors” and “Executive Officers” in the Proxy Statement are incorporated herein by reference. The Board has adopted a Code of Ethics to be followed by our employees, officers (including the Chief Executive Officer, Chief Financial Officer and Corporate Comptroller) and

44


 

directors to achieve conduct that reflects our ethical principles. The Code of Ethics is available on our website at www.popular.com. We will post on our website any amendments to the Code of Ethics or any waivers from a provision of Code of Ethics granted to the Chief Executive Officer, Chief Financial Officer, or Principal Accounting Officer.

 

ITEM 11. EXECUTIVE COMPENSATION

The information in the Proxy Statement under the caption “Executive and Director Compensation,” including the “Compensation Discussion and Analysis,” the “2021 Executive Compensation Tables and Compensation Information” and the “Compensation of Non-Employee Directors,” and under the caption “Committees of the Board – Talent and Compensation Committee – Talent and Compensation Committee Interlocks and Insider Participation” is incorporated herein by reference.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS

 

The information under the captions “Principal Shareholders” and “Shares Beneficially Owned by Directors and Executive Officers” in the Proxy Statement is incorporated herein by reference.

 

The following tables sets forth information as of December 31, 2021 regarding securities remaining available for issuance to directors and eligible employees under our equity-based compensation plans.

 

 

 

 

Plan Category

Plan

Number of Securities

Remaining Available

for Future Issuance

Under Equity Compensation

Plan

Equity compensation plan approved by security holders

2020 Omnibus Incentive Plan

3,677,820

Total

 

3,677,820

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

The information under the caption “Board of Directors’ Independence” and “Certain Relationships and Transactions” in the Proxy Statement is incorporated herein by reference.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Information regarding principal accountant fees and services is set forth under Proposal 3 – Ratification of Appointment of Independent Registered Public Accounting Firm in the Proxy Statement, which is incorporated herein by reference.

 

PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(a). The following financial statements and reports are included on pages 110 through 261 in this Form10K.

 

(1) Financial Statements

 

Report of Independent Registered Public Accounting Firm (PCAOB ID 238)

 

45


 

Consolidated Statements of Financial Condition as of December 31, 2021 and 2020

 

Consolidated Statements of Operations for each of the years in the three-year period ended December 31, 2021

 

Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2021

 

Consolidated Statements of Changes in Stockholders’ Equity for each of the years in the three-year period ended December 31, 2021

 

Consolidated Statements of Comprehensive Income for each of the years in the three-year period ended December 31, 2021

 

Notes to Consolidated Financial Statements

 

(2) Financial Statement Schedules: No schedules are presented because the information is not applicable or is included in the Consolidated Financial Statements described in (a) (1) above or in the notes thereto.

 

(3) Exhibits

 

ITEM 16. FORM 10-K SUMMARY

 

None.

 

The exhibits listed on the Exhibits Index below are filed herewith or are incorporated herein by reference.

46


 

Exhibit Index

 

 

 

 

 

 

2.1

Agreement and Plan of Merger dated as of June 30, 2010, among Popular, Inc., AP Carib Holdings Ltd., Carib Acquisition, Inc. and EVERTEC, Inc. (incorporated by reference to Exhibit 2.1 of Popular, Inc.’s Current Report on Form 8-K dated July 1, 2010 and filed on July 8, 2010).

 

 

2.2

Second Amendment to the Agreement and Plan of Merger, dated as of August 8, 2010, among Popular, Inc., EVERTEC, Inc., AP Carib Holdings, Ltd. and Carib Acquisition, Inc. (incorporated by reference to Exhibit 2.1 of Popular, Inc.’s Current Report on Form 8-K dated August 8, 2010 and filed on August 12, 2010).

 

 

2.3

Third Amendment to the Agreement and Plan of Merger, dated as of September 15, 2010, among Popular, Inc., EVERTEC, Inc., AP Carib Holdings, Ltd. And Carib Acquisition, Inc. (incorporated by reference to Exhibit 2.1 of Popular, Inc.’s Current Report on Form 8- K dated September 15, 2010 and filed on September 21, 2010).

 

 

2.4

Fourth Amendment to the Agreement and Plan of Merger, dated as of September 30, 2010, among Popular, Inc., EVERTEC, Inc., AP Carib Holdings, Ltd. and Carib Acquisition, Inc. (incorporated by reference to Exhibit 2.1 of Popular, Inc.’s Current Report on Form 8- K dated September 30, 2010 and filed on October 6, 2010).

 

 

3.1

Restated Certificate of Incorporation of Popular, Inc. (incorporated by reference to Exhibit 3.1 of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020).

 

3.2

Amended and Restated Bylaws of Popular, Inc. (incorporated by reference to Exhibit 3.1 of Popular, Inc.’s Current Report on Form 8-K dated and filed on January 2, 2020).

 

 

4.1

Specimen of Physical Common Stock Certificate of Popular, Inc. (incorporated by reference to Exhibit 4.1 of Popular, Inc.’s Current Report on Form 8-K dated May 29, 2012 and filed on May 30, 2012).

 

 

4.2

Certificate of Designation of Popular, Inc.’s 6.375% Non-Cumulative Monthly Income Preferred Stock, 2003 Series A (incorporated by reference to Exhibit 3.3 of Popular, Inc.’s Form 8-A filed on February 25, 2003).

 

 

4.3

Form of certificate representing Popular, Inc.’s 6.375% Non-Cumulative Monthly Income Preferred Stock, 2003 Series A (incorporated by reference to Exhibit 4.1 of Popular, Inc.’s Form 8-A filed on February 25, 2003).

 

 

4.4

Senior Indenture of Popular, Inc., dated as of February 15, 1995, as supplemented by the First Supplemental Indenture thereto, dated as of May 8, 1997, each between Popular, Inc. and The Bank of New York Mellon, as successor trustee (incorporated by reference to Exhibit 4(d) to the Registration Statement on Form S-3, File No. 333-26941, of Popular, Inc., Popular International Bank, Inc., and Popular North America, Inc., filed on May 12, 1997).

 

 

4.5

Second Supplemental Indenture of Popular, Inc., dated as of August 5, 1999, between Popular, Inc. and The Bank of New York Mellon, as successor trustee (incorporated by reference to Exhibit 4(e) to Popular, Inc.’s Current Report on Form 8-K dated August 5, 1999 and filed on August 17, 1999).

 

 

4.6

Subordinated Indenture of Popular, Inc., dated as of November 30, 1995, between Popular, Inc. and The Bank of New York Mellon, as successor trustee (incorporated by reference to Exhibit 4(e) to the Registration Statement on Form S-3, File No. 333- 26941, of Popular, Inc., Popular International Bank, Inc. and Popular North America, Inc., filed on May 12, 1997).

47


 

 

 

4.7

Senior Indenture of Popular North America, Inc., dated as of October 1, 1991, as supplemented by the First Supplemental Indenture thereto, dated as of February 28, 1995, and by the Second Supplemental Indenture thereto, dated as of May 8, 1997, each among Popular North America, Inc., Popular, Inc., as guarantor, and The Bank of New York Mellon, as successor trustee (incorporated by reference to Exhibit 4(f) to the Registration Statement on Form S-3, File No. 333-26941, of Popular, Inc., Popular International Bank, Inc. and Popular North America, Inc., filed on May 12, 1997).

 

 

4.8

Third Supplemental Indenture of Popular North America, Inc., dated as of August 5, 1999, among Popular North America, Inc., Popular, Inc., as guarantor, and The Bank of New York Mellon, as successor trustee (incorporated by reference to Exhibit 4(h) to Popular, Inc.’s Current Report on Form 8-K, dated August 5, 1999, as filed on August 17, 1999).

 

4.9

Junior Subordinated Indenture of Popular, Inc., dated as of October 31, 2003, between Popular, Inc. and The Bank of New York Mellon, as successor trustee (incorporated by reference to Exhibit 4.2 of Popular, Inc.’s Current Report on Form 8-K, dated October 31,2003 and filed on November 4, 2003).

 

 

4.10

Description of Popular, Inc.’s securities registered pursuant to Section 12 of the Securities Exchange Act. (1)

 

 

10.1

Amended and Restated Master Services Agreement, dated as of September 30, 2010, among Popular, Banco Popular de Puerto Rico and EVERTEC, Inc. (incorporated by reference to Exhibit 99.1 of Popular, Inc.’s Current Report on Form 8-K dated and filed on October 14, 2011).

 

 

10.2

Technology Agreement, dated as of September 30, 2010, between Popular, Inc. and EVERTEC, Inc. (incorporated by reference to Exhibit 99.4 of Popular, Inc.’s Current Report on Form 8-K dated September 30, 2010 and filed on October 6, 2010).

 

 

10.3

Stockholder Agreement, dated as of April 17, 2012, among Carib Latam Holdings, Inc., and each of the holders of Carib Latam Holdings, Inc. (incorporated by reference to Exhibit 99.1 of Popular, Inc.’s Current Report on Form 8-K dated April 17, 2012 and filed on April 23, 2012).

 

 

10.4

Popular, Inc. 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 4.4 of Popular, Inc.’s Form S-8 filed on May 12, 2020). *

 

 

10.5

Form of Compensation Agreement for Directors Elected Chairman of a Committee (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004). *

 

 

10.6

Form of Compensation Agreement for Directors not Elected Chairman of a Committee (incorporated by reference to Exhibit 10.2 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004). *

 

 

10.7

Compensation Agreement for Alejandro M. Ballester as director of Popular, Inc., dated January 28, 2010 (incorporated by reference to Exhibit 10.9 of Popular, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2009). *

 

 

10.8

Compensation Agreement for Carlos A. Unanue as director of Popular, Inc., dated January 28, 2010 (incorporated by reference to Exhibit 10.10 of Popular, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2009). *

 

 

10.9

Compensation Agreement for C. Kim Goodwin as director of Popular, Inc., dated May 10, 2011 (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011). *

 

 

10.10

Compensation Agreement for Joaquin E. Bacardi, III as director of Popular, Inc., dated April 30, 2013 (incorporated by reference to Exhibit 10.2 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013). *

 

 

10.11

Compensation Agreement for John. W. Diercksen as director of Popular, Inc., dated October 18, 2013 (incorporated by reference to Exhibit 10.13 of Popular, Inc.’s Annual Report on 10-K for the year ended December 31, 2013). *

 

 

 

 

 

 

48


 

 

 

10.12

Form of 2015 Long-Term Equity Incentive Award and Agreement (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015). *

 

 

10.13

Form of 2016 Long-Term Equity Incentive Award and Agreement (incorporated by reference to Exhibit 10.27 of Popular, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015). *

 

 

10.14

Form of Director Compensation Letter, Election Form and Restricted Stock Agreement, effective April 26, 2016 (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016). *

 

 

10.15

Form of 2017 Long-Term Equity Incentive Award and Agreement (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017). *

 

 

10.16

Long-Term Equity Incentive Award and Agreement for Ignacio Alvarez, dated as of June 22, 2017 (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Quarterly report on Form 10-Q for the quarter ended June 30, 2017). *

 

 

10.17

Form of Popular, Inc. 2018 Long-Term Equity Incentive Award and Agreement (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018). *

 

 

10.18

Director Compensation Letter, Election Form and Restricted Stock Agreement for Myrna M. Soto, dated June 22, 2018 (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018). *

 

 

10.19

Director Compensation Letter, Election Form and Restricted Stock Agreement for Robert Carrady, dated December 29, 2018 (incorporated by reference to Exhibit 10.25 of Popular, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018). *

 

 

10.20

Form of Director Compensation Letter, Election Form and Restricted Stock Unit Award Agreement, effective May 7, 2019 (incorporated by reference to Exhibit 10.26 of Popular, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018). *

 

 

10.21

Form of Popular, Inc. 2019 Long-Term Equity Incentive Award and Agreement (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019). *

 

 

10.22

Director Compensation Letter, Election Form and Restricted Stock Unit Award Agreement for Richard L. Carrión, dated July 1, 2019 (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Annual Report on Form 10-Q for the quarter ended September 30, 2019). *

 

49


 

10.25

Form of Popular, Inc. 2020 Long-Term Equity Incentive Award and Agreement (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020). *

 

 

10.26

Form of Director Compensation Election Form and Restricted Stock Unit Award Agreement, effective May 12, 2020 (incorporated by reference to Exhibit 10.2 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020). *

 

 

10.27

Form of Popular, Inc. 2021 Long-Term Equity Incentive Award and Agreement (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021). *

 

 

10.28

Form of Director Compensation Letter, Election Form and Restricted Stock Unit Award Agreement for Betty DeVita and José R. Rodriguez, effective June 25, 2021 (incorporated by reference to Exhibit 10.1 of Popular, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021). *

 

 

10.29

Asset Purchase Agreement, dated as of February 24, 2022, among Evertec, Inc. and Evertec Group, LLC, Popular, Inc. and Banco Popular de Puerto Rico (incorporated by reference to Exhibit 2.1 of Popular, Inc.’s Current Report on Form 8-K dated and filed on February 24, 2022).

 

 

13.1

Popular, Inc.’s Annual Report to Shareholders for the year ended December 31, 2021. (1)

 

 

21.1

Schedule of Subsidiaries of Popular, Inc. (1)

 

 

22.1

Issuers of Guaranteed Securities (1)

 

 

23.1

Consent of Independent Registered Public Accounting Firm. (1)

 

 

31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)

 

 

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)

 

 

32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

 

 

32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

 

 

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline Document. (1)

101.SCH

Inline XBRL Taxonomy Extension Schema Document (1)

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)

101.DEF

Inline XBRL Taxonomy Extension Definitions Linkbase Document (1)

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document (1)

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)

104

The cover page of Popular, Inc. Annual Report on Form 10-K for the year ended December 31, 2021, formatted in Inline XBRL (included within the Exhibit 101 attachments) (1)

 

 

(1)

Included herewith

*

This exhibit is a management contract or compensatory plan or arrangement.

Popular, Inc. has not filed as exhibits certain instruments defining the rights of holders of debt of Popular, Inc. not exceeding 10% of the total assets of Popular, Inc. and its consolidated subsidiaries. Popular, Inc. hereby agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and subordinated debt of Popular, Inc., or of any of its consolidated subsidiaries.

 

50


 

Financial Review and

Supplementary Information

 

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

53

 

 

 

 

Statistical Summaries

106

 

 

 

 

Report of Management on Internal Control Over Financial Reporting

109

 

 

 

 

Report of Independent Registered Public

Accounting Firm

110

 

 

 

 

Consolidated Statements of Financial Condition as of

December 31, 2021 and 2020

114

 

 

 

 

Consolidated Statements of Operations for the

years ended December 31, 2021, 2020 and 2019

115

 

 

 

 

Consolidated Statements of Comprehensive

Income for the years ended December 31, 2021, 2020 and 2019

116

 

 

 

 

Consolidated Statements of Changes in Stockholders’

Equity for the years ended December 31, 2021, 2020 and 2019

117

 

 

 

 

Consolidated Statements of Cash Flows for the

years ended December 31, 2021, 2020 and 2019

118

 

 

 

 

Notes to Consolidated Financial Statements

120

 

 

 

 

Signatures

264

 

 

 

51


 

Management’s Discussion and

Analysis of Financial Condition

and Results of Operations

 

Forward-Looking Statements

53

 

Overview

54

 

Critical Accounting Policies / Estimates

59

 

Statement of Operations Analysis

65

 

Net Interest Income

65

 

Provision for Credit Losses

68

 

Non-Interest Income

68

 

Operating Expenses

69

 

Income Taxes

70

 

Fourth Quarter Results

70

 

Reportable Segment Results

71

 

Statement of Financial Condition Analysis

73

 

Assets

73

 

Liabilities

74

 

Stockholders’ Equity

75

 

Regulatory Capital

75

 

Risk Management

 

78

 

Market / Interest Rate Risk

78

 

Liquidity

83

 

Enterprise Risk Management

103

 

Adoption of New Accounting Standards and Issued but Not Yet Effective Accounting Standards

105

 

Statistical Summaries

 

 

 

Statements of Financial Condition

106

 

Statements of Operations

107

 

Average Balance Sheet and Summary of Net Interest Income

108

 

52


 

FORWARD-LOOKING STATEMENTS

The information included in this report contains certain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including, without limitation, statements about Popular Inc.’s (the “Corporation,” “Popular,” “we,” “us,” “our”) business, financial condition, results of operations, plans, objectives and future performance. These statements are not guarantees of future performance, are based on management’s current expectations and, by their nature, involve risks, uncertainties, estimates and assumptions. Potential factors, some of which are beyond the Corporation’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Risks and uncertainties include without limitation the effect of competitive and economic factors, and our reaction to those factors, the adequacy of the allowance for loan losses, delinquency trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect of legal and regulatory proceedings and new accounting standards on the Corporation’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions are generally intended to identify forward-looking statements.

 

Various factors, some of which are beyond Popular’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Factors that might cause such a difference include, but are not limited to, the rate of growth or decline in the economy and employment levels, as well as general business and economic conditions in the geographic areas we serve and, in particular, in the Commonwealth of Puerto Rico (the “Commonwealth” or “Puerto Rico”), where a significant portion of our business is concentrated; the impact of the current fiscal and economic challenges of Puerto Rico and the measures taken and to be taken by the Puerto Rico Government and the Federally-appointed oversight board on the economy, our customers and our business; the impact of the pending debt restructuring proceedings under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”) and of other actions taken or to be taken to address Puerto Rico’s fiscal challenges on the value of our portfolio of Puerto Rico government securities and loans to governmental entities and of our commercial, mortgage and consumer loan portfolios where private borrowers could be directly affected by governmental action; the amount of Puerto Rico public sector deposits held at the Corporation, whose future balances are uncertain and difficult to predict and may be impacted by factors such as the amount of Federal funds received by the P.R. Government in connection with the COVID-19 pandemic and the rate of expenditure of such funds, as well as the timeline and implementation of the Plan of Adjustment for the Puerto Rico debt restructuring under Title III of PROMESA; risks related to Popular’s planned acquisition of certain information technology and related assets currently used by EVERTEC, Inc. to service certain of Banco Popular de Puerto Rico’s key channels, as well as the planned entry into amended and restated commercial agreements and the sale or conversion into non-voting of Popular’s ownership stake in Evertec (the “Transaction”), including: the length of time necessary to consummate the Transaction; the ability to satisfy the conditions to the closing thereof; the receipt of any regulatory approvals necessary to effect the Transaction and the contemplated return to shareholders of net gains resulting from a sale of EVERTEC, Inc. shares; the ability to successfully transition and integrate the assets acquired as part of the Transaction, as well as related operations, employees and third party contractors; unexpected costs, including, without limitation, costs due to exposure to any unrecorded liabilities or issues not identified during due diligence investigation of the Transaction or that are not subject to indemnification or reimbursement by EVERTEC, Inc.; risks that Popular may be affected by operational and other risks arising from the acquisition of the acquired assets, including the transition and integration thereof, or by adverse effects on relationships with customers, employees and service providers; and business and other risks arising from the extension of Popular’s current commercial agreements with EVERTEC, Inc., as well as the sale or conversion of EVERTEC, Inc. shares owned by Popular; the scope and duration of the COVID-19 pandemic (including the appearance of new strains of the virus), actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on us, our customers, service providers and third parties; changes in interest rates and market liquidity, which may reduce interest margins, impact funding sources and affect our ability to originate and distribute financial products in the primary and secondary markets; the fiscal and monetary policies of the federal government and its agencies; changes in federal bank regulatory and supervisory policies, including required levels of capital and the impact of proposed capital standards on our capital ratios; additional Federal Deposit Insurance Corporation (“FDIC”) assessments; regulatory approvals that may be necessary to undertake certain actions or consummate strategic transactions such as acquisitions and dispositions; unforeseen or catastrophic events, including extreme weather events, other natural disasters, man-made disasters, acts of violence or war, or the emergence of pandemics epidemics and other health-related crises, which could cause a disruption in our operations or other adverse consequences for our business; the relative strength or weakness of the consumer and commercial credit sectors and of the real estate markets in Puerto Rico and the other markets in which borrowers are located; the performance of the stock and bond markets; competition in the financial services industry; possible legislative, tax or regulatory changes; and a failure in or breach of our operational or security systems or infrastructure or those of EVERTEC, Inc., our provider of core financial

53


 

transaction processing and information technology services, or of other third parties providing services to us, including as a result of cyberattacks, e-fraud, denial-of-services and computer intrusion, that might result in loss or breach of customer data, disruption of services, reputational damage or additional costs to Popular. Other possible events or factors that could cause results or performance to differ materially from those expressed in these forward-looking statements include the following: negative economic conditions that adversely affect housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of non-performing assets, charge-offs and provision expense; changes in market rates and prices which may adversely impact the value of financial assets and liabilities; potential judgments, claims, damages, penalties, fines, enforcement actions and reputational damage resulting from pending or future litigation and regulatory or government investigations or actions, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic; changes in accounting standards, rules and interpretations; our ability to grow our core businesses; decisions to downsize, sell or close units or otherwise change our business mix; and management’s ability to identify and manage these and other risks. Moreover, the outcome of legal and regulatory proceedings, as discussed in “Part I, Item 3. Legal Proceedings” of the Corporation’s Form 10-K for the year ended December 31, 2021, is inherently uncertain and depends on judicial interpretations of law and the findings of regulators, judges and/or juries. The description of the Corporation’s business and risk factors contained in Part I, Items 1 and 1A of the Corporation’s Form 10-K for the year ended December 31, 2021 discusses additional information about the business of the Corporation and the material risk factors and uncertainties to which the Corporation is subject that, in addition to the other information in this report, readers should consider.

 

All forward-looking statements included in this report are based upon information available to the Corporation as of the date of this report, 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.

 

OVERVIEW

 

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 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 37 to the Consolidated Financial Statements presents information about the Corporation’s business segments.

The Corporation has several investments which it accounts for under the equity method. These include the 16.19% interest in EVERTEC, a 15.84% interest in Centro Financiero BHD Leon, S.A. (“BHD Leon”), among other investments in limited partnerships which mainly hold loans and investment securities. EVERTEC provides transaction processing services throughout the Caribbean and Latin America, and also provides to the Corporation core banking and transaction processing and other services. BHD León is a diversified financial services institution operating in the Dominican Republic. For the year ended December 31, 2021, the Corporation recorded approximately $58.3 million in earnings from these investments on an aggregate basis. The carrying amounts of these investments as of December 31, 2021 were $299.0 million. Refer to Note 27 to the Consolidated Financial Statements for additional information.

 

SIGNIFICANT EVENTS

Acquisition of K2 Capital Group LLC

 

On October 15, 2021, Popular Equipment Finance LLC (“PEF”), a newly-formed wholly-owned subsidiary of PB, completed the acquisition of certain assets and the assumption of certain liabilities of Minnesota-based K2 Capital Group LLC’s (“K2”) equipment leasing and financing business (the “Acquired Business”). PEF made a payment to K2 of approximately $157 million in cash, representing a premium of $49 million over the book value of K2’s net assets, which has been recorded as goodwill. An additional approximate $29 million in earnout payments could be payable to K2 over the next three years, contingent upon the achievement of certain agreed-upon financial targets during such period.

54


 

 

Specializing in the healthcare industry, the Acquired Business provides a variety of lease products, including operating and finance leases, and also offers private label vendor finance programs to equipment manufacturers and healthcare organizations. The acquisition provides PB with a national equipment leasing platform that complements its existing healthcare lending business.

 

As part of the transaction, PEF acquired approximately $115 million in net assets that consisted mainly of commercial finance leases. The transaction was accounted for as a business combination. Refer to Note 4 to the Consolidated Financial Statements for additional information.

 

 

Capital Actions

 

2021 Increase in Common Stock Dividend

 

On May 6, 2021, the Corporation’s Board of Directors approved a quarterly cash dividend of $0.45 per share, an increase from the previous $0.40 per share quarterly dividend, on its outstanding common stock. During the year ended December 31, 2021, the Corporation declared cash dividend of $1.75 per common share outstanding ($142.3 million in the aggregate).

 

Accelerated Share Repurchase

 

On September 9, 2021, the Corporation completed its previously announced accelerated share repurchase program for the repurchase of an aggregate $350 million of Popular’s common stock. Under the terms of the accelerated share repurchase agreement (the “ASR Agreement”), on May 4, 2021, the Corporation made an initial payment of $350 million and received an initial delivery of 3,785,831 shares of Popular’s Common Stock (the “Initial Shares”). The transaction was accounted for as a treasury stock transaction. As a result of the receipt of the Initial Shares, the Corporation recognized in shareholders’ equity approximately $280 million in treasury stock and $70 million as a reduction in capital surplus. Upon the final settlement of the ASR Agreement, the Corporation received an additional 828,965 shares of Popular’s common stock and recognized $61 million as treasury stock with a corresponding increase in its capital surplus account. The Corporation repurchased a total of 4,614,796 shares at an average purchase price of $75.84 under the ASR Agreement.

 

Redemption of Trust Preferred Securities

 

On November 1, 2021, the Corporation redeemed all outstanding 6.70% Cumulative Monthly Income Trust Preferred Securities (the “Trust Preferred Securities”) issued by the Popular Capital Trust I (the “Trust”) (liquidation amount of $25 per security and amounting to $186,663,800 (or $181,063,250 after excluding the Corporation’s participation in the Trust of $5,600,550) in the aggregate). The redemption price for the Trust Preferred Securities was equal to $25 per security plus accrued and unpaid distributions up to and excluding the redemption date in the amount of $0.139583 per security, for a total payment per security in the amount of $25.139583. Upon redemption, Popular delisted the Trust Preferred Securities (NASDAQ: BPOPN) from the Nasdaq Global Select Market.

 

2022 Capital Plan

 

On January 12, 2022 the Corporation announced the following capital actions:

an increase in the Corporation’s quarterly common stock dividend from $0.45 per share to $0.55 per share, commencing with the dividend payable in the second quarter of 2022, subject to the approval by the Corporation’s Board of Directors; and

common stock repurchases of up to $500 million during 2022.

 

The Corporation’s planned common stock repurchases may be executed in the open market or in privately negotiated transactions. The timing and exact amount of such repurchases will be subject to various factors, including market conditions and the Corporation’s capital position and financial performance.

 

Refer to Table 1 for selected financial data for the past three years.

 

55


 

Table 1 - Selected Financial Data

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

(Dollars in thousands, except per common share data)

 

2021

 

2020

 

2019

 

CONDENSED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

Interest income

$

2,122,637

$

2,091,551

$

2,260,793

 

 

Interest expense

 

165,047

 

234,938

 

369,099

 

 

Net interest income

 

1,957,590

 

1,856,613

 

1,891,694

 

 

Provision for credit losses (benefit)

 

(193,464)

 

292,536

 

165,779

 

 

Non-interest income

 

642,128

 

512,312

 

569,883

 

 

Operating expenses

 

1,549,275

 

1,457,829

 

1,477,482

 

 

Income tax expense

 

309,018

 

111,938

 

147,181

 

 

 

Net income

$

934,889

$

506,622

$

671,135

 

 

 

Net income applicable to common stock

$

933,477

$

504,864

$

667,412

 

PER COMMON SHARE DATA

 

 

 

 

 

 

 

 

Net income per common share - basic

$

11.49

$

5.88

$

6.89

 

 

Net income per common share - diluted

 

11.46

 

5.87

 

6.88

 

 

Dividends declared

 

1.75

 

1.60

 

1.20

 

 

Common equity per share

 

74.48

 

71.30

 

62.42

 

 

Market value per common share

 

82.04

 

56.32

 

58.75

 

 

Outstanding shares:

 

 

 

 

 

 

 

 

 

Average - basic

 

81,263,027

 

85,882,371

 

96,848,835

 

 

 

Average - assuming dilution

 

81,420,154

 

85,975,259

 

96,997,800

 

 

 

End of period

 

79,851,169

 

84,244,235

 

95,589,629

 

AVERAGE BALANCES

 

 

 

 

 

 

 

 

Net loans[1]

$

29,074,036

$

28,384,981

$

26,806,368

 

 

Earning assets

 

68,088,675

 

56,404,607

 

44,944,793

 

 

Total assets

 

71,168,650

 

59,583,455

 

50,341,827

 

 

Deposits

 

63,102,916

 

51,585,779

 

42,218,796

 

 

Borrowings

 

1,255,495

 

1,321,772

 

1,404,459

 

 

Total stockholders' equity

 

5,777,652

 

5,419,938

 

5,713,517

 

PERIOD END BALANCE

 

 

 

 

 

 

 

 

Net loans[1]

$

29,299,725

$

29,484,651

$

27,466,076

 

 

Allowance for credit losses - loans portfolio

 

695,366

 

896,250

 

477,708

 

 

Earning assets

 

72,103,862

 

62,989,715

 

48,674,705

 

 

Total assets

 

75,097,899

 

65,926,000

 

52,115,324

 

 

Deposits

 

67,005,088

 

56,866,340

 

43,758,606

 

 

Borrowings

 

1,155,166

 

1,346,284

 

1,294,986

 

 

Total stockholders' equity

 

5,969,397

 

6,028,687

 

6,016,779

 

SELECTED RATIOS

 

 

 

 

 

 

 

 

Net interest margin (non-taxable equivalent basis)

 

2.88

%

3.29

%

4.03

%

 

Net interest margin (taxable equivalent basis) -Non-GAAP

 

3.19

 

3.62

 

4.43

 

 

Return on assets

 

1.31

 

0.85

 

1.33

 

 

Return on common equity

 

16.22

 

9.36

 

11.78

 

 

Tier I capital

 

17.49

 

16.33

 

17.76

 

 

Total capital

 

19.35

 

18.81

 

20.31

 

[1] Includes loans held-for-sale.

56


 

Non-GAAP financial measures

 

Net interest income on a taxable equivalent basis

 

Net interest income, on a taxable equivalent basis, is presented with its different components on Table 3 for the year ended December 31, 2021 as compared with the same period in 2020, segregated by major categories of interest earning assets and interest-bearing liabilities.

 

The 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, and certain obligations of the Commonwealth of Puerto Rico and its agencies and assets held by the Corporation’s international banking entities. To facilitate the comparison of all interest related to these assets, the interest income has been converted to a taxable equivalent basis, using the applicable statutory income tax rates for each period. The taxable equivalent computation considers the interest expense and other related expense disallowances required by the Puerto Rico tax law. Under Puerto Rico tax law, the exempt interest can be deducted up to the amount of taxable 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 exempt sources.

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 year ended December 31, 2021

The Corporation’s net income for the year ended December 31, 2021 amounted to $934.9 million, compared to a net income of $506.6 million for 2020.

The discussion that follows provides highlights of the Corporation’s results of operations for the year ended December 31, 2021 compared to the results of operations of 2020. It also provides some highlights with respect to the Corporation’s financial condition, credit quality, capital and liquidity. Table 2 presents a three-year summary of the components of net income as a percentage of average total assets.

57


 

Table 2 - Components of Net Income as a Percentage of Average Total Assets

 

 

2021

2020

2019

Net interest income

 

2.75

%

3.12

%

3.76

%

Provision for credit losses (benefit)

 

0.27

 

(0.49)

 

(0.33)

 

Mortgage banking activities

 

0.07

 

0.02

 

0.06

 

Net gain and valuation adjustments on investment securities

 

-

 

0.01

 

-

 

Other non-interest income

 

0.83

 

0.83

 

1.07

 

Total net interest income and non-interest income, net of provision for credit losses

 

3.92

 

3.49

 

4.56

 

Operating expenses

 

(2.18)

 

(2.45)

 

(2.94)

 

Income before income tax

 

1.74

 

1.04

 

1.62

 

Income tax expense

 

0.43

 

0.19

 

0.29

 

Net income

 

1.31

%

0.85

%

1.33

%

 

Net interest income for the year ended December 31, 2021 was $2.0 billion, an increase of $101.0 million when compared to 2020. The increase in net interest income was mainly driven by higher interest income from commercial loans due to income from loans under the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), and higher income from investment securities. In addition, lower interest expense on deposits, despite the higher volume, contributed to the higher net interest income. The net interest margin for the year ended December 31, 2021 was 2.88% compared to 3.29% for the same period in 2020 and was impacted by prolonged low interest rates as well as the change in the earning assets composition. On a taxable equivalent basis, net interest margin was 3.19% in 2021, compared to 3.62% in 2020. Refer to the Net Interest Income section of this MD&A for additional information.

The Corporation’s total provision for credit losses reflected a benefit of $193.5 million for the year ended December 31, 2021, compared to a provision expense of $292.5 million for 2020. The benefit for the year 2021 was due to improvements in credit quality and the macroeconomic outlook. The Corporation continued to exhibit strong credit quality trends and low credit costs with low levels of net charge-offs and lower non-performing loans. Non-performing assets totaled $633 million at December 31, 2021, reflecting a decrease of $191 million when compared to December 31, 2020. Refer to the Provision for Credit Losses and Credit Risk sections of this MD&A for information on the allowance for credit losses, non-performing assets, troubled debt restructurings, net charge-offs and credit quality metrics.

Non-interest income for the year ended December 31, 2021 amounted to $642.1 million, an increase of $129.8 million, when compared with 2020, mostly due to: higher service fees and service charges on deposit accounts due to economic disruptions related to the pandemic, the waiver of service charges and late fees during 2020, higher income from mortgage banking activities and higher other operating income principally due to higher net earnings from the combined portfolio of investments under the equity method. Refer to the Non-Interest Income section of this MD&A for additional information on the major variances of the different categories of non-interest income.

 

Total operating expenses amounted to $1.5 billion for the year 2021, reflecting an increase of $91.4 million, when compared to the same period in 2020, mainly due to higher personnel costs. Refer to the Operating Expenses section of this MD&A for additional information.

 

Income tax expense amounted to $309.0 million for the year ended December 31, 2021, compared with an income tax expense of $111.9 million for the previous year. The increase in income tax expense for the year is mainly due to a higher pre-tax income. Refer to the Income Taxes section in this MD&A and Note 35 to the consolidated financial statements for additional information on income taxes.

At December 31, 2021, the Corporation’s total assets were $75.1 billion, compared with $65.9 billion at December 31, 2020. The increase of $9.2 billion is mainly driven by higher money market investments and debt securities available-for-sale due to the additional funds available to invest resulting from the increase in deposits across various sectors, partially offset by paydowns of agency mortgage-backed securities. Refer to the Statement of Condition Analysis section of this MD&A for additional information.

58


 

Deposits amounted to $67.0 billion at December 31, 2021, compared with $56.9 billion at December 31, 2020. Table 7 presents a breakdown of deposits by major categories. The increase in deposits was mainly due to higher Puerto Rico public sector deposits and higher balances in retail and commercial demand deposits accounts. The Corporation’s borrowings remained flat at $1.2 billion at December 31, 2021. Refer to Note 17 to the Consolidated Financial Statements for detailed information on the Corporation’s borrowings.

 

Refer to Table 6 in the Statement of Financial Condition Analysis section of this MD&A for the percentage allocation of the composition of the Corporation’s financing to total assets.

 

Stockholders’ equity remained flat at $6.0 billion at December 31, 2021, compared with December 31, 2020. The net activity for the year was mainly due to net income of $934.9 million for the year 2021 offset by unrealized losses on debt securities available-for-sale and by capital return transactions, including an accelerated share repurchase transaction completed during 2021. The Corporation and its banking subsidiaries continue to be well-capitalized at December 31, 2021. The Common Equity Tier 1 Capital ratio at December 31, 2021 was 17.42%, compared to 16.26% at December 31, 2020.

 

For further discussion of operating results, financial condition and business risks refer to the narrative and tables included herein.

 

The shares of the Corporation’s common stock are 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 with generally accepted accounting principles in the United States of America (“GAAP”) and general practices within the financial services industry. The Corporation’s significant accounting policies are described in detail in Note 2 to the Consolidated Financial Statements and should be read in conjunction with this section.

Critical accounting policies require management to make estimates and assumptions, which involve significant judgment about the effect of matters that are inherently uncertain and that involve a high degree of subjectivity. 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. The following MD&A section is a summary of what management considers the Corporation’s critical accounting policies and estimates.

 

Fair Value Measurement of Financial Instruments

The Corporation currently measures at fair value on a recurring basis its trading debt securities, debt securities available-for-sale, certain equity securities, derivatives and mortgage servicing rights. Occasionally, the Corporation may be required to record at fair value other assets on a nonrecurring basis, such as loans held-for-sale, loans held-in-portfolio that are collateral dependent and certain other assets. These nonrecurring fair value adjustments typically result from the application of lower of cost or fair value accounting or write-downs of individual assets.

The Corporation categorizes its assets and liabilities measured at fair value under the three-level hierarchy. The level within the hierarchy is based on whether the inputs to the valuation methodology used for fair value measurement are observable.

The Corporation requires the use of observable inputs when available, in order to minimize the use of unobservable inputs to determine fair value. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The amount of judgment involved in estimating the fair value of a financial instrument depends upon the availability of quoted market prices or observable market parameters. In addition, it may be affected by other factors such as the type of instrument, the liquidity of the market for the instrument, transparency around the inputs to the valuation, as well as the contractual characteristics of the instrument.

Broker quotes used for fair value measurements inherently reflect any lack of liquidity in the market since they represent an exit price from the perspective of the market participants. Financial assets that were fair valued using broker quotes amounted to $6 million at December 31, 2021, of which $1 million were Level 3 assets and $5 million were Level 2 assets. Level 3 assets consisted

59


 

principally of tax-exempt GNMA mortgage-backed securities. Fair value for these securities was based on an internally-prepared matrix derived from local broker quotes. The main input used in the matrix pricing was non-binding local broker quotes obtained from limited trade activity. Therefore, these securities were classified as Level 3.

Trading Debt Securities and Debt Securities Available-for-Sale

The majority of the values for trading debt securities and debt securities available-for-sale are obtained from third-party pricing services and are validated with alternate pricing sources when available. Securities not priced by a secondary pricing source are documented and validated internally according to their significance to the Corporation’s financial statements. Management has established materiality thresholds according to the investment class to monitor and investigate material deviations in prices obtained from the primary pricing service provider and the secondary pricing source used as support for the valuation results. During the year ended December 31, 2021, the Corporation did not adjust any prices obtained from pricing service providers or broker dealers.

Inputs are evaluated to ascertain that they consider current market conditions, including the relative liquidity of the market. When a market quote for a specific security is not available, the pricing service provider generally uses observable data to derive an exit price for the instrument, such as benchmark yield curves and trade data for similar products. To the extent trading data is not available, the pricing service provider relies on specific information including dialogue with brokers, buy side clients, credit ratings, spreads to established benchmarks and transactions on similar securities, to draw correlations based on the characteristics of the evaluated instrument. If for any reason the pricing service provider cannot observe data required to feed its model, it discontinues pricing the instrument. During the year ended December 31, 2021, none of the Corporation’s debt securities were subject to pricing discontinuance by the pricing service providers. The pricing methodology and approach of our primary pricing service providers is concluded to be consistent with the fair value measurement guidance.

Furthermore, management assesses the fair value of its portfolio of investment securities at least on a quarterly basis. Securities are classified in the fair value hierarchy according to product type, characteristics and market liquidity. At the end of each period, management assesses the valuation hierarchy for each asset or liability measured. The fair value measurement analysis performed by the Corporation includes validation procedures and review of market changes, pricing methodology, assumption and level hierarchy changes, and evaluation of distressed transactions.

Refer to Note 28 to the Consolidated Financial Statements for a description of the Corporation’s valuation methodologies used for the assets and liabilities measured at fair value.

 

Loans and Allowance for Credit Losses

Interest on loans is accrued and recorded as interest income based upon the principal amount outstanding.

Non-accrual loans are those loans on which the accrual of interest is discontinued. When a loan is placed on non-accrual status, all previously accrued and unpaid interest is charged against interest income and the loan is accounted for either on a cash-basis method or on the cost-recovery method. Loans designated as non-accruing are returned to accrual status when the Corporation expects repayment of the remaining contractual principal and interest. The determination as to the ultimate collectability of the loan’s balance may involve management’s judgment in the evaluation of the borrower’s financial condition and prospects for repayment.

Refer to the MD&A section titled Credit Risk, particularly the Non-performing assets sub-section, for a detailed description of the Corporation’s non-accruing and charge-off policies by major loan categories.

One of the most critical and complex accounting estimates is associated with the determination of the allowance for credit losses (“ACL”). The Corporation establishes an ACL for its loan portfolio based on its estimate of credit losses over the remaining contractual term of the loans, adjusted for expected prepayments, in accordance with Accounting Standards Codification (“ASC”) Topic 326. An ACL is recognized for all loans including originated and purchased loans, since inception, with a corresponding charge to the provision for credit losses, except for purchased credit deteriorated (“PCD”) loans as explained below. The Corporation follows a methodology to establish the ACL which includes a reasonable and supportable forecast period for estimating credit losses, considering quantitative and qualitative factors as well as the economic outlook. As part of this methodology, management evaluates various macroeconomic scenarios provided by third parties. At December 31, 2021, management applied probability weights to the outcome of the selected scenarios.

The Corporation has designated as collateral dependent loans secured by collateral when foreclosure is probable or when foreclosure is not probable but the practical expedient is used. The practical expedient is used when repayment is expected to be

60


 

provided substantially by the sale or operation of the collateral and the borrower is experiencing financial difficulty. The ACL of collateral dependent loans is measured based on the fair value of the collateral less costs to sell. 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. In addition, refer to the Credit Risk section of this MD&A for detailed information on the Corporation’s collateral value estimation for other real estate.

A restructuring constitutes a TDR when the Corporation separately concludes that the restructuring constitutes a concession and the debtor is experiencing financial difficulties. For information on the Corporation’s TDR policy, refer to Note 2. The established framework captures the impact of concessions through discounting modified contractual cash flows, both principal and interest, at the loan’s original effective rate. The impact of these concessions is combined with the expected credit losses generated by the quantitative loss models in order to arrive at the ACL.

 

Loans Acquired with Deteriorated Credit Quality

PCD loans are defined as those with evidence of a more-than-insignificant deterioration in credit quality since origination. PCD loans are initially recorded at its purchase price plus an estimated ACL. Upon the acquisition of a PCD loan, the Corporation recognizes the estimate of the expected credit losses over the remaining contractual term of each individual loan as an ACL with a corresponding addition to the loan purchase price. The amount of the purchased premium or discount which is not related to credit risk is amortized over the life of the loan through net interest income using the effective interest method or a method that approximates the effective interest method. Changes in expected credit losses are recorded as an increase or decrease to the ACL with a corresponding charge (reverse) to the provision for credit losses in the Consolidated Statements of Operations. Upon transition to the individual loan measurement, these loans follow the same nonaccrual policies as non-PCD loans and are therefore no longer excluded from non-performing status. Modifications of PCD loans that meet the definition of a TDR subsequent to the adoption of ASC Topic 326 are accounted and reported as such following the same processes as non-PCD loans.

 

 

Income Taxes

Income taxes are accounted for using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and attributable to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which the temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted.

The calculation of periodic income taxes is complex and requires the use of estimates and judgments. The Corporation has recorded two accruals for income taxes: (i) the net estimated amount currently due or to be received from taxing jurisdictions, including any reserve for potential examination issues, and (ii) a deferred income tax that represents the estimated impact of temporary differences between how the Corporation recognizes assets and liabilities under accounting principles generally accepted in the United States (GAAP), and how such assets and liabilities are recognized under the tax code. Differences in the actual outcome of these future tax consequences could impact the Corporation’s financial position or its results of operations. In estimating taxes, management assesses the relative merits and risks of the appropriate tax treatment of transactions taking into consideration statutory, judicial and regulatory guidance.

A deferred tax asset should be reduced by a valuation allowance if based on the weight of all available evidence, it is more likely than not (a likelihood of more than 50%) that some portion or the entire deferred tax asset will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. The determination of whether a deferred tax asset is realizable is based on weighting all available evidence, including both positive and negative evidence. The realization of deferred tax assets, including carryforwards and deductible temporary differences, depends upon the existence of sufficient taxable income of the same character during the carryback or carryforward period. The realization of deferred tax assets requires the consideration of all sources of taxable income available to realize the deferred tax asset, including

61


 

the future reversal of existing temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in carryback years and tax-planning strategies.

Management evaluates the realization of the deferred tax asset by taxing jurisdiction. The U.S. mainland operations are evaluated as a whole since a consolidated income tax return is filed; on the other hand, the deferred tax asset related to the Puerto Rico operations is evaluated on an entity by entity basis, since no consolidation is allowed in the income tax filing. Accordingly, this evaluation is composed of three major components: U.S. mainland operations, Puerto Rico banking operations and Holding Company.

For the evaluation of the realization of the deferred tax asset by taxing jurisdiction, refer to Note 35.

Under the Puerto Rico Internal Revenue Code, the Corporation and its subsidiaries are treated as separate taxable entities and are not entitled to file consolidated tax returns. The Code provides a dividends-received deduction of 100% on dividends received from “controlled” subsidiaries subject to taxation in Puerto Rico and 85% on dividends received from other taxable domestic corporations.

Changes in the Corporation’s estimates can occur due to changes in tax rates, new business strategies, newly enacted guidance, and resolution of issues with taxing authorities regarding previously taken tax positions. Such changes could affect the amount of accrued taxes. The Corporation has made tax payments in accordance with estimated tax payments rules. Any remaining payment will not have any significant impact on liquidity and capital resources.

The valuation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in the financial statements or tax returns and future profitability. The accounting for deferred tax consequences represents management’s best estimate of those future events. Changes in management’s current estimates, due to unanticipated events, could have a material impact on the Corporation’s financial condition and results of operations.

The Corporation establishes tax liabilities or reduces tax assets for uncertain tax positions when, despite its assessment that its tax return positions are appropriate and supportable under local tax law, the Corporation believes it may not succeed in realizing the tax benefit of certain positions if challenged. In evaluating a tax position, the Corporation determines whether it is more-likely-than-not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Corporation’s estimate of the ultimate tax liability contains assumptions based on past experiences, and judgments about potential actions by taxing jurisdictions as well as judgments about the likely outcome of issues that have been raised by taxing jurisdictions. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Corporation evaluates these uncertain tax positions each quarter and adjusts the related tax liabilities or assets in light of changing facts and circumstances, such as the progress of a tax audit or the expiration of a statute of limitations. The Corporation believes the estimates and assumptions used to support its evaluation of uncertain tax positions are reasonable.

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 through earnings, would affect the Corporation’s effective tax rate, was approximately $5.5 million at December 31, 2021 and $10.2 million at December 31, 2020. Refer to Note 35 to the Consolidated Financial Statements for further information on this subject matter. The Corporation anticipates a reduction in the total amount of unrecognized tax benefits within the next 12 months, which could amount to approximately $1.4 million, including interest.

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. Although the outcome of tax audits is uncertain, the Corporation believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that are expected to result from open years. From time to time, the Corporation is audited by various federal, state and local authorities regarding income tax matters. Although management believes its approach in determining the appropriate tax treatment is supportable and in accordance with the accounting standards, it is possible that the final tax authority will take a tax position that is different than the tax position reflected in the Corporation’s income tax provision and other tax reserves. As each audit is conducted, adjustments, if any, are appropriately recorded in the consolidated financial statement in the period determined. Such differences could have an adverse effect on the Corporation’s income tax provision or benefit, or other tax reserves, in the reporting period in which such determination is made and, consequently, on the Corporation’s results of operations, financial position and / or cash flows for such period.

 

62


 

Goodwill and Other Intangible Assets

The Corporation’s goodwill and other identifiable intangible assets having an indefinite useful life are tested for impairment. Intangibles with indefinite lives are evaluated 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. Other identifiable intangible assets with a finite useful life are evaluated periodically for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.

Goodwill impairment is recognized when the carrying amount of any of the reporting units exceeds its fair value up to the amount of the goodwill. The Corporation estimates the fair value of each reporting unit, consistent with the requirements of the fair value measurements accounting standard, generally using a combination of methods, including market price multiples of comparable companies and transactions, as well as discounted cash flow analyses. Subsequent reversal of goodwill impairment losses is not permitted under applicable accounting standards. No impairment was recognized by the Corporation from the annual test as of July 31, 2021.For a detailed description of the annual goodwill impairment evaluation performed by the Corporation during the third quarter of 2021, refer to Note 15.

At December 31, 2021, goodwill amounted to $720 million. During the year ended December 31, 2021, the Corporation recognized an impairment loss of $5.4 million associated with a trademark. Note 15 to the Consolidated Financial Statements provides the assignment of goodwill by reportable segment.

 

Pension and Postretirement Benefit Obligations

The Corporation provides pension and restoration benefit plans for certain employees of various subsidiaries. The Corporation also provides certain health care benefits for retired employees of BPPR. The non-contributory defined pension and benefit restoration plans (“the Pension Plans”) are frozen with regards to all future benefit accruals.

The estimated benefit costs and obligations of the Pension Plans and Postretirement Health Care Benefit Plan (“OPEB Plan”) are impacted by the use of subjective assumptions, which can materially affect recorded amounts, including expected returns on plan assets, discount rates, termination rates, retirement rates and health care trend rates. Management applies judgment in the determination of these factors, which normally undergo evaluation against current industry practice and the actual experience of the Corporation. The Corporation uses an independent actuarial firm for assistance in the determination of the Pension Plans and OPEB Plan costs and obligations. Detailed information on the Plans and related valuation assumptions are included in Note 30 to the Consolidated Financial Statements.

The Corporation periodically reviews its assumption for the long-term expected return on Pension Plans assets. The Pension Plans’ assets fair value at December 31, 2021 was $860.5 million. The expected return on plan assets is determined by considering various factors, including a total fund return estimate based on a weighted-average of estimated returns for each asset class in each plan. Asset class returns are estimated using current and projected economic and market factors such as real rates of return, inflation, credit spreads, equity risk premiums and excess return expectations.

As part of the review, the Corporation’s independent consulting actuaries performed an analysis of expected returns based on each plan’s expected asset allocation for the year 2022 using the Willis Towers Watson US Expected Return Estimator. This analysis is reviewed by the Corporation and used as a tool to develop expected rates of return, together with other data. This forecast reflects the actuarial firm’s view of expected long-term rates of return for each significant asset class or economic indicator as of January 1, 2022; for example, 8.5% for large cap stocks, 8.8% for small cap stocks, 8.9% for international stocks, 3.5% for long corporate bonds and 2.4% for long Treasury bonds. A range of expected investment returns is developed, and this range relies both on forecasts and on broad-market historical benchmarks for expected returns, correlations, and volatilities for each asset class.

As a consequence of recent reviews, the Corporation decreased its expected return on plan assets for year 2022 to 4.3% and 5.4% for the Pension Plans. Expected rates of return of 4.6% and 5.5% had been used for 2021 and 5.0% and 5.8% had been used for 2020 for the Pension Plans. Since the expected return assumption is on a long-term basis, it is not materially impacted by the yearly fluctuations (either positive or negative) in the actual return on assets. The expected return can be materially impacted by a change in the plan’s asset allocation.

63


 

Net Periodic Benefit Cost (“pension expense”) for the Pension Plans amounted to a net benefit of $3.8 million in 2021. The total pension expense included a benefit of $38.7 million for the expected return on assets.

Pension expense is sensitive to changes in the expected return on assets. For example, decreasing the expected rate of return for 2021 from 4.3% to 4.05% would increase the projected 2022 pension expense for the Banco Popular de Puerto Rico Retirement Plan, the Corporation’s largest plan, by approximately $2.0 million.

If the projected benefit obligation exceeds the fair value of plan assets, the Corporation shall recognize a liability equal to the unfunded projected benefit obligation and vice versa, if the fair value of plan assets exceeds the projected benefit obligation, the Corporation recognizes an asset equal to the overfunded projected benefit obligation. This asset or liability may result in a taxable or deductible temporary difference and its tax effect shall be recognized as an income tax expense or benefit which shall be allocated to various components of the financial statements, including other comprehensive income. The determination of the fair value of pension plan obligations involves judgment, and any changes in those estimates could impact the Corporation’s Consolidated Statements of Financial Condition. Management believes that the fair value estimates of the Pension Plans assets are reasonable given the valuation methodologies used to measure the investments at fair value as described in Note 28. Also, the compositions of the plan assets are primarily in equity and debt securities, which have readily determinable quoted market prices. The Corporation had recorded a pension asset of $17.8 million and a pension liability of $8.8 million at December 31, 2021.

The Corporation uses the spot rate yield curve from the Willis Towers Watson RATE: Link (10/90) Model to discount the expected projected cash flows of the plans. The equivalent single weighted average discount rate ranged from 2.79% to 2.83% for the Pension Plans and 2.94% for the OPEB Plan to determine the benefit obligations at December 31, 2021.

A 50 basis point decrease to each of the rates in the December 31, 2021 Willis Towers Watson RATE: Link (10/90) Model would increase the projected 2022 expense for the Banco Popular de Puerto Rico Retirement Plan by approximately $2.6 million. The change would not affect the minimum required contribution to the Pension Plans.

The OPEB Plan was unfunded (no assets were held by the plan) at December 31, 2021. The Corporation had recorded a liability for the underfunded postretirement benefit obligation of $160.0 million at December 31, 2021.

64


 

STATEMENT OF OPERATIONS ANALYSIS

 

Net Interest Income

Net interest income is the interest earned from loans, debt securities and money market investments, including loan fees, minus the interest cost of deposits and borrowings. Various risk factors affect net interest income including the economic environment in which we operate, market driven events, the mix and size of the earning assets and related funding, changes in volumes, repricing characteristics, loans fees collected, moratoriums granted on loan payments and delay charges, interest collected on nonaccrual loans, as well as strategic decisions made by the Corporation’s management. Net interest income for the year ended December 31, 2021 was $2.0 billion or $101.0 million higher than in 2020. Net interest income, on a taxable equivalent basis, for the year ended December 31, 2021 was $2.2 billion compared to $2.0 billion in 2020.

 

Due to the Corporation’s current asset sensitive position, an increase in interest rates should have a favorable impact on the Corporation’s results. See the Risk Management: Market/Interest Rate Risk section of this MD&A for additional information related to the Corporation’s interest rate risk.

 

The average key index rates for the years 2021 and 2020 were as follows:

 

2021

2020

Prime rate………………………………………………………………………………………………….

3.25%

3.53%

Fed funds rate……………………………………………………………………………………………..

0.25

0.35

3-month LIBOR……………………………………………………………………………………………

0.16

0.65

3-month Treasury Bill…………………………………………………………………………………….

0.03

0.35

10-year Treasury………………………………………………………………………………………….

1.44

0.89

FNMA 30-year…………………………………………………………………………………………….

1.84

1.01

 

Average outstanding securities balances are based upon amortized cost excluding any unrealized gains or losses on securities available-for-sale. Non-accrual loans have been included in the respective average loans and leases categories. Loan fees collected, and costs incurred in the origination of loans are deferred and amortized over the term of the loan as an adjustment to interest yield. Prepayment penalties, late fees collected and the amortization of premiums / discounts on purchased loans, including the discount accretion on purchased credit deteriorated loans (“PCD”), are also included as part of the loan yield. Interest income for the period ended December 31, 2021 included a favorable impact of $131.6 million, related to those items, compared to $98.5 million for the same period in 2020. The year over year increase is related to higher amortized fees resulting mainly from the SBA forgiveness of PPP loans by $53.9 million, partially offset by $15.4 million lower amortization of the fair value discount of the auto and credit card portfolios acquired in previous years.

 

Table 3 presents the different components of the Corporation’s net interest income, on a taxable equivalent basis, for the year ended December 31, 2021, as compared with the same period in 2020, segregated by major categories of interest earning assets and interest-bearing liabilities. Net interest margin was 2.88% in 2021 or 41 basis points lower than the 3.29% reported in 2020. The lower net interest margin for the year is driven by the increase of $11.5 billion in average deposits which were mostly redeployed in overnight Fed Funds and U.S. Treasury and agency debt securities. These assets, although accretive to net interest income, are low yielding assets and have the effect of compressing the net interest margin. Also impacting the net interest margin was a full year of low short-term rates as the Federal Reserve decreased by 150 basis points the Federal Funds Rate in the first quarter of 2020. On a taxable equivalent basis, net interest margin was 3.19% in 2021, compared to 3.62% in 2020. The main drivers for the increase in net interest income on a taxable equivalent basis were:

 

Positive variances:

· Higher interest income from money market and investment securities due to a higher volume by $11.0 billion, which resulted from an increase in deposits in most categories, partially offset by lower yield by 39 basis points driven by a lower interest rate environment. These larger balances resulted from an increase in deposits in most categories;

65


 

· Higher interest income from commercial loans driven by higher interest and fees from PPP loans by $54.0 million when compared to 2020, partially offset the repricing of adjustable rates loans and origination in a low interest rate environment;

· The auto and lease financing portfolios increased by $478 million or 12% driven by continued demand for automobiles in Puerto Rico after the COVID-19 related lockdown and higher household liquidity resulting from COVID-19 relief federal assistances;

· Mortgage loans interest income increased 6% when compared to the year 2020, driven by the $807.6 million bulk loan repurchases from our GSE loan servicing portfolios that occurred at the end of September 2020, partially offset by lower yields also related to the lower rates of the repurchased portfolio; and

· Lower interest expense on deposits due to the decrease in interest cost by 21 basis points resulting from the decrease in market rates in March 2020, increased liquidity in the financial industry as a result of retail and commercial federal support programs and the subsequent effect on these liabilities. The decrease in the cost of interest-bearing deposits was 51 basis points when compared to the year 2020 in the U.S. segment and 13 basis points in P.R. The impact from lower rates was partially offset by higher average balance of interest-bearing deposits by $8.4 billon when compared to the year 2020.

 

Partially offset by:

· Lower interest income from consumer loans due to lower average volume both on the installment loan and credit card portfolios, resulting also from a higher household liquidity in the market, as discussed above.

66


 

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

 

Year ended December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variance

Average Volume

 

Average Yields / Costs

 

 

 

Interest

 

Attributable to

 

2021

 

2020

Variance

 

2021

 

2020

 

Variance

 

 

 

 

 

2021

 

2020

 

Variance

 

Rate

 

Volume

 

(In millions)

 

 

 

 

 

 

 

 

 

 

(In thousands)

$

16,000

$

8,598

$

7,402

 

0.13

%

0.23

%

(0.10)

%

 

Money market investments

$

21,147

$

19,722

$

1,425

$

(10,745)

$

12,170

 

22,931

 

19,353

 

3,578

 

2.22

 

2.42

 

(0.20)

 

 

Investment securities [1]

 

508,131

 

467,994

 

40,137

 

(43,723)

 

83,860

 

84

 

69

 

15

 

5.16

 

6.00

 

(0.84)

 

 

Trading securities

 

4,339

 

4,165

 

174

 

(646)

 

820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total money market,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment and trading

 

 

 

 

 

 

 

 

 

 

 

39,015

 

28,020

 

10,995

 

1.37

 

1.76

 

(0.39)

 

 

 

securities

 

533,617

 

491,881

 

41,736

 

(55,114)

 

96,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

13,455

 

13,245

 

210

 

5.39

 

5.23

 

0.16

 

 

 

Commercial

 

723,765

 

692,372

 

31,393

 

20,297

 

11,096

 

849

 

913

 

(64)

 

5.41

 

5.74

 

(0.33)

 

 

 

Construction

 

45,821

 

52,438

 

(6,617)

 

(3,059)

 

(3,558)

 

1,289

 

1,112

 

177

 

6.00

 

6.05

 

(0.05)

 

 

 

Leasing

 

77,356

 

67,247

 

10,109

 

(522)

 

10,631

 

7,696

 

7,255

 

441

 

5.09

 

5.23

 

(0.14)

 

 

 

Mortgage

 

392,047

 

379,794

 

12,253

 

(10,414)

 

22,667

 

2,463

 

2,839

 

(376)

 

11.17

 

11.34

 

(0.17)

 

 

 

Consumer

 

275,078

 

322,009

 

(46,931)

 

(5,612)

 

(41,319)

 

3,322

 

3,021

 

301

 

8.47

 

8.97

 

(0.50)

 

 

 

Auto

 

280,722

 

271,162

 

9,560

 

(16,500)

 

26,060

 

29,074

 

28,385

 

689

 

6.19

 

6.29

 

(0.10)

 

 

Total loans

 

1,794,789

 

1,785,022

 

9,767

 

(15,810)

 

25,577

$

68,089

$

56,405

$

11,684

 

3.43

%

4.04

%

(0.61)

%

 

Total earning assets

$

2,328,406

$

2,276,903

$

51,503

$

(70,924)

$

122,427

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing deposits:

 

 

 

 

 

 

 

 

 

 

$

25,959

$

19,678

$

6,281

 

0.12

%

0.28

%

(0.16)

%

 

 

NOW and money market [2]

$

31,911

$

54,652

$

(22,741)

$

(37,171)

$

14,430

 

15,429

 

12,399

 

3,030

 

0.18

 

0.30

 

(0.12)

 

 

 

Savings

 

27,123

 

37,765

 

(10,642)

 

(19,220)

 

8,578

 

7,028

 

7,971

 

(943)

 

0.75

 

1.05

 

(0.30)

 

 

 

Time deposits

 

52,587

 

83,438

 

(30,851)

 

(20,755)

 

(10,096)

 

48,416

 

40,048

 

8,368

 

0.23

 

0.44

 

(0.21)

 

 

Total interest bearing deposits

 

111,621

 

175,855

 

(64,234)

 

(77,146)

 

12,912

 

92

 

166

 

(74)

 

0.35

 

1.48

 

(1.13)

 

 

Short-term borrowings

 

318

 

2,457

 

(2,139)

 

(1,411)

 

(728)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other medium and

 

 

 

 

 

 

 

 

 

 

 

1,185

 

1,178

 

7

 

4.49

 

4.81

 

(0.32)

 

 

 

long-term debt

 

53,107

 

56,626

 

(3,519)

 

(2,927)

 

(592)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total interest bearing

 

 

 

 

 

 

 

 

 

 

 

49,693

 

41,392

 

8,301

 

0.33

 

0.57

 

(0.24)

 

 

 

liabilities

 

165,046

 

234,938

 

(69,892)

 

(81,484)

 

11,592

 

14,687

 

11,538

 

3,149

 

 

 

 

 

 

 

 

Demand deposits

 

 

 

 

 

 

 

 

 

 

 

3,709

 

3,475

 

234

 

 

 

 

 

 

 

 

Other sources of funds

 

 

 

 

 

 

 

 

 

 

$

68,089

$

56,405

$

11,684

 

0.24

%

0.42

%

(0.18)

%

 

Total source of funds

 

165,046

 

234,938

 

(69,892)

 

(81,484)

 

11,592

 

 

 

 

 

 

3.19

%

3.62

%

(0.43)

%

 

Net interest margin/ income on a taxable equivalent basis (Non-GAAP)

 

2,163,360

 

2,041,965

 

121,395

$

10,560

$

110,835

 

 

 

 

 

 

 

3.10

%

3.47

%

(0.37)

%

 

Net interest spread

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable equivalent adjustment

 

205,770

 

185,353

 

20,418

 

 

 

 

 

 

 

 

 

 

 

2.88

%

3.29

%

(0.41)

%

 

Net interest margin/ income non-taxable equivalent basis (GAAP)

$

1,957,590

$

1,856,612

$

100,977

 

 

 

 

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 outstanding securities balances are based upon amortized cost excluding any unrealized gains or losses on securities available-for-sale.

[2] Includes interest bearing demand deposits corresponding to certain government entities in Puerto Rico.

67


 

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

For the year ended December 31, 2021, the Corporation recorded a release of $191.3 million for its reserve for credit losses related to loans held-in-portfolio and unfunded commitments, compared with a provision expense of $294.9 million for the year ended December 31, 2020. The reserve release related to the loans-held-in-portfolio for the year 2021 was $183.3 million, compared to a provision expense of $282.3 million for the year 2020. The decrease reflects the improvements in credit quality, changes in the macroeconomic outlook, and changes in qualitative reserves. The provision for unfunded commitments for the year 2021 reflected a benefit of $8.0 million, compared to a provision expense of $12.6 million for the same period of 2020.

 

The reserve release related to loans held-in-portfolio for the BPPR segment was $129.0 million for the year ended December 31, 2021, compared to a provision expense of $205.9 million for the year ended December 31, 2020, a favorable variance of $334.9 million. The reserve release related to loans held-in-portfolio for the Popular U.S. segment was $54.3 million for the year 2021, a favorable variance of $130.8 million, compared to a provision expense of $76.5 million for the year 2020.

 

At December 31, 2021, the total allowance for credit losses for loans held-in-portfolio amounted to $695.4 million, compared to $896.3 million as of December 31, 2020. The ratio of the allowance for credit losses to loans held-in-portfolio was 2.38% at December 31, 2021, compared to 3.05% at December 31, 2020. Refer to Note 9 to the Consolidated Financial Statements, for additional information on the Corporation’s methodology to estimate its allowance for credit losses (“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.

 

As discussed in Note 9 to the Consolidated Financial Statements, within the process to estimate its allowance for credit losses (“ACL”), the Corporation applies probability weights to the outcomes of simulations using Moody’s Analytics’ Baseline, S3 (pessimistic) and S1 (optimistic) scenarios.

 

Provision for Credit Losses – Investment Securities

 

The Corporation’s provision for credit losses related to its investment securities held-to-maturity is related to the portfolio of obligations from the Government of Puerto Rico, states and political subdivisions. For the year ended December 31, 2021, the Corporation recorded a reserve release of $2.2 million, compared to a reserve release of $2.4 million for the year ended December 31, 2020. At December 31, 2021, the total allowance for credit losses for this portfolio amounted to $8.1 million, compared to $10.3 million as of December 31, 2020. Refer to Note 7 for additional information on the ACL for this portfolio.

 

Non-Interest Income

 

For the year ended December 31, 2021, non-interest income increased by $129.8 million, when compared with the previous year, primarily driven by:

 

higher service charges on deposit accounts by $14.9 million principally due to higher fees on transactional cash management services at BPPR in part due to the business disruptions and the waiver of fees related to the COVID-19 pandemic during 2020;

 

higher other service fees by $53.4 million, principally at the BPPR segment, due to higher credit and debit card fees by $43.4 million mainly in interchange income resulting from higher transactional volumes in part due to the business disruptions and the waiver of service charges and late fees related to the COVID-19 pandemic during 2020; higher insurance fees by $5.8 million, from which $3.0 million were related to contingent insurance commissions recognized during the fourth quarter; and higher trust fees by $3.1 million;

 

higher income from mortgage banking activities by $39.7 million mainly due to the impact of the bulk loan repurchases from the Corporation’s GNMA, FNMA and FHLMC loan servicing portfolio during 2020 which resulted in an unfavorable adjustment of $8.8 million and $10.5 million on the valuation of mortgage servicing rights (“MSRs”) and servicing advances losses, respectively, and an offsetting positive adjustment in servicing fees of $3.4 million; lower unfavorable fair value adjustments on MSRs by $23.0 million due to changes in assumptions; and higher realized gains on closed derivatives positions by $11.9 million also contributed to the year over year income improvements; partially offset by lower gains from securitization transactions by $8.9 million; and

68


 

 

higher other operating income by $26.7 million principally due to higher net earnings from the combined portfolio of investments under the equity method by $15.1 million, the gain of $7.0 million recognized in the third quarter of 2021 by BPPR as a result of the sale and partial leaseback of two corporate office buildings, and higher daily auto rental revenues by $3.9 million;

 

partially offset by:

 

lower net gain on equity securities by $6.1 million mainly related to a $4.1 million gain on sale of certain equity securities at PB during the third quarter of 2020.

 

Operating Expenses

 

Table 4 provides a breakdown of operating expenses by major categories.

 

Table 4 - Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

(In thousands)

2021

2020

2019

Personnel costs:

 

 

 

 

 

 

 

 

 

 

Salaries

$

371,644

 

$

370,179

 

$

351,788

 

 

Commissions, incentives and other bonuses

 

113,095

 

 

78,582

 

 

97,764

 

 

Pension, postretirement and medical insurance

 

52,077

 

 

44,123

 

 

41,804

 

 

Other personnel costs, including payroll taxes

 

94,986

 

 

71,321

 

 

99,269

 

 

Total personnel costs

 

631,802

 

 

564,205

 

 

590,625

 

Net occupancy expenses

 

102,226

 

 

119,345

 

 

96,339

 

Equipment expenses

 

92,097

 

 

88,932

 

 

84,215

 

Other taxes

 

56,783

 

 

54,454

 

 

51,653

 

Professional fees:

 

 

 

 

 

 

 

 

 

 

Collections, appraisals and other credit related fees

 

13,199

 

 

12,588

 

 

16,300

 

 

Programming, processing and other technology services

 

272,386

 

 

253,565

 

 

247,332

 

 

Legal fees, excluding collections

 

10,712

 

 

10,611

 

 

12,877

 

 

Other professional fees

 

114,568

 

 

117,358

 

 

107,902

 

 

Total professional fees

 

410,865

 

 

394,122

 

 

384,411

 

Communications

 

25,234

 

 

23,496

 

 

23,450

 

Business promotion

 

72,981

 

 

57,608

 

 

75,372

 

FDIC deposit insurance

 

25,579

 

 

23,868

 

 

18,179

 

Other real estate owned (OREO) (income) expenses

 

(14,414)

 

 

(3,480)

 

 

4,298

 

Other operating expenses:

 

 

 

 

 

 

 

 

 

 

Credit and debit card processing, volume, interchange and other expenses

 

45,088

 

 

45,108

 

 

38,059

 

 

Operational losses

 

38,391

 

 

26,331

 

 

21,414

 

 

All other

 

53,509

 

 

57,443

 

 

80,097

 

 

Total other operating expenses

 

136,988

 

 

128,882

 

 

139,570

 

Amortization of intangibles

 

9,134

 

 

6,397

 

 

9,370

 

Total operating expenses

$

1,549,275

 

$

1,457,829

 

$

1,477,482

 

Personnel costs to average assets

 

0.89

%

 

0.95

%

 

1.17

%

Operating expenses to average assets

 

2.18

 

 

2.45

 

 

2.93

 

Employees (full-time equivalent)

 

8,351

 

 

8,522

 

 

8,560

 

Average assets per employee (in millions)

 

$8.52

 

 

$6.99

 

 

$5.88

 

 

69


 

Operating expenses for the year ended December 31, 2021 increased by $91.4 million, when compared with the previous year. The increase in operating expenses was driven primarily by:

Higher personnel cost by $67.6 million mainly due to higher incentives related to the profit-sharing plan by $29.1 million and higher commission and performance-based incentives by $34.5 million due to improved performance metrics and salary increases, higher fringe benefit expense, mainly medical insurance by $8.0 million, partially offset by higher deferred salaries as a result of higher loan originations during 2021;

Higher equipment expense by $3.2 million due to higher amortization of software costs;

Higher professional fees by $16.7 million primarily due to higher processing service fees due to higher volume of transactions;

Higher business promotions by $15.4 million due to higher customer reward program expense in our credit card business and higher advertising expense;

Higher other operating expenses by $8.1 million mainly due higher sundry losses by $12.1 million, including $3.7 million related to the termination of a white label credit card contract and higher legal reserves; and higher impairment losses on undeveloped properties by $3.2 million; partially offset by lower pension plan cost by $10.0 million due to annual changes in actuarial assumptions and higher gain on sale of repossess auto units by $2.8 million; and

Higher amortization of intangibles by $2.7 million due to a write-down on impairment of a trademark.

These variances were partially offset by:

Lower net occupancy expense by $17.1 million due to $19.0 million in costs related to the termination of real property leases associated with PB’s New York branch realignment, including the impairment of the right-of-use assets recorded during 2020; and

Lower OREO expense by $10.9 million mainly due to higher gains on sale of mortgage properties.

 

Income Taxes

For the year ended December 31, 2021, the Corporation recorded an income tax expense of $309.0 million, compared to $111.9 million for the same period of 2020. The income tax expense for the year ended December 31, 2021 reflects the impact of higher pre-tax income, resulting primarily from a lower provision for credit losses partially offset by higher net exempt interest income and higher income from U.S. operations subject to a lower statutory tax rate.

 

At December 31, 2021, the Corporation had a net deferred tax asset amounting to $0.7 billion, net of a valuation allowance of $0.5 billion. The net deferred tax asset related to the U.S. operations was $0.2 billion, net of a valuation allowance of $0.4 billion.

 

Refer to Note 35 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.

 

Fourth Quarter Results

The Corporation recognized net income of $206.1 million for the quarter ended December 31, 2021, compared with a net income of $176.3 million for the same quarter of 2020.

Net interest income for the fourth quarter of 2021 amounted to $501.3 million, compared with $471.6 million for the fourth quarter of 2020, an increase of $29.7 million. The increase in net interest income was mainly due to increase in average balance of earning assets, mainly due to increase in deposits. The net interest margin declined by 26 basis points to 2.78% due to declines in market rates and the earning assets mix, which were concentrated in overnight Fed Funds, U.S. Treasuries and agency securities, which are all lower yielding assets.

70


 

The provision for credit losses was a benefit of $33.1 million compared to a provision expense of $21.2 million for the fourth quarter of 2020. The benefit recorded in the fourth quarter of 2021 was reflective of improvements in the credit metrics and the macroeconomic outlook as well as releases in qualitative reserves.

 

Non-interest income amounted to $164.7 million for the quarter ended December 31, 2020, compared with $144.8 million for the same quarter in 2020. The increase of $19.9 million was mainly due to other service fees, due to higher volume of transactions, and higher income from mortgage banking activities.

Operating expenses totaled $417.4 million for the quarter ended December 31, 2021, compared with $375.9 million for the same quarter in the previous year. The increase of $41.5 million is mainly related to higher personnel costs due to higher salaries, incentives and commissions, higher business promotion expenses, and higher other operating expenses due to the reclassification during the fourth quarter in 2020 of $10.0 million in provision for unfunded commitments from the other expenses line to the provision for credit losses caption, partially offset by lower net occupancy expenses related to the termination of real property leases associated with PB’s New York branch rationalization, amounting to $19.0 million, including the impairment of the right-of-use assets and related costs recorded in the last quarter of 2020.

Income tax expense amounted to $75.6 million for the quarter ended December 31, 2021, compared with income tax expense of $43.0 million for the same quarter of 2020. The increase is mainly due to higher pre-tax income during the quarter ended December 31, 2021, compared to the quarter ended December 31, 2020.

 

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 37 to the Consolidated Financial Statements.

 

The Corporate group reported a net income of $13.4 million for the year ended December 31, 2021, compared to a net income of $8.5 million for the previous year. The increase in the net income was mainly attributed to lower net interest expense by $1.4 million, mainly due to lower interest expense after the redemption on November 1, 2021 of the trust preferred securities issued by the Popular Capital Trust I; higher non-interest income by $10.1 million mainly due to higher income from the portfolio of equity method investments, partially offset by higher operating expenses by $6.4 million mainly due to higher amortization of intangibles due to the impairment of a trademark.

 

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 $787.5 million for the year ended December 31, 2021, compared with $499.0 million for the year ended December 31, 2020. The results for 2021 included reserve for credit losses release of $136.4 million. The results for 2020 were impacted by the COVID-19 pandemic as well as the implementation of the CECL accounting pronouncement under which provision for credit losses of $211.0 million was recorded throughout the year. The principal factors that contributed to the variance in the financial results included the following:

 

Higher net interest income by $81.0 million due to higher income from investment securities by $35.2 million mainly due to higher average balances, higher income from loans by $15.3 million, mainly from interest and fees from commercial PPP loans and higher volume of mortgage loans and leases, partially offset by lower income from consumer loans, mainly credit cards; and lower interest expense from deposits by $29.2 million. The BPPR segment’s net interest margin was 2.86% for 2021 compared with 3.40% for the same period in 2020. The decrease was mainly due to the earning asset composition;

 

71


 

A reversal of $136.4 million of the reserve for credit losses, due to improved credit metrics and improved macroeconomic outlook, compared to a provision expense of $211.0 million in 2020, which reflected the implementation of CECL and the impact of the COVID-19 pandemic in the macroeconomic outlook;

 

Higher non-interest income by $119.4 million mainly due to:

 

Higher service charges on deposit accounts by $14.8 million due to the impact in 2020 of lower transactions and the temporary waiver of fees in response to the COVID-19 pandemic;

 

Higher other service fees by $51.7 million due to higher debit and credit card transactions and the temporary waiver of fees in response to the COVID-19 pandemic in 2020 and higher contingent insurance revenues in 2021;

 

Higher mortgage banking activities by $39.9 million due to lower unfavorable fair value adjustments on mortgage servicing rights, and the negative net impact that resulted from the from the bulk repurchase of loans from the Corporation’s GNMA, FNMA and FHLMC loan servicing portfolio in 2020; and

 

Higher other operating income by $10.7 million due to higher income from the portfolio of equity method investments, the gain from the sale of two corporate office buildings in 2021 and higher income from daily auto rental activities.

 

Higher operating expenses by $112.0 million, mainly due to:

 

Higher personnel costs by $43.6 million mainly due to higher salaries, incentives and profit-sharing plan expense;

 

Higher professional fees by $20.3 million mainly due to processing service fees due to higher volume of transactions;

 

Higher business promotions by $13.6 million mainly due to higher customer reward program expense in our credit card business and higher advertising expense;

Higher other operating expenses by $34.3 million due to higher sundry losses, including $3.7 million related to the termination of a white label credit card contract, impairment losses on long-lived assets of $5.3 million recorded in 2021, higher legal reserves and higher corporate expense allocations;

Partially offset by:

 

Lower OREO expenses by $11.1 million mainly due to higher gains on sales of residential properties.

 

Higher income tax expense by $147.3 million mainly due to higher income before tax.

 

Popular U.S.

 

For the year ended December 31, 2021, the reportable segment of Popular U.S. reported net income of $134.1 million, compared with a net loss of $0.7 million for the year ended December 31, 2020. The principal factors that contributed to the variance in the financial results included the following:

 

Higher net interest income by $18.6 million mainly due to lower interest expense on deposits by $36.5 million, due to lower rates and lower average balance of certificates of deposits, partially offset by lower income from loans by $9.8 million mainly from consumer and construction loans, and lower income from investment securities by $10.2 million. The Popular U.S. reportable segment’s net interest margin was 3.39% for 2021 compared with 3.21% for the same period in 2020;

 

A release of $56.9 million of the reserve for credit losses, due to improvements credit metrics and the macroeconomic outlook, compared to a provision expense of $81.5 million in 2020, mainly due to the implementation of CECL and the effects of the pandemic;

 

Lower operating expenses by $26.7 million mainly due to:

 

72


 

Lower occupancy expenses by $22.7 million mainly due to the impact of the NY branch rationalization in 2020 that resulted in $19.0 million in lease termination costs, including the impairment of the right of use assets; and

Lower professional fees by $5.1 million mainly due intersegment allocated services;

 

Partially offset by:

 

Higher personnel costs by $6.9 million due to higher salaries, incentives and profit-sharing plan expenses.

 

Income taxes unfavorable variance of $49.1 million mainly due to higher income before tax.

 

STATEMENT OF FINANCIAL CONDITION ANALYSIS

Assets

The Corporation’s total assets were $75.1 billion at December 31, 2021, compared to $65.9 billion at December 31, 2020. Refer to the Corporation’s Consolidated Statements of Financial Condition at December 31, 2021 and 2020 included in this 2021 Annual Report on Form 10-K. Also, refer to the Statistical Summary 2021-2020 in this MD&A for Condensed Statements of Financial Condition.

Money market investments and debt securities available-for-sale

Money market investments and debt securities available-for-sale increased by $5.9 billion and $3.4 billion, respectively, at December 31, 2021. This was largely driven by the additional funds available to invest resulting from the increase in deposits across various sectors, partially offset by paydowns of agency mortgage-backed securities. Refer to Note 6 to the Consolidated Financial Statements for additional information with respect to the Corporation’s debt securities available-for-sale.

Loans

Refer to Table 5 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 decreased by $0.1 billion to $29.2 billion at December 31, 2021, mainly due to a decrease in commercial loans at BPPR of $0.6 billion principally related to the repayment of PPP loans, a decrease in mortgage loans at BPPR of $0.5 billion mainly due to paydowns and a decrease in construction loans of $0.2 billion, partially offset by an increase in commercial loans at PB of $0.7 billion principally in the healthcare industry from which $0.1 billion was related to the acquisition by PEF of K2’s lease financing business and growth in auto loans and leases at BPPR by $0.5 billion.

 

The allowance for credit losses for the loan portfolio decreased by $0.2 billion due to improvements in credit quality, changes in the macroeconomic outlook, and changes in qualitative reserves. Refer to the Credit Quality section of the MD&A for additional information on the Allowance for credit losses for the loan portfolio.

73


 

Table 5 - Loans Ending Balances

 

 

 

 

At December 31,

(In thousands)

 

2021

 

2020

Loans held-in-portfolio:

 

 

 

 

Commercial

$

13,732,701

$

13,614,310

Construction

 

716,220

 

926,208

Leasing

 

1,381,319

 

1,197,661

Mortgage

 

7,427,196

 

7,890,680

Auto

 

3,412,187

 

3,132,228

Consumer

 

2,570,934

 

2,624,109

Total loans held-in-portfolio

$

29,240,557

$

29,385,196

Loans held-for-sale:

 

 

 

 

Commercial

$

-

$

2,738

Mortgage

 

59,168

 

96,717

Total loans held-for-sale

$

59,168

$

99,455

Total loans

$

29,299,725

$

29,484,651

 

Other assets

Other assets amounted to $1.6 billion at December 31, 2021, a decrease of $0.1 billion when compared to December 31, 2020. Refer to Note 14 for a breakdown of the principal categories that comprise the caption of “Other Assets” in the Consolidated Statements of Financial Condition at December 31, 2021 and 2020.

 

Liabilities

The Corporation’s total liabilities were $69.1 billion at December 31, 2021, an increase of $9.2 billion compared to $59.9 billion at December 31, 2020, mainly due to increases in deposits as discussed below. Refer to the Corporation’s Consolidated Statements of Financial Condition included in this Form 10-K.

 

Deposits and Borrowings

The composition of the Corporation’s financing to total assets at December 31, 2021 and 2020 is included in Table 6.

 

Table 6 - Financing to Total Assets

 

 

 

 

 

 

 

December 31,

December 31,

% increase (decrease)

 

% of total assets

(In millions)

 

2021

 

2020

from 2020 to 2021

 

2021

 

2020

 

Non-interest bearing deposits

$

15,684

$

13,129

19.5

%

20.9

%

19.9

%

Interest-bearing core deposits

 

47,954

 

38,599

24.2

 

63.9

 

58.5

 

Other interest-bearing deposits

 

3,367

 

5,138

(34.5)

 

4.5

 

7.8

 

Repurchase agreements

 

92

 

121

(24.0)

 

0.1

 

0.2

 

Other short-term borrowings

 

75

 

-

N.M.

 

0.1

 

-

 

Notes payable

 

989

 

1,225

(19.3)

 

1.3

 

1.9

 

Other liabilities

 

968

 

1,685

(42.6)

 

1.3

 

2.6

 

Stockholders’ equity

 

5,969

 

6,029

(1.0)

 

7.9

 

9.1

 

 

Deposits

The Corporation’s deposits totaled $67.0 billion at December 31, 2021, compared to $56.9 billion at December 31, 2020.The deposits increase of $10.1 billion was mainly due to higher Puerto Rico public sector deposits by $5.2 billion and higher retail and commercial demand deposits by $3.9 billion at BPPR. Public sector deposit balances amounted to $20.3 billion at December 31, 2021. A significant portion of Puerto Rico public sector deposits are expected to be used by Puerto Rico pursuant to the Plan of Adjustment for Puerto Rico confirmed by the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) Title III

74


 

Court, which is expected to become effective on or about March 15, 2022. However, the receipt by the P.R. Government of additional COVID-19 and hurricane recovery-related Federal assistance and seasonal tax collections could increase public deposit balances at BPPR in the near term. The rate at which public deposit balances will decline is uncertain and difficult to predict. The amount and timing of any such reduction is likely to be impacted by, for example, the implementation of the Plan of Adjustment under Title III of PROMESA and the speed at which the COVID-19 federal assistance is distributed. Refer to Table 7 for a breakdown of the Corporation’s deposits at December 31, 2021 and 2020.

 

 

Table 7 - Deposits Ending Balances

 

 

 

 

 

(In thousands)

 

2021

 

 

2020

Demand deposits

$

25,889,732

 

$

22,532,729

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

 

33,674,134

 

 

26,390,565

Savings, NOW and money market deposits (brokered)

 

729,073

 

 

635,198

Time deposits (non-brokered)

 

6,685,938

 

 

7,130,749

Time deposits (brokered CDs)

 

26,211

 

 

177,099

Total deposits

$

67,005,088

 

$

56,866,340

[1] Includes interest and non-interest bearing demand deposits.

 

Borrowings

The Corporation’s borrowings amounted to $1.2 billion at December 31, 2021, compared to $1.3 billion at December 31, 2020. Refer to Note 17 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.

Other liabilities

The Corporation’s other liabilities amounted to $1.0 billion at December 31, 2021, a decrease of $0.7 billion when compared to December 31, 2020, mainly due to the settlement of purchases of debt securities.

 

Stockholders’ Equity

Stockholders’ equity totaled $6.0 billion at December 31, 2021, a decrease of $59.3 million when compared to December 31, 2020, principally due to higher accumulated unrealized losses on debt securities available-for-sale by $557.0 million and the impact of the $350.0 million accelerated share repurchase transaction, offset by net income for the year ended December 31, 2021 of $934.9 million, less declared dividends of $142.3 million on common stock and $1.4 million in dividends on preferred stock and a reduction in the adjustment of pension and postretirement benefit plans of $36.1 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. Also, refer to Note 22 for a detail of accumulated other comprehensive loss (income), an integral component of stockholders’ equity.

 

 

REGULATORY CAPITAL

The Corporation and its bank subsidiaries are subject to capital adequacy standards established by the Federal Reserve Board. The risk-based capital standards applicable to Popular, Inc. and the Banks, BPPR and PB, are based on the final capital framework of Basel III. The capital rules of Basel III include a “Common Equity Tier 1” (“CET1”) capital measure and specifies that Tier 1 capital consist of CET1 and “Additional Tier 1 Capital” instruments meeting specified requirements. Note 21 to the consolidated financial statements presents further information on the Corporation’s regulatory capital requirements, including the regulatory capital ratios of its depository institutions, BPPR and PB.

75


 

An institution is considered “well-capitalized” if it maintains a total capital ratio of 10%, a Tier 1 capital ratio of 8%, a CET1 capital ratio of 6.5% and a leverage ratio of 5%. The Corporation’s ratios presented in Table 8 show that the Corporation was “well capitalized” for regulatory purposes, the highest classification, under Basel III for years 2021 and 2020. BPPR and PB were also well-capitalized for all years presented.

The Basel III Capital Rules also require an additional 2.5% “capital conservation buffer”, composed entirely of CET1, on top of these minimum risk-weighted asset ratios, which excludes the leverage ratio. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. Popular, BPPR and PB are required to maintain this additional capital conservation buffer of 2.5% of CET1, resulting in minimum ratios of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, and (iii) Total capital to risk-weighted assets of at least 10.5%.

Table 8 presents the Corporation’s capital adequacy information for the years 2021 and 2020.

 

 

Table 8 - Capital Adequacy Data

 

 

 

 

 

 

 

 

 

At December 31,

(Dollars in thousands)

 

2021

 

 

 

2020

 

Risk-based capital:

 

 

 

 

 

 

 

 

Common Equity Tier 1 capital

$

5,476,031

 

 

$

4,992,096

 

 

Additional Tier 1 Capital

 

22,143

 

 

 

22,143

 

 

Tier 1 capital

$

5,498,174

 

 

$

5,014,239

 

 

Supplementary (Tier 2) capital

 

585,931

 

 

 

759,680

 

 

Total capital

$

6,084,105

 

 

$

5,773,919

 

 

Total risk-weighted assets

$

31,441,224

 

 

$

30,702,091

 

Adjusted average quarterly assets

$

74,238,367

 

 

$

64,305,022

 

Ratios:

 

 

 

 

 

 

 

 

Common Equity Tier 1 capital

 

17.42

%

 

 

16.26

%

 

Tier 1 capital

 

17.49

 

 

 

16.33

 

 

Total capital

 

19.35

 

 

 

18.81

 

 

Leverage ratio

 

7.41

 

 

 

7.80

 

 

Average equity to assets

 

8.12

 

 

 

9.10

 

 

Average tangible equity to assets

 

7.20

 

 

 

8.02

 

 

Average equity to loans

 

19.87

 

 

 

19.09

 

On April 1, 2020, the Corporation adopted the final rule issued by the federal banking regulatory agencies pursuant to the Economic Growth and Regulatory Paperwork Reduction Act of 1996 that simplified several requirements in the agencies’ regulatory capital rules. These rules simplified the regulatory capital requirement for mortgage servicing assets (MSAs), deferred tax assets arising from temporary differences and investments in the capital of unconsolidated financial institutions by raising the CET1 deduction threshold from 10% to 25%. The 15% CET1 deduction threshold which applies to the aggregate amount of such items was eliminated. The rule also requires, among other changes, increasing from 100% to 250% the risk weight to MSAs and temporary difference deferred tax asset not deducted from capital. For investments in the capital of unconsolidated financial institutions, the risk weight would be based on the exposure category of the investment.

The increase in the CET1 capital ratio, Tier 1 capital ratio and, total capital ratio as of December 31, 2021, compared to December 31, 2020, was mostly due to the year earnings, partially offset by the accelerated share repurchase agreement to repurchase an aggregate of $350 million of Popular’s common stock and the slight increase in risk weighted assets. The decrease in leverage capital ratio was mainly due to the increase in average total assets, driven by investments in zero or low-risk weighted debt securities and overnight Fed Funds that therefore did not have a significant impact on the risk-weighted assets.

76


 

Pursuant to the adoption of CECL 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 benefits provided during the initial two-year delay.

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 December 31, 2021, the Corporation has $353 million in PPP loans and no loans were pledged as collateral for PPPL Facilities.

Table 9 reconciles the Corporation’s total common stockholders’ equity to common equity Tier 1 capital.

 

Table 9 - Reconciliation Common Equity Tier 1 Capital

 

 

 

 

 

 

 

 

 

At December 31,

(In thousands)

 

2021

 

 

2020

 

Common stockholders’ equity

$

6,116,756

 

$

6,224,942

 

AOCI related adjustments due to opt-out election

 

257,762

 

 

(261,245)

 

Goodwill, net of associated deferred tax liability (DTL)

 

(591,703)

 

 

(591,931)

 

Intangible assets, net of associated DTLs

 

(16,219)

 

 

(22,466)

 

Deferred tax assets and other deductions

 

(290,565)

 

 

(357,204)

 

Common equity tier 1 capital

$

5,476,031

 

$

4,992,096

 

Common equity tier 1 capital to risk-weighted assets

 

17.42

%

 

16.26

%

 

Non-GAAP financial measures

The tangible common equity ratio 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 of accounting 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 generally accepted accounting principles in the United States of America (“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 at December 31, 2021 and 2020.

77


 

Table 10 - Reconciliation of Tangible Common Equity and Tangible Assets

 

 

 

 

 

 

 

 

 

At December 31,

 

(In thousands, except share or per share information)

 

 

2021

 

 

 

2020

 

Total stockholders’ equity

 

$

5,969,397

 

 

$

6,028,687

 

Less: Preferred stock

 

 

(22,143)

 

 

 

(22,143)

 

Less: Goodwill

 

 

(720,293)

 

 

 

(671,122)

 

Less: Other intangibles

 

 

(16,219)

 

 

 

(22,466)

 

Total tangible common equity

 

$

5,210,742

 

 

$

5,312,956

 

Total assets

 

$

75,097,899

 

 

$

65,926,000

 

Less: Goodwill

 

 

(720,293)

 

 

 

(671,122)

 

Less: Other intangibles

 

 

(16,219)

 

 

 

(22,466)

 

Total tangible assets

 

$

74,361,387

 

 

$

65,232,412

 

Tangible common equity to tangible assets

 

 

7.01

%

 

 

8.14

%

Common shares outstanding at end of period

 

 

79,851,169

 

 

 

84,244,235

 

Tangible book value per common share

 

$

65.26

 

 

$

63.07

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-to-date average

 

Total stockholders’ equity [1]

 

$

5,777,652

 

 

$

5,419,938

 

Less: Preferred Stock

 

 

(22,143)

 

 

 

(26,277)

 

Less: Goodwill

 

 

(679,959)

 

 

 

(671,121)

 

Less: Other intangibles

 

 

(20,861)

 

 

 

(25,154)

 

Total tangible common equity

 

$

5,054,689

 

 

$

4,697,386

 

Average return on tangible common equity

 

 

18.47

%

 

 

10.75

%

[1] Average balances exclude unrealized gains or losses on debt securities available-for-sale.

 

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 for further information on the debt securities available-for-sale and held-to-maturity portfolios. Debt securities classified as available-for-sale amounted to $25.0 billion as of December 31, 2021. Other assets subject to market risk include loans held-for-sale, which amounted to $59 million, mortgage servicing rights (“MSRs”) which amounted to $122 million and securities classified as “trading”, which amounted to $30 million, as of December 31, 2021.

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.

78


 

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 amount (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. 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 December 31, 2021 and December 31, 2020, 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)

 

December 31, 2021

 

 

December 31, 2020

(Dollars in thousands)

 

Amount Change

Percent Change

 

 

Amount Change

Percent Change

 

Change in interest rate

 

 

 

 

 

 

 

 

+400 basis points

$

257,223

13.21

%

$

167,474

9.19

%

+200 basis points

 

197,354

10.14

 

 

81,690

4.49

 

+100 basis points

 

166,920

8.57

 

 

39,361

2.16

 

-100 basis points

 

(78,408)

(4.03)

 

 

(53,952)

(2.96)

 

-200 basis points

 

(120,661)

(6.20)

 

 

(71,517)

(3.93)

 

 

As of December 31, 2021, NII simulations show the Corporation maintains an asset sensitive position and is expected to benefit from an overall rising rate environment. The increases in sensitivity for the period are primarily driven by the significant deposit increases seen in 2021, which have resulted in a higher level of short-term investments and cash reserves maintained at the Federal Reserve. These assets reprice immediately under the NII simulations, thus improving the NII benefit in rising rate scenarios. The declining rate scenarios show a smaller and asymmetric impact in sensitivity as rates continue to be close to their lower bound and Popular does not allow rates to turn negative in its IRR simulations.

 

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.

79


 

Table 12 - Interest Rate Sensitivity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2021

 

 

By repricing dates

(Dollars in thousands)

 

0-30 days

 

Within 31 - 90 days

 

After three months but within six months

 

After six months but within nine months

 

After nine months but within one year

 

After one year but within two years

 

After two years

 

Non-interest bearing funds

 

Total

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market investments

$

17,536,719

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

17,536,719

Investment and trading securities

 

301,103

 

436,980

 

664,755

 

678,066

 

712,179

 

3,936,869

 

17,980,634

 

548,736

 

25,259,322

Loans

 

4,907,214

 

2,492,007

 

1,412,901

 

1,359,602

 

1,307,655

 

4,272,336

 

13,548,010

 

-

 

29,299,725

Other assets

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

3,002,133

 

3,002,133

Total

 

22,745,036

 

2,928,987

 

2,077,656

 

2,037,668

 

2,019,834

 

8,209,205

 

31,528,644

 

3,550,869

 

75,097,899

Liabilities and stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings, NOW and money market and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

other interest bearing demand deposits

 

23,065,038

 

809,349

 

1,137,611

 

1,053,198

 

976,622

 

3,260,426

 

14,306,213

 

-

 

44,608,457

Certificates of deposit

 

1,940,456

 

496,482

 

642,437

 

647,957

 

357,661

 

971,300

 

1,655,856

 

-

 

6,712,149

Federal funds purchased and assets

 

31,550

 

30,295

 

20,102

 

9,656

 

-

 

-

 

-

 

-

 

91,603

 

sold under agreements to repurchase

 

75,000

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

75,000

Notes payable

 

1,000

 

-

 

100,000

 

-

 

2,148

 

341,103

 

544,312

 

-

 

988,563

Non-interest bearing deposits

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

15,684,482

 

15,684,482

Other non-interest bearing liabilities

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

968,248

 

968,248

Stockholders' equity

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

5,969,397

 

5,969,397

Total

$

25,113,044

$

1,336,126

$

1,900,150

$

1,710,811

$

1,336,431

$

4,572,829

$

16,506,381

$

22,622,127

$

75,097,899

Interest rate sensitive gap

 

(2,368,008)

 

1,592,861

 

177,506

 

326,857

 

683,403

 

3,636,376

 

15,022,263

 

(19,071,258)

 

-

Cumulative interest rate sensitive gap

 

(2,368,008)

 

(775,147)

 

(597,641)

 

(270,784)

 

412,619

 

4,048,995

 

19,071,258

 

-

 

-

Cumulative interest rate sensitive gap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

to earning assets

 

(3.31)

%

(1.08)

%

(0.84)

%

(0.38)

%

0.58

%

5.66

%

26.66

%

-

 

-

 

Table 13, which presents the maturity distribution of earning assets, takes into consideration prepayment assumptions.

 

 

Table 13 - Maturity Distribution of Earning Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2021

 

 

 

 

Maturities

 

 

 

 

 

 

After one year

 

After five years

 

 

 

 

 

 

 

 

 

 

through five years

 

through fifteen years

 

After fifteen years

 

 

 

 

One year

 

Fixed

 

Variable

 

Fixed

 

Variable

 

Fixed

 

Variable

 

 

(In thousands)

 

or less

 

interest rates

 

interest rates

 

interest rates

 

interest rates

 

interest rates

 

interest rates

 

Total

Money market securities

$

17,536,719

$

-

$

-

$

-

$

-

$

-

$

-

$

17,536,719

Investment and trading securities

 

2,714,995

 

14,688,701

 

14,430

 

7,164,229

 

4,952

 

482,039

 

-

 

25,069,345

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

5,067,977

 

4,223,468

 

2,631,141

 

910,162

 

735,828

 

80,071

 

84,054

 

13,732,701

Construction

 

497,519

 

32,857

 

149,412

 

4,693

 

31,739

 

-

 

-

 

716,220

Leasing

 

408,552

 

959,267

 

-

 

13,500

 

-

 

-

 

-

 

1,381,319

Consumer

 

1,640,359

 

3,292,532

 

268,033

 

182,496

 

527,827

 

71,873

 

-

 

5,983,121

Mortgage

 

787,698

 

2,623,120

 

121,010

 

3,381,618

 

26,056

 

546,863

 

-

 

7,486,364

Subtotal loans

 

8,402,106

 

11,131,244

 

3,169,597

 

4,492,468

 

1,321,449

 

698,807

 

84,054

 

29,299,725

Total earning assets

$

28,653,820

$

25,819,945

$

3,184,027

$

11,656,696

$

1,326,401

$

1,180,847

$

84,054

$

71,905,789

Note: Equity securities available-for-sale and other investment securities, including Federal Reserve Bank stock and Federal Home Loan Bank stock held by the Corporation, are not included in this table. Loans held-for-sale have been allocated according to the expected sale date.

 

80


 

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 December 31, 2021, the Corporation held trading securities with a fair value of $30 million, representing approximately 0.04% of the Corporation’s total assets, compared with $37 million and 0.1%, respectively, at December 31, 2020. As shown in Table 14, the trading portfolio consists principally of mortgage-backed securities which at December 31, 2021 were investment grade securities. As of December 31, 2021 and December 31, 2020, the trading portfolio also included $0.1 million in Puerto Rico government obligations. Trading instruments are recognized at fair value, with changes resulting from fluctuations in market prices, interest rates or exchange rates reported in current period earnings. The Corporation recognized a net trading account loss of $389 thousand for the year ended December 31, 2021 and a net trading account gain of $1 million for the year ended December 31, 2020.

 

Table 14 - Trading Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

December 31, 2020

 

(Dollars in thousands)

 

Amount

 

Weighted Average Yield[1]

 

 

Amount

 

Weighted Average Yield[1]

 

Mortgage-backed securities

$

22,559

 

5.12

%

$

24,338

 

5.19

%

U.S. Treasury securities

 

6,530

 

0.03

 

 

11,506

 

0.04

 

Collateralized mortgage obligations

 

257

 

5.61

 

 

346

 

5.65

 

Puerto Rico government obligations

 

85

 

0.47

 

 

103

 

0.48

 

Interest-only strips

 

280

 

12.00

 

 

381

 

12.00

 

Total

$

29,711

 

4.06

%

$

36,674

 

3.64

%

[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 December 31, 2021. 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.

 

Derivatives

Derivatives may be used by the Corporation as part of its overall interest rate risk management strategy to minimize significant unexpected fluctuations in earnings and cash flows that are caused by interest rate volatility. Derivative instruments that the Corporation may use include, among others, interest rate caps, indexed options, and forward contracts. The Corporation does not use highly leveraged derivative instruments in its interest rate risk management strategy. Credit risk embedded in these transactions

81


 

is reduced by requiring appropriate collateral from counterparties and entering into netting agreements whenever possible. All outstanding derivatives are recognized in the Corporation’s Consolidated Statements of Condition at their fair value. Refer to Note 26 for further information on the Corporation’s involvement in derivative instruments and hedging activities.

Cash Flow Hedges

The Corporation manages the variability of cash payments due to interest rate fluctuations by the effective use of derivatives designated as cash flow hedges and that are linked to specified hedged assets and liabilities. The cash flow hedges relate to forward contracts or TBA mortgage-backed securities that are sold and bought for future settlement to hedge mortgage-backed securities and loans prior to securitization. The seller agrees to deliver on a specified future date a specified instrument at a specified price or yield. These securities are hedging a forecasted transaction and are designated for cash flow hedge accounting. The notional amount of derivatives designated as cash flow hedges at December 31, 2021 amounted to $ 88 million (2020 - $ 189 million). Refer to Note 26 for additional quantitative information on these derivative contracts.

 

Fair Value Hedges

The Corporation did not have any derivatives designated as fair value hedges during the years ended December 31, 2021 and 2020.

Trading and Non-Hedging Derivative Activities

The Corporation enters into derivative positions based on market expectations or to benefit from price differentials between financial instruments and markets mostly to economically hedge a related asset or liability. The Corporation also enters into various derivatives to provide these types of derivative products to customers. These free-standing derivatives are carried at fair value with changes in fair value recorded as part of the results of operations for the period.

Following is a description of the most significant of the Corporation’s derivative activities that are not designated for hedge accounting.

The Corporation has over-the-counter option contracts which are utilized in order to limit the Corporation’s exposure on customer deposits whose returns are tied to the S&P 500 or to certain other equity securities or commodity indexes. In these certificates, the customer’s principal is guaranteed by the Corporation and insured by the FDIC to the maximum extent permitted by law. The instruments pay a return based on the increase of these indexes, as applicable, during the term of the instrument. Accordingly, this product gives customers the opportunity to invest in a product that protects the principal invested but allows the customer the potential to earn a return based on the performance of the indexes. The risk of issuing certificates of deposit with returns tied to the applicable indexes is economically hedged by the Corporation. Indexed options are purchased from financial institutions with strong credit standings, whose return is designed to match the return payable on the certificates of deposit issued. By hedging the risk in this manner, the effective cost of these deposits is fixed. The contracts have a maturity and an index equal to the terms of the pool of retail deposits that they are economically hedging.

The purchased indexed options are used to economically hedge the bifurcated embedded option. These option contracts do not qualify for hedge accounting, and therefore, cannot be designated as accounting hedges. At December 31, 2021, the notional amount of the indexed options on deposits approximated $ 79 million (2020 - $ 69 million) with a fair value of $ 26 million (asset) (2020 - $ 21 million) while the embedded options had a notional value of $72 million (2020 - $ 63 million) with a fair value of $ 23 million (liability) (2020 - $ 18 million).

Refer to Note 26 for a description of other non-hedging derivative activities utilized by the Corporation during 2021 and 2020.

 

Foreign Exchange

The Corporation holds an interest in BHD León in the Dominican Republic, which is an investment accounted for under the equity method. The Corporation’s carrying value of the equity interest in BHD León approximated $ 180.3 million at December 31, 2021.

82


 

This business is conducted in the country’s foreign currency. The resulting foreign currency translation adjustment, from operations for which the functional currency is other than the U.S. dollar, is reported in accumulated other comprehensive loss in the consolidated statements of condition, except for highly-inflationary environments in which the effects would be included in the consolidated statements of operations. At December 31, 2021, the Corporation had approximately $ 67 million in an unfavorable foreign currency translation adjustment as part of accumulated other comprehensive income (loss), compared with an unfavorable adjustment of $ 71 million at December 31, 2020 and $ 57 million at December 31, 2019.

 

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 commitments 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 to exogenous events such as the current COVID-19 pandemic, its credit rating is downgraded, or some other event 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 and regulatory changes, could also affect its ability to obtain funding.

Liquidity is managed by the Corporation at the level of the holding companies that own the banking and non-banking subsidiaries. It is also managed at the level of the banking and non-banking subsidiaries. As further explained below, a principal source of liquidity for the bank holding companies (the “BHCs”) are dividends received from banking and non-banking subsidiaries. The Corporation has adopted policies and limits to monitor more effectively the Corporation’s liquidity position and that of the 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 89% of the Corporation’s total assets at December 31, 2021 and 86% at December 31, 2020. The ratio of total ending loans to deposits was 44% at December 31, 2021, compared to 52% at December 31, 2020. In addition to traditional deposits, the Corporation maintains borrowing arrangements, which amounted to approximately $1.2 billion in outstanding balances at December 31, 2021 (December 31, 2020 - $1.3 billion). A detailed description of the Corporation’s borrowings, including their terms, is included in Note 17 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.

On September 9, 2021, the Corporation completed an accelerated share repurchase program for the repurchase of an aggregate $350 million of Popular’s common stock, refer to Note 31 for additional information.

On November 1, 2021, the Corporation redeemed all outstanding 6.70% Cumulative Monthly Income Trust Preferred Securities issued by the Popular Capital Trust I, refer to Note 17 for additional information.

On January 12, 2022, Popular, Inc. announced the plan to increase its quarterly common stock dividend from $0.45 per share to $0.55 per share, commencing with the dividend payable in the second quarter of 2022, subject to the approval by its Board of Directors, and repurchase up to $500 million of its common stock during 2022.

The following sections provide further information on the Corporation’s major funding activities and needs, as well as the risks involved in these activities.

83


 

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.

Refer to Note 17 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, credit card licensing agreements and support to several mutual funds administered by BPPR.

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, credit ratings (by nationally recognized credit rating agencies), and importantly, FDIC deposit insurance. Although a downgrade in the credit ratings of the Corporation’s banking subsidiaries may impact their ability to raise retail and commercial deposits or the rate that it is required to pay on such deposits, management does not believe that the impact should be material. 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 a downgrade in the credit ratings.

Deposits are a key source of funding as they tend to be less volatile than institutional borrowings and their cost is less sensitive to changes in market rates. Refer to Table 7 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 all non-interest bearing deposits, savings deposits and certificates of deposit under $250,000, excluding brokered deposits with denominations under $250,000. Core deposits have historically provided the Corporation with a sizable source of relatively stable and low-cost funds. Core deposits totaled $63.6 billion, or 95% of total deposits, at December 31, 2021, compared with $51.7 billion, or 91% of total deposits, at December 31, 2020. Core deposits financed 88% of the Corporation’s earning assets at December 31, 2021, compared with 82% at December 31, 2020.

The distribution by maturity of certificates of deposits with denominations of $250,000 and over at December 31, 2021 is presented in the table that follows:

 

Table 15 - Distribution by Maturity of Certificate of Deposits of $250,000 and Over

 

 

 

(In thousands)

 

 

 

3 months or less

 

$

1,772,700

Over 3 to 12 months

 

 

500,200

Over 1 year to 3 years

 

 

219,395

Over 3 years

 

 

133,795

Total

 

$

2,626,090

 

Average deposits, including brokered deposits, for the year ended December 31, 2021 represented 93% of average earning assets, compared with 91% for the year ended December 31, 2020. Table 16 summarizes average deposits for the past three years.

84


 

Table 16 - Average Total Deposits

 

 

 

 

 

 

For the years ended December 31,

(In thousands)

 

2021

 

2020

Non-interest bearing demand deposits

$

14,687,093

$

11,537,700

Savings accounts

 

15,753,630

 

12,620,755

NOW, money market and other interest bearing demand accounts

 

25,648,707

 

19,466,357

Certificates of deposit

 

7,013,486

 

7,960,967

 

Total interest bearing deposits

 

48,415,823

 

40,048,079

 

Total average deposits

$

63,102,916

$

51,585,779

 

The Corporation had $0.8 billion in brokered deposits at December 31, 2021, which financed approximately 1% of its total assets (December 31, 2020 - $0.8 billion and 1%, 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 December 31, 2021, total public sector deposits were $20.3 billion, compared to $15.1 billion at December 31, 2020. 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.

At December 31, 2021, 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. 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.

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 and capitalizing its banking subsidiaries.

The BHCs have in the past borrowed in the money markets and in the corporate debt market primarily to finance their non-banking subsidiaries; however, the cash needs of the Corporation’s non-banking subsidiaries other than to repay indebtedness and interest are now minimal. 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.

85


 

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.

The outstanding balance of notes payable at the BHCs amounted to $496 million at December 31, 2021 and $682 at December 31, 2020.

The contractual maturities of the BHCs notes payable at December 31, 2021 are presented in Table 17.

 

Table 17 - Distribution of BHC's Notes Payable by Contractual Maturity

 

 

 

 

 

Year

 

(In thousands)

2023

$

297,842

Later years

 

198,292

Total

$

496,134

 

Annual debt service at the BHCs is approximately $32 million, and the Corporation’s latest quarterly dividend was $0.45 per share. On February 23, 2022, the Board of Directors of the Corporation declared a $0.55 cash dividend per common share, payable on April 1, 2022. 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 BHCs obligations during the foreseeable future. As of December 31, 2021, the BHCs had cash and money markets investments totaling $292 million, borrowing potential of $157 million from its secured facility with BPPR. In addition to these liquidity sources, the stake in EVERTEC had a market value of $583 million as of December 31, 2021 and it represents an additional source of contingent liquidity.

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. Popular, Inc. made capital contributions to its wholly owned subsidiary Popular Securities amounting to $9 million during the year 2021 and $10 million on February 24, 2022.

Dividends

During the year ended December 31, 2021, the Corporation declared cash dividend of $1.75 per common share outstanding $ 142.3 million in the aggregate. The dividends for the Corporation’s Series A preferred stock amounted to $1.4 million. During the year ended December 31, 2021, the BHC’s received dividends amounting to $761 million from BPPR, $4 million from PIBI which main source of income is derived from its investment in BHD, $31 million in dividends from its non-banking subsidiaries and $2 million in dividends from EVERTEC. Dividends from BPPR constitute Popular, Inc.’s primary source of liquidity.

Other Funding Sources and Capital

The debt securities portfolio provides an additional source of liquidity, which may be realized through either securities sales 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 $3.0 billion at December 31, 2021 and $3.4 billion at December 31, 2020. A substantial portion of these debt securities could be used to raise financing in the U.S. money markets or from secured lending sources.

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.

86


 

 

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 24 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 33 for information on operating leases and to Note 23 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. As discussed above, liquidity is managed by the Corporation in order to meet its short- and long-term cash obligations. Note 17 to the Consolidated Financial Statements has information on the Corporation’s borrowings by maturity, which amounted to $1.2 billion at December 31, 2021.

 

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 December 31, 2021 and December 31, 2020, and the results of their operations for the period ended December 31, 2021 and December 31, 2020. Investments in and equity in the earnings from the other subsidiaries and affiliates that are not members of the obligor group have been excluded.

87


 

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 18 - Summarized Statement of Condition

 

 

 

 

 

 

 

 

 

(In thousands)

 

December 31, 2021

 

December 31, 2020

Assets

 

 

 

 

Cash and money market investments

$

291,540

$

190,830

Investment securities

 

25,691

 

27,630

Accounts receivables from non-obligor subsidiaries

 

17,634

 

16,338

Other loans (net of allowance for credit losses of $96 (2020 - $311))

 

29,349

 

31,162

Investment in equity method investees

 

114,955

 

88,272

Other assets

 

42,251

 

46,547

Total assets

$

521,420

$

400,779

Liabilities and Stockholders' deficit

 

 

 

 

Accounts payable to non-obligor subsidiaries

$

6,481

$

3,946

Accounts payable to affiliates and related parties

 

1,254

 

977

Notes payable

 

496,134

 

681,503

Other liabilities

 

97,172

 

79,208

Stockholders' deficit

 

(79,621)

 

(364,855)

Total liabilities and stockholders' deficit

$

521,420

$

400,779

 

 

 

 

 

Table 19 - Summarized Statement of Operations

 

 

 

 

 

 

 

 

 

 

 

For the years ended

(In thousands)

 

December 31, 2021

 

December 31, 2020

Income:

 

 

 

 

Dividends from non-obligor subsidiaries

$

792,000

$

586,000

Interest income from non-obligor subsidiaries and affiliates

 

848

 

2,383

Earnings from investments in equity method investees

 

29,387

 

17,912

Other operating income

 

3,136

 

4,340

Total income

$

825,371

$

610,635

Expenses:

 

 

 

 

Services provided by non-obligor subsidiaries and affiliates (net of reimbursement by subsidiaries for services provided by parent of $162,019 (2020 - $138,729))

$

13,594

$

13,191

Other operating expenses

 

33,524

 

29,652

Total expenses

$

47,118

$

42,843

Net income

$

778,253

$

567,792

 

 

 

 

 

During the year ended December 31, 2021, the Obligor group recorded $3.0 million of distribution from its direct equity method investees (2020 - $2.3 million), of which $2.3 million are related to dividend distributions (2020 - $2.3 million). During the year ended December 31, 2020, the Obligor group received dividend distributions from a non-obligor subsidiary amounting $12.5 million which was recorded as a reduction to the investment.

88


 

 

Risks to Liquidity

Total lines of credit outstanding are not necessarily a measure of the total credit available on a continuing basis. Some of these lines could be subject to collateral requirements, 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 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 year ended December 31, 2021, BPPR declared cash dividends of $761 million. At December 31, 2021, BPPR would have needed to obtain prior approval of the Federal Reserve Board before declaring a dividend due to its declared dividend activity and transfers to statutory reserves over the three year’s ended December 31, 2021. 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, 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, 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 use borrowings that are rated by the major rating agencies, as these banking subsidiaries are funded primarily with deposits and secured borrowings. The banking subsidiaries had $9 million in deposits at December 31, 2021 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 23 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

89


 

required credit ratings are not maintained. Collateral pledged by the Corporation to secure recourse obligations amounted to approximately $32 million at December 31, 2021. 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 (the “Commonwealth” or “Puerto Rico”), which faces severe economic and fiscal challenges.

COVID-19 Pandemic

On December 2019, a novel strain of coronavirus (COVID-19) surfaced in Wuhan, China and has since spread globally to other countries and jurisdictions, including the mainland United States and Puerto Rico. In March 2020, the World Health Organization declared COVID-19 a pandemic. The pandemic has significantly disrupted and negatively impacted the global economy, disrupted global supply chains, created significant volatility in financial markets, and increased unemployment levels worldwide, including in the markets in which we do business.

In Puerto Rico, former Governor Wanda Vázquez issued an executive order in March 2020 declaring a health emergency, ordering residents to shelter in place, implementing a mandatory curfew, and requiring the closure of non-essential businesses. Although the most restrictive measures have been eased or lifted, allowing for the gradual reopening of the economy, certain measures remain in place and additional measures may be implemented in the future as a result of a resurgence in the spread of the virus or new strains of the virus. Since the beginning of the pandemic, most businesses have had to make significant adjustments to protect customers and employees, including transitioning to telework and suspending or modifying certain operations in compliance with health and safety guidelines. The Puerto Rico Legislative Assembly enacted legislation in April 2020 requiring financial institutions to offer moratoriums on consumer financial products to clients impacted by the COVID-19 pandemic, which was effective through August 2020. The Federal Government has also approved several economic stimulus measures that seek to cushion the economic fallout of the pandemic, including providing direct subsidies, expanding eligibility for and increasing unemployment benefits and guaranteeing through the SBA PPP loans to small and medium businesses.

The COVID-19 pandemic and the restrictions imposed to curb the spread of the disease have had and may continue to have a material adverse effect on economic activity worldwide, including in Puerto Rico. The extent to which the COVID-19 pandemic will continue to adversely affect economic activity will depend on future developments, which are highly uncertain and difficult to predict, including the scope and duration of the pandemic (including the appearance of new strains of the virus), the restrictions imposed by governmental authorities and other third parties in response to the same, the pace of global vaccination efforts, and the amount of federal and local assistance offered to offset the impact of the pandemic. Pursuant to the 2022 Fiscal Plan (as defined below), economic stimulus measures have more than offset the estimated income loss due to reduced economic activity in Puerto Rico and are estimated to have caused a temporary increase in personal income on a net basis. However, there can be no assurance that these measures will be sufficient to offset the pandemic’s economic impact in the medium- and long-term.

Economic Performance

The Commonwealth’s economy entered a recession in the fourth quarter of fiscal year 2006 and its gross national product (“GNP”) contracted (in real terms) every fiscal year between 2007 and 2018, with the exception of fiscal year 2012. Pursuant to the latest Puerto Rico Planning Board (the “Planning Board”) estimates, dated March 2021, the Commonwealth’s real GNP increased by 1.8%

90


 

in fiscal year 2019 due to the influx of federal funds and private insurance payments to repair damage caused by Hurricanes Irma and María. However, the Planning Board estimates that the Commonwealth’s real GNP decreased by approximately 3.2% in fiscal year 2020 due primarily to the adverse impact of the COVID-19 pandemic and the measures taken by the government in response to the same. The Planning Board projected that the negative effects of COVID-19 would continue through fiscal year 2021, resulting in a contraction in real GNP of approximately -2%, followed by 0.8% GNP growth in the current fiscal year.

Fiscal Crisis

The Commonwealth’s central government and many of its instrumentalities, public corporations and municipalities continue to face significant fiscal challenges, which have been primarily the result of economic contraction, persistent and significant budget deficits, a high debt burden, unfunded legacy obligations, and lack of access to the capital markets, among other factors. As a result, the Commonwealth and certain of its instrumentalities have been unable to make debt service payments on their outstanding bonds and notes since 2016. The escalating fiscal and economic crisis and imminent widespread defaults prompted the U.S. Congress to enact the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) in June 2016. As further discussed below under “Pending Title III Proceedings,” the Commonwealth and several of its instrumentalities are currently in the process of restructuring their debts through the debt restructuring mechanisms provided by PROMESA.

PROMESA

PROMESA, among other things, created a seven-member federally-appointed oversight board (the “Oversight Board”) with ample powers over the fiscal and economic affairs of the Commonwealth, its public corporations, instrumentalities and municipalities and established two mechanisms for the restructuring of the obligations of such entities. Pursuant to PROMESA, the Oversight Board will remain in place until market access is restored and balanced budgets, in accordance with modified accrual accounting, are produced for at least four consecutive years. In August 2016, President Obama appointed the seven original voting members of the Oversight Board through the process established in PROMESA, which authorizes the President to select the members from several lists required to be submitted by congressional leaders. In 2020, when President Donald Trump reappointed three of the original members and appointed four new members to the Oversight Board.

In October 2016, the Oversight Board designated the Commonwealth and all of its public corporations and instrumentalities as “covered entities” under PROMESA. The only Commonwealth government entities that were not subject to such initial designation were the Commonwealth’s municipalities. In May 2019, however, the Oversight Board designated all of the Commonwealth’s municipalities as covered entities. At the Oversight Board’s request, covered entities 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. Finally, covered entities are potentially eligible to avail themselves of the debt restructuring processes provided by PROMESA. For additional discussion of risk factors related to the Puerto Rico fiscal challenges, see “Part I – Item 1A – Risk Factors” in this Form 10-K.

Fiscal Plans

Commonwealth Fiscal Plan. The Oversight Board has certified several fiscal plans for the Commonwealth since 2017. The most recent fiscal plan for the Commonwealth certified by the Oversight Board is dated January 27, 2022 (the “2022 Fiscal Plan”).

Pursuant to the 2022 Fiscal Plan, while the COVID-19 pandemic and the measures taken in response to the same severely reduced economic activity and caused an unprecedented increase in unemployment in Puerto Rico, pandemic-related federal and local stimulus funding have more than offset the estimated income loss due to reduced economic activity and are estimated to have caused a temporary increase in personal income on a net basis. The 2022 Fiscal Plan’s economic projections incorporate adjustments for these short-term income effects for purposes of estimating tax receipts. For example, the 2022 Fiscal Plan estimates that, for fiscal years 2022 and 2023, real GNP will grow 2.6% and 0.9%, respectively, but projects that growth adjusted for income effects for such years will be approximately 5.2% and 0.6%, respectively.

The 2022 Fiscal Plan incorporates the debt service costs of the Commonwealth’s restructured debt as contemplated by the Plan of Adjustment (as defined and further explained below). Therefore, it projects an unrestricted surplus after debt service average of $1 billion annually between fiscal years 2022 to 2031. This surplus declines over time as federal disaster relief funding slows, nominal GNP growth declines, revenues decline, and healthcare expenditures rise. The 2022 Fiscal Plan estimates that fiscal measures

91


 

could drive approximately $6.3 billion in savings and extra revenue over fiscal years 2022 through 2026 and that structural reforms could drive a cumulative 0.90% increase in growth by fiscal year 2051 (equal to approximately $33 billion).

The 2022 Fiscal Plan provides for the gradual reduction and the ultimate elimination of Commonwealth budgetary subsidies to municipalities, which constitute a material portion of the operating revenues of some municipalities. Since fiscal year 2017, Commonwealth appropriations to municipalities have decreased by approximately 64% (from approximately $370 million in fiscal year 2017 to approximately $132 million in fiscal year 2020). In response to the COVID-19 crisis, reductions in appropriations to municipalities were paused in fiscal year 2021. Municipalities have also received extraordinary appropriations and other funds from federally-funded programs during the current fiscal year, which has helped temporarily offset the impact of the reduced Commonwealth support. However, the 2022 Fiscal Plan contemplates additional reductions in appropriations to municipalities starting in fiscal year 2022, before eventually phasing out all appropriations in fiscal year 2025. Further, while the Commonwealth had enacted legislation in 2019 suspending the municipality’s obligations to contribute to the Commonwealth’s health plan and pay-as-you go retirement system, such legislation was challenged by the Oversight Board and eventually declared null by the Title III court in April 2020. As a result, municipalities are required to cover their own employees’ healthcare costs and retirement benefits and had to reimburse the Commonwealth for such costs corresponding to the period during which the law was in effect. Finally, the 2022 Fiscal Plan notes that municipalities have made little or no progress towards implementing fiscal discipline required to reduce reliance on Commonwealth appropriations and that this lack of fiscal management threatens the ability of municipalities to provide necessary services, such as health, sanitation, public safety, and emergency services to their residents, forcing them to prioritize expenditures.

Other Fiscal Plans. Pursuant to PROMESA, the Oversight Board has also requested and certified fiscal plans for several public corporations and instrumentalities. The certified fiscal plan for the Puerto Rico Electric Power Authority (“PREPA”), Puerto Rico’s electric power utility, contemplated the transformation of Puerto Rico’s electric system through, among other things, the establishment of a public-private partnership with respect to PREPA’s transmission and distribution system (the “T&D System”), and calls for significant structural reforms at PREPA. The procurement process for the establishment of a public-private partnership with respect to the T&D System was completed in June 2020. The selected proponent, LUMA Energy LLC (“LUMA”), and PREPA entered into a 15-year agreement whereby, since June 1, 2021, LUMA is responsible for operating, maintaining and modernizing the T&D System.

On April 23, 2021, the Oversight Board certified the latest version of the fiscal plan (the “CRIM Fiscal Plan”) for the Municipal Revenue Collection Center (“CRIM”), the government entity responsible for collecting property taxes and distributing them among the municipalities. The CRIM Fiscal Plan outlines a series of measures centered around improving the competitiveness of Puerto Rico’s property tax regime and the enhancement of property tax collections, including identifying and appraising new properties as well as improvements to existing properties, and implementing operational and technological initiatives.

Pending Title III Proceedings

On May 3, 2017, the Oversight Board, on behalf of the Commonwealth, filed a petition in the U.S. District Court to restructure the Commonwealth’s liabilities under Title III of PROMESA. The Oversight Board subsequently filed analogous petitions with respect to the Puerto Rico Sales Tax Financing Corporation (“COFINA”), the Employees Retirement System of the Government of the Commonwealth of Puerto Rico (“ERS”), the Puerto Rico Highways and Transportation Authority, PREPA and the Puerto Rico Public Buildings Authority (“PBA”). On February 12, 2019, the government completed a restructuring of COFINA’s debts pursuant to a plan of adjustment confirmed by the U.S. District Court.

On November 3, 2021, the Oversight Board filed the Eighth Amended Title III Joint Plan of Adjustment for the Commonwealth, et. al. (the “Plan of Adjustment”) in the pending debt restructuring proceedings under Title III of PROMESA. The Plan of Adjustment seeks to restructure approximately $35 billion of debt and other claims against the Commonwealth, PBA and ERS. In October 2021, the Commonwealth’s government enacted legislation establishing the framework for the issuance of new securities by the Commonwealth in connection with the Plan of Adjustment. On January 18, 2022, the U.S. District Court confirmed the Plan of Adjustment, which is expected to become effective on or about March 15, 2022 upon the satisfaction of certain conditions to effectiveness.

Exposure of the Corporation

 

92


 

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. The effects of the prolonged recession have been reflected in limited loan demand, an increase in the rate of foreclosures and delinquencies on loans granted in Puerto Rico. While PROMESA provided a process to address the Commonwealth’s fiscal crisis, the complexity and uncertainty of the Title III proceedings for the Commonwealth and various of its instrumentalities and the adjustment measures required by the fiscal plans still present significant economic risks. In addition, the COVID-19 outbreak has affected many of our individual customers and customers’ businesses. This, when added to Puerto Rico’s ongoing fiscal crisis and recession, could cause credit losses that adversely affect us and may negatively affect consumer confidence, result in reductions in consumer spending, and adversely impact our interest and non-interest revenues. If global or local economic conditions worsen or the Government of Puerto Rico and the Oversight Board are unable to adequately manage the Commonwealth’s fiscal and economic challenges, including by controlling the COVID-19 pandemic and consummating an orderly restructuring of the Commonwealth’s debt obligations while continuing to provide essential services, these adverse effects could continue or worsen in ways that we are not able to predict.

 

At December 31, 2021, the Corporation’s direct exposure to the Puerto Rico government’s instrumentalities and municipalities totaled $367 million of which $349 million were outstanding, compared to $377 million at December 31, 2020 which was fully outstanding on such date. Further deterioration of the Commonwealth’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, $319 million consists of loans and $30 million are securities ($342 million and $35 million, respectively, at December 31, 2020). Substantially all of the amount outstanding at December 31, 2021 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 December 31, 2021, 75% of the Corporation’s exposure to municipal loans and securities was concentrated in the municipalities of San Juan, Guaynabo, Carolina and Bayamón. On July 1, 2021, the Corporation received scheduled principal payments amounting to $32 million from various obligations from Puerto Rico municipalities. For additional discussion of the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities, refer to Note 24 – Commitments and Contingencies.

 

In addition, at December 31, 2021, the Corporation had $275 million in loans insured or securities issued by Puerto Rico governmental entities, but for which the principal source of repayment is non-governmental ($317 million at December 31, 2020). These included $232 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, 2020 - $260 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 December 31, 2021, $43 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, 2020 - $46 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 described above. 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.

 

BPPR also has a significant amount of deposits from the Commonwealth, its instrumentalities, and municipalities. The amount of such deposits may fluctuate depending on the financial condition and liquidity of such entities, as well as on the ability of BPPR to maintain these customer relationships.

 

93


 

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 24 of 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 have been and maybe be further exacerbated as a result of the effects of the COVID-19 pandemic, and 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 December 31, 2021, the Corporation has operations in the United States Virgin Islands (the “USVI”) and has approximately $70 million in direct exposure to USVI government entities (December 31, 2020 - $105 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.

British Virgin Islands

 

The Corporation has operations in the British Virgin Islands (“BVI”), which has been 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 December 31, 2021 it has a loan portfolio amounting to approximately $221 million comprised of various retail and commercial clients, compared to a loan portfolio of $251 million at December 31, 2020, which included a $19 million loan with the BVI Government that was paid off during the second quarter of 2021.

 

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, $1.6 billion of residential mortgages, $353 million of SBA loans under the PPP and $67 million commercial loans were insured or guaranteed by the U.S. Government or its agencies at December 31, 2021 (compared to $1.8 billion, $1.3 billion and $60 million, respectively, at December 31, 2020).

 

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 20.

During 2021, the Corporation continued to exhibit strong credit quality and low credit costs, with low level of NCOs and decreasing NPLs, outperforming pre-pandemic trends. These improvements have been aided by the significant government stimulus and the rebound of the economy, as well as payoffs related to troubled loan resolutions. We continue to closely monitor COVID-19 pandemic related risks on borrower performance and changes in the pace of economic recovery as new variants continue to emerge. However, management believes that the improvement over the last few years in the risk profile of the Corporation’s loan portfolios positions Popular to operate successfully under the current environment.

 

Total NPAs decreased by $191 million when compared with December 31, 2020. Total non-performing loans held-in-portfolio (“NPLs”) decreased by $190 million from December 31, 2020. BPPR’s NPLs decreased by $186 million, mainly driven by lower

94


 

commercial, mortgage, and construction NPLs by $84 million, $80 million, and $21 million, respectively. The commercial and construction NPLs decrease reflects payoffs related to troubled loan resolutions, and loans that were returned to accrual status during the period. The mortgage NPLs decrease was mainly due to the combined effects of collection efforts, increased foreclosure activity and the on-going low levels of early delinquency compared with pre-pandemic trends. Popular U.S. NPLs decreased by $4 million from December 31, 2020, mostly related to a $7 million construction loan sold and lower consumer NPLs by $3 million, in part offset by mortgage NPLs increase by $7 million, mostly driven by loans that did not resume payment at the end of the COVID-related deferral period. At December 31, 2021, the ratio of NPLs to total loans held-in-portfolio was 1.9% compared to 2.5% in the fourth quarter of 2020. Other real estate owned loans (“OREOs”) increased by $2 million, mostly related to end of the foreclosure moratorium period.

At December 31, 2021, NPLs secured by real estate amounted to $428 million in the Puerto Rico operations and $31 million in Popular U.S. These figures were $630 million and $34 million, respectively, at December 31, 2020.

The Corporation’s commercial loan portfolio secured by real estate (“CRE”) amounted to $8.4 billion at December 31, 2021, of which $1.8 billion was secured with owner occupied properties, compared with $7.8 billion and $1.9 billion, respectively, at December 31, 2020. CRE NPLs amounted to $77 million at December 31, 2021, compared with $173 million at December 31, 2020. The CRE NPL ratios for the BPPR and Popular U.S. segments were 1.95% and 0.04%, respectively, at December 31, 2021, compared with 4.51% and 0.07%, respectively, at December 31, 2020.

In addition to the NPLs included in Table 20, at December 31, 2021, there were $214 million of performing loans, mostly commercial loans, which in management’s opinion, are currently subject to potential future classification as non-performing (December 31, 2020 - $228 million).

For the year ended December 31, 2021, total inflows of NPLs held-in-portfolio, excluding consumer loans, decreased by approximately $132 million, when compared to the inflows for the same period in 2020. Inflows of NPLs held-in-portfolio at the BPPR segment decreased by $129 million compared to the same period in 2020, driven by lower mortgage inflows by $114 million. Inflows of NPLs held-in-portfolio at the Popular U.S. segment decreased by $3 million from the same period in 2020.

95


 

Table 20 - Non-Performing Assets

 

December 31, 2021

December 31, 2020

 

(Dollars in thousands)

 

BPPR

 

Popular U.S.

 

Popular, Inc.

 

BPPR

 

Popular U.S.

 

Popular, Inc.

 

Non-accrual loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

$

120,047

$

5,532

$

125,579

$

204,092

$

5,988

$

210,080

 

Construction

 

485

 

-

 

485

 

21,497

 

7,560

 

29,057

 

Leasing

 

3,102

 

-

 

3,102

 

3,441

 

-

 

3,441

 

Mortgage

 

333,887

 

21,969

 

355,856

 

414,343

 

14,864

 

429,207

 

Auto

 

23,085

 

-

 

23,085

 

15,736

 

-

 

15,736

 

Consumer

 

33,683

 

6,087

 

39,770

 

41,268

 

8,985

 

50,253

 

Total non-performing loans held-in-portfolio

 

514,289

 

33,588

 

547,877

 

700,377

 

37,397

 

737,774

 

Non-performing loans held-for-sale[1]

 

-

 

-

 

-

 

-

 

2,738

 

2,738

 

Other real estate owned ("OREO")

 

83,618

 

1,459

 

85,077

 

81,512

 

1,634

 

83,146

 

Total non-performing assets

$

597,907

$

35,047

$

632,954

$

781,889

$

41,769

$

823,658

 

Accruing loans past-due 90 days or more[2]

$

480,649

$

118

$

480,767

$

1,028,061

$

3

$

1,028,064

 

Non-performing loans to loans held-in-portfolio

 

 

 

 

 

1.87

%

 

 

 

 

2.51

%

Interest lost

 

 

 

 

$

38,123

 

 

 

 

$

45,040

 

[1] There were no non-performing loans held-for-sale as of December 31, 2021 (December 31, 2020 - $3 million in commercial loans).

[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. The balance of these loans includes $13 million at December 31, 2021 related to the rebooking of loans previously pooled into GNMA securities, in which the Corporation had a buy-back option as further described below (December 31, 2020 - $57 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 (rebooked) on the financial statements of BPPR with an offsetting liability. These balances include $304 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2021 (December 31, 2020 - $329 million). Furthermore, the Corporation has approximately $50 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, 2020 - $60 million).

96


 

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

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31, 2021

(In thousands)

 

BPPR

 

Popular U.S.

 

Popular, Inc.

Beginning balance

$

639,932

$

28,412

$

668,344

Plus:

 

 

 

 

 

 

 

 

New non-performing loans

 

234,258

 

51,494

 

285,752

 

 

Advances on existing non-performing loans

 

-

 

84

 

84

Less:

 

 

 

 

 

 

 

 

Non-performing loans transferred to OREO

 

(34,419)

 

-

 

(34,419)

 

 

Non-performing loans charged-off

 

(35,963)

 

(1,592)

 

(37,555)

 

 

Loans returned to accrual status / loan collections

 

(349,389)

 

(42,124)

 

(391,513)

 

 

Loans transferred to held-for-sale

 

-

 

(8,773)

 

(8,773)

Ending balance NPLs

$

454,419

$

27,501

$

481,920

 

 

 

 

 

 

 

 

 

Table 22 - Activity in Non-Performing Loans Held-in-Portfolio (Excluding Consumer Loans)

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended December 31, 2020

(In thousands)

 

BPPR

 

Popular U.S.

 

Popular, Inc.

Beginning balance

$

431,082

$

16,621

$

447,703

Transition of PCI to PCD loans under CECL

 

245,703

 

18,547

 

264,250

Plus:

 

 

 

 

 

 

 

 

New non-performing loans

 

362,786

 

54,092

 

416,878

 

 

Advances on existing non-performing loans

 

-

 

825

 

825

Less:

 

 

 

 

 

 

 

 

Non-performing loans transferred to OREO

 

(11,762)

 

-

 

(11,762)

 

 

Non-performing loans charged-off

 

(44,675)

 

(3,204)

 

(47,879)

 

 

Loans returned to accrual status / loan collections

 

(343,202)

 

(47,790)

 

(390,992)

 

 

Loans transferred to held-for-sale

 

-

 

(10,679)

 

(10,679)

Ending balance NPLs

$

639,932

$

28,412

$

668,344

97


 

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

 

 

 

For the year ended December 31, 2021

(In thousands)

BPPR

 

Popular U.S.

 

Popular, Inc.

Beginning balance - NPLs

$204,092

 

$5,988

 

$210,080

Plus:

 

 

 

 

 

 

New non-performing loans

57,132

 

13,510

 

70,642

 

Advances on existing non-performing loans

-

 

52

 

52

Less:

 

 

 

 

 

 

Non-performing loans transferred to OREO

(9,261)

 

-

 

(9,261)

 

Non-performing loans charged-off

(14,935)

 

(1,042)

 

(15,977)

 

Loans returned to accrual status / loan collections

(116,981)

 

(11,203)

 

(128,184)

 

Loans transferred to held-for-sale

-

 

(1,773)

 

(1,773)

Ending balance - NPLs

$120,047

 

$5,532

 

$125,579

 

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

 

 

 

For the year ended December 31, 2020

(In thousands)

BPPR

 

Popular U.S.

 

Popular, Inc.

Beginning balance - NPLs

$147,255

 

5,504

 

$152,759

Transition of PCI to PCD loans under CECL

112,517

 

18,547

 

131,064

Plus:

 

 

 

 

 

 

New non-performing loans

50,834

 

15,496

 

66,330

 

Advances on existing non-performing loans

-

 

633

 

633

Less:

 

 

 

 

 

 

Non-performing loans transferred to OREO

(2,304)

 

-

 

(2,304)

 

Non-performing loans charged-off

(23,755)

 

(1,646)

 

(25,401)

 

Loans returned to accrual status / loan collections

(80,455)

 

(21,867)

 

(102,322)

 

Loans transferred to held-for-sale

-

 

(10,679)

 

(10,679)

Ending balance - NPLs

$204,092

 

$5,988

 

$210,080

 

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

 

 

 

For the year ended December 31, 2021

(In thousands)

BPPR

 

Popular U.S.

 

Popular, Inc.

Beginning balance - NPLs

$21,497

 

$7,560

 

$29,057

Plus:

 

 

 

 

 

 

New non-performing loans

481

 

12,141

 

12,622

Less:

 

 

 

 

 

 

Non-performing loans charged-off

(6,620)

 

(523)

 

(7,143)

 

Loans returned to accrual status / loan collections

(14,873)

 

(12,178)

 

(27,051)

 

Loans in accrual status transfer to held-for-sale

-

 

(7,000)

 

(7,000)

Ending balance - NPLs

$485

 

$-

 

$485

98


 

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

 

 

 

For the year ended December 31, 2020

(In thousands)

BPPR

 

Popular U.S.

 

Popular, Inc.

Beginning balance - NPLs

$119

 

$26

 

$145

Plus:

 

 

 

 

 

 

New non-performing loans

21,514

 

9,069

 

30,583

Less:

 

 

 

 

 

 

Non-performing loans charged-off

-

 

(1,509)

 

(1,509)

 

Loans returned to accrual status / loan collections

(136)

 

(26)

 

(162)

Ending balance - NPLs

$21,497

 

$7,560

 

$29,057

 

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

 

 

 

 

 

 

 

 

 

For the year ended December 31, 2021

(In thousands)

BPPR

 

Popular U.S.

 

Popular, Inc.

Beginning balance - NPLs

$414,343

 

$14,864

 

$429,207

Plus:

 

 

 

 

 

 

New non-performing loans

176,645

 

25,843

 

202,488

 

Advances on existing non-performing loans

-

 

32

 

32

Less:

 

 

 

 

 

 

Non-performing loans transferred to OREO

(25,158)

 

-

 

(25,158)

 

Non-performing loans charged-off

(14,408)

 

(27)

 

(14,435)

 

Loans returned to accrual status / loan collections

(217,535)

 

(18,743)

 

(236,278)

Ending balance - NPLs

$333,887

 

$21,969

 

$355,856

 

Table 28 - Activity in Non-Performing Mortgage Loans Held-in-Portfolio

 

 

 

 

 

 

 

 

 

For the year ended December 31, 2020

(In thousands)

BPPR

 

Popular U.S.

 

Popular, Inc.

Beginning balance - NPLs

$283,708

 

$11,091

 

$294,799

Transition of PCI to PCD loans under CECL

133,186

 

-

 

133,186

Plus:

 

 

 

 

 

 

New non-performing loans

290,438

 

29,527

 

319,965

 

Advances on existing non-performing loans

-

 

192

 

192

Less:

 

 

 

 

 

 

Non-performing loans transferred to OREO

(9,458)

 

-

 

(9,458)

 

Non-performing loans charged-off

(20,920)

 

(49)

 

(20,969)

 

Loans returned to accrual status / loan collections

(262,611)

 

(25,897)

 

(288,508)

Ending balance - NPLs

$414,343

 

$14,864

 

$429,207

99


 

Loan Delinquencies

Another key measure used to evaluate and monitor the Corporation’s asset quality is loan delinquencies. Loans delinquent 30 days or more and delinquencies, as a percentage of their related portfolio category at December 31, 2021 and 2020, are presented below.

 

Table 29 - Loan Delinquencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

2021

 

 

2020

 

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

$

161,251

$

13,732,701

 

1.17

%

$

249,484

$

13,614,310

 

1.83

%

Construction

 

485

 

716,220

 

0.07

 

 

50,369

 

926,208

 

5.44

 

Leasing

 

14,379

 

1,381,319

 

1.04

 

 

14,009

 

1,197,661

 

1.17

 

Mortgage [1]

 

1,141,082

 

7,427,196

 

15.36

 

 

1,775,902

 

7,890,680

 

22.51

 

Consumer

 

173,896

 

5,983,121

 

2.91

 

 

179,789

 

5,756,337

 

3.12

 

Loans held-for-sale

 

-

 

59,168

 

-

 

 

3,108

 

99,455

 

3.13

 

Total

$

1,491,093

$

29,299,725

 

5.09

%

$

2,272,661

$

29,484,651

 

7.71

%

[1]

Loans delinquent 30 days or more includes $0.6 billion of residential mortgage loans insured by FHA or guaranteed by the VA as of December 31, 2021 (December 31, 2020 - $1.1 billion). Refer to Note 8 to the Consolidated Financial Statements for additional information of guaranteed loans.

 

Allowance for Credit Losses (“ACL”)

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 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 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.

 

At December 31, 2021, the allowance for credit losses amounted to $695 million, a decrease of $201 million, when compared with December 31, 2020, mainly prompted by improvements in credit quality and the macroeconomic outlook. Since the December 31, 2020, scenarios, updated economic assumptions have included a more optimistic view of the economy, prompting substantial reductions in reserves across different portfolios, also contributing to lower qualitative reserves. 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. During the fourth quarter of 2021, in response to recent events that impacted both epidemiological and fiscal assumptions, the weight assigned to the pessimistic scenario was increased, contributing to an increase of approximately $13 million in reserves.

 

The ACL for BPPR decreased by $146 million to $594 million, when compared to December 31, 2020. The ACL for Popular U.S. decreased by $55 million to $101 million, when compared to December 31, 2020. The decrease in ACL was mainly driven by

100


 

continued borrower performance and improvements in the macroeconomic outlook, coupled with releases of qualitative reserves. The current baseline forecast continues to show a favorable economic scenario. The 2022 expected GDP growth rate for Puerto Rico is approximately 4%, with the unemployment rate expected to average around 7.4% for the year. In the case of the United States, the baseline scenario expects GDP growth for 2022 of approximately 4.6%, with unemployment rate expected to average around 3.7%. For 2023 both regions expect GDP growth with average unemployment rate levels remaining stable in comparison to 2022.

 

The provision for credit losses for the year ended December 31, 2021, amounted to a benefit of $183.3 million, a favorable variance of $465.7 million from the same period in the prior year, mainly driven by the abovementioned improvements in credit quality and the macroeconomic outlook, and lower NCOs. Refer to Note 9 – Allowance for credit losses – loans held-in-portfolio, and to the Provision for Credit Losses section of this MD&A for additional information.

 

The following table presents net charge-offs to average loans held-in-portfolio (“HIP”) ratios by loan category for the years ended December 31, 2021 and 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 30 - Net Charge-Offs (Recoveries) to Average Loans HIP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

December 31, 2020

 

 

BPPR

 

Popular U.S.

 

Popular Inc.

 

BPPR

 

Popular U.S.

 

Popular Inc.

 

Commercial

(0.24)

%

(0.02)

%

(0.15)

%

0.21

%

(0.04)

%

0.11

%

Construction

1.27

 

(0.02)

 

0.19

 

(0.57)

 

0.04

 

(0.07)

 

Mortgage

0.04

 

-

 

0.04

 

0.32

 

-

 

0.27

 

Leasing

0.11

 

-

 

0.11

 

0.66

 

-

 

0.66

 

Consumer

0.58

 

0.99

 

0.60

 

2.44

 

3.07

 

2.48

 

Total

0.09

%

0.01

%

0.07

%

0.85

%

0.13

%

0.66

%

 

NCOs for the year ended December 31, 2021 amounted to $20.7 million, decreasing by $165.7 million when compared to the same period in 2020. The BPPR segment decreased by $156.9 million mainly driven by lower consumer, commercial, and mortgage NCOs by $101.5 million, $35.2 million and $16.9 million, respectively. The PB segment decreased by 8.8 million, mainly driven by lower consumer NCOs by $9.4 million. The decrease in NCOs was due to the effect of a favorable economic environment and continued borrower performance, as reflected in the ongoing low level of delinquencies and NPLs when compared to pre-pandemic trends.

101


 

Table 31 - Allowance for Credit Losses - Loan Portfolios

 

December 31, 2021

(Dollars in thousands)

Commercial

Construction

 

Mortgage

Leasing

Consumer

Total

 

Total ACL

$

215,805

 

$

6,363

 

$

154,478

 

$

17,578

 

$

301,142

 

$

695,366

 

Total loans held-in-portfolio

$

13,732,701

 

$

716,220

 

$

7,427,196

 

$

1,381,319

 

$

5,983,121

 

$

29,240,557

 

ACL to loans held-in-portfolio

 

1.57

%

 

0.89

%

 

2.08

%

 

1.27

%

 

5.03

%

 

2.38

%

Total Non-performing loans held-in-portfolio

$

125,579

 

$

485

 

$

355,856

 

$

3,102

 

$

62,855

 

$

547,877

 

ACL to non-performing loans held-in-portfolio

 

171.85

%

 

N.M.

 

 

43.41

%

 

566.67

%

 

479.11

%

 

126.92

%

N.M. - Not meaningful.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 32 - Allowance for Credit Losses - Loan Portfolios

 

December 31, 2020

(Dollars in thousands)

Commercial

Construction

 

Mortgage

Leasing

Consumer

Total

 

Total ACL

$

333,380

 

$

14,237

 

$

215,716

 

$

16,863

 

$

316,054

 

$

896,250

 

Total loans held-in-portfolio

$

13,614,310

 

$

926,208

 

$

7,890,680

 

$

1,197,661

 

$

5,756,337

 

$

29,385,196

 

ACL to loans held-in-portfolio

 

2.45

%

 

1.54

%

 

2.73

%

 

1.41

%

 

5.49

%

 

3.05

%

Total Non-performing loans held-in-portfolio

$

210,080

 

$

29,057

 

$

429,207

 

$

3,441

 

$

65,989

 

$

737,774

 

ACL to non-performing loans held-in-portfolio

 

158.69

%

 

49.00

%

 

50.26

%

 

490.06

%

 

478.95

%

 

121.48

%

 

Table 33 details the breakdown of the allowance for credit losses by loan categories. The breakdown is made for analytical purposes, and it is not necessarily indicative of the categories in which future loan losses may occur.

102


 

Table 33 - Allocation of the Allowance for Credit Losses - Loans

At December 31,

 

2021

 

2020

 

 

 

% of loans

 

 

% of loans

 

 

 

in each

 

 

in each

 

 

 

category to

 

 

category to

 

(Dollars in millions)

ACL

total loans

 

ACL

total loans

 

Commercial

$215.8

47.0

%

$333.4

46.3

%

Construction

6.4

2.4

 

14.3

3.2

 

Mortgage

154.5

25.4

 

215.7

26.8

 

Leasing

17.6

4.7

 

16.9

4.1

 

Consumer

301.1

20.5

 

316.0

19.6

 

Total[1]

$695.4

100.0

%

$896.3

100.0

%

[1] Note: For purposes of this table the term loans refers to loans held-in-portfolio excluding loans held-for-sale.

 

Troubled debt restructurings

The Corporation’s troubled debt restructurings (“TDRs”) loans amounted to $1.7 billion at December 31, 2021, decreasing by $12 million, from December 31, 2020. A total of $716 million of these TDRs are related to guaranteed loans, which are in accruing status. TDRs in the BPPR segment amounted to $1.6 billion, a decrease of $9 million, mostly related to a combined decrease of $58 million in the commercial and construction TDRs and lower consumer TDRs by $11 million, in part offset by higher mortgage TDRs by $61 million, of which $61 million were related to government guaranteed loans. The Popular U.S. segment TDRs have remained essentially flat since December 31, 2020. TDRs in accruing status increased by $74 million from December 31, 2020, mostly related to an increase of $83 million in BPPR’s mortgage TDRs, in part offset by a decrease of $10 million in BPPR’s consumer TDRs, while non-accruing TDRs decreased by $86 million, of which $60 million were related to commercial and construction TDRs.

 

Refer to Note 9 to the Consolidated Financial Statements for additional information on modifications considered TDRs, including certain qualitative and quantitative data about TDRs performed in the past twelve months.

 

Enterprise Risk Management

The Corporation’s Board of Directors has established a Risk Management Committee (“RMC”) to, among other things, assist the Board in its (i) oversight of the Corporation’s overall risk framework and (ii) to monitor, review, and approve policies to measure, limit and manage the Corporation’s risks.

 

The Corporation has established a three lines of defense framework: (a) business line management constitutes the first line of defense by identifying and managing the risks associated with business activities, (b) components of the Risk Management Group and the Corporate Security Group, among others, act as the second line of defense by, among other things, measuring and reporting on the Corporation’s risk activities, and (c) the Corporate Auditing Division, as the third line of defense, reporting directly to the Audit Committee of the Board, by independently providing assurance regarding the effectiveness of the risk framework.

 

The Enterprise Risk Management Committee (the “ERM Committee”) is a management committee whose purpose is to: (a) monitor the principal risks as defined in the Risk Appetite Statement (“RAS”) of the Risk Management Policy affecting our business and within the Corporation’s Enterprise Risk Management (“ERM”) framework, (b) review key risk indicators and related developments at the business level consistent with the RAS, and (c) lead the incorporation of a uniform Governance, Risk and Compliance framework across the Corporation. The ERM Committee and the Market Risk & ERM Unit in the Financial and Operational Risk Management Division (the “FORM Division”), in coordination with the Chief Risk Officer, create the framework to identify and

103


 

manage multiple and cross-enterprise risks, and to articulate the RAS and supporting metrics. Our risk management program monitors the following principal risks: credit, interest rate, market, liquidity, operational, cyber and information security, legal, regulatory affairs, regulatory and financial compliance, BSA/ AML & sanctions, strategic and reputational.

 

The Market Risk & ERM Unit has established a process to ensure that an appropriate standard readiness assessment is performed before we launch a new product or service. Similar procedures are followed with the Treasury Division for transactions involving the purchase and sale of assets, and by the Mergers and Acquisitions Division for acquisition transactions.

 

The Asset/Liability Committee (“ALCO”), composed of senior management representatives from the business lines and corporate functions, and the Corporate Finance Group, are responsible for planning and executing the Corporation’s market, interest rate risk, funding activities and strategy, as well as for implementing approved policies and procedures. The ALCO also reviews the Corporation’s capital policy and the attainment of the capital management objectives. In addition, the Market Risk Unit independently measures, monitors and reports compliance with liquidity and market risk policies, and oversees controls surrounding interest risk measurements.

 

The Corporate Compliance Committee, comprised of senior management team members and representatives from the Regulatory and Financial Compliance Division, the Financial Crimes Compliance Division and the Corporate Risk Services Division, among others, are responsible for overseeing and assessing the adequacy of the risk management processes that underlie Popular’s compliance program for identifying, assessing, measuring, monitoring, testing, mitigating, and reporting compliance risks. They also supervise Popular’s reporting obligations under the compliance program so as to ensure the adequacy, consistency and timeliness of the reporting of compliance-related risks across the Corporation.

 

The Regulatory Affairs team is responsible for maintaining an open dialog with the banking regulatory agencies in order to ensure regulatory risks are properly identified, measured, monitored, as well as communicated to the appropriate regulatory agency as necessary to keep them apprised of material matters within the purview of these agencies.

 

The Credit Strategy Committee, composed of senior level management representatives from the business lines and corporate functions, and the Corporate Credit Risk Management Division, are responsible for managing the Corporation’s overall credit exposure by establishing policies, standards and guidelines that define, quantify and monitor credit risk and assessing the adequacy of the allowance for credit losses.

 

The Corporation’s Operational Risk Committee (“ORCO”) and the Cyber Security Committee, which are composed of senior level management representatives from the business lines and corporate functions, provide executive oversight to facilitate consistency of effective policies, best practices, controls and monitoring tools for managing and assessing all types of operational risks across the Corporation. The FORM Division, within the Risk Management Group, serves as ORCO’s operating arm and is responsible for establishing baseline processes to measure, monitor, limit and manage operational risk.

The Corporate Security Group (“CSG”), under the direction of the Chief Security Officer, leads all efforts pertaining to cybersecurity, enterprise fraud and data privacy, including developing strategies and oversight processes with policies and programs that mitigate compliance, operational, strategic, financial and reputational risks associated with the Corporation’s and our customers’ data and assets. The CSG also leads the Cyber Security Committee.

 

The Corporate Legal Division, in this context, has the responsibility of assessing, monitoring, managing and reporting with respect to legal risks, including those related to litigation, investigations and other material legal matters.

 

The Corporation has also established an Environmental, Social and Governance (“ESG”) Committee whose purpose and responsibility is to oversee the Corporation’s ESG strategies and support the development and consistent application of policies, processes and procedures that measure, limit and manage ESG matters and risks.

The processes of strategic risk planning and the evaluation of reputational risk are on-going processes through which continuous data gathering and analysis are performed. In order to ensure strategic risks are properly identified and monitored, the Corporate Strategic Planning Division performs periodic assessments regarding corporate strategic priority initiatives as well as emerging issues. The Acquisitions and Corporate Investments Division continuously assesses potential strategic transactions. The Corporate

104


 

Communications Division is responsible for the monitoring, management and implementation of action plans with respect to reputational risk issues.

 

Popular’s capital planning process integrates the Corporation’s risk profile as well as its strategic focus, operating environment, and other factors that could materially affect capital adequacy in hypothetical highly-stressed business scenarios. Capital ratio targets and triggers take into consideration the different risks evaluated under Popular’s risk management framework.

 

In addition to establishing a formal process to manage risk, our corporate culture is also critical to an effective risk management function. Through our Code of Ethics, the Corporation provides a framework for all our employees to conduct themselves with the highest integrity.

 

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.

105


 

Statistical Summary 2020-2021

Statements of Financial Condition

 

 

 

 

 

At December 31,

(In thousands)

2021

2020

Assets:

 

 

 

 

Cash and due from banks

$

428,433

$

491,065

Money market investments:

 

 

 

 

 

 

Time deposits with other banks

 

17,536,719

 

11,640,880

 

 

Total money market investments

 

17,536,719

 

11,640,880

Trading account debt securities, at fair value

 

29,711

 

36,674

Debt securities available-for-sale, at fair value

 

24,968,269

 

21,561,152

Debt securities held-to-maturity, at amortized cost

 

79,461

 

92,621

 

 

Less – Allowance for credit losses

 

8,096

 

10,261

 

 

Debt securities held-to-maturity, net

 

71,365

 

82,360

Equity securities

 

189,977

 

173,737

Loans held-for-sale, at lower of cost or fair value

 

59,168

 

99,455

Loans held-in-portfolio:

 

 

 

 

 

 

Loans held-in-portfolio

 

29,506,225

 

29,588,430

 

 

Less – Unearned income

 

265,668

 

203,234

 

 

 

Allowance for credit losses

 

695,366

 

896,250

 

 

Total loans held-in-portfolio, net

 

28,545,191

 

28,488,946

Premises and equipment, net

 

494,240

 

510,241

Other real estate

 

85,077

 

83,146

Accrued income receivable

 

203,096

 

209,320

Mortgage servicing rights, at fair value

 

121,570

 

118,395

Other assets

 

1,628,571

 

1,737,041

Goodwill

 

720,293

 

671,122

Other intangible assets

 

16,219

 

22,466

Total assets

$

75,097,899

$

65,926,000

Liabilities and Stockholders’ Equity

 

 

 

 

Liabilities:

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Non-interest bearing

$

15,684,482

$

13,128,699

 

 

Interest bearing

 

51,320,606

 

43,737,641

 

 

Total deposits

 

67,005,088

 

56,866,340

Assets sold under agreements to repurchase

 

91,603

 

121,303

Other short-term borrowings

 

75,000

 

-

Notes payable

 

988,563

 

1,224,981

Other liabilities

 

968,248

 

1,684,689

 

 

Total liabilities

 

69,128,502

 

59,897,313

Stockholders’ equity:

 

 

 

 

Preferred stock

 

22,143

 

22,143

Common stock

 

1,046

 

1,045

Surplus

 

4,650,182

 

4,571,534

Retained earnings

 

2,973,745

 

2,260,928

Treasury stock – at cost

 

(1,352,650)

 

(1,016,954)

Accumulated other comprehensive (loss) income, net of tax

 

(325,069)

 

189,991

 

 

Total stockholders’ equity

 

5,969,397

 

6,028,687

Total liabilities and stockholders’ equity

$

75,097,899

$

65,926,000

106


 

Statistical Summary 2019-2021

Statements of Operations

 

 

 

 

For the years ended December 31,

(In thousands)

2021

 

2020

 

2019

Interest income:

 

 

 

 

 

 

 

 

Loans

$

1,747,827

 

$

1,742,390

 

$

1,802,968

Money market investments

 

21,147

 

 

19,721

 

 

89,823

Investment securities

 

353,663

 

 

329,440

 

 

368,002

Total interest income

 

2,122,637

 

 

2,091,551

 

 

2,260,793

Less - Interest expense

 

165,047

 

 

234,938

 

 

369,099

Net interest income

 

1,957,590

 

 

1,856,613

 

 

1,891,694

Provision for credit losses (benefit)

 

(193,464)

 

 

292,536

 

 

165,779

Net interest income after provision for credit losses (benefit)

 

2,151,054

 

 

1,564,077

 

 

1,725,915

Mortgage banking activities

 

50,133

 

 

10,401

 

 

32,093

Net gain (loss) on sale of debt securities

 

23

 

 

41

 

 

(20)

Net gain, including impairment on equity securities

 

131

 

 

6,279

 

 

2,506

Net (loss) profit on trading account debt securities

 

(389)

 

 

1,033

 

 

994

Net (loss) gain on sale of loans, including valuation adjustments on loans held-for-sale

 

(73)

 

 

1,234

 

 

-

Adjustment (expense) to indemnity reserves on loans sold

 

4,406

 

 

390

 

 

(343)

Other non-interest income

 

587,897

 

 

492,934

 

 

534,653

Total non-interest income

 

642,128

 

 

512,312

 

 

569,883

Operating expenses:

 

 

 

 

 

 

 

 

Personnel costs

 

631,802

 

 

564,205

 

 

590,625

All other operating expenses

 

917,473

 

 

893,624

 

 

886,857

Total operating expenses

 

1,549,275

 

 

1,457,829

 

 

1,477,482

Income before income tax

 

1,243,907

 

 

618,560

 

 

818,316

Income tax expense

 

309,018

 

 

111,938

 

 

147,181

Net Income

$

934,889

 

$

506,622

 

$

671,135

Net Income Applicable to Common Stock

$

933,477

 

$

504,864

 

$

667,412

107


 

Statistical Summary 2019-2021

Average Balance Sheet and Summary of Net Interest Income

 

On a Taxable Equivalent Basis*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

2020

 

2019

(Dollars in thousands)

 

Average Balance

 

Interest

Average Rate

 

Average Balance

 

Interest

Average Rate

 

Average Balance

 

Interest

Average Rate

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market investments

$

15,999,741

$

21,147

0.13

%

$

8,597,652

$

19,723

0.23

%

$

4,166,293

$

89,824

2.16

%

U.S. Treasury securities

 

12,396,773

 

266,670

2.16

 

 

12,107,819

 

257,308

2.13

 

 

9,823,518

 

302,025

3.07

 

Obligations of U.S. Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

sponsored entities

 

7,972

 

120

1.50

 

 

70,424

 

2,818

4.00

 

 

234,553

 

5,911

2.52

 

Obligations of Puerto Rico, States

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and political subdivisions

 

75,607

 

7,608

10.06

 

 

82,051

 

5,705

6.95

 

 

93,313

 

6,394

6.85

 

Collateralized mortgage obligations and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

mortgage-backed securities

 

10,255,525

 

224,706

2.19

 

 

6,913,416

 

194,794

2.82

 

 

5,582,051

 

178,964

3.21

 

Other

 

194,640

 

9,027

4.64

 

 

178,818

 

7,369

4.12

 

 

171,223

 

8,487

4.96

 

Total investment securities

 

22,930,517

 

508,131

2.22

 

 

19,352,528

 

467,994

2.42

 

 

15,904,658

 

501,781

3.15

 

Trading account securities

 

84,380

 

4,339

5.16

 

 

69,446

 

4,165

6.00

 

 

67,596

 

5,103

7.55

 

Loans (net of unearned income)

 

29,074,045

 

1,794,789

6.19

 

 

28,384,981

 

1,785,022

6.29

 

 

26,806,368

 

1,850,894

6.90

 

 

Total interest earning assets/Interest income

$

68,088,683

$

2,328,406

3.43

%

$

56,404,607

$

2,276,904

4.04

%

$

46,944,915

$

2,447,602

5.21

%

 

Total non-interest earning assets

 

3,079,942

 

 

 

 

 

3,178,848

 

 

 

 

 

3,396,912

 

 

 

 

 

Total assets

$

71,168,625

 

 

 

 

$

59,583,455

 

 

 

 

$

50,341,827

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings, NOW, money market and other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

interest bearing demand accounts

$

41,387,504

$

59,034

0.15

%

$

32,077,578

$

92,417

0.29

%

$

25,575,455

$

192,200

0.75

%

Time deposits

 

7,028,334

 

52,587

0.75

 

 

7,970,474

 

83,438

1.05

 

 

7,770,430

 

112,658

1.45

 

Federal funds purchased

 

1

 

-

0.25

 

 

342

 

1

0.25

 

 

-

 

-

2.63

 

Securities purchased under agreement to resell

 

91,394

 

317

0.35

 

 

143,718

 

2,336

1.63

 

 

222,565

 

5,882

2.64

 

Other short-term borrowings

 

343

 

1

0.35

 

 

21,557

 

120

0.56

 

 

8,703

 

217

2.50

 

Notes payable

 

1,184,737

 

53,107

4.49

 

 

1,178,169

 

56,626

4.81

 

 

1,194,119

 

58,142

4.77

 

 

Total interest bearing liabilities/Interest expense

 

49,692,313

 

165,046

0.33

 

 

41,391,838

 

234,938

0.57

 

 

34,771,272

 

369,099

1.06

 

 

Total non-interest bearing liabilities

 

15,698,660

 

 

 

 

 

12,771,679

 

 

 

 

 

9,857,038

 

 

 

 

Total liabilities

 

65,390,973

 

 

 

 

 

54,163,517

 

 

 

 

 

44,628,310

 

 

 

 

Stockholders' equity

 

5,777,652

 

 

 

 

 

5,419,938

 

 

 

 

 

5,713,517

 

 

 

 

Total liabilities and stockholders' equity

$

71,168,625

 

 

 

 

$

59,583,455

 

 

 

 

$

50,341,827

 

 

 

 

Net interest income on a taxable equivalent basis

 

 

$

2,163,360

 

 

 

 

$

2,041,966

 

 

 

 

$

2,078,503

 

 

Cost of funding earning assets

 

 

 

 

0.24

%

 

 

 

 

0.42

%

 

 

 

 

0.78

%

Net interest margin

 

 

 

 

3.19

%

 

 

 

 

3.62

%

 

 

 

 

4.43

%

Effect of the taxable equivalent adjustment

 

 

 

205,770

 

 

 

 

 

185,353

 

 

 

 

 

186,809

 

 

Net interest income per books

 

 

$

1,957,590

 

 

 

 

$

1,856,613

 

 

 

 

$

1,891,694

 

 

 

* Shows the effect of the tax exempt status of some loans and investments on their yield, using the applicable statutory income tax rates. The computation considers the interest expense disallowance required by the Puerto Rico Internal Revenue Code. This adjustment is shown in order to compare the yields of the tax exempt and taxable assets on a taxable basis.

 

Note: Average loan balances include the average balance of non-accruing loans. No interest income is recognized for these loans in accordance with the Corporation’s policy.

108


 

Picture 6

Report of Management on Internal Control Over Financial Reporting

The management of Popular, Inc. (the “Corporation”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a - 15(f) and 15d - 15(f) under the Securities Exchange Act of 1934 and for our assessment of internal control over financial reporting. The Corporation’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America, and includes controls over the preparation of financial statements in accordance with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) to comply with the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). The Corporation’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Corporation;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Corporation are being made only in accordance with authorizations of management and directors of the Corporation; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Corporation’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The management of Popular, Inc. has assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

On October 15, 2021, Popular Equipment Finance, LLC (“PEF”), a newly formed wholly-owned subsidiary of Popular Bank (“PB”), completed the acquisition of certain assets and the assumption of certain liabilities of K2 Capital Group LLC’s (“K2”) equipment leasing and financing business based in Minnesota (the “Acquired Business”). The Acquired Business’ total assets and total revenues represented approximately 0.2% and 0.2%, respectively, of the related consolidated financial statements as of and for the period ended December 31, 2021. The Corporation has excluded the Acquired Business from its assessment of the design and operating effectiveness of internal controls over financial reporting for the fiscal year 2021. The Corporation made this determination in accordance with SEC’s guidance which permits the exclusion of a recently acquired business from the scope of this assessment in the year of acquisition.

Based on our assessment, management concluded that the Corporation maintained effective internal control over financial reporting as of December 31, 2021 based on the criteria referred to above.

The Corporation’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2021, as stated in their report dated March 1, 2022 which appears herein.

Picture 5

 

Picture 4

Ignacio Alvarez

 

Carlos J. Vázquez

President and

 

Executive Vice President

Chief Executive Officer

 

and Chief Financial Officer

 

109


 

Picture 1

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders of Popular, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

 

We have audited the accompanying consolidated statements of financial condition of Popular, Inc. and its subsidiaries (the “Corporation”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, including the related notes collectively referred to as the “consolidated financial statements”). We also have audited the Corporation's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Corporation as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

 

Change in Accounting Principle

 

As discussed in Note 3 to the consolidated financial statements, the Corporation changed the manner in which it accounts for its allowance for credit losses in 2020.

 

Basis for Opinions

 

The Corporation's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Corporation’s consolidated financial statements and on the Corporation’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

 

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an

110


 

understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

 

As described in the Report of Management on Internal Control Over Financial Reporting, management has excluded the business acquired from K2 Capital Group LLC (the "acquired business") from its assessment of internal control over financial reporting as of December 31, 2021 because it was acquired by the Corporation in a purchase business combination during 2021. We have also excluded the acquired business from our audit of internal control over financial reporting. The acquired business' total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent .2% and .2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

 

Definition and Limitations of Internal Control over Financial Reporting

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management's assessment and our audit of Popular, Inc.'s internal control over financial reporting also included controls over the preparation of financial statements in accordance with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) to comply with the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Critical Audit Matters

 

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

Allowance for Credit Losses on Loans Held-in-Portfolio - Quantitative Models, and Qualitative Adjustments to the Puerto Rico Portfolios

 

As described in Notes 2 and 9 to the consolidated financial statements, the Corporation follows the current expected credit loss (“CECL”) model, to establish and evaluate the adequacy of the allowance for credit losses (“ACL”) to provide for expected losses in the loan portfolio. As of December 31, 2021, the allowance for credit losses was $695 million on total loans of $29 billion. This CECL model establishes a forward-looking methodology that reflects the expected credit losses over the lives of financial assets. The quantitative modeling framework includes competing risk models to generate lifetime defaults and prepayments, and other loan level modeling techniques to estimate loss

111


 

severity. As part of this methodology, management evaluates various macroeconomic scenarios, and may apply probability weights to the outcome of the selected scenarios. The ACL also includes a qualitative framework that addresses losses that are expected but not captured within the quantitative modeling framework. In order to identify potential losses that are not captured through the models, management evaluated model limitations as well as the different risks covered by the variables used in each quantitative model. To complement the analysis, management also evaluated sectors that have low levels of historical defaults, but current conditions show the potential for future losses.

 

The principal considerations for our determination that performing procedures relating to the allowance for credit losses on loans held-in-portfolio quantitative models, and qualitative adjustments to the Puerto Rico portfolios is a critical audit matter are (i) the significant judgment by management in determining the allowance for credit losses, including qualitative adjustments to the Puerto Rico portfolios, which in turn led to a high degree of auditor effort, judgment, and subjectivity in performing procedures and evaluating audit evidence relating to the allowance for credit losses, including management’s selection of macroeconomic scenarios and probability weights applied; and (ii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the allowance for credit losses for loans held-in-portfolio, including qualitative adjustments to the Puerto Rico portfolios. These procedures also included, among others, testing management’s process for estimating the allowance for credit losses by (i) evaluating the appropriateness of the methodology, including models used for estimating the ACL; (ii) evaluating the reasonableness of management’s selection of various macroeconomic scenarios including probability weights applied to the expected loss outcome of the selected macroeconomic scenarios; (iii) evaluating the reasonableness of the qualitative adjustments to Puerto Rico portfolios allowance for credit losses; and (iv) testing the data used in the allowance for credit losses. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the methodology and models, the reasonableness of management’s selection and weighting of macroeconomic scenarios used to estimate current expected credit losses and reasonableness of the qualitative adjustments to Puerto Rico portfolios allowance for credit losses.

 

Goodwill Annual Impairment Assessment - Banco Popular de Puerto Rico and Popular Bank Reporting Units

 

As described in Note 15 to the consolidated financial statements, the Corporation’s consolidated goodwill balance was $720 million as of December 31, 2021, of which a significant portion relates to the Banco Popular de Puerto Rico (“BPPR”) and Popular Bank (“PB”) reporting units. Management conducts an impairment test as of July 31 of each year and on a more frequent basis if events or circumstances indicate an impairment could have taken place. In determining the fair value of each reporting unit, management 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 computations require management to make estimates, assumptions and calculations related to: (i) a selection of comparable publicly traded companies, based on the nature of business, location and size; (ii) a selection of comparable acquisitions, (iii) calculation of average price multiples of relevant value drivers from a group of selected comparable companies and acquisitions; (iv) the discount rate applied to future earnings, based on an estimate of the cost of equity; (v) the potential future earnings of the reporting units; and (vi) the market growth and new business assumptions. 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 were reasonable.

 

The principal considerations for our determination that performing procedures relating to goodwill annual impairment assessments of the Banco Popular de Puerto Rico and Popular Bank reporting units is a critical audit matter are (i) the significant judgment by management when determining the fair value measurements of the reporting units, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating evidence relating to the calculation of average price multiples of relevant value drivers from a group of selected comparable companies and acquisitions; the potential future earnings of the reporting unit; the estimated cost of equity; and the market growth and new business assumptions; and (ii) the audit effort involved the use of

112


 

professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment process, including controls over the valuation of Banco Popular de Puerto Rico and Popular Bank reporting units. These procedures also included, among others, (i) testing management’s process for determining the fair value estimates of Banco Popular de Puerto Rico and Popular Bank reporting units; (ii) evaluating the appropriateness of the discounted cash flow analyses and guideline public companies methodologies including the weights applied to each valuation method; (iii) testing the underlying data used in the estimates; (iv) evaluating the appropriateness of the calculation of average price multiples of relevant value drivers from a group of selected comparable companies and acquisitions; and (v) evaluating the potential future earnings of the reporting units; the estimated cost of equity; and the market growth and new business assumptions, including whether the assumptions used by management were reasonable considering, as applicable, (i) the current and past performance of the reporting units; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the methods and the reasonableness of certain significant assumptions.

 

Picture 4

San Juan, Puerto Rico

March 1, 2022

 

We have served as the Corporation’s auditor since 1971, which includes periods before the Corporation became subject to SEC reporting requirements.

 

CERTIFIED PUBLIC ACCOUNTANTS

(OF PUERTO RICO)

License No. LLP-216 Expires Dec. 1, 2022

Stamp E452193 of the P.R. Society of

Certified Public Accountants has been

affixed to the file copy of this report

 

113


 

POPULAR, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

 

 

 

 

December 31,

December 31,

(In thousands, except share information)

2021

2020

Assets:

 

 

 

 

Cash and due from banks

$

428,433

$

491,065

Money market investments:

 

 

 

 

 

 

Time deposits with other banks

 

17,536,719

 

11,640,880

 

 

Total money market investments

 

17,536,719

 

11,640,880

Trading account debt securities, at fair value:

 

 

 

 

 

 

Pledged securities with creditors’ right to repledge

 

-

 

241

 

 

Other trading account debt securities

 

29,711

 

36,433

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

 

 

 

 

 

 

Pledged securities with creditors’ right to repledge

 

93,330

 

125,819

 

 

Other debt securities available-for-sale

 

24,874,939

 

21,435,333

Debt securities held-to-maturity, at amortized cost (fair value 2021 - $83,368; 2020 - $94,891)

 

79,461

 

92,621

 

 

Less – Allowance for credit losses

 

8,096

 

10,261

 

 

Debt securities held-to-maturity, net

 

71,365

 

82,360

Equity securities (realizable value 2021 - $192,345; 2020 - $173,929)

 

189,977

 

173,737

Loans held-for-sale, at lower of cost or fair value

 

59,168

 

99,455

Loans held-in-portfolio

 

29,506,225

 

29,588,430

 

 

Less – Unearned income

 

265,668

 

203,234

 

 

Allowance for credit losses

 

695,366

 

896,250

 

 

Total loans held-in-portfolio, net

 

28,545,191

 

28,488,946

Premises and equipment, net

 

494,240

 

510,241

Other real estate

 

85,077

 

83,146

Accrued income receivable

 

203,096

 

209,320

Mortgage servicing rights, at fair value

 

121,570

 

118,395

Other assets

 

1,628,571

 

1,737,041

Goodwill

 

720,293

 

671,122

Other intangible assets

 

16,219

 

22,466

Total assets

$

75,097,899

$

65,926,000

Liabilities and Stockholders’ Equity

 

 

 

 

Liabilities:

 

 

 

 

 

Deposits:

 

 

 

 

 

 

Non-interest bearing

$

15,684,482

$

13,128,699

 

 

Interest bearing

 

51,320,606

 

43,737,641

 

 

Total deposits

 

67,005,088

 

56,866,340

Assets sold under agreements to repurchase

 

91,603

 

121,303

Other short-term borrowings

 

75,000

 

-

Notes payable

 

988,563

 

1,224,981

Other liabilities

 

968,248

 

1,684,689

 

 

Total liabilities

 

69,128,502

 

59,897,313

Commitments and contingencies (Refer to Note 24)

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock, 30,000,000 shares authorized; 885,726 shares issued and outstanding (2020 - 885,726)

 

22,143

 

22,143

Common stock, $0.01 par value; 170,000,000 shares authorized;104,579,334 shares issued (2020 - 104,508,290) and 79,851,169 shares outstanding (2020 - 84,244,235)

 

1,046

 

1,045

Surplus

 

4,650,182

 

4,571,534

Retained earnings

 

2,973,745

 

2,260,928

Treasury stock - at cost, 24,728,165 shares (2020 - 20,264,055)

 

(1,352,650)

 

(1,016,954)

Accumulated other comprehensive (loss) income, net of tax

 

(325,069)

 

189,991

 

 

Total stockholders’ equity

 

5,969,397

 

6,028,687

Total liabilities and stockholders’ equity

$

75,097,899

$

65,926,000

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

114


 

POPULAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

Years ended December 31,

(In thousands, except per share information)

2021

 

2020

 

2019

Interest income:

 

 

 

 

 

 

 

 

 

Loans

$

1,747,827

 

$

1,742,390

 

$

1,802,968

 

Money market investments

 

21,147

 

 

19,721

 

 

89,823

 

Investment securities

 

353,663

 

 

329,440

 

 

368,002

 

 

Total interest income

 

2,122,637

 

 

2,091,551

 

 

2,260,793

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

111,621

 

 

175,855

 

 

304,858

 

Short-term borrowings

 

319

 

 

2,457

 

 

6,100

 

Long-term debt

 

53,107

 

 

56,626

 

 

58,141

 

 

Total interest expense

 

165,047

 

 

234,938

 

 

369,099

Net interest income

 

1,957,590

 

 

1,856,613

 

 

1,891,694

Provision for credit losses (benefit)

 

(193,464)

 

 

292,536

 

 

165,779

Net interest income after provision for credit losses (benefit)

 

2,151,054

 

 

1,564,077

 

 

1,725,915

Service charges on deposit accounts

 

162,698

 

 

147,823

 

 

160,933

Other service fees

 

311,248

 

 

257,892

 

 

285,206

Mortgage banking activities (Refer to Note 10)

 

50,133

 

 

10,401

 

 

32,093

Net gain (loss) on sale of debt securities

 

23

 

 

41

 

 

(20)

Net gain, including impairment on equity securities

 

131

 

 

6,279

 

 

2,506

Net (loss) profit on trading account debt securities

 

(389)

 

 

1,033

 

 

994

Net (loss) gain on sale of loans, including valuation adjustments on loans held-for-sale

 

(73)

 

 

1,234

 

 

-

Adjustments (expense) to indemnity reserves on loans sold

 

4,406

 

 

390

 

 

(343)

Other operating income

 

113,951

 

 

87,219

 

 

88,514

 

 

Total non-interest income

 

642,128

 

 

512,312

 

 

569,883

Operating expenses:

 

 

 

 

 

 

 

 

Personnel costs

 

631,802

 

 

564,205

 

 

590,625

Net occupancy expenses

 

102,226

 

 

119,345

 

 

96,339

Equipment expenses

 

92,097

 

 

88,932

 

 

84,215

Other taxes

 

56,783

 

 

54,454

 

 

51,653

Professional fees

 

410,865

 

 

394,122

 

 

384,411

Communications

 

25,234

 

 

23,496

 

 

23,450

Business promotion

 

72,981

 

 

57,608

 

 

75,372

FDIC deposit insurance

 

25,579

 

 

23,868

 

 

18,179

Other real estate owned (OREO) (income) expenses

 

(14,414)

 

 

(3,480)

 

 

4,298

Other operating expenses

 

136,988

 

 

128,882

 

 

139,570

Amortization of intangibles

 

9,134

 

 

6,397

 

 

9,370

 

 

Total operating expenses

 

1,549,275

 

 

1,457,829

 

 

1,477,482

Income before income tax

 

1,243,907

 

 

618,560

 

 

818,316

Income tax expense

 

309,018

 

 

111,938

 

 

147,181

Net Income

$

934,889

 

$

506,622

 

$

671,135

Net Income Applicable to Common Stock

$

933,477

 

$

504,864

 

$

667,412

Net Income per Common Share – Basic

$

11.49

 

$

5.88

 

$

6.89

Net Income per Common Share – Diluted

$

11.46

 

$

5.87

 

$

6.88

The accompanying notes are an integral part of these consolidated financial statements.

115


 

POPULAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

 

 

Years ended December 31,

(In thousands)

2021

 

2020

 

2019

Net income

$

934,889

 

$

506,622

 

$

671,135

Reclassification to retained earnings due to cumulative effect of accounting change

 

-

 

 

-

 

 

(50)

Other comprehensive income (loss) before tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

3,947

 

 

(14,471)

 

 

(6,847)

Adjustment of pension and postretirement benefit plans

 

36,950

 

 

(9,032)

 

 

(21,874)

 

Amortization of net losses

 

20,749

 

 

21,447

 

 

23,508

Unrealized net holding (losses) gains on debt securities arising during the period

 

(619,470)

 

 

419,993

 

 

286,063

 

Reclassification adjustment for (gains) losses included in net income

 

(23)

 

 

(41)

 

 

20

Unrealized net gains (losses) on cash flow hedges

 

539

 

 

(8,872)

 

 

(5,741)

 

Reclassification adjustment for net losses included in net income

 

1,847

 

 

6,379

 

 

3,882

Other comprehensive (loss) income before tax

 

(555,461)

 

 

415,403

 

 

278,961

Income tax benefit (expense)

 

40,401

 

 

(55,474)

 

 

(20,925)

Total other comprehensive (loss) income, net of tax

 

(515,060)

 

 

359,929

 

 

258,036

Comprehensive income, net of tax

$

419,829

 

$

866,551

 

$

929,171

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Years ended December 31,

(In thousands)

2021

 

2020

 

2019

Adjustment of pension and postretirement benefit plans

$

(13,856)

 

$

3,387

 

$

8,203

 

Amortization of net losses

 

(7,781)

 

 

(8,042)

 

 

(8,817)

Unrealized net holding (losses) gains on debt securities arising during the period

 

62,468

 

 

(51,213)

 

 

(20,113)

 

Reclassification adjustment for (gains) losses included in net income

 

5

 

 

6

 

 

(4)

Unrealized net gains (losses) on cash flow hedges

 

(172)

 

 

2,472

 

 

1,302

 

Reclassification adjustment for net losses included in net income

 

(263)

 

 

(2,084)

 

 

(1,496)

Income tax benefit (expense)

$

40,401

 

$

(55,474)

 

$

(20,925)

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

116


 

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

other

 

 

 

 

 

Common

 

Preferred

 

 

Retained

Treasury

comprehensive

 

 

(In thousands)

stock

stock

Surplus

earnings

stock

(loss) income

Total

Balance at December 31, 2018

$

1,043

$

50,160

$

4,365,606

$

1,651,731

$

(205,509)

$

(427,974)

 

5,435,057

Cumulative effect of accounting change

 

 

 

 

 

 

 

4,905

 

 

 

 

 

4,905

Net income

 

 

 

 

 

 

 

671,135

 

 

 

 

 

671,135

Issuance of stock

 

1

 

 

 

3,496

 

 

 

 

 

 

 

3,497

Dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock[1]

 

 

 

 

 

 

 

(116,022)

 

 

 

 

 

(116,022)

 

Preferred stock

 

 

 

 

 

 

 

(3,723)

 

 

 

 

 

(3,723)

Common stock purchases [2]

 

 

 

 

 

15,740

 

 

 

(271,752)

 

 

 

(256,012)

Common stock reissuance

 

 

 

 

 

374

 

 

 

4,848

 

 

 

5,222

Stock based compensation

 

 

 

 

 

2,085

 

 

 

12,599

 

 

 

14,684

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

258,036

 

258,036

Transfer to statutory reserve

 

 

 

 

 

60,111

 

(60,111)

 

 

 

 

 

-

Balance at December 31, 2019

$

1,044

$

50,160

$

4,447,412

$

2,147,915

$

(459,814)

$

(169,938)

 

6,016,779

Cumulative effect of accounting change

 

 

 

 

 

 

 

(205,842)

 

 

 

 

 

(205,842)

Net income

 

 

 

 

 

 

 

506,622

 

 

 

 

 

506,622

Issuance of stock

 

1

 

 

 

4,262

 

 

 

 

 

 

 

4,263

Dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock[1]

 

 

 

 

 

 

 

(136,561)

 

 

 

 

 

(136,561)

 

Preferred stock

 

 

 

 

 

 

 

(1,758)

 

 

 

 

 

(1,758)

Common stock purchases[3]

 

 

 

 

 

76,335

 

 

 

(580,507)

 

 

 

(504,172)

Common stock reissuance

 

 

 

 

 

(1,192)

 

 

 

6,022

 

 

 

4,830

Preferred Stock, Redemption Amount[4]

 

 

 

(28,017)

 

 

 

 

 

 

 

 

 

(28,017)

Stock based compensation

 

 

 

 

 

(4,731)

 

 

 

17,345

 

 

 

12,614

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

359,929

 

359,929

Transfer to statutory reserve

 

 

 

 

 

49,448

 

(49,448)

 

 

 

 

 

-

Balance at December 31, 2020

$

1,045

$

22,143

$

4,571,534

$

2,260,928

$

(1,016,954)

$

189,991

 

6,028,687

Net income

 

 

 

 

 

 

 

934,889

 

 

 

 

 

934,889

Issuance of stock

 

1

 

 

 

4,673

 

 

 

 

 

 

 

4,674

Dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock[1]

 

 

 

 

 

 

 

(142,290)

 

 

 

 

 

(142,290)

 

Preferred stock

 

 

 

 

 

 

 

(1,412)

 

 

 

 

 

(1,412)

Common stock purchases[5]

 

 

 

 

 

(8,557)

 

 

 

(347,093)

 

 

 

(355,650)

Stock based compensation

 

 

 

 

 

4,162

 

 

 

11,397

 

 

 

15,559

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

(515,060)

 

(515,060)

Transfer to statutory reserve

 

 

 

 

 

78,370

 

(78,370)

 

 

 

 

 

-

Balance at December 31, 2021

$

1,046

$

22,143

$

4,650,182

$

2,973,745

$

(1,352,650)

$

(325,069)

 

5,969,397

[1]

Dividends declared per common share during the year ended December 31, 2021 - $1.75 (2020 - $1.60; 2019 - $1.20).

[2]

During the year ended December 31, 2019, the Corporation completed a $250 million accelerated share repurchase transaction with respect to its common stock, which was accounted for as a treasury stock transaction. Refer to Note 20 for additional information.

[3]

During the year ended December 31, 2020, the Corporation completed a $500 million accelerated share repurchase transaction with respect to its common stock, which was accounted for as a treasury stock transaction. Refer to Note 20 for additional information.

[4]

On February 24, 2020, the Corporation redeemed all the outstanding shares of 2008 Series B Preferred Stock. Refer to Note 20 for additional information.

[5]

During the year ended December 31, 2021, the Corporation completed a $350 million accelerated share repurchase transaction with respect to its common stock, which was accounted for as a treasury stock transaction. Refer to Note 20 for additional information.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

Disclosure of changes in number of shares:

 

 

 

 

 

 

 

2021

 

2020

 

2019

Preferred Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of year

 

 

 

 

 

 

 

 

 

885,726

 

2,006,391

 

2,006,391

 

Redemption of stocks

 

 

 

 

 

 

 

 

 

-

 

(1,120,665)

 

-

 

Balance at end of year

 

 

 

 

 

 

 

 

 

885,726

 

885,726

 

2,006,391

Common Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of year

 

 

 

 

 

 

 

 

 

104,508,290

 

104,392,222

 

104,320,303

 

Issuance of stock

 

 

 

 

 

 

 

 

 

71,044

 

116,068

 

71,919

 

Balance at end of year

 

 

 

 

 

 

 

 

104,579,334

 

104,508,290

 

104,392,222

 

Treasury stock

 

 

 

 

 

 

 

 

 

(24,728,165)

 

(20,264,055)

 

(8,802,593)

Common Stock – Outstanding

 

 

 

 

 

 

 

 

 

79,851,169

 

84,244,235

 

95,589,629

The accompanying notes are an integral part of these consolidated financial statements.

117


 

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Years ended December 31,

(In thousands)

 

2021

 

 

2020

 

 

2019

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

$

934,889

 

$

506,622

 

$

671,135

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

 

 

 

 

 

 

 

 

 

Provision for credit losses (benefit)

 

(193,464)

 

 

292,536

 

 

165,779

 

Amortization of intangibles

 

9,134

 

 

6,397

 

 

9,370

 

Depreciation and amortization of premises and equipment

 

55,104

 

 

58,452

 

 

58,067

 

Net accretion of discounts and amortization of premiums and deferred fees

 

(21,962)

 

 

(63,300)

 

 

(158,070)

 

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

 

(15,567)

 

 

(95,212)

 

 

-

 

Share-based compensation

 

17,774

 

 

8,254

 

 

12,303

 

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

 

5,320

 

 

18,004

 

 

2,591

 

Fair value adjustments on mortgage servicing rights

 

10,206

 

 

42,055

 

 

27,771

 

Adjustments (expense) to indemnity reserves on loans sold

 

(4,406)

 

 

(390)

 

 

343

 

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

 

(50,942)

 

 

(27,738)

 

 

(28,011)

 

Deferred income tax expense

 

229,371

 

 

75,044

 

 

141,332

 

(Gain) loss on:

 

 

 

 

 

 

 

 

 

 

Disposition of premises and equipment and other productive assets

 

(18,393)

 

 

(11,561)

 

 

(6,666)

 

 

Proceeds from insurance claims

 

-

 

 

(366)

 

 

(1,205)

 

 

Sale of debt securities

 

(23)

 

 

(41)

 

 

20

 

 

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

 

(21,611)

 

 

(32,449)

 

 

(15,888)

 

 

Sale of foreclosed assets, including write-downs

 

(30,098)

 

 

(19,958)

 

 

(21,982)

 

Acquisitions of loans held-for-sale

 

(251,336)

 

 

(227,697)

 

 

(223,939)

 

Proceeds from sale of loans held-for-sale

 

95,100

 

 

83,456

 

 

71,075

 

Net originations on loans held-for-sale

 

(527,585)

 

 

(391,537)

 

 

(289,430)

 

Net decrease (increase) in:

 

 

 

 

 

 

 

 

 

 

Trading debt securities

 

741,465

 

 

493,993

 

 

460,969

 

 

Equity securities

 

(2,336)

 

 

(8,263)

 

 

(8,032)

 

 

Accrued income receivable

 

6,193

 

 

(35,616)

 

 

(8,369)

 

 

Other assets

 

25,022

 

 

114,329

 

 

(37,847)

 

Net (decrease) increase in:

 

 

 

 

 

 

 

 

 

 

Interest payable

 

(5,395)

 

 

(5,404)

 

 

(284)

 

 

Pension and other postretirement benefits obligation

 

(4,104)

 

 

5,898

 

 

778

 

 

Other liabilities

 

22,802

 

 

(106,736)

 

 

(116,443)

Total adjustments

 

70,269

 

 

172,150

 

 

34,232

Net cash provided by operating activities

 

1,005,158

 

 

678,772

 

 

705,367

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Net (increase) decrease in money market investments

 

(5,895,789)

 

 

(8,378,577)

 

 

905,558

 

Purchases of investment securities:

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

(14,672,856)

 

 

(21,033,807)

 

 

(18,733,295)

 

 

Equity

 

(16,196)

 

 

(30,794)

 

 

(16,300)

 

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

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

9,602,430

 

 

18,224,362

 

 

14,650,440

 

 

Held-to-maturity

 

15,700

 

 

6,733

 

 

5,913

 

Proceeds from sale of investment securities:

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

235,992

 

 

5,103

 

 

99,445

 

 

Equity

 

2,904

 

 

25,206

 

 

20,030

 

Net repayments (disbursements) on loans

 

469,268

 

 

(875,941)

 

 

(641,029)

 

Proceeds from sale of loans

 

203,179

 

 

84,385

 

 

110,534

 

Acquisition of loan portfolios

 

(348,179)

 

 

(1,138,276)

 

 

(619,737)

 

Payments to acquire other intangible

 

(905)

 

 

(83)

 

 

(10,382)

 

Payments to acquire businesses, net of cash acquired

 

(155,828)

 

 

-

 

 

-

 

Return of capital from equity method investments

 

6,362

 

 

959

 

 

6,942

 

Payments to acquire equity method investments

 

(375)

 

 

(1,778)

 

 

-

 

Acquisition of premises and equipment

 

(72,781)

 

 

(60,073)

 

 

(75,665)

 

Proceeds from insurance claims

 

-

 

 

366

 

 

1,205

118


 

 

Proceeds from sale of:

 

 

 

 

 

 

 

 

 

 

Premises and equipment and other productive assets

 

21,482

 

 

26,548

 

 

18,608

 

 

Foreclosed assets

 

86,942

 

 

77,521

 

 

107,881

Net cash used in investing activities

 

(10,518,650)

 

 

(13,068,146)

 

 

(4,169,852)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Net increase (decrease) in:

 

 

 

 

 

 

 

 

 

 

Deposits

 

10,138,617

 

 

13,102,028

 

 

4,043,955

 

 

Assets sold under agreements to repurchase

 

(29,700)

 

 

(72,076)

 

 

(88,151)

 

 

Other short-term borrowings

 

75,000

 

 

-

 

 

(41)

 

Payments of notes payable

 

(237,713)

 

 

(139,920)

 

 

(210,377)

 

Principal payments of finance leases

 

(2,852)

 

 

(3,145)

 

 

(1,726)

 

Proceeds from issuance of notes payable

 

-

 

 

261,999

 

 

75,000

 

Proceeds from issuance of common stock

 

4,674

 

 

9,093

 

 

8,719

 

Payments for repurchase of redeemable preferred stock

 

-

 

 

(28,017)

 

 

-

 

Dividends paid

 

(141,466)

 

 

(133,645)

 

 

(115,810)

 

Net payments for repurchase of common stock

 

(350,535)

 

 

(500,479)

 

 

(250,581)

 

Payments related to tax withholding for share-based compensation

 

(5,115)

 

 

(3,693)

 

 

(5,431)

Net cash provided by financing activities

 

9,450,910

 

 

12,492,145

 

 

3,455,557

Net (decrease) increase in cash and due from banks, and restricted cash

 

(62,582)

 

 

102,771

 

 

(8,928)

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

 

497,094

 

 

394,323

 

 

403,251

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

$

434,512

 

$

497,094

 

$

394,323

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

119


 

Notes to Consolidated Financial Statements

 

Note 1 -

Nature of Operations

121

 

Note 2 -

Summary of Significant Accounting Policies

122

 

Note 3 -

New Accounting Pronouncements

132

 

Note 4 -

Business Combination

136

 

Note 5 -

Restrictions on Cash and Due from Banks and Certain Securities

138

 

Note 6 -

Debt Securities Available-For-Sale

139

 

Note 7 -

Debt Securities Held-to-Maturity

143

 

Note 8 -

Loans

146

 

Note 9 -

Allowance for Credit Losses – Loans Held-In-Portfolio

155

 

Note 10 -

Mortgage Banking Activities

177

 

Note 11 -

Transfers of Financial Assets and Mortgage Servicing Assets

178

 

Note 12 -

Premises and Equipment

181

 

Note 13 -

Other Real Estate Owned

182

 

Note 14 -

Other Assets

183

 

Note 15 -

Goodwill and Other Intangible Assets

184

 

Note 16 -

Deposits

188

 

Note 17 -

Borrowings

189

 

Note 18 -

Trust Preferred Securities

192

 

Note 19 -

Other Liabilities

194

 

Note 20 -

Stockholders’ Equity

195

 

Note 21 -

Regulatory Capital Requirements

197

 

Note 22 -

Other Comprehensive (Loss) Income

200

 

Note 23 -

Guarantees

202

 

Note 24 -

Commitments and Contingencies

205

 

Note 25-

Non-consolidated Variable Interest Entities

211

 

Note 26 -

Derivative Instruments and Hedging Activities

213

 

Note 27 -

Related Party Transactions

216

 

Note 28 -

Fair Value Measurement

220

 

Note 29 -

Fair Value of Financial Instruments

229

 

Note 30 -

Employee Benefits

232

 

Note 31 -

Net Income per Common Share

240

 

Note 32 -

Revenue from Contracts with Customers

241

 

Note 33 -

Leases

243

 

Note 34 -

Stock-Based Compensation

245

 

Note 35 -

Income Taxes

248

 

Note 36 -

Supplemental Disclosure on the Consolidated Statements of Cash Flows

253

 

Note 37 -

Segment Reporting

254

 

Note 38 -

Popular, Inc. (Holding company only) Financial Information

259

 

Note 39 -

Subsequent Events

262

 

 

 

 

 

 

 

 

 

120


 

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 mainland U.S., the Corporation provides retail, mortgage and commercial banking services 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, and equipment leasing and financing services through Popular Equipment Finance (“PEF”), a newly formed wholly-owned subsidiary of PB based in Minnesota.

 

 

121


 

Note 2 – 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.

The following is a description of the most significant of these policies:

Principles of consolidation

The consolidated financial statements include the accounts of Popular, Inc. and its subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. In accordance with the consolidation guidance for variable interest entities, the Corporation would also consolidate any variable interest entities (“VIEs”) for which it has a controlling financial interest; and therefore, it is the primary beneficiary. Assets held in a fiduciary capacity are not assets of the Corporation and, accordingly, are not included in the Consolidated Statements of Financial Condition.

Unconsolidated investments, in which there is at least 20% ownership and / or the Corporation exercises significant influence, are generally accounted for by the equity method with earnings recorded in other operating income. Limited partnerships are also accounted for by the equity method unless the investor’s interest is so “minor” that the limited partner may have virtually no influence over partnership operating and financial policies. These investments are included in other assets and the Corporation’s proportionate share of income or loss is included in other operating income.

Statutory business trusts that are wholly-owned by the Corporation and are issuers of trust preferred securities are not consolidated in the Corporation’s Consolidated Financial Statements.

Business combinations

Business combinations are accounted for under the acquisition method. Under this method, assets acquired, liabilities assumed and any noncontrolling interest in the acquiree at the acquisition date are measured at their fair values as of the acquisition date. The acquisition date is the date the acquirer obtains control. Transaction costs are expensed as incurred. Contingent consideration classified as an asset or a liability is remeasured to fair value at each reporting date until the contingency is resolved. The changes in fair value of the contingent consideration are recognized in earnings unless the arrangement is a hedging instrument for which changes are initially recognized in other comprehensive income.

On October 15, 2021, Popular Equipment Finance, LLC (“PEF”), a newly formed wholly-owned subsidiary of Popular Bank (“PB”), completed the acquisition of certain assets and the assumption of certain liabilities of K2 Capital Group LLC’s (“K2”) equipment leasing and financing business based in Minnesota (the “Acquired Business”). The Corporation determined that this acquisition constituted a business combination as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805 “Business Combinations”. Refer to Note 4, Business combination, for further details on the K2 Transaction.

 

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.

Fair value measurements

The Corporation determines the fair values of its financial instruments based on the fair value framework established in the guidance for Fair Value Measurements in ASC Subtopic 820-10, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standard describes three levels of inputs that may be used to measure fair value which are (1) quoted market prices for identical assets or liabilities in active markets, (2) observable market-based inputs or unobservable inputs that are corroborated by market data, and (3) unobservable inputs that are not corroborated by market data. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values.

The guidance in ASC Subtopic 820-10 also addresses measuring fair value in situations where markets are inactive and transactions are not orderly. Transactions or quoted prices for assets and liabilities may not be determinative of fair value when transactions are not orderly, and thus, may require adjustments to estimate fair value. Price quotes based on transactions that are

122


 

not orderly should be given little, if any, weight in measuring fair value. Price quotes based on transactions that are orderly shall be considered in determining fair value, and the weight given is based on facts and circumstances. If sufficient information is not available to determine if price quotes are based on orderly transactions, less weight should be given to the price quote relative to other transactions that are known to be orderly.

Investment securities

Investment securities are classified in four categories and accounted for as follows:

Debt securities that the Corporation has the intent and ability to hold to maturity are classified as debt securities held-to-maturity and reported at amortized cost. An ACL is established for the expected credit losses over the remaining term of debt securities held-to-maturity. The Corporation has established a methodology to estimate credit losses which considers qualitative factors, including internal credit ratings and the underlying source of repayment in determining the amount of expected credit losses. Debt securities held-to-maturity are written-off through the ACL when a portion or the entire amount is deemed uncollectible, based on the information considered to develop expected credit losses through the life of the asset. The ACL is estimated by leveraging the expected loss framework for mortgages in the case of securities collateralized by 2nd lien loans and the commercial C&I models for municipal bonds. As part of this framework, internal factors are stressed, as a qualitative adjustment, to reflect current conditions that are not necessarily captured within the historical loss experience. The modeling framework includes a 2-year reasonable and supportable period gradually reverting, over a 1-year horizon, to historical information at the model input level. The Corporation may not sell or transfer held-to-maturity securities without calling into question its intent to hold other debt securities to maturity, unless a nonrecurring or unusual event that could not have been reasonably anticipated has occurred.

Debt securities classified as trading securities are reported at fair value, with unrealized and realized gains and losses included in non-interest income.

Debt securities classified as available-for-sale are reported at fair value. Declines in fair value below the securities’ amortized cost which are not related to estimated credit losses are recorded through other comprehensive income or loss, net of taxes. If the Corporation intends to sell or believes it is more likely than not that it will be required to sell the debt security, it is written down to fair value through earnings. Credit losses relating to available-for-sale debt securities are recorded through an ACL, which are limited to the difference between the amortized cost and the fair value of the asset. The ACL is established for the expected credit losses over the remaining term of debt security. The Corporation’s portfolio of available-for-sale securities is comprised mainly of U.S. Treasury notes and obligations from the U.S. Government. These securities have 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. The Corporation monitors its securities portfolio composition and credit performance on a quarterly basis to determine if any allowance is considered necessary. Debt securities available-for-sale are written-off when a portion or the entire amount is deemed uncollectible, based on the information considered to develop expected credit losses through the life of the asset. The specific identification method is used to determine realized gains and losses on debt securities available-for-sale, which are included in net (loss) gain on sale of debt securities in the Consolidated Statements of Operations.

Equity securities that have readily available fair values are reported at fair value. Equity securities that do not have readily available fair values are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Stock that is owned by the Corporation to comply with regulatory requirements, such as Federal Reserve Bank and Federal Home Loan Bank (“FHLB”) stock, is included in this category, and their realizable value equals their cost. Unrealized and realized gains and losses and any impairment on equity securities are included in net gain (loss), including impairment on equity securities in the Consolidated Statements of Operations. Dividend income from investments in equity securities is included in interest income.

The amortization of premiums is deducted and the accretion of discounts is added to net interest income based on the interest method over the outstanding period of the related securities. Purchases and sales of securities are recognized on a trade date basis.

Derivative financial instruments

All derivatives are recognized on the Statements of Financial Condition at fair value. The Corporation’s policy is not to offset the fair value amounts recognized for multiple derivative instruments executed with the same counterparty under a master netting

123


 

arrangement nor to offset the fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from the same master netting arrangement as the derivative instruments.

For a cash flow hedge, changes in the fair value of the derivative instrument are recorded net of taxes in accumulated other comprehensive income/(loss) and subsequently reclassified to net income (loss) in the same period(s) that the hedged transaction impacts earnings. For free-standing derivative instruments, changes in fair values are reported in current period earnings.

Prior to entering a hedge transaction, the Corporation formally documents the relationship between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivative instruments to specific assets and liabilities on the Statements of Financial Condition or to specific forecasted transactions or firm commitments along with a formal assessment, at both inception of the hedge and on an ongoing basis, as to the effectiveness of the derivative instrument in offsetting changes in fair values or cash flows of the hedged item. Hedge accounting is discontinued when the derivative instrument is not highly effective as a hedge, a derivative expires, is sold, terminated, when it is unlikely that a forecasted transaction will occur or when it is determined that it is no longer appropriate. When hedge accounting is discontinued the derivative continues to be carried at fair value with changes in fair value included in earnings.

For non-exchange traded contracts, fair value is based on dealer quotes, pricing models, discounted cash flow methodologies or similar techniques for which the determination of fair value may require significant management judgment or estimation.

The fair value of derivative instruments considers the risk of non-performance by the counterparty or the Corporation, as applicable.

The Corporation obtains or pledges collateral in connection with its derivative activities when applicable under the agreement .

Loans

Loans are classified as loans held-in-portfolio when management has the intent and ability to hold the loan for the foreseeable future, or until maturity or payoff. The foreseeable future is a management judgment which is determined based upon the type of loan, business strategies, current market conditions, balance sheet management and liquidity needs. Management’s view of the foreseeable future may change based on changes in these conditions. When a decision is made to sell or securitize a loan that was not originated or initially acquired with the intent to sell or securitize, the loan is reclassified from held-in-portfolio into held-for-sale. Due to changing market conditions or other strategic initiatives, management’s intent with respect to the disposition of the loan may change, and accordingly, loans previously classified as held-for-sale may be reclassified into held-in-portfolio. Loans transferred between loans held-for-sale and held-in-portfolio classifications are recorded at the lower of cost or fair value at the date of transfer.

Purchased loans with no evidence of credit deterioration since origination are recorded at fair value upon acquisition. Credit discounts are included in the determination of fair value.

Loans held-for-sale are stated at the lower of cost or fair value, cost being determined based on the outstanding loan balance less unearned income, and fair value determined, generally in the aggregate. Fair value 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. The cost basis also includes consideration of deferred origination fees and costs, which are recognized in earnings at the time of sale. Upon reclassification to held-for-sale, credit related fair value adjustments are recorded as a reduction in the ACL. To the extent that the loan's reduction in value has not already been provided for in the ACL, an additional provision for credit losses is recorded. Subsequent to reclassification to held-for-sale, the amount, by which cost exceeds fair value, if any, is accounted for as a valuation allowance with changes therein included in the determination of net income (loss) for the period in which the change occurs.

Loans held-in-portfolio are reported at their outstanding principal balances net of any unearned income, charge-offs, unamortized deferred fees and costs on originated loans, and premiums or discounts on purchased loans. Fees collected and costs incurred in the origination of new loans are deferred and amortized using the interest method or a method which approximates the interest method over the term of the loan as an adjustment to interest yield.

The past due status of a loan is determined in accordance with its contractual repayment terms. Furthermore, loans are reported as past due when either interest or principal remains unpaid for 30 days or more in accordance with its contractual repayment terms.

Non-accrual loans are those loans on which the accrual of interest is discontinued. When a loan is placed on non-accrual status, all previously accrued and unpaid interest is charged against interest income and the loan is accounted for either on a cash-basis method or on the cost-recovery method. Loans designated as non-accruing are returned to accrual status when the Corporation expects repayment of the remaining contractual principal and interest.

124


 

Recognition of interest income on commercial and construction loans is discontinued when the loans are 90 days or more in arrears on payments of principal or interest or when other factors indicate that the collection of principal and interest is doubtful. The portion of a secured loan deemed uncollectible is charged-off no later than 365 days past due. However, in the case of a collateral dependent loan, the excess of the recorded investment over the fair value of the collateral (portion deemed uncollectible) is generally promptly charged-off, but in any event, not later than the quarter following the quarter in which such excess was first recognized. Commercial unsecured loans are charged-off no later than 180 days past due. 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 portion of a mortgage loan deemed uncollectible is charged-off when the loan is 180 days past due. The Corporation discontinues the recognition of interest on residential mortgage loans insured by the Federal Housing Administration (“FHA”) or guaranteed by the U.S. Department of Veterans Affairs (“VA”) when 15-months delinquent as to principal or interest. The principal repayment on these loans is insured. Recognition of interest income on closed-end consumer loans and home equity lines of credit is discontinued when the loans are 90 days or more in arrears on payments of principal or interest. Income is generally recognized on open-end consumer loans, except for home equity lines of credit, until the loans are charged-off. Recognition of interest income for lease financing is ceased when loans are 90 days or more in arrears. Closed-end consumer loans and leases are charged-off when they are 120 days in arrears. Open-end (revolving credit) consumer loans are charged-off when 180 days in arrears. Commercial and consumer overdrafts are generally charged-off no later than 60 days past their due date.

A loan classified as a troubled debt restructuring (“TDR”) is typically in non-accrual status at the time of the modification. The TDR loan continues 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.

Lease financing

The Corporation leases passenger and commercial vehicles and equipment to individual and corporate customers. The finance method of accounting is used to recognize revenue on lease contracts that meet the criteria specified in the guidance for leases in ASC Topic 842. Aggregate rentals due over the term of the leases less unearned income are included in finance lease contracts receivable. Unearned income is amortized using a method which results in approximate level rates of return on the principal amounts outstanding. Finance lease origination fees and costs are deferred and amortized over the average life of the lease as an adjustment to the interest yield.

Revenue for other leases is recognized as it becomes due under the terms of the agreement.

Loans acquired with deteriorated credit quality

Purchased credit deteriorated (“PCD”) loans are defined as those with evidence of a more-than-insignificant deterioration in credit quality since origination. PCD loans are initially recorded at its purchase price plus an estimated allowance for credit losses (“ACL”). Upon the acquisition of a PCD loan, the Corporation makes an estimate of the expected credit losses over the remaining contractual term of each individual loan. The estimated credit losses over the life of the loan are recorded as an ACL with a corresponding addition to the loan purchase price. The amount of the purchased premium or discount which is not related to credit risk is amortized over the life of the loan through net interest income using the effective interest method or a method that approximates the effective interest method. Changes in expected credit losses are recorded as an increase or decrease to the ACL with a corresponding charge (reverse) to the provision for credit losses in the Consolidated Statement of Operations. Upon transition to the individual loan measurement, these loans follow the same nonaccrual policies as non-PCD loans and are therefore no longer excluded from non-performing status. Modifications of PCD loans that meet the definition of a TDR subsequent to the adoption of ASC Topic 326 are accounted and reported as such following the same processes as non-PCD loans.

Refer to Note 8 to the Consolidated Financial Statements for additional information with respect to loans acquired with deteriorated credit quality.

 

Accrued interest receivable

The amortized basis for loans and investments in debt securities is presented exclusive of accrued interest receivable. The Corporation has elected not to establish an ACL for accrued interest receivable for loans and investments in debt securities, given the Corporation’s non-accrual policies, in which accrual of interest is discontinued and reversed based on the asset’s delinquency status.

Allowance for credit losses – loans portfolio

125


 

The Corporation establishes an ACL for its loan portfolio based on its estimate of credit losses over the remaining contractual term of the loans, adjusted for expected prepayments. An ACL is recognized for all loans including originated and purchased loans, since inception, with a corresponding charge to the provision for credit losses, except for PCD loans for which the ACL at acquisition is recorded as an addition to the purchase price with subsequent changes recorded in earnings. Loan losses are charged and recoveries are credited to the ACL.

The Corporation follows a methodology to estimate the ACL which includes a reasonable and supportable forecast period for estimating credit losses, considering quantitative and qualitative factors as well as the economic outlook. As part of this methodology, management evaluates various macroeconomic scenarios provided by third parties. At December 31, 2021, management applied probability weights to the outcome of the selected scenarios. This evaluation includes benchmarking procedures as well as careful analysis of the underlying assumptions used to build the scenarios. The application of probability weights include baseline, optimistic and pessimistic scenarios. The weights applied are subject to evaluation on a quarterly basis as part of the ACL’s governance process. The Corporation considers additional macroeconomic scenarios as part of its qualitative adjustment framework.

The macroeconomic variables chosen to estimate credit losses were selected by combining quantitative procedures with expert judgment. These variables were determined to be the best predictors of expected credit losses within the Corporation’s loan portfolios and include drivers such as unemployment rate, different measures of employment levels, house prices, gross domestic product and measures of disposable income, amongst others. The loss estimation framework includes a reasonable and supportable period of 2 years for PR portfolios, gradually reverting, over a 1-year horizon, to historical macroeconomic variables at the model input level. For the US portfolio the reasonable and supportable period considers the contractual life of the asset, impacted by prepayments, except for the US CRE portfolio. The US CRE portfolio utilizes a 2-year reasonable and supportable period gradually reverting, over a 1-year horizon, to historical information at the output level.

The Corporation developed loan level quantitative models distributed by geography and loan type. This segmentation was determined by evaluating their risk characteristics, which include default patterns, source of repayment, type of collateral, and lending channels, amongst others. The modeling framework includes competing risk models to generate lifetime defaults and prepayments, and other loan level modeling techniques to estimate loss severity. Recoveries on future losses are contemplated as part of the loss severity modeling. These parameters are estimated by combining internal risk factors with macroeconomic expectations. In order to generate the expected credit losses, the output of these models is combined with loan level repayment information. The internal risk factors contemplated within the models may include borrowers’ credit scores, loan-to-value, delinquency status, risk ratings, interest rate, loan term, loan age and type of collateral, amongst others.

The ACL also includes a qualitative framework that addresses two main components: losses that are expected but not captured within the quantitative modeling framework, and model imprecision. In order to identify potential losses that are not captured through the models, management evaluates model limitations as well as the different risks covered by the variables used in each quantitative model. The Corporation considers additional macroeconomic scenarios to address these risks. This assessment takes into consideration factors listed as part of ASC 326-20-55-4. To complement the analysis, management also evaluates whether there are sectors that have low levels of historical defaults, but current conditions show the potential for future losses. This type of qualitative adjustment is more prevalent in the commercial portfolios. The model imprecision component of the qualitative adjustments is determined after evaluating model performance for these portfolios through different time periods. This type of qualitative adjustment mainly impacts consumer portfolios.

The Corporation has designated as collateral dependent loans secured by collateral when foreclosure is probable or when foreclosure is not probable but the practical expedient is used. The practical expedient is used when repayment is expected to be provided substantially by the sale or operation of the collateral and the borrower is experiencing financial difficulty. The ACL of collateral dependent loans is measured based on the fair value of the collateral less costs to sell. 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.

In the case of troubled debt restructurings (“TDRs”), the established framework captures the impact of concessions through discounting modified contractual cash flows, both principal and interest, at the loan’s original effective rate. The impact of these concessions is combined with the expected credit losses generated by the quantitative loss models in order to arrive at the ACL. As a result, the ACL related to TDRs is impacted by the expected macroeconomic conditions.

The Credit Cards portfolio, due to its revolving nature, does not have a specified maturity date. To estimate the average remaining term of this segment, management evaluated the portfolios payment behavior based on internal historical data. These payment

126


 

behaviors were further classified into sub-categories that accounted for delinquency history and differences between transactors, revolvers and customers that have exhibited mixed transactor/revolver behavior. Transactors are defined as active accounts without any finance charge in the last 6 months. The paydown curves generated for each sub-category are applied to the outstanding exposure at the measurement date using the first-in first-out (FIFO) methodology. These amortization patterns are combined with loan level default and loss severity modeling to arrive at the ACL.

Troubled debt restructurings

A restructuring constitutes a TDR when the Corporation separately concludes that both of the following conditions exist: 1) the restructuring constitute a concession and 2) the debtor is experiencing financial difficulties. The concessions stem from an agreement between the Corporation and the debtor or are imposed by law or a court. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. A concession has been granted when, as a result of the restructuring, the Corporation does not expect to collect all amounts due, including interest accrued at the original contract rate. If the payment of principal is dependent on the value of collateral, the current value of the collateral is taken into consideration in determining the amount of principal to be collected; therefore, all factors that changed are considered to determine if a concession was granted, including the change in the fair value of the underlying collateral that may be used to repay the loan. Classification of loan modifications as TDRs involves a degree of judgment. Indicators that the debtor is experiencing financial difficulties which are considered include: (i) the borrower is currently in default on any of its debt or it is probable that the borrower would be in payment default on any of its debt in the foreseeable future without the modification; (ii) the borrower has declared or is in the process of declaring bankruptcy; (iii) there is significant doubt as to whether the borrower will continue to be a going concern; (iv) the borrower has securities that have been delisted, are in the process of being delisted, or are under threat of being delisted from an exchange; (v) based on estimates and projections that only encompass the borrower’s current business capabilities, it is forecasted that the entity-specific cash flows will be insufficient to service the debt (both interest and principal) in accordance with the contractual terms of the existing agreement through maturity; and (vi) absent the current modification, the borrower cannot obtain funds from sources other than the existing creditors at an effective interest rate equal to the current market interest rate for similar debt for a non-troubled debtor. The identification of TDRs is critical in the determination of the adequacy of the ACL.

A loan may be restructured in a troubled debt restructuring into two (or more) loan agreements, for example, Note A and Note B. Note A represents the portion of the original loan principal amount that is expected to be fully collected along with contractual interest. Note B represents the portion of the original loan that may be considered uncollectible and charged-off, but the obligation is not forgiven to the borrower. Note A may be returned to accrual status provided all of the conditions for a TDR to be returned to accrual status are met. The modified loans are considered TDRs.

Refer to Note 9 to the Consolidated Financial Statements for additional qualitative information on TDRs and the Corporation’s determination of the ACL.

Reserve for unfunded commitments

The Corporation establishes a reserve for unfunded commitments, based on the estimated losses over the remaining term of the facility. An allowance is not established for commitments that are unconditionally cancellable by the Corporation. Accordingly, no reserve is established for unfunded commitments related to its credit cards portfolio. Reserve for the unfunded portion of credit commitments is presented within other liabilities in the Consolidated Statements of Financial Condition. Net adjustments to the reserve for unfunded commitments are reflected in the Consolidated Statements of Operations as provision for credit losses for the years ended December 31, 2021 and 2020.

Transfers and servicing of financial assets

The transfer of an entire financial asset, a group of entire financial assets, or a participating interest in an entire financial asset in which the Corporation surrenders control over the assets is accounted for as a sale if all of the following conditions set forth in ASC Topic 860 are met: (1) the assets must be isolated from creditors of the transferor, (2) the transferee must obtain the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the transferor cannot maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. When the Corporation transfers financial assets and the transfer fails any one of these criteria, the Corporation is prevented from derecognizing the transferred financial assets and the transaction is accounted for as a secured borrowing. For federal and Puerto Rico income tax purposes, the Corporation treats the transfers of loans which do not qualify as “true sales” under the applicable accounting guidance, as sales, recognizing a deferred tax asset or liability on the transaction.

For transfers of financial assets that satisfy the conditions to be accounted for as sales, the Corporation derecognizes all assets sold; recognizes all assets obtained and liabilities incurred in consideration as proceeds of the sale, including servicing assets and

127


 

servicing liabilities, if applicable; initially measures at fair value assets obtained and liabilities incurred in a sale; and recognizes in earnings any gain or loss on the sale.

The guidance on transfer of financial assets requires a true sale analysis of the treatment of the transfer under state law as if the Corporation was a debtor under the bankruptcy code. A true sale legal analysis includes several legally relevant factors, such as the nature and level of recourse to the transferor, and the nature of retained interests in the loans sold. The analytical conclusion as to a true sale is never absolute and unconditional, but contains qualifications based on the inherent equitable powers of a bankruptcy court, as well as the unsettled state of the common law. Once the legal isolation test has been met, other factors concerning the nature and extent of the transferor’s control over the transferred assets are taken into account in order to determine whether derecognition of assets is warranted.

The Corporation sells mortgage loans to the Government National Mortgage Association (“GNMA”) in the normal course of business and retains the servicing rights. The GNMA programs under which the loans are sold allow the Corporation to repurchase individual delinquent loans that meet certain criteria. At the Corporation’s option, and without GNMA’s prior authorization, the Corporation may repurchase the delinquent loan for an amount equal to 100% of the remaining principal balance of the loan. Once the Corporation has the unconditional ability to repurchase the delinquent loan, the Corporation is deemed to have regained effective control over the loan and recognizes the loan on its balance sheet as well as an offsetting liability, regardless of the Corporation’s intent to repurchase the loan.

Servicing assets

The Corporation periodically sells or securitizes loans while retaining the obligation to perform the servicing of such loans. In addition, the Corporation may purchase or assume the right to service loans originated by others. Whenever the Corporation undertakes an obligation to service a loan, management assesses whether a servicing asset or liability should be recognized. A servicing asset is recognized whenever the compensation for servicing is expected to more than adequately compensate the servicer for performing the servicing. Likewise, a servicing liability would be recognized in the event that servicing fees to be received are not expected to adequately compensate the Corporation for its expected cost. Mortgage servicing assets recorded at fair value are separately presented on the Consolidated Statements of Financial Condition.

All separately recognized servicing assets are initially recognized at fair value. For subsequent measurement of servicing rights, the Corporation has elected the fair value method for mortgage loans servicing rights (“MSRs”). Under the fair value measurement method, MSRs are recorded at fair value each reporting period, and changes in fair value are reported in mortgage banking activities in the Consolidated Statement of Operations. Contractual servicing fees including ancillary income and late fees, as well as fair value adjustments, are reported in mortgage banking activities in the Consolidated Statement of Operations. Loan servicing fees, which are based on a percentage of the principal balances of the loans serviced, are credited to income as loan payments are collected.

The fair value of servicing rights is estimated by using a cash flow valuation model which calculates the present value of estimated future net servicing cash flows, taking into consideration actual and expected loan prepayment rates, discount rates, servicing costs, and other economic factors, which are determined based on current market conditions.

Premises and equipment

Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed on a straight-line basis over the estimated useful life of each type of asset. Amortization of leasehold improvements is computed over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Costs of maintenance and repairs which do not improve or extend the life of the respective assets are expensed as incurred. Costs of renewals and betterments are capitalized. When assets are disposed of, their cost and related accumulated depreciation are removed from the accounts and any gain or loss is reflected in earnings as realized or incurred, respectively.

The Corporation capitalizes interest cost incurred in the construction of significant real estate projects, which consist primarily of facilities for its own use or intended for lease. The amount of interest cost capitalized is to be an allocation of the interest cost incurred during the period required to substantially complete the asset. The interest rate for capitalization purposes is to be based on a weighted average rate on the Corporation’s outstanding borrowings, unless there is a specific new borrowing associated with the asset. Interest cost capitalized for the years ended December 31, 2021, 2020 and 2019 was not significant.

The Corporation recognizes right-of-use assets (“ROU assets”) and lease liabilities relating to operating and finance lease arrangements in its Consolidated Statements of Financial Condition within other assets and other liabilities, respectively. For finance leases, interest is recognized on the lease liability separately from the amortization of the ROU asset, whereas for operating leases a single lease cost is recognized so that the cost of the lease is allocated over the lease term on a straight-line basis. Impairments

128


 

on ROU assets are evaluated under the guidance for impairment or disposal of long-lived assets. The Corporation recognizes gains on sale and leaseback transactions in earnings when the transfer constitutes a sale, and the transaction was at fair value. Refer to Note 33 to the Consolidated Financial Statements for additional information on operating and finance lease arrangements.

Impairment of long-lived assets

The Corporation evaluates for impairment its long-lived assets to be held and used, and long-lived assets to be disposed of, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and records a write down for the difference between the carrying amount and the fair value less costs to sell.

Other real estate

Other real estate, received in satisfaction of a loan, is recorded at fair value less estimated costs of disposal. The difference between the carrying amount of the loan and the fair value less cost to sell is recorded as an adjustment to the ACL. Subsequent to foreclosure, any losses in the carrying value arising from periodic re-evaluations of the properties, and any gains or losses on the sale of these properties are credited or charged to expense in the period incurred and are included as OREO expenses. The cost of maintaining and operating such properties is expensed as incurred.

Updated appraisals are obtained to adjust the value of the other real estate assets. The frequency depends on the loan type and total credit exposure. The appraisal for a commercial or construction other real estate property with a book value equal to or greater than $1 million is updated annually and if lower than $1 million it is updated every two years. For residential mortgage properties, the Corporation requests appraisals annually.

Appraisals may be adjusted due to age, collateral inspections, property profiles, or general market conditions. The adjustments applied are based upon internal information such as other appraisals for the type of properties and/or loss severity information that can provide historical trends in the real estate market and may change from time to time based on market conditions.

Goodwill and other intangible assets

Goodwill is recognized when the purchase price is higher than the fair value of net assets acquired in business combinations under the purchase method of accounting. Goodwill is not amortized but is tested for impairment at least annually or more frequently if events or circumstances indicate possible impairment. If the carrying amount of any of the reporting units exceeds its fair value, the Corporation would be required to record an impairment charge for the difference up to the amount of the goodwill. 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. Goodwill impairment losses are recorded as part of operating expenses in the Consolidated Statements of Operations.

Other intangible assets deemed to have an indefinite life are not amortized but are tested for impairment using a one-step process which compares the fair value with the carrying amount of the asset. In determining that an intangible asset has an indefinite life, the Corporation considers expected cash inflows and legal, regulatory, contractual, competitive, economic and other factors, which could limit the intangible asset’s useful life.

Other identifiable intangible assets with a finite useful life, mainly core deposits, are amortized using various methods over the periods benefited, which range from 5 to 10 years. These intangibles are evaluated periodically for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairments on intangible assets with a finite useful life are evaluated under the guidance for impairment or disposal of long-lived assets.

Assets sold / purchased under agreements to repurchase / resell

Repurchase and resell agreements are treated as collateralized financing transactions and are carried at the amounts at which the assets will be subsequently reacquired or resold as specified in the respective agreements.

It is the Corporation’s policy to take possession of securities purchased under agreements to resell. However, the counterparties to such agreements maintain effective control over such securities, and accordingly those securities are not reflected in the Corporation’s Consolidated Statements of Financial Condition. The Corporation monitors the fair value of the underlying securities as compared to the related receivable, including accrued interest.

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.

The Corporation may require counterparties to deposit additional collateral or return collateral pledged, when appropriate.

Software

129


 

Capitalized software is stated at cost, less accumulated amortization. Capitalized software includes purchased software and capitalizable application development costs associated with internally-developed software. Amortization, computed on a straight-line method, is charged to operations over the estimated useful life of the software. Capitalized software is included in “Other assets” in the Consolidated Statement of Financial Condition.

Guarantees, including indirect guarantees of indebtedness to others

The estimated losses to be absorbed under the credit recourse arrangements are recorded as a liability when the loans are sold and are updated by accruing or reversing expense (categorized in the line item “Adjustments (expense) to indemnity reserves on loans sold” in the Consolidated Statements of Operations) throughout the life of the loan, as necessary, when additional relevant information becomes available. The recourse liability is estimated using loan level statistical techniques. Internal factors that are evaluated include customer credit scores, refreshed loan-to-values, loan age, and outstanding balance, amongst others. The methodology leverages the expected loss framework for mortgage loans and includes macroeconomic expectations based on a 2-year reasonable and supportable period, gradually reverting over a 1-year horizon to historical macroeconomic variables at the input level. Estimated future defaults, prepayments and loss severity are combined with loan level repayment information in order to estimate lifetime expected losses for this portfolio. The reserve for the estimated losses under the credit recourse arrangements is presented separately within other liabilities in the Consolidated Statements of Financial Condition. Refer to Note 23 to the Consolidated Financial Statements for further disclosures on guarantees.

 

Treasury stock

Treasury stock is recorded at cost and is carried as a reduction of stockholders’ equity in the Consolidated Statements of Financial Condition. At the date of retirement or subsequent reissue, the treasury stock account is reduced by the cost of such stock. At retirement, the excess of the cost of the treasury stock over its par value is recorded entirely to surplus. At reissuance, the difference between the consideration received upon issuance and the specific cost is charged or credited to surplus.

Revenues from contract with customers

Refer to Note 32 for a detailed description of the Corporation’s policies on the recognition and presentation of revenues from contract with customers.

Foreign exchange

Assets and liabilities denominated in foreign currencies are translated to U.S. dollars using prevailing rates of exchange at the end of the period. Revenues, expenses, gains and losses are translated using weighted average rates for the period. The resulting foreign currency translation adjustment from operations for which the functional currency is other than the U.S. dollar is reported in accumulated other comprehensive loss, except for highly inflationary environments in which the effects are included in other operating expenses.

The Corporation holds interests in Centro Financiero BHD León, S.A. (“BHD León”) in the Dominican Republic. The business of BHD León is mainly conducted in their country’s foreign currency. The resulting foreign currency translation adjustment from these operations is reported in accumulated other comprehensive loss.

Refer to the disclosure of accumulated other comprehensive loss included in Note 22.

Income taxes

The Corporation recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Corporation’s financial statements or tax returns. Deferred income tax assets and liabilities are determined for differences between financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future. The computation is based on enacted tax laws and rates applicable to periods in which the temporary differences are expected to be recovered or settled.

The guidance for income taxes requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not (defined as a likelihood of more than 50 percent) that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically by the Corporation based on the more likely than not realization threshold criterion. In the assessment for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among others, all sources of taxable income available to realize the deferred tax asset, including the future reversal of existing temporary differences, the future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in carryback years and tax-planning strategies. In making such assessments, significant weight is given to evidence that can be objectively verified.

130


 

The valuation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in the Corporation’s financial statements or tax returns and future profitability. The Corporation’s accounting for deferred tax consequences represents management’s best estimate of those future events.

Positions taken in the Corporation’s tax returns may be subject to challenge by the taxing authorities upon examination. Uncertain tax positions are initially recognized in the financial statements when it is more likely than not (greater than 50%) that the position will be sustained upon examination by the tax authorities, assuming full knowledge of the position and all relevant facts. The amount of unrecognized tax benefit 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 statute of limitations, changes in management’s judgment about the level of uncertainty, including addition or elimination of uncertain tax positions, status of examinations, litigation, settlements with tax authorities and legislative activity.

The Corporation accounts for the taxes collected from customers and remitted to governmental authorities on a net basis (excluded from revenues).

Income tax expense or benefit for the year is allocated among continuing operations, discontinued operations, and other comprehensive income, as applicable. The amount allocated to continuing operations is the tax effect of the pre-tax income or loss from continuing operations that occurred during the year, plus or minus income tax effects of (a) changes in circumstances that cause a change in judgment about the realization of deferred tax assets in future years, (b) changes in tax laws or rates, (c) changes in tax status, and (d) tax-deductible dividends paid to shareholders, subject to certain exceptions.

Employees’ retirement and other postretirement benefit plans

Pension costs are computed on the basis of accepted actuarial methods and are charged to current operations. Net pension costs are based on various actuarial assumptions regarding future experience under the plan, which include costs for services rendered during the period, interest costs and return on plan assets, as well as deferral and amortization of certain items such as actuarial gains or losses.

The funding policy is to contribute to the plan, as necessary, to provide for services to date and for those expected to be earned in the future. To the extent that these requirements are fully covered by assets in the plan, a contribution may not be made in a particular year.

The cost of postretirement benefits, which is determined based on actuarial assumptions and estimates of the costs of providing these benefits in the future, is accrued during the years that the employee renders the required service.

The guidance for compensation retirement benefits of ASC Topic 715 requires the recognition of the funded status of each defined pension benefit plan, retiree health care and other postretirement benefit plans on the Consolidated Statements of Financial Condition.

Stock-based compensation

The Corporation opted to use the fair value method of recording stock-based compensation as described in the guidance for employee share plans in ASC Subtopic 718-50.

Comprehensive income

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, except those resulting from investments by owners and distributions to owners. Comprehensive income (loss) is separately presented in the Consolidated Statements of Comprehensive Income.

Net income per common share

Basic income per common share is computed by dividing net income adjusted for preferred stock dividends, including undeclared or unpaid dividends if cumulative, and charges or credits related to the extinguishment of preferred stock or induced conversions of preferred stock, by the weighted average number of common shares outstanding during the year. Diluted income per common share takes into consideration the weighted average common shares adjusted for the effect of stock options, restricted stock, performance shares and warrants, if any, using the treasury stock method.

Statement of cash flows

For purposes of reporting cash flows, cash includes cash on hand and amounts due from banks, including restricted cash.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

131


 

Note 3 - New accounting pronouncements

 

 

 

 

 

 

 

 

 

Recently Adopted Accounting Standards Updates

 

 

 

 

 

 

 

 

 

Standard

 

Description

Date of adoption

Effect on the financial statements

 

 

FASB ASU 2021-06, Presentation of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946): Amendments to SEC Paragraphs Pursuant to SEC Financial Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants

 

The FASB issued ASU 2021-06 in August 2021, which amends certain paragraphs from the ASC in response to the issuance of SEC Final Rules Nos. 33-10786 and 33-10835.

August 9, 2021

The adoption of ASU 2021-06 during 2021 resulted in simplified MD&A disclosures.

 

 

FASB ASU 2020-10, Codification Improvements

 

The FASB issued ASU 2020-10 in October 2020 which moves all disclosures guidance to the appropriate codification section and makes other improvements and technical corrections.

December 31, 2021

The Corporation was not impacted by the adoption of ASU 2020-10 during the fourth quarter of 2021.

 

 

FASB ASU 2020-08, Codification Improvements to Subtopic 310-20 – Receivables – Nonrefundable Fees and Other Costs

 

The FASB issued ASU 2020-08 in October 2020 which clarifies that a reporting entity should assess whether a callable debt security purchased at a premium is within the scope of ASC 310-20-35-33 each reporting period, which impacts the amortization period for nonrefundable fees and other costs.

January 1, 2021

The Corporation was not impacted by the adoption of ASU 2020-08 during the first quarter of 2021 since it does not currently hold purchased callable debt securities at a premium.

 

 

FASB ASU 2020-04, Reference Rate Reform (Topic 848)

 

The FASB issued ASU 2020-04 in March 2020, which provides accounting relief from the impact of the cessation of LIBOR by, among other things, providing optional expedients to treat contract modifications resulting from such reference rate reform as a continuation of the existing contract and for hedging relationships to not be de-designated resulting from such changes provided certain criteria are met.

December 31, 2021

The Corporation identified all LIBOR-based contracts that will be impacted by the cessation of LIBOR. It has incorporated fallback language in new contracts and is in the process of completing the modification of existing contracts to include adequate fallback language. The Company has no outstanding hedge accounting relationships tied to LIBOR-based assets or liabilities. Furthermore, the Company stopped originating LIBOR-based contracts in December 2021 so no new exposures will be added prospectively. The election to apply the optional expedients did not have a material impact on the Consolidated Financial Statements.

132


 

 

 

 

 

 

 

 

 

 

Standard

 

Description

Date of adoption

Effect on the financial statements

 

 

FASB ASU 2020-01, Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323 and Topic 815

 

The FASB issued ASU 2020-01 in January 2020, which clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 and includes scope considerations for entities that hold non-derivative forward contracts and purchased options to acquire equity securities that, upon settlement of the forward contract or exercise of the purchase option, would be accounted for under the equity method of accounting.

January 1, 2021

The Corporation was not impacted by the adoption of ASU 2020-01 during the first quarter of 2021 since it does not hold non-derivative forward contracts and purchased options to acquire equity securities that, upon settlement of the forward or exercise of the purchase option, would be accounted for under the equity method of accounting. Notwithstanding, it will consider this guidance for the purposes of applying the measurement alternative in ASC Topic 321 immediately before applying or discontinuing the equity method of accounting.

 

 

FASB ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

 

The FASB issued ASU 2019-12 in December 2019, which simplifies the accounting for income taxes by removing certain exceptions such as the incremental approach for intraperiod tax allocation and interim period income tax accounting for year-to-date losses that exceed anticipated losses. In addition, the ASU simplifies GAAP in a number of areas such as when separate financial statements of legal entities are not subject to tax and enacted changes in tax laws in interim periods.

January 1, 2021

The Corporation adopted ASU 2019-12 during the first quarter of 2021 but was not materially impacted by the amendments of this ASU. It will consider this guidance for enacted changes in tax laws, subsequent step-ups in the tax basis of goodwill, or ownership changes in investments.

133


 

FASB ASUs Financial Instruments – Credit Losses (Topic 326)

 

The CECL model applies to financial assets measured at amortized cost that are subject to credit losses and certain off-balance sheet exposures. CECL 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. Under the revised methodology, credit losses are measured based on past events, current conditions and reasonable and supportable forecasts that affect the collectability of financial assets. CECL also revises the approach to recognizing credit losses for available-for-sale securities by replacing the direct write-down approach with the allowance approach and limiting the allowance to the amount at which the security’s fair value is less than the amortized cost. In addition, CECL provides that the initial allowance for credit losses on purchased credit deteriorated (“PCD”) financial assets will be recorded as an increase to the purchase price, with subsequent changes to the allowance recorded as a credit loss expense. The standards also expand credit quality disclosures. These accounting standards updates were effective on January 1, 2020. Prior to the adoption of CECL, the Corporation followed a systematic methodology to establish and evaluate the adequacy of the allowance for credit losses to provide for probable losses in the loan portfolio.

As a result of the adoption, the Corporation recorded an increase in its allowance for credit losses related to its loan portfolio of $315 million, and a decrease of $9 million in the allowance for credit losses for unfunded commitments and credit recourse guarantees which is recorded in Other Liabilities. The Corporation also recognized an allowance for credit losses of approximately $13 million related to its held-to-maturity debt securities portfolio. The adoption of CECL was recognized under the modified retrospective approach. Therefore, the adjustments to record the increase in the allowance for credit losses was recorded as a decrease to the opening balance of retained earnings of the year of implementation, net of income taxes, except for approximately $17 million related to loans previously accounted under ASC Subtopic 310-30, which resulted in a reclassification between certain contra loan balance accounts to the allowance for credit losses. The total impact to retained earnings, net of tax, related to the adoption of CECL was of $205.8 million. As part of the adoption of CECL, the Corporation made the election to break the existing pools of purchased credit impaired (“PCI”) loans and, as such, these loans are no longer excluded from non-performing status.

 

134


 

 

 

 

 

 

 

 

Accounting Standards Updates Not Yet Adopted

 

 

 

 

 

 

 

Standard

 

Description

Date of adoption

Effect on the financial statements

 

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 contracts with customers to be recognized in accordance with ASC Topic 606 on the acquisition date instead of fair value.

January 1, 2023

Upon adoption of this ASU, the Corporation will consider this guidance for revenue contracts with customers recognized as part of business combinations entered into on or after the effective date.

 

FASB ASU 2021-05, Leases (Topic 842), Lessors – Certain Leases with Variable Lease Payments

 

The FASB issued ASU 2021-05 in July 2021, which amends ASC Topic 842 so that lessors can classify as operating leases those leases with variable lease payments that, prior to these amendments, would have been classified as a sales-type or direct financing lease and at inception a loss would have been recognized.

January 1, 2022

The Corporation does not expect to be impacted by the adoption of this ASU since it does not hold direct financing leases with variable lease payments.

 

FASB ASU 2021-04, Earnings per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force)

 

The FASB issued ASU 2021-04 in May 2021, which clarifies the accounting for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after a modification or exchange and the related EPS effects of such transaction if recognized as an adjustment to equity.

January 1, 2022

Upon adoption of this ASU, the Corporation will consider this guidance for modifications or exchanges of freestanding equity-classified written call options.

 

FASB ASU 2020-06, Debt – Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

 

The FASB issued ASU 2020-06 in August 2020 which, among other things, simplifies the accounting for convertible instruments and contracts in an entity’s own equity and amends the diluted EPS computation for these instruments.

January 1, 2022

Upon adoption of this standard, the Corporation will consider these amendments in its evaluation of contracts in its own equity, including accelerated share repurchase transactions.

 

 

135


 

Note 4 Business combination

On October 15, 2021, Popular Equipment Finance, LLC (“PEF”), a newly formed wholly-owned subsidiary of Popular Bank (“PB”), completed the acquisition of certain assets and the assumption of certain liabilities of K2 Capital Group LLC’s (“K2”) equipment leasing and financing business based in Minnesota (the “Acquired Business”). Commercial loans acquired by PEF as part of this transaction consisted of $105 million in commercial direct financing leases and $14 million in working capital lines. Refer to Note 2, Summary of significant accounting policies, for further details.

 

Specializing in the healthcare industry, the Acquired Business provides a variety of lease products, including operating and finance leases, and also offers private label vendor finance programs to equipment manufacturers and healthcare organizations. The acquisition provides PB with a national equipment leasing platform that complements its existing health care lending business.

 

The following table presents the fair values of the consideration and major classes of identifiable assets acquired and liabilities assumed by PEF as of October 15, 2021.

 

 

Book value prior to

 

 

 

 

 

 

 

purchase accounting

 

Fair value

 

As recorded by

(In thousands)

adjustments

 

adjustments

 

Popular, Inc.

Cash consideration

$

156,628

 

$

-

 

$

156,628

Contingent consideration

 

-

 

 

9,241

 

 

9,241

Total consideration

$

156,628

 

$

9,241

 

$

165,869

Assets:

 

 

 

 

 

 

 

 

Cash and due from banks

$

800

 

$

-

 

$

800

Commercial loans

 

118,907

 

 

(3,332)

 

 

115,575

Premises and equipment

 

6,987

 

 

2,009

 

 

8,996

Accrued income receivable

 

57

 

 

-

 

 

57

Other assets

 

2,822

 

 

-

 

 

2,822

Other intangible assets

 

-

 

 

2,887

 

 

2,887

Total assets

$

129,573

 

$

1,564

 

$

131,137

Liabilities:

 

 

 

 

 

 

 

 

Other liabilities

 

14,439

 

 

-

 

 

14,439

Total liabilities

$

14,439

 

$

-

 

$

14,439

Net assets acquired

$

115,134

 

$

1,564

 

$

116,698

Goodwill on acquisition

 

 

 

 

 

 

$

49,171

 

The fair values initially assigned to the assets acquired and liabilities assumed are preliminary and are subject to refinement for up to one year after the closing date of the acquisition as new information relative to closing date fair values becomes available. As the Corporation finalizes its analyses, there may continue to be adjustments to the recorded carrying values, and thus the recognized goodwill may increase or decrease.

 

Following is a description of the methods used to determine the fair values of significant assets acquired and liabilities assumed on the K2 Transaction:

 

Commercial Loans

In determining the fair value of commercial direct financing leases, the specific terms and conditions of each lease agreement were considered. The fair values for commercial direct financing leases were calculated based on the fair value of the underlying collateral, or from the cash flows expected to be collected discounted at a market rate commensurate with the credit risk profile of the lessee at origination in instances where there was a purchase option at the end of the lease term with a stated guaranteed residual value. Fair values for commercial working capital lines were calculated based on the present value of remaining contractual payments discounted at a market rate commensurate with the credit risk profile of the borrower at origination. These commercial loans were accounted for under ASC Subtopic 310-20. As of October 15, 2021, the gross contractual receivable for commercial loans amounted to $125 million. An allowance for credit losses of $1 million was recognized as of October 15, 2021 with an offset to provision for credit losses, which represents the estimate of contractual cash flows not expected to be collected.

136


 

 

Goodwill

The amount of goodwill is the residual difference between the consideration transferred to K2 and the fair value of the assets acquired, net of the liabilities assumed. The entire amount of goodwill is deductible for income tax purposes pursuant to U.S. Internal Revenue Code (“IRC”) section 197 over a 15-year period.

 

Contingent consideration

The fair value of the contingent consideration, which relates to approximately $29 million in earnout payments that could be payable to K2 over a three-year period, was calculated based on a Montecarlo Simulation model.

 

The Corporation believes that given the amount of assets and liabilities assumed and the size of the operations acquired in relation to Popular’s operations, the historical results of K2 are not significant to Popular’s results, and thus no pro forma information is presented.

 

 

137


 

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 $2.7 billion at December 31, 2021 (December 31, 2020 - $2.3 billion). Cash and due from banks, as well as other highly liquid securities, are used to cover the required average reserve balances.

 

At December 31, 2021, the Corporation held $50 million in restricted assets in the form of funds deposited in money market accounts, debt securities available for sale and equity securities (December 31, 2020 - $39 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.

138


 

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 December 31, 2021 and December 31, 2020.

 

 

 

At December 31, 2021

 

 

 

 

 

Gross

Gross

 

 

Weighted

 

 

 

Amortized

unrealized

unrealized

Fair

average

 

(In thousands)

cost

gains

losses

value

yield

 

U.S. Treasury securities

 

 

 

 

 

 

 

 

 

 

 

Within 1 year

$

1,225,558

$

13,556

$

69

$

1,239,045

2.33

%

 

After 1 to 5 years

 

10,059,163

 

98,808

 

65,186

 

10,092,785

1.18

 

 

After 5 to 10 years

 

4,563,265

 

739

 

36,804

 

4,527,200

1.22

 

Total U.S. Treasury securities

 

15,847,986

 

113,103

 

102,059

 

15,859,030

1.27

 

Obligations of U.S. Government sponsored entities

 

 

 

 

 

 

 

 

 

 

 

Within 1 year

 

70

 

-

 

-

 

70

5.63

 

Total obligations of U.S. Government sponsored entities

 

70

 

-

 

-

 

70

5.63

 

Collateralized mortgage obligations - federal agencies

 

 

 

 

 

 

 

 

 

 

 

After 1 to 5 years

 

2,433

 

42

 

-

 

2,475

2.16

 

 

After 5 to 10 years

 

43,241

 

295

 

6

 

43,530

1.54

 

 

After 10 years

 

172,176

 

3,441

 

357

 

175,260

2.13

 

Total collateralized mortgage obligations - federal agencies

 

217,850

 

3,778

 

363

 

221,265

2.01

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

Within 1 year

 

11

 

1

 

-

 

12

4.79

 

 

After 1 to 5 years

 

65,749

 

2,380

 

11

 

68,118

2.23

 

 

After 5 to 10 years

 

665,600

 

17,998

 

5

 

683,593

1.97

 

 

After 10 years

 

8,263,835

 

68,128

 

195,910

 

8,136,053

1.67

 

Total mortgage-backed securities

 

8,995,195

 

88,507

 

195,926

 

8,887,776

1.69

 

Other

 

 

 

 

 

 

 

 

 

 

 

After 1 to 5 years

 

123

 

5

 

-

 

128

3.62

 

Total other

 

123

 

5

 

-

 

128

3.62

 

Total debt securities available-for-sale[1]

$

25,061,224

$

205,393

$

298,348

$

24,968,269

1.42

%

[1]

Includes $22.0 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 $20.9 billion serve as collateral for public funds.

139


 

 

 

At December 31, 2020

 

 

 

 

 

Gross

Gross

 

 

Weighted

 

 

 

Amortized

unrealized

unrealized

Fair

average

 

(In thousands)

cost

gains

losses

value

yield

 

U.S. Treasury securities

 

 

 

 

 

 

 

 

 

 

 

Within 1 year

$

4,900,055

$

16,479

$

-

$

4,916,534

0.69

%

 

After 1 to 5 years

 

5,007,223

 

259,399

 

-

 

5,266,622

2.05

 

 

After 5 to 10 years

 

567,367

 

37,517

 

-

 

604,884

1.68

 

Total U.S. Treasury securities

 

10,474,645

 

313,395

 

-

 

10,788,040

1.40

 

Obligations of U.S. Government sponsored entities

 

 

 

 

 

 

 

 

 

 

 

Within 1 year

 

59,993

 

101

 

-

 

60,094

1.46

 

 

After 1 to 5 years

 

90

 

-

 

-

 

90

5.64

 

Total obligations of U.S. Government sponsored entities

 

60,083

 

101

 

-

 

60,184

1.47

 

Collateralized mortgage obligations - federal agencies

 

 

 

 

 

 

 

 

 

 

 

After 1 to 5 years

 

1,388

 

14

 

-

 

1,402

2.97

 

 

After 5 to 10 years

 

61,229

 

1,050

 

-

 

62,279

1.56

 

 

After 10 years

 

318,292

 

10,202

 

43

 

328,451

2.04

 

Total collateralized mortgage obligations - federal agencies

 

380,909

 

11,266

 

43

 

392,132

1.97

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

 

 

Within 1 year

 

5,616

 

56

 

-

 

5,672

2.83

 

 

After 1 to 5 years

 

50,393

 

1,735

 

-

 

52,128

2.35

 

 

After 5 to 10 years

 

454,880

 

20,022

 

6

 

474,896

1.91

 

 

After 10 years

 

9,608,860

 

180,844

 

1,839

 

9,787,865

1.94

 

Total mortgage-backed securities

 

10,119,749

 

202,657

 

1,845

 

10,320,561

1.94

 

Other

 

 

 

 

 

 

 

 

 

 

 

After 1 to 5 years

 

224

 

11

 

-

 

235

3.62

 

Total other

 

224

 

11

 

-

 

235

3.62

 

Total debt securities available-for-sale[1]

$

21,035,610

$

527,430

$

1,888

$

21,561,152

1.66

%

[1]

Includes $18.2 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 $16.9 billion serve as collateral for public funds.

 

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 in 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.

The following table presents the aggregate amortized cost and fair value of debt securities available-for-sale at December 31, 2021 by contractual maturity.

 

(In thousands)

 

Amortized cost

 

Fair value

Within 1 year

$

1,225,639

$

1,239,127

After 1 to 5 years

 

10,127,468

 

10,163,506

After 5 to 10 years

 

5,272,106

 

5,254,323

After 10 years

 

8,436,011

 

8,311,313

Total debt securities available-for-sale

$

25,061,224

$

24,968,269

 

During the years ended December 31, 2021 and 2020, the Corporation sold U.S. Treasury Notes. The proceeds from these sales were $236 million and $5 million, respectively. Gross realized gains and losses on the sale of debt securities available-for-sale for the years ended December 31, 2021, 2020 and 2019 were as follows:

 

140


 

(In thousands)

 

2021

 

2020

 

2019

Gross realized gains

$

695

$

41

$

-

Gross realized losses

 

(672)

 

-

 

(20)

Net realized gains (losses) on sale of debt securities available-for-sale

$

23

$

41

$

(20)

 

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 December 31, 2021 and 2020.

141


 

 

 

At December 31, 2021

 

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

$

9,590,448

$

102,059

$

-

$

-

$

9,590,448

$

102,059

Collateralized mortgage obligations - federal agencies

 

35,533

 

334

 

1,084

 

29

 

36,617

 

363

Mortgage-backed securities

 

5,767,556

 

170,614

 

595,051

 

25,312

 

6,362,607

 

195,926

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

$

15,393,537

$

273,007

$

596,135

$

25,341

$

15,989,672

$

298,348

 

 

 

At December 31, 2020

 

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

Collateralized mortgage obligations - federal agencies

$

4,029

$

43

$

-

$

-

$

4,029

$

43

Mortgage-backed securities

 

886,432

 

1,834

 

555

 

11

 

886,987

 

1,845

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

$

890,461

$

1,877

$

555

$

11

$

891,016

$

1,888

 

 

As of December 31, 2021, the portfolio of available-for-sale debt securities reflects gross unrealized losses of approximately $298 million, driven mainly by U.S. Treasury Securities and mortgage-backed securities, which were impacted by increases in the interest rate environment.

The following table states the name of issuers, and the aggregate amortized cost and fair value of the debt securities of such issuer (includes available-for-sale and held-to-maturity debt securities), in which the aggregate amortized cost of such securities exceeds 10% of stockholders’ equity. This information excludes debt securities backed by the full faith and credit of the U.S. Government. Investments in obligations issued by a state of the U.S. and its political subdivisions and agencies, which are payable and secured by the same source of revenue or taxing authority, other than the U.S. Government, are considered securities of a single issuer.

 

 

 

2021

 

2020

 

 

 

 

 

 

 

 

 

(In thousands)

Amortized cost

Fair value

Amortized cost

Fair value

FNMA

$

1,533,637

$

1,587,127

$

2,242,121

$

2,338,897

Freddie Mac

 

3,228,543

 

3,176,197

 

3,616,238

 

3,675,679

142


 

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 December 31, 2021 and 2020.

 

 

 

At December 31, 2021

 

 

 

 

 

 

Allowance

 

 

Gross

Gross

 

 

Weighted

 

 

 

Amortized

 

for Credit

 

Net of

unrealized

unrealized

Fair

average

 

(In thousands)

cost

 

Losses

 

Allowance

gains

losses

value

yield

 

Obligations of Puerto Rico, States and political subdivisions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Within 1 year

$

4,240

$

7

$

4,233

$

4

$

-

$

4,237

6.07

%

 

After 1 to 5 years

 

14,395

 

148

 

14,247

 

149

 

-

 

14,396

6.23

 

 

After 5 to 10 years

 

11,280

 

122

 

11,158

 

104

 

-

 

11,262

2.18

 

 

After 10 years

 

43,561

 

7,819

 

35,742

 

11,746

 

-

 

47,488

1.50

 

Total obligations of Puerto Rico, States and political subdivisions

 

73,476

 

8,096

 

65,380

 

12,003

 

-

 

77,383

2.79

 

Collateralized mortgage obligations - federal agencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After 1 to 5 years

 

25

 

-

 

25

 

-

 

-

 

25

6.44

 

Total collateralized mortgage obligations - federal agencies

 

25

 

-

 

25

 

-

 

-

 

25

6.44

 

Securities in wholly owned statutory business trusts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After 10 years

 

5,960

 

-

 

5,960

 

-

 

-

 

5,960

6.33

 

Total securities in wholly owned statutory business trusts

 

5,960

 

-

 

5,960

 

-

 

-

 

5,960

6.33

 

Total debt securities held-to-maturity

$

79,461

$

8,096

$

71,365

$

12,003

$

-

$

83,368

3.06

%

 

 

 

At December 31, 2020

 

 

 

 

 

 

Allowance

 

 

Gross

Gross

 

 

Weighted

 

 

 

Amortized

 

for Credit

 

Net of

unrealized

unrealized

Fair

average

 

(In thousands)

cost

 

Losses

 

Allowance

gains

losses

value

yield

 

Obligations of Puerto Rico, States and political subdivisions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Within 1 year

$

3,990

$

50

$

3,940

$

47

$

-

$

3,987

6.05

%

 

After 1 to 5 years

 

16,030

 

710

 

15,320

 

710

 

-

 

16,030

6.16

 

 

After 5 to 10 years

 

14,845

 

573

 

14,272

 

295

 

23

 

14,544

2.77

 

 

After 10 years

 

46,164

 

8,928

 

37,236

 

11,501

 

-

 

48,737

1.58

 

Total obligations of Puerto Rico, States and political subdivisions

 

81,029

 

10,261

 

70,768

 

12,553

 

23

 

83,298

2.93

 

Collateralized mortgage obligations - federal agencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After 1 to 5 years

 

31

 

-

 

31

 

1

 

-

 

32

6.44

 

Total collateralized mortgage obligations - federal agencies

 

31

 

-

 

31

 

1

 

-

 

32

6.44

 

Securities in wholly owned statutory business trusts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After 10 years

 

11,561

 

-

 

11,561

 

-

 

-

 

11,561

6.51

 

Total securities in wholly owned statutory business trusts

 

11,561

 

-

 

11,561

 

-

 

-

 

11,561

6.51

 

Total debt securities held-to-maturity

$

92,621

$

10,261

$

82,360

$

12,554

$

23

$

94,891

3.38

%

 

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.

The following table presents the aggregate amortized cost and fair value of debt securities held-to-maturity at December 31, 2021 by contractual maturity.

143


 

(In thousands)

 

Amortized cost

 

Fair value

Within 1 year

$

4,240

$

4,237

After 1 to 5 years

 

14,420

 

14,421

After 5 to 10 years

 

11,280

 

11,262

After 10 years

 

49,521

 

53,448

Total debt securities held-to-maturity

$

79,461

$

83,368

 

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.

At December 31, 2021 and December 31, 2020, 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 $30 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, 2020 - $35 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.

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 December 31, 2021

At December 31, 2020

(In thousands)

Securities issued by Puerto Rico municipalities

Watch

$

16,345

$

35,315

Pass

 

13,800

 

-

Total

$

30,145

$

35,315

 

At December 31, 2021, the portfolio of “Obligations of Puerto Rico, States and political subdivisions” also includes $43 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, 2020 - $46 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 December 31, 2021, the average refreshed FICO score for the representative sample, comprised of 64% of the nominal value of the securities, used for the loss estimate was of 704 (compared to 66% and 697, respectively, at December 31, 2020). 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 24 for additional information on the Corporation’s exposure to the Puerto Rico Government.

Delinquency status

At December 31, 2021 and December 31, 2020, there were no securities held-to-maturity in past due or non-performing status.

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

144


 

The following table provides the activity in the allowance for credit losses related to debt securities held-to-maturity by security type at December 31, 2021 and December 31, 2020:

 

 

 

For the year ended December 31,

 

 

 

2021

 

2020

(In thousands)

 

Obligations of Puerto Rico, States and political subdivisions

Allowance for credit losses:

 

 

 

 

Beginning balance

 

$

10,261

$

-

Impact of adopting CECL

 

 

-

 

12,654

Provision for credit losses (benefit)

 

 

(2,165)

 

(2,393)

Securities charged-off

 

 

-

 

-

Recoveries

 

 

-

 

-

Ending balance

$

8,096

$

10,261

 

 

 

 

 

 

The allowance for credit losses for the Obligations of Puerto Rico, States and political subdivisions includes $0.3 million for securities issued by municipalities of Puerto Rico, and $7.8 million for bonds issued by the Puerto Rico HFA, which are secured by second mortgage loans on Puerto Rico residential properties (compared to $1.4 million and $8.9 million, respectively, at December 31, 2020).

145


 

Note 8 – Loans

For a summary of the accounting policies related to loans, interest recognition and allowance for credit losses refer to Note 2 - Summary of Significant Accounting Policies of this Form 10-K.

 

During the year ended December 31, 2021, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $393 million including $14 million in Purchased Credit Deteriorated (“PCD”) loans, consumer loans of $61 million and commercial loans of $139 million; compared to purchases (including repurchases) of mortgage loans of $1.3 billion including $160 million in PCD loans, consumer loans of $56 million and commercial loans of $26 million, during the year ended December 31, 2020. During 2020, these mortgage loan repurchases included a bulk repurchase transaction of $688 million in GNMA loans, of which $684 million were 90 days past due at that time, including $324 million which were already included in the Corporation’s ending portfolio balance at June 30, 2020, since due to the delinquency status of the loans the Corporation had the right but not the obligation to repurchase the assets and is required to recognize (rebook) these loans in accordance with U.S. GAAP. The bulk repurchase also included $120 million in loans from the FNMA and FHMLC servicing portfolio, subject to credit recourse which were considered PCD loans.

 

The Corporation performed whole-loan sales involving approximately $145 million of residential mortgage loans and $131 million of commercial and construction loans during the year ended December 31, 2021 (December 31, 2020 - $150 million of residential mortgage loans and $32 million of commercial loans). Also, during the year ended December 31, 2021, the Corporation securitized approximately $380 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities $330 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities, compared to $332 million and $176 million, respectively, during the year ended December 31, 2020. Also, the Corporation securitized approximately $23 million of mortgage loans into Federal Home Loan Mortgage Corporation (“FHLMC”) mortgage-backed securities during the year ended December 31, 2021.

 

As previously disclosed in Note 4, on October 15, 2021 Popular Equipment Finance LLC acquired $105 million in commercial finance leases and $14 million in working capital lines as a result of the acquisition of certain assets and the assumption of certain liabilities from the K2 Capital Group LLC. The portfolio of leases and loans from the acquired business is included in the information presented in this note.

 

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 December 31, 2021 and 2020.

146


 

December 31, 2021

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

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

$

314

 

$

-

 

$

272

$

586

 

$

154,183

 

$

154,769

 

 

$

272

 

$

-

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

2,399

 

 

136

 

 

20,716

 

23,251

 

 

2,266,672

 

 

2,289,923

 

 

 

20,716

 

 

-

 

Owner occupied

 

3,329

 

 

278

 

 

54,335

 

57,942

 

 

1,365,787

 

 

1,423,729

 

 

 

54,335

 

 

-

Commercial and industrial

 

3,438

 

 

1,727

 

 

45,242

 

50,407

 

 

3,478,041

 

 

3,528,448

 

 

 

44,724

 

 

518

Construction

 

-

 

 

-

 

 

485

 

485

 

 

86,626

 

 

87,111

 

 

 

485

 

 

-

Mortgage

 

217,830

 

 

81,754

 

 

805,245

 

1,104,829

 

 

5,147,037

 

 

6,251,866

 

 

 

333,887

 

 

471,358

Leasing

 

9,240

 

 

2,037

 

 

3,102

 

14,379

 

 

1,366,940

 

 

1,381,319

 

 

 

3,102

 

 

-

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards

 

5,768

 

 

3,520

 

 

8,577

 

17,865

 

 

901,986

 

 

919,851

 

 

 

-

 

 

8,577

 

Home equity lines of credit

 

46

 

 

-

 

 

23

 

69

 

 

3,502

 

 

3,571

 

 

 

-

 

 

23

 

Personal

 

10,027

 

 

6,072

 

 

21,235

 

37,334

 

 

1,250,726

 

 

1,288,060

 

 

 

21,235

 

 

-

 

Auto

 

59,128

 

 

15,019

 

 

23,085

 

97,232

 

 

3,314,955

 

 

3,412,187

 

 

 

23,085

 

 

-

 

Other

 

432

 

 

714

 

 

12,621

 

13,767

 

 

110,781

 

 

124,548

 

 

 

12,448

 

 

173

Total

$

311,951

 

$

111,257

 

$

994,938

$

1,418,146

 

$

19,447,236

 

$

20,865,382

 

 

$

514,289

 

$

480,649

 

December 31, 2021

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

 

$

3,826

 

$

-

 

$

-

 

$

3,826

 

$

1,804,035

 

$

1,807,861

 

 

$

-

 

$

-

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

 

5,721

 

 

683

 

 

622

 

 

7,026

 

 

2,316,441

 

 

2,323,467

 

 

 

622

 

 

-

 

Owner occupied

 

 

1,095

 

 

-

 

 

1,013

 

 

2,108

 

 

392,265

 

 

394,373

 

 

 

1,013

 

 

-

Commercial and industrial

 

 

9,410

 

 

2,680

 

 

4,015

 

 

16,105

 

 

1,794,026

 

 

1,810,131

 

 

 

3,897

 

 

118

Construction

 

 

-

 

 

-

 

 

-

 

 

-

 

 

629,109

 

 

629,109

 

 

 

-

 

 

-

Mortgage

 

 

11,711

 

 

2,573

 

 

21,969

 

 

36,253

 

 

1,139,077

 

 

1,175,330

 

 

 

21,969

 

 

-

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards

 

 

-

 

 

-

 

 

-

 

 

-

 

 

10

 

 

10

 

 

 

-

 

 

-

 

Home equity lines of credit

 

 

71

 

 

34

 

 

5,406

 

 

5,511

 

 

69,780

 

 

75,291

 

 

 

5,406

 

 

-

 

Personal

 

 

863

 

 

574

 

 

681

 

 

2,118

 

 

152,827

 

 

154,945

 

 

 

681

 

 

-

 

Other

 

 

-

 

 

-

 

 

-

 

 

-

 

 

4,658

 

 

4,658

 

 

 

-

 

 

-

Total

 

$

32,697

 

$

6,544

 

$

33,706

 

$

72,947

 

$

8,302,228

 

$

8,375,175

 

 

$

33,588

 

$

118

147


 

December 31, 2021

 

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

$

4,140

 

$

-

 

$

272

$

4,412

 

$

1,958,218

 

$

1,962,630

 

 

$

272

 

$

-

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

8,120

 

 

819

 

 

21,338

 

30,277

 

 

4,583,113

 

 

4,613,390

 

 

 

21,338

 

 

-

 

 

Owner occupied

 

4,424

 

 

278

 

 

55,348

 

60,050

 

 

1,758,052

 

 

1,818,102

 

 

 

55,348

 

 

-

 

Commercial and industrial

 

12,848

 

 

4,407

 

 

49,257

 

66,512

 

 

5,272,067

 

 

5,338,579

 

 

 

48,621

 

 

636

 

Construction

 

-

 

 

-

 

 

485

 

485

 

 

715,735

 

 

716,220

 

 

 

485

 

 

-

 

Mortgage[1]

 

229,541

 

 

84,327

 

 

827,214

 

1,141,082

 

 

6,286,114

 

 

7,427,196

 

 

 

355,856

 

 

471,358

 

Leasing

 

9,240

 

 

2,037

 

 

3,102

 

14,379

 

 

1,366,940

 

 

1,381,319

 

 

 

3,102

 

 

-

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards

 

5,768

 

 

3,520

 

 

8,577

 

17,865

 

 

901,996

 

 

919,861

 

 

 

-

 

 

8,577

 

 

Home equity lines of credit

 

117

 

 

34

 

 

5,429

 

5,580

 

 

73,282

 

 

78,862

 

 

 

5,406

 

 

23

 

 

Personal

 

10,890

 

 

6,646

 

 

21,916

 

39,452

 

 

1,403,553

 

 

1,443,005

 

 

 

21,916

 

 

-

 

 

Auto

 

59,128

 

 

15,019

 

 

23,085

 

97,232

 

 

3,314,955

 

 

3,412,187

 

 

 

23,085

 

 

-

 

 

Other

 

432

 

 

714

 

 

12,621

 

13,767

 

 

115,439

 

 

129,206

 

 

 

12,448

 

 

173

 

Total

$

344,648

 

$

117,801

 

$

1,028,644

$

1,491,093

 

$

27,749,464

 

$

29,240,557

 

 

$

547,877

 

$

480,767

 

[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. The balance of these loans includes $13 million at December 31, 2021 related to the rebooking of loans previously pooled into GNMA securities, in which the Corporation had a buy-back option as further described below. 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 repurchases option are required to be reflected (rebooked) on the financial statements of BPPR with an offsetting liability. These balances include $304 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2021. Furthermore, the Corporation has approximately $50 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 $266 million in unearned income and exclude $59 million in loans held-for-sale.

[3]

Includes $6.6 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $3.2 billion were pledged at the Federal Home Loan Bank ("FHLB") as collateral for borrowings and $1.7 billion at the Federal Reserve Bank ("FRB") for discount window borrowings and $1.7 billion serve as collateral for public funds.

148


 

December 31, 2020

 

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

796

 

$

-

 

$

505

 

$

1,301

$

150,979

 

$

152,280

 

 

$

505

 

$

-

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

2,189

 

 

3,503

 

 

77,137

 

 

82,829

 

1,924,504

 

 

2,007,333

 

 

 

77,137

 

 

-

 

 

Owner occupied

 

8,270

 

 

1,218

 

 

92,001

 

 

101,489

 

1,497,406

 

 

1,598,895

 

 

 

92,001

 

 

-

 

Commercial and industrial

 

10,223

 

 

775

 

 

35,012

 

 

46,010

 

4,183,098

 

 

4,229,108

 

 

 

34,449

 

 

563

 

Construction

 

-

 

 

-

 

 

21,497

 

 

21,497

 

135,609

 

 

157,106

 

 

 

21,497

 

 

-

 

Mortgage[1]

 

195,602

 

 

87,726

 

 

1,428,824

 

 

1,712,152

 

5,057,991

 

 

6,770,143

 

 

 

414,343

 

 

1,014,481

 

Leasing

 

9,141

 

 

1,427

 

 

3,441

 

 

14,009

 

1,183,652

 

 

1,197,661

 

 

 

3,441

 

 

-

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards

 

6,550

 

 

4,619

 

 

12,798

 

 

23,967

 

895,968

 

 

919,935

 

 

 

-

 

 

12,798

 

 

Home equity lines of credit

 

184

 

 

-

 

 

48

 

 

232

 

3,947

 

 

4,179

 

 

 

-

 

 

48

 

 

Personal

 

11,255

 

 

8,097

 

 

26,387

 

 

45,739

 

1,232,008

 

 

1,277,747

 

 

 

26,387

 

 

-

 

 

Auto

 

53,186

 

 

12,696

 

 

15,736

 

 

81,618

 

3,050,610

 

 

3,132,228

 

 

 

15,736

 

 

-

 

 

Other

 

304

 

 

483

 

 

15,052

 

 

15,839

 

110,826

 

 

126,665

 

 

 

14,881

 

 

171

 

Total

$

297,700

 

$

120,544

 

$

1,728,438

 

$

2,146,682

$

19,426,598

 

$

21,573,280

 

 

$

700,377

 

$

1,028,061

 

[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 include $57 million in loans rebooked under the GNMA program at December 31, 2020, in which issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due.

 

December 31, 2020

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

 

$

5,273

 

$

-

 

$

1,894

 

$

7,167

 

$

1,736,544

 

$

1,743,711

 

 

$

1,894

 

$

-

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

 

924

 

 

3,640

 

 

669

 

 

5,233

 

 

1,988,577

 

 

1,993,810

 

 

 

669

 

 

-

 

Owner occupied

 

 

191

 

 

650

 

 

334

 

 

1,175

 

 

343,205

 

 

344,380

 

 

 

334

 

 

-

Commercial and industrial

 

 

1,117

 

 

72

 

 

3,091

 

 

4,280

 

 

1,540,513

 

 

1,544,793

 

 

 

3,091

 

 

-

Construction

 

 

21,312

 

 

-

 

 

7,560

 

 

28,872

 

 

740,230

 

 

769,102

 

 

 

7,560

 

 

-

Mortgage

 

 

33,422

 

 

15,464

 

 

14,864

 

 

63,750

 

 

1,056,787

 

 

1,120,537

 

 

 

14,864

 

 

-

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards

 

 

-

 

 

-

 

 

3

 

 

3

 

 

28

 

 

31

 

 

 

-

 

 

3

 

Home equity lines of credit

 

 

236

 

 

342

 

 

7,491

 

 

8,069

 

 

86,502

 

 

94,571

 

 

 

7,491

 

 

-

 

Personal

 

 

1,486

 

 

1,342

 

 

1,474

 

 

4,302

 

 

194,936

 

 

199,238

 

 

 

1,474

 

 

-

 

Other

 

 

-

 

 

-

 

 

20

 

 

20

 

 

1,723

 

 

1,743

 

 

 

20

 

 

-

Total

 

$

63,961

 

$

21,510

 

$

37,400

 

$

122,871

 

$

7,689,045

 

$

7,811,916

 

 

$

37,397

 

$

3

149


 

December 31, 2020

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

$

6,069

 

$

-

 

$

2,399

$

8,468

 

$

1,887,523

 

$

1,895,991

 

 

$

2,399

 

$

-

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

3,113

 

 

7,143

 

 

77,806

 

88,062

 

 

3,913,081

 

 

4,001,143

 

 

 

77,806

 

 

-

 

Owner occupied

 

8,461

 

 

1,868

 

 

92,335

 

102,664

 

 

1,840,611

 

 

1,943,275

 

 

 

92,335

 

 

-

Commercial and industrial

 

11,340

 

 

847

 

 

38,103

 

50,290

 

 

5,723,611

 

 

5,773,901

 

 

 

37,540

 

 

563

Construction

 

21,312

 

 

-

 

 

29,057

 

50,369

 

 

875,839

 

 

926,208

 

 

 

29,057

 

 

-

Mortgage[1]

 

229,024

 

 

103,190

 

 

1,443,688

 

1,775,902

 

 

6,114,778

 

 

7,890,680

 

 

 

429,207

 

 

1,014,481

Leasing

 

9,141

 

 

1,427

 

 

3,441

 

14,009

 

 

1,183,652

 

 

1,197,661

 

 

 

3,441

 

 

-

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit cards

 

6,550

 

 

4,619

 

 

12,801

 

23,970

 

 

895,996

 

 

919,966

 

 

 

-

 

 

12,801

 

Home equity lines of credit

 

420

 

 

342

 

 

7,539

 

8,301

 

 

90,449

 

 

98,750

 

 

 

7,491

 

 

48

 

Personal

 

12,741

 

 

9,439

 

 

27,861

 

50,041

 

 

1,426,944

 

 

1,476,985

 

 

 

27,861

 

 

-

 

Auto

 

53,186

 

 

12,696

 

 

15,736

 

81,618

 

 

3,050,610

 

 

3,132,228

 

 

 

15,736

 

 

-

 

Other

 

304

 

 

483

 

 

15,072

 

15,859

 

 

112,549

 

 

128,408

 

 

 

14,901

 

 

171

Total

$

361,661

 

$

142,054

 

$

1,765,838

$

2,269,553

 

$

27,115,643

 

$

29,385,196

 

 

$

737,774

 

$

1,028,064

[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. The balance of these loans includes $57 million at December 31, 2020 related to the rebooking of loans previously pooled into GNMA securities, in which the Corporation had a buy-back option as further described below. 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 repurchases option are required to be reflected (rebooked) on the financial statements of BPPR with an offsetting liability. These balances include $329 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of December 31, 2020. Furthermore, the Corporation has approximately $60 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 $203 million in unearned income and exclude $99 million in loans held-for-sale.

[3]

Includes $6.5 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which $4.1 billion were pledged at the FHLB as collateral for borrowings and $2.4 billion at the FRB for discount window borrowings.

 

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 December 31, 2021, mortgage loans held-in-portfolio include $1.9 billion (December 31, 2020 - $2.1 billion) of loans insured by the FHA, or guaranteed VA of which $0.5 billion (December 31, 2020 - $1.0 billion) are 90 days or more past due. These balances include $716 million in loans modified under a TDR (December 31, 2020 - $655 million), that are presented as accruing loans. The portfolio of guaranteed loans includes $304 million of residential mortgage loans in Puerto Rico that are no longer accruing interest as of December 31, 2021 (December 31, 2020 - $329 million). The Corporation has approximately $50 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at December 31, 2021 (December 31, 2020 - $60 million).

 

Loans with a delinquency status of 90 days past due as of December 31, 2021 include $13 million in loans previously pooled into GNMA securities (December 31, 2020 - $57 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 components of the net financing leases, including finance leases within the C&I category, receivable at December 31, 2021 and 2020 were as follows:

150


 

(In thousands)

 

2021

 

2020

Total minimum lease payments

$

1,190,545

$

957,367

Estimated residual value of leased property

 

518,670

 

419,024

Deferred origination costs, net of fees

 

21,474

 

18,141

 

Less - Unearned financing income

 

257,738

 

196,788

Net minimum lease payments

 

1,472,951

 

1,197,744

 

Less - Allowance for credit losses

 

18,581

 

16,863

Net minimum lease payments, net of allowance for credit losses

$

1,454,370

$

1,180,881

 

At December 31, 2021, future minimum lease payments are expected to be received as follows:

 

(In thousands)

 

 

2022

$

106,927

2023

 

123,654

2024

 

181,405

2025

 

216,577

2026

 

369,592

2027 and thereafter

 

192,390

Total

$

1,190,545

 

The following tables present the amortized cost basis of non-accrual loans as of December 31, 2021 and 2020 by class of loans:

 

December 31, 2021

 

Puerto Rico

 

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

$

-

$

272

 

$

-

$

-

 

$

-

$

272

Commercial real estate non-owner occupied

 

15,819

 

4,897

 

 

-

 

622

 

 

15,819

 

5,519

Commercial real estate owner occupied

 

13,491

 

40,844

 

 

-

 

1,013

 

 

13,491

 

41,857

Commercial and industrial

 

30,177

 

14,547

 

 

-

 

3,897

 

 

30,177

 

18,444

Construction

 

-

 

485

 

 

-

 

-

 

 

-

 

485

Mortgage

 

169,827

 

164,060

 

 

29

 

21,940

 

 

169,856

 

186,000

Leasing

 

276

 

2,826

 

 

-

 

-

 

 

276

 

2,826

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HELOCs

 

-

 

-

 

 

-

 

5,406

 

 

-

 

5,406

Personal

 

6,279

 

14,956

 

 

81

 

600

 

 

6,360

 

15,556

Auto

 

879

 

22,206

 

 

-

 

-

 

 

879

 

22,206

Other

 

-

 

12,448

 

 

-

 

-

 

 

-

 

12,448

Total

$

236,748

$

277,541

 

$

110

$

33,478

 

$

236,858

$

311,019

 

December 31, 2020

 

Puerto Rico

 

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

$

-

$

505

 

$

-

$

1,894

 

$

-

$

2,399

Commercial real estate non-owner occupied

 

35,968

 

41,169

 

 

-

 

669

 

 

35,968

 

41,838

Commercial real estate owner occupied

 

14,825

 

77,176

 

 

-

 

334

 

 

14,825

 

77,510

Commercial and industrial

 

1,148

 

33,301

 

 

-

 

3,091

 

 

1,148

 

36,392

Construction

 

-

 

21,497

 

 

-

 

7,560

 

 

-

 

29,057

Mortgage

 

141,737

 

272,606

 

 

517

 

14,347

 

 

142,254

 

286,953

Leasing

 

-

 

3,441

 

 

-

 

-

 

 

-

 

3,441

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HELOCs

 

-

 

-

 

 

-

 

7,491

 

 

-

 

7,491

Personal

 

9,265

 

17,122

 

 

-

 

1,474

 

 

9,265

 

18,596

Auto

 

-

 

15,736

 

 

-

 

-

 

 

-

 

15,736

Other

 

-

 

14,881

 

 

-

 

20

 

 

-

 

14,901

Total

$

202,943

$

497,434

 

$

517

$

36,880

 

$

203,460

$

534,314

 

 

151


 

Loans in non-accrual status with no allowance at December 31, 2021 include $237 million in collateral dependent loans (December 31, 2020 - $203 million). The Corporation recognized $3 million in interest income on non-accrual loans during the year ended December 31, 2021 (December 31, 2020 - $4 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 December 31, 2021 and 2020:

152


 

 

 

December 31, 2021

(In thousands)

 

Real Estate

 

Auto

 

Equipment

 

Accounts Receivables

 

Other

 

Total

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

 

Commercial multi-family

$

1,374

$

-

$

-

$

-

$

-

$

1,374

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

211,026

 

-

 

-

 

-

 

-

 

211,026

 

Owner occupied

 

47,268

 

-

 

-

 

-

 

-

 

47,268

Commercial and industrial

 

2,650

 

-

 

680

 

10,675

 

27,893

 

41,898

Mortgage

 

179,774

 

-

 

-

 

-

 

-

 

179,774

Leasing

 

-

 

574

 

-

 

-

 

-

 

574

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal

 

6,165

 

-

 

-

 

-

 

-

 

6,165

 

Auto

 

-

 

8,983

 

-

 

-

 

-

 

8,983

Total Puerto Rico

$

448,257

$

9,557

$

680

$

10,675

$

27,893

$

497,062

Popular U.S.

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage

 

926

 

-

 

-

 

-

 

-

 

926

Total Popular U.S.

$

926

$

-

$

-

$

-

$

-

$

926

Popular, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

Commercial multi-family

$

1,374

$

-

$

-

$

-

$

-

$

1,374

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

211,026

 

-

 

-

 

-

 

-

 

211,026

 

Owner occupied

 

47,268

 

-

 

-

 

-

 

-

 

47,268

Commercial and industrial

 

2,650

 

-

 

680

 

10,675

 

27,893

 

41,898

Mortgage

 

180,700

 

-

 

-

 

-

 

-

 

180,700

Leasing

 

-

 

574

 

-

 

-

 

-

 

574

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal

 

6,165

 

-

 

-

 

-

 

-

 

6,165

 

Auto

 

-

 

8,983

 

-

 

-

 

-

 

8,983

Total Popular, Inc.

$

449,183

$

9,557

$

680

$

10,675

$

27,893

$

497,988

153


 

 

 

December 31, 2020

(In thousands)

 

Real Estate

 

Auto

 

Equipment

 

Taxi Medallions

 

Accounts Receivables

 

Other

 

Total

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial multi-family

$

1,301

$

-

$

-

$

-

$

-

$

-

$

1,301

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

299,223

 

-

 

-

 

-

 

-

 

-

 

299,223

 

Owner occupied

 

79,769

 

-

 

-

 

-

 

-

 

-

 

79,769

Commercial and industrial

 

7,577

 

-

 

1,438

 

-

 

10,989

 

12,046

 

32,050

Construction

 

21,497

 

-

 

-

 

-

 

-

 

-

 

21,497

Mortgage

 

181,648

 

-

 

-

 

-

 

-

 

-

 

181,648

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal

 

7,414

 

-

 

-

 

-

 

-

 

-

 

7,414

 

Auto

 

-

 

4

 

-

 

-

 

-

 

-

 

4

Total Puerto Rico

$

598,429

$

4

$

1,438

$

-

$

10,989

$

12,046

$

622,906

Popular U.S.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial multi-family

$

1,755

$

-

$

-

$

-

$

-

$

-

$

1,755

Commercial and industrial

 

-

 

-

 

-

 

1,545

 

-

 

-

 

1,545

Construction

 

7,560

 

-

 

-

 

-

 

-

 

-

 

7,560

Mortgage

 

855

 

-

 

-

 

-

 

-

 

-

 

855

Total Popular U.S.

$

10,170

$

-

$

-

$

1,545

$

-

$

-

$

11,715

Popular, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial multi-family

$

3,056

$

-

$

-

$

-

$

-

$

-

$

3,056

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-owner occupied

 

299,223

 

-

 

-

 

-

 

-

 

-

 

299,223

 

Owner occupied

 

79,769

 

-

 

-

 

-

 

-

 

-

 

79,769

Commercial and industrial

 

7,577

 

-

 

1,438

 

1,545

 

10,989

 

12,046

 

33,595

Construction

 

29,057

 

-

 

-

 

-

 

-

 

-

 

29,057

Mortgage

 

182,503

 

-

 

-

 

-

 

-

 

-

 

182,503

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal

 

7,414

 

-

 

-

 

-

 

-

 

-

 

7,414

 

Auto

 

-

 

4

 

-

 

-

 

-

 

-

 

4

Total Popular, Inc.

$

608,599

$

4

$

1,438

$

1,545

$

10,989

$

12,046

$

634,621

 

Purchased Credit Deteriorated (PCD) Loans

 

The Corporation has purchased loans during the year 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)

 

December 31, 2021

 

December 31, 2020

Purchase price of loans at acquisition

$

10,995

$

152,667

Allowance for credit losses at acquisition

 

3,142

 

7,512

Non-credit discount / (premium) at acquisition

 

446

 

(6,542)

Par value of acquired loans at acquisition

$

14,583

$

153,637

154


 

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 allowance for credit losses (“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.

At December 31, 2021, 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 weights applied are subject to evaluation on a quarterly basis as part of the ACL’s governance process. The current baseline forecast continues to show a favorable economic scenario. The 2022 expected GDP growth rate for Puerto Rico is approximately 4%, with the unemployment rate expected to average around 7.4% for the year. In the case of the United States, the baseline scenario expects GDP growth for 2022 of approximately 4.6%, with unemployment rate expected to average around 3.7%. For 2023 both regions expect GDP growth with average unemployment rate levels remaining stable in comparison to 2022.

 

The following tables present the changes in the ACL of loans held-in-portfolio and unfunded commitments for the years ended December 31, 2021 and 2020.

 

For the year ended December 31, 2021

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Commercial

 

Construction

 

Mortgage

 

Leasing

 

Consumer

 

Total

Allowance for credit losses - loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

225,323

 

$

4,871

 

$

195,557

 

$

16,863

 

$

297,136

 

$

739,750

 

Provision for credit losses (benefit)

 

(91,695)

 

 

(1,533)

 

 

(57,684)

 

 

2,094

 

 

19,800

 

 

(129,018)

 

Initial allowance for credit losses - PCD Loans

 

-

 

 

-

 

 

3,142

 

 

-

 

 

-

 

 

3,142

 

Charge-offs

 

(17,180)

 

 

(6,620)

 

 

(17,656)

 

 

(4,637)

 

 

(78,047)

 

 

(124,140)

 

Recoveries

 

35,480

 

 

4,923

 

 

14,927

 

 

3,258

 

 

45,840

 

 

104,428

Ending balance - loans

$

151,928

 

$

1,641

 

$

138,286

 

$

17,578

 

$

284,729

 

$

594,162

Allowance for credit losses - unfunded commitments:

Beginning balance

$

4,913

 

$

4,610

 

$

-

 

$

-

 

$

-

 

$

9,523

 

Provision for credit losses (benefit)

 

(3,162)

 

 

(2,222)

 

 

-

 

 

-

 

 

-

 

 

(5,384)

Ending balance - unfunded commitments [1]

$

1,751

 

$

2,388

 

$

-

 

$

-

 

$

-

 

$

4,139

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

155


 

For the year ended December 31, 2021

Popular U.S.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Commercial

 

Construction

 

Mortgage

 

Consumer

 

Total

Allowance for credit losses - loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

108,057

 

$

9,366

 

$

20,159

 

$

18,918

 

$

156,500

 

Provision for credit losses (benefit)

 

(45,427)

 

 

(4,764)

 

 

(3,949)

 

 

(187)

 

 

(54,327)

 

Charge-offs

 

(1,177)

 

 

(523)

 

 

(605)

 

 

(8,732)

 

 

(11,037)

 

Recoveries

 

2,424

 

 

643

 

 

587

 

 

6,414

 

 

10,068

Ending balance - loans

$

63,877

 

$

4,722

 

$

16,192

 

$

16,413

 

$

101,204

Allowance for credit losses - unfunded commitments:

Beginning balance

$

1,753

 

$

4,469

 

$

-

 

$

106

 

$

6,328

 

Provision for credit losses (benefit)

 

(369)

 

 

(2,132)

 

 

-

 

 

(69)

 

 

(2,570)

Ending balance - unfunded commitments [1]

$

1,384

 

$

2,337

 

$

-

 

$

37

 

$

3,758

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

 

For the year ended December 31, 2021

Popular, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Commercial

 

Construction

 

Mortgage

 

Leasing

 

Consumer

 

Total

Allowance for credit losses - loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

333,380

 

$

14,237

 

$

215,716

 

$

16,863

 

$

316,054

 

$

896,250

 

Provision for credit losses (benefit)

 

(137,122)

 

 

(6,297)

 

 

(61,633)

 

 

2,094

 

 

19,613

 

 

(183,345)

 

Initial allowance for credit losses - PCD Loans

 

-

 

 

-

 

 

3,142

 

 

-

 

 

-

 

 

3,142

 

Charge-offs

 

(18,357)

 

 

(7,143)

 

 

(18,261)

 

 

(4,637)

 

 

(86,779)

 

 

(135,177)

 

Recoveries

 

37,904

 

 

5,566

 

 

15,514

 

 

3,258

 

 

52,254

 

 

114,496

Ending balance - loans

$

215,805

 

$

6,363

 

$

154,478

 

$

17,578

 

$

301,142

 

$

695,366

Allowance for credit losses - unfunded commitments:

Beginning balance

$

6,666

 

$

9,079

 

$

-

 

$

-

 

$

106

 

$

15,851

 

Provision for credit losses (benefit)

 

(3,531)

 

 

(4,354)

 

 

-

 

 

-

 

 

(69)

 

 

(7,954)

Ending balance - unfunded commitments [1]

$

3,135

 

$

4,725

 

$

-

 

$

-

 

$

37

 

$

7,897

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

156


 

For the year ended December 31, 2020

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Commercial

 

Construction

 

Mortgage

 

Leasing

 

Consumer

 

Total

Allowance for credit losses - loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

131,063

 

$

574

 

$

116,281

 

$

10,768

 

$

173,965

 

$

432,651

 

Impact of adopting CECL

 

62,393

 

 

115

 

 

86,081

 

 

(713)

 

 

122,492

 

 

270,368

 

Provision for credit losses

 

48,756

 

 

3,228

 

 

5,318

 

 

14,172

 

 

134,391

 

 

205,865

 

Initial allowance for credit losses - PCD Loans

 

-

 

 

-

 

 

7,512

 

 

-

 

 

-

 

 

7,512

 

Charge-offs

 

(27,731)

 

 

-

 

 

(30,080)

 

 

(10,447)

 

 

(170,023)

 

 

(238,281)

 

Recoveries

 

10,842

 

 

954

 

 

10,445

 

 

3,083

 

 

36,311

 

 

61,635

Ending balance - loans

$

225,323

 

$

4,871

 

$

195,557

 

$

16,863

 

$

297,136

 

$

739,750

Allowance for credit losses - unfunded commitments:

Beginning balance

$

678

 

$

294

 

$

-

 

$

-

 

$

7,467

 

$

8,439

 

Impact of adopting CECL

 

1,158

 

 

(185)

 

 

-

 

 

-

 

 

(7,467)

 

 

(6,494)

 

Provision for credit losses

 

3,077

 

 

4,501

 

 

-

 

 

-

 

 

-

 

 

7,578

Ending balance - unfunded commitments [1]

$

4,913

 

$

4,610

 

$

-

 

$

-

 

$

-

 

$

9,523

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

 

For the year ended December 31, 2020

Popular U.S.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Commercial

 

Construction

 

Mortgage

 

Consumer

 

Total

Allowance for credit losses - loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

16,557

 

$

4,266

 

$

4,827

 

$

19,407

 

$

45,057

 

Impact of adopting CECL

 

29,537

 

 

(3,038)

 

 

10,431

 

 

7,809

 

 

44,739

 

Provision for credit losses

 

59,748

 

 

8,427

 

 

4,891

 

 

3,405

 

 

76,471

 

Charge-offs

 

(2,078)

 

 

(1,509)

 

 

(59)

 

 

(17,404)

 

 

(21,050)

 

Recoveries

 

4,293

 

 

1,220

 

 

69

 

 

5,701

 

 

11,283

Ending balance - loans

$

108,057

 

$

9,366

 

$

20,159

 

$

18,918

 

$

156,500

Allowance for credit losses - unfunded commitments:

Beginning balance

$

152

 

$

125

 

$

-

 

$

1

 

$

278

 

Impact of adopting CECL

 

453

 

 

582

 

 

-

 

 

(1)

 

 

1,034

 

Provision for credit losses

 

1,148

 

 

3,762

 

 

-

 

 

106

 

 

5,016

Ending balance - unfunded commitments [1]

$

1,753

 

$

4,469

 

$

-

 

$

106

 

$

6,328

[1]

Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

157


 

For the year ended December 31, 2020

Popular, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

Commercial

Construction

Mortgage

Leasing

Consumer

Total

Allowance for credit losses - loans:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

147,620

$

4,840

$

121,108

$

10,768

$

193,372

$

477,708

 

Impact of adopting CECL

 

91,930

 

(2,923)

 

96,512

 

(713)

 

130,301

 

315,107

 

Provision for credit losses

 

108,504

 

11,655

 

10,209

 

14,172

 

137,796

 

282,336

 

Initial allowance for credit losses - PCD Loans

 

-

 

-

 

7,512

 

-

 

-

 

7,512

 

Charge-offs

 

(29,809)

 

(1,509)

 

(30,139)

 

(10,447)

 

(187,427)

 

(259,331)

 

Recoveries

 

15,135

 

2,174

 

10,514

 

3,083

 

42,012

 

72,918

Ending balance - loans

$

333,380

$

14,237

$

215,716

$

16,863

$

316,054

$

896,250

Allowance for credit losses - unfunded commitments:

Beginning balance

$

830

$

419

$

-

$

-

$

7,468

$

8,717

 

Impact of adopting CECL

 

1,611

 

397

 

-

 

-

 

(7,468)

 

(5,460)

 

Provision for credit losses

 

4,225

 

8,263

 

-

 

-

 

106

 

12,594

Ending balance - unfunded commitments [1]

$

6,666

$

9,079

$

-

$

-

$

106

$

15,851

[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 of a loan constitutes a troubled debt restructuring when a borrower is experiencing financial difficulty and the modification constitutes a concession. For a summary of the accounting policy related to troubled debt restructurings (“TDRs”), refer to the Summary of Significant Accounting Policies included in Note 2 to these Consolidated Financial Statements.

The outstanding balance of loans classified as TDRs amounted to $1.7 billion at December 31, 2021 (December 31, 2020 - $1.7 billion). The amount of outstanding commitments to lend additional funds to debtors owing receivables whose terms have been modified in TDRs amounted to $9 million related to the commercial loan portfolio at December 31, 2021 (December 31, 2020 - $14 million).

The following table presents the outstanding balance of loans classified as TDRs according to their accruing status and the related allowance at December 31, 2021 and 2020.

 

 

December 31, 2021

 

 

December 31, 2020

(In thousands)

 

Accruing

 

Non-Accruing

 

Total

 

Related Allowance

 

 

 

Accruing

 

Non-Accruing

 

Total

 

Related Allowance

Loans held-in-portfolio:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

$

261,344

$

64,744

$

326,088

$

24,736

 

 

$

259,246

$

103,551

$

362,797

$

15,236

Construction

 

-

 

-

 

-

 

-

 

 

 

-

 

21,497

 

21,497

 

4,397

Mortgage[1]

 

1,143,204

 

112,509

 

1,255,713

 

61,888

 

 

 

1,060,193

 

135,772

 

1,195,965

 

71,018

Leasing

 

325

 

47

 

372

 

42

 

 

 

392

 

218

 

610

 

150

Consumer

 

64,093

 

10,556

 

74,649

 

16,124

 

 

 

74,707

 

12,792

 

87,499

 

22,508

Loans held-in-portfolio

$

1,468,966

$

187,856

$

1,656,822

$

102,790

 

 

$

1,394,538

$

273,830

$

1,668,368

$

113,309

[1] At December 31, 2021, accruing mortgage loan TDRs include $716 million guaranteed by U.S. sponsored entities at BPPR, compared to $655 million at December 31, 2020.

 

The following tables present the loan count by type of modification for those loans modified in a TDR during the years ended December 31, 2021 and 2020. Loans modified as TDRs for the U.S. operations are considered insignificant to the Corporation.

158


 

For the year ended December 31, 2021

 

Reduction in interest rate

 

Extension of maturity date

 

Combination of reduction in interest rate and extension of maturity date

 

Other

Commercial multi-family

-

 

1

 

1

 

-

Commercial real estate non-owner occupied

-

 

11

 

1

 

-

Commercial real estate owner occupied

4

 

23

 

4

 

12

Commercial and industrial

5

 

13

 

-

 

21

Mortgage

39

 

140

 

1,590

 

5

Leasing

-

 

-

 

2

 

-

Consumer:

 

 

 

 

 

 

 

Credit cards

134

 

-

 

1

 

43

HELOCs

-

 

1

 

1

 

-

Personal

183

 

117

 

1

 

2

Auto

-

 

7

 

3

 

-

Other

7

 

-

 

-

 

1

Total

372

 

313

 

1,604

 

84

 

For the year ended December 31, 2020

 

Reduction in interest rate

 

Extension of maturity date

 

Combination of reduction in interest rate and extension of maturity date

 

Other

Commercial multi-family

-

 

2

 

-

 

-

Commercial real estate non-owner occupied

2

 

10

 

-

 

1

Commercial real estate owner occupied

-

 

37

 

-

 

-

Commercial and industrial

3

 

50

 

-

 

-

Construction

-

 

1

 

-

 

-

Mortgage

3

 

68

 

331

 

411

Leasing

-

 

-

 

5

 

17

Consumer:

 

 

 

 

 

 

 

Credit cards

659

 

-

 

-

 

93

HELOCs

-

 

2

 

1

 

-

Personal

355

 

5

 

1

 

1

Auto

-

 

2

 

2

 

38

Other

3

 

-

 

-

 

-

Total

1,025

 

177

 

340

 

561

159


 

The following tables present, by class, quantitative information related to loans modified as TDRs during the years ended December 31, 2021 and 2020.

 

 

Popular, Inc.

For the year ended December 31, 2021

(Dollars in thousands)

Loan count

Pre-modification outstanding recorded investment

Post-modification outstanding recorded investment

Increase (decrease) in the allowance for credit losses as a result of modification

Commercial multi-family

2

$

246

$

211

$

26

Commercial real estate non-owner occupied

12

 

3,612

 

3,604

 

177

Commercial real estate owner occupied

43

 

95,354

 

90,096

 

1,577

Commercial and industrial

39

 

6,573

 

5,719

 

745

Mortgage

1,774

 

213,661

 

214,367

 

6,632

Leasing

2

 

40

 

38

 

5

Consumer:

 

 

 

 

 

 

 

Credit cards

178

 

2,223

 

2,136

 

42

HELOCs

2

 

176

 

228

 

54

Personal

303

 

4,222

 

4,217

 

899

Auto

10

 

199

 

206

 

65

Other

8

 

305

 

303

 

124

Total

2,373

$

326,611

$

321,125

$

10,346

 

Popular, Inc.

For the year ended December 31, 2020

(Dollars in thousands)

Loan count

Pre-modification outstanding recorded investment

Post-modification outstanding recorded investment

Increase (decrease) in the allowance for credit losses as a result of modification

Commercial multi-family

2

$

1,133

$

1,115

$

(18)

Commercial real estate non-owner occupied

13

 

25,217

 

22,065

 

(969)

Commercial real estate owner occupied

37

 

10,955

 

10,914

 

137

Commercial and industrial

53

 

3,140

 

3,178

 

34

Construction

1

 

21,514

 

21,514

 

4,370

Mortgage

813

 

102,559

 

85,394

 

6,875

Leasing

22

 

720

 

732

 

65

Consumer:

 

 

 

 

 

 

 

Credit cards

752

 

7,048

 

7,097

 

286

HELOCs

3

 

510

 

396

 

33

Personal

362

 

6,194

 

6,188

 

1,043

Auto

42

 

836

 

838

 

131

Other

3

 

25

 

25

 

6

Total

2,103

$

179,851

$

159,456

$

11,993

160


 

During the year ended December 31, 2021, five loans with an aggregate unpaid principal balance of $ 10.2 million were restructured into multiple notes (“Note A / B split”), compared to ten loans with an aggregate unpaid principal balance of $35.1 million during the year ended December 31, 2020, of which a discounted payoff for one loan with an aggregate unpaid principal balance of $1.7 million was completed after the restructuring. The Corporation recorded $0.3 million in charge-offs as part of Note A / B splits during 2020. The recorded investment on these commercial TDRs amounted to approximately $10.2 million at December 31, 2021, compared to $32.9 million at December 31, 2020. These loans were restructured after analyzing the borrowers’ capacity to repay the debt, collateral and ability to perform under the modified terms.

 

The following tables present, 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.

 

Defaulted during the year ended December 31, 2021

(Dollars in thousands)

Loan count

Recorded investment as of first default date

Commercial real estate non-owner occupied

4

$

8,421

Commercial real estate owner occupied

4

 

4,500

Commercial and industrial

5

 

317

Mortgage

104

 

10,543

Consumer:

 

 

 

Credit cards

81

 

979

Personal

27

 

723

Total

225

$

25,483

 

Defaulted during the year ended December 31, 2020

(Dollars in thousands)

Loan count

Recorded investment as of first default date

Commercial real estate non-owner occupied

1

$

1,700

Commercial real estate owner occupied

6

 

933

Commercial and industrial

4

 

141

Construction

1

 

21,497

Mortgage

249

 

26,925

Consumer:

 

 

 

Credit cards

317

 

2,560

Personal

99

 

1,660

Other

2

 

1

Total

679

$

55,417

161


 

Commercial, consumer and mortgage loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the allowance for credit losses may be increased or partial charge-offs may be taken to further write-down the carrying value of the loan.

Credit Quality

The Corporation has defined a risk rating system to assign a rating to all credit exposures, particularly for the commercial and construction loan portfolios. Risk ratings in the aggregate provide the Corporation’s management the asset quality profile for the loan portfolio. 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 Corporation’s obligor risk rating scales range from rating 1 (Excellent) to rating 14 (Loss). The obligor risk rating reflects the risk of payment default of a borrower in the ordinary course of business.

Pass Credit Classifications:

Pass (Scales 1 through 8) – Loans classified as pass have a well defined primary source of repayment, with no apparent risk, strong financial position, minimal operating risk, profitability, liquidity and strong capitalization.

Watch (Scale 9) – Loans classified as watch have acceptable business credit, but borrower’s operations, cash flow or financial condition evidence more than average risk, requires above average levels of supervision and attention from Loan Officers.

Special Mention (Scale 10) - Loans classified as special mention have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Corporation’s credit position at some future date.

Adversely Classified Classifications:

Substandard (Scales 11 and 12) - Loans classified as substandard are deemed to be inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans classified as such have well-defined weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful (Scale 13) - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the additional characteristic that the weaknesses make the collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss (Scale 14) - Uncollectible and of such little value that continuance as a bankable asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset even though partial recovery may be effected in the future.

Risk ratings scales 10 through 14 conform to regulatory ratings. The assignment of the obligor risk rating is based on relevant information about the ability of borrowers to service their debts such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.

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 December 31, 2021 and 2020 by vintage year.

162


 

December 31, 2021

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2021

 

2020

 

2019

 

2018

 

2017

 

Prior

Years

 

 

 

Total

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial multi-family

 

 

 

Watch

$

-

$

-

$

-

$

-

$

-

$

4,485

$

-

$

-

$

4,485

 

 

 

Special mention

 

-

 

-

 

-

 

-

 

-

 

3,025

 

-

 

-

 

3,025

 

 

 

Substandard

 

-

 

-

 

982

 

-

 

-

 

6,257

 

100

 

-

 

7,339

 

 

 

Pass

 

24,936

 

21,288

 

34,840

 

25,311

 

2,066

 

31,468

 

11

 

-

 

139,920

 

 

Total commercial multi-family

$

24,936

$

21,288

$

35,822

$

25,311

$

2,066

$

45,235

$

111

$

-

$

154,769

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate non-owner occupied

 

 

 

Watch

$

100,465

$

228,852

$

25,443

$

137,044

$

2,406

$

205,304

$

3,237

$

-

$

702,751

 

 

 

Special Mention

 

18,509

 

12,563

 

7,271

 

-

 

4,608

 

24,056

 

-

 

-

 

67,007

 

 

 

Substandard

 

30,155

 

27,790

 

24,200

 

25,456

 

2,770

 

72,407

 

-

 

-

 

182,778

 

 

 

Pass

 

513,087

 

88,662

 

88,353

 

37,999

 

42,522

 

557,052

 

9,712

 

-

 

1,337,387

 

 

Total commercial real estate non-owner occupied

$

662,216

$

357,867

$

145,267

$

200,499

$

52,306

$

858,819

$

12,949

$

-

$

2,289,923

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

 

 

Watch

$

8,393

$

8,612

$

8,972

$

6,958

$

3,039

$

121,716

$

-

$

-

$

157,690

 

 

 

Special Mention

 

5,573

 

857

 

7,598

 

1,427

 

2,449

 

103,472

 

-

 

-

 

121,376

 

 

 

Substandard

 

6,960

 

1,028

 

1,646

 

35,529

 

1,869

 

113,288

 

-

 

-

 

160,320

 

 

 

Doubtful

 

-

 

-

 

-

 

-

 

76

 

612

 

-

 

-

 

688

 

 

 

Pass

 

238,533

 

198,442

 

44,943

 

23,112

 

32,585

 

429,651

 

16,389

 

-

 

983,655

 

 

Total commercial real estate owner occupied

$

259,459

$

208,939

$

63,159

$

67,026

$

40,018

$

768,739

$

16,389

$

-

$

1,423,729

 

 

Commercial and industrial

 

 

 

Watch

$

186,529

$

12,542

$

21,536

$

103,835

$

14,577

$

90,776

$

108,183

$

-

$

537,978

 

 

 

Special Mention

 

7,380

 

9,936

 

14,856

 

28,473

 

1,012

 

28,448

 

60,397

 

-

 

150,502

 

 

 

Substandard

 

2,190

 

1,091

 

3,041

 

35,826

 

66,771

 

45,168

 

38,003

 

-

 

192,090

 

 

 

Doubtful

 

-

 

-

 

-

 

-

 

-

 

62

 

-

 

-

 

62

 

 

 

Pass

 

843,661

 

335,369

 

275,357

 

84,084

 

72,580

 

333,869

 

702,896

 

-

 

2,647,816

 

 

Total commercial and industrial

$

1,039,760

$

358,938

$

314,790

$

252,218

$

154,940

$

498,323

$

909,479

$

-

$

3,528,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

Substandard

$

-

$

-

$

485

$

-

$

-

$

-

$

-

$

-

$

485

 

 

 

Pass

 

21,596

 

41,622

 

1,148

 

-

 

-

 

-

 

22,260

 

-

 

86,626

 

Total construction

$

21,596

$

41,622

$

1,633

$

-

$

-

$

-

$

22,260

$

-

$

87,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage

 

 

 

Substandard

$

-

$

954

$

5,212

$

5,613

$

4,310

$

122,690

$

-

$

-

$

138,779

 

 

 

Pass

 

463,742

 

304,780

 

223,464

 

265,239

 

194,982

 

4,660,880

 

-

 

-

 

6,113,087

 

Total mortgage

$

463,742

$

305,734

$

228,676

$

270,852

$

199,292

$

4,783,570

$

-

$

-

$

6,251,866

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing

 

 

 

Substandard

$

124

$

618

$

880

$

613

$

613

$

235

$

-

$

-

$

3,083

 

 

 

Loss

 

-

 

-

 

-

 

1

 

16

 

2

 

-

 

-

 

19

 

 

 

Pass

 

613,452

 

328,085

 

222,770

 

133,112

 

62,881

 

17,917

 

-

 

-

 

1,378,217

 

Total leasing

$

613,576

$

328,703

$

223,650

$

133,726

$

63,510

$

18,154

$

-

$

-

$

1,381,319

163


 

December 31, 2021

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2021

 

2020

 

2019

 

2018

 

2017

 

Prior

Years

 

 

 

Total

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

Credit cards

 

 

 

Substandard

$

-

$

-

$

-

$

-

$

-

$

-

$

8,577

$

-

$

8,577

 

 

 

Pass

 

-

 

-

 

-

 

-

 

-

 

-

 

911,274

 

-

 

911,274

 

Total credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

919,851

$

-

$

919,851

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HELOCs

 

 

 

Substandard

 

-

 

-

 

-

 

-

 

-

 

-

 

23

 

-

 

23

 

 

 

Pass

$

-

$

-

$

-

$

-

$

-

$

-

$

3,548

$

-

$

3,548

 

Total HELOCs

$

-

$

-

$

-

$

-

$

-

$

-

$

3,571

$

-

$

3,571

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal

 

 

 

Substandard

$

426

$

610

$

2,105

$

866

$

936

$

15,680

$

-

$

1,385

$

22,008

 

 

 

Loss

 

30

 

2

 

3

 

-

 

-

 

3

 

-

 

-

 

38

 

 

 

Pass

 

539,604

 

197,652

 

227,328

 

91,341

 

53,630

 

120,065

 

-

 

36,394

 

1,266,014

 

Total Personal

$

540,060

$

198,264

$

229,436

$

92,207

$

54,566

$

135,748

$

-

$

37,779

$

1,288,060

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Auto

 

 

 

Substandard

$

3,080

$

7,520

$

9,498

$

4,739

$

2,210

$

1,422

$

-

$

-

$

28,469

 

 

 

Loss

 

42

 

11

 

-

 

-

 

-

 

-

 

-

 

-

 

53

 

 

 

Pass

 

1,259,800

 

808,339

 

637,300

 

420,293

 

177,104

 

80,829

 

-

 

-

 

3,383,665

 

Total Auto

$

1,262,922

$

815,870

$

646,798

$

425,032

$

179,314

$

82,251

$

-

$

-

$

3,412,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other consumer

 

 

 

Substandard

$

-

$

114

$

21

$

487

$

-

$

135

$

11,250

$

-

$

12,007

 

 

 

Loss

 

-

 

-

 

-

 

579

 

-

 

34

 

-

 

-

 

613

 

 

 

Pass

 

24,845

 

9,781

 

9,348

 

5,610

 

3,914

 

947

 

57,483

 

-

 

111,928

 

Total Other consumer

$

24,845

$

9,895

$

9,369

$

6,676

$

3,914

$

1,116

$

68,733

$

-

$

124,548

Total Puerto Rico

$

4,913,112

$

2,647,120

$

1,898,600

$

1,473,547

$

749,926

$

7,191,955

$

1,953,343

$

37,779

$

20,865,382

164


 

December 31, 2021

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2021

 

2020

 

2019

 

2018

 

2017

 

Prior

Years

 

 

 

Total

Popular U.S.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial multi-family

 

 

 

Watch

$

8,600

$

41,348

$

56,229

$

20,682

$

37,343

$

48,753

$

-

$

-

$

212,955

 

 

 

Special mention

 

-

 

3,752

 

9,013

 

30,244

 

11,071

 

28,297

 

-

 

-

 

82,377

 

 

 

Substandard

 

-

 

-

 

67,149

 

12,748

 

-

 

18,644

 

-

 

-

 

98,541

 

 

 

Pass

 

422,613

 

241,805

 

201,298

 

144,534

 

46,809

 

352,724

 

4,205

 

-

 

1,413,988

 

 

Total commercial multi-family

$

431,213

$

286,905

$

333,689

$

208,208

$

95,223

$

448,418

$

4,205

$

-

$

1,807,861

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate non-owner occupied

 

 

 

Watch

$

12,716

$

22,109

$

42,067

$

56,576

$

28,604

$

154,289

$

780

$

-

$

317,141

 

 

 

Special Mention

 

2,939

 

-

 

3,205

 

7,025

 

10,573

 

15,569

 

-

 

-

 

39,311

 

 

 

Substandard

 

-

 

756

 

6,405

 

14,544

 

11,384

 

60,323

 

-

 

-

 

93,412

 

 

 

Pass

 

543,667

 

356,071

 

156,925

 

211,432

 

250,516

 

346,606

 

8,386

 

-

 

1,873,603

 

 

Total commercial real estate non-owner occupied

$

559,322

$

378,936

$

208,602

$

289,577

$

301,077

$

576,787

$

9,166

$

-

$

2,323,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

 

 

Watch

$

-

$

239

$

7,825

$

8,150

$

1,676

$

17,132

$

4,222

$

-

$

39,244

 

 

 

Special Mention

 

-

 

-

 

-

 

-

 

-

 

1,800

 

-

 

-

 

1,800

 

 

 

Substandard

 

-

 

-

 

1,148

 

2,878

 

-

 

20,841

 

-

 

-

 

24,867

 

 

 

Pass

 

129,898

 

46,737

 

34,355

 

23,845

 

26,236

 

63,463

 

3,928

 

-

 

328,462

 

 

Total commercial real estate owner occupied

$

129,898

$

46,976

$

43,328

$

34,873

$

27,912

$

103,236

$

8,150

$

-

$

394,373

 

 

Commercial and industrial

 

 

 

Watch

$

3,747

$

4,667

$

4,292

$

9,273

$

5

$

1,530

$

3,925

$

-

$

27,439

 

 

 

Special Mention

 

2,504

 

7,203

 

670

 

481

 

59

 

215

 

8,177

 

-

 

19,309

 

 

 

Substandard

 

537

 

97

 

4,559

 

495

 

168

 

1,890

 

159

 

-

 

7,905

 

 

 

Loss

 

262

 

58

 

108

 

17

 

51

 

191

 

-

 

-

 

687

 

 

 

Pass

 

273,254

 

339,564

 

211,695

 

191,086

 

115,146

 

339,336

 

284,710

 

-

 

1,754,791

 

 

Total commercial and industrial

$

280,304

$

351,589

$

221,324

$

201,352

$

115,429

$

343,162

$

296,971

$

-

$

1,810,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

Watch

$

-

$

14,300

$

23,547

$

28,757

$

34,205

$

-

$

-

$

-

$

100,809

 

 

 

Special Mention

 

-

 

-

 

-

 

-

 

-

 

13,622

 

-

 

-

 

13,622

 

 

 

Substandard

 

-

 

-

 

-

 

15,438

 

10,231

 

-

 

-

 

-

 

25,669

 

 

 

Pass

 

130,587

 

136,045

 

165,105

 

13,634

 

36,500

 

7,138

 

-

 

-

 

489,009

 

Total construction

$

130,587

$

150,345

$

188,652

$

57,829

$

80,936

$

20,760

$

-

$

-

$

629,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage

 

 

 

Substandard

$

-

$

4,338

$

3,894

$

967

$

217

$

12,680

$

-

$

-

$

22,096

 

 

 

Pass

 

326,641

 

266,212

 

215,071

 

61,986

 

6,376

 

276,948

 

-

 

-

 

1,153,234

 

Total mortgage

$

326,641

$

270,550

$

218,965

$

62,953

$

6,593

$

289,628

$

-

$

-

$

1,175,330

165


 

December 31, 2021

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2021

 

2020

 

2019

 

2018

 

2017

 

Prior

Years

 

 

 

Total

Popular U.S.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

Credit cards

 

 

 

Pass

$

-

$

-

$

-

$

-

$

-

$

-

$

10

$

-

$

10

 

Total credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

10

$

-

$

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HELOCs

 

 

 

Substandard

$

-

$

-

$

-

$

-

$

-

$

3,006

$

-

$

935

$

3,941

 

 

 

Loss

 

-

 

-

 

-

 

-

 

-

 

207

 

-

 

1,258

 

1,465

 

 

 

Pass

 

-

 

-

 

-

 

-

 

-

 

11,423

 

38,267

 

20,195

 

69,885

 

Total HELOCs

$

-

$

-

$

-

$

-

$

-

$

14,636

$

38,267

$

22,388

$

75,291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal

 

 

 

Substandard

$

72

$

81

$

250

$

73

$

17

$

163

$

2

$

-

$

658

 

 

 

Loss

 

-

 

-

 

4

 

-

 

-

 

19

 

-

 

-

 

23

 

 

 

Pass

 

75,538

 

19,411

 

43,346

 

7,418

 

2,802

 

5,625

 

124

 

-

 

154,264

 

Total Personal

$

75,610

$

19,492

$

43,600

$

7,491

$

2,819

$

5,807

$

126

$

-

$

154,945

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other consumer

 

 

 

Pass

$

-

$

-

$

-

$

-

$

-

$

-

$

4,658

$

-

$

4,658

 

Total Other consumer

$

-

$

-

$

-

$

-

$

-

$

-

$

4,658

$

-

$

4,658

Total Popular U.S.

$

1,933,575

$

1,504,793

$

1,258,160

$

862,283

$

629,989

$

1,802,434

$

361,553

$

22,388

$

8,375,175

166


 

December 31, 2021

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2021

 

2020

 

2019

 

2018

 

2017

 

Prior

Years

 

 

 

Total

Popular, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial multi-family

 

 

 

Watch

$

8,600

$

41,348

$

56,229

$

20,682

$

37,343

$

53,238

$

-

$

-

$

217,440

 

 

 

Special mention

 

-

 

3,752

 

9,013

 

30,244

 

11,071

 

31,322

 

-

 

-

 

85,402

 

 

 

Substandard

 

-

 

-

 

68,131

 

12,748

 

-

 

24,901

 

100

 

-

 

105,880

 

 

 

Pass

 

447,549

 

263,093

 

236,138

 

169,845

 

48,875

 

384,192

 

4,216

 

-

 

1,553,908

 

 

Total commercial multi-family

$

456,149

$

308,193

$

369,511

$

233,519

$

97,289

$

493,653

$

4,316

$

-

$

1,962,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate non-owner occupied

 

 

 

Watch

$

113,181

$

250,961

$

67,510

$

193,620

$

31,010

$

359,593

$

4,017

$

-

$

1,019,892

 

 

 

Special Mention

 

21,448

 

12,563

 

10,476

 

7,025

 

15,181

 

39,625

 

-

 

-

 

106,318

 

 

 

Substandard

 

30,155

 

28,546

 

30,605

 

40,000

 

14,154

 

132,730

 

-

 

-

 

276,190

 

 

 

Pass

 

1,056,754

 

444,733

 

245,278

 

249,431

 

293,038

 

903,658

 

18,098

 

-

 

3,210,990

 

 

Total commercial real estate non-owner occupied

$

1,221,538

$

736,803

$

353,869

$

490,076

$

353,383

$

1,435,606

$

22,115

$

-

$

4,613,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

 

 

Watch

$

8,393

$

8,851

$

16,797

$

15,108

$

4,715

$

138,848

$

4,222

$

-

$

196,934

 

 

 

Special Mention

 

5,573

 

857

 

7,598

 

1,427

 

2,449

 

105,272

 

-

 

-

 

123,176

 

 

 

Substandard

 

6,960

 

1,028

 

2,794

 

38,407

 

1,869

 

134,129

 

-

 

-

 

185,187

 

 

 

Doubtful

 

-

 

-

 

-

 

-

 

76

 

612

 

-

 

-

 

688

 

 

 

Pass

 

368,431

 

245,179

 

79,298

 

46,957

 

58,821

 

493,114

 

20,317

 

-

 

1,312,117

 

 

Total commercial real estate owner occupied

$

389,357

$

255,915

$

106,487

$

101,899

$

67,930

$

871,975

$

24,539

$

-

$

1,818,102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

 

Watch

$

190,276

$

17,209

$

25,828

$

113,108

$

14,582

$

92,306

$

112,108

$

-

$

565,417

 

 

 

Special Mention

 

9,884

 

17,139

 

15,526

 

28,954

 

1,071

 

28,663

 

68,574

 

-

 

169,811

 

 

 

Substandard

 

2,727

 

1,188

 

7,600

 

36,321

 

66,939

 

47,058

 

38,162

 

-

 

199,995

 

 

 

Doubtful

 

-

 

-

 

-

 

-

 

-

 

62

 

-

 

-

 

62

 

 

 

Loss

 

262

 

58

 

108

 

17

 

51

 

191

 

-

 

-

 

687

 

 

 

Pass

 

1,116,915

 

674,933

 

487,052

 

275,170

 

187,726

 

673,205

 

987,606

 

-

 

4,402,607

 

 

Total commercial and industrial

$

1,320,064

$

710,527

$

536,114

$

453,570

$

270,369

$

841,485

$

1,206,450

$

-

$

5,338,579

167


 

December 31, 2021

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2021

 

2020

 

2019

 

2018

 

2017

 

Prior

Years

 

 

 

Total

Popular, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

Watch

$

-

$

14,300

$

23,547

$

28,757

$

34,205

$

-

$

-

$

-

$

100,809

 

 

 

Special Mention

 

-

 

-

 

-

 

-

 

-

 

13,622

 

-

 

-

 

13,622

 

 

 

Substandard

 

-

 

-

 

485

 

15,438

 

10,231

 

-

 

-

 

-

 

26,154

 

 

 

Pass

 

152,183

 

177,667

 

166,253

 

13,634

 

36,500

 

7,138

 

22,260

 

-

 

575,635

 

Total construction

$

152,183

$

191,967

$

190,285

$

57,829

$

80,936

$

20,760

$

22,260

$

-

$

716,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage

 

 

 

Substandard

$

-

$

5,292

$

9,106

$

6,580

$

4,527

$

135,370

$

-

$

-

$

160,875

 

 

 

Pass

 

790,383

 

570,992

 

438,535

 

327,225

 

201,358

 

4,937,828

 

-

 

-

 

7,266,321

 

Total mortgage

$

790,383

$

576,284

$

447,641

$

333,805

$

205,885

$

5,073,198

$

-

$

-

$

7,427,196

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing

 

 

 

Substandard

$

124

$

618

$

880

$

613

$

613

$

235

$

-

$

-

$

3,083

 

 

 

Loss

 

-

 

-

 

-

 

1

 

16

 

2

 

-

 

-

 

19

 

 

 

Pass

 

613,452

 

328,085

 

222,770

 

133,112

 

62,881

 

17,917

 

-

 

-

 

1,378,217

 

Total leasing

$

613,576

$

328,703

$

223,650

$

133,726

$

63,510

$

18,154

$

-

$

-

$

1,381,319

168


 

December 31, 2021

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2021

 

2020

 

2019

 

2018

 

2017

 

Prior

Years

 

 

 

Total

Popular, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

Credit cards

 

 

 

Substandard

$

-

$

-

$

-

$

-

$

-

$

-

$

8,577

$

-

$

8,577

 

 

 

Pass

 

-

 

-

 

-

 

-

 

-

 

-

 

911,284

 

-

 

911,284

 

Total credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

919,861

$

-

$

919,861

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HELOCs

 

 

 

Substandard

$

-

$

-

$

-

$

-

$

-

$

3,006

$

23

$

935

$

3,964

 

 

 

Loss

 

-

 

-

 

-

 

-

 

-

 

207

 

-

 

1,258

 

1,465

 

 

 

Pass

 

-

 

-

 

-

 

-

 

-

 

11,423

 

41,815

 

20,195

 

73,433

 

Total HELOCs

$

-

$

-

$

-

$

-

$

-

$

14,636

$

41,838

$

22,388

$

78,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal

 

 

 

Substandard

$

498

$

691

$

2,355

$

939

$

953

$

15,843

$

2

$

1,385

$

22,666

 

 

 

Loss

 

30

 

2

 

7

 

-

 

-

 

22

 

-

 

-

 

61

 

 

 

Pass

 

615,142

 

217,063

 

270,674

 

98,759

 

56,432

 

125,690

 

124

 

36,394

 

1,420,278

 

Total Personal

$

615,670

$

217,756

$

273,036

$

99,698

$

57,385

$

141,555

$

126

$

37,779

$

1,443,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Auto

 

 

 

Substandard

$

3,080

$

7,520

$

9,498

$

4,739

$

2,210

$

1,422

$

-

$

-

$

28,469

 

 

 

Loss

 

42

 

11

 

-

 

-

 

-

 

-

 

-

 

-

 

53

 

 

 

Pass

 

1,259,800

 

808,339

 

637,300

 

420,293

 

177,104

 

80,829

 

-

 

-

 

3,383,665

 

Total Auto

$

1,262,922

$

815,870

$

646,798

$

425,032

$

179,314

$

82,251

$

-

$

-

$

3,412,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other consumer

 

 

 

Substandard

$

-

$

114

$

21

$

487

$

-

$

135

$

11,250

$

-

$

12,007

 

 

 

Loss

 

-

 

-

 

-

 

579

 

-

 

34

 

-

 

-

 

613

 

 

 

Pass

 

24,845

 

9,781

 

9,348

 

5,610

 

3,914

 

947

 

62,141

 

-

 

116,586

 

Total Other consumer

$

24,845

$

9,895

$

9,369

$

6,676

$

3,914

$

1,116

$

73,391

$

-

$

129,206

Total Popular Inc.

$

6,846,687

$

4,151,913

$

3,156,760

$

2,335,830

$

1,379,915

$

8,994,389

$

2,314,896

$

60,167

$

29,240,557

169


 

December 31, 2020

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2020

 

2019

 

2018

 

2017

 

2016

 

Prior

Years

 

 

 

Total

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial multi-family

 

 

 

Watch

$

-

$

-

$

-

$

-

$

-

$

460

$

-

$

-

$

460

 

 

 

Special mention

 

-

 

-

 

-

 

-

 

-

 

4,160

 

-

 

-

 

4,160

 

 

 

Substandard

 

-

 

-

 

-

 

-

 

-

 

400

 

100

 

-

 

500

 

 

 

Pass

 

5,216

 

36,433

 

26,051

 

2,106

 

2,563

 

74,791

 

-

 

-

 

147,160

 

 

Total commercial multi-family

$

5,216

$

36,433

$

26,051

$

2,106

$

2,563

$

79,811

$

100

$

-

$

152,280

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate non-owner occupied

 

 

 

Watch

$

160,960

$

73,561

$

27,592

$

40,654

$

33,277

$

197,912

$

2,100

$

-

$

536,056

 

 

 

Special Mention

 

-

 

26,331

 

124,560

 

29,711

 

19,895

 

62,839

 

836

 

-

 

264,172

 

 

 

Substandard

 

43,399

 

74,303

 

26,799

 

4,932

 

29,974

 

130,218

 

95

 

-

 

309,720

 

 

 

Pass

 

88,324

 

53,385

 

39,814

 

60,585

 

124,643

 

527,282

 

3,352

 

-

 

897,385

 

 

Total commercial real estate non-owner occupied

$

292,683

$

227,580

$

218,765

$

135,882

$

207,789

$

918,251

$

6,383

$

-

$

2,007,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

 

 

Watch

$

96,046

$

10,319

$

14,412

$

9,760

$

9,584

$

146,445

$

2,627

$

-

$

289,193

 

 

 

Special Mention

 

850

 

6,638

 

249

 

6,571

 

282

 

172,078

 

-

 

-

 

186,668

 

 

 

Substandard

 

1,774

 

2,181

 

37,686

 

1,878

 

27,094

 

145,193

 

-

 

-

 

215,806

 

 

 

Doubtful

 

-

 

-

 

-

 

-

 

-

 

1,714

 

-

 

-

 

1,714

 

 

 

Pass

 

204,840

 

54,274

 

31,917

 

57,854

 

128,392

 

417,376

 

10,861

 

-

 

905,514

 

 

Total commercial real estate owner occupied

$

303,510

$

73,412

$

84,264

$

76,063

$

165,352

$

882,806

$

13,488

$

-

$

1,598,895

 

 

Commercial and industrial

 

 

 

Watch

$

131,556

$

77,821

$

182,776

$

40,318

$

63,968

$

267,856

$

243,335

$

-

$

1,007,630

 

 

 

Special Mention

 

28,310

 

10,297

 

19,220

 

45,861

 

910

 

28,507

 

86,263

 

-

 

219,368

 

 

 

Substandard

 

32,941

 

2,180

 

26,921

 

26,769

 

1,824

 

55,220

 

49,036

 

-

 

194,891

 

 

 

Doubtful

 

-

 

67

 

-

 

1

 

-

 

54

 

1

 

-

 

123

 

 

 

Loss

 

-

 

-

 

-

 

-

 

-

 

-

 

13

 

-

 

13

 

 

 

Pass

 

1,181,399

 

492,778

 

119,709

 

168,174

 

105,442

 

218,716

 

520,865

 

-

 

2,807,083

 

 

Total commercial and industrial

$

1,374,206

$

583,143

$

348,626

$

281,123

$

172,144

$

570,353

$

899,513

$

-

$

4,229,108

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

Watch

$

-

$

105

$

4,895

$

-

$

-

$

-

$

960

$

-

$

5,960

 

 

 

Substandard

 

-

 

-

 

-

 

21,497

 

-

 

-

 

-

 

-

 

21,497

 

 

 

Pass

 

15,723

 

22,408

 

3,423

 

63,582

 

-

 

-

 

24,513

 

-

 

129,649

 

Total construction

$

15,723

$

22,513

$

8,318

$

85,079

$

-

$

-

$

25,473

$

-

$

157,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage

 

 

 

Substandard

$

754

$

903

$

1,172

$

3,129

$

4,374

$

159,359

$

-

$

-

$

169,691

 

 

 

Pass

 

263,473

 

224,390

 

177,537

 

212,650

 

225,824

 

5,496,578

 

-

 

-

 

6,600,452

 

Total mortgage

$

264,227

$

225,293

$

178,709

$

215,779

$

230,198

$

5,655,937

$

-

$

-

$

6,770,143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing

 

 

 

Substandard

$

200

$

822

$

748

$

913

$

617

$

136

$

-

$

-

$

3,436

 

 

 

Pass

 

480,964

 

315,022

 

209,340

 

109,708

 

63,955

 

15,236

 

-

 

-

 

1,194,225

 

Total leasing

$

481,164

$

315,844

$

210,088

$

110,621

$

64,572

$

15,372

$

-

$

-

$

1,197,661

170


 

December 31, 2020

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2020

 

2019

 

2018

 

2017

 

2016

 

Prior

Years

 

 

 

Total

Puerto Rico

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

Credit cards

 

 

 

Substandard

$

-

$

-

$

-

$

-

$

-

$

-

$

12,798

$

-

$

12,798

 

 

 

Pass

 

-

 

-

 

-

 

-

 

-

 

-

 

907,137

 

-

 

907,137

 

Total credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

919,935

$

-

$

919,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HELOCs

 

 

 

Pass

$

-

$

-

$

-

$

-

$

-

$

540

$

3,639

$

-

$

4,179

 

Total HELOCs

$

-

$

-

$

-

$

-

$

-

$

540

$

3,639

$

-

$

4,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal

 

 

 

Substandard

$

1,288

$

4,782

$

1,741

$

1,022

$

971

$

18,647

$

152

$

1,545

$

30,148

 

 

 

Pass

 

323,170

 

413,973

 

168,142

 

99,768

 

57,319

 

137,693

 

2,144

 

45,390

 

1,247,599

 

Total Personal

$

324,458

$

418,755

$

169,883

$

100,790

$

58,290

$

156,340

$

2,296

$

46,935

$

1,277,747

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Auto

 

 

 

Substandard

$

1,975

$

6,029

$

3,612

$

1,760

$

1,369

$

990

$

-

$

-

$

15,735

 

 

 

Pass

 

1,064,082

 

881,343

 

628,657

 

299,677

 

168,157

 

74,577

 

-

 

-

 

3,116,493

 

Total Auto

$

1,066,057

$

887,372

$

632,269

$

301,437

$

169,526

$

75,567

$

-

$

-

$

3,132,228

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other consumer

 

 

 

Substandard

$

-

$

16

$

1,376

$

240

$

174

$

13,075

$

-

$

-

$

14,881

 

 

 

Pass

 

16,912

 

15,698

 

13,158

 

4,966

 

2,828

 

3,785

 

54,437

 

-

 

111,784

 

Total Other consumer

$

16,912

$

15,714

$

14,534

$

5,206

$

3,002

$

16,860

$

54,437

$

-

$

126,665

Total Puerto Rico

$

4,144,156

$

2,806,059

$

1,891,507

$

1,314,086

$

1,073,436

$

8,371,837

$

1,925,264

$

46,935

$

21,573,280

171


 

December 31, 2020

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2020

 

2019

 

2018

 

2017

 

2016

 

Prior

Years

 

 

 

Total

Popular U.S.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial multi-family

 

 

 

Watch

$

1,643

$

16,787

$

39,980

$

39,713

$

52,989

$

61,369

$

-

$

-

$

212,481

 

 

 

Special mention

 

3,122

 

30,708

 

4,380

 

19,593

 

37,745

 

20,463

 

-

 

-

 

116,011

 

 

 

Substandard

 

-

 

17,376

 

21,771

 

1,755

 

20,085

 

6,247

 

-

 

-

 

67,234

 

 

 

Pass

 

326,008

 

289,652

 

163,812

 

100,555

 

132,400

 

332,709

 

2,849

 

-

 

1,347,985

 

 

Total commercial multi-family

$

330,773

$

354,523

$

229,943

$

161,616

$

243,219

$

420,788

$

2,849

$

-

$

1,743,711

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate non-owner occupied

 

 

 

Watch

$

10,057

$

23,877

$

76,629

$

56,112

$

49,166

$

62,766

$

1,055

$

-

$

279,662

 

 

 

Special Mention

 

-

 

4,760

 

15,304

 

14,623

 

70,224

 

20,028

 

350

 

-

 

125,289

 

 

 

Substandard

 

771

 

18,642

 

36,495

 

11,007

 

40,528

 

28,984

 

-

 

-

 

136,427

 

 

 

Pass

 

397,686

 

231,904

 

224,256

 

236,008

 

142,432

 

214,495

 

5,651

 

-

 

1,452,432

 

 

Total commercial real estate non-owner occupied

$

408,514

$

279,183

$

352,684

$

317,750

$

302,350

$

326,273

$

7,056

$

-

$

1,993,810

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

 

 

Watch

$

393

$

8,266

$

7,941

$

4,060

$

16,689

$

16,108

$

4,222

$

-

$

57,679

 

 

 

Special Mention

 

-

 

-

 

192

 

-

 

-

 

1,467

 

-

 

-

 

1,659

 

 

 

Substandard

 

-

 

1,152

 

2,361

 

-

 

1,348

 

20,305

 

-

 

-

 

25,166

 

 

 

Pass

 

48,684

 

47,484

 

47,451

 

28,761

 

18,296

 

68,739

 

461

 

-

 

259,876

 

 

Total commercial real estate owner occupied

$

49,077

$

56,902

$

57,945

$

32,821

$

36,333

$

106,619

$

4,683

$

-

$

344,380

 

 

Commercial and industrial

 

 

 

Watch

$

16,126

$

1,973

$

30

$

3,621

$

1,196

$

8,488

$

3,972

$

-

$

35,406

 

 

 

Special Mention

 

14,056

 

-

 

-

 

1,634

 

4,807

 

4,756

 

1,637

 

-

 

26,890

 

 

 

Substandard

 

2,029

 

6,568

 

-

 

-

 

-

 

5,980

 

2,394

 

-

 

16,971

 

 

 

Pass

 

410,349

 

196,958

 

198,249

 

132,993

 

123,762

 

300,846

 

102,369

 

-

 

1,465,526

 

 

Total commercial and industrial

$

442,560

$

205,499

$

198,279

$

138,248

$

129,765

$

320,070

$

110,372

$

-

$

1,544,793

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

Watch

$

8,451

$

-

$

-

$

37,015

$

-

$

2,065

$

-

$

-

$

47,531

 

 

 

Special Mention

 

-

 

-

 

-

 

3,089

 

-

 

30,083

 

-

 

-

 

33,172

 

 

 

Substandard

 

-

 

-

 

20,655

 

9,372

 

7,560

 

-

 

-

 

-

 

37,587

 

 

 

Pass

 

79,489

 

288,865

 

168,411

 

99,814

 

8,392

 

5,841

 

-

 

-

 

650,812

 

Total construction

$

87,940

$

288,865

$

189,066

$

149,290

$

15,952

$

37,989

$

-

$

-

$

769,102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage

 

 

 

Substandard

$

29

$

-

$

1,221

$

-

$

328

$

13,287

$

-

$

-

$

14,865

 

 

 

Pass

 

356,839

 

275,289

 

103,160

 

9,337

 

9,530

 

351,517

 

-

 

-

 

1,105,672

 

Total mortgage

$

356,868

$

275,289

$

104,381

$

9,337

$

9,858

$

364,804

$

-

$

-

$

1,120,537

172


 

December 31, 2020

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2020

 

2019

 

2018

 

2017

 

2016

 

Prior

Years

 

 

 

Total

Popular U.S.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

Credit cards

 

 

 

Pass

$

-

$

-

$

-

$

-

$

-

$

-

$

31

$

-

$

31

 

Total credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

31

$

-

$

31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HELOCs

 

 

 

Substandard

$

-

$

-

$

-

$

-

$

-

$

112

$

-

$

357

$

469

 

 

 

Loss

 

-

 

-

 

-

 

-

 

-

 

156

 

-

 

6,867

 

7,023

 

 

 

Pass

 

-

 

-

 

-

 

-

 

-

 

11,907

 

39,366

 

35,806

 

87,079

 

Total HELOCs

$

-

$

-

$

-

$

-

$

-

$

12,175

$

39,366

$

43,030

$

94,571

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal

 

 

 

Substandard

$

83

$

784

$

165

$

74

$

18

$

6

$

-

$

-

$

1,130

 

 

 

Loss

 

-

 

17

 

63

 

12

 

6

 

244

 

2

 

-

 

344

 

 

 

Pass

 

40,539

 

109,606

 

27,693

 

9,623

 

1,855

 

8,256

 

192

 

-

 

197,764

 

Total Personal

$

40,622

$

110,407

$

27,921

$

9,709

$

1,879

$

8,506

$

194

$

-

$

199,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other consumer

 

 

 

Substandard

$

-

$

-

$

-

$

-

$

-

$

-

$

20

$

-

$

20

 

 

 

Pass

 

-

 

-

 

-

 

-

 

-

 

-

 

1,723

 

-

 

1,723

 

Total Other consumer

$

-

$

-

$

-

$

-

$

-

$

-

$

1,743

$

-

$

1,743

Total Popular U.S.

$

1,716,354

$

1,570,668

$

1,160,219

$

818,771

$

739,356

$

1,597,224

$

166,294

$

43,030

$

7,811,916

173


 

December 31, 2020

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2020

 

2019

 

2018

 

2017

 

2016

 

Prior

Years

 

 

 

Total

Popular, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial multi-family

 

 

 

Watch

$

1,643

$

16,787

$

39,980

$

39,713

$

52,989

$

61,829

$

-

$

-

$

212,941

 

 

 

Special mention

 

3,122

 

30,708

 

4,380

 

19,593

 

37,745

 

24,623

 

-

 

-

 

120,171

 

 

 

Substandard

 

-

 

17,376

 

21,771

 

1,755

 

20,085

 

6,647

 

100

 

-

 

67,734

 

 

 

Pass

 

331,224

 

326,085

 

189,863

 

102,661

 

134,963

 

407,500

 

2,849

 

-

 

1,495,145

 

 

Total commercial multi-family

$

335,989

$

390,956

$

255,994

$

163,722

$

245,782

$

500,599

$

2,949

$

-

$

1,895,991

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate non-owner occupied

 

 

 

Watch

$

171,017

$

97,438

$

104,221

$

96,766

$

82,443

$

260,678

$

3,155

$

-

$

815,718

 

 

 

Special Mention

 

-

 

31,091

 

139,864

 

44,334

 

90,119

 

82,867

 

1,186

 

-

 

389,461

 

 

 

Substandard

 

44,170

 

92,945

 

63,294

 

15,939

 

70,502

 

159,202

 

95

 

-

 

446,147

 

 

 

Pass

 

486,010

 

285,289

 

264,070

 

296,593

 

267,075

 

741,777

 

9,003

 

-

 

2,349,817

 

 

Total commercial real estate non-owner occupied

$

701,197

$

506,763

$

571,449

$

453,632

$

510,139

$

1,244,524

$

13,439

$

-

$

4,001,143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate owner occupied

 

 

 

Watch

$

96,439

$

18,585

$

22,353

$

13,820

$

26,273

$

162,553

$

6,849

$

-

$

346,872

 

 

 

Special Mention

 

850

 

6,638

 

441

 

6,571

 

282

 

173,545

 

-

 

-

 

188,327

 

 

 

Substandard

 

1,774

 

3,333

 

40,047

 

1,878

 

28,442

 

165,498

 

-

 

-

 

240,972

 

 

 

Doubtful

 

-

 

-

 

-

 

-

 

-

 

1,714

 

-

 

-

 

1,714

 

 

 

Pass

 

253,524

 

101,758

 

79,368

 

86,615

 

146,688

 

486,115

 

11,322

 

-

 

1,165,390

 

 

Total commercial real estate owner occupied

$

352,587

$

130,314

$

142,209

$

108,884

$

201,685

$

989,425

$

18,171

$

-

$

1,943,275

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

 

Watch

$

147,682

$

79,794

$

182,806

$

43,939

$

65,164

$

276,344

$

247,307

$

-

$

1,043,036

 

 

 

Special Mention

 

42,366

 

10,297

 

19,220

 

47,495

 

5,717

 

33,263

 

87,900

 

-

 

246,258

 

 

 

Substandard

 

34,970

 

8,748

 

26,921

 

26,769

 

1,824

 

61,200

 

51,430

 

-

 

211,862

 

 

 

Doubtful

 

-

 

67

 

-

 

1

 

-

 

54

 

1

 

-

 

123

 

 

 

Loss

 

-

 

-

 

-

 

-

 

-

 

-

 

13

 

-

 

13

 

 

 

Pass

 

1,591,748

 

689,736

 

317,958

 

301,167

 

229,204

 

519,562

 

623,234

 

-

 

4,272,609

 

 

Total commercial and industrial

$

1,816,766

$

788,642

$

546,905

$

419,371

$

301,909

$

890,423

$

1,009,885

$

-

$

5,773,901

174


 

December 31, 2020

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2020

 

2019

 

2018

 

2017

 

2016

 

Prior

Years

 

 

 

Total

Popular, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

 

 

Watch

$

8,451

$

105

$

4,895

$

37,015

$

-

$

2,065

$

960

$

-

$

53,491

 

 

 

Special Mention

 

-

 

-

 

-

 

3,089

 

-

 

30,083

 

-

 

-

 

33,172

 

 

 

Substandard

 

-

 

-

 

20,655

 

30,869

 

7,560

 

-

 

-

 

-

 

59,084

 

 

 

Pass

 

95,212

 

311,273

 

171,834

 

163,396

 

8,392

 

5,841

 

24,513

 

-

 

780,461

 

Total construction

$

103,663

$

311,378

$

197,384

$

234,369

$

15,952

$

37,989

$

25,473

$

-

$

926,208

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage

 

 

 

Substandard

$

783

$

903

$

2,393

$

3,129

$

4,702

$

172,646

$

-

$

-

$

184,556

 

 

 

Pass

 

620,312

 

499,679

 

280,697

 

221,987

 

235,354

 

5,848,095

 

-

 

-

 

7,706,124

 

Total mortgage

$

621,095

$

500,582

$

283,090

$

225,116

$

240,056

$

6,020,741

$

-

$

-

$

7,890,680

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing

 

 

 

Substandard

$

200

$

822

$

748

$

913

$

617

$

136

$

-

$

-

$

3,436

 

 

 

Pass

 

480,964

 

315,022

 

209,340

 

109,708

 

63,955

 

15,236

 

-

 

-

 

1,194,225

 

Total leasing

$

481,164

$

315,844

$

210,088

$

110,621

$

64,572

$

15,372

$

-

$

-

$

1,197,661

175


 

December 31, 2020

 

 

 

 

Term Loans

 

Revolving Loans Amortized Cost Basis

 

Revolving Loans Converted to Term Loans Amortized Cost Basis

 

 

 

 

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

(In thousands)

 

2020

 

2019

 

2018

 

2017

 

2016

 

Prior

Years

 

 

 

Total

Popular, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

Credit cards

 

 

 

Substandard

$

-

$

-

$

-

$

-

$

-

$

-

$

12,798

$

-

$

12,798

 

 

 

Pass

 

-

 

-

 

-

 

-

 

-

 

-

 

907,168

 

-

 

907,168

 

Total credit cards

$

-

$

-

$

-

$

-

$

-

$

-

$

919,966

$

-

$

919,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HELOCs

 

 

 

Substandard

$

-

$

-

$

-

$

-

$

-

$

112

$

-

$

357

$

469

 

 

 

Loss

 

-

 

-

 

-

 

-

 

-

 

156

 

-

 

6,867

 

7,023

 

 

 

Pass

 

-

 

-

 

-

 

-

 

-

 

12,447

 

43,005

 

35,806

 

91,258

 

Total HELOCs

$

-

$

-

$

-

$

-

$

-

$

12,715

$

43,005

$

43,030

$

98,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal

 

 

 

Substandard

$

1,371

$

5,566

$

1,906

$

1,096

$

989

$

18,653

$

152

$

1,545

$

31,278

 

 

 

Loss

 

-

 

17

 

63

 

12

 

6

 

244

 

2

 

-

 

344

 

 

 

Pass

 

363,709

 

523,579

 

195,835

 

109,391

 

59,174

 

145,949

 

2,336

 

45,390

 

1,445,363

 

Total Personal

$

365,080

$

529,162

$

197,804

$

110,499

$

60,169

$

164,846

$

2,490

$

46,935

$

1,476,985

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Auto

 

 

 

Substandard

$

1,975

$

6,029

$

3,612

$

1,760

$

1,369

$

990

$

-

$

-

$

15,735

 

 

 

Pass

 

1,064,082

 

881,343

 

628,657

 

299,677

 

168,157

 

74,577

 

-

 

-

 

3,116,493

 

Total Auto

$

1,066,057

$

887,372

$

632,269

$

301,437

$

169,526

$

75,567

$

-

$

-

$

3,132,228

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other consumer

 

 

 

Substandard

$

-

$

16

$

1,376

$

240

$

174

$

13,075

$

20

$

-

$

14,901

 

 

 

Pass

 

16,912

 

15,698

 

13,158

 

4,966

 

2,828

 

3,785

 

56,160

 

-

 

113,507

 

Total Other consumer

$

16,912

$

15,714

$

14,534

$

5,206

$

3,002

$

16,860

$

56,180

$

-

$

128,408

Total Popular Inc.

$

5,860,510

$

4,376,727

$

3,051,726

$

2,132,857

$

1,812,792

$

9,969,061

$

2,091,558

$

89,965

$

29,385,196

176


 

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, lower-of-cost-or-market 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:

 

 

Years ended December 31,

(In thousands)

 

2021

 

2020

 

2019

Mortgage servicing fees, net of fair value adjustments:

 

 

 

 

 

 

 

Mortgage servicing fees

$

38,105

$

43,234

$

46,952

 

Mortgage servicing rights fair value adjustments

 

(10,206)

 

(42,055)

 

(27,430)

Total mortgage servicing fees, net of fair value adjustments

 

27,899

 

1,179

 

19,522

Net gain on sale of loans, including valuation on loans held for sale

 

21,684

 

31,215

 

18,817

Trading account profit (loss):

 

 

 

 

 

 

 

Realized gains (losses) on closed derivative positions

 

1,323

 

(10,586)

 

(6,246)

Total trading account profit (loss)

 

1,323

 

(10,586)

 

(6,246)

Losses on repurchased loans, including interest advances [1]

 

(773)

 

(11,407)

 

-

Total mortgage banking activities

$

50,133

$

10,401

$

32,093

[1]

The Corporation, from time to time, repurchases delinquent loans from its GNMA servicing portfolio, in compliance with Guarantor guidelines, and may incur in losses related to previously advanced interest on delinquent loans. During the quarter ended September 30, 2020 the Corporation repurchased $687.9 million of GNMA loans and recorded a loss of $10.5 million for previously advanced interest on delinquent loans. Effective for the quarter ended September 30, 2020, the Corporation has determined to present these losses as part of its Mortgage Banking Activities, which were previously presented within the indemnity reserves on loans sold component of non-interest income. The amount of these losses for prior years were considered immaterial for reclassification.

177


 

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 23 to the Consolidated Financial Statements for a description of such arrangements.

No liabilities were incurred as a result of these securitizations during the years ended December 31, 2021 and 2020 because they did not contain any credit recourse arrangements. The Corporation recorded a net gain of $18.4 million and $27.3 million, respectively, during the years ended December 31, 2021 and 2020 related to the residential mortgage loans securitized.

The following tables present the initial fair value of the assets obtained as proceeds from residential mortgage loans securitized during the years ended December 31, 2021 and 2020:

 

 

 

Proceeds Obtained During the Year Ended December 31, 2021

(In thousands)

Level 1

Level 2

Level 3

Initial fair value

Assets

 

 

 

 

 

 

 

 

Trading account debt securities:

 

 

 

 

 

 

 

 

Mortgage-backed securities - GNMA

$

-

$

380,228

$

-

$

380,228

Mortgage-backed securities - FNMA

 

-

 

329,617

 

-

 

329,617

Mortgage-backed securities - FHLMC

 

-

 

22,688

 

-

 

22,688

Total trading account debt securities

$

-

$

732,533

$

-

$

732,533

Mortgage servicing rights

$

-

$

-

$

11,314

$

11,314

Total

$

-

$

732,533

$

11,314

$

743,847

 

 

 

Proceeds Obtained During the Year Ended December 31, 2020

(In thousands)

Level 1

Level 2

Level 3

Initial fair value

Assets

 

 

 

 

 

 

 

 

Trading account debt securities:

 

 

 

 

 

 

 

 

Mortgage-backed securities - GNMA

$

-

$

332,207

$

-

$

332,207

Mortgage-backed securities - FNMA

 

-

 

175,864

 

-

 

175,864

Total trading account debt securities

$

-

$

508,071

$

-

$

508,071

Mortgage servicing rights

$

-

$

-

$

7,236

$

7,236

Total

$

-

$

508,071

$

7,236

$

515,307

 

 

During the year ended December 31, 2021, the Corporation retained servicing rights on whole loan sales involving approximately $144 million in principal balance outstanding (2020 - $147 million), with net realized gains of approximately $3.2 million (2020 - $3.9 million). All loan sales performed during the years ended December 31, 2021 and 2020 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 years ended December 31, 2021 and 2020.

178


 

Residential MSRs

(In thousands)

December 31, 2021

December 31, 2020

Fair value at beginning of period

$

118,395

$

150,906

Additions

 

13,391

 

9,544

Changes due to payments on loans [1]

 

(15,383)

 

(11,692)

Reduction due to loan repurchases

 

(1,233)

 

(11,060)

Changes in fair value due to changes in valuation model inputs or assumptions

 

6,410

 

(19,327)

Other

 

(10)

 

24

Fair value at end of period [2]

$

121,570

$

118,395

[1] Represents changes due to collection / realization of expected cash flows over time.

[2] At December 31, 2021, PB had MSRs amounting to $1.6 million (December 31, 2020 - $0.7 million).

 

Residential mortgage loans serviced for others were $12.1 billion at December 31, 2021 (2020 - $12.9 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 December 31, 2021, those weighted average mortgage servicing fees were 0.30% (2020 – 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 years ended December 31, 2021 and 2020 were as follows:

 

Years ended

 

December 31, 2021

 

December 31, 2020

 

BPPR

PB

 

BPPR

PB

Prepayment speed

6.8

%

19.0

%

 

7.6

%

21.9

%

Weighted average life (in years)

8.3

 

20.9

 

 

8.7

 

3.6

 

Discount rate (annual rate)

10.5

%

10.7

%

 

10.9

%

10.5

%

 

Key economic assumptions used to estimate the fair value of MSRs derived from sales and securitizations of mortgage loans performed by the banking subsidiaries and servicing rights purchased from other financial institutions, and the sensitivity to immediate changes in those assumptions, were as follows as of the end of the periods reported:

 

 

 

Originated MSRs

Purchased MSRs

 

 

December 31,

December 31,

December 31,

December 31,

(In thousands)

2021

2020

2021

2020

Fair value of servicing rights

$

40,058

 

$

44,129

 

$

81,512

 

$

74,266

 

Weighted average life (in years)

 

7.1

 

 

6.2

 

 

7.5

 

 

5.9

 

Weighted average prepayment speed (annual rate)

 

7.7

%

 

6.6

%

 

7.6

%

 

7.1

%

 

Impact on fair value of 10% adverse change

$

(1,500)

 

$

(1,115)

 

$

(1,486)

 

$

(2,206)

 

 

Impact on fair value of 20% adverse change

$

(2,359)

 

$

(2,194)

 

$

(3,495)

 

$

(4,312)

 

Weighted average discount rate (annual rate)

 

11.2

%

 

11.3

%

 

11.0

%

 

11.1

%

 

Impact on fair value of 10% adverse change

$

(2,079)

 

$

(1,640)

 

$

(2,731)

 

$

(2,740)

 

 

Impact on fair value of 20% adverse change

$

(3,452)

 

$

(3,175)

 

$

(5,832)

 

$

(5,301)

 

179


 

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 December 31, 2021, the Corporation serviced $0.7 billion (2020 - $0.9 billion) in residential mortgage loans with credit recourse to the Corporation, from which $26 million was 60 days or more past due (2020 - $52 million). Also refer to Note 23 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 December 31, 2021, the Corporation had recorded $13 million in mortgage loans on its Consolidated Statements of Financial Condition related to this buy-back option program (2020 - $57 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 year ended December 31, 2021, the Corporation repurchased approximately $94 million of mortgage loans from its GNMA servicing portfolio (2020 - $862 million). 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, mostly 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 COVID-19 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.

180


 

Note 12 - Premises and equipment

Premises and equipment are stated at cost less accumulated depreciation and amortization as follows:

 

(In thousands)

Useful life in years

 

2021

 

2020

Premises and equipment:

 

 

 

 

 

 

Land

 

$

94,246

$

109,780

 

Buildings

10-50

 

468,293

 

512,131

 

Equipment

2-10

 

374,192

 

350,014

 

Leasehold improvements

3-10

 

87,406

 

87,289

 

 

 

 

929,891

 

949,434

 

Less - Accumulated depreciation and amortization

 

 

559,234

 

574,835

 

Subtotal

 

 

370,657

 

374,599

 

Construction in progress

 

 

29,337

 

25,862

Premises and equipment, net

 

$

494,240

$

510,241

 

Depreciation and amortization of premises and equipment for the year 2021 was $55.1 million (2020 -$58.4 million; 2019 - $58.1 million), of which $25.2 million (2020 - $27.2 million; 2019 - $27.3 million) was charged to occupancy expense and $29.8 million (2020 - $31.2 million; 2019 - $30.8 million) was charged to equipment, communications and other operating expenses. Occupancy expense of premises and equipment is net of rental income of $13.4 million (2020 - $15.5 million; 2019 - $19.3 million). For information related to the amortization expense of finance leases, refer to Note 33 - Leases.

181


 

Note 13 – Other real estate owned

The following tables present the activity related to Other Real Estate Owned (“OREO”), for the years ended December 31, 2021, 2020 and 2019.

 

 

 

For the year ended December 31, 2021

 

 

OREO

 

OREO

 

 

(In thousands)

 

Commercial/Construction

 

Mortgage

 

Total

Balance at beginning of period

$

13,214

$

69,932

$

83,146

Write-downs in value

 

(1,058)

 

(2,161)

 

(3,219)

Additions

 

9,746

 

55,898

 

65,644

Sales

 

(7,282)

 

(52,666)

 

(59,948)

Other adjustments

 

397

 

(943)

 

(546)

Ending balance

$

15,017

$

70,060

$

85,077

 

 

 

For the year ended December 31, 2020

 

 

OREO

 

OREO

 

 

(In thousands)

 

Commercial/Construction

 

Mortgage

 

Total

Balance at beginning of period

$

16,959

$

105,113

$

122,072

Write-downs in value

 

(1,564)

 

(3,060)

 

(4,624)

Additions

 

2,223

 

17,785

 

20,008

Sales

 

(4,359)

 

(49,797)

 

(54,156)

Other adjustments

 

(45)

 

(109)

 

(154)

Ending balance

$

13,214

$

69,932

$

83,146

 

 

 

For the year ended December 31, 2019

 

 

OREO

 

OREO

 

 

(In thousands)

 

Commercial/ Construction

 

Mortgage

 

Total

Balance at beginning of period

$

21,794

$

114,911

$

136,705

Write-downs in value

 

(1,584)

 

(4,541)

 

(6,125)

Additions

 

6,801

 

62,630

 

69,431

Sales

 

(9,892)

 

(67,137)

 

(77,029)

Other adjustments

 

(160)

 

(750)

 

(910)

Ending balance

$

16,959

$

105,113

$

122,072

182


 

Note 14 − Other assets

The caption of other assets in the consolidated statements of financial condition consists of the following major categories:

 

(In thousands)

December 31, 2021

December 31, 2020

Net deferred tax assets (net of valuation allowance)

$

657,597

$

851,592

Investments under the equity method

 

298,988

 

250,467

Prepaid taxes

 

37,924

 

32,615

Other prepaid expenses

 

79,845

 

74,572

Derivative assets

 

26,093

 

20,785

Trades receivable from brokers and counterparties

 

65,460

 

65,429

Principal, interest and escrow servicing advances

 

53,942

 

65,671

Guaranteed mortgage loan claims receivable

 

98,001

 

80,477

Operating ROU assets (Note 33)

 

141,748

 

131,921

Finance ROU assets (Note 33)

 

13,459

 

15,464

Others

 

155,514

 

148,048

Total other assets

$

1,628,571

$

1,737,041

 

The Corporation enters in the ordinary course of business into technology hosting arrangements that are service contracts. These arrangements can include capitalizable implementation costs that are amortized during the term of the hosting arrangement. The Corporation recognizes capitalizable implementation costs related to hosting arrangements that are service contracts within Others in the table above. As of December 31, 2021, the total capitalized implementation costs amounted to $18.4 million with an accumulated amortization of $8.8 million for a net value of $9.6 million, compared to total capitalized implementation costs amounting to $17.4 million with an accumulated amortization of $4.9 million for a net value of $12.5 million as of December 31, 2020. Total amortization expense for all capitalized implementation costs of hosting arrangements that are service contracts for the year ended December 31, 2021 was $3.9 million (December 31, 2020 - $2.2 million).

183


 

Note 15 – Goodwill and other intangible assets

The changes in the carrying amount of goodwill for the year ended December 31, 2021, allocated by reportable segments, were as follows (refer to Note 37 for the definition of the Corporation’s reportable segments):

 

2021

 

 

 

 

 

 

 

Balance at

Goodwill on

Balance at

(In thousands)

January 1, 2021

acquisition

December 31,2021

Banco Popular de Puerto Rico

$

320,248

$

-

$

320,248

Popular U.S.

 

350,874

 

49,171

 

400,045

Total Popular, Inc.

$

671,122

$

49,171

$

720,293

 

The goodwill recognized during the year ended December 31, 2021 in the reportable segment of Popular U.S. of $49 million was related to the K2 Transaction. Refer to Note 4, Business combination, for additional information related to the K2 Transaction, including the goodwill and other intangible assets recognized.

 

There were no changes in the carrying amount of goodwill for the year ended December 31, 2020.

 

At December 31, 2021, the Corporation had $0.7 million of identifiable intangible assets with indefinite useful lives, compared to $6.1 million at December 31, 2020, due to the recognition of an impairment loss of $5.4 million associated with a trademark.

 

The following table reflects the components of other intangible assets subject to amortization:

 

 

 

 

Gross

 

 

 

Net

 

 

 

Carrying

 

Accumulated

 

Carrying

(In thousands)

 

Amount

 

Amortization

 

Value

December 31, 2021

 

 

 

 

 

 

 

 

 

 

Core deposits

 

$

12,810

 

$

8,754

 

$

4,056

 

Other customer relationships

 

 

14,286

 

 

2,883

 

 

11,403

Total other intangible assets

 

$

27,096

 

$

11,637

 

$

15,459

December 31, 2020

 

 

 

 

 

 

 

 

 

 

Core deposits

 

$

12,810

 

$

7,473

 

$

5,337

 

Other customer relationships

 

 

26,397

 

 

15,684

 

 

10,713

 

Trademark

 

 

488

 

 

236

 

 

252

Total other intangible assets

 

$

39,695

 

$

23,393

 

$

16,302

 

During the year ended December 31, 2021, $15.0 million in other customer relationships became fully amortized and thus were removed from the Corporation’s intangibles assets, from which $14.2 million were recognized as part of the purchase of the American Airlines co-branded credit card portfolio during 2011.

 

During the year ended December 31, 2021, the Corporation recognized $ 9.1 million in amortization expense related to other intangible assets with definite useful lives, which includes the previously mentioned $5.4 million impairment loss (2020 - $ 6.4 million; 2019 - $9.4 million).

 

The following table presents the estimated amortization of the intangible assets with definite useful lives for each of the following periods:

184


 

(In thousands)

 

 

Year 2022

$

3,299

Year 2023

 

3,179

Year 2024

 

2,938

Year 2025

 

1,750

Year 2026

 

1,416

Later years

 

2,877

 

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 2021 using July 31, 2021 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

185


 

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 11.34% to15.13 % for the 2021 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.

 

No impairment was recognized by the Corporation from the annual test as of July 31, 2021. The results of the BPPR annual goodwill impairment test as of July 31, 2021 indicated that the average estimated fair value using all valuation methodologies exceeded BPPR’s equity value by approximately $1.5 billion or 50% compared to $282 million or 9%, for the annual goodwill impairment test completed as of July 31, 2020. 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 $412 million or 24%, compared to $215 million or 13%, for the annual goodwill impairment test completed as of July 31, 2020. The goodwill balance of BPPR and PB, as legal entities, represented approximately 91% of the Corporation’s total goodwill balance as of the July 31, 2021 valuation date.

 

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, 2021 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. Declines in the Corporation’s market capitalization and adverse economic conditions sustained over a longer period of time negatively affecting forecasted cash flows could increase the risk of goodwill impairment in the future.

 

The extent to which the COVID-19 pandemic further impacts our business, results of operations and financial condition, as well as the operations of our clients, customers, service providers and suppliers, will depend on future developments, which are highly uncertain and is difficult to predict, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response thereto. A decline in the Corporation’s stock price related to global and/or regional macroeconomic conditions, the continued weakness in the Puerto Rico economy and fiscal situation, reduced future earnings estimates, additional expenses and higher credit losses, and the continuance of the current interest rate environment 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 impact regulatory capital calculations.

 

The following tables present the gross amount of goodwill and accumulated impairment losses by reportable segments.

 

186


 

December 31, 2021

 

Balance at

 

 

Balance at

 

December 31,

Accumulated

December 31,

 

2021

impairment

2021

(In thousands)

(gross amounts)

losses

(net amounts)

Banco Popular de Puerto Rico

$

324,049

$

3,801

$

320,248

Popular U.S.

 

564,456

 

164,411

 

400,045

Total Popular, Inc.

$

888,505

$

168,212

$

720,293

 

December 31, 2020

 

Balance at

 

 

Balance at

 

December 31,

Accumulated

December 31,

 

2020

impairment

2020

(In thousands)

(gross amounts)

losses

(net amounts)

Banco Popular de Puerto Rico

$

324,049

$

3,801

$

320,248

Popular U.S.

 

515,285

 

164,411

 

350,874

Total Popular, Inc.

$

839,334

$

168,212

$

671,122

187


 

Note 16 – Deposits

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

(In thousands)

December 31, 2021

December 31, 2020

Savings accounts

$

15,871,998

$

14,031,736

NOW, money market and other interest bearing demand deposits

 

28,736,459

 

22,398,057

Total savings, NOW, money market and other interest bearing demand deposits

 

44,608,457

 

36,429,793

Certificates of deposit:

 

 

 

 

 

Under $250,000

 

4,086,059

 

4,524,794

 

$250,000 and over

 

2,626,090

 

2,783,054

Total certificates of deposit

 

6,712,149

 

7,307,848

Total interest bearing deposits

$

51,320,606

$

43,737,641

 

A summary of certificates of deposits by maturity at December 31, 2021 follows:

(In thousands)

 

 

2022

$

4,043,357

2023

 

864,315

2024

 

681,201

2025

 

511,710

2026

 

534,030

2027 and thereafter

 

77,536

Total certificates of deposit

$

6,712,149

 

At December 31, 2021, the Corporation had brokered deposits amounting to $ 0.8 billion (December 31, 2020 - $ 0.8 billion).

 

The aggregate amount of overdrafts in demand deposit accounts that were reclassified to loans was $6 million at December 31, 2021 (December 31, 2020 - $3 million)

 

At December 31, 2021, public sector deposits amounted to $20.3 billion. A significant portion of Puerto Rico public sector deposits are expected to be used by Puerto Rico pursuant to the Plan of Adjustment for Puerto Rico confirmed by the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) Title III Court, which is expected to become effective on or about March 15, 2022. However, the receipt by the P.R. Government of additional COVID-19 and hurricane recovery related Federal assistance, and seasonal tax collections, could increase public deposit balances at BPPR in the near term. The rate at which public deposit balances will decline is uncertain and difficult to predict. The amount and timing of any such reduction is likely to be impacted by, for example, the implementation of PROMESA and the speed at which COVID-19 federal assistance is distributed.

188


 

Note 17 – Borrowings

 

Assets sold under agreements to repurchase

Assets sold under agreements to repurchase amounted to $92 million at December 31, 2021 and $121 million December 31, 2020.

 

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, 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

 

 

December 31, 2021

December 31, 2020

 

 

 

 

Repurchase liability

 

 

Repurchase liability

 

 

 

Repurchase

weighted average

 

Repurchase

weighted average

(Dollars in thousands)

 

liability

interest rate

 

liability

interest rate

U.S. Treasury securities

 

 

 

 

 

 

 

 

 

Within 30 days

$

19,538

0.30

%

$

67,157

1.16

%

 

After 30 to 90 days

 

30,295

0.21

 

 

39,318

1.20

 

 

After 90 days

 

29,036

0.29

 

 

9,979

0.33

 

Total U.S. Treasury securities

 

78,869

0.26

 

 

116,454

1.10

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

 

Within 30 days

 

11,733

0.26

 

 

3,778

0.28

 

 

After 30 to 90 days

 

-

-

 

 

268

1.50

 

 

After 90 days

 

722

0.16

 

 

-

-

 

Total mortgage-backed securities

 

12,455

0.26

 

 

4,046

0.36

 

Collateralized mortgage obligations

 

 

 

 

 

 

 

 

 

Within 30 days

 

279

0.25

 

 

803

0.24

 

Total collateralized mortgage obligations

 

279

0.25

 

 

803

0.24

 

Total

$

91,603

0.26

%

$

121,303

1.07

%

 

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.

189


 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

2021

 

 

2020

 

Maximum aggregate balance outstanding at any month-end

$

92,101

 

$

195,498

 

Average monthly aggregate balance outstanding

$

91,394

 

$

143,718

 

Weighted average interest rate:

 

 

 

 

 

 

 

For the year

 

0.35

%

 

1.63

%

 

At December 31

 

0.26

%

 

1.11

%

 

Other short-term borrowings

At December 31, 2021, other short-term borrowings consisted of $75 million in FHLB Advances. There were no other short-term borrowings outstanding at December 31, 2020. The following table presents additional information related to the Corporation’s other short-term borrowings for the years ended December 31, 2021 and December 31, 2020.

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

2021

 

 

2020

 

Maximum aggregate balance outstanding at any month-end

$

75,000

 

$

100,000

 

Average monthly aggregate balance outstanding

$

343

 

$

21,557

 

Weighted average interest rate:

 

 

 

 

 

 

 

For the year

 

0.35

%

 

0.56

%

 

At December 31

 

0.35

%

 

0.73

%

 

Notes Payable

 

The following table presents the composition of notes payable at December 31, 2021 and December 31, 2020.

 

(In thousands)

December 31, 2021

 

December 31, 2020

Advances with the FHLB with maturities ranging from 2022 through 2029 paying interest at monthly fixed rates ranging from 0.39% to 3.18% (2020 - 0.39% to 4.19%)

$

492,429

 

$

542,469

Advances with the FRB maturing on 2022 paying interest at annual fixed rate of 0.35%[1]

 

-

 

 

1,009

Unsecured senior debt securities maturing on 2023 paying interest semiannually at a fixed rate of 6.125%, net of debt issuance costs of $2,158 (2020 - $3,426)

 

297,842

 

 

296,574

Junior subordinated deferrable interest debentures (related to trust preferred securities) maturing on 2034 with fixed interest rates ranging from 6.125% to 6.564% (2020 - 6.125% to 6.70%), net of debt issuance costs of $342 (2020 - $369)

 

198,292

 

 

384,929

Total notes payable

$

988,563

 

$

1,224,981

[1] During the second quarter of 2021, the Paycheck Protection Program Liquidity Facility advance was prepaid.

 

Notes payable included junior subordinated debentures issued by the Corporation that were associated to capital issued by the Popular Capital Trust I. On November 1, 2021, the Corporation redeemed all outstanding 6.70% Cumulative Monthly Income Trust Preferred Securities (the “Capital Securities”) issued by the Popular Capital Trust I (liquidation amount of $25 per security and amounting to approximately $187 million (or approximately $181 million after excluding Popular’s participation in the Trust of approximately $6 million) in the aggregate). The redemption price for the Capital Securities was equal to $25 per security plus accrued and unpaid distributions up to and excluding the redemption date in the amount of $0.139583 per security, for a total payment per security in the amount of $25.139583. Upon redemption, Popular delisted the Capital Securities of Popular Capital Trust I (NASDAQ: BPOPN) from the Nasdaq Global Select Market.

A breakdown of borrowings by contractual maturities at December 31, 2021 is included in the table below.

 

190


 

 

 

Assets sold under

 

Short-term

 

 

 

(In thousands)

 

agreements to repurchase

 

borrowings

 

Notes payable

Total

2022

$

91,603

 

75,000

$

103,148

$

269,751

2023

 

-

 

-

 

341,103

 

341,103

2024

 

-

 

-

 

91,943

 

91,943

2025

 

-

 

-

 

139,920

 

139,920

2026

 

-

 

-

 

74,500

 

74,500

Later years

 

-

 

-

 

237,949

 

237,949

Total borrowings

$

91,603

 

75,000

$

988,563

$

1,155,166

 

At December 31, 2021 and 2020, the Corporation had FHLB borrowing facilities whereby the Corporation could borrow up to $3.0 billion, of which $0.6 billion and $0.5 billion, respectively, were used. In addition, at December 31, 2021 and 2020, the Corporation had placed $1.2 billion and $0.9 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 loans held-in-portfolio, and do not have restrictive covenants or callable features.

 

Also, at December 31, 2021, the Corporation has a borrowing facility at the discount window of the Federal Reserve Bank of New York amounting to $1.3 billion (2020 - $1.4 billion), which remained unused at December 31, 2021 and December 31, 2020.

191


 

Note 18 – Trust preferred securities

Statutory trusts established by the Corporation (Popular Capital Trust I, Popular North America Capital Trust I and Popular Capital Trust II) had issued trust preferred securities (also referred to as “capital securities”) to the public. The proceeds from such issuances, together with the proceeds of the related issuances of common securities of the trusts (the “common securities”), were used by the trusts to purchase junior subordinated deferrable interest debentures (the “junior subordinated debentures”) issued by the Corporation.

The sole assets of the trusts consisted of the junior subordinated debentures of the Corporation and the related accrued interest receivable. These trusts are not consolidated by the Corporation pursuant to accounting principles generally accepted in the United States of America.

The junior subordinated debentures are included by the Corporation as notes payable in the Consolidated Statements of Financial Condition, while the common securities issued by the issuer trusts are included as debt securities held-to-maturity. The common securities of each trust are wholly-owned, or indirectly wholly-owned, by the Corporation.

As disclosed in Note 17, on November 1, 2021, the Corporation redeemed all outstanding trust preferred securities issued by the Popular Capital Trust I amounting to approximately $187 million (or approximately $181 million after excluding the Corporation’s participation in the Trust of approximately $6 million) in the aggregate.

The following tables presents financial data pertaining to the different trusts at December 31, 2021 and 2020.

 

(Dollars in thousands)

December 31, 2021

 

 

 

 

Popular

 

 

 

 

 

 

 

 

North America

 

 

Popular

 

Issuer

 

Capital Trust I

 

Capital Trust Il

 

Capital securities

 

 

$

91,651

 

 

$

101,023

 

Distribution rate

 

 

 

6.564

%

 

 

6.125

%

Common securities

 

 

$

2,835

 

 

$

3,125

 

Junior subordinated debentures aggregate liquidation amount

 

 

$

94,486

 

 

$

104,148

 

Stated maturity date

 

 

September 2034

 

 

December 2034

 

Reference notes

 

 

 

[1],[3],[5]

 

 

 

[2],[4],[5]

 

[1] Statutory business trust that is wholly-owned by PNA and indirectly wholly-owned by the Corporation.

[2] Statutory business trust that is wholly-owned by the Corporation.

[3] The obligation of PNA under the junior subordinated debenture and its guarantees of the capital securities under the trust is fully and unconditionally guaranteed on a subordinated basis by the Corporation to the extent set forth in the guarantee agreement.

[4] These capital securities are fully and unconditionally guaranteed on a subordinated basis by the Corporation to the extent set forth in the guarantee agreement.

[5] The Corporation has the right, subject to any required prior approval from the Federal Reserve, to redeem after certain dates or upon the occurrence of certain events mentioned below, the junior subordinated debentures at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of redemption. The maturity of the junior subordinated debentures may be shortened at the option of the Corporation prior to their stated maturity dates (i) on or after the stated optional redemption dates stipulated in the agreements, in whole at any time or in part from time to time, or (ii) in whole, but not in part, at any time within 90 days following the occurrence and during the continuation of a tax event, an investment company event or a capital treatment event as set forth in the indentures relating to the capital securities, in each case subject to regulatory approval.

 

192


 

(Dollars in thousands)

December 31, 2020

 

 

 

 

 

 

 

Popular

 

 

 

 

 

 

 

 

Popular

 

North America

 

 

Popular

 

Issuer

Capital Trust I

 

Capital Trust I

 

Capital Trust Il

 

Capital securities

 

$

181,063

 

 

$

91,651

 

 

$

101,023

 

Distribution rate

 

 

6.700

%

 

 

6.564

%

 

 

6.125

%

Common securities

 

$

5,601

 

 

$

2,835

 

 

$

3,125

 

Junior subordinated debentures aggregate liquidation amount

$

186,664

 

 

$

94,486

 

 

$

104,148

 

Stated maturity date

 

November 2033

 

 

September 2034

 

 

December 2034

 

Reference notes

 

 

[2],[4],[5]

 

 

 

[1],[3],[5]

 

 

 

[2],[4],[5]

 

[1] Statutory business trust that is wholly-owned by PNA and indirectly wholly-owned by the Corporation.

[2] Statutory business trust that is wholly-owned by the Corporation.

[3] The obligation of PNA under the junior subordinated debenture and its guarantees of the capital securities under the trust is fully and unconditionally guaranteed on a subordinated basis by the Corporation to the extent set forth in the guarantee agreement.

[4] These capital securities are fully and unconditionally guaranteed on a subordinated basis by the Corporation to the extent set forth in the applicable guarantee agreement.

[5] The Corporation has the right, subject to any required prior approval from the Federal Reserve, to redeem after certain dates or upon the occurrence of certain events mentioned below, the junior subordinated debentures at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of redemption. The maturity of the junior subordinated debentures may be shortened at the option of the Corporation prior to their stated maturity dates (i) on or after the stated optional redemption dates stipulated in the agreements, in whole at any time or in part from time to time, or (ii) in whole, but not in part, at any time within 90 days following the occurrence and during the continuation of a tax event, an investment company event or a capital treatment event as set forth in the indentures relating to the capital securities, in each case subject to regulatory approval.

At December 31, 2021, the Corporation’s $193 million in trust preferred securities outstanding do not qualify for Tier 1 capital treatment, but instead qualify for Tier 2 capital treatment compared to $374 million at December 31, 2020.

 

193


 

Note 19 − Other liabilities

The caption of other liabilities in the consolidated statements of financial condition consists of the following major categories:

 

(In thousands)

December 31, 2021

December 31, 2020

Accrued expenses

$

308,594

$

235,449

Accrued interest payable

 

33,227

 

38,622

Accounts payable

 

91,804

 

69,784

Dividends payable

 

35,937

 

33,701

Trades payable

 

13,789

 

720,212

Liability for GNMA loans sold with an option to repurchase

 

12,806

 

57,189

Reserves for loan indemnifications

 

12,639

 

24,781

Reserve for operational losses

 

43,886

 

41,452

Operating lease liabilities (Note 33)

 

154,114

 

152,588

Finance lease liabilities (Note 33)

 

19,719

 

22,572

Pension benefit obligation

 

8,778

 

35,568

Postretirement benefit obligation

 

161,988

 

179,211

Others

 

70,967

 

73,560

Total other liabilities

$

968,248

$

1,684,689

194


 

Note 20 – Stockholders’ equity

The Corporation’s common stock ranks junior to all series of preferred stock as to dividend rights and / or as to rights on liquidation, dissolution or winding up of the Corporation. Dividends on preferred stock are payable if declared. The Corporation’s ability to declare or pay dividends on, or purchase, redeem or otherwise acquire, its common stock is subject to certain restrictions in the event that the Corporation fails to pay or set aside full dividends on the preferred stock for the latest dividend period. The ability of the Corporation to pay dividends in the future is limited by regulatory requirements, legal availability of funds, recent and projected financial results, capital levels and liquidity of the Corporation, general business conditions and other factors deemed relevant by the Corporation’s Board of Directors.

The Corporation’s common stock trades on the NASDAQ Stock Market LLC (the “NASDAQ”) under the symbol BPOP. The 2003 Series A Preferred Stock are not listed on NASDAQ.

Preferred stocks

The Corporation has 30,000,000 shares of authorized preferred stock that may be issued in one or more series, and the shares of each series shall have such rights and preferences as shall be fixed by the Board of Directors when authorizing the issuance of that particular series. The Corporation’s shares of preferred stock at December 31, 2021 consisted of:

 

6.375% non-cumulative monthly income preferred stock, 2003 Series A, no par value, liquidation preference value of $25 per share. Holders on record of the 2003 Series A Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors of the Corporation or an authorized committee thereof, out of funds legally available, non-cumulative cash dividends at the annual rate per share of 6.375% of their liquidation preference value, or $0.1328125 per share per month. These shares of preferred stock are perpetual, nonconvertible, have no preferential rights to purchase any securities of the Corporation and are redeemable solely at the option of the Corporation with the consent of the Board of Governors of the Federal Reserve System. The redemption price per share is $25.00. The shares of 2003 Series A Preferred Stock have no voting rights, except for certain rights in instances when the Corporation does not pay dividends for a defined period. These shares are not subject to any sinking fund requirement. Cash dividends declared and paid on the 2003 Series A Preferred Stock amounted to $1.4 million for the years ended December 31, 2021, 2020 and 2019. Outstanding shares of 2003 Series A Preferred Stock amounted to 885,726 at December 31, 2021, 2020 and 2019.

 

On February 24, 2020, the Corporation redeemed all the outstanding shares of the 2008 Series B Preferred Stock. The redemption price of the 2008 Series B Preferred Stock was $25.00 per share, plus $0.1375 (representing the amount of accrued and unpaid dividends for the current monthly dividend period to the redemption date), for a total payment per share in the amount of $25.1375.

 

At December 31, 2019 the Corporation had 1,120,665 outstanding shares of 2008 Series B Preferred Stock, described as follows:

 

8.25% non-cumulative monthly income preferred stock, 2008 Series B, no par value, liquidation preference value of $25 per share. The shares of 2008 Series B Preferred Stock were issued in May 2008. Holders of record of the 2008 Series B Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors of the Corporation or an authorized committee thereof, out of funds legally available, non-cumulative cash dividends at the annual rate per share of 8.25% of their liquidation preferences, or $0.171875 per share per month. These shares of preferred stock are perpetual, nonconvertible, have no preferential rights to purchase any securities of the Corporation and are redeemable solely at the option of the Corporation with the consent of the Board of Governors of the Federal Reserve System beginning on May 28, 2013. Cash dividends declared and paid on the 2008 Series B Preferred Stock amounted to $ 2.3 million for the year ended December 31, 2019.

 

Common stocks

Dividends

During the year 2021, cash dividends of $1.75 (2020 - $1.60; 2019 - $1.20) per common share outstanding were declared amounting to $142.3 million (2020 - $136.6 million; 2019 - $116.0 million) of which $35.9 million were payable to shareholders of common stock at December 31, 2021 (2020 - $33.7 million; 2019 - $29.0 million). The quarterly dividend of $0.45 per share declared to shareholders of record as of the close of business on December 7, 2021, was paid on January 3, 2022. On January 12, 2022, the Corporation announced as part of its capital plan for 2022, an increase in its quarterly common stock dividend from $0.45 to $0.55 per share, beginning in the second quarter of 2022, subject to approval by its Board of Directors. On February 23, 2022, the

195


 

Corporation’s Board of Directors approved a quarterly cash dividend of $0.55 per share on its outstanding common stock, payable on April 1, 2022 to shareholders of record at the close of business on March 15, 2022.

Accelerated share repurchase transaction (“ASR”)

On May 3, 2021, the Corporation entered into a $350 million ASR transaction with respect to its common stock, which was accounted for as a treasury stock transaction. As a result of the receipt of the initial 3,785,831 shares, the Corporation recognized in stockholders’ equity approximately $280 million in treasury stock and $70 million as a reduction in capital surplus. The Corporation completed the transaction on September 9, 2021 and received 828,965 additional shares of common stock and recognized $61 million in treasury stock with a corresponding increase in capital surplus. In total, the Corporation repurchased a total of 4,614,796 shares at an average price of $75.8430 under the ASR Agreement.

 

On January 30, 2020, the Corporation entered into a $500 million ASR transaction with respect to its common stock, which was accounted for as a treasury stock transaction. As a result of the receipt of the initial 7,055,919 shares, the Corporation recognized in stockholders’ equity approximately $400 million in treasury stock and $100 million as a reduction in capital surplus. On March 19, 2020 (the “early termination date”), the dealer counterparty to the ASR exercised its right to terminate the ASR as a result of the trading price of the Corporation’s common stock falling below a specified level due to the effects of the COVID-19 pandemic on the global markets. As a result of such early termination, the final settlement of the ASR, which was expected to occur during the fourth quarter of 2020, occurred during the second quarter of 2020. The Corporation completed the transaction on May 27, 2020 and received 4,763,216 additional shares of common stock after the early termination date. In total the Corporation repurchased 11,819,135 shares at an average price per share of $42.3043 under the ASR.

 

During the fourth quarter of 2019, the Corporation completed a $250 million ASR. In connection therewith, the Corporation received an initial delivery of 3,500,000 shares of common stock during the first quarter of 2019 and received 1,165,607 additional shares of common stock during the fourth quarter of 2019. The final number of shares delivered at settlement was based on the average daily volume weighted average prince (“VWAP”) of its common stock, net of a discount, during the term of the ASR of $53.58. In connection with the transaction, the Corporation recognized $266 million in treasury stock, offset by $16 million adjustment to capital surplus.

Statutory reserve

The Banking Act of the Commonwealth of Puerto Rico requires that a minimum of 10% of BPPR’s net income for the year be transferred to a statutory reserve account until such statutory reserve equals the total of paid-in capital on common and preferred stock. Any losses incurred by a bank must first be charged to retained earnings and then to the reserve fund. Amounts credited to the reserve fund may not be used to pay dividends without the prior consent of the Puerto Rico Commissioner of Financial Institutions. The failure to maintain sufficient statutory reserves would preclude BPPR from paying dividends. BPPR’s statutory reserve fund amounted to $786 million at December 31, 2021 (2020 - $708 million; 2019 - $659 million). During 2021, $78 million was transferred to the statutory reserve account (2020 - $49 million, 2019 - $60 million). BPPR was in compliance with the statutory reserve requirement in 2021, 2020 and 2019.

196


 

Note 21 – Regulatory capital requirements

The Corporation, BPPR and PB are subject to various regulatory capital requirements imposed by the federal banking agencies. Failure to meet minimum capital requirements can lead to certain mandatory and additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s consolidated financial statements. Popular, Inc., BPPR and PB are subject to Basel III capital requirements, including minimum and well capitalized regulatory capital ratios and compliance with the standardized approach for determining risk-weighted assets.

The Basel III Capital Rules established a Common Equity Tier I (“CET1”) capital measure and related regulatory capital ratio CET1 to risk-weighted assets.

The Basel III Capital Rules provide that a depository institution will be deemed to be well capitalized if it maintained a leverage ratio of at least 5%, a CET1 ratio of at least 6.5%, a Tier 1 risk-based capital ratio of at least 8% and a total risk-based ratio of at least 10%. Management has determined that at December 31, 2021 and 2020, the Corporation exceeded all capital adequacy requirements to which it is subject.

The Corporation has been designated by the Federal Reserve Board as a Financial Holding Company (“FHC”) and is eligible to engage in certain financial activities permitted under the Gramm-Leach-Bliley Act of 1999.

Pursuant to the adoption of the CECL accounting standard on January 1, 2020, the Corporation elected to use a five-year transition period option as permitted 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 the adoption of the CECL accounting standard 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.

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 December 31, 2021, the Corporation has $353 million in PPP loans and no loans were pledged as collateral for PPPL Facilities.

At December 31, 2021 and 2020, BPPR and PB were well-capitalized under the regulatory framework for prompt corrective action.

The following tables present the Corporation’s risk-based capital and leverage ratios at December 31, 2021 and 2020 under the Basel III regulatory guidance.

197


 

 

 

Actual

 

 

Capital adequacy minimum requirement (including conservation capital buffer) [1]

(Dollars in thousands)

 

Amount

Ratio

 

 

Amount

Ratio

 

 

 

2021

 

Total Capital (to Risk-Weighted Assets):

 

 

 

 

 

 

 

 

Corporation

$

6,084,105

19.35

%

$

3,301,329

10.500

%

BPPR

 

4,281,930

18.92

 

 

2,376,184

10.500

 

PB

 

1,361,911

16.78

 

 

852,032

10.500

 

 

 

 

 

 

 

 

 

 

Common Equity Tier I Capital (to Risk-Weighted Assets):

 

 

 

 

 

 

 

 

Corporation

$

5,476,031

17.42

%

$

2,200,886

7.000

%

BPPR

 

3,998,102

17.67

 

 

1,584,123

7.000

 

PB

 

1,309,398

16.14

 

 

568,021

7.000

 

 

 

 

 

 

 

 

 

 

Tier I Capital (to Risk-Weighted Assets):

 

 

 

 

 

 

 

 

Corporation

$

5,498,174

17.49

%

$

2,672,504

8.500

%

BPPR

 

3,998,102

17.67

 

 

1,923,577

8.500

 

PB

 

1,309,398

16.14

 

 

689,740

8.500

 

 

 

 

 

 

 

 

 

 

Tier I Capital (to Average Assets):

 

 

 

 

 

 

 

 

Corporation

$

5,498,174

7.41

%

$

2,969,535

4

%

BPPR

 

3,998,102

6.24

 

 

2,561,003

4

 

PB

 

1,309,398

13.44

 

 

389,736

4

 

[1] The conservation capital buffer included for these ratios is 2.5%, except for the Tier I to Average Asset ratio for which the buffer is not applicable and therefore the capital adequacy minimum of 4% is presented.

198


 

 

 

Actual

 

 

Capital adequacy minimum requirement (including conservation capital buffer)

 

(Dollars in thousands)

 

Amount

Ratio

 

 

Amount

Ratio

 

 

 

2020

 

Total Capital (to Risk-Weighted Assets):

 

 

 

 

 

 

 

 

Corporation

$

5,773,919

18.81

%

$

3,223,720

10.500

%

BPPR

 

4,226,887

18.58

 

 

2,388,394

10.500

 

PB

 

1,283,332

17.34

 

 

776,975

10.500

 

 

 

 

 

 

 

 

 

 

Common Equity Tier I Capital (to Risk-Weighted Assets):

 

 

 

 

 

 

 

 

Corporation

$

4,992,096

16.26

%

$

2,149,146

7.000

%

BPPR

 

3,940,385

17.32

 

 

1,592,262

7.000

 

PB

 

1,190,758

16.09

 

 

517,983

7.000

 

 

 

 

 

 

 

 

 

 

Tier I Capital (to Risk-Weighted Assets):

 

 

 

 

 

 

 

 

Corporation

$

5,014,239

16.33

%

$

2,609,678

8.500

%

BPPR

 

3,940,385

17.32

 

 

1,933,461

8.500

 

PB

 

1,190,758

16.09

 

 

628,980

8.500

 

 

 

 

 

 

 

 

 

 

Tier I Capital (to Average Assets):

 

 

 

 

 

 

 

 

Corporation

$

5,014,239

7.80

%

$

2,572,201

4

%

BPPR

 

3,940,385

7.26

 

 

2,169,835

4

 

PB

 

1,190,758

12.35

 

 

385,685

4

 

 

The following table presents the minimum amounts and ratios for the Corporation’s banks to be categorized as well-capitalized.

 

 

 

2021

 

 

2020

 

(Dollars in thousands)

 

Amount

Ratio

 

 

Amount

Ratio

 

Total Capital (to Risk-Weighted Assets):

 

 

 

 

 

 

 

 

BPPR

$

2,263,032

10

%

$

2,274,660

10

%

PB

 

811,459

10

 

 

739,976

10

 

 

 

 

 

 

 

 

 

 

Common Equity Tier I Capital (to Risk-Weighted Assets):

 

 

 

 

 

 

 

 

BPPR

$

1,470,971

6.5

%

$

1,478,529

6.5

%

PB

 

527,448

6.5

 

 

480,985

6.5

 

 

 

 

 

 

 

 

 

 

Tier I Capital (to Risk-Weighted Assets):

 

 

 

 

 

 

 

 

BPPR

$

1,810,426

8

%

$

1,819,728

8

%

PB

 

649,167

8

 

 

591,981

8

 

 

 

 

 

 

 

 

 

 

Tier I Capital (to Average Assets):

 

 

 

 

 

 

 

 

BPPR

$

3,201,254

5

%

$

2,712,294

5

%

PB

 

487,171

5

 

 

482,106

5

 

199


 

Note 22 – Other comprehensive (loss) income

The following table presents changes in accumulated other comprehensive (loss) income by component for the years ended December 31, 2021, 2020 and 2019.

 

 

Changes in Accumulated Other Comprehensive (Loss) Income by Component [1]

 

 

 

 

Years ended December 31,

(In thousands)

 

 

2021

 

2020

 

2019

Foreign currency translation

Beginning Balance

$

(71,254)

$

(56,783)

$

(49,936)

 

 

Other comprehensive income (loss)

 

3,947

 

(14,471)

 

(6,847)

 

 

Net change

 

3,947

 

(14,471)

 

(6,847)

 

 

Ending balance

$

(67,307)

$

(71,254)

$

(56,783)

Adjustment of pension and postretirement benefit plans

Beginning Balance

$

(195,056)

$

(202,816)

$

(203,836)

 

 

Other comprehensive income (loss) before reclassifications

 

23,094

 

(5,645)

 

(13,671)

 

 

Amounts reclassified from accumulated other comprehensive loss for amortization of net losses

 

12,968

 

13,405

 

14,691

 

 

Net change

 

36,062

 

7,760

 

1,020

 

 

Ending balance

$

(158,994)

$

(195,056)

$

(202,816)

Unrealized net holding (losses) gains on debt securities

Beginning Balance

$

460,900

$

92,155

$

(173,811)

 

 

Other comprehensive (loss) income before reclassifications

 

(557,002)

 

368,780

 

265,950

 

 

Amounts reclassified from accumulated other comprehensive income (loss) for (gains) losses on securities

 

(18)

 

(35)

 

16

 

 

Net change

 

(557,020)

 

368,745

 

265,966

 

 

Ending balance

$

(96,120)

$

460,900

$

92,155

Unrealized net losses on cash flow hedges

Beginning Balance

$

(4,599)

$

(2,494)

$

(391)

 

 

Reclassification to retained earnings due to cumulative effect adjustment of accounting change

 

-

 

-

 

(50)

 

 

Other comprehensive income (loss) before reclassifications

 

367

 

(6,400)

 

(4,439)

 

 

Amounts reclassified from accumulated other comprehensive loss

 

1,584

 

4,295

 

2,386

 

 

Net change

 

1,951

 

(2,105)

 

(2,103)

 

 

Ending balance

$

(2,648)

$

(4,599)

$

(2,494)

 

 

Total

$

(325,069)

$

189,991

$

(169,938)

[1] All amounts presented are net of tax.

 

 

 

 

 

 

200


 

The following table presents the amounts reclassified out of each component of accumulated other comprehensive (loss) income for the years ended December 31, 2021, 2020, and 2019.

 

 

 

Reclassifications Out of Accumulated Other Comprehensive (Loss) Income

 

 

Affected Line Item in the

Years ended December 31,

(In thousands)

Consolidated Statements of Operations

2021

2020

2019

Adjustment of pension and postretirement benefit plans

 

 

 

 

 

 

 

 

Amortization of net losses

Other operating expenses

$

(20,749)

$

(21,447)

$

(23,508)

 

 

Total before tax

 

(20,749)

 

(21,447)

 

(23,508)

 

 

Income tax benefit

 

7,781

 

8,042

 

8,817

 

 

Total net of tax

$

(12,968)

$

(13,405)

$

(14,691)

Unrealized net holding (losses) gains on debt securities

 

 

 

 

 

 

 

 

Realized gain (loss) on sale of debt securities

Net gain (loss) on sale of debt securities

$

23

$

41

$

(20)

 

 

Total before tax

 

23

 

41

 

(20)

 

 

Income tax (expense) benefit

 

(5)

 

(6)

 

4

 

 

Total net of tax

$

18

$

35

$

(16)

Unrealized net losses on cash flow hedges

 

 

 

 

 

 

 

 

Forward contracts

Mortgage banking activities

$

(704)

$

(5,559)

$

(3,992)

 

Interest rate swaps

Other operating income

 

(1,143)

 

(820)

 

110

 

 

Total before tax

 

(1,847)

 

(6,379)

 

(3,882)

 

 

Income tax benefit

 

263

 

2,084

 

1,496

 

 

Total net of tax

$

(1,584)

$

(4,295)

$

(2,386)

 

 

Total reclassification adjustments, net of tax

$

(14,534)

$

(17,665)

$

(17,093)

201


 

Note 23 – Guarantees

The Corporation has obligations upon the occurrence of certain events under financial guarantees provided in certain contractual agreements as summarized below.

 

The Corporation issues financial standby letters of credit and has risk participation in standby letters of credit issued by other financial institutions, in each case to guarantee the performance of various customers to third parties. If the customers failed to meet its financial or performance obligation to the third party under the terms of the contract, then, upon their request, the Corporation would be obligated to make the payment to the guaranteed party. At December 31, 2021, the Corporation recorded a liability of $0.2 million (December 31, 2020 - $0.2 million), which represents the unamortized balance of the obligations undertaken in issuing the guarantees under the standby letters of credit. In accordance with the provisions of ASC Topic 460, the Corporation recognizes at fair value the obligation at inception of the standby letters of credit. The fair value approximates the fee received from the customer for issuing such commitments. These fees are deferred and are recognized over the commitment period. The contracted amounts in standby letters of credit outstanding at December 31, 2021 and 2020, shown in Note 24, represent the maximum potential amount of future payments that the Corporation could be required to make under the guarantees in the event of nonperformance by the customers. These standby letters of credit are used by the customers as a credit enhancement and typically expire without being drawn upon. The Corporation’s standby letters of credit are generally secured, and in the event of nonperformance by the customers, the Corporation has rights to the underlying collateral provided, which normally includes cash, marketable securities, real estate, receivables, and others. Management does not anticipate any material losses related to these instruments.

 

Also, from time to time, the Corporation securitized mortgage loans into guaranteed mortgage-backed securities subject in certain instances, to 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. Also, from time to time, the Corporation may sell, in bulk sale transactions, residential mortgage loans and Small Business Administration (“SBA”) commercial loans subject to credit recourse or to certain representations and warranties from the Corporation to the purchaser. These representations and warranties may relate, for example, to borrower creditworthiness, loan documentation, collateral, prepayment and early payment defaults. The Corporation may be required to repurchase the loans under the credit recourse agreements or representation and warranties.

At December 31, 2021, the Corporation serviced $0.7 billion (December 31, 2020 - $0.9 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 2021, the Corporation repurchased approximately $19 million of unpaid principal balance in mortgage loans subject to the credit recourse provisions (2020 - $161 million, which included $120 million as part of the bulk loan repurchase from FNMA and FHLMC during the third quarter of 2020, for which the Corporation recorded a release of $5.1 million in its reserve for credit recourse). In the event of nonperformance by the borrower, the Corporation has rights to the underlying collateral securing the mortgage loan. The Corporation suffers 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 December 31, 2021, the Corporation’s liability established to cover the estimated credit loss exposure related to loans sold or serviced with credit recourse amounted to $12 million (December 31, 2020 - $22 million). The following table shows the changes in the Corporation’s liability of estimated losses from these credit recourses agreements, included in the consolidated statements of financial condition during the years ended December 31, 2021 and 2020.

 

 

 

Years ended December 31,

(In thousands)

 

2021

 

2020

Balance as of beginning of period

$

22,484

$

34,862

Impact of adopting CECL

 

-

 

(3,831)

Provision (benefit) for recourse liability

 

(2,948)

 

(104)

Net charge-offs

 

(7,736)

 

(8,443)

Balance as of end of period

$

11,800

$

22,484

202


 

The estimated losses to be absorbed under the credit recourse arrangements are recorded as a liability when the loans are sold and are updated by accruing or reversing expense (categorized in the line item “Adjustments (expense) to indemnity reserves on loans sold” in the consolidated statements of operations) throughout the life of the loan, as necessary, when additional relevant information becomes available. The methodology used to estimate the recourse liability is a function of the recourse arrangements given and considers a variety of factors, which include actual defaults and historical loss experience, foreclosure rate, estimated future defaults and the probability that a loan would be delinquent. Statistical methods are used to estimate the recourse liability. Expected loss rates are applied to different loan segmentations. The expected loss, which represents the amount expected to be lost on a given loan, considers the probability of default and loss severity. The probability of default represents the probability that a loan in good standing would become 90 days delinquent within the following twelve-month period. Regression analysis quantifies the relationship between the default event and loan-specific characteristics, including credit scores, loan-to-value ratios, and loan aging, among others.

 

When the Corporation sells or securitizes mortgage loans, it generally makes customary representations and warranties regarding the characteristics of the loans sold. The Corporation’s mortgage operations in Puerto Rico group conforming mortgage loans into pools which are exchanged for FNMA and GNMA mortgage-backed securities, which are generally sold to private investors, or are sold directly to FNMA for cash. As required under the government agency programs, quality review procedures are performed by the Corporation to ensure that asset guideline qualifications are met. To the extent the loans do not meet specified characteristics, the Corporation may be required to repurchase such loans or indemnify for losses and bear any subsequent loss related to the loans. There were no repurchases under BPPR’s representation and warranty arrangements during the years ended December 31, 2021 and 2020. A substantial amount of these loans reinstate to performing status or have mortgage insurance, and thus the ultimate losses on the loans are not deemed significant.

 

The following table presents the changes in the Corporation’s liability for estimated losses associated with the indemnifications and representations and warranties related to loans sold during the years ended December 31, 2021 and 2020.

 

 

 

Years ended December 31,

(In thousands)

 

2021

 

 

2020

Balance as of beginning of period

$

2,297

 

$

3,212

Provision (benefit) for representation and warranties

 

(1,458)

 

 

(915)

Balance as of end of period

$

839

 

$

2,297

203


 

Servicing agreements relating to the mortgage-backed securities programs of FNMA 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 December 31, 2021, the Corporation serviced $12.1 billion in mortgage loans for third-parties, including the loans serviced with credit recourse (December 31, 2020 - $12.9 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 December 31, 2021, the outstanding balance of funds advanced by the Corporation under such mortgage loan servicing agreements was approximately $54 million (December 31, 2020 - $66 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 both December 31, 2021 and December 31, 2020, respectively. In addition, at both December 31, 2021 and December 31, 2020, PIHC fully and unconditionally guaranteed on a subordinated basis $193 million and $374 million, respectively, 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 for further information on the trust preferred securities.

 

204


 

Note 24 – 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)

December 31, 2021

December 31, 2020

Commitments to extend credit:

 

 

 

 

 

Credit card lines

$

5,382,089

$

5,226,660

 

Commercial and construction lines of credit

 

3,830,601

 

3,805,459

 

Other consumer unused credit commitments

 

250,229

 

257,312

Commercial letters of credit

 

3,260

 

1,864

Standby letters of credit

 

27,848

 

22,266

Commitments to originate or fund mortgage loans

 

95,372

 

96,786

 

At December 31, 2021 and December 31, 2020, the Corporation maintained a reserve of approximately $7.9 million and $15.9 million, respectively, for potential losses associated with unfunded loan commitments related to commercial, construction and consumer lines of credit.

 

Other commitments

At December 31, 2021, and December 31, 2020, the Corporation also maintained other non-credit commitments for approximately $1.0 million and $1.4 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 37 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 a Fiscal Oversight and Management Board for Puerto Rico (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 December 31, 2021, the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities totaled $367 million, of which $349 million were outstanding, compared to $377 million, which were fully outstanding at December 31, 2020. Of the amount outstanding, $319 million consists of loans and $30 million are securities ($342 million and $35 million at December 31, 2020). Substantially all of the amount outstanding at December 31, 2021 and December 31, 2020 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 December 31, 2021, 75% of the Corporation’s exposure to municipal loans and securities was concentrated in the municipalities of San Juan, Guaynabo, Carolina and Bayamón. On July 1, 2021, the

205


 

Corporation received scheduled principal payments amounting to $32 million from various obligations from Puerto Rico municipalities.

 

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 December 31, 2021:

 

(In thousands)

 

Investment Portfolio

 

Loans

 

Total Outstanding

 

Total Exposure

Central Government

 

 

 

 

 

 

 

 

After 1 to 5 years

$

14

$

-

$

14

$

14

After 5 to 10 years

 

1

 

-

 

1

 

1

After 10 years

 

38

 

-

 

38

 

38

Total Central Government

 

53

 

-

 

53

 

53

Municipalities

 

 

 

 

 

 

 

 

Within 1 year

 

4,240

 

68,650

 

72,890

 

72,890

After 1 to 5 years

 

14,395

 

70,962

 

85,357

 

103,546

After 5 to 10 years

 

11,280

 

123,521

 

134,801

 

134,801

After 10 years

 

230

 

55,257

 

55,487

 

55,487

Total Municipalities

 

30,145

 

318,390

 

348,535

 

366,724

Total Direct Government Exposure

$

30,198

$

318,390

$

348,588

$

366,777

 

In addition, at December 31, 2021, the Corporation had $275 million in loans insured or securities issued by Puerto Rico governmental entities but for which the principal source of repayment is non-governmental ($317 million at December 31, 2020). These included $232 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, 2020 - $260 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 December 31, 2021, $43 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, 2020 - $46 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, $1.6 billion of residential mortgages, $353 million of Small Business Administration (“SBA”) loans under the Paycheck Protection Program (“PPP”) and $67 million commercial loans were insured or guaranteed by the U.S. Government or its agencies at December 31, 2021 (compared to $1.8 billion, $1.3 billion and $60 million, respectively, at December 31, 2020).

 

At December 31, 2021, the Corporation has operations in the United States Virgin Islands (the “USVI”) and has approximately $70 million in direct exposure to USVI government entities (December 31, 2020 - $105 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 December 31, 2021, the Corporation has operations in the British Virgin Islands (“BVI”), which has been 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

206


 

approximately $221 million comprised of various retail and commercial clients, compared to a loan portfolio of $251 million at December 31, 2020, which included a $19 million loan with the BVI Government that was paid off during the second quarter of 2021.

 

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 the 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 $33.9 million as of December 31, 2021. 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

Hazard Insurance Commission-Related Litigation

 

Popular, Inc., BPPR and Popular Insurance, LLC (the “Popular Defendants”) have been named defendants in a class action complaint captioned Pérez Díaz v. Popular, Inc., et al, filed before the Court of First Instance, Arecibo Part. The complaint originally sought damages and preliminary and permanent injunctive relief on behalf of the class against the Popular Defendants, as well as Antilles Insurance Company and MAPFRE-PRAICO Insurance Company (the “Defendant Insurance Companies”). Plaintiffs allege that the Popular Defendants have been unjustly enriched by failing to reimburse them for commissions paid by the Defendant Insurance Companies to the insurance agent and/or mortgagee for policy years when no claims were filed against their hazard insurance policies. They demand the reimbursement to the purported “class” of an estimated $400 million plus legal interest, for the “good experience” commissions allegedly paid by the Defendant Insurance Companies during the relevant time period, as well as injunctive relief seeking to enjoin the Defendant Insurance Companies from paying commissions to the insurance agent/mortgagee and ordering them to pay those fees directly to the insured. A motion for dismissal on the merits filed by the Defendant Insurance Companies was denied with a right to replead following limited targeted discovery. Each of the Puerto Rico Court of Appeals and the Puerto Rico Supreme Court denied the Popular Defendants’ request to review the lower court’s denial of the motion to dismiss. In December 2017, plaintiffs amended the complaint and, in January 2018, defendants filed an answer thereto. Separately, in October 2017, the Court entered an order whereby it broadly certified the class, after which the Popular Defendants filed a certiorari petition before the Puerto Rico Court of Appeals in relation to the class certification, which the Court declined to entertain. In November 2018 and in January 2019, plaintiffs filed voluntary dismissal petitions against MAPFRE-PRAICO Insurance Company and Antilles Insurance Company, respectively, leaving the Popular Defendants as the sole remaining defendants in the action.

207


 

 

In April 2019, the Court amended the class definition to limit it to individual homeowners whose residential units were subject to a mortgage from BPPR who, in turn, obtained risk insurance policies with Antilles Insurance or MAPFRE Insurance through Popular Insurance from 2002 to 2015, and who did not make insurance claims against said policies during their effective term. The Court approved in September 2020 the notice to the class, which is yet to be published.

 

On May 7, 2021, the Popular Defendants filed a motion for summary judgment with respect to plaintiffs’ unjust enrichment theory of liability, reserving the right to file an additional motion for summary judgment regarding damages should the court deny the Popular Defendant’s pending motion to exclude an economic expert recently designated by Plaintiffs. On May 7, 2021, Popular, Inc. and BPPR also filed a separate motion for summary judgment alleging that, even taking as true and correct Plaintiffs’ theory of liability, Popular, Inc. and BPPR are not liable to Plaintiffs since they do not receive—and are legally prohibited from receiving insurance commissions. On September 27, 2021, the Court held an oral hearing to discuss the pending motions for summary judgment. At such hearing, Plaintiffs notified they did not object the dismissal of the action with prejudice as to Popular, Inc. and BPPR, leaving Popular Insurance, LLC as the sole remaining defendant in the case. On November 1, 2021, the Court issued a resolution denying Popular Insurance, LLC’s motion for summary judgment. On December 29, 2021, Popular Insurance filed a petition of certiorari to the Puerto Rico Court of Appeals, seeking review from the denial of the motion for summary judgment. This petition of certiorari is now fully briefed and pending resolution.

 

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. The appeal is now fully briefed and pending resolution.

 

Insufficient Funds and Overdraft Fees Class Actions

 

In February 2020, BPPR was served with a putative class action complaint captioned Soto-Melendez v. Banco Popular de Puerto Rico, filed before the United States District Court for the District of Puerto Rico. The complaint alleges breach of contract, breach of the covenant of good faith and fair dealing and unjust enrichment due to BPPR’s purported practice of (a) assessing more than one insufficient funds fee (“NSF Fees”) on the same “item” or transaction and (b) charging both NSF Fees and overdraft fees (“OD Fees”) on the same item or transaction, and is filed on behalf of all persons who during the applicable statute of limitations period were charged NSF Fees and/or OD Fees pursuant to these purported practices. In April 2020, BPPR filed a motion to dismiss the case. On April 21, 2021, the Court issued an order granting in part and denying in part BPPR’s motion to dismiss; the unjust enrichment claim was dismissed, whereas the breach of contract and covenant of good faith and fair dealing claims survived the motion. Discovery is ongoing.

 

Popular has been also 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 alleges 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 OD Fees on transactions that, under plaintiffs’ theory, do not overdraw the account. Plaintiff describes Popular’s purported practice of charging OD Fees as “Authorize Positive, Purportedly

208


 

Settle Negative” (“APPSN”) transactions and alleges 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, Plaintiffs 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, Plaintiffs 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.

 

On October 4, 2021, the District Court, notwithstanding that BPPR’s Motion to Dismiss remains pending resolution, held an initial scheduling conference and, thereafter, issued a trial management order where it scheduled the deadline for all discovery for November 1, 2022, the deadline for the filing of a joint pre-trial brief for June 1, 2023, and the trial for June 20 to June 30, 2023.

 

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 alleges that Popular assesses OD Fees over authorized transactions for which sufficient funds are held for settlement. Popular waived service of process and expects to file a responsive allegation by April 4, 2022.

 

POPULAR BANK

Employment-Related Litigation

 

In July 2019, Popular Bank (“PB”) was served in a putative class complaint in which it was named as a defendant along with five (5) current PB employees (collectively, the “AB Defendants”), captioned Aileen Betances, et al. v. Popular Bank, et al., filed before the Supreme Court of the State of New York (the “AB Action”). The complaint, filed by five (5) current and former PB employees, seeks to recover damages for the AB Defendants' alleged violation of local and state sexual harassment, discrimination and retaliation laws. Additionally, in July 2019, PB was served in a putative class complaint in which it was named as a defendant along with six (6) current PB employees (collectively, the “DR Defendants”), captioned Damian Reyes, et al. v. Popular Bank, et al., filed before the Supreme Court of the State of New York (the “DR Action”). The DR Action, filed by three (3) current and former PB employees, seeks to recover damages for the DR Defendants’ alleged violation of local and state discrimination and retaliation laws. Plaintiffs in both complaints are represented by the same legal counsel, and five of the six named individual defendants in the DR Action are the same named individual defendants in the AB Action. Both complaints are related, among other things, to allegations of purported sexual harassment and/or misconduct by a former PB employee as well as PB’s actions in connection thereto and seek no less than $100 million in damages each. In October 2019, PB and the other defendants filed several Motions to Dismiss. Plaintiffs opposed the motions in December 2019 and PB and the other defendants replied in January 2020. In July 2020, a hearing to discuss the motions to dismiss filed by PB in both actions was held, at which the Court dismissed one of the causes of action included by plaintiffs in the AB Action.

 

In June 2021, the Court in the AB Action entered a judgment dismissing all claims except those regarding the principal plaintiff Aileen Betances against PB for retaliation, and Betances’ claim against three (3) other AB Defendants for aiding/abetting the alleged retaliation. Also, in July 2021, the Court in the DR action entered a partial judgment dismissing all claims against the individual DR Defendants, with all surviving claims being against PB and limited to local retaliation claims and local and state discrimination claims. Plaintiffs in both the AB Action and the DR Action have filed notices of appeal of both judgments. On August 11, 2021, PB and the remaining AB Defendants in the AB Action, as well as PB in the DR Action, answered the respective complaints as to the surviving claims. Discovery is ongoing.

 

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 have experienced since August 2013 have led to regulatory inquiries, customer complaints and arbitrations for most broker-dealers in Puerto Rico, including Popular Securities. Popular Securities has received customer complaints and, as of December 31, 2021, was named as a respondent (among other broker-dealers) in 65 pending arbitration

209


 

proceedings with initial claimed amounts of approximately $62 million in the aggregate. While Popular Securities believes it has meritorious defenses to the claims asserted in these proceedings, it has often determined that it is in its best interest to settle certain claims rather than expend the money and resources required to see such cases to completion. The Puerto Rico Government’s defaults and non-payment of its various debt obligations, as well as the Commonwealth’s and the Financial Oversight Management Board’s (the “Oversight Board”) decision to pursue restructurings under Title III and Title VI of PROMESA, have impacted the number of customer complaints (and claimed damages) filed against Popular Securities concerning Puerto Rico bonds and closed-end investment companies that invest primarily in Puerto Rico bonds. An adverse result in the arbitration proceedings described above, or a significant increase in customer complaints, could have a material adverse effect on Popular.

 

On October 28, 2021, a panel in an arbitration proceeding with claimed damages arising from trading losses of approximately $30 million ordered Popular Securities to pay claimants approximately $6.9 million in compensatory damages and expenses. On November 4, 2021, the claimants in such arbitration proceeding filed a complaint captioned Trinidad García v. Popular, Inc. et. al. before the United States District Court for the District of Puerto Rico against Popular, Inc., BPPR and Popular Securities (the “Popular Defendants”) alleging, inter alia, that they sustained monetary losses as a result of the Popular Defendants’ anticompetitive, unfair, and predatory practices, including tying arrangements prohibited by the Bank Holding Company Act. Plaintiffs claim that the Popular Defendants caused them to enter a tying arrangement scheme whereby BPPR allegedly would extend secured credit lines to the Plaintiffs on the conditions that they transfer their portfolios to Popular Securities to be used as pledged collateral and obtain additional investment services and products solely from Popular Securities, not from any of its competitors. Plaintiffs also invoke federal court’s supplemental jurisdiction to allege several state law claims against the Popular Defendants, including contractual fault, fault in causing losses in value of the pledge collateral, breach of contract, request for specific compliance thereof, fault in pre-contractual negotiations, emotional distress, and punitive damages. On January 27, 2022, Plaintiffs filed an Amended Complaint and the Popular Defendants were served with summons on that same date. Plaintiffs demand no less than $390 million in damages, plus an award for costs and attorney's fees. The Popular Defendants expect to file their response by March 21, 2022.

 

PROMESA Title III Proceedings

 

In 2017, the Oversight Board engaged the law firm of Kobre & Kim to carry out an independent investigation on behalf of the Oversight Board regarding, among other things, the causes of the Puerto Rico financial crisis. Popular, Inc., BPPR and Popular Securities (collectively, the “Popular Companies”) were served by, and cooperated with, the Oversight Board in connection with requests for the preservation and voluntary production of certain documents and witnesses with respect to Kobre & Kim’s independent investigation.

 

On August 20, 2018, Kobre & Kim issued its Final Report, which contained various references to the Popular Companies, including an allegation that Popular Securities participated as an underwriter in the Commonwealth’s 2014 issuance of government obligation bonds notwithstanding having allegedly advised against it. The report noted that such allegation could give rise to an unjust enrichment claim against the Corporation and could also serve as a basis to equitably subordinate claims filed by the Corporation in the Title III proceeding to other third-party claims.

 

After the publication of the Final Report, the Oversight Board created a special claims committee (“SCC”) and, before the end of the applicable two-year statute of limitations for the filing of such claims pursuant to the U.S. Bankruptcy Code, the SCC, along with the Commonwealth’s Unsecured Creditors’ Committee (“UCC”), filed various avoidance, fraudulent transfer and other claims against third parties, including government vendors and financial institutions and other professionals involved in bond issuances then being challenged as invalid by the SCC and the UCC. The Popular Companies, the SCC and the UCC entered into a tolling agreement with respect to potential claims the SCC and the UCC, on behalf of the Commonwealth or other Title III debtors, may assert against the Popular Companies for the avoidance and recovery of payments and/or transfers made to the Popular Companies or as a result of any role of the Popular Companies in the offering of the aforementioned challenged bond issuances. On January 12, 2022, the SCC, the UCC and the Popular Companies executed a settlement agreement as to potential claims related to the avoidance and recovery of payments and/or transfers made to the Popular Companies. The tolling agreement as to potential claims the SCC and the UCC may assert against the Popular Companies as a result of any role of the Popular Companies in the offering of certain challenged bond issuances remains in effect.

210


 

Note 25 – Non-consolidated variable interest entities

The Corporation is involved with three statutory trusts which it established 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. 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 28 to the Consolidated Financial Statements for additional information on the debt securities outstanding at December 31, 2021 and 2020, 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 December 31, 2021 and 2020.

211


 

(In thousands)

December 31, 2021

December 31, 2020

Assets

 

 

 

 

Servicing assets:

 

 

 

 

 

Mortgage servicing rights

$

94,464

$

90,273

Total servicing assets

$

94,464

$

90,273

Other assets:

 

 

 

 

 

Servicing advances

$

7,968

$

8,769

Total other assets

$

7,968

$

8,769

Total assets

$

102,432

$

99,042

Maximum exposure to loss

$

102,432

$

99,042

 

 

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 $8.3 billion at December 31, 2021 (December 31, 2020 - $8.7 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 December 31, 2021 and 2020 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 December 31, 2021.

212


 

Note 26 – Derivative instruments and hedging activities

The use of derivatives is incorporated as part of the Corporation’s overall interest rate risk management strategy to minimize significant unplanned fluctuations in earnings and cash flows that are caused by interest rate volatility. The Corporation’s goal is to manage interest rate sensitivity by modifying the repricing or maturity characteristics of certain balance sheet assets and liabilities so that the net interest income is not materially affected by movements in interest rates. The Corporation uses derivatives in its trading activities to facilitate customer transactions, and as a means of risk management. As a result of interest rate fluctuations, hedged fixed and variable interest rate assets and liabilities will appreciate or depreciate in fair value. The effect of this unrealized appreciation or depreciation is expected to be substantially offset by the Corporation’s gains or losses on the derivative instruments that are linked to these hedged assets and liabilities. As a matter of policy, the Corporation does not use highly leveraged derivative instruments for interest rate risk management.

The credit risk attributed to the counterparty’s nonperformance risk is incorporated in the fair value of the derivatives. Additionally, the fair value of the Corporation’s own credit standing is considered in the fair value of the derivative liabilities. During the year ended December 31, 2021, inclusion of the credit risk in the fair value of the derivatives resulted in a loss of $0.3 million from the Corporation’s credit standing adjustment and a loss of $0.1 million from the counterparty’s nonperformance risk. During the years ended December 31, 2020 and 2019, the Corporation recognized a gain of $0.7 million and $0.2 million, respectively, from the Corporation’s credit standing adjustment.

The Corporation’s derivatives are subject to agreements which allow a right of set-off with each respective counterparty. 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 fair value of derivatives is not offset with the fair value of other derivatives held with the same counterparty even if these agreements allow a right of set-off. In addition, the fair value of derivatives is not offset with the amounts for the right to reclaim financial collateral or the obligation to return financial collateral.

Financial instruments designated as cash flow hedges or non-hedging derivatives outstanding at December 31, 2021 and 2020 were as follows:

213


 

 

 

Notional amount

 

Derivative assets

Derivative liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement of

 

Fair value at

Statement of

 

Fair value at

 

 

At December 31,

 

condition

 

December 31,

condition

 

December 31,

(In thousands)

 

2021

 

2020

 

classification

 

2021

 

2020

classification

 

2021

 

2020

Derivatives designated as

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward contracts

$

87,900

$

188,800

 

Other assets

$

18

$

-

Other liabilities

$

125

$

1,267

Total derivatives designated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

as hedging instruments

$

87,900

$

188,800

 

 

$

18

$

-

 

$

125

$

1,267

Derivatives not designated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate caps

$

27,866

$

29,248

 

Other assets

$

-

$

-

Other liabilities

$

-

$

-

Indexed options on deposits

 

79,114

 

69,054

 

Other assets

 

26,075

 

20,785

-

 

-

 

-

Bifurcated embedded options

 

72,352

 

63,121

 

-

 

-

 

-

Interest bearing deposits

 

22,753

 

17,658

Total derivatives not

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

designated as

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

hedging instruments

$

179,332

$

161,423

 

 

$

26,075

$

20,785

 

$

22,753

$

17,658

Total derivative assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and liabilities

$

267,232

$

350,223

 

 

$

26,093

$

20,785

 

$

22,878

$

18,925

 

Cash Flow Hedges

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. Changes in the fair value of the derivatives are recorded in other comprehensive (loss) income. The amount included in accumulated other comprehensive (loss) income corresponding to these forward contracts is expected to be reclassified to earnings in the next twelve months. These contracts have a maximum remaining maturity of 76 days at December 31, 2021.

For cash flow hedges, net gains (losses) on derivative contracts that are reclassified from accumulated other comprehensive (loss) income to current period earnings are included in the line item in which the hedged item is recorded and during the period in which the forecasted transaction impacts earnings, as presented in the tables below.

 

Year ended December 31, 2021

(In thousands)

Amount of net gain (loss) recognized in OCI on derivatives (effective portion)

 

Classification in the statement of operations of the net gain (loss) reclassified from AOCI into income (effective portion and ineffective portion)

 

Amount of net gain (loss) reclassified from AOCI into income (effective portion)

 

Amount of net gain (loss) recognized in income on derivatives (ineffective portion)

Forward contracts

$

456

 

Mortgage banking activities

$

(704)

$

-

Total

$

456

 

 

$

(704)

$

-

214


 

Year ended December 31, 2020

(In thousands)

Amount of net gain (loss) recognized in OCI on derivatives (effective portion)

 

Classification in the statement of operations of the net gain (loss) reclassified from AOCI into income (effective portion and ineffective portion)

 

Amount of net gain (loss) reclassified from AOCI into income (effective portion)

 

Amount of net gain (loss) recognized in income on derivatives (ineffective portion)

Forward contracts

$

(6,594)

 

Mortgage banking activities

$

(5,559)

$

-

Total

$

(6,594)

 

 

$

(5,559)

$

-

 

Year ended December 31, 2019

(In thousands)

Amount of net gain (loss) recognized in OCI on derivatives (effective portion)

 

Classification in the statement of operations of the net gain (loss) reclassified from AOCI into income (effective portion and ineffective portion)

 

Amount of net gain (loss) reclassified from AOCI into income (effective portion)

 

Amount of net gain (loss) recognized in income on derivatives (ineffective portion)

Forward contracts

$

(3,502)

 

Mortgage banking activities

$

(3,992)

$

-

Total

$

(3,502)

 

 

$

(3,992)

$

-

 

Fair Value Hedges

At December 31, 2021 and 2020, there were no derivatives designated as fair value hedges.

Non-Hedging Activities

For the year ended December 31, 2021, the Corporation recognized a gain of $ 2.3 million (2020 – loss of $3.0 million; 2019 – loss of $ 1.2 million) related to its non-hedging derivatives, as detailed in the table below.

 

 

Amount of Net Gain (Loss) Recognized in Income on Derivatives

 

 

Year ended

Year ended

Year ended

 

Classification of Net Gain (Loss)

December 31,

December 31,

December 31,

(In thousands)

Recognized in Income on Derivatives

2021

2020

2019

Forward contracts

Mortgage banking activities

$

2,027

$

(5,027)

$

(2,254)

Interest rate caps

Other operating income

 

-

 

-

 

(5)

Indexed options on deposits

Interest expense

 

6,824

 

5,462

 

7,898

Bifurcated embedded options

Interest expense

 

(6,538)

 

(3,417)

 

(6,883)

Total

 

$

2,313

$

(2,982)

$

(1,244)

 

Forward Contracts

The Corporation has forward contracts to sell mortgage-backed securities, which are accounted for as trading derivatives. Changes in their fair value are recognized in mortgage banking activities.

Interest Rate Caps

The Corporation enters into interest rate caps as an intermediary on behalf of its customers and simultaneously takes offsetting positions under the same terms and conditions, thus minimizing its market and credit risks.

Indexed and Embedded Options

The Corporation offers certain customers’ deposits whose return are tied to the performance of the Standard and Poor’s (“S&P 500”) stock market indexes, and other deposits whose returns are tied to other stock market indexes or other equity securities performance. The Corporation bifurcated the related options embedded within these customers’ deposits from the host contract in accordance with ASC Subtopic 815-15. In order to limit the Corporation’s exposure to changes in these indexes, the Corporation purchases indexed options which returns are tied to the same indexes from major broker dealer companies in the over the counter market. Accordingly, the embedded options and the related indexed options are marked-to-market through earnings.

215


 

Note 27 – Related party transactions

The Corporation grants loans to its directors, executive officers, including certain related individuals or organizations, and affiliates in the ordinary course of business. The activity and balance of these loans were as follows:

 

 

 

 

(In thousands)

 

 

Balance at December 31, 2019

$

133,054

New loans

 

8,360

Payments

 

(16,839)

Other changes, including existing loans to new related parties

 

316

Balance at December 31, 2020

$

124,891

New loans

 

3,182

Payments

 

(28,208)

Other changes, including existing loans to new related parties

 

2,714

Balance at December 31, 2021

$

102,579

New loans and payments include disbursements and collections from existing lines of credit.

 

The Corporation has had loan transactions with the Corporation’s directors, executive officers, including certain related individuals or organizations, and affiliates, and proposes to continue such transactions in the ordinary course of its business, on substantially the same terms, including interest rates and collateral, as those prevailing for comparable loan transactions with third parties. Except as discussed below, the extensions of credit have not involved and do not currently involve more than normal risks of collection or present other unfavorable features. In addition, during 2020, in response to the coronavirus (COVID-19) pandemic, BPPR implemented loan payment moratorium programs with respect to consumer and commercial loans which were made available to all qualifying customers to provide financial relief during the pandemic. Certain Related Parties participated in this moratorium programs under the same terms and conditions offered to other unrelated third parties.

 

In 2010, as part of the Westernbank FDIC assisted transaction, BPPR acquired five commercial loans made to entities that were wholly owned by one brother-in-law of a director of the Corporation. The loans were secured by real estate and personally guaranteed by the director’s brother-in-law. The loans were originated by Westernbank between 2001 and 2005 and had an aggregate outstanding principal balance of approximately $33.5 million when they were acquired by BPPR in 2010. Between 2011 and 2014, the loans were restructured to consist of (i) five notes with an aggregate outstanding principal balance of $19.8 million with a 6% annual interest rate (“Notes A”) and (ii) five notes with an aggregate outstanding balance of $13.5 million with a 1% annual interest rate, to be paid upon maturity (“Notes B”). The restructured notes had an original maturity of September 30, 2016 and, thereafter, various interim renewals were approved to allow for the re-negotiation of a longer-term extension. The most recent of these interim renewals were approved on February, April and August 2020. These renewals, among other things, decreased the interest rate applicable to the Notes A to 4.25% and maintained the Notes B at an interest rate of 1%. During 2020, the Audit Committee also authorized two separate 90-day principal and interest moratoriums, from March to May and from June to August, as financial relief in response to the coronavirus (COVID-19) pandemic. On September 2020, in accordance with the Related Party Transaction Policy and after being approved by the Audit Committee, the maturity date of the credit facilities was extended until April 2022, fixing the interest rate at 4.25% for Notes A and at 1% for Notes B during such term. The aggregate outstanding balance on the loans as of December 31, 2021 was approximately $30.6 million, of which approximately $17.1 million corresponded to Notes A and $13.5 million to Notes B.

 

In April 2010, in connection with the acquisition of the Westernbank assets from the FDIC, as receiver, BPPR acquired a term loan to a corporate borrower partially owned by an investment corporation in which the Corporation’s Chairman, at that time the Chief Executive Officer, as well as certain of his family members, are the owners. In addition, the Chairman’s sister and brother-in-law are owners of an entity that holds an ownership interest in the borrower. At the time the loan was acquired by BPPR, it had an unpaid principal balance of $40.2 million. In May 2017, this loan was sold by BPPR to Popular, Inc., holding company (“PIHC”). At the time of sale, the loan had an unpaid principal balance of $37.9 million. PIHC paid $37.9 million to BPPR for the loan, of which $6.0 million was recognized by BPPR as a capital contribution representing the difference between the fair value and the book value of the loan at the time of transfer. Immediately upon being acquired by PIHC, the loan’s maturity was extended by 90 days (under the same terms as originally contracted) to provide the PIHC additional time to evaluate a refinancing or long-term extension of the loan. In

216


 

August 2017, the credit facility was refinanced with a stated maturity in February 2019. During 2017, the facility was subject to the loan payment moratorium offered as part of the hurricane relief efforts. As such, interest payments amounting to approximately $0.5 million were deferred and capitalized as part of the loan balance. In February 2019, the Audit Committee approved, under the Related Party Policy, a 36-month renewal of the loan at an interest rate of 5.75% and a 30-year amortization schedule. In December 2021, the Corporation refinanced the then-current $36.0 million principal balance of the loan at an interest rate of 4.50%, a maturity date of December 2026 and a 20-year amortization schedule. As of December 31, 2021, the unpaid principal balance amounted to $34.8 million.

 

 

In April 2010, a private trust and a sister-in-law of a director, as co-borrowers, obtained a $0.2 million mortgage loan from Popular Mortgage, then a subsidiary of BPPR, secured by a residential property. The loan was a fully amortizing 40-year mortgage loan with a fixed annual rate of 2.99% for the first 5 years, and thereafter an annual rate of 5.875%. From March to August 2020, the borrowers participated in the COVID-19 forbearance program offered by BPPR to qualifying mortgage customers in response to the coronavirus (COVID-19) pandemic. After the expiration of such moratorium period, borrowers did not make any payments under the loan during the months of September and October 2020, thereby defaulting on the indebtedness. On November 2020, the borrowers requested and were granted, an additional 3-month loan payment moratorium pursuant to BPPR’s ordinary course loss mitigation program, which expired in January 2021. Since the expiration of this 3-month loan payment forbearance the borrowers have failed to make the monthly loan payments when due. The outstanding balance of the loan as of December 31, 2021 was approximately $0.2 million. BPPR is currently evaluating borrowers’ application in connection with this loan under BPPR’s loss mitigation program.

 

At December 31, 2021, the Corporation’s banking subsidiaries held deposits from related parties, excluding EVERTEC, Inc. (“EVERTEC”) amounting to approximately $700 million (2020 - $851 million).

 

From time to time, the Corporation, in the ordinary course of business, obtains services from related parties that have some association with the Corporation. Management believes the terms of such arrangements are consistent with arrangements entered into with independent third parties.

 

For the year ended December 31, 2021, the Corporation made contributions of approximately $4.5 million to Fundación Banco Popular and Popular Bank Foundation, which are not-for-profit corporations dedicated to philanthropic work (2020 - $1.6 million). The Corporation also provided human and operational resources to support the activities of the Fundación Banco Popular which in 2021 amounted to approximately $1.3 million (2020- $1.4 million).

 

Related party transactions with EVERTEC, as an affiliate

 

The Corporation has an investment in EVERTEC, Inc. (“EVERTEC”), which provides various processing and information technology services to the Corporation and its subsidiaries and gives BPPR access to the ATH network owned and operated by EVERTEC. As of December 31, 2021, the Corporation’s stake in EVERTEC was 16.19%. The Corporation continues to have significant influence over EVERTEC. Accordingly, the investment in EVERTEC is accounted for under the equity method and is evaluated for impairment if events or circumstances indicate that a decrease in value of the investment has occurred that is other than temporary.

 

The Corporation recorded $2.3 million in dividend distributions during the year ended December 31, 2021 from its investments in EVERTEC’s holding company (December 31, 2020 - $2.3 million). The Corporation’s equity in EVERTEC is presented in the table which follows and is included as part of “other assets” in the consolidated statement of financial condition.

(In thousands)

 

December 31, 2021

 

 

December 31, 2020

Equity investment in EVERTEC

$

110,299

 

$

86,158

 

 

 

 

 

 

The Corporation had the following financial condition balances outstanding with EVERTEC at December 31, 2021 and December 31, 2020. Items that represent liabilities to the Corporation are presented with parenthesis.

217


 

(In thousands)

December 31, 2021

December 31, 2020

Accounts receivable (Other assets)

$

5,668

$

5,678

Deposits

 

(150,737)

 

(125,361)

Accounts payable (Other liabilities)

 

(3,431)

 

(2,395)

Net total

$

(148,500)

$

(122,078)

 

The Corporation’s proportionate share of income from EVERTEC is included in other operating income in the consolidated statements of operations. The following table presents the Corporation’s proportionate share of EVERTEC’s income and changes in stockholders’ equity for the years ended December 31, 2021, 2020 and 2019.

 

 

 

Years ended December 31,

(In thousands)

 

2021

 

 

2020

 

2019

Share of income from investment in EVERTEC

$

26,096

 

$

16,936

$

16,749

Share of other changes in EVERTEC's stockholders' equity

 

53

 

 

865

 

516

Share of EVERTEC's changes in equity recognized in income

$

26,149

 

$

17,801

$

17,265

 

The following tables present 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 years ended December 31, 2021, 2020 and 2019. Items that represent expenses to the Corporation are presented with parenthesis.

218


 

 

Years ended December 31,

 

(In thousands)

2021

2020

2019

Category

Interest expense on deposits

$

(388)

$

(315)

$

(106)

Interest expense

ATH and credit cards interchange income from services to EVERTEC

 

27,384

 

22,406

 

29,224

Other service fees

Rental income charged to EVERTEC

 

6,593

 

7,305

 

7,418

Net occupancy

Fees on services provided by EVERTEC

 

(245,945)

 

(223,069)

 

(219,992)

Professional fees

Other services provided to EVERTEC

 

740

 

1,002

 

1,118

Other operating expenses

Total

$

(211,616)

$

(192,671)

$

(182,338)

 

 

Centro Financiero BHD León

At December 31, 2021, the Corporation had a 15.84% equity interest in Centro Financiero BHD León, S.A. (“BHD León”), one of the largest banking and financial services groups in the Dominican Republic. During the year ended December 31, 2021, the Corporation recorded $27.7 million in earnings from its investment in BHD León (December 31, 2020 - $27.0 million), which had a carrying amount of $180.3 million at December 31, 2021 (December 31, 2020 - $153.1 million). The Corporation received $4.3 million in dividends distributions during the year ended December 31, 2021, from its investment in BHD León (December 31, 2020 - $13.2 million).

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 administrative, custody and 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 year ended December 31, 2021 administrative fees charged to these investment companies amounted to $4.1 million (December 31, 2020 - $6.3 million) and waived fees amounted to $1.5 million (December 31, 2020 - $2.8 million), for a net fee of $2.6 million (December 31, 2020 - $3.5 million).

The Corporation, through its subsidiary BPPR, had also entered into certain uncommitted credit facilities with those investment companies. The available lines of credit facilities amounted to $275 million at December 31, 2020. The aggregate sum of all outstanding balances under all credit facilities that could be made available by BPPR, from time to time, to those investment companies for which PAM acted as investment advisor or co-investment advisor, could have never exceed the lesser of $200 million or 10% of BPPR’s capital. During the year ended December 31, 2021, these credit facilities expired and the investment companies entered into credit facilities with a third party.

219


 

Note 28 – 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.

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 December 31, 2021 and 2020:

220


 

At December 31, 2021

(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

$

-

$

15,859,030

$

-

$

-

$

15,859,030

Obligations of U.S. Government sponsored entities

 

-

 

70

 

-

 

-

 

70

Collateralized mortgage obligations - federal agencies

 

-

 

221,265

 

-

 

-

 

221,265

Mortgage-backed securities

 

-

 

8,886,950

 

826

 

-

 

8,887,776

Other

 

-

 

128

 

-

 

-

 

128

Total debt securities available-for-sale

$

-

$

24,967,443

$

826

$

-

$

24,968,269

Trading account debt securities, excluding derivatives:

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

$

6,530

$

-

$

-

$

-

$

6,530

Obligations of Puerto Rico, States and political subdivisions

 

-

 

85

 

-

 

-

 

85

Collateralized mortgage obligations

 

-

 

59

 

198

 

-

 

257

Mortgage-backed securities

 

-

 

22,559

 

-

 

-

 

22,559

Other

 

-

 

-

 

280

 

-

 

280

Total trading account debt securities, excluding derivatives

$

6,530

$

22,703

$

478

$

-

$

29,711

Equity securities

$

-

$

32,429

$

-

$

77

$

32,506

Mortgage servicing rights

 

-

 

-

 

121,570

 

-

 

121,570

Derivatives

 

-

 

26,093

 

-

 

-

 

26,093

Total assets measured at fair value on a recurring basis

$

6,530

$

25,048,668

$

122,874

$

77

$

25,178,149

Liabilities

 

 

 

 

 

 

 

 

 

 

Derivatives

$

-

$

(22,878)

$

-

$

-

$

(22,878)

Contingent consideration

 

-

 

-

 

(9,241)

 

-

 

(9,241)

Total liabilities measured at fair value on a recurring basis

$

-

$

(22,878)

$

(9,241)

$

-

$

(32,119)

221


 

At December 31, 2020

(In thousands)

Level 1

Level 2

Level 3

Total

RECURRING FAIR VALUE MEASUREMENTS

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Debt securities available-for-sale:

 

 

 

 

 

 

 

 

U.S. Treasury securities

$

3,499,781

$

7,288,259

$

-

$

10,788,040

Obligations of U.S. Government sponsored entities

 

-

 

60,184

 

-

 

60,184

Collateralized mortgage obligations - federal agencies

 

-

 

392,132

 

-

 

392,132

Mortgage-backed securities

 

-

 

10,319,547

 

1,014

 

10,320,561

Other

 

-

 

235

 

-

 

235

Total debt securities available-for-sale

$

3,499,781

$

18,060,357

$

1,014

$

21,561,152

Trading account debt securities, excluding derivatives:

 

 

 

 

 

 

 

 

U.S. Treasury securities

$

11,506

$

-

$

-

$

11,506

Obligations of Puerto Rico, States and political subdivisions

 

-

 

103

 

-

 

103

Collateralized mortgage obligations

 

-

 

68

 

278

 

346

Mortgage-backed securities

 

-

 

24,338

 

-

 

24,338

Other

 

-

 

-

 

381

 

381

Total trading account debt securities, excluding derivatives

$

11,506

$

24,509

$

659

$

36,674

Equity securities

$

-

$

29,590

$

-

$

29,590

Mortgage servicing rights

 

-

 

-

 

118,395

 

118,395

Derivatives

 

-

 

20,785

 

-

 

20,785

Total assets measured at fair value on a recurring basis

$

3,511,287

$

18,135,241

$

120,068

$

21,766,596

Liabilities

 

 

 

 

 

 

 

 

Derivatives

$

-

$

(18,925)

$

-

$

(18,925)

Total liabilities measured at fair value on a recurring basis

$

-

$

(18,925)

$

-

$

(18,925)

 

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 years ended December 31, 2021, 2020 and 2019 and excludes nonrecurring fair value measurements of assets no longer outstanding as of the reporting date.

 

222


 

Year ended December 31, 2021

(In thousands)

Level 1

Level 2

Level 3

Total

 

 

NONRECURRING FAIR VALUE MEASUREMENTS

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Write-downs

Loans[1]

$

-

$

-

$

21,167

$

21,167

$

(3,721)

Other real estate owned[2]

 

-

 

-

 

7,727

 

7,727

 

(1,579)

Other foreclosed assets[2]

 

-

 

-

 

68

 

68

 

(33)

Long-lived assets held-for-sale[3]

 

-

 

-

 

9,007

 

9,007

 

(5,320)

Trademark[4]

 

-

 

-

 

156

 

156

 

(5,404)

Total assets measured at fair value on a nonrecurring basis

$

-

$

-

$

38,125

$

38,125

$

(16,057)

[1] Relates mostly 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.

[3] Represents the fair value of long-lived assets held-for-sale that were written down to their fair value.

[4] Represents the fair value of a trademark due to a write-down on impairment.

Year ended December 31, 2020

 

 

 

 

 

 

 

 

 

 

(In thousands)

Level 1

Level 2

Level 3

Total

 

 

NONRECURRING FAIR VALUE MEASUREMENTS

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Write-downs

Loans[1]

$

-

$

-

$

74,511

$

74,511

$

(15,290)

Loans held-for-sale[2]

 

-

 

-

 

2,738

 

2,738

 

(1,311)

Other real estate owned[3]

 

-

 

-

 

20,123

 

20,123

 

(3,325)

Other foreclosed assets[3]

 

-

 

-

 

116

 

116

 

(148)

ROU assets[4]

 

-

 

-

 

446

 

446

 

(15,920)

Leasehold improvements[4]

 

-

 

-

 

126

 

126

 

(2,084)

Total assets measured at fair value on a nonrecurring basis

$

-

$

-

$

98,060

$

98,060

$

(38,078)

[1] Relates mostly 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] The impairment was measured based on the sublease rental value of the branches that were subject to the strategic realignment of PB's New Metro Branch network.

223


 

Year ended December 31, 2019

 

 

 

 

 

 

 

 

 

 

(In thousands)

Level 1

Level 2

Level 3

Total

 

 

NONRECURRING FAIR VALUE MEASUREMENTS

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Write-downs

Loans[1]

$

-

$

-

$

35,363

$

35,363

$

(13,533)

Other real estate owned[2]

 

-

 

-

 

18,132

 

18,132

 

(3,526)

Other foreclosed assets[2]

 

-

 

-

 

1,213

 

1,213

 

(156)

Long-lived assets held-for-sale[3]

 

-

 

-

 

2,500

 

2,500

 

(2,591)

Total assets measured at fair value on a nonrecurring basis

$

-

$

-

$

57,208

$

57,208

$

(19,806)

[1] Relates mostly 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.

[3] 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 years ended December 31, 2021, 2020, and 2019.

 

Year ended December 31, 2021

 

 

MBS

 

 

Other

 

 

 

 

 

 

 

 

 

 

classified

CMOs

securities

 

 

 

 

 

 

 

 

 

 

as debt

classified

classified

 

 

 

 

 

 

 

 

 

 

securities

as trading

as trading

Mortgage

 

 

 

 

 

 

available-

account debt

account debt

servicing

Total

Contingent

Total

(In thousands)

for-sale

securities

securities

rights

assets

Consideration

liabilities

Balance at January 1, 2021

$

1,014

$

278

$

381

$

118,395

$

120,068

$

-

$

-

Gains (losses) included in earnings

 

-

 

(1)

 

(101)

 

(10,216)

 

(10,318)

 

-

 

-

Gains (losses) included in OCI

 

(13)

 

-

 

-

 

-

 

(13)

 

-

 

-

Additions

 

-

 

29

 

-

 

13,391

 

13,419

 

9,241

 

9,241

Settlements

 

(175)

 

(107)

 

-

 

-

 

(282)

 

-

 

-

Balance at December 31, 2021

$

826

$

198

$

280

$

121,570

$

122,874

$

9,241

$

9,241

Changes in unrealized gains (losses) included in earnings relating to assets still held at December 31, 2021

$

-

$

(1)

$

(45)

$

6,410

$

6,364

$

-

 

-

224


 

 

Year ended December 31, 2020

 

 

MBS

 

 

Other

 

 

 

 

 

 

classified

CMOs

securities

 

 

 

 

 

 

as debt

classified

classified

 

 

 

 

 

 

securities

as trading

as trading

Mortgage

 

 

 

available-

account debt

account debt

servicing

Total

(In thousands)

for-sale

securities

securities

rights

assets

Balance at January 1, 2020

$

1,182

$

530

$

440

$

150,906

$

153,058

Gains (losses) included in earnings

 

-

 

(1)

 

(59)

 

(42,055)

 

(42,115)

Gains (losses) included in OCI

 

(18)

 

-

 

-

 

-

 

(18)

Additions

 

-

 

4

 

-

 

9,544

 

9,548

Settlements

 

(150)

 

(255)

 

-

 

-

 

(405)

Balance at December 31, 2020

$

1,014

$

278

$

381

$

118,395

$

120,068

Changes in unrealized gains (losses) included in earnings relating to assets still held at December 31, 2020

$

-

$

-

$

27

$

(19,327)

$

(19,300)

 

 

Year ended December 31, 2019

 

 

MBS

 

 

 

 

Other

 

 

 

 

 

 

classified

CMOs

 

 

securities

 

 

 

 

 

 

as debt

classified

MBS

classified

 

 

 

 

 

 

securities

as trading

classified as

as trading

Mortgage

 

 

 

available-

account debt

trading account

account debt

servicing

Total

(In thousands)

for-sale

securities

debt securities

securities

rights

assets

Balance at January 1, 2019

$

1,233

$

611

$

43

$

485

$

169,777

$

172,149

Gains (losses) included in earnings

 

-

 

(1)

 

(1)

 

(45)

 

(27,516)

 

(27,563)

Gains (losses) included in OCI

 

(1)

 

-

 

-

 

-

 

-

 

(1)

Additions

 

-

 

71

 

25

 

-

 

9,143

 

9,239

Settlements

 

(50)

 

(151)

 

(41)

 

-

 

(498)

 

(740)

Transfers out of Level 3

 

-

 

-

 

(26)

 

-

 

-

 

(26)

Balance at December 31, 2019

$

1,182

$

530

$

-

$

440

$

150,906

$

153,058

Changes in unrealized gains (losses) included in earnings relating to assets still held at December 31, 2019

$

-

$

1

$

-

$

20

$

(14,190)

$

(14,169)

 

During the year ended December 31, 2019, certain MBS were transferred from Level 3 to Level 2 due to a change in valuation technique from an internally prepared pricing matrix to a bond’s theoretical value.

Gains and losses (realized and unrealized) included in earnings for the years ended December 31, 2021, 2020, and 2019 for Level 3 assets and liabilities included in the previous tables are reported in the consolidated statement of operations as follows:

 

 

2021

2020

2019

 

 

Total

Changes in unrealized

Total

Changes in unrealized

Total

Changes in unrealized

 

 

gains (losses)

gains (losses)

gains (losses)

gains (losses)

gains (losses)

gains (losses)

 

 

included

relating to assets still

included

relating to assets still

included

relating to assets still

(In thousands)

in earnings

held at reporting date

in earnings

held at reporting date

in earnings

held at reporting date

Mortgage banking activities

$

(10,216)

$

6,410

$

(42,055)

$

(19,327)

$

(27,516)

$

(14,190)

Trading account (loss) profit

 

(102)

 

(46)

 

(60)

 

27

 

(47)

 

21

Total

$

(10,318)

$

6,364

$

(42,115)

$

(19,300)

$

(27,563)

$

(14,169)

 

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 December 31, 2021 and 2020.

225


 

 

 

 

Fair value at

 

 

 

 

 

 

December 31,

 

 

 

 

 

(In thousands)

 

2021

 

Valuation technique

Unobservable inputs

Weighted average (range) [1]

CMO's - trading

$

198

 

Discounted cash flow model

Weighted average life

0.8 years (0.04 - 1.0 years)

 

 

 

 

 

 

 

Yield

3.6% (3.6% - 4.1%)

 

 

 

 

 

 

 

Prepayment speed

11.4% (10.1% - 17.2%)

 

Other - trading

$

280

 

Discounted cash flow model

Weighted average life

2.9 years

 

 

 

 

 

 

 

Yield

12.0%

 

 

 

 

 

 

 

Prepayment speed

10.8%

 

Loans held-in-portfolio

$

20,041

[2]

External appraisal

Haircut applied on

 

 

 

 

 

 

 

 

external appraisals

5.0%

 

Other real estate owned

$

3,631

[3]

External appraisal

Haircut applied on

 

 

 

 

 

 

 

 

external appraisals

22.3% (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.

 

 

 

 

Fair value at

 

 

 

 

 

 

December 31,

 

 

 

 

 

(In thousands)

 

2020

 

Valuation technique

Unobservable inputs

Weighted average (range) [1]

CMO's - trading

$

278

 

Discounted cash flow model

Weighted average life

1.2 years (0.6 - 1.4 years)

 

 

 

 

 

 

 

Yield

3.6% (3.6% - 4.1%)

 

 

 

 

 

 

 

Prepayment speed

17.7% (13.8% - 18.3%)

 

Other - trading

$

381

 

Discounted cash flow model

Weighted average life

3.6 years

 

 

 

 

 

 

 

Yield

12.0%

 

 

 

 

 

 

 

Prepayment speed

10.8%

 

Mortgage servicing rights

$

118,395

 

Discounted cash flow model

Prepayment speed

6.9% (0.3% - 24.6%)

 

 

 

 

 

 

 

Weighted average life

6.0 years (0.3 - 12.3 years)

 

 

 

 

 

 

 

Discount rate

11.1% (9.5% - 14.7%)

 

Loans held-in-portfolio

$

74,347

[2]

External appraisal

Haircut applied on

 

 

 

 

 

 

 

 

external appraisals

20.9% (10.0% - 40.0%)

 

Other real estate owned

$

14,926

[3]

External appraisal

Haircut applied on

 

 

 

 

 

 

 

 

external appraisals

22.1% (5.0% - 30.0%)

 

[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.

 

Effective the fourth quarter 2021, the mortgage servicing rights fair value was provided by a third-party valuation specialist. Refer to Note 11 for additional information on MSRs.

The significant unobservable inputs used in the fair value measurement of the Corporation’s collateralized mortgage obligations and interest-only collateralized mortgage obligation (reported as “other”), which are classified in the “trading” category, are yield, constant prepayment rate, and weighted average life. Significant increases (decreases) in any of those inputs in isolation would result in significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the constant prepayment rate will generate a directionally opposite change in the weighted average life. For example, as the average life is reduced by a higher constant prepayment rate, a lower yield will be realized, and when there is a reduction in the constant prepayment rate, the average life of these collateralized mortgage obligations will extend, thus resulting in a higher yield.

The significant unobservable inputs used in the fair value measurement of the Corporation’s mortgage servicing rights are constant prepayment rates and discount rates. Increases in interest rates may result in lower prepayments. Discount rates vary according to products and / or portfolios depending on the perceived risk. Increases in discount rates result in a lower fair value measurement.

 

Following is a description of the Corporation’s valuation methodologies used for assets and liabilities measured at fair value. The disclosure requirements exclude certain financial instruments and all non-financial instruments. Accordingly, the aggregate fair value amounts of the financial instruments disclosed do not represent management’s estimate of the underlying value of the Corporation.

Trading account debt securities and debt securities available-for-sale

U.S. Treasury securities: The fair value of U.S. Treasury notes is based on yields that are interpolated from the constant maturity treasury curve. These securities are classified as Level 2. U.S. Treasury bills are classified as Level 1 given the high volume of trades and pricing based on those trades.

226


 

Obligations of U.S. Government sponsored entities: The Obligations of U.S. Government sponsored entities include U.S. agency securities, which fair value is based on an active exchange market and on quoted market prices for similar securities. The U.S. agency securities are classified as Level 2.

Obligations of Puerto Rico, States and political subdivisions: Obligations of Puerto Rico, States and political subdivisions include municipal bonds. The bonds are segregated and the like characteristics divided into specific sectors. Market inputs used in the evaluation process include all or some of the following: trades, bid price or spread, two sided markets, quotes, benchmark curves including but not limited to Treasury benchmarks, LIBOR and swap curves, market data feeds such as those obtained from municipal market sources, discount and capital rates, and trustee reports. The municipal bonds are classified as Level 2.

Mortgage-backed securities: Certain agency mortgage-backed securities (“MBS”) are priced based on a bond’s theoretical value derived from similar bonds defined by credit quality and market sector. Their fair value incorporates an option adjusted spread. The agency MBS are classified as Level 2. Other agency MBS such as GNMA Puerto Rico Serials are priced using an internally-prepared pricing matrix with quoted prices from local brokers dealers. These particular MBS are classified as Level 3.

Collateralized mortgage obligations: Agency collateralized mortgage obligations (“CMOs”) are priced based on a bond’s theoretical value derived from similar bonds defined by credit quality and market sector and for which fair value incorporates an option adjusted spread. The option adjusted spread model includes prepayment and volatility assumptions, ratings (whole loans collateral) and spread adjustments. These CMOs are classified as Level 2. Other CMOs, due to their limited liquidity, are classified as Level 3 due to the insufficiency of inputs such as executed trades, credit information and cash flows.

Corporate securities (included as “other” in the “available-for-sale” category): Given that the quoted prices are for similar instruments, these securities are classified as Level 2.

Corporate securities and interest-only strips (included as “other” in the “trading account debt securities” category): For corporate securities, quoted prices for these security types are obtained from broker dealers. Given that the quoted prices are for similar instruments or do not trade in highly liquid markets, these securities are classified as Level 2. Given that the fair value was estimated based on a discounted cash flow model using unobservable inputs, interest-only strips are classified as Level 3.

 

Equity securities

Equity securities are comprised principally of shares in closed-ended and open-ended mutual funds and other equity securities. Closed-end funds are traded on the secondary market at the shares’ market value. Open-ended funds are considered to be liquid, as investors can sell their shares continually to the fund and are priced at NAV. Mutual funds are classified as Level 2. Other equity securities that do not trade in highly liquid markets are also classified as Level 2, except for one equity security that do not have readily determinable fair value and is under an investment company is measured at NAV.

 

Mortgage servicing rights

Mortgage servicing rights (“MSRs”) do not trade in an active market with readily observable prices. MSRs are priced using a discounted cash flow model valuation performed by a third party. The discounted cash flow model incorporates assumptions that market participants would use in estimating future net servicing income, including portfolio characteristics, prepayments assumptions, discount rates, delinquency and foreclosure rates, late charges, other ancillary revenues, cost to service and other economic factors. Prepayment speeds are adjusted for the loans’ characteristics and portfolio behavior. Due to the unobservable nature of certain valuation inputs, the MSRs are classified as Level 3.

 

Derivatives

Interest rate caps and indexed options are traded in over-the-counter active markets. These derivatives are indexed to an observable interest rate benchmark, such as LIBOR or equity indexes, and are priced using an income approach based on present value and option pricing models using observable inputs. Other derivatives are liquid and have quoted prices, such as forward contracts or “to be announced securities” (“TBAs”). All of these derivatives are classified as Level 2. The non-performance risk is determined using internally-developed models that consider the collateral held, the remaining term, and the creditworthiness of the entity that bears the risk, and uses available public data or internally-developed data related to current spreads that denote their probability of default.

Contingent consideration liability

227


 

The fair value of the contingent consideration, which relates to earnout payments that could be payable to K2 over a three-year period, was calculated based on a discounted cash flow technique using the probability-weighted average from likely scenarios. This contingent consideration is classified as Level 3.

Loans held-in-portfolio that are collateral dependent

The impairment is 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 and which could be subject to internal adjustments. These collateral dependent loans are classified as Level 3.

Loans measured at fair value pursuant to lower of cost or fair value adjustments

Loans measured at fair value on a nonrecurring basis pursuant to lower of cost or fair value were priced based on secondary market prices and discounted cash flow models which incorporate internally-developed assumptions for prepayments and credit loss estimates. These loans are classified as Level 3.

Other real estate owned and other foreclosed assets

Other real estate owned includes real estate properties securing mortgage, consumer, and commercial loans. Other foreclosed assets include primarily automobiles securing auto loans. The fair value of foreclosed assets may be determined using an external appraisal, broker price opinion, or an internal valuation. These foreclosed assets are classified as Level 3 since they are subject to internal adjustments.

ROU assets and leasehold improvements

The impairment was measured based on the sublease rental value of the branches that were subject to the strategic realignment of PB’s New York Metro Branch network. These ROU assets and leasehold improvements are classified as Level 3.

Long-lived assets held-for-sale

The Corporation evaluates for impairment its long-lived assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and records a write down for the difference between the carrying amount and the fair value less cost to sell. These long-lived assets held-for-sale are classified as Level 3.

Trademark

The write-down on impairment of a trademark was based on the discontinuance of origination thru e-loan platform. This trademark is classified as Level 3.

228


 

Note 29 – 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 December 31, 2021 and December 31, 2020, 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.

 

229


 

 

 

December 31, 2021

 

Carrying

 

 

 

 

Measured

 

(In thousands)

amount

Level 1

Level 2

Level 3

 

at NAV

Fair value

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

$

428,433

$

428,433

$

-

$

-

$

-

$

428,433

Money market investments

 

17,536,719

 

17,530,640

 

6,079

 

-

 

-

 

17,536,719

Trading account debt securities, excluding derivatives[1]

 

29,711

 

6,530

 

22,703

 

478

 

-

 

29,711

Debt securities available-for-sale[1]

 

24,968,269

 

-

 

24,967,443

 

826

 

-

 

24,968,269

Debt securities held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of Puerto Rico, States and political subdivisions

$

65,380

$

-

$

-

$

77,383

$

-

$

77,383

 

Collateralized mortgage obligation-federal agency

 

25

 

-

 

-

 

25

 

-

 

25

 

Securities in wholly owned statutory business trusts

 

5,960

 

-

 

5,960

 

-

 

-

 

5,960

Total debt securities held-to-maturity

$

71,365

$

-

$

5,960

$

77,408

$

-

$

83,368

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

FHLB stock

$

59,918

$

-

$

59,918

$

-

$

-

$

59,918

 

FRB stock

 

96,217

 

-

 

96,217

 

-

 

-

 

96,217

 

Other investments

 

33,842

 

-

 

32,429

 

3,704

 

77

 

36,210

Total equity securities

$

189,977

$

-

$

188,564

$

3,704

$

77

$

192,345

Loans held-for-sale

$

59,168

$

-

$

-

$

59,885

$

-

$

59,885

Loans held-in-portfolio

 

28,545,191

 

-

 

-

 

27,489,583

 

-

 

27,489,583

Mortgage servicing rights

 

121,570

 

-

 

-

 

121,570

 

-

 

121,570

Derivatives

 

26,093

 

-

 

26,093

 

-

 

-

 

26,093

 

 

December 31, 2021

 

Carrying

 

 

 

 

Measured

 

(In thousands)

amount

Level 1

Level 2

Level 3

 

at NAV

Fair value

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

$

60,292,939

$

-

$

60,292,939

$

-

$

-

$

60,292,939

 

Time deposits

 

6,712,149

 

-

 

6,647,301

 

-

 

-

 

6,647,301

Total deposits

$

67,005,088

$

-

$

66,940,240

$

-

$

-

$

66,940,240

Assets sold under agreements to repurchase

$

91,603

$

-

$

91,602

$

-

$

-

$

91,602

Other short-term borrowings[2]

$

75,000

$

-

$

75,000

$

-

$

-

$

75,000

Notes payable:

 

 

 

 

 

 

 

 

 

 

 

 

 

FHLB advances

$

492,429

$

-

$

496,091

$

-

$

-

$

496,091

 

Unsecured senior debt securities

 

297,842

 

-

 

319,296

 

-

 

-

 

319,296

 

Junior subordinated deferrable interest debentures (related to trust preferred securities)

 

198,292

 

-

 

201,879

 

-

 

-

 

201,879

Total notes payable

$

988,563

$

-

$

1,017,266

$

-

$

-

$

1,017,266

Derivatives

$

22,878

$

-

$

22,878

$

-

$

-

$

22,878

Contingent consideration

$

9,241

$

-

$

-

$

9,241

$

-

$

9,241

[1]

Refer to Note 28 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.

[2]

Refer to Note 17 to the Consolidated Financial Statements for the composition of other short-term borrowings.

230


 

 

 

December 31, 2020

 

Carrying

 

 

 

 

(In thousands)

amount

Level 1

Level 2

Level 3

Fair value

Financial Assets:

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

$

491,065

$

491,065

$

-

$

-

$

491,065

Money market investments

 

11,640,880

 

11,634,851

 

6,029

 

-

 

11,640,880

Trading account debt securities, excluding derivatives[1]

 

36,674

 

11,506

 

24,509

 

659

 

36,674

Debt securities available-for-sale[1]

 

21,561,152

 

3,499,781

 

18,060,357

 

1,014

 

21,561,152

Debt securities held-to-maturity:

 

 

 

 

 

 

 

 

 

 

 

Obligations of Puerto Rico, States and political subdivisions

$

70,768

$

-

$

-

$

83,298

$

83,298

 

Collateralized mortgage obligation-federal agency

 

31

 

-

 

-

 

32

 

32

 

Securities in wholly owned statutory business trusts

 

11,561

 

-

 

11,561

 

-

 

11,561

Total debt securities held-to-maturity

$

82,360

$

-

$

11,561

$

83,330

$

94,891

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

FHLB stock

$

49,799

$

-

$

49,799

$

-

$

49,799

 

FRB stock

 

93,045

 

-

 

93,045

 

-

 

93,045

 

Other investments

 

30,893

 

-

 

29,590

 

1,495

 

31,085

Total equity securities

$

173,737

$

-

$

172,434

$

1,495

$

173,929

Loans held-for-sale

$

99,455

$

-

$

-

$

102,189

$

102,189

Loans held-in-portfolio

 

28,488,946

 

-

 

-

 

27,098,297

 

27,098,297

Mortgage servicing rights

 

118,395

 

-

 

-

 

118,395

 

118,395

Derivatives

 

20,785

 

-

 

20,785

 

-

 

20,785

 

 

December 31, 2020

 

Carrying

 

 

 

 

(In thousands)

amount

Level 1

Level 2

Level 3

Fair value

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

$

49,558,492

$

-

$

49,558,492

$

-

$

49,558,492

 

Time deposits

 

7,307,848

 

-

 

7,319,963

 

-

 

7,319,963

Total deposits

$

56,866,340

$

-

$

56,878,455

$

-

$

56,878,455

Assets sold under agreements to repurchase

$

121,303

$

-

$

121,257

$

-

$

121,257

Notes payable:

 

 

 

 

 

 

 

 

 

 

 

FHLB advances

$

542,469

$

-

$

561,977

$

-

$

561,977

 

Unsecured senior debt securities

 

296,574

 

-

 

321,078

 

-

 

321,078

 

Junior subordinated deferrable interest debentures (related to trust preferred securities)

 

384,929

 

-

 

395,078

 

-

 

395,078

 

FRB advances

 

1,009

 

-

 

1,009

 

-

 

1,009

Total notes payable

$

1,224,981

$

-

$

1,279,142

$

-

$

1,279,142

Derivatives

$

18,925

$

-

$

18,925

$

-

$

18,925

[1]

Refer to Note 28 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.

 

The notional amount of commitments to extend credit at December 31, 2021 and December 31, 2020 is $ 9.5 billion and $9.3 billion, respectively, and represents the unused portion of credit facilities granted to customers. The notional amount of letters of credit at December 31, 2021 and December 31, 2020 is $ 31 million and $ 24 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.

 

231


 

Note 30 – Employee benefits

 

Certain employees of BPPR are covered by three non-contributory defined benefit pension plans, the Banco Popular de Puerto Rico Retirement Plan and two Restoration Plans (the “Pension Plans”). Pension benefits are based on age, years of credited service, and final average compensation.

The Pension Plans are currently closed to new hires and the accrual of benefits are frozen to all participants. The Pension Plans’ benefit formula is based on a percentage of average final compensation and years of service as of the plan freeze date. Normal retirement age under the retirement plan is age 65 with 5 years of service. Pension costs are funded in accordance with minimum funding standards under the Employee Retirement Income Security Act of 1974 (“ERISA”). Benefits under the Pension Plans are subject to the U.S. and Puerto Rico Internal Revenue Code limits on compensation and benefits. Benefits under restoration plans restore benefits to selected employees that are limited under the Banco Popular de Puerto Rico Retirement Plan due to U.S. and Puerto Rico Internal Revenue Code limits and a compensation definition that excludes amounts deferred pursuant to nonqualified arrangements.

In addition to providing pension benefits, BPPR provides certain health care benefits for certain retired employees (the “OPEB Plan”). Regular employees of BPPR, hired before February 1, 2000, may become eligible for health care benefits, provided they reach retirement age while working for BPPR.

The Corporation’s funding policy is to make annual contributions to the plans, when necessary, in amounts which fully provide for all benefits as they become due under the plans.

The Corporation’s pension fund investment strategy is to invest in a prudent manner for the exclusive purpose of providing benefits to participants. A well defined internal structure has been established to develop and implement a risk-controlled investment strategy that is targeted to produce a total return that, when combined with BPPR contributions to the fund, will maintain the fund’s ability to meet all required benefit obligations. Risk is controlled through diversification of asset types, such as investments in domestic and international equities and fixed income.

Equity investments include various types of stock and index funds. Also, this category includes Popular, Inc.’s common stock. Fixed income investments include U.S. Government securities and other U.S. agencies’ obligations, corporate bonds, mortgage loans, mortgage-backed securities and index funds, among others. A designated committee periodically reviews the performance of the pension plans’ investments and assets allocation. The Trustee and the money managers are allowed to exercise investment discretion, subject to limitations established by the pension plans’ investment policies. The plans forbid money managers to enter into derivative transactions, unless approved by the Trustee.

The overall expected long-term rate-of-return-on-assets assumption reflects the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the benefit obligation. The assumption has been determined by reflecting expectations regarding future rates of return for the plan assets, with consideration given to the distribution of the investments by asset class and historical rates of return for each individual asset class. This process is reevaluated at least on an annual basis and if market, actuarial and economic conditions change, adjustments to the rate of return may come into place.

The Pension Plans weighted average asset allocation as of December 31, 2021 and 2020 and the approved asset allocation ranges, by asset category, are summarized in the table below.

 

Minimum allotment

Maximum allotment

2021

2020

Equity

0

%

70

%

30

%

38

%

Debt securities

0

%

100

%

67

%

60

%

Popular related securities

0

%

5

%

2

%

1

%

Cash and cash equivalents

0

%

100

%

1

%

1

%

232


 

The following table sets forth by level, within the fair value hierarchy, the Pension Plans’ assets at fair value at December 31, 2021 and 2020. Investments measured at net asset value per share (“NAV”) as a practical expedient have not been classified in the fair value hierarchy, but are presented in order to permit reconciliation of the plans’ assets. During the year ended December 31, 2021 investments in certain government obligations classified as Level 2 were substituted by proprietary funds of a money manager that invest in government obligations that are measured at NAV.

 

 

2021

 

2020

(In thousands)

 

Level 1

 

Level 2

 

Level 3

 

Measured at NAV

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Measured at NAV

 

Total

Obligations of the U.S. Government, its agencies, states and political subdivisions

$

-

$

9,259

$

-

$

188,377

$

197,636

$

-

$

187,065

$

-

$

7,377

$

194,442

Corporate bonds and debentures

 

-

 

375,875

 

-

 

8,485

 

384,360

 

-

 

326,344

 

-

 

8,180

 

334,524

Equity securities - Common Stocks

 

41,414

 

-

 

-

 

-

 

41,414

 

101,081

 

-

 

-

 

-

 

101,081

Equity securities - ETF's

 

111,365

 

25,446

 

-

 

-

 

136,811

 

94,009

 

38,229

 

-

 

-

 

132,238

Foreign commingled trust funds

 

-

 

-

 

-

 

82,912

 

82,912

 

-

 

-

 

-

 

98,431

 

98,431

Mutual fund

 

-

 

5,262

 

-

 

-

 

5,262

 

-

 

4,526

 

-

 

-

 

4,526

Private equity investments

 

-

 

-

 

56

 

-

 

56

 

-

 

-

 

70

 

-

 

70

Cash and cash equivalents

 

7,523

 

-

 

-

 

-

 

7,523

 

9,626

 

-

 

-

 

-

 

9,626

Accrued investment income

 

-

 

-

 

4,510

 

-

 

4,510

 

-

 

-

 

3,847

 

-

 

3,847

Total assets

$

160,302

$

415,842

$

4,566

$

279,774

$

860,484

$

204,716

$

556,164

$

3,917

$

113,988

$

878,785

233


 

The closing prices reported in the active markets in which the securities are traded are used to value the investments.

Following is a description of the valuation methodologies used for investments measured at fair value:

Obligations of U.S. Government, its agencies, states and political subdivisions - The fair value of Obligations of U.S. Government and its agencies obligations are based on an active exchange market and on quoted market prices for similar securities. U.S. agency structured notes are priced based on a bond’s theoretical value from similar bonds defined by credit quality and market sector and for which the fair value incorporates an option adjusted spread in deriving their fair value. The fair value of municipal bonds are based on trade data on these instruments reported on Municipal Securities Rulemaking Board (“MSRB”) transaction reporting system or comparable bonds from the same issuer and credit quality. These securities are classified as Level 2, except for the governmental index funds that are measured at NAV.

Corporate bonds and debentures - Corporate bonds and debentures are valued at fair value at the closing price reported in the active market in which the bond is traded. These securities are classified as Level 2, except for the corporate bond funds that are measured at NAV.

Equity securities – common stocks - Equity securities with quoted market prices obtained from an active exchange market and high liquidity are classified as Level 1.

Equity securities – ETF’s – Exchange Traded Funds shares with quoted market prices obtained from an active exchange market. Highly liquid ETF’s are classified as Level 1 while less liquid ETF’s are classified as Level 2.

Foreign commingled trust fund- Collective investment funds are valued at the NAV of shares held by the plan at year end.

Mutual funds – Mutual funds are valued at the NAV of shares held by the plan at year end. Mutual funds are classified as Level 2.

Mortgage-backed securities The fair value is based on trade data from brokers and exchange platforms where these instruments regularly trade. Certain agency mortgage and other asset backed securities (“MBS”) are priced based on a bond’s theoretical value from similar bonds defined by credit quality and market sector. Their fair value incorporates an option adjusted spread and prepayment projections. The agency MBS are classified as Level 2.

Private equity investments - Private equity investments include an investment in a private equity fund. The fund value is recorded at its net realizable value which is affected by the changes in the fair market value of the investments held in the fund. This fund is classified as Level 3.

Cash and cash equivalents - The carrying amount of cash and cash equivalents is a reasonable estimate of the fair value since it is available on demand or due to their short-term maturity. Cash and cash equivalents are classified as Level 1.

Accrued investment income – Given the short-term nature of these assets, their carrying amount approximates fair value. Since there is a lack of observable inputs related to instrument specific attributes, these are reported as Level 3.

The preceding valuation methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following table presents the change in Level 3 assets measured at fair value.

234


 

(In thousands)

 

2021

 

2020

Balance at beginning of year

$

3,917

$

4,670

Purchases, sales, issuance and settlements (net)

 

649

 

(753)

Balance at end of year

$

4,566

$

3,917

 

There were no transfers in and/or out of Level 3 for financial instruments measured at fair value on a recurring basis during the years ended December 31, 2021 and 2020. There were no transfers in and/or out of Level 1 and Level 2 during the years ended December 31, 2021 and 2020.

Information on the shares of common stock held by the pension plans is provided in the table that follows.

(In thousands, except number of shares information)

 

2021

 

2020

Shares of Popular, Inc. common stock

 

167,182

 

162,936

Fair value of shares of Popular, Inc. common stock

$

13,716

$

9,177

Dividends paid on shares of Popular, Inc. common stock held by the plan

$

280

$

238

 

The following table presents the components of net periodic benefit cost for the years ended December 31, 2021, 2020 and 2019.

 

 

Pension Plans

 

OPEB Plan

(In thousands)

 

2021

 

2020

 

2019

 

2021

 

2020

 

2019

Personnel costs:

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

$

-

$

-

$

-

$

642

$

713

$

759

Other operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest cost

 

15,993

 

23,389

 

28,439

 

3,573

 

4,913

 

5,955

Expected return on plan assets

 

(38,679)

 

(38,104)

 

(32,388)

 

-

 

-

 

-

Recognized net actuarial loss

 

18,876

 

20,880

 

23,508

 

1,873

 

567

 

-

Net periodic benefit cost

$

(3,810)

$

6,165

$

19,559

$

6,088

$

6,193

$

6,714

Total benefit cost

$

(3,810)

$

6,165

$

19,559

$

6,088

$

6,193

$

6,714

235


 

The following table sets forth the aggregate status of the plans and the amounts recognized in the consolidated financial statements at December 31, 2021 and 2020.

 

 

 

Pension Plans

 

OPEB Plan

(In thousands)

 

2021

 

2020

 

2021

 

2020

Change in benefit obligation:

 

 

 

 

 

 

 

 

Benefit obligation at beginning of year

$

914,353

$

852,551

$

179,210

$

168,681

Service cost

 

-

 

-

 

642

 

713

Interest cost

 

15,993

 

23,389

 

3,573

 

4,913

Actuarial (gain)/loss[1]

 

(34,297)

 

83,277

 

(17,286)

 

11,247

Benefits paid

 

(44,578)

 

(44,864)

 

(6,181)

 

(6,344)

Benefit obligation at end of year

$

851,471

$

914,353

$

159,958

$

179,210

Change in fair value of plan assets:

 

 

 

 

 

 

 

 

Fair value of plan assets at beginning of year

$

878,785

$

799,935

$

-

$

-

Actual return on plan assets

 

26,049

 

123,484

 

-

 

-

Employer contributions

 

228

 

230

 

6,181

 

6,344

Benefits paid

 

(44,578)

 

(44,864)

 

(6,181)

 

(6,344)

Fair value of plan assets at end of year

$

860,484

$

878,785

$

-

$

-

Funded status of the plan:

 

 

 

 

 

 

 

 

Benefit obligation at end of year

$

(851,471)

$

(914,353)

$

(159,958)

$

(179,210)

Fair value of plan assets at end of year

 

860,484

 

878,785

 

-

 

-

Funded status at year end

$

9,013

$

(35,568)

$

(159,958)

$

(179,210)

Amounts recognized in accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

225,356

 

265,899

 

12,993

 

32,152

Accumulated other comprehensive loss (AOCL)

$

225,356

$

265,899

$

12,993

$

32,152

Reconciliation of net (liabilities) assets:

 

 

 

 

 

 

 

 

Net liabilities at beginning of year

$

(35,568)

$

(52,616)

$

(179,210)

$

(168,681)

Amount recognized in AOCL at beginning of year, pre-tax

 

265,899

 

288,882

 

32,152

 

21,472

Amount prepaid at beginning of year

 

230,331

 

236,266

 

(147,058)

 

(147,209)

Net periodic benefit cost

 

3,810

 

(6,165)

 

(6,088)

 

(6,193)

Contributions

 

228

 

230

 

6,181

 

6,344

Amount prepaid at end of year

 

234,369

 

230,331

 

(146,965)

 

(147,058)

Amount recognized in AOCL

 

(225,356)

 

(265,899)

 

(12,993)

 

(32,152)

Net asset/(liabilities) at end of year

$

9,013

$

(35,568)

$

(159,958)

$

(179,210)

[1]

For 2021, significant components of the Pension Plans actuarial gain that changed the benefit obligation were mainly related to an increase in the single weighted-average discount rates partially offset by a lower return on the fair value of plan assets. For OPEB Plans significant components of the actuarial gain that change the benefit obligation were mainly related to an increase in discount rates and the per capita claim assumption at year-end which was lower than expected. The per capita claim methodology for the fully insured Medicare Advantage plans changed from age-based per capita cost to cost that do not vary by age. For 2020, significant components of the Pension Plans actuarial loss that changed the benefit obligation were mainly related to a decrease in discount rates partially offset by a greater return on the fair value of plan assets. For OPEB Plans significant components of the actuarial loss that change the benefit obligation were mainly related to a decrease in discount rates partially offset by the per capita claim assumption at year-end which was lower than expected and the healthcare trend rate assumption which was updated at year-end.

 

236


 

The following table presents the change in accumulated other comprehensive loss (“AOCL”), pre-tax, for the years ended December 31, 2021 and 2020.

(In thousands)

 

Pension Plans

 

OPEB Plan

 

 

 

2021

 

2020

 

2021

 

2020

Accumulated other comprehensive loss at beginning of year

$

265,899

$

288,882

$

32,152

$

21,472

Increase (decrease) in AOCL:

 

 

 

 

 

 

 

 

Recognized during the year:

 

 

 

 

 

 

 

 

 

Amortization of actuarial losses

 

(18,876)

 

(20,880)

 

(1,873)

 

(567)

Occurring during the year:

 

 

 

 

 

 

 

 

 

Net actuarial (gains)/losses

 

(21,667)

 

(2,103)

 

(17,286)

 

11,247

Total (decrease) increase in AOCL

 

(40,543)

 

(22,983)

 

(19,159)

 

10,680

Accumulated other comprehensive loss at end of year

$

225,356

$

265,899

$

12,993

$

32,152

 

The Corporation estimates the service and interest cost components utilizing a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to their underlying projected cash flows.

To determine benefit obligation at year end, the Corporation used a weighted average of annual spot rates applied to future expected cash flows for years ended December 31, 2021 and 2020.

The following table presents the discount rate and assumed health care cost trend rates used to determine the benefit obligation and net periodic benefit cost for the plans:

 

 

Pension Plans

 

OPEB Plan

Weighted average assumptions used to determine net periodic benefit cost for the years ended December 31:

2021

 

2020

 

2019

 

2021

 

2020

 

2019

 

Discount rate for benefit obligation

2.41 - 2.48

%

3.22 - 3.27

%

4.20 - 4.23

%

2.65

%

3.38

%

4.30

%

Discount rate for service cost

N/A

 

N/A

 

N/A

 

3.09

%

3.72

%

4.49

%

Discount rate for interest cost

1.76 - 1.80

%

2.81 - 2.83

%

3.87 - 3.90

%

2.03

%

2.98

%

3.99

%

Expected return on plan assets

4.60 - 5.50

%

5.00 - 5.80

%

5.30 - 6.00

%

N/A

 

N/A

 

N/A

 

Initial health care cost trend rate

N/A

 

N/A

 

N/A

 

5.00

%

5.00

%

5.00

%

Ultimate health care cost trend rate

N/A

 

N/A

 

N/A

 

4.50

%

5.00

%

5.00

%

Year that the ultimate trend rate is reached

N/A

 

N/A

 

N/A

 

2023

 

2020

 

2019

 

 

 

 

 

 

 

Pension Plans

OPEB Plan

Weighted average assumptions used to determine benefit obligation at December 31:

2021

 

2020

 

2021

 

2020

 

Discount rate for benefit obligation

 

 

 

 

2.79-2.83

%

2.41-2.48

%

2.94

%

2.65

%

Initial health care cost trend rate

 

 

 

 

N/A

 

N/A

 

4.75

%

5.00

%

Ultimate health care cost trend rate

 

 

 

 

N/A

 

N/A

 

4.50

%

4.50

%

Year that the ultimate trend rate is reached

 

 

 

 

N/A

 

N/A

 

2023

 

2023

 

237


 

The following table presents information for plans with a projected benefit obligation and accumulated benefit obligation in excess of plan assets for the years ended December 31, 2021 and 2020.

 

 

 

Pension Plans

 

OPEB Plan

(In thousands)

 

2021

 

2020

 

2021

 

2020

Projected benefit obligation

$

851,471

$

914,353

$

159,958

$

179,210

Accumulated benefit obligation

 

851,471

 

914,353

 

159,958

 

179,210

Fair value of plan assets

 

860,484

 

878,785

 

-

 

-

 

The Corporation expects to pay the following contributions to the plans during the year ended December 31, 2022.

(In thousands)

2022

Pension Plans

$

227

OPEB Plan

$

5,971

 

Benefit payments projected to be made from the plans during the next ten years are presented in the table below.

(In thousands)

 

Pension Plans

 

OPEB Plan

2022

$

48,339

$

5,971

2023

 

45,409

 

6,117

2024

 

45,598

 

6,293

2025

 

45,742

 

6,458

2026

 

45,824

 

6,667

2027 - 2031

 

226,642

 

35,807

238


 

The table below presents a breakdown of the plans’ assets and liabilities at December 31, 2021 and 2020.

 

 

 

Pension Plans

 

OPEB Plan

(In thousands)

 

2021

 

2020

 

2021

 

2020

Non-current assets

$

17,792

$

-

$

-

$

-

Current liabilities

 

227

 

229

 

5,959

 

6,328

Non-current liabilities

 

8,552

 

35,339

 

153,999

 

172,882

 

Savings plans

The Corporation also provides defined contribution savings plans pursuant to Section 1081.01(d) of the Puerto Rico Internal Revenue Code and Section 401(k) of the U.S. Internal Revenue Code, as applicable, for substantially all the employees of the Corporation. Investments in the plans are participant-directed, and employer matching contributions are determined based on the specific provisions of each plan. Employees are fully vested in the employer’s contribution after five years of service. The cost of providing these benefits in the year ended December 31, 2021 was $13.3 million (2020 - $14.0 million, 2019 - $15.1 million).

The plans held 1,279,982 (2020 – 1,362,593) shares of common stock of the Corporation with a market value of approximately $105 million at December 31, 2021 (2020 - $77 million).

239


 

Note 31 – Net income per common share

The following table sets forth the computation of net income per common share (“EPS”), basic and diluted, for the years ended December 31, 2021, 2020 and 2019:

 

(In thousands, except per share information)

 

 

2021

 

2020

 

2019

Net income

 

$

934,889

$

506,622

$

671,135

Preferred stock dividends

 

 

(1,412)

 

(1,758)

 

(3,723)

Net income applicable to common stock

 

$

933,477

$

504,864

$

667,412

Average common shares outstanding

 

 

81,263,027

 

85,882,371

 

96,848,835

Average potential dilutive common shares

 

 

157,127

 

92,888

 

148,965

Average common shares outstanding - assuming dilution

 

 

81,420,154

 

85,975,259

 

96,997,800

Basic EPS

 

$

11.49

$

5.88

$

6.89

Diluted EPS

 

$

11.46

$

5.87

$

6.88

 

 

As disclosed in Note 20, as of September 30, 2021, the Corporation completed its $350 million accelerated share repurchase transaction (“ASR”) and, in connection therewith, received an initial delivery of 3,785,831 shares of common stock during the second quarter of 2021 and 828,965 additional shares of common stock during the third quarter of 2021. The final number of shares delivered was based in the average daily volume weighted average price (“VWAP”) of its common stock, net of discount, during the term of the ASR, which amounted to $75.84.

 

Potential common shares consist of shares of common stock issuable under the assumed exercise of stock options, restricted stock and performance share awards using the treasury stock method. This method assumes that the potential common shares are issued and the proceeds from exercise, in addition to the amount of compensation cost attributed to future services, are used to purchase shares of common stock at the exercise date. The difference between the number of potential common shares issued and the shares of common stock purchased is added as incremental shares to the actual number of shares outstanding to compute diluted earnings per share. Warrants, stock options, restricted stock and performance share awards, if any, that result in lower potential common shares issued than shares of common stock purchased under the treasury stock method are not included in the computation of dilutive earnings per share since their inclusion would have an antidilutive effect in earnings per common share.

240


 

Note 32 – Revenue from contracts with customers

The following table presents the Corporation’s revenue streams from contracts with customers by reportable segment for the years ended December 31, 2021, 2020 and 2019.

 

 

 

 

Years ended December 31,

(In thousands)

 

2021

2020

2019

 

 

 

 

BPPR

 

Popular U.S.

 

BPPR

 

Popular U.S.

 

BPPR

 

Popular U.S.

Service charges on deposit accounts

 

$

151,453

$

11,245

$

136,703

$

11,120

$

146,384

$

14,549

Other service fees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debit card fees

 

 

47,681

 

956

 

38,685

 

967

 

46,066

 

1,076

 

Insurance fees, excluding reinsurance

 

 

40,929

 

3,798

 

35,799

 

2,484

 

42,995

 

3,803

 

Credit card fees, excluding late fees and membership fees

 

 

117,418

 

1,052

 

88,091

 

831

 

86,884

 

866

 

Sale and administration of investment products

 

 

23,634

 

-

 

21,755

 

-

 

23,072

 

-

 

Trust fees

 

 

24,855

 

-

 

21,700

 

-

 

21,198

 

-

Total revenue from contracts with customers

[1]

$

405,970

$

17,051

$

342,733

$

15,402

$

366,599

$

20,294

[1] The amounts include intersegment transactions of $4.1 million, $4.3 million and $3.8 million, respectively, for the years ended December 31, 2021, 2020 and 2019.

 

 

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

241


 

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.

242


 

Note 33 – 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 32.0 years considers options to extend the leases for up to 20.0 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 14 and Note 19, 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.

 

On October 27, 2020, PB, the United States mainland banking subsidiary of the Corporation, authorized and approved a strategic realignment of its New York Metro branch network that resulted in eleven branch closures, of which nine were leased properties. The branch closures were completed on January 29, 2021. An impairment loss of ROU assets amounting to $15.9 million was recognized in connection with this transaction during the fourth quarter of 2020.

 

The following table presents the undiscounted cash flows of operating and finance leases for each of the following periods:

 

December 31, 2021

(In thousands)

 

2022

 

2023

 

2024

 

2025

 

2026

 

Later Years

 

Total Lease Payments

 

Less: Imputed Interest

 

Total

Operating Leases

$

30,044

$

27,956

$

26,550

$

23,619

$

15,187

$

50,912

$

174,268

$

(20,154)

$

154,114

Finance Leases

 

3,402

 

3,491

 

3,589

 

3,701

 

3,350

 

5,501

 

23,034

 

(3,315)

 

19,719

 

 

The following table presents the lease cost recognized by the Corporation in the Consolidated Statements of Operations as follows:

 

 

 

 

Years ended December 31,

(In thousands)

2021

 

2020

2019

Finance lease cost:

 

 

 

 

 

 

 

Amortization of ROU assets

$

2,006

$

2,215

$

1,701

 

Interest on lease liabilities

 

1,044

 

1,185

 

1,194

Operating lease cost

 

29,970

 

31,674

 

30,664

Short-term lease cost

 

647

 

214

 

252

Variable lease cost

 

93

 

51

 

97

Sublease income

 

(70)

 

(113)

 

(113)

Net gain recognized from sale and leaseback transaction[1]

 

(7,007)

 

(5,550)

 

-

Impairment of operating ROU assets[2]

 

-

 

14,805

 

-

Impairment of finance ROU assets[2]

 

-

 

1,115

 

-

Total lease cost[3]

$

26,683

$

45,596

$

33,795

[1]

During the quarter ended September 30, 2021, the Corporation recognized the transfer of two corporate office buildings as a sale. During the quarter ended June 30, 2020, the Corporation recognized the transfer of the Caparra Center as a sale. Since these sale and partial leaseback transactions were considered to be at fair value, no portion of the gain on sale was deferred.

[2]

Impairment loss recognized during the fourth quarter of 2020 in connection with the closure of nine branches as a result of the strategic realignment of PB’s New York Metro branch network.

[3]

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.

 

243


 

The following table presents supplemental cash flow information and other related information related to operating and finance leases.

 

 

 

 

Years ended December 31,

(Dollars in thousands)

 

2021

 

2020

 

2019

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

 

 

Operating cash flows from operating leases[1]

$

38,288

$

41,650

$

30,073

 

Operating cash flows from finance leases

 

1,044

 

1,185

 

1,200

 

Financing cash flows from finance leases[1]

 

2,852

 

3,145

 

1,726

ROU assets obtained in exchange for new lease obligations:

 

 

 

 

 

 

 

Operating leases[2]

$

24,136

$

14,975

$

28,430

 

Finance leases

 

-

 

4,510

 

661

Weighted-average remaining lease term:

 

 

 

 

 

 

 

 

 

 

Operating leases

 

7.9

years

 

8.0

years

 

8.7

years

 

Finance leases

 

8.3

years

 

8.9

years

 

7.3

years

Weighted-average discount rate:

 

 

 

 

 

 

 

 

 

 

Operating leases

 

2.7

%

 

3.0

%

 

3.4

%

 

Finance leases

 

5.0

%

 

5.0

%

 

5.9

%

[1]

During the quarter ended March 31, 2021, the Corporation made base lease termination payments amounting to $7.8 million in connection with the closure of nine branches as a result of the strategic realignment of PB’s New York Metro branch network.

[2]

During the quarter ended September 30, 2021, the Corporation recognized a lease liability of $16.8 million and a corresponding ROU asset for the same amount as a result of the partial leaseback of two corporate office buildings.

 

As of December 31, 2021, the Corporation has an additional operating lease contract that has not yet commenced with an undiscounted contract amount of $2.3 million, which will have a lease term of 20 years.

244


 

Note 34 - 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 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 for 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 is determined based on a two-prong vesting schedule. The first part is vested ratably over five years commencing at the date of grant (the “graduated vesting portion”) and the second part is vested at termination of employment after attaining 55 years of age and 10 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. The vesting schedule for restricted shares granted on or after 2014 and prior to 2021 was modified as follows: the graduated vesting portion is vested ratably over four years commencing at the date of the grant and the retirement vesting portion is vested 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 graduated vesting portion is accelerated at termination of employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service. Restricted stock granted on or after 2021 will vest ratably in equal annual installments over a period of 4 years or 3 years, depending in the classification of the employee.

 

The performance share award 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 Earnings per Share (“EPS”) goals. For grants issued on 2020 and 2021, the EPS goal is substituted by the Absolute Return on Average Assets (“ROA”) goal and the Absolute Return on Average Tangible Common Equity (“ROATCE”) respectively. 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 EPS, ROA and ROATCE metrics are considered to be a performance condition under ASC 718. The fair value is determined based on the probability of achieving the EPS, ROA goal as of each reporting period. The TSR and EPS, ROA or 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 (EPS, ROA and 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.

 

245


 

(Not in thousands)

Shares

 

Weighted-average grant date fair value

Non-vested at January 1, 2019

382,186

$

36.41

Granted

218,169

 

55.55

Performance Shares Quantity Adjustment

15,061

 

55.72

Vested

(270,051)

 

44.73

Non-vested at December 31, 2019

345,365

$

41.68

Granted

253,943

 

42.49

Performance Shares Quantity Adjustment

(7)

 

48.79

Vested

(234,421)

 

42.64

Forfeited

(6,368)

 

44.26

Non-vested at December 31, 2020

358,512

$

41.23

Granted

191,479

 

69.38

Performance Shares Quantity Adjustment

54,306

 

54.21

Vested

(273,974)

 

55.11

Forfeited

(8,440)

 

43.48

Non-vested at December 31, 2021

321,883

$

47.98

 

 

During the year ended December 31, 2021, 120,105 shares of restricted stock (2020 - 213,511; 2019 - 152,773) and 71,374 performance shares (2020 - 40,432; 2019 - 65,396) were awarded to management under the Incentive Plan.

During the year ended December 31, 2021, the Corporation recognized $8.6 million of restricted stock expense related to management incentive awards, with a tax benefit of $1.6 million (2020 - $7.6 million, with a tax benefit of $1.3 million; 2019 - $7.7 million, with a tax benefit of $1.2 million). During the year ended December 31, 2021, the fair market value of the restricted stock vested was $11.6 million at grant date and $18.6 million at vesting date. This triggers a windfall of $2.5 million that was recorded as a reduction on income tax expense. During the year ended December 31, 2021 the Corporation recognized $5.8 million of performance shares expense, with a tax benefit of $0.5 million (2020 - $2.3 million, with a tax benefit of $0.2 million; 2019 - $4.6 million, with a tax benefit of $0.3 million). The total unrecognized compensation cost related to non-vested restricted stock awards to members of management at December 31, 2021 was $8.9 million and is expected to be recognized over a weighted-average period of 2.1 years.

The following table summarizes the restricted stock activity under the Incentive Plan for members of the Board of Directors:

 

(Not in thousands)

Restricted stock

 

Weighted-average grant date fair value

RSU

 

Weighted-average grant date fair value

Non-vested at January 1, 2019

-

 

-

-

 

-

Granted

1,052

$

49.25

27,449

$

57.64

Vested

(1,052)

 

49.25

(27,449)

 

57.64

Forfeited

-

 

-

-

 

-

Non-vested at December 31, 2019

-

 

-

-

 

-

Granted

-

$

-

43,866

$

35.47

Vested

-

 

-

(43,866)

 

35.47

Forfeited

-

 

-

-

 

-

Non-vested at December 31, 2020

-

 

-

-

 

-

Granted

-

$

-

20,638

$

78.20

Vested

-

 

-

(20,638)

 

78.20

Forfeited

-

 

-

-

 

-

Non-vested at December 31, 2021

-

 

-

-

 

-

246


 

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 restricted 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 RSU award until their retirement. To the extent that cash dividends are paid on the Corporation’s outstanding common stock, the Directors holding RSUs will receive an additional number of RSUs that reflect a reinvested dividend equivalent.

For 2019, Directors elected shares of restricted stock and RSUs and for 2020 and 2021, all Directors elected RSUs. For the year ended December 31, 2021, 20,638 RSUs were granted to the Directors (2020 - 43,866; 2019 - 1,052; shares of restricted stock and 27,449 RSUs). For the year ended December 31, 2021, $1.9 million of restricted stock expense related to these RSUs was recognized, with a tax benefit of $0.4 million (2020 - $1.6 million with a tax benefit of $0.3 million; 2019 - $52 thousand with a tax benefit of $6 thousand for shares of restricted stock and $1.6 million with a tax benefit of $0.2 million for RSUs). The fair value at vesting date of the RSUs vested during the year ended December 31, 2021 for the Directors was $1.6 million.

 

 

247


 

Note 35 – Income taxes

The components of income tax expense for the years ended December 31, are summarized in the following table.

 

(In thousands)

 

2021

 

2020

 

2019

Current income tax (benefit) expense:

 

 

 

 

 

 

Puerto Rico

$

69,415

$

33,281

$

2,251

Federal and States

 

10,232

 

3,613

 

3,598

Subtotal

 

79,647

 

36,894

 

5,849

Deferred income tax expense (benefit):

 

 

 

 

 

 

Puerto Rico

 

179,688

 

69,300

 

123,337

Federal and States

 

49,683

 

5,744

 

17,995

Subtotal

 

229,371

 

75,044

 

141,332

Total income tax expense

$

309,018

$

111,938

$

147,181

 

The reasons 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:

 

 

 

 

2021

 

 

2020

 

 

2019

 

(In thousands)

 

Amount

% of pre-tax income

 

 

Amount

% of pre-tax income

 

 

Amount

% of pre-tax income

 

Computed income tax at statutory rates

$

466,465

38

%

$

231,960

38

%

$

306,869

38

%

Benefit of net tax exempt interest income

 

(139,426)

(12)

 

 

(126,232)

(20)

 

 

(145,597)

(18)

 

Effect of income subject to preferential tax rate

 

(11,981)

(1)

 

 

(10,141)

(2)

 

 

(9,562)

(1)

 

Deferred tax asset valuation allowance

 

20,932

2

 

 

15,276

2

 

 

16,992

2

 

Difference in tax rates due to multiple jurisdictions

 

(30,719)

(3)

 

 

(1,903)

-

 

 

(12,888)

(2)

 

Adjustment in net deferred tax due to change in the applicable tax rate

 

-

-

 

 

-

-

 

 

(6,559)

(1)

 

Unrecognized tax benefits

 

(5,484)

-

 

 

(2,163)

-

 

 

-

-

 

State and local taxes

 

14,629

1

 

 

4,350

-

 

 

4,749

1

 

Others

 

(5,398)

-

 

 

791

-

 

 

(6,823)

(1)

 

Income tax expense

$

309,018

25

%

$

111,938

18

%

$

147,181

18

%

 

For the year ended December 31, 2021, the Corporation recorded income tax expense of $309.0 million, compared to $111.9 million for the previous year. The increase in income tax expense was mainly due to higher pre-tax income during the year 2021 as compared to year 2020 resulting primarily from a lower provision for credit losses partially offset by higher net exempt interest income and higher income from the U.S. operations subject to lower statutory tax rate.

 

The results for the year 2019 include an additional income tax benefit of $26 million related to the revision of the amount of exempt income earned in prior years, that resulted in the amendment of income tax returns for Banco Popular de Puerto Rico for the years 2015 to 2017 and certain adjustments pertaining to tax periods for which the statute of limitations had expired.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Significant components of the Corporation’s deferred tax assets and liabilities at December 31 were as follows:

248


 

 

 

 

December 31, 2021

(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

 

112,331

 

665,164

 

777,495

Postretirement and pension benefits

 

57,002

 

-

 

57,002

Deferred loan origination fees/cost

 

2,788

 

-

 

2,788

Allowance for credit losses

 

233,500

 

31,872

 

265,372

Deferred gains

 

1,642

 

-

 

1,642

Accelerated depreciation

 

5,246

 

7,422

 

12,668

FDIC-assisted transaction

 

152,665

 

-

 

152,665

Lease liability

 

31,211

 

23,894

 

55,105

Difference in outside basis from pass-through entities

 

54,781

 

-

 

54,781

Other temporary differences

 

38,512

 

8,418

 

46,930

 

Total gross deferred tax assets

 

689,939

 

739,551

 

1,429,490

Deferred tax liabilities:

 

 

 

 

 

 

Indefinite-lived intangibles

 

76,635

 

51,150

 

127,785

Unrealized net gain (loss) on trading and available-for-sale securities

 

4,329

 

2,817

 

7,146

Right of use assets

 

29,025

 

20,282

 

49,307

Deferred loan origination fees/cost

 

-

 

3,567

 

3,567

Other temporary differences

 

43,856

 

1,530

 

45,386

 

Total gross deferred tax liabilities

 

153,845

 

79,346

 

233,191

Valuation allowance

 

128,557

 

410,970

 

539,527

Net deferred tax asset

$

407,537

$

249,235

$

656,772

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

(In thousands)

 

PR

 

US

 

Total

Deferred tax assets:

 

 

 

 

 

 

Tax credits available for carryforward

$

3,003

$

5,269

$

8,272

Net operating loss and other carryforward available

 

124,355

 

698,842

 

823,197

Postretirement and pension benefits

 

80,179

 

-

 

80,179

Deferred loan origination fees

 

12,079

 

(2,652)

 

9,427

Allowance for credit losses

 

373,010

 

38,606

 

411,616

Accelerated depreciation

 

3,439

 

5,390

 

8,829

FDIC-assisted transaction

 

152,665

 

-

 

152,665

Intercompany deferred gains

 

1,728

 

-

 

1,728

Lease liability

 

22,790

 

18,850

 

41,640

Difference in outside basis from pass-through entities

 

61,222

 

-

 

61,222

Other temporary differences

 

38,954

 

7,344

 

46,298

 

Total gross deferred tax assets

 

873,424

 

771,649

 

1,645,073

Deferred tax liabilities:

 

 

 

 

 

 

Indefinite-lived intangibles

 

73,305

 

37,745

 

111,050

Unrealized net gain (loss) on trading and available-for-sale securities

 

67,003

 

8,595

 

75,598

Right of use assets

 

20,708

 

15,510

 

36,218

Other temporary differences

 

50,247

 

1,169

 

51,416

 

Total gross deferred tax liabilities

 

211,263

 

63,019

 

274,282

Valuation allowance

 

112,871

 

407,225

 

520,096

Net deferred tax asset

$

549,290

$

301,405

$

850,695

 

249


 

The net deferred tax asset shown in the table above at December 31, 2021 is reflected in the consolidated statements of financial condition as $0.7 billion in net deferred tax assets (in the “other assets” caption) (2020 - $0.9 billion in deferred tax asset in the “other assets” caption) and $825 thousand in deferred tax liabilities (in the “other liabilities” caption) (2020 - $897 thousand in deferred tax liabilities in the “other liabilities” caption), reflecting the aggregate deferred tax assets or liabilities of individual tax-paying subsidiaries of the Corporation.

The deferred tax asset related to the NOLs outstanding at December 31, 2021 expires as follows:

 

(In thousands)

 

 

2022

$

396

2023

 

1,363

2024

 

9,310

2025

 

13,516

2026

 

13,367

2027

 

15,202

2028

 

288,395

2029

 

119,297

2030

 

120,255

2031

 

117,210

2032

 

22,758

2033

 

10,749

2034

 

44,473

2035

 

1,079

2036

 

125

 

$

777,495

 

 

At December 31, 2021 the net deferred tax asset of the U.S. operations amounted to $660 million with a valuation allowance of approximately $411 million, for a net deferred tax asset after valuation allowance of approximately $249 million. The Corporation evaluates the realization of the deferred tax asset by taxing jurisdiction. The U.S. operation is not in a cumulative three-year loss position and had sustained profitability for the three-year period ended December 31, 2021. Years 2020 and 2021 have been impacted by the COVID-19 pandemic and other events. Year 2020 was unfavorably impacted by the ACL reserve build-ups and the impairment of expenses on the branch closures in the New York region. Year 2021 has been favorably impacted by a strong economic recovery that resulted in ACL reserve releases, reversing the year 2020 build-up. The financial results for year 2021 is 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 the uncertainty created by new variants of COVID-19. As of December 31, 2021, after weighting all positive and negative evidence, the Corporation concluded that it is more likely than not that approximately $249 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 and the pre-tax earnings forecast on a quarterly basis to assess the future realization of the deferred tax asset. Management will closely monitor factors, including, net income versus forecast, targeted loan growth, net interest income margin, allowance for credit losses, charge offs, NPLs inflows and NPA balances. Strong financial results during year 2022 together with the additional income expected from the recent acquisition of K2 assets, along with new tax initiatives could be considered additional positive evidence that, in the future, could overcome totally or partially the negative evidence evaluated as of December 31, 2021, that could result in future adjustments to the valuation allowance.

At December 31, 2021, the Corporation’s net deferred tax assets related to its Puerto Rico operations amounted to $408 million.

250


 

The Corporation’s Puerto Rico Banking operation is not in a cumulative loss position and has sustained profitability for the three year period ended December 31, 2021. This is considered a strong piece of objectively verifiable positive evidence that out weights 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 three years period ending December 31, 2021. Management expects these losses will be a trend in future years. This objectively verifiable negative evidence is considered by management a strong negative evidence that will suggest that income in future years will be insufficient to support the realization of all deferred tax asset. 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, considering the criteria of ASC Topic 740. Accordingly, the Corporation has maintained a full valuation allowance on the deferred tax asset of $129 million as of December 2021.

Under the Puerto Rico Internal Revenue Code, the Corporation and its subsidiaries are treated as separate taxable entities and are not entitled to file consolidated tax returns. However, certain subsidiaries that are organized as limited liability companies with a partnership election are treated as pass-through entities for Puerto Rico tax purposes. The Code provides a dividends-received deduction of 100% on dividends received from “controlled” subsidiaries subject to taxation in Puerto Rico and 85% on dividends received from other taxable domestic corporations.

The Corporation’s subsidiaries in the United States file a consolidated federal income tax return. The intercompany settlement of taxes paid is based on tax sharing agreements which generally allocate taxes to each entity based on a separate return basis.

The following table presents a reconciliation of unrecognized tax benefits.

 

(In millions)

 

 

Balance at January 1, 2020

$

16.3

Reduction as a result of lapse of statute of limitations

 

(1.5)

Balance at December 31, 2020

$

14.8

Reduction as a result of lapse of statute of limitations

 

(11.3)

Balance at December 31, 2021

$

3.5

251


 

At December 31, 2021, the total amount of interest recognized in the statement of financial condition approximated $2.8 million (2020 - $4.8 million). The total interest expense recognized during 2021 was $892 thousand net of a reduction of $2.9 million due to the expiration of the statute of limitation (2020 - $2.0 million net of a reduction of $645 thousand). Management determined that, as of December 31, 2021 and 2020, 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 through earnings, would affect the Corporation’s effective tax rate, was approximately $5.5 million at December 31, 2021 (2020 - $10.2 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 statute of limitations, 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 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. As of December 31, 2021, the following years remain subject to examination in the U.S. Federal jurisdiction – 2018 and thereafter and in the Puerto Rico jurisdiction – 2017 and thereafter. The Corporation anticipates a reduction in the total amount of unrecognized tax benefits within the next 12 months, which could amount to approximately $1.4 million, including interest.

252


 

Note 36 – Supplemental disclosure on the consolidated statements of cash flows

Additional disclosures on cash flow information and non-cash activities for the years ended December 31, 2021, 2020 and 2019 are listed in the following table:

 

(In thousands)

 

2021

 

2020

 

2019

Income taxes paid

$

64,997

$

13,045

$

14,461

Interest paid

 

170,442

 

240,342

 

369,383

Non-cash activities:

 

 

 

 

 

 

Loans transferred to other real estate

 

57,638

 

14,464

 

67,056

Loans transferred to other property

 

45,144

 

48,614

 

53,286

Total loans transferred to foreclosed assets

 

102,782

 

63,078

 

120,342

Loans transferred to other assets

 

7,219

 

7,117

 

16,503

Financed sales of other real estate assets

 

13,014

 

15,606

 

15,907

Financed sales of other foreclosed assets

 

43,060

 

34,492

 

30,840

Total financed sales of foreclosed assets

 

56,074

 

50,098

 

46,747

Financed sale of premises and equipment

 

31,085

 

31,350

 

-

Transfers from premises and equipment to long-lived assets held-for-sale

 

32,103

 

-

 

-

Transfers from loans held-in-portfolio to loans held-for-sale

 

69,890

 

82,299

 

-

Transfers from loans held-for-sale to loans held-in-portfolio

 

9,762

 

20,153

 

7,829

Loans securitized into investment securities[1]

 

732,533

 

508,071

 

458,758

Trades receivables from brokers and counterparties

 

64,824

 

64,092

 

39,364

Trades payable to brokers and counterparties

 

13,789

 

720,212

 

4,084

Recognition of mortgage servicing rights on securitizations or asset transfers

 

13,391

 

9,544

 

9,143

Loans booked under the GNMA buy-back option

 

19,798

 

24,244

 

72,480

Capitalization of Right of Use Assets

 

35,683

 

29,692

 

189,097

[1]

Includes loans securitized into trading securities and subsequently sold before year 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)

December 31, 2021

December 31, 2020

December 31, 2019

Cash and due from banks

$

411,346

$

484,859

$

361,705

Restricted cash and due from banks

 

17,087

 

6,206

 

26,606

Restricted cash in money market investments

 

6,079

 

6,029

 

6,012

Total cash and due from banks, and restricted cash[2]

$

434,512

$

497,094

$

394,323

[2]

Refer to Note 5 - Restrictions on cash and due from banks and certain securities for nature of restrictions.

253


 

Note 37 – 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:

Given that Banco Popular de Puerto Rico constitutes a significant portion of the Corporation’s results of operations and total assets at December 31, 2021, additional disclosures are provided for the business areas included in this reportable segment, as described below:

 

Commercial banking represents the Corporation’s banking operations conducted at BPPR, which are targeted mainly to corporate, small and middle size businesses. It includes aspects of the lending and depository businesses, as well as other finance and advisory services. BPPR allocates funds across business areas based on duration matched transfer pricing at market rates. This area also incorporates income related with the investment of excess funds, as well as a proportionate share of the investment function of BPPR.

 

Consumer and retail banking represents the branch banking operations of BPPR which focus on retail clients. It includes the consumer lending business operations of BPPR, as well as the lending operations of Popular Auto and Popular Mortgage. Popular Auto focuses on auto and lease financing, while Popular Mortgage focuses principally on residential mortgage loan originations. The consumer and retail banking area also incorporates income related with the investment of excess funds from the branch network, as well as a proportionate share of the investment function of BPPR.

 

Other financial services 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, and Popular Life Re. Most of the services that are provided by these subsidiaries generate profits based on fee income.

 

Popular U.S.:

Popular U.S. reportable segment consists of the banking operations of Popular Bank (PB), Popular Insurance Agency, U.S.A., and Popular Equipment Finance (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 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:

254


 

December 31, 2021

 

 

 

 

Banco Popular

 

 

 

Intersegment

(In thousands)

 

 

 

de Puerto Rico

 

Popular U.S.

 

Eliminations

Net interest income

 

 

$

1,674,589

$

321,154

$

6

Provision for credit losses (benefit)

 

 

 

(136,352)

 

(56,897)

 

-

Non-interest income

 

 

 

565,310

 

24,518

 

(548)

Amortization of intangibles

 

 

 

2,813

 

665

 

-

Depreciation expense

 

 

 

46,539

 

7,415

 

-

Other operating expenses

 

 

 

1,285,959

 

203,892

 

(544)

Income tax expense

 

 

 

253,479

 

56,538

 

-

Net income

 

 

$

787,461

$

134,059

$

2

Segment assets

 

 

$

64,336,681

$

10,399,066

$

(31,528)

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

Reportable

 

 

 

 

 

Total

(In thousands)

 

Segments

 

Corporate

 

Eliminations

 

Popular, Inc.

Net interest income (expense)

$

1,995,749

$

(38,159)

$

-

$

1,957,590

Provision for credit losses (benefit)

 

(193,249)

 

(215)

 

-

 

(193,464)

Non-interest income

 

589,280

 

56,535

 

(3,687)

 

642,128

Amortization of intangibles

 

3,478

 

5,656

 

-

 

9,134

Depreciation expense

 

53,954

 

1,150

 

-

 

55,104

Other operating expenses

 

1,489,307

 

(545)

 

(3,725)

 

1,485,037

Income tax expense (benefit)

 

310,017

 

(1,085)

 

86

 

309,018

Net income

$

921,522

$

13,415

$

(48)

$

934,889

Segment assets

$

74,704,219

$

5,458,718

$

(5,065,038)

$

75,097,899

 

December 31, 2020

 

 

 

 

Banco Popular

 

 

 

Intersegment

(In thousands)

 

 

 

de Puerto Rico

 

Popular U.S.

 

Eliminations

Net interest income

 

 

$

1,593,599

$

302,517

$

11

Provision for credit losses

 

 

 

210,955

 

81,486

 

-

Non-interest income

 

 

 

445,893

 

24,285

 

(553)

Amortization of intangibles

 

 

 

5,634

 

665

 

-

Depreciation expense

 

 

 

47,890

 

9,558

 

-

Other operating expenses

 

 

 

1,169,816

 

228,406

 

(544)

Income tax expense

 

 

 

106,211

 

7,411

 

-

Net income (loss)

 

 

$

498,986

$

(724)

$

2

Segment assets

 

 

$

55,353,626

$

10,255,954

$

(33,935)

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

Reportable

 

 

 

 

 

Total

(In thousands)

 

Segments

 

Corporate

 

Eliminations

 

Popular, Inc.

Net interest income (expense)

$

1,896,127

$

(39,514)

$

-

$

1,856,613

Provision for credit losses

 

292,441

 

95

 

-

 

292,536

Non-interest income

 

469,625

 

46,442

 

(3,755)

 

512,312

Amortization of intangibles

 

6,299

 

98

 

-

 

6,397

Depreciation expense

 

57,448

 

1,004

 

-

 

58,452

Other operating expenses

 

1,397,678

 

(1,212)

 

(3,486)

 

1,392,980

Income tax expense (benefit)

 

113,622

 

(1,560)

 

(124)

 

111,938

Net income

$

498,264

$

8,503

$

(145)

$

506,622

Segment assets

$

65,575,645

$

5,214,439

$

(4,864,084)

$

65,926,000

255


 

December 31, 2019

 

 

 

 

Banco Popular

 

 

 

Intersegment

(In thousands)

 

 

 

de Puerto Rico

 

Popular U.S.

 

Eliminations

Net interest income

 

 

$

1,633,950

$

295,470

$

(51)

Provision for credit losses

 

 

 

135,495

 

30,028

 

-

Non-interest income

 

 

 

506,739

 

23,160

 

(561)

Amortization of intangibles

 

 

 

8,610

 

664

 

-

Depreciation expense

 

 

 

49,058

 

8,263

 

-

Other operating expenses

 

 

 

1,208,458

 

205,219

 

(547)

Income tax expense

 

 

 

129,145

 

19,164

 

-

Net income

 

 

$

609,923

$

55,292

$

(65)

Segment assets

 

 

$

41,756,864

$

10,056,316

$

(18,576)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

Reportable

 

 

 

 

 

Total

(In thousands)

 

Segments

 

Corporate

 

Eliminations

 

Popular, Inc.

Net interest income (expense)

$

1,929,369

$

(37,675)

$

-

$

1,891,694

Provision for credit losses

 

165,523

 

256

 

-

 

165,779

Non-interest income

 

529,338

 

43,901

 

(3,356)

 

569,883

Amortization of intangibles

 

9,274

 

96

 

-

 

9,370

Depreciation expense

 

57,321

 

746

 

-

 

58,067

Other operating expenses

 

1,413,130

 

55

 

(3,140)

 

1,410,045

Income tax expense (benefit)

 

148,309

 

(1,041)

 

(87)

 

147,181

Net income

$

665,150

$

6,114

$

(129)

$

671,135

Segment assets

$

51,794,604

$

5,228,276

$

(4,907,556)

$

52,115,324

 

Additional disclosures with respect to the Banco Popular de Puerto Rico reportable segment are as follows:

 

December 31, 2021

Banco Popular de Puerto Rico

 

 

 

 

Consumer

 

Other

 

 

 

Total Banco

 

 

Commercial

 

and Retail

 

Financial

 

 

 

Popular de

(In thousands)

 

Banking

 

Banking

 

Services

 

Eliminations

 

Puerto Rico

Net interest income

$

734,501

$

934,611

$

5,477

$

-

$

1,674,589

Provision for credit losses (benefit)

 

(85,990)

 

(50,362)

 

-

 

-

 

(136,352)

Non-interest income

 

118,126

 

343,125

 

109,018

 

(4,959)

 

565,310

Amortization of intangibles

 

290

 

2,110

 

609

 

(196)

 

2,813

Depreciation expense

 

20,512

 

25,386

 

641

 

-

 

46,539

Other operating expenses

 

377,563

 

818,503

 

91,652

 

(1,759)

 

1,285,959

Income tax expense

 

180,874

 

66,616

 

5,989

 

-

 

253,479

Net income

$

359,378

$

415,483

$

15,604

$

(3,004)

$

787,461

Segment assets

$

64,994,081

$

31,313,708

$

2,038,402

$

(34,009,510)

$

64,336,681

 

 

December 31, 2020

 

Banco Popular de Puerto Rico

 

 

 

 

Consumer

 

Other

 

 

 

Total Banco

 

 

Commercial

 

and Retail

 

Financial

 

 

 

Popular de

(In thousands)

 

Banking

 

Banking

 

Services

 

Eliminations

 

Puerto Rico

Net interest income

$

653,091

$

927,165

$

13,343

$

-

$

1,593,599

Provision for credit losses

 

47,905

 

163,050

 

-

 

-

 

210,955

Non-interest income

 

100,329

 

249,464

 

97,443

 

(1,343)

 

445,893

Amortization of intangibles

 

197

 

3,609

 

1,828

 

-

 

5,634

Depreciation expense

 

20,488

 

26,746

 

656

 

-

 

47,890

Other operating expenses

 

303,534

 

782,521

 

85,122

 

(1,361)

 

1,169,816

Income tax expense (benefit)

 

104,617

 

(5,934)

 

7,528

 

-

 

106,211

Net income

$

276,679

$

206,637

$

15,652

$

18

$

498,986

Segment assets

$

49,806,766

$

29,000,270

$

2,218,444

$

(25,671,854)

$

55,353,626

256


 

 

December 31, 2019

Banco Popular de Puerto Rico

 

 

 

 

 

Consumer

 

Other

 

Eliminations

 

Total Banco

 

 

 

Commercial

 

and Retail

 

Financial

 

and Other

 

Popular de

(In thousands)

 

Banking

 

Banking

 

Services

 

Adjustments

 

Puerto Rico

Net interest income

$

619,926

$

1,009,196

$

4,828

$

-

$

1,633,950

Provision for credit losses (benefit)

 

(46,099)

 

181,594

 

-

 

-

 

135,495

Non-interest income

 

99,758

 

303,268

 

106,218

 

(2,505)

 

506,739

Amortization of intangibles

 

195

 

4,294

 

4,121

 

-

 

8,610

Depreciation expense

 

20,024

 

28,411

 

623

 

-

 

49,058

Other operating expenses

 

309,762

 

835,582

 

65,631

 

(2,517)

 

1,208,458

Income tax expense

 

104,636

 

11,999

 

12,510

 

-

 

129,145

Net income

$

331,166

$

250,584

$

28,161

$

12

$

609,923

Segment assets

$

34,340,842

$

23,976,004

$

380,557

$

(16,940,539)

$

41,756,864

 

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 United States include E-loan, an online platform used to offer personal loans, co-branded credit cards offerings and an online deposit gathering platform. In the Virgin Islands, the BPPR segment offers banking products, including loans and deposits. During the year ended December 31, 2021, the BPPR segment generated approximately $50.6 million (2020 - $55.3 million, 2019 - $55.7 million) in revenues from its operations in the United States, including net interest income, service charges on deposit accounts and other service fees. In addition, the BPPR segment generated $45.4 million in revenues (2020 - $44.2 million, 2019 - $47.6 million) from its operations in the U.S. and British Virgin Islands. At December 31, 2021, total assets for the BPPR segment related to its operations in the United States amounted to $589 million (2020 - $627 million).

 

 

(In thousands)

 

2021

 

2020

 

2019

 

Revenues:[1]

 

 

 

 

 

 

 

 

Puerto Rico

$

2,136,481

$

1,921,207

$

2,016,089

 

 

United States

 

390,201

 

376,529

 

371,368

 

 

Other

 

73,036

 

71,189

 

74,120

 

Total consolidated revenues

$

2,599,718

$

2,368,925

$

2,461,577

 

[1]

Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net gain (loss) on sale of debt securities, net gain, including impairment on equity securities, net (loss) profit on trading account debt securities, net (loss) gain on sale of loans, including valuation adjustments on loans held-for-sale, adjustments (expense) to indemnity reserves on loans sold, and other operating income.

257


 

Selected Balance Sheet Information

(In thousands)

 

2021

 

2020

 

2019

Puerto Rico

 

 

 

 

 

 

 

Total assets

$

63,221,282

$

54,143,954

$

40,544,255

 

Loans

 

19,770,118

 

20,413,112

 

18,989,286

 

Deposits

 

57,211,608

 

47,586,880

 

34,664,243

United States

 

 

 

 

 

 

 

Total assets

$

10,986,055

$

10,878,030

$

10,693,536

 

Loans

 

8,903,493

 

8,396,983

 

7,819,187

 

Deposits

 

7,777,232

 

7,672,549

 

7,664,792

Other

 

 

 

 

 

 

 

Total assets

$

890,562

$

904,016

$

877,533

 

Loans

 

626,115

 

674,556

 

657,603

 

Deposits [1]

 

2,016,248

 

1,606,911

 

1,429,571

[1]

Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.

 

258


 

Note 38 - Popular, Inc. (holding company only) financial information

The following condensed financial information presents the financial position of Popular, Inc. Holding Company only at December 31, 2021 and 2020, and the results of its operations and cash flows for the years ended December 31, 2021, 2020 and 2019.

 

Condensed Statements of Condition

 

 

 

 

 

 

 

December 31,

(In thousands)

 

2021

 

2020

ASSETS

 

 

 

 

Cash and due from banks (includes $79,660 due from bank subsidiary (2020 - $69,299))

$

79,660

$

69,299

Money market investments

 

205,646

 

111,596

Debt securities held-to-maturity, at amortized cost (includes $3,125 in common
securities from statutory trusts (2020 - $
8,726))[1]

 

3,125

 

8,726

Equity securities, at lower of cost or realizable value

 

19,711

 

16,049

Investment in BPPR and subsidiaries, at equity

 

3,858,701

 

4,327,188

Investment in Popular North America and subsidiaries, at equity

 

1,834,931

 

1,733,411

Investment in other non-bank subsidiaries, at equity

 

288,736

 

271,129

Other loans

 

29,445

 

31,473

 

Less - Allowance for credit losses

 

96

 

311

Premises and equipment

 

5,684

 

5,322

Investment in equity method investees

 

114,955

 

88,272

Other assets (includes $6,802 due from subsidiaries and affiliate (2020 - $5,518))

 

32,810

 

35,002

Total assets

$

6,473,308

$

6,697,156

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Notes payable

$

401,990

$

587,386

Other liabilities (includes $6,591 due to subsidiaries and affiliate (2020 - $3,779))

 

101,923

 

81,148

Stockholders’ equity

 

5,969,395

 

6,028,622

Total liabilities and stockholders’ equity

$

6,473,308

$

6,697,156

[1] Refer to Note 18 to the consolidated financial statements for information on the statutory trusts.

 

Condensed Statements of Operations

 

 

 

 

 

 

 

 

 

Years ended December 31,

(In thousands)

 

2021

 

2020

 

2019

Income:

 

 

 

 

 

 

 

Dividends from subsidiaries

$

792,000

$

586,000

$

408,000

 

Interest income (includes $828 due from subsidiaries and affiliates (2020 - $2,290; 2019 - $4,237))

 

4,303

 

4,949

 

6,669

 

Earnings from investments in equity method investees

 

29,387

 

17,841

 

17,279

 

Other operating income

 

-

 

1

 

1

 

Net (loss) gain, including impairment, on equity securities

 

(525)

 

1,494

 

988

Total income

 

825,165

 

610,285

 

432,937

Expenses:

 

 

 

 

 

 

 

Interest expense

 

36,444

 

38,528

 

38,528

 

Provision for credit losses (benefit)

 

(215)

 

95

 

256

 

Operating expense (income) (includes expenses for services provided by subsidiaries and affiliate of $13,546 (2020 - $13,140 ; 2019 - $14,400)), net of reimbursement by subsidiaries for services provided by parent of $162,019 (2020 - $138,729 ; 2019 - $106,725)

 

5,432

 

(921)

 

80

Total expenses

 

41,661

 

37,702

 

38,864

Income before income taxes and equity in undistributed earnings (losses) of subsidiaries

 

783,504

 

572,583

 

394,073

Income tax expense

 

352

 

17

 

-

Income before equity in undistributed earnings (losses) of subsidiaries

 

783,152

 

572,566

 

394,073

Equity in undistributed earnings (losses) of subsidiaries

 

151,737

 

(65,944)

 

277,062

Net income

$

934,889

$

506,622

$

671,135

Comprehensive income, net of tax

$

419,829

$

866,551

$

929,171

259


 

Condensed Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

(In thousands)

 

2021

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

 

 

Net income

$

934,889

$

506,622

$

671,135

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

 

 

 

 

 

 

 

Equity in (earnings) losses of subsidiaries, net of dividends or distributions

 

(151,737)

 

65,944

 

(277,062)

 

Provision for credit losses (benefit)

 

(215)

 

95

 

256

 

Amortization of intangibles

 

5,656

 

98

 

96

 

Net accretion of discounts and amortization of premiums and deferred fees

 

1,241

 

1,233

 

1,240

 

Share-based compensation

 

8,895

 

5,770

 

7,927

 

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

 

(26,360)

 

(15,510)

 

(14,948)

 

Sale of foreclosed assets, including write-downs

 

59

 

-

 

-

 

Net (increase) decrease in:

 

 

 

 

 

 

 

 

Equity securities

 

(3,662)

 

(5,305)

 

(4,051)

 

 

Other assets

 

(1,970)

 

(8,327)

 

1,134

 

Net (decrease) increase in:

 

 

 

 

 

 

 

 

Interest payable

 

(1,042)

 

-

 

-

 

 

Other liabilities

 

19,095

 

2,470

 

2,508

Total adjustments

 

(150,040)

 

46,468

 

(282,900)

Net cash provided by operating activities

 

784,849

 

553,090

 

388,235

Cash flows from investing activities:

 

 

 

 

 

 

 

Net (increase) decrease in money market investments

 

(94,000)

 

110,000

 

(45,000)

 

Proceeds from calls, paydowns, maturities and redemptions of investment securities held-to-maturity

 

5,601

 

-

 

-

 

Net repayments on other loans

 

1,879

 

587

 

677

 

Capital contribution to subsidiaries

 

(12,900)

 

(10,000)

 

(9,000)

 

Return of capital from wholly owned subsidiaries

 

-

 

12,500

 

13,000

 

Return of capital from equity method investments

 

-

 

131

 

-

 

Acquisition of premises and equipment

 

(1,788)

 

(2,667)

 

(1,289)

 

Proceeds from sale of premises and equipment

 

83

 

285

 

3

 

Proceeds from sale of foreclosed assets

 

87

 

-

 

-

Net cash (used in) provided by investing activities

 

(101,038)

 

110,836

 

(41,609)

Cash flows from financing activities:

 

 

 

 

 

 

 

Payments of notes payable

 

(186,664)

 

-

 

-

 

Proceeds from issuance of common stock

 

10,493

 

15,175

 

13,451

 

Payments for repurchase of redeemable preferred stock

 

-

 

(28,017)

 

-

 

Dividends paid

 

(141,466)

 

(133,645)

 

(115,810)

 

Net payments for repurchase of common stock

 

(350,656)

 

(500,705)

 

(250,571)

 

Payments related to tax withholding for share-based compensation

 

(5,107)

 

(3,394)

 

(5,420)

Net cash used in financing activities

 

(673,400)

 

(650,586)

 

(358,350)

Net increase (decrease) in cash and due from banks, and restricted cash

 

10,411

 

13,340

 

(11,724)

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

 

69,894

 

56,554

 

68,278

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

$

80,305

$

69,894

$

56,554

 

260


 

Popular, Inc. (parent company only) received distributions from its direct equity method investees amounting to $3.0 million for the year ended December 31, 2021 (2020 - $2.3 million; 2019 - $2.3 million), of which $2.3 million are related to dividend distributions (2020 - $2.3 million; 2019 - $2.3 million). There were no dividend distributions from PIBI for the year ended Dec 31, 2021 (2020 - $12.5 million; 2019 - $13.0 million). PIBI main source of income is derived from its investment in BHD.

 

Notes payable include junior subordinated debentures issued by the Corporation that are associated to capital securities issued by the Popular Capital Trust II and medium-term notes. Refer to Note 18 for a description of significant provisions related to these junior subordinated debentures. The following table presents the aggregate amounts by contractual maturities of notes payable at December 31, 2021:

 

Year

 

(In thousands)

2022

$

-

2023

 

297,842

2024

 

-

2025

 

-

2026

 

-

Later years

 

104,148

Total

$

401,990

261


 

Note 39 ─ Subsequent events

 

Accelerated Share Repurchase Transaction

 

On February 28, 2022, the Corporation entered into an accelerated share repurchase transaction of $400 million with respect to its common stock, which will be accounted for as a treasury stock transaction. Accordingly, as a result of the receipt of the initial shares, the Corporation will recognize in shareholders’ equity approximately $320 million in treasury stock and $80 million as a reduction of capital surplus. The Corporation expects to further adjust its treasury stock and capital surplus accounts to reflect the delivery or receipt of cash or shares upon the termination of the ASR agreement, which will depend on the average price of the Corporation’s shares during the term of the ASR, less a discount. The final settlement of the ASR is expected to occur no later than the third quarter of 2022.

 

Entry into Asset Purchase Agreement with Evertec; Renegotiation and Extension of Commercial Agreements

 

On February 24, 2022, the Corporation and BPPR, entered into an Asset Purchase Agreement (the “Purchase Agreement”), dated as of February 24, 2022, with EVERTEC and Evertec Group, LLC, a wholly owned subsidiary of EVERTEC (“EVERTEC Group”), pursuant to which BPPR will purchase from EVERTEC Group certain information technology and related assets currently used by EVERTEC to service certain of BPPR’s key channels (the “Acquired Assets”) under the Amended and Restated Master Service Agreement (the “MSA”), dated September 30, 2010, among Popular, BPPR and EVERTEC. In connection with the purchase of the Acquired Assets, BPPR will assume certain liabilities relating to the Acquired Assets (together with the purchase of the Acquired Assets, the “Transaction”). The Transaction is expected to close on or about June 30, 2022, subject to the satisfaction of certain closing conditions.

 

In connection with the consummation of the Transaction (the “Closing”), Popular or BPPR will transfer to EVERTEC Group, as consideration for the Transaction, shares of EVERTEC’s common stock (“EVERTEC Common Stock”) having an aggregate value equal to $197 million, subject to certain purchase price adjustments, calculated on the basis that each share of EVERTEC Common Stock is valued at $42.84 per share. As a result of this transfer, Popular expects that its percentage ownership of the outstanding shares of EVERTEC Common Stock will be reduced from its current level, which is approximately 16.2%, to approximately 10.5% immediately following the Closing.

 

In connection with the Closing, Popular and BPPR will also enter with EVERTEC into, among other commercial agreements, a Second Amended and Restated Master Services Agreement (the “Second A&R MSA”), pursuant to which EVERTEC Group will continue to provide various key information technology and various transaction processing services to Popular, BPPR and their respective subsidiaries, which services are provided under the currently effective MSA.

 

Under the Second A&R MSA, Popular and BPPR would no longer be subject to exclusivity provisions under the currently effective MSA that require Popular and BPPR to obtain certain services from EVERTEC Group, nor will they be subject to rights of first refusal that EVERTEC Group currently has under the currently effective MSA with respect to certain technology projects. In connection with the elimination of exclusivity provisions under the currently effective MSA, EVERTEC Group will be entitled to receive monthly payments from Popular and BPPR to the extent that EVERTEC Group’s revenues under the Second A&R MSA fall below certain agreed minimum amounts on an annualized basis (each, an “Annual Minimum”). The Annual Minimum will equal (i) $170 million for each one-year period from the effective date of the Second A&R MSA through September 30, 2025; (ii) $165 million for each one-year period from October 1, 2025 through September 30, 2026; and (iii) $160 million for each one-year period from October 1, 2026 through September 30, 2028 (in each case, pro-rated for any partial one-year period).

 

Under the currently effective MSA, EVERTEC Group is entitled to increase annually the fees charged under the MSA based on the annual increases in the Consumer Price Index (the “Annual MSA CPI Escalation”), subject to an annual cap of 5%. At the Closing, the Annual MSA CPI Escalation that became effective as of October 1, 2021 will be retroactively eliminated, and BPPR will receive a credit against fees payable under the Second A&R MSA equal to the amount by which the fees paid by BPPR for the period from October 1, 2021 through the Closing were increased as a result of the most recent Annual MSA CPI Escalation. Additionally, the cap on the Annual MSA CPI Escalation will be reduced relative to the currently effective MSA and will be capped (i) at 1.5% for each one-year period beginning on the effective date of the Second A&R MSA through September 30, 2025, and (ii) at 2% for each one-year period from October 1, 2025 through September 30, 2028 (or if lower, at the percentage by which the CPI increase during the

262


 

prior one-year period exceeded 2%). In addition, beginning in October 2025, BPPR will receive a 10% fee discount for services provided under the Second A&R MSA.

 

 

At the Closing, EVERTEC and Popular will also enter into a Registration Rights and Sell-Down Agreement (the “Registration Rights Agreement”) pursuant to which Popular may sell to third parties during the 90-day period following the Closing (the “Sell-Down Period”) a sufficient number of its shares of EVERTEC Common Stock so as to reduce Popular’s ownership of shares of EVERTEC Common Stock to no more than 4.99% of the total number of shares of EVERTEC Common Stock issued and outstanding. At the end of the Sell-Down Period, if there are any shares of EVERTEC Common Stock beneficially owned, owned of record or controlled by Popular in excess of 4.5% of the total number of shares of EVERTEC Common Stock issued and outstanding (“Excess Common Stock”), EVERTEC shall cause all the shares of Excess Common Stock to be exchanged for shares of EVERTEC non-voting preferred stock (the “Non-Voting Preferred Stock”, and such conversion, the “Share Conversion”). Following the Share Conversion, if Popular at any point would beneficially own, own of record or control shares of Excess Common Stock, EVERTEC shall cause all such Excess Common Stock to be exchanged for Non-Voting Preferred Stock. The Non-Voting Preferred Stock will have identical rights and privileges as EVERTEC Common Stock, except that the Non-Voting Preferred Stock will be non-voting other than limited protective voting rights and will automatically convert into shares of EVERTEC Common Stock in the hands of a transferee after a transfer (i) in a widespread public distribution, (ii) to EVERTEC, (iii) in which no transferee (or group of associated transferees) would receive 2% or more of the outstanding securities of any class of voting securities of EVERTEC or (iv) to a transferee that would control more than 50% of every class of voting securities of EVERTEC without any such transfer.

 

The Registration Rights Agreement contains customary registration rights with respect to the shares of EVERTEC Common Stock and Non-Voting Preferred Stock held by Popular, including customary indemnification provisions, similar to the registration rights provided for in the Stockholder Agreement (the “Stockholder Agreement”), dated April 17, 2012, among Carib Latam Holdings, Inc., and each of the holders of Carib Latam Holdings, Inc., as amended on March 27, 2013, June 30, 2013 and November 13, 2013. Under the Stockholder Agreement, which will be terminated at Closing, Popular is currently entitled to, among other things, (1) nominate two directors for election to EVERTEC’s board of directors, (2) limited pre-emptive rights and (3) various registration rights with respect to EVERTEC Common Stock.

 

At the Closing, certain other commercial agreements will be entered into by and between Popular or BPPR (or both) and EVERTEC or EVERTEC Group, Inc., including (i) a Second Amended and Restated Independent Sales Organization Sponsorship and Services Agreement, pursuant to which BPPR will continue to sponsor EVERTEC Group as an independent sales organization with various credit card associations and will receive revenue sharing on a percentage of the net revenues of EVERTEC Group’s merchant acquiring business and person-to-business merchant services business, for an initial term commencing on the date of the Closing and ending on December 31, 2035 (a ten-year extension of the term of the currently effective agreement), and (ii) a Second Amended and Restated ATH Network Participation Agreement, pursuant to which BPPR will continue to be required to issue ATH-branded debit cards and may issue dual-branded debit cards having certain enhanced functionalities and will continue to have the ability to access the ATH Network and BPPR’s customers will continue to be able to access EVERTEC Group’s ATH Movil person-to-person and person-to-business services, for an initial term commencing on the date of the Closing and ending on September 30, 2030 (a five-year extension of the term of the currently effective agreement).

263


 

SIGNATURES

 

 

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 1, 2022.

 

 

 

 

 

POPULAR, INC.

 

 

(Registrant)

 

 

 

 

 

By: /S/ IGNACIO ALVAREZ

 

 

Ignacio Alvarez

 

 

President and

 

 

Chief Executive Officer

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

 

/S/ RICHARD L. CARRIÓN

Chairman of the Board

3-1-22

Richard L. Carrión

 

 

Chairman of the Board

 

 

 

 

 

/S/ IGNACIO ALVAREZ

President, Chief Executive Officer

3-1-22

Ignacio Alvarez

and Director

 

President and Chief Executive Officer

 

 

 

 

 

/S/ CARLOS J. VÁZQUEZ

Principal Financial Officer

3-1-22

Carlos J. Vázquez

 

 

Executive Vice President

 

 

 

 

 

/S/ JORGE J. GARCÍA

Principal Accounting Officer

3-1-22

Jorge J. García

 

 

Senior Vice President and Comptroller

 

 

 

 

 

/S/ ALEJANDRO M. BALLESTER

Director

3-1-22

Alejandro M. Ballester

 

 

 

 

 

S/ MARÍA LUISA FERRÉ

Director

3-1-22

María Luisa Ferré

 

 

 

 

 

/S/ C. KIM GOODWIN

Director

3-1-22

C. Kim Goodwin

 

 

 

 

 

/S/ JOAQUÍN E. BACARDÍ, III

Director

3-1-22

Joaquín E. Bacardi, III

 

 

 

 

 

/S/ CARLOS A. UNANUE

Director

3-1-22

Carlos A. Unanue

 

 

 

 

 

/S/ JOHN W. DIERCKSEN

Director

3-1-22

John W. Diercksen

 

 

 

 

 

/S/ MYRNA M. SOTO

Director

3-1-22

Myrna M. Soto

 

 

 

 

 

/S/ ROBERT CARRADY

Director

3-1-22

Robert Carrady

 

 

 

 

 

/S/ JOSÉ R. RODRÍGUEZ

Director

3-1-22

José R. Rodríguez

 

 

 

 

 

/S/ BETTY DEVITA

Director

3-1-22

Betty Devita

 

 

264

 
EXHIBIT 4.10
POPULAR, INC.
DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT
TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
AS OF DECEMBER 31, 2021
The following is a summary description of the
 
securities of Popular, Inc. (the “Company”) that are registered
under Section 12
 
of the Securities
 
Exchange Act
 
of 1934, as
 
amended, consisting
 
of (1) our
 
Common Stock and
 
(2)
our 6.125% Cumulative Monthly Income Trust Preferred
 
Securities.
In
 
this
 
summary,
 
when
 
we
 
refer
 
to
 
the
 
“Company,”
 
“we,”
 
“us”
 
or
 
“our”
 
or
 
when
 
we
 
otherwise
 
refer
 
to
ourselves, we mean
 
Popular, Inc.,
 
excluding the Company’s
 
subsidiaries, unless otherwise
 
expressly stated or
 
as the
context requires; all references to “common stock” refer only to common stock issued
 
by the Company and not to any
common stock issued by any subsidiary.
Description of Common Stock
The
 
following
 
description
 
of
 
the
 
Company’s
 
Common
 
Stock
 
is
 
a
 
summary
 
and
 
does
 
not
 
purport
 
to
 
be
complete.
 
It
 
is
 
subject
 
to
 
and
 
qualified
 
in
 
its
 
entirety
 
by
 
reference
 
to
 
the
 
Company’s
 
Restated
 
Certificate
 
of
Incorporation (the
 
“Charter”) and
 
the Company’s
 
Amended and
 
Restated By-laws
 
(the “Bylaws”),
 
each of
 
which is
filed as an
 
exhibit to the
 
Annual Report on
 
Form 10 K
 
of which this
 
exhibit is a
 
part. We
 
encourage you to
 
read the
Charter and
 
Bylaws and the
 
applicable provisions
 
of the General
 
Corporations Act of
 
the Commonwealth
 
of Puerto
Rico for additional information.
Authorized Capital Shares
Pursuant to
 
the Charter,
 
the Company’s
 
authorized capital
 
stock consists
 
of 170,000,000
 
million shares
 
of
common stock,
 
$0.01 par value
 
per share
 
(“Common Stock”),
 
and 30,000,000
 
shares of preferred
 
stock without
 
par
value (“Preferred Stock”).
Voting
 
Rights
The holders of the Company’s Common Stock
 
are entitled to one
 
vote per share on
 
all matters brought before
the stockholders. The holders
 
of the Common Stock
 
do not have cumulative voting
 
rights. The Charter provides
 
that
the
 
approval
 
of
 
the
 
Company’s
 
merger,
 
reorganization,
 
or
 
consolidation
 
or
 
the
 
sale,
 
lease
 
or
 
hypothecation
 
of
substantially
 
all
 
of
 
the
 
Company’s
 
assets
 
or
 
the
 
approval
 
of
 
the
 
Company’s
 
voluntary
 
dissolution
 
requires
 
the
affirmative
 
vote
 
of
 
the
 
holders
 
of
 
a
 
majority
 
of
 
the
 
outstanding
 
shares
 
of
 
the
 
Common
 
Stock
 
(the
 
minimum
 
vote
standard required by
 
the Puerto Rico General
 
Corporations Act). In
 
addition, the affirmative
 
vote of the holders
 
of a
majority of the outstanding shares of Common Stock are required to amend
 
the Charter.
Dividend Rights
Subject to the rights of
 
holders of any Preferred Stock outstanding, holders
 
of the Common Stock are
 
entitled
to receive
 
ratably such
 
dividends, if
 
any,
 
as the
 
Company’s
 
Board of
 
Directors may
 
in its
 
discretion declare
 
out of
legally available funds.
Liquidation Rights
In
 
the
 
event
 
of
 
liquidation,
 
holders
 
of
 
the
 
Common
 
Stock
 
are
 
entitled
 
to
 
receive
 
pro
 
rata
 
any
 
assets
distributable to a stockholder with respect to the shares held
 
by them, after payment of liabilities and such preferential
amounts as may be required to be paid to the holders
 
of the Company’s outstanding
 
series of preferred stock and any
preferred stock the Company may hereafter issue.
Other Rights and Preferences
The Company’s
 
Common Stock
 
has no
 
sinking fund
 
or redemption
 
provisions or
 
preemptive, conversion,
exchange or call rights.
Classification of the Board of Directors
Until our existing classified Board of Directors structure is fully phased out beginning
 
with our 2023 annual
meeting of stockholders, the Charter provides that the members of the Company’s Board of Directors are divided into
three
 
classes.
 
At
 
the
 
2021
 
annual
 
meeting
 
of
 
stockholders,
 
one-third
 
of
 
the
 
members
 
of
 
the
 
Company’s
 
Board
 
of
Directors were elected for a
 
term expiring at the 2022 annual meeting
 
of stockholders, at the 2022 annual
 
meeting of
stockholders, two-thirds
 
of the members
 
of the Company’s
 
Board of
 
Directors will be
 
elected for a
 
term expiring at
the 2023 annual meeting of stockholders, and thereafter directors will be elected annually.
The Charter
 
provides that a
 
director, or
 
the entire Board
 
of Directors, may
 
be removed by
 
the stockholders
only for cause.
The Charter and the Bylaws also
 
provide that the affirmative vote
 
of the holders of at least two-thirds
 
of the
combined
 
voting
 
power
 
of
 
the
 
outstanding
 
capital
 
stock
 
entitled
 
to
 
vote
 
generally
 
for
 
the
 
election
 
of
 
directors
 
is
required to remove a director or the entire Board of Directors from office
 
for cause.
Advance Notice Requirements
The Company’s
 
Bylaws establish advance
 
notice procedures
 
with respect to
 
shareholder proposals
 
relating
to
 
nominations
 
or
 
any
 
other
 
matter
 
to
 
be
 
brought
 
before
 
any
 
meetings
 
of
 
shareholders
 
of
 
the
 
Company.
 
These
procedures provide
 
that notice of
 
such shareholder proposals
 
must be timely
 
given in writing
 
to the Secretary
 
of the
Company prior to
 
the meeting at which
 
the action is to
 
be taken. The required
 
notice period varies
 
depending on the
timing of the
 
proposal and the
 
shareholders meeting
 
to which it
 
relates. The notice
 
must contain certain
 
information
specified in the Bylaws and must otherwise comply with the amended and
 
restated Bylaws.
“Blank Check” Preferred Stock
The Charter authorizes the
 
issuance of “blank
 
check” preferred stock,
 
which may be
 
issued by the
 
Company’s
Board
 
of
 
Directors
 
without
 
shareholder
 
approval
 
and
 
may
 
contain
 
voting,
 
liquidation,
 
dividend
 
and
 
other
 
rights
superior to the Common Stock.
Listing
The Common Stock is traded on The Nasdaq Stock Market LLC under
 
the trading symbol “BPOP”.
 
 
 
Description of 6.125% Cumulative Monthly Income Trust
 
Preferred Securities of Popular Capital Trust
 
II
(Fully and Unconditionally Guaranteed by Popular,
 
Inc.).
The following description of the Company’s 6.125% Cumulative Monthly Income Trust Preferred Securities
(the “Capital Securities”) is a
 
summary and does not purport to
 
be complete. It is
 
subject to and qualified in
 
its entirety
by reference to (i) the Amended and Restated Declaration of Trust and Trust Agreement, dated as of August 31, 2009
(the
 
“Trust
 
Agreement”),
 
among
 
the
 
Company,
 
as
 
depositor,
 
the
 
Property
 
Trustee,
 
the
 
Delaware
 
Trustee,
 
the
Administrative
 
Trustees
 
and
 
the
 
several
 
Holders
 
(as
 
defined
 
therein),
 
as
 
amended,
 
amended
 
and
 
restated
 
or
supplemented from time to time, and (ii) the Prospectus Supplement (to Prospectus dated November 18, 2004), dated
as
 
of
 
November
 
24,
 
2004,
 
relating
 
to
 
the
 
Capital
 
Securities
 
(the
 
“Prospectus
 
Supplement”),
 
each
 
of
 
which
 
is
incorporated
 
by
 
reference
 
as
 
an
 
exhibit
 
to
 
the
 
Annual
 
Report
 
on
 
Form
 
10-K
 
of
 
which
 
this
 
exhibit
 
is
 
a
 
part.
 
We
encourage you to read the Trust Agreement, the Prospectus Supplement and the Delaware Statutory Trust Act and the
Trust Indenture Act for more information.
The Capital Securities and the Common Securities (the “Common
 
Securities”, and together with the Capital
Securities,
 
the
 
“Trust
 
Securities”)
 
of
 
Popular
 
Capital
 
Trust
 
II
 
(the
 
“Trust”),
 
a
 
Delaware
 
statutory
 
trust,
 
represent
beneficial
 
interests
 
in
 
the
 
Trust.
 
The
 
Trust
 
holds
 
the
 
Company’s
 
6.125%
 
junior
 
subordinated
 
debentures
 
(the
“Debentures”).
Each
 
holder
 
of the
 
Capital
 
Securities
 
has
 
a
 
beneficial
 
interest
 
in
 
the
 
Trust
 
but
 
does
 
not
 
own
 
any
 
specific
Debentures
 
held by
 
the Trust.
 
However,
 
the Trust
 
Agreement under
 
which the
 
Trust
 
operates defines
 
the financial
entitlements of the
 
Capital Securities in
 
a manner that
 
causes those financial
 
entitlements to correspond to
 
the financial
entitlements of the Trust in the Debentures it holds.
The Trust
The Trust is a statutory trust formed under Delaware law pursuant to the Trust Agreement and the certificate
of trust filed with the Delaware Secretary of State.
The Trust exists for the exclusive purposes of:
issuing the Trust Securities;
investing the gross proceeds of the Trust Securities
 
in an equivalent amount of the Debentures and
holding the Debentures; and
engaging in only those activities convenient, necessary or incidental to the
 
activities described above.
In addition to
 
the Capital Securities, the
 
Trust Agreement
 
authorizes the Trust
 
to issue Common Securities.
All of the Common Securities are directly or indirectly owned
 
by the Company. The Common Securities rank equally
with the
 
Capital Securities
 
and
 
the Trust
 
makes payment
 
on the
 
Trust
 
Securities pro
 
rata, except
 
that upon
 
certain
events of default under the Trust
 
Agreement relating to payment defaults
 
on the Debentures, the rights of the
 
holders
of
 
the
 
Common
 
Securities
 
to
 
payment
 
in
 
respect
 
of
 
distributions
 
and
 
payments
 
upon
 
liquidation,
 
redemption
 
and
otherwise
 
are
 
subordinated
 
to the
 
rights of
 
the holders
 
of the
 
Capital
 
Securities.
 
The
 
Company
 
acquired
 
Common
Securities in an aggregate liquidation amount equal to at least three percent of
 
the total capital of the Trust.
The Trust
 
Agreement does
 
not permit
 
the Trust
 
to issue
 
any securities
 
other than
 
the Trust
 
Securities or
 
to
incur any indebtedness.
The Trust’s
 
business and
 
affairs are
 
conducted by
 
its respective
 
trustees. The
 
Property Trustee
 
acts as
 
sole
trustee under
 
the Trust
 
Agreement for
 
purposes of
 
compliance with
 
the Trust
 
Indenture Act
 
and also
 
acts as
 
trustee
under the Guarantee (as defined below).
The
 
Trust
 
has
 
a
 
term
 
of
 
approximately
 
30
 
years,
 
but
 
may
 
be
 
terminated
 
earlier
 
as
 
provided
 
in
 
the
 
Trust
Agreement.
The Company pays all fees and expenses related to the Trus
 
t.
DESCRIPTION OF THE CAPITAL
 
SECURITIES
General
The terms
 
of the
 
Capital Securities
 
include (i)
 
those stated
 
in the
 
Trust
 
Agreement, as
 
amended, amended
and restated, or
 
supplemented from time
 
to time,
 
and (ii)
 
those made
 
part of
 
the Trust Agreement
 
by the
 
Trust Indenture
Act and the Delaware Statutory Trust Act.
The Property
 
Trustee
 
acts as
 
indenture trustee
 
for purposes
 
of compliance
 
with the
 
provisions of
 
the Trust
Indenture Act with respect to the Trust. The Capital Securities have
 
a liquidation amount of $25.
The payment of distributions out
 
of money held by the Trust,
 
and payments upon redemption
 
of the Capital
Securities or
 
liquidation of
 
the Trust,
 
are guaranteed
 
by the Company
 
to the
 
extent described
 
under “Description
 
of
the
 
Guarantee”.
 
The
 
Guarantee,
 
when
 
taken
 
together
 
with
 
the
 
Company’s
 
obligations
 
under
 
the
 
Trust
 
Agreement,
including the Company’s
 
obligations to pay costs, expenses, debts and liabilities of the
 
Trust, other than with respect
to the Trust
 
Securities, has the
 
effect of
 
providing a
 
full and unconditional
 
guarantee of amounts
 
due on the
 
Capital
Securities. The Property Trustee,
 
in its role as the guarantee trustee with respect to the Trust,
 
holds the Guarantee for
the benefit of the holders of the Capital Securities. The
 
Guarantee does not cover payment of distributions or amounts
payable on redemption
 
or liquidation of the Capital
 
Securities when the Trust
 
does not have funds
 
on hand available
to make such payments.
The Capital Securities
 
were issued in
 
the form of
 
one or more
 
global securities deposited with
 
The Depository
Trust Company (“DTC”).
The Capital Securities are
 
securities of the Trust
 
and are issued pursuant
 
to the Trust
 
Agreement. Under the
Trust
 
Agreement, the
 
Trust
 
holds the
 
Debentures for
 
the benefit
 
of the
 
holders of
 
the Trust
 
Securities. The
 
Capital
Securities are limited to $130,000,000 aggregate liquidation amount. The Capital
 
Securities are traded on The Nasdaq
Stock Market LLC under the trading symbol “BPOPM”.
Distributions
Distributions on the Capital Securities are fixed at an annual rate of 6.125% of the stated liquidation amount
of $25 per Capital Security.
 
Distributions under the Trust Agreement are cumulative.
Distributions under
 
the currently
 
effective Trust
 
Agreement are
 
payable monthly
 
in arrears on
 
the first
 
day
of each
 
month, commencing
 
on September
 
1, 2009.
 
Distributions under
 
the Amended
 
and Restated
 
Declaration of
Trust and Trust
 
Agreement dated as of November
 
30, 2004 (the “Initial Trust
 
Agreement”) were payable monthly
 
in
arrears on the first day of each month commencing on January 1, 2005. Funds available for distributions
 
with respect
to the Capital Securities are limited to payments received from the Company
 
on the Debentures.
If the Trust is terminated and
 
its assets distributed, for
 
each Capital Security, each holder is
 
entitled to receive
a
 
like
 
amount
 
of
 
the
 
Debentures
 
held
 
by
 
the
 
Trust
 
or
 
the
 
liquidation
 
amount
 
of
 
$25
 
plus accumulated
 
but
 
unpaid
distributions from
 
the assets
 
of the
 
Trust
 
available for
 
distribution, after
 
it has
 
paid liabilities
 
owed to
 
its creditors,
subject to the rights of the holders of the Common Securities to receive a pro rata distribution. Distributions
 
to which
holders of the Capital Securities are
 
entitled and that are past
 
due will accumulate additional distributions to the
 
extent
permitted by applicable law,
 
at an annual rate of 6.125% of the unpaid distributions, compounded monthly.
 
The term
“distribution” includes any additional distributions payable unless otherwise
 
stated.
The term “like amount” as used in this description means:
with respect to a redemption
 
of any Trust Securities,
 
Capital Securities or Common
 
Securities having a
liquidation amount equal
 
to that portion
 
of the principal amount
 
of the Debentures held
 
by the Trust
 
to
be contemporaneously
 
redeemed in
 
accordance with
 
the Indenture,
 
the proceeds
 
of which
 
are used
 
to
pay the redemption price of the Capital Securities or Common Securities; and
with respect to a distribution of
 
the Debentures held by the Trust
 
to holders of any Capital Securities or
Common
 
Securities in
 
exchange therefor
 
in connection
 
with a
 
dissolution or
 
liquidation of
 
the Trust,
Debentures held
 
by the Trust
 
having a
 
principal amount
 
equal to the
 
liquidation amount
 
of the Capital
Securities or Common Securities of the holder to whom the Debentures
 
would be distributed.
Under the
 
Trust Agreement,
 
the amount of
 
distributions payable
 
for any period
 
less than a
 
full distribution
period is computed on the basis of a 360-day year of twelve 30- day months and the actual number of days elapsed in
a partial month in
 
that period. Under the Trust Agreement, the
 
amount of distributions payable for
 
any full distribution
period is computed by dividing the rate per annum by twelve.
Payment of Distributions
The Trust pays
 
distributions on its Capital Securities
 
to DTC, which credits
 
the applicable accounts at
 
DTC
on the
 
applicable payment
 
dates, or
 
if the
 
securities certificate
 
for the
 
Capital Securities
 
is no
 
longer held
 
by or
 
on
behalf of DTC,
 
the Trust
 
will make the
 
payments by
 
check mailed to
 
the addresses of
 
the holders as
 
such addresses
appear on the books and records of the Trust on the
 
applicable record dates. However, a holder of $1
 
million or more
in aggregate liquidation
 
amount of the
 
Capital Securities may receive
 
distribution payments, other
 
than distributions
payable at
 
maturity,
 
by wire transfer
 
of immediately
 
available funds
 
upon written
 
request to the
 
Trust not
 
later than
15 calendar days prior to the date on which the
 
distribution is payable. The record date for distributions on the Capital
Securities is the fifteenth day of the month preceding the distribution
 
date, whether or not a business day.
The Trust pays distributions
 
through the Property
 
Trustee. The Property Trustee holds
 
amounts received from
the Debentures in the payment account for the benefit of the holders of the Trust
 
Securities.
If a
 
distribution
 
is payable
 
pursuant
 
to the
 
Trust
 
Agreement
 
on a
 
day that
 
is not
 
a business
 
day,
 
then that
distribution is to be paid
 
on the next day that
 
is a business day, and without any interest
 
or other payment for any
 
delay
with the same force and effect as if made on the payment date.
The Trust
 
Agreement defines
 
a business
 
day as
 
a day
 
other than
 
a Saturday,
 
a Sunday
 
or any
 
other day
 
on
which banking institutions in
 
New York,
 
New York,
 
San Juan, Puerto Rico or
 
Wilmington, Delaware
 
are authorized
or required by law,
 
regulation or executive order to remain closed or are customarily closed.
Deferral of Distributions
As long as there is no event of default under the Debentures, the Company has the
 
right to defer payments of
interest on the Debentures at any time and from time to
 
time by extending the interest payment period for a period (an
“Extension Period”) of up to 60 consecutive months, but not beyond the maturity
 
of the Debentures.
As a consequence, during an Extension
 
Period, the Trust will defer payment
 
of the monthly distributions on
the Capital Securities. The accumulated but unpaid
 
distributions will continue to accumulate additional distributions,
as permitted by applicable law,
 
at an annual rate of 6.125% compounded monthly.
While the Company defers interest payments on the Debentures, it will be restricted
 
from:
declaring
 
or
 
paying
 
any
 
dividends
 
or
 
distributions
 
on,
 
or
 
redeeming,
 
purchasing,
 
acquiring
 
or
making a liquidation payment on, any shares of its capital stock; and
making
 
payments
 
on
 
or
 
repaying,
 
repurchasing
 
or
 
redeeming
 
any
 
of
 
its
 
debt
 
securities
 
that
 
rank
equal or junior to the Debentures.
If the
 
Trust
 
defers distributions,
 
the deferred
 
distributions,
 
including
 
accumulated
 
additional distributions,
are to
 
be paid
 
on the
 
distribution payment
 
date following
 
the last
 
day of
 
the Extension
 
Period to
 
the holders
 
on the
record date for
 
that distribution payment
 
date. Upon termination
 
of an Extension Period
 
and payment of all
 
amounts
due on the Capital Securities, the
 
Company may elect to begin a
 
new Extension Period with respect to
 
the Debentures,
subject to the above conditions.
Redemption
Repayment or Redemption of the Debentures
When the Company
 
repays or redeems
 
the Debentures, whether at
 
stated maturity or
 
upon earlier redemption,
the Property Trustee
 
will apply the
 
proceeds from the
 
repayment or redemption
 
to redeem Capital
 
Securities having
an aggregate liquidation amount equal
 
to that portion of
 
the principal amount of
 
Debentures being repaid or redeemed.
The
 
redemption
 
price
 
per
 
security
 
is the
 
$25
 
liquidation
 
amount,
 
plus
 
accumulated
 
but unpaid
 
distributions
 
to
 
the
redemption date.
If less than all of
 
the Debentures are to
 
be repaid or redeemed,
 
then the aggregate liquidation
 
amount of the
Trust Securities to be redeemed will be allocated approximately 3% to the
 
Common Securities and 97% to the Capital
Securities, except in the case of an event of default as a result of any failure by the Company to make
 
any principal or
interest payments under the Debentures when due.
The Company
 
has the
 
right,
 
subject to
 
any
 
required
 
prior
 
approval of
 
the Federal
 
Reserve, to
 
redeem
 
the
Debentures at a redemption price equal to 100%
 
of the principal amount, plus accrued and unpaid
 
interest to the date
of redemption:
on or after December 1, 2009, in whole or in part, on one or more occasions,
 
at any time; and
in
 
whole,
 
but not
 
in part,
 
at
 
any
 
time within
 
90 days
 
following
 
the occurrence
 
and
 
continuation
 
of a
 
Tax
Event, an Investment Company Event or a Capital Treatment
 
Event, each as described below.
If less than all of the Debentures
 
are to be repaid or redeemed on
 
the date of redemption, then the proceeds
 
from
such repayment or redemption will be allocated to the redemption of Trust
 
Securities proportionately.
A redemption of the Debentures will cause a mandatory redemption of the Trust
 
Securities.
Tax Event; Investment
 
Company Event; Capital Treatment Event
A “Tax Event”,
 
under the Trust Agreement, means the
 
receipt by the Trust of an opinion
 
of counsel experienced
in such matters to the effect that as a result of:
any amendment to,
 
or change, including any
 
announced prospective change,
 
in the laws, or
 
any regulations
thereunder, of
 
the United States or
 
any political subdivision
 
thereof or Puerto
 
Rico, or a taxing
 
authority of
the United States or Puerto Rico, affecting taxation; or
any official or administrative pronouncement or
 
action or judicial decision
 
interpreting or applying such laws
or regulations;
there is more
 
than an insubstantial risk that:
(1)
the
 
Trust
 
is, or
 
will be
 
within 90
 
days of
 
the delivery
 
of
 
the opinion
 
of
 
counsel,
 
subject to
 
United
 
States
federal or Puerto Rico income tax with respect to income received
 
or accrued on the Debentures held by the
Trust;
(2)
interest payable by the Company to the Trust on the
 
Debentures held by the Trust is not, or
 
will not be within
90 days of the delivery of the opinion of counsel, deductible by the Company, in whole or in part, for Puerto
Rico income tax purposes or for U.S. income tax purposes, to the extent applicable
 
to the Company; or
(3)
the
 
Trust
 
is, or
 
will be
 
within
 
90
 
days
 
of
 
the delivery
 
of
 
the opinion
 
of
 
counsel,
 
subject
 
to
 
more
 
than
 
an
immaterial amount of taxes, duties or other governmental charges.
If a Tax Event
 
has occurred and is continuing with respect to the Trust
 
Agreement, and the Trust is the holder of
all the Debentures, the Company
 
will pay any additional sums required
 
so that distributions on the Capital
 
Securities
will
 
not
 
be
 
reduced
 
by
 
any
 
additional
 
taxes
 
(other
 
than
 
withholding
 
taxes),
 
duties
 
or
 
other
 
governmental
 
charges
payable by the Trust as a result of the Tax
 
Event.
An “Investment
 
Company Event”,
 
under the
 
Trust
 
Agreement, means
 
the receipt
 
by the
 
Trust
 
of an
 
opinion of
counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or
a written change, including any announced prospective change, in
 
interpretation or application of law or
 
regulation by
any legislative body,
 
court, governmental agency or regulatory
 
authority, there
 
is more than an insubstantial risk that
the
 
Trust
 
is or
 
will be
 
considered
 
an “investment
 
company”
 
that
 
is required
 
to be
 
registered
 
under the
 
Investment
Company Act.
A “Capital Treatment
 
Event”, under the
 
Trust Agreement,
 
means the reasonable
 
determination of
 
the Company
that,
 
as
 
a
 
result
 
of
 
any
 
amendment
 
to,
 
or
 
change
 
in,
 
including
 
any
 
announced
 
proposed
 
change
 
in,
 
the
 
laws
 
or
regulations
 
of
 
the
 
United
 
States
 
or
 
any
 
political
 
subdivision
 
thereof
 
or
 
therein,
 
or
 
as
 
a
 
result
 
of
 
any
 
official
 
or
administrative
 
pronouncement
 
or action
 
or judicial
 
decision interpreting
 
or applying
 
such laws
 
or regulations,
 
that
there is more than
 
an insubstantial risk that
 
the Company will not
 
be entitled to treat
 
an amount equal to
 
the liquidation
amount of
 
the Capital
 
Securities as
 
Tier
 
1 capital,
 
or the
 
then-equivalent thereof,
 
for purposes
 
of capital
 
adequacy
guidelines of the Federal Reserve, as then in effect and applicable
 
to the Company.
Redemption Procedures
The Trust may redeem the Capital Securities only in an amount equal to the funds it has on hand and legally
available to pay the redemption price.
The Property
 
Trustee
 
will mail
 
written notice
 
of the
 
redemption of
 
the Capital
 
Securities to
 
the registered
holders
 
at
 
least
 
30
 
but
 
not
 
more
 
than
 
60
 
days
 
before
 
the
 
date
 
fixed
 
for
 
redemption.
 
If
 
the
 
Trust
 
gives
 
a
 
notice
 
of
redemption,
 
then,
 
by
 
12:00
 
noon,
 
New
 
York
 
City
 
time,
 
on
 
the
 
date
 
of
 
redemption,
 
if
 
the
 
funds
 
are
 
available
 
for
payment, the Property Trustee will, for Capital Securities
 
held in book-entry form:
irrevocably deposit with DTC funds sufficient to pay the redemption
 
price; and
give
 
DTC irrevocable
 
instructions and
 
authority
 
to pay
 
the redemption
 
price
 
to the
 
holders of
 
the Capital
Securities.
With respect to the Capital
 
Securities not held in
 
book-entry form, if funds
 
are available for
 
payment, the Property
Trustee will:
irrevocably deposit with the paying agent funds sufficient
 
to pay the redemption price; and
give the paying agent irrevocable instructions and authority to pay the redemption price to the holders of the
Capital Securities upon surrender of the certificates evidencing the
 
Capital Securities.
Notwithstanding the above,
 
distributions payable on
 
or prior to
 
the date of
 
redemption for Capital
 
Securities called
for redemption are payable to the holders of the Capital Securities on
 
the applicable record dates.
Once notice
 
of redemption
 
pursuant to
 
the Trust
 
Agreement is
 
given and
 
funds are
 
deposited, then
 
all rights
 
of
the holders of the Capital Securities called for redemption terminate, except the right
 
to receive the redemption price,
but without any interest or other payment for any
 
delay in receiving it. If such notice
 
of redemption is given and funds
deposited as required, the Capital Securities then will cease to be outstanding.
If
 
payment
 
of the
 
redemption
 
price
 
for
 
the Capital
 
Securities
 
called
 
for
 
redemption
 
is improperly
 
withheld
 
or
refused and not
 
paid either by the
 
Trust or
 
by the Company
 
under the Guarantee,
 
then distributions on
 
those Capital
Securities will
 
continue to
 
accumulate at
 
the then-applicable
 
rate, from
 
the date
 
of redemption
 
to the
 
date of
 
actual
payment. In
 
this case,
 
the actual
 
payment date
 
will be
 
the date
 
fixed for
 
redemption for
 
purposes of
 
calculating the
redemption price.
If less than all of the Trust Securities are redeemed, then the aggregate liquidation amount of the Trust
 
Securities
to
 
be
 
redeemed
 
normally
 
will
 
be
 
allocated
 
approximately
 
3%
 
to
 
the
 
Common
 
Securities
 
and
 
97%
 
to
 
the
 
Capital
Securities. However, if an
 
event of default
 
has occurred as
 
a result
 
of any failure
 
by the Company
 
to make any
 
principal
or interest payments under
 
the Debentures when due,
 
holders of the Capital Securities
 
will be paid in
 
full before any
payments are made to
 
holders of the Common
 
Securities. The Property Trustee selects
 
the particular Capital Securities
to be
 
redeemed on
 
the pro
 
rata basis
 
described
 
above not
 
more than
 
60 days
 
before the
 
date of
 
redemption by
 
any
method the Property Trustee deems fair and appropriate or,
 
if the Capital Securities are then held in book-entry form,
in accordance with DTC’s customary
 
procedures.
Under the Trust Agreement,
 
if any
 
date fixed for
 
redemption is not
 
a business
 
day, then payment of the
 
redemption
price will be made on the next day that is a business day,
 
without any interest or other payment for the delay.
Subject
 
to
 
the
 
above
 
and
 
applicable
 
law
 
and
 
regulations,
 
including
 
United
 
States
 
federal
 
securities
 
laws
 
and
banking laws
 
and regulations,
 
the Company
 
or its
 
affiliates
 
may,
 
under the
 
Trust Agreement,
 
at any
 
time and
 
from
time to time purchase
 
outstanding Capital Securities by
 
tender, in the
 
open market or by private
 
agreement, and may
resell the Capital Securities.
Ranking of Capital Securities
Payment of distributions on, and the redemption price of
 
and the liquidation distribution in respect of
 
Capital
Securities and
 
Common Securities,
 
as applicable,
 
are made
 
pro rata
 
based on
 
the relative
 
liquidation amount
 
of the
Capital
 
Securities
 
and
 
Common
 
Securities,
 
except
 
that
 
upon
 
certain
 
events
 
of
 
default
 
under
 
the
 
Trust
 
Agreement
relating to payment defaults on Debentures, the rights of the holders of the Common
 
Securities to payment in respect
of distributions and payments upon liquidation, redemption and
 
otherwise are subordinated to the rights of
 
the holders
of the Capital Securities.
In the
 
case of
 
any event
 
of default
 
under the
 
Trust Agreement
 
resulting from
 
an event
 
of default
 
under the
Indenture, the
 
Company,
 
as holder
 
of the
 
Common Securities,
 
will be
 
deemed to
 
have waived
 
any right
 
to act
 
with
respect to any
 
such event of default
 
under the Trust Agreement
 
until all such
 
events of default have
 
been cured, waived
or otherwise eliminated. Until
 
all events of
 
default under the
 
Trust Agreement have been
 
so cured, waived
 
or otherwise
eliminated,
 
the
 
Property
 
Trustee
 
will
 
act
 
solely
 
on
 
behalf
 
of
 
the
 
holders
 
of
 
the
 
Capital
 
Securities
 
and
 
not
 
on
 
the
Company’s behalf,
 
and only the holders
 
of the Capital Securities
 
will have the right
 
to direct the Property
 
Trustee to
act on their behalf.
Liquidation Distribution Upon Dissolution
The amount
 
payable on
 
the Capital
 
Securities in
 
the event
 
of any
 
liquidation of
 
the Trust
 
is the
 
liquidation
amount of
 
$25 per
 
Capital Security
 
plus accumulated
 
but unpaid
 
distributions, subject
 
to certain
 
exceptions, which
may be paid in the form of a distribution of Debentures.
The Company can at any time dissolve the Trust. If the Trust
 
dissolves and it has paid the liabilities owed to
its creditors, the Debentures will be distributed to the holders of the Trust
 
Securities.
Any distributions of the Debentures may require approval of the Federal
 
Reserve.
The Trust Agreement states that the Trust
 
will dissolve automatically on December 1, 2035 or earlier upon:
(1)
the bankruptcy, dissolution
 
or liquidation of the Company;
(2)
the
 
distribution
 
of
 
Debentures
 
having
 
a
 
principal
 
amount
 
equal
 
to
 
the
 
liquidation
 
amount
 
of
 
the
 
Trust
Securities of the holders to whom the Debentures are distributed, if the Company has given written direction
to the Property Trustee to dissolve the
 
Trust, which direction, subject to the foregoing restrictions,
 
is optional
and wholly within the discretion of the Company;
(3)
the redemption of all Capital Securities in connection with the redemption of all the Debentures or the stated
maturity of the Debentures; or
(4)
the entry of an order for the dissolution of the Trust
 
by a court of competent jurisdiction.
If the
 
Trust
 
dissolves as
 
described in
 
clauses (1),
 
(2) or
 
(4) in
 
the preceding
 
paragraph, after
 
the Trust
 
pays all
amounts owed to creditors,
 
holders of the Capital Securities
 
and holders of its Common
 
Securities will be entitled to
receive Debentures having a principal amount equal to the liquidation
 
amount of the Trust Securities of the holders.
If the Trust cannot pay the full amount due
 
on the Trust Securities because it has insufficient
 
assets for payment,
then the amounts the Trust
 
owes on the Capital Securities
 
will be proportionately allocated.
 
The holders of Common
Securities are entitled to receive
 
distributions upon any liquidation
 
on a pro rata basis
 
with the holders of the
 
Capital
Securities, except
 
that if
 
an event
 
of default
 
under the
 
Debentures has
 
occurred and
 
is continuing
 
as a
 
result of
 
any
failure by the Company to make any principal or interest payments
 
in respect of Debentures when due, the Trust will
pay the total amounts due on the Capital Securities before making any distributi
 
on on the Common Securities.
After the liquidation date is fixed for any distribution of Debentures, upon dissolution
 
the Trust:
the Trust Securities will no longer be deemed to be outstanding;
DTC
 
or
 
its
 
nominee,
 
as
 
the
 
registered
 
holder
 
of
 
the
 
Capital
 
Securities,
 
will
 
receive
 
a
 
registered
 
global
certificate
 
or certificates
 
representing the
 
Debentures to
 
be delivered
 
upon distribution
 
with respect
 
to the
Capital Securities held by DTC or its nominee; and
any
 
certificates
 
representing
 
the Capital
 
Securities
 
will
 
be
 
deemed
 
to
 
represent
 
the
 
Debentures
 
having
 
an
aggregate principal amount equal to the
 
liquidation amount of the Capital Securities,
 
and bearing accrued but
unpaid interest equal to accumulated
 
but unpaid distributions on Capital
 
Securities, until the holder of
 
those
certificates presents them to the security registrar for Capital Securities for transfer
 
or reissuance.
Exchanges
If
 
at
 
any
 
time
 
a
 
Depositor
 
Affiliated
 
Owner
 
is
 
the
 
owner
 
of
 
Capital
 
Securities,
 
such
 
Depositor
 
Affiliated
Owner will have the right to deliver to the Property Trustee all or such portion of its Capital Securities as it elects and
receive,
 
in
 
exchange
 
therefore,
 
a
 
like
 
amount
 
of
 
Debentures.
 
After
 
the
 
exchange,
 
the
 
Capital
 
Securities
 
will
 
be
cancelled and will no longer
 
be deemed to be
 
outstanding and all rights of
 
the Depositor Affiliated Owner with
 
respect
to the Capital Securities will cease.
In the case of an exchange described in the previous paragraph, the Trust will, on the date of such exchange,
exchange Debentures having
 
a principal amount
 
equal to a proportional
 
amount of the
 
aggregate liquidation amount
of its outstanding Common Securities, based on the ratio of the aggregate liquidation
 
amount of its Capital Securities
exchanged divided by the aggregate
 
liquidation amount of its Capital
 
Securities outstanding immediately prior to such
exchange, for
 
such proportional amount
 
of its Common
 
Securities held by
 
the Company (which
 
contemporaneously
will be cancelled and no longer be deemed to be outstanding).
Events of Default; Notice
Any one of the following events constitutes an event of default
 
of the Trust, regardless of the reason for such
event of default and whether
 
it will be voluntary or involuntary
 
or be effected by operation
 
of law or pursuant to any
judgment, decree or order of any court or any order,
 
rule or regulation of any administrative or governmental body:
the occurrence of an event of default under the Indenture with
 
respect to the Debentures held by the Trust; or
the default by the
 
Property Trustee in
 
the payment of any
 
distribution on the Capital
 
Securities or Common
Securities when such distribution becomes due and payable, and
 
continuation of such default for a period of
30 days; or
the default by the Property Trustee in the payment of any redemption price of Capital Securities or Common
Securities when such redemption price becomes due and payable; or
the failure to perform or the breach, in any material respect,
 
of any other covenant or warranty of the trustees
of the Trust in
 
the Trust Agreement
 
for 90 days after the defaulting
 
trustee or trustees have received
 
written
notice of the failure to perform or breach of warranty in the manner
 
specified in the Trust Agreement; or
the occurrence
 
of certain
 
events of
 
bankruptcy
 
or insolvency
 
with respect
 
to the
 
Property Trustee
 
and the
Company’s failure to appoint a successor
 
property trustee within 90 days.
Within ten days after any event
 
of default of the Trust actually
 
known to the Property Trustee occurs,
 
the Property
Trustee will transmit notice of such event of default to
 
the holders of the Capital Securities or Common Securities
 
and
to
 
the
 
Administrative
 
Trustees,
 
unless
 
such
 
event
 
of
 
default
 
shall
 
have
 
been
 
cured
 
or
 
waived.
 
The
 
Company,
 
as
depositor,
 
and the
 
Administrative Trustees
 
are required
 
to file
 
annually with
 
the Property
 
Trustee
 
a certificate
 
as to
whether or not
 
the Company or
 
the Administrative Trustees
 
are in compliance
 
with all the conditions
 
and covenants
applicable to the Company and the Administrative Trustees
 
under the Trust Agreement.
The existence
 
of an event
 
of default under
 
the Trust
 
Agreement, in and
 
of itself, with
 
respect to the
 
Debentures
does not entitle the holders of the Capital Securities to accelerate the maturity of
 
the Debentures.
Removal of Trustees
Unless an event
 
of default under the
 
Indenture has occurred
 
and is continuing,
 
the Property Trustee
 
and the
Delaware Trustee may be removed at any time by the holder of the Common Securities. The Property Trustee and the
Delaware
 
Trustee
 
may
 
be
 
removed
 
by
 
the
 
holders
 
of
 
a
 
majority
 
in
 
liquidation
 
amount
 
of
 
the
 
outstanding
 
Capital
Securities for cause
 
or if an event
 
of default under the
 
Indenture has occurred
 
and is continuing. In
 
no event will the
holders
 
of the
 
Capital
 
Securities have
 
the
 
right
 
to vote
 
to
 
appoint,
 
remove
 
or replace
 
the Administrative
 
Trustees,
which voting
 
rights are vested
 
exclusively in the
 
Company,
 
as the holder
 
of the Common
 
Securities. No resignation
or removal of a trustee and
 
no appointment of a successor trustee will
 
be effective until the acceptance of appointment
by the successor trustee in accordance with the provisions of the Trust
 
Agreement.
Co-Trustees and Separate
 
Property Trustee
Unless an event of default under
 
the Debentures has occurred and
 
is continuing, at any time or
 
from time to
time, for the purpose of meeting the legal requirements of the Trust
 
Indenture Act or of any jurisdiction in which any
part of the
 
trust property may
 
at the time
 
be located, the
 
Company,
 
as the holder
 
of the Common
 
Securities, and the
Administrative Trustees have the power to
 
appoint one or more
 
persons either to act
 
as a co-trustee of
 
the Trust, jointly
with the Property
 
Trustee, of all
 
or any part
 
of such trust property,
 
or to act as
 
separate trustee of
 
any such property,
in either
 
case with such
 
powers as
 
may be provided
 
in the
 
instrument of
 
appointment, and
 
to vest in
 
such person or
persons in such capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of
the Trust
 
Agreement. If an
 
event of default
 
under the Indenture
 
has occurred and
 
is continuing, the Property
 
Trustee
alone shall have power to make such appointment.
Mergers or Consolidation of Trustees
Any person into which the Property Trustee or the Delaware Trustee, if not a natural person, may be merged
or
 
converted
 
or
 
with
 
which
 
it
 
may
 
be
 
consolidated,
 
or
 
any
 
person
 
resulting
 
from
 
any
 
merger,
 
conversion
 
or
consolidation to
 
which such trustee
 
is a party,
 
or any person
 
succeeding to
 
all or substantially
 
all the corporate
 
trust
business of
 
such trustee,
 
will be
 
the successor
 
of such
 
trustee under
 
the Trust
 
Agreement, provided
 
such person
 
is
otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trusts
The Trust
 
may not
 
merge
 
with or
 
into, consolidate,
 
amalgamate, or
 
be replaced
 
by,
 
or convey,
 
transfer or
lease its
 
properties
 
and assets
 
substantially as
 
an entirety
 
to the
 
Company or
 
any other
 
person, except
 
as described
below or as otherwise described
 
in the Trust
 
Agreement. The Trust
 
may, at
 
the Company’s
 
request, with the consent
of the Administrative
 
Trustees but
 
without the
 
consent of
 
the holders
 
of the Capital
 
Securities, the Property
 
Trustee
or the Delaware Trustee, merge
 
with or into, consolidate, amalgamate, or be
 
replaced by, or convey,
 
transfer or lease
its properties and assets
 
substantially as an entirety
 
to, a trust
 
organized as such under the
 
laws of any
 
state, the District
of Columbia or the Commonwealth of Puerto Rico if:
such successor entity either:
o
expressly assumes all of the obligations of the Trust
 
with respect to the Capital Securities, or
o
substitutes
 
for
 
the
 
Capital
 
Securities
 
other
 
securities
 
having
 
substantially
 
the
 
same
 
terms
 
as
 
the
Capital Securities, or the “Successor
 
Securities”, so long as the
 
Successor Securities rank the same
as
 
the
 
substituted
 
Capital
 
Securities
 
in
 
priority
 
with
 
respect
 
to
 
distributions
 
and
 
payments
 
upon
liquidation, redemption and otherwise;
the Company expressly appoints a trustee of such successor entity possessing the same powers and duties as
the Property Trustee as the holder of the Debentures;
such
 
merger,
 
consolidation,
 
amalgamation,
 
replacement,
 
conveyance,
 
transfer
 
or
 
lease
 
does not
 
cause
 
the
Capital
 
Securities,
 
including
 
any
 
Successor
 
Securities,
 
to
 
be
 
downgraded
 
by
 
any
 
nationally
 
recognized
statistical rating organization;
such
 
merger,
 
consolidation,
 
amalgamation,
 
replacement,
 
conveyance,
 
transfer
 
or
 
lease
 
does not
 
adversely
affect the rights, preferences and privileges
 
of the holders of the Capital Securities, including any
 
Successor
Securities, in any material respect;
such successor entity has a purpose substantially identical to that of the Trust;
prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the Company
has received an opinion from independent counsel to the Trust experienced in such matters to the effect that:
o
such
 
merger,
 
consolidation,
 
amalgamation,
 
replacement,
 
conveyance,
 
transfer
 
or
 
lease
 
does
 
not
adversely
 
affect
 
the
 
rights,
 
preferences
 
and
 
privileges
 
of
 
the
 
holders
 
of
 
the
 
Capital
 
Securities,
including any Successor Securities, in any material respect, and
o
following
 
such merger,
 
consolidation,
 
amalgamation,
 
replacement,
 
conveyance,
 
transfer or
 
lease,
neither the
 
Trust
 
nor such
 
successor entity
 
will be
 
required to
 
register as
 
an investment
 
company
under the Investment Company Act; and
the Company
 
or any permitted
 
successor or assignee
 
owns all of
 
the Common
 
Securities of such
 
successor
entity and
 
guarantees the
 
obligations of
 
such successor
 
entity under
 
the Successor
 
Securities at least
 
to the
extent provided by the Guarantee.
Notwithstanding
 
the
 
foregoing,
 
the
 
Trust
 
may
 
not,
 
except
 
with
 
the
 
consent
 
of
 
holders
 
of
 
100%
 
in
 
liquidation
amount of the
 
Capital Securities, consolidate,
 
amalgamate, merge
 
with or into, or
 
be replaced by
 
or convey,
 
transfer
or lease its
 
properties and assets
 
substantially as an
 
entirety to any
 
other entity or
 
permit any other
 
entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement,
 
conveyance,
transfer or lease would
 
cause the Trust
 
or the successor entity
 
to be classified as other
 
than a grantor trust
 
for United
States federal or Puerto Rico income tax purposes.
Voting
 
Rights; Amendment of the Trust
 
Agreement
Except as otherwise provided below
 
and as otherwise required by law
 
and the Trust Agreement,
 
the holders
of the Capital Securities have no voting rights.
The Company and
 
the Administrative Trustees
 
may amend the
 
Trust Agreement
 
without the consent
 
of the
holders
 
of
 
the
 
Capital
 
Securities,
 
unless
 
such
 
amendment
 
will
 
materially
 
and
 
adversely
 
affect
 
the
 
interests
 
of
 
any
holder of the Capital Securities, to:
cure any
 
ambiguity,
 
correct or supplement
 
any provisions
 
in the
 
Trust Agreement
 
that may be
 
inconsistent
with any other provision,
 
or to make any other
 
provisions with respect to matters
 
or questions arising under
the Trust Agreement, which may not be inconsistent
 
with the other provisions of the Trust Agreement;
 
or
modify,
 
eliminate
 
or add
 
to any
 
provisions
 
of the
 
Trust
 
Agreement
 
to such
 
extent as
 
will be
 
necessary
 
to
ensure
 
that the
 
Trust
 
will be
 
classified for
 
United
 
States federal
 
or Puerto
 
Rico income
 
tax purposes
 
as a
grantor trust at all times that any Capital Securities and Common Securities are outstanding or to ensure that
the Trust will not be required to register as an “investment
 
company” under the Investment Company Act.
The Company,
 
the Administrative Trustees
 
and the Property Trustee
 
may generally amend the
 
Trust Agreement
with:
the
 
consent
 
of
 
holders
 
representing
 
not
 
less
 
than
 
a
 
majority,
 
based
 
upon
 
liquidation
 
amounts,
 
of
 
the
outstanding Capital Securities; and
receipt by the
 
trustees of an
 
opinion of counsel
 
to the effect that
 
such amendment or the
 
exercise of any
 
power
granted to the trustees in accordance with such amendment will not affect the Trust’s status as a grantor trust
for
 
United
 
States
 
federal
 
or
 
Puerto
 
Rico
 
income
 
tax
 
purposes
 
or
 
the
 
Trust’s
 
exemption
 
from
 
status
 
as
 
an
“investment company” under the Investment Company Act.
However, without the consent of each holder
 
of Trust Securities, the Trust
 
Agreement may not be amended to:
change the amount or timing of any distribution required to be made in respect of the Trust Securities as of a
specified date; or
restrict the right of a holder of Trust Securities to institute a suit for the enforcement of any such payment on
or after such date.
So long
 
as the
 
Property Trustee
 
holds any
 
Debentures, the
 
trustees of
 
the Trust
 
may not,
 
without obtaining
 
the
prior approval of the holders of a majority in aggregate liquidation amount
 
of all outstanding Capital Securities:
direct
 
the
 
time,
 
method
 
and
 
place
 
of
 
conducting
 
any
 
proceeding
 
for
 
any
 
remedy
 
available
 
to
 
the
 
junior
subordinated trustee, or
 
executing any trust
 
or power conferred
 
on the junior
 
subordinated trustee with
 
respect
to the Debentures;
waive any past default that is waivable under the Indenture;
exercise any right to rescind
 
or annul a declaration that
 
the principal of all
 
the Debentures is due and payable;
or
consent
 
to
 
any
 
amendment,
 
modification
 
or
 
termination
 
of
 
the
 
Indenture
 
or
 
the
 
Debentures,
 
where
 
such
consent will be required.
If a consent under the Indenture
 
would require the consent of
 
each holder of Debentures affected thereby, no such
consent may be given by
 
the Property Trustee without
 
the prior consent of each
 
holder of the Capital Securities. The
Property Trustee may not revoke any action previously authorized or approved by a vote of the holders of the Capital
Securities except
 
by subsequent
 
vote of
 
the holders
 
of the
 
Capital Securities.
 
The Property
 
Trustee will
 
notify each
holder
 
of
 
Capital
 
Securities
 
of
 
any
 
notice
 
of
 
default
 
with
 
respect
 
to
 
the
 
Debentures.
 
In
 
addition
 
to
 
obtaining
 
the
foregoing approvals
 
of the
 
holders of
 
the Capital
 
Securities, before
 
taking any
 
of the
 
foregoing actions,
 
the trustees
will obtain an opinion of counsel experienced in such
 
matters to the effect that such action would
 
not cause the Trust
to be classified as other than a grantor trust for United States federal or Puerto Rico income tax
 
purposes.
Any required approval of holders of Capital Securities may be given at a meeting of holders of Capital Securities
convened for such purpose or pursuant to written consent. The Property Trustee
 
will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter upon which action
 
by written consent of such
holders is
 
to be taken,
 
to be given
 
to each holder
 
of record of
 
Capital Securities
 
in the manner
 
set forth
 
in the Trust
Agreement.
Notwithstanding that holders of
 
Capital Securities are entitled to
 
vote or consent under any of
 
the circumstances
described above, any of the Capital Securities that are owned by the Company or its affiliates or the trustees or any of
their affiliates, will, for purposes of such vote or consent, be treated as if they
 
were not outstanding.
Payment and Paying Agent
Payments on
 
the Capital
 
Securities are made
 
to DTC, which
 
credits the applicable
 
accounts at DTC
 
on the
applicable distribution dates. If any Capital Securities are not held by DTC, such payments are made by check mailed
to the address of the holder as such address appears on the register.
The paying agent
 
for the Trust
 
is Banco Popular
 
de Puerto Rico. The
 
paying agent is
 
permitted to resign
 
as
paying agent of the Trust
 
upon 30 days’ written notice
 
to the Administrative Trustees
 
and to the Property Trustee.
 
In
the event
 
that Banco
 
Popular de
 
Puerto Rico
 
is no
 
longer be
 
the paying
 
agent, the
 
Property Trustee
 
will appoint
 
a
successor to act as paying agent, which will be a
 
bank or trust company acceptable to the Administrative Trustees and
to the Company.
Registrar and Transfer
 
Agent
Banco Popular de Puerto Rico Trust Division acts as registrar
 
and transfer agent for the Capital Securities.
Registrations of
 
transfers of Capital
 
Securities are effected
 
without charge
 
by or on
 
behalf of the
 
Trust, but
upon
 
payment
 
of
 
any
 
tax
 
or
 
other
 
governmental
 
charges
 
that
 
may
 
be
 
imposed
 
in
 
connection
 
with
 
any
 
transfer
 
or
exchange. The Trust is
 
not required to register or cause to be
 
registered the transfer of the Capital Securities
 
after the
Capital Securities have been called for redemption.
Information Concerning the Property Trustee
Other
 
than
 
during
 
the
 
occurrence
 
and
 
continuance
 
of
 
an
 
event
 
of
 
default
 
under
 
the
 
Trust
 
Agreement,
 
the
Property Trustee undertakes to perform only the duties that are specifically set forth in the Trust
 
Agreement. After an
event of default under the Trust Agreement, the Property Trustee
 
must exercise the same degree of care and skill as a
prudent individual would exercise
 
or use in
 
the conduct of
 
his or her
 
own affairs. Subject to
 
this provision, the
 
Property
Trustee is under no obligation to exercise
 
any of the powers vested in it by the Trust
 
Agreement at the request of any
holder
 
of
 
the
 
Capital
 
Securities
 
unless
 
it
 
is
 
offered
 
indemnity
 
satisfactory
 
to
 
it
 
by
 
such
 
holder
 
against
 
the
 
costs,
expenses and liabilities
 
that might be
 
incurred. If no event
 
of default under
 
the Trust Agreement
 
has occurred and
 
is
continuing and the
 
Property Trustee
 
is required to
 
decide between alternative
 
courses of action,
 
construe ambiguous
provisions the Trust Agreement or is
 
unsure of the application
 
of any provision of
 
the Trust Agreement, and the
 
matter
is
 
not
 
one
 
upon
 
which
 
holders
 
of
 
the
 
Capital
 
Securities
 
are
 
entitled
 
under
 
the
 
Trust
 
Agreement
 
to
 
vote,
 
then
 
the
Property
 
Trustee
 
will
 
take
 
any
 
action
 
that
 
the
 
Company
 
directs.
 
If
 
the
 
Company
 
does
 
not
 
provide
 
direction,
 
the
Property
 
Trustee
 
may
 
take
 
any
 
action
 
that
 
it deems
 
advisable
 
and
 
in
 
the
 
best
 
interests
 
of
 
the
 
holders
 
of
 
the
 
Trust
Securities and will have no liability except for its own bad faith, negligence or
 
willful misconduct.
The Company and
 
its affiliates maintain
 
certain accounts and
 
other banking relationships
 
with the Property
Trustee and its affiliates in the ordinary
 
course of business.
Trust Expenses
Pursuant to the Trust Agreement, the Company,
 
as depositor, has agreed to pay:
all debts and other obligations of the Trust (other
 
than with respect the Capital Securities);
all costs and expenses of the Trust, including costs and expenses relating to the organization of the Trust, the
fees and expenses of the trustees of the Trust and the cost and expenses relating to the
 
operation of the Trust;
and
any
 
and
 
all taxes
 
and
 
costs and
 
expenses
 
with respect
 
thereto,
 
other
 
than
 
withholding
 
taxes, to
 
which
 
the
Trust might become subject.
Governing Law
The Trust Agreement is governed by and construed
 
in accordance with the laws of Delaware.
Miscellaneous
The Administrative Trustees are authorized
 
and directed to conduct the affairs of and to operate
 
the Trust in
such a way that it will not be required to register
 
as an “investment company” under the Investment Company
 
Act or
characterized
 
as
 
other
 
than
 
a
 
grantor
 
trust
 
for
 
United
 
States
 
federal
 
or
 
Puerto
 
Rico
 
income
 
tax
 
purposes.
 
The
Administrative Trustees
 
are authorized and
 
directed to conduct
 
their affairs so
 
that the Debentures
 
will be treated
 
as
indebtedness of the Company for Puerto Rico income tax purposes.
In
 
this
 
regard,
 
the
 
Company
 
and
 
the
 
Administrative
 
Trustees
 
are
 
authorized
 
to
 
take
 
any
 
action,
 
not
inconsistent with applicable law, the certificate of trust of the Trust or the Trust Agreement, that the Company and the
Administrative Trustees
 
determine to
 
be necessary
 
or desirable to
 
achieve such
 
end, as long
 
as such action
 
does not
materially and adversely affect the interests of the holders of the Capital Securities.
Holders of the Capital Securities have no preemptive or similar rights.
The Trust may not borrow money or issue debt or
 
mortgage or pledge any of its assets.
DESCRIPTION OF THE GUARANTEE
The following description of the terms of the guarantee (the
 
“Guarantee”) is a summary and does not purport
to be
 
complete. It
 
is subject
 
to and qualified
 
in its
 
entirety by
 
reference to
 
(i) the
 
Guarantee Agreement,
 
dated as
 
of
August 31, 2009 (the “Guarantee Agreements”) and (ii) the Prospectus Supplement, each of which is incorporated by
reference as an exhibit to
 
the Annual Report on Form 10-K of
 
which this exhibit is a part. We
 
encourage you to read
the Guarantee Agreement and Prospectus Supplement for more information.
General
The Company’s obligation to make a Guarantee Payment (as defined below) to the Trust may be satisfied by
direct payment
 
of the
 
required amounts
 
to the
 
holders of
 
the Capital
 
Securities or
 
by causing
 
the Trust
 
to pay
 
such
amounts to such holders.
The Guarantee does not apply to any payment of distributions by the Trust except to the extent the Trust has
funds available
 
for such
 
payments. If
 
the Company
 
does not
 
make interest
 
payments on
 
the Debentures
 
held by
 
the
Trust, the Trust will
 
not pay distributions
 
on the Capital
 
Securities and will
 
not have funds
 
available for such
 
payments.
See “— Status of the Guarantee”. Because the Company is a holding company, the Company’s rights to participate in
the assets
 
of any
 
of the
 
Company’s
 
subsidiaries upon
 
the subsidiary’s
 
liquidation or
 
reorganization is
 
subject to
 
the
prior claims of
 
the subsidiary’s creditors except to
 
the extent that
 
the Company may
 
itself be a
 
creditor with recognized
claims against the
 
subsidiary. Except as otherwise described
 
in this exhibit,
 
the Guarantee does
 
not limit the
 
incurrence
or issuance by the Company of other secured or unsecured debt.
The Guarantee,
 
when taken
 
together with
 
the Company’s
 
obligations
 
under the
 
Debentures,
 
the Indenture
and
 
the
 
Trust
 
Agreement,
 
including
 
the
 
Company’s
 
obligations
 
to
 
pay
 
costs,
 
expenses,
 
debts
 
and
 
liabilities
 
of
 
the
Trust, other than
 
those relating
 
to Capital
 
Securities or Common
 
Securities, provides a
 
full and
 
unconditional guarantee
on a subordinated basis of payments due on the Capital Securities issued by the Trust.
Under the
 
Guarantee Agreement,
 
the Company
 
irrevocably and
 
unconditionally agrees
 
to pay in
 
full to the
holders of
 
the Trust
 
Securities, except
 
to the
 
extent paid
 
by the
 
Trust,
 
as and
 
when due,
 
regardless of
 
any defense,
right of set-off or counterclaim which the Trust
 
may have or assert, the Guarantee Payments without duplication:
any accrued and
 
unpaid distributions that
 
are required to
 
be paid on
 
the Capital Securities,
 
to the extent
 
the
Trust has funds available for distributions;
the redemption
 
price, plus
 
all accrued
 
and unpaid
 
distributions relating
 
to any
 
Capital Securities
 
called for
redemption by the Trust, to the extent the Trust
 
has funds available for redemptions; and
upon a voluntary or involuntary dissolution, winding-up or termination of the
 
Trust, other than in connection
with the distribution of Debentures to the holders of Capital Securities or the redemption
 
of all of its Capital
Securities, the lesser of:
the aggregate of the liquidation
 
amount and all accrued and unpaid
 
distributions on the Capital Securities
 
to
the date of payment to the extent the Trust has funds available;
 
and
the amount of assets of
 
the Trust remaining
 
for distribution to holders of
 
Capital Securities in liquidation of
the Trust.
Status of the Guarantee
The Guarantee is unsecured and ranks:
subordinate and
 
junior in right
 
of payment
 
to all the
 
Company’s
 
other liabilities in
 
the same
 
manner as
 
the
Debentures as set forth in the Indenture; and
equally with all other Guarantees that the Company 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 Guarantee
 
without suing any
 
other person or
 
entity. The Guarantee
is held by the guarantee trustee for the benefit of the
 
holders of the Trust Securities. The Guarantee will be discharged
only
 
by payment
 
of the
 
Guarantee Payments
 
in full
 
to the
 
extent
 
not paid
 
by the
 
Trust
 
or upon
 
the distribution
 
of
Debentures.
Amendments and Assignment
The Guarantee
 
may be
 
amended only
 
with the
 
prior approval
 
of the
 
holders of
 
not less
 
than a
 
majority in
aggregate liquidation amount of the outstanding Capital Securities.
 
No vote is required, however, for any changes that
do
 
not
 
adversely
 
affect
 
the
 
rights
 
of
 
holders
 
of
 
the
 
Capital
 
Securities
 
in
 
any
 
material
 
respect.
 
All
 
guarantees
 
and
agreements
 
contained
 
in
 
the
 
Guarantee
 
bind
 
the
 
Company’s
 
successors,
 
assignees,
 
receivers,
 
trustees
 
and
representatives and will be for the benefit of the holders of the Capital Securities then
 
outstanding.
Termination
 
of the Guarantee
The Guarantee will
 
terminate (1) upon full
 
payment of the
 
redemption price of all
 
Capital Securities, (2) upon
distribution of the
 
Debentures to the holders
 
of the Trust
 
Securities or (3) upon
 
full payment of the
 
amounts payable
in accordance with the Trust Agreement upon
 
liquidation of the Trust. The Guarantee will continue
 
to be effective or
will be reinstated, as the
 
case may be, if at
 
any time any holder of
 
Capital Securities must restore payment of
 
any sums
paid under the Capital Securities or the Guarantee.
Events of Default
Under the Guarantee, an event of default will occur if the Company fails to perform
 
any payment obligation
or other obligation under the Guarantee.
With respect to the Guarantee, the holders
 
of a majority in liquidation amount of the Capital Securities have
the right to direct the time, method and place of conducting any proceeding for any remedy available to the guarantee
trustee or to
 
direct the exercise
 
of any trust
 
or power conferred
 
upon the guarantee
 
trustee under the
 
Guarantee. Holders
of
 
the
 
Capital
 
Securities
 
may
 
institute
 
a
 
legal
 
proceeding
 
directly
 
against
 
the
 
Company
 
to
 
enforce
 
the
 
guarantee
trustee’s rights and the Company’s obligations under the Guarantee,
 
without first instituting a
 
legal proceeding against
the Trust, the guarantee trustee or any other person
 
or entity.
As
 
guarantor
 
under
 
the
 
Guarantee,
 
the
 
Company
 
is
 
required
 
to
 
file
 
annually
 
with
 
the
 
guarantee
 
a
 
trustee
certificate pursuant to the Guarantee,
 
as to whether or
 
not the Company is
 
in compliance with all
 
applicable conditions
and covenants under the Guarantee.
Information Concerning the Guarantee Trustee
With
 
respect to
 
the Guarantee,
 
prior to
 
the occurrence
 
of an
 
event of
 
default relating
 
to the
 
Guarantee, the
guarantee trustee is required
 
to perform only the duties
 
that are specifically set forth
 
in the Guarantee. Following
 
the
occurrence of an
 
event of default, the
 
guarantee trustee will exercise
 
the same degree
 
of care as a
 
prudent individual
would exercise in the
 
conduct of his or her
 
own affairs. Provided that
 
the foregoing requirements have
 
been met, the
guarantee trustee
 
is under no
 
obligation to
 
exercise any of
 
the powers vested
 
in it by
 
the Guarantee at
 
the request of
any holder
 
of Capital
 
Securities unless
 
offered indemnity
 
satisfactory to
 
it against the
 
costs, expenses
 
and liabilities
which might be incurred thereby.
The Company and its affiliates maintain certain accounts and other banking relationships with the guarantee
trustee and its affiliates in the ordinary course of business.
Governing Law
The Guarantee is
 
governed by and
 
construed in accordance with
 
the internal laws
 
of the Commonwealth
 
of
Puerto Rico.
DESCRIPTION OF THE DEBENTURES
The following is a brief description
 
of the terms of the Debentures held
 
by the Trust. This summary
 
does not purport
to be
 
complete and
 
is subject
 
to and
 
qualified in
 
its entirety
 
by reference
 
to the
 
Junior Subordinated
 
Indenture (the
“Base Indenture”), dated
 
as of
 
October 31, 2003,
 
as supplemented by
 
the Second Supplemental
 
Indenture (the “Second
Supplemental Indenture”, and together with the Base
 
Indenture, the “Indenture”), as supplemented by the Supplement
to Second Supplemental Indenture, dated as of August 31, 2009; and (ii) the Prospectus Supplement, each of which is
incorporated by
 
reference to
 
the Annual
 
Report on
 
Form 10
 
K of
 
which this
 
exhibit is
 
a part.
 
We
 
encourage you
 
to
read the Indenture and the Prospectus Supplement for more information.
General
The
 
Debentures
 
are
 
unsecured,
 
junior
 
subordinated
 
obligations
 
of
 
the
 
Company.
 
The
 
Debentures
 
are
 
limited
 
in
aggregate principal amount to $134,021,000. The
 
aggregate principal amount of the Debentures is limited to the
 
sum
of:
the aggregate stated liquidation amount of the Capital Securities; and
the amount of capital contributed by the Company in exchange for the Common Securities.
The Debentures ranks junior to the Company’s senior debt, including the subordinated debt of the Company.
 
For
information on the subordination of the Debentures, see “Description of
 
the Debentures — Subordination”.
The entire principal amount of
 
the Debentures will become due
 
and payable, with any accrued
 
and unpaid interest
thereon, on December 1, 2034. There is no sinking fund for the Debentures.
The Company
 
does not
 
pay any
 
additional amounts
 
on the
 
Debentures to
 
compensate any
 
holder or
 
beneficial
owner for any Puerto Rico tax withheld from payments of principal or interest
 
on the Debentures.
The Debentures are registered in the name
 
of the Trust. The Property Trustee holds the Debentures in trust
 
for the
benefit of the holders of the Trust Securities.
Interest
The Debentures bear interest
 
at an annual rate of
 
6.125%,from and including their
 
date of issuance until the
principal becomes
 
due and payable.
 
Interest is payable
 
monthly in arrears
 
on the first
 
day of each
 
month, beginning
January 1,
 
2005. Interest
 
payments not
 
paid when
 
due accrue,
 
to the
 
extent permitted
 
by applicable
 
law,
 
additional
interest, compounded
 
monthly, at
 
the annual rate
 
of 6.125%, computed
 
on the basis
 
of a 360-day
 
year of twelve
 
30-
day months and the actual number of days elapsed in a partial month in such period.
The Company
 
pays interest
 
on the
 
Debentures to
 
the holders
 
of record
 
on the
 
applicable record
 
date. The
record date
 
for interest
 
payments on
 
the Debentures
 
is the
 
fifteenth
 
day of
 
the month
 
preceding the
 
payment
 
date,
whether or not a business day.
The amount
 
of interest
 
payable for
 
any period
 
less than
 
a full interest
 
period is
 
computed on
 
the basis of
 
a
360-day year
 
of twelve
 
30-day months
 
and the
 
actual days elapsed
 
in a partial
 
month in
 
that period.
 
The amount
 
of
interest payable for any full interest period is computed by dividing the
 
annual rate by twelve.
If any date on which interest is payable on the Debentures is not a business day, then payment of the interest
payable
 
on that
 
date will
 
be made
 
on the
 
next succeeding
 
day
 
that is
 
a business
 
day,
 
without
 
any interest
 
or other
payment in
 
respect of
 
the delay,
 
with the
 
same force
 
and effect
 
as if
 
made on
 
the date
 
that payment
 
was originally
payable.
The amount of additional interest payable for any full interest period is
 
computed by dividing the annual rate
by twelve.
 
The term
 
“interest” as
 
used in
 
this description
 
includes
 
monthly
 
interest payments,
 
interest on
 
monthly
interest payments not
 
paid when due,
 
compounded interest and
 
additional sums, as
 
applicable. The interest
 
payment
provisions for the Debentures correspond to the distribution provisions for the Capital Securities. See “Description of
the Capital Securities — Payment of Distributions” in this description.
Option to Extend Interest Payment Period
As long as the
 
Company is not in default
 
under the Debentures, the
 
Company has the right,
 
at any time and
from time to time, to
 
defer payments of interest
 
during an Extension Period,
 
of up to 60 consecutive
 
months, but not
beyond the maturity
 
date of the Debentures.
 
During an Extension
 
Period, interest continues
 
to accrue and
 
holders of
the Debentures,
 
or holders
 
of Capital
 
Securities using
 
the accrual
 
method of
 
accounting to
 
determine
 
their taxable
income, are required to accrue interest income for Puerto Rico income tax purposes.
On the interest
 
payment date following
 
the last day of
 
any Extension Period,
 
the Company pays
 
all interest
then accrued and unpaid, together with additional interest
 
on the accrued and unpaid interest
 
to the extent as permitted
by law, compounded monthly,
 
at the annual rate of 6.125%, plus any additional sums, as described below.
Before termination of an
 
Extension Period for
 
the Debentures, the
 
Company may further
 
extend the payments
of interest. However,
 
no Extension Period, including all
 
previous and further extensions, may
 
exceed 60 consecutive
months or extend beyond
 
the maturity of the Debentures.
 
If any Debentures are called
 
for redemption before the end
of an Extension Period relating
 
to the Debentures, such
 
Extension Period will end
 
on that redemption date
 
or an earlier
date as determined by the Company. After the termination of an Extension Period for
 
the Debentures and the payment
of all
 
amounts due,
 
the Company
 
may begin
 
a new
 
Extension Period,
 
as described
 
above. There
 
is no
 
limitation on
the number of times the
 
Company may elect to begin
 
an Extension Period for the
 
Debentures. Interest is not payable
during
 
an
 
Extension
 
Period
 
for
 
the
 
Debentures,
 
only
 
at
 
the
 
end
 
of
 
the
 
Extension
 
Period
 
for
 
the
 
Debentures.
 
The
Company may,
 
however, prepay,
 
on any interest
 
payment date, at
 
any time all
 
or any portion
 
of the interest
 
accrued
during an Extension Period for the Debentures.
If the Property Trustee is the sole holder of the Debentures, the Company
 
will give the Property Trustee and
the Delaware Trustee written notice of its election of an Extension Period for the Debentures
 
at least one business day
before the earlier of:
the next succeeding date on which the distributions on the Capital Securities are payable;
 
and
the date
 
the Property
 
Trustee is
 
required to
 
give notice
 
to holders
 
of the
 
Capital Securities
 
of the
 
record or
payment date for the applicable distribution.
The Property Trustee will give notice of the Company’s election of an Extension Period for the Debentures to the
holders of the Capital Securities.
With
 
respect
 
to
 
either
 
Trust,
 
if
 
the
 
Property
 
Trustee
 
is
 
not
 
the
 
sole
 
holder,
 
or
 
is
 
not
 
itself
 
the
 
holder,
 
of
 
the
Debentures, the Company
 
will give
 
the holders of
 
the Debentures and
 
the indenture trustee
 
written notice of
 
its election
of
 
an
 
Extension
 
Period
 
for
 
the
 
Debentures
 
at
 
least
 
one
 
business
 
day
 
before
 
the
 
next
 
interest
 
payment
 
date
 
for
 
the
Debentures.
Additional Sums
If, at
 
any time
 
while the
 
Property Trustee
 
is the
 
holder of
 
the Debentures,
 
the Trust
 
is required
 
to pay
 
any
additional taxes (other
 
than withholding taxes), duties
 
or other governmental
 
charges as a result
 
of a Tax
 
Event with
respect to
 
the Trust,
 
the Company
 
will pay
 
as additional
 
interest on
 
the Debentures
 
any additional
 
amounts that
 
are
required
 
so
 
that
 
the
 
distributions
 
paid
 
by the
 
Trust
 
will not
 
be
 
reduced
 
as a
 
result
 
of any
 
of
 
those taxes,
 
duties
 
or
governmental charges.
Redemption
The Company
 
has the
 
right,
 
subject to
 
any
 
required
 
prior
 
approval of
 
the Federal
 
Reserve, to
 
redeem
 
the
Debentures at a redemption price equal to 100%
 
of the principal amount, plus accrued and unpaid
 
interest to the date
of redemption:
on or after December 1, 2009, in whole or in part, on one or more occasions,
 
at any time; and
in
 
whole,
 
but not
 
in part,
 
at
 
any
 
time within
 
90 days
 
following
 
the occurrence
 
and
 
continuation
 
of a
 
Tax
Event, an Investment Company Event or a Capital Treatment
 
Event, each as described above.
Notice of any
 
redemption will be
 
mailed at least 45
 
days but not
 
more than 75 days
 
before the redemption
 
date.
Unless the Company defaults in payment of the redemption price,
 
on and after the redemption date, interest will
 
cease
to accrue on the Debentures
 
or portions thereof called for
 
redemption. The Debentures are not
 
subject to any sinking
fund and are not redeemable at the option of the holder.
Restrictions on Certain Payments; Certain Covenants of the Company
Any money that the Company pays to a paying agent for the purpose of making
 
payments on the Debentures
and
 
that
 
remains
 
unclaimed
 
two
 
years
 
after
 
the
 
payments
 
were
 
due
 
under
 
the
 
Debentures,
 
will,
 
at
 
the
 
Company’s
request, be returned
 
to the Company and
 
after that time any
 
holder of the
 
Debentures can only
 
look to the Company
for the payments on the Debentures.
With respect to the Debentures, the Company
 
may not:
declare or
 
pay any
 
dividends or distributions,
 
or redeem,
 
purchase, acquire,
 
or make
 
a liquidation payment
on any of its capital stock; or
make
 
any payment
 
of principal
 
of or
 
interest or
 
premium, if
 
any,
 
on or
 
repay,
 
repurchase or
 
redeem debt
securities of the Company that rank equal or junior to the Debentures,
if at such time:
there has
 
occurred any
 
event of
 
default under
 
the Debentures
 
resulting from
 
a failure
 
to make
 
principal or
interest payments
 
on the
 
Debentures or
 
from certain
 
events in
 
bankruptcy,
 
insolvency or
 
reorganization
 
of
the Company;
the
 
Debentures
 
are
 
held
 
by
 
the
 
Trust
 
and
 
the
 
Company
 
is
 
in
 
default
 
with
 
respect
 
to
 
its
 
payment
 
of
 
any
obligations under the Guarantee; or
the Company has given
 
notice of its election of
 
an Extension Period with
 
respect to the Debentures
 
and has
not rescinded that notice, and such Extension Period, or any extension thereof,
 
is continuing.
The restrictions listed above do not apply to:
repurchases, redemptions or other acquisitions of shares of
 
capital stock of the Company in connection with
(1) any employment contract, benefit plan
 
or other similar arrangement with or for
 
the benefit of any one or
more employees,
 
officers, directors,
 
consultants or
 
independent contractors,
 
(2) a dividend
 
reinvestment or
stockholder stock purchase plan, or
 
(3) the issuance of
 
capital stock of the
 
Company, or securities convertible
into or exercisable
 
for such capital stock,
 
as consideration in an
 
acquisition transaction entered
 
into prior to
the Extension Period for the Debentures;
an exchange, redemption or
 
conversion of any class or
 
series of the Company’s
 
capital stock, or any capital
stock of a subsidiary of the Company,
 
for any other class or series of the Company’s
 
capital stock, or of any
class or series of the Company’s indebtedness
 
for any class or series of the Company’s capital stock;
the purchase of
 
fractional interests in
 
shares of the
 
Company’s capital stock under the
 
conversion or exchange
provisions of the capital stock or the security being converted or exchanged;
any declaration of a
 
dividend in connection with
 
any stockholder’s rights plan, or
 
the issuance of rights,
 
stock
or other property
 
under any stockholder’s
 
rights plan, or
 
the redemption or
 
repurchase of rights
 
pursuant to
the plan;
payments by the Company under the Guarantee; or
any dividend
 
in the
 
form of
 
stock, warrants,
 
options or
 
other rights
 
where the
 
dividend stock
 
or the
 
stock
issuable upon exercise
 
of such
 
warrants, options or
 
other rights
 
is the same
 
stock as
 
that on which
 
the dividend
is being paid or ranks equal or junior to that stock.
In addition, as long as the Trust holds the Debentures,
 
the Company agrees, with respect to the Debentures:
to continue to hold, directly or
 
indirectly, 100%
 
of the Common Securities, provided
 
that certain successors
that are permitted
 
under the Indenture may
 
succeed to the
 
Company’s ownership of such Common
 
Securities;
as holder of the Common Securities, not to
 
voluntarily dissolve, wind up or liquidate the Trust, other than
 
(a)
as part
 
of the
 
distribution of
 
the Debentures
 
to the
 
holders of
 
the Capital
 
Securities in
 
accordance with
 
the
terms of the Capital Securities
 
or (b) as part of
 
a merger,
 
consolidation or amalgamation which
 
is permitted
under the Trust Agreement; and
to use
 
its reasonable
 
efforts, consistent
 
with the
 
terms and
 
provisions of
 
the Trust
 
Agreement, to
 
cause the
Trust
 
to
 
continue
 
not
 
to
 
be
 
taxable
 
as
 
a
 
corporation
 
for
 
United
 
States
 
federal
 
or
 
Puerto
 
Rico
 
income
 
tax
purposes.
Registration, Denomination and Transfer
The
 
Company
 
registered
 
the Debentures
 
in
 
the
 
name
 
of
 
the Property
 
Trustee
 
on
 
behalf of
 
the
 
Trust.
 
The
Property Trustee
 
holds the Debentures
 
in trust for
 
the benefit of
 
the holders
 
of the Trust
 
Securities. The
 
Debentures
are issued in denominations of $1,000 and integral multiples of $1,000.
DTC acts as securities depositary for the Debentures.
With respect to the Debentures, if the Debentures are in certificated form, payments of principal and interest
will be
 
payable, the
 
transfer of
 
the Debentures
 
will be
 
registrable, and
 
the Debentures
 
will be
 
exchangeable for
 
the
Debentures of other authorized denominations of a like aggregate principal amount. In such case, payment of interest
may also be made at the option of the Company by
 
check mailed to the address of the holder entitled to the payment.
Upon written request to the paying agent not less than 15 calendar days prior to the date on which
 
interest is payable,
a holder
 
of $1,000,000
 
or more
 
in aggregate
 
principal amount
 
of the
 
Debentures may
 
receive payment
 
of interest,
other than payments of interest payable at maturity,
 
by wire transfer of immediately available funds.
The Debentures may be presented for registration of transfer or exchange with an endorsed form
 
of transfer,
or a duly executed and satisfactory written instrument of transfer, at the security registrar’s
 
office in San Juan, Puerto
Rico or
 
the office
 
of any
 
transfer agent
 
selected by
 
the Company
 
without service
 
charge and
 
upon payment
 
of any
taxes and other
 
governmental charges
 
as described
 
in the Indenture.
 
The Company has
 
appointed Banco
 
Popular de
Puerto
 
Rico
 
as transfer
 
agent
 
and
 
security
 
registrar
 
under
 
the Indenture.
 
The Company
 
may
 
at
 
any
 
time designate
additional transfer agents with respect to the Debentures.
With respect
 
to the Debentures,
 
in the event
 
of any
 
redemption, the
 
Company and
 
the indenture
 
trustee for
the Debentures will not be required to:
issue, register the transfer of or exchange the
 
Debentures during a period beginning 15 calendar days before
the first mailing of the notice of redemption; or
register the
 
transfer of
 
or exchange
 
the Debentures
 
selected for
 
redemption, except,
 
in the
 
case of
 
any the
Debentures being redeemed in part, any portion not to be redeemed.
At
 
the
 
request
 
of
 
the
 
Company,
 
funds
 
deposited
 
with
 
the
 
indenture
 
trustee
 
or
 
any
 
paying
 
agent
 
held
 
for
 
the
Company for the payment
 
of principal, interest, and premium,
 
if any,
 
on any Debenture which remain
 
unclaimed for
two years
 
after the
 
principal, interest,
 
and premium,
 
if any,
 
has become
 
payable will
 
be repaid
 
to the
 
Company and
the holder of the Debentures will, as a general unsecured creditor,
 
look only to the Company for payment thereof.
Limitation on Mergers and Sales of Assets
The Indenture generally
 
permit a consolidation
 
or merger between
 
the Company and
 
another entity. The Indenture
also permits the sale or transfer by the Company of all or substantially all of its property and assets.
 
Such transactions
are permitted if:
the resulting or
 
acquiring entity,
 
if other than
 
the Company,
 
is organized
 
and existing under
 
the laws of the
United States or any state, the District of Columbia or the Commonwealth of Puerto Rico and assumes all of
the Company’s responsibilities and liabilities under
 
the Indenture, including the payment of all amounts due
on the Debentures and performance of the covenants in the Indenture; and
immediately after the transaction, and giving
 
effect to the transaction, no event
 
of default under the Indenture
exists.
If the Company consolidates or merges with or into any other entity or sells or leases all or substantially all of its
assets according to
 
the terms and conditions
 
of the Indenture,
 
the resulting or
 
acquiring entity will be
 
substituted for
the Company in the Indenture with the
 
same effect as if it had been
 
an original party to the
 
Indenture. As a result, such
successor entity
 
may exercise
 
the Company’s
 
rights and
 
powers under
 
the Indenture,
 
in the
 
Company’s
 
name and,
except in the case of a lease
 
of all or substantially all of
 
the Company’s properties, the Company will be released from
all the Company’s liabilities and
 
obligations under the Indenture and under the Debentures.
Modification of Indenture
With respect to the Capital Securities, if any of the
 
Capital Securities are outstanding:
no modification
 
may be
 
made to
 
the Indenture
 
that materially
 
adversely affects
 
the holders
 
of the
 
Capital
Securities;
no termination of the Indenture may occur; and
no waiver of any event of
 
default under the Debentures or compliance with any
 
covenant under the Indenture
may be effective,
 
without the prior
 
consent of the
 
holders of at
 
least a majority
 
of the aggregate
 
liquidation
amount of
 
such outstanding Capital
 
Securities unless and
 
until the principal
 
of and premium,
 
if any,
 
on the
Debentures and
 
all accrued
 
and unpaid
 
interest thereon
 
have been
 
paid in
 
full and
 
certain other
 
conditions
are satisfied.
In addition,
 
with respect to
 
the Capital Securities,
 
if any of
 
the Capital Securities
 
are outstanding, all
 
holders of
the Capital Securities must consent if the Company wants to amend the Indenture
 
to:
remove the rights of holders of the Capital Securities to institute a Direct Action (as defined
 
below); or
modify a provision of the
 
Indenture that requires the consent
 
of all the holders of
 
the outstanding Debentures.
Events of Default and the Rights of Capital Securities Holders to Take
 
Action Against the Company
An event of default under the Indenture means any of the following, with
 
respect to the Debentures:
failure to pay
 
interest on the Debentures
 
for 30 days after
 
the payment is due
 
(subject to the deferral
 
of any
due date in the case of an Extension Period with respect to the Debentures);
failure to pay the principal of or any premium on any the Debentures when due;
failure to
 
perform any
 
other covenant
 
in the
 
Indenture for
 
90 days
 
after the
 
Company has
 
received written
notice of the failure to perform in the manner specified in the Indenture;
certain events relating to a bankruptcy,
 
insolvency or reorganization of the Company; or
any other event of default that may be specified for the Debentures in the
 
Indenture.
With
 
respect
 
to
 
the
 
Trust,
 
so
 
long
 
as the
 
Trust
 
holds
 
Debentures,
 
the
 
Property
 
Trustee
 
and
 
the
 
holders
 
of
 
the
Capital Securities will have the following rights under the Indenture upon the
 
occurrence of an event of default:
the
 
Property
 
Trustee
 
and
 
the holders
 
of not
 
less than
 
25% in
 
aggregate
 
liquidation
 
amount
 
of the
 
Capital
Securities may declare the principal of and interest accrued on the Debentures due and payable immediately;
if all defaults have been cured, the consent of the holders of more than 50% in aggregate liquidation amount
of the Capital
 
Securities is required
 
to annul a
 
declaration by the
 
indenture trustee,
 
the Trust
 
or the holders
of Capital Securities that the principal of the Debentures is due and payable
 
immediately;
unless the default
 
is cured, the consent
 
of each holder
 
of Capital Securities
 
is required to
 
waive a default
 
in
the
 
payment
 
of
 
principal,
 
premium
 
or
 
interest
 
with
 
respect
 
to
 
the
 
Debentures
 
or
 
a
 
default
 
in
 
respect
 
of
 
a
covenant
 
or
 
provision
 
that
 
cannot
 
be
 
modified
 
or
 
amended
 
without
 
the
 
consent
 
of
 
the
 
holder
 
of
 
each
outstanding Debenture; and
unless the default
 
is cured, the
 
consent of the
 
holders of more
 
than 50% in
 
aggregate liquidation amount
 
of
the Capital Securities is required to waive any other default.
If the event
 
of default under
 
the Debentures is
 
the failure of
 
the Company to
 
make payments of
 
principal or interest
on
 
the
 
Debentures
 
when
 
due,
 
then
 
a
 
registered
 
holder
 
of
 
Capital
 
Securities
 
may
 
bring
 
a
 
legal
 
action
 
against
 
the
Company directly
 
for enforcement of
 
payment to such
 
registered holder of
 
amounts owed on
 
the Debentures
 
with a
principal amount
 
equal to
 
the aggregate
 
liquidation amount
 
of such
 
registered holder’s
 
Capital Securities
 
(a “Direct
Action”). The Company may not amend the Debentures to
 
remove this right to bring a
 
Direct Action without the prior
written consent of the registered holders of all the
 
Capital Securities. The Company can offset against
 
payments then
due
 
under
 
the
 
Debentures
 
any
 
corresponding
 
payments
 
made
 
to
 
holders
 
of
 
Capital
 
Securities
 
by
 
the
 
Company
 
in
connection with a Direct Action.
The holders of the Capital Securities are not able to exercise directly any remedies available to the holders of the
Debentures except under the circumstance described in the preceding
 
paragraph.
The Indenture Does Not Restrict the Company’s Ability to Take
 
Certain Actions that may Affect the Debentures
The Indenture does not contain restrictions on the Company’s
 
ability to:
incur, assume or become liable for any type of debt
 
or other obligation;
create liens on the Company’s property
 
for any purpose; or
pay dividends or make distributions on the Company’s capital stock or repurchase or redeem the Company’s
capital stock, except as set forth under “— Restrictions on Certain Payments”
 
above.
The Indenture does not
 
require the maintenance of
 
any financial ratios or
 
specified levels of
 
net worth or liquidity.
In addition, the Indenture does contain
 
any provisions which would require
 
the Company to repurchase or redeem
 
or
modify the terms of any of the
 
Debentures upon a change of control or
 
other event involving the Company which may
adversely affect the creditworthiness of such debt securities.
Subordination
The Debentures are subordinated to all of the Company’s existing and
 
future Senior Debt, as defined below.
The Company’s “Senior Debt” includes
 
its senior debt securities and its subordinated debt securities and means:
any of the Company’s
 
indebtedness for borrowed or
 
purchased money,
 
whether or not evidenced
 
by bonds,
debt securities, notes or other written instruments,
the Company’s obligations
 
under letters of credit,
any of
 
the Company’s
 
indebtedness or
 
other obligations
 
with respect
 
to commodity
 
contracts, interest
 
rate
and currency
 
swap agreements,
 
cap, floor
 
and collar
 
agreements, currency
 
spot and
 
forward contracts,
 
and
other similar
 
agreements or
 
arrangements designed
 
to protect
 
against fluctuations
 
in currency
 
exchange or
interest rates, and
any
 
guarantees,
 
endorsements
 
(other
 
than
 
by
 
endorsement
 
of
 
negotiable
 
instruments
 
for
 
collection
 
in
 
the
ordinary course
 
of business)
 
or other
 
similar contingent
 
obligations in
 
respect of
 
obligations of
 
others of
 
a
type described
 
above, whether or
 
not such obligation
 
is classified as
 
a liability on
 
a balance sheet
 
prepared
in accordance with generally accepted accounting principles,
whether outstanding on the date
 
of execution of the Indenture
 
or thereafter incurred, other than
 
obligations expressly
on a parity with or junior to the Debentures. The
 
Debentures rank on a parity with obligations evidenced
 
by any debt
securities, and
 
guarantees in
 
respect of
 
those debt
 
securities, initially
 
issued to
 
any trust,
 
partnership or
 
other entity
affiliated with
 
the Company,
 
that is,
 
directly or
 
indirectly,
 
the Company’s
 
financing vehicle
 
in connection
 
with the
issuance by such entity of capital securities or other similar securities.
If certain events relating to a bankruptcy,
 
insolvency or reorganization of the Company occur,
 
the Company
will first pay all Senior Debt, including any interest accrued after the events occur, in full before the Company makes
any payment or distribution, whether in cash, securities or other property, on account of the principal of or interest on
the Debentures. In such an event, the Company will pay or deliver directly to the holders of Senior Debt any payment
or distribution
 
otherwise payable
 
or deliverable
 
to holders
 
of the Debentures.
 
The Company
 
makes the payments
 
to
the holders of Senior Debt according to priorities existing among those holders until the Company has paid all Senior
Debt, including accrued interest, in
 
full. Notwithstanding the subordination provisions discussed in
 
this paragraph, the
Company may make payments or distributions on the Debentures so
 
long as:
the payments or distributions consist of securities issued by the Company or another company in connection
with a plan of reorganization or readjustment; and
payment on those securities is subordinate to outstanding Senior
 
Debt and any securities issued with respect
to Senior Debt under
 
such plan of reorganization
 
or readjustment at least to
 
the same extent provided
 
in the
subordination provisions of the Debentures.
If such
 
events relating
 
to a bankruptcy,
 
insolvency or
 
reorganization of
 
the Company
 
occur,
 
after it
 
has paid
 
in
full all
 
amounts owed on
 
Senior Debt, the
 
holders of the
 
Debentures, together with
 
the holders
 
of any of
 
the Company’s
other obligations ranking equal with the Debentures, will be entitled to receive from the Company’s
 
remaining assets
any principal, premium or interest due at that time on the Debentures and such other
 
obligations before the Company
makes any
 
payment
 
or other
 
distribution
 
on account
 
of any
 
of the
 
Company’s
 
capital stock
 
or obligations
 
ranking
junior to the Debentures.
If the Company violates the Indenture by making a payment or distribution to holders of the Debentures before it
has paid all the Senior Debt in full, then the holders
 
of the Debentures will be deemed to have received the payments
or distributions in trust for the benefit of, and will have to pay or transfer the payments or distributions to, the holders
of the
 
Senior Debt
 
outstanding at
 
the time.
 
The payment
 
or transfer
 
to the
 
holders of
 
the Senior
 
Debt will
 
be made
according to
 
the priorities
 
existing among
 
those holders.
 
Notwithstanding the
 
subordination provisions
 
discussed in
this paragraph, holders
 
of the Debentures are
 
not required to pay,
 
or transfer payments
 
or distributions to, holders
 
of
Senior Debt so long as:
the payments or distributions consist of securities issued by the Company or another company in connection
with a plan of reorganization or readjustment; and
payment on those securities is subordinate to outstanding Senior
 
Debt and any securities issued with respect
to Senior Debt under
 
such plan of reorganization
 
or readjustment at least to
 
the same extent provided
 
in the
subordination provisions of those Debentures.
Because
 
of
 
the
 
subordination,
 
if
 
the
 
Company
 
becomes
 
insolvent,
 
holders
 
of
 
Senior
 
Debt
 
may
 
receive
 
more,
ratably,
 
and holders
 
of the
 
Debentures may
 
receive
 
less, ratably,
 
than
 
the Company’s
 
other
 
creditors.
 
This type
 
of
subordination
 
will
 
not
 
prevent
 
an
 
event
 
of
 
default
 
from
 
occurring
 
under
 
the
 
Indenture
 
in
 
connection
 
with
 
the
Debentures.
Any modification or amendment
 
of the Indenture may
 
not, without the consent
 
of the holders of all
 
Senior Debt
outstanding,
 
modify
 
any
 
of
 
the
 
provisions
 
of
 
the
 
Debentures
 
relating
 
to
 
the
 
subordination
 
of
 
the
 
Debentures
 
in
 
a
manner that would adversely affect the holders of Senior Debt.
The Indenture does not place a limitation on the amount of Senior Debt that
 
the Company may incur.
Concerning the Indenture Trustee
The indenture
 
trustee has
 
all the
 
duties and
 
responsibilities specified
 
under the
 
Trust
 
Indenture Act.
 
Other
than its duties in case of a default, the indenture trustee is under no obligation to exercise any of the powers under the
Indenture at the request, order or direction of any holders of Debentures unless
 
offered reasonable indemnification.
From time to time, the Company
 
and certain of its subsidiaries maintain
 
deposit accounts and conduct other
banking transactions, including lending transactions, with the indenture
 
trustee in the ordinary course of business.
Governing Law
The Indenture
 
and the
 
Debentures are
 
governed by,
 
and construed
 
in accordance
 
with, the
 
internal laws
 
of
the Commonwealth of Puerto Rico.

Exhibit 13.1

 

LOGO

2021 Annual Report Informe Anual POPULAR®


LOGO

Contents Índice Letter From The President & Chief Executive Officer 3 25-Year Historical Financial Summary 6 Management & Board Of Directors 8 Carta Dél Presidente y Principal Oficial Ejecutivo 11 Resumen Financiero Histórico (25 Años) 14 Gerencia y Junta de Directores 16 Popular, Inc. (NASDAQ: BPOP) is the leading financial institution by both assets and deposits in Puerto Rico and ranks among the top 50 U.S. bank holding companies by assets. Founded in 1893, Banco Popular de Puerto Rico, Popular’s principal subsidiary, provides retail, mortgage and commercial banking services in Puerto Rico and the U.S. Virgin Islands. Popular also offers in Puerto Rico auto and equipment leasing and financing, investment banking, broker-dealer and insurance services through specialized subsidiaries. In the mainland United States, Popular provides retail, mortgage and commercial banking services through its New York-chartered banking subsidiary, Popular Bank, which has branches located in New York, New Jersey and Florida. Corporate Information Independent Registered Public Accounting Firm: PricewaterhouseCoopers LLP. The company’s Form 10-K, proxy statement and any other financial information is available on popular.com/en/investor-relations/annual-reports/Popular, Inc. (NASDAQ: BPOP) es la institución bancaria líder en depósitos y activos en Puerto Rico y se encuentra entre las primeras 50 entidades tenedoras de instituciones bancarias por número de activos. Fundado en 1893, Banco Popular de Puerto Rico, la principal subsidiaria de Popular, brinda servicios de banca individual, hipotecas y banca comercial en Puerto Rico e Islas Vírgenes estadounidenses. Popular también ofrece en Puerto Rico servicios de financiamiento de autos y equipo, inversiones y seguros a través de subsidiarias especializadas. En Estados Unidos, Popular provee servicios de banca individual, hipotecas y banca comercial a través de su filial bancaria en Nueva York, Popular Bank, la cual cuenta con sucursales localizadas en Nueva York, Nueva Jersey y Florida. Información Corporativa Firma registrada de Contabilidad Pública Independiente: PricewaterhouseCoopers LLP El Formulario 10-K, el proxy y otra información financiera están disponibles en popular.com/accionistas/informe-anual/ Annual Meeting The Annual Stockholders’ Meeting of Popular, Inc. will be held on Thursday, May 12, 2022, at 9:00 a.m. AST by means of remote communication, in a virtual format only through www.virtualshareholdermeeting.com/BPOP2022. Reunión Anual La Reunión Anual de Accionistas de Popular, Inc. se celebrará el jueves 12 de mayo de 2022 a las 9:00 a.m. AST exclusivamente vía comunicación remota, mediante formato virtual a través de www.virtualshareholdermeeting.com/BPOP2022. 2 | Popular, Inc.


LOGO

Popular, Inc. Year In Review Dear Shareholders: 2021 was an outstanding year for Popular, driven by record earnings, solid credit quality, increased deposit levels, continued customer growth and the successful execution of capital actions. Our results reflect the continued recovery in economic activity in the markets in which we do business, our diversified sources of revenue and prudent risk management. Financial Results, Capital and Stock Performance Our net income for the year reached $935 million, $428 million or 84% higher than the previous year. The increase was largely driven by a lower expense in the provision for loan losses. In 2021, we reported a provision benefit of $193 million, compared to a provision expense of $293 million in 2020. The provision benefit was driven by the current economic recovery and positive outlook, coupled with solid credit quality metrics. Higher net interest income and fees also contributed to the positive results. Capital levels remained strong, closing the year with a Common Equity Tier 1 ratio of 17.4% and a tangible book value of $65.26, both higher than 2020. During the year, we executed important capital actions, including an increase in the quarterly common stock dividend from $0.40 to $0.45 per share, a $350 million common stock buyback and the redemption of $187 million of outstanding trust preferred securities. Early in 2022, we announced our capital plan for the year, which includes an increase in the quarterly common stock dividend from $0.45 to $0.55 per share and common stock repurchases of up to $500 million. Our capital actions underscore the strength of Popular’s financial performance and capital position, which allow us to deliver value for shareholders while continuing to invest in our franchise. Our shares performed well during 2021, closing the year at $82.04, 46% higher than 2020. This performance compares favorably against the KBW Nasdaq Regional Bank Index, which increased by 34%, and aligned with our U.S. peer banks which increased by 52%. 2020 $507 MILLION 2021 $935 MILLION NET INCOME STOCK PRICE 46% HIGHER THAN YEAR-END 2020 $82.04 CLOSING PRICE FOR 2021 POPULAR, INC. SHARES (BPOP) 2021 was an outstanding year for Popular, driven by record earnings, improved credit quality, record deposit levels, continued customer growth and the successful execution of our capital actions. 2021 Annual Report | 3


LOGO

Business Highlights We continued to execute our business strategy, structured around four strategic pillars Sustainable and Profitable Growth Increased deposits by approximately $10 billion. Funded approximately $675 million in loans in the second round of the SBA Paycheck Protection Program (PPP), reaching a program total of $2.1 billion. Grew total loans, excluding the PPP portfolio, by $810 million. The increase was driven by auto loans in Puerto Rico and our commercial niche businesses in the United States, including community association banking and health care lending. Acquired the assets of K2 Capital Group, a national healthcare equipment leasing business, with $119 million in assets, which complements and expands our existing healthcare lending business in the mainland United States. Simplicity Successfully completed the strategic realignment of our New York Metro branch network, and achieved positive momentum in refocusing remaining branches towards small and medium businesses. Continued efforts to digitize and automate operational processes to increase efficiency and improve customer satisfaction. Customer Focus Deployed a new customer experience management platform that provides businesses and delivery channels with more frequent and timelier customer feedback. Launched various digital applications to streamline our commercial credit card and small business loan applications. Fit for the Future Executed various initiatives related to compensation, including merit increases and market adjustments. Announced increases in minimum base salaries in all our markets, beginning in 2022. Launched the first Employee Resource Group for the LGBTQ+ community and its allies. Continued strengthening our compliance and cybersecurity programs. Management and Board of Directors During the past two years, our colleagues have demonstrated remarkable resilience and agility, adapting to rapidly evolving conditions. The way we work and how our customers interact with us changed abruptly and we are aware that the pace of change will keep accelerating. Late in 2021 we announced certain organizational changes designed to meet our customers’ evolving needs and allow us to compete more effectively. Javier D. Ferrer was appointed as the Corporation’s Executive Vice President, Chief Operating Officer and Head of Business Strategy, reporting directly to me. Javier joined Popular in 2015 as General Counsel and has also overseen our corporate strategic planning function since 2019. He has provided us with invaluable counsel through periods of significant change and challenges, earning the trust and respect of our leadership and key stakeholders. José R. Coleman was appointed Executive Vice President, Chief Legal Officer and General Counsel of Popular, succeeding Javier. José served as Popular’s Senior Vice President, Deputy General Counsel and Assistant Secretary since 2017, playing a vital role in transforming the Corporation’s Legal function and building a strong track record in delivering results. I am confident this new leadership structure strengthens Popular as we strive to serve our customers in today’s exciting and ever-changing environment. We were also fortunate to bring in two new Directors to our Board. Betty DeVita, who has extensive experience in the banking and payments industry, is currently the Chief Business Officer and a member of the board of directors of FinConecta, a global technology company focused on the digitalization of finance and open banking. Betty’s record of delivering strong growth and innovation in diverse financial services contexts is invaluable as we navigate our constantly evolving industry. José R. Rodríguez, an experienced certified public accountant, was an audit partner at KPMG LLP from 1995 until his retirement in April 2021. Over more than 25 years with KPMG, José held diverse leadership positions at national and global levels. José provides Popular with vital insights and judgment, drawn from his vast knowledge and expertise in the accounting, auditing, and financial sectors, as well as his many roles as a trusted advisor. 4 | Popular, Inc.


LOGO

Our Board of Directors is a group of highly talented and committed individuals, who provide invaluable counsel to me and the entire management team. We are grateful for their guidance and support. We are also fortunate to have a team of more than 8,500 dedicated colleagues. Once again, they showed their resilience, facing challenges with resolve and a positive attitude. They continue to be, without a doubt, our most valuable asset, and we are committed to their professional, financial and general wellbeing. Looking Ahead The year 2022 will bring its own set of challenges and opportunities. As we have seen in the first months, the pandemic will continue to require patience, flexibility and agility from all of us for some time. We have demonstrated our capacity to adapt to changing conditions and will continue to do so with energy and determination. We are optimistic about the economic outlook for Puerto Rico. In addition to the unprecedented level of federal stimulus received to counter the effects of the COVID-19 pandemic, Puerto Rico still has a significant amount of hurricane recovery funds that have yet to be disbursed. The recovery funds have now begun to flow at a faster pace. Also, the recent court approval of the plan of adjustment for the Commonwealth of Puerto Rico under Title III of the Puerto Rico Oversight, Management and Economic Stability Act is a key step in the process to end Puerto Rico’s public debt crisis and allows it to make necessary investments towards sustainable economic growth. A significant amount of time and effort has been invested to get to this point, and we look forward for these resources to be refocused on the island’s long-term economic development. The combined impact of these factors should generate considerable economic activity in Puerto Rico for the coming years and we are ideally positioned to benefit from such activity. We stand ready to build on our leadership position and leverage the momentum achieved to make 2022 another great year for your company, as we continue to serve our customers, care for our colleagues, support our communities and deliver value to our shareholders. IGNACIO ALVAREZ President and Chief Executive Officer Popular, Inc. ESG Our business provides a powerful platform to make a difference in the lives of our customers, colleagues, communities, and shareholders, a privilege and responsibility we take very seriously. During 2021, we advanced our environmental, social and governance (ESG) strategy. An important milestone was publishing our first Corporate Sustainability Report aligned with external sustainability reporting standards, such as SASB and GRI. Equal access to banking services closely aligns with the core values of our organization and is one of the key focus areas of our ESG strategy. We are committed to improving access to financial services for members of our communities that have, for numerous reasons, remained outside of the traditional banking system. We are proud that Banco Popular de Puerto Rico and Popular Bank are now offering Bank On certified accounts. This certification is granted by the national nonprofit Cities for Financial Empowerment Fund to promote financial inclusion through standard account features that ensure low costs while offering robust transaction capabilities. We are also proud to be included, for the first time, in the Bloomberg Gender-Equality Index (GEI) as we continue to make important strides in gender parity at Popular. Our commitment to fostering a workplace that values inclusion, respect and accountability doesn’t just make us a better employer, it makes us a stronger organization. 2021 Annual Report | 5


LOGO

25-Year Historical Financial Summary (Dollars in millions, except per share data) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Selected Financial Information Net Income (Loss) $209.6 $232.3 $257.6 $276.1 $304.5 $351.9 $470.9 $489.9 $540.7 $357.7 $(64.5) Assets 19,300.5 23,160.4 25,460.5 28,057.1 30,744.7 33,660.4 36,434.7 44,401.6 48,623.7 47,404.0 44,411.4 Gross Loans 11,376.6 13,078.8 14,907.8 16,057.1 18,168.6 19,582.1 22,602.2 28,742.3 31,710.2 32,736.9 29,911.0 Deposits 11,749.6 13,672.2 14,173.7 14,804.9 16,370.0 17,614.7 18,097.8 20,593.2 22,638.0 24,438.3 28,334.4 Stockholders’ Equity 1,503.1 1,709.1 1,661.0 1,993.6 2,272.8 2,410.9 2,754.4 3,104.6 3,449.2 3,620.3 3,581.9 Market Capitalization $3,350.3 $4,611.7 $3,790.2 $3,578.1 $3,965.4 $4,476.4 $5,960.2 $7,685.6 $5,836.5 $5,003.4 $2,968.3 Return on Average Assets (ROAA) 1.14% 1.14% 1.08% 1.04% 1.09% 1.11% 1.36% 1.23% 1.17% 0.74% -0.14% Return on Average Common Equity (ROACE) 15.83% 15.41% 15.45% 15.00% 14.84% 16.29% 19.30% 17.60% 17.12% 9.73% -2.08% Per Common Share1 Net Income (Loss) - Basic $7.51 $8.26 $9.19 $9.85 $10.87 $13.05 $17.36 $17.95 $19.78 $12.41 $(2.73) Net Income (Loss) - Diluted 7.51 8.26 9.19 9.85 10.87 13.05 17.36 17.92 19.74 12.41 (2.73) Dividends (Declared) 2.00 2.50 3.00 3.20 3.80 4.00 5.05 6.20 6.40 6.40 6.40 Book Value 51.83 59.32 57.54 69.62 79.67 91.02 96.60 109.45 118.22 123.18 121.24 Market Price 123.75 170.00 139.69 131.56 145.40 169.00 224.25 288.30 211.50 179.50 106.00 Assets by Geographical Area Puerto Rico 74% 71% 71% 72% 68% 66% 62% 55% 53% 52% 59% United States 23% 25% 25% 26% 30% 32% 36% 43% 45% 45% 38% Caribbean and Latin America 3% 4% 4% 2% 2% 2% 2% 2% 2% 3% 3% Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Traditional Delivery System Banking Branches Puerto Rico 201 198 199 199 196 195 193 192 194 191 196 Virgin Islands 8 8 8 8 8 8 8 8 8 8 8 United States2 63 89 91 95 96 96 97 128 136 142 147 Subtotal 272 295 298 302 300 299 298 328 338 341 351 Non-Banking Offices Popular Financial Holdings 117 128 137 136 149 153 181 183 212 158 134 Popular Cash Express 51 102 132 154 195 129 114 4 Popular Finance 44 48 47 61 55 36 43 43 49 52 51 Popular Auto (including Reliable) 10 10 12 12 20 18 18 18 17 15 12 Popular Leasing, U.S.A. 7 8 10 11 13 13 11 15 14 11 24 Popular Mortgage 3 11 13 21 25 29 32 30 33 32 32 Popular Securities 2 2 2 3 4 7 8 9 12 12 13 Popular One Popular Insurance and Popular Risk Services 2 2 2 2 2 2 2 2 Popular Insurance Agency, U.S.A. 1 1 1 1 1 1 1 Popular Insurance V.I. 1 1 1 1 1 1 E-LOAN 1 1 1 Popular Equipment Finance EVERTEC 4 4 4 5 5 5 5 7 9 Subtotal 183 258 327 382 427 460 431 421 351 292 280 Total 455 553 625 684 727 759 729 749 689 633 631 Electronic Delivery System ATMs Owned Puerto Rico 391 421 442 478 524 539 557 568 583 605 615 Virgin Islands 17 59 68 37 39 53 57 59 61 65 69 United States 71 94 99 109 118 131 129 163 181 192 187 Total 479 574 609 624 681 723 743 790 825 862 871 Employees (full-time equivalent) 8,854 10,549 11,501 10,651 11,334 11,037 11,474 12,139 13,210 12,508 12,303 6 | Popular, Inc.


LOGO

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 $(1,243.9) $(573.9) $137.4 $151.3 $245.3 $599.3 $(313.5) $895.3 $216.7 $107.7 $618.2 $671.1 $506.6 $934.9 38,882.8 34,736.3 38,815.0 37,348.4 36,506.9 35,748.8 33,086.8 35,761.7 38,661.6 44,277.3 47,604.6 52,115.3 65,926.0 75,097.9 26,268.9 23,803.9 26,458.9 25,314.4 25,093.6 24,706.7 22,053.2 23,129.2 23,435.4 24,942.5 26,559.3 27,466.1 29,484.7 29,299.7 27,550.2 25,924.9 26,762.2 27,942.1 27,000.6 26,711.1 24,807.5 27,209.7 30,496.2 35,453.5 39,710.0 43,758.6 56,866.3 67,005.1 3,268.4 2,538.8 3,800.5 3,918.8 4,110.0 4,626.2 4,267.4 5,105.3 5,198.0 5,103.9 5,435.1 6,016.8 6,028.7 5,969.4 $1,455.1 $1,445.4 $3,211.4 $1,426.0 $2,144.9 $2,970.6 $3,523.4 $2,936.6 $4,548.1 $3,622.4 $4,719.3 $5,615.9 $4,744.6 $6,551.0 -3.04% -1.57% 0.36% 0.40% 0.68% 1.65% -0.89% 2.54% 0.58% 0.26% 1.33% 1.33% 0.85% 1.31% -44.47% -32.95% 4.37% 4.01% 6.37% 14.43% -7.04% 19.16% 4.07% 1.96% 11.39% 11.78% 9.36% 16.22% $(45.51) $2.39 $(0.62) $1.44 $2.36 $5.80 $(3.08) $8.66 $2.06 $1.02 $6.07 $6.89 $5.88 $11.49 (45.51) 2.39 (0.62) 1.44 2.35 5.78 (3.08) 8.65 2.06 1.02 6.06 6.88 5.87 11.46 4.80 0.20 - - - - - 0.30 0.60 1.00 1.00 1.20 1.60 1.75 63.29 38.91 36.67 37.71 39.35 44.26 40.76 48.79 49.60 49.51 53.88 62.42 71.30 74.48 51.60 22.60 31.40 13.90 20.79 28.73 34.05 28.34 43.82 35.49 47.22 58.75 56.32 82.04 64% 65% 74% 74% 73% 72% 80% 75% 75% 76% 77% 78% 82% 84% 33% 32% 23% 23% 24% 25% 17% 22% 23% 22% 21% 20% 17% 15% 3% 3% 3% 3% 3% 3% 3% 3% 2% 2% 2% 2% 1% 1% 100%100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 179 173 185 183 175 171 168 173 171 168 163 164 162 159 8 8 8 9 9 9 9 9 9 9 9 10 10 10 139 101 96 94 92 90 47 50 51 51 51 51 50 39 326 282 289 286 276 270 224 232 231 228 223 225 222 208 2 9 12 10 10 10 10 9 9 9 9 9 12 12 11 11 22 32 33 36 37 37 38 25 24 17 14 14 14 15 15 7 6 6 4 4 3 3 3 2 2 2 2 2 2 4 5 6 6 6 5 5 5 5 6 7 1 1 1 1 1 1 1 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 9 9 97 61 55 58 59 59 46 46 37 34 36 36 37 39 423 343 344 344 335 329 270 278 268 262 259 261 259 247 605 571 624 613 597 599 602 622 635 633 619 622 619 616 74 77 17 20 20 22 21 21 20 22 22 23 23 23 176 136 138 135 134 132 83 87 101 110 115 119 118 91 855 784 779 768 751 753 706 730 756 765 756 764 760 730 10,587 9,407 8,277 8,329 8,072 8,059 7,752 7,810 7,828 7,784 8,474 8,560 8,522 8,351 1 Per common share data adjusted for stock splits and reverse stock split executed in May 2012. 2 Excludes a Banco Popular de Puerto Rico branch operating in New York. 2021 Annual Report | 7


LOGO

Popular, Inc. Management & Board Of Directors Senior Management Team IGNACIO ALVAREZ President & Chief Executive Officer Popular, Inc. CAMILLE BURCKHART Executive Vice President Chief Information & Digital Officer Innovation, Technology & Operations Group Popular, Inc. BEATRIZ CASTELLVÍ Executive Vice President & Chief Security Officer Corporate Security Group Popular, Inc. LUIS E. CESTERO Executive Vice President Retail Banking Group Banco Popular de Puerto Rico MANUEL CHINEA Executive Vice President Popular, Inc. Chief Operating Officer Popular Bank JOSÉ R. COLEMAN TIÓ Executive Vice President & Chief Legal Officer General Counsel & Corporate Matters Group Popular, Inc. JAVIER D. FERRER Executive Vice President, Chief Operating Officer, Head of Business Strategy & Corporate Secretary Popular, Inc. MARÍA CRISTINA (MC) GONZÁLEZ Executive Vice President Chief Communications and Public Affairs Officer Corporate Communications & Public Affairs Group Popular, Inc. JUAN O. GUERRERO Executive Vice President Financial & Insurance Services Group Banco Popular de Puerto Rico GILBERTO MONZÓN Executive Vice President Individual Credit Group Banco Popular de Puerto Rico EDUARDO J. NEGRÓN Executive Vice President & Chief Administration Officer Administration Group Popular, Inc. ELI S. SEPÚLVEDA Executive Vice President Commercial Credit Group Banco Popular de Puerto Rico LIDIO V. SORIANO Executive Vice President & Chief Risk Officer Corporate Risk Management Group Popular, Inc. CARLOS J. VÁZQUEZ Executive Vice President & Chief Financial Officer Corporate Finance Group Popular, Inc. 8 | Popular, Inc.


LOGO

Board of Directors RICHARD L. CARRIÓN Chairman of the Board of Directors Popular, Inc. IGNACIO ALVAREZ President & Chief Executive Officer Popular, Inc. JOAQUÍN E. BACARDÍ, III President and Chairman Edmundo B. Fernández, Inc. ALEJANDRO M. BALLESTER President Ballester Hermanos, Inc. ROBERT CARRADY President Caribbean Cinemas BETTY DEVITA Chief Business Officer FinConecta JOHN W. DIERCKSEN Principal Greycrest, LLC MARÍA LUISA FERRÉ RANGEL Chief Executive Officer FRG, LLC C. C. KIM GOODWIN Private Investor JOSÉ R. RODRIGUEZ Chairman of the Board of Directors CareMax, Inc. MYRNA M. SOTO Chief Executive Officer & Founder Apogee Executive Advisors, LLC CARLOS A. UNANUE President Goya de Puerto Rico, Inc. 2021 Annual Report | 9


LOGO


LOGO

Popular, Inc. Resumen del año Estimados Accionistas: El 2021 fue un año excepcional para Popular, impulsado por ganancias récord, calidad crediticia sólida, aumento en los depósitos, crecimiento continuo de clientes y la ejecución exitosa de acciones de capital. Nuestros resultados reflejan la continua recuperacin econmica en los mercados en los que operamos, nuestras fuentes diversificadas de ingresos y una gestin prudente del riesgo. Resultados financieros, capital y desempeo de la accin Nuestro ingreso neto para el año alcanzó $935 millones, $428 millones o 84% más que el año anterior. El aumento fue impulsado en gran medida por un menor gasto de provisión para pérdidas de crédito. En 2021, reportamos un beneficio de provisión de $193 millones, en comparación con un gasto de provisión de $293 millones en 2020. El beneficio de la provisión fue impulsado por la recuperación económica actual y las perspectivas positivas, junto con métricas sólidas de calidad de crédito. El aumento en ingresos por intereses y comisiones también contribuyó a los resultados positivos. Los niveles de capital se mantuvieron sólidos, cerrando el año con una relación de capital “Tier 1 Common” de 17.4% y un valor tangible en libros de $65.26 dólares, ambos superiores a los del 2020. Durante el año, ejecutamos importantes acciones de capital, incluyendo un aumento en el dividendo trimestral de acciones comunes de $0.40 a $ 0.45 por acción, la recompra de $350 millones de acciones comunes en el mercado y la redención de $187 millones de acciones preferidas. A principios de 2022, anunciamos nuestro plan de capital para el año, que incluye un aumento en el dividendo trimestral de acciones comunes de $0.45 a $ 0.55 por acción y recompras de acciones comunes de hasta $500 millones. Nuestras acciones de capital reflejan la fortaleza del desempeño financiero y la posición de capital de Popular, que nos permiten ofrecer valor a los accionistas mientras continuamos invirtiendo en nuestra franquicia. Nuestras acciones tuvieron un buen desempeño durante 2021, cerrando el año en $82.04, un 46% más alto que en 2020. Este desempeño compara favorablemente con el Índice KBW Nasdaq Regional Banking, que aumentó 34%, y estuvo en lĺnea con nuestros bancos pares en los Estados Unidos, que aumentaron 52%. 2020 $507 MILLONES 2021 $935 MILLONES INGRESO NETO PRECIO DE LA ACCIÓN 46% MÁS ALTO QUE EL CIERRE DEL AÑO 2020 $82.04 PRECIO AL CIERRE DE 2021 ACCIONES DE POPULAR, INC. (BPOP) El 2021 fue un año excepcional para Popular, impulsado por ganancias récord, calidad crediticia sólida, aumento en los depósitos, crecimiento continuo de clientes y la ejecución exitosa de acciones de capital. Informe Anual 2021 | 11


LOGO

Aspectos destacados del negocio Continuamos ejecutando nuestra estrategia de negocio, estructurada en torno a cuatro pilares estratégicos. Crecimiento rentable y sostenible Aumentamos los depósitos por aproximadamente $10 mil millones. Procesamos aproximadamente $675 millones en préstamos en la segunda ronda del Programa de Protección de Nómina (PPP), de la Administración de Pequeños Negocios, alcanzando un total de $2.1 mil millones en el programa. Aumentamos el total de préstamos por $810 millones, excluyendo la cartera de PPP. El aumento fue impulsado por los préstamos para automóviles en Puerto Rico y nuestros negocios especializados en los Estados Unidos, principalmente servicios a asociaciones de condominios y préstamos al sector de la salud. Adquirimos los activos de K2 Capital Group, un negocio nacional de arrendamiento de equipos médicos, con $119 millones en activos, que complementa y expande nuestro negocio de préstamos al sector de salud en los Estados Unidos. Simplicidad Completamos exitosamente la reorganización estratégica de nuestra red de sucursales del área metropolitana de Nueva York, y logramos un impulso positivo en el reenfoque de los recursos hacia las pequeñas y medianas empresas. Continuamos los esfuerzos para digitalizar y automatizar procesos operacionales para aumentar la eficiencia y mejorar la satisfacción del cliente. Enfoque al cliente Implementamos una nueva plataforma de manejo de la experiencia del cliente, la cual provee a los negocios el sentir de los clientes de manera más frecuente y oportuna. Lanzamos varias aplicaciones digitales para agilizar las solicitudes de tarjetas de crédito comerciales y préstamos para pequeñas empresas. Preparados para el futuro Ejecutamos diversas iniciativas relacionadas con la compensación, incluyendo aumentos de mérito y ajustes de mercado. Anunciamos aumentos en los salarios base mínimos en todos nuestros mercados, a partir de 2022. Lanzamos el primer Grupo de Recursos para Empleados para la comunidad LGBTQ+ y sus aliados. Continuamos fortaleciendo nuestros programas de cumplimiento y ciberseguridad. Gerencia y Junta de Directores Durante los últimos dos años, nuestros colegas han demostrado una notable resiliencia y agilidad, adaptándose a condiciones que evolucionan rápidamente. La forma en que trabajamos y cómo nuestros clientes interactúan con nosotros cambió abruptamente y sabemos que el ritmo del cambio seguirá acelerándose. A finales de 2021 anunciamos ciertos cambios organizacionales diseñados para satisfacer las necesidades cambiantes de nuestros clientes y permitirnos competir de manera más efectiva. Javier D. Ferrer fue nombrado vicepresidente ejecutivo, director de operaciones y jefe de estrategia de negocio de la Corporación, reportando directamente a mí. Javier se unió a Popular en 2015 como asesor general y también ha supervisado nuestra función corporativa de planificación estratégica desde 2019. Nos ha brindado un asesoramiento invaluable durante períodos de cambios y desafíos significativos, ganándose la confianza y el respeto de nuestro liderazgo y grupos claves. José R. Coleman fue nombrado vicepresidente ejecutivo, director jurídico y consejero general de Popular, como sucesor de Javier. José se desempeñó como primer vicepresidente, asesor general y secretario de Popular desde 2017, desempeñando un papel vital en la transformación de la función legal de la Corporación y alcanzando excelentes resultados en una gran variedad de proyectos. Estoy seguro de que esta nueva estructura de liderazgo fortalece a Popular a medida que nos esforzamos por servir a nuestros clientes en el entorno dinámico de hoy. Además, somos afortunados de contar con dos nuevos directores en nuestra Junta. Betty DeVita, que tiene una amplia experiencia en la industria bancaria y de pagos, es actualmente la directora de Negocios y miembro de la junta directiva de FinConecta, una compañía de tecnología global centrada en la digitalización de las finanzas y la banca abierta. El historial de Betty de propiciar crecimiento e innovación en diversos contextos de servicios financieros es invaluable mientras navegamos por una industria en constante evolución. José R. Rodríguez, un experimentado contador público certificado, fue socio auditor en KPMG LLP desde 1995 hasta su jubilación en abril de 2021. Durante más de 25 años con KPMG, José ocupó diversos puestos de liderazgo a nivel nacional y mundial. José proporciona a Popular ideas y consejos vitales, extraídos de su vasto conocimiento y experiencia en los sectores de contabilidad, auditoría y finanzas, así como de sus muchos roles como asesor. Nuestra Junta de Directores es un grupo de personas altamente talentosas y comprometidas, que nos 12 | Popular, Inc.


LOGO

brindan un asesoramiento invaluable a mí y a todo el equipo de gerencial. Estamos agradecidos por su orientación y apoyo. También, somos dichosos de tener un equipo de más de 8,500 compañeros dedicados. Una vez más, mostraron su resiliencia, enfrentando los desafíos con determinación y una actitud positiva. Ellos continúan siendo, sin duda, nuestro activo más valioso, y estamos comprometidos con su bienestar profesional, financiero y general. Mirando hacia el futuro El año 2022 traerá su propio conjunto de desafíos y oportunidades. Como hemos visto en los primeros meses, la pandemia seguirá requiriendo paciencia, flexibilidad y agilidad de todos nosotros durante algún tiempo. Hemos demostrado nuestra capacidad de adaptación a las condiciones cambiantes y continuaremos haciéndolo con energía y determinación. Nos sentimos optimistas sobre las perspectivas económicas para Puerto Rico. Además del nivel sin precedentes de estímulo federal recibido para contrarrestar los efectos de la pandemia de COVID-19, Puerto Rico todavía cuenta con una cantidad significativa de fondos de recuperación de huracanes que aún no se han desembolsado. Estos fondos ahora han comenzado a fluir a un ritmo más acelerado. Además, la reciente aprobación judicial del plan de ajuste bajo el Título III de la Ley de Supervisión, Administración y Estabilidad Económica de Puerto Rico es un paso clave en el proceso para poner fin a la crisis de deuda pública del país y le permite realizar las inversiones necesarias para el crecimiento económico sostenible. Se ha invertido una cantidad significativa de tiempo y esfuerzo para llegar a este punto, y esperamos que estos recursos se vuelvan a enfocar en el desarrollo económico a largo plazo de la isla. El impacto combinado de estos factores debería generar un movimiento económico considerable en Puerto Rico durante los próximos años y estamos en una posición ideal para beneficiarnos de dicha actividad. Nos encontramos listos para construir sobre nuestra posición de liderazgo y aprovechar el impulso logrado para hacer de 2022 otro gran año para nuestra organización, a medida que continuamos sirviendo a nuestros clientes, cuidando a nuestros compañeros, apoyando a nuestras comunidades y aportando valor a nuestros accionistas. IGNACIO ÁLVAREZ Presidente y Principal Oficial Ejecutivo Popular, Inc. ESG Nuestro negocio proporciona una plataforma poderosa para hacer una diferencia en la vida de nuestros clientes, compañeros, comunidades y accionistas, un privilegio y una responsabilidad que nos tomamos muy en serio. Durante 2021, avanzamos en nuestra estrategia ambiental, social y de gobernanza (ESG, por sus siglas en inglés). Un hito importante fue la publicación de nuestro primer Informe de Sustentabilidad Corporativa alineado con los estándares externos de informes de sustentabilidad, como SASB y GRI. El acceso a servicios bancarios se alinea estrechamente con los valores de nuestra organización y es una de las áreas de enfoque clave de nuestra estrategia ESG. Estamos comprometidos a mejorar el acceso a los servicios financieros para los miembros de nuestras comunidades que, por numerosas razones, han permanecido fuera del sistema bancario tradicional. Estamos orgullosos de que Banco Popular de Puerto Rico y Popular Bank ahora ofrecen cuentas certificadas de Bank On. Esta certificación la otorga la organización nacional sin fines de lucro Cities for Financial Empowerment Fund para promover la inclusión financiera a través cuentas con características que aseguran bajos costos, a la vez que ofrecen una capacidad transaccional robusta. También estamos orgullosos de ser incluidos, por primera vez, en el Índice de Igualdad de Género (GEI) de Bloomberg, a medida que continuamos haciendo importantes avances en la paridad de género en Popular. Nuestro compromiso de fomentar un lugar de trabajo que valore la inclusión, el respeto y la responsabilidad no solo nos convierte en un mejor patrono, sino que nos hace una organización más fuerte. Informe Anual 2021 | 13


LOGO

25 Años Resumen Financiero Histórico (Dólares en millones, excepto información por acción) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Información Financiera Seleccionada Ingreso neto (Pérdida Neta) $209.6 $232.3 $257.6 $276.1 $304.5 $351.9 $470.9 $489.9 $540.7 $357.7 $(64.5) Activos 19,300.5 23,160.4 25,460.5 28,057.1 30,744.7 33,660.4 36,434.7 44,401.6 48,623.7 47,404.0 44,411.4 Préstamos Brutos 11,376.6 13,078.8 14,907.8 16,057.1 18,168.6 19,582.1 22,602.2 28,742.3 31,710.2 32,736.9 29,911.0 Depósitos 11,749.6 13,672.2 14,173.7 14,804.9 16,370.0 17,614.7 18,097.8 20,593.2 22,638.0 24,438.3 28,334.4 Capital de Accionistas 1,503.1 1,709.1 1,661.0 1,993.6 2,272.8 2,410.9 2,754.4 3,104.6 3,449.2 3,620.3 3,581.9 Valor agregado en el mercado $3,350.3 $4,611.7 $3,790.2 $3,578.1 $3,965.4 $4,476.4 $5,960.2 $7,685.6 $5,836.5 $5,003.4 $2,968.3 Rendimiento de Activos Promedio (ROAA) 1.14% 1.14% 1.08% 1.04% 1.09% 1.11% 1.36% 1.23% 1.17% 0.74% -0.14% Rendimiento de Capital Común Promedio (ROACE) 15.83% 15.41% 15.45% 15.00% 14.84% 16.29% 19.30% 17.60% 17.12% 9.73% -2.08% Por Acción Común1 Ingreso neto (Pérdida Neta) - Básico $7.51 $8.26 $9.19 $9.85 $10.87 $13.05 $17.36 $17.95 $19.78 $12.41 $(2.73) Ingreso neto (Pérdida Neta) - Diluido 7.51 8.26 9.19 9.85 10.87 13.05 17.36 17.92 19.74 12.41 (2.73) Dividendos (Declarados) 2.00 2.50 3.00 3.20 3.80 4.00 5.05 6.20 6.40 6.40 6.40 Valor en los Libros 51.83 59.32 57.54 69.62 79.67 91.02 96.60 109.45 118.22 123.18 121.24 Precio en el Mercado 123.75 170.00 139.69 131.56 145.40 169.00 224.25 288.30 211.50 179.50 106.00 Activos por Área Geográfica Puerto Rico 74% 71% 71% 72% 68% 66% 62% 55% 53% 52% 59% Estados Unidos 23% 25% 25% 26% 30% 32% 36% 43% 45% 45% 38% Caribe y Latinoamérica 3% 4% 4% 2% 2% 2% 2% 2% 2% 3% 3% Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Sistema de Distribución Tradicional Sucursales Bancarias Puerto Rico 201 198 199 199 196 195 193 192 194 191 196 Islas Vírgenes 8 8 8 8 8 8 8 8 8 8 8 Estados Unidos2 63 89 91 95 96 96 97 128 136 142 147 Subtotal 272 295 298 302 300 299 298 328 338 341 351 Oficinas No Bancarias Popular Financial Holdings 117 128 137 136 149 153 181 183 212 158 134 Popular Cash Express 51 102 132 154 195 129 114 4 Popular Finance 44 48 47 61 55 36 43 43 49 52 51 Popular Auto (incluyendo Reliable) 10 10 12 12 20 18 18 18 17 15 12 Popular Leasing, U.S.A. 7 8 10 11 13 13 11 15 14 11 24 Popular Mortgage 3 11 13 21 25 29 32 30 33 32 32 Popular Securities 2 2 2 3 4 7 8 9 12 12 13 Popular One Popular Insurance y Popular Risk Services 2 2 2 2 2 2 2 2 Popular Insurance Agency, U.S.A. 1 1 1 1 1 1 1 Popular Insurance V.I. 1 1 1 1 1 1 E-LOAN 1 1 1 Popular Equipment Finance EVERTEC 4 4 4 5 5 5 5 7 9 Subtotal 183 258 327 382 427 460 431 421 351 292 280 Total 455 553 625 684 727 759 729 749 689 633 631 Sistema Electrónico de Distribución Cajeros Automáticos Propios y Administrados Puerto Rico 391 421 442 478 524 539 557 568 583 605 615 Islas Virgenes 17 59 68 37 39 53 57 59 61 65 69 Estados Unidos 71 94 99 109 118 131 129 163 181 192 187 Total 479 574 609 624 681 723 743 790 825 862 871 Empleados (equivalente a tiempo completo) 8,854 10,549 11,501 10,651 11,334 11,037 11,474 12,139 13,210 12,508 12,303 14 | Popular, Inc.


LOGO

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 $(1,243.9) $(573.9) $137.4 $151.3 $245.3 $599.3 $(313.5) $895.3 $216.7 $107.7 $618.2 $671.1 $506.6 $934.9 38,882.8 34,736.3 38,815.0 37,348.4 36,506.9 35,748.8 33,086.8 35,761.7 38,661.6 44,277.3 47,604.6 52,115.3 65,926.0 75,097.9 26,268.9 23,803.9 26,458.9 25,314.4 25,093.6 24,706.7 22,053.2 23,129.2 23,435.4 24,942.5 26,559.3 27,466.1 29,484.7 29,299.7 27,550.2 25,924.9 26,762.2 27,942.1 27,000.6 26,711.1 24,807.5 27,209.7 30,496.2 35,453.5 39,710.0 43,758.6 56,866.3 67,005.1 3,268.4 2,538.8 3,800.5 3,918.8 4,110.0 4,626.2 4,267.4 5,105.3 5,198.0 5,103.9 5,435.1 6,016.8 6,028.7 5,969.4 $1,455.1 $1,445.4 $3,211.4 $1,426.0 $2,144.9 $2,970.6 $3,523.4 $2,936.6 $4,548.1 $3,622.4 $4,719.3 $5,615.9 $4,744.6 $6,551.0 -3.04% -1.57% 0.36% 0.40% 0.68% 1.65% -0.89% 2.54% 0.58% 0.26% 1.33% 1.33% 0.85% 1.31% -44.47% -32.95% 4.37% 4.01% 6.37% 14.43% -7.04% 19.16% 4.07% 1.96% 11.39% 11.78% 9.36% 16.22% $(45.51) $2.39 $(0.62) $1.44 $2.36 $5.80 $(3.08) $8.66 $2.06 $1.02 $6.07 $6.89 $5.88 $11.49 (45.51) 2.39 (0.62) 1.44 2.35 5.78 (3.08) 8.65 2.06 1.02 6.06 6.88 5.87 11.46 4.80 0.20 ----- 0.30 0.60 1.00 1.00 1.20 1.60 1.75 63.29 38.91 36.67 37.71 39.35 44.26 40.76 48.79 49.60 49.51 53.88 62.42 71.30 74.48 51.60 22.60 31.40 13.90 20.79 28.73 34.05 28.34 43.82 35.49 47.22 58.75 56.32 82.04 64% 65% 74% 74% 73% 72% 80% 75% 75% 76% 77% 78% 82% 84% 33% 32% 23% 23% 24% 25% 17% 22% 23% 22% 21% 20% 17% 15% 3% 3% 3% 3% 3% 3% 3% 3% 2% 2% 2% 2% 1% 1% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 179 173 185 183 175 171 168 173 171 168 163 164 162 159 8 8 8 9 9 9 9 9 9 9 9 10 10 10 139 101 96 94 92 90 47 50 51 51 51 51 50 39 326 282 289 286 276 270 224 232 231 228 223 225 222 208 2 9 12 10 10 10 10 9 9 9 9 9 12 12 11 11 22 32 33 36 37 37 38 25 24 17 14 14 14 15 15 7 6 6 4 4 3 3 3 2 2 2 2 2 2 4 5 6 6 6 5 5 5 5 6 7 1 1 1 1 1 1 1 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 9 9 97 61 55 58 59 59 46 46 37 34 36 36 37 39 423 343 344 344 335 329 270 278 268 262 259 261 259 247 605 571 624 613 597 599 602 622 635 633 619 622 619 616 74 77 17 20 20 22 21 21 20 22 22 23 23 23 176 136 138 135 134 132 83 87 101 110 115 119 118 91 855 784 779 768 751 753 706 730 756 765 756 764 760 730 10,587 9,407 8,277 8,329 8,072 8,059 7,752 7,810 7,828 7,784 8,474 8,560 8,522 8,351 1 Los datos de las acciones comunes han sido ajustados por las divisiones en acciones y la división de acciones a la inversa realizada en mayo 2012. 2 Excluye una sucursal de Banco Popular de Puerto Rico en Nueva York. Informe Anual 2021 | 15


LOGO

Popular, Inc. Gerencia y Junta de Directores Gerencia IGNACIO ÁLVAREZ Presidente y Principal Oficial Ejecutivo Popular, Inc. CAMILLE BURCKHART Vicepresidenta Ejecutiva Principal Oficial de Informática y Tecnología Digital Grupo de Innovación, Tecnología y Operaciones Popular, Inc. BEATRIZ CASTELLVÍ Vicepresidenta Ejecutiva y Principal Oficial de Seguridad Grupo de Seguridad Corporativa Popular, Inc. LUIS E. CESTERO Vicepresidente Ejecutivo Grupo de Banca Individual Banco Popular de Puerto Rico MANUEL CHINEA Vicepresidente Ejecutivo Popular, Inc. Principal Oficial de Operaciones Popular Bank JOSÉ R. COLEMAN TIÓ Vicepresidente Ejecutivo y Principal Oficial Legal Grupo del Asesor General y Asuntos Corporativos Popular, Inc. JAVIER D. FERRER Vicepresidente Ejecutivo Principal Oficial de Operaciones Principal Oficial de Estrategia y Secretario Corporativo Popular, Inc. MARÍA CRISTINA (MC) GONZÁLEZ Vicepresidenta Ejecutiva y Principal Oficial de Comunicaciones y Asuntos Públicos Grupo de Comunicaciones Corporativas y Asuntos Públicos Popular, Inc. JUAN O. GUERRERO Vicepresidente Ejecutivo Grupo de Servicios Financieros y Seguros Banco Popular de Puerto Rico GILBERTO MONZÓN Vicepresidente Ejecutivo Grupo de Crédito a Individuo Banco Popular de Puerto Rico EDUARDO J. NEGRÓN Vicepresidente Ejecutivo y Principal Oficial de Administración Grupo de Administración Popular, Inc. ELI S. SEPÚLVEDA Vicepresidente Ejecutivo Grupo de Crédito Comercial Banco Popular de Puerto Rico LIDIO V. SORIANO Vicepresidente Ejecutivo y Principal Oficial de Riesgo Grupo Corporativo de Manejo de Riesgo Popular, Inc. CARLOS J. VÁZQUEZ Vicepresidente Ejecutivo y Principal Oficial Financiero Grupo de Finanzas Corporativas Popular, Inc. 16 | POPULAR, INC.


LOGO

Junta De Directores RICHARD L. CARRIÓN Presidente de la Junta de Directores Popular, Inc. IGNACIO ÁLVAREZ Presidente y Principal Oficial Ejecutivo Popular, Inc. JOAQUÍN E. BACARDÍ, III Presidente Edmundo B. Fernández, Inc. ALEJANDRO M. BALLESTER Presidente Ballester Hermanos, Inc. ROBERT CARRADY Presidente Caribbean Cinemas BETTY DEVITA Principal Oficial de Negocios FinConecta JOHN W. DIERCKSEN Principal Greycrest, LLC MARÍA LUISA FERRÉ RANGEL Principal Oficial Ejecutiva FRG, LLC C. KIM GOODWIN Inversionista Privada JOSÉ R. RODRÍGUEZ Presidente de la Junta de Directores CareMax, Inc. MYRNA M. SOTO Principal Oficial Ejecutiva y Fundadora Apogee Executive Advisors, LLC CARLOS A. UNANUE Presidente Goya de Puerto Rico, Inc. Informe Anual 2021 | 17


LOGO


1
Financial Review and
Supplementary Information
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
3
Statistical Summaries
56
Report of Management on Internal Control Over Financial
Reporting
59
Report of Independent Registered Public
 
Accounting Firm
60
Consolidated Statements of Financial Condition as of
 
December 31, 2021 and 2020
64
Consolidated Statements of Operations for the
 
years ended December 31, 2021, 2020 and
 
2019
65
Consolidated Statements of Comprehensive
Income for the years ended December 31, 2021,
 
2020 and
2019
66
Consolidated Statements of Changes in Stockholders’
Equity for the years ended December 31, 2021,
 
2020 and
2019
67
Consolidated Statements of Cash Flows for the
years ended December 31, 2021, 2020 and
 
2019
68
Notes to Consolidated Financial Statements
70
2
Management’s Discussion and
Analysis of Financial Condition
 
and Results of Operations
Forward-Looking Statements
3
Overview
4
Critical Accounting Policies / Estimates
9
Statement of Operations Analysis
15
Net Interest Income
15
Provision for Credit Losses
18
Non-Interest Income
18
Operating Expenses
19
Income Taxes
20
Fourth Quarter Results
20
Reportable Segment Results
21
Statement of Financial Condition Analysis
23
Assets
23
Liabilities
24
Stockholders’ Equity
25
Regulatory Capital
25
Risk Management
28
Market / Interest Rate Risk
28
Liquidity
33
Enterprise Risk Management
53
Adoption of New Accounting Standards and Issued
 
but
Not Yet Effective Accounting Standards
55
Statistical Summaries
Statements of Financial Condition
56
Statements of Operations
57
Average Balance Sheet and Summary of Net Interest
Income
58
3
FORWARD-LOOKING STATEMENTS
The information included in this report contains
 
certain forward-looking statements within the meaning of the U.S.
 
Private Securities
Litigation Reform Act of
 
1995, including, without limitation, statements about
 
Popular Inc.’s (the “Corporation,”
 
“Popular,” “we,” “us,”
“our”)
 
business,
 
financial
 
condition,
 
results
 
of
 
operations,
 
plans,
 
objectives
 
and
 
future
 
performance.
 
These
 
statements
 
are
 
not
guarantees
 
of
 
future
 
performance,
 
are
 
based
 
on
 
management’s
 
current
 
expectations
 
and,
 
by
 
their
 
nature,
 
involve
 
risks,
uncertainties, estimates and assumptions. Potential factors, some of which are beyond the Corporation’s control, could cause actual
results to differ
 
materially from those
 
expressed in, or implied
 
by, such
 
forward-looking statements. Risks and
 
uncertainties include
without limitation the effect of competitive and economic factors, and our
 
reaction to those factors, the adequacy of the allowance for
loan losses,
 
delinquency trends, market
 
risk and
 
the impact
 
of interest
 
rate changes,
 
capital markets
 
conditions, capital
 
adequacy
and
 
liquidity,
 
and
 
the
 
effect
 
of
 
legal
 
and
 
regulatory
 
proceedings
 
and
 
new
 
accounting
 
standards
 
on
 
the
 
Corporation’s
 
financial
condition and results of
 
operations. All statements contained herein that
 
are not clearly historical
 
in nature are forward-looking, and
the
 
words
 
“anticipate,”
 
“believe,”
 
“continues,”
 
“expect,”
 
“estimate,”
 
“intend,”
 
“project”
 
and
 
similar
 
expressions
 
and
 
future
 
or
conditional verbs
 
such
 
as
 
“will,”
 
“would,”
 
“should,”
 
“could,” “might,”
 
“can,”
 
“may”
 
or similar
 
expressions are
 
generally
 
intended to
identify forward-looking statements.
Various factors, some of which
 
are beyond Popular’s control, could cause actual results to differ materially from those expressed in,
or implied by, such forward-looking statements. Factors that might cause such a difference
 
include, but are not limited to, the rate of
growth or
 
decline in the
 
economy and employment
 
levels, as well
 
as general
 
business and economic
 
conditions in the
 
geographic
areas we serve and,
 
in particular, in
 
the Commonwealth of Puerto Rico
 
(the “Commonwealth” or “Puerto Rico”), where
 
a significant
portion of our
 
business is concentrated; the impact
 
of the current fiscal
 
and economic challenges of Puerto
 
Rico and the
 
measures
taken and to be taken by the Puerto Rico Government and the Federally-appointed oversight board on the
 
economy, our customers
and
 
our
 
business;
 
the
 
impact
 
of
 
the
 
pending
 
debt
 
restructuring
 
proceedings
 
under
 
Title
 
III
 
of
 
the
 
Puerto
 
Rico
 
Oversight,
Management and
 
Economic Stability
 
Act (“PROMESA”)
 
and of
 
other actions
 
taken or
 
to be
 
taken to
 
address Puerto
 
Rico’s fiscal
challenges
 
on
 
the
 
value
 
of
 
our
 
portfolio
 
of
 
Puerto
 
Rico
 
government
 
securities
 
and
 
loans
 
to
 
governmental
 
entities
 
and
 
of
 
our
commercial, mortgage and consumer loan portfolios where
 
private borrowers could be directly affected
 
by governmental action; the
amount of
 
Puerto Rico
 
public sector
 
deposits held
 
at the
 
Corporation, whose
 
future balances
 
are uncertain
 
and difficult
 
to predict
and
 
may
 
be
 
impacted by
 
factors such
 
as
 
the
 
amount of
 
Federal funds
 
received by
 
the
 
P.R.
 
Government in
 
connection with
 
the
COVID-19 pandemic and the rate of expenditure of
 
such funds, as well as the timeline and implementation
 
of the Plan of Adjustment
 
for
 
the
 
Puerto
 
Rico
 
debt
 
restructuring
 
under
 
Title
 
III
 
of
 
PROMESA;
 
risks
 
related
 
to
 
Popular’s
 
planned
 
acquisition
 
of
 
certain
information technology
 
and related
 
assets currently
 
used by
 
EVERTEC, Inc.
 
to service
 
certain of
 
Banco Popular
 
de Puerto
 
Rico’s
key channels, as well as the planned entry into amended and restated commercial agreements and the sale or conversion into
 
non-
voting
 
of
 
Popular’s ownership
 
stake
 
in
 
Evertec
 
(the
 
“Transaction”),
 
including:
 
the
 
length
 
of
 
time
 
necessary
 
to
 
consummate
 
the
Transaction; the ability to satisfy the conditions to the closing thereof; the receipt of any regulatory approvals necessary to effect
 
the
Transaction and
 
the contemplated return to
 
shareholders of net
 
gains resulting from
 
a sale of
 
EVERTEC, Inc. shares;
 
the ability to
successfully transition
 
and integrate
 
the assets
 
acquired as
 
part of
 
the Transaction,
 
as well
 
as related
 
operations, employees
 
and
third party contractors;
 
unexpected costs, including,
 
without limitation, costs due
 
to exposure to
 
any unrecorded liabilities or
 
issues
not identified
 
during due
 
diligence investigation
 
of the
 
Transaction or
 
that are
 
not subject
 
to indemnification
 
or reimbursement
 
by
EVERTEC, Inc.; risks that Popular may be affected by operational
 
and other risks arising from the acquisition of
 
the acquired assets,
including
 
the
 
transition
 
and
 
integration
 
thereof,
 
or
 
by
 
adverse
 
effects
 
on
 
relationships
 
with
 
customers,
 
employees
 
and
 
service
providers; and
 
business and
 
other risks
 
arising from
 
the
 
extension of
 
Popular’s current
 
commercial agreements
 
with EVERTEC,
Inc.,
 
as
 
well
 
as
 
the
 
sale
 
or
 
conversion
 
of
 
EVERTEC,
 
Inc.
 
shares
 
owned
 
by
 
Popular;
 
the
 
scope
 
and
 
duration
 
of
 
the
 
COVID-19
pandemic
 
(including
 
the
 
appearance
 
of
 
new
 
strains
 
of
 
the
 
virus),
 
actions
 
taken
 
by
 
governmental
 
authorities
 
in
 
response
 
to
 
the
pandemic, and the direct
 
and indirect impact of
 
the pandemic on us,
 
our customers, service providers and
 
third parties; changes in
interest rates and market liquidity,
 
which may reduce interest margins, impact funding sources
 
and affect our ability to originate and
distribute financial products
 
in the
 
primary and secondary
 
markets; the fiscal
 
and monetary policies
 
of the federal
 
government and
its
 
agencies;
 
changes
 
in
 
federal
 
bank
 
regulatory
 
and
 
supervisory
 
policies,
 
including
 
required
 
levels
 
of
 
capital
 
and
 
the
 
impact
 
of
proposed capital standards on our capital ratios; additional Federal
 
Deposit Insurance Corporation (“FDIC”) assessments; regulatory
approvals
 
that
 
may
 
be
 
necessary
 
to
 
undertake
 
certain
 
actions
 
or
 
consummate
 
strategic
 
transactions
 
such
 
as
 
acquisitions
 
and
dispositions;
 
unforeseen or
 
catastrophic
 
events, including
 
extreme weather
 
events,
 
other
 
natural
 
disasters, man-made
 
disasters,
acts of violence or war, or the emergence of pandemics epidemics and other health-related crises,
 
which could cause a disruption in
our operations or other adverse consequences for our business; the relative strength or weakness
 
of the consumer and commercial
credit sectors and of the
 
real estate markets in Puerto
 
Rico and the other markets in
 
which borrowers are located; the
 
performance
of the stock
 
and bond markets;
 
competition in the
 
financial services industry;
 
possible legislative, tax
 
or regulatory changes;
 
and a
failure in or breach of
 
our operational or security systems or infrastructure or
 
those of EVERTEC, Inc., our provider
 
of core financial
 
 
4
transaction processing and information technology services, or of other third parties providing services to us, including as a
 
result of
cyberattacks, e-fraud, denial-of-services
 
and computer intrusion,
 
that might
 
result in
 
loss or
 
breach of customer
 
data, disruption of
services,
 
reputational
 
damage
 
or
 
additional
 
costs
 
to
 
Popular.
 
Other
 
possible
 
events
 
or
 
factors
 
that
 
could
 
cause
 
results
 
or
performance to differ materially from
 
those expressed in these forward-looking statements
 
include the following: negative economic
conditions that adversely affect housing prices, the
 
job market, consumer confidence and spending habits which may
 
affect, among
other things, the level
 
of non-performing assets, charge-offs and provision
 
expense; changes in market rates and
 
prices which may
adversely impact
 
the value
 
of financial
 
assets and
 
liabilities; potential
 
judgments, claims,
 
damages, penalties,
 
fines, enforcement
actions and
 
reputational damage resulting
 
from pending
 
or future
 
litigation and regulatory
 
or government
 
investigations or
 
actions,
including as
 
a result
 
of our
 
participation in and
 
execution of government
 
programs related to
 
the COVID-19 pandemic;
 
changes in
accounting standards, rules and interpretations; our ability to grow our core businesses; decisions to downsize, sell or close
 
units or
otherwise change our business mix; and management’s ability to identify and manage these and other risks. Moreover, the outcome
of legal and regulatory proceedings, as discussed in
 
“Part I, Item 3. Legal Proceedings” of
 
the Corporation’s Form 10-K for the year
ended
 
December 31,
 
2021,
 
is
 
inherently uncertain
 
and
 
depends on
 
judicial
 
interpretations of
 
law and
 
the
 
findings
 
of
 
regulators,
judges
 
and/or
 
juries.
 
The
 
description
 
of
 
the
 
Corporation’s
 
business
 
and
 
risk
 
factors
 
contained
 
in
 
Part
 
I,
 
Items
 
1
 
and
 
1A
 
of
 
the
Corporation’s
 
Form
 
10-K
 
for
 
the
 
year
 
ended
 
December
 
31,
 
2021
 
discusses
 
additional
 
information
 
about
 
the
 
business
 
of
 
the
Corporation
 
and
 
the
 
material
 
risk
 
factors
 
and
 
uncertainties
 
to
 
which
 
the
 
Corporation
 
is
 
subject
 
that,
 
in
 
addition
 
to
 
the
 
other
information in this report, readers should consider.
All forward-looking statements included
 
in this report
 
are based upon information
 
available to the
 
Corporation as of the
 
date of this
report,
 
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.
OVERVIEW
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 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
 
37
 
to
 
the
 
Consolidated
Financial Statements presents information about the
 
Corporation’s business segments.
The
 
Corporation
 
has
 
several
 
investments
 
which
 
it
 
accounts
 
for
 
under
 
the
 
equity
 
method.
 
These
 
include
 
the
 
16.19%
 
interest
 
in
EVERTEC, a 15.84%
 
interest in Centro Financiero BHD
 
Leon, S.A. (“BHD Leon”),
 
among other investments in
 
limited partnerships
which mainly
 
hold loans
 
and investment
 
securities. EVERTEC
 
provides transaction processing
 
services throughout
 
the Caribbean
and Latin America, and also provides to the Corporation core
 
banking and transaction processing and other
 
services. BHD León is a
diversified
 
financial
 
services
 
institution
 
operating
 
in
 
the
 
Dominican
 
Republic.
 
For
 
the
 
year
 
ended
 
December
 
31,
 
2021,
 
the
Corporation recorded approximately $58.3 million in earnings from these
 
investments on an aggregate basis. The carrying amounts
of these investments
 
as of December 31,
 
2021 were $299.0 million.
 
Refer to Note
 
27 to the
 
Consolidated Financial Statements for
additional information.
 
SIGNIFICANT EVENTS
Acquisition
of K2 Capital Group LLC
On
 
October
 
15,
 
2021,
 
Popular
 
Equipment
 
Finance
 
LLC
 
(“PEF”),
 
a
 
newly-formed
 
wholly-owned
 
subsidiary
 
of
 
PB,
 
completed
 
the
acquisition of certain
 
assets and the
 
assumption of certain
 
liabilities of Minnesota-based
 
K2 Capital Group
 
LLC’s (“K2”)
 
equipment
leasing
 
and
 
financing
 
business
 
(the
 
“Acquired
 
Business”).
 
PEF
 
made
 
a
 
payment
 
to
 
K2
 
of
 
approximately
 
$157
 
million
 
in
 
cash,
representing a premium of
 
$49 million over the
 
book value of K2’s
 
net assets, which has
 
been recorded as goodwill.
 
An additional
approximate $29 million in earnout payments could be payable to K2 over the next three years, contingent upon the achievement of
certain agreed-upon financial targets during such period.
 
 
 
 
 
5
 
Specializing in the healthcare
 
industry, the
 
Acquired Business provides a variety
 
of lease products, including
 
operating and finance
leases,
 
and
 
also
 
offers
 
private
 
label
 
vendor
 
finance
 
programs
 
to
 
equipment
 
manufacturers
 
and
 
healthcare
 
organizations.
 
The
acquisition provides PB with a national equipment
 
leasing platform that complements its existing healthcare
 
lending business.
 
 
As
 
part
 
of
 
the
 
transaction,
 
PEF
 
acquired
 
approximately
 
$115
 
million
 
in
 
net
 
assets
 
that
 
consisted
 
mainly
 
of
 
commercial
 
finance
leases. The transaction was accounted for as a business combination. Refer to Note 4
 
to the Consolidated Financial Statements for
additional information.
 
Capital Actions
 
2021 Increase in Common Stock Dividend
On May 6, 2021,
 
the Corporation’s Board of
 
Directors approved a quarterly cash
 
dividend of $0.45
 
per share, an increase
 
from the
previous
 
$0.40
 
per
 
share
 
quarterly
 
dividend, on
 
its
 
outstanding common
 
stock.
 
During
 
the
 
year
 
ended December
 
31,
 
2021,
 
the
Corporation declared cash dividend of $1.75 per common
 
share outstanding ($142.3 million in the aggregate).
Accelerated Share Repurchase
On
 
September
 
9,
 
2021,
 
the
 
Corporation
 
completed
 
its
 
previously
 
announced
 
accelerated
 
share
 
repurchase
 
program
 
for
 
the
repurchase
 
of
 
an
 
aggregate
 
$350
 
million
 
of
 
Popular’s
 
common
 
stock.
 
Under
 
the
 
terms
 
of
 
the
 
accelerated
 
share
 
repurchase
agreement (the “ASR Agreement”), on
 
May 4, 2021, the Corporation
 
made an initial payment of
 
$350 million and received an
 
initial
delivery
 
of 3,785,831
 
shares of
 
Popular’s Common
 
Stock (the
 
“Initial Shares”).
 
The transaction
 
was accounted
 
for
 
as a
 
treasury
stock transaction. As
 
a result
 
of the
 
receipt of
 
the Initial Shares,
 
the Corporation recognized
 
in shareholders’ equity
 
approximately
$280 million in treasury stock and $70 million as a reduction in
 
capital surplus. Upon the final settlement of the ASR Agreement, the
Corporation received an additional
 
828,965 shares of Popular’s common
 
stock and recognized $61
 
million as treasury stock
 
with a
corresponding
 
increase
 
in
 
its
 
capital
 
surplus
 
account.
 
The
 
Corporation
 
repurchased
 
a
 
total
 
of
 
4,614,796
 
shares
 
at
 
an
 
average
purchase price of $75.84 under the ASR Agreement.
Redemption of Trust Preferred Securities
On November 1, 2021, the Corporation redeemed all outstanding 6.70% Cumulative Monthly Income Trust Preferred Securities (the
“Trust Preferred Securities”) issued by the Popular Capital Trust I (the “Trust”) (liquidation amount of
 
$25 per security and amounting
to $186,663,800 (or
 
$181,063,250 after excluding the
 
Corporation’s participation in the
 
Trust of
 
$5,600,550) in the aggregate).
 
The
redemption price
 
for the
 
Trust Preferred
 
Securities was
 
equal to
 
$25 per
 
security plus
 
accrued and
 
unpaid distributions
 
up to
 
and
excluding
 
the
 
redemption
 
date
 
in
 
the
 
amount
 
of
 
$0.139583
 
per
 
security,
 
for
 
a
 
total
 
payment
 
per
 
security
 
in
 
the
 
amount
 
of
$25.139583. Upon redemption, Popular
 
delisted the Trust
 
Preferred Securities (NASDAQ: BPOPN) from
 
the Nasdaq Global
 
Select
Market.
2022 Capital Plan
On January 12, 2022 the Corporation announced
 
the following capital actions:
 
an increase in the
 
Corporation’s quarterly common stock
 
dividend from $0.45 per share
 
to $0.55 per share,
 
commencing
with the dividend
 
payable in the second
 
quarter of 2022, subject
 
to the approval
 
by the Corporation’s
 
Board of Directors;
and
 
 
common stock repurchases of up to $500 million
 
during 2022.
 
The Corporation’s planned common stock
 
repurchases may be executed in the
 
open market or in privately negotiated
 
transactions.
The
 
timing
 
and
 
exact
 
amount
 
of
 
such
 
repurchases
 
will
 
be
 
subject
 
to
 
various
 
factors,
 
including
 
market
 
conditions
 
and
 
the
Corporation’s capital position and financial performance.
Refer to Table 1 for selected financial data for the past three years.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
Table 1 - Selected Financial Data
Years ended December
 
31,
(Dollars in thousands, except per common share data)
2021
2020
2019
CONDENSED STATEMENTS
 
OF OPERATIONS
Interest income
$
2,122,637
$
2,091,551
$
2,260,793
Interest expense
165,047
234,938
369,099
Net interest income
 
1,957,590
1,856,613
1,891,694
Provision for credit losses (benefit)
 
(193,464)
292,536
165,779
Non-interest income
642,128
512,312
569,883
Operating expenses
1,549,275
1,457,829
1,477,482
Income tax expense
 
309,018
111,938
147,181
Net income
$
934,889
$
506,622
$
671,135
Net income applicable to common stock
$
933,477
$
504,864
$
667,412
PER COMMON SHARE DATA
Net income per common share - basic
$
11.49
$
5.88
$
6.89
Net income per common share - diluted
11.46
5.87
6.88
Dividends declared
1.75
1.60
1.20
Common equity per share
74.48
71.30
62.42
Market value per common share
82.04
56.32
58.75
Outstanding shares:
Average - basic
81,263,027
85,882,371
96,848,835
Average - assuming dilution
81,420,154
85,975,259
96,997,800
End of period
79,851,169
84,244,235
95,589,629
AVERAGE BALANCES
Net loans
[1]
$
29,074,036
$
28,384,981
$
26,806,368
Earning assets
68,088,675
56,404,607
44,944,793
Total assets
71,168,650
59,583,455
50,341,827
Deposits
63,102,916
51,585,779
42,218,796
Borrowings
1,255,495
1,321,772
1,404,459
Total stockholders'
 
equity
5,777,652
5,419,938
5,713,517
PERIOD END BALANCE
Net loans
[1]
$
29,299,725
$
29,484,651
$
27,466,076
Allowance for credit losses - loans portfolio
695,366
896,250
477,708
Earning assets
72,103,862
62,989,715
48,674,705
Total assets
75,097,899
65,926,000
52,115,324
Deposits
67,005,088
56,866,340
43,758,606
Borrowings
1,155,166
1,346,284
1,294,986
Total stockholders'
 
equity
5,969,397
6,028,687
6,016,779
SELECTED RATIOS
Net interest margin (non-taxable equivalent basis)
2.88
%
3.29
%
4.03
%
Net interest margin (taxable equivalent basis) -Non-GAAP
3.19
3.62
4.43
Return on assets
1.31
0.85
1.33
Return on common equity
16.22
9.36
11.78
Tier I capital
17.49
16.33
17.76
Total capital
19.35
18.81
20.31
[1] Includes loans held-for-sale.
 
7
Non-GAAP financial measures
Net interest income on a taxable equivalent basis
 
Net
 
interest
 
income,
 
on
 
a
 
taxable
 
equivalent
 
basis,
 
is
 
presented
 
with
 
its
 
different
 
components
 
on
 
Table
 
3
 
for
 
the
 
year
 
ended
December 31,
 
2021
 
as compared
 
with
 
the
 
same
 
period in
 
2020, segregated
 
by
 
major categories
 
of
 
interest
 
earning assets
 
and
interest-bearing liabilities.
 
The 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,
 
and
 
certain
 
obligations
 
of
 
the
 
Commonwealth
 
of
 
Puerto
 
Rico
 
and
 
its
 
agencies
 
and
 
assets
 
held
 
by
 
the
Corporation’s international
 
banking entities.
 
To
 
facilitate the
 
comparison of
 
all interest
 
related to
 
these assets,
 
the interest
 
income
has
 
been
 
converted
 
to
 
a
 
taxable
 
equivalent
 
basis,
 
using
 
the
 
applicable
 
statutory
 
income
 
tax
 
rates
 
for
 
each
 
period.
 
The
 
taxable
equivalent computation
 
considers the
 
interest expense
 
and other
 
related expense
 
disallowances required
 
by the
 
Puerto Rico
 
tax
law. Under Puerto
 
Rico tax law, the
 
exempt interest can be deducted up
 
to the amount of taxable
 
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 exempt sources.
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 year ended December 31,
 
2021
The Corporation’s
 
net income
 
for the
 
year ended
 
December 31,
 
2021 amounted
 
to
 
$934.9 million,
 
compared to
 
a net
 
income of
$506.6 million for 2020.
The discussion
 
that follows
 
provides highlights
 
of the
 
Corporation’s results
 
of
 
operations for
 
the year
 
ended December
 
31, 2021
compared to the results of
 
operations of 2020. It also
 
provides some highlights with respect to
 
the Corporation’s financial condition,
credit
 
quality,
 
capital and
 
liquidity.
 
Table
 
2 presents
 
a three-year
 
summary of
 
the components
 
of
 
net income
 
as a
 
percentage of
average total assets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
Table 2 - Components of Net
 
Income as a Percentage of Average Total
 
Assets
2021
2020
2019
Net interest income
2.75
%
3.12
%
3.76
%
Provision for credit losses (benefit)
0.27
(0.49)
(0.33)
Mortgage banking activities
0.07
0.02
0.06
Net gain and valuation adjustments on investment securities
-
0.01
-
Other non-interest income
 
0.83
0.83
1.07
Total net interest
 
income and non-interest income, net of provision
 
for credit losses
 
3.92
3.49
4.56
Operating expenses
(2.18)
(2.45)
(2.94)
Income before income tax
 
1.74
1.04
1.62
Income tax expense
0.43
0.19
0.29
Net income
1.31
%
0.85
%
1.33
%
Net interest income for the
 
year ended December 31, 2021 was
 
$2.0 billion, an increase of $101.0
 
million when compared to 2020.
The increase in
 
net interest income
 
was mainly driven
 
by higher
 
interest income from
 
commercial loans due
 
to income from
 
loans
under
 
the
 
Small
 
Business
 
Administration
 
(“SBA”)
 
Paycheck
 
Protection
 
Program
 
(“PPP”),
 
and
 
higher
 
income
 
from
 
investment
securities. In addition, lower
 
interest expense on deposits, despite
 
the higher volume, contributed to
 
the higher net interest
 
income.
The net interest margin for the year ended December 31, 2021 was 2.88% compared to 3.29% for the same period in 2020 and was
impacted by
 
prolonged low interest
 
rates as
 
well as
 
the change
 
in the
 
earning assets composition.
 
On a
 
taxable equivalent
 
basis,
net
 
interest margin
 
was 3.19%
 
in 2021,
 
compared to
 
3.62%
 
in 2020.
 
Refer to
 
the Net
 
Interest Income
 
section
 
of this
 
MD&A for
additional information.
The
 
Corporation’s
 
total
 
provision
 
for
 
credit
 
losses
 
reflected
 
a
 
benefit
 
of
 
$193.5
 
million
 
for
 
the
 
year
 
ended
 
December
 
31,
 
2021,
compared to a provision expense of $292.5 million for 2020. The benefit for the year 2021 was due to improvements in credit quality
and
 
the
 
macroeconomic
 
outlook. The
 
Corporation continued
 
to
 
exhibit strong
 
credit
 
quality
 
trends and
 
low
 
credit
 
costs
 
with
 
low
levels
 
of
 
net
 
charge-offs
 
and
 
lower
 
non-performing
 
loans.
 
Non-performing
 
assets
 
totaled
 
$633
 
million
 
at
 
December
 
31,
 
2021,
reflecting a
 
decrease of
 
$191 million
 
when compared
 
to December
 
31, 2020.
 
Refer to
 
the Provision
 
for Credit
 
Losses and
 
Credit
Risk sections
 
of this
 
MD&A for information
 
on the
 
allowance for credit
 
losses, non-performing assets,
 
troubled debt restructurings,
net charge-offs and credit quality metrics.
Non-interest
 
income
 
for
 
the
 
year
 
ended
 
December
 
31,
 
2021
 
amounted
 
to
 
$642.1
 
million,
 
an
 
increase
 
of
 
$129.8
 
million,
 
when
compared
 
with
 
2020,
 
mostly
 
due
 
to:
 
higher
 
service
 
fees
 
and
 
service
 
charges
 
on
 
deposit
 
accounts
 
due
 
to
 
economic
 
disruptions
related to
 
the pandemic,
 
the waiver of
 
service charges and
 
late fees
 
during 2020,
 
higher income from
 
mortgage banking activities
and higher other operating income principally due to higher
 
net earnings from the combined portfolio of investments
 
under the equity
method. Refer
 
to the
 
Non-Interest Income
 
section of
 
this MD&A
 
for additional
 
information on
 
the major
 
variances of
 
the different
categories of non-interest income.
Total
 
operating expenses amounted to
 
$1.5 billion for the
 
year 2021, reflecting
 
an increase of
 
$91.4 million, when compared
 
to the
same period
 
in 2020,
 
mainly due
 
to higher
 
personnel costs.
 
Refer to
 
the Operating
 
Expenses section
 
of this
 
MD&A for
 
additional
information.
Income tax expense
 
amounted to $309.0 million
 
for the year
 
ended December 31, 2021,
 
compared with an
 
income tax expense of
$111.9
 
million for the previous year. The increase in income tax expense
 
for the year is mainly due to a higher pre-tax income.
 
Refer
to the Income Taxes section in this MD&A
 
and Note 35 to the consolidated financial statements for additional information on income
taxes.
 
At December
 
31, 2021,
 
the Corporation’s
 
total assets
 
were $75.1 billion,
 
compared with
 
$65.9 billion at
 
December 31,
 
2020. The
increase
 
of
 
$9.2
 
billion
 
is
 
mainly
 
driven
 
by
 
higher
 
money
 
market
 
investments
 
and
 
debt
 
securities
 
available-for-sale
 
due
 
to
 
the
additional funds
 
available to
 
invest resulting
 
from the
 
increase in
 
deposits across
 
various sectors,
 
partially offset
 
by paydowns
 
of
agency mortgage-backed securities.
 
Refer to the Statement of Condition Analysis
 
section of this MD&A for additional information.
9
 
Deposits amounted to $67.0
 
billion at December 31,
 
2021, compared with $56.9
 
billion at December 31,
 
2020. Table
 
7 presents a
breakdown of deposits
 
by major categories.
 
The increase in
 
deposits was mainly
 
due to
 
higher Puerto Rico
 
public sector deposits
and higher balances in retail and
 
commercial demand deposits accounts. The Corporation’s borrowings remained flat
 
at $1.2 billion
at
 
December 31,
 
2021. Refer
 
to Note
 
17
 
to
 
the
 
Consolidated Financial
 
Statements for
 
detailed information
 
on the
 
Corporation’s
borrowings.
Refer
 
to
 
Table
 
6
 
in
 
the
 
Statement
 
of
 
Financial
 
Condition
 
Analysis
 
section
 
of
 
this
 
MD&A
 
for
 
the
 
percentage
 
allocation
 
of
 
the
composition of the Corporation’s financing to total assets.
Stockholders’ equity remained flat at $6.0 billion
 
at December 31, 2021, compared with December 31,
 
2020. The net activity for the
year was mainly
 
due to
 
net income of
 
$934.9 million for
 
the year 2021
 
offset by
 
unrealized losses on
 
debt securities
 
available-for-
sale
 
and
 
by
 
capital
 
return
 
transactions,
 
including
 
an
 
accelerated
 
share
 
repurchase
 
transaction
 
completed
 
during
 
2021.
 
The
Corporation and its
 
banking subsidiaries continue to
 
be well-capitalized at December
 
31, 2021. The Common
 
Equity Tier
 
1 Capital
ratio at December 31, 2021 was 17.42%, compared
 
to 16.26% at December 31, 2020.
For further discussion of operating results, financial
 
condition and business risks refer to the narrative
 
and tables included
 
herein.
The shares of the Corporation’s common stock are 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 with generally
 
accepted accounting
principles in
 
the United
 
States of America
 
(“GAAP”) and
 
general practices within
 
the financial services
 
industry. The
 
Corporation’s
significant
 
accounting policies
 
are described
 
in
 
detail in
 
Note 2
 
to the
 
Consolidated Financial
 
Statements and
 
should
 
be
 
read in
conjunction with this section.
 
Critical accounting policies
 
require management to
 
make estimates and
 
assumptions, which involve significant
 
judgment about the
effect of matters
 
that are inherently uncertain
 
and that involve a
 
high degree of subjectivity.
 
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. The
 
following MD&A
 
section is
 
a summary
 
of what
 
management considers
 
the Corporation’s
 
critical accounting
policies and estimates.
Fair Value Measurement of Financial Instruments
The Corporation
 
currently measures
 
at fair
 
value on
 
a recurring
 
basis its
 
trading debt
 
securities, debt
 
securities available-for-sale,
certain equity securities,
 
derivatives and mortgage
 
servicing rights. Occasionally,
 
the Corporation may
 
be required to
 
record at
 
fair
value other
 
assets on
 
a nonrecurring
 
basis, such
 
as loans
 
held-for-sale, loans
 
held-in-portfolio that
 
are collateral
 
dependent and
certain other
 
assets. These
 
nonrecurring fair
 
value adjustments
 
typically result
 
from
 
the application
 
of
 
lower of
 
cost
 
or fair
 
value
accounting or write-downs of individual assets.
 
The
 
Corporation categorizes
 
its
 
assets and
 
liabilities measured
 
at fair
 
value under
 
the three-level
 
hierarchy.
 
The level
 
within the
hierarchy is based on whether the inputs to
 
the valuation methodology used for fair value measurement
 
are observable.
The
 
Corporation
 
requires
 
the
 
use
 
of
 
observable
 
inputs
 
when
 
available,
 
in
 
order
 
to
 
minimize
 
the
 
use
 
of
 
unobservable
 
inputs
 
to
determine fair value. The inputs or methodologies used for valuing securities are
 
not necessarily an indication of the risk associated
with investing
 
in those
 
securities. The
 
amount of
 
judgment involved
 
in estimating
 
the fair
 
value of
 
a financial
 
instrument depends
upon the availability of
 
quoted market prices or observable market
 
parameters. In addition, it may
 
be affected by other
 
factors such
as the
 
type of instrument,
 
the liquidity of
 
the market for
 
the instrument, transparency
 
around the inputs
 
to the valuation,
 
as well
 
as
the contractual characteristics of the instrument.
Broker quotes
 
used for
 
fair value
 
measurements inherently
 
reflect any
 
lack of
 
liquidity in
 
the market
 
since they
 
represent an
 
exit
price from
 
the perspective
 
of the
 
market participants.
 
Financial assets
 
that were
 
fair valued
 
using broker
 
quotes amounted
 
to $6
million at December 31, 2021, of which $1
 
million were Level 3 assets and $5 million
 
were Level 2 assets. Level 3 assets consisted
 
10
principally of
 
tax-exempt GNMA
 
mortgage-backed securities.
 
Fair value
 
for these
 
securities was
 
based on
 
an internally-prepared
matrix derived
 
from local
 
broker quotes.
 
The main
 
input used
 
in the
 
matrix pricing
 
was non-binding
 
local broker
 
quotes obtained
from limited trade activity. Therefore, these securities were classified as Level
 
3.
 
Trading Debt Securities and Debt Securities Available-for-Sale
The
 
majority
 
of
 
the
 
values
 
for
 
trading
 
debt
 
securities
 
and
 
debt
 
securities
 
available-for-sale
 
are
 
obtained
 
from
 
third-party
 
pricing
services and
 
are validated
 
with alternate
 
pricing sources
 
when available.
 
Securities not
 
priced by
 
a secondary
 
pricing source
 
are
documented
 
and
 
validated
 
internally
 
according
 
to
 
their
 
significance
 
to
 
the
 
Corporation’s
 
financial
 
statements.
 
Management
 
has
established materiality thresholds according to the investment class to monitor and investigate material deviations in prices obtained
from the primary pricing service provider and the secondary pricing source used as support for the valuation results. During the year
ended December 31, 2021, the Corporation did
 
not adjust any prices obtained from pricing
 
service providers or broker dealers.
Inputs are evaluated to
 
ascertain that they consider current
 
market conditions, including the
 
relative liquidity of the
 
market. When a
market quote
 
for a
 
specific security
 
is not
 
available, the
 
pricing service
 
provider generally
 
uses observable
 
data to
 
derive an
 
exit
price
 
for
 
the
 
instrument,
 
such
 
as
 
benchmark
 
yield
 
curves
 
and
 
trade
 
data
 
for
 
similar
 
products.
 
To
 
the
 
extent
 
trading
 
data
 
is
 
not
available, the
 
pricing service provider
 
relies on
 
specific information including
 
dialogue with brokers,
 
buy side clients,
 
credit ratings,
spreads to
 
established benchmarks and
 
transactions on similar
 
securities, to
 
draw correlations based
 
on the
 
characteristics of
 
the
evaluated instrument. If
 
for any
 
reason the pricing
 
service provider cannot
 
observe data required
 
to feed
 
its model,
 
it discontinues
pricing the instrument. During the year
 
ended December 31, 2021, none of
 
the Corporation’s debt securities were subject
 
to pricing
discontinuance by the
 
pricing service providers.
 
The pricing
 
methodology and approach
 
of our
 
primary pricing service
 
providers is
concluded to be consistent with the fair value measurement
 
guidance.
 
Furthermore, management assesses the fair value of its
 
portfolio of investment securities at least on a
 
quarterly basis. Securities are
classified
 
in
 
the
 
fair
 
value
 
hierarchy
 
according
 
to
 
product
 
type,
 
characteristics
 
and
 
market
 
liquidity.
 
At
 
the
 
end
 
of
 
each
 
period,
management assesses the valuation hierarchy for each asset or liability measured. The fair
 
value measurement analysis performed
by
 
the
 
Corporation
 
includes
 
validation
 
procedures
 
and
 
review
 
of
 
market
 
changes,
 
pricing
 
methodology,
 
assumption
 
and
 
level
hierarchy changes, and evaluation of distressed transactions.
 
Refer to
 
Note 28
 
to the
 
Consolidated Financial Statements for
 
a description of
 
the Corporation’s
 
valuation methodologies used
 
for
the assets and liabilities measured at fair value.
Loans and Allowance for Credit Losses
 
Interest on loans is accrued and recorded as
 
interest income based upon the principal amount
 
outstanding.
Non-accrual loans are those loans on which the
 
accrual of interest is discontinued. When a loan is
 
placed on non-accrual status, all
previously
 
accrued
 
and
 
unpaid interest
 
is
 
charged against
 
interest
 
income
 
and
 
the
 
loan
 
is
 
accounted for
 
either
 
on
 
a cash-basis
method or
 
on the
 
cost-recovery method.
 
Loans designated
 
as non-accruing
 
are returned
 
to accrual
 
status when
 
the Corporation
expects repayment of the remaining contractual principal and interest.
 
The determination as to the ultimate collectability of the loan’s
balance may involve management’s judgment in the evaluation of
 
the borrower’s financial condition and
 
prospects for repayment.
Refer to
 
the MD&A
 
section titled
 
Credit Risk,
 
particularly the
 
Non-performing assets
 
sub-section, for
 
a detailed
 
description of
 
the
Corporation’s non-accruing and charge-off policies by major loan
 
categories.
 
One of
 
the most
 
critical and
 
complex accounting
 
estimates is
 
associated with
 
the determination
 
of the
 
allowance for
 
credit losses
(“ACL”).
 
The
 
Corporation
 
establishes
 
an
 
ACL
 
for
 
its
 
loan
 
portfolio
 
based
 
on
 
its
 
estimate
 
of
 
credit
 
losses
 
over
 
the
 
remaining
contractual term
 
of the
 
loans, adjusted
 
for expected
 
prepayments, in
 
accordance with
 
Accounting Standards
 
Codification (“ASC”)
Topic
 
326.
 
An
 
ACL
 
is
 
recognized
 
for
 
all
 
loans
 
including
 
originated
 
and
 
purchased
 
loans,
 
since
 
inception,
 
with
 
a
 
corresponding
charge
 
to
 
the
 
provision
 
for
 
credit
 
losses,
 
except
 
for
 
purchased
 
credit
 
deteriorated
 
(“PCD”)
 
loans
 
as
 
explained
 
below.
 
The
Corporation follows a methodology to establish the ACL which includes a
 
reasonable and supportable forecast period for estimating
credit
 
losses,
 
considering
 
quantitative
 
and
 
qualitative
 
factors
 
as
 
well
 
as
 
the
 
economic
 
outlook.
 
As
 
part
 
of
 
this
 
methodology,
management evaluates
 
various macroeconomic
 
scenarios provided
 
by third
 
parties. At
 
December 31,
 
2021, management
 
applied
probability weights to the outcome of the selected
 
scenarios.
The
 
Corporation
 
has
 
designated
 
as
 
collateral
 
dependent
 
loans
 
secured
 
by
 
collateral
 
when
 
foreclosure
 
is
 
probable
 
or
 
when
foreclosure is
 
not probable but
 
the practical
 
expedient is used.
 
The practical expedient
 
is used
 
when repayment is
 
expected to be
11
provided
 
substantially
 
by
 
the
 
sale
 
or
 
operation
 
of
 
the
 
collateral
 
and
 
the
 
borrower is
 
experiencing financial
 
difficulty.
 
The
 
ACL
 
of
collateral dependent loans
 
is measured based
 
on the fair
 
value of the
 
collateral less costs
 
to sell. 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.
 
In
addition, refer
 
to the
 
Credit Risk
 
section of
 
this MD&A
 
for detailed
 
information on
 
the Corporation’s
 
collateral value
 
estimation for
other real estate.
A restructuring constitutes a TDR when the Corporation
 
separately concludes that the restructuring constitutes a
 
concession and the
debtor
 
is
 
experiencing
 
financial
 
difficulties.
 
For
 
information
 
on
 
the
 
Corporation’s
 
TDR
 
policy,
 
refer
 
to
 
Note
 
2.
 
The
 
established
framework captures
 
the impact
 
of concessions
 
through discounting
 
modified contractual cash
 
flows, both
 
principal and
 
interest, at
the loan’s
 
original effective
 
rate. The
 
impact of
 
these concessions
 
is combined
 
with the
 
expected credit
 
losses generated
 
by the
quantitative loss models in order to arrive at the
 
ACL.
Loans Acquired with Deteriorated Credit Quality
 
PCD loans are defined as those with evidence of a more-than-insignificant
 
deterioration in credit quality since origination. PCD loans
are initially recorded
 
at its purchase
 
price plus an
 
estimated ACL. Upon
 
the acquisition of
 
a PCD loan,
 
the Corporation recognizes
the
 
estimate
 
of
 
the
 
expected
 
credit
 
losses
 
over
 
the
 
remaining
 
contractual
 
term
 
of
 
each
 
individual
 
loan
 
as
 
an
 
ACL
 
with
 
a
corresponding addition to the
 
loan purchase price. The
 
amount of the purchased
 
premium or discount which
 
is not related to
 
credit
risk
 
is
 
amortized
 
over
 
the
 
life
 
of
 
the
 
loan
 
through
 
net
 
interest
 
income
 
using
 
the
 
effective
 
interest
 
method
 
or
 
a
 
method
 
that
approximates the effective interest method. Changes in
 
expected credit losses are recorded as an
 
increase or decrease to the ACL
with
 
a
 
corresponding
 
charge
 
(reverse)
 
to
 
the
 
provision
 
for
 
credit
 
losses
 
in
 
the
 
Consolidated
 
Statements
 
of
 
Operations.
 
Upon
transition to the individual loan measurement,
 
these loans follow the same
 
nonaccrual policies as non-PCD loans and are
 
therefore
no longer
 
excluded from
 
non-performing status.
 
Modifications of
 
PCD loans
 
that meet
 
the definition
 
of
 
a TDR
 
subsequent to
 
the
adoption of ASC Topic 326 are accounted and reported as such following the same processes
 
as non-PCD loans.
Income Taxes
Income
 
taxes
 
are
 
accounted
 
for
 
using
 
the
 
asset
 
and
 
liability
 
method.
 
Under
 
this
 
method,
 
deferred
 
tax
 
assets
 
and
 
liabilities
 
are
recognized based
 
on the
 
future tax
 
consequences attributable
 
to temporary
 
differences
 
between the
 
financial statement
 
carrying
amounts
 
of
 
existing
 
assets
 
and
 
liabilities
 
and
 
their
 
respective
 
tax
 
basis,
 
and
 
attributable
 
to
 
operating
 
loss
 
and
 
tax
 
credit
carryforwards. Deferred tax assets
 
and liabilities are measured
 
using enacted tax rates
 
expected to apply in
 
the years in
 
which the
temporary differences are expected to be recovered or paid. The effect on deferred tax assets and liabilities of a change in tax
 
rates
is recognized in earnings in the period when
 
the changes are enacted.
 
The
 
calculation
 
of
 
periodic
 
income
 
taxes
 
is
 
complex
 
and
 
requires
 
the
 
use
 
of
 
estimates
 
and
 
judgments.
 
The
 
Corporation
 
has
recorded
 
two
 
accruals
 
for
 
income
 
taxes:
 
(i)
 
the
 
net
 
estimated
 
amount
 
currently
 
due
 
or
 
to
 
be
 
received
 
from
 
taxing
 
jurisdictions,
including
 
any
 
reserve
 
for
 
potential
 
examination
 
issues,
 
and
 
(ii)
 
a
 
deferred
 
income
 
tax
 
that
 
represents
 
the
 
estimated
 
impact
 
of
temporary differences between how the Corporation recognizes assets and
 
liabilities under accounting principles generally accepted
in
 
the
 
United
 
States
 
(GAAP),
 
and
 
how
 
such
 
assets
 
and
 
liabilities
 
are
 
recognized
 
under
 
the
 
tax
 
code.
 
Differences
 
in
 
the
 
actual
outcome of these future tax consequences could impact the Corporation’s financial position or its results of operations. In estimating
taxes, management assesses the relative
 
merits and risks of
 
the appropriate tax treatment
 
of transactions taking into consideration
statutory, judicial and regulatory guidance.
 
A deferred
 
tax asset
 
should be
 
reduced by
 
a valuation
 
allowance if based
 
on the
 
weight of
 
all available evidence,
 
it is
 
more likely
than
 
not
 
(a
 
likelihood
 
of
 
more
 
than
 
50%)
 
that
 
some
 
portion
 
or
 
the
 
entire
 
deferred
 
tax
 
asset
 
will
 
not
 
be
 
realized.
 
The
 
valuation
allowance
 
should
 
be
 
sufficient
 
to
 
reduce
 
the
 
deferred
 
tax
 
asset
 
to
 
the
 
amount
 
that
 
is
 
more
 
likely
 
than
 
not
 
to
 
be
 
realized.
 
The
determination of whether a deferred
 
tax asset is realizable is
 
based on weighting all
 
available evidence, including both positive and
negative evidence.
 
The realization
 
of deferred
 
tax assets,
 
including carryforwards
 
and deductible
 
temporary differences,
 
depends
upon the existence of sufficient taxable income of the same character during the carryback or carryforward period. The realization of
deferred tax assets requires
 
the consideration of all
 
sources of taxable income
 
available to realize the
 
deferred tax asset, including
12
the
 
future
 
reversal
 
of
 
existing
 
temporary
 
differences,
 
future
 
taxable
 
income
 
exclusive
 
of
 
reversing
 
temporary
 
differences
 
and
carryforwards, taxable income in carryback years and
 
tax-planning strategies.
Management evaluates the
 
realization of the
 
deferred tax asset
 
by taxing
 
jurisdiction. The U.S.
 
mainland operations are
 
evaluated
as
 
a whole
 
since a
 
consolidated income
 
tax return
 
is filed;
 
on the
 
other
 
hand, the
 
deferred tax
 
asset related
 
to the
 
Puerto
 
Rico
operations
 
is evaluated
 
on an
 
entity
 
by entity
 
basis, since
 
no consolidation
 
is
 
allowed in
 
the income
 
tax filing.
 
Accordingly,
 
this
evaluation
 
is
 
composed
 
of
 
three
 
major
 
components:
 
U.S.
 
mainland
 
operations,
 
Puerto
 
Rico
 
banking
 
operations
 
and
 
Holding
Company.
For the evaluation of the realization of the deferred
 
tax asset by taxing jurisdiction, refer to Note 35.
Under the Puerto Rico Internal Revenue Code, the
 
Corporation and its subsidiaries are treated as separate taxable
 
entities and are
not entitled to file
 
consolidated tax returns. The Code
 
provides a dividends-received deduction of 100%
 
on dividends received from
“controlled” subsidiaries subject to taxation in Puerto Rico
 
and 85% on dividends received from other
 
taxable domestic corporations.
 
Changes in
 
the Corporation’s
 
estimates can occur
 
due to changes
 
in tax
 
rates, new business
 
strategies, newly
 
enacted guidance,
and resolution
 
of issues
 
with taxing
 
authorities regarding
 
previously taken tax
 
positions. Such
 
changes could
 
affect the
 
amount of
accrued taxes. The Corporation has made
 
tax payments in accordance with
 
estimated tax payments rules. Any remaining
 
payment
will not have any significant impact on liquidity
 
and capital resources.
The valuation
 
of deferred
 
tax assets
 
requires judgment
 
in assessing
 
the likely
 
future tax
 
consequences of
 
events that
 
have been
recognized
 
in
 
the
 
financial
 
statements
 
or
 
tax
 
returns
 
and
 
future
 
profitability.
 
The
 
accounting
 
for
 
deferred
 
tax
 
consequences
represents management’s best
 
estimate of those
 
future events. Changes
 
in management’s current
 
estimates, due to
 
unanticipated
events, could have a material impact on the
 
Corporation’s financial condition and results of operations.
The Corporation establishes tax liabilities or
 
reduces tax assets for uncertain tax
 
positions when, despite its assessment that
 
its tax
return positions are appropriate and supportable under local tax law, the Corporation believes it may not succeed in realizing the tax
benefit of
 
certain positions if
 
challenged. In evaluating
 
a tax position,
 
the Corporation determines
 
whether it is
 
more-likely-than-not
that the position will be sustained upon examination, including resolution
 
of any related appeals or litigation processes, based on the
technical
 
merits
 
of
 
the
 
position.
 
The
 
Corporation’s
 
estimate
 
of
 
the
 
ultimate
 
tax
 
liability
 
contains
 
assumptions
 
based
 
on
 
past
experiences, and judgments
 
about potential actions
 
by taxing jurisdictions
 
as well as
 
judgments about the
 
likely outcome of
 
issues
that have been raised by taxing jurisdictions. The tax
 
position is measured as the largest amount of benefit that
 
is greater than 50%
likely of being
 
realized upon ultimate settlement.
 
The Corporation evaluates these
 
uncertain tax positions each
 
quarter and adjusts
the related tax liabilities or
 
assets in light of changing
 
facts and circumstances, such as the
 
progress of a tax audit
 
or the expiration
of a
 
statute of
 
limitations. The Corporation
 
believes the
 
estimates and assumptions
 
used to
 
support its
 
evaluation of
 
uncertain tax
positions are reasonable.
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
 
through earnings, would
 
affect the Corporation’s
 
effective tax
 
rate, was
approximately $5.5
 
million at
 
December 31,
 
2021 and
 
$10.2 million
 
at December
 
31, 2020.
 
Refer to
 
Note 35
 
to the
 
Consolidated
Financial Statements
 
for further
 
information on
 
this subject
 
matter.
 
The Corporation
 
anticipates a
 
reduction in
 
the total
 
amount of
unrecognized tax benefits within the next 12 months, which
 
could amount to approximately $1.4 million, including
 
interest.
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. Although
 
the
 
outcome of
 
tax audits
 
is uncertain,
 
the Corporation
 
believes that
 
adequate amounts
 
of tax,
interest and penalties
 
have been provided
 
for any adjustments
 
that are expected
 
to result from
 
open years. From
 
time to time,
 
the
Corporation is audited
 
by various federal, state
 
and local authorities regarding
 
income tax matters. Although
 
management believes
its
 
approach
 
in
 
determining the
 
appropriate
 
tax
 
treatment
 
is
 
supportable
 
and
 
in
 
accordance
 
with
 
the
 
accounting standards,
 
it
 
is
possible that the final tax
 
authority will take a tax position that
 
is different than the tax
 
position reflected in the Corporation’s income
tax provision and other tax reserves. As each audit is conducted, adjustments, if any,
 
are appropriately recorded in the consolidated
financial
 
statement
 
in
 
the
 
period
 
determined.
 
Such
 
differences
 
could
 
have
 
an
 
adverse
 
effect
 
on
 
the
 
Corporation’s
 
income
 
tax
provision or
 
benefit, or
 
other tax
 
reserves, in
 
the reporting
 
period in
 
which such
 
determination is
 
made and,
 
consequently,
 
on the
Corporation’s results of operations, financial position and
 
/ or cash flows for such period.
13
Goodwill and Other Intangible Assets
The
 
Corporation’s
 
goodwill
 
and
 
other
 
identifiable
 
intangible
 
assets
 
having
 
an
 
indefinite
 
useful
 
life
 
are
 
tested
 
for
 
impairment.
Intangibles
 
with
 
indefinite
 
lives
 
are
 
evaluated
 
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.
 
Other
 
identifiable
 
intangible
 
assets
 
with
 
a
 
finite
 
useful
 
life
 
are
 
evaluated
periodically for impairment when events or changes
 
in circumstances indicate that the carrying amount
 
may not be recoverable.
 
Goodwill impairment is recognized when the carrying amount of any
 
of the reporting units exceeds its fair value
 
up to the amount of
the
 
goodwill.
 
The
 
Corporation
 
estimates
 
the
 
fair
 
value
 
of
 
each
 
reporting
 
unit,
 
consistent
 
with
 
the
 
requirements
 
of
 
the
 
fair
 
value
measurements
 
accounting
 
standard,
 
generally
 
using
 
a
 
combination
 
of
 
methods,
 
including
 
market
 
price
 
multiples
 
of
 
comparable
companies and
 
transactions, as
 
well as
 
discounted cash
 
flow analyses.
 
Subsequent reversal
 
of goodwill
 
impairment losses
 
is not
permitted under applicable accounting standards. No impairment was recognized by the
 
Corporation from the annual test as of July
31,
 
2021.For
 
a
 
detailed
 
description
 
of
 
the
 
annual
 
goodwill
 
impairment
 
evaluation
 
performed
 
by
 
the
 
Corporation
 
during
 
the
 
third
quarter of 2021, refer to Note 15.
At December 31, 2021,
 
goodwill amounted to $720 million.
 
During the year ended December
 
31, 2021, the Corporation recognized
an
 
impairment loss
 
of
 
$5.4
 
million
 
associated with
 
a
 
trademark.
 
Note
 
15
 
to
 
the
 
Consolidated Financial
 
Statements
 
provides the
assignment of goodwill by reportable segment.
Pension and Postretirement Benefit Obligations
The Corporation provides pension and
 
restoration benefit plans for certain employees
 
of various subsidiaries. The Corporation also
provides certain
 
health care
 
benefits for
 
retired employees of
 
BPPR. The
 
non-contributory defined pension
 
and benefit
 
restoration
plans (“the Pension Plans”) are frozen with regards
 
to all future benefit accruals.
 
The estimated
 
benefit costs
 
and obligations
 
of the
 
Pension Plans and
 
Postretirement Health
 
Care Benefit Plan
 
(“OPEB Plan”)
 
are
impacted by
 
the use
 
of subjective
 
assumptions, which can
 
materially affect
 
recorded amounts, including
 
expected returns on
 
plan
assets,
 
discount
 
rates,
 
termination
 
rates,
 
retirement
 
rates
 
and
 
health
 
care
 
trend
 
rates.
 
Management
 
applies
 
judgment
 
in
 
the
determination of these factors, which normally undergo evaluation against current industry practice and the
 
actual experience of the
Corporation.
 
The
 
Corporation
 
uses
 
an
 
independent
 
actuarial
 
firm
 
for
 
assistance
 
in
 
the
 
determination
 
of
 
the
 
Pension
 
Plans
 
and
OPEB Plan
 
costs and
 
obligations. Detailed information
 
on the Plans
 
and related valuation
 
assumptions are included
 
in Note
 
30 to
the Consolidated Financial Statements.
 
The Corporation periodically reviews its assumption for the long-term expected return on Pension Plans
 
assets. The Pension Plans’
assets
 
fair
 
value
 
at
 
December
 
31,
 
2021
 
was
 
$860.5
 
million.
 
The
 
expected
 
return
 
on
 
plan
 
assets
 
is
 
determined
 
by
 
considering
various factors, including a total fund return estimate based on a weighted-average
 
of estimated returns for each asset class in each
plan.
 
Asset
 
class
 
returns
 
are
 
estimated
 
using
 
current
 
and
 
projected
 
economic
 
and
 
market
 
factors
 
such
 
as
 
real
 
rates
 
of
 
return,
inflation, credit spreads, equity risk premiums and
 
excess return expectations.
 
As part of the review,
 
the Corporation’s independent consulting actuaries performed an analysis of expected
 
returns based on each
plan’s expected asset
 
allocation for the year
 
2022 using the
 
Willis Towers
 
Watson US Expected
 
Return Estimator.
 
This analysis is
reviewed by the Corporation
 
and used as a
 
tool to develop expected
 
rates of return, together
 
with other data. This
 
forecast reflects
the actuarial firm’s view of
 
expected long-term rates of return for each significant asset
 
class or economic indicator as of January
 
1,
2022;
 
for
 
example, 8.5%
 
for
 
large
 
cap
 
stocks,
 
8.8% for
 
small cap
 
stocks,
 
8.9% for
 
international stocks,
 
3.5% for
 
long
 
corporate
bonds
 
and
 
2.4%
 
for
 
long
 
Treasury
 
bonds.
 
A
 
range
 
of
 
expected
 
investment
 
returns
 
is
 
developed,
 
and
 
this
 
range
 
relies
 
both
 
on
forecasts and on broad-market historical benchmarks
 
for expected returns, correlations, and volatilities
 
for each asset class.
 
As a consequence of recent reviews, the Corporation decreased its expected return on plan assets for year 2022
 
to 4.3% and 5.4%
for the Pension
 
Plans.
 
Expected rates
 
of return of
 
4.6% and 5.5%
 
had been used
 
for 2021 and
 
5.0% and 5.8%
 
had been used
 
for
2020 for the Pension Plans. Since the expected return assumption is on a long-term basis, it is not materially impacted by the yearly
fluctuations (either positive or negative) in the actual
 
return on assets. The expected return can be
 
materially impacted by a change
in the plan’s asset allocation.
14
Net Periodic
 
Benefit Cost
 
(“pension expense”)
 
for the
 
Pension Plans
 
amounted to
 
a net
 
benefit of
 
$3.8 million
 
in 2021.
 
The total
pension expense included a benefit of $38.7 million
 
for the expected return on assets.
 
Pension expense is sensitive
 
to changes in the
 
expected return on assets.
 
For example, decreasing the expected
 
rate of return
 
for
2021 from
 
4.3% to
 
4.05% would
 
increase the
 
projected 2022
 
pension expense
 
for the
 
Banco Popular
 
de Puerto
 
Rico Retirement
Plan, the Corporation’s largest plan, by approximately $2.0
 
million.
 
If
 
the
 
projected
 
benefit
 
obligation
 
exceeds
 
the
 
fair
 
value
 
of
 
plan
 
assets,
 
the
 
Corporation
 
shall
 
recognize
 
a
 
liability
 
equal
 
to
 
the
unfunded projected
 
benefit obligation
 
and vice
 
versa, if
 
the fair
 
value of
 
plan assets
 
exceeds the
 
projected benefit
 
obligation, the
Corporation recognizes an asset equal to the overfunded projected
 
benefit obligation. This asset or liability may result in a
 
taxable or
deductible temporary difference and its
 
tax effect shall be
 
recognized as an income tax
 
expense or benefit which shall
 
be allocated
to various
 
components of
 
the financial
 
statements, including
 
other comprehensive
 
income.
 
The determination
 
of the
 
fair value
 
of
pension
 
plan
 
obligations
 
involves
 
judgment,
 
and
 
any
 
changes
 
in
 
those
 
estimates
 
could
 
impact
 
the
 
Corporation’s
 
Consolidated
Statements
 
of Financial Condition.
 
Management believes that
 
the fair value
 
estimates of the
 
Pension Plans assets
 
are reasonable
given the valuation methodologies used to measure the investments at fair value as
 
described in Note 28. Also, the compositions of
the plan assets
 
are primarily in
 
equity and debt
 
securities, which have
 
readily determinable quoted market
 
prices. The Corporation
had recorded a pension asset of $17.8 million
 
and a pension liability of $8.8 million at December
 
31, 2021.
The Corporation uses
 
the spot rate
 
yield curve from
 
the Willis Towers
 
Watson RATE:
 
Link (10/90) Model
 
to discount the
 
expected
projected
 
cash
 
flows
 
of
 
the
 
plans.
 
The
 
equivalent
 
single
 
weighted
 
average
 
discount
 
rate
 
ranged
 
from
 
2.79%
 
to
 
2.83%
 
for
 
the
Pension Plans and 2.94%
 
for the OPEB Plan to determine the benefit obligations
 
at December 31, 2021.
A 50
 
basis point
 
decrease to
 
each of
 
the rates
 
in the
 
December 31,
 
2021 Willis
 
Towers
 
Watson RATE:
 
Link (10/90)
 
Model would
increase the
 
projected 2022
 
expense for
 
the Banco
 
Popular de
 
Puerto Rico
 
Retirement Plan
 
by approximately
 
$2.6 million.
 
The
change would not affect the minimum required contribution
 
to the Pension Plans.
 
The OPEB Plan was unfunded (no assets were held by the plan) at December 31, 2021. The Corporation had recorded a liability for
the underfunded postretirement benefit obligation of $160.0
 
million at December 31, 2021.
 
15
STATEMENT
 
OF OPERATIONS ANALYSIS
Net Interest Income
 
Net interest income is the interest earned from loans, debt securities and money market investments, including loan fees, minus
 
the
interest cost of deposits and borrowings. Various risk factors affect net interest income including the economic environment in which
we
 
operate,
 
market
 
driven
 
events,
 
the
 
mix
 
and
 
size
 
of
 
the
 
earning
 
assets
 
and
 
related
 
funding,
 
changes
 
in
 
volumes,
 
repricing
characteristics, loans
 
fees collected,
 
moratoriums granted
 
on loan
 
payments and
 
delay charges,
 
interest collected
 
on nonaccrual
loans, as well as strategic decisions made by the Corporation’s management. Net interest income for the
 
year ended December 31,
2021 was $2.0
 
billion or $101.0
 
million higher than
 
in 2020. Net
 
interest income, on
 
a taxable equivalent
 
basis, for the
 
year ended
December 31, 2021 was $2.2 billion compared
 
to $2.0 billion in 2020.
Due
 
to
 
the
 
Corporation’s
 
current
 
asset
 
sensitive
 
position,
 
an
 
increase
 
in
 
interest
 
rates
 
should
 
have
 
a
 
favorable
 
impact
 
on
 
the
Corporation’s results. See
 
the Risk Management:
 
Market/Interest Rate Risk
 
section of this
 
MD&A for additional
 
information related
to the Corporation’s interest rate risk.
The average key index rates for the years 2021
 
and 2020 were as follows:
 
2021
2020
Prime rate………………………………………………………………………………………………….
3.25%
3.53%
Fed funds rate……………………………………………………………………………………………..
0.25
0.35
3-month LIBOR……………………………………………………………………………………………
0.16
0.65
3-month Treasury Bill…………………………………………………………………………………….
0.03
0.35
10-year Treasury………………………………………………………………………………………….
1.44
0.89
FNMA 30-year…………………………………………………………………………………………….
1.84
1.01
Average
 
outstanding securities
 
balances are
 
based
 
upon
 
amortized cost
 
excluding any
 
unrealized gains
 
or
 
losses
 
on
 
securities
available-for-sale.
 
Non-accrual
 
loans
 
have
 
been
 
included
 
in
 
the
 
respective
 
average
 
loans
 
and
 
leases
 
categories.
 
Loan
 
fees
collected, and
 
costs incurred
 
in the
 
origination of
 
loans are
 
deferred and
 
amortized over
 
the term
 
of the
 
loan as
 
an adjustment
 
to
interest yield. Prepayment penalties, late fees collected and the amortization of premiums /
 
discounts on purchased loans, including
the discount accretion on purchased credit deteriorated loans (“PCD”),
 
are also included as part of the loan yield. Interest income for
the
 
period
 
ended
 
December
 
31, 2021
 
included
 
a
 
favorable
 
impact of
 
$131.6
 
million,
 
related
 
to
 
those
 
items,
 
compared
 
to
 
$98.5
million for the
 
same period in
 
2020. The year
 
over year increase
 
is related to
 
higher amortized fees
 
resulting mainly from
 
the SBA
forgiveness of PPP
 
loans by
 
$53.9 million,
 
partially offset
 
by $15.4
 
million lower
 
amortization of the
 
fair value
 
discount of
 
the auto
and credit card portfolios acquired in previous
 
years.
 
Table
 
3 presents
 
the
 
different
 
components
 
of
 
the
 
Corporation’s
 
net
 
interest
 
income,
 
on
 
a
 
taxable
 
equivalent
 
basis,
 
for
 
the
 
year
ended December 31,
 
2021, as compared
 
with the same
 
period in 2020,
 
segregated by major
 
categories of interest
 
earning assets
and interest-bearing liabilities. Net interest margin was 2.88% in 2021 or 41 basis points lower than the 3.29% reported in 2020. The
lower net interest margin for the
 
year is driven by the
 
increase of $11.5
 
billion in average deposits which were mostly
 
redeployed in
overnight Fed
 
Funds and
 
U.S. Treasury
 
and agency
 
debt securities.
 
These assets,
 
although accretive
 
to net
 
interest income,
 
are
low yielding assets and have the effect of compressing the net interest margin.
 
Also impacting the net interest
 
margin was a full year
of low short-term
 
rates as the
 
Federal Reserve decreased
 
by 150 basis
 
points the Federal
 
Funds Rate in
 
the first quarter
 
of 2020.
On
 
a
 
taxable
 
equivalent
 
basis,
 
net
 
interest
 
margin
 
was 3.19% in
 
2021,
 
compared
 
to
 
3.62%
 
in
 
2020.
 
The
 
main
 
drivers
 
for
 
the
increase in net interest income on a taxable equivalent
 
basis were:
Positive variances:
Higher
 
interest
 
income
 
from
 
money
 
market
 
and
 
investment
 
securities
 
due
 
to
 
a
 
higher
 
volume
 
by
 
$11.0
 
billion,
 
which
resulted from an increase in deposits in most categories, partially
 
offset by lower yield by 39 basis points driven by a lower
interest rate environment. These larger balances resulted
 
from an increase in deposits in most categories;
16
Higher interest
 
income from
 
commercial loans
 
driven by
 
higher interest
 
and fees
 
from PPP
 
loans by
 
$54.0 million
 
when
compared to 2020, partially offset the repricing of adjustable
 
rates loans and origination in a low
 
interest rate environment;
The auto and
 
lease financing portfolios increased
 
by $478 million
 
or 12% driven
 
by continued demand for
 
automobiles in
Puerto Rico
 
after the
 
COVID-19 related
 
lockdown and
 
higher household
 
liquidity resulting
 
from COVID-19
 
relief federal
assistances;
Mortgage loans
 
interest income
 
increased 6%
 
when compared
 
to the
 
year 2020,
 
driven by
the $807.6
 
million bulk
 
loan
repurchases from our
 
GSE loan servicing
 
portfolios that occurred at
 
the end of
 
September 2020, partially offset
 
by lower
yields also related to the lower rates
 
of the repurchased portfolio; and
Lower interest expense on
 
deposits due to the
 
decrease in interest cost
 
by 21 basis points
 
resulting from the decrease in
market rates in March 2020, increased liquidity in the financial industry as a result of retail and
 
commercial federal support
programs
 
and
 
the
 
subsequent
 
effect
 
on
 
these
 
liabilities.
 
The
 
decrease in
 
the
 
cost
 
of
 
interest-bearing deposits
 
was
 
51
basis points
 
when compared
 
to the
 
year 2020
 
in the
 
U.S. segment
 
and 13
 
basis points
 
in P.R.
 
The impact
 
from lower
rates was partially offset by higher average balance of interest-bearing deposits by $8.4 billon when compared to the year
2020.
Partially offset by:
Lower interest
 
income from
 
consumer loans
 
due to
 
lower average
 
volume both
 
on the
 
installment loan
 
and credit
 
card
portfolios, resulting also from a higher household
 
liquidity in the market, as discussed above.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17
Table 3 – Analysis of Levels & Yields
 
on a Taxable Equivalent Basis
 
from Continuing Operations (Non-GAAP)
Year ended December 31,
Variance
Average Volume
Average Yields / Costs
Interest
Attributable to
2021
2020
Variance
2021
2020
 
Variance
2021
2020
Variance
Rate
Volume
(In millions)
(In thousands)
$
16,000
$
8,598
$
7,402
0.13
%
0.23
%
(0.10)
%
Money market investments
$
21,147
$
19,722
$
1,425
$
(10,745)
$
12,170
22,931
19,353
3,578
2.22
2.42
(0.20)
Investment securities [1]
508,131
467,994
40,137
(43,723)
83,860
84
69
15
5.16
6.00
(0.84)
Trading securities
 
4,339
4,165
174
(646)
820
Total money market,
 
investment and trading
39,015
28,020
10,995
1.37
1.76
(0.39)
securities
533,617
491,881
41,736
(55,114)
96,850
Loans:
13,455
13,245
210
5.39
5.23
0.16
Commercial
 
723,765
692,372
31,393
20,297
11,096
849
913
(64)
5.41
5.74
(0.33)
Construction
45,821
52,438
(6,617)
(3,059)
(3,558)
1,289
1,112
177
6.00
6.05
(0.05)
Leasing
77,356
67,247
10,109
(522)
10,631
7,696
7,255
441
5.09
5.23
(0.14)
Mortgage
392,047
379,794
12,253
(10,414)
22,667
2,463
2,839
(376)
11.17
11.34
(0.17)
Consumer
275,078
322,009
(46,931)
(5,612)
(41,319)
3,322
3,021
301
8.47
8.97
(0.50)
Auto
280,722
271,162
9,560
(16,500)
26,060
29,074
28,385
689
6.19
6.29
(0.10)
Total loans
1,794,789
1,785,022
9,767
(15,810)
25,577
$
68,089
$
56,405
$
11,684
3.43
%
4.04
%
(0.61)
%
Total earning assets
$
2,328,406
$
2,276,903
$
51,503
$
(70,924)
$
122,427
Interest bearing deposits:
$
25,959
$
19,678
$
6,281
0.12
%
0.28
%
(0.16)
%
NOW and money market [2]
$
31,911
$
54,652
$
(22,741)
$
(37,171)
$
14,430
15,429
12,399
3,030
0.18
0.30
(0.12)
Savings
 
27,123
37,765
(10,642)
(19,220)
8,578
7,028
7,971
(943)
0.75
1.05
(0.30)
Time deposits
52,587
83,438
(30,851)
(20,755)
(10,096)
48,416
40,048
8,368
0.23
0.44
(0.21)
Total interest bearing
 
deposits
111,621
175,855
(64,234)
(77,146)
12,912
92
166
(74)
0.35
1.48
(1.13)
Short-term borrowings
318
2,457
(2,139)
(1,411)
(728)
Other medium and
 
1,185
1,178
7
4.49
4.81
(0.32)
long-term debt
53,107
56,626
(3,519)
(2,927)
(592)
Total interest bearing
49,693
41,392
8,301
0.33
0.57
(0.24)
liabilities
165,046
234,938
(69,892)
(81,484)
11,592
14,687
11,538
3,149
Demand deposits
3,709
3,475
234
Other sources of funds
$
68,089
$
56,405
$
11,684
0.24
%
0.42
%
(0.18)
%
Total source of funds
165,046
234,938
(69,892)
(81,484)
11,592
3.19
%
3.62
%
(0.43)
%
Net interest margin/ income
on a taxable equivalent basis
(Non-GAAP)
2,163,360
2,041,965
121,395
$
10,560
$
110,835
3.10
%
3.47
%
(0.37)
%
Net interest spread
Taxable equivalent
adjustment
205,770
185,353
20,418
2.88
%
3.29
%
(0.41)
%
Net interest margin/ income
non-taxable equivalent basis
(GAAP)
$
1,957,590
$
1,856,612
$
100,977
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 outstanding securities balances are based
 
upon amortized cost excluding any unrealized gains or losses
 
on securities available-for-sale.
[2] Includes interest bearing demand deposits corresponding
 
to certain government entities in Puerto Rico.
18
Provision for Credit Losses - Loans Held-in-Portfolio
 
and Unfunded Commitments
For the year ended December 31, 2021, the Corporation recorded a release of $191.3 million for its reserve for
 
credit losses related
to
 
loans
 
held-in-portfolio
 
and
 
unfunded
 
commitments,
 
compared
 
with
 
a
 
provision
 
expense
 
of
 
$294.9
 
million
 
for
 
the
 
year
 
ended
December 31, 2020. The
 
reserve release related to
 
the loans-held-in-portfolio for
 
the year 2021 was
 
$183.3 million, compared to
 
a
provision
 
expense of
 
$282.3 million
 
for
 
the year
 
2020.
 
The
 
decrease reflects
 
the
 
improvements in
 
credit
 
quality,
 
changes in
 
the
macroeconomic outlook, and changes in qualitative reserves. The provision for unfunded commitments for the year 2021 reflected a
benefit of $8.0 million, compared to a provision expense
 
of $12.6 million for the same period of 2020.
 
The reserve
 
release related to
 
loans held-in-portfolio
 
for the
 
BPPR segment
 
was $129.0
 
million for
 
the year
 
ended December
 
31,
2021, compared
 
to a
 
provision expense
 
of $205.9
 
million for
 
the year
 
ended December
 
31, 2020,
 
a favorable
 
variance of
 
$334.9
million. The
 
reserve release
 
related to
 
loans held-in-portfolio
 
for the
 
Popular U.S.
 
segment was
 
$54.3 million
 
for the
 
year 2021,
 
a
favorable variance of $130.8 million, compared to a provision
 
expense of $76.5 million for the year 2020.
At
 
December
 
31,
 
2021,
 
the
 
total
 
allowance
 
for
 
credit
 
losses
 
for
 
loans
 
held-in-portfolio amounted
 
to
 
$695.4
 
million,
 
compared
 
to
$896.3
 
million
 
as
 
of
 
December
 
31,
 
2020.
 
The
 
ratio
 
of
 
the
 
allowance
 
for
 
credit
 
losses
 
to
 
loans
 
held-in-portfolio
 
was
 
2.38%
 
at
December
 
31,
 
2021, compared
 
to
 
3.05%
 
at
 
December 31,
 
2020. Refer
 
to
 
Note
 
9
 
to
 
the
 
Consolidated Financial
 
Statements, for
additional information on the Corporation’s
 
methodology to estimate its allowance
 
for credit losses (“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.
As
 
discussed
 
in
 
Note
 
9
 
to
 
the
 
Consolidated Financial
 
Statements, within
 
the
 
process
 
to
 
estimate its
 
allowance for
 
credit
 
losses
(“ACL”),
 
the
 
Corporation
 
applies
 
probability
 
weights
 
to
 
the
 
outcomes
 
of
 
simulations
 
using
 
Moody’s
 
Analytics’
 
Baseline,
 
S3
(pessimistic) and S1 (optimistic) scenarios.
Provision for Credit Losses – Investment Securities
The
 
Corporation’s
 
provision
 
for
 
credit
 
losses
 
related
 
to
 
its
 
investment
 
securities
 
held-to-maturity
 
is
 
related
 
to
 
the
 
portfolio
 
of
obligations
 
from
 
the
 
Government
 
of
 
Puerto
 
Rico,
 
states
 
and
 
political
 
subdivisions.
 
For
 
the
 
year
 
ended
 
December
 
31,
 
2021,
 
the
Corporation recorded a reserve release of
 
$2.2 million, compared to a reserve
 
release of $2.4 million for the
 
year ended December
31, 2020. At December 31,
 
2021, the total allowance for credit
 
losses for this portfolio amounted to
 
$8.1 million, compared to $10.3
million as of December 31, 2020. Refer to Note
 
7 for additional information on the ACL for this
 
portfolio.
Non-Interest Income
For the
 
year ended December
 
31, 2021, non-interest
 
income increased by
 
$129.8 million, when
 
compared with the
 
previous year,
primarily driven by:
 
higher
 
service
 
charges
 
on
 
deposit
 
accounts
 
by
 
$14.9
 
million
 
principally
 
due
 
to
 
higher
 
fees
 
on
 
transactional
 
cash
management services
 
at BPPR
 
in part
 
due to
 
the business
 
disruptions and
 
the waiver
 
of fees
 
related to
 
the COVID-19
pandemic
 
during 2020;
 
higher other
 
service fees
 
by $53.4
 
million, principally
 
at the
 
BPPR segment,
 
due to
 
higher credit
 
and debit
 
card fees
 
by
$43.4
 
million
 
mainly
 
in
 
interchange
 
income
 
resulting
 
from
 
higher
 
transactional
 
volumes
 
in
 
part
 
due
 
to
 
the
 
business
disruptions
 
and
 
the
 
waiver
 
of
 
service
 
charges
 
and
 
late
 
fees
 
related
 
to
 
the
 
COVID-19
 
pandemic
 
during
 
2020;
 
higher
insurance
 
fees
 
by
 
$5.8
 
million,
 
from
 
which
 
$3.0
 
million
 
were
 
related
 
to
 
contingent
 
insurance
 
commissions
 
recognized
during the fourth quarter;
 
and higher trust fees by $3.1 million;
 
 
higher income
 
from mortgage
 
banking activities
 
by $39.7
 
million mainly
 
due to
 
the impact
 
of the
 
bulk loan
 
repurchases
from the
 
Corporation’s GNMA,
 
FNMA and
 
FHLMC loan servicing
 
portfolio during
 
2020 which
 
resulted in
 
an unfavorable
adjustment
 
of
 
$8.8
 
million
 
and
 
$10.5
 
million
 
on
 
the
 
valuation
 
of
 
mortgage
 
servicing
 
rights
 
(“MSRs”)
 
and
 
servicing
advances losses,
 
respectively,
 
and an
 
offsetting positive
 
adjustment in
 
servicing fees
 
of $3.4
 
million; lower
 
unfavorable
fair value
 
adjustments on
 
MSRs by
 
$23.0 million
 
due to
 
changes in
 
assumptions; and
 
higher realized
 
gains on
 
closed
derivatives positions by $11.9 million also contributed to the year over year income improvements; partially offset by lower
gains from securitization transactions by $8.9 million;
 
and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19
 
higher
 
other
 
operating
 
income
 
by
 
$26.7
 
million
 
principally
 
due
 
to
 
higher
 
net
 
earnings
 
from
 
the
 
combined
 
portfolio
 
of
investments under the
 
equity method by
 
$15.1 million, the
 
gain of $7.0
 
million recognized in
 
the third quarter
 
of 2021 by
BPPR as a result of the sale and partial leaseback of two corporate office
 
buildings, and higher daily auto rental revenues
by $3.9 million;
partially offset by:
lower net gain on
 
equity securities
 
by $6.1 million mainly
 
related to a $4.1
 
million gain on sale
 
of certain equity securities
at PB during the third quarter of 2020.
Operating Expenses
Table 4 provides a breakdown of operating expenses by major categories.
 
Table 4 - Operating Expenses
Years ended December
 
31,
 
(In thousands)
2021
2020
2019
Personnel costs:
Salaries
$
371,644
$
370,179
$
351,788
Commissions, incentives and other bonuses
113,095
78,582
97,764
Pension, postretirement and medical insurance
52,077
44,123
41,804
Other personnel costs, including payroll taxes
94,986
71,321
99,269
Total personnel
 
costs
631,802
564,205
590,625
Net occupancy expenses
102,226
119,345
96,339
Equipment expenses
92,097
88,932
84,215
Other taxes
56,783
54,454
51,653
Professional fees:
Collections, appraisals and other credit related fees
13,199
12,588
16,300
Programming, processing and other technology services
272,386
253,565
247,332
Legal fees, excluding collections
10,712
10,611
12,877
Other professional fees
114,568
117,358
107,902
Total professional
 
fees
410,865
394,122
384,411
Communications
25,234
23,496
23,450
Business promotion
72,981
57,608
75,372
FDIC deposit insurance
25,579
23,868
18,179
Other real estate owned (OREO) (income) expenses
(14,414)
(3,480)
4,298
Other operating expenses:
Credit and debit card processing, volume, interchange and
 
other expenses
45,088
45,108
38,059
Operational losses
38,391
26,331
21,414
All other
53,509
57,443
80,097
Total other operating
 
expenses
136,988
128,882
139,570
Amortization of intangibles
9,134
6,397
9,370
Total operating
 
expenses
$
1,549,275
$
1,457,829
$
1,477,482
Personnel costs to average assets
0.89
%
0.95
%
1.17
%
Operating expenses to average assets
2.18
2.45
2.93
Employees (full-time equivalent)
8,351
8,522
8,560
Average assets per employee (in millions)
$8.52
$6.99
$5.88
20
Operating expenses for the year ended December 31, 2021 increased by $91.4 million, when compared with the previous year. The
increase in operating expenses was driven primarily
 
by:
 
Higher personnel cost
 
by $67.6
 
million mainly
 
due to
 
higher incentives related
 
to the
 
profit-sharing plan by
 
$29.1 million
and
 
higher
 
commission
 
and
 
performance-based incentives
 
by
 
$34.5
 
million
 
due
 
to
 
improved
 
performance metrics
 
and
salary
 
increases,
 
higher
 
fringe
 
benefit
 
expense,
 
mainly
 
medical
 
insurance
 
by
 
$8.0
 
million,
 
partially
 
offset
 
by
 
higher
deferred salaries as a result of higher
 
loan originations during 2021;
 
Higher equipment expense by $3.2 million due
 
to higher amortization of software costs;
 
Higher
 
professional
 
fees
 
by
 
$16.7
 
million
 
primarily
 
due
 
to
 
higher
 
processing
 
service
 
fees
 
due
 
to
 
higher
 
volume
 
of
transactions;
 
Higher business promotions by $15.4 million due to
 
higher customer reward program expense in our credit card
 
business
and higher advertising expense;
 
Higher other
 
operating expenses by
 
$8.1 million mainly
 
due higher sundry
 
losses by $12.1
 
million, including $3.7
 
million
related to the termination of
 
a white label credit card
 
contract and higher legal reserves; and
 
higher impairment losses on
undeveloped properties by $3.2 million; partially offset by lower
 
pension plan cost by $10.0 million due to annual changes
in actuarial assumptions and higher gain on
 
sale of repossess auto units by $2.8 million; and
 
Higher amortization of intangibles by $2.7 million due
 
to a write-down on impairment of a trademark.
These variances were partially offset by:
 
Lower net
 
occupancy expense
 
by $17.1
 
million due
 
to
 
$19.0 million
 
in costs
 
related to
 
the termination
 
of
 
real property
leases associated
 
with PB’s
 
New York
 
branch realignment,
 
including the
 
impairment of
 
the right-of-use
 
assets recorded
during 2020; and
 
Lower OREO expense by $10.9 million mainly due
 
to higher gains on sale of mortgage properties.
Income Taxes
For the
 
year ended
 
December 31,
 
2021, the
 
Corporation recorded an
 
income tax
 
expense of
 
$309.0 million,
 
compared to
 
$111.9
million for the
 
same period of
 
2020.
 
The income tax
 
expense for the
 
year ended December
 
31, 2021 reflects
 
the impact of
 
higher
pre-tax income, resulting
 
primarily from a
 
lower provision for
 
credit losses partially
 
offset by higher
 
net exempt interest
 
income and
higher income from U.S. operations subject to a
 
lower statutory tax rate.
At December 31, 2021,
 
the Corporation had a
 
net deferred tax asset
 
amounting to $0.7 billion, net
 
of a valuation allowance
 
of $0.5
billion. The net deferred tax asset related to the U.S.
 
operations was $0.2 billion, net of a valuation
 
allowance of $0.4 billion.
Refer to
 
Note 35
 
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.
Fourth Quarter Results
The Corporation recognized net income of $206.1 million for the
 
quarter ended December 31, 2021, compared with a net income
 
of
$176.3 million for the same quarter of 2020.
Net interest income for the fourth quarter of
 
2021 amounted to $501.3 million, compared with $471.6 million for the
 
fourth quarter of
2020, an increase
 
of $29.7 million.
 
The increase in
 
net interest income
 
was mainly due
 
to increase in
 
average balance of
 
earning
assets, mainly due
 
to increase in deposits.
 
The net interest
 
margin declined by 26
 
basis points to
 
2.78% due to
 
declines in market
rates and
 
the earning
 
assets mix, which
 
were concentrated in
 
overnight Fed Funds,
 
U.S. Treasuries
 
and agency securities,
 
which
are all lower yielding assets.
21
The provision for credit losses was a
 
benefit of $33.1 million compared to a provision
 
expense of $21.2 million for the fourth quarter
of
 
2020.
 
The
 
benefit
 
recorded
 
in
 
the
 
fourth
 
quarter
 
of
 
2021
 
was
 
reflective
 
of
 
improvements
 
in
 
the
 
credit
 
metrics
 
and
 
the
macroeconomic outlook as well as releases in
 
qualitative reserves.
 
Non-interest income
 
amounted to
 
$164.7 million
 
for the
 
quarter ended
 
December 31,
 
2020, compared
 
with $144.8
 
million for
 
the
same quarter in 2020. The increase of $19.9 million was mainly due to other service fees, due to higher volume of transactions, and
higher income from mortgage banking activities.
Operating expenses
 
totaled $417.4
 
million for
 
the quarter
 
ended December
 
31, 2021,
 
compared with
 
$375.9 million
 
for the
 
same
quarter
 
in
 
the
 
previous
 
year.
 
The
 
increase
 
of
 
$41.5
 
million
 
is
 
mainly
 
related
 
to
 
higher
 
personnel
 
costs
 
due
 
to
 
higher
 
salaries,
incentives and commissions, higher
 
business promotion expenses, and
 
higher other operating expenses
 
due to the
 
reclassification
during
 
the
 
fourth
 
quarter
 
in
 
2020
 
of
 
$10.0
 
million
 
in
 
provision
 
for
 
unfunded
 
commitments
 
from
 
the
 
other
 
expenses
 
line
 
to
 
the
provision for credit losses caption, partially offset by lower net occupancy expenses related to the termination of real property leases
associated with PB’s New York branch rationalization, amounting to $19.0 million, including the impairment
 
of the right-of-use assets
and related costs recorded in the last quarter of
 
2020.
Income tax
 
expense amounted
 
to $75.6
 
million for
 
the quarter
 
ended December
 
31, 2021,
 
compared with
 
income tax
 
expense of
$43.0 million for the same quarter of 2020. The increase is mainly due to higher pre-tax income during the quarter ended December
31, 2021, compared to the quarter ended December 31,
 
2020.
 
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 37
 
to the Consolidated Financial Statements.
 
The Corporate
 
group reported a
 
net income of
 
$13.4 million for
 
the year ended
 
December 31, 2021,
 
compared to a
 
net income of
$8.5 million for the previous year. The increase in the net income was mainly attributed to lower net interest expense
 
by $1.4 million,
mainly
 
due
 
to
 
lower
 
interest
 
expense
 
after
 
the
 
redemption
 
on
 
November
 
1,
 
2021
 
of
 
the
 
trust
 
preferred securities
 
issued
 
by
 
the
Popular Capital Trust I;
 
higher non-interest income by $10.1 million mainly due
 
to higher income from the portfolio
 
of equity method
investments, partially offset by higher operating expenses by $6.4 million mainly due
 
to higher amortization of intangibles due to the
impairment
 
of a trademark.
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 $787.5
 
million for the
 
year ended December 31,
2021, compared with $499.0 million for
 
the year ended December 31, 2020.
 
The results for 2021 included
 
reserve for credit losses
release
 
of
 
$136.4 million.
 
The
 
results for
 
2020
 
were impacted
 
by the
 
COVID-19 pandemic
 
as
 
well as
 
the implementation
 
of
 
the
CECL accounting pronouncement
 
under which provision
 
for credit
 
losses of $211.0
 
million was recorded
 
throughout the year.
 
The
principal factors that contributed to the variance in the
 
financial results included the following:
 
 
Higher net interest income by $81.0 million due to higher income from investment
 
securities by $35.2 million mainly due to
higher average balances, higher income
 
from loans by $15.3 million,
 
mainly from interest and fees
 
from commercial PPP
loans
 
and
 
higher volume
 
of
 
mortgage loans
 
and
 
leases,
 
partially offset
 
by
 
lower income
 
from
 
consumer loans,
 
mainly
credit cards;
 
and lower
 
interest expense
 
from deposits
 
by $29.2
 
million.
 
The BPPR
 
segment’s net
 
interest margin
 
was
2.86% for
 
2021 compared
 
with 3.40%
 
for the
 
same period
 
in 2020.
 
The decrease
 
was mainly
 
due to
 
the earning
 
asset
composition;
22
 
A reversal of $136.4 million
 
of the reserve for credit
 
losses, due to improved credit metrics
 
and improved macroeconomic
outlook, compared to a
 
provision expense of $211.0
 
million in 2020, which
 
reflected the implementation of CECL and
 
the
impact of the COVID-19 pandemic in the macroeconomic
 
outlook;
 
 
Higher non-interest income by $119.4 million mainly due to:
 
Higher service charges on deposit accounts by
 
$14.8 million due to the impact in
 
2020 of lower transactions and the
temporary waiver of fees in response to the COVID-19
 
pandemic;
 
Higher other service fees by
 
$51.7 million due to
 
higher debit and credit card
 
transactions and the temporary waiver
of fees in response to the COVID-19 pandemic in 2020
 
and higher contingent insurance revenues in 2021;
 
Higher mortgage
 
banking
 
activities by
 
$39.9 million
 
due
 
to
 
lower unfavorable
 
fair value
 
adjustments
 
on
 
mortgage
servicing
 
rights,
 
and
 
the
 
negative
 
net
 
impact
 
that
 
resulted
 
from
 
the
 
from
 
the
 
bulk
 
repurchase
 
of
 
loans
 
from
 
the
Corporation’s GNMA, FNMA and FHLMC loan servicing
 
portfolio in 2020; and
 
Higher other operating income by $10.7 million due to higher income from the portfolio
 
of equity method investments,
the gain from the sale of two corporate office buildings in 2021
 
and higher income from daily auto rental
 
activities.
 
Higher operating expenses by $112.0 million, mainly due to:
 
 
Higher personnel costs by $43.6 million mainly due
 
to higher salaries, incentives and profit-sharing plan
 
expense;
 
Higher professional
 
fees by $20.3 million mainly due to processing service
 
fees due to higher volume of transactions;
 
Higher business
 
promotions by
 
$13.6 million
 
mainly due
 
to higher
 
customer reward
 
program expense
 
in our
 
credit
card business and higher advertising expense;
 
Higher other
 
operating expenses
 
by $34.3
 
million due
 
to higher
 
sundry losses,
 
including $3.7
 
million related
 
to the
termination of
 
a white
 
label credit
 
card contract,
 
impairment losses
 
on long-lived
 
assets of
 
$5.3 million
 
recorded in
2021, higher legal reserves and higher corporate
 
expense allocations;
Partially offset by:
 
 
 
Lower OREO expenses by $11.1 million mainly due to higher gains
 
on sales of residential properties.
 
Higher income tax expense by $147.3 million mainly
 
due to higher income before tax.
 
Popular U.S.
 
For the
 
year ended
 
December 31, 2021, the
 
reportable segment of
 
Popular U.S.
 
reported net income
 
of $134.1
 
million, compared
with a
 
net loss
 
of $0.7
 
million for
 
the year
 
ended December
 
31, 2020.
 
The principal
 
factors that
 
contributed to
 
the variance
 
in the
financial results included the following:
 
 
Higher net
 
interest
 
income
 
by
 
$18.6 million
 
mainly
 
due to
 
lower
 
interest
 
expense on
 
deposits by
 
$36.5 million,
 
due to
lower
 
rates
 
and
 
lower
 
average
 
balance
 
of
 
certificates
 
of
 
deposits,
 
partially
 
offset
 
by
 
lower
 
income
 
from
 
loans
 
by
 
$9.8
million mainly from
 
consumer and construction loans,
 
and lower income
 
from investment securities by
 
$10.2 million. The
Popular U.S. reportable
 
segment’s net
 
interest margin was
 
3.39% for 2021
 
compared with 3.21%
 
for the same
 
period in
2020;
 
A
 
release of
 
$56.9 million
 
of the
 
reserve for
 
credit losses,
 
due to
 
improvements credit
 
metrics
 
and the
 
macroeconomic
outlook, compared
 
to a
 
provision expense
 
of $81.5
 
million in
 
2020, mainly
 
due to
 
the implementation
 
of CECL
 
and the
effects of the pandemic;
 
 
Lower operating expenses by $26.7 million mainly
 
due to:
 
 
23
 
Lower occupancy expenses
 
by $22.7 million
 
mainly due to
 
the impact of
 
the NY branch
 
rationalization in 2020
that resulted in $19.0 million in lease termination
 
costs, including the impairment of the right of use
 
assets;
 
and
 
 
Lower professional fees by $5.1 million mainly
 
due intersegment allocated services;
Partially offset by:
 
 
Higher personnel costs by $6.9 million due to higher
 
salaries, incentives and profit-sharing plan expenses.
 
Income taxes unfavorable variance of $49.1 million
 
mainly due to higher income before tax.
 
STATEMENT
 
OF FINANCIAL CONDITION ANALYSIS
 
Assets
The Corporation’s total
 
assets were $75.1 billion
 
at December 31, 2021,
 
compared to $65.9 billion
 
at December 31, 2020.
 
Refer to
the Corporation’s
 
Consolidated Statements
 
of Financial
 
Condition at
 
December 31,
 
2021 and
 
2020 included
 
in this
 
2021 Annual
Report
 
on
 
Form
 
10-K.
 
Also,
 
refer
 
to
 
the
 
Statistical
 
Summary
 
2021-2020
 
in
 
this
 
MD&A
 
for
 
Condensed
 
Statements
 
of
 
Financial
Condition.
 
Money market investments and debt securities available-for-sale
Money
 
market
 
investments
 
and
 
debt
 
securities
 
available-for-sale
 
increased
 
by
 
$5.9
 
billion
 
and
 
$3.4
 
billion,
 
respectively,
 
at
December 31, 2021. This was largely driven by the additional funds
 
available to invest resulting from the increase in deposits across
various sectors, partially
 
offset by
 
paydowns of agency
 
mortgage-backed securities. Refer
 
to Note
 
6 to
 
the Consolidated Financial
Statements for additional information with respect
 
to the Corporation’s debt securities available-for-sale.
Loans
Refer to Tab
 
le 5 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
 
decreased by
 
$0.1 billion
 
to $29.2
 
billion at
 
December 31,
 
2021, mainly
 
due to
 
a decrease
 
in commercial
loans at
 
BPPR of
 
$0.6 billion
 
principally related
 
to
 
the repayment
 
of
 
PPP loans,
 
a decrease
 
in mortgage
 
loans
 
at BPPR
 
of $0.5
billion mainly
 
due to
 
paydowns and
 
a decrease
 
in construction
 
loans of
 
$0.2 billion,
 
partially offset
 
by an
 
increase in
 
commercial
loans at PB of $0.7
 
billion principally in the healthcare industry from which
 
$0.1 billion was related to the
 
acquisition by PEF of K2’s
lease financing business and growth in auto loans
 
and leases at BPPR by $0.5 billion.
The allowance for credit losses for
 
the loan portfolio decreased by $0.2
 
billion due to improvements in credit quality,
 
changes in the
macroeconomic
 
outlook,
 
and
 
changes
 
in
 
qualitative
 
reserves.
 
Refer
 
to
 
the
 
Credit
 
Quality
 
section
 
of
 
the
 
MD&A
 
for
 
additional
information on the Allowance for credit losses for
 
the loan portfolio.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24
Table 5 - Loans Ending Balances
At December 31,
 
(In thousands)
2021
2020
Loans held-in-portfolio:
 
Commercial
 
$
13,732,701
$
13,614,310
 
Construction
716,220
926,208
 
Leasing
1,381,319
1,197,661
 
Mortgage
7,427,196
7,890,680
 
Auto
3,412,187
3,132,228
 
Consumer
 
2,570,934
2,624,109
Total loans held-in
 
-portfolio
$
29,240,557
$
29,385,196
Loans held-for-sale:
 
Commercial
$
-
$
2,738
 
Mortgage
59,168
96,717
Total loans held-for-sale
$
59,168
$
99,455
Total loans
$
29,299,725
$
29,484,651
Other assets
Other assets
 
amounted to
 
$1.6 billion
 
at December
 
31, 2021,
 
a decrease
 
of $0.1
 
billion when
 
compared to
 
December 31,
 
2020.
Refer
 
to
 
Note
 
14
 
for
 
a
 
breakdown
 
of
 
the
 
principal
 
categories
 
that
 
comprise
 
the
 
caption
 
of
 
“Other
 
Assets”
 
in
 
the
 
Consolidated
Statements of Financial Condition at December
 
31, 2021 and 2020.
Liabilities
The Corporation’s
 
total liabilities were
 
$69.1 billion
 
at December
 
31, 2021,
 
an increase
 
of $9.2
 
billion compared to
 
$59.9 billion
 
at
December 31, 2020, mainly due to increases in deposits as discussed
 
below. Refer to the Corporation’s Consolidated Statements of
Financial Condition included in this Form 10-K.
 
Deposits and Borrowings
The composition of the Corporation’s financing to total assets
 
at December 31, 2021 and 2020 is included
 
in Table 6.
 
Table 6 - Financing to Total
 
Assets
December 31,
December 31,
 
% increase (decrease)
% of total assets
(In millions)
2021
2020
from 2020 to 2021
2021
2020
Non-interest bearing deposits
$
15,684
$
13,129
19.5
%
20.9
%
19.9
%
Interest-bearing core deposits
47,954
38,599
24.2
63.9
58.5
Other interest-bearing deposits
3,367
5,138
(34.5)
4.5
7.8
Repurchase agreements
92
121
(24.0)
0.1
0.2
Other short-term borrowings
75
-
N.M.
0.1
-
Notes payable
989
1,225
(19.3)
1.3
1.9
Other liabilities
968
1,685
(42.6)
1.3
2.6
Stockholders’ equity
5,969
6,029
(1.0)
7.9
9.1
Deposits
The
 
Corporation’s
 
deposits
 
totaled
 
$67.0
 
billion
 
at
 
December
 
31,
 
2021,
 
compared
 
to
 
$56.9
 
billion
 
at
 
December
 
31,
 
2020.The
deposits increase of
 
$10.1 billion was
 
mainly due
 
to higher Puerto
 
Rico public sector
 
deposits by $5.2
 
billion and higher
 
retail and
commercial demand
 
deposits by
 
$3.9 billion
 
at BPPR.
 
Public sector
 
deposit balances
 
amounted to
 
$20.3 billion
 
at December
 
31,
2021. A
 
significant portion
 
of Puerto
 
Rico public
 
sector deposits
 
are expected
 
to be
 
used by
 
Puerto Rico
 
pursuant to
 
the Plan
 
of
Adjustment for Puerto Rico confirmed by the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”)
 
Title III
 
 
 
 
 
 
 
 
 
 
 
 
 
25
Court,
 
which
 
is
 
expected
 
to
 
become
 
effective
 
on
 
or
 
about
 
March
 
15,
 
2022.
 
However,
 
the
 
receipt
 
by
 
the
 
P.R.
 
Government
 
of
additional COVID-19 and
 
hurricane recovery-related Federal assistance
 
and seasonal tax
 
collections could increase
 
public deposit
balances at BPPR
 
in the near term.
 
The rate at
 
which public deposit balances
 
will decline is
 
uncertain and difficult
 
to predict.
 
The
amount and
 
timing of
 
any such
 
reduction is
 
likely to
 
be impacted
 
by,
 
for
 
example, the
 
implementation of
 
the Plan
 
of Adjustment
under
 
Title
 
III
 
of
 
PROMESA
 
and
 
the
 
speed
 
at
 
which
 
the
 
COVID-19
 
federal
 
assistance
 
is
 
distributed.
 
Refer
 
to
 
Table
 
7
 
for
 
a
breakdown of the Corporation’s deposits at December 31,
 
2021 and 2020.
 
Table 7 - Deposits Ending Balances
(In thousands)
2021
2020
Demand deposits
$
25,889,732
$
22,532,729
Savings, NOW and money market deposits (non-brokered)
33,674,134
26,390,565
Savings, NOW and money market deposits (brokered)
729,073
635,198
Time deposits (non-brokered)
6,685,938
7,130,749
Time deposits (brokered CDs)
26,211
177,099
Total deposits
$
67,005,088
$
56,866,340
[1] Includes interest and non-interest bearing demand deposits.
Borrowings
The Corporation’s
 
borrowings amounted
 
to $1.2
 
billion at
 
December 31,
 
2021, compared
 
to $1.3
 
billion at
 
December 31,
 
2020.
Refer to
 
Note 17
 
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.
Other liabilities
The
 
Corporation’s
 
other
 
liabilities amounted
 
to
 
$1.0
 
billion at
 
December 31,
 
2021,
 
a
 
decrease
 
of
 
$0.7
 
billion
 
when
 
compared to
December 31, 2020, mainly due to the settlement of
 
purchases of debt securities.
 
Stockholders’ Equity
Stockholders’ equity totaled $6.0 billion at December 31, 2021, a decrease of $59.3 million when compared to
 
December 31, 2020,
principally due to higher accumulated unrealized losses on
 
debt securities available-for-sale by $557.0 million and the impact
 
of the
$350.0 million
 
accelerated share
 
repurchase transaction,
 
offset
 
by net
 
income for
 
the year
 
ended December
 
31, 2021
 
of $934.9
million, less declared dividends of $142.3 million
 
on common stock and $1.4 million in
 
dividends on preferred stock and a
 
reduction
in the
 
adjustment of
 
pension and
 
postretirement benefit
 
plans of
 
$36.1 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. Also, refer to Note 22 for a detail
 
of accumulated other comprehensive loss (income), an integral component of stockholders’
equity.
REGULATORY CAPITAL
The Corporation and its bank subsidiaries are subject to capital adequacy
 
standards established by the Federal Reserve Board. The
risk-based capital standards
 
applicable to Popular,
 
Inc. and the
 
Banks, BPPR
 
and PB, are
 
based on the
 
final capital framework
 
of
Basel III. The
 
capital rules of
 
Basel III include
 
a “Common Equity Tier
 
1” (“CET1”) capital
 
measure and specifies
 
that Tier
 
1 capital
consist of
 
CET1 and
 
“Additional Tier
 
1 Capital”
 
instruments meeting
 
specified requirements.
 
Note 21
 
to the
 
consolidated financial
statements presents further
 
information on the
 
Corporation’s regulatory capital
 
requirements, including the
 
regulatory capital ratios
of its depository institutions, BPPR and PB.
An institution
 
is considered “well-capitalized”
 
if it
 
maintains a total
 
capital ratio
 
of 10%,
 
a Tier
 
1 capital ratio
 
of 8%,
 
a CET1 capital
ratio
 
of
 
6.5%
 
and
 
a
 
leverage
 
ratio
 
of
 
5%.
 
The
 
Corporation’s
 
ratios
 
presented
 
in
 
Table
8
 
show
 
that
 
the
 
Corporation
 
was
 
“well
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26
capitalized” for
 
regulatory purposes,
 
the highest
 
classification, under
 
Basel III
 
for years
 
2021 and
 
2020. BPPR
 
and PB
 
were also
well-capitalized for all years presented.
The Basel III Capital Rules also require an additional 2.5% “capital conservation buffer”, composed entirely of CET1, on top of these
minimum risk-weighted asset ratios, which excludes the leverage ratio. The capital conservation buffer is
 
designed to absorb losses
during periods of
 
economic stress. Banking
 
institutions with a
 
ratio of CET1
 
to risk-weighted assets
 
above the minimum
 
but below
the capital conservation buffer will face constraints on dividends, equity repurchases, and compensation
 
based on the amount of the
shortfall. Popular,
 
BPPR and
 
PB are
 
required to
 
maintain this
 
additional capital
 
conservation buffer
 
of 2.5%
 
of CET1,
 
resulting in
minimum ratios
 
of (i) CET1
 
to risk-weighted
 
assets of
 
at least
 
7%, (ii) Tier
 
1 capital
 
to risk-weighted
 
assets of
 
at least
 
8.5%, and
(iii) Total capital to risk-weighted assets of at least 10.5%.
Table 8 presents the Corporation’s capital adequacy
 
information for the years 2021 and 2020.
 
Table 8 - Capital Adequacy
 
Data
At December 31,
 
(Dollars in thousands)
2021
2020
Risk-based capital:
Common Equity Tier 1 capital
$
5,476,031
$
4,992,096
Additional Tier 1 Capital
 
22,143
22,143
Tier 1 capital
$
5,498,174
$
5,014,239
Supplementary (Tier 2) capital
 
585,931
759,680
 
Total
 
capital
 
$
6,084,105
$
5,773,919
 
Total
 
risk-weighted assets
 
$
31,441,224
$
30,702,091
Adjusted average quarterly assets
$
74,238,367
$
64,305,022
Ratios:
Common Equity Tier 1 capital
17.42
%
16.26
%
Tier 1 capital
 
17.49
16.33
Total capital
 
19.35
18.81
Leverage ratio
 
7.41
7.80
Average equity to assets
8.12
9.10
Average tangible equity to assets
7.20
8.02
Average equity to loans
19.87
19.09
On April 1, 2020, the Corporation adopted the final rule issued by the federal banking regulatory agencies pursuant to the Economic
Growth and
 
Regulatory Paperwork
 
Reduction Act
 
of 1996
 
that simplified
 
several requirements
 
in the
 
agencies’ regulatory
 
capital
rules. These
 
rules simplified
 
the regulatory
 
capital requirement
 
for mortgage
 
servicing assets
 
(MSAs), deferred
 
tax assets
 
arising
from
 
temporary
 
differences
 
and
 
investments in
 
the
 
capital
 
of
 
unconsolidated financial
 
institutions
 
by
 
raising
 
the
 
CET1
 
deduction
threshold
 
from
 
10%
 
to
 
25%.
 
The
 
15%
 
CET1
 
deduction
 
threshold
 
which
 
applies
 
to
 
the
 
aggregate
 
amount
 
of
 
such
 
items
 
was
eliminated. The
 
rule also
 
requires, among
 
other changes,
 
increasing from
 
100% to
 
250% the
 
risk weight
 
to MSAs
 
and temporary
difference deferred
 
tax asset
 
not deducted
 
from capital.
 
For investments
 
in the
 
capital of
 
unconsolidated financial
 
institutions, the
risk weight would be based on the exposure category
 
of the investment.
 
The increase in the
 
CET1 capital ratio, Tier
 
1 capital ratio and,
 
total capital ratio as
 
of December 31, 2021, compared to
 
December
31, 2020,
 
was mostly
 
due to
 
the year
 
earnings,
 
partially offset
 
by the
 
accelerated share
 
repurchase agreement
 
to repurchase
 
an
aggregate of
 
$350 million
 
of Popular’s
 
common stock
 
and the
 
slight increase
 
in
 
risk weighted
 
assets.
 
The
 
decrease in
 
leverage
capital
 
ratio
 
was
 
mainly
 
due
 
to
 
the
 
increase
 
in
 
average
 
total
 
assets,
 
driven
 
by
 
investments
 
in
 
zero
 
or
 
low-risk
 
weighted
 
debt
securities and overnight Fed Funds that therefore did
 
not have a significant impact on the risk-weighted
 
assets.
Pursuant
 
to
 
the
 
adoption
 
of
 
CECL
 
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 benefits provided during
 
the initial two-year delay.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
27
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 December 31,
 
2021,
the Corporation has $353 million in PPP loans
 
and no loans were pledged as collateral for
 
PPPL Facilities.
Table 9 reconciles the Corporation’s total common stockholders’ equity to common equity Tier 1 capital.
Table 9 - Reconciliation Common
 
Equity Tier 1 Capital
At December 31,
 
(In thousands)
2021
2020
Common stockholders’ equity
$
6,116,756
$
6,224,942
 
AOCI related adjustments due to opt-out election
257,762
(261,245)
 
Goodwill, net of associated deferred tax liability
 
(DTL)
(591,703)
(591,931)
 
Intangible assets, net of associated DTLs
(16,219)
(22,466)
 
Deferred tax assets and other deductions
(290,565)
(357,204)
Common equity tier 1 capital
$
5,476,031
$
4,992,096
Common equity tier 1 capital to risk-weighted assets
17.42
%
16.26
%
Non-GAAP financial measures
The tangible
 
common equity
 
ratio 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
 
of
accounting
 
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
generally accepted accounting principles in the United
 
States of America (“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
 
at
December 31, 2021 and 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28
Table 10 - Reconciliation
 
of Tangible Common Equity
 
and Tangible Assets
At December 31,
(In thousands, except share or per share information)
2021
2020
Total stockholders’
 
equity
$
5,969,397
$
6,028,687
Less: Preferred stock
(22,143)
(22,143)
Less: Goodwill
(720,293)
(671,122)
Less: Other intangibles
(16,219)
(22,466)
Total tangible common
 
equity
$
5,210,742
$
5,312,956
Total assets
 
$
75,097,899
$
65,926,000
Less: Goodwill
(720,293)
(671,122)
Less: Other intangibles
(16,219)
(22,466)
Total tangible assets
$
74,361,387
$
65,232,412
Tangible common
 
equity to tangible assets
7.01
%
8.14
%
Common shares outstanding at end of period
79,851,169
84,244,235
Tangible book value
 
per common share
$
65.26
$
63.07
Year-to-date average
Total stockholders’
 
equity [1]
$
5,777,652
$
5,419,938
Less: Preferred Stock
(22,143)
(26,277)
Less: Goodwill
(679,959)
(671,121)
Less: Other intangibles
(20,861)
(25,154)
Total tangible common
 
equity
$
5,054,689
$
4,697,386
Average return on tangible common equity
18.47
%
10.75
%
[1] Average balances exclude unrealized gains or losses
 
on debt securities available-for-sale.
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 for
further information on the debt securities available-for-sale and held-to-maturity portfolios. Debt securities classified as available-for-
sale
 
amounted to
 
$25.0
 
billion
 
as of
 
December 31,
 
2021. Other
 
assets subject
 
to
 
market
 
risk
 
include loans
 
held-for-sale,
 
which
amounted to $59
 
million, mortgage servicing
 
rights (“MSRs”) which
 
amounted to $122
 
million and securities
 
classified as “trading”,
which amounted to $30 million, as of December 31,
 
2021.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
29
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
 
amount
 
(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.
 
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 December
 
31, 2021 and
 
December 31, 2020,
 
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)
December 31, 2021
December 31, 2020
(Dollars in thousands)
Amount Change
Percent Change
Amount Change
Percent Change
Change in interest rate
+400 basis points
$
257,223
13.21
%
$
167,474
9.19
%
+200 basis points
197,354
10.14
81,690
4.49
+100 basis points
166,920
8.57
39,361
2.16
-100 basis points
(78,408)
(4.03)
(53,952)
(2.96)
-200 basis points
(120,661)
(6.20)
(71,517)
(3.93)
As of
 
December 31,
 
2021, NII
 
simulations show
 
the Corporation
 
maintains an
 
asset sensitive
 
position and
 
is expected
 
to benefit
from
 
an
 
overall rising
 
rate
 
environment. The
 
increases in
 
sensitivity
 
for
 
the
 
period are
 
primarily driven
 
by
 
the
 
significant
 
deposit
increases
 
seen
 
in
 
2021,
 
which
 
have
 
resulted
 
in
 
a
 
higher
 
level
 
of
 
short-term
 
investments
 
and
 
cash
 
reserves
 
maintained
 
at
 
the
Federal Reserve. These assets reprice immediately under the NII simulations, thus improving the NII benefit in rising rate scenarios.
The declining rate scenarios show a
 
smaller and asymmetric impact in sensitivity
 
as rates continue to be close
 
to their lower bound
and Popular does not allow rates to turn negative
 
in its IRR simulations.
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30
Table 12 - Interest Rate Sensitivity
At December 31, 2021
By repricing dates
 
(Dollars in thousands)
0-30 days
Within 31 -
90 days
After three
months but
within six
months
After six
months but
within nine
months
After nine
months but
within one
year
After one
year but
within two
years
After two
years
Non-interest
bearing
funds
Total
Assets:
Money market investments
$
17,536,719
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
17,536,719
Investment and trading securities
 
301,103
436,980
664,755
678,066
712,179
3,936,869
17,980,634
548,736
25,259,322
Loans
4,907,214
2,492,007
1,412,901
1,359,602
1,307,655
4,272,336
13,548,010
-
29,299,725
Other assets
-
-
-
-
-
-
-
3,002,133
3,002,133
 
Total
 
22,745,036
2,928,987
2,077,656
2,037,668
2,019,834
8,209,205
31,528,644
3,550,869
75,097,899
Liabilities and stockholders' equity:
Savings, NOW and money market and
 
other interest bearing demand deposits
23,065,038
809,349
1,137,611
1,053,198
976,622
3,260,426
14,306,213
-
44,608,457
Certificates of deposit
1,940,456
496,482
642,437
647,957
357,661
971,300
1,655,856
-
6,712,149
Federal funds purchased and assets
 
31,550
30,295
20,102
9,656
-
-
-
-
91,603
sold under agreements to repurchase
75,000
-
-
-
-
-
-
-
75,000
Notes payable
 
1,000
-
100,000
-
2,148
341,103
544,312
-
988,563
Non-interest bearing deposits
-
-
-
-
-
-
-
15,684,482
15,684,482
Other non-interest bearing liabilities
-
-
-
-
-
-
-
968,248
968,248
Stockholders' equity
-
-
-
-
-
-
-
5,969,397
5,969,397
 
Total
 
$
25,113,044
$
1,336,126
$
1,900,150
$
1,710,811
$
1,336,431
$
4,572,829
$
16,506,381
$
22,622,127
$
75,097,899
Interest rate sensitive gap
(2,368,008)
1,592,861
177,506
326,857
683,403
3,636,376
15,022,263
(19,071,258)
-
Cumulative interest rate sensitive gap
(2,368,008)
(775,147)
(597,641)
(270,784)
412,619
4,048,995
19,071,258
-
-
Cumulative interest rate sensitive gap
 
to earning assets
(3.31)
%
(1.08)
%
(0.84)
%
(0.38)
%
0.58
%
5.66
%
26.66
%
-
-
Table 13, which presents the maturity distribution of earning assets, takes into consideration
 
prepayment assumptions.
 
Table 13 - Maturity Distribution
 
of Earning Assets
As of December 31, 2021
Maturities
After one year
 
After five years
through five years
through fifteen years
After fifteen years
One year
Fixed
Variable
 
Fixed
Variable
 
Fixed
Variable
 
(In thousands)
 
or less
interest rates
interest rates
interest rates
interest rates
interest rates
interest rates
Total
Money market securities
 
$
17,536,719
$
-
$
-
$
-
 
$
-
 
$
-
 
$
-
$
17,536,719
Investment and trading
securities
 
2,714,995
14,688,701
14,430
7,164,229
4,952
482,039
-
25,069,345
Loans:
 
Commercial
 
5,067,977
4,223,468
2,631,141
910,162
735,828
80,071
84,054
13,732,701
 
Construction
 
497,519
32,857
149,412
4,693
31,739
-
-
716,220
 
Leasing
 
408,552
959,267
-
13,500
-
-
-
1,381,319
 
Consumer
 
1,640,359
3,292,532
268,033
182,496
527,827
71,873
-
5,983,121
 
Mortgage
 
787,698
2,623,120
121,010
3,381,618
26,056
546,863
-
7,486,364
Subtotal loans
 
8,402,106
11,131,244
3,169,597
4,492,468
1,321,449
698,807
84,054
29,299,725
Total earning assets
$
28,653,820
$
25,819,945
$
3,184,027
$
11,656,696
$
1,326,401
$
1,180,847
$
84,054
$
71,905,789
Note: Equity securities available-for-sale and other investment
 
securities, including Federal Reserve Bank stock and
 
Federal Home Loan Bank stock
held by the Corporation, are not included in this table.
 
Loans held-for-sale have been allocated according to the
 
expected sale date.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31
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 December 31, 2021,
 
the Corporation held trading securities
 
with a fair value
 
of $30 million, representing approximately 0.04%
 
of
the Corporation’s total assets,
 
compared with $37 million and 0.1%, respectively,
 
at December 31, 2020.
 
As shown in Table
 
14, the
trading portfolio
 
consists principally of
 
mortgage-backed securities which
 
at December 31,
 
2021 were investment
 
grade securities.
As
 
of
 
December
 
31,
 
2021
 
and
 
December
 
31,
 
2020,
 
the
 
trading
 
portfolio
 
also
 
included
 
$0.1
 
million
 
in
 
Puerto
 
Rico
 
government
obligations.
 
Trading instruments are recognized at fair value, with changes resulting from fluctuations in market prices, interest rates
or exchange rates reported in
 
current period earnings. The Corporation recognized
 
a net trading account loss
 
of $389 thousand for
the year ended December 31, 2021 and a net
 
trading account gain of $1 million for the year
 
ended December 31, 2020.
Table 14 - Trading
 
Portfolio
December 31, 2021
December 31, 2020
(Dollars in thousands)
Amount
Weighted
Average Yield
[1]
Amount
Weighted
Average Yield
[1]
Mortgage-backed securities
 
$
22,559
5.12
%
$
24,338
5.19
%
U.S. Treasury securities
6,530
0.03
11,506
0.04
Collateralized mortgage obligations
257
5.61
346
5.65
Puerto Rico government obligations
85
0.47
103
0.48
Interest-only strips
 
280
12.00
381
12.00
Total
 
$
29,711
4.06
%
$
36,674
3.64
%
[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 December
 
31, 2021.
 
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.
Derivatives
Derivatives may
 
be
 
used by
 
the Corporation
 
as
 
part
 
of
 
its
 
overall interest
 
rate risk
 
management strategy
 
to
 
minimize significant
unexpected
 
fluctuations
 
in
 
earnings
 
and
 
cash
 
flows
 
that
 
are
 
caused
 
by
 
interest
 
rate
 
volatility.
 
Derivative
 
instruments
 
that
 
the
Corporation may use
 
include, among others,
 
interest rate caps,
 
indexed options, and
 
forward contracts. The
 
Corporation does not
use highly leveraged derivative instruments in its interest rate risk management strategy. Credit risk embedded in these transactions
 
32
is
 
reduced
 
by
 
requiring
 
appropriate
 
collateral
 
from
 
counterparties
 
and
 
entering
 
into
 
netting
 
agreements
 
whenever
 
possible.
 
All
outstanding derivatives are
 
recognized in the
 
Corporation’s Consolidated Statements
 
of Condition at
 
their fair
 
value. Refer
 
to Note
26 for further information on the Corporation’s involvement
 
in derivative instruments and hedging activities.
 
Cash Flow Hedges
The
 
Corporation
 
manages
 
the
 
variability
 
of
 
cash
 
payments
 
due
 
to
 
interest
 
rate
 
fluctuations
 
by
 
the
 
effective
 
use
 
of
 
derivatives
designated
 
as
 
cash
 
flow
 
hedges
 
and
 
that
 
are
 
linked
 
to
 
specified
 
hedged
 
assets
 
and
 
liabilities.
 
The
 
cash
 
flow
 
hedges
 
relate
 
to
forward
 
contracts
 
or
 
TBA
 
mortgage-backed securities
 
that
 
are
 
sold
 
and
 
bought
 
for
 
future
 
settlement to
 
hedge
 
mortgage-backed
securities
 
and
 
loans
 
prior
 
to
 
securitization.
 
The
 
seller
 
agrees
 
to
 
deliver
 
on
 
a
 
specified
 
future
 
date
 
a
 
specified
 
instrument
 
at
 
a
specified price or
 
yield. These securities
 
are hedging a
 
forecasted transaction and
 
are designated for
 
cash flow hedge
 
accounting.
The notional amount
 
of derivatives designated as
 
cash flow hedges at
 
December 31, 2021 amounted
 
to $ 88
 
million (2020 - $
 
189
million). Refer to Note 26 for additional quantitative
 
information on these derivative contracts.
Fair Value Hedges
The
 
Corporation did
 
not
 
have
 
any
 
derivatives designated
 
as
 
fair value
 
hedges
 
during the
 
years
 
ended December
 
31,
 
2021
 
and
2020.
Trading and Non-Hedging Derivative Activities
The Corporation enters into derivative positions based on market expectations or to benefit from price differentials between financial
instruments
 
and
 
markets
 
mostly
 
to
 
economically
 
hedge
 
a
 
related
 
asset
 
or
 
liability.
 
The
 
Corporation
 
also
 
enters
 
into
 
various
derivatives to provide these
 
types of derivative products to
 
customers. These free-standing derivatives are carried
 
at fair value with
changes in fair value recorded as part of the results of
 
operations for the period.
 
Following
 
is
 
a
 
description
 
of
 
the
 
most
 
significant
 
of
 
the
 
Corporation’s
 
derivative
 
activities
 
that
 
are
 
not
 
designated
 
for
 
hedge
accounting.
 
The Corporation
 
has over-the-counter
 
option contracts
 
which are
 
utilized in
 
order to
 
limit the
 
Corporation’s exposure
 
on customer
deposits whose returns are tied
 
to the S&P 500
 
or to certain other
 
equity securities or commodity indexes. In
 
these certificates, the
customer’s
 
principal
 
is
 
guaranteed
 
by
 
the
 
Corporation
 
and
 
insured
 
by
 
the
 
FDIC
 
to
 
the
 
maximum
 
extent
 
permitted
 
by
 
law.
 
The
instruments pay a return based
 
on the increase of these
 
indexes, as applicable, during the term
 
of the instrument. Accordingly,
 
this
product
 
gives
 
customers
 
the
 
opportunity
 
to
 
invest
 
in
 
a
 
product
 
that
 
protects
 
the
 
principal
 
invested
 
but
 
allows
 
the
 
customer
 
the
potential to earn a return
 
based on the performance of the indexes. The
 
risk of issuing certificates of deposit
 
with returns tied to the
applicable indexes is economically hedged by the Corporation. Indexed
 
options are purchased from financial institutions with strong
credit standings, whose
 
return is designed
 
to match the
 
return payable on
 
the certificates of
 
deposit issued. By
 
hedging the risk
 
in
this manner,
 
the effective cost of
 
these deposits is fixed.
 
The contracts have a maturity
 
and an index equal to
 
the terms of the
 
pool
of retail deposits that they are economically hedging.
 
The purchased
 
indexed options
 
are used
 
to economically
 
hedge the
 
bifurcated embedded
 
option. These
 
option contracts
 
do not
qualify
 
for
 
hedge
 
accounting,
 
and
 
therefore,
 
cannot
 
be
 
designated
 
as
 
accounting
 
hedges.
 
At
 
December
 
31,
 
2021,
 
the
 
notional
amount of
 
the indexed
 
options on deposits
 
approximated $
 
79 million
 
(2020 -
 
$ 69
 
million) with
 
a fair
 
value of
 
$ 26
 
million (asset)
(2020 -
 
$ 21 million)
 
while the embedded
 
options had a
 
notional value of
 
$72 million (2020
 
- $ 63
 
million) with
 
a fair value
 
of $
 
23
million (liability) (2020 - $ 18 million).
 
Refer to Note 26 for a description of other non-hedging
 
derivative activities utilized by the Corporation
 
during 2021 and 2020.
Foreign Exchange
The Corporation holds
 
an interest in
 
BHD León
 
in the
 
Dominican Republic, which
 
is an investment
 
accounted for under
 
the equity
method. The
 
Corporation’s carrying value
 
of the
 
equity interest in
 
BHD León
 
approximated $
 
180.3 million at
 
December 31, 2021.
 
33
This business is conducted in
 
the country’s foreign currency.
 
The resulting foreign currency translation
 
adjustment, from operations
for
 
which
 
the
 
functional
 
currency
 
is
 
other
 
than
 
the
 
U.S.
 
dollar,
 
is
 
reported
 
in
 
accumulated
 
other
 
comprehensive
 
loss
 
in
 
the
consolidated
 
statements
 
of
 
condition,
 
except
 
for
 
highly-inflationary
 
environments
 
in
 
which
 
the
 
effects
 
would
 
be
 
included
 
in
 
the
consolidated statements
 
of
 
operations. At
 
December 31,
 
2021, the
 
Corporation had
 
approximately $
 
67 million in
 
an unfavorable
foreign currency translation
 
adjustment as part
 
of accumulated other
 
comprehensive income (loss),
 
compared with an
 
unfavorable
adjustment of $ 71 million at December 31,
 
2020 and $ 57 million at December 31,
 
2019.
 
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
commitments
 
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 to
exogenous
 
events
 
such
 
as
 
the
 
current
 
COVID-19
 
pandemic,
 
its
 
credit
 
rating
 
is
 
downgraded,
 
or
 
some
 
other
 
event
 
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 and regulatory
 
changes, could also affect its ability to obtain funding.
 
Liquidity is managed by the Corporation at the level of
 
the holding companies that own the banking and non-banking subsidiaries. It
is also managed at the
 
level of the banking and
 
non-banking subsidiaries. As further explained below,
 
a principal source of liquidity
for the
 
bank holding
 
companies (the
 
“BHCs”) are
 
dividends received
 
from banking
 
and non-banking subsidiaries.
 
The Corporation
has adopted
 
policies and limits
 
to monitor
 
more effectively
 
the Corporation’s
 
liquidity position
 
and that of
 
the 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
 
89% of
 
the Corporation’s
 
total assets
 
at December
 
31, 2021
 
and 86%
 
at December
 
31, 2020.
 
The ratio of total ending loans to deposits was
 
44% at December 31, 2021, compared to 52% at December 31, 2020.
 
In addition to
traditional deposits, the Corporation maintains borrowing
 
arrangements,
 
which amounted to approximately $1.2 billion in
 
outstanding
balances at December 31, 2021 (December 31, 2020 - $1.3 billion). A detailed
 
description of the Corporation’s borrowings, including
their terms,
 
is included
 
in Note
 
17 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.
On September
 
9, 2021,
 
the Corporation
 
completed an
 
accelerated share
 
repurchase program for
 
the repurchase
 
of an
 
aggregate
$350 million of Popular’s common stock, refer
 
to Note 31 for additional information.
 
On
 
November
 
1,
 
2021,
 
the
 
Corporation
 
redeemed
 
all
 
outstanding 6.70%
 
Cumulative Monthly
 
Income
 
Trust
 
Preferred
 
Securities
issued by the Popular Capital Trust I, refer to Note 17
 
for additional information.
 
On January
 
12, 2022,
 
Popular,
 
Inc. announced
 
the plan
 
to increase
 
its quarterly
 
common stock
 
dividend from
 
$0.45 per
 
share to
$0.55
 
per
 
share,
 
commencing
 
with
 
the
 
dividend
 
payable
 
in
 
the
 
second
 
quarter
 
of
 
2022,
 
subject
 
to
 
the
 
approval
 
by
 
its
 
Board
 
of
Directors, and repurchase up to $500 million
 
of its common stock during 2022.
The
 
following
 
sections
 
provide
 
further
 
information
 
on
 
the
 
Corporation’s
 
major
 
funding
 
activities
 
and
 
needs,
 
as
 
well
 
as
 
the
 
risks
involved in these activities.
 
 
 
 
 
 
 
 
 
 
34
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.
 
Refer
 
to
 
Note
 
17
 
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, credit
 
card licensing agreements
and support to several mutual funds administered by BPPR.
 
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, credit
 
ratings (by
 
nationally
recognized
 
credit
 
rating
 
agencies),
 
and
 
importantly,
 
FDIC
 
deposit
 
insurance.
 
Although
 
a
 
downgrade
 
in
 
the
 
credit
 
ratings
 
of
 
the
Corporation’s banking
 
subsidiaries may
 
impact their
 
ability to
 
raise retail
 
and commercial
 
deposits or
 
the rate
 
that it
 
is required
 
to
pay on such deposits, management does not believe that the impact should be material. 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
 
a downgrade in
 
the
credit ratings.
 
Deposits are a
 
key source of
 
funding as they
 
tend to be
 
less volatile than institutional
 
borrowings and their cost
 
is less sensitive
 
to
changes in
 
market rates.
 
Refer to
 
Table
 
7 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 all non-interest bearing deposits, savings
 
deposits
and certificates
 
of deposit
 
under $250,000,
 
excluding brokered
 
deposits
 
with denominations
 
under $250,000.
 
Core deposits
 
have
historically provided the Corporation with a sizable source of relatively stable and low-cost funds. Core deposits totaled $63.6 billion,
or
 
95% of total deposits, at December 31, 2021, compared with $51.7 billion, or 91% of
 
total deposits, at December 31, 2020. Core
deposits financed 88% of the Corporation’s earning assets
 
at December 31, 2021, compared with 82%
 
at December 31, 2020.
 
The distribution by maturity of
 
certificates of deposits with denominations of
 
$250,000 and over at December 31,
 
2021 is presented
in the table that follows:
Table 15 - Distribution by
 
Maturity of Certificate of Deposits of $250,000 and Over
(In thousands)
3 months or less
$
1,772,700
Over 3 to 12 months
500,200
Over 1 year to 3 years
219,395
Over 3 years
133,795
Total
$
2,626,090
Average deposits, including brokered deposits, for the year ended December
 
31, 2021 represented
 
93%
 
of average earning assets,
compared with 91% for the year ended December
 
31, 2020. Table 16 summarizes average deposits for the past three years.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
35
Table 16 - Average
 
Total Deposits
For the years ended December 31,
(In thousands)
2021
2020
Non-interest bearing demand deposits
$
14,687,093
$
11,537,700
Savings accounts
 
15,753,630
12,620,755
NOW, money market and other interest
 
bearing demand accounts
25,648,707
19,466,357
Certificates of deposit
7,013,486
7,960,967
Total interest bearing
 
deposits
48,415,823
40,048,079
Total average deposits
$
63,102,916
$
51,585,779
The Corporation
 
had $0.8
 
billion in
 
brokered deposits
 
at December
 
31, 2021,
 
which financed
 
approximately 1%
 
of its
 
total assets
(December 31, 2020 -
 
$0.8 billion and 1%,
 
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
 
December 31, 2021,
 
total public
sector deposits were $20.3 billion,
 
compared to $15.1 billion at December 31, 2020.
 
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.
At December 31, 2021,
 
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. 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.
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
 
and
capitalizing its banking subsidiaries.
 
The BHCs have in
 
the past borrowed in the
 
money markets and in the
 
corporate debt market primarily to
 
finance their non-banking
subsidiaries; however, the
 
cash needs of the
 
Corporation’s non-banking subsidiaries other than
 
to repay indebtedness and
 
interest
are now minimal. 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.
 
 
 
 
 
 
 
 
 
 
36
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.
The outstanding balance of notes payable at the BHCs
 
amounted to $496 million at December 31, 2021 and $682 at
 
December 31,
2020.
The contractual maturities of the BHCs notes payable
 
at December 31, 2021 are presented in
 
Table 17.
Table 17
 
- Distribution of BHC's Notes Payable by Contractual
 
Maturity
Year
(In thousands)
2023
$
297,842
Later years
198,292
Total
$
496,134
Annual debt service at
 
the BHCs is approximately
 
$32 million, and the
 
Corporation’s latest quarterly dividend
 
was $0.45 per share.
On February
 
23, 2022,
 
the Board
 
of Directors
 
of the
 
Corporation declared
 
a $0.55
 
cash dividend
 
per common
 
share, payable
 
on
April 1, 2022.
 
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 BHCs obligations during the foreseeable future. As of
 
December 31, 2021, the
BHCs had
 
cash and
 
money markets
 
investments totaling
 
$292 million,
 
borrowing potential
 
of $157
 
million from
 
its secured
 
facility
with BPPR.
 
In addition
 
to these
 
liquidity sources,
 
the stake
 
in EVERTEC
 
had a
 
market value
 
of $583
 
million as
 
of December
 
31,
2021 and it represents an additional source of
 
contingent liquidity.
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.
 
Popular,
 
Inc.
made capital contributions
 
to its wholly
 
owned subsidiary Popular Securities
 
amounting to $9
 
million during the
 
year 2021 and
 
$10
million on February 24, 2022.
Dividends
During the year ended December 31, 2021, the Corporation
 
declared cash dividend of $1.75 per common share outstanding
 
$ 142.3
million
 
in the
 
aggregate.
 
The dividends
 
for the
 
Corporation’s Series
 
A
 
preferred stock
 
amounted to
 
$1.4 million.
 
During the
 
year
ended December
 
31, 2021,
 
the BHC’s
 
received dividends amounting
 
to $761
 
million from
 
BPPR, $4
 
million from
 
PIBI which
 
main
source of income is
 
derived from its investment in
 
BHD, $31 million in
 
dividends from its non-banking subsidiaries
 
and $2 million in
dividends from EVERTEC. Dividends from BPPR constitute
 
Popular, Inc.’s primary source of liquidity.
 
Other Funding Sources and Capital
The
 
debt
 
securities
 
portfolio
 
provides
 
an
 
additional
 
source
 
of
 
liquidity,
 
which
 
may
 
be
 
realized
 
through
 
either
 
securities
 
sales
 
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
 
$3.0
 
billion at
 
December 31,
 
2021
 
and
 
$3.4 billion
 
at
 
December 31,
 
2020. A
 
substantial
portion of these debt securities could be used to
 
raise financing in the U.S. money markets or
 
from secured lending sources.
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.
 
 
37
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 24
 
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 33
 
for information
on
 
operating
 
leases
 
and
 
to
 
Note
 
23
 
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.
 
As discussed above,
liquidity
 
is
 
managed
 
by
 
the
 
Corporation in
 
order to
 
meet
 
its
 
short-
 
and
 
long-term cash
 
obligations. Note
 
17
 
to
 
the
 
Consolidated
Financial Statements has information on
 
the Corporation’s borrowings by maturity,
 
which amounted to $1.2 billion
 
at December 31,
2021.
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
December
 
31,
 
2021
 
and
 
December 31,
 
2020,
 
and
 
the
 
results
 
of
 
their
 
operations
 
for
 
the
 
period
 
ended December
 
31,
 
2021
 
and
December 31, 2020. Investments in and equity in the earnings from the other subsidiaries and affiliates
 
that are not members of the
obligor group have been excluded.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
38
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 18 - Summarized Statement
 
of Condition
(In thousands)
December 31, 2021
December 31, 2020
Assets
Cash and money market investments
$
291,540
$
190,830
Investment securities
25,691
27,630
Accounts receivables from non-obligor subsidiaries
17,634
16,338
Other loans (net of allowance for credit losses of $96 (2020
 
- $311))
29,349
31,162
Investment in equity method investees
114,955
88,272
Other assets
42,251
46,547
Total assets
$
521,420
$
400,779
Liabilities and Stockholders' deficit
Accounts payable to non-obligor subsidiaries
$
6,481
$
3,946
Accounts payable to affiliates and related parties
1,254
977
Notes payable
496,134
681,503
Other liabilities
97,172
79,208
Stockholders' deficit
(79,621)
(364,855)
Total liabilities and
 
stockholders' deficit
$
521,420
$
400,779
Table 19 - Summarized Statement
 
of Operations
For the years ended
(In thousands)
December 31, 2021
December 31, 2020
Income:
Dividends from non-obligor subsidiaries
$
792,000
$
586,000
Interest income from non-obligor subsidiaries and affiliates
848
2,383
Earnings from investments in equity method investees
29,387
17,912
Other operating income
3,136
4,340
Total income
$
825,371
$
610,635
Expenses:
Services provided by non-obligor subsidiaries and affiliates
 
(net of
reimbursement by subsidiaries for services provided by parent
 
of
$162,019 (2020 - $138,729))
$
13,594
$
13,191
Other operating expenses
33,524
29,652
Total expenses
$
47,118
$
42,843
Net income
$
778,253
$
567,792
During the
 
year ended
 
December 31,
 
2021, the
 
Obligor
 
group recorded
 
$3.0 million
 
of
 
distribution from
 
its
 
direct equity
method
 
investees
 
(2020
 
-
 
$2.3
 
million),
 
of
 
which
 
$2.3
 
million
 
are
 
related
 
to
 
dividend
 
distributions (2020
 
-
 
$2.3
 
million).
During the year ended December 31, 2020, the
 
Obligor group received dividend distributions from a non-obligor subsidiary
amounting $12.5 million which was recorded as
 
a reduction to the investment.
 
 
39
Risks to Liquidity
 
Total lines of credit outstanding are not necessarily a measure of the total credit available on a continuing
 
basis. Some of these lines
could be subject to collateral requirements, 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 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 year ended December 31, 2021, BPPR
declared cash dividends
 
of $761 million.
 
At December 31,
 
2021, BPPR would
 
have needed to
 
obtain prior approval
 
of the Federal
Reserve Board
 
before declaring
 
a dividend
 
due to
 
its declared
 
dividend activity
 
and transfers
 
to statutory
 
reserves over
 
the three
year’s ended
 
December 31,
 
2021. 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, 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, 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
 
use
 
borrowings
 
that
 
are
 
rated
 
by
 
the
 
major
 
rating
 
agencies,
 
as
 
these
banking subsidiaries are funded primarily with deposits and secured borrowings. The banking subsidiaries had $9 million in deposits
at December 31, 2021 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
 
23
 
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
 
 
40
required
 
credit
 
ratings
 
are
 
not
 
maintained.
 
Collateral
 
pledged
 
by
 
the
 
Corporation
 
to
 
secure
 
recourse
 
obligations
 
amounted
 
to
approximately
 
$32
 
million
 
at
 
December
 
31,
 
2021.
 
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
 
(the
“Commonwealth” or “Puerto Rico”), which faces
 
severe economic and fiscal challenges.
COVID-19 Pandemic
On December
 
2019, a
 
novel strain
 
of coronavirus
 
(COVID-19) surfaced
 
in Wuhan,
 
China and
 
has since
 
spread globally
 
to
 
other
countries and
 
jurisdictions, including
 
the mainland
 
United States
 
and Puerto
 
Rico. In
 
March 2020,
 
the World
 
Health Organization
declared COVID-19 a
 
pandemic. The pandemic
 
has significantly disrupted
 
and negatively impacted
 
the global economy,
 
disrupted
global supply
 
chains, created
 
significant volatility
 
in financial
 
markets, and
 
increased unemployment
 
levels worldwide,
 
including in
the markets in which we do business.
 
In Puerto Rico, former
 
Governor Wanda Vázquez issued an
 
executive order in March 2020
 
declaring a health emergency,
 
ordering
residents to shelter in place, implementing a mandatory curfew,
 
and requiring the closure of non-essential businesses. Although the
most restrictive measures have been eased or lifted, allowing for the gradual reopening of the economy, certain measures remain in
place
 
and
 
additional measures
 
may
 
be
 
implemented in
 
the future
 
as
 
a
 
result
 
of
 
a
 
resurgence in
 
the spread
 
of
 
the
 
virus
 
or
 
new
strains
 
of
 
the virus.
 
Since the
 
beginning of
 
the
 
pandemic, most
 
businesses have
 
had
 
to
 
make significant
 
adjustments to
 
protect
customers and
 
employees, including
 
transitioning to
 
telework and
 
suspending or
 
modifying certain
 
operations in
 
compliance with
health and safety guidelines. The Puerto Rico Legislative Assembly
 
enacted legislation in April 2020 requiring financial institutions
 
to
offer
 
moratoriums
 
on
 
consumer
 
financial
 
products
 
to
 
clients
 
impacted
 
by
 
the
 
COVID-19
 
pandemic,
 
which
 
was
 
effective
 
through
August 2020. The Federal Government has
 
also approved several economic stimulus measures that seek
 
to cushion the economic
fallout
 
of
 
the
 
pandemic,
 
including
 
providing
 
direct
 
subsidies,
 
expanding
 
eligibility
 
for
 
and
 
increasing
 
unemployment
 
benefits
 
and
guaranteeing through the SBA PPP loans to small and medium
 
businesses.
The
 
COVID-19 pandemic
 
and the
 
restrictions imposed
 
to
 
curb the
 
spread
 
of the
 
disease have
 
had and
 
may continue
 
to
 
have a
material adverse effect
 
on economic activity
 
worldwide, including in
 
Puerto Rico. The
 
extent to which
 
the COVID-19 pandemic
 
will
continue to adversely affect economic activity will depend on future developments, which are highly uncertain and difficult to predict,
including the scope and duration of the pandemic (including the
 
appearance of new strains of the virus), the restrictions
 
imposed by
governmental authorities and other
 
third parties in
 
response to the
 
same, the pace
 
of global vaccination efforts,
 
and the amount
 
of
federal
 
and
 
local
 
assistance offered
 
to
 
offset
 
the
 
impact
 
of
 
the
 
pandemic. Pursuant
 
to
 
the
 
2022
 
Fiscal
 
Plan
 
(as
 
defined
 
below),
economic stimulus measures have more than offset the estimated income loss
 
due to reduced economic activity in Puerto Rico and
are estimated
 
to have
 
caused a
 
temporary increase in
 
personal income on
 
a net
 
basis. However,
 
there can
 
be no
 
assurance that
these measures will be sufficient to offset the pandemic’s economic impact
 
in the medium- and long-term.
Economic Performance
The Commonwealth’s economy entered
 
a recession in the
 
fourth quarter of fiscal
 
year 2006 and its
 
gross national product (“GNP”)
contracted (in
 
real terms)
 
every fiscal
 
year between
 
2007 and
 
2018, with
 
the exception
 
of fiscal
 
year 2012.
 
Pursuant to
 
the latest
Puerto Rico Planning Board (the “Planning Board”) estimates, dated
 
March 2021, the Commonwealth’s real GNP increased by 1.8%
41
in fiscal year
 
2019 due to
 
the influx
 
of federal funds
 
and private insurance
 
payments to repair
 
damage caused by
 
Hurricanes Irma
and María. However,
 
the Planning Board
 
estimates that the
 
Commonwealth’s real GNP
 
decreased by approximately 3.2%
 
in fiscal
year 2020 due primarily
 
to the adverse impact
 
of the COVID-19 pandemic and
 
the measures taken by
 
the government in response
to the same. The Planning Board projected that the negative effects of COVID-19 would continue through fiscal year 2021, resulting
in a contraction in real GNP of approximately -2%,
 
followed by 0.8% GNP growth in the current fiscal
 
year.
 
Fiscal Crisis
The Commonwealth’s central
 
government and many
 
of its instrumentalities,
 
public corporations and municipalities
 
continue to face
significant fiscal challenges, which have been primarily the
 
result of economic contraction, persistent and significant budget
 
deficits,
a high
 
debt burden,
 
unfunded legacy
 
obligations, and
 
lack of
 
access
 
to the
 
capital markets,
 
among other
 
factors. As
 
a result,
 
the
Commonwealth and certain of its instrumentalities have been unable
 
to make debt service payments on their outstanding bonds and
notes since 2016. The escalating fiscal and economic
 
crisis and imminent widespread defaults prompted
 
the U.S. Congress to enact
the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) in June 2016. As further discussed below under
“Pending Title
 
III Proceedings,” the
 
Commonwealth and several
 
of its
 
instrumentalities are currently
 
in the
 
process of
 
restructuring
their debts through the debt restructuring mechanisms
 
provided by PROMESA.
 
PROMESA
PROMESA, among
 
other things,
 
created a
 
seven-member federally-appointed oversight
 
board (the
 
“Oversight Board”)
 
with ample
powers over
 
the fiscal and
 
economic affairs of
 
the Commonwealth, its
 
public corporations, instrumentalities
 
and municipalities and
established two
 
mechanisms for
 
the restructuring
 
of the
 
obligations of
 
such entities.
 
Pursuant to
 
PROMESA, the
 
Oversight Board
will
 
remain
 
in
 
place
 
until
 
market access
 
is
 
restored
 
and
 
balanced budgets,
 
in
 
accordance with
 
modified
 
accrual
 
accounting, are
produced for at least four consecutive years. In August
 
2016, President Obama appointed the seven original voting members of the
Oversight Board through the process established in PROMESA, which authorizes the President to select
 
the members from several
lists required
 
to be
 
submitted by
 
congressional leaders.
 
In 2020,
 
when President
 
Donald Trump
 
reappointed three
 
of the
 
original
members and appointed four new members to the Oversight
 
Board.
 
In
 
October
 
2016,
 
the
 
Oversight
 
Board
 
designated
 
the
 
Commonwealth and
 
all
 
of
 
its
 
public
 
corporations
 
and
 
instrumentalities
 
as
“covered entities” under
 
PROMESA. The only
 
Commonwealth government entities
 
that were not
 
subject to such
 
initial designation
were
 
the
 
Commonwealth’s
 
municipalities.
 
In
 
May
 
2019,
 
however,
 
the
 
Oversight
 
Board
 
designated
 
all
 
of
 
the
 
Commonwealth’s
municipalities as covered entities. At
 
the Oversight Board’s
 
request, covered entities 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.
 
Finally, covered
 
entities
are potentially eligible
 
to avail themselves
 
of the debt
 
restructuring processes provided by
 
PROMESA. For additional
 
discussion of
risk factors related to the Puerto Rico fiscal challenges,
 
see “Part I – Item 1A – Risk Factors” in this
 
Form 10-K.
 
Fiscal Plans
Commonwealth Fiscal
 
Plan
. The
 
Oversight Board
 
has certified
 
several fiscal
 
plans for
 
the Commonwealth
 
since 2017.
 
The most
recent fiscal plan for the Commonwealth certified by
 
the Oversight Board is dated January 27, 2022
 
(the “2022 Fiscal Plan”).
 
Pursuant to the 2022 Fiscal Plan, while the COVID-19 pandemic and the measures taken in response to the same severely reduced
economic
 
activity
 
and
 
caused
 
an
 
unprecedented
 
increase
 
in
 
unemployment
 
in
 
Puerto
 
Rico,
 
pandemic-related
 
federal
 
and
 
local
stimulus
 
funding
 
have more
 
than
 
offset
 
the
 
estimated income
 
loss
 
due
 
to
 
reduced economic
 
activity
 
and
 
are
 
estimated to
 
have
caused
 
a
 
temporary
 
increase
 
in
 
personal
 
income
 
on
 
a
 
net
 
basis.
 
The
 
2022
 
Fiscal
 
Plan’s
 
economic
 
projections
 
incorporate
adjustments
 
for
 
these
 
short-term
 
income
 
effects
 
for
 
purposes
 
of
 
estimating
 
tax
 
receipts.
 
For
 
example,
 
the
 
2022
 
Fiscal
 
Plan
estimates that, for fiscal years 2022 and 2023, real GNP will grow 2.6% and 0.9%, respectively, but projects that growth adjusted for
income effects for such years will be approximately 5.2% and
 
0.6%, respectively.
 
The 2022 Fiscal Plan
 
incorporates the debt service costs
 
of the Commonwealth’s restructured debt
 
as contemplated by the Plan
 
of
Adjustment (as defined and further explained below).
 
Therefore, it projects an unrestricted surplus after debt
 
service average of $1
billion annually between fiscal
 
years 2022 to
 
2031. This surplus declines
 
over time as federal
 
disaster relief funding slows,
 
nominal
GNP
 
growth declines,
 
revenues decline,
 
and
 
healthcare expenditures
 
rise.
 
The
 
2022
 
Fiscal
 
Plan estimates
 
that
 
fiscal
 
measures
42
could drive approximately $6.3
 
billion in savings and
 
extra revenue over fiscal
 
years 2022 through 2026
 
and that structural
 
reforms
could drive a cumulative 0.90% increase in growth
 
by fiscal year 2051 (equal to approximately
 
$33 billion).
 
The
 
2022
 
Fiscal
 
Plan
 
provides
 
for
 
the
 
gradual
 
reduction
 
and
 
the
 
ultimate
 
elimination
 
of
 
Commonwealth budgetary
 
subsidies
 
to
municipalities,
 
which
 
constitute
 
a
 
material
 
portion
 
of
 
the
 
operating
 
revenues
 
of
 
some
 
municipalities.
 
Since
 
fiscal
 
year
 
2017,
Commonwealth appropriations
 
to municipalities
 
have decreased
 
by approximately
 
64% (from
 
approximately $370
 
million in
 
fiscal
year 2017
 
to approximately
 
$132 million
 
in fiscal
 
year 2020).
 
In
 
response to
 
the COVID-19
 
crisis, reductions
 
in appropriations
 
to
municipalities were paused in fiscal
 
year 2021. Municipalities have also
 
received extraordinary appropriations and other
 
funds from
federally-funded
 
programs
 
during
 
the
 
current
 
fiscal
 
year,
 
which
 
has
 
helped
 
temporarily
 
offset
 
the
 
impact
 
of
 
the
 
reduced
Commonwealth
 
support.
 
However,
 
the
 
2022
 
Fiscal
 
Plan
 
contemplates
 
additional
 
reductions
 
in
 
appropriations
 
to
 
municipalities
starting in
 
fiscal year
 
2022, before
 
eventually phasing
 
out all
 
appropriations in
 
fiscal year
 
2025. Further,
 
while the
 
Commonwealth
had enacted legislation in 2019 suspending the municipality’s
 
obligations to contribute to the Commonwealth’s health
 
plan and pay-
as-you go
 
retirement system,
 
such legislation
 
was challenged
 
by the
 
Oversight Board
 
and eventually
 
declared null
 
by the
 
Title III
court in April
 
2020.
 
As a result,
 
municipalities are required to
 
cover their own
 
employees’ healthcare costs and
 
retirement benefits
and had to reimburse the
 
Commonwealth for such costs corresponding to the period during
 
which the law was in
 
effect. Finally, the
2022 Fiscal Plan notes
 
that municipalities have made
 
little or no progress
 
towards implementing fiscal discipline required to
 
reduce
reliance on
 
Commonwealth appropriations and
 
that this
 
lack of fiscal
 
management threatens the
 
ability of municipalities
 
to provide
necessary services,
 
such as
 
health, sanitation,
 
public safety,
 
and emergency
 
services to
 
their residents,
 
forcing them
 
to prioritize
expenditures.
Other
 
Fiscal
 
Plans.
 
Pursuant to
 
PROMESA, the
 
Oversight Board
 
has
 
also
 
requested and
 
certified fiscal
 
plans
 
for several
 
public
corporations and
 
instrumentalities. The
 
certified fiscal
 
plan for
 
the Puerto
 
Rico Electric
 
Power Authority
 
(“PREPA”),
 
Puerto Rico’s
electric
 
power
 
utility,
 
contemplated
 
the
 
transformation
 
of
 
Puerto
 
Rico’s
 
electric
 
system
 
through,
 
among
 
other
 
things,
 
the
establishment of a public-private partnership with respect to PREPA’s
 
transmission and distribution system (the “T&D System”), and
calls for significant structural reforms at PREPA.
 
The procurement process for the establishment of a public-private partnership with
respect
 
to
 
the
 
T&D
 
System
 
was
 
completed
 
in
 
June
 
2020.
 
The
 
selected
 
proponent,
 
LUMA
 
Energy
 
LLC
 
(“LUMA”),
 
and
 
PREPA
entered into a 15-year agreement whereby, since June 1, 2021, LUMA is responsible
 
for operating, maintaining and modernizing the
T&D System.
 
On
 
April
 
23,
 
2021,
 
the
 
Oversight
 
Board
 
certified
 
the
 
latest
 
version
 
of
 
the
 
fiscal
 
plan
 
(the
 
“CRIM
 
Fiscal
 
Plan”)
 
for
 
the
 
Municipal
Revenue Collection
 
Center (“CRIM”),
 
the government
 
entity responsible
 
for collecting
 
property taxes
 
and distributing
 
them among
the municipalities.
 
The CRIM
 
Fiscal Plan
 
outlines a
 
series of
 
measures centered
 
around improving
 
the competitiveness
 
of Puerto
Rico’s property tax
 
regime and the
 
enhancement of property
 
tax collections, including identifying
 
and appraising new
 
properties as
well as improvements to existing properties, and
 
implementing operational and technological initiatives.
Pending Title III Proceedings
On May
 
3, 2017, the
 
Oversight Board, on
 
behalf of
 
the Commonwealth, filed
 
a petition
 
in the
 
U.S. District Court
 
to restructure the
Commonwealth’s liabilities under Title
 
III of PROMESA. The Oversight Board
 
subsequently filed analogous petitions with respect to
the
 
Puerto
 
Rico
 
Sales
 
Tax
 
Financing
 
Corporation
 
(“COFINA”),
 
the
 
Employees
 
Retirement
 
System
 
of
 
the
 
Government
 
of
 
the
Commonwealth of Puerto Rico (“ERS”), the Puerto Rico Highways and Transportation Authority, PREPA
 
and the Puerto Rico Public
Buildings Authority (“PBA”). On February 12, 2019, the government completed a restructuring of COFINA’s debts
 
pursuant to a plan
of adjustment confirmed by the U.S. District Court.
 
On November 3, 2021, the Oversight Board filed the Eighth Amended
 
Title III Joint Plan of Adjustment for the Commonwealth, et. al.
(the “Plan of Adjustment”) in the pending debt restructuring proceedings under Title III
 
of PROMESA. The Plan of Adjustment seeks
to restructure
 
approximately $35 billion
 
of debt
 
and other claims
 
against the
 
Commonwealth, PBA and
 
ERS. In
 
October 2021, the
Commonwealth’s
 
government
 
enacted
 
legislation
 
establishing
 
the
 
framework
 
for
 
the
 
issuance
 
of
 
new
 
securities
 
by
 
the
Commonwealth
 
in
 
connection
 
with
 
the
 
Plan
 
of
 
Adjustment.
 
On
 
January
 
18,
 
2022,
 
the
 
U.S.
 
District
 
Court
 
confirmed
 
the
 
Plan
 
of
Adjustment,
 
which
 
is
 
expected
 
to
 
become
 
effective
 
on
 
or
 
about
 
March
 
15,
 
2022
 
upon
 
the
 
satisfaction
 
of
 
certain
 
conditions
 
to
effectiveness.
Exposure of the Corporation
 
43
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. The effects of the prolonged recession
 
have been reflected in
limited loan
 
demand, an increase
 
in the
 
rate of foreclosures
 
and delinquencies on
 
loans granted in
 
Puerto Rico. While
 
PROMESA
provided a
 
process to address
 
the Commonwealth’s fiscal
 
crisis, the
 
complexity and
 
uncertainty of the
 
Title III
 
proceedings for the
Commonwealth and various of its instrumentalities and the
 
adjustment measures required by the fiscal plans still
 
present significant
economic risks. In addition, the COVID-19 outbreak has
 
affected many of our individual customers and customers’ businesses.
 
This,
when
 
added
 
to
 
Puerto
 
Rico’s
 
ongoing
 
fiscal
 
crisis
 
and
 
recession,
 
could
 
cause
 
credit
 
losses
 
that
 
adversely
 
affect
 
us
 
and
 
may
negatively
 
affect
 
consumer
 
confidence,
 
result
 
in
 
reductions
 
in
 
consumer
 
spending,
 
and
 
adversely
 
impact
 
our
 
interest
 
and
 
non-
interest revenues.
 
If global
 
or local
 
economic conditions
 
worsen or
 
the
 
Government of
 
Puerto Rico
 
and the
 
Oversight Board
 
are
unable
 
to
 
adequately
 
manage
 
the
 
Commonwealth’s
 
fiscal
 
and
 
economic
 
challenges,
 
including
 
by
 
controlling
 
the
 
COVID-19
pandemic and consummating an orderly restructuring
 
of the Commonwealth’s debt obligations while
 
continuing to provide essential
services, these adverse effects could continue or worsen
 
in ways that we are not able to predict.
At
 
December
 
31,
 
2021,
 
the
 
Corporation’s
 
direct
 
exposure
 
to
 
the
 
Puerto
 
Rico
 
government’s
 
instrumentalities
 
and
 
municipalities
totaled
 
$367
 
million
 
of
 
which
 
$349
 
million
 
were
 
outstanding,
 
compared
 
to
 
$377
 
million
 
at
 
December
 
31,
 
2020
 
which
 
was
 
fully
outstanding
 
on such
 
date.
 
Further
 
deterioration of
 
the
 
Commonwealth’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, $319 million consists of loans
and
 
$30 million are
 
securities
 
($342 million and
 
$35 million, respectively,
 
at
 
December 31, 2020).
 
Substantially all
 
of
 
the
 
amount
outstanding at
 
December 31,
 
2021 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 December 31, 2021, 75%
of
 
the
 
Corporation’s exposure
 
to
 
municipal
 
loans and
 
securities
 
was concentrated
 
in
 
the
 
municipalities of
 
San
 
Juan,
 
Guaynabo,
Carolina and
 
Bayamón.
 
On July
 
1,
 
2021,
 
the
 
Corporation received
 
scheduled
 
principal payments
 
amounting
 
to
 
$32
 
million
 
from
various obligations from Puerto Rico municipalities. For additional discussion of the Corporation’s direct exposure to the Puerto Rico
government and its instrumentalities and municipalities, refer
 
to Note 24 – Commitments and Contingencies.
 
In
 
addition,
 
at
 
December
 
31,
 
2021,
 
the
 
Corporation
 
had
 
$275 million
 
in
 
loans
 
insured
 
or
 
securities
 
issued
 
by
 
Puerto
 
Rico
governmental entities,
 
but for
 
which the
 
principal source
 
of repayment
 
is non-governmental
 
($317 million at
 
December 31, 2020).
These
 
included
 
$232
 
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,
 
2020 -
 
$260 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 December
 
31,
2021, $43 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, 2020
 
- $46
 
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 described
 
above. 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.
 
BPPR also
 
has a
 
significant amount
 
of deposits
 
from the
 
Commonwealth, its
 
instrumentalities, and
 
municipalities. The
 
amount of
such deposits may
 
fluctuate depending on
 
the financial condition
 
and liquidity of
 
such entities, as
 
well as on
 
the ability of
 
BPPR to
maintain these customer relationships.
 
 
 
 
44
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 24
of 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 have been and maybe be further exacerbated
as
 
a
 
result
 
of
 
the
 
effects
 
of
 
the COVID-19
 
pandemic, and
 
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 December 31,
 
2021, the Corporation has
 
operations in the United
 
States Virgin Islands
 
(the “USVI”) and
 
has approximately $70
million
 
in
 
direct
 
exposure to
 
USVI
 
government entities
 
(December 31,
 
2020
 
-
 
$105
 
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.
British Virgin Islands
The Corporation has operations in the British Virgin Islands (“BVI”), which has been 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 December 31, 2021 it has a loan portfolio amounting to approximately
$221 million comprised of various retail
 
and commercial clients, compared to a loan
 
portfolio of $251 million at December 31,
 
2020,
which included a $19 million loan with the BVI
 
Government that was paid off during the second quarter
 
of 2021.
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, $1.6
 
billion of
 
residential mortgages,
 
$353 million
 
of SBA
 
loans under
the PPP
 
and $67 million
 
commercial loans
 
were insured
 
or guaranteed
 
by the
 
U.S. Government
 
or its
 
agencies at
 
December 31,
2021 (compared to $1.8 billion, $1.3 billion and
 
$60 million, respectively, at December 31, 2020).
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 20.
During 2021, the Corporation
 
continued to exhibit strong
 
credit quality and low
 
credit costs, with low
 
level of NCOs
 
and decreasing
NPLs, outperforming
 
pre-pandemic trends. These
 
improvements have
 
been aided
 
by the
 
significant government
 
stimulus and
 
the
rebound
 
of
 
the
 
economy,
 
as
 
well
 
as
 
payoffs
 
related
 
to
 
troubled
 
loan
 
resolutions.
 
We
 
continue
 
to
 
closely
 
monitor
 
COVID-19
pandemic
 
related
 
risks
 
on
 
borrower
 
performance
 
and
 
changes
 
in
 
the
 
pace
 
of
 
economic
 
recovery
 
as
 
new
 
variants
 
continue
 
to
emerge. However,
 
management believes that
 
the improvement
 
over the
 
last few
 
years in
 
the risk
 
profile of
 
the Corporation’s
 
loan
portfolios positions Popular to operate successfully
 
under the current environment.
 
Total
 
NPAs
 
decreased
 
by
 
$191
 
million
 
when
 
compared
 
with
 
December
 
31,
 
2020.
 
Total
 
non-performing
 
loans
 
held-in-portfolio
(“NPLs”) decreased
 
by
 
$190 million
 
from
 
December 31,
 
2020. BPPR’s
 
NPLs
 
decreased by
 
$186 million,
 
mainly
 
driven by
 
lower
45
commercial,
 
mortgage,
 
and
 
construction
 
NPLs
 
by
 
$84
 
million,
 
$80
 
million,
 
and
 
$21
 
million,
 
respectively.
 
The
 
commercial
 
and
construction
 
NPLs
 
decrease
 
reflects
 
payoffs
 
related
 
to
 
troubled loan
 
resolutions,
 
and
 
loans
 
that
 
were returned
 
to
 
accrual status
during the period. The mortgage NPLs
 
decrease was mainly due to the combined
 
effects of collection efforts, increased foreclosure
activity and the on-going low
 
levels of early delinquency compared with
 
pre-pandemic trends.
 
Popular U.S. NPLs decreased by
 
$4
million from
 
December 31,
 
2020, mostly
 
related to
 
a $7
 
million construction
 
loan sold
 
and lower
 
consumer NPLs
 
by $3
 
million, in
part offset by mortgage
 
NPLs increase by $7 million, mostly
 
driven by loans that
 
did not resume payment at
 
the end of the
 
COVID-
related deferral period.
 
At December 31,
 
2021, the ratio
 
of NPLs to
 
total loans held-in-portfolio
 
was 1.9% compared
 
to 2.5% in
 
the
fourth quarter
 
of 2020.
 
Other real
 
estate owned
 
loans (“OREOs”)
 
increased by
 
$2 million,
 
mostly related
 
to end
 
of the
 
foreclosure
moratorium period.
 
At
 
December 31,
 
2021, NPLs
 
secured by
 
real
 
estate amounted
 
to
 
$428 million
 
in the
 
Puerto Rico
 
operations and
 
$31 million
 
in
Popular U.S. These figures were $630 million and
 
$34 million, respectively, at December 31, 2020.
 
The Corporation’s commercial loan portfolio secured by real estate
 
(“CRE”) amounted to $8.4 billion at December 31,
 
2021, of which
$1.8 billion was secured
 
with owner occupied properties, compared
 
with $7.8 billion
 
and $1.9 billion, respectively,
 
at December 31,
2020. CRE NPLs amounted to $77 million at December 31,
 
2021, compared with $173 million at December
 
31, 2020. The CRE NPL
ratios for the BPPR and Popular U.S. segments were 1.95% and 0.04%, respectively,
 
at December 31, 2021, compared with 4.51%
and 0.07%, respectively, at December 31, 2020.
In addition to the NPLs included in Table 20, at December 31, 2021, there were $214 million of performing loans, mostly commercial
loans, which in management’s opinion, are currently subject to potential future classification as non-performing (December 31, 2020
- $228 million).
For
 
the
 
year
 
ended
 
December
 
31,
 
2021,
 
total
 
inflows
 
of
 
NPLs
 
held-in-portfolio,
 
excluding
 
consumer
 
loans,
 
decreased
 
by
approximately
 
$132
 
million,
 
when compared
 
to
 
the
 
inflows
 
for
 
the
 
same
 
period
 
in
 
2020.
 
Inflows
 
of
 
NPLs
 
held-in-portfolio at
 
the
BPPR segment decreased by $129 million compared to the
 
same period in 2020, driven by
 
lower mortgage inflows by $114
 
million.
Inflows of NPLs held-in-portfolio at the Popular U.S. segment
 
decreased by $3 million from the same period
 
in 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
46
Table 20 - Non-Performing
 
Assets
December 31, 2021
December 31, 2020
(Dollars in thousands)
BPPR
Popular
U.S.
Popular,
Inc.
BPPR
Popular
U.S.
Popular,
Inc.
Non-accrual loans:
 
Commercial
 
$
120,047
$
5,532
$
125,579
$
204,092
$
5,988
$
210,080
 
Construction
 
485
-
485
21,497
7,560
29,057
 
Leasing
3,102
-
3,102
3,441
-
3,441
 
Mortgage
333,887
21,969
355,856
414,343
14,864
429,207
 
Auto
23,085
-
23,085
15,736
-
15,736
 
Consumer
 
33,683
6,087
39,770
41,268
8,985
50,253
Total non-performing
 
loans held-in-portfolio
514,289
33,588
547,877
700,377
37,397
737,774
Non-performing loans held-for-sale
[1]
-
-
-
-
2,738
2,738
Other real estate owned ("OREO")
83,618
1,459
85,077
81,512
1,634
83,146
Total non-performing
 
assets
 
$
597,907
$
35,047
$
632,954
$
781,889
$
41,769
$
823,658
Accruing loans past-due 90 days or more
[2]
$
480,649
$
118
$
480,767
$
1,028,061
$
3
$
1,028,064
Non-performing loans to loans held-in-portfolio
1.87
%
2.51
%
Interest lost
 
$
38,123
$
45,040
[1] There were no non-performing loans held-for-sale
 
as of December 31, 2021 (December 31, 2020 - $3 million
 
in commercial loans).
[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. The balance of these loans
 
includes $13 million at December 31,
2021 related to the rebooking of loans previously pooled into
 
GNMA securities, in which the Corporation had a buy-back
 
option as further described
below (December 31, 2020 - $57 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 (rebooked) on
the financial statements of BPPR with an offsetting
 
liability. These balances include
 
$304 million of residential mortgage loans insured by
 
FHA or
guaranteed by the VA that
 
are no longer accruing interest as of December 31, 2021 (December
 
31, 2020 - $329 million).
 
Furthermore, the Corporation
has approximately $50 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, 2020 - $60 million).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
47
Table 21 - Activity in Non
 
-Performing Loans Held-in-Portfolio (Excluding Consumer
 
Loans)
For the year ended December 31, 2021
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
639,932
$
28,412
$
668,344
Plus:
New non-performing loans
234,258
51,494
285,752
Advances on existing non-performing loans
-
84
84
Less:
Non-performing loans transferred to OREO
(34,419)
-
(34,419)
Non-performing loans charged-off
(35,963)
(1,592)
(37,555)
Loans returned to accrual status / loan collections
(349,389)
(42,124)
(391,513)
Loans transferred to held-for-sale
-
(8,773)
(8,773)
Ending balance NPLs
$
454,419
$
27,501
$
481,920
Table 22 - Activity in Non
 
-Performing Loans Held-in-Portfolio (Excluding Consumer
 
Loans)
For the year ended December 31, 2020
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
431,082
$
16,621
$
447,703
Transition of PCI to PCD loans under CECL
 
245,703
18,547
264,250
Plus:
New non-performing loans
362,786
54,092
416,878
Advances on existing non-performing loans
-
825
825
Less:
Non-performing loans transferred to OREO
(11,762)
-
(11,762)
Non-performing loans charged-off
(44,675)
(3,204)
(47,879)
Loans returned to accrual status / loan collections
(343,202)
(47,790)
(390,992)
Loans transferred to held-for-sale
-
(10,679)
(10,679)
Ending balance NPLs
$
639,932
$
28,412
$
668,344
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
48
Table 23 - Activity in Non
 
-Performing Commercial Loans Held-In-Portfolio
For the year ended December 31, 2021
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$204,092
$5,988
$210,080
Plus:
New non-performing loans
57,132
13,510
70,642
Advances on existing non-performing loans
-
52
52
Less:
Non-performing loans transferred to OREO
(9,261)
-
(9,261)
Non-performing loans charged-off
(14,935)
(1,042)
(15,977)
Loans returned to accrual status / loan collections
(116,981)
(11,203)
(128,184)
Loans transferred to held-for-sale
-
(1,773)
(1,773)
Ending balance - NPLs
$120,047
$5,532
$125,579
Table 24 - Activity in Non
 
-Performing Commercial Loans Held-in-Portfolio
For the year ended December 31, 2020
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$147,255
5,504
$152,759
Transition of PCI to PCD loans under CECL
 
112,517
18,547
131,064
Plus:
New non-performing loans
50,834
15,496
66,330
Advances on existing non-performing loans
-
633
633
Less:
Non-performing loans transferred to OREO
(2,304)
-
(2,304)
Non-performing loans charged-off
(23,755)
(1,646)
(25,401)
Loans returned to accrual status / loan collections
(80,455)
(21,867)
(102,322)
Loans transferred to held-for-sale
-
(10,679)
(10,679)
Ending balance - NPLs
$204,092
$5,988
$210,080
Table 25
 
-
 
Activity in Non-Performing Construction Loans Held-In
 
-Portfolio
For the year ended December 31, 2021
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$21,497
$7,560
$29,057
Plus:
New non-performing loans
481
12,141
12,622
Less:
Non-performing loans charged-off
(6,620)
(523)
(7,143)
Loans returned to accrual status / loan collections
(14,873)
(12,178)
(27,051)
Loans in accrual status transfer to held-for-sale
-
(7,000)
(7,000)
Ending balance - NPLs
$485
$-
$485
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
49
Table 26 -
 
Activity in Non-Performing Construction Loans Held-in
 
-Portfolio
For the year ended December 31, 2020
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$119
$26
$145
Plus:
New non-performing loans
21,514
9,069
30,583
Less:
Non-performing loans charged-off
-
(1,509)
(1,509)
Loans returned to accrual status / loan collections
(136)
(26)
(162)
Ending balance - NPLs
$21,497
$7,560
$29,057
Table 27 - Activity in Non
 
-Performing Mortgage Loans Held-in-Portfolio
For the year ended December 31,
 
2021
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$414,343
$14,864
$429,207
Plus:
New non-performing loans
176,645
25,843
202,488
Advances on existing non-performing loans
-
32
32
Less:
Non-performing loans transferred to OREO
(25,158)
-
(25,158)
Non-performing loans charged-off
(14,408)
(27)
(14,435)
Loans returned to accrual status / loan collections
(217,535)
(18,743)
(236,278)
Ending balance - NPLs
$333,887
$21,969
$355,856
Table 28 - Activity in Non
 
-Performing Mortgage Loans Held-in-Portfolio
For the year ended December 31,
 
2020
(In thousands)
BPPR
Popular U.S.
Popular, Inc.
Beginning balance - NPLs
$283,708
$11,091
$294,799
Transition of PCI to PCD loans under CECL
 
133,186
-
133,186
Plus:
New non-performing loans
290,438
29,527
319,965
Advances on existing non-performing loans
-
192
192
Less:
Non-performing loans transferred to OREO
(9,458)
-
(9,458)
Non-performing loans charged-off
(20,920)
(49)
(20,969)
Loans returned to accrual status / loan collections
(262,611)
(25,897)
(288,508)
Ending balance - NPLs
$414,343
$14,864
$429,207
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50
Loan Delinquencies
Another key measure used to evaluate and
 
monitor the Corporation’s asset quality is
 
loan delinquencies. Loans delinquent 30 days
or
 
more
 
and
 
delinquencies, as
 
a
 
percentage
 
of
 
their
 
related
 
portfolio
 
category
 
at
 
December
 
31,
 
2021
 
and
 
2020,
 
are
 
presented
below.
Table 29 - Loan Delinquencies
(Dollars in thousands)
2021
2020
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
 
$
161,251
$
13,732,701
1.17
%
$
249,484
$
13,614,310
1.83
%
Construction
 
485
716,220
0.07
50,369
926,208
5.44
Leasing
14,379
1,381,319
1.04
14,009
1,197,661
1.17
Mortgage
[1]
1,141,082
7,427,196
15.36
1,775,902
7,890,680
22.51
Consumer
 
173,896
5,983,121
2.91
179,789
5,756,337
3.12
Loans held-for-sale
-
59,168
-
3,108
99,455
3.13
Total
 
$
1,491,093
$
29,299,725
5.09
%
$
2,272,661
$
29,484,651
7.71
%
[1]
Loans delinquent 30 days or more includes $0.6 billion of
 
residential mortgage loans insured by FHA or guaranteed
 
by the VA as of December
 
31,
2021 (December 31, 2020 - $1.1 billion). Refer to Note
 
8 to the Consolidated Financial Statements for additional
 
information of guaranteed loans.
Allowance for Credit Losses (“ACL”)
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
 
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 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.
At December 31,
 
2021, the allowance for
 
credit losses amounted
 
to $695 million,
 
a decrease of
 
$201 million, when
 
compared with
December 31,
 
2020, mainly prompted
 
by improvements in
 
credit quality
 
and the macroeconomic
 
outlook. Since the
 
December 31,
2020,
 
scenarios,
 
updated
 
economic
 
assumptions
 
have
 
included
 
a
 
more
 
optimistic
 
view
 
of
 
the
 
economy,
 
prompting
 
substantial
reductions
 
in
 
reserves
 
across
 
different
 
portfolios,
 
also
 
contributing
 
to
 
lower
 
qualitative
 
reserves.
 
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. During
 
the fourth
 
quarter of
 
2021, in
 
response to
 
recent
events that
 
impacted both epidemiological
 
and fiscal
 
assumptions, the weight
 
assigned to the
 
pessimistic scenario was
 
increased,
contributing to an increase of approximately $13
 
million in reserves.
The ACL
 
for BPPR
 
decreased
 
by $146
 
million to
 
$594 million,
 
when compared to
 
December 31,
 
2020. The
 
ACL for
 
Popular U.S.
decreased
 
by
 
$55
 
million
 
to
 
$101
 
million,
 
when
 
compared
 
to
 
December
 
31,
 
2020.
 
The
 
decrease
 
in
 
ACL
 
was
 
mainly
 
driven
 
by
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
51
continued borrower
 
performance and
 
improvements in
 
the macroeconomic
 
outlook, coupled
 
with releases
 
of qualitative
 
reserves.
 
The current
 
baseline forecast
 
continues to
 
show a
 
favorable economic
 
scenario. The
 
2022 expected
 
GDP growth
 
rate for
 
Puerto
Rico is
 
approximately 4%,
 
with the
 
unemployment rate
 
expected to
 
average around
 
7.4% for
 
the year.
 
In the
 
case of
 
the United
States, the
 
baseline scenario
 
expects GDP
 
growth for
 
2022 of
 
approximately 4.6%,
 
with unemployment
 
rate expected
 
to average
around 3.7%.
 
For 2023 both regions expect GDP growth with average unemployment rate levels remaining stable in
 
comparison to
2022.
The provision for credit losses for the year ended December 31, 2021, amounted to a benefit of $183.3 million, a
 
favorable variance
of $465.7 million from the same period in the prior
 
year, mainly driven by the abovementioned improvements in credit quality and
 
the
macroeconomic
 
outlook,
 
and
 
lower
 
NCOs.
 
Refer
 
to
 
Note
 
9
 
 
Allowance
 
for
 
credit
 
losses
 
 
loans
 
held-in-portfolio,
 
and
 
to
 
the
Provision for Credit Losses section of this MD&A
 
for additional information.
 
The following
 
table presents
 
net charge-offs
 
to average
 
loans held-in-portfolio
 
(“HIP”) ratios
 
by loan
 
category for
 
the years
 
ended
December 31, 2021 and 2020:
Table 30 - Net Charge-Offs
 
(Recoveries) to Average Loans HIP
December 31, 2021
December 31, 2020
BPPR
Popular U.S.
Popular Inc.
BPPR
Popular U.S.
Popular Inc.
Commercial
 
(0.24)
%
(0.02)
%
(0.15)
%
0.21
%
(0.04)
%
0.11
%
Construction
 
1.27
(0.02)
0.19
(0.57)
0.04
(0.07)
Mortgage
 
0.04
-
0.04
0.32
-
0.27
Leasing
0.11
-
0.11
0.66
-
0.66
Consumer
 
0.58
0.99
0.60
2.44
3.07
2.48
Total
 
0.09
%
0.01
%
0.07
%
0.85
%
0.13
%
0.66
%
NCOs for the year ended December 31, 2021 amounted to
 
$20.7 million, decreasing by $165.7 million when compared to the same
period
 
in
 
2020.
 
The
 
BPPR
 
segment
 
decreased
 
by
 
$156.9
 
million
 
mainly
 
driven
 
by
 
lower
 
consumer,
 
commercial,
 
and
 
mortgage
NCOs by
 
$101.5 million, $35.2
 
million and
 
$16.9 million, respectively.
 
The PB segment
 
decreased by 8.8
 
million, mainly driven
 
by
lower
 
consumer
 
NCOs by
 
$9.4 million.
 
The
 
decrease in
 
NCOs was
 
due
 
to
 
the
 
effect
 
of
 
a
 
favorable
 
economic
 
environment and
continued borrower performance, as reflected in the
 
ongoing low level of delinquencies and NPLs
 
when compared to pre-pandemic
trends.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
52
Table 31 - Allowance for Credit
 
Losses - Loan Portfolios
December 31, 2021
(Dollars in thousands)
Commercial
Construction
Mortgage
Leasing
Consumer
Total
Total ACL
$
215,805
$
6,363
$
154,478
$
17,578
$
301,142
$
695,366
Total loans held-in
 
-portfolio
$
13,732,701
$
716,220
$
7,427,196
$
1,381,319
$
5,983,121
$
29,240,557
ACL to loans held-in-portfolio
1.57
%
0.89
%
2.08
%
1.27
%
5.03
%
2.38
%
Total Non-performing
 
loans held-in-portfolio
$
125,579
$
485
$
355,856
$
3,102
$
62,855
$
547,877
ACL to non-performing loans held-in-portfolio
171.85
%
N.M.
43.41
%
566.67
%
479.11
%
126.92
%
N.M. - Not meaningful.
Table 32 - Allowance for Credit
 
Losses - Loan Portfolios
December 31, 2020
(Dollars in thousands)
Commercial
Construction
Mortgage
Leasing
Consumer
Total
Total ACL
$
333,380
$
14,237
$
215,716
$
16,863
$
316,054
$
896,250
Total loans held-in
 
-portfolio
$
13,614,310
$
926,208
$
7,890,680
$
1,197,661
$
5,756,337
$
29,385,196
ACL to loans held-in-portfolio
2.45
%
1.54
%
2.73
%
1.41
%
5.49
%
3.05
%
Total Non-performing
 
loans held-in-portfolio
$
210,080
$
29,057
$
429,207
$
3,441
$
65,989
$
737,774
ACL to non-performing loans held-in-portfolio
158.69
%
49.00
%
50.26
%
490.06
%
478.95
%
121.48
%
Table
 
33
 
details
 
the
 
breakdown
 
of
 
the
 
allowance
 
for
 
credit
 
losses
 
by
 
loan
 
categories.
 
The
 
breakdown
 
is
 
made
 
for
 
analytical
purposes, and it is not necessarily indicative of
 
the categories in which future loan losses may occur.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
53
Table 33 - Allocation of the
 
Allowance for Credit Losses - Loans
At December 31,
2021
2020
% of loans
% of loans
in each
in each
category to
category to
(Dollars in millions)
ACL
total loans
ACL
total loans
Commercial
$215.8
47.0
%
$333.4
46.3
%
Construction
6.4
2.4
14.3
3.2
Mortgage
154.5
25.4
215.7
26.8
Leasing
17.6
4.7
16.9
4.1
Consumer
301.1
20.5
316.0
19.6
Total
[1]
$695.4
100.0
%
$896.3
100.0
%
[1] Note: For purposes of this table the term loans refers to
 
loans held-in-portfolio excluding loans held-for-sale.
Troubled debt restructurings
The Corporation’s
 
troubled debt
 
restructurings (“TDRs”) loans
 
amounted to
 
$1.7 billion
 
at December
 
31, 2021,
 
decreasing by
 
$12
million,
 
from
 
December 31,
 
2020.
 
A
 
total
 
of
 
$716
 
million
 
of
 
these
 
TDRs
 
are
 
related
 
to
 
guaranteed
 
loans,
 
which
 
are
 
in
 
accruing
status. TDRs in the BPPR segment amounted to $1.6 billion, a decrease
 
of $9 million, mostly related to a combined decrease of $58
million in the commercial and
 
construction TDRs and lower consumer TDRs
 
by $11
 
million, in part offset
 
by higher mortgage TDRs
by $61 million, of which $61 million
 
were related to government guaranteed loans. The Popular U.S.
 
segment TDRs have remained
essentially flat since December 31, 2020. TDRs in accruing status increased by $74 million from December 31, 2020, mostly related
to an increase of $83 million in BPPR’s mortgage TDRs, in part
 
offset by a decrease of $10 million in BPPR’s consumer TDRs, while
non-accruing TDRs decreased by $86 million, of which
 
$60 million were related to commercial and
 
construction TDRs.
Refer to
 
Note 9
 
to the
 
Consolidated Financial
 
Statements for
 
additional information
 
on modifications
 
considered TDRs,
 
including
certain qualitative and quantitative data about TDRs
 
performed in the past twelve months.
Enterprise Risk Management
The Corporation’s
 
Board of
 
Directors has
 
established a
 
Risk Management
 
Committee (“RMC”)
 
to, among
 
other things,
 
assist the
Board in its (i) oversight of the Corporation’s overall risk framework and (ii) to monitor, review, and approve policies to measure, limit
and manage the Corporation’s risks.
 
The
 
Corporation
 
has
 
established
 
a
 
three
 
lines
 
of
 
defense
 
framework:
 
(a)
 
business
 
line
 
management constitutes
 
the
 
first
 
line
 
of
defense by identifying
 
and managing the
 
risks associated with
 
business activities, (b)
 
components of the
 
Risk Management Group
and
 
the
 
Corporate
 
Security
 
Group,
 
among
 
others,
 
act
 
as
 
the
 
second
 
line
 
of
 
defense
 
by,
 
among
 
other
 
things,
 
measuring
 
and
reporting on the Corporation’s risk activities, and (c) the Corporate Auditing Division
,
 
as the third line of defense, reporting directly to
the Audit Committee of the Board, by independently providing
 
assurance regarding the effectiveness of the risk
 
framework.
 
The Enterprise Risk Management Committee (the “ERM Committee”) is a
 
management committee whose purpose is to: (a) monitor
the
 
principal risks
 
as defined
 
in the
 
Risk Appetite
 
Statement (“RAS”)
 
of the
 
Risk Management
 
Policy
 
affecting
 
our
 
business and
within the Corporation’s Enterprise Risk Management (“ERM”) framework,
 
(b) review key risk indicators and related developments
 
at
the
 
business
 
level
 
consistent
 
with
 
the
 
RAS,
 
and
 
(c)
 
lead
 
the
 
incorporation
 
of
 
a
 
uniform
 
Governance,
 
Risk
 
and
 
Compliance
framework across
 
the Corporation.
 
The ERM
 
Committee and
 
the Market
 
Risk &
 
ERM Unit
 
in the
 
Financial and
 
Operational Risk
Management
 
Division
 
(the
 
“FORM
 
Division”),
 
in
 
coordination
 
with
 
the
 
Chief
 
Risk
 
Officer,
 
create
 
the
 
framework
 
to
 
identify
 
and
54
manage
 
multiple
 
and
 
cross-enterprise
 
risks,
 
and
 
to
 
articulate
 
the
 
RAS
 
and
 
supporting
 
metrics.
Our
 
risk
 
management
 
program
monitors
 
the
 
following
 
principal
 
risks:
 
credit,
 
interest
 
rate,
 
market,
 
liquidity,
 
operational,
 
cyber
 
and
 
information
 
security,
 
legal,
regulatory affairs, regulatory and financial compliance, BSA/
 
AML & sanctions, strategic and reputational.
The Market Risk & ERM Unit has
 
established a process to ensure that an
 
appropriate standard readiness assessment is performed
before we launch a new product or service. Similar
 
procedures are followed with the Treasury Division for
 
transactions involving the
purchase and sale of assets, and by the Mergers
 
and Acquisitions Division for acquisition transactions.
The Asset/Liability
 
Committee (“ALCO”),
 
composed of
 
senior management
 
representatives from
 
the business
 
lines and
 
corporate
functions, and the Corporate Finance Group, are responsible for planning and executing the
 
Corporation’s market, interest rate risk,
funding
 
activities
 
and
 
strategy,
 
as
 
well
 
as
 
for
 
implementing
 
approved
 
policies
 
and
 
procedures.
 
The
 
ALCO
 
also
 
reviews
 
the
Corporation’s
 
capital
 
policy
 
and
 
the
 
attainment
 
of
 
the
 
capital
 
management
 
objectives.
 
In
 
addition,
 
the
 
Market
 
Risk
 
Unit
independently measures, monitors and reports compliance with liquidity and market risk policies, and oversees controls surrounding
interest risk measurements.
The Corporate Compliance
 
Committee, comprised of
 
senior management team
 
members and representatives
 
from the Regulatory
and
 
Financial Compliance
 
Division,
 
the
 
Financial Crimes
 
Compliance Division
 
and
 
the
 
Corporate Risk
 
Services
 
Division, among
others,
 
are
 
responsible
 
for
 
overseeing
 
and
 
assessing
 
the
 
adequacy
 
of
 
the
 
risk
 
management
 
processes
 
that
 
underlie
 
Popular’s
compliance program for identifying, assessing, measuring, monitoring, testing, mitigating, and reporting compliance
 
risks. They also
supervise Popular’s reporting obligations under
 
the compliance program so
 
as to ensure the
 
adequacy, consistency
 
and timeliness
of the reporting of compliance-related risks across
 
the Corporation.
 
The Regulatory Affairs
 
team is
 
responsible for maintaining
 
an open dialog
 
with the banking
 
regulatory agencies in
 
order to
 
ensure
regulatory
 
risks
 
are
 
properly identified,
 
measured,
 
monitored,
 
as
 
well
 
as
 
communicated to
 
the
 
appropriate regulatory
 
agency
 
as
necessary to keep them apprised of material matters within
 
the purview of these agencies.
The
 
Credit
 
Strategy
 
Committee,
 
composed
 
of
 
senior
 
level
 
management
 
representatives
 
from
 
the
 
business
 
lines
 
and
 
corporate
functions,
 
and
 
the
 
Corporate
 
Credit
 
Risk
 
Management
 
Division,
 
are
 
responsible
 
for
 
managing
 
the
 
Corporation’s
 
overall
 
credit
exposure by establishing policies, standards and guidelines that define, quantify and monitor credit risk and assessing
 
the adequacy
of the allowance for credit losses.
 
The Corporation’s
 
Operational Risk
 
Committee (“ORCO”)
 
and the
 
Cyber Security
 
Committee, which are
 
composed of
 
senior level
management representatives from
 
the business
 
lines and corporate
 
functions, provide
 
executive oversight to
 
facilitate consistency
of effective
 
policies, best practices,
 
controls and
 
monitoring tools for
 
managing and
 
assessing all types
 
of operational
 
risks across
the Corporation. The
 
FORM Division, within
 
the Risk Management Group,
 
serves as ORCO’s
 
operating arm and
 
is responsible for
establishing baseline processes to measure, monitor, limit and manage
 
operational risk.
 
 
The Corporate Security Group (“CSG”), under the direction of the
 
Chief Security Officer, leads
 
all efforts pertaining to cybersecurity,
enterprise fraud and data
 
privacy, including
 
developing strategies and oversight processes with
 
policies and programs that mitigate
compliance, operational,
 
strategic, financial
 
and reputational
 
risks associated
 
with the
 
Corporation’s and
 
our customers’
 
data and
assets.
 
The CSG also leads the Cyber Security Committee.
The Corporate Legal Division, in this context, has the responsibility
 
of assessing, monitoring, managing and reporting with respect to
legal risks, including those related to litigation, investigations
 
and other material legal matters.
 
The
 
Corporation
 
has
 
also
 
established
 
an
 
Environmental,
 
Social
 
and
 
Governance
 
(“ESG”)
 
Committee
 
whose
 
purpose
 
and
responsibility is
 
to oversee
 
the Corporation’s
 
ESG strategies
 
and support
 
the development
 
and consistent
 
application of
 
policies,
processes and procedures that measure, limit and
 
manage ESG matters and risks.
The processes
 
of strategic
 
risk planning
 
and the
 
evaluation of
 
reputational risk
 
are on-going
 
processes through
 
which continuous
data gathering and
 
analysis are performed.
 
In order
 
to ensure strategic
 
risks are properly
 
identified and monitored,
 
the Corporate
Strategic
 
Planning
 
Division
 
performs
 
periodic
 
assessments
 
regarding
 
corporate
 
strategic
 
priority
 
initiatives
 
as
 
well
 
as
 
emerging
issues.
 
The Acquisitions and Corporate Investments Division
 
continuously assesses potential strategic transactions.
 
The Corporate
55
Communications
 
Division
 
is
 
responsible
 
for
 
the
 
monitoring,
 
management
 
and
 
implementation
 
of
 
action
 
plans
 
with
 
respect
 
to
reputational risk issues.
 
Popular’s capital planning process integrates the Corporation’s risk profile
 
as well as its strategic focus, operating
 
environment, and
other factors
 
that could
 
materially affect
 
capital adequacy
 
in hypothetical
 
highly-stressed business
 
scenarios. Capital
 
ratio targets
and triggers take into consideration the different risks evaluated
 
under Popular’s risk management framework.
In
 
addition to
 
establishing a
 
formal process
 
to manage
 
risk, our
 
corporate culture
 
is also
 
critical to
 
an effective
 
risk management
function.
 
Through our Code
 
of Ethics, the
 
Corporation provides a framework
 
for all our
 
employees to conduct themselves
 
with the
highest integrity.
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
56
Statistical Summary 2020-2021
Statements of Financial Condition
At December 31,
(In thousands)
2021
2020
Assets:
Cash and due from banks
$
428,433
$
491,065
Money market investments:
 
Time deposits with other banks
 
17,536,719
11,640,880
Total money market investments
17,536,719
11,640,880
Trading account debt securities, at fair value
29,711
36,674
Debt securities available-for-sale, at fair
 
value
24,968,269
21,561,152
Debt securities held-to-maturity, at amortized cost
79,461
92,621
Less – Allowance for credit losses
8,096
10,261
Debt securities held-to-maturity, net
71,365
82,360
Equity securities
189,977
173,737
Loans held-for-sale, at lower of cost or fair
 
value
59,168
99,455
Loans held-in-portfolio:
Loans held-in-portfolio
29,506,225
29,588,430
Less – Unearned income
265,668
203,234
 
Allowance for credit losses
695,366
896,250
Total loans held-in-portfolio, net
28,545,191
28,488,946
Premises and equipment, net
494,240
510,241
Other real estate
 
85,077
83,146
Accrued income receivable
203,096
209,320
Mortgage servicing rights, at fair value
121,570
118,395
Other assets
1,628,571
1,737,041
Goodwill
720,293
671,122
Other intangible assets
16,219
22,466
Total assets
$
75,097,899
$
65,926,000
Liabilities and Stockholders’ Equity
Liabilities:
 
Deposits:
 
Non-interest bearing
$
15,684,482
$
13,128,699
Interest bearing
51,320,606
43,737,641
Total deposits
67,005,088
56,866,340
Assets sold under agreements to repurchase
91,603
121,303
Other short-term borrowings
75,000
-
Notes payable
988,563
1,224,981
Other liabilities
968,248
1,684,689
Total liabilities
69,128,502
59,897,313
Stockholders’ equity:
Preferred stock
22,143
22,143
Common stock
1,046
1,045
Surplus
4,650,182
4,571,534
Retained earnings
2,973,745
2,260,928
Treasury stock – at cost
(1,352,650)
(1,016,954)
Accumulated other comprehensive (loss)
 
income, net of tax
(325,069)
189,991
Total stockholders’ equity
 
5,969,397
6,028,687
Total liabilities and stockholders’ equity
$
75,097,899
$
65,926,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
57
Statistical Summary 2019-2021
Statements of Operations
For the years ended December 31,
(In thousands)
2021
2020
2019
Interest income:
Loans
$
1,747,827
$
1,742,390
$
1,802,968
Money market investments
21,147
19,721
89,823
Investment securities
353,663
329,440
368,002
Total interest income
2,122,637
2,091,551
2,260,793
Less - Interest expense
165,047
234,938
369,099
Net interest income
1,957,590
1,856,613
1,891,694
Provision for credit losses (benefit)
(193,464)
292,536
165,779
Net interest income after provision for
 
credit losses (benefit)
2,151,054
1,564,077
1,725,915
Mortgage banking activities
50,133
10,401
32,093
Net gain (loss) on sale of debt securities
23
41
(20)
Net gain, including impairment on equity securities
131
6,279
2,506
Net (loss) profit on trading account debt securities
(389)
1,033
994
Net (loss) gain on sale of loans, including
 
valuation adjustments on loans held-for-sale
(73)
1,234
-
Adjustment (expense) to indemnity reserves
 
on loans sold
4,406
390
(343)
Other non-interest income
587,897
492,934
534,653
Total non-interest income
642,128
512,312
569,883
Operating expenses:
 
Personnel costs
631,802
564,205
590,625
All other operating expenses
917,473
893,624
886,857
Total operating expenses
1,549,275
1,457,829
1,477,482
Income before income tax
 
1,243,907
618,560
818,316
Income tax expense
309,018
111,938
147,181
Net Income
$
934,889
$
506,622
$
671,135
Net Income Applicable to Common Stock
 
$
933,477
$
504,864
$
667,412
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
58
Statistical Summary 2019-2021
Average Balance Sheet and Summary of
 
Net Interest Income
On a Taxable Equivalent
 
Basis*
2021
2020
2019
(Dollars in thousands)
Average
Balance
Interest
 
Average
Rate
 
Average
Balance
Interest
 
Average
Rate
 
Average
Balance
Interest
 
Average
Rate
 
Assets
Interest earning assets:
Money market investments
$
15,999,741
$
21,147
0.13
%
$
8,597,652
$
19,723
0.23
%
$
4,166,293
$
89,824
2.16
%
U.S.
 
Treasury securities
12,396,773
266,670
2.16
12,107,819
257,308
2.13
9,823,518
302,025
3.07
Obligations of U.S.
 
Government
 
sponsored entities
7,972
120
1.50
70,424
2,818
4.00
234,553
5,911
2.52
Obligations of Puerto Rico, States
and political subdivisions
75,607
7,608
10.06
82,051
5,705
6.95
93,313
6,394
6.85
Collateralized mortgage obligations and
 
mortgage-backed securities
10,255,525
224,706
2.19
6,913,416
194,794
2.82
5,582,051
178,964
3.21
Other
 
194,640
9,027
4.64
178,818
7,369
4.12
171,223
8,487
4.96
Total investment securities
22,930,517
508,131
2.22
19,352,528
467,994
2.42
15,904,658
501,781
3.15
Trading account securities
84,380
4,339
5.16
69,446
4,165
6.00
67,596
5,103
7.55
Loans (net of unearned income)
29,074,045
1,794,789
6.19
28,384,981
1,785,022
6.29
26,806,368
1,850,894
6.90
Total interest earning
 
assets/Interest
income
$
68,088,683
$
2,328,406
3.43
%
$
56,404,607
$
2,276,904
4.04
%
$
46,944,915
$
2,447,602
5.21
%
Total non-interest
 
earning assets
3,079,942
3,178,848
3,396,912
Total assets
$
71,168,625
$
59,583,455
$
50,341,827
Liabilities and Stockholders' Equity
 
Interest bearing liabilities:
Savings, NOW,
 
money market and other
 
 
interest bearing demand accounts
$
41,387,504
$
59,034
0.15
%
$
32,077,578
$
92,417
0.29
%
$
25,575,455
$
192,200
0.75
%
Time deposits
7,028,334
52,587
0.75
7,970,474
83,438
1.05
7,770,430
112,658
1.45
Federal funds purchased
1
-
0.25
342
1
0.25
-
-
2.63
Securities purchased under agreement to
resell
91,394
317
0.35
143,718
2,336
1.63
222,565
5,882
2.64
Other short-term borrowings
343
1
0.35
21,557
120
0.56
8,703
217
2.50
Notes payable
 
1,184,737
53,107
4.49
1,178,169
56,626
4.81
1,194,119
58,142
4.77
 
Total interest bearing
 
liabilities/Interest
expense
49,692,313
165,046
0.33
41,391,838
234,938
0.57
34,771,272
369,099
1.06
 
Total non-interest
 
bearing liabilities
15,698,660
12,771,679
9,857,038
Total liabilities
65,390,973
54,163,517
44,628,310
Stockholders' equity
 
5,777,652
5,419,938
5,713,517
Total liabilities and
 
stockholders' equity
$
71,168,625
$
59,583,455
$
50,341,827
Net interest income on a taxable
equivalent basis
$
2,163,360
$
2,041,966
$
2,078,503
Cost of funding earning assets
0.24
%
0.42
%
0.78
%
Net interest margin
3.19
%
3.62
%
4.43
%
Effect of the taxable equivalent
205,770
185,353
186,809
Net interest income per books
$
1,957,590
$
1,856,613
$
1,891,694
*
 
Shows
 
the
 
effect
 
of
 
the
 
tax
 
exempt
 
status
 
of
 
some
 
loans
 
and
 
investments
 
on
 
their
 
yield,
 
using
 
the
 
applicable
 
statutory
 
income
 
tax
 
rates.
 
The
computation considers
 
the interest
 
expense disallowance
 
required by
 
the Puerto
 
Rico Internal
 
Revenue Code.
 
This adjustment
 
is shown
 
in order
 
to
compare the yields of the tax exempt and taxable assets
 
on a taxable basis.
 
Note: Average loan
 
balances include the
 
average balance of
 
non-accruing loans. No
 
interest income is
 
recognized for these
 
loans in accordance
 
with
the Corporation’s policy.
 
decp59i0.jpg decp59i2.jpg decp59i1.jpg
59
Report of Management on Internal Control Over Financial
 
Reporting
The management of
 
Popular, Inc.
 
(the “Corporation”) is responsible
 
for establishing and
 
maintaining adequate internal control
 
over
financial reporting as defined in Rules 13a - 15(f) and 15d -
 
15(f) under the Securities Exchange Act of 1934 and for our assessment
of internal control over financial reporting. The Corporation’s internal
 
control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in
 
accordance
 
with
 
accounting
 
principles
 
generally
 
accepted
 
in
 
the
 
United
 
States
 
of
 
America,
 
and
 
includes
 
controls
 
over
 
the
preparation of
 
financial statements
 
in accordance
 
with the
 
instructions to
 
the Consolidated
 
Financial Statements
 
for Bank
 
Holding
Companies (Form FR Y-9C)
 
to comply with the reporting requirements of Section 112
 
of the Federal Deposit Insurance Corporation
Improvement Act (FDICIA). The Corporation’s internal control
 
over financial reporting includes those policies
 
and procedures that:
(i)
 
pertain
 
to
 
the
 
maintenance
 
of
 
records
 
that,
 
in
 
reasonable
 
detail,
 
accurately
 
and
 
fairly
 
reflect
 
the
 
transactions
 
and
dispositions of the assets of the Corporation;
(ii)
 
provide
 
reasonable
 
assurance
 
that
 
transactions
 
are
 
recorded
 
as
 
necessary
 
to
 
permit
 
preparation
 
of
 
financial
statements in accordance with accounting principles generally accepted in the United States of America, and that receipts
and expenditures of the Corporation are being made only in accordance with authorizations of management and directors
of the Corporation; and
(iii) provide reasonable assurance regarding
 
prevention or timely detection of
 
unauthorized acquisition, use or disposition
of the Corporation’s assets that could have a material effect
 
on the financial statements.
Because
 
of
 
its
 
inherent
 
limitations,
 
internal
 
control
 
over
 
financial
 
reporting
 
may
 
not
 
prevent
 
or
 
detect
 
misstatements.
 
Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance
 
with the policies or procedures may deteriorate.
The management of Popular,
 
Inc. has assessed the
 
effectiveness of the Corporation’s
 
internal control over financial reporting
 
as of
December
 
31,
 
2021.
 
In
 
making
 
this
 
assessment,
 
management
 
used
 
the
 
criteria
 
set
 
forth
 
in
 
the
 
Internal
 
Control-Integrated
Framework (2013) issued by the Committee of
 
Sponsoring Organizations of the Treadway Commission (COSO).
 
On October
 
15, 2021, Popular
 
Equipment Finance, LLC
 
(“PEF”), a newly
 
formed wholly-owned subsidiary
 
of Popular Bank
 
(“PB”),
completed the
 
acquisition of
 
certain assets
 
and
 
the
 
assumption of
 
certain
 
liabilities of
 
K2
 
Capital Group
 
LLC’s
 
(“K2”) equipment
leasing
 
and
 
financing
 
business
 
based
 
in
 
Minnesota
 
(the
 
“Acquired
 
Business”).
 
The
 
Acquired
 
Business’
 
total
 
assets
 
and
 
total
revenues represented approximately 0.2% and 0.2%, respectively, of
 
the related consolidated financial statements as of and for
 
the
period ended
 
December 31,
 
2021. The
 
Corporation has
 
excluded the
 
Acquired Business
 
from
 
its assessment
 
of the
 
design and
operating effectiveness of internal controls over financial reporting for the fiscal year 2021. The Corporation made this determination
in accordance with SEC’s
 
guidance which permits the exclusion of
 
a recently acquired business from
 
the scope of this
 
assessment
in the year of acquisition.
 
Based on our assessment, management concluded that the Corporation maintained effective internal control over financial reporting
as of December 31, 2021 based on the
 
criteria referred to above.
The Corporation’s
 
independent registered
 
public accounting
 
firm, PricewaterhouseCoopers
 
LLP,
 
has audited
 
the effectiveness
 
of
the Corporation’s
 
internal control
 
over financial
 
reporting as
 
of December
 
31, 2021,
 
as stated
 
in their
 
report dated
 
March 1,
 
2022
which appears herein.
Ignacio Alvarez
Carlos J. Vázquez
President and
Executive Vice President
Chief Executive Officer
and Chief Financial Officer
decp60i0.gif
60
Report of Independent Registered Public Accounting Firm
 
To
the
Board of Directors and Stockholders of Popular, Inc.
Opinions on the Financial Statements and Internal
 
Control over Financial Reporting
 
We
 
have
 
audited
 
the
 
accompanying
 
consolidated
 
statements
 
of
 
financial
 
condition
 
of
 
Popular,
 
Inc.
 
and
 
its
subsidiaries
 
(the
 
“Corporation”)
 
as
 
of
 
December
 
31,
 
2021
 
and
 
2020,
 
and
 
the
 
related
 
consolidated
 
statements
 
of
operations, comprehensive income, changes
 
in stockholders’ equity and cash
 
flows for each of
 
the three years in
 
the
period
 
ended December
 
31, 2021,
 
including the
 
related notes
 
collectively
 
referred
 
to
 
as the
 
“consolidated
 
financial
statements”).
 
We
 
also
 
have
 
audited
 
the
 
Corporation's
 
internal
 
control
 
over
 
financial
 
reporting
 
as
 
of
 
December
 
31,
2021,
 
based
 
on
 
criteria
 
established
 
in
Internal
 
Control
 
-
 
Integrated
 
Framework
(2013)
 
issued
 
by
 
the
 
Committee
 
of
Sponsoring Organizations of the Treadway Commission (COSO).
 
In
 
our
 
opinion,
 
the
 
consolidated
 
financial
 
statements
 
referred
 
to
 
above
 
present
 
fairly,
 
in
 
all
 
material
 
respects,
 
the
financial position of the Corporation as of
 
December 31, 2021 and 2020, and the
 
results of its operations and its cash
flows
 
for
 
each
 
of
 
the
 
three
 
years
 
in
 
the
 
period
 
ended
 
December
 
31,
 
2021
 
in
 
conformity with
 
accounting
 
principles
generally accepted
 
in the
 
United States
 
of America.
 
Also, in
 
our opinion,
 
the Corporation
 
maintained, in
 
all material
respects, effective
 
internal control over
 
financial reporting
 
as of
 
December 31, 2021,
 
based on criteria
 
established in
Internal Control - Integrated Framework
 
(2013) issued by the COSO.
 
Change in Accounting Principle
As
 
discussed
 
in
 
Note
 
3
to
 
the
 
consolidated
 
financial
 
statements,
 
the
 
Corporation
 
changed
 
the
 
manner
 
in
 
which
 
it
accounts for its allowance for credit losses in 2020.
Basis for Opinions
 
The
 
Corporation's management
 
is responsible
 
for these
 
consolidated
 
financial statements,
 
for maintaining
 
effective
internal control
 
over financial
 
reporting, and
 
for its
 
assessment of
 
the effectiveness
 
of internal
 
control over
 
financial
reporting,
 
included
 
in
 
the
 
accompanying
 
Report
 
of
 
Management
 
on
 
Internal
 
Control
 
over
 
Financial
 
Reporting.
 
Our
responsibility is
 
to express opinions
 
on the
 
Corporation’s consolidated
 
financial statements and
 
on the
 
Corporation’s
internal
 
control
 
over
 
financial
 
reporting
 
based
 
on
 
our
 
audits.
 
We
 
are
 
a
 
public
 
accounting
 
firm
 
registered
 
with
 
the
Public
 
Company
 
Accounting
 
Oversight
 
Board
 
(United
 
States)
 
(PCAOB)
 
and
 
are
 
required
 
to
 
be
 
independent
 
with
respect
 
to
 
the
 
Corporation
 
in
 
accordance
 
with
 
the
 
U.S.
 
federal
 
securities
 
laws
 
and
 
the
 
applicable
 
rules
 
and
regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits
 
in accordance with the standards
 
of the PCAOB. Those standards
 
require that we plan and
perform
 
the audits
 
to obtain
 
reasonable assurance
 
about
 
whether the
 
consolidated financial
 
statements are
 
free of
material
 
misstatement,
 
whether due
 
to error
 
or
 
fraud, and
 
whether
 
effective
 
internal control
 
over financial
 
reporting
was maintained in all material respects.
 
Our
 
audits
 
of
 
the
 
consolidated
 
financial
 
statements
 
included
 
performing
 
procedures
 
to
 
assess
 
the
 
risks of
 
material
misstatement of the consolidated
 
financial statements, whether due
 
to error or fraud,
 
and performing procedures that
respond to
 
those risks.
 
Such procedures
 
included examining,
 
on a
 
test basis,
 
evidence regarding
 
the amounts
 
and
disclosures
 
in
 
the
 
consolidated
 
financial
 
statements.
 
Our
 
audits
 
also
 
included
 
evaluating
 
the
 
accounting
 
principles
used
 
and
 
significant
 
estimates
 
made
 
by
 
management,
 
as
 
well
 
as
 
evaluating
 
the
 
overall
 
presentation
 
of
 
the
consolidated
 
financial
 
statements.
 
Our
 
audit
 
of
 
internal
 
control
 
over
 
financial
 
reporting
 
included
 
obtaining
 
an
61
understanding
 
of
 
internal
 
control
 
over
 
financial
 
reporting,
 
assessing
 
the
 
risk
 
that
 
a
 
material
 
weakness
 
exists,
 
and
testing
 
and
 
evaluating
 
the
 
design
 
and
 
operating
 
effectiveness
 
of
 
internal
 
control
 
based
 
on
 
the
 
assessed
 
risk.
 
Our
audits also included performing such other procedures as we considered necessary in
 
the circumstances. We believe
that our audits provide a reasonable basis for our opinions.
 
As described in
 
the Report of
 
Management on Internal
 
Control Over Financial Reporting,
 
management has excluded
the business
 
acquired from
 
K2 Capital
 
Group LLC
 
(the "acquired
 
business") from
 
its assessment
 
of internal
 
control
over financial reporting as of December
 
31, 2021 because it was acquired
 
by the Corporation in a purchase
 
business
combination
 
during
 
2021.
 
We
 
have
 
also
 
excluded
 
the
 
acquired
 
business
 
from
 
our
 
audit
 
of
 
internal
 
control
 
over
financial reporting. The acquired
 
business' total assets and
 
total revenues excluded from
 
management’s assessment
and
 
our
 
audit
 
of
 
internal
 
control
 
over
 
financial
 
reporting
 
represent
 
.2%
 
and
 
.2%,
 
respectively,
 
of
 
the
 
related
consolidated financial statement amounts as of and for the year ended December 31, 2021.
 
Definition and Limitations of Internal Control over Financial Reporting
 
A
 
company’s
 
internal
 
control
 
over
 
financial
 
reporting
 
is
 
a
 
process
 
designed
 
to
 
provide
 
reasonable
 
assurance
regarding
 
the
 
reliability
 
of
 
financial
 
reporting
 
and
 
the
 
preparation
 
of
 
financial
 
statements
 
for
 
external
 
purposes
 
in
accordance
 
with
 
generally
 
accepted
 
accounting
 
principles.
 
Management's
 
assessment
 
and
 
our
 
audit
 
of
 
Popular,
Inc.'s
 
internal
 
control
 
over
 
financial
 
reporting
 
also
 
included
 
controls
 
over
 
the
 
preparation
 
of
 
financial
 
statements
 
in
accordance with the instructions
 
to the Consolidated Financial Statements
 
for Bank Holding Companies
 
(Form FR Y-
9C)
 
to
 
comply
 
with
 
the
 
reporting
 
requirements
 
of
 
Section
 
112
 
of
 
the
 
Federal
 
Deposit
 
Insurance
 
Corporation
Improvement
 
Act
 
(FDICIA).
 
A
 
company’s
 
internal
 
control
 
over
 
financial
 
reporting
 
includes
 
those
 
policies
 
and
procedures
 
that (i)
 
pertain to
 
the maintenance
 
of records
 
that, in
 
reasonable detail,
 
accurately
 
and fairly
 
reflect the
transactions and
 
dispositions of
 
the assets
 
of the
 
company; (ii)
 
provide reasonable
 
assurance that
 
transactions are
recorded
 
as
 
necessary
 
to
 
permit
 
preparation
 
of
 
financial
 
statements
 
in
 
accordance
 
with
 
generally
 
accepted
accounting
 
principles, and
 
that receipts
 
and expenditures
 
of the
 
company are
 
being made
 
only
 
in accordance
 
with
authorizations
 
of
 
management
 
and
 
directors
 
of
 
the
 
company;
 
and
 
(iii)
 
provide
 
reasonable
 
assurance
 
regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
 
Because of
 
its inherent
 
limitations, internal
 
control over
 
financial reporting
 
may not
 
prevent or
 
detect misstatements.
Also, projections of
 
any evaluation of effectiveness
 
to future periods are
 
subject to the risk
 
that controls may become
inadequate because
 
of changes
 
in conditions,
 
or that
 
the degree
 
of compliance
 
with the
 
policies or
 
procedures may
deteriorate.
 
Critical Audit Matters
 
The critical
 
audit matters
 
communicated below
 
are matters
 
arising from
 
the current
 
period audit
 
of the
 
consolidated
financial
 
statements
 
that
 
were
 
communicated
 
or
 
required
 
to
 
be
 
communicated
 
to
 
the
 
audit
 
committee
 
and
 
that
 
(i)
relate
 
to
 
accounts
 
or
 
disclosures
 
that
 
are
 
material
 
to
 
the
 
consolidated
 
financial
 
statements
 
and
 
(ii)
 
involved
 
our
especially challenging,
 
subjective, or
 
complex judgments.
 
The communication
 
of critical
 
audit matters
 
does not
 
alter
in any way our opinion on the consolidated financial statements, taken as a whole, and
 
we are not, by communicating
the
 
critical
 
audit
 
matters
 
below,
 
providing
 
separate
 
opinions
 
on
 
the
 
critical
 
audit
 
matters
 
or
 
on
 
the
 
accounts
 
or
disclosures to which they relate.
 
Allowance
 
for
 
Credit
 
Losses
 
on
 
Loans
 
Held-in-Portfolio
 
-
 
Quantitative
 
Models,
 
and
 
Qualitative
 
Adjustments
 
to
 
the
Puerto Rico Portfolios
 
As described in
 
Notes 2 and
 
9 to the
 
consolidated financial statements,
 
the Corporation follows
 
the current expected
credit
 
loss
 
(“CECL”)
 
model,
 
to
 
establish
 
and
 
evaluate
 
the
 
adequacy
 
of
 
the
 
allowance
 
for
 
credit
 
losses
 
(“ACL”)
 
to
provide for expected
 
losses in the loan
 
portfolio. As of December
 
31, 2021, the allowance
 
for credit losses
 
was $695
million
 
on
 
total
 
loans
 
of
 
$29
 
billion.
 
This
 
CECL
 
model
 
establishes
 
a
 
forward-looking
 
methodology
 
that
 
reflects
 
the
expected credit losses over the lives of financial assets. The quantitative modeling framework includes competing risk
models
 
to
 
generate
 
lifetime
 
defaults
 
and
 
prepayments,
 
and
 
other
 
loan
 
level
 
modeling
 
techniques
 
to
 
estimate
 
loss
62
severity.
 
As
 
part
 
of
 
this
 
methodology,
 
management
 
evaluates
 
various
 
macroeconomic
 
scenarios,
 
and
 
may
 
apply
probability
 
weights
 
to
 
the
 
outcome
 
of
 
the
 
selected
 
scenarios.
 
The
 
ACL
 
also
 
includes
 
a
 
qualitative
 
framework
 
that
addresses losses
 
that are
 
expected but
 
not captured
 
within the
 
quantitative modeling
 
framework. In
 
order to
 
identify
potential
 
losses
 
that are
 
not captured
 
through the
 
models, management
 
evaluated model
 
limitations as
 
well as
 
the
different
 
risks covered
 
by the
 
variables used
 
in each
 
quantitative model.
 
To
 
complement the
 
analysis, management
also evaluated
 
sectors that
 
have low
 
levels of
 
historical defaults,
 
but current
 
conditions show
 
the potential
 
for future
losses.
The
 
principal
 
considerations
 
for
 
our
 
determination
 
that
 
performing
 
procedures
 
relating
 
to
 
the
 
allowance
 
for
 
credit
losses on
 
loans
 
held-in-portfolio quantitative
 
models, and
 
qualitative adjustments
 
to the
 
Puerto Rico
 
portfolios is
 
a
critical
 
audit
 
matter
 
are
 
(i)
 
the
 
significant
 
judgment
 
by
 
management
 
in
 
determining
 
the
 
allowance
 
for
 
credit
 
losses,
including
 
qualitative adjustments
 
to the
 
Puerto Rico
 
portfolios,
 
which in
 
turn led
 
to a
 
high degree
 
of auditor
 
effort,
judgment, and subjectivity in performing
 
procedures and evaluating audit evidence
 
relating to the allowance for
 
credit
losses,
 
including management’s
 
selection of
 
macroeconomic
 
scenarios and
 
probability
 
weights applied;
 
and (ii)
 
the
audit
 
effort
 
involved the
 
use of
 
professionals with
 
specialized skill
 
and knowledge.
 
Addressing the
 
matter
 
involved
performing
 
procedures
 
and
 
evaluating
 
audit
 
evidence
 
in
 
connection
 
with
 
forming
 
our
 
overall
 
opinion
 
on
 
the
consolidated
 
financial
 
statements.
 
These
 
procedures
 
included
 
testing
 
the
 
effectiveness
 
of
 
controls
 
relating
 
to
 
the
allowance for
 
credit losses
 
for loans
 
held-in-portfolio, including
 
qualitative adjustments
 
to the
 
Puerto Rico
 
portfolios.
These procedures also included, among others, testing management’s
 
process for estimating the allowance for credit
losses
 
by (i)
 
evaluating the
 
appropriateness of
 
the methodology,
 
including models
 
used for
 
estimating the
 
ACL; (ii)
evaluating
 
the reasonableness of management’s
 
selection of various macroeconomic
 
scenarios including probability
weights
 
applied
 
to
 
the
 
expected
 
loss
 
outcome
 
of
 
the
 
selected
 
macroeconomic
 
scenarios;
 
(iii)
 
evaluating
 
the
reasonableness of
 
the qualitative
 
adjustments to
 
Puerto Rico
 
portfolios allowance
 
for credit
 
losses;
 
and (iv)
 
testing
the
 
data
 
used
 
in
 
the
 
allowance
 
for
 
credit
 
losses.
 
Professionals
 
with
 
specialized
 
skill
 
and
 
knowledge
 
were
 
used
 
to
assist
 
in
 
evaluating
 
the
 
appropriateness
 
of
 
the
 
methodology
 
and
 
models,
 
the
 
reasonableness
 
of
 
management’s
selection
 
and
 
weighting
 
of
 
macroeconomic
 
scenarios
 
used
 
to
 
estimate
 
current
 
expected
 
credit
 
losses
 
and
reasonableness of the qualitative adjustments to Puerto Rico portfolios allowance for credit losses.
 
Goodwill Annual Impairment Assessment - Banco Popular de Puerto Rico and Popular Bank Reporting Units
 
As
 
described
 
in
 
Note
 
15
 
to
 
the
 
consolidated
 
financial
 
statements,
 
the
 
Corporation’s
 
consolidated
 
goodwill
 
balance
was $720 million as of December 31, 2021, of which a significant
 
portion relates to the Banco Popular de Puerto Rico
(“BPPR”) and
 
Popular Bank
 
(“PB”) reporting
 
units. Management
 
conducts an
 
impairment test
 
as of
 
July 31
 
of each
year
 
and
 
on
 
a
 
more
 
frequent
 
basis
 
if
 
events
 
or
 
circumstances
 
indicate
 
an
 
impairment
 
could
 
have
 
taken
 
place.
 
In
determining
 
the
 
fair
 
value
 
of each
 
reporting
 
unit,
 
management
 
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
 
computations
require
 
management
 
to
 
make
 
estimates,
 
assumptions
 
and
 
calculations
 
related
 
to:
 
(i)
 
a
 
selection
 
of
 
comparable
publicly
 
traded
 
companies,
 
based
 
on
 
the
 
nature
 
of
 
business,
 
location
 
and
 
size;
 
(ii)
 
a
 
selection
 
of
 
comparable
acquisitions, (iii)
 
calculation of average price multiples
 
of relevant value drivers from
 
a group of selected
 
comparable
companies
 
and
 
acquisitions;
 
(iv)
 
the
 
discount
 
rate
 
applied
 
to
 
future
 
earnings,
 
based
 
on
 
an
 
estimate
 
of
 
the
 
cost
 
of
equity;
 
(v)
 
the
 
potential
 
future
 
earnings
 
of
 
the
 
reporting
 
units;
 
and
 
(vi)
 
the
 
market
 
growth
 
and
 
new
 
business
assumptions.
 
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 were reasonable.
 
The principal
 
considerations for our
 
determination that performing
 
procedures relating to
 
goodwill annual
 
impairment
assessments of
 
the Banco
 
Popular de
 
Puerto Rico
 
and Popular
 
Bank reporting
 
units is
 
a critical
 
audit matter
 
are (i)
the significant judgment by
 
management when determining the
 
fair value measurements of
 
the reporting units, which
in
 
turn
 
led
 
to
 
a
 
high
 
degree
 
of
 
auditor
 
judgment,
 
subjectivity,
 
and
 
effort
 
in
 
performing
 
procedures
 
and
 
evaluating
evidence
 
relating
 
to
 
the
 
calculation
 
of
 
average
 
price
 
multiples
 
of
 
relevant
 
value
 
drivers
 
from
 
a
 
group
 
of
 
selected
comparable
 
companies
 
and
 
acquisitions;
 
the
 
potential
 
future
 
earnings
 
of
 
the
 
reporting
 
unit;
 
the
 
estimated
 
cost
 
of
equity;
 
and
 
the
 
market
 
growth
 
and
 
new
 
business
 
assumptions;
 
and
 
(ii)
 
the
 
audit
 
effort
 
involved
 
the
 
use
 
of
decp63i0.jpg
63
professionals
 
with
 
specialized
 
skill
 
and
 
knowledge.
 
Addressing
 
the
 
matter
 
involved
 
performing
 
procedures
 
and
evaluating
 
audit
 
evidence
 
in
 
connection
 
with
 
forming
 
our
 
overall
 
opinion
 
on
 
the
 
consolidated
 
financial
 
statements.
These
 
procedures
 
included
 
testing
 
the
 
effectiveness
 
of
 
controls
 
relating
 
to
 
management’s
 
goodwill
 
impairment
assessment
 
process,
 
including
 
controls
 
over
 
the
 
valuation
 
of
 
Banco
 
Popular
 
de
 
Puerto
 
Rico
 
and
 
Popular
 
Bank
reporting units. These procedures
 
also included, among others, (i) testing management’s process for determining the
fair
 
value
 
estimates
 
of
 
Banco
 
Popular
 
de
 
Puerto
 
Rico
 
and
 
Popular
 
Bank
 
reporting
 
units;
 
(ii)
 
evaluating
 
the
appropriateness of
 
the discounted cash
 
flow analyses and
 
guideline public companies
 
methodologies including
 
the
weights applied
 
to each
 
valuation method;
 
(iii) testing
 
the underlying
 
data used
 
in the
 
estimates;
 
(iv) evaluating
 
the
appropriateness
 
of
 
the
 
calculation
 
of
 
average
 
price
 
multiples
 
of
 
relevant
 
value
 
drivers
 
from
 
a
 
group
 
of
 
selected
comparable
 
companies
 
and acquisitions;
 
and (v)
 
evaluating the
 
potential
 
future
 
earnings of
 
the
 
reporting units;
 
the
 
estimated cost
 
of equity;
 
and the market
 
growth and
 
new business
 
assumptions, including
 
whether the
 
assumptions
used
 
by
 
management
 
were
 
reasonable
 
considering,
 
as
 
applicable,
 
(i)
 
the
 
current
 
and
 
past
 
performance
 
of
 
the
reporting units;
 
(ii) the
 
consistency with
 
external market and
 
industry data;
 
and (iii) whether
 
these assumptions
 
were
consistent with evidence obtained in other areas of the audit.
 
Professionals with specialized skill and knowledge were
used
 
to
 
assist
 
in
 
evaluating
 
the
 
appropriateness
 
of
 
the
 
methods
 
and
 
the
 
reasonableness
 
of
 
certain
 
significant
assumptions.
 
San Juan, Puerto Rico
March 1, 2022
We have served as the Corporation’s auditor since 1971, which includes periods before the Corporation became
subject to SEC reporting requirements.
CERTIFIED PUBLIC ACCOUNTANTS
 
(OF PUERTO RICO)
License No. LLP-216 Expires Dec. 1, 2022
Stamp E452193 of the P.R. Society of
Certified Public Accountants has been
affixed to the file copy of this report
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
64
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF FINANCIAL CONDITION
December 31,
December 31,
(In thousands, except share information)
2021
2020
Assets:
Cash and due from banks
$
428,433
$
491,065
Money market investments:
 
Time deposits with other banks
 
17,536,719
11,640,880
Total money market investments
17,536,719
11,640,880
Trading account debt securities, at fair value:
 
Pledged securities with creditors’ right to repledge
 
-
241
Other trading account debt securities
29,711
36,433
Debt securities available-for-sale, at fair
 
value:
Pledged securities with creditors’ right to repledge
 
93,330
125,819
Other debt securities available-for-sale
24,874,939
21,435,333
Debt securities held-to-maturity, at amortized cost (fair value 2021
 
- $83,368; 2020 - $94,891)
79,461
92,621
Less – Allowance for credit losses
8,096
10,261
Debt securities held-to-maturity, net
71,365
82,360
Equity securities (realizable value 2021 -
 
$192,345; 2020 - $173,929)
189,977
173,737
Loans held-for-sale, at lower of cost or fair
 
value
59,168
99,455
Loans held-in-portfolio
29,506,225
29,588,430
Less – Unearned income
265,668
203,234
 
Allowance for credit losses
695,366
896,250
Total loans held-in-portfolio, net
28,545,191
28,488,946
Premises and equipment, net
494,240
510,241
Other real estate
85,077
83,146
Accrued income receivable
203,096
209,320
Mortgage servicing rights, at fair value
121,570
118,395
Other assets
1,628,571
1,737,041
Goodwill
720,293
671,122
Other intangible assets
16,219
22,466
Total assets
$
75,097,899
$
65,926,000
Liabilities and Stockholders’ Equity
Liabilities:
 
Deposits:
Non-interest bearing
$
15,684,482
$
13,128,699
Interest bearing
51,320,606
43,737,641
Total deposits
67,005,088
56,866,340
Assets sold under agreements to repurchase
91,603
121,303
Other short-term borrowings
75,000
-
Notes payable
988,563
1,224,981
Other liabilities
968,248
1,684,689
Total liabilities
69,128,502
59,897,313
Commitments and contingencies (Refer
 
to Note 24)
 
 
Stockholders’ equity:
 
Preferred stock, 30,000,000 shares authorized;
 
885,726 shares issued and outstanding (2020
 
-
885,726)
22,143
22,143
Common stock, $0.01 par value; 170,000,000
 
shares authorized;104,579,334 shares issued
 
(2020 -
104,508,290) and 79,851,169 shares outstanding
 
(2020 - 84,244,235)
1,046
1,045
Surplus
4,650,182
4,571,534
Retained earnings
2,973,745
2,260,928
Treasury stock - at cost, 24,728,165 shares (2020 -
 
20,264,055)
 
(1,352,650)
(1,016,954)
Accumulated other comprehensive (loss)
 
income, net of tax
 
(325,069)
189,991
Total stockholders’ equity
 
5,969,397
6,028,687
Total liabilities and stockholders’ equity
$
75,097,899
$
65,926,000
The accompanying notes are an integral part of
 
these Consolidated Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
65
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF OPERATIONS
 
Years ended December 31,
(In thousands, except per share information)
2021
2020
2019
Interest income:
Loans
$
1,747,827
$
1,742,390
$
1,802,968
Money market investments
21,147
19,721
89,823
Investment securities
353,663
329,440
368,002
Total interest income
2,122,637
2,091,551
2,260,793
Interest expense:
Deposits
111,621
175,855
304,858
Short-term borrowings
319
2,457
6,100
Long-term debt
53,107
56,626
58,141
Total interest expense
165,047
234,938
369,099
Net interest income
1,957,590
1,856,613
1,891,694
Provision for credit losses (benefit)
(193,464)
292,536
165,779
Net interest income after provision for credit losses
 
(benefit)
2,151,054
1,564,077
1,725,915
Service charges on deposit accounts
162,698
147,823
160,933
Other service fees
311,248
257,892
285,206
Mortgage banking activities (Refer to Note 10)
50,133
10,401
32,093
Net gain (loss) on sale of debt securities
23
41
(20)
Net gain, including impairment on equity securities
131
6,279
2,506
Net (loss) profit on trading account debt securities
(389)
1,033
994
Net (loss) gain on sale of loans, including
 
valuation adjustments on loans
held-for-sale
(73)
1,234
-
Adjustments (expense) to indemnity reserves on loans
 
sold
4,406
390
(343)
Other operating income
113,951
87,219
88,514
Total non-interest income
642,128
512,312
569,883
Operating expenses:
Personnel costs
631,802
564,205
590,625
Net occupancy expenses
102,226
119,345
96,339
Equipment expenses
92,097
88,932
84,215
Other taxes
56,783
54,454
51,653
Professional fees
410,865
394,122
384,411
Communications
25,234
23,496
23,450
Business promotion
72,981
57,608
75,372
FDIC deposit insurance
25,579
23,868
18,179
Other real estate owned (OREO) (income) expenses
(14,414)
(3,480)
4,298
Other operating expenses
136,988
128,882
139,570
Amortization of intangibles
9,134
6,397
9,370
Total operating expenses
1,549,275
1,457,829
1,477,482
Income before income tax
1,243,907
618,560
818,316
Income tax expense
309,018
111,938
147,181
Net Income
$
934,889
$
506,622
$
671,135
Net Income Applicable to Common Stock
$
933,477
$
504,864
$
667,412
Net Income per Common Share – Basic
$
11.49
$
5.88
$
6.89
Net Income per Common Share – Diluted
$
11.46
$
5.87
$
6.88
The accompanying notes are an integral part of
 
these consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
66
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF COMPREHENSIVE INCOME
Years ended December 31,
 
(In thousands)
2021
2020
2019
Net income
$
934,889
$
506,622
$
671,135
Reclassification to retained earnings
 
due to cumulative effect of accounting change
-
-
(50)
Other comprehensive income (loss) before
 
tax:
Foreign currency translation adjustment
3,947
(14,471)
(6,847)
Adjustment of pension and postretirement
 
benefit plans
36,950
(9,032)
(21,874)
Amortization of net losses
20,749
21,447
23,508
Unrealized net holding (losses) gains on debt
 
securities arising during the period
 
(619,470)
419,993
286,063
Reclassification adjustment for (gains) losses
 
included in net income
(23)
(41)
20
Unrealized net gains (losses) on cash flow hedges
539
(8,872)
(5,741)
Reclassification adjustment for net losses included
 
in net income
1,847
6,379
3,882
Other comprehensive (loss) income before
 
tax
(555,461)
415,403
278,961
Income tax benefit (expense)
40,401
(55,474)
(20,925)
Total other comprehensive (loss) income, net of tax
(515,060)
359,929
258,036
Comprehensive income, net of tax
$
419,829
$
866,551
$
929,171
Tax effect allocated to each component of other comprehensive
 
(loss) income:
Years ended December 31,
 
(In thousands)
2021
2020
2019
Adjustment of pension and postretirement
 
benefit plans
$
(13,856)
$
3,387
$
8,203
Amortization of net losses
(7,781)
(8,042)
(8,817)
Unrealized net holding (losses) gains on debt
 
securities arising during the period
 
62,468
(51,213)
(20,113)
Reclassification adjustment for (gains) losses
 
included in net income
5
6
(4)
Unrealized net gains (losses) on cash flow
 
hedges
(172)
2,472
1,302
Reclassification adjustment for net losses included
 
in net income
(263)
(2,084)
(1,496)
Income tax benefit (expense)
$
40,401
$
(55,474)
$
(20,925)
The accompanying notes are an integral
 
part of these consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
67
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF CHANGES IN STOCKHOLDERS’ EQUITY
Accumulated
 
other
Common
 
Preferred
Retained
Treasury
comprehensive
(In thousands)
stock
stock
Surplus
earnings
stock
(loss) income
Total
Balance at December 31, 2018
$
1,043
$
50,160
$
4,365,606
$
1,651,731
$
(205,509)
$
(427,974)
5,435,057
Cumulative effect of accounting change
4,905
4,905
Net income
671,135
671,135
Issuance of stock
1
3,496
3,497
Dividends declared:
Common stock
[1]
(116,022)
(116,022)
Preferred stock
(3,723)
(3,723)
Common stock purchases
[2]
15,740
(271,752)
(256,012)
Common stock reissuance
374
4,848
5,222
Stock based compensation
2,085
12,599
14,684
Other comprehensive income, net of tax
258,036
258,036
Transfer to statutory reserve
60,111
(60,111)
-
Balance at December 31, 2019
$
1,044
$
50,160
$
4,447,412
$
2,147,915
$
(459,814)
$
(169,938)
6,016,779
Cumulative effect of accounting change
(205,842)
(205,842)
Net income
506,622
506,622
Issuance of stock
1
4,262
4,263
Dividends declared:
Common stock
[1]
(136,561)
(136,561)
Preferred stock
(1,758)
(1,758)
Common stock purchases
[3]
76,335
(580,507)
(504,172)
Common stock reissuance
(1,192)
6,022
4,830
Preferred Stock, Redemption Amount
[4]
(28,017)
(28,017)
Stock based compensation
(4,731)
17,345
12,614
Other comprehensive income, net of tax
359,929
359,929
Transfer to statutory reserve
49,448
(49,448)
-
Balance at December 31, 2020
$
1,045
$
22,143
$
4,571,534
$
2,260,928
$
(1,016,954)
$
189,991
6,028,687
Net income
934,889
934,889
Issuance of stock
1
4,673
4,674
Dividends declared:
Common stock
[1]
(142,290)
(142,290)
Preferred stock
(1,412)
(1,412)
Common stock purchases
[5]
(8,557)
(347,093)
(355,650)
Stock based compensation
4,162
11,397
15,559
Other comprehensive loss, net of tax
(515,060)
(515,060)
Transfer
 
to statutory reserve
78,370
(78,370)
-
Balance at December 31, 2021
$
1,046
$
22,143
$
4,650,182
$
2,973,745
$
(1,352,650)
$
(325,069)
5,969,397
[1]
Dividends declared per common share during the year ended
 
December 31, 2021 - $1.75 (2020 - $1.60; 2019 -
 
$1.20).
[2]
During the year ended December 31, 2019, the Corporation
 
completed a $250 million accelerated share repurchase
 
transaction with respect to its
common stock, which was accounted for as a treasury stock
 
transaction. Refer to Note 20 for additional information.
[3]
During the year ended December 31, 2020, the Corporation
 
completed a $500 million accelerated share repurchase
 
transaction with respect to its
common stock, which was accounted for as a treasury stock
 
transaction. Refer to Note 20 for additional information.
[4]
On February 24, 2020, the Corporation redeemed all
 
the outstanding shares of 2008 Series B Preferred Stock.
 
Refer to Note 20 for additional
information.
[5]
During the year ended December 31, 2021, the Corporation
 
completed a $350 million accelerated share repurchase
 
transaction with respect to its
common stock, which was accounted for as a treasury stock
 
transaction. Refer to Note 20 for additional information.
Years ended December
 
31,
Disclosure of changes in number of shares:
2021
2020
2019
Preferred Stock:
Balance at beginning of year
885,726
2,006,391
2,006,391
Redemption of stocks
-
(1,120,665)
-
Balance at end of year
885,726
885,726
2,006,391
Common Stock:
Balance at beginning of year
104,508,290
104,392,222
104,320,303
Issuance of stock
71,044
116,068
71,919
Balance at end of year
104,579,334
104,508,290
104,392,222
Treasury stock
(24,728,165)
(20,264,055)
(8,802,593)
Common Stock – Outstanding
79,851,169
84,244,235
95,589,629
The accompanying notes are an integral part of these consolidated
 
financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
68
POPULAR, INC.
CONSOLIDATED STATEMENTS
 
OF CASH FLOWS
Years ended December
 
31,
(In thousands)
2021
2020
2019
Cash flows from operating activities:
Net income
$
934,889
$
506,622
$
671,135
Adjustments to reconcile net income to net cash provided
 
by operating activities:
Provision for credit losses (benefit)
(193,464)
292,536
165,779
Amortization of intangibles
9,134
6,397
9,370
Depreciation and amortization of premises and equipment
55,104
58,452
58,067
Net accretion of discounts and amortization of premiums and
 
deferred fees
 
(21,962)
(63,300)
(158,070)
Interest capitalized on loans subject to the temporary payment
 
moratorium or loss mitigation
alternatives
(15,567)
(95,212)
-
Share-based compensation
17,774
8,254
12,303
Impairment losses on right-of-use and long-lived assets
5,320
18,004
2,591
Fair value adjustments on mortgage servicing rights
10,206
42,055
27,771
Adjustments (expense) to indemnity reserves on loans sold
(4,406)
(390)
343
Earnings from investments under the equity method, net
 
of dividends or distributions
(50,942)
(27,738)
(28,011)
Deferred income tax expense
229,371
75,044
141,332
(Gain) loss on:
Disposition of premises and equipment and other productive
 
assets
(18,393)
(11,561)
(6,666)
Proceeds from insurance claims
-
(366)
(1,205)
Sale of debt securities
(23)
(41)
20
Sale of loans, including valuation adjustments on loans
 
held-for-sale and mortgage banking
activities
(21,611)
(32,449)
(15,888)
Sale of foreclosed assets, including write-downs
(30,098)
(19,958)
(21,982)
Acquisitions of loans held-for-sale
(251,336)
(227,697)
(223,939)
Proceeds from sale of loans held-for-sale
95,100
83,456
71,075
Net originations on loans held-for-sale
(527,585)
(391,537)
(289,430)
Net decrease (increase) in:
Trading debt securities
741,465
493,993
460,969
Equity securities
(2,336)
(8,263)
(8,032)
Accrued income receivable
 
6,193
(35,616)
(8,369)
Other assets
25,022
114,329
(37,847)
Net (decrease) increase in:
Interest payable
(5,395)
(5,404)
(284)
Pension and other postretirement benefits obligation
(4,104)
5,898
778
Other liabilities
22,802
(106,736)
(116,443)
Total adjustments
70,269
172,150
34,232
Net cash provided by operating activities
1,005,158
678,772
705,367
Cash flows from investing activities:
 
Net (increase) decrease in money market investments
(5,895,789)
(8,378,577)
905,558
Purchases of investment securities:
Available-for-sale
(14,672,856)
(21,033,807)
(18,733,295)
Equity
(16,196)
(30,794)
(16,300)
Proceeds from calls, paydowns, maturities and redemptions
 
of investment securities:
Available-for-sale
9,602,430
18,224,362
14,650,440
Held-to-maturity
15,700
6,733
5,913
Proceeds from sale of investment securities:
Available-for-sale
235,992
5,103
99,445
Equity
2,904
25,206
20,030
Net repayments (disbursements) on loans
469,268
(875,941)
(641,029)
Proceeds from sale of loans
203,179
84,385
110,534
Acquisition of loan portfolios
(348,179)
(1,138,276)
(619,737)
Payments to acquire other intangible
(905)
(83)
(10,382)
Payments to acquire businesses, net of cash acquired
(155,828)
-
-
Return of capital from equity method investments
6,362
959
6,942
Payments to acquire equity method investments
(375)
(1,778)
-
Acquisition of premises and equipment
(72,781)
(60,073)
(75,665)
Proceeds from insurance claims
-
366
1,205
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
69
Proceeds from sale of:
Premises and equipment and other productive assets
21,482
26,548
18,608
Foreclosed assets
86,942
77,521
107,881
Net cash used in investing activities
(10,518,650)
(13,068,146)
(4,169,852)
Cash flows from financing activities:
 
Net increase (decrease) in:
Deposits
10,138,617
13,102,028
4,043,955
Assets sold under agreements to repurchase
 
(29,700)
(72,076)
(88,151)
Other short-term borrowings
75,000
-
(41)
Payments of notes payable
(237,713)
(139,920)
(210,377)
Principal payments of finance leases
(2,852)
(3,145)
(1,726)
Proceeds from issuance of notes payable
-
261,999
75,000
Proceeds from issuance of common stock
4,674
9,093
8,719
Payments for repurchase of redeemable preferred stock
-
(28,017)
-
Dividends paid
(141,466)
(133,645)
(115,810)
Net payments for repurchase of common stock
(350,535)
(500,479)
(250,581)
Payments related to tax withholding for share-based compensation
(5,115)
(3,693)
(5,431)
Net cash provided by financing activities
9,450,910
12,492,145
3,455,557
Net (decrease) increase in cash and due from banks, and
 
restricted cash
(62,582)
102,771
(8,928)
Cash and due from banks, and restricted cash at beginning
 
of period
497,094
394,323
403,251
Cash and due from banks, and restricted cash at end of period
$
434,512
$
497,094
$
394,323
The accompanying notes are an integral part of these consolidated
 
financial statements.
70
Notes to Consolidated Financial Statements
 
Note 1 -
Nature of Operations
71
Note 2 -
Summary of Significant Accounting
72
Note 3 -
New Accounting Pronouncements
82
Note 4 -
Business Combination
86
Note 5 -
Restrictions on Cash and Due from Banks
88
Note 6 -
Debt Securities Available-For-Sale
89
Note 7 -
Debt Securities Held-to-Maturity
93
Note 8 -
Loans
96
Note 9 -
Allowance for Credit Losses – Loans
105
Note 10 -
Mortgage Banking Activities
127
Note 11 -
Transfers of Financial Assets and
128
Note 12 -
Premises and Equipment
131
Note 13 -
Other Real Estate Owned
132
Note 14 -
Other Assets
133
Note 15 -
Goodwill and Other Intangible Assets
 
134
Note 16 -
Deposits
138
Note 17 -
Borrowings
139
Note 18 -
Trust Preferred Securities
142
Note 19 -
Other Liabilities
144
Note 20 -
Stockholders’ Equity
145
Note 21 -
Regulatory Capital Requirements
147
Note 22 -
Other Comprehensive (Loss) Income
 
150
Note 23 -
Guarantees
152
Note 24 -
Commitments and Contingencies
155
Note 25-
Non-consolidated Variable Interest
161
Note 26 -
Derivative Instruments and Hedging
163
Note 27 -
Related Party Transactions
166
Note 28 -
Fair Value Measurement
170
Note 29 -
Fair Value of Financial Instruments
179
Note 30 -
Employee Benefits
 
182
Note 31 -
Net Income per Common Share
190
Note 32 -
Revenue from Contracts with Customers
191
Note 33 -
Leases
193
Note 34 -
Stock-Based Compensation
195
Note 35 -
Income Taxes
198
Note 36 -
Supplemental Disclosure on the
203
Note 37 -
Segment Reporting
204
Note 38 -
Popular, Inc. (Holding company only)
209
Note 39 -
Subsequent Events
212
71
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
 
mainland
 
U.S.,
 
the
 
Corporation
 
provides
 
retail,
 
mortgage
 
and
 
commercial
 
banking
 
services
 
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, and
 
equipment leasing
 
and
 
financing services
 
through Popular
 
Equipment Finance
 
(“PEF”), a
 
newly formed
 
wholly-
owned subsidiary of PB based in Minnesota.
72
Note 2 – 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.
 
The following is a description of the most significant
 
of these policies:
Principles of consolidation
The
 
consolidated
 
financial
 
statements
 
include
 
the
 
accounts
 
of
 
Popular,
 
Inc.
 
and
 
its
 
subsidiaries.
 
Intercompany
 
accounts
 
and
transactions have been
 
eliminated in consolidation. In
 
accordance with the
 
consolidation guidance for variable
 
interest entities, the
Corporation
 
would
 
also
 
consolidate
 
any
 
variable
 
interest
 
entities
 
(“VIEs”)
 
for
 
which
 
it
 
has
 
a
 
controlling
 
financial
 
interest;
 
and
therefore, it is the primary beneficiary. Assets
 
held in a fiduciary capacity are not assets of the Corporation and, accordingly,
 
are not
included in the Consolidated Statements of Financial
 
Condition.
Unconsolidated investments, in
 
which there is
 
at least
 
20% ownership and
 
/ or
 
the Corporation exercises
 
significant influence, are
generally
 
accounted
 
for
 
by
 
the
 
equity
 
method
 
with
 
earnings
 
recorded
 
in
 
other
 
operating
 
income.
 
Limited
 
partnerships
 
are
 
also
accounted for by the equity method unless the investor’s
 
interest is so “minor” that the limited partner may have
 
virtually no influence
over
 
partnership
 
operating
 
and
 
financial
 
policies.
 
These
 
investments
 
are
 
included
 
in
 
other
 
assets
 
and
 
the
 
Corporation’s
proportionate share of income or loss is included
 
in other operating income.
 
Statutory business trusts that are wholly-owned by the Corporation and are
 
issuers of trust preferred securities are not consolidated
in the Corporation’s Consolidated Financial Statements.
Business combinations
Business combinations are accounted for under the acquisition method. Under this method, assets acquired, liabilities assumed and
any noncontrolling
 
interest in
 
the acquiree
 
at the
 
acquisition date
 
are measured
 
at their
 
fair values
 
as of
 
the acquisition
 
date. The
acquisition
 
date
 
is
 
the
 
date
 
the
 
acquirer
 
obtains
 
control.
 
Transaction
 
costs
 
are
 
expensed
 
as
 
incurred.
 
Contingent
 
consideration
classified as an asset
 
or a liability is remeasured to
 
fair value at each
 
reporting date until the contingency
 
is resolved. The changes
in fair
 
value of
 
the contingent
 
consideration are
 
recognized in
 
earnings unless
 
the arrangement
 
is a
 
hedging instrument
 
for which
changes are initially recognized in other comprehensive
 
income.
 
On October
 
15, 2021, Popular
 
Equipment Finance, LLC
 
(“PEF”), a newly
 
formed wholly-owned subsidiary
 
of Popular Bank
 
(“PB”),
completed the
 
acquisition of
 
certain assets
 
and
 
the
 
assumption of
 
certain
 
liabilities of
 
K2
 
Capital Group
 
LLC’s
 
(“K2”) equipment
leasing
 
and
 
financing
 
business
 
based
 
in
 
Minnesota
 
(the
 
“Acquired
 
Business”).
 
The
 
Corporation
 
determined that
 
this
 
acquisition
constituted
 
a
 
business
 
combination
 
as
 
defined
 
by
 
the
 
Financial
 
Accounting
 
Standards
 
Board
 
(“FASB”)
 
Accounting
 
Standards
Codification
 
(“ASC”)
 
Topic
 
805
 
“Business
 
Combinations”.
 
Refer
 
to
 
Note
 
4,
 
Business
 
combination,
 
for
 
further
 
details
 
on
 
the
 
K2
Transaction.
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.
Fair value measurements
The Corporation determines the fair values of its
 
financial instruments based on the fair value framework
 
established in the guidance
for
 
Fair
 
Value
 
Measurements
 
in
 
ASC
 
Subtopic
 
820-10,
 
which
 
requires
 
an
 
entity
 
to
 
maximize
 
the
 
use
 
of
 
observable
 
inputs
 
and
minimize
 
the
 
use
 
of
 
unobservable inputs
 
when
 
measuring fair
 
value.
 
Fair value
 
is
 
defined
 
as
 
the
 
exchange
 
price
 
that
 
would be
received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly
 
transaction between market participants
 
on the measurement date.
 
The standard describes three
 
levels of inputs
 
that
may
 
be
 
used
 
to
 
measure
 
fair
 
value
 
which
 
are
 
(1)
 
quoted
 
market
 
prices
 
for
 
identical
 
assets
 
or
 
liabilities
 
in
 
active
 
markets,
 
(2)
observable market-based inputs or unobservable inputs
 
that are corroborated by market
 
data, and (3) unobservable inputs
 
that are
not corroborated
 
by market
 
data. The fair
 
value hierarchy
 
ranks the
 
quality and
 
reliability of the
 
information used to
 
determine fair
values.
 
The
 
guidance
 
in
 
ASC
 
Subtopic
 
820-10
 
also
 
addresses
 
measuring
 
fair
 
value
 
in
 
situations
 
where
 
markets
 
are
 
inactive
 
and
transactions are
 
not orderly.
 
Transactions
 
or quoted
 
prices for
 
assets and
 
liabilities may
 
not be
 
determinative of
 
fair value
 
when
transactions are not
 
orderly, and
 
thus, may require
 
adjustments to estimate fair
 
value. Price quotes
 
based on transactions
 
that are
73
not orderly should be given
 
little, if any,
 
weight in measuring fair value. Price
 
quotes based on transactions that are
 
orderly shall be
considered
 
in
 
determining
 
fair
 
value,
 
and
 
the
 
weight
 
given
 
is
 
based
 
on
 
facts
 
and
 
circumstances.
 
If
 
sufficient
 
information
 
is
 
not
available to
 
determine if
 
price quotes
 
are based
 
on orderly
 
transactions, less
 
weight should
 
be given to
 
the price
 
quote relative
 
to
other transactions that are known to be orderly.
 
Investment securities
Investment securities are classified in four categories and
 
accounted for as follows:
 
Debt securities that
 
the Corporation has
 
the intent and
 
ability to hold
 
to maturity are
 
classified as debt
 
securities held-to-
maturity and reported
 
at amortized cost. An
 
ACL is established
 
for the expected credit
 
losses over the remaining
 
term of
debt securities held-to-maturity. The Corporation has established a methodology to estimate credit losses which
 
considers
qualitative factors,
 
including internal credit
 
ratings and
 
the underlying source
 
of repayment
 
in determining
 
the amount
 
of
expected
 
credit
 
losses.
 
Debt
 
securities
 
held-to-maturity
 
are
 
written-off
 
through
 
the
 
ACL
 
when
 
a
 
portion
 
or
 
the
 
entire
amount is deemed uncollectible, based on the information considered to develop expected credit losses through the life of
the
 
asset.
 
The
 
ACL
 
is
 
estimated
 
by
 
leveraging
 
the
 
expected
 
loss
 
framework
 
for
 
mortgages
 
in
 
the
 
case
 
of
 
securities
collateralized by
 
2
nd
 
lien loans
 
and the
 
commercial C&I
 
models for
 
municipal bonds.
 
As part
 
of this
 
framework, internal
factors are stressed,
 
as a qualitative
 
adjustment, to reflect current
 
conditions that are
 
not necessarily captured
 
within the
historical
 
loss
 
experience.
 
The
 
modeling
 
framework
 
includes
 
a
 
2-year
 
reasonable
 
and
 
supportable
 
period
 
gradually
reverting, over a 1-year horizon, to historical information at the model
 
input level. The Corporation may not sell or transfer
held-to-maturity
 
securities
 
without
 
calling
 
into
 
question
 
its
 
intent
 
to
 
hold
 
other
 
debt
 
securities
 
to
 
maturity,
 
unless
 
a
nonrecurring or unusual event that could not have
 
been reasonably anticipated has occurred.
 
Debt securities
 
classified as
 
trading securities
 
are reported
 
at fair
 
value, with
 
unrealized and
 
realized gains
 
and losses
included in non-interest income.
 
Debt
 
securities
 
classified
 
as
 
available-for-sale
 
are
 
reported
 
at
 
fair
 
value.
 
Declines
 
in
 
fair
 
value
 
below
 
the
 
securities’
amortized cost which are not related to estimated credit losses are recorded through other comprehensive income or loss,
net of
 
taxes. If
 
the Corporation intends
 
to sell
 
or believes
 
it is
 
more likely than
 
not that it
 
will be
 
required to sell
 
the debt
security,
 
it is
 
written down
 
to
 
fair value
 
through earnings.
 
Credit losses
 
relating to
 
available-for-sale debt
 
securities are
recorded through an
 
ACL, which are
 
limited to the
 
difference between
 
the amortized cost
 
and the fair
 
value of the
 
asset.
The ACL is established for the expected credit losses over the remaining term of debt security. The Corporation’s portfolio
of
 
available-for-sale securities
 
is comprised
 
mainly
 
of
 
U.S. Treasury
 
notes
 
and
 
obligations from
 
the
 
U.S.
 
Government.
These
 
securities
 
have
 
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. The Corporation
 
monitors its securities
 
portfolio composition and
credit performance on a
 
quarterly basis to determine if
 
any allowance is considered necessary.
 
Debt securities available-
for-sale are written-off when
 
a portion or
 
the entire amount is
 
deemed uncollectible, based on the
 
information considered
to
 
develop expected
 
credit losses
 
through the
 
life of
 
the asset.
 
The specific
 
identification method
 
is used
 
to
 
determine
realized
 
gains
 
and
 
losses
 
on
 
debt
 
securities
 
available-for-sale,
 
which
 
are
 
included
 
in
 
net
 
(loss)
 
gain
 
on
 
sale
 
of
 
debt
securities in the Consolidated Statements of Operations.
 
Equity securities that have readily available fair values are reported at fair value. Equity securities that do not have readily
available fair
 
values are
 
measured at
 
cost, less
 
any impairment,
 
plus or
 
minus changes
 
resulting from
 
observable price
changes in
 
orderly transactions
 
for the
 
identical or
 
a similar
 
investment of
 
the same
 
issuer.
 
Stock that
 
is owned
 
by the
Corporation
 
to
 
comply
 
with
 
regulatory
 
requirements,
 
such
 
as
 
Federal
 
Reserve
 
Bank
 
and
 
Federal
 
Home
 
Loan
 
Bank
(“FHLB”) stock, is included in this category, and their realizable value equals their cost. Unrealized and realized gains and
losses and any impairment on equity securities are included in net gain (loss), including impairment on equity securities in
the Consolidated Statements
 
of Operations. Dividend income
 
from investments in
 
equity securities is included
 
in interest
income.
The
 
amortization
 
of
 
premiums is
 
deducted
 
and
 
the
 
accretion of
 
discounts is
 
added to
 
net
 
interest income
 
based on
 
the
 
interest
method
 
over the
 
outstanding period
 
of
 
the
 
related
 
securities.
 
Purchases and
 
sales
 
of
 
securities
 
are
 
recognized
 
on
 
a
 
trade
 
date
basis.
Derivative financial instruments
All derivatives are recognized on the Statements of Financial Condition at
 
fair value. The Corporation’s policy is not to
 
offset the fair
value
 
amounts
 
recognized
 
for
 
multiple
 
derivative
 
instruments
 
executed
 
with
 
the
 
same
 
counterparty
 
under
 
a
 
master
 
netting
74
arrangement nor to offset the fair value amounts recognized for the
 
right to reclaim cash collateral (a receivable) or the obligation
 
to
return cash collateral (a payable) arising from the
 
same master netting arrangement as the derivative
 
instruments.
For
 
a
 
cash
 
flow
 
hedge,
 
changes
 
in
 
the
 
fair
 
value
 
of
 
the
 
derivative
 
instrument
 
are
 
recorded
 
net
 
of
 
taxes
 
in
 
accumulated
 
other
comprehensive income/(loss) and subsequently
 
reclassified to net
 
income (loss) in
 
the same period(s)
 
that the hedged
 
transaction
impacts earnings. For free-standing derivative instruments,
 
changes in fair values are reported in current period earnings.
Prior
 
to
 
entering
 
a
 
hedge
 
transaction,
 
the
 
Corporation
 
formally
 
documents
 
the
 
relationship
 
between
 
hedging
 
instruments
 
and
hedged
 
items,
 
as
 
well
 
as
 
the
 
risk
 
management objective
 
and
 
strategy for
 
undertaking various
 
hedge
 
transactions.
 
This
 
process
includes
 
linking all
 
derivative instruments
 
to
 
specific assets
 
and
 
liabilities
 
on the
 
Statements of
 
Financial Condition
 
or to
 
specific
forecasted transactions
 
or firm
 
commitments along
 
with a
 
formal assessment,
 
at both
 
inception of
 
the hedge
 
and on
 
an ongoing
basis,
 
as
 
to
 
the
 
effectiveness
 
of the
 
derivative instrument
 
in
 
offsetting
 
changes
 
in
 
fair
 
values
 
or
 
cash
 
flows
 
of
 
the
 
hedged item.
Hedge accounting
 
is discontinued
 
when the
 
derivative instrument
 
is not
 
highly effective
 
as a
 
hedge, a
 
derivative expires,
 
is sold,
terminated, when it is unlikely that a forecasted transaction will
 
occur or when it is determined that it
 
is no longer appropriate. When
hedge accounting is discontinued the derivative continues
 
to be carried at fair value with changes in fair
 
value included in earnings.
 
For non-exchange
 
traded contracts,
 
fair value
 
is based
 
on dealer
 
quotes, pricing
 
models, discounted
 
cash flow
 
methodologies or
similar techniques for which the determination of
 
fair value may require significant management judgment
 
or estimation.
 
The fair value of derivative instruments considers
 
the risk of non-performance by the counterparty
 
or the Corporation, as applicable.
 
The Corporation obtains or pledges collateral in
 
connection with its derivative activities when applicable
 
under the agreement.
Loans
 
Loans
 
are
 
classified
 
as
 
loans
 
held-in-portfolio when
 
management has
 
the
 
intent
 
and
 
ability
 
to
 
hold
 
the
 
loan
 
for
 
the
 
foreseeable
future, or
 
until maturity
 
or payoff.
 
The foreseeable
 
future is
 
a management
 
judgment which
 
is determined
 
based upon
 
the type
 
of
loan,
 
business strategies,
 
current market
 
conditions, balance
 
sheet
 
management and
 
liquidity needs.
 
Management’s view
 
of
 
the
foreseeable future may change based on changes in these conditions. When a decision is made to sell or securitize a loan that
 
was
not originated or
 
initially acquired with the
 
intent to sell
 
or securitize, the loan
 
is reclassified from held-in-portfolio
 
into held-for-sale.
Due to changing market conditions or other strategic
 
initiatives, management’s intent with respect to the disposition of
 
the loan may
change,
 
and
 
accordingly,
 
loans
 
previously classified
 
as
 
held-for-sale may
 
be
 
reclassified into
 
held-in-portfolio. Loans
 
transferred
between loans held-for-sale and held-in-portfolio
 
classifications are recorded at the lower of cost or
 
fair value at the date of transfer.
 
Purchased
 
loans
 
with
 
no
 
evidence
 
of
 
credit
 
deterioration
 
since
 
origination
 
are
 
recorded
 
at
 
fair
 
value
 
upon
 
acquisition.
 
Credit
discounts are included in the determination of fair
 
value.
 
Loans held-for-sale are stated
 
at the lower
 
of cost or
 
fair value, cost
 
being determined based on
 
the outstanding loan balance
 
less
unearned income, and fair value determined, generally
 
in the aggregate. Fair value 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.
 
The
 
cost
 
basis
 
also
 
includes
 
consideration
 
of
deferred origination fees and costs, which are recognized in earnings
 
at the time of sale. Upon reclassification to held-for-sale,
 
credit
related
 
fair
 
value
 
adjustments are
 
recorded
 
as
 
a
 
reduction
 
in
 
the
 
ACL.
 
To
 
the
 
extent
 
that
 
the
 
loan's
 
reduction
 
in
 
value
 
has
 
not
already been provided for in the ACL, an additional provision for credit losses is recorded. Subsequent to reclassification to held-for-
sale, the amount,
 
by which cost exceeds
 
fair value, if any,
 
is accounted for as
 
a valuation allowance with
 
changes therein included
in the determination of net income (loss) for the
 
period in which the change occurs.
 
Loans held-in-portfolio
 
are reported
 
at their
 
outstanding principal
 
balances net
 
of any
 
unearned income,
 
charge-offs, unamortized
deferred fees and
 
costs on originated
 
loans, and premiums
 
or discounts on
 
purchased loans. Fees
 
collected and costs
 
incurred in
the
 
origination of
 
new
 
loans are
 
deferred and
 
amortized using
 
the interest
 
method or
 
a method
 
which approximates
 
the interest
method over the term of the loan as an adjustment
 
to interest yield.
The past due status of a loan is determined in accordance with its
 
contractual repayment terms. Furthermore, loans are reported as
past due when either interest or principal remains
 
unpaid for 30 days or more in accordance
 
with its contractual repayment terms.
Non-accrual loans are those loans on which the
 
accrual of interest is discontinued. When a loan is
 
placed on non-accrual status, all
previously
 
accrued
 
and
 
unpaid interest
 
is
 
charged against
 
interest
 
income
 
and
 
the
 
loan
 
is
 
accounted for
 
either
 
on
 
a cash-basis
method or
 
on the
 
cost-recovery method.
 
Loans designated
 
as non-accruing
 
are returned
 
to accrual
 
status when
 
the Corporation
expects repayment of the remaining contractual principal
 
and interest.
 
75
Recognition of interest income on commercial and construction loans is discontinued when the loans are 90 days or more in arrears
on payments of principal or interest or when other factors indicate that the collection of principal and interest is
 
doubtful. The portion
of
 
a
 
secured
 
loan
 
deemed
 
uncollectible
 
is
 
charged-off
 
no
 
later
 
than
 
365
 
days
 
past
 
due.
 
However,
 
in
 
the
 
case
 
of
 
a
 
collateral
dependent
 
loan,
 
the
 
excess
 
of
 
the
 
recorded
 
investment
 
over
 
the
 
fair
 
value
 
of
 
the
 
collateral
 
(portion
 
deemed
 
uncollectible)
 
is
generally
 
promptly charged-off,
 
but
 
in
 
any
 
event,
 
not
 
later
 
than
 
the
 
quarter
 
following
 
the
 
quarter
 
in
 
which
 
such
 
excess was
 
first
recognized.
 
Commercial
 
unsecured
 
loans
 
are
 
charged-off
 
no
 
later
 
than
 
180
 
days
 
past
 
due.
 
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
portion of a
 
mortgage loan deemed
 
uncollectible is charged-off
 
when the loan
 
is 180 days
 
past due. The
 
Corporation discontinues
the recognition
 
of interest
 
on residential
 
mortgage loans
 
insured by
 
the Federal
 
Housing Administration
 
(“FHA”) or
 
guaranteed by
the U.S.
 
Department of Veterans
 
Affairs (“VA”)
 
when 15-months
 
delinquent as
 
to principal
 
or interest.
 
The principal
 
repayment on
these loans is insured. Recognition of interest income on closed-end consumer loans and home equity lines of credit is discontinued
when the
 
loans are
 
90 days
 
or more
 
in arrears
 
on payments
 
of principal
 
or interest.
 
Income is
 
generally recognized
 
on open-end
consumer loans,
 
except for
 
home equity
 
lines
 
of
 
credit,
 
until
 
the
 
loans
 
are
 
charged-off.
 
Recognition of
 
interest
 
income
 
for
 
lease
financing is ceased when
 
loans are 90 days
 
or more in arrears.
 
Closed-end consumer loans and leases
 
are charged-off when they
are 120
 
days in
 
arrears. Open-end
 
(revolving credit)
 
consumer loans
 
are charged-off
 
when 180
 
days in
 
arrears. Commercial
 
and
consumer overdrafts are generally charged-off no later than
 
60 days past their due date.
A loan classified
 
as a troubled
 
debt restructuring (“TDR”) is
 
typically in non-accrual status
 
at the time
 
of the modification.
 
The TDR
loan continues
 
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.
Lease financing
The
 
Corporation leases
 
passenger and
 
commercial
 
vehicles
 
and
 
equipment
 
to
 
individual
 
and
 
corporate
 
customers.
 
The
 
finance
method of accounting
 
is used to
 
recognize revenue on lease
 
contracts that meet
 
the criteria specified in
 
the guidance for leases
 
in
ASC Topic
 
842. Aggregate
 
rentals due
 
over the
 
term of
 
the leases
 
less unearned
 
income are
 
included in
 
finance lease
 
contracts
receivable.
 
Unearned
 
income
 
is
 
amortized
 
using
 
a
 
method
 
which
 
results
 
in
 
approximate
 
level
 
rates
 
of
 
return
 
on
 
the
 
principal
amounts outstanding. Finance lease origination
 
fees and costs
 
are deferred and amortized
 
over the average life
 
of the lease as
 
an
adjustment to the interest yield.
Revenue for other leases is recognized as it becomes
 
due under the terms of the agreement.
Loans acquired with deteriorated credit quality
 
Purchased credit
 
deteriorated (“PCD”) loans
 
are defined
 
as those
 
with evidence
 
of a
 
more-than-insignificant deterioration in
 
credit
quality since origination.
 
PCD loans are initially recorded at its purchase price plus an estimated
 
allowance for credit losses (“ACL”).
Upon the acquisition of a PCD loan, the Corporation makes an estimate
 
of the expected credit losses over the remaining contractual
term
 
of
 
each individual
 
loan. The
 
estimated credit
 
losses over
 
the life
 
of the
 
loan are
 
recorded as
 
an ACL
 
with a
 
corresponding
addition to the loan purchase price. The amount of the purchased
 
premium or discount which is not related to credit risk
 
is amortized
over the life of
 
the loan through net
 
interest income using the
 
effective interest method or
 
a method that approximates the
 
effective
interest
 
method.
 
Changes
 
in
 
expected
 
credit
 
losses
 
are
 
recorded as
 
an
 
increase
 
or
 
decrease
 
to
 
the
 
ACL
 
with
 
a
 
corresponding
charge (reverse) to the provision for credit losses in the Consolidated Statement of Operations. Upon transition to the individual loan
measurement, these loans
 
follow the same
 
nonaccrual policies as non-PCD
 
loans and are
 
therefore no longer
 
excluded from non-
performing status. Modifications
 
of PCD loans
 
that meet the
 
definition of a
 
TDR subsequent to
 
the adoption of
 
ASC Topic
 
326 are
accounted and reported as such following the same
 
processes as non-PCD loans.
Refer to Note 8
to the Consolidated Financial Statements
 
for additional information with respect
 
to loans acquired with
 
deteriorated
credit quality.
Accrued interest receivable
The
 
amortized
 
basis
 
for
 
loans
 
and
 
investments
 
in
 
debt
 
securities
 
is
 
presented
 
exclusive
 
of
 
accrued
 
interest
 
receivable.
 
The
Corporation has elected
 
not to establish
 
an ACL for
 
accrued interest receivable for
 
loans and investments
 
in debt securities,
 
given
the Corporation’s
 
non-accrual policies, in
 
which accrual
 
of interest is
 
discontinued and reversed
 
based on the
 
asset’s delinquency
status.
 
Allowance for credit losses – loans portfolio
76
The Corporation establishes an ACL
 
for its loan
 
portfolio based on its
 
estimate of credit losses
 
over the remaining contractual
 
term
of the loans, adjusted for expected prepayments. An ACL is recognized for all loans including originated and purchased loans, since
inception, with
 
a corresponding charge
 
to the
 
provision for
 
credit losses,
 
except for
 
PCD loans
 
for which
 
the ACL
 
at acquisition
 
is
recorded
 
as
 
an
 
addition
 
to
 
the
 
purchase
 
price
 
with
 
subsequent
 
changes
 
recorded
 
in
 
earnings.
 
Loan
 
losses
 
are
 
charged
 
and
recoveries are credited to the ACL.
The
 
Corporation
 
follows
 
a
 
methodology
 
to
 
estimate
 
the
 
ACL
 
which
 
includes
 
a
 
reasonable
 
and
 
supportable
 
forecast
 
period
 
for
estimating
 
credit
 
losses,
 
considering
 
quantitative
 
and
 
qualitative
 
factors
 
as
 
well
 
as
 
the
 
economic
 
outlook.
 
As
 
part
 
of
 
this
methodology,
 
management
 
evaluates
 
various
 
macroeconomic
 
scenarios
 
provided
 
by
 
third
 
parties.
 
At
 
December
 
31,
 
2021,
management
 
applied
 
probability
 
weights
 
to
 
the
 
outcome
 
of
 
the
 
selected
 
scenarios.
 
This
 
evaluation
 
includes
 
benchmarking
procedures
 
as
 
well
 
as
 
careful
 
analysis
 
of
 
the
 
underlying assumptions
 
used to
 
build the
 
scenarios. The
 
application of
 
probability
weights include baseline, optimistic and pessimistic scenarios. The weights applied are subject to evaluation on a quarterly basis as
part
 
of
 
the
 
ACL’s
 
governance
 
process.
 
The
 
Corporation considers
 
additional
 
macroeconomic scenarios
 
as
 
part
 
of
 
its
 
qualitative
adjustment framework.
 
The
 
macroeconomic variables
 
chosen
 
to
 
estimate credit
 
losses
 
were selected
 
by
 
combining
 
quantitative
 
procedures
 
with
 
expert
judgment.
 
These
 
variables
 
were
 
determined
 
to
 
be
 
the
 
best
 
predictors
 
of
 
expected
 
credit
 
losses
 
within
 
the
 
Corporation’s
 
loan
portfolios and
 
include drivers such
 
as unemployment rate,
 
different measures
 
of employment levels,
 
house prices,
 
gross domestic
product
 
and
 
measures
 
of
 
disposable
 
income,
 
amongst
 
others.
 
The
 
loss
 
estimation
 
framework
 
includes
 
a
 
reasonable
 
and
supportable period of
 
2 years for PR
 
portfolios, gradually reverting, over
 
a 1-year horizon, to
 
historical macroeconomic variables at
the
 
model
 
input
 
level.
 
For
 
the
 
US
 
portfolio
 
the
 
reasonable
 
and
 
supportable
 
period
 
considers
 
the
 
contractual
 
life
 
of
 
the
 
asset,
impacted
 
by
 
prepayments, except
 
for
 
the US
 
CRE portfolio.
 
The US
 
CRE portfolio
 
utilizes a
 
2-year reasonable
 
and supportable
period gradually reverting, over a 1-year horizon,
 
to historical information at the output level.
 
The
 
Corporation
 
developed
 
loan
 
level
 
quantitative
 
models
 
distributed
 
by
 
geography
 
and
 
loan
 
type.
 
This
 
segmentation
 
was
determined
 
by
 
evaluating
 
their
 
risk
 
characteristics,
 
which
 
include
 
default
 
patterns,
 
source
 
of
 
repayment,
 
type
 
of
 
collateral,
 
and
lending
 
channels,
 
amongst
 
others.
 
The
 
modeling
 
framework
 
includes
 
competing
 
risk
 
models
 
to
 
generate
 
lifetime
 
defaults
 
and
prepayments, and other loan
 
level modeling techniques to estimate
 
loss severity.
 
Recoveries on future losses
 
are contemplated as
part
 
of
 
the
 
loss
 
severity
 
modeling.
 
These
 
parameters
 
are
 
estimated
 
by
 
combining
 
internal
 
risk
 
factors
 
with
 
macroeconomic
expectations. In
 
order to
 
generate the
 
expected credit
 
losses, the
 
output of
 
these models
 
is combined
 
with loan
 
level repayment
information.
 
The
 
internal
 
risk
 
factors
 
contemplated
 
within
 
the
 
models
 
may
 
include
 
borrowers’
 
credit
 
scores,
 
loan-to-value,
delinquency status, risk ratings, interest rate, loan
 
term, loan age and type of collateral, amongst
 
others.
 
The ACL
 
also includes
 
a qualitative
 
framework that
 
addresses two
 
main components:
 
losses that
 
are expected
 
but not
 
captured
within the quantitative modeling framework, and model imprecision. In order to identify
 
potential losses that are not captured through
the
 
models,
 
management
 
evaluates
 
model
 
limitations
 
as
 
well
 
as
 
the
 
different
 
risks
 
covered
 
by
 
the
 
variables
 
used
 
in
 
each
quantitative model. The
 
Corporation considers additional macroeconomic
 
scenarios to address
 
these risks. This
 
assessment takes
into
 
consideration factors
 
listed
 
as
 
part
 
of
 
ASC
 
326-20-55-4. To
 
complement
 
the
 
analysis, management
 
also
 
evaluates
 
whether
there are sectors
 
that have low
 
levels of historical
 
defaults, but current
 
conditions show the
 
potential for future
 
losses. This type
 
of
qualitative
 
adjustment
 
is
 
more
 
prevalent
 
in
 
the
 
commercial
 
portfolios.
 
The
 
model
 
imprecision
 
component
 
of
 
the
 
qualitative
adjustments
 
is
 
determined
 
after
 
evaluating
 
model
 
performance
 
for
 
these
 
portfolios
 
through
 
different
 
time
 
periods.
 
This
 
type
 
of
qualitative adjustment mainly impacts consumer portfolios.
The
 
Corporation
 
has
 
designated
 
as
 
collateral
 
dependent
 
loans
 
secured
 
by
 
collateral
 
when
 
foreclosure
 
is
 
probable
 
or
 
when
foreclosure is
 
not probable but
 
the practical
 
expedient is used.
 
The practical expedient
 
is used
 
when repayment is
 
expected to be
provided
 
substantially
 
by
 
the
 
sale
 
or
 
operation
 
of
 
the
 
collateral
 
and
 
the
 
borrower is
 
experiencing financial
 
difficulty.
 
The
 
ACL
 
of
collateral dependent loans
 
is measured based
 
on the fair
 
value of the
 
collateral less costs
 
to sell. 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.
 
In
 
the
 
case
 
of
 
troubled
 
debt
 
restructurings
 
(“TDRs”),
 
the
 
established
 
framework
 
captures
 
the
 
impact
 
of
 
concessions
 
through
discounting
 
modified contractual
 
cash
 
flows,
 
both principal
 
and
 
interest, at
 
the
 
loan’s
 
original
 
effective rate.
 
The
 
impact of
 
these
concessions is combined with the expected credit losses generated by the quantitative loss models in order to arrive at
 
the ACL. As
a result, the ACL related to TDRs is impacted by
 
the expected macroeconomic conditions.
The Credit Cards
 
portfolio, due to
 
its revolving nature,
 
does not have
 
a specified maturity
 
date. To
 
estimate the average remaining
term
 
of
 
this
 
segment,
 
management
 
evaluated the
 
portfolios
 
payment
 
behavior
 
based
 
on
 
internal
 
historical data.
 
These payment
77
behaviors were
 
further classified
 
into sub-categories
 
that accounted
 
for
 
delinquency history
 
and differences
 
between transactors,
revolvers and customers that have exhibited mixed transactor/revolver behavior. Transactors are defined as active accounts without
any
 
finance
 
charge
 
in
 
the
 
last
 
6
 
months.
 
The
 
paydown
 
curves
 
generated
 
for
 
each
 
sub-category
 
are
 
applied
 
to
 
the
 
outstanding
exposure at
 
the measurement
 
date using
 
the first-in
 
first-out (FIFO)
 
methodology.
 
These amortization
 
patterns are
 
combined with
loan level default and loss severity modeling to arrive
 
at the ACL.
Troubled debt restructurings
A
 
restructuring constitutes
 
a
 
TDR
 
when
 
the
 
Corporation separately
 
concludes
 
that
 
both
 
of
 
the
 
following
 
conditions
 
exist:
 
1)
 
the
restructuring
 
constitute
 
a
 
concession
 
and
 
2)
 
the
 
debtor
 
is
 
experiencing
 
financial
 
difficulties.
 
The
 
concessions
 
stem
 
from
 
an
agreement between the Corporation and the
 
debtor or are imposed by
 
law or a court. These
 
concessions could include a reduction
in the
 
interest rate
 
on the
 
loan, payment
 
extensions, forgiveness
 
of principal,
 
forbearance or
 
other actions
 
intended to
 
maximize
collection.
 
A
 
concession
 
has
 
been
 
granted
 
when,
 
as
 
a
 
result
 
of
 
the
 
restructuring,
 
the
 
Corporation does
 
not
 
expect
 
to
 
collect
 
all
amounts
 
due,
 
including
 
interest
 
accrued
 
at
 
the
 
original
 
contract
 
rate.
 
If
 
the
 
payment
 
of
 
principal
 
is
 
dependent
 
on
 
the
 
value
 
of
collateral,
 
the
 
current
 
value
 
of
 
the
 
collateral
 
is
 
taken
 
into
 
consideration
 
in
 
determining
 
the
 
amount
 
of
 
principal
 
to
 
be
 
collected;
therefore, all factors that changed are considered to determine if a concession was granted, including the change in the fair value of
the
 
underlying collateral
 
that
 
may
 
be
 
used
 
to
 
repay
 
the
 
loan.
 
Classification of
 
loan
 
modifications
 
as
 
TDRs
 
involves
 
a
 
degree
 
of
judgment. Indicators that the debtor is experiencing financial difficulties
 
which are considered include: (i) the borrower is currently in
default on any of its
 
debt or it is
 
probable that the borrower would be
 
in payment default on any
 
of its debt in the
 
foreseeable future
without the modification; (ii)
 
the borrower has declared or
 
is in the process
 
of declaring bankruptcy; (iii) there
 
is significant doubt as
to
 
whether the
 
borrower will
 
continue to
 
be a
 
going concern;
 
(iv) the
 
borrower has
 
securities that
 
have been
 
delisted, are
 
in the
process of being delisted,
 
or are under threat
 
of being delisted from an
 
exchange; (v) based on
 
estimates and projections that only
encompass
 
the
 
borrower’s current
 
business
 
capabilities,
 
it
 
is
 
forecasted
 
that
 
the
 
entity-specific
 
cash
 
flows
 
will
 
be
 
insufficient
 
to
service the
 
debt (both
 
interest and
 
principal) in
 
accordance with the
 
contractual terms
 
of the
 
existing agreement through
 
maturity;
and
 
(vi)
 
absent
 
the
 
current
 
modification,
 
the
 
borrower
 
cannot
 
obtain
 
funds
 
from
 
sources
 
other
 
than
 
the
 
existing
 
creditors
 
at
 
an
effective interest rate equal to the current market interest rate for similar debt for a non-troubled debtor. The identification of TDRs is
critical in the determination of the adequacy of the ACL.
 
A loan
 
may be
 
restructured in
 
a troubled
 
debt restructuring
 
into two
 
(or more)
 
loan agreements,
 
for example,
 
Note A
 
and Note
 
B.
Note
 
A
 
represents
 
the
 
portion
 
of
 
the
 
original
 
loan
 
principal
 
amount
 
that
 
is
 
expected
 
to
 
be
 
fully
 
collected
 
along
 
with
 
contractual
interest. Note B represents the portion of the original loan that may be considered uncollectible and charged-off, but the obligation is
not forgiven
 
to the
 
borrower.
 
Note A
 
may be
 
returned to
 
accrual status
 
provided all
 
of the
 
conditions for
 
a TDR
 
to be
 
returned to
accrual status are met. The modified loans are
 
considered TDRs.
Refer
 
to
 
Note
 
9
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
 
qualitative
 
information
 
on
 
TDRs
 
and
 
the
 
Corporation’s
determination of the ACL.
Reserve for unfunded commitments
The Corporation
 
establishes a
 
reserve for
 
unfunded commitments,
 
based on
 
the estimated
 
losses over
 
the remaining
 
term of
 
the
facility.
 
An allowance
 
is not
 
established for
 
commitments that
 
are unconditionally
 
cancellable by
 
the Corporation.
 
Accordingly,
 
no
reserve
 
is
 
established
 
for
 
unfunded commitments
 
related to
 
its
 
credit
 
cards
 
portfolio.
 
Reserve for
 
the
 
unfunded
 
portion
 
of
 
credit
commitments
 
is
 
presented
 
within
 
other
 
liabilities
 
in
 
the
 
Consolidated Statements
 
of
 
Financial
 
Condition.
 
Net
 
adjustments
 
to
 
the
reserve for unfunded commitments are
 
reflected in the Consolidated Statements
 
of Operations as provision for
 
credit losses for the
years ended December 31, 2021 and 2020.
Transfers and servicing of financial assets
The transfer
 
of an
 
entire financial
 
asset, a
 
group of
 
entire financial
 
assets, or
 
a participating interest
 
in an
 
entire financial
 
asset in
which the Corporation surrenders control over the assets is accounted
 
for as a sale
 
if all of the following conditions set forth in
 
ASC
Topic
 
860 are met:
 
(1) the assets
 
must be isolated
 
from creditors of
 
the transferor,
 
(2) the transferee
 
must obtain the
 
right (free of
conditions that constrain it
 
from taking advantage
 
of that right)
 
to pledge or
 
exchange the transferred assets,
 
and (3) the
 
transferor
cannot maintain effective control over
 
the transferred assets through an agreement
 
to repurchase them before their
 
maturity. When
the
 
Corporation
 
transfers
 
financial
 
assets
 
and
 
the
 
transfer
 
fails
 
any
 
one
 
of
 
these
 
criteria,
 
the
 
Corporation
 
is
 
prevented
 
from
derecognizing the transferred financial
 
assets and the
 
transaction is accounted for
 
as a secured
 
borrowing. For federal and
 
Puerto
Rico income
 
tax purposes,
 
the Corporation
 
treats the
 
transfers of
 
loans which
 
do not
 
qualify as
 
“true sales”
 
under the
 
applicable
accounting guidance, as sales, recognizing a deferred
 
tax asset or liability on the transaction.
 
For transfers
 
of financial
 
assets that
 
satisfy the
 
conditions to
 
be accounted
 
for as
 
sales, the
 
Corporation derecognizes
 
all assets
sold; recognizes all
 
assets obtained and liabilities
 
incurred in consideration as
 
proceeds of the
 
sale, including servicing
 
assets and
78
servicing liabilities, if
 
applicable; initially measures
 
at fair
 
value assets obtained
 
and liabilities incurred
 
in a
 
sale; and
 
recognizes in
earnings any gain or loss on the sale.
 
The guidance
 
on transfer
 
of financial
 
assets requires a
 
true sale
 
analysis of
 
the treatment
 
of the
 
transfer under state
 
law as
 
if the
Corporation was a debtor under the bankruptcy code. A true sale legal analysis includes several legally relevant factors, such as the
nature and level of recourse to the transferor, and the nature of retained interests in the loans sold. The analytical conclusion as to a
true sale
 
is never
 
absolute and
 
unconditional, but
 
contains qualifications
 
based on
 
the inherent
 
equitable powers
 
of a
 
bankruptcy
court, as
 
well as
 
the unsettled
 
state of
 
the common
 
law.
 
Once the
 
legal isolation
 
test has
 
been met,
 
other factors
 
concerning the
nature
 
and
 
extent
 
of
 
the
 
transferor’s
 
control
 
over
 
the
 
transferred
 
assets
 
are
 
taken
 
into
 
account
 
in
 
order
 
to
 
determine
 
whether
derecognition of assets is warranted.
 
The Corporation sells mortgage loans to the Government National Mortgage Association (“GNMA”)
 
in the normal course of business
and retains the servicing rights. The GNMA programs under which the loans
 
are sold allow the Corporation to repurchase individual
delinquent loans that meet certain criteria. At the Corporation’s option, and without GNMA’s prior authorization, the Corporation may
repurchase the delinquent
 
loan for an
 
amount equal to
 
100% of the
 
remaining principal balance
 
of the loan.
 
Once the Corporation
has the
 
unconditional ability
 
to repurchase
 
the delinquent
 
loan, the
 
Corporation is
 
deemed to
 
have regained
 
effective control
 
over
the
 
loan
 
and
 
recognizes
 
the
 
loan
 
on
 
its
 
balance
 
sheet
 
as
 
well
 
as
 
an
 
offsetting
 
liability,
 
regardless of
 
the
 
Corporation’s
 
intent
 
to
repurchase the loan.
Servicing assets
The
 
Corporation
 
periodically
 
sells
 
or
 
securitizes
 
loans
 
while
 
retaining
 
the
 
obligation
 
to
 
perform
 
the
 
servicing
 
of
 
such
 
loans.
 
In
addition,
 
the
 
Corporation
 
may
 
purchase
 
or
 
assume
 
the
 
right
 
to
 
service
 
loans
 
originated
 
by
 
others.
 
Whenever
 
the
 
Corporation
undertakes an
 
obligation to
 
service a
 
loan, management
 
assesses whether
 
a servicing
 
asset or
 
liability should
 
be recognized.
 
A
servicing
 
asset
 
is
 
recognized
 
whenever
 
the
 
compensation
 
for
 
servicing
 
is
 
expected
 
to
 
more
 
than
 
adequately
 
compensate
 
the
servicer
 
for
 
performing
 
the
 
servicing.
 
Likewise,
 
a
 
servicing
 
liability
 
would
 
be
 
recognized
 
in
 
the
 
event
 
that
 
servicing
 
fees
 
to
 
be
received are not
 
expected to adequately
 
compensate the Corporation
 
for its
 
expected cost. Mortgage servicing
 
assets recorded at
fair value are separately presented on the Consolidated
 
Statements of Financial Condition.
 
All separately recognized servicing assets are initially recognized at fair value. For subsequent measurement of
 
servicing rights, the
Corporation
 
has
 
elected
 
the
 
fair
 
value
 
method
 
for
 
mortgage
 
loans
 
servicing
 
rights
 
(“MSRs”).
 
Under
 
the
 
fair
 
value
 
measurement
method,
 
MSRs
 
are
 
recorded
 
at
 
fair
 
value
 
each
 
reporting
 
period,
 
and
 
changes
 
in
 
fair
 
value
 
are
 
reported
 
in
 
mortgage
 
banking
activities in the Consolidated Statement of Operations. Contractual
 
servicing fees including ancillary income and late
 
fees, as well as
fair
 
value
 
adjustments, are
 
reported in
 
mortgage
 
banking
 
activities in
 
the
 
Consolidated Statement
 
of
 
Operations. Loan
 
servicing
fees, which are based on a percentage of the principal balances of the
 
loans serviced, are credited to income as loan payments are
collected.
 
The fair value
 
of servicing rights is
 
estimated by using a
 
cash flow valuation model
 
which calculates the present value
 
of estimated
future net servicing cash flows, taking into consideration actual and expected loan prepayment rates, discount rates, servicing
 
costs,
and other economic factors, which are determined
 
based on current market conditions.
Premises and equipment
 
Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed on a
 
straight-
line basis over the estimated useful life of each
 
type of asset. Amortization of leasehold improvements
 
is computed over the terms of
the respective
 
leases or
 
the estimated
 
useful lives
 
of the
 
improvements, whichever
 
is shorter.
 
Costs of
 
maintenance and
 
repairs
which do not
 
improve or extend
 
the life of
 
the respective assets
 
are expensed as
 
incurred. Costs of
 
renewals and betterments
 
are
capitalized. When assets are
 
disposed of, their cost
 
and related accumulated depreciation are removed
 
from the accounts and
 
any
gain or loss is reflected in earnings as realized
 
or incurred, respectively.
The Corporation
 
capitalizes interest
 
cost
 
incurred in
 
the construction
 
of
 
significant real
 
estate projects,
 
which consist
 
primarily of
facilities
 
for
 
its
 
own
 
use
 
or
 
intended for
 
lease.
 
The
 
amount
 
of
 
interest cost
 
capitalized is
 
to
 
be
 
an
 
allocation of
 
the
 
interest cost
incurred during the
 
period required to substantially
 
complete the asset.
 
The interest rate
 
for capitalization purposes is
 
to be based
on a weighted
 
average rate on
 
the Corporation’s outstanding
 
borrowings, unless there
 
is a specific
 
new borrowing associated
 
with
the asset. Interest cost capitalized for the years ended
 
December 31, 2021, 2020 and 2019 was not
 
significant.
 
The
 
Corporation
 
recognizes
 
right-of-use
 
assets
 
(“ROU
 
assets”)
 
and
 
lease
 
liabilities
 
relating
 
to
 
operating
 
and
 
finance
 
lease
arrangements in its Consolidated Statements of Financial Condition within other assets and other liabilities, respectively. For finance
leases, interest is recognized on the
 
lease liability separately from the amortization
 
of the ROU asset, whereas for
 
operating leases
a single lease cost
 
is recognized so that
 
the cost of the
 
lease is allocated over
 
the lease term on
 
a straight-line basis. Impairments
79
on ROU assets are evaluated under the guidance for impairment
 
or disposal of long-lived assets.
 
The Corporation recognizes gains
on sale and
 
leaseback transactions in earnings when
 
the transfer constitutes a
 
sale, and the transaction
 
was at fair value.
 
Refer to
Note 33 to the Consolidated Financial Statements
 
for additional information on operating and
 
finance lease arrangements.
Impairment of long-lived assets
The
 
Corporation
 
evaluates
 
for
 
impairment
 
its
 
long-lived
 
assets
 
to
 
be
 
held
 
and
 
used,
 
and
 
long-lived
 
assets
 
to
 
be
 
disposed
 
of,
whenever events or changes
 
in circumstances indicate that the
 
carrying amount of an
 
asset may not be recoverable
 
and records a
write down for the difference between the carrying amount
 
and the fair value less costs to sell.
 
Other real estate
Other
 
real
 
estate,
 
received
 
in
 
satisfaction
 
of
 
a
 
loan,
 
is
 
recorded
 
at
 
fair
 
value
 
less
 
estimated
 
costs
 
of
 
disposal.
 
The
 
difference
between the carrying amount of the loan and the fair value less cost to
 
sell is recorded as an adjustment to the ACL. Subsequent to
foreclosure, any
 
losses in
 
the carrying
 
value arising
 
from periodic
 
re-evaluations of the
 
properties, and any
 
gains or
 
losses on
 
the
sale of these properties are credited or charged to expense in the period incurred and are included as OREO expenses. The cost of
maintaining and operating such properties is expensed
 
as incurred.
Updated appraisals
 
are obtained
 
to adjust
 
the value
 
of the
 
other real
 
estate assets.
 
The frequency
 
depends on
 
the loan
 
type and
total credit exposure. The appraisal for a commercial or construction other real estate property with a book value
 
equal to or greater
than $1 million is updated annually and if lower
 
than $1 million it is updated every two years.
 
For residential mortgage properties, the
Corporation requests appraisals annually.
 
Appraisals
 
may
 
be
 
adjusted
 
due
 
to
 
age,
 
collateral
 
inspections,
 
property
 
profiles,
 
or
 
general
 
market
 
conditions.
 
The
 
adjustments
applied are based upon
 
internal information such
 
as other appraisals for
 
the type of
 
properties and/or loss severity
 
information that
can provide historical trends in the real estate market
 
and may change from time to time based
 
on market conditions.
Goodwill and other intangible assets
Goodwill is recognized when the purchase
 
price is higher than the fair
 
value of net assets acquired in
 
business combinations under
the purchase
 
method of
 
accounting. Goodwill
 
is not
 
amortized but
 
is tested
 
for impairment
 
at least
 
annually or
 
more frequently
 
if
events or circumstances indicate possible impairment. If the
 
carrying amount of any of the
 
reporting units exceeds its fair value, the
Corporation would be required to record an impairment
 
charge for the difference up to the amount of the goodwill. 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. Goodwill impairment losses are recorded
 
as part
of operating expenses in the Consolidated Statements
 
of Operations.
 
Other intangible assets deemed
 
to have an
 
indefinite life are
 
not amortized but are
 
tested for impairment using
 
a one-step process
which compares the fair value with the carrying amount of the asset.
 
In determining that an intangible asset has an indefinite life, the
Corporation
 
considers
 
expected
 
cash
 
inflows
 
and
 
legal,
 
regulatory,
 
contractual,
 
competitive,
 
economic
 
and
 
other
 
factors,
 
which
could limit the intangible asset’s useful life.
 
Other
 
identifiable
 
intangible
 
assets
 
with
 
a
 
finite
 
useful
 
life,
 
mainly
 
core
 
deposits,
 
are
 
amortized
 
using
 
various
 
methods
 
over
 
the
periods
 
benefited,
 
which
 
range
 
from
 
5
 
to
 
10
 
years.
 
These
 
intangibles are
 
evaluated
 
periodically for
 
impairment
 
when
 
events
 
or
changes in circumstances
 
indicate that the carrying
 
amount may not
 
be recoverable. Impairments on
 
intangible assets with
 
a finite
useful life are evaluated under the guidance for
 
impairment or disposal of long-lived assets.
 
Assets sold / purchased under agreements to repurchase
 
/ resell
Repurchase and resell agreements
 
are treated as collateralized
 
financing transactions and are
 
carried at the
 
amounts at which the
assets will be subsequently reacquired or resold as
 
specified in the respective agreements.
It is the
 
Corporation’s policy to take possession
 
of securities purchased under agreements
 
to resell. However, the
 
counterparties to
such
 
agreements
 
maintain
 
effective
 
control
 
over
 
such
 
securities,
 
and
 
accordingly
 
those
 
securities
 
are
 
not
 
reflected
 
in
 
the
Corporation’s Consolidated Statements
 
of Financial
 
Condition. The Corporation
 
monitors the
 
fair value of
 
the underlying
 
securities
as compared to the related receivable, including accrued
 
interest.
 
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.
The Corporation may require counterparties to deposit
 
additional collateral or return collateral pledged,
 
when appropriate.
Software
80
Capitalized
 
software
 
is
 
stated
 
at
 
cost,
 
less
 
accumulated
 
amortization.
 
Capitalized
 
software
 
includes
 
purchased
 
software
 
and
capitalizable application development costs associated with internally-developed software. Amortization, computed on a straight-line
method, is charged to operations
 
over the estimated useful life
 
of the software. Capitalized software is
 
included in “Other assets” in
the Consolidated Statement of Financial Condition.
Guarantees, including indirect guarantees of indebtedness
 
to others
The estimated losses to be absorbed under the credit
 
recourse arrangements are recorded as a liability when
 
the loans are sold and
are updated by
 
accruing or reversing expense
 
(categorized in the line
 
item “Adjustments (expense) to
 
indemnity reserves on loans
sold”
 
in
 
the
 
Consolidated
 
Statements
 
of
 
Operations)
 
throughout
 
the
 
life
 
of
 
the
 
loan,
 
as
 
necessary,
 
when
 
additional
 
relevant
information becomes
 
available. The
 
recourse liability
 
is
 
estimated using
 
loan level
 
statistical techniques.
 
Internal factors
 
that
 
are
evaluated
 
include
 
customer
 
credit
 
scores,
 
refreshed
 
loan-to-values,
 
loan
 
age,
 
and
 
outstanding
 
balance,
 
amongst
 
others.
 
The
methodology leverages the
 
expected loss framework
 
for mortgage loans
 
and includes macroeconomic
 
expectations based on
 
a 2-
year reasonable and supportable period, gradually reverting over a 1-year horizon to historical macroeconomic
 
variables at the input
level.
 
Estimated
 
future
 
defaults,
 
prepayments
 
and
 
loss
 
severity
 
are
 
combined
 
with
 
loan
 
level
 
repayment
 
information
 
in
 
order
 
to
estimate lifetime expected
 
losses for this
 
portfolio. The reserve
 
for the estimated
 
losses under the
 
credit recourse arrangements
 
is
presented
 
separately
 
within
 
other
 
liabilities
 
in
 
the
 
Consolidated
 
Statements
 
of
 
Financial
 
Condition.
 
Refer
 
to
 
Note
 
23
 
to
 
the
Consolidated Financial Statements for further disclosures
 
on guarantees.
Treasury stock
Treasury stock is
 
recorded at cost and
 
is carried as a
 
reduction of stockholders’ equity in
 
the Consolidated Statements of Financial
Condition.
 
At the
 
date of
 
retirement or
 
subsequent reissue,
 
the treasury
 
stock account
 
is reduced
 
by
 
the cost
 
of such
 
stock.
 
At
retirement, the excess of the cost of the treasury stock over
 
its par value is recorded entirely to surplus. At reissuance,
 
the difference
between the consideration received upon issuance
 
and the specific cost is charged or credited to
 
surplus.
 
Revenues from contract with customers
Refer
 
to
 
Note
 
32
 
for
 
a
 
detailed
 
description
 
of
 
the
 
Corporation’s
 
policies
 
on
 
the
 
recognition
 
and
 
presentation
 
of
 
revenues
 
from
contract with customers.
Foreign exchange
Assets and liabilities
 
denominated in foreign currencies
 
are translated to U.S.
 
dollars using prevailing rates
 
of exchange at
 
the end
of
 
the
 
period.
 
Revenues, expenses,
 
gains
 
and
 
losses
 
are
 
translated using
 
weighted
 
average
 
rates
 
for
 
the
 
period.
 
The
 
resulting
foreign currency translation adjustment
 
from operations for which
 
the functional currency is
 
other than the U.S.
 
dollar is reported in
accumulated
 
other
 
comprehensive
 
loss,
 
except
 
for
 
highly
 
inflationary
 
environments
 
in
 
which
 
the
 
effects
 
are
 
included
 
in
 
other
operating expenses.
The Corporation
 
holds interests
 
in Centro
 
Financiero BHD
 
León, S.A.
 
(“BHD León”)
 
in the
 
Dominican Republic.
 
The business
 
of
BHD León is
 
mainly conducted in their
 
country’s foreign currency.
 
The resulting foreign currency
 
translation adjustment from these
operations is reported in accumulated other comprehensive
 
loss.
 
Refer to the disclosure of accumulated other comprehensive
 
loss included in Note 22.
Income taxes
The Corporation
 
recognizes deferred tax
 
assets and
 
liabilities for
 
the expected
 
future tax
 
consequences of
 
events that
 
have been
recognized in
 
the Corporation’s
 
financial statements
 
or tax
 
returns. Deferred
 
income tax
 
assets and
 
liabilities are
 
determined for
differences between financial statement and tax bases of assets and liabilities that will result in taxable or deductible
 
amounts in the
future.
 
The
 
computation
 
is
 
based
 
on
 
enacted
 
tax
 
laws
 
and
 
rates
 
applicable
 
to
 
periods
 
in
 
which
 
the
 
temporary
 
differences
 
are
expected to be recovered or settled.
 
The
 
guidance for
 
income
 
taxes
 
requires a
 
reduction of
 
the
 
carrying
 
amounts
 
of
 
deferred tax
 
assets
 
by
 
a valuation
 
allowance if,
based on the available evidence, it is more likely
 
than not (defined as a likelihood of more
 
than 50 percent) that such assets will not
be
 
realized.
 
Accordingly,
 
the
 
need
 
to
 
establish
 
valuation
 
allowances
 
for
 
deferred
 
tax
 
assets
 
is
 
assessed
 
periodically
 
by
 
the
Corporation
 
based
 
on
 
the
 
more
 
likely
 
than
 
not
 
realization
 
threshold
 
criterion.
 
In
 
the
 
assessment
 
for
 
a
 
valuation
 
allowance,
appropriate consideration
 
is given
 
to all
 
positive and
 
negative evidence
 
related to
 
the realization
 
of the
 
deferred tax
 
assets. This
assessment considers, among others,
 
all sources of
 
taxable income available to
 
realize the deferred tax
 
asset, including the future
reversal of existing temporary differences, the future taxable income
 
exclusive of reversing temporary differences and carryforwards,
taxable income in carryback years and tax-planning strategies. In making such
 
assessments, significant weight is given to evidence
that can be objectively verified.
 
81
The valuation
 
of deferred
 
tax assets
 
requires judgment
 
in assessing
 
the likely
 
future tax
 
consequences of
 
events that
 
have been
recognized in the Corporation’s financial statements or tax returns and future profitability.
 
The Corporation’s accounting for deferred
tax consequences represents management’s best estimate
 
of those future events.
 
Positions taken in
 
the Corporation’s
 
tax returns may
 
be subject to
 
challenge by the
 
taxing authorities upon
 
examination. Uncertain
tax positions
 
are initially
 
recognized in the
 
financial statements when
 
it is
 
more likely than
 
not (greater than
 
50%) that
 
the position
will be sustained upon examination by the tax authorities, assuming full knowledge of the position and all relevant facts. The amount
of unrecognized tax benefit 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 statute of limitations, changes in management’s judgment about the level
of
 
uncertainty,
 
including
 
addition
 
or
 
elimination
 
of
 
uncertain
 
tax
 
positions,
 
status
 
of
 
examinations, litigation,
 
settlements
 
with
 
tax
authorities and legislative activity.
 
The Corporation accounts for the taxes collected from customers
 
and remitted to governmental authorities on a net
 
basis (excluded
from revenues).
Income
 
tax
 
expense
 
or
 
benefit
 
for
 
the
 
year
 
is
 
allocated
 
among
 
continuing
 
operations,
 
discontinued
 
operations,
 
and
 
other
comprehensive income, as applicable. The
 
amount allocated to continuing operations is
 
the tax effect of
 
the pre-tax income or
 
loss
from
 
continuing operations
 
that
 
occurred during
 
the year,
 
plus
 
or minus
 
income tax
 
effects
 
of
 
(a) changes
 
in circumstances
 
that
cause
 
a
 
change
 
in
 
judgment
 
about
 
the
 
realization
 
of
 
deferred
 
tax
 
assets
 
in
 
future
 
years,
 
(b)
 
changes
 
in
 
tax
 
laws
 
or
 
rates,
 
(c)
changes in tax status, and (d) tax-deductible
 
dividends paid to shareholders, subject to certain
 
exceptions.
Employees’ retirement and other postretirement benefit
 
plans
Pension costs are
 
computed on the
 
basis of accepted
 
actuarial methods and are
 
charged to current
 
operations. Net pension costs
are based
 
on various actuarial
 
assumptions regarding future
 
experience under the
 
plan, which include
 
costs for services
 
rendered
during the
 
period, interest
 
costs and
 
return on
 
plan assets,
 
as well
 
as deferral
 
and amortization
 
of certain
 
items such
 
as actuarial
gains or losses.
 
The funding policy is
 
to contribute to the
 
plan, as necessary,
 
to provide for services
 
to date and for
 
those expected to be
 
earned in
the
 
future.
 
To
 
the
 
extent
 
that
 
these
 
requirements
 
are
 
fully
 
covered
 
by
 
assets
 
in
 
the
 
plan,
 
a
 
contribution
 
may
 
not
 
be
 
made
 
in
 
a
particular year.
The cost
 
of postretirement
 
benefits, which
 
is determined
 
based on
 
actuarial assumptions
 
and estimates
 
of the
 
costs of
 
providing
these benefits in the future, is accrued during
 
the years that the employee renders the required
 
service.
The guidance for compensation
 
retirement benefits of ASC
 
Topic
 
715 requires the recognition
 
of the funded status
 
of each defined
pension
 
benefit
 
plan,
 
retiree
 
health
 
care
 
and
 
other
 
postretirement
 
benefit
 
plans
 
on
 
the
 
Consolidated
 
Statements
 
of
 
Financial
Condition.
 
Stock-based compensation
The
 
Corporation
 
opted
 
to
 
use
 
the
 
fair
 
value
 
method
 
of
 
recording
 
stock-based
 
compensation
 
as
 
described
 
in
 
the
 
guidance
 
for
employee share plans in ASC Subtopic 718-50.
Comprehensive income
 
Comprehensive income
 
(loss) is
 
defined as
 
the change
 
in equity
 
of
 
a business
 
enterprise during
 
a period
 
from
 
transactions and
other events
 
and circumstances,
 
except those
 
resulting from
 
investments by
 
owners and
 
distributions to
 
owners. Comprehensive
income (loss) is separately presented in the Consolidated
 
Statements of Comprehensive Income.
Net income per common share
Basic income per common share is computed by dividing net income adjusted for preferred stock dividends, including undeclared or
unpaid dividends
 
if cumulative,
 
and charges
 
or credits
 
related to
 
the extinguishment
 
of preferred
 
stock or
 
induced conversions
 
of
preferred stock, by the weighted average number of
 
common shares outstanding during the year. Diluted income per common
 
share
takes into consideration the weighted average common shares adjusted for the effect of stock options, restricted stock, performance
shares and warrants, if any, using the treasury stock method.
Statement of cash flows
For purposes of reporting cash flows, cash includes
 
cash on hand and amounts due from banks, including
 
restricted cash.
 
82
 
Note 3 - New accounting pronouncements
Recently Adopted Accounting Standards Updates
Standard
Description
Date of adoption
Effect on the financial statements
 
FASB ASU 2021-06,
Presentation of Financial
Statements (Topic 205),
Financial Services –
Depository and Lending
(Topic 942), and Financial
Services – Investment
Companies (Topic 946):
Amendments to SEC
Paragraphs Pursuant to
SEC Financial Rule
Releases No. 33-10786,
Amendments to Financial
Disclosures about
Acquired and Disposed
Businesses, and No. 33-
10835, Update of
Statistical Disclosures for
Bank and Savings and
Loan Registrants
The
 
FASB
 
issued
 
ASU
 
2021-06
 
in
 
August
2021,
 
which
 
amends
 
certain
 
paragraphs
from the ASC in response to the issuance of
SEC
 
Final
 
Rules
 
Nos.
 
33-10786
 
and
 
33-
10835.
 
August 9, 2021
The
 
adoption
 
of
 
ASU
 
2021-06
 
during
2021
 
resulted
 
in
 
simplified
 
MD&A
disclosures.
 
FASB ASU 2020-10,
Codification Improvements
The FASB
 
issued ASU
 
2020-10 in
 
October
2020 which
 
moves all
 
disclosures guidance
to
 
the
 
appropriate
 
codification
 
section
 
and
makes
 
other
 
improvements
 
and
 
technical
corrections.
December 31, 2021
The
 
Corporation
 
was
 
not
 
impacted
 
by
the
 
adoption
 
of
 
ASU
 
2020-10
 
during
the fourth quarter of 2021.
FASB ASU 2020-08,
Codification Improvements
to Subtopic 310-20 –
Receivables –
Nonrefundable Fees and
Other Costs
The FASB
 
issued ASU
 
2020-08 in
 
October
2020
 
which
 
clarifies
 
that
 
a
 
reporting
 
entity
should
 
assess
 
whether
 
a
 
callable
 
debt
security
 
purchased
 
at
 
a
 
premium
 
is
 
within
the
 
scope
 
of
 
ASC
 
310-20-35-33
 
each
reporting
 
period,
 
which
 
impacts
 
the
amortization
 
period
 
for
 
nonrefundable
 
fees
and other costs.
January 1, 2021
The
 
Corporation
 
was
 
not
 
impacted
 
by
the
 
adoption
 
of
 
ASU
 
2020-08
 
during
the
 
first
 
quarter
 
of
 
2021
 
since
 
it
 
does
not
 
currently
 
hold
 
purchased
 
callable
debt securities at a premium.
FASB ASU 2020-04,
Reference Rate Reform
(Topic 848)
The
 
FASB
 
issued
 
ASU
 
2020-04
 
in
 
March
2020, which provides
 
accounting relief from
the
 
impact
 
of
 
the
 
cessation
 
of
 
LIBOR
 
by,
among
 
other
 
things,
 
providing
 
optional
expedients
 
to
 
treat
 
contract
 
modifications
resulting from such reference rate reform as
a
 
continuation
 
of
 
the
 
existing
 
contract
 
and
for
 
hedging
 
relationships
 
to
 
not
 
be
 
de-
designated
 
resulting
 
from
 
such
 
changes
provided certain criteria are met.
December 31, 2021
The
 
Corporation
 
identified
 
all
 
LIBOR-
based
 
contracts
 
that
 
will
 
be
 
impacted
by
 
the
 
cessation
 
of
 
LIBOR.
 
It
 
has
incorporated
 
fallback
 
language
 
in
 
new
contracts
 
and
 
is
 
in
 
the
 
process
 
of
completing
 
the
 
modification
 
of
 
existing
contracts
 
to
 
include
 
adequate
 
fallback
language.
 
The
 
Company
 
has
 
no
outstanding
 
hedge
 
accounting
relationships
 
tied
 
to
 
LIBOR-based
assets
 
or
 
liabilities.
 
Furthermore,
 
the
Company
 
stopped
 
originating
 
LIBOR-
based
 
contracts
 
in
 
December 2021
 
so
no
 
new
 
exposures
 
will
 
be
 
added
prospectively. The
 
election to apply
 
the
optional
 
expedients
 
did
 
not
 
have
 
a
material
 
impact
 
on
 
the
 
Consolidated
Financial Statements.
 
83
Standard
Description
Date of adoption
Effect on the financial statements
 
FASB ASU 2020-01,
Investments – Equity
Securities (Topic 321),
Investments – Equity
Method and Joint
Ventures (Topic 323), and
Derivatives and Hedging
(Topic 815): Clarifying the
Interactions between
Topic 321, Topic
 
323 and
Topic 815
The FASB
 
issued ASU
 
2020-01 in
 
January
2020,
 
which
 
clarifies
 
that
 
an
 
entity
 
should
consider
 
observable
 
transactions
 
that
require it
 
to
 
either
 
apply or
 
discontinue the
equity
 
method
 
of
 
accounting
 
for
 
the
purposes
 
of
 
applying
 
the
 
measurement
alternative
 
in
 
accordance
 
with
 
Topic
 
321
and
 
includes
 
scope
 
considerations
 
for
entities
 
that
 
hold
 
non-derivative
 
forward
contracts and
 
purchased options to
 
acquire
equity securities that, upon settlement of the
forward contract or exercise of the purchase
option,
 
would
 
be
 
accounted
 
for
 
under
 
the
equity method of accounting.
January 1, 2021
The
 
Corporation
 
was
 
not
 
impacted
 
by
the
 
adoption
 
of
 
ASU
 
2020-01
 
during
the
 
first
 
quarter
 
of
 
2021
 
since
 
it
 
does
not
 
hold
 
non-derivative
 
forward
contracts
 
and
 
purchased
 
options
 
to
acquire
 
equity
 
securities
 
that,
 
upon
settlement of the
 
forward or exercise of
the
 
purchase
 
option,
 
would
 
be
accounted for
 
under the
 
equity method
of
 
accounting.
 
Notwithstanding,
 
it
 
will
consider this guidance for the purposes
of
 
applying
 
the
 
measurement
alternative
 
in
 
ASC
 
Topic
 
321
immediately
 
before
 
applying
 
or
discontinuing
 
the
 
equity
 
method
 
of
accounting.
FASB ASU 2019-12,
Income Taxes (Topic
 
740):
Simplifying the Accounting
for Income Taxes
The
 
FASB
 
issued
 
ASU
 
2019-12
 
in
December
 
2019,
 
which
 
simplifies
 
the
accounting
 
for
 
income
 
taxes
 
by
 
removing
certain
 
exceptions such
 
as
 
the incremental
approach
 
for
 
intraperiod
 
tax
 
allocation
 
and
interim
 
period
 
income
 
tax
 
accounting
 
for
year-to-date losses
 
that
 
exceed anticipated
losses.
 
In
 
addition,
 
the
 
ASU
 
simplifies
GAAP in
 
a number
 
of areas
 
such as
 
when
separate
 
financial
 
statements
 
of
 
legal
entities
 
are
 
not
 
subject
 
to
 
tax
 
and
 
enacted
changes in tax laws in interim periods.
January 1, 2021
The Corporation adopted ASU
 
2019-12
during the
 
first quarter of
 
2021 but
 
was
not
 
materially
 
impacted
 
by
 
the
amendments
 
of
 
this
 
ASU.
 
It
 
will
consider
 
this
 
guidance
 
for
 
enacted
changes in
 
tax laws,
 
subsequent step-
ups
 
in
 
the
 
tax
 
basis
 
of
 
goodwill,
 
or
ownership changes in investments.
84
FASB ASUs Financial Instruments – Credit Losses (Topic 326)
The CECL
 
model applies
 
to financial
 
assets measured
 
at amortized
 
cost that
 
are subject
 
to credit
 
losses and
 
certain off-balance
sheet exposures. CECL 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.
 
Under
 
the
 
revised
 
methodology,
 
credit
 
losses
 
are
 
measured
based on past
 
events, current conditions
 
and reasonable and
 
supportable forecasts that
 
affect the collectability
 
of financial assets.
CECL
 
also
 
revises
 
the
 
approach
 
to
 
recognizing
 
credit
 
losses
 
for
 
available-for-sale
 
securities
 
by
 
replacing
 
the
 
direct
 
write-down
approach with
 
the allowance
 
approach and
 
limiting the
 
allowance to
 
the amount
 
at which
 
the security’s
 
fair value
 
is less
 
than the
amortized
 
cost.
 
In
 
addition,
 
CECL
 
provides
 
that
 
the
 
initial
 
allowance
 
for
 
credit
 
losses
 
on
 
purchased
 
credit
 
deteriorated
 
(“PCD”)
financial assets
 
will be
 
recorded as
 
an increase
 
to the
 
purchase price,
 
with subsequent
 
changes to
 
the allowance
 
recorded as
 
a
credit loss
 
expense.
 
The standards
 
also expand credit
 
quality disclosures. These
 
accounting standards
 
updates were
 
effective on
January 1,
 
2020. Prior
 
to the
 
adoption of
 
CECL, the Corporation
 
followed a
 
systematic methodology to
 
establish and
 
evaluate the
adequacy of the allowance for credit losses to provide
 
for probable losses in the loan portfolio.
As a result of the adoption, the Corporation recorded an
 
increase in its allowance for credit losses related to its loan portfolio
 
of $315
million, and
 
a decrease
 
of $9
 
million in
 
the allowance
 
for credit
 
losses for
 
unfunded commitments and
 
credit recourse
 
guarantees
which is
 
recorded in Other
 
Liabilities. The
 
Corporation also recognized
 
an allowance
 
for credit
 
losses of
 
approximately $13 million
related
 
to
 
its
 
held-to-maturity
 
debt
 
securities
 
portfolio.
 
The
 
adoption
 
of
 
CECL
 
was
 
recognized
 
under
 
the
 
modified
 
retrospective
approach. Therefore, the
 
adjustments to record
 
the increase
 
in the
 
allowance for credit
 
losses was
 
recorded as
 
a decrease to
 
the
opening
 
balance
 
of
 
retained
 
earnings
 
of
 
the
 
year
 
of
 
implementation,
 
net
 
of
 
income
 
taxes,
 
except
 
for
 
approximately
 
$17
 
million
related to loans
 
previously accounted under ASC
 
Subtopic 310-30, which
 
resulted in a
 
reclassification between certain contra
 
loan
balance
 
accounts to
 
the
 
allowance for
 
credit
 
losses. The
 
total
 
impact to
 
retained earnings,
 
net of
 
tax,
 
related to
 
the adoption
 
of
CECL
 
was of
 
$205.8 million.
 
As part
 
of
 
the adoption
 
of
 
CECL, the
 
Corporation made
 
the election
 
to
 
break the
 
existing pools
 
of
purchased credit impaired (“PCI”) loans and, as such,
 
these loans are no longer excluded from non-performing
 
status.
 
85
Accounting Standards Updates Not Yet Adopted
Standard
Description
Date of adoption
Effect on the financial statements
 
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 contracts with
customers
 
to
 
be
 
recognized
 
in
 
accordance
with ASC
 
Topic
 
606 on
 
the acquisition date
instead of fair value.
January 1, 2023
Upon
 
adoption
 
of
 
this
 
ASU,
 
the
Corporation will
 
consider this
 
guidance
for
 
revenue
 
contracts
 
with
 
customers
recognized
 
as
 
part
 
of
 
business
combinations
 
entered
 
into
 
on
 
or
 
after
the effective date.
FASB ASU 2021-05,
Leases (Topic 842),
Lessors – Certain Leases
with Variable Lease
Payments
The
 
FASB
 
issued
 
ASU
 
2021-05
 
in
 
July
2021, which amends ASC Topic
 
842 so that
lessors
 
can
 
classify
 
as
 
operating
 
leases
those
 
leases
 
with
 
variable
 
lease
 
payments
that,
 
prior
 
to
 
these
 
amendments,
 
would
have
 
been
 
classified
 
as
 
a
 
sales-type
 
or
direct
 
financing
 
lease
 
and
 
at
 
inception
 
a
loss would have been recognized.
January 1, 2022
The Corporation
 
does not
 
expect to
 
be
impacted
 
by
 
the
 
adoption
 
of
 
this
 
ASU
since
 
it
 
does
 
not
 
hold
 
direct
 
financing
leases with variable lease payments.
FASB ASU 2021-04,
Earnings per Share (Topic
260), Debt – Modifications
and Extinguishments
(Subtopic 470-50),
Compensation – Stock
Compensation (Topic
718), and Derivatives and
Hedging – Contracts in
Entity’s Own Equity
(Subtopic 815-40):
Issuer’s Accounting for
Certain Modifications or
Exchanges of
Freestanding Equity-
Classified Written Call
Options (a consensus of
the FASB Emerging
Issues Task Force)
The
 
FASB
 
issued
 
ASU
 
2021-04
 
in
 
May
2021,
 
which
 
clarifies
 
the
 
accounting
 
for
 
a
modification
 
or
 
an
 
exchange
 
of
 
a
freestanding
 
equity-classified
 
written
 
call
option that
 
remains equity
 
classified after
 
a
modification
 
or
 
exchange
 
and
 
the
 
related
EPS
 
effects
 
of
 
such
 
transaction
 
if
recognized as an adjustment to equity.
January 1, 2022
Upon
 
adoption
 
of
 
this
 
ASU,
 
the
Corporation will
 
consider this
 
guidance
for
 
modifications
 
or
 
exchanges
 
of
freestanding
 
equity-classified
 
written
call options.
FASB ASU 2020-06, Debt
– Debt with Conversion
and other Options
(Subtopic 470-20) and
Derivatives and Hedging –
Contracts in Entity’s Own
Equity (Subtopic 815-40):
Accounting for Convertible
Instruments and Contracts
in an Entity’s Own Equity
The
 
FASB
 
issued
 
ASU
 
2020-06
 
in
 
August
2020
 
which,
 
among
 
other
 
things,
 
simplifies
the
 
accounting
 
for
 
convertible
 
instruments
and contracts
 
in an
 
entity’s own
 
equity and
amends
 
the
 
diluted
 
EPS
 
computation
 
for
these instruments.
January 1, 2022
Upon
 
adoption
 
of
 
this
 
standard,
 
the
Corporation
 
will
 
consider
 
these
amendments
 
in
 
its
 
evaluation
 
of
contracts
 
in
 
its
 
own
 
equity,
 
including
accelerated
 
share
 
repurchase
transactions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
86
Note 4
 
Business combination
On October
 
15, 2021, Popular
 
Equipment Finance, LLC
 
(“PEF”), a newly
 
formed wholly-owned subsidiary
 
of Popular Bank
 
(“PB”),
completed the
 
acquisition of
 
certain assets
 
and
 
the
 
assumption of
 
certain
 
liabilities of
 
K2
 
Capital Group
 
LLC’s
 
(“K2”) equipment
leasing and
 
financing business
 
based in
 
Minnesota (the
 
“Acquired Business”).
 
Commercial loans
 
acquired by
 
PEF as
 
part of
 
this
transaction consisted of $105 million
 
in commercial direct financing leases
 
and $14 million in
 
working capital lines. Refer to
 
Note 2,
Summary of significant accounting policies, for further
 
details.
Specializing in the healthcare
 
industry, the
 
Acquired Business provides a variety
 
of lease products, including
 
operating and finance
leases,
 
and
 
also
 
offers
 
private
 
label
 
vendor
 
finance
 
programs
 
to
 
equipment
 
manufacturers
 
and
 
healthcare
 
organizations.
 
The
acquisition provides PB with a national equipment
 
leasing platform that complements its existing health
 
care lending business.
The
 
following
 
table
 
presents
 
the
 
fair
 
values
 
of
 
the
 
consideration
 
and
 
major
 
classes
 
of
 
identifiable
 
assets
 
acquired
 
and
 
liabilities
assumed by PEF as of October 15, 2021.
Book value prior to
purchase accounting
Fair value
As recorded by
 
(In thousands)
 
adjustments
 
adjustments
Popular, Inc.
Cash consideration
$
156,628
$
-
$
156,628
Contingent consideration
-
9,241
9,241
Total consideration
$
156,628
$
9,241
$
165,869
Assets:
Cash and due from banks
$
800
$
-
$
800
Commercial loans
118,907
(3,332)
115,575
Premises and equipment
6,987
2,009
8,996
Accrued income receivable
57
-
57
Other assets
2,822
-
2,822
Other intangible assets
-
2,887
2,887
Total assets
 
$
129,573
$
1,564
$
131,137
Liabilities:
Other liabilities
14,439
-
14,439
Total liabilities
$
14,439
$
-
$
14,439
Net assets acquired
$
115,134
$
1,564
$
116,698
Goodwill on acquisition
$
49,171
The fair values
 
initially assigned to the
 
assets acquired and liabilities
 
assumed are preliminary and
 
are subject to refinement
 
for up
to one year after the closing date of the acquisition as
 
new information relative to closing date fair values becomes available. As the
Corporation finalizes
 
its analyses, there
 
may continue
 
to be
 
adjustments to the
 
recorded carrying values,
 
and thus
 
the recognized
goodwill may increase or decrease.
Following is a description of
 
the methods used to determine
 
the fair values of significant
 
assets acquired and liabilities assumed
 
on
the K2 Transaction:
Commercial Loans
In determining the fair value
 
of commercial direct financing leases, the specific
 
terms and conditions of each lease
 
agreement were
considered.
 
The
 
fair
 
values
 
for
 
commercial
 
direct
 
financing
 
leases
 
were
 
calculated
 
based
 
on
 
the
 
fair
 
value
 
of
 
the
 
underlying
collateral, or from
 
the cash flows
 
expected to be
 
collected discounted at
 
a market rate
 
commensurate with the
 
credit risk profile
 
of
the
 
lessee at
 
origination in
 
instances where
 
there
 
was a
 
purchase option
 
at the
 
end of
 
the lease
 
term
 
with a
 
stated
 
guaranteed
residual value. Fair values for commercial working capital lines were calculated based on the present value of remaining contractual
payments discounted
 
at a
 
market rate
 
commensurate with
 
the credit
 
risk profile
 
of the
 
borrower at
 
origination. These
 
commercial
loans were
 
accounted for
 
under ASC
 
Subtopic 310-20.
 
As of
 
October 15,
 
2021, the
 
gross contractual
 
receivable for
 
commercial
loans amounted to $125 million. An allowance for credit losses of $1 million was recognized as of October 15, 2021 with an offset to
provision for credit losses, which represents the estimate
 
of contractual cash flows not expected to be
 
collected.
87
Goodwill
The
 
amount
 
of
 
goodwill
 
is
 
the
 
residual
 
difference
 
between
 
the
 
consideration
 
transferred
 
to
 
K2
 
and
 
the
 
fair
 
value
 
of
 
the
 
assets
acquired,
 
net
 
of
 
the
 
liabilities
 
assumed.
 
The
 
entire
 
amount
 
of
 
goodwill
 
is
 
deductible
 
for
 
income
 
tax
 
purposes
 
pursuant
 
to
 
U.S.
Internal Revenue Code (“IRC”) section 197 over
 
a 15-year period.
Contingent consideration
The fair value of the contingent consideration, which relates to approximately $29 million in earnout payments that could be payable
to K2 over a three-year period, was calculated based
 
on a Montecarlo Simulation model.
 
The Corporation believes that given the
 
amount of assets and liabilities assumed
 
and the size of the operations
 
acquired in relation
to
 
Popular’s operations,
 
the
 
historical results
 
of
 
K2
 
are
 
not significant
 
to
 
Popular’s results,
 
and thus
 
no
 
pro
 
forma
 
information is
presented.
88
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
 
$2.7 billion
 
at December
 
31, 2021
 
(December 31,
2020
 
-
 
$2.3
 
billion). Cash
 
and
 
due from
 
banks, as
 
well
 
as
 
other highly
 
liquid securities,
 
are
 
used to
 
cover
 
the required
 
average
reserve balances.
 
At
 
December
 
31,
 
2021
,
 
t
he
 
Corporation
 
held
 
$50
 
million
 
in
 
restricted
 
assets
 
in
 
the
 
form
 
of
 
funds
 
deposited
 
in
 
money
 
market
accounts, debt
 
securities available for
 
sale and
 
equity securities (December
 
31, 2020
 
- $39
 
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
89
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 December 31, 2021 and December 31, 2020.
 
At December 31, 2021
Gross
Gross
Weighted
Amortized
unrealized
unrealized
Fair
average
(In thousands)
cost
gains
losses
value
yield
U.S. Treasury securities
Within 1 year
$
1,225,558
$
13,556
$
69
$
1,239,045
2.33
%
After 1 to 5 years
10,059,163
98,808
65,186
10,092,785
1.18
After 5 to 10 years
4,563,265
739
36,804
4,527,200
1.22
Total U.S. Treasury
 
securities
15,847,986
113,103
102,059
15,859,030
1.27
Obligations of U.S. Government sponsored entities
Within 1 year
70
-
-
70
5.63
Total obligations of
 
U.S. Government sponsored entities
 
70
-
-
70
5.63
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
2,433
42
-
2,475
2.16
After 5 to 10 years
43,241
295
6
43,530
1.54
After 10 years
172,176
3,441
357
175,260
2.13
Total collateralized
 
mortgage obligations - federal agencies
217,850
3,778
363
221,265
2.01
Mortgage-backed securities
Within 1 year
11
1
-
12
4.79
After 1 to 5 years
65,749
2,380
11
68,118
2.23
After 5 to 10 years
665,600
17,998
5
683,593
1.97
After 10 years
8,263,835
68,128
195,910
8,136,053
1.67
Total mortgage-backed
 
securities
 
8,995,195
88,507
195,926
8,887,776
1.69
Other
After 1 to 5 years
123
5
-
128
3.62
Total other
 
123
5
-
128
3.62
Total debt securities
 
available-for-sale
[1]
$
25,061,224
$
205,393
$
298,348
$
24,968,269
1.42
%
[1]
 
Includes $22.0 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 $20.9
 
billion serve as collateral for
public funds.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
90
At December 31, 2020
Gross
 
Gross
 
Weighted
Amortized
unrealized
unrealized
Fair
average
(In thousands)
cost
gains
losses
value
yield
U.S. Treasury securities
 
Within 1 year
$
4,900,055
$
16,479
$
-
$
4,916,534
0.69
%
After 1 to 5 years
5,007,223
259,399
-
5,266,622
2.05
After 5 to 10 years
567,367
37,517
-
604,884
1.68
Total U.S. Treasury
 
securities
10,474,645
313,395
-
10,788,040
1.40
Obligations of U.S. Government sponsored entities
Within 1 year
59,993
101
-
60,094
1.46
After 1 to 5 years
90
-
-
90
5.64
Total obligations of
 
U.S. Government sponsored entities
 
60,083
101
-
60,184
1.47
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
1,388
14
-
1,402
2.97
After 5 to 10 years
61,229
1,050
-
62,279
1.56
After 10 years
318,292
10,202
43
328,451
2.04
Total collateralized
 
mortgage obligations - federal agencies
380,909
11,266
43
392,132
1.97
Mortgage-backed securities
Within 1 year
5,616
56
-
5,672
2.83
After 1 to 5 years
50,393
1,735
-
52,128
2.35
After 5 to 10 years
454,880
20,022
6
474,896
1.91
After 10 years
9,608,860
180,844
1,839
9,787,865
1.94
Total mortgage-backed
 
securities
 
10,119,749
202,657
1,845
10,320,561
1.94
Other
After 1 to 5 years
224
11
-
235
3.62
Total other
 
224
11
-
235
3.62
Total debt securities
 
available-for-sale
[1]
$
21,035,610
$
527,430
$
1,888
$
21,561,152
1.66
%
[1]
Includes $18.2 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 $16.9
 
billion serve as collateral for
public funds.
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
 
in 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.
The following table presents the
 
aggregate amortized cost and fair value of
 
debt securities available-for-sale at December 31, 2021
by contractual maturity.
(In thousands)
Amortized cost
Fair value
Within 1 year
$
1,225,639
$
1,239,127
After 1 to 5 years
10,127,468
10,163,506
After 5 to 10 years
5,272,106
5,254,323
After 10 years
8,436,011
8,311,313
Total debt securities
 
available-for-sale
$
25,061,224
$
24,968,269
During the years
 
ended December 31,
 
2021 and 2020,
 
the Corporation sold
 
U.S. Treasury
 
Notes. The proceeds
 
from these sales
were $236
 
million and $5
 
million, respectively.
 
Gross realized gains
 
and losses on
 
the sale
 
of debt securities
 
available-for-sale for
the years ended December 31, 2021, 2020 and
 
2019 were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
91
(In thousands)
2021
2020
2019
Gross realized gains
$
695
$
41
$
-
Gross realized losses
(672)
-
(20)
Net realized gains (losses) on sale of debt securities available
 
-for-sale
$
23
$
41
$
(20)
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 December 31, 2021 and 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
92
 
At December 31, 2021
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
$
9,590,448
$
102,059
$
-
$
-
$
9,590,448
$
102,059
Collateralized mortgage obligations - federal agencies
 
35,533
334
1,084
29
36,617
363
Mortgage-backed securities
5,767,556
170,614
595,051
25,312
6,362,607
195,926
Total debt securities
 
available-for-sale in an unrealized loss position
 
$
15,393,537
$
273,007
$
596,135
$
25,341
$
15,989,672
$
298,348
 
At December 31, 2020
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
Collateralized mortgage obligations - federal agencies
 
$
4,029
$
43
$
-
$
-
$
4,029
$
43
Mortgage-backed securities
886,432
1,834
555
11
886,987
1,845
Total debt securities
 
available-for-sale in an unrealized loss position
 
$
890,461
$
1,877
$
555
$
11
$
891,016
$
1,888
As of
 
December 31, 2021,
 
the portfolio
 
of available-for-sale debt
 
securities reflects gross
 
unrealized losses of
 
approximately $298
million, driven mainly by U.S. Treasury Securities and mortgage-backed securities, which were impacted by increases in the interest
rate environment.
 
The following table states the name of issuers, and the
 
aggregate amortized cost and fair value of the debt securities of such
 
issuer
(includes available-for-sale and
 
held-to-maturity debt securities),
 
in which the
 
aggregate amortized cost
 
of such securities
 
exceeds
10% of
 
stockholders’ equity.
 
This information
 
excludes debt
 
securities backed
 
by the
 
full faith
 
and credit
 
of the
 
U.S. Government.
Investments in obligations issued
 
by a state
 
of the U.S.
 
and its political subdivisions
 
and agencies, which are
 
payable and secured
by the same source of revenue or taxing authority, other than the U.S. Government,
 
are considered securities of a single issuer.
 
2021
2020
(In thousands)
Amortized cost
Fair value
Amortized cost
Fair value
FNMA
$
1,533,637
$
1,587,127
$
2,242,121
$
2,338,897
Freddie Mac
3,228,543
3,176,197
3,616,238
3,675,679
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
93
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 December
 
31, 2021 and 2020.
 
 
At December 31, 2021
Allowance
Gross
 
Gross
 
Weighted
Amortized
for Credit
Net of
unrealized
unrealized
Fair
average
(In thousands)
cost
Losses
Allowance
gains
losses
value
yield
Obligations of Puerto Rico, States and political
subdivisions
Within 1 year
$
4,240
$
7
$
4,233
$
4
$
-
$
4,237
6.07
%
After 1 to 5 years
14,395
148
14,247
149
-
14,396
6.23
After 5 to 10 years
11,280
122
11,158
104
-
11,262
2.18
After 10 years
43,561
7,819
35,742
11,746
-
47,488
1.50
Total obligations of
 
Puerto Rico, States and political
subdivisions
73,476
8,096
65,380
12,003
-
77,383
2.79
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
25
-
25
-
-
25
6.44
Total collateralized
 
mortgage obligations - federal
25
-
25
-
-
25
6.44
Securities in wholly owned statutory business trusts
After 10 years
5,960
-
5,960
-
-
5,960
6.33
Total securities
 
in wholly owned statutory business
5,960
-
5,960
-
-
5,960
6.33
Total debt securities
 
held-to-maturity
$
79,461
$
8,096
$
71,365
$
12,003
$
-
$
83,368
3.06
%
At December 31, 2020
Allowance
Gross
 
Gross
 
Weighted
Amortized
for Credit
Net of
unrealized
unrealized
Fair
average
(In thousands)
cost
Losses
Allowance
gains
losses
value
yield
Obligations of Puerto Rico, States and political
subdivisions
Within 1 year
$
3,990
$
50
$
3,940
$
47
$
-
$
3,987
6.05
%
After 1 to 5 years
16,030
710
15,320
710
-
16,030
6.16
After 5 to 10 years
14,845
573
14,272
295
23
14,544
2.77
After 10 years
46,164
8,928
37,236
11,501
-
48,737
1.58
Total obligations of
 
Puerto Rico, States and political
subdivisions
81,029
10,261
70,768
12,553
23
83,298
2.93
Collateralized mortgage obligations - federal agencies
After 1 to 5 years
31
-
31
1
-
32
6.44
Total collateralized
 
mortgage obligations - federal
31
-
31
1
-
32
6.44
Securities in wholly owned statutory business trusts
After 10 years
11,561
-
11,561
-
-
11,561
6.51
Total securities
 
in wholly owned statutory business
11,561
-
11,561
-
-
11,561
6.51
Total debt securities
 
held-to-maturity
$
92,621
$
10,261
$
82,360
$
12,554
$
23
$
94,891
3.38
%
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.
The following
 
table presents the
 
aggregate amortized cost
 
and fair value
 
of debt securities
 
held-to-maturity at December
 
31, 2021
by contractual maturity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
94
(In thousands)
Amortized cost
Fair value
Within 1 year
$
4,240
$
4,237
After 1 to 5 years
14,420
14,421
After 5 to 10 years
11,280
11,262
After 10 years
49,521
53,448
Total debt securities
 
held-to-maturity
$
79,461
$
83,368
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.
At December 31, 2021 and December 31, 2020, 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 $30 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,
 
2020
 
-
 
$35
 
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.
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 December 31, 2021
At December 31, 2020
(In thousands)
Securities issued by Puerto Rico municipalities
Watch
$
16,345
$
35,315
Pass
13,800
-
Total
$
30,145
$
35,315
At December
 
31, 2021,
 
the portfolio
 
of “Obligations
 
of Puerto
 
Rico, States
 
and political
 
subdivisions” also
 
includes $43
 
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, 2020 -
 
$46 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 December 31,
 
2021, the average
refreshed FICO
 
score
 
for the
 
representative sample,
 
comprised of
 
64%
 
of
 
the
 
nominal value
 
of the
 
securities, used
 
for the
 
loss
estimate was
 
of
 
704 (compared
 
to
 
66% and
 
697, respectively,
 
at December
 
31, 2020).
 
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 24
for additional information on the Corporation’s exposure to
 
the Puerto Rico Government.
Delinquency status
At December 31, 2021 and December 31, 2020,
 
there were no securities held-to-maturity in
 
past due or non-performing status.
Allowance for credit losses on debt securities held-to-maturity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
95
The following table provides the
 
activity in the allowance for
 
credit losses related to debt securities
 
held-to-maturity by security type
at December 31, 2021 and December 31, 2020:
For the year ended December 31,
 
2021
2020
(In thousands)
Obligations of Puerto Rico, States and political subdivisions
Allowance for credit losses:
Beginning balance
$
10,261
$
-
Impact of adopting CECL
-
12,654
Provision for credit losses (benefit)
(2,165)
(2,393)
Securities charged-off
-
-
Recoveries
-
-
Ending balance
$
8,096
$
10,261
The
 
allowance
 
for
 
credit
 
losses
 
for
 
the
 
Obligations
 
of
 
Puerto
 
Rico,
 
States
 
and
 
political
 
subdivisions
 
includes
 
$0.3
 
million
 
for
securities issued by municipalities of
 
Puerto Rico, and $7.8
 
million for bonds issued by
 
the Puerto Rico HFA
 
,
 
which are secured by
second mortgage loans on
 
Puerto Rico residential properties (compared to
 
$1.4 million and $8.9 million,
 
respectively, at
 
December
31, 2020).
96
Note 8 – Loans
For
 
a
 
summary
 
of the
 
accounting policies
 
related to
 
loans, interest
 
recognition
 
and
 
allowance for
 
credit
 
losses
 
refer to
 
Note
 
2
 
-
Summary of Significant Accounting Policies of this Form
 
10-K.
During
 
the
 
year
 
ended
 
December
 
31,
 
2021,
 
the
 
Corporation
 
recorded
 
purchases
 
(including
 
repurchases)
 
of
 
mortgage
 
loans
amounting to $393 million
 
including $14 million in
 
Purchased Credit Deteriorated (“PCD”) loans,
 
consumer loans of $61
 
million and
commercial loans of
 
$139 million; compared
 
to purchases (including
 
repurchases) of mortgage
 
loans of $1.3
 
billion including $160
million
 
in
 
PCD loans,
 
consumer loans
 
of
 
$56 million
 
and commercial
 
loans
 
of
 
$26
 
million, during
 
the year
 
ended December
 
31,
2020.
 
During 2020,
 
these mortgage
 
loan repurchases
 
included a
 
bulk
 
repurchase transaction
 
of
 
$688 million
 
in GNMA
 
loans, of
which
 
$684 million
 
were 90
 
days past
 
due
 
at
 
that
 
time,
 
including $324
 
million
 
which
 
were already
 
included
 
in
 
the
 
Corporation’s
ending portfolio balance at June 30, 2020, since due to the
 
delinquency status of the loans the Corporation had the right but not the
obligation
 
to
 
repurchase the
 
assets
 
and
 
is
 
required to
 
recognize
 
(rebook) these
 
loans
 
in
 
accordance with
 
U.S.
 
GAAP.
 
The
 
bulk
repurchase also included $120 million in loans from the FNMA and FHMLC servicing portfolio, subject to credit recourse which were
considered PCD loans.
The Corporation performed whole-loan sales involving
 
approximately $145 million of residential mortgage
 
loans and $131 million of
commercial and
 
construction loans
 
during the
 
year
 
ended December
 
31,
 
2021
 
(December 31,
 
2020 -
 
$150
 
million
 
of
 
residential
mortgage loans and $32 million of commercial loans).
 
Also, during the year ended December 31, 2021, the
 
Corporation securitized
approximately
 
$380
 
million
 
of
 
mortgage
 
loans
 
into
 
Government
 
National
 
Mortgage
 
Association
 
(“GNMA”)
 
mortgage-backed
securities
 
$330
 
million
 
of
 
mortgage
 
loans
 
into
 
Federal
 
National
 
Mortgage
 
Association
 
(“FNMA”)
 
mortgage-backed
 
securities,
compared
 
to
 
$332
 
million
 
and
 
$176
 
million,
 
respectively,
 
during
 
the
 
year
 
ended
 
December
 
31,
 
2020.
 
Also,
 
the
 
Corporation
securitized
 
approximately
 
$23
 
million
 
of
 
mortgage
 
loans
 
into
 
Federal
 
Home
 
Loan
 
Mortgage
 
Corporation
 
(“FHLMC”)
 
mortgage-
backed securities during the year ended December 31,
 
2021.
As
 
previously
 
disclosed
 
in
 
Note
 
4,
 
on
 
October
 
15,
 
2021
 
Popular
 
Equipment
 
Finance
 
LLC
 
acquired
 
$105
 
million
 
in
 
commercial
finance leases and
 
$14 million in
 
working capital lines
 
as a result
 
of the acquisition of
 
certain assets and
 
the assumption of certain
liabilities from the K2 Capital Group LLC. The portfolio of leases and loans
 
from the acquired business is included in the information
presented in this note.
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
December 31, 2021 and 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
97
December 31, 2021
Puerto Rico
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
$
314
$
-
$
272
$
586
$
154,183
$
154,769
$
272
$
-
Commercial real estate:
Non-owner occupied
2,399
136
20,716
23,251
2,266,672
2,289,923
20,716
-
Owner occupied
3,329
278
54,335
57,942
1,365,787
1,423,729
54,335
-
Commercial and industrial
3,438
1,727
45,242
50,407
3,478,041
3,528,448
44,724
518
Construction
-
-
485
485
86,626
87,111
485
-
Mortgage
217,830
81,754
805,245
1,104,829
5,147,037
6,251,866
333,887
471,358
Leasing
9,240
2,037
3,102
14,379
1,366,940
1,381,319
3,102
-
Consumer:
Credit cards
5,768
3,520
8,577
17,865
901,986
919,851
-
8,577
Home equity lines of credit
46
-
23
69
3,502
3,571
-
23
Personal
10,027
6,072
21,235
37,334
1,250,726
1,288,060
21,235
-
Auto
59,128
15,019
23,085
97,232
3,314,955
3,412,187
23,085
-
Other
432
714
12,621
13,767
110,781
124,548
12,448
173
Total
$
311,951
$
111,257
$
994,938
$
1,418,146
$
19,447,236
$
20,865,382
$
514,289
$
480,649
December 31, 2021
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
$
3,826
$
-
$
-
$
3,826
$
1,804,035
$
1,807,861
$
-
$
-
Commercial real estate:
Non-owner occupied
5,721
683
622
7,026
2,316,441
2,323,467
622
-
Owner occupied
1,095
-
1,013
2,108
392,265
394,373
1,013
-
Commercial and industrial
9,410
2,680
4,015
16,105
1,794,026
1,810,131
3,897
118
Construction
-
-
-
-
629,109
629,109
-
-
Mortgage
11,711
2,573
21,969
36,253
1,139,077
1,175,330
21,969
-
Consumer:
Credit cards
-
-
-
-
10
10
-
-
Home equity lines of credit
71
34
5,406
5,511
69,780
75,291
5,406
-
Personal
863
574
681
2,118
152,827
154,945
681
-
Other
-
-
-
-
4,658
4,658
-
-
Total
$
32,697
$
6,544
$
33,706
$
72,947
$
8,302,228
$
8,375,175
$
33,588
$
118
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
98
December 31, 2021
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
$
4,140
$
-
$
272
$
4,412
$
1,958,218
$
1,962,630
$
272
$
-
Commercial real estate:
Non-owner occupied
8,120
819
21,338
30,277
4,583,113
4,613,390
21,338
-
Owner occupied
4,424
278
55,348
60,050
1,758,052
1,818,102
55,348
-
Commercial and industrial
12,848
4,407
49,257
66,512
5,272,067
5,338,579
48,621
636
Construction
-
-
485
485
715,735
716,220
485
-
Mortgage
[1]
229,541
84,327
827,214
1,141,082
6,286,114
7,427,196
355,856
471,358
Leasing
9,240
2,037
3,102
14,379
1,366,940
1,381,319
3,102
-
Consumer:
Credit cards
5,768
3,520
8,577
17,865
901,996
919,861
-
8,577
Home equity lines of credit
117
34
5,429
5,580
73,282
78,862
5,406
23
Personal
10,890
6,646
21,916
39,452
1,403,553
1,443,005
21,916
-
Auto
59,128
15,019
23,085
97,232
3,314,955
3,412,187
23,085
-
Other
432
714
12,621
13,767
115,439
129,206
12,448
173
Total
$
344,648
$
117,801
$
1,028,644
$
1,491,093
$
27,749,464
$
29,240,557
$
547,877
$
480,767
[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.
 
The balance of these loans includes $13 million at
 
December 31, 2021 related to the rebooking of loans
 
previously pooled
into GNMA securities, in which the Corporation had a
 
buy-back option as further described below.
 
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 repurchases option are required to be reflected (rebooked)
 
on the financial statements of BPPR with an offsetting
 
liability. These balances
include $304 million of residential mortgage loans insured
 
by FHA or guaranteed by the VA
 
that are no longer accruing interest as of December
31, 2021. Furthermore, the Corporation has approximately
 
$50 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 $266 million in unearned income
 
and exclude $59 million in loans held-for-sale.
[3]
Includes $6.6 billion pledged to secure credit facilities and
 
public funds that the secured parties are not permitted to
 
sell or repledge the collateral,
of which $3.2 billion were pledged at the Federal Home
 
Loan Bank ("FHLB") as collateral for borrowings and
 
$1.7 billion at the Federal Reserve
Bank ("FRB") for discount window borrowings and $1.7
 
billion serve as collateral for public funds.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
99
December 31, 2020
Puerto Rico
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
$
796
$
-
$
505
$
1,301
$
150,979
$
152,280
$
505
$
-
Commercial real estate:
Non-owner occupied
2,189
3,503
77,137
82,829
1,924,504
2,007,333
77,137
-
Owner occupied
8,270
1,218
92,001
101,489
1,497,406
1,598,895
92,001
-
Commercial and industrial
10,223
775
35,012
46,010
4,183,098
4,229,108
34,449
563
Construction
-
-
21,497
21,497
135,609
157,106
21,497
-
Mortgage
[1]
195,602
87,726
1,428,824
1,712,152
5,057,991
6,770,143
414,343
1,014,481
Leasing
9,141
1,427
3,441
14,009
1,183,652
1,197,661
3,441
-
Consumer:
Credit cards
6,550
4,619
12,798
23,967
895,968
919,935
-
12,798
Home equity lines of credit
184
-
48
232
3,947
4,179
-
48
Personal
11,255
8,097
26,387
45,739
1,232,008
1,277,747
26,387
-
Auto
53,186
12,696
15,736
81,618
3,050,610
3,132,228
15,736
-
Other
304
483
15,052
15,839
110,826
126,665
14,881
171
Total
$
297,700
$
120,544
$
1,728,438
$
2,146,682
$
19,426,598
$
21,573,280
$
700,377
$
1,028,061
[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 include $57 million
 
in loans rebooked under the
GNMA program at December 31, 2020, in which issuers such
 
as BPPR have the option but not the obligation to repurchase
 
loans that are 90
days or more past due.
December 31, 2020
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
$
5,273
$
-
$
1,894
$
7,167
$
1,736,544
$
1,743,711
$
1,894
$
-
Commercial real estate:
Non-owner occupied
924
3,640
669
5,233
1,988,577
1,993,810
669
-
Owner occupied
191
650
334
1,175
343,205
344,380
334
-
Commercial and industrial
1,117
72
3,091
4,280
1,540,513
1,544,793
3,091
-
Construction
21,312
-
7,560
28,872
740,230
769,102
7,560
-
Mortgage
33,422
15,464
14,864
63,750
1,056,787
1,120,537
14,864
-
Consumer:
Credit cards
-
-
3
3
28
31
-
3
Home equity lines of credit
236
342
7,491
8,069
86,502
94,571
7,491
-
Personal
 
1,486
1,342
1,474
4,302
194,936
199,238
1,474
-
Other
-
-
20
20
1,723
1,743
20
-
Total
$
63,961
$
21,510
$
37,400
$
122,871
$
7,689,045
$
7,811,916
$
37,397
$
3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100
December 31, 2020
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
$
6,069
$
-
$
2,399
$
8,468
$
1,887,523
$
1,895,991
$
2,399
$
-
Commercial real estate:
Non-owner occupied
3,113
7,143
77,806
88,062
3,913,081
4,001,143
77,806
-
Owner occupied
8,461
1,868
92,335
102,664
1,840,611
1,943,275
92,335
-
Commercial and industrial
11,340
847
38,103
50,290
5,723,611
5,773,901
37,540
563
Construction
21,312
-
29,057
50,369
875,839
926,208
29,057
-
Mortgage
[1]
229,024
103,190
1,443,688
1,775,902
6,114,778
7,890,680
429,207
1,014,481
Leasing
9,141
1,427
3,441
14,009
1,183,652
1,197,661
3,441
-
Consumer:
Credit cards
6,550
4,619
12,801
23,970
895,996
919,966
-
12,801
Home equity lines of credit
420
342
7,539
8,301
90,449
98,750
7,491
48
Personal
12,741
9,439
27,861
50,041
1,426,944
1,476,985
27,861
-
Auto
53,186
12,696
15,736
81,618
3,050,610
3,132,228
15,736
-
Other
304
483
15,072
15,859
112,549
128,408
14,901
171
Total
$
361,661
$
142,054
$
1,765,838
$
2,269,553
$
27,115,643
$
29,385,196
$
737,774
$
1,028,064
[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.
 
The balance of these loans includes $57 million
 
at
December 31, 2020 related to the rebooking of loans
 
previously pooled into GNMA securities, in which the Corporation
 
had a buy-back option as
further described below. 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 repurchases option are required to be reflected
 
(rebooked) on the
financial statements of BPPR with an offsetting liability.
 
These balances include $329 million of residential mortgage
 
loans insured by FHA or
guaranteed by the VA that
 
are no longer accruing interest as of December 31, 2020.
 
Furthermore, the Corporation has approximately $60
 
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 $203 million in unearned income
 
and exclude $99 million in loans held-for-sale.
[3]
Includes $6.5 billion pledged to secure credit facilities and
 
public funds that the secured parties are not permitted to
 
sell or repledge the collateral,
of which $4.1 billion were pledged at the FHLB as collateral
 
for borrowings and $2.4 billion at the FRB for discount
 
window borrowings.
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 December
 
31, 2021, mortgage
 
loans held-in-portfolio include
 
$1.9 billion (December
 
31, 2020 -
 
$2.1 billion) of
 
loans insured by
the FHA, or
 
guaranteed VA
 
of which $0.5 billion
 
(December 31, 2020 -
 
$1.0 billion) are 90
 
days or more past
 
due. These balances
include $716 million in
 
loans modified under a
 
TDR (December 31, 2020 -
 
$655 million), that are
 
presented as accruing loans. The
portfolio of guaranteed loans includes
 
$304 million of residential mortgage
 
loans in Puerto Rico
 
that are no longer
 
accruing interest
as of December
 
31, 2021 (December 31,
 
2020 - $329 million).
 
The Corporation has approximately $50
 
million in reverse mortgage
loans in Puerto Rico which
 
are guaranteed by FHA, but which
 
are currently not accruing interest at
 
December 31, 2021 (December
31, 2020 - $60 million).
 
Loans with
 
a delinquency status
 
of 90
 
days past due
 
as of
 
December 31, 2021
 
include $13 million
 
in loans
 
previously pooled into
GNMA securities (December 31, 2020 -
 
$57 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 components of the net financing leases,
 
including finance leases within the C&I category,
 
receivable at December 31, 2021 and
2020 were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101
(In thousands)
2021
2020
Total minimum lease
 
payments
$
1,190,545
$
957,367
Estimated residual value of leased property
518,670
419,024
Deferred origination costs, net of fees
21,474
18,141
Less - Unearned financing income
257,738
196,788
Net minimum lease payments
1,472,951
1,197,744
Less - Allowance for credit losses
18,581
16,863
Net minimum lease payments, net of allowance for credit losses
$
1,454,370
$
1,180,881
At December 31, 2021, future minimum lease payments
 
are expected to be received as follows:
(In thousands)
2022
$
106,927
2023
123,654
2024
181,405
2025
216,577
2026
369,592
2027 and thereafter
192,390
Total
$
1,190,545
The following tables present the amortized cost basis
 
of non-accrual loans as of December 31, 2021
 
and 2020 by class of loans:
December 31, 2021
Puerto Rico
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
$
-
$
272
$
-
$
-
$
-
$
272
Commercial real estate non-owner occupied
15,819
4,897
-
622
15,819
5,519
Commercial real estate owner occupied
13,491
40,844
-
1,013
13,491
41,857
Commercial and industrial
30,177
14,547
-
3,897
30,177
18,444
Construction
-
485
-
-
-
485
Mortgage
169,827
164,060
29
21,940
169,856
186,000
Leasing
276
2,826
-
-
276
2,826
Consumer:
 
HELOCs
-
-
-
5,406
-
5,406
 
Personal
 
6,279
14,956
81
600
6,360
15,556
 
Auto
 
879
22,206
-
-
879
22,206
 
Other
-
12,448
-
-
-
12,448
Total
$
236,748
$
277,541
$
110
$
33,478
$
236,858
$
311,019
December 31, 2020
Puerto Rico
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
$
-
$
505
$
-
$
1,894
$
-
$
2,399
Commercial real estate non-owner occupied
35,968
41,169
-
669
35,968
41,838
Commercial real estate owner occupied
14,825
77,176
-
334
14,825
77,510
Commercial and industrial
1,148
33,301
-
3,091
1,148
36,392
Construction
-
21,497
-
7,560
-
29,057
Mortgage
141,737
272,606
517
14,347
142,254
286,953
Leasing
-
3,441
-
-
-
3,441
Consumer:
 
HELOCs
-
-
-
7,491
-
7,491
 
Personal
 
9,265
17,122
-
1,474
9,265
18,596
 
Auto
 
-
15,736
-
-
-
15,736
 
Other
-
14,881
-
20
-
14,901
Total
$
202,943
$
497,434
$
517
$
36,880
$
203,460
$
534,314
102
Loans in non-accrual status with no
 
allowance at December 31, 2021 include
 
$237 million in collateral dependent loans
 
(December
31,
 
2020
 
-
 
$203
 
million).
 
The
 
Corporation recognized
 
$3
 
million
 
in
 
interest
 
income
 
on
 
non-accrual loans
 
during
 
the
 
year
 
ended
December 31, 2021 (December 31, 2020 - $4
 
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 December
 
31, 2021 and 2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
103
December 31, 2021
(In thousands)
Real Estate
Auto
Equipment
Accounts
Receivables
Other
Total
Puerto Rico
Commercial multi-family
$
1,374
$
-
$
-
$
-
$
-
$
1,374
Commercial real estate:
Non-owner occupied
211,026
-
-
-
-
211,026
Owner occupied
47,268
-
-
-
-
47,268
Commercial and industrial
2,650
-
680
10,675
27,893
41,898
Mortgage
179,774
-
-
-
-
179,774
Leasing
-
574
-
-
-
574
Consumer:
Personal
6,165
-
-
-
-
6,165
Auto
-
8,983
-
-
-
8,983
Total Puerto Rico
$
448,257
$
9,557
$
680
$
10,675
$
27,893
$
497,062
Popular U.S.
Mortgage
926
-
-
-
-
926
Total Popular U.S.
$
926
$
-
$
-
$
-
$
-
$
926
Popular, Inc.
Commercial multi-family
$
1,374
$
-
$
-
$
-
$
-
$
1,374
Commercial real estate:
Non-owner occupied
211,026
-
-
-
-
211,026
Owner occupied
47,268
-
-
-
-
47,268
Commercial and industrial
2,650
-
680
10,675
27,893
41,898
Mortgage
180,700
-
-
-
-
180,700
Leasing
-
574
-
-
-
574
Consumer:
Personal
6,165
-
-
-
-
6,165
Auto
-
8,983
-
-
-
8,983
Total Popular,
 
Inc.
$
449,183
$
9,557
$
680
$
10,675
$
27,893
$
497,988
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
104
December 31, 2020
(In thousands)
Real Estate
Auto
Equipment
Taxi
Medallions
Accounts
Receivables
Other
Total
Puerto Rico
Commercial multi-family
$
1,301
$
-
$
-
$
-
$
-
$
-
$
1,301
Commercial real estate:
Non-owner occupied
299,223
-
-
-
-
-
299,223
Owner occupied
79,769
-
-
-
-
-
79,769
Commercial and industrial
7,577
-
1,438
-
10,989
12,046
32,050
Construction
21,497
-
-
-
-
-
21,497
Mortgage
181,648
-
-
-
-
-
181,648
Consumer:
Personal
7,414
-
-
-
-
-
7,414
Auto
-
4
-
-
-
-
4
Total Puerto Rico
$
598,429
$
4
$
1,438
$
-
$
10,989
$
12,046
$
622,906
Popular U.S.
Commercial multi-family
$
1,755
$
-
$
-
$
-
$
-
$
-
$
1,755
Commercial and industrial
-
-
-
1,545
-
-
1,545
Construction
7,560
-
-
-
-
-
7,560
Mortgage
855
-
-
-
-
-
855
Total Popular U.S.
$
10,170
$
-
$
-
$
1,545
$
-
$
-
$
11,715
Popular, Inc.
Commercial multi-family
$
3,056
$
-
$
-
$
-
$
-
$
-
$
3,056
Commercial real estate:
Non-owner occupied
299,223
-
-
-
-
-
299,223
Owner occupied
79,769
-
-
-
-
-
79,769
Commercial and industrial
7,577
-
1,438
1,545
10,989
12,046
33,595
Construction
29,057
-
-
-
-
-
29,057
Mortgage
182,503
-
-
-
-
-
182,503
Consumer:
Personal
7,414
-
-
-
-
-
7,414
Auto
-
4
-
-
-
-
4
Total Popular,
 
Inc.
$
608,599
$
4
$
1,438
$
1,545
$
10,989
$
12,046
$
634,621
Purchased Credit Deteriorated (PCD) Loans
The Corporation has purchased loans during the
 
year 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)
December 31, 2021
December 31, 2020
Purchase price of loans at acquisition
$
10,995
$
152,667
Allowance for credit losses at acquisition
3,142
7,512
Non-credit discount / (premium) at acquisition
446
(6,542)
Par value of acquired loans at acquisition
$
14,583
$
153,637
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
105
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 allowance
for credit losses
 
(“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.
At
 
December
 
31,
 
2021,
 
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
 
weights
 
applied
 
are
 
subject
 
to
evaluation
 
on
 
a
 
quarterly
 
basis
 
as
 
part
 
of
 
the
 
ACL’s
 
governance
 
process.
 
The
 
current
 
baseline
 
forecast
 
continues
 
to
 
show
 
a
favorable economic
 
scenario. The
 
2022 expected
 
GDP growth
 
rate for
 
Puerto Rico
 
is approximately
 
4%, with
 
the unemployment
rate expected to average around 7.4%
 
for the year.
 
In the case of the
 
United States, the baseline scenario expects GDP
 
growth for
2022 of approximately 4.6%, with unemployment rate expected
 
to average around 3.7%.
 
For 2023 both regions expect GDP growth
with average unemployment rate levels remaining
 
stable in comparison to 2022.
The
 
following
 
tables
 
present
 
the
 
changes
 
in
 
the
 
ACL
 
of
 
loans
 
held-in-portfolio
 
and
 
unfunded
 
commitments
 
for
 
the
 
years
 
ended
December 31, 2021 and 2020.
For the year ended December 31, 2021
Puerto Rico
(In thousands)
Commercial
Construction
Mortgage
Leasing
Consumer
Total
Allowance for credit losses - loans:
Beginning balance
$
225,323
$
4,871
$
195,557
$
16,863
$
297,136
$
739,750
Provision for credit losses (benefit)
(91,695)
(1,533)
(57,684)
2,094
19,800
(129,018)
Initial allowance for credit losses - PCD Loans
-
-
3,142
-
-
3,142
Charge-offs
(17,180)
(6,620)
(17,656)
(4,637)
(78,047)
(124,140)
Recoveries
35,480
4,923
14,927
3,258
45,840
104,428
Ending balance - loans
$
151,928
$
1,641
$
138,286
$
17,578
$
284,729
$
594,162
Allowance for credit losses - unfunded commitments:
Beginning balance
$
4,913
$
4,610
$
-
$
-
$
-
$
9,523
Provision for credit losses (benefit)
(3,162)
(2,222)
-
-
-
(5,384)
Ending balance - unfunded commitments [1]
$
1,751
$
2,388
$
-
$
-
$
-
$
4,139
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
106
For the year ended December 31, 2021
Popular U.S.
(In thousands)
Commercial
Construction
Mortgage
Consumer
Total
Allowance for credit losses - loans:
Beginning balance
$
108,057
$
9,366
$
20,159
$
18,918
$
156,500
Provision for credit losses (benefit)
(45,427)
(4,764)
(3,949)
(187)
(54,327)
Charge-offs
(1,177)
(523)
(605)
(8,732)
(11,037)
Recoveries
2,424
643
587
6,414
10,068
Ending balance - loans
$
63,877
$
4,722
$
16,192
$
16,413
$
101,204
Allowance for credit losses - unfunded commitments:
Beginning balance
$
1,753
$
4,469
$
-
$
106
$
6,328
Provision for credit losses (benefit)
(369)
(2,132)
-
(69)
(2,570)
Ending balance - unfunded commitments [1]
$
1,384
$
2,337
$
-
$
37
$
3,758
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
For the year ended December 31, 2021
Popular, Inc.
(In thousands)
Commercial
Construction
Mortgage
Leasing
Consumer
Total
Allowance for credit losses - loans:
Beginning balance
$
333,380
$
14,237
$
215,716
$
16,863
$
316,054
$
896,250
Provision for credit losses (benefit)
(137,122)
(6,297)
(61,633)
2,094
19,613
(183,345)
Initial allowance for credit losses - PCD Loans
-
-
3,142
-
-
3,142
Charge-offs
(18,357)
(7,143)
(18,261)
(4,637)
(86,779)
(135,177)
Recoveries
37,904
5,566
15,514
3,258
52,254
114,496
Ending balance - loans
$
215,805
$
6,363
$
154,478
$
17,578
$
301,142
$
695,366
Allowance for credit losses - unfunded commitments:
Beginning balance
$
6,666
$
9,079
$
-
$
-
$
106
$
15,851
Provision for credit losses (benefit)
(3,531)
(4,354)
-
-
(69)
(7,954)
Ending balance - unfunded commitments [1]
$
3,135
$
4,725
$
-
$
-
$
37
$
7,897
[1
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
107
For the year ended December 31, 2020
Puerto Rico
 
(In thousands)
Commercial
Construction
Mortgage
Leasing
Consumer
Total
Allowance for credit losses - loans:
Beginning balance
$
131,063
$
574
$
116,281
$
10,768
$
173,965
$
432,651
Impact of adopting CECL
62,393
115
86,081
(713)
122,492
270,368
Provision for credit losses
48,756
3,228
5,318
14,172
134,391
205,865
Initial allowance for credit losses - PCD Loans
-
-
7,512
-
-
7,512
Charge-offs
(27,731)
-
(30,080)
(10,447)
(170,023)
(238,281)
Recoveries
10,842
954
10,445
3,083
36,311
61,635
Ending balance - loans
$
225,323
$
4,871
$
195,557
$
16,863
$
297,136
$
739,750
Allowance for credit losses - unfunded commitments:
Beginning balance
$
678
$
294
$
-
$
-
$
7,467
$
8,439
Impact of adopting CECL
1,158
(185)
-
-
(7,467)
(6,494)
Provision for credit losses
3,077
4,501
-
-
-
7,578
Ending balance - unfunded commitments [1]
$
4,913
$
4,610
$
-
$
-
$
-
$
9,523
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
For the year ended December 31, 2020
Popular U.S.
 
(In thousands)
Commercial
Construction
Mortgage
Consumer
Total
Allowance for credit losses - loans:
Beginning balance
$
16,557
$
4,266
$
4,827
$
19,407
$
45,057
Impact of adopting CECL
29,537
(3,038)
10,431
7,809
44,739
Provision for credit losses
59,748
8,427
4,891
3,405
76,471
Charge-offs
(2,078)
(1,509)
(59)
(17,404)
(21,050)
Recoveries
4,293
1,220
69
5,701
11,283
Ending balance - loans
$
108,057
$
9,366
$
20,159
$
18,918
$
156,500
Allowance for credit losses - unfunded commitments:
Beginning balance
$
152
$
125
$
-
$
1
$
278
Impact of adopting CECL
453
582
-
(1)
1,034
Provision for credit losses
1,148
3,762
-
106
5,016
Ending balance - unfunded commitments [1]
$
1,753
$
4,469
$
-
$
106
$
6,328
[1]
Allowance for credit losses of unfunded commitments is
 
presented as part of Other Liabilities in the Consolidated
 
Statements of Financial Condition.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
108
For the year ended December 31, 2020
Popular, Inc.
(In thousands)
Commercial
Construction
Mortgage
Leasing
Consumer
Total
Allowance for credit losses - loans:
Beginning balance
$
147,620
$
4,840
$
121,108
$
10,768
$
193,372
$
477,708
Impact of adopting CECL
91,930
(2,923)
96,512
(713)
130,301
315,107
Provision for credit losses
108,504
11,655
10,209
14,172
137,796
282,336
Initial allowance for credit losses - PCD Loans
-
-
7,512
-
-
7,512
Charge-offs
(29,809)
(1,509)
(30,139)
(10,447)
(187,427)
(259,331)
Recoveries
15,135
2,174
10,514
3,083
42,012
72,918
Ending balance - loans
$
333,380
$
14,237
$
215,716
$
16,863
$
316,054
$
896,250
Allowance for credit losses - unfunded commitments:
Beginning balance
$
830
$
419
$
-
$
-
$
7,468
$
8,717
Impact of adopting CECL
1,611
397
-
-
(7,468)
(5,460)
Provision for credit losses
4,225
8,263
-
-
106
12,594
Ending balance - unfunded commitments [1]
$
6,666
$
9,079
$
-
$
-
$
106
$
15,851
[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
 
of
 
a
 
loan
 
constitutes
 
a
 
troubled
 
debt
 
restructuring
 
when
 
a
 
borrower
 
is
 
experiencing
 
financial
 
difficulty
 
and
 
the
modification constitutes a concession. For a summary of the accounting policy related to troubled debt restructurings (“TDRs”), refer
to the Summary of Significant Accounting Policies
 
included in Note 2 to these Consolidated Financial
 
Statements.
The outstanding
 
balance of
 
loans classified
 
as TDRs
 
amounted to
 
$1.7 billion
 
at December
 
31, 2021
 
(December 31,
 
2020 -
 
$1.7
billion).
 
The amount
 
of outstanding
 
commitments to
 
lend additional
 
funds to
 
debtors owing
 
receivables whose
 
terms have
 
been
modified in TDRs amounted to
 
$9 million related to the
 
commercial loan portfolio at December 31,
 
2021 (December 31, 2020 -
 
$14
million).
The following table presents
 
the outstanding balance of
 
loans classified as TDRs
 
according to their accruing
 
status and the related
allowance at December 31, 2021 and 2020.
December 31, 2021
 
December 31, 2020
(In thousands)
Accruing
Non-
Accruing
Total
Related
Allowance
Accruing
Non-
Accruing
Total
Related
Allowance
Loans held-in-portfolio:
 
Commercial
$
261,344
$
64,744
$
326,088
$
24,736
$
259,246
$
103,551
$
362,797
$
15,236
 
Construction
-
-
-
-
-
21,497
21,497
4,397
 
Mortgage
[1]
1,143,204
112,509
1,255,713
61,888
1,060,193
135,772
1,195,965
71,018
 
Leasing
325
47
372
42
392
218
610
150
 
Consumer
64,093
10,556
74,649
16,124
74,707
12,792
87,499
22,508
Loans held-in-portfolio
$
1,468,966
$
187,856
$
1,656,822
$
102,790
$
1,394,538
$
273,830
$
1,668,368
$
113,309
[1] At December 31, 2021, accruing mortgage loan TDRs include
 
$716 million guaranteed by U.S. sponsored entities
 
at BPPR, compared to $655
million at December 31, 2020.
The
 
following
 
tables
 
present
 
the
 
loan
 
count
 
by
 
type
 
of
 
modification
 
for
 
those
 
loans
 
modified
 
in
 
a
 
TDR
 
during
 
the
 
years
 
ended
December 31, 2021 and 2020. Loans modified
 
as TDRs for the U.S. operations are considered
 
insignificant to the Corporation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
109
For the year ended December 31, 2021
Reduction in
interest rate
Extension of
maturity date
Combination of
reduction in interest
rate and extension of
maturity date
Other
Commercial multi-family
-
1
1
-
Commercial real estate non-owner occupied
-
11
1
-
Commercial real estate owner occupied
4
23
4
12
Commercial and industrial
5
13
-
21
Mortgage
39
140
1,590
5
Leasing
-
-
2
-
Consumer:
 
Credit cards
134
-
1
43
 
HELOCs
-
1
1
-
 
Personal
183
117
1
2
 
Auto
-
7
3
-
 
Other
7
-
-
1
Total
372
313
1,604
84
For the year ended December 31, 2020
Reduction in
interest rate
Extension of
maturity date
Combination of
reduction in interest
rate and extension of
maturity date
Other
Commercial multi-family
-
2
-
-
Commercial real estate non-owner occupied
2
10
-
1
Commercial real estate owner occupied
-
37
-
-
Commercial and industrial
3
50
-
-
Construction
-
1
-
-
Mortgage
3
68
331
411
Leasing
-
-
5
17
Consumer:
 
Credit cards
659
-
-
93
 
HELOCs
-
2
1
-
 
Personal
355
5
1
1
 
Auto
-
2
2
38
 
Other
3
-
-
-
Total
1,025
177
340
561
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
110
The following tables present,
 
by class, quantitative information related
 
to loans modified as TDRs during the years
 
ended December
31, 2021 and 2020.
Popular, Inc.
 
For the year ended December 31, 2021
(Dollars in thousands)
Loan count
Pre-modification
outstanding recorded
investment
Post-modification
outstanding recorded
investment
Increase (decrease) in the
allowance for credit losses
as a result of modification
Commercial multi-family
2
$
246
$
211
$
26
Commercial real estate non-owner occupied
12
3,612
3,604
177
Commercial real estate owner occupied
43
95,354
90,096
1,577
Commercial and industrial
39
6,573
5,719
745
Mortgage
1,774
213,661
214,367
6,632
Leasing
2
40
38
5
Consumer:
 
Credit cards
178
2,223
2,136
42
 
HELOCs
2
176
228
54
 
Personal
303
4,222
4,217
899
 
Auto
10
199
206
65
 
Other
8
305
303
124
Total
2,373
$
326,611
$
321,125
$
10,346
Popular, Inc.
 
For the year ended December 31, 2020
(Dollars in thousands)
Loan count
Pre-modification
outstanding recorded
investment
Post-modification
outstanding recorded
investment
Increase (decrease) in the
allowance for credit losses
as a result of modification
Commercial multi-family
2
$
1,133
$
1,115
$
(18)
Commercial real estate non-owner occupied
13
25,217
22,065
(969)
Commercial real estate owner occupied
37
10,955
10,914
137
Commercial and industrial
53
3,140
3,178
34
Construction
1
21,514
21,514
4,370
Mortgage
813
102,559
85,394
6,875
Leasing
22
720
732
65
Consumer:
 
Credit cards
752
7,048
7,097
286
 
HELOCs
3
510
396
33
 
Personal
362
6,194
6,188
1,043
 
Auto
42
836
838
131
 
Other
3
25
25
6
Total
2,103
$
179,851
$
159,456
$
11,993
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
111
During the year ended December 31, 2021, five loans with an aggregate
 
unpaid principal balance of $ 10.2 million were restructured
into multiple notes (“Note A / B
 
split”)
,
 
compared to ten loans with an aggregate unpaid
 
principal balance of $35.1 million during the
year
 
ended
 
December
 
31,
 
2020,
 
of
 
which
 
a
 
discounted
 
payoff
 
for
 
one
 
loan
 
with
 
an
 
aggregate
 
unpaid principal
 
balance
 
of
 
$1.7
million was completed after the restructuring.
 
The Corporation recorded $0.3 million in charge-offs as part of Note A / B splits during
2020.
 
The
 
recorded
 
investment
 
on
 
these
 
commercial
 
TDRs
 
amounted
 
to
 
approximately
 
$10.2
 
million
 
at
 
December
 
31,
 
2021,
compared to
 
$32.9 million
 
at December
 
31, 2020.
 
These loans
 
were restructured
 
after analyzing
 
the borrowers’
 
capacity to
 
repay
the debt, collateral and ability to perform under
 
the modified terms.
The following tables present,
 
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.
 
Defaulted during the year ended December 31, 2021
(Dollars in thousands)
Loan count
Recorded investment as of first default date
Commercial real estate non-owner occupied
4
$
8,421
Commercial real estate owner occupied
4
4,500
Commercial and industrial
5
317
Mortgage
104
10,543
Consumer:
 
Credit cards
81
979
 
Personal
27
723
Total
225
$
25,483
Defaulted during the year ended December 31, 2020
(Dollars in thousands)
Loan count
Recorded investment as of first default date
Commercial real estate non-owner occupied
1
$
1,700
Commercial real estate owner occupied
6
933
Commercial and industrial
4
141
Construction
1
21,497
Mortgage
249
26,925
Consumer:
 
Credit cards
317
2,560
 
Personal
99
1,660
 
Other
2
1
Total
679
$
55,417
 
 
112
Commercial,
 
consumer
 
and
 
mortgage
 
loans
 
modified
 
in
 
a
 
TDR
 
are
 
closely
 
monitored
 
for
 
delinquency
 
as
 
an
 
early
 
indicator
 
of
possible future default.
 
If loans modified in a TDR
 
subsequently default, the allowance for credit losses
 
may be increased or partial
charge-offs may be taken to further write-down the carrying
 
value of the loan.
Credit Quality
The
 
Corporation
 
has
 
defined
 
a
 
risk
 
rating
 
system
 
to
 
assign
 
a
 
rating
 
to
 
all
 
credit
 
exposures,
 
particularly
 
for
 
the
 
commercial
 
and
construction loan
 
portfolios. Risk
 
ratings in
 
the aggregate
 
provide the
 
Corporation’s management
 
the asset
 
quality profile
 
for
 
the
loan portfolio. 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 Corporation’s obligor risk rating scales range from rating 1 (Excellent) to rating 14 (Loss). The obligor risk rating reflects the risk
of payment default of a borrower in the ordinary
 
course of business.
 
Pass Credit Classifications:
Pass (Scales 1 through 8)
 
– Loans classified as
 
pass have a well defined
 
primary source of repayment, with no
 
apparent
risk, strong financial position, minimal operating risk, profitability, liquidity and strong
 
capitalization.
 
Watch
 
(Scale 9)
 
– Loans
 
classified as
 
watch have
 
acceptable business
 
credit,
 
but borrower’s
 
operations, cash
 
flow or
financial condition evidence more than average risk, requires above
 
average levels of supervision and attention from Loan
Officers.
Special Mention (Scale 10) -
 
Loans classified as special mention have
 
potential weaknesses that deserve management’s
close attention.
 
If left uncorrected, these potential weaknesses may result
 
in deterioration of the repayment prospects for
the loan or of the Corporation’s credit position at
 
some future date.
 
Adversely Classified Classifications:
Substandard
 
(Scales
 
11
 
and
 
12)
 
-
 
Loans
 
classified
 
as
 
substandard
 
are
 
deemed
 
to
 
be
 
inadequately
 
protected
 
by
 
the
current net worth
 
and payment capacity
 
of the obligor
 
or of the
 
collateral pledged, if
 
any.
 
Loans classified as
 
such have
well-defined weaknesses that jeopardize the liquidation of
 
the debt.
 
They are characterized by the
 
distinct possibility that
the institution will sustain some loss if the deficiencies
 
are not corrected.
 
Doubtful (Scale
 
13) - Loans
 
classified as
 
doubtful have
 
all the
 
weaknesses inherent
 
in those
 
classified as
 
substandard,
with the
 
additional characteristic
 
that the
 
weaknesses make
 
the collection
 
or liquidation
 
in full,
 
on the
 
basis of
 
currently
existing facts, conditions, and values, highly questionable
 
and improbable.
 
Loss
 
(Scale
 
14)
 
-
 
Uncollectible
 
and
 
of
 
such
 
little
 
value
 
that
 
continuance
 
as
 
a
 
bankable
 
asset
 
is
 
not
 
warranted.
 
This
classification does
 
not mean
 
that the
 
asset has
 
absolutely no
 
recovery or
 
salvage value,
 
but rather
 
it is
 
not practical
 
or
desirable to defer writing off this asset even though partial
 
recovery may be effected in the future.
Risk
 
ratings scales
 
10
 
through
 
14
 
conform
 
to
 
regulatory
 
ratings.
 
The
 
assignment
 
of
 
the
 
obligor
 
risk
 
rating
 
is
 
based
 
on
 
relevant
information about the ability of borrowers to
 
service their debts such as current
 
financial information, historical payment experience,
credit documentation, public information, and
 
current economic trends, among other factors.
 
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
 
December 31, 2021 and 2020 by vintage year.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
113
December 31, 2021
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2021
2020
2019
2018
2017
Prior
 
Years
Total
Puerto Rico
Commercial:
Commercial multi-family
Watch
$
-
$
-
$
-
$
-
$
-
$
4,485
$
-
$
-
$
4,485
Special mention
-
-
-
-
-
3,025
-
-
3,025
Substandard
-
-
982
-
-
6,257
100
-
7,339
Pass
24,936
21,288
34,840
25,311
2,066
31,468
11
-
139,920
Total commercial
multi-family
$
24,936
$
21,288
$
35,822
$
25,311
$
2,066
$
45,235
$
111
$
-
$
154,769
Commercial real estate non-owner occupied
Watch
$
100,465
$
228,852
$
25,443
$
137,044
$
2,406
$
205,304
$
3,237
$
-
$
702,751
Special Mention
18,509
12,563
7,271
-
4,608
24,056
-
-
67,007
Substandard
30,155
27,790
24,200
25,456
2,770
72,407
-
-
182,778
Pass
513,087
88,662
88,353
37,999
42,522
557,052
9,712
-
1,337,387
Total commercial
real estate non-
owner occupied
$
662,216
$
357,867
$
145,267
$
200,499
$
52,306
$
858,819
$
12,949
$
-
$
2,289,923
Commercial real estate owner occupied
Watch
$
8,393
$
8,612
$
8,972
$
6,958
$
3,039
$
121,716
$
-
$
-
$
157,690
Special Mention
5,573
857
7,598
1,427
2,449
103,472
-
-
121,376
Substandard
6,960
1,028
1,646
35,529
1,869
113,288
-
-
160,320
Doubtful
-
-
-
-
76
612
-
-
688
Pass
238,533
198,442
44,943
23,112
32,585
429,651
16,389
-
983,655
Total commercial
real estate owner
occupied
$
259,459
$
208,939
$
63,159
$
67,026
$
40,018
$
768,739
$
16,389
$
-
$
1,423,729
Commercial and industrial
Watch
$
186,529
$
12,542
$
21,536
$
103,835
$
14,577
$
90,776
$
108,183
$
-
$
537,978
Special Mention
7,380
9,936
14,856
28,473
1,012
28,448
60,397
-
150,502
Substandard
2,190
1,091
3,041
35,826
66,771
45,168
38,003
-
192,090
Doubtful
-
-
-
-
-
62
-
-
62
Pass
843,661
335,369
275,357
84,084
72,580
333,869
702,896
-
2,647,816
Total commercial
and industrial
$
1,039,760
$
358,938
$
314,790
$
252,218
$
154,940
$
498,323
$
909,479
$
-
$
3,528,448
Construction
Substandard
$
-
$
-
$
485
$
-
$
-
$
-
$
-
$
-
$
485
Pass
21,596
41,622
1,148
-
-
-
22,260
-
86,626
Total construction
$
21,596
$
41,622
$
1,633
$
-
$
-
$
-
$
22,260
$
-
$
87,111
Mortgage
Substandard
$
-
$
954
$
5,212
$
5,613
$
4,310
$
122,690
$
-
$
-
$
138,779
Pass
463,742
304,780
223,464
265,239
194,982
4,660,880
-
-
6,113,087
Total mortgage
$
463,742
$
305,734
$
228,676
$
270,852
$
199,292
$
4,783,570
$
-
$
-
$
6,251,866
Leasing
Substandard
$
124
$
618
$
880
$
613
$
613
$
235
$
-
$
-
$
3,083
Loss
-
-
-
1
16
2
-
-
19
Pass
613,452
328,085
222,770
133,112
62,881
17,917
-
-
1,378,217
Total leasing
$
613,576
$
328,703
$
223,650
$
133,726
$
63,510
$
18,154
$
-
$
-
$
1,381,319
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
114
December 31, 2021
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2021
2020
2019
2018
2017
Prior
 
Years
Total
Puerto Rico
Consumer:
Credit cards
Substandard
$
-
$
-
$
-
$
-
$
-
$
-
$
8,577
$
-
$
8,577
Pass
-
-
-
-
-
-
911,274
-
911,274
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
919,851
$
-
$
919,851
HELOCs
Substandard
-
-
-
-
-
-
23
-
23
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
3,548
$
-
$
3,548
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
-
$
3,571
$
-
$
3,571
Personal
Substandard
$
426
$
610
$
2,105
$
866
$
936
$
15,680
$
-
$
1,385
$
22,008
Loss
30
2
3
-
-
3
-
-
38
Pass
539,604
197,652
227,328
91,341
53,630
120,065
-
36,394
1,266,014
Total Personal
$
540,060
$
198,264
$
229,436
$
92,207
$
54,566
$
135,748
$
-
$
37,779
$
1,288,060
Auto
Substandard
$
3,080
$
7,520
$
9,498
$
4,739
$
2,210
$
1,422
$
-
$
-
$
28,469
Loss
42
11
-
-
-
-
-
-
53
Pass
1,259,800
808,339
637,300
420,293
177,104
80,829
-
-
3,383,665
Total Auto
$
1,262,922
$
815,870
$
646,798
$
425,032
$
179,314
$
82,251
$
-
$
-
$
3,412,187
Other consumer
Substandard
$
-
$
114
$
21
$
487
$
-
$
135
$
11,250
$
-
$
12,007
Loss
-
-
-
579
-
34
-
-
613
Pass
24,845
9,781
9,348
5,610
3,914
947
57,483
-
111,928
Total Other
consumer
$
24,845
$
9,895
$
9,369
$
6,676
$
3,914
$
1,116
$
68,733
$
-
$
124,548
Total Puerto Rico
$
4,913,112
$
2,647,120
$
1,898,600
$
1,473,547
$
749,926
$
7,191,955
$
1,953,343
$
37,779
$
20,865,382
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
115
December 31, 2021
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2021
2020
2019
2018
2017
Prior
Years
Total
Popular U.S.
Commercial:
Commercial multi-family
Watch
$
8,600
$
41,348
$
56,229
$
20,682
$
37,343
$
48,753
$
-
$
-
$
212,955
Special mention
-
3,752
9,013
30,244
11,071
28,297
-
-
82,377
Substandard
-
-
67,149
12,748
-
18,644
-
-
98,541
Pass
422,613
241,805
201,298
144,534
46,809
352,724
4,205
-
1,413,988
Total commercial
multi-family
$
431,213
$
286,905
$
333,689
$
208,208
$
95,223
$
448,418
$
4,205
$
-
$
1,807,861
Commercial real estate non-owner occupied
Watch
$
12,716
$
22,109
$
42,067
$
56,576
$
28,604
$
154,289
$
780
$
-
$
317,141
Special Mention
2,939
-
3,205
7,025
10,573
15,569
-
-
39,311
Substandard
-
756
6,405
14,544
11,384
60,323
-
-
93,412
Pass
543,667
356,071
156,925
211,432
250,516
346,606
8,386
-
1,873,603
Total commercial
real estate non-
owner occupied
$
559,322
$
378,936
$
208,602
$
289,577
$
301,077
$
576,787
$
9,166
$
-
$
2,323,467
Commercial real estate owner occupied
Watch
$
-
$
239
$
7,825
$
8,150
$
1,676
$
17,132
$
4,222
$
-
$
39,244
Special Mention
-
-
-
-
-
1,800
-
-
1,800
Substandard
-
-
1,148
2,878
-
20,841
-
-
24,867
Pass
129,898
46,737
34,355
23,845
26,236
63,463
3,928
-
328,462
Total commercial
real estate owner
occupied
$
129,898
$
46,976
$
43,328
$
34,873
$
27,912
$
103,236
$
8,150
$
-
$
394,373
Commercial and industrial
Watch
$
3,747
$
4,667
$
4,292
$
9,273
$
5
$
1,530
$
3,925
$
-
$
27,439
Special Mention
2,504
7,203
670
481
59
215
8,177
-
19,309
Substandard
537
97
4,559
495
168
1,890
159
-
7,905
Loss
262
58
108
17
51
191
-
-
687
Pass
273,254
339,564
211,695
191,086
115,146
339,336
284,710
-
1,754,791
Total commercial
and industrial
$
280,304
$
351,589
$
221,324
$
201,352
$
115,429
$
343,162
$
296,971
$
-
$
1,810,131
Construction
Watch
$
-
$
14,300
$
23,547
$
28,757
$
34,205
$
-
$
-
$
-
$
100,809
Special Mention
-
-
-
-
-
13,622
-
-
13,622
Substandard
-
-
-
15,438
10,231
-
-
-
25,669
Pass
130,587
136,045
165,105
13,634
36,500
7,138
-
-
489,009
Total construction
$
130,587
$
150,345
$
188,652
$
57,829
$
80,936
$
20,760
$
-
$
-
$
629,109
Mortgage
Substandard
$
-
$
4,338
$
3,894
$
967
$
217
$
12,680
$
-
$
-
$
22,096
Pass
326,641
266,212
215,071
61,986
6,376
276,948
-
-
1,153,234
Total mortgage
$
326,641
$
270,550
$
218,965
$
62,953
$
6,593
$
289,628
$
-
$
-
$
1,175,330
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
116
December 31, 2021
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2021
2020
2019
2018
2017
Prior
Years
Total
Popular U.S.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
10
$
-
$
10
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
10
$
-
$
10
HELOCs
Substandard
$
-
$
-
$
-
$
-
$
-
$
3,006
$
-
$
935
$
3,941
Loss
-
-
-
-
-
207
-
1,258
1,465
Pass
-
-
-
-
-
11,423
38,267
20,195
69,885
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
14,636
$
38,267
$
22,388
$
75,291
Personal
Substandard
$
72
$
81
$
250
$
73
$
17
$
163
$
2
$
-
$
658
Loss
-
-
4
-
-
19
-
-
23
Pass
75,538
19,411
43,346
7,418
2,802
5,625
124
-
154,264
Total Personal
$
75,610
$
19,492
$
43,600
$
7,491
$
2,819
$
5,807
$
126
$
-
$
154,945
Other consumer
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
4,658
$
-
$
4,658
Total Other
consumer
$
-
$
-
$
-
$
-
$
-
$
-
$
4,658
$
-
$
4,658
Total Popular U.S.
$
1,933,575
$
1,504,793
$
1,258,160
$
862,283
$
629,989
$
1,802,434
$
361,553
$
22,388
$
8,375,175
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
117
December 31, 2021
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2021
2020
2019
2018
2017
Prior
Years
Total
Popular, Inc.
Commercial:
Commercial multi-family
Watch
$
8,600
$
41,348
$
56,229
$
20,682
$
37,343
$
53,238
$
-
$
-
$
217,440
Special mention
-
3,752
9,013
30,244
11,071
31,322
-
-
85,402
Substandard
-
-
68,131
12,748
-
24,901
100
-
105,880
Pass
447,549
263,093
236,138
169,845
48,875
384,192
4,216
-
1,553,908
Total commercial
multi-family
$
456,149
$
308,193
$
369,511
$
233,519
$
97,289
$
493,653
$
4,316
$
-
$
1,962,630
Commercial real estate non-owner occupied
Watch
$
113,181
$
250,961
$
67,510
$
193,620
$
31,010
$
359,593
$
4,017
$
-
$
1,019,892
Special Mention
21,448
12,563
10,476
7,025
15,181
39,625
-
-
106,318
Substandard
30,155
28,546
30,605
40,000
14,154
132,730
-
-
276,190
Pass
1,056,754
444,733
245,278
249,431
293,038
903,658
18,098
-
3,210,990
Total commercial
real estate non-
owner occupied
$
1,221,538
$
736,803
$
353,869
$
490,076
$
353,383
$
1,435,606
$
22,115
$
-
$
4,613,390
Commercial real estate owner occupied
Watch
$
8,393
$
8,851
$
16,797
$
15,108
$
4,715
$
138,848
$
4,222
$
-
$
196,934
Special Mention
5,573
857
7,598
1,427
2,449
105,272
-
-
123,176
Substandard
6,960
1,028
2,794
38,407
1,869
134,129
-
-
185,187
Doubtful
-
-
-
-
76
612
-
-
688
Pass
368,431
245,179
79,298
46,957
58,821
493,114
20,317
-
1,312,117
Total commercial
real estate owner
occupied
$
389,357
$
255,915
$
106,487
$
101,899
$
67,930
$
871,975
$
24,539
$
-
$
1,818,102
Commercial and industrial
Watch
$
190,276
$
17,209
$
25,828
$
113,108
$
14,582
$
92,306
$
112,108
$
-
$
565,417
Special Mention
9,884
17,139
15,526
28,954
1,071
28,663
68,574
-
169,811
Substandard
2,727
1,188
7,600
36,321
66,939
47,058
38,162
-
199,995
Doubtful
-
-
-
-
-
62
-
-
62
Loss
262
58
108
17
51
191
-
-
687
Pass
1,116,915
674,933
487,052
275,170
187,726
673,205
987,606
-
4,402,607
Total commercial
and industrial
$
1,320,064
$
710,527
$
536,114
$
453,570
$
270,369
$
841,485
$
1,206,450
$
-
$
5,338,579
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
118
December 31, 2021
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2021
2020
2019
2018
2017
Prior
Years
Total
Popular, Inc.
Construction
Watch
$
-
$
14,300
$
23,547
$
28,757
$
34,205
$
-
$
-
$
-
$
100,809
Special Mention
-
-
-
-
-
13,622
-
-
13,622
Substandard
-
-
485
15,438
10,231
-
-
-
26,154
Pass
152,183
177,667
166,253
13,634
36,500
7,138
22,260
-
575,635
Total construction
$
152,183
$
191,967
$
190,285
$
57,829
$
80,936
$
20,760
$
22,260
$
-
$
716,220
Mortgage
Substandard
$
-
$
5,292
$
9,106
$
6,580
$
4,527
$
135,370
$
-
$
-
$
160,875
Pass
790,383
570,992
438,535
327,225
201,358
4,937,828
-
-
7,266,321
Total mortgage
$
790,383
$
576,284
$
447,641
$
333,805
$
205,885
$
5,073,198
$
-
$
-
$
7,427,196
Leasing
Substandard
$
124
$
618
$
880
$
613
$
613
$
235
$
-
$
-
$
3,083
Loss
-
-
-
1
16
2
-
-
19
Pass
613,452
328,085
222,770
133,112
62,881
17,917
-
-
1,378,217
Total leasing
$
613,576
$
328,703
$
223,650
$
133,726
$
63,510
$
18,154
$
-
$
-
$
1,381,319
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
119
December 31, 2021
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2021
2020
2019
2018
2017
Prior
Years
Total
Popular, Inc.
Consumer:
Credit cards
Substandard
$
-
$
-
$
-
$
-
$
-
$
-
$
8,577
$
-
$
8,577
Pass
-
-
-
-
-
-
911,284
-
911,284
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
919,861
$
-
$
919,861
HELOCs
Substandard
$
-
$
-
$
-
$
-
$
-
$
3,006
$
23
$
935
$
3,964
Loss
-
-
-
-
-
207
-
1,258
1,465
Pass
-
-
-
-
-
11,423
41,815
20,195
73,433
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
14,636
$
41,838
$
22,388
$
78,862
Personal
Substandard
$
498
$
691
$
2,355
$
939
$
953
$
15,843
$
2
$
1,385
$
22,666
Loss
30
2
7
-
-
22
-
-
61
Pass
615,142
217,063
270,674
98,759
56,432
125,690
124
36,394
1,420,278
Total Personal
$
615,670
$
217,756
$
273,036
$
99,698
$
57,385
$
141,555
$
126
$
37,779
$
1,443,005
Auto
Substandard
$
3,080
$
7,520
$
9,498
$
4,739
$
2,210
$
1,422
$
-
$
-
$
28,469
Loss
42
11
-
-
-
-
-
-
53
Pass
1,259,800
808,339
637,300
420,293
177,104
80,829
-
-
3,383,665
Total Auto
$
1,262,922
$
815,870
$
646,798
$
425,032
$
179,314
$
82,251
$
-
$
-
$
3,412,187
Other consumer
Substandard
$
-
$
114
$
21
$
487
$
-
$
135
$
11,250
$
-
$
12,007
Loss
-
-
-
579
-
34
-
-
613
Pass
24,845
9,781
9,348
5,610
3,914
947
62,141
-
116,586
Total Other
consumer
$
24,845
$
9,895
$
9,369
$
6,676
$
3,914
$
1,116
$
73,391
$
-
$
129,206
Total Popular Inc.
$
6,846,687
$
4,151,913
$
3,156,760
$
2,335,830
$
1,379,915
$
8,994,389
$
2,314,896
$
60,167
$
29,240,557
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
120
December 31, 2020
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2020
2019
2018
2017
2016
Prior
 
Years
Total
Puerto Rico
Commercial:
Commercial multi-family
Watch
$
-
$
-
$
-
$
-
$
-
$
460
$
-
$
-
$
460
Special mention
-
-
-
-
-
4,160
-
-
4,160
Substandard
-
-
-
-
-
400
100
-
500
Pass
5,216
36,433
26,051
2,106
2,563
74,791
-
-
147,160
Total commercial
multi-family
$
5,216
$
36,433
$
26,051
$
2,106
$
2,563
$
79,811
$
100
$
-
$
152,280
Commercial real estate non-owner occupied
Watch
$
160,960
$
73,561
$
27,592
$
40,654
$
33,277
$
197,912
$
2,100
$
-
$
536,056
Special Mention
-
26,331
124,560
29,711
19,895
62,839
836
-
264,172
Substandard
43,399
74,303
26,799
4,932
29,974
130,218
95
-
309,720
Pass
88,324
53,385
39,814
60,585
124,643
527,282
3,352
-
897,385
Total commercial
real estate non-
owner occupied
$
292,683
$
227,580
$
218,765
$
135,882
$
207,789
$
918,251
$
6,383
$
-
$
2,007,333
Commercial real estate owner occupied
Watch
$
96,046
$
10,319
$
14,412
$
9,760
$
9,584
$
146,445
$
2,627
$
-
$
289,193
Special Mention
850
6,638
249
6,571
282
172,078
-
-
186,668
Substandard
1,774
2,181
37,686
1,878
27,094
145,193
-
-
215,806
Doubtful
-
-
-
-
-
1,714
-
-
1,714
Pass
204,840
54,274
31,917
57,854
128,392
417,376
10,861
-
905,514
Total commercial
real estate owner
occupied
$
303,510
$
73,412
$
84,264
$
76,063
$
165,352
$
882,806
$
13,488
$
-
$
1,598,895
Commercial and industrial
Watch
$
131,556
$
77,821
$
182,776
$
40,318
$
63,968
$
267,856
$
243,335
$
-
$
1,007,630
Special Mention
28,310
10,297
19,220
45,861
910
28,507
86,263
-
219,368
Substandard
32,941
2,180
26,921
26,769
1,824
55,220
49,036
-
194,891
Doubtful
-
67
-
1
-
54
1
-
123
Loss
-
-
-
-
-
-
13
-
13
Pass
1,181,399
492,778
119,709
168,174
105,442
218,716
520,865
-
2,807,083
Total commercial
and industrial
$
1,374,206
$
583,143
$
348,626
$
281,123
$
172,144
$
570,353
$
899,513
$
-
$
4,229,108
Construction
Watch
$
-
$
105
$
4,895
$
-
$
-
$
-
$
960
$
-
$
5,960
Substandard
-
-
-
21,497
-
-
-
-
21,497
Pass
15,723
22,408
3,423
63,582
-
-
24,513
-
129,649
Total construction
$
15,723
$
22,513
$
8,318
$
85,079
$
-
$
-
$
25,473
$
-
$
157,106
Mortgage
Substandard
$
754
$
903
$
1,172
$
3,129
$
4,374
$
159,359
$
-
$
-
$
169,691
Pass
263,473
224,390
177,537
212,650
225,824
5,496,578
-
-
6,600,452
Total mortgage
$
264,227
$
225,293
$
178,709
$
215,779
$
230,198
$
5,655,937
$
-
$
-
$
6,770,143
Leasing
Substandard
$
200
$
822
$
748
$
913
$
617
$
136
$
-
$
-
$
3,436
Pass
480,964
315,022
209,340
109,708
63,955
15,236
-
-
1,194,225
Total leasing
$
481,164
$
315,844
$
210,088
$
110,621
$
64,572
$
15,372
$
-
$
-
$
1,197,661
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
121
December 31, 2020
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2020
2019
2018
2017
2016
Prior
 
Years
Total
Puerto Rico
Consumer:
Credit cards
Substandard
$
-
$
-
$
-
$
-
$
-
$
-
$
12,798
$
-
$
12,798
Pass
-
-
-
-
-
-
907,137
-
907,137
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
919,935
$
-
$
919,935
HELOCs
Pass
$
-
$
-
$
-
$
-
$
-
$
540
$
3,639
$
-
$
4,179
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
540
$
3,639
$
-
$
4,179
Personal
Substandard
$
1,288
$
4,782
$
1,741
$
1,022
$
971
$
18,647
$
152
$
1,545
$
30,148
Pass
323,170
413,973
168,142
99,768
57,319
137,693
2,144
45,390
1,247,599
Total Personal
$
324,458
$
418,755
$
169,883
$
100,790
$
58,290
$
156,340
$
2,296
$
46,935
$
1,277,747
Auto
Substandard
$
1,975
$
6,029
$
3,612
$
1,760
$
1,369
$
990
$
-
$
-
$
15,735
Pass
1,064,082
881,343
628,657
299,677
168,157
74,577
-
-
3,116,493
Total Auto
$
1,066,057
$
887,372
$
632,269
$
301,437
$
169,526
$
75,567
$
-
$
-
$
3,132,228
Other consumer
Substandard
$
-
$
16
$
1,376
$
240
$
174
$
13,075
$
-
$
-
$
14,881
Pass
16,912
15,698
13,158
4,966
2,828
3,785
54,437
-
111,784
Total Other
consumer
$
16,912
$
15,714
$
14,534
$
5,206
$
3,002
$
16,860
$
54,437
$
-
$
126,665
Total Puerto Rico
$
4,144,156
$
2,806,059
$
1,891,507
$
1,314,086
$
1,073,436
$
8,371,837
$
1,925,264
$
46,935
$
21,573,280
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
122
December 31, 2020
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2020
2019
2018
2017
2016
Prior
Years
Total
Popular U.S.
Commercial:
Commercial multi-family
Watch
$
1,643
$
16,787
$
39,980
$
39,713
$
52,989
$
61,369
$
-
$
-
$
212,481
Special mention
3,122
30,708
4,380
19,593
37,745
20,463
-
-
116,011
Substandard
-
17,376
21,771
1,755
20,085
6,247
-
-
67,234
Pass
326,008
289,652
163,812
100,555
132,400
332,709
2,849
-
1,347,985
Total commercial
multi-family
$
330,773
$
354,523
$
229,943
$
161,616
$
243,219
$
420,788
$
2,849
$
-
$
1,743,711
Commercial real estate non-owner occupied
Watch
$
10,057
$
23,877
$
76,629
$
56,112
$
49,166
$
62,766
$
1,055
$
-
$
279,662
Special Mention
-
4,760
15,304
14,623
70,224
20,028
350
-
125,289
Substandard
771
18,642
36,495
11,007
40,528
28,984
-
-
136,427
Pass
397,686
231,904
224,256
236,008
142,432
214,495
5,651
-
1,452,432
Total commercial
real estate non-
owner occupied
$
408,514
$
279,183
$
352,684
$
317,750
$
302,350
$
326,273
$
7,056
$
-
$
1,993,810
Commercial real estate owner occupied
Watch
$
393
$
8,266
$
7,941
$
4,060
$
16,689
$
16,108
$
4,222
$
-
$
57,679
Special Mention
-
-
192
-
-
1,467
-
-
1,659
Substandard
-
1,152
2,361
-
1,348
20,305
-
-
25,166
Pass
48,684
47,484
47,451
28,761
18,296
68,739
461
-
259,876
Total commercial
real estate owner
occupied
$
49,077
$
56,902
$
57,945
$
32,821
$
36,333
$
106,619
$
4,683
$
-
$
344,380
Commercial and industrial
Watch
$
16,126
$
1,973
$
30
$
3,621
$
1,196
$
8,488
$
3,972
$
-
$
35,406
Special Mention
14,056
-
-
1,634
4,807
4,756
1,637
-
26,890
Substandard
2,029
6,568
-
-
-
5,980
2,394
-
16,971
Pass
410,349
196,958
198,249
132,993
123,762
300,846
102,369
-
1,465,526
Total commercial
and industrial
$
442,560
$
205,499
$
198,279
$
138,248
$
129,765
$
320,070
$
110,372
$
-
$
1,544,793
Construction
Watch
$
8,451
$
-
$
-
$
37,015
$
-
$
2,065
$
-
$
-
$
47,531
Special Mention
-
-
-
3,089
-
30,083
-
-
33,172
Substandard
-
-
20,655
9,372
7,560
-
-
-
37,587
Pass
79,489
288,865
168,411
99,814
8,392
5,841
-
-
650,812
Total construction
$
87,940
$
288,865
$
189,066
$
149,290
$
15,952
$
37,989
$
-
$
-
$
769,102
Mortgage
Substandard
$
29
$
-
$
1,221
$
-
$
328
$
13,287
$
-
$
-
$
14,865
Pass
356,839
275,289
103,160
9,337
9,530
351,517
-
-
1,105,672
Total mortgage
$
356,868
$
275,289
$
104,381
$
9,337
$
9,858
$
364,804
$
-
$
-
$
1,120,537
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
123
December 31, 2020
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2020
2019
2018
2017
2016
Prior
Years
Total
Popular U.S.
Consumer:
Credit cards
Pass
$
-
$
-
$
-
$
-
$
-
$
-
$
31
$
-
$
31
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
31
$
-
$
31
HELOCs
Substandard
$
-
$
-
$
-
$
-
$
-
$
112
$
-
$
357
$
469
Loss
-
-
-
-
-
156
-
6,867
7,023
Pass
-
-
-
-
-
11,907
39,366
35,806
87,079
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
12,175
$
39,366
$
43,030
$
94,571
Personal
Substandard
$
83
$
784
$
165
$
74
$
18
$
6
$
-
$
-
$
1,130
Loss
-
17
63
12
6
244
2
-
344
Pass
40,539
109,606
27,693
9,623
1,855
8,256
192
-
197,764
Total Personal
$
40,622
$
110,407
$
27,921
$
9,709
$
1,879
$
8,506
$
194
$
-
$
199,238
Other consumer
Substandard
$
-
$
-
$
-
$
-
$
-
$
-
$
20
$
-
$
20
Pass
-
-
-
-
-
-
1,723
-
1,723
Total Other
consumer
$
-
$
-
$
-
$
-
$
-
$
-
$
1,743
$
-
$
1,743
Total Popular U.S.
$
1,716,354
$
1,570,668
$
1,160,219
$
818,771
$
739,356
$
1,597,224
$
166,294
$
43,030
$
7,811,916
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
124
December 31, 2020
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2020
2019
2018
2017
2016
Prior
Years
Total
Popular, Inc.
Commercial:
Commercial multi-family
Watch
$
1,643
$
16,787
$
39,980
$
39,713
$
52,989
$
61,829
$
-
$
-
$
212,941
Special mention
3,122
30,708
4,380
19,593
37,745
24,623
-
-
120,171
Substandard
-
17,376
21,771
1,755
20,085
6,647
100
-
67,734
Pass
331,224
326,085
189,863
102,661
134,963
407,500
2,849
-
1,495,145
Total commercial
multi-family
$
335,989
$
390,956
$
255,994
$
163,722
$
245,782
$
500,599
$
2,949
$
-
$
1,895,991
Commercial real estate non-owner occupied
Watch
$
171,017
$
97,438
$
104,221
$
96,766
$
82,443
$
260,678
$
3,155
$
-
$
815,718
Special Mention
-
31,091
139,864
44,334
90,119
82,867
1,186
-
389,461
Substandard
44,170
92,945
63,294
15,939
70,502
159,202
95
-
446,147
Pass
486,010
285,289
264,070
296,593
267,075
741,777
9,003
-
2,349,817
Total commercial
real estate non-
owner occupied
$
701,197
$
506,763
$
571,449
$
453,632
$
510,139
$
1,244,524
$
13,439
$
-
$
4,001,143
Commercial real estate owner occupied
Watch
$
96,439
$
18,585
$
22,353
$
13,820
$
26,273
$
162,553
$
6,849
$
-
$
346,872
Special Mention
850
6,638
441
6,571
282
173,545
-
-
188,327
Substandard
1,774
3,333
40,047
1,878
28,442
165,498
-
-
240,972
Doubtful
-
-
-
-
-
1,714
-
-
1,714
Pass
253,524
101,758
79,368
86,615
146,688
486,115
11,322
-
1,165,390
Total commercial
real estate owner
occupied
$
352,587
$
130,314
$
142,209
$
108,884
$
201,685
$
989,425
$
18,171
$
-
$
1,943,275
Commercial and industrial
Watch
$
147,682
$
79,794
$
182,806
$
43,939
$
65,164
$
276,344
$
247,307
$
-
$
1,043,036
Special Mention
42,366
10,297
19,220
47,495
5,717
33,263
87,900
-
246,258
Substandard
34,970
8,748
26,921
26,769
1,824
61,200
51,430
-
211,862
Doubtful
-
67
-
1
-
54
1
-
123
Loss
-
-
-
-
-
-
13
-
13
Pass
1,591,748
689,736
317,958
301,167
229,204
519,562
623,234
-
4,272,609
Total commercial
and industrial
$
1,816,766
$
788,642
$
546,905
$
419,371
$
301,909
$
890,423
$
1,009,885
$
-
$
5,773,901
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
125
December 31, 2020
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2020
2019
2018
2017
2016
Prior
Years
Total
Popular, Inc.
Construction
Watch
$
8,451
$
105
$
4,895
$
37,015
$
-
$
2,065
$
960
$
-
$
53,491
Special Mention
-
-
-
3,089
-
30,083
-
-
33,172
Substandard
-
-
20,655
30,869
7,560
-
-
-
59,084
Pass
95,212
311,273
171,834
163,396
8,392
5,841
24,513
-
780,461
Total construction
$
103,663
$
311,378
$
197,384
$
234,369
$
15,952
$
37,989
$
25,473
$
-
$
926,208
Mortgage
Substandard
$
783
$
903
$
2,393
$
3,129
$
4,702
$
172,646
$
-
$
-
$
184,556
Pass
620,312
499,679
280,697
221,987
235,354
5,848,095
-
-
7,706,124
Total mortgage
$
621,095
$
500,582
$
283,090
$
225,116
$
240,056
$
6,020,741
$
-
$
-
$
7,890,680
Leasing
Substandard
$
200
$
822
$
748
$
913
$
617
$
136
$
-
$
-
$
3,436
Pass
480,964
315,022
209,340
109,708
63,955
15,236
-
-
1,194,225
Total leasing
$
481,164
$
315,844
$
210,088
$
110,621
$
64,572
$
15,372
$
-
$
-
$
1,197,661
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
126
December 31, 2020
Term Loans
Revolving
Loans
Amortized
Cost Basis
Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis
Amortized Cost Basis by Origination Year
(In thousands)
2020
2019
2018
2017
2016
Prior
Years
Total
Popular, Inc.
Consumer:
Credit cards
Substandard
$
-
$
-
$
-
$
-
$
-
$
-
$
12,798
$
-
$
12,798
Pass
-
-
-
-
-
-
907,168
-
907,168
Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
919,966
$
-
$
919,966
HELOCs
Substandard
$
-
$
-
$
-
$
-
$
-
$
112
$
-
$
357
$
469
Loss
-
-
-
-
-
156
-
6,867
7,023
Pass
-
-
-
-
-
12,447
43,005
35,806
91,258
Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
12,715
$
43,005
$
43,030
$
98,750
Personal
Substandard
$
1,371
$
5,566
$
1,906
$
1,096
$
989
$
18,653
$
152
$
1,545
$
31,278
Loss
-
17
63
12
6
244
2
-
344
Pass
363,709
523,579
195,835
109,391
59,174
145,949
2,336
45,390
1,445,363
Total Personal
$
365,080
$
529,162
$
197,804
$
110,499
$
60,169
$
164,846
$
2,490
$
46,935
$
1,476,985
Auto
Substandard
$
1,975
$
6,029
$
3,612
$
1,760
$
1,369
$
990
$
-
$
-
$
15,735
Pass
1,064,082
881,343
628,657
299,677
168,157
74,577
-
-
3,116,493
Total Auto
$
1,066,057
$
887,372
$
632,269
$
301,437
$
169,526
$
75,567
$
-
$
-
$
3,132,228
Other consumer
Substandard
$
-
$
16
$
1,376
$
240
$
174
$
13,075
$
20
$
-
$
14,901
Pass
16,912
15,698
13,158
4,966
2,828
3,785
56,160
-
113,507
Total Other
consumer
$
16,912
$
15,714
$
14,534
$
5,206
$
3,002
$
16,860
$
56,180
$
-
$
128,408
Total Popular Inc.
$
5,860,510
$
4,376,727
$
3,051,726
$
2,132,857
$
1,812,792
$
9,969,061
$
2,091,558
$
89,965
$
29,385,196
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
127
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,
 
lower-of-cost-or-market
 
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:
Years ended December
 
31,
(In thousands)
2021
2020
2019
Mortgage servicing fees, net of fair value adjustments:
Mortgage servicing fees
$
38,105
$
43,234
$
46,952
Mortgage servicing rights fair value adjustments
(10,206)
(42,055)
(27,430)
Total mortgage
 
servicing fees, net of fair value adjustments
27,899
1,179
19,522
Net gain on sale of loans, including valuation on loans
 
held for sale
21,684
31,215
18,817
Trading account profit (loss):
Realized gains (losses) on closed derivative positions
1,323
(10,586)
(6,246)
Total trading account
 
profit (loss)
1,323
(10,586)
(6,246)
Losses on repurchased loans, including interest advances [1]
(773)
(11,407)
-
Total mortgage
 
banking activities
$
50,133
$
10,401
$
32,093
[1]
The Corporation, from time to time, repurchases delinquent
 
loans from its GNMA servicing portfolio, in compliance
 
with Guarantor guidelines, and
may incur in losses related to previously advanced interest
 
on delinquent loans. During the quarter ended September
 
30, 2020 the Corporation
repurchased $687.9 million of GNMA loans and recorded
 
a loss of $10.5 million for previously advanced interest
 
on delinquent loans. Effective for
the quarter ended September 30, 2020, the Corporation
 
has determined to present these losses as part of its
 
Mortgage Banking Activities, which
were previously presented within the indemnity reserves on loans
 
sold component of non-interest income. The amount
 
of these losses for prior
years were considered immaterial for reclassification.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
128
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
 
23
 
to
 
the
 
Consolidated
 
Financial
Statements for a description of such arrangements.
 
No liabilities were
 
incurred as a
 
result of these
 
securitizations during the
 
years ended December
 
31, 2021 and
 
2020 because they
did
 
not
 
contain
 
any
 
credit
 
recourse
 
arrangements.
 
The
 
Corporation
 
recorded
 
a
 
net
 
gain
 
of
 
$18.4
 
million
 
and
 
$27.3
 
million,
respectively, during the years ended December 31, 2021 and 2020 related to the residential
 
mortgage loans securitized.
 
The
 
following tables
 
present the
 
initial fair
 
value of
 
the
 
assets obtained
 
as
 
proceeds from
 
residential mortgage
 
loans securitized
during the years ended December 31, 2021 and
 
2020:
Proceeds Obtained During the Year
 
Ended December 31, 2021
(In thousands)
Level 1
Level 2
Level 3
Initial fair value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
-
$
380,228
$
-
$
380,228
Mortgage-backed securities - FNMA
-
329,617
-
329,617
Mortgage-backed securities - FHLMC
-
22,688
-
22,688
Total trading account
 
debt securities
$
-
$
732,533
$
-
$
732,533
Mortgage servicing rights
$
-
$
-
$
11,314
$
11,314
Total
 
$
-
$
732,533
$
11,314
$
743,847
Proceeds Obtained During the Year
 
Ended December 31, 2020
(In thousands)
Level 1
Level 2
Level 3
Initial fair value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA
$
-
$
332,207
$
-
$
332,207
Mortgage-backed securities - FNMA
-
175,864
-
175,864
Total trading account
 
debt securities
$
-
$
508,071
$
-
$
508,071
Mortgage servicing rights
$
-
$
-
$
7,236
$
7,236
Total
 
$
-
$
508,071
$
7,236
$
515,307
During the
 
year ended
 
December 31,
 
2021, the
 
Corporation retained
 
servicing rights
 
on whole
 
loan sales
 
involving approximately
$144 million in principal balance outstanding (2020 - $147 million), with net realized gains of
 
approximately $3.2 million (2020 - $3.9
million). All loan sales performed during the
 
years ended December 31, 2021 and 2020 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 years ended
 
December 31, 2021
and 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
129
Residential MSRs
(In thousands)
December 31, 2021
December 31, 2020
Fair value at beginning of period
$
118,395
$
150,906
Additions
13,391
9,544
Changes due to payments on loans
 
[1]
(15,383)
(11,692)
Reduction due to loan repurchases
(1,233)
(11,060)
Changes in fair value due to changes in valuation model inputs
 
or assumptions
6,410
(19,327)
Other
(10)
24
Fair value at end of period
 
[2]
$
121,570
$
118,395
[1] Represents changes due to collection / realization
 
of expected cash flows over time.
[2] At December 31, 2021, PB had MSRs amounting to $1.6
 
million (December 31, 2020 - $0.7 million).
Residential mortgage loans serviced for others were $12.1
 
billion at December 31, 2021 (2020 - $12.9
 
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
 
December 31,
 
2021, those weighted
 
average mortgage servicing
 
fees were
 
0.30%
(2020 –
 
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
years ended December 31, 2021 and 2020 were
 
as follows:
Years ended
December 31, 2021
December 31, 2020
 
BPPR
PB
BPPR
PB
Prepayment speed
6.8
%
19.0
%
7.6
%
21.9
%
Weighted average life (in years)
8.3
20.9
8.7
3.6
Discount rate (annual rate)
10.5
%
10.7
%
10.9
%
10.5
%
Key
 
economic
 
assumptions
 
used
 
to
 
estimate
 
the
 
fair
 
value
 
of
 
MSRs
 
derived
 
from
 
sales
 
and
 
securitizations
 
of
 
mortgage
 
loans
performed
 
by
 
the
 
banking
 
subsidiaries
 
and
 
servicing
 
rights
 
purchased
 
from
 
other
 
financial
 
institutions,
 
and
 
the
 
sensitivity
 
to
immediate changes in those assumptions,
 
were as follows as of the end of the periods
 
reported:
Originated MSRs
Purchased MSRs
December 31,
December 31,
December 31,
December 31,
 
(In thousands)
2021
2020
2021
2020
Fair value of servicing rights
$
40,058
$
44,129
$
81,512
$
74,266
Weighted average life (in years)
7.1
6.2
7.5
5.9
Weighted average prepayment speed (annual
 
rate)
7.7
%
6.6
%
7.6
%
7.1
%
Impact on fair value of 10% adverse change
$
(1,500)
$
(1,115)
$
(1,486)
$
(2,206)
Impact on fair value of 20% adverse change
$
(2,359)
$
(2,194)
$
(3,495)
$
(4,312)
Weighted average discount rate (annual rate)
11.2
%
11.3
%
11.0
%
11.1
%
Impact on fair value of 10% adverse change
$
(2,079)
$
(1,640)
$
(2,731)
$
(2,740)
Impact on fair value of 20% adverse change
$
(3,452)
$
(3,175)
$
(5,832)
$
(5,301)
130
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 December 31, 2021, the Corporation serviced $0.7
 
billion (2020 - $0.9 billion) in residential mortgage
 
loans with credit recourse to
the Corporation,
 
from which $26 million was 60
 
days or more past due (2020
 
- $52 million). Also refer
 
to Note 23 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
December
 
31,
 
2021,
 
the
 
Corporation
 
had
 
recorded
 
$13
 
million
 
in
 
mortgage
 
loans
 
on
 
its
 
Consolidated
 
Statements
 
of
 
Financial
Condition related to this
 
buy-back option program (2020 -
 
$57 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
 
year
 
ended
 
December
 
31,
 
2021,
 
the
 
Corporation
 
repurchased
 
approximately
 
$94
 
million
 
of
 
mortgage
 
loans
 
from
 
its
GNMA servicing portfolio (2020 - $862 million). 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, mostly 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 COVID-19 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
131
Note 12 - Premises and equipment
Premises and equipment are stated at cost less accumulated
 
depreciation and amortization as follows:
(In thousands)
Useful life in years
2021
2020
Premises and equipment:
Land
$
94,246
$
109,780
Buildings
10-50
468,293
512,131
Equipment
2-10
374,192
350,014
Leasehold improvements
3-10
87,406
87,289
929,891
949,434
 
Less - Accumulated depreciation and amortization
559,234
574,835
Subtotal
370,657
374,599
Construction in progress
29,337
25,862
Premises and equipment, net
$
494,240
$
510,241
Depreciation and
 
amortization of
 
premises and
 
equipment for
 
the year
 
2021 was
 
$55.1 million
 
(2020 -$58.4
 
million; 2019
 
- $58.1
million), of
 
which $25.2
 
million (2020
 
- $27.2
 
million; 2019
 
- $27.3
 
million) was
 
charged to
 
occupancy expense
 
and $29.8
 
million
(2020 - $31.2
 
million; 2019 -
 
$30.8 million) was charged
 
to equipment, communications and
 
other operating expenses. Occupancy
expense
 
of
 
premises
 
and
 
equipment
 
is
 
net
 
of
 
rental
 
income
 
of
 
$13.4
 
million
 
(2020
 
-
 
$15.5
 
million;
 
2019
 
-
 
$19.3
 
million).
 
For
information related to the amortization expense of finance
 
leases, refer to Note 33 - Leases.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
132
Note 13 – Other real estate owned
The following
 
tables present
 
the activity
 
related to
 
Other Real
 
Estate Owned
 
(“OREO”), for
 
the years
 
ended December
 
31, 2021,
2020 and 2019.
 
For the year ended December 31, 2021
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
13,214
$
69,932
$
83,146
Write-downs in value
(1,058)
(2,161)
(3,219)
Additions
9,746
55,898
65,644
Sales
(7,282)
(52,666)
(59,948)
Other adjustments
397
(943)
(546)
Ending balance
$
15,017
$
70,060
$
85,077
For the year ended December 31, 2020
OREO
OREO
(In thousands)
Commercial/Construction
Mortgage
Total
Balance at beginning of period
$
16,959
$
105,113
$
122,072
Write-downs in value
(1,564)
(3,060)
(4,624)
Additions
2,223
17,785
20,008
Sales
(4,359)
(49,797)
(54,156)
Other adjustments
(45)
(109)
(154)
Ending balance
$
13,214
$
69,932
$
83,146
For the year ended December 31, 2019
OREO
OREO
(In thousands)
Commercial/ Construction
Mortgage
Total
Balance at beginning of period
$
21,794
$
114,911
$
136,705
Write-downs in value
(1,584)
(4,541)
(6,125)
Additions
6,801
62,630
69,431
Sales
(9,892)
(67,137)
(77,029)
Other adjustments
(160)
(750)
(910)
Ending balance
$
16,959
$
105,113
$
122,072
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
133
Note 14 − Other assets
The caption of other assets in the consolidated
 
statements of financial condition consists of the following
 
major categories:
(In thousands)
December 31, 2021
December 31, 2020
Net deferred tax assets (net of valuation allowance)
$
657,597
$
851,592
Investments under the equity method
298,988
250,467
Prepaid taxes
37,924
32,615
Other prepaid expenses
79,845
74,572
Derivative assets
26,093
20,785
Trades receivable from brokers and counterparties
65,460
65,429
Principal, interest and escrow servicing advances
53,942
65,671
Guaranteed mortgage loan claims receivable
98,001
80,477
Operating ROU assets (Note 33)
141,748
131,921
Finance ROU assets (Note 33)
13,459
15,464
Others
155,514
148,048
Total other assets
$
1,628,571
$
1,737,041
The Corporation enters
 
in the
 
ordinary course of
 
business into technology
 
hosting arrangements that
 
are service contracts.
 
These
arrangements can
 
include capitalizable
 
implementation costs
 
that are
 
amortized during
 
the term
 
of the
 
hosting arrangement.
 
The
Corporation recognizes capitalizable implementation costs
 
related to hosting arrangements
 
that are service
 
contracts within Others
in
 
the
 
table
 
above.
 
As
 
of
 
December
 
31,
 
2021,
 
the
 
total
 
capitalized
 
implementation
 
costs
 
amounted
 
to
 
$18.4
 
million
 
with
 
an
accumulated
 
amortization
 
of
 
$8.8
 
million
 
for
 
a
 
net
 
value
 
of
 
$9.6
 
million,
 
compared
 
to
 
total
 
capitalized
 
implementation
 
costs
amounting to
 
$17.4 million
 
with an
 
accumulated amortization
 
of $4.9
 
million for
 
a net
 
value of
 
$12.5 million
 
as of
 
December 31,
2020. Total
 
amortization expense for all capitalized implementation costs
 
of hosting arrangements that are service
 
contracts for the
year ended December 31, 2021 was $3.9 million
 
(December 31, 2020 - $2.2 million).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
134
Note 15 – Goodwill and other intangible assets
The changes in the carrying
 
amount of goodwill for the year
 
ended December 31, 2021, allocated by
 
reportable segments, were as
follows (refer to Note 37 for the definition of
 
the Corporation’s reportable segments):
 
2021
Balance at
Goodwill on
Balance at
(In thousands)
January 1, 2021
 
acquisition
December 31,2021
Banco Popular de Puerto Rico
$
320,248
$
-
$
320,248
Popular U.S.
350,874
49,171
400,045
Total Popular,
 
Inc.
 
$
671,122
$
49,171
$
720,293
The goodwill
 
recognized during
 
the year
 
ended December
 
31, 2021
 
in the
 
reportable segment of
 
Popular U.S.
 
of $49
 
million was
related
 
to
 
the
 
K2
 
Transaction.
 
Refer
 
to
 
Note
 
4,
 
Business
 
combination,
 
for
 
additional
 
information
 
related
 
to
 
the
 
K2
 
Transaction,
including the goodwill and other intangible assets recognized.
There were no changes in the carrying amount
 
of goodwill for the year ended December 31,
 
2020.
 
At
 
December 31,
 
2021, the
 
Corporation had
 
$0.7 million
 
of identifiable
 
intangible assets
 
with indefinite
 
useful lives,
 
compared to
$6.1 million at December 31, 2020, due
 
to the recognition of an impairment loss of $5.4
 
million associated with a trademark.
The following table reflects the components of
 
other intangible assets subject to amortization:
Gross
Net
Carrying
Accumulated
Carrying
(In thousands)
Amount
Amortization
Value
December 31, 2021
Core deposits
$
12,810
$
8,754
$
4,056
Other customer relationships
14,286
2,883
11,403
Total other intangible
 
assets
$
27,096
$
11,637
$
15,459
December 31, 2020
Core deposits
$
12,810
$
7,473
$
5,337
Other customer relationships
26,397
15,684
10,713
Trademark
488
236
252
Total other intangible
 
assets
$
39,695
$
23,393
$
16,302
During the
 
year
 
ended December
 
31, 2021,
 
$15.0 million
 
in
 
other customer
 
relationships became
 
fully amortized
 
and thus
 
were
removed
 
from
 
the
 
Corporation’s
 
intangibles
 
assets,
 
from
 
which
 
$14.2
 
million
 
were
 
recognized
 
as
 
part
 
of
 
the
 
purchase
 
of
 
the
American Airlines co-branded credit card portfolio during
 
2011.
During
 
the
 
year
 
ended
 
December
 
31,
 
2021,
 
the
 
Corporation
 
recognized
 
$
 
9.1
 
million
 
in
 
amortization
 
expense
 
related
 
to
 
other
intangible
 
assets
 
with
 
definite
 
useful
 
lives,
 
which
 
includes
 
the
 
previously
 
mentioned
 
$5.4
 
million
 
impairment
 
loss
 
(2020
 
-
 
$
 
6.4
million; 2019 - $9.4 million).
 
The following
 
table presents
 
the estimated
 
amortization of
 
the intangible
 
assets with
 
definite useful
 
lives for
 
each of
 
the following
periods:
 
 
 
 
 
 
 
 
 
135
(In thousands)
Year 2022
$
3,299
Year 2023
3,179
Year 2024
2,938
Year 2025
1,750
Year 2026
1,416
Later years
2,877
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 2021
using July 31, 2021 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
136
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 11.34%
 
to 15.13% for
the 2021 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.
No impairment was recognized by the Corporation from
 
the annual test as of July 31, 2021. The results
 
of the BPPR annual goodwill
impairment
 
test
 
as
 
of
 
July
 
31,
 
2021
 
indicated that
 
the
 
average estimated
 
fair
 
value
 
using
 
all
 
valuation methodologies
 
exceeded
BPPR’s equity value
 
by approximately $1.5
 
billion or 50% compared
 
to $282 million
 
or 9%, for
 
the annual goodwill
 
impairment test
completed as of July
 
31, 2020. 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 $412 million
 
or 24%,
 
compared to
 
$215
million or
 
13%, for
 
the annual
 
goodwill impairment test
 
completed as
 
of July
 
31, 2020.
 
The goodwill balance
 
of BPPR
 
and PB,
 
as
legal entities, represented approximately 91% of the
 
Corporation’s total goodwill balance as of the July 31,
 
2021 valuation date.
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, 2021 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. Declines in
 
the Corporation’s
 
market capitalization and
 
adverse economic conditions
 
sustained over a
 
longer
period of time negatively affecting forecasted cash flows could
 
increase the risk of goodwill impairment in
 
the future.
 
The extent to
 
which the COVID-19 pandemic
 
further impacts our
 
business, results of
 
operations and financial condition,
 
as well as
the
 
operations
 
of
 
our
 
clients,
 
customers,
 
service
 
providers
 
and
 
suppliers,
 
will
 
depend
 
on
 
future
 
developments,
 
which
 
are
 
highly
uncertain and is difficult to
 
predict, including the scope and duration of
 
the pandemic and actions taken by
 
governmental authorities
and
 
other
 
third
 
parties
 
in
 
response
 
thereto.
 
A
 
decline
 
in
 
the
 
Corporation’s
 
stock
 
price
 
related
 
to
 
global
 
and/or
 
regional
macroeconomic
 
conditions,
 
the
 
continued
 
weakness
 
in
 
the
 
Puerto
 
Rico
 
economy
 
and
 
fiscal
 
situation,
 
reduced
 
future
 
earnings
estimates,
 
additional
 
expenses
 
and
 
higher
 
credit
 
losses,
 
and
 
the
 
continuance
 
of
 
the
 
current
 
interest
 
rate
 
environment
 
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 impact regulatory capital
 
calculations.
The following tables present the gross amount of
 
goodwill and accumulated impairment losses by
 
reportable segments.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
137
December 31, 2021
Balance at
Balance at
December 31,
Accumulated
December 31,
2021
impairment
2021
(In thousands)
 
(gross amounts)
losses
 
(net amounts)
Banco Popular de Puerto Rico
$
324,049
$
3,801
$
320,248
Popular U.S.
564,456
164,411
400,045
Total Popular,
 
Inc.
 
$
888,505
$
168,212
$
720,293
December 31, 2020
 
Balance at
 
Balance at
December 31,
Accumulated
December 31,
2020
impairment
2020
(In thousands)
 
(gross amounts)
losses
 
(net amounts)
Banco Popular de Puerto Rico
$
324,049
$
3,801
$
320,248
Popular U.S.
515,285
164,411
350,874
Total Popular,
 
Inc.
 
$
839,334
$
168,212
$
671,122
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
138
Note 16 – Deposits
Total interest bearing deposits as of the end of the periods presented consisted of:
(In thousands)
December 31, 2021
December 31, 2020
Savings accounts
$
15,871,998
$
14,031,736
NOW, money market and other interest
 
bearing demand deposits
28,736,459
22,398,057
Total savings, NOW,
 
money market and other interest bearing demand
 
deposits
44,608,457
36,429,793
Certificates of deposit:
Under $250,000
4,086,059
4,524,794
$250,000 and over
2,626,090
2,783,054
 
Total certificates
 
of deposit
6,712,149
7,307,848
Total interest bearing
 
deposits
$
51,320,606
$
43,737,641
A summary of certificates of deposits by maturity at
 
December 31, 2021 follows:
 
(In thousands)
2022
$
4,043,357
2023
864,315
2024
681,201
2025
511,710
2026
534,030
2027 and thereafter
77,536
Total certificates of
 
deposit
$
6,712,149
At December 31, 2021, the Corporation had brokered
 
deposits amounting to $ 0.8 billion (December
 
31, 2020 - $ 0.8 billion).
The aggregate
 
amount of
 
overdrafts in
 
demand deposit
 
accounts that
 
were reclassified
 
to loans
 
was $6
 
million at
 
December 31,
2021 (December 31, 2020 - $3 million)
At December 31,
 
2021, public sector
 
deposits amounted to
 
$20.3 billion. A significant
 
portion of Puerto
 
Rico public sector
 
deposits
are expected to be used by Puerto Rico pursuant to the Plan of Adjustment for Puerto Rico confirmed by the Puerto Rico Oversight,
Management, and Economic Stability Act
 
(PROMESA) Title III
 
Court, which is expected to
 
become effective on or
 
about March 15,
2022. However, the receipt by the P.R.
 
Government of additional COVID-19 and hurricane recovery related Federal assistance, and
seasonal
 
tax
 
collections,
 
could
 
increase
 
public
 
deposit
 
balances
 
at
 
BPPR
 
in
 
the
 
near
 
term.
 
The
 
rate
 
at
 
which
 
public
 
deposit
balances will decline is uncertain and difficult to predict.
 
The amount and timing of any such reduction
 
is likely to be impacted by, for
example, the implementation of PROMESA and
 
the speed at which COVID-19 federal assistance is
 
distributed.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
139
Note 17 – Borrowings
Assets sold under agreements to repurchase
 
Assets sold under agreements to repurchase amounted
 
to $92 million at December 31, 2021 and $121
 
million December 31, 2020.
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,
 
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
December 31, 2021
December 31, 2020
Repurchase liability
Repurchase liability
Repurchase
 
weighted average
Repurchase
 
weighted average
(Dollars in thousands)
 
liability
interest rate
 
liability
interest rate
U.S. Treasury securities
 
Within 30 days
$
19,538
0.30
%
$
67,157
1.16
%
 
After 30 to 90 days
30,295
0.21
39,318
1.20
 
After 90 days
29,036
0.29
9,979
0.33
Total U.S. Treasury
 
securities
78,869
0.26
116,454
1.10
Mortgage-backed securities
 
Within 30 days
11,733
0.26
3,778
0.28
 
After 30 to 90 days
-
-
268
1.50
 
After 90 days
722
0.16
-
-
Total mortgage-backed
 
securities
12,455
0.26
4,046
0.36
Collateralized mortgage obligations
 
Within 30 days
279
0.25
803
0.24
Total collateralized
 
mortgage obligations
279
0.25
803
0.24
Total
$
91,603
0.26
%
$
121,303
1.07
%
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
140
(Dollars in thousands)
2021
2020
Maximum aggregate balance outstanding at any month-end
$
92,101
$
195,498
Average monthly aggregate balance outstanding
$
91,394
$
143,718
Weighted average interest rate:
For the year
0.35
%
1.63
%
At December 31
0.26
%
1.11
%
Other short-term borrowings
 
At December 31, 2021, other short-term borrowings
 
consisted of $75 million in FHLB Advances. There
 
were no other short-term
borrowings outstanding at December 31, 2020. The
 
following table presents additional information related
 
to the Corporation’s other
short-term borrowings for the years ended December
 
31, 2021 and December 31, 2020.
(Dollars in thousands)
2021
2020
Maximum aggregate balance outstanding at any month-end
$
75,000
$
100,000
Average monthly aggregate balance outstanding
$
343
$
21,557
Weighted average interest rate:
For the year
0.35
%
0.56
%
At December 31
0.35
%
0.73
%
Notes Payable
The following table presents the composition of notes
 
payable at December 31, 2021 and December
 
31, 2020.
(In thousands)
December 31, 2021
December 31, 2020
Advances with the FHLB with maturities ranging from
 
2022 through 2029 paying interest at monthly
fixed rates ranging from 0.39% to 3.18%
 
(2020 - 0.39% to 4.19%)
$
492,429
$
542,469
Advances with the FRB maturing on 2022 paying interest
 
at annual fixed rate of 0.35%
[1]
-
1,009
Unsecured senior debt securities maturing on 2023 paying interest
 
semiannually at a fixed rate of
6.125%, net of debt issuance costs of $2,158 (2020 - $3,426)
297,842
296,574
Junior subordinated deferrable interest debentures (related
 
to trust preferred securities) maturing on
2034 with fixed interest rates ranging from 6.125% to
 
6.564% (2020 - 6.125% to 6.70%), net of debt
issuance costs of $342 (2020 - $369)
198,292
384,929
Total notes payable
$
988,563
$
1,224,981
[1] During the second quarter of 2021, the Paycheck Protection
 
Program Liquidity Facility advance was prepaid.
Notes
 
payable
 
included junior
 
subordinated debentures
 
issued
 
by
 
the
 
Corporation that
 
were
 
associated to
 
capital
 
issued
 
by
 
the
Popular Capital Trust
 
I. On November 1,
 
2021, the Corporation redeemed
 
all outstanding 6.70%
 
Cumulative Monthly Income Trust
Preferred
 
Securities
 
(the
 
“Capital
 
Securities”)
 
issued
 
by
 
the
 
Popular
 
Capital
 
Trust
 
I
 
(liquidation
 
amount
 
of
 
$25
 
per
 
security
 
and
amounting
 
to
 
approximately
 
$187
 
million
 
(or
 
approximately
 
$181
 
million
 
after
 
excluding
 
Popular’s
 
participation
 
in
 
the
 
Trust
 
of
approximately
 
$6
 
million)
 
in
 
the
 
aggregate).
 
The
 
redemption
 
price
 
for
 
the
 
Capital
 
Securities
 
was
 
equal
 
to
 
$25
 
per
 
security
 
plus
accrued
 
and
 
unpaid
 
distributions up
 
to
 
and
 
excluding
 
the
 
redemption date
 
in
 
the
 
amount
 
of
 
$0.139583
 
per
 
security,
 
for
 
a
 
total
payment
 
per
 
security in
 
the
 
amount of
 
$25.139583. Upon
 
redemption, Popular
 
delisted the
 
Capital Securities
 
of Popular
 
Capital
Trust I (NASDAQ: BPOPN) from the Nasdaq Global Select
 
Market.
 
A breakdown of borrowings by contractual maturities
 
at December 31, 2021 is included in
 
the table below.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
141
Assets sold under
 
Short-term
(In thousands)
agreements to repurchase
borrowings
Notes payable
Total
2022
$
91,603
75,000
$
103,148
$
269,751
2023
-
-
341,103
341,103
2024
-
-
91,943
91,943
2025
-
-
139,920
139,920
2026
-
-
74,500
74,500
Later years
-
-
237,949
237,949
Total borrowings
$
91,603
75,000
$
988,563
$
1,155,166
At December
 
31, 2021
 
and 2020, the
 
Corporation had FHLB
 
borrowing facilities whereby
 
the Corporation could
 
borrow up to
 
$3.0
billion, of which
 
$0.6 billion and
 
$0.5 billion, respectively,
 
were used. In
 
addition, at December 31,
 
2021 and 2020,
 
the Corporation
had placed $1.2
 
billion and $0.9 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 loans held-in-portfolio, and
 
do not have restrictive covenants
or callable features.
 
Also, at
 
December 31, 2021,
 
the Corporation has
 
a borrowing facility
 
at the discount
 
window of the
 
Federal Reserve Bank
 
of New
York amounting to $1.3 billion (2020 - $1.4 billion), which remained unused at
 
December 31, 2021 and December 31, 2020.
 
 
 
 
 
 
 
 
 
 
 
142
Note 18 – Trust preferred securities
Statutory trusts established
 
by the Corporation
 
(Popular Capital Trust
 
I, Popular North
 
America Capital Trust
 
I and Popular
 
Capital
Trust
 
II)
 
had
 
issued
 
trust
 
preferred
 
securities
 
(also
 
referred
 
to
 
as
 
“capital
 
securities”)
 
to
 
the
 
public.
 
The
 
proceeds
 
from
 
such
issuances, together with
 
the proceeds of
 
the related
 
issuances of common
 
securities of the
 
trusts (the
 
“common securities”), were
used by
 
the trusts to
 
purchase junior subordinated
 
deferrable interest debentures
 
(the “junior subordinated
 
debentures”) issued by
the Corporation.
 
The sole
 
assets of
 
the trusts
 
consisted of
 
the junior
 
subordinated debentures
 
of the
 
Corporation and
 
the related
 
accrued interest
receivable. These trusts are not consolidated
 
by the Corporation pursuant to accounting
 
principles generally accepted in the United
States of America.
The junior subordinated
 
debentures are included
 
by the Corporation
 
as notes payable
 
in the Consolidated
 
Statements of Financial
Condition, while
 
the common
 
securities issued
 
by the
 
issuer trusts
 
are included
 
as debt
 
securities held-to-maturity.
 
The common
securities of each trust are wholly-owned, or
 
indirectly wholly-owned, by the Corporation.
As disclosed
 
in Note
 
17, on
 
November 1,
 
2021, the
 
Corporation redeemed all
 
outstanding trust
 
preferred securities
 
issued by
 
the
Popular
 
Capital Trust
 
I
 
amounting to
 
approximately $187
 
million
 
(or approximately
 
$181 million
 
after excluding
 
the Corporation’s
participation in the Trust of approximately $6 million) in the aggregate.
 
The following tables presents financial data pertaining
 
to the different trusts at December 31, 2021 and
 
2020.
(Dollars in thousands)
December 31, 2021
Popular
North America
Popular
Issuer
Capital Trust I
Capital Trust Il
Capital securities
$
91,651
$
101,023
Distribution rate
6.564
%
6.125
%
Common securities
$
2,835
$
3,125
Junior subordinated debentures aggregate liquidation amount
$
94,486
$
104,148
Stated maturity date
September 2034
December 2034
Reference notes
[1],[3],[5]
[2],[4],[5]
[1] Statutory business trust that is wholly-owned by
 
PNA and indirectly wholly-owned by the Corporation.
[2] Statutory business trust that is wholly-owned by
 
the Corporation.
[3] The obligation of PNA under the junior subordinated
 
debenture and its guarantees of the capital securities under
 
the trust is fully and unconditionally
guaranteed on a subordinated basis by the Corporation
 
to the extent set forth in the guarantee agreement.
[4] These capital securities are fully and unconditionally guaranteed
 
on a subordinated basis by the Corporation to the extent
 
set forth in the guarantee
agreement.
[5] The Corporation has the right, subject to any required
 
prior approval from the Federal Reserve, to redeem
 
after certain dates or upon the
occurrence of certain events mentioned below,
 
the junior subordinated debentures at a redemption
 
price equal to 100% of the principal amount, plus
accrued and unpaid interest to the date of redemption. The
 
maturity of the junior subordinated debentures may
 
be shortened at the option of the
Corporation prior to their stated maturity dates (i) on or
 
after the stated optional redemption dates stipulated in
 
the agreements, in whole at any time or
in part from time to time, or (ii) in whole, but not in part,
 
at any time within 90 days following the occurrence
 
and during the continuation of a tax event,
an investment company event or a capital treatment event
 
as set forth in the indentures relating to the capital securities,
 
in each case subject to
regulatory approval.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
143
(Dollars in thousands)
December 31, 2020
Popular
Popular
North America
Popular
Issuer
Capital Trust I
Capital Trust I
Capital Trust Il
Capital securities
$
181,063
$
91,651
$
101,023
Distribution rate
6.700
%
6.564
%
6.125
%
Common securities
$
5,601
$
2,835
$
3,125
Junior subordinated debentures aggregate liquidation amount
$
186,664
$
94,486
$
104,148
Stated maturity date
November 2033
September 2034
December 2034
Reference notes
[2],[4],[5]
[1],[3],[5]
[2],[4],[5]
[1] Statutory business trust that is wholly-owned by
 
PNA and indirectly wholly-owned by the Corporation.
[2] Statutory business trust that is wholly-owned by
 
the Corporation.
[3] The obligation of PNA under the junior subordinated
 
debenture and its guarantees of the capital securities under
 
the trust is fully and unconditionally
guaranteed on a subordinated basis by the Corporation
 
to the extent set forth in the guarantee agreement.
[4] These capital securities are fully and unconditionally guaranteed
 
on a subordinated basis by the Corporation to the extent
 
set forth in the applicable
guarantee agreement.
[5] The Corporation has the right, subject to any required
 
prior approval from the Federal Reserve, to redeem
 
after certain dates or upon the
occurrence of certain events mentioned below,
 
the junior subordinated debentures at a redemption
 
price equal to 100% of the principal amount, plus
accrued and unpaid interest to the date of redemption. The
 
maturity of the junior subordinated debentures may
 
be shortened at the option of the
Corporation prior to their stated maturity dates (i) on or
 
after the stated optional redemption dates stipulated in
 
the agreements, in whole at any time or
in part from time to time, or (ii) in whole, but not in part,
 
at any time within 90 days following the occurrence
 
and during the continuation of a tax event,
an investment company event or a capital treatment event
 
as set forth in the indentures relating to the capital securities,
 
in each case subject to
regulatory approval.
 
At
 
December
 
31,
 
2021,
 
the
 
Corporation’s
 
$193
 
million
 
in
 
trust
 
preferred
 
securities
 
outstanding
 
do
 
not
 
qualify
 
for
 
Tier
 
1
 
capital
treatment, but instead qualify for Tier 2 capital treatment
 
compared to $374 million at December 31,
 
2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
144
Note 19 − Other liabilities
The caption of other liabilities in the consolidated
 
statements of financial condition consists of the following
 
major categories:
(In thousands)
December 31, 2021
December 31, 2020
Accrued expenses
$
308,594
$
235,449
Accrued interest payable
33,227
38,622
Accounts payable
91,804
69,784
Dividends payable
35,937
33,701
Trades payable
13,789
720,212
Liability for GNMA loans sold with an option to repurchase
12,806
57,189
Reserves for loan indemnifications
12,639
24,781
Reserve for operational losses
43,886
41,452
Operating lease liabilities (Note 33)
154,114
152,588
Finance lease liabilities (Note 33)
19,719
22,572
Pension benefit obligation
8,778
35,568
Postretirement benefit obligation
161,988
179,211
Others
70,967
73,560
Total other liabilities
$
968,248
$
1,684,689
145
Note 20 – Stockholders’ equity
 
The Corporation’s common stock ranks junior to all series
 
of preferred stock as to dividend rights and / or
 
as to rights on liquidation,
dissolution
 
or
 
winding
 
up
 
of
 
the
 
Corporation.
 
Dividends
 
on
 
preferred
 
stock
 
are
 
payable
 
if
 
declared.
 
The
 
Corporation’s
 
ability
 
to
declare or
 
pay dividends
 
on, or
 
purchase, redeem
 
or otherwise
 
acquire, its
 
common stock
 
is subject
 
to certain
 
restrictions in
 
the
event that the
 
Corporation fails to pay
 
or set aside
 
full dividends on the
 
preferred stock for the
 
latest dividend period. The
 
ability of
the Corporation to
 
pay dividends in
 
the future is
 
limited by regulatory
 
requirements, legal availability of
 
funds, recent and
 
projected
financial results, capital levels and liquidity of the Corporation, general
 
business conditions and other factors deemed relevant by the
Corporation’s Board of Directors.
The Corporation’s
 
common stock
 
trades on
 
the NASDAQ
 
Stock Market
 
LLC (the
 
“NASDAQ”) under
 
the symbol
 
BPOP.
 
The 2003
Series A Preferred Stock are not listed on NASDAQ.
 
Preferred stocks
The Corporation has
 
30,000,000 shares of authorized
 
preferred stock that may
 
be issued in
 
one or more
 
series, and the
 
shares of
each series shall have such rights and preferences as shall be fixed by the Board of Directors when authorizing the issuance of that
particular series. The Corporation’s shares of preferred stock at
 
December 31, 2021 consisted of:
 
6.375% non-cumulative monthly income preferred stock, 2003 Series
 
A, no par value, liquidation
 
preference value of $25
per share. Holders on record of the 2003 Series A Preferred Stock are entitled to
 
receive, when, as and if declared by the
Board of
 
Directors of
 
the Corporation
 
or an
 
authorized committee thereof,
 
out of
 
funds legally
 
available, non-cumulative
cash dividends at the
 
annual rate per share
 
of 6.375% of
 
their liquidation preference value,
 
or $0.1328125 per share
 
per
month.
 
These
 
shares
 
of
 
preferred
 
stock
 
are
 
perpetual,
 
nonconvertible,
 
have
 
no
 
preferential
 
rights
 
to
 
purchase
 
any
securities of the
 
Corporation and are redeemable solely
 
at the option of
 
the Corporation with the
 
consent of the Board
 
of
Governors
 
of
 
the
 
Federal
 
Reserve
 
System.
 
The
 
redemption
 
price
 
per
 
share
 
is
 
$25.00.
 
The
 
shares
 
of
 
2003
 
Series
 
A
Preferred Stock have no voting
 
rights, except for certain rights in
 
instances when the Corporation does not
 
pay dividends
for a defined period. These
 
shares are not subject to
 
any sinking fund requirement. Cash dividends declared
 
and paid on
the 2003
 
Series A
 
Preferred Stock
 
amounted to
 
$1.4 million
 
for the
 
years ended
 
December 31,
 
2021, 2020
 
and 2019.
Outstanding shares of 2003 Series A Preferred Stock amounted
 
to 885,726 at December 31, 2021, 2020
 
and 2019.
On February 24, 2020, the
 
Corporation redeemed all the outstanding shares of
 
the 2008 Series B Preferred Stock.
 
The redemption
price of
 
the 2008
 
Series B
 
Preferred Stock
 
was $25.00
 
per share,
 
plus $0.1375
 
(representing the
 
amount of
 
accrued and
 
unpaid
dividends for the current monthly dividend period to the redemption
 
date), for a total payment per share in the amount
 
of $25.1375.
At December 31, 2019 the Corporation had 1,120,665
 
outstanding shares of 2008 Series B Preferred
 
Stock, described as follows:
 
8.25% non-cumulative monthly
 
income preferred stock,
 
2008 Series B,
 
no par value,
 
liquidation preference value
 
of $25
per share. The shares of 2008 Series B Preferred Stock were issued in May 2008. Holders of
 
record of the 2008 Series B
Preferred
 
Stock
 
are
 
entitled
 
to
 
receive,
 
when,
 
as
 
and
 
if
 
declared
 
by
 
the
 
Board
 
of
 
Directors
 
of
 
the
 
Corporation
 
or
 
an
authorized committee thereof, out of funds legally available,
 
non-cumulative cash dividends at the annual
 
rate per share of
8.25% of their liquidation preferences, or
 
$0.171875 per share per month. These
 
shares of preferred stock are
 
perpetual,
nonconvertible, have no preferential rights to purchase any securities of the Corporation and are redeemable solely at the
option of
 
the Corporation
 
with the
 
consent of
 
the Board
 
of Governors of
 
the Federal
 
Reserve System beginning
 
on May
28, 2013. Cash dividends
 
declared and paid on the
 
2008 Series B Preferred Stock
 
amounted to $ 2.3 million
 
for the year
ended December 31, 2019.
 
Common stocks
Dividends
During
 
the
 
year
 
2021,
 
cash
 
dividends
 
of
 
$1.75
 
(2020
 
-
 
$1.60;
 
2019
 
-
 
$1.20)
 
per
 
common
 
share
 
outstanding
 
were
 
declared
amounting to
 
$142.3 million
 
(2020 -
 
$136.6 million;
 
2019 -
 
$116.0
 
million) of
 
which $35.9
 
million were
 
payable to
 
shareholders of
common
 
stock
 
at
 
December
 
31,
 
2021
 
(2020
 
-
 
$33.7
 
million;
 
2019
 
-
 
$29.0
 
million).
 
The
 
quarterly
 
dividend
 
of
 
$0.45
 
per
 
share
declared to shareholders of record as of the close
 
of business on December 7, 2021, was paid on January
 
3, 2022. On January 12,
2022, the Corporation announced as part of its capital
 
plan for 2022, an increase in its
 
quarterly common stock dividend from $0.45
to $0.55 per share, beginning in the second quarter
 
of 2022, subject to approval by its Board of Directors. On
 
February 23, 2022, the
146
Corporation’s Board of
 
Directors approved a
 
quarterly cash dividend
 
of $0.55 per
 
share on its
 
outstanding common stock, payable
on April 1, 2022 to shareholders of record at
 
the close of business on March 15,
 
2022.
Accelerated share repurchase transaction (“ASR”)
On
 
May
 
3,
 
2021,
 
the
 
Corporation
 
entered
 
into
 
a
 
$350
 
million
 
ASR
 
transaction
 
with
 
respect
 
to
 
its
 
common
 
stock,
 
which
 
was
accounted for as a treasury stock transaction. As a result of the receipt of the initial 3,785,831 shares, the Corporation recognized in
stockholders’ equity approximately $280
 
million in treasury stock
 
and $70 million
 
as a reduction
 
in capital surplus. The
 
Corporation
completed the
 
transaction on
 
September 9,
 
2021 and
 
received 828,965
 
additional shares
 
of
 
common stock
 
and
 
recognized $61
million in treasury
 
stock with a
 
corresponding increase in
 
capital surplus. In
 
total, the Corporation
 
repurchased a total
 
of 4,614,796
shares at an average price of $75.8430 under
 
the ASR Agreement.
On January
 
30, 2020,
 
the Corporation
 
entered into
 
a $500
 
million ASR
 
transaction with
 
respect to
 
its common
 
stock, which
 
was
accounted for as a treasury stock transaction. As a result of the receipt of the initial 7,055,919 shares, the Corporation recognized in
stockholders’ equity
 
approximately $400 million
 
in treasury
 
stock and
 
$100 million
 
as a
 
reduction in
 
capital surplus.
 
On March
 
19,
2020 (the
 
“early termination
 
date”), the
 
dealer counterparty
 
to the
 
ASR exercised
 
its right
 
to terminate
 
the ASR
 
as a
 
result of
 
the
trading price of the
 
Corporation’s common stock falling below
 
a specified level due to
 
the effects of the
 
COVID-19 pandemic on the
global markets. As a result of such early
 
termination, the final settlement of the ASR, which was
 
expected to occur during the fourth
quarter
 
of
 
2020,
 
occurred during
 
the
 
second
 
quarter
 
of
 
2020.
 
The
 
Corporation completed
 
the
 
transaction on
 
May
 
27,
 
2020
 
and
received
 
4,763,216
 
additional
 
shares
 
of
 
common
 
stock
 
after
 
the
 
early
 
termination
 
date.
 
In
 
total
 
the
 
Corporation
 
repurchased
11,819,135 shares at an average price per share of $42.3043 under the ASR.
During the fourth quarter of 2019, the
 
Corporation completed a $250 million ASR. In connection therewith, the
 
Corporation received
an initial delivery of
 
3,500,000 shares of common stock during
 
the first quarter of
 
2019 and received 1,165,607 additional shares
 
of
common stock during the fourth quarter of 2019. The final number of shares delivered at settlement was based on the average daily
volume
 
weighted
 
average
 
prince
 
(“VWAP”)
 
of
 
its
 
common
 
stock,
 
net
 
of
 
a
 
discount,
 
during
 
the
 
term
 
of
 
the
 
ASR
 
of
 
$53.58.
 
In
connection with the transaction, the Corporation recognized $266 million in treasury stock, offset by $16 million adjustment
 
to capital
surplus.
Statutory reserve
The
 
Banking
 
Act
 
of
 
the
 
Commonwealth of
 
Puerto
 
Rico
 
requires that
 
a
 
minimum
 
of
 
10%
 
of
 
BPPR’s
 
net
 
income
 
for
 
the
 
year
 
be
transferred to
 
a statutory
 
reserve account
 
until such
 
statutory reserve
 
equals
 
the total
 
of paid-in
 
capital on
 
common and
 
preferred
stock. Any losses
 
incurred by a
 
bank must first
 
be charged to
 
retained earnings and
 
then to the
 
reserve fund. Amounts
 
credited to
the
 
reserve
 
fund
 
may
 
not
 
be
 
used
 
to
 
pay
 
dividends
 
without
 
the
 
prior
 
consent
 
of
 
the
 
Puerto
 
Rico
 
Commissioner
 
of
 
Financial
Institutions.
 
The
 
failure
 
to
 
maintain
 
sufficient
 
statutory
 
reserves
 
would
 
preclude
 
BPPR
 
from
 
paying
 
dividends.
 
BPPR’s
 
statutory
reserve fund
 
amounted to $786
 
million at
 
December 31, 2021
 
(2020 - $708
 
million; 2019 -
 
$659 million). During
 
2021, $78 million
was transferred to the statutory reserve account (2020 - $49 million, 2019 -
 
$60 million). BPPR was in compliance with the statutory
reserve requirement in 2021, 2020 and 2019.
147
Note 21 – Regulatory capital requirements
 
The Corporation,
 
BPPR and
 
PB are
 
subject to
 
various regulatory
 
capital requirements
 
imposed by
 
the federal
 
banking agencies.
Failure to meet minimum capital requirements can
 
lead to certain mandatory and additional
 
discretionary actions by regulators that,
if undertaken,
 
could have
 
a direct
 
material effect
 
on the
 
Corporation’s consolidated financial
 
statements. Popular,
 
Inc., BPPR
 
and
PB are
 
subject to
 
Basel III
 
capital requirements,
 
including minimum
 
and well
 
capitalized regulatory
 
capital ratios
 
and compliance
with the standardized approach for determining
 
risk-weighted assets.
 
The Basel III Capital
 
Rules established a Common Equity
 
Tier I (“CET1”) capital
 
measure and related regulatory capital ratio
 
CET1
to risk-weighted assets.
 
The Basel III Capital Rules provide that a
 
depository institution will be deemed to be well capitalized if
 
it maintained a leverage ratio
of at
 
least 5%, a
 
CET1 ratio of
 
at least
 
6.5%, a Tier
 
1 risk-based capital
 
ratio of at
 
least 8% and
 
a total risk-based
 
ratio of
 
at least
10%.
 
Management
 
has
 
determined
 
that
 
at
 
December
 
31,
 
2021
 
and
 
2020,
 
the
 
Corporation
 
exceeded
 
all
 
capital
 
adequacy
requirements to which it is subject.
The Corporation
 
has
 
been designated
 
by the
 
Federal Reserve
 
Board as
 
a Financial
 
Holding Company
 
(“FHC”) and
 
is eligible
 
to
engage in certain financial activities permitted under
 
the Gramm-Leach-Bliley Act of 1999.
Pursuant to the adoption of the CECL accounting standard on
 
January 1, 2020, the Corporation elected to use a five-year
 
transition
period
 
option
 
as
 
permitted
 
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 the adoption of the CECL accounting standard 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.
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 December 31,
 
2021,
the Corporation has $353 million in PPP loans
 
and no loans were pledged as collateral for
 
PPPL Facilities.
At December 31, 2021 and 2020, BPPR and
 
PB were well-capitalized under the regulatory
 
framework for prompt corrective action.
 
The following
 
tables present
 
the Corporation’s
 
risk-based capital
 
and leverage
 
ratios at
 
December 31,
 
2021 and
 
2020 under
 
the
Basel III regulatory guidance.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
148
Actual
 
Capital adequacy minimum
requirement (including
conservation capital buffer) [1]
(Dollars in thousands)
Amount
 
Ratio
Amount
Ratio
2021
Total Capital (to Risk-Weighted
 
Assets):
Corporation
$
6,084,105
19.35
%
$
3,301,329
10.500
%
BPPR
4,281,930
18.92
2,376,184
10.500
PB
1,361,911
16.78
852,032
10.500
Common Equity Tier I Capital (to Risk-Weighted
 
Assets):
Corporation
$
5,476,031
17.42
%
$
2,200,886
7.000
%
BPPR
3,998,102
17.67
1,584,123
7.000
PB
1,309,398
16.14
568,021
7.000
Tier I Capital (to Risk-Weighted Assets):
Corporation
$
5,498,174
17.49
%
$
2,672,504
8.500
%
BPPR
3,998,102
17.67
1,923,577
8.500
PB
1,309,398
16.14
689,740
8.500
Tier I Capital (to Average Assets):
Corporation
 
$
5,498,174
7.41
%
$
2,969,535
4
%
 
BPPR
3,998,102
6.24
2,561,003
4
PB
1,309,398
13.44
389,736
4
[1] The conservation capital buffer included for these
 
ratios is 2.5%, except for the Tier I
 
to Average Asset ratio for which the buffer
 
is not applicable
and therefore the capital adequacy minimum of 4% is
 
presented.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
149
Actual
 
Capital adequacy minimum
requirement (including
conservation capital buffer)
(Dollars in thousands)
Amount
 
Ratio
Amount
Ratio
2020
Total Capital (to Risk-Weighted
 
Assets):
Corporation
$
5,773,919
18.81
%
$
3,223,720
10.500
%
BPPR
4,226,887
18.58
2,388,394
10.500
PB
1,283,332
17.34
776,975
10.500
Common Equity Tier I Capital (to Risk-Weighted
 
Assets):
Corporation
$
4,992,096
16.26
%
$
2,149,146
7.000
%
BPPR
3,940,385
17.32
1,592,262
7.000
PB
1,190,758
16.09
517,983
7.000
Tier I Capital (to Risk-Weighted Assets):
Corporation
$
5,014,239
16.33
%
$
2,609,678
8.500
%
BPPR
3,940,385
17.32
1,933,461
8.500
PB
1,190,758
16.09
628,980
8.500
Tier I Capital (to Average Assets):
Corporation
 
$
5,014,239
7.80
%
$
2,572,201
4
%
BPPR
3,940,385
7.26
2,169,835
4
PB
1,190,758
12.35
385,685
4
The following table presents the minimum amounts
 
and ratios for the Corporation’s banks to be
 
categorized as well-capitalized.
2021
2020
(Dollars in thousands)
Amount
 
Ratio
 
Amount
 
Ratio
Total Capital (to Risk-Weighted
 
Assets):
BPPR
$
2,263,032
10
%
$
2,274,660
10
%
PB
811,459
10
739,976
10
Common Equity Tier I Capital (to Risk-Weighted
 
Assets):
BPPR
$
1,470,971
6.5
%
$
1,478,529
6.5
%
PB
527,448
6.5
480,985
6.5
Tier I Capital (to Risk-Weighted Assets):
BPPR
$
1,810,426
8
%
$
1,819,728
8
%
PB
649,167
8
591,981
8
Tier I Capital (to Average Assets):
BPPR
$
3,201,254
5
%
$
2,712,294
5
%
PB
487,171
5
482,106
5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
150
Note 22 – Other comprehensive (loss) income
 
The
 
following
 
table
 
presents
 
changes
 
in
 
accumulated
 
other
 
comprehensive
 
(loss)
 
income
 
by
 
component
 
for
 
the
 
years
 
ended
December 31, 2021, 2020 and 2019.
Changes in Accumulated Other Comprehensive (Loss) Income
 
by Component [1]
Years ended December
 
31,
(In thousands)
2021
2020
2019
Foreign currency translation
Beginning Balance
$
(71,254)
$
(56,783)
$
(49,936)
Other comprehensive income (loss)
 
3,947
(14,471)
(6,847)
Net change
3,947
(14,471)
(6,847)
Ending balance
$
(67,307)
$
(71,254)
$
(56,783)
Adjustment of pension and
postretirement benefit plans
Beginning Balance
$
(195,056)
$
(202,816)
$
(203,836)
Other comprehensive income (loss) before reclassifications
23,094
(5,645)
(13,671)
Amounts reclassified from accumulated other comprehensive
 
loss for
amortization of net losses
12,968
13,405
14,691
Net change
36,062
7,760
1,020
Ending balance
$
(158,994)
$
(195,056)
$
(202,816)
Unrealized net holding
(losses) gains on debt
securities
Beginning Balance
$
460,900
$
92,155
$
(173,811)
Other comprehensive (loss) income before reclassifications
(557,002)
368,780
265,950
Amounts reclassified from accumulated other comprehensive income
(loss) for (gains) losses on securities
(18)
(35)
16
Net change
(557,020)
368,745
265,966
Ending balance
$
(96,120)
$
460,900
$
92,155
Unrealized net losses on cash
flow hedges
Beginning Balance
$
(4,599)
$
(2,494)
$
(391)
Reclassification to retained earnings due to cumulative effect
adjustment of accounting change
-
-
(50)
Other comprehensive income (loss) before reclassifications
367
(6,400)
(4,439)
Amounts reclassified from accumulated other comprehensive loss
1,584
4,295
2,386
Net change
1,951
(2,105)
(2,103)
Ending balance
$
(2,648)
$
(4,599)
$
(2,494)
Total
 
$
(325,069)
$
189,991
$
(169,938)
[1] All amounts presented are net of tax.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
151
The following table presents the amounts reclassified out of each component of accumulated other comprehensive (loss) income for
the years ended December 31, 2021,
 
2020, and 2019.
Reclassifications Out of Accumulated Other Comprehensive
 
(Loss) Income
Affected Line Item in the
 
Years ended December
 
31,
(In thousands)
Consolidated Statements of Operations
2021
2020
2019
Adjustment of pension and postretirement benefit plans
Amortization of net losses
Other operating expenses
$
(20,749)
$
(21,447)
$
(23,508)
Total before tax
(20,749)
(21,447)
(23,508)
Income tax benefit
7,781
8,042
8,817
Total net of tax
$
(12,968)
$
(13,405)
$
(14,691)
Unrealized net holding (losses) gains on debt securities
Realized gain (loss) on sale of debt securities
Net gain (loss) on sale of debt securities
$
23
$
41
$
(20)
Total before tax
23
41
(20)
Income tax (expense) benefit
(5)
(6)
4
Total net of tax
$
18
$
35
$
(16)
Unrealized net losses on cash flow hedges
Forward contracts
Mortgage banking activities
$
(704)
$
(5,559)
$
(3,992)
Interest rate swaps
Other operating income
(1,143)
(820)
110
Total before tax
(1,847)
(6,379)
(3,882)
Income tax benefit
263
2,084
1,496
Total net of tax
$
(1,584)
$
(4,295)
$
(2,386)
Total reclassification
 
adjustments, net of tax
$
(14,534)
$
(17,665)
$
(17,093)
 
 
 
 
 
 
 
 
 
 
 
152
Note 23 – Guarantees
The Corporation
 
has obligations
 
upon the
 
occurrence of
 
certain events
 
under financial
 
guarantees provided
 
in certain
 
contractual
agreements as summarized below.
The
 
Corporation
 
issues
 
financial
 
standby
 
letters
 
of
 
credit
 
and
 
has
 
risk
 
participation
 
in
 
standby
 
letters
 
of
 
credit
 
issued
 
by
 
other
financial institutions, in each case to guarantee the performance of various
 
customers to third parties. If the customers failed to meet
its financial
 
or performance
 
obligation to
 
the third
 
party under
 
the terms
 
of the
 
contract, then,
 
upon their
 
request, the
 
Corporation
would be obligated to make the payment to the guaranteed party. At December 31, 2021, the Corporation recorded a liability of $0.2
million (December
 
31, 2020
 
- $0.2
 
million), which
 
represents the
 
unamortized balance of
 
the obligations undertaken
 
in issuing
 
the
guarantees under the standby
 
letters of credit.
 
In accordance with the
 
provisions of ASC Topic
 
460, the Corporation recognizes at
fair value the obligation at
 
inception of the standby letters
 
of credit. The fair value
 
approximates the fee received from the
 
customer
for issuing such commitments. These fees are deferred and are recognized over the commitment period. The contracted amounts
 
in
standby letters of
 
credit outstanding at
 
December 31, 2021
 
and 2020, shown
 
in Note 24,
 
represent the maximum
 
potential amount
of future
 
payments that
 
the Corporation
 
could be
 
required to
 
make under
 
the guarantees
 
in the
 
event of
 
nonperformance by
 
the
customers. These
 
standby letters
 
of credit
 
are used
 
by the
 
customers as
 
a credit
 
enhancement and
 
typically expire
 
without being
drawn
 
upon.
 
The
 
Corporation’s
 
standby
 
letters
 
of
 
credit
 
are
 
generally
 
secured,
 
and
 
in
 
the
 
event
 
of
 
nonperformance
 
by
 
the
customers, the Corporation has rights to the underlying
 
collateral provided, which normally includes cash,
 
marketable securities, real
estate, receivables, and others. Management does
 
not anticipate any material losses related to these instruments.
Also, from
 
time to
 
time, the
 
Corporation securitized mortgage
 
loans into
 
guaranteed mortgage-backed securities
 
subject in
 
certain
instances, to 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. Also,
 
from time
 
to time,
 
the Corporation
 
may sell,
 
in bulk
 
sale
transactions, residential mortgage loans
 
and Small Business Administration
 
(“SBA”) commercial loans subject
 
to credit recourse
 
or
to certain representations
 
and warranties from the
 
Corporation to the purchaser.
 
These representations and warranties
 
may relate,
for example, to borrower creditworthiness, loan documentation, collateral, prepayment and early payment defaults.
 
The Corporation
may be required to repurchase the loans under
 
the credit recourse agreements or representation
 
and warranties.
At
 
December
 
31,
 
2021,
 
the
 
Corporation
 
serviced
 
$0.7
 
billion
 
(December
 
31,
 
2020
 
-
 
$0.9
 
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 2021,
 
the Corporation
 
repurchased approximately $19
 
million of
 
unpaid principal
 
balance in
 
mortgage loans
 
subject to
 
the
credit recourse
 
provisions (2020
 
- $161
 
million, which
 
included $120
 
million as
 
part of
 
the bulk
 
loan repurchase
 
from FNMA
 
and
FHLMC
 
during
 
the
 
third
 
quarter
 
of
 
2020,
 
for
 
which
 
the
 
Corporation
 
recorded
 
a
 
release
 
of
 
$5.1
 
million
 
in
 
its
 
reserve
 
for
 
credit
recourse).
 
In
 
the
 
event
 
of
 
nonperformance by
 
the
 
borrower,
 
the
 
Corporation has
 
rights
 
to
 
the
 
underlying
 
collateral
 
securing
 
the
mortgage loan. The Corporation suffers 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 December 31,
 
2021, the Corporation’s
 
liability established to
 
cover the
estimated credit loss exposure related to
 
loans sold or serviced with credit
 
recourse amounted to $12 million (December 31,
 
2020 -
$22 million).
 
The following
 
table shows
 
the changes
 
in the
 
Corporation’s liability
 
of estimated
 
losses from
 
these credit
 
recourses
agreements, included in the consolidated statements of
 
financial condition during the years ended December
 
31, 2021 and 2020.
 
Years ended December
 
31,
(In thousands)
2021
2020
Balance as of beginning of period
$
22,484
$
34,862
Impact of adopting CECL
-
(3,831)
Provision (benefit) for recourse liability
(2,948)
(104)
Net charge-offs
(7,736)
(8,443)
Balance as of end of period
$
11,800
$
22,484
 
 
 
 
 
 
 
 
 
153
The estimated losses to be absorbed under the credit
 
recourse arrangements are recorded as a liability when
 
the loans are sold and
are updated by
 
accruing or reversing expense
 
(categorized in the
 
line item “Adjustments
 
(expense) to indemnity reserves
 
on loans
sold”
 
in
 
the
 
consolidated
 
statements
 
of
 
operations)
 
throughout
 
the
 
life
 
of
 
the
 
loan,
 
as
 
necessary,
 
when
 
additional
 
relevant
information becomes available. The
 
methodology used to
 
estimate the recourse
 
liability is a
 
function of the
 
recourse arrangements
given and
 
considers a
 
variety of
 
factors, which
 
include actual
 
defaults and
 
historical loss
 
experience, foreclosure
 
rate, estimated
future defaults
 
and the
 
probability that
 
a loan
 
would be
 
delinquent. Statistical
 
methods are
 
used to
 
estimate the
 
recourse liability.
Expected loss
 
rates are
 
applied to
 
different loan
 
segmentations. The
 
expected loss,
 
which represents
 
the amount
 
expected to
 
be
lost on a given loan, considers the
 
probability of default and loss severity.
 
The probability of default represents the probability that
 
a
loan in
 
good standing
 
would become
 
90 days
 
delinquent within
 
the following
 
twelve-month period.
 
Regression analysis
 
quantifies
the relationship
 
between the
 
default event
 
and loan-specific
 
characteristics, including
 
credit scores,
 
loan-to-value ratios,
 
and loan
aging, among others.
 
When the
 
Corporation sells or
 
securitizes mortgage loans,
 
it generally makes
 
customary representations and
 
warranties regarding
the characteristics
 
of the
 
loans sold. The
 
Corporation’s mortgage operations
 
in Puerto
 
Rico group conforming
 
mortgage loans into
pools which are
 
exchanged for FNMA and
 
GNMA mortgage-backed securities, which are
 
generally sold to
 
private investors, or are
sold directly
 
to FNMA
 
for cash.
 
As required
 
under the
 
government agency
 
programs, quality
 
review procedures
 
are performed
 
by
the Corporation to
 
ensure that asset
 
guideline qualifications are met.
 
To
 
the extent the
 
loans do not
 
meet specified characteristics,
the
 
Corporation may
 
be required
 
to
 
repurchase such
 
loans or
 
indemnify for
 
losses and
 
bear any
 
subsequent loss
 
related to
 
the
loans. There were no repurchases under BPPR’s
 
representation and warranty arrangements
 
during the years ended December 31,
2021
 
and
 
2020.
 
A
 
substantial
 
amount
 
of
 
these
 
loans
 
reinstate
 
to
 
performing
 
status
 
or
 
have
 
mortgage
 
insurance,
 
and
 
thus
 
the
ultimate losses on the loans are not deemed
 
significant.
The following table presents the
 
changes in the Corporation’s
 
liability for estimated losses associated
 
with the indemnifications and
representations and warranties related to loans
 
sold during the years ended December 31,
 
2021 and 2020.
Years ended December
 
31,
(In thousands)
2021
2020
Balance as of beginning of period
$
2,297
$
3,212
Provision (benefit) for representation and warranties
(1,458)
(915)
Balance as of end of period
$
839
$
2,297
154
Servicing agreements
 
relating to
 
the mortgage-backed
 
securities
 
programs of
 
FNMA 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 December
 
31, 2021,
 
the
Corporation serviced
 
$12.1 billion
 
in mortgage
 
loans for
 
third-parties, including
 
the loans
 
serviced with
 
credit recourse
 
(December
31, 2020
 
- $12.9
 
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
December
 
31,
 
2021,
 
the
 
outstanding
 
balance
 
of
 
funds
 
advanced
 
by
 
the
 
Corporation
 
under
 
such
 
mortgage
 
loan
 
servicing
agreements
 
was approximately
 
$54 million
 
(December 31,
 
2020
 
- $66
 
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 both December 31,
 
2021 and December 31, 2020, respectively.
In addition, at both December 31, 2021 and December 31, 2020, PIHC
 
fully and unconditionally guaranteed on a subordinated basis
$193
 
million
 
and
 
$374
 
million,
 
respectively,
 
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
 
for
further information on the trust preferred securities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
155
Note 24 – 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)
December 31, 2021
December 31, 2020
Commitments to extend credit:
Credit card lines
$
5,382,089
$
5,226,660
Commercial and construction lines of credit
3,830,601
3,805,459
Other consumer unused credit commitments
 
250,229
257,312
Commercial letters of credit
3,260
1,864
Standby letters of credit
27,848
22,266
Commitments to originate or fund mortgage loans
95,372
96,786
At
 
December 31,
 
2021
 
and
 
December 31,
 
2020,
 
the
 
Corporation maintained
 
a
 
reserve
 
of
 
approximately $7.9
 
million
 
and
 
$15.9
million,
 
respectively,
 
for
 
potential
 
losses
 
associated
 
with
 
unfunded
 
loan
 
commitments
 
related
 
to
 
commercial,
 
construction
 
and
consumer lines of credit.
Other commitments
At December 31,
 
2021, and December
 
31, 2020, the
 
Corporation also maintained
 
other non-credit commitments
 
for approximately
$1.0 million and $1.4 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 37
 
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 a
 
Fiscal
 
Oversight
 
and
 
Management Board
 
for
 
Puerto
 
Rico
 
(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 December 31, 2021, the Corporation’s direct exposure to the
 
Puerto Rico government and its instrumentalities and municipalities
totaled $367
 
million, of
 
which $349 million
 
were outstanding, compared
 
to $377
 
million, which were
 
fully outstanding at
 
December
31, 2020. Of
 
the amount outstanding,
 
$319 million consists
 
of loans and
 
$30 million are
 
securities ($342 million
 
and $35 million
 
at
December 31,
 
2020). Substantially all
 
of the
 
amount outstanding at
 
December 31,
 
2021 and December
 
31, 2020
 
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
 
December 31, 2021,
 
75% of the
 
Corporation’s exposure to
 
municipal loans
and
 
securities
 
was
 
concentrated
 
in
 
the
 
municipalities
 
of
 
San
 
Juan,
 
Guaynabo,
 
Carolina
 
and
 
Bayamón.
 
On
 
July
 
1,
 
2021,
 
the
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
156
Corporation
 
received
 
scheduled
 
principal
 
payments
 
amounting
 
to
 
$32
 
million
 
from
 
various
 
obligations
 
from
 
Puerto
 
Rico
municipalities.
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 December 31, 2021:
(In thousands)
Investment
Portfolio
Loans
Total Outstanding
Total Exposure
Central Government
 
After 1 to 5 years
$
14
$
-
$
14
$
14
 
After 5 to 10 years
1
-
1
1
 
After 10 years
38
-
38
38
Total Central
 
Government
53
-
53
53
Municipalities
 
Within 1 year
4,240
68,650
72,890
72,890
 
After 1 to 5 years
14,395
70,962
85,357
103,546
 
After 5 to 10 years
11,280
123,521
134,801
134,801
 
After 10 years
230
55,257
55,487
55,487
Total Municipalities
30,145
318,390
348,535
366,724
Total Direct Government
 
Exposure
$
30,198
$
318,390
$
348,588
$
366,777
In
 
addition,
 
at
 
December
 
31,
 
2021,
 
the
 
Corporation
 
had
 
$275
 
million
 
in
 
loans
 
insured
 
or
 
securities
 
issued
 
by
 
Puerto
 
Rico
governmental entities
 
but for
 
which the
 
principal source
 
of repayment
 
is non-governmental
 
($317 million
 
at December
 
31, 2020).
These
 
included
 
$232
 
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,
 
2020 -
 
$260 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 December
 
31,
2021, $43 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, 2020
 
- $46
 
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,
 
$1.6 billion
 
of residential
 
mortgages, $353
 
million of
 
Small Business
 
Administration (“SBA”) loans
 
under the
 
Paycheck
Protection Program (“PPP”) and
 
$67
 
million commercial loans were
 
insured or guaranteed
 
by the U.S.
 
Government or its agencies
at December 31, 2021 (compared to $1.8 billion,
 
$1.3 billion and $60 million, respectively, at December 31, 2020).
At December 31,
 
2021, the Corporation has
 
operations in the United
 
States Virgin Islands
 
(the “USVI”) and
 
has approximately $70
million
 
in
 
direct
 
exposure to
 
USVI
 
government entities
 
(December 31,
 
2020
 
-
 
$105
 
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 December
 
31, 2021, the
 
Corporation has
 
operations in the
 
British Virgin
 
Islands (“BVI”),
 
which has
 
been 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
157
approximately
 
$221
 
million
 
comprised
 
of
 
various
 
retail
 
and
 
commercial
 
clients,
 
compared
 
to
 
a
 
loan
 
portfolio
 
of
 
$251
 
million
 
at
December 31, 2020, which included a $19 million
 
loan with the BVI Government that was paid
 
off during the second quarter of 2021.
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
 
the 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 $33.9 million as
of
 
December
 
31,
 
2021.
 
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
Hazard Insurance Commission-Related Litigation
Popular,
 
Inc.,
 
BPPR
 
and
 
Popular
 
Insurance,
 
LLC
 
(the
 
“Popular
 
Defendants”)
 
have
 
been
 
named
 
defendants
 
in
 
a
 
class
 
action
complaint captioned Pérez Díaz v.
 
Popular, Inc., et al,
 
filed before the Court of First
 
Instance, Arecibo Part. The complaint originally
sought damages and
 
preliminary and permanent
 
injunctive relief on
 
behalf of the
 
class against the
 
Popular Defendants, as
 
well as
Antilles Insurance
 
Company and
 
MAPFRE-PRAICO Insurance
 
Company (the
 
“Defendant Insurance Companies”).
 
Plaintiffs allege
that
 
the
 
Popular
 
Defendants
 
have
 
been
 
unjustly
 
enriched
 
by
 
failing
 
to
 
reimburse
 
them
 
for
 
commissions
 
paid
 
by
 
the
 
Defendant
Insurance
 
Companies to
 
the
 
insurance
 
agent
 
and/or
 
mortgagee for
 
policy
 
years
 
when no
 
claims
 
were filed
 
against
 
their
 
hazard
insurance policies. They demand the reimbursement to the purported “class”
 
of an estimated $400 million plus legal interest, for
 
the
“good experience” commissions
 
allegedly paid
 
by the
 
Defendant Insurance Companies
 
during the
 
relevant time
 
period, as
 
well as
injunctive relief seeking to
 
enjoin the Defendant Insurance
 
Companies from paying commissions to
 
the insurance agent/mortgagee
and ordering them
 
to pay
 
those fees
 
directly to the
 
insured. A motion
 
for dismissal
 
on the merits
 
filed by
 
the Defendant Insurance
Companies was denied with a right to replead following
 
limited targeted discovery. Each of the Puerto Rico Court of Appeals and the
Puerto Rico Supreme
 
Court denied the
 
Popular Defendants’ request
 
to review the
 
lower court’s
 
denial of the
 
motion to dismiss.
 
In
December 2017, plaintiffs amended the complaint and, in January
 
2018, defendants filed an answer thereto. Separately,
 
in October
2017, the Court entered an
 
order whereby it broadly certified
 
the class, after which the Popular
 
Defendants filed a certiorari petition
before the
 
Puerto Rico
 
Court of
 
Appeals in
 
relation to
 
the class
 
certification, which
 
the Court
 
declined to
 
entertain. In
 
November
2018 and
 
in January 2019,
 
plaintiffs filed
 
voluntary dismissal petitions
 
against MAPFRE-PRAICO Insurance
 
Company and Antilles
Insurance Company, respectively, leaving the Popular Defendants as the sole remaining defendants in the
 
action.
 
158
In April
 
2019, the Court
 
amended the class
 
definition to limit
 
it to
 
individual homeowners whose
 
residential units were
 
subject to
 
a
mortgage from BPPR
 
who, in turn,
 
obtained risk insurance
 
policies with Antilles
 
Insurance or MAPFRE
 
Insurance through Popular
Insurance from
 
2002 to
 
2015, and
 
who did
 
not make
 
insurance claims
 
against said
 
policies during
 
their effective
 
term. The
 
Court
approved in September 2020 the notice to the class, which
 
is yet to be published.
 
On May 7, 2021, the Popular
 
Defendants filed a motion for summary judgment with
 
respect to plaintiffs’ unjust enrichment theory of
liability, reserving the
 
right to file an additional
 
motion for summary judgment regarding
 
damages should the court deny
 
the Popular
Defendant’s pending
 
motion to
 
exclude an
 
economic expert
 
recently designated
 
by Plaintiffs.
 
On May
 
7, 2021,
 
Popular,
 
Inc. and
BPPR also filed
 
a separate motion for
 
summary judgment alleging that,
 
even taking as
 
true and correct Plaintiffs’
 
theory of liability,
Popular,
 
Inc. and
 
BPPR are
 
not liable
 
to Plaintiffs
 
since they
 
do not
 
receive—and are
 
legally prohibited
 
from receiving
 
insurance
commissions. On
 
September 27, 2021,
 
the Court
 
held an
 
oral hearing
 
to discuss
 
the pending
 
motions for
 
summary judgment.
 
At
such hearing, Plaintiffs
 
notified they did
 
not object the
 
dismissal of the
 
action with prejudice
 
as to Popular,
 
Inc. and BPPR,
 
leaving
Popular Insurance, LLC as
 
the sole remaining defendant
 
in the case. On
 
November 1, 2021, the Court
 
issued a resolution denying
Popular Insurance, LLC’s
 
motion for summary
 
judgment. On December
 
29, 2021, Popular
 
Insurance filed a
 
petition of
certiorari
 
to
the Puerto Rico
 
Court of Appeals,
 
seeking review from
 
the denial of
 
the motion for
 
summary judgment. This
 
petition of
certiorari
 
is
now fully briefed and pending resolution.
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. The appeal is now fully briefed
 
and pending resolution.
Insufficient Funds and Overdraft Fees Class Actions
In February
 
2020, BPPR
 
was served
 
with a
 
putative class
 
action complaint captioned
 
Soto-Melendez v.
 
Banco Popular
 
de Puerto
Rico, filed before the United States District
 
Court for the District of Puerto Rico.
 
The complaint alleges breach of contract, breach of
the covenant of good faith and fair dealing
 
and unjust enrichment due to BPPR’s purported practice of (a)
 
assessing more than one
insufficient
 
funds
 
fee
 
(“NSF
 
Fees”)
 
on
 
the
 
same
 
“item”
 
or
 
transaction
 
and
 
(b)
 
charging
 
both
 
NSF
 
Fees
 
and
 
overdraft fees
 
(“OD
Fees”) on
 
the same
 
item or transaction,
 
and is filed
 
on behalf
 
of all persons
 
who during the
 
applicable statute of
 
limitations period
were charged NSF
 
Fees and/or OD
 
Fees pursuant to
 
these purported practices.
 
In April 2020,
 
BPPR filed a
 
motion to dismiss
 
the
case.
 
On
 
April
 
21,
 
2021,
 
the
 
Court
 
issued
 
an
 
order
 
granting
 
in
 
part
 
and
 
denying
 
in
 
part
 
BPPR’s
 
motion
 
to
 
dismiss;
 
the
 
unjust
enrichment claim
 
was dismissed,
 
whereas the
 
breach of
 
contract and
 
covenant of
 
good faith
 
and fair
 
dealing claims
 
survived the
motion. Discovery is ongoing.
Popular has been also
 
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
alleges
 
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 OD
 
Fees on transactions
 
that, under plaintiffs’
 
theory,
 
do
not overdraw the
 
account. Plaintiff describes
 
Popular’s purported practice of
 
charging OD Fees
 
as “Authorize Positive, Purportedly
159
Settle
 
Negative”
 
(“APPSN”)
 
transactions
 
and
 
alleges
 
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, Plaintiffs 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,
 
Plaintiffs
 
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.
On October
 
4, 2021,
 
the District
 
Court, notwithstanding
 
that BPPR’s
 
Motion to
 
Dismiss remains
 
pending resolution,
 
held an
 
initial
scheduling
 
conference
 
and,
 
thereafter,
 
issued
 
a
 
trial
 
management
 
order
 
where
 
it
 
scheduled
 
the
 
deadline
 
for
 
all
 
discovery
 
for
November 1, 2022, the deadline for the filing of a
 
joint pre-trial brief for June 1, 2023, and
 
the trial for June 20 to June 30, 2023.
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 alleges
 
that Popular assesses OD
 
Fees over authorized transactions
 
for which sufficient
 
funds
are held for settlement. Popular waived service of process
 
and expects to file a responsive allegation
 
by April 4, 2022.
POPULAR BANK
Employment-Related Litigation
In July 2019, Popular Bank (“PB”) was served in a putative class complaint in which it was named as a defendant along with
 
five (5)
current PB employees (collectively,
 
the “AB Defendants”),
 
captioned Aileen Betances, et
 
al. v.
 
Popular Bank, et al.,
 
filed before the
Supreme Court of the State of New
 
York (the
 
“AB Action”).
 
The complaint, filed by five (5) current and former
 
PB employees, seeks
to
 
recover damages
 
for the
 
AB
 
Defendants' alleged
 
violation of
 
local and
 
state sexual
 
harassment, discrimination
 
and retaliation
laws. Additionally, in July 2019, PB was served in a putative class complaint in which it was named as a defendant along with six (6)
current PB
 
employees (collectively,
 
the “DR
 
Defendants”), captioned Damian
 
Reyes, et
 
al. v.
 
Popular Bank,
 
et al.,
 
filed before the
Supreme Court
 
of the
 
State of
 
New York
 
(the “DR
 
Action”). The
 
DR Action,
 
filed by
 
three (3)
 
current and
 
former PB
 
employees,
seeks to recover damages for the DR Defendants’
 
alleged violation of local and state discrimination and retaliation laws. Plaintiffs in
both complaints are represented by the same legal counsel, and five
 
of the six named individual defendants in the DR Action are
 
the
same named
 
individual
 
defendants in
 
the AB
 
Action. Both
 
complaints are
 
related,
 
among other
 
things, to
 
allegations of
 
purported
sexual harassment and/or misconduct by a former PB employee
 
as well as PB’s actions in connection thereto and seek no less than
$100 million
 
in damages
 
each. In October
 
2019, PB
 
and the
 
other defendants filed
 
several Motions
 
to Dismiss.
 
Plaintiffs opposed
the motions
 
in December
 
2019 and
 
PB and
 
the other
 
defendants replied
 
in January
 
2020. In
 
July 2020,
 
a hearing
 
to discuss
 
the
motions
 
to
 
dismiss filed
 
by
 
PB
 
in
 
both
 
actions
 
was
 
held, at
 
which
 
the
 
Court
 
dismissed one
 
of
 
the causes
 
of
 
action
 
included
 
by
plaintiffs in the AB Action.
 
In
 
June
 
2021,
 
the
 
Court
 
in the
 
AB
 
Action
 
entered a
 
judgment dismissing
 
all
 
claims
 
except those
 
regarding
 
the
 
principal
 
plaintiff
Aileen Betances against PB for retaliation, and Betances’ claim against
 
three (3) other AB Defendants for aiding/abetting the alleged
retaliation. Also, in July
 
2021, the Court
 
in the DR
 
action entered a partial
 
judgment dismissing all claims
 
against the individual DR
Defendants,
 
with
 
all
 
surviving
 
claims
 
being
 
against
 
PB
 
and
 
limited
 
to
 
local
 
retaliation
 
claims
 
and
 
local
 
and
 
state
 
discrimination
claims. Plaintiffs in
 
both the AB
 
Action and the
 
DR Action have
 
filed notices of
 
appeal of both
 
judgments. On August
 
11,
 
2021, PB
and the remaining
 
AB Defendants in
 
the AB Action,
 
as well as
 
PB in the
 
DR Action, answered
 
the respective complaints
 
as to the
surviving claims. Discovery is ongoing.
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 have experienced since August 2013 have led to regulatory inquiries, customer complaints
and
 
arbitrations
 
for
 
most
 
broker-dealers
 
in
 
Puerto
 
Rico,
 
including
 
Popular
 
Securities.
 
Popular
 
Securities
 
has
 
received
 
customer
complaints
 
and,
 
as
 
of
 
December 31,
 
2021,
 
was named
 
as
 
a
 
respondent (among
 
other
 
broker-dealers) in
 
65
 
pending arbitration
160
proceedings with
 
initial claimed
 
amounts of
 
approximately $62
 
million
 
in
 
the
 
aggregate. While
 
Popular
 
Securities
 
believes
 
it
 
has
meritorious defenses to the claims asserted in these proceedings, it
 
has often determined that it is in its best interest to settle certain
claims
 
rather
 
than
 
expend
 
the
 
money
 
and
 
resources required
 
to
 
see
 
such
 
cases
 
to
 
completion.
 
The
 
Puerto
 
Rico
 
Government’s
defaults and non-payment of its
 
various debt obligations, as well
 
as the Commonwealth’s and the
 
Financial Oversight Management
Board’s
 
(the
 
“Oversight
 
Board”)
 
decision
 
to
 
pursue
 
restructurings
 
under
 
Title
 
III
 
and
 
Title
 
VI
 
of
 
PROMESA,
 
have
 
impacted
 
the
number of customer complaints (and
 
claimed damages) filed against Popular
 
Securities concerning Puerto Rico bonds
 
and closed-
end investment
 
companies that
 
invest primarily
 
in Puerto
 
Rico bonds.
 
An
 
adverse result
 
in the
 
arbitration proceedings
 
described
above, or a significant increase in customer complaints,
 
could have a material adverse effect on Popular.
On
 
October
 
28,
 
2021,
 
a
 
panel
 
in
 
an
 
arbitration
 
proceeding
 
with
 
claimed
 
damages
 
arising
 
from
 
trading
 
losses
 
of
 
approximately
$30 million ordered
 
Popular Securities
 
to
 
pay claimants
 
approximately $6.9
 
million in
 
compensatory damages
 
and expenses.
 
On
November 4,
 
2021, the claimants
 
in such
 
arbitration proceeding filed
 
a complaint
 
captioned Trinidad
 
García v.
 
Popular, Inc.
 
et. al.
before
 
the
 
United
 
States
 
District
 
Court
 
for
 
the
 
District
 
of
 
Puerto
 
Rico
 
against
 
Popular,
 
Inc.,
 
BPPR
 
and
 
Popular
 
Securities
 
(the
“Popular
 
Defendants”)
 
alleging,
 
inter
 
alia,
 
that
 
they
 
sustained
 
monetary
 
losses
 
as
 
a
 
result
 
of
 
the
 
Popular
 
Defendants’
anticompetitive,
 
unfair,
 
and
 
predatory
 
practices,
 
including
 
tying
 
arrangements
 
prohibited
 
by
 
the
 
Bank
 
Holding
 
Company
 
Act.
 
Plaintiffs
 
claim
 
that
 
the
 
Popular
 
Defendants
 
caused
 
them
 
to
 
enter
 
a
 
tying
 
arrangement scheme
 
whereby BPPR
 
allegedly
 
would
extend secured
 
credit lines
 
to the
 
Plaintiffs on
 
the conditions
 
that they
 
transfer their
 
portfolios to
 
Popular Securities
 
to be
 
used as
pledged
 
collateral
 
and
 
obtain
 
additional
 
investment
 
services
 
and
 
products
 
solely
 
from
 
Popular
 
Securities,
 
not
 
from
 
any
 
of
 
its
competitors. Plaintiffs
 
also
 
invoke federal
 
court’s
 
supplemental jurisdiction
 
to
 
allege several
 
state law
 
claims
 
against the
 
Popular
Defendants,
 
including
 
contractual
 
fault,
 
fault
 
in
 
causing
 
losses
 
in
 
value
 
of
 
the
 
pledge
 
collateral,
 
breach
 
of
 
contract,
 
request
 
for
specific compliance
 
thereof, fault
 
in pre-contractual negotiations,
 
emotional distress, and
 
punitive damages. On
 
January 27,
 
2022,
Plaintiffs filed an Amended Complaint and the Popular Defendants were served with summons on that same date. Plaintiffs demand
no
 
less than
 
$390
 
million
 
in
 
damages,
 
plus
 
an
 
award for
 
costs
 
and
 
attorney's fees.
 
The
 
Popular
 
Defendants expect
 
to
 
file
 
their
response by March 21, 2022.
 
PROMESA Title III Proceedings
In
 
2017,
 
the
 
Oversight
 
Board
 
engaged
 
the
 
law
 
firm
 
of
 
Kobre &
 
Kim
 
to
 
carry
 
out
 
an
 
independent
 
investigation
 
on
 
behalf
 
of
 
the
Oversight Board
 
regarding, among
 
other things,
 
the causes
 
of the
 
Puerto Rico
 
financial crisis.
 
Popular,
 
Inc.,
 
BPPR and
 
Popular
Securities
 
(collectively,
 
the
 
“Popular Companies”)
 
were
 
served
 
by,
 
and
 
cooperated
 
with,
 
the
 
Oversight
 
Board
 
in
 
connection with
requests
 
for
 
the
 
preservation
 
and
 
voluntary
 
production
 
of
 
certain
 
documents
 
and
 
witnesses
 
with
 
respect
 
to
 
Kobre
 
&
 
Kim’s
independent investigation.
 
On August 20, 2018, Kobre & Kim
 
issued its Final Report, which
 
contained various references to the Popular
 
Companies, including
an allegation that Popular Securities participated as an underwriter in the
 
Commonwealth’s 2014 issuance of government obligation
bonds
 
notwithstanding
 
having
 
allegedly
 
advised
 
against
 
it.
 
The
 
report
 
noted
 
that
 
such
 
allegation
 
could
 
give
 
rise
 
to
 
an
 
unjust
enrichment claim against the Corporation and could also serve as a basis to equitably subordinate claims filed by the Corporation in
the Title III proceeding to other third-party claims.
 
After the publication of the Final Report, the Oversight Board created a special claims committee (“SCC”) and, before the end of the
applicable two-year statute of limitations for the filing of such claims
 
pursuant to the U.S. Bankruptcy Code, the SCC, along
 
with the
Commonwealth’s
 
Unsecured Creditors’
 
Committee (“UCC”),
 
filed
 
various
 
avoidance, fraudulent
 
transfer and
 
other claims
 
against
third parties, including government vendors
 
and financial institutions and other professionals involved
 
in bond issuances then being
challenged as
 
invalid by the
 
SCC and
 
the UCC.
 
The Popular
 
Companies, the SCC
 
and the
 
UCC entered into
 
a tolling
 
agreement
with respect to potential claims the SCC and the UCC,
 
on behalf of the Commonwealth or other Title III
 
debtors, may assert against
the Popular Companies for the avoidance and recovery of payments and/or transfers made to the Popular Companies or as a result
of any
 
role of the
 
Popular Companies in
 
the offering
 
of the
 
aforementioned challenged bond
 
issuances.
 
On January 12,
 
2022, the
SCC, the
 
UCC and
 
the Popular
 
Companies executed
 
a settlement
 
agreement as
 
to potential
 
claims related
 
to the
 
avoidance and
recovery of payments
 
and/or transfers made
 
to the Popular
 
Companies. The tolling
 
agreement as to
 
potential claims the
 
SCC and
the
 
UCC may
 
assert against
 
the Popular
 
Companies as
 
a result
 
of
 
any role
 
of the
 
Popular Companies
 
in the
 
offering
 
of certain
challenged bond issuances remains in effect.
161
Note 25 – Non-consolidated variable interest
 
entities
The Corporation
 
is involved
 
with three
 
statutory trusts
 
which it
 
established 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. 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
 
28
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
for
 
additional
information
 
on
 
the
 
debt
 
securities
 
outstanding
 
at
 
December
 
31,
 
2021
 
and
 
2020,
 
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 December 31, 2021 and 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
162
(In thousands)
December 31, 2021
December 31, 2020
Assets
Servicing assets:
Mortgage servicing rights
$
94,464
$
90,273
Total servicing
 
assets
 
$
94,464
$
90,273
Other assets:
Servicing advances
$
7,968
$
8,769
Total other assets
$
7,968
$
8,769
Total assets
$
102,432
$
99,042
Maximum exposure to loss
$
102,432
$
99,042
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 $8.3 billion at December 31, 2021
 
(December 31, 2020 - $8.7 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 December 31,
 
2021 and
 
2020 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 December 31, 2021.
163
Note 26 – Derivative instruments and hedging
 
activities
The
 
use
 
of
 
derivatives
 
is
 
incorporated
 
as
 
part
 
of
 
the
 
Corporation’s
 
overall
 
interest
 
rate
 
risk
 
management
 
strategy
 
to
 
minimize
significant unplanned fluctuations in
 
earnings and cash flows
 
that are caused
 
by interest rate volatility.
 
The Corporation’s goal
 
is to
manage interest
 
rate sensitivity by
 
modifying the repricing
 
or maturity characteristics
 
of certain
 
balance sheet assets
 
and liabilities
so
 
that the
 
net interest
 
income is
 
not materially
 
affected
 
by movements
 
in interest
 
rates. The
 
Corporation uses
 
derivatives in
 
its
trading activities
 
to facilitate
 
customer transactions,
 
and as
 
a means
 
of risk
 
management. As
 
a result
 
of interest
 
rate fluctuations,
hedged fixed and
 
variable interest rate
 
assets and liabilities
 
will appreciate or
 
depreciate in fair
 
value. The effect
 
of this
 
unrealized
appreciation or depreciation is expected to be
 
substantially offset by the Corporation’s
 
gains or losses on the derivative instruments
that are linked to these hedged assets and liabilities. As a matter of policy,
 
the Corporation does not use highly leveraged derivative
instruments for interest rate risk management.
 
The credit
 
risk attributed to
 
the counterparty’s
 
nonperformance risk is
 
incorporated in the
 
fair value
 
of the
 
derivatives. Additionally,
the
 
fair value
 
of
 
the
 
Corporation’s own
 
credit
 
standing is
 
considered in
 
the fair
 
value
 
of the
 
derivative liabilities.
 
During the
 
year
ended December
 
31, 2021, inclusion
 
of the
 
credit risk
 
in the
 
fair value
 
of the
 
derivatives resulted in
 
a loss
 
of $0.3
 
million from the
Corporation’s credit
 
standing adjustment
 
and a
 
loss of
 
$0.1 million
 
from the
 
counterparty’s
 
nonperformance risk.
 
During the
 
years
ended
 
December
 
31,
 
2020
 
and
 
2019,
 
the
 
Corporation recognized
 
a
 
gain
 
of
 
$0.7
 
million
 
and
 
$0.2 million,
 
respectively,
 
from
 
the
Corporation’s credit standing adjustment.
The Corporation’s derivatives are subject to agreements which allow a right of set-off with each respective counterparty.
 
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
 
fair
 
value
 
of
 
derivatives
 
is
 
not
 
offset
 
with
 
the
 
fair
 
value
 
of
 
other
 
derivatives
 
held
 
with
 
the
 
same
 
counterparty
 
even
 
if
 
these
agreements allow
 
a right
 
of set-off.
 
In
 
addition,
 
the fair
 
value of
 
derivatives is
 
not offset
 
with the
 
amounts for
 
the right
 
to
 
reclaim
financial collateral or the obligation to return financial
 
collateral.
 
Financial
 
instruments
 
designated as
 
cash
 
flow
 
hedges
 
or
 
non-hedging derivatives
 
outstanding at
 
December 31,
 
2021
 
and
 
2020
were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
164
Notional amount
Derivative assets
Derivative liabilities
 
Statement of
Fair value at
Statement of
Fair value at
At December 31,
condition
December 31,
condition
December 31,
(In thousands)
2021
2020
classification
2021
2020
classification
2021
2020
Derivatives designated as
 
hedging instruments:
Forward contracts
$
87,900
$
188,800
Other assets
$
18
$
-
Other liabilities
$
125
$
1,267
Total derivatives designated
 
 
as hedging instruments
$
87,900
$
188,800
$
18
$
-
$
125
$
1,267
Derivatives not designated
 
as hedging instruments:
Interest rate caps
$
27,866
$
29,248
Other assets
$
-
$
-
Other liabilities
$
-
$
-
Indexed options on deposits
 
79,114
69,054
Other assets
26,075
20,785
-
-
-
Bifurcated embedded options
72,352
63,121
-
-
-
Interest
bearing
deposits
22,753
17,658
Total derivatives not
 
designated as
 
 
hedging instruments
$
179,332
$
161,423
$
26,075
$
20,785
$
22,753
$
17,658
Total derivative assets
 
and liabilities
 
$
267,232
$
350,223
$
26,093
$
20,785
$
22,878
$
18,925
Cash Flow Hedges
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. Changes in the fair value of the derivatives are recorded in other comprehensive (loss)
 
income.
 
The amount included in
accumulated other comprehensive (loss) income corresponding to these forward contracts is expected to be reclassified to earnings
in the next twelve months. These contracts have
 
a maximum remaining maturity of 76 days at
 
December 31, 2021.
 
For cash flow hedges,
 
net gains (losses) on
 
derivative contracts that are
 
reclassified from accumulated other comprehensive
 
(loss)
income to current period
 
earnings are included in the
 
line item in which the
 
hedged item is recorded and
 
during the period in
 
which
the forecasted transaction impacts earnings, as
 
presented in the tables below.
Year ended December
 
31, 2021
(In thousands)
Amount of net gain (loss)
recognized in OCI on
derivatives (effective
portion)
Classification in the statement of
operations of the net gain (loss)
reclassified from AOCI into income
(effective portion and ineffective
portion)
Amount of net gain
(loss) reclassified from
AOCI into income
(effective portion)
Amount of net gain
(loss) recognized in
income on derivatives
(ineffective portion)
Forward contracts
$
456
Mortgage banking activities
$
(704)
$
-
Total
$
456
$
(704)
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
165
Year ended December
 
31, 2020
(In thousands)
Amount of net gain (loss)
recognized in OCI on
derivatives (effective
portion)
Classification in the statement of
operations of the net gain (loss)
reclassified from AOCI into income
(effective portion and ineffective
portion)
Amount of net gain
(loss) reclassified from
AOCI into income
(effective portion)
Amount of net gain
(loss) recognized in
income on derivatives
(ineffective portion)
Forward contracts
$
(6,594)
Mortgage banking activities
$
(5,559)
$
-
Total
$
(6,594)
$
(5,559)
$
-
Year ended December
 
31, 2019
(In thousands)
Amount of net gain (loss)
recognized in OCI on
derivatives (effective
portion)
Classification in the statement of
operations of the net gain (loss)
reclassified from AOCI into income
(effective portion and ineffective
portion)
Amount of net gain
(loss) reclassified from
AOCI into income
(effective portion)
Amount of net gain
(loss) recognized in
income on derivatives
(ineffective portion)
Forward contracts
$
(3,502)
Mortgage banking activities
$
(3,992)
$
-
Total
$
(3,502)
$
(3,992)
$
-
Fair Value Hedges
At December 31, 2021 and 2020, there were
 
no derivatives designated as fair value hedges.
Non-Hedging Activities
For the year ended
 
December 31, 2021, the
 
Corporation recognized a gain
 
of $2.3 million (2020
 
– loss of $3.0
 
million; 2019 – loss
of $ 1.2 million) related to its non-hedging
 
derivatives, as detailed in the table below.
Amount of Net Gain (Loss) Recognized in Income on Derivatives
Year ended
 
Year ended
 
Year ended
 
Classification of Net Gain (Loss)
December 31,
December 31,
December 31,
(In thousands)
Recognized in Income on Derivatives
2021
2020
2019
Forward contracts
Mortgage banking activities
$
2,027
$
(5,027)
$
(2,254)
Interest rate caps
Other operating income
-
-
(5)
Indexed options on deposits
Interest expense
6,824
5,462
7,898
Bifurcated embedded options
 
Interest expense
(6,538)
(3,417)
(6,883)
Total
 
$
2,313
$
(2,982)
$
(1,244)
Forward Contracts
The Corporation has forward contracts to sell
 
mortgage-backed securities, which are accounted for as trading
 
derivatives. Changes
in their fair value are recognized in mortgage banking
 
activities.
Interest Rate Caps
 
The
 
Corporation enters
 
into
 
interest rate
 
caps as
 
an intermediary
 
on
 
behalf of
 
its customers
 
and simultaneously
 
takes offsetting
positions under the same terms and conditions, thus minimizing
 
its market and credit risks.
Indexed and Embedded Options
The Corporation offers certain customers’ deposits whose
 
return are tied to the performance of the Standard
 
and Poor’s (“S&P 500”)
stock
 
market
 
indexes,
 
and
 
other
 
deposits
 
whose
 
returns
 
are
 
tied
 
to
 
other
 
stock
 
market
 
indexes
 
or
 
other
 
equity
 
securities
performance. The
 
Corporation bifurcated the
 
related options embedded
 
within these
 
customers’ deposits from
 
the host
 
contract in
accordance with
 
ASC Subtopic
 
815-15. In
 
order to
 
limit the
 
Corporation’s exposure
 
to changes
 
in these
 
indexes, the
 
Corporation
purchases indexed options which
 
returns are tied to
 
the same indexes from
 
major broker dealer companies
 
in the over the
 
counter
market. Accordingly, the embedded options and the related indexed options are marked-to-market
 
through earnings.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
166
Note 27 – Related party transactions
The Corporation grants loans to its directors, executive officers, including
 
certain related individuals or organizations, and affiliates in
the ordinary course of business. The activity and
 
balance of these loans were as follows:
(In thousands)
Balance at December 31, 2019
$
133,054
New loans
8,360
Payments
(16,839)
Other changes, including existing loans to new related parties
316
Balance at December 31, 2020
$
124,891
New loans
3,182
Payments
(28,208)
Other changes, including existing loans to new related parties
2,714
Balance at December 31, 2021
$
102,579
New loans and payments include disbursements and collections
 
from existing lines of credit.
The Corporation has had loan transactions with the Corporation’s
 
directors, executive officers, including certain related individuals
 
or
organizations, and affiliates, and
 
proposes to continue such
 
transactions in the ordinary
 
course of its business,
 
on substantially the
same terms, including interest rates and collateral, as those prevailing for comparable loan transactions with third parties. Except as
discussed
 
below,
 
the extensions
 
of
 
credit
 
have not
 
involved and
 
do not
 
currently
 
involve more
 
than normal
 
risks of
 
collection or
present
 
other
 
unfavorable
 
features.
 
In
 
addition,
 
during
 
2020,
 
in
 
response
 
to
 
the
 
coronavirus
 
(COVID-19)
 
pandemic,
 
BPPR
implemented loan payment moratorium programs with respect to
 
consumer and commercial loans which were made
 
available to all
qualifying
 
customers
 
to
 
provide
 
financial
 
relief
 
during
 
the
 
pandemic.
 
Certain
 
Related
 
Parties
 
participated
 
in
 
this
 
moratorium
programs under the same terms and conditions
 
offered to other unrelated third parties.
 
In 2010,
 
as part
 
of the
 
Westernbank FDIC
 
assisted transaction,
 
BPPR acquired
 
five commercial
 
loans made
 
to entities
 
that were
wholly
 
owned
 
by
 
one
 
brother-in-law
 
of
 
a
 
director
 
of
 
the
 
Corporation.
 
The
 
loans
 
were
 
secured
 
by
 
real
 
estate
 
and
 
personally
guaranteed
 
by
 
the
 
director’s
 
brother-in-law.
 
The
 
loans
 
were
 
originated
 
by
 
Westernbank
 
between
 
2001
 
and
 
2005
 
and
 
had
 
an
aggregate outstanding principal
 
balance of approximately
 
$33.5 million when
 
they were acquired
 
by BPPR in
 
2010. Between 2011
and 2014,
 
the loans
 
were restructured to
 
consist of
 
(i) five
 
notes with
 
an aggregate
 
outstanding principal
 
balance of
 
$19.8 million
with
 
a
 
6%
 
annual interest
 
rate
 
(“Notes A”)
 
and
 
(ii)
 
five
 
notes
 
with
 
an
 
aggregate outstanding
 
balance
 
of
 
$13.5
 
million
 
with a
 
1%
annual interest
 
rate, to
 
be paid
 
upon maturity
 
(“Notes B”).
 
The restructured
 
notes had
 
an original
 
maturity of
 
September 30,
 
2016
and, thereafter,
 
various interim renewals were
 
approved to allow
 
for the re-negotiation of
 
a longer-term extension. The
 
most recent
of these interim renewals
 
were approved on February,
 
April and August 2020.
 
These renewals, among other things,
 
decreased the
interest
 
rate
 
applicable
 
to
 
the
 
Notes
 
A
 
to
 
4.25%
 
and
 
maintained
 
the
 
Notes
 
B
 
at
 
an
 
interest
 
rate
 
of
 
1%.
 
During
 
2020,
 
the
 
Audit
Committee also authorized two separate 90-day principal and interest moratoriums, from March to May and from June to August, as
financial
 
relief in
 
response to
 
the coronavirus
 
(COVID-19) pandemic.
 
On September
 
2020, in
 
accordance with
 
the Related
 
Party
Transaction Policy and after being approved by the Audit Committee, the
 
maturity date of the credit facilities was extended until April
2022, fixing the
 
interest rate at 4.25%
 
for Notes A
 
and at 1% for
 
Notes B during such
 
term. The aggregate outstanding
 
balance on
the loans as of December 31, 2021
 
was approximately $30.6 million, of which approximately $17.1 million corresponded to Notes A
and $13.5 million to Notes B.
 
In April 2010, in
 
connection with the acquisition of
 
the Westernbank assets from
 
the FDIC, as receiver,
 
BPPR acquired a term loan
to a
 
corporate borrower
 
partially owned
 
by an
 
investment corporation
 
in which
 
the Corporation’s
 
Chairman, at
 
that time
 
the Chief
Executive Officer, as well as certain of
 
his family members, are the owners. In addition, the Chairman’s sister and brother-in-law are
owners of an
 
entity that holds
 
an ownership interest
 
in the borrower.
 
At the time
 
the loan was
 
acquired by BPPR,
 
it had an
 
unpaid
principal balance of $40.2 million. In
 
May 2017, this loan was sold by
 
BPPR to Popular, Inc.,
 
holding company (“PIHC”). At the time
of sale, the loan had an unpaid principal balance of $37.9
 
million. PIHC paid $37.9 million to BPPR for the loan,
 
of which $6.0 million
was recognized by BPPR as a capital contribution representing the difference
 
between the fair value and the book value of the
 
loan
at the
 
time of
 
transfer.
 
Immediately upon
 
being acquired
 
by PIHC,
 
the loan’s
 
maturity was
 
extended by
 
90 days
 
(under the
 
same
terms as
 
originally contracted) to
 
provide the PIHC
 
additional time to
 
evaluate a
 
refinancing or long-term
 
extension of the
 
loan.
 
In
 
 
 
 
 
167
August 2017, the credit
 
facility was refinanced with
 
a stated maturity in
 
February 2019.
 
During 2017, the facility
 
was subject to the
loan payment moratorium offered as part of the hurricane relief efforts. As such,
 
interest payments amounting to approximately $0.5
million
 
were
 
deferred
 
and
 
capitalized
 
as
 
part
 
of
 
the
 
loan
 
balance.
 
In
 
February
 
2019,
 
the
 
Audit
 
Committee
 
approved,
 
under
 
the
Related Party Policy, a 36-month renewal of the loan at an interest rate of 5.75% and a 30-year
 
amortization schedule. In
December
2021, the Corporation refinanced the then-current $36.0 million
 
principal balance of the loan at
 
an interest rate of 4.50%, a
 
maturity
date of December 2026
 
and a 20-year amortization schedule.
 
As of December 31,
 
2021, the unpaid principal
 
balance amounted to
$34.8 million.
 
In April
 
2010, a private
 
trust and a
 
sister-in-law of a
 
director, as
 
co-borrowers, obtained a
 
$0.2 million mortgage
 
loan from Popular
Mortgage, then a subsidiary of BPPR, secured by a residential property. The loan was a fully amortizing 40-year mortgage loan with
a
 
fixed
 
annual
 
rate
 
of
 
2.99%
 
for
 
the
 
first
 
5
 
years,
 
and
 
thereafter
 
an
 
annual
 
rate
 
of
 
5.875%.
 
From
 
March
 
to
 
August
 
2020,
 
the
borrowers participated in the COVID-19 forbearance program offered by BPPR to
 
qualifying mortgage customers in response to the
coronavirus (COVID-19) pandemic. After the expiration of such moratorium period, borrowers did not make any payments under the
loan during the months of September and October 2020,
 
thereby defaulting on the indebtedness. On November 2020,
 
the borrowers
requested and
 
were granted,
 
an additional
 
3-month loan
 
payment moratorium
 
pursuant to
 
BPPR’s ordinary
 
course loss
 
mitigation
program, which expired
 
in January 2021.
 
Since the expiration
 
of this 3-month
 
loan payment forbearance the
 
borrowers have failed
to make
 
the monthly
 
loan payments
 
when due. The
 
outstanding balance of
 
the loan
 
as of
 
December 31,
 
2021 was
 
approximately
$0.2 million. BPPR is currently evaluating borrowers’ application
 
in connection with this loan under BPPR’s loss mitigation
 
program.
At
 
December
 
31,
 
2021,
 
the
 
Corporation’s
 
banking
 
subsidiaries
 
held
 
deposits
 
from
 
related
 
parties,
 
excluding
 
EVERTEC,
 
Inc.
(“EVERTEC”) amounting to approximately $700 million (2020
 
- $851 million).
 
From
 
time
 
to
 
time,
 
the
 
Corporation,
 
in
 
the
 
ordinary
 
course
 
of
 
business,
 
obtains
 
services
 
from
 
related
 
parties
 
that
 
have
 
some
association with the
 
Corporation. Management believes the
 
terms of such
 
arrangements are consistent with
 
arrangements entered
into with independent third parties.
 
For
 
the
 
year
 
ended
 
December
 
31,
 
2021,
 
the
 
Corporation made
 
contributions
 
of
 
approximately
 
$4.5
 
million
 
to
 
Fundación
 
Banco
Popular and
 
Popular Bank
 
Foundation, which
 
are not-for-profit
 
corporations dedicated
 
to philanthropic
 
work (2020
 
- $1.6
 
million).
The Corporation also provided
 
human and operational resources
 
to support the
 
activities of the Fundación
 
Banco Popular which in
2021 amounted to approximately $1.3 million (2020- $1.4
 
million).
 
Related party transactions with EVERTEC, as an affiliate
The Corporation has an investment in EVERTEC, Inc. (“EVERTEC”), which provides various processing and information technology
services to the Corporation and its subsidiaries and gives BPPR
 
access to the ATH
 
network owned and operated by EVERTEC. As
of December 31,
 
2021, the Corporation’s
 
stake in EVERTEC
 
was 16.19%. The
 
Corporation continues to
 
have significant influence
over EVERTEC. Accordingly, the investment in EVERTEC is accounted for under the equity method and is evaluated
 
for impairment
if events or circumstances indicate that a decrease
 
in value of the investment has occurred that
 
is other than temporary.
The Corporation
 
recorded $2.3
 
million in
 
dividend distributions
 
during the
 
year ended
 
December 31,
 
2021 from
 
its investments
 
in
EVERTEC’s holding company
 
(December 31, 2020
 
- $2.3 million).
 
The Corporation’s equity
 
in EVERTEC
 
is presented in
 
the table
which follows and is included as part of “other
 
assets” in the consolidated statement of financial
 
condition.
(In thousands)
December 31, 2021
 
December 31, 2020
Equity investment in EVERTEC
$
110,299
$
86,158
The Corporation
 
had the
 
following financial
 
condition balances
 
outstanding with
 
EVERTEC at
 
December 31,
 
2021 and
 
December
31, 2020.
 
Items that represent liabilities to the Corporation
 
are presented with parenthesis.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
168
(In thousands)
December 31, 2021
 
December 31, 2020
Accounts receivable (Other assets)
$
5,668
$
5,678
Deposits
(150,737)
(125,361)
Accounts payable (Other liabilities)
(3,431)
(2,395)
Net total
$
(148,500)
$
(122,078)
The
 
Corporation’s
 
proportionate
 
share
 
of
 
income
 
from
 
EVERTEC
 
is
 
included
 
in
 
other
 
operating
 
income
 
in
 
the
 
consolidated
statements of operations. The following table presents the Corporation’s proportionate share of EVERTEC’s income and changes in
stockholders’ equity for the years ended December
 
31, 2021, 2020 and 2019.
 
Years ended December
 
31,
(In thousands)
2021
2020
2019
Share of income from
 
investment in EVERTEC
$
26,096
$
16,936
$
16,749
Share of other changes in EVERTEC's stockholders'
 
equity
53
865
516
Share of EVERTEC's changes in equity recognized
 
in income
$
26,149
$
17,801
$
17,265
The
 
following
 
tables
 
present
 
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 years ended December
 
31, 2021, 2020 and 2019. Items that represent
expenses to the Corporation are presented with
 
parenthesis.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
169
Years ended December
 
31,
(In thousands)
2021
2020
2019
Category
Interest expense on deposits
$
(388)
$
(315)
$
(106)
Interest expense
ATH and credit cards interchange
 
income from services to EVERTEC
27,384
22,406
29,224
Other service fees
Rental income charged to EVERTEC
6,593
7,305
7,418
Net occupancy
Fees on services provided by EVERTEC
(245,945)
(223,069)
(219,992)
Professional fees
Other services provided to EVERTEC
740
1,002
1,118
Other operating expenses
Total
$
(211,616)
$
(192,671)
$
(182,338)
Centro Financiero BHD León
At December 31, 2021, the Corporation had a 15.84% equity interest in Centro Financiero BHD León, S.A. (“BHD León”), one of the
largest
 
banking
 
and
 
financial
 
services
 
groups
 
in
 
the
 
Dominican
 
Republic.
 
During
 
the
 
year
 
ended
 
December
 
31,
 
2021,
 
the
Corporation recorded $27.7
 
million in earnings
 
from its investment
 
in BHD León
 
(December 31, 2020
 
- $27.0 million),
 
which had a
carrying
 
amount
 
of
 
$180.3
 
million
 
at
 
December 31,
 
2021
 
(December 31,
 
2020
 
-
 
$153.1
 
million).
 
The
 
Corporation received
 
$4.3
million in dividends distributions during the year ended December 31, 2021,
 
from its investment in BHD León (December 31, 2020
 
-
$13.2 million).
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
 
administrative,
 
custody
 
and
 
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
 
year
 
ended
 
December
 
31,
 
2021
 
administrative
 
fees
 
charged
 
to
 
these
 
investment
 
companies
 
amounted
 
to
 
$4.1
 
million
(December 31,
 
2020 -
 
$6.3 million)
 
and waived
 
fees amounted to
 
$1.5 million
 
(December 31, 2020
 
- $2.8
 
million), for
 
a net
 
fee of
$2.6 million (December 31, 2020 - $3.5 million).
The
 
Corporation,
 
through
 
its
 
subsidiary
 
BPPR,
 
had
 
also
 
entered
 
into
 
certain
 
uncommitted credit
 
facilities
 
with
 
those
 
investment
companies.
 
The
 
available
 
lines
 
of
 
credit
 
facilities
 
amounted
 
to
 
$275
 
million
 
at
 
December
 
31,
 
2020.
 
The
 
aggregate
 
sum
 
of
 
all
outstanding
 
balances
 
under
 
all
 
credit
 
facilities
 
that
 
could
 
be
 
made
 
available
 
by
 
BPPR,
 
from
 
time
 
to
 
time,
 
to
 
those
 
investment
companies for which PAM acted as investment advisor or co-investment advisor, could have never exceed the lesser
 
of $200 million
or 10% of BPPR’s
 
capital. During the year
 
ended December 31, 2021,
 
these credit facilities expired and
 
the investment companies
entered into credit facilities with a third party.
170
Note 28 – 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.
 
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 December 31, 2021 and
 
2020:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
171
At December 31, 2021
(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
$
-
$
15,859,030
$
-
$
-
$
15,859,030
Obligations of U.S. Government
 
sponsored
entities
-
70
-
-
70
Collateralized mortgage obligations - federal
agencies
-
221,265
-
-
221,265
Mortgage-backed securities
-
8,886,950
826
-
8,887,776
Other
-
128
-
-
128
Total debt securities
 
available-for-sale
$
-
$
24,967,443
$
826
$
-
$
24,968,269
Trading account debt securities, excluding
derivatives:
U.S. Treasury securities
$
6,530
$
-
$
-
$
-
$
6,530
Obligations of Puerto Rico, States and political
subdivisions
-
85
-
-
85
Collateralized mortgage obligations
-
59
198
-
257
Mortgage-backed securities
-
22,559
-
-
22,559
Other
-
-
280
-
280
Total trading account
 
debt securities, excluding
derivatives
$
6,530
$
22,703
$
478
$
-
$
29,711
Equity securities
$
-
$
32,429
$
-
$
77
$
32,506
Mortgage servicing rights
-
-
121,570
-
121,570
Derivatives
 
-
26,093
-
-
26,093
Total assets measured
 
at fair value on a
recurring basis
$
6,530
$
25,048,668
$
122,874
$
77
$
25,178,149
Liabilities
Derivatives
$
-
$
(22,878)
$
-
$
-
$
(22,878)
Contingent consideration
-
-
(9,241)
-
(9,241)
Total liabilities measured
 
at fair value on a
recurring basis
$
-
$
(22,878)
$
(9,241)
$
-
$
(32,119)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
172
At December 31, 2020
(In thousands)
Level 1
Level 2
Level 3
Total
RECURRING FAIR VALUE
 
MEASUREMENTS
Assets
 
 
 
 
 
Debt securities available-for-sale:
U.S. Treasury securities
$
3,499,781
$
7,288,259
$
-
$
10,788,040
Obligations of U.S. Government
 
sponsored entities
-
60,184
-
60,184
Collateralized mortgage obligations - federal agencies
-
392,132
-
392,132
Mortgage-backed securities
-
10,319,547
1,014
10,320,561
Other
-
235
-
235
Total debt securities
 
available-for-sale
$
3,499,781
$
18,060,357
$
1,014
$
21,561,152
Trading account debt securities, excluding
 
derivatives:
U.S. Treasury securities
$
11,506
$
-
$
-
$
11,506
Obligations of Puerto Rico, States and political subdivisions
-
103
-
103
Collateralized mortgage obligations
-
68
278
346
Mortgage-backed securities
-
24,338
-
24,338
Other
-
-
381
381
Total trading account
 
debt securities, excluding derivatives
$
11,506
$
24,509
$
659
$
36,674
Equity securities
$
-
$
29,590
$
-
$
29,590
Mortgage servicing rights
-
-
118,395
118,395
Derivatives
 
-
20,785
-
20,785
Total assets measured
 
at fair value on a recurring basis
$
3,511,287
$
18,135,241
$
120,068
$
21,766,596
Liabilities
 
 
 
Derivatives
$
-
$
(18,925)
$
-
$
(18,925)
Total liabilities measured
 
at fair value on a recurring basis
$
-
$
(18,925)
$
-
$
(18,925)
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 years ended December 31, 2021,
 
2020 and 2019
 
and excludes nonrecurring fair value measurements
 
of
assets no longer outstanding
 
as of the reporting date.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
173
Year ended December
 
31, 2021
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE
 
MEASUREMENTS
Assets
 
 
 
 
 
Write-downs
Loans
[1]
$
-
$
-
$
21,167
$
21,167
$
(3,721)
Other real estate owned
[2]
-
-
7,727
7,727
(1,579)
Other foreclosed assets
[2]
-
-
68
68
(33)
Long-lived assets held-for-sale
[3]
-
-
9,007
9,007
(5,320)
Trademark
[4]
-
-
156
156
(5,404)
Total assets measured
 
at fair value on a nonrecurring basis
$
-
$
-
$
38,125
$
38,125
$
(16,057)
[1] Relates mostly 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.
[3] Represents the fair value of long-lived assets held-for-sale
 
that were written down to their fair value.
[4] Represents the fair value of a trademark due to a write-down
 
on impairment.
Year ended December
 
31, 2020
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE
 
MEASUREMENTS
Assets
 
 
 
 
 
Write-downs
Loans
[1]
$
-
$
-
$
74,511
$
74,511
$
(15,290)
Loans held-for-sale
[2]
-
-
2,738
2,738
(1,311)
Other real estate owned
[3]
-
-
20,123
20,123
(3,325)
Other foreclosed assets
[3]
-
-
116
116
(148)
ROU assets
[4]
-
-
446
446
(15,920)
Leasehold improvements
[4]
-
-
126
126
(2,084)
Total assets measured
 
at fair value on a nonrecurring basis
$
-
$
-
$
98,060
$
98,060
$
(38,078)
[1] Relates mostly 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] The impairment was measured based on the sublease
 
rental value of the branches that were subject to the
 
strategic realignment of PB's New
Metro Branch network.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
174
Year ended December
 
31, 2019
(In thousands)
Level 1
Level 2
Level 3
Total
NONRECURRING FAIR VALUE
 
MEASUREMENTS
Assets
 
 
 
 
 
Write-downs
Loans
[1]
$
-
$
-
$
35,363
$
35,363
$
(13,533)
Other real estate owned
[2]
-
-
18,132
18,132
(3,526)
Other foreclosed assets
[2]
-
-
1,213
1,213
(156)
Long-lived assets held-for-sale
[3]
-
-
2,500
2,500
(2,591)
Total assets measured
 
at fair value on a nonrecurring basis
$
-
$
-
$
57,208
$
57,208
$
(19,806)
[1] Relates mostly 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.
[3] 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 years
ended December 31, 2021, 2020, and 2019.
Year ended December
 
31, 2021
MBS
Other
classified
CMOs
securities
as debt
classified
classified
securities
as trading
as trading
Mortgage
available-
account debt
account debt
servicing
Total
Contingent
Total
(In thousands)
for-sale
securities
securities
rights
assets
Consideration
liabilities
Balance at January 1,
 
2021
$
1,014
$
278
$
381
$
118,395
$
120,068
$
-
$
-
Gains (losses) included in earnings
-
(1)
(101)
(10,216)
(10,318)
-
-
Gains (losses) included in OCI
(13)
-
-
-
(13)
-
-
Additions
-
29
-
13,391
13,419
9,241
9,241
Settlements
(175)
(107)
-
-
(282)
-
-
Balance at December 31, 2021
$
826
$
198
$
280
$
121,570
$
122,874
$
9,241
$
9,241
Changes in unrealized gains (losses) included in
earnings relating to assets still held at December
31, 2021
$
-
$
(1)
$
(45)
$
6,410
$
6,364
$
-
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
175
Year ended December
 
31, 2020
MBS
Other
classified
CMOs
securities
as debt
classified
classified
securities
as trading
as trading
Mortgage
available-
account debt
account debt
servicing
Total
(In thousands)
for-sale
securities
securities
rights
assets
Balance at January 1, 2020
$
1,182
$
530
$
440
$
150,906
$
153,058
Gains (losses) included in earnings
-
(1)
(59)
(42,055)
(42,115)
Gains (losses) included in OCI
(18)
-
-
-
(18)
Additions
-
4
-
9,544
9,548
Settlements
(150)
(255)
-
-
(405)
Balance at December 31, 2020
$
1,014
$
278
$
381
$
118,395
$
120,068
Changes in unrealized gains (losses) included in earnings
 
relating to assets still
held at December 31, 2020
$
-
$
-
$
27
$
(19,327)
$
(19,300)
Year ended December
 
31, 2019
MBS
Other
classified
CMOs
securities
as debt
classified
MBS
classified
securities
as trading
classified as
as trading
Mortgage
available-
account debt
trading account
account debt
servicing
Total
(In thousands)
for-sale
securities
debt securities
securities
rights
assets
Balance at January 1,
 
2019
$
1,233
$
611
$
43
$
485
$
169,777
$
172,149
Gains (losses) included in earnings
-
(1)
(1)
(45)
(27,516)
(27,563)
Gains (losses) included in OCI
(1)
-
-
-
-
(1)
Additions
-
71
25
-
9,143
9,239
Settlements
(50)
(151)
(41)
-
(498)
(740)
Transfers out of Level 3
-
-
(26)
-
-
(26)
Balance at December 31, 2019
$
1,182
$
530
$
-
$
440
$
150,906
$
153,058
Changes in unrealized gains (losses) included in earnings
relating to assets still held at December 31, 2019
$
-
$
1
$
-
$
20
$
(14,190)
$
(14,169)
During the
 
year ended
 
December 31,
 
2019, certain
 
MBS were
 
transferred from
 
Level 3
 
to
 
Level 2
 
due to
 
a change
 
in valuation
technique from an internally prepared pricing matrix
 
to a bond’s theoretical value.
Gains and losses (realized and
 
unrealized) included in earnings for the
 
years ended December 31, 2021,
 
2020, and 2019 for Level
3 assets and liabilities included in the previous
 
tables are reported in the consolidated statement
 
of operations as follows:
2021
2020
2019
Total
Changes in unrealized
Total
Changes in unrealized
Total
Changes in
unrealized
gains (losses)
gains (losses)
 
gains (losses)
gains (losses)
 
gains (losses)
gains (losses)
 
included
relating to assets still
included
relating to assets still
included
relating to assets
still
 
(In thousands)
in earnings
held at reporting date
in earnings
held at reporting date
in earnings
held at reporting
date
Mortgage banking activities
$
(10,216)
$
6,410
$
(42,055)
$
(19,327)
$
(27,516)
$
(14,190)
Trading account (loss) profit
 
(102)
(46)
(60)
27
(47)
21
Total
 
$
(10,318)
$
6,364
$
(42,115)
$
(19,300)
$
(27,563)
$
(14,169)
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 December 31, 2021 and 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
176
Fair value at
 
December 31,
(In thousands)
2021
Valuation technique
Unobservable inputs
Weighted average (range) [1]
CMO's - trading
$
198
Discounted cash flow model
Weighted average life
0.8 years (0.04 - 1.0 years)
Yield
3.6% (3.6% - 4.1%)
Prepayment speed
11.4% (10.1% - 17.2%)
Other - trading
$
280
Discounted cash flow model
Weighted average life
2.9 years
Yield
12.0%
Prepayment speed
10.8%
Loans held-in-portfolio
$
20,041
[
External appraisal
Haircut applied on
external appraisals
5.0%
Other real estate owned
$
3,631
[
External appraisal
Haircut applied on
external appraisals
22.3% (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.
Fair value at
 
December 31,
(In thousands)
2020
Valuation technique
Unobservable inputs
Weighted average (range) [1]
CMO's - trading
$
278
Discounted cash flow model
Weighted average life
1.2 years (0.6 - 1.4 years)
Yield
3.6% (3.6% - 4.1%)
Prepayment speed
17.7% (13.8% - 18.3%)
Other - trading
$
381
Discounted cash flow model
Weighted average life
3.6 years
Yield
12.0%
Prepayment speed
10.8%
Mortgage servicing rights
$
118,395
Discounted cash flow model
Prepayment speed
6.9% (0.3% - 24.6%)
Weighted average life
6.0 years (0.3 - 12.3 years)
Discount rate
11.1% (9.5% - 14.7%)
Loans held-in-portfolio
$
74,347
[
External appraisal
Haircut applied on
external appraisals
20.9% (10.0% - 40.0%)
Other real estate owned
$
14,926
[
External appraisal
Haircut applied on
external appraisals
22.1% (5.0% - 30.0%)
[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.
Effective the fourth quarter 2021, the mortgage
 
servicing rights fair value was provided by
 
a third-party valuation specialist. Refer to
Note 11 for additional information on MSRs.
The significant unobservable inputs used in the fair value measurement of the Corporation’s collateralized mortgage obligations and
interest-only
 
collateralized
 
mortgage
 
obligation
 
(reported
 
as
 
“other”),
 
which
 
are
 
classified
 
in
 
the
 
“trading”
 
category,
 
are
 
yield,
constant
 
prepayment rate,
 
and
 
weighted average
 
life. Significant
 
increases (decreases)
 
in
 
any
 
of
 
those
 
inputs in
 
isolation would
result
 
in
 
significantly
 
lower
 
(higher)
 
fair
 
value
 
measurement.
 
Generally,
 
a
 
change
 
in
 
the
 
assumption
 
used
 
for
 
the
 
constant
prepayment
 
rate
 
will
 
generate
 
a
 
directionally
 
opposite
 
change
 
in
 
the
 
weighted
 
average
 
life.
 
For
 
example,
 
as
 
the
 
average life
 
is
reduced
 
by
 
a
 
higher
 
constant
 
prepayment
 
rate,
 
a
 
lower
 
yield
 
will
 
be
 
realized,
 
and
 
when
 
there
 
is
 
a
 
reduction
 
in
 
the
 
constant
prepayment
 
rate,
 
the
 
average
 
life
 
of
 
these
 
collateralized
 
mortgage
 
obligations
 
will
 
extend,
 
thus
 
resulting
 
in
 
a
 
higher
 
yield.
 
The
significant
 
unobservable
 
inputs
 
used
 
in
 
the
 
fair
 
value
 
measurement
 
of
 
the
 
Corporation’s
 
mortgage
 
servicing
 
rights
 
are
 
constant
prepayment rates and discount rates.
 
Increases in interest rates may result in lower prepayments. Discount rates vary
 
according to
products and / or portfolios depending on the
 
perceived risk. Increases in discount rates result
 
in a lower fair value measurement.
Following is
 
a description
 
of the
 
Corporation’s valuation
 
methodologies used
 
for assets
 
and liabilities
 
measured at
 
fair value.
 
The
disclosure requirements exclude certain financial instruments and all
 
non-financial instruments. Accordingly, the aggregate fair value
amounts of the financial instruments disclosed do
 
not represent management’s estimate of the underlying
 
value of the Corporation.
Trading account debt securities and debt securities available-for-sale
 
 
U.S. Treasury securities:
 
The fair value
 
of U.S. Treasury
 
notes is based
 
on yields that
 
are interpolated from the
 
constant
maturity treasury curve.
 
These securities are classified
 
as Level 2.
 
U.S. Treasury
 
bills are classified as
 
Level 1 given the
high volume of trades and pricing based on those
 
trades.
 
177
 
Obligations of U.S.
 
Government sponsored entities: The
 
Obligations of U.S. Government
 
sponsored entities include U.S.
agency
 
securities,
 
which
 
fair
 
value
 
is
 
based
 
on
 
an
 
active
 
exchange
 
market
 
and
 
on
 
quoted
 
market
 
prices
 
for
 
similar
securities. The U.S. agency securities are classified as Level
 
2.
 
 
Obligations of Puerto
 
Rico, States and
 
political subdivisions: Obligations of
 
Puerto Rico, States
 
and political subdivisions
include
 
municipal
 
bonds.
 
The
 
bonds
 
are
 
segregated
 
and
 
the
 
like
 
characteristics
 
divided
 
into
 
specific
 
sectors.
 
Market
inputs used in the
 
evaluation process include all or
 
some of the following:
 
trades, bid price or
 
spread, two sided markets,
quotes, benchmark curves including but not
 
limited to Treasury benchmarks, LIBOR
 
and swap curves, market data feeds
such
 
as those
 
obtained from
 
municipal market
 
sources,
 
discount and
 
capital
 
rates,
 
and trustee
 
reports. The
 
municipal
bonds are classified as Level 2.
 
Mortgage-backed securities: Certain agency mortgage-backed
 
securities (“MBS”) are priced based on a bond’s theoretical
value
 
derived
 
from
 
similar
 
bonds
 
defined
 
by
 
credit
 
quality
 
and
 
market
 
sector.
 
Their
 
fair
 
value
 
incorporates
 
an
 
option
adjusted spread. The
 
agency MBS are classified
 
as Level 2.
 
Other agency MBS
 
such as GNMA
 
Puerto Rico Serials
 
are
priced using an internally-prepared pricing matrix with quoted prices from local brokers dealers. These particular MBS are
classified as Level 3.
 
Collateralized mortgage
 
obligations: Agency
 
collateralized mortgage
 
obligations (“CMOs”)
 
are priced
 
based on
 
a bond’s
theoretical
 
value
 
derived
 
from
 
similar
 
bonds
 
defined
 
by
 
credit
 
quality
 
and
 
market
 
sector
 
and
 
for
 
which
 
fair
 
value
incorporates
 
an
 
option
 
adjusted
 
spread.
 
The
 
option
 
adjusted
 
spread
 
model
 
includes
 
prepayment
 
and
 
volatility
assumptions,
 
ratings
 
(whole
 
loans
 
collateral)
 
and
 
spread
 
adjustments.
 
These
 
CMOs
 
are
 
classified
 
as
 
Level
 
2.
 
Other
CMOs, due
 
to their
 
limited liquidity,
 
are classified
 
as Level
 
3 due
 
to the
 
insufficiency of
 
inputs such
 
as executed
 
trades,
credit information and cash flows.
 
 
Corporate securities (included
 
as “other” in
 
the “available-for-sale” category):
 
Given that the
 
quoted prices are
 
for similar
instruments, these securities are classified as Level
 
2.
 
 
Corporate securities
 
and
 
interest-only strips
 
(included as
 
“other” in
 
the
 
“trading account
 
debt securities”
 
category): For
corporate securities, quoted prices for these security types are obtained from broker dealers. Given that the quoted prices
are for similar instruments or do not trade in highly liquid markets,
 
these securities are classified as Level 2. Given that the
fair
 
value
 
was
 
estimated
 
based
 
on
 
a
 
discounted
 
cash
 
flow
 
model
 
using
 
unobservable
 
inputs,
 
interest-only
 
strips
 
are
classified as Level 3.
 
Equity securities
Equity
 
securities
 
are
 
comprised principally
 
of
 
shares
 
in
 
closed-ended and
 
open-ended mutual
 
funds
 
and
 
other
 
equity
 
securities.
Closed-end funds are
 
traded on the
 
secondary market at
 
the shares’ market value.
 
Open-ended funds are considered
 
to be liquid,
as investors can sell their shares continually to the fund and are priced at NAV.
 
Mutual funds are classified as Level 2. Other equity
securities that
 
do not
 
trade in
 
highly liquid
 
markets are
 
also classified
 
as Level
 
2, except
 
for one
 
equity security
 
that do
 
not have
readily determinable fair value and is under an investment
 
company is measured at NAV.
Mortgage servicing rights
 
Mortgage
 
servicing
 
rights
 
(“MSRs”)
 
do
 
not
 
trade
 
in
 
an
 
active
 
market
 
with
 
readily
 
observable
 
prices.
 
MSRs
 
are
 
priced
 
using
 
a
discounted cash
 
flow model
 
valuation performed
 
by a
 
third party.
 
The discounted
 
cash flow
 
model incorporates
 
assumptions that
market
 
participants
 
would
 
use
 
in
 
estimating
 
future
 
net
 
servicing
 
income,
 
including
 
portfolio
 
characteristics,
 
prepayments
assumptions, discount
 
rates, delinquency
 
and foreclosure
 
rates, late
 
charges, other
 
ancillary revenues,
 
cost to
 
service and
 
other
economic factors.
 
Prepayment speeds
 
are adjusted
 
for the
 
loans’ characteristics
 
and portfolio
 
behavior.
 
Due to
 
the unobservable
nature of certain valuation inputs, the MSRs are
 
classified as Level 3.
 
Derivatives
 
Interest
 
rate
 
caps
 
and
 
indexed
 
options
 
are
 
traded
 
in
 
over-the-counter
 
active
 
markets.
 
These
 
derivatives
 
are
 
indexed
 
to
 
an
observable interest rate benchmark, such
 
as LIBOR or equity indexes,
 
and are priced using an
 
income approach based on present
value
 
and
 
option
 
pricing
 
models
 
using
 
observable
 
inputs.
 
Other
 
derivatives
 
are
 
liquid
 
and
 
have
 
quoted
 
prices,
 
such
 
as
 
forward
contracts or
 
“to be
 
announced securities”
 
(“TBAs”). All
 
of these
 
derivatives are
 
classified as
 
Level 2.
 
The non-performance
 
risk is
determined using internally-developed models that
 
consider the collateral
 
held, the remaining
 
term, and the
 
creditworthiness of the
entity that
 
bears the
 
risk, and
 
uses available
 
public data
 
or internally-developed
 
data related
 
to current
 
spreads that
 
denote their
probability of default.
Contingent consideration liability
178
The fair
 
value of
 
the contingent
 
consideration, which
 
relates to
 
earnout payments
 
that could
 
be payable
 
to
 
K2 over
 
a three-year
period, was
 
calculated based
 
on a
 
discounted cash
 
flow technique
 
using the
 
probability-weighted average
 
from
 
likely scenarios.
 
This contingent consideration is classified as Level
 
3.
Loans held-in-portfolio that are collateral dependent
The impairment is
 
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
 
and
 
which
 
could
 
be
 
subject
 
to
 
internal
 
adjustments.
These collateral dependent loans are classified as Level
 
3.
 
Loans measured at fair value pursuant to lower
 
of cost or fair value adjustments
Loans measured at fair value on a nonrecurring basis pursuant to lower
 
of cost or fair value were priced based on secondary market
prices
 
and
 
discounted
 
cash
 
flow
 
models
 
which
 
incorporate
 
internally-developed
 
assumptions
 
for
 
prepayments
 
and
 
credit
 
loss
estimates. These loans are classified as Level 3.
 
Other real estate owned and other foreclosed assets
 
Other
 
real
 
estate
 
owned
 
includes
 
real
 
estate
 
properties
 
securing
 
mortgage,
 
consumer,
 
and
 
commercial
 
loans.
 
Other
 
foreclosed
assets include primarily automobiles
 
securing auto loans. The
 
fair value of
 
foreclosed assets may be
 
determined using an external
appraisal, broker price opinion, or an
 
internal valuation.
 
These foreclosed assets are classified as Level
 
3 since they are subject
 
to
internal adjustments.
ROU assets and leasehold improvements
The impairment was measured based on the sublease rental value of
 
the branches that were subject to the strategic realignment
 
of
PB’s New York Metro Branch network.
 
These ROU assets and leasehold improvements are
 
classified as Level 3.
Long-lived assets held-for-sale
The
 
Corporation
 
evaluates
 
for
 
impairment
 
its
 
long-lived
 
assets,
 
whenever
 
events
 
or
 
changes
 
in
 
circumstances
 
indicate
 
that
 
the
carrying amount of
 
an asset may not
 
be recoverable and records
 
a write down for
 
the difference between the
 
carrying amount and
the fair value less cost to sell. These long-lived
 
assets held-for-sale are classified as Level
 
3.
Trademark
The write-down on impairment of a trademark was based on the
 
discontinuance of origination thru e-loan platform. This
 
trademark is
classified as Level 3.
179
Note 29 – 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
 
December
 
31,
 
2021
 
and
December 31, 2020, 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
180
December 31, 2021
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Assets:
Cash and due from banks
$
428,433
$
428,433
$
-
$
-
$
-
$
428,433
Money market investments
17,536,719
17,530,640
6,079
-
-
17,536,719
Trading account debt securities, excluding
 
derivatives
[1]
29,711
6,530
22,703
478
-
29,711
Debt securities available-for-sale
[1]
24,968,269
-
24,967,443
826
-
24,968,269
Debt securities held-to-maturity:
Obligations of Puerto Rico, States and political
subdivisions
$
65,380
$
-
$
-
$
77,383
$
-
$
77,383
Collateralized mortgage obligation-federal agency
25
-
-
25
-
25
Securities in wholly owned statutory business trusts
5,960
-
5,960
-
-
5,960
Total debt securities
 
held-to-maturity
$
71,365
$
-
$
5,960
$
77,408
$
-
$
83,368
Equity securities:
FHLB stock
$
59,918
$
-
$
59,918
$
-
$
-
$
59,918
FRB stock
96,217
-
96,217
-
-
96,217
Other investments
33,842
-
32,429
3,704
77
36,210
Total equity securities
$
189,977
$
-
$
188,564
$
3,704
$
77
$
192,345
Loans held-for-sale
$
59,168
$
-
$
-
$
59,885
$
-
$
59,885
Loans held-in-portfolio
28,545,191
-
-
27,489,583
-
27,489,583
Mortgage servicing rights
121,570
-
-
121,570
-
121,570
Derivatives
26,093
-
26,093
-
-
26,093
December 31, 2021
Carrying
Measured
(In thousands)
amount
Level 1
Level 2
Level 3
at NAV
Fair value
Financial Liabilities:
Deposits:
Demand deposits
$
60,292,939
$
-
$
60,292,939
$
-
$
-
$
60,292,939
Time deposits
6,712,149
-
6,647,301
-
-
6,647,301
Total deposits
$
67,005,088
$
-
$
66,940,240
$
-
$
-
$
66,940,240
Assets sold under agreements to repurchase
$
91,603
$
-
$
91,602
$
-
$
-
$
91,602
Other short-term borrowings
[2]
$
75,000
$
-
$
75,000
$
-
$
-
$
75,000
Notes payable:
FHLB advances
$
492,429
$
-
$
496,091
$
-
$
-
$
496,091
Unsecured senior debt securities
297,842
-
319,296
-
-
319,296
Junior subordinated deferrable interest debentures
(related to trust preferred securities)
198,292
-
201,879
-
-
201,879
Total notes payable
$
988,563
$
-
$
1,017,266
$
-
$
-
$
1,017,266
Derivatives
$
22,878
$
-
$
22,878
$
-
$
-
$
22,878
Contingent consideration
$
9,241
$
-
$
-
$
9,241
$
-
$
9,241
[1]
Refer to Note 28 to the Consolidated Financial Statements
 
for the fair value by class of financial asset and its hierarchy
 
level.
[2]
Refer to Note 17 to the Consolidated Financial Statements
 
for the composition of other short-term borrowings.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
181
December 31, 2020
Carrying
(In thousands)
amount
Level 1
Level 2
Level 3
Fair value
Financial Assets:
Cash and due from banks
$
491,065
$
491,065
$
-
$
-
$
491,065
Money market investments
11,640,880
11,634,851
6,029
-
11,640,880
Trading account debt securities, excluding
 
derivatives
[1]
36,674
11,506
24,509
659
36,674
Debt securities available-for-sale
[1]
21,561,152
3,499,781
18,060,357
1,014
21,561,152
Debt securities held-to-maturity:
Obligations of Puerto Rico, States and political subdivisions
$
70,768
$
-
$
-
$
83,298
$
83,298
Collateralized mortgage
 
obligation-federal agency
31
-
-
32
32
Securities in wholly owned statutory business trusts
11,561
-
11,561
-
11,561
Total debt securities
 
held-to-maturity
$
82,360
$
-
$
11,561
$
83,330
$
94,891
Equity securities:
FHLB stock
$
49,799
$
-
$
49,799
$
-
$
49,799
FRB stock
93,045
-
93,045
-
93,045
Other investments
30,893
-
29,590
1,495
31,085
Total equity securities
$
173,737
$
-
$
172,434
$
1,495
$
173,929
Loans held-for-sale
$
99,455
$
-
$
-
$
102,189
$
102,189
Loans held-in-portfolio
28,488,946
-
-
27,098,297
27,098,297
Mortgage servicing rights
118,395
-
-
118,395
118,395
Derivatives
20,785
-
20,785
-
20,785
December 31, 2020
Carrying
(In thousands)
amount
Level 1
Level 2
Level 3
Fair value
Financial Liabilities:
Deposits:
Demand deposits
$
49,558,492
$
-
$
49,558,492
$
-
$
49,558,492
Time deposits
7,307,848
-
7,319,963
-
7,319,963
Total deposits
$
56,866,340
$
-
$
56,878,455
$
-
$
56,878,455
Assets sold under agreements to repurchase
$
121,303
$
-
$
121,257
$
-
$
121,257
Notes payable:
FHLB advances
$
542,469
$
-
$
561,977
$
-
$
561,977
Unsecured senior debt securities
296,574
-
321,078
-
321,078
Junior subordinated deferrable interest debentures (related to
trust preferred securities)
384,929
-
395,078
-
395,078
FRB advances
1,009
-
1,009
-
1,009
Total notes payable
$
1,224,981
$
-
$
1,279,142
$
-
$
1,279,142
Derivatives
$
18,925
$
-
$
18,925
$
-
$
18,925
[1]
Refer to Note 28 to the Consolidated Financial Statements
 
for the fair value by class of financial asset and its hierarchy
 
level.
 
The notional amount of commitments to extend credit at December 31, 2021
 
and December 31, 2020 is $ 9.5 billion and $9.3 billion,
respectively,
 
and represents the
 
unused portion of
 
credit facilities
 
granted to customers.
 
The notional amount
 
of letters of
 
credit at
December 31,
 
2021 and
 
December 31,
 
2020 is
 
$ 31
 
million and
 
$ 24
 
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.
 
 
 
 
 
 
 
182
Note 30 – Employee benefits
Certain employees of BPPR are covered by three
 
non-contributory defined benefit pension plans,
 
the Banco Popular de Puerto Rico
Retirement Plan and two Restoration Plans (the
 
“Pension Plans”).
 
Pension benefits are based on age, years of
 
credited service,
and final average compensation.
The Pension
 
Plans are
 
currently closed to
 
new hires
 
and the
 
accrual of
 
benefits are
 
frozen to
 
all participants. The
 
Pension Plans’
benefit formula
 
is based
 
on a
 
percentage of
 
average final
 
compensation and
 
years of
 
service as
 
of the
 
plan freeze
 
date. Normal
retirement age under
 
the retirement plan
 
is age 65
 
with 5 years
 
of service. Pension
 
costs are funded
 
in accordance with
 
minimum
funding standards
 
under the
 
Employee Retirement
 
Income Security
 
Act of
 
1974 (“ERISA”).
 
Benefits under
 
the Pension
 
Plans are
subject to
 
the U.S.
 
and Puerto
 
Rico Internal Revenue
 
Code limits
 
on compensation
 
and benefits.
 
Benefits under restoration
 
plans
restore benefits
 
to selected
 
employees that are
 
limited under
 
the Banco
 
Popular de
 
Puerto Rico
 
Retirement Plan
 
due to
 
U.S. and
Puerto Rico
 
Internal Revenue
 
Code limits
 
and a
 
compensation definition
 
that excludes
 
amounts deferred pursuant
 
to nonqualified
arrangements.
 
In
 
addition
 
to
 
providing
 
pension
 
benefits,
 
BPPR
 
provides
 
certain
 
health
 
care
 
benefits
 
for
 
certain
 
retired
 
employees
 
(the
 
“OPEB
Plan”).
 
Regular employees
 
of BPPR,
 
hired before
 
February 1,
 
2000, may
 
become eligible
 
for health
 
care benefits,
 
provided they
reach retirement age while working for BPPR.
The Corporation’s funding policy is to make annual contributions to the plans, when necessary, in amounts which fully provide for all
benefits as they become due under the plans.
 
The Corporation’s pension fund investment strategy
 
is to invest in a
 
prudent manner for the exclusive
 
purpose of providing benefits
to participants. A well defined internal structure has
 
been established to develop and implement
 
a risk-controlled investment strategy
that is targeted to
 
produce a total return that,
 
when combined with BPPR contributions to
 
the fund, will maintain the
 
fund’s ability to
meet all
 
required benefit obligations.
 
Risk is controlled
 
through diversification of
 
asset types, such
 
as investments in
 
domestic and
international equities and fixed income.
Equity investments include various types of stock and index funds. Also, this category
 
includes Popular, Inc.’s common stock. Fixed
income
 
investments include
 
U.S. Government
 
securities
 
and
 
other U.S.
 
agencies’ obligations,
 
corporate
 
bonds, mortgage
 
loans,
mortgage-backed securities
 
and index
 
funds, among
 
others. A
 
designated committee
 
periodically reviews
 
the performance
 
of the
pension
 
plans’
 
investments
 
and
 
assets
 
allocation.
 
The
 
Trustee
 
and
 
the
 
money
 
managers
 
are
 
allowed
 
to
 
exercise
 
investment
discretion, subject
 
to limitations
 
established by
 
the pension
 
plans’ investment
 
policies. The
 
plans forbid
 
money managers
 
to enter
into derivative transactions, unless approved by the
 
Trustee.
 
The
 
overall
 
expected
 
long-term
 
rate-of-return-on-assets assumption
 
reflects
 
the
 
average rate
 
of
 
earnings
 
expected
 
on
 
the funds
invested or
 
to
 
be invested
 
to provide
 
for the
 
benefits included
 
in the
 
benefit obligation.
 
The assumption
 
has been
 
determined by
reflecting
 
expectations
 
regarding
 
future
 
rates
 
of
 
return
 
for
 
the
 
plan
 
assets,
 
with
 
consideration
 
given
 
to
 
the
 
distribution
 
of
 
the
investments by asset
 
class and
 
historical rates of
 
return for each
 
individual asset class.
 
This process is
 
reevaluated at least
 
on an
annual basis and if market, actuarial and economic
 
conditions change, adjustments to the rate of return
 
may come into place.
The
 
Pension
 
Plans
 
weighted
 
average
 
asset
 
allocation
 
as
 
of
 
December
 
31,
 
2021
 
and
 
2020
 
and
 
the
 
approved
 
asset
 
allocation
ranges, by asset category, are summarized in the table below.
Minimum allotment
Maximum allotment
2021
2020
Equity
0
%
70
%
30
%
38
%
Debt securities
0
%
100
%
67
%
60
%
Popular related securities
0
%
5
%
2
%
1
%
Cash and cash equivalents
0
%
100
%
1
%
1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
183
The following table sets
 
forth by level, within
 
the fair value hierarchy,
 
the Pension Plans’ assets at
 
fair value at December
 
31, 2021
and 2020. Investments
 
measured at net
 
asset value per share
 
(“NAV”) as
 
a practical expedient have
 
not been classified
 
in the fair
value hierarchy,
 
but are presented in order to
 
permit reconciliation of the plans’ assets.
 
During the year ended December 31, 2021
investments in certain government
 
obligations classified as Level
 
2 were substituted by
 
proprietary funds of a
 
money manager that
invest in government obligations that are measured
 
at NAV.
2021
2020
(In thousands)
Level 1
Level 2
Level 3
Measured
at NAV
Total
Level 1
Level 2
Level 3
Measured
at NAV
Total
Obligations of the U.S.
Government, its agencies,
states and political
subdivisions
$
-
$
9,259
$
-
$
188,377
$
197,636
$
-
$
187,065
$
-
$
7,377
$
194,442
Corporate bonds and
debentures
-
375,875
-
8,485
384,360
-
326,344
-
8,180
334,524
Equity securities - Common
Stocks
41,414
-
-
-
41,414
101,081
-
-
-
101,081
Equity securities - ETF's
111,365
25,446
-
-
136,811
94,009
38,229
-
-
132,238
Foreign commingled trust
funds
-
-
-
82,912
82,912
-
-
-
98,431
98,431
Mutual fund
-
5,262
-
-
5,262
-
4,526
-
-
4,526
Private equity investments
-
-
56
-
56
-
-
70
-
70
Cash and cash equivalents
7,523
-
-
-
7,523
9,626
-
-
-
9,626
Accrued investment income
-
-
4,510
-
4,510
-
-
3,847
-
3,847
Total assets
 
$
160,302
$
415,842
$
4,566
$
279,774
$
860,484
$
204,716
$
556,164
$
3,917
$
113,988
$
878,785
184
The closing prices reported in the active markets
 
in which the securities are traded are used
 
to value the investments.
 
Following is a description of the valuation methodologies
 
used for investments measured at fair value:
 
Obligations
 
of
 
U.S.
 
Government,
 
its
 
agencies,
 
states
 
and
 
political
 
subdivisions
 
-
 
The
 
fair
 
value
 
of
 
Obligations
 
of
 
U.S.
Government and its agencies obligations are based on
 
an active exchange market and on quoted market prices
 
for similar
securities. U.S.
 
agency structured
 
notes
 
are
 
priced based
 
on
 
a bond’s
 
theoretical value
 
from similar
 
bonds
 
defined by
credit quality
 
and market sector
 
and for
 
which the
 
fair value
 
incorporates an
 
option adjusted spread
 
in deriving
 
their fair
value.
 
The fair value
 
of municipal bonds
 
are based on
 
trade data on
 
these instruments reported on
 
Municipal Securities
Rulemaking Board (“MSRB”)
 
transaction reporting system
 
or comparable bonds
 
from the same
 
issuer and credit
 
quality.
 
These securities are classified as Level 2, except for
 
the governmental index funds that are measured
 
at NAV.
 
Corporate bonds and debentures -
 
Corporate bonds and debentures are
 
valued at fair value at
 
the closing price reported
in the active market in
 
which the bond is traded. These
 
securities are classified as Level
 
2, except for the
c
orporate bond
funds that are measured at NAV.
 
Equity securities – common stocks - Equity securities with quoted market prices obtained from an active exchange market
and high liquidity are classified as Level 1.
 
Equity securities – ETF’s
 
– Exchange Traded Funds
 
shares with quoted market prices
 
obtained from an active exchange
market. Highly liquid ETF’s are classified as Level 1 while
 
less liquid ETF’s are classified as Level 2.
 
 
Foreign commingled trust fund- Collective investment
 
funds are valued at the NAV of shares held by the plan at year end.
 
 
Mutual funds – Mutual funds are valued at
 
the NAV of
 
shares held by the plan at year
 
end. Mutual funds are classified as
Level 2.
 
Mortgage-backed securities
 
The fair
 
value is
 
based on
 
trade data
 
from brokers
 
and exchange
 
platforms where
 
these
instruments regularly trade.
 
Certain agency mortgage
 
and other asset
 
backed securities (“MBS”)
 
are priced
 
based on a
bond’s theoretical
 
value from
 
similar bonds
 
defined by
 
credit quality
 
and market
 
sector.
 
Their fair
 
value incorporates
 
an
option adjusted spread and prepayment projections.
 
The agency MBS are classified as Level 2.
 
Private equity
 
investments - Private
 
equity investments include
 
an investment in
 
a private
 
equity fund. The
 
fund value is
recorded at its net realizable value which is affected by the changes in the fair market value of the investments held in the
fund. This fund is classified as Level 3.
 
Cash and cash equivalents - The carrying amount of
 
cash and cash equivalents is a reasonable estimate of the
 
fair value
since it is available on demand or due
 
to their short-term maturity. Cash and cash equivalents are classified as Level
 
1.
 
Accrued investment income – Given the
 
short-term nature of these assets, their carrying
 
amount approximates fair value.
Since there is a lack of observable inputs
 
related to instrument specific attributes,
 
these are reported as Level 3.
The preceding valuation methods may produce a fair value calculation that may not be indicative of net realizable value or
 
reflective
of future fair values. Furthermore, although the plan believes its valuation methods are appropriate and consistent with other market
participants, the
 
use
 
of
 
different
 
methodologies
 
or
 
assumptions to
 
determine
 
the
 
fair value
 
of
 
certain financial
 
instruments could
result in a different fair value measurement at the reporting
 
date.
The following table presents the change in Level
 
3 assets measured at fair value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
185
(In thousands)
2021
2020
Balance at beginning of year
$
3,917
$
4,670
Purchases, sales, issuance and settlements (net)
649
(753)
Balance at end of year
$
4,566
$
3,917
There were
 
no transfers
 
in and/or
 
out of
 
Level 3
 
for financial
 
instruments measured
 
at fair
 
value on
 
a recurring
 
basis during
 
the
years ended
 
December 31,
 
2021 and
 
2020. There
 
were no
 
transfers in
 
and/or out
 
of Level
 
1 and
 
Level 2
 
during the
 
years ended
December 31, 2021 and 2020.
Information on the shares of common stock held by
 
the pension plans is provided in the table that
 
follows.
(In thousands, except number of shares information)
2021
2020
Shares of Popular, Inc. common stock
167,182
162,936
Fair value of shares of Popular, Inc. common
 
stock
$
13,716
$
9,177
Dividends paid on shares of Popular,
 
Inc. common stock held by the plan
$
280
$
238
The following table presents the components of net
 
periodic benefit cost for the years ended
 
December 31, 2021, 2020 and 2019.
Pension Plans
OPEB Plan
(In thousands)
2021
2020
2019
2021
2020
2019
Personnel costs:
Service cost
$
-
$
-
$
-
$
642
$
713
$
759
Other operating expenses:
Interest cost
15,993
23,389
28,439
3,573
4,913
5,955
Expected return on plan assets
(38,679)
(38,104)
(32,388)
-
-
-
Recognized net actuarial loss
18,876
20,880
23,508
1,873
567
-
Net periodic benefit cost
$
(3,810)
$
6,165
$
19,559
$
6,088
$
6,193
$
6,714
Total benefit cost
 
$
(3,810)
$
6,165
$
19,559
$
6,088
$
6,193
$
6,714
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
186
The following table sets forth the aggregate status of the plans and the amounts recognized in the consolidated financial statements
at December 31, 2021 and 2020.
Pension Plans
OPEB Plan
(In thousands)
2021
2020
2021
2020
Change in benefit obligation:
Benefit obligation at beginning of year
$
914,353
$
852,551
$
179,210
$
168,681
Service cost
 
-
-
642
713
Interest cost
 
15,993
23,389
3,573
4,913
Actuarial (gain)/loss
[1]
(34,297)
83,277
(17,286)
11,247
Benefits paid
(44,578)
(44,864)
(6,181)
(6,344)
Benefit obligation at end of year
$
851,471
$
914,353
$
159,958
$
179,210
Change in fair value of plan assets:
Fair value of plan assets at beginning of year
$
878,785
$
799,935
$
-
$
-
Actual return on plan assets
26,049
123,484
-
-
Employer contributions
228
230
6,181
6,344
Benefits paid
(44,578)
(44,864)
(6,181)
(6,344)
Fair value of plan assets at end of year
$
860,484
$
878,785
$
-
$
-
Funded status of the plan:
Benefit obligation at end of year
$
(851,471)
$
(914,353)
$
(159,958)
$
(179,210)
Fair value of plan assets at end of year
860,484
878,785
-
-
Funded status at year end
$
9,013
$
(35,568)
$
(159,958)
$
(179,210)
Amounts recognized in accumulated other comprehensive
 
loss:
Net loss
225,356
265,899
12,993
32,152
Accumulated other comprehensive loss (AOCL)
$
225,356
$
265,899
$
12,993
$
32,152
Reconciliation of net (liabilities) assets:
Net liabilities at beginning of year
$
(35,568)
$
(52,616)
$
(179,210)
$
(168,681)
Amount recognized in AOCL at beginning of year,
 
pre-tax
265,899
288,882
32,152
21,472
Amount prepaid at beginning of year
230,331
236,266
(147,058)
(147,209)
Net periodic benefit
 
cost
3,810
(6,165)
(6,088)
(6,193)
Contributions
228
230
6,181
6,344
Amount prepaid at end of year
234,369
230,331
(146,965)
(147,058)
Amount recognized in AOCL
(225,356)
(265,899)
(12,993)
(32,152)
Net asset/(liabilities) at end of year
$
9,013
$
(35,568)
$
(159,958)
$
(179,210)
[1]
For 2021, significant components of the Pension Plans
 
actuarial gain that changed the benefit obligation were
 
mainly related to an increase in the
single weighted-average discount rates partially offset
 
by a lower return on the fair value of plan assets. For OPEB
 
Plans significant components of
the actuarial gain that change the benefit obligation were
 
mainly related to an increase in discount rates and
 
the per capita claim assumption at year-
end which was lower than expected.
 
The per capita claim methodology for the fully insured Medicare
 
Advantage plans changed from age-based per
capita cost to cost that
 
do not vary by age.
 
For 2020, significant components of the Pension Plans
 
actuarial loss that changed the benefit obligation
were mainly related to a decrease in discount rates partially
 
offset by a greater return on the fair value of plan
 
assets. For OPEB Plans significant
components of the actuarial loss that change the benefit
 
obligation were mainly related to a decrease in discount
 
rates partially offset by the per
capita claim assumption at year-end which was lower than
 
expected and the healthcare trend rate assumption which
 
was updated at year-end.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
187
The following table presents the change in accumulated other
 
comprehensive loss (“AOCL”), pre-tax, for the years ended December
31, 2021 and 2020.
(In thousands)
Pension Plans
OPEB Plan
2021
2020
2021
2020
Accumulated other comprehensive loss at beginning of year
$
265,899
$
288,882
$
32,152
$
21,472
Increase (decrease) in AOCL:
Recognized during the year:
Amortization of actuarial losses
(18,876)
(20,880)
(1,873)
(567)
Occurring during the year:
Net actuarial (gains)/losses
(21,667)
(2,103)
(17,286)
11,247
Total (decrease) increase
 
in AOCL
(40,543)
(22,983)
(19,159)
10,680
Accumulated other comprehensive loss at end of year
$
225,356
$
265,899
$
12,993
$
32,152
The Corporation estimates
 
the service
 
and interest cost
 
components utilizing a
 
full yield curve
 
approach in the
 
estimation of these
components
 
by
 
applying the
 
specific spot
 
rates
 
along
 
the yield
 
curve
 
used in
 
the
 
determination of
 
the
 
benefit obligation
 
to
 
their
underlying projected cash flows.
 
To
 
determine
 
benefit
 
obligation
 
at
 
year
 
end,
 
the
 
Corporation
 
used
 
a
 
weighted
 
average
 
of
 
annual
 
spot
 
rates
 
applied
 
to
 
future
expected cash flows for years ended December 31, 2021
 
and 2020.
The following
 
table presents
 
the discount
 
rate and
 
assumed health
 
care cost
 
trend rates
 
used to
 
determine the
 
benefit obligation
and net periodic benefit cost for the plans:
Pension Plans
OPEB Plan
Weighted average assumptions used to
determine net periodic benefit cost for the
years ended December 31:
2021
2020
2019
2021
2020
2019
Discount rate for benefit obligation
2.41 - 2.48
%
3.22 - 3.27
%
4.20 - 4.23
%
2.65
%
3.38
%
4.30
%
Discount rate for service cost
N/A
N/A
N/A
3.09
%
3.72
%
4.49
%
Discount rate for interest cost
1.76 - 1.80
%
2.81 - 2.83
%
3.87 - 3.90
%
2.03
%
2.98
%
3.99
%
Expected return on plan assets
4.60 - 5.50
%
5.00 - 5.80
%
5.30 - 6.00
%
N/A
N/A
N/A
Initial health care cost trend rate
N/A
N/A
N/A
5.00
%
5.00
%
5.00
%
Ultimate health care cost trend rate
N/A
N/A
N/A
4.50
%
5.00
%
5.00
%
Year that the ultimate trend
 
rate is reached
N/A
N/A
N/A
2023
2020
2019
Pension Plans
OPEB Plan
Weighted average assumptions used to determine
 
benefit obligation at
December 31:
2021
2020
2021
2020
Discount rate for benefit obligation
2.79-2.83
%
2.41-2.48
%
2.94
%
2.65
%
Initial health care cost trend rate
N/A
N/A
4.75
%
5.00
%
Ultimate health care cost trend rate
N/A
N/A
4.50
%
4.50
%
Year that the ultimate trend
 
rate is reached
N/A
N/A
2023
2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
188
The following table presents information for plans with a projected benefit obligation and accumulated benefit obligation in excess of
plan assets for the years ended December 31,
 
2021 and 2020.
Pension Plans
OPEB Plan
(In thousands)
2021
2020
2021
2020
Projected benefit obligation
$
851,471
$
914,353
$
159,958
$
179,210
Accumulated benefit obligation
 
851,471
914,353
159,958
179,210
Fair value of plan assets
 
860,484
878,785
-
-
The Corporation expects to pay the following contributions
 
to the plans during the year ended December
 
31, 2022.
(In thousands)
2022
Pension Plans
$
227
OPEB Plan
$
5,971
Benefit payments projected to be made from the
 
plans during the next ten years are presented
 
in the table below.
 
(In thousands)
Pension Plans
OPEB Plan
2022
$
48,339
$
5,971
2023
45,409
6,117
2024
45,598
6,293
2025
45,742
6,458
2026
45,824
6,667
2027 - 2031
226,642
35,807
 
 
 
 
 
 
 
 
 
 
 
 
 
189
The table below presents a breakdown of the
 
plans’ assets and liabilities at December
 
31, 2021 and 2020.
Pension Plans
OPEB Plan
(In thousands)
2021
2020
2021
2020
Non-current assets
$
17,792
$
-
$
-
$
-
Current liabilities
 
227
229
5,959
6,328
Non-current liabilities
8,552
35,339
153,999
172,882
Savings plans
The
 
Corporation
 
also
 
provides
 
defined
 
contribution
 
savings
 
plans
 
pursuant
 
to
 
Section
 
1081.01(d)
 
of
 
the
 
Puerto
 
Rico
 
Internal
Revenue
 
Code
 
and
 
Section
 
401(k)
 
of
 
the
 
U.S.
 
Internal
 
Revenue Code,
 
as
 
applicable, for
 
substantially
 
all
 
the
 
employees
 
of
 
the
Corporation. Investments
 
in the
 
plans are
 
participant-directed, and employer
 
matching contributions
 
are determined
 
based on
 
the
specific provisions
 
of each
 
plan. Employees
 
are fully
 
vested in
 
the employer’s
 
contribution after
 
five years
 
of service.
 
The cost
 
of
providing these benefits in the year ended
 
December 31, 2021 was $13.3 million (2020 - $14.0
 
million, 2019 - $15.1 million).
 
The plans held 1,279,982 (2020 – 1,362,593)
 
shares of common stock of the Corporation with a market
 
value of approximately $105
million at December 31, 2021 (2020 - $77 million).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
190
Note 31 – Net income per common share
The
 
following table
 
sets
 
forth the
 
computation of
 
net
 
income per
 
common share
 
(“EPS”), basic
 
and diluted,
 
for the
 
years
 
ended
December 31, 2021, 2020 and 2019:
(In thousands, except per share information)
2021
2020
2019
Net income
$
934,889
$
506,622
$
671,135
Preferred stock dividends
(1,412)
(1,758)
(3,723)
Net income applicable to common stock
$
933,477
$
504,864
$
667,412
Average common shares outstanding
81,263,027
85,882,371
96,848,835
Average potential dilutive common shares
 
157,127
92,888
148,965
Average common shares outstanding - assuming dilution
81,420,154
85,975,259
96,997,800
Basic EPS
$
11.49
$
5.88
$
6.89
Diluted EPS
$
11.46
$
5.87
$
6.88
As
 
disclosed
 
in
 
Note
 
20,
 
as
 
of
 
September
 
30,
 
2021,
 
the
 
Corporation completed
 
its
 
$350
 
million
 
accelerated
 
share
 
repurchase
transaction (“ASR”) and, in connection therewith, received
 
an initial delivery of 3,785,831 shares of common stock during
 
the second
quarter
 
of
 
2021
 
and
 
828,965
 
additional
 
shares
 
of
 
common
 
stock
 
during
 
the
 
third
 
quarter
 
of
 
2021.
 
The
 
final
 
number
 
of
 
shares
delivered was based in the average daily volume
 
weighted average price (“VWAP”) of its common stock,
 
net of discount, during the
term of the ASR, which amounted to $75.84.
 
Potential common shares consist of shares of common stock issuable under the assumed exercise of stock options, restricted stock
and
 
performance
 
share
 
awards
 
using
 
the
 
treasury
 
stock
 
method.
 
This
 
method
 
assumes
 
that
 
the
 
potential
 
common
 
shares
 
are
issued and
 
the proceeds
 
from exercise,
 
in addition
 
to the
 
amount of
 
compensation cost
 
attributed to
 
future services,
 
are used
 
to
purchase shares of common stock at the exercise date. The difference between the number of potential common shares issued and
the shares
 
of common
 
stock
 
purchased is
 
added as
 
incremental shares
 
to
 
the actual
 
number of
 
shares outstanding
 
to
 
compute
diluted
 
earnings
 
per
 
share.
 
Warrants,
 
stock
 
options,
 
restricted
 
stock
 
and
 
performance share
 
awards,
 
if
 
any,
 
that
 
result
 
in
 
lower
potential common shares
 
issued than shares
 
of common stock
 
purchased under the treasury
 
stock method are
 
not included in
 
the
computation of dilutive earnings per share
 
since their inclusion would have an antidilutive effect in earnings
 
per common share.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
191
Note 32 – Revenue from contracts with customers
The following table presents
 
the Corporation’s revenue streams
 
from contracts with customers
 
by reportable segment for the
 
years
ended December 31, 2021, 2020 and 2019.
Years ended December
 
31,
(In thousands)
2021
2020
2019
BPPR
Popular U.S.
BPPR
Popular U.S.
BPPR
Popular U.S.
Service charges on deposit accounts
$
151,453
$
11,245
$
136,703
$
11,120
$
146,384
$
14,549
Other service fees:
Debit card fees
47,681
956
38,685
967
46,066
1,076
Insurance fees, excluding reinsurance
40,929
3,798
35,799
2,484
42,995
3,803
Credit card fees, excluding late fees and membership
 
fees
117,418
1,052
88,091
831
86,884
866
Sale and administration of investment products
23,634
-
21,755
-
23,072
-
Trust fees
24,855
-
21,700
-
21,198
-
Total revenue from
 
contracts with customers
[1]
$
405,970
$
17,051
$
342,733
$
15,402
$
366,599
$
20,294
[1] The amounts include intersegment transactions of $4.1 million,
 
$4.3 million and $3.8 million, respectively,
 
for the years ended December 31, 2021,
2020 and 2019.
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
192
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
193
Note 33 – 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
 
32.0
years considers
 
options to
 
extend the
 
leases for
 
up to
 
20.0 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 14
and Note 19, 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.
On October
 
27, 2020, PB,
 
the United
 
States mainland banking
 
subsidiary of the
 
Corporation, authorized and
 
approved a strategic
realignment of
 
its New
 
York
 
Metro branch
 
network that
 
resulted in
 
eleven branch
 
closures, of
 
which nine
 
were leased
 
properties.
The
 
branch
 
closures
 
were completed
 
on
 
January
 
29,
 
2021.
 
An
 
impairment loss
 
of
 
ROU
 
assets
 
amounting to
 
$15.9
 
million
 
was
recognized in connection with this transaction during
 
the fourth quarter of 2020.
The following table presents the undiscounted
 
cash flows of operating and finance leases for
 
each of the following periods:
December 31, 2021
(In thousands)
2022
2023
2024
2025
2026
Later
Years
Total Lease
Payments
Less:
Imputed
Interest
Total
Operating Leases
$
30,044
$
27,956
$
26,550
$
23,619
$
15,187
$
50,912
$
174,268
$
(20,154)
$
154,114
Finance Leases
3,402
3,491
3,589
3,701
3,350
5,501
23,034
(3,315)
19,719
The following table presents the lease cost recognized
 
by the Corporation in the Consolidated
 
Statements of Operations as follows:
Years ended December
 
31,
(In thousands)
2021
2020
2019
Finance lease cost:
Amortization of ROU assets
$
2,006
$
2,215
$
1,701
Interest on lease liabilities
1,044
1,185
1,194
Operating lease cost
29,970
31,674
30,664
Short-term lease cost
647
214
252
Variable lease cost
93
51
97
Sublease income
(70)
(113)
(113)
Net gain recognized from sale and leaseback transaction
[1]
(7,007)
(5,550)
-
Impairment of operating ROU assets
[2]
-
14,805
-
Impairment of finance ROU assets
[2]
-
1,115
-
Total lease cost
[3]
$
26,683
$
45,596
$
33,795
[1]
During the quarter ended September 30, 2021, the Corporation
 
recognized the transfer of two corporate office
 
buildings as a sale. During the
quarter ended June 30, 2020, the Corporation recognized the
 
transfer of the Caparra Center as a sale. Since these
 
sale and partial leaseback
transactions were considered to be at fair value, no portion
 
of the gain on sale was deferred.
[2]
Impairment loss recognized during the fourth quarter of
 
2020 in connection with the closure of nine branches as
 
a result of the strategic
realignment of PB’s New York
 
Metro branch network.
[3]
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
194
The
 
following
 
table
 
presents
 
supplemental
 
cash
 
flow
 
information
 
and
 
other
 
related
 
information
 
related
 
to
 
operating
 
and
 
finance
leases.
Years ended December
 
31,
(Dollars in thousands)
2021
2020
2019
Cash paid for amounts included in the measurement of
 
lease liabilities:
Operating cash flows from operating leases
[1]
$
38,288
$
41,650
$
30,073
Operating cash flows from finance leases
1,044
1,185
1,200
Financing cash flows from finance leases
[1]
2,852
3,145
1,726
ROU assets obtained in exchange for new lease obligations:
Operating leases
[2]
$
24,136
$
14,975
$
28,430
Finance leases
-
4,510
661
Weighted-average remaining lease term:
Operating leases
7.9
years
8.0
years
8.7
years
Finance leases
8.3
years
8.9
years
7.3
years
Weighted-average discount rate:
Operating leases
2.7
%
3.0
%
3.4
%
Finance leases
5.0
%
5.0
%
5.9
%
[1]
During the quarter ended March 31, 2021, the Corporation made
 
base lease termination payments amounting to $7.8 million
 
in connection with
the closure of nine branches as a result of the strategic realignment
 
of PB’s New York
 
Metro branch network.
[2]
During the quarter ended September 30, 2021, the Corporation
 
recognized a lease liability of $16.8 million and
 
a corresponding ROU asset for
the same amount as a result of the partial leaseback of
 
two corporate office buildings.
As
 
of
 
December
 
31,
 
2021,
 
the
 
Corporation
 
has
 
an
 
additional
 
operating
 
lease
 
contract
 
that
 
has
 
not
 
yet
 
commenced
 
with
 
an
undiscounted contract amount of $2.3 million, which
 
will have a lease term of 20 years.
195
Note 34 - 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
 
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 for 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
 
is
determined based on a two-prong vesting
 
schedule. The first part is vested
 
ratably over five years commencing at the
 
date of grant
(the “graduated vesting portion”) and
 
the second part is vested
 
at termination of employment after attaining
 
55 years of age
 
and 10
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. The vesting
 
schedule for restricted
 
shares granted on
 
or after
 
2014 and prior
 
to
2021 was modified
 
as follows:
 
the graduated vesting
 
portion is vested
 
ratably over four
 
years commencing at
 
the date of
 
the grant
and the retirement vesting portion is
 
vested 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 graduated
 
vesting portion
 
is accelerated
 
at termination
 
of employment
after attaining
 
the earlier
 
of 55
 
years of
 
age and
 
10 years
 
of service
 
or 60
 
years of
 
age and
 
5 years
 
of service.
 
Restricted stock
granted
 
on
 
or
 
after
 
2021
 
will
 
vest
 
ratably
 
in
 
equal
 
annual
 
installments
 
over
 
a
 
period
 
of
 
4
 
years
 
or
 
3
 
years,
 
depending
 
in
 
the
classification of the employee.
 
The
 
performance
 
share
 
award
 
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 Earnings per Share (“EPS”) goals.
 
For grants issued
 
on 2020 and
 
2021, the EPS
 
goal is substituted by
 
the Absolute Return
 
on Average Assets
 
(“ROA”) goal and the
Absolute
 
Return on
 
Average
 
Tangible
 
Common Equity
 
(“ROATCE”)
 
respectively.
 
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
 
EPS,
 
ROA
 
and
 
ROATCE
 
metrics
 
are
 
considered
 
to
 
be
 
a
performance condition under ASC 718.
 
The fair value is determined based on the probability of achieving the EPS,
 
ROA goal as of
each reporting period.
 
The TSR and EPS, ROA or 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 (EPS, ROA and
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
196
 
(Not in thousands)
Shares
Weighted-average
grant date fair value
Non-vested at January 1, 2019
382,186
$
36.41
Granted
218,169
55.55
Performance Shares Quantity Adjustment
15,061
55.72
Vested
 
(270,051)
44.73
Non-vested at December 31, 2019
345,365
$
41.68
Granted
253,943
42.49
Performance Shares Quantity Adjustment
(7)
48.79
Vested
 
(234,421)
42.64
Forfeited
(6,368)
44.26
Non-vested at December 31, 2020
358,512
$
41.23
Granted
191,479
69.38
Performance Shares Quantity Adjustment
54,306
54.21
Vested
 
(273,974)
55.11
Forfeited
(8,440)
43.48
Non-vested at December 31, 2021
321,883
$
47.98
During
 
the
 
year
 
ended
 
December
 
31,
 
2021,
 
120,105
 
shares
 
of
 
restricted
 
stock
 
(2020
 
-
 
213,511
;
 
2
019
 
-
 
152,773)
 
and
 
71,374
performance shares (2020 - 40,432;
 
2019 - 65,396)
 
were awarded to management under the
 
Incentive Plan.
During
 
the
 
year
 
ended
 
December
 
31,
 
2021,
 
the
 
Corporation
 
recognized
 
$8.6
 
million
 
of
 
restricted
 
stock
 
expense
 
related
 
to
management incentive awards,
 
with a tax
 
benefit of $1.6
 
million (2020 -
 
$7.6 million, with
 
a tax benefit
 
of $1.3 million;
 
2019 - $7.7
million, with
 
a tax
 
benefit of
 
$1.2 million).
 
During the
 
year ended
 
December 31,
 
2021, the
 
fair market
 
value of
 
the restricted
 
stock
vested was $11.6 million
 
at grant date and $18.6 million at vesting date. This
 
triggers a windfall of $2.5 million that was recorded as
a
 
reduction
 
on
 
income
 
tax
 
expense.
 
During
 
the
 
year
 
ended
 
December
 
31,
 
2021
 
the
 
Corporation
 
recognized
 
$5.8
 
million
 
of
performance shares
 
expense, with
 
a tax
 
benefit of
 
$0.5 million
 
(2020 -
 
$2.3 million,
 
with a
 
tax benefit
 
of $0.2
 
million; 2019
 
- $4.6
million, with a
 
tax benefit of
 
$0.3 million).
 
The total unrecognized compensation cost
 
related to non-vested restricted
 
stock awards
to members
 
of management
 
at December
 
31, 2021
 
was $8.9
 
million and
 
is expected
 
to
 
be recognized
 
over a
 
weighted-average
period of 2.1 years.
The following table summarizes the restricted stock
 
activity under the Incentive Plan for members of
 
the Board of Directors:
 
(Not in thousands)
Restricted stock
Weighted-average
 
grant date fair value
RSU
Weighted-average
 
grant date fair value
Non-vested at January 1, 2019
-
-
-
-
Granted
1,052
$
49.25
27,449
$
57.64
Vested
 
(1,052)
49.25
(27,449)
57.64
Forfeited
-
-
-
-
Non-vested at December 31, 2019
-
-
-
-
Granted
-
$
-
43,866
$
35.47
Vested
 
-
-
(43,866)
35.47
Forfeited
-
-
-
-
Non-vested at December 31, 2020
-
-
-
-
Granted
-
$
-
20,638
$
78.20
Vested
 
-
-
(20,638)
78.20
Forfeited
-
-
-
-
Non-vested at December 31, 2021
-
-
-
-
197
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
restricted
 
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
 
RSU award
 
until
 
their
 
retirement. To
 
the
 
extent that
 
cash
 
dividends are
 
paid
 
on
 
the
 
Corporation’s
outstanding common stock, the Directors holding RSUs will receive an
 
additional number of RSUs that reflect a
 
reinvested dividend
equivalent.
 
For 2019, Directors
 
elected shares of
 
restricted stock and
 
RSUs and for
 
2020 and 2021,
 
all Directors elected
 
RSUs.
 
For the year
ended December 31, 2021, 20,638 RSUs were granted to the Directors (2020 - 43,866; 2019 -
 
1,052; shares of restricted stock and
27,449
 
RSUs).
 
For
 
the
 
year
 
ended
 
December
 
31,
 
2021,
 
$1.9
 
million
 
of
 
restricted
 
stock
 
expense
 
related
 
to
 
these
 
RSUs
 
was
recognized, with a
 
tax benefit
 
of $0.4
 
million (2020
 
- $1.6 million
 
with a
 
tax benefit of
 
$0.3 million; 2019
 
- $52
 
thousand with a
 
tax
benefit of $6
 
thousand for shares
 
of restricted stock
 
and $1.6 million
 
with a tax
 
benefit of $0.2
 
million for RSUs).
 
The fair value
 
at
vesting date of the RSUs vested during the
 
year ended December 31, 2021 for the Directors was
 
$1.6 million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
198
Note 35 – Income taxes
 
The components of income tax expense for the years
 
ended December 31, are summarized in the
 
following table.
 
(In thousands)
2021
2020
2019
Current income tax (benefit) expense:
Puerto Rico
$
69,415
$
33,281
$
2,251
Federal and States
10,232
3,613
3,598
 
Subtotal
79,647
36,894
5,849
Deferred income tax expense (benefit):
Puerto Rico
179,688
69,300
123,337
Federal and States
49,683
5,744
17,995
 
Subtotal
229,371
75,044
141,332
Total income tax
 
expense
$
309,018
$
111,938
$
147,181
The reasons
 
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:
2021
2020
2019
(In thousands)
Amount
% of pre-tax
income
Amount
% of pre-tax
income
Amount
% of pre-tax
income
Computed income tax at statutory rates
 
$
466,465
38
%
$
231,960
38
%
$
306,869
38
%
Benefit of net tax exempt interest income
(139,426)
(12)
(126,232)
(20)
(145,597)
(18)
Effect of income subject to preferential tax rate
(11,981)
(1)
(10,141)
(2)
(9,562)
(1)
Deferred tax asset valuation allowance
20,932
2
15,276
2
16,992
2
Difference in tax rates due to multiple jurisdictions
(30,719)
(3)
(1,903)
-
(12,888)
(2)
Adjustment in net deferred tax due to change in the
applicable tax rate
-
-
-
-
(6,559)
(1)
Unrecognized tax benefits
(5,484)
-
(2,163)
-
-
-
State and local taxes
14,629
1
4,350
-
4,749
1
Others
(5,398)
-
791
-
(6,823)
(1)
Income tax expense
$
309,018
25
%
$
111,938
18
%
$
147,181
18
%
For the year ended December 31, 2021, the Corporation
 
recorded income tax expense of $309.0 million,
 
compared to $111.9 million
for
 
the
 
previous
 
year.
 
The
 
increase
 
in
 
income
 
tax
 
expense
 
was
 
mainly
 
due
 
to
 
higher
 
pre-tax
 
income
 
during
 
the
 
year
 
2021
 
as
compared
 
to
 
year
 
2020
 
resulting
 
primarily
 
from
 
a
 
lower
 
provision
 
for
 
credit
 
losses
 
partially
 
offset
 
by
 
higher
 
net
 
exempt
 
interest
income and higher income from the U.S. operations
 
subject to lower statutory tax rate.
The results for the year
 
2019 include an additional income tax
 
benefit of $26 million related to
 
the revision of the amount
 
of exempt
income earned in prior years,
 
that resulted in the amendment of
 
income tax returns for Banco Popular
 
de Puerto Rico for the
 
years
2015 to 2017 and certain adjustments pertaining
 
to tax periods for which the statute of limitations had
 
expired.
Deferred income taxes reflect the
 
net tax effects
 
of temporary differences between the
 
carrying amounts of assets and
 
liabilities for
financial reporting
 
purposes and
 
their tax
 
bases. Significant
 
components of
 
the Corporation’s
 
deferred tax
 
assets and
 
liabilities at
December 31 were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
199
December 31, 2021
 
(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
 
112,331
665,164
777,495
Postretirement and pension benefits
57,002
-
57,002
Deferred loan origination fees/cost
2,788
-
2,788
Allowance for credit losses
233,500
31,872
265,372
Deferred gains
1,642
-
1,642
Accelerated depreciation
5,246
7,422
12,668
FDIC-assisted transaction
152,665
-
152,665
Lease liability
31,211
23,894
55,105
Difference in outside basis from pass-through entities
54,781
-
54,781
Other temporary differences
38,512
8,418
46,930
Total gross deferred
 
tax assets
689,939
739,551
1,429,490
Deferred tax liabilities:
Indefinite-lived intangibles
76,635
51,150
127,785
Unrealized net gain (loss) on trading and available-for-sale securities
 
4,329
2,817
7,146
Right of use assets
29,025
20,282
49,307
Deferred loan origination fees/cost
-
3,567
3,567
Other temporary differences
43,856
1,530
45,386
 
Total gross deferred
 
tax liabilities
153,845
79,346
233,191
Valuation allowance
128,557
410,970
539,527
Net deferred tax asset
$
407,537
$
249,235
$
656,772
 
December 31, 2020
 
(In thousands)
PR
US
Total
Deferred tax assets:
Tax credits available
 
for carryforward
$
3,003
$
5,269
$
8,272
Net operating loss and other carryforward available
 
124,355
698,842
823,197
Postretirement and pension benefits
80,179
-
80,179
Deferred loan origination fees
12,079
(2,652)
9,427
Allowance for credit losses
373,010
38,606
411,616
Accelerated depreciation
3,439
5,390
8,829
FDIC-assisted transaction
152,665
-
152,665
Intercompany deferred gains
1,728
-
1,728
Lease liability
22,790
18,850
41,640
Difference in outside basis from pass-through entities
61,222
-
61,222
Other temporary differences
38,954
7,344
46,298
Total gross deferred
 
tax assets
873,424
771,649
1,645,073
Deferred tax liabilities:
Indefinite-lived intangibles
73,305
37,745
111,050
Unrealized net gain (loss) on trading and available-for-sale securities
 
67,003
8,595
75,598
Right of use assets
20,708
15,510
36,218
Other temporary differences
50,247
1,169
51,416
 
Total gross deferred
 
tax liabilities
211,263
63,019
274,282
Valuation allowance
112,871
407,225
520,096
Net deferred tax asset
$
549,290
$
301,405
$
850,695
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
200
The net deferred
 
tax asset shown
 
in the
 
table above at
 
December 31, 2021
 
is reflected in
 
the consolidated statements
 
of financial
condition as
 
$0.7 billion
 
in net
 
deferred tax
 
assets (in
 
the “other
 
assets” caption)
 
(2020 -
 
$0.9 billion
 
in deferred
 
tax asset
 
in the
“other
 
assets”
 
caption)
 
and
 
$825
 
thousand
 
in
 
deferred
 
tax
 
liabilities
 
(in
 
the
 
“other
 
liabilities”
 
caption)
 
(2020
 
-
 
$897
 
thousand
 
in
deferred
 
tax
 
liabilities
 
in
 
the
 
“other
 
liabilities”
 
caption),
 
reflecting the
 
aggregate
 
deferred
 
tax
 
assets or
 
liabilities
 
of
 
individual tax-
paying subsidiaries of the Corporation.
The deferred tax asset related to the NOLs outstanding
 
at December 31, 2021 expires as follows:
(In thousands)
2022
$
396
2023
1,363
2024
9,310
2025
13,516
2026
13,367
2027
15,202
2028
288,395
2029
119,297
2030
120,255
2031
117,210
2032
22,758
2033
10,749
2034
44,473
2035
1,079
2036
125
$
777,495
At December
 
31, 2021
 
the net
 
deferred tax
 
asset of
 
the U.S.
 
operations amounted
 
to $660
 
million with
 
a valuation
 
allowance of
approximately $411
 
million, for
 
a net
 
deferred tax
 
asset after
 
valuation allowance
 
of approximately
 
$249 million.
 
The Corporation
evaluates the
 
realization of
 
the deferred
 
tax asset
 
by taxing
 
jurisdiction. The
 
U.S. operation
 
is not
 
in a
 
cumulative three-year
 
loss
position
 
and
 
had
 
sustained
 
profitability
 
for
 
the
 
three-year
 
period
 
ended
 
December
 
31,
 
2021.
 
Years
 
2020
 
and
 
2021
 
have
 
been
impacted by the COVID-19 pandemic and other events. Year
 
2020 was unfavorably impacted by the ACL reserve build-ups and the
impairment
 
of
 
expenses
 
on
 
the
 
branch
 
closures
 
in
 
the
 
New
 
York
 
region.
 
Year
 
2021
 
has
 
been
 
favorably
 
impacted
 
by
 
a
 
strong
economic recovery that
 
resulted in ACL
 
reserve releases,
 
reversing the
 
year 2020
 
build-up.
 
The financial
 
results for year
 
2021 is
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 the uncertainty created by new variants of COVID-19. As of December
31,
 
2021,
 
after
 
weighting
 
all
 
positive
 
and
 
negative
 
evidence,
 
the
 
Corporation
 
concluded
 
that
 
it
 
is
 
more
 
likely
 
than
 
not
 
that
approximately $249
 
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
 
and the pre-tax earnings forecast
 
on a quarterly basis to
 
assess the
future realization of the deferred tax asset. Management
 
will closely monitor factors, including, net income versus forecast, targeted
loan growth, net interest
 
income margin, allowance for credit
 
losses, charge offs,
 
NPLs inflows and NPA
 
balances. Strong financial
results during year
 
2022 together with the
 
additional income expected from
 
the recent acquisition of
 
K2 assets, along
 
with new tax
initiatives
 
could
 
be
 
considered
 
additional
 
positive
 
evidence
 
that,
 
in
 
the
 
future,
 
could
 
overcome
 
totally
 
or
 
partially
 
the
 
negative
evidence evaluated as of December 31, 2021,
 
that could result in future adjustments to the
 
valuation allowance.
At December 31, 2021, the Corporation’s net deferred
 
tax assets related to its Puerto Rico operations
 
amounted to $408 million.
 
 
 
 
 
 
 
 
 
 
201
The Corporation’s
 
Puerto Rico
 
Banking operation
 
is not
 
in a
 
cumulative loss
 
position and
 
has sustained
 
profitability for
 
the three
year period ended December 31, 2021. This
 
is considered a strong piece of
 
objectively verifiable positive evidence that out weights
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 three
 
years period ending
 
December 31, 2021.
 
Management expects these
 
losses will be
 
a trend in
future
 
years.
 
This
 
objectively
 
verifiable
 
negative
 
evidence
 
is
 
considered
 
by
 
management
 
a
 
strong
 
negative
 
evidence
 
that
 
will
suggest
 
that
 
income
 
in
 
future
 
years
 
will
 
be
 
insufficient
 
to
 
support
 
the
 
realization
 
of
 
all
 
deferred
 
tax
 
asset.
 
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, considering the criteria
 
of ASC Topic
 
740.
 
Accordingly,
the Corporation has maintained a full valuation allowance
 
on the deferred tax asset of $129 million
 
as of December 2021.
Under the Puerto Rico Internal Revenue Code, the
 
Corporation and its subsidiaries are treated as separate taxable
 
entities and are
not
 
entitled to
 
file consolidated
 
tax returns.
 
However,
 
certain subsidiaries
 
that
 
are organized
 
as limited
 
liability companies
 
with a
partnership
 
election
 
are
 
treated
 
as
 
pass-through entities
 
for
 
Puerto
 
Rico
 
tax
 
purposes. The
 
Code
 
provides
 
a
 
dividends-received
deduction of
 
100% on
 
dividends received
 
from “controlled”
 
subsidiaries subject
 
to taxation
 
in Puerto
 
Rico and
 
85% on
 
dividends
received from other taxable domestic corporations.
The Corporation’s
 
subsidiaries in
 
the United
 
States file
 
a consolidated
 
federal income
 
tax return.
 
The intercompany
 
settlement of
taxes paid is based on tax sharing agreements
 
which generally allocate taxes to each
 
entity based on a separate return basis.
The following table presents a reconciliation of
 
unrecognized tax benefits.
(In millions)
Balance at January 1, 2020
$
16.3
Reduction as a result of lapse of statute of limitations
(1.5)
Balance at December 31, 2020
$
14.8
Reduction as a result of lapse of statute of limitations
(11.3)
Balance at December 31, 2021
$
3.5
202
At
 
December 31,
 
2021, the
 
total amount
 
of
 
interest recognized
 
in the
 
statement of
 
financial condition
 
approximated
 
$2.8
 
million
(2020 - $4.8 million). The total interest expense recognized during 2021 was $892 thousand net of a reduction of $2.9 million due to
the expiration of the statute
 
of limitation (2020 - $2.0 million
 
net of a reduction of
 
$645 thousand). Management determined that, as
of December
 
31, 2021
 
and 2020,
 
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
 
through earnings, would
 
affect the Corporation’s
 
effective tax rate,
 
was
approximately $5.5 million at December 31, 2021
 
(2020 - $10.2 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
 
statute
 
of
 
limitations,
 
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 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. As
 
of December 31,
 
2021, the
 
following years remain
 
subject to
 
examination in the
U.S.
 
Federal
 
jurisdiction
 
 
2018
 
and
 
thereafter
 
and
 
in
 
the
 
Puerto
 
Rico
 
jurisdiction
 
 
2017
 
and
 
thereafter.
 
The
 
Corporation
anticipates
 
a
 
reduction
 
in
 
the
 
total
 
amount
 
of
 
unrecognized
 
tax
 
benefits
 
within
 
the
 
next
 
12
 
months,
 
which
 
could
 
amount
 
to
approximately $1.4 million, including interest.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
203
Note 36 – Supplemental disclosure on the consolidated
 
statements of cash flows
Additional disclosures on cash flow information and
 
non-cash activities for the years ended December
 
31, 2021, 2020 and 2019 are
listed in the following table:
(In thousands)
2021
2020
2019
Income taxes paid
$
64,997
$
13,045
$
14,461
Interest paid
170,442
240,342
369,383
Non-cash activities:
 
Loans transferred to other real estate
57,638
14,464
67,056
 
Loans transferred to other property
45,144
48,614
53,286
 
Total loans transferred
 
to foreclosed assets
102,782
63,078
120,342
 
Loans transferred to other assets
7,219
7,117
16,503
 
Financed sales of other real estate assets
13,014
15,606
15,907
 
Financed sales of other foreclosed assets
43,060
34,492
30,840
 
Total financed sales
 
of foreclosed assets
56,074
50,098
46,747
 
Financed sale of premises and equipment
31,085
31,350
-
 
Transfers from premises and equipment to
 
long-lived assets held-for-sale
32,103
-
-
 
Transfers from loans held-in-portfolio to
 
loans held-for-sale
69,890
82,299
-
 
Transfers from loans held-for-sale to loans
 
held-in-portfolio
9,762
20,153
7,829
 
Loans securitized into investment securities
[1]
732,533
508,071
458,758
 
Trades receivables from brokers and
 
counterparties
64,824
64,092
39,364
 
Trades payable to brokers and counterparties
13,789
720,212
4,084
 
Recognition of mortgage servicing rights on securitizations
 
or asset transfers
13,391
9,544
9,143
 
Loans booked under the GNMA buy-back option
19,798
24,244
72,480
 
Capitalization of Right of Use Assets
35,683
29,692
189,097
[1]
 
Includes loans securitized into trading securities and subsequently
 
sold before year 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)
December 31, 2021
December 31, 2020
December 31, 2019
Cash and due from banks
$
411,346
$
484,859
$
361,705
Restricted cash and due from banks
17,087
6,206
26,606
Restricted cash in money market investments
6,079
6,029
6,012
Total cash and due
 
from banks, and restricted cash
[2]
$
434,512
$
497,094
$
394,323
[2]
Refer to Note 5 - Restrictions on cash and due from banks
 
and certain securities for nature of restrictions.
204
Note 37 – 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:
 
Given that Banco Popular de
 
Puerto Rico constitutes a significant portion of
 
the Corporation’s results of operations
 
and total assets
at December 31, 2021, additional disclosures are provided for
 
the business areas included in this reportable segment, as described
below:
 
 
Commercial
 
banking
 
represents
 
the
 
Corporation’s
 
banking
 
operations
 
conducted
 
at
 
BPPR,
 
which
 
are
 
targeted
 
mainly
 
to
corporate, small
 
and middle
 
size businesses.
 
It includes
 
aspects of
 
the lending
 
and depository
 
businesses, as
 
well as
 
other
finance
 
and
 
advisory services.
 
BPPR
 
allocates funds
 
across
 
business areas
 
based on
 
duration matched
 
transfer pricing
 
at
market rates. This area also incorporates income related with the investment of excess funds,
 
as well as a proportionate share
of the investment function of BPPR.
 
 
Consumer and
 
retail banking
 
represents the
 
branch banking operations
 
of BPPR
 
which focus
 
on retail clients.
 
It includes
 
the
consumer lending
 
business
 
operations of
 
BPPR, as
 
well as
 
the
 
lending operations
 
of
 
Popular
 
Auto
 
and
 
Popular
 
Mortgage.
Popular Auto
 
focuses on
 
auto and
 
lease financing,
 
while Popular
 
Mortgage focuses
 
principally on
 
residential mortgage
 
loan
originations.
 
The consumer and retail banking
 
area also incorporates income related
 
with the investment of excess funds
 
from
the branch network, as well as a proportionate
 
share of the investment function of BPPR.
 
 
Other financial
 
services 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, and Popular Life Re. Most of
 
the services that are provided by these subsidiaries
generate profits based on fee income.
 
Popular U.S.:
 
Popular U.S. reportable segment
 
consists of the
 
banking operations of Popular
 
Bank (PB), Popular Insurance
 
Agency, U.S.A.,
 
and
Popular Equipment
 
Finance (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
 
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:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
205
 
December 31, 2021
Banco Popular
Intersegment
(In thousands)
de Puerto Rico
Popular U.S.
Eliminations
Net interest income
$
1,674,589
$
321,154
$
6
Provision for credit losses (benefit)
(136,352)
(56,897)
-
Non-interest income
 
565,310
24,518
(548)
Amortization of intangibles
2,813
665
-
Depreciation expense
46,539
7,415
-
Other operating expenses
1,285,959
203,892
(544)
Income tax expense
253,479
56,538
-
Net income
$
787,461
$
134,059
$
2
Segment assets
$
64,336,681
$
10,399,066
$
(31,528)
 
December 31, 2021
Reportable
Total
(In thousands)
 
Segments
Corporate
Eliminations
Popular, Inc.
Net interest income (expense)
$
1,995,749
$
(38,159)
$
-
$
1,957,590
Provision for credit losses (benefit)
(193,249)
(215)
-
(193,464)
Non-interest income
589,280
56,535
(3,687)
642,128
Amortization of intangibles
3,478
5,656
-
9,134
Depreciation expense
53,954
1,150
-
55,104
Other operating expenses
1,489,307
(545)
(3,725)
1,485,037
Income tax expense (benefit)
310,017
(1,085)
86
309,018
Net income
$
921,522
$
13,415
$
(48)
$
934,889
Segment assets
$
74,704,219
$
5,458,718
$
(5,065,038)
$
75,097,899
 
December 31, 2020
Banco Popular
Intersegment
(In thousands)
de Puerto Rico
Popular U.S.
 
Eliminations
Net interest income
$
1,593,599
$
302,517
$
11
Provision for credit losses
210,955
81,486
-
Non-interest income
 
445,893
24,285
(553)
Amortization of intangibles
5,634
665
-
Depreciation expense
47,890
9,558
-
Other operating expenses
1,169,816
228,406
(544)
Income tax expense
106,211
7,411
-
Net income (loss)
$
498,986
$
(724)
$
2
Segment assets
$
55,353,626
$
10,255,954
$
(33,935)
 
December 31, 2020
Reportable
Total
(In thousands)
 
Segments
Corporate
Eliminations
Popular, Inc.
Net interest income (expense)
$
1,896,127
$
(39,514)
$
-
$
1,856,613
Provision for credit losses
292,441
95
-
292,536
Non-interest income
469,625
46,442
(3,755)
512,312
Amortization of intangibles
6,299
98
-
6,397
Depreciation expense
57,448
1,004
-
58,452
Other operating expenses
1,397,678
(1,212)
(3,486)
1,392,980
Income tax expense (benefit)
113,622
(1,560)
(124)
111,938
Net income
$
498,264
$
8,503
$
(145)
$
506,622
Segment assets
$
65,575,645
$
5,214,439
$
(4,864,084)
$
65,926,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
206
 
December 31, 2019
Banco Popular
Intersegment
(In thousands)
de Puerto Rico
Popular U.S.
 
Eliminations
Net interest income
$
1,633,950
$
295,470
$
(51)
Provision for credit losses
135,495
30,028
-
Non-interest income
 
506,739
23,160
(561)
Amortization of intangibles
8,610
664
-
Depreciation expense
49,058
8,263
-
Other operating expenses
1,208,458
205,219
(547)
Income tax expense
129,145
19,164
-
Net income
$
609,923
$
55,292
$
(65)
Segment assets
$
41,756,864
$
10,056,316
$
(18,576)
 
December 31, 2019
Reportable
Total
(In thousands)
 
Segments
Corporate
Eliminations
Popular, Inc.
Net interest income (expense)
$
1,929,369
$
(37,675)
$
-
$
1,891,694
Provision for credit losses
165,523
256
-
165,779
Non-interest income
529,338
43,901
(3,356)
569,883
Amortization of intangibles
9,274
96
-
9,370
Depreciation expense
57,321
746
-
58,067
Other operating expenses
1,413,130
55
(3,140)
1,410,045
Income tax expense (benefit)
148,309
(1,041)
(87)
147,181
Net income
$
665,150
$
6,114
$
(129)
$
671,135
Segment assets
$
51,794,604
$
5,228,276
$
(4,907,556)
$
52,115,324
Additional disclosures with respect to the Banco
 
Popular de Puerto Rico reportable segment are
 
as follows:
 
December 31, 2021
Banco Popular de Puerto Rico
Consumer
Other
Total Banco
Commercial
and Retail
Financial
Popular de
(In thousands)
 
Banking
Banking
Services
Eliminations
Puerto Rico
Net interest income
 
$
734,501
$
934,611
$
5,477
$
-
$
1,674,589
Provision for credit losses (benefit)
(85,990)
(50,362)
-
-
(136,352)
Non-interest income
118,126
343,125
109,018
(4,959)
565,310
Amortization of intangibles
290
2,110
609
(196)
2,813
Depreciation expense
20,512
25,386
641
-
46,539
Other operating expenses
377,563
818,503
91,652
(1,759)
1,285,959
Income tax expense
180,874
66,616
5,989
-
253,479
Net income
 
$
359,378
$
415,483
$
15,604
$
(3,004)
$
787,461
Segment assets
$
64,994,081
$
31,313,708
$
2,038,402
$
(34,009,510)
$
64,336,681
 
December 31, 2020
Banco Popular de Puerto Rico
Consumer
Other
Total Banco
Commercial
 
and Retail
Financial
Popular de
(In thousands)
Banking
Banking
 
Services
Eliminations
Puerto Rico
Net interest income
 
$
653,091
$
927,165
$
13,343
$
-
$
1,593,599
Provision for credit losses
47,905
163,050
-
-
210,955
Non-interest income
100,329
249,464
97,443
(1,343)
445,893
Amortization of intangibles
197
3,609
1,828
-
5,634
Depreciation expense
20,488
26,746
656
-
47,890
Other operating expenses
303,534
782,521
85,122
(1,361)
1,169,816
Income tax expense (benefit)
104,617
(5,934)
7,528
-
106,211
Net income
 
$
276,679
$
206,637
$
15,652
$
18
$
498,986
Segment assets
$
49,806,766
$
29,000,270
$
2,218,444
$
(25,671,854)
$
55,353,626
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
207
 
December 31, 2019
Banco Popular de Puerto Rico
Consumer
Other
Eliminations
Total Banco
Commercial
 
and Retail
Financial
and Other
Popular de
(In thousands)
Banking
Banking
 
Services
Adjustments
Puerto Rico
Net interest income
 
$
619,926
$
1,009,196
$
4,828
$
-
$
1,633,950
Provision for credit losses (benefit)
(46,099)
181,594
-
-
135,495
Non-interest income
99,758
303,268
106,218
(2,505)
506,739
Amortization of intangibles
195
4,294
4,121
-
8,610
Depreciation expense
20,024
28,411
623
-
49,058
Other operating expenses
309,762
835,582
65,631
(2,517)
1,208,458
Income tax expense
104,636
11,999
12,510
-
129,145
Net income
 
$
331,166
$
250,584
$
28,161
$
12
$
609,923
Segment assets
$
34,340,842
$
23,976,004
$
380,557
$
(16,940,539)
$
41,756,864
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 United
 
States include
 
E-loan, an
 
online platform
 
used to
 
offer personal
 
loans, co-branded
 
credit cards
 
offerings
and
 
an
 
online
 
deposit
 
gathering platform.
 
In
 
the Virgin
 
Islands,
 
the BPPR
 
segment
 
offers
 
banking products,
 
including loans
 
and
deposits.
 
During
 
the
 
year
 
ended
 
December
 
31,
 
2021,
 
the
 
BPPR
 
segment
 
generated
 
approximately $50.6
 
million
 
(2020
 
-
 
$55.3
million, 2019 - $55.7
 
million) in revenues from
 
its operations in the
 
United States, including net
 
interest income, service charges on
deposit accounts and other
 
service fees. In addition,
 
the BPPR segment generated $45.4
 
million in revenues (2020
 
- $44.2 million,
2019 -
 
$47.6 million)
 
from its
 
operations in
 
the U.S.
 
and British
 
Virgin Islands.
 
At December
 
31, 2021,
 
total assets
 
for the
 
BPPR
segment related to its operations in the United States
 
amounted to $589 million (2020 - $627
 
million).
 
(In thousands)
2021
2020
2019
Revenues:
[1]
Puerto Rico
 
$
2,136,481
$
1,921,207
$
2,016,089
United States
390,201
376,529
371,368
Other
73,036
71,189
74,120
Total consolidated
 
revenues
$
2,599,718
$
2,368,925
$
2,461,577
[1]
Total revenues include
 
net interest income, service charges on deposit accounts,
 
other service fees, mortgage banking activities, net
 
gain (loss) on
sale of debt securities, net gain, including impairment on equity
 
securities, net (loss) profit on trading account debt
 
securities, net (loss) gain on
sale of loans, including valuation adjustments on loans held-for-sale,
 
adjustments (expense) to indemnity reserves on loans sold,
 
and other
operating income.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
208
Selected Balance Sheet Information
(In thousands)
2021
2020
2019
Puerto Rico
Total assets
$
63,221,282
$
54,143,954
$
40,544,255
Loans
19,770,118
20,413,112
18,989,286
Deposits
57,211,608
47,586,880
34,664,243
United States
Total assets
$
10,986,055
$
10,878,030
$
10,693,536
Loans
8,903,493
8,396,983
7,819,187
Deposits
7,777,232
7,672,549
7,664,792
Other
Total assets
$
890,562
$
904,016
$
877,533
Loans
626,115
674,556
657,603
Deposits
[1]
2,016,248
1,606,911
1,429,571
[1]
Represents deposits from BPPR operations located in the
 
U.S. and British Virgin Islands.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
209
Note 38 - Popular, Inc. (holding company only) financial information
The following
 
condensed financial
 
information presents
 
the financial
 
position of
 
Popular,
 
Inc. Holding
 
Company only
 
at December
31, 2021 and 2020, and the results of its
 
operations and cash flows for the years ended
 
December 31, 2021, 2020 and 2019.
Condensed Statements of Condition
December 31,
(In thousands)
2021
2020
ASSETS
Cash and due from banks (includes $79,660 due from bank
 
subsidiary (2020 - $69,299))
$
79,660
$
69,299
Money market investments
205,646
111,596
Debt securities held-to-maturity,
 
at amortized cost (includes $3,125 in common
 
securities from statutory trusts (2020 - $8,726))
[1]
3,125
8,726
Equity securities, at lower of cost or realizable value
19,711
16,049
Investment in BPPR and subsidiaries, at equity
3,858,701
4,327,188
Investment in Popular North America and subsidiaries,
 
at equity
1,834,931
1,733,411
Investment in other non-bank subsidiaries, at equity
288,736
271,129
Other loans
 
29,445
31,473
Less - Allowance for credit losses
96
311
Premises and equipment
5,684
5,322
Investment in equity method investees
114,955
88,272
Other assets (includes $6,802 due from subsidiaries and affiliate
 
(2020 - $5,518))
32,810
35,002
Total assets
 
$
6,473,308
$
6,697,156
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable
$
401,990
$
587,386
Other liabilities (includes $6,591 due to subsidiaries
 
and affiliate (2020 - $3,779))
101,923
81,148
Stockholders’ equity
5,969,395
6,028,622
Total liabilities and
 
stockholders’ equity
 
$
6,473,308
$
6,697,156
[1] Refer to Note 18 to the consolidated financial statements
 
for information on the statutory trusts.
 
Condensed Statements of Operations
Years ended December 31,
(In thousands)
2021
2020
2019
Income:
Dividends from subsidiaries
$
792,000
$
586,000
$
408,000
Interest income (includes $828 due from subsidiaries and
 
affiliates (2020 - $2,290; 2019 -
$4,237))
4,303
4,949
6,669
Earnings from investments in equity method investees
29,387
17,841
17,279
Other operating income
-
1
1
Net (loss) gain, including impairment, on equity securities
(525)
1,494
988
Total income
 
825,165
610,285
432,937
Expenses:
Interest expense
36,444
38,528
38,528
Provision for credit losses (benefit)
(215)
95
256
Operating expense (income) (includes expenses for services
 
provided by subsidiaries and
affiliate of $13,546 (2020 - $13,140 ; 2019 - $14,400)),
 
net of reimbursement by subsidiaries
for services provided by parent of $162,019 (2020
 
- $138,729 ; 2019 - $106,725)
5,432
(921)
80
Total expenses
41,661
37,702
38,864
Income before income taxes and equity in undistributed
 
earnings (losses) of subsidiaries
783,504
572,583
394,073
Income tax expense
352
17
-
Income before equity in undistributed earnings (losses) of subsidiaries
783,152
572,566
394,073
Equity in undistributed earnings (losses) of subsidiaries
151,737
(65,944)
277,062
Net income
$
934,889
$
506,622
$
671,135
Comprehensive income, net of tax
$
419,829
$
866,551
$
929,171
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
210
Condensed Statements of Cash Flows
Years ended December 31,
(In thousands)
2021
2020
2019
Cash flows from operating activities:
Net income
$
934,889
$
506,622
$
671,135
Adjustments to reconcile net income to net cash provided
 
by operating activities:
Equity in (earnings) losses of subsidiaries, net of dividends
 
or distributions
(151,737)
65,944
(277,062)
Provision for credit losses (benefit)
(215)
95
256
Amortization of intangibles
5,656
98
96
Net accretion of discounts and amortization of premiums and
 
deferred fees
 
1,241
1,233
1,240
Share-based compensation
8,895
5,770
7,927
Earnings from investments under the equity method, net
 
of dividends or distributions
(26,360)
(15,510)
(14,948)
Sale of foreclosed assets, including write-downs
59
-
-
Net (increase) decrease
 
in:
Equity securities
(3,662)
(5,305)
(4,051)
Other assets
(1,970)
(8,327)
1,134
Net (decrease) increase in:
Interest payable
(1,042)
-
-
Other liabilities
19,095
2,470
2,508
Total adjustments
(150,040)
46,468
(282,900)
Net cash provided by operating activities
784,849
553,090
388,235
Cash flows from investing activities:
 
Net (increase) decrease in money market investments
(94,000)
110,000
(45,000)
Proceeds from calls, paydowns, maturities and redemptions
 
of investment securities held-to-maturity
5,601
-
-
Net repayments on other loans
1,879
587
677
Capital contribution to subsidiaries
(12,900)
(10,000)
(9,000)
Return of capital from wholly owned subsidiaries
-
12,500
13,000
Return of capital from equity method investments
-
131
-
Acquisition of premises and equipment
(1,788)
(2,667)
(1,289)
Proceeds from sale of premises and equipment
83
285
3
Proceeds from sale of foreclosed assets
87
-
-
Net cash (used in) provided by investing activities
(101,038)
110,836
(41,609)
Cash flows from financing activities:
 
Payments of notes payable
(186,664)
-
-
Proceeds from issuance of common stock
10,493
15,175
13,451
Payments for repurchase of redeemable preferred stock
-
(28,017)
-
Dividends paid
(141,466)
(133,645)
(115,810)
Net payments for repurchase of common stock
(350,656)
(500,705)
(250,571)
Payments related to tax withholding for share-based compensation
(5,107)
(3,394)
(5,420)
Net cash used in financing activities
(673,400)
(650,586)
(358,350)
Net increase (decrease) in cash and due from banks, and
 
restricted cash
 
10,411
13,340
(11,724)
Cash and due from banks, and restricted cash at beginning
 
of period
69,894
56,554
68,278
Cash and due from banks, and restricted cash at end of period
$
80,305
$
69,894
$
56,554
 
 
 
 
 
 
 
 
 
 
 
211
Popular, Inc.
 
(parent company only)
 
received distributions from
 
its direct equity
 
method investees amounting to
 
$3.0 million for
 
the
year ended December
 
31, 2021 (2020
 
- $2.3 million;
 
2019 - $2.3
 
million), of which
 
$2.3 million are
 
related to dividend
 
distributions
(2020 -
 
$2.3 million;
 
2019 -
 
$2.3 million). There
 
were no
 
dividend distributions from
 
PIBI for
 
the year
 
ended Dec
 
31, 2021
 
(2020 -
$12.5 million; 2019 - $13.0 million).
 
PIBI main source of income is derived from its
 
investment in BHD.
Notes payable include junior
 
subordinated debentures issued by
 
the Corporation that are
 
associated to capital securities
 
issued by
the
 
Popular Capital
 
Trust
 
II
 
and medium-term
 
notes. Refer
 
to
 
Note 18
 
for
 
a description
 
of
 
significant provisions
 
related to
 
these
junior subordinated
 
debentures. The following
 
table presents
 
the aggregate amounts
 
by contractual maturities
 
of notes
 
payable at
December 31, 2021:
 
Year
(In thousands)
2022
$
-
2023
297,842
2024
-
2025
-
2026
-
Later years
104,148
Total
 
$
401,990
 
 
212
Note 39 ─ Subsequent events
Accelerated Share Repurchase Transaction
On February 28,
 
2022, the Corporation entered into
 
an accelerated share repurchase transaction
 
of $400 million with
 
respect to its
common
 
stock,
 
which
 
will
 
be
 
accounted
 
for
 
as
 
a
 
treasury
 
stock
 
transaction.
 
Accordingly,
 
as
 
a
 
result
 
of
 
the
 
receipt
 
of
 
the
 
initial
shares,
 
the
 
Corporation will
 
recognize in
 
shareholders’ equity
 
approximately $320
 
million
 
in
 
treasury
 
stock
 
and
 
$80
 
million
 
as
 
a
reduction of capital
 
surplus. The Corporation
 
expects to
 
further adjust its
 
treasury stock
 
and capital surplus
 
accounts to
 
reflect the
delivery or
 
receipt of
 
cash or
 
shares upon
 
the termination
 
of the
 
ASR agreement,
 
which will
 
depend on
 
the average
 
price of
 
the
Corporation’s shares during the term of the ASR, less
 
a discount. The final settlement of the ASR is
 
expected to occur no later than
the third quarter of 2022.
Entry into Asset Purchase Agreement with Evertec;
 
Renegotiation and Extension of Commercial Agreements
On February 24,
 
2022, the Corporation and
 
BPPR, entered into
 
an Asset Purchase Agreement
 
(the “Purchase Agreement”), dated
as of
 
February 24,
 
2022, with
 
EVERTEC and
 
Evertec Group,
 
LLC, a
 
wholly owned
 
subsidiary of
 
EVERTEC (“EVERTEC
 
Group”),
pursuant to
 
which BPPR
 
will purchase
 
from EVERTEC
 
Group certain information
 
technology and related
 
assets currently
 
used by
EVERTEC
 
to
 
service certain
 
of
 
BPPR’s
 
key channels
 
(the “Acquired
 
Assets”) under
 
the Amended
 
and
 
Restated Master
 
Service
Agreement (the “MSA”), dated September 30, 2010, among Popular,
 
BPPR and EVERTEC.
 
In connection with the purchase of the
Acquired Assets,
 
BPPR will
 
assume certain
 
liabilities relating
 
to the
 
Acquired Assets
 
(together with
 
the purchase
 
of the
 
Acquired
Assets, the
 
“Transaction”).
The Transaction
 
is expected
 
to close
 
on or
 
about June
 
30, 2022,
 
subject to
 
the satisfaction
 
of certain
closing conditions.
In
 
connection
 
with
 
the
 
consummation
 
of
 
the
 
Transaction
 
(the
 
“Closing”),
 
Popular
 
or
 
BPPR
 
will
 
transfer
 
to
 
EVERTEC
 
Group,
 
as
consideration for
 
the Transaction,
 
shares of
 
EVERTEC’s common
 
stock (“EVERTEC
 
Common Stock”)
 
having an
 
aggregate value
equal to $197 million, subject to certain purchase price adjustments, calculated on the basis that each share of EVERTEC Common
Stock is valued
 
at $42.84 per
 
share.
 
As a result
 
of this transfer,
 
Popular expects that
 
its percentage ownership
 
of the outstanding
shares of
 
EVERTEC Common Stock
 
will be
 
reduced from its
 
current level,
 
which is approximately
 
16.2%, to
 
approximately 10.5%
immediately following the Closing.
In
 
connection
 
with the
 
Closing, Popular
 
and
 
BPPR
 
will
 
also
 
enter with
 
EVERTEC
 
into,
 
among
 
other
 
commercial
 
agreements,
 
a
Second Amended
 
and
 
Restated Master
 
Services Agreement
 
(the “Second
 
A&R
 
MSA”), pursuant
 
to
 
which EVERTEC
 
Group will
continue
 
to
 
provide various
 
key
 
information technology
 
and
 
various
 
transaction
 
processing services
 
to
 
Popular,
 
BPPR
 
and
 
their
respective subsidiaries, which services are provided
 
under the currently effective MSA.
 
Under the Second
 
A&R MSA, Popular
 
and BPPR would
 
no longer be
 
subject to exclusivity
 
provisions under the currently
 
effective
MSA
 
that
 
require Popular
 
and
 
BPPR
 
to
 
obtain certain
 
services
 
from
 
EVERTEC
 
Group,
 
nor
 
will
 
they
 
be
 
subject
 
to
 
rights
 
of
 
first
refusal
 
that
 
EVERTEC
 
Group
 
currently
 
has
 
under
 
the
 
currently
 
effective
 
MSA
 
with
 
respect
 
to
 
certain
 
technology
 
projects.
 
In
connection
 
with
 
the
 
elimination
 
of
 
exclusivity
 
provisions
 
under
 
the
 
currently
 
effective
 
MSA,
 
EVERTEC
 
Group
 
will
 
be
 
entitled
 
to
receive monthly payments from Popular and BPPR to the
 
extent that EVERTEC Group’s revenues under the Second
 
A&R MSA fall
below certain agreed
 
minimum amounts on
 
an annualized basis
 
(each, an “Annual
 
Minimum”).
 
The Annual Minimum
 
will equal (i)
$170 million for each one-year period from the effective date of the Second A&R MSA through September 30, 2025; (ii) $165 million
for each
 
one-year period
 
from October
 
1, 2025
 
through September
 
30, 2026;
 
and (iii)
 
$160 million
 
for each
 
one-year period
 
from
October 1, 2026 through September 30, 2028 (in
 
each case, pro-rated for any partial one-year period).
Under the currently effective
 
MSA, EVERTEC Group is entitled
 
to increase annually the fees
 
charged under the MSA based
 
on the
annual increases in the Consumer Price
 
Index (the “Annual MSA CPI
 
Escalation”), subject to an annual cap
 
of 5%.
 
At the Closing,
the Annual MSA CPI Escalation
 
that became effective as
 
of October 1, 2021
 
will be retroactively eliminated, and BPPR
 
will receive
a credit against fees payable under the
 
Second A&R MSA equal to the amount
 
by which the fees paid by BPPR
 
for the period from
October 1,
 
2021 through the
 
Closing were increased
 
as a
 
result of the
 
most recent
 
Annual MSA CPI
 
Escalation.
 
Additionally, the
cap on the Annual MSA CPI Escalation will be reduced relative
 
to the currently effective MSA and will be capped (i) at 1.5% for each
one-year period beginning on the effective
 
date of the Second A&R MSA
 
through September 30, 2025, and (ii) at
 
2% for each one-
year period from October
 
1, 2025 through September 30,
 
2028 (or if lower,
 
at the percentage by
 
which the CPI increase during
 
the
213
prior
 
one-year period
 
exceeded 2%).
 
In
 
addition, beginning
 
in
 
October 2025,
 
BPPR will
 
receive a
 
10% fee
 
discount for
 
services
provided under the Second A&R MSA.
At the Closing, EVERTEC and Popular will
 
also enter into a Registration Rights and Sell-Down Agreement
 
(the “Registration Rights
Agreement”)
 
pursuant
 
to
 
which
 
Popular
 
may
 
sell
 
to
 
third
 
parties
 
during the
 
90-day
 
period
 
following
 
the
 
Closing
 
(the
 
“Sell-Down
Period”) a sufficient number of its shares of EVERTEC Common Stock so as
 
to reduce Popular’s ownership of shares of EVERTEC
Common Stock to no
 
more than 4.99%
 
of the total number
 
of shares of EVERTEC
 
Common Stock issued and outstanding.
 
At the
end of the Sell-Down Period, if there are any shares of EVERTEC Common Stock beneficially owned, owned of record or controlled
by Popular in excess of 4.5% of the total number of shares of EVERTEC Common Stock issued and outstanding (“Excess Common
Stock”),
 
EVERTEC
 
shall
 
cause
 
all
 
the
 
shares
 
of
 
Excess
 
Common
 
Stock
 
to
 
be
 
exchanged
 
for
 
shares
 
of
 
EVERTEC
 
non-voting
preferred stock (the “Non-Voting Preferred Stock”, and such
 
conversion, the “Share Conversion”).
 
Following the Share Conversion,
if Popular at any point would
 
beneficially own, own of record or control
 
shares of Excess Common Stock, EVERTEC
 
shall cause all
such Excess Common
 
Stock to be
 
exchanged for Non-Voting
 
Preferred Stock.
 
The Non-Voting Preferred
 
Stock will have
 
identical
rights and privileges as EVERTEC Common Stock,
 
except that the Non-Voting Preferred
 
Stock will be non-voting other than
 
limited
protective voting rights
 
and will automatically
 
convert into shares
 
of EVERTEC Common
 
Stock in the
 
hands of
 
a transferee after
 
a
transfer
 
(i)
 
in
 
a
 
widespread public
 
distribution, (ii)
 
to
 
EVERTEC,
 
(iii)
 
in
 
which
 
no
 
transferee
 
(or
 
group
 
of
 
associated transferees)
would receive
 
2% or
 
more of
 
the outstanding
 
securities of
 
any class
 
of voting
 
securities of
 
EVERTEC or
 
(iv) to
 
a transferee
 
that
would control more than 50% of every class of
 
voting securities of EVERTEC without any such transfer.
The Registration Rights
 
Agreement contains customary
 
registration rights with
 
respect to the
 
shares of EVERTEC
 
Common Stock
and Non-Voting
 
Preferred Stock
 
held by
 
Popular,
 
including customary
 
indemnification provisions,
 
similar to
 
the
 
registration rights
provided for in the Stockholder Agreement
 
(the “Stockholder Agreement”), dated April 17, 2012,
 
among Carib Latam Holdings, Inc.,
and each
 
of the
 
holders of
 
Carib Latam
 
Holdings, Inc.,
 
as amended
 
on March
 
27, 2013,
 
June 30,
 
2013 and
 
November 13,
 
2013.
 
Under
 
the
 
Stockholder
 
Agreement,
 
which
 
will
 
be
 
terminated
 
at
 
Closing,
 
Popular
 
is
 
currently
 
entitled
 
to,
 
among
 
other
 
things,
 
(1)
nominate two directors for election to EVERTEC’s board of directors, (2) limited pre-emptive rights and (3) various registration rights
with respect to EVERTEC Common Stock.
 
At the Closing, certain other commercial agreements will be entered into by and between Popular or BPPR (or both) and EVERTEC
or
 
EVERTEC
 
Group,
 
Inc.,
 
including
 
(i)
 
a
 
Second
 
Amended
 
and
 
Restated
 
Independent
 
Sales
 
Organization
 
Sponsorship
 
and
Services Agreement, pursuant to which BPPR will continue to sponsor
 
EVERTEC Group as an independent sales organization with
various
 
credit
 
card
 
associations
 
and
 
will
 
receive
 
revenue
 
sharing
 
on
 
a
 
percentage
 
of
 
the
 
net
 
revenues
 
of
 
EVERTEC
 
Group’s
merchant acquiring business and person-to-business merchant services business, for an initial term
 
commencing on the date of the
Closing and ending on December 31, 2035 (a ten-year extension of the term of the currently effective agreement), and (ii) a Second
Amended and Restated ATH
 
Network Participation Agreement, pursuant to
 
which BPPR will continue
 
to be required to
 
issue ATH-
branded debit cards
 
and may issue
 
dual-branded debit cards
 
having certain enhanced
 
functionalities and will
 
continue to have
 
the
ability to access the ATH
 
Network and BPPR’s customers will continue
 
to be able to
 
access EVERTEC Group’s ATH
 
Movil person-
to-person and person-to-business services, for an initial term commencing
 
on the date of the Closing and
 
ending on September 30,
2030 (a five-year extension of the term of the
 
currently effective agreement).


LOGO

 

Mix Paper from responsible sources FSC www.fsc.org FSC C132107 POPULAR P.O. Box 362708 | San Juan, Puerto Rico 00936-2708

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 21.1
Popular, Inc.
Subsidiaries of the Registrant
Name
Jurisdiction of Incorporation
Banco Popular de Puerto Rico
Puerto Rico
Popular Auto LLC
Puerto Rico
PR Rent-to-Own LLC
Delaware
Popular Community Capital, LLC
Delaware
Popular Mezzanine Fund LLC
Puerto Rico
Popular Center Holdings LLC
Delaware
Popular Insurance LLC
Puerto Rico
Popular Securities LLC
Puerto Rico
Popular Risk Services LLC
Puerto Rico
Popular Life RE
Puerto Rico
Popular Impact Fund LLC
Delaware
Popular Asset Management LLC
Puerto Rico
Popular Capital Trust II
Delaware
Popular International Bank, Inc.
Puerto Rico
Popular North America, Inc.
Delaware
Popular Bank
New York
Popular Equipment Finance, LLC
Delaware
Popular Insurance Agency USA, Inc.
Delaware
E-LOAN, Inc.
Delaware
Equity One, Inc.
Delaware
Popular ABS, Inc.
 
Delaware
Popular North America Capital Trust I
Delaware
 
Exhibit 22.1
ISSUERS OF GUARANTEED SECURITIES
Popular
 
North
 
America,
 
Inc.
 
(“PNA”)
 
is
 
100%
 
owned
 
by
 
Popular,
 
Inc.
 
Holding
 
Company
 
(“PIHC”)
 
and
 
has
outstanding
 
debt securities
 
registered
 
under
 
the Securities
 
Act of
 
1933,
 
as amended,
 
that are
 
guaranteed
 
by PIHC.
There are no subsidiary guarantors of such securities.
 
 
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
 
FIRM
We
 
hereby consent
 
to the incorporation
 
by reference
 
in the Registration
 
Statements on
 
Form S-3 (Nos.
 
333-257218
and
 
333-257217)
 
and
 
Form
 
S-8 (Nos.
 
333-238205,
 
333-153044,
 
333-128909
 
and
 
333-229711)
 
of
 
Popular,
 
Inc.
 
of
our
 
report
 
dated
 
March
 
1,
 
2022
 
relating
 
to
 
the
 
financial
 
statements
 
and
 
the
 
effectiveness
 
of
 
internal
 
control
 
over
financial reporting, which appears in this Form 10-K.
 
/s/PricewaterhouseCoopers LLP
San Juan, Puerto Rico
March 1, 2022
 
 
d192149dex311p1i0.jpg
CERTIFICATION
EXHIBIT 31.1
I, Ignacio Alvarez, certify that:
1. I have reviewed this annual report on Form 10-K of Popular,
 
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
 
of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under
 
which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
 
information included in this report, fairly
present in all material respects the financial condition, results of operations and
 
cash flows of the registrant as of,
and for, the periods presented in this report;
4. The
 
registrant's other
 
certifying officer
 
and I
 
are responsible
 
for establishing
 
and maintaining
 
disclosure controls
and
 
procedures
 
(as
 
defined
 
in
 
Exchange
 
Act
 
Rules
 
13a-15(e)
 
and
 
15d-15(e))
 
and
 
internal
 
control
 
over
 
financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
 
registrant and have:
a)
Designed such
 
disclosure controls
 
and procedures,
 
or caused such
 
disclosure controls
 
and procedures
 
to be
designed under
 
our supervision,
 
to ensure
 
that material
 
information
 
relating to
 
the registrant,
 
including its
consolidated
 
subsidiaries,
 
is
 
made
 
known
 
to
 
us
 
by
 
others
 
within
 
those
 
entities,
 
particularly
 
during
 
the
period in which this report is being prepared;
b)
Designed
 
such
 
internal
 
control
 
over
 
financial
 
reporting,
 
or
 
caused
 
such
 
internal
 
control
 
over
 
financial
reporting to
 
be designed under
 
our supervision,
 
to provide reasonable
 
assurance regarding
 
the reliability
 
of
financial
 
reporting
 
and
 
the
 
preparation
 
of
 
financial
 
statements
 
for
 
external
 
purposes
 
in
 
accordance
 
with
generally accepted accounting principles;
c)
Evaluated
 
the
 
effectiveness
 
of
 
the
 
registrant's
 
disclosure
 
controls
 
and
 
procedures
 
and
 
presented
 
in
 
this
report our conclusions about the effectiveness of
 
the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d)
Disclosed in this report
 
any change in the
 
registrant’s
 
internal control over financial
 
reporting that occurred
during
 
the
 
registrant’s
 
most
 
recent
 
fiscal
 
quarter
 
(the
 
registrant’s
 
fourth
 
fiscal
 
quarter
 
in
 
the
 
case
 
of
 
an
annual
 
report)
 
that
 
has
 
materially
 
affected,
 
or
 
is
 
reasonably
 
likely
 
to
 
materially
 
affect,
 
the
 
registrant’s
internal control over financial reporting; and
5.
 
The
 
registrant's
 
other
 
certifying
 
officer
 
and
 
I
 
have
 
disclosed,
 
based
 
on
 
our
 
most
 
recent
 
evaluation
 
of
 
internal
control
 
over
 
financial
 
reporting,
 
to
 
the
 
registrant's
 
auditors
 
and
 
the
 
audit
 
committee
 
of
 
the
 
registrant's
 
board
 
of
directors (or persons performing the equivalent functions):
a)
All
 
significant
 
deficiencies
 
and
 
material
 
weaknesses
 
in
 
the
 
design
 
or
 
operation
 
of
 
internal
 
control
 
over
financial reporting which
 
are reasonably likely to
 
adversely affect the
 
registrant’s
 
ability to record, process,
summarize and report financial information; and
b)
Any fraud,
 
whether or
 
not material,
 
that involves
 
management or
 
other employees
 
who have
 
a significant
role in the registrant's internal controls over financial reporting.
Date:
 
March 1, 2022
By: /s/ Ignacio Alvarez
Ignacio Alvarez
Chief Executive Officer
 
 
d192149dex312p1i0.jpg
CERTIFICATION
EXHIBIT 31.2
I, Carlos J. Vázquez, certify that:
1. I have reviewed this annual report on Form 10-K of Popular,
 
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
 
of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under
 
which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
 
information included in this report, fairly
present in all material respects the financial condition, results of operations and
 
cash flows of the registrant as of,
and for, the periods presented in this report;
4. The
 
registrant's other
 
certifying officer
 
and I
 
are responsible
 
for establishing
 
and maintaining
 
disclosure controls
and
 
procedures
 
(as
 
defined
 
in
 
Exchange
 
Act
 
Rules
 
13a-15(e)
 
and
 
15d-15(e))
 
and
 
internal
 
control
 
over
 
financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
 
registrant and have:
a)
Designed such
 
disclosure controls
 
and procedures,
 
or caused such
 
disclosure controls
 
and procedures
 
to be
designed under
 
our supervision,
 
to ensure
 
that material
 
information
 
relating to
 
the registrant,
 
including its
consolidated
 
subsidiaries,
 
is
 
made
 
known
 
to
 
us
 
by
 
others
 
within
 
those
 
entities,
 
particularly
 
during
 
the
period in which this report is being prepared;
b)
Designed
 
such
 
internal
 
control
 
over
 
financial
 
reporting,
 
or
 
caused
 
such
 
internal
 
control
 
over
 
financial
reporting to
 
be designed under
 
our supervision,
 
to provide reasonable
 
assurance regarding
 
the reliability
 
of
financial
 
reporting
 
and
 
the
 
preparation
 
of
 
financial
 
statements
 
for
 
external
 
purposes
 
in
 
accordance
 
with
generally accepted accounting principles;
c)
Evaluated
 
the
 
effectiveness
 
of
 
the
 
registrant's
 
disclosure
 
controls
 
and
 
procedures
 
and
 
presented
 
in
 
this
report our conclusions about the effectiveness of
 
the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
d)
Disclosed in this report
 
any change in the
 
registrant’s
 
internal control over financial
 
reporting that occurred
during
 
the
 
registrant’s
 
most
 
recent
 
fiscal
 
quarter
 
(the
 
registrant’s
 
fourth
 
fiscal
 
quarter
 
in
 
the
 
case
 
of
 
an
annual
 
report)
 
that
 
has
 
materially
 
affected,
 
or
 
is
 
reasonably
 
likely
 
to
 
materially
 
affect,
 
the
 
registrant’s
internal control over financial reporting; and
5.
 
The
 
registrant's
 
other
 
certifying
 
officer
 
and
 
I
 
have
 
disclosed,
 
based
 
on
 
our
 
most
 
recent
 
evaluation
 
of
 
internal
control
 
over
 
financial
 
reporting,
 
to
 
the
 
registrant's
 
auditors
 
and
 
the
 
audit
 
committee
 
of
 
the
 
registrant's
 
board
 
of
directors (or persons performing the equivalent functions):
a)
All
 
significant
 
deficiencies
 
and
 
material
 
weaknesses
 
in
 
the
 
design
 
or
 
operation
 
of
 
internal
 
control
 
over
financial reporting which
 
are reasonably likely to
 
adversely affect the
 
registrant’s
 
ability to record, process,
summarize and report financial information; and
b)
Any fraud,
 
whether or
 
not material,
 
that involves
 
management or
 
other employees
 
who have
 
a significant
role in the registrant's internal controls over financial reporting.
Date:
 
March 1, 2022
By: /s/ Carlos J. Vázquez
Carlos J. Vázquez
Chief Financial Officer
 
 
d192149dex321p1i0.jpg
EXHIBIT 32.1
CERTIFICATION
 
PURSUANT TO
18 U.S.C. Section 1350
Pursuant
 
to
 
18
 
U.S.C.
 
Section
 
1350,
 
the
 
undersigned
 
officer
 
of
 
Popular,
 
Inc.
 
(the
 
"Company"),
 
hereby
certifies
 
that
 
the
 
Company's
 
Annual
 
Report
 
on
 
Form
 
10-K
 
for
 
the
 
year
 
ended
 
December
 
31,
 
2021
 
(the
 
"Report")
fully
 
complies
 
with
 
the
 
requirements
 
of
 
Section
 
13(a)
 
or
 
15(d),
 
as
 
applicable,
 
of
 
the
 
Securities
 
Exchange
 
Act
 
of
1934 and that
 
the information contained in
 
the Report fairly presents,
 
in all material respects,
 
the financial condition
and results of operations of the Company.
Dated: March 1, 2022
By:
 
/s/ Ignacio Alvarez
Name: Ignacio Alvarez
Title: Chief Executive Officer
A signed original of this written statement has been provided to the Company and will be retained
 
by the
Company and furnished to the Securities and Exchange Commission or its staff
 
upon request.
 
 
d192149dex322p1i0.jpg
EXHIBIT 32.2
CERTIFICATION
 
PURSUANT TO
18 U.S.C. Section 1350
Pursuant
 
to
 
18
 
U.S.C.
 
Section
 
1350,
 
the
 
undersigned
 
officer
 
of
 
Popular,
 
Inc.
 
(the
 
"Company"),
 
hereby
certifies
 
that
 
the
 
Company's
 
Report
 
on
 
Form
 
10-Q
 
for
 
the
 
quarter
 
ended
 
December
 
31,
 
2021
 
(the
 
"Report")
 
fully
complies with the
 
requirements of Section
 
13(a) or 15(d), as
 
applicable, of the
 
Securities Exchange Act
 
of 1934 and
that
 
the
 
information
 
contained
 
in
 
the
 
Report
 
fairly
 
presents,
 
in
 
all
 
material
 
respects,
 
the
 
financial
 
condition
 
and
results of operations of the Company.
Dated:March 1, 2022
By:
 
/s/ Carlos J. Vázquez
Name:
 
Carlos J. Vázquez
Title: Chief Financial Officer
A signed original of this written statement has been provided to the Company
 
and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff
 
upon request.
 
 
d192149dex322p1i0.jpg
EXHIBIT 32.2
CERTIFICATION
 
PURSUANT TO
18 U.S.C. Section 1350
Pursuant
 
to
 
18
 
U.S.C.
 
Section
 
1350,
 
the
 
undersigned
 
officer
 
of
 
Popular,
 
Inc.
 
(the
 
"Company"),
 
hereby
certifies
 
that
 
the
 
Company's
 
Annual
 
Report
 
on
 
Form
 
10-K
 
for
 
the
 
year
 
ended
 
December
 
31,
 
2021
 
(the
 
"Report")
fully
 
complies
 
with
 
the
 
requirements
 
of
 
Section
 
13(a)
 
or
 
15(d),
 
as
 
applicable,
 
of
 
the
 
Securities
 
Exchange
 
Act
 
of
1934 and that
 
the information contained in
 
the Report fairly presents,
 
in all material respects,
 
the financial condition
and results of operations of the Company.
Dated: March 1, 2022
By:
 
/s/ Carlos Vázquez
Name: Carlos J. Vázquez
Title: Chief Financial Officer
A signed original of this written statement has been provided to the Company and will be retained
 
by the
Company and furnished to the Securities and Exchange Commission or its staff
 
upon request.