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POPULAR, INC.

POPULAR, INC.BPOPEarnings & Financial Report

Nasdaq · Financials · State Commercial Banks

Popular, Inc., doing business as Banco Popular de Puerto Rico (BPPR) or simply as Banco Popular in Puerto Rico and the U.S. and British Virgin Islands, and as Popular Bank in the United States, is a full-service financial services conglomerate headquartered at Popular Center in the Milla de Oro financial district in the Hato Rey business center of San Juan, the capital municipality of the archipelago and island of Puerto Rico. Founded in 1893, it is the largest banking institution in Puerto R...

What changed in POPULAR, INC.'s 10-K — 2022 vs 2023

Top changes in POPULAR, INC.'s 2023 10-K

289 paragraphs added · 251 removed · 190 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

80 edited+61 added−35 removed143 unchanged
Lending Activities We concentrate our lending activities in the following areas: 8 (1) Commercial.
Lending Activities 8 We concentrate our lending activities in the following areas: (1) Commercial.
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).
Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face 16 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).
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 hand, and that impose collateralization requirements on such credit extensions.
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 hand, and that impose collateralization requirements on such credit 14 extensions.
In addition, as noted above in “Regulation of Reinsurers, Insurance Producers and Agents”, Popular’s reinsurance subsidiaries are subject to licensure and regulatory supervision by the Puerto Rico Office of the Commissioner of Insurance and to insurance laws and regulations. Available Information We maintain an Internet website at www.popular.com.
In addition, as noted above in “Regulation of Reinsurers, Insurance Producers and Agents”, Popular’s reinsurance subsidiaries are subject to licensure and regulatory supervision by the Puerto Rico Office of the Commissioner of Insurance and to insurance laws and regulations. 24 Available Information We maintain an Internet website at www.popular.com.
Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, 17 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.
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.
Popular’s reinsurance subsidiaries are subject to licensure and regulatory supervision by the Puerto Rico Office of the Commissioner of Insurance and to insurance laws and regulations requiring, among other things, minimum capital and solvency standards, financial reporting, restrictions on the amount of dividends payable, record keeping and examinations.
Popular’s reinsurance subsidiaries are subject to licensure and regulatory supervision by the Puerto Rico 23 Office of the Commissioner of Insurance and to insurance laws and regulations requiring, among other things, minimum capital and solvency standards, financial reporting, restrictions on the amount of dividends payable, record keeping and examinations.
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.
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 19 composite rating.
If the reserve fund is not sufficient to cover such balance in whole or in part, the outstanding 22 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.
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.
The FDIC, as required under the Federal Deposit Insurance Act (“FDIA”), established a plan in September 2020 to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35 percent within eight years.
The FDIC, as required under the Federal Deposit Insurance Act 15 (“FDIA”), established a plan in September 2020 to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35 percent within eight years.
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.
In addition, a member 18 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.
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 19 Crimes Enforcement Network, a bureau of the U.S.
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.
We work to anticipat e and adap t to dynamic competitive conditions whether through developing and marketing innovative products and services, adopting or developin g new technologie s that differentiat e our product s and services , cross-marketing , or providing personalized banking services.
We work to anticipat e and adap t to dynamic competitive conditions whether through developing and marketing innovative products and services, adopting or developin g new technologie s that differentiat e our products and services, cross-marketing, or providing personalized banking services.
The Federal Reserve Board, OCC and FDIC have issued comprehensive final guidance on incentive compensation policies intended to discourage excessive risk-taking in the incentive compensation policies of banking organizations in order to not 21 undermine the safety and soundness of such organizations.
The Federal Reserve Board, OCC and FDIC have issued comprehensive final guidance on incentive compensation policies intended to discourage excessive risk-taking in the incentive compensation policies of banking organizations in order to not undermine the safety and soundness of such organizations.
We strive to distinguish ourselves from other banks and financial services providers in our marketplace by providin g a high level of service to enhance customer loyalty and to attrac t and retain business.
We strive to distinguish ourselves from other banks and financial services providers in our marketplace by providin g a high level of service to enhance customer 11 loyalty and to attrac t and retain business.
A bank may not engage in any covered transaction if the aggregate amount of the bank’s covered transactions with that affiliate would exceed 14 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.
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.
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.
Consumer loans are mainly comprised of unsecured 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.
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 23 Committee, as well as our Corporate Governance Guidelines.
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.
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.
Resolution Planning and Resolution-Related Requirements 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.
As a 10 general policy, we do not advance additional money to borrowers who have loans that are 90 days past due or over.
As a general policy, we do not advance additional money to borrowers who have loans that are 90 days past due or over.
Our technology and business transformation will be a significant priority for the Corporation over the next three years and beyond. Refer to the Overview section of Management’s Discussion and Analysis included in this Form 10-K for information on this transformation initiative and other recent significant events that have impacted or will impact our current and future operations.
Our technology and business transformation will be a significant priority for the Corporation over the next three years and beyond. Refer to the Overview section of Management’s Discussion and Analysis included in this Form 10-K for information on recent significant events that have impacted or will impact our current and future operations.
Many commercia l 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 restructure d 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.
Some commercia l 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 restructure d 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.
Capital Adequacy Popular, Popular, BPPR and PB are each required to comply with applicable capital adequacy standards established by 15 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.
Capital Adequacy Popular, PNA, 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 the Basel Committee on Banking Supervision (the “Basel Committee”) as well as certain provisions of the Dodd-Frank Act.
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.
The FDIA 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.
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 2022, BPPR was in compliance with the statutory reserve requirement.
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 2023, BPPR was in compliance with the statutory reserve requirement.
During 2022, 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.
During 2023, 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.
As of December 31, 2022, 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.
As of December 31, 2023, 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.
If the borrower is not deemed to have financial difficulties , extensions, renewals and restructuring s are done in the normal course of busines s and the loans continue to be recorde d as performing. We evaluate various factors to determine if a borrower is experiencing financial difficulties.
If the borrower is not deemed to have financial difficulties , extensions, renewals and restructurings are done in the normal course of busines s and the loans continue to be recorde d as performing. We evaluate various factors to determine if a borrower is experiencing financial difficulties.
Board Oversight The Talent and Compensation Committee of the Corporation’s Board of Directors has oversight responsibility for the Corporation’s human capital management.
Board Oversight in Human Capital The Talent and Compensation Committee of the Corporation’s Board of Directors has oversight responsibility for the Corporation’s human capital management.
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 establishe s limits that consider factors such as maintainin g a prudent balance of risk-taking across diversified risk types and business units, compliance with regulator y guidance, and controlling the exposure to lower credit quality assets.
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 maintainin g a prudent balance of risk-taking across diversified risk types and business units, compliance with regulator y guidance, and controlling the exposure to lower credit quality assets.
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. The Capital Rules preclude certain hybrid securities, such as trust preferred securities, from inclusion in bank holding companies’ Tier 1 capital.
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 available for sale securities portfolios. The Capital Rules preclude certain hybrid securities, such as trust preferred securities, from inclusion in bank holding companies’ Tier 1 capital.
Additionally, the Corporation promotes employee health by encouraging annual physical exams and maintaining a Health and Wellness Center at its Puerto Rico-based corporate offices staffed with healthcare providers, where employees and eligible dependents can complete their physical exam, receive acute care or visit a nutritionist or psychologist free of charge.
Additionally, the Corporation promotes employee health and wellbeing by encouraging annual physical exams and maintaining a health and wellness center at its Puerto Rico-based corporate offices staffed with healthcare providers, where employees can complete their physical exam, receive acute care or visit a nutritionist or psychologist free of charge.
At December 31, 2022, 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.
At December 31, 2023, 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.
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.
Construction loans are CRE loans to companies, community or homeowners’ associations, 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.
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, 2022, the legal lending limit for BPPR under this provision was approximately $334 million.
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, 2023, the legal lending limit for BPPR under this provision was approximately $341 million.
The increased assessment is intended to improve the likelihood that the DIF reserve ratio would reach the required minimum by the statutory deadline of September 30, 2028. As of December 31, 2022, we had a DIF average total asset less average tangible equity assessment base of approximately $65 billion.
The increased assessment is intended to improve the likelihood that the DIF reserve ratio would reach the required minimum by the statutory deadline of September 30, 2028. As of December 31, 2023, we had a DIF average total asset less average tangible equity assessment base of approximately $66 billion.
In addition to BPPR’s commercial banking operations in New York that include direct loan origination and participating loans originated by PB, BPPR offers or holds financial products on a National scale in the U.S. market, including personal loans previously originated under the E-Loan brand, purchased personal loans originated by third parties, issuing co-branded credit cards offerings and gathering insured institutional deposits via online deposit gathering platforms.
In addition to BPPR’s commercial banking operations in New York that include direct loan origination and participating loans originated by PB, BPPR offers or holds financial products on a National scale in the U.S. market, including personal loans previously originated under the E-Loan brand, purchased personal loans originated by third parties, and gathering insured institutional deposits via online deposit gathering platforms.
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. On October 18, 2022, the FDIC finalized a rule that would increase initial base deposit insurance assessment rates by 2 basis points, beginning with the first quarterly assessment period of 2023.
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. In October 2022, the FDIC finalized a rule that increased initial base deposit insurance assessment rates by 2 basis points, beginning with the first quarterly assessment period of 2023.
Our loan portfolio is diversified by loan category. However, approximately 57% of our loan portfolio at December 31, 2022 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, 2022.
Our loan portfolio is diversified by loan category. However, approximately 55% of our loan portfolio at December 31, 2023 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, 2023.
We also compete with specialized players in th e local financial industry that are not subje ct to the same regulatory restrictions as domestic banks and bank holdin g companies.
We also compete with specialized players in th e local financial industry that are not subjec t to the same regulatory restrictions as domestic banks and bank holdin g companies.
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.
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 investment and insurance services, and commercial direct financing leases through specialized subsidiaries.
Refer to the Consolidated Financial Statements in this Form 10-K., Note 21 and Table 9 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 this Form 10-K Note 3 for more information regarding CECL.
Refer to the Consolidated Financial Statements in this Form 10-K., Note 21 and Table 9 of Management’s Discussion and Analysis for the capital ratios of Popular, BPPR and PB under Basel III.
At December 31, 2022, BPPR needed to obtain prior approval of the Federal Reserve Board before declaring a dividend in excess of $53 million due to its declared dividend activity and transfers to statutory reserves over the three year’s ended December 31, 2022.
At December 31, 2023, BPPR needed to obtain prior approval of the Federal Reserve Board before declaring a dividend in excess of $387 million due to its retained income, declared dividend activity and transfers to statutory reserves over the three year’s ended December 31, 2023.
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 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 2018, the FDIC issued a moratorium on resolution plans for insured depository institutions with more than $50 billion in assets.
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, 2022, Popular had total consolidated assets of $67.6 billion.
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, 2023, Popular had total consolidated assets of $70.8 billion.
Indicators that the borrower is experiencing financial difficultie s include, for example: (i) the borrower is currently in default on any of its debt or it is probable tha t the borrower would be in payment default on any of its debt in th e foreseeable future without the modificatio n; (ii) the borrower has declare d or is in the process of declarin g bankruptcy; (iii) there is significan t 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 threa t of bein g delisted from an exchange ; (v) based on estimate s and projection s that only encompass the current business capabilities , the borrower forecasts that its entity-specifi c cash flows will be insufficien t 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-trouble d debtor.
Indicators that the borrower is experiencing financial difficultie s include, for example: (i) the borrower is currently in default on any of its debt or it is probable tha t the borrower would be in payment default on any of its debt in th e foreseeable future without the modification ; (ii) the borrower has declare d or is in the process of declarin g bankruptcy; (iii) there is significan t 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 threa t of bein g delisted from an exchange ; (v) based on estimates and projection s that only encompass the current business capabilities , the borrower forecasts that its entity-specifi c cash flows will be insufficien t 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. 10 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 loans that are considere d problem loans based on their risk profile .
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.
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. In October 2023, the Federal Reserve Board proposed amendments to its rules on interchange fees.
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.
Banking organizations that are not subject to Category I or II standards 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.
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) unless customers have the opportunity to opt out of the disclosure.
Failure to comply with these sanctions could have serious legal and reputational consequences. 21 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) unless customers have the opportunity to opt out of the disclosure.
For a discussion of our loan portfolio, our deposits portfolio and our exposure to the Government of Puerto Rico, see “Financial Condition – Loans”, “Financial Condition – Deposits” and “Credit Risk – Geographical and Government Risk” in the MD&A and to Note 24 - Commitment and Contingencies to the Consolidated Financial Statements included in this Form 10-K.
For a discussion of our loan portfolio, our deposits portfolio and our exposure to the Government of Puerto Rico, see “Financial Condition – Loans”, “Financial Condition – Deposits” and “Credit Risk – Geographical and Government Risk” in the MD&A and to Note 24 - Commitment and Contingencies to the Consolidated Financial Statements included in this Form 10-K. 9 Credit Administration and Credit Policies Interest from our loan portfolios is our principal source of revenue.
Refer to Note 2 and Note 9 to the Consolidated Financial Statements included 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.
Refer to Note 2 and Note 9 to the Consolidated Financial Statements included in this Form 10-K, for additional information on loan modifications to borrowers with financial difficulties. Competition The financial services industry in which we operate is highly competitive.
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.
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.
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 $67.6 billion, total deposits of $61.2 billion and stockholders’ equity of $4.1 billion at December 31, 2022.
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 $70.8 billion, total deposits of $63.6 billion and stockholders’ equity of $5.1 billion at December 31, 2023.
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, 2022, both BPPR and PB were well capitalized.
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, 2023, both BPPR and PB met the quantitative requirements for ‘well capitalized’ status.
Credit Administration and Credit Policies 9 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 through active asset quality administration.
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 through active asset quality administration.
During the year ended December 31, 2022, BPPR declared cash dividends of $450 million, a portion of which was used by Popular for the payments of the cash dividends on its outstanding common stock and $231 million in accelerated stock repurchases.
During the year ended December 31, 2023, BPPR declared cash dividends of $200 million, a portion of which was used by Popular for the payments of the cash dividends on its outstanding common stock.
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 other state banks. 18 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.
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.
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.
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.
A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and 20 address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack.
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.
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.
Lease financings are offered by BPPR and are primarily comprised of automobile loans/leases made through automotive dealerships. 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.
However, we can provide no assuranc e as to the effectivenes s of these effort s on our future busines s or results of operations , and as to our continue d ability to anticipat e and adapt to changing 11 conditions, and to sufficientl y improve our services and/or banking products, in order to successfully compete in our primary service areas.
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 sufficientl y improve our services and/or banking products, in order to successfully compete in our primary service areas.
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.
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.
Pursuant to the 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.
Pursuant to the Capital Rules, the effects of certain AOCI items are not excluded; however, banking organizations that are not subject to Categories I or II standards under the framework for banking organizations with $100 billion or more in assets, including Popular, BPPR and PB, may make a one-time permanent election to continue to exclude these items.
During 2022, $76.9 million was transferred to the statutory reserve account.
During 2023, $44.5 million was transferred to the statutory reserve account.
A depository institution’s capital tier will depend upon how its capital levels compare with various relevant capital measures and certain other factors.
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.
Popular does not believe the brokered deposits regulations have had or will have a material effect on the funding or liquidity of BPPR and PB.
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. Popular does not believe the brokered deposits regulations have had or will have a material effect on the funding or liquidity of BPPR and PB.
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.
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.
See “Puerto Rico Regulation” below for a description of legislations and regulations on information privacy and cybersecurity in Puerto Rico. Climate-Related Financial Risks State and federal banking regulators have become increasingly focused on matters regarding climate change and its associated risks.
See “Puerto Rico Regulation” below for a description of legislations and regulations on information privacy and cybersecurity in Puerto Rico.
Popular also offers a 401(k) savings and investment plan. Popular matches $0.50 for every dollar the employee contributes to the 401(k) plan, up to 8% of their salary.
Moreover, we continuously offer activities and workshops centered on physical fitness and personal financial management. Popular further provides a 401(k) savings and investment plan, in which 98% of employees participate. Popular matches $0.50 for every dollar the employee contributes to the 401(k) plan, up to 8% of their salary.
As of December 31, 2022, 65% of the Corporation’s employees were female, while 35% were male. Women accounted for 64% of first and mid-level management and 33% of executive-level management as of such date.
Diversity, Equity and Inclusion Popular is committed to fostering a diverse, equitable and inclusive workplace. As of December 31, 2023, 64.5% of the Corporation’s employees were female, and 35.5% were male. Women accounted for 63% of first and mid-level management and 36.6% of executive-level management as of such date.
In March 2022, the SEC proposed new rules that would require registrants, such as Popular, to (i) report material cybersecurity incidents on Form 8-K, (ii) include updated disclosure in Forms 10-K and 10-Q of previously disclosed cybersecurity incidents, and disclose previously undisclosed, individually immaterial incidents when a determination is made that they have become material on an aggregated basis, (iii) disclose cybersecurity policies and procedures and governance practices, including at the board and management levels, in Form 10-K and (iv) disclose the board of directors’ cybersecurity expertise.
On July 6, 2023, the SEC adopted new rules that would require registrants, such as Popular, to (i) report material cybersecurity incidents on Form 8-K and, (ii) disclose in Annual Report on Form 10-K cybersecurity policies and procedures and governance practices, including at the board and management levels.
Loan category (Dollars in millions) BPPR % PB % POPULAR % C&I $3,796 17 $2,043 21 $5,839 18 CRE 4,627 20 5,273 55 9,900 31 Construction 147 1 611 7 758 2 Leasing 1,586 7 - - 1,586 5 Consumer 6,281 28 317 3 6,598 21 Mortgage 6,110 27 1,287 14 7,397 23 Total $22,547 100 $9,531 100 $32,078 100 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.
Loan category (Dollars in millions) BPPR % PB % POPULAR % C&I $4,796 20 $2,330 22 $7,126 20 CRE 4,695 19 5,888 56 10,583 30 Construction 170 1 789 7 959 3 Leasing 1,732 7 - - 1,732 5 Consumer 6,726 27 243 2 6,969 20 Mortgage 6,392 26 1,304 13 7,696 22 Total $24,511 100 $10,554 100 $35,065 100 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.
In May 2022, the Office of the Comptroller of the Currency (“OCC”), the Federal Reserve Board, and the FDIC jointly issued a proposed rule to modernize federal banking agencies’ CRA regulations.
On October 24, 2023, the OCC, the Federal Reserve Board, and the FDIC jointly issued a final rule to modernize the federal banking agencies’ CRA regulations and respond to changes in the banking industry.
Prompt Corrective Action 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”.
Refer to the Consolidated Financial Statements in this Form 10-K Note 2 for more information regarding CECL. 17 Prompt Corrective Action 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.
Human Capital Management Attracting, developing, and retaining top talent in an environment that promotes wellness, inclusion, learning, and transparency is a fundamental pillar of our long-term strategy. As of December 31, 2022, Popular employed approximately 8,900 employees, none of whom are represented by a collective bargaining group .
Human Capital Management Popular seeks to embody our purpose of “putting people at the center of progress” throughout its human capital management. Attracting, developing and retaining top talent in an environment that promotes wellness, diversity, inclusion, learning and transparency are fundamental pillars of our long-term strategy.
Furthermore, since 2017 we have invested in our compensation strategy, introducing a job leveling framework, adjusting salaries to better compete with the market, offering merit increases, and raising our base salary to $13 per hour in Puerto Rico, $15 per hour in the Virgin Islands, $17 per hour in Florida, and $20 per hour in New York and New Jersey.
Our ongoing enhancements to our employees’ compensation includes market-aligned salary adjustments, merit increases and raising our hourly pay rates to $15 per hour in Puerto Rico and $16 per hour in the Virgin Islands as of 2023, and $17 per hour in Florida and $20 per hour in New York and New Jersey as of 2022.
The effects on Popular of any potential change to the CRA rules will depend on the final form of any Federal Reserve rulemaking. Interchange Fees Regulation The Federal Reserve Board has established standards for debit card interchange fees and prohibited network exclusivity arrangements and routing restrictions.
The effective date of the final rule is April 1, 2024; however, banks will not be required to begin complying with certain provisions of the final rule until January 1, 2026, with data reporting requirements becoming applicable on January 1, 2027. 20 Interchange Fees Regulation The Federal Reserve Board has established standards for debit card interchange fees and prohibited network exclusivity arrangements and routing restrictions.
The excess compensation would be based on the amount the executive officer would have received had the incentive-based compensation been determined using the restated financials. The final rule requires the securities exchanges to propose conforming listing standards by February 26, 2023 and requires the standards to become effective no later than November 28, 2023.
The excess compensation would be based on the amount the executive officer would have received had the incentive-based compensation been determined using the restated financials. The Nasdaq Stock Market’s listing standards pursuant to the SEC’s rule became effective October 2, 2023. Popular’s clawback policy adopted in accordance with these listing standards is included as Exhibit 97.1.
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.
Our 40,000 square foot Development Center in San Juan, Puerto Rico and our satellite facilities in New York, South Florida, and the Virgin Islands offer year-round training sessions, activities and workshops. In 2023, we transitioned back to in-person sessions, but also continued offering virtual training programs.
As of December 31, 2022, Popular, PNA, BPPR and PB’s total assets were below the thresholds for applicability of these rules.
As of December 31, 2023, Popular, PNA, BPPR and PB’s total assets were below the thresholds for applicability of these rules, except that BPPR would be subject to the FDIC’s proposed amendments to its resolution planning requirements applicable to insured depository institutions with more than $50 billion but less than $100 billion in assets (if those amendments are adopted as proposed).
In 2021, the OCC proposed principles to provide for a framework for the management of climate-related risks for financial institutions and in 2022, the FDIC, the Federal Reserve Board and the NYSDFS each proposed principles or guidance with respect to the management of climate-related risks for financial institutions.
For example, on October 24, 2023, the Federal Reserve, FDIC, and OCC finalized interagency guidance on principles for climate-related financial risk management applicable to regulated financial 22 institutions with more than $100 billion in total consolidated assets.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Moreover, potential new regulations may require us to disclose information about a cybersecurity event before it has been resolved or fully investigated. 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.
Moreover, new regulations may require us to disclose information about a cybersecurity event before it has been resolved or fully investigated. 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.
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.
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 compromise of our systems, misappropriation of our confidential information 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.
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.
In addition, as a financial institution we are required to, among other things, identify our 33 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.
The failure to achieve the goals of the transformation project, the inability to maintain project expenses within current estimates or delays in executing our plans to implement the transformation project, may materially and adversely affect our business, 35 financial condition, results of operations, or cause reputational harm. The Corporation has embarked on a broad-based multi-year, technological and business process transformation.
The failure to achieve the goals of the transformation project, the inability to maintain project expenses within current estimates or delays in executing our plans to implement the transformation project, may materially and adversely affect our business, financial condition, results of operations, or cause reputational harm. The Corporation has embarked on a broad-based multi-year, technological and business process transformation.
A weakening of the Puerto Rico economy or other adverse economic conditions affecting Puerto Rico consumers and businesses could result in decreased demand for our products or services, deterioration in the credit quality of our customers, higher delinquencies, charge-offs or increased losses, all of which could adversely affect our financial condition and results of operations.
A weakening of the Puerto Rico economy or other adverse economic conditions affecting Puerto Rico consumers and businesses could result in 25 decreased demand for our products or services, deterioration in the credit quality of our customers, higher delinquencies, charge- offs or increased losses, all of which could adversely affect our financial condition and results of operations.
Furthermore, higher interest rates could negatively affect the payment performance on loans linked to variable interest rates to the extent borrowers are unable to afford higher interest payments, which could result in higher delinquencies. Additionally, inflationary pressure arising from increases in interest rates may also affect borrowers’ financial condition and their ability to pay their debts when due.
Furthermore, higher interest rates could negatively affect the payment performance on loans linked to variable interest rates to the extent borrowers are unable to afford higher interest payments, which could result in higher delinquencies. Inflationary pressure arising from increases in interest rates may also affect borrowers’ financial condition and their ability to pay their debts when due.
If the current economic environment were to deteriorate, more customers may have difficulty in repaying their credit obligations, which may result in higher levels of credit losses and reserves for credit losses. We are exposed to increased credit risks and credit losses to the extent our clients are concentrated by industry segment or type of client.
If the current economic environment were to 26 deteriorate, more customers may have difficulty in repaying their credit obligations, which may result in higher levels of credit losses and reserves for credit losses. We are exposed to increased credit risks and credit losses to the extent our clients are concentrated by industry segment or type of client.
Since a high percentage of our assets and liabilities are interest bearing or otherwise sensitive in value to changes in interest rates, changes in interest rates, in the shape of the yield curve or in spreads between different types of rates, have had and could in the future have 24 a material impact on our results of operations and the values of our assets and liabilities, including our investment portfolio.
Since a high percentage of our assets and liabilities are interest bearing or otherwise sensitive in value to changes in interest rates, changes in interest rates, in the shape of the yield curve or in spreads between different types of rates, have had and could in the future have a material impact on our results of operations and the values of our assets and liabilities, including our investment portfolio.
For example, on January 24, 2023, Popular Bank consented to the imposition of an order from the Federal Reserve Board requiring it to pay a $2.3 million civil money penalty to settle certain findings arising from Popular Bank’s approval of six (6) Payment Protection Program loans.
For example, on January 24, 2023, Popular Bank consented to the imposition of an order from the Federal Reserve Board requiring it to pay a $2.3 million civil money penalty to settle certain findings arising from Popular Bank’s approval of six Payment Protection Program loans.
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, including through brute force, password spraying and credential stuffing attacks directed at gaining unauthorized access to individual accounts.
Loss from e-fraud occurs when cybercriminals compromise our systems or the systems of our 28 customers and extract funds from customer’s credit cards or bank accounts, including through brute force, password spraying and credential stuffing attacks directed at gaining unauthorized access to individual accounts.
We are subject to extensive regulation under U.S. federal, state and Puerto Rico laws that govern almost all aspects of our operations and limit the businesses in which we may be engaged, including regulation, supervision and examination by federal, state and foreign banking authorities.
We are subject to extensive and evolving regulation under U.S. federal, state and Puerto Rico laws that govern almost all aspects of our operations and limit the businesses in which we may be engaged, including regulation, supervision and examination by federal, state and foreign banking authorities.
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.
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 37 requirements, and in most cases such costs are borne by the technology provider.
Central bank responses to inflationary pressures have led to higher market interest rates and, in turn, lower activity levels across U.S. and global financial markets. These circumstances have resulted in, and could continue to result in, reductions in the value of our investments.
Central bank responses to inflationary pressures led to higher market interest rates and, in turn, lower activity levels across U.S. and global financial markets. These circumstances resulted in, and could continue to result in, reductions in the value of our investments.
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. We have embarked on a broad-based multi-year, technological and business process transformation.
Difficulties associated 36 with potential acquisitions that may result from these factors could have a material adverse effect on our business, financial condition and results of operations. We have embarked on a broad-based multi-year, technological and business process transformation.
For example, we use estimates 37 and assumptions to determine our allowance for credit losses, our liability for contingent litigation losses, and the fair value of certain of our assets and liabilities, such as debt securities, loans held for sale, MSRs, intangible assets and deferred tax assets.
For example, we use estimates and assumptions to determine our allowance for credit losses, our liability for contingent litigation losses, and the fair value of certain of our assets and liabilities, such as debt securities, loans held for sale, MSRs, intangible assets and deferred tax assets.
Higher interest rates could also lead to fewer originations of commercial and residential real estate loans, loss of deposits, a misalignment in the pricing of short-term and long-term borrowings, less liquidity in the financial markets and higher funding costs.
Higher interest rates could lead to fewer originations of commercial and residential real estate loans, loss of deposits, a misalignment in the pricing of short-term and long-term borrowings, less liquidity in the financial markets and higher funding costs.
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.
The analysis considers all sources of 38 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.
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.
We from time-to-time self-report compliance matters to, or receive requests for information from, departments and agencies of the U.S. and Puerto Rico governments, including with respect to compliance with consumer protection laws and regulations.
We are from time to time subject to information requests, investigations and other regulatory enforcement proceedings from departments of the U.S. and Puerto Rico governments, including those that investigate compliance with consumer protection laws and regulations, which may expose us to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on our operations.
We are from time to time subject to information requests, investigations and other regulatory enforcement proceedings from departments and agencies of the U.S. and Puerto Rico governments, including those that investigate compliance with U.S. sanctions and consumer protection laws and regulations, which may expose us to significant penalties and collateral consequences, and could result in higher compliance costs or restrictions on our operations.
Our technology and business transformation will be a significant priority for the Corporation over the next three years and beyond. We expect the expenses tied to this transformation project, which will continue through at least 2025, to result in an enhanced digital experience for our clients, as well as better technology and more efficient processes for our employees.
Our technology and business transformation will be a significant priority for the Corporation over the next two years and beyond. We expect the expenses tied to this transformation project, which will continue through at least 2025, to result in an enhanced digital experience for our clients, as well as better technology and more efficient processes for our employees.
Denial-of-service attacks intentionally disrupt the ability of legitimate users, including customers and 27 employees, to access networks, websites and online resources.
Denial-of-service attacks intentionally disrupt the ability of legitimate users, including customers and employees, to access networks, websites and online resources.
For a discussion of the guidance and rules that federal banking regulators have released or proposed regarding cybersecurity and cyber risk management standards, see “Regulation and Supervision” in Part I, Item 1 — Business, included in the Form 10-K for the year ended December 31, 2022.
For a discussion of the guidance and rules that federal banking regulators have released or proposed regarding cybersecurity and cyber risk management standards, see “Regulation and Supervision” in Part I, Item 1 — Business, included in the Form 10-K for the year ended December 31, 2023.
We 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.
We 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 and employed software designed to assist us and our personnel in complying with these applicable laws and regulations.
Any or all of the foregoing factors could further increase the impact of the incident and thereby the costs and consequences of a cyber attack. We also rely on third parties for the performance of a significant portion of our information technology functions and the 28 provision of information security, technology and business process services.
Any or all of the foregoing factors could further increase the impact of the incident and thereby the costs and consequences of a cyber-attack. We also rely on third parties for the performance of a significant portion of our information technology functions and the 29 provision of information security, technology and business process services.
At December 31, 2022, we were exposed to credit risk with respect to $0.6 billion in residential mortgage loans sold or serviced subject to credit recourse provisions, consisting principally of loans associated with the Fannie Mae and Freddie Mac programs.
At December 31, 2023, we were exposed to credit risk with respect to $0.6 billion in residential mortgage loans sold or serviced subject to credit recourse provisions, consisting principally of loans associated with the Fannie Mae and Freddie Mac programs.
Although the Evertec Business Acquisition Transaction eliminated certain provisions of a previous Master Services Agreement with Evertec that required us to use Evertec exclusively to develop and implement new or enhanced products and services, and is expected to improve Popular’s ability to manage and control the development of the customer channels supported by the Acquired Assets, Popular expects that it will continue to depend on Evertec’s technology services to operate and control current products and services and to implement future products and services, 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.
Although the Evertec Business Acquisition Transaction eliminated certain provisions of a previous Master Services Agreement with Evertec that required us to use Evertec exclusively to develop and implement new or enhanced products and services, and is expected to improve Popular’s ability to manage and control the development of the customer channels supported by the assets acquired as part of the Evertec Business Acquisition Transaction (the “Acquired Assets”), Popular expects that it will continue to depend on Evertec’s technology services to operate and control current products and services and to implement future products and services, 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.
Additionally, if BPPR or PB cease to be well-capitalized, the FDIA and regulations adopted thereunder would restrict their ability to accept brokered deposits and limits the rate of interest payable on deposits. Our banking subsidiaries also have recourse obligations under certain agreements with third parties, including servicing and custodial agreements, that include ratings covenants.
Additionally, if BPPR or PB cease to be well-capitalized, the FDIA and regulations adopted thereunder would restrict their ability to accept brokered deposits and limit the rate of interest payable on deposits. 35 Our banking subsidiaries also have recourse obligations under certain agreements with third parties, including servicing and custodial agreements, that include ratings covenants.
The increased use of remote access and third-party video conferencing solutions 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 increased use of remote access and third-party video conferencing solutions to enable work-from-home arrangements for employees and facilitate the use of digital channels by our customers, has also 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.
Our ability to attract and retain qualified employees is also impacted by regulatory limitations on our compensation practices, such a s clawback requirements of incentive compensation, which may not affect other institutions with which we compete for talent. The scope and content of regulators’ policies on executive compensation continue to develop and are likely to continue evolving.
Our ability to attract and retain qualified employees is also impacted by regulatory limitations on our compensation practices, such as clawback requirements of incentive compensation, which may not affect other institutions with which we compete for talent. The scope and content of regulators’ policies on executive compensation continue to develop and are likely to continue evolving.
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.
In addition, 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.
Moreover, our ability to timely mitigate vulnerabilities and manage such risks, given the rise in number of required patches and third-party software, including “zero-day vulnerabilities”, as well as the obsolescence in some of our hardware and software, may impact our day-to-day operations, the availability of our systems and delay the deployment of technology enhancements and innovation.
Moreover, our efforts to timely mitigate vulnerabilities and manage such risks, given the rise in number and urgency of required patches and third-party software, including “zero-day vulnerabilities”, as well as the obsolescence in some of our hardware and software, may impact our day-to-day operations, the availability of our systems and delay the deployment of technology enhancements and innovation.
Any problems caused by these vendors, including those resulting from disruptions in the services provided, vulnerabilities in or breaches of the vendor’s systems, failure of the vendor to handle current or higher volumes, failure of the vendor to provide services for any reason or poor performance of services, or failure of the vendor to notify us of a reportable event in a timely manner, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business, result in potential liability to clients and customers, result in the imposition of fines, penalties or judgments by our regulators or harm to our reputation, any of which could materially and adversely affect us.
Any problems caused by these vendors, including those resulting from disruptions in the services provided, vulnerabilities in or breaches of the vendor’s systems, failure of the vendor to handle current or higher volumes, failure of the vendor to provide services for any reason or poor performance of services, or failure of the vendor to notify us of a reportable event in a timely manner, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business, result in potential liability to clients and customers, result in the imposition of fines, penalties or judgments by our regulators, lead to exposure of BPPR customer information or harm to our reputation, any of which could materially and adversely affect us.
An impact on the tangible capital levels of our operating subsidiaries, could also limit the amount of capital we may upstream to the holding company. Tangible capital levels have, and may continue to be, adversely affected by the impact of rapidly rising interest rates on investment securities in our available-for-sale portfolio.
An impact on the tangible capital levels of our operating subsidiaries, could also limit the amount of capital we may upstream to the holding company. Tangible capital levels have in the past been, and may in the future be, adversely affected by the impact of rapidly rising interest rates on investment securities in our available-for-sale portfolio.
Actions by the rating agencies or decreases in our capital levels may have adverse effects on our business, including by raising the cost of our obligations or affecting our ability to borrow.
Furthermore, actions by the rating agencies or decreases in our capital levels may have adverse effects on our liquidity and business, including by raising the cost of our obligations or affecting our ability to borrow.
We have been, and will continue to be, impacted by global and local economic and market conditions, including weakness in the economy, disruptions and volatility in the financial markets, inflation, changing monetary and fiscal policies, geopolitical conflicts, consumer and changes in business sentiment and unemployment.
We have been, and will continue to be, impacted by global and local economic and market conditions, including weakness in the economy, disruptions and volatility in the financial markets, inflation, monetary and fiscal policies, public policy, geopolitical conflicts, business and consumer sentiment and unemployment.
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.
Although we are regularly targeted by unauthorized threat- actor activity, including denial-of-service attacks, we have not, to date, experienced any material losses as a result of cyber-attacks.
Substantially all the deposits of BPPR and PB are subject to insurance up to applicable limits by the FDIC’s DIF and, as a result, BPPR and PB are subject to FDIC deposit insurance assessments.
Substantially all the deposits of BPPR and PB are subject to insurance up to applicable limits by the FDIC’s deposit insurance fund (“DIF”) and, as a result, BPPR and PB are subject to FDIC deposit insurance assessments.
Our ability to enhance our customer channels is also dependent on Evertec timely delivering Core APIs that meet BPPR’s requirements, which Evertec has committed to develop under the MSA. The Core APIs are necessary for BPPR to connect future enhancements to the Acquired Assets to existing Evertec core applications.
Our ability to enhance our customer channels is also dependent on Evertec timely delivering the core application programming interfaces (“Core APIs”) that meet BPPR’s requirements, which Evertec has committed to develop under the MSA. The Core APIs are necessary for BPPR to connect future enhancements to the Acquired Assets to existing Evertec core applications.
Future unforeseen or catastrophic events, including the appearance of new strains of the COVID-19 virus, and actions taken by governmental authorities and other third parties in response to such events, could again adversely affect our operations, cause economic and market disruption, adversely impact the ability of borrowers to timely repay their loans, or affect the value of any 29 collateral held by us, any of which could have a material adverse effect on our business, financial condition or results of operations.
Future unforeseen or catastrophic events, including new pandemic events, and actions taken by governmental authorities and other third parties in response to such events, could again adversely affect our operations, cause economic and market disruption, adversely 30 impact the ability of borrowers to timely repay their loans, or affect the value of any collateral held by us, any of which could have a material adverse effect on our business, financial condition or results of operations.
Recent events, including the Russian conflict in Ukraine, 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.
Recent events, including the wars in Ukraine and the Gaza Strip, 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.
Computer intrusion attempts either direct or through social engineering, supply chain compromise, email, text or voice messages, including using brand impersonation (regularly referred to as phishing, vishing and smishing), 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.
Computer intrusion attempts either direct or through social engineering (pretext calls), supply chain compromise, email, text or voice messages, including using brand impersonation (regularly referred to as phishing, vishing, smishing and quishing), have resulted in and may continue to 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.
For a discussion of the risks related to our dependence on third parties, including Evertec, see “We rely on other companies to provide key components of our business infrastructure, including 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 the Operational Risks section of Item 1A in this Form 10-K.
Certain risks particular to Evertec and our dependence on third parties are discussed under “We rely on other companies to provide key components of our business infrastructure, including 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 the Operational Risks section of Item 1A in this Form 10-K.
In the event of nonperformance by the borrower, we have rights to the underlying collateral securing the mortgage loan. During 2022, we repurchased approximately $7 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. During 2023, we repurchased approximately $2 million in mortgage loans subject to credit recourse provisions.
As of December 31, 2022, our liability established to cover the estimated credit loss exposure related to loans sold or serviced with credit recourse amounted to $7 million.
As of December 31, 2023, our liability established to cover the estimated credit loss exposure related to loans sold or serviced with credit recourse amounted to $4 million.
At December 31, 2022, our exposure to the Puerto Rico government consisted of $374 million in direct lending exposure to Puerto Rico municipalities and $251 million in loans insured or securities issued by Puerto Rico governmental entities but for which the principal source of repayment is non-governmental.
At December 31, 2023, our exposure to the Puerto Rico government consisted of $362 million in direct lending exposure to Puerto Rico municipalities and $238 million in loans insured or securities issued by Puerto Rico governmental entities but for which the principal source of repayment is non-governmental.
Furthermore, we have a significant amount of deposits from the Puerto Rico government, its instrumentalities and municipalities ($15.2 billion, or approximately 25% of our total deposits, as of December 31, 2022), and the amount of these deposits may fluctuate depending on the financial condition and liquidity of these entities, as well as on our ability to maintain these customer relationships.
Furthermore, we have a significant amount of deposits from the Puerto Rico government, its instrumentalities and municipalities ($18.1 billion, or approximately 28% of our total deposits, as of December 31, 2023), and the amount of these deposits may fluctuate depending on the financial condition and liquidity of these entities, as well as on our ability to maintain these customer relationships.
Furthermore, if we are unsuccessful or decide 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. We are subject to additional risks relating to the Evertec Business Acquisition Transaction.
Furthermore, if we are unsuccessful or decide 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.
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 recourse obligations. Collateral pledged by us to secure recourse obligations approximated $29 million at December 31, 2022.
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 recourse obligations. Collateral pledged by us to secure recourse obligations approximated $27.1 million on December 31, 2023.
The Federal Housing Finance Agency restricts the Federal Home Loan Bank of New York (“FHLBNY”) from lending to members of the FHLBNY with negative tangible capital unless the member’s primary banking regulator makes a written request to the FHLBNY to maintain access to borrowings.
The Federal Housing Finance Agency restricts the FHLBNY from lending to members of the FHLBNY with negative tangible capital unless the member’s primary banking regulator makes a written request to the FHLBNY to maintain access to borrowings.
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.
The most significant cyber-attack risks that we or our critical service providers may face include, but are not limited to, 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.
We may suffer losses on these loans if the proceeds from a foreclosure sale of 26 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.
We may suffer losses on these loans if 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.
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, growing geo-political threats, such as the ongoing Russian conflict in Ukraine, and the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, hacktivists and other parties.
Cybersecurity 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 mobile banking, artificial intelligence and the ability to conduct instant financial transactions anywhere globally, growing geo-political threats, such as the ongoing wars in Ukraine and in the Gaza Strip, and the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, hacktivists and other parties.
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 “Supervision and Regulation—FDIC Insurance” discussion in Item 1.
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 additional increases in FDIC premiums, assessment rates or special assessments may materially adversely affect our results of operations.
Both BPPR and PB have secured borrowing facilities with the FHLBNY, and had outstanding exposures of $1.9 billion and $1.4 million respectively as of December 31, 2022. Losing access to the FHLBNY borrowing facilities could adversely impact liquidity at the banking subsidiaries.
Both BPPR and PB have secured borrowing facilities with the FHLBNY and had outstanding exposures of $2.5 billion and $1.7 billion respectively as of December 31, 2023. Losing access to the FHLBNY borrowing facilities could adversely impact liquidity at the banking subsidiaries.
Further, regulators in the performance of their supervisory and enforcement duties, have significant discretion and power to prevent or remedy what they deem to be 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.
Further, regulators in the performance of their supervisory and enforcement duties, have significant discretion and power to prevent or remedy what they deem to be unsafe and unsound practices or violations of laws by banks and bank holding companies.
Over the course of our relationship with Evertec, we have experienced 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 have in certain cases led to exposure of BPPR customer information.
Over the course of our relationship with Evertec, we have experienced interruptions and delays in key services provided by Evertec, as well as cyber events, as a result of system breakdowns, misconfigurations, human error, application obsolescence and dependency on shared infrastructure components, which have in certain cases also led to exposure of BPPR customer information.
Increasing levels of inflation, driven by pent-up demand and supply-chain disruptions caused by the COVID-19 pandemic and the war in Ukraine, led the Federal Reserve Board to execute a series of sharp benchmark interest rate increases over the past year.
Increasing levels of inflation, driven by pent-up demand and supply-chain disruptions caused by the COVID-19 pandemic and the war in Ukraine, led the Federal Market Committee of the Federal Reserve Board (the “FOMC”) to execute a series of sharp benchmark interest rate increases beginning in the first quarter of 2022.
As of December 31, 2022, approximately 56% of our loan portfolio consisted of loans secured by real estate collateral (comprised of 29% in commercial loans, 25% in residential mortgage loans and 2% in construction loans). The value of the collateral securing such loans is dependent upon economic conditions in the area in which the collateral is located.
As of December 31, 2023, approximately 55% of our loan portfolio consisted of loans secured by real estate collateral (comprised of 30% in commercial loans, 22% in residential mortgage loans and 3% in construction loans). The value of the collateral securing such loans is dependent upon economic conditions in the area in which the collateral is located.
A significant portion of our business is concentrated in Puerto Rico, which accounted for approximately 79% of our assets and 84% of our deposits as of December 31, 2022 and 82% of our revenues for the year ended December 31, 2022.
A significant portion of our business is concentrated in Puerto Rico, which accounted for approximately 77% of our assets and 81% of our deposits as of December 31, 2023 and 78% of our revenues for the year ended December 31, 2023.
The performance of these credit portfolios significantly affects our financial condition and results of operations. We have in the past been adversely affected by negative changes in the financial condition of our clients due to weakness in the Puerto Rico and U.S. economy.
We have in the past been adversely affected by negative changes in the financial condition of our clients due to weakness in the Puerto Rico and U.S. economy.
Cyber attacks at third-party service providers are also becoming increasingly common, and, as a result, cybersecurity risks relating to our vendors have increased. The most important of these third-party service providers for us is Evertec, and certain risks particular to Evertec are discussed under “Operational Risks — We are subject to additional risks relating to the Evertec Business Acquisition Transaction”.
Cyber-attacks at third-party service providers are also becoming increasingly common, and, as a result, cybersecurity risks relating to our vendors have increased. The most important of these third-party service providers for us is Evertec.
In connection with the sale and securitization of mortgage loans, we are required to make a variety of customary representations and warranties regarding Popular and the loans being sold or securitized.
Defective and repurchased loans may harm our business and financial condition. 27 In connection with the sale and securitization of mortgage loans, we are required to make a variety of customary representations and warranties regarding Popular and the loans being sold or securitized.
Management expects that we would be able to meet any additional collateral requirements if and when needed. The requirements to post collateral under certain agreements or the loss of custodian funds, however, could reduce our liquidity resources and impact our results of operations.
While management expects that we would be able to meet any 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 our results of operations. As a holding company, we depend on dividends and distributions from our subsidiaries for liquidity.
If the interest rates we pay on our deposits and other borrowings increase at a faster rate than the interest rates we receive on loans and other investments, our net interest income, and, therefore, our earnings, could be adversely affected.
Additionally, if the interest rates we pay on our deposits and other borrowings were to increase at a faster rate than the interest rates we receive on loans and other investments, our net interest income, and, therefore, our earnings, could be adversely affected. All of these outcomes could adversely affect our earnings, liquidity and capital levels.
All of these outcomes could adversely affect our earnings, liquidity and capital levels. The rapid rise in interest rates in 2022 resulted in approximately $2.5 billion in unrealized mark-to-market losses on available-for-sale securities held in our investment securities portfolio. In October 2022, we transferred U.S.
The rapid rise in interest rates in 2022 resulted in approximately $2.5 billion in unrealized mark-to-market losses on available-for-sale securities held in our investment securities portfolio. In October 2022, we transferred U.S.
Global financial markets have recently experienced periods of extraordinary disruption and volatility, exacerbated by the COVID-19 pandemic, the war in Ukraine, supply- chain disruptions, high levels of, and rapid increases in, inflation, and increasing and high interest rates. Inflationary pressures have increased certain of our expenses (including our personnel expenses) and adversely affected consumer sentiment.
Global financial markets have recently experienced periods of extraordinary disruption and volatility, exacerbated by geopolitical conflicts, the U.S. debt-ceiling situation, high levels of inflation and rapid increases in interest rates. Inflationary pressures increased certain of our expenses (including our personnel expenses) and adversely affected consumer sentiment.
We have to date not experienced material losses in connection with these attacks. Cyber-security risks have also been recently exacerbated by the discovery of zero-day vulnerabilities in widely distributed third party software, such as the vulnerability identified in December 2021 in the Apache log4j, which could affect Popular’s or any of its service provider’s systems.
Cyber-security risks have also been recently exacerbated by the discovery of zero- day vulnerabilities in widely distributed third party software, such as the vulnerability identified in the Apache log4j in December 2021 and in the MOVEit file transfer application in May 2023, which could affect Popular’s or any of its service provider’s systems.
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. 32 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.
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.
Treasury securities with a fair value of approximately $6.5 billion (par value of $7.4 billion), and with accumulated unrealized losses of $873 million, from our available-for-sale portfolio to our held-to-maturity portfolio to reduce the impact of further increases in interest rates on accumulated other comprehensive income and tangible capital.
Treasury securities with a fair value of approximately $6.5 billion (par value of $7.4 billion), and with accumulated unrealized losses of $873 million, from our available-for-sale portfolio to our held-to-maturity portfolio.
Business of this Form 10-K for additional information related to the FDIC’s deposit insurance assessments applicable to BPPR and PB. 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.
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.
On October 18, 2022, the FDIC finalized a rule that would increase initial base deposit insurance assessment rates by 2 basis points, beginning with the first quarterly assessment period of 2023. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance.
On October 18, 2022, the FDIC finalized a rule that increased initial base deposit insurance assessment rates by 2 basis points, beginning with the first quarterly assessment period of 2023.
Switching from one vendor of core bank processing and related technology and security services to one or more new vendors is a complex process that carries business and financial risks. The implementation cycle for such a transition can be lengthy and require significant financial and management resources from us.
The transition to new financial services technology providers, and the replacement of services currently provided to us by Evertec, will be lengthy and complex. 31 Switching from one vendor of core bank processing and related technology and security services to one or more new vendors is a complex process that carries business and financial risks.
However, if interest rates continue to rise rapidly or for a prolonged period, we may accumulate significant additional mark-to-market losses on other investment securities in our available-for-sale portfolio, which may adversely affect our tangible capital and impact our ability to return capital to our stockholders.
While the size of our unrealized mark-to-market losses on available-for- sale securities had been reduced to $1.4 billion as of December 31, 2023, if interest rates were to again rise rapidly or for a prolonged period, we may accumulate significant additional mark-to-market losses on investment securities in our available-for-sale portfolio, which may adversely affect our tangible capital and impact our ability to return capital to our stockholders.
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.
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.
If we were unable to refinance these notes, we could have to declare extraordinary dividends from our banking and other operating subsidiaries to repay such notes. Our ability to declare such dividends would be subject to regulatory requirements and could require the prior approval of the Federal Reserve Board.
We also depend on dividends from our banking and other operating subsidiaries to pay debt service on outstanding debt and to repay maturing debt. Our ability to declare such dividends would be subject to regulatory requirements and could require the prior approval of the Federal Reserve Board.
As of December 31, 2022, we had approximately $827 million, $954 million and $94 million, respectively, of goodwill, net deferred tax assets and amortizable intangible assets recorded on our balance sheet.
As of December 31, 2023, we had approximately $804 million, $1 billion and $102 million, respectively, of goodwill, net deferred tax assets and amortizable intangible assets, including capitalized software costs, recorded on our balance sheet.
Puerto Rico’s fiscal and economic challenges have in the past adversely affected our customers, resulting in higher delinquencies, charge-offs and increased losses for us.
Puerto Rico’s fiscal and economic challenges have in the past adversely affected our customers, resulting in higher delinquencies, charge-offs and increased losses for us. While Puerto Rico’s economy has been gradually recovering and the Puerto Rico government emerged from bankruptcy in 2022, Puerto Rico still faces economic and fiscal challenges.
BUSINESS RISKS Negative changes in the financial condition of our clients have adversely impacted us in the past and may adversely impact us in the future. 25 A significant portion of our business involves lending money, which exposes us to credit risk and risk of loss if borrowers do not repay their loans, leases, credit cards or other credit obligations.
A significant portion of our business involves lending money, which exposes us to credit risk and risk of loss if borrowers do not repay their loans, leases, credit cards or other credit obligations. The performance of these credit portfolios significantly affects our financial condition and results of operations.
In addition, changes in our ratings and capital levels could affect our relationships with some creditors and business counterparties. For example, having negative tangible capital may impact our ability to access some sources of wholesale funding.
If Popular is unable to access the capital markets on favorable terms, our liquidity may be adversely affected. Changes in our ratings and capital levels could affect our relationships with some creditors and limit our access to funding. For example, having negative tangible capital may impact our ability to access some sources of wholesale funding.
For further information relating to our legal risk, see Note 24 - “Commitments & Contingencies”, to the Consolidated Financial Statements in this Form 10-K. LIQUIDITY RISKS We are subject to risks related to our own credit rating and capital levels.
For further information relating to our legal risk, see Note 24 - “Commitments & Contingencies”, to the Consolidated Financial Statements in this Form 10-K. LIQUIDITY RISKS We are subject to liquidity risks arising from market events or disruptions and instances of low investor and depositor confidence.

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Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. PROPERTIES As of December 31, 2022, BPPR operated 168 branches, of which 65 were owned and 103 were leased premises, and PB operated 39 branches of which 3 were owned and 36 were on leased premises. Also, the Corporation had 584 ATMs operating in Puerto Rico, 23 in the Virgin Islands and 94 in the U.S. Mainland.
ITEM 2. PROPERTIES As of December 31, 2023, BPPR operated 162 branches, of which 68 were owned and 94 were leased premises, and PB operated 40 branches of which 3 were owned and 37 were on leased premises. Also, the Corporation had 576 ATMs operating in Puerto Rico, 23 in the Virgin Islands and 100 in the U.S. Mainland.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Popular’s Preferred Stock issued and outstanding at December 31, 2022 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. 39 All series of Preferred Stock are pari passu. Dividends on each series of Preferred Stock are payable if declared by our Board of Directors.
Popular’s Preferred Stock issued and outstanding at December 31, 2023 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.
Monthly dividends on the Preferred Stock amounted to a total of $1.4 million for the year 2022. There can be no assurance that any dividends will be declared on the Preferred Stock in any future periods.
Monthly dividends on the Preferred Stock amounted to a total of $1.4 million for the year 2023. There can be no assurance that any dividends will be declared on the Preferred Stock in any future periods.
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, 2022, the maximum number of shares of common stock remaining available for future issuance under this plan was 3,444,778.
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, 2023, the maximum number of shares of 43 common stock remaining available for future issuance under this plan was 3,144,461.
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, 2022: 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 [2] Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs October 1 – October 31 - $- - - November 1 – November 30 - - - - December 1 – December 31 840,064 70.80 840,024 - Total December 31, 2022 840,064 $70.80 840,024 - [1] Includes 40 shares of common stock acquired by the Corporation during December 2022, 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.
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, 2023: 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 31 174 $62.92 - - November 1 – November 30 - - - - December 1 – December 31 498 67.95 - - Total December 31, 2023 672 $66.65 - - [1] Includes 174 and 498 shares of the Corporation's common stock acquired by the Corporation during October and December 2023, respectively, in connection with the satisfaction of tax withholding obligations on vested awards of restricted stock or restricted stock units granted to directors and certain employees under the Corporation’s Omnibus Incentive Plan.
Comparison of Five-Year Cumulative Total Return (TSR) Assumes all dividends were reinvested Base Year: December 31, 2017 = $100 (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.
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, 2018, plus (ii) the change in the per share price since the measurement date, by the share price at the measurement date. 44 Comparison of Five-Year Cumulative Total Return (TSR) Assumes all dividends were reinvested Base Year: December 31, 2018 = $100 (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.
Equity Compensation Plans For information about our equity compensation plans, refer to Part III, Item 12. Stock Performance Graph (1) 40 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.
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.
During 2022, the Corporation declared cash dividends in the total amount of $2.20 per common share outstanding, for an aggregate amount of $163.7 million. The Common Stock ranks junior to all series of Preferred Stock as to dividend rights and rights on liquidation, dissolution or winding up of Popular.
The Common Stock ranks junior to all series of Preferred Stock as to dividend rights and rights on liquidation, dissolution or winding up of Popular.
The Corporation repurchased a total of 3,179,265 shares at an average purchase price of $72.66, which were recorded as treasury stock by $245 million under the August ASR Agreement. 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.
The Corporation repurchased a total of 3,179,265 shares at an average purchase price of $72.66, which were recorded as treasury stock by $245 million under the August ASR Agreement. 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.
ITEM 4. MINE SAFETY DISCLOSURE Not applicable. 38 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”.
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”. 42 During 2023, the Corporation declared cash dividends in the total amount of $2.27 per common share outstanding, for an aggregate amount of $163.7 million.
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, 2023, Popular had 6,612 stockholders of record of the Common Stock, not including beneficial owners whose shares are held in record names of brokers or other nominees.
As of February 27, 2024, Popular had 6,564 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 $84.07 per share.
Removed
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.
Added
ITEM 4. MINE SAFETY DISCLOSURE Not applicable. PART II ITEM 5.
Removed
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.
Added
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.
Removed
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.
Removed
The last sales price for the Common Stock on that date was $71.27 per share.
Removed
The acquired shares of common stock were added back to treasury stock. [2] On August 24, 2022, the Corporation entered into an accelerated repurchase program for the repurchase of an aggregate $231 million of Popular's common stock, which was completed on December 7, 2022. Upon the final settlement, the Corporation received 840,024 shares of common stock.
Removed
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, 2017, plus (ii) the change in the per share price since the measurement date, by the share price at the measurement date.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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 80 within Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K. 41
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 84 within Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K.

Other BPOP 10-K year-over-year comparisons