FULLTEXT DEL 6 AV 6
10-Q – 2025-08-11 – d82325d10q.htm
●
The provision for credit losses amounted to $48.9 million
for the quarter ended June 30, 2025,
an increase of $2.1 million
when
compared
to
the
quarter
ended
June
30,
2024,
driven
by
additional
reserves
in
the
commercial
loans
portfolio,
specifically in Commercial
Real Estate portfolio in
the PB segment
due to higher
qualitative reserves and changes
in the
macroeconomic
scenario,
partially
offset
by
a
lower
provision
in
the
BPPR
segment
due
to
lower
net
charge-offs
and
improvements of credit quality in the commercial
portfolio.
●
Non-interest income
amounted to
$168.5 million,
an increase
of $2.2
million when
compared to
the quarter
ended June
30, 2024, mainly driven by higher
credit and debit card fee income,
higher investment management fees,
and a favorable
fair value
adjustment of
equity securities held
for deferred
benefit plans,
partially offset
by lower
other operating
income
mainly related to the daily rental car business sold
during the fourth quarter of 2024.
●
Operating expenses amounted to $492.8 million for
the quarter, reflecting
an increase of $23.2 million when
compared to
the quarter
ended June
30, 2024.
The increase
was driven
mainly by
higher personnel
costs due
to higher
incentives,
partially offset by lower professional fees.
●
Income tax expense of
$47.9 million with an
effective tax rate
(“ETR”) of 18.5% during
the quarter ended June
30, 2025,
compared to an income tax expense of $40.5
million with an ETR of 18.5% for the quarter ended
June 30, 2024.
●
At June
30, 2025,
the Corporation’s
total assets
amounted to
$76.1 billion,
compared to
$73.0 billion
at December
31,
2024. The
increase of
$3.1 billion
is primarily
due to
higher balance
in the
available-for-sale (“AFS”)
securities portfolio
and an
increase across
most loan
portfolios,
mainly in
commercial, mortgage,
and construction,
partially offset
by lower
balance in the held-to-maturity (“HTM”) investment
securities, money market investments, and a decrease in
other assets.
●
Deposits amounted to $67.2
billion at June 30, 2025,
an increase of $2.3
billion from December 31, 2024,
driven by P.R.
public deposits.
●
Stockholders’
equity
amounted
to
$6.0
billion
at
June
30,
2025,
compared
to
$5.6
billion
at
December 31,
2024.
The
Corporation and its
banking subsidiaries continue
to be
well capitalized. As
of June
30, 2025, the
Corporation’s tangible
book value
per common
share was
$75.41, an
increase of
$7.25 from
December 31,
2024. The
Common Equity
Tier
1
Capital ratio at June 30, 2025 was 15.91%,
compared to 16.03% at December 31, 2024.
Refer to Table 1 for selected financial data for the quarters ended June 30, 2025 and June
30, 2024.
135
Table 1 - Financial Highlights
Financial Condition Highlights
Ending balances at
Average for the six months ended
(In thousands)
June 30, 2025
December 31,
2024
Variance
June 30,
2025
June 30,
2024
Variance
Money market investments
$
6,340,786
$
6,380,948
$
(40,162)
$
6,314,487
$
6,477,180
$
(162,693)
Investment securities
28,283,970
26,244,977
2,038,993
28,642,361
28,034,347
608,014
Loans
[1]
38,188,076
37,113,075
1,075,001
37,310,383
35,226,488
2,083,895
Earning assets
72,812,832
69,739,000
3,073,832
72,267,231
69,738,015
2,529,216
Total assets
76,065,090
73,045,383
3,019,707
75,391,749
72,800,664
2,591,085
Deposits
67,217,491
64,884,345
2,333,146
66,112,327
64,529,716
1,582,611
Borrowings
1,414,494
1,176,126
238,368
1,120,666
1,045,181
75,485
Total liabilities
70,111,072
67,432,317
2,678,755
68,224,476
66,549,458
1,675,018
Stockholders’ equity
5,954,018
5,613,066
340,952
7,167,273
6,251,206
916,067
Note: Average balances exclude unrealized gains or losses on debt securities available-for-sale and the unrealized loss related to certain securities transferred from available-for-
sale to held-to-maturity.
Operating Highlights
Quarters ended June 30,
Six months ended June 30,
(In thousands, except per share information)
2025
2024
Variance
2025
2024
Variance
Net interest income
$
631,549
$
568,312
$
63,237
$
1,237,146
$
1,119,056
$
118,090
Provision for credit losses
(benefit)
48,941
46,794
2,147
113,022
119,392
(6,370)
Non-interest income
168,477
166,306
2,171
320,538
330,124
(9,586)
Operating expenses
492,761
469,576
23,185
963,773
952,689
11,084
Income before income tax
258,324
218,248
40,076
480,889
377,099
103,790
Income tax expense
47,884
40,459
7,425
92,947
96,027
(3,080)
Net income
$
210,440
$
177,789
$
32,651
$
387,942
$
281,072
$
106,870
Net income applicable to common stock
$
210,087
$
177,436
$
32,651
$
387,236
$
280,366
$
106,870
Net income per common share – basic
$
3.09
$
2.47
$
0.62
$
5.64
$
3.90
$
1.74
Net income per common share – diluted
$
3.09
$
2.46
$
0.63
$
5.64
$
3.90
$
1.74
Dividends declared per common share
$
0.70
$
0.62
$
0.08
$
1.40
$
1.24
$
0.16
Quarters ended June 30,
Six months ended June 30,
Selected Statistical Information
2025
2024
2025
2024
Common Stock Data
End market price
$
110.21
88.43
$
110.21
88.43
Book value per common share at period end
87.31
73.94
87.31
73.94
Profitability Ratios
Return on assets
1.11
%
0.97
%
1.04
%
0.77
%
Return on common equity
11.77
10.38
10.93
8.24
Net interest spread (non-taxable equivalent basis)
2.85
2.44
2.79
2.41
Net interest spread (taxable equivalent) - Non-GAAP
3.21
2.70
3.14
2.65
Net interest margin (non-taxable equivalent basis)
3.49
3.22
3.45
3.20
Net interest margin (taxable equivalent) - Non-GAAP
3.85
3.48
3.80
3.44
Capitalization Ratios
Average equity to average assets
9.48
%
8.60
%
9.51
%
8.59
%
Common equity Tier 1 capital
15.91
16.48
15.91
16.48
Tangible common
book value per common share (non-GAAP)
[2]
75.41
62.71
75.41
62.71
Return on average tangible common equity
[2]
13.26
11.77
12.32
9.35
Tier I capital
15.96
16.54
15.96
16.54
Total capital
17.70
18.30
17.70
18.30
Tier 1 leverage
8.51
8.53
8.51
8.53
[1]
Includes loans held-for-sale.
[2]
Refer to Table 10 for reconciliation to GAAP financial measures.
Non-GAAP Financial Measures
This Form 10-Q
contains financial information
prepared under accounting
principles generally accepted in
the United States
(“U.S.
136
GAAP”)
and
non-GAAP
financial
measures.
Management
uses
non-GAAP
financial
measures
when
it
is
determined
that
these
measures provide
meaningful information
about the
underlying performance
of the
Corporation’s ongoing
operations. Non-GAAP
financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by
other
companies.
Adjusted net income - Non-GAAP Financial Measure
In
addition to
analyzing the
Corporation’s
results on
a reported
basis, management
monitors whether
the
impact of
certain non-
recurring or
infrequent transactions
need to
be excluded
from the
results of
operations to
present what
is then
considered to
be
“adjusted
net
income”
of
the
Corporation.
Management
believes
that
the
“adjusted
net
income”
provides
meaningful
information
about
the
underlying
performance
of
the
Corporation’s
ongoing
operations.
The
“adjusted
net
income”
is
a
non-GAAP
financial
measure.
The
following
table
presents
the
adjusted
net
income
for
the
six
months
ended
June
30,
2024.
There
were
no
non-GAAP
adjustments for the six months ended June 30, 2025.
Table 2 - Adjusted Net Income
for the Six Months Ended June 30, 2024 (Non-GAAP)
(In thousands)
Income before
income tax
Income tax
expense
(benefit)
Total
U.S. GAAP Net income
$377,099
$96,027
$281,072
Non-GAAP Adjustments:
FDIC Special Assessment [1]
14,287
(5,234)
9,053
Adjustments related to intercompany distributions [2]
6,400
16,483
22,883
Adjusted net income (Non-GAAP)
$397,786
$84,778
$313,008
[1] Expense recorded during the first quarter of 2024 to
increase the estimate recognized during the fourth
quarter of 2023 related to the November 16,
2023 FDIC Special Assessment to recover the losses to the
deposit insurance fund used by the FDIC in connection
with the receiverships of several
failed banks. The special assessment amount and collection
period may change if the estimated loss is periodically
adjusted or if the total amount
collected varies.
[2] Income tax expense and other related expenses from
prior periods related to withholding taxes on certain
distributions from U.S. subsidiaries.
137
Net interest income on a taxable equivalent basis
– Non-GAAP Financial Measure
Net interest income, on
a taxable equivalent basis,
is presented with its
different components in Table
s
3 and 4 for
the quarter and
six months
ended June
30, 2025,
as compared
with the
same period
in 2024,
segregated by
major categories
of interest
earning
assets and interest-bearing liabilities.
The
main
sources
of
tax-exempt
interest
income
are
certain
loans
and
investments
in
obligations
of
the
U.S.
Government,
its
agencies and sponsored entities, and
certain obligations of the
Commonwealth of Puerto Rico and
its agencies and assets
held by
the Corporation’s international
banking entities. On
tables 3 and
4, the interest
income has been
converted to a
taxable equivalent
basis, using the applicable statutory income tax rates for each period net of interest expense that the Puerto Rico tax law requires to
be disallowed, based on an equal proportion of tax-exempt assets to total assets, and by an allocation of general and administrative
expenses attributed to
exempt income, reducing
the benefit
of the
tax-exempt income. The
effective yield, on
a taxable
equivalent
basis, will vary depending on the
level of these expenses that are
attributed to the available exempt income.
Under Puerto Rico tax
law, the exempt interest can be
deducted up to the amount of taxable income. Management believes that this presentation provides
meaningful information since it facilitates the comparison
of revenues arising from taxable and exempt
sources.
Tangible Common Equity and Tangible Assets
Tangible
common equity,
tangible common equity ratio, tangible
assets and tangible book value
per common share are
non-GAAP
financial measures.
Tangible
common equity
ratio and
tangible book
value per
common share
should be
used in
conjunction with
more
traditional
bank
capital
ratios
commonly
used
by
banks
and
analysts
to
compare
the
capital
adequacy
of
banking
organizations
with
significant
amounts
of
goodwill
or
other
intangible
assets,
typically
stemming
from
the
use
of
the
purchase
accounting method for
mergers and acquisitions.
Tangible
common equity,
tangible assets
and other related
measures should not
be
used
in
isolation
or
as
a substitute
for
stockholders' equity,
total
assets
or
any
other
measure calculated
in
accordance
with
GAAP.
Moreover, the
way the Corporation
calculates its tangible
common equity,
tangible assets and
other related measures
may
differ from that of other companies reporting measures
with similar names.
Table
10 provides
a reconciliation of
total stockholders’ equity
to tangible common
equity and total
assets to tangible
assets
as of
June 30, 2025 and December 31, 2024.
138
CRITICAL ACCOUNTING POLICIES / ESTIMATES
The accounting and reporting policies followed by the Corporation
and its subsidiaries conform to U.S. GAAP and
general practices
within
the
financial
services
industry.
Various
elements
of
the
Corporation’s
accounting
policies,
by
their
nature,
are
inherently
subject to estimation techniques, valuation assumptions
and other subjective assessments.
Management
has
discussed
the
development
and
selection
of
the
critical
accounting
estimates
with
the
Corporation’s
Audit
Committee. The Corporation has identified as critical accounting estimates those related to: (i) Fair Value
Measurement of Financial
Instruments;
(ii)
Loans
and
Allowance
for
Credit
Losses;
(iii)
Income
Taxes;
(iv)
Goodwill
and
Other
Intangible
Assets;
and
(v)
Pension and Postretirement
Benefit Obligations. For
a summary of
these critical accounting
estimates, refer to
the MD&A included
in
the
2024
Form
10-K.
Also,
refer
to
Note
2
to
the
Consolidated
Financial
Statements
included
in
the
2024
Form
10-K
for
a
summary of the Corporation’s significant accounting policies and to Note 3 to the Consolidated Financial Statements included in this
Form 10-Q for information on recently adopted accounting
standard updates.
STATEMENT
OF OPERATIONS ANALYSIS
NET INTEREST INCOME
The
Corporation’s
net
interest
income
for
the
quarter
ended
June
30,
2025
was
$631.5
million
and
increased
$63.2
million,
compared to the same
quarter in 2024.
Higher net interest income
was supported by
an increase in average
deposit balances and
loan growth.
Net interest
income on
a taxable
equivalent basis
for the
second quarter
of 2025
was $697.2
million, an
increase of
$82.4 million.
Net interest margin (“NIM”) for the quarter was 3.49%, an increase
of 27 basis points when compared to the second quarter
of 2024.
On a
taxable equivalent
basis, net
interest margin
for the
second quarter
of
2025 was
3.85% or
37 basis
points higher
than the
second quarter
of 2024.
NIM expansion
was mainly
attributed to
lower deposit
costs driven
by the
repricing of
high-cost deposits
that are
market-linked, such
as P.R.
public deposits,
coupled with
a higher
volume of
loans and
higher yields
of U.S.
Treasuries.
Total cost of deposits decreased 32 basis points to 1.78%.
On a taxable equivalent basis, the main drivers of
the increase for the second quarter of 2025
were:
●
higher income
from
U.S. Treasury
securities
by
$21.5
million,
due to
investment
activity
at
higher yields
supported
by
deposits growth.
The U.S.
Treasuries yield
increased 30
basis points
when compared
to the
second quarter
of 2024
as
reinvestment of maturing debt securities along with
incremental balances are being reinvested
at higher current rates;
●
higher
income
from
loans
by
$40.4
million
resulting
from
higher
average
balances
across
most
portfolios,
led
by
commercial, construction,
mortgage, auto
and lease
portfolios, resulting
from origination
activity.
Higher yields
from the
auto, lease and
mortgage portfolios mitigated the
impact of lower
yields from the
commercial and construction portfolios,
due to
the impact of
short-term market rates
decline on adjustable-rate
loans. Overall, the
loan portfolio yield
decreased
by two basis points to 7.50%; and
●
lower interest expense on deposits
by $44.9 million or 32
basis points lower when compared to
the same period in 2024.
The cost
of interest-bearing
deposits decreased
by 45
basis points,
mainly due
to the
repricing of
P.R.
public deposits
which decreased by 93 basis points to 3.22% and
a decrease in the cost of deposits in the
PB segment;
partially offset by:
●
lower interest
income from
money market
investments by
$18.8 million
or
103 basis
points mainly
due
to
lower yields
resulting from lower short-term market rates.
139
Table 3 - Analysis of Levels & Yields
on a Taxable Equivalent Basis
(Non-GAAP)
Quarter ended June 30,
Variance
Average Volume
Average Yields / Costs
Interest
Attributable to
2025
2024
Variance
2025
2024
Variance
2025
2024
Variance
Rate
Volume
(In millions)
(In thousands)
$
6,251
$
6,471
$
(220)
4.46
%
5.49
%
(1.03)
%
Money market
investments
$
69,532
$
88,316
$
(18,784)
$
(15,866)
$
(2,918)
28,809
28,943
(134)
3.29
3.01
0.28
Investment securities [1]
236,372
216,922
19,450
18,673
777
27
26
1
5.99
5.69
0.30
Trading securities
407
367
40
21
19
Total money market,
investment and
trading
35,087
35,440
(353)
3.50
3.47
0.03
securities
306,311
305,605
706
2,828
(2,122)
Loans:
18,676
17,707
969
6.73
6.86
(0.13)
Commercial
313,493
302,003
11,490
(4,831)
16,321
1,459
1,070
389
8.19
9.11
(0.92)
Construction
29,806
24,224
5,582
(2,558)
8,140
1,963
1,789
174
7.18
6.86
0.32
Leasing
35,249
30,697
4,552
1,467
3,085
8,339
7,817
522
5.89
5.66
0.23
Mortgage
122,873
110,673
12,200
4,632
7,568
3,211
3,192
19
14.00
13.97
0.03
Consumer
112,083
110,906
1,177
374
803
3,937
3,819
118
9.14
8.88
0.26
Auto
89,706
84,268
5,438
2,780
2,658
37,585
35,394
2,191
7.50
7.52
(0.02)
Total loans
703,210
662,771
40,439
1,864
38,575
$
72,672
$
70,834
$
1,838
5.57
%
5.49
%
0.08
%
Total earning assets
$
1,009,521
$
968,376
$
41,145
$
4,692
$
36,453
Interest bearing
deposits:
$
8,062
$
7,522
$
540
1.71
%
1.97
%
(0.26)
%
NOW and money
market
$
34,288
$
36,783
$
(2,495)
$
(4,611)
$
2,116
14,605
14,728
(123)
0.83
0.92
(0.09)
Savings
30,378
33,749
(3,371)
(2,862)
(509)
8,532
8,237
295
3.15
3.39
(0.24)
Time deposits
67,032
69,494
(2,462)
(4,857)
2,395
20,333
19,364
969
3.22
4.15
(0.93)
P.R. public
deposits
163,360
199,913
(36,553)
(45,918)
9,365
51,532
49,851
1,681
2.29
2.74
(0.45)
Total interest bearing
deposits
295,058
339,939
(44,881)
(58,248)
13,367
14,825
15,176
(351)
Non-interest bearing
demand deposits
66,357
65,027
1,330
1.78
2.10
(0.32)
Total deposits
295,058
339,939
(44,881)
(58,248)
13,367
470
80
390
4.52
5.64
(1.12)
Short-term borrowings
5,300
1,126
4,174
(213)
4,387
Other medium and
832
978
(146)
5.79
5.16
0.63
long-term debt
11,965
12,530
(565)
181
(746)
Total interest bearing
52,834
50,909
1,925
2.36
2.79
(0.43)
liabilities (excluding
demand deposits)
312,323
353,595
(41,272)
(58,280)
17,008
Other sources of funds
5,013
4,749
264
$
72,672
$
70,834
$
1,838
1.72
%
2.01
%
(0.29)
%
Total source of funds
$
312,323
$
353,595
$
(41,272)
$
(58,280)
$
17,008
Net interest margin/
income on a taxable
equivalent basis (Non-
GAAP)
3.85
%
3.48
%
0.37
%
$
697,198
$
614,781
$
82,417
$
62,972
$
19,445
3.21
%
2.70
%
0.51
%
Net interest spread
Taxable equivalent
adjustment
65,649
46,469
19,180
Net interest margin/
income non-taxable
equivalent basis (GAAP)
3.49
%
3.22
%
0.27
%
$
631,549
$
568,312
$
63,237
Note: The changes that are not due solely to volume or
rate are allocated to volume and rate based on the
proportion of the change in each category.
[1] Average balances exclude unrealized gains or losses
on debt securities available-for-sale and the unrealized
loss related to certain securities transferred from
available-for-sale to held-to-maturity.
140
The Corporation’s net
interest income for the
six-month period ended June
30, 2025 was
$1.2 billion, or $118.1
million higher than
the same period
in 2024. Taxable
equivalent net interest
income was $1.4
billion, an increase
of $156.7 million
when compared to
the same
period in
2024. NIM
was 3.45%,
an increase
of
25 basis
points when
compared to
3.20% in
2024. NIM,
on a
taxable
equivalent basis, for the six months ended June
30, 2025, was 3.80%, an increase of
36 basis points compared to the same
period
of 2024.
The main drivers of the variances in net interest income on a taxable equivalent basis for the six-month period ended June 20, 2025
were:
●
higher income from U.S.
Treasury securities by
$53.9 million mainly driven
by higher yields, coupled with
higher average
volume by $640.0 million;
●
higher income from
loans by $71.6
million driven by
higher average balances across
most portfolios, mainly commercial,
construction and
mortgage, and
higher yields
in the
mortgage, auto
and leasing
portfolios due
to originations
at higher
rates, partially
offset by
lower yields
in commercial
and construction
portfolios due
to
adjustable-rate loans
which were
impacted by the decline in index rates; and
●
lower deposit
cost by
$76.5 million
mainly due
to the
repricing of
marked linked
P.R.
public deposits,
which reflected
a
lower cost by 90 basis points and deposit costs repricing
in both banks;
partially offset by:
●
lower income from money markets investments by
$37.1 million driven by the decline in
short-term market rate and lower
average balances due to loan growth and investments,
mainly in U.S. Treasuries; and
●
higher
short-term
borrowings
expenses
by
$4.4
million
mainly
due
to
higher
average
balances
of
FHLB
advances
at
Popular Bank.
141
Table 4 – Analysis of Levels & Yields
on a Taxable Equivalent Basis
from Continuing Operations (Non-GAAP)
Period ended June 30,
Variance
Average Volume
Average Yields / Costs
Interest
Attributable to
2025
2024
Variance
2025
2024
Variance
2025
2024
Variance
Rate
Volume
(In millions)
(In thousands)
$
6,314
$
6,477
$
(163)
4.46
%
5.49
%
(1.03)
%
Money market
investments
$
139,698
$
176,832
$
(37,134)
$
(32,791)
$
(4,343)
28,613
28,626
(13)
3.22
2.86
0.36
Investment securities
[1]
456,807
408,024
48,783
45,804
2,979
29
30
(1)
5.90
4.60
1.30
Trading securities
847
678
169
186
(17)
Total money market,
investment and
trading
34,956
35,133
(177)
3.45
3.35
0.10
securities
597,352
585,534
11,818
13,199
(1,381)
Loans:
18,585
17,660
925
6.72
6.85
(0.13)
Commercial
619,461
601,507
17,954
(13,059)
31,013
1,385
1,031
354
8.15
9.04
(0.89)
Construction
55,995
46,324
9,671
(4,994)
14,665
1,951
1,766
185
7.14
6.80
0.34
Leasing
69,693
60,051
9,642
3,129
6,513
8,254
7,770
484
5.86
5.64
0.22
Mortgage
241,789
219,216
22,573
8,609
13,964
3,207
3,208
(1)
14.02
13.94
0.08
Consumer
222,989
222,396
593
230
363
3,929
3,791
138
9.11
8.82
0.29
Auto
177,511
166,322
11,189
5,010
6,179
37,311
35,226
2,085
7.49
7.50
(0.01)
Total loans
1,387,438
1,315,816
71,622
(1,075)
72,697
$
72,267
$
70,359
$
1,908
5.54
%
5.43
%
0.11
%
Total earning assets
$
1,984,790
$
1,901,350
$
83,440
$
12,124
$
71,316
Interest bearing
deposits:
$
8,022
$
7,643
$
379
1.72
%
1.99
%
(0.27)
%
NOW and money
market
$
68,290
$
75,548
$
(7,258)
$
(9,978)
$
2,720
14,556
14,711
(155)
0.85
0.93
(0.08)
Savings
61,658
67,873
(6,215)
(5,274)
(941)
8,466
8,029
437
3.18
3.29
(0.11)
Time deposits
133,713
131,511
2,202
(5,555)
7,757
20,310
19,017
1,293
3.27
4.17
(0.90)
P.R. public
deposits
329,260
394,503
(65,243)
(90,446)
25,203
51,354
49,400
1,954
2.33
2.73
(0.40)
Total interest bearing
deposits
592,921
669,435
(76,514)
(111,253)
34,739
14,758
15,129
(371)
Non-interest bearing
demand deposits
66,112
64,529
1,583
1.81
2.09
(0.28)
Total deposits
592,921
669,435
(76,514)
(111,253)
34,739
297
82
215
4.57
5.67
(1.10)
Short-term
borrowings
6,726
2,318
4,408
(404)
4,812
Other medium and
847
988
(141)
5.72
5.13
0.59
long-term debt
24,077
25,239
(1,162)
250
(1,412)
Total interest bearing
52,498
50,470
2,028
2.40
2.78
(0.38)
liabilities (excluding
demand deposits)
623,724
696,992
(73,268)
(111,407)
38,139
5,011
4,760
251
Other sources of
funds
$
72,267
$
70,359
$
1,908
1.74
%
1.99
%
(0.25)
%
Total source of funds
$
623,724
$
696,992
$
(73,268)
$
(111,407)
$
38,139
3.80
%
3.44
%
0.36
%
Net interest margin/
income on a taxable
equivalent basis
(Non-GAAP)
$
1,361,066
$
1,204,358
$
156,708
$
123,531
$
33,177
3.14
%
2.65
%
0.49
%
Net interest spread
Taxable equivalent
adjustment
123,920
85,302
38,618
3.45
%
3.20
%
0.25
%
Net interest margin/
income non-taxable
equivalent basis
(GAAP)
$
1,237,146
$
1,119,056
$
118,090
Note: The changes that are not due solely to volume or
rate are allocated to volume and rate based on the
proportion of the change in each category.
[1] Average balances exclude unrealized gains or losses
on debt securities available-for-sale and the unrealized
loss related to certain securities transferred
from available-for-sale to held-to-maturity.
142
Provision for Credit Losses - Loans Held-in-Portfolio
and Unfunded Commitments
For the
quarter ended
June 30,
2025,
the Corporation
recorded a
provision for
credit losses
related to
loans held-in-portfolio
and
unfunded commitments of
$48.4 million, an
increase of $2.1
million when compared to
the same quarter
of the previous
year.
The
provision
for
the
loan
portfolio
was
$49.5
million,
an
increase
of
$5.4
million,
and
the
provision
release
related
to
unfunded
commitments was $1.1
million, a favorable
variance of $3.2
million, mainly driven
by lower unfunded
commitments reserves at
the
BPPR segment.
As discussed
in Note
8 to
the Consolidated
Financial Statements,
the Corporation
estimates the
ACL by
weighting the
outputs of
optimistic,
baseline,
and
pessimistic
scenarios.
During
the
first
quarter
of
2025,
in
response
to
the
economic
uncertainty,
the
Corporation increased the probability assigned to the pessimistic
scenario making it equal to the baseline scenario. Subsequently, in
the second quarter
of 2025, the
probability assigned to the
pessimistic scenario was moderately
reduced based on
the changes in
the economic outlook and
a reassessment of uncertainty
compared to the previous
quarter. The
net impact of these
two events on
the
ACL
levels
for
the
six
months
ended June
30,
2025
was
$13.7
million
in
additional
reserves. The
probability
weight for
the
pessimistic scenario remains above the levels observed
in 2024, given the ongoing economic uncertainty.
The major
drivers of
the changes
in the
provision for
loan losses
during the
quarter by
business segment
when compared
to the
same quarter in 2024, were as follows:
●
In the BPPR segment,
the provision for loans losses
was $43.2 million, a decrease
of $5.4 million when
compared to the
same quarter in
2024, mainly driven
by lower reserves
for the commercial
portfolio of $16.4 million
due to improvements
in credit quality and lower net
charge-offs,
which offset the increase in the
weight assigned to the pessimistic scenario for
the
year
2025,
as
discussed
above.
The
favorable
variance
was
partially
offset
by
higher
reserves
in
the
consumer
portfolio due to changes in credit quality mainly within
the auto portfolio and changes in the macroeconomic
scenarios.
●
In
the Popular
U.S. segment,
the provision
for
loans losses
was
$6.4 million
for the
quarter ended
June
30, 2025,
an
increase of
$10.8 million, mainly
driven by
higher qualitative reserves
for the
U.S. Commercial Real
Estate portfolio
and
changes in macroeconomic
scenarios, when compared to
the reserve release
recorded for the
same period in
2024 due
to improvement in credit ratings.
For the six
months ended June
30, 2025, the
provision for credit
loss related to
loans held-in-portfolio and
unfunded commitments
amounted to $112.3 million, a decrease of $6.1 million, compared to the six months ended June 30, 2024. The provision for the loan
portfolio
was
$114.8
million,
a
decrease
of
$1.8
million,
and
the
provision
release
related
to
unfunded
commitments
was
$2.4
million, a
decrease of
$4.3 million,
mainly driven
by the
reduction in
unfunded commitment
reserves within
the U.S.
construction
portfolio. The major drivers of the decrease
in the provision for loan losses during
the six months ended June 30,
2025 by business
segment when compared to the same period in
2024, were as follows:
●
In the
BPPR segment,
the provision
for loan
losses was
$95.8 million,
a decrease
of $13.8
million, driven
by lower
net
charge-offs,
mainly
in
commercial
and
consumer
loans,
and
improvement
in
credit
quality,
mainly
in
the
commercial
portfolio, partially offset by the
increase in the probability weight assigned to
the pessimistic scenario which generated an
additional reserve of $8.8 million.
●
In the
Popular U.S.
segment, the
provision for
loan losses
was $18.9
million, an
increase of
$12.0 million,
driven by
an
increase of $7.1 million mainly
due to credit quality changes and
additional qualitative reserves established, mainly within
the
commercial
portfolio,
and
an
increase
of
$4.9
million
related
to
the
increase
in
probability
weight
assigned
to
the
pessimistic scenario.
At June
30, 2025,
the total
allowance for
credit losses
for loans
held-in-portfolio amounted
to $769.5
million, compared
to $746.0
million as of December 31, 2024.
The ratio of the allowance for
credit losses to loans held-in-portfolio was
2.02% at June 30, 2025,
compared to 2.01% at
December 31, 2024. Refer to
Note 8 to the
Consolidated Financial Statements, for additional
information on
the
Corporation’s
methodology to
estimate
its
ACL.
Refer to
the
Credit Risk
section of
this MD&A
for a
detailed
analysis
of
net
charge-offs, non-performing assets, the allowance for credit losses
and selected loan losses statistics.
Non-Interest Income
143
Non-interest income amounted to $168.5 million for the second quarter of 2025, an increase of $2.2 million when compared with the
same quarter for the previous year. The variance was primarily due
to:
●
higher other
service fees
by
$3.7 million
mainly due
to
higher credit
and debit
card fee
income by
$2.5 million,
due to
higher volume
of costumer
transactions,
and higher
investment management
fees by
$1.2 million,
due to
higher assets
under management; and
●
a favorable fair value adjustment of equity securities held
for deferred compensation plans which have an offsetting effect
in personnel cost of $1.5 million;
partially offset by:
●
lower other operating income
by $3.6 million mainly
due to lower daily
car rental revenue by
$4.9 million and lower
gains
from
the sale
of car
rental units
by
$2.9 million,
both due
to
the sale
of
the daily
car rental
business during
the fourth
quarter of 2024, partially
offset by $2.3 million
of income related to
the reimbursement of excess
interest paid to the
U.S.
Internal Revenue Service
(“the IRS”) for
late payment penalties
related to tax
withholdings on intercompany
distributions
for the years 2014-2024
previously disclosed in 2024, and
a $1.2 million cash
distribution from the exit of
a legacy equity
investment.
Non-interest income amounted to $320.5 million for the six
months ended June 30, 2025, a decrease of $9.6 million when
compared
to the same period of the previous year. The main factors that
contributed to the variance were:
●
lower other operating income by $15.6 million mainly due to daily
car rental revenue by $9.8 million and the gains from the
sale of car rental units by
$6.3 million during the six months ended June
30, 2024 associated with the car rental business
sold in the fourth quarter of 2024, partially offset
by $3.9
million income related to the reimbursement of interest paid from
the IRS, as discussed above;
partially offset by:
●
higher other
service fees
by $3.9
million due
to
higher credit
and debit
card fee
income by
$4.0 million,
due to
higher
volume
of
transactions,
and
higher
investment
management
fees
by
$2.8
million,
due
to
higher
assets
under
management,
partially offset by lower insurance fees by $4.1 million;
and
●
higher
service
charges
on
deposit
accounts
by
$2.9
million
mainly
due
to
higher
non-balance
compensation
fees
in
commercial deposits.
144
Operating Expenses
Operating expenses amounted to $492.8 million for the
quarter ended June 30, 2025, an
increase of $23.2 million, when compared
with the same quarter of 2024. The variance
in operating expenses was mainly driven by:
●
higher personnel costs by $31.9 million mainly due to higher incentives, including $13.0 million related to the profit-sharing
plan
which
is
tied
to
the
Corporation’s
financial
performance
and
$9.9
million
in
other
performance-based incentives
and
stock-
based compensation, and higher salaries expense by
$4.1 million due to a higher headcount and
annual salary revisions;
●
higher
technology
and
software
expenses
by
$4.9
million
mainly
due
to
higher
software
amortization
expense
due
to
the
acquisition
and
renewal
of
multiple
technology
licenses
reflective
of
the
continuous
investment
in
technology
and
transformation initiatives and an increase in network
management services expense; and
●
higher other taxes expense by $3.3 million
mainly due to higher regulatory fees and
an increase in municipal license tax;
partially offset by:
●
lower
professional
fees
by
$9.6
million
mainly
due
to
a
decrease
in
advisory
expenses
related
to
corporate
initiatives,
a
decrease, due
to
expense-recognition timing
differences,
in the
cost of
restricted stock
granted to
directors, and
lower legal
fees;
●
lower operational losses by
$5.6 million due to
a buildup of reserves
for operational losses during the
second quarter of 2024;
and
●
lower equipment expenses
by $3.9 million, mainly due to the
elimination of the car rental fleet depreciation
expense, related to
the car rental business sold in 2024.
Operating
expenses
amounted
to
$963.8
million
for
the
six
months
ended
June
30,
2025,
an
increase
of
$11.1
million
when
compared with the
same period of
2024. Excluding the
$6.4 million of
interest accrued related
to prior period
tax withholdings and
the
$14.3
million
impact
of
the
FDIC
Special
Assessment,
total
operating
expenses
for
the
six
months
ended
June
30,
2025,
increased by $31.8 million, when compared with
the same period of 2024. The main drivers of the increase
were:
●
higher personnel costs by $29.3 million mainly due to higher incentives, including $13.0 million related to the profit-sharing plan
which
is
tied
to
the
Corporation’s
financial
performance
and
$9.3
million
in
other
performance-based incentives
and
stock-
based compensation, and higher salaries expenses
by $5.7 million due to a higher headcount
and annual salary revisions;
●
higher
technology
and
software
expenses
by
$9.2
million
mainly
due
to
higher
software
amortization
expense
due
to
the
acquisition
and
renewal
of
multiple
technology
licenses
reflective
of
the
continuous
investment
in
technology
and
transformation initiatives and an increase in network
management services expense;
and
●
higher other taxes expense by $7.6 million
mainly due to higher regulatory fees and an
increase in municipal license tax;
partially offset by:
●
lower professional fees by $11.7
million mainly due to a
decrease in advisory expenses related to corporate initiatives
focused
on compliance and cyber security efforts, a decrease in
IT professional services,
and lower legal fees;
●
lower equipment expenses
by $8.1 million, mainly due to the depreciation of car rental units associated with the daily car rental
transaction; and
●
lower operational losses by $3.1 million due to a
buildup of reserves for operational losses during
the second quarter of 2024.
145
Table 5 - Operating Expenses
Quarters ended June 30,
Six months ended June 30,
(In thousands)
2025
2024
Variance
2025
2024
Variance
Personnel costs:
Salaries
$
132,752
$
128,634
$
4,118
$
263,702
$
258,018
$
5,684
Commissions, incentives, and other bonuses
40,551
30,626
9,925
78,537
69,237
9,300
Profit sharing
13,000
-
13,000
13,000
-
13,000
Pension, postretirement, and medical insurance
18,458
16,619
1,839
33,024
34,004
(980)
Other personnel costs, including payroll taxes
24,594
21,545
3,049
53,805
51,542
2,263
Total personnel
costs
229,355
197,424
31,931
442,068
412,801
29,267
Net occupancy expenses
29,140
27,692
1,448
56,358
55,733
625
Equipment expenses
5,789
9,662
(3,873)
11,091
19,229
(8,138)
Other taxes
18,632
15,333
3,299
37,357
29,708
7,649
Professional fees
28,108
37,744
(9,636)
54,933
66,662
(11,729)
Technology and
software expenses
84,696
79,752
4,944
168,364
159,214
9,150
Processing and transactional services:
Credit and debit cards
13,044
13,739
(695)
25,970
25,883
87
Other processing and transactional services
24,817
25,357
(540)
49,672
47,407
2,265
Total processing
and transactional services
37,861
39,096
(1,235)
75,642
73,290
2,352
Communications
5,010
4,357
653
9,914
8,914
1,000
Business promotion:
Rewards and customer loyalty programs
18,047
16,406
1,641
34,412
30,462
3,950
Other business promotion
8,338
9,043
(705)
15,648
15,976
(328)
Total business
promotion
26,385
25,449
936
50,060
46,438
3,622
Deposit insurance
9,407
10,581
(1,174)
19,442
34,468
(15,026)
Other real estate owned (OREO) income
(4,124)
(5,750)
1,626
(7,454)
(11,071)
3,617
Other operating expenses:
Operational losses
6,185
11,823
(5,638)
12,323
15,384
(3,061)
All other
15,932
15,679
253
32,693
40,390
(7,697)
Total other operating
expenses
22,117
27,502
(5,385)
45,016
55,774
(10,758)
Amortization of intangibles
385
734
(349)
982
1,529
(547)
Total operating
expenses
$
492,761
$
469,576
$
23,185
$
963,773
$
952,689
$
11,084
Income Taxes
For the quarter
and six months
ended June 30,
2025, the Corporation recorded
an income tax
expense of $47.9
million and $92.9
million with an effective tax rate (“ETR”) of 18.5% and 19.3%, respectively, compared to $40.5 million and $96.0 million with an ETR
of 18.5% and 25.5% for the respective periods
of year 2024.
Higher income tax expense of $7.4
million for the second quarter,
when compared to the same quarter of
2024, is mainly attributed
to higher income before tax, partially offset with higher net exempt income. For the
six-month period ended June 30, 2025, the lower
income
tax
expense
of
$3.1
million
reflects
the
impact
of
the
tax
withholding
expense
of
$22.9
million
recorded
during
the
first
quarter of year 2024, in connection with intercompany distributions
for years 2014-2024, as disclosed in Note 34 to the Consolidated
Financial Statements in the
2024 Form 10-K,
and the benefit
of $5.2 million
related to the FDIC
Special Assessment expense; this
was partially offset by the increase in
income before tax. Excluding the impact of the
withholding tax expense and the additional net
expense related to the FDIC Special Assessment in the first quarter
of 2024, the ETR for the six-month period ended June 30, 2024,
would have been 21.3%.
At
June
30,
2025,
the
Corporation
had
a
net
deferred
tax
asset
amounting
to
$860.3
million,
net
of
a
valuation
allowance
of
$463.7million. The net
deferred tax asset
related to the
U.S. operations was
$242.2 million, net
of a valuation
allowance of $386.9
million.
Refer to
Note 30
to the
Consolidated Financial
Statements for
a reconciliation
of the
statutory income
tax rate
to the
effective tax
rate and additional information on the income
tax expense and deferred tax asset balances.
REPORTABLE SEGMENT RESULTS
The Corporation’s
reportable segments
for managerial
reporting purposes
consist of
Banco Popular
de Puerto
Rico and
Popular
U.S. A Corporate group
has also been defined to support the reportable
segments.
146
For
a
description
of
the
Corporation’s
reportable
segments,
including
additional
financial
information
and
the
underlying
management accounting process, refer to Note 32
to the Consolidated Financial Statements.
The corporate group reported a net income of $3.3
million for the quarter ended June 30, 2025, compared with a net income of $3.8
million for the same quarter of
the previous year. For
the six months ended June 30,
2025, the corporate group reported net loss
of
$0.3 million, compared
to a
net loss of
$21.6 million for
the same period
of the
previous year.
The higher loss
in 2024 was
mainly
attributed to
the expense
related to
the $22.9
million adjustment
recorded in
the first
quarter of
2024 to
recognize the
tax impact
associated with
prior period
intercompany distributions and
the additional
$6.5 million
expense for
the tax
impact of
intercompany
distributions paid
during the
first quarter
of 2024.
A positive
adjustment of
$3.9 million
was recorded
during the
six months
ended
June 30,
2025, resulting
from reimbursements
received from
the U.S.
Internal Revenue
Service related
to interest
paid for
these
intercompany
distributions.
There
were
no
intercompany
distributions
between
the
U.S.
subsidiaries
and
the
bank
holding
companies.
Highlights on the earnings results for the reportable
segments are discussed below:
Banco Popular de Puerto Rico
The Banco
Popular de
Puerto Rico
reportable segment’s
net income
amounted to
$184.5 million
for the
quarter ended
June 30,
2025, compared
with a
net income of
$157.2 million
for the
same quarter
of the
previous year.
The factors
that contributed
to the
variance in the financial results included the following:
●
Net interest income
of $538.5 million
was higher by
$49.7 million primarily
driven by lower
interest expense on
deposits,
mainly from the
re-pricing of P.R.
public funds,
higher income from
U.S. Treasury
securities, mainly due
to higher
yields
and
higher income
from
the
loans portfolio
driven by
loan
growth, partially
offset
by
lower income
from
money market
investments reflecting the
decline in rates.
The net interest
margin for the
quarter ended June
30, 2025 was
3.68%, and
increase of 28 basis points, compared to 3.40% for the same quarter in the previous year. The increase in the margin was
mainly impacted
by lower
cost of
deposits and
higher yield
from investment
securities, as
well as
higher loan
balances
which carry a higher yield, partially offset by lower rates
on money market investments;
●
the provision
for loan
losses of
$43.2 million
was lower
by $5.4
million mainly
driven by
lower reserves
for commercial
loans,
due
to
improvements
in
credit
quality
and
lower
net
charge-offs
partially
offset
by
a
higher
provision
for
the
consumer loan portfolios due to changes in credit quality,
mainly within the auto portfolio, and changes in macroeconomic
scenarios;
●
lower non-interest income by $6.7 million mainly due to lower income from the daily car rental business, which was sold in
the fourth quarter of 2024;
●
higher operating expenses by $21.9 million mostly due to higher personnel costs by $19.0 million, mainly due to the profit-
sharing expense accrual and other performance-related
incentives, and higher technology expenses by
$4.0 million, offset
by lower
equipment expenses by
$4.2 million
mainly related to
the daily
car rental
business sold
in the
fourth quarter
of
2024; and
●
higher
income
tax
expense
by
$1.7
million
mainly
due
to
higher
income
before
tax;
partially
offset
by
higher
exempt
income and other tax credits recorded during the
first quarter of 2025.
For the six months ended
June 30, 2025, the BPPR segment
recorded a net income of $350.4
million compared to a net income
of
$278.5 million for the
same period of the
previous year. The factors
that contributed to the variance
in the financial results
included
the following:
●
Net
interest
income
of
$1.1
billion was
higher by
$98.8 million
primarily
driven by
lower interest
expense on
deposits,
mainly from
the re-pricing
of P.R.
public funds,
higher income
from investment
securities and
higher income
from loans
due to portfolio growth, partially offset by lower income from money market
investments reflecting the decline in rates and
lower balances. The net interest margin for the six months ended June
30, 2025 was 3.66% compared with the 3.36% for
147
the same period
of the previous
year. The
increase in the
margin was mainly
impacted by
lower cost of
deposits, higher
yield from investment securities and loan growth, partially
offset by lower rates from money market investments;
●
the provision
for loan
losses of
$95.9 million
was lower
by $13.7
million mainly
driven by
the commercial
and consumer
portfolios due to lower net charge-offs and
improvements in credit quality,
partially offset by the increase in the
probability
weight assigned to the pessimistic economic scenario;
●
lower non-interest income by $14.8 million mainly due to lower income from the daily car rental business sold in 2024 and
lower insurance fees, partially
offset by higher credit
and debit card income,
due to higher volume
of transactions, higher
investment management fees and an increase in non-balance
compensation fees in commercial deposits;
●
higher operating
expenses by
$19.2 million
mostly due
to higher
personnel costs
by $17.4
million, due
to incentives
as
discussed
above,
higher
regulatory
examination
fees,
municipal
license
tax
and
higher
technology expenses,
partially
offset by
lower equipment
expenses related
to the
daily rental
business sold
and lower
FDIC expense
due to
the FDIC
Special Assessment recorded in 2024;
and
●
Higher income tax expense by $8.0 million mainly
due to higher income before tax.
Popular U.S.
For the quarter ended June 30, 2025, the reportable segment of Popular U.S. reported a net income of $22.6 million, compared with
a net income
of $17.7 million for
the same quarter of
the previous year.
The factors that contributed
to the variance
in the financial
results included the following:
●
Net interest income of
$102.2 million, higher by
$16.3 million due to
higher income from loans,
mainly from growth in
the
commercial and
construction portfolios,
and lower
cost of
deposits due
to the
repricing of
most interest-bearing
deposit
products,
partially
offset
by
lower
income
from
money
market
investments
due
to
average
balances
and
lower
yields
reflecting
the
decrease
in
short-term
rates.
The
net
interest
margin
for
the
quarter
ended
June
30,
2025
was
2.93%
compared to 2.60% for the same quarter in the
previous year driven by lower cost of deposits;
●
the provision for loan losses was $6.4 million, reflecting higher reserves due to changes in economic scenarios, compared
to a benefit of $4.4 million in 2024, which was
mainly related to improvements in commercial
credit ratings;
●
higher operating expenses by $1.5 million, reflecting
higher personnel costs driven by incentives;
and
●
higher income tax expense by $1.3 million due
to higher net income before tax.
For the six months ended June 30, 2025, the reportable segment of Popular
U.S. recorded a net income of $37.4 million, compared
with
a
net
income
of
$24.8
million
for
the
same
period
of
the
previous
year.
The
factors
that
contributed
to
the
variance
in
the
financial results included the following:
●
Higher net interest
income by $24.4
million due to
higher income from
the loans
portfolio mainly related
to growth in
the
commercial and construction
portfolios and lower
interest expense from
deposits, due to
product repricing as
mentioned
above, partially offset by lower income from money market investments due to lower rates. The net interest margin for the
six months ended June 30, 2025 was 2.84% compared to 2.60% for the same
period of the previous year driven by lower
cost of deposits;
●
the provision
for loan
losses of
$18.9 million
was higher
by $12.0
million driven
by higher
reserves
for the
commercial
portfolio due to higher loan balances;
148
●
lower operating expenses by
$1.6 million reflecting lower
FDIC expense due to
FDIC Special Assessment of
$1.6 million
recorded in
2024 and
lower professional
fees, offset
by higher
allocation of
Corporate expenses
reflective of
personnel
costs and consulting fees; and
●
higher income tax expense by $4.6 million due
to higher net income before tax.
STATEMENT
OF FINANCIAL CONDITION ANALYSIS
Assets
The Corporation’s total assets were $76.1 billion at June 30, 2025, compared
to $73.0 billion at December 31, 2024. The variance in
total assets of $3.1 billion was driven by an increase in AFS securities and loan growth across most portfolios at both BPPR and PB
segments,
partially offset by a decrease in
HTM securities, other assets, and money market investments.
Refer to the Consolidated
Statements of Financial Condition included in
this report and to the following narrative for
additional information.
Money market investments and investment securities
Money market investments decreased by $40.2 million as of June 30,
2025, when compared to December 31, 2024, driven by funds
deployed to support loan growth.
AFS securities increased $2.2 billion, mainly due to investment in U.S. Treasury securities and the
decrease in
the unrealized
losses of
AFS securities
of $232.7
million, partially
offset
by maturities
and principal
paydowns.
HTM
securities
decreased
by
$216.4 million
driven
by
maturities
and
principal
paydowns,
partially
offset
by
the
amortization
of
$91.6
million of the discount related to U.S. Treasury securities previously reclassified
from the AFS to HTM.
Refer to Note 5 and to Note 6
to the
Consolidated Financial
Statements for
additional information
with respect
to the
Corporation’s debt
securities available-for-
sale and held-to-maturity.
149
Loans
Refer to Table
6 for a
breakdown of the Corporation’s
loan portfolio. Also, refer
to Note 7 in
the Consolidated Financial Statements
for detailed information about the Corporation’s loan portfolio
composition and loan purchases and sales.
Loans held-in-portfolio
increased by
$1.1 billion
to $38.2
billion at
June 30,
2025, compared
to
December 31,
2024. Despite
the
uncertainty about the economic outlook, demand for credit across all segments was strong during the second quarter of 2025. In the
BPPR segment
loan balances
increased by
$626.0 million
across all
portfolios, mostly
due to
commercial and
construction loans,
which
include
the
origination
of
a
$265.0
million
commercial
loan
during
the
second
quarter
of
2025
which
represents
the
Corporation’s
portion
of
a
$425.0
million
issuance
in
which
BPPR
acted
as
the
lead
bank
and
administrative agent,
and
higher
mortgage loans,
driven primarily
by home
purchase activity.
Auto loans
and leases
also increased,
driven by
a strong
origination
activity. The PB
segment also increased
by $451.6 million, driven by commercial and construction lending.
Nonetheless, the impact
of trade and tariff policies on economic activity may affect
loan demand as uncertainty on the short-term
economic outlook exists.
150
Table 6 - Loans Ending Balances
(In thousands)
June 30, 2025
December 31, 2024
Variance
Loans held-in-portfolio:
Commercial
Commercial multi-family
$
2,520,789
$
2,399,620
$
121,169
Commercial real estate non-owner occupied
5,521,374
5,363,235
158,139
Commercial real estate owner occupied
3,003,855
3,157,746
(153,891)
Commercial and industrial
8,043,752
7,741,562
302,190
Total Commercial
19,089,770
18,662,163
427,607
Construction
1,468,201
1,263,792
204,409
Leasing
1,983,068
1,925,405
57,663
Mortgage
8,444,427
8,114,183
330,244
Consumer
Credit cards
1,215,293
1,218,079
(2,786)
Home equity lines of credit
77,479
73,571
3,908
Personal
1,876,463
1,855,244
21,219
Auto
3,861,702
3,823,437
38,265
Other
168,775
171,778
(3,003)
Total Consumer
7,199,712
7,142,109
57,603
Total loans held-in
-portfolio
$
38,185,178
$
37,107,652
$
1,077,526
Loans held-for-sale:
Mortgage
$
2,898
$
5,423
$
(2,525)
Total loans held-for-sale
$
2,898
$
5,423
$
(2,525)
Total loans
$
38,188,076
$
37,113,075
$
1,075,001
151
Other assets
Other assets amounted to $1.7 billion at June 30, 2025, a decrease of
$52.7 million when compared to $1.8 billion at December 31,
2024.
The variance
was mainly
driven by
a
decrease in
net
deferred tax
assets
of
$64.2
million
due to
positive changes
in
the
valuation of
AFS securities,
a reduction
in unsettled
trade receivables
of $14.6
million related
to proceeds
from maturities
of U.S.
Treasury securities,
lower principal, interest and escrow servicing advances
of $8.0 million, and a reduction in investments under
the
equity
method
by
$7.0
million
mainly
related
to
unrealized
losses
on
the
underlying
investment
portfolio
held
by
the
investee,
partially offset
by an
increase in
capitalized software costs
of $33.1
million mainly
related to
technology modernization
and higher
prepaid
taxes
of
$20.8
million.
Refer
to
Note
12
to
the
Consolidated
Financial
Statements
for
a
breakdown
of
the
principal
categories that comprise the caption
of “Other Assets” in
the Consolidated Statements of Financial
Condition at June 30,
2025 and
December 31, 2024.
Liabilities
The Corporation’s total
liabilities were $70.1
billion at June
30, 2025, an
increase of $2.7
billion, when compared
to December 31,
2024. The following is a discussion of the significant
changes in liabilities.
Deposits and Borrowings
Total Deposits
The Corporation’s
deposits totaled $67.2
billion as
of June
30, 2025,
compared to
$64.9 billion
as of
December 31,
2024. Ending
deposit
balances increased
by
$2.3 billion,
while
average quarterly
balances grew
by $2.1
billion. The
average deposit
balance,
excluding P.R.
public deposits, increased by
$1.1 billion. Non-interest-bearing deposits
remained flat when compared to
December
31, 2024. At the end
of the second quarter of
2025, Puerto Rico public deposits were
$20.9 billion, an increase of
$1.5
billion when
compared to December 31, 2024.
P.R
public deposits represent 31% of
total deposits and are expected
to continue to range in
the
short term
between $18
billion and
$20 billion.
However,
the rate
at which
public deposit
balances may
change is
uncertain and
difficult to predict. The amount and timing of any such change is likely
to be impacted by, for example, the level of federal assistance
and speed
at which
any federal
assistance is
distributed, the
financial condition,
liquidity and
cash management
practices of
the
Puerto Rico Government and its instrumentalities,
and the implementation of fiscal and debt adjustment plans approved pursuant to
PROMESA or
other
actions
mandated by
the
Fiscal
Oversight and
Management Board
for Puerto
Rico
(the
“Oversight Board”).
Additionally,
the Trump
Administration is
conducting a
review of
federal funding,
which could
entail a
reduction in
federal funding
available for Puerto Rico. P.R
public deposits costs are generally
indexed to changes in short-term
market rates with a
one-quarter
lag, in
accordance with
contractual terms.
As a
result, these
deposits’ costs
have typically
lagged variable
asset repricing.
These
deposits require that the bank pledge high credit quality securities as collateral; therefore, liquidity risks arising
from deposit outflows
are lower.
At BPPR,
excluding Puerto
Rico public
deposits, ending
deposits increased
by $340
million, while
at PB
segment ending
deposit
balances increased by
$400 million, net
of intercompany activity.
We continue to
expect third quarter deposit
balances in BPPR
to
reflect historical seasonality and decrease based on past
experience of our retail client behavior.
The volume and cost of P.R.
public deposits and the proportion of high-cost deposits in the U.S, directly impact the balance and mix
of earning assets and therefore represent a key
factor in the Corporation’s ability to expand its net
interest margin.
Refer to Table 7 for a breakdown of the Corporation’s deposits at June 30, 2025 and December
31, 2024.
152
Table 7 - Deposits Ending Balances
(In thousands)
June 30, 2025
December 31, 2024
Variance
Deposits excluding P.R.
public deposits:
Demand deposits
$
15,114,614
$
15,139,555
$
(24,941)
Savings, NOW and money market deposits (non-brokered)
21,554,606
21,177,506
377,100
Savings, NOW and money market deposits (brokered)
829,506
736,225
93,281
Time deposits (non-brokered)
7,938,858
7,476,924
461,934
Time deposits (brokered CDs)
861,947
890,704
(28,757)
Sub-total deposits excluding P.R.
public deposits
46,299,531
45,420,914
878,617
P.R. public
deposits:
Demand deposits
[1]
12,376,316
11,730,273
646,043
Savings, NOW and money market deposits (non-brokered)
7,743,663
7,087,904
655,759
Time deposits (non-brokered)
797,981
645,254
152,727
Sub-total P.R.
public deposits
20,917,960
19,463,431
1,454,529
Total deposits
$
67,217,491
$
64,884,345
$
2,333,146
[1] Includes interest bearing demand deposits.
Borrowings
The Corporation’s
borrowings totaled
$1.4 billion
at June
30, 2025
compared to
$1.2
billion at
December 31,
2024. The
increase
was
mainly
related
to
higher
FHLB
advances
by
$236.5
million,
mainly
at
PB.
Refer
to
Note
15
to
the
Consolidated
Financial
Statements for detailed
information on the
Corporation’s borrowings. Also,
refer to the
Liquidity section in
this MD&A for
additional
information on the Corporation’s funding sources.
Stockholders’ Equity
Stockholders’ equity totaled $6.0 billion at June 30, 2025, an increase of $341.0 million when compared to December 31, 2024. The
increase was
principally due
to net
income for
the six
months ended
June 30,
2025 of
$387.9 million,
coupled with
the after-tax
effect of the
decrease in net unrealized losses in
the portfolio of AFS securities
of $188.6 million and the
amortization of unrealized
losses
from
securities
previously reclassified
to
HTM
of
$73.2 million,
partially
offset
by
an
increase in
treasury
stock
of
$226.9
million, mainly due to
common stock repurchases, and
the common and preferred dividends
declared of $96.9 million.
Refer to the
Consolidated Statements
of Financial
Condition, Comprehensive
Income and
Changes in
Stockholders’ Equity
for information
on
the composition of stockholders’ equity.
The composition of the Corporation’s financing to total assets
at June 30, 2025 and December 31, 2024
is included in Table 8.
153
Table 8 - Financing to Total
Assets
June 30,
December 31,
% (decrease) increase
% of total assets
(Dollars in millions)
2025
2024
from 2024 to 2025
2025
2024
Non-interest-bearing core deposits
$
15,115
$
15,139
(0.2)
%
19.9
%
20.7
%
Interest-bearing core deposits
46,517
44,622
4.2
61.2
61.1
Interest-bearing other deposits
5,586
5,123
9.0
7.3
7.0
Repurchase agreements
56
55
1.8
0.1
0.1
Other short-term borrowings
550
225
144.4
0.7
0.3
Notes payable
808
896
(9.8)
1.1
1.2
Other liabilities
1,479
1,372
7.8
1.9
1.9
Stockholders’ equity
5,954
5,613
6.1
7.8
7.7
154
CAPITAL
Regulatory Capital
The Corporation, BPPR and PB
are subject to regulatory capital
requirements established by the Federal Reserve Board.
The risk-
based
capital
standards
applicable
to
the
Corporation,
BPPR
and
PB
(“Basel
III
capital
rules”)
are
based
on
the
final
capital
framework for strengthening international capital standards, known
as Basel III, of the Basel Committee on Banking Supervision.
As
of June 30,
2025, the Corporation’s, BPPR’s
and PB’s capital
ratios continue to
exceed the minimum requirements
for being “well-
capitalized”.
The risk-based
capital ratios
presented in
Table
9,
which include
common equity
tier 1,
Tier
1 capital,
total capital
and leverage
capital as of June 30, 2025 and December
31, 2024.
Table 9 - Capital Adequacy
Data
(Dollars in thousands)
June 30, 2025
December 31, 2024
Common equity tier 1 capital:
Common stockholders' equity - U.S. GAAP basis
$
5,931,875
$
5,590,923
CECL transitional amount
[1]
-
42,375
AOCI related adjustments due to opt-out election
1,325,146
1,589,875
Goodwill, net of associated deferred tax liability (DTL)
(653,493)
(657,181)
Intangible assets, net of associated DTLs
(5,844)
(6,826)
Deferred tax assets and other deductions
(228,617)
(296,374)
Common equity tier 1 capital
$
6,369,067
$
6,262,792
Additional tier 1 capital:
Preferred stock
22,143
22,143
Additional tier 1 capital
$
22,143
$
22,143
Tier 1 capital
$
6,391,210
$
6,284,935
Tier 2 capital:
Trust preferred securities subject to phase in as
tier 2
192,674
192,674
Other inclusions (deductions), net
503,781
490,594
Tier 2 capital
$
696,455
$
683,268
Total risk-based capital
$
7,087,665
$
6,968,203
Minimum total capital requirement to be well capitalized
$
4,003,691
$
3,907,346
Excess total capital over minimum well capitalized
$
3,083,974
$
3,060,857
Total risk-weighted
assets
$
40,036,914
$
39,073,462
Total assets for leverage
ratio
$
75,114,655
$
72,593,464
Risk-based capital ratios:
Common equity tier 1 capital
15.91
%
16.03
%
Tier 1 capital
15.96
16.08
Total capital
17.70
17.83
Tier 1 leverage
8.51
8.66
[1] The CECL transitional amount includes the impact
of Popular's adoption of the new CECL accounting standard
on January 1, 2020.
155
The Basel
III capital rules
provide that a
depository institution is
deemed to be
well capitalized if
it maintains a
leverage ratio of
at
least 5%,
a common equity
Tier 1
ratio of
at least 6.5%,
a Tier
1 capital ratio
of at least
8% and a
total risk-based
ratio of at
least
10%. The Corporation, BPPR and PB leverage ratio, common equity
Tier 1 ratio and Tier
1 capital ratio, respectively as of June 30,
2025, continue to exceed the minimum requirements
for being “well-capitalized” under the Basel III
capital rules.
Pursuant
to
the
adoption
of
the
CECL
accounting
standard
on
January
1,
2020,
the
Corporation
elected
to
use
the
five-year
transition
period option
as
provided in
the
final
interim
regulatory capital
rules effective
March 31,
2020.
The
five-year
transition
period provision delayed for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period
to phase out
the aggregate amount of
the capital benefit provided
during the initial two-year
delay. During
the first quarter
of 2025,
the Corporation phased-in all the cumulative CECL
deferral over the three-year transition period.
The decrease in the common
equity Tier I
capital ratio, Tier
I capital ratio, total capital
ratio,
and leverage ratio as of
June 30, 2025
as compared to December 31, 2024
was mainly due to
higher risk weighted assets driven by
the increase in loans held
in portfolio,
the
repurchase
of
shares
under
the
2024
Repurchase
Program
and
common
stock
dividends,
partially
offset
by
the
six-month
period’s earnings.
Reconciliation to Tangible Common Equity and Tangible Assets
Table
10 provides
a reconciliation of
total stockholders’ equity
to tangible common
equity and total
assets to tangible
assets as
of
June 30, 2025, and December 31, 2024.
156
Table 10 - Reconciliation
of Tangible Common Equity
and Tangible Assets
(In thousands, except share or per share information)
June 30, 2025
December 31, 2024
Total stockholders’
equity
$
5,954,018
$
5,613,066
Less: Preferred stock
(22,143)
(22,143)
Less: Goodwill
(802,954)
(802,954)
Less: Other intangibles
(5,844)
(6,826)
Total tangible common
equity
$
5,123,077
$
4,781,143
Total assets
$
76,065,090
$
73,045,383
Less: Goodwill
(802,954)
(802,954)
Less: Other intangibles
(5,844)
(6,826)
Total tangible assets
$
75,256,292
$
72,235,603
Tangible common
equity to tangible assets
6.81
%
6.62
%
Common shares outstanding at end of period
67,937,468
70,141,291
Tangible book value
per common share
$
75.41
$
68.16
Quarterly average
Total stockholders’
equity [1]
$
6,849,789
$
6,620,766
Average unrealized (gains) losses on AFS securities
transferred to HTM
334,183
505,791
Adjusted total stockholder's equity
7,183,972
7,126,557
Less: Preferred Stock
(22,143)
(22,143)
Less: Goodwill
(802,953)
(804,411)
Less: Other intangibles
(6,096)
(7,288)
Total tangible common
equity
$
6,352,780
$
6,292,715
Return on average tangible common equity
13.26
%
11.22
%
[1] Average balances exclude unrealized gains or
losses on debt securities available-for-sale.
157
RISK MANAGEMENT
Market / Interest Rate Risk
The Corporation’s assets that are mainly subject to market valuation risk are debt securities classified as available-for-sale. Refer to
Notes 5 and 6 to
the Consolidated Financial Statements for further information on
the debt securities available-for-sale and held-to-
maturity portfolios.
Debt securities
classified as
available-for-sale and
held-to-maturity amounted
to
$20.5 billion
and
$7.5 billion,
respectively, as of June 30, 2025. Other assets subject to market risk include mortgage servicing rights ("MSRs") with a fair value of
$103.1 million as of June 30, 2025.
Interest Rate Risk (“IRR”)
The Corporation’s net interest income is subject
to various categories of interest rate risk,
including repricing, basis, yield curve and
option risks.
In managing
interest rate
risk, management may
alter the
mix of
floating and
fixed rate
assets and
liabilities, change
pricing
schedules,
adjust
maturities
through
sales
and
purchases
of
investment
securities,
and
enter
into
derivative
contracts,
among other alternatives.
Management utilizes various tools to assess IRR, including Net Interest
Income (“NII”) simulation modeling, static gap analysis, and
Economic Value of Equity (“EVE”) to monitor the risk arising from the dynamic characteristics of assets and liabilities subject to IRR.
The
three
methodologies complement
each
other
and
are
used jointly
in
the
evaluation of
the
Corporation’s IRR.
NII simulation
modeling is prepared for a five-year period, which in conjunction with the EVE analysis, provides management a better view of long-
term IRR.
Net
interest
income
simulation
analysis
performed by
legal
entity and
on
a
consolidated
basis
is
used
to
estimate the
potential
change
in
net
interest
income
resulting
from
hypothetical
changes
in
interest
rates.
Sensitivity
analysis
is
calculated
using
a
simulation model which incorporates actual balance
sheet figures detailed by maturity and interest
yields or costs.
Management assesses interest
rate risk
by comparing various
NII simulations under
different interest rate
scenarios to assess
the
degree of
change and
the projected
shape of
the yield
curve. Management
also performs
analyses to
isolate and
measure basis
and
prepayment
risk
exposures.
These
models
are
periodically
monitored.
Assumptions
are
validated
by
management
and
are
subject to independent validations according to the Corporations’
Model Governance Policy.
The Corporation processes NII
simulations under interest rate
scenarios in which the
yield curve is assumed
to rise and
decline by
the same magnitude
(parallel shifts). The
rate scenarios considered in
these market risk
simulations include instantaneous parallel
changes of
-100,
-200, +100,
and +200
basis points
during the
succeeding twelve-month
period. Assumptions
included in
these
analyses
include
that
the
balance
sheet
remains
flat,
relative
levels
of
market
interest
rates
across
all
yield
curve
points
and
indexes, interest rate spreads, loan
prepayments and deposit elasticity.
Thus, they should not be
relied upon as indicative of
actual
results
and
do
not
contemplate
actions
that
management
may
engage
in
as
a
response
to
future
changes
in
interest
rates.
Additionally,
the Corporation
is also
subject to
the risk
inherent in
the use
of different
rate indexes
for the
repricing of
assets and
liabilities, as well the
risk of pricing lags
due to contractual or
timing differences between the
market and management response
to
changes
in
the
rate
environment.
These
forward-looking
computations
are
management’s
best
estimate
based
on
known
and
available information and actual results
may differ.
The following table presents the
results of the simulations at
June 30, 2025 and
December 31, 2024, assuming a static balance
sheet and parallel changes over flat spot rates
over a one-year time horizon:
158
Table 11
- Net Interest Income Sensitivity (One Year
Projection)
June 30, 2025
December 31, 2024
(Dollars in thousands)
Amount Change
Percent Change
Amount Change
Percent Change
Change in interest rate
+200 basis points
22,433
0.85
44,747
1.78
+100 basis points
10,515
0.40
22,917
0.91
-100 basis points
(12,636)
(0.48)
9,157
0.36
-200 basis points
(18,563)
(0.71)
588
0.02
As of June
30, 2025, NII simulations
show the Corporation maintains
an asset sensitive position
that is symmetric
in the rising
and
declining rates scenarios. Compared to the
results as of December 31, 2024,
the variation in sensitivity and the
resulting profile are
mainly driven
by updated
deposit beta
model assumptions that
reflect lower
elasticity in
declining rate
scenarios. In
declining rate
scenarios, the reduction in net interest income is driven by the repricing of short-term assets and variable rate loans offset in part by
declining
deposit
costs.
In
rising rate
scenarios, Popular’s
net interest
income
would increase
due
to
the
repricing
of
short-term
assets,
variable
rate
loans,
and
intermediate
maturity
assets
coming
due
within
one
year,
that
are
offset
in
part
by
increased
deposits costs
due to
BPPR’s large
proportion of
market-linked Puerto Rico
public sector
deposits. Changes
in the
balance sheet
during the quarter
led to reduced
asset sensitivity.
The Corporation purchased
$2.4 billion in
U.S. Treasury
Notes with an
average
maturity
of
approximately
1.5
years.
Higher
loan
balances
and
growth
in
market-linked
Puerto
Rico
public
sector
deposits
also
contributed to reduced asset sensitivity.
The
Corporation’s
loan
and
investment
portfolios
are
subject
to
prepayment
risk.
Prepayment
risk
also
could
have
a
significant
impact on the duration of mortgage-backed securities
and collateralized mortgage obligations.
Trading
The Corporation
engages in
trading activities
in the
ordinary course
of business
at its
subsidiaries, BPPR
and Popular
Securities.
Popular Securities’
trading activities
consist primarily
of market-making
activities to
meet expected
customers’ needs
related to
its
retail brokerage business, and purchases and sales of
U.S. Government and government sponsored securities with the objective of
realizing gains
from expected
short-term price
movements. BPPR’s
trading activities consist
primarily of
holding U.S.
Government
sponsored
mortgage-backed
securities
and
economic
hedges
of
the
related
market
risk
with
“TBA”
(to-be-announced)
market
transactions. In
addition, BPPR
uses forward
contracts or
TBAs that
have characteristics
similar to
that of
the forecasted
security
and its conversion timeline to hedge its securitization
pipeline.
At June 30,
2025, the Corporation held
trading securities with a
fair value of
$29.6 million, representing 0.04%
of the Corporation’s
total assets, compared
with $32.8 million
and 0.05%, respectively,
at December 31,
2024. The trading
portfolio consists principally
of investment grade securities such as mortgage-backed securities of $23.0
million with a weighted average yield of 5.28% and U.S.
Treasuries of $5.8 million with a weighted average yield of 3.41% at June 30, 2025
and $29.1 million with a yield of 5.54% and $2.8
million with a yield of 3.28%, respectively, as of December 31, 2024.
The Corporation’s trading activities are
limited by internal policies. For each
of the two subsidiaries, the
market risk assumed under
trading
activities
is
measured
by
the
5-day
net
value-at-risk
(“VAR”),
with
a
confidence
level
of
99%.
The
VAR
measures
the
maximum estimated loss that may occur over a
5-day holding period, given a 99% probability.
The Corporation’s trading portfolio had a 5-day VAR of $0.4 million for the last week
in June 2025. VAR models include assumptions
and estimates
thus actual
results could
differ from
the outputs
from these
models and
assumptions. Back-testing is
performed on
model results to compare actual results against maximum
estimated losses, in order to evaluate model
and assumptions accuracy.
In the opinion of management, the size and composition
of the trading portfolio does not represent
a significant source of market risk
for the Corporation.
159
Liquidity
Liquidity Risk Management Process
The Corporation
has adopted
policies and
limits to
monitor the
Corporation’s liquidity
position and
that of
its banking
subsidiaries.
Refer to
the Enterprise
Risk Management
section of
Management’s Discussion
and Analysis
included in
the 2024
Form 10-K
for
information on the framework
in place to monitor,
review, and approve
policies to measure, limit and
manage funding activities and
strategies
impacting
liquidity
risk.
Additionally,
contingency
funding
plans
are
used
to
model
various
stress
events
of
different
magnitudes that
affect different
time horizons,
to assist
management in
evaluating the
size of
the liquidity
buffers needed
if those
events occur. However,
such models may not predict
accurately how the market and customers
might react to every
event and are
dependent on
many assumptions.
The objective
of effective
liquidity management
is to
ensure that
the Corporation
has sufficient
liquidity
to
meet
all
its
financial
obligations,
finance
expected
future
growth,
fund
planned
capital
distributions
and
maintain
a
reasonable safety margin for cash needs under both
normal and stressed market conditions.
Sources of Liquidity
Deposits, including
customer deposits,
brokered deposits
and public
funds deposits,
continue to
be the
most significant
source of
funds for the Corporation,
representing
88% and 89% of
funding of the Corporation’s
total assets at June
30, 2025 and December
31, 2024, respectively.
The ratio of
total ending loans to
deposits remained at
57% at June
30, 2025 and
December 31, 2024.
In
addition to
traditional deposits,
the Corporation
maintains borrowing
arrangements, which
amounted to
$1.4 billion
in outstanding
balances at June 30, 2025 (December 31, 2024 - $1.2 billion). A detailed description of the Corporation’s borrowings, including their
terms, is
included in
Note 15
to the
Consolidated Financial
Statements. Also,
the Consolidated
Statements of
Cash Flows
in the
accompanying Consolidated Financial Statements provide
information on the Corporation’s cash inflows and outflows.
The
following
sections
provide
further
information
on
the
Corporation’s
major
funding
activities
and
needs,
as
well
as
the
risks
involved in these activities.
Banking Subsidiaries
Primary
sources of
funding
for the
Corporation’s
banking subsidiaries
(BPPR and
PB
or,
collectively,
“the banking
subsidiaries”)
include
retail,
commercial
and
public
sector
deposits,
brokered
deposits,
unpledged
investment
securities,
mortgage
loan
securitization and, to a lesser extent, loan sales. In
addition, the Corporation maintains borrowing facilities with the FHLB and at the
discount window
of the
Federal Reserve
Bank of
New York
(the “FRB”)
and has
a considerable
amount of
collateral pledged
that
can be used to raise funds under these facilities.
During the second quarter of 2025, BPPR was able to increase its available
liquidity by approximately $2.9 billion after the merger of
Popular Auto, LLC with
and into BPPR, effective
on May 1,
2025, that allowed BPPR
to pledge auto loans
and leases as collateral
under the federal
reserve’s discount
window. At
June 30,
2025, the Corporation’s
available liquidity increased
to $26.1 billion
from
$21.6
billion on
December 31,
2024. During
the second
quarter of
2025, the
Corporation had
no material
incremental use
of its
available liquidity sources. The liquidity sources of
the Corporation at June 30, 2025 are presented
in Table 12 below:
160
Table 12 - Liquidity Sources
June 30, 2025
December 31, 2024
(In thousands)
BPPR
Popular U.S.
Total
BPPR
Popular U.S.
Total
Unpledged securities and unused funding
sources:
Money market (excess funds at the
Federal Reserve Bank)
$
4,753,672
$
1,576,770
$
6,330,442
$
4,882,358
$
1,488,857
$
6,371,215
Unpledged securities
4,453,281
519,711
4,972,992
3,806,066
522,869
4,328,935
FHLB borrowing capacity
3,178,798
816,840
3,995,638
2,777,090
1,058,921
3,836,011
Discount window of the Federal Reserve
Bank borrowing capacity
7,895,298
2,875,787
10,771,085
4,839,388
2,178,646
7,018,034
Total available liquidity
$
20,281,049
$
5,789,108
$
26,070,157
$
16,304,902
$
5,249,293
$
21,554,195
Refer
to
Note
15
to
the
Consolidated
Financial
Statements
for
additional
information
of
the
Corporation’s
borrowing
facilities
available through its banking subsidiaries.
The principal
uses of
funds for
the banking
subsidiaries include
loan originations,
investment portfolio
purchases, loan
purchases
and repurchases, repayment of outstanding obligations (including deposits), advances on certain serviced portfolios and operational
expenses. Also, the
banking subsidiaries assume liquidity
risk related to collateral
posting requirements for certain
activities mainly
in
connection
with
contractual
commitments,
recourse
provisions,
servicing
advances,
derivatives
and
credit
card
licensing
agreements.
The banking
subsidiaries maintain
sufficient funding
capacity to
address large
increases in
funding requirements
such as
deposit
outflows.
The
Corporation has
established
liquidity
guidelines
that
require
the
banking
subsidiaries
to
have
sufficient
liquidity
to
cover all short-term borrowings and a portion of deposits.
Deposits are
a key
source of
funding. Refer
to Table
7 for
a breakdown
of deposits
by major
types. Core
deposits are
generated
from a large base of consumer, corporate and public sector customers. Core deposits
include certificates
of deposit under $250,000,
all
interest-bearing
transactional
deposit
accounts,
non-interest-bearing
deposits,
and
savings
deposits.
Core
deposits
exclude
brokered
deposits
and
certificates
of
deposit
over
$250,000.
Core
deposits,
excluding
P.R.
public
funds,
which
are
fully
collateralized, have
historically provided
the Corporation
with a
sizable source
of relatively
stable and
low-cost funds.
P.R.
public
funds, while
linked to
market interest
rates, provide
a stable
source of
funding with
an attractive
earning spread.
As of
June 30,
2025, total Puerto Rico public sector deposits were
$20.9 billion, compared to $19.5 billion at
December 31, 2024.
Core deposits
continue to
represent 92%
of total
deposits at
$61.6
billion, as
of June
30, 2025,
and compared
to
December 31,
2024. Core deposits financed 85% of the Corporation’s
earning assets at June 30, 2025, compared
to 86% at December 31, 2024.
The distribution by maturity
of certificates of deposit
with denominations of $250,000 and
over at June 30,
2025 is presented in
the
table that follows:
161
Table 13 - Distribution by
Maturity of Certificates of Deposit of $250,000 and Over
(In thousands)
3 months or less
$
2,591,418
Over 3 to 12 months
992,191
Over 1 year to 3 years
287,373
Over 3 years
147,470
Total
$
4,018,452
The
Corporation
had
$1.7
billion
in
brokered
deposits
at
June
30,
2025,
which
financed
approximately
2%
of
its
total
assets
(December 31, 2024 - $1.6 billion and 2%,
respectively).
As of
June 30,
2025, the
banking subsidiaries had
sufficient current
and projected
liquidity sources
to meet
their anticipated
cash
flow obligations, as well as special needs and off-balance sheet commitments,
in the ordinary course of business and have sufficient
liquidity
resources to
address
a
stress
event.
Although
the
banking
subsidiaries
have
historically
been
able
to
replace
maturing
deposits and advances, no assurance can
be given that they would
be able to replace those
funds in the future if
the Corporation’s
financial
condition
or
general
market
conditions
were
to
deteriorate.
The
Corporation’s
financial
flexibility
would
be
severely
constrained
if
the
banking
subsidiaries
are
unable
to
maintain
access
to
funding
or
if
adequate
funding
is
not
available
to
accommodate future
financing needs
at
acceptable interest
rates. The
banking subsidiaries
also
are required
to
deposit cash
or
qualifying
securities
to
meet
margin
requirements
on
repurchase
agreements,
deposit
agreements
and
other
collateralized
borrowing facilities. To
the extent that
the value of
securities previously pledged as
collateral declines because of
market changes,
the Corporation will be required to deposit additional cash or securities to meet its margin or collateral requirements and would need
to
rely
more
heavily
on
alternative
funding
sources.
In
these
scenarios,
the
Corporation’s
financial
flexibility
and
ability
to
grow
revenues may not increase proportionately to cover costs and
profitability would be adversely affected.
The Corporation considers balances in
excess of $250,000 to have a
higher potential liquidity risk.
Table
14 reflects the aggregate
balance in
deposit accounts
in excess
of $250,000,
including collateralized
public funds
and deposits
outside of
the U.S.
and its
territories.
Collateralized public funds, as presented in Table 14, represent public deposit balances from governmental
entities in the
U.S.
and
its
territories,
including
Puerto
Rico
and
the
United
States
Virgin
Islands,
collateralized
based
on
such
jurisdictions’
applicable collateral requirements.
162
Table 14 - Deposits
30-Jun-25
Popular, Inc.
(Dollars in thousands)
BPPR
% of Total
Popular U.S.
% of Total
(Consolidated)
% of Total
Deposits:
Deposits balances under $250,000 [1]
$
23,741,443
42
%
$
8,341,661
70
%
$
32,083,104
48
%
Transactional deposits balances over
$250,000
7,968,081
14
%
2,042,469
17
%
10,010,550
15
%
Time deposits balances over $250,000
2,262,268
4
%
833,527
7
%
3,095,795
5
%
Uninsured foreign deposits
444,748
1
%
-
-
%
444,748
1
%
Collateralized public funds
21,269,940
39
%
313,354
3
%
21,583,294
31
%
Intercompany deposits
195,313
-
%
415,184
3
%
-
-
%
Total deposits
$
55,881,793
100
%
$
11,946,195
100
%
$
67,217,491
100
%
[1] Includes the first $250,000 in balances of transactional
and time deposit accounts with balances in excess
of $250,000.
31-Dec-24
Popular, Inc.
(Dollars in thousands)
BPPR
% of Total
Popular U.S.
% of Total
(Consolidated)
% of Total
Deposits
Deposits balances under $250,000 [1]
$
23,588,937
44
%
$
7,961,334
68
%
$
31,550,271
49
%
Transactional deposits balances over
$250,000
8,046,175
15
%
1,944,674
16
%
9,990,849
15
%
Time deposits balances over $250,000
1,991,934
4
%
813,424
7
%
2,805,358
4
%
Uninsured foreign deposits
450,068
1
%
-
-
%
450,068
1
%
Collateralized public funds
19,771,083
36
%
316,716
3
%
20,087,799
31
%
Intercompany deposits
205,839
-
%
667,839
6
%
-
-
%
Total deposits
$
54,054,036
100
%
$
11,703,987
100
%
$
64,884,345
100
%
[1] Includes the first $250,000 in balances of transactional
and time deposit accounts with balances in excess
of $250,000.
Bank Holding Companies
The principal
sources of
funding for
the BHCs,
which are
Popular,
Inc.
(holding company
only) and
PNA, include
cash on
hand,
investment
securities,
dividends
received from
banking
and
non-banking subsidiaries,
asset sales,
credit
facilities
available from
affiliate banking subsidiaries and proceeds from potential securities offerings.
Dividends from banking and non-banking subsidiaries
are subject
to various
regulatory limits
and authorization
requirements imposed
by banking
regulators, including
the FED
and the
NYDFS, that may limit the ability of those subsidiaries
to act as a source of funding to the BHCs.
The principal uses of these funds include the repayment of debt, interest payments to holders of senior debt and junior subordinated
deferrable interest debentures (related to trust preferred securities), the payment of dividends to common stockholders,
repurchases
of the Corporation’s securities and capitalizing its subsidiaries.
The outstanding balance of notes payable at the
BHCs amounted to $594 million at June 30, 2025
and December 31, 2024.
The contractual maturities of the BHCs notes payable
at June 30, 2025 are presented in Table 15.
Table 15
- Distribution of BHC's Notes Payable by Contractual
Maturity
Year
(In thousands)
2028
$
395,865
Later years
198,386
Total
$
594,251
163
As of
June 30,
2025, the
BHCs had
cash and
money markets
investments totaling
$503 million
and borrowing
potential of
$165
million
from
its
secured
facility
with
BPPR.
The
BHCs’
liquidity
position
continues
to
be
adequate
with
sufficient
cash
on
hand,
investments and
other sources of
liquidity that are
expected to be
sufficient to
meet all
interest payments and
dividend obligations
for the
foreseeable future.
Additionally,
the Corporation’s
latest quarterly
paid dividend
was $0.70
per share
or approximately
$48
million per quarter.
The BHCs have in
the past borrowed in the
corporate debt market primarily to finance
their non-banking subsidiaries and refinance
debt
obligations.
These
sources
of
funding
are
more
costly
given
that
two
out
of
three
principal
credit
rating
agencies
rate
the
Corporation’s debt
securities below
“investment grade”.
The Corporation
has a
shelf registration
statement filed
and effective
with
the
Securities
and
Exchange
Commission,
which
permits
the
Corporation
to
issue
an
unspecified
amount
of
debt
or
equity
securities.
Non-Banking Subsidiaries
The
principal
sources
of
funding
for
the
non-banking
subsidiaries
include
internally
generated
cash
flows
from
operations,
loan
sales, repurchase agreements, capital
injections and borrowed funds
from their direct
parent companies or the
holding companies.
The principal uses of funds for the non-banking
subsidiaries include repayment of maturing debt,
operational expenses and payment
of dividends to the BHCs.
Dividends
During
the
six
months
ended June
30,
2025,
the
Corporation declared
cash
dividends of
$1.40
per
common
share
outstanding
($96.2 million in the
aggregate). The dividends for the
Corporation’s Series A preferred stock amounted to
$0.7 million.
On July 16,
2025, the
Corporation announced an
increase in its
quarterly common stock
dividend from $0.70
to $0.75
per share, commencing
with the dividend payable in the fourth quarter of
2025, subject to the approval by the Corporation’s
Board of Directors.
During the six
months ended June 30,
2025, the BHCs
received dividends and distributions
amounting to $200 million
from BPPR,
$23 from
Popular International
Bank, Inc.
(“PIBI”) and
$15 million
from
its
other non-banking
subsidiaries. Dividends
from BPPR
constitute Popular,
Inc.’s primary
source of
liquidity.
In addition,
during the
six months
ended June
30, 2025,PIBI,
a wholly
owned
subsidiary of Popular, Inc., received $20.0 million in cash dividends
and $5.3 million in stock dividends from its investment
in BHD.
In
addition to
regulatory
limits previously
discussed, the
ability
of a
bank
subsidiary to
up-stream dividends
to
its
BHC could
be
impacted by
its financial
performance and
capital, including
tangible and
regulatory capital,
thus potentially
limiting the
amount of
cash up
streamed to
the BHCs
from the
banking subsidiaries.
This could,
in turn,
affect BHC’s
ability to
declare dividends
on its
outstanding common
and
preferred stock,
repurchase its
securities
or
meet
its
debt
obligations, for
example. At
June
30,
2025,
BPPR could declare
a dividend of
up to
approximately $209 million
without prior approval
of the Federal
Reserve Board due
to its
retained income, declared dividend activity and transfers to statutory reserves over the measurement period.
In addition, pursuant to
the
FRB
requirements, PB
may not
declare
or
pay
a
dividend without
the
prior
approval
of
the
Federal Reserve
Board
and
the
NYSDFS.
Other Funding Sources and Capital
In
addition to
cash
reserves held
at
the
FRB
that
totaled $6.3
billion at
June
30, 2025,
the
debt securities
portfolio provides
an
additional
source
of
liquidity,
which
may
be
realized
through
either
securities
sales,
collateralized
borrowings
or
repurchase
agreements.
The
Corporation’s
debt
securities
portfolio
consists
primarily
of
liquid
U.S.
government
debt
securities,
U.S.
government
sponsored
agency
debt
securities,
U.S.
government
sponsored
agency
mortgage-backed
securities,
and
U.S.
government
sponsored
agency
collateralized
mortgage
obligations
that
can
be
used
to
raise
funds
in
the
repo
markets.
The
availability
of
repurchase
agreements
would
be
subject
to
having
sufficient
unpledged
collateral
available
at
the
time
the
transactions are
consummated, in addition
to overall
liquidity and
risk appetite
of the
various counterparties.
Refer to
Table
12 for
details of
the Corporation’s
unpledged debt
securities and
available credit
facilities with
the FHLB
and the
discount window
of the
Federal Reserve Bank. A substantial portion
of these debt securities could
be used to raise financing
in the U.S. money markets
or
from secured lending sources, subject to changes in
their fair market value and customary adjustments (haircuts).
Additional
liquidity
may
be
provided
through
loan
maturities,
prepayments
and
sales.
The
loan
portfolio
provides
a
source
of
collateral to
secure the
available credit
facilities with
the FHLB
and the
discount window
of the
Federal Reserve
Bank. After
the
merger of Popular Auto LLC into its
parent company BPPR, effective on May 1, 2025, the
Corporation has $2.9 billion in auto loans
pledged at June 30, 2025, in
addition to mortgage loans, to secure credit
facilities with the Federal Reserve's discount window.
The
164
loan portfolio
can also
be used to
obtain funding
in the
capital markets. Mortgage
loans and
some types of
consumer loans, have
secondary markets which the Corporation could use.
Off-Balance Sheet Arrangements and Other Commitments
In the ordinary course
of business, the Corporation
engages in financial transactions that
are not recorded on
the balance sheet or
may be recorded on the balance sheet in amounts that are different than the full contract or notional amount of the transaction. As a
provider of
financial services,
the Corporation
routinely enters
into commitments
with off-balance
sheet risk
to meet
the financial
needs
of
its
customers.
Refer
to
Note
20
to
the
Consolidated
Financial
Statements
for
information
on
the
Corporation’s
commitments to extent credit and other non-credit commitments.
Other types
of off-balance
sheet arrangements
that the
Corporation enters
in the
ordinary course
of business
include derivatives,
operating
leases
and
provision
of
guarantees,
indemnifications,
and
representation
and
warranties.
Refer
to
Note
27
to
the
Consolidated
Financial
Statements
for
more
information
on
operating
leases
and
to
Note
19
to
the
Consolidated
Financial
Statements for
a detailed
discussion related
to the
Corporation’s guarantees,
indemnifications obligations, and
representation and
warranties arrangements.
The Corporation monitors its cash requirements, including
its contractual obligations and debt commitments.
Financial Information of Guarantor and Issuers of Registered
Guaranteed Securities
The principal sources of funding for Popular, Inc. Holding Company (“PIHC”) and Popular North America, Inc. (“PNA”) have included
dividends received
from their
banking and
non-banking subsidiaries subject
to statutory
provisions that
limit dividends
paid by
the
banking subsidiary without regulatory approval,
asset sales and proceeds from the issuance
of debt and equity.
The Corporation ("PIHC") is
the parent holding company
of Popular North America (“PNA”)
and operates financial services through
its subsidiaries. PNA, a wholly owned subsidiary of Popular, Inc., manages entities such as Equity One, Inc., and PB, including PB’s
subsidiaries: Popular Equipment Finance, LLC,
Popular Insurance Agency, U.S.A., and E-LOAN, Inc.
PNA has issued junior subordinated debentures guaranteed by PIHC (the “obligor group”), purchased by statutory
trusts established
by the Corporation using proceeds from trust preferred
securities (“capital securities”) and common securities
of the trusts.
PIHC guarantees
the junior
subordinated debentures
issued by
PNA. If
PIHC fails
to make
interest payments
on the
debentures
held by the trust,
the trust will not
distribute payments on the
capital securities. The guarantee
ranks subordinate and junior
in right
of
payment to
all
other liabilities
of
PIHC and
equally with
all
other PIHC-issued
guarantees, allowing
direct
legal
action against
PIHC without involving other entities.
Funding
for
PIHC
and
PNA
includes
dividends
from
subsidiaries,
asset
sales,
and
proceeds
from
debt
and
equity
issuance.
Statutory provisions limit the dividends an insured
depository institution can pay to its holding
company without regulatory approval.
The summarized
financial information
below shows
the combined
financial position
of the
obligor group
as of
June 30,
2025, and
December 31, 2024, and the results of
their operations for the six-month period ended June
30, 2025 and June 30, 2024. Excluded
are investments and equity in earnings from subsidiaries
and affiliates outside the obligor group.
Intercompany balances
and transactions
within the
obligor group
have been
eliminated. Material
amounts due
from, due
to, and
transactions with subsidiaries and affiliates are shown separately. Related party transactions
are also presented separately.
165
Table 16 - Summarized Statement
of Condition
(In thousands)
June 30, 2025
December 31, 2024
Assets
Cash and money market investments
$
502,784
$
634,809
Investment securities
35,557
35,150
Accounts receivables from non-obligor subsidiaries
29,111
14,602
Other loans (net of allowance for credit losses of $197 (2024
- $281))
24,791
25,381
Investment in equity method investees
5,281
5,279
Other assets
83,401
65,483
Total assets
$
680,925
$
780,704
Liabilities and Stockholders' equity
Accounts payable to non-obligor subsidiaries
$
5,004
$
12,163
Notes payable
594,251
593,571
Other liabilities
129,332
126,718
Stockholders' (deficit) equity
(47,662)
48,252
Total liabilities and
stockholders' equity
$
680,925
$
780,704
Table 17 - Summarized Statement
of Operations
For the period ended
(In thousands)
June 30, 2025
June 30, 2024
Income:
Dividends from non-obligor subsidiaries
$
215,100
$
313,000
Interest income from non-obligor subsidiaries and affiliates
2,248
7,106
Earnings (losses) from investments in equity method investees
1
(10)
Other operating income
6,155
2,439
Total income
$
223,504
$
322,535
Expenses:
Services provided by non-obligor subsidiaries and affiliates
(net of
reimbursement by subsidiaries for services provided by parent
of
$127,054 (2024 - $120,987))
$
7,739
$
6,447
Other expenses
14,359
22,685
Income tax expense
[1]
5,952
22,208
Total expenses
$
28,050
$
51,340
Net income
$
195,454
$
271,195
[1] The
net income
for the
six months
ended
June
30, 2024,
included
$22.9
million
of
expenses,
of
which
$16.5
million
was
reflected
in
income tax
expense and
$6.4 million
was reflected
in other
operating expenses,
related to
an out-of-period
adjustment associated
with the
Corporation’s U.S.
subsidiary’s non-payment
of taxes
on certain
intercompany distributions
to the
Bank Holding
Company (BHC)
in Puerto
Rico, a foreign corporation for U.S. tax purposes.
In addition to the
dividend income reflected in the
Statement of Operations table
above, during the six months
ended June
30,
2025,
the
obligor
group
recorded
a
$23.0
million
of
dividend
distributions
from
non-obligor
subsidiary
which
was
recorded as a reduction to the investment (2024 -
$67.4 million).
166
Risk to Liquidity
The
Corporation’s
liquidity
may
come
under
pressure
if
it
experiences
significant
unexpected
cash
outflows
due
to
deposit
withdrawals, which could arise
from various factors like
economic conditions, loss of
depositor confidence, competition, exogenous
events, regulatory requirements or changes, a
downgrade in credit rating, or other events
causing counterparties to avoid exposure.
Investors should refer to Liquidity Risks section of “Part I, Item 1A”
of 2024 Form 10-K for an additional discussion of liquidity
risks to
which the Corporation is subject.
Credit Risk
Geographic and Government Risk
The Corporation is exposed to geographic and government risk.
The Corporation’s assets and revenue composition by geographical
area and by
business segment reporting are
presented in Note 32 to the
Consolidated Financial Statements. Readers
should refer
to
Economic
and
Market
Risk
section
and
Business
Risk
Section
of
“Part
I,
Item
1A”
of
the
2024
Form
10-K
for
an
additional
discussion
on
how
the
Corporation is
impacted
by
global
and
local
economic
and
market
conditions, including
weakness
in
the
economy,
particularly in Puerto
Rico, where a
significant portion of
our business is
concentrated. This section
also addresses how
our credit risk and credit
losses can increase to the extent
our loans are concentrated on borrowers engaged in
the same or similar
activities or in borrowers who as a group
may be uniquely or disproportionately affected by certain
economic or market conditions.
Commonwealth of Puerto Rico
A
significant portion
of
our financial
activities and
credit
exposure is
concentrated in
the
Commonwealth of
Puerto Rico
(“Puerto
Rico”) which has faced severe economic and fiscal
challenges in the past and may face additional
challenges in the future.
Economic Performance
The latest estimates from the
Puerto Rico Planning Board (the
“Planning Board”) indicate that real
GNP grew by 2.1%
during fiscal
year
2024
(July 2023-June
2024) and
by
1.1% in
fiscal
year
2025 (July
2024-June 2025).
For fiscal
year 2026
(July
2025-June
2026),
the
Planning
Board
forecasts
more
modest
GNP
growth
of
0.5%.
Meanwhile,
the
Puerto
Rico
Economic
Activity
Index
showed a
0.9% year-over-year
decline and
a 0.5%
month-over-month increase
in February
2025. While
this index
is not
a direct
measure of real GNP, it serves as an indicator of ongoing economic activity.
In
2021
and
2022,
inflation
rose
sharply
in
the
U.S.
and
Puerto
Rico
due
to
post-pandemic
demand
and
supply
chain
issues.
Inflation
began
to
decrease
by
mid-2022
as
the
Federal
Reserve
raised
interest
rates,
largely
stabilizing
by
September
2024,
leading to
a series
of rate
reductions by the
Federal Reserve for
the first
time in
four years.
As of
June 2025,
the U.S.
Consumer
Price Index
showed a
2.7% year-over-year increase,
which is
significantly lower
than peak
2022 inflation
levels but
still above
the
Federal Reserve’s
2%
target. In
Puerto
Rico, the
Consumer Price
Index
increased by
0.9% over
the 12
months ending
in June
2025.
Fiscal Challenges of Puerto Rico and its Municipalities
As
Puerto Rico’s
economy contracted
in the
2000s, public
debt
increased rapidly
due to
borrowing to
cover
deficits to
pay
debt
service, pension benefits,
and other expenditures.
By 2016, the
government had over
$120 billion in
combined debt and
unfunded
pension liabilities, lost access to capital markets, and
faced a fiscal crisis.
In
response,
the
U.S.
Congress
enacted
PROMESA
in
June
2016.
PROMESA
established
an
Oversight
Board
with
significant
control over Puerto Rico’s
fiscal and economic affairs,
including those of its public
corporations, instrumentalities and municipalities
(collectively, “PR Government Entities”). On August 5, 2025, President Donald J. Trump dismissed five of the seven members of the
Oversight Board, reportedly due to inefficient leadership and
excessive spending. As of the date of
this report, the vacant Oversight
Board seats remain unfilled, and no official replacements have been announced. While the two remaining members may continue to
act
on
behalf
of
the
Oversight
Board,
their
authority
is
limited
with
respect
to
certain
matters
specified
in
PROMESA
and
the
Oversight
Board’s
by-laws.
It
is
still
too
early
to
determine
what
impact
these
changes
may
have
on
the
Oversight
Board’s
operations or on Puerto Rico’s fiscal and economic
affairs.
167
Under PROMESA, the Oversight
Board will remain
in place until market
access is restored and
balanced budgets are achieved for
at
least
four
consecutive
years.
PROMESA
also
established
two
mechanisms
for
the
restructuring
of
the
obligations
of
PR
Government Entities:
(a) Title
III, an
in-court process
akin to
that of
the U.S.
Bankruptcy Code
and which
permits adjustment
of a
broad range
of
obligations, and
(b) Title
VI,
a largely
out-of-court process
through which
a supermajority
of creditors
can
accept
modifications to debt and bind holdouts.
Since
2017,
Puerto
Rico
and
several
of
its
instrumentalities
have
availed
themselves
of
these
mechanisms.
The
Puerto
Rico
government exited Title III in March 2022, and several instrumentalities, such as the Government Development Bank and the Puerto
Rico Highways and Transportation
Authority have also completed
debt restructurings under Titles
III or VI
of PROMESA. However,
the Puerto Rico Electric Power Authority is still undergoing
its debt restructuring.
Puerto
Rico's economic
difficulties
have also
impacted its
municipalities. Historically,
the central
government provided
significant
municipal subsidies.
However,
these, have
decreased pursuant
to fiscal
measures required
by the
Oversight Board.
This decline
has been partly offset by federal disaster and COVID-relief funding received
by municipalities in recent years. The latest Puerto
Rico
fiscal plan proposes a
restructured grant system to enhance
municipal services and encourage accountability through
performance
metrics.
Municipalities
are
subject
to
PROMESA,
and
the
Oversight
Board
has
required
certain
municipalities
to
submit
fiscal
plans
and
annual budgets
for review
and approval.
Municipalities are
also required
to seek
Oversight Board
approval to
issue, guarantee
or
modify
their
debts
and
to
enter
into
significant
contracts.
To
date
no
municipality
has
availed
itself
of
the
debt
restructuring
mechanisms available to them under PROMESA.
Exposure of the Corporation
The credit
quality of BPPR’s
loan portfolio
reflects, among other
things, the
general economic conditions
in Puerto
Rico and
other
adverse conditions affecting Puerto
Rico consumers and businesses.
Deterioration in the Puerto
Rico economy has resulted
in the
past, and could
result in the future,
in higher delinquencies, greater
charge-offs and increased losses,
which could materially affect
our financial condition and results of operations.
At June
30, 2025,
the Corporation’s
direct exposure
to
PR Government
Entities totaled
$412 million,
of
which $362
million were
outstanding, compared
to $336
million, at
December 31,
2024, all
of which
were outstanding.
The Corporation’s
exposure to
PR
Government Entities
at June
30, 2025
included up
to
$47.4 million
in Automated
Clearing House
(“ACH”) transaction
settlement
exposure, none of which
was outstanding.
Substantially all of the
Corporation’s direct exposure outstanding at
June 30, 2025
were
obligations from various
Puerto Rico municipalities.
In most
cases, these were
“general obligations” of
a municipality,
to which
the
applicable municipality
has
pledged its
good faith,
credit
and unlimited
taxing
power,
or “special
obligations” of
a municipality,
to
which the applicable municipality has pledged basic property tax or sales tax
revenues.
At June 30, 2025, 81% of the
Corporation’s
exposure to
municipal loans
and securities
was concentrated
in the
municipalities of
San Juan,
Guaynabo, Carolina
and Caguas.
For
additional
discussion
of
the
Corporation’s
direct
exposure
to
the
Puerto
Rico
government
and
its
instrumentalities
and
municipalities, refer to Note 20 – Commitments and
Contingencies to the Consolidated Financial
Statements.
In addition,
at June 30,
2025, the Corporation
had $212 million
in loans insured
or securities issued
by PR Governmental
Entities,
but
for which
the principal
source of
repayment is
non-governmental ($220 million
at
December 31, 2024).
These included
$168
million
in
residential mortgage
loans
insured
by
the
Puerto
Rico
Housing
Finance Authority
(“HFA”),
a
Puerto
Rico
Government
Entity ($176 million at December 31, 2024).
The Corporation also had, at June 30,
2025, $37 million in bonds issued by
HFA which
are secured
by second mortgage
loans on
Puerto Rico
residential properties, and
for which
HFA also
provides insurance to
cover
losses in the
event of a
borrower default, and
upon the satisfaction of
certain other conditions
($38 million at
December 31, 2024).
HFA’s
ability to honor its
insurance will depend, among
other factors, on the
financial condition of HFA
at the time such
obligations
become
due
and
payable.
The
Corporation
does
not
consider
the
government
guarantee
when
estimating
the
credit
losses
associated with this portfolio.
BPPR’s
commercial loan
portfolio also
includes loans
to
private borrowers
who
are service
providers, lessors,
suppliers or
have
other
relationships
with
the
PR
government.
These
borrowers
could
be
negatively
affected
by
a
deterioration
in
the
fiscal
and
economic
situation
of
PR
Government
Entities.
Similarly,
BPPR’s
mortgage
and
consumer
loan
portfolios
include
loans
to
government
employees
and
retirees,
which
could
also
be
negatively
affected
by
fiscal
measures,
such
as
employee
layoffs
or
furloughs or reductions in pension benefits, if the
fiscal and economic situation deteriorates.
As of June
30, 2025, BPPR had
$20.9 billion in deposits from
the Puerto Rico government, its
instrumentalities, and municipalities.
The
rate
at
which
public
deposit
balances
may
decline is
uncertain and
difficult
to
predict.
The
amount
and
timing
of
any
such
reduction is likely to
be impacted by,
for example, the level
of federal assistance, the
speed at which such
assistance is distributed
168
and
the financial
condition, liquidity
and cash
management practices
of such
entities, as
well as
the ability
of
BPPR to
maintain
these customer relationships.
United States Virgin Islands
The
Corporation
has
operations
in
the
United
States
Virgin
Islands
(the
“USVI”)
and
has
credit
exposure
to
USVI
government
entities.
The USVI has
been experiencing a
number of fiscal
and economic challenges,
which could adversely
affect the
ability of its
public
corporations and instrumentalities to service their outstanding
debt obligations. PROMESA does not apply to the USVI
and, as such,
there
is
currently
no
federal
legislation
permitting
the
restructuring
of
the
debts
of
the
USVI
and
its
public
corporations
and
instrumentalities.
Non-Performing Assets
NPAs
include primarily
past-due loans
that are
no longer
accruing interest,
renegotiated loans,
and real
estate property
acquired
through foreclosure. A summary, including certain credit quality metrics, is presented
in Table 18.
The Corporation’s
credit quality
metrics demonstrated
favorable trends
in the
second quarter
of 2025
with improvements
in NPLs
and Net Charge-Offs (NCOs). The Corporation continues to
closely monitor the economic landscape and borrower performance, as
economic
uncertainty
remains
a
key
consideration.
The
Corporation’s
experience
managing
credit
risk
under
different
macroeconomic and
operating environments and,
more recently,
the steps
taken around
credit tightening
supports management’s
view
that
exposure
to
riskier
borrowers
is
adequately
managed.
Nonetheless,
carefully
monitoring
the
performance
of
our
loan
portfolio and its response to the environment will
continue to be a priority.
Total
NPAs of $357.8 million
as of June 30, 2025 decreased by
$50.3 million when compared with December 31, 2024. Total
NPLs
of $311.6
million decreased by
$39.2 million from December
31, 2024. BPPR’s
NPLs decreased by $34.4
million, mainly driven
by
lower consumer,
mortgage and commercial
NPLs by $12.9
million, $11.0
million and $8.9
million, respectively.
Popular U.S. NPLs
decreased
by
$4.7
million,
mostly
driven
by
decreases
of
$1.9
million
and
$1.8
million
in
commercial
and
mortgage
NPLs,
respectively.
On June
30, 2025, the
ratio of
NPLs to total
loans held-in-portfolio was
0.82%, compared to
0.95% on December
31, 2024.
Other
real estate owned loans (“OREOs”) decreased by $11.1 million from December 31, 2024. The decrease in OREO was mainly driven
by the combination of
sales and lower residential
property foreclosures. On June
30, 2025, NPLs secured
by real estate amounted
to
$189
million
in
the
Puerto
Rico
operations
and
$50
million
in
Popular
U.S,
compared
with
$200
million
and
$56
million,
respectively, on December 31, 2024.
The Corporation’s commercial
loan portfolio secured
by real estate
(“CRE”) amounted to
$11.0
billion on June
30, 2025,
with $3.0
billion secured by owner-occupied properties (December
31, 2024 - $10.9 billion and $3.2 billion, respectively).
The
non-owner occupied
CRE portfolio
was $5.5
billion at
June
30, 2025,
split
between $3.3
billion in
BPPR
and $2.2
billion in
Popular U.S.
This portfolio is diversified across sectors: retail (33%), hotels (19%), and office
space (13%) which together represent
two-thirds of
total non-owner
occupied CRE
exposure. Specifically,
office space
leasing accounts
for just
1.8% ($688.8
million) of
the total
loan portfolio,
mainly comprising
mid-rise
properties with
an average
loan size
of $2.4
million, and
is well
diversified by
tenant type.
Within CRE, the
commercial multi-family portfolio is
$2.5 billion (approximately 7%
of total loans),
concentrated in New
York
Metro
($1.5 billion), South Florida ($716.6 million) and Puerto Rico
($202.1 million) regions. In the New York Metro, there is no exposure to
rent-controlled buildings and rent-stabilized
units make up less than 40% of total units,
with most originated after 2019.
CRE NPLs amounted to
$52.5 million on June 30,
2025, compared with $53.7 million
on December 31, 2024. The
CRE NPL ratios
for
the
BPPR
and
Popular
U.S.
segments
were
0.69%
and
0.30%,
respectively,
on
June
30,
2025,
compared
with
0.64%
and
0.37%, respectively, on December 31, 2024.
169
In addition
to the
NPLs included
in Table
18, on
June 30,
2025, there
were $529
million of
performing loans,
mostly commercial
loans, which in management’s opinion, are currently subject to potential future classification as non-performing (December 31, 2024
- $596 million).
The following table presents the Corporation’s NPAs as of June 30, 2025 and December
31, 2024:
170
Table 18 - Non-Performing
Assets
June 30, 2025
December 31, 2024
(Dollars in thousands)
BPPR
Popular
U.S.
Popular,
Inc.
As a % of
loans HIP
by
category
BPPR
Popular
U.S.
Popular,
Inc.
As a % of
loans HIP
by
category
Commercial
Commercial multi-family
$
174
$
10,751
$
10,925
0.4
%
$
79
$
8,700
$
8,779
0.4
%
Commercial real estate non-owner
occupied
6,084
7,893
13,977
0.3
6,429
8,015
14,444
0.3
Commercial real estate owner
occupied
27,320
231
27,551
0.9
25,258
5,191
30,449
1.0
Commercial and industrial
8,588
2,836
11,424
0.1
19,335
1,748
21,083
0.3
Total Commercial
42,166
21,711
63,877
0.3
51,101
23,654
74,755
0.4
Leasing
7,976
-
7,976
0.4
9,588
-
9,588
0.5
Mortgage
147,464
28,052
175,516
2.1
158,442
29,890
188,332
2.3
Consumer
Home equity lines of credit
-
3,120
3,120
4.0
-
3,393
3,393
4.6
Personal
17,499
1,094
18,593
1.0
20,269
1,741
22,010
1.2
Auto
40,595
-
40,595
1.1
51,792
-
51,792
1.4
Other
1,948
-
1,948
1.2
899
11
910
0.5
Total Consumer
60,042
4,214
64,256
0.9
72,960
5,145
78,105
1.1
Total non-performing
loans held-in-
portfolio
257,648
53,977
311,625
0.8
%
292,091
58,689
350,780
0.9
%
Other real estate owned (“OREO”)
45,643
483
46,126
57,197
71
57,268
Total non-performing
assets
[1]
$
303,291
$
54,460
$
357,751
$
349,288
$
58,760
$
408,048
Accruing loans past due 90 days or
more
[2]
$
206,205
$
189
$
206,394
$
242,250
$
190
$
242,440
Ratios:
Non-performing assets to total assets
0.51
%
0.34
%
0.47
%
0.61
%
0.37
%
0.56
%
Non-performing loans held-in-portfolio
to loans held-in-portfolio
0.96
0.47
0.82
1.12
0.54
0.95
Allowance for credit losses to loans
held-in-portfolio
2.53
0.79
2.02
2.56
0.69
2.01
Allowance for credit losses to non-
performing loans, excluding held-for-
sale
263.63
167.17
246.93
229.61
128.40
212.68
[1] There were no non-performing loans held-for-sale
as of June 30, 2025 and December 31, 2024.
[2] It is the Corporation’s policy to report delinquent
residential mortgage loans insured by FHA or guaranteed
by the VA as accruing
loans past due 90
days or
more
as
opposed
to
non-performing
since
the principal
repayment
is insured.
These
balances
include
$52 million
of residential
mortgage
loans
insured
by
FHA
or
guaranteed
by
the
VA
that
are
no
longer
accruing
interest
as
of
June
30,
2025
(December
31,
2024
-
$65
million).
Furthermore, the Corporation
has $29 million
in reverse mortgage
loans which are
guaranteed by
FHA, but which
are currently
not accruing interest.
Due to the guaranteed
nature of the loans,
it is the Corporation’s
policy to exclude these
balances from non-performing
assets (December 31,
2024 -
$31 million).
For the quarter ended June 30,
2025, total inflows of NPLs held-in-portfolio, excluding consumer loans,
decreased by $26.1 million,
when compared
to the
inflows for
the same
period in
2024. Inflows
of NPLs
held-in-portfolio at
the BPPR
segment decreased
by
$8.8 million,
compared to
the same
period in
2024, mainly
driven by
lower mortgage
NPL inflows
by $6.6
million. Inflows
of NPLs
held-in-portfolio at the Popular U.S. segment decreased by
$17.3 million from the same period in
2024, driven by lower commercial
NPL inflows by $16.6 million, as the prior period
was impacted by a single $17.3 million loan.
Tables 19 to 25 present the Corporation’s inflows to NPLs for the quarters and six months ended
June 30, 2025 and 2024.
171
Table 19 - Activity in Non
-Performing Loans Held-in-Portfolio (Excluding Consumer
Loans)
For the quarter ended June 30, 2025
For the six months ended June 30, 2025
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
191,103
$
46,594
$
237,697
$
209,543
$
53,544
$
263,087
Plus:
New non-performing loans
32,205
8,909
41,114
69,228
17,067
86,295
Advances on existing non-performing loans
-
20
20
-
38
38
Less:
Non-performing loans transferred to OREO
(2,385)
(433)
(2,818)
(4,940)
(433)
(5,373)
Non-performing loans charged-off
(790)
(583)
(1,373)
(1,717)
(1,713)
(3,430)
Loans returned to accrual status / loan collections
(30,503)
(4,744)
(35,247)
(82,484)
(18,740)
(101,224)
Ending balance NPLs
$
189,630
$
49,763
$
239,393
$
189,630
$
49,763
$
239,393
Table 20 - Activity in Non
-Performing Loans Held-in-Portfolio (Excluding Consumer
Loans)
For the quarter ended June 30, 2024
For the six months ended June 30, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
229,796
$
49,478
$
279,274
$
254,476
$
22,354
$
276,830
Plus:
New non-performing loans
41,040
25,907
66,947
74,543
61,280
135,823
Advances on existing non-performing loans
-
298
298
-
320
320
Less:
Non-performing loans transferred to OREO
(4,540)
(24)
(4,564)
(8,649)
(24)
(8,673)
Non-performing loans charged-off
(5,590)
(18)
(5,608)
(13,899)
(968)
(14,867)
Loans returned to accrual status / loan collections
(40,746)
(26,324)
(67,070)
(86,511)
(33,645)
(120,156)
Ending balance NPLs
$
219,960
$
49,317
$
269,277
$
219,960
$
49,317
$
269,277
Table 21 - Activity in Non
-Performing Commercial Loans Held-in-Portfolio
For the quarter ended June 30, 2025
For the six months ended June 30, 2025
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
42,597
$
17,507
$
60,104
$
51,101
$
23,654
$
74,755
Plus:
New non-performing loans
1,768
5,632
7,400
7,549
11,045
18,594
Advances on existing non-performing loans
-
20
20
-
37
37
Less:
Non-performing loans transferred to OREO
(140)
-
(140)
(260)
-
(260)
Non-performing loans charged-off
(403)
(583)
(986)
(1,142)
(1,713)
(2,855)
Loans returned to accrual status / loan
collections
(1,656)
(865)
(2,521)
(15,082)
(11,312)
(26,394)
Ending balance NPLs
$
42,166
$
21,711
$
63,877
$
42,166
$
21,711
$
63,877
172
Table 22 - Activity in Non
-Performing Commercial Loans Held-in-Portfolio
For the quarter ended June 30, 2024
For the six months ended June 30, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
63,323
$
21,407
$
84,730
$
72,992
$
11,163
$
84,155
Plus:
New non-performing loans
4,031
21,940
25,971
8,374
36,979
45,353
Advances on existing non-performing loans
-
282
282
-
302
302
Less:
Non-performing loans transferred to OREO
(280)
-
(280)
(280)
-
(280)
Non-performing loans charged-off
(5,700)
-
(5,700)
(13,699)
(950)
(14,649)
Loans returned to accrual status / loan collections
(5,204)
(5,866)
(11,070)
(11,217)
(9,731)
(20,948)
Ending balance NPLs
$
56,170
$
37,763
$
93,933
$
56,170
$
37,763
$
93,933
Table 23 - Activity in Non
-Performing Construction Loans Held-in-Portfolio
For the quarter ended June 30, 2024
For the six months ended June 30, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
-
$
-
$
-
$
6,378
$
-
$
6,378
Less:
Loans returned to accrual status / loan collections
-
-
-
(6,378)
-
(6,378)
Ending balance NPLs
$
-
$
-
$
-
$
-
$
-
$
-
173
Table 24 - Activity in Non
-Performing Mortgage Loans Held-in-Portfolio
For the quarter ended June 30, 2025
For the six months ended
June 30, 2025
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
148,506
$
29,087
$
177,593
$
158,442
$
29,890
$
188,332
Plus:
New non-performing loans
30,437
3,277
33,714
61,679
6,022
67,701
Advances on existing non-performing loans
-
-
-
-
1
1
Less:
Non-performing loans transferred to OREO
(2,245)
(433)
(2,678)
(4,680)
(433)
(5,113)
Non-performing loans charged-off
(387)
-
(387)
(575)
-
(575)
Loans returned to accrual status / loan
collections
(28,847)
(3,879)
(32,726)
(67,402)
(7,428)
(74,830)
Ending balance NPLs
$
147,464
$
28,052
$
175,516
$
147,464
$
28,052
$
175,516
Table 25 - Activity in Non
-Performing Mortgage Loans Held-in-Portfolio
For the quarter ended June 30, 2024
For the six months ended June 30, 2024
(Dollars in thousands)
BPPR
Popular U.S.
Popular, Inc.
BPPR
Popular U.S.
Popular, Inc.
Beginning balance
$
166,473
$
28,071
$
194,544
$
175,106
$
11,191
$
186,297
Plus:
New non-performing loans
37,009
3,967
40,976
66,169
24,301
90,470
Advances on existing non-performing loans
-
16
16
-
18
18
Less:
Non-performing loans transferred to OREO
(4,260)
(24)
(4,284)
(8,369)
(24)
(8,393)
Non-performing loans charged-off
110
(18)
92
(200)
(18)
(218)
Loans returned to accrual status / loan collections
(35,542)
(20,458)
(56,000)
(68,916)
(23,914)
(92,830)
Ending balance NPLs
$
163,790
$
11,554
$
175,344
$
163,790
$
11,554
$
175,344
174
Loan Delinquencies
Another key measure used to evaluate and
monitor the Corporation’s asset quality is loan
delinquencies. Loans delinquent 30 days
or more, as a percentage of their related portfolio
category on June 30, 2025 and December 31, 2024,
are presented below.
Table 26 - Loan Delinquencies
(Dollars in thousands)
June 30, 2025
December 31, 2024
Loans delinquent
30 days or more
Total loans
Total delinquencies
as a percentage
of total loans
Loans delinquent
30 days or more
Total loans
Total delinquencies
as a percentage
of total loans
Commercial
Commercial multi-family
$
21,937
$
2,520,789
0.87
%
$
15,826
$
2,399,620
0.66
%
Commercial real estate
non-owner occupied
17,272
5,521,374
0.31
24,925
5,363,235
0.46
Commercial real estate
owner occupied
41,413
3,003,855
1.38
42,311
3,157,746
1.34
Commercial and industrial
37,213
8,043,752
0.46
49,942
7,741,562
0.65
Total Commercial
117,835
19,089,770
0.62
133,004
18,662,163
0.71
Construction
3,720
1,468,201
0.25
1,039
1,263,792
0.08
Leasing
36,714
1,983,068
1.85
39,641
1,925,405
2.06
Mortgage
[1]
728,253
8,444,427
8.62
798,130
8,114,183
9.84
Consumer
Credit cards
48,745
1,215,293
4.01
59,078
1,218,079
4.85
Home equity lines of credit
4,682
77,479
6.04
5,054
73,571
6.87
Personal
51,109
1,876,463
2.72
57,835
1,855,244
3.12
Auto
165,642
3,861,702
4.29
191,008
3,823,437
5.00
Other
5,567
168,775
3.30
3,930
171,778
2.29
Total Consumer
275,745
7,199,712
3.83
316,905
7,142,109
4.44
Loans held-for-sale
-
2,898
-
-
5,423
-
Total
$
1,162,267
$
38,188,076
3.04
%
$
1,288,719
$
37,113,075
3.47
%
[1]
Loans delinquent 30 days or more includes $0.4 billion
of residential mortgage loans insured by FHA or guaranteed
by the VA as of June
30,
2025 (December 31, 2024 - $0.4 billion). Refer to Note
7 to the Consolidated Financial Statements for additional
information of guaranteed loans.
Allowance for Credit Losses Loans Held-in-Portfolio
The ACL
represents management’s
estimate of
expected credit
losses through
the remaining
contractual life
of the
different loan
segments, impacted by expected prepayments. The ACL
is maintained at a sufficient
level to provide for estimated credit
losses on
collateral dependent loans as well as loans modified
for borrowers with financial difficulties separately from the remainder
of the loan
portfolio. Refer to
Note 8 to
the Consolidated Financial
Statements, for additional
information on the
Corporation’s methodology to
estimate its ACL.
On June 30,
2025, the ACL increased by
$23.5 million from December 31,
2024 to $769.5 million. The
increase in ACL was
driven
by changes in the economic scenario
probability weights and increases in qualitative reserves, in
response to the current economic
environment uncertainty,
coupled with
reserve build-up associated
with portfolio
growth and
unfavorable changes in
the economic
assumptions used
in the
ACL model.
These increases
were offset
in part
by the
net effect
of changes
in credit
quality and
NCOs
during the period.
Given that any economic outlook is inherently uncertain, the Corporation
leverages multiple scenarios to estimate
its
ACL.
Prior
to
the
first
quarter
of
2025,
the
Corporation
assigned
the
baseline
scenario
the
highest
probability
among
the
scenarios
used
to
estimate
the
ACL,
followed
by
the
pessimistic
scenario
given
the
uncertainties
in
the
economic
outlook
and
downside risk, and
the optimistic scenario
had the lowest
probability. During
the first quarter
of 2025, the
Corporation modified the
weight assigned
to the
pessimistic scenario to
be equal
to the
baseline scenario
in response
to the
current economic
uncertainty,
resulting in
an increase
of $18.2
million in
the reserves.
In
the second
quarter of
2025, the
probability weight
for the
pessimistic
175
scenario was moderately decreased based on changes in the economic outlook and a reassessment of uncertainty compared to the
previous
quarter.
This
change
resulted
in
a
$4.5
million
reduction
in
ACL
reserve
levels,
for
a
$13.7
million
net
increase
from
December
31,
2024.
The
probability
weight
for
the
pessimistic
scenario
remains
above
the
levels
observed
in
2024,
given
the
ongoing
economic
uncertainty.
Refer
to
Note
8
to
the
Consolidated
Financial
Statements,
for
additional
information
on
the
Corporation’s methodology to estimate its ACL, including
probability weights assigned
On
June
30,
2025,
the
ACL
for BPPR
increased by
$8.6
million
from
December 31,
2024,
driven by
changes
in
the
probability
weights that resulted
in a
$8.8 million net
ACL increase, coupled
with an increase
in the reserves
for auto loans
due to migrations
between FICO
score categories
and changes
in the
economic scenarios.
This increase
was partially
offset by
lower reserves
for
commercial loans
due to
improvements in credit
quality,
partially offset
by ACL
reserve build-up
due to
portfolio growth. In
PB, on
June
30,
2025,
the
ACL
increased
by
$14.9
million,
when
compared
to
December
31,
2024.
This
increase
was
influenced
by
changes in
the forecast
of the
U.S. unemployment rate
as well
as higher
qualitative reserves for
the CRE
portfolio in
response to
current market volatility and economic uncertainty, coupled
with changes in the probability weights that resulted in a
$4.9 million net
increase.
The Corporation’s ratio of the allowance for credit losses to loans held-in-portfolio was 2.02% on June 30, 2025, compared to 2.01%
on
December 31,
2024. The
ratio of
the ACL
to
NPLs held-in-portfolio
stood
at
246.9%, compared
to
212.7% on
December 31,
2024.
Tables
27 and
28 detail
the allowance
for credit
losses by
loan categories
and the
percentage it
represents of
total loans
held-in-
portfolio and
NPLs. The
breakdown is
made for
analytical purposes,
and it
is not
necessarily indicative
of the
categories in
which
future loan losses may occur.
176
Table 27 - Allowance for Credit
Losses - Loan Portfolios
June 30, 2025
(Dollars in thousands)
Total ACL
Total loans held-
in-portfolio
ACL to loans held-
in-portfolio
Total non-
performing loans
held-in-portfolio
ACL to non-
performing loans
held-in-portfolio
Commercial
Commercial multi-family
$
16,781
$
2,520,789
0.67
%
$
10,925
153.60
%
Commercial real estate non-owner occupied
59,117
5,521,374
1.07
%
13,977
422.96
%
Commercial real estate owner occupied
49,051
3,003,855
1.63
%
27,551
178.04
%
Commercial and industrial
141,362
8,043,752
1.76
%
11,424
N.M.
Total Commercial
$
266,311
$
19,089,770
1.40
%
$
63,877
416.91
%
Construction
10,579
1,468,201
0.72
%
-
-
Leasing
20,040
1,983,068
1.01
%
7,976
251.25
%
Mortgage
85,175
8,444,427
1.01
%
175,516
48.53
%
Consumer
Credit cards
92,306
1,215,293
7.60
%
-
-
Home equity lines of credit
1,384
77,479
1.79
%
3,120
44.36
%
Personal
103,654
1,876,463
5.52
%
18,593
557.49
%
Auto
182,274
3,861,702
4.72
%
40,595
449.01
%
Other
7,762
168,775
4.60
%
1,948
398.46
%
Total Consumer
$
387,380
$
7,199,712
5.38
%
$
64,256
602.87
%
Total
$
769,485
$
38,185,178
2.02
%
$
311,625
246.93
%
N.M. - Not meaningful.
Table 28 - Allowance for Credit
Losses - Loan Portfolios
December 31, 2024
(Dollars in thousands)
Total ACL
Total loans held-
in-portfolio
ACL to loans held-
in-portfolio
Total non-
performing loans
held-in-portfolio
ACL to non-
performing loans
held-in-portfolio
Commercial
Commercial multi-family
$
9,236
$
2,399,620
0.38
%
$
8,779
105.21
%
Commercial real estate non-owner occupied
54,494
5,363,235
1.02
%
14,444
377.28
%
Commercial real estate owner occupied
49,828
3,157,746
1.58
%
30,449
163.64
%
Commercial and industrial
146,006
7,741,562
1.89
%
21,083
692.53
%
Total Commercial
$
259,564
$
18,662,163
1.39
%
$
74,755
347.22
%
Construction
11,264
1,263,792
0.89
%
-
-
Leasing
16,419
1,925,405
0.85
%
9,588
171.25
%
Mortgage
82,409
8,114,183
1.02
%
188,332
43.76
%
Consumer
Credit cards
99,130
1,218,079
8.14
%
-
-
Home equity lines of credit
1,503
73,571
2.04
%
3,393
44.30
%
Personal
102,736
1,855,244
5.54
%
22,010
466.77
%
Auto
165,995
3,823,437
4.34
%
51,792
320.50
%
Other
7,004
171,778
4.08
%
910
769.67
%
Total Consumer
$
376,368
$
7,142,109
5.27
%
$
78,105
481.87
%
Total
$
746,024
$
37,107,652
2.01
%
$
350,780
212.68
%
177
Annualized net charge-offs (recoveries)
The following
table presents
annualized net charge-offs
(recoveries) to average
loans held-in-portfolio (“HIP”)
by loan
category for
the quarters and six months ended June 30, 2025
and 2024.
Table 29 - Annualized Net Charge
-offs (Recoveries) to Average Loans
Held-in-Portfolio
Quarters ended
June 30, 2025
June 30, 2024
BPPR
Popular U.S.
Popular Inc.
BPPR
Popular U.S.
Popular Inc.
Commercial
―
%
0.02
%
0.01
%
0.20
%
0.04
%
0.13
%
Construction
―
―
―
―
(0.04)
(0.04)
Mortgage
(0.14)
(0.01)
(0.12)
(0.23)
(0.01)
(0.19)
Leasing
0.56
―
0.56
0.60
―
0.60
Consumer
2.29
4.00
2.33
2.68
6.58
2.80
Total annualized
net charge-offs
(recoveries) to average loans held-in-
portfolio
0.61
%
0.07
%
0.45
%
0.79
%
0.16
%
0.61
%
Six months ended
June 30, 2025
June 30, 2024
BPPR
Popular U.S.
Popular Inc.
BPPR
Popular U.S.
Popular Inc.
Commercial
(0.05)
%
0.02
%
(0.02)
%
0.25
%
0.04
%
0.15
%
Construction
―
―
―
―
(0.02)
(0.02)
Mortgage
(0.14)
(0.03)
(0.12)
(0.25)
(0.01)
(0.21)
Leasing
0.62
―
0.62
0.72
―
0.72
Consumer
2.55
3.95
2.59
2.83
7.54
2.98
Total annualized
net charge-offs
(recoveries) to average loans held-in-
portfolio
0.67
%
0.07
%
0.49
%
0.86
%
0.19
%
0.66
%
NCOs for the quarter ended June 30, 2025, amounted
to $42.2 million, decreasing by $11.4 million when compared to the same
period in 2024. The BPPR segment decreased by
$9.1 million, mainly driven by decreases of
$5.6 million and $4.9 million in
consumer and commercial NCOs, respectively. The PB segment NCOs decreased
by $2.3 million, mainly driven by lower
consumer
NCOs by $1.8 million
NCOs for the six months ended June 30, 2025,
amounted to $91.3 million, decreasing by $24.5
million when compared to the same
period in 2024. The BPPR segment decreased by
$18.6 million, mainly driven by decreases of
$14.4 million and $7.0 million in
commercial and consumer NCOs, respectively. The PB segment NCOs decreased
by $5.9 million, mainly driven by lower consumer
NCOs by $4.9 million.
Loan Modifications
For
the
quarter
ended
June
30,
2025,
modified
loans
to
borrowers
with
financial
difficulty
amounted
to
$276.9
million,
of
which
$266.6 million were in
accruing status. The BPPR segment’s
modifications to borrowers with financial difficulty
amounted to $217.5
million, mainly comprised of commercial and mortgage loans of $192.5
million and $17.4 million, respectively. A total of $10.7 million
of
the
mortgage
modifications
were
related
to
government
guaranteed
loans.
The
Popular
U.S.
segment’s
modifications
to
borrowers with financial difficulty amounted to $59.4 million,
mostly comprised of commercial loans.
Refer
to
Note
8
to
the
Consolidated
Financial
Statements
for
additional
information
on
modifications
made
to
borrowers
experiencing financial difficulties.
178
ADOPTION OF NEW ACCOUNTING STANDARDS AND ISSUED BUT NOT
YET EFFECTIVE ACCOUNTING STANDARDS
Refer to Note 3, “New Accounting Pronouncements”
to the Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Quantitative and qualitative disclosures for the current
period can be found in the Market Risk
section of this report, which includes
changes in market risk exposures from disclosures presented
in the 2024 Form 10-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Corporation’s management,
with the
participation of the
Corporation’s Chief Executive
Officer and Chief
Financial Officer,
has
evaluated the effectiveness of the Corporation’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based
on such evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer have concluded that,
as of the end of such
period, the Corporation’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a
timely basis,
information required to
be disclosed
by the
Corporation in
the reports
that it
files or
submits under
the Exchange Act
and
such
information
is
accumulated
and
communicated
to
management,
as
appropriate,
to
allow
timely
decisions
regarding
required disclosures.
Internal Control Over Financial Reporting
There have been no changes in the Corporation’s internal control over financial reporting (as such term is defined in Rules 13a-15(f)
and 15d-15(f) under
the Exchange Act)
that occurred during
the quarter ended
June 30,
2025 that have
materially affected, or
are
reasonably likely to materially affect, the Corporation’s internal control
over financial reporting.
Part II - Other Information
Item 1. Legal Proceedings
For a discussion of Legal Proceedings, see Note 20
to the Consolidated Financial Statements.
Item 1A. Risk Factors
In addition to the other information set forth in
this report, you should carefully consider the risk
factors discussed under “Part I - Item
1A - Risk Factors” in our 2024 Form
10-K. These factors could materially adversely affect our business, financial condition, liquidity,
results of
operations and
capital position,
and could
cause our
actual results
to
differ
materially from
our historical
results or
the
results contemplated
by the
forward-looking statements
contained in
this report.
Also refer
to the
discussion in
“Part I
- Item
2 –
Management’s Discussion
and Analysis
of Financial
Condition and
Results of
Operations” in
this report
for additional
information
that may supplement or update the discussion
of risk factors below and in our 2024 Form 10-K.
There have been no material changes to the risk
factors previously disclosed under Item 1A of the
Corporation’s 2024 Form 10-K.
The risks described
in our 2024 Form
10-K and in
this report are not
the only risks
facing us. Additional risks
and uncertainties not
currently
known
to
us
or
that
we
currently
deem
to
be
immaterial
also
may
materially
adversely
affect
our
business,
financial
condition, liquidity, results of operations and capital position.
179
Item 2.
Unregistered Sales of Equity Securities and
Use of Proceeds
The Corporation did not have any unregistered
sales of equity securities during the quarter ended
June 30, 2025.
Issuer Purchases of Equity Securities
The following table
sets forth the
details of
purchases of common
stock by
the Corporation and
its affiliated
purchasers during the
quarter ended June 30, 2025:
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]
Approximate Dollar Value of
Shares that May Yet be
Purchased Under the Plans or
Programs [2]
April 1 - April 30
357,832
$
87.37
355,539
$129,330,233
May 1 -May 31
447,956
101.50
417,666
$86,774,331
June 1 - June 30
380,593
105.93
363,185
$48,375,729
Total
1,186,381
$
98.66
1,136,390
$48,375,729
[1]
Includes
2,293,
30,290
and
17,408
shares
of
the
Corporation’s
common
stock
acquired
by
the
Corporation
during
April,
May
and
June
2025,
respectively,
in connection
with the
satisfaction of
tax withholding
obligations on
vested awards
of restricted
stock or
restricted stock
units granted
to
directors and certain
employees under
the Corporation’s
Omnibus Incentive
Plan. The acquired
shares of common
stock were added
back to treasury
stock.
[2] As part of its capital
plan, in July 2024,
the Corporation announced plans
to repurchase up to
$500 million in common
stock and repurchases
began
in August 2024.
As of June 30, 2025,
the Corporation repurchased 4,663,379
shares of common stock for
$451.5 million at an average
price of $96.82
per share, under the previously announced share repurchase
authorization.
Item 3.
Defaults Upon Senior Securities
None.
Item 4.
Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans or Other Preplanned Trading Arrangements
Certain of our
officers or directors have
made, and may from
time to time make,
elections to participate in,
and are
participating in
,
our dividend reinvestment and purchase plan, the
Company stock fund associated with our 401(k)
plans and/or the Company stock
fund associated with
our non-qualified deferred compensation
plans and have shares
withheld to cover
withholding taxes upon the
vesting of
equity awards, which
may be
designed to satisfy
the affirmative defense
conditions of Rule
10b5-1 under the
Exchange
Act or may constitute non-Rule 10b5–1
trading arrangements
(as defined in Item 408(c) of Regulation
S-K).
180
Item 6.
Exhibits
Exhibit Index
Exhibit No
Exhibit Description
10.1
Form of Director Compensation Letter, Election Form, Restricted Stock Award Agreement and Restricted
Stock Unit Award Agreement, effective May 8, 2025
(1)*
10.2
Equity Award Agreement, dated as of June 26, 2025, by and between Ignacio Alvarez and Popular, Inc.
(1)*
10.3
2025 Long-Term Equity Incentive Award Agreement, dated as of June 26, 2025, by and between Javier D.
Ferrer and Popular, Inc.
(1)*
22.1
Issuers of Guaranteed Securities (Incorporated by reference to Exhibit 22.1 of Popular, Inc.’s Annual
Report on Form 10-K for the year ended December 31, 2024)
31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(1)
31.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(1)
32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
(1)
32.2
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 d82325dex322.htm
(1)
101. INS
XBRL Instance Document – the instance document
does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline Document.
101.SCH
Inline Taxonomy Extension Schema Document
(1)
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
(1)
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document
(1)
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
(1)
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
(1)
104
The cover page of Popular, Inc. Quarterly Report on Form 10-Q for the
quarter ended June 30, 2025,
formatted in Inline XBRL (included within the Exhibit
101 attachments)
(1)
(1)
Included herewith
* This exhibit is a management contract or compensatory
plan or arrangement.
Popular, Inc. has not filed as exhibits certain instruments defining
the rights of holders of debt of Popular, Inc. not
exceeding 10% of the total assets of Popular, Inc. and its consolidated
subsidiaries. Popular, Inc. hereby agrees to
furnish upon request to the Commission a copy of
each instrument defining the rights of holders
of senior and
subordinated debt of Popular, Inc., or of any of its consolidated
subsidiaries.
181
SIGNATURES
Pursuant to the
requirements of the Securities Exchange
Act of 1934, the
registrant has duly caused this
report to be signed
on its
behalf by the undersigned thereunto duly authorized.
POPULAR, INC.
(Registrant)
Date: August 11, 2025
By: /s/ Jorge J. García
Jorge J. García
Executive Vice President &
Chief Financial Officer
Date: August 11, 2025
By: /s/ Denissa M. Rodríguez
Denissa M. Rodríguez
Senior Vice President & Corporate Comptroller