Commitments and contingencies	12 Months Ended
Commitments and contingencies	Dec. 31, 2023
Commitments and Contingencies Disclosure
Commitments And Contingencies	Note 24 – Commitments and contingencies Off-balance sheet risk The Corporation is a party to financial instruments with off-balance sheet credit risk in the normal course of business to meet the financial needs of its customers. These financial instruments include loan commitments, letters of credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, standby letters of credit and financial guarantees is represented by the contractual notional amounts of those instruments. The Corporation uses the same credit policies in making these commitments and conditional obligations as it does for those reflected on the consolidated statements of financial condition. Financial instruments with off-balance sheet credit risk, whose contract amounts represent potential credit risk as of the end of the periods presented were as follows: (In thousands) December 31, 2023 December 31, 2022 Commitments to extend credit: Credit card lines $ 6,108,939 $ 5,853,990 Commercial lines of credit 3,626,269 3,523,930 Construction lines of credit 1,287,679 901,895 Other consumer unused credit commitments 256,610 250,271 Commercial letters of credit 1,404 3,351 Standby letters of credit 80,889 27,868 Commitments to originate or fund mortgage loans 32,968 45,170 At December 31, 2023 and December 31, 2022, the Corporation maintained a reserve of approximately $ 17 million and $ 8.8 million, respectively, for potential losses associated with unfunded loan commitments related to commercial and construction lines of credit. Other commitments At December 31, 2023 and December 31, 2022, the Corporation also maintained other non-credit commitments for approximately $ 3.3 million and $ 4.8 million, respectively, primarily for the acquisition of other investments. Business concentration Since the Corporation’s business activities are concentrated primarily in Puerto Rico, its results of operations and financial condition are dependent upon the general trends of the Puerto Rico economy and, in particular, the residential and commercial real estate markets. The concentration of the Corporation’s operations in Puerto Rico exposes it to greater risk than other banking companies with a wider geographic base. Its asset and revenue composition by geographical area is presented in Note 37 to the Consolidated Financial Statements. Puerto Rico has faced significant fiscal and economic challenges for over a decade. In response to such challenges, the U.S. Congress enacted the Puerto Rico Oversight Management and Economic Stability Act (“PROMESA”) in 2016, which, among other things, established the Oversight Board and a framework for the restructuring of the debts of the Commonwealth, its instrumentalities and municipalities. The Commonwealth and several of its instrumentalities have commenced debt restructuring proceedings under PROMESA. As of the date of this report, while municipalities have been designated as covered entities under PROMESA, no municipality has commenced, or has been authorized by the Oversight Board to commence, any such debt restructuring proceeding under PROMESA. At December 31, 2023, the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities totaled $ 362 million, of which $ 333 million were outstanding ($ 374 million and $ 327 million at December 31, 2022). Of the amount outstanding, $ 314 million consists of loans and $ 19 million are securities ($ 302 million and $ 25 million at December 31, 2022). Substantially all of the amount outstanding at December 31, 2023 and December 31, 2022 were obligations from various Puerto Rico municipalities. In most cases, these were “general obligations” of a municipality, to which the applicable municipality has pledged its good faith, credit and unlimited taxing power, or “special obligations” of a municipality, to which the applicable municipality has pledged other revenues. At December 31, 2023, 76 % of the Corporation’s exposure to municipal loans and securities was concentrated in the municipalities of San Juan, Guaynabo, Carolina and Caguas. The following table details the loans and investments representing the Corporation’s direct exposure to the Puerto Rico government according to their maturities as of December 31, 2023: (In thousands) Investment Portfolio Loans Total Outstanding Total Exposure Central Government After 1 to 5 years $ 10 $ - $ 10 $ 10 After 5 to 10 years 1 - 1 1 After 10 years 44 - 44 44 Total Central Government 55 - 55 55 Municipalities Within 1 year 4,820 13,218 18,038 47,038 After 1 to 5 years 13,155 141,519 154,674 154,674 After 5 to 10 years 845 112,169 113,014 113,014 After 10 years - 46,823 46,823 46,823 Total Municipalities 18,820 313,729 332,549 361,549 Total Direct Government Exposure $ 18,875 $ 313,729 $ 332,604 $ 361,604 In addition, at December 31, 2023, the Corporation had $ 238 million in loans insured or securities issued by Puerto Rico governmental entities but for which the principal source of repayment is non-governmental ($ 251 million at December 31, 2022). These included $ 191 million in residential mortgage loans insured by the Puerto Rico Housing Finance Authority (“HFA”), a governmental instrumentality that has been designated as a covered entity under PROMESA (December 31, 2022 - $ 209 million). These mortgage loans are secured by first mortgages on Puerto Rico residential properties and the HFA insurance covers losses in the event of a borrower default and upon the satisfaction of certain other conditions. The Corporation also had at December 31, 2023, $ 40 million in bonds issued by HFA which are secured by second mortgage loans on Puerto Rico residential properties, and for which HFA also provides insurance to cover losses in the event of a borrower default and upon the satisfaction of certain other conditions (December 31, 2022 - $ 42 million). In the event that the mortgage loans insured by HFA and held by the Corporation directly or those serving as collateral for the HFA bonds default and the collateral is insufficient to satisfy the outstanding balance of these loans, HFA’s ability to honor its insurance will depend, among other factors, on the financial condition of HFA at the time such obligations become due and payable. The Corporation does not consider the government guarantee when estimating the credit losses associated with this portfolio. Although the Governor is currently authorized by local legislation to impose a temporary moratorium on the financial obligations of the HFA, a moratorium on such obligations has not been imposed as of the date hereof. BPPR’s commercial loan portfolio also includes loans to private borrowers who are service providers, lessors, suppliers or have other relationships with the government. These borrowers could be negatively affected by the Commonwealth’s fiscal crisis and the ongoing Title III proceedings under PROMESA. Similarly, BPPR’s mortgage and consumer loan portfolios include loans to government employees and retirees, which could also be negatively affected by fiscal measures such as employee layoffs or furloughs or reductions in pension benefits. In addition, $ 1.9 billion of residential mortgages, $ 9.2 million of Small Business Administration (“SBA”) loans under the Paycheck Protection Program (“PPP”) and $ 80 million commercial loans were insured or guaranteed by the U.S. Government or its agencies at December 31, 2023 (compared to $ 1.6 billion, $ 38 million and $ 72 million, respectively, at December 31, 2022). The Corporation also had U.S. Treasury and obligations from the U.S. Government, its agencies or government sponsored entities within the portfolio of available-for-sale and held-to-maturity securities as described in Note 6 and 7 to the Consolidated Financial Statements. At December 31, 2023, the Corporation has operations in the United States Virgin Islands (the “USVI”) and has approximately $ 28 million in direct exposure to USVI government entities (December 31, 2022 - $ 28 million). The USVI has been experiencing a number of fiscal and economic challenges that could adversely affect the ability of its public corporations and instrumentalities to service their outstanding debt obligations. At December 31, 2023, the Corporation has operations in the British Virgin Islands (“BVI”), which islands were negatively affected by the COVID-19 pandemic, particularly due to a reduction in the tourism activity which accounts for a significant portion of their economy. Although the Corporation has no significant exposure to a single borrower in the BVI, it has a loan portfolio amounting to approximately $ 205 million comprised of various retail and commercial clients, compared to a loan portfolio of $ 214 million at December 31, 2022. FDIC Special Assessment On November 16, 2023, the Federal Deposit Insurance Corporation (“FDIC”) approved a final rule that imposes a special assessment (the “FDIC Special Assessment”) to recover the losses to the deposit insurance fund (“DIF”) resulting from the FDIC’s use, in March 2023, of the systemic risk exception to the least-cost resolution test under the Federal Deposit Insurance Act in connection with the receiverships of several failed banks. Under the final rule, the assessment base for the special assessment is equal to an insured depository institution’s (“IDI”) estimated uninsured deposits, as reported in the IDI’s December 31, 2022 Call Report, excluding the first $ 5 billion in estimated uninsured deposits. For a holding company that has more than one IDI subsidiary, such as Popular, the $ 5 billion exclusion is allocated among the company’s IDI subsidiaries in proportion to each IDI’s estimated uninsured deposits. The special assessments will be collected at an annual rate of approximately 13.4 basis points per year ( 3.35 basis points per quarter) over eight quarters in 2024 and 2025, with the first assessment period beginning January 1, 2024. In their December 31, 2022 Call Reports, BPPR and PB reported estimated uninsured deposits of approximately $ 28.1 billion, including $ 16.2 billion in fully collateralized public sector deposits, and $ 3.5 billion, respectively. The Corporation recorded an expense of $ 71.4 million, $ 45.3 million net of tax, in the fourth quarter of 2023, representing the full amount of the assessment. By statute, the FDIC is required to recover the loss arising from the use of a systemic risk determination through one or more special assessments. As of December 31, 2023, the FDIC’s loss estimate described in the final rule had increased by approximately $ 4.1 billion to $ 20.4 billion, or approximately 25 %. The exact amount of losses will be determined when the FDIC terminates the related receiverships considered in the final rule. Accordingly, the special assessment amount and collection period may change as the estimated loss is periodically adjusted or if the total amount collected varies. If the most recent increase in the FDIC’s estimate remains unchanged and is assessed in the same manner, the Corporation estimates that the incremental expense for the FDIC Special Assessment could be approximately $ 18 million. Legal Proceedings The nature of Popular’s business ordinarily generates claims, litigation, investigations, and legal and administrative cases and proceedings (collectively, “Legal Proceedings”). When the Corporation determines that it has meritorious defenses to the claims asserted, it vigorously defends itself. The Corporation will consider the settlement of cases (including cases where it has meritorious defenses) when, in management’s judgment, it is in the best interest of the Corporation and its stockholders to do so. On at least a quarterly basis, Popular assesses its liabilities and contingencies relating to outstanding Legal Proceedings utilizing the most current information available. For matters where it is probable that the Corporation will incur a material loss and the amount can be reasonably estimated, the Corporation establishes an accrual for the loss. Once established, the accrual is adjusted on at least a quarterly basis to reflect any relevant developments, as appropriate. For matters where a material loss is not probable, or the amount of the loss cannot be reasonably estimated, no accrual is established. In certain cases, exposure to loss exists in excess of any accrual to the extent such loss is reasonably possible, but not probable. Management believes and estimates that the range of reasonably possible losses (with respect to those matters where such limits may be determined, in excess of amounts accrued) for current Legal Proceedings ranged from $ 0 to approximately $ 16.3 million as of December 31, 2023. In certain cases, management cannot reasonably estimate the possible loss at this time. Any estimate involves significant judgment, given the varying stages of the Legal Proceedings (including the fact that many of them are currently in preliminary stages), the existence of multiple defendants in several of the current Legal Proceedings whose share of liability has yet to be determined, the numerous unresolved issues in many of the Legal Proceedings, and the inherent uncertainty of the various potential outcomes of such Legal Proceedings. Accordingly, management’s estimate will change from time-to-time, and actual losses may be more or less than the current estimate. While the outcome of Legal Proceedings is inherently uncertain, based on information currently available, advice of counsel, and available insurance coverage, management believes that the amount it has already accrued is adequate and any incremental liability arising from the Legal Proceedings in matters in which a loss amount can be reasonably estimated will not have a material adverse effect on the Corporation’s consolidated financial position. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these matters in a reporting period, if unfavorable, could have a material adverse effect on the Corporation’s consolidated financial position for that period. Set forth below is a description of the Corporation’s significant Legal Proceedings. BANCO POPULAR DE PUERTO RICO Insufficient Funds and Overdraft Fees Class Actions Popular was named as a defendant on a putative class action complaint captioned Golden v. Popular, Inc. filed in March 2020 before the U.S. District Court for the Southern District of New York, seeking damages, restitution and injunctive relief. Plaintiff alleged breach of contract, violation of the covenant of good faith and fair dealing, unjust enrichment and violation of New York consumer protection law due to Popular’s purported practice of charging overdraft fees (“OD Fees”) on transactions that, under plaintiffs’ theory, do not overdraw the account. Plaintiff described Popular’s purported practice of charging OD Fees as “Authorize Positive, Purportedly Settle Negative” (“APPSN”) transactions and alleged that Popular assesses OD Fees over authorized transactions for which sufficient funds are held for settlement. In August 2020, Popular filed a Motion to Dismiss on several grounds, including failure to state a claim against Popular, Inc. and improper venue. In October 2020, Plaintiff filed a Notice of Voluntary Dismissal before the U.S. District Court for the Southern District of New York and, simultaneously, filed an identical complaint in the U.S. District Court for the District of the Virgin Islands against Popular, Inc., Popular Bank and Banco Popular de Puerto Rico (“BPPR”). In November 2020, Plaintiff filed a Notice of Voluntary Dismissal against Popular, Inc. and Popular Bank following a Motion to Dismiss filed on behalf of such entities, which argued failure to state a claim and lack of minimum contacts of such parties with the U.S.V.I. district court jurisdiction. BPPR, the only defendant remaining in the case, was served with process in November 2020 and filed a Motion to Dismiss in January 2021. In October 2021, the District Court, notwithstanding that BPPR’s Motion to Dismiss remained pending resolution, held an initial scheduling conference and, thereafter, issued a trial management order where it scheduled the deadline for all discovery for November 2022, and several other trial-related deadlines for June 2023. During a mediation hearing held in October 2022, the parties reached a settlement in principle on a class-wide basis subject to final court approval. In January 2023, the parties filed before the Court a motion for preliminary approval of the settlement agreement and, on March 31, 2023, the Court issued an order granting preliminary approval of the settlement agreement. The Court scheduled the final approval hearing for September 8, 2023. On September 8, 2023, the Court held a hearing to consider the final approval of the class settlement agreement and, on September 29, 2023, the Court issued an Opinion and Order granting final approval to the settlement agreement. On December 19, 2023, the Court issued an Order staying all deadlines in the settlement agreement regarding payment of benefit until further notice after the parties informed the Court that the settlement administrator had mistakenly failed to send the settlement notice to approximately 3,000 class members. The parties expect to file a supplemental notice plan for court approval by February 29, 2024. On January 31, 2022, Popular was also named as a defendant on a putative class action complaint captioned Lipsett v. Popular, Inc. d/b/a Banco Popular, filed before the U.S. District Court for the Southern District of New York, seeking damages, restitution and injunctive relief. Similar to the claims set forth in the aforementioned Golden complaint, Plaintiff alleges breach of contract, including violations of the covenant of good faith and fair dealing, as a result of Popular’s purported practice of charging OD Fees for APPSN transactions. The complaint further alleged that Popular assesses OD Fees over authorized transactions for which sufficient funds are held for settlement. Popular waived service of process and filed a Motion to Compel Arbitration. In response to Popular’s motion, Plaintiff filed a Notice of Voluntary Dismissal in April 2022. On May 13, 2022, Plaintiff in the Lipsett complaint filed a new complaint captioned Lipsett v. Banco Popular North America d/b/a Popular Community Bank with the same allegations of his previous complaint against Popular. In June 2022, after serving Plaintiff with a written notice of election to arbitrate the claims asserted in the complaint which went unanswered, Popular Bank (“PB”) filed a Pre-Motion Conference motion related to a new Motion to Compel Arbitration. After Plaintiff responded to the Pre-Motion conference motion, the Court allowed PB to file its Motion to Compel Arbitration, which it did in September 2022. Plaintiff opposed such motion in October 2022, and PB filed its reply in November 2022. On December 9, 2022, the Court issued a Decision and Order denying PB’s Motion to Compel Arbitration. On December 20, 2022, PB filed a Notice of Appeal with the United States Court of Appeals for the Second Circuit. PB filed its appeal brief on April 5, 2023 and Plaintiff filed his opposition brief on July 5, 2023. PB filed its reply brief on July 26, 2023. The Court of Appeals held an oral argument on December 4, 2023. On January 10, 2024, the Court of Appeals entered judgment affirming the trial court’s decision denying PB’s Motion to Compel Arbitration. The formal mandate of the Court of Appeals remanding the case to the lower court was issued on January 31, 2024. PB expects to file a responsive allegation to the complaint on or before March 16, 2024.