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Commitments and contingencies | 9 Months Ended
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Sep. 30, 2025
Commitments and Contingencies Disclosure |
Commitments And Contingencies | Note 18 – Commitments and contingencies Off-balance sheet risk The Corporation is a party to financial instruments with off-balance sheet credit risk in the normal course of business to meet the financial needs of its customers. These financial instruments include loan commitments, letters of credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Statements of Financial Condition. The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, standby letters of credit and financial guarantees is represented by the contractual notional amounts of those instruments. The Corporation uses the same credit policies in making these commitments and conditional obligations as it does for those reflected on the Consolidated Statements of Financial Condition. Financial instruments with off-balance sheet credit risk, whose contract amounts represent potential credit risk as of the end of the periods presented were as follows: (In thousands) September 30, 2025 December 31, 2024 Commitments to extend credit: Credit card lines $ 6,266,974 $ 5,599,823 Commercial lines of credit 4,422,977 3,971,331 Construction lines of credit 1,126,310 1,131,824 Other consumer unused credit commitments 275,462 260,121 Commercial letters of credit 14,920 5,002 Standby letters of credit 130,856 144,845 Commitments to originate or fund mortgage loans 16,091 29,604 At September 30, 2025 and December 31, 2024, the Corporation maintained a reserve of $ 14 million and $ 15 million, respectively, for potential losses associated with unfunded loan commitments related to commercial and construction lines of credit. Other commitments At September 30, 2025 and December 31, 2024, the Corporation also maintained other non-credit commitments for $ 6 million, 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 28 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 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 availed themselves of debt restructuring proceedings under PROMESA. As of the date of this report, while municipalities have been designated as covered entities under PROMESA, no municipality has commenced or has been authorized by the Oversight Board to commence, any such debt restructuring proceeding under PROMESA. At September 30, 2025, the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities totaled $ 391 million, of which $ 342 million were outstanding ($ 336 million and $ 336 million at December 31, 2024). The Corporation’s exposure at September 30, 2025, included up to $ 47.4 million in Automated Clearing House (“ACH”) transaction settlement exposure, none of which was outstanding. Of the amount outstanding, $ 333 million consists of loans and $ 9 million are securities ($ 323 million and $ 13 million at December 31, 2024). Substantially all of the amount outstanding at September 30, 2025 and December 31, 2024 were obligations from various Puerto Rico municipalities. In most cases, these were “general obligations” of a municipality, to which the applicable municipality has pledged its good faith, credit and unlimited taxing power, or “special obligations” of a municipality, to which the applicable municipality has pledged other revenues. At September 30, 2025, approximately 76 % of the Corporation’s exposure to municipal loans and securities was concentrated in the municipalities of San Juan, Guaynabo, Carolina and Caguas. The following table details the loans and investments representing the Corporation’s direct exposure to the Puerto Rico government according to their maturities as of September 30, 2025 : (In thousands) Investment Portfolio Loans Total Outstanding Total Exposure Central Government Within 1 year $ - $ - $ - $ 47,400 After 10 years 41 - 41 41 Total Central Government 41 - 41 47,441 Municipalities Within 1 year 2,605 11,574 14,179 16,179 After 1 to 5 years 5,660 166,515 172,175 172,175 After 5 to 10 years 450 124,087 124,537 124,537 After 10 years - 30,991 30,991 30,991 Total Municipalities 8,715 333,167 341,882 343,882 Total Direct Government Exposure $ 8,756 $ 333,167 $ 341,923 $ 391,323 In addition, at September 30, 2025, the Corporation had $ 208 million in loans insured or securities issued by Puerto Rico governmental entities but for which the principal source of repayment is non-governmental ($ 220 million at December 31, 2024). These included $ 165 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, 2024 - $ 176 million). These mortgage loans are secured by first mortgages on Puerto Rico residential properties and the HFA insurance covers losses in the event of a borrower default and upon the satisfaction of certain other conditions. The Corporation also had at September 30, 2025, $ 36 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, 2024 - $ 38 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, $ 2.4 billion of residential mortgages and $ 80.9 million commercial loans were insured or guaranteed by the U.S. Government or its agencies at September 30, 2025 (compared to $ 2.1 billion and $ 87.4 million, respectively, at December 31, 2024). 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 5 and 6 to the Consolidated Financial Statements. At September 30, 2025, the Corporation had operations in the United States Virgin Islands (the “USVI”) and had $ 28 million in direct exposure to USVI government entities (December 31, 2024 - $ 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. 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. At September 30, 2025, the Corporation had operations in the British Virgin Islands (“BVI”) and it had a loan portfolio amounting to $ 193 million comprised of various retail and commercial clients, compared to a loan portfolio of $ 196 million at December 31, 2024. At September 30, 2025, the Corporation had no significant exposure to a single borrower in the BVI. FDIC Special Assessment On November 16, 2023, the Federal Deposit Insurance Corporation (“FDIC”) imposed a special assessment (the “FDIC Special Assessment”) amount to recover the losses to the deposit insurance fund resulting from the FDIC’s funds used, in March 2023, in connection with the systemic risk exception, to the least-cost resolution test, under the Federal Deposit Insurance Act to manage the receiverships of several failed banks. In connection with this assessment, the Corporation accrued $ 71.4 million, $ 45.3 million net of tax, in the fourth quarter of 2023, representing the full amount of the assessment. During the first quarter of 2024, the Corporation recorded an additional expense of $ 14.3 million, $ 9.1 million net of tax, to reflect the FDIC's higher loss estimate communicated by the FDIC. The special assessment amount and collection period may change as the estimated loss is periodically adjusted or if the total amount collected varies. The last payment for the FDIC special assessment is projected to be in the third quarter, September 2026. Legal Proceedings The nature of Popular’s business ordinarily generates claims, litigation, arbitration, regulatory and governmental investigations, and legal and administrative cases and proceedings (collectively, “Legal Proceedings”). Popular’s Legal Proceedings may involve various lines of business and include claims relating to contract, torts, consumer protection, securities, antitrust, employment, tax and other laws. The recovery sought in Legal Proceedings may include substantial or indeterminate compensatory damages, punitive damages, injunctive relief, or recovery on a class-wide basis. 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 $ 7.2 million as of September 30, 2025. 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.

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