0000763901 ~~us-gaap:CreditCardReceivablesMember~~country:US us-gaap:ConsumerPortfolioSegmentMember ~~2019-01-01 2019-03-31~~us-gaap:HomeEquityMember us-gaap:UnlikelyToBeCollectedFinancingReceivableMember 2021-03-31 0000763901 ~~bpop:TradingAccountDebtSecuritiesMember~~ us-gaap:~~FairValueInputsLevel2Member~~ConsumerPortfolioSegmentMember us-gaap:~~GovernmentNationalMortgageAssociationCertificatesAndObligationsGNMAMember 2020-01-01 2020-03-31 0000763901~~AutomobileLoanMember us-gaap:~~CommercialPortfolioSegmentMember bpop:CommercialRealEstateOwnerOccupiedMember us-gaap:CollateralPledgedMember 2020-03-31~~RealEstateMember 2021-03-31

	UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549

	Form 10-Q

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

	For the quarterly period ended March 31, ~~2020~~2021
	Or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	Commission File Number: 001-34084

POPULAR, INC.
(Exact name of registrant as specified in its charter)
Puerto Rico			66-0667416
(State or other jurisdiction of Incorporation or			(IRS Employer Identification Number)
organization)
Popular Center Building
209 Muñoz Rivera Avenue
Hato Rey, Puerto Rico			00918
(Address of principal executive offices)			(Zip code)
(787) 765-9800
(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class		Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($0.01 par value)		BPOP	The NASDAQ Stock Market
6.70% Cumulative Monthly Income Trust Preferred Securities		BPOPN	The NASDAQ Stock Market
6.125% Cumulative Monthly Income Trust Preferred Securities		BPOPM	The NASDAQ Stock Market

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer [X]		Accelerated filer [ ]	Non-accelerated filer [ ]
Smaller reporting company [ ]		Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
	[ ] Yes	[X] No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $0.01 par value, ~~85,715,649~~80,593,882 shares outstanding as of May ~~6, 2020.~~

5, 2021.

POPULAR, INC.
INDEX

Part I – Financial Information	Page

Item 1. Financial Statements

Unaudited Consolidated Statements of Financial Condition at March 31, ~~2020~~2021 and
December 31, ~~2019~~2020	6

Unaudited Consolidated Statements of Operations for the quarters
ended March 31, ~~2020~~2021 and ~~2019~~2020	7

Unaudited Consolidated Statements of Comprehensive Income for the
quarters ended March 31, ~~2020~~2021 and ~~2019~~2020	8

Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the
quarters ended March 31, ~~2020~~2021 and ~~2019~~2020	9


Unaudited Consolidated Statements of Cash Flows for the quarters
ended March 31, ~~2020~~2021 and ~~2019~~2020	1110

Notes to Unaudited Consolidated Financial Statements	1312

Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations	~~124~~109

Item 3. Quantitative and Qualitative Disclosures about Market Risk	~~167~~151

Item 4. Controls and Procedures	~~167~~151

Part II – Other Information

Item 1. Legal Proceedings	~~168~~152

Item 1A. Risk Factors	~~168~~152

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	~~170~~153

Item 3. Defaults Upon Senior Securities	~~171~~154

Item 4. Mine Safety Disclosures	~~171~~154

Item 5. Other information	~~171~~154

Item 6. Exhibits	~~171~~154

Signatures	~~172~~155

Forward-Looking Information

This Form 10-Q contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including, without limitation, statements about Popular Inc.’s (the “Corporation,” “Popular,” “we,” “us,” “our”) business, financial condition, results of operations, plans, objectives, future performance and the effects of the COVID-19 pandemic on our business. These statements are not guarantees of future performance, are based on management’s current expectations and, by their nature, involve risks, uncertainties, estimates and assumptions. Potential factors, some of which are beyond the Corporation’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Risks and uncertainties include without limitation the effect of competitive and economic factors, and our reaction to those factors, the adequacy of the allowance for loan losses, delinquency trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect of legal and regulatory proceedings and new accounting standards on the Corporation’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may” or similar expressions are generally intended to identify forward-looking statements.

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

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

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

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

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

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

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

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

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

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

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

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

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

 the performance of the stock and bond markets;

 competition in the financial services industry;

 possible legislative, tax or regulatory changes; and

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

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

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

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

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

 changes in accounting standards, rules and interpretations;

 our ability to grow our core businesses;

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

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

Further, statements about the potential effects of the COVID-19 pandemic on our business, financial condition, liquidity and results of operation may constitute forward-looking statements and are subject to the risk that actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including actions taken by governmental authorities in response to the pandemic and the direct and indirect impact of the pandemic on us, our customers, ~~clients,~~service providers and third ~~parties and us.~~parties.

Moreover, the outcome of legal and regulatory proceedings, as discussed in “Part II, Item 1. Legal Proceedings,” is inherently uncertain and depends on judicial interpretations of law and the findings of regulators, judges and/or juries. Investors should refer to the Corporation’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, as well as “Part II, Item 1A” of ~~this~~our Quarterly Reports on Form 10-Q for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.

All forward-looking statements included in this Form 10-Q are based upon information available to Popular as of the date of this Form 10-Q, and other than as required by law, including the requirements of applicable securities laws, we assume no obligation to update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

			March 31,		December 31,				March 31,		December 31,
(In thousands, except share information)	(In thousands, except share information)		2020		2019		(In thousands, except share information)		2021		2020
Assets:	Assets:						Assets:
Cash and due from banks	Cash and due from banks		$	445,551	$	388,311	Cash and due from banks		$	495,915	$	491,065
Money market investments:	Money market investments:						Money market investments:
		Time deposits with other banks		5,941,716		3,262,286		Time deposits with other banks		11,568,677		11,640,880
		Total money market investments		5,941,716		3,262,286		Total money market investments		11,568,677		11,640,880
Trading account debt securities, at fair value:	Trading account debt securities, at fair value:						Trading account debt securities, at fair value:
		Pledged securities with creditors’ right to repledge		606		598		Pledged securities with creditors’ right to repledge		239		241
		Other trading account debt securities		41,939		39,723		Other trading account debt securities		36,265		36,433
Debt securities available-for-sale, at fair value:	Debt securities available-for-sale, at fair value:						Debt securities available-for-sale, at fair value:
		Pledged securities with creditors’ right to repledge		190,092		202,585		Pledged securities with creditors’ right to repledge		88,668		125,819
		Other debt securities available-for-sale		15,623,209		17,445,888		Other debt securities available-for-sale		22,682,941		21,435,333
Debt securities held-to-maturity, at amortized cost (fair value 2020 - $80,400; 2019 - $105,110)				95,263		97,662
Debt securities held-to-maturity, at amortized cost (fair value 2021 - $92,643; 2020 - $94,891)							Debt securities held-to-maturity, at amortized cost (fair value 2021 - $92,643; 2020 - $94,891)			89,725		92,621
		Less – Allowance for credit losses		13,390		-		Less – Allowance for credit losses		10,096		10,261
		Debt securities held-to-maturity, net		81,873		97,662		Debt securities held-to-maturity, net		79,629		82,360
Equity securities (realizable value 2020 -$168,459); (2019 - $165,952)				163,058		159,887
Equity securities (realizable value 2021 - $179,000; 2020 - $173,929)							Equity securities (realizable value 2021 - $179,000; 2020 - $173,929)			178,650		173,737
Loans held-for-sale, at lower of cost or fair value	Loans held-for-sale, at lower of cost or fair value			87,855		59,203	Loans held-for-sale, at lower of cost or fair value			84,214		99,455
Loans held-in-portfolio	Loans held-in-portfolio			27,847,840		27,587,856	Loans held-in-portfolio			29,344,620		29,588,430
		Less – Unearned income		185,568		180,983		Less – Unearned income		212,992		203,234
		Allowance for credit losses		919,716		477,708		Allowance for credit losses		800,797		896,250
		Total loans held-in-portfolio, net		26,742,556		26,929,165		Total loans held-in-portfolio, net		28,330,831		28,488,946
Premises and equipment, net	Premises and equipment, net			552,007		556,650	Premises and equipment, net			508,023		510,241
Other real estate	Other real estate			123,922		122,072	Other real estate			72,060		83,146
Accrued income receivable	Accrued income receivable			176,078		180,871	Accrued income receivable			215,993		209,320
Mortgage servicing assets, at fair value				147,311		150,906
Mortgage servicing rights, at fair value							Mortgage servicing rights, at fair value			122,543		118,395
Other assets	Other assets			1,788,437		1,819,615	Other assets			1,713,083		1,737,041
Goodwill	Goodwill			671,122		671,122	Goodwill			671,122		671,122
Other intangible assets	Other intangible assets			26,307		28,780	Other intangible assets			21,415		22,466
Total assets	Total assets		$	52,803,639	$	52,115,324	Total assets		$	66,870,268	$	65,926,000
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity						Liabilities and Stockholders’ Equity
Liabilities:	Liabilities:						Liabilities:
	Deposits:						Deposits:
		Non-interest bearing	$	9,396,449	$	9,160,173		Non-interest bearing	$	14,263,548	$	13,128,699
		Interest bearing		35,400,727		34,598,433		Interest bearing		44,479,253		43,737,641
		Total deposits		44,797,176		43,758,606		Total deposits		58,742,801		56,866,340
Assets sold under agreements to repurchase	Assets sold under agreements to repurchase			178,766		193,378	Assets sold under agreements to repurchase			86,834		121,303
Other short-term borrowings				100,000		-
Notes payable	Notes payable			1,058,131		1,101,608	Notes payable			1,224,230		1,224,981
Other liabilities	Other liabilities			999,961		1,044,953	Other liabilities			918,844		1,684,689
		Total liabilities		47,134,034		46,098,545		Total liabilities		60,972,709		59,897,313
Commitments and contingencies (Refer to Note 21)
Commitments and contingencies (Refer to Note 20)							Commitments and contingencies (Refer to Note 20)
Stockholders’ equity:	Stockholders’ equity:						Stockholders’ equity:
Preferred stock, 30,000,000 shares authorized; 885,726 shares issued and outstanding (2019 - 2,006,391)				22,143		50,160
Common stock, $0.01 par value; 170,000,000 shares authorized;104,407,688 shares issued (2019 - 104,392,222) and 88,125,974 shares outstanding (2019 - 95,589,629)				1,044		1,044
Preferred stock, 30,000,000 shares authorized; 885,726 shares issued and outstanding (2020 - 885,726)							Preferred stock, 30,000,000 shares authorized; 885,726 shares issued and outstanding (2020 - 885,726)			22,143		22,143
Common stock, $0.01 par value; 170,000,000 shares authorized;104,529,277 shares issued (2020 - 104,508,290) and 84,379,180 shares outstanding (2020 - 84,244,235)							Common stock, $0.01 par value; 170,000,000 shares authorized;104,529,277 shares issued (2020 - 104,508,290) and 84,379,180 shares outstanding (2020 - 84,244,235)			1,045		1,045
Surplus	Surplus			4,366,300		4,447,412	Surplus			4,571,919		4,571,534
Retained earnings	Retained earnings			1,940,170		2,147,915	Retained earnings			2,489,453		2,260,928
Treasury stock - at cost, 16,281,714 shares (2019 - 8,802,593)				(870,675)		(459,814)
Accumulated other comprehensive income (loss), net of tax				210,623		(169,938)
Treasury stock - at cost, 20,150,097 shares (2020 - 20,264,055)							Treasury stock - at cost, 20,150,097 shares (2020 - 20,264,055)			(1,012,263)		(1,016,954)
Accumulated other comprehensive (loss) income, net of tax							Accumulated other comprehensive (loss) income, net of tax			(174,738)		189,991
		Total stockholders’ equity		5,669,605		6,016,779		Total stockholders’ equity		5,897,559		6,028,687
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity		$	52,803,639	$	52,115,324	Total liabilities and stockholders’ equity		$	66,870,268	$	65,926,000
The accompanying notes are an integral part of these Consolidated Financial Statements.	The accompanying notes are an integral part of these Consolidated Financial Statements.						The accompanying notes are an integral part of these Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Quarters ended March 31,
(In thousands, except per share information)

2020

2019
Interest income:

Loans
$
450,446

$
447,713

Money market investments

12,000

29,220

Investment securities

87,912

81,036

Total interest income

550,358

557,969
Interest expense:

Deposits

62,101

70,826

Short-term borrowings

1,048

1,600

Long-term debt

14,114

14,580

Total interest expense

77,263

87,006
Net interest income

473,095

470,963
Provision for credit losses - loan portfolios

188,995

41,825
Provision for credit losses - investment securities

736

-
Net interest income after provision for credit losses

283,364

429,138
Service charges on deposit accounts

41,659

38,691
Other service fees

64,773

64,307
Mortgage banking activities (Refer to Note 10)

6,420

9,926
Net (loss) gain, including impairment, on equity securities

(2,728)

1,433
Net profit on trading account debt securities

491

260
Net gain on sale of loans, including valuation adjustments on loans held-for-sale

957

-
Indemnity reserves on loans sold expense

(4,793)

(93)
Other operating income

19,864

21,906

Total non-interest income

126,643

136,430
Operating expenses:

Personnel costs

146,831

143,117
Net occupancy expenses

25,158

23,537
Equipment expenses

21,605

19,705
Other taxes

13,681

11,662
Professional fees

101,071

87,466
Communications

5,954

5,849
Business promotion

14,197

14,674
FDIC deposit insurance

5,080

4,806
Other real estate owned (OREO) expenses

2,479

2,677
Other operating expenses

34,079

31,615
Amortization of intangibles

2,473

2,312

Total operating expenses

372,608

347,420
Income before income tax

37,399

218,148
Income tax expense

3,097

50,223
Net Income
$
34,302

$
167,925
Net Income Applicable to Common Stock
$
33,632

$
166,994
Net Income per Common Share - Basic
$
0.37

$
1.69
Net Income per Common Share - Diluted
$
0.37

$
1.69
The accompanying notes are an integral part of these Consolidated Financial Statements.

			Quarters ended March 31,
(In thousands, except per share information)				2021		2020
Interest income:
	Loans		$	434,649	$	450,446
	Money market investments			3,112		12,000
	Investment securities			85,690		87,912
		Total interest income		523,451		550,358
Interest expense:
	Deposits			30,201		62,101
	Short-term borrowings			143		1,048
	Long-term debt			13,995		14,114
		Total interest expense		44,339		77,263
Net interest income				479,112		473,095
Provision (reversal) for credit losses				(82,226)		189,731
Net interest income after provision (reversal) for credit losses				561,338		283,364
Service charges on deposit accounts				39,620		41,659
Other service fees				70,628		64,773
Mortgage banking activities (Refer to Note 9)				17,343		6,420
Net gain (loss), including impairment, on equity securities				421		(2,728)
Net (loss) profit on trading account debt securities				(45)		491
Net gain on sale of loans, including valuation adjustments on loans held-for-sale				0		957
Indemnity reserves on loans sold expense				(698)		(4,793)
Other operating income				26,384		19,864
		Total non-interest income		153,653		126,643
Operating expenses:
Personnel costs				159,479		146,831
Net occupancy expenses				26,013		25,158
Equipment expenses				21,575		21,605
Other taxes				13,959		13,681
Professional fees				99,948		101,071
Communications				6,833		5,954
Business promotion				12,521		14,197
FDIC deposit insurance				5,968		5,080
Other real estate owned (OREO) (income) expenses				(4,533)		2,479
Other operating expenses				32,714		34,079
Amortization of intangibles				1,051		2,473
		Total operating expenses		375,528		372,608
Income before income tax				339,463		37,399
Income tax expense				76,831		3,097
Net Income			$	262,632	$	34,302
Net Income Applicable to Common Stock			$	262,279	$	33,602
Net Income per Common Share - Basic			$	3.13	$	0.37
Net Income per Common Share - Diluted			$	3.12	$	0.37
The accompanying notes are an integral part of these Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

Quarters ended March 31,
(In thousands)

2020

2019
Net income

$
34,302

$
167,925
Reclassification to retained earnings due to cumulative effect of accounting change

-

(50)
Other comprehensive income before tax:

Foreign currency translation adjustment

(1,818)

(1,238)
Amortization of net losses of pension and postretirement benefit plans

5,362

5,876
Unrealized holding gains on debt securities arising during the period

447,117

109,863
Unrealized net losses on cash flow hedges

(4,702)

(682)

Reclassification adjustment for net losses included in net income

1,327

1,030
Other comprehensive income before tax

447,286

114,799
Income tax expense

(66,725)

(10,804)
Total other comprehensive income, net of tax

380,561

103,995
Comprehensive income, net of tax

$
414,863

$
271,920

Tax effect allocated to each component of other comprehensive income:

Quarters ended March 31,
(In thousands)

2020

2019
Amortization of net losses of pension and postretirement benefit plans

$
(2,011)

$
(2,203)
Unrealized holding gains on debt securities arising during the period

(65,341)

(8,460)
Unrealized net losses on cash flow hedges

1,113

245

Reclassification adjustment for net losses included in net income

(486)

(386)
Income tax expense

$
(66,725)

$
(10,804)
The accompanying notes are an integral part of these Consolidated Financial Statements.

			Quarters ended March 31,
(In thousands)		2021		2020
Net income		$	262,632	$	34,302
Other comprehensive (loss) income before tax:
Foreign currency translation adjustment			569		(1,818)
Amortization of net losses of pension and postretirement benefit plans			5,190		5,362
Unrealized holding (losses) gains on debt securities arising during the period			(397,327)		447,117
Unrealized net gains (losses) on cash flow hedges			2,223		(4,702)
	Reclassification adjustment for net (gains) losses included in net income		(91)		1,327
Other comprehensive (loss) income before tax			(389,436)		447,286
Income tax benefit (expense)			24,707		(66,725)
Total other comprehensive (loss) income, net of tax			(364,729)		380,561
Comprehensive (loss) income, net of tax		$	(102,097)	$	414,863

Tax effect allocated to each component of other comprehensive (loss) income:			Quarters ended March 31,
(In thousands)		2021		2020
Amortization of net losses of pension and postretirement benefit plans		$	(1,948)	$	(2,011)
Unrealized holding (losses) gains on debt securities arising during the period			27,382		(65,341)
Unrealized net gains (losses) on cash flow hedges			(866)		1,113
	Reclassification adjustment for net (gains) losses included in net income		139		(486)
Income tax benefit (expense)		$	24,707	$	(66,725)
The accompanying notes are an integral part of these Consolidated Financial Statements.

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)


												Accumulated															Accumulated
												other															other
		Common		Preferred				Retained		Treasury		comprehensive					Common		Preferred				Retained		Treasury		comprehensive
(In thousands)	(In thousands)	stock		stock		Surplus		earnings		stock		(loss) income		Total		(In thousands)	stock		stock		Surplus		earnings		stock		(loss) income		Total
Balance at December 31, 2018		$	1,043	$	50,160	$	4,365,606	$	1,651,731	$	(205,509)	$	(427,974)	$	5,435,057
Balance at December 31, 2019																Balance at December 31, 2019	$	1,044	$	50,160	$	4,447,412	$	2,147,915	$	(459,814)	$	(169,938)	$	6,016,779
Cumulative effect of accounting change	Cumulative effect of accounting change								4,905						4,905	Cumulative effect of accounting change								(205,842)						(205,842)
Net income	Net income								167,925						167,925	Net income								34,302						34,302
Issuance of stock	Issuance of stock						793								793	Issuance of stock						863								863
Dividends declared:	Dividends declared:															Dividends declared:
	Common stock^[1]								(28,986)						(28,986)	Common stock^[1]								(35,505)						(35,505)
	Preferred stock								(931)						(931)	Preferred stock								(700)						(700)
Common stock purchases^[2]	Common stock purchases^[2]						(52,670)				(200,449)				(253,119)	Common stock purchases^[2]						(77,066)				(425,735)				(502,801)
Common stock reissuance	Common stock reissuance						178				2,005				2,183	Common stock reissuance						(563)				3,669				3,106
Preferred stock redemption^[3]																Preferred stock redemption^[3]				(28,017)										(28,017)
Stock based compensation	Stock based compensation						(867)				9,105				8,238	Stock based compensation						(4,346)				11,205				6,859
Other comprehensive income, net of tax	Other comprehensive income, net of tax												103,995		103,995	Other comprehensive income, net of tax												380,561		380,561
Balance at March 31, 2019		$	1,043	$	50,160	$	4,313,040	$	1,794,644	$	(394,848)	$	(323,979)	$	5,440,060
Balance at December 31, 2019		$	1,044	$	50,160	$	4,447,412	$	2,147,915	$	(459,814)	$	(169,938)	$	6,016,779
Cumulative effect of accounting change									(205,842)						(205,842)
Balance at March 31, 2020																Balance at March 31, 2020	$	1,044	$	22,143	$	4,366,300	$	1,940,170	$	(870,675)	$	210,623	$	5,669,605
Balance at December 31, 2020																Balance at December 31, 2020	$	1,045	$	22,143	$	4,571,534	$	2,260,928	$	(1,016,954)	$	189,991	$	6,028,687
Net income	Net income								34,302						34,302	Net income								262,632						262,632
Issuance of stock	Issuance of stock						863								863	Issuance of stock						1,118								1,118
Dividends declared:	Dividends declared:															Dividends declared:
	Common stock^[1]								(35,505)						(35,505)	Common stock^[1]								(33,754)						(33,754)
	Preferred stock								(700)						(700)	Preferred stock								(353)						(353)
Common stock purchases^[3]							(77,066)				(425,735)				(502,801)
Common stock reissuance							(563)				3,669				3,106
Preferred stock redemption^[4]					(28,017)										(28,017)
Common stock purchases																Common stock purchases										(3,942)				(3,942)
Stock based compensation	Stock based compensation						(4,346)				11,205				6,859	Stock based compensation						(733)				8,633				7,900
Other comprehensive income, net of tax													380,561		380,561
Balance at March 31, 2020		$	1,044	$	22,143	$	4,366,300	$	1,940,170	$	(870,675)	$	210,623	$	5,669,605
Other comprehensive loss, net of tax																Other comprehensive loss, net of tax												(364,729)		(364,729)
Balance at March 31, 2021																Balance at March 31, 2021	$	1,045	$	22,143	$	4,571,919	$	2,489,453	$	(1,012,263)	$	(174,738)	$	5,897,559
[1]	Dividends declared per common share during the quarter ended March 31, 2020 - $0.40 (2019 - $0.30).															Dividends declared per common share during the quarter ended March 31, 2021 - $0.40 (2020 - $0.40).
[2]	During the quarter ended March 31, 2019, the Corporation entered into a $250 million accelerated share repurchase transaction with respect to its common stock, which was accounted for as a treasury stock transaction. Refer to Note 18 for additional information.															On January 30, 2020, the Corporation entered into a $500 million accelerated share repurchase transaction with respect to its common stock, which was accounted for as a treasury stock transaction.The transaction was completed on May 27, 2020. Refer to Note 17 for additional information.
[3]	On January 30, 2020, the Corporation entered into a $500 million accelerated share repurchase transaction with respect to its common stock, which was accounted for as a treasury stock transaction. Refer to Note 18 for additional information.															On February 24, 2020, the Corporation redeemed all the outstanding shares of 2008 Series B Preferred Stock. Refer to Note 17 for additional information.
[4]	On February 24, 2020, the Corporation redeemed all the outstanding shares of 2008 Series B Preferred Stock. Refer to Note 18 for additional information.


		March 31,	March 31,
Disclosure of changes in number of shares:		2021	2020
Preferred Stock:
	Balance at beginning of period	885,726	2,006,391
	Redemption of stock	0	(1,120,665)
	Balance at end of period	885,726	885,726
Common Stock – Issued:
	Balance at beginning of period	104,508,290	104,392,222
	Issuance of stock	20,987	15,466
	Balance at end of period	104,529,277	104,407,688
	Treasury stock	(20,150,097)	(16,281,714)
Common Stock – Outstanding		84,379,180	88,125,974


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

March 31,

March 31,
Disclosure of changes in number of shares:

2020

2019
Preferred Stock:

Balance at beginning of period

2,006,391

2,006,391

Redemption of stock

(1,120,665)

-

Balance at end of period

885,726

2,006,391
Common Stock – Issued:

Balance at beginning of period

104,392,222

104,320,303

Issuance of stock

15,466

18,037

Balance at end of period

104,407,688

104,338,340

Treasury stock

(16,281,714)

(7,708,449)
Common Stock – Outstanding

88,125,974

96,629,891

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

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)




			Quarters ended March 31,						Quarters ended March 31,
(In thousands)	(In thousands)			2020		2019	(In thousands)			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:						Cash flows from operating activities:
Net income	Net income		$	34,302	$	167,925	Net income		$	262,632	$	34,302
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
							Provision (reversal) for credit losses			(82,226)		189,731
							Amortization of intangibles			1,051		2,473
	Provision for credit losses			189,731		41,825	Depreciation and amortization of premises and equipment			14,738		14,486
	Amortization of intangibles			2,473		2,312	Net accretion of discounts and amortization of premiums and deferred fees			(12,361)		(27,269)
	Depreciation and amortization of premises and equipment			14,486		14,295	Interest capitalized on loans subject to the temporary payment moratorium			(2,855)		0
	Net accretion of discounts and amortization of premiums and deferred fees			(27,269)		(38,813)	Share-based compensation			8,905		5,331
	Share-based compensation			5,331		6,930	Impairment losses on right-of-use and long-lived assets			303		0
	Fair value adjustments on mortgage servicing rights			5,229		3,825	Fair value adjustments on mortgage servicing rights			(512)		5,229
	Indemnity reserves on loans sold expense			4,793		93	Adjustments to indemnity reserves on loans sold			698		4,793
	Earnings from investments under the equity method, net of dividends or distributions			(9,716)		(9,027)	Earnings from investments under the equity method, net of dividends or distributions			(12,088)		(9,716)
	Deferred income tax (benefit) expense			(23,152)		45,796	Deferred income tax expense (benefit)			69,633		(23,152)
	Gain on:						(Gain) loss on:
		Disposition of premises and equipment and other productive assets		(1,369)		(2,265)		Disposition of premises and equipment and other productive assets		(4,443)		(1,369)
		Proceeds from insurance claims		(366)		-		Proceeds from insurance claims		0		(366)
		Sale of loans, including valuation adjustments on loans held-for-sale and mortgage banking activities		(4,944)		(4,058)		Sale of loans, including valuation adjustments on loans held-for-sale and mortgage banking activities		(4,977)		(4,944)
		Sale of foreclosed assets, including write-downs		(4,850)		(3,772)		Sale of foreclosed assets, including write-downs		(6,090)		(4,850)
	Acquisitions of loans held-for-sale			(51,163)		(44,748)	Acquisitions of loans held-for-sale			(63,261)		(51,163)
	Proceeds from sale of loans held-for-sale			12,135		13,802	Proceeds from sale of loans held-for-sale			218,483		12,135
	Net originations on loans held-for-sale			(58,166)		(53,231)	Net originations on loans held-for-sale			(327,742)		(58,166)
	Net decrease (increase) in:						Net decrease (increase) in:
		Trading debt securities		117,276		105,838		Trading debt securities		182,659		117,276
		Equity securities		(273)		(4,362)		Equity securities		(3,197)		(273)
		Accrued income receivable		4,794		3,224		Accrued income receivable		(6,728)		4,794
		Other assets		55,644		28,709		Other assets		(4,942)		55,644
	Net (decrease) increase in:						Net (decrease) increase in:
		Interest payable		(9,488)		(6,915)		Interest payable		(8,498)		(9,488)
		Pension and other postretirement benefits obligation		3,276		5,297		Pension and other postretirement benefits obligation		(1,071)		3,276
		Other liabilities		(65,735)		(100,585)		Other liabilities		(27,714)		(65,735)
Total adjustments	Total adjustments			158,677		4,170	Total adjustments			(72,235)		158,677
Net cash provided by operating activities	Net cash provided by operating activities			192,979		172,095	Net cash provided by operating activities			190,397		192,979
Cash flows from investing activities:	Cash flows from investing activities:						Cash flows from investing activities:
	Net increase in money market investments			(2,679,671)		(643,117)	Net decrease (increase) in money market investments			72,284		(2,679,671)
	Purchases of investment securities:						Purchases of investment securities:
		Available-for-sale		(1,550,746)		(3,123,508)		Available-for-sale		(6,828,725)		(1,550,746)
		Equity		(15,219)		(1,239)		Equity		(1,296)		(15,219)
	Proceeds from calls, paydowns, maturities and redemptions of investment securities:						Proceeds from calls, paydowns, maturities and redemptions of investment securities:
		Available-for-sale		3,838,754		3,006,779		Available-for-sale		4,492,494		3,838,754
		Held-to-maturity		2,877		2,587		Held-to-maturity		3,339		2,877
	Proceeds from sale of investment securities:						Proceeds from sale of investment securities:
		Equity		12,321		2,679		Equity		64		12,321
	Net disbursements on loans			(192,839)		(78,969)	Net repayments (disbursements) on loans			290,232		(192,839)
	Proceeds from sale of loans			1,884		7,806	Proceeds from sale of loans			48,156		1,884
	Acquisition of loan portfolios			(96,153)		(129,875)	Acquisition of loan portfolios			(86,071)		(96,153)
	Return of capital from equity method investments			131		1,371	Return of capital from equity method investments			682		131
	Payments to acquire equity method investments			(440)		-	Payments to acquire equity method investments			0		(440)
	Acquisition of premises and equipment			(15,133)		(19,438)	Acquisition of premises and equipment			(17,850)		(15,133)
	Proceeds from insurance claims			366		-	Proceeds from insurance claims			0		366
	Proceeds from sale of:						Proceeds from sale of:
		Premises and equipment and other productive assets		6,659		5,975		Premises and equipment and other productive assets		8,497		6,659
		Foreclosed assets		19,413		26,119		Foreclosed assets		24,968		19,413
Net cash used in investing activities	Net cash used in investing activities			(667,796)		(942,830)	Net cash used in investing activities			(1,993,226)		(667,796)

Cash flows from financing activities:
	Net increase (decrease) in:
		Deposits		1,881,314		1,047,341
		Assets sold under agreements to repurchase		(34,469)		(14,612)
		Other short-term borrowings		0		100,000
	Payments of notes payable			(1,075)		(43,800)
	Principal payments of finance leases			(1,133)		(538)
	Proceeds from issuance of common stock			1,118		3,969
	Payments for repurchase of redeemable preferred stock			0		(28,017)
	Dividends paid			(34,053)		(29,726)
	Net payments for repurchase of common stock			(279)		(500,222)
	Payments related to tax withholding for share-based compensation			(3,663)		(2,579)
Net cash provided by financing activities				1,807,760		531,816
Net increase in cash and due from banks, and restricted cash				4,931		56,999
Cash and due from banks, and restricted cash at beginning of period				497,094		394,323
Cash and due from banks, and restricted cash at the end of the period			$	502,025	$	451,322
The accompanying notes are an integral part of these Consolidated Financial Statements.

Cash flows from financing activities:

Net increase (decrease) in:

Deposits

1,047,341

1,169,706

Assets sold under agreements to repurchase

(14,612)

(80,659)

Other short-term borrowings

100,000

1

Payments of notes payable

(43,800)

(59,526)

Principal payments of finance leases

(538)

(439)

Proceeds from issuance of common stock

3,969

2,976

Payments for repurchase of redeemable preferred stock

(28,017)

-

Dividends paid

(29,726)

(25,713)

Net payments for repurchase of common stock

(500,222)

(250,314)

Payments related to tax withholding for share-based compensation

(2,579)

(2,805)
Net cash provided by financing activities

531,816

753,227
Net increase (decrease) in cash and due from banks, and restricted cash

56,999

(17,508)
Cash and due from banks, and restricted cash at beginning of period

394,323

403,251
Cash and due from banks, and restricted cash at the end of the period
$
451,322

$
385,743
The accompanying notes are an integral part of these Consolidated Financial Statements.

Notes to Consolidated Financial

Statements (Unaudited)

		Note 1 -	Nature of operations	1413
	Note 2 -		Basis of presentation	1514
	Note 3 -		New accounting pronouncements	1615
		Note 4 -	~~Summary of significant accounting policies~~	21
	~~Note 5~~ -	Restrictions on cash and due from banks and certain securities	2417
Note 5 -		Debt securities available-for-sale	18
Note 6 -		Debt securities ~~available-for-sale~~held-to-maturity	2521
	Note 7 -		~~Debt securities held-to-maturity~~Loans	2824
		Note 8 -	~~Loans~~	31
	~~Note 9~~ -	Allowance for credit losses – loans held-in-portfolio	3932
		Note 109 -	Mortgage banking activities	5754
		Note 1110 -	Transfers of financial assets and mortgage servicing assets	5855
		Note 1211 -	Other real estate owned	6158
		Note 1312 -	Other assets	6259
		Note 1413 -	Goodwill and other intangible assets	6360
Note 14 -		Deposits	62
Note 15 -		~~Deposits~~Borrowings	6663
		Note 16 -	~~Borrowings~~	67
	~~Note 17~~ -	Other liabilities	6965
		Note 1817 -	Stockholders’ equity	7066
Note 18 -		Other comprehensive (loss) income	67
Note 19 -		~~Other comprehensive loss~~Guarantees	7169
		Note 20 -	~~Guarantees~~	73
	~~Note 21~~ -	Commitments and contingencies	7571
		Note ~~22-~~21-	Non-consolidated variable interest entities	8278
		Note 2322 -	Related party transactions	8480
		Note 2423 -	Fair value measurement	8782
		Note 2524 -	Fair value of financial instruments	9389
		Note 2625 -	Net income per common share	9692
		Note 2726 -	Revenue from contracts with customers	9793
		Note 2827 -	Leases	9995
		Note 2928 -	Pension and postretirement benefits	~~101~~97
		Note 3029 -	Stock-based compensation	~~102~~98
		Note 3130 -	Income taxes	~~104~~100
		Note 3231 -	Supplemental disclosure on the consolidated statements of cash flows	~~108~~104
		Note 3332 -	Segment reporting	~~109~~105
	~~Note 34 -~~		~~Condensed consolidating financial information of guarantor and issuers of registered guaranteed securities~~
	~~114~~

1312

Note 1 – Nature of operations

Popular, Inc. (the “Corporation” or “Popular”) is a diversified, publicly-owned financial holding company subject to the supervision and regulation of the Board of Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the mainland United States (“U.S.”) and the U.S. and British Virgin Islands. In Puerto Rico, the Corporation provides retail, mortgage, and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as investment banking, broker-dealer, auto and equipment leasing and financing, and insurance services through specialized subsidiaries. In the mainland U.S., the Corporation provides retail, mortgage and commercial banking services through its New York-chartered banking subsidiary, Popular Bank (“PB” or “Popular U.S.”), which has branches located in New York, New Jersey and Florida.

1413

Note 2 – Basis of Presentation

Basis of Presentation

The consolidated interim financial statements have been prepared without audit. The Consolidated Statement of Financial Condition data at December 31, ~~2019~~2020 was derived from audited financial statements. The unaudited interim financial statements are, in the opinion of management, a fair statement of the results for the periods reported and include all necessary adjustments, all of a normal recurring nature, for a fair statement of such results.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from the unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements should be read in conjunction with the audited Consolidated Financial Statements of the Corporation for the year ended December 31, ~~2019,~~2020, included in the Corporation’s ~~2019~~2020 Form 10-K. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

1514

Note 3 - New accounting pronouncements


Recently Adopted Accounting Standards Updates

Standard	Description	Date of adoption	Effect on the financial statements
FASB ASU ~~2020-03,~~2020-08, Codification Improvements to ~~Financial Instruments~~Subtopic 310-20 – Receivables – Nonrefundable Fees and Other Costs	The FASB issued ASU ~~2020-03~~2020-08 in ~~March~~October 2020 which ~~among~~clarifies that a reporting entity should assess whether a callable debt security purchased at a premium is within the scope of ASC 310-20-35-33 each reporting period, which impacts the amortization period for nonrefundable fees and other things, provides clarification on issues related to the term that should be used to measure expected credit losses of net investments in leases and that an allowance for credit losses should be recorded once control of financial assets has been regained.costs.	January 1, ~~2020~~2021	The Corporation was not impacted by the adoption of ASU ~~2020-03~~2020-08 during the first quarter of ~~2020.~~2021 since it does not currently hold purchased callable debt securities at a premium.
FASB ASU ~~2019-08, Compensation~~2020-01, Investments – ~~Stock Compensation~~Equity Securities (Topic ~~718)~~321), Investments – Equity Method and ~~Revenue from Contracts with Customers~~Joint Ventures (Topic ~~606)~~323), and Derivatives and Hedging (Topic 815): ~~Codification Improvements – Share-Based Consideration Payable to a Customer~~Clarifying the Interactions between Topic 321, Topic 323 and Topic 815	The FASB issued ASU ~~2019-08~~2020-01 in ~~November 2019,~~January 2020, which ~~requires~~clarifies that an entity ~~measure and classify share-based payment awards granted~~should consider observable transactions that require it to ~~a customer~~either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic ~~718. Therefore, the grant-date fair value~~321 and includes scope considerations for entities that hold certain non-derivative forward contracts and purchased options to acquire equity securities that, upon settlement of the ~~share-based payment awards will be the basis for the reduction~~forward contract or exercise of the ~~transaction price.~~purchase option, would be accounted for under the equity method of accounting.	January 1, ~~2020~~2021	The Corporation was not impacted by the adoption of ASU ~~2019-08~~2020-01 during the first quarter of ~~2020~~2021 since it does not ~~grant shared-based payments awards~~hold certain non-derivative forward contracts and purchased options to ~~its customers.~~acquire equity securities that, upon settlement of the forward or exercise of the purchase option, would be accounted for under the equity method of accounting. Notwithstanding, it will consider this guidance for the purposes of applying the measurement alternative in ASC Topic 321 immediately before applying or discontinuing the equity method of accounting.


~~Standard~~	~~Description~~	~~Date of adoption~~	~~Effect on the financial statements~~
FASB ASU ~~2018-18, Collaborative Arrangements~~2019-12, Income Taxes (Topic ~~808)~~740): ~~Clarifying~~Simplifying the ~~Interaction between Topic 808 and Topic 606~~Accounting for Income Taxes	The FASB issued ASU ~~2018-18~~2019-12 in ~~November 2018~~December 2019, which ~~among other things, provides guidance on how~~simplifies the accounting for income taxes by removing certain exceptions such as the incremental approach for intraperiod tax allocation and interim period income tax accounting for year-to-date losses that exceed anticipated losses. In addition, the ASU simplifies GAAP in a number of areas such as when separate financial statements of legal entities are not subject to ~~assess whether certain collaborative arrangement transactions should be accounted for under Topic 606.~~tax and enacted changes in tax laws in interim periods.	January 1, ~~2020~~	~~The Corporation was not impacted by the adoption of ASU 2018-18 during the first quarter of 2020 since it does not have collaborative arrangements.~~
FASB ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract	The FASB issued ASU 2018-15 in August 2018 which, among other things, aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, and clarifies the term over which such capitalized implementation costs should be amortized.	~~January 1, 2020~~2021	The Corporation adopted ASU ~~2018-15~~2019-12 during the first quarter of ~~2020 and~~2021 but was not ~~significantly~~materially impacted ~~since it applied~~by the ~~existing~~amendments of this ASU. It will consider this guidance ~~and capitalized implementation costs~~for enacted changes in tax laws, subsequent step-ups in the tax basis of ~~cloud computing arrangements. Capitalized implementation costs of cloud computing arrangements are presented as part of “Other assets”. Refer to amended disclosures on Note 13, Other assets.~~goodwill, or ownership changes in investments.


~~Standard~~	~~Description~~	~~Date of adoption~~	~~Effect on the financial statements~~
~~FASB ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment~~	The FASB issued ASU 2017-04 in January 2017, which simplifies the accounting for goodwill impairment by removing Step 2 of the two-step goodwill impairment test under the current guidance. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Entities will be required to disclose the amount of goodwill at reporting units with zero or negative carrying amounts.	~~January 1, 2020~~	The Corporation adopted ASU 2017-04 during the first quarter of 2020 and, as such, considered this guidance when performing the interim impairment test as of March 31, 2020. Refer to Note 14, Goodwill and other intangible assets, for additional information.
FASB ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update)	The FASB issued ASU 2017-03 in January 2017, which incorporates into the Accounting Standards Codification recent SEC guidance about certain investments in qualified affordable housing and disclosing under SEC SAB Topic 11.M the effect on financial statements of adopting the revenue, leases and credit losses standards.	~~January 1, 2020~~	~~The Corporation has considered the guidance in this Update in its disclosures on the effect in its consolidated financial statements of adoption of the new Credit Loss Standard, discussed below.~~

~~FASB ASUs Financial Instruments – Credit Losses (Topic 326)~~

Since June 2016, the FASB has issued a series of ASUs mainly related to credit losses (Topic 326), which replace the incurred loss model with a current expected credit loss (“CECL”) model. The CECL model applies to financial assets measured at amortized cost that are subject to credit losses and certain off-balance sheet exposures. CECL ~~establishes a forw~~ard-looking methodology that reflects the expected credit losses over the lives of financial assets, starting when such assets are first acquired. Under the revised methodology, credit losses will be measured based on past events, current conditions and reasonable and supportable forecasts that affect the collectability of financial assets. CECL also revises the approach to recognizing credit losses for available-for-sale securities by replacing the direct write-down approach with the allowance approach and limiting the allowance to the amount at which the security’s fair value is less than the amortized cost. In addition, CECL provides that the initial allowance for credit losses on purchased credit deteriorated (“PCD”) financial assets will be recorded as an increase to the purchase price, with subsequent changes to the allowance recorded as a credit loss expense. The amendments to Topic 326 include the areas of accrued interest receivable, transfers of loans and debt securities between classifications and the inclusion of expected recoveries in the allowance for credit losses including PCD assets. The standards also expand credit quality disclosures. ~~These accounting standards updates were effective on January 1, 2020.~~

The Corporation adopted the new CECL accounting standard effective on January 1, 2020. As a result of the adoption, the Corporation recorded an increase in its allowance for credit losses related to its loan portfolio of $315 million, and a decrease of $9 million in the allowance for credit losses for unfunded commitments and credit recourse guarantees which is recorded in Other Liabilities. The Corporation also recognized an allowance for credit losses of approximately $13 million related to its held-to-maturity debt securities portfolio. The adoption of CECL was recognized under the modified retrospective approach. Therefore, the adjustments to record the increase in the allowance for credit losses was recorded as a decrease to the opening balance of retained earnings of the year of implementation, net of income taxes, except for approximately $17 million related to loans previously accounted under ASC Subtopic 310-30, which resulted in a reclassification between certain contra loan balance accounts to the allowance for credit losses. The total impact to retained earnings, net of tax, related to the adoption of CECL was of $205.8 million.

As part of the adoption of CECL, the Corporation has made the election to break the existing pools of purchased credit impaired (“PCI”) loans previously accounted for under the ASC Subtopic 310-30 guidance. These loans are now accounted for on an individual loan basis under the PCD accounting methodology under CECL. Following the applicable accounting guidance, PCI loans were previously excluded from non-performing status. Upon transition to the individual loan measurement, these loans are no longer excluded from non-performing status, resulting in an increase of $278 million in NPLs at January 1, 2020. This increase includes $144 million in loans currently over 90 days past due and $134 million in loans that are not delinquent in their payment terms but are reported as non-performing due to other credit quality considerations.

The Corporation will avail itself of the option to phase in over a period of three years, beginning on January 1, 2022, the day-one effects on regulatory capital arising from the adoption of CECL. The Corporation was also impacted by the additional disclosures required by CECL. The CECL accounting standard also requires additional disclosures related to delinquencies, collateral types and other credit metrics for loans and investments. Refer to Notes 7, Investment Securities Held- to- maturity, Note 8 -Loans and Note 9- Allowance for Credit losses for additional disclosures provided in compliance with the new CECL standard.

~~Additionally, adoption of the following standards during 2020 did not have a significant impact on the Corporation’s Consolidated Financial Statements:~~

~~FASB ASUs 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities~~

1915


Accounting Standards Updates Not Yet Adopted

Standard	Description	Date of adoption	Effect on the financial statements
FASB ASU ~~2020-04, Reference Rate Reform~~2021-04, Earnings per Share (Topic ~~848)~~260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force)	The FASB issued ASU ~~2020-04~~2021-04 in ~~March 2020,~~May 2021, which ~~provides~~clarifies the accounting ~~relief from~~for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after a modification or exchange and the ~~future impact~~related EPS effects of ~~the cessation of LIBOR by, among other things, providing optional expedients~~such transaction if recognized as an adjustment to treat contract modifications resulting from such reference rate reform as a continuation of the existing contract and for hedging relationships to not be de-designated resulting from such changes provided certain criteria are met.equity.	~~December 31,~~January 1, 2022	~~The~~Upon adoption of this ASU, the Corporation ~~is currently in the process~~will consider this guidance for modifications or exchanges of identifying its LIBOR-based contracts that will be impacted by this standard, incorporating fallback language if negotiated and incorporating reference rate language in new contracts to prepare for these changes. Notwithstanding, it will elect such optional expedients for contracts left unmodified.freestanding equity-classified written call options.

For other recently issued Accounting Standards Updates not yet effective, refer to Note 3 to the Consolidated Financial Statements included in the ~~2019~~2020 Form 10-K.

2016

Note 4 ~~– Summary of significant accounting policies~~

The accounting and financial reporting policies of Popular, Inc. and its subsidiaries (the “Corporation”) conform with accounting principles generally accepted in the United States of America and with prevailing practices within the financial services industry. A description of the significant accounting and financial reporting policies can be found on Note 2 to the Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2019.

In connection with the implementation of the CECL new accounting standard, the Corporation has made changes to certain of its accounting policies related to its loans portfolio, debt securities portfolio and allowance for credit losses

~~Investment securities~~

Debt securities that the Corporation has the intent and ability to hold to maturity are classified as debt securities held-to-maturity and reported at amortized cost. An allowance for credit losses is established for the expected credit losses over the remaining term of debt securities-held-to-maturity. The Corporation has established a methodology to estimate credit losses which considers qualitative factors, including internal credit ratings and the underlying source of repayment in determining the amount of expected credit losses. Debt securities held-to-maturity are written-off through the allowance for credit losses when a portion or the entire amount is deemed uncollectible, based on the information considered to develop expected credit losses through the life of the asset. The allowance for credit losses is estimated by leveraging the expected loss framework for mortgages in the case of securities collateralized by 2^nd lien loans and the commercial C&I models for municipal bonds. As part of this framework, internal factors are stressed, as a qualitative adjustment, to reflect current conditions that are not necessarily captured within the historical loss experience. The modeling framework includes a 2 year reasonable and supportable period gradually reverting, over a 1-year horizon, to historical information at the model input level.

Debt securities classified as available-for-sale are reported at fair value. Declines in fair value below the securities’ amortized cost which are not related to estimated credit losses are recorded through other comprehensive income or loss, net of taxes. If the Corporation intends to sell or believes it is more likely than not that it will be required to sell the debt security, it is written down to fair value through earnings. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses, which will be limited to the difference between the amortized cost and the fair value of the asset. The allowance for credit losses should be established for the expected credit losses over the remaining term of debt security. The Corporation’s portfolio of available-for-sale securities is comprised mainly of U.S. Treasury notes and obligations from the U.S. Government. These securities have an explicit or implicit guarantee from the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. Accordingly, the Corporation applies a zero-credit loss assumption and no allowance for credit losses has been established. The Corporation monitors its securities portfolio composition and credit performance on a quarterly basis to determine if any allowance is considered necessary. Debt securities available-for-sale are written-off when a portion or the entire amount is deemed uncollectible, based on the information considered to develop expected credit losses through the life of the asset.

~~Loans~~

Purchased loans with no evidence of credit deterioration since origination are accounted at fair value upon acquisition. Credit discounts are included in the determination of fair value and are amortized over the remaining contractual term using the effective interest method. An allowance for credit losses is recognized as a provision expense for expected losses over the remaining life of the loans.

~~Loans acquired with deteriorated credit quality~~

PCD loans are defined as those with evidence of a more-than-insignificant deterioration in a loan’s credit quality since origination. PCD loans are initially recorded at its purchase price plus an estimated allowance for credit losses. Upon the acquisition of a PCD loan, the Corporation makes an estimate of the expected credit losses over the remaining contractual term of each individual loan. The estimated credit losses over the life of the loan is recorded as an allowance of credit losses with a corresponding addition to the loan purchase price. The amount of the purchase premium or discount which is not related to credit risk is amortized over the life of the loan through net interest income using the effective interest method or a method that approximates the effective interest method.

Changes in expected credit losses are recorded as an increase or decrease to the allowance for credit losses with a corresponding charge (reverse) to the provision for credit losses in the Consolidated Statement of Operations.

~~Refer to Note 8to the Consolidated Financial Statements for additional information with respect to loans acquired with deteriorated credit quality.~~

~~Allowance for credit losses – loans portfolio~~

The Corporation establishes an allowance for credit losses (“ACL”) for its loan portfolio based on its estimate of credit losses over the remaining contractual term of the loans, adjusted for expected prepayments. An ACL is recognized for all loans including originated and purchased loans, since inception, with a corresponding charge to the provision for loan losses, except for PCD loans for which the ACL at acquisition is recorded as an addition to the purchase price with subsequent changes recorded in earnings.

The Corporation has established a methodology to estimate the ACL which includes a reasonable and supportable forecast period for estimating credit losses, considering quantitative and qualitative factors as well as the economic outlook. As part of this methodology management will evaluate various macroeconomic scenarios, provided by third parties, before selecting a single forward-looking scenario for loss estimation. This evaluation may include benchmarking procedures as well as careful analysis of the underlying assumptions used to build the scenarios. The Corporation may process, from time to time additional macroeconomic scenarios as part of its qualitative adjustment framework.

The macroeconomic variables chosen to estimate credit losses were selected by combining quantitative procedures with expert judgment. These variables were determined to be the best predictors of expected credit losses within the Corporation’s loan portfolios and include drivers such as; unemployment rate, different measures of employment levels, house prices, gross domestic product and measures of disposable income, amongst others. The loss estimation framework includes a reasonable and supportable period of 2 years for PR portfolios, gradually reverting, over a 1-year horizon, to historical macroeconomic variables at the model input level. For the US portfolio the reasonable and supportable period considers the contractual life of the asset, impacted by prepayments, except for the US CRE portfolio. The US CRE portfolio utilizes a 2 year reasonable and supportable period gradually reverting, over a 1-year horizon, to historical information at the output level.

The Corporation developed loan level quantitative models distributed by geography and loan type. This segmentation was determined by evaluating their risk characteristics, which include default patterns, source of repayment, type of collateral, and lending channels, amongst others. The modeling framework includes competing risk models to generate lifetime defaults and prepayments, and other loan level modeling techniques to estimate loss severity. Recoveries on future losses are contemplated as part of the loss severity modeling. These parameters are estimated by combining internal risk factors with macroeconomic expectations. In order to generate the expected credit losses, the output of these models is combined with loan level repayment information. The internal risk factors contemplated within the models may include borrowers credit scores, loan-to-value, delinquency status, risk ratings, interest rate, loan term, loan age and type of collateral, amongst others.

The allowance for credit losses also includes a qualitative framework that addresses two main components; losses that are expected but not captured within the quantitative modeling framework, and model imprecision. In order to identify potential losses that are not captured through the models, management evaluated model limitations as well as the different risks covered by the variables used in each quantitative model. This assessment took into consideration factors listed as part of ASU 326-20-55-4. To complement the analysis management also evaluated sectors that have low levels of historical defaults, but current conditions show the potential for future losses. This type of qualitative adjustment is more prevalent in the commercial portfolios. The model imprecision component of the qualitative adjustments is determined after evaluating model performance for these portfolios through different time periods. This type of qualitative adjustment mainly impacts consumer portfolios.

The Corporation has designated loans classified as collateral dependent for which it applies the practical expedient to measure the ACL based on the fair value of the collateral less cost to sell, when the repayment is expected to be provided substantially by the sale or operation of the collateral and the borrower is experiencing financial difficulty. The fair value of the collateral is based on appraisals, which may be adjusted due to their age, and the type, location, and condition of the property or area or general market conditions to reflect the expected change in value between the effective date of the appraisal and the measurement date.

In the case of trouble debt restructurings, the established framework captures the impact of concessions through discounting modified contractual cash flows, both principal and interest, at the loan’s original effective rate. The impact of these concessions is combined with the expected credit losses generated by the quantitative loss models in order to arrive at the allowance for credit losses. As a result, the allowance for credit losses related to TDRs is impacted by the expected macroeconomic conditions.

The Credit Cards portfolio, due to its revolving nature, does not have a specified maturity date. To estimate the average remaining term of this segment management evaluated the portfolios payment behavior based on internal historical data. These payment behaviors were further classified into sub-categories that accounted for delinquency history and differences between transactors, revolvers and customers that have exhibited mixed transactor/revolver behavior. Transactors are defined as active accounts without any finance charge in the last 6 months. The paydown curves generated for each sub-category are applied to the outstanding exposure at the measurement date using the first-in first-out (FIFO) methodology. These amortization patterns are combined with loan level default and loss severity modeling to arrive at the allowance for credit losses.

~~Accrued interest receivable~~

The amortized basis for loans and investments in debt securities is presented exclusive of accrued interest receivable. The Corporation has elected not to establish an allowance for credit losses for accrued interest receivable for loans and investments in debt securities, given the Corporation’s non-accrual policies, in which accrual of interest is discontinued and reversed based on the asset’s delinquency status. Refer to Note 2 to the Consolidated Financial Statements included in the Corporation’s Annual Report on Form 10k for year ended December 31, 2019 for a description of the Corporation’s nonaccrual policies.

~~Reserve for unfunded commitments~~

The Corporation establishes a reserve for unfunded commitments, based on the estimated losses over the remaining term of the facility, which is based on the maximum repayment term associated with future draws from credit lines. An allowance is not established for commitments that are unconditionally cancellable by the Corporation. Accordingly, no reserve is established for unfunded commitments related to its credit cards portfolio. Reserve for the unfunded portion of credit commitments is presented separately within other liabilities in the Consolidated Statements of Financial Condition.

~~Guarantees, including indirect guarantees of indebtedness to others~~

The estimated losses to be absorbed under the credit recourse arrangements are recorded as a liability when the loans are sold and are updated by accruing or reversing expense (categorized in the line item “Adjustments (expense) to indemnity reserves on loans sold” in the consolidated statements of operations) throughout the life of the loan, as necessary, when additional relevant information becomes available. The recourse liability is estimated using loan level statistical techniques. Internal factors that are evaluated include customer credit scores, refreshed loan-to-values, loan age, and outstanding balance, amongst others. The methodology leverages the expected loss framework for mortgage loans and includes macroeconomic expectations based on a 2 year reasonable and supportable period, gradually reverting over a 1-year horizon to historical macroeconomic variables at the input level. Estimated future defaults, prepayments and loss severity are combined with loan level repayment information in order to estimate lifetime expected losses for this portfolio. The reserve for the estimated losses under the credit recourse arrangements is presented separately within other liabilities in the Consolidated Statements of Financial Condition.

~~Note 5~~ - Restrictions on cash and due from banks and certain securities

~~The Corporation’s banking subsidiaries,~~ BPPR ~~and PB, are~~is required by ~~federal and state~~ regulatory agencies to maintain average reserve balances with the Federal Reserve Bank of New York (the “Fed”) or other banks. Those required average reserve balances amounted to $ ~~1.7~~2.5 billion at March 31, ~~2020~~2021 (December 31, ~~2019~~2020 - $ ~~1.6~~2.3 billion). Cash and due from banks, as well as other highly liquid securities, are used to cover the required average reserve balances.

At March 31, ~~2020,~~2021, the Corporation held ~~$64~~$ 41 million in restricted assets in the form of funds deposited in money market accounts, debt securities available for sale and equity securities (December 31, ~~2019~~2020 - $ 5239 million). The restricted assets held in debt securities available for sale and equity securities consist primarily of assets held for the Corporation’s non-qualified retirement plans and fund deposits guaranteeing possible liens or encumbrances over the title of insured properties.

2417

Note 65 – Debt securities available-for-sale

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of debt securities available-for-sale at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

		At March 31, 2020											At March 31, 2021
				Gross						Weighted					Gross						Weighted
		Amortized		unrealized				Fair		average			Amortized		unrealized				Fair		average
(In thousands)	(In thousands)	cost		gains		losses		value		yield		(In thousands)	cost		gains		losses		value		yield
U.S. Treasury securities	U.S. Treasury securities											U.S. Treasury securities
	Within 1 year	$	3,401,265	$	16,188	$	-	$	3,417,453	1.50	%	Within 1 year	$	1,357,228	$	16,087	$	0	$	1,373,315	2.25	%
	After 1 to 5 years		5,109,362		271,488		-		5,380,850	2.16		After 1 to 5 years		6,089,702		209,634		7,620		6,291,716	1.72
	After 5 to 10 years		1,516,770		102,440		-		1,619,210	1.70		After 5 to 10 years		4,226,436		7,863		41,553		4,192,746	1.11
Total U.S. Treasury securities	Total U.S. Treasury securities		10,027,397		390,116		-		10,417,513	1.87		Total U.S. Treasury securities		11,673,366		233,584		49,173		11,857,777	1.56
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities											Obligations of U.S. Government sponsored entities
	Within 1 year		85,638		606		-		86,244	1.48		After 1 to 5 years		90		2		0		92	5.63
	After 1 to 5 years		90		2		-		92	5.64
Total obligations of U.S. Government sponsored entities	Total obligations of U.S. Government sponsored entities		85,728		608		-		86,336	1.48		Total obligations of U.S. Government sponsored entities		90		2		0		92	5.63
Collateralized mortgage obligations - federal agencies	Collateralized mortgage obligations - federal agencies											Collateralized mortgage obligations - federal agencies
	Within 1 year		156		-		-		156	1.77
	After 1 to 5 years		1,009		8		-		1,017	2.55		After 1 to 5 years		1,054		11		0		1,065	2.86
	After 5 to 10 years		79,853		1,066		-		80,919	1.61		After 5 to 10 years		54,344		1,085		0		55,429	1.55
	After 10 years		469,095		11,263		1,614		478,744	2.06		After 10 years		273,644		7,930		104		281,470	2.04
Total collateralized mortgage obligations - federal agencies	Total collateralized mortgage obligations - federal agencies		550,113		12,337		1,614		560,836	1.99		Total collateralized mortgage obligations - federal agencies		329,042		9,026		104		337,964	1.96
Mortgage-backed securities	Mortgage-backed securities											Mortgage-backed securities
	Within 1 year		17		1		-		18	2.18		Within 1 year		5,572		22		0		5,594	2.86
	After 1 to 5 years		39,494		1,299		15		40,778	3.12		After 1 to 5 years		63,882		2,892		9		66,765	2.39
	After 5 to 10 years		349,654		9,573		21		359,206	1.47		After 5 to 10 years		553,299		19,919		5		573,213	1.89
	After 10 years		4,207,124		141,907		733		4,348,298	2.52		After 10 years		10,018,263		113,577		201,840		9,930,000	1.83
Total mortgage-backed securities	Total mortgage-backed securities		4,596,289		152,780		769		4,748,300	2.45		Total mortgage-backed securities		10,641,016		136,410		201,854		10,575,572	1.84
Other	Other											Other
	After 1 to 5 years		305		11		-		316	3.62		After 1 to 5 years		194		10		0		204	3.62
Total other	Total other		305		11		-		316	3.62		Total other		194		10		0		204	3.62
Total debt securities available-for-sale^[1]	Total debt securities available-for-sale^[1]	$	15,259,832	$	555,852	$	2,383	$	15,813,301	2.04	%	Total debt securities available-for-sale^[1]	$	22,643,708	$	379,032	$	251,131	$	22,771,609	1.69	%
[1]	Includes $12.8 billion pledged to secure public and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $10.7 billion serve as collateral for public funds.											Includes $17.2 billion pledged to secure government and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $16.0 billion serve as collateral for public funds.

2518

		At December 31, 2019											At December 31, 2020
				Gross						Weighted					Gross						Weighted
		Amortized		unrealized				Fair		average			Amortized		unrealized				Fair		average
(In thousands)	(In thousands)	cost		gains		losses		value		yield		(In thousands)	cost		gains		losses		value		yield
U.S. Treasury securities	U.S. Treasury securities											U.S. Treasury securities
	Within 1 year	$	5,071,201	$	3,262	$	567	$	5,073,896	1.58	%	Within 1 year	$	4,900,055	$	16,479	$	0	$	4,916,534	0.69	%
	After 1 to 5 years		5,137,804		75,597		3,435		5,209,966	2.19		After 1 to 5 years		5,007,223		259,399		0		5,266,622	2.05
	After 5 to 10 years		1,778,568		429		6,604		1,772,393	1.70		After 5 to 10 years		567,367		37,517		0		604,884	1.68
Total U.S. Treasury securities	Total U.S. Treasury securities		11,987,573		79,288		10,606		12,056,255	1.86		Total U.S. Treasury securities		10,474,645		313,395		0		10,788,040	1.40
Obligations of U.S. Government sponsored entities	Obligations of U.S. Government sponsored entities											Obligations of U.S. Government sponsored entities
	Within 1 year		62,492		2		21		62,473	1.45		Within 1 year		59,993		101		0		60,094	1.46
	After 1 to 5 years		60,021		-		90		59,931	1.48		After 1 to 5 years		90		0		0		90	5.64
Total obligations of U.S. Government sponsored entities	Total obligations of U.S. Government sponsored entities		122,513		2		111		122,404	1.47		Total obligations of U.S. Government sponsored entities		60,083		101		0		60,184	1.47
Obligations of Puerto Rico, States and political subdivisions
	Within 1 year		6,975		-		-		6,975	-
Total obligations of Puerto Rico, States and political subdivisions			6,975		-		-		6,975	-
Collateralized mortgage obligations - federal agencies	Collateralized mortgage obligations - federal agencies											Collateralized mortgage obligations - federal agencies
	Within 1 year		236		-		-		236	1.83
	After 1 to 5 years		350		1		-		351	2.16		After 1 to 5 years		1,388		14		0		1,402	2.97
	After 5 to 10 years		85,079		31		1,180		83,930	1.63		After 5 to 10 years		61,229		1,050		0		62,279	1.56
	After 10 years		504,391		3,640		6,373		501,658	2.08		After 10 years		318,292		10,202		43		328,451	2.04
Total collateralized mortgage obligations - federal agencies	Total collateralized mortgage obligations - federal agencies		590,056		3,672		7,553		586,175	2.02		Total collateralized mortgage obligations - federal agencies		380,909		11,266		43		392,132	1.97
Mortgage-backed securities	Mortgage-backed securities											Mortgage-backed securities
	Within 1 year		16		-		-		16	2.13		Within 1 year		5,616		56		0		5,672	2.83
	After 1 to 5 years		36,717		852		1		37,568	3.38		After 1 to 5 years		50,393		1,735		0		52,128	2.35
	After 5 to 10 years		350,373		1,958		1,303		351,028	2.02		After 5 to 10 years		454,880		20,022		6		474,896	1.91
	After 10 years		4,447,561		60,384		20,243		4,487,702	2.60		After 10 years		9,608,860		180,844		1,839		9,787,865	1.94
Total mortgage-backed securities	Total mortgage-backed securities		4,834,667		63,194		21,547		4,876,314	2.57		Total mortgage-backed securities		10,119,749		202,657		1,845		10,320,561	1.94
Other	Other											Other
	After 1 to 5 years		341		9		-		350	3.62		After 1 to 5 years		224		11		0		235	3.62
Total other	Total other		341		9		-		350	3.62		Total other		224		11		0		235	3.62
Total debt securities available-for-sale^[1]	Total debt securities available-for-sale^[1]	$	17,542,125	$	146,165	$	39,817	$	17,648,473	2.05	%	Total debt securities available-for-sale^[1]	$	21,035,610	$	527,430	$	1,888	$	21,561,152	1.66	%
[1]	Includes $12.2 billion pledged to secure public and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $10.9 billion serve as collateral for public funds.											Includes $18.2 billion pledged to secure government and trust deposits, assets sold under agreements to repurchase, credit facilities and loan servicing agreements that the secured parties are not permitted to sell or repledge the collateral, of which $16.9 billion serve as collateral for public funds.

The weighted average yield on debt securities available-for-sale is based on amortized cost; therefore, it does not give effect to changes in fair value.

Debt securities not due on a single contractual maturity date, such as mortgage-backed securities and collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations, mortgage-backed securities and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

There were 0 debt securities sold during the quarters ended March 31, ~~2020~~2021 and ~~March 31, 2019.~~2020.

The following ~~table~~tables present the Corporation’s fair value and gross unrealized losses of debt securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, ~~2020~~2021 and December 31, ~~2019~~2020.

		At March 31, 2020													At March 31, 2021
		Less than 12 months				12 months or more				Total					Less than 12 months				12 months or more				Total
				Gross				Gross				Gross					Gross				Gross				Gross
		Fair		unrealized		Fair		unrealized		Fair		unrealized			Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)	(In thousands)	value		losses		value		losses		value		losses		(In thousands)	value		losses		value		losses		value		losses
U.S. Treasury securities														U.S. Treasury securities	$	4,974,081	$	49,173	$	0	$	0	$	4,974,081	$	49,173
Collateralized mortgage obligations - federal agencies	Collateralized mortgage obligations - federal agencies	$	11,335	$	117	$	50,605	$	1,497	$	61,940	$	1,614	Collateralized mortgage obligations - federal agencies		37,475		75		1,808		29		39,283		104
Mortgage-backed securities	Mortgage-backed securities		127		2		187,402		767		187,529		769	Mortgage-backed securities		7,225,135		201,842		608		12		7,225,743		201,854
Total debt securities available-for-sale in an unrealized loss position	Total debt securities available-for-sale in an unrealized loss position	$	11,462	$	119	$	238,007	$	2,264	$	249,469	$	2,383	Total debt securities available-for-sale in an unrealized loss position	$	12,236,691	$	251,090	$	2,416	$	41	$	12,239,107	$	251,131

2619

		At December 31, 2019													At December 31, 2020
		Less than 12 months				12 months or more				Total					Less than 12 months				12 months or more				Total
				Gross				Gross				Gross					Gross				Gross				Gross
		Fair		unrealized		Fair		unrealized		Fair		unrealized			Fair		unrealized		Fair		unrealized		Fair		unrealized
(In thousands)	(In thousands)	value		losses		value		losses		value		losses		(In thousands)	value		losses		value		losses		value		losses
U.S. Treasury securities		$	2,439,114	$	9,798	$	452,784	$	808	$	2,891,898	$	10,606
Obligations of U.S. Government sponsored entities			9,973		4		99,846		107		109,819		111
Collateralized mortgage obligations - federal agencies	Collateralized mortgage obligations - federal agencies		114,603		537		310,315		7,016		424,918		7,553	Collateralized mortgage obligations - federal agencies	$	4,029	$	43	$	0	$	0	$	4,029	$	43
Mortgage-backed securities	Mortgage-backed securities		179,312		693		1,784,414		20,854		1,963,726		21,547	Mortgage-backed securities		886,432		1,834		555		11		886,987		1,845
Total debt securities available-for-sale in an unrealized loss position	Total debt securities available-for-sale in an unrealized loss position	$	2,743,002	$	11,032	$	2,647,359	$	28,785	$	5,390,361	$	39,817	Total debt securities available-for-sale in an unrealized loss position	$	890,461	$	1,877	$	555	$	11	$	891,016	$	1,888

As of March 31, ~~2020,~~2021, the portfolio of available-for-sale debt securities reflects gross unrealized losses of approximately $2$251 million, driven mainly by mortgage-backed securities, ~~and collateralized mortgage obligations.~~which were impacted by increases in the interest rate environment.

The following table states the name of issuers, and the aggregate amortized cost and fair value of the debt securities of such issuer (includes available-for-sale and held-to-maturity debt securities), in which the aggregate amortized cost of such securities exceeds 10% of stockholders’ equity. This information excludes debt securities backed by the full faith and credit of the U.S. Government. Investments in obligations issued by a state of the U.S. and its political subdivisions and agencies, which are payable and secured by the same source of revenue or taxing authority, other than the U.S. Government, are considered securities of a single issuer.

March 31, 2020

December 31, 2019

(In thousands)
Amortized cost
Fair value
Amortized cost
Fair value
FNMA
$
2,934,302
$
3,025,419
$
3,113,373
$
3,129,538
Freddie Mac

1,536,397

1,588,763

1,623,116

1,638,796

		March 31, 2021				December 31, 2020

(In thousands)	Amortized cost		Fair value		Amortized cost		Fair value
FNMA	$	2,031,853	$	2,114,358	$	2,242,121	$	2,338,897
Freddie Mac		3,787,952		3,747,196		3,616,238		3,675,679

2720

Note 76 –Debt securities held-to-maturity

The following tables present the amortized cost, allowance for credit losses, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of debt securities held-to-maturity at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

		At March 31, 2020															At March 31, 2021
					Allowance			Gross						Weighted						Allowance			Gross						Weighted
		Amortized			for Credit		Net of	unrealized				Fair		average			Amortized			for Credit		Net of	unrealized				Fair		average
(In thousands)	(In thousands)	cost			Losses		Allowance	gains		losses		value		yield		(In thousands)	cost			Losses		Allowance	gains		losses		value		yield
Obligations of Puerto Rico, States and political subdivisions	Obligations of Puerto Rico, States and political subdivisions															Obligations of Puerto Rico, States and political subdivisions
	Within 1 year	$	3,920	$	191	$	3,729	$	-	$	27	$	3,702	6.05	%	Within 1 year	$	4,165	$	69	$	4,096	$	69	$	0	$	4,165	6.07	%
	After 1 to 5 years		16,390		1,683		14,707		-		131		14,576	6.13		After 1 to 5 years		14,765		619		14,146		619		0		14,765	6.20
	After 5 to 10 years		16,660		1,424		15,236		-		1,880		13,356	2.81		After 5 to 10 years		13,210		440		12,770		235		0		13,005	2.33
	After 10 years		46,191		10,092		36,099		3,083		2,520		36,662	1.65		After 10 years		45,993		8,968		37,025		12,090		0		49,115	1.57
Total obligations of Puerto Rico, States and political subdivisions	Total obligations of Puerto Rico, States and political subdivisions		83,161		13,390		69,771		3,083		4,558		68,296	2.97		Total obligations of Puerto Rico, States and political subdivisions		78,133		10,096		68,037		13,013		0		81,050	2.81
Collateralized mortgage obligations - federal agencies	Collateralized mortgage obligations - federal agencies															Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		41		-		41		2		-		43	6.44		After 1 to 5 years		31		0		31		1		0		32	6.44
Total collateralized mortgage obligations - federal agencies	Total collateralized mortgage obligations - federal agencies		41		-		41		2		-		43	6.44		Total collateralized mortgage obligations - federal agencies		31		0		31		1		0		32	6.44
Securities in wholly owned statutory business trusts	Securities in wholly owned statutory business trusts															Securities in wholly owned statutory business trusts
	After 10 years		11,561		-		11,561		-		-		11,561	6.51		After 10 years		11,561		0		11,561		0		0		11,561	6.51
Total securities in wholly owned statutory business trusts	Total securities in wholly owned statutory business trusts		11,561		-		11,561		-		-		11,561	6.51		Total securities in wholly owned statutory business trusts		11,561		0		11,561		0		0		11,561	6.51
Other
	Within 1 year		500		-		500		-		-		500	2.97
Total other			500		-		500		-		-		500	2.97
Total debt securities held-to-maturity	Total debt securities held-to-maturity	$	95,263	$	13,390	$	81,873	$	3,085	$	4,558	$	80,400	3.40	%	Total debt securities held-to-maturity	$	89,725	$	10,096	$	79,629	$	13,014	$	0	$	92,643	3.29	%

		At December 31, 2019											At December 31, 2020
				Gross						Weighted						Allowance			Gross						Weighted
		Amortized		unrealized				Fair		average			Amortized			for Credit		Net of	unrealized				Fair		average
(In thousands)	(In thousands)	cost		gains		losses		value		yield		(In thousands)	cost			Losses		Allowance	gains		losses		value		yield
Obligations of Puerto Rico, States and political subdivisions	Obligations of Puerto Rico, States and political subdivisions											Obligations of Puerto Rico, States and political subdivisions
	Within 1 year	$	3,745	$	-	$	11	$	3,734	6.01	%	Within 1 year	$	3,990	$	50	$	3,940	$	47	$	0	$	3,987	6.05	%
	After 1 to 5 years		17,580		-		320		17,260	6.11		After 1 to 5 years		16,030		710		15,320		710		0		16,030	6.16
	After 5 to 10 years		18,195		-		1,607		16,588	3.11		After 5 to 10 years		14,845		573		14,272		295		23		14,544	2.77
	After 10 years		46,036		9,384		-		55,420	1.67		After 10 years		46,164		8,928		37,236		11,501		0		48,737	1.58
Total obligations of Puerto Rico, States and political subdivisions	Total obligations of Puerto Rico, States and political subdivisions		85,556		9,384		1,938		93,002	3.08		Total obligations of Puerto Rico, States and political subdivisions		81,029		10,261		70,768		12,553		23		83,298	2.93
Collateralized mortgage obligations - federal agencies	Collateralized mortgage obligations - federal agencies											Collateralized mortgage obligations - federal agencies
	After 1 to 5 years		45		2		-		47	6.44		After 1 to 5 years		31		0		31		1		0		32	6.44
Total collateralized mortgage obligations - federal agencies	Total collateralized mortgage obligations - federal agencies		45		2		-		47	6.44		Total collateralized mortgage obligations - federal agencies		31		0		31		1		0		32	6.44
Securities in wholly owned statutory business trusts	Securities in wholly owned statutory business trusts											Securities in wholly owned statutory business trusts
	After 10 years		11,561		-		-		11,561	6.51		After 10 years		11,561		0		11,561		0		0		11,561	6.51
Total securities in wholly owned statutory business trusts	Total securities in wholly owned statutory business trusts		11,561		-		-		11,561	6.51		Total securities in wholly owned statutory business trusts		11,561		0		11,561		0		0		11,561	6.51
Other
	Within 1 year		500		-		-		500	2.97
Total other			500		-		-		500	2.97
Total debt securities held-to-maturity	Total debt securities held-to-maturity	$	97,662	$	9,386	$	1,938	$	105,110	3.49	%	Total debt securities held-to-maturity	$	92,621	$	10,261	$	82,360	$	12,554	$	23	$	94,891	3.38	%

Debt securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

The following tables present the Corporation’s fair value and gross unrealized losses of debt securities held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2019.

2821

At December 31, 2019

Less than 12 months
12 months or more
Total

Gross

Gross

Gross

Fair
unrealized
Fair
unrealized
Fair
unrealized
(In thousands)
value
losses
value
losses
value
losses
Obligations of Puerto Rico, States and political subdivisions
$
17,544
$
291
$
12,673
$
1,647
$
30,217
$
1,938
Total debt securities held-to-maturity in an unrealized loss position
$
17,544
$
291
$
12,673
$
1,647
$
30,217
$
1,938

Credit Quality Indicators

The following describes the credit quality indicators by major security type that the Corporation considers in its’ estimate to develop the allowance for credit losses for investment securities held-to-maturity.

~~The~~At March 31, 2021 and December 31, 2020, the “Obligations of Puerto Rico, States and political subdivisions” classified as held-to-maturity, ~~at March 31, 2020~~ includes securities issued by municipalities of Puerto Rico that are generally not rated by a credit rating agency. This includes ~~$38~~$33 million of general and special obligation bonds issued by three municipalities of Puerto Rico, ~~which~~that are payable primarily from certain property taxes imposed by the issuing ~~municipality.~~municipality (December 31, 2020 - $35 million). In the case of general obligations, they also benefit from a pledge of the full faith, credit and unlimited taxing power of the issuing municipality, which is required by law to levy property taxes in an amount sufficient for the payment of debt service on such general obligation bonds. The Corporation performs periodic credit quality reviews of these securities and internally assigns standardized credit risk ratings based on its evaluation. The Corporation considers these ratings in its estimate to develop the allowance for credit losses associated with these securities. For the definitions of the obligor risk ratings, refer to the Credit Quality section of Note 98 to the Consolidated Financial Statements included in the Corporation’s Form ~~10K~~10-K for the year ended December 31, ~~2019.~~2020.

The following presents the amortized cost basis of securities held by the Corporation issued by municipalities of Puerto Rico aggregated by the internally assigned standardized credit risk rating:


~~At March 31, 2020~~
~~(In thousands)~~		~~Securities issued by Puerto Rico Municipalities~~
~~Watch~~	$	~~22,230~~
~~Special Mention~~		~~15,395~~
~~Ending Balance~~	$	~~37,625~~


	At March 31, 2021		At December 31, 2020
(In thousands)	Securities issued by Puerto Rico municipalities
Watch	$	32,590	$	35,315
Total	$	32,590	$	35,315

~~The~~At March 31, 2021, the portfolio of “Obligations of Puerto Rico, States and political subdivisions” also includes $45 million in securities issued by the Puerto Rico Housing Finance Authority (“HFA”), a government instrumentality, for which the underlying source of payment is second mortgage loans in Puerto Rico residential properties (not the government), but for which HFA, provides a guarantee in the event of default and upon the satisfaction of certain other ~~conditions.~~conditions (December 31, 2020 - $46 million). These securities are not rated by a credit rating agency. The Corporation assesses the credit risk associated with these securities by evaluating the refreshed FICO scores of a representative sample of the underlying borrowers. ~~The~~At March 31, 2021, the average refreshed FICO score for the representative sample, comprised of ~~65%~~67% of the nominal value of the securities, used for the ~~March 31, 2020~~ loss estimate was of ~~685.~~697 (compared to 66% and 697, respectively, at December 31, 2020). The loss estimates for this portfolio was based on the methodology established under CECL for similar loan obligations. The Corporation does not consider the government guarantee when estimating the credit losses associated with this portfolio.

A further deterioration of the Puerto Rico economy or of the fiscal health of the Government of Puerto Rico and/or its instrumentalities (including if any of the issuing municipalities become subject to a debt restructuring proceeding under PROMESA) could further affect the value of these securities, resulting in losses to the Corporation.

Refer to Note 2120 for additional information on the Corporation’s exposure to the Puerto Rico Government.

Delinquency status

At March 31, 2021 and December 31, 2020, there ~~are~~were 0 securities held-to-maturity in past due or non-performing status.

Allowance for credit losses on debt securities held-to-maturity

The following table provides the activity in the allowance for credit losses related to debt securities held-to-maturity by security type ~~for the period ended~~at March 31, ~~2020.~~2021 and March 31, 2020:

At March 31, 2020
(In thousands)

Obligations of Puerto Rico, States and political subdivisions

Collateralized mortgage obligations - federal agencies

Securities in wholly owned statutory business trusts

Other

Total
Allowance for credit losses:

Beginning balance, January 1, 2020
$
-
$
-
$
-
$
-
$
-

Impact of adopting CECL

12,654

-

-

-

12,654

Provision for credit loss expense (reversal of provision)

736

-

-

-

736

Securities charged-off

-

-

-

-

-

Recoveries

-

-

-

-

-
Ending Balance
$
13,390
$
-
$
-
$
-
$
13,390


	For the quarters ended March 31,
		2021		2020
(In thousands)	Obligations of Puerto Rico, States and political subdivisions
Allowance for credit losses:
Beginning balance	$	10,261	$	0
Impact of adopting CECL		0		12,654
Provision for credit loss expense (reversal of provision)		(165)		736
Securities charged-off		0		0
Recoveries		0		0
Ending balance	$	10,096	$	13,390

The allowance for credit losses for the Obligations of Puerto Rico, States and political subdivisions includes ~~$3.4~~$1.2 million for securities issued by municipalities of Puerto Rico, and ~~$10~~$8.9 million for bonds issued by the Puerto Rico HFA, which are secured by second mortgage loans on Puerto Rico residential ~~properties.~~properties (compared to $1.4 million and $8.9 million, respectively, at December 31, 2020).

3023

Note 87 – Loans

For a summary of the accounting policies related to loans, interest recognition and allowance for credit losses refer to Note 2- Summary of Significant Accounting Policies ofin the ~~2019~~2020 Form ~~10-K and updated in this Form 10Q in Note 4 to the Consolidated Financial Statements..~~10-K.

During the quarter ended March 31, ~~2020~~2021, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to ~~$85~~$126 million including $4$ 6 million in ~~PCD~~Purchased Credit Deteriorated (“PCD”) loans ~~consumer~~ ~~loans of $18 million, construction loans of $37 million~~ and commercial loans of $1$21 million; compared to purchases (including repurchases) of mortgage loans of ~~$81~~$85 million ~~and~~including $4 million in PCD loans, consumer loans of ~~$69~~$56 million and commercial loans of $1 million, during the quarter ended March 31, ~~2019~~2020.

The Corporation performed whole-loan sales involving approximately ~~$10~~$66 million of residential mortgage loans and $2$17 million of commercial ~~and construction~~ loans during the quarter ended March 31, ~~2020~~2021 (March 31, ~~2019~~2020 - ~~$12~~$10 million of residential mortgage and $8$2 million of commercial and construction loans). Also, during the quarter ended March 31, ~~2020~~2021, the Corporation securitized approximately $ 51102 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities and $ 3486 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities, compared to ~~$71~~$ 51 million and $ 2134 million, respectively, during the quarter ended March 31, ~~2019.~~2020.

Delinquency status

The following table presents the amortized cost basis of loans held-in-portfolio (“HIP”), net of unearned income, by past due status, and by loan class including those that are in non-performing status or that are accruing interest but are past due 90 days or more at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

March 31, 2020
Puerto Rico

Past due

Past due 90 days or more

30-59

60-89

90 days
Total

Non-accrual

Accruing
(In thousands)

days

days

or more^[1]
past due

Current

Loans HIP

loans

loans
Commercial multi-family

$
8,382

$
359

$
1,379
$
10,120

$
137,145

$
147,265

$
1,379

$
-
Commercial real estate:

Non-owner occupied

4,632

4,382

109,054

118,068

1,968,831

2,086,899

109,054

-

Owner occupied

11,649

4,276

101,887

117,812

1,460,599

1,578,411

101,887

-
Commercial and industrial

17,112

3,608

39,280

60,000

3,458,407

3,518,407

38,784

496
Construction

4,411

-

-

4,411

159,979

164,390

-

-
Mortgage

339,648

141,841

854,105

1,335,594

4,680,414

6,016,008

404,465

449,640
Leasing

18,301

5,938

4,076

28,315

1,060,227

1,088,542

4,076

-
Consumer:

Credit cards

14,062

9,297

20,588

43,947

1,020,740

1,064,687

-

20,588

Home equity lines of credit

49

51

93

193

4,736

4,929

-

93

Personal

23,697

13,078

36,125

72,900

1,390,326

1,463,226

36,064

61

Auto

110,408

38,018

26,431

174,857

2,779,293

2,954,150

26,431

-

Other

622

293

13,966

14,881

122,086

136,967

13,543

423
Total

$
552,973

$
221,141

$
1,206,984
$
1,981,098

$
18,242,783

$
20,223,881

$
735,683

$
471,301
[1]
Loans included as 90 days or more past due include loans that that are not delinquent in their payment terms but that are reported as non-performing due to other credit quality considerations. As part of the adoption of CECL, at January 1, 2020, the Corporation reclassified to this category $134 million of acquired loans with credit deterioration that were previously accounted for under ASC 310-30 and were excluded from non-performing status. In addition, as part of the CECL transition, an additional $125 million of loans that were 90 days or more past due previously accounted for under ASC 310-30 and excluded from non-performing status are now included as non-performing.

3124

March 31, 2020
Popular U.S.
March 31, 2021																		March 31, 2021
Puerto Rico																		Puerto Rico

			Past due											Past due 90 days or more						Past due											Past due 90 days or more
		30-59		60-89		90 days		Total						Non-accrual			Accruing		30-59		60-89		90 days		Total						Non-accrual			Accruing
(In thousands)	(In thousands)	days		days		or more		past due		Current		Loans HIP		loans		loans		(In thousands)	days		days		or more		past due		Current		Loans HIP		loans		loans
Commercial multi-family	Commercial multi-family	$	974	$	-	$	2,097	$	3,071	$	1,627,274	$	1,630,345	$	2,097	$	-	Commercial multi-family	$	196	$	0	$	814	$	1,010	$	137,097	$	138,107	$	814	$	0
Commercial real estate:	Commercial real estate:																	Commercial real estate:
	Non-owner occupied		25,944		-		269		26,213		1,950,611		1,976,824		269		-	Non-owner occupied		939		25,406		76,524		102,869		1,958,129		2,060,998		76,524		0
	Owner occupied		3,910		-		245		4,155		338,805		342,960		245		-	Owner occupied		6,749		2,114		89,752		98,615		1,413,356		1,511,971		89,752		0
Commercial and industrial	Commercial and industrial		1,067		3,546		4,793		9,406		1,208,452		1,217,858		4,793		-	Commercial and industrial		3,870		650		34,333		38,853		4,032,359		4,071,212		33,773		560
Construction	Construction		-		-		-		-		737,990		737,990		-		-	Construction		639		0		14,877		15,516		145,081		160,597		14,877		0
Mortgage			25,639		391		12,176		38,206		1,040,543		1,078,749		12,176		-
Legacy			37		41		1,980		2,058		18,377		20,435		1,980		-
Mortgage^[1]																		Mortgage^[1]		175,930		83,770		1,211,935		1,471,635		5,204,344		6,675,979		390,781		821,154
Leasing																		Leasing		7,564		1,408		3,040		12,012		1,232,944		1,244,956		3,040		0
Consumer:	Consumer:																	Consumer:
	Credit cards		-		-		-		-		36		36		-		-	Credit cards		4,824		3,883		10,779		19,486		858,255		877,741		0		10,779
	Home equity lines of credit		1,438		72		9,322		10,832		106,579		117,411		9,322		-	Home equity lines of credit		0		0		46		46		3,498		3,544		0		46
	Personal		2,687		1,632		2,110		6,429		308,559		314,988		2,110		-	Personal		10,216		6,250		25,731		42,197		1,219,094		1,261,291		25,731		0
	Other		21		-		-		21		774		795		-		-	Auto		47,396		8,783		15,405		71,584		3,131,553		3,203,137		15,405		0
																		Other		360		375		15,489		16,224		108,508		124,732		15,281		208
Total	Total	$	61,717	$	5,682	$	32,992	$	100,391	$	7,338,000	$	7,438,391	$	32,992	$	-	Total	$	258,683	$	132,639	$	1,498,725	$	1,890,047	$	19,444,218	$	21,334,265	$	665,978	$	832,747

March 31, 2020
Popular, Inc.
March 31, 2021																		March 31, 2021
Popular U.S.																		Popular U.S.

			Past due											Past due 90 days or more						Past due											Past due 90 days or more
		30-59		60-89		90 days		Total						Non-accrual			Accruing		30-59		60-89		90 days		Total						Non-accrual			Accruing
(In thousands)	(In thousands)	days		days		or more^[3]		past due		Current		Loans HIP^{[4] [5]}		loans		loans		(In thousands)	days		days		or more		past due		Current		Loans HIP		loans		loans
Commercial multi-family	Commercial multi-family	$	9,356	$	359	$	3,476	$	13,191	$	1,764,419	$	1,777,610	$	3,476	$	-	Commercial multi-family	$	30,185	$	0	$	0	$	30,185	$	1,724,802	$	1,754,987	$	0	$	0
Commercial real estate:	Commercial real estate:																	Commercial real estate:
	Non-owner occupied		30,576		4,382		109,323		144,281		3,919,442		4,063,723		109,323		-	Non-owner occupied		8,280		0		392		8,672		2,034,383		2,043,055		392		0
	Owner occupied		15,559		4,276		102,132		121,967		1,799,404		1,921,371		102,132		-	Owner occupied		5,437		644		323		6,404		323,541		329,945		323		0
Commercial and industrial	Commercial and industrial		18,179		7,154		44,073		69,406		4,666,859		4,736,265		43,577		496	Commercial and industrial		7,226		1,321		1,201		9,748		1,522,463		1,532,211		1,192		9
Construction	Construction		4,411		-		-		4,411		897,969		902,380		-		-	Construction		11,110		0		7,523		18,633		728,506		747,139		7,523		0
Mortgage^[1]			365,287		142,232		866,281		1,373,800		5,720,957		7,094,757		416,641		449,640
Leasing			18,301		5,938		4,076		28,315		1,060,227		1,088,542		4,076		-
Legacy^[2]			37		41		1,980		2,058		18,377		20,435		1,980		-
Mortgage																		Mortgage		13,032		1,762		14,793		29,587		1,103,286		1,132,873		14,793		0
Consumer:	Consumer:																	Consumer:
	Credit cards		14,062		9,297		20,588		43,947		1,020,776		1,064,723		-		20,588	Credit cards		0		0		0		0		22		22		0		0
	Home equity lines of credit		1,487		123		9,415		11,025		111,315		122,340		9,322		93	Home equity lines of credit		121		10		6,855		6,986		82,631		89,617		6,855		0
	Personal		26,384		14,710		38,235		79,329		1,698,885		1,778,214		38,174		61	Personal		1,156		666		1,086		2,908		162,540		165,448		1,086		0
	Auto		110,408		38,018		26,431		174,857		2,779,293		2,954,150		26,431		-	Other		0		0		0		0		2,066		2,066		0		0
	Other		643		293		13,966		14,902		122,860		137,762		13,543		423
Total	Total	$	614,690	$	226,823	$	1,239,976	$	2,081,489	$	25,580,783	$	27,662,272	$	768,675	$	471,301	Total	$	76,547	$	4,403	$	32,173	$	113,123	$	7,684,240	$	7,797,363	$	32,164	$	9

March 31, 2021
Popular, Inc.

			Past due											Past due 90 days or more
		30-59		60-89		90 days		Total						Non-accrual			Accruing
(In thousands)		days		days		or more		past due		Current		Loans HIP^{[2] [3]}		loans		loans
Commercial multi-family		$	30,381	$	0	$	814	$	31,195	$	1,861,899	$	1,893,094	$	814	$	0
Commercial real estate:
	Non-owner occupied		9,219		25,406		76,916		111,541		3,992,512		4,104,053		76,916		0
	Owner occupied		12,186		2,758		90,075		105,019		1,736,897		1,841,916		90,075		0
Commercial and industrial			11,096		1,971		35,534		48,601		5,554,822		5,603,423		34,965		569
Construction			11,749		0		22,400		34,149		873,587		907,736		22,400		0
Mortgage^[1]			188,962		85,532		1,226,728		1,501,222		6,307,630		7,808,852		405,574		821,154
Leasing			7,564		1,408		3,040		12,012		1,232,944		1,244,956		3,040		0
Consumer:
	Credit cards		4,824		3,883		10,779		19,486		858,277		877,763		0		10,779
	Home equity lines of credit		121		10		6,901		7,032		86,129		93,161		6,855		46
	Personal		11,372		6,916		26,817		45,105		1,381,634		1,426,739		26,817		0
	Auto		47,396		8,783		15,405		71,584		3,131,553		3,203,137		15,405		0
	Other		360		375		15,489		16,224		110,574		126,798		15,281		208
Total		$	335,230	$	137,042	$	1,530,898	$	2,003,170	$	27,128,458	$	29,131,628	$	698,142	$	832,756

[1]	It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured. These include loans rebooked, which were previously pooled into GNMA securities amounting to $29 million. Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected (rebooked) on the financial statements of BPPR with an offsetting liability. Loans in our serviced GNMA portfolio benefit from payment forbearance programs but continue to reflect the contractual delinquency until the borrower repays deferred payments or completes a payment deferral modification or other borrower assistance alternative.
[2]	~~The legacy portfolio is comprised~~Loans held-in-portfolio are net of ~~commercial~~$213 million in unearned income and exclude $84 million in loans ~~construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the Popular U.S. segment.~~held-for-sale.
[3]	Loans included as 90 days or more past due include loans that that are not delinquent in their payment terms but that are reported as non-performing due to other credit quality considerations. As part of the adoption of CECL, at January 1, 2020, the Corporation reclassified to this category $134 million of acquired loans with credit deterioration that were previously accounted for under ASC 310-30 and were excluded from non-performing status. In addition, as part of the CECL transition, an additional $144 million of loans that were 90 days or more past due previously accounted for under ASC 310-30 and excluded from non-performing status are now included as non-performing.
~~[4]~~	~~Loans held-in-portfolio are net of $ 186 million in unearned income and exclude $ 88 million in loans held-for-sale.~~
~~[5]~~	Includes ~~$7.3~~$6.3 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which ~~$4.6~~$4.0 billion were pledged at the Federal Home Loan Bank ("FHLB") as collateral for borrowings and ~~$2.7~~$2.3 billion at the Federal Reserve Bank ("FRB") for discount window borrowings.

3226

December 31, 2019
December 31, 2020																		December 31, 2020
Puerto Rico	Puerto Rico																	Puerto Rico

			Past due											Past due 90 days or more						Past due											Past due 90 days or more
			30-59		60-89		90 days	Total						Non-accrual			Accruing			30-59		60-89		90 days	Total						Non-accrual			Accruing
(In thousands)	(In thousands)		days		days		or more	past due		Current		Loans HIP		loans		loans^[1]		(In thousands)		days		days		or more	past due^[1]		Current		Loans HIP		loans		loans
Commercial multi-family	Commercial multi-family	$	2,941	$	129	$	1,512	$	4,582	$	143,267	$	147,849	$	1,473	$	-	Commercial multi-family	$	796	$	0	$	505	$	1,301	$	150,979	$	152,280	$	505	$	0
Commercial real estate:	Commercial real estate:																	Commercial real estate:
	Non-owner occupied		10,439		5,244		43,664		59,347		2,048,871		2,108,218		39,968		-	Non-owner occupied		2,189		3,503		77,137		82,829		1,924,504		2,007,333		77,137		0
	Owner occupied		5,704		3,978		84,537		94,219		1,492,110		1,586,329		69,276		-	Owner occupied		8,270		1,218		92,001		101,489		1,497,406		1,598,895		92,001		0
Commercial and industrial	Commercial and industrial		8,780		1,646		37,156		47,582		3,371,152		3,418,734		36,538		544	Commercial and industrial		10,223		775		35,012		46,010		4,183,098		4,229,108		34,449		563
Construction	Construction		1,555		-		119		1,674		135,796		137,470		119		-	Construction		0		0		21,497		21,497		135,609		157,106		21,497		0
Mortgage			285,006		146,197		837,651		1,268,854		4,897,894		6,166,748		283,708		439,662
Mortgage^[2]																		Mortgage^[2]		195,602		87,726		1,428,824		1,712,152		5,057,991		6,770,143		414,343		1,014,481
Leasing	Leasing		12,014		3,053		3,657		18,724		1,040,783		1,059,507		3,657		-	Leasing		9,141		1,427		3,441		14,009		1,183,652		1,197,661		3,441		0
Consumer:	Consumer:																	Consumer:
	Credit cards		11,358		7,928		19,461		38,747		1,085,053		1,123,800		-		19,461	Credit cards		6,550		4,619		12,798		23,967		895,968		919,935		0		12,798
	Home equity lines of credit		-		85		-		85		4,953		5,038		-		-	Home equity lines of credit		184		0		48		232		3,947		4,179		0		48
	Personal		13,481		9,352		20,296		43,129		1,325,021		1,368,150		19,529		61	Personal		11,255		8,097		26,387		45,739		1,232,008		1,277,747		26,387		0
	Auto		81,169		23,182		31,148		135,499		2,782,023		2,917,522		31,148		-	Auto		53,186		12,696		15,736		81,618		3,050,610		3,132,228		15,736		0
	Other		358		1,418		14,189		15,965		124,902		140,867		13,784		405	Other		304		483		15,052		15,839		110,826		126,665		14,881		171
Total	Total	$	432,805	$	202,212	$	1,093,390	$	1,728,407	$	18,451,825	$	20,180,232	$	499,200	$	460,133	Total	$	297,700	$	120,544	$	1,728,438	$	2,146,682	$	19,426,598	$	21,573,280	$	700,377	$	1,028,061
[1]	Loans HIP of $134 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans would accrete interest income over the remaining life of the loans using estimated cash flow analysis.																	Loans included as 90 days or more past due include loans that that are not delinquent in their payment terms but that are reported as nonperforming due to other credit quality considerations. As part of the adoption of CECL, at January 1, 2020, the Corporation reclassified to this category $134 million of acquired loans with credit deterioration that were previously excluded from non-performing status. In addition, as part of the CECL transition, an additional $125 million of loans that were 90 days or more past due previously excluded from non-performing status are now included as non-performing.
[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 include $57 million in loans rebooked under the GNMA program at December 31, 2020, in which issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due.

December 31, 2019
December 31, 2020																		December 31, 2020
Popular U.S.	Popular U.S.																	Popular U.S.

			Past due											Past due 90 days or more						Past due											Past due 90 days or more
			30-59		60-89		90 days		Total					Non-accrual			Accruing			30-59		60-89		90 days		Total					Non-accrual			Accruing
(In thousands)	(In thousands)		days		days		or more		past due		Current		Loans HIP	loans		loans^[1]		(In thousands)		days		days		or more		past due		Current		Loans HIP	loans		loans
Commercial multi-family	Commercial multi-family	$	9	$	-	$	2,097	$	2,106	$	1,645,204	$	1,647,310	$	2,097	$	-	Commercial multi-family	$	5,273	$	0	$	1,894	$	7,167	$	1,736,544	$	1,743,711	$	1,894	$	0
Commercial real estate:	Commercial real estate:																	Commercial real estate:
	Non-owner occupied		1,047		-		281		1,328		1,868,968		1,870,296		281		-	Non-owner occupied		924		3,640		669		5,233		1,988,577		1,993,810		669		0
	Owner occupied		1,750		-		251		2,001		337,134		339,135		251		-	Owner occupied		191		650		334		1,175		343,205		344,380		334		0
Commercial and industrial	Commercial and industrial		454		128		19,945		20,527		1,174,353		1,194,880		876		-	Commercial and industrial		1,117		72		3,091		4,280		1,540,513		1,544,793		3,091		0
Construction	Construction		-		-		26		26		693,596		693,622		26		-	Construction		21,312		0		7,560		28,872		740,230		769,102		7,560		0
Mortgage	Mortgage		15,474		4,024		11,091		30,589		986,195		1,016,784		11,091		-	Mortgage		33,422		15,464		14,864		63,750		1,056,787		1,120,537		14,864		0
Legacy			49		8		1,999		2,056		20,049		22,105		1,999		-
Consumer:	Consumer:																	Consumer:
	Credit cards		-		-		-		-		36		36		-		-	Credit cards		0		0		3		3		28		31		0		3
	Home equity lines of credit		404		267		9,954		10,625		106,718		117,343		9,954		-	Home equity lines of credit		236		342		7,491		8,069		86,502		94,571		7,491		0
	Personal		2,286		1,582		2,066		5,934		318,506		324,440		2,066		-	Personal		1,486		1,342		1,474		4,302		194,936		199,238		1,474		0
	Other		3		-		-		3		687		690		-		-	Other		0		0		20		20		1,723		1,743		20		0
Total	Total	$	21,476	$	6,009	$	47,710	$	75,195	$	7,151,446	$	7,226,641	$	28,641	$	-	Total	$	63,961	$	21,510	$	37,400	$	122,871	$	7,689,045	$	7,811,916	$	37,397	$	3
[1]	Loans HIP of $ 19 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans would accrete interest income over the remaining life of the loans using estimated cash flow analysis.

3327

December 31, 2019
December 31, 2020																		December 31, 2020
Popular, Inc.	Popular, Inc.																	Popular, Inc.

			Past due											Past due 90 days or more						Past due											Past due 90 days or more
			30-59		60-89		90 days		Total					Non-accrual			Accruing			30-59		60-89		90 days		Total					Non-accrual			Accruing
(In thousands)	(In thousands)		days		days		or more		past due	Current		Loans HIP^{[3] [4]}		loans		loans^[5]		(In thousands)		days		days		or more^[2]		past due	Current		Loans HIP^{[3] [4]}		loans		loans
Commercial multi-family	Commercial multi-family	$	2,950	$	129	$	3,609	$	6,688	$	1,788,471	$	1,795,159	$	3,570	$	-	Commercial multi-family	$	6,069	$	0	$	2,399	$	8,468	$	1,887,523	$	1,895,991	$	2,399	$	0
Commercial real estate:	Commercial real estate:																	Commercial real estate:
	Non-owner occupied		11,486		5,244		43,945		60,675		3,917,839		3,978,514		40,249		-	Non-owner occupied		3,113		7,143		77,806		88,062		3,913,081		4,001,143		77,806		0
	Owner occupied		7,454		3,978		84,788		96,220		1,829,244		1,925,464		69,527		-	Owner occupied		8,461		1,868		92,335		102,664		1,840,611		1,943,275		92,335		0
Commercial and industrial	Commercial and industrial		9,234		1,774		57,101		68,109		4,545,505		4,613,614		37,414		544	Commercial and industrial		11,340		847		38,103		50,290		5,723,611		5,773,901		37,540		563
Construction	Construction		1,555		-		145		1,700		829,392		831,092		145		-	Construction		21,312		0		29,057		50,369		875,839		926,208		29,057		0
Mortgage^[1]	Mortgage^[1]		300,480		150,221		848,742		1,299,443		5,884,089		7,183,532		294,799		439,662	Mortgage^[1]		229,024		103,190		1,443,688		1,775,902		6,114,778		7,890,680		429,207		1,014,481
Leasing	Leasing		12,014		3,053		3,657		18,724		1,040,783		1,059,507		3,657		-	Leasing		9,141		1,427		3,441		14,009		1,183,652		1,197,661		3,441		0
Legacy^[2]			49		8		1,999		2,056		20,049		22,105		1,999		-
Consumer:	Consumer:																	Consumer:
	Credit cards		11,358		7,928		19,461		38,747		1,085,089		1,123,836		-		19,461	Credit cards		6,550		4,619		12,801		23,970		895,996		919,966		0		12,801
	Home equity lines of credit		404		352		9,954		10,710		111,671		122,381		9,954		-	Home equity lines of credit		420		342		7,539		8,301		90,449		98,750		7,491		48
	Personal		15,767		10,934		22,362		49,063		1,643,527		1,692,590		21,595		61	Personal		12,741		9,439		27,861		50,041		1,426,944		1,476,985		27,861		0
	Auto		81,169		23,182		31,148		135,499		2,782,023		2,917,522		31,148		-	Auto		53,186		12,696		15,736		81,618		3,050,610		3,132,228		15,736		0
	Other		361		1,418		14,189		15,968		125,589		141,557		13,784		405	Other		304		483		15,072		15,859		112,549		128,408		14,901		171
Total	Total	$	454,281	$	208,221	$	1,141,100	$	1,803,602	$	25,603,271	$	27,406,873	$	527,841	$	460,133	Total	$	361,661	$	142,054	$	1,765,838	$	2,269,553	$	27,115,643	$	29,385,196	$	737,774	$	1,028,064

[1]	It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured. These include loans rebooked, which were previously pooled into GNMA securities amounting to $57 million. Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected (rebooked) on the financial statements of BPPR with an offsetting liability. Loans in our serviced GNMA portfolio benefit from payment forbearance programs but continue to reflect the contractual delinquency until the borrower repays deferred payments or completes a payment deferral modification or other borrower assistance alternative.
[2]	~~The legacy portfolio is comprised~~Loans included as 90 days or more past due include loans that that are not delinquent in their payment terms but that are reported as nonperforming due to other credit quality considerations. As part of ~~commercial~~the adoption of CECL, at January 1, 2020, the Corporation reclassified to this category $134 million of acquired loans ~~construction loans and lease financings related to certain lending products exited by the Corporation~~with credit deterioration that were previously excluded from non-performing status. In addition, as part of ~~restructuring efforts carried out in prior years at~~ the ~~Popular U.S. segment.~~CECL transition, an additional $144 million of loans that were 90 days or more past due previously excluded from non-performing status are now included as non-performing.
[3]	Loans held-in-portfolio are net of ~~$ 181~~$203 million in unearned income and exclude ~~$ 59~~$99 million in loans held-for-sale.
[4]	Includes ~~$6.7~~$6.5 billion pledged to secure credit facilities and public funds that the secured parties are not permitted to sell or repledge the collateral, of which ~~$4.6~~$4.1 billion were pledged at the FHLB as collateral for borrowings and ~~$2.1~~$2.4 billion at the FRB for discount window borrowings.
~~[5]~~

Recognition of interest income on mortgage loans is generally discontinued when loans are 90 days or more in arrears on payments of principal or interest. The Corporation discontinues the recognition of interest income on residential mortgage loans insured by the Federal Housing Administration (“FHA”) or guaranteed by the U.S. Department of Veterans Affairs (“VA”) when 15 months delinquent as to principal or interest, since the principal repayment on these loans is insured.

Loans HIP of $153 million accounted for under ASC Subtopic 310-30 are excluded from the above table as they are considered to be performing due to the application of the accretion method, in which these loans would accrete interest income over the remaining life of the loans using estimated cash flow analysis.

At March 31, ~~2020,~~2021, mortgage loans held-in-portfolio include ~~$1.4~~$2.1 billion (December 31, 2020 - $2.1 billion) of loans insured by the Federal Housing Administration (“FHA”), or guaranteed by the U.S. Department of Veterans Affairs (“VA”) of which ~~$450 million~~$0.8 billion (December 31, 2020 - $1.0 million) are 90 days or more past due, including $111 million of loans rebooked under the GNMA buyback option, discussed below (December 31, 2019 - $1.4 billion, $441 million and $103 million, respectively). Within this portfolio, loans in a delinquency status of 90 days or more are reported as accruing loans as opposed to non-performing since the principal repayment is insured.due. These balances include ~~$222~~$675 million in loans modified under a TDR (December 31, 2020 - $655 million), that are presented as accruing loans. The portfolio of U.S. guaranteed loans includes $341 million of residential mortgage loans in Puerto Rico that are no longer accruing interest as of March 31, ~~2020~~2021 (December 31, ~~2019~~2020 - ~~$213~~$329 million). ~~Additionally, the~~The Corporation has approximately ~~$62~~$58 million in reverse mortgage loans in Puerto Rico which are guaranteed by FHA, but which are currently not accruing interest at March 31, ~~2020~~2021 (December 31, ~~2019~~2020 - ~~$65~~$60 million).

Loans with a delinquency status of 90 days past due as of March 31, ~~2020~~2021 include ~~$111~~$29 million in loans previously pooled into GNMA securities (December 31, ~~2019~~2020 - ~~$103~~$57 million). Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to the repurchase option are required to be reflected on the financial statements of BPPR with an offsetting liability. Loans in our serviced GNMA portfolio benefit from payment forbearance programs but continue to reflect the contractual delinquency until the borrower repays deferred payments or completes a payment deferral modification or other borrower assistance alternative.

The following ~~table presents~~tables present the amortized cost basis of non-accrual loans as of March 31, 2021 and December 31, 2020 by class of ~~loans and the related interest income recognized on these loans for the quarter-ended:~~loans:

3428

March 31, 2020

Puerto Rico

Popular U.S.

Popular, Inc.
(In thousands)
Non-accrual with no allowance
Non-accrual with allowance
Interest income recognized

Non-accrual with no allowance
Non-accrual with allowance
Interest income recognized

Non-accrual with no allowance
Non-accrual with allowance
Interest income recognized
Commercial multi-family
$
-
$
1,379
$
1

$
2,097
$
-
$
-

$
2,097
$
1,379
$
1
Commercial real estate non-owner occupied

41,150

67,904

193

-

269

-

41,150

68,173

193
Commercial real estate owner occupied

31,003

70,884

519

-

245

-

31,003

71,129

519
Commercial and industrial

24,922

13,862

209

4,431

362

-

29,353

14,224

209
Construction

-

-

-

-

-

-

-

-

-
Mortgage

138,066

266,399

1,115

-

12,176

37

138,066

278,575

1,152
Leasing

242

3,834

(35)

-

-

-

242

3,834

(35)
Legacy

-

-

-

-

1,980

-

-

1,980

-
Consumer:

HELOCs

-

-

-

-

9,322

8

-

9,322

8
Personal

7,346

28,718

524

-

2,110

161

7,346

30,828

685
Auto

1,549

24,882

407

-

-

-

1,549

24,882

407
Other

-

13,543

128

-

-

-

-

13,543

128
Total
$
244,278
$
491,405
$
3,061

$
6,528
$
26,464
$
206

$
250,806
$
517,869
$
3,267

March 31, 2021
	Puerto Rico				Popular U.S.				Popular, Inc.
(In thousands)	Non-accrual with no allowance		Non-accrual with allowance		Non-accrual with no allowance		Non-accrual with allowance		Non-accrual with no allowance		Non-accrual with allowance
Commercial multi-family	$	0	$	814	$	0	$	0	$	0	$	814
Commercial real estate non-owner occupied		60,727		15,797		0		392		60,727		16,189
Commercial real estate owner occupied		25,612		64,140		0		323		25,612		64,463
Commercial and industrial		22,264		11,509		0		1,192		22,264		12,701
Construction		14,877		0		7,523		0		22,400		0
Mortgage		160,605		230,176		0		14,793		160,605		244,969
Leasing		0		3,040		0		0		0		3,040
Consumer:
HELOCs		0		0		0		6,855		0		6,855
Personal		7,690		18,041		0		1,086		7,690		19,127
Auto		0		15,405		0		0		0		15,405
Other		0		15,281		-		0		0		15,281
Total	$	291,775	$	374,203	$	7,523	$	24,641	$	299,298	$	398,844

December 31, 2020
	Puerto Rico				Popular U.S.				Popular, Inc.
(In thousands)	Non-accrual with no allowance		Non-accrual with allowance		Non-accrual with no allowance		Non-accrual with allowance		Non-accrual with no allowance		Non-accrual with allowance
Commercial multi-family	$	0	$	505	$	0	$	1,894	$	0	$	2,399
Commercial real estate non-owner occupied		35,968		41,169		0		669		35,968		41,838
Commercial real estate owner occupied		14,825		77,176		0		334		14,825		77,510
Commercial and industrial		1,148		33,301		0		3,091		1,148		36,392
Construction		0		21,497		0		7,560		0		29,057
Mortgage		141,737		272,606		517		14,347		142,254		286,953
Leasing		0		3,441		0		0		0		3,441
Consumer:
HELOCs		0		0		0		7,491		0		7,491
Personal		9,265		17,122		0		1,474		9,265		18,596
Auto		0		15,736		0		0		0		15,736
Other		0		14,881		0		20		0		14,901
Total	$	202,943	$	497,434	$	517	$	36,880	$	203,460	$	534,314

Loans in non-accrual status with no allowance at March 31, 2021 include ~~$242~~$299 million in collateral dependent ~~loans.~~loans (December 31, 2020 - $203 million). The Corporation recognized $4 million in interest income on non-accrual loans during the quarter ended March 31, 2021 (March 31, 2020 - $3 million).

The following ~~table~~tables present the amortized cost basis of collateral-dependent loans by class of loans and type of collateral as of March 31, 2021 and December 31, 2020:

3529

		March 31, 2020															March 31, 2021
(In thousands)	(In thousands)		Real Estate		Auto		Equipment		Taxi Medallions		Accounts Receivables		Other		Total	(In thousands)		Real Estate		Auto		Equipment		Taxi Medallions		Accounts Receivables		Other		Total
Puerto Rico	Puerto Rico															Puerto Rico
Commercial multi-family																Commercial multi-family	$	1,374	$	0	$	0	$	0	$	0	$	0	$	1,374
Commercial real estate:	Commercial real estate:															Commercial real estate:
	Non-owner occupied	$	291,083	$	-	$	-	$	-	$	-	$	-	$	291,083	Non-owner occupied		295,454		0		0		0		0		0		295,454
	Owner occupied		62,330		-		-		-		-		-		62,330	Owner occupied		78,710		0		0		0		0		0		78,710
Commercial and industrial	Commercial and industrial		3,965		-		-		-		13,612		9,565		27,142	Commercial and industrial		6,481		0		1,428		0		10,982		12,005		30,896
Construction																Construction		14,877		0		0		0		0		0		14,877
Mortgage	Mortgage		195,783		-		-		-		-		-		195,783	Mortgage		208,691		0		0		0		0		0		208,691
Leases			-		187		4		-		-		-		191
Consumer:	Consumer:															Consumer:
																Personal		7,817		0		0		0		0		0		7,817
	Auto		-		1,549		-		-		-		-		1,549	Auto		0		517		0		0		0		0		517
Total Puerto Rico	Total Puerto Rico	$	553,161	$	1,736	$	4	$	-	$	13,612	$	9,565	$	578,078	Total Puerto Rico	$	613,404	$	517	$	1,428	$	0	$	10,982	$	12,005	$	638,336
Popular U.S.	Popular U.S.															Popular U.S.
Commercial multi-family		$	2,097	$	-	$	-	$	-	$	-	$	-	$	2,097
Commercial and industrial	Commercial and industrial		-		-		-		4,430		-		-		4,430	Commercial and industrial	$	0	$	0	$	0	$	115	$	0	$	0	$	115
Construction																Construction		7,523		0		0		0		0		0		7,523
Mortgage	Mortgage		717		-		-		-		-		-		717	Mortgage		573		0		0		0		0		0		573
Total Popular U.S.	Total Popular U.S.	$	2,814	$	-	$	-	$	4,430	$	-	$	-	$	7,244	Total Popular U.S.	$	8,096	$	0	$	0	$	115	$	0	$	0	$	8,211
Popular, Inc.	Popular, Inc.															Popular, Inc.
Commercial multi-family	Commercial multi-family	$	2,097	$	-	$	-	$	-	$	-	$	-	$	2,097	Commercial multi-family	$	1,374	$	0	$	0	$	0	$	0	$	0	$	1,374
Commercial real estate:	Commercial real estate:															Commercial real estate:
	Non-owner occupied		291,083		-		-		-		-		-		291,083	Non-owner occupied		295,454		0		0		0		0		0		295,454
	Owner occupied		62,330		-		-		-		-		-		62,330	Owner occupied		78,710		0		0		0		0		0		78,710
Commercial and industrial	Commercial and industrial		3,965		-		-		4,430		13,612		9,565		31,572	Commercial and industrial		6,481		0		1,428		115		10,982		12,005		31,011
Construction																Construction		22,400		0		0		0		0		0		22,400
Mortgage	Mortgage		196,500		-		-		-		-		-		196,500	Mortgage		209,264		0		0		0		0		0		209,264
Leases			-		187		4		-		-		-		191
Consumer:	Consumer:															Consumer:
	Auto		-		1,549		-		-		-		-		1,549	Personal		7,817		0		0		0		0		0		7,817
																Auto		0		517		0		0		0		0		517
Total Popular, Inc.	Total Popular, Inc.	$	555,975	$	1,736	$	4	$	4,430	$	13,612	$	9,565	$	585,322	Total Popular, Inc.	$	621,500	$	517	$	1,428	$	115	$	10,982	$	12,005	$	646,547

		December 31, 2020
(In thousands)			Real Estate		Auto		Equipment		Taxi Medallions		Accounts Receivables		Other		Total
Puerto Rico
Commercial multi-family		$	1,301	$	0	$	0	$	0	$	0	$	0	$	1,301
Commercial real estate:
	Non-owner occupied		299,223		0		0		0		0		0		299,223
	Owner occupied		79,769		0		0		0		0		0		79,769
Commercial and industrial			7,577		0		1,438		0		10,989		12,046		32,050
Construction			21,497		0		0		0		0		0		21,497
Mortgage			181,648		0		0		0		0		0		181,648
Consumer:
	Personal		7,414		0		0		0		0		0		7,414
	Auto		0		4		0		0		0		0		4
Total Puerto Rico		$	598,429	$	4	$	1,438	$	0	$	10,989	$	12,046	$	622,906
Popular U.S.
Commercial multi-family		$	1,755	$	0	$	0	$	0	$	0	$	0	$	1,755
Commercial and industrial			0		0		0		1,545		0		0		1,545
Construction			7,560		0		0		0		0		0		7,560
Mortgage			855		0		0		0		0		0		855
Total Popular U.S.		$	10,170	$	0	$	0	$	1,545	$	0	$	0	$	11,715
Popular, Inc.
Commercial multi-family		$	3,056	$	0	$	0	$	0	$	0	$	0	$	3,056
Commercial real estate:
	Non-owner occupied		299,223		0		0		0		0		0		299,223
	Owner occupied		79,769		0		0		0		0		0		79,769
Commercial and industrial			7,577		0		1,438		1,545		10,989		12,046		33,595
Construction			29,057		0		0		0		0		0		29,057
Mortgage			182,503		0		0		0		0		0		182,503
Consumer:
	Personal		7,414		0		0		0		0		0		7,414
	Auto		0		4		0		0		0		0		4
Total Popular, Inc.		$	608,599	$	4	$	1,438	$	1,545	$	10,989	$	12,046	$	634,621

Purchased Credit Deteriorated (PCD) Loans ~~(PCD)~~

The Corporation has purchased loans during the quarter, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:

(In thousands)

March 31, 2020
Purchase price of loans at acquisition
$
3,112
Allowance for credit losses at acquisition

429
Non-credit discount/premium at acquisition

138
Par value of acquired loans at acquisition
$
3,679

~~Loans acquired with deteriorated credit quality accounted for under ASC 310-30~~

~~The following provides information of loans acquired with evidence of credit deterioration as of the acquisition date, accounted for under the guidance of ASC 310-30.~~


(In thousands)		March 31, 2021		March 31, 2020
Purchase price of loans at acquisition	$	4,935	$	3,112
Allowance for credit losses at acquisition		1,356		429
Non-credit premium at acquisition		121		138
Par value of acquired loans at acquisition	$	6,412	$	3,679

3631

The outstanding principal balance of acquired loans accounted pursuant to ASC Subtopic 310-30, amounted $2.1 billion at March 31, 2019. The carrying amount of these loans consisted of loans determined to be impaired at the time of acquisition, which are accounted for in accordance with ASC Subtopic 310-30 (“credit impaired loans”), and loans that were considered to be performing at the acquisition date, accounted for by analogy to ASC Subtopic 310-30 (“non-credit impaired loans”).

~~The following table provides the carrying amount of acquired loans accounted for under ASC 310-30 by portfolio at December 31, 2019.~~

Carrying amount
(In thousands)

December 31, 2019
Commercial real estate
$
670,566
Commercial and industrial

104,756
Mortgage

856,618
Consumer

11,778
Carrying amount

1,643,718
Allowance for loan losses

(74,039)
Carrying amount, net of allowance
$
1,569,679

At March 31, 2019, none of the acquired loans accounted for under ASC Subtopic 310-30 were considered non-performing loans. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, was recognized on all acquired loans.

~~Changes in the carrying amount and the accretable yield for the loans accounted pursuant to the ASC Subtopic 310-30, for the quarter ended March 31, 2019, were as follows:~~

Carrying amount of acquired loans accounted for pursuant to ASC 310-30
(In thousands)

For the quarter ended March 31, 2019
Beginning balance

$
1,883,556
Additions

5,220
Accretion

37,404
Collections / loan sales / charge-offs

(94,923)
Ending balance^[1]

$
1,831,257
Allowance for loan losses

(124,147)
Ending balance, net of ALLL

$
1,707,110
[1]
At March 31, 2019, includes $1.3 billion of loans considered non-credit impaired at the acquisition date.

Activity in the accretable yield of acquired loans accounted for pursuant to ASC 310-30
(In thousands)

For the quarter ended March 31, 2019
Beginning balance

$
1,092,504
Additions

2,890
Accretion

(37,404)
Change in expected cash flows

10,177
Ending balance^[1]

$
1,068,167
[1]
At March 31, 2019, includes $0.7 billion for loans considered non-credit impaired at the acquisition date.

Note 98 – Allowance for credit losses – loans held-in-portfolio

The Corporation follows the current expected credit loss (“CECL”) model, to establish and evaluate the adequacy of the allowance for credit losses (“ACL”) to provide for ~~inherent~~expected losses in the loan portfolio. This model establishes a forward-looking methodology that reflects the expected credit losses over the lives of financial assets, starting when such assets are first ~~acquired.~~acquired or originated. In addition, CECL provides that the initial ~~allowance for credit losses~~ACL on purchased credit deteriorated (“PCD”) financial assets ~~will~~ be recorded as an increase to the purchase price, with subsequent changes to the allowance recorded as a credit loss expense. The provision for credit losses charged to current operations is based on this methodology. Loan losses are charged and recoveries are credited to the ACL. ~~Refer to Note 4 - Summary~~

At March 31, 2021, the Corporation estimated the ACL by weighting the outputs of ~~significant accounting policies, for a description of~~optimistic, baseline, and pessimistic scenarios. Among the ~~Corporation’s methodology~~three scenarios used to estimate the ~~ACL.~~ACL, the baseline is assigned the highest probability, followed by the pessimistic scenario given the uncertainties in the economic outlook and downside risk. The weights applied are subject to evaluation on a quarterly basis as part of the ACL’s governance process. The current baseline scenario shows improvement in both 2021 GDP growth and unemployment rate when compared to previous estimates. The 2021 forecasted GDP growth is now at 4.9% for U.S. and 3.4% for P.R., compared to 4.1% and 2.5%, respectively, in the previous 2021 forecast. Expectations for 2022 also present an improvement over the prior forecast. The U.S. and P.R. forecasted unemployment rate average for 2021 is now 6.09% and 7.98%, respectively. This is an improvement over the previous estimate of 7.41% for U.S. and 8.34% for P.R. The reduction in ACL for the loans portfolio and the reserve for unfunded commitments of $82.1 million is mainly attributed to the improvements in the macroeconomic forecast.

The following tables present the changes in the ~~allowance for credit losses,~~ACL of loans held-in-portfolio and ~~loan ending balances~~unfunded commitments for the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

For the quarter ended March 31, 2020
Puerto Rico

(In thousands)
Commercial

Construction

Mortgage

Leasing

Consumer

Total
Allowance for credit losses:

Beginning balance
$
131,063

$
574

$
116,281

$
10,768

$
173,965

$
432,651

Impact of adopting CECL

62,393

115

86,081

(713)

122,492

270,368

Provision (reversal of provision)

14,974

(289)

5,547

5,841

86,931

113,004

Initial allowance for credit losses - PCD Loans

-

-

429

-

-

429

Charge-offs

(2,994)

-

(8,306)

(3,775)

(58,084)

(73,159)

Recoveries

2,414

19

2,768

468

7,973

13,642
Ending balance
$
207,850

$
419

$
202,800

$
12,589

$
333,277

$
756,935

For the quarter ended March 31, 2020
Popular U.S.

(In thousands)
Commercial

Construction

Mortgage

Legacy

Consumer

Total
Allowance for credit losses:

Beginning balance
$
15,989

$
4,204

$
4,827

$
630

$
19,407

$
45,057

Impact of adopting CECL

29,103

(2,986)

10,431

382

7,809

44,739

Provision (reversal of provision)

52,206

799

9,028

913

13,045

75,991

Charge-offs

(568)

-

(9)

(9)

(4,938)

(5,524)

Recoveries

468

155

10

110

1,775

2,518
Ending balance
$
97,198

$
2,172

$
24,287

$
2,026

$
37,098

$
162,781

For the quarter ended March 31, 2020
Popular, Inc.

(In thousands)
Commercial

Construction

Mortgage

Legacy
Leasing

Consumer

Total
Allowance for credit losses:

Beginning balance
$
147,052

$
4,778

$
121,108

$
630
$
10,768

$
193,372

$
477,708

Impact of adopting CECL

91,496

(2,871)

96,512

382

(713)

130,301

315,107

Provision (reversal of provision)

67,180

510

14,575

913

5,841

99,976

188,995

Initial allowance for credit losses - PCD Loans

-

-

429

-

-

-

429

Charge-offs

(3,562)

-

(8,315)

(9)

(3,775)

(63,022)

(78,683)

Recoveries

2,882

174

2,778

110

468

9,748

16,160
Ending balance
$
305,048

$
2,591

$
227,087

$
2,026
$
12,589

$
370,375

$
919,716

For the quarter ended March 31, 2021
Puerto Rico


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses - loans:
Beginning balance		$	225,323	$	4,871	$	195,557	$	16,863	$	297,136	$	739,750
	Provision (reversal of provision)		(29,646)		1,306		(2,805)		(4,058)		(4,773)		(39,976)
	Initial allowance for credit losses - PCD Loans		0		0		1,356		0		0		1,356
	Charge-offs		(2,883)		(6,619)		(10,381)		(1,058)		(24,029)		(44,970)
	Recoveries		4,317		702		2,078		940		17,459		25,496
Ending balance - loans		$	197,111	$	260	$	185,805	$	12,687	$	285,793	$	681,656
Allowance for credit losses - unfunded commitments:
Beginning balance		$	4,913	$	4,610	$	0	$	0	$	0	$	9,523
	Reversal of provision		(1,000)		(4,365)		0		0		0		(5,365)
Ending balance - unfunded commitments [1]		$	3,913	$	245	$	0	$	0	$	0	$	4,158
[1]	Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

3932

For the quarter ended March 31, 2019
Puerto Rico

(In thousands)
Commercial

Construction

Mortgage

Leasing

Consumer

Total
Allowance for credit losses:

Beginning balance
$
207,214

$
886

$
142,978

$
11,486

$
144,594

$
507,158

Provision (reversal of provision)

(1,689)

(81)

6,061

(891)

28,054

31,454

Charge-offs

(19,461)

(22)

(13,174)

(2,096)

(35,869)

(70,622)

Recoveries

2,867

39

1,991

610

10,886

16,393
Ending balance
$
188,931

$
822

$
137,856

$
9,109

$
147,665

$
484,383
Specific ALLL
$
33,253

$
19

$
40,779

$
321

$
23,350

$
97,722
General ALLL
$
155,678

$
803

$
97,077

$
8,788

$
124,315

$
386,661
Loans held-in-portfolio:

Impaired loans
$
381,803

$
1,788

$
515,365

$
1,018

$
101,887

$
1,001,861
Loans held-in-portfolio excluding impaired loans

7,009,319

89,584

5,860,223

962,214

5,073,149

18,994,489
Total loans held-in-portfolio
$
7,391,122

$
91,372

$
6,375,588

$
963,232

$
5,175,036

$
19,996,350

For the quarter ended March 31, 2021
Popular U.S.


(In thousands)		Commercial		Construction		Mortgage		Consumer		Total
Allowance for credit losses - loans:
Beginning balance		$	108,057	$	9,366	$	20,159	$	18,918	$	156,500
	Reversal of provision		(28,933)		(431)		(3,918)		(2,521)		(35,803)
	Charge-offs		(383)		0		(1)		(3,256)		(3,640)
	Recoveries		367		0		81		1,636		2,084
Ending balance - loans		$	79,108	$	8,935	$	16,321	$	14,777	$	119,141
Allowance for credit losses - unfunded commitments:
Beginning balance		$	1,753	$	4,469	$	0	$	106	$	6,328
	Reversal of provision		(310)		(566)		0		(41)		(917)
Ending balance - unfunded commitments [1]		$	1,443	$	3,903	$	0	$	65	$	5,411
[1]	Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the quarter ended March 31, 2019
Popular U.S.

(In thousands)
Commercial

Construction

Mortgage

Legacy

Consumer

Total
Allowance for credit losses:

Beginning balance
$
31,901

$
6,538

$
4,434

$
969

$
18,348

$
62,190

Provision (reversal of provision)

6,491

128

237

(855)

4,370

10,371

Charge-offs

(3,481)

-

(251)

164

(5,651)

(9,219)

Recoveries

647

8

22

551

1,675

2,903
Ending balance
$
35,558

$
6,674

$
4,442

$
829

$
18,742

$
66,245
Specific ALLL
$
223

$
-

$
2,360

$
-

$
1,653

$
4,236
General ALLL
$
35,335

$
6,674

$
2,082

$
829

$
17,089

$
62,009
Loans held-in-portfolio:

Impaired loans
$
1,691

$
12,060

$
9,438

$
-

$
8,987

$
32,176
Loans held-in-portfolio excluding impaired loans

4,665,497

687,888

822,154

24,404

419,239

6,619,182
Total loans held-in-portfolio
$
4,667,188

$
699,948

$
831,592

$
24,404

$
428,226

$
6,651,358

For the quarter ended March 31, 2021
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses - loans:
Beginning balance		$	333,380	$	14,237	$	215,716	$	16,863	$	316,054	$	896,250
	Provision (reversal of provision)		(58,579)		875		(6,723)		(4,058)		(7,294)		(75,779)
	Initial allowance for credit losses - PCD Loans		0		0		1,356		0		0		1,356
	Charge-offs		(3,266)		(6,619)		(10,382)		(1,058)		(27,285)		(48,610)
	Recoveries		4,684		702		2,159		940		19,095		27,580
Ending balance - loans		$	276,219	$	9,195	$	202,126	$	12,687	$	300,570	$	800,797
Allowance for credit losses - unfunded commitments:
Beginning balance		$	6,666	$	9,079	$	0	$	0	$	106	$	15,851
	Reversal of provision		(1,310)		(4,931)		0		0		(41)		(6,282)
Ending balance - unfunded commitments [1]		$	5,356	$	4,148	$	0	$	0	$	65	$	9,569
[1]	Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

4033

For the quarter ended March 31, 2019
Popular, Inc.

(In thousands)
Commercial
Construction
Mortgage
Legacy
Leasing
Consumer
Total
Allowance for credit losses:

Beginning balance
$
239,115
$
7,424
$
147,412
$
969
$
11,486
$
162,942
$
569,348

Provision (reversal of provision)

4,802

47

6,298

(855)

(891)

32,424

41,825

Charge-offs

(22,942)

(22)

(13,425)

164

(2,096)

(41,520)

(79,841)

Recoveries

3,514

47

2,013

551

610

12,561

19,296
Ending balance
$
224,489
$
7,496
$
142,298
$
829
$
9,109
$
166,407
$
550,628
Specific ALLL
$
33,476
$
19
$
43,139
$
-
$
321
$
25,003
$
101,958
General ALLL
$
191,013
$
7,477
$
99,159
$
829
$
8,788
$
141,404
$
448,670
Loans held-in-portfolio:

Impaired loans
$
383,494
$
13,848
$
524,803
$
-
$
1,018
$
110,874
$
1,034,037
Loans held-in-portfolio excluding impaired loans

11,674,816

777,472

6,682,377

24,404

962,214

5,492,388

25,613,671
Total loans held-in-portfolio
$
12,058,310
$
791,320
$
7,207,180
$
24,404
$
963,232
$
5,603,262
$
26,647,708

For the quarter ended March 31, 2020
Puerto Rico


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses - loans:
Beginning balance		$	131,063	$	574	$	116,281	$	10,768	$	173,965	$	432,651
	Impact of adopting CECL		62,393		115		86,081		(713)		122,492		270,368
	Provision (reversal of provision)		14,974		(289)		5,547		5,841		86,931		113,004
	Initial allowance for credit losses - PCD Loans		0		0		429		0		0		429
	Charge-offs		(2,994)		0		(8,306)		(3,775)		(58,084)		(73,159)
	Recoveries		2,414		19		2,768		468		7,973		13,642
Ending balance - loans		$	207,850	$	419	$	202,800	$	12,589	$	333,277	$	756,935
Allowance for credit losses - unfunded commitments:
Beginning balance		$	678	$	294	$	0	$	0	$	7,467	$	8,439
	Impact of adopting CECL		1,158		(185)		0		0		(7,467)		(6,494)
	Provision		141		69		0		0		0		210
Ending balance - unfunded commitments [1]		$	1,977	$	178	$	0	$	0	$	0	$	2,155
[1]	Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

For the quarter ended March 31, 2020
Popular U.S.


(In thousands)		Commercial		Construction		Mortgage		Consumer		Total
Allowance for credit losses - loans:
Beginning balance		$	16,557	$	4,266	$	4,827	$	19,407	$	45,057
	Impact of adopting CECL		29,537		(3,038)		10,431		7,809		44,739
	Provision		53,072		846		9,028		13,045		75,991
	Charge-offs		(577)		0		(9)		(4,938)		(5,524)
	Recoveries		578		155		10		1,775		2,518
Ending balance - loans		$	99,167	$	2,229	$	24,287	$	37,098	$	162,781
Allowance for credit losses - unfunded commitments:
Beginning balance		$	152	$	125	$	0	$	1	$	278
	Impact of adopting CECL		453		582		0		(1)		1,034
	Provision		506		434		0		59		999
Ending balance - unfunded commitments [1]		$	1,111	$	1,141	$	0	$	59	$	2,311
[1]	Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

~~The following table presents the changes in the allowance for credit losses on unfunded commitments, which is presented as part of Other Liabilities, for the quarters ended March 31, 2020 and 2019.~~34

For the quarters ended March 31,
(In thousands)
2020
2019
Allowance for credit losses on unfunded commitments:

Balance at beginning of period
$
8,717
$
8,216

Impact of adopting CECL

(5,460)

-

Provision

1,209

119
Ending balance
$
4,466
$
8,335

For the quarter ended March 31, 2020
Popular, Inc.


(In thousands)		Commercial		Construction		Mortgage		Leasing		Consumer		Total
Allowance for credit losses - loans:
Beginning balance		$	147,620	$	4,840	$	121,108	$	10,768	$	193,372	$	477,708
	Impact of adopting CECL		91,930		(2,923)		96,512		(713)		130,301		315,107
	Provision		68,046		557		14,575		5,841		99,976		188,995
	Initial allowance for credit losses - PCD Loans		0		0		429		0		0		429
	Charge-offs		(3,571)		0		(8,315)		(3,775)		(63,022)		(78,683)
	Recoveries		2,992		174		2,778		468		9,748		16,160
Ending balance - loans		$	307,017	$	2,648	$	227,087	$	12,589	$	370,375	$	919,716
Allowance for credit losses - unfunded commitments:
Beginning balance		$	830	$	419	$	0	$	0	$	7,468	$	8,717
	Impact of adopting CECL		1,611		397		0		0		(7,468)		(5,460)
	Provision		647		503		0		0		59		1,209
Ending balance - unfunded commitments [1]		$	3,088	$	1,319	$	0	$	0	$	59	$	4,466
[1]	Allowance for credit losses of unfunded commitments is presented as part of Other Liabilities in the Consolidated Statements of Financial Condition.

~~The following table provides the activity in the allowance for credit losses related to loans accounted for pursuant to ASC Subtopic 310-30.~~

ASC 310-30
(In thousands)
For the quarter ended March 31, 2019
Balance at beginning of period
$
122,135
Provision

7,726
Net charge-offs

(5,714)
Balance at end of period
$
124,147

Modifications

A modification of a loan constitutes a troubled debt restructuring when a borrower is experiencing financial difficulty and the modification constitutes a concession. For a summary of the accounting policy related to troubled debt restructurings (“TDRs”), refer to the Summary of Significant Accounting Policies included in Note 2 to the ~~2019~~2020 Form 10-K.

The outstanding balance of loans classified as TDRs amounted to $ ~~1.6~~1.7 billion at March 31, ~~2020~~2021 (December 31, ~~2019~~2020 - $ ~~1.6~~1.7 billion). The amount of outstanding commitments to lend additional funds to debtors owing receivables whose terms have been modified in TDRs amounted to ~~$12~~$14 million related to the commercial loan portfolio at March 31, ~~2020~~2021 (December 31, ~~2019~~2020 - $14 million).

~~At March 31, 2020, the mortgage loan TDRs include $639 million guaranteed by U.S. sponsored entities at BPPR, compared to $625 million at December 31, 2019.~~

In response to the COVID-19 pandemic, the Corporation ~~has entered into loan modifications~~implemented a relief program in March 2020 to work with eligible customers in mortgage, ~~consumer~~personal loans, credit cards, auto loans and leases and certain commercial credit facilities, comprised mainly of payment deferrals of up to six months, subject to certain terms and conditions. In addition, certain participating clients impacted by the seismic activity in the Southern region of the island also benefitted from other loan payment moratoriums offered by the Corporation since mid-January 2020. These loan modifications do not affect the asset quality measures as the deferred payments are not deemed to be delinquent and the Corporation continues to accrue interest on these loans. The Puerto Rico Legislative Assembly ~~has also~~ enacted legislation ~~requiring~~in April 2020 that required financial institutions to offer through June 2020 moratoriums on consumer financial products to clients impacted by the COVID-19 pandemic ~~moratoriums on consumer financial~~and extended relief with respect to mortgage products through ~~June~~August 2020. ~~The~~Additionally, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), signed by the President of the United States as part of an economic stimulus package, ~~provided~~provides relief related to U.S. GAAP requirements for loan modifications related to COVID-19 relief measures. This relief was subsequently extended until the earlier of January 1, 2022 or 60 days after the national COVID-19 emergency ends. In addition, the Federal Reserve, along with other U.S. banking regulators, also issued interagency guidance to financial institutions that offers some practical expedients for evaluating whether loan modifications that occur in response to the COVID-19 pandemic are TDRs. According to the interagency guidance, COVID-19 related short-term modifications (i.e., six months or less) granted to consumer or commercial loans that were current as of the date of the loan modification are not TDRs, since ~~financial institutions may~~the lender can conclude that the borrower is current on their loan and thus not experiencing financial ~~difficulties.~~difficulties and furthermore the period of the deferral granted does not represent a more than insignificant concession on the part of the lender. In addition, a modification or deferral program that is mandated by the federal government or a state government (e.g., a state program that requires all institutions within that state to suspend mortgage payments for a specified period) does not represent a TDR.

~~In accordance with the guidance in the CARES Act and interagency regulatory guidance, the~~ As of March 31, 2021, approximately $34 million of loan ~~modifications completed by the Corporation as part of~~payment moratoriums granted under the COVID-19 relief ~~measures~~program have ~~not~~ been ~~treated~~classified as TDRs. ~~Furthermore, these loan modifications do not affect the asset quality measures as the deferred payments are not deemed to be delinquent and~~In making this determination, the Corporation ~~continues to accrue interest on these loans.~~considered the criteria of whether the borrower was in financial difficulty at the time of the deferral and whether the deferral period was more than insignificant.

At35

Excluding government guaranteed loans, at March 31, ~~2020,~~2021, the Corporation had ~~completed 6,304 modifications for residential mortgage~~122,216 loans with an ~~unpaid principal balance~~aggregate book value of ~~$832 million and 3,798 modifications for credit cards~~$6.8 billion that had completed their moratorium period, of which 114,900 loans, or 94%, with an ~~unpaid principal balance~~aggregate book value of ~~$22 million~~$6.5 billion were current in ~~response to the COVID-19 pandemic.~~their payments.

The following table presents the outstanding balance of loans classified as TDRs according to their accruing status and the related allowance at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

	March 31, 2020								December 31, 2019								March 31, 2021								December 31, 2020
(In thousands)		Accruing		Non-Accruing		Total		Related Allowance		Accruing		Non-Accruing		Total		Related Allowance		Accruing		Non-Accruing		Total		Related Allowance		Accruing		Non-Accruing		Total		Related Allowance
Loans held-in-portfolio:	Loans held-in-portfolio:																Loans held-in-portfolio:
Commercial	$	241,294	$	107,442	$	348,736	$	20,089	$	237,861	$	111,587	$	349,448	$	16,443	$	281,234	$	107,933	$	389,167	$	26,109	$	259,246	$	103,551	$	362,797	$	15,236
Construction		-		-		-		-		-		119		119		6		0		14,877		14,877		0		0		21,497		21,497		4,397
Mortgage		1,028,415		132,414		1,160,829		72,215		1,013,561		126,036		1,139,597		42,012
Mortgage^[1]																		1,098,479		118,536		1,217,015		71,623		1,060,193		135,772		1,195,965		71,018
Leases		313		53		366		23		264		243		507		61		388		160		548		97		392		218		610		150
Consumer		78,972		15,579		94,551		27,016		82,205		15,808		98,013		21,404		74,150		11,771		85,921		20,785		74,707		12,792		87,499		22,508
Loans held-in-portfolio	$	1,348,994	$	255,488	$	1,604,482	$	119,343	$	1,333,891	$	253,793	$	1,587,684	$	79,926	$	1,454,251	$	253,277	$	1,707,528	$	118,614	$	1,394,538	$	273,830	$	1,668,368	$	113,309
[1] At March 31, 2021, accruing mortgage loan TDRs include $675 million guaranteed by U.S. sponsored entities at BPPR, compared to $655 million at December 31, 2020.																	[1] At March 31, 2021, accruing mortgage loan TDRs include $675 million guaranteed by U.S. sponsored entities at BPPR, compared to $655 million at December 31, 2020.

The following tables present the loan count by type of modification for those loans modified in a TDR during the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020. Loans modified as TDRs for the U.S. operations are considered insignificant to the Corporation.

For the quarter ended March 31, 2021
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Commercial multi-family	0	1	0	0
Commercial real estate non-owner occupied	0	9	0	0
Commercial real estate owner occupied	2	20	0	0
Commercial and industrial	0	8	0	0
Mortgage	8	40	360	0
Leasing	0	0	1	0
Consumer:
Credit cards	52	0	0	14
HELOCs	0	0	1	0
Personal	61	2	1	0
Auto	0	1	2	0
Other	4	0	0	0
Total	127	81	365	14

For the quarter ended March 31, 2020
	Reduction in interest rate	Extension of maturity date	Combination of reduction in interest rate and extension of maturity date	Other
Commercial real estate non-owner occupied	0	1	0	0
Commercial real estate owner occupied	0	6	0	0
Commercial and industrial	1	11	0	1
Mortgage	2	26	147	0
Leasing	0	0	3	0
Consumer:
Credit cards	148	0	0	13
HELOCs	0	0	1	0
Personal	100	1	0	1
Auto	0	1	2	0
Other	1	0	0	0
Total	252	46	153	15

4237

For the quarter ended March 31, 2020

Reduction in interest rate

Extension of maturity date

Combination of reduction in interest rate and extension of maturity date

Other
Commercial real estate non-owner occupied
-

1

-

-
Commercial real estate owner occupied
-

6

-

-
Commercial and industrial
1

11

-

1
Mortgage
2

26

147

-
Leasing
-

-

3

-
Consumer:

Credit cards
148

-

-

13
HELOCs
-

-

1

-
Personal
100

1

-

1
Auto
-

1

2

-
Other
1

-

-

-
Total
252

46

153

15

For the quarter ended March 31, 2019

Reduction in interest rate

Extension of maturity date

Combination of reduction in interest rate and extension of maturity date

Other
Commercial real estate non-owner occupied
-

1

-

-
Commercial real estate owner occupied
-

10

-

-
Commercial and industrial
-

16

-

-
Mortgage
6

27

157

-
Consumer:

Credit cards
122

-

1

66
HELOCs
-

6

4

-
Personal
152

2

-

-
Auto
-

2

-

-
Other
6

-

-

-
Total
286

64

162

66

The following tables present, by class, quantitative information related to loans modified as TDRs during the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

For the quarter ended March 31, 2020
(Dollars in thousands)
Loan count
Pre-modification outstanding recorded investment
Post-modification outstanding recorded investment
Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied
1
$
104
$
104
$
(8)
Commercial real estate owner occupied
6

3,906

3,902

105
Commercial and industrial
13

4,070

4,068

(717)
Mortgage
175

20,315

17,940

2,012
Leasing
3

94

95

6
Consumer:

Credit cards
161

1,260

1,273

84
HELOCs
1

332

265

854
Personal
102

1,861

1,859

297
Auto
3

86

87

12
Other
1

20

20

5
Total
466
$
32,048
$
29,613
$
2,650

For the quarter ended March 31, 2021
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial multi-family	1	$	87	$	86	$	4
Commercial real estate non-owner occupied	9		3,295		3,281		141
Commercial real estate owner occupied	22		29,750		29,484		572
Commercial and industrial	8		222		218		8
Mortgage	408		47,654		49,729		1,046
Leasing	1		32		32		4
Consumer:
Credit cards	66		824		854		27
HELOCs	1		63		116		28
Personal	64		1,062		1,062		304
Auto	3		48		53		10
Other	4		6		6		1
Total	587	$	83,043	$	84,921	$	2,145

For the quarter ended March 31, 2019
For the quarter ended March 31, 2020								For the quarter ended March 31, 2020
(Dollars in thousands)	Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification		Loan count	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Increase (decrease) in the allowance for loan losses as a result of modification
Commercial real estate non-owner occupied	1	$	314	$	311	$	18	1	$	104	$	104	$	(8)
Commercial real estate owner occupied	10		2,019		1,973		19	6		3,906		3,902		105
Commercial and industrial	16		3,943		4,479		314	13		4,070		4,068		(717)
Mortgage	190		20,732		18,591		671	175		20,315		17,940		2,012
Leasing								3		94		95		6
Consumer:
Credit cards	189		1,543		1,530		171	161		1,260		1,273		84
HELOCs	10		694		621		55	1		332		265		854
Personal	154		3,147		3,153		805	102		1,861		1,859		297
Auto	2		25		23		4	3		86		87		12
Other	6		13		13		2	1		20		20		5
Total	578	$	32,430	$	30,694	$	2,059	466	$	32,048	$	29,613	$	2,650

The following tables present, by class, TDRs that were subject to payment default and that had been modified as a TDR during the twelve months preceding the default date. Payment default is defined as a restructured loan becoming 90 days past due after being modified, foreclosed or charged-off, whichever occurs first. The recorded investment as of period end is inclusive of all partial paydowns and charge-offs since the modification date. Loans modified as a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

Defaulted during the quarter ended March 31, 2020
(Dollars in thousands)
Loan count
Recorded investment as of first default date
Commercial real estate owner occupied
2
$
243
Commercial and industrial
2

40
Mortgage
39

4,482
Consumer:

Credit cards
106

859
Personal
45

808
Other
1

-
Total
195
$
6,432
Defaulted during the quarter ended March 31, 2019
(Dollars in thousands)
Loan count
Recorded investment as of first default date
Commercial real estate non-owner occupied
1
$
47
Commercial real estate owner occupied
2

427
Commercial and industrial
1

50
Mortgage
8

745
Leasing
1

22
Consumer:

Credit cards
104

1,087
Personal
68

1,352
Total
185
$
3,730

Defaulted during the quarter ended March 31, 2021
(Dollars in thousands)	Loan count	Recorded investment as of first default date
Commercial real estate owner occupied	2	$	3,754
Commercial and industrial	2		224
Mortgage	23		1,732
Consumer:
Credit cards	40		535
Personal	6		260
Total	73	$	6,505

Defaulted during the quarter ended March 31, 2020
(Dollars in thousands)	Loan count	Recorded investment as of first default date
Commercial real estate owner occupied	2	$	243
Commercial and industrial	2		40
Mortgage	39		4,482
Consumer:
Credit cards	106		859
Personal	45		808
Other	1		0
Total	195	$	6,432

Commercial, consumer and mortgage loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the ~~Corporation evaluates the loan for possible further impairment. The~~ allowance for credit losses may be increased or partial charge-offs may be taken to further write-down the carrying value of the loan.

Credit Quality

The risk rating system provides for the assignment of ratings at the obligor level based on the financial condition of the borrower. The risk rating analysis process is performed at least once a year or more frequently if events or conditions change which may deteriorate the credit quality. In the case of consumer and mortgage loans, these loans are classified considering their delinquency status at the end of the reporting period.

The following ~~table presents~~tables present the amortized cost basis, net of unearned income, of loans held-in-portfolio based on the Corporation’s assignment of obligor risk ratings as defined at March 31, 2021 and December 31, 2020 by vintage year. For the definitions of the obligor risk ratings, refer to

the Credit Quality section of Note 98 to the Consolidated Financial Statements included in the Corporation’s Form ~~10K~~10-K for the year ended December 31, ~~2019.~~2020.

March 31, 2021
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2021		2020		2019		2018		2017		Prior Years						Total
Puerto Rico
	Commercial:
		Commercial multi-family
			Watch	$	0	$	0	$	0	$	0	$	0	$	566	$	0	$	0	$	566
			Special mention		0		0		0		0		0		4,096		0		0		4,096
			Substandard		0		0		0		0		0		1,018		100		0		1,118
			Pass		2,500		10,447		36,212		25,889		2,096		55,091		92		0		132,327
		Total commercial multi-family		$	2,500	$	10,447	$	36,212	$	25,889	$	2,096	$	60,771	$	192	$	0	$	138,107

		Commercial real estate non-owner occupied
			Watch	$	0	$	232,123	$	72,809	$	27,128	$	225,172	$	40,421	$	2,037	$	0	$	599,690
			Special Mention		17,959		0		26,449		124,060		36,824		29,611		0		0		234,903
			Substandard		0		43,336		74,608		26,602		158,367		4,928		95		0		307,936
			Pass		31,990		88,654		27,905		39,238		665,039		59,157		6,486		0		918,469
		Total commercial real estate non-owner occupied		$	49,949	$	364,113	$	201,771	$	217,028	$	1,085,402	$	134,117	$	8,618	$	0	$	2,060,998

		Commercial real estate owner occupied
			Watch	$	0	$	7,016	$	15,518	$	13,986	$	6,108	$	132,580	$	1,222	$	0	$	176,430
			Special Mention		0		1,245		6,588		241		8,547		175,158		0		0		191,779
			Substandard		2,692		1,987		2,044		37,707		2,383		172,336		0		0		219,149
			Doubtful		0		-		0		0		0		1,478		0		0		1,478
			Pass		16,029		217,419		47,995		31,309		58,557		539,283		12,543		0		923,135
		Total commercial real estate owner occupied		$	18,721	$	227,667	$	72,145	$	83,243	$	75,595	$	1,020,835	$	13,765	$	0	$	1,511,971

	Commercial and industrial
		Watch	$	47,071	$	117,215	$	73,327	$	147,175	$	49,845	$	325,459	$	213,847	$	0	$	973,939
		Special Mention		14,491		25,350		9,977		47,433		45,004		28,711		96,605		0		267,571
		Substandard		15,597		22,254		1,907		35,980		26,946		56,443		71,661		0		230,788
		Doubtful		0		0		67		0		0		51		4		0		122
		Loss		0		0		0		0		0		0		14		0		14
		Pass		412,730		899,524		373,582		108,200		145,588		116,412		542,742		0		2,598,778
	Total commercial and industrial		$	489,889	$	1,064,343	$	458,860	$	338,788	$	267,383	$	527,076	$	924,873	$	0	$	4,071,212

Construction
		Watch	$	0	$	0	$	3,580	$	0	$	0	$	0	$	0	$	0	$	3,580
		Substandard		0		0		0		0		14,877		0		0		0		14,877
		Pass		2,925		22,730		21,067		3,316		64,738		0		27,364		0		142,140
Total construction			$	2,925	$	22,730	$	24,647	$	3,316	$	79,615	$	0	$	27,364	$	0	$	160,597

Mortgage
		Substandard	$	0	$	1,515	$	948	$	1,278	$	2,879	$	141,940	$	0	$	0	$	148,560
		Pass		66,896		271,135		218,744		163,092		207,737		5,599,815		0		0		6,527,419
Total mortgage			$	66,896	$	272,650	$	219,692	$	164,370	$	210,616	$	5,741,755	$	0	$	0	$	6,675,979

Leasing
		Substandard	$	0	$	252	$	1,127	$	504	$	900	$	256	$	0	$	0	$	3,039
		Pass		195,606		406,064		292,103		189,562		97,018		61,564		0		0		1,241,917
Total leasing			$	195,606	$	406,316	$	293,230	$	190,066	$	97,918	$	61,820	$	0	$	0	$	1,244,956

March 31, 2021
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2021		2020		2019		2018		2017		Prior Years						Total
Puerto Rico
	Consumer:
		Credit cards
			Substandard	$	0	$	0	$	0	$	0	$	0	$	0	$	10,779	$	0	$	10,779
			Pass		0		0		0		0		0		0		866,962		0		866,962
	Total credit cards			$	0	$	0	$	0	$	0	$	0	$	0	$	877,741	$	0	$	877,741

		HELOCs
			Pass	$	0	$	0	$	0	$	0	$	0	$	526	$	3,018	$	0	$	3,544
	Total HELOCs			$	0	$	0	$	0	$	0	$	0	$	526	$	3,018	$	0	$	3,544

		Personal
			Substandard	$	0	$	441	$	2,170	$	1,275	$	1,007	$	19,422	$	0	$	1,416	$	25,731
			Pass		125,173		297,600		361,153		145,452		86,373		174,319		1,924		43,566		1,235,560
	Total Personal			$	125,173	$	298,041	$	363,323	$	146,727	$	87,380	$	193,741	$	1,924	$	44,982	$	1,261,291

		Auto
			Substandard	$	34	$	3,086	$	5,906	$	3,238	$	1,421	$	1,720	$	0	$	0	$	15,405
			Pass		350,123		984,223		819,082		574,799		267,006		192,499		0		0		3,187,732
	Total Auto			$	350,157	$	987,309	$	824,988	$	578,037	$	268,427	$	194,219	$	0	$	0	$	3,203,137

		Other consumer
			Substandard	$	0	$	0	$	0	$	2,097	$	240	$	12,943	$	0	$	0	$	15,280
			Pass		5,992		15,845		13,463		9,410		4,465		6,203		54,074		0		109,452
	Total Other consumer			$	5,992	$	15,845	$	13,463	$	11,507	$	4,705	$	19,146	$	54,074	$	0	$	124,732
Total Puerto Rico				$	1,307,808	$	3,669,461	$	2,508,331	$	1,758,971	$	2,179,137	$	7,954,006	$	1,911,569	$	44,982	$	21,334,265

March 31, 2021
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2021		2020		2019		2018		2017		Prior Years						Total
Popular U.S.
	Commercial:
		Commercial multi-family
			Watch	$	0	$	41,982	$	19,813	$	33,251	$	52,889	$	93,850	$	0	$	0	$	241,785
			Special mention		0		15,500		12,384		4,250		34,531		61,330		0		0		127,995
			Substandard		0		0		74,778		25,202		0		21,386		0		0		121,366
			Pass		65,917		271,994		288,541		165,986		66,381		403,611		1,411		0		1,263,841
		Total commercial multi-family		$	65,917	$	329,476	$	395,516	$	228,689	$	153,801	$	580,177	$	1,411	$	0	$	1,754,987

		Commercial real estate non-owner occupied
			Watch	$	0	$	8,381	$	23,773	$	69,771	$	44,935	$	65,724	$	957	$	0	$	213,541
			Special Mention		0		0		3,767		15,219		9,330		89,003		350		0		117,669
			Substandard		0		767		18,617		36,419		10,877		85,562		0		0		152,242
			Pass		74,164		381,234		231,033		228,180		259,590		378,697		6,705		0		1,559,603
		Total commercial real estate non-owner occupied		$	74,164	$	390,382	$	277,190	$	349,589	$	324,732	$	618,986	$	8,012	$	0	$	2,043,055

		Commercial real estate owner occupied
			Watch	$	0	$	244	$	10,466	$	7,490	$	1,937	$	25,599	$	4,222	$	0	$	49,958
			Special Mention		0		0		0		0		0		2,339		0		0		2,339
			Substandard		0		0		1,159		2,929		0		21,426		0		0		25,514
			Pass		5,764		48,521		44,906		40,173		26,817		85,631		322		0		252,134
		Total commercial real estate owner occupied		$	5,764	$	48,765	$	56,531	$	50,592	$	28,754	$	134,995	$	4,544	$	0	$	329,945

	Commercial and industrial
		Watch	$	1,916	$	13,874	$	377	$	75	$	12	$	7,685	$	5,474	$	0	$	29,413
		Special Mention		2,415		13,492		0		0		115		9,429		98		0		25,549
		Substandard		527		463		7,472		0		0		5,210		1,689		0		15,361
		Pass		57,862		391,530		199,475		192,904		127,651		395,589		96,877		0		1,461,888
	Total commercial and industrial		$	62,720	$	419,359	$	207,324	$	192,979	$	127,778	$	417,913	$	104,138	$	0	$	1,532,211

Construction
		Watch	$	0	$	12,387	$	7,000	$	31,008	$	55,383	$	2,034	$	0	$	0	$	107,812
		Special Mention		0		0		0		0		0		28,778		0		0		28,778
		Substandard		0		0		0		20,803		0		7,523		0		0		28,326
		Pass		14,234		100,699		292,585		94,932		67,349		12,424		0		0		582,223
Total construction			$	14,234	$	113,086	$	299,585	$	146,743	$	122,732	$	50,759	$	0	$	0	$	747,139

Mortgage
		Substandard	$	0	$	340	$	2,453	$	990	$	0	$	11,010	$	0	$	0	$	14,793
		Pass		112,924		303,906		256,141		90,161		9,265		345,683		0		0		1,118,080
Total mortgage			$	112,924	$	304,246	$	258,594	$	91,151	$	9,265	$	356,693	$	0	$	0	$	1,132,873

March 31, 2021
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2021		2020		2019		2018		2017		Prior Years						Total
Popular U.S.
	Consumer:
		Credit cards
			Pass	$	0	$	0	$	0	$	0	$	0	$	0	$	22	$	0	$	22
	Total credit cards			$	0	$	0	$	0	$	0	$	0	$	0	$	22	$	0	$	22

		HELOCs
			Substandard	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	195	$	195
			Loss		0		0		0		0		0		258		0		6,403		6,661
			Pass		0		0		0		0		0		10,540		38,819		33,402		82,761
	Total HELOCs			$	0	$	0	$	0	$	0	$	0	$	10,798	$	38,819	$	40,000	$	89,617

		Personal
			Substandard	$	0	$	54	$	482	$	191	$	54	$	5	$	0	$	0	$	786
			Loss		0		0		57		1		5		234		2		0		299
			Pass		3,182		34,910		90,489		19,710		7,599		8,297		176		0		164,363
	Total Personal			$	3,182	$	34,964	$	91,028	$	19,902	$	7,658	$	8,536	$	178	$	0	$	165,448

		Other consumer
			Pass	$	0	$	0	$	0	$	0	$	0	$	0	$	2,066	$	0	$	2,066
	Total Other consumer			$	0	$	0	$	0	$	0	$	0	$	0	$	2,066	$	0	$	2,066
Total Popular U.S.				$	338,905	$	1,640,278	$	1,585,768	$	1,079,645	$	774,720	$	2,178,857	$	159,190	$	40,000	$	7,797,363

March 31, 2021
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2021		2020		2019		2018		2017		Prior Years						Total
Popular, Inc.
	Commercial:
		Commercial multi-family
			Watch	$	0	$	41,982	$	19,813	$	33,251	$	52,889	$	94,416	$	0	$	0	$	242,351
			Special mention		0		15,500		12,384		4,250		34,531		65,426		0		0		132,091
			Substandard		0		0		74,778		25,202		0		22,404		100		-		122,484
			Pass		68,417		282,441		324,753		191,875		68,477		458,702		1,503		0		1,396,168
		Total commercial multi-family		$	68,417	$	339,923	$	431,728	$	254,578	$	155,897	$	640,948	$	1,603	$	0	$	1,893,094

		Commercial real estate non-owner occupied
			Watch	$	0	$	240,504	$	96,582	$	96,899	$	270,107	$	106,145	$	2,994	$	0	$	813,231
			Special Mention		17,959		0		30,216		139,279		46,154		118,614		350		0		352,572
			Substandard		0		44,103		93,225		63,021		169,244		90,490		95		0		460,178
			Pass		106,154		469,888		258,938		267,418		924,629		437,854		13,191		0		2,478,072
		Total commercial real estate non-owner occupied		$	124,113	$	754,495	$	478,961	$	566,617	$	1,410,134	$	753,103	$	16,630	$	0	$	4,104,053

		Commercial real estate owner occupied
			Watch	$	0	$	7,260	$	25,984	$	21,476	$	8,045	$	158,179	$	5,444	$	0	$	226,388
			Special Mention		0		1,245		6,588		241		8,547		177,497		0		0		194,118
			Substandard		2,692		1,987		3,203		40,636		2,383		193,762		0		0		244,663
			Doubtful		0		0		0		0		0		1,478		0		0		1,478
			Pass		21,793		265,940		92,901		71,482		85,374		624,914		12,865		0		1,175,269
		Total commercial real estate owner occupied		$	24,485	$	276,432	$	128,676	$	133,835	$	104,349	$	1,155,830	$	18,309	$	0	$	1,841,916

		Commercial and industrial
			Watch	$	48,987	$	131,089	$	73,704	$	147,250	$	49,857	$	333,144	$	219,321	$	0	$	1,003,352
			Special Mention		16,906		38,842		9,977		47,433		45,119		38,140		96,703		0		293,120
			Substandard		16,124		22,717		9,379		35,980		26,946		61,653		73,350		0		246,149
			Doubtful		0		0		67		0		0		51		4		0		122
			Loss		0		0		0		0		0		0		14		0		14
			Pass		470,592		1,291,054		573,057		301,104		273,239	��	512,001		639,619		0		4,060,666
		Total commercial and industrial		$	552,609	$	1,483,702	$	666,184	$	531,767	$	395,161	$	944,989	$	1,029,011	$	0	$	5,603,423

March 31, 2021
			Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year
(In thousands)				2021		2020		2019		2018		2017		Prior Years						Total
Popular, Inc.

	Construction
		Watch	$	0	$	12,387	$	10,580	$	31,008	$	55,383	$	2,034	$	0	$	0	$	111,392
		Special Mention		0		0		0		0		0		28,778		0		0		28,778
		Substandard		0		0		0		20,803		14,877		7,523		0		0		43,203
		Pass		17,159		123,429		313,652		98,248		132,087		12,424		27,364		0		724,363
	Total construction		$	17,159	$	135,816	$	324,232	$	150,059	$	202,347	$	50,759	$	27,364	$	0	$	907,736

	Mortgage
		Substandard	$	0	$	1,855	$	3,401	$	2,268	$	2,879	$	152,950	$	0	$	0	$	163,353
		Pass		179,820		575,041		474,885		253,253		217,002		5,945,498		0		0		7,645,499
	Total mortgage		$	179,820	$	576,896	$	478,286	$	255,521	$	219,881	$	6,098,448	$	0	$	0	$	7,808,852

	Leasing
		Substandard	$	0	$	252	$	1,127	$	504	$	900	$	256	$	0	$	0	$	3,039
		Pass		195,606		406,064		292,103		189,562		97,018		61,564		0		0		1,241,917
	Total leasing		$	195,606	$	406,316	$	293,230	$	190,066	$	97,918	$	61,820	$	0	$	0	$	1,244,956

March 31, 2020

Term Loans

Revolving Loans Amortized Cost Basis

Revolving Loans Converted to Term Loans Amortized Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2020

2019

2018

2017

2016

Prior
Years

Total
Puerto Rico

Commercial:

Commercial multi-family

Watch
$
-
$
-
$
-
$
-
$
-
$
4,778
$
-
$
-
$
4,778

Special mention

-

-

-

-

-

3,810

-

-

3,810

Substandard

-

-

-

-

-

1,262

100

-

1,362

Pass/Unrated

1,300

37,086

26,582

2,135

4,805

65,407

-

-

137,315

Total commercial multi-family
$
1,300
$
37,086
$
26,582
$
2,135
$
4,805
$
75,257
$
100
$
-
$
147,265

Commercial real estate non-owner occupied

Watch
$
-
$
62,790
$
20,494
$
37,793
$
55,762
$
214,651
$
1,400
$
-
$
392,890

Special Mention

-

16,085

-

116

18,734

200,490

150

-

235,575

Substandard

-

58,948

27,138

4,186

19,956

138,773

95

-

249,096

Doubtful

-

-

-

-

-

2,222

-

-

2,222

Pass/Unrated

4,763

111,994

174,404

102,193

122,328

684,278

7,156

-

1,207,116

Total commercial real estate non-owner occupied
$
4,763
$
249,817
$
222,036
$
144,288
$
216,780
$
1,240,414
$
8,801
$
-
$
2,086,899

Commercial real estate owner occupied

Watch
$
441
$
5,725
$
46,201
$
10,116
$
5,970
$
166,946
$
2,106
$
-
$
237,505

Special Mention

47

1,216

389

2,903

12,533

156,966

-

-

174,054

Substandard

-

1,703

6,187

1,609

29,015

81,381

-

-

119,895

Doubtful

-

-

-

-

-

76,214

-

-

76,214

Loss

-

-

-

-

-

1,788

-

-

1,788

Pass/Unrated

10,695

90,459

72,705

74,373

140,878

553,055

26,790

-

968,955

Total commercial real estate owner occupied
$
11,183
$
99,103
$
125,482
$
89,001
$
188,396
$
1,036,350
$
28,896
$
-
$
1,578,411

Commercial and industrial

Watch
$
1,224
$
100,274
$
6,443
$
70,195
$
21,603
$
383,873
$
43,378
$
-
$
626,990

Special Mention

123

8,229

9,877

25,048

10,611

139,478

10,057

-

203,423

Substandard

208

3,021

11,901

4,837

2,497

66,849

47,280

-

136,593

Doubtful

-

-

-

17

-

184

2

-

203

Loss

-

-

-

-

-

-

5

-

5

Pass/Unrated

35,559

563,273

454,997

255,949

181,119

475,913

584,383

-

2,551,193

Total commercial and industrial
$
37,114
$
674,797
$
483,218
$
356,046
$
215,830
$
1,066,297
$
685,105
$
-
$
3,518,407

Construction

Watch
$
-
$
-
$
8,942
$
-
$
-
$
-
$
340
$
-
$
9,282

Special Mention

-

-

675

-

-

-

-

-

675

Substandard

-

-

-

20,975

-

-

-

-

20,975

Pass/Unrated

147

33,769

16,874

56,768

1,378

-

24,522

-

133,458

Total construction
$
147
$
33,769
$
26,491
$
77,743
$
1,378
$
-
$
24,862
$
-
$
164,390

Mortgage

Substandard
$
920
$
1,103
$
1,148
$
2,949
$
3,653
$
148,444
$
-
$
-
$
158,217

Pass/Unrated

28,286

217,430

160,292

211,799

200,212

5,039,772

-

-

5,857,791

Total mortgage
$
29,206
$
218,533
$
161,440
$
214,748
$
203,865
$
5,188,216
$
-
$
-
$
6,016,008

Leasing

Substandard
$
29
$
1,129
$
1,178
$
886
$
543
$
309
$
-
$
-
$
4,074

Pass/Unrated

160,443

373,109

262,568

144,915

93,388

50,045

-

-

1,084,468

Total leasing
$
160,472
$
374,238
$
263,746
$
145,801
$
93,931
$
50,354
$
-
$
-
$
1,088,542

March 31, 2021
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2021		2020		2019		2018		2017		Prior Years						Total
Popular, Inc.
	Consumer:
		Credit cards
			Substandard	$	0	$	0	$	0	$	0	$	0	$	0	$	10,779	$	0	$	10,779
			Pass		0		0		0		0		0		0		866,984		0		866,984
	Total credit cards			$	0	$	0	$	0	$	0	$	0	$	0	$	877,763	$	0	$	877,763

		HELOCs
			Substandard	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	195	$	195
			Loss		0		0		0		0		0		258		0		6,403		6,661
			Pass		0		0		0		0		0		11,066		41,837		33,402		86,305
	Total HELOCs			$	0	$	0	$	0	$	0	$	0	$	11,324	$	41,837	$	40,000	$	93,161

		Personal
			Substandard	$	0	$	495	$	2,652	$	1,466	$	1,061	$	19,427	$	0	$	1,416	$	26,517
			Loss		0		0		57		1		5		234		2		0		299
			Pass		128,355		332,510		451,642		165,162		93,972		182,616		2,100		43,566		1,399,923
	Total Personal			$	128,355	$	333,005	$	454,351	$	166,629	$	95,038	$	202,277	$	2,102	$	44,982	$	1,426,739

		Auto
			Substandard	$	34	$	3,086	$	5,906	$	3,238	$	1,421	$	1,720	$	0	$	0	$	15,405
			Pass		350,123		984,223		819,082		574,799		267,006		192,499		0		0		3,187,732
	Total Auto			$	350,157	$	987,309	$	824,988	$	578,037	$	268,427	$	194,219	$	0	$	0	$	3,203,137

		Other consumer
			Substandard	$	0	$	0	$	0	$	2,097	$	240	$	12,943	$	0	$	0	$	15,280
			Pass		5,992		15,845		13,463		9,410		4,465		6,203		56,140		0		111,518
	Total Other consumer			$	5,992	$	15,845	$	13,463	$	11,507	$	4,705	$	19,146	$	56,140	$	0	$	126,798
Total Popular Inc.				$	1,646,713	$	5,309,739	$	4,094,099	$	2,838,616	$	2,953,857	$	10,132,863	$	2,070,759	$	84,982	$	29,131,628

December 31, 2020
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2020		2019		2018		2017		2016		Prior Years						Total
Puerto Rico
	Commercial:
		Commercial multi-family
			Watch	$	0	$	0	$	0	$	0	$	0	$	460	$	0	$	0	$	460
			Special mention		0		0		0		0		0		4,160		0		0		4,160
			Substandard		0		0		0		0		0		400		100		0		500
			Pass		5,216		36,433		26,051		2,106		2,563		74,791		0		0		147,160
		Total commercial multi-family		$	5,216	$	36,433	$	26,051	$	2,106	$	2,563	$	79,811	$	100	$	0	$	152,280

		Commercial real estate non-owner occupied
			Watch	$	160,960	$	73,561	$	27,592	$	40,654	$	33,277	$	197,912	$	2,100	$	0	$	536,056
			Special Mention		0		26,331		124,560		29,711		19,895		62,839		836		0		264,172
			Substandard		43,399		74,303		26,799		4,932		29,974		130,218		95		0		309,720
			Pass		88,324		53,385		39,814		60,585		124,643		527,282		3,352		0		897,385
		Total commercial real estate non-owner occupied		$	292,683	$	227,580	$	218,765	$	135,882	$	207,789	$	918,251	$	6,383	$	0	$	2,007,333

		Commercial real estate owner occupied
			Watch	$	96,046	$	10,319	$	14,412	$	9,760	$	9,584	$	146,445	$	2,627	$	0	$	289,193
			Special Mention		850		6,638		249		6,571		282		172,078		0		0		186,668
			Substandard		1,774		2,181		37,686		1,878		27,094		145,193		0		0		215,806
			Doubtful		0		0		0		0		0		1,714		0		0		1,714
			Pass		204,840		54,274		31,917		57,854		128,392		417,376		10,861		0		905,514
		Total commercial real estate owner occupied		$	303,510	$	73,412	$	84,264	$	76,063	$	165,352	$	882,806	$	13,488	$	0	$	1,598,895

	Commercial and industrial
		Watch	$	131,556	$	77,821	$	182,776	$	40,318	$	63,968	$	267,856	$	243,335	$	0	$	1,007,630
		Special Mention		28,310		10,297		19,220		45,861		910		28,507		86,263		0		219,368
		Substandard		32,941		2,180		26,921		26,769		1,824		55,220		49,036		0		194,891
		Doubtful		0		67		0		1		0		54		1		0		123
		Loss		0		0		0		0		0		0		13		0		13
		Pass		1,181,399		492,778		119,709		168,174		105,442		218,716		520,865		0		2,807,083
	Total commercial and industrial		$	1,374,206	$	583,143	$	348,626	$	281,123	$	172,144	$	570,353	$	899,513	$	0	$	4,229,108

Construction
		Watch	$	0	$	105	$	4,895	$	0	$	0	$	0	$	960	$	0	$	5,960
		Substandard		0		0		0		21,497		0		0		0		0		21,497
		Pass		15,723		22,408		3,423		63,582		0		0		24,513		0		129,649
Total construction			$	15,723	$	22,513	$	8,318	$	85,079	$	0	$	0	$	25,473	$	0	$	157,106

Mortgage
		Substandard	$	754	$	903	$	1,172	$	3,129	$	4,374	$	159,359	$	0	$	0	$	169,691
		Pass		263,473		224,390		177,537		212,650		225,824		5,496,578		0		0		6,600,452
Total mortgage			$	264,227	$	225,293	$	178,709	$	215,779	$	230,198	$	5,655,937	$	0	$	0	$	6,770,143

Leasing
		Substandard	$	200	$	822	$	748	$	913	$	617	$	136	$	0	$	0	$	3,436
		Pass		480,964		315,022		209,340		109,708		63,955		15,236		0		0		1,194,225
Total leasing			$	481,164	$	315,844	$	210,088	$	110,621	$	64,572	$	15,372	$	0	$	0	$	1,197,661

March 31, 2020

Term Loans

Revolving Loans Amortized Cost Basis

Revolving Loans Converted to Term Loans Amortized Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2020

2019

2018

2017

2016

Prior
Years

Total
Popular U.S.

Commercial:

Commercial multi-family

Watch
$
-
$
-
$
1,415
$
12,796
$
12,135
$
18,285
$
-
$
-
$
44,631

Special mention

-

-

-

6,706

2,086

6,658

-

-

15,450

Substandard

-

-

-

2,097

4,721

1,153

-

-

7,971

Pass/Unrated

64,645

405,889

259,639

159,495

291,251

379,684

1,690

-

1,562,293

Total commercial multi-family
$
64,645
$
405,889
$
261,054
$
181,094
$
310,193
$
405,780
$
1,690
$
-
$
1,630,345

Commercial real estate non-owner occupied

Watch
$
4,442
$
-
$
6,471
$
26,527
$
2,235
$
23,710
$
-
$
-
$
63,385

Special Mention

-

-

18,709

1,618

-

5,382

350

-

26,059

Substandard

-

-

-

34,308

29,118

41,036

-

-

104,462

Pass/Unrated

137,463

290,320

409,302

307,475

300,251

321,858

16,249

-

1,782,918

Total commercial real estate non-owner occupied
$
141,905
$
290,320
$
434,482
$
369,928
$
331,604
$
391,986
$
16,599
$
-
$
1,976,824

Commercial real estate owner occupied

Watch
$
-
$
-
$
3,294
$
1,462
$
8,206
$
8,333
$
-
$
-
$
21,295

Special Mention

-

-

195

-

-

5,604

-

-

5,799

Substandard

-

-

1,349

-

-

16,222

-

-

17,571

Pass/Unrated

8,980

57,796

51,801

38,479

28,838

105,036

7,365

-

298,295

Total commercial real estate owner occupied
$
8,980
$
57,796
$
56,639
$
39,941
$
37,044
$
135,195
$
7,365
$
-
$
342,960

Commercial and industrial

Watch
$
-
$
373
$
60
$
304
$
1,330
$
5,704
$
7,434
$
-
$
15,205

Special Mention

-

150

250

187

486

37

420

-

1,530

Substandard

-

119

-

-

377

7,786

939

-

9,221

Pass/Unrated

42,137

200,107

199,983

153,229

145,918

350,024

100,504

-

1,191,902

Total commercial and industrial
$
42,137
$
200,749
$
200,293
$
153,720
$
148,111
$
363,551
$
109,297
$
-
$
1,217,858

Construction

Watch
$
-
$
-
$
4,581
$
11,093
$
-
$
22,625
$
-
$
-
$
38,299

Special Mention

-

-

-

-

-

8,064

-

-

8,064

Substandard

-

-

5,434

8,572

10,069

18,500

-

-

42,575

Pass/Unrated

27,149

217,733

164,075

190,824

39,485

9,786

-

-

649,052

Total construction
$
27,149
$
217,733
$
174,090
$
210,489
$
49,554
$
58,975
$
-
$
-
$
737,990

Mortgage

Substandard
$
-
$
481
$
433
$
-
$
-
$
11,262
$
-
$
-
$
12,176

Pass/Unrated

106,888

332,525

147,870

12,634

14,498

452,158

-

-

1,066,573

Total mortgage
$
106,888
$
333,006
$
148,303
$
12,634
$
14,498
$
463,420
$
-
$
-
$
1,078,749

Legacy

Watch
$
-
$
-
$
-
$
-
$
-
$
1,113
$
-
$
-
$
1,113

Special Mention

-

-

-

-

-

197

-

-

197

Substandard

-

-

-

-

-

4,697

-

-

4,697

Pass/Unrated

1,835

2,559

-

-

-

10,034

-

-

14,428

Total legacy
$
1,835
$
2,559
$
-
$
-
$
-
$
16,041
$
-
$
-
$
20,435

December 31, 2020
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2020		2019		2018		2017		2016		Prior Years						Total
Puerto Rico
	Consumer:
		Credit cards
			Substandard	$	0	$	0	$	0	$	0	$	0	$	0	$	12,798	$	0	$	12,798
			Pass		0		0		0		0		0		0		907,137		0		907,137
	Total credit cards			$	0	$	0	$	0	$	0	$	0	$	0	$	919,935	$	0	$	919,935

		HELOCs
			Pass	$	0	$	0	$	0	$	0	$	0	$	540	$	3,639	$	0	$	4,179
	Total HELOCs			$	0	$	0	$	0	$	0	$	0	$	540	$	3,639	$	0	$	4,179

		Personal
			Substandard	$	1,288	$	4,782	$	1,741	$	1,022	$	971	$	18,647	$	152	$	1,545	$	30,148
			Pass		323,170		413,973		168,142		99,768		57,319		137,693		2,144		45,390		1,247,599
	Total Personal			$	324,458	$	418,755	$	169,883	$	100,790	$	58,290	$	156,340	$	2,296	$	46,935	$	1,277,747

		Auto
			Substandard	$	1,975	$	6,029	$	3,612	$	1,760	$	1,369	$	990	$	0	$	0	$	15,735
			Pass		1,064,082		881,343		628,657		299,677		168,157		74,577		0		0		3,116,493
	Total Auto			$	1,066,057	$	887,372	$	632,269	$	301,437	$	169,526	$	75,567	$	0	$	0	$	3,132,228

		Other consumer
			Substandard	$	0	$	16	$	1,376	$	240	$	174	$	13,075	$	0	$	0	$	14,881
			Pass		16,912		15,698		13,158		4,966		2,828		3,785		54,437		0		111,784
	Total Other consumer			$	16,912	$	15,714	$	14,534	$	5,206	$	3,002	$	16,860	$	54,437	$	0	$	126,665
Total Puerto Rico				$	4,144,156	$	2,806,059	$	1,891,507	$	1,314,086	$	1,073,436	$	8,371,837	$	1,925,264	$	46,935	$	21,573,280

March 31, 2020

Term Loans

Revolving Loans Amortized Cost Basis

Revolving Loans Converted to Term Loans Amortized Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2020

2019

2018

2017

2016

Prior
Years

Total
Popular U.S.

Consumer:

Credit cards

Pass/Unrated
$
-
$
-
$
-
$
-
$
-
$
-
$
36
$
-
$
36

Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
36
$
-
$
36

HELOCs

Substandard
$
-
$
-
$
-
$
-
$
-
$
26
$
-
$
1,889
$
1,915

Loss

-

-

-

-

-

322

-

7,137

7,459

Pass/Unrated

-

-

-

-

-

16,490

61,301

30,246

108,037

Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
16,838
$
61,301
$
39,272
$
117,411

Personal

Substandard
$
-
$
700
$
514
$
134
$
64
$
255
$
-
$
-
$
1,667

Loss

-

48

28

-

26

339

2

-

443

Pass/Unrated

42,784

169,193

58,305

22,369

7,247

12,732

248

-

312,878

Total Personal
$
42,784
$
169,941
$
58,847
$
22,503
$
7,337
$
13,326
$
250
$
-
$
314,988

Other consumer

Pass/Unrated
$
-
$
-
$
-
$
-
$
-
$
-
$
795
$
-
$
795

Total Other consumer
$
-
$
-
$
-
$
-
$
-
$
-
$
795
$
-
$
795
Total Popular U.S.
$
436,323
$
1,677,993
$
1,333,708
$
990,309
$
898,341
$
1,865,112
$
197,333
$
39,272
$
7,438,391

December 31, 2020
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2020		2019		2018		2017		2016		Prior Years						Total
Popular U.S.
	Commercial:
		Commercial multi-family
			Watch	$	1,643	$	16,787	$	39,980	$	39,713	$	52,989	$	61,369	$	0	$	0	$	212,481
			Special mention		3,122		30,708		4,380		19,593		37,745		20,463		0		0		116,011
			Substandard		0		17,376		21,771		1,755		20,085		6,247		0		0		67,234
			Pass		326,008		289,652		163,812		100,555		132,400		332,709		2,849		0		1,347,985
		Total commercial multi-family		$	330,773	$	354,523	$	229,943	$	161,616	$	243,219	$	420,788	$	2,849	$	0	$	1,743,711

		Commercial real estate non-owner occupied
			Watch	$	10,057	$	23,877	$	76,629	$	56,112	$	49,166	$	62,766	$	1,055	$	0	$	279,662
			Special Mention		0		4,760		15,304		14,623		70,224		20,028		350		0		125,289
			Substandard		771		18,642		36,495		11,007		40,528		28,984		0		0		136,427
			Pass		397,686		231,904		224,256		236,008		142,432		214,495		5,651		0		1,452,432
		Total commercial real estate non-owner occupied		$	408,514	$	279,183	$	352,684	$	317,750	$	302,350	$	326,273	$	7,056	$	0	$	1,993,810

		Commercial real estate owner occupied
			Watch	$	393	$	8,266	$	7,941	$	4,060	$	16,689	$	16,108	$	4,222	$	0	$	57,679
			Special Mention		0		0		192		0		0		1,467		0		0		1,659
			Substandard		0		1,152		2,361		0		1,348		20,305		0		0		25,166
			Pass		48,684		47,484		47,451		28,761		18,296		68,739		461		0		259,876
		Total commercial real estate owner occupied		$	49,077	$	56,902	$	57,945	$	32,821	$	36,333	$	106,619	$	4,683	$	0	$	344,380

	Commercial and industrial
		Watch	$	16,126	$	1,973	$	30	$	3,621	$	1,196	$	8,488	$	3,972	$	0	$	35,406
		Special Mention		14,056		0		0		1,634		4,807		4,756		1,637		0		26,890
		Substandard		2,029		6,568		0		0		0		5,980		2,394		0		16,971
		Pass		410,349		196,958		198,249		132,993		123,762		300,846		102,369		0		1,465,526
	Total commercial and industrial		$	442,560	$	205,499	$	198,279	$	138,248	$	129,765	$	320,070	$	110,372	$	0	$	1,544,793

Construction
		Watch	$	8,451	$	0	$	0	$	37,015	$	0	$	2,065	$	0	$	0	$	47,531
		Special Mention		0		0		0		3,089		0		30,083		0		0		33,172
		Substandard		0		0		20,655		9,372		7,560		0		0		0		37,587
		Pass		79,489		288,865		168,411		99,814		8,392		5,841		0		0		650,812
Total construction			$	87,940	$	288,865	$	189,066	$	149,290	$	15,952	$	37,989	$	0	$	0	$	769,102

Mortgage
		Substandard	$	29	$	0	$	1,221	$	0	$	328	$	13,287	$	0	$	0	$	14,865
		Pass		356,839		275,289		103,160		9,337		9,530		351,517		0		0		1,105,672
Total mortgage			$	356,868	$	275,289	$	104,381	$	9,337	$	9,858	$	364,804	$	0	$	0	$	1,120,537

March 31, 2020

Term Loans

Revolving Loans Amortized Cost Basis

Revolving Loans Converted to Term Loans Amortized Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2020

2019

2018

2017

2016

Prior
Years

Total
Popular, Inc.

Commercial:

Commercial multi-family

Watch
$
-
$
-
$
1,415
$
12,796
$
12,135
$
23,063
$
-
$
-
$
49,409

Special mention

-

-

-

6,706

2,086

10,468

-

-

19,260

Substandard

-

-

-

2,097

4,721

2,415

100

-

9,333

Pass/Unrated

65,945

442,975

286,221

161,630

296,056

445,091

1,690

-

1,699,608

Total commercial multi-family
$
65,945
$
442,975
$
287,636
$
183,229
$
314,998
$
481,037
$
1,790
$
-
$
1,777,610

Commercial real estate non-owner occupied

Watch
$
4,442
$
62,790
$
26,965
$
64,320
$
57,997
$
238,361
$
1,400
$
-
$
456,275

Special Mention

-

16,085

18,709

1,734

18,734

205,872

500

-

261,634

Substandard

-

58,948

27,138

38,494

49,074

179,809

95

-

353,558

Doubtful

-

-

-

-

-

2,222

-

-

2,222

Pass/Unrated

142,226

402,314

583,706

409,668

422,579

1,006,136

23,405

-

2,990,034

Total commercial real estate non-owner occupied
$
146,668
$
540,137
$
656,518
$
514,216
$
548,384
$
1,632,400
$
25,400
$
-
$
4,063,723

Commercial real estate owner occupied

Watch
$
441
$
5,725
$
49,495
$
11,578
$
14,176
$
175,279
$
2,106
$
-
$
258,800

Special Mention

47

1,216

584

2,903

12,533

162,570

-

-

179,853

Substandard

-

1,703

7,536

1,609

29,015

97,603

-

-

137,466

Doubtful

-

-

-

-

-

76,214

-

-

76,214

Loss

-

-

-

-

-

1,788

-

-

1,788

Pass/Unrated

19,675

148,255

124,506

112,852

169,716

658,091

34,155

-

1,267,250

Total commercial real estate owner occupied
$
20,163
$
156,899
$
182,121
$
128,942
$
225,440
$
1,171,545
$
36,261
$
-
$
1,921,371

Commercial and industrial

Watch
$
1,224
$
100,647
$
6,503
$
70,499
$
22,933
$
389,577
$
50,812
$
-
$
642,195

Special Mention

123

8,379

10,127

25,235

11,097

139,515

10,477

-

204,953

Substandard

208

3,140

11,901

4,837

2,874

74,635

48,219

-

145,814

Doubtful

-

-

-

17

-

184

2

-

203

Loss

-

-

-

-

-

-

5

-

5

Pass/Unrated

77,696

763,380

654,980

409,178

327,037

825,937

684,887

-

3,743,095

Total commercial and industrial
$
79,251
$
875,546
$
683,511
$
509,766
$
363,941
$
1,429,848
$
794,402
$
-
$
4,736,265

December 31, 2020
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2020		2019		2018		2017		2016		Prior Years						Total
Popular U.S.
	Consumer:
		Credit cards
			Pass	$	0	$	0	$	0	$	0	$	0	$	0	$	31	$	0	$	31
	Total credit cards			$	0	$	0	$	0	$	0	$	0	$	0	$	31	$	0	$	31

		HELOCs
			Substandard	$	0	$	0	$	0	$	0	$	0	$	112	$	0	$	357	$	469
			Loss		0		0		0		0		0		156		0		6,867		7,023
			Pass		0		0		0		0		0		11,907		39,366		35,806		87,079
	Total HELOCs			$	0	$	0	$	0	$	0	$	0	$	12,175	$	39,366	$	43,030	$	94,571

		Personal
			Substandard	$	83	$	784	$	165	$	74	$	18	$	6	$	0	$	0	$	1,130
			Loss		0		17		63		12		6		244		2		0		344
			Pass		40,539		109,606		27,693		9,623		1,855		8,256		192		0		197,764
	Total Personal			$	40,622	$	110,407	$	27,921	$	9,709	$	1,879	$	8,506	$	194	$	0	$	199,238

		Other consumer
			Substandard	$	0		0		0		0		0		0		20		0		20
			Pass	$	0	$	0	$	0	$	0	$	0	$	0	$	1,723	$	0	$	1,723
	Total Other consumer			$	0	$	0	$	0	$	0	$	0	$	0	$	1,743	$	0	$	1,743
Total Popular U.S.				$	1,716,354	$	1,570,668	$	1,160,219	$	818,771	$	739,356	$	1,597,224	$	166,294	$	43,030	$	7,811,916

March 31, 2020
December 31, 2020																					December 31, 2020
			Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis						Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year																				Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)			2020		2019		2018		2017		2016		Prior Years					Total	(In thousands)				2020		2019		2018		2017		2016		Prior Years				Total
Popular, Inc.	Popular, Inc.																					Popular, Inc.
																						Commercial:
	Construction																					Commercial multi-family
		Watch	$	-	$	-	$	13,523	$	11,093	$	-	$	22,625	$	340	$	-	$	47,581			Watch	$	1,643	$	16,787	$	39,980	$	39,713	$	52,989	$	61,829	$	0	$	0	$	212,941
		Special Mention		-		-		675		-		-		8,064		-		-		8,739			Special mention		3,122		30,708		4,380		19,593		37,745		24,623		0		0		120,171
		Substandard		-		-		5,434		29,547		10,069		18,500		-		-		63,550			Substandard		0		17,376		21,771		1,755		20,085		6,647		100		0		67,734
		Pass/Unrated		27,296		251,502		180,949		247,592		40,863		9,786		24,522		-		782,510			Pass		331,224		326,085		189,863		102,661		134,963		407,500		2,849		0		1,495,145
	Total construction		$	27,296	$	251,502	$	200,581	$	288,232	$	50,932	$	58,975	$	24,862	$	-	$	902,380		Total commercial multi-family		$	335,989	$	390,956	$	255,994	$	163,722	$	245,782	$	500,599	$	2,949	$	0	$	1,895,991

	Mortgage																					Commercial real estate non-owner occupied
		Substandard	$	920	$	1,584	$	1,581	$	2,949	$	3,653	$	159,706	$	-	$	-	$	170,393			Watch	$	171,017	$	97,438	$	104,221	$	96,766	$	82,443	$	260,678	$	3,155	$	0	$	815,718
		Pass/Unrated		135,174		549,955		308,162		224,433		214,710		5,491,930		-		-		6,924,364			Special Mention		0		31,091		139,864		44,334		90,119		82,867		1,186		0		389,461
	Total mortgage		$	136,094	$	551,539	$	309,743	$	227,382	$	218,363	$	5,651,636	$	-	$	-	$	7,094,757			Substandard		44,170		92,945		63,294		15,939		70,502		159,202		95		0		446,147
																							Pass		486,010		285,289		264,070		296,593		267,075		741,777		9,003		0		2,349,817
	Legacy																					Total commercial real estate non-owner occupied		$	701,197	$	506,763	$	571,449	$	453,632	$	510,139	$	1,244,524	$	13,439	$	0	$	4,001,143
		Watch	$	-	$	-	$	-	$	-	$	-	$	1,113	$	-	$	-	$	1,113
		Special Mention		-		-		-		-		-		197		-		-		197		Commercial real estate owner occupied
		Substandard		-		-		-		-		-		4,697		-		-		4,697			Watch	$	96,439	$	18,585	$	22,353	$	13,820	$	26,273	$	162,553	$	6,849	$	0	$	346,872
		Pass/Unrated		1,835		2,559		-		-		-		10,034		-		-		14,428			Special Mention		850		6,638		441		6,571		282		173,545		0		0		188,327
	Total legacy		$	1,835	$	2,559	$	-	$	-	$	-	$	16,041	$	-	$	-	$	20,435			Substandard		1,774		3,333		40,047		1,878		28,442		165,498		0		0		240,972
																							Doubtful		0		0		0		0		0		1,714		0		0		1,714
	Leasing																						Pass		253,524		101,758		79,368		86,615		146,688		486,115		11,322		0		1,165,390
		Substandard	$	29	$	1,129	$	1,178	$	886	$	543	$	309	$	-	$	-	$	4,074		Total commercial real estate owner occupied		$	352,587	$	130,314	$	142,209	$	108,884	$	201,685	$	989,425	$	18,171	$	0	$	1,943,275
		Pass/Unrated		160,443		373,109		262,568		144,915		93,388		50,045		-		-		1,084,468
	Total leasing		$	160,472	$	374,238	$	263,746	$	145,801	$	93,931	$	50,354	$	-	$	-	$	1,088,542		Commercial and industrial
																							Watch	$	147,682	$	79,794	$	182,806	$	43,939	$	65,164	$	276,344	$	247,307	$	0	$	1,043,036
																							Special Mention		42,366		10,297		19,220		47,495		5,717		33,263		87,900		0		246,258
																							Substandard		34,970		8,748		26,921		26,769		1,824		61,200		51,430		0		211,862
																							Doubtful		0		67		0		1		0		54		1		0		123
																							Loss		0		0		0		0		0		0		13		0		13
																							Pass		1,591,748		689,736		317,958		301,167		229,204		519,562		623,234		0		4,272,609
																						Total commercial and industrial		$	1,816,766	$	788,642	$	546,905	$	419,371	$	301,909	$	890,423	$	1,009,885	$	0	$	5,773,901

March 31, 2020

Term Loans

Revolving Loans Amortized Cost Basis

Revolving Loans Converted to Term Loans Amortized Cost Basis

Amortized Cost Basis by Origination Year

(In thousands)

2020

2019

2018

2017

2016

Prior
Years

Total
Popular, Inc.

Consumer:

Credit cards

Substandard
$
-
$
-
$
-
$
-
$
-
$
-
$
20,588
$
-
$
20,588

Pass/Unrated

-

-

-

-

-

-

1,044,135

-

1,044,135

Total credit cards
$
-
$
-
$
-
$
-
$
-
$
-
$
1,064,723
$
-
$
1,064,723

HELOCs

Substandard
$
-
$
-
$
-
$
-
$
-
$
26
$
-
$
1,889
$
1,915

Loss

-

-

-

-

-

322

-

7,137

7,459

Pass/Unrated

-

-

-

-

-

17,098

65,622

30,246

112,966

Total HELOCs
$
-
$
-
$
-
$
-
$
-
$
17,446
$
65,622
$
39,272
$
122,340

Personal

Substandard
$
1,159
$
7,998
$
3,135
$
2,565
$
1,797
$
18,135
$
81
$
2,523
$
37,393

Loss

-

48

28

-

26

339

2

-

443

Pass/Unrated

202,084

739,222

302,833

170,064

95,309

179,598

1,689

49,579

1,740,378

Total Personal
$
203,243
$
747,268
$
305,996
$
172,629
$
97,132
$
198,072
$
1,772
$
52,102
$
1,778,214

Auto

Substandard
$
58
$
7,727
$
7,846
$
4,353
$
3,035
$
3,412
$
-
$
-
$
26,431

Pass/Unrated

296,102

1,040,732

778,165

392,860

246,082

173,778

-

-

2,927,719

Total Auto
$
296,160
$
1,048,459
$
786,011
$
397,213
$
249,117
$
177,190
$
-
$
-
$
2,954,150

Other consumer

Substandard
$
-
$
-
$
893
$
-
$
-
$
12,989
$
-
$
-
$
13,882

Pass/Unrated

1,442

19,254

13,501

7,134

3,268

15,783

63,498

-

123,880

Total Other consumer
$
1,442
$
19,254
$
14,394
$
7,134
$
3,268
$
28,772
$
63,498
$
-
$
137,762
Total Popular Inc.
$
1,138,569
$
5,010,376
$
3,690,257
$
2,574,544
$
2,165,506
$
10,913,316
$
2,078,330
$
91,374
$
27,662,272

The following table presents the outstanding balance, net of unearned income, of loans held-in-portfolio based on the Corporation’s assignment of obligor risk ratings as defined at December 31, 2019.

December 31, 2020
			Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
			Amortized Cost Basis by Origination Year
(In thousands)				2020		2019		2018		2017		2016		Prior Years						Total
Popular, Inc.

	Construction
		Watch	$	8,451	$	105	$	4,895	$	37,015	$	0	$	2,065	$	960	$	0	$	53,491
		Special Mention		0		0		0		3,089		0		30,083		0		0		33,172
		Substandard		0		0		20,655		30,869		7,560		0		0		0		59,084
		Pass		95,212		311,273		171,834		163,396		8,392		5,841		24,513		0		780,461
	Total construction		$	103,663	$	311,378	$	197,384	$	234,369	$	15,952	$	37,989	$	25,473	$	0	$	926,208

	Mortgage
		Substandard	$	783	$	903	$	2,393	$	3,129	$	4,702	$	172,646	$	0	$	0	$	184,556
		Pass		620,312		499,679		280,697		221,987		235,354		5,848,095		0		0		7,706,124
	Total mortgage		$	621,095	$	500,582	$	283,090	$	225,116	$	240,056	$	6,020,741	$	0	$	0	$	7,890,680

	Leasing
		Substandard	$	200	$	822	$	748	$	913	$	617	$	136	$	0	$	0	$	3,436
		Pass		480,964		315,022		209,340		109,708		63,955		15,236		0		0		1,194,225
	Total leasing		$	481,164	$	315,844	$	210,088	$	110,621	$	64,572	$	15,372	$	0	$	0	$	1,197,661

December 31, 2019

Special

Pass/

(In thousands)
Watch
Mention
Substandard
Doubtful
Loss
Sub-total
Unrated
Total
Puerto Rico

Commercial multi-family
$
1,341
$
3,870
$
1,793
$
-
$
-
$
7,004
$
140,845
$
147,849
Commercial real estate non-owner occupied

492,357

166,810

239,448

3,290

-

901,905

1,206,313

2,108,218
Commercial real estate owner occupied

192,895

184,678

183,377

1,629

-

562,579

1,023,750

1,586,329
Commercial and industrial

592,861

170,183

130,872

148

16

894,080

2,524,654

3,418,734

Total Commercial

1,279,454

525,541

555,490

5,067

16

2,365,568

4,895,562

7,261,130
Construction

340

649

20,771

-

-

21,760

115,710

137,470
Mortgage

2,187

2,218

127,621

-

-

132,026

6,034,722

6,166,748
Leasing

-

-

3,590

-

68

3,658

1,055,849

1,059,507
Consumer:

Credit cards

-

-

19,461

-

-

19,461

1,104,339

1,123,800

HELOCs

-

-

-

-

-

-

5,038

5,038

Personal

77

-

19,558

-

-

19,635

1,348,515

1,368,150

Auto

-

-

30,775

-

372

31,147

2,886,375

2,917,522

Other

459

11

15,020

-

53

15,543

125,324

140,867

Total Consumer

536

11

84,814

-

425

85,786

5,469,591

5,555,377
Total Puerto Rico
$
1,282,517
$
528,419
$
792,286
$
5,067
$
509
$
2,608,798
$
17,571,434
$
20,180,232
Popular U.S.

Commercial multi-family
$
48,359
$
13,827
$
8,433
$
-
$
-
$
70,619
$
1,576,691
$
1,647,310
Commercial real estate non-owner occupied

80,608

24,383

100,658

-

-

205,649

1,664,647

1,870,296
Commercial real estate owner occupied

27,298

5,709

13,826

-

-

46,833

292,302

339,135
Commercial and industrial

25,679

1,460

20,386

-

-

47,525

1,147,355

1,194,880

Total Commercial

181,944

45,379

143,303

-

-

370,626

4,680,995

5,051,621
Construction

46,644

17,291

44,798

-

-

108,733

584,889

693,622
Mortgage

-

-

11,091

-

-

11,091

1,005,693

1,016,784
Legacy

388

202

1,528

-

-

2,118

19,987

22,105
Consumer:

Credit cards

-

-

-

-

-

-

36

36

HELOCs

-

-

2,024

-

7,930

9,954

107,389

117,343

Personal

-

-

1,664

-

403

2,067

322,373

324,440

Other

-

-

-

-

-

-

690

690

Total Consumer

-

-

3,688

-

8,333

12,021

430,488

442,509
Total Popular U.S.
$
228,976
$
62,872
$
204,408
$
-
$
8,333
$
504,589
$
6,722,052
$
7,226,641
Popular, Inc.

Commercial multi-family
$
49,700
$
17,697
$
10,226
$
-
$
-
$
77,623
$
1,717,536
$
1,795,159
Commercial real estate non-owner occupied

572,965

191,193

340,106

3,290

-

1,107,554

2,870,960

3,978,514
Commercial real estate owner occupied

220,193

190,387

197,203

1,629

-

609,412

1,316,052

1,925,464
Commercial and industrial

618,540

171,643

151,258

148

16

941,605

3,672,009

4,613,614

Total Commercial

1,461,398

570,920

698,793

5,067

16

2,736,194

9,576,557

12,312,751
Construction

46,984

17,940

65,569

-

-

130,493

700,599

831,092
Mortgage

2,187

2,218

138,712

-

-

143,117

7,040,415

7,183,532
Legacy

388

202

1,528

-

-

2,118

19,987

22,105
Leasing

-

-

3,590

-

68

3,658

1,055,849

1,059,507
Consumer:

Credit cards

-

-

19,461

-

-

19,461

1,104,375

1,123,836

HELOCs

-

-

2,024

-

7,930

9,954

112,427

122,381

Personal

77

-

21,222

-

403

21,702

1,670,888

1,692,590

Auto

-

-

30,775

-

372

31,147

2,886,375

2,917,522

Other

459

11

15,020

-

53

15,543

126,014

141,557

Total Consumer

536

11

88,502

-

8,758

97,807

5,900,079

5,997,886
Total Popular, Inc.
$
1,511,493
$
591,291
$
996,694
$
5,067
$
8,842
$
3,113,387
$
24,293,486
$
27,406,873

The following table presents the weighted average obligor risk rating at December 31, 2019 for those classifications that consider a range of rating scales.

December 31, 2020
				Term Loans													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis
				Amortized Cost Basis by Origination Year
(In thousands)					2020		2019		2018		2017		2016		Prior Years						Total
Popular, Inc.
	Consumer:
		Credit cards
			Substandard	$	0	$	0	$	0	$	0	$	0	$	0	$	12,798	$	0	$	12,798
			Pass		0		0		0		0		0		0		907,168		0		907,168
	Total credit cards			$	0	$	0	$	0	$	0	$	0	$	0	$	919,966	$	0	$	919,966

		HELOCs
			Substandard	$	0	$	0	$	0	$	0	$	0	$	112	$	0	$	357	$	469
			Loss		0		0		0		0		0		156		0		6,867		7,023
			Pass		0		0		0		0		0		12,447		43,005		35,806		91,258
	Total HELOCs			$	0	$	0	$	0	$	0	$	0	$	12,715	$	43,005	$	43,030	$	98,750

		Personal
			Substandard	$	1,371	$	5,566	$	1,906	$	1,096	$	989	$	18,653	$	152	$	1,545	$	31,278
			Loss		0		17		63		12		6		244		2		0		344
			Pass		363,709		523,579		195,835		109,391		59,174		145,949		2,336		45,390		1,445,363
	Total Personal			$	365,080	$	529,162	$	197,804	$	110,499	$	60,169	$	164,846	$	2,490	$	46,935	$	1,476,985

		Auto
			Substandard	$	1,975	$	6,029	$	3,612	$	1,760	$	1,369	$	990	$	0	$	0	$	15,735
			Pass		1,064,082		881,343		628,657		299,677		168,157		74,577		0		0		3,116,493
	Total Auto			$	1,066,057	$	887,372	$	632,269	$	301,437	$	169,526	$	75,567	$	0	$	0	$	3,132,228

		Other consumer
			Substandard	$	0	$	16	$	1,376	$	240	$	174	$	13,075	$	20	$	0	$	14,901
			Pass		16,912		15,698		13,158		4,966		2,828		3,785		56,160		0		113,507
	Total Other consumer			$	16,912	$	15,714	$	14,534	$	5,206	$	3,002	$	16,860	$	56,180	$	0	$	128,408
Total Popular Inc.				$	5,860,510	$	4,376,727	$	3,051,726	$	2,132,857	$	1,812,792	$	9,969,061	$	2,091,558	$	89,965	$	29,385,196

Weighted average obligor risk rating
(Scales 11 and 12)

(Scales 1 through 8)
Puerto Rico:

Substandard

Pass

Commercial multi-family

11.82

6.02

Commercial real estate non-owner occupied

11.17

6.77

Commercial real estate owner occupied

11.36

7.30

Commercial and industrial

11.26

7.20

Total Commercial

11.25

7.10

Construction

11.01

7.85

Popular U.S.:

Substandard

Pass

Commercial multi-family

11.25

7.37

Commercial real estate non-owner occupied

11.00

6.94

Commercial real estate owner occupied

11.02

7.48

Commercial and industrial

11.01

6.63

Total Commercial

11.02

7.04

Construction

11.00

7.74

Legacy

11.25

7.95

For changes in the allowance for credit losses, loan ending balances and whether such loans and the allowance pertained to loans individually or collectively evaluated for impairment for the quarter ended March 31, 2019, refer to the allowance activity section of this note..

~~Impaired loans~~

~~The following tables present loans individually evaluated for impairment at December 31, 2019.~~

December 31, 2019
Puerto Rico

Impaired Loans – With an
Impaired Loans

Allowance
With No Allowance
Impaired Loans - Total

Unpaid

Unpaid

Unpaid

Recorded
principal
Related
Recorded
principal
Recorded
principal

Related
(In thousands)
investment
balance
allowance
investment
balance
investment
balance

allowance
Commercial multi-family
$
1,196
$
1,229
$
4
$
1,017
$
1,247
$
2,213
$
2,476
$
4
Commercial real estate non-owner occupied

44,975

45,803

12,281

149,587

173,124

194,562

218,927

12,281
Commercial real estate owner occupied

105,841

122,814

5,077

26,365

58,540

132,206

181,354

5,077
Commercial and industrial

43,640

47,611

3,171

24,831

44,255

68,471

91,866

3,171
Construction

119

119

6

-

-

119

119

6
Mortgage

420,949

479,936

40,596

101,520

134,331

522,469

614,267

40,596
Leasing

507

507

61

-

-

507

507

61
Consumer:

Credit cards

24,475

24,475

2,957

-

-

24,475

24,475

2,957
Personal

65,521

65,521

17,142

-

-

65,521

65,521

17,142
Auto

310

310

51

-

-

310

310

51
Other

851

851

109

-

-

851

851

109
Total Puerto Rico
$
708,384
$
789,176
$
81,455
$
303,320
$
411,497
$
1,011,704
$
1,200,673
$
81,455

December 31, 2019
Popular U.S.

Impaired Loans – With an
Impaired Loans

Allowance
With No Allowance
Impaired Loans - Total

Unpaid

Unpaid

Unpaid

Recorded
principal
Related
Recorded
principal
Recorded
principal
Related
(In thousands)
investment
balance
allowance
investment
balance
investment
balance
allowance
Commercial multi-family
$
-
$
-
$
-
$
2,097
$
2,539
$
2,097
$
2,539
$
-
Mortgage

6,906

7,257

2,208

2,480

2,844

9,386

10,101

2,208
Consumer:

HELOCs

6,691

6,691

1,560

2,829

3,087

9,520

9,778

1,560
Personal

26

26

3

88

88

114

114

3
Total Popular U.S.
$
13,623
$
13,974
$
3,771
$
7,494
$
8,558
$
21,117
$
22,532
$
3,771

December 31, 2019
Popular, Inc.

Impaired Loans – With an
Impaired Loans

Allowance
With No Allowance
Impaired Loans - Total

Unpaid

Unpaid

Unpaid

Recorded
principal
Related
Recorded
principal
Recorded
principal
Related
(In thousands)
investment
balance
allowance
investment
balance
investment
balance
allowance
Commercial multi-family
$
1,196
$
1,229
$
4
$
3,114
$
3,786
$
4,310
$
5,015
$
4
Commercial real estate non-owner occupied

44,975

45,803

12,281

149,587

173,124

194,562

218,927

12,281
Commercial real estate owner occupied

105,841

122,814

5,077

26,365

58,540

132,206

181,354

5,077
Commercial and industrial

43,640

47,611

3,171

24,831

44,255

68,471

91,866

3,171
Construction

119

119

6

-

-

119

119

6
Mortgage

427,855

487,193

42,804

104,000

137,175

531,855

624,368

42,804
Leasing

507

507

61

-

-

507

507

61
Consumer:

Credit cards

24,475

24,475

2,957

-

-

24,475

24,475

2,957
HELOCs

6,691

6,691

1,560

2,829

3,087

9,520

9,778

1,560
Personal

65,547

65,547

17,145

88

88

65,635

65,635

17,145
Auto

310

310

51

-

-

310

310

51
Other

851

851

109

-

-

851

851

109
Total Popular, Inc.
$
722,007
$
803,150
$
85,226
$
310,814
$
420,055
$
1,032,821
$
1,223,205
$
85,226

~~The following table presents the average recorded investment and interest income recognized on impaired loans for the quarter ended March 31, 2019.~~

For the quarter ended March 31, 2019

Puerto Rico

Popular U.S.

Popular, Inc.

Average

Interest

Average

Interest

Average

Interest

recorded

income

recorded

income

recorded

income
(In thousands)
investment

recognized

investment

recognized

investment

recognized
Commercial multi-family
$
928

$
12

$
-

$
-

$
928

$
12
Commercial real estate non-owner occupied

178,725

1,712

-

-

178,725

1,712
Commercial real estate owner occupied

139,846

1,458

846

-

140,692

1,458
Commercial and industrial

70,662

745

-

-

70,662

745
Construction

1,788

-

12,060

-

13,848

-
Mortgage

512,417

4,026

9,429

40

521,846

4,066
Leasing

1,059

-

-

-

1,059

-
Consumer:

Credit cards

28,354

-

-

-

28,354

-
HELOCs

-

-

7,962

-

7,962

-
Personal

72,298

69

786

-

73,084

69
Auto

1,162

-

-

-

1,162

-
Other

1,247

-

-

-

1,247

-
Total Popular, Inc.
$
1,008,486

$
8,022

$
31,083

$
40

$
1,039,569

$
8,062

Note 109 – Mortgage banking activities

Income from mortgage banking activities includes mortgage servicing fees earned in connection with administering residential mortgage loans and valuation adjustments on mortgage servicing rights. It also includes gain on sales and securitizations of residential mortgage loans, losses on repurchased loans, including interest advances, and trading gains and losses on derivative contracts used to hedge the Corporation’s securitization activities. In addition, lower-of-cost-or-market valuation adjustments to residential mortgage loans held for sale, if any, are recorded as part of the mortgage banking activities.

The following table presents the components of mortgage banking activities:

Quarters ended March 31,
(In thousands)

2020

2019
Mortgage servicing fees, net of fair value adjustments:

Mortgage servicing fees
$
10,968
$
11,687

Mortgage servicing rights fair value adjustments

(5,229)

(3,825)
Total mortgage servicing fees, net of fair value adjustments

5,739

7,862
Net gain on sale of loans, including valuation on loans held-for-sale

3,986

4,017
Trading account loss:

Unrealized losses on outstanding derivative positions

(1,695)

-

Realized losses on closed derivative positions

(1,610)

(1,953)
Total trading account loss

(3,305)

(1,953)
Total mortgage banking activities
$
6,420
$
9,926


			Quarters ended March 31,
(In thousands)			2021		2020
Mortgage servicing fees, net of fair value adjustments:
	Mortgage servicing fees	$	9,715	$	10,968
	Mortgage servicing rights fair value adjustments		512		(5,229)
Total mortgage servicing fees, net of fair value adjustments			10,227		5,739
Net gain on sale of loans, including valuation on loans held-for-sale			4,975		3,986
Trading account profit (loss):
	Unrealized losses on outstanding derivative positions		0		(1,695)
	Realized profit (losses) on closed derivative positions		2,502		(1,610)
Total trading account profit (loss)			2,502		(3,305)
Losses on repurchased loans, including interest advances [1]			(361)		0
Total mortgage banking activities		$	17,343	$	6,420
[1]	The Corporation, from time to time, repurchases delinquent loans from its GNMA servicing portfolio, in compliance with Guarantor guidelines, and may incur in losses related to previously advanced interest on delinquent loans. Effective for the quarter ended September 30, 2020, the Corporation has determined to present these losses as part of its Mortgage Banking Activities, which were previously presented within the indemnity reserves on loans sold component of non-interest income. The amount of these losses for prior years were considered immaterial for reclassification.

5754

Note 1110 – Transfers of financial assets and mortgage servicing assets

The Corporation typically transfers conforming residential mortgage loans in conjunction with GNMA and FNMA securitization transactions whereby the loans are exchanged for cash or securities and servicing rights. As seller, the Corporation has made certain representations and warranties with respect to the originally transferred loans and, in the past, has sold certain loans with credit recourse to a government-sponsored entity, namely FNMA. Refer to Note 2019 to the Consolidated Financial Statements for a description of such arrangements.

No liabilities were incurred as a result of these securitizations during the quarters ended March 31, ~~2020~~2021 and ~~2019~~2020 because they did not contain any credit recourse arrangements. During the quarter ended March 31, ~~2020,~~2021, the Corporation recorded a net gain of ~~$3.8~~$3.7 million (March 31, ~~2019~~2020 - ~~$3.7~~$3.8 million) related to the residential mortgage loans securitized.

The following tables present the initial fair value of the assets obtained as proceeds from residential mortgage loans securitized during the quarters ended March 31, ~~2020~~2021 and ~~2019:~~2020:

		Proceeds Obtained During the Quarter Ended March 31, 2020								Proceeds Obtained During the Quarter Ended March 31, 2021
(In thousands)	Level 1		Level 2		Level 3		Initial Fair Value		Level 1		Level 2		Level 3		Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA	$	-	$	50,648	$	-	$	50,648	$	0	$	101,988	$	0	$	101,988
Mortgage-backed securities - FNMA		-		33,573		-		33,573		0		86,280		0		86,280
Total trading account debt securities	$	-	$	84,221	$	-	$	84,221	$	0	$	188,268	$	0	$	188,268
Mortgage servicing rights	$	-	$	-	$	1,487	$	1,487	$	0	$	0	$	2,809	$	2,809
Total	$	-	$	84,221	$	1,487	$	85,708	$	0	$	188,268	$	2,809	$	191,077

		Proceeds Obtained During the Quarter Ended March 31, 2019								Proceeds Obtained During the Quarter Ended March 31, 2020
(In thousands)	Level 1		Level 2		Level 3		Initial Fair Value		Level 1		Level 2		Level 3		Initial Fair Value
Assets
Trading account debt securities:
Mortgage-backed securities - GNMA	$	-	$	71,149	$	-	$	71,149	$	0	$	50,648	$	0	$	50,648
Mortgage-backed securities - FNMA		-		20,918		-		20,918		0		33,573		0		33,573
Total trading account debt securities	$	-	$	92,067	$	-	$	92,067	$	0	$	84,221	$	0	$	84,221
Mortgage servicing rights	$	-	$	-	$	1,658	$	1,658	$	0	$	0	$	1,487	$	1,487
Total	$	-	$	92,067	$	1,658	$	93,725	$	0	$	84,221	$	1,487	$	85,708

During the quarter ended March 31, ~~2020,~~2021, the Corporation retained servicing rights on whole loan sales involving approximately ~~$10.0~~$65 million in principal balance outstanding (March 31, ~~2019~~2020 - ~~$11.9~~$10 million), with net realized gains of approximately ~~$0.2~~$1.3 million (March 31, ~~2019~~2020 - gains of ~~$0.4~~$0.2 million). All loan sales performed during the quarters ended March 31, ~~2020~~2021 and ~~2019~~2020 were without credit recourse agreements.

The Corporation recognizes as assets the rights to service loans for others, whether these rights are purchased or result from asset transfers such as sales and securitizations. These mortgage servicing rights (“MSR”) are measured at fair value.

The Corporation uses a discounted cash flow model to estimate the fair value of MSRs. The discounted cash flow model incorporates assumptions that market participants would use in estimating future net servicing income, including estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, prepayment and late fees, among other considerations. Prepayment speeds are adjusted for the Corporation’s loan characteristics and portfolio behavior.

The following table presents the changes in MSRs measured using the fair value method for the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

5855

Residential MSRs	Residential MSRs				Residential MSRs
(In thousands)	March 31, 2020		March 31, 2019		March 31, 2021		March 31, 2020
Fair value at beginning of period	$	150,906	$	169,777	$	118,395	$	150,906
Additions		1,634		1,861		3,636		1,634
Changes due to payments on loans^[1]		(2,502)		(2,587)		(4,094)		(2,502)
Reduction due to loan repurchases		(312)		(491)		(556)		(312)
Changes in fair value due to changes in valuation model inputs or assumptions		(2,439)		(747)		5,162		(2,439)
Other		24		-		0		24
Fair value at end of period	$	147,311	$	167,813	$	122,543	$	147,311
[1] Represents changes due to collection / realization of expected cash flows over time.

Residential mortgage loans serviced for others were ~~$14.3~~$12.7 billion at March 31, ~~2020~~2021 (December 31, ~~2019~~2020 - ~~$14.8~~$12.9 billion).

Net mortgage servicing fees, a component of mortgage banking activities in the Consolidated Statements of Operations, include the changes from period to period in the fair value of the MSRs, including changes due to collection / realization of expected cash flows. The banking subsidiaries receive servicing fees based on a percentage of the outstanding loan balance. These servicing fees are credited to income when they are collected. At March 31, 2021 and 2020, those weighted average mortgage servicing fees were 0.30% ~~(March 31, 2019 - 0.29%)~~. Under these servicing agreements, the banking subsidiaries do not generally earn significant prepayment penalty fees on the underlying loans serviced.

During the quarter ended June 30, 2020, PB commenced selling whole loans with servicing retained. At March 31, 2021, PB had MSRs amounting to $1.0 million.

The section below includes information on assumptions used in the valuation model of the MSRs, originated and purchased.

Key economic assumptions used in measuring the servicing rights derived from loans securitized or sold by the Corporation during the quarters ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:

					Quarters ended
	Quarters ended				March 31, 2021				March 31, 2020
	March 31, 2020		March 31, 2019		BPPR		PB		BPPR		PB
Prepayment speed	5.9	%	6.3	%	8.8	%	21.4	%	5.9	%	0	%
Weighted average life (in years)	9.8		9.9		7.2		3.5		9.8		-
Discount rate (annual rate)	10.9	%	11.0	%	10.5	%	11.0	%	10.9	%	0	%

Key economic assumptions used to estimate the fair value of MSRs derived from sales and securitizations of mortgage loans performed by the banking subsidiaries and servicing rights purchased from other financial institutions, and the sensitivity to immediate changes in those assumptions, were as follows as of the end of the periods reported:

		Originated MSRs						Purchased MSRs							Originated MSRs						Purchased MSRs
		March 31,			December 31,			March 31,			December 31,				March 31,			December 31,			March 31,			December 31,
(In thousands)	(In thousands)	2020			2019			2020			2019			(In thousands)	2021			2020			2021			2020
Fair value of servicing rights	Fair value of servicing rights	$	56,725		$	58,842		$	90,586		$	92,064		Fair value of servicing rights	$	43,655		$	44,129		$	78,888		$	74,266
Weighted average life (in years)	Weighted average life (in years)		6.6			6.7			6.3			6.3		Weighted average life (in years)		6.3			6.2			6.2			5.9
Weighted average prepayment speed (annual rate)	Weighted average prepayment speed (annual rate)		6.0	%		5.7	%		6.5	%		6.2	%	Weighted average prepayment speed (annual rate)		6.0	%		6.6	%		6.1	%		7.1	%
	Impact on fair value of 10% adverse change	$	(1,348)		$	(1,303)		$	(2,409)		$	(2,306)		Impact on fair value of 10% adverse change	$	(951)		$	(1,115)		$	(1,972)		$	(2,206)
	Impact on fair value of 20% adverse change	$	(2,652)		$	(2,568)		$	(4,720)		$	(4,525)		Impact on fair value of 20% adverse change	$	(1,876)		$	(2,194)		$	(3,871)		$	(4,312)
Weighted average discount rate (annual rate)	Weighted average discount rate (annual rate)		11.4	%		11.4	%		11.0	%		11.0	%	Weighted average discount rate (annual rate)		11.3	%		11.3	%		11.1	%		11.1	%
	Impact on fair value of 10% adverse change	$	(2,268)		$	(2,381)		$	(3,508)		$	(3,603)		Impact on fair value of 10% adverse change	$	(1,630)		$	(1,640)		$	(3,059)		$	(2,740)
	Impact on fair value of 20% adverse change	$	(4,379)		$	(4,596)		$	(6,778)		$	(6,959)		Impact on fair value of 20% adverse change	$	(3,156)		$	(3,175)		$	(5,910)		$	(5,301)

The sensitivity analyses presented in the table above for servicing rights are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10 and 20 percent variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the sensitivity tables included herein, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without

changing any other assumption. In reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments and increased credit losses), which might magnify or counteract the sensitivities.

At March 31, 2021 and December 31, 2020, the Corporation serviced ~~$1.1~~$0.9 billion ~~(December 31, 2019 - $1.2 billion)~~ in residential mortgage loans with credit recourse to the Corporation. ~~Refer~~Also refer to Note 2019 for information on changes in the Corporation’s liability of estimated losses related to loans serviced with credit recourse.

Under the GNMA securitizations, the Corporation, as servicer, has the right to repurchase (but not the obligation), at its option and without GNMA’s prior authorization, any loan that is collateral for a GNMA guaranteed mortgage-backed security when certain delinquency criteria are met. At the time that individual loans meet GNMA’s specified delinquency criteria and are eligible for repurchase, the Corporation is deemed to have regained effective control over these loans if the Corporation was the pool issuer. At March 31, ~~2020,~~2021, the Corporation had recorded ~~$111~~$29 million in mortgage loans on its Consolidated Statements of Financial Condition related to this buy-back option program (December 31, ~~2019~~2020 - ~~$103~~$57 million). Loans in our serviced GNMA portfolio benefit from payment forbearance programs but continue to reflect the contractual delinquency until the borrower repays deferred payments or completes a payment deferral modification or other borrower assistance alternative. As long as the Corporation continues to service the loans that continue to be collateral in a GNMA guaranteed mortgage-backed security, the MSR is recognized by the Corporation.

During the quarter ~~months~~ ended March 31, ~~2020,~~2021, the Corporation repurchased approximately ~~$22~~$44 million (March 31, ~~2019~~2020 - ~~$34~~$22 million) of mortgage loans ~~under the~~from its GNMA ~~buy-back option program.~~servicing portfolio. The determination to repurchase these loans was based on the economic benefits of the transaction, which results in a reduction of the servicing costs for these severely delinquent loans, mostly related to principal and interest advances. ~~Furthermore, the~~The risk associated with the loans is reduced due to their guaranteed nature. The Corporation ~~places~~may place these loans under ~~its~~COVID-19 modification programs offered by FHA, VA or USDA or other loss mitigation programs offered by the Corporation, and once brought back to current status, these may be either retained in portfolio or re-sold in the secondary market.

6057

Note 1211 – Other real estate owned

The following tables present the activity related to Other Real Estate Owned (“OREO”), for the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

		For the quarter ended March 31, 2020						For the quarter ended March 31, 2021
		OREO		OREO				OREO		OREO
(In thousands)		Commercial/Construction		Mortgage		Total		Commercial/Construction		Mortgage		Total
Balance at beginning of period	$	16,959	$	105,113	$	122,072	$	13,214	$	69,932	$	83,146
Write-downs in value		(509)		(900)		(1,409)		(307)		(970)		(1,277)
Additions		2,120		15,407		17,527		3,850		1,873		5,723
Sales		(1,033)		(13,340)		(14,373)		(1,672)		(13,860)		(15,532)
Other adjustments		-		105		105
Ending balance	$	17,537	$	106,385	$	123,922	$	15,085	$	56,975	$	72,060

		For the quarter ended March 31, 2019						For the quarter ended March 31, 2020
		OREO		OREO				OREO		OREO
(In thousands)		Commercial/Construction		Mortgage		Total		Commercial/Construction		Mortgage		Total
Balance at beginning of period	$	21,794	$	114,911	$	136,705	$	16,959	$	105,113	$	122,072
Write-downs in value		(571)		(1,610)		(2,181)		(509)		(900)		(1,409)
Additions		1,170		7,764		8,934		2,120		15,407		17,527
Sales		(1,514)		(16,333)		(17,847)		(1,033)		(13,340)		(14,373)
Other adjustments		-		(133)		(133)		0		105		105
Ending balance	$	20,879	$	104,599	$	125,478	$	17,537	$	106,385	$	123,922

6158

Note 1312 − Other assets

The caption of other assets in the consolidated statements of financial condition consists of the following major categories:

(In thousands)	March 31, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Net deferred tax assets (net of valuation allowance)	$	929,321	$	886,353	$	804,148	$	851,592
Investments under the equity method		243,578		237,081		262,335		250,467
Prepaid taxes		24,605		47,226		26,464		32,615
Other prepaid expenses		88,099		82,425		78,864		74,572
Derivative assets		9,534		17,966		20,971		20,785
Trades receivable from brokers and counterparties		6,027		47,049		72,567		65,429
Principal, interest and escrow servicing advances		83,848		77,800		66,158		65,671
Guaranteed mortgage loan claims receivable		108,605		108,946		72,649		80,477
Operating ROU assets (Note 28)		146,665		149,849
Finance ROU assets (Note 28)		13,625		12,888
Operating ROU assets (Note 27)						127,622		131,921
Finance ROU assets (Note 27)						14,884		15,464
Others		134,530		152,032		166,421		148,048
Total other assets	$	1,788,437	$	1,819,615	$	1,713,083	$	1,737,041

The Corporation enters in the ordinary course of business into technology hosting arrangements that are service contracts. These arrangements can include capitalizable implementation costs that are amortized during the term of the hosting arrangement. The Corporation recognizes capitalizable implementation costs related to hosting arrangements that are service contracts within ~~the Other assets line~~Others in the ~~accompanying Consolidated Statement of Financial Condition.~~table above. As of March 31, ~~2020,~~2021, the total capitalized implementation costs amounted to ~~$13.7~~$17.9 million with an accumulated amortization of ~~$3.2~~$5.7 million for a net value of ~~$10.5 million.~~$12.2 million, compared to total capitalized implementation costs amounting to $17.4 million with an accumulated amortization of $4.9 million for a net value of $12.5 million as of December 31, 2020. Total amortization expense for all capitalized implementation costs of hosting arrangements that are service contracts for the ~~period~~quarter ended March 31, 2021 was $0.8 million (March 31, 2020 ~~was~~- $0.5 ~~million.~~million).

6259

Note 1413 – Goodwill and other intangible assets

Goodwill

There were 0 changes in the carrying amount of goodwill for the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

The following ~~table presents~~tables present the gross amount of goodwill and accumulated impairment losses by reportable segments:

March 31, 2021
	Balance at				Balance at
	March 31,		Accumulated		March 31,
	2021		impairment		2021
(In thousands)	(gross amounts)		losses		(net amounts)
Banco Popular de Puerto Rico	$	324,049	$	3,801	$	320,248
Popular U.S.		515,285		164,411		350,874
Total Popular, Inc.	$	839,334	$	168,212	$	671,122

March 31, 2020
December 31, 2020							December 31, 2020
	Balance at				Balance at		Balance at				Balance at
	March 31,		Accumulated		March 31,		December 31,		Accumulated		December 31,
	2020		impairment		2020		2020		impairment		2020
(In thousands)	(gross amounts)		losses		(net amounts)		(gross amounts)		losses		(net amounts)
Banco Popular de Puerto Rico	$	324,049	$	3,801	$	320,248	$	324,049	$	3,801	$	320,248
Popular U.S.		515,285		164,411		350,874		515,285		164,411		350,874
Total Popular, Inc.	$	839,334	$	168,212	$	671,122	$	839,334	$	168,212	$	671,122

December 31, 2019

Balance at

Balance at

December 31,
Accumulated
December 31,

2019
impairment
2019
(In thousands)
(gross amounts)
losses
(net amounts)
Banco Popular de Puerto Rico
$
324,049
$
3,801
$
320,248
Popular U.S.

515,285

164,411

350,874
Total Popular, Inc.
$
839,334
$
168,212
$
671,122

~~Interim Goodwill Impairment Test~~

The Corporation’s goodwill and other identifiable intangible assets having an indefinite useful life are tested for impairment, at least annually and on a more frequent basis if events or circumstances indicate impairment could have taken place. Such events could include, among others, a significant adverse change in the business climate, an adverse action by a regulator, an unanticipated change in the competitive environment and a decision to change the operations or dispose of a reporting unit.

Management monitors events or changes in circumstances between annual tests to determine if these events or changes in circumstances would more likely than not reduce the fair value of a reporting unit below its carrying amounts

As discussed in Note 3, “New accounting pronouncements”, effective on January 1, 2020, the Corporation adopted ASU 2017-04, which simplifies the accounting for goodwill impairment by removing Step 2 of the two-step goodwill impairment test under the previous guidance. Accordingly, if the carrying amount of any of the reporting units exceeds its fair value, the Corporation would be required to record an impairment charge for the difference up to the amount of the goodwill.

In determining the fair value of a reporting unit, the Corporation generally uses a combination of methods, including market price multiples of comparable companies and transactions, as well as discounted cash flow analysis. Management evaluates the particular circumstances of each reporting unit in order to determine the most appropriate valuation methodology. The Corporation evaluates the results obtained under each valuation methodology to identify and understand the key value drivers in order to ascertain that the results obtained are reasonable and appropriate under the circumstances. Elements considered include current market and economic conditions, developments in specific lines of business, and any particular features in the individual reporting units. For purposes of the interim triggering event evaluation, management also considered the results of the fair value of the

~~reporting units without considering the comparable transaction approach as there is limited information of comparable transactions during the COVID-19 pandemic.~~

~~The computations require management to make estimates and assumptions. Critical assumptions that are used as part of these evaluations include:~~

~~a selection of comparable publicly traded companies, based on nature of business, location and size;~~

~~a selection of comparable acquisitions;~~

~~the discount rate applied to future earnings, based on an estimate of the cost of equity;~~

~~the potential future earnings of the reporting unit; and~~

~~the market growth and new business assumptions.~~

For purposes of the market comparable companies’ approach, valuations were determined by calculating average price multiples of relevant value drivers from a group of companies that are comparable to the reporting unit being analyzed and applying those price multiples to the value drivers of the reporting unit. Comparable companies’ price multiples represent minority-based multiples and thus, a control premium adjustment is added to the comparable companies’ market multiples applied to the reporting unit’s value drivers. For purposes of the market comparable transactions’ approach, valuations were determined by calculating average price multiples of relevant value drivers from a group of transactions for which the target companies are comparable to the reporting unit being analyzed and applying those price multiples to the value drivers of the reporting unit. Comparable transactions’ price multiples represent controlling based multiples and thus, no control premium adjustment is made to the comparable transactions’ market multiples applied to the reporting unit’s value drivers. While the market price multiple is not an assumption, a presumption that it provides an indicator of the value of the reporting unit is inherent in the valuation. The determination of the market comparable companies and transactions also involves a degree of judgment.

For purposes of the discounted cash flows (“DCF”) approach, the valuation is based on estimated future cash flows. The financial projections used in the DCF valuation analysis for each reporting unit are based on the most recent (as of the valuation date) financial projections presented to the Corporation’s Asset / Liability Management Committee (“ALCO”). The growth assumptions included in these projections are based on management’s expectations for each reporting unit’s financial prospects considering economic and industry conditions as well as particular plans of each entity (i.e. restructuring plans, de-leveraging, etc.). The cost of equity used to discount the cash flows was calculated using the Ibbotson Build-Up Method and ranged from 10.27% to11.01% for the March 2020 analysis. The Ibbotson Build-Up Method builds up a cost of equity starting with the rate of return of a “risk-free” asset (20-year U.S. Treasury note) and adds to it additional risk elements such as equity risk premium, size premium and industry risk premium. The resulting discount rates were analyzed in terms of reasonability given the current market conditions.

~~The results of BPPR interim goodwill impairment test as of March 31, 2020~~ ~~indicated that the average estimated fair value using all valuation methodologies exceeded BPPR’s equity value by approximately $761 million or 25%~~ ~~compared to $1.2 billion or 37%, for the annual goodwill impairment test completed as of July 31, 2019~~. The fair value conclusion for BPPR considers the comparable transactions approach. If the comparable transactions approach is not considered, as those transactions occurred prior to COVID-19, the average estimated fair value exceeded BPPR’s equity value by approximately $589 million or 19%. Accordingly, there was 0 impairment on goodwill recorded in BPPR at March 31, 2020. ~~PB’s interim goodwill impairment test results as of such dates~~ ~~indicated that the average estimated fair value using all valuation methodologies exceeded PB’s equity value by approximately $85 million or 5%, compared to $338 million or 21%, for the annual goodwill impairment test completed as of July 31, 2019~~. The fair value conclusion for PB considers the comparable transactions approach. If the comparable transactions approach is not considered, as those transactions occurred prior to COVID-19, the average estimated fair value exceeded PB’s equity value by approximately $26 million or 2%. Accordingly, there was 0 impairment on goodwill recorded in PB at March 31, 2020. The goodwill balance of BPPR and PB, as legal entities, represented approximately 91% of the Corporation’s total goodwill balance as of the March 31, 2020 valuation date.

Furthermore, as part of the analyses, management performed a reconciliation of the aggregate fair values determined for the reporting units to the market capitalization of the Corporation concluding that the fair value results determined for the reporting units in the March 31, 2020 interim assessment were reasonable.

The goodwill impairment evaluation process requires the Corporation to make estimates and assumptions with regard to the fair value of the reporting units. Actual values may differ significantly from these estimates. Such differences could result in future impairment of goodwill that would, in turn, negatively impact the Corporation’s results of operations and the reporting units where the

goodwill is recorded. Declines in the Corporation’s market capitalization and adverse economic conditions sustained over a longer period of time negatively affecting forecasted cash flows could increase the risk of goodwill impairment in the future.

The extent to which the COVID-19 pandemic further impacts our business, results of operations and financial condition, as well as the operations of our clients, customers, service providers and suppliers, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response thereto. A further decline in the Corporation’s stock price related to global and/or regional macroeconomic conditions, the continued weakness in the Puerto Rico economy and fiscal situation, reduced future earnings estimates, additional expenses and higher credit losses, and the continuance of the current interest rate environment could, individually or in the aggregate, have a material impact on the determination of the fair value of our reporting units, which could in turn result in an impairment of goodwill in the future. An impairment of goodwill would result in a non-cash expense, net of tax impact. A charge to earnings related to a goodwill impairment would not impact regulatory capital calculations.

Other Intangible Assets

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Corporation had $6.1 million of identifiable intangible assets with indefinite useful lives, mostly associated with the E-LOAN trademark.

The following table reflects the components of other intangible assets subject to amortization:

		Gross Carrying			Accumulated		Net Carrying		Gross Carrying			Accumulated		Net Carrying
(In thousands)	(In thousands)		Amount		Amortization		Value	(In thousands)		Amount		Amortization		Value
March 31, 2020
March 31, 2021								March 31, 2021
	Core deposits	$	37,224	$	30,723	$	6,501	Core deposits	$	12,810	$	7,793	$	5,017
	Other customer relationships		42,909		29,592		13,317	Other customer relationships		26,397		16,390		10,007
	Trademark		488		163		325	Trademark		488		261		227
Total other intangible assets	Total other intangible assets	$	80,621	$	60,478	$	20,143	Total other intangible assets	$	39,695	$	24,444	$	15,251
December 31, 2019
December 31, 2020								December 31, 2020
	Core deposits	$	37,224	$	29,792	$	7,432	Core deposits	$	12,810	$	7,473	$	5,337
	Other customer relationships		42,909		28,075		14,834	Other customer relationships		26,397		15,684		10,713
	Trademark		488		138		350	Trademark		488		236		252
Total other intangible assets	Total other intangible assets	$	80,621	$	58,005	$	22,616	Total other intangible assets	$	39,695	$	23,393	$	16,302

During the quarter ended March 31, ~~2020,~~2021, the Corporation recognized ~~$2.5~~$1.1 million in amortization expense related to other intangible assets with definite useful lives (March 31, ~~2019~~2020 - ~~$2.3~~$2.5 million).

The following table presents the estimated amortization of the intangible assets with definite useful lives for each of the following periods:

(In thousands)

Remaining 2020
$
3,897
Year 2021

3,559
Year 2022

2,683
Year 2023

2,642
Year 2024

2,355
Later years

5,007

6560

(In thousands)
Remaining 2021	$	2,524
Year 2022		2,700
Year 2023		2,659
Year 2024		2,361
Year 2025		1,172
Later years		3,835

Note 1514 – Deposits

Total interest bearing deposits as of the end of the periods presented consisted of:

(In thousands)	(In thousands)	March 31, 2020		December 31, 2019		(In thousands)	March 31, 2021		December 31, 2020
Savings accounts	Savings accounts	$	10,801,188	$	10,618,629	Savings accounts	$	14,599,535	$	14,031,736
NOW, money market and other interest bearing demand deposits	NOW, money market and other interest bearing demand deposits		16,071,715		16,305,007	NOW, money market and other interest bearing demand deposits		22,623,197		22,398,057
Total savings, NOW, money market and other interest bearing demand deposits	Total savings, NOW, money market and other interest bearing demand deposits		26,872,903		26,923,636	Total savings, NOW, money market and other interest bearing demand deposits		37,222,732		36,429,793
Certificates of deposit:	Certificates of deposit:					Certificates of deposit:
	Under $100,000		3,088,350		3,133,840	Under $100,000		2,877,209		2,917,700
	$100,000 and over		5,439,474		4,540,957	$100,000 and over		4,379,312		4,390,148
Total certificates of deposit	Total certificates of deposit		8,527,824		7,674,797	Total certificates of deposit		7,256,521		7,307,848
Total interest bearing deposits	Total interest bearing deposits	$	35,400,727	$	34,598,433	Total interest bearing deposits	$	44,479,253	$	43,737,641

A summary of certificates of ~~deposit~~deposits by maturity at March 31, ~~2020~~2021 follows:

(In thousands)
2020	$	4,906,644
2021		1,431,390	$	3,996,245
2022		770,852		1,166,193
2023		546,596		702,298
2024		592,903		609,922
2025 and thereafter		279,439
2025				549,390
2026 and thereafter				232,473
Total certificates of deposit	$	8,527,824	$	7,256,521

At March 31, ~~2020,~~2021, the Corporation had brokered deposits amounting to $ ~~0.6~~0.8 billion (December 31, ~~2019~~2020 - $ ~~0.5~~0.8 billion).

The aggregate amount of overdrafts in demand deposit accounts that were reclassified to loans was $53 million at March 31, ~~2020~~2021 (December 31, ~~2019~~2020 - $4$3 million).

At March 31, 2021, public sector deposits amounted to $15 billion. These balances are expected to decline over the long term, however, the receipt by the P.R. Government of additional COVID-19 and hurricane relief related Federal assistance, and seasonal tax collections, are likely to increase public deposit balances at BPPR in the near term. The rate at which public deposit balances will decline is uncertain and difficult to predict. The amount and timing of any such reduction is likely to be impacted by, for example, the timeline of current debt restructuring efforts under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) and the speed at which COVID-19 federal assistance is distributed.

6662

Note 1615 – Borrowings

Assets sold under agreements to repurchase amounted to ~~$179~~$87 million at March 31, ~~2020~~2021 and ~~$193~~$121 million December 31, ~~2019.~~2020.

The Corporation’s repurchase transactions are overcollateralized with the securities detailed in the table below. The Corporation’s repurchase agreements have a right of set-off with the respective counterparty under the supplemental terms of the master repurchase agreements. In an event of default each party has a right of set-off against the other party for amounts owed in the related agreement and any other amount or obligation owed in respect of any other agreement or transaction between them. Pursuant to the Corporation’s accounting policy, the repurchase agreements are not offset with other repurchase agreements held with the same counterparty.

The following table presents information related to the Corporation’s repurchase transactions accounted for as secured borrowings that are collateralized with debt securities available-for-sale, other assets held-for-trading purposes or which have been obtained under agreements to resell. It is the Corporation’s policy to maintain effective control over assets sold under agreements to repurchase; accordingly, such securities continue to be carried on the Consolidated Statements of Financial Condition.

Repurchase agreements accounted for as secured borrowings

		March 31, 2020		December 31, 2019			March 31, 2021		December 31, 2020
			Repurchase		Repurchase			Repurchase		Repurchase
(In thousands)	(In thousands)		liability		liability	(In thousands)		liability		liability
U.S. Treasury securities	U.S. Treasury securities					U.S. Treasury securities
	Within 30 days	$	19,425	$	88,646	Within 30 days	$	14,665	$	67,157
	After 30 to 90 days		14,673		78,061	After 30 to 90 days		14,732		39,318
	After 90 days		119,304		24,538	After 90 days		44,796		9,979
Total U.S. Treasury securities	Total U.S. Treasury securities		153,402		191,245	Total U.S. Treasury securities		74,193		116,454
Mortgage-backed securities	Mortgage-backed securities					Mortgage-backed securities
	Within 30 days		23,967		1,235	Within 30 days		2,129		3,778
	After 90 days		323		-	After 30 to 90 days		0		268
						After 90 days		9,735		0
Total mortgage-backed securities	Total mortgage-backed securities		24,290		1,235	Total mortgage-backed securities		11,864		4,046
Collateralized mortgage obligations	Collateralized mortgage obligations					Collateralized mortgage obligations
	Within 30 days		1,074		898	Within 30 days		777		803
Total collateralized mortgage obligations	Total collateralized mortgage obligations		1,074		898	Total collateralized mortgage obligations		777		803
Total	Total	$	178,766	$	193,378	Total	$	86,834	$	121,303

Repurchase agreements in this portfolio are generally short-term, often overnight. As such our risk is very limited. We manage the liquidity risks arising from secured funding by sourcing funding globally from a diverse group of counterparties, providing a range of securities collateral and pursuing longer durations, when appropriate.

~~At March 31, 2020, other short-term borrowings consisted of $100 million in FHLB advances drawn during the first quarter of 2020.~~ There were 0 other short-term borrowings outstanding at March 31, 2021 and December 31, ~~2019.~~2020.

The following table presents the composition of notes payable at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

6763

(In thousands)
March 31, 2020

December 31, 2019
Advances with the FHLB with maturities ranging from 2020 through 2029 paying interest at monthly fixed rates ranging from 1.14% to 4.19%
$
377,598

$
421,399
Unsecured senior debt securities maturing on 2023 paying interest semiannually at a fixed rate of 6.125%, net of debt issuance costs of $ 4,376

295,624

295,307
Junior subordinated deferrable interest debentures (related to trust preferred securities) with maturities ranging from 2033 to 2034 with fixed interest rates ranging from 6.125% to 6.7%, net of debt issuance costs of $389

384,909

384,902
Total notes payable
$
1,058,131

$
1,101,608
Note: Refer to the Corporation's 2019 Form 10-K for rates information at December 31, 2019.

(In thousands)	March 31, 2021		December 31, 2020
Advances with the FHLB with maturities ranging from 2021 through 2029 paying interest at monthly fixed rates ranging from 0.39% to 4.19%	$	541,469	$	542,469
Advances with the FRB maturing on 2022 paying interest annually at a fixed rate of 0.35%		934		1,009
Unsecured senior debt securities maturing on 2023 paying interest semiannually at a fixed rate of 6.125%, net of debt issuance costs of $ 3,109		296,891		296,574
Junior subordinated deferrable interest debentures (related to trust preferred securities) with maturities ranging from 2033 to 2034 with fixed interest rates ranging from 6.125% to 6.7%, net of debt issuance costs of $362		384,936		384,929
Total notes payable	$	1,224,230	$	1,224,981
Note: Refer to the Corporation's 2020 Form 10-K for rates information at December 31, 2020.

A breakdown of borrowings by contractual maturities at March 31, ~~2020~~2021 is included in the table below.

		Assets sold under		Short-term						Assets sold under
(In thousands)		agreements to repurchase		borrowings		Notes payable	Total			agreements to repurchase		Notes payable	Total
2020	$	116,113	$	100,000	$	96,120	$	312,233
2021		62,653		-		50,040		112,693	$	62,099	$	49,040	$	111,139
2022		-		-		103,148		103,148		24,735		104,081		128,816
2023		-		-		318,884		318,884		0		340,152		340,152
2024		-		-		28,373		28,373		0		91,944		91,944
2025										0		139,920		139,920
Later years		-		-		461,566		461,566		0		499,093		499,093
Total borrowings	$	178,766	$	100,000	$	1,058,131	$	1,336,897	$	86,834	$	1,224,230	$	1,311,064

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Corporation had FHLB borrowing facilities whereby the Corporation could borrow up to ~~$3.8~~$2.9 billion and ~~$3.6~~$3.0 billion, respectively, of which $0.5 billion ~~and $0.4 billion, respectively,~~ were ~~used.~~used at each period. In addition, at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Corporation had placed $~~0.9~~$0.9 billion of the available FHLB credit facility as collateral for a municipal ~~letter~~letters of credit to secure deposits. The FHLB borrowing facilities are collateralized with loans held-in-portfolio, and do not have restrictive covenants or callable features.

Also, at March 31, ~~2020,~~2021, the Corporation has a borrowing facility at the discount window of the Federal Reserve Bank of New York amounting to ~~$1.5~~$1.3 billion ~~(2019~~(2020 - ~~$1.1~~$1.4 billion), which remained unused at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. The facility is a collateralized source of credit that is highly reliable even under difficult market conditions.

6864

Note 1716 − Other liabilities

The caption of other liabilities in the consolidated statements of financial condition consists of the following major categories:

(In thousands)
March 31, 2020
December 31, 2019
Accrued expenses
$
233,692
$
273,184
Accrued interest payable

34,539

44,026
Accounts payable

61,833

65,688
Dividends payable

35,505

29,027
Trades payable

5,279

4,084
Liability for GNMA loans sold with an option to repurchase

111,285

102,663
Reserves for loan indemnifications

34,862

38,074
Reserve for operational losses

38,373

35,665
Operating lease liabilities (Note 28)

161,961

165,139
Finance lease liabilities (Note 28)

20,529

19,810
Pension benefit obligation

48,704

52,616
Postretirement benefit obligation

170,507

168,681
Others

42,892

46,296
Total other liabilities
$
999,961
$
1,044,953

(In thousands)	March 31, 2021		December 31, 2020
Accrued expenses	$	246,177	$	235,449
Accrued interest payable		30,124		38,622
Accounts payable		71,174		69,784
Dividends payable		33,754		33,701
Trades payable		12,180		720,212
Liability for GNMA loans sold with an option to repurchase		29,399		57,189
Reserves for loan indemnifications		22,422		24,781
Reserve for operational losses		44,144		41,452
Operating lease liabilities (Note 27)		140,129		152,588
Finance lease liabilities (Note 27)		21,439		22,572
Pension benefit obligation		29,854		35,568
Postretirement benefit obligation		178,666		179,211
Others		59,382		73,560
Total other liabilities	$	918,844	$	1,684,689

6965

Note 1817 – Stockholders’ equity

As of March 31, ~~2020,~~2021, stockholder’s equity totaled ~~$5.7~~$5.9 billion. During the quarter ~~months~~ ended March 31, ~~2020,~~2021, the Corporation declared cash dividends of $0.40 ~~(2019~~(2020 - ~~$0.30)~~$0.40) per common share outstanding ~~amounting~~ to ~~$35.5~~$33.8 million ~~(2019~~(2020 - ~~$29.0~~$35.5 million). The quarterly dividend declared to shareholders of record as of the close of business on ~~February 28, 2020~~March 18, 2021 was paid on April 1, ~~2020.~~2021. On May 6, 2021, the Corporation’s Board of Directors approved a quarterly cash dividend of $0.45 per share on its outstanding common stock. The dividend will be payable on July 1, 2020 to shareholders of record at the close of business on May 26, 2021.

~~During the quarter ended March 31, 2019,~~Preferred Stocks

On February 24, 2020, the Corporation ~~entered into~~redeemed all the outstanding shares of the 2008 Series B Preferred Stock. The redemption price of the 2008 Series B Preferred Stock was $25.00 per share, plus $0.1375 (representing the amount of accrued and unpaid dividends for the current monthly dividend period to the redemption date), for a ~~$250 million accelerated~~total payment per share in the amount of $25.1375.

Accelerated share repurchase transaction (“ASR”)

On May 3, 2021, the Corporation announced that it had entered into an accelerated share repurchase agreement (the “ASR Agreement”) to repurchase an aggregate of $350 million of Corpration’s common stock. Under the terms of the ASR Agreement, on May 4, 2021 the Corporation made an initial payment of $350 million and ~~in connection therewith,~~ received an initial delivery of ~~3,500,000~~3,785,831 shares of ~~common stock~~Corporation’s Common Stock (the “Initial Shares”)~~, which~~. The transaction was accounted for as a treasury stock transaction. AsFurthermore, as a result of the receipt of the Initial Shares, the Corporation recognized in ~~shareholders’~~stockholders’ equity approximately ~~$200~~$280 million in treasury stock and ~~$50~~$70 million as a reduction ofin capital surplus. ~~The~~Upon the final settlement of the ASR Agreement, the Corporation ~~completed this transaction during~~expects to further adjust its treasury stock and capital surplus accounts to reflect the ~~fourth quarter~~final delivery or receipt of ~~2019 and received 1,165,607 additional~~cash or shares, ~~of common stock. The final number of shares delivered at settlement was based~~which will depend on the ~~average daily volume weighted~~volume-weighted average price ~~(“VWAP”)~~ of ~~its~~the Corporation’s common stock ~~net of a discount,~~ during the term of the ASR Agreement, less a discount. The final settlement of ~~$53.58.~~the ASR Agreement is expected to occur no later than the third quarter of 2021.

On January 30, 2020, the Corporation entered into a $500 million ~~“ASR”~~ASR transaction with respect to its common stock, which was accounted for as a treasury stock transaction. As a result of the receipt of the initial 7,055,919 shares, the Corporation recognized in shareholder’s equity approximately $400 million in treasury stock and $100 million as a reduction in capital surplus. The ASR provided that the final number of shares delivered at settlement would be based on the average daily volume weighted average price (“VWAP”) of the Corporation’s common stock, net of a discount, during the term of the ASR. As a result of the recent decrease in the trading price of the Corporation’s common stock during the COVID-19 pandemic, onOn March 19, 2020 (the “early termination date”), the dealer counterparty to the ASR exercised its right to terminate the ASR as a result of the trading price of the Corporation’s common stock falling below a specified ~~level. The agreement executed in connection with~~level due to the effects of the COVID-19 pandemic on the global markets. As a result of such early termination, ~~(the “Termination Agreement”) provides for the acceleration of~~ the final settlement of the ASR, which was ~~originally~~ expected to occur during the fourth quarter of 2020, occurred during the second quarter of 2020. ~~Under~~The Corporation completed the ~~settlement resulting from the Termination Agreement, the Corporation will receive a further number of~~transaction on May 27, 2020 and received 4,763,216 additional shares of common stock ~~equivalent to approximately $167 million. As of March 31, 2020, the Corporation had received 642,400 additional shares~~ after the early termination date. In total the Corporation repurchased 11,819,135 shares at an average price per share of $42.3043 under the ASR. ~~In connection with such receipt, the Corporation recorded approximately $~~23 ~~million as treasury stock and recognized that amount as an increase in capital surplus.~~

On February 24, 2020, the Corporation redeemed all outstanding shares of its 8.25% Non-Cumulative Monthly Income Preferred Stock, Series B (“Series B Preferred Stock”). The Series B Preferred Stock was redeemed at the redemption price of $25.00 per share, plus $0.1375 in accrued and unpaid dividends on each share, for a total payment per share in the amount of $25.1375 and a total aggregate payment of $28.2 million.

7066

Note 1918 – Other comprehensive (loss) income ~~(loss)~~

The following table presents changes in accumulated other comprehensive (loss) income ~~(loss)~~ by component for the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

		Changes in Accumulated Other Comprehensive Income (Loss) by Component [1]						Changes in Accumulated Other Comprehensive (Loss) Income by Component [1]
			Quarters ended March 31,						Quarters ended March 31,
(In thousands)	(In thousands)		2020		2019		(In thousands)		2021		2020
Foreign currency translation	Foreign currency translation	Beginning Balance	$	(56,783)	$	(49,936)	Foreign currency translation	Beginning Balance	$	(71,254)	$	(56,783)
		Other comprehensive loss		(1,818)		(1,238)		Other comprehensive income (loss)		569		(1,818)
		Net change		(1,818)		(1,238)		Net change		569		(1,818)
		Ending balance	$	(58,601)	$	(51,174)		Ending balance	$	(70,685)	$	(58,601)
Adjustment of pension and postretirement benefit plans	Adjustment of pension and postretirement benefit plans	Beginning Balance	$	(202,816)	$	(203,836)	Adjustment of pension and postretirement benefit plans	Beginning Balance	$	(195,056)	$	(202,816)
		Amounts reclassified from accumulated other comprehensive loss for amortization of net losses		3,351		3,673		Amounts reclassified from accumulated other comprehensive loss for amortization of net losses		3,242		3,351
		Net change		3,351		3,673		Net change		3,242		3,351
		Ending balance	$	(199,465)	$	(200,163)		Ending balance	$	(191,814)	$	(199,465)
Unrealized net holding gains (losses) on debt securities		Beginning Balance	$	92,155	$	(173,811)
Unrealized net holding gains on debt securities							Unrealized net holding gains on debt securities	Beginning Balance	$	460,900	$	92,155
		Other comprehensive income		381,776		101,403		Other comprehensive (loss) income		(369,945)		381,776
		Net change		381,776		101,403		Net change		(369,945)		381,776
		Ending balance	$	473,931	$	(72,408)		Ending balance	$	90,955	$	473,931
Unrealized net losses on cash flow hedges	Unrealized net losses on cash flow hedges	Beginning Balance	$	(2,494)	$	(391)	Unrealized net losses on cash flow hedges	Beginning Balance	$	(4,599)	$	(2,494)
		Reclassification to retained earnings due to cumulative effect adjustment of accounting change		-		(50)		Other comprehensive income (loss) before reclassifications		1,357		(3,589)
		Other comprehensive loss before reclassifications		(3,589)		(437)		Amounts reclassified from accumulated other comprehensive loss		48		841
		Amounts reclassified from accumulated other comprehensive loss		841		644		Net change		1,405		(2,748)
		Net change		(2,748)		157		Ending balance	$	(3,194)	$	(5,242)
		Ending balance	$	(5,242)	$	(234)		Total	$	(174,738)	$	210,623
		Total	$	210,623	$	(323,979)
[1] All amounts presented are net of tax.	[1] All amounts presented are net of tax.						[1] All amounts presented are net of tax.

The following table presents the amounts reclassified out of each component of accumulated other comprehensive (loss) income ~~(loss)~~ during the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

		Reclassifications Out of Accumulated Other Comprehensive (Loss) Income
		Affected Line Item in the	Quarters ended March 31,
(In thousands)		Consolidated Statements of Operations	2021		2020

Adjustment of pension and postretirement benefit plans
	Amortization of net losses	Other operating expenses	$	(5,190)	$	(5,362)
		Total before tax		(5,190)		(5,362)
		Income tax benefit		1,948		2,011
		Total net of tax	$	(3,242)	$	(3,351)
Unrealized net losses on cash flow hedges
	Forward contracts	Mortgage banking activities	$	370	$	(1,296)
	Interest rate swaps	Other operating income	$	(279)	$	(31)
		Total before tax		91		(1,327)
		Income tax (expense) benefit		(139)		486
		Total net of tax	$	(48)	$	(841)
		Total reclassification adjustments, net of tax	$	(3,290)	$	(4,192)

7168

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

Affected Line Item in the
Quarters ended March 31,
(In thousands)
Consolidated Statements of Operations
2020
2019

Adjustment of pension and postretirement benefit plans

Amortization of net losses
Personnel costs
$
(5,362)
$
(5,876)

Total before tax

(5,362)

(5,876)

Income tax benefit

2,011

2,203

Total net of tax
$
(3,351)
$
(3,673)
Unrealized net losses on cash flow hedges

Forward contracts
Mortgage banking activities
$
(1,296)
$
(1,030)

Interest rate swaps
Other operating income
$
(31)
$
-

Total before tax

(1,327)

(1,030)

Income tax benefit (expense)

486

386

Total net of tax
$
(841)
$
(644)

Total reclassification adjustments, net of tax
$
(4,192)
$
(4,317)

Note 2019 – Guarantees

At March 31, ~~2020~~2021 the Corporation ~~recorded~~had a liability of $0.2 million (December 31, ~~2019~~2020 - ~~$0.3~~$0.2 million), which represents the unamortized balance of the obligations undertaken in issuing the guarantees under the standby letters of credit. Management does not anticipate any material losses related to these instruments.

From time to time, the Corporation securitized mortgage loans into guaranteed mortgage-backed securities subject to limited, and in certain instances, lifetime credit recourse on the loans that serve as collateral for the mortgage-backed securities. The Corporation has not sold any mortgage loans subject to credit recourse since 2009. At March 31, ~~2020~~2021, the Corporation serviced ~~$1.1~~$0.9 billion (December 31, ~~2019~~2020 - ~~$1.2~~$0.9 billion) in residential mortgage loans subject to credit recourse provisions, principally loans associated with FNMA and FHLMC residential mortgage loan securitization programs. In the event of any customer default, pursuant to the credit recourse provided, the Corporation is required to repurchase the loan or reimburse the third party investor for the incurred loss. The maximum potential amount of future payments that the Corporation would be required to make under the recourse arrangements in the event of nonperformance by the borrowers is equivalent to the total outstanding balance of the residential mortgage loans serviced with recourse and interest, if applicable. During the quarter ended March 31, ~~2020,~~2021, the Corporation repurchased approximately $8 million of unpaid principal balance in mortgage loans subject to the credit recourse provisions (March 31, ~~2019~~2020 - $8 million). In the event of nonperformance by the borrower, the Corporation has rights to the underlying collateral securing the mortgage loan. The Corporation suffers ultimate losses on these loans when the proceeds from a foreclosure sale of the property underlying a defaulted mortgage loan are less than the outstanding principal balance of the loan plus any uncollected interest advanced and the costs of holding and disposing the related property. At March 31, ~~2020~~2021 the Corporation’s liability established to cover the estimated credit loss exposure related to loans sold or serviced with credit recourse amounted to ~~$32~~$20 million (December 31, ~~2019~~2020 - ~~$35~~$22 million).

The following table shows the changes in the Corporation’s liability of estimated losses related to loans serviced with credit recourse provisions during the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

		Quarters ended March 31,				Quarters ended March 31,
(In thousands)		2020		2019		2021		2020
Balance as of beginning of period	$	34,862	$	56,230	$	22,484	$	34,862
Impact of adopting CECL		(3,831)		-		0		(3,831)
Provision (reversal) for recourse liability		4,364		(311)
Provision for recourse liability						817		4,364
Net charge-offs		(3,676)		(3,908)		(3,057)		(3,676)
Balance as of end of period	$	31,719	$	52,011	$	20,244	$	31,719

When the Corporation sells or securitizes mortgage loans, it generally makes customary representations and warranties regarding the characteristics of the loans sold. To the extent the loans do not meet specified characteristics, the Corporation may be required to repurchase such loans or indemnify for losses and bear any subsequent loss related to the loans. There were 0 repurchases of loans under representation and warranty arrangements during the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020. A substantial amount of these loans reinstates to performing status or have mortgage insurance, and thus the ultimate losses on the loans are not deemed significant.

From time to time, the Corporation sells loans and agrees to indemnify the purchaser for credit losses or any breach of certain representations and warranties made in connection with the sale. The following table presents the changes in the Corporation’s liability for estimated losses associated with indemnifications and representations and warranties related to loans sold by BPPR for the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

		Quarters ended March 31,				Quarters ended March 31,
(In thousands)		2020		2019		2021		2020
Balance as of beginning of period	$	3,212	$	10,837	$	2,297	$	3,212
Provision (reversal) for representation and warranties		(69)		104		(119)		(69)
Net charge-offs		-		(75)
Balance as of end of period	$	3,143	$	10,866	$	2,178	$	3,143

7369

Servicing agreements relating to the mortgage-backed securities programs of FNMA and GNMA, and to mortgage loans sold or serviced to certain other investors, including FHLMC, require the Corporation to advance funds to make scheduled payments of principal, interest, taxes and insurance, if such payments have not been received from the borrowers. At March 31, ~~2020,~~2021, the Corporation serviced ~~$14.3~~$12.7 billion in mortgage loans for third-parties, including the loans serviced with credit recourse (December 31, ~~2019~~2020 - ~~$14.8~~$12.9 billion). The Corporation generally recovers funds advanced pursuant to these arrangements from the mortgage owner, from liquidation proceeds when the mortgage loan is foreclosed or, in the case of FHA/VA loans, under the applicable FHA and VA insurance and guarantees programs. However, in the meantime, the Corporation must absorb the cost of the funds it advances during the time the advance is outstanding. The Corporation must also bear the costs of attempting to collect on delinquent and defaulted mortgage loans. In addition, if a defaulted loan is not cured, the mortgage loan would be canceled as part of the foreclosure proceedings and the Corporation would not receive any future servicing income with respect to that loan. At March 31, ~~2020,~~2021, the outstanding balance of funds advanced by the Corporation under such mortgage loan servicing agreements was approximately ~~$84~~$66 million (December 31, ~~2019~~2020 - ~~$78~~$66 million). To the extent the mortgage loans underlying the Corporation’s servicing portfolio experience increased delinquencies, the Corporation would be required to dedicate additional cash resources to comply with its obligation to advance funds as well as incur additional administrative costs related to increases in collection efforts.

Popular, Inc. Holding Company (“PIHC”) fully and unconditionally guarantees certain borrowing obligations issued by certain of its 100% owned consolidated subsidiaries amounting to $94 million at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. In addition, at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, PIHC fully and unconditionally guaranteed on a subordinated basis $374 million of capital securities (trust preferred securities) issued by wholly-owned issuing trust entities to the extent set forth in the applicable guarantee agreement. Refer to Note 2017 to the Consolidated Financial Statements in the ~~2019~~2020 Form 10-K for further information on the trust preferred securities.

7470

Note 2120 – 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)	(In thousands)	March 31, 2020		December 31, 2019		(In thousands)	March 31, 2021		December 31, 2020
Commitments to extend credit:	Commitments to extend credit:					Commitments to extend credit:
	Credit card lines	$	4,958,736	$	4,889,694	Credit card lines	$	5,271,202	$	5,226,660
	Commercial and construction lines of credit		2,938,929		3,205,306	Commercial and construction lines of credit		3,844,356		3,805,459
	Other consumer unused credit commitments		259,580		262,516	Other consumer unused credit commitments		251,574		257,312
Commercial letters of credit	Commercial letters of credit		1,644		2,629	Commercial letters of credit		3,090		1,864
Standby letters of credit	Standby letters of credit		71,739		75,186	Standby letters of credit		21,330		22,266
Commitments to originate or fund mortgage loans	Commitments to originate or fund mortgage loans		26,818		96,653	Commitments to originate or fund mortgage loans		107,464		96,786

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Corporation maintained a reserve of approximately $4$10 million and $9$16 million, respectively, for potential losses associated with unfunded loan commitments related to commercial, construction and consumer lines of credit.

Other commitments

At March 31, ~~2020,~~2021, and December 31, ~~2019,~~2020, the Corporation’s also maintained other non-credit commitments for approximately ~~$2.1~~$1.4 million, ~~and $2.5 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 3332 to the Consolidated Financial Statements.

Puerto Rico ~~remains in the midst of a profound~~has faced significant fiscal and economic ~~crisis.~~challenges for over a decade. In response to such ~~crisis,~~challenges, the U.S. Congress enacted the Puerto Rico Oversight Management and Economic Stability Act (“PROMESA”) in 2016, which, among other things, established a Fiscal Oversight and Management Board for Puerto Rico (the “Oversight Board”) and a framework for the restructuring of the debts of the Commonwealth, its instrumentalities and municipalities. The Commonwealth and several of its instrumentalities have commenced debt restructuring proceedings under PROMESA. As of the date of this report, while municipalities have been ~~recently~~ 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 March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities totaled ~~$428~~$375 million and ~~$432~~$377 million, respectively, which amounts were fully outstanding on such dates. Of this amount, ~~$391~~$342 million consists of loans and ~~$37~~$33 million are securities ($~~391~~342 million and $ 4135 million at December 31, ~~2019)~~2020). Substantially all of the amount outstanding at March 31, 2021 and March 31, 2020 were obligations from various Puerto Rico municipalities. In most cases, these were “general obligations” of a municipality, to which the applicable municipality has pledged its good faith, credit and unlimited taxing power, or “special obligations” of a municipality, to which the applicable municipality has pledged other revenues. At March 31, ~~2020, 75%~~2021, 74% of the Corporation’s exposure to municipal loans and securities was concentrated in the municipalities of San Juan, Guaynabo, Carolina and Bayamón. ~~On July 1, 2019 the Corporation received principal payments amounting to $22 million from various obligations from Puerto Rico municipalities.~~

7571

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 March 31, ~~2020:~~2021:

(In thousands)		Investment Portfolio		Loans		Total Outstanding		Total Exposure		Investment Portfolio		Loans		Total Outstanding		Total Exposure
Central Government
After 1 to 5 years	$	7	$	-	$	7	$	7	$	3	$	0	$	3	$	3
After 5 to 10 years		19		-		19		19		16		0		16		16
After 10 years		30		-		30		30		36		0		36		36
Total Central Government		56		-		56		56		55		0		55		55
Municipalities
Within 1 year		3,920		78,107		82,027		82,027		4,165		17,147		21,312		21,312
After 1 to 5 years		16,390		139,218		155,608		155,608		14,765		133,365		148,130		148,130
After 5 to 10 years		16,660		82,967		99,627		99,627		13,210		120,935		134,145		134,145
After 10 years		655		90,601		91,256		91,256		450		70,478		70,928		70,928
Total Municipalities		37,625		390,893		428,518		428,518		32,590		341,925		374,515		374,515
Total Direct Government Exposure	$	37,681	$	390,893	$	428,574	$	428,574	$	32,645	$	341,925	$	374,570	$	374,570

In addition, at March 31, ~~2020,~~2021, the Corporation had $~~339~~311 million in loans insured or securities issued by Puerto Rico governmental entities but for which the principal source of repayment is non-governmental ($~~350~~317 million at December 31, ~~2019~~2020). These included $~~273~~255 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, ~~2019~~2020 - ~~$276~~$260 million). These mortgage loans are secured by first mortgages on Puerto Rico residential properties and the HFA insurance covers losses in the event of a borrower default and upon the satisfaction of certain other conditions. The Corporation also had at March 31, ~~2020,~~2021, $45 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, ~~2019~~2020 - $46 million). In the event that the mortgage loans insured by HFA and held by the Corporation directly or those serving as collateral for the HFA bonds default and the collateral is insufficient to satisfy the outstanding balance of these loans, HFA’s ability to honor its insurance will depend, among other factors, on the financial condition of HFA at the time such obligations become due and payable. The Corporation does not consider the government guarantee when estimating the credit losses associated with this portfolio. Although the Governor is currently authorized by local legislation to impose a temporary moratorium on the financial obligations of the HFA, ~~the Governor~~a moratorium on such obligations has not ~~exercised this power~~been imposed as of the date hereof. In addition, at March 31, ~~2020,~~2021, the Corporation had $2111 million of commercial real estate notes issued by government entities but that are payable from rent paid by non-governmental parties (December 31, ~~2019~~2020 - $2111 million). On January 1, 2020, the Corporation received a payment amounting to $7 million upon the maturity of securities issued by HFA which had been economically defeased and refunded and for which securities consisting of U.S. agencies and Treasury obligations had been escrowed (December 31, 2019 - $7 million).

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 ~~fiscal measures to be implemented to address the~~ Commonwealth’s fiscal crisis and the ongoing Title III proceedings under ~~PROMESA described above.~~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.~~furloughs or reductions in pension benefits.

~~The~~In addition, $1.7 billion of residential mortgages, $1.2 billion of Small Business Administration (“SBA”) loans under the Paycheck Protection Program (“PPP”) and $60 million commercial loans were insured or guaranteed by the U.S. Government or its agencies at March 31, 2021 (compared to $1.8 billion, $1.3 billion and $60 million, respectively, at December 31, 2020).

At March 31, 2021, the Corporation has operations in the United States Virgin Islands (the “USVI”) and has approximately ~~$69~~$103 million in direct exposure to USVI government ~~entities.~~entities (December 31, 2020 - $105 million). The USVI has been experiencing a number of fiscal and economic challenges that could adversely affect the ability of its public corporations and instrumentalities to service their outstanding debt obligations.

At March 31, 2021, the Corporation has operations in the British Virgin Islands (“BVI”), which has been negatively affected by the COVID-19 pandemic, particularly as a reduction in the tourism activity which accounts for a significant portion of its economy. Although the Corporation has no significant exposure to a single borrower in the BVI, it has a loan portfolio amounting to

7672

approximately $250 million comprised of various retail and commercial clients, including a loan of approximately $18 million with the government of the BVI (compared to $251 million and $19 million, respectively, at December 31, 2020).

Legal Proceedings

The nature of Popular’s business ordinarily ~~results in a certain number of~~generates claims, litigation, investigations, and legal and administrative cases and proceedings ~~(“Legal~~(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 ~~both~~ the Corporation and its ~~shareholders~~stockholders to do so. On at least a quarterly basis, Popular assesses its liabilities and contingencies relating to outstanding Legal Proceedings utilizing the ~~latest~~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 ~~as appropriate~~ to reflect any relevant ~~developments.~~developments, as appropriate. For matters where a material loss is not probable, or the amount of the loss cannot be reasonably estimated, no accrual is established.

In certain cases, exposure to loss exists in excess of the accrual to the extent such loss is reasonably possible, but not probable. Management believes and estimates that the range of reasonably possible losses (with respect to those matters where such limits may be determined, in excess of amounts accrued) for current Legal Proceedings ranged from $0 to approximately ~~$27.2~~$34.2 million as of March 31, ~~2020. For~~2021. In certain ~~other~~ 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 ~~particular~~ period.

Set forth below is a description of the Corporation’s significant Legal Proceedings.

BANCO POPULAR DE PUERTO RICO

Hazard Insurance Commission-Related Litigation

Popular, Inc., BPPR and Popular Insurance, LLC (the “Popular Defendants”) have been named defendants in a ~~putative~~ class action complaint captioned Pérez Díaz v. Popular, Inc., et al, filed before the Court of First Instance, Arecibo Part. The complaint seeks damages and preliminary and permanent injunctive relief on behalf of the ~~purported~~ class against the Popular Defendants, as well as Antilles Insurance Company and MAPFRE-PRAICO Insurance Company (the “Defendant Insurance Companies”). Plaintiffs allege that the Popular Defendants have been unjustly enriched by failing to reimburse them for commissions paid by the Defendant Insurance Companies to the insurance agent and/or mortgagee for policy years when no claims were filed against their hazard insurance policies. They demand the reimbursement to the purported “class” of an estimated $400 million plus legal interest, for the “good experience” commissions allegedly paid by the Defendant Insurance Companies during the relevant time period, as well as injunctive relief seeking to enjoin the Defendant Insurance Companies from paying commissions to the insurance agent/mortgagee and ordering them to pay those fees directly to the insured. A motion for dismissal on the merits filed by the Defendant Insurance Companies was denied with a right to replead following limited targeted discovery. Each of the Puerto Rico Court of Appeals and the Puerto Rico Supreme Court denied the Popular Defendants’ request to review the lower court’s denial of the motion to dismiss. In December 2017, plaintiffs amended the complaint, and, in January 2018, defendants filed an answer thereto. Separately, in October 2017, the Court entered an order whereby it broadly certified the class, after which the Popular Defendants filed a certiorari petition before the Puerto Rico Court of Appeals in relation to the class certification, which the Court declined to entertain. In November

2018 and in January 2019, plaintiffs filed voluntary dismissal petitions against MAPFRE-PRAICO Insurance Company and Antilles Insurance Company, respectively, leaving the Popular Defendants as the sole remaining defendants in the action.

In April 2019, the Court amended the class definition to limit it to individual homeowners whose residential units were subject to a mortgage from BPPR who, in turn, obtained risk insurance policies with Antilles Insurance or MAPFRE Insurance through Popular Insurance from 2002 to 2015, and who did not make insurance claims against said policies during their effective term. The Court ~~had set May 1,~~approved in September 2020 as the ~~deadline to complete discovery, but this deadline has been continued due~~notice to the ~~effects~~class, which is yet to be published. The Popular Defendants expect to file a Motion for Summary Judgment requesting the dismissal of ~~COVID-19 pandemic. The Court also had scheduled a pre-trial hearing and tentative trial dates~~the action by May 7, 2021, which is the current deadline for the ~~second half~~filing of ~~2020, but those dates~~dispositive motions. This deadline, and current deadlines for the Pre-Trial and Trial hearings, may ~~also~~ be ~~continued due to~~extended if the ~~same reason.~~

~~BPPR has separately been named a defendant in a putative class action complaint captioned Ramirez Torres, et al. v. Banco Popular de Puerto Rico, et al, filed before the Puerto Rico~~ Court of First Instance, San Juan Part. The complaint seeks damages and preliminary and permanent injunctive relief on behalf of the purported class against the same Popular Defendants, as well as other financial institutions with insurance brokerage subsidiaries in Puerto Rico.allows an additional expert witness recently disclosed by Plaintiffs contend that in November 2015 Antilles Insurance Company obtained approval from the Puerto Rico Insurance Commissioner to market an endorsement that allowed its customers to obtain reimbursement on their insurance deductible for good experience, but that defendants failed to offer this product or disclose its existence to their customers, favoring other products instead, in violation of their duties as insurance brokers. Plaintiffs seek a determination that defendants unlawfully failed to comply with their duty to disclose the existence of this new insurance product, as well as double or treble damages (the latter subject to a determination that defendants engaged in monopolistic practices in failing to offer this product). In July 2017, after co-defendants filed motions to dismiss the complaint and opposed the request for preliminary injunctive relief, the Court dismissed the complaint with prejudice. In August 2017, plaintiffs appealed this judgment, and in March 2018 the Court of Appeals reversed the Court of First Instance’s dismissal. The Puerto Rico Supreme Court denied review. In August 2019,by the Popular Defendants and plaintiffs filed a Joint Motion where they informed the Court that plaintiffs were simultaneously filing voluntary dismissals with prejudice against all other parties. In September 2019, a status hearing was held where plaintiffs and the Popular Defendants informed the Court that the parties were in the process of stipulating a class for settlement purposes. The Court held a hearing on April 24, 2020 where it preliminarily approved the terms of the proposed class settlement. Notices to the proposed class for settlement purposes were published on April 28 and May 5, 2020. The Court set a hearing for June 28, 2020 to consider the final approval of the proposed class settlement.

Defendants.

Mortgage-Related Litigation and Claims

BPPR has been named a defendant in a putative class action captioned Lilliam González Camacho, et al. v. Banco Popular de Puerto Rico, et al., filed before the United States District Court for the District of Puerto Rico on behalf of mortgage-holders who have allegedly been subjected to illegal foreclosures and/or loan modifications through their mortgage servicers. Plaintiffs maintain that when they sought to reduce their loan payments, defendants failed to provide them with such reduced loan payments, instead subjecting them to lengthy loss mitigation processes while filing foreclosure claims against them in parallel (or dual tracking). Plaintiffs assert that such actions violate the Home Affordable Modification Program (“HAMP”), the Home Affordable Refinance Program (“HARP”) and other federally sponsored loan modification programs, as well as the Puerto Rico Mortgage Debtor Assistance Act and the Truth in Lending Act (“TILA”). For the alleged violations stated above, plaintiffs request that all defendants (over 20, including all local banks) be held jointly and severally liable in an amount no less than $400 million. BPPR filed a motion to dismiss in August 2017, as did most co-defendants, and, in March 2018, the District Court dismissed the complaint in its entirety. After being denied reconsideration by the District Court, onin August 2018, plaintiffs filed a Notice of Appeal to the U.S. Court of Appeals for the First Circuit. ~~The~~In July 2020, the U.S. Court of Appeals ~~has entered an order where it consolidated three pending appeals related to~~for the ~~same subset of facts. Plaintiffs~~First Circuit affirmed the District Court’s decision dismissing the complaint. In September 2020, the Appellants filed ~~their appellate brief~~a petition for rehearing and for rehearing en banc, which was denied in ~~August 2019, but in September 2019,~~December 2020. Proceedings before the First Circuit Court of Appeals ~~ordered plaintiffs to submit a new brief for~~concluded, and Plaintiffs did not seek certiorari review before the consolidated appeals that complied with the applicable appellate procedural rules. In October 2019, plaintiffs filed a revised brief and in November 2019, defendants filed their appellate brief, along with a motion to dismiss the appeal due to plaintiffs’ repeated failure to comply with the Circuit Court’s rules and orders. The appealU.S. Supreme Court. This matter is now ~~fully briefed and pending resolution.~~closed.

BPPR has also been named a defendant in another putative class action captioned Yiries Josef Saad Maura v. Banco Popular, et al., filed by the same counsel who filed the González Camacho action referenced above, on behalf of residential customers of the defendant banks who have allegedly been subject to illegal foreclosures and/or loan modifications through their mortgage servicers. As in González Camacho, plaintiffs contend that when they sought to reduce their loan payments, defendants failed to provide them with such reduced loan payments, instead subjecting them to lengthy loss mitigation processes while filing foreclosure claims against them in parallel, all in violation of TILA, the Real Estate Settlement Procedures Act (“RESPA”), the Equal Credit Opportunity Act (“ECOA”), the Fair Credit Reporting Act (“FCRA”), the Fair Debt Collection Practices Act (“FDCPA”) and other ~~consumer-~~

~~protection~~consumer-protection laws and regulations. Plaintiffs did not include a specific amount of damages in their complaint. After waiving service of process, BPPR filed a motion to dismiss the complaint on the same grounds as those asserted in the González Camacho action (as did most co-defendants, separately). BPPR further filed a motion to oppose class certification, which the Court granted in September 2018. In April 2019, the Court entered an Opinion and Order granting BPPR’s and several other defendants’ motions to dismiss with prejudice. Plaintiffs filed a Motion for Reconsideration in April 2019, which Popular timely opposed. In September 2019, the Court issued an Amended Opinion and Order dismissing plaintiffs’ claims against all defendants, denying the reconsideration requests and other pending motions, and issuing final judgment. In October 2019, plaintiffs filed a Motion for Reconsideration of the Court’s Amended Opinion and Order, which was denied in December 2019. OnIn January ~~13,~~ 2020, plaintiffs filed a Notice of Appeal to the U.S. Court of Appeals for the First Circuit. ~~Appellants’~~Plaintiffs filed their appeal brief ~~is due on June 8,~~in July 2020, Appellees filed their brief in September 2020, and ~~Appellee’s~~Appellants filed their reply brief in January 2021. The appeal is ~~due 30 days thereafter.~~

~~BPPR has been named a defendant in a complaint for damages~~now fully briefed and breach of contract captioned Héctor Robles Rodriguez et al. v. Municipio de Ceiba, et al. Plaintiffs are residents of a development called Hacienda Las Lomas. Through the Doral Bank-FDIC assisted transaction, BPPR acquired a significant number of mortgage loans within this development and is currently the primary mortgage lender in the project. Plaintiffs claim damages against the developer, contractor, the relevant insurance companies, and most recently, their mortgage lenders, because of a landslide that occurred in October 2015, affecting various streets and houses within the development. Plaintiffs specifically allege that the mortgage lenders, including BPPR, should be deemed liable for their alleged failure to properly inspect the subject properties. Plaintiffs demand $30 million in damages plus attorney’s fees, costs and the annulment of their mortgages. BPPR extended plaintiffs four consecutive six-month payment forbearances, the last of which is still in effect. In November 2017, the FDIC notified BPPR that it had agreed to indemnify the Bank in connection with its Doral Bank-related exposure, pursuant to the terms of the relevant Purchase and Assumption Agreement with the FDIC. The FDIC filed a Notice of Removal to the United States District Court for the District of Puerto Rico on March 2018 and, in April 2018, the state court stayed the proceedings in response thereto. In October 2018, the Court granted the FDIC’s motion to stay the proceedings until plaintiffs have exhausted administrative remedies and, thereafter, the FDIC filed a motion to dismiss all claims for lack of subject matter jurisdiction due to plaintiffs’ failure to properly make any applicable administrative claims. Such motion was referred to a Magistrate Judge, which in May 2019 recommended that the motion be granted and all claims against the FDIC be dismissed. On September 30, 2019, the District Judge issued an order where she adopted the Report and Recommendation of the Magistrate Judge granting the FDIC’s Motion to Dismiss and remanding the remaining claims related to mortgage loans not acquired from Doral (approximately eight loans) to the Commonwealth of Puerto Rico’s Court of First Instance. On March 19, 2020, the District Judge issued an Opinion and Order and a Judgment dismissing the case, consistent with the September 2019 order. On April 15, 2020, several plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the First Circuit. Although the parties have reached a settlement in principle, the completion of documentation related thereto has been delayed because of the COVID-19 pandemic.pending resolution.

Insufficient Funds and Overdraft Fees Class Actions

OnIn February 7, 2020, BPPR was served with a putative class action complaint captioned Soto-Melendez ~~vs.~~v. Banco Popular de Puerto Rico, filed before the United States District Court for the District of Puerto Rico. The complaint alleges breach of contract, breach of the covenant of good faith and fair dealing and unjust enrichment due to BPPR’s purported practice of (a) assessing more than one

insufficient funds fee (“NSF Fees”) on the same “item” or transaction and (b) charging both NSF Fees and overdraft fees (“OD Fees”) on the same item or transaction, and is filed on behalf of all persons who during the applicable statute of limitations period were charged NSF Fees and/or OD Fees pursuant to ~~this~~these purported practices. OnIn April ~~10,~~ 2020, BPPR filed a ~~Motion~~motion to ~~Dismiss~~dismiss the case. On April 21, 2021, the Court issued an order granting in part and denying in part BPPR’s motion to dismiss; the ~~case, which~~unjust enrichment claim was ~~opposed by plaintiffs on April 24, 2020. BPPR expects to reply to~~dismissed, whereas the ~~opposition on or before May 12, 2020.~~breach of contract and covenant of good faith and fair dealing claims survived the motion. Discovery is ongoing.

Popular ~~recently received notice of~~has been also named as a defendant on a putative class action complaint captioned Golden ~~vs.~~v. Popular, Inc. filed onin March ~~25,~~ 2020 before the U.S. District Court for the Southern District of New York, seeking damages, restitution and injunctive relief. Plaintiff alleges breach of contract, violation of the covenant of good faith and fair dealing, unjust enrichment and violation of New York consumer protection law due to Popular’s purported practice of charging OD Fees on transactions that, under plaintiffs’ theory, do not overdraw the account. Plaintiff describes Popular’s purported practice of charging OD Fees as “Authorize Positive, Purportedly Settle Negative Transactions” (“APPSN”) and states that Popular assesses OD Fees over authorized transactions for which sufficient funds are held for settlement. In August 2020, Popular ~~has not been~~filed a Motion to Dismiss on several grounds, including failure to state a claim against Popular, Inc. and improper venue. In October 2020, Plaintiffs filed a Notice of Voluntary Dismissal before the U.S. District Court for the Southern District of New York and, on that same date, filed an identical complaint in the U.S. District Court for the District of the Virgin Islands against Popular, Inc., Popular Bank and BPPR. In November 2020, Plaintiffs filed a Notice of Voluntary Dismissal against Popular, Inc. and Popular Bank following a Motion to Dismiss filed on behalf of such entities which argued failure to state a claim and lack of minimum contacts of such parties with the U.S.V.I. district court jurisdiction. BPPR, the only defendant remaining in the case, was served with process in ~~connection with this case.~~November 2020 and filed a Motion to Dismiss in January 2021. Plaintiff opposed the Motion to Dismiss in February 2021 and BPPR replied in March 2021. The Motion to Dismiss is now fully briefed and pending resolution.

Other ~~Significant~~ Proceedings

In June 2017, a syndicate comprised of BPPR and other local banks (the “Lenders”) filed an involuntary Chapter 11 bankruptcy proceeding against Betteroads Asphalt and Betterecycling Corporation (the “Involuntary Debtors”). This filing followed attempts by the Lenders to restructure and resolve the Involuntary Debtors’ obligations and outstanding defaults under a certain credit agreement, first through good faith negotiations and subsequently, through the filing of a collection action against the Involuntary Debtors in local court. The Involuntary Debtors subsequently counterclaimed, asserting damages in excess of $900 million. The Lenders ultimately joined in the commencement of these involuntary bankruptcy proceedings against the Debtors in order to preserve and recover the Involuntary Debtors’ assets, having confirmed that the Involuntary Debtors were transferring assets out of their estate for little or no consideration.

The Involuntary Debtors filed a motion to dismiss the proceedings and for damages against the syndicate, arguing both that this petition was filed in bad faith and that there was a bona fide dispute as to the petitioners’ claims, as set forth in the counterclaim filed by the Involuntary Debtors in local court. After the Court held hearings in June and July 2019 to consider whether the involuntary petitions were filed in bad faith, ~~that is, for an improper purpose that constitutes an abuse of the bankruptcy process~~ in October 2019, the Court entered an Opinion and Order determining that the involuntary petitions were not filed in bad faith and issued an order for relief under Chapter 11 of the U.S. Bankruptcy Code granting the involuntary petitions. In October 2019, the debtors filed a Notice of Appeal to the U.S. District Court. ~~Debtors’~~In November 2020, the U.S. District Court issued an opinion affirming the order for relief issued by the Bankruptcy Court under Chapter 11 of the U.S. Bankruptcy Code granting the involuntary petitions. In January 2021, Debtors filed ~~their appellate briefs in April 2020, and Lenders’ appellate briefs are due on or~~a Notice of Appeal from this decision before ~~May 11, 2020.~~the U.S. Court of Appeals for the First Circuit.

OnIn February ~~11,~~ 2020, the Debtors initiated an adversary proceeding seeking in excess of $80 million in damages, alleging that in 2016 the Lenders illegally foreclosed on their accounts receivable and as a result illegally interfered with contracts entered with third parties, forcing the Debtors into bankruptcy. Debtors further seek a judgment declaring that Lenders do not possess security interests over certain personal property of the Debtors because either such security interests were not adequately perfected according to Puerto Rico law, or the security interests were lost upon the lapsing date of the financing statements that the Lenders had originally perfected in connection with such interests. ~~On February 25, 2020,~~ Debtors amended their adversary complaint to include references to the Lenders’ Syndicate and ~~Banco Popular’s~~BPPR’s proof of claims and formally object to such proof of claims, as well as to demand that the District Court, not the Bankruptcy Court, entertains the complaint, requesting trial by jury on all counts. Lenders ~~expect to file~~filed a Motion to ~~Dismiss on or before~~dismiss in June 2020. In September 2020, the Court granted the parties an extension of all pending deadlines for 30 days in furtherance of settlement negotiations, and, thereafter, the Court granted, at the request of the parties, multiple additional 30-day extensions for the

parties to continue settlement conversations. On April 28, 2021, the Lenders, the Debtors and other related parties executed a settlement agreement that contemplates the resolution of any and all claims between the parties as part of the bankruptcy proceedings. The Bankruptcy Court set May ~~13, 2020.~~14, 2021 as the deadline to submit objections to the settlement agreement, May 20, 2021 as the deadline for objections to the Debtors’ disclosure statement and set a hearing for May 27, 2021 to approve the settlement agreement and the disclosure statement.

POPULAR BANK

Employment-Related Litigation

In July 2019, Popular Bank (“PB”) was served in a putative class complaint in which it was named as a defendant along with five (5) current PB employees (collectively, the “AB Defendants”), captioned Aileen Betances, et al. v. Popular Bank, et al., filed before the Supreme Court of the State of New York (the “AB Action”). The complaint, filed by five (5) current and former PB employees, seeks to recover damages for the AB Defendants' alleged violation of local and state sexual harassment, discrimination and retaliation laws. Additionally, in July 2019, PB was served in a putative class complaint in which it was named as a defendant along with six (6) current PB employees (collectively, the “DR Defendants”), captioned Damian Reyes, et al. v. Popular Bank, et al., filed before the Supreme Court of the State of New York (the “DR Action”). The DR Action, filed by three (3) current and former PB employees, seeks to recover damages for the DR Defendants’ alleged violation of local and state discrimination and retaliation laws. Plaintiffs in both complaints are represented by the same legal counsel, and five of the six named individual defendants in the DR Action are the same named individual defendants in the AB Action. Both complaints are related, among other things, to allegations of purported sexual harassment and/or misconduct by a former PB employee as well as PB’s actions in connection thereto and seek no less than $100 million in damages each. OnIn October ~~21,~~ 2019, PB and the other defendants filed several Motions to Dismiss. Plaintiffs opposed the motions in December 2019 and PB and the other defendants replied onin January ~~22,~~ 2020. ~~Although~~In July 2020, a hearing to discuss the motions to dismiss filed by PB in both actions was held, at which the Court ~~set~~dismissed one of the causes of action included by plaintiffs in the AB Action and ordered the parties to submit a ~~hearing on~~copy of the ~~Motions~~court reporter’s transcript. The parties submitted a copy of the court reporter’s transcript in August 2020 and the motions to ~~Dismiss in both cases for March 16, 2020, that hearing was cancelled due to the COVID-19 pandemic and has not been rescheduled. The Motions to Dismiss~~dismiss are ~~still~~ pending resolution.

POPULAR SECURITIES

Puerto Rico Bonds and Closed-End Investment Funds

The volatility in prices and declines in value that Puerto Rico municipal bonds and closed-end investment companies that invest primarily in Puerto Rico municipal bonds have experienced since August 2013 have led to regulatory inquiries, customer complaints

and arbitrations for most broker-dealers in Puerto Rico, including Popular Securities. Popular Securities has received customer complaints and, as of March 31, ~~2020,~~2021, is named as a respondent (among other broker-dealers) in ~~165~~131 pending arbitration proceedings with aggregate claimed amounts of approximately ~~$223~~$139 million, including 1 arbitration with claimed damages of approximately $30 million. While Popular Securities believes it has meritorious defenses to the claims asserted in these proceedings, it has often determined that it is in its best interest to settle certain claims rather than expend the money and resources required to see such cases to completion. The Puerto Rico Government’s defaults and non-payment of its various debt obligations, as well as the Commonwealth’s and the Financial Oversight Management Board’s (the “Oversight Board”) decision to pursue restructurings under Title III and Title VI of PROMESA, have ~~increased and may continue to increase~~impacted the number of customer complaints (and claimed damages) filed against Popular Securities concerning Puerto Rico bonds and closed-end investment companies that invest primarily in Puerto Rico bonds. An adverse result in the arbitration proceedings described above, or a significant increase in customer complaints, could have a material adverse effect on Popular.

PROMESA Title III Proceedings

In 2017, the Oversight Board engaged the law firm of Kobre & Kim to carry out an independent investigation on behalf of the Oversight Board regarding, among other things, the causes of the Puerto Rico financial crisis. Popular, Inc., BPPR and Popular Securities (collectively, the “Popular Companies”) were served by, and cooperated with, the Oversight Board in connection with requests for the preservation and voluntary production of certain documents and witnesses with respect to Kobre & Kim’s independent investigation.

On August 20, 2018, Kobre & Kim issued its Final Report, which contained various references to the Popular Companies, including an allegation that Popular Securities participated as an underwriter in the Commonwealth’s 2014 issuance of government obligation bonds notwithstanding having allegedly advised against it. The report noted that such allegation could give rise to an unjust enrichment claim against the Corporation and could also serve as a basis to equitably subordinate claims filed by the Corporation in the Title III proceeding to other third-party claims.

After the publication of the Final Report, the Oversight Board created a special claims committee (“SCC”) and, before the end of the applicable two-year statute of limitations for the filing of such claims pursuant to the U.S. Bankruptcy Code, the SCC, along with the Commonwealth’s Unsecured Creditors’ Committee (“UCC”), filed various avoidance, fraudulent transfer and other claims against third parties, including government vendors and financial institutions and other professionals involved in bond issuances being challenged as invalid by the SCC and the UCC. The Popular Companies, the SCC and the UCC have entered into a tolling agreement with respect to potential claims the SCC and the UCC, on behalf of the Commonwealth or other Title III debtors, may assert against the Popular Companies for the avoidance and recovery of payments and/or transfers made to the Popular Companies or as a result of any role of the Popular Companies in the offering of the aforementioned challenged bond issuances.

8177

Note 2221 – Non-consolidated variable interest entities

The Corporation is involved with 3 statutory trusts which it created to issue trust preferred securities to the public. These trusts are deemed to be variable interest entities (“VIEs”) since the equity investors at risk have no substantial decision-making rights. The Corporation does not hold any variable interest in the trusts, and therefore, cannot be the trusts’ primary beneficiary. Furthermore, the Corporation concluded that it did not hold a controlling financial interest in these trusts since the decisions of the trusts are predetermined through the trust documents and the guarantee of the trust preferred securities is irrelevant since in substance the sponsor is guaranteeing its own debt.

Also, the Corporation is involved with various special purpose entities mainly in guaranteed mortgage securitization transactions, including GNMA and FNMA. These special purpose entities are deemed to be VIEs since they lack equity investments at risk. The Corporation’s continuing involvement in these guaranteed loan securitizations includes owning certain beneficial interests in the form of securities as well as the servicing rights retained. The Corporation is not required to provide additional financial support to any of the variable interest entities to which it has transferred the financial assets. The mortgage-backed securities, to the extent retained, are classified in the Corporation’s Consolidated Statements of Financial Condition as available-for-sale or trading securities. The Corporation concluded that, essentially, these entities (FNMA and GNMA) control the design of their respective VIEs, dictate the quality and nature of the collateral, require the underlying insurance, set the servicing standards via the servicing guides and can change them at will, and can remove a primary servicer with cause, and without cause in the case of FNMA. Moreover, through their guarantee obligations, agencies (FNMA and GNMA) have the obligation to absorb losses that could be potentially significant to the VIE.

The Corporation holds variable interests in these VIEs in the form of agency mortgage-backed securities and collateralized mortgage obligations, including those securities originated by the Corporation and those acquired from third parties. Additionally, the Corporation holds agency mortgage-backed securities and agency collateralized mortgage obligations issued by third party VIEs in which it has no other form of continuing involvement. Refer to Note 2423 to the Consolidated Financial Statements for additional information on the debt securities outstanding at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, which are classified as available-for-sale and trading securities in the Corporation’s Consolidated Statements of Financial Condition. In addition, the Corporation holds variable interests in the form of servicing fees, since it retains the right to service the transferred loans in those government-sponsored special purpose entities (“SPEs”) and may also purchase the right to service loans in other government-sponsored SPEs that were transferred to those SPEs by a third-party.

The following table presents the carrying amount and classification of the assets related to the Corporation’s variable interests in non-consolidated VIEs and the maximum exposure to loss as a result of the Corporation’s involvement as servicer of GNMA and FNMA loans at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

(In thousands)	(In thousands)	March 31, 2020		December 31, 2019		(In thousands)	March 31, 2021		December 31, 2020
Assets	Assets					Assets
Servicing assets:	Servicing assets:					Servicing assets:
	Mortgage servicing rights	$	113,793	$	115,718	Mortgage servicing rights	$	94,890	$	90,273
Total servicing assets	Total servicing assets	$	113,793	$	115,718	Total servicing assets	$	94,890	$	90,273
Other assets:	Other assets:					Other assets:
	Servicing advances	$	30,172	$	29,212	Servicing advances	$	9,482	$	8,769
Total other assets	Total other assets	$	30,172	$	29,212	Total other assets	$	9,482	$	8,769
Total assets	Total assets	$	143,965	$	144,930	Total assets	$	104,372	$	99,042
Maximum exposure to loss	Maximum exposure to loss	$	143,965	$	144,930	Maximum exposure to loss	$	104,372	$	99,042

The size of the non-consolidated VIEs, in which the Corporation has a variable interest in the form of servicing fees, measured as the total unpaid principal balance of the loans, amounted to ~~$9.8~~$8.5 billion at March 31, ~~2020~~2021 (December 31, ~~2019~~2020 - ~~$9.9~~$8.7 billion).

The Corporation determined that the maximum exposure to loss includes the fair value of the MSRs and the assumption that the servicing advances at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, will not be recovered. The agency debt securities are not included as part of the maximum exposure to loss since they are guaranteed by the related agencies.

8278

In September of 2011, BPPR sold construction and commercial real estate loans to a newly created joint venture, PRLP 2011 Holdings, LLC. In March of 2013, BPPR completed a sale of commercial and construction loans, and commercial and single family real estate owned to a newly created joint venture, PR Asset Portfolio 2013-1 International, LLC.

These joint ventures were created for the limited purpose of acquiring the loans from BPPR; servicing the loans through a third-party servicer; ultimately working out, resolving and/or foreclosing the loans; and indirectly owning, operating, constructing, developing, leasing and selling any real properties acquired by the joint ventures through deed in lieu of foreclosure, foreclosure, or by resolution of any loan.

BPPR provided financing to these entities for the acquisition of the assets. In addition, BPPR provided these joint ventures with a non-revolving advance facility to cover unfunded commitments and costs-to-complete related to certain construction projects, and a revolving working capital line to fund certain operating expenses of the joint venture. As part of these transactions, BPPR received $ 48 million and $92 million, for PRLP 2011 Holdings, LLC and PR Asset Portfolio 2013-1 International, LLC, respectively, in cash and a 24.9% equity interest in each joint venture. The Corporation is not required to provide any other financial support to these joint ventures. BPPR accounted for both transactions as a true sale pursuant to ASC Subtopic 860-10.

The Corporation determined that PRLP 2011 Holdings, LLC and PR Asset Portfolio 2013-1 International, LLC are VIEs but it is not the primary beneficiary. All decisions are made by Caribbean Property Group (“CPG”) (or an affiliate thereof) (the “Manager”), except for certain limited material decisions which would require the unanimous consent of all members. The Manager is authorized to execute and deliver on behalf of the joint ventures any and all documents, contracts, certificates, agreements and instruments, and to take any action deemed necessary in the benefit of the joint ventures. All financing facilities extended by BPPR to these joint ventures have been repaid in full. The Corporation maintains a variable interests in these VIEs in the form of the 24.9% equity interest. The equity interest is accounted for under the equity method of accounting pursuant to ASC Subtopic 323-10.

The following tables present the carrying amount and classification of the assets and liabilities related to the Corporation’s variable interests in the non-consolidated VIEs, PRLP 2011 Holdings, LLC and PR Asset Portfolio 2013-1 International, LLC, and their maximum exposure to loss at March 31, 2020 and December 31, 2019.

PRLP 2011 Holdings, LLC
PR Asset Portfolio 2013-1 International, LLC
(In thousands)
March 31, 2020
December 31, 2019
March 31, 2020
December 31, 2019
Assets

Other assets:

Equity investment
$
5,276
$
6,306
$
3,657
$
3,333
Total assets
$
5,276
$
6,306
$
3,657
$
3,333
Liabilities

Deposits
$
(20)
$
(3)
$
(5,793)
$
(5,081)
Total liabilities
$
(20)
$
(3)
$
(5,793)
$
(5,081)
Total net assets
$
5,256
$
6,303
$
(2,136)
$
(1,748)
Maximum exposure to loss
$
5,256
$
6,303
$
-
$
-

ASU 2009-17 requires that an ongoing primary beneficiary assessment should be made to determine whether the Corporation is the primary beneficiary of any of the VIEs it is involved with. The conclusion on the assessment of these non-consolidated VIEs has not changed since their initial evaluation. The Corporation concluded that it is still not the primary beneficiary of these VIEs, and therefore, these VIEs are not required to be consolidated in the Corporation’s financial statements at March 31, ~~2020.~~2021.

8379

Note 2322 – Related party transactions

The Corporation considers its equity method investees as related parties. The following provides information on transactions with equity method investees considered related parties.

EVERTEC

The Corporation has an investment in EVERTEC, Inc. (“EVERTEC”), which provides various processing and information technology services to the Corporation and its subsidiaries and gives BPPR access to the ATH network owned and operated by EVERTEC. As of March 31, ~~2020,~~2021, the Corporation held 11,654,803 shares of EVERTEC, representing an ownership stake of ~~16.22~~16.15%. The Corporation continues to have significant influence over EVERTEC. Accordingly, the investment in EVERTEC is accounted for under the equity method and is evaluated for impairment if events or circumstances indicate that a decrease in value of the investment has occurred that is other than temporary.

The Corporation ~~received~~recorded $0.6 million in ~~dividend~~dividends distributions during the quarter ended March 31, ~~2020,~~2021 from its investments in ~~EVERTEC’s holding company~~EVERTEC (March 31, ~~2019~~2020 - $0.6 million). The Corporation’s equity in EVERTEC is presented in the table which follows and is included as part of “other assets” in the Consolidated Statements of Financial Condition.

(In thousands)		March 31, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Equity investment in EVERTEC	$	74,323	$	73,534	$	92,004	$	86,158

The Corporation had the following financial condition balances outstanding with EVERTEC at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. Items that represent liabilities to the Corporation are presented with parenthesis.

(In thousands)	March 31, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Accounts receivable (Other assets)	$	3,474	$	7,779	$	3,597	$	5,678
Deposits		(56,584)		(63,850)		(75,420)		(125,361)
Accounts payable (Other liabilities)		(433)		(1,290)		(1,835)		(2,395)
Net total	$	(53,543)	$	(57,361)	$	(73,658)	$	(122,078)

The Corporation’s proportionate share of income from EVERTEC is included in other operating income in the consolidated statements of operations. The following table presents the Corporation’s proportionate share of EVERTEC’s income and changes in stockholders’ equity for the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

		Quarters ended March 31,				Quarters ended March 31,
(In thousands)		2020		2019		2021		2020
Share of income from investment in EVERTEC	$	3,602	$	4,297	$	5,734	$	3,602
Share of other changes in EVERTEC's stockholders' equity		785		895		178		785
Share of EVERTEC's changes in equity recognized in income	$	4,387	$	5,192	$	5,912	$	4,387

The following table presents the impact of transactions and service payments between the Corporation and EVERTEC (as an affiliate) and their impact on the results of operations for the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020. Items that represent expenses to the Corporation are presented with parenthesis.

Quarters ended March 31,

(In thousands)
2020
2019
Category
Interest expense on deposits
$
(67)
$
(17)
Interest expense
ATH and credit cards interchange income from services to EVERTEC

5,489

8,219
Other service fees
Rental income charged to EVERTEC

1,767

1,796
Net occupancy
Processing fees on services provided by EVERTEC

(55,596)

(53,862)
Professional fees
Other services provided to EVERTEC

261

276
Other operating expenses
Total
$
(48,146)
$
(43,588)

8480

	Quarters ended March 31,
(In thousands)	2021		2020		Category
Interest expense on deposits	$	(89)	$	(67)	Interest expense
ATH and credit cards interchange income from services to EVERTEC		6,454		5,489	Other service fees
Rental income charged to EVERTEC		1,547		1,767	Net occupancy
Processing fees on services provided by EVERTEC		(60,141)		(55,596)	Professional fees
Other services provided to EVERTEC		121		261	Other operating expenses
Total	$	(52,108)	$	(48,146)

~~PRLP 2011 Holdings, LLC and PR Asset Portfolio 2013-1 International, LLC~~

~~As indicated in Note 22 to the Consolidated Financial Statements, the Corporation holds a 24.9 % equity interest in PRLP 2011 Holdings, LLC and PR Asset Portfolio 2013-1 International, LLC.~~

The Corporation’s equity in PRLP 2011 Holdings, LLC and PR Asset Portfolio 2013-1 International, LLC is presented in the table which follows and is included as part of “other assets” in the Consolidated Statements of Financial Condition.

PRLP 2011 Holdings, LLC

PR Asset Portfolio 2013-1 International, LLC
(In thousands)

March 31, 2020

December 31, 2019

March 31, 2020

December 31, 2019
Equity investment
$
5,276
$
6,306
$
3,657
$
3,333

~~The Corporation held deposits from these entities, as follows:~~

PRLP 2011 Holdings, LLC

PR Asset Portfolio 2013-1 International, LLC
(In thousands)
March 31, 2020
December 31, 2019

March 31, 2020
December 31, 2019
Deposits (non-interest bearing)
$
(20)
$
(3)

$
(5,793)
$
(5,081)

The Corporation’s proportionate share of income or loss from these entities is presented in the following table and is included in other operating income in the Consolidated Statements of Operations.

PRLP 2011 Holdings, LLC

PR Asset Portfolio 2013-1 International, LLC

Quarters ended March 31,
(In thousands)

2020

2019

2020

2019
Share of (loss) income from the equity investment
$
(1,030)
$
(120)

$
324
$
296

~~During the quarter ended March 31, 2020, there were 0 capital distributions received by the Corporation from its investment in PR Asset Portfolio 2013-1 International, LLC~~ ~~(March 31, 2019 - $1.3 million). NaN capital distributions was received from its investment in PRLP Holdings, LLC during the quarters ended March 31, 2020 and~~ ~~2019~~.

Centro Financiero BHD León

At March 31, ~~2020,~~2021, the Corporation had a 15.84% equity interest in Centro Financiero BHD León, S.A. (“BHD León”), one of the largest banking and financial services groups in the Dominican Republic. During the quarter ended March 31, ~~2020,~~2021, the Corporation recorded ~~$6.8~~$6.4 million in earnings from its investment in BHD León (March 31, ~~2019~~2020 - ~~$5.5~~$6.8 million), which had a carrying amount of ~~$157.9~~$160.1 million at March 31, ~~2020~~2021 (December 31, ~~2019~~2020 - ~~$151.6~~$153.1 million). There were ~~no dividend~~0 dividends distributions received by the Corporation from its investment in BHD León, during the quarter ended March 31, ~~2020~~2021 and ~~2019.~~2020.

Investment Companies

The Corporation provides advisory services to several investment companies registered under the Puerto Rico Investment Companies Act in exchange for a fee. The Corporation also provides administrative, custody and transfer agency services to these investment companies. These fees are calculated at an annual rate of the average net assets of the investment company, as defined in each agreement. Due to its advisory role, the Corporation considers these investment companies as related parties.

For the quarter ended March 31, ~~2020~~2021 administrative fees charged to these investment companies amounted to ~~$1.6~~$1.2 million (March 31, ~~2019~~2020 - ~~$1.5~~$1.6 million) and waived fees amounted to $0.5 million (March 31, ~~2019~~2020 - $0.5 million), for a net fee of ~~$1.1~~$0.7 million (March 31, ~~2019~~2020 - ~~$1.0~~$1.1 million).

The Corporation, through its subsidiary BPPR, has also entered into certain uncommitted credit facilities with those investment companies. As of March 31, ~~2020,~~2021, the available lines of credit facilities amounted to ~~$275~~$255 million (December 31, ~~2019~~2020 - ~~$330~~$275 million). The aggregate sum of all outstanding balances under all credit facilities that may be made available by BPPR, from time to time, to those investment companies for which BPPR acts as investment advisor or co-investment advisor, shall never exceed the lesser of $200 million or 10% of BPPR’s capital. At March 31, ~~2020~~2021 there was 0 outstanding balance for these credit facilities.

~~Other related party transactions~~

On August 2018, BPPR acquired certain assets and assumed certain liabilities of Reliable Financial Services and Reliable Finance Holding Company, Puerto Rico-based subsidiaries of Wells Fargo & Company engaged in the auto finance business in Puerto Rico. As part of the acquisition transaction, the Corporation entered into an agreement with Reliable Financial Services to sublease the space necessary to continue the acquired operations. Reliable Financial Services’ underlying lease agreement was with an entity in which the Corporation’s Chairman of the Board and his family members hold an ownership interest. This lease expired on April 30, 2019 pursuant to its terms. During the quarter ended March 31, 2019, the Corporation paid to Reliable Financial Services approximately $0.4 million under the sublease.

8681

Note 2423 – Fair value measurement

ASC Subtopic 820-10 “Fair Value Measurements and Disclosures” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels in order to increase consistency and comparability in fair value measurements and disclosures. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

 Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to access at the measurement date. Valuation on these instruments does not necessitate a significant degree of judgment since valuations are based on quoted prices that are readily available in an active market.

 Level 2 - Quoted prices other than those included in Level 1 that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or that can be corroborated by observable market data for substantially the full term of the financial instrument.

 Level 3 - Inputs are unobservable and significant to the fair value measurement. Unobservable inputs reflect the Corporation’s own assumptions about assumptions that market participants would use in pricing the asset or liability.

The Corporation maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Fair value is based upon quoted market prices when available. If listed prices or quotes are not available, the Corporation employs internally-developed models that primarily use market-based inputs including yield curves, interest rates, volatilities, and credit curves, among others. Valuation adjustments are limited to those necessary to ensure that the financial instrument’s fair value is adequately representative of the price that would be received or paid in the marketplace. These adjustments include amounts that reflect counterparty credit quality, the Corporation’s credit standing, constraints on liquidity and unobservable parameters that are applied consistently. There have been no changes in the Corporation’s methodologies used to estimate the fair value of assets and liabilities from those disclosed in the ~~2019~~2020 Form 10-K.

The estimated fair value may be subjective in nature and may involve uncertainties and matters of significant judgment for certain financial instruments. Changes in the underlying assumptions used in calculating fair value could significantly affect the results.

Fair Value on a Recurring and Nonrecurring Basis

The following fair value hierarchy tables present information about the Corporation’s assets and liabilities measured at fair value on a recurring basis at March 31, ~~2020~~2021 and December 31, ~~2019~~2020:

8782

At March 31, 2020
At March 31, 2021									At March 31, 2021
(In thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
RECURRING FAIR VALUE MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities	$	2,099,856	$	8,317,657	$	-	$	10,417,513	$	0	$	11,857,777	$	0	$	11,857,777
Obligations of U.S. Government sponsored entities		-		86,336		-		86,336		0		92		0		92
Collateralized mortgage obligations - federal agencies		-		560,836		-		560,836		0		337,964		0		337,964
Mortgage-backed securities		-		4,747,123		1,177		4,748,300		0		10,574,638		934		10,575,572
Other		-		316		-		316		0		204		0		204
Total debt securities available-for-sale	$	2,099,856	$	13,712,268	$	1,177	$	15,813,301	$	0	$	22,770,675	$	934	$	22,771,609
Trading account debt securities, excluding derivatives:
U.S. Treasury securities	$	1	$	-	$	-	$	1	$	11,620	$	0	$	0	$	11,620
Obligations of Puerto Rico, States and political subdivisions		-		109		-		109		0		94		0		94
Collateralized mortgage obligations		-		76		467		543		0		65		251		316
Mortgage-backed securities		-		38,468		-		38,468		0		24,102		0		24,102
Other		-		2,996		428		3,424		0		0		372		372
Total trading account debt securities, excluding derivatives	$	1	$	41,649	$	895	$	42,545	$	11,620	$	24,261	$	623	$	36,504
Equity securities	$	-	$	21,601	$	-	$	21,601	$	0	$	31,787	$	0	$	31,787
Mortgage servicing rights		-		-		147,311		147,311		0		0		122,543		122,543
Derivatives		-		9,534		-		9,534		0		20,971		0		20,971
Total assets measured at fair value on a recurring basis	$	2,099,857	$	13,785,052	$	149,383	$	16,034,292	$	11,620	$	22,847,694	$	124,100	$	22,983,414
Liabilities
Derivatives	$	-	$	(12,037)	$	-	$	(12,037)	$	0	$	(17,851)	$	0	$	(17,851)
Total liabilities measured at fair value on a recurring basis	$	-	$	(12,037)	$	-	$	(12,037)	$	0	$	(17,851)	$	0	$	(17,851)

8883

At December 31, 2019
At December 31, 2020									At December 31, 2020
(In thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
RECURRING FAIR VALUE MEASUREMENTS
Assets
Debt securities available-for-sale:
U.S. Treasury securities	$	3,841,715	$	8,214,540	$	-	$	12,056,255	$	3,499,781	$	7,288,259	$	0	$	10,788,040
Obligations of U.S. Government sponsored entities		-		122,404		-		122,404		0		60,184		0		60,184
Obligations of Puerto Rico, States and political subdivisions		-		6,975		-		6,975
Collateralized mortgage obligations - federal agencies		-		586,175		-		586,175		0		392,132		0		392,132
Mortgage-backed securities		-		4,875,132		1,182		4,876,314		0		10,319,547		1,014		10,320,561
Other		-		350		-		350		0		235		0		235
Total debt securities available-for-sale	$	3,841,715	$	13,805,576	$	1,182	$	17,648,473	$	3,499,781	$	18,060,357	$	1,014	$	21,561,152
Trading account debt securities, excluding derivatives:
U.S. Treasury securities	$	7,081	$	2	$	-	$	7,083	$	11,506	$	0	$	0	$	11,506
Obligations of Puerto Rico, States and political subdivisions		-		633		-		633		0		103		0		103
Collateralized mortgage obligations		-		76		530		606		0		68		278		346
Mortgage-backed securities		-		28,556		-		28,556		0		24,338		0		24,338
Other		-		3,003		440		3,443		0		0		381		381
Total trading account debt securities, excluding derivatives	$	7,081	$	32,270	$	970	$	40,321	$	11,506	$	24,509	$	659	$	36,674
Equity securities	$	-	$	21,327	$	-	$	21,327	$	0	$	29,590	$	0	$	29,590
Mortgage servicing rights		-		-		150,906		150,906		0		0		118,395		118,395
Derivatives		-		17,966		-		17,966		0		20,785		0		20,785
Total assets measured at fair value on a recurring basis	$	3,848,796	$	13,877,139	$	153,058	$	17,878,993	$	3,511,287	$	18,135,241	$	120,068	$	21,766,596
Liabilities
Derivatives	$	-	$	(16,619)	$	-	$	(16,619)	$	0	$	(18,925)	$	0	$	(18,925)
Total liabilities measured at fair value on a recurring basis	$	-	$	(16,619)	$	-	$	(16,619)	$	0	$	(18,925)	$	0	$	(18,925)

The fair value information included in the following tables is not as of period end, but as of the date that the fair value measurement was recorded during the quarters ended March 31, ~~2020~~2021 and ~~2019~~2020 and excludes nonrecurring fair value measurements of assets no longer outstanding as of the reporting date.

Quarter ended March 31, 2020
(In thousands)
Level 1
Level 2
Level 3
Total

NONRECURRING FAIR VALUE MEASUREMENTS

Assets

Write-downs
Loans^[1]
$
-
$
-
$
3,151
$
3,151
$
(497)
Other real estate owned^[2]

-

-

10,742

10,742

(1,368)
Other foreclosed assets^[2]

-

-

1,021

1,021

(152)
Total assets measured at fair value on a nonrecurring basis
$
-
$
-
$
14,914
$
14,914
$
(2,017)
[1]
Relates mostly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations. Costs to sell are excluded from the reported fair value amount.
[2]
Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are excluded from the reported fair value amount.

8984

Quarter ended March 31, 2019

(In thousands)
Level 1
Level 2
Level 3
Total

NONRECURRING FAIR VALUE MEASUREMENTS

Assets

Write-downs
Loans^[1]
$
-
$
-
$
13,147
$
13,147
$
(3,316)
Other real estate owned^[2]

-

-

8,035

8,035

(1,889)
Other foreclosed assets^[2]

-

-

1,283

1,283

(118)
Total assets measured at fair value on a nonrecurring basis
$
-
$
-
$
22,465
$
22,465
$
(5,323)
[1]
Relates mostly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations. Costs to sell are excluded from the reported fair value amount.
[2]
Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are excluded from the reported fair value amount.

Quarter ended March 31, 2021
(In thousands)		Level 1		Level 2		Level 3		Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets											Write-downs
Loans^[1]		$	0	$	0	$	2,384	$	2,384	$	(406)
Loans held-for-sale^[2]			0		0		3,549		3,549		(846)
Other real estate owned^[3]			0		0		6,205		6,205		(1,073)
Other foreclosed assets^[3]			0		0		48		48		(7)
Long-lived assets held-for-sale^[4]			0		0		2,728		2,728		(303)
Total assets measured at fair value on a nonrecurring basis		$	0	$	0	$	14,914	$	14,914	$	(2,635)
[1]	Relates mostly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations. Costs to sell are excluded from the reported fair value amount.
[2]	Relates to a quarterly valuation on loans held-for-sale. Costs to sell are excluded from the reported fair value amount.
[3]	Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are excluded from the reported fair value amount.
[4]	Represents the fair value of long-lived assets held-for-sale that were written down to their fair value.

Quarter ended March 31, 2020

(In thousands)		Level 1		Level 2		Level 3		Total
NONRECURRING FAIR VALUE MEASUREMENTS
Assets											Write-downs
Loans^[1]		$	0	$	0	$	3,151	$	3,151	$	(497)
Other real estate owned^[2]			0		0		10,742		10,742		(1,368)
Other foreclosed assets^[2]			0		0		1,021		1,021		(152)
Total assets measured at fair value on a nonrecurring basis		$	0	$	0	$	14,914	$	14,914	$	(2,017)
[1]	Relates mostly to certain impaired collateral dependent loans. The impairment was measured based on the fair value of the collateral, which is derived from appraisals that take into consideration prices in observed transactions involving similar assets in similar locations. Costs to sell are excluded from the reported fair value amount.
[2]	Represents the fair value of foreclosed real estate and other collateral owned that were written down to their fair value. Costs to sell are excluded from the reported fair value amount.

The following tables present the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the quarters ended March 31, ~~2020~~2021 and ~~2019~~2020.

	Quarter ended March 31, 2020													Quarter ended March 31, 2021
		MBS		CMOs				Other							MBS		CMOs		Other
		classified						securities							classified				securities
		as debt		as trading		MBS		classified							as debt		as trading		classified
		securities		account		classified as		as trading		Mortgage					securities		account		as trading		Mortgage
		available-		debt		trading account		account debt		servicing		Total			available-		debt		account debt		servicing		Total
(In thousands)	(In thousands)	for-sale		securities		debt securities		securities		rights		assets		(In thousands)	for-sale		securities				rights		assets
Balance at December 31, 2019		$	1,182	$	530	$	-	$	440	$	150,906	$	153,058
Balance at December 31, 2020														Balance at December 31, 2020	$	1,014	$	278	$	381	$	118,395	$	120,068
Gains (losses) included in earnings	Gains (losses) included in earnings		-		1		-		(12)		(5,229)		(5,240)	Gains (losses) included in earnings		0		0		(9)		512		503
Gains (losses) included in OCI	Gains (losses) included in OCI		(5)		-		-		-		-		(5)	Gains (losses) included in OCI		(5)		0		0		0		(5)
Additions	Additions		-		2		-		-		1,634		1,636	Additions		0		1		0		3,636		3,637
Settlements	Settlements		-		(66)		-		-		-		(66)	Settlements		(75)		(28)		0		0		(103)
Balance at March 31, 2020		$	1,177	$	467	$	-	$	428	$	147,311	$	149,383
Changes in unrealized gains (losses) included in earnings relating to assets still held at March 31, 2020		$	-	$	1	$	-	$	6	$	(2,439)	$	(2,432)
Balance at March 31, 2021														Balance at March 31, 2021	$	934	$	251	$	372	$	122,543	$	124,100
Changes in unrealized gains (losses) included in earnings relating to assets still held at March 31, 2021														Changes in unrealized gains (losses) included in earnings relating to assets still held at March 31, 2021	$	0	$	0	$	4	$	5,162	$	5,166

9085

	Quarter ended March 31, 2019													Quarter ended March 31, 2020
		MBS						Other							MBS						Other
		classified		CMOs				securities							classified		CMOs				securities
		as investment		classified		MBS		classified							as investment		classified		MBS		classified
		securities		as trading		classified as		as trading		Mortgage					securities		as trading		classified as		as trading		Mortgage
		available-		account		trading account		account		servicing		Total			available-		account		trading account		account		servicing		Total
(In thousands)	(In thousands)	for-sale		securities		securities				rights		assets		(In thousands)	for-sale		securities		securities				rights		assets
Balance at December 31, 2018		$	1,233	$	611	$	43	$	485	$	169,777	$	172,149
Balance at December 31, 2019														Balance at December 31, 2019	$	1,182	$	530	$	0	$	440	$	150,906	$	153,058
Gains (losses) included in earnings	Gains (losses) included in earnings		-		-		-		(7)		(3,825)		(3,832)	Gains (losses) included in earnings		0		1		0		(12)		(5,229)		(5,240)
Gains (losses) included in OCI	Gains (losses) included in OCI		2		-		-		-		-		2	Gains (losses) included in OCI		(5)		0		0		0		0		(5)
Additions	Additions		-		14		-		-		1,861		1,875	Additions		0		2		0		0		1,634		1,636
Settlements	Settlements		-		(30)		-		-		-		(30)	Settlements		0		(66)		0		0		0		(66)
Balance at March 31, 2019		$	1,235	$	595	$	43	$	478	$	167,813	$	170,164
Changes in unrealized gains (losses) included in earnings relating to assets still held at March 31, 2019		$	-	$	-	$	-	$	3	$	(747)	$	(744)
Balance at March 31, 2020														Balance at March 31, 2020	$	1,177	$	467	$	0	$	428	$	147,311	$	149,383
Changes in unrealized gains (losses) included in earnings relating to assets still held at March 31, 2020														Changes in unrealized gains (losses) included in earnings relating to assets still held at March 31, 2020	$	0	$	1	$	0	$	6	$	(2,439)	$	(2,432)

Gains and losses (realized and unrealized) included in earnings for the quarters ended March 31, ~~2020~~2021 and ~~2019~~2020 for Level 3 assets and liabilities included in the previous tables are reported in the consolidated statements of operations as follows:

Quarter ended March 31, 2020
Quarter ended March 31, 2019

Changes in unrealized

Changes in unrealized

Total gains

gains (losses) relating to

Total gains

gains (losses) relating to

(losses) included

assets still held at

(losses) included

assets still held at
(In thousands)

in earnings

reporting date

in earnings

reporting date

Mortgage banking activities
$
(5,229)
$
(2,439)
$
(3,825)
$
(747)
Trading account loss

(11)

7

(7)

3
Total
$
(5,240)
$
(2,432)
$
(3,832)
$
(744)

	Quarter ended March 31, 2021				Quarter ended March 31, 2020
				Changes in unrealized				Changes in unrealized
		Total gains		gains (losses) relating to		Total gains		gains (losses) relating to
		(losses) included		assets still held at		(losses) included		assets still held at
(In thousands)		in earnings		reporting date		in earnings		reporting date

Mortgage banking activities	$	512	$	5,162	$	(5,229)	$	(2,439)
Trading account loss		(9)		4		(11)		7
Total	$	503	$	5,166	$	(5,240)	$	(2,432)

The following tables include quantitative information about significant unobservable inputs used to derive the fair value of Level 3 instruments, excluding those instruments for which the unobservable inputs were not developed by the Corporation such as prices of prior transactions and/or unadjusted third-party pricing sources at March 31, ~~2020~~2021 and ~~2019.~~2020.

Fair value

at March 31,

(In thousands)

2020

Valuation technique
Unobservable inputs
Weighted average (range) [1]
CMO's - trading
$
467

Discounted cash flow model
Weighted average life
1.5 years (0.1 - 1.6 years)

Yield
3.8% (3.7% - 4.3%)

Prepayment speed
18.4% (14.5% - 21.2%)

Other - trading
$
428

Discounted cash flow model
Weighted average life
3.8 years

Yield
12.0%

Prepayment speed
10.8%

Mortgage servicing rights
$
147,311

Discounted cash flow model
Prepayment speed
6.3%(0.2% - 18.9%)

Weighted average life
7.2 years (0.1 - 14.3 years)

Discount rate
11.1% (9.5% - 14.7%)

Loans held-in-portfolio
$
3,151
^[2]
External appraisal
Haircut applied on

external appraisals
10.0%

Other real estate owned
$
7,050
^[3]
External appraisal
Haircut applied on

external appraisals
22.3% (5.0% - 30.0%)

[1]
Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.
[3]
Other real estate owned in which haircuts were not applied to external appraisals were excluded from this table.

Fair value

at March 31,

(In thousands)

2019

Valuation technique
Unobservable inputs
Weighted average (range) [1]
CMO's - trading
$
595

Discounted cash flow model
Weighted average life
1.8 years (1.2 - 2.0 years)

Yield
4.1% (3.9% - 4.4%)

Prepayment speed
17.7% (15.0% - 19.6%)

Other - trading
$
478

Discounted cash flow model
Weighted average life
5.2 years

Yield
12.0%

Prepayment speed
10.8%

Mortgage servicing rights
$
167,813

Discounted cash flow model
Prepayment speed
5.4% (0.2% - 23.2%)

Weighted average life
6.8 years (0.1 - 15.6 years)

Discount rate
11.2% (9.5% - 24.5%)

Loans held-in-portfolio
$
9,610
^[2]
External appraisal
Haircut applied on

external appraisals
13.8% (11.4% - 25.0%)

Other real estate owned
$
5,871
^[3]
External appraisal
Haircut applied on

external appraisals
21.2% (15.0% - 25.0%)

[1]
Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.
[2]
Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.
[3]
Other real estate owned in which haircuts were not applied to external appraisals were excluded from this table.

			Fair value
			at March 31,
(In thousands)			2021		Valuation technique	Unobservable inputs	Weighted average (range) [1]
CMO's - trading		$	251		Discounted cash flow model	Weighted average life	1.1 years (0.3 - 1.3 years)
						Yield	3.6% (3.6% - 4.1%)
						Prepayment speed	12.9% (10.4% - 18.3%)
Other - trading		$	372		Discounted cash flow model	Weighted average life	3.6 years
						Yield	12.0%
						Prepayment speed	10.8%
Mortgage servicing rights		$	122,543		Discounted cash flow model	Prepayment speed	6.0% (0.4% - 24.6%)
						Weighted average life	6.3 years (0.1 - 12.8 years)
						Discount rate	11.1% (9.5% - 14.7%)
Loans held-in-portfolio		$	2,162	^[2]	External appraisal	Haircut applied on
						external appraisals	16.3% (12.6% - 21.4%)
Other real estate owned		$	5,772	^[3]	External appraisal	Haircut applied on
						external appraisals	22.1% (5.0% - 35.0%)
[1]	Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.
[2]	Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.
[3]	Other real estate owned in which haircuts were not applied to external appraisals were excluded from this table.

			Fair value
			at March 31,
(In thousands)			2020		Valuation technique	Unobservable inputs	Weighted average (range) [1]
CMO's - trading		$	467		Discounted cash flow model	Weighted average life	1.5 years (0.1 - 1.6 years)
						Yield	3.8% (3.7% - 4.3%)
						Prepayment speed	18.4% (14.5% - 21.2%)
Other - trading		$	428		Discounted cash flow model	Weighted average life	3.8 years
						Yield	12.0%
						Prepayment speed	10.8%
Mortgage servicing rights		$	147,311		Discounted cash flow model	Prepayment speed	6.3% (0.2% - 18.9%)
						Weighted average life	7.2 years (0.1 - 14.3 years)
						Discount rate	11.1% (9.5% - 14.7%)
Loans held-in-portfolio		$	3,151	^[2]	External appraisal	Haircut applied on
						external appraisals	10%
Other real estate owned		$	7,050	^[3]	External appraisal	Haircut applied on
						external appraisals	22.3% (5.0% - 30.0%)
[1]	Weighted average of significant unobservable inputs used to develop Level 3 fair value measurements were calculated by relative fair value.
[2]	Loans held-in-portfolio in which haircuts were not applied to external appraisals were excluded from this table.
[3]	Other real estate owned in which haircuts were not applied to external appraisals were excluded from this table.

The significant unobservable inputs used in the fair value measurement of the Corporation’s collateralized mortgage obligations and interest-only collateralized mortgage obligation (reported as “other”), which are classified in the “trading” category, are yield, constant prepayment rate, and weighted average life. Significant increases (decreases) in any of those inputs in isolation would result in significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the constant prepayment rate will generate a directionally opposite change in the weighted average life. For example, as the average life is reduced by a higher constant prepayment rate, a lower yield will be realized, and when there is a reduction in the constant prepayment rate, the average life of these collateralized mortgage obligations will extend, thus resulting in a higher yield.The significant unobservable inputs used in the fair value measurement of the Corporation’s mortgage servicing rights are constant prepayment rates and discount rates. Increases in interest rates may result in lower prepayments. Discount rates vary according to products and / or portfolios depending on the perceived risk. Increases in discount rates result in a lower fair value measurement.

9288

Note 2524 – Fair value of financial instruments

The fair value of financial instruments is the amount at which an asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. For those financial instruments with no quoted market prices available, fair values have been estimated using present value calculations or other valuation techniques, as well as management’s best judgment with respect to current economic conditions, including discount rates, estimates of future cash flows, and prepayment assumptions. Many of these estimates involve various assumptions and may vary significantly from amounts that could be realized in actual transactions.

The fair values reflected herein have been determined based on the prevailing rate environment at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, as applicable. In different interest rate environments, fair value estimates can differ significantly, especially for certain fixed rate financial instruments. In addition, the fair values presented do not attempt to estimate the value of the Corporation’s fee generating businesses and anticipated future business activities, that is, they do not represent the Corporation’s value as a going concern. There have been no changes in the Corporation’s valuation methodologies and inputs used to estimate the fair values for each class of financial assets and liabilities not measured at fair value.

The following tables present the carrying amount and estimated fair values of financial instruments with their corresponding level in the fair value hierarchy. The aggregate fair value amounts of the financial instruments disclosed do not represent management’s estimate of the underlying value of the Corporation.

9389

		March 31, 2020											March 31, 2021
		Carrying											Carrying
(In thousands)	(In thousands)	amount		Level 1		Level 2		Level 3		Fair value		(In thousands)	amount		Level 1		Level 2		Level 3		Fair value
Financial Assets:	Financial Assets:											Financial Assets:
Cash and due from banks	Cash and due from banks	$	445,551	$	445,551	$	-	$	-	$	445,551	Cash and due from banks	$	495,915	$	495,915	$	0	$	0	$	495,915
Money market investments	Money market investments		5,941,716		5,935,945		5,771		-		5,941,716	Money market investments		11,568,677		11,562,567		6,110		0		11,568,677
Trading account debt securities, excluding derivatives^[1]	Trading account debt securities, excluding derivatives^[1]		42,545		1		41,649		895		42,545	Trading account debt securities, excluding derivatives^[1]		36,504		11,620		24,261		623		36,504
Debt securities available-for-sale^[1]	Debt securities available-for-sale^[1]		15,813,301		2,099,856		13,712,268		1,177		15,813,301	Debt securities available-for-sale^[1]		22,771,609		0		22,770,675		934		22,771,609
Debt securities held-to-maturity:	Debt securities held-to-maturity:											Debt securities held-to-maturity:
	Obligations of Puerto Rico, States and political subdivisions	$	69,771	$	-	$	-	$	68,296	$	68,296
	Collateralized mortgage obligation-federal agency		41		-		-		43		43	Obligations of Puerto Rico, States and political subdivisions	$	68,037	$	0	$	0	$	81,050	$	81,050
	Securities in wholly owned statutory business trusts		11,561		-		11,561		-		11,561	Collateralized mortgage obligation-federal agency		31		0		0		32		32
	Other		500		-		500		-		500	Securities in wholly owned statutory business trusts		11,561		0		11,561		0		11,561
Total debt securities held-to-maturity	Total debt securities held-to-maturity	$	81,873	$	-	$	12,061	$	68,339	$	80,400	Total debt securities held-to-maturity	$	79,629	$	0	$	11,561	$	81,082	$	92,643
Equity securities:	Equity securities:											Equity securities:
	FHLB stock	$	46,316	$	-	$	46,316	$	-	$	46,316	FHLB stock	$	50,554	$	0	$	50,554	$	0	$	50,554
	FRB stock		93,838		-		93,838		-		93,838	FRB stock		93,522		0		93,522		0		93,522
	Other investments		22,904		-		21,601		6,704		28,305	Other investments		34,574		0		31,787		3,137		34,924
Total equity securities	Total equity securities	$	163,058	$	-	$	161,755	$	6,704	$	168,459	Total equity securities	$	178,650	$	0	$	175,863	$	3,137	$	179,000
Loans held-for-sale	Loans held-for-sale	$	87,855	$	-	$	-	$	91,182	$	91,182	Loans held-for-sale	$	84,214	$	0	$	0	$	84,608	$	84,608
Loans held-in-portfolio	Loans held-in-portfolio		26,742,556		-		-		24,977,460		24,977,460	Loans held-in-portfolio		28,330,831		0		0		27,285,789		27,285,789
Mortgage servicing rights	Mortgage servicing rights		147,311		-		-		147,311		147,311	Mortgage servicing rights		122,543		0		0		122,543		122,543
Derivatives	Derivatives		9,534		-		9,534		-		9,534	Derivatives		20,971		0		20,971		0		20,971
		March 31, 2020											March 31, 2021
		Carrying											Carrying
(In thousands)	(In thousands)	amount		Level 1		Level 2		Level 3		Fair value		(In thousands)	amount		Level 1		Level 2		Level 3		Fair value
Financial Liabilities:	Financial Liabilities:											Financial Liabilities:
Deposits:	Deposits:											Deposits:
	Demand deposits	$	36,269,352	$	-	$	36,269,352	$	-	$	36,269,352	Demand deposits	$	51,486,280	$	0	$	51,486,280	$	0	$	51,486,280
	Time deposits		8,527,824		-		8,398,572		-		8,398,572	Time deposits		7,256,521		0		7,234,844		0		7,234,844
Total deposits	Total deposits	$	44,797,176	$	-	$	44,667,924	$	-	$	44,667,924	Total deposits	$	58,742,801	$	0	$	58,721,124	$	0	$	58,721,124
Assets sold under agreements to repurchase	Assets sold under agreements to repurchase	$	178,766	$	-	$	178,104	$	-	$	178,104	Assets sold under agreements to repurchase	$	86,834	$	0	$	86,816	$	0	$	86,816
Other short-term borrowings^[2]		$	100,000	$	-	$	100,000	$	-	$	100,000
Notes payable:	Notes payable:											Notes payable:
												FHLB advances	$	541,469	$	0	$	551,151	$	0	$	551,151
	FHLB advances	$	377,598	$	-	$	393,674	$	-	$	393,674	Unsecured senior debt securities		296,891		0		324,342		0		324,342
	Unsecured senior debt securities		295,624		-		309,228		-		309,228	Junior subordinated deferrable interest debentures (related to trust preferred securities)		384,936		0		385,792		0		385,792
	Junior subordinated deferrable interest debentures (related to trust preferred securities)		384,909		-		371,086		-		371,086	FRB advances		934		0		934		0		934
Total notes payable	Total notes payable	$	1,058,131	$	-	$	1,073,988	$	-	$	1,073,988	Total notes payable	$	1,224,230	$	0	$	1,262,219	$	0	$	1,262,219
Derivatives	Derivatives	$	12,037	$	-	$	12,037	$	-	$	12,037	Derivatives	$	17,851	$	0	$	17,851	$	0	$	17,851
[1]	Refer to Note 24 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level											Refer to Note 23 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.
[2]	Refer to Note 16 to the Consolidated Financial Statements for the composition of other short-term borrowings.

9490

		December 31, 2019											December 31, 2020
		Carrying											Carrying
(In thousands)	(In thousands)	amount		Level 1		Level 2		Level 3		Fair value		(In thousands)	amount		Level 1		Level 2		Level 3		Fair value
Financial Assets:	Financial Assets:											Financial Assets:
Cash and due from banks	Cash and due from banks	$	388,311	$	388,311	$	-	$	-	$	388,311	Cash and due from banks	$	491,065	$	491,065	$	0	$	0	$	491,065
Money market investments	Money market investments		3,262,286		3,256,274		6,012		-		3,262,286	Money market investments		11,640,880		11,634,851		6,029		0		11,640,880
Trading account debt securities, excluding derivatives^[1]	Trading account debt securities, excluding derivatives^[1]		40,321		7,081		32,270		970		40,321	Trading account debt securities, excluding derivatives^[1]		36,674		11,506		24,509		659		36,674
Debt securities available-for-sale^[1]	Debt securities available-for-sale^[1]		17,648,473		3,841,715		13,805,576		1,182		17,648,473	Debt securities available-for-sale^[1]		21,561,152		3,499,781		18,060,357		1,014		21,561,152
Debt securities held-to-maturity:	Debt securities held-to-maturity:											Debt securities held-to-maturity:
	Obligations of Puerto Rico, States and political subdivisions	$	85,556	$	-	$	-	$	93,002	$	93,002
	Collateralized mortgage obligation-federal agency		45		-		-		47		47	Obligations of Puerto Rico, States and political subdivisions	$	70,768	$	0	$	0	$	83,298	$	83,298
	Securities in wholly owned statutory business trusts		11,561		-		11,561		-		11,561	Collateralized mortgage obligation-federal agency		31		0		0		32		32
	Other		500		-		500		-		500	Securities in wholly owned statutory business trusts		11,561		0		11,561		0		11,561
Total debt securities held-to-maturity	Total debt securities held-to-maturity	$	97,662	$	-	$	12,061	$	93,049	$	105,110	Total debt securities held-to-maturity	$	82,360	$	0	$	11,561	$	83,330	$	94,891
Equity securities:	Equity securities:											Equity securities:
	FHLB stock	$	43,787	$	-	$	43,787	$	-	$	43,787	FHLB stock	$	49,799	$	0	$	49,799	$	0	$	49,799
	FRB stock		93,470		-		93,470		-		93,470	FRB stock		93,045		0		93,045		0		93,045
	Other investments		22,630		-		21,328		7,367		28,695	Other investments		30,893		0		29,590		1,495		31,085
Total equity securities	Total equity securities	$	159,887	$	-	$	158,585	$	7,367	$	165,952	Total equity securities	$	173,737	$	0	$	172,434	$	1,495	$	173,929
Loans held-for-sale	Loans held-for-sale	$	59,203	$	-	$	-	$	60,030	$	60,030	Loans held-for-sale	$	99,455	$	0	$	0	$	102,189	$	102,189
Loans held-in-portfolio	Loans held-in-portfolio		26,929,165		-		-		25,051,400		25,051,400	Loans held-in-portfolio		28,488,946		0		0		27,098,297		27,098,297
Mortgage servicing rights	Mortgage servicing rights		150,906		-		-		150,906		150,906	Mortgage servicing rights		118,395		0		0		118,395		118,395
Derivatives	Derivatives		17,966		-		17,966		-		17,966	Derivatives		20,785		0		20,785		0		20,785
		December 31, 2019											December 31, 2020
		Carrying											Carrying
(In thousands)	(In thousands)	amount		Level 1		Level 2		Level 3		Fair value		(In thousands)	amount		Level 1		Level 2		Level 3		Fair value
Financial Liabilities:	Financial Liabilities:											Financial Liabilities:
Deposits:	Deposits:											Deposits:
	Demand deposits	$	36,083,809	$	-	$	36,083,809	$	-	$	36,083,809	Demand deposits	$	49,558,492	$	0	$	49,558,492	$	0	$	49,558,492
	Time deposits		7,674,797		-		7,598,732		-		7,598,732	Time deposits		7,307,848		0		7,319,963		0		7,319,963
Total deposits	Total deposits	$	43,758,606	$	-	$	43,682,541	$	-	$	43,682,541	Total deposits	$	56,866,340	$	0	$	56,878,455	$	0	$	56,878,455
Assets sold under agreements to repurchase	Assets sold under agreements to repurchase	$	193,378	$	-	$	193,271	$	-	$	193,271	Assets sold under agreements to repurchase	$	121,303	$	0	$	121,257	$	0	$	121,257
Notes payable:	Notes payable:											Notes payable:
	FHLB advances	$	421,399	$	-	$	429,718	$	-	$	429,718	FHLB advances	$	542,469	$	0	$	561,977	$	0	$	561,977
	Unsecured senior debt		295,307		-		323,415		-		323,415	Unsecured senior debt securities		296,574		0		321,078		0		321,078
	Junior subordinated deferrable interest debentures (related to trust preferred securities)		384,902		-		395,216		-		395,216	Junior subordinated deferrable interest debentures (related to trust preferred securities)		384,929		0		395,078		0		395,078
												FRB advances		1,009		0		1,009		0		1,009
Total notes payable	Total notes payable	$	1,101,608	$	-	$	1,148,349	$	-	$	1,148,349	Total notes payable	$	1,224,981	$	0	$	1,279,142	$	0	$	1,279,142
Derivatives	Derivatives	$	16,619	$	-	$	16,619	$	-	$	16,619	Derivatives	$	18,925	$	0	$	18,925	$	0	$	18,925
[1]	Refer to Note 24 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.											Refer to Note 23 to the Consolidated Financial Statements for the fair value by class of financial asset and its hierarchy level.
[2]	Refer to Note 16 to the Consolidated Financial Statements for the composition of other short-term borrowings.

The notional amount of commitments to extend credit at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 is $ ~~8.2~~9.4 billion and $ ~~8.4~~9.3 billion, respectively, and represents the unused portion of credit facilities granted to customers. The notional amount of letters of credit at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 is $ 7324 million and $ 7824 million respectively, and represents the contractual amount that is required to be paid in the event of nonperformance. The fair value of commitments to extend credit and letters of credit, which are based on the fees charged to enter into those agreements, are not material to Popular’s financial statements.

9591

Note 2625 – Net income per common share

The following table sets forth the computation of net income per common share (“EPS”), basic and diluted, for the quarters ended March 31, ~~2020~~2021 and ~~2019:~~2020:

		Quarters ended March 31,				Quarters ended March 31,
(In thousands, except per share information)		2020		2019		2021		2020
Net income	$	34,302	$	167,925	$	262,632	$	34,302
Preferred stock dividends		(670)		(931)		(353)		(700)
Net income applicable to common stock	$	33,632	$	166,994	$	262,279	$	33,602
Average common shares outstanding		90,788,557		98,581,743		83,899,769		90,788,557
Average potential dilutive common shares		104,404		177,155		152,166		104,404
Average common shares outstanding - assuming dilution		90,892,961		98,758,898		84,051,935		90,892,961
Basic EPS	$	0.37	$	1.69	$	3.13	$	0.37
Diluted EPS	$	0.37	$	1.69	$	3.12	$	0.37

As disclosed in Note 18, on January 30, 2020, the Corporation entered into an accelerated share repurchase transaction (“ASR”) of $500 million with respect to its common stock, and, in connection therewith, received an initial delivery of 7,055,919 shares of common stock. The initial share delivery was accounted for as a treasury stock transaction. As a result of the recent decrease in the trading price of the Corporation’s common stock during the COVID-19 pandemic, on March 19, 2020, the dealer counterparty to the ASR exercised its right to terminate the ASR as a result of the trading price of the Corporation’s common stock falling below a specified level. The Termination Agreement executed in connection with such termination provides for the acceleration of the final settlement of the ASR, which was originally expected to occur during the fourth quarter of 2020. Under the settlement resulting from the Termination Agreement of the ASR due to the decrease in share price resulting from the COVID-19 pandemic, the Corporation will receive a further number of shares of common stock, equivalent to approximately $167 million. As of March 31, 2020, the Corporation had received 642,400 additional shares after the early termination of the ASR. The diluted EPS computation for the quarter ended March 31, 2020 excludes 4,228,622 to be received under the ASR since their effect would be antidilutive.

For the quarters ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Corporation calculated the impact of potential dilutive common shares under the treasury stock method, consistent with the method used for the preparation of the financial statements for the year ended December 31, ~~2019.~~2020. For a discussion of the calculation under the treasury stock method, refer to Note 3330 of the Consolidated Financial Statements included in the ~~2019~~2020 Form 10-K.

9692

Note 2726 – Revenue from contracts with customers

The following table presents the Corporation’s revenue streams from contracts with customers by reportable segment for the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

		Quarters ended March 31,									Quarters ended March 31,
(In thousands)	(In thousands)	2020				2019				(In thousands)	2021				2020
			BPPR		Popular U.S.		BPPR		Popular U.S.			BPPR		Popular U.S.		BPPR		Popular U.S.
Service charges on deposit accounts	Service charges on deposit accounts	$	38,331	$	3,328	$	35,064	$	3,627	Service charges on deposit accounts	$	36,859	$	2,761	$	38,331	$	3,328
Other service fees:	Other service fees:									Other service fees:
	Debit card fees		9,999		238		10,899		271	Debit card fees		11,342		235		9,999		238
	Insurance fees, excluding reinsurance		7,688		737		7,445		770	Insurance fees, excluding reinsurance		8,238		609		7,688		737
	Credit card fees, excluding late fees and membership fees		19,768		242		18,286		216	Credit card fees, excluding late fees and membership fees		25,410		248		19,768		242
	Sale and administration of investment products		6,263		-		5,259		-	Sale and administration of investment products		5,540		0		6,263		0
	Trust fees		5,386		-		4,815		-	Trust fees		6,015		0		5,386		0
Total revenue from contracts with customers^[1]	Total revenue from contracts with customers^[1]	$	87,435	$	4,545	$	81,768	$	4,884	Total revenue from contracts with customers^[1]	$	93,404	$	3,853	$	87,435	$	4,545
[1] The amounts include intersegment transactions of $ 0.3 million and $ 0.2 million, respectively, for the quarters ended March 31, 2020 and 2019.
[1] The amounts include intersegment transactions of $0.3 million and $0.3 million, respectively, for the quarters ended March 31, 2021 and 2020.										[1] The amounts include intersegment transactions of $0.3 million and $0.3 million, respectively, for the quarters ended March 31, 2021 and 2020.

Revenue from contracts with customers is recognized when, or as, the performance obligations are satisfied by the Corporation by transferring the promised services to the customers. A service is transferred to the customer when, or as, the customer obtains control of that service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized based on the services that have been rendered to date. Revenue from a performance obligation satisfied at a point in time is recognized when the customer obtains control over the service. The transaction price, or the amount of revenue recognized, reflects the consideration the Corporation expects to be entitled to in exchange for those promised services. In determining the transaction price, the Corporation considers the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Corporation is the principal in a transaction if it obtains control of the specified goods or services before they are transferred to the customer. If the Corporation acts as principal, revenues are presented in the gross amount of consideration to which it expects to be entitled and are not netted with any related expenses. On the other hand, the Corporation is an agent if it does not control the specified goods or services before they are transferred to the customer. If the Corporation acts as an agent, revenues are presented in the amount of consideration to which it expects to be entitled, net of related expenses.

Following is a description of the nature and timing of revenue streams from contracts with customers:

Service charges on deposit accounts

Service charges on deposit accounts are earned on retail and commercial deposit activities and include, but are not limited to, nonsufficient fund fees, overdraft fees and checks stop payment fees. These transaction-based fees are recognized at a point in time, upon occurrence of an activity or event or upon the occurrence of a condition which triggers the fee assessment. The Corporation is acting as principal in these transactions.

Debit card fees

Debit card fees include, but are not limited to, interchange fees, surcharging income and foreign transaction fees. These transaction-based fees are recognized at a point in time, upon occurrence of an activity or event or upon the occurrence of a condition which triggers the fee assessment. Interchange fees are recognized upon settlement of the debit card payment transactions. The Corporation is acting as principal in these transactions.

Insurance fees

Insurance fees include, but are not limited to, commissions and contingent commissions. Commissions and fees are recognized when related policies are effective since the Corporation does not have an enforceable right to payment for services completed to date. An allowance is created for expected adjustments to commissions earned related to policy cancellations. Contingent commissions are recorded on an accrual basis when the amount to be received is notified by the insurance company. The

9793

Corporation is acting as an agent since it arranges for the sale of the policies and receives commissions if, and when, it achieves the sale.

Credit card fees

Credit card fees include, but are not limited to, interchange fees, additional card fees, cash advance fees, balance transfer fees, foreign transaction fees, and returned payments fees. Credit card fees are recognized at a point in time, upon the occurrence of an activity or an event. Interchange fees are recognized upon settlement of the credit card payment transactions. The Corporation is acting as principal in these transactions.

Sale and administration of investment products

Fees from the sale and administration of investment products include, but are not limited to, commission income from the sale of investment products, asset management fees, underwriting fees, and mutual fund fees.

Commission income from investment products is recognized on the trade date since clearing, trade execution, and custody services are satisfied when the customer acquires or disposes of the rights to obtain the economic benefits of the investment products and brokerage contracts have no fixed duration and are terminable at will by either party. The Corporation is acting as principal in these transactions since it performs the service of providing the customer with the ability to acquire or dispose of the rights to obtain the economic benefits of investment products.

Asset management fees are satisfied over time and are recognized in arrears. At contract inception, the estimate of the asset management fee is constrained from the inclusion in the transaction price since the promised consideration is dependent on the market and thus is highly susceptible to factors outside the manager’s influence. As advisor, the broker-dealer subsidiary is acting as principal.

Underwriting fees are recognized at a point in time, when the investment products are sold in the open market at a markup. When the broker-dealer subsidiary is lead underwriter, it is acting as an agent. In turn, when it is a participating underwriter, it is acting as principal.

Mutual fund fees, such as distribution fees, are considered variable consideration and are recognized over time, as the uncertainty of the fees to be received is resolved as NAV is determined and investor activity occurs. The promise to provide distribution-related services is considered a single performance obligation as it requires the provision of a series of distinct services that are substantially the same and have the same pattern of transfer. When the broker-dealer subsidiary is acting as a distributor, it is acting as principal. In turn, when it acts as third-party dealer, it is acting as an agent.

Trust fees

Trust fees are recognized from retirement plan, mutual fund administration, investment management, trustee, escrow, and custody and safekeeping services. These asset management services are considered a single performance obligation as it requires the provision of a series of distinct services that are substantially the same and have the same pattern of transfer. The performance obligation is satisfied over time, except for optional services and certain other services that are satisfied at a point in time. Revenues are recognized in arrears, when, or as, the services are rendered. The Corporation is acting as principal since, as asset manager, it has the obligation to provide the specified service to the customer and has the ultimate discretion in establishing the fee paid by the customer for the specified services.

9894

Note 2827 – Leases

The Corporation enters in the ordinary course of business into operating and finance leases for land, buildings and equipment. These contracts generally do not include purchase options or residual value guarantees. The remaining lease terms of ~~0.2~~0.1 to ~~33.8years~~32.8 years considers options to extend the leases for up to 20.0 years. The Corporation identifies leases when it has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.

The Corporation recognizes right-of-use assets (“ROU assets”) and lease liabilities related to operating and finance leases in its Consolidated Statements of Financial Condition under the caption of other assets and other liabilities, respectively. Refer to Note 1312 and Note ~~17,~~16, respectively, for information on the balances of these lease assets and liabilities.

The Corporation uses the incremental borrowing rate for purposes of discounting lease payments for operating and finance leases, since it does not have enough information to determine the rates implicit in the leases. The discount rates are based on fixed-rate and fully amortizing borrowing facilities of its banking subsidiaries that are collateralized. For leases held by non-banking subsidiaries, a credit spread is added to this rate based on financing transactions with a similar credit risk profile.

On October 27, 2020, PB authorized and approved a strategic realignment of its New York Metro branch network that resulted in eleven branch closures, of which nine were leased properties. The branch closures were completed on January 29, 2021. An impairment loss of ROU assets amounting to $15.9 million was recognized in connection with this transaction during the fourth quarter of 2020.

The following table presents the undiscounted cash flows of operating and finance leases for each of the following periods:

March 31, 2020
March 31, 2021																			March 31, 2021
(In thousands)		Remaining 2020		2021		2022		2023		2024		Later Years		Total Lease Payments		Less: Imputed Interest		Total		Remaining 2021		2022		2023		2024		2025		Later Years		Total Lease Payments		Less: Imputed Interest		Total
Operating Leases	$	22,908	$	28,201	$	24,113	$	21,829	$	20,729	$	70,978	$	188,758	$	(26,797)	$	161,961	$	21,007	$	24,843	$	22,657	$	21,549	$	18,605	$	52,393	$	161,054	$	(20,925)	$	140,129
Finance Leases		2,411		3,299		3,392		3,489		3,594		8,938		25,123		(4,594)		20,529		2,491		3,402		3,492		3,589		3,701		8,850		25,525		(4,086)		21,439

December 31, 2019
(In thousands)		2020		2021		2022		2023		2024		Later Years		Total Lease Payments		Less: Imputed Interest		Total
Operating Leases	$	29,872	$	27,445	$	23,540	$	21,257	$	20,176	$	70,842	$	193,132	$	(27,993)	$	165,139
Finance Leases		3,068		3,159		3,252		3,349		3,448		8,220		24,496		(4,686)		19,810

The following table presents the lease cost recognized by the Corporation in the Consolidated Statements of Operations as follows:

		Quarter ended					Quarters ended March 31,
(In thousands)	(In thousands)	March 31, 2020		March 31, 2019		(In thousands)	2021		2020
Finance lease cost:	Finance lease cost:					Finance lease cost:
	Amortization of ROU assets	$	520	$	458	Amortization of ROU assets	$	581	$	520
	Interest on lease liabilities		313		321	Interest on lease liabilities		273		313
Operating lease cost	Operating lease cost		7,914		8,155	Operating lease cost		7,055		7,914
Short-term lease cost	Short-term lease cost		57		24	Short-term lease cost		87		57
Variable lease cost	Variable lease cost		11		-	Variable lease cost		30		11
Sublease income	Sublease income		(30)		(25)	Sublease income		(19)		(30)
Total lease cost		$	8,785	$	8,933
Total lease cost^[1]						Total lease cost^[1]	$	8,007	$	8,785
[1]						Total lease cost is recognized as part of net occupancy expense.

The following table presents supplemental cash flow information and other related information related to operating and finance leases.

			Quarters ended March 31,
(Dollars in thousands)			2021			2020
Cash paid for amounts included in the measurement of lease liabilities:
	Operating cash flows from operating leases^[1]	$	15,197		$	7,822
	Operating cash flows from finance leases		273			313
	Financing cash flows from finance leases^[1]		1,133			538
ROU assets obtained in exchange for new lease obligations:
	Operating leases	$	2,394		$	259
Weighted-average remaining lease term:
	Operating leases		8.2	years		8.6	years
	Finance leases		8.9	years		7.3	years
Weighted-average discount rate:
	Operating leases		3.0	%		3.4	%
	Finance leases		5.1	%		5.7	%
[1]	During the quarter ended March 31, 2021, the Corporation made base lease termination payments amounting to $7.8 million in connection with the closure of nine branches as a result of the strategic realignment of PB’s New York Metro branch network.

Quarters ended
(Dollars in thousands)

March 31, 2020

March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases
$
7,822
$
7,391

Operating cash flows from finance leases

313

327

Financing cash flows from finance leases

538

439
ROU assets obtained in exchange for new lease obligations:

Operating leases
$
259
$
356

Finance leases

-

3,308
Weighted-average remaining lease term:

Operating leases

8.6
years

8.4
years

Finance leases

7.3
years

8.9
years
Weighted-average discount rate:

Operating leases

3.4
%

3.8
%

Finance leases

5.7
%

5.7
%

As of March 31, ~~2020,~~2021, the Corporation has additional operating ~~and finance~~ leases contracts that have not yet commenced with an undiscounted contract amount of ~~$5.9~~$3.6 million, ~~and $5.3 million, respectively,~~ which will have lease terms ranging from 10 to 20 years.

~~100~~96

Note 2928 – Pension and postretirement benefits

The Corporation has a non-contributory defined benefit pension plan and supplementary pension benefit restoration plans for regular employees of certain of its subsidiaries (the “Pension Plans”). The accrual of benefits under the Pension Plans is frozen to all participants. The Corporation also provides certain postretirement health care benefits for retired employees of certain subsidiaries (the “OPEB Plan”).

The components of net periodic cost for the Pension Plans and the OPEB Plan for the periods presented were as follows:


		Pension Plans				OPEB Plan				Pension Plans				OPEB Plan
		Quarters ended March 31,				Quarters ended March 31,				Quarters ended March 31,				Quarters ended March 31,
(In thousands)		2020		2019		2020		2019		2021		2020		2021		2020
Personnel Cost:
Service cost	$	-	$	-	$	178	$	190	$	0	$	0	$	159	$	178
Other operating expenses:
Interest cost		5,847		7,110		1,228		1,489		3,998		5,847		893		1,228
Expected return on plan assets		(9,526)		(8,096)		-		-		(9,670)		(9,526)		0		0
Amortization of prior service cost/(credit)		-		-		-		-		0		0		0		0
Amortization of net loss		5,220		5,876		142		-		4,720		5,220		470		142
Total net periodic pension cost	$	1,541	$	4,890	$	1,548	$	1,679	$	(952)	$	1,541	$	1,522	$	1,548

The Corporation paid the following contributions to the plans ~~during~~for the quarter ended March 31, ~~2020~~2021 and expects to pay the following contributions for the year ending December 31, ~~2020.~~2021.

For the quarter ended
For the year ending
(In thousands)
March 31, 2020
December 31, 2020
Pension Plans
$
57
$
229
OPEB Plan
$
1,213
$
6,516

	For the quarter ended		For the year ending
(In thousands)	March 31, 2021		December 31, 2021
Pension Plans	$	57	$	229
OPEB Plan	$	1,567	$	6,333

~~101~~97

Note 3029 - Stock-based compensation

~~The~~On May 12, 2020, the stockholders of the Corporation approved the Popular, Inc. ~~2004~~2020 Omnibus Incentive Plan, ~~(the “Incentive Plan”)~~which permits the ~~issuance of~~Corporation to issue several types of ~~stock based~~stock-based compensation ~~for~~to employees and directors of the Corporation and/or any of its ~~subsidiaries.~~subsidiaries (the “2020 Incentive Plan”). The 2020 Incentive Plan replaced the Popular, Inc. 2004 Omnibus Incentive Plan, which was in effect prior to the adoption of the 2020 Incentive Plan (the “2004 Incentive Plan” and, together with the 2020 Incentive Plan, the “Incentive Plan”). Participants inunder the Incentive Plan are designated by the Talent and Compensation Committee of the Board of Directors (or its delegate, as determined by the Board). Under the Incentive Plan, the Corporation has issued restricted ~~stocks~~stock and performance shares for its employees and restricted ~~stocks~~stock and restricted stock units (“RSU”), to its directors.

The restricted ~~stocks for~~stock granted under the Incentive Plan to employees ~~will become~~becomes vested based on the employees’ continued service with Popular. Unless otherwise stated in an agreement, the compensation cost associated with the shares of restricted stock is determined based on a two-prong vesting schedule. The first part is vested ratably over five years commencing at the date of grant (“the graduated vesting portion”) and the second part is vested at termination of employment after attainment of 55 years of age and 10 years of service (“the retirement vesting portion”). The graduated vesting portion is accelerated at termination of employment after attaining 55 years of age and 10 years of service. The vesting schedule for restricted shares granted on or after 2014 ~~was modified~~is as follows, the graduated vesting portion is vested ratably over four years commencing at the date of the grant and the retirement vesting portion is vested at termination of employment after attainment of the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service. The graduated vesting portion is accelerated at termination of employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service. Restricted stock granted on or after 2021 will vest ratably in equal annual installments over a period of 4 years or 3 years, depending on the classification of the employee.

The performance share ~~awards~~award granted under the Incentive Plan consist of the opportunity to receive shares of Popular, Inc.’s common stock provided that the Corporation achieves certain goals during a three-year performance cycle. The goals will be based on two metrics weighted equally: the Relative Total Shareholder Return (“TSR”) and the Absolute Earnings per Share (“EPS”) goals. For grants issued on 2020 and ~~thereafter,~~2021, the EPS goal is substituted by the Absolute Return on Average Assets (“ROA”) ~~goal.~~goal and the Absolute Return on Average Tangible Common Equity (“ROATCE”) respectively. The TSR metric is considered to be a market condition under ASC 718. For equity settled awards based on a market condition, the fair value is determined as of the grant date and is not subsequently revised based on actual performance. The EPS, ROA and ~~ROA~~ROATCE metrics are considered to be a performance condition under ASC 718. The fair value is determined based on the probability of achieving the EPS, ROA or ~~ROA~~ROATCE goal as of each reporting period. The TSR and EPS, ROA or ~~ROA~~ROATCE metrics are equally weighted and work independently. The number of shares that will ultimately vest ranges from 50% to a 150% of target based on both market (TSR) and performance (EPS, ROA and ~~ROA)~~ROATCE) conditions. The performance shares vest at the end of the three-year performance cycle. If a participant terminates employment after attaining the earlier of 55 years of age and 10 years of service or 60 years of age and 5 years of service, the performance shares shall continue outstanding and vest at the end of the performance cycle.

The following table summarizes the restricted stock and performance shares activity under the Incentive Plan for members of management.

(Not in thousands)	Shares		Weighted-Average Grant Date Fair Value	Shares		Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2018	382,186	$	36.41
Granted	218,169		55.55
Performance Shares Quantity Adjustment	15,061		55.72
Vested	(270,051)		44.73
Non-vested at December 31, 2019	345,365	$	41.68	345,365	$	41.68
Granted	152,521		47.68	253,943		42.49
Performance Shares Quantity Adjustment	(7)		48.79	(7)		48.79
Vested	(160,333)		44.17	(234,421)		42.64
Non-vested at March 31, 2020	337,546	$	42.83
Forfeited				(6,368)		44.26
Non-vested at December 31, 2020				358,512	$	41.23
Granted				124,613		66.84
Performance Shares Quantity Adjustment				46,704		51.48
Vested				(193,946)		57.16
Non-vested at March 31, 2021				335,883	$	42.96

During the quarter ended March 31, ~~2020, 87,706~~2021, 53,239 shares of restricted stock (March 31, ~~2019~~2020 - ~~84,590)~~87,706) and ~~64,815~~ 71,374 performance shares (March 31, ~~2019~~2020 - ~~65,369)~~64,815) were awarded to management under the Incentive Plan.

During the quarter ended March 31, ~~2020,~~2021, the Corporation recognized ~~$3.6~~$3.9 million of restricted stock expense related to management incentive awards, with a tax benefit of ~~$0.4~~$0.5 million (March 31, ~~2019~~2020 - ~~$3.8~~$3.6 million, with a tax benefit of $0.4 million). For

~~102~~

the quarter ended March 31, ~~2020,~~2021, the fair market value of the restricted stock and performance shares vested was $7$3.2 million at grant date and ~~$8.7~~$4.3 million at vesting date. This differential triggers a windfall, of ~~$0.6~~$1.7 million that was recorded as a reduction in income tax expense. For the quarter ended March 31, ~~2020~~2021, the Corporation recognized $~~2.5~~4.3 million of performance shares expense, with a tax benefit of $~~0.2~~0.4 million (March 31, ~~2019~~2020 - ~~$3.6~~$2.5 million, with a tax benefit of ~~$0.3~~$0.2 million). The total unrecognized compensation cost related to non-vested restricted stock awards and performance shares to members of management at March 31, ~~2020~~2021 was ~~$9.8~~$9.9 million and is expected to be recognized over a weighted-average period of ~~2.28~~2.21 years.

The following table summarizes the restricted stock activity under the Incentive Plan for members of the Board of Directors:

(Not in thousands)	Restricted Stock shares		Weighted-Average Grant Date Fair Value per Share	Restricted Stock units		Weighted-Average Grant Date Fair Value per Unit		Restricted Stock units		Weighted-Average Grant Date Fair Value per Unit
Non-vested at December 31, 2018	-	$	-	-	$	-
Granted	1,052		49.25	27,449		57.64
Vested	(1,052)		49.25	(27,449)		57.64
Forfeited	-		-	-		-
Non-vested at December 31, 2019	-	$	-	-	$	-	$	0	$	0
Granted	-		-	298		59.29		43,866		35.47
Vested	-		-	(298)		59.29		(43,866)		35.47
Forfeited	-		-	-		-		0		0
Non-vested at March 31, 2020	-	$	-	-	$	-
Non-vested at December 31, 2020							$	0	$	0
Granted								524		55.23
Vested								(524)		55.23
Forfeited								0		0
Non-vested at March 31, 2021							$	0	$	0

~~Effective on May 2019, all~~The equity awards granted to members of the ~~directors may be paid in either restricted stocks or RSU, at the directors’ election. For the year 2019, all directors elected RSU. The directors’ equity awards~~Board of Directors of Popular, Inc. (the “Directors”) will vest and become non-forfeitable on the grant date of such award. AtEffective on May 2019 all equity awards granted to the ~~director’s option,~~Directors may be paid in either restricted stocks or RSU, at the Directors’ election. If RSU are elected the Directors may defer the delivery of the shares of common stocks underlying the RSU award ~~shall be delivered to the director~~ after ~~its retirement, either on a fix date or in annual installments.~~their retirement. To the extent that cash dividends are paid on the Corporation’s outstanding common stocks, the ~~director~~Directors will receive an additional number of RSU that reflect reinvested dividend equivalent.

For 2020 and 2021, all Directors elected RSU. During the quarter ended March 31, ~~2020, 0 shares of restricted stock were granted to members of the Board of Directors of Popular, Inc. (March 31, 2019 - 1,052) and 298~~2021, 524 RSU were granted to ~~members of~~ the ~~Board of~~ Directors ~~of Popular, Inc.~~(March 31, 2020 - 298). During this period, the Corporation ~~did 0t~~ recognized ~~any expense related to these restricted stock shares, (March 31, 2019 - $0.1 million, with a tax benefit of $6 thousand) and recognized $ 18~~$29 thousand of restricted stock expense related to these RSU, with a tax benefit of $5 thousand (March 31, 2020 - $18 thousand, with a tax benefit of $2 ~~thousand.~~thousand). The fair value at vesting date of the RSU vested during the quarter ended March 31, ~~2020~~2021 for directors was ~~$18 thousand .~~$29 thousand.

~~103~~99

Note 3130 – Income taxes

The reason for the difference between the income tax expense applicable to income before provision for income taxes and the amount computed by applying the statutory tax rate in Puerto Rico, were as follows:

			Quarters ended									Quarters ended
			March 31, 2020				March 31, 2019					March 31, 2021				March 31, 2020
(In thousands)	(In thousands)		Amount	% of pre-tax income			Amount	% of pre-tax income		(In thousands)		Amount	% of pre-tax income			Amount	% of pre-tax income
Computed income tax expense at statutory rates	Computed income tax expense at statutory rates	$	14,025	38	%	$	81,806	38	%	Computed income tax expense at statutory rates	$	127,299	38	%	$	14,025	38	%
Net benefit of tax exempt interest income	Net benefit of tax exempt interest income		(32,896)	(88)			(26,944)	(12)		Net benefit of tax exempt interest income		(34,163)	(10)			(32,896)	(88)
Deferred tax asset valuation allowance	Deferred tax asset valuation allowance		5,538	15			5,482	2		Deferred tax asset valuation allowance		10,321	3			5,538	15
Difference in tax rates due to multiple jurisdictions	Difference in tax rates due to multiple jurisdictions		8,875	24			(2,862)	(1)		Difference in tax rates due to multiple jurisdictions		(10,948)	(3)			8,875	24
Effect of income subject to preferential tax rate	Effect of income subject to preferential tax rate		(1,900)	(5)			(2,928)	(1)		Effect of income subject to preferential tax rate		(3,329)	(1)			(1,900)	(5)
Adjustment due to estimate on the annual effective rate	Adjustment due to estimate on the annual effective rate		9,004	24			(3,130)	(2)		Adjustment due to estimate on the annual effective rate		(10,328)	(3)			9,004	24
State and local taxes	State and local taxes		(555)	(2)			1,624	-		State and local taxes		61	0			(555)	(2)
Others	Others		1,006	2			(2,825)	(1)		Others		(2,082)	(1)			1,006	2
Income tax expense	Income tax expense	$	3,097	8	%	$	50,223	23	%	Income tax expense	$	76,831	23	%	$	3,097	8	%

For the quarter ended March 31, ~~2020,~~2021, the Corporation recorded an income tax expense of $~~$3.1~~76.8 million, compared to ~~$50.2~~$3.1 million for the ~~same~~ quarter ~~2019.~~ended March 31, 2020. The increase in income tax expense ~~for~~was primarily due to higher pre-tax income during the first quarter of ~~2020, reflects the impact of lower pre-tax income, resulting primarily from a higher provision for credit losses due~~2021 compared to the ~~implementation~~same quarter of ~~CECL and the impact of the COVID-19 pandemic.~~2020.

The following table presents a breakdown of the significant components of the Corporation’s deferred tax assets and liabilities.

~~104~~100

			March 31, 2020							March 31, 2021
(In thousands)	(In thousands)		PR		US		Total	(In thousands)		PR		US		Total
Deferred tax assets:	Deferred tax assets:							Deferred tax assets:
Tax credits available for carryforward	Tax credits available for carryforward	$	2,368	$	5,269	$	7,637	Tax credits available for carryforward	$	3,003	$	2,781	$	5,784
Net operating loss and other carryforward available	Net operating loss and other carryforward available		117,927		717,565		835,492	Net operating loss and other carryforward available		130,535		696,884		827,419
Postretirement and pension benefits	Postretirement and pension benefits		81,912		-		81,912	Postretirement and pension benefits		77,832		0		77,832
Deferred loan origination fees	Deferred loan origination fees		2,043		(3,164)		(1,121)	Deferred loan origination fees		17,041		(3,092)		13,949
Allowance for loan losses			465,054		38,957		504,011
Allowance for credit losses								Allowance for credit losses		321,981		33,545		355,526
Accelerated depreciation	Accelerated depreciation		3,439		4,908		8,347	Accelerated depreciation		4,400		6,496		10,896
FDIC-assisted transaction	FDIC-assisted transaction		82,936		-		82,936	FDIC-assisted transaction		152,665		0		152,665
Intercompany deferred gains	Intercompany deferred gains		1,335		-		1,335	Intercompany deferred gains		1,412		0		1,412
Lease liability	Lease liability		22,847		22,636		45,483	Lease liability		21,967		18,844		40,811
Difference in outside basis from pass-through entities	Difference in outside basis from pass-through entities		53,892		-		53,892	Difference in outside basis from pass-through entities		56,932		0		56,932
Other temporary differences	Other temporary differences		31,893		7,702		39,595	Other temporary differences		37,968		7,944		45,912
	Total gross deferred tax assets		865,646		793,873		1,659,519	Total gross deferred tax assets		825,736		763,402		1,589,138
Deferred tax liabilities:	Deferred tax liabilities:							Deferred tax liabilities:
Indefinite-lived intangibles	Indefinite-lived intangibles		38,243		37,152		75,395	Indefinite-lived intangibles		74,138		43,552		117,690
Unrealized net gain (loss) on trading and available-for-sale securities	Unrealized net gain (loss) on trading and available-for-sale securities		81,077		7,306		88,383	Unrealized net gain (loss) on trading and available-for-sale securities		39,536		5,027		44,563
Right of use assets	Right of use assets		20,739		20,702		41,441	Right of use assets		19,883		17,181		37,064
Other temporary differences	Other temporary differences		11,924		1,182		13,106	Other temporary differences		51,553		1,332		52,885
	Total gross deferred tax liabilities		151,983		66,342		218,325	Total gross deferred tax liabilities		185,110		67,092		252,202
Valuation allowance	Valuation allowance		105,165		408,079		513,244	Valuation allowance		118,575		415,079		533,654
Net deferred tax asset	Net deferred tax asset	$	608,498	$	319,452	$	927,950	Net deferred tax asset	$	522,051	$	281,231	$	803,282

			December 31, 2019							December 31, 2020
(In thousands)	(In thousands)		PR		US		Total	(In thousands)		PR		US		Total
Deferred tax assets:	Deferred tax assets:							Deferred tax assets:
Tax credits available for carryforward	Tax credits available for carryforward	$	2,368	$	5,269	$	7,637	Tax credits available for carryforward	$	3,003	$	5,269	$	8,272
Net operating loss and other carryforward available	Net operating loss and other carryforward available		112,803		716,796		829,599	Net operating loss and other carryforward available		124,355		698,842		823,197
Postretirement and pension benefits	Postretirement and pension benefits		82,623		-		82,623	Postretirement and pension benefits		80,179		0		80,179
Deferred loan origination fees	Deferred loan origination fees		2,519		(2,759)		(240)	Deferred loan origination fees		12,079		(2,652)		9,427
Allowance for loan losses	Allowance for loan losses		405,475		10,981		416,456	Allowance for loan losses		373,010		38,606		411,616
Accelerated depreciation	Accelerated depreciation		3,439		4,914		8,353	Accelerated depreciation		3,439		5,390		8,829
FDIC-assisted transaction	FDIC-assisted transaction		82,684		-		82,684	FDIC-assisted transaction		152,665		0		152,665
Intercompany deferred gains	Intercompany deferred gains		1,604		-		1,604	Intercompany deferred gains		1,728		0		1,728
Lease liability	Lease liability		22,694		23,387		46,081	Lease liability		22,790		18,850		41,640
Difference in outside basis from pass-through entities	Difference in outside basis from pass-through entities		21,670		-		21,670	Difference in outside basis from pass-through entities		61,222		0		61,222
Other temporary differences	Other temporary differences		26,554		7,460		34,014	Other temporary differences		38,954		7,344		46,298
	Total gross deferred tax assets		764,433		766,048		1,530,481	Total gross deferred tax assets		873,424		771,649		1,645,073
Deferred tax liabilities:	Deferred tax liabilities:							Deferred tax liabilities:
Indefinite-lived intangibles	Indefinite-lived intangibles		37,411		36,058		73,469	Indefinite-lived intangibles		73,305		37,745		111,050
Unrealized net gain (loss) on trading and available-for-sale securities	Unrealized net gain (loss) on trading and available-for-sale securities		15,635		432		16,067	Unrealized net gain (loss) on trading and available-for-sale securities		67,003		8,595		75,598
Right of use assets	Right of use assets		20,598		21,430		42,028	Right of use assets		20,708		15,510		36,218
Other temporary differences	Other temporary differences		12,778		1,179		13,957	Other temporary differences		50,247		1,169		51,416
	Total gross deferred tax liabilities		86,422		59,099		145,521	Total gross deferred tax liabilities		211,263		63,019		274,282
Valuation allowance	Valuation allowance		100,175		399,800		499,975	Valuation allowance		112,871		407,225		520,096
Net deferred tax asset	Net deferred tax asset	$	577,836	$	307,149	$	884,985	Net deferred tax asset	$	549,290	$	301,405	$	850,695

~~105~~101

The net deferred tax asset shown in the table above at March 31, ~~2020~~2021 is reflected in the consolidated statements of financial condition as ~~$0.9~~$0.8 billion in net deferred tax assets in the “Other assets” caption (December 31, ~~2019~~2020 - $0.9 billion) and ~~$1.4 million~~$866 thousand in deferred tax liabilities in the “Other liabilities” caption (December 31, ~~2019~~2020 - ~~$1.4 million)~~$897 thousand), reflecting the aggregate deferred tax assets or liabilities of individual tax-paying subsidiaries of the Corporation in their respective tax jurisdiction, Puerto Rico or the United States.

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

At March 31, ~~2020~~2021 the net deferred tax asset of the U.S. operations amounted to ~~$727~~$696 million with a valuation allowance of approximately ~~$408~~$415 million, for a net deferred tax asset after valuation allowance of approximately ~~$319 million. Management~~$281 million. The Corporation evaluates the realization of the deferred tax asset by taxing jurisdiction. The U.S. ~~mainland~~ operations are evaluated, as a whole,since a consolidated income tax return is filed. ~~During this quarter, two additional pieces of~~Currently management considers as negative evidence ~~arose: further reduction in interest rates combined with a lower expectation of rate increases in the near future and~~ the economic uncertainty ~~around~~resulting from the effects of the COVID-19 pandemic. ~~This economic disruption was~~While the ~~principal driver~~scope and duration of the ~~significant increase~~COVID-19 pandemic, the actions taken by governmental authorities in ~~our provision for credit losses during this quarter, although net charge-offs~~response to it, and the direct and indirect impact of the pandemic on the economy are not certain, vaccination process in Puerto Rico and the United States, as well as the economic stimulus measures taken by the federal government as a result of the pandemic creates a positive economic outlook in the short term. Notwithstanding the challenges raised by the pandemic, the financial results of the U.S. operations for the year ended December 31,2020 and the quarter ~~were lower and early credit indicators such as NPL inflows~~ended March 31,2021 were also ~~lower in our U.S. operations. Due to the economic uncertainty, at this time, the additional negative~~positive. This objectively verifiable positive evidence ~~related to the economic disruption is not enough to overcome~~together with the positive evidence of ~~recent historical operating performance such as sustained loan growth, the early success of new business initiatives and~~ stable credit metrics, in combination with the length of the expiration of the ~~NOLs. The~~NOLs are enough to overcome the negative evidence related to the COVID-19 pandemic. As of March 31,2021, after weighting all positive and negative evidence, the Corporation ~~believes~~concluded that ~~this objectively verified positive evidence places~~it is more likely than not that approximately $281 million of the deferred tax asset from the U.S. operations, ~~in a good position to continue executing~~comprised mainly of net operating losses, will be realized. The Corporation based this determination on its business plan once the economic environment stabilizes after the current pandemic turmoil. As a result, as of March 31, 2020, management estimates that the U.S. operations would earn enough pre-tax income during the carryover periodestimated earnings available to realize the ~~total amount of net~~ deferred tax asset ~~after valuation allowance.~~for the remaining carryforward period, together with the historical level of book income adjusted by permanent differences. Management will continue to monitor and review the U.S. operation’s results and the pre-tax earnings forecast on a quarterly basis to assess the future realization of the DTA. Management will closely monitor factors like, net income versus forecast, targeted loan growth, net interest income margin, allowance for credit losses, charge offs, NPLs inflows and NPA balances. If such factors worsen during future periods, they could constitute sufficient objectively verifiable negative evidence to overcome the positive evidence, that currently exists, and could require additional amounts of valuation allowance to be registered on the DTA. Any increases to the valuation allowance would be reflected as an income tax expense, reducing the Corporation’s earnings.

At March 31, ~~2020,~~2021, the Corporation’s net deferred tax assets related to its Puerto Rico operations amounted to ~~$608 million.~~$522 million net of valuation allowance pertaining to the Holding Company operation.

The Corporation’s Puerto Rico Banking operation is not in a cumulative three-year loss position and has sustained profitability for the three-year period ended March 31, ~~2020.~~2021. This is considered a strong piece of objectively verifiable positive evidence that outweighs any negative evidence considered by management in the evaluation of the realization of the deferred tax asset. Based on this evidence and management’s estimate of future taxable income, the Corporation has concluded that it is more likely than not that such net deferred tax asset of the Puerto Rico Banking operations will be realized as of March 31, ~~2020.~~2021.

The ~~Popular, Inc., holding company (“PIHC”)~~Holding Company operation is in a cumulative loss position, taking into account taxable income exclusive of reversing temporary differences, for the ~~three-year~~three years period ~~ended~~ending March ~~31, 2020.~~31,2021. Management expects these losses will be a trend in future years. This objectively verifiable negative evidence is considered by management asa strong negative evidence that will suggest that income in future years will be insufficient to support the realization of all deferred tax asset. After weighting of ~~negative~~all positive and ~~positive~~negative evidence management concluded, as of the reporting date, that it is more likely than not that the ~~PIHC~~Holding Company will not be able to realize any portion of the deferred tax assets, considering the criteria of ASC Topic 740. Accordingly, the Corporation has maintained a valuation allowance ~~is recorded~~ on the deferred tax asset ~~at the PIHC, which amounted to $105~~of $119 million as of March ~~31, 2020.~~

~~106~~

The extent to which the COVID-19 pandemic further impacts our business, results of operations and financial condition, as well as the operations of our clients, customers, service providers and suppliers, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response thereto. To the extent that the COVID-19 pandemic results in the continued closure of businesses and a reduction in economic activity, and interest rates, the Corporation and its subsidiaries will be further impacted in the form of reduced revenues, additional expenses and higher credit losses and could result in further impairment or reduction in the assessment of the realizability of our DTA in our Puerto Rico and U.S. operations.31,2021.

The reconciliation of unrecognized tax benefits, excluding interest, was as follows:

102

(In millions)

2020

2019
Balance at January 1
$
16.3

$
7.2
Additions for tax positions -January through March

-

0.3
Balance at March 31
$
16.3

$
7.5

(In millions)		2021		2020
Balance at January 1	$	14.8	$	16.3
Balance at March 31	$	14.8	$	16.3

At March 31, ~~2020,~~2021, the total amount of accrued interest recognized in the statement of financial condition approximated ~~$4.3~~$5.2 million (December 31, ~~2019~~2020 - ~~$3.5~~$4.8 million). The total interest expense recognized at March 31, ~~2020~~2021 was ~~$854~~$364 thousand (March 31, ~~2019~~2020 - ~~$149~~$854 thousand). Management determined that at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 there was 0 need to accrue for the payment of penalties. The Corporation’s policy is to report interest related to unrecognized tax benefits in income tax expense, while the penalties, if any, are reported in other operating expenses in the consolidated statements of operations.

After consideration of the effect on U.S. federal tax of unrecognized U.S. state tax benefits, the total amount of unrecognized tax benefits, including U.S. and Puerto Rico, that if recognized, would affect the Corporation’s effective tax rate, was approximately ~~$11.2~~$10.5 million at March 31, ~~2020~~2021 (December 31, ~~2019~~2020 - ~~$10.5~~$10.2 million).

The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to the statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examinations, litigation and legislative activity and the addition or elimination of uncertain tax positions.

The Corporation and its subsidiaries file income tax returns in Puerto Rico, the U.S. federal jurisdiction, various U.S. states and political subdivisions, and foreign jurisdictions. At March 31, ~~2020~~2021, the following years remain subject to examination in the U.S. Federal jurisdiction: ~~2016~~2017 and thereafter; and in the Puerto Rico jurisdiction, 2014, 2016 and thereafter. The Corporation anticipates a reduction in the total amount of unrecognized tax benefits within the next 12 months, which could amount to approximately ~~$2.1 million.~~$13.9 million, including interest.

~~107~~103

Note 3231 – Supplemental disclosure on the consolidated statements of cash flows

Additional disclosures on cash flow information and non-cash activities for the quarters ended March 31, ~~2020~~2021 and March 31, ~~2019~~2020 are listed in the following table:

(In thousands)

March 31, 2020

March 31, 2019
Non-cash activities:

Loans transferred to other real estate
$
16,986
$
8,628
Loans transferred to other property

14,232

12,072
Total loans transferred to foreclosed assets

31,218

20,700
Loans transferred to other assets

1,681

5,678
Financed sales of other real estate assets

4,619

3,643
Financed sales of other foreclosed assets

10,823

6,435
Total financed sales of foreclosed assets

15,442

10,078
Transfers from loans held-in-portfolio to loans held-for-sale

10,723

-
Transfers from loans held-for-sale to loans held-in-portfolio

-

7,283
Loans securitized into investment securities^[1]

84,221

92,067
Trades receivable from brokers and counterparties

5,280

32,043
Trades payable to brokers and counterparties

5,279

7,220
Recognition of mortgage servicing rights on securitizations or asset transfers

1,634

12,084
Loans booked under the GNMA buy-back option

30,211

5,782
Capitalization of lease right of use asset

4,536

155,727
[1]
Includes loans securitized into trading securities and subsequently sold before quarter end.


(In thousands)			March 31, 2021		March 31, 2020
Non-cash activities:
Loans transferred to other real estate		$	2,900	$	16,986
Loans transferred to other property			13,029		14,232
Total loans transferred to foreclosed assets			15,929		31,218
Loans transferred to other assets			1,156		1,681
Financed sales of other real estate assets			3,206		4,619
Financed sales of other foreclosed assets			9,417		10,823
Total financed sales of foreclosed assets			12,623		15,442
Transfers from loans held-in-portfolio to loans held-for-sale			38,959		10,723
Transfers from loans held-for-sale to loans held-in-portfolio			1,136		0
Loans securitized into investment securities^[1]			188,268		84,221
Trades receivable from brokers and counterparties			70,965		5,280
Trades payable to brokers and counterparties			12,180		5,279
Recognition of mortgage servicing rights on securitizations or asset transfers			3,636		1,634
Loans booked under the GNMA buy-back option			7,393		30,211
Capitalization of lease right of use asset			1,774		4,536
[1]	Includes loans securitized into trading securities and subsequently sold before quarter end.

The following table provides a reconciliation of cash and due from banks, and restricted cash reported within the Consolidated Statement of Financial Condition that sum to the total of the same such amounts shown in the Consolidated Statement of Cash Flows.

(In thousands)
March 31, 2020
March 31, 2019
Cash and due from banks
$
406,853
$
355,720
Restricted cash and due from banks

38,698

20,838
Restricted cash in money market investments

5,771

9,185
Total cash and due from banks, and restricted cash^[2]
$
451,322
$
385,743
[2]
Refer to Note 5 - Restrictions on cash and due from banks and certain securities for nature of restrictions.


(In thousands)		March 31, 2021		March 31, 2020
Cash and due from banks		$	489,084	$	406,853
Restricted cash and due from banks			6,831		38,698
Restricted cash in money market investments			6,110		5,771
Total cash and due from banks, and restricted cash^[2]		$	502,025	$	451,322
[2]	Refer to Note 4 - Restrictions on cash and due from banks and certain securities for nature of restrictions.

~~108~~104

Note 3332 – Segment reporting

The Corporation’s corporate structure consists of 2 reportable segments – Banco Popular de Puerto Rico and Popular U.S. Management determined the reportable segments based on the internal reporting used to evaluate performance and to assess where to allocate resources. The segments were determined based on the organizational structure, which focuses primarily on the markets the segments serve, as well as on the products and services offered by the segments.

Banco Popular de Puerto Rico:

Given that Banco Popular de Puerto Rico constitutes a significant portion of the Corporation’s results of operations and total assets at March 31, ~~2020,~~2021, additional disclosures are provided for the business areas included in this reportable segment, as described below:

 Commercial banking represents the Corporation’s banking operations conducted at BPPR, which are targeted mainly to corporate, small and middle size businesses. It includes aspects of the lending and depository businesses, as well as other finance and advisory services. BPPR allocates funds across business areas based on duration matched transfer pricing at market rates. This area also incorporates income related with the investment of excess funds, as well as a proportionate share of the investment function of BPPR.

 Consumer and retail banking represents the branch banking operations of BPPR which focus on retail clients. It includes the consumer lending business operations of BPPR, as well as the lending operations of Popular Auto and Popular Mortgage. Popular Auto focuses on auto and lease financing, while Popular Mortgage focuses principally on residential mortgage loan originations. The consumer and retail banking area also incorporates income related with the investment of excess funds from the branch network, as well as a proportionate share of the investment function of BPPR.

 Other financial services include the trust and asset management service units of BPPR, the brokerage and investment banking operations of Popular Securities, and the insurance agency and reinsurance businesses of Popular Insurance, Popular Risk Services, and Popular Life Re. Most of the services that are provided by these subsidiaries generate profits based on fee income.

Popular U.S.:

Popular U.S. reportable segment consists of the banking operations of Popular Bank (PB) and Popular Insurance Agency, U.S.A. PB operates through a retail branch network in the U.S. mainland under the name of Popular. Popular Insurance Agency, U.S.A. offers investment and insurance services across the PB branch network.

The Corporate group consists primarily of the holding companies Popular, Inc., Popular North America, Popular International Bank and certain of the Corporation’s investments accounted for under the equity method, including EVERTEC and Centro Financiero BHD, León.

The accounting policies of the individual operating segments are the same as those of the Corporation. Transactions between reportable segments are primarily conducted at market rates, resulting in profits that are eliminated for reporting consolidated results of operations.

Effective on January 1, 2019, the Corporation’s management changed the measurement basis for its reportable segments. Historically, for management reporting purposes, the Corporation had reversed the effect of the intercompany billings from Popular Inc., holding company, to its subsidiaries for certain services or expenses incurred on their behalf. In addition, the Corporation used to reflect an income tax expense allocation for several of its subsidiaries which are Limited Liability Companies (“LLCs”) and had made an election to be treated as a pass through entities for income tax purposes. The Corporation’s management has determined to discontinue making these adjustments, effective on January 1, 2019, for purposes of its management and reportable segment reporting. The Corporation reflected these changes in the measurement of the reportable segments’ results prospectively beginning on January 1, 2019.

The tables that follow present the results of operations and total assets by reportable segments:

~~109~~105

2020
For the quarter ended March 31, 2020

Banco Popular

Intersegment
(In thousands)

de Puerto Rico

Popular U.S.

Eliminations
Net interest income

$
409,626
$
72,689
$
3
Provision for credit losses

113,582

75,991

-
Non-interest income

112,142

5,232

(140)
Amortization of intangibles

2,282

167

-
Depreciation expense

12,287

1,953

-
Other operating expenses

300,377

55,194

(137)
Income tax expense (benefit)

15,101

(11,951)

-
Net income (loss)

$
78,139
$
(43,433)
$
-
Segment assets

$
42,392,356
$
10,107,045
$
(23,284)

For the quarter ended March 31, 2020

Reportable

(In thousands)

Segments

Corporate

Eliminations

Total Popular, Inc.
Net interest income (expense)
$
482,318
$
(9,223)
$
-
$
473,095
Provision for credit losses

189,573

158

-

189,731
Non-interest income

117,234

9,461

(52)

126,643
Amortization of intangibles

2,449

24

-

2,473
Depreciation expense

14,240

246

-

14,486
Other operating expenses

355,434

1,037

(822)

355,649
Income tax expense (benefit)

3,150

(322)

269

3,097
Net income (loss)
$
34,706
$
(905)
$
501
$
34,302
Segment assets
$
52,476,117
$
5,241,196
$
(4,913,674)
$
52,803,639

~~110~~

2021
For the quarter ended March 31, 2021
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular U.S.		Eliminations
Net interest income			$	410,323	$	79,169	$	2
Provision (reversal) for credit losses				(45,361)		(36,720)		0
Non-interest income				135,208		5,666		(138)
Amortization of intangibles				861		166		0
Depreciation expense				12,143		2,328		0
Other operating expenses				306,920		53,194		(136)
Income tax expense				58,813		18,035		0
Net income			$	212,155	$	47,832	$	0
Segment assets			$	55,990,801	$	10,557,751	$	(41,613)

For the quarter ended March 31, 2021
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	489,494	$	(10,382)	$	0	$	479,112
Provision (reversal) for credit losses		(82,081)		(145)		0		(82,226)
Non-interest income		140,736		13,150		(233)		153,653
Amortization of intangibles		1,027		24		0		1,051
Depreciation expense		14,471		267		0		14,738
Other operating expenses		359,978		670		(909)		359,739
Income tax expense (benefit)		76,848		(333)		316		76,831
Net income	$	259,987	$	2,285	$	360	$	262,632
Segment assets	$	66,506,939	$	5,193,058	$	(4,829,729)	$	66,870,268

2020
For the quarter ended March 31, 2020
				Banco Popular				Intersegment
(In thousands)				de Puerto Rico		Popular U.S.		Eliminations
Net interest income			$	409,626	$	72,689	$	3
Provision for credit losses				113,582		75,991		0
Non-interest income				112,142		5,232		(140)
Amortization of intangibles				2,282		167		0
Depreciation expense				12,287		1,953		0
Other operating expenses				300,377		55,194		(137)
Income tax expense (benefit)				15,101		(11,951)		0
Net income (loss)			$	78,139	$	(43,433)	$	0
Segment assets			$	42,392,356	$	10,107,045	$	(23,284)

For the quarter ended March 31, 2020
		Reportable
(In thousands)		Segments		Corporate		Eliminations		Total Popular, Inc.
Net interest income (expense)	$	482,318	$	(9,223)	$	0	$	473,095
Provision for credit losses		189,573		158		0		189,731
Non-interest income		117,234		9,461		(52)		126,643
Amortization of intangibles		2,449		24		0		2,473
Depreciation expense		14,240		246		0		14,486
Other operating expenses		355,434		1,037		(822)		355,649
Income tax expense (benefit)		3,150		(322)		269		3,097
Net income (loss)	$	34,706	$	(905)	$	501	$	34,302
Segment assets	$	52,476,117	$	5,241,196	$	(4,913,674)	$	52,803,639

2019
For the quarter ended March 31, 2019

Banco Popular

Intersegment
(In thousands)

de Puerto Rico

Popular U.S.

Eliminations
Net interest income

$
407,357
$
72,828
$
4
Provision for credit losses

31,349

10,371

-
Non-interest income

120,770

5,864

(141)
Amortization of intangibles

2,122

166

-
Depreciation expense

11,939

2,168

-
Other operating expenses

280,698

48,609

(136)
Income tax expense

45,376

5,215

-
Net income

$
156,643
$
12,163
$
(1)
Segment assets

$
38,896,514
$
9,585,380
$
(113,126)

For the quarter ended March 31, 2019

Reportable

(In thousands)

Segments

Corporate

Eliminations

Total Popular, Inc.
Net interest income (expense)
$
480,189
$
(9,226)
$
-
$
470,963
Provision for credit losses

41,720

105

-

41,825
Non-interest income

126,493

10,061

(124)

136,430
Amortization of intangibles

2,288

24

-

2,312
Depreciation expense

14,107

188

-

14,295
Other operating expenses

329,171

2,358

(716)

330,813
Income tax expense (benefit)

50,591

(586)

218

50,223
Net income (loss)
$
168,805
$
(1,254)
$
374
$
167,925
Segment assets
$
48,368,768
$
5,021,367
$
(4,709,528)
$
48,680,607

Additional disclosures with respect to the Banco Popular de Puerto Rico reportable segment are as follows:

2020
For the quarter ended March 31, 2020
Banco Popular de Puerto Rico

Consumer

Other

Total Banco

Commercial

and Retail

Financial

Popular de
(In thousands)

Banking

Banking

Services

Eliminations

Puerto Rico
Net interest income
$
161,534
$
243,056
$
5,036
$
-
$
409,626
Provision for credit losses

10,313

103,269

-

-

113,582
Non-interest income

24,712

63,984

23,740

(294)

112,142
Amortization of intangibles

48

1,310

924

-

2,282
Depreciation expense

5,150

6,978

159

-

12,287
Other operating expenses

74,875

202,042

23,769

(309)

300,377
Income tax expense (benefit)

25,616

(12,952)

2,437

-

15,101
Net income
$
70,244
$
6,393
$
1,487
$
15
$
78,139
Segment assets
$
33,212,687
$
24,388,065
$
3,080,386
$
(18,288,782)
$
42,392,356

~~111~~106

2019

For the quarter ended March 31, 2019

Banco Popular de Puerto Rico

Consumer

Other

Total Banco

Commercial

and Retail

Financial

Popular de
(In thousands)

Banking

Banking

Services

Eliminations

Puerto Rico
Net interest income
$
151,460
$
254,668
$
1,318
$
(89)
$
407,357
Provision (reversal) for credit losses

(1,992)

33,341

-

-

31,349
Non-interest income

23,589

75,404

22,534

(757)

120,770
Amortization of intangibles

49

1,072

1,001

-

2,122
Depreciation expense

4,654

7,127

158

-

11,939
Other operating expenses

72,929

192,670

15,827

(728)

280,698
Income tax expense

31,194

11,743

2,439

-

45,376
Net income
$
68,215
$
84,119
$
4,427
$
(118)
$
156,643
Segment assets
$
29,478,917
$
23,039,995
$
327,487
$
(13,949,885)
$
38,896,514

2021
For the quarter ended March 31, 2021
Banco Popular de Puerto Rico
				Consumer		Other				Total Banco
		Commercial		and Retail		Financial				Popular de
(In thousands)		Banking		Banking		Services		Eliminations		Puerto Rico
Net interest income	$	179,511	$	229,386	$	1,426	$	0	$	410,323
Provision (reversal) for credit losses		(27,606)		(17,755)		0		0		(45,361)
Non-interest income		25,741		86,197		23,658		(388)		135,208
Amortization of intangibles		54		694		113		0		861
Depreciation expense		5,289		6,685		169		0		12,143
Other operating expenses		86,828		199,316		21,268		(492)		306,920
Income tax expense		42,108		15,582		1,123		0		58,813
Net income	$	98,579	$	111,061	$	2,411	$	104	$	212,155
Segment assets	$	51,622,574	$	28,932,452	$	2,386,006	$	(26,950,231)	$	55,990,801

	2020
	For the quarter ended March 31, 2020
	Banco Popular de Puerto Rico
					Consumer		Other				Total Banco
			Commercial		and Retail		Financial				Popular de
(In thousands)			Banking		Banking		Services		Eliminations		Puerto Rico
Net interest income		$	161,534	$	243,056	$	5,036	$	0	$	409,626
Provision for credit losses			10,313		103,269		0		0		113,582
Non-interest income			24,712		63,984		23,740		(294)		112,142
Amortization of intangibles			48		1,310		924		0		2,282
Depreciation expense			5,150		6,978		159		0		12,287
Other operating expenses			74,875		202,042		23,769		(309)		300,377
Income tax expense (benefit)			25,616		(12,952)		2,437		0		15,101
Net income		$	70,244	$	6,393	$	1,487	$	15	$	78,139
Segment assets		$	33,212,687	$	24,388,065	$	3,080,386	$	(18,288,782)	$	42,392,356

Geographic Information

The following information presents selected financial information based on the geographic location where the Corporation conducts its business. The banking operations of BPPR are primarily based in Puerto Rico, where it has the largest retail banking franchise. BPPR also conducts banking operations in the U.S. Virgin Islands, the British Virgin Islands and New York. BPPR’s banking operations in the United States include E-loan, an online platform used to offer personal loans, co-branded credit cards offerings and an online deposit gathering platform. In the Virgin Islands, the BPPR segment offers banking products, including loans and deposits. During the quarter ended March 31, 2020, the BPPR segment generated approximately ~~$15.1~~$12.7 million ~~(2019~~(2020 - ~~$12.8~~$15.1 million) in revenues from its operations in the United States, including net interest income, service charges on deposit accounts and other service fees. In addition, the BPPR segment generated $11.6 million in revenues ~~(2019~~(2020 - ~~$11.9~~$11.6 million) from its operations in the U.S. and British Virgin Islands. At March 31, 2020, total assets for the BPPR segment related to its operations in the United States amounted to ~~$582~~$576 million ~~(2019~~(2020 - ~~$550 million) and total deposits amounted to $43 million (2019 - $70~~$582 million).

Geographic Information	Geographic Information					Geographic Information
			Quarter ended					Quarter ended
(In thousands)	(In thousands)		March 31, 2020		March 31, 2019	(In thousands)		March 31, 2021		March 31, 2020
Revenues:^[1]	Revenues:^[1]					Revenues:^[1]
Puerto Rico	Puerto Rico	$	489,636	$	500,138	Puerto Rico	$	518,709	$	489,636
United States	United States		91,679		89,856	United States		96,012		91,679
Other	Other		18,423		17,399	Other		18,044		18,423
Total consolidated revenues	Total consolidated revenues	$	599,738	$	607,393	Total consolidated revenues	$	632,765	$	599,738
[1]	Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net (loss) gain, including impairment, on equity securities, net profit on trading account debt securities, net gain on sale of loans, including valuation adjustments on loans held-for-sale, indemnity reserves on loans sold and other operating income.					Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net gain (loss), including impairment, on equity securities, net (loss) profit on trading account debt securities, net gain on sale of loans, including valuation adjustments on loans held-for-sale, indemnity reserves on loans sold and other operating income.

~~112~~107

Selected Balance Sheet Information:
(In thousands)

March 31, 2020

December 31, 2019
Puerto Rico

Total assets
$
41,233,363
$
40,544,255

Loans

19,039,704

18,989,286

Deposits

35,768,869

34,664,243
United States

Total assets
$
10,686,885
$
10,693,536

Loans

8,054,521

7,819,187

Deposits

7,589,707

7,664,792
Other

Total assets
$
883,391
$
877,533

Loans

655,902

657,603

Deposits^[1]

1,438,600

1,429,571
[1]
Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.

Selected Balance Sheet Information:
(In thousands)			March 31, 2021		December 31, 2020
Puerto Rico
	Total assets	$	54,832,769	$	54,143,954
	Loans		20,226,682		20,413,112
	Deposits		49,133,585		47,586,880
United States
	Total assets	$	11,128,729	$	10,878,030
	Loans		8,315,116		8,396,983
	Deposits		7,987,426		7,672,549
Other
	Total assets	$	908,770	$	904,016
	Loans		674,044		674,556
	Deposits^[1]		1,621,790		1,606,911
[1]	Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.

~~113~~108

~~Note 34 – Condensed consolidating financial information of guarantor and issuers of registered guaranteed securities~~

The following condensed consolidating financial information presents the financial position of Popular, Inc. Holding Company (“PIHC”) (parent only), Popular North America, Inc. (“PNA”) and all other subsidiaries of the Corporation at March 31, 2020 and December 31, 2019, and the results of their operations and cash flows for periods ended March 31, 2020 and 2019.

PNA is an operating, 100% owned subsidiary of PIHC and is the holding company of its wholly-owned subsidiaries: Equity One, Inc. and Popular Bank (“PB”), including PB’s wholly-owned subsidiaries Popular Equipment Finance, Inc., Popular Insurance Agency, U.S.A., and E-LOAN, Inc.

~~PIHC fully and unconditionally guarantees, joint and severally, all registered debt securities issued by PNA.~~

~~114~~

~~Condensed Consolidating Statement of Financial Condition (Unaudited)~~

At March 31, 2020

All other

Popular Inc.
PNA

subsidiaries and

Elimination

Popular, Inc.
(In thousands)

Holding Co.
Holding Co.

eliminations

entries

Consolidated
Assets:

Cash and due from banks

$
76,617
$
-

$
445,553

$
(76,619)

$
445,551
Money market investments

211,343

13,099

5,941,374

(224,100)

5,941,716
Trading account debt securities, at fair value

-

-

42,545

-

42,545
Debt securities available-for-sale, at fair value

-

-

15,813,301

-

15,813,301
Debt securities held -to maturity, at amortized cost

8,726

2,835

83,702

-

95,263

Less - Allowance for credit losses

-

-

13,390

-

13,390

Debt securities held-to-maturity, net

8,726

2,835

70,312

-

81,873
Equity securities

11,284

20

151,873

(119)

163,058
Investment in subsidiaries

5,880,938

1,746,263

-

(7,627,201)

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

-

-

87,855

-

87,855
Loans held-in-portfolio

31,888

-

27,809,997

5,955

27,847,840

Less - Unearned income

-

-

185,568

-

185,568

Allowance for credit losses

374

-

919,342

-

919,716

Total loans held-in-portfolio, net

31,514

-

26,705,087

5,955

26,742,556
Premises and equipment, net

4,371

-

547,636

-

552,007
Other real estate

146

-

123,776

-

123,922
Accrued income receivable

272

12

175,873

(79)

176,078
Mortgage servicing assets, at fair value

-

-

147,311

-

147,311
Other assets

95,083

21,614

1,691,922

(20,182)

1,788,437
Goodwill

-

-

671,123

(1)

671,122
Other intangible assets

6,439

-

19,868

-

26,307
Total assets

$
6,326,733
$
1,783,843

$
52,635,409

$
(7,942,346)

$
52,803,639
Liabilities and Stockholders' Equity

Liabilities:

Deposits:

Non-interest bearing

$
-
$
-

$
9,473,068

$
(76,619)

$
9,396,449

Interest bearing

-

-

35,624,827

(224,100)

35,400,727

Total deposits

-

-

45,097,895

(300,719)

44,797,176
Assets sold under agreements to repurchase

-

-

178,766

-

178,766
Other short-term borrowings

-

-

100,000

-

100,000
Notes payable

586,435

94,097

377,599

-

1,058,131
Other liabilities

70,844

1,651

948,224

(20,758)

999,961
Total liabilities

657,279

95,748

46,702,484

(321,477)

47,134,034
Stockholders' equity:

Preferred stock

22,143

-

-

-

22,143
Common stock

1,044

2

56,307

(56,309)

1,044
Surplus

4,357,512

4,173,039

5,847,100

(10,011,351)

4,366,300
Retained earnings (accumulated deficit)

1,948,697

(2,516,370)

(189,242)

2,697,085

1,940,170
Treasury stock, at cost

(870,565)

-

-

(110)

(870,675)
Accumulated other comprehensive income, net of tax

210,623

31,424

218,760

(250,184)

210,623
Total stockholders' equity

5,669,454

1,688,095

5,932,925

(7,620,869)

5,669,605
Total liabilities and stockholders' equity

$
6,326,733
$
1,783,843

$
52,635,409

$
(7,942,346)

$
52,803,639

~~115~~

Condensed Consolidating Statement of Financial Condition (Unaudited)

At December 31, 2019

All other

Popular, Inc.
PNA

subsidiaries and

Elimination

Popular, Inc.
(In thousands)

Holding Co.
Holding Co.

eliminations

entries

Consolidated
Assets:

Cash and due from banks

$
55,956
$
-

$
388,363

$
(56,008)

$
388,311
Money market investments

221,598

16,029

3,261,688

(237,029)

3,262,286
Trading account debt securities, at fair value

-

-

40,321

-

40,321
Debt securities available-for-sale, at fair value

-

-

17,648,473

-

17,648,473
Debt securities held-to-maturity, at amortized cost

8,726

2,835

86,101

-

97,662
Equity securities

10,744

20

149,322

(199)

159,887
Investment in subsidiaries

6,243,065

1,806,583

-

(8,049,648)

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

-

-

59,203

-

59,203
Loans held-in-portfolio

32,027

-

27,549,874

5,955

27,587,856

Less - Unearned income

-

-

180,983

-

180,983

Allowance for loan losses

410

-

477,298

-

477,708

Total loans held-in-portfolio, net

31,617

-

26,891,593

5,955

26,929,165
Premises and equipment, net

3,893

-

552,757

-

556,650
Other real estate

146

-

121,926

-

122,072
Accrued income receivable

382

108

180,630

(249)

180,871
Mortgage servicing assets, at fair value

-

-

150,906

-

150,906
Other assets

93,835

21,324

1,722,839

(18,383)

1,819,615
Goodwill

-

-

671,123

(1)

671,122
Other intangible assets

6,463

-

22,317

-

28,780
Total assets

$
6,676,425
$
1,846,899

$
51,947,562

$
(8,355,562)

$
52,115,324
Liabilities and Stockholders' Equity

Liabilities:

Deposits:

Non-interest bearing

$
-
$
-

$
9,216,181

$
(56,008)

$
9,160,173

Interest bearing

-

-

34,835,462

(237,029)

34,598,433

Total deposits

-

-

44,051,643

(293,037)

43,758,606
Assets sold under agreements to repurchase

-

-

193,378

-

193,378
Notes payable

586,119

94,090

421,399

-

1,101,608
Other liabilities

73,596

3,200

986,865

(18,708)

1,044,953
Total liabilities

659,715

97,290

45,653,285

(311,745)

46,098,545
Stockholders' equity:

Preferred stock

50,160

-

-

-

50,160
Common stock

1,044

2

56,307

(56,309)

1,044
Surplus

4,438,706

4,173,169

5,847,389

(10,011,852)

4,447,412
Retained earnings (accumulated deficit)

2,156,442

(2,425,429)

555,398

1,861,504

2,147,915
Treasury stock, at cost

(459,704)

-

-

(110)

(459,814)
Accumulated other comprehensive (loss) income, net of tax

(169,938)

1,867

(164,817)

162,950

(169,938)
Total stockholders' equity

6,016,710

1,749,609

6,294,277

(8,043,817)

6,016,779
Total liabilities and stockholders' equity

$
6,676,425
$
1,846,899

$
51,947,562

$
(8,355,562)

$
52,115,324

~~116~~

Condensed Consolidating Statement of Operations (Unaudited)

Quarter ended March 31, 2020

All other

Popular, Inc.
PNA
subsidiaries and
Elimination
Popular, Inc.
(In thousands)

Holding Co.
Holding Co.
eliminations
entries
Consolidated
Interest and dividend income:

Dividend income from subsidiaries

$
580,000

$
-

$
-

$
(580,000)

$
-

Loans

562

-

449,884

-

450,446

Money market investments

1,151

45

12,001

(1,197)

12,000

Investment securities

158

47

87,707

-

87,912

Total interest and dividend income

581,871

92

549,592

(581,197)

550,358
Interest expense:

Deposits

-

-

63,298

(1,197)

62,101

Short-term borrowings

-

-

1,048

-

1,048

Long-term debt

9,632

1,557

2,925

-

14,114

Total interest expense

9,632

1,557

67,271

(1,197)

77,263
Net interest income (expense)

572,239

(1,465)

482,321

(580,000)

473,095
Provision for credit losses - loan portfolios

158

-

188,837

-

188,995
Provision for credit losses - investment securities

-

-

736

-

736
Net interest income (expense) after provision for credit losses

572,081

(1,465)

292,748

(580,000)

283,364
Service charges on deposit accounts

-

-

41,659

-

41,659
Other service fees

-

-

64,899

(126)

64,773
Mortgage banking activities

-

-

6,420

-

6,420
Net loss, including impairment on equity securities

(1,543)

-

(1,266)

81

(2,728)
Net profit on trading account debt securities

-

-

491

-

491
Net gain on sale of loans, including valuation adjustments on loans held-for-sale

-

-

957

-

957
Indemnity reserves on loans sold expense

-

-

(4,793)

-

(4,793)
Other operating income (expense)

4,169

-

15,701

(6)

19,864

Total non-interest income

2,626

-

124,068

(51)

126,643
Operating expenses:

Personnel costs

18,273

-

128,558

-

146,831
Net occupancy expenses

1,053

-

24,105

-

25,158
Equipment expenses

873

1

20,731

-

21,605
Other taxes

62

1

13,618

-

13,681
Professional fees

6,466

30

94,701

(126)

101,071
Communications

127

-

5,827

-

5,954
Business promotion

816

-

13,381

-

14,197
FDIC deposit insurance

-

-

5,080

-

5,080
Other real estate owned (OREO) expenses

-

-

2,479

-

2,479
Other operating expenses

(26,583)

13

61,346

(697)

34,079
Amortization of intangibles

24

-

2,449

-

2,473

Total operating expenses

1,111

45

372,275

(823)

372,608
Income (loss) before income tax and equity in (losses) earnings of subsidiaries

573,596

(1,510)

44,541

(579,228)

37,399
Income tax (benefit) expense

-

(317)

3,145

269

3,097

~~117~~

Income (loss) before equity in losses of subsidiaries

573,596

(1,193)

41,396

(579,497)

34,302
Equity in undistributed losses of subsidiaries

(539,294)

(43,452)

-

582,746

-
Net income (loss)

$
34,302

$
(44,645)

$
41,396

$
3,249

$
34,302
Comprehensive income (loss), net of tax

$
414,863

$
(15,088)

$
424,973

$
(409,885)

$
414,863

~~118~~

~~Condensed Consolidating Statement of Operations (Unaudited)~~

Quarter ended March 31, 2019

All other

Popular, Inc.
PNA
subsidiaries and
Elimination
Popular, Inc.
(In thousands)
Holding Co.
Holding Co.
eliminations
entries
Consolidated
Interest and dividend income:

Dividend income from subsidiaries

$
202,300

$
-

$
-

$
(202,300)

$
-

Loans

588

-

447,125

-

447,713

Money market investments

1,122

51

29,220

(1,173)

29,220

Investment securities

154

46

80,836

-

81,036

Total interest and dividend income

204,164

97

557,181

(203,473)

557,969
Interest expense:

Deposits

-

-

71,999

(1,173)

70,826

Short-term borrowings

-

-

1,600

-

1,600

Long-term debt

9,632

1,557

3,391

-

14,580

Total interest expense

9,632

1,557

76,990

(1,173)

87,006
Net interest income (expense)

194,532

(1,460)

480,191

(202,300)

470,963
Provision for credit losses - loan portfolios

106

-

41,719

-

41,825
Net interest income (expense) after provision for credit losses

194,426

(1,460)

438,472

(202,300)

429,138
Service charges on deposit accounts

-

-

38,691

-

38,691
Other service fees

1

-

64,406

(100)

64,307
Mortgage banking activities

-

-

9,926

-

9,926
Net gain, including impairment on equity securities

587

-

859

(13)

1,433
Net profit on trading account debt securities

-

-

260

-

260
Adjustments (expense) to indemnity reserves on loans sold

-

-

(93)

-

(93)
Other operating income (expense)

5,169

(1,267)

18,015

(11)

21,906

Total non-interest income (expense)

5,757

(1,267)

132,064

(124)

136,430
Operating expenses:

Personnel costs

18,327

-

124,790

-

143,117
Net occupancy expenses

1,047

-

22,535

(45)

23,537
Equipment expenses

672

1

19,032

-

19,705
Other taxes

62

-

11,600

-

11,662
Professional fees

2,689

27

84,850

(100)

87,466
Communications

114

-

5,735

-

5,849
Business promotion

782

-

13,892

-

14,674
FDIC deposit insurance

-

-

4,806

-

4,806
Other real estate owned (OREO) expenses

-

-

2,677

-

2,677
Other operating expenses

(21,339)

13

53,512

(571)

31,615
Amortization of intangibles

24

-

2,288

-

2,312

Total operating expenses

2,378

41

345,717

(716)

347,420
Income (loss) before income tax and equity in (losses) earnings of subsidiaries

197,805

(2,768)

224,819

(201,708)

218,148
Income tax (benefit) expense

-

(581)

50,586

218

50,223

~~119~~

Income (loss) before equity in (losses) earnings of subsidiaries

197,805

(2,187)

174,233

(201,926)

167,925
Equity in undistributed (losses) earnings of subsidiaries

(29,880)

12,145

-

17,735

-
Net income

$
167,925

$
9,958

$
174,233

$
(184,191)

$
167,925
Comprehensive income, net of tax

$
271,920

$
28,018

$
278,854

$
(306,872)

$
271,920

~~120~~

~~Condensed Consolidating Statement of Cash Flows (Unaudited)~~

Quarter ended March 31, 2020

All other

Popular, Inc.

PNA

subsidiaries

Elimination

Popular, Inc.
(In thousands)

Holding Co.

Holding Co.

and eliminations

entries

Consolidated
Cash flows from operating activities:

Net income (loss)
$
34,302
$
(44,645)
$
41,396
$
3,249
$
34,302
Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Equity in earnings of subsidiaries, net of dividends or distributions

539,294

43,452

-

(582,746)

-

Provision for credit losses

158

-

189,573

-

189,731

Amortization of intangibles

24

-

2,449

-

2,473

Depreciation and amortization of premises and equipment

247

-

14,239

-

14,486

Net accretion of discounts and amortization of premiums and deferred fees

308

7

(27,584)

-

(27,269)

Share-based compensation

4,200

-

1,131

-

5,331

Fair value adjustments on mortgage servicing rights

-

-

5,229

-

5,229

Indemnity reserves on loans sold expense

-

-

4,793

-

4,793

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

(3,586)

-

(6,130)

-

(9,716)

Deferred income tax benefit

-

(317)

(23,104)

269

(23,152)

(Gain) loss on:

Disposition of premises and equipment and other productive assets

-

-

(1,369)

-

(1,369)

Proceeds from insurance claims

-

-

(366)

-

(366)

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

-

-

(4,944)

-

(4,944)

Sale of foreclosed assets, including write-downs

-

-

(4,850)

-

(4,850)

Acquisitions of loans held-for-sale

-

-

(51,163)

-

(51,163)

Proceeds from sale of loans held-for-sale

-

-

12,135

-

12,135

Net originations on loans held-for-sale

-

-

(58,166)

-

(58,166)

Net decrease (increase) in:

Trading debt securities

-

-

117,276

-

117,276

Equity securities

(540)

-

267

-

(273)

Accrued income receivable

110

95

4,759

(170)

4,794

Other assets

2,437

27

51,653

1,527

55,644

Net (decrease) increase in:

Interest payable

(4,594)

(1,550)

(3,514)

170

(9,488)

Pension and other postretirement benefits obligations

-

-

3,276

-

3,276

Other liabilities

(5,974)

1

(57,543)

(2,219)

(65,735)
Total adjustments

532,084

41,715

168,047

(583,169)

158,677
Net cash provided by (used in) operating activities

566,386

(2,930)

209,443

(579,920)

192,979
Cash flows from investing activities:

Net decrease (increase) in money market investments

10,000

2,930

(2,679,671)

(12,930)

(2,679,671)

Purchases of investment securities:

Available-for-sale

-

-

(1,550,746)

-

(1,550,746)

Equity

-

-

(15,140)

(79)

(15,219)

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

Available-for-sale

-

-

3,838,754

-

3,838,754

Held-to-maturity

-

-

2,877

-

2,877

Proceeds from sale of investment securities:

Equity

-

-

12,321

-

12,321

Net repayments (disbursements) on loans

147

-

(192,986)

-

(192,839)

Proceeds from sale of loans

-

-

1,884

-

1,884

Acquisition of loan portfolios

-

-

(96,153)

-

(96,153)

Return of capital from equity method investments

-

-

131

-

131

Payments to acquire equity method investments

-

-

(440)

-

(440)

Acquisition of premises and equipment

(901)

-

(14,232)

-

(15,133)

Proceeds from insurance claims

-

-

366

-

366

~~121~~

Proceeds from sale of:

Premises and equipment and other productive assets

12

-

6,647

-

6,659

Foreclosed assets

-

-

19,413

-

19,413
Net cash provided by (used in) investing activities

9,258

2,930

(666,975)

(13,009)

(667,796)
Cash flows from financing activities:

Net increase (decrease) in:

Deposits

-

-

1,055,023

(7,682)

1,047,341

Assets sold under agreements to repurchase

-

-

(14,612)

-

(14,612)

Other short-term borrowings

-

-

100,000

-

100,000

Payments of notes payable

-

-

(43,800)

-

(43,800)

Principal payments of finance leases

-

-

(538)

-

(538)

Proceeds from issuance of common stock

3,969

-

-

-

3,969

Payments for repurchase of reedemable preferred stock

(28,017)

-

-

-

(28,017)

Dividends paid to parent company

-

-

(580,000)

580,000

-

Dividends paid

(29,726)

-

-

-

(29,726)

Net payments for repurchase of common stock

(500,183)

-

(39)

-

(500,222)

Payments related to tax withholding for share-based compensation

(1,281)

-

(1,298)

-

(2,579)
Net cash (used in) provided by financing activities

(555,238)

-

514,736

572,318

531,816
Net decrease in cash and due from banks, and restricted cash

20,406

-

57,204

(20,611)

56,999
Cash and due from banks, and restricted cash at beginning of period

56,554

-

393,777

(56,008)

394,323
Cash and due from banks, and restricted cash at end of period
$
76,960
$
-
$
450,981
$
(76,619)
$
451,322

~~122~~

~~Condensed Consolidating Statement of Cash Flows (Unaudited)~~

Quarter ended March 31, 2019

All other

Popular, Inc.

PNA

subsidiaries

Elimination

Popular, Inc.
(In thousands)

Holding Co.

Holding Co.

and eliminations

entries

Consolidated
Cash flows from operating activities:

Net income
$
167,925
$
9,958
$
174,233
$
(184,191)
$
167,925
Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Equity in earnings of subsidiaries, net of dividends or distributions

29,880

(12,145)

-

(17,735)

-

Provision for loan losses

106

-

41,719

-

41,825

Amortization of intangibles

24

-

2,288

-

2,312

Depreciation and amortization of premises and equipment

188

-

14,107

-

14,295

Net accretion of discounts and amortization of premiums and deferred fees

316

7

(39,136)

-

(38,813)

Share-based compensation

5,369

-

1,561

-

6,930

Fair value adjustments on mortgage servicing rights

-

-

3,825

-

3,825

Adjustments to indemnity reserves on loans sold

-

-

93

-

93

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

(4,587)

1,267

(5,707)

-

(9,027)

Deferred income tax (benefit) expense

-

(581)

46,159

218

45,796

Loss (gain) on:

Disposition of premises and equipment and other productive assets

40

-

(2,305)

-

(2,265)

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

-

-

(4,058)

-

(4,058)

Sale of foreclosed assets, including write-downs

-

-

(3,772)

-

(3,772)

Acquisitions of loans held-for-sale

-

-

(44,748)

-

(44,748)

Proceeds from sale of loans held-for-sale

-

-

13,802

-

13,802

Net originations on loans held-for-sale

-

-

(53,231)

-

(53,231)

Net decrease (increase) in:

Trading debt securities

-

-

105,838

-

105,838

Equity securities

(2,374)

-

(1,988)

-

(4,362)

Accrued income receivable

(99)

97

3,326

(100)

3,224

Other assets

(1,337)

26

24,028

5,992

28,709

Net (decrease) increase in:

Interest payable

(4,594)

(1,551)

(870)

100

(6,915)

Pension and other postretirement benefits obligations

-

-

5,297

-

5,297

Other liabilities

(9,019)

(98)

(84,870)

(6,598)

(100,585)
Total adjustments

13,913

(12,978)

21,358

(18,123)

4,170
Net cash provided by (used in) operating activities

181,838

(3,020)

195,591

(202,314)

172,095
Cash flows from investing activities:

Net decrease (increase) in money market investments

45,000

3,020

(643,117)

(48,020)

(643,117)

Purchases of investment securities:

Available-for-sale

-

-

(3,123,508)

-

(3,123,508)

Equity

-

-

(1,297)

58

(1,239)

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

Available-for-sale

-

-

3,006,779

-

3,006,779

Held-to-maturity

-

-

2,587

-

2,587

Proceeds from sale of investment securities:

Equity

-

-

2,679

-

2,679

Net repayments (disbursements) on loans

252

-

(79,221)

-

(78,969)

Proceeds from sale of loans

-

-

7,806

-

7,806

Acquisition of loan portfolios

-

-

(129,875)

-

(129,875)

Return of capital from equity method investments

-

-

1,371

-

1,371

~~123~~

Acquisition of premises and equipment

(231)

-

(19,207)

-

(19,438)

Proceeds from sale of:

Premises and equipment and other productive assets

3

-

5,972

-

5,975

Foreclosed assets

-

-

26,119

-

26,119
Net cash provided by (used in) investing activities

45,024

3,020

(942,912)

(47,962)

(942,830)
Cash flows from financing activities:

Net increase (decrease) in:

Deposits

-

-

1,073,526

96,180

1,169,706

Assets sold under agreements to repurchase

-

-

(80,659)

-

(80,659)

Other short-term borrowings

-

-

1

-

1

Payments of notes payable

-

-

(59,526)

-

(59,526)

Principal payments of finance leases

-

-

(439)

-

(439)

Proceeds from issuance of common stock

3,981

-

(1,005)

-

2,976

Dividends paid to parent company

-

-

(202,300)

202,300

-

Dividends paid

(25,713)

-

-

-

(25,713)

Net payments for repurchase of common stock

(250,271)

-

2

(45)

(250,314)

Payments related to tax withholding for share-based compensation

(2,805)

-

-

-

(2,805)
Net cash (used in) provided by financing activities

(274,808)

-

729,600

298,435

753,227
Net decrease in cash and due from banks, and restricted cash

(47,946)

-

(17,721)

48,159

(17,508)
Cash and due from banks, and restricted cash at beginning of period

68,278

-

402,995

(68,022)

403,251
Cash and due from banks, and restricted cash at end of period
$
20,332
$
-
$
385,274
$
(19,863)
$
385,743

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report includes management’s discussion and analysis (“MD&A”) of the consolidated financial position and financial performance of Popular, Inc. (the “Corporation” or “Popular”). All accompanying tables, financial statements and notes included elsewhere in this report should be considered an integral part of this analysis.

The Corporation is a diversified, publicly-owned financial holding company subject to the supervision and regulation of the Board of Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the United States (“U.S.”) mainland and the U.S. and British Virgin Islands. In Puerto Rico, the Corporation provides retail, mortgage and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as investment banking, broker-dealer, auto and equipment leasing and financing, and insurance services through specialized subsidiaries. The Corporation’s mortgage origination business is conducted under the brand name Popular Mortgage, a division of BPPR. In the U.S. mainland, the Corporation provides retail, mortgage and commercial banking services through its New York-chartered banking subsidiary, Popular Bank (“PB”), which has branches located in New York, New Jersey and Florida. Note 3332 to the Consolidated Financial Statements presents information about the Corporation’s business segments.

The Corporation has several investments which it accounts for under the equity method. As of March 31, ~~2020,~~2021, the Corporation had a ~~16.22~~16.15% interest in EVERTEC, Inc. (“EVERTEC”), whose operating subsidiaries provide transaction processing services throughout the Caribbean and Latin America, and service many of the Corporation’s systems infrastructure and transaction processing businesses. During the quarter ended March 31, ~~2020,~~2021, the Corporation recorded $~~4.4~~ 5.9 million in earnings from its investment in EVERTEC, which had a carrying amount of $7492 million as of the end of the quarter. Also, the Corporation had a 15.84% equity interest in Centro Financiero BHD León, S.A. (“BHD León”), one of the largest banking and financial services groups in the Dominican Republic. During the quarter ended March 31, ~~2020,~~2021, the Corporation recorded ~~$6.8~~$6.4 million in earnings from its investment in BHD León, which had a carrying amount of ~~$158~~$160 million, as of the end of the quarter.

SIGNIFICANT EVENTS

~~Impact of the adoption of the current expected credit loss model (“CECL”)~~

The Corporation adopted the new CECL accounting standard effective on January 1, 2020, as discussed in Note 3- “New Accounting Pronouncements”. As a result of the adoption of the CECL model, the Corporation recorded a net increase in its allowance for credit losses related to its loan portfolio, unfunded commitments and credit recourse guarantees amounting to $306 million. The Corporation also recognized an allowance for credit losses of approximately $13 million related to its held-to-maturity debt securities portfolio. The adjustments to reflect the increase in the allowance for credit losses was recorded as a decrease to the opening balance of retained earnings at January 1, 2020, net of deferred tax asset, except for approximately $17 million related to

~~124~~

purchased credit impaired (“PCI”) loans previously accounted under ASC Subtopic 310-30, which resulted in a reclassification between certain contra loan balance accounts to the allowance for credit losses.

As part of the adoption of CECL, the Corporation made the election to break the existing pools of PCI loans, which were excluded from non-performing status, in accordance with the applicable accounting guidance. Upon being measured at the individual loan level, these loans are no longer excluded from non-performing status, resulting in an increase of $278 million in NPLs as of January 1, 2020. This increase included $144 million in loans currently over 90 days past due and $134 million in loans that are not delinquent in their payment terms but that are reported as non-performing due to other credit quality considerations.

~~Coronavirus (COVID-19) pandemic~~

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

~~In Puerto Rico, our primary market,~~ ~~the Governor issued executive orders~~ in March 2020 that declared a state of emergency as a result of the pandemic and ordered the closure of all businesses, with the exception of businesses that provide essential services, including banking and financial institutions such as Banco Popular de Puerto Rico (“BPPR”). Furthermore, the Puerto Rico government has mandated its citizens to remain sheltered in place and imposed a mandatory curfew, significantly limiting the activities that may be done in public. ~~Certain of the restrictions were eased effective on May 4, 2020, and the government announced that,if the island continues to exhibit progress with respect to the containment of the pandemic, it expects to implement additional changes to gradually allow for the~~ opening of additional businesses and industries in the upcoming weeks. However, significant restrictions on non-essential business activities remain and many businesses, including retail establishments and certain of the Corporation’s lines of business, remain closed or are operating partially.

The government of the USVI and state governments in the U.S. mainland, including New York, New Jersey and Florida, where Popular Bank (“Popular U.S.” or “PB”) has branches, have also declared states of emergency as a result of the pandemic, ordered the temporary closure of all non-essential businesses and its citizens to remain sheltered in place and observe social distancing, causing a similar significant economic disruption.

The COVID-19 pandemic has significantly disrupted our operations and already negatively impacted our business, financial condition and operations. In response to the pandemic, the Corporation has taken measures to ensure the continuity of our operations and the safety of our employees and customers through this pandemic, while providing financial relief to customers through programs such as payment moratoriums, suspensions of foreclosures and other collection activity, as well as waivers of certain fees and service charges, including late-payment charges and ATM transaction fees.

~~The following is a summary of the main steps the Corporation has undertaken in response to the COVID-19 outbreak.~~

~~Employees~~

~~Broadened remote working capabilities through the use of technology~~

~~Executed actions to support employees working in our offices, including sanitation measures, social distance, staggered shifts and the distribution of masks and gloves~~

~~125~~

~~Provided special compensation incentives to front-line employees (in our branches and call centers)~~

~~Expanded health insurance benefits, including free COVID-19 tests and the availability of telephone consultations to employees and covered family members.~~

~~Customers~~

~~Published dedicated phoneline and online tool to request financial assistance for customers impacted by COVID-19~~

~~Offered payment moratoriums for eligible customers in mortgage, consumer loans, credit cards, auto loans and leases and certain commercial credit facilities, subject to certain terms and conditions~~

~~Suspended residential property foreclosures and evictions, as well as most other collection activity~~

~~Waived ATM fees and early withdrawal penalties on certificates of deposits~~

~~Offered expedited lines of credit of up to $100,000 for BPPR commercial clients with favorable terms~~

Mobilized to offer Small Business Administration loans under the Paycheck Protection Program (“PPP”) to affected businesses; as of May 8, 2020 submitted and received approval of more than $1.2 billion of PPP loans.

~~Branch Operations~~

PR and USVI - Branches are operating under a reduced schedule and are rotating personnel to reduce their health exposure. In PR approximately 75% of BPPR’s branches are in operation, many primarily by drive-thru. In USVI, approximately 90% of BPPR’s branches are in operation.

~~Mainland U.S. operations - Nearly all of PB’s branches are operating, with some on daily alternating schedules.~~

~~Community~~

Established a fund with an initial contribution of $1 million to support efforts in three primary areas: a) medical equipment and healthcare projects that combat COVID-19; b) entrepreneurs, small and medium businesses, providing financial advice and business continuity support; and c) non-profit organizations to ensure the continuity of their services.

Notwithstanding the foregoing actions, the COVID-19 outbreak could still greatly affect our routine and essential operations due to staff absenteeism, particularly among key personnel; further limited access to or closures of our branch facilities and other physical offices; operational, technical or security-related risks arising from a remote work-force; and government or regulatory agency orders, among other things. The business and operations of our third-party service providers, many of whom perform critical services for our business, could also be significantly impacted, which in turn could impact us. As a result, we are currently unable to fully assess or predict the extent of the effects of COVID-19 on our operations~~, as well as the operations of our clients, customers, service providers and suppliers,~~ ~~as the ultimate impact will depend on factors that are currently unknown and/or beyond our control.~~

The results for the first quarter of 2020 reflect the impact during the month of March 2020 of the business disruption and relief measures described above. The provision for credit losses for the three months ended March 31, 2020 for the loans and investments portfolios, under the CECL methodology, was $189.7 million, including $134 million in incremental reserves due to the expected economic impact of COVID-19. The Corporation’s revenue streams were impacted in the form of reduced consumer transaction activity, the waiver of certain late fees and service charges, including ATM transaction fees, as well as the suspension in mortgage origination and related securitization and loan sale activities. These impacted revenue captions resulted in a decrease in income of approximately $6.8 million when compared to the previous quarter, reflecting the impact of the COVID-19 disruptions, mainly over the last two weeks of March. Furthermore, the Corporation has incurred additional expenses related to front-line employee bonuses, the enabling of remote access for employees to work from home, the expansion of employee benefits, as well

~~126~~

~~as the impact~~ ~~of specific measures to prevent the spread of the disease and efforts related to customer relief programs, among other related expenses.~~

The continued impact of the COVID-19 pandemic on our business, results of operations and financial condition (including our regulatory capital and liquidity ratios), will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the direct and indirect impact of the pandemic on our employees, customers, clients, counterparties and service providers, as well as other market participants,and actions taken by governmental authorities and other third parties in response to the pandemic. The COVID-19 pandemic’s impact on our business, financial condition, liquidity, results of operations and capital position may also affect the ability of the Corporation to continue paying dividends to its shareholders or repurchase shares of the Corporation’s common stock, as well as the value of the Corporation’s goodwill and its deferred tax assets.~~Refer to Part II, Item 1A - Risk Factors, of this Form 10-Q for additional information~~

~~Common Stock Repurchase Plan~~Actions

On January 30, 2020, the Corporation entered into an accelerated share repurchase transaction (“ASR”) of $500 million with respect to its common stock, which was accounted for as a treasury stock transaction. As a result of the receipt of the initial 7,055,919 shares under the ASR, the Corporation recognized in shareholders’ equity approximately $400 million in treasury stock and $100 million as a reduction of capital surplus. The ASR provided that the final number of shares delivered at settlement would be based on the average daily volume weighted average price (“VWAP”) of the Corporation’s common stock, net of a discount, during the term of the ASR.

As a result of the recent decrease in the trading price of the Corporation’s common stock during the COVID-19 pandemic, on March 19, 2020, the dealer counterparty to the ASR exercised its right under the ASR Agreement to terminate the ASR as a result of the trading price of the Corporation’s common stock falling below a specified level, allowing the dealer counterparty to terminate the ASR. The agreement executed in connection with such termination (the “Termination Agreement”) provides for the acceleration of the final settlement of the ASR, which was originally expected to occur during the fourth quarter of 2020.

~~Under the~~ ~~settlement resulting from~~ the Termination Agreement, the Corporation will receive a further number of shares of common stock, equivalent to approximately $167 million. As of March 31, 2020, the Corporation had received 642,400 additional shares after the early termination of the ASR. In connection with such receipt, the Corporation recorded approximately $23 million as treasury stock and recognized that amount as an increase in capital surplus.

~~Increase in common stock dividends~~

~~On January 9, 2020, the Corporation announced an increase in~~ its quarterly common stock dividend from $0.30 per share to $0.40 per share, payable commencing in the second quarter of 2020, subject to the approval of the Corporation’s Board of Directors. On February 28, 2020,May 6, 2021, the Corporation’s Board of Directors approved ~~the first~~a quarterly cash dividend of ~~$0.40~~$0.45 per share on its outstanding common ~~stock, which was paid~~stock. The dividend will be payable on ~~April~~July 1, ~~2020~~2021 to shareholders of record at the close of business on ~~March 19, 2020.~~

~~Redemption of Series B Preferred Stock~~May 26, 2021.

On ~~February 24, 2020,~~May 3, 2021, the Corporation ~~redeemed all outstanding~~announced that it had entered into an accelerated share repurchase agreement (the “ASR Agreement”) to repurchase an aggregate of $350 million of the Corporation’s common stock. Under the terms of the ASR Agreement, on May 4, 2021 the Corporation made an initial payment of $350 million and received an initial delivery of 3,785,831 shares of ~~its 8.25% Non-Cumulative Monthly Income Preferred~~the Corporation’s Common Stock ~~Series B (“Series B Preferred Stock”~~(the “Initial Shares”). The ~~Series B Preferred Stock~~transaction was ~~redeemed at~~accounted for as a treasury stock transaction. Furthermore, as a result of the ~~redemption~~receipt of the Initial Shares, the Corporation recognized in stockholders’ equity approximately $280 million in treasury stock and $70 million as a reduction of capital surplus. Upon the final settlement of the ASR Agreement, the Corporation expects to further adjust its treasury stock and capital surplus accounts to reflect the final delivery or receipt of cash or shares, which will depend on the volume-weighted average price of ~~$25.00 per share, plus $0.1375 in accrued and unpaid dividends on each share, for~~the Corporation’s common stock during the term of the ASR Agreement, less a ~~total payment per share in~~discount. The final settlement of the ~~amount~~ASR Agreement is expected to occur no later than the third quarter of ~~$25.1375 and a total aggregate payment of $28.2 million.~~

2021.

OVERVIEW

Table 1 provides selected financial data and performance indicators for the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

~~127~~109

Table 1 - Financial highlights

Financial Condition Highlights		Ending Balances at					Average for the Quarter Ended										Ending Balances at					Average for the Quarter Ended
(In thousands)		March 31, 2020	December 31, 2019			Variance		March 31, 2020			March 31, 2019			Variance			March 31, 2021	December 31, 2020			Variance		March 31, 2021			March 31, 2020			Variance
Money market investments	$	5,941,716	$	3,262,286	$	2,679,430	$	4,024,477		$	4,872,326		$	(847,849)		$	11,568,677	$	11,640,880	$	(72,203)	$	12,450,533		$	4,024,477		$	8,426,056
Investment securities		16,114,167		17,946,343		(1,832,176)		16,707,338			13,900,754			2,806,584			23,076,488		21,864,184		1,212,304		21,305,160			16,707,338			4,597,822
Loans		27,750,127		27,466,076		284,051		27,404,841			26,491,458			913,383			29,215,842		29,484,651		(268,809)		29,335,164			27,404,841			1,930,323
Earning assets		49,806,011		48,674,705		1,131,306		48,149,448			45,264,538			2,884,910			63,861,007		62,989,715		871,292		63,090,857			48,149,448			14,941,409
Total assets		52,803,639		52,115,324		688,315		51,354,494			48,626,532			2,727,962			66,870,268		65,926,000		944,268		66,086,263			51,354,494			14,731,769
Deposits		44,797,176		43,758,606		1,038,570		43,650,084			40,526,505			3,123,579			58,742,801		56,866,340		1,876,461		57,696,863			43,650,084			14,046,779
Borrowings		1,357,426		1,294,986		62,440		1,326,784			1,468,826			(142,042)			1,311,064		1,346,284		(35,220)		1,322,431			1,326,784			(4,353)
Stockholders’ equity		5,669,605		6,016,779		(347,174)		5,481,179			5,614,778			(133,599)			5,897,559		6,028,687		(131,128)		5,693,673			5,481,179			212,494


Operating Highlights							First Quarter															First Quarter
(In thousands, except per share information)								2020			2019			Variance									2021			2020			Variance
Net interest income							$	473,095		$	470,963		$	2,132								$	479,112		$	473,095		$	6,017
Provision for credit losses - loan portfolios								188,995			41,825			147,170
Provision for credit losses - investment securities								736			-			736
Provision (reversal) for credit losses																							(82,226)			189,731			(271,957)
Non-interest income								126,643			136,430			(9,787)									153,653			126,643			27,010
Operating expenses								372,608			347,420			25,188									375,528			372,608			2,920
Income before income tax	Income before income tax							37,399			218,148			(180,749)	Income before income tax								339,463			37,399			302,064
Income tax expense								3,097			50,223			(47,126)									76,831			3,097			73,734
Net income							$	34,302		$	167,925		$	(133,623)								$	262,632		$	34,302		$	228,330
Net income applicable to common stock							$	33,632		$	166,994		$	(133,362)								$	262,279		$	33,602		$	228,677
Net income per common share - basic							$	0.37		$	1.69		$	(1.32)								$	3.13		$	0.37		$	2.76
Net income per common share - diluted							$	0.37		$	1.69		$	(1.32)								$	3.12		$	0.37		$	2.75
Dividends declared per common share							$	0.40		$	0.30		$	0.10								$	0.40		$	0.40		$	―

							First Quarter															First Quarter
Selected Statistical Information								2020			2019												2021			2020
Common Stock Data
End market price							$	35.00		$	52.13											$	70.32		$	35.00
Book value per common share at period end								64.08			55.78												69.63			64.08
Profitability Ratios
Return on assets								0.27	%		1.40	%											1.61	%		0.27	%
Return on common equity								2.50			12.17												18.76			2.50
Net interest spread								3.73			3.91												2.96			3.73
Net interest spread (taxable equivalent) - Non-GAAP	Net interest spread (taxable equivalent) - Non-GAAP							4.13			4.26				Net interest spread (taxable equivalent) - Non-GAAP								3.28			4.13
Net interest margin								3.94			4.20												3.07			3.94
Net interest margin (taxable equivalent) - Non-GAAP	Net interest margin (taxable equivalent) - Non-GAAP							4.34			4.56				Net interest margin (taxable equivalent) - Non-GAAP								3.39			4.34
Capitalization Ratios
Average equity to average assets								10.67	%		11.55	%											8.62	%		10.67	%
Common equity Tier 1 capital								15.79			16.39												17.08			15.79
Tier I capital								15.79			16.39												17.15			15.79
Total capital								18.36			19.00												19.62			18.36
Tier 1 leverage								8.94			9.57												8.06			8.94

110

Net interest income on a taxable equivalent basis – Non-GAAP Financial Measure

~~128~~

The Corporation’s interest earning assets include investment securities and loans that are exempt from income tax, principally in Puerto Rico. The main sources of tax-exempt interest income are certain investments in obligations of the U.S. Government, its agencies and sponsored entities, ~~and~~ certain obligations of the Commonwealth of Puerto Rico and/or its agencies and municipalities and assets held by the Corporation’s international banking entities. To facilitate the comparison of all interest related to these assets, the interest income has been converted to a taxable equivalent basis, using the applicable statutory income tax rates for each period. The taxable equivalent computation considers the interest expense and other related expense disallowances required by Puerto Rico tax law. Thereunder, the exempt interest can be deducted up to the amount of taxable income.

Net interest income on a taxable equivalent basis is a non-GAAP financial measure. Management believes that this presentation provides meaningful information since it facilitates the comparison of revenues arising from taxable and tax-exempt sources. Net interest income on a taxable equivalent basis is presented with its different components in Table 2, along with the reconciliation to net interest income (GAAP), for the ~~quarters~~quarter ended March 31, ~~2020~~2021 as compared with the same ~~period~~periods in ~~2019,~~2020, segregated by major categories of interest earning assets and interest-bearing liabilities.

Non-GAAP financial measures used by the Corporation may not be comparable to similarly named Non-GAAP financial measures used by other companies.

Financial highlights for the quarter ended March 31, ~~2020~~2021

 As previously described, the results for the first quarter of 2020 reflect the impact during the month of March 2020 of the business disruption and relief measures related to the COVID-19 pandemic described above, and the adoption of the new CECL accounting standard effective on January 1, 2020. For the quarter ended March 31, ~~2020,~~2021, the Corporation recorded net income of $ ~~34.3~~262.6 million, compared to net income of $ ~~167.9~~34.3 million for the same quarter of the previous year. ~~The results~~Net interest income was $479.1 million, an increase of $6.0 million when compared to the same quarter of 2020. Net interest margin for the first quarter of ~~2020 reflect higher~~2021 was 3.07%, a decrease of 87 basis points when compared to 3.94% for the same quarter of the previous year, driven by the decrease in the Federal Funds Rate and the increase in average deposits, which were redeployed mostly at overnight Fed Funds, U.S. Treasuries, agency debt securities and in loans funded under the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”). On a taxable equivalent basis, the net interest ~~income by $2.1 million mainly due~~margin was of 3.39%, compared to ~~higher volume~~4.34% for the same quarter of ~~debt securities, higher income from~~ the ~~loans portfolio and lower interest expense from deposits, partially offset by lower interest income from money market investments.~~previous year. The provision for credit losses ~~increased by $147.9~~for the loan portfolio was a benefit of $75.8 million, ~~calculated under~~a decrease of $264.8 million when compared to the ~~new CECL accounting standard, included an additional reserve amounting~~same quarter of 2020, reflecting changes to ~~$134 million resulting from the deterioration in~~ the economic outlook, ~~as a result of the COVID-19 pandemic.~~qualitative reserves, and portfolio credit quality. Non-interest income was ~~lower~~higher by ~~$9.8~~$27.0 million mostly due to higher ~~adjustments for reserves for loans previously sold with credit recourse,~~income from mortgage banking activities, mainly due to a favorable variance in fair value adjustments on mortgage servicing ~~rights and unrealized losses on equity securities.~~rights. Operating expenses were higher by ~~$25.2~~$2.9 million ~~mainly~~principally due to higher ~~professional fees and~~ personnel costs, ~~among~~partially offset by lower other ~~operating~~real estate expenses.

 Total assets at March 31, ~~2020~~2021 amounted to $~~52.8~~66.9 billion, compared to $~~52.1~~65.9 billion, at December 31, ~~2019.~~2020. The increase ~~of $0.7 billion~~ was mainly due to higher ~~money market investments and loan balances, partially offset by lower investments in~~ debt securities ~~available-for-sale.~~available-for-sale due to purchases of U.S. treasury securities and agency mortgage-backed securities.

 Total deposits at March 31, ~~2020~~2021 increased by ~~$1.0~~$1.9 billion when compared to deposits at December 31, ~~2019,~~2020, mainly due to ~~an increase in time deposits from trust account~~higher retail and ~~savings accounts, partially offset by a decrease in Puerto Rico public sector~~commercial demand deposits at BPPR.

 Capital ratios continued to be strong. As of March 31, ~~2020,~~2021, the Corporation’s common equity tier 1 capital ratio was ~~15.79%~~17.08%, while the total capital ratio was ~~18.36%~~19.62%. Refer to Table 7 for capital ratios.

Due to the effects of the current and projected interest rate environment and the effects of the COVID-19 pandemic on the valuation of the Corporation and its subsidiaries, the Corporation deemed these factors as a triggering event which required management to perform an interim goodwill impairment test. Based on the analysis performed, no impairment was recognized. Refer to Note- 14 “Goodwill and Other Intangible Assets” for additional information of the Corporation’s interim goodwill impairment test.

Refer to the Operating Results Analysis and Financial Condition Analysis within this MD&A for additional discussion of significant quarterly variances and items impacting the financial performance of the Corporation.

~~129~~

As a financial services company, the Corporation’s earnings are significantly affected by general business and economic conditions in the markets which we serve. Lending and deposit activities and fee income generation are influenced by the level of business spending and investment, consumer income, spending and savings, capital market activities, competition, customer preferences, interest rate conditions and prevailing market rates on competing products.

The Corporation operates in a highly regulated environment and may be adversely affected by changes in federal and local laws and regulations. Also, competition with other financial institutions could adversely affect its ~~profitability~~profitability.

111

The Corporation continuously monitors general business and economic conditions, industry-related indicators and trends, competition, interest rate volatility, credit quality indicators, loan and deposit demand, operational and systems efficiencies, revenue enhancements and changes in the regulation of financial services companies.

The description of the Corporation’s business contained in Item 1 of the Corporation’s ~~2019~~2020 Form 10-K, while not all inclusive, discusses additional information about the business of the Corporation and risk factors, many beyond the Corporation’s control that, in addition to the other information in this Form 10-Q, readers should consider. ~~Also, refer to Part II, Item 1A - Risk Factors, of this Form 10-Q for additional information.~~

The Corporation’s common stock is traded on the NASDAQ Global Select Market under the symbol BPOP.

112

CRITICAL ACCOUNTING POLICIES / ESTIMATES

The accounting and reporting policies followed by the Corporation and its subsidiaries conform to generally accepted accounting principles in the United States of America 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. These estimates are made under facts and circumstances at a point in time and changes in those facts and circumstances could produce actual results that differ from those estimates.

Management has discussed the development and selection of the critical accounting policies and estimates with the Corporation’s Audit Committee. The Corporation has identified as critical accounting policies those related to: (i) Fair Value Measurement of Financial Instruments; (ii) Loans and Allowance for Credit Losses; (iii) Loans Acquired with Deteriorated Credit Quality; (iv) Income Taxes; (v) Goodwill; and (vi) Pension and Postretirement Benefit Obligations. For a summary of these critical accounting policies and estimates, refer to that particular section in the MD&A included in Popular, Inc.’s ~~2019~~2020 Form 10-K. Also, refer to Note 2 to the Consolidated Financial Statements included in the ~~2019~~2020 Form 10-K for a summary of the Corporation’s significant accounting policies ~~including those related to business combinations,~~ and to Note 43 to the Consolidated Financial Statements included in this Form ~~10Q~~10-Q for information on recently adopted accounting standard updates.

~~130~~113

OPERATING RESULTS ANALYSIS

NET INTEREST INCOME

Net interest income for the first quarter of 2021 was $479.1 million, an increase of $6.0 million when compared to $473.1 million for the same quarter of 2020. Taxable equivalent net interest income was $529.8 million for the first quarter of ~~2020,~~2021, an increase of ~~$2.1~~$8.3 million when compared to ~~$471.0~~$521.5 million for the same quarter of 2019. Taxable equivalent net interest income was $521.4 million for the first quarter of 2020, an increase of $10.9 million when compared to $510.5 million in the same quarter of 2019. The increase of $8.8 million in the taxable equivalent adjustment is directly related to a higher volume of tax-exempt investments in BPPR.2020.

Net interest margin for the first quarter of ~~2020~~2021 was ~~3.94%~~3.07%, a decrease of 2687 basis points when compared to ~~4.20%~~3.94% for the same quarter of the previous year. ~~Net~~The lower net interest margin for the quarter is mainly driven by the decrease of 150 basis points in the Federal Funds Rate that occurred in March 2020 at the beginning of the COVID-19 pandemic. Also impacting the net interest margin is the increase in average deposits of $14.0 billion resulting from pandemic relief programs, which were redeployed in overnight Fed Funds, investment securities andloans funded under the SBA PPP. Loans under the SBA PPP had an average balance of $1.3 billion for the first quarter of 2021. Management is constantly monitoring the liquidity position of the Corporation and has taken actions to deploy a portion of this liquidity. These actions include bulk loan repurchases from its GNMA, FNMA and FHMLC loan servicing portfolios, which occurred in the third quarter of 2020, and acquiring investment securities, including U.S. Treasury and agency mortgage-backed securities. The net interest margin, on a taxable equivalent basis, for the first quarter of ~~2020~~2021 was ~~4.34%~~3.39%, a decrease of 2295 basis points when compared to ~~4.56%~~4.34% for the same quarter of ~~2019.The~~2020.The detailed variances of the decrease in net interest income are described below:

~~Positive variances:~~

Higher interest income from investment securities due to a higher volume of U.S. Treasury securities and agencies related to recent purchases to deploy liquidity and the benefit from the Puerto Rico tax exemption of these assets.

~~Higher interest income from loans:~~

o~~Commercial loans, driven by higher volume of loans mainly in the U.S. portfolio partially offset by lower market rates as described above;~~

o~~Lease portfolio due to improved origination activity at Popular Auto;~~

o~~Consumer loans, driven by the acquisition of a $74 million credit card portfolio at the end of 2019 and higher volume of consumer loans originated through the Eloan channel.~~

oPartially offset by lower income from mortgage loans mostly associated to the run-off of the portfolio and lower service fees related to the condonation of late payment fees as part of the financial assistance to customers on the COVID-19 pandemic.

~~Lower interest expense on deposits mainly due to lower deposit costs mostly on the P.R. government deposits partially offset by higher volume in P.R. by $2.5 billion and in the U.S. by $0.5 billion.~~

Negative variances:

 Lower interest income from money market investments related to the above-mentioned decrease in the Federal funds rate, partially offset by an increase in average volume;

Lower interest income from investment securities due lower yield, partially offset by a higher volume of U.S. Treasuries and U.S. agency mortgage-backed securities, related to purchases to deploy liquidity and to benefit from the Puerto Rico tax exemption of these assets; and

Lower interest income from loans driven by lower interest income from a lower volume of consumer loans, and by the impact of the decrease in rates in variable rate loans and loans issued under a lower interest rate environment. Partially offsetting these negative variances is a higher average loan balance, mainly mortgage, auto loan and lease financing and PPP loans. The latter carry a yield of approximately 7.21%, including the amortization of fees received under the program which is accelerated upon the full repayment of these loans.

Positive variances:

Lower interest expense on deposits due to lower ~~volume~~interest cost by 44 basis points resulting from the decrease in market rates, mostly on Puerto Rico Government and U.S. deposits, and management actions to reduce rates in most deposit categories, partially offset by higher average interest-bearing deposits increasing by $9.7 billion when compared with the ~~cumulative impact of the Federal Reserve~~same quarter in 2020, therefore increasing interest ~~rate decreases that occurred in 2019 and Q1 2020.~~expense.

Interest income for the quarter ended March 31, ~~2020,~~2021, included the amortization of deferred loans fees, prepayment penalties, late fees and the amortization of premium/discounts, amounting to ~~$26.8~~$26.6 million, ~~or an increase of $10.5~~including $20.0 million ~~when~~on fees related to PPP loans, compared towith $11.2 million income from the same quarter in ~~2019. This increase~~2020. Excluding the impact of PPP fees, the decrease is ~~mainly~~ related to ~~the adoption~~a lower amortization of ~~CECL, where the Corporation made the election to break the existing pools of PCI~~PCD loans ~~resulting in a higher~~and lower amortization ~~on the discount on the individual loans, previously accounted on the average life~~ of the ~~pool~~fair value discount of ~~loans.~~auto and credit card portfolios acquired in previous years.

The impact of higher earning asset volumes and lower cost of funds led to higher net interest income by $2.1 million in the first quarter of 2020 over the same period in 2019, However, due to the Corporation’s current asset sensitive position, the cumulative reductions of 225 basis points of the federal funds rate by the Federal Open Market Committee (“FOMC”) beginning in August 2019 and accelerating in March 2020 and further expectation of low interest rates, we expect our future net interest income to be negatively impacted. See the Risk Management: ~~Market / Interest Rate Risk section of this MD&A for additional information related to the Corporation’s interest rate risk.~~

~~131~~114

	Table 2 - Analysis of Levels & Yields on a Taxable Equivalent Basis (Non-GAAP)																							Table 2 - Analysis of Levels & Yields on a Taxable Equivalent Basis (Non-GAAP)
	Quarters ended March 31,																							Quarters ended March 31,
																					Variance																							Variance
	Average Volume					Average Yields / Costs								Interest							Attributable to			Average Volume					Average Yields / Costs								Interest							Attributable to
	2020		2019	Variance		2020		2019		Variance					2020		2019		Variance		Rate		Volume	2021		2020	Variance		2021		2020		Variance					2021		2020		Variance		Rate		Volume
	(In millions)														(In thousands)									(In millions)														(In thousands)
$	4,024	$	4,872	$	(848)	1.20	%	2.43	%	(1.23)	%	Money market investments		$	12,000	$	29,220	$	(17,220)	$	(12,792)	$	(4,428)	12,451	$	4,024	$	8,427	0.10	%	1.20	%	(1.10)	%	Money market investments		$	3,112	$	12,000	$	(8,888)	$	(18,000)	$	9,112
	16,659		13,836		2,823	2.96		3.23		(0.27)		Investment securities			122,715		110,809		11,906		(8,562)		20,468	21,221		16,659		4,562	2.35		2.96		(0.61)		Investment securities [1]			123,665		122,715		950		(27,000)		27,951
	61		65		(4)	6.67		8.03		(1.36)		Trading securities			1,020		1,289		(269)		(201)		(68)	84		61		23	4.96		6.67		(1.71)		Trading securities			1,033		1,020		13		(309)		322
												Total money market,																							Total money market,
													investment and trading																							investment and trading
	20,744		18,773		1,971	2.63		3.04		(0.41)			securities		135,735		141,318		(5,583)		(21,555)		15,972	33,756		20,744		13,012	1.52		2.63		(1.11)			securities		127,810		135,735		(7,925)		(45,309)		37,385
												Loans:																							Loans:
	12,342		12,064		278	5.97		6.14		(0.17)			Commercial		183,202		182,737		465		(3,700)		4,165	13,624		12,342		1,282	5.33		5.97		(0.64)			Commercial		179,064		183,202		(4,138)		(22,143)		18,006
	861		807		54	6.16		6.85		(0.69)			Construction		13,175		13,624		(449)		(1,315)		866	911		861		50	5.30		6.16		(0.86)			Construction		11,901		13,175		(1,274)		(2,012)		738
	1,072		944		128	6.07		6.08		(0.01)			Leasing		16,269		14,331		1,938		(7)		1,945	1,215		1,072		143	6.04		6.07		(0.03)			Leasing		18,354		16,269		2,085		(86)		2,171
	7,028		7,134		(106)	5.30		5.34		(0.04)			Mortgage		93,201		95,168		(1,967)		(561)		(1,406)	7,869		7,028		841	5.00		5.30		(0.30)			Mortgage		98,429		93,201		5,228		(5,489)		10,716
	3,110		2,814		296	11.56		11.93		(0.37)			Consumer		89,423		82,780		6,643		(2,198)		8,841	2,513		3,110		(597)	11.36		11.56		(0.20)			Consumer		70,401		89,423		(19,022)		(2,226)		(16,796)
	2,992		2,729		263	9.10		10.04		(0.94)			Auto		67,721		67,584		137		(6,086)		6,223	3,203		2,992		211	8.63		9.10		(0.47)			Auto		68,152		67,721		431		(4,178)		4,609
	27,405		26,492		913	6.79		6.96		(0.17)		Total loans			462,991		456,224		6,767		(13,867)		20,634	29,335		27,405		1,930	6.15		6.79		(0.64)		Total loans			446,301		462,991		(16,690)		(36,134)		19,444
$	48,149	$	45,265	$	2,884	4.99	%	5.33	%	(0.34)	%	Total earning assets		$	598,726	$	597,542	$	1,184	$	(35,422)	$	36,606	63,091	$	48,149	$	14,942	3.67	%	4.99	%	(1.32)	%	Total earning assets		$	574,111	$	598,726	$	(24,615)	$	(81,443)	$	56,829
												Interest bearing deposits:																							Interest bearing deposits:
$	16,229	$	14,051	$	2,178	0.63	%	0.97	%	(0.34)	%		NOW and money market [1]	$	25,295	$	33,776	$	(8,481)	$	(11,647)	$	3,166	22,674	$	16,229	$	6,445	0.15	%	0.63	%	(0.48)	%		NOW and money market [2]	$	8,262	$	25,295	$	(17,033)	$	(24,308)	$	7,275
	10,724		9,847		877	0.44		0.41		0.03			Savings		11,661		9,909		1,752		212		1,540	14,364		10,724		3,640	0.20		0.44		(0.24)			Savings		7,020		11,661		(4,641)		(8,012)		3,371
	7,691		7,676		15	1.31		1.43		(0.12)			Time deposits		25,145		27,141		(1,996)		(2,247)		251	7,265		7,691		(426)	0.83		1.31		(0.48)			Time deposits		14,919		25,145		(10,226)		(8,484)		(1,741)
	34,644		31,574		3,070	0.72		0.91		(0.19)		Total deposits			62,101		70,826		(8,725)		(13,682)		4,957	44,303		34,644		9,659	0.28		0.72		(0.44)		Total deposits			30,201		62,101		(31,900)		(40,804)		8,905
	229		248		(19)	1.84		2.62		(0.78)		Short-term borrowings			1,048		1,599		(551)		(197)		(354)	98		229		(131)	0.59		1.84		(1.25)		Short-term borrowings			143		1,048		(905)		(501)		(404)
												Other medium and																							Other medium and
	1,098		1,221		(123)	5.17		4.81		0.36			long-term debt		14,114		14,580		(466)		285		(751)	1,246		1,098		148	4.51		5.17		(0.66)			long-term debt		13,995		14,114		(119)		(887)		768
												Total interest bearing																							Total interest bearing
	35,971		33,043		2,928	0.86		1.07		(0.21)			liabilities		77,263		87,005		(9,742)		(13,594)		3,852	45,647		35,971		9,676	0.39		0.86		(0.47)			liabilities		44,339		77,263		(32,924)		(42,192)		9,269
	9,005		8,953		52							Demand deposits												13,394		9,005		4,389							Demand deposits
	3,173		3,269		(96)							Other sources of funds												4,050		3,173		877							Other sources of funds
$	48,149	$	45,265	$	2,884	0.65	%	0.78	%	(0.13)	%	Total source of funds			77,263		87,005		(9,742)		(13,594)		3,852	63,091	$	48,149	$	14,942	0.28	%	0.65	%	(0.37)	%	Total source of funds			44,339		77,263		(32,924)		(42,192)		9,269
												Net interest margin/																							Net interest margin/
						4.34	%	4.56	%	(0.22)	%		income on a taxable equivalent basis (Non-GAAP)		521,463		510,537		10,926	$	(21,828)	$	32,754						3.39	%	4.34	%	(0.95)	%		income on a taxable equivalent basis (Non-GAAP)		529,772		521,463		8,309	$	(39,251)	$	47,560
						4.13	%	4.26	%	(0.13)	%	Net interest spread																	3.28	%	4.13	%	(0.85)	%	Net interest spread
												Taxable equivalent adjustment			48,369		39,573		8,796																Taxable equivalent adjustment			50,661		48,369		2,292
												Net interest margin/ income																							Net interest margin/ income
						3.94	%	4.20	%	(0.26)	%		non-taxable equivalent basis (GAAP)	$	473,094	$	470,964	$	2,130										3.07	%	3.94	%	(0.87)	%		non-taxable equivalent basis (GAAP)	$	479,111	$	473,094	$	6,017
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.	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.																							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] Includes interest bearing demand deposits corresponding to certain government entities in Puerto Rico.
[1] Average outstanding securities balances are based upon amortized cost excluding any unrealized gains or losses on securities available-for-sale.																								[1] Average outstanding securities balances are based upon amortized cost excluding any unrealized gains or losses on securities available-for-sale.
[2] Includes interest bearing demand deposits corresponding to certain government entities in Puerto Rico.																								[2] Includes interest bearing demand deposits corresponding to certain government entities in Puerto Rico.

~~132~~115

Provision for Credit Losses - Loans Held-in-Portfolio

For the quarter ended March 31, 2021, the Corporation recorded a release of $82.2 million for its reserve for credit losses related to loans held-in-portfolio and unfunded commitments. The Corporation’s provision for credit losses ~~was~~for its loans-held-in-portfolio for the quarter ended March 31, 2021 decreased by $264.8 million to a benefit of $75.8 million, compared to a provision expense of $189.0 million for the quarter ended March 31, ~~2020,~~2020. The decrease reflects changes to the economic outlook, qualitative reserves, and portfolio credit quality. The provision for unfunded commitments for the first quarter of 2021 reflected a benefit of $6.3 million, compared to ~~$41.8~~a provision expense of $1.2 million for the ~~quarter ended March 31, 2019, an increase~~same period of ~~$147.2 million.~~2020.

The provision for credit losses for the BPPR segment was a benefit of $40.0 million for the quarter ended March 31, 2021, compared to a provision expense of $113.0 million for the quarter ended March 31, 2020, ~~compared to $31.5 million for the quarter ended March 31, 2019, an increase~~a decrease of ~~$81.5~~$153.0 million. The Popular U.S. segment provision for credit losses ~~amounted to $76.0~~was also a benefit of $35.8 million for the quarter ended March 31, ~~2020, an increase~~2021, a decrease of ~~$65.6~~$111.8 million, compared to ~~$10.4~~a provision expense of $76.0 million for the same quarter in ~~2019.~~2020.

~~The increase in~~

At March 31, 2021, the ~~provision~~total allowance for credit losses ~~when~~for loans held-in-portfolio amounted to $800.8 million, compared to ~~the same quarter~~$896.3 million as of December 31, 2020. The ratio of the ~~previous year reflects the impact of the adoption of the new CECL accounting standard, discussed in~~allowance for credit losses to loans held-in-portfolio was 2.75% at March 31, 2021, compared to 3.05% at December 31, 2020. Refer to Note 28 to the Consolidated Financial Statements, ~~as well as~~for additional information on the impact of the COVID-19 pandemic. During the quarter ended March 31, 2020, the Corporation recorded $134 million in incremental reserves resulting from the deterioration in the economic outlook as a result of the COVID-19 pandemic. Management will continueCorporation’s methodology to ~~carefully review the exposure of the portfolios to COVID-19 related risks, as well as changes in the economic outlook and their effect on~~estimate its allowance for credit ~~quality.~~

losses (“ACL”). Refer to the Credit Risk section of this MD&A for a detailed analysis of net charge-offs, non-performing assets, the allowance for credit losses and selected loan losses statistics.

Provision for Credit Losses – Investment Securities

The Corporation’s provision for credit losses related to its investment securities held-to-maturity ~~amounted to $0.7 million and it~~ is related to the portfolio of ~~Obligations~~obligations from the Government of Puerto Rico, states and political subdivisions. ~~The~~For the quarter ended March 31, 2021, the provision for credit losses was a benefit of $0.2 million, compared to a provision expense of $0.7 million for the quarter ended March 31, 2020. At March 31, 2021, the total allowance for credit losses for this portfolio amounted to ~~$13.4~~$10.1 million, ~~and includes the impact of the adoption of CECL for which the Corporation recorded $12.7~~compared to $10.3 million as ~~a cumulative effect adjustment to the beginning balance~~ of ~~retained earnings.~~December 31, 2020.

~~133~~116

Non-Interest Income

Non-interest income was ~~$126.6~~$153.7 million for the first quarter of ~~2020, a decrease~~2021, an increase of ~~$9.8~~$27.0 million when compared with the same quarter of the previous year. The ~~decrease~~increase in non-interest income was primarily driven by:

 ~~Lower mortgage banking activity~~higher other service fees by ~~$3.5~~$5.9 million mainly due to higher credit card fees by $5.5 million as a result of higher interchange transactional volumes;

higher income from mortgage banking activities by $10.9 million mainly due to a favorable variance in fair value adjustments on mortgage servicing rights ~~by $1.4~~(“MSRs”) of $5.7 million due to ~~an increase~~a decrease in estimated prepayments driven by ~~declines~~increases in ~~market~~interest rates, coupled with higher ~~trading account losses~~realized gains on closed derivative positions by ~~$1.4~~$4.1 million;

 ~~an unfavorable~~a favorable variance in unrealized net ~~losses~~gains on equity securities by ~~$4.2~~$3.1 million mainly on deferred compensation plans that have an offsetting expense in personnel related expenses;

 ~~an unfavorable~~a favorable variance in adjustments to indemnity reserves on previously sold loans of ~~$4.7~~$4.1 million mainly due to ~~higher~~lower provision expense related to loans previously sold with credit recourse; and

 ~~lower~~higher other operating income by ~~$2.0~~$6.5 million mainly due to ~~lower gains~~higher net earnings from the combined portfolio of investments under the equity method by $2.4 million and a higher gain on ~~sales~~sale of daily auto rental ~~fleet~~ units by ~~$1.1million.~~$2.0 million.

These increases were partially offset by ~~higher~~lower service charges ~~in deposits account~~on deposit accounts by ~~$3.0~~$2.0 million due ~~higher fees on transactional cash management services at BPPR.~~to increases in average deposits.

Operating Expenses

Operating expenses for the quarter ended March 31, ~~2020~~2021 increased by ~~$25.2~~$ 2.9 million when compared with the same quarter of ~~2019,~~2020, driven primarily by:

 higher personnel cost by ~~$3.7~~$12.6 million largely impacted by a higher headcount, reflecting higher salaries by $7.8 million, a special incentive to front-line employees due to COVID-19 amounting to $3.4 million, partially offset by a lower incentive compensation of $3.5 millionmainly related to annual employee incentives tied to the ~~Corporation~~Corporation’s financial performance ~~including the Corporation’s Profit-Sharing plan, recognized during prior year~~by $7.4 million and higher commission, incentives and other bonuses by $8.0 million; partially offset by lower ~~deferred plan compensation expense~~salaries by ~~$3.8 million;~~$2.9 million.

Partially offset by:

 ~~higher net occupancy expense~~lower professional fees by ~~$1.6~~$1.1 million mainly due to ~~higher~~ ~~insurance cost and cleaning costs in response to the COVID-19 pandemic~~;

~~higher equipment expense by $1.9 million due to higher software license cost and maintenance~~lower advisory expenses;

 ~~higher other taxes~~lower business promotion by ~~$2.0~~$1.7 million due to ~~higher municipal license tax;~~lower seasonal donations and advertising expense;

 ~~higher professional fees~~lower OREO expenses by ~~$13.6~~$7.0 million ~~primarily~~mainly due to higher ~~advisory expenses~~gain on sale of properties by ~~$8.2~~$3.4 million ~~related to Corporate initiatives, higher audit~~ and ~~tax services by $2.2 million mainly related to work on new accounting pronouncements~~lower OREO costs including repairs and ~~higher programming, processing and other technology expenses by $2.6 million which included expenses related to remote access to employees, among other efforts in response to the COVID-19 pandemic;~~maintenance; and

 ~~higher~~lower other operating expenses by $1.4 million due mainly to lower pension plan expense driven by annual changes in actuarial assumptions by $2.5 million ~~mainly due to~~and lower provision for unfunded commitments by $1.2 million since this is currently presented within the provision for credit losses, while it was included within other expenses in the first quarter of 2020; partially offset by higher credit and debit card processing, volume and interchange expenses by $2.1 million and higher operational losses by $3.5 million, including legal contingency reserves; partially offset by lower pension plan cost by $3.3 million due to annual changes in actuarial assumptions.$2.2 million.

~~134~~117

Table 3 - Operating Expenses	Table 3 - Operating Expenses							Table 3 - Operating Expenses
		Quarters ended March 31,							Quarters ended March 31,
(In thousands)	(In thousands)	2020		2019		Variance		(In thousands)	2021		2020		Variance
Personnel costs:	Personnel costs:							Personnel costs:
	Salaries	$	92,256	$	84,450	$	7,806	Salaries	$	89,335	$	92,256	$	(2,921)
	Commissions, incentives and other bonuses		25,258		25,761		(503)	Commissions, incentives and other bonuses		33,218		25,258		7,960
	Pension, postretirement and medical insurance		9,638		9,761		(123)	Pension, postretirement and medical insurance		10,924		9,638		1,286
	Other personnel costs, including payroll taxes		19,679		23,145		(3,466)	Other personnel costs, including payroll taxes		26,002		19,679		6,323
	Total personnel costs		146,831		143,117		3,714	Total personnel costs		159,479		146,831		12,648
Net occupancy expenses	Net occupancy expenses		25,158		23,537		1,621	Net occupancy expenses		26,013		25,158		855
Equipment expenses	Equipment expenses		21,605		19,705		1,900	Equipment expenses		21,575		21,605		(30)
Other taxes	Other taxes		13,681		11,662		2,019	Other taxes		13,959		13,681		278
Professional fees:	Professional fees:							Professional fees:
	Collections, appraisals and other credit related fees		3,881		3,724		157	Collections, appraisals and other credit related fees		3,320		3,881		(561)
	Programming, processing and other technology services		62,819		60,178		2,641	Programming, processing and other technology services		66,366		62,819		3,547
	Legal fees, excluding collections		2,986		3,489		(503)	Legal fees, excluding collections		2,365		2,986		(621)
	Other professional fees		31,385		20,075		11,310	Other professional fees		27,897		31,385		(3,488)
	Total professional fees		101,071		87,466		13,605	Total professional fees		99,948		101,071		(1,123)
Communications	Communications		5,954		5,849		105	Communications		6,833		5,954		879
Business promotion	Business promotion		14,197		14,674		(477)	Business promotion		12,521		14,197		(1,676)
FDIC deposit insurance	FDIC deposit insurance		5,080		4,806		274	FDIC deposit insurance		5,968		5,080		888
Other real estate owned (OREO) expenses			2,479		2,677		(198)
Other real estate owned (OREO) (income) expenses								Other real estate owned (OREO) (income) expenses		(4,533)		2,479		(7,012)
Other operating expenses:	Other operating expenses:							Other operating expenses:
	Credit and debit card processing, volume and interchange expenses		10,282		8,223		2,059	Credit and debit card processing, volume and interchange expenses		12,454		10,282		2,172
	Operational losses		8,374		4,888		3,486	Operational losses		7,896		8,374		(478)
	All other		15,423		18,504		(3,081)	All other		12,364		15,423		(3,059)
	Total other operating expenses		34,079		31,615		2,464	Total other operating expenses		32,714		34,079		(1,365)
Amortization of intangibles	Amortization of intangibles		2,473		2,312		161	Amortization of intangibles		1,051		2,473		(1,422)
Total operating expenses	Total operating expenses	$	372,608	$	347,420	$	25,188	Total operating expenses	$	375,528	$	372,608	$	2,920

INCOME TAXES

For the quarter ended March 31, ~~2020,~~2021, the Corporation recorded an income tax expense of ~~$3.1~~$76.8 million with an effective tax rate (“ETR”) of 8%23%, compared to ~~income tax expense $50.2~~$3.1 million with an ETR of ~~23%~~8% for the same ~~quarter 2019.~~period of 2020. The increase in income tax expense and ETR for the ~~first~~ quarter ~~of 2020,~~ended March 31, 2021 reflects the impact of ~~lower pre-tax income, resulting primarily from a~~ higher provision for credit losses due to the implementation of CECL and the impact of the COVID-19 pandemic. The Corporation expects a consolidated ETR for the year 2020 to be within a range of 14% to 18%. This expectation will be impacted by the composition and source of the Corporation’s pre-tax income.

At March ~~31, 2020,~~31,2021, the Corporation had a deferred tax asset amounting to ~~$0.9~~$0.8 billion, net of a valuation allowance of $0.5 billion. The deferred tax asset related to the U.S. operations was $0.3 billion, net of a valuation allowance of $0.4 billion.

Refer to Note 3130 to the Consolidated Financial Statements for a reconciliation of the statutory income tax rate to the effective tax rate and additional information on the ~~realizability of the~~income tax expense and deferred tax asset balances.

~~135~~118

REPORTABLE SEGMENT RESULTS

The Corporation’s reportable segments for managerial reporting purposes consist of Banco Popular de Puerto Rico and Popular U.S. A Corporate group has been defined to support the reportable segments.

For a description of the Corporation’s reportable segments, including additional financial information and the underlying management accounting process, refer to Note 3332 to the Consolidated Financial Statements.

The Corporate group reported a net ~~loss~~income of ~~$0.9~~$2.3 million for the quarter ended March 31, ~~2020,~~2021, compared with a net loss of ~~$1.3~~$0.9 million for the same quarter of the previous year.

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 ~~$78.1~~$212.2 million for the quarter ended March 31, ~~2020,~~2021, compared with net income of ~~$156.6~~$78.1 million for the same quarter of the previous year. The increase in net income was principally driven by the benefit of $45.4 million in the reserve for credit losses and unfunded commitments recorded in the quarter ended March 31, 2021. The principal factors that contributed to the variance in the financial results include the following:

 Higher net interest income by ~~$2.3~~$0.7 million mainly due to:

~~Higher interest income from investments in debt securities by $9.1 million due to a higher volume of U.S. Treasury securities and mortgage-backed securities; and~~

 ~~Lower~~lower interest income from loans by $11.3 million mainly due to lower yields in the commercial portfolio and lower average balance and yields in consumer loans; and

lower interest income from investment securities by $8.3 million largely due to lower yields in money market investments and U.S. Treasuries due to the decrease interest rates, partially offset by higher income from mortgage-backed securities due to higher average balances;

Partially offset by:

lower interest expense on deposits by ~~$10.6~~$19.9 million mainly due to a lower cost of public sector ~~deposits;~~

~~Partially~~deposits and time deposits, partially offset ~~by:~~

~~Lower interest income from money market investments~~ by ~~$17.1 million due to a lower volume and yield resulting from Federal~~ ~~Reserve interest rate decreases.~~higher average balances.

The net interest margin for the quarter ended March 31, ~~2020~~2021 was ~~4.22%~~3.10% compared to ~~4.49%~~4.22% for the same quarter in the previous year. The decrease in net interest margin is driven by a lower yield in earning assets, and earning asset mix, partially offset by a lower cost of public sector deposits.

 The ~~total provision~~BPPR segment recorded a benefit of $45.4 million in its reserve for credit losses and unfunded commitments for the quarter ended March 31, 2021 due to the improvements in the macroeconomic outlook and portfolio credit metrics. This compared to a provision expense of $113.6 million for the first quarter of ~~2020~~2020.

Non-interest income was ~~$113.6~~higher by $23.1 million mainly due to:

higher other service fees by $6.2 million mainly due to higher credit card fees as a result of higher interchange transactional volumes;

higher income from mortgage banking activities by $10.4 million due to a favorable variance in fair value adjustments on mortgage servicing rights of $5.8 million due to a decrease in estimated prepayments driven by increases in interest rates, coupled with higher realized gains on closed derivative positions;

a favorable variance in adjustments to indemnity reserves on previously sold loans of $4.1 million mainly due to lower provision expense related to loans previously sold with credit recourse; and

119

higher other operating income by $4.0 million mainly due to higher gain on sale of daily auto rental units by $2.0 million, recoveries from the sale of acquired fully charged off loans by $1.0 million and higher net earnings from the combined portfolio of investments under the equity method;

Partially offset by:

Lower service charges on deposit accounts by $1.5 million due to an increase in average deposits.

Higher operating expenses by $5.0 million mostly due to:

Higher personnel costs by $4.4 million due mainly to the annual incentives tied to the Corporation’s financial performance;

Higher occupancy expenses by $2.2 million, due to higher rent and lower income from building tenants; and

Higher other operating expenses by $9.8 million due to higher allocations from the Corporate segment, mainly related to professional services fees and personnel costs;

Partially offset by:

Lower professional fees by $3.0 million mainly due to lower advisory expenses related to corporate initiatives; and

Lower OREO expenses by $6.6 million mainly due to lower maintenance expenses and higher gain on sale of residential properties.

Higher income tax expense by $43.7 million due to higher income before tax.

Popular U.S.

For the quarter ended March 31, 2021, the reportable segment of Popular U.S. reported a net income of $47.8 million, compared ~~to $31.3~~with a net loss of $43.4 million for the same quarter of the previous year. The ~~increase~~favorable variance was principally driven by the benefit of ~~$82.3~~$36.7 million ~~was mainly due to~~in the ~~impact of the adoption of the new CECL accounting standard and the impact of the COVID-19 pandemic.~~

~~Non-interest income was lower by $8.6 million mainly due to:~~

~~Lower income from mortgage banking activities by $3.5 million due to negative fair value adjustments on mortgage servicing rights and higher trading account losses;~~

~~Unfavorable variance in adjustments to indemnity reserves of $4.7 million mainly due to higher provision related to loans previously sold with credit recourse; and~~

Lower other operating income by $3.6 million due to lower gains on sales of daily rental fleet units, higher losses from equity method investments, and lower modification fees received for the successful completion of loss mitigation alternatives;

~~Partially offset by:~~

~~Higher service charges on deposit accounts by $3.3 million due to higher fees on transactional cash management services.~~

~~Higher operating expenses by $20.2 million mostly due to:~~

Higher personnel cost by $4.3 million resulting from a higher headcount and a special COVID-19 related incentive to front-line employees, partially offset by a lower incentive compensation related to annual incentives tied to the Corporation’s financial performance, including the Corporation’s Profit Sharing Plan, recognized during the prior year;

~~Higher net occupancy expenses by $1.1 million due to higher insurance cost and cleaning costs related to the COVID-19 pandemic;~~

~~Higher equipment expense by $1.2 million due to higher software license costs;~~

~~136~~

~~Higher other taxes by $1.3 million due to higher municipal license tax;~~

~~Higher professional fees by $6.5 million due to higher advisory, audit and tax services and higher programming, processing and other technology expenses; and~~

Higher other operating expenses by $6.5 million due to higher credit and debit card processing, volume and interchange expenses and higher operational losses, partially offset by lower pension plan cost;

~~Partially offset by:~~

~~Lower OREO expenses by $1.0 million.~~

~~Lower income tax expense by $30.3 million mainly due to lower income before tax resulting primarily from a higher provision~~reserve for credit losses ~~as explained above.~~

~~Popular U.S.~~

~~For~~and unfunded commitments recorded in the quarter ended March 31, ~~2020, the reportable segment of Popular U.S. reported a net loss of $43.4 million, compared with a net income of $12.2 million for the same quarter of the previous year.~~2021. The factors that contributed to the variance in the financial results included the following:

 ~~Higher provision~~higher net interest income by $6.5 million due to:

lower interest expense on deposits by $13.1 million mainly due to lower interest rates;

Partially offset by:

lower interest income from loans by $4.5 million mainly due to lower average balance in consumer loans; and

lower interest income from investment securities by $2.8 million due to lower yields and lower average balances.

The net interest margin for the quarter ended March 31, 2021 was 3.35% compared to 3.21% for the same quarter in the previous year.

The PB segment recorded a benefit of $36.7 million in its reserve for credit losses and unfunded commitments for the quarter ended March 31, 2021 due to the improvements in the macroeconomic outlook and portfolio credit metrics. This compared to a provision expense of $76.0 million for the first quarter of 2020.

Lower operating expenses by ~~$65.6~~$1.6 million due to:

120

lower occupancy expense by 1.4 million due to lower rent expense related to the ~~impact~~benefits of the ~~adoption~~completed branch optimization initiative in our New York Metro region; and

Lower professional fees by $4.6 million, a portion of which is now centralized at the ~~new CECL accounting standard~~Corporate segment and ~~the impact of the COVID-19 pandemic;~~charged back to operating units.

Partially offset by:

 Higher other operating expenses by ~~$6.4~~$2.6 million ~~mainly~~ due to higher ~~professional fees and higher other operating expenses mainly due to a higher provision for unused commitments resulting from the adoption of the new CECL accounting standard; and~~Corporate expense allocations.

 Income tax ~~favorable~~unfavorable variance of ~~$17.2~~$30.0 million mainly due to ~~pre-tax loss~~income before tax of $65.9 million for the first quarter of ~~2020,~~2021, compared to a pre-tax loss of $55.4 million recorded in the ~~pre-tax income for the same~~ quarter ~~of the previous year.~~ended March 31, 2020.

~~137~~121

FINANCIAL CONDITION ANALYSIS

Assets

The Corporation’s total assets were ~~$52.8~~$66.9 billion at March 31, ~~2020,~~2021, compared to ~~$52.1~~$65.9 billion at December 31, ~~2019.~~2020. Refer to the Consolidated Statements of Financial Condition included in this report for additional information.

Money market investments ~~trading~~ and ~~investment~~debt securities available-for-sale

Money market investments ~~totaled $5.9~~remained flat at $11.6 billion at March 31, ~~2020, compared to $3.3 billion at~~2021 and December 31, ~~2019. The increase was mainly due to an increase in deposits and lower investment portfolio balances.~~2020.

Debt securities available-for-sale ~~decreased~~increased by ~~$1.8~~$1.2 billion to ~~$15.8~~$22.8 billion at March 31, ~~2020.~~2021. The ~~decrease~~increase was mainly due to ~~the maturities~~purchases of U.S. treasury securities and ~~paydowns of~~agency mortgage-backed securities, partially offset by ~~purchase of U.S. Treasury securities~~paydowns and a decrease in unrealized gains ~~on the portfolio by $381.8 million mainly driven by the declines~~of $0.4 billion in ~~market rates.~~this portfolio. Refer to Note 65 to the Consolidated Financial Statements for additional information with respect to the Corporation’s debt securities available-for-sale.

Loans

Refer to Table 4 for a breakdown of the Corporation’s loan ~~portfolio, the principal category of earning assets.~~portfolio. Also, refer to Note 87 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~~decreased by $0.3 billion to ~~$ 27.6~~$29.1 billion at March 31, ~~2020~~2021, mainly ~~driven by an by an increase~~ in commercial loans ~~auto loans and lease financing~~at BPPR, in ~~BPPR, an increase in mortgage, commercial and construction loans at PB, partially offset by lower mortgage loans in BPPR.~~part due to the repayments of PPP loans.

The Allowance for credit losses for the loan portfolio increased by $0.4 billion, which includes the impact of the adoption of CECL and reserves resulting from the deterioration in the economic outlook as result of the COVID-19 pandemic. Refer to the Credit Quality section of the MD&A for additional information on the Allowance for credit losses for the loan portfolio.

Table 4 - Loans Ending Balances

(In thousands)

March 31, 2020

December 31, 2019

Variance
Loans held-in-portfolio:

Commercial
$
12,498,969
$
12,312,751
$
186,218
Construction

902,380

831,092

71,288
Legacy^[1]

20,435

22,105

(1,670)
Lease financing

1,088,542

1,059,507

29,035
Mortgage

7,094,757

7,183,532

(88,775)
Auto

2,954,150

2,917,522

36,628
Consumer

3,103,039

3,080,364

22,675
Total loans held-in-portfolio

27,662,272

27,406,873

255,399
Loans held-for-sale:

Commercial

10,679

-

10,679
Mortgage

77,176

59,203

17,973
Total loans held-for-sale

87,855

59,203

28,652
Total loans
$
27,750,127
$
27,466,076
$
284,051
[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the Popular U.S. segment.

Table 4 - Loans Ending Balances
(In thousands)		March 31, 2021		December 31, 2020		Variance
Loans held-in-portfolio:
Commercial	$	13,442,486	$	13,614,310	$	(171,824)
Construction		907,736		926,208		(18,472)
Lease financing		1,244,956		1,197,661		47,295
Mortgage		7,808,852		7,890,680		(81,828)
Auto		3,203,137		3,132,228		70,909
Consumer		2,524,461		2,624,109		(99,648)
Total loans held-in-portfolio		29,131,628		29,385,196		(253,568)
Loans held-for-sale:
Commercial		3,549		2,738		811
Mortgage		80,665		96,717		(16,052)
Total loans held-for-sale		84,214		99,455		(15,241)
Total loans	$	29,215,842	$	29,484,651	$	(268,809)

~~138~~122

Other assets

Other assets amounted to $1.7 billion at March 31, 2021 and December 31, 2020. Refer to Note 1312 for a breakdown of the principal categories that comprise the caption of “Other Assets” in the Consolidated Statements of Financial Condition at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

Liabilities

The Corporation’s total liabilities were ~~$47.1~~$61.0 billion at March 31, ~~2020,~~2021, compared to ~~$46.1~~$59.9 billion at December 31, ~~2019.~~2020, mainly due to increases in deposits as discussed below.

Deposits and Borrowings

The composition of the Corporation’s financing ~~sources~~ to total assets at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 is included in Table 5.

~~139~~

Table 5 - Financing to Total Assets	Table 5 - Financing to Total Assets										Table 5 - Financing to Total Assets
	March 31,		December 31,		% increase (decrease)		% of total assets				March 31,		December 31,		% increase (decrease)		% of total assets
(In millions)		2020		2019	from 2019 to 2020		2020		2019			2021		2020	from 2020 to 2021		2021		2020
Non-interest bearing deposits	$	9,396	$	9,160	2.6	%	17.8	%	17.6	%	$	14,264	$	13,129	8.6	%	21.4	%	19.9	%
Interest-bearing core deposits		29,409		29,610	(0.7)		55.7		56.8			39,328		38,599	1.9		58.8		58.5
Other interest-bearing deposits		5,992		4,988	20.1		11.4		9.6			5,151		5,138	0.3		7.7		7.8
Repurchase agreements		179		193	(7.3)		0.3		0.4			87		121	(28.1)		0.1		0.2
Other short-term borrowings		100		-	N.M.		0.2		-
Notes payable		1,058		1,102	(4.0)		2.0		2.1			1,224		1,225	(0.1)		1.8		1.9
Other liabilities		1,000		1,045	(4.3)		1.9		2.0			919		1,685	(45.5)		1.4		2.6
Stockholders’ equity		5,670		6,017	(5.8)		10.7		11.5			5,897		6,029	(2.2)		8.8		9.1

Deposits

The Corporation’s deposits totaled ~~$44.8~~$58.8 billion at March 31, ~~2020,~~2021, compared to ~~$43.8~~$56.9 billion at December 31, ~~2019.~~2020. The deposits increase of ~~$1.0~~$1.9 billion was mainly due to anhigher retail and commercial demand deposits by $1.6 billion at BPPR and PB and higher savings account deposits at BPPR by $0.3 billion. Public sector deposit balances, which amounted to $15.0 billion at March 31, 2021, are expected to decline over the long term. However, the receipt by the P.R. Government of additional COVID-19-related Federal assistance and seasonal tax collections are likely to increase public deposit balances at BPPR in ~~time deposits from trust accounts~~the near term. The rate at which public deposit balances will decline is uncertain and ~~saving accounts, partially offset~~difficult to predict. The amount and timing of any such reduction is likely to be impacted by, ~~a decrease in~~for example, the timeline of current debt restructuring efforts under Title III of the Puerto Rico ~~public sector deposits.~~Oversight, Management, and Economic Stability Act (“PROMESA”) and the speed at which the COVID-19 federal assistance is distributed. Refer to Table 6 for a breakdown of the Corporation’s deposits at March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

Table 6 - Deposits Ending Balances
(In thousands)
March 31, 2020

December 31, 2019

Variance
Demand deposits^[1]
$
17,023,170

$
16,566,145

$
457,025
Savings, NOW and money market deposits (non-brokered)

18,786,042

19,169,899

(383,857)
Savings, NOW and money market deposits (brokered)

460,140

347,765

112,375
Time deposits (non-brokered)

8,404,525

7,546,621

857,904
Time deposits (brokered CDs)

123,299

128,176

(4,877)
Total deposits
$
44,797,176

$
43,758,606

$
1,038,570
[1]
Includes interest and non-interest bearing demand deposits.

123

Table 6 - Deposits Ending Balances
(In thousands)		March 31, 2021		December 31, 2020		Variance
Demand deposits^[1]		$	23,450,312	$	22,532,729	$	917,583
Savings, NOW and money market deposits (non-brokered)			27,356,136		26,390,565		965,571
Savings, NOW and money market deposits (brokered)			679,832		635,198		44,634
Time deposits (non-brokered)			7,143,221		7,130,749		12,472
Time deposits (brokered CDs)			113,300		177,099		(63,799)
Total deposits		$	58,742,801	$	56,866,340	$	1,876,461
[1]	Includes interest and non-interest bearing demand deposits.

Borrowings

The Corporation’s borrowings remained ~~relatively~~ flat at $1.3 billion at March 31, ~~2020, compared to $1.3 billion at~~2021 and December 31, ~~2019.~~2020. Refer to Note 1615 to the Consolidated Financial Statements for detailed information on the Corporation’s borrowings. Also, refer to the Liquidity section in this MD&A for additional information on the Corporation’s funding sources.

Other liabilities

The Corporation’s other liabilities ~~remained relatively flat at $1.0~~decreased by $0.8 billion to $0.9 billion at March 31, ~~2020,~~2021, when compared to December 31, ~~2019~~2020, mainly due to the settlement of purchases of debt securities.

Stockholders’ Equity

Stockholders’ equity totaled ~~$5.7~~$5.9 billion at March 31, ~~2020,~~2021, a decrease of ~~$347.3~~$131.1 million when compared to December 31, 2020, principally due to the impact of the $500 million accelerated share repurchase transaction, the cumulative effect of $205.8 million related to the adoption of CECL, declared dividends of $35.5 million on common stock, the redemption of $28 million in Series B Preferred Stock and $0.7 million in dividends on preferred stock, partially offset by the net income for the quarter of $34.3 million and an increase oflower accumulated unrealized gains on debt securities available-for-sale by ~~$381.8 million.~~$369.9 million, offset by net income for the quarter of $262.6 million, less declared dividends of $33.7 million on common stock and $0.4 million in dividends on preferred stock. Refer to the Consolidated Statements of Financial Condition, Comprehensive Income and of Changes in Stockholders’ Equity for information on the composition of stockholders’ equity.

~~140~~124

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 March 31, ~~2020,~~2021, the Corporation’s, BPPR’s and PB’s capital ratios continue to exceed the minimum requirements for being “well-capitalized” under the Basel III capital rules.

The risk-based capital ratios presented in Table 7, which include common equity tier 1, Tier 1 capital, total capital and leverage capital as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

Table 7 - Capital Adequacy Data	Table 7 - Capital Adequacy Data							Table 7 - Capital Adequacy Data

(Dollars in thousands)	(Dollars in thousands)		March 31, 2020			December 31, 2019		(Dollars in thousands)		March 31, 2021			December 31, 2020
Common equity tier 1 capital:	Common equity tier 1 capital:							Common equity tier 1 capital:
	Common stockholders equity - GAAP basis	$	5,869,803		$	5,966,619		Common stockholders equity - GAAP basis	$	5,875,416		$	6,006,544
	AOCI related adjustments due to opt-out election		(269,223)			113,155		CECL transitional amount^[1]		191,687			218,398
	Goodwill, net of associated deferred tax liability (DTL)		(595,052)			(596,994)		AOCI related adjustments due to opt-out election		104,053			(261,245)
	Intangible assets, net of associated DTLs		(26,307)			(28,780)		Goodwill, net of associated deferred tax liability (DTL)		(552,614)			(591,931)
	Deferred tax assets and other deductions		(454,994)			(332,763)		Intangible assets, net of associated DTLs		(21,415)			(22,466)
								Deferred tax assets and other deductions		(345,105)			(357,204)
Common equity tier 1 capital	Common equity tier 1 capital	$	4,524,227		$	5,121,237		Common equity tier 1 capital	$	5,252,022		$	4,992,096
Additional tier 1 capital:	Additional tier 1 capital:							Additional tier 1 capital:
	Preferred stock		22,143			50,160
	Other additional tier 1 capital deductions		(22,143)			(50,160)		Preferred stock		22,143			22,143
Additional tier 1 capital	Additional tier 1 capital	$	-		$	-		Additional tier 1 capital	$	22,143		$	22,143
Tier 1 capital	Tier 1 capital	$	4,524,227		$	5,121,237		Tier 1 capital	$	5,274,165		$	5,014,239
Tier 2 capital:	Tier 2 capital:							Tier 2 capital:
	Trust preferred securities subject to phase in as tier 2		373,737			373,737		Trust preferred securities subject to phase in as tier 2		373,737			373,737
	Other inclusions (deductions), net		362,969			363,638		Other inclusions (deductions), net		385,483			385,943
Tier 2 capital	Tier 2 capital	$	736,706		$	737,375		Tier 2 capital	$	759,220		$	759,680
Total risk-based capital	Total risk-based capital	$	5,260,933		$	5,858,612		Total risk-based capital	$	6,033,385		$	5,773,919
Minimum total capital requirement to be well capitalized	Minimum total capital requirement to be well capitalized	$	2,865,296		$	2,884,037		Minimum total capital requirement to be well capitalized	$	3,074,491		$	3,070,209
Excess total capital over minimum well capitalized	Excess total capital over minimum well capitalized	$	2,395,637		$	2,974,575		Excess total capital over minimum well capitalized	$	2,958,894		$	2,703,710
Total risk-weighted assets	Total risk-weighted assets	$	28,652,964		$	28,840,368		Total risk-weighted assets	$	30,744,906		$	30,702,091
Total assets for leverage ratio	Total assets for leverage ratio	$	50,581,606		$	51,057,484		Total assets for leverage ratio	$	65,460,228		$	64,305,022
Risk-based capital ratios:	Risk-based capital ratios:							Risk-based capital ratios:
	Common equity tier 1 capital		15.79	%		17.76	%	Common equity tier 1 capital		17.08	%		16.26	%
	Tier 1 capital		15.79			17.76		Tier 1 capital		17.15			16.33
	Total capital		18.36			20.31		Total capital		19.62			18.81
	Tier 1 leverage		8.94			10.03		Tier 1 leverage		8.06			7.80
[1] The CECL transitional amount includes the impact of Popular's adoption of the new CECL accounting standard on January 1, 2020.								[1] The CECL transitional amount includes the impact of Popular's adoption of the new CECL accounting standard on January 1, 2020.

~~141~~125

The Basel III capital rules provide that a depository institution will be 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%. Management has determined that as of March 31, ~~2020,~~2021, the Corporation, BPPR and PB continue to exceed the minimum requirements for being “well-capitalized” under the Basel III capital rules.

The decrease in the common equity Tier I capital ratio, Tier I capital ratio, total capital ratio, and leverage capital ratio as of March 31, 2020 as compared to December 31, 2019 was mainly attributed to the accelerated share repurchase transaction of $500 million.

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 delays for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay.

~~Simplifications~~On April 9, 2020, federal banking regulators issued an interim final rule to modify the ~~Capital Rule Pursuant~~Basel III regulatory capital rules applicable to banking organizations to allow those organizations participating in the Paycheck Protection Program (“PPP”) established under the Coronavirus Aid, Relief and Economic ~~Growth~~Security Act (the “CARES Act”) to neutralize the regulatory capital effects of participating in the program. Specifically, the agencies have clarified that banking organizations, including the Corporation and ~~Regulatory Paperwork Reduction Act~~its Bank subsidiaries, are permitted to assign a zero percent risk weight to PPP loans for purposes of ~~1996~~determining risk-weighted assets and risk-based capital ratios. Additionally, in order to facilitate use of the Paycheck Protection Program Liquidity Facility (the “PPPL Facility”), which provides Federal Reserve Bank loans to eligible financial institutions such as the Corporation’s Bank subsidiaries to fund PPP loans, the agencies further clarified that, for purposes of determining leverage ratios, a banking organization is permitted to exclude from total average assets PPP loans that have been pledged as collateral for a PPPL Facility. As of March 31, 2021, the Corporation has $1.2 billion in PPP loans and $934 thousand pledged as collateral for PPPL Facilities.

~~On July 9, 2019, the federal banking regulatory agencies issued a final rule that simplified several requirements~~The increase in the ~~agencies' regulatory~~common equity Tier I capital ~~rules. These rules, effective on April 1, 2020, simplify the regulatory~~ratio, Tier I capital ~~requirement for mortgage servicing assets (MSAs), deferred tax assets arising from temporary differences~~ratio, total capital ratio, and ~~investments in the~~leverage capital of unconsolidated financial institutions by raising the CET1 deduction threshold from 10% to 25%. The 15% CET 1 deduction threshold which applies to aggregate amount of such items would be eliminated. The rule also requires, among other changes, increasing from 100% to 250% the risk weight to MSAs and temporary difference deferred tax asset not deducted from capital. For investments in the capital of unconsolidated financial institutions, the risk weight would be based on the exposure category of the investment. As a result of these rules, the Corporation’s risk-based capital ratios are expected to decrease driven by the change in risk weighting. On a pro forma basisratio as of March 31, 2021 as compared to December 31, 2020 was mainly attributed to the ~~impact would have been a reduction of approximately 35 bps.~~three months period earnings.

~~142~~126

Non-GAAP financial measures

The tangible common equity, tangible common equity ratio, tangible assets and tangible book value per common share, which are presented in the table that follows, are non-GAAP measures. Management and many stock analysts use the tangible common equity ratio and tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase accounting method for mergers and acquisitions. Neither tangible common equity nor tangible assets or related measures should be considered in isolation or as a substitute for stockholders' equity, total assets or any other measure calculated in accordance with GAAP. Moreover, the manner in which the Corporation calculates its tangible common equity, tangible assets and any other related measures may differ from that of other companies reporting measures with similar names.

Table 8 provides a reconciliation of total stockholders’ equity to tangible common equity and total assets to tangible assets as of March 31, ~~2020,~~2021, and December 31, ~~2019.~~2020.

Table 8 - Reconciliation of Tangible Common Equity and Tangible Assets	Table 8 - Reconciliation of Tangible Common Equity and Tangible Assets							Table 8 - Reconciliation of Tangible Common Equity and Tangible Assets

(In thousands, except share or per share information)			March 31, 2020			December 31, 2019				March 31, 2021			December 31, 2020
Total stockholders’ equity		$	5,669,605		$	6,016,779			$	5,897,559		$	6,028,687
Less: Preferred stock			(22,143)			(50,160)				(22,143)			(22,143)
Less: Goodwill			(671,122)			(671,122)				(671,122)			(671,122)
Less: Other intangibles			(26,307)			(28,780)				(21,415)			(22,466)
Total tangible common equity		$	4,950,033		$	5,266,717			$	5,182,879		$	5,312,956
Total assets		$	52,803,639		$	52,115,324			$	66,870,268		$	65,926,000
Less: Goodwill			(671,122)			(671,122)				(671,122)			(671,122)
Less: Other intangibles			(26,307)			(28,780)				(21,415)			(22,466)
Total tangible assets		$	52,106,210		$	51,415,422			$	66,177,731		$	65,232,412
Tangible common equity to tangible assets			9.50	%		10.24	%			7.83	%		8.14	%
Common shares outstanding at end of period			88,125,974			95,589,629				84,379,180			84,244,235
Tangible book value per common share		$	56.17		$	55.10			$	61.42		$	63.07


			Quarterly average							Quarterly average
Total stockholders’ equity		$	5,481,179		$	5,887,125
Total stockholders’ equity [1]									$	5,693,672		$	5,540,456
Less: Preferred Stock			(38,768)			(50,160)				(22,143)			(22,143)
Less: Goodwill			(671,121)			(671,121)				(671,121)			(671,121)
Less: Other intangibles			(27,826)			(20,674)				(22,104)			(23,166)
Total tangible common equity		$	4,743,464		$	5,145,170			$	4,978,304		$	4,824,026
Return on average tangible common equity			2.87	%		12.79	%			21.37	%		14.50	%
[1] Average balances exclude unrealized gains or losses on debt securities available-for-sale.								[1] Average balances exclude unrealized gains or losses on debt securities available-for-sale.

~~143~~127

OFF-BALANCE SHEET ARRANGEMENTS AND OTHER COMMITMENTS

In the ordinary course of business, the Corporation engages in financial transactions that are not recorded on the balance sheet, or may be recorded on the balance sheet in amounts that are different than the full contract or notional amount of the transaction. As a provider of financial services, the Corporation routinely enters into commitments with off-balance sheet risk to meet the financial needs of its customers. These commitments may include loan commitments and standby letters of credit. These commitments are subject to the same credit policies and approval process used for on-balance sheet instruments. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial position. Other types of off-balance sheet arrangements that the Corporation enters in the ordinary course of business include derivatives and provision of guarantees, indemnifications, and representation and warranties. Refer to Note 2019 in the Consolidated Financial Statements for a detailed discussion related to the Corporation’s obligations under credit recourse and representation and warranties arrangements.

Contractual Obligations and Commercial Commitments

The Corporation has various financial obligations, including contractual obligations and commercial commitments, which require future cash payments on debt agreements.

As previously indicated, the Corporation also enters into derivative contracts under which it is required either to receive or pay cash, depending on changes in interest rates. These contracts are carried at fair value on the Consolidated Statement of Financial Condition with the fair value representing the net present value of the expected future cash receipts and payments based on market rates of interest as of the statement of condition date. The fair value of the contract changes daily as interest rates change. The Corporation may also be required to post additional collateral on margin calls on the derivatives and repurchase transactions.

Refer to Note 1615 in the Consolidated Financial Statements for a breakdown of long-term borrowings by maturity.

The Corporation utilizes lending-related financial instruments in the normal course of business to accommodate the financial needs of its customers. The Corporation’s exposure to credit losses in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, standby letters of credit and commercial letters of credit is represented by the contractual notional amount of these instruments. The Corporation uses credit procedures and policies in making those commitments and conditional obligations as it does in extending loans to customers. Since many of the commitments expire without being drawn upon or a default occurring, the total contractual amounts are not representative of the Corporation’s actual future credit exposure or liquidity requirements for these commitments.

Table 9 presents the contractual amounts related to the Corporation’s off-balance sheet lending and other activities at March 31, ~~2020.~~2021.

Table 9 - Off-Balance Sheet Lending and Other Activities

Amount of commitment - Expiration Period
(In thousands)

2020
Years 2021 - 2022
Years 2023 - 2024
Years 2025 - thereafter
Total
Commitments to extend credit

$
7,029,956
$
917,392
$
136,231
$
73,666
$
8,157,245
Commercial letters of credit

1,644

-

-

-

1,644
Standby letters of credit

64,322

7,417

-

-

71,739
Commitments to originate or fund mortgage loans

23,700

3,118

-

-

26,818
Total

$
7,119,622
$
927,927
$
136,231
$
73,666
$
8,257,446

~~144~~128

Table 9 - Off-Balance Sheet Lending and Other Activities
		Amount of commitment - Expiration Period
(In thousands)	2021		Years 2022 - 2023		Years 2024 - 2025		Years 2026 - thereafter		Total
Commitments to extend credit	$	8,058,989	$	1,095,191	$	127,309	$	85,643	$	9,367,132
Commercial letters of credit		3,090		-		-		-		3,090
Standby letters of credit		15,757		5,573		-		-		21,330
Commitments to originate or fund mortgage loans		103,634		3,830		-		-		107,464
Total	$	8,181,470	$	1,104,594	$	127,309	$	85,643	$	9,499,016

RISK MANAGEMENT

Market / Interest Rate Risk

The financial results and capital levels of the Corporation are constantly exposed to market, interest rate and liquidity risks.

Market risk refers to the risk of a reduction in the Corporation’s capital due to changes in the market valuation of its assets and/or liabilities.

Most of the assets subject to market valuation risk are debt securities classified as available-for-sale. Refer to Notes 65 and 76 for further information on the debt securities available-for-sale and held-to-maturity portfolios. Debt securities classified as available-for-sale amounted to ~~$15.8~~$22.8 billion as of March 31, ~~2020.~~2021. Other assets subject to market risk include loans held-for-sale, which amounted to ~~$88~~$84 million, mortgage servicing rights (“MSRs”) which amounted to ~~$147~~$123 million and securities classified as “trading”, which amounted to ~~$43~~$37 million, as of March 31, ~~2020.~~2021.

Interest Rate Risk (“IRR”)

The Corporation’s net interest income is subject to various categories of interest rate risk, including repricing, basis, yield curve and option risks. In managing interest rate risk, management may alter the mix of floating and fixed rate assets and liabilities, change pricing schedules, adjust maturities through sales and purchases of investment securities, and enter into derivative contracts, among other alternatives.

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate rate risk position given line of business forecasts, management objectives, market expectations and policy constraints.

Management utilizes various tools to assess IRR, including Net Interest Income (“NII”) simulation modeling, static gap analysis, and Economic Value of Equity (“EVE”). The three methodologies complement each other and are used jointly in the evaluation of the Corporation’s IRR. NII simulation modeling is prepared for a five-year period, which in conjunction with the EVE analysis, provides management a better view of long-term IRR.

Net interest income simulation analysis performed by legal entity and on a consolidated basis is a tool used by the Corporation in estimating the potential change in net interest income resulting from hypothetical changes in interest rates. Sensitivity analysis is calculated using a simulation model which incorporates actual balance sheet figures detailed by maturity and interest yields or costs.

Management assesses interest rate risk by comparing various NII simulations under different interest rate scenarios that differ in direction of interest rate changes, the degree of change and the projected shape of the yield curve. For example, the types of rate scenarios processed during the quarter include flat rates, implied forwards, and parallel and non-parallel rate shocks. Management also performs analyses to isolate and measure basis and prepayment risk exposures.

The asset and liability management group ~~performs~~perform validation procedures on various assumptions used as part of the simulation analyses as well as validations of results on a monthly basis. In addition, the model and processes used to assess IRR are subject to independent validations according to the guidelines established in the Model Governance and Validation policy.

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The Corporation processes NII simulations under interest rate scenarios in which the yield curve is assumed to rise and decline by the same amount (parallel shifts). The rate scenarios considered in these market risk simulations reflect instantaneous parallel changes of -100, -200, +100, +200 and +400 basis points during the succeeding twelve-month period. Simulation analyses are based on many assumptions, including relative levels of market interest rates across all yield curve points and indexes, interest rate spreads, loan prepayments and deposit elasticity. Thus, they should not be relied upon as indicative of actual results. Further, the estimates do not contemplate actions that management could take to respond to changes in interest rates. By their nature, these forward-looking computations are only estimates and may be different from what may actually occur in the future. The following table presents the results of the simulations at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, assuming a static balance sheet and parallel changes over flat spot rates over a one-year time horizon:

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Table 10 - Net Interest Income Sensitivity (One Year Projection)	Table 10 - Net Interest Income Sensitivity (One Year Projection)								Table 10 - Net Interest Income Sensitivity (One Year Projection)
	March 31, 2020					December 31, 2019			March 31, 2021					December 31, 2020
(Dollars in thousands)		Amount Change	Percent Change			Amount Change	Percent Change			Amount Change	Percent Change			Amount Change	Percent Change
Change in interest rate
+400 basis points	$	99,400	5.58	%	$	64,351	3.37	%	$	160,598	8.39	%	$	167,474	9.19	%
+200 basis points		44,817	2.52			32,766	1.72			135,245	7.07			81,690	4.49
+100 basis points		18,382	1.03			16,379	0.86			121,100	6.33			39,361	2.16
-100 basis points		8,411	0.47			(35,213)	(1.84)			(73,283)	(3.83)			(53,952)	(2.96)
-200 basis points		11,141	0.63			(131,874)	(6.91)			(111,000)	(5.80)			(71,517)	(3.93)

During the quarter, the Federal Reserve reduced the Fed Funds Target Rate from 1.75% to 0.25%. For the same period, the U.S. Treasury 10-Year Note decreased from 1.92% to 0.67%. The NII sensitivity to declining rate scenarios decreased notably from the December simulation, primarily related to the actual low rate environment. Rates are now considered to be close to their “lower bound” because we currently assume, in our interest risk models, that rates will not reach negative values. This has the effect of reducing sensitivity in most products given that rates are close to zero in most curve tenors and therefore have little room to fall further in the declining rates scenarios. However, the Corporation’s U.S. operations are expected to benefit from modeled additional decreases in rates as the bank could potentially lower its cost of funds while existing contractual interest rate floors in the loan portfolio contribute to NII improvement. We would expect this “flooring” effect on sensitivity to declining rates to reverse itself if rates were to rise, because it would mean that rates would once again have more room to fall. As of March 31, ~~2020,~~2021, NII simulations show the Corporation ~~continues~~maintains an asset sensitive position and is expected to benefit from an overall rising rate environment. The increases in sensitivity for the period are primarily driven by deposit increases which have increased the level of cash reserves maintained at the Federal Reserve as well as liftoff effects from market rates increasing over the quarter. Popular assumes rates do not turn negative therefore the increase in rates in the quarter impacted declining rate scenarios as rates now have more room to fall and thus increase the projected NII impact (negative) in the declining rate scenarios. The sensitivity to rising rate scenarios increased as well driven by growth in deposits which rose the levels of short-term assets and cash reserves that the Company maintains at the Federal Reserve. These short-term assets reprice immediately in rising rate scenarios thus increasing the NII benefit in these scenarios.

The Corporation’s loan and investment portfolios are subject to prepayment risk, which results from the ability of a third-party to repay debt obligations prior to maturity. Prepayment risk also could have a significant impact on the duration of mortgage-backed securities and collateralized mortgage obligations since prepayments could shorten (or lower prepayments could extend) the weighted average life of these portfolios.

Trading

The Corporation engages in trading activities in the ordinary course of business at its subsidiaries, BPPR and Popular Securities. Popular Securities’ trading activities consist primarily of market-making activities to meet expected customers’ needs related to its retail brokerage business, and purchases and sales of U.S. Government and government sponsored securities with the objective of realizing gains from expected short-term price movements. BPPR’s trading activities consist primarily of holding U.S. Government sponsored mortgage-backed securities classified as “trading” and hedging the related market risk with “TBA” (to-be-announced) market transactions. The objective is to derive spread income from the portfolio and not to benefit from short-term market movements. In addition, BPPR uses forward contracts or TBAs to hedge its securitization pipeline. Risks related to variations in interest rates and market volatility are hedged with TBAs that have characteristics similar to that of the forecasted security and its conversion timeline.

At March 31, 2021 and December 31, 2020, the Corporation held trading securities with a fair value of ~~$43~~$37 million, representing approximately 0.1% of the Corporation’s total ~~assets, compared with $40 million and 0.1%, respectively, at December 31, 2019.~~assets. As shown in Table 11, the trading portfolio consists principally of mortgage-backed securities which at March 31, ~~2020~~2021 were investment grade securities. As of March 31, 2021 and December 31, 2020, the

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trading portfolio also included $0.1 million in Puerto Rico government ~~obligations ($0.6 million as of December 31, 2019).~~obligations. Trading instruments are recognized at fair value, with changes resulting from fluctuations in market prices, interest rates or exchange rates reported in current period earnings. The Corporation recognized a net trading account ~~gain~~loss of ~~$ 491~~$45 thousand for the quarter ended March 31, ~~2020~~2021 and a net trading account gain of ~~$260~~$491 thousand for the quarter ended March 31, ~~2019.~~2020.

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Table 11 - Trading Portfolio
		March 31, 2021				December 31, 2020
(Dollars in thousands)		Amount	Weighted Average Yield^[1]			Amount	Weighted Average Yield^[1]
Mortgage-backed securities	$	24,102	5.06	%	$	24,338	5.19	%
U.S. Treasury securities		11,620	-			11,506	0.04
Collateralized mortgage obligations		316	5.66			346	5.65
Puerto Rico government obligations		94	0.44			103	0.48
Interest-only strips		372	12.00			381	12.00
Total	$	36,504	3.51	%	$	36,674	3.64	%
[1] Not on a taxable equivalent basis.

Table 11 - Trading Portfolio

March 31, 2020

December 31, 2019

(Dollars in thousands)

Amount

Weighted Average Yield^[1]

Amount

Weighted Average Yield^[1]

Mortgage-backed securities
$
38,468

4.48
%
$
28,556

5.28
%
U.S. Treasury securities

1

0.14

7,083

1.22

Collateralized mortgage obligations

543

5.71

606

5.72

Puerto Rico government obligations

109

0.01

633

2.60

Interest-only strips

428

12.00

440

12.05

Other

2,996

2.57

3,003

2.79

Total
$
42,545

4.43
%
$
40,321

4.42
%
[1] Not on a taxable equivalent basis.

The Corporation’s trading activities are limited by internal policies. For each of the two subsidiaries, the market risk assumed under trading activities is measured by the 5-day net value-at-risk (“VAR”), with a confidence level of 99%. The VAR measures the maximum estimated loss that may occur over a 5-day holding period, given a 99% probability.

The Corporation’s trading portfolio had a 5-day VAR of approximately ~~$0.7~~$0.4 million for the last week in March ~~2020.~~2021. There are numerous assumptions and estimates associated with VAR modeling, and actual results could differ from these assumptions and estimates. Backtesting is performed to compare actual results against maximum estimated losses, in order to evaluate model and assumptions accuracy.

In the opinion of management, the size and composition of the trading portfolio does not represent a significant source of market risk for the Corporation.

~~FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS~~

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

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

~~Refer to Note 24 to the Consolidated Financial Statements for information on the Corporation’s fair value measurement required by the applicable accounting standard.~~

A description of the Corporation’s valuation methodologies used for the assets and liabilities measured at fair value is included in Note 30 to the Consolidated Financial Statements in the 2019 Form 10-K. Also, Refer to the Critical Accounting Policies / Estimates in the 2019 Form 10-K for additional information on the accounting guidance and the Corporation’s policies or procedures related to fair value measurements.

~~147~~131

Liquidity

The objective of effective liquidity management is to ensure that the Corporation has sufficient liquidity to meet all of its financial obligations, finance expected future growth, fund planned capital distributions and maintain a reasonable safety margin for cash commitments under both normal and stressed market conditions. The Board of Directors is responsible for establishing the Corporation’s tolerance for liquidity risk, including approving relevant risk limits and policies. The Board of Directors has delegated the monitoring of these risks to the Board’s Risk Management Committee and the Asset/Liability Management Committee. The management of liquidity risk, on a long-term and day-to-day basis, is the responsibility of the Corporate Treasury Division. The Corporation’s Corporate Treasurer is responsible for implementing the policies and procedures approved by the Board of Directors and for monitoring the Corporation’s liquidity position on an ongoing basis. Also, the Corporate Treasury Division coordinates corporate wide liquidity management strategies and activities with the reportable segments, oversees policy breaches and manages the escalation process. The Financial and Operational Risk Management Division is responsible for the independent monitoring and reporting of adherence with established policies.

An institution’s liquidity may be pressured if, for example, it experiences a sudden and unexpected substantial cash outflow due to exogenous events such as the current COVID-19 pandemic, its credit rating is downgraded, or some other event causes counterparties to avoid exposure to the institution. Factors that the Corporation does not control, such as the economic outlook, adverse ratings of its principal markets and regulatory changes, could also affect its ability to obtain funding.

Liquidity is managed by the Corporation at the level of the holding companies that own the banking and non-banking subsidiaries. It is also managed at the level of the banking and non-banking subsidiaries. As further explained below, a principal source of liquidity for the bank holding companies (the “BHCs”) are dividends received from banking and non-banking subsidiaries. The Corporation has adopted policies and limits to monitor more effectively the Corporation’s liquidity position and that of the banking subsidiaries. Additionally, contingency funding plans are used to model various stress events of different magnitudes and affecting different time horizons that assist management in evaluating the size of the liquidity buffers needed if those stress events occur. However, such models may not predict accurately how the market and customers might react to every event, and are dependent on many assumptions.

Deposits, including customer deposits, brokered deposits and public funds deposits, continue to be the most significant source of funds for the Corporation, funding ~~85%~~88% of the Corporation’s total assets at March 31, ~~2020~~2021 and ~~84%~~86% at December 31, ~~2019.~~2020. The ratio of total ending loans to deposits was ~~62%~~50% at March 31, ~~2020,~~2021, compared to ~~63%~~52% at December 31, ~~2019.~~2020. In addition to traditional deposits, the Corporation maintains borrowing arrangements, which amounted to approximately $1.3 billion in outstanding balances at March 31, ~~2020 (December~~2021 and December 31, ~~2019 - $1.3 billion)~~2020. . A detailed description of the Corporation’s borrowings, including their terms, is included in Note 1615 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.

As previously mentioned, during 2020 the Corporation executed actions corresponding to its capital and liquidity strategic plans. These included the $500 million accelerated share repurchase transaction with respect to its common stock and an increase in quarterly common stock dividend from $0.30 per share to $0.40 per share. Refer to additional details of these transactions in the Overview section of this MD&A and Notes 18 - Stockholders Equity and Note 26 - Net Income Per Common Share.

The following sections provide further information on the Corporation’s major funding activities and needs, as well as the risks involved in these activities. ~~Note~~ 34 to the Consolidated Financial Statements provides consolidating statements of condition, of operations and of cash flows which separately presents the Corporation’s bank holding companies and its subsidiaries as part of the “All other subsidiaries and eliminations” column.

Banking Subsidiaries

Primary sources of funding for the Corporation’s banking subsidiaries (BPPR and PB or, collectively, “the banking subsidiaries”) include retail, commercial and public sector deposits, brokered deposits, unpledged investment securities, mortgage loan securitization and, to a lesser extent, loan sales. In addition, the Corporation maintains borrowing facilities with the FHLB and at the discount window of the Federal Reserve Bank of New York (the “FRB”), and has a considerable amount of collateral pledged that can be used to raise funds under these facilities.

Refer to Note 1615 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

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expenses. Also, the banking subsidiaries assume liquidity risk related to collateral posting requirements for certain activities mainly in connection with contractual commitments, recourse provisions, servicing advances, derivatives, credit card licensing agreements and support to several mutual funds administered by BPPR.

The banking subsidiaries maintain sufficient funding capacity to address large increases in funding requirements such as deposit outflows. The Corporation has established liquidity guidelines that require the banking subsidiaries to have sufficient liquidity to cover all short-term borrowings and a portion of deposits.

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The Corporation’s ability to compete successfully in the marketplace for deposits, excluding brokered deposits, depends on various factors, including pricing, service, convenience and financial stability as reflected by operating results, credit ratings (by nationally recognized credit rating agencies), and importantly, FDIC deposit insurance. Although a downgrade in the credit ratings of the Corporation’s banking subsidiaries may impact their ability to raise retail and commercial deposits or the rate that it is required to pay on such deposits, management does not believe that the impact should be material. Deposits at all of the Corporation’s banking subsidiaries are federally insured (subject to FDIC limits) and this is expected to mitigate the potential effect of a downgrade in the credit ratings.

Deposits are a key source of funding as they tend to be less volatile than institutional borrowings and their cost is less sensitive to changes in market rates. Refer to Table 6 for a breakdown of deposits by major types. Core deposits are generated from a large base of consumer, corporate and public sector customers. Core deposits include all non-interest bearing deposits, savings deposits and certificates of deposit under $100,000, excluding brokered deposits with denominations under $100,000. Core deposits have historically provided the Corporation with a sizable source of relatively stable and low-cost funds. Core deposits totaled $ ~~38.8~~53.6 billion, or ~~87%~~91% of total deposits, at March 31, ~~2020~~2021, compared with ~~$38.8~~$51.7 billion, or ~~89%~~91% of total deposits, at December 31, ~~2019~~2020. Core deposits financed ~~78%~~84% of the Corporation’s earning assets at March 31, ~~2020,~~2021, compared with ~~80%~~82% at December 31, ~~2019~~2020.

The distribution by maturity of certificates of deposits with denominations of $100,000 and over at March 31, ~~2020~~2021 is presented in the table that follows:

Table 12 - Distribution by Maturity of Certificate of Deposits of $100,000 and Over
(In thousands)
3 months or less	$	2,965,301	$	2,433,443
3 to 6 months		430,290		238,091
6 to 12 months		748,086		545,054
Over 12 months		1,295,797		1,162,724
Total	$	5,439,474	$	4,379,312

The Corporation had $ ~~0.6~~0.8 billion in brokered deposits at March 31, ~~2020~~2021, which financed approximately 1% of its total assets (December 31, ~~2019~~2020 - ~~$0.5~~$0.8 billion and 1%, respectively). In the event that any of the Corporation’s banking subsidiaries’ regulatory capital ratios fall below those required by a well-capitalized institution or are subject to capital restrictions by the regulators, that banking subsidiary faces the risk of not being able to raise or maintain brokered deposits and faces limitations on the rate paid on deposits, which may hinder the Corporation’s ability to effectively compete in its retail markets and could affect its deposit raising efforts.

Deposits from the public sector represent an important source of funds for the ~~Company.~~Corporation. As of March 31, ~~2020,~~2021, total public sector deposits were ~~$10.4 billion.~~$15.0 billion, compared to $15.1 billion at December 31, 2020. Generally, these deposits require that the bank pledge high credit quality securities as collateral; therefore liquidity risks arising from public sector deposit outflows are lower given that the bank receives its collateral in return. ~~However, there are some timing differences between the time the deposit outflow happens and when the bank receives its collateral.~~ This, now unpledged, collateral can either be financed via repurchase agreements or sold for cash. However, there are some timing differences between the time the deposit outflow occurs and when the bank receives its collateral.

At March 31, ~~2020~~2021, management believes that the banking subsidiaries had sufficient current and projected liquidity sources to meet their anticipated cash flow obligations, as well as special needs and off-balance sheet commitments, in the ordinary course of business and have sufficient liquidity resources to address a stress event. Although the banking subsidiaries have historically been able to replace maturing deposits and advances, no assurance can be given that they would be able to replace those funds in the future if the Corporation’s financial condition or general market conditions were to deteriorate. The Corporation’s financial flexibility will be severely constrained if ~~its~~the banking subsidiaries are unable to maintain access to funding or if adequate financing is not

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available to accommodate future financing needs at acceptable interest rates. The banking subsidiaries also are required to deposit cash or qualifying securities to meet margin requirements. To the extent that the value of securities previously pledged as collateral declines because of market changes, the Corporation will be required to deposit additional cash or securities to meet its margin requirements, thereby adversely affecting its liquidity. Finally, if management is required to rely more heavily on more expensive funding sources to meet its future growth, revenues may not increase proportionately to cover costs. In this case, profitability would be adversely affected.

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Bank Holding Companies

The principal sources of funding for the BHCs, which are Popular, Inc. (holding company only) and PNA, include cash on hand, investment securities, dividends received from banking and non-banking subsidiaries, asset sales, credit facilities available from affiliate banking subsidiaries and proceeds from potential securities offerings. Dividends from banking and non-banking subsidiaries are subject to various regulatory limits and authorization requirements that are further described below and that may limit the ability of those subsidiaries to act as a source of funding to the BHCs.

The principal use of these funds includes the repayment of debt, and interest payments to holders of senior debt and junior subordinated deferrable interest (related to trust preferred securities), the payment of dividends to common ~~stock holders~~stockholders and capitalizing its banking subsidiaries.

The BHCs have in the past borrowed in the money markets and in the corporate debt market primarily to finance their non-banking ~~subsidiaries,~~subsidiaries; however, the cash needs of the Corporation’s non-banking subsidiaries other than to repay indebtedness and interest are now minimal. These sources of funding have become more costly due to the Corporation’s ~~below “investment grade” credit ratings. The Corporation’s~~ principal credit ~~ratings are~~rating being below “investment grade”, which affects the Corporation’s ability to raise funds in the capital markets. The Corporation has an automatic shelf registration statement filed and effective with the Securities and Exchange Commission, which permits the Corporation to issue an unspecified amount of debt or equity securities.

The outstanding balance of notes payable at the BHCs amounted to ~~$681~~$682 million at March 31, ~~2020~~2021 and ~~$680 million at~~ December 31, ~~2019~~2020.

The contractual maturities of the BHCs notes payable at March 31, ~~2020~~2021 are presented in Table 13.

Table 13 - Distribution of BHC's Notes Payable by Contractual Maturity

Year		(In thousands)		(In thousands)
2023		295,624	$	296,891
Later years		384,909		384,936
Total	$	680,533	$	681,827

Annual debt service at the BHCs is approximately $44 million, ~~per annum,~~ and the ~~Company’s~~Corporation’s latest quarterly dividend was $0.40 per share. The BHCs liquidity position continues to be adequate with sufficient cash on hand, investments and other sources of liquidity which are expected to be enough to meet all BHCs obligations during the foreseeable future. As of March 31, ~~2020,~~2021, the BHCs had cash and money markets investments totaling ~~$301~~$150 million, borrowing potential of ~~$184~~$152 million from its secured facility with BPPR. In addition to these liquidity sources, the stake in EVERTEC had a market value of ~~$265~~$434 million as of March 31, ~~2020,~~2021 and it represents an additional source of contingent liquidity.

~~Non-banking subsidiaries~~Non-Banking Subsidiaries

The principal sources of funding for the non-banking subsidiaries include internally generated cash flows from operations, loan sales, repurchase agreements, capital injections and borrowed funds from their direct parent companies or the holding companies. The principal uses of funds for the non-banking subsidiaries include repayment of maturing debt, operational expenses and payment of dividends to the BHCs. The liquidity needs of the non-banking subsidiaries are minimal since most of them are funded internally from operating cash flows or from intercompany borrowings or capital contributions from their holding companies.

Dividends

During the quarter ended March 31, ~~2020,~~2021, the Corporation declared quarterly dividends on its outstanding common stock of $0.40 per share, for a year-to-date total of $ ~~35.5~~33.8 million. The dividends for the Corporation’s Series A ~~and Series B~~ preferred stock

~~150~~

amounted to ~~$0.7~~$0.4 million. ~~On February 24, 2020, the Corporation redeemed all the outstanding shares of 2008 Series B Preferred Stock. Refer to Note 18 for additional information.~~ During the quarter ended March 31, ~~2020,~~2021, the BHC’s received dividends amounting to ~~$578 million from BPPR and~~ $2 million in dividends from its non-banking subsidiaries. Dividends from BPPR constitute Popular, Inc.’s primary source of liquidity. On May 6, 2021, the Corporation’s Board of Directors approved a quarterly cash dividend of $0.45 per share on its outstanding common stock. The dividend will be payable on July 1, 2021 to shareholders of record at the close of business on May 26, 2021. On May 3, 2021, the Corporation announced that it had entered into an accelerated share repurchase agreement (the “ASR Agreement”) to repurchase an aggregate of $350 million of Popular’s common stock. Refer to Note 17 to the Consolidated financial statements for additional information of the ASR.

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Other Funding Sources and Capital

The debt securities portfolio provides an additional source of liquidity, which may be realized through either securities sales or repurchase agreements. The Corporation’s debt securities portfolio consists primarily of liquid U.S. government debt securities, U.S. government sponsored agency debt securities, U.S. government sponsored agency mortgage-backed securities, and U.S. government sponsored agency collateralized mortgage obligations that can be used to raise funds in the repo markets. The availability of the repurchase agreement would be subject to having sufficient unpledged collateral available at the time the transactions are to be consummated, in addition to overall liquidity and risk appetite of the various counterparties. The Corporation’s unpledged debt securities amounted to ~~$2.9~~$5.6 billion at March 31, ~~2020~~2021 and ~~$5.4~~$3.4 billion at December 31, ~~2019.~~2020. A substantial portion of these debt securities could be used to raise financing in the U.S. money markets or from secured lending sources.

Additional liquidity may be provided through loan maturities, prepayments and sales. The loan portfolio can also be used to obtain funding in the capital markets. In particular, mortgage loans and some types of consumer loans, have secondary markets which the Corporation could use.

Financial information of guarantor and issuers of registered guaranteed securities

The Corporation (not including any of its subsidiaries, “PIHC”) is the parent holding company of Popular North America “PNA” and has other subsidiaries through which it conducts its financial services operations. PNA is an operating, 100% subsidiary of Popular, Inc. Holding Company (“PIHC”) and is the holding company of its wholly-owned subsidiaries: Equity One, Inc. and Popular Bank, including Popular Bank’s wholly-owned subsidiaries Popular Equipment Finance, Inc., Popular Insurance Agency, U.S.A., and E-LOAN, Inc.

PNA has issued junior subordinated debentures guaranteed by PIHC (together with PNA, the “obligor group”) purchased by statutory trusts established by the Corporation. These debentures were purchased by the statutory trust using the proceeds from trust preferred securities issued to the public (referred to as “capital securities”), together with the proceeds of the related issuances of common securities of the trusts.

PIHC fully and unconditionally guarantees the junior subordinated debentures issued by PNA. PIHC’s obligation to make a guarantee payment may be satisfied by direct payment of the required amounts to the holders of the applicable capital securities or by causing the applicable trust to pay such amounts to such holders. Each guarantee does not apply to any payment of distributions by the applicable trust except to the extent such trust has funds available for such payments. If PIHC does not make interest payments on the debentures held by such trust, such trust will not pay distributions on the applicable capital securities and will not have funds available for such payments. PIHC’s guarantee of PNA’s junior subordinated debentures is unsecured and ranks subordinate and junior in right of payment to all the PIHC’s other liabilities in the same manner as the applicable debentures as set forth in the applicable indentures; and equally with all other guarantees that the PIHC issues. The guarantee constitutes a guarantee of payment and not of collection, which means that the guaranteed party may sue the guarantor to enforce its rights under the respective guarantee without suing any other person or entity.

The principal sources of funding for PIHC and PNA have included dividends received from their banking and non-banking subsidiaries, asset sales and proceeds from the issuance of debt and equity. As further described below, in the Risk to Liquidity section, various statutory provisions limit the amount of dividends an insured depository institution may pay to its holding company without regulatory approval.

The following summarized financial information presents the financial position of the obligor group, on a combined basis at March 31, 2021 and December 31, 2020, and the results of their operations for the period ended March 31, 2021. Investments in and equity in the earnings from the other subsidiaries and affiliates that are not members of the obligor group have been excluded.

The summarized financial information of the obligor group is presented on a combined basis with intercompany balances and transactions between entities in the obligor group eliminated. The obligor group's amounts due from, amounts due to and transactions with subsidiaries and affiliates have been presented in separate line items, if they are material. In addition, related parties transactions are presented separately.

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Table 14 - Summarized Statement of Condition

(In thousands)		March 31, 2021		December 31, 2020
Assets
Cash and money market investments	$	149,639	$	190,830
Investment securities		30,170		27,630
Accounts receivables from non-obligor subsidiaries		20,973		16,338
Accounts receivables from affiliates and related parties		583		-
Other loans (net of allowance for credit losses of $167)		31,152		31,162
Investment in equity method investees		94,672		88,272
Other assets		45,237		46,547
Total assets	$	372,426	$	400,779
Liabilities and Stockholders' deficit
Accounts payable to non-obligor subsidiaries	$	6,511	$	3,946
Accounts payable to affiliates and related parties		982		977
Notes payable		681,827		681,503
Other liabilities		78,646		79,208
Stockholders' deficit		(395,540)		(364,855)
Total liabilities and stockholders' deficit	$	372,426	$	400,779

Table 15 - Summarized Statement of Operations

				For the quarter ended
(In thousands)				March 31, 2021
Income:
Dividends from non-obligor subsidiaries			$	2,000
Interest income from non-obligor subsidiaries and affiliates				192
Earnings from investments in equity method investees				6,465
Other operating income				908
Total income			$	9,565
Expenses:
Services provided by non-obligor subsidiaries and affiliates (net of reimbursement by subsidiaries for services provided by parent of ($41,438))			$	2,825
Other operating expenses				8,701
Total expenses			$	11,526
Net income			$	(1,961)

The Obligor group recorded $0.6 million of dividend receivable from its direct equity method investees for the quarter ended March 31, 2021.

Risks to Liquidity

Total lines of credit outstanding are not necessarily a measure of the total credit available on a continuing basis. Some of these lines could be subject to collateral requirements, standards of creditworthiness, leverage ratios and other regulatory requirements, among other factors. Derivatives, such as those embedded in long-term repurchase transactions or interest rate swaps, and off-balance sheet exposures, such as recourse, performance bonds or credit card arrangements, are subject to collateral requirements. As their fair value increases, the collateral requirements may increase, thereby reducing the balance of unpledged securities.

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The importance of the Puerto Rico market for the Corporation is an additional risk factor that could affect its financing activities. In the case of a deterioration in economic and fiscal conditions in Puerto Rico, the credit quality of the Corporation could be affected and result in higher credit costs. ~~The Puerto Rico economy continues to face various challenges, including significant pressures in some sectors of the residential real estate market.~~ Refer to the Geographic and Government Risk section of this MD&A for some highlights on the current status of the Puerto Rico economy and the ongoing fiscal crisis.

Factors that the Corporation does not control, such as the economic outlook and credit ratings of its principal markets and regulatory changes, could also affect its ability to obtain funding. In order to prepare for the possibility of such scenario, management has adopted contingency plans for raising financing under stress scenarios when important sources of funds that are usually fully available are temporarily unavailable. These plans call for using alternate funding mechanisms, such as the pledging of certain asset classes and accessing secured credit lines and loan facilities put in place with the FHLB and the FRB.

The credit ratings of Popular’s debt obligations are a relevant factor for liquidity because they impact the Corporation’s ability to borrow in the capital markets, its cost and access to funding sources. Credit ratings are based on the financial strength, credit quality and concentrations in the loan portfolio, the level and volatility of earnings, capital adequacy, the quality of management, geographic concentration in Puerto Rico, the liquidity of the balance sheet, the availability of a significant base of core retail and commercial deposits, and the Corporation’s ability to access a broad array of wholesale funding sources, among other factors.

Furthermore, various statutory provisions limit the amount of dividends an insured depository institution may pay to its holding company without regulatory approval. A member bank must obtain the approval of the Federal Reserve Board for any dividend, if the total of all dividends declared by the member bank during the calendar year would exceed the total of its net income for that year, combined with its retained net income for the preceding two years, less any required transfers to surplus or to a fund for the retirement of any preferred stock. In addition, a member bank may not declare or pay a dividend in an amount greater than its undivided profits as reported in its Report of Condition and Income, unless the member bank has received the approval of the Federal Reserve Board. A member bank also may not permit any portion of its permanent capital to be withdrawn unless the withdrawal has been approved by the Federal Reserve Board. Pursuant to these requirements, PB may not declare or pay a dividend without the prior approval of the Federal Reserve Board orand the NYSDFS. The ability of a bank subsidiary to up-stream dividends to its BHC could thus be impacted by its financial performance, thus potentially limiting the amount of cash moving up to the BHCs from the banking subsidiaries. This could, in turn, affect the BHCs ability to declare dividends on its outstanding common and preferred stock, for example. ~~Popular, Inc. received $578 million in dividends from BPPR during the quarter ended March 31,~~

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~~2020 and its ability to continue receiving dividends from BPPR will depend on such banking subsidiary’s financial condition and results of operation.~~

The Corporation’s banking subsidiaries have historically not used unsecured capital market borrowings to finance its operations, and therefore are less sensitive to the level and changes in the Corporation’s overall credit ratings.

Obligations Subject to Rating Triggers or Collateral Requirements

The Corporation’s banking subsidiaries currently do not use borrowings that are rated by the major rating agencies, as these banking subsidiaries are funded primarily with deposits and secured borrowings. The banking subsidiaries had $9 million in deposits at March 31, ~~2020~~2021 that are subject to rating triggers.

In addition, certain mortgage servicing and custodial agreements that BPPR has with third parties include rating covenants. In the event of a credit rating downgrade, the third parties have the right to require the institution to engage a substitute cash custodian for escrow deposits and/or increase collateral levels securing the recourse obligations. Also, as discussed in Note 2019 to the Consolidated Financial Statements, the Corporation services residential mortgage loans subject to credit recourse provisions. Certain contractual agreements require the Corporation to post collateral to secure such recourse obligations if the institution’s required credit ratings are not maintained. Collateral pledged by the Corporation to secure recourse obligations amounted to approximately ~~$64~~$43 million at March 31, ~~2020.~~2021. The Corporation could be required to post additional collateral under the agreements. Management expects that it would be able to meet additional collateral requirements if and when needed. The requirements to post collateral under certain agreements or the loss of escrow deposits could reduce the Corporation’s liquidity resources and impact its operating results.

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Credit Risk

Geographic and Government Risk

The Corporation is exposed to geographic and government risk. The Corporation’s assets and revenue composition by geographical area and by business segment reporting are presented in Note 33 to the Consolidated Financial Statements.

Commonwealth of Puerto Rico

A significant portion of our financial activities and credit exposure is concentrated in the Commonwealth of Puerto Rico (the “Commonwealth” or “Puerto Rico”), which faces severe economic and fiscal challenges.

COVID-19 Pandemic

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

In Puerto Rico, ~~the~~former Governor Wanda Vázquez issued an executive order onin March ~~15,~~ 2020 declaring a health emergency, ordering residents to shelter in place, implementing a mandatory curfew, and requiring the closure of ~~all businesses, except for businesses that provide essential services, including banking and financial institutions with respect to certain services. Certain~~non-essential businesses. While many of the restrictions ~~were eased~~have been gradually lifted, a mandatory curfew is still in effect and most businesses have had to make significant adjustments to protect customers and employees, including transitioning to telework and suspending or modifying certain operations in compliance with health and safety guidelines. The Puerto Rico Legislative Assembly enacted legislation in April 2020 requiring financial institutions to offer moratoriums on consumer financial products to clients impacted by the COVID-19 pandemic, which was effective ~~on May 4, 2020, and~~through August 2020. The Federal Government has also approved several economic stimulus measures that seek to cushion the ~~government announced that,if the island continues to exhibit progress with respect to the containment~~economic fallout of the pandemic, ~~it expects~~including providing direct subsidies, expanding eligibility for and increasing unemployment benefits and guaranteeing through the Small Business Administration’s Paycheck Protection Program (the “PPP”) loans to ~~implement additional changes to gradually allow for the opening of additional businesses~~small and industries in the upcoming weeks. However, significant restrictions on non-essential business activities remain and many businesses, including retail establishments, remain closed or are operating partially.medium businesses.

The COVID-19 pandemic and the restrictions imposed to curb the spread of the disease have had and may continue to have a material adverse effect on economic activity worldwide, including in Puerto Rico. The extent to which the COVID-19 pandemic will continue ~~to have an adverse effect on~~adversely affect economic activity ~~in Puerto Rico in the medium- and long-term~~ will depend on future developments, which are highly uncertain and ~~cannot be predicted,~~difficult to predict, including the scope and duration of the pandemic, ~~and of~~ the restrictions imposed by governmental authorities and other third parties in response to the ~~same. However, at least in~~same, the ~~short-term, the COVID-19 pandemic~~pace of global vaccination efforts, and the ~~actions taken by governments in response~~amount of federal and local assistance offered to offset the impact of the pandemic. Pursuant to the ~~same~~2021 Fiscal Plan (as defined below), economic stimulus measures have ~~had a material adverse effect on~~more than offset the estimated income loss due to reduced economic activity ~~worldwide, including~~ in Puerto Rico and are estimated to have caused a temporary increase in personal income on a net basis. However, there can be no assurance that these measures ~~taken by governmental authorities~~ will be sufficient to offset the pandemic’s economic ~~impact. In response to~~impact in the pandemic, the Puerto Rico Legislative Assembly has enacted legislation requiring financial institutions to offer moratoriums through June 2020 on consumer financial products to clients impacted by the COVID-19 pandemic. Bills under the consideration of the Legislative Assembly propose to further extend the terms of such moratoriums beyond June 2020. These moratoriums could, among other things, limit our ability to determine the impact of the COVID-19 pandemic on the financial condition of certain of our customersmedium- and ~~the credit quality of our loan portfolio until borrowers that have benefited from such moratoriums are required to resume loan repayments.~~

long-term.

For a discussion of the impact of the pandemic on the Corporation’s operations and financial results during the first quarter of ~~2020,~~2021, refer to the MD&A Significant Events section, on the accompanying financial statements. For additional discussion of risk factors related to the impact of the pandemic, see “Part I – Item 1A ~~of this report and,~~– Risk Factors” in the Corporation’s Form 10-K for ~~information regarding~~ the ~~projections of the 2020 Proposed Fiscal Plan (defined below) regarding the impact of the pandemic, see Fiscal Plans,~~ ~~Commonwealth Fiscal Plan, below.~~

year ended December 31, 2020.

Economic Performance

The Commonwealth’s economy entered a recession in the fourth quarter of fiscal year 2006 and its gross national product (“GNP”) ~~has~~ contracted (in real terms) every fiscal year between 2007 and 2018, with the exception of fiscal year 2012. Pursuant to the latest Puerto Rico Planning Board (the “Planning Board”) estimates, ~~published in July 2019,~~dated March 2021, the Commonwealth’s real GNP ~~for fiscal years 2017 and 2018 decreased~~increased by ~~3% and 4.7%, respectively. The Planning Board’s report also projected an increase in real GNP of approximately 2% and 3.6%~~1.8% in fiscal ~~years~~year 2019 ~~and 2020, respectively, in part~~ due to the influx of federal funds and private insurance payments to repair damage caused by Hurricanes Irma and María. ~~The~~However, the Planning ~~Board’s projections for~~Board estimates that the Commonwealth’s real GNP decreased by approximately 3.2% in fiscal year 2020 ~~however, do not account for~~due primarily to the adverse impact of the COVID-19 pandemic orand the ~~recent seismic activity, discussed below, on~~measures taken by the government in response

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~~Commonwealth’s economy. For information regarding~~to the ~~economic projections~~same. Finally, the Planning Board projects that the negative effects of COVID-19 will continue through the ~~Commonwealth Fiscal Plans (defined below), see Fiscal Plans,~~ ~~Commonwealth Fiscal Plan, below.~~

current fiscal year, resulting in a contraction in real GNP of approximately -2%.

Fiscal Crisis

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

~~Recent Seismic Activity~~

On January 7, 2020, Puerto Rico was struck by a magnitude 6.4 earthquake, which caused island-wide power outages and significant damage to infrastructure and property in the southwest region of the island. The 6.4 earthquake was preceded by foreshocks and followed by aftershocks. Pursuant to the 2020 Proposed Fiscal Plan, the damages caused by the earthquake and aftershocks are preliminarily estimated to be approximately $1 billion, and the figure may increase as inspections continue in the most affected municipalities.

PROMESA

PROMESA, among other things, created a seven-member federally-appointed oversight board (the “Oversight Board”) with ample powers over the fiscal and economic affairs of the Commonwealth, its public corporations, instrumentalities and municipalities and established two mechanisms for the restructuring of the obligations of such entities. Pursuant to PROMESA, the Oversight Board will remain in place until market access is restored and balanced budgets, in accordance with modified accrual accounting, are produced for at least four consecutive years. In August 2016, President Obama appointed the seven voting members of the Oversight Board through the process established in PROMESA, which ~~authorized~~authorizes the President to select the members from several lists required to be submitted by congressional ~~leaders. The constitutionality of such appointments, however, is currently being challenged before~~leaders and which process was recently upheld by the U.S. Supreme Court.

The terms of the original Oversight Board members expired in August 2019, but PROMESA allows members to remain in their roles until their successors have been appointed. All of the original members continued to serve on the Oversight Board on holdover status until 2020, when President Donald Trump reappointed three of the original members and appointed four new members to the Oversight Board.

In October 2016, the Oversight Board designated the Commonwealth and all of its public corporations and instrumentalities as “covered entities” under PROMESA. The only Commonwealth government entities that were not subject to such initial designation were the Commonwealth’s municipalities. In May 2019, however, the Oversight Board designated all of the Commonwealth’s municipalities as covered entities. At the Oversight Board’s request, covered entities are required to submit fiscal plans and annual budgets to the Oversight Board for its review and approval. They are also required to seek Oversight Board approval to issue, guarantee or modify their debts and to enter into contracts with an aggregate value of $10 million or more. Finally, covered entities are potentially eligible to avail themselves of the debt restructuring processes provided by PROMESA.

Fiscal Plans

Commonwealth Fiscal Plan. The Oversight Board has certified several ~~versions of~~ fiscal plans for the Commonwealth since 2017. The most recent fiscal plan for the Commonwealth certified by the Oversight Board is dated ~~as of May 9, 2019~~April 23, 2021 (the ~~“2019~~“2021 Fiscal Plan”). ~~However, on May 3, 2020, the Government submitted~~

Pursuant to the ~~Oversight Board a further revised fiscal plan (the “Proposed 2020 Fiscal Plan” and, together with the 2019~~2021 Fiscal Plan, while the “Commonwealth Fiscal Plans”). The Proposed 2020 Fiscal Plan, which has not been certified by the Oversight Board, includes updated projections that account for the impact of the recent seismic activity, discussed below,COVID-19 pandemic and the ~~COVID-19 pandemic. It recognizes, however, that there is considerable uncertainty surrounding~~measures taken in response to the ~~progression~~same severely reduced economic activity and caused an unprecedented increase in unemployment in Puerto Rico, pandemic-related federal and local stimulus funding have more than offset the estimated income loss due to reduced economic activity and are estimated to have caused a temporary increase in personal income on a net basis. The 2021 Fiscal Plan’s economic projections incorporate adjustments for these short-term income effects for purposes of estimating tax receipts. For example, the ~~pandemic and, therefore, the plan’s economic projections.~~

~~The 2020 Proposed~~2021 Fiscal Plan estimates that ~~Hurricane María caused a real decline in GNP of 4.7% in fiscal year 2018, followed by an increase in~~ real GNP ~~of 1.5% in fiscal year 2019, fueled~~contracted by ~~disaster relief spending (the 2019 Fiscal Plan had projected real~~

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GNP growth of approximately 4% in fiscal year 2019). Taking into account the adverse impact of the COVID-19 pandemic, the Proposed 2020 Fiscal Plan estimates the Commonwealth’s real GNP will contract 3.6%3% in fiscal year 2020, ~~and 7.8% in fiscal year 2021 (the 2019 Fiscal Plan had estimated real~~but estimates the GNP ~~growth of~~contraction adjusted for short-term income effects to have been approximately ~~1.5% in~~1.1%. For fiscal years ~~2020~~2021 and ~~real GNP contraction contraction of -0.9% in fiscal year 2021).~~

~~Beginning in fiscal year~~2022, the 2021 ~~the 2020 Proposed~~ Fiscal Plan projects that ~~the unfavorable impact of the COVID-19 pandemic on the Puerto Rico economy~~real GNP will ~~result in pre-contractual debt service deficit of -$708 million. An annual deficit is forecasted to continue through fiscal year 2023, as~~grow 1% and 0.6%, respectively, but projects that growth ~~rebounds but the impact of COVID-19 lingers. From fiscal year 2024 through 2029, the 2020 Proposed~~adjusted for income effects for such years will be approximately 3.8% and 1.5%, respectively.

The 2021 Fiscal Plan projects that, ~~Puerto Rico will achieve an annual surplus as~~if the ~~impact of COVID-19 diminishes and there is nominal GNP growth averaging 1.5% per year. However, even after~~ fiscal measures and structural reforms contemplated by the plan are not successfully implemented, the ~~plan projects that there~~Commonwealth will ~~be an annual~~have a pre-contractual debt service deficit starting in fiscal year ~~2030~~2023. It estimates that the fiscal measures could drive approximately $10 billion in savings and ~~lasting~~extra revenue over fiscal years 2022 through 2026 and that the structural reforms could drive a cumulative 0.90% increase in growth by fiscal year ~~2039.~~2051 (equal to approximately $30.7 billion).

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However, even after the fiscal measures and structural reforms, and before contractual debt service, the 2021 Fiscal Plan projects that there will be an annual deficit starting in fiscal year 2036.

The ~~Commonwealth~~2021 Fiscal ~~Plans provide~~Plan provides for the gradual reduction and the ultimate elimination of Commonwealth budgetary subsidies to municipalities, which constitute a material portion of the operating revenues of ~~certain~~some municipalities. Since fiscal year 2017, Commonwealth appropriations to municipalities have ~~been reduced~~decreased by approximately 64% (from approximately $370 million in fiscal year 2017 to approximately $132 million in fiscal year 2020). ~~The~~In response to the COVID-19 crisis, reductions in appropriations to municipalities were paused in fiscal year 2021. Municipalities have also received extraordinary appropriations and other funds from federally-funded programs during the current fiscal year, which has helped temporarily offset the impact of the reduced Commonwealth support. However, the 2021 Fiscal ~~Plans contemplate~~Plan contemplates additional reductions in appropriations to municipalities ~~every fiscal year, holding appropriations constant at $112 million~~ starting in fiscal year ~~2022. The 2019 Fiscal Plan proposes to phase~~2022, before eventually phasing out all appropriations ~~to municipalities~~ in fiscal year ~~2024, whereas~~2025. Further, while the ~~2020 Proposed Fiscal Plan proposes~~Commonwealth had enacted legislation in 2019 suspending the municipality’s obligations to ~~delay~~contribute to the Commonwealth’s health plan and pay-as-you go retirement system, such ~~phase out until fiscal year 2026. The 2020 Proposed~~legislation was challenged by the Oversight Board and eventually declared null by the Title III court in April 2020. As a result, municipalities are required to cover their own employees’ healthcare costs and retirement benefits and had to reimburse the Commonwealth for such costs corresponding to the period during which the law in effect. Finally, the 2021 Fiscal Plan notes that ~~the challenges already faced by~~ municipalities ~~combined with the impact~~have made little or no progress towards implementing fiscal discipline required to reduce reliance on Commonwealth appropriations and that this lack of ~~the recent court’s decision regarding Act 29-2019 (discussed below under “PROMESA Adversary Proceeding”) and the COVID-19 emergency, threaten~~fiscal management threatens the ability of municipalities to provide necessary services, ~~to their residents~~ such as health, sanitation, public safety, and emergency services ~~and may force municipalities~~ to ~~make difficult decisions in prioritizing obligations.~~their residents, forcing them to prioritize expenditures.

Other Fiscal Plans. Pursuant to PROMESA, the Oversight Board has also requested and certified fiscal plans for several public corporations and instrumentalities. ~~Such plans conclude that such entities cannot afford to meet all of their contractual obligations as currently scheduled.~~ The certified fiscal plan for the Puerto Rico Electric Power Authority (“PREPA”), Puerto Rico’s electric power utility, ~~contemplates~~contemplated the transformation of Puerto Rico’s electric system through, among other things, the establishment of a public-private partnership with respect to PREPA’s transmission and distribution system, and calls for significant structural reforms at PREPA. The ~~plan also contemplates changes~~procurement process for the establishment of a public-private partnership with respect to PREPA’s transmission and distribution system (the “T&D System”) was completed in June 2020. The selected proponent, LUMA Energy LLC (“LUMA”), and PREPA entered into a 15-year agreement whereby LUMA will be responsible for operating, maintaining and modernizing the ~~treatment~~T&D System. LUMA and PREPA have announced that the transition of the ~~municipal contribution in lieu~~operations of ~~taxes, which could result in increased electricity expenses for municipalities.~~the T&D System to LUMA is expected to occur on or about June 1, 2021.

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

Pending Title III Proceedings

On May 3, 2017, the Oversight Board, on behalf of the Commonwealth, filed a petition in the U.S. District Court to restructure the Commonwealth’s liabilities under Title III of PROMESA. The Oversight Board has subsequently filed analogous petitions with respect to the Puerto Rico Sales Tax Financing Corporation (“COFINA”), the Employees Retirement System of the Government of the Commonwealth of Puerto Rico (“ERS”), the Puerto Rico Highways and Transportation Authority, PREPA and the Puerto Rico Public Buildings Authority (“PBA”). On February 12, 2019, the government completed a restructuring of COFINA’s debts pursuant to a plan of adjustment confirmed by the U.S. District Court. ~~On September 27, 2019,~~In March 2021, the Oversight Board filed a plan of adjustment for the Commonwealth, ERS and PBA in the pending debt restructuring proceedings under Title III of PROMESA. ~~On February 9, 2020, the Oversight Board announced that it had reached a new agreement with certain bondholders on a new framework for a~~The plan, of adjustment and, on February 28, 2020, the Oversight Board filed an amended plan of adjustment reflecting such new agreement. However, the 2020 Proposed Fiscal Plan notes that the amended plan of adjustment should bewhich has substantial support from several creditor constituencies but is still subject to ~~re-evaluation~~confirmation in the Title III proceeding, seeks to restructure approximately $35 billion of debt and ~~potentially substantial revision as a result of the effects of the COVID-19 outbreak.~~

~~PROMESA Adversary Proceeding~~

~~In 2019, the Oversight Board commenced an adversary proceeding~~other claims against the Commonwealth, ~~seeking~~PBA and ERS, and more than $50 billion of pension liabilities.

Seismic Activity

On January 7, 2020, Puerto Rico was struck by a magnitude 6.4 earthquake, which caused island-wide power outages and significant damage to ~~invalidate Act 29-2019 (“Act 29”), which eliminated~~infrastructure and property in the obligation of municipalities to contribute to the Commonwealth’s health plan and pay-as-you-go retirement system, on the grounds that Act 29 was inconsistent with the 2019 Fiscal Plan. On April 15, 2020, the Judge ruled in favorsouthwest region of the ~~Oversight Board~~island. The 6.4 earthquake was preceded by foreshocks and ~~declared Act 29 “unenforceable and of no effect.” Judge Swain delayed the effective date of the~~followed by aftershocks. The Commonwealth’s government has estimated total earthquake-related damages at approximately $1 billion.

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opinion and order for three weeks, through May 6, 2020, to provide time for the Government and the Oversight Board to agree on a mechanism for the reimbursement to the Commonwealth of approximately $166 million and $32 million, respectively, on account of retirement and health plan obligations due by municipalities as a result of the invalidation of Act 29. Subsequent to the Court’s decision, the Oversight Board, the Government and the Municipal Revenue Collection Center (“CRIM”), which is the entity primarily responsible for the collection of property taxes for the municipalities, made various proposals to resolve the immediate fiscal impact of Act 29’s invalidation. On May 6, 2020, the Government filed a motion informing the Court that CRIM had agreed to accept a proposal by the Oversight Board to reverse a $132 million transfer from the Commonwealth to the municipalities in the Commonwealth’s fiscal year 2020 budget (to be allocated among municipalities) to offset the approximately $198 million obligation of municipalities for the health plan and pay-as-you go retirement system payments for fiscal year 2020. The remaining $66 million would have to be repaid by municipalities by the end of fiscal year 2022 from other sources of revenue. There continue to be differences between the Government and the Oversight Board as to the calculation of the municipalities obligation for the health plan and retirement system payments, as well as to long-term solutions to the fiscal consequences to the municipalities of Act 29’s invalidation. The effect of the court’s decision and the implementation of the offset proposal described above on municipal finances is likely to vary significantly across municipalities.

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

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Corporation’s direct exposure to the Puerto Rico ~~government and its~~government’s instrumentalities and municipalities totaled $~~428~~ $375 million and ~~$432~~$377 million, respectively, which amounts were fully outstanding on such dates. Further deterioration of the Commonwealth’s fiscal and economic situation could adversely affect the value of our Puerto Rico government obligations, resulting in losses to us. Of the amount outstanding, $~~391~~$342 million consists of loans and $37$33 million are securities ($~~391~~342 million and ~~$41~~$35 million, respectively, at December 31, ~~2019)~~2020). Substantially all of the amount outstanding at March 31, ~~2020~~2021 were obligations from various Puerto Rico municipalities. In most cases, these were “general obligations” of a municipality, to which the applicable municipality has pledged its good faith, credit and unlimited taxing power, or “special obligations” of a municipality, to which the applicable municipality has pledged other revenues. At March 31, ~~2020, 75%~~2021, 74% of the Corporation’s exposure to municipal loans and securities was concentrated in the municipalities of San Juan, Guaynabo, Carolina and Bayamón. For additional discussion of the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities, refer to Note 2120 – Commitments and Contingencies.

In addition, at March 31, ~~2020,~~2021, the Corporation had $~~339~~311 million in loans insured or securities issued by Puerto Rico governmental entities, but for which the principal source of repayment is non-governmental ($~~350~~317 million at December 31, ~~2019)~~2020). These included $~~273~~255 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, ~~2019~~2020 - ~~$276~~$260 million). These mortgage loans are secured by first mortgages on Puerto Rico residential properties and the HFA insurance covers losses in the event of a borrower default and upon the satisfaction of certain other conditions. The Corporation also had, at March 31, ~~2020,~~2021, $45 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, ~~2019~~2020 - $46 million). In the event that the mortgage loans insured by HFA and held by the Corporation directly or those serving as collateral for the HFA bonds default and the collateral is insufficient to satisfy the outstanding balance of this 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

~~156~~

the financial obligations of the HFA, ~~she~~a moratorium on such obligations has not ~~exercised this power~~been imposed as of the date hereof. In addition, at March 31, ~~2020,~~2021, the Corporation had ~~$21~~$11 million of commercial real estate notes issued by government entities but that are payable from rent paid by non-governmental parties (December 31, ~~2019~~2020 - $21 million). On January 1, 2020, the Corporation received a payment amounting to $7 million upon the maturity of securities issued by HFA which had been economically defeased and refunded and for which securities consisting of U.S. agencies and Treasury obligations had been escrowed (December 31, 2019 - $7$11 million).

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 ~~fiscal measures to be implemented to address the~~ Commonwealth’s fiscal crisis and the ongoing Title III proceedings under PROMESA described above. Similarly, BPPR’s mortgage and consumer loan portfolios include loans to ~~current~~government employees and ~~former government employees~~retirees, which could also be negatively affected by fiscal measures such as employee layoffs or furloughs or reductions in pension benefits.

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

141

The Corporation may also have direct exposure with regards to avoidance and other causes of action initiated by the Oversight Board on behalf of the Commonwealth or other Title III debtors. For additional information regarding such exposure, refer to Note 2120 of the Consolidated Financial Statements.

United States Virgin Islands

The Corporation has operations in the United States Virgin Islands (the “USVI”) and has credit exposure to USVI government entities.

The USVI has been experiencing a number of fiscal and economic challenges, ~~that~~ which have been and maybe be further exacerbated as a result of the effects of the COVID-19 pandemic, and which could adversely affect the ability of its public corporations and instrumentalities to service their outstanding debt obligations. PROMESA does not apply to the USVI and, as such, there is currently no federal legislation permitting the restructuring of the debts of the USVI and its public corporations and instrumentalities.

To the extent that the fiscal condition of the USVI continues to deteriorate, the U.S. Congress or the Government of the USVI may enact legislation allowing for the restructuring of the financial obligations of USVI government entities or imposing a stay on creditor remedies, including by making PROMESA applicable to the USVI.

At March 31, ~~2020,~~2021, the Corporation’s direct exposure to USVI instrumentalities and public corporations amounted to approximately $69103 million, of which ~~$68~~$69 million is outstanding (compared to ~~$71~~$105 million and ~~$67~~$70 million, respectively, at December 31, ~~2019)~~2020). Of the amount outstanding, approximately (i) $4142 million represents loans to the West Indian Company LTD, a government-owned company that owns and operates a cruise ship pier and shopping mall complex in St. Thomas, (ii) $20 million represents loans to the Virgin Islands Water and Power Authority, a public corporation of the USVI that operates USVI’s water production and electric generation plants, ~~and~~ (iii) $7$3 million represents loans to the Virgin Islands Public Finance Authority (“VI PFA” ), a public corporation of the USVI created for the purpose of raising capital for public projects and (iv) $4 million in loans to the Virgin Islands Porth Authority (compared to ~~$42~~$43 million, ~~$17~~$20 million, $3 million, and $8$4 million, respectively, at December 31, ~~2019)~~2020).

British Virgin Islands

The Corporation has operations in the British Virgin Islands (“BVI”), which has been negatively affected by the COVID-19 pandemic, particularly as a reduction in the tourism activity which accounts for a significant portion of its economy. Although the Corporation has no significant exposure to a single borrower in the BVI, it has a loan portfolio amounting to approximately $250 million comprised of various retail and commercial clients, including a loan of approximately $18 million with the government of the BVI (compared to $251 million and $19 million, respectively, as of December 31, 2020).

U.S. Government

As further detailed in Notes 65 and 76 to the Consolidated Financial Statements, a substantial portion of the Corporation’s investment securities represented exposure to the U.S. Government in the form of U.S. Government sponsored entities, as well as agency mortgage-backed and U.S. Treasury securities. In addition, ~~$1.2~~$1.8 billion of residential mortgages, $1.2 billion of SBA loans under the PPP and ~~$65~~$60 million commercial loans were insured or guaranteed by the U.S. Government or its agencies at March 31, ~~2020~~2021 (compared to ~~$1.1~~$1.8 billion, $1.3 billion and ~~$66~~$60 million, respectively, at December 31, ~~2019)~~2020).

~~157~~142

Non-Performing Assets

Non-performing assets 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 ~~14.~~16.

The Corporation adopted the CECL accounting standard effective January 1, 2020. This framework requires management to estimate credit losses over the full remaining expected life of the loan using economic forecasts over a reasonable and supportable period, and historical information thereafter.

~~Excluding the impact of the adoption of CECL as well as the COVID-19 pandemic, the~~The Corporation exhibited ~~stable~~improved credit quality metrics ~~throughout~~and lower credit costs during the first quarter of ~~2020. Significant changes in certain metrics reflect~~2021, driven by the ~~adoption of the CECL methodology, as well as~~improving economic environment, which reflects the impact of the unprecedented ~~events that have unfolded as a result~~amounts of ~~the COVID-19 pandemic. The allowance for credit losses as of the first quarter of 2020 increased considerably due~~government stimulus in response to ~~the actual and expected impact of COVID-19 pandemic on the economic environment and the CECL adoption. The effects of~~ the COVID-19 pandemic and prudent risk management practices. Notwithstanding, given the disruptions and continued uncertainties caused by the pandemic, we will continue to ~~evolve and~~closely monitor economic conditions, the ~~full extent~~effect of the ~~economic disruption is uncertain. Management~~pandemic on our loan portfolios and associated risks. However, management believes that the improvement over the last few years in the risk profile of the Corporation’s loan portfolios, along with the government stimulus, positions Popular to operate successfully under ~~challenging environments. Management will continue to carefully review~~ the ~~exposure of the portfolios to COVID-19 related risks, as well as changes in the economic outlook and their effect on credit quality.~~current environment.

At ~~March 31, 2020, total non-performing assets (“NPAs”) increased~~Total NPAs decreased by ~~$253~~$50 million when compared with December 31, ~~2019.~~2020. Total non-performing loans held-in-portfolio ~~increased~~decreased by ~~$241~~$40 million from December 31, ~~2019, mainly~~2020. BPPR’s NPLs decreased by $34 million, driven by ~~loans previously accounted for as purchased credit impaired (“PCD”). Following existing accounting guidance, purchased credit impaired (“PCI’) loans were excluded from non-performing status~~lower mortgage NPLs by $24 million, reflective of the resumption of consistent loan payments following the end of the COVID-19 moratorium period. BPPR’s construction NPLs decreased by $7 million mostly due to a previously reserved loan that was partially charged-off during the estimation of cash flows at the pool level. Under CECL, these loans are accounted for on an individual loan basis under PCD accounting methodology and are no longer excluded from non-performing status. BPPR’squarter. Popular Bank’s NPLs ~~increased~~decreased by ~~$237~~$5 million, mostly related to ~~PCI~~a commercial loan transferred to loans-held-for-sale and loan collection activity. Excluding government guaranteed loans, ~~transition impact~~at March 31, 2021, the Corporation had 122,216 loans with an aggregate book value of ~~$260 million. Excluding this impact, NPLs decreased by $23 million, mostly related to lower mortgage NPLs. Popular Bank’s NPLs increased by $4 million, also driven by the PCI transition~~$6.8 billion that had completed their COVID-19 moratorium period, of ~~the taxi medallion portfolio.~~which 114,900 loans, or 94%, with an aggregate book value of $6.5 billion were current in their payments. At March 31, ~~2020,~~2021, the ratio of NPLs to total loans held-in-portfolio was ~~2.8%~~2.4% compared to ~~1.9%~~2.5% in the fourth quarter of ~~2019.~~2020. In addition, ~~loans-held-for-sale (“LHFS’) increased by $11 million driven by taxi medallion loans, and~~ other real estate owned loans (“OREOs”) ~~increased~~decreased by ~~$2 million.~~$11 million, mostly due to the resumption of sales and the suspension of foreclosure activity due to the COVID-19 pandemic.

At March 31, ~~2020,~~2021, NPLs secured by real estate amounted to ~~$645~~$596 million in the Puerto Rico operations and ~~$26~~$33 million in ~~the~~ Popular U.S. ~~operations.~~ These figures were ~~$406~~$630 million and ~~$26~~$34 million, respectively, at December 31, ~~2019.~~2020.

The Corporation’s commercial loan portfolio secured by real estate (“CRE”) amounted to $7.8 billion at March 31, ~~2020,~~2021, of which ~~$1.9~~$1.8 billion was secured with owner occupied properties, compared with ~~$7.7~~$7.8 billion and $1.9 billion, respectively, at December 31, ~~2019.~~2020. CRE NPLs amounted to ~~$215~~$168 million at March 31, ~~2020,~~2021, compared with ~~$113~~$173 million at December 31, ~~2019.~~2020. The CRE NPL ratios for the BPPR and Popular U.S. segments were ~~5.57%~~4.50% and ~~0.07%~~0.02%, respectively, at March 31, ~~2020,~~2021, compared with ~~2.88%~~4.51% and 0.07%, respectively, at December 31, ~~2019.~~2020.

In addition to the NPLs included in Table ~~14,~~16, at March 31, ~~2020,~~2021, there were ~~$244~~$228 million of performing loans, mostly commercial loans, which in management’s opinion, are currently subject to potential future classification as non-performing~~(December~~ and are considered impaired (December 31, ~~2019~~2020 - ~~$207~~$228 million).

~~Excluding~~For the ~~PCI to PCD transition impact mentioned above,~~quarter ended March 31, 2021, total inflows of NPLs held-in-portfolio, excluding consumer loans, ~~increased by $23.2~~remained flat at approximately $84 million, when compared to the inflows for the same ~~quarter~~period in ~~2019, primarily driven by higher inflows~~2020. Inflows of NPLs held-in-portfolio at the BPPR ~~segment. The BPPR mortgage inflows increased~~segment decreased by ~~$28.7~~$15 million, ~~from the same quarter in 2019, mainly due to repurchased PCD loans, offset in part by lower commercial inflows by $5.6 million. The U.S. inflows remained flat when~~or 18%, compared to the same period in 2020, driven by lower mortgage inflows by $18 million. Inflows of NPLs held-in-portfolio at the ~~prior year.~~Popular U.S. segment increased by $14 million from the same period in 2020, mostly due to due to higher construction inflows related to a loan that reached 90 days past due during its renewal process. As of March 31, 2021, the loan was current.

~~158~~143

Table 14 - Non-Performing Assets
Table 16 - Non-Performing Assets																			Table 16 - Non-Performing Assets
	March 31, 2020										December 31, 2019								March 31, 2021										December 31, 2020
(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			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^[1]	$	251,104	$	7,404	$	258,508		2.1	%	$	147,255	$	3,505	$	150,760		1.2	%
Commercial																			$	200,863	$	1,907	$	202,770		1.5	%	$	204,092	$	5,988	$	210,080		1.5	%
Construction		-		-		-		-			119		26		145		-			14,877		7,523		22,400		2.5			21,497		7,560		29,057		3.1
Legacy^[2]		-		1,980		1,980		9.7			-		1,999		1,999		9.0
Leasing		4,076		-		4,076		0.4			3,657		-		3,657		0.3			3,040		-		3,040		0.2			3,441		-		3,441		0.3
Mortgage^[1]		404,465		12,176		416,641		5.9			283,708		11,091		294,799		4.1
Mortgage																				390,781		14,793		405,574		5.2			414,343		14,864		429,207		5.4
Auto		26,431		-		26,431		0.9			31,148		-		31,148		1.1			15,405		-		15,405		0.5			15,736		-		15,736		0.5
Consumer ^[1]		49,607		11,432		61,039		2.0			33,313		12,020		45,333		1.5
Consumer																				41,012		7,941		48,953		1.9			41,268		8,985		50,253		1.9
Total non-performing loans held-in-portfolio		735,683		32,992		768,675		2.8	%		499,200		28,641		527,841		1.9	%		665,978		32,164		698,142		2.4	%		700,377		37,397		737,774		2.5	%
Non-performing loans held-for-sale ^[3]		-		10,679		10,679					-		-		-
Non-performing loans held-for-sale ^[1]																				-		3,549		3,549					-		2,738		2,738
Other real estate owned (“OREO”)		122,118		1,804		123,922					120,011		2,061		122,072					70,537		1,523		72,060					81,512		1,634		83,146
Total non-performing assets	$	857,801	$	45,475	$	903,276				$	619,211	$	30,702	$	649,913				$	736,515	$	37,236	$	773,751				$	781,889	$	41,769	$	823,658
Accruing loans past due 90 days or more^{[4] [5]}	$	471,301	$	-	$	471,301				$	460,133	$	-	$	460,133
Accruing loans past due 90 days or more^[2]																			$	832,747	$	9	$	832,756				$	1,028,061	$	3	$	1,028,064
Ratios:
Non-performing assets to total assets		2.04	%	0.43	%	1.71	%				1.49	%	0.29	%	1.25	%				1.32	%	0.33	%	1.16	%				1.42	%	0.38	%	1.25	%
Non-performing loans held-in-portfolio to loans held-in-portfolio		3.64		0.44		2.78					2.47		0.40		1.93					3.12		0.41		2.40					3.25		0.48		2.51
Allowance for credit losses to loans held-in-portfolio		3.74		2.19		3.32					2.14		0.62		1.74					3.20		1.53		2.75					3.43		2.00		3.05
Allowance for credit losses to non-performing loans, excluding held-for-sale		102.89		493.40		119.65					86.67		157.32		90.50					102.35		370.42		114.70					105.62		418.48		121.48
HIP = “held-in-portfolio”	HIP = “held-in-portfolio”																		HIP = “held-in-portfolio”
[1] The increase in non-accrual loans includes the initial impact of $278 million related to the adoption of CECL on the portfolio of previously purchased credit deteriorated loans. This includes mortgage loans for $133 million, commercial loans for $131 million and $14 million in consumer loans.
[2] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the Popular U.S. segment.
[3] There were $11 million in non-performing commercial loans held-for-sale as of March 31, 2020, none for the quarter ended December 31, 2019.
[4] It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured. These include loans rebooked, which were previously pooled into GNMA securities amounting to $111 million (December 31, 2019 - $103 million). Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to repurchases option are required to be reflected on the financial statements of BPPR with an offseting liability. These balances include $222 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of March 31, 2020 (December 31, 2019 - $213 million). Furthermore, the Corporation has approximately $62 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, 2019 - $65 million).
[5] The carrying value of loans accounted for under ASC Sub-topic 310-30 that are contractually 90 days or more past due was $153 million at December 31, 2019. This amount is excluded from the above table as the loans’ accretable yield interest recognition is independent from the underlying contractual loan delinquency status.
[1] There were $4 million in non-performing commercial loans held-for-sale as of March 31, 2021 and $3 million as of December 31, 2020.																			[1] There were $4 million in non-performing commercial loans held-for-sale as of March 31, 2021 and $3 million as of December 31, 2020.
[2] It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured. The balance of these loans includes $29 million at March 31, 2021 related to the rebooking of loans previously pooled into GNMA securities, in which the Corporation had a buy-back option as further described below (December 31, 2020 - $57 million). Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to repurchases option are required to be reflected (rebooked) on the financial statements of BPPR with an offsetting liability. While the borrowers for our serviced GNMA portfolio benefited from the moratorium, the delinquency status of these loans continued to be reported to GNMA without considering the moratorium. These balances include $341 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of March 31, 2021 (December 31, 2020 - $329 million). Furthermore, the Corporation has approximately $58 million in reverse mortgage loans which are guaranteed by FHA, but which are currently not accruing interest. Due to the guaranteed nature of the loans, it is the Corporation’s policy to exclude these balances from non-performing assets (December 31, 2020 - $60 million).																			[2] It is the Corporation’s policy to report delinquent residential mortgage loans insured by FHA or guaranteed by the VA as accruing loans past due 90 days or more as opposed to non-performing since the principal repayment is insured. The balance of these loans includes $29 million at March 31, 2021 related to the rebooking of loans previously pooled into GNMA securities, in which the Corporation had a buy-back option as further described below (December 31, 2020 - $57 million). Under the GNMA program, issuers such as BPPR have the option but not the obligation to repurchase loans that are 90 days or more past due. For accounting purposes, these loans subject to repurchases option are required to be reflected (rebooked) on the financial statements of BPPR with an offsetting liability. While the borrowers for our serviced GNMA portfolio benefited from the moratorium, the delinquency status of these loans continued to be reported to GNMA without considering the moratorium. These balances include $341 million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of March 31, 2021 (December 31, 2020 - $329 million). Furthermore, the Corporation has approximately $58 million in reverse mortgage loans which are guaranteed by FHA, but which are currently not accruing interest. Due to the guaranteed nature of the loans, it is the Corporation’s policy to exclude these balances from non-performing assets (December 31, 2020 - $60 million).

~~159~~144

Table 15 - Activity in Non-Performing Loans Held-in-Portfolio (Excluding Consumer Loans)
Table 17 - Activity in Non-Performing Loans Held-in-Portfolio (Excluding Consumer Loans)								Table 17 - Activity in Non-Performing Loans Held-in-Portfolio (Excluding Consumer Loans)

									For the quarter ended March 31, 2021
(Dollars in thousands)								(Dollars in thousands)		BPPR		Popular U.S.	Popular, Inc.
Beginning balance								Beginning balance	$	639,932	$	28,412	$	668,344
Plus:								Plus:
								New non-performing loans		66,121		18,157		84,278
								Advances on existing non-performing loans		-		11		11
Less:								Less:
								Non-performing loans transferred to OREO		(4,651)		-		(4,651)
								Non-performing loans charged-off		(17,733)		(353)		(18,086)
								Loans returned to accrual status / loan collections		(77,148)		(20,231)		(97,379)
								Loans transferred to held-for-sale		-		(1,773)		(1,773)
Ending balance NPLs								Ending balance NPLs	$	606,521	$	24,223	$	630,744

Table 18 - Activity in Non-Performing Loans Held-in-Portfolio (Excluding Consumer Loans)								Table 18 - Activity in Non-Performing Loans Held-in-Portfolio (Excluding Consumer Loans)

		For the quarter ended March 31, 2020							For the quarter ended March 31, 2020
(Dollars in thousands)	(Dollars in thousands)		BPPR		Popular U.S.	Popular, Inc.		(Dollars in thousands)		BPPR		Popular U.S.	Popular, Inc.
Beginning balance	Beginning balance	$	431,082	$	16,621	$	447,703	Beginning balance	$	431,082	$	16,621	$	447,703
Transition of PCI to PCD loans under CECL	Transition of PCI to PCD loans under CECL		245,703		18,547		264,250	Transition of PCI to PCD loans under CECL		245,703		18,547		264,250
Plus:	Plus:							Plus:
	New non-performing loans		80,920		4,173		85,093	New non-performing loans		80,920		4,173		85,093
	Advances on existing non-performing loans		-		171		171	Advances on existing non-performing loans		-		171		171
Less:	Less:							Less:
	Non-performing loans transferred to OREO		(10,390)		-		(10,390)	Non-performing loans transferred to OREO		(10,390)		-		(10,390)
	Non-performing loans charged-off		(6,893)		(554)		(7,447)	Non-performing loans charged-off		(6,893)		(554)		(7,447)
	Loans returned to accrual status / loan collections		(84,853)		(6,719)		(91,572)	Loans returned to accrual status / loan collections		(84,853)		(6,719)		(91,572)
	Loans transferred to held-for-sale		-		(10,679)		(10,679)	Loans transferred to held-for-sale		-		(10,679)		(10,679)
Ending balance NPLs^[1]		$	655,569	$	21,560	$	677,129
[1] Includes $2.0 million of NPLs related to the legacy portfolio.


Table 16 - Activity in Non-Performing Loans Held-in-Portfolio (Excluding Consumer Loans)

		For the quarter ended March 31, 2019
(Dollars in thousands)			BPPR		Popular U.S.	Popular, Inc.
Beginning balance		$	508,303	$	26,796	$	535,099
Plus:
	New non-performing loans		57,782		4,250		62,032
	Advances on existing non-performing loans		-		79		79
Less:
	Non-performing loans transferred to OREO		(4,117)		(124)		(4,241)
	Non-performing loans charged-off		(23,652)		(247)		(23,899)
	Loans returned to accrual status / loan collections		(52,385)		(3,442)		(55,827)
Ending balance NPLs^[1]		$	485,931	$	27,312	$	513,243
[1] Includes $2.6 million of NPLs related to the legacy portfolio.
Ending balance NPLs								Ending balance NPLs	$	655,569	$	21,560	$	677,129

Table 17 - Activity in Non-Performing Commercial Loans Held-In-Portfolio

For the quarter ended March 31, 2020
(In thousands)

BPPR

Popular U.S.

Popular, Inc.
Beginning Balance - NPLs
$
147,255

$
3,505

$
150,760
Transition of PCI to PCD loans under CECL

112,517

18,547

131,064
Plus:

New non-performing loans

4,954

166

5,120

Advances on existing non-performing loans

-

95

95
Less:

Non-performing loans transferred to OREO

(2,202)

-

(2,202)

Non-performing loans charged-off

(2,146)

(554)

(2,700)

Loans returned to accrual status / loan collections

(9,274)

(3,676)

(12,950)

Loans transferred to held-for-sale

-

(10,679)

(10,679)
Ending balance - NPLs
$
251,104

$
7,404

$
258,508

Table 19 - Activity in Non-Performing Commercial Loans Held-In-Portfolio
		For the quarter ended March 31, 2021
(In thousands)			BPPR		Popular U.S.		Popular, Inc.
Beginning Balance - NPLs		$	204,092	$	5,988	$	210,080
Plus:
	New non-performing loans		7,724		1,693		9,417
	Advances on existing non-performing loans		-		6		6
Less:
	Non-performing loans transferred to OREO		(3,850)		-		(3,850)
	Non-performing loans charged-off		(2,391)		(352)		(2,743)
	Loans returned to accrual status / loan collections		(4,712)		(3,655)		(8,367)
	Loans transferred to held-for-sale		-		(1,773)		(1,773)
Ending balance - NPLs		$	200,863	$	1,907	$	202,770

~~160~~145

Table 18 - Activity in Non-Performing Commercial Loans Held-In-Portfolio
Table 20 - Activity in Non-Performing Commercial Loans Held-In-Portfolio								Table 20 - Activity in Non-Performing Commercial Loans Held-In-Portfolio
		For the quarter ended March 31, 2019							For the quarter ended March 31, 2020
(In thousands)	(In thousands)		BPPR		Popular U.S.		Popular, Inc.	(In thousands)		BPPR		Popular U.S.		Popular, Inc.
Beginning Balance - NPLs	Beginning Balance - NPLs	$	182,950	$	1,076	$	184,026	Beginning Balance - NPLs	$	147,255	$	5,504	$	152,759
Transition of PCI to PCD loans under CECL								Transition of PCI to PCD loans under CECL		112,517		18,547		131,064
Plus:	Plus:							Plus:
								New non-performing loans		4,954		166		5,120
	New non-performing loans		10,554		2,220		12,774	Advances on existing non-performing loans		-		119		119
Less:	Less:							Less:
	Non-performing loans transferred to OREO		(962)		-		(962)	Non-performing loans transferred to OREO		(2,202)		-		(2,202)
	Non-performing loans charged-off		(17,918)		(50)		(17,968)	Non-performing loans charged-off		(2,146)		(554)		(2,700)
	Loans returned to accrual status / loan collections		(8,331)		(385)		(8,716)	Loans returned to accrual status / loan collections		(9,274)		(3,719)		(12,993)
								Loans transferred to held-for-sale		-		(10,679)		(10,679)
Ending balance - NPLs	Ending balance - NPLs	$	166,293	$	2,861	$	169,154	Ending balance - NPLs	$	251,104	$	9,384	$	260,488

Table 19 - Activity in Non-Performing Construction Loans Held-In-Portfolio
Table 21 - Activity in Non-Performing Construction Loans Held-In-Portfolio								Table 21 - Activity in Non-Performing Construction Loans Held-In-Portfolio

		For the quarter ended March 31, 2020							For the quarter ended March 31, 2021
(In thousands)	(In thousands)		BPPR		Popular U.S.		Popular, Inc.	(In thousands)		BPPR		Popular U.S.		Popular, Inc.
Beginning Balance - NPLs	Beginning Balance - NPLs	$	119	$	26	$	145	Beginning Balance - NPLs	$	21,497	$	7,560	$	29,057
Plus:								Plus:
								New non-performing loans		-		12,141		12,141
Less:	Less:							Less:
	Loans returned to accrual status / loan collections		(119)		(26)		(145)	Non-performing loans charged-off		(6,620)		-		(6,620)
								Loans returned to accrual status / loan collections		-		(12,178)		(12,178)
Ending balance - NPLs	Ending balance - NPLs	$	-	$	-	$	-	Ending balance - NPLs	$	14,877	$	7,523	$	22,400

~~161~~146

Table 20 - Activity in Non-Performing Construction Loans Held-In-Portfolio
Table 22 - Activity in Non-Performing Construction Loans Held-In-Portfolio								Table 22 - Activity in Non-Performing Construction Loans Held-In-Portfolio

		For the quarter ended March 31, 2019							For the quarter ended March 31, 2020
(In thousands)	(In thousands)		BPPR		Popular U.S.		Popular, Inc.	(In thousands)		BPPR		Popular U.S.		Popular, Inc.
Beginning Balance - NPLs	Beginning Balance - NPLs	$	1,788	$	12,060	$	13,848	Beginning Balance - NPLs	$	119	$	26	$	145
Plus:
	New non-performing loans		-		-		-
Less:								Less:		-		-
	Advances on existing non-performing loans		-		-		-	Loans returned to accrual status / loan collections		(119)		(26)		(145)
Ending balance - NPLs	Ending balance - NPLs	$	1,788	$	12,060	$	13,848	Ending balance - NPLs	$	-	$	-	$	-

Table 21 - Activity in Non-Performing Mortgage Loans Held-in-Portfolio
Table 23 - Activity in Non-Performing Mortgage Loans Held-in-Portfolio								Table 23 - Activity in Non-Performing Mortgage Loans Held-in-Portfolio
		For the quarter ended March 31, 2020							For the quarter ended March 31, 2021
(Dollars in thousands)	(Dollars in thousands)		BPPR		Popular U.S.		Popular, Inc.	(Dollars in thousands)		BPPR		Popular U.S.		Popular, Inc.
Beginning balance - NPLs	Beginning balance - NPLs	$	283,708	$	11,091	$	294,799	Beginning balance - NPLs	$	414,343	$	14,864	$	429,207
Transition of PCI to PCD loans under CECL			133,186		-		133,186
Plus:	Plus:							Plus:
	New non-performing loans		75,966		4,007		79,973	New non-performing loans		58,397		4,323		62,720
	Advances on existing non-performing loans		-		52		52	Advances on existing non-performing loans		-		5		5
Less:	Less:							Less:
	Non-performing loans transferred to OREO		(8,188)		-		(8,188)	Non-performing loans transferred to OREO		(801)		-		(801)
	Non-performing loans charged-off		(4,747)		-		(4,747)	Non-performing loans charged-off		(8,722)		(1)		(8,723)
	Loans returned to accrual status / loan collections		(75,460)		(2,974)		(78,434)	Loans returned to accrual status / loan collections		(72,436)		(4,398)		(76,834)
Ending balance - NPLs	Ending balance - NPLs	$	404,465	$	12,176	$	416,641	Ending balance - NPLs	$	390,781	$	14,793	$	405,574

Table 24 - Activity in Non-Performing Mortgage Loans Held-in-Portfolio
		For the quarter ended March 31, 2020
(Dollars in thousands)			BPPR		Popular U.S.		Popular, Inc.
Beginning balance - NPLs		$	283,708	$	11,091	$	294,799
Transition of PCI to PCD loans under CECL			133,186		-		133,186
Plus:
	New non-performing loans		75,966		4,007		79,973
	Advances on existing non-performing loans		-		52		52
Less:
	Non-performing loans transferred to OREO		(8,188)		-		(8,188)
	Non-performing loans charged-off		(4,747)		-		(4,747)
	Loans returned to accrual status / loan collections		(75,460)		(2,974)		(78,434)
Ending balance - NPLs		$	404,465	$	12,176	$	416,641

~~162~~147

Table 22 - Activity in Non-Performing Mortgage Loans Held-in-Portfolio

For the quarter ended March 31, 2019
(Dollars in thousands)

BPPR

Popular U.S.

Popular, Inc.
Beginning balance - NPLs
$
323,565

$
11,033

$
334,598
Plus:

New non-performing loans

47,228

1,820

49,048

Advances on existing non-performing loans

-

72

72
Less:

Non-performing loans transferred to OREO

(3,155)

(124)

(3,279)

Non-performing loans charged-off

(5,734)

(197)

(5,931)

Loans returned to accrual status / loan collections

(44,054)

(2,796)

(46,850)
Ending balance - NPLs
$
317,850

$
9,808

$
327,658

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 at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, are presented below.

Table 23 - Loan Delinquencies

(Dollars in thousands)

March 31, 2020

December 31, 2019

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
$
348,845
$
12,498,969

2.79
%
$
231,692
$
12,312,751

1.88
%
Construction

4,411

902,380

0.49

1,700

831,092

0.20

Legacy

2,058

20,435

10.07

2,056

22,105

9.30

Leasing

28,315

1,088,542

2.60

18,724

1,059,507

1.77

Mortgage

1,373,800

7,094,757

19.36

1,299,443

7,183,532

18.09

Consumer

324,060

6,057,189

5.35

249,987

5,997,886

4.17

Loans held-for-sale

11,452

87,855

13.04

-

59,203

-

Total
$
2,092,941
$
27,750,127

7.54
%
$
1,803,602
$
27,466,076

6.57
%

Table 25 - Loan Delinquencies

(Dollars in thousands)		March 31, 2021							December 31, 2020
	Loans delinquent 30 days or more		Total loans		Total delinquencies as a percentage of total loans			Loans delinquent 30 days or more		Total loans		Total delinquencies as a percentage of total loans
Commercial	$	296,356	$	13,442,486		2.20	%	$	249,484	$	13,614,310		1.83	%
Construction		34,149		907,736		3.76			50,369		926,208		5.44
Leasing		12,012		1,244,956		0.96			14,009		1,197,661		1.17
Mortgage ^[1]		1,501,222		7,808,852		19.22			1,775,902		7,890,680		22.51
Consumer		159,431		5,727,598		2.78			179,789		5,756,337		3.12
Loans held-for-sale		3,718		84,214		4.41			3,108		99,455		3.13
Total	$	2,006,888	$	29,215,842		6.87	%	$	2,272,661	$	29,484,651		7.71	%
[1] Loans delinquent 30 days or more includes $0.9 billion of residential mortgage loans insured by FHA or guaranteed by the VA as of March 31, 2021 (December 31, 2020 - $1.1 billion). Refer to Note 7 to the Consolidated Financial Statements for additional information of guaranteed loans.

~~163~~148

Allowance for Credit Losses Loans Held-in-Portfolio

The Corporation adopted the new CECL accounting standard effective on January 1, 2020.The allowance for credit losses (“ACL”), represents management’s estimate of expected credit losses through the remaining contractual life of the different loan segments, impacted by expected prepayments. The ACL is maintained at a sufficient level to provide for estimated credit losses on collateral dependent loans as well as troubled debt restructurings separately from the remainder of the loan portfolio. The Corporation’s management evaluates the adequacy of the ACL on a quarterly basis. In this evaluation, management considers current conditions, macroeconomic economic expectations through a reasonable and supportable period, historical loss experience, portfolio composition by loan type and risk characteristics, results of periodic credit reviews of individual loans, and regulatory requirements, amongst other factors.

The Corporation must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown, such as economic developments affecting specific customers, industries or markets. Other factors that can affect management’s estimates are recalibration of statistical models used to calculate lifetime expected losses, changes in underwriting standards, financial accounting standards and loan impairment measurements, among others. Changes in the financial condition of individual borrowers, in economic conditions, and in the condition of the various markets in which collateral may be sold, may also affect the required level of the ~~allowance for loan losses.~~ACL. Consequently, the business financial condition, liquidity, capital and results of operations could also be affected. ~~Refer to Note 4 – Summary of significant accounting policies included in this Form 10-Q for a description of the Corporation’s allowance for credit losses methodology.~~

At March 31, 2021, the ACL for the Corporation’s loans held-in-portfolio amounted to $801 million, a decrease of $95 million, when compared with December 31, 2020, mainly prompted by improvements in the ~~allowance for credit losses increased by $442 million from~~macroeconomic outlook. The ACL incorporated updated economic stimulus assumptions that contributed to a more optimistic view of the economy compared to the fourth quarter ~~of 2019~~2020 scenarios, prompting substantial reductions in reserves across different portfolios. The ACL for BPPR decreased by $58 million to ~~$920 million; an increase of 93%.~~$682 million, while the ACL for PB decreased by $37 million to $119 million, when compared to December 31, 2020. The ~~CECL adoption impact resulted in an increase of $315 million (“Day 1 impact”)~~decrease in the ~~allowance~~reserve for ~~credit losses related to loans. Approximately, $298 million of this increase~~PB was reflected as a reduction of the opening balance of retained earnings, net of income taxes. The remaining $17 million, related to PCD loans previously accounted for under the Accounting Standards Codification ("ASC") Subtopic 310-30, were reclassified from certain contra loan balance accounts of that portfolio. Excluding such Day 1 impact, the ACL increase of $127 million waspartially offset with qualitative reserves aimed at addressing uncertainties mainly ~~attributable to the significant change~~ in the macroeconomic conditions from the COVID-19 pandemic. The ratio of the allowance for credit losses to loans held-in-portfolio was 3.32% at March 31, 2020, compared to 1.74% at December 31, 2019. The ratio of the allowance for credit losses to NPLs held-in-portfolio stood at 119.7% compared to 90.5% in the previous quarter.

The BPPR ACL increased by $324 million to $757 million, or 3.74% of loan-held-in portfolio, from December 31, 2019, mainly driven by the Day 1 impact of $270 million. Consumer and mortgage loans accounted for $122 million and $86 million, respectively of this impact. The Popular U.S. ACL increased by $118 million to $163 million, or 2.19% of loan-held-in portfolio, from December 31, 2019, primarily due to the CECL adoption impact of $45 million. Excluding the Day 1 impact, ~~incremental reserves were due to the expected economic impact of COVID-19.~~

commercial real estate portfolio. The provision for credit losses for the ~~first~~loans-held-in portfolio for the quarter ~~of 2020~~ended March 31, 2021 amounted to ~~$189.0~~a benefit of $75.8 million, ~~compared to $41.8~~decreasing by $264.8 million infrom the same period in the prior year, an increase of $147.2 million, reflective the impact of the CECL adoption, as well as the impact of the COVID-19 pandemic. Refer to the Provision for Credit Losses section of this MD&A for additional information.

~~The following tables present the breakdown of the allowance for credit losses by loan categories for the periods ended March 31, 2020~~amid improved macroeconomic outlook and ~~December 31, 2019.~~

lower NCOs.

~~164~~149

Table 24 - Allowance for Credit Losses - Loan Portfolios
March 31, 2020
Table 26 - Allowance for Credit Losses - Loan Portfolios																					Table 26 - Allowance for Credit Losses - Loan Portfolios
March 31, 2021																					March 31, 2021
(Dollars in thousands)	Commercial			Construction				Legacy ^[1]		Leasing		Mortgage			Consumer			Total			Commercial			Construction				Mortgage		Leasing			Consumer			Total
Total ACL	$	305,048		$	2,591		$	2,026	$	12,589		$	227,087		$	370,375		$	919,716		$	276,219		$	9,195		$	202,126		$	12,687		$	300,570		$	800,797
Total loans held-in-portfolio	$	12,498,969		$	902,380		$	20,435	$	1,088,542		$	7,094,757		$	6,057,189		$	27,662,272		$	13,442,486		$	907,736		$	7,808,852		$	1,244,956		$	5,727,598		$	29,131,628
ACL to loans held-in-portfolio		2.44	%		0.29	%		9.91	%	1.16	%		3.20	%		6.11	%		3.32	%		2.05	%		1.01	%		2.59	%		1.02	%		5.25	%		2.75	%
[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the
Corporation as part of restructuring efforts carried out in prior years at the Popular U.S. reportable segment.

Table 25 - Allowance for Credit Losses - Loan Portfolios
December 31, 2019
(Dollars in thousands)
Commercial
Construction

Legacy ^[1]

Leasing

Mortgage
Consumer
Total

Specific ALLL
$
20,533

$
6

$
-
$
61

$
42,804

$
21,822

$
85,226

Impaired loans
$
399,549

$
119

$
-
$
507

$
531,855

$
100,791

$
1,032,821

Specific ALLL to impaired loans

5.14
%

5.04
%

-
%
12.03
%

8.05
%

21.65
%

8.25
%
General ALLL
$
126,519

$
4,772

$
630
$
10,707

$
78,304

$
171,550

$
392,482

Loans held-in-portfolio, excluding impaired loans
$
11,913,202

$
830,973

$
22,105
$
1,059,000

$
6,651,677

$
5,897,095

$
26,374,052

General ALLL to loans held-in-portfolio, excluding impaired loans

1.06
%

0.57
%

2.85
%
1.01
%

1.18
%

2.91
%

1.49
%
Total ALLL
$
147,052

$
4,778

$
630
$
10,768

$
121,108

$
193,372

$
477,708

Total loans held-in-portfolio
$
12,312,751

$
831,092

$
22,105
$
1,059,507

$
7,183,532

$
5,997,886

$
27,406,873

ALLL to loans held-in-portfolio

1.19
%

0.57
%

2.85
%
1.02
%

1.69
%

3.22
%

1.74
%
[1] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the
Corporation as part of restructuring efforts carried out in prior years at the Popular U.S. reportable segment.

~~165~~

Table 27 - Allowance for Credit Losses - Loan Portfolios
December 31, 2020
(Dollars in thousands)	Commercial			Construction				Mortgage		Leasing			Consumer			Total
Total ACL	$	333,380		$	14,237		$	215,716		$	16,863		$	316,054		$	896,250
Total loans held-in-portfolio	$	13,614,310		$	926,208		$	7,890,680		$	1,197,661		$	5,756,337		$	29,385,196
ACL to loans held-in-portfolio		2.45	%		1.54	%		2.73	%		1.41	%		5.49	%		3.05	%

Annualized net charge offs

The following table presents annualized net charge-offs to average loans held-in-portfolio (“HIP”) by loan category for the quarters ended March 31, ~~2020~~2021 and ~~2019.~~2020.

Table 26 - Annualized Net Charge-offs (Recoveries) to Average Loans Held-in-Portfolio
Table 28 - Annualized Net Charge-offs (Recoveries) to Average Loans Held-in-Portfolio													Table 28 - Annualized Net Charge-offs (Recoveries) to Average Loans Held-in-Portfolio
	Quarter ended March 31, 2020						Quarter ended March 31, 2019						Quarter ended March 31, 2021						Quarter ended March 31, 2020
	BPPR		Popular U.S.		Popular, Inc.		BPPR		Popular U.S.		Popular, Inc.		BPPR		Popular U.S.		Popular, Inc.		BPPR		Popular U.S.		Popular, Inc.
Commercial	0.03	%	0.01	%	0.02	%	0.90	%	0.24	%	0.64	%	(0.07)	%	―	%	(0.04)	%	0.03	%	―	%	0.02	%
Construction	(0.05)		(0.09)		(0.08)		(0.08)		―		(0.01)		14.62		―		2.60		(0.05)		(0.09)		(0.08)
Leases	1.23		―		1.23		0.63		―		0.63
Legacy	―		(1.93)		(1.93)		―		(11.36)		(11.36)
Mortgage	0.37		―		0.32		0.71		0.11		0.64		0.50		(0.03)		0.42		0.37		―		0.32
Leasing													0.04		―		0.04		1.23		―		1.23
Consumer	3.54		2.88		3.49		1.95		3.73		2.09		0.48		2.35		0.57		3.54		2.88		3.49
Total annualized net charge-offs to average loans held-in-portfolio	1.18	%	0.17	%	0.91	%	1.09	%	0.38	%	0.92	%	0.36	%	0.08	%	0.29	%	1.18	%	0.17	%	0.91	%

~~Net charge-offs (“NCOs”)~~NCOs for the quarter ended March 31, ~~2020~~2021 amounted to ~~$62.5~~$21.0 million, ~~increased slightly~~decreasing by ~~$2.0~~$41.5 million when compared to the same ~~quarter~~period in ~~2019. This increase was primarily due to higher NCOs in the~~2020. The BPPR segment NCOs decreased by $40.0 million mainly driven by ~~higher~~lower consumer NCOs by ~~$25.1~~$43.5 million, ~~(mostly auto loans), offset~~aided by measures taken by the Corporation to control the impact of the pandemic, as well as the U.S. government stimulus programs, and $7.6 million in ~~part~~recoveries recorded from the sale of fully charged-off loans during the first quarter of 2021. The PB segment NCOs amounted to $1.6 million, decreasing by $1.5 million, mainly driven by lower ~~commercial NCOs by $16.0 million.~~consumer. The Corporation continues to be attentive to the effect of the pandemic on our loan portfolios and changes in delinquencies and NCOs.

Troubled ~~debt restructurings~~Debt Restructurings

The Corporation’s ~~TDR~~troubled debt restructurings (“TDRs”) loans amounted to ~~$1.6~~$1.7 billion at March 31, ~~2020,~~2021, increasing by ~~$17~~$39 million, or approximately ~~1.06%~~2.35%, from December 31, ~~2019,~~2020, mainly ~~driven by higher~~related to mortgage borrowers that needed additional COVID extensions past the original 6-month moratorium period. TDRs in the BPPR segment increased by ~~$16 million. The increase in BPPR was~~$40 million, mostly related to higher mortgage TDRs by ~~$21~~$22 million, of which ~~$14~~$20 million were related to government guaranteed loans, ~~partially offset by~~coupled with a ~~decrease~~combined increase of $4$20 million in the ~~BPPR consumer portfolio.~~commercial and construction TDRs. The PB segment TDRs remained essentially flat at $16 million from December 31, 2020. TDRs in accruing status increased by ~~$15~~$60 million from December 31, ~~2019,~~2020, mostly related to an increase of $39 million and $22 million in BPPR’s mortgage and commercial TDRs, respectively, while non-accruing TDRs ~~increased~~decreased by $2$21 million.

In response to the COVID-19 pandemic, the Corporation has entered into loan modifications with eligible customers in mortgage, consumer loans, credit cards, auto loans and leases and certain commercial credit facilities, comprised mainly of payment deferrals of up to six months, subject to certain terms and conditions. The Puerto Rico Legislative Assembly has also enacted legislation requiring financial institutions to offer to clients impacted by the COVID-19 pandemic moratoriums on consumer financial products through June 2020. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), signed by the President of the United States as part of an economic stimulus package, provided relief related to U.S. GAAP requirements for loan modifications related to COVID-19 relief measures. In addition, the Federal Reserve, along with other U.S. banking regulators, also issued interagency guidance to financial institutions that offers some practical expedients for evaluating whether loan modifications that occur in response to the COVID-19 pandemic are TDRs. According to the interagency guidance, COVID-19 related short-term modifications (i.e., six months or less) granted to consumer or commercial loans that were current as of the date of the loan modification are not TDRs, since financial institutions may conclude that the borrower is not experiencing financial difficulties. In addition, a modification or deferral program that is mandated by the federal government or a state government (e.g., a state program that requires all institutions within that state to suspend mortgage payments for a specified period) does not represent a TDR.

In accordance with the guidance in the CARES Act and interagency regulatory guidance, the loan modifications completed by the Corporation as part of the COVID-19 relief measures have not been treated as TDRs. Furthermore, these loan modifications do not affect the asset quality measures as the deferred payments are not deemed to be delinquent and the Corporation continues to accrue interest on these loans.

~~At March 31, 2020, the Corporation had completed 6,304 in modifications for residential mortgage loans with an unpaid principal balance of $832 million in response to the COVID-19 pandemic.~~

~~166~~150

Refer to Note 98 to the Consolidated Financial Statements for additional information on modifications considered ~~troubled debt restructurings,~~TDRs, including certain qualitative and quantitative data about troubled debt restructurings performed in the past twelve months.

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 Corporation’s ~~2019~~2020 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 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 March 31, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

~~167~~151

Part II - Other Information

Item 1. Legal Proceedings

For a discussion of Legal Proceedings, see Note ~~21,~~20, Commitments and Contingencies, 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 ~~2019~~2020 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 ~~2019~~2020 Form 10-K.

There have been no material changes to the risk factors previously disclosed under Item 1A of the Corporation’s 2020 Form 10-K.

The risks described in our ~~2019~~2020 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.

There have been no material changes to the risk factors previously disclosed under Item 1A of the Corporation’s 2019 Form 10-K, except for the risks included below which supplement the risk factors described in our 2019 Form 10-K.

The coronavirus (COVID-19) pandemic has significantly disrupted the global economy and the markets in which we operate, which has adversely impacted, and is likely to continue to adversely impact, our business, financial condition and results of operation. Its continued impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the direct and indirect impact of the pandemic on our employees, customers, clients, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic.

The COVID-19 pandemic has significantly disrupted and negatively impacted the global economy, disrupted global supply chains, created significant volatility in the financial markets, significantly increased unemployment levels worldwide and decreased consumer confidence and commercial activity generally, including in the markets in which we do business, leading to an increased risk of delinquencies, defaults and foreclosures. Governments across the world have ordered the temporary closure of many businesses and the institution of social distancing and shelter in place requirements in response to the pandemic. The COVID-19 pandemic has also contributed to:

~~Higher and more volatile credit loss expense and potential for increased charge-offs;~~

~~Ratings downgrades, credit deterioration and defaults in many industries;~~

~~A sudden and significant reduction in the valuation of the equity, fixed-income and commodity markets and the significant increase in the volatility of those markets; and~~

~~A decrease in the rates and yields on U.S. Treasury securities, which has led to decreased net interest income.~~

In Puerto Rico, our primary market, the Governor has issued several executive orders beginning on March 15, 2020 declaring a health emergency, ordering residents to shelter in place, implementing a mandatory curfew and requiring the closure of all businesses~~, except for certain businesses that provide essential services, including banking and financial institutions~~. Certain of the restrictions on the operation of businesses have been eased in recent weeks and the government has stated that it may provide for further easing of such restrictions in a manner that gradually allows for the opening of the economy. Significant restrictions on non-essential business activities remain, however, and many businesses, including retail establishments, remain closed or are operating partially. The government of the USVI and state governments in the U.S. mainland, including New York, New Jersey and Florida, where PB has branches, also declared states of emergency as a result of the pandemic, ordered the temporary closure of all non-essential businesses, and ordered its citizens to remain sheltered in place and to observe social distancing, causing a similar significant economic disruption.

~~168~~152

The restrictions imposed by governments in response to the outbreak have caused significant disruption to economic activity and a sharp increase in unemployment in Puerto Rico, which has been facing significant fiscal and economic challenges for over a decade, as well as in the other markets in which we operate. Further deterioration of the Puerto Rico and the broader U.S. economy would be expected to adversely affect the ability of our borrowers to comply with their financial obligations and adversely impact demand for our products and services. The disruption in economic activity would be expected to further adversely affect the financial condition of government entities in Puerto Rico and the USVI to which we have exposure.

The COVID-19 pandemic has significantly disrupted our operations and already negatively impacted our business, financial condition and operations. Many of BPPR’s and PB’s branches were temporarily closed in response to the pandemic. Currently, approximately 75% of BPPR’s branches are operating and nearly all of PB’s branches are operating, with some on daily alternating schedules. Furthermore, due to restrictions on non-essential business activities imposed on some of our third-party service providers, certain of BPPR’s lines of business, including mortgage originations, were temporarily suspended from mid-March to early May. To protect the health and safety of our workforce, we have facilitated a significant portion of our workforce to work remotely, which further exposes the Corporation to heightened risks with respect to cyber-security, information security, other operational incidents and its ability to maintain an effective system of internal controls. Any disruption to our ability to deliver financial products or services to, or interact with, our clients and customers could result in losses or increased operational costs, regulatory fines, penalties and other sanctions, or harm our reputation.

~~Furthermore,~~ in response to the pandemic, the Corporation has taken measures to ensure the continuity of our operations and the safety of our employees and customers, while providing financial relief to customers through programs such as payment moratoriums, suspensions of foreclosures and other collection activity, as well as waivers of certain fees and service charges. The Puerto Rico Legislative Assembly has enacted legislation requiring financial institutions to offer to clients impacted by the COVID-19 pandemic moratoriums on consumer financial products through June 2020. The Federal Government has also approved several economic stimulus measures, including the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, that seek to cushion the economic fallout of the pandemic. However, there can be no assurance that measures taken by governmental authorities will be sufficient to offset the pandemic’s economic impact and our participation (or lack of participation) in certain of governmental programs enacted in response to the pandemic could result in reputational harm, litigation and/or regulatory and other government action against the Corporation. Furthermore, moratoriums imposed by Federal and/or state law or provided voluntarily by the Corporation may limit our ability to determine the impact of the COVID-19 pandemic on the financial condition of certain of our customers and the credit quality of our loan portfolio until borrowers that have benefited from such moratoriums are required to resume loan repayments.

The Corporation’s results for the first quarter of 2020 already reflect the impact during the month of March 2020 of the business disruption and relief measures described above. For example, the Corporation’s revenue streams were impacted during the quarter reflecting the impact of reduced consumer transaction activity, the waiver of certain late fees and service charges, as well as the suspension in mortgage origination and related securitization and loan sale activities. The Corporation also incurred additional expenses related to front-line employee bonuses, the enabling of remote access for employees to work from home, the expansion of employee benefits, as well as the impact of specific measures to prevent the spread of the disease and efforts related to customer relief programs, among other related expenses. During the length of the impact of the pandemic, its effects on certain of the Corporation’s revenue line items, such as interchange income, service charges, debit and credit card fees, mortgage servicing income and gain on sale of mortgage loans, are expected to be more pronounced during at least the second quarter of 2020. The continued effects of the pandemic may also impact the liquidity of the bank holding company and its operating subsidiaries. Moreover, the provision for credit losses for the loans and investments portfolios includes $134 million in incremental reserves due to the expected ~~economic impact of COVID-19.~~ While this provision is based on management’s current best estimate of the impact of the pandemic, there is significant uncertainty with respect to the full extent of its impact and, as a result, the financial impact on the Corporation’s business, financial condition, liquidity, results of operations and capital position may be significantly greater than that estimated by management and reflected in our financial statements for the quarter ended March 31, 2020. The extent to which the COVID-19 pandemic continues to impact our business, results of operations and financial condition (including our regulatory capital and liquidity ratios), as well as the operations of our clients, customers, service providers and suppliers, will depend on future developments, which are highly uncertain and cannot be predicted at this time, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

~~169~~

The length of the pandemic and the efficacy of the extraordinary measures being put in place to address it are unknown. Even after the pandemic subsides, the global economy may continue to experience a recession, and we anticipate our businesses would be materially and adversely affected by a prolonged recession. To the extent the pandemic adversely affects our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in the section entitled “Risk Factors” in our 2019 Form 10-K and any subsequent Quarterly Reports on Form 10-Q.

~~The COVID-19 pandemic’s impact on our business, financial condition, liquidity,~~results of operations and capital position may affect the ability of the Corporation to continue paying dividends to its shareholders or repurchase shares of the Corporation’s common stock, as well as the value of the Corporation’s goodwill and its deferred tax assets.

As a bank holding company, the Corporation depends primarily on dividends from its banking and other operating subsidiaries to fund its cash needs, as well as declare dividends to its shareholders and to repurchase shares of its common stock. If as a result of the effects of the COVID-19 pandemic the Corporation’s banking subsidiaries fail to generate sufficient net income to make dividend payments to the bank holding company, this would be expected to have a negative impact on the Corporation’s financial condition, liquidity, results of operation and capital position and affect the ability of the Corporation to pay dividends to its shareholders and to repurchase shares of its common stock.

Furthermore, the impact of the COVID-19 pandemic may also adversely affect the Corporation’s goodwill and the realizability of its deferred tax assets. For example, a further decline in the Corporation’s stock price related to global and/or regional macroeconomic conditions, the continued weakness in the Puerto Rico economy and fiscal situation, reduced future earnings estimates and the continuance of the current interest rate environment could ~~have a material impact on the determination of the fair value of our reporting units, which could in turn result in an impairment of goodwill. Similarly, the~~COVID-19 pandemic’s impact on the expected profitability of our businesses may affect the realizability of our deferred tax assets in our Puerto Rico and U.S. operations. An impairment of goodwill or a write-down of the Corporation’s deferred tax assets would affect the Corporation’s financial condition and results of operation.

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 March 31, 2021.

Issuer Purchases of Equity Securities

In April 2004, the Corporation’s shareholders adopted the Popular, Inc. 2004 Omnibus Incentive Plan. As of March 31, 2020, the maximum number of shares of common stock remaining available for future issuance under this plan was 581,841. In January 2020, the Corporation entered into an accelerated share repurchase transaction (“ASR”) and, in connection therewith, received an initial share delivery of 7,055,919 shares of common stock. In March 2020, the Corporation received 642,400 additional shares after the early termination of the ASR and added to treasury stock 53,323 shares of common stock related to shares that were withheld under Popular’s employee restricted and performance share awards to satisfy tax requirements.

The following table sets forth the details of purchases of Common Stock by the Corporation during the quarter ended March 31, ~~2020~~2021:

Issuer Purchases of Equity Securities	Issuer Purchases of Equity Securities					Issuer Purchases of Equity Securities
Not in thousands	Not in thousands					Not in thousands
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
January 1- January 31	7,055,919	$	56.69	-	$167,047,411	4,780	$	61.81	-
February 1- February 29	-		-	-	167,047,411
March1- March 31	695,723		36.86	-	148,001,779
Total March 31, 2020	7,751,642	$	54.91	-	$148,001,779
February 1- February 28						-		-	-
March 1- March 31						53,755		67.42	-
Total						58,535	$	66.96	-
(1) Includes 58,535 shares of the Corporation’s common stock acquired by the Corporation in connection with the satisfaction of tax withholding obligations on vested awards of restricted stock or restricted stock units granted to directors and certain employees under the Corporation’s Omnibus Incentive Plan. The acquired shares of common stock were added back to treasury stock.						(1) Includes 58,535 shares of the Corporation’s common stock acquired by the Corporation in connection with the satisfaction of tax withholding obligations on vested awards of restricted stock or restricted stock units granted to directors and certain employees under the Corporation’s Omnibus Incentive Plan. The acquired shares of common stock were added back to treasury stock.

~~170~~153

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Index

Exhibit No	Exhibit Description
10.1	Form of Popular, Inc. ~~2020~~2021 Long-Term Equity Incentive Award and Agreement (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, 2020.)
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⁽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 March 31, ~~2020,~~2021, formatted in Inline XBRL (included within the Exhibit 101 attachments)⁽¹⁾

(1) Included herewith

~~171~~154

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: May ~~11, 2020~~10, 2021	By: /s/ Carlos J. Vázquez
	Carlos J. Vázquez
	Executive Vice President &
	Chief Financial Officer

Date: May ~~11, 2020~~10, 2021	By: /s/ Jorge J. García
	Jorge J. García
	Senior Vice President & Corporate Comptroller

~~172~~155

Carrying amount
(In thousands)		December 31, 2019
Commercial real estate	$	670,566
Commercial and industrial		104,756
Mortgage		856,618
Consumer		11,778
Carrying amount		1,643,718
Allowance for loan losses		(74,039)
Carrying amount, net of allowance	$	1,569,679

	ASC 310-30
(In thousands)	For the quarter ended March 31, 2019
Balance at beginning of period	$	122,135
Provision		7,726
Net charge-offs		(5,714)
Balance at end of period	$	124,147

	Commercial and industrial
		Watch	$	-	$	373	$	60	$	304	$	1,330	$	5,704	$	7,434	$	-	$	15,205
		Special Mention		-		150		250		187		486		37		420		-		1,530
		Substandard		-		119		-		-		377		7,786		939		-		9,221
		Pass/Unrated		42,137		200,107		199,983		153,229		145,918		350,024		100,504		-		1,191,902
	Total commercial and industrial		$	42,137	$	200,749	$	200,293	$	153,720	$	148,111	$	363,551	$	109,297	$	-	$	1,217,858

Construction
		Watch	$	-	$	-	$	4,581	$	11,093	$	-	$	22,625	$	-	$	-	$	38,299
		Special Mention		-		-		-		-		-		8,064		-		-		8,064
		Substandard		-		-		5,434		8,572		10,069		18,500		-		-		42,575
		Pass/Unrated		27,149		217,733		164,075		190,824		39,485		9,786		-		-		649,052
Total construction			$	27,149	$	217,733	$	174,090	$	210,489	$	49,554	$	58,975	$	-	$	-	$	737,990

Mortgage
		Substandard	$	-	$	481	$	433	$	-	$	-	$	11,262	$	-	$	-	$	12,176
		Pass/Unrated		106,888		332,525		147,870		12,634		14,498		452,158		-		-		1,066,573
Total mortgage			$	106,888	$	333,006	$	148,303	$	12,634	$	14,498	$	463,420	$	-	$	-	$	1,078,749

Legacy
		Watch	$	-	$	-	$	-	$	-	$	-	$	1,113	$	-	$	-	$	1,113
		Special Mention		-		-		-		-		-		197		-		-		197
		Substandard		-		-		-		-		-		4,697		-		-		4,697
		Pass/Unrated		1,835		2,559		-		-		-		10,034		-		-		14,428
Total legacy			$	1,835	$	2,559	$	-	$	-	$	-	$	16,041	$	-	$	-	$	20,435

December 31, 2019
				Special										Pass/
(In thousands)		Watch		Mention		Substandard		Doubtful		Loss		Sub-total		Unrated		Total
Puerto Rico
Commercial multi-family		$	1,341	$	3,870	$	1,793	$	-	$	-	$	7,004	$	140,845	$	147,849
Commercial real estate non-owner occupied			492,357		166,810		239,448		3,290		-		901,905		1,206,313		2,108,218
Commercial real estate owner occupied			192,895		184,678		183,377		1,629		-		562,579		1,023,750		1,586,329
Commercial and industrial			592,861		170,183		130,872		148		16		894,080		2,524,654		3,418,734
	Total Commercial		1,279,454		525,541		555,490		5,067		16		2,365,568		4,895,562		7,261,130
Construction			340		649		20,771		-		-		21,760		115,710		137,470
Mortgage			2,187		2,218		127,621		-		-		132,026		6,034,722		6,166,748
Leasing			-		-		3,590		-		68		3,658		1,055,849		1,059,507
Consumer:
	Credit cards		-		-		19,461		-		-		19,461		1,104,339		1,123,800
	HELOCs		-		-		-		-		-		-		5,038		5,038
	Personal		77		-		19,558		-		-		19,635		1,348,515		1,368,150
	Auto		-		-		30,775		-		372		31,147		2,886,375		2,917,522
	Other		459		11		15,020		-		53		15,543		125,324		140,867
	Total Consumer		536		11		84,814		-		425		85,786		5,469,591		5,555,377
Total Puerto Rico		$	1,282,517	$	528,419	$	792,286	$	5,067	$	509	$	2,608,798	$	17,571,434	$	20,180,232
Popular U.S.
Commercial multi-family		$	48,359	$	13,827	$	8,433	$	-	$	-	$	70,619	$	1,576,691	$	1,647,310
Commercial real estate non-owner occupied			80,608		24,383		100,658		-		-		205,649		1,664,647		1,870,296
Commercial real estate owner occupied			27,298		5,709		13,826		-		-		46,833		292,302		339,135
Commercial and industrial			25,679		1,460		20,386		-		-		47,525		1,147,355		1,194,880
	Total Commercial		181,944		45,379		143,303		-		-		370,626		4,680,995		5,051,621
Construction			46,644		17,291		44,798		-		-		108,733		584,889		693,622
Mortgage			-		-		11,091		-		-		11,091		1,005,693		1,016,784
Legacy			388		202		1,528		-		-		2,118		19,987		22,105
Consumer:
	Credit cards		-		-		-		-		-		-		36		36
	HELOCs		-		-		2,024		-		7,930		9,954		107,389		117,343
	Personal		-		-		1,664		-		403		2,067		322,373		324,440
	Other		-		-		-		-		-		-		690		690
	Total Consumer		-		-		3,688		-		8,333		12,021		430,488		442,509
Total Popular U.S.		$	228,976	$	62,872	$	204,408	$	-	$	8,333	$	504,589	$	6,722,052	$	7,226,641
Popular, Inc.
Commercial multi-family		$	49,700	$	17,697	$	10,226	$	-	$	-	$	77,623	$	1,717,536	$	1,795,159
Commercial real estate non-owner occupied			572,965		191,193		340,106		3,290		-		1,107,554		2,870,960		3,978,514
Commercial real estate owner occupied			220,193		190,387		197,203		1,629		-		609,412		1,316,052		1,925,464
Commercial and industrial			618,540		171,643		151,258		148		16		941,605		3,672,009		4,613,614
	Total Commercial		1,461,398		570,920		698,793		5,067		16		2,736,194		9,576,557		12,312,751
Construction			46,984		17,940		65,569		-		-		130,493		700,599		831,092
Mortgage			2,187		2,218		138,712		-		-		143,117		7,040,415		7,183,532
Legacy			388		202		1,528		-		-		2,118		19,987		22,105
Leasing			-		-		3,590		-		68		3,658		1,055,849		1,059,507
Consumer:
	Credit cards		-		-		19,461		-		-		19,461		1,104,375		1,123,836
	HELOCs		-		-		2,024		-		7,930		9,954		112,427		122,381
	Personal		77		-		21,222		-		403		21,702		1,670,888		1,692,590
	Auto		-		-		30,775		-		372		31,147		2,886,375		2,917,522
	Other		459		11		15,020		-		53		15,543		126,014		141,557
	Total Consumer		536		11		88,502		-		8,758		97,807		5,900,079		5,997,886
Total Popular, Inc.		$	1,511,493	$	591,291	$	996,694	$	5,067	$	8,842	$	3,113,387	$	24,293,486	$	27,406,873

The following table presents the weighted average obligor risk rating at December 31, 2019 for those classifications that consider a range of rating scales.

Weighted average obligor risk rating		(Scales 11 and 12)			(Scales 1 through 8)
Puerto Rico:			Substandard			Pass
Commercial multi-family				11.82		6.02
Commercial real estate non-owner occupied				11.17		6.77
Commercial real estate owner occupied				11.36		7.30
Commercial and industrial				11.26		7.20
	Total Commercial			11.25		7.10
Construction				11.01		7.85

Popular U.S.:			Substandard			Pass
Commercial multi-family				11.25		7.37
Commercial real estate non-owner occupied				11.00		6.94
Commercial real estate owner occupied				11.02		7.48
Commercial and industrial				11.01		6.63
	Total Commercial			11.02		7.04
Construction				11.00		7.74
Legacy				11.25		7.95

December 31, 2019
Puerto Rico
	Impaired Loans – With an						Impaired Loans
	Allowance						With No Allowance				Impaired Loans - Total
			Unpaid						Unpaid				Unpaid
	Recorded		principal		Related		Recorded		principal		Recorded		principal			Related
(In thousands)	investment		balance		allowance		investment		balance		investment		balance			allowance
Commercial multi-family	$	1,196	$	1,229	$	4	$	1,017	$	1,247	$	2,213	$	2,476	$	4
Commercial real estate non-owner occupied		44,975		45,803		12,281		149,587		173,124		194,562		218,927		12,281
Commercial real estate owner occupied		105,841		122,814		5,077		26,365		58,540		132,206		181,354		5,077
Commercial and industrial		43,640		47,611		3,171		24,831		44,255		68,471		91,866		3,171
Construction		119		119		6		-		-		119		119		6
Mortgage		420,949		479,936		40,596		101,520		134,331		522,469		614,267		40,596
Leasing		507		507		61		-		-		507		507		61
Consumer:
Credit cards		24,475		24,475		2,957		-		-		24,475		24,475		2,957
Personal		65,521		65,521		17,142		-		-		65,521		65,521		17,142
Auto		310		310		51		-		-		310		310		51
Other		851		851		109		-		-		851		851		109
Total Puerto Rico	$	708,384	$	789,176	$	81,455	$	303,320	$	411,497	$	1,011,704	$	1,200,673	$	81,455

(In thousands)
Remaining 2020	$	3,897
Year 2021		3,559
Year 2022		2,683
Year 2023		2,642
Year 2024		2,355
Later years		5,007

		PRLP 2011 Holdings, LLC				PR Asset Portfolio 2013-1 International, LLC
(In thousands)		March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Assets
Other assets:
	Equity investment	$	5,276	$	6,306	$	3,657	$	3,333
Total assets		$	5,276	$	6,306	$	3,657	$	3,333
Liabilities
Deposits		$	(20)	$	(3)	$	(5,793)	$	(5,081)
Total liabilities		$	(20)	$	(3)	$	(5,793)	$	(5,081)
Total net assets		$	5,256	$	6,303	$	(2,136)	$	(1,748)
Maximum exposure to loss		$	5,256	$	6,303	$	-	$	-

			At March 31, 2020
								All other
				Popular Inc.		PNA		subsidiaries and		Elimination		Popular, Inc.
(In thousands)				Holding Co.		Holding Co.		eliminations		entries		Consolidated
Assets:
Cash and due from banks				$	76,617	$	-	$	445,553	$	(76,619)	$	445,551
Money market investments					211,343		13,099		5,941,374		(224,100)		5,941,716
Trading account debt securities, at fair value					-		-		42,545		-		42,545
Debt securities available-for-sale, at fair value					-		-		15,813,301		-		15,813,301
Debt securities held -to maturity, at amortized cost					8,726		2,835		83,702		-		95,263
	Less - Allowance for credit losses				-		-		13,390		-		13,390
	Debt securities held-to-maturity, net				8,726		2,835		70,312		-		81,873
Equity securities					11,284		20		151,873		(119)		163,058
Investment in subsidiaries					5,880,938		1,746,263		-		(7,627,201)		-
Loans held-for-sale, at lower of cost or fair value					-		-		87,855		-		87,855
Loans held-in-portfolio					31,888		-		27,809,997		5,955		27,847,840
	Less - Unearned income				-		-		185,568		-		185,568
	Allowance for credit losses				374		-		919,342		-		919,716
	Total loans held-in-portfolio, net				31,514		-		26,705,087		5,955		26,742,556
Premises and equipment, net					4,371		-		547,636		-		552,007
Other real estate					146		-		123,776		-		123,922
Accrued income receivable					272		12		175,873		(79)		176,078
Mortgage servicing assets, at fair value					-		-		147,311		-		147,311
Other assets					95,083		21,614		1,691,922		(20,182)		1,788,437
Goodwill					-		-		671,123		(1)		671,122
Other intangible assets					6,439		-		19,868		-		26,307
Total assets				$	6,326,733	$	1,783,843	$	52,635,409	$	(7,942,346)	$	52,803,639
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
	Non-interest bearing			$	-	$	-	$	9,473,068	$	(76,619)	$	9,396,449
	Interest bearing				-		-		35,624,827		(224,100)		35,400,727
		Total deposits			-		-		45,097,895		(300,719)		44,797,176
Assets sold under agreements to repurchase					-		-		178,766		-		178,766
Other short-term borrowings					-		-		100,000		-		100,000
Notes payable					586,435		94,097		377,599		-		1,058,131
Other liabilities					70,844		1,651		948,224		(20,758)		999,961
Total liabilities					657,279		95,748		46,702,484		(321,477)		47,134,034
Stockholders' equity:
Preferred stock					22,143		-		-		-		22,143
Common stock					1,044		2		56,307		(56,309)		1,044
Surplus					4,357,512		4,173,039		5,847,100		(10,011,351)		4,366,300
Retained earnings (accumulated deficit)					1,948,697		(2,516,370)		(189,242)		2,697,085		1,940,170
Treasury stock, at cost					(870,565)		-		-		(110)		(870,675)
Accumulated other comprehensive income, net of tax					210,623		31,424		218,760		(250,184)		210,623
Total stockholders' equity					5,669,454		1,688,095		5,932,925		(7,620,869)		5,669,605
Total liabilities and stockholders' equity				$	6,326,733	$	1,783,843	$	52,635,409	$	(7,942,346)	$	52,803,639

Income (loss) before equity in losses of subsidiaries		573,596		(1,193)		41,396		(579,497)		34,302
Equity in undistributed losses of subsidiaries		(539,294)		(43,452)		-		582,746		-
Net income (loss)	$	34,302	$	(44,645)	$	41,396	$	3,249	$	34,302
Comprehensive income (loss), net of tax	$	414,863	$	(15,088)	$	424,973	$	(409,885)	$	414,863

Income (loss) before equity in (losses) earnings of subsidiaries		197,805		(2,187)		174,233		(201,926)		167,925
Equity in undistributed (losses) earnings of subsidiaries		(29,880)		12,145		-		17,735		-
Net income	$	167,925	$	9,958	$	174,233	$	(184,191)	$	167,925
Comprehensive income, net of tax	$	271,920	$	28,018	$	278,854	$	(306,872)	$	271,920

	Acquisition of premises and equipment			(231)		-		(19,207)		-		(19,438)
	Proceeds from sale of:
		Premises and equipment and other productive assets		3		-		5,972		-		5,975
		Foreclosed assets		-		-		26,119		-		26,119
Net cash provided by (used in) investing activities				45,024		3,020		(942,912)		(47,962)		(942,830)
Cash flows from financing activities:
	Net increase (decrease) in:
		Deposits		-		-		1,073,526		96,180		1,169,706
		Assets sold under agreements to repurchase		-		-		(80,659)		-		(80,659)
		Other short-term borrowings		-		-		1		-		1
	Payments of notes payable			-		-		(59,526)		-		(59,526)
	Principal payments of finance leases			-		-		(439)		-		(439)
	Proceeds from issuance of common stock			3,981		-		(1,005)		-		2,976
	Dividends paid to parent company			-		-		(202,300)		202,300		-
	Dividends paid			(25,713)		-		-		-		(25,713)
	Net payments for repurchase of common stock			(250,271)		-		2		(45)		(250,314)
	Payments related to tax withholding for share-based compensation			(2,805)		-		-		-		(2,805)
Net cash (used in) provided by financing activities				(274,808)		-		729,600		298,435		753,227
Net decrease in cash and due from banks, and restricted cash				(47,946)		-		(17,721)		48,159		(17,508)
Cash and due from banks, and restricted cash at beginning of period				68,278		-		402,995		(68,022)		403,251
Cash and due from banks, and restricted cash at end of period			$	20,332	$	-	$	385,274	$	(19,863)	$	385,743

Table 23 - Loan Delinquencies

(Dollars in thousands)		March 31, 2020							December 31, 2019
	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	$	348,845	$	12,498,969		2.79	%	$	231,692	$	12,312,751		1.88	%
Construction		4,411		902,380		0.49			1,700		831,092		0.20
Legacy		2,058		20,435		10.07			2,056		22,105		9.30
Leasing		28,315		1,088,542		2.60			18,724		1,059,507		1.77
Mortgage		1,373,800		7,094,757		19.36			1,299,443		7,183,532		18.09
Consumer		324,060		6,057,189		5.35			249,987		5,997,886		4.17
Loans held-for-sale		11,452		87,855		13.04			-		59,203		-
Total	$	2,092,941	$	27,750,127		7.54	%	$	1,803,602	$	27,466,076		6.57	%