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Commitments and contingencies
 12 Months Ended
Dec. 31, 2024
Commitments and Contingencies Disclosure  
Commitments And Contingencies
Note 23 – Commitments and contingencies
Off-balance sheet risk
The Corporation
 
is a
 
party to
 
financial instruments
 
with off-balance
 
sheet credit
 
risk in
 
the normal
 
course of
 
business to
 
meet the
financial needs of its customers. These financial instruments
 
include loan commitments, letters of credit and standby
 
letters of credit.
These instruments involve,
 
to varying
 
degrees, elements of
 
credit and
 
interest rate
 
risk in
 
excess of
 
the amount
 
recognized in
 
the
consolidated statements of financial condition.
The
 
Corporation’s
 
exposure
 
to
 
credit
 
loss
 
in
 
the
 
event
 
of
 
nonperformance
 
by
 
the
 
other
 
party
 
to
 
the
 
financial
 
instrument
 
for
commitments to extend credit, standby
 
letters of credit and financial
 
guarantees is represented by the
 
contractual notional amounts
of those instruments. The
 
Corporation uses the same
 
credit policies in
 
making these commitments and conditional
 
obligations as it
does for those reflected on the consolidated statements
 
of financial condition.
Financial instruments with
 
off-balance sheet credit
 
risk, whose contract
 
amounts represent potential credit
 
risk as of
 
the end of
 
the
periods presented were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
December 31, 2024
December 31, 2023
Commitments to extend credit:
Credit card lines
$
5,599,823
$
6,108,939
Commercial lines of credit
3,971,331
3,626,269
Construction lines of credit
1,131,824
1,287,679
Other consumer unused credit commitments
 
260,121
256,610
Commercial letters of credit
5,002
1,404
Standby letters of credit
144,845
80,889
Commitments to originate or fund mortgage loans
29,604
32,968
At December 31, 2024 and December 31, 2023, the
 
Corporation maintained a reserve of approximately $
15
 
million and $
17
 
million,
respectively, for potential losses associated with unfunded loan commitments
 
related to commercial and construction lines
 
of credit.
Other commitments
At December
 
31, 2024
 
and December 31,
 
2023, the
 
Corporation also maintained
 
other non-credit
 
commitments for
 
approximately
$
2.0
 
million and $
3.3
 
million, respectively, primarily for the acquisition of other investments.
 
Business concentration
Since the Corporation’s business activities are concentrated primarily in Puerto Rico, its results of operations and financial condition
are dependent
 
upon the
 
general trends
 
of the
 
Puerto Rico
 
economy and,
 
in particular,
 
the residential
 
and commercial
 
real estate
markets. The concentration
 
of the Corporation’s
 
operations in Puerto Rico
 
exposes it to
 
greater risk than other
 
banking companies
with a wider geographic base. Its
 
asset and revenue composition by geographical area
 
is presented in Note 36
 
to the Consolidated
Financial Statements.
 
Puerto
 
Rico
 
has
 
faced
 
significant
 
fiscal
 
and
 
economic
 
challenges
 
for
 
over
 
a
 
decade.
 
In
 
response
 
to
 
such
 
challenges,
 
the
 
U.S.
Congress enacted the
 
Puerto Rico Oversight
 
Management and Economic Stability
 
Act (“PROMESA”) in
 
2016, which, among
 
other
things,
 
established
 
the
 
Oversight
 
Board
 
and
 
a
 
framework
 
for
 
the
 
restructuring
 
of
 
the
 
debts
 
of
 
the
 
Commonwealth,
 
its
instrumentalities
 
and
 
municipalities.
 
The
 
Commonwealth
 
and
 
several
 
of
 
its
 
instrumentalities
 
have
 
availed
 
themselves
 
of
 
debt
restructuring proceedings
 
under PROMESA.
 
As
 
of the
 
date of
 
this report,
 
while municipalities
 
have been
 
designated as
 
covered
entities under PROMESA, no municipality has commenced, or has been authorized by the Oversight Board to commence, any such
debt restructuring proceeding under PROMESA.
At December 31, 2024, the Corporation’s direct exposure to the
 
Puerto Rico government and its instrumentalities and municipalities
totaled $
336
 
million, of which
 
$
336
 
million were outstanding
 
($
362
 
million and $
333
 
million at December
 
31, 2023). Of
 
the amount
outstanding,
 
$
323
 
million
 
consists
 
of
 
loans
 
and
 
$
13
 
million
 
are
 
securities
 
($
314
 
million
 
and
 
$
19
 
million
 
at
 
December 31,
 
2023).
Substantially all
 
of the
 
amount outstanding
 
at December
 
31, 2024
 
and December
 
31, 2023
 
were obligations
 
from various
 
Puerto
Rico
 
municipalities.
 
In
 
most
 
cases,
 
these
 
were
 
“general
 
obligations”
 
of
 
a
 
municipality,
 
to
 
which
 
the
 
applicable
 
municipality
 
has
pledged
 
its
 
good
 
faith,
 
credit
 
and
 
unlimited
 
taxing
 
power,
 
or
 
“special
 
obligations”
 
of
 
a
 
municipality,
 
to
 
which
 
the
 
applicable
municipality
 
has
 
pledged
 
other
 
revenues.
 
At
 
December
 
31,
 
2024,
80
%
 
of
 
the
 
Corporation’s
 
exposure
 
to
 
municipal
 
loans
 
and
securities
 
was
 
concentrated
 
in
 
the
 
municipalities
 
of
 
San
 
Juan,
 
Guaynabo,
 
Carolina
 
and
 
Caguas.
In
 
July
 
2024,
 
the
 
Corporation
received scheduled principal payments amounting to $
40
 
million from various obligations from Puerto Rico
 
municipalities.
The following table details the loans and investments representing the Corporation’s direct exposure to
 
the Puerto Rico government
according to their maturities as of December 31, 2024
:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In thousands)
Investment
Portfolio
Loans
Total Outstanding
Total Exposure
Central Government
Within 1 year
3
-
3
3
After 5 to 10 years
1
-
1
1
After 10 years
42
-
42
42
Total Central
 
Government
46
-
46
46
Municipalities
Within 1 year
2,440
12,764
15,204
15,204
After 1 to 5 years
9,520
147,033
156,553
156,553
After 5 to 10 years
655
119,073
119,728
119,728
After 10 years
-
44,582
44,582
44,582
Total Municipalities
12,615
323,452
336,067
336,067
Total Direct Government
 
Exposure
$
12,661
$
323,452
$
336,113
$
336,113
 
 
 
 
 
 
 
 
 
 
 
 
 
In
 
addition,
 
at
 
December
 
31,
 
2024,
 
the
 
Corporation
 
had
 
$
220
 
million
 
in
 
loans
 
insured
 
or
 
securities
 
issued
 
by
 
Puerto
 
Rico
governmental entities
 
but for
 
which the
 
principal source
 
of repayment
 
is non-governmental
 
($
238
 
million at
 
December 31,
 
2023).
These
 
included
 
$
176
 
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,
 
2023 -
 
$
191
 
million).
These mortgage loans are secured by first mortgages on Puerto Rico residential properties and the HFA
 
insurance covers losses in
the event
 
of a
 
borrower default
 
and upon
 
the satisfaction
 
of certain
 
other conditions.
 
The Corporation
 
also had
 
at December
 
31,
2024, $
38
 
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, 2023
 
- $
40
 
million). In
 
the event
 
that the
 
mortgage loans
 
insured by
 
HFA
 
and held
 
by the
 
Corporation
directly or those serving as collateral for the HFA
 
bonds default and the collateral is insufficient to satisfy the
 
outstanding balance of
these loans, HFA’s
 
ability to honor its insurance will depend, among other factors, on the financial condition of HFA
 
at the time such
obligations
 
become
 
due
 
and
 
payable. The
 
Corporation does
 
not consider
 
the
 
government guarantee
 
when
 
estimating the
 
credit
losses
 
associated
 
with
 
this
 
portfolio.
 
Although
 
the
 
Governor
 
is
 
currently
 
authorized
 
by
 
local
 
legislation
 
to
 
impose
 
a
 
temporary
moratorium on the financial obligations of the HFA, a moratorium on
 
such obligations has not been imposed as of
 
the date hereof.
 
BPPR’s
 
commercial loan
 
portfolio also
 
includes loans
 
to
 
private borrowers
 
who
 
are service
 
providers, lessors,
 
suppliers or
 
have
other relationships with the government. These
 
borrowers could be negatively affected by
 
the Commonwealth’s fiscal crisis and
 
the
ongoing
 
Title
 
III
 
proceedings
 
under
 
PROMESA.
 
Similarly,
 
BPPR’s
 
mortgage
 
and
 
consumer
 
loan
 
portfolios
 
include
 
loans
 
to
government
 
employees
 
and
 
retirees,
 
which
 
could
 
also
 
be
 
negatively
 
affected
 
by
 
fiscal
 
measures
 
such
 
as
 
employee
 
layoffs
 
or
furloughs or reductions in pension benefits.
 
In
 
addition,
 
$
2.1
 
billion
 
of
 
residential
 
mortgages
 
and
 
$
87.4
 
million
 
commercial
 
loans
 
were
 
insured
 
or
 
guaranteed
 
by
 
the
 
U.S.
Government or its agencies at December 31, 2024 (compared to $
1.9
 
billion and $
89.2
 
million, respectively, at December 31, 2023).
The Corporation also had
 
U.S. Treasury and
 
obligations from the U.S.
 
Government, its agencies or
 
government sponsored entities
within the
 
portfolio of
 
available-for-sale and
 
held-to-maturity securities as
 
described in
 
Note 5
 
and 6
 
to the
 
Consolidated Financial
Statements.
At December 31, 2024,
 
the Corporation had operations
 
in the United States
 
Virgin Islands (the
 
“USVI”) and had approximately
 
$
28
million
 
in
 
direct
 
exposure
 
to
 
USVI
 
government
 
entities
 
(December
 
31,
 
2023
 
-
 
$
28
 
million).
 
The
 
USVI
 
has
 
been
 
experiencing
 
a
number of
 
fiscal and
 
economic challenges
 
that could
 
adversely affect
 
the ability
 
of its
 
public corporations
 
and instrumentalities
 
to
service their outstanding debt obligations.
 
At December 31,
 
2024, the Corporation
 
had operations in
 
the British Virgin
 
Islands (“BVI”) and
 
it had a
 
loan portfolio amounting
 
to
approximately
 
$
196
 
million
 
comprised
 
of
 
various
 
retail
 
and
 
commercial
 
clients,
 
compared
 
to
 
a
 
loan
 
portfolio
 
of
 
$
205
 
million
 
at
December 31, 2023. At December 31, 2024, the
 
Corporation had no significant exposure to a single
 
borrower in the BVI.
FDIC Special Assessment
 
On
 
November
 
16,
 
2023,
 
the
 
Federal
 
Deposit
 
Insurance
 
Corporation
 
(“FDIC”)
 
approved
 
a
 
final
 
rule
 
that
 
imposes
 
a
 
special
assessment (the “FDIC
 
Special Assessment”) to recover
 
the losses to
 
the deposit insurance
 
fund resulting from
 
the FDIC’s use,
 
in
March 2023,
 
of the systemic
 
risk exception to
 
the least-cost resolution
 
test under the
 
Federal Deposit Insurance
 
Act in
 
connection
with the
 
receiverships of
 
several failed
 
banks. In
 
connection with
 
this assessment,
 
the Corporation
 
recorded an
 
expense of
 
$
71.4
million, $
45.3
 
million net of tax, in the fourth quarter
 
of 2023, representing the full amount of the
 
assessment.
During the first quarter of 2024, the Corporation recorded an additional expense of $
14.3
 
million, $
9.1
 
million net of tax, to reflect the
FDIC's
 
higher
 
loss
 
estimate
 
which increased
 
from
 
$
16.3
 
billion,
 
when
 
approved,
 
to
 
$
20.4
 
billion
 
during the
 
quarter.
 
The
 
special
assessment amount and collection period may
 
change as the estimated loss
 
is periodically adjusted or if
 
the total amount collected
varies.
Legal Proceedings
The nature of Popular’s business ordinarily
 
generates claims, litigation,
arbitration, regulatory and governmental investigations, and
legal
 
and
 
administrative
 
cases
 
and
 
proceedings
 
(collectively,
 
“Legal
 
Proceedings”).
 
Popular’s
 
Legal
 
Proceedings
 
may
 
involve
various lines
 
of business
 
and include
 
claims relating
 
to contract,
 
torts, consumer
 
protection, securities,
 
antitrust, employment,
 
tax
and
 
other
 
laws.
 
The
 
recovery
 
sought
 
in
 
Legal
 
Proceedings
 
may
 
include
 
substantial
 
or
 
indeterminate
 
compensatory
 
damages,
punitive
 
damages,
 
injunctive
 
relief,
 
or
 
recovery
 
on
 
a
 
class-wide
 
basis.
 
When
 
the
 
Corporation
 
determines
 
that
 
it
 
has
 
meritorious
defenses to the claims
 
asserted, it vigorously defends
 
itself. The Corporation will
 
consider the settlement of
 
cases (including cases
where it has meritorious defenses) when, in management’s judgment,
 
it is in the best interest of the Corporation and
 
its stockholders
to do so.
 
On at least
 
a quarterly basis,
 
Popular assesses its
 
liabilities and contingencies
 
relating to outstanding Legal
 
Proceedings
utilizing the most current information available. For
 
matters where it is probable that the Corporation will
 
incur a material loss and the
amount can be reasonably estimated, the Corporation establishes an accrual for
 
the loss. Once established, the accrual is
 
adjusted
on at least a quarterly basis to reflect any relevant
 
developments, as appropriate. For matters where a material loss is not probable,
or the amount of the loss cannot be reasonably
 
estimated, no accrual is established.
 
In certain cases,
 
exposure to loss
 
exists in
 
excess of any
 
accrual to the
 
extent such loss
 
is reasonably possible,
 
but not
 
probable.
Management believes and
 
estimates that the
 
range of reasonably
 
possible losses (with
 
respect to those
 
matters where such
 
limits
may be determined in
 
excess of amounts accrued) for
 
current Legal Proceedings ranged from
 
$
0
 
to approximately $
5.95
 
million as
of
 
December
 
31,
 
2024.
 
In
 
certain
 
cases,
 
management cannot
 
reasonably
 
estimate
 
the
 
possible
 
loss
 
at
 
this
 
time.
 
Any
 
estimate
involves significant judgment, given the
 
varying stages of the
 
Legal Proceedings (including the fact
 
that many of them
 
are currently
in preliminary stages), the
 
existence of multiple
 
defendants in several of
 
the current Legal Proceedings
 
whose share of liability
 
has
yet to be determined, the numerous unresolved issues in
 
many of the Legal Proceedings, and the inherent uncertainty
 
of the various
potential
 
outcomes
 
of
 
such
 
Legal
 
Proceedings.
 
Accordingly,
 
management’s
 
estimate
 
will
 
change
 
from
 
time-to-time,
 
and
 
actual
losses may be more or less than the current estimate.
 
While the
 
outcome of
 
Legal Proceedings
 
is inherently
 
uncertain, based
 
on information
 
currently available,
 
advice of
 
counsel, and
available
 
insurance
 
coverage,
 
management
 
believes
 
that
 
the
 
amount
 
it
 
has
 
already
 
accrued
 
is
 
adequate
 
and
 
any
 
incremental
liability arising from
 
the Legal Proceedings
 
in matters in
 
which a loss
 
amount can be
 
reasonably estimated will not
 
have a material
adverse effect
 
on the Corporation’s
 
consolidated financial position.
 
However, in
 
the event
 
of unexpected future
 
developments, it is
possible that
 
the ultimate
 
resolution of
 
these matters
 
in a
 
reporting period, if
 
unfavorable, could have
 
a material
 
adverse effect
 
on
the Corporation’s consolidated financial position for that period.
 
Set forth below is a description of certain Legal Proceedings.
Insufficient Funds and Overdraft Fees Class Actions
Popular, Inc. (“Popular”) was named as
 
a defendant in a putative class action complaint captioned Golden v.
 
Popular, Inc. originally
filed in March 2020
 
before the U.S. District Court for
 
the Southern District of New
 
York, seeking
 
damages, restitution and injunctive
relief. Plaintiff alleged breach of
 
contract, violation of the covenant of
 
good faith and fair dealing,
 
unjust enrichment,
 
and violation of
New York
 
consumer protection law due to Popular’s purported
 
practice of charging overdraft fees
 
(“OD Fees”)
 
on transactions that,
under plaintiffs’ theory, do
 
not overdraw the account.
The complaint further alleged that Popular assessed OD Fees over authorized
transactions for
 
which sufficient
 
funds are
 
held for
 
settlement. Following
 
a Motion
 
to Compel
 
Arbitration filed
 
by Popular,
 
Plaintiff
filed a Notice of Voluntary Dismissal in April 2022.
 
In May 2022,
 
Plaintiff filed a
 
new complaint captioned Lipsett v.
 
Banco Popular North America
 
d/b/a Popular Community Bank
 
with
the same allegations of
 
his previous complaint against
 
Popular. On May
 
2, 2024, the parties
 
reached a settlement in
 
principle on a
class-wide basis. The Court approved the settlement
 
agreement on January 7, 2025. This matter is
 
now closed.