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 32 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 September 30, 2021, the Corporation had a 16.19% 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 and nine months ended September 30, 2021, the
Corporation recorded $6.3 million and $20.4 million, respectively, in earnings
from its investment in EVERTEC, which had a carrying amount of $105 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 and nine
months ended September 30, 2021, the Corporation recorded $7.8 million and $20.4
million, respectively, in earnings from its investment in BHD León, which had a
carrying amount of $172 million, as of the end of the quarter.



SIGNIFICANT EVENTS



Capital Actions



Accelerated Share Repurchase

On September 9, 2021, the Corporation completed its previously announced
accelerated share repurchase program for the repurchase of an aggregate $350
million of Popular's common stock. Under the terms of the accelerated share
repurchase agreement (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 Popular's Common Stock (the "Initial Shares"). The transaction was
accounted for as a treasury stock transaction. As a result of the receipt of the
Initial Shares, the Corporation recognized in shareholders' equity approximately
$280 million in treasury stock and $70 million as a reduction in capital
surplus. Upon the final settlement of the ASR Agreement, the Corporation
received an additional 828,965 shares and recognized $61 million as treasury
stock with a corresponding increase in its capital surplus account. The
Corporation repurchased a total of 4,614,796 shares at an average purchase price
of $75.84 under the ASR Agreement.



Redemption of Trust Preferred Securities



On November 1, 2021, the Corporation redeemed all outstanding 6.70% Cumulative
Monthly Income Trust Preferred Securities (the "Capital Securities") issued by
the Popular Capital Trust I (the "Trust") (liquidation amount of $25 per
security and amounting to $186,663,800 (or $181,063,250 after excluding the
Corporation's participation in the Trust of $5,600,550) in the aggregate). The
redemption price for the Capital Securities was equal to $25 per security plus
accrued and unpaid distributions up to and excluding the redemption date in the
amount of $0.139583 per security, for a total payment per security in the amount
of $25.139583. Upon redemption, Popular delisted the Capital Securities of the
Popular Capital Trust I (NASDAQ: BPOPN) from the Nasdaq Global Select Market.



Acquisition of K2 Capital Group LLC



On October 15, 2021, Popular Equipment Finance, LLC ("PEF"), a newly-formed
wholly-owned subsidiary of PB, completed the acquisition of certain assets and
the assumption of certain liabilities of Minnesota-based K2 Capital Group LLC's
("K2") equipment

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leasing and financing business (the "Acquired Business"). PEF made a payment to
K2 at closing of approximately $159 million in cash, representing a premium of
approximately $40 million over the book value of K2's net assets. An additional
approximately $29 million in earnout payments could be payable to K2 over the
next three years, contingent upon the achievement of certain agreed-upon
financial targets during such period.



Specializing in the healthcare industry, the Acquired Business provides a variety of lease products, including operating and capital leases, and also offers private label vendor finance programs to equipment manufacturers and healthcare organizations. The acquisition provides PB with a national equipment leasing platform that complements its existing healthcare lending business.

As part of the transaction, PEF acquired approximately $119 million in net assets that consisted mainly of capital leases. All of K2's former employees, including its management team, became PEF employees at the closing of the transaction. The transaction will be accounted for as a business combination.

OVERVIEW

Table 1 provides selected financial data and performance indicators for the quarters and nine-month periods ended September 30, 2021 and 2020.

Net interest income on a taxable equivalent basis - Non-GAAP Financial Measure





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, 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 Tables 2 and 3, along with the
reconciliation to net interest income (GAAP), for the quarter and nine-month
periods ended September 30, 2021 as compared with the same periods in 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 September 30, 2021



? For the quarter ended September 30, 2021, the Corporation recorded net income
of $ 248.1 million, compared to net income of $ 168.4 million for the same
quarter of the previous year. Net interest margin for the third quarter of 2021
was 2.77%, a decrease of 29 basis points when compared to 3.06% for the same
quarter of the previous year, mainly due to earning asset mix driven by higher
money market and investment securities which carry a low yield, and the low
interest rate environment, partially offset by higher interest and fees from
loans under the U.S. Small Business Administration's ("SBA") Paycheck Protection
Program ("PPP"), and lower cost of deposits. On a taxable equivalent basis, the
net interest margin was of 3.04%, compared to 3.37% for the same quarter of the
previous year. The Corporation recorded a release of $61.2 million on its
reserve for credit losses, a decrease of $80.3 million when compared to the same
quarter of 2020, reflecting changes to the economic outlook, qualitative
reserves, and portfolio credit quality. Non-interest income was higher by $40.5
million mostly due to lower unfavorable fair value adjustments on mortgage
servicing rights ("MSRs"); the gains from the sale and partial leaseback of two
corporate office buildings; higher net earnings from the combined portfolio of
investments under the equity method; and higher other service fees due to higher
credit and debit card fees in part due to the business disruptions and the
waiver of service charges and late fees related to the COVID-19 pandemic during
2020. Operating expenses were higher by $27.1 million principally due to higher
personnel costs, mostly related to incentive compensation, and higher
professional fees.

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? Total assets at September 30, 2021 amounted to $74.2 billion, compared to $65.9 billion, at December 31, 2020. The increase was mainly due to higher money market investments and debt securities available-for-sale.



? Total deposits at September 30, 2021 increased by $9.1 billion when compared
to deposits at December 31, 2020, reflecting growth across various sectors at
BPPR, mainly in the Puerto Rico public sector.

? At September 30, 2021, the Corporation's tangible book value per common share was $66.01.



? Capital ratios continued to be strong. As of September 30, 2021, the
Corporation's common equity tier 1 capital ratio was 17.36%, the tier 1 leverage
ratio was 7.38%, and the total capital ratio was 19.90%. Refer to Table 8 for
capital ratios.

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.

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.

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 2020 Form 10-K, while not all inclusive, discusses additional
information about the business of the Corporation. Readers should also refer to
"Part I - Item 1A" of the 2020 Form 10-K and "Part II - Item 1A" of any
subsequent Form 10-Q for a discussion of certain risks and uncertainties to
which the Corporation is subject, many beyond the Corporation's control that, in
addition to the other information in this Form 10-Q, readers should consider.

The Corporation's common stock is traded on the NASDAQ Global Select Market under the symbol BPOP.


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Table 1 - Financial
Highlights

Financial Condition
Highlights
                                          Ending balances at               

Average for the nine months ended


                               September 30,  December 31,                   September 30,      September
(In thousands)                          2021          2020      Variance              2021       30, 2020     Variance
Money market investments    $ 17,526,238      $ 11,640,880   $ 5,885,358   $ 15,364,275    $  7,628,941   $  7,735,334
Investment securities         24,697,876        21,864,184     2,833,692     22,386,777      18,868,073      3,518,704
Loans                         28,946,685        29,484,651     (537,966)     29,120,107      28,077,906      1,042,201
Earning assets                71,170,799        62,989,715     8,181,084     66,871,159      54,574,920     12,296,239
Total assets                  74,189,163        65,926,000     8,263,163     69,938,785      57,776,191     12,162,594
Deposits                      66,013,561        56,866,340     9,147,221     61,864,897      49,875,563     11,989,334
Borrowings                     1,263,413         1,346,284      (82,871)      1,314,592       1,340,437       (25,845)
Stockholders' equity           5,982,971         6,028,687      (45,716)    

5,715,792 5,379,472 336,320



Operating Highlights                Quarters ended September 30,                 Nine months ended September 30,
(In thousands, except per           2021              2020      Variance           2021            2020       Variance
share information)
Net interest income         $    489,393      $    461,021   $    28,372   $  1,456,307    $  1,384,997   $     71,310
Provision for credit losses     (61,173)            19,138      (80,311)      (160,414)         271,318      (431,732)
(benefit)
Non-interest income              169,258           128,767        40,491        477,451         367,465        109,986
Operating expenses               388,168           361,066        27,102      1,131,881       1,081,905         49,976
Income before income tax         331,656           209,584       122,072        962,291         399,239        563,052
Income tax expense                83,542            41,168        42,374        233,466          68,893        164,573
Net income                  $    248,114      $    168,416   $    79,698   $    728,825    $    330,346   $    398,479
Net income applicable to    $    247,761      $    168,064   $    79,697   $    727,766    $    328,941   $    398,825
common stock
Net income per common share $       3.09      $       2.01   $      1.08   $       8.89    $       3.80   $       5.09
- basic
Net income per common share $       3.09      $       2.00   $      1.09   $       8.87    $       3.80   $       5.07
- diluted
Dividends declared per      $       0.45      $       0.40   $      0.05   $       1.30    $       1.20   $       0.10
common share

                                                Quarters ended September
                                                                     30,                 Nine months ended September 30,
Selected Statistical                                  2021          2020                           2021           2020
Information
Common Stock Data
End market price                              $      77.67         36.27                   $      77.67          36.27
Book value per common share at period                74.66         69.94                          74.66          69.94

end


Profitability Ratios
Return on assets                                      1.34 %        1.06 %                         1.39 %         0.76 %
Return on common equity                              17.10         12.46                          17.09           8.21
Net interest spread                                   2.69          2.93                           2.82           3.23
Net interest spread (taxable equivalent)              2.96          3.24                           3.13           3.56
- Non-GAAP
Net interest margin                                   2.77          3.06                           2.92           3.39
Net interest margin (taxable equivalent)              3.04          3.37                           3.23           3.72
- Non-GAAP
Capitalization Ratios
Average equity to average                             7.87 %        8.53 %                         8.17 %         9.31 %
assets
Common equity Tier 1                                 17.36         15.93                          17.36          15.93
capital
Tier I capital                                       17.43         16.01                          17.43          16.01
Total capital                                        19.90         18.49                          19.90          18.49
Tier 1 leverage                                       7.38          7.80                           7.38           7.80


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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 2020
Form 10-K. Also, refer to Note 2 to the Consolidated Financial Statements
included in the 2020 Form 10-K for a summary of the Corporation's significant
accounting policies and to Note 3 to the Consolidated Financial Statements
included in this Form 10-Q for information on recently adopted accounting
standard updates.

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OPERATING RESULTS ANALYSIS

NET INTEREST INCOME

Net interest income for the third quarter of 2021 was $489.4 million, an
increase of $28.4 million when compared to $461.0 million for the same quarter
of 2020. Taxable equivalent net interest income was $536.3 million for the third
quarter of 2021 compared to $506.8 million in the third quarter of 2020, an
increase of $29.5 million.

Net interest margin for the third quarter of 2021 was 2.77%, a decrease of 29
basis points when compared to 3.06% for the same quarter of the previous year.
The decrease in the net interest margin is due to earning assets mix, a higher
proportion of money market and investment securities resulting from a higher
volume of deposits in the quarter, partially offset by higher loan fees related
to loans issued under the SBA PPP and a lower cost of deposits. The net interest
margin, on a taxable equivalent basis, for the third quarter of 2021 was 3.04%,
a decrease of 33 basis points when compared to 3.37% for the same quarter of
2020. The detailed variances of the increase in net interest income are
described below:

Positive variances:



? Higher interest income from money market investments due to both a higher
volume and a higher interest rate received on excess reserves at the Federal
Reserve by 5 basis points, effective in mid-June,2021. Also, higher trading and
investment securities mainly driven by a higher volume of mortgage-backed
securities and higher yields from U.S. Treasury Notes due to renewal of
maturities at longer terms. These larger balances resulted from an increase in
deposits in most categories;

? Higher interest income from commercial loans driven by interest and fees from
PPP loans which increased $11.7 million when compared to the third quarter of
2020, partially offset by lower volume upon the SBA forgiveness of PPP loans.
The average balance and yield of PPP loans in the third quarter of 2021 was
$852.4 million and 10.10%, respectively, compared to $1.4 billion and 2.88% in
the same quarter of 2020;

? The auto and lease financing portfolios increased by $561.2 million or 14%
driven by increased demand for automobiles in the quarters after the COVID-19
related lockdown and higher household liquidity resulting from COVID-19 relief
federal assistances;

? Mortgage loans increased 8% when compared to the same quarter in 2020, driven
by the $807.6 million bulk loan repurchases from our GSE loan servicing
portfolios that occurred at the end of September 2020, partially offset by lower
yields also related to the lower rate of the repurchased portfolio; and

? Lower interest expense on deposits due to the decrease in interest cost by 14
basis points resulting from the decrease in market rates in March 2020 and the
subsequent effect on these liabilities. In the U.S. the cost of interest-bearing
deposits decreased 42 basis points when compared to the same quarter in 2020 and
in P.R. the decrease was 7 basis points. The impact from lower rates was
partially offset by higher average balance of interest-bearing deposits by $8.2
billon when compared with the same quarter in 2020.

Partially offset by:

? Lower interest income from consumer loans due to lower average volume both on the installment loan and credit card portfolios.



Interest income for the quarter ended September 30, 2021, included the
amortization of deferred loan fees, prepayment penalties, late fees and the
amortization of premium/discounts, including the amortization of the discount of
PCD loans, amounted to $27.0 million compared to $13.7 million reported in the
same quarter of 2020. The increase in this amortization is related to higher
amortized fees resulting mainly from the SBA forgiveness of PPP loans of $19.9
million compared to $6.7 million in the third quarter of 2020, partially offset
by a lower amortization of the fair value discount of auto and credit card
portfolios acquired in previous years.

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Table 2 - Analysis of Levels & Yields on a Taxable Equivalent Basis (Non-GAAP)


   Quarter ended September 30,
                                                                                                                                      Variance
           Average Volume                 Average Yields / Costs                                          Interest                Attributable to
    2021       2020    Variance         2021      2020    Variance                                2021       2020     Variance     Rate     Volume
           (In millions)                                                                                          (In thousands)
                                                                        Money market
$   18,041 $   10,853 $     7,188       0.15 %    0.10 %       0.05 %   investments           $    6,914 $    2,773 $    4,141 $    1,781 $   2,360
                                                                        Investment securities

23,154 20,405 2,749 2.10 2.22 (0.12) [1]

                      121,857    113,603      8,254    (6,872)    15,126
        84         79           5       4.97      5.44       (0.47)     Trading securities         1,051      1,079       (28)       (94)        66
                                                                        Total money market,
                                                                           investment and
                                                                           trading

41,279 31,337 9,942 1.25 1.49 (0.24) securities

            129,822    117,455     12,367    (5,185)    17,552
                                                                        

Loans:

13,265 13,669 (404) 5.36 4.95 0.41 Commercial

            179,204    170,124      9,080     14,215   (5,135)

854 930 (76) 5.40 5.67 (0.27) Construction

           11,621     13,251    (1,630)      (583)   (1,047)

1,317 1,122 195 5.99 6.08 (0.09) Leasing

                19,737     17,069      2,668      (253)     2,921

7,652 7,094 558 5.11 5.40 (0.29) Mortgage

               97,806     95,770      2,036    (5,258)     7,294

2,435 2,722 (287) 11.28 11.21 0.07 Consumer

               67,749     76,696    (8,947)    (1,178)   (7,769)

3,372 3,006 366 8.37 9.08 (0.71) Auto

                   71,171     68,604      2,567    (5,409)     7,976

28,895 28,543 352 6.15 6.16 (0.01) Total loans

              447,288    441,514      5,774      1,534     4,240

$ 70,174 $ 59,880 $ 10,294 3.27 % 3.72 % (0.45) % Total earning assets $ 577,110 $ 558,969 $ 18,141 $ (3,651) $ 21,792


                                                                        Interest bearing
                                                                        deposits:
                                                                          

NOW and money $ 27,773 $ 21,225 $ 6,548 0.11 % 0.17 % (0.06) % market [2] $ 7,935 $ 9,063 $ (1,128) $ (4,170) $ 3,042

15,621 13,103 2,518 0.16 0.25 (0.09) Savings

                 6,353      8,328    (1,975)    (3,613)     1,638

6,957 7,810 (853) 0.73 1.03 (0.30) Time deposits 12,741 20,164 (7,423) (4,975) (2,448)


                                                                        Total interest
    50,351     42,138       8,213       0.21      0.35       (0.14)     bearing deposits          27,029     37,555   (10,526)   (12,758)     2,232
        87        138        (51)       0.25      1.19       (0.94)     Short-term borrowings         54        416      (362)      (260)     (102)
                                                                        Other medium and
     1,197      1,220        (23)       4.57      4.67       (0.10)        long-term debt         13,686     14,209      (523)      (375)     (148)
                                                                        Total interest
                                                                        bearing
    51,635     43,496       8,139       0.31      0.48       (0.17)        liabilities            40,769     52,180   (11,411)   (13,393)     1,982
    14,955     12,806       2,149                                       Demand deposits
                                                                        Other sources of
     3,584      3,578           6                                       funds
$   70,174 $   59,880 $    10,294       0.23 %    0.35 %     (0.12) %   Total source of funds     40,769     52,180   (11,411)   (13,393)     1,982
                                                                        Net interest margin/
                                                                           income on a
                                                                           taxable equivalent
                                        3.04 %    3.37 %     (0.33) %      basis (Non-GAAP)      536,341    506,789     29,552 $    9,742 $  19,810
                                        2.96 %    3.24 %     (0.28) %   Net interest spread
                                                                        Taxable equivalent
                                                                        adjustment                46,947     45,769      1,178
                                                                        Net interest margin/
                                                                               income
                                                                           non-taxable
                                                                           equivalent basis
                                        2.77 %    3.06 %     (0.29) %      (GAAP)             $  489,394 $  461,020 $   28,374
Note: The changes that are not due solely to volume or rate are allocated to volume and rate based on the proportion of the change in each
category.
[1] Average 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.


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Net interest income for the nine-month period ended September 30, 2021 was $1.5
billion, or $71.3 million higher than the same period in 2020. Taxable
equivalent net interest income was $1.6 billion for the nine months ended
September 30, 2021, or $90.7 million higher than the same period in 2020. Net
interest margin was 2.92%, a decrease of 47 basis points when compared to 3.39%
in 2020. The decrease in net interest margin is mainly driven by earning assets
mix with a higher volume of money market and investment securities, which
resulted in higher interest income but contributed negatively to the decrease in
net interest margin due to the low rate of these assets and the low interest
rate environment. Net interest margin, on a taxable equivalent basis, for the
nine months ended September 30, 2021, was 3.23%, a decrease of 49 basis points
when compared to the 3.72% for the same period of 2020. The drivers of the
variances in net interest income for the nine-month period are:

Positive variances:



? Higher interest income from money market, trading and investment securities.
Part of the liquidity resulting from the increase in deposits has been used to
acquire tax exempt investment securities in P.R.

? Higher interest income from commercial loans driven by interest and fees from PPP loans.

? Higher interest income from the auto and lease financing portfolios due to the increase in volume of $473.4 million or 12%.



? Mortgage loans increased 10% when compared to the same period in 2020, driven
by the $807.6 million bulk loan repurchases from our GSE loan servicing
portfolios that occurred at the end of September 2020, partially offset by lower
yields also related to the lower rate of the repurchased portfolio.

? Lower interest expense on deposits due to lower interest cost resulting from
the decrease in market rates and the subsequent effect on these liabilities,
partially offset by higher average balance of deposits.

Negative variances:

? Lower interest income from consumer loans driven by lower volume of credit cards and personal loans.



Net interest income for the nine months ended September 30, 2021, included the
amortization of deferred loan fees, prepayment penalties, late fees and the
amortization of premium/discounts, including the amortization of the discount of
PCD loans, amounted to $69.7 million, compared to $39.3 million in the same
period of 2020. The increase in loan fee income was driven by PPP loan fees,
which amounted to $50.8 million for the nine-month periods ended September 30,
2021 versus $18.9 million in the nine-month period ended September 30, 2020.

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Table 3 - Analysis of Levels & Yields on a Taxable Equivalent Basis from Continuing Operations (Non-GAAP) Nine months ended September 30,


                                                                                                                                      Variance
       Average Volume            Average Yields / Costs                                                  Interest                  Attributable to
   2021     2020   Variance     2021    2020    Variance                                        2021        2020      Variance     Rate      Volume
        (In millions)                                                                                             (In thousands)

$ 15,364 $ 7,629 $ 7,735 0.12 % 0.29 % (0.17) % Money market investments $ 14,300 $ 16,789 $ (2,489) $ (13,259) $ 10,770


  22,302    18,804     3,498     2.29    2.45     (0.16)        Investment securities [1]       382,280     344,926     37,354   (26,880)     64,234
      85        64        21     5.06    6.20     (1.14)        Trading securities                3,218       2,960        258      (619)        877
                                                                Total money market,
                                                                        investment and
                                                                        trading
  37,751    26,497    11,254     1.42    1.84     (0.42)                securities              399,798     364,675     35,123   (40,758)     

75,881


                                                                Loans:
  13,475    13,122       353     5.32    5.31       0.01                Commercial              535,126     522,126     13,000    (1,048)     14,048
     874       909      (35)     5.39    5.83     (0.44)                Construction             35,125      39,649    (4,524)    (3,054)    (1,470)
   1,265     1,092       173     6.01    6.04     (0.03)                Leasing                  57,055      49,480      7,575      (228)      7,803
   7,761     7,054       707     5.08    5.32     (0.24)                Mortgage                295,598     281,191     14,407   (12,928)     27,335
   2,460     2,916     (456)    11.24   11.40     (0.16)                Consumer                206,896     248,912   (42,016)    (3,997)   (38,019)
   3,285     2,985       300     8.55    9.06     (0.51)                Auto                    209,460     202,372      7,088   (12,551)     19,639
  29,120    28,078     1,042     6.16    6.39     (0.23)        Total loans                   1,339,260   1,343,730    (4,470)   (33,806)     29,336
$ 66,871 $  54,575 $  12,296     3.48 %  4.18 %   (0.70) %      Total earning assets        $ 1,739,058 $ 1,708,405 $   30,653 $ (74,564) $  105,217
                                                                Interest bearing deposits:
                                                                        NOW and money
$ 25,201 $  18,956 $   6,245     0.13 %  0.32 %   (0.19) %              market [2]          $    24,169 $    45,909 $ (21,740) $ (33,877) $   12,137
  15,128    11,899     3,229     0.18    0.34     (0.16)                Savings                  20,289      30,239    (9,950)   (17,340)      7,390
   7,108     8,076     (968)     0.77    1.10     (0.33)                Time deposits            40,832      66,287   (25,455)   (17,281)    (8,174)
                                                                Total interest bearing
  47,437    38,931     8,506     0.24    0.49     (0.25)        deposits                         85,290     142,435   (57,145)   (68,498)     11,353
      92       178      (86)     0.38    1.58     (1.20)        Short-term borrowings               259       2,109    (1,850)    (1,182)      (668)
                                                                Other medium and
   1,222     1,162        60     4.54    4.89     (0.35)                long-term debt           41,518      42,587    (1,069)    (2,816)      

1,747


                                                                Total 

interest bearing


  48,751    40,271     8,480     0.35    0.62     (0.27)                liabilities             127,067     187,131   (60,064)   (72,496)     12,432
  14,428    10,945     3,483                                    Demand deposits
   3,692     3,359       333                                    Other sources of funds
$ 66,871 $  54,575 $  12,296     0.25 %  0.46 %   (0.21) %      Total source of funds           127,067     187,131   (60,064)   (72,496)     12,432
                                                                Net interest margin/ income
                                                                on a taxable equivalent
                                 3.23 %  3.72 %   (0.49) %      basis (Non-GAAP)              1,611,991   1,521,274     90,717 $  (2,068) $   92,785
                                 3.13 %  3.56 %   (0.43) %      Net interest spread
                                                                Taxable equivalent
                                                                adjustment                      155,684     136,278     19,406
                                                                Net interest margin/ income
                                                                non-taxable equivalent
                                 2.92 %  3.39 %   (0.47) %      basis (GAAP)                $ 1,456,307 $ 1,384,996 $   71,311

Note: The changes that are not due solely to volume or rate are allocated to volume and rate based on the proportion of the change in each category. [1] Average 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.


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Provision for Credit Losses - Loans Held-in-Portfolio and Unfunded Commitments



For the quarter ended September 30, 2021, the Corporation recorded a release of
$60.2 million for its reserve for credit losses related to loans
held-in-portfolio and unfunded commitments. The reserve release related to the
loans-held-in-portfolio for the quarter ended September 30, 2021 was $58.6
million, compared to a provision expense of $19.5 million for the quarter ended
September 30, 2020. The decrease reflects the improvements in credit quality,
changes in the macroeconomic outlook, and changes in qualitative reserves. The
reserve release related to unfunded commitments for the third quarter of 2021
was $1.5 million, compared to a provision expense of $6.6 million for the same
period of 2020.



For the quarter ended September 30, 2021, the Corporation recorded a reserve
release for the BPPR segment of $36.0 million, compared to a provision expense
of $7.7 million for the quarter ended September 30, 2020, a decrease of $43.7
million. The Popular U.S. segment recorded a reserve release of $22.7 million
for the quarter ended September 30, 2021, a decrease of $34.5 million, compared
to a provision expense of $11.8 million for the same quarter in 2020.



For the nine-month period ended September 30, 2021, the Corporation recorded a
release of $159.4 million for its reserve for credit losses related to loans
held-in-portfolio and unfunded commitments. The reserve release related to the
loans-held-in-portfolio for the nine-month period ended September 30, 2021 was
$151.9 million, compared to a provision expense of $271.6 million for the nine
month period ended September 30, 2020. The decrease reflects the improvements in
credit quality, changes in the macroeconomic outlook, and changes in qualitative
reserves. The provision for unfunded commitments for the nine-month period of
2021 reflected a benefit of $7.4 million, compared to a provision expense of
$10.0 million for the same period of 2020.



The reserve release related to loans held-in-portfolio for the BPPR segment was
$98.5 million for the nine-month period ended September 30, 2021, compared to a
provision expense of $181.1 million for the nine-month period ended September
30, 2020, a decrease of $279.6 million. The reserve release related to loans
held-in-portfolio for the Popular U.S. segment was $53.5 million for the
nine-month period ended September 30, 2021, a decrease of $143.9 million,
compared to a provision expense of $90.4 million for the same period in 2020.



At September 30, 2021, the total allowance for credit losses for loans
held-in-portfolio amounted to $718.6 million, compared to $896.3 million as of
December 31, 2020. The ratio of the allowance for credit losses to loans
held-in-portfolio was 2.49% at September 30, 2021, compared to 3.05% at December
31, 2020. Refer to Note 8 to the Consolidated Financial Statements, for
additional information on the Corporation's methodology to estimate its
allowance for credit 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 is related to the portfolio of obligations from the
Government of Puerto Rico, states and political subdivisions. For the quarter
and nine-month period ended September 30, 2021, the Corporation recorded a
reserve release of $1.0 million for each period, compared to a benefit of $0.3
million and $0.2 million, respectively, for the quarter and nine-month period
ended September 30, 2020. At September 30, 2021, the total allowance for credit
losses for this portfolio amounted to $9.2 million, compared to $10.3 million as
of December 31, 2020. Refer to Note 8 for additional information on the ACL for
this portfolio.



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Non-Interest Income



Non-interest income amounted to $169.3 million for the quarter ended September
30, 2021, compared to $128.8 million for the same quarter of the previous year.
The increase in non-interest income by $40.5 million was primarily driven by:

? higher service charges on deposit accounts by $4.5 million principally due to
higher fees on transactional cash management services at BPPR in part due to the
business disruptions and the waiver of fees related to the COVID-19 pandemic
during 2020;

? higher other service fees by $10.6 million, principally at the BPPR segment,
due to higher credit and debit card fees by $7.4 million mainly in interchange
income resulting from higher transactional volumes in part due to the business
disruptions and the waiver of service charges and late fees related to the
COVID-19 pandemic during 2020;

? higher income from mortgage banking activities by $17.8 million mainly due to
lower unfavorable fair value adjustments on mortgage servicing rights ("MSRs")
by $14.5 million, of which $8.8 million was related to the bulk loan repurchases
from the Corporation's GNMA, FNMA and FHLMC loan servicing portfolio during the
third quarter of 2020; $10.5 million in interest advanced losses related to the
loans repurchased in bulk from GNMA during 2020; partially offset by lower gains
on securitization transactions by $3.8 million and lower mortgage servicing fees
by $3.6 million mostly due to the collection of fees in arrears at the time of
the previously mentioned bulk loan repurchase in 2020;

? a favorable variance in net (loss) gain on sale of loans, including valuation
adjustments, of $2.2 million mainly due to a $2.0 million negative valuation
adjustment recognized during the third quarter of 2020 on the held-for-sale taxi
medallion portfolio at PB; and

? higher other operating income by $13.1 million mostly due to a gain of $7.0
million recognized by BPPR as a result of the sale and partial leaseback of two
corporate office buildings and higher net earnings from the combined portfolio
of investments under the equity method by $4.7 million;

partially offset by:

? an unfavorable variance in net (loss) gain on equity securities of $5.6 million mainly related to a $4.1 million gain on sale of certain equity securities at PB during the third quarter of 2020; and



? an unfavorable variance in adjustments to indemnity reserves of $2.1 million
mainly due to a $5.1 million recourse reserve release during the third quarter
of 2020 related to the bulk loan repurchase from FNMA and FHLMC.



Non-interest income amounted to $477.5 million for the nine months ended September 30, 2021, compared to $367.5 million for the same period of the previous year. Non-interest income increased by $110.0 million primarily driven by:



? higher service charges on deposit accounts by $12.4 million principally due to
higher fees on transactional cash management services at BPPR in part due to the
business disruptions and the waiver of fees related to the COVID-19 pandemic
during 2020;

? higher other service fees by $40.7 million, principally at the BPPR segment,
due to higher credit and debit card fees by $34.6 million mainly in interchange
income resulting from higher transactional volumes in part due to the business
disruptions and the waiver of service charges and late fees related to the
COVID-19 pandemic during 2020;

? higher income from mortgage banking activities by $32.4 million mainly due to
lower unfavorable fair value adjustments on MSRs by $21.7 million and $10.5
million in interest advanced losses recognized as a result of the previously
mentioned bulk GNMA repurchase during 2020; and

? higher other operating income by $24.6 million principally due to higher net
earnings from the combined portfolio of investments under the equity method by
$11.6 million, the previously mentioned $7.0 million gain on sale of two
corporate office buildings, and higher daily auto rental revenues by $3.2
million.

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Operating Expenses



Operating expenses amounted to $388.2 million for the quarter ended September
30, 2021, an increase of $27.1 million when compared with the same quarter of
2020, driven primarily by:



? Higher personnel cost by $21.7 million mainly due to higher incentives related
to the profit-sharing plan which is tied to the Corporation's financial
performance by $7.2 million and higher commission, incentive and other bonuses
by $8.0 million;



? Higher professional fees by $8.2 million due higher programming, processing
and other technology services by $4.3 million mainly due to higher volume of
transactions and higher advisory expense by $4.2 million related to corporate
initiatives; and


? Higher business promotions by $3.5 million due to higher advertising and sponsorship expense by $2.1 million and higher customer reward program expense in our credit card business by $1.1 million.

These increases were partially offset by:





? Lower other operating expenses by $4.9 million mainly due to provision for
unfunded commitments by $6.6 million which is included within the provision for
credit losses caption for 2021 and lower operational losses by $1.7 million;
partially offset by lower gain on sale of repossessed auto units by $1.7 million
and higher credit and debit card processing expenses by $1.2 million due to
higher transactional volumes.



Operating expenses amounted to $1.1 billion for the nine months ended September
30, 2021, an increase of $50.0 million when compared with the same period of
2020, driven primarily by:



? Higher personnel cost by $49.4 million mainly due to due to higher incentives
related to the profit-sharing plan by $21.9 million and higher commission and
incentive by $26.3 million due to performance metrics and salary increases;
higher fringe benefits expense, mainly medical insurance by $6.4 million;
partially offset by higher deferred salaries as a result of higher loan
originations during 2021;



? Higher professional fees by $15.7 million primarily due to higher processing services due to higher volume of transactions; and

? Higher business promotions by $6.0 million due to higher customer reward program expense in our credit card business and higher advertising expense.

These increases were partially offset by:

? Lower OREO expenses by $11.1 million due to higher gain on sale on mortgage, commercial and construction properties by $8.4 million; and





? Lower other operating expenses by $11.5 million mainly due to lower pension
plan cost by $7.5 million due to annual changes in actuarial assumptions,
provision for unfunded commitments by $10.0 million which is included within the
provision for credit losses caption for 2021; partially offset by higher credit
and debit card processing expenses by $4.4 million due to higher transactional
volumes and lower gain on sale of repossessed auto units by $2.2 million.

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Table 4 - Operating Expenses


                                          Quarters ended September 30,        Nine months ended September 30,
(In thousands)                                  2021       2020  Variance         2021          2020   Variance
Personnel costs:
   Salaries                             $     95,185  $  91,891 $   3,294 $    274,814  $    278,116 $  (3,302)
   Commissions, incentives and other
   bonuses                                    25,892     17,849     8,043       85,484        59,183     26,301
   Pension, postretirement and medical
   insurance                                  13,893     10,639     3,254       38,106        31,669      6,437
   Other personnel costs, including
   payroll taxes                              22,677     15,562     7,115       72,926        52,970     19,956
   Total personnel costs                     157,647    135,941    21,706      471,330       421,938     49,392
Net occupancy expenses                        24,896     25,907   (1,011)       75,471        76,552    (1,081)
Equipment expenses                            22,537     24,088   (1,551)       66,917        66,537        380
Other taxes                                   14,459     13,918       541       41,623        40,922        701
Professional fees:

   Collections, appraisals and other
   credit related fees                         3,166      2,862       304        9,972         9,640        332
   Programming, processing and other
   technology services                        69,221     64,876     4,345      202,739       187,082     15,657
   Legal fees, excluding collections           2,535      2,707     (172)        7,267         7,877      (610)
   Other professional fees                    29,787     26,029     3,758       85,832        85,493        339
   Total professional fees                   104,709     96,474     8,235      305,810       290,092     15,718
Communications                                 6,133      5,694       439       18,971        17,222      1,749
Business promotion                            18,116     14,664     3,452       47,148        41,142      6,006
FDIC deposit insurance                         7,181      6,568       613       18,891        16,988      1,903
Other real estate owned (OREO) (income)
expenses                                     (1,722)    (1,615)     (107)     (10,554)           520   (11,074)

Other operating expenses:


   Credit and debit card processing,
   volume and interchange and other
   expenses                                   12,960     11,744     1,216       36,331        31,899      4,432
   Operational losses                          7,147      8,837   (1,690)       21,571        21,339        232
   All other                                  13,322     17,770   (4,448)       35,283        51,409   (16,126)
   Total other operating expenses             33,429     38,351   (4,922)       93,185       104,647   (11,462)
Amortization of intangibles                      783      1,076     (293)        3,089         5,345    (2,256)
Total operating expenses                 $   388,168  $ 361,066 $  27,102 $  1,131,881  $  1,081,905 $   49,976




INCOME TAXES

For the quarter and nine months ended September 30, 2021, the Corporation
recorded an income tax expense of $83.5 million and $233.5 million with an
effective tax rate ("ETR") of 25% and 24%, respectively, compared to $41.2
million and $68.9 million with an ETR of 20% and 17% for the respective period
of 2020. The increase in income tax expense was primarily due to higher pre-tax
income resulting primarily from a lower provision for credit losses partially
offset by higher net exempt interest income and higher income from the U.S.
operations subject to lower statutory tax rate.



At September 30, 2021, the Corporation had a net deferred tax asset amounting to
$0.7 billion, net of a valuation allowance of $0.5 billion. The net 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 30 to the Consolidated Financial Statements for a reconciliation of the statutory income tax rate to the effective tax rate and additional information on the income tax expense and deferred tax asset balances.


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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 32 to the Consolidated Financial Statements.



The Corporate group reported a net income of $7.0 million for the quarter ended
September 30, 2021, compared with a net income of $4.8 million for the same
quarter of the previous year. The increase in net income was mainly attributed
to higher income from the portfolio of equity method investments, partially
offset by higher operating expenses, mainly personnel costs. For the nine months
ended September 30, 2021 the Corporate group reported a net income of $15.9
million, an increase of $8.6 million compared to a net income of $7.3 million
for the same period of the previous year mainly due to higher income from the
portfolio of equity method investments.



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
$201.0 million for the quarter ended September 30, 2021, compared with net
income of $153.8 million for the same quarter of the previous year. The increase
in net income was principally driven by the benefit of $37.0 million in the
reserve for credit losses and unfunded commitments recorded in the quarter ended
September 30, 2021, compared to a provision expense of $7.3 million for the same
quarter of the previous year. The additional factors that contributed to the
variance in the financial results include the following:



? Higher net interest income by $24.5 million mainly due to:





? higher interest income from money market and investment securities by $15.2
million largely due to higher average balance of money market investments and
mortgage-backed securities available-for-sale funded from the increase in
deposit balances and higher yields from U.S. Treasury securities, offset by
lower yields on mortgage-backed securities;



? higher interest income from loans by $6.1 million mainly from commercial loans
due to higher interest and fees from PPP loans and higher average balance in the
mortgage and auto loans portfolio, partially offset by lower average balance in
personal and credit card loans portfolio; and



? lower interest expense on deposits by $2.9 million mainly due to lower costs, partially offset by higher average balance of deposits.





The net interest margin for the quarter ended September 30, 2021 was 2.75%
compared to 3.13% for the same quarter in the previous year. The decrease in net
interest margin is driven by earnings assets mix and a lower yield in earning
assets, partially offset by a lower cost of deposits.





? Non-interest income was higher by $38.6 million mainly due to:





? Higher service charges on deposit accounts by $4.4 million and higher other
service fees by $10.1 million, mainly from debit and credit card fees, from
higher transactional volumes due in part to the business disruptions and waiver
of fees related to the COVID-19 pandemic in 2020;



? higher income from mortgage banking activities by $18.6 million due to the
impact of the bulk loan repurchases from the Corporation's GNMA, FNMA and FHLMC
loan servicing portfolio during the third quarter of 2020, which included
interest advanced losses of $10.5 million and an unfavorable fair value
adjustment on mortgage servicing rights of $8.8 million; and

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? higher other operating income by $7.8 million mostly due to a gain of $7.0
million recognized by BPPR as a result of the sale and partial leaseback of two
corporate office buildings;





Partially offset by:



? an unfavorable variance in adjustments to indemnity reserves of $2.1 million
mainly due a $5.1 million recourse reserve release during the third quarter of
2020 related to the bulk loan repurchase from FNMA and FHLMC.



? Higher operating expenses by $30.6 million mostly due to:

? Higher personnel costs by $15.8 million driven by higher salaries and incentives tied to the Corporation's financial performance;

? higher professional fees by $9.6 million mainly due to processing related services due to higher volume of transactions; and

? higher business promotion expenses by $3.1 million due to advertising and customer rewards programs;

? Higher income tax expense by $29.5 million mainly due to higher income before tax.





For the nine months ended September 30, 2021, the BPPR reportable segment
recorded a net income of $606.5 million, compared to $339.8 million for the same
period of the previous year. The increase in net income was principally driven
by the benefit of $104.4 million in the reserve for credit losses and unfunded
commitments recorded in the period, compared to a provision expense of $180.7
million for the same period of the previous year. The additional factors that
contributed to the variance in the financial results include the following:



? Higher net interest income by $57.2 million mainly due to:





? higher interest income from money market and investment securities by $26.2
million largely due to higher average balance of money market investments and
mortgage-backed securities available-for-sale funded from the increase in
deposit balances, offset by lower average balance of U.S. Treasuries and lower
yields;



? higher income from loans by $3.0 million due to higher interest and fees from
PPP commercial loans and higher average balances, mostly in mortgage and auto
loans, partially offset by lower yields and lower average balances in personal
and credit card loans; and


? lower interest expense on deposits by $27.0 million mainly due to lower costs, partially offset by higher average balance of deposits across various sectors.







The net interest margin for the nine months ended September 30, 2021 was 2.91%
compared to 3.53% for the same period of the previous year. The decrease in net
interest margin is driven by the earnings assets mix and lower yield, partially
offset by a lower cost of deposits.





? Non-interest income was higher by $101.9 million mainly due to:





? Higher service charges on deposit accounts by $12.2 million and higher other
service fees by $40.0 million mainly from debit and credit card fees, due to
higher transactional volumes due in part to the business disruptions and waiver
of fees related to the COVID-19 pandemic in 2020;



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? higher income from mortgage banking activities by $32.6 million mainly due to the impact of the bulk loan repurchase in 2020, as mentioned above;

? a favorable variance in adjustments to indemnity reserves of $4.8 million mainly due to a release of reserve for loans previously sold with credit recourse; and

? higher other operating income by $12.9 million mainly due to the previously mentioned $7.0 million gain on sale of two corporate office buildings, and higher daily auto rental revenues by $3.2 million.

? Higher operating expenses by $58.7 million mostly due to:

? Higher personnel costs by $31.6 million driven by higher salaries and incentives tied to the Corporation's financial performance;

? higher professional fees by $16.1 million mainly due to programing, processing and technology related services due to higher volume of transactions;

? higher business promotion expenses by $6.7 million due to customer rewards programs and advertising expenses; and





? higher other operating expenses by $10.1 million due higher expenses allocated
from the Corporate group, higher credit and debit card processing expenses due
to higher transactional volumes, partially offset by lower provision for
unfunded commitments, which for 2021 is included within the provision for credit
losses.



Partially offset by:


? Lower OREO expenses by $11.2 million mainly due to higher gains on sales of residential properties and lower maintenance expenses.

? Higher income tax expense by $118.7 million mainly due to higher income before tax.







Popular U.S.

For the quarter ended September 30, 2021, the reportable segment of Popular U.S.
reported a net income of $39.6 million, compared with a net income of $9.4
million for the same quarter of the previous year. The increase in net income
was principally driven by the benefit of $23.9 million in the reserve for credit
losses and unfunded commitments recorded in the quarter ended September 30,
2021, compared to a provision expense of $11.8 million for the same quarter of
the previous year. The factors that contributed to the variance in the financial
results included the following:



? higher net interest income by $3.6 million due to:

? lower interest expense on deposits by $7.7 million mainly due to lower interest rates and lower average balance of time deposits.





Partially offset by:



? lower interest income from loans by $2.1 million due to lower average balance
in personal loans, partially offset by an increase in the commercial portfolio;
and


? lower income from money market and investment securities by $2.6 million due to lower average balances and lower yields.

The net interest margin for the quarter ended September 30, 2021 was 3.36% compared to 3.18% for the same quarter in the previous year.


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? Lower operating expenses by $4.8 million due to:





? lower other operating expenses by $6.2 million due to lower sundry losses and
lower provision for unfunded commitments which for 2021 is recorded within the
provision for credit losses



? lower net occupancy expenses by $1.7 million due to the lower rent expense
related to the benefits of the completed branch optimization initiative in the
New York Metro region.



Partially offset by

? higher personnel costs by $1.9 million due to higher salaries and incentives tied to the Corporation's financial performance.

? Income tax unfavorable variance of $12.8 million due to higher income before tax and blended state income tax rate.





For the nine-month period ended September 30, 2021, the reportable segment of
Popular U.S. reported a net income of $106.1 million, compared with a net loss
of $17.0 million for the same period of the previous year. The increase in net
income was principally driven by the release of $55.8 million in the reserve for
credit losses and unfunded commitments recorded for the period, due to changes
in credit quality and credit metrics, compared to a provision expense of $90.4
million for the same period of the previous year. The factors that contributed
to the variance in the financial results included the following:



? higher net interest income by $15.1 million due to:

? lower interest expense on deposits by $31.7 million mainly due to lower interest rates and lower average balance of time deposits.





? Partially offset by:


? lower interest income from loans by $10.6 million due to lower yield and lower average balance in consumer loans, partially offset by an increase in the commercial portfolio; and

? lower income from money market and investment securities by $7.8 million due to lower average balances and lower yields.

The net interest margin for the nine-month period ended September 30, 2021 was 3.35% compared to 3.15% for the same period of the previous year.

? Lower operating expenses by $9.3 million due to:





? lower occupancy expense by $4.9 million due to lower rent expense related to
the benefits of the completed branch optimization initiative in our New York
Metro region;


? Lower professional fees by $3.0 million, a portion of which is now centralized at the Corporate group and charged back to operating units and reflected in higher other operating expenses; and





? Lower other operating expenses by $3.3 million mainly due to lower provision
for unfunded commitments which for 2021 is recorded within the provision for
credit losses, partially offset by higher allocations from the Corporate group,
mainly professional services.



? Partially offset by:


? Higher personnel costs by $4.6 million mainly due to incentives tied to the Corporation's financial performance.


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? Unfavorable variance in income tax expense of $45.7 million due to higher income before tax and blended state income tax rate.

FINANCIAL CONDITION ANALYSIS

Assets

The Corporation's total assets were $74.2 billion at September 30, 2021, compared to $65.9 billion at December 31, 2020. Refer to the Consolidated Statements of Financial Condition included in this report for additional information.

Money market investments and debt securities available-for-sale



Money market investments and debt securities available-for-sale increased by
$5.9 billion and $2.8 billion, respectively, at September 30, 2021. This was
largely driven by the additional funds available to invest resulting from the
increase in deposits across various sectors, partially offset by paydowns of
agency mortgage-backed securities. Refer to Note 5 to the Consolidated Financial
Statements for additional information with respect to the Corporation's debt
securities available-for-sale.

Loans

Refer to Table 5 for a breakdown of the Corporation's loan portfolio. Also, refer to Note 7 in the Consolidated Financial Statements for detailed information about the Corporation's loan portfolio composition and loan purchases and sales.





Loans held-in-portfolio decreased by $0.5 billion to $28.9 billion at September
30, 2021, mainly due to a decrease in commercial loans at BPPR of $0.3 billion
mainly due to the repayment of PPP loans and a decrease in mortgage loans at
BPPR of $0.4 billion mainly due to paydowns, partially offset by growth in auto
loans and leases at BPPR by $0.4 billion.


Table 5 - Loans Ending Balances
(In thousands)                    September 30, 2021   December 31, 2020    Variance
Loans held-in-portfolio:
Commercial                      $         13,303,671 $        13,614,310 $ (310,639)
Construction                                 801,040             926,208   (125,168)
Lease financing                            1,348,679           1,197,661     151,018
Mortgage                                   7,539,152           7,890,680   (351,528)
Auto                                       3,376,694           3,132,228     244,466
Consumer                                   2,486,136           2,624,109   (137,973)
Total loans held-in-portfolio             28,855,372          29,385,196   (529,824)
Loans held-for-sale:
Commercial                                         -               2,738     (2,738)
Mortgage                                      91,313              96,717     (5,404)
Total loans held-for-sale                     91,313              99,455     (8,142)
Total loans                     $         28,946,685 $        29,484,651 $ (537,966)


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Other assets



Other assets amounted to $1.6 billion at September 30, 2021, compared to $1.7
billion at December 31, 2020. Refer to Note 12 for a breakdown of the principal
categories that comprise the caption of "Other Assets" in the Consolidated
Statements of Financial Condition at September 30, 2021 and December 31, 2020.



Liabilities

The Corporation's total liabilities were $68.2 billion at September 30, 2021, an
increase of $8.3 billion, compared to $59.9 billion at December 31, 2020, mainly
due to increases in deposits as discussed below.



Deposits and Borrowings

The composition of the Corporation's financing to total assets at September 30, 2021 and December 31, 2020 is included in Table 6.

Table 6 - Financing to Total Assets


                                                                 % increase
                                 September 30,   December 31,    (decrease)    % of total assets
                                                               from 2020 to
(In millions)                              2021           2020         2021      2021       2020
Non-interest bearing deposits    $       15,148  $      13,129         15.4 %    20.4 %     19.9 %
Interest-bearing core deposits           45,981         38,599         19.1      62.0       58.5
Other interest-bearing deposits           4,885          5,138        (4.9)       6.6        7.8
Repurchase agreements                        86            121       (28.9)       0.1        0.2
Notes payable                             1,177          1,225        (3.9)       1.6        1.9
Other liabilities                           929          1,685       (44.9)       1.2        2.6
Stockholders' equity                      5,983          6,029        (0.8)       8.1        9.1




Deposits



The Corporation's deposits totaled $66.0 billion at September 30, 2021, compared
to $56.9 billion at December 31, 2020. The deposits increase of $9.1 billion was
mainly due to higher Puerto Rico public sector deposits by $4.9 billion and
higher retail and commercial demand deposits by $3.2 billion at BPPR. Public
sector deposit balances, which amounted to $20.0 billion at September 30, 2021,
are expected to decline over the long term. However, the receipt by the P.R.
Government of additional COVID-19 and hurricane recovery-related Federal
assistance and seasonal tax collections could 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 the COVID-19
federal assistance is distributed. Refer to Table 7 for a breakdown of the
Corporation's deposits at September 30, 2021 and December 31, 2020.

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Table 7 - Deposits Ending Balances
(In thousands)                                September 30, 2021     December 31, 2020     Variance
Demand deposits [1]                          $         25,495,481    $       22,532,729   $ 2,962,752
Savings, NOW and money market deposits
(non-brokered)                                         32,867,805            26,390,565     6,477,240
Savings, NOW and money market deposits
(brokered)                                                718,155               635,198        82,957
Time deposits (non-brokered)                            6,906,509             7,130,749     (224,240)
Time deposits (brokered CDs)                               25,611               177,099     (151,488)
Total deposits                               $         66,013,561    $       56,866,340   $ 9,147,221
[1] Includes interest and non-interest bearing demand deposits.




Borrowings

The Corporation's borrowings remained flat at $1.3 billion at September 30, 2021
and December 31, 2020. Refer to Note 15 to the Consolidated Financial Statements
for detailed information on the Corporation's borrowings. Also, refer to the
Liquidity section in this MD&A for additional information on the Corporation's
funding sources.



Other liabilities

The Corporation's other liabilities decreased by $0.8 billion, when compared to December 31, 2020, due to the settlement of purchases of debt securities.





Stockholders' Equity



Stockholders' equity totaled $6.0 billion at September 30, 2021, a decrease of
$45.7 million when compared to December 31, 2020, principally due to the impact
of the $350.0 million accelerated share repurchase transaction and lower
accumulated unrealized gains on debt securities available-for-sale by $343.9
million, offset by net income for the nine months ended September 30, 2021 of
$728.8 million, less declared dividends of $106.3 million on common stock and
$1.1 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.



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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 September 30, 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 8, which include common equity
tier 1, Tier 1 capital, total capital and leverage capital as of September 30,
2021 and December 31, 2020.


Table 8 - Capital Adequacy Data



                                                         September       December 31,
(Dollars in thousands)                                    30, 2021          

2020

Common equity tier 1 capital:

Common stockholders equity - GAAP basis $ 5,960,828 $ 6,006,544


   CECL transitional amount [1]                            172,459          

218,398

AOCI related adjustments due to opt-out


   election                                                 70,871          

(261,245)

Goodwill, net of associated deferred tax


   liability (DTL)                                       (543,799)          

(591,931)


   Intangible assets, net of associated DTLs              (19,657)          

(22,466)


   Deferred tax assets and other deductions              (299,418)          

(357,204)


Common equity tier 1 capital                        $    5,341,284     $    4,992,096
Additional tier 1 capital:
   Preferred stock                                          22,143             22,143
Additional tier 1 capital                           $       22,143     $       22,143
Tier 1 capital                                      $    5,363,427     $    5,014,239
Tier 2 capital:

   Trust preferred securities subject to phase in
   as tier 2                                               373,737            373,737
   Other inclusions (deductions), net                      385,047            385,943
Tier 2 capital                                      $      758,784     $      759,680
Total risk-based capital                            $    6,122,211     $    

5,773,919


Minimum total capital requirement to be well
capitalized                                         $    3,076,738     $    

3,070,209

Excess total capital over minimum well capitalized $ 3,045,473 $ 2,703,710 Total risk-weighted assets

$   30,767,384     $   

30,702,091


Total assets for leverage ratio                     $   72,713,570     $   

64,305,022

Risk-based capital ratios:


   Common equity tier 1 capital                              17.36 %            16.26 %
   Tier 1 capital                                            17.43              16.33
   Total capital                                             19.90              18.81
   Tier 1 leverage                                            7.38               7.80

[1] The CECL transitional amount includes the impact of Popular's adoption of the new CECL accounting standard on January 1, 2020.


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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
September 30, 2021, the Corporation, BPPR and PB continue to exceed the minimum
requirements for being "well-capitalized" under the Basel III capital rules.



Pursuant to the adoption of the CECL accounting standard on January 1, 2020, the
Corporation elected to use the five-year transition period option as provided in
the final interim regulatory capital rules effective March 31, 2020. The
five-year transition period provision 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.



On April 9, 2020, federal banking regulators issued an interim final rule to
modify the 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 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 its Bank
subsidiaries, are permitted to assign a zero percent risk weight to PPP loans
for purposes of 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 September 30, 2021, the Corporation has $670 million
in PPP loans and no loans were pledge as collateral for PPPL Facilities.



The increase in the common equity Tier I capital ratio, Tier I capital ratio,
and total capital ratio as of September 30, 2021 as compared to December 31,
2020 was mainly attributed to the nine months period earnings, partially offset
by the accelerated share repurchase agreement to repurchase an aggregate of $350
million of Popular's common stock. The decrease in leverage capital ratio was
mainly due to the increase in average total assets, which did not have a
significant impact on the risk-weighted assets.



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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 9 provides a reconciliation of total stockholders' equity to tangible common equity and total assets to tangible assets as of September 30, 2021, and December 31, 2020.

Table 9 - Reconciliation of Tangible Common Equity and Tangible Assets



(In thousands, except share or per share               September              December
information)                                            30, 2021              31, 2020
Total stockholders' equity                         $   5,982,971         $   6,028,687
Less: Preferred stock                                   (22,143)              (22,143)
Less: Goodwill                                         (671,122)             (671,122)
Less: Other intangibles                                 (19,657)              (22,466)
Total tangible common equity                       $   5,270,049         $   5,312,956
Total assets                                       $  74,189,163         $  65,926,000
Less: Goodwill                                         (671,122)             (671,122)
Less: Other intangibles                                 (19,657)              (22,466)
Total tangible assets                              $  73,498,384         $  65,232,412
Tangible common equity to tangible assets                   7.17 %                8.14 %
Common shares outstanding at end of period            79,841,564            

84,244,235


Tangible book value per common share               $       66.01         $       63.07


                                                             Quarterly average
Total stockholders' equity [1]                     $   5,769,545         $   5,540,456
Less: Preferred Stock                                   (22,143)              (22,143)
Less: Goodwill                                         (671,121)             (671,121)
Less: Other intangibles                                 (20,132)              (23,166)
Total tangible common equity                       $   5,056,149         $   4,824,026
Return on average tangible common equity                   19.44 %          

14.50 % [1] Average balances exclude unrealized gains or losses on debt securities available-for-sale.




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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
19 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 15 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 10 presents the contractual amounts related to the Corporation's off-balance sheet lending and other activities at September 30, 2021.


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Table 10 - Off-Balance Sheet Lending and Other Activities


                                                 Amount of commitment - Expiration Period
                                                Years 2022 -  Years 2024  Years 2026 -
(In thousands)                         2021         2023        - 2025     thereafter       Total
Commitments to extend credit        $ 6,689,881   $ 2,296,037   $ 127,099   $   150,872   $ 9,263,889
Commercial letters of credit              3,545         1,124           -             -         4,669
Standby letters of credit                10,956        12,161           -             -        23,117
Commitments to originate or fund
mortgage loans                           98,295         8,708           -             -       107,003
Total                               $ 6,802,677   $ 2,318,030   $ 127,099   $   150,872   $ 9,398,678




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 5 and 6 for further information
on the debt securities available-for-sale and held-to-maturity portfolios. Debt
securities classified as available-for-sale amounted to $24.4 billion as of
September 30, 2021. Other assets subject to market risk include loans
held-for-sale, which amounted to $91 million, mortgage servicing rights ("MSRs")
which amounted to $117 million and securities classified as "trading", which
amounted to $36 million, as of September 30, 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 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 September 30, 2021 and December 31, 2020, assuming a static
balance sheet and parallel changes over flat spot rates over a one-year time
horizon:


Table 11 - Net Interest Income Sensitivity (One Year Projection)


                                       September 30, 2021                   December 31, 2020
(Dollars in thousands)             Amount Change Percent Change       Amount Change Percent Change
Change in interest rate
+400 basis points                $       276,317          14.51 % $         167,474           9.19 %
+200 basis points                        205,581          10.80              81,690           4.49
+100 basis points                        170,207           8.94              39,361           2.16
-100 basis points                       (72,909)         (3.83)            (53,952)         (2.96)
-200 basis points                      (109,352)         (5.74)            (71,517)         (3.93)




As of September 30, 2021, NII simulations show the Corporation 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
the significant deposit increases seen so far in 2021, which have increased the
level of cash reserves maintained at the Federal Reserve. These short-term
assets reprice immediately, thus increasing the NII benefit in rising rate
scenarios. The declining rate scenarios show a smaller impact in sensitivity as
rates continue to be close to their lower bound and Popular does not allow rates
to turn negative in its IRR simulations.



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 September 30, 2021, the Corporation held trading securities with a fair value
of $36 million, representing approximately 0.1% of the Corporation's total
assets, compared with $37 million and 0.1%, respectively, at December 31, 2020.
As shown in Table 12, the trading portfolio consists principally of
mortgage-backed securities which at September 30, 2021 were investment grade
securities. As of September 30, 2021 and December 31, 2020, the trading
portfolio also included $0.1 million in Puerto Rico government obligations.
Trading instruments are recognized at fair value, with changes resulting from
fluctuations in market prices, interest rates

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or exchange rates reported in current period earnings. The Corporation recognized a net trading account gain of $58 thousand for the quarter ended September 30, 2021 and a net trading account gain of $20 thousand for the quarter ended September 30, 2020.





Table 12 - Trading Portfolio
                                              September 30,
                                                  2021            December 31, 2020
                                                     Weighted              Weighted
                                                      Average               Average
(Dollars in thousands)                      Amount   Yield[1]     Amount   Yield[1]
Mortgage-backed securities                $ 24,569       4.95 % $ 24,338       5.19 %
U.S. Treasury securities                    10,780          -     11,506       0.04
Collateralized mortgage obligations            281       5.64        346    

5.65


Puerto Rico government obligations              82       0.46        103       0.48
Interest-only strips                           352      12.00        381      12.00
Total                                     $ 36,064       3.53 % $ 36,674       3.64 %
[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 $0.3
million for the last week in September 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.


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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 89% of the Corporation's total assets at September 30, 2021
and 86% at December 31, 2020. The ratio of total ending loans to deposits was
44% at September 30, 2021, compared to 52% at December 31, 2020. In addition to
traditional deposits, the Corporation maintains borrowing arrangements, which
amounted to approximately $1.3 billion in outstanding balances at September 30,
2021 and December 31, 2020. A detailed description of the Corporation's
borrowings, including their terms, is included in Note 15 to the Consolidated
Financial Statements. Also, the Consolidated Statements of Cash Flows in the
accompanying Consolidated Financial Statements provide information on the
Corporation's cash inflows and outflows.

On September 9, 2021, the Corporation completed its previously announced accelerated share repurchase program for the repurchase of an aggregate $350 million of Popular's common stock, refer to Note 25 for additional information.



On November 1, 2021, the corporation redeemed all outstanding 6.70% Cumulative
Monthly Income Trust Preferred Securities issued by the Popular Capital Trust I,
refer to Note 15 for additional information.

The following sections provide further information on the Corporation's major funding activities and needs, as well as the risks involved in these activities.

Banking Subsidiaries



Primary sources of funding for the Corporation's banking subsidiaries (BPPR and
PB or, collectively, "the banking subsidiaries") include retail, commercial and
public sector deposits, brokered deposits, unpledged investment securities,
mortgage loan securitization and, to a lesser extent, loan sales. In addition,
the Corporation maintains borrowing facilities with the FHLB and at the discount
window of the Federal Reserve Bank of New York (the "FRB") and has a
considerable amount of collateral pledged that can be used to raise funds under
these facilities.

Refer to Note 15 to the Consolidated Financial Statements, for additional information of the Corporation's borrowing facilities available through its banking subsidiaries.



The principal uses of funds for the banking subsidiaries include loan
originations, investment portfolio purchases, loan purchases and repurchases,
repayment of outstanding obligations (including deposits), advances on certain
serviced portfolios and operational expenses. Also, the banking subsidiaries
assume liquidity risk related to collateral posting requirements for certain
activities mainly

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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.

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 7 for a breakdown of deposits by major types. Core
deposits are generated from a large base of consumer, corporate and public
sector customers. Core deposits include 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 $ 61.1 billion, or 93% of total deposits, at
September 30, 2021, compared with $51.7 billion, or 91% of total deposits, at
December 31, 2020. Core deposits financed 86% of the Corporation's earning
assets at September 30, 2021, compared with 82% at December 31, 2020.

The distribution by maturity of certificates of deposits with denominations of $100,000 and over at September 30, 2021 is presented in the table that follows:





Table 13 - Distribution by Maturity of Certificate of Deposits
of $100,000 and Over
(In thousands)
3 months or less                                                         $ 2,069,982
3 to 6 months                                                                294,714
6 to 12 months                                                               697,634
Over 12 months                                                             1,093,576
Total                                                                    $ 4,155,906




The Corporation had $ 0.7 billion in brokered deposits at September 30, 2021,
which financed approximately 1% of its total assets (December 31, 2020 - $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
Corporation. As of September 30, 2021, total public sector deposits were $20.0
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. 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 September 30, 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

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future if the Corporation's financial condition or general market conditions
were to deteriorate. The Corporation's financial flexibility will be severely
constrained if the banking subsidiaries are unable to maintain access to funding
or if adequate financing is not available to accommodate future financing needs
at acceptable interest rates. The banking subsidiaries also are required to
deposit cash or qualifying securities to meet margin requirements. 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.

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
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; 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 are more
costly due to the fact that two out of the three principal credit rating
agencies rate the Corporation below "investment grade", which affects the
Corporation's cost and 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 $682 million at September 30, 2021 and December 31, 2020.

The contractual maturities of the BHCs notes payable at September 30, 2021 are presented in Table 14.

Table 14 - Distribution of BHC's Notes Payable by Contractual Maturity



Year                                                                       (In thousands)
2023                                                                     $        297,525
Later years                                                                       384,949
Total                                                                    $        682,474




Annual debt service at the BHCs is approximately $44 million, and the
Corporation's latest quarterly dividend was $0.45 per share, for a total of
$36.3 million for the quarter ended September 30, 2021. 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 September 30, 2021, the BHCs
had cash and money markets investments totaling $300 million, borrowing
potential of $152 million from its secured facility with BPPR. In addition to
these liquidity sources, the stake in EVERTEC had a market value of $533 million
as of September 30, 2021 and it represents an additional source of contingent
liquidity.

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. During 2021, Popular, Inc. made a
capital contribution to its wholly owned subsidiary Popular Securities amounting
to $5 million.

Dividends

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During the nine months ended September 30, 2021, the Corporation declared cash
dividend of $1.30 per common share outstanding to $ 106.4 million. The dividends
for the Corporation's Series A preferred stock amounted to $1.1 million. During
the quarter ended September 30, 2021, the BHC's received dividends amounting to
$575 million from BPPR, $4 million from PIBI which main source of income is
derived from its investment in BHD, $6 million in dividends from its non-banking
subsidiaries and $2 million in dividends from EVERTEC. Dividends from BPPR
constitute Popular, Inc.'s primary source of liquidity.

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 $2.6 billion at September 30, 2021 and $3.4 billion at
December 31, 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 PB,
including PB's wholly-owned subsidiaries Popular Equipment Finance, LLC, 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 September 30, 2021 and December 31,
2020, and the results of their operations for the period ended September 30,
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

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transactions with subsidiaries and affiliates have been presented in separate
line items, if they are material. In addition, related parties transactions are
presented separately.



Table 15 - Summarized Statement of
Condition

(In thousands)                                   September 30, 2021      December 31, 2020
Assets
Cash and money market investments           $               301,126 $       

190,830


Investment securities                                        31,167         

27,630


Accounts receivables from non-obligor
subsidiaries                                                 12,051         

16,338


Other loans (net of allowance for credit
losses of $123)                                              30,902         

31,162


Investment in equity method investees                       110,228                 88,272
Other assets                                                 48,396                 46,547
Total assets                                $               533,870 $              400,779
Liabilities and Stockholders' deficit
Accounts payable to non-obligor
subsidiaries                                $                 3,245 $       

3,946


Accounts payable to affiliates and related
parties                                                       1,025                    977
Notes payable                                               682,473                681,503
Other liabilities                                            87,909                 79,208
Stockholders' deficit                                     (240,782)              (364,855)
Total liabilities and stockholders'
deficit                                     $               533,870 $       

400,779



Table 16 - Summarized Statement of
Operations

                                                                      For the period ended
(In thousands)                                                          September 30, 2021
Income:
Dividends from non-obligor subsidiaries                             $       

581,000


Interest income from non-obligor
subsidiaries and affiliates                                                            680
Earnings from investments in equity method
investees                                                                           24,195
Other operating income                                                               3,605
Total income                                                        $              609,480
Expenses:
Services provided by non-obligor
subsidiaries and affiliates (net of
reimbursement by subsidiaries for services
provided by parent of ($120,032))                                   $                9,820
Other operating expenses                                                            22,712
Total expenses                                                      $               32,532
Net income                                                          $              576,948

During the nine months ended September 30, 2021, the Obligor group recorded $2.2 million
of distribution from its direct equity method investees, of which $1.7 million are related
to dividend distributions.




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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.

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.
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 and 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.

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 September 30, 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 19 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 $36 million at September 30, 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 COVID-19 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, former Governor Wanda Vázquez issued an executive order in March
2020 declaring a health emergency, ordering residents to shelter in place,
implementing a mandatory curfew, and requiring the closure of non-essential
businesses. Although the most restrictive measures have been eased or lifted,
allowing for the gradual reopening of the economy, certain measures remain in
place and additional measures may be implemented in the future as a result of a
resurgence in the spread of the virus or new strains of the virus. Since the
beginning of the pandemic, 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 through August 2020. The Federal Government has also
approved several economic stimulus measures that seek to cushion the economic
fallout of the pandemic, including providing direct subsidies, expanding
eligibility for and increasing unemployment benefits and guaranteeing through
the SBA PPP loans to small and 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 adversely affect economic activity will depend on
future developments, which are highly uncertain and difficult to predict,
including the scope and duration of the pandemic (including the appearance of
new strains of the virus), the restrictions imposed by governmental authorities
and other third parties in response to the same, the pace of global vaccination
efforts, and the amount of federal and local assistance offered to offset the
impact of the pandemic. Pursuant to the 2021 Fiscal Plan (as defined below),
economic stimulus measures have more than offset the estimated income loss due
to reduced economic activity 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 will be sufficient to offset the pandemic's
economic impact in the medium- and long-term.

For a discussion of the impact of the pandemic on the Corporation's operations
and financial results during the third quarter of 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 - Risk Factors" in the Corporation's Form 10-K for the year
ended December 31, 2020 and "Part II- Item 1A - Risk Factors" of any subsequent
Form 10-Q.

Economic Performance

The Commonwealth's economy entered a recession in the fourth quarter of fiscal
year 2006 and its gross national product ("GNP") 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, dated March 2021, the Commonwealth's real GNP increased by 1.8% in
fiscal year 2019 due to the influx of federal funds and private insurance
payments to repair damage caused by Hurricanes Irma and María. However, the
Planning Board estimates that the Commonwealth's real GNP decreased by
approximately 3.2% in fiscal year 2020 due primarily to the adverse impact of
the COVID-19 pandemic and the measures taken by the government in response

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to the same. The Planning Board projected that the negative effects of COVID-19
would continue through fiscal year 2021, resulting in a contraction in real GNP
of approximately -2%, followed by 0.8% GNP growth in the current fiscal year.

Fiscal Crisis



The Commonwealth's central government and many of its instrumentalities, public
corporations and municipalities continue to face significant fiscal 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, 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. 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.

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 original
voting members of the Oversight Board through the process established in
PROMESA, which authorizes the President to select the members from several lists
required to be submitted by congressional leaders. Such appointments 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. For
additional discussion of risk factors related to the Puerto Rico fiscal
challenges, see "Part I - Item 1A - Risk Factors" in the Corporation's Form 10-K
for the year ended December 31, 2020.

Fiscal Plans



Commonwealth Fiscal Plan. The Oversight Board has certified several fiscal plans
for the Commonwealth since 2017. The most recent fiscal plan for the
Commonwealth certified by the Oversight Board is dated April 23, 2021 (the "2021
Fiscal Plan").

Pursuant to the 2021 Fiscal Plan, while the COVID-19 pandemic and the measures
taken in response to the 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 2021 Fiscal Plan estimates
that real GNP contracted by 3% in fiscal year 2020, but estimates the GNP
contraction adjusted for short-term income effects to have been approximately
1.1%. For fiscal years 2021 and 2022, the 2021 Fiscal Plan projects that real
GNP will grow 1% and 0.6%, respectively, but projects that growth adjusted for
income effects for such years will be approximately 3.8% and 1.5%, respectively.

The 2021 Fiscal Plan projects that, if the fiscal measures and structural reforms contemplated by the plan are not successfully implemented, the Commonwealth will have a pre-contractual debt service deficit starting in fiscal year 2023. It estimates that the


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fiscal measures could drive approximately $10 billion in savings and 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 2051 (equal to
approximately $30.7 billion). 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 2021 Fiscal 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 some municipalities.
Since fiscal year 2017, Commonwealth appropriations to municipalities have
decreased by approximately 64% (from approximately $370 million in fiscal year
2017 to approximately $132 million in fiscal year 2020). 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 Plan contemplates additional reductions in
appropriations to municipalities starting in fiscal year 2022, before eventually
phasing out all appropriations in fiscal year 2025. Further, while the
Commonwealth had enacted legislation in 2019 suspending the municipality's
obligations to contribute to the Commonwealth's health plan and pay-as-you go
retirement system, such 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 municipalities have made little or no progress towards
implementing fiscal discipline required to reduce reliance on Commonwealth
appropriations and that this lack of fiscal management threatens the ability of
municipalities to provide necessary services, such as health, sanitation, public
safety, and emergency services to 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. The certified fiscal plan for the Puerto Rico Electric Power
Authority ("PREPA"), Puerto Rico's electric power utility, 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 (the "T&D System"), and calls for
significant structural reforms at PREPA. The procurement process for the
establishment of a public-private partnership with respect to 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, since June 1, 2021, LUMA is
responsible for operating, maintaining and modernizing the T&D System.

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 November 3, 2021, the Oversight Board filed the Eight Amended Title III Joint
Plan of Adjustment for the Commonwealth, et. al. in the pending debt
restructuring proceedings under Title III of PROMESA. The proposed plan, which
has substantial support from several creditor constituencies but is still
subject to confirmation in the Title III proceeding, seeks to restructure
approximately $35 billion of debt and other claims against the Commonwealth, PBA
and ERS. In October 2021, the Commonwealth's government enacted legislation
establishing the framework for the issuance of new securities by the
Commonwealth in connection with the proposed plan. The final hearings for the
confirmation of the plan of adjustment are scheduled to begin on November 8,
2021 and continue as necessary through November 23, 2021.

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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. The Commonwealth's government has
estimated total earthquake-related damages at approximately $1 billion.

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
provided a process to address the Commonwealth's fiscal crisis, the complexity
and 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 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 September 30, 2021, the Corporation's direct exposure to the Puerto Rico
government's instrumentalities and municipalities totaled $365 million of which
$346 million were outstanding, compared to $377 million at December 31, 2020
which was fully outstanding on such date. 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, $316 million consists of loans and $30 million are securities ($342
million and $35 million, respectively, at December 31, 2020). Substantially all
of the amount outstanding at September 30, 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 September
30, 2021, 75% 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, 2021, the Corporation received scheduled principal payments
amounting to $32 million from various obligations from Puerto Rico
municipalities. For additional discussion of the Corporation's direct exposure
to the Puerto Rico government and its instrumentalities and municipalities,
refer to Note 20 - Commitments and Contingencies.



In addition, at September 30, 2021, the Corporation had $284 million in loans
insured or securities issued by Puerto Rico governmental entities, but for which
the principal source of repayment is non-governmental ($317 million at December
31, 2020). These included $240 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, 2020 - $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 September 30, 2021, $44 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, 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 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 described
above. Similarly, BPPR's mortgage and consumer loan portfolios include

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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.





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.



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 20 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, 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 September 30, 2021, the Corporation's direct exposure to USVI
instrumentalities and public corporations amounted to approximately $72 million,
of which $69 million is outstanding (compared to $105 million and $70 million,
respectively, at December 31, 2020). The amount outstanding included
approximately $42 million in loans to a government-owned company that owns and
operates a cruise ship pier and shopping mall complex in St. Thomas, $20 million
in 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 $6 million in loans to the Virgin Islands Porth Authority (compared to $43
million, $20 million, and $4 million, respectively, at December 31, 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, at September 30, 2020 it has a loan portfolio amounting to approximately
$226 million comprised of various retail and commercial clients, compared to a
loan portfolio of $251 million at December 31, 2020, which included a $19
million loan with the BVI Government that was paid off during the second quarter
of 2021.





U.S. Government



As further detailed in Notes 5 and 6 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, $1.6 billion of residential mortgages, $670 million of SBA loans under
the PPP and $65 million commercial loans were insured or guaranteed by the U.S.
Government or its agencies at September 30, 2021 (compared to $1.8 billion, $1.3
billion and $60 million, respectively, at December 31, 2020).



The United States federal government, through legislation, has created a limit
on the amount of debt that it may issue, commonly referred to as the "debt
ceiling." The Bipartisan Budget Act of 2019 and subsequent legislation have
suspended and/or temporarily increased the debt ceiling through December 2021.
Failure by Congress to further suspend or increase the debt ceiling may impact
the federal government's ability to incur additional debt and pay its existing
debt instruments or other obligations.

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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 17.

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.

During the third quarter of 2021, the Corporation's assets continued to exhibit
favorable credit quality and low credit costs, outperforming pre-pandemic
trends. These improvements have been aided by the significant government
stimulus and the rebound in the economy. We will continue to closely monitor
post COVID-19 risks and the effects of the receding stimulus on macroeconomic
conditions and on borrower performance. However, management believes that the
improvement over the last few years in the risk profile of the Corporation's
loan portfolios, positions Popular to operate successfully under the current
environment.



Total NPAs decreased by $114 million when compared with December 31, 2020. Total
non-performing loans held-in-portfolio ("NPLs") decreased by $105 million from
December 31, 2020. BPPR's NPLs decreased by $92 million, mainly driven by lower
mortgage NPLs by $60 million, as inflows continue trending lower than pre-COVID
levels, and lower commercial NPLs by $21 million, mostly driven by repayment
activity. BPPR's construction NPLs decreased by $7 million mostly due to a
previously reserved loan that was partially charged-off during the first quarter
of 2021. Popular U.S. NPLs decreased by $13 million from December 31, 2020,
mostly related to a $7 million construction loan sold and $6 million commercial
loan pay-off. At September 30, 2021, the ratio of NPLs to total loans
held-in-portfolio was 2.2% compared to 2.5% in the fourth quarter of 2020. In
addition, other real estate owned loans ("OREOs") decreased by $6 million,
mostly related to sales activity, combined with the suspension of foreclosure
activity due to the COVID-19 pandemic.

At September 30, 2021, NPLs secured by real estate amounted to $522 million in
the Puerto Rico operations and $23 million in Popular U.S. These figures were
$630 million and $34 million, respectively, at December 31, 2020.

The Corporation's commercial loan portfolio secured by real estate ("CRE")
amounted to $8.1 billion at September 30, 2021, of which $1.8 billion was
secured with owner occupied properties, compared with $7.8 billion and $1.9
billion, respectively, at December 31, 2020. CRE NPLs amounted to $134 million
at September 30, 2021, compared with $173 million at December 31, 2020. The CRE
NPL ratios for the BPPR and Popular U.S. segments were 3.34% and 0.03%,
respectively, at September 30, 2021, compared with 4.51% and 0.07%,
respectively, at December 31, 2020.

In addition to the NPLs included in Table 17, at September 30, 2021, there were
$200 million of performing loans, mostly commercial loans, which in management's
opinion, are currently subject to potential future classification as
non-performing and are considered impaired (December 31, 2020 - $228 million).

For the quarter ended September 30, 2021, total inflows of NPLs
held-in-portfolio, excluding consumer loans, decreased by approximately $60
million, when compared to the inflows for the same period in 2020. Inflows of
NPLs held-in-portfolio at the BPPR segment decreased by $37 million compared to
the same period in 2020, driven by lower construction and commercial inflows by
$22 million and $13 million, respectively. Inflows of NPLs held-in-portfolio at
the Popular U.S. segment decreased by $23.2 million from the same period in
2020, mostly due to lower commercial NPL inflows.



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Table 17 - Non-Performing Assets


                                      September 30, 2021                                December 31, 2020
                                                                 As a %                                         As a %
                                                               of loans                                       of loans
                                          Popular   Popular,     HIP by                 Popular    Popular,     HIP by
(Dollars in thousands)             BPPR      U.S.       Inc.   category          BPPR      U.S.        Inc.   category
Commercial                    $ 183,394 $   2,787 $  186,181        1.4 % $   204,092 $   5,988 $   210,080        1.5 %
Construction                     14,877         -     14,877        1.9        21,497     7,560      29,057        3.1
Leasing                           2,542         -      2,542        0.2         3,441         -       3,441        0.3
Mortgage                        354,555    14,488    369,043        4.9       414,343    14,864     429,207        5.4
Auto                             17,345         -     17,345        0.5        15,736         -      15,736        0.5
Consumer                         36,158     6,689     42,847        1.7        41,268     8,985      50,253        1.9
Total non-performing
loans held-in-portfolio         608,871    23,964    632,835        2.2 %     700,377    37,397     737,774        2.5 %
Non-performing loans
held-for-sale [1]                     -         -          -                        -     2,738       2,738
Other real estate owned
("OREO")                         75,369     1,459     76,828                   81,512     1,634      83,146
Total non-performing
assets                        $ 684,240 $  25,423 $  709,663              $   781,889 $  41,769 $   823,658
Accruing loans past due
90 days or more[2]            $ 549,784 $       1 $  549,785              $ 1,028,061 $       3 $ 1,028,064
Ratios:
Non-performing assets
to total assets                    1.08 %    0.23 %     0.96 %                   1.42 %    0.38 %      1.25 %
Non-performing loans
held-in-portfolio to
loans held-in-portfolio            2.88      0.31       2.19                     3.25      0.48        2.51
Allowance for credit
losses to loans
held-in-portfolio                  2.92      1.32       2.49                     3.43      2.00        3.05
Allowance for credit
losses to
non-performing loans,
excluding held-for-sale          101.30    424.79     113.55                   105.62    418.48      121.48
HIP = "held-in-portfolio"
[1] There were no non-performing loans held-for-sale as of September 30, 2021 (December 31, 2020 - $3 million in
commercial loans).
[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 $12 million at September 30, 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. These balances include $350
million of residential mortgage loans insured by FHA or guaranteed by the VA that are no longer accruing interest as of
September 30, 2021 (December 31, 2020 - $329 million). Furthermore, the Corporation has approximately $53 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).


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Table 18 - Activity in Non-Performing Loans Held-in-Portfolio (Excluding Consumer Loans)

For the nine months ended September 30,


                               For the quarter ended September 30, 2021                       2021
                                                Popular                                     Popular
(Dollars in thousands)               BPPR         U.S.     Popular, Inc.       BPPR           U.S.      Popular, Inc.
Beginning balance               $    603,233  $   21,185   $     624,418 $       639,932  $   28,412  $       668,344
Plus:
  New non-performing loans            46,060       5,701          51,761         195,270      36,202          231,472
  Advances on existing
  non-performing loans                     -          12              12               -          35               35
Less:
  Non-performing loans
  transferred to OREO               (11,053)           -        (11,053)        (26,307)           -         (26,307)
  Non-performing loans
  charged-off                        (9,640)           -         (9,640)        (33,185)     (1,500)         (34,685)
  Loans returned to accrual
  status / loan collections         (75,774)     (9,623)        (85,397)       (222,884)    (37,101)        (259,985)
  Loans transferred to
  held-for-sale                            -           -               -               -     (8,773)          (8,773)
Ending balance NPLs             $    552,826  $   17,275   $     570,101 $       552,826  $   17,275  $       570,101

Table 19 - Activity in Non-Performing Loans Held-in-Portfolio (Excluding Consumer Loans)

For the nine months ended September 30,


                               For the quarter ended September 30, 2020                       2020
                                                Popular                                     Popular
(Dollars in thousands)               BPPR         U.S.     Popular, Inc.       BPPR           U.S.      Popular, Inc.
Beginning balance               $    651,152  $   23,383   $     674,535 $       431,082  $   16,621  $       447,703
Transition of PCI to PCD loans
under CECL                                 -           -               -         245,703      18,547          264,250
Plus:
  New non-performing loans            83,277      28,843         112,120         260,944      42,442          303,386
  Advances on existing
  non-performing loans                     -         106             106               -         414              414
Less:
  Non-performing loans
  transferred to OREO                  (531)           -           (531)        (10,969)           -         (10,969)
  Non-performing loans
  charged-off                        (4,738)       (463)         (5,201)        (20,880)     (1,392)         (22,272)
  Loans returned to accrual
  status / loan collections         (95,602)    (20,562)       (116,164)       (272,322)    (34,646)        (306,968)
  Loans transferred to
  held-for-sale                            -           -               -               -    (10,679)         (10,679)
Ending balance NPLs             $    633,558  $   31,307   $     664,865 $       633,558  $   31,307  $       664,865

Table 20 - Activity in Non-Performing Commercial Loans Held-in-Portfolio



                                                                       For 

the nine months ended September 30,


                           For the quarter ended September 30, 2021                      2021
                                           Popular                                     Popular
(Dollars in thousands)          BPPR         U.S.     Popular, Inc.         BPPR         U.S.      Popular, Inc.
Beginning balance           $   217,703  $    7,862 $       225,565    $    204,092  $    5,988  $       210,080
Plus:
  New non-performing loans        7,454       1,039           8,493          54,835      10,302           65,137
  Advances on existing
  non-performing loans                -          10              10               -          17               17
Less:
  Non-performing loans
  transferred to OREO           (2,069)           -         (2,069)         (8,265)           -          (8,265)
  Non-performing loans
  charged-off                   (8,617)           -         (8,617)        (12,523)       (976)         (13,499)
  Loans returned to
  accrual status / loan
  collections                  (31,077)     (6,124)        (37,201)        (54,745)    (10,771)         (65,516)
  Loans transferred to
  held-for-sale                       -           -               -               -     (1,773)          (1,773)
Ending balance NPLs         $   183,394  $    2,787 $       186,181    $    183,394  $    2,787  $       186,181


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Table 21 - Activity in Non-Performing Commercial Loans Held-in-Portfolio

For the nine months ended September 30,


                             For the quarter ended September 30, 2020                      2020
                                             Popular                                     Popular
(Dollars in thousands)            BPPR         U.S.     Popular, Inc.         BPPR         U.S.      Popular, Inc.
Beginning balance             $   253,890  $    9,239 $       263,129    $    147,255  $    5,504  $       152,759
Transition of PCI to PCD
loans under CECL                        -           -               -         112,517      18,547          131,064
Plus:
  New non-performing loans         20,250      12,877          33,127          39,391      15,029           54,420
  Advances on existing
  non-performing loans                  -          58              58               -         303              303
Less:
  Non-performing loans
  transferred to OREO                (39)           -            (39)         (2,241)           -          (2,241)
  Non-performing loans
  charged-off                     (1,000)       (452)         (1,452)         (4,548)     (1,374)          (5,922)
  Loans returned to accrual
  status / loan collections      (31,117)    (13,968)        (45,085)        (50,390)    (19,576)         (69,966)
  Loans transferred to
  held-for-sale                         -           -               -               -    (10,679)         (10,679)
Ending balance NPLs           $   241,984  $    7,754 $       249,738    $    241,984  $    7,754  $       249,738

Table 22 - Activity in Non-Performing Construction Loans Held-in-Portfolio



                               For the quarter ended September 30,      For 

the nine months ended September 30,


                                               2021                                      2021
                                             Popular                                   Popular
(Dollars in thousands)             BPPR       U.S.     Popular, Inc.        BPPR         U.S.      Popular, Inc.
Beginning balance              $   14,877  $       - $        14,877    $    21,497  $    7,560  $        29,057
Plus:
  New non-performing loans              -          -               -              -      12,141           12,141
Less:
  Non-performing loans
  charged-off                           -          -               -        (6,620)       (523)          (7,143)
  Loans returned to accrual
  status / loan collections             -          -               -              -    (12,178)         (12,178)
  Loans transferred to
  held-for-sale                         -          -               -              -     (7,000)          (7,000)
Ending balance NPLs            $   14,877  $       - $        14,877    $    14,877  $        -  $        14,877

Table 23 - Activity in Non-Performing Construction Loans Held-in-Portfolio



                              For the quarter ended September 30,     For 

the nine months ended September


                                              2020                          

30, 2020


                                            Popular                                  Popular     Popular,
(Dollars in thousands)            BPPR       U.S.     Popular, Inc.        BPPR        U.S.        Inc.
Beginning balance             $        -  $       - $             -    $      119  $       26  $      145
Plus:

New non-performing loans 21,514 9,069 30,583 21,514 9,069 30,583 Less:

Loans returned to accrual


  status / loan collections            -          -               -         (119)        (26)       (145)
Ending balance NPLs           $   21,514  $   9,069 $        30,583    $   21,514  $    9,069  $   30,583


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Table 24 - Activity in Non-Performing Mortgage Loans Held-in-Portfolio



                                For the quarter ended September 30,      

For the nine months ended September 30,


                                               2021                                        2021
                                              Popular                                     Popular
(Dollars in thousands)             BPPR        U.S.     Popular, Inc.         BPPR          U.S.     Popular, Inc.
Beginning balance              $   370,653  $  13,323 $       383,976    $     414,343  $   14,864 $       429,207
Plus:
   New non-performing loans         38,606      4,662          43,268          140,435      13,759         154,194
   Advances on existing
   non-performing loans                  -          2               2                -          18              18
Less:
   Non-performing loans
   transferred to OREO             (8,984)          -         (8,984)         (18,042)           -        (18,042)
   Non-performing loans
   charged-off                     (1,023)          -         (1,023)         (14,042)         (1)        (14,043)

Loans returned to accrual

status / loan collections (44,697) (3,499) (48,196)


 (168,139)    (14,152)       (182,291)
Ending balance NPLs            $   354,555  $  14,488 $       369,043    $     354,555  $   14,488 $       369,043

Table 25 - Activity in Non-Performing Mortgage Loans Held-in-Portfolio



                                For the quarter ended September 30,      

For the nine months ended September 30,


                                               2020                                        2020
                                              Popular                                     Popular
(Dollars in thousands)             BPPR        U.S.     Popular, Inc.         BPPR          U.S.     Popular, Inc.
Beginning balance              $   397,262  $  14,144 $       411,406    $     283,708  $   11,091 $       294,799
Transition of PCI to PCD
loans under CECL                         -          -               -          133,186           -         133,186
Plus:
   New non-performing loans         41,513      6,897          48,410          200,039      18,344         218,383
   Advances on existing
   non-performing loans                  -         48              48                -         111             111
Less:
   Non-performing loans
   transferred to OREO               (492)          -           (492)          (8,728)           -         (8,728)
   Non-performing loans
   charged-off                     (3,738)       (11)         (3,749)         (16,332)        (18)        (16,350)

Loans returned to accrual

status / loan collections (64,485) (6,594) (71,079)


 (221,813)    (15,044)       (236,857)
Ending balance NPLs            $   370,060  $  14,484 $       384,544    $     370,060  $   14,484 $       384,544


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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 September 30, 2021 and December 31, 2020,
are presented below.


Table 26 - Loan Delinquencies



(Dollars in thousands)                      September 30, 2021                                    December 31, 2020
                                                                        Total                                              Total
                                                             delinquencies as                                      delinquencies
                         Loans delinquent                     a percentage of Loans delinquent                   as a percentage
                          30 days or more       Total loans       total

loans 30 days or more Total loans of total loans Commercial

$   241,967  $     13,303,671            1.82 

% $ 249,484 $ 13,614,310 1.83 % Construction

                       29,855           801,040            3.73             50,369           926,208          5.44
Leasing                            12,704         1,348,679            0.94             14,009         1,197,661          1.17
Mortgage [1]                    1,189,198         7,539,152           15.77 

1,775,902 7,890,680 22.51 Consumer

                          158,598         5,862,830            2.71            179,789         5,756,337          3.12
Loans held-for-sale                   391            91,313            0.43              3,108            99,455          3.13
Total                         $ 1,632,713  $     28,946,685            5.64 

% $ 2,272,661 $ 29,484,651 7.71 % [1] Loans delinquent 30 days or more includes $0.7 billion of residential mortgage loans insured by FHA or guaranteed by the VA as of September 30, 2021 (December 31, 2020 - $1.1 billion). Refer to Note 7 to the Consolidated Financial Statements for additional information of guaranteed loans.

Allowance for Credit Losses Loans Held-in-Portfolio



The 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 credit losses. Consequently, the
business financial condition, liquidity, capital, and results of operations
could also be affected.



At September 30, 2021, the allowance for credit losses amounted to $719 million,
a decrease of $178 million, when compared with December 31, 2020, mainly
prompted by improvements in credit quality and the macroeconomic outlook. Since
the December 31, 2020 scenarios, updated economic assumptions have included a
more optimistic view of the economy, prompting substantial reductions in
reserves across different portfolios, also contributing to lower qualitative
reserves. The ACL for BPPR decreased by $123 million to $617 million, when
compared to December 31, 2020. The ACL for Popular U.S. decreased by $55 million
to $102 million, when compared to December 31, 2020, mainly driven by a
reduction in the qualitative reserve for commercial real estate loans,
influenced by the changes in the macroeconomic scenarios The provision for
credit losses for the quarter ended September 30, 2021 amounted to a benefit of
$58.6 million, a favorable variance of $78.1 million from the same period in the
prior year, driven by improved credit quality and macroeconomic outlook, and
lower NCOs. Refer to Note 8 - Allowance for credit losses - loans
held-in-portfolio, and to the Provision for Credit Losses section of this MD&A
for additional information.

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Table 27 - Allowance for Credit Losses - Loan Portfolios

September 30, 2021

(Dollars in thousands) Commercial Construction Mortgage Leasing Consumer Total Total ACL

$    234,814   $       9,850   $   170,378   $    11,634   $   291,899   $    718,575
Total loans
held-in-portfolio       $ 13,303,671   $     801,040   $ 7,539,152   $ 1,348,679   $ 5,862,830   $ 28,855,372
ACL to loans
held-in-portfolio               1.77 %          1.23 %        2.26 %        0.86 %        4.98 %         2.49 %



Table 28 - 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 (recoveries)

The following tables present annualized net charge-offs (recoveries) to average loans held-in-portfolio ("HIP") by loan category for the quarters and nine months ended September 30, 2021 and 2020.





Table 29 - Annualized Net Charge-offs (Recoveries) to Average Loans Held-in-Portfolio

                                                            Quarters ended
                                     September 30, 2021                        September 30, 2020
                               BPPR   Popular U.S.   Popular Inc.       BPPR   Popular U.S.   Popular Inc.
Commercial                     0.23 %       (0.03) %         0.12 %   (0.10) %         0.02 %       (0.05) %
Construction                 (6.82)              -         (1.05)     (0.33)              -         (0.07)
Mortgage                     (0.13)         (0.02)         (0.11)       0.13              -           0.11
Leasing                        0.09              -           0.09     (0.12)              -         (0.12)
Consumer                       0.64              -           0.62       1.06           3.09           1.19
Total annualized net
charge-offs (recoveries)
to average loans
held-in-portfolio              0.18 %       (0.03) %         0.12 %     0.26 %         0.16 %         0.24 %

                                                           Nine months ended
                                     September 30, 2021                        September 30, 2020
                               BPPR   Popular U.S.   Popular Inc.       BPPR   Popular U.S.   Popular Inc.
Commercial                   (0.12) %       (0.02) %       (0.08) %        - %       (0.01) %       (0.01) %
Construction                   3.01           0.02           0.51     (0.29)         (0.03)         (0.08)
Mortgage                       0.14         (0.06)           0.11       0.34              -           0.29
Leasing                        0.09              -           0.09       0.78              -           0.78
Consumer                       0.56           1.41           0.60       2.78           3.16           2.81
Total annualized net
charge-offs to average
loans held-in-portfolio        0.17 %         0.02 %         0.13 %     0.88 %         0.16 %         0.69 %




NCOs for the quarter ended September 30, 2021 amounted to $8.8 million,
decreasing by $8.0 million when compared to the same period in 2020. NCOs have
remained at low levels, aided by measures taken by the Corporation to control
the impact of the pandemic, as well as the U.S. government stimulus programs.

                                      163

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.



Troubled Debt Restructurings

The Corporation's troubled debt restructurings ("TDRs") loans amounted to $1.7
billion at September 30, 2021, increasing by $18 million, from December 31,
2020, mainly related to mortgage borrowers that needed additional COVID-19
extensions past the original 6-month moratorium period. TDRs in the BPPR segment
increased by $20 million, mostly related to higher mortgage TDRs by $59 million,
of which $54 million were related to government guaranteed loans, in part offset
by a combined decrease of $30 million in the commercial and construction TDRs.
The Popular U.S. segment TDRs have remained essentially flat since December 31,
2020. TDRs in accruing status increased by $54 million from December 31, 2020,
mostly related to an increase of $75 million in BPPR's mortgage TDRs, in part
offset by a decrease of $14 million in BPPR's commercial TDRs, while
non-accruing TDRs decreased by $36 million.

Refer to Note 8 to the Consolidated Financial Statements for additional information on modifications considered 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.

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