Popular(BPOP) - 2024 Q4 - Annual Report

Loan Portfolio - Approximately 55% of the loan portfolio as of December 31, 2024, consisted of real estate-related loans, including residential mortgage loans, construction loans, and commercial loans secured by commercial real estate[29]. - The total loan portfolio amounted to $37.108 billion, with commercial and industrial loans making up 21% and mortgage loans accounting for 22%[30]. - The loan portfolio is diversified by category, with commercial and industrial loans making up 21% of the total portfolio[30]. - Approximately 26% of the loan portfolio is comprised of mortgage loans, indicating a strong focus on residential lending[30]. Company Operations - The company operates primarily in Puerto Rico, where it has the largest retail banking franchise, and also has a presence in the mainland United States, specifically in New York, New Jersey, and Florida[24]. - The Corporation's banking operations in Puerto Rico are primarily conducted through Banco Popular de Puerto Rico, which has the largest retail banking franchise in the region[7]. - The company’s lending activities are concentrated in commercial, mortgage, consumer, construction, and lease financings, with commercial loans being a significant portion of the portfolio[24][25][26][27]. - The company’s operations are significantly influenced by the economic trends in Puerto Rico, particularly in the residential and commercial real estate markets[28]. Competition and Market Environment - The competitive landscape includes local commercial banks, credit unions, and specialized financial institutions, with significant pressure on pricing and service delivery[44][45][46]. - The company faces substantial competition in both Puerto Rico and the mainland United States, requiring effective strategies to maintain market share[47]. Credit Policies and Risk Management - The company’s credit policies are designed to mitigate credit risk, with comprehensive procedures for monitoring and evaluating loan portfolio quality[34]. - The company has specialized workout officers to manage commercial loans that are past due 90 days and over, focusing on minimizing potential losses[40]. Financial Performance and Capital Management - The Corporation expects to achieve at least a 12% return on tangible common equity (ROTCE) by the end of 2025, down from an earlier target of 14% due to higher-cost deposits and lower loan growth[50]. - As of December 31, 2024, Popular had total consolidated assets of$ 73.0 billion, placing it under the most stringent regulatory standards[65]. - Both BPPR and PB met the quantitative requirements for 'well capitalized' status, indicating a total risk-based capital ratio of 10.0% or greater[92]. - Popular is required to maintain a capital conservation buffer of 2.5% of CET1, resulting in minimum ratios of at least 7% CET1 to risk-weighted assets[79]. - Popular has opted to phase in the regulatory capital effects of the Current Expected Credit Loss (CECL) model over three years, impacting future capital ratios[86]. Employee Engagement and Development - The Corporation invested more than $13 million in enhancing employee compensation in 2024, with 98% of employees participating in the 401(k) savings plan[54]. - The employee turnover rate was maintained at 8.6% as of the end of 2024, with an employee loyalty score of 81%, above the 50th percentile of the Qualtrics global benchmark[59]. - The Corporation's internal mobility rate in 2024 was 44%, indicating strong opportunities for employee advancement[56]. - More than 4,100 employees participated in various training programs, highlighting the Corporation's focus on talent development[55]. - The health and wellness center at the corporate offices received over 15,561 visits from employees during 2024, emphasizing the Corporation's commitment to employee well-being[52]. Regulatory Compliance and Legal Obligations - The FDIC's increased deposit insurance assessment rates began in 2023, aimed at restoring the DIF reserve ratio to meet statutory minimums by 2028[72]. - The SEC has adopted new rules requiring registrants to report material cybersecurity incidents on Form 8-K and disclose cybersecurity policies in the Annual Report on Form 10-K[118][119]. - The Federal Reserve Board may limit Popular's ability to conduct activities and make acquisitions as a financial holding company, requiring prior approval for acquisitions of nonbank companies with$ 10 billion or more in total assets[102]. - The Volcker Rule restricts Popular and its subsidiaries from engaging in certain proprietary trading and sponsoring covered funds, but it does not materially affect operations[103]. - The Community Reinvestment Act requires banks to serve the credit needs of their communities, with new regulations effective April 1, 2024, and certain data reporting requirements starting January 1, 2027[108]. Dividends and Shareholder Returns - BPPR declared cash dividends of $600 million during the year ended December 31, 2024, with a portion used for Popular's common stock dividends[93]. - At December 31, 2024, BPPR needed prior approval from the Federal Reserve Board before declaring a dividend in excess of$ 318 million due to its retained income and declared dividend activity[93].