instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated

Statements of Financial Condition.

The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to

extend credit, standby letters of credit and financial guarantees is represented by the contractual notional amounts of those instruments.

The Corporation uses the same credit policies in making these commitments and conditional obligations as it does for those reflected on the

Consolidated Statements of Financial Condition.

Financial instruments with off-balance sheet credit risk, whose contract amounts represent potential credit risk as of the end of the periods

presented were as follows:


(In thousands)	June 30, 2026	December 31, 2025
Commitments to extend credit:
Credit card lines	$7,001,118	$6,415,208
Commercial lines of credit	4,359,079	4,257,505
Construction lines of credit	1,068,649	1,197,319
Other consumer unused credit commitments	290,569	277,635
Commercial letters of credit	8,957	21,248
Standby letters of credit	134,686	111,554
Commitments to originate or fund mortgage loans	21,709	20,099

At June 30, 2026 and December 31, 2025, the Corporation maintained a reserve of $14.9 million and $14.4 million, respectively, for

potential losses associated with unfunded loan commitments related to commercial and construction lines of credit.

Other commitments

At June 30, 2026 and December 31, 2025, the Corporation also maintained other non-credit commitments for $5.1 million and $6.8 million,

respectively, primarily for the acquisition of other investments.

Business concentration

Since the Corporation’s business activities are concentrated primarily in Puerto Rico, its results of operations and financial condition are

dependent upon the general trends of the Puerto Rico economy and, in particular, the residential and commercial real estate markets. The

concentration of the Corporation’s operations in Puerto Rico exposes it to greater risk than other banking companies with a wider

geographic base. Its asset and revenue composition by geographical area is presented in Note 26 to the Consolidated Financial

Statements.

Puerto Rico has faced significant fiscal and economic challenges for over a decade. In response to such challenges, the U.S. Congress

enacted PROMESA in 2016, which, among other things, established the Oversight Board and a framework for the restructuring of the debts

of the Commonwealth, its instrumentalities and municipalities. The Commonwealth and several of its instrumentalities have availed

themselves of debt restructuring proceedings under PROMESA. As of the date of this report, while municipalities have been designated as

covered entities under PROMESA, no municipality has commenced or has been authorized by the Oversight Board to commence, any such

debt restructuring proceeding under PROMESA.

At June 30, 2026, the Corporation’s direct exposure to the Puerto Rico government and its instrumentalities and municipalities totaled

$464.1 million, of which $414.7 million were outstanding ($391.3 million and $342.9 million at December 31, 2025). The Corporation’s

exposure at June 30, 2026 included up to $47.4 million in Automated Clearing House (“ACH”) transaction settlement exposure, none of

which was outstanding. Of the amount outstanding, $407.6 million consists of loans and $7.1 million are securities ($333.2 million and $8.8

million at December 31, 2025). Substantially all of the amount outstanding at June 30, 2026 and December 31, 2025 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 June 30, 2026, approximately 81% of the Corporation’s exposure to municipal loans and securities was

concentrated in the municipalities of San Juan, Guaynabo, Carolina and Caguas.

The following table details the loans and investments representing the Corporation’s direct exposure to the Puerto Rico government

according to their maturities as of June 30, 2026:


(In thousands)	Investment Portfolio	Loans	Total Outstanding	Total Exposure
Central Government
Within 1 year	$42	$-	$42	$47,442
Total Central Government	42	-	42	47,442
Municipalities
Within 1 year	2,720	11,574	14,294	16,294
After 1 to 5 years	3,910	126,585	130,495	130,495
After 5 to 10 years	450	238,424	238,874	238,874
After 10 years	-	30,991	30,991	30,991
Total Municipalities	7,080	407,574	414,654	416,654
Total Direct Government Exposure	$7,122	$407,574	$414,696	$464,096

In addition, at June 30, 2026, the Corporation had $199.7 million in loans insured or securities issued by Puerto Rico governmental entities

but for which the principal source of repayment is non-governmental ($209.3 million at December 31, 2025). These included $164.9 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, 2025 - $166.9 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 June 30, 2026, $34.8 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, 2025 - $35.5 million). In the event that the mortgage

loans insured by HFA and held by the Corporation directly or those serving as collateral for the HFA bonds default and the collateral is

insufficient to satisfy the outstanding balance of these loans, HFA’s ability to honor its insurance will depend, among other factors, on the

financial condition of HFA at the time such obligations become due and payable. The Corporation does not consider the government

guarantee when estimating the credit losses associated with this portfolio. Although the Governor is currently authorized by local legislation

to impose a temporary moratorium on the financial obligations of the HFA, a moratorium on such obligations has not been imposed as of the

date hereof.

BPPR’s commercial loan portfolio also includes loans to private borrowers who are service providers, lessors, suppliers or have other

relationships with the government. These borrowers could be negatively affected by the Commonwealth’s fiscal crisis and the ongoing Title

III proceedings under PROMESA. Similarly, BPPR’s mortgage and consumer loan portfolios include loans to government employees and

retirees, which could also be negatively affected by fiscal measures such as employee layoffs or furloughs or reductions in pension benefits.

In addition, $2.7 billion of residential mortgages and $84.3 million commercial loans were insured or guaranteed by the U.S. Government or

its agencies at June 30, 2026 (compared to $2.5 billion and $80.5 million, respectively, at December 31, 2025). The Corporation also had

U.S. Treasury and obligations from the U.S. Government, its agencies or government sponsored entities within the portfolio of available-for-

sale and held-to-maturity securities as described in Note 5 and 6 to the Consolidated Financial Statements.

At June 30, 2026, the Corporation had operations in the United States Virgin Islands (the “USVI") and had $28.3 million in direct exposure to

USVI government entities (December 31, 2025 - $28.3 million). The USVI has been experiencing a number of fiscal and economic

challenges that could adversely affect the ability of its public corporations and instrumentalities to service their outstanding debt obligations.

At June 30, 2026, the Corporation had operations in the British Virgin Islands (“BVI”) and it had a loan portfolio amounting to $197.6 million

comprised of various retail and commercial clients, compared to a loan portfolio of $195.3 million at December 31, 2025. At June 30, 2026,

the Corporation had no significant exposure to a single borrower in the BVI.

Legal Proceedings

The nature of Popular’s business ordinarily generates claims, litigation, arbitration, regulatory and governmental investigations, and legal

and administrative cases and proceedings (collectively, “Legal Proceedings”). Popular’s Legal Proceedings may involve various lines of

business and include claims relating to contract, torts, consumer protection, securities, antitrust, employment, tax and other laws. The

recovery sought in Legal Proceedings may include substantial or indeterminate compensatory damages, punitive damages, injunctive relief,

or recovery on a class-wide basis. When the Corporation determines that it has meritorious defenses to the claims asserted, it vigorously

defends itself. The Corporation will consider the settlement of cases (including cases where it has meritorious defenses) when, in

management’s judgment, it is in the best interest of the Corporation and its stockholders to do so. On at least a quarterly basis, Popular

assesses its liabilities and contingencies relating to outstanding Legal Proceedings utilizing the most current information available. For

matters where it is probable that the Corporation will incur a material loss and the amount can be reasonably estimated, the Corporation

establishes an accrual for the loss. Once established, the accrual is adjusted on at least a quarterly basis to reflect any relevant