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Commitments and contingencies
6 Months Ended
Jun. 30, 2023
Commitments and Contingencies Disclosure  
Commitments And Contingencies
Note 21 – Commitments and contingencies
Off-balance sheet risk
The Corporation
 
is a
 
party to
 
financial instruments
 
with off-balance
 
sheet credit
 
risk in
 
the normal
 
course of
 
business to
 
meet the
financial needs of its customers. These financial instruments
 
include loan commitments, letters of credit and standby
 
letters of credit.
These instruments involve,
 
to varying
 
degrees, elements of
 
credit and
 
interest rate
 
risk in
 
excess of
 
the amount
 
recognized in
 
the
consolidated statements of financial condition.
The
 
Corporation’s
 
exposure
 
to
 
credit
 
loss
 
in
 
the
 
event
 
of
 
nonperformance
 
by
 
the
 
other
 
party
 
to
 
the
 
financial
 
instrument
 
for
commitments to extend credit, standby
 
letters of credit and financial
 
guarantees is represented by the
 
contractual notional amounts
of those instruments. The
 
Corporation uses the same
 
credit policies in
 
making these commitments and conditional
 
obligations as it
does for those reflected on the consolidated statements
 
of financial condition.
Financial instruments with
 
off-balance sheet credit
 
risk, whose contract
 
amounts represent potential credit
 
risk as of
 
the end of
 
the
periods presented were as follows:
(In thousands)
June 30, 2023
December 31, 2022
Commitments to extend credit:
Credit card lines
$
6,008,516
$
5,853,990
Commercial and construction lines of credit
4,381,533
4,425,825
Other consumer unused credit commitments
 
249,211
250,271
Commercial letters of credit
2,256
3,351
Standby letters of credit
29,404
27,868
Commitments to originate or fund mortgage loans
43,593
45,170
At June
 
30, 2023
 
and December
 
31, 2022,
 
the Corporation
 
maintained a
 
reserve of
 
approximately $
11.6
 
million and
 
$
8.8
 
million,
respectively, for potential losses associated with unfunded loan commitments
 
related to commercial
 
and construction lines of credit.
Other commitments
At June
 
30, 2023
 
and December 31,
 
2022, the
 
Corporation also
 
maintained other
 
non-credit commitments for
 
approximately $
4.8
million, primarily for the acquisition of other investments.
 
Business concentration
Since the Corporation’s business activities are concentrated primarily in Puerto Rico, its results of operations and financial condition
are dependent
 
upon the
 
general trends
 
of the
 
Puerto Rico
 
economy and,
 
in particular,
 
the residential
 
and commercial
 
real estate
markets. The concentration
 
of the Corporation’s
 
operations in Puerto Rico
 
exposes it to
 
greater risk than other
 
banking companies
with a wider geographic base. Its
 
asset and revenue composition by geographical area
 
is presented in Note 33
 
to the Consolidated
Financial Statements.
 
Puerto
 
Rico
 
has
 
faced
 
significant
 
fiscal
 
and
 
economic
 
challenges
 
for
 
over
 
a
 
decade.
 
In
 
response
 
to
 
such
 
challenges,
 
the
 
U.S.
Congress enacted the
 
Puerto Rico Oversight
 
Management and Economic Stability
 
Act (“PROMESA”) in
 
2016, which, among
 
other
things,
 
established
 
the
 
Oversight
 
Board
 
and
 
a
 
framework
 
for
 
the
 
restructuring
 
of
 
the
 
debts
 
of
 
the
 
Commonwealth,
 
its
instrumentalities and
 
municipalities.
 
The
 
Commonwealth and
 
several
 
of
 
its
 
instrumentalities have
 
commenced
 
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,
 
2023,
 
the
 
Corporation’s
 
direct
 
exposure
 
to
 
the
 
Puerto
 
Rico
 
government
 
and
 
its
 
instrumentalities
 
and
 
municipalities
totaled $
380
 
million, of which
 
$
351
 
million were outstanding
 
($
374
 
million and $
327
 
million at December
 
31, 2022). Of
 
the amount
outstanding,
 
$
325
 
million
 
consists
 
of
 
loans
 
and
 
$
26
 
million
 
are
 
securities
 
($
302
 
million
 
and
 
$
25
 
million
 
at
 
December 31,
 
2022).
Substantially all
 
of the
 
amount outstanding
 
at June
 
30, 2023
 
and December
 
31, 2022
 
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, 2023,
74
% of the Corporation’s exposure to municipal loans and
 
securities was concentrated in
the
 
municipalities
 
of
 
San
 
Juan,
 
Guaynabo,
 
Carolina
 
and
 
Caguas.
 
In
 
July
 
2023,
 
the
 
Corporation
 
received
 
scheduled
 
principal
payments amounting to $
34
 
million from various obligations from Puerto
 
Rico municipalities.
The following table details the loans and investments representing the Corporation’s direct exposure to
 
the Puerto Rico government
according to their maturities as of June 30, 2023:
(In thousands)
Investment
Portfolio
Loans
Total Outstanding
Total Exposure
Central Government
After 1 to 5 years
$
10
$
-
$
10
$
10
After 5 to 10 years
1
-
1
1
After 10 years
30
-
30
30
Total Central
 
Government
41
-
41
41
Municipalities
Within 1 year
4,730
13,089
17,819
42,819
After 1 to 5 years
20,282
115,804
136,086
140,086
After 5 to 10 years
1,025
146,681
147,706
147,706
After 10 years
-
49,831
49,831
49,831
Total Municipalities
26,037
325,405
351,442
380,442
Total Direct Government
 
Exposure
$
26,078
$
325,405
$
351,483
$
380,483
In addition,
 
at June
 
30, 2023,
 
the Corporation had
 
$
240
 
million in
 
loans insured
 
or securities issued
 
by Puerto
 
Rico governmental
entities but for
 
which the principal
 
source of
 
repayment is non-governmental
 
($
251
 
million at December
 
31, 2022). These
 
included
$
199
 
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,
 
2022
 
-
 
$
209
 
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, 2023,
 
$
40
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,
 
2022 -
 
$
42
 
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, $
1.6
 
billion of
 
residential mortgages,
 
$
12
 
million of
 
Small Business
 
Administration (“SBA”)
 
loans under
 
the Paycheck
Protection Program (“PPP”) and
 
$
71
 
million commercial loans were
 
insured or guaranteed
 
by the U.S.
 
Government or its agencies
at June 30,
 
2023 (compared to $
1.6
 
billion, $
38
 
million and $
72
 
million, respectively,
 
at December 31, 2022).
 
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 6 and 7 to the Consolidated Financial
 
Statements.
At June 30, 2023, the Corporation has operations in the United States Virgin Islands (the “USVI”) and has approximately $
28
 
million
in direct
 
exposure to
 
USVI government entities
 
(December 31, 2022
 
- $
28
 
million). The
 
USVI has
 
been experiencing a
 
number of
fiscal and economic challenges
 
that could adversely
 
affect the ability
 
of its public
 
corporations and instrumentalities to
 
service their
outstanding debt obligations.
 
At June 30, 2023, the
 
Corporation has operations in the British
 
Virgin Islands (“BVI”), which
 
was negatively affected by the
 
COVID-
19 pandemic, particularly as a
 
reduction in the tourism activity
 
which accounts for a significant
 
portion of its economy.
 
Although the
Corporation has
 
no significant
 
exposure to
 
a single
 
borrower in
 
the BVI,
 
it has
 
a loan
 
portfolio amounting
 
to approximately
 
$
207
million comprised of various retail and commercial
 
clients, compared to a loan portfolio of $
214
 
million at December 31, 2022.
Legal Proceedings
The
 
nature
 
of
 
Popular’s
 
business
 
ordinarily
 
generates
 
claims,
 
litigation,
 
investigations,
 
and
 
legal
 
and
 
administrative
 
cases
 
and
proceedings
 
(collectively,
 
“Legal Proceedings”).
 
When the
 
Corporation determines
 
that
 
it
 
has
 
meritorious
 
defenses to
 
the
 
claims
asserted, it vigorously defends itself. The Corporation will consider the settlement of cases (including cases where it has meritorious
defenses) when, in management’s judgment, it
 
is in the best
 
interest of the Corporation and
 
its stockholders to do so.
 
On at least a
quarterly basis, Popular assesses its liabilities and contingencies relating
 
to outstanding Legal Proceedings utilizing the most current
information
 
available.
 
For
 
matters
 
where
 
it
 
is
 
probable
 
that
 
the
 
Corporation
 
will
 
incur
 
a
 
material
 
loss
 
and
 
the
 
amount
 
can
 
be
reasonably estimated,
 
the Corporation
 
establishes an
 
accrual for
 
the loss.
 
Once established,
 
the accrual
 
is adjusted
 
on at
 
least a
quarterly
 
basis
 
to
 
reflect
 
any
 
relevant
 
developments,
 
as
 
appropriate.
 
For
 
matters
 
where
 
a
 
material
 
loss
 
is
 
not
 
probable,
 
or
 
the
amount of the loss cannot be reasonably estimated,
 
no accrual is established.
 
In certain cases,
 
exposure to loss
 
exists in
 
excess of any
 
accrual to the
 
extent such loss
 
is reasonably possible,
 
but not
 
probable.
Management believes and
 
estimates that the
 
range of reasonably
 
possible losses (with
 
respect to those
 
matters where such
 
limits
may be determined, in excess of amounts accrued)
 
for current Legal Proceedings ranged from $
0
 
to approximately $
20.1
 
million as
of June
 
30, 2023.
 
In certain
 
cases, management cannot
 
reasonably estimate the
 
possible loss
 
at this
 
time. Any
 
estimate involves
significant
 
judgment,
 
given
 
the
 
varying
 
stages
 
of
 
the
 
Legal
 
Proceedings
 
(including
 
the
 
fact
 
that
 
many
 
of
 
them
 
are
 
currently
 
in
preliminary stages), the existence of multiple defendants in several of the current Legal Proceedings whose share of liability has yet
to be
 
determined, the
 
numerous unresolved issues
 
in many
 
of the
 
Legal Proceedings,
 
and the
 
inherent uncertainty
 
of the
 
various
potential
 
outcomes
 
of
 
such
 
Legal
 
Proceedings.
 
Accordingly,
 
management’s
 
estimate
 
will
 
change
 
from
 
time-to-time,
 
and
 
actual
losses may be more or less than the current estimate.
 
While the
 
outcome of
 
Legal Proceedings
 
is inherently
 
uncertain, based
 
on information
 
currently available,
 
advice of
 
counsel, and
available
 
insurance
 
coverage,
 
management
 
believes
 
that
 
the
 
amount
 
it
 
has
 
already
 
accrued
 
is
 
adequate
 
and
 
any
 
incremental
liability arising from
 
the Legal Proceedings
 
in matters in
 
which a loss
 
amount can be
 
reasonably estimated will not
 
have a material
adverse effect
 
on the Corporation’s
 
consolidated financial position.
 
However, in
 
the event
 
of unexpected future
 
developments, it is
possible that
 
the ultimate
 
resolution of
 
these matters
 
in a
 
reporting period, if
 
unfavorable, could have
 
a material
 
adverse effect
 
on
the Corporation’s consolidated financial position for that period.
 
Set forth below is a description of the Corporation’s
 
significant Legal Proceedings.
BANCO POPULAR DE PUERTO RICO
Mortgage-Related Litigation
 
BPPR was
 
named a
 
defendant in
 
a putative
 
class action
 
captioned Yiries
 
Josef Saad
 
Maura v.
 
Banco Popular,
 
et al.
 
on behalf
 
of
residential
 
customers
 
of
 
the
 
defendant
 
banks
 
who
 
have
 
allegedly
 
been
 
subject
 
to
 
illegal
 
foreclosures
 
and/or
 
loan
 
modifications
through
 
their
 
mortgage
 
servicers.
 
Plaintiffs
 
contend
 
that
 
when
 
they
 
sought
 
to
 
reduce
 
their
 
loan
 
payments,
 
defendants
 
failed
 
to
provide them with such reduced loan payments, instead subjecting them to lengthy loss mitigation processes while filing foreclosure
claims
 
against
 
them
 
in
 
parallel,
 
all
 
in
 
violation
 
of
 
the
 
Truth
 
In
 
Lending
 
Act
 
(“TILA”),
 
the
 
Real
 
Estate
 
Settlement
 
Procedures
 
Act
(“RESPA”),
 
the Equal
 
Credit Opportunity Act
 
(“ECOA”), the
 
Fair Credit
 
Reporting Act
 
(“FCRA”), the
 
Fair Debt
 
Collection Practices
Act (“FDCPA”)
 
and other consumer-protection laws
 
and regulations. Plaintiffs did
 
not include a specific
 
amount of damages in
 
their
complaint. After waiving service
 
of process, BPPR filed
 
a motion to
 
dismiss the complaint
 
(as did most
 
co-defendants, separately).
 
BPPR
 
further
 
filed
 
a
 
motion
 
to
 
oppose
 
class
 
certification,
 
which the
 
Court
 
granted
 
in
 
September
 
2018.
 
In
 
April
 
2019,
 
the
 
Court
entered an
 
Opinion and
 
Order granting
 
BPPR’s and
 
several other
 
defendants’ motions
 
to dismiss
 
with prejudice.
 
Plaintiffs filed
 
a
Motion for Reconsideration in April 2019, which Popular timely opposed. In September 2019, the Court issued an Amended Opinion
and Order dismissing plaintiffs’ claims against all
 
defendants, denying the reconsideration requests and other pending motions, and
issuing final
 
judgment.
 
In October
 
2019, plaintiffs
 
filed a
 
Motion for
 
Reconsideration of
 
the Court’s
 
Amended Opinion
 
and Order,
which was denied
 
in December 2019.
 
In January
 
2020, plaintiffs filed
 
a Notice
 
of Appeal to
 
the U.S. Court
 
of Appeals for
 
the First
Circuit.
 
Plaintiffs filed their
 
appeal brief in
 
July 2020, Appellees
 
filed their brief
 
in September 2020,
 
and Appellants filed
 
their reply
brief in January 2021.
 
On March 13, 2023, the U.S. Court of Appeals for the First Circuit entered judgment affirming the
 
trial court’s
order dismissing
 
the complaint.
 
On
 
March 23,
 
2023, Plaintiffs
 
filed
 
a
 
Petition for
 
Rehearing and/or
 
Rehearing
en
 
Banc
,
 
which is
pending resolution.
 
Insufficient Funds and Overdraft Fees Class Actions
Popular
 
was
 
named
 
as
 
a
 
defendant on
 
a
 
putative class
 
action
 
complaint captioned
 
Golden
 
v.
 
Popular,
 
Inc.
 
filed
 
in
 
March
 
2020
before
 
the
 
U.S.
 
District
 
Court
 
for
 
the
 
Southern
 
District
 
of
 
New
 
York,
 
seeking
 
damages,
 
restitution
 
and
 
injunctive
 
relief.
 
Plaintiff
alleged breach
 
of contract,
 
violation
 
of
 
the covenant
 
of
 
good faith
 
and
 
fair
 
dealing, unjust
 
enrichment and
 
violation
 
of
 
New York
consumer
 
protection law
 
due
 
to
 
Popular’s purported
 
practice of
 
charging
 
overdraft fees
 
(“OD
 
Fees”) on
 
transactions that,
 
under
plaintiffs’ theory,
 
do not
 
overdraw the
 
account. Plaintiff
 
described Popular’s purported
 
practice of
 
charging OD
 
Fees as
 
“Authorize
Positive,
 
Purportedly
 
Settle
 
Negative”
 
(“APPSN”)
 
transactions
 
and
 
alleged
 
that
 
Popular
 
assesses
 
OD
 
Fees
 
over
 
authorized
transactions
 
for
 
which
 
sufficient
 
funds
 
are
 
held
 
for
 
settlement.
 
In
 
August
 
2020,
 
Popular
 
filed
 
a
 
Motion
 
to
 
Dismiss
 
on
 
several
grounds,
 
including
 
failure
 
to
 
state
 
a
 
claim
 
against
 
Popular,
 
Inc.
 
and
 
improper
 
venue.
 
In
 
October
 
2020,
 
Plaintiff
 
filed
 
a
 
Notice
 
of
Voluntary
 
Dismissal
 
before
 
the
 
U.S.
 
District
 
Court
 
for
 
the
 
Southern
 
District
 
of
 
New
 
York
 
and,
 
simultaneously,
 
filed
 
an
 
identical
complaint in the U.S. District Court for the
 
District of the Virgin Islands against Popular,
 
Inc., Popular Bank and BPPR. In November
2020, Plaintiff
 
filed a
 
Notice of
 
Voluntary
 
Dismissal against
 
Popular, Inc.
 
and Popular
 
Bank following
 
a Motion
 
to Dismiss
 
filed on
behalf of
 
such entities, which
 
argued failure to
 
state a claim
 
and lack of
 
minimum contacts of
 
such parties with
 
the U.S.V.I.
 
district
court jurisdiction. BPPR, the only defendant remaining in the case, was served with process in November 2020 and filed a Motion to
Dismiss in January 2021.
In
 
October
 
2021,
 
the
 
District
 
Court,
 
notwithstanding that
 
BPPR’s
 
Motion
 
to
 
Dismiss
 
remained
 
pending
 
resolution,
 
held
 
an
 
initial
scheduling
 
conference
 
and,
 
thereafter,
 
issued
 
a
 
trial
 
management
 
order
 
where
 
it
 
scheduled
 
the
 
deadline
 
for
 
all
 
discovery
 
for
November
 
2022,
 
and
 
several
 
other
 
trial-related
 
deadlines
 
for
 
June
 
2023.
 
During
 
a
 
mediation
 
hearing held
 
in
 
October
 
2022,
 
the
parties
 
reached a
 
settlement in
 
principle on
 
a class-wide
 
basis subject
 
to
 
final
 
court
 
approval. In
 
January 2023,
 
the
 
parties filed
before the Court a
 
motion for preliminary approval
 
of the settlement agreement
 
and, on March 31,
 
2023, the Court issued
 
an order
granting preliminary approval of the settlement agreement.
 
The final approval hearing is scheduled for September 8,
 
2023.
On January
 
31, 2022,
 
Popular was
 
also named
 
as a
 
defendant on a
 
putative class
 
action complaint captioned
 
Lipsett v.
 
Popular,
Inc. d/b/a Banco Popular, filed before the U.S. District Court for the Southern District
 
of New York, seeking damages, restitution and
injunctive relief. Similar to the claims set forth in the
 
aforementioned Golden complaint, Plaintiff alleges breach of contract, including
violations of the covenant of good faith and
 
fair dealing, as a result of Popular’s purported practice of
 
charging OD Fees for APPSN
transactions.
 
The complaint further alleged that
 
Popular assesses OD Fees
 
over authorized transactions for
 
which sufficient funds
are held for settlement. Popular waived service of process
 
and filed a Motion to Compel Arbitration. In response to Popular’s
 
motion,
Plaintiff filed a Notice of Voluntary Dismissal in April 2022.
 
On May
 
13, 2022,
 
Plaintiff in
 
the Lipsett
 
complaint filed
 
a new
 
complaint captioned
 
Lipsett v.
 
Banco Popular
 
North America
 
d/b/a
Popular Community Bank
 
with the same
 
allegations of his
 
previous complaint against
 
Popular. In
 
June 2022, after
 
serving Plaintiff
with a written notice of election to arbitrate the claims asserted in the complaint which went unanswered, Popular Bank (“PB”) filed a
Pre-Motion Conference motion related to a new Motion to Compel Arbitration. After Plaintiff responded to the Pre-Motion
 
conference
motion, the Court allowed PB
 
to file its Motion
 
to Compel Arbitration, which it
 
did in September 2022. Plaintiff
 
opposed such motion
in October 2022, and PB filed its reply in November
 
2022.
 
On December 9, 2022, the
 
Court issued a Decision and
 
Order denying PB’s Motion to
 
Compel Arbitration. On December 20, 2022,
PB filed a Notice of
 
Appeal with the United States
 
Court of Appeals for the Second
 
Circuit. PB filed its appeal brief
 
on April 5, 2023
and Plaintiff
 
filed his opposition
 
brief on July
 
5, 2023. PB
 
filed its
 
reply brief on
 
July 26,
 
2023.
 
The matter is
 
now fully briefed
 
and
pending resolution.
POPULAR SECURITIES
Puerto Rico Bonds and Closed-End Investment
 
Funds
The volatility
 
in prices
 
and declines
 
in value
 
that Puerto
 
Rico municipal
 
bonds and
 
closed-end investment
 
companies that
 
invest
primarily in
 
Puerto Rico
 
municipal bonds experienced
 
following August
 
2013 have
 
led to
 
regulatory inquiries, customer
 
complaints
and
 
arbitrations
 
for
 
most
 
broker-dealers
 
in
 
Puerto
 
Rico,
 
including
 
Popular
 
Securities.
 
Popular
 
Securities
 
has
 
received
 
customer
complaints
 
and,
 
as
 
of
 
June
 
30,
 
2023,
 
was
 
named
 
as
 
a
 
respondent
 
(among
 
other
 
broker-dealers)
 
in
6
 
pending
 
arbitration
proceedings with
 
initial claimed
 
amounts of
 
approximately $
5.88
 
million in
 
the aggregate.
 
While Popular
 
Securities believes
 
it has
meritorious defenses to the claims asserted in these proceedings,
 
it has often determined that it is in its best interest to settle certain
claims
 
rather
 
than
 
expend
 
the
 
money
 
and
 
resources required
 
to
 
see
 
such
 
cases
 
to
 
completion.
 
The
 
Puerto
 
Rico
 
Government’s
defaults and
 
non-payment of
 
its various
 
debt obligations,
 
as well
 
as the
 
Oversight Board
 
decision to
 
pursue restructurings
 
under
Title III and
 
Title VI of
 
PROMESA, have impacted the number of
 
customer complaints (and claimed damages) filed
 
against Popular
Securities concerning Puerto Rico bonds and closed-end investment companies that invest primarily in Puerto
 
Rico bonds. Adverse
results in the arbitration proceedings described above
 
could have a material adverse effect on Popular.