Guarantees

9 Months Ended

Sep. 30, 2023

Guarantees

Guarantees

Note 20 – Guarantees

At September 30, 2023, the Corporation recorded a liability of $

1

 million (December 31, 2022 - $

0.3

 million), which represents the

unamortized balance of the obligations undertaken in issuing the guarantees under the standby letters of credit. Management does

not anticipate any material losses related to these instruments.

From time to time, the Corporation securitized mortgage loans into guaranteed mortgage-backed securities subject to limited, and in

certain instances, lifetime credit recourse on the loans that serve as collateral for the mortgage-backed securities. The Corporation

has not sold any mortgage loans subject to credit recourse since 2009. At September 30, 2023, the Corporation serviced $

0.6

 billion

(December 31, 2022 - $

0.6

 billion) in residential mortgage loans subject to credit recourse provisions, principally loans associated

with FNMA and FHLMC residential mortgage loan securitization programs. In the event of any customer default, pursuant to the

credit recourse provided, the Corporation is required to repurchase the loan or reimburse the third party investor for the incurred

loss. The maximum potential amount of future payments that the Corporation would be required to make under the recourse

arrangements in the event of nonperformance by the borrowers is equivalent to the total outstanding balance of the residential

mortgage loans serviced with recourse and interest, if applicable. During the quarter and nine months ended September 30, 2023,

the Corporation repurchased approximately $

0.4

 million and $

2

 million, respectively, of unpaid principal balance in mortgage loans

subject to the credit recourse provisions (September 30, 2022

-

$

1

 million and $

6

 million, respectively). In the event of

nonperformance by the borrower, the Corporation has rights to the underlying collateral securing the mortgage loan. The

Corporation suffers ultimate losses on these loans when the proceeds from a foreclosure sale of the property underlying a defaulted

mortgage loan are less than the outstanding principal balance of the loan plus any uncollected interest advanced and the costs of

holding and disposing the related property. At September 30, 2023, the Corporation’s liability established to cover the estimated

credit loss exposure related to loans sold or serviced with credit recourse amounted to $

6

 million (December 31, 2022 - $

7

 million).

The following table shows the changes in the Corporation’s liability of estimated losses related to loans serviced with credit recourse

provisions during the quarters and nine months ended September 30, 2023 and 2022.

Quarters ended September 30,

Nine months ended September 30,

(In thousands)

2023

2022

2023

2022

Balance as of beginning of period

$

6,223

$

9,095

$

6,897

$

11,800

Provision (benefit) for recourse liability

228

(1,718)

52

(2,067)

Net charge-offs

(54)

(184)

(552)

(2,540)

Balance as of end of period

$

6,397

$

7,193

$

6,397

$

7,193

From time to time, the Corporation sells loans and agrees to indemnify the purchaser for credit losses or any breach of certain

representations and warranties made in connection with the sale. The loan repurchase activity under these indemnity agreements

for the quarter and nine months ended September 30, 2023 as well as the liability for estimated losses at period end was not

considered material for the Corporation.

Servicing agreements relating to the mortgage-backed securities programs of FNMA, FHLMC and GNMA, and to mortgage loans

sold or serviced to certain other investors, including FHLMC, require the Corporation to advance funds to make scheduled payments

of principal, interest, taxes and insurance, if such payments have not been received from the borrowers. At September 30, 2023, the

Corporation serviced $

10.1

 billion in mortgage loans for third-parties, including the loans serviced with credit recourse (December

31, 2022 - $

11.1

 billion). The Corporation generally recovers funds advanced pursuant to these arrangements from the mortgage

owner, from liquidation proceeds when the mortgage loan is foreclosed or, in the case of FHA/VA loans, under the applicable FHA

and VA insurance and guarantees programs. However, in the meantime, the Corporation must absorb the cost of the funds it

advances during the time the advance is outstanding. The Corporation must also bear the costs of attempting to collect on

delinquent and defaulted mortgage loans. In addition, if a defaulted loan is not cured, the mortgage loan would be canceled as part

of the foreclosure proceedings and the Corporation would not receive any future servicing income with respect to that loan. At

September 30, 2023, the outstanding balance of funds advanced by the Corporation under such mortgage loan servicing

agreements was approximately $

51

 million (December 31, 2022 - $

42

 million). To the extent the mortgage loans underlying the

Corporation’s servicing portfolio experience increased delinquencies, the Corporation would be required to dedicate additional cash

resources to comply with its obligation to advance funds as well as incur additional administrative costs related to increases in

collection efforts.

Popular, Inc. Holding Company (“PIHC”) fully and unconditionally guarantees certain borrowing obligations issued by certain of its

100

% owned consolidated subsidiaries amounting to $

94

 million at September 30, 2023 and December 31, 2022. In addition, at

September 30, 2023 and December 31, 2022, PIHC fully and unconditionally guaranteed on a subordinated basis $

193

 million of

capital securities (trust preferred securities) issued by wholly-owned issuing trust entities to the extent set forth in the applicable

guarantee agreement. Refer to Note 18 to the Consolidated Financial Statements in the 2022 Form 10-K for further information on

the trust preferred securities.